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1. INDUSTRY PROFILE
BANKING SECTOR IN INDIA
The growth in the Indian Banking Industry has been more qualitative than quantitative and it is expected to remain the same in the coming years. Based on the projections made in the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total assets of all scheduled commercial banks by end-March 2010 is estimated at Rs 40,90,000 crores. That will comprise about 65 per cent of GDP at current market prices as compared to 67 per cent in 2002-03. Bank assets are expected to grow at an annual composite rate of 13.4 per cent during the rest of the decade as against the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is expected that there will be large additions to the capital base and reserves on the liability side. The Indian Banking Industry and scheduled banks. Scheduled banks can be categorized into non-scheduled banks constitute of commercial banks and co-
operative banks. There are about 67,000 branches of Scheduled banks spread across India. As far as the present scenario is concerned the Banking Industry in India is going through a transitional phase. The Public Sector Banks (PSBs), which are the base of the Banking sector in India account for more than 78 per cent of the total banking industry assets. Unfortunately they are burdened with excessive Non Performing assets (NPAs), massive manpower and lack of modern technology. On the other hand the Private Sector Banks are making tremendous progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs. As far as foreign banks are concerned they are likely to succeed in the Indian Banking Industry. In the Indian Banking Industry some of the Private Sector Banks operating are IDBI Bank, ING Vyasa Bank, SBI Commercial and International Bank Ltd, Bank of Rajasthan Ltd. and banks from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank among others. ANZ Grindlays Bank, ABN-AMRO Bank, American Express Bank Ltd, Citibank are some of the foreign banks operating in the Indian Banking Industry. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans
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PERFORMANCE OF EQUITY PORTFOLIO or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The commercial banking structure in India consists of:
Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act.
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PERFORMANCE OF EQUITY PORTFOLIO As on 30th June, 1999, there were 300 scheduled banks in India having a total network of 64,918 branches.The scheduled commercial banks in India comprise of State bank of India and its associates (8), nationalised banks (19), foreign banks (45), private sector banks (32), co-operative banks and regional rural banks."Non-scheduled bank in India" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank.
SCOPE
The Banking sector is considered the most lucrative option in todays job market. In the industry, a position in Treasury or Forex is considered right on top and this is followed by careers in Private Banking, Investment Banking and Retail Banking. One could work in a variety of areas in banking industry including Recurring Deposit account, banking officer, probationary officer, loan officer, assessor, personal loan officer, home loan officer, home loan agent, loan manager, mortgage loan underwriter, loan processing officer, accountant, product marketing and sales executive, and customer service executive among others.
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PERFORMANCE OF EQUITY PORTFOLIO In the Financial Services, some of the important jobs include that of a stockbroker who is essentially a person who buys and sells securities on behalf of individuals and institutions for some commission. While some brokers like to practice with individual clients others work for institutions. Brokers who work for institutional investors are often called securities traders. Many prefer to work as dealers, advisors and securities analysts. Security analysts are those who advise companies on floatations of shares as they are expected to have sound knowledge of capital markets. Investment analysts are the backbone of the financial services sector. They study the financial reports of companies, assess various statistical information, profitability projections, compare financial results, survey the industry as a whole and on the basis of the available information, and finally conclude to a decision. Equity Analysts do jobs similar to investment analysts and research the equity markets and make predictions.
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1. COMPANY PROFILE
HISTORY
2.1 BACKGROUND AND INCEPTION OF THE COMPANY Vijaya Bank was founded on 23rd October 1931 by late Shri A.B.Shetty and other enterprising farmers in Mangalore, Karnataka. The objective of the founders was essentially to promote banking habit, thrift and enterpreneurship among the farming community of Dakshina Kannada district in Karnataka State. The bank became a scheduled bank in 1958. Vijaya Bank steadily grew into a large All India bank, with nine smaller banks merging with it during the 1963-68. The credit for this merger as well as growth goes to late Shri M.Sunder Ram Shetty, who was then the Chief Executive of the bank. The bank was nationalised on 15th April 1980. The bank has built a network of 1180 branches,47 Extention Counters and 500 ATMs as at 30.11.2010, that span all 28 states and 4 union territories in the country.
OVERVIEW
Vijaya Bank has the highest number of branches in its home state Karnataka. During the financial Year 2010 -11, the bank so far has opened 22 Branches and 1 Extension Counters. In line with the prevailing trends, the bank has been giving greater thrust towards technological upgradation of its operations. Realising your constantly evolving and diverse needs, the bank has diversified too. Entering several new areas such as credit card, merchant banking, hire purchase and leasing, and electronic remittance services. Vijaya Bank is one among the few banks in the country to take up principal membership of VISA International and MasterCard International. The driving force behind Vijaya Bank's every initiative has been its 11565 strong dedicated workforce.
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2.2 NATURE OF THE BUSINESS CARRIED Vijaya Bank is a Public Sector company undertaking which is running under the Administrative Control of Govt of India. Vijaya Bank is a commercial bank which was nationalized in the year 1969. The total share capital is Rs 210 crores of which government capital is 100 crores, others Rs 110 crores and, the total business of the Bank stood at Rs. 2,25,890 crore. Vijaya Bank is a nationalized bank which is offering services to the industry, NRIs and all the classes of people such as Personal Banking, Corporate Banking, NRI banking, Priority credit and other services which includes savings and deposits, Loan Products, Technology products, Mutual Funds, Insurance business, International services, Card services, Consultancy services, Depository services, Ancillary services, Accounts and banking, Cash management services, Loans and services , Syndication Services, IPO, Merchant banking, TUF schemes, Deposits services, consultancy services . The bank has also carved a distinctive mark, in various corporate social responsibilities, namely serving national priorities, promoting rural development, enhancing rural self-employment through several training institutes and spreading financial inclusion objective.
CORPORATE GOALS
Profitable business growth driven by technology and core business .
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Vijaya Bank also offers a few more services to its customers which can be listed as below: Merchant Banking Vijaya Raksha Service Charges Pension Payments Mobile Banking
1.5
AREA OF OPERATION
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Global scenario
Having operations only in the domestic area, Vijaya Bank has a host of strategic alliances abroad to further its international business. It has correspondent banking arrangements with 154 international banks spreading across 67 countries. For swift remittance business, the Bank has also tied up with the western union money Transfer. The bank is also actively involved in export financing activities, with outstanding export credit amounting to Rs. 1056 crore as at June 30th , 2010.
1.6
OWNERSHIP PATTERN
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PERFORMANCE OF EQUITY PORTFOLIO Category No. of shares held Percentage of shareholding A 1 Promoters Holding Promoters -Indian Promoters (Govt. of India) -Foreign Promoters 2 Persons Acting In Concert Sub-Total B 3 Non-Promoters Holding Institutional Investors Mutual Funds & UTI Banks, Financial Institutions, Insurance Companies(Central/ State Institutions/ Non-Government Institutions) FIIs/FMFs Sub-Total C Others Private Corporate Bodies Indian Public NRIs/OCBs Any Others Sub-Total GRAND TOTAL 1,64,01,559 10,04,79,721 28,71,487 -Nil11,97,52,767 43,35,17,800 3.78 23.20 0.66 -Nil27.64 100.00 194,69,959 8,02,47,233 4.49 18.49 46,61,097 5,59,16,177 1.12 12.88 23,35,17,800 23,35,17,800 53.87 53.87
PERFORMANCE OF EQUITY PORTFOLIO SL. NO. 1 2 President of India LIC of Indian Name of Shareholders Name of Shares Held 23,35,17,800 52,83,784 Percentage of Shareholding 53.87 1.22 Indian promoter Govt. Sponsored Financial Institution 3 LIC of India 1,99,85,814 4.61 Govt. Sponsored Financial Institution 4 LIC of Indian Money Plus 1,38,13,333 3.19 Govt. Sponsored Financial Institution Category
largest branch network in India and the bank has 141 overseas offices spread over 32 countries. State Bank of India is one of the Big Four Banks of India with ICICI bank, Axis bank and HDFC Bank. The State bank of India is 29th most reputable company in the world according to Forbes. The products of the bank are Loans, Credit cards, Savings, Investment, Vehicles, etc. It has employees of 205,896.
2. ICICI Bank: It is Indias largest private sector bank by market capitalization and
second largest overall in terms of assets. The bank also has a network of 1,640 branches and about 4,721 ATMs in India and presence in 18 countries, as well as some 24 million customers. ICICI banks offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels. ICICI bank is also the largest issuer of credit cards in India.
3. HDFC Bank Ltd: It is commercial bank of India. HDFC Bank has 1,412 branches
and over 3,295 ATMs, in 528 cities in India, and all branches of bank are linked on an online real-time basis. For the fiscal year 2009-2010, the bank has reported net
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PERFORMANCE OF EQUITY PORTFOLIO profit of Rs2,6798 crore, up 46% from the previous fiscal. Total annual earnings of the bank increased by 58% reaching at Rs.20,100 crore in 2009-2010.
4. Central Bank of India: It is a government-owned bank, is one of the oldest and
largest commercial bank in India based in Mumbai. The bank currently has 3,168 branches and 270 extension counters across 27 Indian states. The net profit of the bank in 2009-2010 went up to Rs. 600crore.
5. Corporation Bank: It is a public sector undertaking with 57.17% of share capital
held by the government of India. The products of the bank are loans, Credit cards, investments, deposits etc. It has currently 12,724 full time employees, and operates from several branches in India. The banks net worth stood at Rs. 3,054.92 crores.
6. Bank of Baroda: It is the third largest Public Sector bank in India, after State Bank
of India and Punjab National Bank. It has a network of over 3000 branches and offices, and about 1100+ ATMs. It offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, credit cards and asset management. It has banking sales of Rs.17, 754 crores and a net profit of Rs.2,227 crores.
7. Bank of India: It was established on 7 September 1906 is a bank with headquarters
in Mumbai. Government-Owned since nationalization in 1969. It is one of Indias leading banks, with about 3101 branches including 27 branches outside India. Bank of India is a founder member of SWIFT (Society for Worldwide Inter Bank Financial Telecommunications) in India which facilitates provision of cost-effective financial processing and communication services.
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Bank has sponsored Visveshvaraya Grameena Bank (VGB), a Regional Rural Bank (RRB) which has a total network of 30 branches in Mandya District of Karnataka state, has total deposits and advances of Rs.191.35 Crore and Rs.133.41 crore respectively as on March 2010.VIBSETIs (Vijaya Bank Self-Employment Training Institutes). INFORMATION TECHNOLOGY (IT)
The bank has Core banking system on a Centralized platform. RTGS and NEFT services are available to the bank customers from all branches. Online trading facilities are provided to the customers.
2.9 AWARDS
In recognition of performance in implementing Hindi Language, the bank was awarded 3 rd prize under the prestigious INDIRA GANDHI RAJBHASHA PURASKAR for the year 2007-2008. The bank has also been awarded 2nd prize in region for progressive use of Hindi under Reserve Bank Rajbhasha Shield Scheme for the year 2008-09.The bank was awarded 1st prize by Regional Implementation office (North-East), Ministry of home, Govt. of India in North Eastern Region for progressive use of Hindi for the year 2008-09. During the year, the bank received an award from the NABARD in recognition of the highest share of SHG business to its overall business, under SHG bank linkage programme for the year 2008-09, among Commercial Banks in the State of Karnataka. The staff members working in Bangalore city participated in the Inter-Bank competitions conducted under the aegis of TOLIC. 12 competitions were conducted, in which bank bagged 9 prizes, out which 2 were first prizes.
PERFORMANCE OF EQUITY PORTFOLIO CHAIRMAN & MANAGING DIRECTORS EXECUTIVE DIRECTOR HEAD OFFICE FUNCTIONAL DEPARTMENTS (General/ Dy. General Manager, etc.) REGIONAL OFFICES (20) SL. NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Region Ahmadabad* Bangalore(N)* Bangalore(s)* Chandigarh Chennai* Delhi* Guwahati Hassan Hubli* Hyderabad* Kochi Kolkata* Lucknow Mangalore* Mumbai* Mysore* Nagpur Shimoga Udupi Branches 47 58 55 55 77 75 25 53 70 59 69 62 62 71 61 59 52 36 69 1 1
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Service Branches 1 1
Currency Chests 1 1 1
1 1
3 2
1 1 1 1 1 1 1 1 1 1 2 3 3 2 2 1 1
2.11
year.
The bank will continue the retail centric focus in our business mix so as to ensure
that the bank stays put on the profitable growth trajectory. The bank has proposed to re-enter third party business like insurance that would help augment our other income and launch services like phone banking and online trading portal. The bank has taken internal steps to improve the quality of customer service provided.
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CHAPTER 3
3.1 MCKINSEY 7S FRAMEWORK MODEL
What is 7S-Model? The 7S-model is a tool for managerial analysis and action that provides a structure with which to consider a company as a whole, so that the organizations problems may be diagnosed and a strategy may be developed and implemented. The seven Ss is a framework for analyzing organizations and their effectiveness. It looks at the seven key elements that make the organizations successful or not. The 7S diagram illustrates the multiplicity interconnectedness of elements that define an organizations ability to change. The theory helped to change managers thinking about how companies could be improved. It says that it is not just a matter of devising a new strategy and following it through. Nor is it a matter of setting up new systems and letting them generate improvements.
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To be effective, their organization must have a higher degree of fit, or internal alignment among the seven Ss. All Ss are interrelated, so a change in one has a ripple effect on all others. It is impossible to make progress on one without making progress on all. Thus, to improve the organization, one has to pay attention to all of the seven elements at the same time.
STRUCTURE
The design of organization structure is a critical task of the top management of an organization. It is the selection of the whole organization edifice. Organization structure refers to the relatively more durable Organizational arrangements and relationships. It
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PERFORMANCE OF EQUITY PORTFOLIO prescribes the formal relationship, how an organizational members procedure exists. To guide the various activities performed by member of all part of the organization. Organizational Structure Chairman M.D & CEO Sr.Executive Executive VP/ Country Head Business Head HEAD/VP Associate VP Assistance VP Manager Asst. Manager
SKILL:
Classification of skill:
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PERFORMANCE OF EQUITY PORTFOLIO Knowledge skills Regulation ship knowledge Regulations knowledge Industry knowledge Soft skills
Steps to impart skills Primary module This module is for welcoming a new staff to the bank. He will be briefed on the working culture, products & services, duties & responsibilities and the liabilities & assets. Secondary module This is to provide soft training to the existing employees. Training is given to the employees as per the needs of the branch. Information is provided on new technology, changing global economy & economic uncertainties.
STYLE
Policy making style The board of directors frames all the policies and plans. The top-level managers are also asked for their suggestions on policy framing. Decision Making Style The top management executives make the decisions. All managers are given the choice to take part in decision-making. Branch managers are given the freedom to take up decisions related to their branch. Personal bankers deal with the day-to-day operations of the bank. The managers are given 100% freedom for decision-making provided the decision is for the interest and the profitability of the bank. For examples:
drilling down MIS for the profitability of the bank. Fee is what the bank earns. The staffs are given the freedom to wave off the fees. Working Style
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PERFORMANCE OF EQUITY PORTFOLIO The working hours is a 10-hour schedule starting from 9am to 7pm. The officers and managers are given 100% freedom to take up decisions relating to the day-to-day operations in the bank. The bank operates from Monday to Saturday in the case of car loans the usual interest rate 11%, but for a customer who uses lot of products and has a long-standing relationship with the bank the personal bankers have the choice of reducing the interest rate to 9 or 8%.
STRATEGY:
One of the strategy adopted by the bank to face the competition is to compete in the niche market where multi- national and foreign banks exists. Quality of assets and customer orientation are another strategies adopted to stand out in the competition the around the world. Vijaya bank uses technology to its fullest extent to be no;1 in the banking industry. CMS is an example for that CMS stands for Cash Machine Services. With the help of these services the customers can clear their cheques from any of the country within 3days, whereas all other banks in India take 7days.
SHARED VALUE:
Quality is the key word and everything revolves around the word quality both in business and in processes. Quality of assets and customer orientation are the trademarks of Vijaya bank. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. Vijaya banks business philosophy is based on four core values-operational excellence, customer focus, product leadership and people.
Vijaya Banks mission is to be lending, global, client-focused, innovation and Low-cost provider of financial services through the distribution channels of the clients preferences in the markets where Vijaya can create value. Internal business models Wide product range Valuation of shares Key business initiative
SYSTEM:
A system refers to the processes used to manage the organization. It includes: Management information Systems Innovation Systems Performance Management System Financial System/Capital Allocation System Compensation System/Reward System Customer Satisfaction Monitoring System
Every organization has some systems or internal processes to support and implement the strategy and run day-to-day affairs. For example, a company may follow a particular process for recruitment. These processes are normally strictly followed and are designed to achieve maximum effectiveness. Traditionally the organizations have been following a bureaucraticstyle process model where most decisions are taken at the higher management level and there are various and sometimes unnecessary requirements for a specific decision (e.g. procurement of daily use goods) to be taken. Increasingly, the organizations are simplifying and modernizing their process by innovation and use of new technology to make the decision-making process quicker. Special emphasis is on the customers with the intention to make the processes that involve customers as user friendly as possible. At Vijaya Bank we look for five key elements in our new recruits to ensure their alignment with our ideals: Excitement to bring ones knowledge to the table. Hunger for knowledge and desire to invest in one self.
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PERFORMANCE OF EQUITY PORTFOLIO Diversify skill and capacity of innovative. Ability to thrive through teamwork. Strong sense of stewardship and commitment to nation building.
In addition to regular implementation of our organization's objectives, our employees provide thought leadership to the industry in their specific area of expertise. Internal job postings To minimize talent attrition, we look at movement of talent from one place to another through an internal job posting program. Through this, employees can apply to any new vacancy within the organization. The program has ensured that we have one of the lowest rates of employee attrition in any industry. Compensation and benefits The Vijaya bank has a formal process of compensation benchmarking where they have an inbuilt process for annual review. The rigorous and transparent performance pay scale program ensures that high performers are well-compensated both monetarily and in stock.
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PERFORMANCE OF EQUITY PORTFOLIO separate it into internal (strengths and weaknesses) and external issues (opportunities and threats).
Greater and superior technology. Good credit culture and policies. Well trained employees. Wide range of product and services. Retail products like savings accounts, current accounts and deposit account. Investment products like mutual fund advisory services and government securities. Value added services like debit card, demat services and western union money transfer services. Consistent business track record with increasing turnover every year. Ideal participative management. Highly motivated employees.
WEAKNESS:
The weakness plays an important role in the growth of the company. The number of existing players and likely new entrants will intensify the competition which will have direct impact on the margin of profit. Non- expansion of branches in the north and eastern parts of India.
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PERFORMANCE OF EQUITY PORTFOLIO Job attrition is high, because work recognition is less. Slow in adopting new things reluctance to change.
OPPORTUNITIES
As the economy is booming the banking sector has many opportunities to expand and grow: The bank has scope for expansion. Innovations and technological improvements. Availability of funds through supporting bank systems.
THREATS
The cut throat competition from foreign companies The changing global economy and changes in economy rates and policies are major threats. Staffing shortages in speciality areas. Increasing salaries and incentives. Changing government policies. Not adopting to modern style of working in all sections may cause hindrance in future.
2009/03
2008/03
2007/03
2006/03
10.89
6.05
8.33
7.64
2.93
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Book Value Dividend/Share Liquidity ratios Debt/Equity Current Ratio Quick Ratio Interest Cover
61.44 2.50
53.47 1.00
48.59 2.00
42.70 2.00
37.37 1.00
Earnings Per Share: EPS is the earnings after tax divided by the number of common
shares outstanding. EPS= EAT Number of shares outstanding We can see that the banks EPS is increasing over the period of 5 years which is a good for the company.
Book value per share: The ratio indicates that the share of equity shareholders after the
company has paid all its liabilities, creditors, debenture holders and preference shareholder. Book Value per share= equity share capital+ reserve Total no. Of equity share outstanding We can see a constant raise in the Book value of the company in 2010, it is more than the market price.
Dividend to market price: dividend is the regular income received by the shareholder.
The shareholder would like to know the relationship between the market price and the dividend. Divided yield= dividend per share
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* 100
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PERFORMANCE OF EQUITY PORTFOLIO Market price per share The bank provides dividend that is low because of the high market price. Whenever companies plough back their profits to settle the loans or for expansion program, the yield would be low.
Liquidity Ratios measure a companys ability to meet short term financial obligations Debt to equity
A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.
High debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.
Current ratio
Current Ratio = Current Assets/Current Liabilities The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. By analysing the ratios we can conclude that the bank is in bad position and would not be able to pay off its obligations.
Quick Ratio
Quick Ratio (Acid Test Ratio) = Current Assets Inventories/Current Liabilities The quick ratio is a more conservative measure of liquidity than the current ratio as it removes inventory from the current assets used in the ratio's formula. By excluding inventory, the quick ratio focuses on the more-liquid assets of a company. The basics and use of this ratio are similar to the current ratio in that it gives users an idea of the ability of a company to meet its short-term liabilities with its short-term assets. Another
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PERFORMANCE OF EQUITY PORTFOLIO beneficial use is to compare the quick ratio with the current ratio. If the current ratio is significantly higher, it is a clear indication that the company's current assets are dependent on inventory.
Interest cover
This shows how many times the operating income covers the interest payment. Interest coverage ratio= EBIT/ Interest We can see that in 2010, the banks earnings before interest and tax are sufficient to service the debt to the extent of 1.22.
The key short-term liquidity ratios are: Current Ratio Quick Ratio 0.56 16.40
Long term liquidity or gearing is concerned with the financial structure of the company. Long term liquidity ratios measure the extent to which the capital employed in the business has been financed either by shareholders through share capital and retained earnings, or through borrowing and long-term finance. 3. b. Table showing stock performance BSE period 3 Months 6 Months 12 Months close price 106.90 69.95 51.65 change -13.24 32.59 79.57 NSE period 3 Months 6 Months 12 Months close price 106.90 70.00 51.80 change -13.10 32.71 79.34
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PERFORMANCE OF EQUITY PORTFOLIO Benefits derived from in training: It involved exposure to the corporate environment by means of various facts of corporate world. Enriched my skill of observation and interaction. It strengthened my vision and my self-confidence. A comparison between theoretical and practical knowledge can be made. Finally i can say totally the company is excellent training facility, good co-operative among the employees, excellent working environment. This training was very much educative; it has definitely made me more prepared to face the real world in the organization once we step out of college. I will be able to make our way better in the organizational environment. It has prepared me in a definite manner to face the challenges. I would like to conclude saying that learning is never ending process.
PERFORMANCE OF EQUITY PORTFOLIO Governments. Whereas activities in foreign exchange were mostly confined to meeting merchants and customers requirements for imports, exports, remittances and deposits. The deregulation of financial markets began with the shift to market- determined exchange rates and moved ahead with the freeing of Bank deposit and lending rates. The RBI began using monetary intervention tools such as LAF and Open Market Operations (OMOs) to manage liquidity. The volatility in interest rates (yields) is at the heart of the transformation of Bank Treasuries from mere maintenance of CRR and SLR to become to a profit centre. Downwards and upward movements in yields offer excellent scope and opportunities to trade in securities and earn profits for the Bank, as also trading in forex to take advantage of currency variations. Similarly, the rupees exchange rate has become volatile. There is sufficient fluctuation both intraday and interday to earn trading profits on buying and selling the currency. The forward market in India is another potential source of profits as more often it deviates from interest parity conditions. An active Treasury also earns profit by doing arbitrages. New products, such as derivatives, currency Futures enable spotting and capitalizing on such opportunities. Another key (modern) function of Treasury is asset-liability management and hedging (i.e. insulating) the banks balance sheet from interest and exchange rate fluctuations. OBJECTIVES OF INTEGRATED TREASURY MANEGEMENT POLICY To maintain Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) in terms of RBI guidelines. To achieve optimum level of return from the investment operation including forex transactions keeping in mind the liquidity and risk aspects of the portfolio. To manage liquidity i.e to bridge temporary mismatch in fund position by resorting to various options viz Call, CBLO etc. To maintain maturity pattern of investments consistent with the banks need for funds and in line with Asset Liability management Policy of the Bank. To achieve Portfolio optimization by implementing various strategies and information technology solutions to maximize the value and manage the risk of investment portfolios over the near and medium to long-term. To manage credit risks, liquidity risk, market risk and operational risk in tune with banks risk management policies.
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To maintain a healthy and well diversified portfolio of investments consisting of both SLR and NON SLR categories in relation to pricing, maturity, coupon, market prices etc.
4.2 STATEMENT OF THE PROBLEM Treasury plays a vital role in the banks it is a form of security as well as investment. It involves many factors and requires a deep study about the pattern, process, procedures and performance. This study is intended to identify the various concepts of investments and methods to help in the selection of script to create a portfolio. The study done at Vijaya Bank is A STUDY ON THE PERFOERMANCE OF INVESTMENTS IN EQUITY SECTOR. 4.3 OBJECTIVES OF THE STUDY
To study the operations in Treasury management (Domestic Treasury). To understand different portfolio of investments made by VIJYA BANK. To analyse the performance of the equity sectors and selection of portfolio.
4.4 SCOPE OF THE STUDY The study encompasses only the domestic treasury (equity portfolio) . The study gives an understanding of the performance of the investments made in equity sector and the behaviour of such investments. The scope of the study is limited to the performance of the industry for the limited period. 4.5 METHODOLOGY
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PERFORMANCE OF EQUITY PORTFOLIO The report is descriptive in nature. The analysis is based on the data collected from the secondary sources. For the purpose of study historical prices of the selected stocks, sensex (BSE) are extracted for the calendar year 2010-2011 starting from 1st December 2010 to 31st January 2011. The criteria for selection of stocks were top 10 beta values and top five industries that were identified for the purpose of study. The returns are calculated based on the closing prices of the stocks and indices. The returns do not include dividend received and concentrates only on capital gains.
SOURCES OF DATA Primary Data Observation & personal discussion with bank personnel, professionals experts and statutory loan monitoring formed the main sources of primary data. Secondary Data Internal Secondary data Accounting records like registers, annual records, auditors reports & inspection files formed the sources of internal secondary data. External Secondary data RBI circulars, manuals, journals & magazines, libraries and main sources of secondary data. 4.6 LIMITATIONS OF THE STUDY
Owing to the confidentiality enforced by the bank, some information not obtained. The current trend slightly affected due to changes in financial flexibilities. Time constraint is also one of the major limitations. The external factors such as fiscals policy, bank rate, government etc., are as applicable to previous years and this impact may change from year to year.
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Ensuring strict compliance with statutory requirements of maintaining the stipulated Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). Liquidity management by ensuring the optimum utilisation of the residual resources through investments and raising additional resources required for meeting credit demands at optimal cost.
ORGANISATIONAL STRUCTURE OF TREASURY Organisational structure of a commercial bank treasury should facilitate the handling of all market operations, from dealing to settlement, custody and accounting, in both the domestic and foreign exchange markets. In view of the voluminous and complex nature of transactions handled by a treasury, various functions are segregated as under. TREASURY ORGANISATION
FRONT-OFFICE
Mid-Office
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Back-office
The organisation of a treasury depends on the volume of activities handled. However, notwithstanding the size or volume of transactions, it is important that the above three functions are distinct and work in water-tight compartments. Accordingly the dealers are not supposed to handle settlement or accounts or risk management. The back-office should not perform dealing but may perform Back office functions. TREASURY ORGANIZATION STRUCTURE
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FRONT OFFICE The front office of a treasury has a responsibility to manage investment and market
risks in accordance with the instructions received from the banks ALCO. This is undertaken through the Dealing room which acts as the banks interface to international and domestic financial markets. It is a clearing house for risk and responsibility to manage treasury risks taken in all areas of the bank, on behalf of customers, and on behalf of the bank, within the policies and limits prescribed by the board and management committee.
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PERFORMANCE OF EQUITY PORTFOLIO The dealers enter into transactions on the basis of current market price which is ascertained by them through the information network made available. Reuters and Bloomberg are companies which make available market information on a real time basis. In making deals, the dealers will have to adhere to the various limits such as counterparty exposure, day dealing limit, etc., that have been prescribed. MID-OFFICE Mid office is responsible for onsite risk measurement, monitoring and management reporting. The other functions of Mid-Office are: Limit setting and monitoring exposures in relation to limits. Evolving hedging strategies for assets and liabilities. Monitoring open currency positions. Calculating and reporting VAR. Risk-return analysis. Marking open positions to market to asses unrealised gain and losses.
BACK-OFFICE FUNCTIONS The key functions of back-office are: Deal slip verification Generation and dispatch of interbank confirmations Monitoring receipt of confirmations from counterparty banks Monitoring receipt of confirmations of forward contracts Statutory reports to the RBI Monitoring approved exposure and position limits
BANK Bank invests in many portfolios in accordance with the RBI guidelines. As mentioned before the bank can invest in any of the following segments: Government Securities
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Other approved securities Shares Debentures and bonds Investments in Subsidiaries/joint ventures/ Associates Others (Commercial Paper, Units of Mutual Fund, NABARD-RIDF, Preference Shares, Venture Capital Funds etc.)
NATURE OF TREASURY ASSETS AND LIABILITIES Banks balance sheet consists of treasury assets and liabilities on the one hand and nontreasury assets and liabilities on the other. There is clear distinction between the two groups. List of Banks Treasury 1. 1. 1. 1. 2. 3. 4. DOMESTIC TREASURY Asset Products/Instruments Call/Notice Money Lending Term Money Lending/Inter-bank deposits Investments in CDs Commercial Paper Inter-bank participation certificates Reverse Repos/CBLO- backed leading through CCIL SLR bonds (notified as such by the RBI) Issued by the Government of India as securities and T-bills Issued by State Governments Guaranteed by Government of India Guaranteed by State Governments Bonds (Issued by) Financial Institutions Banks/NBFCs (Tier II capitals) Corporate State-level enterprises Infrastructure projects Assets- backed securities (PTCs) Private placements Floating rate bonds Tax- free bonds
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LIABILITY PRODUCTS/ INSTRUMENTS Call/ notice money borrowing Term money borrowing CD issues Inter-bank participation certificates Repos/CBLO- backed borrowing through CCIL Refinance (RBI, SIDBI, NABARD, EXIM BANK, NHB) Tier II bonds ( issued by bank)
PORTFOLIO A combination of securities with different risk & return characteristics will constitute the portfolio of the investor. Thus, a portfolio is the combination of various assets and/or instruments of investments. The combination may have different features of risk & return, separate from those of the components. Types of portfolio for study: In portfolio Design, we are considering only two types of portfolio. They are as follow: 1. Random Portfolio
PESIT, Dept of MBA Page 38
1. Random portfolio
Random portfolio consists of the scripts that are randomly selected by the investor by its own knowledge and preference of the stocks. Here there is no analysis is done of the script, they are selected on the tips and buts received by the investors from the external sources.
There is no method used for selection of the script in the portfolio. Selection is based on the individual criteria for the scripts. The investment is made for higher return in short term. Generally in India most of the portfolios are selected according to this random method as no investor himself in that much of analysis of the script.
It is the experience of the individual that can fetch him good return.
The BETA factor is considered to design our Random Portfolio. Interpretation of Beta
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When B = 1 means that the scrip has same volatility as compared to Index. Suitable for moderate investor. When B>1 means that scrip is more volatile as compared to market suitable for aggressive investors. When B<1 then scrip is less volatile as compared to market and suitable for defensive investors.
Beta of scrips plays vital role in scrip selection in Portfolio management. Portfolio can be created in many ways as sector wise, diversified in various sector, beta wise scrip portfolio. So based on the beta we can prepare 3 portfolio, they are: AGGRESSIVE MODERATE DEFENSIVE
Script form the same group of companies that are in to the similar type of business. Maximum exposure to the industry/sector. So any news or event has the direct effect on the portfolio. Risk regarding the portfolio increases as it is expose to sector specific ups and downs. Useful investment tools for speculator and short-sellers. It is better suited for the sectors which have been providing good revenue in the near past.
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It provides better short term return then other portfolios. It is easy to keep a watch on one sector rather than many. You can have a good command over the things happening. Limited exposure to other sectors keeps the portfolio safe from the performance of other sectors in the economy.
It is a highly risky portfolio as risk associated with the sector directly affects the performance of the portfolio. These types of portfolios are not suited for long-term investor as risk taken for the return can be too high. There is always the possibly many scripts in the sector may not be giving that much good attractive return as others. They may eat the profits from other scripts.
RANDOM PORTFOLIO
DEFENSIVE PORTFOLIO SL.NO SCRIPT BETA PRICE ON 1-12-2010 1 BHARATI AIRTEL 0.7224 352.15 0.05 WI
BHEL
0.7774
2235
0.33
0.6889
1321
0.20
AMBUJA CEMENTS
0.8046
141
0.02
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0.8042
120
0.02
0.6897
966.3
0.13
GRINDWEL NORTON
0.6621
222
0.04
HATHWAY CABLE
0.6935
150
0.02
J K PAPER
0.8146
50
0.01
10
0.8458
1102
0.18
TOTAL PORTFOLIO INVESTMENT= Rs. TOTAL PORTFOLIO BETA= WI*BETA =0.752421 IN TERMS OF (%) = 75.42% Based on the nature of beta i.e, beta in the range of 0.60-0.85 has been classified as defensive in nature and the total portfolio beta is found to be 0.752421.
In order to calculate the total return of the defensive portfolio the following steps are taken: Calculation of the return of individual script for the month of December 2010 and January 2011. For the calculation of return the opening and closing price of that month is considered. Return= (Market price- Purchase price)/ purchase price Using the above formula the return of each script is calculated.
PESIT, Dept of MBA Page 42
RETURN ON INDIVIDUAL SCRIPTS 1ST MONTH SL.NO SCRIPT BETA PRICE AS ON 1-12-2010 1 BHARATI AIRTEL 0.7224 352.15 PRICE AS ON 31-12-2010 358.40 1.77% RETUN (%)
BHEL
0.7774
2235
2324.75
4.02%
0.6889
1321
1420.6
7.54%
AMBUJA CEMENTS
0.8046
141
143.05
1.45%
BRIGADE ENTERPRISES
0.8042
120
113.65
-5.29%
Bank of Baroda
0.6897
966.3
896.50
-7.22%
GRINDWEL NORTON
0.6621
222
243.20
9.55%
HATHWAY CABLE
0.6935
125
167.05
33.64 % 13.30%
J K PAPER
0.8146
50
56.65
10
PNB
1102
1221.85
10.88%
SL.NO
SCRIPT
BETA
PRICE AS ON 3-1-2011
PRICE AS ON 31-1-2011
RETURN (%)
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PERFORMANCE OF EQUITY PORTFOLIO 1 BHARATI AIRTEL 0.7224 358.4 318.55 11.12% -0.6 4%
BHEL
0.7774
2346
2331
0.6889
1432
1390
-2.93%
AMBUJA CEMENTS
0.8046
143.05
128.05
-10.49%
0.8042
114.1
94.95
-16.78%
Bank of Baroda
0.6897
900
801
-11.00%
GRINDWEL NORTON
0.6621
245
223
-8.98%
HATHWAY CABLE
0.6935
164
151
-7.93%
J K PAPER
0.8146
60
51
-15.00%
10
0.8458
1230
1143
-7.07%
RETURN ON THE PORTFOLIO TOTAL PORTFOLIO INVESTMENT= Rs 10,00,000 VALUE OF PORTFOLIO AS ON 31-01-2011=1041130.54 TOTAL RETURN ON PORTFOLIO = 1166628.41 - 1000000 = 166628.41 TOTAL RETURN IN TERMS OF % = 16.67% The Total return on portfolio is calculated by taking the difference between the total investment made and the value of portfolio as on 31-01-2011.
PESIT, Dept of MBA Page 44
MODERATE PORTFOLIO SL.NO SCRIPT BETA PRICE ON 1-12-2010 1 LARSEN & TOUBRO 0.9582 1845 0.43 WI
TCS
0.8309
1084
0.25
TECH MAHINDRA
0.8902
680
0.15
TVS MOTORS
0.9893
84
0.02
T F C I LTD
0.9111
33
0.01
TANTIA CONSTRUCTIONS
0.982
83
0.02
RAJESH EXPORTS
0.9117
102
0.03
0.9978
20
0.005
340
0.08
10
MTNL
0.9636
55
0.01
TOTAL PORTFOLIO INVESTMENT= Rs 10,00,000 TOTAL PORTFOLIO BETA= WI*BETA =0.918645 INTERMS OF (%) = 91.86%
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PERFORMANCE OF EQUITY PORTFOLIO The Moderate portfolio is constructed by taking beta values between 0.80 to 1.00. The total portfolio beta is found to be 0.918645.
For the calculation of the total returns the same method as Defensive is followed.
RETURN ON INDIVIDUAL SCRIPTS 1ST MONTH SL.NO SCRIPT BETA PRICE AS ON 1-12-2010 1845 PRICE AS ON 31-12-2010 1979.05 RETURN (%) 7.27%
0.9582
0.8309
1084
1165.05
7.48%
0.8902
680
702.4
3.29%
0.9893
84
70.65
-15.89%
0.9111
33
36.2
9.70%
0.982
83
83.35
0.42%
0.9117
102
131.3
28.73%
0.9978
20
22.65
13.25%
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10
0.9636
55
54.85
-0.27%
2ND MONTH SL.NO SCRIPT BETA PRICE AS ON 3-1-2011 1878 PRICE AS ON 31-1-2011 1899 RETURN (%) 1.12%
0.9582
0.8309
1165
1173
0.69%
0.8902
704
647
-8.10%
0.9893
73.1
52.5
-28.77%
0.9111
27
32
18.52%
0.9978
85
75
-11.76%
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PERFORMANCE OF EQUITY PORTFOLIO 7 RAJESH EXPORTS RATHI STEEL & POWER LTD RAYMOND LTD MTNL 0.9117 100 90 -10.00%
0.9978
30
25
-16.67%
377
314
-16.71%
10
0.9636
55.5
47.4
-14.59%
RETURN ON THE PORTFOLIO TOTAL PORTFOLIO INVESTMENT=Rs VALUE OF PORTFOLIO AS ON 31-01-2011=786106.3 TOTAL RETURN ON PORTFOLIO =786106.3= TOTAL RETURN IN TERMS OF %= - 21.38% The analysis shows that the Total return of the scripts with moderate beta is negative, this contradicts the belief that higher the risk greater the return. AGGRESSIVE PORTFOLIO SL.NO SCRIPT BETA PRICE AS ON 1-12-2010 1 RELIANCE CAPITAL Reliance Industries Ltd. SBI 1.2421 701 0.10 WI
1.088
999
0.15
1.1537
3129
0.41
GMR Infra
1.194
49.8
0.01
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Hindalco
1.8237
206.9
0.04
ICICI Bank
1.5027
1149
0.17
IDFC
1.2715
187.8
0.03
IFCI
1.2831
61.65
0.01
1.1645
600
0.09
10
1.1321
30
0.01
TOTAL PORTFOLIO INVESTMENT= Rs. 544550245.4 TOTAL PORTFOLIO BETA= WI*BETA = 1.239823 IN TERMS OF (%) = 123.98% The scripts selected have beta<1 , the total portfolio beta is found to be 1.239823.
RETURN ON INDIVIDUAL SCRIPTS 1ST MONTH SCRIPT SL.NO BETA PRICE AS ON 1-12-2010 PRICE AS ON 31-12-2010 RETURN (%)
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PERFORMANCE OF EQUITY PORTFOLIO 1 RELIANCE CAPITAL Reliance Industries Ltd. SBI 1.2421 701 668.05 -4.70%
1.088
999
1058.25
5.93%
1.1537
3129
2811.05
-10.16%
GMR Infra
1.194
49.8
45.85
-7.93%
Hindalco
1.8237
206.9
246
18.90%
ICICI Bank
1.5027
1149
1144.65
-0.38%
IDFC
1.2715
187.8
182.2
-2.98%
IFCI
1.2831
61.65
67.3
9.16%
1.1645
600
612.3
2.05%
10
1.1321
30
34.9
16.33%
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2ND MONTH SL.NO SCRIPT BETA PRICE AS ON 3-1-2011 1 RELIANCE CAPITAL Reliance Industries Ltd. SBI 1.2421 673 PRICE AS ON 31-1-2011 524 -22.14% RETURN (%)
1.088
1062
909
-14.41%
1.1537
2830
2580
-8.83%
GMR Infra
1.194
46.5
39.35
-15.38%
Hindalco
1.8237
248
229
-7.66%
ICICI Bank
1.5027
1153
1020
-11.54%
IDFC
1.2715
184.9
147.45
-20.25%
IFCI
1.2831
68.2
53.2
-21.99%
1.1645
620
597
-3.71%
10
1.1321
36
32
-11.11%
Based on the opening and closing price, the returns for each month are calculated. RETURN ON THE PORTFOLIO TOTAL PORTFOLIO INVESTMENT= RS 544550245.4
PESIT, Dept of MBA Page 51
PERFORMANCE OF EQUITY PORTFOLIO VALUE OF PORTFOLIO AS ON 31-01-2011= Rs 4423915.20 TOTAL RETURN ON PORTFOLIO = 442391520 -544550245.4 = -102,158,725.4 RS IN terms of (%) = -1.02% The total return of the portfolio is calculated after finding out the return of individual scripts. The return of portfolio is -1.02% for the month of Dec 2010 and Jan 2011. Interpretation of Random Portfolio
As in the theoretical way we have seen that the Beta shows the movement or change in the price of script vis--vis index. And a Beta >1 is more risky and hence should give more return as compared to the script having Beta < 1. As the bank is taking more risk they should get more return. But in our case we can see that defensive portfolio having Beta < 1 has given more return as compared to Aggressive Portfolio.
So we can easily say that the investment in equity market is subject to market risk and anyone having long-term investment horizon should only enter into equity market. This analysis that has been carried out was only for a period of two month there are chances that in the long run aggressive portfolio would outperform the other portfolio.
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SECTOR PORTFOLIO Sector specific portfolio includes securities of those companies which are in the same business. Sector portfolios are very useful when there is a particular sector which is doing very good and has a bright future a head. Sector portfolio has the securities of those companies that engage in same kind of business. e.g. In 2000s sector that was providing the highest return was BANK, IT Investors who have invested their money in these securities had earned very high return. The sectors considered for the analysis are: IT SECTOR BANK SECTOR POWER SECTOR
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IT SECTOR
SL.NO
SCRIPT
AVG RET(%)
6.04%
5.16%
1.68%
15.19%
8.44%
2.27%
8.76%
5.52%
7.48%
-0.69%
3.40%
TECH MAHINDRA
3.29%
8.10%
5.70%
PRICE AS ON PARTICULAR DATE COMPANY FINANCIAL TECHNOLOGIES HINDUJA VENTURES PRICE AS ON 1-12-2010 843 PRICE AS ON 31-1-2011 850
360.25
313.75
SMARTLINK NETWORK
55
51.55
TCS
PESIT, Dept of MBA
1084
1173
Page 54
TECH MAHINDRA
680
647
TOTAL RETURN ON PORTFOLIO =TOTAL MARKET VALUE- TOTAL BOOK VALUE = 27647762- 27787280 = -139518 TOTAL RETURN IN %= -13.95% The investments made in IT sector have given a total return of -13.95%. Though the IT sector performance is consistent for past six months the return got is negative.
BANK SECTOR SL.NO SCRIPT RETURN(%) 1ST MONTH 1 AXIS BANK -1.36% RETURN(%) 2ND MONTH -8.14% AVG RET(%) -4.75%
-7.22%
-11.00%
-9.11%
-10.16%
-8.83%
-9.50%
2.11%
-13.80%
-5.85%
-0.38%
-11.54%
-5.96%
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PRICE AS ON PARTICULAR DATE COMPANY AXIS BANK PRICE AS ON 1-12-2010 1368.1 PRICE AS ON 31-1-2011 1246.75
Bank of Baroda
966.3
2580
SBI
3129
2580
2298
2042
ICICI Bank
1149
1020
TOTAL RETURN ON PORTFOLIO =TOTAL MARKET VALUE- TOTAL BOOK VALUE = 118549974- 139570985 = -21021011 TOTAL RETURN IN %= -2.102% The top 5 companies in which the bank has made its investments are selected and there total returns are analysed the total return for this sector is -2.102%
POWER SECTOR
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PERFORMANCE OF EQUITY PORTFOLIO SL.NO SCRIPT RETURN(%) RETURN(%) 1ST MONTH 1 JSW ENERGY LTD 2 NHPC -0.88% -12.92% -6.90% -1.44% 2ND MONTH -18.90% AVG RET(%) -10.17%
NTPC
9.02%
-6.47%
1.28%
Power Grid
4.11%
-1.73%
1.19%
RELIANCE INFRA.LTD
17.93%
-20.88%
-1.48%
PRICE AS ON PARTICULAR DATE COMPANY JSW ENERGY LTD NHPC PRICE AS ON 1-12-2010 101 28.4 PRICE AS ON 31-1-2011 81.1 24.6
NTPC
184
188
POWER GRID
94.32
96.5
RELIANCE INFRA.LTD
714
568.45
TOTAL RETURN ON PORTFOLIO =TOTAL MARKET VALUE- TOTAL BOOK VALUE =74347184- 82560804 = -8213620 TOTAL RETURN IN %= -8.21% The investments made in power sector is mainly for a long term the returns for short term is very less, the total return obtained for this period is -8.21%. Interpretation of Sector Portfolio
As we can see that sector specific portfolio has perform negatively during the period of the report. That is due to the fact that there is a systematic risk involve with the portfolio as lack of diversification. If we look at the performance of the Sensex during this period than we will find that Sensex has perform better than the sector portfolio. It is mainly due to diversification of risk as Sensex has the 30 script from different sectors, so any ups and downs in a sectors performance will not affect the overall Sensex that badly that in the case of sector portfolio.
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FINDING OF THE REPORT Random portfolio After understanding the various concepts about what treasury means and the various investments option available. The analysis is done to see the movement of beta in equity.
It is advisable to use the direct equity investment only if the investors have adequate knowledge about selection of stocks. There task does not ends with the selection of script but they are also required to pay close attention to the various happening in the economy that have direct or indirect effect on stock market as we have learn that the price of the script is affected by two factor, one is company specific news and the other is economy specific news so any investor investing in the equity directly has to keep the close track of the economy as well as the company in which they invest to look out for any new development that take place.
As in the theoretical way we have seen that the Beta shows the movement or change in the price of script vis--vis index. And a Beta >1 is more risky and hence should give more return as compared to the script having Beta < 1. As the person is taking more risk then he should get more return. But in our case we have seen that defensive portfolio having Beta < 1 has given more returned as compared to Aggressive Portfolio.
So we can easily say that the investment in equity market is subject to market risk and anyone having long-term investment horizon should only enter into equity market. This analysis that has been carried out was only for a period of two month there are chances that in the long run aggressive portfolio would outperform the other portfolio.
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PERFORMANCE OF EQUITY PORTFOLIO So if one does not have enough knowledge, expertise & analytical capabilities then one should avoid going for direct equity investment as the chances of loss increases. And the other very important aspect is the regular monitoring of the portfolio and reviewing is also an important aspect that one needs to pay close attention to.
Sector portfolio
Sector portfolio has given negative return in the month of the study as there is systemic risk as very high in the sector portfolio because of non diversification. This portfolio has given negative returns on the two month performance so it is advisable for the investor not to go for such a high risky investment options.
IT sectors clients are mainly from foreign countries and as such there profitability gets affected by the value of INDIAN rupees. Competition is expected from countries like China who has got cheap labour when compared to India. IT sector for past year has shown good return and will continue to do so.
Banking sectors profit is mainly depended on Rate of interest with higher rate of interest its margin gets squeezed as the cost of borrowing becomes dearer. Banking has shown good result and is expected to do reasonably well because of fast developing economy.
Power Sector is always a long term bet because power generation has got a long gestation period to make it functional. As such there is not much of variation in the prices of Power stocks.
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RECOMMENDATION From the above given findings and the conclusions of the study done by me, here are the list of recommendations that comes out of the study.
Form the study it is also proven that even in short run sector portfolio is highly risky option for investment. Here in the study it is providing negative return. That shows that investors who want to have safe return must think twice before selecting sector portfolio for a long term investment.
Though random portfolio is having scripts with highest return and volatility, but for a long term prospect is becomes hard to fetch good return out of it as it is hard to make use of high volatility.
There is a requirement for frequent portfolio checking to maintain the higher return and to make use of high volatility.
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CONCLUSION
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