A

STUDY ON

INVESTMENT IN EQUITIES
AT
ITI FINANCIAL SERVICES LTD

A Training report submitted

At
GAUHATI UNIVERSITY

In Partial fulfillment of requirements

for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION

Under Organization Guidance of: Under Institutional Guidance of:

Mr. SHIVA KUMAR Mr.SHRIKAR
(Area Manager) Faculty guide, SITAM,
Hyderabad. Hyderabad.

Prepared & submitted by:

M.SUJANESWAR
G.U. Regd. no: 09010299

SUN INSTITUTE OF TECHNOLOGY AND MANAGEMENT

HYDERABAD
1
 CERTIFICATE OF THE ORGANISATION

To,
The Director,
NIAM
Bangalore/New Delhi.

This is to certify that

Mr./Ms……………………………………………………………………………………
Of MBA (Industry Integrated) course of Gauhati University at ………………….
…………………………………………………………… Academic partner has undergone
Management training at our Organisation from ………….............................
to……………………................

His / Her Performance during the training period was……………………………….

Authorized Signatory

2
 CERTIFICATE
This is to certify that M.SUJANESWAR, with
regd. No 09010299 a student of the “GAUHATI
UNIVERSITY” has prepared his training report entitled
“INVESTMENT IN EQUITIES AT ITI FINANCIAL SERVICES LTD”
under my guidance. He has fulfilled all
requirements under the regulation of the MBA (IIP)
Gauhati University, leading to the M.B.A (IIP)
degree. This work is the result of his own
investigation and the project; neither as a whole
nor any part of it was submitted to any other
university or educational institution for any
research or diploma.

I wish him all success in life.

Mrs.??,
Head of
the Department,
SITAM, HYDERABAD.

3
 STUDENT DECLARATION

I hereby declare that the training report entitled

“INVESTMENT IN EQUITIES”
AT ITI FINANCIAL SERVICES LTD

Conducted at

ITI FINANCIAL SERVICES LTD

Under the guidance of

Mr. SHRIKAR

Submitted in partial fulfillment of the requirements for the award

of degree of

MASTER OF BUSINESS ADMINISTRATION

(Industry Integrated-III Semester)

To
GAUHATI UNIVERSITY, GUWAHATI.
Is my original work and the same has not been submitted
for the award of any other degree / diploma / fellowship
or other similar titles or prizes.

Place: Hyderabad Signature of Student

4
Date: Reg. No

ACKNOWLEDGEMENT

I render my sincere thanks to Mr. SHIVA KUMAR (Area Manager) of ITI

Financial Services Ltd for giving us an opportunity of doing the project
work in this esteemed organization.

I thankful to Mrs.VANI (DIRECTOR) ,??,,Mrs??, HOD and Mr. SHRIKAR

faculty guide and all my faculty members of Sun Institute of Technology and
Management for their valuable support extended during the project.

As a token of my gratitude. I would like to acknowledge special thanks to the

Faculty members of Sun Institute of Technology And Management for
guidance and support extended through the period of study.

I would like to acknowledge my sincere thanks to all for their encouragement

through out the academic period.

5
 CONTENTS

Chapter no Name of the concept Page no

I Introduction 1

Objectives 2

Need of the study 3

Scope of the study 4

Research Methodology 5

Limitations 6

II Review of literature 7- 49

III Industry profile

Company profile 50- 52

Key learnings in Organization 53

IV Data analysis and interpretation 54-74

V Summary 75

VI Suggestions 76

VII Conclusion 77

6
Bibliography 78

Introduction

7
 INTROUDCTION
Investment management once seemed a simple process. Well-heeled investors would hold

portfolios composed of stocks and bonds of blue chip industrial companies, treasury bonds, notes

and bills. The choices available to less well-off investors were much more limited, confirmed

primarily to passbook savings accounts. If the investment environment can be thought of as an

ice cream parlor, then the customers of past decades were offered only chocolate and vanilla.

Mirroring the diversity of modern society, the investment ice cream parlor now makes

available a myriad of flavors to the investing public. Investors face a dizzying array of choices.

The ability to purchase different securities has become both less expensive and more convenient

with the advent of advanced communications and computer networks, along with the

proliferating market for mutual funds that has developed to serve large or small investors.

Investment environment encompasses the kinds of marketable securities that exist and

where and how they are bought and sold. Investment process is concerned with how an investor

should proceed in making decisions about what marketable securities to invest in, how extensive

the investments should be and when the investments should made.

Investment means the sacrifice of current rupees for future rupees. Two different attributes

are involved – “time” and “risk”. The sacrifice takes place in the present and is certain. The

8
reward comes later and the magnitude is uncertain. In some cases, risk is the dominant attribute.

These are two types of investments. They are:

1) Real Investments

2) Financial Investments

Real investments involve some kind of tangible assets such as land, machinery, factories.

Financial investments involve contracts written on pieces of paper such as common

stocks and bonds.

Investment in securities such as shares, debentures and bonds is profitable as well as exciting,
but it involves great deal of risk. Investing in financial securities is considered to be one of
the best avenues for investing one’s savings while it is acknowledged to be one of the most
risky avenues of investment. Even Indian government wants to encourage people in rural
areas to invest in equities. This will help the markets to stabilize by tapping the rural areas
and decreases the dependency on foreign institutional investors.

NEED FOR THE STUDY

PURPOSE OF THE STUDY

9
 The purpose of the study is to know about stock markets in India, how they work,

fundamental requirements before entering the stock market, how to enter the stock market,

market design, stock selection, when to buy or sell a stock, how to invest and knowing about

market intermediaries.

OBJECTIVES OF THE STUDY

 The objective of the study is to look into the scientific approach for selecting a stock

where Fundamental Analysis and Technical Analysis are looked into.

 For that purpose the most happening banking sector was taken for study and from that

sector, two stocks were picked up and analyzed.

 The study deals with analysis of performance of the company, share price fluctuations and

comparing it with another company from same sector.

 The purpose of the study is to locate a stock which gives good returns with minimum risk.

SCOPE OF THE STUDY

For the purpose of study, banking sector – is selected. ICICI and SBI are the two

companies that are taken for analysis.

INTRODUCTION TO STOCKS
The first step for you to understand the stock market is to understand stocks.

10
 A share of stock is the smallest unit of ownership in a company. If you own a share of a

company’s stock, you are a part owner of the company.

You have the right to vote on members of the board of directors and other important matters

before the company. If the company distributes profits to shareholders, you will likely receive a

proportionate share.

One of the unique features of stock ownership is the notion of limited liability. If the

company loses a lawsuit and must pay a huge judgment, the worse that can happen is your stock

becomes worthless. The creditors can’t come after your personal assets. That’s necessarily true in

private-held companies.

There are two types of stock:

 Common stock

 Preferred stock

Most of the stock held by individuals is common stock.

Common Stock:

Common stock represents the majority of stock held by the public. It has voting rights,

along with the right to share in dividends.

Preferred Stock:

Despite its name, preferred stock has fewer rights than common stock, except in one

important are – dividends. Companies that issue preferred stocks usually pay consistent dividends

and preferred stock has first call on dividends over common stock.

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 Investors buy preferred stock for its current income from dividends, so look for

companies that make big profits to use preferred stock to return some of those profits via

dividends.

DEMAT ACCOUNT

What is Demat account and why it is required?

Securities and Exchange Board of India (SEBI) is a board (corporate body) appointed by

the Government of India in 1992 with its head office at Mumbai. Its one of the function is

helping the business in stock exchanges and any other securities markets. Demat (short form of

Dematerialization) is the process by which an investor can get stocks (also called as physical

certificates) converted into electronic form maintained in an account with the Depository

Participant (DP).

DP could be organizations involved in the business of providing financial services like

banks, brokers, financial institutions etc. DP’s are like agents of Depository.

Depository is an organization responsible to maintain investor's securities (securities can

be stocks or any other form of investments) in the electronic form. In India there are two such

organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central Depository

Services India Ltd.)

Investor’s wishing to open Demat account has to go DP and open the account. Opening

the Demat account is as simple as opening the bank account with any bank. As we need bank

account to save our money, make cheque payments etc, likewise we need to open a demat

account if we want to buy or sell stocks. All stocks what we possess will show in our demat

account. So we don't have to possess any physical certificates. They are all held electronically in

12
our demat account. As we buy and sell the stocks, accordingly our stocks will get adjusted in our

account.

Is a demat account must?

The market regulator, the Securities and Exchange Board of India (SEBI), has made it

compulsory to open the demat account if you want to buy and sell stocks.

So a demat account is a must for trading and investing.

How to start to open a Demat account?

We have to approach a DP to open a Demat account. Most banks are DP participants so

we may approach them.

A broker and a DP are two different people. A broker is a member of the stock exchange,

who buys and sells stocks on his behalf and also on behalf of his customers.

Following are the documents required to open Demat account.

When we approach any DP, we will be guided through the formalities of opening an

account. The DP will ask to provide some documents as proof of our identity and address. Below

is a list but we may not require all of them.

PAN card, Voter's ID, Passport, Ration card, Driver’s license, Photo credit card

Employee ID card, IT returns, Electricity/ Landline phone bill etc.

Do we need any stocks to open a Demat account?

No. We need not need any stocks to open a demat account. A demat account can be

opened with no balance of stocks. And there is no minimum balance to be maintained either. You

can have a zero balance in your account.

How much it cost to open a Demat account?

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 The charges for account opening, annual account maintenance fees and transaction

charges vary between various DP’s.

Finally – After successfully opening the demat account, the DP will allot “Beneficial Owner

Identification” Number, which will be needed to mention for all our future transactions.

If we want to sell our stocks, we need to place an order with our broker and give a

'Delivery Instruction' to your DP. The DP will debit our account with the number of stocks sold.

We will receive the payment from our broker.

If we want to buy stocks, inform our broker about our Depository Account Number, so

that the stocks bought are credited into our account.

Points to remember while opening online account

a) Make multiple enquiries and try getting low brokerage trading and dematting account.
b) Also discuss about the margin they provide for day trading.
c) Discuss about fund transfer. The fund transfer should be reliable and easy. Fund transfer from
our bank account to trading account and visa versa. Some online share trading account has
integrated savings account which makes easy for us to transfer funds from our saving account to
trading account.
d) Very important is about service they provide, the research calls, intraday or daily trading tips.
e) Also enquire about their services charges and any other hidden charges if any.
f) And also see how reliable and easy is to contact them in case if any emergency.

14
 Literature
Review
 Investment process
 Fundamental analysis
 Technical analysis

INVESTMENT PROCESS

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 Investment process describes how an investor should go about making decisions with

regard to what marketable securities to invest in, how extensive the investment should be and

when the investment should be made. An eight-step procedure for making these decisions forms

the basis for the investment process.

1) What is Investment

2) Understanding stocks

3) Finding a broker

4) Evaluation of stocks

5) Research tools

6) Investing strategy

7) Investing technique

8) What moves the market

Step 1: What is investment?

Investing is making your money work for you without taking any more risks than necessary

for your comfort.

 Investing is the proactive use of your money to make more money.

 How to calculate Risk Premium?

Risk premium is what a stock should return over a “risk-free” investment. It is your reward

for taking a risk with your money.

 Weak demand is the important factor in stock pricing:

Despite high crude oil prices, its weak demand for gasoline that holds back oil stock prices.

Supply and demand is an important factor in determining price of stocks.

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  Corrections are natural part of stock market cycle.

 Don’t be too conservative with stocks in retirement:

There is a danger you can be too conservative in your investment strategy as you approach

retirement – don’t back off stocks too soon.

Step 2: Understanding stocks

 Stocks are the basic units of ownership in publicly traded companies. There are two basic

types of stocks.

a. Common Stock: Common stock represents the majority of stock held by the public. It

has voting rights, along with the right to share in dividends.

b. Preferred Stock: Companies that issue preferred stocks usually pay consistent

dividends and preferred stock has first call on dividends over common stock.

 Bull and Bear stock markets are the two sides of same coin:

Bull and bear markets go together and are necessary for an efficient market.

 Poll results show confidence in stocks:

The results of a poll on where the sensex be at the end of 2008 show stock investors are

positive.

Step 3: Finding a Broker

 To decide which type of broker is right for you, you need to use these resources to find the

brokerage arrangement that best fits your needs.

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 Thirteen of the top online stock trading sites offer investors a wide variety of services

including research and advice.

 Brokers offer different levels of service. A broker fills in the gaps in knowledge and

experience.

 Broker explains what types of accounts are available and how to open an account.

 Financial advisers can map a blue print that will get you from where you are to your financial

goals.

 Financial advisers come in a variety of flavors. Finding the one right for you involves

knowing how each is compensated and what they do.

 The new year poses many challenges for stocks, including high oil prices, the credit crisis,

and a potential recession.

 Stock prices are driven by the relationship between buyers and sellers. Attractive stocks have

more buyers than sellers, which drives up prices, while less attractive stocks feel the reverse

effect.

Step 4: Evaluating stocks for investment

Fundamental analysis relies on several tools to give investors an accurate picture of the

financial health of a company and how the market values the stock. The following are the most

popular tools of fundamental analysis. They focus on earnings, growth, and value in the market.

a) Earnings per Share – EPS

b) Price to Earnings Ratio – P/E

c) Projected Earnings Growth – PEG

d) Price to Sales – P/S

e) Price to Book – P/B

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 f) Dividend Payout Ratio

g) Dividend Yield

h) Book Value

i) Return on Equity

Step 5: Research Tools

The internet is a gold mine of information, but you’ll need some tools to get to the nuggets.

Research tools make the job easier if you know where to find them and how to use them.

 The better stock screens offer similar characteristics that give you greater flexibility when

looking for investment candidates and eliminate other companies.

 Stock screens will save time and help to build a thoughtful portfolio by focusing on those

companies that meet your investing requirements.

 Stock screens can help any investor make better stock selections by reducing the number of

companies to research.

 Dividend ratios can tell much about a stock and its future payout prospects.

 One of the best sources of information on companies is free and as near as your computer.

Step 6: Investing Strategies

What strategy to use as an investor? The different investment strategies and how to

develop personal investment strategy is explained below:

 When and how to sell a winning stock?

Knowing when and how to sell a winning stock is as important as knowing when to sell a

losing stock.

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 Don’t be too conservative with stocks:

Following a too conservative investment strategy in retirement may not protect you from

outliving your money.

 Bottom-up investors focus on strong companies and believe they will perform well in any

market conditions.

 Top-down investing looks at big picture before narrowing in on individual stocks.

Step 7: Investing Techniques

Investing techniques offer powerful ways for investors to execute their strategies. These

techniques provide a structure for investing.

 After-hours trading of stocks may seem like a great idea, but it is full of risks for the average

investor.

 Diversify stocks by industry to avoid across-the-board losses on bad economic news.

Investments should not be correlated to achieve diversity.

 Investing with expectations of high returns is not investing but gambling. Don’t try to double

or triple your money quickly in the stock market – you’ll be disappointed and perhaps poorer.

Step 8: What moves the market?

What makes the market rise or fall? Sometimes it seems to have a mind of its own that

reacts poorly to good news and with enthusiasm to bad news. One should learn the factors that

are the major influences on the markets and how to use this information.

Basic steps in how stock trading works

Trade = Buy or Sell

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 To “trade” means to buy and sell in the jargon of the financial markets. How a system that

can accommodate one billion shares trading in a single day works is a mystery to most people.

No doubt, our financial markets are marvels of technological efficiency.

We don’t need to know all of the technical details of how to buy or sell stocks, however it

is important to have a basic understanding of how the markets work.

Important terms in stock market and in stock trading

Open - The first price at which the stock opens when market opens in the morning.

High - The stock price reached at the highest level in a day.

Low - The stock price reached the lowest level in a day.

Close - The stock price at which it remains after the end of market timings or the final price of

the stock when the market closes for a day.

Volume - Volume is nothing but quantity.

Bid - The Buying price is called as Bid price.

Offer - The selling price is called offer price.

Bid Quantity - The total number of stocks available for buying is called Bid Quantity.

Offer Quantity - The total number of stocks available for selling is called Offer Quantity.

Buying and selling of stocks - Buy is also called as demand or bid and selling is also called as

supply or offer. First selling and then buying (this only happens in day trading) is called as

shorting of stocks or short sell.

Stock Trading - Buying and Selling of stocks is called stock trading.

Transaction - One complete cycle of buying and selling of stocks is called One Transaction.

Squaring off - This term is used to complete one transaction. Means if we buy then we have to

sell (means square-off) and if we sell then we have to buy (means square-off).
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Limit Order - In limit order the buying or selling price has to be mentioned and when the stock

price comes to that price then our order will get executed with the mentioned price by us.

Market Order- When we put buy or sell price at market rate then the price get executes at the

current rate of market. The market order get immediately executed at the current available price.

Success Mantra
There are two steps to achieve success in the stock market.

1) How not to loose

When you learn what to do and what not to do in order to lose nothing means you have won

the half battle. Only then you can learn how to gain or what to do in order to win. A new investor

should do paper trading in order to get the market knowledge before actually entering into the

market.

2) How to gain

How to gain requires deep understanding about the market trends and fluctuations.

A new investor can take the route of mutual fund.

The average person generally falls into one of two categories.

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 The first believe investing is a form of gambling; they are certain that if you invest,

you will more than likely end up losing your money.

The second category consists of those who know they should invest for the long-run,

but don’t know where to begin.

Their characteristics….

 feel investing in some sort of black-magic that only a few people hold the key to

 they leave their financial decisions up to professionals

 cannot tell you why they own a particular stock / mutual fund.

 investment style is blind faith or limited to “this stock is going up. We should but it.”

This group is in far more danger than the first. They invest like the masses and

then wonder why their results are mediocre [or in some cases, devastating.

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 FUNDAMENTAL ANALYSIS
To determine the intrinsic value of an equity share, the security analyst must forecast the earnings

and dividends expected from the stock and choose a discount rate which reflects the riskiness of

the stock. This is what is involved in fundamental analysis, perhaps the most popular method

used by investment professionals. The earnings potential and riskiness of a firm are linked to the

prospects of the industry to which it belongs. The prospects of various industries, in turn, are

largely influenced by the developments in the macro economy.

Researchers have found that stock price changes can be attributed to the following

factors:

 Economy-wide factors: 30-35 percent

 Industry factors: 15-20 percent

 Company factors: 30-35 percent

 Others factors: 15-25 percent

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 Based on the above evidence, a commonly advocated procedure of fundamental analysis

involves a three-step examination, which calls for:

1) Understanding of the macro-economic environment and developments.

2) Analyzing the prospects of the industry to which the firm belongs.

3) Assessing the projected performance of the company and the intrinsic value of its

shares.

A. MACRO-ECONOMIC ANALYSIS

The macro-economy is the overall economic environment in which all firms operate. The

key variables commonly used to describe the state of the macro-economy are:

a) Growth Rate of Gross Domestic Product (GDP)

The gross domestic product (GDP) is a measure of the total production of final goods and

services in the economy during a specified period usually a year. The growth rate of GDP is the

most important indicator of the performance of the economy. Firm estimates of GDP growth rate

are available with a time lag of one to two years or so, but preliminary estimates are made from

time to time by various bodies like CMIE, NCAER, and the RBI. The higher the growth rate of

GDP, other things being equal, the more favorable it is for the stock market.

b) Industrial Growth Rate

The GDP growth rate represents the average of the growth rates of the three principal sectors

of the economy, viz. the services sector, the industrial sector and the agricultural sector.

Publicly listed companies play a major role in the industrial sector but only a minor role in

the services sector and the agricultural sector. Hence stock market analysts focus more on the

industrial sector. They look at the overall industrial growth rate as well as the growth rates of

25
different industries. The higher the growth rate of the industrial sector, other things being equal,

the more favorable it is for the stock market.

c) Agriculture and Monsoons

Agriculture accounts for about a quarter of the Indian economy and has important linkages,

direct and indirect, with industry. Companies using agricultural raw materials as inputs or

supplying inputs to agriculture are directly affected by the changes in agricultural production.

Other companies also tend to be affected due to indirect linkages.

A spell of good monsoons imparts dynamism to the industrial sector and buoyancy to the

stock market. Likewise, a streak of bad monsoons casts its shadow over the industrial sector and

the stock market.

d) Savings and Investment

The demand for corporate securities has an important bearing on stock price movements. So

investment analysts should know what the level of investment in the economy is and what

proportion of that investment is directed toward the capital market.

The level of investment in the economy is equal to:

Domestic savings + Inflow of foreign capital – Investment made abroad.

In India, as in many other countries, the domestic savings is the dominant component in

this expression. In addition to knowing what the savings are we should also know how the same

are allocated over various instruments like equities, bonds, bank deposits, small savings schemes,

and bullion.

26
 Other things being equal, the higher the level of savings and investments and the greater the

allocation of the same to equities, the more favorable it is for the stock market.

e) Government Budget and Deficit

Governments play an important role in most economies, including the Indian economy. The

central budget as well as the state budgets prepared annually provides information on revenues,

expenditures, and deficit or surplus.

In India, governmental revenues come more from indirect taxes such as excise duty and

customs duty and less from direct taxes such as income tax. The bulk of the governmental

expenditures goes toward administration, interest payment, defence, and subsidies, leaving very

little for public investment. The excess of governmental expenditures over governmental

revenues represents the deficit. While there are several measures of deficit, the most popular

measure is the fiscal deficit.

The fiscal deficit has to be financed with government a borrowing which is done in three

ways. First, the government can borrow from the Reserve Bank of India. This leads to increase in

money supply which has an inflationary impact on the economy. Second, the government can

resort to borrowing in domestic capital market. This tends to push up domestic interest rates and

crowd out private sector investment. Third, the government may borrow from abroad.

Investment analysts examine the government budget to assess how it is likely to impact on

the stock market.

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f) Money Supply

There are several definitions of money. The two more commonly used ones are:

M1 = currency with public + demand deposits with bank + other

deposits with RBI.

M3 = M1 + time deposits with banks

When we talk of money supply, we usually refer to M3. The growth rate of M3 in India has

been around 15 percent per year. This growth can be explained by three factors in the main:

growth in the real economy, monetization of a portion of deficit financing and financial

deepening of the economy. Monetization of a portion of deficit financing means the RBI buys

the securities issued by the government.

g) Price Level and Inflation

The price level measures the degree to which the nominal rate of growth in GDP is

attributable to the factor of inflation. The effect of inflation on the corporate sector tends to be

uneven. While certain industries may benefit, others tends to suffer. Industries that enjoy a strong

market for their products and which do not come under the purview of price control may benefit.

On the whole, it appears that a mild level of inflation is good for the stock market.

h) Interest Rate

Interest rates vary with maturity, default risk, inflation rate, and productivity of capital and so

on. The interest rates on money market instruments which are virtually risk free tend to be the

28
lowest. Long dated government securities generally carry slightly higher interest rates. Corporate

debentures which have some default risk associated with them carry still higher interest rates.

A rise in interest rates depresses corporate profitability and also leads to an increase in the

discount rate applied by equity investors, both of which have an adverse impact on stock prices.

i) Foreign Investment

Foreign investment in India comes in two forms: foreign direct investment and foreign

portfolio investment. The former represents investment for setting up new projects and hence is

long term in nature; the latter is in the form of purchase of outstanding securities in the capital

market and hence can be reversed easily.

j) Infrastructural Facilities and Arrangements

Infrastructural facilities and arrangements significantly influence industrial performance.

More specifically, the following are important:

 Adequate and regular supply of electric power at a reasonable tariff.

 A well-developed transportation and communication system.

 An assured supply of basic industrial raw materials like steel, coal, petroleum products

and cement.

 Responsive financial support for fixed assets and working capital.

k) Sentiments

The sentiments of consumers and businessmen can have an important bearing on economic

performance. Higher consumer confidence leads to higher expenditure on big ticket items. Higher

business confidence gets translated into greater business investment that has a stimulating effect

29
on the economy. Thus, sentiments influence consumption and investment decisions and have a

bearing on the aggregate demand for goods and services.

A. INDUSTRY ANALYSIS

The objective of industry analysis is to assess the prospects of various industrial groupings. It

is almost impossible to forecast exactly which industrial groupings will appreciate the most. Yet

careful analysis can suggest which industries have a brighter future than others and which

industries are plagued with problems that are likely to persist for a while.

Industrial analysis is divided into three parts namely,

I. Industry life cycle analysis

II. Structure and characteristics of an industry

III. Profit potential of industries: Porter model.

I. Industry Life Cycle Analysis

Many industrial economists believe that the development of almost every industry may be

analyzed in terms of a life cycle with four well-defined stages:

a. Pioneering Stage

b. Rapid Growth Stage

c. Maturity and Stabilization Stage

d. Decline Stage

a. Pioneering Stage: During this stage, the technology and or the product is relatively new.

Lured by promising prospects, many entrepreneurs enter this field. As a result, there is keen,

and often chaotic, competition. Only a few entrants may survive this stage.

30
b. Rapid Growth Stage: Once the period of chaotic developments is over, the rapid growth

stage arise. Firms which survive the intense competition of the pioneering stage, witness

significant expansion in their sales and profits.

c. Maturity and Stabilization Stage: During this stage, when the industry is more or less fully

developed, its growth rate is comparable to that of the economy as a whole.

d. Decline Stage: With the satiation of demand, encroachment of new products, and changes in

consumer preferences, the industry enters the decline stage, relative to the economy as a

whole. In this stage, the industry may grow slightly during prosperous periods, stagnate

during normal periods and decline during recessionary periods.

The experience of most industries suggests that they go through the 4 phases of the

industry life cycle though there are considerable variations in terms of the relative duration of

various stages and the rates of growth during these stages.

II. Structure and Characteristics of an Industry

Since each industry is unique, a systematic study of its specific features and

characteristics must be an integral part of the investment decision process. Industry analysis

should focus on the following:

a. Structure of the industry and nature of competition:

 The number of the firms in the industry and market share of the top

few firms in the industry.

 Licensing policy of the government.

 Entry barriers, if any.

 Pricing policies of the firm.

 Differentiation among products.

31
  Competition from foreign firms.

b. Nature and prospects of demand:

 Major customers and their requirements.

 Key determinants of demand.

 Degree of cyclicality in demand.

 Expected rate of growth in the foreseeable future.

c. Cost, efficiency and profitability:

 Proportions of the key cost elements – raw materials, labor, utilities

and fuel.

 Productivity of labor.

 Turnover of inventory, receivables and fixed assets.

 Control over prices of outputs and inputs.

 Gross profit, operating profit and net profit margins.

 Return on assets, earning power and return on equity.

d. Technology and research:

 Degree of technological stability.

 Important technological changes on the horizon and their implications.

 Research and development outlays as a percentage of industry sales.

 Proportion of sales growth attributable to new products.

III. Profit Potential of Industries: Porter Model

32
 Michael Porter has argued that the profit potential of an industry depends on the

combined strength of the following five basic competitive forces:

a. Threat of new entrants

b. Rivalry among the existing firms

c. Pressure from substitute products

d. Bargaining power of buyers

e. Bargaining power of sellers

Following figure shows the forces that drive competition and determine

industry profit potential:

33
a. Threat of new entrance

New entrants add capacity, inflate costs, push prices down, and reduce profitability. If an

industry faces the threat of new entrants, its profit potential would be limited. The threat of new

entrants is low if the entry barriers confer an advantage on existing firms and deter new entrants.

Entry barriers are high when:

 The new entrants have to invest substantial resources to enter the industry.

 Economies of scale are enjoyed by the industry.

 Existing firms control the distribution channels, benefit from product differentiation in the

form of brand image and customer loyalty.

 Switching costs –these are essentially onetime cost of switching from the products of one

supplier to another-are high.

b. Rivalry between existing firms

Firms in an industry compete on the basis of price quality, promotion, service, warranties, and

so on if the rivalry between the firms in an industry is strong, competitive moves and counter

moves dampen the average profitability of the industry. The intensity of rivalry in an industry

tends to be high when:

 The number of competitors in an industry is large.

 At least a few firms are relatively balanced and capable of engaging in a sustained

competitive battle.

 The industry growth is sluggish, prodding firms to strive for a higher market share.

 There is chronic over capacity in the industry.

 The industry confronts high exit barriers.

34
c. Pressure from substitute products

All firms in an industry face competition from industries producing substitute products.

Substitute products may limit a profit potential of the industry by imposing a ceiling on the prices

that can be charged by the firms in the industry. The threat from substitute products is high when:

 The price- performance trade off offered by the substitute products is attractive.

 The switching costs for prospective buyers are minimal

 The substitute products are being produced by industries earning superior profits.

d. Bargaining power of buyers

Buyers are competitive force. They can bargain for price cut, ask for superior quality and

better service and induce rivalry among competitors. If they are powerful, they can depress the

profitability of the supplier industry. The bargaining power of a buyer group is high when:

 Its purchases are large relative to the sales of the seller.

 Its switching costs are low.

 It poses a strong threat of back ward integration.

e. Bargaining power of suppliers:

35
 Suppliers can exert a competitive force in an industry as they can raise prices, lower quality

and curtail the range of free services they provide. Suppliers have strong bargaining power when;

 There is hardly any viable substitute for the products supplied.

 Few suppliers dominate and the supplier group is more concentrated than the buyer group.

 The switching cost for the buyers is high.

 Suppliers do present a real threat of forward integration.

B. COMPANY ANALYSIS

Company analysis is concerned with fundamental analysis of equity shares. Fundamental

analysts take two somewhat different approaches in their search for mispriced securities. The

first approach involves estimating the intrinsic value and comparing the same with the

36
 prevailing market price to determine whether the security is underpriced or fairly priced or

overpriced. The second approach involves estimating a security’s expected return, given its

current price and intrinsic value, and then comparing it with the “appropriate” return for

securities with similar characteristics.

Company analysis is the last leg in the economy-industry-company analysis sequence. It

may be organized into two parts (a) a study of financials, and (b) a study of other factors.

Investment analysts start with a historical analysis of earning (and dividends), growth,

risk, and valuation and use company analysis as a foundation for developing the forecasts

required for estimating the intrinsic value.

TECHNICAL ANALYSIS

Technical analysis is radically different from fundamental analysis. While the

fundamental analyst believes that the market is 90 percent logical and 10 percent psychological,

the technical analyst assumes that it is 90 percent psychological and 10 percent logical. Technical

analysts don’t evaluate a large number of fundamental factors relating to the company, the

industry and the economy. Instead, they analyze internal market data with the help of charts and

graphs. Subscribing to the ‘castles-in-the-air’ approach, they view the investment game as an

exercise in anticipating the behavior of market participants. They look at charts to understand

what the market participants have been doing and believe that this provides a basis for predicting

future behavior.

The technical approach is the oldest approach to equity investment, dating back to the late

19th century. It continues to flourish in modern times as well. As an investor, we will often

37
encounter technical analysis because newspapers cover it, television programmes routinely call

technical experts for their comments, and investment advisory services circulate technical

reports. Technical analysis can be applied to commodities, currencies, bonds, and equity stocks,

our studies are restricted to equity stocks.

Technical analysis involves a study of market generated data like prices and volumes to

determine the future direction of price movement.

Martin J. Pring explains: “The technical approach to investing is essentially a reflection of

the idea that prices move in trends which are determined by the changing attitudes of investors

toward a variety of economic, monetary, political and psychological forces. The art of technical

analysis--for it is art—is to identify trend changes at an early stage and to maintain an investment

posture until the weight of the evidence indicates that the trend has been reversed.”

THE DOW THEORY

Originally proposed in the late nineteenth century by Charles H. Dow, the editor of the

Wall Street Journal, the Dow Theory is perhaps the oldest and best known theory of technical

analysis.

In the words of Charles Dow:

“The market is always considered as having three movements, all going at the same time.

The first is the narrow movement from day to day. The second is the short swing, running from

38
two weeks to a month or more; the third is the main movement, covering at least four years in its

duration.”

Proponents of the Dow Theory refer to the three movements as: (a) daily fluctuations that

are random day-to-day wiggles; (b) secondary movements or corrections that may last for a few

weeks to some months; and (c) primary trends representing bull and bear phases of the market.

An upward primary trend represents a bull market, whereas a downward primary trend

represents a bear market. A major upward move is said to occur when the high point of each rally

is higher than the low point of the preceding decline. Likewise, a major downward move is said

to occur when the high point of each rally is lower than the low point of the preceding decline.

The secondary movements represent technical correction. They represent adjustments to

the excesses that may have occurred in the primary movements. These movements are considered

quite significant in the application of the Dow Theory.

The daily fluctuations are considered to be minor significance. Even zealous technical

analysts do not usually try to forecast day-to-day movements in the market.

Bar and Line Charts

The bar chart, one of the simplest and most commonly used tool of technical analysis,

depicts the daily price range along with the closing price. In addition, it may show the daily

volume of transactions. The upper end of each bar represents the day’s highest price and the

lower end the day’s lowest price. The small cross across the bar marks the day’s closing price.

Technical analysts believe that certain formations or patterns observed on the bar char or

line chart have predictive value. The more important formations and their indications are

described below:

Head and Shoulders Top (HST) Pattern: As the name suggests, the HST formation has a left

shoulder, a head, and a right shoulder. The HST formation represents a bearish development. It
39
the price falls below the neckline (the line drawn tangentially to the left and right shoulders), a

price decline is expected. Hence, it is a signal to sell.

Inverse Head and Shoulders Top (IHST) Pattern: As the name indicates, the IHST formation

is the inverse of the HST formation. Hence, it reflects a bullish development. It the price rises

above the neck line, a price rise is expected. Hence, it is a signal to buy.

Triangle or Coil Formation: This formation represents a pattern of uncertainty. Hence, it is

difficult to predict which way the price will break out.

Flags and Pennants Formation: It typically signifies a pause after which the previous price

trend is likely to continue.

Double Top Formation: It represents a bearish development, signaling that the price is expected

to fall.

Double Bottom Formation: It reflects a bullish development, signaling that the price is expected

to rise.

Point and Figure Chart

More complex than a bar chart, a point and figure chart (PFC) has the following features:

40
Company
Profile

41
 COMPANY PROFILE

ITIFSL is emerging as one of the top most wealth management companies in India with a
daily turnover of over 200 crores and 116 branches spread all over the country. ITIFSL,
originally promoted by the Investment Trust of India, is now a part of the Sharyans and Inga
Group. The Sharyans Group has an impressive portfolio of businesses under its fold which
mainly fall under the real estate and financial services categories. The prominent subsidiaries of
this Group are Prebone Yamane (Country’s largest debt broking company), Intime Spectrum
(India’s largest Registry & Transfer Agents), and Collin Stewarts India Private Limited
(Portfolio Management Services & Research along with institutional broking operations for
Collin Stewarts which is the largest wealth management company in the UK). Under the

42
guidance of the Sharyans and Inga Group, ITIFSL will soon touch the pinnacles of success in
the financial services industry by being a dominant force in the broking as well as the
distribution arena. With an unblemished and reputed track record, ITIFSL is all set become an
imposing wealth management firm in the country by giving the best to its clients as well as
stakeholders.

ITI FSL has been set up to engage in

• Stock Broking
• Institutional Broking
• Derivatives
• Depository Services
• Distribution of Investment Products
• Distribution of Insurance
• Commodities Broking
Headquartered in Chennai, ITI FSL has a growing network of offices across several states to
ensure easy accessibility to our clients wherever they are. ITIFSL has over 116 Branch Offices
spread across the country to offer better reach and service to the investor. The company
currently marks its presence in the following regions:
• Andhra Pradesh

• Delhi

• Karnataka

• Maharashtra

• Madhya Pradesh

• Tamil Nadu

• West Bengal

43
Mission:
ITI FSL's mission is to deliver value with commitment. Emerging as one of the front-
line Brokerage Houses and a dominant force in the Distribution arena, we are continuously
engaged in the assessment of market conditions to balance risk and reward so as to optimize
returns to our investors.

Vision:
"To be the most Preferred Financial Advisor, Creator, Wealth Manager and to deliver the
Highest Standards of Service to customers and be Prominent in the horde of Finance
Companies offering similar services".

Why ITIFSL?

• ITIFSL’s services are offered under total confidentiality and integrity with the sole purpose

of maximizing returns for their clients.

• Equity Broking - Corporate Member of The Stock Exchange, Mumbai (BSE) and National

Stock Exchange of India Ltd. (NSE).

• Pan India reach - 380 terminals spread across 75 different locations, in semi urban, urban

and metropolitan areas.

• More than 100,000 retail clients serviced from the above locations

• ITIFSL have heavily invested in technology (customized and ready to use software)

involving front and back end operations offering seamless process and flawless execution

and raising our service levels.

44
• ITIFSL operate on an alert and well-defined system in risk management and settlement

mechanism

OFFERINGS

45
Research competency:

Our primary strengths lie in research and operational efficiency. The day-to-day operations are
managed by some of the best professionals in the industry having in-depth understanding of
underlying market trends and sound business practices The Research Team comprises of
competent professionals with vast experience, insightful analytical abilities and high standards of

46
integrity.

Some of research reports are as below:

Economic Outlook and Updates

Sector & Company Reports
Technical Recommendations
Daily Market Report
Daily Technical Outlook
Reports on New Fund Offerings
Weekly analysis of mutual funds – Fund Focus
Weekly debt report: Debt Dose
Monthly Newsletter - ITI Investment Flash
Monthly 4 Pager - ITI Wealth Wise

ITIFSL also offer daily technical calls through SMS to our clients free of charge

ADVANTAGES TO INVESTERS:

Why you need a financial planner?

The financial planner is someone who can help you invest across investment avenues based on
your risk profile and investment objectives. Post-investment, he monitors your investments and
ensures that you are on course to achieve your investment objectives. If necessary, he suggests
changes to your financial plan so that you are able to achieve your investment objectives as
planned.

Given the critical inputs provided by the financial planner in helping you achieve your financial
goals, it is important that you select the right financial planner. Here are the reasons why ITI is
the right planner for you…

Certification/Membership

More than anything else, this is a pre-requisite from the compliance point of view. Your financial
planner should be certified and registered as a broker or mutual fund agent with NSE, BSE,
AMFI etc. ITI FSL has Trading and Clearing Memberships with major Stock Exchanges in India
to offer broking services across market segments at all of the National-level Exchanges. ITI FSL

47
is a Depository Participant with CDSL. We also have memberships with commodity exchanges.
We have AMFI certified professionals to advice you on mutual funds.

Competence

Gone are the days when financial planning simply required delivering application forms. The
traditional "one-size fits all" approach is passé.

With the increasing list of investment avenues on offer, selecting the one that suits you the best is
becoming a challenge. To that end, competence and skill set are the basic criteria that investors
should look for in an investment planner.

With ITI fine staff of professionals, you can be sure that you will get the best advice and service
to achieve your financial goals. Furthermore, the recommendations offered by ITI are backed by
solid research.

Value-add services

In addition to financial planning, ITI provides related, value-add services that can assist you in
the investment process. On-line tools and calculators are some of our more popular value-add
services. These tools can help you keep track of your investments. These value-add services form
an integral part of our offering.

One-stop shop

Every individual has different needs and the same undergo a change over a period of time. The
financial planner should be capable enough to understand these needs and offer suitable products
to fulfill them. For this purpose, ITI provides you with the entire range of investment products
from stocks, mutual funds, bonds to fixed deposits. In other words, we offer a "one-stop"
solution for all your investment needs.

Accessibility

One of the common complaints from investors is that their financial planner is
unavailable/inaccessible and therefore unable to provide adequate/prompt service. This is
particularly common in a one-man setup where the financial planner's services begin and end
with him, with little or no backup.

If the financial planner is preoccupied with some important clients or if he re-locates, it leaves

48
you in a soup because your financial plan is in limbo. It is best to go with a financial planning
initiative that is run by teams (as opposed to one-man setups) to ensure continuity of your
financial plan. ITI has a team of professionals who are ever ready to serve you at any point of
time. We are spread across the country so that you can have access to us always

KEY LEARNINGS IN THE ORGANIZATION

 EQUITY

 FUTURES

 OPTIONS

 COMMODITIES

 IPO

 MUTUAL FUNDS

 SIP

 TAX SAVING SCHEMES IN INDIA

 ONLINE AND OFFLINE TRADING

 PORTFOLIO MANAGEMENT

49
 Data
Analysis

ANALYSIS

50
COMPANY PROFILE:

ICICI:

ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00 billion (US$ 81
billion) at March 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896 million) for the year
ended March 31, 2010. The Bank has a network of 2,044 branches and about 5,546 ATMs in
India and presence in 18 countries. ICICI Bank offers a wide range of banking products and
financial services to corporate and retail customers through a variety of delivery channels and
through its specialized subsidiaries in the areas of investment banking, life and non-life
insurance, venture capital and asset management. The Bank currently has subsidiaries in the
United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong
Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in
United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our
UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock
Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New
York Stock Exchange (NYSE).

History:
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution,
and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%
through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs
listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-
stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors
in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the
Government of India and representatives of Indian industry. The principal objective was to create
a development financial institution for providing medium-term and long-term project financing to
Indian businesses. In the 1990s, ICICI transformed its business from a development financial
institution offering only project finance to a diversified financial services group offering a wide
variety of products and services, both directly and through a number of subsidiaries and affiliates
like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial
institution from non-Japan Asia to be listed on the NYSE.

51
After consideration of various corporate structuring alternatives in the context of the emerging
competitive scenario in the Indian banking industry, and the move towards universal banking, the
managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI
Bank would be the optimal strategic alternative for both entities, and would create the optimal
legal structure for the ICICI group's universal banking strategy. The merger would enhance value
for ICICI shareholders through the merged entity's access to low-cost deposits, greater
opportunities for earning fee-based income and the ability to participate in the payments system
and provide transaction-banking services. The merger would enhance value for ICICI Bank
shareholders through a large capital base and scale of operations, seamless access to ICICI's
strong corporate relationships built up over five decades, entry into new business segments,
higher market share in various business segments, particularly fee-based services, and access to
the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of
ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance
subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with
ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January
2002, by the High Court of Gujarat at Ahmadabad in March 2002, and by the High Court of
Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger,
the ICICI group's financing and banking operations, both wholesale and retail, have been
integrated in a single entity.

Board of Directors:

ICICI Bank's Board members include eminent individuals with a wealth of experience in
international business, management consulting, banking and financial services

Director's Profiles

Chanda Kochhar
Managing Director and Chief Executive Officer

52
 N.S. Kannan K. Ramkumar Rajiv Sabharwal
Executive Director & CFO Executive Director Executive Director

Board Members:

Mr. K. V. Kamath, Chairman

Mr. Sridar Iyengar

Mr. Homi R. Khusrokhan

Dr. Anup K. Pujari

Mr. M.S. Ramachandran

Dr. Tushaar Shah

Mr. M.K. Sharma

Mr. V. Sridar

Mr. V. Prem Watsa

Ms. Chanda D. Kochhar,

Managing Director & CEO

Mr. N. S. Kannan,
Executive Director & CFO

53
Mr. K. Ramkumar,
Executive Director

Mr. Rajiv Sabharwal,

Executive Director

Investor Relations:

All the latest, in-depth information about ICICI Bank's financial performance and
business initiatives.

ICICI Bank disseminates information on its operations and initiatives on a regular basis.

The ICICI Bank website serves as a key investor awareness facility, allowing

stakeholders to access information on ICICI Bank at their convenience. ICICI Bank's

dedicated investor relations personnel play a proactive role in disseminating information

to both analysts and investors and respond to specific queries.

BALANCE SHEET AS AT MARCH 31, 2010

PARTICULARS As at As at
March March 31, 2009
31, 2010 Rs. in crores
Rs.in crores
SOURCES OF FUNDS:

54
 11148.89 11132.90
Share Capital
0.00 0.00
Share warrants and outstanding
505034.77 484197.29
Total reserve
2020165.97 2183478.25
Deposits
942635.69 931554.54
Borrowings
155011.83 182646.64
Other liabilities and provisions

TOTAL LIABILITIES 3633997.15 3793009.62

APPLICATION OF FUNDS:
Cash and balance with reserve bank 275142.92 175363.94
of india
Balance with banks and money at call 113594.02 124302.30
and short notice
1208928.01 1030583.08
Investments
1812055.97 2183108.49
Advances
71141.15 74437.06
(a) Gross Block
39014.25 36420.85
(b) Less:- Accumulated Depreciation
0 0
Less: impairment of assets
32126.90 38016.21
(c) Net Block
Lease adjustment 0 0
0 0
(d) Capital Work-in-Progress

OTHER ASSETS 3633997.15 3793009.62

Contingent liability 7270840.59 8346830.03

Bills of collection 64749.54 60004.38

55
CASH FLOW STATEMENT
(Rs. in Million)

Year ended March 31,

2010 2009

Net profit before tax 53453.22 51169.69

Adjustments for expenses and provisions 52409.07 55240.66

Adjustments for liabilities and assets -71184.82 -232835.55

Cash flow from investing activities 61507.32 38578.81

Cash flow from financing activities 13826.17 16253.59

Effect of exchange fluctuation on translation reserve -4954.30 6306.85

Net increase (decrease) in cash and cash equivalents 94025.60 -87052.50

Cash and cash equivalents at 1st April 299665.64 280411.29

Cash and cash equivalents at 31st march 388736.94 299665.64

DATE CLOSING PRICE

1st-Nov 1243.47
2nd-Nov 1250.79
3rd-Nov 1258.15
4th-Nov 1274.50
5th-Nov 1285.02
8th-Nov 1274.50
9th-Nov 1279
10thNov 1271.52

56
11thNov 1267.04
12thNov 1240.55
15thNov 1243.47
16thNov 1242.01
18th-Nov 1210.35
19th-Nov 1168.47
22ndNov 1197.63
23rdNov 1175.34
24th-Nov 1173.97
25th-Nov 1158.90
26th-Nov 1156.19
29th-Nov 1164.36
30th-Nov 1157.54

57
INFERENCE:
The above graph represents the daily fluctuations in the market which is one of the major
proponent in Dow Theory. It is difficult to forecast day-to-day movements in the market. In the
above 15 days of trading, the share price of ICICI was highest on 5th Nov.- Rs.1285.02 and the
lowest was on 25th Nov. – Rs. 1156.19.

DATE CLOSING SUM OF THREE AVERAGE

PRICE YEARS
1st-Nov 1243.47
2nd-Nov 1250.79 3752.41 1250.80
3rd-Nov 1258.15 3783.44 1261.14
4th-Nov 1274.50 3817.67 1272.55
5th-Nov 1285.02 3834.02 1278
8th-Nov 1274.50 2550.52 850.17
9th-Nov 1279 3817.56 1272.52
10thNov 1271.52 3779.11 1259.70
11thNov 1267.04 3751.06 1250.35
12thNov 1240.55 3726.03 1242.01
15thNov 1243.47 3695.83 1231.94
16thNov 1242.01 3620.83 1206.94
18th-Nov 1210.35 3576.45 1192.15
19th-Nov 1168.47 3541.44 1180.48
22ndNov 1197.63 3546.94 1182.31
23rdNov 1175.34 3508.21 1169.40
24th-Nov 1173.97 3489.06 1163.02
25th-Nov 1158.90 3479.45 1159.81
26th-Nov 1156.19 3478.09 1159.36
29th-Nov 1164.36
30th-Nov 1157.54

58
INFERENCES:

A 15-day moving average of daily prices may be used to detect a short term trend. This stock

price line stands as an indicator to an investor whether to buy the share or to sell it. In the above

15-day average the highest 3-year moving average is on 05th Nov.

59
STATE BANK OF INDIA:

Company Profile:

The evolution of State Bank of India can be traced back to the first decade of the 19th century. It
began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was
redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-
stock bank of the British India, established under the sponsorship of the Government of Bengal.
Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras
(established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the
modern banking scenario in India, until when they were amalgamated to form the Imperial Bank
of India, on 27 January1921

State Bank of India is an India-based bank. In addition to banking, the Company, through
its subsidiaries, provides a range of financial services, which include life insurance, merchant
banking, mutual funds, credit card, factoring, security trading, pension fund management and
primary dealership in the money market. It operates in four business segments: Treasury,
Corporate/Wholesale Banking, Retail Banking and Other Banking Business. The Treasury
segment includes the investment portfolio and trading in foreign exchange contracts and
derivative contracts. The Corporate/Wholesale Banking segment comprises the lending activities
of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management
Group. The Retail Banking segment consists of branches in National Banking Group, which
primarily includes personal banking activities, including lending activities to corporate customers
having banking relations with branches in the National Banking Group.

History:

An important turning point in the history of State Bank of India is the launch of the first Five
Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in
general and the rural sector of the country, in particular. Until the Plan, the commercial banks of
the country, including the Imperial Bank of India, confined their services to the urban sector.
Moreover, they were not equipped to respond to the growing needs of the economic revival
taking shape in the rural areas of the country. Therefore, in order to serve the economy as a whole
and rural sector in particular, the All India Rural Credit Survey Committee recommended the
formation of a state-partnered and state-sponsoredbank.

The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of
India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an
Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI)

60
was established on 1 July 1955. This resulted in making the State Bank of India more powerful,
because as much as a quarter of the resources of the Indian banking system were controlled
directly by the State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in
1959. The Act enabled the State Bank of India to make the eight former State-associated banks as
its subsidiaries.

The State Bank of India emerged as a pacesetter, with its operations carried out by the 480 offices
comprising branches, sub offices and three Local Head Offices, inherited from the Imperial Bank.
Instead of serving as mere repositories of the community's savings and lending to creditworthy
parties, the State Bank of India catered to the needs of the customers, by banking purposefully.
The bank served the heterogeneous financial needs of the planned economic development.

INVESTOR RELATIONS :

State Bank of India, the country’s largest commercial Bank in terms of profits, assets, deposits,
branches and employees, welcomes you to its ‘Investors Relations’ Section. SBI, with its heritage
dating back to the year 1806, strives to continuously provide latest and up to date information on
its financial performance. It is our endeavour to walk on the path of transparency and allow
complete access to all the stakeholders enabling total awareness about the Bank. The Bank
communicates with the stakeholders through a variety of channels, such as through e-mail,
website, conference call, one-on-one meeting, analysts’ meet and attendance at Investor
Conference throughout the world.
Please find below Bank’s financial results, analysis of performance and other highlights which
will be of interest to Investors, Fund Managers and Analysts. SBI has always been fundamentally
strong in its core business which is mirrored in its results – year after year.

Board of directors:

61
1 Mr. P Bhatt Chairman / Chair Person

2 Dr.Ashok Jhunjhunwala Director

Director
3 Dr.(Mrs.)Vasantha Bharucha
Director
4 Mrs.Shyamala Gopinath
Director
5 Mr.S Venkatachalam
Director
6 Mr.Ashok Chawla
Director
7 Mr.D Sundaram
Director
8 Mr.Dileep C Choksi
Director
9 Dr.Rajiv Kumar
Managing Director
10 Mr.R Sridharan

Branches:
The corporate centre of SBI is located in Mumbai. In order to cater to different functions, there
are several other establishments in and outside Mumbai, apart from the corporate centre. The
bank boasts of having as many as 14 local head offices and 57 Zonal Offices, located at major
cities throughout India. It is recorded that SBI has about 10000 branches, well networked to cater
to its customers throughout India.

ATMServices:

SBI provides easy access to money to its customers through more than 8500 ATMs in India. The
Bank also facilitates the free transaction of money at the ATMs of State Bank Group, which
includes the ATMs of State Bank of India as

Well as the Associate Banks –

State Bank of Bikaner & Jaipur,
State Bank of Hyderabad,
State Bank of Indore, etc.

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You may also transact money through SBI Commercial and International Bank Ltd by using the
State Bank ATM-cum-Debit (Cash Plus) card.

Subsidiaries:

The State Bank Group includes a network of eight banking subsidiaries and several non-banking
subsidiaries. Through the establishments, it offers various services including merchant banking
services, fund management, factoring services, primary dealership in government securities,
credit cards and insurance.

The eight banking subsidiaries are:

• State Bank of Bikaner and Jaipur (SBBJ)

• State Bank of Hyderabad (SBH)
• State Bank of India (SBI)
• State Bank of Indore (SBIR)
• State Bank of Mysore (SBM)
• State Bank of Patiala (SBP)
• State Bank of Saurashtra (SBS)
• State Bank of Travancore (SBT)

Personal Banking:

• SBI Term Deposits SBI Loan For Pensioners

• SBI Recurring Deposits Loan Against Mortgage Of Property
• SBI Housing Loan Against Shares & Debentures
• SBI Car Loan Rent Plus Scheme
• SBI Educational Loan Medi-Plus Scheme

Other Services:

• Agriculture/Rural Banking
• NRI Services
• ATM Services
• Demat Services
• Corporate Banking
• Internet Banking
• Mobile Banking
• International Banking

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• Safe Deposit Locker
• RBIEFT
• E-Pay
• E-Rail
• SBI Vishwa Yatra Foreign Travel Card
• Broking Services
• Gift Cheques

BALANCE SHEET AS AT MARCH 31, 2010

PARTICULARS As at As at
March March 31, 2009
31, 2010 Rs. in crores
Rs.in crores

SOURCES OF FUNDS:
6348.83 6348.80
Share Capital
0.00 0.00
Share warrants and outstanding
653143.16 573128.16
Total reserve
8041162.27 7420731.28
Deposits
1030116.01 840579.29
Borrowings
803367.04 9644320.81
Other liabilities and provisions

TOTAL LIABILITIES 10534137.31 9644320.81

APPLICATION OF FUNDS:
Cash and balance with reserve bank 612908.65 555461.73
of india
Balance with banks and money at call 348929.76 488576.26
and short notice
2857900.71 2759539.57
Investments
6319141.52 5425032.04
Advances

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 (a) Gross Block 118316.27 104030.58

(b) Less:- Accumulated Depreciation 77141.07 68310.06

Less: impairment of assets 0 0

(c) Net Block 41175.20 35720.52

Lease adjustment 2.03 23.57

(d) Capital Work-in-Progress 2951.84 2634.37

Other assets 351127.60 377332.74

Total assets 10534137.31 9644320.81

Contingent liability 5484468.85 7236997.57

Bills of collection 479223.28 438705.67

CASH FLOW STATEMENT

(Rs. in Million)

Year ended March 31,

2010 2009

Net profit before tax 139260.96 141806.43

Adjustments for expenses and provisions 51863.33 85529.74

Adjustments for liabilities and assets -140025.50 140255.77

Cash flow from investing activities -17615.23 -16519.30

Cash flow from financing activities -33596.71 50973.84

Effect of exchange fluctuation on translation reserve -12937.75 20581.62

Net increase (decrease) in cash and cash equivalents -69261.82 -329251.83

65
 1044037.9
st
Cash and cash equivalents at 1 April 9 674663.35

Cash and cash equivalents at 31st march 961838.42 1044037.99

DATE CLOSING PRICE

1st-Nov 3223.15
2nd-Nov 3245.71
3rd-Nov 3294.58
4th-Nov 3462.86
5th-Nov 3501.02
8th-Nov 3511.50
9th-Nov 3347.52
10thNov 3297.86
11thNov 3255.42
12thNov 3178.50
15thNov 3184.84
16thNov 3197.56
18th-Nov 3115.79
19th-Nov 3069.57
22ndNov 3060.41
23rdNov 3015.02
24th-Nov 2979.18
25th-Nov 2894.33
26th-Nov 2920.40
30th-Nov 3000.03

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INFERENCE:
The above graph represents the daily fluctuations in the market which is one of the major
proponent in Dow Theory. It is difficult to forecast day-to-day movements in the market. In the
above 15 days of trading, the share price of ICICI was highest on 5th Nov.- Rs.3501.02 and the
lowest was on 25th Nov. – Rs. 2894.33.

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DATE CLOSING SUM OF THREE AVERAGE
PRICE YEARS
1st-Nov 3223.15
2nd-Nov 3245.71 9763.44 3254.48
3rd-Nov 3294.58 10003.15 3334.38
4th-Nov 3462.86 10258.46 3419.48
5th-Nov 3501.02 10475.38 3491.79
8th-Nov 3511.50 10360.04 3453.34
9th-Nov 3347.52 10156.88 3385.62
10thNov 3297.86 9900.8 3300.26
11thNov 3255.42 9731.78 3243.92
12thNov 3178.50 9618.76 3206.25
15thNov 3184.84 9560.9 3186.96
16thNov 3197.56 9498.19 3166.06
18th-Nov 3115.79 9382.92 3127.64
19th-Nov 3069.57 9245.77 3081.92
22ndNov 3060.41 9145 3048.33
23rdNov 3015.02 9054.61 3018.20
24th-Nov 2979.18 8888.53 2962.84
25th-Nov 2894.33 8793.91 2931.30
26th-Nov 2920.40 8814.76 2938.25
30th-Nov 3000.03

68
INFERENCES:

A 15-day moving average of daily prices may be used to detect a short term trend. This stock

price line stands as an indicator to an investor whether to buy the share or to sell it. In the above

15-day average the highest 3-year moving average is on 05th Nov.

FINDINGS

From the above analysis, it is found that:

• ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00 billion (US$

81 billion) at March 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896 million) for

the year ended March 31, 2010

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• State Bank of India, the country’s largest commercial Bank in terms of profits, assets,
deposits, branches and employees. with total assets of Rs. 10534137.31 billion at march
31,2010 and profit after tax Rs. 961838.42 billion.
• Comparison to ICICI and SBI share price analysis, it is found that SBI has highest share
price value because of its diversification. Like financial services, which include life
insurance, merchant banking, mutual funds, credit card, factoring, security trading,
pension fund management and primary dealership in the money market .
• If the stock price line falls below the moving average line, the investor should purchase

the stock because the intrinsic value is more than the market price. That means the stock

is undervalued.

• If the stock price line rises above the moving average line, the investor should sell the

stock as the intrinsic value is more than the market price. Therefore, the stock is

overvalued.

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 Summary

SUMMARY

Investing in financial securities is now considered to be one of the best avenues for

investing one’s savings while it is acknowledged to be one of the most risky avenues of

investment. Even Indian Government is planning to encourage people in rural areas to invest in

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equity. This will help the markets to stabilize by tapping the rural areas and decreases the

dependency on Foreign Institutional Investors.

The factors which were studied under this are to know about stock markets in India, how

they work, prerequisites to enter the stock markets, market design, stock selection, when to buy

or sell a stock, how to invest, knowing about market intermediaries.

For successful investment factors like timing, selection, setting targets, avoiding

speculation and constant review of portfolio is advised.

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 Suggestions

SUGGESTIONS
Suggestions to an investor for reaping good returns in Equity Investment

73
 Proper scientific way of investigation should be undertaken about sector and its players

before investment

 Clear targets should be set before investment

 Stock pickup should be always selective and should not depend on rumors of the market

 Define price range first before buying and selling shares

 Before buying and selling shares latest price movement trends should be analyzed

 Speculation is not advised in the market

 Individual Risk tolerance should be known and then be ready for unexpected

 Constant proper review of portfolio should be done and wherever required buying and

selling of shares should be done.

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Conclusions

75
 CONCLUSIONS
Economic liberalization has accelerated the pace of development in the securities market. In

India, the role of securities market has undergone structural transformation with the introduction

of computerized online trading and interconnected market system.

Investment in securities such as shares, debentures and bonds is profitable, but also

involves great deal of risk. Even Indian Government wants to encourage Equity Investment.

According to Fundamental Analysis:

Economy:

While analyzing stock, investor should consider GNP, Price conditions, Economy, Housing,

Construction Activity, Employment, Accumulation of inventories, Personal Disposable Income,

Personal savings, Interest rates, Balance of Trade, Strength of the Rupee in Forex market and

Corporate Taxation (Direct and Indirect)

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Sector Analysis:

It is advised to invest in a sector that is either in a pioneering stage or in its expansion stage. It is

advisable to quickly get out of sectors which are in the stagnation stage prior to its lapse into the

decline stage. The particular phase or stage of a sector can be determined in terms of sales,

profitability and their growth rates amongst other factors.

Company Analysis:

In company analysis, history of the company and line of business, Product portfolio’s strength,

Market share, Top Management, Intrinsic Values like Patents and Trademarks held, Foreign

collaboration, its need and availability for future, Quality of competition in the market, present

and future, Future business plans and projects, Level of trading of the company’s listed scrip,

EPS, its growth and rating vis-à-vis other companies in the industry, P/E Ratio, Growth in Sales

are analyzed.

According to technical analysis:

The fundamental analysis is the determination of price based on future earnings; where as the

price of a security represents a consensus. The price at which an investor is willing to buy or sell

depends primarily on his expectations. For this purpose technical analysis also forms a strong

tool in analyzing a company where the price movements are recorded in charts and analyzed.

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LIMITATIONS OF THE STUDY

 The study is confined to only one sector.

 All the limitations of Fundamental Analysis, Technical Analysis are applicable to the

study.

 The factors which affect the markets and intangible are not considered.

 Risk perception is considered to be moderate which may not be acceptable to all.

 The data for the study considered is of past two years, so analysis is restricted to that

period only.

 In the application of Dow Theory, only daily price fluctuations were considered due to

time constraint.

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Bibliography

79
 BIBILIOGRAPHY
BOOKS REFFERED:

 Security Analysis and Portfolio Management

- Prasanna Chandra.

 Investments

- William, Sharpe

WEBSITES:

www.about.stocks.com

www.nseindia.com

www.buzzingstocks.com

www.moneycontrol.com

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