Trends Of Equity Market----iifl-2018.docx

+INTRODUCTION India is a developing country. Nowadays many people are interested to invest in financial markets especially on equities to get high returns, and to save tax in honest way. Equities are playing a major role in contribution of capital to the business from the beginning. Since the introduction of shares concept, large numbers of investors are showing interest to invest in stock market. In an industry plagued with skepticism and a stock market increasingly difficult to predict and contend with, if one looks hard enough there may still be a genuine aid for the Day Trader and Short Term Investor. The price of a security represents a consensus. It is the price at which one person agrees to buy and another agrees to sell. The price at which an investor is willing to buy or sell depends primarily on his expectations. If he expects the security's price to rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple statements are the cause of a major challenge in forecasting security prices, because they refer to human expectations. As we all know firsthand, humans expectations are neither easily quantifiable nor predictable. If prices are based on investor expectations, then knowing what a security should sell for (i.e., fundamental analysis) becomes less important than knowing what other investors expect it to sell for. That's not to say that knowing what a security should sell for isn't important--it is. But there is usually a fairly strong consensus of a stock's future earnings that the average investor cannot disprove Fundamental analysis and technical analysis can co-exist in peace and complement each other. Since all the investors in the stock market want to make the maximum profits possible, they just cannot afford to ignore either fundamental or technical analysis.

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NEED OF THE STUDY To start any business capital plays major role. Capital can be acquired in two ways by issuing shares or by taking debt from financial institutions or borrowing money from financial institutions. The owners of the company have to pay regular interest and principal amount at the end. Stock is ownership in a company, with each share of stock representing a tiny piece of ownership. The more shares you own, the more of the company you own. The more shares you own, the more dividends you earn when the company makes a profit. In the financial world, ownership is called “Equity”. Advantages of selling stock: 

A company can raise more capital than it could borrow.

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A company does not have to make periodic interest payments to creditors.

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A company does not have to make principal payments Stock/shares play a major role in acquiring capital to the business in return

investors are paid dividends to the shares they own. The more shares you own the more dividends you receive. The role of equity analysis is to provide information to the market. An efficient market relies on information: a lack of information creates inefficiencies that result in stocks being misrepresented (over or under valued). This is valuable because it fills information gaps so that each individual investor does not need to analyze every stock thereby making the markets more efficient.

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OBJECTIVES OF THE STUDY The objective of this project is to deeply analyze our Banking Sector for investment purpose by monitoring the growth rate and performance on the basis of historical data. The main objectives of the Project study are: 

To study the overall growth of Indian Economy which is growing at a fast pace.

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Detailed analysis of Banking Sector which is gearing towards international standards

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Analyze the impact of qualitative factors on industry’s and company’s prospects

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Comparative analysis of three main banks in the industry ICICI Bank, HDFC Bank and Axis Banks through fundamental analysis.

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Suggesting as to which company’s shares would be best for an investor to invest.

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SCOPE OF THE STUDY The scope of the study is identified after and during the study is conducted. The project is based on tools like fundamental analysis and ratio analysis. Further, the study is based on information of last five years. 

The analysis is made by taking into consideration three banks i.e. ICICI Bank,

HDFC Bank and AXIS Banks. 

The equity analysis of banking stocks study is carried out in Chaitanyapuri office

of INDIA INFOLINE LIMITEDin Hyderabad 

The scope of the study is limited for a period of five years.

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The scope is limited to only the fundamental analysis of the chosen stocks.

IMPORTANCE OF THE STUDY Decisions like whether you should buy or sell when trading in the share market is a difficult task to do. It requires split-hair analysis of the market. To do so one also needs to have excellent understanding of the market. Equity analysis forms an integral part of the share trading experience. Equity analysis decides the stance one would take in the share trading industry. Finding out the highs and lows in the market and analyzing the equity is of utmost importance before making any sort of investment. Technical analysis and fundamental analysis form part of the equity analysis.

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PERIOD OF THE STUDY

Made a study for the period of 45 days.

RESEARCH METHODOLOGY Research design or research methodology is the procedure of collecting, analyzing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion. The methodology used in the study for the completion of the project and the fulfillment of the project objectives. The sample of the stocks for the purpose of collecting secondary data has been selected on the basis of Random Sampling. The stocks are chosen in an unbiased manner and each stock is chosen independent of the other stocks chosen. The stocks are chosen from the banking sector. The sample size for the number of stocks is taken as three for fundamental analysis of stocks as fundamental analysis is very exhaustive and requires detailed study. Research Findings: Considerable amount of time was spent to collate the findings of the research. The findings had to be stated. Interpretation: Interpretation refers to the task of drawing inference from the colleted facts after an analytical study, in fact it is a search for broader meaning of research findings it is through interpretation that the researcher can well understand the abstract principle that respondents beneath his findings. The simple statistical tool will be used to analyze the data collection, and bar graphs and pie charts have been used to illustrate the findings diagrammatically.

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LIMITATIONS Every study has its own limitations in terms of methodology and available resources for its conduct. This study was not an exception and was carried out under the following limitations: 

This study has been conducted purely to understand Equity analysis for investors.

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The study is restricted to three companies, i.e. ICICI, HDFC and Axis bank, based

on Fundamental analysis. 

The study is limited to the companies having equities.

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Detailed study of the topic was not possible due to limited size of the project.

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There was a constraint with regard to time allocation for the research study i.e. for a period of 45 days.

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Topic is vast but availability of information and timeline is short.

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Suggestions and conclusions are based on the limited data of five years.

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CHAPTER II THEORETICAL FRAMEWORK

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SECURITY ANALYSIS Investment success is pretty much a matter of careful selection and timing of stock purchases coupled with perfect matching to an individuals risk tolerance. In order to carry out selection, timing and matching actions an investor must conduct deep security analysis. Investors purchase equity shares with two basic objectives: 1.

To make capital profits by selling shares at higher prices.

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To earn dividend income. These two factors are affected by a host of factors. An investor has to carefully

understand and analyze all these factors. There are basically two approaches to study security prices and valuation i.e. fundamental analysis and technical analysis The value of common stock is determined in large measure by the performance of the firm that issued the stock. If the company is healthy and can demonstrate strength and growth, the value of the stock will increase. When values increase then prices follow and returns on an investment will increase. However, just to keep the savvy investor on their toes, the mix is complicated by the risk factors involved. Fundamental analysis examines all the dimensions of risk exposure and the probabilities of return, and merges them with broader economic analysis and greater industry analysis to formulate the valuation of a stock.

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FUNDAMENTAL ANALYSIS Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. It is the study of economic, industry and company conditions in an effort to determine the value of a company’s stock. Fundamental analysis typically focuses on key statistics in company’s financial statements to determine if the stock price is correctly valued. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements. Fundamental analysis is the cornerstone of investing. The basic philosophy underlying the fundamental analysis is that if an investor invests re.1 in buying a share of a company, how much expected returns from this investment he has. The fundamental analysis is to appraise the intrinsic value of a security. It insists that no one should purchase or sell a share on the basis of tips and rumors. The fundamental approach calls upon the investors to make his buy or sell decision on the basis of a detailed analysis of the information about the company, about the industry, and the economy. It is also known as “top-down approach”. This approach attempts to study the economic scenario, industry position and the company expectations and is also known as “economic-industrycompany approach (EIC approach)”. Thus the EIC approach involves three steps: 1.

Economic analysis

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Industry analysis

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Company analysis

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COMPANY ANALYSIS INDUSTRY ANALYSIS ECONOMIC ANALYSIS

I. ECONOMIC ANALYSIS The level of economic activity has an impact on investment in many ways. If the economy grows rapidly, the industry can also be expected to show rapid growth and vice versa. When the level of economic activity is low, stock prices are low, and when the level of economic activity is high, stock prices are high reflecting the prosperous outlook for sales and profits of the firms. The analysis of macro economic environment is essential to understand the behavior of the stock prices. The commonly analyzed macro economic factors are as follows: Gross Domestic Product (GDP): GDP indicates the rate of growth of the economy. It represents the aggregate value of the goods and services produced in the economy. It consists of personal consumption expenditure, gross private domestic investment and government expenditure on goods and services and net exports of goods and services. The growth rate of economy points out the prospects for the industrial sector and the return investors can expect from investment in shares. The higher growth rate is more favorable to the stock market. Savings and investment: It is obvious that growth requires investment which in turn requires substantial amount of domestic savings. Stock market is a channel through which the savings are made available to the corporate bodies. Savings are distributed over 10

various assets like equity shares, deposits, mutual funds, real estate and bullion. The savings and investment patterns of the public affect the stock to a great extent. Inflation: Along with the growth of GDP, if the inflation rate also increases, then the real growth would be very little. The effects of inflation on capital markets are numerous. An increase in the expected rate of inflation is expected to cause a nominal rise in interest rates. Also, it increases uncertainty of future business and investment decisions. As inflation increases, it results in extra costs to businesses, thereby squeezing their profit margins and leading to real declines in profitability. Interest rates: The interest rate affects the cost of financing to the firms. A decrease in interest rate implies lower cost of finance for firms and more profitability. More money is available at a lower interest rate for the brokers who are doing business with borrowed money. Availability of cheap funds encourages speculation and rise in the price of shares. Tax structure: Every year in March, the business community eagerly awaits the Government’s announcement regarding the tax policy. Concessions and incentives given to a certain industry encourage investment in that particular industry. Tax relief’s given to savings encourage savings. The type of tax exemption has impact on the profitability of the industries. Infrastructure facilities: Infrastructure facilities are essential for the growth of industrial and agricultural sector. A wide network of communication system is a must for the growth of the economy. Regular supply of power without any power cut would boost the production. Banking and financial sectors also should be sound enough to provide adequate support to the industry. Good infrastructure facilities affect the stock market favorably.

II. INDUSTRY ANALYSIS An industry is a group of firms that have similar technological structure of production and produce similar products and Industry analysis is a type of business research that focuses on the status of an industry or an industrial sector (a broad industry classification, like "manufacturing"). Irrespective of specific economic situations, some industries might be expected to perform better, and share prices in these industries may not decline as much as in other industries. This identification of economic and industry specific factors influencing share prices will help investors to identify the shares that fit individual expectations 11

Industry Life Cycle: The industry life cycle theory is generally attributed to Julius Grodensky. The life cycle of the industry is separated into four well defined stages.

1. Pioneering stage: The prospective demand for the product is promising in this stage and the technology of the product is low. The demand for the product attracts many producers to produce the particular product. There would be severe competition and only fittest companies survive this stage. The producers try to develop brand name, differentiate the product and create a product image. In this situation, it is difficult to select companies for investment because the survival rate is unknown. 2. Rapid growth stage: This stage starts with the appearance of surviving firms from the pioneering stage. The companies that have withstood the competition grow strongly in market share and financial performance. The technology of the production would have improved resulting in low cost of production and good quality products. The companies have stable growth rate in this stage and they declare dividend to the shareholders. It is advisable to invest in the shares of these companies. 3. Maturity and stabilization stage: the growth rate tends to moderate and the rate of growth would be more or less equal to the industrial growth rate or the gross domestic product growth rate. Symptoms of obsolescence may appear in the technology. To keep going, technological innovations in the production process and products should be introduced. The investors have to closely monitor the events that take place in the maturity stage of the industry. 4. Decline stage: demand for the particular product and the earnings of the companies in the industry decline. It is better to avoid investing in the shares of the low growth industry even in the boom period. Investment in the shares of these types of companies leads to erosion of capital. Growth of the industry: The historical performance of the industry in terms of growth and profitability should be analyzed. The past variability in return and growth in reaction to macro economic factors provide an insight into the future. Nature of competition: Nature of competition is an essential factor that determines the demand for the particular product, its profitability and the price of the concerned company scrips. The companies' ability to withstand the local as well as the multinational competition 12

counts much. If too many firms are present in the organized sector, the competition would be severe. The competition would lead to a decline in the price of the product. The investor before investing in the scrip of a company should analyze the market share of the particular company's product and should compare it with the top five companies. SWOT analysis: SWOT analysis represents the strength, weakness, opportunity and threat for an industry. Every investor should carry out a SWOT analysis for the chosen industry. Take for instance, increase in demand for the industry’s product becomes its strength, presence of numerous players in the market, i.e. competition becomes the threat to a particular company. The progress in R & D in that industry is an opportunity and entry of multinationals in the industry is a threat. In this way the factors are to be arranged and analyzed. III. COMPANY ANALYSIS In the company analysis the investor assimilates the several bits of information related to the company and evaluates the present and future values of the stock. The risk and return associated with the purchase of the stock is analyzed to take better investment decisions. The present and future values are affected by a number of factors. Competitive edge of the company: Major industries in India are composed of hundreds of individual companies. Though the number of companies is large, only few companies control the major market share. The competitiveness of the company can be studied with the help of the following; 

Market share: The market share of the annual sales helps to determine a

company’s relative competitive position within the industry. If the market share is high, the company would be able to meet the competition successfully. The companies in the market should be compared with like product groups otherwise, the results will be misleading. 

Growth of sales: The rapid growth in sales would keep the shareholder in a better

position than one with stagnant growth rate. Investors generally prefer size and growth in sales because the larger size companies may be able to withstand the business cycle rather than the company of smaller size. 

Stability of sales: If a firm has stable sales revenue, it will have more stable

earnings. The fall in the market share indicates the declining trend of company, even if the

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sales are stable. Hence the stability of sales should be compared with its market share and the competitor’s market share. Earnings of the company: Sales alone do not increase the earnings but the costs and expenses of the company also influence the earnings. Further, earnings do not always increase with increase in sales. The company’s sales might have increased but its earnings per share may decline due to rise in costs. Hence, the investor should not only depend on the sales, but should analyze the earnings of the company. Financial analysis: The best source of financial information about a company is its own financial statements. This is a primary source of information for evaluating the investment prospects in the particular company’s stock. Financial statement analysis is the study of a company’s financial statement from various viewpoints. The statement gives the historical and current information about the company’s operations. Historical financial statement helps to predict the future and the current information aids to analyze the present status of the company. The two main statements used in the analysis are Balance sheet and Profit and Loss Account. The balance sheet is one of the financial statements that companies prepare every year for their shareholders. It is like a financial snapshot, the company's financial situation at a moment in time. It is prepared at the year end, listing the company's current assets and liabilities. It helps to study the capital structure of the company. It is better for the investor to avoid a company with excessive debt component in its capital structure. From the balance sheet, liquidity position of the company can also be assessed with the information on current assets and current liabilities. Ratio analysis: Ratio is a relationship between two figures expressed mathematically. Financial ratios provide numerical relationship between two relevant financial data. Financial ratios are calculated from the balance sheet and profit and loss account. The relationship can be either expressed as a percent or as a quotient. Ratios summarize the data for easy understanding, comparison and interpretations. Ratios for investment purposes can be classified into profitability ratios, turnover ratios, and leverage ratios. Profitability ratios are the most popular ratios since investors prefer to measure the present profit performance and use this information to forecast the future strength of the company. The most often used profitability ratios are return on assets, price

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earnings multiplier, price to book value, price to cash flow, and price to sales, dividend yield, return on equity, present value of cash flows, and profit margins. a) Return on Assets (ROA) ROA is computed as the product of the net profit margin and the total asset turnover ratios. ROA = (Net Profit/Total income) x (Total income/Total Assets) This ratio indicates the firm's strategic success. Companies can have one of two strategies: cost leadership, or product differentiation. ROA should be rising or keeping pace with the company's competitors if the company is successfully pursuing either of these strategies, but how ROA rises will depend on the company's strategy. ROA should rise with a successful cost leadership strategy because the company’s increasing operating efficiency. An example is an increasing, total asset, turnover ratio as the company expands into new markets, increasing its market share. The company may achieve leadership by using its assets more efficiently. With a successful product differentiation strategy, ROA will rise because of a rising profit margin. b) Return on Investment (ROI) ROI is the return on capital invested in business, i.e., if an investment Rs 1 crore in men, machines, land and material is made to generate Rs. 25 lakhs of net profit, then the ROI is 25%. The computation of return on investment is as follows: Return on Investment (ROI) = (Net profit/Equity investments) x 100 As this ratio reveals how well the resources of a firm are being used, higher the ratio, better are the results. The return on shareholder’s investment should be compared with the return of other similar firms in the same industry. The inert-firm comparison of this ratio determines whether the investments in the firm are attractive or not as the investors would like to invest only where the return is higher. c) Return on Equity Return on equity measures how much an equity shareholder's investment is actually earning. The return on equity tells the investor how much the invested rupee is earning from the company. The higher the number, the better is the performance of the company and suggests the usefulness of the projects the company has invested in.

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The computation of return on equity is as follows: Return on equity = (Net profit to owners/value of the specific owner' Contribution to the business) x 100 The ratio is more meaningful to the equity shareholders who are invested to know profits earned by the company and those profits which can be made available to pay dividend to them. d) Earnings per Share (EPS) This ratio determines what the company is earning for every share. For many investors, earnings are the most important tool. EPS is calculated by dividing the earnings (net profit) by the total number of equity shares. The computation of EPS is as follows: Earnings per share = Net profit/Number of shares outstanding The EPS is a good measure of profitability and when compared with EPS of similar other companies, it gives a view of the comparative earnings or earnings power of a firm. EPS calculated for a number of years indicates whether or not earning power of the company has increased. e) Dividend per Share (DPS) The extent of payment of dividend to the shareholders is measured in the form of dividend per share. The dividend per share gives the amount of cash flow from the company to the owners and is calculated as follows: Dividend per share = Total dividend payment / Number of shares outstanding The payment of dividend can have several interpretations to the shareholder. The distribution of dividend could be thought of as the distribution of excess profits/abnormal profits by the company. On the other hand, it could also be negatively interpreted as lack of investment opportunities. In all, dividend payout gives the extent of inflows to the shareholders from the company.

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f) Dividend Payout Ratio From the profits of each company a cash flow called dividend is distributed among its shareholders. This is the continuous stream of cash flow to the owners of shares, apart from the price differentials (capital gains) in the market. The return to the shareholders, in the form of dividend, out of the company's profit is measured through the payout ratio. The payout ratio is computed as follows: Payout Ratio = (Dividend per share / Earnings per share) * 100 The percentage of payout ratio can also be used to compute the percentage of retained earnings. The profits available for distribution are either paid as dividends or retained internally for business growth opportunities. Hence, when dividends are not declared, the entire profit is ploughed back into the business for its future investments. g) Price/Earnings Ratio (P/E) The P/E multiplier or the price earnings ratio relates the current market price of the share to the earnings per share. This is computed as follows: Price/earnings ratio = Current market price / Earnings per share This ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company. Many investors prefer to buy the company's shares at a low P/E ratio since the general interpretation is that the market is undervaluing the share and there will be a correction in the market price sooner or later. A very high P/E ratio on the other hand implies that the company's shares are overvalued and the investor can benefit by selling the shares at this high market price. h) Debt-to-Equity Ratio Debt-Equity ratio is used to measure the claims of outsiders and the owners against the firm’s assets. Debt-to-equity ratio = Outsiders Funds / Shareholders Funds The debt-equity ratio is calculated to measure the extent to which debt financing has been used in a business. It indicates the proportionate claims of owners and the outsiders against the firm’s assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. 17

CHAPTER III – COMPANY PROFILE

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IIFL Ltd The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd and its subsidiaries, is one of the leading players in the Indian financial services space. IIFL offers advice and execution platform for the entire range of financial services covering products ranging from Equities and derivatives, Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking, Gold bonds and other small savings instruments. IIFL recently received an in-principle approval for Securities Trading and Clearing memberships from Singapore Exchange (SGX) paving the way for IIFL to become the first Indian brokerage to get a membership of the SGX. IIFL also received membership of the Colombo Stock Exchange becoming the first foreign broker to enter Sri Lanka. IIFL owns and manages the website, www.indiainfoline.com, which is one of India’s leading online destinations for personal finance, stock markets, economy and business. IIFL has been awarded the ‘Best Broker, India’ by Finance Asia and the ‘Most improved brokerage, India’ in the Asia Money polls. India Infoline was also adjudged as ‘Fastest Growing Equity Broking House - Large firms’ by Dun & Bradstreet. A forerunner in the field of equity research, IIFL’s research is acknowledged by none other than Forbes as ‘Best of the Web’ and ‘…a must read for investors in Asia’. The company’s research is available not just over the Internet but also on international wire services like Bloomberg, Thomson First Call and Internet Securities where it is amongst one of the most read Indian brokers. A network of over 2,500 business locations spread over more than 500 cities and towns across India facilitates the smooth acquisition and servicing of a large customer base. All our offices are connected with the corporate office in Mumbai with cutting edge networking technology. The group caters to a customer base of about a million customers, over a variety of mediums viz. online, over the phone and at our branches.

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VISION The company’s vision is to be the most respected company in the financial services space.

COMPANY STRUCTURE

India Infoline Limited

India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services and Portfolio Management Services. It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL as a depository participant, providing a onestop solution for clients trading in the equities market. It has recently launched its Investment banking and Institutional Broking business.

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A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. These services are offered to clients as different schemes, which are based on differing investment strategies made to reflect the varied risk-return preferences of clients.

India Infoline Media and Research Services Limited The services represent a strong support that drives the broking, commodities, mutual fund and portfolio management services businesses. It undertakes equities research which is acknowledged by none other than Forbes as 'Best of the Web' and '…a must read for investors in Asia'. India Infoline's research is available not just over the internet but also on international wire services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where India Infoline is amongst the most read Indian brokers. India Infoline Commodities Limited. India Infoline Commodities Pvt Limited is engaged in the business of commodities broking. Their experience in securities broking empowered them with the requisite skills and technologies to allow them to offer commodities broking as a contra-cyclical alternative to equities broking. It enjoys memberships with the MCX and NCDEX, two leading Indian commodities exchanges, and recently acquired membership of DGCX. It has a multi-channel delivery model, making it among the select few to offer online as well as offline trading facilities. India Infoline Marketing & Services India Infoline Marketing and Services Limited is the holding company of India Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited. 

India Infoline Insurance Services Limited is a registered Corporate Agent with the Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate Agent for ICICI Prudential Life Insurance Co Limited, which is India's largest private Life Insurance Company. India Infoline was the first corporate agent to get licensed by IRDA in early 2001.

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India Infoline Insurance Brokers Limited India Infoline Insurance Brokers Limited is a newly formed subsidiary which will carry out the business of Insurance broking.

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India Infoline Investment Services Limited Consolidated shareholdings of all the subsidiary companies engaged in loans and financing activities under one subsidiary. Recently, Orient Global, a Singapore-based investment institution invested USD 76.7 million for a 22.5% stake in India Infoline Investment Services. This will help focused expansion and capital raising in the said subsidiaries for various lending businesses like loans against securities, SME financing, distribution of retail loan products, consumer finance business and housing finance business. India Infoline Investment Services Private Limited consists of the following step-down subsidiaries. 

India Infoline Distribution Company Limited (distribution of retail loan products)

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Moneyline Credit Limited (consumer finance)

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India Infoline Housing Finance Limited (housing finance)

IIFL (Asia) Private Limited IIFL (Asia) Private Limited is wholly owned subsidiary which has been incorporated in Singapore to pursue financial sector activities in other Asian markets. Further to obtaining the necessary regulatory approvals, the company has been initially capitalized at 1 million Singapore dollars.

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IIFL MANAGEMENT 

THE MANAGEMENT TEAM

Mr. Nirmal Jain, Chairman & Managing Director Nirmal Jain, MBA (IIM, Ahmadabad) and a Chartered and Cost Accountant, founded India’s leading financial services company India Infoline Ltd. in 1995, providing globally acclaimed financial services in equities and commodities broking, life insurance and mutual funds distribution, among others.

Mr. R Venkataraman, Executive Director R Venkataraman, co-promoter and Executive Director of India Infoline Ltd., is a B. Tech (Electronics and Electrical Communications Engineering, IIT Kharagpur) and an MBA (IIM Bangalore). He joined the India Infoline board in July 1999.

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THE BOARD OF DIRECTORS

Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India Infoline Ltd. comprises:

Mr. Nilesh Vikamsey, Independent Director Mr. Vikamsey, Board member since February 2005 - a practicing Chartered Accountant and partner (Khimji Kunverji & Co., Chartered Accountants), a member firm of HLB International, headed the audit department till 1990 and thereafter also handles financial services, consultancy, investigations, mergers and acquisitions, valuations etc

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Mr Kranti Sinha, Independent Director Mr. Kranti Sinha — Board member since January 2005 — completed his masters from the Agra University and started his career as a Class I officer with Life Insurance Corporation of India. Mr Arun K. Purvar, Independent Director Mr. A.K. Purvar – Board member since March 2013 – completed his Masters degree in commerce from Allahabad University in 1966 and a diploma in Business Administration in 1967. PRODUCTS & SERVICES Equities India Infoline provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to India Infoline. India Infoline leveraged technology to bring the convenience of trading to the investor’s location of preference (residence or office) through computerized access. India Infoline made it possible for clients to view transaction costs and ledger updates in real time. The Company is among the few financial intermediaries in India to offer a complement of online and offline broking. The Companies network of branches also allows customers to place orders on phone or visit our branches for trading. Commodities India Infoline’s extension into commodities trading reconciles its strategic intent to emerge as a one stop solutions financial intermediary. Its experience in securities broking has empowered it with requisite skills and technologies. The Companies commodities business provides a contra-cyclical alternative to equities broking. The Company was among the first to offer the facility of commodities trading in India’s young commodities market (the MCX commenced operations in 2003). Average monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs 20.02 bn.

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Insurance An entry into this segment helped complete the client's product basket; concurrently, it graduated the Company into a one stop retail financial solutions provider. To ensure maximum reach to customers across India, it has employed a multi pronged approach and reaches out to customers via our Network, Direct and Affiliate channels. India Infoline was the first corporate in India to get the agency license in early 2001. Invest Online India Infoline has made investing in Mutual funds and primary market so effortless. Only registration is needed. No paperwork no queues and No registration charges. India Infoline offers a host of mutual fund choices under one roof, backed by in-depth research and advice from research house and tools configured as investor friendly. Wealth Management The key to achieving a successful Investment Portfolio is to have a carefully planned financial strategy based on a thorough understanding of the client's investment needs and risk appetite. The IIFL Private Wealth Management Team of financial experts will recommend an appropriate financial strategy to effectively meet customer’s investment requirements. Asset Management India Infoline is a leading pan-India mutual fund distribution house associated with leading asset management companies. It operates primarily in the retail segment leveraging its existing distribution network to reach prospective clients. It has received the in-principle approval to set up a mutual fund. Portfolio Management IIFL Portfolio Management Service is a product wherein an equity investment portfolio is created to suit the investment objectives of a client. India Infoline invests the client’s resources into stocks from different sectors, depending on client’s risk-return profile. This

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service is particularly advisable for investors who cannot afford to give time or don't have that expertise for day-to-day management of their equity portfolio. Newsletters As a subscriber to the Daily Market Strategy, client’s get research reports of India Infoline research team on a priority basis. The Indiainfoline Weekly Newsletter is the flashback for the week gone by. A weekly outlook coupled with the best of the web stories from Indiainfoline and links to important investment ideas, Leader Speak and features is delivered in the client’s inbox every Friday evening.

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INDUSTRY PROFILE

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FINANCIAL MARKETS Finance is the pre-requisite for modern business and financial institutions play a vital role in the economic system. It is through financial markets and institutions that the financial system of an economy works. Financial markets refer to the institutional arrangements for dealing in financial assets and credit instruments of different types such as currency, cheques, bank deposits, bills, bonds, equities, etc.

Financial market is a broad term describing any marketplace where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives. They are typically defined by having transparent pricing, basic regulations on trading, costs and fees and market forces determining the prices of securities that trade.

Generally, there is no specific place or location to indicate a financial market. Wherever a financial transaction takes place, it is deemed to have taken place in the financial market. Hence financial markets are pervasive in nature since financial transactions are themselves very pervasive throughout the economic system. For instance, issue of equity shares, granting of loan by term lending institutions, deposit of money into a bank, purchase of debentures, sale of shares and so on.

In a nutshell, financial markets are the credit markets catering to the various needs of the individuals, firms and institutions by facilitating buying and selling of financial assets, claims and services.

28

CLASSIFICATION OF FINANCIAL MARKETS

Financial markets

Organized markets

Capital Markets

Unorganized markets

Money Markets

Industrial Securities Market

Primary Market

Secondary market

Call Money Market

Commercial Bill Market

No

Government Securities Market

Long-term loan market

29

Money Lenders, Indigenuos Bankers

Capital Market The capital market is a market for financial assets which have a long or indefinite maturity. Generally, it deals with long term securities which have a period of above one year. In the widest sense, it consists of a series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities. As a whole, capital market facilitates raising of capital.

The major functions performed by a capital market are: 1. Mobilization of financial resources on a nation-wide scale. 2. Securing the foreign capital and know-how to fill up deficit in the required resources for economic growth at a faster rate. 3. Effective allocation of the mobilized financial resources, by directing the same to projects yielding highest yield or to the projects needed to promote balanced economic development.

Capital market consists of primary market and secondary market. Primary market: Primary market is a market for new issues or new financial claims. Hence it is also called as New Issue Market. It basically deals with those securities which are issued to the public for the first time. The market, therefore, makes available a new block of securities for public subscription. In other words, it deals with raising of fresh capital by companies either for cash or for consideration other than cash. The best example could be Initial Public Offering (IPO) where a firm offers shares to the public for the first time.

Secondary market: Secondary market is a market where existing securities are traded. In other words, securities which have already passed through new issue market are traded in this market. Generally, such securities are quoted in the stock exchange and it provides a continuous and regular market for buying and selling of securities. This market consists of all stock exchanges recognized by the government of India.

Money Market

Money markets are the markets for short-term, highly liquid debt securities. Money market securities are generally very safe investments which return relatively low interest 30

rate that is most appropriate for temporary cash storage or short term time needs. It consists of a number of sub-markets which collectively constitute the money market namely call money market, commercial bills market, acceptance market, and Treasury bill market.

Derivatives Market

The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets. A derivative is a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. The important financial derivatives are the following: 

Forwards: Forwards are the oldest of all the derivatives. A forward contract refers to an agreement between two parties to exchange an agreed quantity of an asset for cash at a certain date in future at a predetermined price specified in that agreement. The promised asset may be currency, commodity, instrument etc.



Futures: Future contract is very similar to a forward contract in all respects excepting the fact that it is completely a standardized one. It is nothing but a standardized forward contract which is legally enforceable and always traded on an organized exchange.



Options: A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date). Call options give the option to buy at certain price, so the buyer would want the stock to go up. Put options give the option to sell at a certain price, so the buyer would want the stock to go down.



Swaps: It is yet another exciting trading instrument. Infact, it is the combination of forwards by two counterparties. It is arranged to reap the benefits arising from the fluctuations in the market – either currency market or interest rate market or any other market for that matter. 31

Foreign Exchange Market It is a market in which participants are able to buy, sell, exchange and speculate on currencies. Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The forex market is considered to be the largest financial market in the world. It is a worldwide decentralized over-the-counter financial market for the trading of currencies. Because the currency markets are large and liquid, they are believed to be the most efficient financial markets. It is important to realize that the foreign exchange market is not a single exchange, but is constructed of a global network of computers that connects participants from all parts of the world. Commodities Market It is a physical or virtual marketplace for buying, selling and trading raw or primary products. For investors' purposes there are currently about 50 major commodity markets worldwide

that

facilitate

investment

trade

in

nearly

100

primary

commodities. Commodities are split into two types: hard and soft commodities. Hard commodities are typically natural resources that must be mined or extracted (gold, rubber, oil, etc.), whereas soft commodities are agricultural products or livestock (corn, wheat, coffee, sugar, soybeans, pork, etc.)

32

INDIAN FINANCIAL MARKETS

India Financial market is one of the oldest in the world and is considered to be the fastest growing and best among all the markets of the emerging economies. The history of Indian capital markets dates back 200 years toward the end of the 18th century when India was under the rule of the East India Company. The development of the capital market in India concentrated around Mumbai where no less than 200 to 250 securities brokers were active during the second half of the 19th century. The financial market in India today is more developed than many other sectors because it was organized long before with the securities exchanges of Mumbai, Ahmadabad and Kolkata were established as early as the 19th century. By the early 1960s the total number of securities exchanges in India rose to eight, including Mumbai, Ahmadabad and Kolkata apart from Madras, Kanpur, Delhi, Bangalore and Pune. Today there are 21 regional securities exchanges in India in addition to the centralized NSE (National Stock Exchange) and OTCEI (Over the Counter Exchange of India). However the stock markets in India remained stagnant due to stringent controls on the market economy that allowed only a handful of monopolies to dominate their respective sectors. The corporate sector wasn't allowed into many industry segments, which were dominated by the state controlled public sector resulting in stagnation of the economy right up to the early 1990s. Thereafter when the Indian economy began liberalizing and the controls began to be dismantled or eased out; the securities markets witnessed a flurry of IPO’s that were launched. This resulted in many new companies across different industry

segments

to

come

up

with

newer

products

and

services.

A remarkable feature of the growth of the Indian economy in recent years has been the role played by its securities markets in assisting and fuelling that growth with money rose within the economy. This was in marked contrast to the initial phase of growth in many of the fast growing economies of East Asia that witnessed huge doses of FDI (Foreign Direct Investment) spurring growth in their initial days of market decontrol. During this phase in India much of the organized sector has been affected by high growth as the financial markets played an all-inclusive role in sustaining financial resource

33

mobilization. Many PSUs (Public Sector Undertakings) that decided to offload part of their equity were also helped by the well-organized securities market in India.

The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange of India) during the mid 1990s by the government of India was meant to usher in an easier and more transparent form of trading in securities. The NSE was conceived as the market for trading in the securities of companies from the large-scale sector and the OTCEI for those from the small-scale sector. While the NSE has not just done well to grow and evolve into the virtual backbone of capital markets in India the OTCEI struggled and is yet to show any sign of growth and development. The integration of IT into the capital market infrastructure has been particularly smooth in India due to the country’s world class IT industry. This has pushed up the operational efficiency of the Indian stock market to global standards and as a result the country has been able to capitalize on its high growth and attract foreign capital like never before.

The regulating authority for capital markets in India is the SEBI (Securities and Exchange Board of India). SEBI came into prominence in the 1990s after the capital markets experienced some turbulence. It had to take drastic measures to plug many loopholes that were exploited by certain market forces to advance their vested interests. After this initial phase of struggle SEBI has grown in strength as the regulator of India’s capital markets and as one of the country’s most important institutions.

34

CHAPTER IV DATA ANALYSIS & INTERPRETATIONS

35

1. ECONOMY ANALYSIS Economic analysis is the analysis of forces operating the overall economy a country. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic analysis is important in order to understand exact condition of an economy. The level of economic activity has an impact on investment in many ways. If the economy grows rapidly, the industry can also be expected to show rapid growth and vice versa. When the level of economic activity is low, stock prices are low, and when the level of economic activity is high, stock prices are high reflecting the prosperous outlook for sales and profits of the firms. The analysis of macroeconomic environment is essential to understand the behavior of the stock prices. Economy analysis includes: 1.

GDP (Gross Domestic Product)

2.

INTEREST RATES

3.

INFLATION RATES

4.

EXCHANGE RATES

GROSS DOMESTIC PRODUCT The Gross Domestic Product growth rate measures the increase in value of the goods and services produced by an economy. Economic growth is usually calculated in real terms or inflation-adjusted terms, in order to net out the effect of changes on the price of the goods and services produced. The Gross Domestic Product can be determined using three different approaches, which should give the same result. These different methods are the product technique, the income technique, and the expenditure technique. In sum, the product technique sums the outputs of every class of enterprise to arrive at the total. The expenditure technique works on the principle that every product must be bought by somebody, therefore the value of the total product must be equal to people's total expenditures in buying products and services. The income technique works on the principle that the incomes of the productive factors must be equal to the value of their product, and determines GDP by finding the sum of all producers' incomes. The real GDP per capita of an economy is often used as an indicator

36

of the average standard of living of individuals in that country, and economic growth is therefore often seen as indicating an increase in the average standard of living.

Figure 1:

2014

India GDP Growth Rate – 2014 – 2018

2015

2016

2017

2018

Source: Secondary Data, Tradeconomics.com

The most important and the fastest growing sector of Indian economy are services. Trade, hotels, transport and communication; financing, insurance, real estate and business services and community, social and personal services account for more than 60 percent of GDP. Agriculture, forestry and fishing constitute around 15 percent of the output, but employs more than 50 percent of the labor force. Manufacturing accounts for 15 percent of GDP, construction for another 8 percent and mining, quarrying, electricity, gas and water supply for the remaining 5 percent.

37

INTEREST RATES Interest rates will have an effect on stocks. If interest rates decrease then borrowing capacity of a company increases so company can go for further expansion and generates more profits. So demand for stock increases and stock price will rise. In India, interest rate decisions are taken by the Reserve Bank of India's Central Board of Directors. The official interest rate is the benchmark repurchase rate.

Figure 2:

India Interest Rates

Source: Primary Data, Tradeconomics.com

In 2016, the primary objective of the RBI monetary policy became price stability, giving less importance to government's borrowing, the stability of the rupee exchange rate and the need to protect exports. In February 2018, the government and the central bank agreed to set a consumer inflation target of 4 percent, with a band of plus or minus 2 percentage points, from the financial year ending in March 2018. INFLATION RATES The inflation rate in India was recorded at 5.40 percent in June of 2018. Inflation Rate in India averaged 8.44 percent from 2015 until 2018, reaching an all time high of 13.16 percent in November of 2014 and a record low of 4.38 percent in November of 2016. Inflation Rate in India is reported by the Ministry of Statistics and Programme Implementation (MOSPI), India.

38

Figure 3:

India Inflation Rate

2014

2015

2016

2017

2018

Source: Primary Data, Tradeconomics.com

The wholesale price index (WPI) is the main measure of inflation. The WPI measures the price of a representative basket of wholesale goods. In India, wholesale price index is divided into three groups: Primary Articles (20.1 percent of total weight), Fuel and Power (16.9 percent) and Manufactured Products (65 percent). Food Articles from the Primary Articles Group account for 16.3 percent of the total weight. The most important components of the Manufactured Products Group are Chemicals and Chemical products (15 percent of the total weight); Basic Metals, Alloys and Metal Products (10.8 percent); Machinery and Machine Tools (8.9 percent); Textiles (7.3 percent) and Transport, Equipment and Parts (5.2 percent)

EXCHANGE RATES Exchange rates will also have an impact on stock. If exchange rates decrease then company can import at lower rates which leads to increase in profits and causes an increase in profits. The USDINR spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the INR. While the USDINR spot exchange rate is quoted and exchanged in the same day, the USDINR forward rate is quoted today but for delivery and payment on a specific future date. The USDINR spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the INR. While the USDINR spot exchange rate is quoted and exchanged in the same day, the USDINR forward rate is quoted today but for delivery and payment on a specific future date. 39

Figure 4:

India Exchange Rate

2014

2015

2016

2017

2018

Source: Secondary Data, Tradeconomics.com

The USDINR traded at 63.77 INR on August 10, 2018 according to interbank foreign exchange market quotes. The Indian Rupee averaged 33.89 from 1973 until 2018, reaching an all time high of 68.15 in August of 2014 and a record low of 7.19 in March of 1973.

ANALYSIS OF BANKING SECTOR Introduction

According to the Reserve Bank of India (RBI), the banking sector in India is sound, adequately capitalised and well-regulated. Indian financial and economic conditions are much better than in many other countries of the world. Credit, market and liquidity risk studies show that Indian banks are generally resilient and have withstood the global downturn well.

With a sense of optimism slowly creeping in, the banking industry expects that 2018 will bring better growth prospects. This optimism stems from factors such as the Government working hard to revitalise the industrial growth in the country and the RBI initiating a number of measures that would go a long way in helping the banks to restructure. The 40

recent announcements of RBI, it is felt, are a clear pointer to the future of the restructured domestic banking industry.

Market Size

The Indian banking sector is fragmented, with 46 commercial banks jostling for business with dozens of foreign banks as well as rural and co-operative lenders. State banks control 80 percent of the market, leaving relatively small shares for private rivals.

At the end of February, 14.7 crore accounts had been opened under Pradhanmantri Jan Dhan Yojna (PMJDY) and 15.2 crore RuPay debit cards were issued. These new accounts have mobilised deposits of Rs 15,694 crore (US$ 2.01 billion). Standard & Poor’s estimates that credit growth in India’s banking sector would improve to 15-14 per cent in FY16 from less than 10% in the second half of CY16. Investments/developments

There have been many investments and developments in the Indian banking sector in the past few months. 

The United Economic Forum (UEF), an organisation that works to improve socioeconomic status of the minority community in India has signed a memorandum of understanding (MoU) with Indian Overseas Bank (IOB) for financing entrepreneurs from backward communities to set up businesses in Tamil Nadu



The RBI has allowed third-party white label automated teller machines (ATM) to accept international cards, including international prepaid cards, and said white label ATMs can now tie up with any commercial bank for cash supply.



With the objective of increasing investment opportunities for Indian alternative investment funds (AIFs), the RBI has allowed these funds to invest overseas.



In a major boost for the infrastructure sector, as well as for banks financing long gestation projects, the RBI has extended its flexible refinancing and repayment option for long-term infrastructure projects to existing ones where the total exposure of lenders is more than Rs 500 crore (US$ 78.98 million).



Syndicate Bank is planning to open 300-500 branches in the next financial year



RBI governor Mr Raghuram Rajan and European Central Bank President Mr Mario Draghi have signed an MoU on cooperation in central banking. “The 41

memorandum of understanding provides a framework for regular exchange of information, policy dialogue and technical cooperation between the two institutions. Technical cooperation may take the form of joint seminars and workshops in areas of mutual interest in the field of central banking,” RBI said on its website. 

RBL Bank has announced that it would be the anchor investor in Trifecta Capital’s Venture Debt Fund, the first alternative investment fund (AIF) of its kind in India with a commitment of Rs 50 crore (US$ 7.89 million). This move provides RBL Bank the opportunity to support the emerging venture debt market in India.



The RBI has allowed banks to become insurance brokers, permitting them to sell policies of different insurance firms subject to certain conditions.



Bandhan Financial Services Pvt. Ltd has raised Rs 1,600 crore (US$ 252.69 million) from two international institutional investors to help convert its microfinance business into a full service bank. Bandhan was one of the two entities to get a banking licence in April 2016 along with infrastructure finance company IDFC Ltd.



Yes Bank Ltd has signed an MoU with the US government’s development finance institution Overseas Private Investment Corp (OPIC) to explore US$ 220 million of financing to lend to micro, small and medium enterprises (MSMEs) in India.



Reliance Industries Limited (RIL) has said that it has applied for a Payments Bank licence, where the company will be the promoter and State Bank of India will be its joint venture partner with an equity investment of up to 30 per cent.



The RBI has allowed bonds issued by multilateral financial institutions like World Bank Group, the Asian Development Bank and the African Development Bank in India as eligible securities for interbank borrowing. The move will further develop the corporate bonds market, RBI said in a notification.



The Competition Commission of India (CCI) has cleared the merger of ING Vysya Bank with Kotak Mahindra Bank, which would create the country's fourth largest private sector lender. The proposed Rs 15,000 crore (US$ 2.36 billion) deal is not likely to have any appreciable adverse effect on competition in India, as per the competition "The share of both entities in various relevant markets is insignificant," the CCI said.

42



Tata Consultancy Services Ltd (TCS), India’s largest software services exporter, has announced that it has expanded its presence in Singapore with the opening of a new 1,000-seat TCS Singapore banking and financial services (BFS) centre. The new centre replaces a 500-seat centre opened in 2013 and will offer a broader range of services to global banks in the Asia-Pacific region, with a major focus on digital offerings.

Government Initiatives

There have been a lot of developments in the Indian banking sector. 

The Government has announced a capital infusion of Rs 6,990 crore (US$ 1.1 billion) in nine state run banks, including State Bank of India (SBI) and Punjab National Bank (PNB), but based on new efficiency parameters such as return on assets and return on equity. In a statement, the finance ministry said, “This year, the Government of India has adopted new criteria in which the banks which are more efficient would only be rewarded with extra capital for their equity so that they can further strengthen their position."



The Union cabinet has approved the establishment of the US$ 100 billion New Development Bank (NDB) envisaged by the five-member BRICS group as well as the BRICS “contingent reserve arrangement” (CRA).



The RBI has decided to allow nominated banks to import gold, including coins, on a consignment basis, extending its clarification issued in November 2016, which had eased certain categories of gold imports.



To help Micro Small and Medium Enterprises (MSME), RBI has permitted setting up of an exchange-based trading platform to facilitate financing of bills raised by such small entities to corporate and other buyers, including government departments and PSUs.

Indian banking sector credit growth has grown at a healthy pace • Credit off-take has been surging ahead over the past decade, aided by strong economic growth, rising disposable incomes, increasing consumerism and easier access to credit • Total credit extended went up to US$ 1,139 billion by FY15 • Credit to non-food industries increased 9.75 per cent to US$ 1,073.4 billion in FY15, from the previous financial year • Demand has grown for both corporate and retail loans 43

Deposit growth has been steady • Deposits have grown at a CAGR of 14.6 per cent during FY05–16 and reached US$ 1.5 trillion • Deposit growth has been mainly driven by strong growth in savings amid rising disposable income levels • Access to the banking system has also improved over the years due to persistent government efforts to promote banking-technology, and promote expansion in unbanked and non-metropolitan regions

Road Ahead

The Indian economy is now on the threshold of a major transformation, with expectations of policy initiatives being implemented. Positive business sentiments, improved consumer confidence and more controlled inflation should help boost the economic growth. Higher 44

spending on infrastructure, speedy implementation of projects and continuation of reforms will provide further impetus to growth. All this translates into a strong growth for the banking sector too, as rapidly growing business turn to banks for their credit needs, thus helping them grow.

Also, with the advancements in technology, mobile and internet banking services have come to the fore. Banks in India are focusing more and more to provide better services to their clients and have also started upgrading their technology infrastructure, which can help improve customer experience as well as give banks a competitive edge.

Many banks, including HDFC, ICICI and AXIS are exploring the option to launch contact-less credit and debit cards in the market soon. The cards, which use near field communication (NFC) mechanism, will allow customers to transact without having to insert or swipe.

3. COMPANY ANALYSIS The company analysis shows the long-term strenght of the company that what is the financial position of the company in the market, where it stands among its competitors and who are the key drivers of the company, what are the future plans of the company, what are the policies of government towards the company and how the stake of the company divested among different groups of people. Here, I have taken three banking companies namely ICICI Bank, HDFC Bank and Axis Bank for the Fundamental Analysis: ICICI BANK ICICI Bank Limited provides banking products and financial services in the areas of investment banking, life and non-life insurance, venture capital, and asset management to corporate and retail customers. It offers savings accounts, fixed deposits, recurring deposits, and salary accounts; and consumer and commercial cards. The company also provides home loans, commercial vehicle loans, personal loans, car loans, and loans against securities. In addition, it offers tax saving bonds, government of India bonds, mutual funds, initial public

45

offers, foreign exchange services, and senior citizens savings schemes; and health, overseas travel, student medical, motor, and home, insurance products, as well as invests in gold.

Further, it provides cash management services and global trade services; mergers and acquisitions advisory services and private equity syndication services; financial institution, capital market, and custodial services; and structured and project finance products. Additionally, the company offers business advantage loans, vendor/dealer finance, and industry specific loans; transaction banking and CMS services; trade services; and private equity placement services.

It also provides NRI banking, international banking, rural and agri banking, Internet banking, mobile banking, and phone banking services, as well as dematerialization services. ICICI Bank Limited was founded in 1955 and is based in Mumbai, India. HDFC BANK HDFC Bank Limited provides commercial banking products and services in India. It operates in three segments: Retail Banking, Wholesale Banking, and Treasury. The Retail Banking segment offers various deposit products, including savings accounts, current accounts, fixed deposits, recurring deposits, and demat accounts. It also provides auto, personal, commercial vehicle, home, gold, and educational loans; loans against gold, securities, property, and rental receivables; and health care finance, retail agri and tractor loans, working capital finance, construction equipment finance, and warehouse receipt loans, as well as credit cards, debit cards, depository, investment advisory, bill payments, and transactional services; and distributes life, health, and general insurance, and mutual fund products.

In addition, this segment offers wealth advisory, tax planning, bonds, forex and trade services, and private banking services. The Wholesale Banking segment provides loans, nonfund facilities, and transaction services to large corporate, emerging corporate, small and medium enterprise, public sector units, government bodies, financial institutions, and medium scale enterprises. It offers commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, and structured solutions to corporate customers, mutual funds, stock exchange members, and banks. The 46

Treasury segment offers products in the areas of foreign exchange and derivatives, money market and debt securities, and equities.

The company also offers NRI banking services. The company was founded in 1994 and is based in Mumbai, India. AXIS BANK Axis Bank Limited provides corporate, retail, and business banking products and services in India. The company’s deposit products include demand, savings bank, current account, and term deposits. The company also provides home loans, car loans, personal loans, loan against shares and security, loan against property, education and consumer loans, structured finance and microfinance products, short-term loans, loans for small and medium enterprises, agriculture loans, as well as credit and debit cards, and insurance services.

In addition, it engages in investing in sovereign and corporate debt, equity, and mutual funds; trading operations; derivative trading and foreign exchange operations; and central funding operations. Further, the company offers corporate advisory, placements and syndication, public issue management, project appraisal, capital market related, card, Internet banking, ATM, depository, financial advisory, NRI, international banking, cash management, and other services, as well as liability products and government services.

Further, the company provides mergers and acquisitions, private equity syndication, and transaction and merchant banking services, as well as involves in equity capital markets business. It also has branches in Singapore, Hong Kong, and Dubai. The company was formerly known as UTI Bank Limited and changed its name to Axis Bank Limited in July 2007. Axis Bank Limited was founded in 1993 and is based in Mumbai, India.

47

ICICI Bank – Comparative Balance Sheets (Rs. in Crores)

Standalone Balance Sheet

------------------- in Rs. Cr. ------------------Mar '18

Mar '17

Mar '16

Mar '15

Mar '14

Total Share Capital

1,159.66

1,155.04

1,153.64

1,152.77

1,151.82

Equity Share Capital

1,159.66

1,155.04

1,153.64

1,152.77

1,151.82

Share Application Money

7.44

6.57

4.48

2.39

0.29

Preference Share Capital

0.00

0.00

0.00

0.00

0.00

Reserves

79,262.26

72,051.71

65,547.84

59,250.09

53,938.82

Net Worth

80,429.36

73,214.32

66,705.96

60,405.25

55,090.93

Deposits

361,562.73

331,914.66

292,614.63

255,499.96

225,602.13

Borrowings

182,418.35

154,759.05

165,341.49

160,164.91

109,554.28

Total Debt

533,980.13

486,672.71

437,955.15

395,664.87

335,156.39

31,719.86

34,755.55

32,143.60

18,576.98

15,986.35

646,159.30

594,641.58

536,794.68

473,647.10

406,233.67

Cash & Balances with RBI

25,652.91

21,821.83

19,052.73

20,461.29

20,906.97

Balance with Banks, Money at Call

16,651.71

19,707.77

22,364.79

15,768.02

14,183.13

Advances

387,522.07

338,702.65

290,249.44

253,727.66

216,365.90

Investments

186,580.03

187,021.82

181,393.60

159,560.04

144,685.96

Gross Block

4,725.52

4,678.16

4,647.06

4,616.69

4,744.26

Revaluation Reserves

0.00

0.00

0.00

0.00

0.00

Accumulated Depreciation

0.00

0.00

0.00

0.00

0.00

4,725.52

4,678.16

4,647.06

4,616.69

4,744.26

0.00

0.00

0.00

0.00

0.00

Other Assets

24,997.05

32,709.39

29,137.07

19,515.39

16,347.47

Total Assets

646,159.29

594,641.60

536,794.69

473,647.09

406,233.67

Contingent Liabilities

868,190.58

794,965.35

802,383.84

923,037.16

931,651.64

0.00

0.00

0.00

0.00

0.00

148.72

633.92

578.21

524.01

478.31

Capital and Liabilities:

Other Liabilities & Provisions Total Liabilities Assets

Net Block Capital Work In Progress

Bills for collection Book Value (Rs)

48

ICICI Bank

– Comparative Profit & Loss Accounts

Standalone Profit & Loss account

(Rs. in Crores)

------------------- in Rs. Cr. ------------------Mar '18

Mar '17

Mar '16

Mar '15

Mar '14

Interest Earned

49,091.16

44,188.15

40,075.60

33,542.65

25,974.05

Other Income

15,186.14

10,427.87

8,345.70

7,502.76

6,647.89

Total Income

61,267.27

54,606.02

48,421.30

41,045.41

32,621.94

30,051.53

27,702.59

26,209.18

22,813.50

16,957.15

4,749.88

4,220.13

3,893.29

3,515.28

2,816.93

16,631.56

15,296.88

9,503.20

7,731.85

7,144.05

658.95

575.97

490.16

524.53

562.44

0.00

0.00

0.00

0.00

0.00

13,495.83

10,313.86

9,015.89

7,850.44

6,618.25

8,544.56

6,784.10

4,873.76

3,921.22

3,896.18

Total Expenses

50,091.92

44,795.55

40,095.83

34,580.16

27,470.57

Net Profit for the Year

13,185.35

9,810.48

8,325.47

6,465.26

5,151.38

0.00

0.00

0.00

0.00

0.00

Profit brought forward

14,318.59

9,902.29

7,054.23

5,018.18

3,464.38

Total

24,493.94

19,715.77

15,379.70

13,483.44

8,615.76

0.00

0.00

0.00

0.00

0.00

2,898.81

2,656.28

2,307.23

1,902.04

1,615.58

271.15

231.25

292.16

220.35

202.28

19.28

84.95

72.18

56.09

44.73

Equity Dividend (%)

250.00

230.00

200.00

165.00

160.00

Book Value (Rs)

148.72

633.92

578.21

524.01

478.31

4,062.57

3,506.65

2,878.03

2,306.49

1,782.45

0.00

0.00

0.00

0.33

0.26

3,169.96

2,887.53

2,599.39

2,152.39

1,816.86

Balance c/f to Balance Sheet

18,261.42

14,318.59

9,902.29

7,054.23

5,018.18

Total

24,493.95

19,715.77

15,379.71

13,483.44

8,615.75

Income

Expenditure Interest expended Employee Cost Selling, Admin & Misc Expenses Depreciation Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies

Extraordinary Items

Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs)

Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt

49

HDFC Bank – Comparative Balance Sheets (Rs. in Crores) Standalone Balance Sheet

------------------- in Rs. Cr. ------------------Mar '18

Mar '17

Mar '16

Mar '15

Mar '14

Total Share Capital

501.30

479.81

475.88

469.34

465.23

Equity Share Capital

501.30

479.81

475.88

469.34

465.23

Share Application Money

0.00

0.00

0.00

0.30

2.91

Preference Share Capital

0.00

0.00

0.00

0.00

0.00

Reserves

61,513.15

42,998.82

35,738.26

29,455.04

24,913.14

Net Worth

62,009.42

43,478.63

36,216.16

29,924.68

25,379.27

450,795.64

367,337.48

296,246.98

246,706.45

213,586.41

Borrowings

45,214.56

39,438.99

33,006.60

23,846.51

16,394.06

Total Debt

496,009.20

406,776.47

329,253.58

270,552.96

222,980.47

32,484.46

41,344.40

34,864.18

37,431.87

28,992.86

590,503.13

491,599.50

400,331.89

337,909.51

277,352.60

27,510.45

25,345.63

16,627.40

16,991.09

25,100.82

8,821.00

16,238.01

15,652.77

5,946.63

4,568.02

Advances

365,495.03

303,000.27

239,720.64

195,420.03

159,982.67

Investments

166,459.95

150,951.07

131,614.60

97,482.91

70,929.37

Gross Block

3,151.73

2,939.92

2,703.13

2,347.19

2,180.65

Revaluation Reserves

0.00

0.00

0.00

0.00

0.00

Accumulated Depreciation

0.00

0.00

0.00

0.00

0.00

3,151.73

2,939.92

2,703.13

2,347.19

2,180.65

0.00

0.00

0.00

0.00

0.00

Other Assets

19,094.91

25,154.60

19,016.41

21,721.64

16,601.13

Total Assets

590,503.07

491,599.50

400,331.90

337,909.49

277,352.61

Contingent Liabilities

997,538.88

744,097.98

746,226.39

883,985.32

588,550.98

0.00

0.00

0.00

0.00

0.00

247.39

181.23

152.20

157.52

545.46

Capital and Liabilities:

Deposits

Other Liabilities & Provisions Total Liabilities Assets Cash & Balances with RBI Balance with Banks, Money at Call

Net Block Capital Work In Progress

Bills for collection Book Value (Rs)

50

HDFC Bank – Comparative Profit & Loss Accounts (Rs. in Crores) Standalone Profit & Loss account

------------------- in Rs. Cr. ------------------Mar '18

Mar '17

Mar '16

Mar '15

Mar '14

Interest Earned

48,469.90

41,145.53

35,064.87

27,286.35

19,928.21

Other Income

8,996.35

7,919.64

6,852.62

5,243.69

4,335.15

Total Income

57,466.25

49,055.18

41,918.49

32,530.04

24,263.36

26,074.24

22,652.90

19,253.75

16,989.58

9,385.13

4,750.96

4,188.98

3,965.38

3,399.91

2,836.04

15,768.85

14,073.31

13,320.41

8,430.96

7,618.43

656.30

671.61

651.67

542.52

497.41

0.00

0.00

0.00

0.00

0.00

14,987.55

15,042.20

13,236.15

8,590.07

7,152.91

7,188.56

5,881.70

4,701.34

3,783.32

3,798.97

Total Expenses

47,250.35

40,576.80

35,191.21

27,362.97

20,336.96

Net Profit for the Year

10,215.92

8,478.38

6,726.28

5,167.09

3,926.40

0.00

0.00

0.00

0.00

0.00

Profit brought forward

16,654.15

13,142.18

8,399.65

6,184.24

4,532.79

Total

24,870.07

19,610.56

15,155.93

13,341.33

8,459.19

0.00

0.00

0.00

0.00

0.00

2,005.20

1,643.35

1,309.13

1,009.13

767.62

413.21

279.29

222.48

163.70

154.53

40.76

35.34

28.27

22.02

84.40

Equity Dividend (%)

400.00

342.50

275.00

215.00

165.00

Book Value (Rs)

247.39

181.23

152.20

157.52

545.46

Transfer to Statutory Reserves

2,807.28

2,185.93

1,789.56

1,252.20

1,000.16

Transfer to Other Reserves

1,021.59

847.84

672.63

516.71

392.64

Proposed Dividend/Transfer to Govt

2,414.41

1,922.64

1,531.56

1,182.78

892.15

Balance c/f to Balance Sheet

18,627.79

16,654.15

13,142.18

8,399.65

6,184.24

Total

24,870.07

19,610.56

15,155.93

13,341.34

8,459.19

Income

Expenditure Interest expended Employee Cost Selling, Admin & Misc Expenses Depreciation Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies

Extraordinary Items

Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs)

Appropriations

51

AXIS Bank – Comparative Balance Sheets (Rs. in Crores)

Standalone Balance Sheet

------------------- in Rs. Cr. ------------------Mar '18

Mar '17

Mar '16

Mar '15

Mar '14

Total Share Capital

474.10

469.84

467.95

414.20

410.55

Equity Share Capital

474.10

469.84

467.95

414.20

410.55

Share Application Money

0.00

0.00

0.00

0.00

0.00

Preference Share Capital

0.00

0.00

0.00

0.00

0.00

Reserves

44,202.41

37,750.64

32,639.91

22,395.34

18,588.28

Net Worth

44,676.51

38,220.48

33,107.86

22,813.54

18,998.83

322,441.94

280,944.56

252,614.59

220,104.30

189,237.80

Borrowings

79,758.27

50,290.94

43,951.10

34,071.67

26,267.88

Total Debt

402,200.21

331,235.50

296,564.69

254,185.97

215,505.68

15,055.67

14,788.89

10,888.13

8,643.28

8,213.86

461,932.39

383,244.87

340,560.66

285,627.79

242,714.37

Cash & Balances with RBI

19,818.84

18,041.32

16,792.09

10,702.92

14,886.16

Balance with Banks, Money at Call

16,280.19

13,197.38

5,642.87

3,230.99

7,522.49

Advances

281,133.03

230,066.76

196,965.96

169,759.54

162,407.83

Investments

142,342.83

134,548.43

134,737.54

93,192.09

71,991.62

Gross Block

2,414.05

2,310.54

2,230.54

2,188.56

2,250.46

Revaluation Reserves

0.00

0.00

0.00

0.00

0.00

Accumulated Depreciation

0.00

0.00

0.00

0.00

0.00

2,414.05

2,310.54

2,230.54

2,188.56

2,250.46

101.26

99.67

155.13

70.77

22.69

Other Assets

9,893.19

8,980.79

7,066.56

6,482.93

4,632.15

Total Assets

461,932.39

383,244.89

340,560.67

285,627.80

242,714.37

Contingent Liabilities

640,183.59

613,547.25

574,782.38

516,871.98

477,864.55

0.00

0.00

0.00

0.00

0.00

188.47

814.47

707.50

551.99

462.77

Capital and Liabilities:

Deposits

Other Liabilities & Provisions Total Liabilities Assets

Net Block Capital Work In Progress

Bills for collection Book Value (Rs)

52

AXIS Bank – – Comparative Profit & Loss Accounts (Rs. in Crores) Standalone Profit & Loss account

------------------- in Rs. Cr. ------------------Mar '18

Mar '17

Mar '16

Mar '15

Mar '14

Interest Earned

35,478.60

30,641.16

27,182.57

21,994.65

15,154.81

Other Income

8,365.05

7,405.22

6,551.13

5,420.22

4,632.14

Total Income

43,843.65

38,046.38

33,733.68

27,416.87

19,786.94

21,254.46

18,689.52

18,516.31

14,976.90

8,591.82

3,136.97

2,601.35

2,376.98

2,130.18

1,614.90

13,710.72

10,183.91

8,309.22

6,773.35

5,903.16

405.67

363.93

351.73

342.24

289.59

0.00

0.00

0.00

0.00

0.00

Operating Expenses

9,203.74

7,900.77

6,916.23

6,007.10

4,779.43

Provisions & Contingencies

6,027.62

5,238.42

4,153.70

3,188.66

3,027.20

36,485.82

31,828.71

28,554.24

23,182.66

16,398.45

7,357.82

6,218.67

5,189.43

4,242.21

3,388.49

Profit brought forward

14,501.45

10,029.26

7,329.45

4,969.77

3,427.43

Total

20,859.27

16,246.93

15,513.88

9,213.98

6,815.92

1,137.54

939.69

843.86

658.24

573.00

221.42

161.44

163.37

131.83

97.35

31.04

142.33

130.68

102.67

82.54

Equity Dividend (%)

230.00

200.00

180.00

160.00

160.00

Book Value (Rs)

188.47

814.47

707.50

551.99

462.77

1,926.82

1,644.36

1,492.38

1,135.46

836.95

0.00

-0.01

0.01

0.00

338.85

1,313.96

1,101.14

987.23

770.07

670.35

Balance c/f to Balance Sheet

18,623.49

14,501.45

10,029.26

7,329.45

4,969.77

Total

20,859.27

16,246.93

15,513.88

9,213.98

6,815.9

Income

Expenditure Interest expended Employee Cost Selling, Admin & Misc Expenses Depreciation Preoperative Exp Capitalised

Total Expenses Net Profit for the Year

Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs)

Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt

53

COMPARITIVE ANALYSIS 1.

Total Income

Total Income (In Rs Crores) S.No.

Company Name

Mar '18

Mar '16

Mar '15

Mar '14

Mar '13

1

ICICI Bank

61,267.27

54,606.02

48,421.30

41,045.41

32,621.94

2

HDFC Bank

57,466.25

49,055.18

41,918.49

32,530.04

24,263.36

3

AXIS Bank

43,843.65

38,046.38

33,733.68

27,416.87

19,786.94

Interpretation Total Income indicates the growth of the company. The above table indicates that the total income of all the banks under consideration have increased considerably. ICICI Bank has been at the top in terms of total income followed by HDFC Bank and AXIS Banks.

Total Income

70,000.00 60,000.00 50,000.00

61,267.27 57,466.25 54,606.02 49,055.17 43,843.65 38,046.38

40,000.00

48,421.30 41,917.49 33,733.68

30,000.00

41,045.41 32,530.04 32,621.94 27,414.87 24,263.36 19,786.94

20,000.00 10,000.00 0.00 Mar'15

Mar'14 ICICI Bank

Mar'13 HDFC Bank

54

Mar'12 AXIS Bank

Mar'11

2. Net Profit

Net Profit (In Rs Crores) S.No.

Company Name

Mar '18

Mar '16

Mar '15

Mar '14

Mar '13

1

ICICI Bank

13,185.35

9,810.48

8,325.47

6,465.26

5,151.38

2

HDFC Bank

10,215.92

8,478.38

6,726.28

5,167.09

3,926.40

3

AXIS Bank

7,357.82

6,218.67

5,189.43

4,242.21

3,388.49

Interpretation Net Profit indicates the profitablity of the companies. The above table indicates that all the companies showed a positive trend in net profits over the last few years. The net profits of all the companies have increased siginificantly in 2018 compared to the previous year.

Net Profit

12,000.00 11,175.35 10,000.00 8,000.00

10,215.92 9,810.48 7,357.82

8,478.38

8,325.47

6,217.67

6,726.28 5,179.43

6,000.00 4,000.00

6,465.26 5,167.09 5,151.38 4,242.21 3,926.40 3,388.49

2,000.00 0.00 Mar'15

Mar'14 ICICI Bank

Mar'13 HDFC Bank

55

Mar'12 AXIS Bank

Mar'11

3.

Earnings Per Share

Earnings Per Share S.No.

Company Name

Mar '18

Mar '16

Mar '15

Mar '14

Mar '13

1

ICICI Bank

19.28

84.95

72.18

56.09

44.73

2

HDFC Bank

40.76

35.34

28.27

22.02

84.40

3

AXIS Bank

31.04

142.33

130.68

102.67

82.54

Interpretation EPS measures the profit available to the equity shareholders per share, that is, the amount that they can get on every share held. HDFC has recorded a gradual increase in EPS compared to the previous year. EPS of ICICI and AXIS banks has recorded a drastic fall in 2018 compared to the previous years.

Earnings Per Share

132.33

140

110.68

120 100

84.95

84.4 72.17

80 60

102.67

56.09 44.73

40.76

40

31.04

35.34

28.27

19.28

22.02

20 0 Mar'15

Mar'14 ICICI Bank

Mar'13 HDFC Bank

56

Mar'12 AXIS Bank

Mar'11

82.54

4.

P/E Ratio

P/E Ratio S.No.

Company Name

1

ICICI Bank

2

HDFC Bank

3

AXIS Bank

Mar '18

Mar '16

Mar '15

Mar '14

Mar '13

16.8

15.0

15.0

16.4

25.9

26.1

21.9

22.8

24.4

28.7

18.6

56.7

15.1

13.5

18.5

Interpretation The P/E ratio (price-to-earnings ratio) of a stock is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. A higher P/E ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with a lower P/E ratio. HDFC Bank has the highest P/E ratio of 26.1 times while ICICI Bank has the lowest P/E ratio of 16.8 times.

P/E Ratio 56.7

60 50 40 26.1

30 20

16.8

18.6

21.9 15

25.9

24.4

22.8

28.7 17.5

16.4

15

12.1

11.5

10 0 Mar'15

Mar'14 ICICI Bank

Mar'13 HDFC Bank

57

Mar'12 AXIS Bank

Mar'11

5.

Price/Book Value

Price / Book Value Ratio S.No.

Company Name

1

ICICI Bank

2

HDFC Bank

3

AXIS Bank

Mar '18

Mar '16

Mar '15

Mar '14

Mar '13

2.3

2.0

1.8

1.7

2.3

4.1

4.1

4.1

4.1

4.3

3.0

9.0

1.8

2.1

3.0

Interpretation Book value is the company's common stock equity as it appears on a balance sheet, equal to total assets minus liabilities, preferred stock, and intangible assets such as goodwill. This is how much the company would have left over in assets if it went out of business immediately. HDFC is valued at 4.1 times its Book Value while AXIS and ICICI Bank are valued at only 3.0 times and 2.3 times each at their Book Value.

Price/Book Value

10 9 8 7 6 5 4 3 2 1 0

9

4.1 2.3

Mar'15

4.1

4.1

4.3

4.1

3 2

1.8

Mar'14 ICICI Bank

1.8

Mar'13 HDFC Bank

58

1.7

2.1

Mar'12 AXIS Bank

2.3

Mar'11

3

6.

Return On Net Worth

Return on Net Worth S.No.

Company Name

1

ICICI Bank

2

HDFC Bank

3

AXIS Bank

Mar '18

Mar '16

Mar '15

Mar '14

Mar '13

16.6

16.0

14.1

13.2

9.7

19.4

21.3

20.3

18.7

16.7

18.8

18.4

18.5

20.3

19.3

Interpretation Return on Net Worth is one of the most important ratios used for measuring the overall efficiency of a firm and determines whether the investments in the firms are attractive or not. According to the table, ICICI Bank and AXIS banks have recorded an RONW of around 16 20% while HDFC Bank has recorded a RONW of 19.4.3%. As the investors would like to invest only where the return is higher, HDFC would be attractive for investment as they have the highest Return on Net worth.

Return on Net Worth

25

15

21.3

19.4

20

17.8 14.6

20.3

17.4 14

20.3

19.3

18.7

18.5

16.7 13.1 11.2 9.7

10 5 0 Mar'15

Mar'14 ICICI Bank

Mar'13 HDFC Bank

Source: Secondary Data

59

Mar'12 AXIS Bank

Mar'11

CHAPTER VI FINDINGS, SUGGESTIONS & CONCLUSION

60

FINDINGS From the data analysis and interpretations of the ratios of three companies, namely ICICI Bank, HDFC and AXIS Bank, the following findings have been given: 

All the three banks have shown increase in total incomes  The three banks have been performing well in the wake of growing Indian economy. ICICI Bank appears to have reached its saturation point as it is maintaining stable ratios in the last five years.  HDFC and AXIS bank has been showing good growth in all the aspects over the last few years.  Axis Bank has shown a considerable increase in the total income, while ICICI and HDFC have maintained a good growth in their total income in 2018 compared to 2016.  The total income of ICICI Bank has started increasing in the last two years, while AXIS bank is improving its positions quite rapidly when compared to the previous years.  All the companies showed a positive trend in net profits over the last few years  All the companies have declared consistent EPS in the last few years except in 2018. By analyzing the current trend of Indian Economy and Banking Sectors it is found that being a developing economy there is lot of scope for growth and this sector still has to cross many levels so there are huge opportunities to invest in. Increase in income level, increase in consumer demand, technology development, globalization, foreign investments are few of the opportunities which the sectors has to explore for developing the economy.

61

SUGGESTIONS By analyzing the banking sector with the help of fundamental analysis, it has been revealed that this sector has a lot of potential to grow. So recommending investing in banking sector with no doubt is going to be a good and smart option because this industry is booming like never before. The three giants of Indian Banking Sector viz. ICICI, HDFC and AXIS Banks have outperformed in the industry. 

ICICI Bank, the largest private sector bank in India seems to have reached its

saturation point after a very good growth over the years. 

HDFC Bank has been performing consistently and stands in between ICICI and

AXIS Banks in terms of increase in its growth. 

AXIS Bank seems to be the best bet for the investors from Fundamental Analysis

as it has registered very good growth in the recent years. All its ratios have out performed over ICICI and HDFC Banks. Few Suggestions for “Right Stock Selection” There are three factors which an investor must consider for selecting the right stocks. 

Business: An investor must look into what kind of business the company is doing,

visibility of the business, its past track record, capital needs of the company for expansion etc. 

Balance Sheet: The investor must focus on its key financial ratios such as

earnings per share, price-earning ratio; debt-equity ratio, dividends per share etc and he must also check whether the company is generating cash flows. 

Bargaining: This is the most important factor which shows the true worth of the

company. An investor needs to choose valuation parameters which suit its business. Investment rules 

Invest for long term in equity markets



Align your thought process with the business cycle of the company.



Set the purpose for investment. 62



Long term goals should be the objective of equity investment.



Disciplined investment during market volatility helps attains profits.



Planning, Knowledge and Discipline are very crucial for investment.

63

CONCLUSION Indian banks have fared well on growth, asset quality and profitability with other regional banks over the last few years. Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks. However, the cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. While bank lending has been a significant driver of GDP growth and employment, periodic instances of the “failure” of some weak banks have often threatened the stability of the system. Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCBs), unless addressed, could seriously weaken the health of the sector. Further, the inability of bank managements (with some notable exceptions) to improve capital allocation, increase the productivity of their service platforms and improve the performance ethic in their organisations could seriously affect future performance. The bar for what it means to be a successful player in the sector has been raised. Four challenges must be addressed before success can be achieved. First, the market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side.

These require new skills in sales & marketing, credit and operations. Second, banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates provided. This will expose the weaker banks. Third, with increased interest in India, competition from foreign banks will only intensify. Fourth, given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks.

64

The analysis gives an optimistic view about the industry and its growth which recommends the investors to keep a good watch on the major players to benefit in terms of returns on their investments.

65

BIBLIOGRAPHY Text Books 

Security Analysis and Portfolio Management by Punithavathy Pandian, Vikas

Publications. 

Security analysis and portfolio management by V.A. Avadhani



Financial Markets and Services by Gordon and Natarajan, Himalaya Publications.



Financial Management by Shashi K Gupta and R. K Sharma, Kalyani

Publications. Newspapers 

Economic times



Business line

Websites 

www.nseindia.com



www.bseindia.com



www.investopedia.com



www.moneycontrol.com

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www.indiainfoline.com



www.sebi.gov.in

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