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INTRODUCTION
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ABOUT THE TOPIC:
Equity is the ownership interest of investors in a business firm. Investors can own
equity shares in a firm in the form of common stock or preferred stock. Equity
ownership in the firm means that the original business owner no longer owns 100% of
the firm but shares ownership with others. On a company's balance sheet, equity is
represented by the following accounts: common stock, preferred stock, paid-in capital,
and retained earnings. Equity can be calculated by subtracting total liabilities from total
assets.
EQUITY ANALYSIS:-
Stock analysis is a term that refers to the evaluation of a particular trading instrument,
an investment sector or the market as a whole. Stock analysts attempt to determine the
future activity of an instrument, sector or market. There are two basic types of stock
analysis: fundamental analysis and technical analysis. Fundamental analysis
concentrates on data from sources including financial records, economic reports,
company assets and market share. Technical analysis focuses on the study of past
market action to predict future price movement.
The main aim of this project is to analyze current growth trend of scripts of
banking in equity market. Based on the study of Indian economy. Research studies
have proved that investments in some shares with a longer tenure of investment
have yielded far superior returns than any other investment. However, this does not
mean all equity investments would guarantee similar high returns. Equities are high-risk
investments. One needs to study them carefully before investing.
Since 1990 till date, Indian stock market has returned about 17% to investors
on an average in terms of increase in share prices or capital appreciation annually.
Besides that on average stocks have paid 1.5 % dividend annually. Dividend is a
percentage of the face value of a share that a company returns to its shareholders from
its annual profits. Compared to most other forms of investments, investing in
equity shares offers the highest rate of return, if invested over a longer duration.
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Each investment alternative has its own strengths and weaknesses. Some options seek
to achieve superior returns (like equity), but with corresponding higher risk. Other
provide safety (like PPF) but at the expense of liquidity and growth. Other options such
as FDs offer safety and liquidity, but at the cost of return. Mutual funds seek to combine
the advantages of investing in arch of these alternatives while dispensing with the
shortcomings. Indian stock market is semi-efficient by nature and, is considered as one
of the most respected stock markets, where information is quickly and widely
disseminated, thereby allowing each security’s price to adjust rapidly in an unbiased
manner to new information so that, it reflects the nearest investment value. And mainly
after the introduction of electronic trading system, the information flow has become
much faster. But sometimes, in developing countries like India, sentiments play major
role in price movements, or say, fluctuations, where investors find it difficult to predict
the future with certainty.
Banks are the major part of any economic system. They provide a strong base to Indian
economy as well. Even in the share markets, the performance of banks shares is of great
importance.
Thus, the performance of the share market, the rise and the fall of market is greatly
affected by the performance of the banking sector shares and this report revolves around
all factors, their understanding and a theoretical and technical analysis
1.2 OBJECTIVES:
• To study and compare the performance of the banks in the banking sector.
• To help the investors for choosing to make their investments in banking sector.
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1.3 SCOPE
The scopes of the project are limited to understanding the basics of fundamental
analysis and technical analysis and apply it to take a decision of investing in banking
sector
The process used to collect information and data for the purpose for making business
decisions. The methodology may include publication research ,interviews ,surveys and
other research techniques, and could include present and historical information.
The data has been collected through primary and secondary sources
primary data :-
secondary data:-
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• Comparative analysis of balance sheets
• Financial ratio’s
• The data has been analysed through different graphs for the selected banks.
1.5 LIMITATIONS
The study is based on the data is given by the investors and the employee which
may not be 100% correct.
Moreover, very few investors and agents have a detail knowledge of the study.
The project has been limited to investment analysis of banking sector only.
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CHAPTER-2
REVIEW OF LITERATURE
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2.1 Literature review
A lot of investors trading in the financial markets with securities and stocks are trying to
foresee the market movements with the help of accessible information of the press. This
may concern the question will securities with higher prospective benefits get greater
revenues to securities with lower prospective benefits? These ideas can be investigated
using time research and deeper analysis. If a security is determined precisely, the future
return of the security will come to the beta at the securities market line. Nevertheless, if
it goes down that line then that states the security is understated and it is overrated if it
goes above the line. In any situation, regulations have to be implemented.
Security market line is a line that shows the risks against revenue in the trading market
at a specified time and can expose all the securities that are in a good demand. It is also
called characteristic line or SML. Security market line really shows the outcomes of the
financial capital asset pricing model. It is also called CAPM formula. Risk on the
market is represented through the X-axis also called beta. Prospective revenue is
represented through the Y-axis. Securities risk premium is identified with the help of
security market line
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CHAPTER-3
COMPANY PROFILE
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INDUSTRY PROFILE
3.1 INTRODUCTION
The banking section will navigate through all the aspects of the Banking System in
India. It will discuss upon the matters with the birth of the banking concept in the
country to new players adding their names in the industry in coming few years.
The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association
(IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well
defined under three separate heads with one page dedicated to each bank.
However, in the introduction part of the entire banking cosmos, the past has been well
explained under three different heads namely:
The first deals with the history part since the dawn of banking system in India.
Government took major step in the 1969 to put the banking sector into systems and it
nationalized 14 private banks in the mentioned year. This has been elaborated in
Nationalization of Banks in India. The last but not the least explains about the
scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act 1934 lays
down the condition of scheduled commercial banks.
Without a sound and effective banking system in India it cannot have a healthy
economy. The banking system of India should not only be hassle free but it should be
able to meet new challenges posed by the technology and any other external,internal
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factors.
For the past three decades India's banking system has several outstanding achievements
to its credit. The most striking is its extensive reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian banking system has reached
even to the remote corners of the country. This is one of the main reasons of India's
growth process.
The government's regular policy for Indian bank since 1969 has paid rich dividends
with the nationalization of 14 major private banks of India.
Not long ago, an account holder had to wait for hours at the bank counters for getting a
draft or for withdrawing his own money. Today, he has a choice. Gone are days when
the most efficient bank transferred money from one branch to other in two days. Now it
is simple as instant messaging or dial a pizza. Money have become the order of the day.
The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct
phases. They are as mentioned below:
New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.
The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct
phases. They are as mentioned below:
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New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.
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Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan
and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of
Bombay (1840) and Bank of Madras (1843) as independent units and called it
Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of
India was established which started as private shareholders banks, mostly European
shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian
Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small.
To streamline the functioning and activities of commercial banks, the Government of
India came up with The Banking Companies Act, 1949 which was later changed to
Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).
Reserve Bank of India was vested with extensive powers for the supervision of banking
in India as the Central Banking Authority.
During those days public had lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal
department was comparatively safer. Moreover, funds were largely given to traders.
Phase II
Government took major steps in this Indian Banking Sector Reform after independence.
In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a
large scale especially in rural and semi-urban areas. It formed State Bank of India to act
as the principal agent of RBI and to handle banking transactions of the Union and State
Governments all over the country.
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Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on
19th July, 1969, major process of nationalization was carried out. It was the effort of the
then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the
country were nationalized.
Second phase of nationalization Indian Banking Sector Reform was carried out in 1980
with seven more banks. This step brought 80% of the banking segment in India under
Government ownership.
The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:
After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and
immense confidence about the sustainability of these institutions.
Phase III
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This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimhan,a committee was
set up by his name which worked for the liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being put
to give a satisfactory service to customers. Phone banking and net banking is
introduced. The entire system became more convenient and swift. Time is given more
importance than money.
The financial system of India has shown a great deal of resilience. It is sheltered from
any crisis triggered by any external macroeconomics shock as other East Asian
Countries suffered. This is all due to a flexible exchange rate regime, the foreign
reserves are high, the capital account is not yet fully convertible, and banks and their
customers have limited foreign exchange exposure.
Scheduled Banks in India constitute those banks which have been included in the
Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only
those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a)
of the Act.
As on 30th June, 1999, there were 300 scheduled banks in India having a total network
of 64,918 branches. The scheduled commercial banks in India comprise of State bank of
India and its associates (8), nationalized banks (19), foreign banks (45), private sector
banks (32), co-operative banks and regional rural banks.
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"Scheduled banks in India" means the State Bank of India constituted under the State
Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of
India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted
under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank
included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934),
but does not include a co-operative bank".
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Bank of India United Bank of India
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ANZ Gridlays Bank Plc. Hongkong and Shanghai Banking
Corporation
Bank of America NT & SA
Standard Chartered Bank.
Bank of Tokyo Ltd.
The Chase Manhattan Bank Ltd.
BanqucNationale de Paris
Dresdner Bank AG.
Barclays Bank Plc
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BNP Paribas Bank South Indian Bank
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3.4 Organizational Structure of Banks in India:
In India banks are classified in various categories according to differ rent criteria. The
following charts indicate the banking structure
1) The RBI: The RBI is the supreme monetary and banking authority in the
country and has the responsibility to control the banking system in the country.
It keeps the reserves of all scheduled banks and hence is known as the “Reserve
Bank”.
2) Public Sector Banks:
State Bank of India and its Associates (8)
Nationalized Banks (19)
Regional Rural Banks Sponsored by Public Sector Banks (196)
3) Private Sector Banks:
Old Generation Private Banks (22)
Foreign New Generation Private Banks (8)
Banks in India (40)
4) Co-operative Sector Banks:
State Co-operative Banks
Central Co-operative Banks
Primary Agricultural Credit Societies
Land Development Banks
State Land Development Banks
5) Development Banks: Development Banks mostly provide long term finance for
setting up industries. They also provide short-term finance (for export and
import activities)
Industrial Finance Co-operation of India (IFCI)
Industrial Development of India (IDBI)
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Industrial Investment Bank of India (IIBI)
Small Industries Development Bank of India (SIDBI)
National Bank for Agriculture and Rural Development (NABARD)
Export-Import Bank of India.
By pooling the savings together, banks can make available funds to specialized
institutions which finance different sectors of the economy, needing capital for various
purposes, risks and durations. By contributing to government securities, bonds and
debentures of term-lending institutions in the fields of agriculture, industries and now
housing, banks are also providing these institutions with an access to the common pool
of savings mobilized by them, to that extent relieving them of the responsibility of
directly approaching the saver. This intermediation role of banks is particularly
important in the early stages of economic development and financial specification. A
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country like India, with different regions at different stages of development, presents an
interesting spectrum of the evolving role of banks, in the matter of inter-mediation and
beyond.
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Investment Banking
Consumer Banking
Commercial Banking
Retail Banking
Products Private Banking
Asset Management
Pensions
Mortgages
Credit Cards
Retail Banking and Trade finance operations are conducted at the branch level while the
wholesale banking operations, which cover treasury operations, are at the hand office or
a designated branch.
Retail Banking:
Deposits
Loans, Cash Credit and Overdraft
Negotiating for Loans and advances
Remittances
Book-Keeping (maintaining all accounting records)
Receiving all kinds of bonds valuable for safe keeping
Trade Finance:
Issuing and confirming of letter of credit.
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Drawing, accepting, discounting, buying, selling, collecting of bills of exchange,
promissory notes, drafts, bill of lading and other securities.
Treasury Operations:
Buying and selling of bullion. Foreign exchange
Acquiring, holding, underwriting and dealing in shares, debentures, etc.
Purchasing and selling of bonds and securities on behalf of constituents.
The banks can also act as an agent of the Government or local authority. They insure,
guarantee, underwrite, participate in managing and carrying out issue of shares,
debentures, etc.
Apart from the above-mentioned functions of the bank, the bank provides a whole lot of
other services like investment counseling for individuals, short-term funds management
and portfolio management for individuals and companies. It undertakes the inward and
outward remittances with reference to foreign exchange and collection of varied types
for the Government.
Bill Payment
Funds Transfer
Special Promotions & Offers
Ticket Booking
Online loans and credit cards
Online Shopping
Online Tax payment
Prepaid mobile recharge
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region and other South East Asian countries, in which India has maintained good trade
relations. They can set up captive operations or expand through inorganic means by
undergoing M&A (mergers and acquisitions) with banks in foreign countries.
With an aim to reform and strengthen India's banking sector, the LokSabha passed the
'Banking Amendment Bill' in Dec 2018. Once, the bill is passed by RajyaSabha as well,
it will pave way for RBI to issue new banking licenses to private sector and attract more
foreign investments in the sector.
The Bill also proposes to enhance the voting rights of investors in case of both public
sector and private sector banks from existing 1% to 10% of public sector banks and
from 10% to 26% of private sector banks. This move will attract more foreign
investment in the sector
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3.7 FACTORS AFFECTING BANKING SECTOR
Starting off with the project, in the initial phase of SIP, I learnt the basics of the stock
market. As I had to work here in this market for 3.5 months this was the basic necessity.
In that phase I had a nice exposure of how to deal with clients, how to handle the
queries of the investors, it was a practical exposure to learn the working of the market,
how the market moves and all about the corporate culture. Also I had learnt what factors
basically affect the equity market. Then I decided to limit my project to just Banking
Sector, because it is one of the most dynamic sector and also availability of time was
not permitting me to go beyond this. There are N numbers of factors which affect the
share prices. They can be broadly classified into two:
INTERNAL FACTORS
EXTERNAL FACTORS
INTERNAL FACTORS:
As the name suggests, Internal Factors are those which affect the share prices internally,
i.e. they are internal to the company or more specifically bank. Some of the major
internal factors that affect the share prices of a bank are as follows:
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Market capitalization:
Generally we commit one mistake that we guess the company’s worth from the price of
its stock. It is the market capitalization of the company, rather than the stock price, that
is more
Important when it comes to determining the worth of the company. We need to multiply
the stock price with the total number of outstanding stocks in the market to get the
market capitalization of a company and that is the worth of the company. Thus, a
company or bank with high Market Capitalization turns out to be more popular among
investors. For example, HDFC BANK, ICICI BANK and SBI are more popular among
investors than other banks because they have huge market share and market
capitalization. As market capitalization increases, the share price tends to increase and
as market capitalization decreases, the share price tends to decrease.
Price/earnings ratio:
Price/Earnings ratio or the P/E ratio gives us a fair idea of how a company's share price
compares to its earnings. If the price of the share is too much lower than the earning of
the company, the stock is undervalued and it has the potential to rise in the near future.
On the other hand, if the price is way too much higher than the actual earning of the
company and then the stock is said to overvalued and the price can fall at any point. The
earnings also have a direct relation with price which is already explained above.
Interest rates:
Interest rates play a major role in determining stock market trends. Bull markets (those
in an upward market) are usually associated with low interest rates and high Capital
Gains, and bear markets (those in a downward trend) with high interest rates and low
Capital gains. Interest rates are determined by the demand for capital – pushes them up
and normally indicates that the economy is thriving and that shares probably expensive.
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Low interest indicate low demand for capital, thus liquidity builds up on the economy,
driving share price down. Other interest rates like that of on Deposits and Borrowings
also have impact on share prices.
Other factors:
Other factors like Growth of the company, figures of deposits, advances, balance sheet,
Profit and Loss Account, etc. Also affect the share prices drastically. A discussion for
the same is done in later part of the report.
EXTERNAL FACTORS:
After studying the internal factors, let’s take a look at some External Factors which
affect the Share Prices.
Sentiments:
Investor sentiment is almost impossible to predict and can be infuriating if, for example,
you have bought shares in a company that you think is a good „buy‟ but the price
remains flat. Investor sentiment is influenced by a wide variety of factors. Share prices
can, for example, be flat during the summer simply because so many major investors
are on holiday or attending major sporting events such as Royal Ascot and Wimbledon,
hence the adage „sell in May and go away‟. Investor sentiment can lead to irrational
buying or selling of shares and result in bull and bear markets. A bull market is when
share prices rise while a bear market is when they fall. In the technology boom of the
late 1990s, for example, investors paid extremely high prices for shares and ignored
traditional valuation measures, such as P/E ratios. This carried on until 2000 when
investors belatedly realized these shares has risen too far and resulted in a three year
bear market in shares. Thus, Sentiments of investors affect the share prices a lot and this
is something unpredictable and immeasurable factor, but still the most important one.
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Company news and other news:
The way investors interpret news coming out of companies is also a major influence on
share prices. If, for example, a company puts out a warning that business conditions are
tough, shares will often drop in value. If, however, a director buys shares in the firm, it
may be a signal that the company’s prospects are improving. Companies put out a great
deal of news and most of the major announcements are covered by the financial press.
But some announcements not regarded as so important and sometimes, particularly
among smaller firms that are monitored less by investors and financial journalists,
indicators of the company’s health can be missed. Takeovers or even rumours of
takeovers also have a big influence on prices. This is because investors expect the
bidder to pay a premium to shareholders. Also any other news or speculation about
factors like change in Repo Rate, Cash Reserve Ratio, Reverse Repo Rate, any change
or likely change in the policies of government or RBI or SEBI, any new guidelines
issued by the concerned authority, etc. affect the price of the share. A positive news in
any of these respects leads to a rise in price and a negative takes it to the other side.
Thus, news in any respect is undoubtedly a huge factor when it comes to stock price.
Positive news about a company can increase buying interest in the market while a
negative press release can ruin the prospect of a stock. Having said that, we must
always remember that often times, despite amazingly good news, a stock can show least
movement. It is the overall performance of the company that matters more than news. It
is always wise to take a wait and watch policy in a volatile market or when there is
mixed reaction about a particular stock.
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Analysts’ reports:
Reports produced by independent analysts also influence share prices. If an analyst
changes their recommendation from „sell‟ to „buy‟, for example, the shares will often
rise in value. Analysts‟ reports are produced primarily by investment banks for
professional investors, although some stockbrokers will make their research available to
private investors. We may find summaries of some reports published on financial news
websites or in newspapers and magazines. Some investment banks also publish their
reports on their websites for free. We should remember that the recommendation an
analyst puts on a company will affect its share price very quickly and can become
irrelevant within hours. This is because the analyst will usually say a stock is a „buy‟
within a particular price range. If the price moves above their targets the improvements
the analyst expects may be „priced in‟ and so the shares are not worth buying. But
analysts‟ reports are always worth reading, even if the recommendation is out of date.
The reports usually contain a great deal of useful information on the company and how
its business is developing. They also often look at how the company rates against its
competitors.
The economy:
The health of the global economy has a fundamental influence on share prices because
it is ultimately responsible for driving company profits. Broadly speaking, if the
economy is growing, company profits improve and shares will become more highly
valued. If the economy is weakening, company profits will fall and share prices will go
down. Investors look at a vast amount of data to try and work out what is going to
happen to the economy and shift their portfolios before the events occur. This is why we
will often see markets move well ahead of an actual event occurring. For example, we
could get little reaction from the stock market when interest rates rise. This is because
investors have already anticipated the shift months in advance and adjusted their
portfolios beforehand. We can usually assume that the stock market will anticipate
moves in the economy by around six to nine months. So if we want to stay ahead of the
game we need to follow economic data as closely as the professionals. The kind of
information we need to play close attention to is: employment data, the reports put out
by the Monetary Policy Committee (to get an idea where interest rates are headed),
trade with other countries, retail sales and manufacturing. Sentiment surveys produced
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by trade bodies such as the Confederation of British Industry are also important
indicators of where the economy is heading.
It is not only news about the US and UK economy that will impact on share prices. The
signals coming out of other major economies, particularly the US and UK‟s major
trading partners, such as the Europe and Asia will also affect US and UK shares as what
happens in these economies will have an impact on our own. When looking at economic
data, we need to think not only how the wider economy will be affected but whether
certain areas will be more affected than others. A rise in interest rates is, for example,
often bad news for house builders as people feel less confident about taking on debt.
Retailers are often badly affected too as people spend less. Pharmaceutical companies
are, however, usually unaffected as people’s demand for drugs is not influenced by the
state of the economy. Companies whose profits are closely tied to the health of the
economy are known as “cyclical” stocks. Those businesses that aren’t too affected by
the economy are called “defensive” stocks. If economic conditions deteriorate you will
often see investors shift from cyclical stocks to defensives. Thus, the economic health
of an Economy affects the Share Prices.
Technical influences:
Share prices can rise and fall for a variety of technical reasons that may have nothing to
do with the actual outlook for an individual company or the outlook for the market. It is,
for example, a common occurrence for share prices to drop back after a strong rally.
This happens because investors take profits on some of the shares that have risen in
value, protecting their gains just in case the shares start to slip back. Investors often
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refer to this as market consolidation. Another technical reason for share prices to rise or
fall is the quarterly adjustment in the FTSE 100™ index. Shares that are expected to
enter the FTSE 100™ may experience a sharper rise than one would expect in the
weeks beforehand while shares that leave the index can fall more sharply. This happens
because funds that simply track the index have to match the composition of the index.
Some professional fund managers who hold the affected stocks also adjust their
portfolios as they do not want their holding to be too far above or below the company’s
weighting in the index. Share prices can also be affected by investors who use technical
analysis to drive their investment techniques. Technical analysis, also known as
Chartism, is simply the study of past share price movements and stock market index
trends, which are then used to forecast how shares and stock markets will behave in
future. Market makers can also influence prices. If they, for example, do not own
enough shares to balance their books they will have to buy more. Market makers also
influence prices if the market is looking flat, reducing prices to attract buyers. Thus,
technical reasons can also be a cause for the rise or fall in the prices of shares.
OTHER FACTORS:
Some other factors which influence share prices are as follows:
Global changes:
Any change in the global economy or in other words global changes also affects Indian
economy. Thus, the performance of an economy and its banks is affected by these
global changes. For example: The recession was first observed in the USA and later on
it caught its lead in other countries too. When it entered India, the share market crashed
literally. So, a careful and logical investor always keeps this in mind that what global
changes affect the market and thus leads to rise or fall in share prices.
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Change in Government Policies:
Keeping in mind the progress and well wishes about the country, the government takes
desired steps and keeps on reviewing its policies, rules and regulations and procedures.
A change in FDI and FII inflow restrictions, entry exit barriers for foreign banks in
India, EXIM regulations, change in Basel Norms, etc form part of important
government policies. Thus, a change in these policies affects the market scenario. For
example: if government allows entry of foreign Banks in India, then the competition
would rise and it might happen that those foreign Banks may outperform and leave our
own banks far behind. Then in this case, the investors would be interested in investing
in those foreign Banks and a government would never like that the funds are invested in
some foreign banks rather than our own banks. Thus, some restriction would follow and
this will definitely affect the share prices.
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3.8 COMPANY PROFILE
Indiabulls is India’s leading Financial, Real Estate and Power Company with a wide
presence throughout India. They ensure convenience and reliability in all their products
and services. Indiabulls has over 640 branches all over India. The customers of
Indiabulls are more than 4,50,000 which covers from a wide range of financial services
and products from securities, derivatives trading, depositary services, research &
advisory services, consumer secured & unsecured credit, loan against shares and
mortgage & housing finance. The company employs around 4000 Relationship
managers who help the clients to satisfy their customized financial goals. Indiabulls
entered the Real Estate business in the year 2005 with its group of companies. Large
scale projects worth several hundred million dollars are evaluated by them.
Indiabulls Financial Services Ltd is listed on the National Stock Exchange (NSE),
Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The market
Indiabulls Group is one of India’s top business houses with businesses spread over Real
Estate, Infrastructure, Financial Services, Securities, Retail, Multiplex and Power
sectors. The group companies are listed on important Indian and Overseas markets.
Indiabulls has been conferred the status of a “Business Superbrand” by The Brand
Council, Superbrands India.
VISION
To be the largest and most profitable financial services organization in Indian retail
market and become one stop shop for all non banking financial products and services
for the retail customers. To become the preferred long term financial partner to a wide
base of customers whilst optimizing stake holder’s value
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MISSION
In 1999, three IIT-Delhi alumni Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal
acquired Orbis,a Delhi based stock broking company. Young entrepreneur Sameer
Gehlaut established Indiabulls in 2000, after acquiring orbis Securities, a stock
brokerage company in Delhi. The group started its operations from a small office near
HauzKhas bus terminal in Delhi.The office had a tin roof and two computers. The idea
of leveraging technology for trading stocks led to the creation of Indiabulls
Incorporated on 10th January 2000, it was converted into a public limited company on
27th February 2004.
Its original idea of leveraging technology bore fruit when Indiabulls was accorded
permission to conduct online trading on Indian stock exchanges.The company had
achieved the distinction of becoming only the second brokerage firm in India to be
granted this consent. The challenges facing it were immense – not least of all the mind
set of investors who were called to make the big leap from traditional stock trading to a
completely online interface. Having overcome this resistance, the company later
expanded its service portfolio to include equity, F&O, wholesale debt, mutual fund
distribution and equity research.
35
Indiabulls Financial Services Limited
Indiabulls Financial Services Limited was incorporated on January 10, 2000 as M/s
OrbisInfoTech Private Limited at New Delhi under the Companies Act, 1956. The
name of company was changed to M/s. Indiabulls Financial Services Private
Limited on March 16, 2001. In the year 2004, Indiabulls came up with it own public
issue & became a public limited company on February 27, 2004. The name of
company was changed to M/s. Indiabulls Financial Services Limited.
The company was promoted by three engineers from IIT Delhi, and has attracted more
than Rs.700 million as investments from venture capital, private equity and institutional
investors and has developed significant relationships with large commercial banks such
as Citibank, HDFC Bank, Union Bank, ICICI Bank, ABN Amro Bank, Standard
Chartered Bank and IL&FS.
Brand Values
Indiabulls is amongst the largest non-banking financial services companies in India and
enjoys strong brand recognition and customer acceptance. The company attributes its
dominant position in the brokerage industry to the preferential status it enjoys with
investors Coupled with its forays into various segments; the Group believes that the
bulk of its brand story is yet to be written. Indeed, when a case study on India’s
youngest brands which have had a profound impact on the economy is crafted,
Indiabulls will feature prominently in it
INDIABULLS GROUP
36
Offers purchase and sale of securities (stock, bonds, debentures etc.)
Broker assisted trade execution
Automated online investing
Access to all IPO's
Milestones Achieved
37
STRATEGY AND FOCUS
.MAJOR COMPETITORS
KOTAK SECURITIES
SHAREKHAN
A competitor’s strength may be its marketing systems, aggressive sales force, and itsrel
ationship with major external environmental variables like government &financial instit
ute or a financial resources base. For the effective competitiveanalysis only strength &
weaknesses are not sufficient we need to consider other key factors like market share of
the company & 7p s of service marketing i.e.
Product
Price
Place
Promotion
Process
Physical evidence
People etc.
38
SWOT ANALYSIS
Weaknesses
It should have its own mutual funds as it provides advises on mutual funds
It does not provide indices on major world markets, ADR Prices of Indian
Scripts.
Opportunities
High client base will help for cross sales of its products.
Threats
Companies like Sharekhan, ICICI Direct, Kotak Securities and Private brokers
are major threats.
39
Local brokers capable of charging lower brokerage
40
CHAPTER-4
DATA ANALYSIS
41
4.1 Fundamental Analysis:
Fundamental analysisrefers to the study of the core underlying elements that influence
the economy of a particular entity. It is a method of study that attempts to predict price
action and market trends by analyzing economic indicators, government policy and
societal factors within a business cycle framework. The fundamental analysis of a
company involves the following parameters:
1. Macroeconomic Analysis
2. Industry Analysis
3.Company analysis
1. Macroeconomic Analysis:
Global Analysis:
Any change in global economy or in other words, global changes also affects Indian
Economy. For example: The recession was first observed in USA and later on it caught
42
its lead in other countries too. When it entered India, the share market crashed literally.
It affected many banks as ICICI and others, resulting in loss of people’s confidence
towards banks.
Monetary policy affects banking sector in many ways. One way is through
creditMarkets. Because of imperfect information, incomplete contracts and imperfect
bankCompetition, monetary policy may affect banks’ loan supply. In particular,
expansive Monetary policy may increase banks’ loan supply directly (bank lending
channel), or Indirectly by improving borrowers’ net worth and, hence, by reducing the
agency costs of lending.
2. Industry Analysis:
Life Cycle Analysis:
Bank plays an important role in the economic development of the country. The entire
commercial and industrial activities are well knitted with the banks. One cannot
imagine the cessation of the banking activities even for a day. There may be an
economic crisis in the country if the banks stop functioning for some days.
In the early days, the banking business was confined to receiving of deposits and
lending of money. But the modern bankers undertake wide variety of functions to assist
43
their customers. Banks are like any other business in that they produce goods and
services to customers. Like any other businesses, their products have life cycles.
Cheques are in a decline phase of their life cycle and use of cheques is declining rapidly
and being replaced by electronic bill pay and debit cards. Internet Banking and
Electronic Bill pay are in their growth phase as more and more customers are using
these services. Cards or Cheque Cards are in their maturity phase as they are accepted
by nearly everyone. So overall, the banking industry is in a GROWTH PHASE, as new
measures are being adopted overtime so as to make transactions speedy and easy.
1. Threat of New Entrants. The average person can't come along and start up a bank,
but there are services, such as internet bill payment, on which entrepreneurs can
capitalize. Banks are fearful of being squeezed out of the payments business, because it
is a good source of fee-based revenue. Another trend that poses a threat is companies
offering other financial services. Also, the possibility of a mega bank entering into the
market poses a real threat.
2.Power of Suppliers. The suppliers of capital might not pose a big threat, but the
threat of suppliers luring away human capital does. If a talented individual is working in
a smaller regional bank, there is the chance that person will be enticed away by bigger
banks, investment firms, etc.
3. Power of Buyers. The individual doesn't pose much of a threat to the banking
industry, but one major factor affecting the power of buyers is relatively high switching
costs. If a person has a mortgage, car loan, credit card, checking account and mutual
funds with one particular bank, it can be extremely tough for that person to switch to
another bank. In an attempt to lure in customers, banks try to lower the price of
switching, but many people would still rather stick with their current bank. On the other
hand, large corporate clients have banks wrapped around their little fingers. Financial
institutions - by offering better exchange rates, more services, and exposure to foreign
capital markets - work extremely hard to get high-margin corporate clients.
44
4. Availability of Substitutes. There are plenty of substitutes in the banking industry.
Banks offer a suite of services over and above taking deposits and lending money, but
whether it is insurance, mutual funds or fixed income securities, chances are there is a
non-banking financial services company that can offer similar services. On the lending
side of the business, banks are seeing competition rise from unconventional companies.
Sony, General Motors and Microsoft all offer preferred financing to customers who buy
big ticket items
45
4.2 DATA ANALYSIS
Company Profile
Company Information
State Bank of India (SBI) is the India’s oldest and largest bank by revenue, assets
and market capitalization. SBI has launched various cost-effective channels, such as
SBI Tiny Card(biometrically enabled card), Kiosk banking (internet enabled
kiosk/computer
with biometric validation) and cell phone messaging channel. The bank also has more
than 170branches in ~30 foreign countries, including multiple locations in the US,
Canada, and Nigeria.
“The objective of the lending rate cut is to improve demand for assets which in our
view could have a positive cascading effect on related industries”
46
KEY MANAGEMENT
Treasury: Includes investment portfolio and trading in foreign exchange contracts and
derivative contracts.
Other Services: NRI Services, ATM Services, Demat Services, E-Pay/E-Rail Broking
Services.
COMPANY PROFILE:
COMPANY INFORMATION:
47
BUSINESS OVERVIEW:
“The strategy of focusing on profitability, growth and risk management for fiscal
2018 resulted in better than the
expected results.”
KEY MANAGEMENT:
Company Information
48
Base interest rate: 10.50%
No. of branches: Over 5,900
No. of ATMs: Over 6,000
Business Overview:
Punjab National Bank (PNB) is the largest nationalized Bank in the country
in terms of its branch network, total business, advances, operating profit and
low cost CASA deposits
Apart from offering banking products, the bank has also taken up Wealth
Management Services such as credit card / debit card; bullion business;
life/non-life insurance PNB Prerna and PNB Pragati are two corporate
social responsibility initiatives undertaken by the bank.
“The status of the banking sector in 2013will depend on how the economy
behaves over the next one year”
Key Management:
Chairman & MD: Mr. K. R. Kamath
Executive Director: Mr. RakeshSethi
Executive Director: Mr. UshaA Subramanian
Executive Director: Mr. S. R. Bansal
Canara Bank
Company Profile
Company Information:
49
No. of ATMs: Over 3,100
BUSINESS OVERVIEW:
Over the years, Canara Bank has been scaling up its market position to emerge
as a major 'Financial Conglomerate' with as many as nine
subsidiaries/sponsored institutions/joint ventures in India and abroad
Besides commercial banking, the Bank has also carved a distinctive mark in
various corporate social responsibilities areas, namely, serving national
priorities, promoting rural development and enhancing rural self-employment
through several training institutes
It is the first bank to introduce Centralized Solution for Service
Units(CSSU), developed in-house adopting the latest technology in the IT
Industry’
Key Management
COMPANY PROFILE
COMPANY INFORMATION:
50
BUSINESS OVERVIEW:
Bank of Baroda is a 103 year old State owned Bank with a good mix of modern
&contemporary personality, offering banking products and services to large
industrial, SME, retail & agricultural customers across the country
The Bank has developed an Integrated Global Treasury Solution in its major
territories such as the UK, UAE, Bahamas Bahrain, Honkong, Singapore,
Belgium, USA and India to reduce the cost of operations and improve funds
management.
“The Indian banking industry has always been resilient in facing challenges”
KEY MANAGEMENT:
Chairman & MD: Mr. M. D. Mallya
Executive Director: Mr. S. K. Jain
Executive Director: Mr. P. Srinivas
Executive Director: Mr. RanjanDhawan
BANK OF INDIA
COMPANY PROFILE
COMPANY INFORMATION:
BUSINESS OVERVIEW:
51
Bank of India was founded on 7thSeptember, 1906 by a group of eminent
businessmen from Mumbai. The Bank was under private ownership and
control till July 1969, after which it was nationalized along with 13 other
banks
The Bank has a sizable presence abroad, with a network of 29 branches
(including five representative office) at key banking and financial centers
such as London, New York, Paris, Tokyo, Hong-Kong an Singapore.
International business accounts for around 17.82% of the Bank's total business
The bank is always looking forward to being more consumers centric and
reaching out especially in the rural belts of the country.
KEY MANAGEMENT:
52
.TABLE 1.1
CHART 1.1 shows the net profit ratio of selected banks which are as follows:-
53
20
18
16
14
12
10
0
D
K
A
DA
A
N
N
LT
DI
DI
RO
BA
BA
IN
IN
K
AN
BA
AL
RA
OF
OF
IB
ON
OF
NA
K
K
IC
AN
N
TI
K
CA
IC
BA
N
NA
EB
BA
AT
AB
ST
NJ
PU
INTERPRETATION:
The net profit margin is a good way of comparing companies in the same industry,
since such companies are generally subject to similar business conditions. However, the
net profit margins are also a good way to compare companies in different industries in
order to gauge which industries are relatively more profitable. Also called net margin.
A higher profit margin indicates a more profitable company that has better control
over its costs compared to its competitors. Profit margin. The profit margin ratio, also
known as the operating performance ratio, measures the company’s ability to turn its
sales into net income. To evaluate the profit margin, it must be compared to competitors
and industry statistics. It is calculated by dividing net income by net sales
STATE BANK OF INDIA: In table 1.1 chart shows decreasing trend till 2017 and
from 2018 it shows increasing trend .
54
ICICI BANK: Its shows increasing trend in 2017 and 2018 it has slightly increase
which indicate more profit margin.
PUNJAB NATIONAL BANK : Every year its fluctuating but only in 2016 it increases.
CANARA BANK: It shows increasing trend at increasing rate.
BANK OF BARODA: It has increases till 2017 but in 2018 it has decreases.
BANK OF INDIA: Every year it has fluctuate.
TABLE 1.2:-
DIVIDEND PAYOUT RATIO 2015 2016 2017 2018
NET PROFIT
STATE BANK OF INDIA 22.90 23.36 26.03 22.59
Chart 1.2 which shows the dividend payout ratio of selected banks:-
55
40
35
30
25
20
15
10
0
A D NK A A
DI LT NK OD DI
IN K BA BA R I N
OF AN AL A
FB
A
OF
I B
ON AR
AN
K IC TI N O NK
B IC NA CA NK BA
TE AB BA
STA NJ
PU
INTERPRETATION:
The part of the earnings not paid to investors is left for investment to provide for
future earnings growth. Investors seeking high current income and limited capital
growth prefer companies with high Dividend payout ratio. However investors seeking
capital growth may prefer lower payout ratio because capital gains are taxed at a lower
rate. High growth firms in early life generally have low or zero payout ratios. As they
mature, they tend to return more of the earnings back to investors
STATE BANK OF INDIA: There is a slightly increase inyear 2017 and decrease in
2018
ICICI BANK LTD:There is a decrease from year 2016 to 2018
PUNJAB NATIONAL BANK: There is decreasing trend in the following year
CANARA BANK:There is decreasing trend at faster rate
56
BANK OF BARODA:There is decrease in the year from 2016
BANK OF INDIA: There is increasing trend before the year 2017 but decrease in year
2018.
EARNING PER SHARE:
Chart 1.3 shows the position of EPS ratio of selected banks which are as follows:
57
200
180
160
140
120
100
80
60
40
20
0
IA NK NK NK DA IA
I ND I BA L BA BA ARO I ND
O F IC A RA FB O F
K IC ON NA O NK
AN TI CA
NK
B NA BA
TE AB BA
STA NJ
PU
INTERPRETATION:-
The portion of a company’s profit allocated to each outstanding share of common stock.
Earnings per share serves as an indicator of a company’s profitability. Earnings per
share is generally considered to be the single most important variable in determining a
share’s price. It is also a major component used to calculate the price-to-earnings
valuation ratio
This chart shows that all selected banks are increasing, STATE BANK OF INDIA
reduced 144 in year 2016 to 116 in year 2017 then again by 58 in year 2018 ICICI
BANK, PUNJAB NATIONAL BANK ,CANARA BANK , BANK OF BARODA
Shows increasing trend but again bank of India reduced in year 2016 then again
increase gradually from year 2017.
STATE BANK OF 29 30 30 35
58
INDIA
PUNJAB NATIONAL 20 22 22 22
BANK
CANARA BANK 8 8 10 11
BANK OF BARODA
9 15 16.50 17
BANK OF INDIA 4 8 7 7
40
35
30
25
20
15
10
0
IA LT
D
AN
K NK OD
A IA
I ND NK B BA R I ND
O F BA AL AR
A BA O F
NK IC
I ON N OF NK
TI CA NK
BA IC NA BA
TE B BA
STA NJA
PU
INTERPRETATION:
59
The sum of declared dividends for every ordinary share issued. Dividend per share
(DPS) is the total dividends paid out over an entire year (including interim dividends
but not including special dividends) divided by the number of outstanding ordinary
shares issued
This chart1.4 indicates a positive trend as all are increasing except BANK OF INDIA.
CURRENT RATIO:
60
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
IA K NK NK DA IA
I ND BAN BA BA RO I ND
F I L RA A F
O
IC
IC
ON
A
NA FB O
AN
K
TI A O NK
B NA C NK BA
TE AB BA
STA NJ
P U
INTERPRETATION:
This chart 1.5 indicates that there is frequent fluctuations except State Bank Of India
and Bank Of Baroda which has gradually increase in year 2018.
QUICK RATIO:
TABLE 1.6 SHOWS THE quick ratio of selected banks which are as follows:-
61
CANARA BANK 9.17 11.29 26.98 30.86
\
CHART 1.6 SHOWS the position of selected banks:-
35
30
25
20
15
10
0
STATE BANK OF INDIA ICICI BANK LTD P & B BANK CANARA BANK BANK OF BARODA BANK OF INDIA
62
INTERPRETATION:
This chart 1.6 indicates increasing or positive trend except BANK OF INDIA which
shows the downfall in year 2018.
63
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
IA LT
D
AN
K NK OD
A IA
I ND NK B BA R I ND
O F BA AL AR
A BA O F
K IC
I ON N OF NK
AN IC TI CA NK
B NA BA
TE B BA
STA NJA
PU
64
DATA INTERPRETATION:-
A debt obligation where the borrower has not paid any previously agreed upon interest
and principal repayments to the designated lender for an extended period of time. The
nonperforming asset is therefore not yielding any income to the lender in the form of
principal and interest payments. Chart 1.7 shows a positive trend for every selected
banks except ICICI BANK LTD which shows fluctuations in every year.
65
CHAPTER-5
FINDINGS
66
5.1 From the data analysis and interpretations of the ratios of six selected banks the
following findings have been given:
1. State bank of India: - In net profit margin ratio 2017 it has decrease in year 2017
from 10.54 to 8.55 i.e., 1.99 times and again it has increased in 2018 1.18 times. In
dividend payout ratio it has gradually increase in year 2016 by 0.46 times, in tear 2017
by 2.67 times which has reduced again in year 2018 by 3.47 times. Earnings per share
have increase in year 2018 by 58.08 times which has decrease in year 2017 by 28.30
times. Dividend per share and Non-performing assets has also increase in every year.
Current ratio has increase form 0.1 times in year 2018 and quick ratio has also
frequently increases.
2. ICICI BANK LTD: -net profit margin, it has gradually increases in every year. In
2016 dividend payout ratio increases by 1 times but again it slowly it starts decreasing.
Earnings per share, dividend per share & quick ratio increases frequently in every year.
Current ratio there is frequent fluctuations. Non-performing assets fluctuates in every
year.
3. PUNJAB NATIONAL BANK: - From year 2015 net profit margin has gradually
increase but in year 2018 it has reduced to 2.47 times. Dividend payout ratio has
decreased in every year frequently but Earning per share, Dividend per share , Quick
ratio& Non-performing assets has increase frequently in every year. Current ratio has
increase in year 2017 by 0.01 times and remains same in every 3 years.
67
4. CANARA BANK: -net profit margin ratio, Earnings per share has frequently
increased in every year but dividend payout ratio has decreased gradually in every year.
Dividend per share increases by 1 times in year 2018. In 2017 current ratio has decrease
by 0.01 times and remains same in all the 3 years. Quick ratio has increases slowly in
every year.
5. BANK OF BARODA: -net profit margin ratio has slowly increases in year 2015 but
in 2018 it has decreases by 2 times in year 2018.dividend payout ratio has frequent
fluctuates in every year. Earnings per share Quick ratio, dividend per share& Non-
performing assets has increases slowly in every year. Current ratio increases in year
2018 by 0.01 times.
6. BANK OF INDIA: - Net profit margin ratio has gradually increase but in year 2017
it has reduced to 7 times and again it has increase. Dividend payout ratio has slowly
increased but in 2018 it decreases by 7 times. Earnings per share have decrease in year
2016 by 24 times and again started increasing. Dividend per share has increased by 4
times in year 2016and form year 2017 it started decreasing. Current ratio has frequent
fluctuations by 0.01 times and quick ratio has increases every year slowly. Non –
performing assets has increases in every year.
68
SUGGESTIONS
69
services at an affordable cost to the vast sections of disadvantaged and low income
groups.
Investors shouldn’t be depending upon the rumors and TV news which might
affect the shares only for a short span of time.
The banks can expand its network by increasing its branches.Investments are to
be made in those banks which give fairly good returns, dividends every year.
Financial inclusion initiatives also need to be taken care of as India fares very
poorly on this regard as half the population does not have access to banking
services.
70
CONCLUSION
The economic growth of the country is an apt indicator for the growth of the
banking sector. The Indian economy is projected to grow at a rate of 5-6
percent34 and the country’s banking industry is expected to reflect this growth.
The onus for this lies in the capabilities of the Reserve Bank of India as an able
central regulatory authority, whose policies have shielded Indian banks from
excessive leveraging and making high risk investments.
During 2017-12, majority of public sector banks failed to meet the priority
sector target. Though at an aggregate level, foreign banks’ performance was
better as compared to domestic banks, bank-wise data revealed that some
foreign banks also failed to meet the priority sector lending target.
The Indian banking sector has been relatively well shielded by the central bank
and has managed to sail through most of the crisis. But, currently in light of
slowing domestic GDP growth, persistent inflation, asset quality concerns and
elevated interest rates, the investment cycle has been wavering in the country.
BIBLIOGRAPHY
71
The following articles from internet have been used for the study purpose:
(a) www.nseindia.com
(b) www.bseindia.com
(c) www.sharegyan.com
(d) www.moneycontrol.com
(e) www.statebankofindia.com
(f)www.icicibank.com
(g)www.punjabnationalbank.com
(h)www.canarabank.com
(i)www.bankofindia.com
(j)www.bankofbaroda.com
(k) Guidance from company mentor Mr. Gireesh Kumar
(l)http://www.indiainfoline.com/Markets/News/Indian-Banking-Sector-Outlook-2013-
Dun-and-Bradstreet/5571598340
(m)www.livemint.com
72