Analysis of Indian Economy

India's economy expanded 8.8% in the second quarter from a year earlier, compared to an 8.6% on-year expansion in
the first, lifted by robust activity in manufacturing. Agricultural output along with strong development in the
Industrial, Mining and banking sector have helped to boost the Indian economy. Agricultural output rose 2.8 per cent
y-o-y thanks to improved harvests. Industrial production increased by 12% and in the mining sector by 9%.
According to 2010 data the shares of banking sector value add in GDP has been increased 7.7% from
2.5%.The forecasters have assigned highest 29.6 per cent chance that it will fall in 6.0-6.9 per cent in 2010-11. They
raised their forecasts slightly for agriculture growth to 4.0 percent from 3.5 percent, for industry to 9.0 percent
from 8.1 percent and for services it was steady at 9.0 percent. The survey showed the economists expect GDP
growth in the April-June quarter to be 8.1 percent up from 7.9 percent in the last survey. For the July-September
quarter, GDP growth is placed at 8.3 percent. The Reserve Bank Of India has stated that it had seen an annual
growth of 8.5% steadily. The main priority of the Reserve Bank is to curb the ongoing inflation, which peaked at
11% last month. Interest rates have been increased by the banks to contain the inflation, but it could slow down the
growth of the Indian economy in the coming months. But even thought there has been a rise in the interest rates there
hasn’t been much change in the distribution of loans, the Indian customer is hardly affected with the hiked interest
rates.

Year Mar Jun Sep Dec Average

2010 8.60 8.80 8.80 8.73
2009 5.80 6.00 8.60 6.50 6.73
2008 8.50 7.80 7.50 6.10 7.48

Almost every sector of the economy is poised to grow faster and a 9 per cent growth in 2010-11 is not difficult if
domestic policies and external factors do not come in the way.
Expert expects that India s economy to grow by 8.1% in 2010 based on a steep gain in industrial output and
resurgent private consumption investment and exports. Were these scenarios to continue growth would lift further to
8.3% in 2011 said Chief Economist. They also expect the Reserve Bank of India (RBI) to continue gradually
raising interest rates and to keep a tight leash on liquidity to tame inflation. Recently RBI changed the repo
rate from 5.75% to 6% and reverse repo rate 4.5% to 5%. CRR rate they keeping unchanged. This the six
time I a year they revise key parameter to control inflation.

Meanwhile higher than expected revenues from 3G spectrum sales and the positive kick to tax revenue from
sustained economic recovery will keep the fiscal deficit within the budgeted 5.5% of GDP in the current fiscal year
which began in April 2010. Growth is also expected to become more balanced government spending is declining as
fiscal stimulus measures are unwinding and private spending is picking up. In 2010 favorable monsoons (the rains
that fall from June to September) should lead to strong farm production which will help drive economic recovery
and bring down food inflation. While inflation remains a concern economists expect it will recede in coming
months. In our opinion CPI inflation should continue to recede from current double digits as food inflation comes
down on the back of improved farm output and as the RBI s tightening measures tame nonfood inflation he said.
Resurgent exports and capital inflows add to the positive story.

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 16.22 14.86 14.86 13.33 13.91 13.53 11.25 11.25
2009 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72 11.64 11.49 13.51 14.97
2008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.70

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2010 3.25 3.25 3.34 3.61 3.75 3.75 4.08 4.50 5.0
2009 4.05 4.00 3.55 3.39 3.25 3.25 3.25 3.25 3.25 3.25 3.25 3.25
2008 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 5.24
 INDIAN BANKING INDUSTRY ANALYSIS

Structure of the Indian banking system

The Indian banking system is financially stable and resilient to the shocks that may arise due to higher non-
performing assets (NPAs) and the global economic crisis, according to a stress test done by the Reserve Bank of
India (RBI).
Globalization and liberalization of the Indian economy, and the interest of foreign banks to expand their presence in
India through the inorganic route, have fuelled the growth of the banking industry.

The banking penetration calculated on the basis of total number of credit accounts to total population was 9.4 per
thousand in 2007–08.
Significantly, the RBI has the tenth largest gold reserves in the world after spending US$ 6.7 billion towards the
purchase of 200 metric tones of gold from the International Monetary Fund (IMF) in November 2009. The purchase
has increased the country's share of gold holdings in its foreign exchange reserves from approximately 4 per cent to
about 6 per cent.
In the annual international ranking conducted by UK-based Brand Finance Plc, 20 Indian banks have been included
in the Brand Finance® Global Banking 500. In fact, the State Bank of India (SBI) has become the first Indian bank
to be ranked among the Top 50 banks in the world, capturing the 36th rank, as per the Brand Finance study. The
brand value of SBI increased from US$ 1.5 billion in 2009 to US$ 4.6 billion in 2010. ICICI Bank also made it to
the Top 100 list with a brand value of US$ 2.2 billion. The total brand value of the 20 Indian banks featured in the
list stood at US$ 13 billion.

Market analysis

There has been a gradual shift in business from public to private and foreign banks.

The banking system in India is dominated by Scheduled Commercial Banks (SCBs) with a pan-India presence. As
of March 2009, SCBs controlled most of the assets, with the rest being controlled by a large number of small co-
operative credit institutions with a very limited geographic reach.

Within SCBs, public sector banks accounted for 71.9 per cent of the assets and the rest was held by foreign banks
and private sector banks.

Credit demand from corporate organizations has helped maintain credit growth in recent years.

Upside risks to inflation and liquidity might call for interest rate environment to remain at current levels in the near
future, thus, impacting the credit growth further.
Sharp growth in term deposits during 2006–07 as banks rely more on these deposits than finance advances.

Growth in savings deposit is expected to increase by an increase in the amount per account and a steady increase in
the number of savings accounts as banks reach out to new markets.
According to recent data credit growth has dropped to approx 17% to FY10 after previous three year. Some argue
are there why credit growth has come down…
It is mainly on account of huge borrowing by telecomm industry for 3G auction which suck out more than 1 lakes
crore out of the system.
It has been observe that there is a strong relation between IIP and GDP growth rate. According to recent data recent
GDP growth rate is 8.6% with compare last year at same time it was 6.6%. similarly IIP also came down last few
month. But now IIP growth come up and come up double digit and it is now 14% which last year it was at same
time 1.6%.
Growth in housing finance is come down because housing finance bank getting money issuing ECB at low rate of
interest and lend this money much lesser than bank to the customer so credit growth in housing finance has come
down.
Growth of Indian Banking Industry

Increasing emphasis by banks on fee-based services to boost income growth

Favorable demographics and rising income levels Rising literacy rate, specially in rural India, has increased the need
for banking.

Between 2006 and 2026, the working population (25–60 years) is expected to increase from 675.8 million to 795.5
million giving rise to a favourable market for banks.

Projected per capita GDP is expected to increase from US$ 380.8 in 2000–01 to US$ 2,097.5 in 2026, reflecting
higher disposable income.

Significant latent demand for retail banking services, given a low penetration level of approximately 59 per cent.
Key factors driving the growth of retail banking are‘

➢ Any where’, ‘any time’ banking

➢ Improved processes and bundled product offerings
➢ Faster service
➢ Customer-specific products or offerings on a regular basis
➢ ‘Bank’ customer has replaced ‘Branch’ customer
➢ Focus on understanding customer needs or preferences
➢ Segmentation or differentiation of customers
➢ Customer-driven strategies

Large number of micro, small and medium enterprises (MSMEs) with significant growth opportunities in their
respective sectors

The MSME sector assumes importance in the economy due to its employment potential and regional dispersal. The
total credit provided by public sector banks to the MSME sector in 2009 was US$ 39.8 billion, which formed 11.3
per cent of ANBC/CEOBSE (Adjusted Net Bank Credit/Credit Equivalent Amount Off-Balance Sheet Exposure)
and 26.5 per cent of the total priority sector advances of these banks

Large amount of money is remitted by non-resident Indians (NRIs), one of the largest Diasporas in the world.

Conducive banking environment with well-capitalized banks provides a base to meet the growing need for banking
services.

India has a well-balanced mix of public and private sector banks. While public sector banks provide stability to the
banking system in the country, private sector banks add the necessary dynamism to it.

Adoption of best practices from other countries

➢ With an increasingly global footprint, the Indian banking industry has adopted certain global best practices
such as International Financial Reporting Standards (IFRS) and Basel II. These not only position India at
an international level, but also provide confidence to foreign players planning to establish businesses in
India.
➢ As of March 31, 2009, all commercial banks in India, excluding RRBs and local area banks, have become
Basel II compliant.

Major Developments
The Monetary Authority of Singapore (MAS) has provided qualified full banking (QFB) privileges to ICICI Bank
for its branch operations in Singapore. Currently, only SBI had QFB privileges in country.
The Indian operations of Standard Chartered reported a profit of above US$ 1 billion for the first time. The bank
posted a profit before tax (PAT) of US$ 1.06 billion in the calendar year 2009, as compared to US$ 891 million in
2008.
Punjab National Bank (PNB) plans to expand its international operations by foraying into Indonesia and South
Africa. The bank is also planning to increase its share in the international business operations to 7 per cent in the
next three years.
The State Bank of India (SBI) has posted a net profit of US$ 1.56 billion for the nine months ended December 2009,
up 14.43 per cent from US$ 175.4 million posted in the nine months ended December 2008.
Amongst the private banks, Axis Bank's net profit surged by 32 per cent to US$ 115.4 million on 21.2 per cent rise
in total income to US$ 852.16 million in the second quarter of 2009-10, over the corresponding period last year.
HDFC Bank has posted a 32 per cent rise in its net profit at US$ 175.4 million for the quarter ended December 31,
2009 over the figure of US$ 128.05 million for the same quarter in the previous year.

Government Initiatives
The government plans to invest US$ 3.63 billion into public sector banks to aid them for maintaining their capital
adequacy ratio (CAR), as per the Union Budget presented by the Union Finance Minister in February 2010. Out of
the total allocation, US$ 2.1 billion would be used for recapitalization of the public sector banks during April-June
2010 and US$ 1.5 billion will be invested during the rest of 2010-11.
The RBI has allowed banks to make changes in the repayment schedules or drawdown without prior approval from
the central bank. However, such a change could be made on the condition that the average maturity of the loan
should remain the same. The move is expected to make external commercial borrowing (ECB) transactions easier.
Transactions both through automatic and approval routes can take advantage of this change. Now, without the prior
approval of RBI, Indian companies may borrow up to US$ 500 million in a year.
Further, RBI also allowed domestic scheduled commercial banks to open up their branches in Tier III to Tier VI
regions that have population of up to 49,999 without the prior permission of the central bank. Banks such as PNB
and UCO Bank are planning to take advantage of this initiative and would open around 440 and 89 branches,
respectively, in such regions.
In its platinum jubilee year, the RBI, the central bank of the country, in a notification issued on June 25, 2009, said
that banks should link more branches to the National Electronic Clearing Service (NECS). Ideally, all core-banking-
enabled branches should be part of NECS. NECS was introduced in September 2008 for centralized processing of
repetitive and bulk payment instructions. Currently, a little over 26,000 branches of 114 banks are enabled to
participate in NECS.
The repo rate and the reverse repo rate were increased by 25 basis points each in mid-March 2010.
The Monetary Policy Statement 2010-11, dated April 20, 2010, specifies the following monetary measures:
i. The repo rate has been raised by 25 basis points from 5.0 per cent to 5.25 per cent with immediate effect.
ii. The reverse repo rate has been raised by 25 basis points from 3.5 per cent to 3.75 per cent with immediate
effect.
iii. The cash reserve ratio (CRR) of scheduled banks has been raised by 25 basis points from 5.75 per cent to
6.0 per cent of their net demand and time liabilities (NDTL) effective the fortnight beginning April 24,
2010.
Meanwhile, outstanding bank credit in the 15 days up to January 29, 2010 rose by US$ 4.32 billion, pointing to a
revival in credit growth. This is the highest year-on-year growth recorded since August 14, 2009. Furthermore, the
outstanding bank credit in the 15 days up to February 12, 2010, rose by US$ 4.87 billion to US$ 658.24 billion,
according to data from the Reserve of Bank of India (RBI), marking a 15.07 per cent year-on-year growth in credit.

SWOT ANALYSIS OF INDIAN BANKING INDUSTRY

STRENGTH-

➢ Valuable contribution to our GDP over a period of 15 year. According to recent data in the year 2010
banking sector contribute 7.7% from 2.5%.
➢ High standard of Regulatory body like RBI.
➢ Liquidity has been a traditional strength of the Indian banking system.
➢ Indian Banks have favorable growth of assets quality and profitability than other sector.
➢ Vast networking and growing no of branches and ATM. At present over 34,000 ATMs are in India. And
2010 RBI Monetary policy addressed more ATM will be introduce in market.
➢ In the Growing INDIAN ECONOMY the demand of banking service specially retail Banking industry,
investment Banking are going to be strong.

WEAKNESS-

➢ According to 12th Five year planning still 22% people don’t have banking literacy.
➢ There is an uneven distribution of banking services in the country. It is limited to few customer segments
and geographies only. Of the total 611 districts in the country, 375 districts are under-banked. There is a
need for banks to open branches at these locations and establish connectivity with the help of a core
banking solution. According to a report on banking sector consolidation by Ernst & Young, the country
 would require 11,600 branches by 2013 and an additional 20,300 branches by 2018 in order to achieve the
desired penetration levels of 74 per cent and 81.5 per cent in 2013 and 2018 respectively.
➢ Structural weakness such as fragment industry structure, restriction on capital availability, weak
corporate governance.
➢ Competition from Foreign bank. The RBI Report on Currency and Finance presents the view that
mergers are the only way to face competition from foreign banks.
➢ Lack of product differentiation: The financial products offered by banks in India are similar across the
industry with no distinctive features, thereby leading to unhealthy competition.
➢ High level of breakup: There is a high level of fragmentation, especially among cooperative banks, as
compared to some of the advanced economies of the world, which poses a serious threat to their
profitability and viability in conducting business. About 1, 00,000 entities in the cooperative sector share
just 4 percent of the total banking assets in the economy.
➢ No competition at international level: Indian banks are not able to compete globally in terms of fund
mobilization, credit disbursal, investment and rendering of financial services.

Opportunities-

➢ Advanced technology: New generation private sector banks and foreign banks are technologically more
advanced in terms of management information systems, delivery mechanisms, etc.
➢ Basel norms: Basel II requires banks to meet tougher and higher capital adequacy norms such as capital
allocation towards operational risk, in addition to credit and market risks. Many Indian banks, especially
public sector banks, cooperative banks and regional rural banks are unprepared for this implementation due
to capital inadequacy. According to the report, every category of bank has to arrange additional capital
from its own internal sources. To maintain the 51 per cent minimum government share, PSBs cannot
collect additional capital directly from the public and with this view it promotes bank mergers.
➢ The enhanced rural branch network may lead to increase in microfinance activities and lending to the
agriculture sector.
➢ Geographical spread: Banks can diversify the risk of concentrated lending through mergers. They can
also have a greater market access thereby widening the deposit base.

➢ Retail banking-Retail banking still has low penetration levels. These services are not only related to the
banking sector, but also to other related services such as insurance, wealth management etc. The following
factors are likely to trigger the demand for retail products
Dramatic changes are expected in the credit portfolio of banks in the next five years.
Housing is expected to continue to be the biggest growth segment followed by auto loans.
Banks are looking to expand and diversify by focusing on the non-urban segment as well as varied
income and demographic groups.
Rural areas also offer tremendous potential, which needs to be exploited.

➢ Corporate banking
The growing MSME sector provides a significant opportunity to the banking sector. The
banking system envisages doubling of credit flow to the SME sector in the next five years ending
2011–12, with an annual growth of 20 per cent.
Product offerings can be increased by leveraging corporate relationships.
 Rise in corporate credit requirement provides corporate banks an avenue to channelize funds.

➢ Microfinance
Increasing economic prosperity in rural areas, coupled with fierce competition in urban and
metropolitan areas, has provided banks with the opportunity to cater to the rural market.
With a network of around 70,000 branches, of which around 46,000 are in rural and semi-urban
areas, microfinance has emerged as one of the most promising areas for commercial banks. The
growth of non-government organizations (NGOs) and self-help groups and their linkage with
banks offer ample scope to facilitate microfinance activities in rural areas.

➢ Growing long-term fund requirements

Banks play an important role in channelizing funds (savings of investors) for long-term
development. These include infrastructure development and meeting the capital requirements of
the MSME sector. For example, in the Eleventh Five Year Plan (2007–2012), the Planning
Commission estimates the investment in infrastructure to increase from US$ 81.09 billion in
2009–2010 to US$ 124.15 billion in 2011–12.

➢ Remittance

Increasing immigration and NRI remittance offer growth opportunities for retail and NRI banking.
India has maintained its dominant position in remittance receipts in 2008 as well, with total remittances
worth US$ 45 billion in 2008.
Debit or credit card transfers and instant money transfers through a special arrangement with overseas
correspondent banks or the use of automated clearing house facilities are gaining importance in addition to
the traditional modes of drafts and cheques.

THREATH-

➢ Failure of some bank has often threatened of stability of system like GLOBEL TRUST BANK.
➢ Rise in inflation figure which would raise interest rate.
➢ Increase no of foreign player would threat to PSU and Private Bank.
➢ Other better savings and investment opportunity.
➢ Capital market slow down would be threat for bank.
➢ Rise of monopolistic structures: Mergers are an impediment to perfect competition. They may give rise to
monopolistic structures and lower competition. Monopolistic entities may charge higher fees for services
rendered in case there is no effective competition.
Porter’s 5 forces Analysis of Banking Industry in India
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. What would it take for an insurance company to start offering mortgage and
loan services? Not much. Also, when analyzing a regional bank, remember that the possibility of a mega bank
entering into the market poses a real threat.
2. Power of Suppliers

Banking industry is governed by Reserve Bank of India. Reserve Bank of India is the authority to take
monetary action which leads to direct impact on circulation of money in the Economy. The rules and regulation
lay down by RBI. Suppliers of banks are depositors these are those people who have excess money and prefer
regular income and safety. In banking industry suppliers have low bargaining power.
a. Nature of suppliers - Suppliers of banks is those people who prefer low risk and those who need regular
income and safety as well. Banks best place for them to deposits theirs surplus money.

b. RBI rules and regulations - Banks are subject to RBI rules and regulations. Bank has to behave in a way
that RBI wants. So RBI takes all decisions related to interest rates. This reduce bargaining power of
suppliers

c. Suppliers not concentrated - Banking industry suppliers sure not concentrated. There are numerous with
negligible portion of offer. So this reduces their bargaining power.

1. Power of Buyers

The 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. In today world, Customer is the King. Banks offers different services According to
clients need and requirement. They offer loans at Prime Lending Rate (PLR) to their trust worthy clients and
higher rate to others clients. Customers of banks are those who take loans and uses services of banks.
Customers have high bargaining power. These are

a. Large no of alternatives - Customers have large no of alternatives, there are so many banks, which fight
for same pie. There are many non-financial institutions like ICICI, HDFC, and IFCI, etc. which has also
jump into these business .there are foreign banks , privet banks, co-operative banks and development banks
together with specialized financial companies that provides finance to customers .these all increase
preference for customers.

b. Low switching cost - Cost of switching from one bank to another is low. Banks are also providing zero
balance account and other types of facilities. They are free to select any banks service. Switching cost are
becoming lower with internet banking gaining momentum and a result customers loyalties are harder to
retain.

c. Undiffenciated service - Bank provide merely similar service there are no much diffracted in service
provides by different banks so, bargaining power of customers increase. They cannot be charged for
differentiation.

d. Full information about the market - Customers have full information about the market due to
globalization and digitalization Consumers have become advance and sophisticated .they are aware with
each market condition so banks have to be more competitive and customer friendly to serve them.
e. For good creditworthy borrowers bargaining power is high due to the availability of large number of banks.
1. Availability of Substitutes
Banks are not limited to traditional banking which just offers deposit and lending. In addition, today banks
offers loans for all products, derivatives, Forex, Insurance, Mutual Fund, Demat account to name a few. The
wide range of choices and needs give a sufficient room for new product development and product enhancement.
Substitute products or services are those, which are different but satisfy the same set of customers. In private
banking industry following are the substitutes:

a. NBFC: Non-banking financial Institutions play an important role in giving financial assistance.
Mobilization of financial resources outside the traditional banking system has witnessed a tremendous
growth in recent years in the India. NBFC is a close substitute of banking in respect of raising funds
borrower can easily raise funds from NBFC because it requires less formal procedure for getting funds
compare to private banks.

b. Post Office Savings: Post office is also providing some service like fixed deposit facility, saving account,
recurring account etc. It is fully secured by the government so people who do not want to take risk for them
post office saving is good substitute.

c. Government Bond: Government Bonds also attracts savings from the general public. It is less risky as
well source of regular income and more secured as compare to savings in private banks.

d. Mutual Funds: Mutual funds are also now acting as good substitutes for banks. They assure for providing
high return with less time in comparison of banks. The administrative expenses are also very low as
compared to banks. Investment in Mutual funds is more flexible than investment in banks.

e. Stock Market: Investors who are ready to bear the risk and expects high return on their investment, stock
market is a good substitute for them. Day by day investors are moving towards stock market as interest rate
in banks are decreasing. In present scenario stock market has proved as a big competitor for baking sector.

f. Other Investment Alternatives: Investors attraction is shifting from banks to other alternatives such as
gold, precious metals, land, small savings etc. As we can see the growing trend in these alternatives in
comparison of decreasing interest rates in banks.

1. Competitive Rivalry.

Rivalry among competitors is very fierce in Indian Banking Industry. The services banks offer is more of
homogeneous which makes the Company to offer the same service at a lower rate and eat their competitor
market’s share. Market Players use all sorts of aggressive selling strategies and activities from intensive
advertisement campaigns to promotional stuff. Even consumer switch from one bank to another, if there is a
wide spread in the interest. Hence the intensity of rivalry is very high. The no of factors has contributed to
increase rivalry those are.

a. A large no of banks - There is so many banks and non-financial institution fighting for same pie, which
has intensified competition.

b. High market growth rate - India is seen as one of the biggest market place and growth rate in Indian
banking industry is also very high. This has ignited the competition.

c. Homogeneous product and services - The services banks offer is more of homogeneous which makes the
company to offer the same service at a lower rate and eat their competitors market’s share.

d. Low switching cost - Costumers switching cost is very low, they can easily switch from one bank to
another bank and very little loyalty exist.
e. Undifferentiated services - Almost every bank provides similar services. Every bank tries to copy each
other services and technology which increase level of competition.

f. High fixed cost

g. High exit barriers - High exit barriers humiliate banks to earn profit and retain customers by providing
world class services

h. Low governments regulations - There are low regulations exist to start a new business.

Industry life cycle of banking industry

Banking Industry in
India

 The growth in the Indian Banking Industry has been more qualitative than quantitative and it is
expected to remain the same in the coming years. Based on the projections made in the "India Vision
2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts that the pace
of expansion in the balance-sheets of banks is likely to decelerate. The total asset of all scheduled
commercial banks by end-March 2010 is estimated at Rs 40, 90,000 crores. That will comprise about 65
per cent of GDP at current market prices as compared to 67 per cent in 2002-03. Bank assets are
expected to grow at an annual composite rate of 13.4 per cent during the rest of the decade as against
the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is expected that there will
be large additions to the capital base and reserves on the liability side.
  The Indian Banking Industry can be categorized into non-scheduled banks and scheduled banks.
Scheduled banks constitute of commercial banks and co-operative banks. There are about 67,000
branches of Scheduled banks spread across India. As far as the present scenario is concerned the
Banking Industry in India is going through a transitional phase.

 The Public Sector Banks (PSBs), which are the base of the Banking sector in India account for more
than 78 per cent of the total banking industry assets. Unfortunately they are burdened with excessive
Non-Performing assets (NPAs), massive manpower and lack of modern technology. On the other hand
the Private Sector Banks are making tremendous progress. They are leaders in Internet banking, mobile
banking, phone banking, ATMs. As far as foreign banks are concerned they are likely to succeed in the
Indian Banking Industry.

Despite intense competition and high inflationary pressures, India's sector will continue to show high growth owing
to the country's strong economic expansion. Growth in India's banking sector will remain high, bolstered by sound
economic growth prospects and expecting credit growth of about 20 per cent in the next fiscal year.

The growth in banking would happen despite high domestic inflation and intense competition in the sector, it added.

So, I conclude that the Indian banking industry is in growth stage from the above information.

Security Analysis

OPPORTUNITIES
THREAT Environment
External

INDIAN BANKING
INDUSTRY

STRENGTH WEAKNESS

Internal Environment
NIFTY MIDCAP COMPANY \

ANDHRA BANK

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006
Operational & Financial Ratios
Earnings Per Share (Rs) 21.56 13.46 11.87 11.09 10.01
Valuation Parameters
PER(x) 5.01 3.34 6.24 6.86 8.07

Operating Income of ANDHRA

year BANK Reported net profit of ANDHRA BANK
2006 2,885.75 485.5
2007 3,453.62 537.9
2008 4,567.63 575.57
2009 5,664.34 653.05
2010 7,024.44 1,045.85

Allahabad bank

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006
Operational & Financial Ratios
Earnings Per Share (Rs) 27.01 17.21 21.82 16.79 15.81
Valuation Parameters
PER(x) 5.28 2.26 3.51 4.33 4.99

Syndicate Bank

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006
Operational & Financial Ratios
Earnings Per Share (Rs) 15.58 17.49 16.25 13.72 10.28
Valuation Parameters
PER(x) 5.52 2.74 4.62 4.66 8.69

year Operating Income of Syndicate Bank Reported net profit of Syndicate

 Bank
2006 4,397.41 536.49
2007 6,316.19 716.06
2008 8,507.14 848.07
2009 9,979.92 912.82
2010 10,838.97 813.32

NIFTY LEARGE CAP COMPANY

STATE BANK OF INDIA

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006
Operational & Financial Ratios
Earnings Per Share (Rs) 144.37 143.67 106.56 86.29 83.73
Valuation Parameters
PER(x) 14.40 7.42 15.00 10.86 10.91

year Operating Income of SBI Reported net profit of SBI

2006 37869.52 4,406.67
2007 43860.57 4,541.31
2008 56821.55 6,729.12
2009 74880.76 9,121.23
2010 85909.36 9,166.05

ICICI BANK

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006
Operational & Financial Ratios
Earnings Per Share (Rs) 36.10 33.76 37,37 34.59 28.55
Valuation Parameters
PER(x) 26.39 9.85 20.61 24.66 20.64

Operating Income of
year ICICI Reported net profit of ICICI
2006 17,517.83 2,540.07
2007 28,457.13 3,110.22
2008 39,467.92 4,157.73
2009 38,250.39 3,757.55
2010 32,747.36 4,024.98

HDFC BANK

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006
Operational & Financial Ratios
Earnings Per Share (Rs) 64.42 52.77 44.87 36.29 27.92
Valuation Parameters
PER(x) 30.00 18.34 29.42 26.16 27.7O

year Operating Income Reported net profit

2006 5,567.60 870.78
2007 8,303.34 1,141.10
2008 12,354.41 1,590.12
2009 19,770.72 2,244.35
2010 19,958.76 2,947.77
BSE SMALL CAP COMPANY

DHANALAKSHMI BANK

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006
Operational & Financial Ratios
Earnings Per Share (Rs) 3.63 8.96 8.88 5.03 2.97
Valuation Parameters
PER(x) 36.56 5.60 7.10 8.39 7.55

Operating Income of Reported net profit of Dhanalakshmi Bank

year Dhanalakshmi Bank Ltd Ltd
2006 216.2 9.52
2007 252.62 16.14
2008 327.84 28.46
2009 430.63 57.45
2010 561.05 23.3

DEVELOPMENTAL CREDIT BANK

Particulars Mar 2010 Mar 2009 Mar 2008 Mar 2007 Mar 2006
Operational & Financial Ratios
Earnings Per Share (Rs) -3.92 -5.05 2.20 .50 -11.20
Valuation Parameters
PER(x) 0.0 0.0 38.83 140.08 0.0

Operating Income of
Development Credit Bank Reported net profit of Development Credit Bank
year Ltd Ltd
2006 343.61 -85.26
2007 406.31 7.37
2008 680.65 33.49
2009 742.93 -88.1
2010 549.29 -78.45

ANALYSIS OF EPS AND P/E RATIO

EPS- (Net profit after tax- preference Dividend)/ No of Equity Share

Earnings per Share measure of good profitability. If we compare two companies it gives a view of comparative
earning or earning power of firms.

P/E ratio- Market price per equity share/ EPS

It interprets that either you buy or not to buy the particular share of a company.

If P/E ratio is high it is good for a company.. but it has been coming down significantly last two or three year than
management should look into the case….

This P/E Ratio will tell you any share price of company is overvalued or undervalued.
 Company Analysis

Background & Business

SBI is India's largest bank with around 16% market share in deposits and loans, over 10,000 branches and more than
90 million customers. Together with its seven associate banks (ownership ranging from 75% to 100%), the SBI
group has more than 20% market share in deposits and loans, and has over 14,000 branches. SBI has the largest
overseas presence among Indian banks, with 54 offices in 28 countries. The Government of India is the majority
stakeholder in the bank with a 59.73% stake. SBI has a presence in other financial services through subsidiaries
and joint ventures. It has a joint venture with Cardiff for life insurance, Society General for general insurance &
mutual funds and with GE Capital for credit cards. It also has a presence in asset management, investment banking
and primary dealership. The SBI group has more than 9,000 ATMs spread, which is by far the largest in the country.
The bank has more than 30 million cards outstanding, is networked across over 10,000 offices of the SBI group and
is aggressively expanding its technology based offering, across is existing network. Over the last couple of years,
SBI has been focusing on drawing significant synergies through an internal consolidation of its associate banks. SBI
has announced merger of its 100%-owned subsidiary, State Bank of Saurashtra, with itself wef 14th August
2008. SBI has 124-mn customer base. (Both depositors & borrowers).

SBI has witnessed strong loan book expansion of 20% in the past 12 months increasing its market share to 17%.
Key drivers have been robust branch addition in past three years and the new-found aggressiveness especially with
respect to retail loans. SBI has emerged as the No.1 retail lender in the country with dominant market share in home,
auto and education loans. Going ahead, growth is likely to become more broad-based with demand picking up from
other segments.

Despite the decline in ROA, SBI’s NIM has recovered by significant 90bps in the past four quarters aided by 1)
material decline in average surplus liquidity 2) significant improvement (900 bps) in the CASA ratio 3) reduction in
contribution of bulk term deposits and within that high-cost deposits and 4) sharp improvement in C/D ratio (900
bps). We believe that NIM would remain stable in the medium term driven by a stronger credit demand that would
revive pricing power of the bank. The recent deposits and lending rate hike would have a net negligible impact.

There has been a material deterioration in bank’s asset quality over the past five quarters with present NPL levels
being higher than most peers. NPL risk is the highest for SBI with NNPLs comprising 16.5% of net worth. With
PCR at 61%, the bank requires additional provisioning of ~Rs28bn to reach the stipulated 70% by Sept 2011. We
estimate SBI’s balance sheet to witness 18.5% CAGR over FY10-12. The expansion would be mainly funded by
plough backs and a rights issue/follow-on offer. While ROA is likely to improve, ROE would be depressed by the
equity issuance.

State-run State Bank of India announced that its joint venture (JV) Co in association with Insurance Australia Group
(IAG) is expected to commence commercial operations in the first half of the calendar year 2010 subject to final
approvals from Insurance Regulatory and Development Authority (IRDA).

The bank, for its general insurance subsidiary has made an investment of Rs 1.11 billion towards the 74% share of
the equity capital of SBI General Insurance Company. Also, IAG International, a subsidiary of Insurance Australia
Group (IAG) has made an investment Rs. 5.42 billion (including share premium) towards 26% share of the equity
capital of SBI General Insurance Company.

Government has granted sanction to State Bank of India, under Section 35(1) of the State Bank of India Act, 1955,
vide Department of Financial Services letter dated October 8, for proceeding with the negotiation with State Bank
of Indore for acquiring its business. Consequently, the scheme of acquisition of State Bank of Indore by the
State Bank of India has been approved by Board of both the Banks.

State Bank of India has planned to raise Rs 40-50,000 crore over the next five year which will meet the requirement
of newly proposed Basel 3 and Basel 2 requirement. The propose capital would enable the banking behemoth to fuel
its business plans of 20-25% 0f growth in future.
 Year Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Income

Interest Earned 35,794.93 39,491.03 48,950.31 63,788.43 70,993.92

Other Income 7,388.69 7,446.76 9,398.43 12,691.35 14,968.15

Total Income 43,183.62 46,937.79 58,348.74 76,479.78 85,962.07

Expenditure

Interest expended 20,159.29 23,436.82 31,929.08 42,915.29 47,322.48

Employee Cost 8,123.04 7,932.58 7,785.87 9,747.31 12,754.65

Selling and Admin 1,853.32 3,251.14 4,165.94 5,122.06 7,898.23

Expenses

Depreciation 729.13 602.39 679.98 763.14 932.66

Miscellaneous Expenses 7,912.15 7,173.55 7,058.75 8,810.75 7,888.00

Preoperative Exp 0 0 0 0 0
Capitalized

Operating Expenses 11,872.89 13,251.78 14,609.55 18,123.66 24,941.01

Provisions & 6,744.75 5,707.88 5,080.99 6,319.60 4,532.53

Contingencies

Total Expenses 38,776.93 42,396.48 51,619.62 67,358.55 76,796.02

Ratio Analysis

Net Profit for the Year 4,406.67 4,541.31 6,729.12 9,121.23 9,166.05

Extraordinary Items 0 0 0 0 0

Profit brought forward 0.34 0.34 0.34 0.34 0.34

Total 4,407.01 4,541.65 6,729.46 9,121.57 9,166.39

Preference Dividend 0 0 0 0 0

Equity Dividend 736.82 736.82 1,357.66 1,841.15 1,904.65

Corporate Dividend Tax 103.34 125.22 165.87 248.03 236.76

Per share data (annualized)

Earning Per Share (Rs) 83.73 86.29 106.56 143.67 144.37

Equity Dividend (%) 140 140 215 290 300

Book Value (Rs) 525.25 594.69 776.48 912.73 1,038.76

 Appropriations

Transfer to Statutory Reserves 3,566.51 3,682.15 5,205.69 6,725.15 6,495.14

Transfer to Other Reserves 0 -2.88 -0.1 306.9 529.5

Proposed Dividend/Transfer to 840.16 862.04 1,523.53 2,089.18 2,141.41

Govt

Balance c/f to Balance Sheet 0.34 0.34 0.34 0.34 0.34

Total 4,407.01 4,541.65 6,729.46 9,121.57 9,166.39

YEAR Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share Capital 526.3 526.3 631.47 634.88 634.88

Equity Share Capital 526.3 526.3 631.47 634.88 634.88

Share Application Money 0 0 0 0 0

Preference Share Capital 0 0 0 0

Reserves 27,117.79 30,772.26 48,401.19 57,312.82 65,314.32

Revaluation Reserves 0 0 0 0 0

Net Worth 27,644.09 31,298.56 49,032.66 57,947.70 65,949.20

Deposits 380,046.06 435,521.09 537,403.94 742,073.13 804,116.23

Borrowings 30,641.24 39,703.34 51,727.41 53,713.68 103,011.60

Total Debt 410,687.30 475,224.43 589,131.35 795,786.81 907,127.83

 Other Liabilities & 55,538.17 60,042.26 83,362.30 110,697.57 80,336.70
Provisions

Total Liabilities 493,869.56 566,565.25 721,526.31 964,432.08 1,053,413.73

Assets

Cash & Balances with RBI 21,652.70 29,076.43 51,534.62 55,546.17 61,290.87

Balance with Banks, 22,907.30 22,892.27 15,931.72 48,857.63 34,892.98

Money at Call

Advances 261,641.53 337,336.49 416,768.20 542,503.20 631,914.15

Investments 162,534.24 149,148.88 189,501.27 275,953.96 285,790.07

Gross Block 7,424.84 8,061.92 8,988.35 10,403.06 11,831.63

Accumulated Depreciation 4,751.73 5,385.01 5,849.13 6,828.65 7,713.90

Net Block 2,673.11 2,676.91 3,139.22 3,574.41 4,117.73

Capital Work In Progress 79.82 141.95 234.26 263.44 295.18

Other Assets 22,380.84 25,292.31 44,417.03 37,733.27 35,112.76

Total Assets 493,869.54 566,565.24 721,526.32 964,432.08 1,053,413.74

191,819.34 259,536.57 736,087.59 614,603.47 429,917.37

Contingent Liabilities

Bills for collection 57,618.44 70,418.15 93,652.89 152,964.06 166,449.04

Book Value (Rs) 525.25 594.69 776.48 912.73 1,038.76

Key ratios for analysis of bank performance

YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar

Current Ratio 0.05 0.05 0.07 0.04 0.04
The ratio measure of liquidity of firm. It represents a margin of safety available to the creditor. High current ratio
indicates that firm is liquid and able to pay current liability. In the year 09 the current ratio had come down .07 to .
04 i.e. safety of fund decrease. But in year 2010 current ratio has been same i.e. bank has 1 rupee current liability, .
04 rupee current asset.

YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar

Quick Ratio 5.5 6.52 6.15 5.74 9.07

The ratio measure of liquidity and firm’s capacity of payoff current obligation immediately. High quick ratio firm is
more liquid. SBI quick ratio has increase than previous year i.e. bank is more liquid than previous year.

YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar

Loan/ Deposits 0.08 0.09 0.1 0.11 0.13

The higher the ratio means bank relying on borrowed fund than their deposit. SBI loan-deposit ratio keep on has
been increasing form 06 to10. In the year 2010 bank deposit not to much than previous, so loan deposit ratio has
increased much than last year.

YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar

Earnings Per Share 83.73 86.29 106.56 143.67 144.37

EPS is one of the most important ratio to measure net profit earn per share. Steady growth of EPS is indicating a
good profitability.

YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar

DPS 14 14 21.5 29 30

Dividends are a form of profit distribution to the shareholder. Having a growing dividend per share can be a sign
that the company's management believes that the growth can be sustained.
 YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar
Credit Deposit Ratio 62.11 73.44 77.51 74.97 75.96

The proportion of loans generated by banks from the deposits received. CDR ratio is increased than previous it. It is
good sine that bank has been increasing credit growth as well as deposit growth.

YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar

Capital Adequacy Ratio 11.88 12.34 13.47 14.25 13.39

CAR ratio is one of the important form banking industry perspective. CAR ratio is tier1+tier2+tier3 capital divided
by risk weighted asset. SBI CAR ratio has decrease than previous year i.e. risk weighted asset has decrease and it is
good for bank.

YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar

ROA
(%) 0.92 0.86 1.04 1.08 0.91

Return on assets measures a company’s earnings in relation to all of the resources it had at its disposal (the
shareholders’ capital plus short and long-term borrowed funds). Bank ROA has decreased compare with last year
i.e. bank earn .91 rupee on 1 rupee asset which was 1.08 last year.

YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar

ROE (%) 17.04 15.41 16.75 17.05 14.8

ROE indicate how much profit it is able to generate which is provided by its stockholders. Investors usually look for
companies with returns on equity that are high and growing. For SBI ROE also come down than last year i.e. bank
are unable to manage shareholder fund.

YEAR 6-Mar 7-Mar 8-Mar 9-Mar 10-Mar

NIM 5.98 4.46 4.08 3.85 3.75
The performance of banks is largely dependent on the NIM for the year. The difference between interest income and
interest expense is known as net interest income. It is the income, which the bank earns from its core business of
lending.

YEAR 10-Mar 9-Mar 8-Mar 7-Mar 6-Mar

P/E 14.40 7.42 15.00 10.86 10.91

P/E ratio is market price of share divided by EPS. SBI P/E ratio has increase almost double. P/E ratio vary time to
time because share price will change time to time than P/E ratio will change. It is also important parameter form
investor point of view.

10-
YEAR 6-Mar 7-Mar 8-Mar 9-Mar Mar
Investment
Deposit Ratio 48.14 38.22 34.81 36.38 36.33

IDR also important ratio form bank point of view. How much bank has invest and how much bank has deposit. SBI
IDR has slidely decrease than previous year due to high invest in Govt. security.

Intra Industry Comparison

EPS

YEAR 2010 2009 2008 2007

 SBI 144.37 143.67 106.56 86.29
PNB 123.86 98.03 64.98 48.84
ICICI 36.1 33.76 37.37 34.59
ALLAHABAD BANK 27.01 17.21 21.82 16.79

We can see that EPS of SBI high than peer group. Bt EPS should not be one parameter to measure of bank. Because
outstanding share will be one reason i.e. different bank outstanding share is different. But it is one of the main
parameter to be considered by the investor.

DIVIDEND PER SHARE

YEAR 2010 2009 2008 2007

SBI 30 29 21.5 14
PNB 22 20 13 10
ICICI 12 11 11 10
ALLAHABAD BANK 5.5 3.5 2.5 3

The DPS would be better indicator than EPS because it shows what exactly the is received by the owners. Dividends
are a form of profit distribution to the shareholder. Having a growing dividend per share can be a sign that the
company's management believes that the growth can be sustained.

P/E RATIO

YEAR 2010 2009 2008 2007

SBI 14.4 7.42 15 10.86
PNB 8.18 4.19 7.82 9.66
ICICI 26.39 9.85 20.61 24.67
ALLAHABAD BANK 5.28 2.26 3.51 4.33

The PE ratio reflects the price currently being paid by the market for each rupee of currently reported EPS. In other
words, the PE ratio measures investor’s expectations and the market appraisal of the performance of the firm.

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to
companies with a lower P/E.

P/E ratio is fluctuate time to time because market price on of the reason. Some organization P/E ratio too high but
should not be.. P/E ratio should be little much higher than industry average.
ICICI bank P/E ratio much higher than SBI.

Net interest margin

YEAR 2010 2009 2008 2007

SBI 3.75 3.85 4.08 4.46
PNB 4.57 4.54 4.63 5.4
ICICI 4.48 3.83 3,24 2.88
ALLAHABAD BANK 3.7 3.67 3.58 4.28

The difference between interest income and interest expense is known as net interest income. It is the income, which
the bank earns from its core business of lending. As such, NIM is the net margin earned by the bank on its average
earning assets. These assets comprises of advances, investments, balance with the RBI and money at call. The
proportion of low costs deposits (on which the bank pays interest) has a lot to do with this ratio. Particularly because
banks that have been able to sustain or improve the proportion of low costs deposits would be able to garner higher
NIMs. Low costs deposits are deposits in the form of current accounts and savings accounts (CASA).
If you look at the graph you can see that PNB is the only bank whose NIM is higher than SBI and may be casa
deposit would be one of reason. SBI casa deposit is 45% and PNB casa deposit is 46.5%.

Technical Analysis

Support & Resistance :( Nifty)

The concepts of support and resistance are undoubtedly two of the most highly discussed attributes of
technical analysis.
Support: Support for a price is a price area where there are lots of buyers ready to buy the stocks rather than
sellers . At that price point, the general perception is that its a good buy, and lots of buyers come to buy it. Hence
buyers outnumber sellers and there is a higher possibility that prices will bounce back from that point. This is a point
where Buying has less risk.
Resistance: Resistance is just opposite of Support, At this price levels there are more sellers than buyers and with
high probability prices reverses from this point . At this point there are enough seller in the market to prevent it
further rise.
Resistance and support of Nifty
FOR 24th Aug High 5547.25

FOR 24th Aug Low 5488.45

FOR 24th Aug Close Price 5505.1

FOR 25 th Aug (High+Close+Low)/3 Pivot Point 5513.6

FOR 25 th Aug (Forcast) High+2×(Pivot-Low) Resistance 3 5597.55

FOR 25 th Aug (Forcast) Pivot+(R1-S1) Resistance 2 5572.4

FOR 25 th Aug (Forcast) 2×Pivot-Low Resistance 1 5538.75

FOR 25 th Aug (Forcast) 2×Pivot-High Support 1 5479.95

FOR 25 th Aug (Forcast) Pivot-(R1-S1) Support 2 5454.8

FOR 25 th Aug (Forcast) Low-2×(High-Pivot) Support 3 5421.15

FOR 25 th Aug (Actual) High Price 5506.15

FOR 25 th Aug (Actual) Low Price 5519.4

FOR 25 th Aug (Actual) Close Price 5462.35

Here, we take the (high, low, close) prices of Nifty for 24th Aug 2010 and try to find the resistance and support for
25th Aug 2010. For 25th Aug 2010 we find that the high value of Nifty did not go beyond Resistance 3(R3) and the
low price did not go to less than support 3(S3).
Resistance and support of SBI

FOR 24th Aug High 2854.9

FOR 24th Aug Low 2796.5

FOR 24th Aug Close Price 2845.8

FOR 25 th Aug (High+Close+Low)/3 Pivot Point 2832.4

FOR 25 th Aug (Forcast) High+2×(Pivot-Low) Resistance 3 2926.7

FOR 25 th Aug (Forcast) Pivot+(R1-S1) Resistance 2 2890.8

FOR 25 th Aug (Forcast) 2×Pivot-Low Resistance 1 2868.3

FOR 25 th Aug (Forcast) 2×Pivot-High Support 1 2809.9

FOR 25 th Aug(Forcast) Pivot-(R1-S1) Support 2 2774

FOR 25 th Aug (Forcast) Low-2×(High-Pivot) Support 3 2751.5

FOR 25 th Aug (Actual) High Price 2854.5

FOR 25 th Aug (Actual) Low Price 2815

FOR 25 th Aug (Actual) Close Price 2823.55

Here, we take the (high, low, close) prices of SBI for 24th Aug 2010 and try to find the resistance and support for
25th Aug 2010. We find that the high value of SBI did not go beyond Resistance 3(R3) and the low price did not go
to less than support 3(S3).

Simple Moving Average (SMA)

This is the most common method used to calculate the moving average of prices. It simply takes the sum of all of
the past closing prices over the time period and divides the result by the number of prices used in the calculation.

ANALYSIS

 POSITION NO 1 AND 2 IS CROSSOVER POINT. IN POSITION 1 SHORTER MOVING AVARAGE ie

10 DAYS MOVING AVARAGE CUT 20 DAYS MOVING AVARAGE FORM ABOVE, SO IT IS
SIGNALLING A BEARISH MARKET. AND IF CLOSING PRICE GRAPH WE CAN SEE THAT
CLOSING PRICE OF STOCK HSAS FALLEN AFTER CUTING POINT.
 POSITION 2, 50 DAYS MOVING AVARAGE LINE CUT 100 DAYS MOVING AVARAGE LINE
FORM ABOVE AND IN THAT POSITION WE CAN SEE STOCK PRICE HAD FALLEN.
 IN POSITION 3, 10 DAYS AND 20 DAYS MOVING AVARAGE LINE CUT 100 DAYS MOVING
AVARAGE LINE FORM BELOW AND STOCK UP SHARPLY.
 IN POSITION 4, 50 DAYS MOVING AVARAGE LINE CUT 100 DAYS MOVING AVARAGE LINE
FORM BELOW AND STOCK PRICE WAS UP.
 IN POSITION 5 STOCK PRICE ABOVE 100 DAYS MOVING AVARAGE LINE AND STARTED
DECLING TOWARD THE LINE AND LATER AGAIN UP.IT IS A SIGNAL FOR BUYING STOCK.
 IN POSITION A STOCK PRICE ADVANCE SO FAST ABOVE 100 DAYS MOVING AVARAGE
LINE, IT IS INDICATING THAT STOCK REACTION BACK TOWARD THE AVARAGE LINE AND
ITS TIME TO SELL THE STOCK.

Exponential Moving Average (EMA) :

This moving average calculation uses a smoothing factor to place a higher weight on recent data points and is
regarded as much more efficient than the linear weighted average
.

This type of moving average reacts faster to recent price changes than a simple moving average. The 12- and 26-day
EMAs are the most popular short-term averages, and they are used to create indicators like the moving average
convergence divergence (MACD) and the percentage price oscillator (PPO). In general, the 50- and 200-day EMAs
are used as signals of long-term trends

Rate of change (ROC) –

It is a very popular oscillator to measure the rate of change of current price as compare to the price of certain no of
days back.

ROC= (current price/ price of ‘n’ period ago) -1

In this project I have calculate 20 days ROC.

Analysis
 THE ROC VALUE OSCILLATES ACROSS THE ZERO LINE. SOME TIME ZERO LINE CALLED AS
BUYING AND SELLING OPPORTINUTY.

 IDEALLY INVESTER SHOULD BUY AT OVERSOLD POSITION AND SELL THEIR SHARE AT
OVERBOUGHT POSITION.

 IN ROC CHART OVERBOUGHT POSITION ALWAYS ABOVE ZERO LINE AND OVERSLOD
POSITION WILL BE BELOW THE ZERO LINE.
Relative Strength index
This indicator measures the relative internal strength of stock. It gives the signal of buying and selling opportunity.
The RSI value range from 0 to 100. RSI values above 70 consider denoting overbought condition and value below
30 are denoting oversold. When RSI has crossed 30 lines from below to above and is rising, it gives buying signal.
When it has crossed 70 lines from above to below it gives selling signal.

RSI= 100-(100/1+RS)

RS= (average up of closing price/ average down of closing price)

In this project RS value is 1.203356.

In this project I have calculate 42 weeks RSI and I got RSI value 54.61. As value of RSI is slightly above 50. It is
indicating neither overbought nor oversold position. Simply hold the stock for long time.
 Beta Calculation
Covariance (Nifty, SBI) - 1.572531088
Variance (Nifty) - 1.372072295
Beta- 1.15
Alpha- .0808711
Correlation- .72044397

Beta value describes the relationship between the stock return and market index return i.e. Beta is a measure of a
stock's volatility in relation to the market. If the regression line is at an exact 45 0 angle then beta equal to 1.Which
mean that 1% change in market index 1% change in stock return.

A stock that swings more than the market over time has a beta above 1.0. If a stock moves less than the market, the
stock's beta is less than 1.0. High-beta stocks are supposed to be riskier but provide a potential for higher returns;
low-beta stocks pose less risk but also lower returns.
Here, the value of BETA is 1.15(approximately),this mean that 1% change in market index 1.15% change stock
return i.e. SBI Stock return
SBI Alpha value is .0808 and it shows that SBI should have return of about .0808 per month if market going flate.

Correlation coefficient:
A correlation coefficient of 1 (or -1) indicates that the two series of numbers plot exactly along a straight line. A
correlation coefficient of zero indicates that there is no straight line relationship between the two series of numbers.

correlation value shows that a positive relation with market return and SBI return.

Conclusion
From the fundamental analysis it is clear that Indian economy doing well during this recession period as compare to
other developing or developed country. Actually Indian economy doing well more than expectation because India’s
Gross Domestic Product (GDP) registered a better-than-expected growth rate. In second quarter growth rate was
8.8% which is better than last year same quarter. According to economist end of this fiscal year our growth rate will
be 9.2%. Sustained growth rate is good for Indian economy. But inflation is one of the reasons which can sustain
Indian growth. In the month of Aug it was 11.25%. But control inflation rate RBI has taken some step like increase
repo rate and reserve repo rate without disturbing growth rate. According to recent data realise that Indian banking
industry contributing 5.3times in Indian growth so Indian banking industry in growing stage.
State bank India fee base income i.e. interest income has increased 11.75% than last year as well as net profit also
increased in compare with last year. From the ratio analysis it is find that the EPS of SBI is much high as compare
to SBI competitor. Sometime EPS does not show the real picture of the because of manipulation the income of the
company so DPS gives more good picture as compare to EPS. We find that DPS is also high as compare to SBI
competitor. So it profitable for a investor in long run, moreover the volatility of SBI share price is too aggressive
(β=1.15).
After considering technical analysis RSI of SBI is 54% i.e. you hold the SBI share for long term you will be
benefited. State Bank of India is second largest public sector bank in India and these bank is very much fundamental
strong so if you invest in SBI share for long term you will get a good return from these stock.