A PROJECT REPORT

On

EQUITY ANALYSIS
AT
INDIA INFOLINE
Submitted in partial fulfillment for the requirement for the award of

MASTER OF BUSINESS ADMINISTRATION

By:

SOWMYA
(HT. No:228213672208)
Project submitted in partial fulfillment for the award of Degree of
MASTER OF BUSINESS ADMINISTRATION
To

Osmania University, Hyderabad

Under the guidance of
T.RAVI KUMAR
(ASSOCIATE PROFESSOR)

Department Of Business Administratio

Kommuri Pratap Reddy Institute Of Management

Ghanpur Village, Ghatkesar (M), Ranga Reddy Dist.
2013-2015

DECLARATION
I hereby declare that the project report entitled A PROJECT ON EQUITY
ANALYSIS carried out at INDIA INFOLINE. Is my original work written and
submitted by me in partial fulfillment of Master`s Degree in Business Administration of
Osmania University. I also declare that this project has not been submitted earlier in
any other university or institution.

SOWMYA
(HT. No: 228213672208)

ACKNOWLEDGEMENT

I take this opportunity to extend my profound thanks and deep sense of gratitude
to the authorities of INDIA INFOLINE. For giving me the opportunity to under take this
project work in their esteemed organization. I profusely thank Mr. Company Guide Name
MUKESH
My sincere thanks to Honorable Vice Chairman Sri K. Prashanth Reddy
, principal T.JOGACHARY, and my project guide T.RAVI KUMAR. For the kind
encouragement and constant support extended in completion of this project work. From
the bottom of my heart
I am also thankful to all those who have incidentally helped me, through their
valued guidance, co-operation and unstinted support during the course of my project.

SOWMYA
(HT.No: 228213672208)

SUMMARY

The Banking Sector, one of the core sectors, has undergone metamorphosis in the light of
liberalization and globalization. The sector seems to be optimistic of posting strong
growth in the couple of years in the view of a reasonable surge in demand. The rise of
retail lending in emerging economies like India has been of recent origin. Asia Pacifics
vast population, combined with high savings rates, explosive economic growth, and
underdeveloped retail banking services, provide the most significant growth opportunities
for banks. Banks will have to serve the retail banking segment effectively in order to
utilize the growth opportunity. A detailed analysis of Banking Sector has been covered in
respect of past growth and performance. Under this project to better understand the
Industry I have used Fundamental tools to make it more authentic and meaningful.

An economy-industry-company (E.I.C) approach has been followed under Fundamental

Analysis which covers effect of Recession, the impact of inflation, FDIs, Export, and
GDP etc. on Banking Sector. The Industry Analysis has been done with the help of
SWOT analysis and industry life cycle. For Company Analysis as a part of Fundamental
tool I have undertaken with the comparative analysis of ICICI Bank, AXIS Bank and
HDFC Bank along with the help of ratio analysis. The fundamental aspect consists of
financial and Non-Financial analysis of these companies.

At the end conclusion and recommendations have been specified so as to make the
project work more meaningful and purposeful.

CHAPTER I - INTRODUCTION

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.

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.

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

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.

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.

Detailed analysis of Banking Sector which is gearing towards international

standards

Analyze the impact of qualitative factors on industrys and companys

prospects

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

Suggesting as to which companys shares would be best for an investor to

invest.

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

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.

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 automobile 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.

LIMITATIONS

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

The study is restricted to three companies based on Fundamental analysis.

The study is limited to the companies having equities.

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

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

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

CHAPTER II - REVIEW OF LITERATURE

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.

2.

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.

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 companys stock. Fundamental analysis typically
focuses on key statistics in companys financial statements to determine if the stock
price is correctly valued. The term simply refers to the analysis of the economic wellbeing 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-industry-company approach (EIC approach).

Thus the EIC approach involves three steps:

1.

Economic analysis

2.

Industry analysis

3.

Company analysis

1. 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 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
Governments announcement regarding the tax policy. Concessions and incentives
given to a certain industry encourage investment in that particular industry. Tax reliefs
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.

2. 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

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.

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.

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.

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.

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 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 industrys 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.

3. 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
companys 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 sales are stable. Hence the stability of sales should be compared with
its market share and the competitors 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 companys 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 companys stock. Financial statement analysis is
the study of a companys financial statement from various viewpoints. The statement
gives the historical and current information about the companys 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 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 companys 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 shareholders 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.
The computation of return on equity is as follows:

Return on equity = (Net profit to owners/value of the specific owner's

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.

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) Dividend Yield
Dividend yield is computed by relating the dividend per share to the market price of the
share. The market place provides opportunities for the investor to buy the company's
share at any point of time. The price at which the share has been bought from the
market is the actual cost of the investment to the shareholder. The market price is to be
taken as the cum-dividend price. Dividend yield relates the actual cost to the cash flows
received from the company. The computation of dividend yield is as follows

Dividend yield = (Dividend per share / Market price per share) * 100

High dividend yield ratios are usually interpreted as undervalued companies in the
market. The market price is a measure of future discounted values, while the dividend
per share is the present return from the investment. Hence, a high dividend yield
implies that the share has been under priced in the market. On the other hand a low
dividend yield need not be interpreted as overvaluation of shares. A company that does
not pay out dividends will not have a dividend yield and the real measure of the market
price will be in terms of earnings per share and not through the dividend payments.

h) 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.

i) Debt-to-Equity Ratio
Debt-Equity ratio is used to measure the claims of outsiders and the owners against the
firms 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 firms assets. The purpose is to get an idea of the cushion available
to outsiders on the liquidation of the firm.

CHAPTER III - INDUSTRY PROFILE

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.

CLASSIFICATION OF FINANCIAL MARKETS

Financial markets

Organized markets

Capital Markets

Unorganized markets

Money Markets

Industrial Securities
Market

Money Lenders,
Indigenuos Bankers

Call Money Market

Primary Market

Commercial Bill
Market

Secondary market

Treasury Bill Market

Government
Securities Market
Long-term loan
market

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 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.

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.)

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 IPOs 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 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 countrys 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 Indias
capital markets and as one of the countrys most important institutions.

FINANCIAL MARKET REGULATIONS

Regulations are an absolute necessity in the face of the growing importance of capital
markets throughout the world. The development of a market economy is dependent on
the development of the capital market. The regulation of a capital market involves the
regulation of securities; these rules enable the capital market to function more
efficiently and impartially.
A well regulated market has the potential to encourage additional investors to partake,
and contribute in, furthering the development of the economy. The chief capital market
regulatory authority is Securities and Exchange Board of India (SEBI).
SEBI is the regulator for the securities market in India. It is the apex body to develop
and regulate the stock market in India It was formed officially by the Government of
India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by C
B Bhave, SEBI is headquartered in the popular business district of Bandra-Kurla
complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices
in New Delhi, Kolkata, Chennai and Ahmedabad. In place of Government Control, a
statutory and autonomous regulatory board with defined responsibilities, to cover both
development & regulation of the market, and independent powers has been set up.

The basic objectives of the Board were identified as:

to protect the interests of investors in securities;

to promote the development of Securities Market;

to regulate the securities market and

For matters connected therewith or incidental thereto.

Since its inception SEBI has been working targeting the securities and is attending to
the fulfillment of its objectives with commendable zeal and dexterity. The
improvements in the securities markets like capitalization requirements, margining,
establishment of clearing corporations etc. reduced the risk of credit and also reduced
the market.

SEBI has introduced the comprehensive regulatory measures, prescribed registration

norms, the eligibility criteria, the code of obligations and the code of conduct for
different intermediaries like, bankers to issue, merchant bankers, brokers and subbrokers, registrars, portfolio managers, credit rating agencies, underwriters and others.
It has framed bye-laws, risk identification and risk management systems for Clearing
houses of stock exchanges, surveillance system etc. which has made dealing in
securities both safe and transparent to the end investor.

Another significant event is the approval of trading in stock indices (like S&P CNX
Nifty & Sensex) in 2000. A market Index is a convenient and effective product because
of the following reasons:

It acts as a barometer for market behavior;

It is used to benchmark portfolio performance;

It is used in derivative instruments like index futures and index options;

It can be used for passive fund management as in case of Index Funds.

Two broad approaches of SEBI is to integrate the securities market at the national level,
and also to diversify the trading products, so that there is an increase in number of
traders including banks, financial institutions, insurance companies, mutual funds,
primary dealers etc. to transact through the Exchanges. In this context the introduction
of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD
is a real landmark.
SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and
successively (e.g. the quick movement towards making the markets electronic and
paperless rolling settlement on T+2 bases). SEBI has been active in setting up the
regulations as required under law.

STOCK EXCHANGES IN INDIA

Stock Exchanges are an organized marketplace, either corporation or mutual
organization, where members of the organization gather to trade company stocks or
other securities. The members may act either as agents for their customers, or as
principals for their own accounts.
As per the Securities Contracts Regulation Act, 1956 a stock exchange is an
association, organization or body of individuals whether incorporated or not,
established for the purpose of assisting, regulating and controlling business in buying,
selling and dealing in securities.

Stock exchanges facilitate for the issue and redemption of securities and other financial
instruments including the payment of income and dividends. The record keeping is
central but trade is linked to such physical place because modern markets are
computerized. The trade on an exchange is only by members and stock broker do have
a seat on the exchange.
List of Stock Exchanges in India
Bombay Stock Exchange
National Stock Exchange

19. Uttar Pradesh

OTC Exchange of India

20. Vadodara

Regional Stock Exchanges

1. Ahmedabad
2. Bangalore
3. Bhubaneswar
4. Calcutta
5. Cochin
6. Coimbatore
7. Delhi
8. Guwahati
9. Hyderabad
10. Jaipur
11. Ludhiana
12. Madhya Pradesh
13. Madras
14. Magadh
15. Mangalore
16. Meerut
17. Pune
18. Saurashtra Kutch

BOMBAY STOCK EXCHANGE

A very common name for all traders in the stock market, BSE, stands for Bombay
Stock Exchange. It is the oldest market not only in the country, but also in Asia. In the
early days, BSE was known as "The Native Share & Stock Brokers Association." It
was established in the year 1875 and became the first stock exchange in the country
to be recognized by the government. In 1956, BSE obtained a permanent recognition
from the Government of India under the Securities Contracts (Regulation) Act, 1956.

In the past and even now, it plays a pivotal role in the development of the country's
capital market. This is recognized worldwide and its index, SENSEX, is also tracked
worldwide. Earlier it was an Association of Persons (AOP), but now it is a
demutualised and corporatised entity incorporated under the provisions of the
Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualization)
Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).

BSE Vision
The vision of the Bombay Stock Exchange is to "Emerge as the premier Indian stock
exchange by establishing global benchmarks."

BSE Management
Bombay Stock Exchange is managed professionally by Board of Directors. It
comprises of eminent professionals, representatives of Trading Members and the
Managing Director. The Board is an inclusive one and is shaped to benefit from the
market intermediaries participation.

The Board exercises complete control and formulates larger policy issues. The dayto-day operations of BSE are managed by the Managing Director and its school of
professional as a management team.

BSE Network
The Exchange reaches physically to 417 cities and towns in the country. The
framework of it has been designed to safeguard market integrity and to operate with
transparency. It provides an efficient market for the trading in equity, debt instruments
and derivatives. Its online trading system, popularly known as BOLT, is a proprietary
system and it is BS 7799-2-2002 certified. The BOLT network was expanded,
nationwide, in 1997. The surveillance and clearing & settlement functions of the
Exchange are ISO 9001:2000 certified.

BSE Facts
BSE as a brand is synonymous with capital markets in India. The BSE SENSEX is
the benchmark equity index that reflects the robustness of the economy and finance. It
was the

First in India to introduce Equity Derivatives

First in India to launch a Free Float Index

First in India to launch US$ version of BSE Sensex

First in India to launch Exchange Enabled Internet Trading Platform

First in India to obtain ISO certification for Surveillance, Clearing &

Settlement

'BSE On-Line Trading System (BOLT) has been awarded the globally
recognized the Information Security Management System standard
BS7799-2:2002.

First to have an exclusive facility for financial training

Moved from Open Outcry to Electronic Trading within just 50 days

BSE with its long history of capital market development is fully geared to continue
its contributions to further the growth of the securities markets of the country, thus
helping India increases its sphere of influence in international financial markets.

NATIONAL
LIMITED

STOCK

EXCHANGE

OF

INDIA

The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions (FIs)
to provide access to investors from all across the country on an equal footing. Based
on the recommendations, NSE was promoted by leading Financial Institutions at the
behest of the Government of India and was incorporated in November 1992 as a taxpaying company unlike other stock Exchange in the country.
On its recognition as a stock exchange under the Securities Contracts (Regulation)
Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market
(WDM) segment in June 1994. The Capital Market (Equities) segment commenced
operations in November 1994 and operations in Derivatives segment commenced in
June 2000.
NSE GROUP
National Securities Clearing Corporation Ltd. (NSCCL)
It is a wholly owned subsidiary, which was incorporated in August 1995 and
commenced clearing operations in April 1996. It was formed to build confidence in
clearing and settlement of securities, to promote and maintain the short and consistent

settlement cycles, to provide a counter-party risk guarantee and to operate a tight risk
containment system.

NSE.IT Ltd.
It is also a wholly owned subsidiary of NSE and is its IT arm. This arm of the NSE is
uniquely positioned to provide products, services and solutions for the securities
industry. NSE.IT primarily focuses on in the area of trading, broker front-end and
back-office, clearing and settlement, web-based, insurance, etc. Along with this, it
also provides consultancy and implementation services in Data Warehousing,
Business Continuity Plans, Site Maintenance and Backups, Stratus Mainframe
Facility Management, Real Time Market Analysis & Financial News.

India Index Services & Products Ltd. (IISL)

It is a joint venture between NSE and CRISIL Ltd. to provide a variety of indices and
index related services and products for the Indian Capital markets. It was set up in
May 1998. IISL has a consulting and licensing agreement with the Standard and
Poor's (S&P), world's leading provider of investible equity indices, for co-branding
equity indices.

National Securities Depository Ltd. (NSDL)

NSE joined hands with IDBI and UTI to promote dematerialization of securities. This
step was taken to solve problems related to trading in physical securities. It
commenced operations in November 1996.

NSE Facts

It uses satellite communication technology to energize participation from

around 400 cities in India.

NSE can handle up to 1 million trades per day.

It is one of the largest interactive VSAT based stock exchanges in the world.

The NSE- network is the largest private wide area network in India and the
first extended C- Band VSAT network in the world.

Presently more than 9000 users are trading on the real time-online NSE
application.

Today, NSE is one of the largest exchanges in the world and still forging ahead. At
NSE, we are constantly working towards creating a more transparent, vibrant and
innovative capital market.

OVER THE COUNTER EXCHANGE OF INDIA

OTCEI was incorporated in 1990 as a section 25 company under the companies Act
1956 and is recognized as a stock exchange under section 4 of the securities Contracts
Regulation Act, 1956. The exchange was set up to aid enterprising promotes in raising
finance for new projects in a cost effective manner and to provide investors with a
transparent and efficient mode of trading Modeled along the lines of the NASDAQ
market of USA, OTCEI introduced many novel concepts to the Indian capital markets
such as screen-based nationwide trading, sponsorship of companies, market making

and scrip less trading. As a measure of success of these efforts, the Exchange today
has 115 listings and has assisted in providing capital for enterprises that have gone on
to build successful brands for themselves like VIP Advanta, Sonora Tiles & Brilliant
mineral water, etc.

Need for OTCEI:

Studies by NASSCOM, software technology parks of India, the venture capitals funds
and the governments IT tasks Force, as well as rising interest in IT, Pharmaceutical,
Biotechnology and Media shares have repeatedly emphasized the need for a national
stock market for innovation and high growth companies.

Innovative companies are critical to developing economics like India, which is

undergoing a major technological revolution. With their abilities to generate
employment opportunities and contribute to the economy, it is essential that these
companies not only expand existing operations but also set up new units. The key
issue for these companies is raising timely, cost effective and long term capital to
sustain their operations and enhance growth. Such companies, particularly those that
have been in operation for a short time, are unable to raise funds through the
traditional financing methods, because they have not yet been evaluated by the
financial world.

CHAPTER IV - COMPANY PROFILE

About the Company

India Infoline is a one-stop financial services shop, most respected for quality of its
information, personalized service and cutting-edge technology.
Vision
Our vision is to be the most respected company in the financial services space.

India Infoline Group

The India Infoline group, comprising the holding company, India Infoline Limited
and its wholly-owned subsidiaries, include the entire financial services space with
offerings ranging from Equity research, Equities and derivatives trading,
Commodities trading, Portfolio Management Services, Mutual Funds, Life Insurance,
Fixed deposits, GoI bonds and other small savings instruments to loan products and
Investment banking.

India Infoline also owns and manages the websites www.indiainfoline.com and
www.5paisa.com. The company has a network of over 2100 business locations
(branches and sub-brokers) spread across more than 450 cities and towns. The group
caters to approximately a million customers.

Founded in 1995 by Mr. Nirmal Jain (Chairman and Managing Director) as an

independent business research and information provider, the company gradually
evolved into a one-stop financial services solutions provider.

India Infoline received registration for a housing finance company from the National
Housing Bank and received the Fastest growing Equity Broking House - Large
firms in India by Dun & Bradstreet in 2009. It also received the Insurance broking
license from IRDA; received the venture capital license; received in principle
approval to sponsor a mutual fund; received Best broker- India award from Finance
Asia; Most Improved Brokerage- India award from Asia money.

COMPANY STRUCTURE
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 one-stop solution for clients trading in the equities market. It
has recently launched its Investment banking and Institutional Broking business.

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 contracyclical 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.

India Infoline Insurance Brokers Limited India Infoline Insurance Brokers

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

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)

Moneyline Credit Limited (consumer finance)

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.

IIFL MANAGEMENT

THE MANAGEMENT TEAM

Mr. Nirmal Jain, Chairman & Managing Director

Nirmal Jain, MBA (IIM, Ahmadabad) and a Chartered and Cost Accountant, founded
Indias 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.

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
Mr Sat Pal Khattar, Non Executive Director
Mr Sat Pal Khattar, - Board member since April 2001 - Presidential Council of
Minority Rights member, Chairman of the Board of Trustee of
Singapore Business Federation, is also a life trustee of SINDA, a non
profit body, helping the under-privileged Indians in Singapore. He joined the India
Infoline board in April 2001.
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 2008 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 investors 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 Infolines 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 Indias
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.

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
customers 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 clients resources into stocks from different sectors, depending on
clients risk-return profile. This 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, clients 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 clients inbox every Friday evening.

CHAPTER V
DATA ANALYSIS & INTERPRETATIONS

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 Centre for Monitoring Indian Economy (CMIE) has estimated Indias gross
domestic product (GDP) to expand at 9.2 per cent in 2010-11 as compared to the
growth of 7.4 per cent in 2009-10. Overall growth in industrial output was 10.8 per
cent year-on-year (y-o-y) in October 2010. The growth in the industrial sector is
expected to increase at 9.4 per cent in 2010-11, as compared to 9.2 per cent in 200910. According to a survey by the Confederation of Indian Industry (CII) and ASCON,
around 50 segments (out of 127) in the manufacturing sector grew by 39 per cent,
entering the 'excellent growth' category, during April-December 2010-11 compared to
29 sectors (22.9 per cent) in April-December 2009 which shows a marked
improvement. Also, services sector is projected to expand by 10 per cent as compared
to 8.6 per cent last year, led by the trade and transport segment. The major turnaround
is expected from the agriculture and allied sector, which is being projected to grow by
5.7 per cent in 2010-11. As per Use-based classification, the Sectoral growth rates in
October 2010 over October 2009 are 7.7 per cent in Basic goods, 22 per cent in
Capital goods and 9.5 per cent in Intermediate goods. The Consumer durables and
Consumer non-durables have expanded by 31 per cent and 0.1 per cent respectively in
the reported month.
The industrial output registered a robust growth of 10.8 per cent year-on-year (y-o-y)
in October 2010. Among the three major constituents of the IIP, manufacturing and
electricity recorded higher growth rates of 11.3 per cent and 8.8 per cent in October as
against their corresponding levels of 10.8 per cent and 4 per cent for the

corresponding month in 2009. The third constituent mining index registered 6.5 per
cent in October 2010.
The Economic scenario
Foreign injections amounted to US$ 6.4 billion in October 2010, which was almost
25 per cent of the total inflows in the stock market registered so far in 2010. The net
foreign fund investment crossed the US$ 100 billion mark on November 8 2010,
since the liberalization policy was implemented in 1992. As per the data given by
SEBI, the total figure stood at US$100.9 billion, wherein US$ 4.78 billion were
infused in November itself. The humungous increase in investment mirrors the
foreign investors faith in the Indian markets. FIIs have made investments worth US$
4.11 billion in equities and poured US$ 667.71 million into the debt market.
Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and
number of registered sub-accounts rose to 5,592 as of November 10, 2010.
As on December 17, 2010, India's foreign exchange reserves totalled US$ 294.60
billion, an increase of US$ 11.13 billion over the same period last year, according to
the Reserve Bank of India's (RBI) Weekly Statistical Supplement.
Moreover, India received foreign direct investment (FDI) equity worth US$ 12.39
billion during April-October, 2010-11, taking the cumulative amount of FDI inflows
during April 2000 - October 2010 to US$ 179.45 billion, according to the Department
of Industrial Policy and Promotion (DIPP).
The services sector comprising financial and non-financial services attracted 21 per
cent of the total FDI equity inflow into India, with FDI worth US$ 2,163 million
during April-October 2010, while telecommunications including radio paging,
cellular mobile and basic telephone services attracted second largest amount of FDI
worth US$ 1,062 million during the same period. Metallurgical industries were the

third highest sector attracting FDI worth US$ 920 million followed by power sector
which garnered US$ 729 million during the financial year April-October 2010.

Exports from India have increased by 26.8 per cent year-on-year (y-o-y) to
touch US$ 18.9 billion in November 2010, urging the Government to exude
confidence that overall shipments in 2010-11 may touch US$ 215 billion. For
the April-November 2010 period, exports have grown by 26.7 per cent to US$
140.3 billion, while imports totaled up to US$ 222 billion, expanding 24 per
cent.

India's logistics sector is witnessing increased activity. According to the Indian

Shipping ministry, the country's major ports handled 44.4 million tones of
cargo during September 2010, 4.5 per cent higher as compared to 5.9 per cent
growth in September 2009. Leading consultants Frost&Sullivan, as cited by
The Economic Times, are expecting traffic to boost at Indian ports from 814.1
million tones (MT) to 1,373.1 MT from 2010 to 2015 at a CAGR of 11 per
cent. The study group has underlined three key trends in the sector, namely,
increase in containerized cargo, increased private sector participation and
traffic diversion toward minor ports.

Foreign Tourist Arrivals (FTA) in India during the period of JanuaryNovember 2010 were 4.93 million as compared to the FTAs of 4.46 million
during the same period of 2009, showing a growth of 10.4 per cent. The
Foreign Exchange Earnings (FEE) during the period of January-November
2010 were US$ 12.88 billion as compared to US$ 10.67 billion during the
same period of 2009, registering a growth rate of 20.7 per cent, according to
data released by the Ministry of Tourism.

The total telephone subscriber base in the country reached 742.12 million as
on October 31, 2010, taking the overall tele-density to 62.51, according to the
figures released by the Telecom Regulatory Authority of India (TRAI). Also
the wireless subscriber base increased to 706.69 million.

The average assets under management of the mutual fund industry stood at
US$ 160.44 billion for the month of September 2010, according to the data
released by Association of Mutual Funds in India (AMFI).

As per NASSCOMs Strategic Review 2010, the Indian IT-BPO sector

continues to be the fastest growing segment of the industry and is estimated to
aggregate revenues of USD 73.1 billion in FY2010, with the IT software and
services industry accounting for USD 63.7 billion of revenues.

The cumulative production of vehicles in India grew by 32.4 per cent upto
August 2010 as compared to the same period in 2009, Mr B S Meena,
Secretary, Ministry of Heavy Industry, reported. Passenger vehicles,
commercial vehicles and two-wheeler segments had all recorded impressive
growth rates of 32 per cent, 49 per cent and 31 per cent, respectively during
the period upto August 2010.

According to the Gem and Jewellery Export Promotion Council, jewellery

shipments were worth US$ 23.57 billion in April-November 2010, registering
a rise of 38.25 per cent as compared to US$ 17.05 billion in the corresponding
period of 2009.

According to the Ministry of Civil Aviation, passengers carried by domestic

airlines from January-November, 2010 were 46.81 million as against 39.35
million in the corresponding period of year 2009, thereby registering a growth
of 18.9 per cent.

According to Ernst & Young (E&Y), a global consultancy firm, India is

expected to receive more than US$ 7 billion in private equity (PE)
investments in 2010, on the back of robust economic growth. According to
research firm VCCEdge, mergers and acquisition (M&A) deals worth US$
54.6 billion have been signed till December 15, 2010, significantly more than
the previous high of US$ 42 billion achieved in 2007.

The HSBC Market Business Activity Index, which measures business activity
among Indian services companies, based on a survey of 400 firms, rose to
60.1 in November 2010 from 56.2 in October 2010.

Agriculture
Agriculture is one of the strongholds of the Indian economy and accounts for 14.6 per
cent of the country's gross domestic product (GDP) in 2009-10, and 10.23 per cent
(provisional) of the total exports. Furthermore, the sector provided employment to 55
per cent of the work force.
India's agriculture and allied sector grew by 3.8 per cent in the first six months of the
current fiscal (2010-11). Capital investment in agriculture has increased from US$ 1.2
billion in 2007-08 to US$ 3.26 billion in 2010-11 (inclusive of State Plan Scheme
Rashtriya Krishi Vikas Yojana), as per a Ministry of Agriculture press release dated
August 3, 2010.
In the Union Budget 2010-11, the Finance Minister, Mr Pranab Mukherjee made the
following announcements for the agriculture sector.

US$ 86.89 million is provided to increase the Green Revolution to the eastern
region of the country comprising Bihar, Chattisgarh, Jharkhand, Eastern up,
West Bengal and Orissa.

US$ 65.17 million has been provided to organise 60,000 pulses and oil-seed
villages in rain-fed areas in 2010-11 and provide an integrated intervention for
water harvesting, watershed management and soil health to improve
productivitiy of the dry land farming areas.

Banks have been consistently meeting the targets set for agricultural credit
flow in the past few years. For the year 2010-11, the target has been set at US$
81.47 billion.

In addition to the 10 mega food park projects already being set up, the
government has decided to set up five more such parks.

External commercial borrowings are available for cold storage for

preservation or storage of agricultural and allied products, marine products
and meat.

Growth potential story

The data centre services market in the country is forecast to grow at a

compound annual growth rate (CAGR) of 22.7 per cent between 2009 and
2011, to touch close to US$ 2.2 billion by the end of 2011, according to
research firm IDC Indias report published in March 2010. The report further
stated that the overall India data centre services market in 2009 was estimated
at US$ 1.39 billion.

According to a report by research and advisory firm Gartner published in

March 2010, the domestic BPO market is expected to grow at 25 per cent in
2010 to touch US$ 1.2 billion by 2011. Further, the BPO market in India is
estimated to grow 19 per cent through 2013 and grow to US$ 1.8 billion by
2013. According to the report, the domestic India BPO services market grew
by 7.3 per cent year-on-year in 2009.

The BMI India Retail Report Quarter 3, 2010 released in May 2010, forecasts
that total retail sales will grow from US$ 353 billion in 2010 to US$ 543.2
billion by 2014.

According to a report titled 'India 2020: Seeing, Beyond', published by

domestic broking major, Edelweiss Capital in March 2010, stated that India's
GDP is set to quadruple over the next ten years and the country is likely to
become an over US$ 4 trillion economy by 2020.

India will overtake China to become the world's fastest growing economy by
2018, according to the Economist Intelligence Unit (EIU), the research arm of
London-based Economist magazine.

Economic Survey 2009-10 Highlights

According to the Economic Survey 2009-10, tabled in Parliament on February 25,
2010 by the Union Finance Minister, Mr Pranab Mukherjee, the economy is expected
to grow at 7.2 per cent in 2009-10. The expected growth comes on the back of the
growth momentum witnessed in Q2 2009-10 estimates, when the economy recorded a
GDP growth of 7.9 per cent as against 7.5 per cent in the corresponding quarter of
2008-09. The industrial and the service sectors are growing at 8.2 and 8.7 per cent
respectively, as per the advance estimates of gross domestic product (GDP) for 200910, released by the Central Statistical Organisation (CSO).
The Economic Survey estimates:

Growth rate of GDP at factor cost expected to be 7.2 per cent.

Growth in the manufacturing sector has more than doubled from 3.2 per cent
in 2008-09 to 8.9 per cent in 2009-10.

Growth of private investment demand picked up in 2009-10.

Savings rate as a percentage of GDP in 2008-09 stood at 32.5 per cent.

Growth rate of capital formation as a percentage of GDP in 2008-09 stood at

34.9 per cent.

Foreign Exchange Reserves in 2009-10 as of December 31, 2009 stood at US$

283.5 billion.

Financing, insurance, real estate and business services have retained their
growth momentum at around 10 per cent in 2009-10.

The main highlights of the survey are:

The recovery in GDP growth for 2009-10, as indicated in the advance

estimates, is broad based. Seven out of eight sectors/sub-sectors show a
growth rate of 6.5 per cent or higher. Sectors including mining and quarrying;
manufacturing; and electricity, gas and water supply have significantly
improved their growth rates at over 8 per cent in comparison with 2008-09.
The construction sector and trade, hotels, transport and communication have
also improved their growth rates over the preceding year.

Strong growth in automobiles, rubber and plastic products, wool and silk
textiles, wood products, chemicals and miscellaneous manufacturing; modest
growth in nonmetallic mineral products.

The opening of the telecom sector led to rapid growth in subscriber base.
From only 54.6 million telephone subscribers in 2003, the number increased
to 429.7 million at the end of March 2009 and further to 562 million as of
October 31, 2009 showing an addition of 96 million subscribers during the
period from March to December 2009.

There has been improvement in the balance of payments (BoP) situation

during H1 of 2009-10 over H1 of 2008-09, reflected in higher net capital
inflows and lower trade deficit.

Net capital flows to India at US$ 29.6 billion in April-September 2009

remained higher as compared to US$ 12 billion in April-September 2008.

During fiscal 2009-10, foreign exchange reserves increased by US$ 31.5

billion from US$ 252 billion in end March 2009 to US$ 283.5 billion in end
December 2009.

Growth rate of gross fixed capital formation in 2009-10 has recovered, as per
the revised National Accounts Statistics (NAS).

Turnaround in merchandise export growth witnessed in November 2009,

which has been sustained in December 2009.

ANALYSIS OF BANKING SECTOR

The rise of retail lending in emerging economies like India has been of recent origin.
Asia Pacifics vast population, combined with high savings rates, explosive economic
growth, and underdeveloped retail banking services, provide the most significant
growth opportunities for banks. Banks will have to serve the retail banking segment
effectively in order to utilize the growth opportunity.
Banking strategies are presently undergoing various transformations, as the overall
scenario has changed over the last couple of years. Till the recent past, most of the
banks had adopted fierce cost cutting measures to sustain their competitiveness. This
strategy however has become obsolete in the new light of immense growth
opportunities for banking industry. Most bankers are now confident about their high
performance in terms of organic growth and in realising high returns. Nowadays, the
growth strategies of banks revolve around customer satisfaction. Improved customer
relationship management can only lead to fulfilment of long-term, as well as, shortterm objectives of the bankers. This requires, efficient and accurate customer database
management and development of well-trained sales force to develop and sustain longterm profitable customer relationship.
The banking system in India is significantly different from that of the other Asian
nations, because of the countrys unique geographic, social, and economic
characteristics. Though the sector opened up quite late in India compared to other
developed nations, like the US and the UK, the profitability of Indian banking sector
is at par with that of the developed countries and at times even better on some

parameters. For instance, return on equity and assets of the Indian banks are on par
with Asian banks, and higher when compared to that of the US and the UK.

Banks in India are mainly classified into Scheduled Banks and Non-Scheduled Banks.
Scheduled Banks are the ones, which are included in the second schedule of the RBI
Act 1934 and they comply with the minimum statutory requirements. Non-Scheduled
Banks are joint stock banks, which are not included in the second Schedule of the
RBI Act 134, on account of the failure to comply with the minimum requirements for
being scheduled.

STRENGTHS

Indian banks have compared favourably on growth, asset quality and

profitability with other regional banks over the last few years. The banking
index has grown at a compounded annual rate of over 51 per cent since April
2001 as compared to a 27 per cent growth in the market index for the same
period.

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.

Bank lending has been a significant driver of GDP growth and employment.

Extensive reach: the vast networking & growing number of branches &
ATMs. Indian banking system has reached even to the remote corners of the
country.

The government's regular policy for Indian bank since 1969 has paid rich
dividends with the nationalisation of 14 major private banks of India.

In terms of quality of assets and capital adequacy, Indian banks are considered
to have clean, strong and transparent balance sheets relative to other banks in
comparable economies in its region.

India has 88 scheduled commercial banks (SCBs) - 27 public sector banks

(that is with the Government of India holding a stake)after merger of New
Bank of India in Punjab National Bank in 1993, 29 private banks (these do not
have government stake; they may be publicly listed and traded on stock
exchanges) and 31 foreign banks. They have a combined network of over
53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a
rating agency, the public sector banks hold over 75 percent of total assets of
the banking industry, with the private and foreign banks holding 18.2% and
6.5% respectively.

Foreign banks will have the opportunity to own up to 74 per cent of Indian
private sector banks and 20 per cent of government owned banks.

WEAKNESSES

PSBs need to fundamentally strengthen institutional skill levels especially in

sales and marketing, service operations, risk management and the overall
organisational performance ethic & strengthen human capital.

Old private sector banks also have the need to fundamentally strengthen skill
levels.

The cost of intermediation remains high and bank penetration is limited to

only a few customer segments and geographies.

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 industry utilities and

service bureaus.

Refusal to dilute stake in PSU banks: The government has refused to dilute its
stake in PSU banks below 51% thus choking the headroom available to these
banks for raining equity capital.

Impediments in sectoral reforms: Opposition from Left and resultant

cautious approach from the North Block in terms of approving merger of PSU
banks may hamper their growth prospects in the medium term.

OPPORTUNITY

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.

\banks will no longer enjoy windfall treasury gains that the decade-long
secular decline in interest rates provided. This will expose the weaker banks.

With increased interest in India, competition from foreign banks will only
intensify.

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.

New private banks could reach the next level of their growth in the Indian
banking sector by continuing to innovate and develop differentiated business
models to profitably serve segments like the rural/low income and
affluent/HNI segments; actively adopting acquisitions as a means to grow and

reaching the next level of performance in their service platforms. Attracting,

developing and retaining more leadership capacity

Foreign banks committed to making a play in India will need to adopt

alternative approaches to win the race for the customer and build a valuecreating customer franchise in advance of regulations potentially opening up
post 2009. At the same time, they should stay in the game for potential
acquisition opportunities as and when they appear in the near term.
Maintaining a fundamentally long-term value-creation mindset.

reach in rural India for the private sector and foreign banks.

With the growth in the Indian economy expected to be strong for quite some
time-especially in its services sector-the demand for banking services,
especially retail banking, mortgages and investment services are expected to
be strong.

the Reserve Bank of India (RBI) has approved a proposal from the
government to amend the Banking Regulation Act to permit banks to trade in
commodities and commodity derivatives.

Liberalisation of ECB norms: The government also liberalised the ECB

norms to permit financial sector entities engaged in infrastructure funding to
raise ECBs. This enabled banks and financial institutions, which were earlier
not permitted to raise such funds, explore this route for raising cheaper funds
in the overseas markets.

Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI
has allowed them to raise perpetual bonds and other hybrid capital securities
to shore up their capital. If the new instruments find takers, it would help PSU
banks, left with little headroom for raising equity. Significantly, FII and NRI
investment limits in these securities have been fixed at 49%, compared to 20%
foreign equity holding allowed in PSU banks.

THREATS

Threat of stability of the system: failure of some weak banks has often
threatened the stability of the system.

Rise in inflation figures which would lead to increase in interest rates.

Increase in the number of foreign players would pose a threat to the PSB as
well as the private players.

ROAD AHEAD

Liquidity significantly tightened during the quarter with banks daily average
borrowing from RBI under LAF increasing to Rs1.2tn in December as
compared to Rs250bn in September. The short-term rates (call rates and
3m/6m CPs) spiked by +200bps between September-December 2010.

In its second quarter monetary policy review in November, RBI raised key
policy rates by 25bps to anchor inflationary expectations while in the latest
mid-quarter review in December, the central bank kept rates unchanged and
focused more on increasing liquidity in the system.

System credit growth has improved significantly on revival in private

investments - Qoq loan growth in Q3 at 6.4% v/s 3.4 in Q2. Yoy credit growth
momentum has increased to 23.7% and Ytd credit expansion stands at 12.3%.
To achieve RBIs full-year credit growth target of 20% yoy, the system
requires Rs2.5tn credit expansion in Q4 (6.8% qoq growth). We expect FY11
credit growth target to be achieved driven by further acceleration in corporate

credit demand and banks rushing to meet their PSL target (a seasonal
tailwind).

On the flipside, deposits have been growing at muted pace. In Q3, it grew by
just 2% qoq. Both, yoy growth momentum and YTD accretion in deposits
have been significantly behind advances at 14.7% and 7% respectively. To
achieve RBIs full-year deposit growth target of 18% yoy, the system requires
Rs5tn mobilization in Q4 (10.3% qoq growth). Though banks are raising
deposit rates quickly to capitalize on the improving credit demand, we think
annual deposit growth would be lower at near 15%. Due to high inflation,
retail customers have been preferring higher return yielding assets over
deposits.

We expect 4-7% qoq loan growth for the banks under our coverage. In-line
with the system, deposit growth could be lower than advances thereby
improving the C/D ratio on sequential basis. In Q4, the C/D ratio is likely to
come-off though.

With more frequent and significant deposit rate hikes than lending rate hikes
during the past five months, we expect NIMs (currently at multi-quarter high
for many banks) to contract by 10-30bps qoq in Q3. A probable decline in
CASA due to substantial increase in term deposit rates (as witnessed during
Q2 FY09-Q1 FY10) would also increase cost of deposits on sequential basis.
We expect NII growth to be in the range of 25-30% yoy.

The 25-30bps increase in the G-Sec yields could mean sequentially lower
treasury income. However, the growth in the core fee income is likely to be
strong driven by robust loan growth. The C/I ratio could deteriorate qoq on
account of continued investments in network expansion and flattish NII
growth.

Asset quality of PSU banks may further show some strain while that of private
banks would remain stable. Loan-loss provisioning by SBI and PNB is
expected to be significantly higher thereby depressing profit growth.

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 banks 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 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, non-fund 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 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 companys 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.

ICICI Bank Comparative Balance Sheets

(Rs. in Crores)

Particulars

Mar-14

Mar-13

Mar-12

Mar-11

Mar-10

1,151.82

1,114.89

1,113.29

1,462.68

1,249.34

Reserves Total

54,150.38

50,181.61

45,664.24

43,609.55

23,058.32

Minority Interest

1,358.22

1,270.40

910.51

731.19

509.57

Deposits

259,106.00

241,572.30

261,855.75

276,983.23

248,613.63

Borrowings

125,838.86

115,698.32

116,066.35

84,566.05

61,659.54

92,618.27

79,989.68

57,641.23

78,895.39

59,894.44

534,223.55

489,827.20

483,251.37

486,248.09

394,984.84

Cash & Balances with RBI

21,234.00

27,850.28

17,875.44

29,800.75

19,241.04

Balances with Banks & money at Call

18,151.26

19,293.84

17,185.94

15,527.93

20,448.09

Investments

209,652.78

186,319.78

148,107.00

160,046.76

120,616.69

Advances

256,019.31

225,778.13

266,130.47

251,401.67

211,399.44

SOURCES OF FUNDS
Capital

Other Liabilities & Provisions

TOTAL LIABILITIES
APPLICATION OF FUNDS :

Fixed Assets

5,489.55

3,862.29

4,497.46

4,678.35

4,402.55

Other Assets

23,676.94

26,722.88

29,455.06

24,792.63

18,877.03

0.00

0.00

0.00

0.00

0.00

Miscellaneous Expenditure not

written off
TOTAL ASSETS
Contingent Liability
Bills for collection

534,223.84

489,827.20

483,251.37

486,248.09

394,984.84

1,022,599.66

820,519.93

867,788.40

1,310,328.54

673,611.69

8,530.40

6,718.86

6,002.66

4,290.81

4,055.39

ICICI Bank Comparative Profit & Loss Accounts

(Rs. in Crores)

Particulars

Mar-14

Mar-13

Mar-12

Mar-11

Mar-10

Interest Earned

30,081.40

30,153.71

36,250.71

34,094.96

24,002.55

Other Income

31,513.30

29,446.06

28,375.94

26,436.88

17,540.24

Total

61,594.70

59,599.77

64,626.65

60,531.84

41,542.79

Total

55,276.51

54,756.36

61,247.23

57,416.58

38,909.39

19,342.57

20,729.19

26,487.25

25,766.98

17,675.72

Payments to/Provisions for Employees

4,392.60

3,678.43

3,904.30

3,969.80

2,636.50

Operating Expenses & Administrative

Expenses

2,777.37

2,991.89

3,128.16

3,271.68

2,414.01

739.68

762.87

806.69

679.42

615.50

25,955.80

24,861.80

25,334.91

22,622.02

14,806.59

1,624.33

1,497.20

2,138.85

1,962.82

1,201.34

0.00

0.00

65.92

78.00

58.72

444.16

234.98

-618.85

-934.14

-498.99

Total

61,594.70

59,599.77

64,626.65

60,531.84

41,542.79

Total

55,276.51

54,756.36

61,247.23

57,416.58

38,909.39

6,318.19

4,843.41

3,379.42

3,115.26

2,633.40

224.92

173.12

-197.53

-282.97

-127.23

6,093.27

4,670.29

3,576.95

3,398.23

2,760.63

21.01

57.58

0.83

32.82

22.69

Adjusted Net Profit

6,072.26

4,612.71

3,576.12

3,365.41

2,737.94

Profit brought forward

1,688.64

537.17

549.68

-7.37

-243.56

1,288.00

1,007.00

940.00

1,040.00

780.00

607.23

945.40

1,215.93

365.68

648.17

Trans. to Government /Proposed

Dividend

1,878.92

1,566.42

1,433.53

1,435.50

1,096.27

Balance carried forward to Balance

Sheet

4,007.76

1,688.64

537.17

549.68

-7.37

140.00

120.00

110.00

110.00

101.00

EPS before Minority Interest

52.56

41.39

28.48

26.14

27.19

EPS after Minority Interest

52.56

41.39

28.48

26.14

27.19

480.13

460.10

420.17

401.93

266.39

INCOME :

II. Expenditure
Interest expended

Depreciation
Other Expenses, Provisions &
Contingencies
Provision for Tax
Fringe Benefit Tax
Deferred Tax

III. Profit & Loss

Net Profit before Minority Interest
Minority Interest
Net Profit after Minority Interest
Extraordinary Items

IV. Appropriations
Transfer to Statutory Reserve
Transfer to Other Reserves

Equity Dividend (%)

Book Value (Unit Curr.)

HDFC Bank Comparative Balance Sheets

(Rs. in Crores)
Particulars

Mar-14

Mar-13

Mar-12

Mar-11

Mar-10

SOURCES OF FUNDS :
Capital
Reserves Total
Minority Interest

465.23

457.74

425.38

354.43

319.39

25,117.91

21,158.15

14,262.74

11,180.72

6,150.98

121.66

75.89

43.35

36.92

28.61

208,287.21

167,297.78

142,644.80

100,631.38

68,264.27

Borrowings

14,650.44

13,171.80

9,253.64

4,594.92

2,815.39

Other Liabilities & Provisions

29,393.44

20,881.46

16,455.40

16,470.97

13,815.91

278,035.89

223,042.82

183,085.31

133,269.34

91,394.55

25,100.89

15,483.31

13,527.21

12,553.18

5,075.25

4,737.39

14,594.88

4,009.94

2,274.80

3,998.18

70,276.67

58,508.28

58,715.15

49,288.01

30,567.04
46,944.78

Deposits

TOTAL LIABILITIES
APPLICATION OF FUNDS :
Cash & Balances with RBI
Balances with Banks & money at Call
Investments
Advances

160,831.41

126,162.73

99,027.37

63,426.90

Fixed Assets

2,200.94

2,149.06

1,732.28

1,196.24

987.53

Other Assets

14,891.50

6,147.47

6,479.77

4,530.21

3,821.77

0.00

0.00

0.00

0.00

0.00

TOTAL ASSETS

278,038.80

223,045.73

183,491.72

133,269.34

91,394.55

Contingent Liability

575,159.47

479,125.00

406,027.36

593,112.33

328,196.07

13,428.49

8,124.86

8,552.24

6,920.71

4,606.83

Miscellaneous Expenditure not written off

Bills for collection

HDFC Bank Comparative Profit & Loss Accounts

(Rs. in Crores)
Particulars

Mar-14

Mar-13

Mar-12

Mar-11

Mar-10

INCOME :
Interest Earned

19,928.21

16,172.72

16,332.26

10,115.00

6,647.93

4,335.15

3,983.11

3,470.64

2,283.15

1,594.59

24,263.36

20,155.83

19,802.90

12,398.15

8,242.52

Interest expended

9,385.08

7,786.30

8,911.10

4,887.11

3,179.45

Payments to/Provisions for Employees

2,836.04

2,289.18

2,238.20

1,301.35

776.86

Operating Expenses & Administrative

Expenses

2,048.46

1,783.23

1,580.24

1,135.40

856.26

497.40

394.39

359.91

271.71

219.60

Other Expenses, Provisions & Contingencies

3,677.72

3,613.59

3,414.20

2,521.93

1,571.60

Provision for Tax

2,237.46

1,365.67

1,054.31

866.25

581.88

0.00

0.00

0.00

16.78

12.00

-345.20

-25.23

0.00

-192.58

-96.58

20,336.96

17,207.13

17,557.96

10,807.95

7,101.07

Reported Net Profit

3,926.40

2,948.70

2,244.94

1,590.20

1,141.45

Extraordinary Items

-0.50

2.74

2.85

0.43

-0.68

3,926.90

2,945.96

2,242.09

1,589.77

1,142.13

0.00

0.00

0.00

0.00

0.00

4,532.79

3,455.57

2,574.63

1,932.03

1,455.02

Transfer to Statutory Reserve

981.60

737.18

561.23

397.55

285.36

Transfer to Other Reserves

408.55

492.84

304.51

197.52

117.16

Trans. to Government /Proposed Dividend

894.80

641.46

498.26

352.53

261.92

Balance carried forward to Balance Sheet

6,174.24

4,532.79

3,455.57

2,574.63

1,932.03

Other Income
Total I
II. Expenditure

Depreciation

Fringe Benefit tax

Deferred Tax
Total II
III. Profit & Loss

Adjusted Net Profit

Prior Year Adjustments
Profit brought forward
IV. Appropriations

Equity Dividend %

165.00

120.00

100.00

85.00

70.00

Earnings Per Share-Unit Curr

81.72

62.43

51.08

43.42

34.55

Earnings Per Share(Adj)-Unit Curr

81.72

62.43

51.08

43.42

34.55

545.46

470.13

344.31

324.39

201.42

Book Value-Unit Curr

AXIS Bank Comparative Balance Sheets

(Rs. in Crores)

Particulars
SOURCES OF FUNDS :
Capital
Reserves Total
Minority Interest
Deposits
Borrowings
Other Liabilities & Provisions
TOTAL LIABILITIES
APPLICATION OF FUNDS :
Cash & Balances with RBI
Balances with Banks & money at Call
Investments
Advances
Fixed Assets
Other Assets
Miscellaneous Expenditure not written off
TOTAL ASSETS
Contingent Liability
Bills for collection

Mar-14

Mar-13

Mar-12

Mar-11

Mar-10

410.55
18,484.06
0.00
189,166.43
26,267.88
8,270.39
242,599.31

405.17
15,583.93
0.00
141,278.66
17,169.55
6,181.98
180,619.29

359.01
9,836.70
0.00
117,357.66
15,519.87
4,660.74
147,733.98

357.71
8,394.13
0.00
87,619.34
5,624.04
7,618.98
109,614.20

13,886.16
9,482.05
7,522.49
5,723.84
71,787.55
55,876.54
142,407.83 104,340.95
2,292.92
1,235.99
4,702.36
3,959.92
0.00
0.00
242,599.31 180,619.29
453,998.76 318,281.38
32,473.11
19,292.87

9,419.21
5,600.19
46,271.75
81,556.77
1,082.39
3,803.67
0.00
147,733.98
209,259.83
13,957.31

7,305.66
4,661.03
5,199.86
2,257.27
33,865.10 26,887.16
59,475.99 36,876.46
932.47
677.84
2,835.12
1,948.72
0.00
0.00
109,614.20 73,308.48
258,895.66 184,165.35
8,323.39
6,274.63

281.63
3,106.82
0.00
58,785.02
5,195.60
5,939.41
73,308.48

AXIS Bank Comparative Profit & Loss Accounts

(Rs. in Crores)
Particulars
INCOME :

Mar-14

Mar-13

Mar-12

Mar-11

Mar-10

Interest Earned

15,154.86

11,639.05

10,829.11

7,005.08

4,461.65

4,671.45

3,964.21

2,996.74

1,811.21

1,012.82

Total

19,826.31

15,603.26

13,825.85

8,816.29

5,474.47

Total

16,481.63

13,125.12

12,012.92

7,757.15

4,820.22

Interest expended

8,588.61

6,632.63

7,148.92

4,419.84

2,993.18

Payments to/Provisions for Employees

1,745.80

1,359.79

1,067.76

752.10

391.18

Operating Expenses & Administrative Expenses

1,674.58

1,276.76

1,002.47

766.12

488.58

Other Income

II. Expenditure

Depreciation

293.69

237.87

190.22

159.30

112.01

Other Expenses, Provisions & Contingencies

2,426.43

2,277.16

1,633.84

1,084.12

498.11

Provision for Tax

1,958.34

1,495.27

1,096.01

725.59

412.60

-0.34

0.00

11.68

9.33

6.05

-205.48

-154.36

-137.98

-159.25

-81.49

Total

19,826.31

15,603.26

13,825.85

8,816.29

5,474.47

Total

16,481.63

13,125.12

12,012.92

7,757.15

4,820.22

3,344.68

2,478.14

1,812.93

1,059.14

654.25

0.00

0.00

0.00

0.00

0.00

3,339.91

2,478.14

1,812.93

1,059.14

654.25

-4.40

-2.73

-4.97

-8.44

-1.70

3,344.31

2,480.87

1,817.90

1,067.58

655.95

0.00

0.00

0.00

0.00

-31.81

3,371.63

2,328.95

1,537.20

1,024.29

731.04

Transfer to Statutory Reserve

847.12

628.63

453.84

267.75

164.76

Transfer to Other Reserves

329.49

239.38

146.82

26.84

15.64

Trans. to Government /Proposed Dividend

670.48

567.45

420.52

251.64

148.79

Balance carried forward to Balance Sheet

4,864.45

3,371.63

2,328.95

1,537.20

1,024.29

140.00

120.00

100.00

60.00

45.00

EPS before Minority Interest (Unit Curr.)

79.14

59.16

48.78

28.57

22.45

EPS after Minority Interest (Unit Curr.)

79.14

59.16

48.78

28.57

22.45

460.23

394.63

284.00

244.66

120.32

Fringe Benefit Tax

Deferred Tax

III. Profit & Loss

Net Profit before Minority Interest
Minority Interest
Net Profit after Minority Interest
Extraordinary Items
Adjusted Net Profit
Prior Year Adjustments
Profit brought forward
IV. Appropriations

Equity Dividend (%)

Book Value (Unit Curr.)

COMPARITIVE ANALYSIS OF ICICI, HDFC AND AXIS BANKS

TOTAL INCOME
Total Income

In Rs Crores

ICICI Bank
HDFC Bank
AXIS Bank

2014

2013

2012

2011

2010

55,276.51

54,756.36

61,247.23

57,416.58

38,909.39

24,263.36

20,155.83

19,802.90

12,398.15

8,242.52

16,481.63

13,125.12

12,012.92

7,757.15

4,820.22

Interpretations
ICICI Bank has shown a marginal increase in the total income, while HDFC and Axis
Banks have maintained a good growth in their total income in 2011 compared to
2010. The total income of ICICI Bank has remained stable in the last three years
while HDFC and AXIS banks are improving their positions quite rapidly.

Total Income
70,000.00
Income

60,000.00
50,000.00

ICICI Bank

40,000.00

HDFC Bank

30,000.00

AXIS Bank

20,000.00
10,000.00
0.00
2014

2013

2012

2011

2010

Year

NET PROFIT
Net Profit for the Year
ICICI Bank
HDFC Bank
AXIS Bank

In Rs Crores
2014

2013

2012

2011

2010

6,072.26

4,612.71

3,576.12

3,365.41

2,737.94

3,926.90

2,945.96

2,242.09

1,589.77

1,142.13

3,344.31

2,480.87

1,817.90

1,067.58

655.95

Interpretations
All the banks showed a positive trend in net profits over the last few years. Although
the net profits of all the banks have increased sharply in 2011, AXIS Bank stands on
the top increasing its net profit by nearly 35%. Therefore AXIS Bank would be the
best option for an investor to expect good growth.

Net Profit

Net Profit

7,000.00
6,000.00
5,000.00

ICICI Bank

4,000.00

HDFC Bank

3,000.00

AXIS Bank

2,000.00
1,000.00
0.00
2014

2013

2012

2011

2010

Year

EARNINGS PER SHARE

EPS

In Rs
2014

2013

2012

2011

2010

ICICI Bank

43.0

34.6

32.4

36.0

32.9

HDFC Bank

81.7

62.4

51.1

43.4

34.6

AXIS Bank

80.2

60.1

48.9

28.9

22.6

Interpretations
EPS measures the profit available to the equity shareholders per share, that is, the
amount that they can get on every share held. Although, all the three banks have
declared an increase in their Earnings Per Share, HDFC Bank stood on top of the
three players with AXIS Bank following closely. HDFC and AXIS Banks have good
potential and shareholders can expect better returns in the future.

EPS (in Rs)

Earnings per Share

90
80
70
60
50
40
30
20
10
0

ICICI Bank
HDFC Bank
AXIS Bank

2014

2013

2012

2011

2010

Year

P/E Ratio
P/E Ratio
ICICI Bank

2014

2013

In Rs
2012

25.9

27.5

10.3

2011

2010

21.4

26.0

HDFC Bank
AXIS Bank

28.7

31.0

19.0

30.4

27.5

17.5

19.5

8.5

27.0

21.7

Interpretations
The P/E ratio (price-to-earnings ratio) of a stock (also called its "P/E", or simply
"multiple") 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 28.7 times while
AXIS Bank has the lowest P/E ratio of 17.5 times.

P/E Ratio

P/E Ratio

35
30
25

ICICI Bank

20

HDFC Bank

15

AXIS Bank

10
5
0
2014

2013

2012

2011

Year

PRICE/BOOK VALUE

2010

Book Value
ICICI Bank
HDFC Bank
AXIS Bank

In Rs Per Share
2012
2011

2014

2013

2010

2.3

2.1

0.8

1.8

3.2

4.3

4.1

2.8

4.1

4.7

3.0

3.0

1.5

3.2

4.1

Interpretations
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 4.3 times its Book Value while ICICI
Bank is valued at only 2.3 times its Book Value.

Price/Book Value Ratio

5

PBV

4
ICICI Bank

HDFC Bank
2

AXIS Bank

1
0
2014

2013

2012

2011

2010

Year

RETURN ON NET WORTH

Return on Net Worth

Years
ICICI Bank
HDFC Bank
AXIS Bank

2014

2013

%
2012

2011

2010

9.7

8.0

7.8

11.8

13.4

16.7

16.1

16.9

17.7

19.5

19.3

19.2

19.1

17.6

21.0

Interpretations
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 the graph, Return on Net worth of ICICI has registered a
marginal growth, while HDFC and AXIS Banks have maintained a stable ROI. As the
investors would like to invest only where the return is higher, AXIS Bank would be
again attractive for investment as it still has the highest Return on Net worth.

RONW (%)

Return on Net Worth

25
20
ICICI Bank

15

HDFC Bank
10

AXIS Bank

5
0
2014

2013

2012
Year

2011

2010

CHAPTER VI
FINDINGS, SUGGESTIONS & CONCLUSION

FINDINGS
From the data analysis and interpretations of the ratios of three banks viz. ICICI
Bank, HDFC and AXIS Banks, the following findings have been given:

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. AXIS bank has been showing
good growth in all the aspects over the last few years.

ICICI Bank has shown a marginal increase in the total income, while HDFC
and Axis Banks have maintained a good growth in their total income in 2014
compared to 2013. The total income of ICICI Bank has remained stable in the
last three years while HDFC and AXIS banks are improving their positions
quite rapidly.

All the banks showed a positive trend in net profits over the last few years.
Although the net profits of all the banks have increased sharply in 2014, AXIS
Bank stands on the top increasing its net profit by nearly 35%. Therefore
AXIS Bank would be the best option for an investor to expect good growth.

Although, all the three banks have declared an increase in their Earnings Per
Share, HDFC Bank stood on top of the three players with AXIS Bank
following closely. HDFC and AXIS Banks have good potential and
shareholders can expect better returns in the future.

HDFC Bank has the highest P/E ratio of 28.7 times while AXIS Bank has the
lowest P/E ratio of 17.5 times.

HDFC is valued at 4.3 times its Book Value while ICICI Bank is valued at
only 2.3 times its Book Value.

Return on Net worth of ICICI has registered a marginal growth, while HDFC
and AXIS Banks have maintained a stable ROI. As the investors would like to
invest only where the return is higher, AXIS Bank would be again attractive
for investment as it still has the highest Return on Net worth.

By analyzing the current trend of Indian Economy and Banking Sector 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 sector has to
explore for developing the economy.

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.

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.

CONCLUSION
Indian banks have fared well on growth, asset quality and profitability with other
regional banks over the last few years. The banking index has grown at a
compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per
cent growth in the market index for the same period. 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.
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.

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

www.angelbroking.com

www.sebi.gov.in