A REPORT

ON

FUNDAMENTAL AND TECHNICAL

ANALYSIS OF BANKS WITH SPECIAL
REFERENCE TO NSE

BY
Deepesh Mittal
Enrollment No. – 18BSP1576

1
 REPORT
ON

FUNDAMENTAL AND TECHNICAL

ANALYSIS OF BANKS WITH SPECIAL
REFERENCE TO NSE

SUBMITTED BY:

DEEPESH MITTAL (18BSP1576)

PRAEDICO GLOBAL RESEARCH

A report submitted in partial fulfilment of the requirements of PGPM Program of

IBS Gurgaon

Distribution List :

Company Guide

Mr. Sunny Ralli

Director

Praedico Global Research

Date of Submission

2
 AUTHORIZATION

This is to certify that this report is submitted in partial fulfillment of the requirements of
PGPM program of ICFAI Business School (IBS), Gurgaon.
This report document titled: “Fundamental and Technical Analysis of Banks With Special
Reference To NSE” is done by Deepesh Mittal as part of the completion of the study at
Praedico Global Research Pvt. Ltd during his Internship program under the guidance of Mr.
Sunny Ralli, Director, Praedico Global Research, Gurgaon.

3
 ACKNOWLEDGMENT
It’s been a great privilege for me to work for such organization as a part of my internship. In
this regard I would like to thank all of my faculty members for encouraging me to work for
the benefit of the organization and also to learn different methods which help me to grow
professionally and personally.

IBS Gurgaon curriculum gives us this opportunity to work while pursuing our education in
order to understand various methods and style of modern day working environment.

I am grateful to my faculty guide for her guidance and generosity throughout internship
period as she proved to be a very enthusiastic and encouraging mentor.

I pay my gratitude towards Mr. Sunny Ralli ( Praedico Global Research – Director ) and Mr.
Priyank for their way of teaching me about work and methods to make sure we deliver good
quality research work in time. I am indebted to you to offer me such meaningful and
technology oriented working period.

Also, I would like to thank all my colleagues who helped me during my internship with such
great support and knowledge.

4
 TABLE OF CONTENTS
Acknowledgment..................................................................................................................4
Executive Summary..............................................................................................................10
Abstract.................................................................................................................................11
1. About the Company........................................................................................................12
1.1 Services of the company...........................................................................................13

1.2 SWOT Analysis........................................................................................................14

2. An Introduction to Stock Market...........................................................................................................................15-16

3. Summer Internship Project………………………………………………………….17-18

3.1 Title
3.2 Objectives
3.3 Work Area
4. Fundamental Analysis……………………………………………………………….19
4.1 Economy of India………………………………………………………………..19
4.2 Macroeconomics factors affecting Banking sector stock market………………..20
4.3 Industry Overview: Banking Sector……………………………………………..21-22
4.4 Companies Analysis……………………………………………………………..23-33
5. Technical Analysis…………………………………………………………………..34-46
6. Research 1 – Check Prediction Accuracy……………………………………………47
7. Research 2- Fundamental Tool- PE ratio…………………………………………….48
8. Research 3- Technical Tool- Share Volume…………………………………………49
9. Research 4- Technical Tool- Candlestick Charts (Doji)……………………………..50
10. Research 5- Technical Tool- Pivot Point…………………………………………….51
11. Research 6- Fundamental Tool- EBIT, PAT………………………………………...52
12. Marketing Action Plan and Achievements…………………………………………..53
13. Learning……………………………………………………………………………….54
13. Conclusion…………………………………………………………………………...55
14. References…………………………………………………………………………...56

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 LIST OF TABLES
Table 1: BETA
Table 2: Weightage
Table 3: Ideal Parameter
Table 4: Scores
Table 5: Score Distribution
Table 6: Weightage
Table 7: Weightage Score

6
 LIST OF CHARTS
Chart 1: Weightage
Chart 2: Shareholding Pattern
Chart 3: CRAR
Chart 4: Debt Equity Ratio
Chart 5: Advances to Total Assets
Chart 6: Gross NPA to Total Advances
Chart 7: Net NPA to Total Advances
Chart 8: Asset Turnover Ratio
Chart 9: Profit Per Employee
Chart 10: Net Profit Margin
Chart 11: Return on Asset
Chart 12: Net Interest Margin
Chart 13: Cash to Deposit Ratio
Chart 14: Interest Expended to Interest Earning Ratio
Chart 15: BETA
Chart 16: Bollinger Band – HDFC Bank
Chart 17: RSI – HDFC Bank
Chart 18: ADX – HDFC Bank
Chart 19: CCI – HDFC Bank
Chart 20: Bollinger Band – ICICI Bank
Chart 21: RSI – ICICI Bank
Chart 22: ADX – ICICI Bank
Chart 23: CCI – ICICI Bank
Chart 24: Bollinger Band – Kotak Bank
Chart 25: RSI – Kotak Bank
Chart 26: ADX – Kotak Bank
Chart 27: CCI – Kotak Bank
Chart 28: Bollinger Band – SBI Bank
Chart 29: RSI – SBI Bank

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Chart 30: ADX – SBI Bank
Chart 31: CCI – SBI Bank
Chart 32: Bollinger Band – Bank of Baroda
Chart 33: RSI – Bank of Baroda
Chart 34: ADX – Bank of Baroda
Chart 35: CCI – Bank of Baroda
Chart 36: Bollinger Band – Federal Bank
Chart 37: RSI – Federal Bank
Chart 38: ADX – Federal Bank
Chart 39: CCI – Federal Bank
Chart 40: Intraday Chart of Kotak bank
Chart 41: Share Volume of HDFC Bank
Chart 42: Candlestick Chart of ICICI Bank
Chart 43: Pivot Point of SBI Bank

8
 ABBREVIATIONS

AI: Artificial Intelligence

Pvt.: Private
Ltd.: Limited
PGR: Praedico Global Research
NSE: National Stock Exchange
SEBI: Securities and Exchange Board of India
FDI: Foreign direct investment
FPI: Foreign portfolio investment
FII: Foreign institutional investor
ETF: Exchanged traded funds
EBIT: Earning before Interest and Tax
PAT: Profit after Tax
EPS: Earning Per Share
CRAR: Capital to Risk-weighted Assets Ratio
NPA: Non-Performing Assets
HDFC: Housing Development and Financial Corporation
ICICI: Industrial Credit and Investment Corporation of India
ROA: Return on Assets
RSI: Relative Strength Index
SBI: State Bank of India
ADX: Average Directional Index
CCI: Commodity Channel Index
CAGR: Compound Annual Growth Rate

9
 EXECUTIVE SUMMARY

Student Name Deepesh Mittal

Enrolment Number 18BSP1576
Industry Type Financial Services
Company Praedico Global Research Pvt. Ltd.

Organization Description:
Praedico Global Research Pvt. Ltd. is India’s first “integrated global research cum training”
organization.
Project Title:
“Fundamental and Technical Analysis of Banks with special reference to NSE”
Objective of the project
 The main objective of this SIP is to understand the stock market and analyse stock
market past trends and forecast future trends with maximum possible accuracy.
 To spread awareness among the young generations about the exciting career
opportunities available in capital markets and the financial services industry.
Methodology
The methodology being used involves Secondary sources of information:
 The data for the study of the project was collected from the different websites like
money control, investing.com, economic times, stockcharts.com, chittorgarh.com,
nseindia.com, etc.
 Apart from this, various journals, magazines, textbooks and articles have been
referred to get the relevant information.
Findings and Conclusion
 The deposit of banking companies is increasing with increase in GDP at market price.
 Non Performing Assets Ratio of Indian banking companies drop from 10.8% to
10.3% in March 2019.
 Among the banks selected for the CAMELS analysis and the ranking methodology
adopted for the analysis, HDFC bank is the best bank.
 The Technical Analysis suggests, HOLD the shares of Kotak Mahindra Bank. SELL
the shares of ICICI, State Bank of India, Bank of Baroda and Federal Bank and BUY
the shares of HDFC for short period of time.
Achievements
Received the appreciation letter and award from the company for achieving the target.

10
 ABSTRACT

The project revolves around banking sector and the topic of the project has been chosen so
because banking sector acts as the backbone of the economy. Any slight policy change in the
sector creates ripple effect in the economy on whole including the stock market. The sector
itself caters a vast customer base and has been in limelight for a while now. A good banking
system is essential for the growth of the economy. Constant changes in regulation and interest
rates by the Reserve Bank of India have created many trends in the banking sector. In the
present environment understanding the future of banking industry is very important. The
growth of this sector will portray the growth of all other sectors in the country. This study
examines the changes that have taken in the banking sector. The analysis is done by
fundamental and technical analysis. In fundamental analysis economy, industry and company
analysis is done. Technical analysis is done by using various tools on the selected companies.
As a part of corporate learning, IBS Gurgaon Summer Internship Program gave me a chance
to work for Praedico Global Research in Financial Services (Stock Trading) sector. The
project and work done is purely related to study of advanced tools and techniques used to
understand the market trend and accurately forecast the upcoming market trends and stock
price changes.

My work was to study various fundamental and technical analysis tools and techniques used
to analyse the stock market trend and forecast the future trends with the aim to attain
maximum level of accuracy. I also got a chance to learn about the scope of Artificial
Intelligence in forecasting the stock market trend and also got an opportunity to run some of
the neural network program already derived by Praedico Global Research team which helps
in predicting market trend with maximum accuracy. As and when I gained trading
knowledge, I have started implementing those strategies for trading in live stock market.

Being the finance and marketing intern of our company. This project gave me opportunity to
interact with different people to capture their thoughts and study their reaction towards the
financial knowledge to analyze their behavior towards their financial status. I was also given
the opportunity to be a part of its Financial Literacy mission through which we work out our
best to spread the financial literacy all across the country and conduct various seminars and
stock trading workshops.

11
 ABOUT THE COMPANY

Praedico Global Research Pvt. Ltd. is India’s first “integrated global research cum training”
organization. Praedico Global Research Pvt Ltd was founded on 09 April 2018 as a part of its
two companies – Millennium Bulls Securities and Stock Gurukul. Millennium Bulls
Securities would be officially launched in October 2018 and would offer retail broking
services to its clients all over the country. Stock Gurukul works on its model of spreading
“Financial Literacy” all across the Globe and have their own Research model for Indian and
Global Stock Exchange.
Head Office: Mumbai
Founder: Mr. Sunny Ralli
 Praedico Global Research Pvt. Ltd. is an advisory firm which provides stock trading
and investment advisory to its global clients.
 Praedico Global Research Pvt. Ltd. thrives on driving its own exclusive investment
strategies and train people to use them efficiently.
 It has its own neural networks which predict the Indian stock market trends that no
other firm is capable of doing till now.
 It conducts Financial Workshops all across the globe and provides training on whole
bouquet of financial products. Praedico specialize in stock trading strategies, option
trading strategies, derivatives strategies, hedging strategies, and technical and
fundamental analysis.
 With India having one of the lowest financial literacy across the globe, Praedico
Global Research Pvt. Ltd. has undertaken daunting task to spread financial literacy all
across India and with its exclusive financial modules designed specifically for the
laymen it is also imparting financial knowledge to the masses free of cost.

Company’s Mission and Vision:

Mission – To be the leader in financial products development world over. Products so
developed should have highest performance and lowest fees in comparison to other financial
products in the market.
Vision – To be the bellwethers in eradicating financial discrepancy around the world by
providing financial access to people who don’t have money to access costly financial
products.

12
 SERVICES OF THE COMPANY

1. JUGGERNAUT
Juggernaut, as the name suggests, have been developed keenly keeping in mind the
competitive stock market and coping with varying changes at every glances so as to keep
your investments risk at bay… juggernaut brings you the trend signals of the index nifty 50
and bank nifty, making stock market predictions easier by providing signals such as 10
minutes, half hour, one hour and day using artificial intelligence based results.

2. Neutral Portfolio Assist

Presenting first of its kind artificial intelligence based neural portfolio building platform .This
platform designs tailor made portfolios for the user taking input neural from users with their
risk profiling and matching it with the intrinsic neural of the stocks which leads to portfolio
being built with accurate RIME(Risk Modulation efficiency)

World over investment products are designed with the TOP-DOWN methodology in which
first the investment portfolio is made and then investors selects the portfolio suited for
him/her .But with Praedico’s neural portfolio first time BOTTOM-UP approach is being
introduced to the investors world over where investors can input their investment goals and
then portfolio is designed.

3. STOCKOMETER
One of its kind day trading stock indicator platform which gives users access to the strongest
and weakest stock for the day. This platform will help day traders to pick stocks for both Buy
(Long) and Sell (Short) side. Platform will even tell about the trend build up in the stocks
giving traders right signals to enter and exit stocks at right price.

4. Workshops and live webinars

Praedico global research is on a mission to spread financial literacy. So they have designed
workshops and courses to make people aware about stock market and earn a great return on
their investment. Make people self-sufficient. Through these courses and webinars a beginner
with no experience in stock trading can start trading and earn himself.

13
 SWOT ANALYSIS

WEAKNESS
STRENGTHS
 Indians being conservative
 Perform intensive research invest in safe options
in all sectors  Low costumer base
 1st Indian company to use  Competition with big
AI in stock market advisory brands like bajaj capital
 A team of committed and  Praedico Global Research
hardworking individuals. Pvt. Ltd. not being an
 Have strong neural network established brand, faces
which forecast with 100% issue to prove its
accuracy. credibility to its
customers.

SWOT

OPPURUNITIES
THREATS
 To become the best advisory


firm in India with help of AI
To spread financial literacy
 It has many competitors in the
stock market advisory area
all across the country and
(Angel broking, Bajaj
improves the financial
Capital), they can be treated
literacy statistics of India.
as its threat.
 The most fulfilling
opportunity for Praedico  Only 2% of the people in
Global Research is to be the India have knowledge of stock
leading Robotic Stock market.
Research firm able to predict
share prices with 100%
accuracy.

14
 AN INTRODUCTION TO STOCK MARKRET
Trading Mechanism
Trading at both the exchanges takes place through an open electronic limit order book in
which order matching is done by the trading computer. There are no market
makers or specialists and the entire process is order-driven, which means that market
orders placed by investors are automatically matched with the best limit orders. As a result,
buyers and sellers remain anonymous. The advantage of an order-driven market is that it
brings more transparency by displaying all buy and sell orders in the trading system.
However, in the absence of market makers, there is no guarantee that orders will be executed.
All orders in the trading system need to be placed through brokers, many of which provide
online trading facility to retail customers. Institutional investors can also take advantage of
the direct market access (DMA) option in which they use trading terminals provided by
brokers for placing orders directly into the stock market trading system. Settlement Cycle and
Trading Hours
Equity spot markets follow a T+2 rolling settlement. This means that any trade taking place
on Monday gets settled by Wednesday. All trading on stock exchanges takes place between
9:55 am and 3:30 pm, Indian Standard Time, Monday through Friday. Delivery of shares
must be made in dematerialized form, and each exchange has its own clearing house, which
assumes all settlement risk by serving as a central counterparty.
Market Indexes
The two prominent Indian market indexes are Sensex and Nifty. Sensex is the oldest market
index for equities; it includes shares of 30 firms listed on the BSE, which represent about
45% of the index's free-float market capitalization. It was created in 1986 and provides time
series data from April 1979, onward.
Another index is the Standard and Poor's CNX Nifty; it includes 50 shares listed on the NSE,
which represent about 62% of its free-float market capitalization. It was created in 1996 and
provides time series data from July 1990, onward.
Market Regulation
The overall responsibility of development, regulation and supervision of the stock market
rests with the Securities and Exchange Board of India (SEBI), which was formed in 1992 as
an independent authority. Since then, SEBI has consistently tried to lay down market rules in
line with the best market practices. It enjoys vast powers of imposing penalties on market
participants, in case of a breach.

15
Who Can Invest In India?
India started permitting outside investments only in the 1990s. Foreign investments are
classified into two categories: foreign direct investment (FDI) and foreign portfolio
investment (FPI). All investments in which an investor takes part in the day-to-day
management and operations of the company, are treated as FDI, whereas investments in
shares without any control over management and operations, are treated as FPI.
For making portfolio investment in India, one should be registered either as a foreign
institutional investor (FII) or as one of the sub-accounts of one of the registered FIIs. Both
registrations are granted by the market regulator, SEBI. Foreign institutional investors mainly
consist of mutual funds, pension funds, endowments, sovereign wealth funds, insurance
companies, banks, asset management companies etc. At present, India does not allow foreign
individuals to invest directly in its stock market. However, high-net-worth individuals (those
with a net worth of at least $US50 million) can be registered as sub-accounts of an FII.

NATIONAL STOCK EXCHANGE: NSE

The National Stock Exchange of India Limited (NSE) is India's largest financial market.
Incorporated in 1992, the NSE has developed into a sophisticated, electronic market, which
ranked fourth in the world by equity trading volume in 2015. Trading commenced in 1994
with the launch of the wholesale debt market and a cash market segment shortly thereafter.
Today, the exchange conducts transactions in the wholesale debt, equity and derivative
markets. One of the more popular offerings is the NIFTY 50 Index, which tracks the largest
assets in the Indian equity market. US investors can access the index with exchanged traded
funds (ETF) like the Shares India 50 ETF, which is listed under the ticker symbol.

16
 ABOUT THE PROJECT

SIP Project Title

“Fundamental and technical analysis of banks with special references to NSE”

Objective of SIP
 The main objective of this SIP is to understand the stock market and analyse stock
market past trends and forecast future trends with maximum possible accuracy.
 Learning the advanced technical and fundamental analysis tools to forecast market
trend.
 Machine learning and introduction to the neural networks- use of Artificial
Intelligence to predict stock market trend.
 To analyze the effect of P/E ratio on the stocks of the company.
 To evaluate the risk and return of the stocks.
 To evaluate the performance of the company.
 To spread awareness among the young generations about the exciting career
opportunities available in capital markets and the financial services industry.
 Pitch for the workshop to the prospects who have interest in the stock market.

LIMITATIONS
 The project depends entirely on the secondary data.
 Fundamental analysis is done on the CAMELS framework only.
 Technical analysis involves usage of four tools only.

17
Stock Market Research:
Stock Market Research is a creative and systematic research done to analyse the historical
data of the stock market and to predict its future trends accurately using various analysis
techniques.
Analysis is done using two major analysis techniques – Fundamental and Technical.
Fundamental Analysis involves the study of the financial statements of a company using
fundamental analysis tools such as earnings ratio, balance sheet analysis, etc.
Tools like EBIT ( Earning before Interest and Tax), PAT(Profit after Tax), PE ratio (Price
Earning Ratio), Beta, EPS(Earning Per Share) etc are used to perform fundamental analysis
of the stock market.One major tool used for fundamental analysis is CAMELS framework.
CAMELS framework gives a broader insight on the position of a bank.
PEG (price earning to growth) ratio will help in determining the relative trade-off between
the price of a stock, the earnings generated per share, and the company's expected growth.
P/B (price to book ratio) ,dividend payout , dividend yield , ROE , ROC and ROA will be
used in analyzing the company’s annual performance in order to be at a place to predict
future growth.
Technical Analysis involves the study of past market data and present data in the form of
charts and tables to forecast the market trend and prices of the share. Technical analysis is
useful to analyse trend since, it is believed that history repeats itself. Thus, the present and
future market trends might follow some past trend.
Tools like- Candlestick Charts (Doji, Marobozu, Bollinger Band, Relative Strength Index,
Average Directional Index , CCI etc patterns), Mountain Chars, Share Volume( traded
volume), OHLC(open high low close) charts etc. are used to perform technical analysis of the
stock market.
Different theories will be used to make the trend analysis like Dow’s theory , dead cat bounce
theory which explains that even a falling stock will make momentary correction which won’t
last for long , don’t fight the tape theory explaining the investors perspective and suggesting
not to place bets against the trend in the financial market.

Marketing Area:
 One of the most crucial life skills that everybody requires is financial education.
Money management is needed at every stage of life for various reasons. We need it to
meet our regular expenses, secure our future, and to tide over the various crises that
can come our way. Unfortunately, this is an aspect that is not addressed by formal
education systems in many countries, including India.
 Thus Praedico Global Research Pvt. Ltd. has taken up a very daunting task of
spreading financial literacy (related to stock market and where to invest money to
earn profit) among the youth.
 We organized stock trading workshops and free of cost seminars across the country to
spread financial awareness among the potential youth of the country.

18
 FUNDAMENTAL ANALYSIS

The fundamental analysis of the banking sector deals with:

a) The effect of economy on the banking sector in the economic analysis,
b) The banking industry as a whole in industrial analysis,
c) The analysis of six selected banking companies in company analysis.

ECONOMY OF INDIA
The project moves forward with EIC approach which is a part of the fundamental analysis of
the industry. The EIC approach is nothing but the top down approach chosen for the project
which would look into economy of the country, then industry undertaken and thereafter the
chosen companies. The Indian economy is set to revert to its trend growth rate of 7.5 percent
in the coming years as it bottoms out from the impact of the Goods and Services Tax (GST)
and demonetization, a new World Bank report says.
The India Development Update, released today, is a biannual flagship publication of the
World Bank which takes stock of the Indian economy. The current issue (March 2018), titled
“India’s Growth Story” describes the state of the Indian economy, shares India’s growth
experience and trajectory over the past several decades and provides a long-term perspective
on India’s growth outlook. Over the last 50 years, the Update notes that India’s average
growth has accelerated slowly but steadily across sectors – agriculture, industry and services
– and become more stable. This is reflected in increasing labor productivity and total factor
productivity. After growing far more rapidly before the global financial crisis, the economy
has grown at an average rate of about 7 percent since 2008–09.
The Update centers around an assessment of what it will take for India to return to growth
rates of 8 percent and higher on a sustained basis. To sustain its growth path, India will need
to keep a close eye on several factors to make the country more resilient to shocks: the
changing landscape of open trade, reforms in the banking sector, strengthening financial
institutions, and regulatory supervision of the financial sector. Deepening its structural
reforms in the areas of health, education and service delivery will be critical for development
of human capital required to sustain growth.

Outlook
India’s GDP growth saw a temporary dip in the last two quarters of 2016-17 and the first
quarter of 2017-18 due to demonetization and disruptions surrounding the initial
implementation of GST. Economic activity has begun to stabilize since August 2017. India’s
GDP growth is projected to reach 6.7 percent in 2017-18 and accelerate to 7.3 percent and 7.5
percent in 2018-19 and 2019-20 respectively. While services will continue to remain the main
driver of economic growth; industrial activity is poised to grow, with manufacturing expected
to accelerate following the implementation of the GST, and agriculture will likely grow at its
long-term average growth rate.

19
India’s growth in recent years has been supported by prudent macroeconomic policy: a new
inflation targeting framework, energy subsidy reforms, fiscal consolidation, higher quality of
public expenditure and a stable balance of payment situation. In addition, recent policy
reforms have helped India improve the business environment, ease inflows of foreign direct
investment (FDI) and improve credit behavior.
The Update points to the positive impulse expected from India’s novel GST system which,
while remaining more complex than comparable systems in other countries, is likely to
improve the domestic flow of goods and services, contribute to the formalization of the
economy and sustainably enhance growth. Despite the recent momentum, attaining a growth
rate of 8 percent and higher on a sustained basis will require addressing several structural
challenges. India needs to durably recover its two lagging engines of growth – private
investments and exports - while maintaining its hard-won macroeconomic stability. Crucial
steps in this process include cleaning up banks’ balance sheets, realizing the expected growth
and fiscal dividend from the GST, and continuing the integration into the global economy.

MACRO ECONOMIC FACTORS AFFECTING

BANKING SECTOR STOCK MARKET
There are several macroeconomic factors or indicators that have an indirect or direct impact
on the banking sector on whole. There is definitely a unique relationship between the sector
and these macroeconomic factors and the reason behind this is bank is a major contributor to
the economy. Government interference, business cycle and other demand supply do make an
impact on the policies laid down by the government, be it the lending rate or the legal
amendments in the laws pertaining to the sector.

1) Business cycle : While the performance of each and every company vary upon
several degrees for various reasons business cycle of the economy plays a huge role in
deciding the profit earnings by the company. It is important to understand that if the
economy is in expansion phase investors are ought to invest more and thus stock
market will grow. Now if the economy is in boom phase, definitely the profit will be
maximized but there are certain predictions that coming period will have a dearth of
investors and so business cycle and stock market have a direct relationship.
2) Political climate of the country: A strong government brings confidence in the
investors that they would reap benefit from their respective investments which gives
an optimistic outlook to the economy as well as the stock market this is one of the
reasons that election period witnesses a lot of commotion in the stock market.
3) Natural and man-made disasters: This is another factor that has an impact on the
economy and trend of the stock market. In conditions of natural and man-made
disasters in a bustling city or economically active city lowers the stock market as
investors fear the negative impact of the disasters.
4) Lending rates: Lending rates are a government interference that determines the
outlook of the economy and hence it is of utmost importance to understand that if
interest rates on loans are low or there is an announcement of the same generally
market reacts positively. And the converse is also true. Example: the repo rate cut of
25 points in the month of April, 2019 saw a negative reaction on the stock market

20
 which some analyst also believed to be the correction period in the market. The later
analysis was proved correct later on as since then the market is in constant upward
motion for more than 15 days.
5) Demand –supply: Demand supply of a product in the market or related products in
the market affects the stock market heavily.
6) Government Interference: Government make laws and policies supporting different
industries, they announce subsidies to support particular industries and the industry
gets a boom .Thus pushing stocks of the companies belonging to the industry.
Example: Recently, sugar stocks saw a boom in the month of March because of the
subsidy announced for companies dealing in the industry.
7) Inflation: Inflation also has an indirect relation with the stock market. During
inflation value of money goes down thus, the demand sinks and market shrinks. This
affects the stocks market adversely .The vice versa is also true for negative inflation.

INDUSTRY OVERVIEW: BANKING SECTOR OF

INDIA
INTRODUCTION
As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and
well- regulated. The financial and economic conditions in the country are far superior to any
other country in the world. Credit, market and liquidity risk studies suggest that Indian banks
are generally resilient and have withstood the global downturn well.
Indian banking industry has recently witnessed the roll out of innovative banking models like
payments and small finance banks. RBI’s new measures may go a long way in helping the
restructuring of the domestic banking industry.
The digital payments system in India has evolved the most among 25 countries with India’s
Immediate Payment Service (IMPS) being the only system at level 5 in the Faster Payments
Innovation Index (FPII).

MARKET SIZE

The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49
foreign banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural
cooperative banks, in addition to cooperative credit institutions.^^ In FY07-18, total lending
increased at a CAGR of 10.94 per cent and total deposits increased at a CAGR of 11.66 per
cent. India’s retail credit market is the fourth largest in the emerging countries. It increased to
US$ 281 billion on December 2017 from US$ 181 billion on December 2014.

21
RECENT DEVELOPMENTS

Key investments and developments in India’s banking industry include:

 As of September 2018, the Government of India launched India Post Payments Bank
(IPPB) and has opened branches across 650 districts to achieve the objective of
financial inclusion.
 The total value of mergers and acquisition during 2017 in NBFC diversified financial
services and banking was US$ 2,564 billion, US$ 103 million and US$ 79 million
respectively.
 The biggest merger deal of FY17 was in the microfinance segment of IndusInd Bank
Limited and Bharat Financial Inclusion Limited of US$ 2.4 billion.
 In May 2018, total equity funding's of microfinance sector grew at the rate of 39.88 to
Rs 96.31 billion (Rs 4.49 billion) in 2017-18 from Rs 68.85 billion (US$ 1.03 billion).

GOVERNMENT INITIATIVES
 As of September 2018, the Government of India has made the Pradhan Mantri Jan
Dhan Yojana (PMJDY) scheme an open ended scheme and has also added more
incentives.
 The Government of India is planning to inject Rs 42,000 crore (US$ 5.99 billion) in
the public sector banks by March 2019 and will infuse the next tranche of
recapitalisation by mid- December 2018.

ROAD AHEAD

Enhanced spending on infrastructure, speedy implementation of projects and continuation of

reforms are expected to provide further impetus to growth. All these factors suggest that
India’s banking sector is also poised for robust growth as the rapidly growing business would
turn to banks for their credit needs.
Also, the advancements in technology have brought the mobile and internet banking services
to the fore. The banking sector is laying greater emphasis on providing improved services to
their clients and also upgrading their technology infrastructure, in order to enhance the
customer’s overall experience as well as give banks a competitive edge.
India’s digital lending stood at US$ 75 billion in FY18 and is estimated to reach US$ 1
trillion by FY2023 driven by the five-fold increase in the digital disbursements. Exchange
Rate Used: INR 1 = US$ 0.0139 as on Q3 FY19.

22
 COMPANY ANALYSIS
In the learning phase of the research analysis tools during the SIP I have focused more on the
Banking Sector because this sector acts as the backbone of the economy. Any slight policy
change in the sector creates ripple effect in the economy on whole including the stock market.
The sector itself caters a vast customer base and has been in limelight for a while now.
For analysis of banking companies, six banks were selected. The selection of these
companies was based on the weightage in Nifty bank. I have taken three major
contributor of Nifty bank and three minor contributor of Nifty bank to get the overview
of the banking sector. I have researched over following banks and thus forecast the
price trend majorly using two analysis tools- Fundamental and Technical:
1. HDFC Bank Ltd.
2. ICICI Bank Ltd.
3. Kotak Mahindra Bank Ltd.
4. State Bank of India
5. Bank of Baroda
6. Federal Bank Ltd.
Chart 1: Weightage

2.38
2.15 1.411.07 Weigthage(%)
6.31

HDFC Bank
33.45 ICICI Bank
8.9
Kotak Mahindra Bank
Axis Bank
State Bank of India
Induslnd Bank
11.48 Yes Bank
RBL Bank
Federal Bank
Bank of Baroda

13.01 18.45

Interpretation:
It can be seen that private banks such as HDFC (33.45%) , ICICI (18.45%) , Kotak Mahindra
Bank(13.01%), Axis bank(11.48%) are the major contributor of Nifty bank.
Public bank such as State bank of India (8.9%) and Bank of Baroda(1.07%) are minor
contributor to nifty bank.

23
Chart 2: Shareholding Pattern

Shareholding Pattern
70.00%
60.00%
50.00%
Percentage

40.00% HDFC BAnk

30.00% ICICI Bank
20.00%
10.00% Kotak Mahindra Bank
0.00% State Bank of India
Federal Bank
Bank of Baroda

Interpretation:
The banking companies selected for the analysis are: HDFC Bank, ICICI Bank, Kotak
Mahindra Bank, State Bank of India, Bank of Baroda and Federal Bank.
HDFC Bank can be said as bank run by Corporate. Both Indian and Foreign Corporates are
major shareholder of this bank.
ICICI bank can be said to be run by the Foreign Institutions and GDR as they have nearly
57% stake in the bank.
Kotak Mahindra Bank can be said to be run by Foreign Institution and promoters. They are
having 40.27% and 29.99% stake in the bank respectively.
The major shareholder of State Bank of India is the Government and RBI, hence it could be
considered as a bank run by Government.
Federal bank can be said to be run by the Foreign Institutions and General Public as they
have nearly 64% stake in the bank.
The major shareholder of Bank of Baroda is the Government and RBI, hence it could be
considered as a bank run by Government.

24
 CAMELS FRAMEWORK
Several foreign supervisory and regulating agencies; such as Office of the Comptroller of the
Currency (OOC) and Federal Deposit Insurance Corporation were used to rate the banks
under their authority on CAMELS framework. CAMELS framework gives a broader insight
on the position of a bank. In 1995 RBI had set up a working group headed by Sri. S.
Padmanabhan to take a fresh look at the banking supervision during 1995. It suggested
measures for on-site and off-site supervision and subsequent rating of banks by RBI. The
committee suggested that supervision of bank should focus on defined parameters of
soundness, financial, managerial and operational efficiency. Accordingly it recommended
that bank should be rated on a 5 point scale; from A to E, widely on the lines of international
CAMELS framework. It stands for:

CAPITAL ADEQUACY
Capital Adequacy is a measure of a bank's financial strength, in particular its ability to
cushion operational and abnormal losses. In the volatile economic environment the capital
base is the only safeguard that any financial institutions have with them. By using their
capital base, banks can honour their obligations even in a case of financial breakdown. The
parameters defining the capital adequacy are:
 Capital to Risk Weighted Asset Ratio
 Debt Equity Ratio
 Advances to total Asset Ratio
ASSET QUALITY
Appreciation or depreciation of the value of assets that banks have is dependent on various
market conditions. Asset quality has direct impact on the performance of the bank. The
quality of assets particularly, loan assets and investments, would depend largely on the risk
management system of the bank. To increase profitability bank provide large amount of loans
on which it earns the interest. The nature and risk involved in each loan varies. Thus to
measure the asset quality, one have to look at the Non Performing Assets of the bank. The
parameters describing asset quality of a bank are:
 Gross NPA to Advances
 Net NPA to Advances

25
MANAGEMENT
As important for any company, management plays a vital role in the functioning of banks.
The performance of the other five CAMELS components will depend on the vision,
capability, agility, integrity, and competence of the bank's management. In effect,
management rating is just an amalgam of performance in the above-mentioned areas. The
parameters defining management efficiency are:
 Asset Turnover Ratio
 Profit per Employee
EARNINGS
The ultimate aim of any financial institution is to increase its bottom line and bring profit to
the stakeholders. In addition, it also helps to support present and future operations of the
institutions. A bank must earn reasonable profit to support asset growth, build up adequate
reserves and enhance shareholder’s value. Good earnings performance would inspire the
confidence of depositors, investors, creditors, and the public at large. The parameters defining
earnings are:
 Net Profit Margin
 Return on Asset
 Net Interest Margin
LIQUIDITY
To meet the demands of the customers; the depositors and the creditors, banks must maintain
liquidity in their asset. This is done by an effective mechanism called the Asset and Liability
Management. It minimizes maturity mismatches between assets and liabilities and to
optimize returns. The indicators used to determine the liquidity of a bank are:
 Cash to Deposit Ratio
 Interest Expended to Interest Earning Ratio
SENSITIVITY TO MARKET RISK
Over the years Indian banks have diversified the areas in which they operate. They are into
exchange of foreign currencies, insurance related operations etc. Some of the risks associated
with the banks are the interest rate risk, exchange rate risk, equity price risk, etc. Sensitivity
analysis reflects institution’s exposure to interest rate risk, foreign exchange volatility and
equity price risks (these risks are summed in market risk). Risk sensitivity is mostly evaluated
in terms of management’s ability to monitor and control market risk. The common method
of quantifying risk is
Beta: Beta is a measure of the volatility of a security or a portfolio of securities in comparison
to the market as a whole. It is a measure of the sensitivity of the assets return to the market
return. It measures the strength of the relationship between the market return and the security
return. A positive beta will indicate that the securities return and the market return follow the
same trend whereas a negative beta will indicate that the securities return and the market
return follows the opposite trend i.e. if market moves up then the securities return will move
down.

26
CAPITAL ADEQUACY RATIO
Chart 3: CRAR

20.00%

18.00%

HDFC Bank
16.00%
ICICI Bank

14.00% Kotak Mahindra Bank

State Bank of India
12.00% Bank of Baroda
Federal Bank
10.00%

8.00%
2015 2016 2017 2018 2019

Interpretation:
It can be seen that private banks such as HDFC bank, ICICI Bank, Kotak Mahindra Bank
have stored a large amount of capital in 2018 and 2019 to safeguard them from any financial
shocks. Federal Bank on the other has maintained its CRAR to a safe around 14.14% level.
State Bank of India being a govt. bank is maintaining, just sufficient level of CRAR. Bank of
Baroda too is maintaining more than the required CRAR. It has raised its reserve capital from
12.13% in 2018 to 12.62% in 2019.
Chart 4: DEBT EQUITY RATIO

2.5
HDFC Bank
2 ICICI Bank

1.5 Kotak Mahindra Bank

State Bank of India
1
Bank of Baroda
0.5 Federal Bank
0
2015 2016 2017 2018 2019

Interpretation:
Banks in India has an average of debt to equity ratio of 1. Banks like bank of Baroda, Federal
bank, HDFC bank can raise more capital when required as their ratio is less than 1. On the
other hand ICICI bank, SBI Bank and kotak bank will have problem in borrowing the money
as they are highly leveraged.

27
Chart 5: ADVANCE TO TOTAL ASSET

0.75

0.7

0.65 HDFC Bank

ICICI Bank
0.6
Kotak Mahindra Bank
0.55 State Bank of India
0.5 Bank of Baroda
Federal Bank
0.45

0.4
2015 2016 2017 2018 2019

Interpretation:
All the banks except State bank of India and Bank of Baroda have maintained their advances
to total assets to around 0.6. Since bank of Baroda was very slow to change in the banking
sector it’s Advance to Total Assets ratio was very less in 2016 and 2017. But from 2018
onwards it has increased the amount of advances with respect to the total assets.

ASSET QUALITY
Chart 6: Gross Non-Performing Assets to Advances

14

12

10 HDFC Bank
ICICI Bank
percentage

8
Kotak Mahindra Bank
6 State Bank of India

4 Bank of Baroda
Federal Bank
2

0
2015 2016 2017 2018 2019

Interpretation:
Compared to the peers of the banking sector the gross NPA to advances of HDFC bank,
Kotak bank and Federal Bank are very low that means the banks has granted sound loans and
proves the good quality of advances. On the other hand, State Bank of India, ICICI Bank and
Bank of Baroda are very high. This is due to the aggressive policies they adopt while
sanctioning the advances.

28
Chart 7: Net NPA to Total Advances

5 HDFC Bank
ICICI Bank
percentage

4
Kotak Mahindra Bank
3 State Bank of India

2 Bank of Baroda
Federal Bank
1

0
2015 2016 2017 2018 2019

Interpretation:
Net Non Performing Asset to total advances of each bank is well within the trigger level of
RBI. HDFC Bank and Kotak Mahindra Bank being the most conservative player in the field
is having the lowest value of the ratio. State bank of India, ICICI bank are having high
percentage that reflects rising bad quality of loans.

MANAGEMENT EFFICIENCY
Chart 8: Asset Turnover Ratio

0.12

0.1
HDFC Bank
0.08
ICICI Bank

0.06 Kotak Mahindra Bank

State Bank of India
0.04
Bank of Baroda

0.02 Federal Bank

0
2015 2016 2017 2018 2019

Interpretation:
Compared to the peers of the banking sector the Asset turnover ratio of HDFC bank and
Kotak bank are very high that means the banks is utilizing all its assets efficiently to generate
income. On the other hand, State Bank of India and Bank of Baroda are low.

29
Chart 9: Profit per Employee

0.3

0.25

0.2
HDFC Bank
0.15
ICICI Bank
in crores

0.1 Kotak Mahindra Bank

0.05 State Bank of India
Bank of Baroda
0
2015 2016 2017 2018 2019 Federal Bank
-0.05

-0.1

-0.15

Interpretation:
Bank of Baroda being a public sector bank, very resistive to changes has a very low profit per
employee ratio among its peers. Kotak Mahindra Bank is yet to fully establish itself also has
a very low profit per employee ratio. HDFC Bank is having a good profit per employee ratio
which shows good management efficiency of the bank. HDFC Bank’s management policy
gives great importance to its human capital. Its HR policies involve great precaution in
selection process. Hence HDFC Bank has the highest profit per employee ratio.

EARNING QUALITY
Chart 10: Net Profit Margin

25
20
HDFC Bank
15
ICICI Bank
10
Percentage

Kotak Mahindra Bank

5
State Bank of India
0
Bank of Baroda
2015 2016 2017 2018 2019
-5
Federal Bank
-10
-15
Interpretation:
Net profit margin is an important criterion to measure the earnings quality in banks.
Increasing profits is the best indicator that the bank can pay dividends due to which the share
price will trend upward. HDFC Bank and Kotak Mahindra Bank are very high net profit
margin that means the banks have stable and steady earnings. Bank of Baroda and State Bank
of India being the public bank are very low net profit margin and there are no stable earnings.

30
 Chart 11: Return on Asset

1.5
HDFC Bank
1 ICICI Bank
percentage

Kotak Mahindra Bank

0.5
State Bank of India

0 Bank of Baroda
2015 2016 2017 2018 2019 Federal Bank
-0.5

-1

Interpretation:
HDFC Bank and Kotak Mahindra Bank are having the high return on assets that means the
banks are efficiently using its assets to generate earnings. On the other hand bank of Baroda
and State bank of India being a public bank having low reurn on assets that means they are
not efficiently utilizing assets to generate earnings.

Chart 12: Net Interest Margin

4.5
4
3.5 HDFC Bank
3
ICICI Bank
2.5
Kotak Mahindra Bank
2
State Bank of India
1.5
Bank of Baroda
1
Federal Bank
0.5
0
2015 2016 2017 2018 2019

Interpretation:
Net Interest margin is an important parameter of the performance of banks. NIM, shows the
ability of the bank to keep the interest on deposits low and interest on advance high.
Compared to the peers of the banking sector the Net Interest Margin of HDFC bank and
Kotak bank are very high that means better earnings as against the total assets. On the other
hand, State Bank of India, Bank of Baroda are low.

31
LIQUIDITY
Chart 13: Cash to Deposit Ratio

12

10

HDFC Bank
8
ICICI Bank

6 Kotak Mahindra Bank

State Bank of India
4 Bank of Baroda
Federal Bank
2

0
2014 2015 2016 2017 2018

Interpretation:
On an average Banks in India maintain 50% cash in hand to deposit that they have. Bank of
Baroda, Federal Bank, Kotak Mahindra Bank are keeping less cash compared to their deposit
compared to the industrial average.
Chart 14: Interest Expended to Interest Earned Ratio

80

70

60 HDFC Bank
50 ICICI Bank
percentage

40 Kotak Mahindra Bank

State Bank of India
30
Bank of Baroda
20
Federal Bank
10

0
2015 2016 2017 2018 2019

Interpretation:
It measures the ability of the bank to meet the interest expenditure on deposits from the
interest income from advances. Compared to the peers of the banking sector the Interest
Expended to Interest Earned of HDFC bank, Kotak bank and ICICI bank are very low that
means the banks is generating enough interest from advances to meet its interest obligations
of deposits which signifies sound liquidity of the bank. On the other hand, State Bank of
India, Bank of Baroda and Federal bank are high.

32
SENSITIVITY TO MARKET RISK
Note: For calculating the beta of the banking companies, share price data of 6 banking
companies are taken on a yearly basis. All of these banks are listed in the National Stock
Exchange. Their return is compared Nifty return, which is taken as a proxy for market
return. It consists of stocks of 50 companies over 23 sectors, and hence is a diversified
portfolio, reflecting the overall trend of the market.
Table 1: Beta
HDFC ICICI Kotak SBI Bank of Federal
Bank Bank Bank Bank Baroda Bank Nifty 50
Yearly
Return 0.19 0.42 0.19 0.21 -0.01 0.29 0.108
Beta 0.61 1.33 0.84 1.47 1.85 1.35

Chart 15: BETA

1.5

1
Yearly Return
Beta
0.5

0
HDFC Bank ICICI Bank Kotak Bank SBI Bank Bank of Federal
Baroda Bank
-0.5

Interpretation:
ICICI Bank, State Bank of India, Bank of Baroda, Federal Bank shows greater fluctuation
than the market and hence are more risky than the market portfolio. On the other hand HDFC
bank and Kotak Mahindra bank have less volatility than the market portfolio and hence are
less risky. If we compare the risk with return, we find that banks with high risk have also
given high returns. But Bank of Baroda, though being perceived risky has given no yearly
return.
The banks selected for the analysis and the methodology adopted for the analysis, HDFC, a
bank solely run by corporate is the best bank.

33
 TECHNICAL ANALYSIS
HDFC BANK
Chart 16: Bollinger Band

Interpretation:
From this it can be seen that M-tops are formed during March 12, May 2, May 20 (due to Lok
Sabha elections) when the prices have overshot the upper band and if we look at the lower
band only one time share price touch the lower band and not crossed on April 23 this
indicates that the share price is strong and hence a upward trend prevails thereafter. For a
long run, this indicates a BUY signal.
Chart 17: Relative Strength Index

Interpretation:
The RSI line shows the trend line has not crossed below 30 in last 3 months that means the
stock is not overbought and hence it is not undervalued and as the stock RSI is 57 on May 24
that indicates a bullish market is on the way. This indicates a BUY signal.

34
Chart 18: Average Directional Index

Interpretation:
The ADX value on 7th May, 2019 was 27.3 which is a strong trend indicator and as we can
see after that price continuously increased and even reached its peak on 20th May,
2019.Whereas as soon as the ADX fell below 20 on 21st May there was continuous fall in the
prices. Currently the ADX value is 22.27 as noted on 24th May, 2019 which again confirms
the above mentioned findings that there is no proper trend strength and so it will show some
flat movements for coming days. This indicates a BUY signal.
Chart 19: Commodity Channel Index

Interpretation:
The CCI indicator tells about the valuation of the stock and the more negative CCI is the
more undervalued a stock is and similarly vice versa is also true.
The arrows show that on 28th Feb CCI was at -131.53 which is highly undervalued price and
soon after it there was a constant increase in prices till 13rd March, 2019.And as soon as the
CCI reached its upper valuation limit prices started falling down.
Right Now the CCI of HDFC Bank is 60.98 as on 24th May 2019 which suggests that prices
will rise and it is a good purchase choice.

35
ICICI BANK
Chart 20: Bollinger Band

Interpretation:
From this it can be seen that M-tops are formed during March 6, April 16, May 23 (due to
Lok Sabha elections) when the prices have overshot the upper band and if we look at the
lower band only one time share price touch the lower band and not crossed on May 8 this
indicates that the share price is strong and hence a upward trend prevails thereafter. For a
long run, this indicates a BUY signal.
Chart 21: Relative Strength Index

Interpretation:
The RSI line shows the trend line has not crossed below 30 in last 3 months that means the
stock s not overbought and hence it is not undervalued and as the stock RSI is 68.76 on May
24 that indicates a bullish market is existing. This indicates a SELL signal for short period of
time.

36
Chart 22: Average Directional Index

Interpretation:
The ADX value on 15th April, 2019 was 29.3 which is a strong trend indicator and as we can
see after that price increased. Whereas as soon as the ADX fell below 25 on 7th May there
was continuous fall in the prices. Currently the ADX value is 24.62 as noted on 24th may,
2019 which again confirms the above mentioned findings that there is no proper trend
strength and so it will show some flat movements for coming days.
Chart 23: Commodity Channel Index

Interpretation:
The arrows show that on 16th April CCI was at 192.24 which is highly overvalued price and
soon after it there was a constant decrease in prices till 13rd May, 2019.And as soon as the
CCI reached its lower valuation limit prices started moving up.
Right Now the CCI of ICICI Bank is 183 as on 24th May 2019 which suggests that prices
will fall and it is a good sell choice for short period of time.

37
KOTAK MAHINDRA BANK
Chart 24: Bollinger Band

Interpretation:
From this it can be seen that M-tops are formed during March 15, April 15, May 17 (due to
Lok Sabha elections) when the prices have overshot the upper band and if we look at the
lower band only one time share price touch the lower band and not crossed on 27th feb. This
indicates that the share price is strong and hence a upward trend prevails thereafter. For a
long run, this indicates a BUY signal.
Chart 25: Relative Strength Index

Interpretation:
The RSI line shows the trend line has not crossed below 30 in last 3 months that means the
stock s not overbought and hence it is not undervalued and as the stock RSI is 75.56 on May
24 that indicates stock is considered to be oversold and hence it is overvalued. So it is a high
time to sell the stock so as to book profit.

38
Chart 26: Average Directional Index

Interpretation:
The ADX value on 18th April, 2019 was 32 which is a strong trend indicator and as we can
see after that prices continuously increased and even reached its peak on 24th May,2019.
Whereas the ADX fell below 20 on 21st feb, there was fall in the price. Currently the ADX
value is 24 as noted on 17th may, 2019 which again confirms the above mentioned findings
that there is no proper trend strength and so it will show some flat movement for coming
days. It is expected that after lok sabha election result some movement can be traced based on
the results and new government in power.
Chart 27: Commodity Channel Index

Interpretation:
The arrows show that on 16th April CCI was at 323 which is highly overvalued price and
soon after it there was a constant decrease in prices till 23rd April, 2019.And as soon as the
CCI reached its lower valuation limit prices started moving up.
Right Now the CCI of Kotak Mahindra Bank is 135.9 as on 24th May 2019 which suggests
that prices will increase for short period of time and it is a good purchase choice for short
period of time.

39
STATE BANK OF INDIA
Chart 28: Bollinger Band

Interpretation:
From this it can be seen that M-tops are formed during March 13, when the prices have
overshot the upper band again in 28th March the price has crossed the previous high but is
unable to touch band which indicates that the share price is weakening and hence downward
trend prevails thereafter. But a price have crossed the lower band in 8th May which indicate a
formation of W-bottoms and rising of the share in the future indicating bullish market trend.
For a long run, this indicates a BUY signal.
Chart 29: Relative Strength Index

Interpretation:
The RSI line shows the trend line has not crossed below 30 in last 3 months that means the
stock s not overbought and hence it is not undervalued and as the stock RSI is 74.3 on May
24 that indicates stock is considered to be oversold and hence it is overvalued. So it is a high
time to sell the stock so as to book profit.

40
Chart 30: Average Directional Index

Interpretation:
The ADX value on 25th March, 2019 was 31 which is a strong trend indicator and as we can
see after that prices continuously increased till 2nd April,2019. Whereas the ADX fell below
25 on7th May 2019, there was fall in the price. Currently the ADX value is 34 as noted on
24th may, 2019 which indicates that the price of the stock will move up. For Short period, this
indicate a BUY signal.
Chart 31: Commodity Channel Index

Interpretation:
The arrows show that on 28th March CCI was at 186 which is highly overvalued price and
soon after it there was a constant decrease in prices till 8th May, 2019.And as soon as the CCI
reached its lower valuation limit prices started moving up.
Right Now the CCI of State Bank of India is 172 as on 24th May 2019 which suggests that
prices will fall and it is a good sell choice for short period of time.

41
BANK OF BARODA
Chart 32: Bollinger Band

Interpretation:
From this it can be seen that M-tops are formed during March 5 when the prices have
overshot the upper band again in 29th March the price has crossed the previous high but is
unable to touch band which indicates that the share price is weakening and hence downward
trend prevails thereafter. But a price have crossed the lower band in 30th April which indicate
formation of W-bottoms and rising of the share in the future indicating bullish market trend
and on 23rd May M-top is formed again due to Lok Sabha election result. For a long run, this
indicates a BUY signal.
Chart 33: Relative Strength Index

Interpretation:
The RSI line shows the trend line has crossed below 30 mark on 13rd May and hence it is
overbought and reversal of the trend is indicative of that and as the stock RSI is 69.7 on May
24 that indicates stock is considered to be oversold and hence it is overvalued. So it is a high
time to sell the stock so as to book profit.

42
Chart 34: Average Directional Index

Interpretation:
The ADX value on 28th feb, 2019 was 34.4 which is a strong trend indicator and as we can
see after that prices continuously increased till 2nd April,2019. Whereas the ADX fell below
30 on 25th April , there was fall in the price. Currently the ADX value is 31.56 as noted on
24th may, 2019 which indicates that the price of the stock will move up. For Short period, this
indicate a BUY signal.
Chart 35: Commodity Channel Index

Interpretation:
The arrows show that on 1st April CCI was at 182 which is highly overvalued price and soon
after it there was a constant decrease in prices till 13th May, 2019.And as soon as the CCI
reached its lower valuation limit prices started moving up.
Right Now the CCI of Bank of Baroda is 177 as on 24th May 2019 which suggests that prices
will fall and it is a good sell choice for short period of time.

43
FEDERAL BANK
Chart 36: Bollinger Band

Interpretation:
From this it can be seen that M-tops are formed during March 11, April 1, May 20 (due to
Lok Sabha elections) when the prices have overshot the upper band and if we look at the
lower band only one time share price touch the lower band and not crossed on April 30 this
indicates that the share price is strong and hence a upward trend prevails thereafter. For a
long run, this indicates a BUY signal.
Chart 37: Relative Strength Index

Interpretation:
The RSI line shows the trend line has not crossed below 30 in last 3 months that means the
stock s not overbought and hence it is not undervalued and as the stock RSI is 68.96 on May
24 that indicates stock is considered to be oversold and hence it is overvalued. So it is a high
time to sell the stock so as to book profit.

44
Chart 38: Average Directional Index

Interpretation:
The ADX value on 25th feb, 2019 was 51 which is a very strong trend indicator and as we can
see after that prices continuously increased till 1st April,2019. Whereas the ADX fell below
25 on 6th May, there was fall in the price. Currently the ADX value is 31.25 as noted on 24th
may, 2019 which indicates that the price of the stock will move up. For Short period, this
indicate a BUY signal.
Chart 39: Commodity Channel Index

Interpretation:
The arrows show that on 1st April CCI was at 217 which is highly overvalued price and soon
after it there was a decrease in prices till 4th April, 2019.And as soon as the CCI reached its
lower valuation limit prices started moving up.
Right Now the CCI of Federal Bank is 163 as on 24th May 2019 which suggests that prices
will fall. So it is a good sell choice for short period of time.

45
STRATEGY
Since each of the tool used in the Technical analysis gave different result for a particular
share, therefore to decide on the final strategy to follow, a “Weighted Score” method is
followed.
Table 5: Score Distribution:

Strategy BUY SELL HOLD

Score(X) 1 -2 1

The score given to each strategy is based on the assumption that investor is risk averse. As
carrying a stock has a risk of earning loss, therefore he is more willing to sell the shares than
to keep or buy it.

Table 6: Weightage:
Weighted Explanation:
Indicator Weight Score Score
Bollinger As there are four tools used in
Band 0.25 X X*0.25 the technical analysis, each tool
RSI 0.25 X X*0.25 is given equal weightage. The
score obtained is multiplied with
ADX 0.25 X X*0.25
the weight and weighted score is
CCI 0.25 X X*0.25
obtained.

Table 7: Weighted Score

Weighted Rationale:
Action Score
As the investor is risk averse, he will buy the share only when all
BUY S=1
the tool indicates a bullish market. On the other hand, he will sell
SELL S<=0 the shares if more than one tool in indicating a bearish market for
HOLD 0<S<1 that stock.
The Scores obtained are:
HDFC ICICI Kotak Mahindra State Bank of Bank of Federal
Bank Bank Bank India Baroda Bank
1 -0.5 0.25 -0.5 -0.5 -0.5

Therefore it is concluded that the final strategy to be followed is to HOLD the shares of
Kotak Mahindra Bank. SELL the shares of ICICI, State Bank of India, Bank of Baroda and
Federal Bank and BUY the shares of HDFC.

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Following Research Reports were prepared during the SIP which enabled
me to understand the fundamental and technical analysis tools by
implementing them to the live stock market (Nifty50)
Research 1

“Monitor and track the movement of the stocks advisory given by Economic times now
and see how accurate their prediction is and how the stock performs after their
prediction”
At the infancy stage of the internship, the task assigned for the 1st 14 days were to track the
stock advisory given by the economic times. Monitor and track the movement of the stocks
advisory given by Economic times now expert advisors like KUNAL BOTHRA, MANAS
JAISWAL and see how accurate their prediction is and how the stock performs after their
prediction. This task was given to set a base of stock market and to know how stock market
works in real life and on what basis the prediction of the stocks were made.
Chart 40: Intraday Chart of Kotak Bank

We have calculated the accuracy percentage i.e. 74.6% of Kotak Mahindra Bank Ltd. by
comparing the close price with the target price given by the advisory Manas Jaiswal on
Economics Times Now Channel and after that noticed the price movement of the stock. Price
moved according to the prediction only but not reached the target price so the prediction
made by the Manas Jaiswal was not Accurate.

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 Research 2

“A study on impact of fundamental analysis tool- PE ratio in predicting the stock price
of various banks under banking sector”
To be self- sufficient to make monetary decisions on their own and to understand equity
market it is very important to understand the basic technical and fundamental analysis tools.
Thus, this report explained one of the fundamental analysis tool i.e. PE ratio is very powerful
tool to determine that how much the investors are interested to pay per dollar of the
company’s earnings. Thus PE ratio helps investors to choose companies which give higher
returns and which company show high growth rates.
Key Highlights:

 The PE ratio (price to earnings ratio) is the measure of the share price relative to the
annual net income earned by the firm per share.
 A high PE ratio generally indicates increased demand because investors anticipate
earnings growth in the future.
 When PE ratio tends to be closer to the index PE ratio, then the stock price shows an
increasing pattern. In other words when the difference between the PE ratio of the
stock and PE ratio of index reduces, the price of the stock increases.
 Banks Like Federal Bank Ltd. which have low PE ratio as compared to the banks
which have high PE ratio tend to give lower rate of return in the market. Therefore
companies with high PE ratio give good returns.
 HDFC Bank having a high PE ratio as compared to Federal Bank was proved to give
better growth returns over the period of 5 years.

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 Research 3

“A study on effect of technical analysis tool- Share volume in predicting the stock trend
of various companies under Banking sector”
Tool used in this research is share price and share volume correlation. The share volume
analysis is a very important tool to perform technical analysis which helps in predicting
market trend. Volume is defined as, “The number of shares or contracts traded in a security or
an entire market during a given period of time.” Trading volume can help an investor identify
momentum in a stock and confirm a trend.
Key Highlights:
 When there is an increase in share price and share volume also increase then, demand
for the share increase i.e. people are investing heavily in that stock. It’s time to buy
the stock.
 Similarly, if the share price decreases and share volume also decrease then the
demand for the stock decreases and people are withdrawing their interest in the stock
trading volume signaling time to take profits and sell a security due to low activity.
 Also, when there occur a decline of share volume during the upward trend of share
price (for more than 4 days continuously), then there a chances of reversal trend in the
share price and vice versa.
Looking at a historical data of HDFC bank, we found that the share price was in an upward
trend from 11th April to 16Th April 2019, which was supported by a decreasing trend in share
volume during that time period. This suggests that there I bearish trend, decrease in volume
suggests that market is in confusion. And still the prices are increasing which means that the
share is being overbought.
Chart 41: Share Volume of HDFC Bank

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 Research 4

“A study on impact of technical analysis tool- Candlestick charts (Doji) in predicting the
stock price of various companies under Banking sector”

This report explained an interesting technical analysis tool i.e. candlestick charts. It helps the
investor to analyse the market trend using a pictorial representation (charts/graphs). Thus
studying candlestick charts is easy yet it is important to study it accurately. Doji one of the
indicator in candlestick charts usually indicates a trend reversal in the existing market trend.
Investors can be sure of the changes in market trends before investing and thus can prevent
themselves from any loss.
Key Highlights:
 Taken past data of ICICI Bank and studied there exist a Doji pattern on the 19th
October 2018 and thus this indicate trend reversal in the stock of ICICI Bank
 Due to formation of doji there is possibility of trend reversal and if we consider the
trend reversal in case of ICICI Bank its trends show an upward trend in the coming
days of the stock market. And when we noticed the price of the stock on the next day
it was moving in upward direction as shown in the figure. This is how doji help in
predicting price of the stock.
 In the figure given below, the circle part is creating doji as both the bears and bulls are
equal in the market i.e. people are selling as well as buying the stock in equal amount.

Chart 42: Candlestick Chart of ICICI Bank

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 Research 5

“A study on effect of technical analysis tool – Calculate the pivot point and with the help
of that calculate the resistance level of the stocks. Which would help to identify on what
price the stock is heading towards”

This task was done after the training sessions were provided. The tasks given were to
calculate the pivot point and with the help of that calculate the resistance level of the stocks.
Which would help to identify on what price the stock is heading toward.
Key Headlights:
 With the help of pivot point we calculate resistance level and support level which
shows at what level will stock head towards, if bulls are dominating the market and
the price of the stock crosses the first resistance level then the stock will try to touch
second resistance level and first level of resistance become support price of the stock.
 Similarly, if bears are dominating the stock market and price of the stock crosses the
first level of support then the stock will try to touch second level of support and the
first level of support becomes the resistance level for that stock.
 Looking at the figure given below, we have calculated pivot point of State Bank of
India and with the help of pivot point we have calculated resistance level and support
level. In the figure given below, first level of resistance is 301.68 and first level of
support is 295.43 the price of the State Bank of India crosses the second level of
resistance and bulls tried to bring the prices upto third level of resistance by pulling it
upto 306.4 which was the high for the day but didn’t break the R3. And when the
second level of resistance was crosses it become the support level.
Chart 43: Pivot Point of SBI Bank

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 Research 6

“A study on effect of fundamental analysis tool – EBIT and PAT in predicting the stock
trend of various companies under banking sector”

This research deals with the study of the past data of various companies under the banking
sector and understand the company’s health to predict its future growth by studying
company’s financials. PAT(Profit after Tax) and EBIT (Earning before Interest and Taxes)
have been used as the analysis tool in this research. Earning Before Interest and Taxes (EBIT)
measures the profit a company generates from its operation excluding the tax and interest
paid. It is the difference between the operating revenue and operating expenses. When the
company does not have non-operating income, operating income sometimes used as a
synonym for EBIT and operating profit. Profit after Tax margin is a financial performance
ratio, calculated by dividing net profit after taxes by revenue. A company’s after tax profit
margin is important because it tells investors the percentage of money a company actually
earns per rupee of revenue.
Key Highlights:
 Share price of the company increases when there is an increase in PAT of any
company provided it has minimum debt. Thus, PAT can be increased when the
company utilizes all its maximum capital efficiently and minimizes its debt liabilities.
 Increase in PAT value indicates that the company is performing better and thus its
stock price rise in that particular time period.
 Thus it is beneficiary to invest in companies with high and consistent EBIT and PAT
values to earn long term profit.
 Looking at the historical data of HDFC bank, we found that the Earning before
Interest and Tax (EBIT) and Profit after tax (PAT) are continuously increasing at a
consistent rate so it is beneficial to invest in such types of share and if we look at the
share price of HDFC bank it is also increases continuously from the last 5 years.

Date Share Price (in Rs) EBIT (Rs in crores) PAT ( Rs in crores)
31-March-2014 748.8 37012.98 8478.38
31-March-2015 1022.7 43478.71 10215.92
31-March-2016 1071.15 53993.47 12296.21
31-March-2017 1442.55 61899.11 14549.64
31-March-2018 1886.1 72771.28 17486.73

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 MARKETING ACTION PLAN
We being a part of Praedico Global Research’s marketing team are promoting Praedico
mission of motivating people to gain knowledge about the growth aspects in financial sector
in our country which would help them to be the self –reliant traders.
 Collected a data of various colleges and corporate offices in Delhi NCR.
 Approaching the colleges via email, phone calls, one to one meetings.
 Understanding and implementing various marketing strategies to pitch to various
institutes and corporate offices regarding the free seminar offered by Praedico Global
Research to help people understand the equity market.
 Online Marketing
 Telle Marketing
 Buzz Marketing
 Ambush Marketing
 Conducted seminars in various colleges and received positive response in return.

ACHIEVEMENTS
 Documented reports in proper Research Report format.
 Received the appreciation and award from the company for achieving the target.

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 LEARNINGS
Basically learning during my Summer Internship Program can be classified under two heads
i.e. primary learning and secondary learning. The methods of my learning during the SIP
tenure were by discussing with the employees and secondary data.

Primary Learning Secondary Learning

 Learnt investing techniques of stock  Client dealing and networking
market and practically implementing helped me enhance my
these techniques in live markets. communication skills.
 Gained the financial literacy which is  Team work and interpersonal
lacking in most of the youth in skills
today’s times.  To be punctual in going to office
 Establish relation between and in proper dress code of the
macroeconomic factors and stock office.
fluctuations.  Learnt to be more focused and
 Gained knowledge to make reports in self monitored to perform and
a research paper format which would submit research reports on time.
in turn help me to prepare a good
research paper for the International
Journal in future.
 Learnt the analysis tools to do
analysis such as Fundamental and
Technical Analysis.
 Got a understanding of a marketing
strategies and implementing them in
real world scenarios.

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 CONCLUSION
 Indian Banking Industry has gone through various phases of development in history.
 The present growth in the banking sector can be attributed to the various financial
reforms undertaken by the government.
 The deposit of banking companies is increasing with increase in GDP at market price.
 Indian banks are increasingly focusing on adopting integrated approach to risk
management. Banks have already embraced the international banking supervision
accord of Basel II, and majority of the banks already meet capital requirements of
Basel III, which has a deadline of 31 March 2019.
 Statutory requirement is being used as tool by RBI to keep inflation under check.
 During FY07-18, credit off-take grew at a CAGR of 11%. As of Q1 FY19, total credit
extended surged to Rs 86,976 billion (US$ 1,297.4 billion).
 Demand has grown for both corporate & retail loans; particularly the services, real
estate, consumer durables & agriculture allied sectors have led the growth in credit.
 Total banking sector assets (including public and private sector banks) have increased
at a CAGR of 6% to US$ 2.2 trillion during FY13–18. FY13-18 saw growth in assets
of banks across sectors.
 Non Performing Assets Ratio of Indian banking companies drop from 10.8% to
10.3% in March 2019.
 Banking companies in India differs in the shareholding pattern.
 Among the banks selected for the CAMELS analysis and the ranking methodology
adopted for the analysis, HDFC bank is the best bank.
 The Technical Analysis suggests, HOLD the shares of Kotak Mahindra Bank. SELL
the shares of ICICI, State Bank of India, Bank of Baroda and Federal Bank and BUY
the shares of HDFC for short period of time.

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 REFERENCES

1. www.economictimes.com
2. www.praedicoglobalrsearch.com

3. www.investing.com
4. www.linkedin.com

5. www.nseindia.com

6. www.moneycontrol.com

7. www.stockcharts.com

8. www.businessstandard.com

9. www.financialexpress.com

10. www.investopedia.com

11. www.ycharts.com
12. Annual Reports

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