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SUMMER INTERNSHIP PROGRAM
A
REPORT
ON
FACTORS AFFECTING INDIAN
EQUITY MARKET
(BANKING SECTOR)
Page | 1
INDIA INFOLINE LIMITED
A
REPORT
ON
FACTORS AFFECTING INDIAN
EQUITY MARKET
(BANKING SECTOR)
Page | 2
A report submitted in partial fulfillment of the
requirement of MBA program of
ICFAI Business School, AhmedabadSubmitted to:
Prof. Bharat Kantharia (Faculty Guide)
Mr. Chintan Shah (Company Guide)
ACKNOWLEDGEMENT
Page | 3
“No good work flows without the help from Faculty Members, Industry
Professionals, Colleagues, Organization and Friends.”
Summer Internship is a nurturing period which is indispensable for joining any company. On the
voyage of learning I came across many hurdles but each hurdle was a good experience for me. At
each step of my training, my mentor gave me full support which helped me in carrying positive
attitude whenever I faced any problem.
Firstly, I take this opportunity to thank Prof. P. Bala Bhaskaran (Director, IBS
Ahmedabad), who has always stood by me and encouraged me to embark on the
path of learning.
I wish to convey my special thanks to Mr. Dhiraj Chaudhary (Associate Vice
President), Mr. Ishwarsinh Rajpurohit (Territory Manager), my company
project guide Mr. Chintan Shah (Sales Manager) and all employees who have helped me directly
or indirectly in my difficulties at India Infoline Securities Pvt. ltd., Area Office, Surat who have
been a constant source of inspiration and encouragement to me.
I wish to express my deepest and most sincere thanks to my Faculty Guide,P ro f.
Bharat Kantharia and especially to Dr. Himani Joshiand Prof. Mayank Patel
who have continuously guided me throughout this project.
Last but not the least I would like to thank my fellow management trainees from IBS,
Ahmedabad. By interacting with them, I was able to generate more meaningful ideas that have
enabled me to further complete this project successfully.
 Page | 4
TABLE OF CONTENTS
ACKNOWLEDGEMEN T................................ ................................ ................................ ............. iii
ABS TRAC T.................................................................................................................................... 5

INTRODUCTION................................ ................................ ................................ .......................... 6 MARK ETS

DEFINED................................................................................................................ 6 OBJEC TIVE OF THE S

TUDY................................ ................................ ................................ 10 PURPOSE, SCOPE AND

LIMITATIONS................................ ................................ .............. 10 SOURCES AND METHODS OF COLLEC

TING DATA................................ ...................... 12 REPO RT O

RGANIZATION................................ ................................ ................................ .... 13

MAIN TEXT................................................................................................................................. 16
FACTORS AFFECTING BANKING SECTOR................................ ................................ ...... 17

INTERNAL FAC TORS:................................................................................................ 17

EXTERNAL FACTO RS:............................................................................................... 19

THE MODEL................................................................................................................................ 26 What the MO DEL is

all about?................................ ................................ ............................. 26

Methodology................................ ................................ ................................ .......................... 26 Sources and Data

Collection.................................................................................................. 27 Tool and

Techniques.............................................................................................................. 28

MODEL................................ ................................ ................................ ................................ . 29 HDFC

BANK................................ ................................ ................................ ........................ 29 ICICI

BANK.......................................................................................................................... 37 STATE BANK OF

INDIA................................ ................................ ................................ .... 43

FINDINGS AND CONCLUSION................................ ................................ ............................... 49

APPENDIX................................ ................................ ................................ ................................ ... 51

REFERENCES:................................ ................................ ................................ ............................ 53

ABSTRACT
Page | 5

Banking Sector in India is one of the growing sectors with great dynamics. There are various
factors which affect the share prices of Banking Companies. This report is all about how
various factors (Internal and External) affect the Banking Sector Share Prices. In this report a
detailed analysis of the factors affecting the share prices is carried on and a model is developed
to study the effect of various factors on the share prices.
Here, various internal factors (Bank‟s Profitability, Income, Expenses, and News about the
Bank.) and external factors (Government policies, CRR, Repo Rate, Reverse Repo Rate, Rules
and Regulations.) are considered which affect the prices
of the shares of Bank. Data‟s are collected for all the quantifiable factors and for
the rest factors a theoretical exp lanation is given in detail. Using SPSS a model is developed
which shows the regression and correlation co-efficient between the share prices and various
factors affecting the same.
INTRODUCTION
Page | 6
MARKETS DEFINED
STOCK MARKET IN INDIA
The Indian security market has become one of the most dynamic and efficient security markets
in Asia today. The Indian market now conforms to International Standards in terms of
operating efficiency.
During the latter half of 19th century, shares of companies used to be floated in India
occasionally. There were share brokers in Bombay who assisted in the floatation of shares of
companies. A small group of stock brokers in Bombay jo ined together in 1875 to form an
association called Native Share & Stockbrokers Association. The association drew up codes of
conduct for brokerage business and mobilizes private funds for investment in the corporate sector.
It was this association which later became the Bombay Stock Exchange, Mumbai or BS E
Later on in 1894 the brokers of Ahmedabad formed the Ahmedabad Stock Exchange, the second
stock exchange of the country. During the 1900s Kolkata became another major center of share
trading and as a result Kolkata Stock Exchange was formed in 1908. Later on Chennai Stock
Exchange was started in 1920. However, by 1923, it ceased to exist. Then the Madras Stock
Exchange was started in 1937. Three more stock exchanges were established before
independence, at Indore in 1930, at Hyderabad in 1943 and at Delh i in 1947.

Page | 7

Thus along with the increase in number of stock exchanges, the number of listed companies and
the capital of listed companies grown tremendously after 1985 which results into growth and
development of stock market in Ind ia.
ABOUT BSE SENSEX
BSE SENSEX or Bombay Stock Exchange Sensitive Index is a value-weighted index composed
of 30 stocks started in 01 of January, 1986. It consists of the 30 largest and most actively traded
stocks, representative of various sectors, on the Bombay Stock Exchange. These companies
account for around one-fifth of the market capitalization of the BSE. The base value of the
SENSEX is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79.
At irregular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its
composition to make sure it reflects current market conditions. The index is calculated based
on a free-float capitalization method; a variation of the market cap method. Instead of using a
company's outstanding shares it uses its float, or shares that are readily available for trading.
The free-float method, therefore, does not include restricted stocks, such as those held by
company insiders.
The index has increased by over ten times from June 1990 to the present. Using information from
April 1979 onwards, the long-run rate of return on the BSE SENSEX works out to be 18.6% per
annum, which translates to roughly 9% per annum after compensating for inflation. There are five
major indices in BSE, thirteen sector specific indices and a BSE Dollex Index for dollar prices
and movements.

Page | 8
ABOUT NSE AND NIF TY 50
The National Stock Exchange of India Limited (NSE) is a Mumbai-based stock exchange. It is
the largest stock exchange in India in terms of daily turnover and number of trades, for both
equities and derivative trading. Though a number of other exchanges exist, NSE and the Bombay
Stock Exchange are the two most significant stock exchanges in India and between them are
responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX
Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization.
NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and
other financial intermediaries in India but its ownership and management operate as separate
entities. There are at least 2 foreign investors NYSE Euro next and Goldman Sachs who have
taken a stake in the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than
1500 c ities across India. In October 2007, the equity market capitalization of the companies listed
on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia.
NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities.
It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%.
The Standard & Poor's CRISIL NSE Index 50 or S&P CNX Nifty nicknamed Nifty 50 or simply
Nifty, is the lead ing index for large companies on the National Stock Exchange of India. The
Nifty is a well divers ified 50 stock index accounting for 22 sectors of the economy. It is used for
a variety of purposes such as benchmarking fund portfolios, index based derivatives and index
funds. There are seven major Indices in NSE and fifteen sector specific Ind ices. CNX BANK
INDEX or BANK NIFTY is the index which has 17 banks listed on it and is a separate index to
look upon price movements of bank‟s share prices. A brief account of the same is given below.

Page | 9
CNX Bank Index
The Indian banking Industry has been undergoing major changes, reflecting a number of
underlying developments. Advancement in communication and information technology has
facilitated growth in internet-banking, ATM Network, Electronic transfer of funds and quick
dissemination of information. Structural reforms in the banking sector have improved the health
of the banking sector. The reforms recently introduced include the enactment of the Securitization
Act to step up loan recoveries, establishment of asset reconstruction companies, initiatives on
improving recoveries from Non-performing Assets (NPAs) and change in the basis of income
recognition has raised transparency and efficiency in the banking system. Spurt in treasury
income and improvement in loan recoveries has helped Indian Banks to record better profitability.
In order to have a good benchmark of the Indian banking sector, India Index Service and Product
Limited (IISL) has developed the CNX Bank Index.
CNX Bank Index is an index comprised of the most liquid and large capitalized Indian Banking
stocks. It provides investors and market intermediaries with a benchmark that captures the capital
market performance of Indian Banks. The index will have 12 stocks from the banking sector
which trade on the National Stock Exchange.
The average total traded value for the last six months of CNX Bank Index stocks is approximately
95.85% of the traded value of the banking sector. CNX Bank Index stocks represent about
86.06% of the total market capitalization of the banking sector as on January 30, 2009.
The average total traded value for the last six months of all the CNX Bank Index constituents
is approximately 14.86% of the traded value of all stocks on the NSE. CNX Bank Index
constituents represent about 8.63% of the total market capitalization on January 30, 2009.

Page | 10
OBJECTIVE OF THE STUDY
The objective of the project is to identify, understand and analyze the impact of various factors
that affect the Indian Equity Market (BANKING SECTOR). The main focus will be on
understanding, analyzing and providing a valid explanat ion both theoretically and technically,
that how various factors affect the share prices of BNAKING SECTOR. By undertaking this
study I would like to keep my first step in the field of research. This project will help me in
enhancing my analytical skills and will give me a better understanding of how things move on
and are to be studied. At the same time with this study I will be providing the organization a
list of factors that affect the market, so that they can keep a watch on the same and use the
same for the benefit of clients and company and also increase their accuracy and profits. This
will be my contribution to this huge company.
PURPOSE, SCOPE AND LIMITATIONS
PURPOSE
TheP URP OS E of the report is to analyze how various factors affect the prices of
a bank‟s share. The share prices are highly affected by various internal and
external factors. It is of great importance to understand, learn and analyze the same. Thus, this
report is a move in path of understanding those factors and analyzing the impact of the same.
Banks are a major part of any economic system. They provide a strong base to Indian economy
too. Even in share markets, the performance of bank shares is of great importance. This is
justified by the proof that in both BSE and NSE we have separate index for Banking Sector
Shares. But for our study we have taken only Bank Nifty which is a part of NSE. Thus, the
performance of share market, the rise

Page | 11

and the fall of market is greatly affected by the performance of Banking Sector Shares and this
report revolves around all those factors, their understanding and a theoretical and technical
analysis of the same.
SCOPE OF STUDY
It gave me an opportunity to study the banking sector in a detailed manner.
I got knowledge of prevailing Market Scenario.
It helped me in learning the market dynamics, study the movement of share prices
and to give a proper justification for the same, theoretically and technically.
It helped me in understanding and learning the corporate culture
And above all, the concerned organization can get some valuable recommendations, which can
definitely improve the performance of the organization.
LIMITATIONS OF THE STUDY
Though the resources seem sufficient enough to achieve high standard for this
research, still we foresee the follo wing limitations of study.
The Sector is very vast and it was not possible to cover every nook and corner of
this sector.
The variab ility and availab ility of data was also a limitation.
The data were linear and possessed multi collinearity, so each and every data was
not considered for analysis.
The objective which we want to fulfill in this project is really good, but the major demerit to
our study is the availability of time for our search and analysis, but then also, I have tried my
level best to show a glimpse of my Research in tune with the objectives.

Page | 12
SOURCES AND METHODS OF COLLECTING DATA
To meet the objective of the project, a lot of data was required to be collected from
varied sources. For the technical analys is, the data was required in respect of
Interest Income, Advances, Various rates, Share Prices, etc. For this, the data was
obtained from Balance Sheets, Quarterly results, Websites, News Papers, etc. A list
of same is provided in the references.
Page | 13
REPORT ORGANIZATION
COMPANY PROFILE
“India Infoline Securities Pvt. Ltd.”
“Knowledge is power and power brings security. Risk is a very relative term
and changes with every individual and situation. Financial management is not just
about managing risk but also managing knowledge and finally deriving answers
that generate wealth, security and trust.”
VISION
Vision is to be the most respected company in the financial services space.
To be the premier provider of investment advisory and financial planning services
in India.
PUNCH LINE:“IT‟S ALL ABOUT MONEY, HONEY!”.

A Report on Banking Sector Analysis-

Factors Affecting Indian Banking Sector
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