PROJECT REPORT ON A STUDY OF BEST PERFORMING SCRIPTS OF NIFTY IN LAST 5 YEAR IN BANKING SECTOR

CONTENTS 1. 2. 3. 4. 5. Declaration Mentor Certificate Acknowledgement Chapter 1 - Introduction Chapter 2 - Objective/Research methodology/ Limitation/Scope Chapter 3 - Organizational Profile Chapter 4 - Data Analysis And Interpretation Chapter 5 - Observations And Findings Chapter 6 Conclusion Recommendations Bibliography (i) (ii) (iii) 1 11 10 22

6. 7. 8. 9. 10. 11.

23 52 63 65 66 67

51 62 64 -

12.

Annexure

68

88

Chapter 1 Introduction

INTRODUCTION

My Topic Best performing scripts of nifty in last 5 year in

banking sector Is a Comparative Analysis Of All the Banks Which are listed
in Nifty In the period of last five years. For this I have calculated beta separately for each bank as well as Risk & Return Relating to each of them. I made review of various Journals published by NSE and gone Through NSE INDIA web. As Showed in my Project The Banking sector Is one Of The Most performed During Last Five Year, which Inspired me To Select this topic.

To develop a more clear view about the topic we have to Understand Nifty and Banking

NIFTY & BANKING

NIFTY- The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges. It recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. The following years witnessed rapid development of Indian capital market 2

with introduction of internet trading, Exchange traded funds (ETF), stock derivatives and the first volatility index - IndiaVIX in April 2008, by NSE. August 2008 saw introduction of Currency derivatives in India with the launch of Currency Futures in USD INR by NSE. Interest Rate Futures was introduced for the first time in India by NSE on 31st August 2009, exactly after one year of the launch of Currency Futures. With this, now both the retail and institutional investors can participate in equities, equity derivatives, currency and interest rate derivatives, giving them wide range of products to take care of their evolving needs.

OUR GROUP Associate/Affiliate Companies

NSCCL

NCCL

NSETECH

DotEx Intl. Ltd. IISL NSE.IT

NIFTY 50 IN LAST 20 YEAR: ONE OF THE GREATEST WEALTH CREATER

Equity is the one of the most exotic asset class, it has given about 21% average annualized return since 1990, investment in equity has seen sea change in recent decade. Emergence of business channel sprayed the awareness about equity among the investor community ,earlier to buy equity was not so easy as it is now, today market is in pockets of investor in terms of access, technology has provided the multiple way to access the market through internet, through cell phone and WAP , now a days various expert advices trading and investment tips are available with the investors, Many fund house are running their mutual fund and giving good return to their investors and the asset under management of mutual fund industry is approximately $ 6.7 lakh billion. Reliance capital is the largest mutual fund whose asset under management is more than one lakh crore followed by HDFC MF, ICICI Prudential MF, state run UTI Mutual Fund whose asset under management is 68,000 crore and Birla Sun Life MF are the five largest fund house of the country. Insurance companies, HNI, FII, Retail investors are holding significant amount of equities in their portfolio, although the allocation in equity is less than 5% of the total house hold saving in the country however in totality it is a huge amount. In recent market selloff where FII has sold 13.1billion US$ at one way and DII has bought more than 16.2 US$ at the same time in other way. Identification of investable share is the tuff job even for the market participant and timing the market is even tougher for the expert, but the fundamental analysis and technical analysis helps the people to identify the cheap stocks at the right time to park their investments. But still

4 the question remain same what and how much one should buy? The main barometer which is index it gives the diversity and credibility of the basket and also liquid to exit and enter at desired time for the investor NIFTY 50 stocks reflects the appropriate behaviour of equity because this is the broader index composed of 50 blue chips Company of various sector having better corporate governance, credibility and profitability. Nifty is claimed as the stocks of the nation gives the diversity and reliability .Reshuffling in script is also an important phenomena because we have observed that time to time the company who hasnt followed the corporate governance and not adequately performed have shown exit way from the index, similar incident happened with the Satyam computers after the scam broke out in the company the script of the company removed from the index and replaced by other company. The most important characteristics of NIFTY is the diversity it is the basket of the shares who represents the various sectors like Reliance and ONGC represents the petrochemical sector, NTPC represents the power sector, ACC represents the cement sector ,Infosys represent the IT sector and SBI and ICICI bank represents the banking sectors and so on. The stocks in NIFTY gets proportionate weight age according to their market capitalization so if money will allocated to the company who are the component of index according to their proportion, then the capital appreciation will be similar as the index fluctuation.

LIST OF COMPANIES IN THE NIFTY 50

Company Name ABB Ltd. ACC Ltd. Ambuja Cements Ltd. Axis Bank Ltd. Bharat Heavy Electricals Ltd. Bharat Petroleum Corporation Ltd. Bharti Airtel Ltd. Cairn India Ltd. Cipla Ltd. DLF Ltd. GAIL (India) Ltd. HCL Technologies Ltd. HDFC Bank Ltd. Hero Honda Motors Ltd. Hindalco Industries Ltd. Hindustan Unilever Ltd. Housing Development Finance Corporation Ltd. I T C Ltd. ICICI Bank Ltd. Idea Cellular Ltd. Infosys Technologies Ltd. Infrastructure Development Finance Co. Ltd. Jaiprakash Associates Ltd. Jindal Steel & Power Ltd. Kotak Mahindra Bank Ltd. Larsen & Toubro Ltd. Mahindra & Mahindra Ltd. Maruti Suzuki India Ltd. NTPC Ltd. Oil & Natural Gas Corporation Ltd. Power Grid Corporation of India Ltd. Punjab National Bank Ranbaxy Laboratories Ltd. Industry ELECTRICAL EQUIPMENT CEMENT AND CEMENT PRODUCTS CEMENT AND CEMENT PRODUCTS BANKS ELECTRICAL EQUIPMENT REFINERIES TELECOMMUNICATION SERVICES OIL EXPLORATION/PRODUCTION PHARMACEUTICALS CONSTRUCTION GAS COMPUTERS - SOFTWARE BANKS AUTOMOBILES - 2 AND 3 WHEELERS ALUMINIUM DIVERSIFIED FINANCE - HOUSING CIGARETTES BANKS TELECOMMUNICATION SERVICES COMPUTERS - SOFTWARE FINANCIAL INSTITUTION DIVERSIFIED STEEL AND STEEL PRODUCTS BANKS ENGINEERING AUTOMOBILES - 4 WHEELERS AUTOMOBILES - 4 WHEELERS POWER OIL EXPLORATION/PRODUCTION POWER BANKS PHARMACEUTICALS Symbol ABB ACC AMBUJACEM AXISBANK BHEL BPCL BHARTIARTL CAIRN CIPLA DLF GAIL HCLTECH HDFCBANK HEROHONDA HINDALCO HINDUNILVR HDFC ITC ICICIBANK IDEA INFOSYSTCH IDFC JPASSOCIAT JINDALSTEL KOTAKBANK LT M&M MARUTI NTPC ONGC POWERGRID PNB RANBAXY

Reliance Capital Ltd. Reliance Communications Ltd. Reliance Industries Ltd. Reliance Infrastructure Ltd. Reliance Power Ltd. Siemens Ltd. State Bank of India Steel Authority of India Ltd. Sterlite Industries (India) Ltd. Sun Pharmaceutical Industries Ltd. Suzlon Energy Ltd. Tata Consultancy Services Ltd. Tata Motors Ltd. Tata Power Co. Ltd. Tata Steel Ltd. Unitech Ltd. Wipro Ltd.

FINANCE TELECOMMUNICATION SERVICES REFINERIES POWER POWER ELECTRICAL EQUIPMENT BANKS STEEL AND STEEL PRODUCTS METALS PHARMACEUTICALS ELECTRICAL EQUIPMENT COMPUTERS SOFTWARE AUTOMOBILES - 4 WHEELERS POWER STEEL AND STEEL PRODUCTS CONSTRUCTION COMPUTERS SOFTWARE

RELCAPITAL RCOM RELIANCE RELINFRA RPOWER SIEMENS SBIN SAIL STER SUNPHARMA SUZLON TCS TATAMOTORS TATAPOWER TATASTEEL UNITECH WIPRO

7 BANKING- The Indian Banking industry, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old/ new domestic and foreign). These banks have over 67,000 branches spread across the country. The banking section will navigate through all the aspects of the Banking System in India. It will discuss upon the matters with the birth of the banking concept in the country to new players adding their names in the industry in coming few years. The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well defined under three separate heads with one page dedicated to each bank.

However, in the introduction part of the entire banking cosmos, the past has been well explained under three different heads namely:

History of Banking in India Nationalisation of Banks in India Scheduled Commercial Banks in India The first deals with the history part since the dawn of banking system

in India. Government took major step in the 1969 to put the banking sector into systems and it nationalised 14 private banks in the mentioned year. This has

been elaborated in Nationalisation of Banks in India. The last but not the least explains about the scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act

8 1934 lays down the condition of scheduled commercial banks. The description along with a list of scheduled commercial banks is given on this page. Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 49,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

EARLY HISTORY

Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of

Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasicentral banks, as did their 9 successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians

had established small banks, most of which served particular ethnic and religious communities.

10

LIBERALISATION

In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets

and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true.

Chapter 2 Objective

 Research Methodology Limitatins Scope

11

OBJECTIVES OF THE PROJECT

1.

To know the correlation between Nifty movement & Banks movement

under Nifty 50.

2.

To know the best bank in the Nifty 50 in terms of risk & return. To guide the investors in framing the criteria for judging the best bank in

3.

terms associated risk & returns generated. 4. To check the volatility of banking counter through Beta calculation.

ASSUMPTIONS

1. All the news related to banks is ignored in this calculation. 2. All the extra benefits given by these banks are also ignored in the calculation like ESOP, Bonus Shares, and Right Issues, etc.

12

RESEARCH METHODOLOGY

For the project undertaken collecting Primary Data is very difficult so I use Secondary Data for the project.

SAMPLE SIZE- For the project I have taken 4 banks of Nifty 50 i.e. HDFC Bank ICICI Bank

Punjab National Bank State Bank of India

DATA ANALYSIS TOOLS

Calculation of Correlation. Risk & Return Calculation. Beta Calculation.

13

WHAT IS CORRELATION?
The correlation coefficient a concept from statistics is a measure of how well trends in the predicted values follow trends in past actual values. It is a measure of how well the predicted values from a forecast model "fit" with the real-life data. The correlation coefficient is a number between 0 and 1. If there is no relationship between the predicted values and the actual values the correlation coefficient is 0 or very low (the predicted values are no better than random numbers). As the strength of the relationship between the predicted values and

actual values increases so does the correlation coefficient. A perfect fit gives a coefficient of 1.0. Thus, the higher the correlation coefficient the better. In statistics, correlation and dependence are any of a broad class of statistical relationships between two or more random variables or observed data values. Familiar examples of dependent phenomena include the correlation between the physical statures of parents and their offspring, and the correlation between the demand for a product and its price. Correlations are useful because they can indicate a predictive relationship that can be exploited in practice. For example, an electrical utility may produce less power on a mild day based on the correlation between electricity demand and weather. Correlations can also suggest possible causal, or mechanistic relationships; however, statistical dependence is not sufficient to demonstrate the presence of such a relationship.

14

PEARSON'S PRODUCT-MOMENT COEFFICIENT

The most familiar measure of dependence between two quantities is the Pearson product-moment correlation coefficient, or "Pearson's correlation." It is obtained by dividing the covariance of the two variables by the product of their standard deviations. Karl Pearson developed the coefficient from a similar but slightly different idea by Francis Galton. The population correlation coefficient X,Y between two random variables X and Y with expected values X and Y and standard deviations X and Y is defined as:

where E is the expected value operator, cov means covariance, and, corr a widely used alternative notation for Pearson's correlation. The Pearson correlation is defined only if both of the standard deviations are finite and both of them are nonzero. It is a corollary of the CauchySchwarz inequality that the correlation cannot exceed 1 in absolute value. The correlation coefficient is symmetric: corr(X,Y) = corr(Y,X). The Pearson correlation is +1 in the case of a perfect positive (increasing) linear relationship, 1 in the case of a perfect decreasing (negative) linear relationship, and some value between 1 and 1 in all other cases, indicating the degree of linear dependence between the variables. As it approaches zero there is less of a relationship. The closer the coefficient is to either 1 or 1, the stronger the correlation between the variables.

15

RISK VERSUS RETURN

One Can't Have One Without the Other Risk Just the thought of it can give investors sleepless nights. However, through careful planning for your financial future, you can help manage risk.

Risk is something you encounter every day. Even crossing a busy street involves some risk. With investments, balancing risk and return can be a tricky operation. All investors want to maximize their return, while minimizing risk. Some investments are certainly more "risky" than others, but no investment is risk free. Trying to avoid risk by not investing at all can be the riskiest move of all. That would be like standing at the curb, never setting foot into the street. You'll never be able to get to your destination if you don't accept some risk. In investing, just like crossing that street, you carefully consider the situation, accept a comfortable level of risk, and proceed to where you're going. Risk can never be eliminated, but it can be managed. Let's take a look at the different types of risk, how different asset categories perform, and the ways and means to help manage risk.

16

TYPES OF RISK
However, there are many kinds of risk. Let's take a look at some of them:

Capital Risk: Losing your invested monies.

Inflationary Risk: Investment's rate of return doesn't keep pace with inflation rate.

Interest Rate Risk: A drop in an investment's interest rate. Market Risk: Selling an investment at an unfavorable price. Liquidity Risk: Limitations on the availability of funds for a specific period of time.

Legislative Risk: Changes in tax laws may make certain investments less advantageous.

Default Risk: The failure of the institution where an investment is made.

The risk/return tradeoff could easily be called the "ability-to-sleep-at-night test." While some people can handle the equivalent of financial skydiving without batting an eye, others are terrified to climb the financial ladder without a secure harness. Deciding what amount of risk you can take while remaining comfortable with your investments is very important.

In the investing world, the dictionary definition of risk is the chance that an investment's actual return will be different than expected. Technically, this is measured in statistics by standard deviation. Risk means you have the possibility of losing some, or even all, of our original investment.

17 Low levels of uncertainty (low risk) are associated with low potential returns. High levels of uncertainty (high risk) are associated with high potential returns. The risk/return tradeoff is the balance between the desire for the lowest possible risk and the highest possible return. This is demonstrated graphically in the

chart below. A higher standard deviation means a higher risk and higher possible return.

WHAT DOES RISK-RETURN TRADE-OFF MEAN?

The principle that potential return rises with an increase in risk. Low levels of uncertainty (low risk) are associated with low potential returns, whereas high levels of uncertainty (high risk) are associated with high potential

returns. According to the risk-return trade-off, invested money can render higher profits only if it is subject to the possibility of being lost. The objective of risk and return analysis is to maximize the return by creating a balance of risk. For example, in case of working capital management, the less inventory you keep, the higher the expected return as less of your money is locked as asset; but you also have a increased risk of running out of raw material when you actually need it for production or maintenance. Which means you lose sale. Thus all 18 companies tries very hard to maintain a minimum inventory as possible without effecting smooth production. This is a very common example of risk return

trade-off

WHAT IS BETA CALCULATION?

In finance, the beta () of a stock or portfolio is a number describing the relation of its returns with that of the financial market as a whole. An asset with a beta of 0 means that its price is not at all correlated with the market. A positive beta means that the asset generally follows the market. A negative beta shows that the asset inversely follows the market; the asset generally decreases in value if the market goes up and vice versa. The beta coefficient is a key parameter in the capital asset pricing model (CAPM). It measures the part of the asset's statistical variance that cannot be mitigated by the diversification provided by the portfolio of many risky assets, because it is correlated with the return of the other assets that are in the portfolio. Beta can be estimated for individual companies using regression analysis against a stock market index. The formula for the beta of an asset within a portfolio is

, where ra measures the rate of return of the asset, rp measures the rate of return of the portfolio, and cov(ra,rp) is the covariance between the rates of return. The 19

portfolio of interest in the CAPM formulation is the market portfolio that contains all risky assets, and so the rp terms in the formula are replaced by rm, the rate of return of the market. Beta is also referred to as financial elasticity or correlated relative volatility, and can be referred to as a measure of the sensitivity of the asset's returns to market returns, its non-diversifiable risk, its systematic risk, or market risk. On an individual asset level, measuring beta can give clues to volatility and liquidity in the marketplace. In fund management, measuring beta is thought to separate a manager's skill from his or her willingness to take risk.

SECURITY MARKET LINE

The SML graphs the results from the capital asset pricing model (CAPM) formula. The x-axis represents the risk (beta), and the y-axis represents the expected return. The market risk premium is determined from the slope of the SML. The relationship between and required return is plotted on the security market line (SML) which shows expected return as a function of . The intercept is the nominal risk-free rate available for the market, while the slope is E(Rm) Rf. The security market line can be regarded as representing a single-factor model of the asset price, where Beta is exposure to changes in value of the Market.

20

A beta value less than 1 indicates the investment is less volatile than the benchmark. A beta value equal to 1 means the investment's volatility is the same as the benchmark, and a beta greater than 1 means the investment is more volatile.

Beta is a measure of a stock's volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. 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.

Beta is a key component for the capital asset pricing model (CAPM), which is used to calculate cost of equity. Recall that the cost of capital represents the discount rate used to arrive at the present value of a company's future cash flows. All things being equal, the higher a company's beta is, the higher its cost of capital discount rate. The higher the discount rate, the lower the present

value placed on the company's future cash flows. In short, beta can impact a company's share valuation.

21

Advantages of Beta
To followers of CAPM, beta is a useful measure. A stock's price variability is important to consider when assessing risk. Indeed, if you think about risk as the possibility of a stock losing its value, beta has appeal as a proxy for risk. Intuitively, it makes plenty of sense. Think of an early-stage technology stock with a price that bounces up and down more than the market. It's hard not to think that stock will be riskier than, say, a safe-haven utility industry stock with a low beta. Besides, beta offers a clear, quantifiable measure, which makes it easy to work with. Sure, there are variations on beta depending on things such as the market index used and the time period measured, but broadly speaking, the notion of beta is fairly straightforward to understand. It's a convenient measure that can be used to calculate the costs of equity used in a valuation method that discounts cash flows.

DISADVANTAGES OF BETA
However, if you are investing in a stock's fundamentals, beta has plenty of shortcomings. For starters, beta doesn't incorporate new information. Consider the electrical utility company American Electric Power (AEP). Historically, AEP has been considered a defensive stock with a low beta. But when it entered the merchant energy business and assumed high debt levels, AEP's historic beta no longer captured the substantial risks the company took on. At the same time, many technology stocks, such as Google, are so new to the market they have insufficient price history to establish a reliable beta. Another troubling factor is that past price movements are very poor predictors of the future. Betas are merely rear-view mirrors, reflecting very little of what lies ahead. Furthermore, the beta measure on a single stock tends to flip around over time, which makes it unreliable. Granted, for traders looking to buy and sell stocks within short time periods, beta is a fairly good risk metric. But for investors with long-term horizons, it's less useful.

LIMITATIONS

Sample size is of only 5 years.

Calculation is little bit time consuming. Major Banks like Axis & Kotak Mahindra are not included because of data unavailability.

22

Scope
With the help of this study An individual as well as organisational investor can select the banking stock of their choice before investment. Also they can study the beta distribution so calculated to gain better results from their stocks. They can also judge the risk and return relation before going for a combination of stocks.

Chapter 3 Organization Profile

23

I. HDFC BANK (HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED)

HDFC Bank Ltd. (BSE: 500180, NYSE: HDB) is a major Indian financial services company based in Mumbai, incorporated in August 1994, after the Reserve Bank of India allowed establishing private sector banks. The Bank was promoted by the Housing Development Finance Corporation, a premier housing finance company (set up in 1977) of India. HDFC Bank has 1,412 branches and over 3,295 ATMs, in 528 cities in India, and all branches of the bank are linked on an online real-time basis. As of September 30, 2008 the bank had total assets of INR 1006.82 billion. For the fiscal year 2008-09, the bank has reported net profit of Rs.2,244.9 crore, up 41% from the previous fiscal. Total annual earnings of the bank increased by 58% reaching at Rs.19,622.8 crore in 200809.

HISTORY
HDFC Bank was incorporated in the year of 1994 by Housing Development Finance Corporation Limited (HDFC), India's premier housing finance company. It was among the first companies to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. The Bank commenced its operations as a Scheduled Commercial Bank in January 1995 with the help of RBI's liberalization policies. In a milestone transaction in the Indian banking industry, Times Bank Limited (promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., in 2000. This was the first merger of two private banks in

India. As per the scheme of amalgamation approved by the shareholders of both banks and the

24 Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than 1,000. The amalgamated bank emerged with a strong deposit base of around Rs. 1,22,000 crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity is over Rs. 1,63,000 crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower.

BUSINESS FOCUS

HDFC Bank deals with three key business segments - Wholesale Banking Services, Retail Banking Services, Treasury. It has entered the banking consortia of over 50 corporate for providing working capital finance, trade services, corporate finance and merchant banking. It is also providing sophisticated product structures in areas of foreign exchange and derivatives, money markets and debt trading and equity research.

25

WHOLESALE BANKING SERVICES

The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corp to small & mid-sized corporates and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services,transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. HDFC Bank has made significant inroads into the banking consortia of a number of leading Indian corporate including multinationals, companies from the domestic business houses and prime public sector companies. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.

RETAIL BANKING SERVICES

The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed

by world-class service and delivered to customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the MasterCard Maestro debit card 26 as well. The Bank launched its credit card business in late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the merchant acquiring business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.

TREASURY

Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. These services are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. HDFC Ltd has the objective to enhance residential housing stock and promote home ownership. Their offerings range from hassle-free home loans

and deposit products, to property related services and a training facility. They also offer specialized financial services to the customer base through partnerships with some of the best financial institutions worldwide. HDFC Bank is a young and dynamic bank, with a youthful and enthusiastic team determined to accomplish the vision of becoming a worldclass Indian bank. Our business philosophy is based on four core values - Customer Focus, Operational Excellence, Product Leadership and People. We believe that the 27 ultimate identity and success of our bank will reside in the exceptional quality of our people and their extraordinary efforts. For this reason, we are committed to hiring, developing, motivating and retaining the best people in the industry.

MISSION AND BUSINESS STRATEGY

Our mission is to be "a World Class Indian Bank", benchmarking ourselves against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. We are committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance.

PROMOTER

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial

28 markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

KEY PEOPLE
1-Deepak Parekh (Founder) 2-Jagdish Kapoor (Chairman) 3-Aditya Puri (MD)

29

II.

ICICI BANK (Industrial Credit and Investment Corporation of India)

ICICI Bank (BSE: 532174, NYSE: IBN) (formerly Industrial Credit and Investment Corporation of India) is a major banking and financial services organization in India. It is the 4th largest bank in India and the largest private sector bank in India by market capitalization. The bank also has a network of 1,700+ branches (as on 31 March 2010) and about 4,721 ATMs in India and presence in 18 countries, as well as some 24 million customers (at the end of

July 2007). ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and specialization subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. (These data are dynamic.) ICICI Bank is also the largest issuer of credit cards in India. ICICI Bank's shares are listed on the stock exchanges at Kolkata and Vadodara, Mumbai and the National Stock Exchange of India Limited; its ADRs trade on the New York Stock Exchange (NYSE). Founded in 1955 as Industrial Credit and Investment Corporation of India, ICICI Limited was established by the Government of India in the 1960s as a Financial Institution like Industrial Development Bank of India (IDBI) to finance large industrial projects . ICICI then, was not a bank and hence could not take retail deposits and was not required to comply with Indian banking requirements for liquid reserves. ICICI borrowed funds from various agencies like the World Bank, often at

30 concessional rates. These funds were deployed in large corporate loans. However, the scenario changed drastically in1990s when ICICI founded a separate legal entity and named it "ICICI Bank". ICICI Bank, as the name would suggest, undertook normal banking operations like accepting deposits, issuing credit cards, providing car loans etc. The experiment was so successful that ICICI merged into ICICI Bank and this "reverse merger" happened in 2002.

ICICI Bank (BSE: ICICI) (formerly Industrial Credit and Investment Corporation of India) "ICICI Bank is India's second largest Bank with consolidated total assets of over Rs. 470,000 crores and networth of over Rs. 50,000 crores. The Bank's capital adequacy ratio of 15.6% is among the highest levels of capital adequacy in large Indian banks and much higher than the regulatory requirement of 9.0%. ICICI Bank made a profit after tax of Rs. 4,158 crore (over US$ 850 million) in FY2008 and Rs. 3,014 crore (US$ 619 million) in the nine months ended December 31, 2008." ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank is also the largest issuer of credit cards in India. Banks have also provide internet banking, phone banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various other services and integrated them into the mainstream banking arena. In a span of just four years, ICICI Bank has emerged as a consumer banking behemoth. With a retail book of over Rs 56,000 crore (Rs 560 billion) and a market 31 share that is the envy of competition -- it has a share of over 30 per cent -- ICICI Bank today has reached a commanding position. The bank boasts of the widest

integrated technology platform in the country and only a fourth of its business takes place at its branches

The Bank is expanding in overseas markets and has the largest international balance sheet among Indian banks. ICICI Bank now has whollyowned subsidiaries, branches and representative offices in 18 countries, including an offshore unit in Mumbai. This includes wholly owned subsidiaries in Canada, Russia and the UK (the subsidiary through which the his savings brand is operated), offshore banking units in Bahrain and Singapore, an advisory branch in Dubai, branches in Belgium, Hong Kong and Sri Lanka, and representative offices in Bangladesh, China, Malaysia, Indonesia, South Africa, Thailand, the United Arab Emirates and USA. Overseas, the Bank is targeting the NRI (Non-Resident Indian) population in particular.

HISTORY

1955 The Industrial Credit and Investment Corporation of India Limited

(ICICI) was incorporated at the initiative of World Bank, the Government of India and representatives of Indian industry, with the objective of creating a development financial institution for providing medium-term and long-term project financing to Indian businesses.

32

1994 ICICI established Banking Corporation as a banking subsidiary.

formerly Industrial Credit and Investment Corporation of India. Later, ICICI

Banking Corporation was renamed as 'ICICI Bank Limited'. ICICI founded a separate legal

entity, ICICI Bank, to undertake normal banking operations - taking deposits, credit cards, car loans etc.

2001 ICICI acquired Bank of Madura (est. 1943). Bank of Madura was a

Chettiar bank, and had acquired Chettinad Mercantile Bank (est. 1933) and Illanji Bank (established 1904) in the 1960s.

2002 The Boards of Directors of ICICI and ICICI Bank approved the

reverse merger of ICICI, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, into ICICI Bank. After receiving all necessary regulatory approvals, ICICI integrated the group's financing and banking operations, both wholesale and retail, into a single entity.

Also in 2002, ICICI Bank bought the Shimla and Darjeeling branches that

Standard Chartered Bank had inherited when it acquired Grindlays Bank. 33 ICICI started its international expansion by opening representative offices

in New York and London.

2003 ICICI opened subsidiaries in Canada and the United Kingdom (UK),

and in the UK it established an alliance with Lloyds TSB. It also opened an Offshore Banking Unit (OBU) in Singapore and representative offices in Dubai and Shanghai.

2004 ICICI opens a rep office in Bangladesh to tap the extensive trade

between that country, India and South Africa.

2005 ICICI acquired Investitsionno-Kreditny Bank (IKB), a Russia bank

with about US$4mn in assets, head office in Balabanovo in the Kaluga region, and with a branch in Moscow. ICICI renamed the bank ICICI Bank Eurasia. Also, ICICI established a branch in Dubai International Financial Centre and in Hong Kong.

2006 ICICI Bank UK opened a branch in Antwerp, in Belgium. ICICI

opened representative offices in Bangkok, Jakarta, and Kuala Lumpur.

34

2007 ICICI amalgamated Sangli Bank, which was headquartered in

Sangli, in Maharashtra State, and which had 158 branches in Maharashtra and another 31 in Karnataka State. Sangli Bank had been founded in 1916 and was particularly strong in rural areas.

ICICI also received permission from the government of Qatar to open a

branch in Doha.

ICICI Bank Eurasia opened a second branch, this time in St. Petersburg.

2008 The US Federal Reserve permitted ICICI to convert its

representative office in New York into a branch.

ICICI also established a branch in Frankfurt.

NATURE OF BUSINESS:

ICICI is a financial intermediary which brings together the savers and borrowers in the economic system. It collects funds from surplus units and lends the same to those units whose income exceeds its expenditure. In the pursuit of these objectives the ICICI Bank Limited (ICICI Bank) offers products and services in the

35 areas of commercial banking to retail and corporate customers (both domestic and international), treasury and investment banking and other products, such as insurance and asset management. Its commercial banking operations for retail customers consist of retail lending and deposits, distribution of third-party investment products and other fee-based products and services, as well as issuance of unsecured redeemable bonds. ICICI Bank provides a range of commercial banking and project finance products and services, including loan products, fee and commission-based products and services, deposits and foreign exchange and derivatives products to corporations, growth-oriented middle market companies and small and medium enterprises.

ONWNERSHIP TYPE

JOINT STOCK COMPANY:

ICICI BANK LIMITED, is the joint stock company which is incorporated under the Companies Act, 1956 and licensed as a bank under the Banking Regulation Act, 1949 ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

36

VISION

To be the leading provider of financial services in India and a major

global bank.

To be the preferred brand for total financial and banking solutions for

both corporate and individuals To be the dominant Life, Health and Pensions player built on trust by

world-class people and service.

MISSION
We will leverage our people, technology, speed and financial capital to: be the banker of first choice for our customers by delivering high quality,

world-class products and services. expand the frontiers of our business globally. play a proactive role in the full realisation of Indias potential. maintain a healthy financial profile and diversify our earnings across

businesses and geographies. maintain high standards of governance and ethics.

contribute positively to the various countries and markets in which we

operate. create value for our stakeholders Provide the social facilities to the society 37

SUBSIDIARIES

KEY PEOPLE

1. K.V. Kamath (Chairman) 2. Chanda Kochhar (MD & CEO)

3. N. S. Kannan (CFO)

38

III.

PNB (Punjab National Bank)

Punjab National Bank (PNB) (BSE: 532461), was registered on May 19, 1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. Today, the Bank is the second largest government-owned commercial bank in India with about 5000 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the world by the Bankers Almanac, London. The bank's total assets for financial year 2007 were about US$60 billion. PNB has a banking subsidiary in the UK, as well as branches in Hong Kong, Dubai and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai. Punjab National Bank with 4497 offices and the largest nationalised bank is serving its 3.5 crore customers with the following wide variety of banking services:

Corporate banking Personal banking Industrial finance Agricultural finance Financing of trade International banking

Punjab National Bank has been ranked 38th amongst top 500 companies by The Economic Times. PNB has earned 9th position among top 50 trusted brands in India. Punjab National Bank India maintains relationship with more than

200 leading international banks world wide. PNB India has Rupee Drawing Arrangements with 15 exchange companies in UAE and 1 in Singapore.

39

PNB ONLINE

Punjab National Bank of India is also a member of SWIFT and more than 150 PNB Branches are connected with terminals in Mumbai. It promotes "Any Time, Any Where Banking". PNB offers Internet Banking services for both to the Corporate and Individuals. It provides 24 hours, 365 days banking from the PC of the user. A user can operate anytime and from anywhere its accounts. The following are some of the services available online:

Access to account Complete details of transactions and statement of account Online information of deposits, loans overdraft account etc. Online Payment Facility for railway reservation through IRCTC Payment Gateway Project

Online Utility Bill Payment Services which allows Internet Banking account holders to pay their telephone, mobile, electricity, insurance and other bills anytime from anywhere from their desktop.

Punjab National Bank Card user can buy goods and enable services from 45,000 merchant outlet in India and can withdraw cash from over 4500 ATMs with its own 450 ATMs.

40

PUNJAB NATIONAL BANK BRANCHES

Punjab National Bank has its Branches in all the 7 metropolitan and cosmopolitan cities in India namely New Delhi, Mumbai, Calcutta, Chennai, Bangalore, Hyderabad and Ahmedabad. It even has its branches in small town in both urban as well as rural areas.

PNB is always focussing on expanding abroad and till date has identified some emerging economies abroad. They are in few of these places.

Almaty Kazakhktan Shanghai China London Kabul Afghanistan

PUNJAB NATIONAL BANK HOUSING LOAN

Any individual can avail Punjab National Bank Housing Loan for any of the following purpose:

For construction of house. For purchase of house/ flat. For purchase of house/ flat from the original allottee, i.e. on First Power of Attorney basis.

41

For carrying out repairs/ renovation/ additions/ alterations in the existing house.

Approximately 80% of the cost of project is sanctioned by PNB Housing Finance, subject to a maximum of Rs. 50 lac. In case of carrying out repairs/ renovation/ additions/ alterations in the existing house, the ceiling is Rs. 5 lac. The loan is available for a period of 5 years to 20 years or before the borrowers attain the age of 65. Interest of Punjab National Bank Home Loan is charged on reducing balance and the amount to be sanctioned depends upon the repaying capability of the borrower. The following securities are required by the cell of PNB Housing Loan: Mortgage of property for which finance is being given.

In case of purchase of house flat from housing board/ society where

mortgage cannot be created immediately, a tripartite agreement shall be executed amongst the housing board/society, borrower and the Bank. In case of purchase of house/ flat on first power of attorney, additional

security by way of mortgage of some other property or pledge of Bank's Fixed Deposit Receipt/ LIC policy/ Govt. securities has to be provided.

Suitable third party guarantee acceptable to the Bank which may include

guarantee from family members/ other relatives.

42

HISTORY

1895: PNB commenced its operations in Lahore. PNB has the distinction

of being the first Indian bank to have been started solely with Indian capital that has survived to the present. (The first entirely Indian bank, the Oudh Commercial Bank, was established in 1881 in Faizabad, but failed in 1958.) PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala HarKishen Lal,Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the management of the Bank in its early years.

1904: PNB established branches in Karachi and Peshawar. 1940: PNB absorbed Bhagwan Dass Bank, a scheduled bank located in

Delhi circle. 1947: Partition of India and Pakistan at Independence. PNB lost its

premises in Lahore, but continued to operate in Pakistan. 1951: PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat

Bank became Bharat Nidhi Ltd. 1961: PNB acquired Universal Bank of India. 1963: The Government of Burma nationalized PNB's branch in Rangoon

(Yangon). September 1965: After the Indo-Pak war the government of Pakistan

seized all the offices in Pakistan of Indian banks, including PNB's headoffice, which may have moved to Karachi. PNB also had one or more branches in East Pakistan (Bangladesh).

43 1960s: PNB amalgamated Indo Commercial Bank (est. 1933) in a

rescue. 1969: The Government of India (GOI) nationalized PNB and 13 other

major commercial banks, on July 19, 1969. 1976 or 1978: PNB opened a branch in London.

1986 The Reserve Bank of India required PNB to transfer its London

branch to State Bank of India after the branch was involved in a fraud scandal. 1986: PNB acquired Hindustan Commercial Bank (est. 1943) in a rescue.

The acquisition added Hindustan's 142 branches to PNB's network. 1993: PNB acquired New Bank of India, which the GOI had nationalized

in 1980. 1998: PNB set up a representative office in Almaty, Kazakhstan. 2003: PNB took over Nedungadi Bank, the oldest private sector bank in

Kerala. At the time of the merger with PNB, Nedungadi Bank's shares had zero value, with the result that its shareholders received no payment for their shares. PNB also opened a representative office in London. 2004: PNB established a branch in Kabul, Afghanistan. PNB also opened a representative office in Shanghai. PNB established an alliance with Everest Bank in Nepal that permits

migrants to transfer funds easily between India and Everest Bank's 12 branches in Nepal. 2005: PNB opened a representative office in Dubai.

44

2007: PNB established PNBIL - Punjab National Bank (International) - in

the UK, with two offices, one in London, and one in South Hall. Since then it has opened a third branch in Leicester, and is planning a fourth in Birmingham. 2008: PNB opened a branch in Hong Kong. 2009: PNB opened a representative office in Oslo, Norway, and a second

branch in Hong Kong, this in Kowloon. 2010: PNB received permission to upgrade its representative office in the

Dubai International Financial Centre to a branch.

PRODUCTS OFFERED
Investment Banking Consumer Banking Commercial Banking Retail Banking Private Banking Asset Management Pensions Mortgage Loans Credit Cards Life insurance

45

VISION
"To be a Leading Global Bank with Pan India footprints and become a household brand in the Indo-Gangetic Plains providing entire range of financial products and services under one roof"

MISSION
"Banking for the unbaked"

CHAIRMAN OF PNB
Mr. K.R. Kamath (Since 2009)

46

IV.

SBIN (STATE BANK OF INDIA)

State Bank of India (SBI) (BSE: 500112, NSE: SBIN) is the largest banking and financial services company in India, by almost every parameter revenues, profits, assets, market capitalization etc. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stake held by the Reserve Bank of India. The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on 27 January 1921.

An important turning point in the history of State Bank of India is the launch of the first Five Year Plan of independent India, in 1951. The Plan aimed at serving

the Indian economy in general and the rural sector of the country, in particular. Until the Plan, the commercial banks of the country, including the Imperial Bank of India, confined their services to the urban sector. Moreover, they were not equipped to respond to the growing needs of the economic revival taking shape in the rural areas

47 of the country. Therefore, in order to serve the economy as a whole and rural sector in particular, the All India Rural Credit Survey Committee recommended the formation of a state-partnered and state-sponsored bank.

The All India Rural Credit Survey Committee proposed the takeover of the Imperial Bank of India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was established on 1 July 1955. This resulted in making the State Bank of India more powerful, because as much as a quarter of the resources of the Indian banking system were controlled directly by the State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959. The Act enabled the State Bank of India to make the eight former State-associated banks as its subsidiaries.

The State Bank of India emerged as a pacesetter, with its operations carried out by the 480 offices comprising branches, sub offices and three Local Head Offices, inherited from the Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to creditworthy parties, the State Bank of India catered to the needs of the customers, by banking purposefully. The bank served the heterogeneous financial needs of the

planned economic development.

BRANCHES

The corporate centre of SBI is located in Mumbai. In order to cater to different functions, there are several other establishments in and outside Mumbai, apart from the corporate center. The bank boasts of having as many as 14 local

48 head offices and 57 Zonal Offices, located at major cities throughout India. It is recorded that SBI has about 10000 branches, well networked to cater to its customers throughout India.

ATM SERVICES

SBI provides easy access to money to its customers through more than 8500 ATMs in India. The Bank also facilitates the free transaction of money at the ATMs of State Bank Group, which includes the ATMs of State Bank of India as well as the Associate Banks State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, etc. You may also transact money through SBI Commercial and International Bank Ltd by using the State Bank ATM-cum-Debit (Cash Plus) card.

SUBSIDIARIES

The State Bank Group includes a network of eight banking subsidiaries and several non-banking subsidiaries. Through the establishments, it offers various services including merchant banking services, fund

management, factoring services, primary dealership in government securities, credit cards and insurance.

THE EIGHT BANKING SUBSIDIARIES ARE:

State Bank of Bikaner and Jaipur (SBBJ) State Bank of Hyderabad (SBH)

49

State Bank of Indore (SBIR) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Saurashtra (SBS) State Bank of Travancore (SBT)

PRODUCTS AND SERVICES

PERSONAL BANKING

SBI Term Deposits SBI Loan For Pensioners SBI Recurring Deposits Loan Against Mortgage Of Property SBI Housing Loan Loan Against Shares & Debentures SBI Car Loan Rent Plus Scheme

SBI Educational Loan Medi-Plus Scheme

OTHER SERVICES

Agriculture/Rural Banking NRI Services ATM Services Demat Services Corporate Banking Internet Banking Mobile Banking International Banking Safe Deposit Locker RBIEFT 50

E-Pay E-Rail SBI Vishwa Yatra Foreign Travel Card Broking Services Gift Cheques

INTERNATIONAL PRESENCE
The bank has 52 branches, agencies or offices in 32 countries. It has branches of the parent in Colombo, Dhaka, Frankfurt, Hong environs, Los Angeles, Male in

Kong,Johannesburg, London and

the Maldives, Muscat, New York, Osaka, Sydney, and Tokyo. It has offshore

banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town. SBI operates several foreign subsidiaries or affiliates. In 1990 it established an offshore bank, State Bank of India (Mauritius). It has two subsidiaries in North America, State Bank of India (California), and State Bank of India (Canada). In 1982, the bank established its California subsidiary, which now has seven branches. The Canadian subsidiary was also established in 1982 and also has seven branches, four in the greater Toronto area, and three in British Columbia. In Nigeria, it operates as INMB Bank . This bank was established in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria. In Nepal SBI owns 50% of Nepal SBI Bank, which has branches throughout the country. In Moscow SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest. In Indonesia it owns 76% of PT Bank Indo Monex. State Bank of India already has a branch in Shanghai and plans to open one

51 up in Tianjin.State Bank of India has presence in Dubai International Financial Centre, Dubai, United Arab Emirates.

GROWTH
State Bank of India has often acted as guarantor to the Indian Government, most notably during Chandra Shekhar's tenure as Prime Minister of India. With 11,448 branches and a further 6500+ associate bank branches, the SBI has extensive coverage. State Bank of India has electronically networked all of its

branches under Core Banking System(CBS). The bank has one of the largest ATM networks in the region. More than 8500 ATMs across India. The State Bank of India has had steady growth over its history, though it was marred by the Harshad Mehtascam in 1992. In recent years, the bank has sought to expand its overseas operations by buying foreign banks. It is the only Indian bank to feature in the top 100 world banks in the Fortune Global 500 rating and various other rankings.

Chapter 4

Data Analysis & Interpretation

52

CALCULATION OF CORRELATION

Bank Names HDFC ICICI PNB SBIN

Correlation 0.930206867 0.877994998 0.702472868 0.914815796

*Data is attached in annexure.

RESULT FROM THE CALCULATION OF CORRELATION

In the calculation I have seen that correlation coefficient of HDFC is higher than other banks (0.930) in last 5 years which shows that it is highly correlated with nifty. So, whenever Nifty 50 moves up usually the share price of HDFC also moves up and vice-versa. It means that in last 5 years it moves according to Nifty. In second place correlation coefficient of SBIN is good it shows that SBIN is also highly correlated with the Nifty 50 ups & downs in last 5 years analysis.

53

CALCULATION OF RISK & RETURN

1- HDFC BANK

Date 1st Year 01-Apr05 31Mar-06 2nd Year 03-Apr06 30Mar-07 3rd Year 02-Apr07 31Mar-08 4th Year 01-Apr08 31Mar-09 5th Year 01-Apr09 31Mar-10

HDFC Bank Closing Rate

Yearly Return on HDFC Bank (in %age)

551.5 774.25 1st Year 40.38984587

773.85 954.15 2nd Year 23.29908897

901.35 1331.25 3rd Year 47.69512398

1309.55 945.5 4th Year -27.79962583

973.4 1933.5 5th Year Risk Average Return 98.63365523 45.57889548 36.44361765

54

2- ICICI BANK

Date 1st Year 01-Apr05 31Mar-06 2nd Year 03-Apr06 30Mar-07 4th Year 02-Apr07 31Mar-08 4th Year 01-Apr08 31Mar-09 5th Year 01-Apr09 31Mar-10

ICICI Bank Closing Rate

Yearly Return on ICICI Bank (in %age)

406.05 589.05 1st Year 45.06834134

604 855.3 2nd Year 41.60596026

857 843.95 3rd Year -1.522753792

834.55 375.05 4th Year -55.05961297

385.2 952.5 5th Year Risk Average Return 147.2741433 74.48828638 35.47321563

55

3- PUNJAB NATIONAL BANK

PNB Bank Closing Rate Date 1st Year 01-Apr05 396.9 31-Mar06 470.4 1st Year 2nd Year 03-Apr06 466.5 30-Mar07 474.2 2nd Year 3rd Year 02-Apr07 426.7 31-Mar08 510.25 3rd Year 4th Year 01-Apr08 438.6 31-Mar09 411.45 4th Year 5th Year 01-Apr09 405.75 31-Mar10 1012.75 5th Year
Risk Average Return

Yearly Return on PNB Bank (in %age)

18.51851852

1.650589496

19.58050152

-6.190150479

149.5995071 64.10527498 36.63179323

56

4- STATE BANK OF INDIA

Date 1st Year 01-Apr05 31-Mar06 2nd Year 03-Apr06 30-Mar07 3rd Year 02-Apr07 31-Mar08 4th Year 01-Apr08 31-Mar09 5th Year 01-Apr09

SBIN Bank Closing Rate

Yearly Return on SBIN Bank (in %age)

670.1 968.5 1st Year 44.53066706

983.35 994.45 2nd Year 1.128794427

930.5 1600.25 3rd Year 71.97743149

1623.2 1067.1 4th Year -34.25948743

1077.45

31-Mar10

2078.2 5th Year Risk Average Return

92.8813402 51.84648463 35.25174915

57

RESULT FROM THE CALCULATION OF RISK & RETURN

From the above calculation performance of HDFC Bank in last 5 years is better than other banks because it is providing 36.44% of return at 45.58% risk. It means providing good return at lower risk. At second place SBIN bank stand and provide return of 35.25% at 51.85% risk. In Risk & Return analysis we consider that script as best script which gave the Maximum return at Minimum Risk. So from the data of 5 years HDFC bank is the best script in terms of RISK & RETURN analysis.

Dates 01-Apr-05 31-Oct-05 01-Apr-06 31-Oct-06 01-Apr-07 31-Oct-07 01-Apr-08 31-Oct-08 01-Apr-09 31-Oct-09 01-Apr-10

Avg. Closing Nifty (Six Month Basis) 2067.65 2242.98 2902.053 3330.201 3921.559 4471.548 5507.344 4331.751 2842.19 4384.67 5051.0225

Six Monthly %age change 7.816832963 22.71057765 12.85652127 15.07966602 12.29974497 18.80754135 -27.13897913 -52.40891707 35.17893023 13.19242787

Avg. Closing HDFC (Six Month Basis) 551.55 615.375 720.62 826.618 1034.44 1174.977 1570.683 1224.422 931.748 1423.734 1724.95

Six Monthly %age change 10.37172456 14.60478477 12.82309362 20.0902904 11.96082987 25.19324396 -28.27954741 -31.41128288 34.55603364 17.46230326

58

CALCULATION OF BETA

1. HDFC BANK WITH NIFTY

Beta of HDFC Bank = 0.804697745

59

2. ICICI BANK WITH NIFTY

Avg. Closing Nifty (Six Month Basis) 2067.65 2242.98 2902.053 3330.201 3921.559 4471.548 5507.344 4331.751 2842.19 4384.67 5051.0225 7.816832963 22.71057765 12.85652127 15.07966602 12.29974497 18.80754135 -27.13897913 -52.40891707 35.17893023 13.19242787 Six Monthly %age change 11.48735253 20.33080012 2.114226362 33.65652469 5.484930724 18.7932918 66.59268905 79.33974707 45.2401858 18.63383382

Dates 01-Apr-05 31-Oct-05 01-Apr-06 31-Oct-06 01-Apr-07 31-Oct-07 01-Apr-08 31-Oct-08 01-Apr-09 31-Oct-09 01-Apr-10

Six Monthly %age change

Avg. Closing ICICI (Six Month Basis) 406.05 458.748 575.816 588.253 886.678 938.134 1155.242 693.453 386.67 706.12 867.83

Beta of ICICI Bank = 1.8709125

3. PUNJAB NATIONAL BANK WITH NIFTY

Six Monthly %age change 1.090521237 10.47702337 5.321553608 14.51698754 2.210485171 15.59754246 25.91907582 12.35915262 36.26894675 26.75563186

Dates 01-Apr-05 31-Oct-05 01-Apr-06 31-Oct-06 01-Apr-07 31-Oct-07 01-Apr-08 31-Oct-08 01-Apr-09 31-Oct-09 01-Apr-10

Avg. Closing Nifty (Six Month Basis) 2067.65 2242.98 2902.053 3330.201 3921.559 4471.548 5507.344 4331.751 2842.19 4384.67 5051.0225

Six Monthly %age change 7.816832963 22.71057765 12.85652127 15.07966602 12.29974497 18.80754135 -27.13897913 -52.40891707 35.17893023 13.19242787

Avg. Closing PNB (Six Month Basis) 396.9 401.276 448.238 425.59 497.865 509.119 603.204 479.041 426.348 668.98 913.3535

60

Beta of PNB = 0.381567483

4. STATE BANK OF INDIA WITH NIFTY

Dates 01-Apr-05 31-Oct-05 01-Apr-06 31-Oct-06 01-Apr-07 31-Oct-07 01-Apr-08 31-Oct-08 01-Apr-09 31-Oct-09 01-Apr-10

Avg. Closing Nifty (Six Month Basis) 2067.65 2242.98 2902.053 3330.201 3921.559 4471.548 5507.344 4331.751 2842.19 4384.67 5051.0225

Six Monthly %age change 7.816832963 22.71057765 12.85652127 15.07966602 12.29974497 18.80754135 -27.13897913 -52.40891707 35.17893023 13.19242787

Avg. Closing SBIN (Six Month Basis) 670.1 748.327 903.008 887.974 1156.044 1493.534 2188.263 1458.928 1130.347 1752.056 2135.446

Six Monthly %age change 10.45358513 17.12952709 -1.69306759 23.18856376 22.59674035 31.74796631 49.99115789 29.06903809 35.48453931 17.95362655

Beta of SBIN = 1.313855349

61

62

RESULT FROM BETA CALCULATION

Beta is a measure of a stock's volatility in relation to the market. By definition, the market has a beta of 1.0, and individual stocks are ranked according to how much they deviate from the market. 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. Therefore, investing in PNB would be much saver for the investors who aim at investing for long durations as its beta is lowest, HDFC is also a good option for the investors who are looking for a stock which is less risky in comparison to the other competitors and offers high and timely returns. Whereas, ICICI is an aggressive stock whose beta is almost double than the market beta.

Chapter 5 Observati ons & Finding

63

Observations
TOOLS USED

BANKS NAME

HDFC ICICI PNB SBIN Correlation 0.930206867 0.877994998 0.702472868 0.914815796 Risk Vs. Return (in %age) 45.57:36.44 74.48:35.47 64.10:36.63 51.84:35.25 Beta 0.804698 1.870913 0.381567 1.313855

1- The result of Correlation shows that in last 5 years HDFC Bank is highly

correlates with nifty. It means that this script positively moves according to the Nifty movement. In second place State Bank of India correlates better with Nifty-50.

2-

In the analysis of Risk & Return I observe that HDFC bank is the best performing bank in the Nifty in last 5 years because its risk level is low in comparison of other banks stock taken into consideration and its average return is also higher. In second place SBIN is the best stock in last 5 years.

64 3- From the calculation of Beta I observe that Punjab National Bank is the best stock in Nifty 50 in last 5 years because its Beta is less than 1 and it stands at 0.381. At the second place HDFC is best stock if we compare stock with Beta calculation because its beta also less than 1 but little bit higher than PNB.

Chapter 6 Conclusion

65

CONCLUSION
It's important for investors to make the distinction between short-term risk--where beta and price volatility are useful--and longer-term, fundamental risk, where big-picture risk factors are more telling. High betas may mean price volatility over the near term, but they don't always rule out long-term opportunities. Inflation rate Of the Economy should Also Be Considered While investing. The stock prices Hit the top At the end of the financial year(refer to annexure chart) in comparison to begning of the year.

Chapter 7 Recommendations

66

Recommendations

Investors can invest in Share market for better returns but his investment view should be long term.

Investment in HDFC Bank & SBIN Bank is more profitable in banking sector.

Chapter 8 Bibliography

67

BIBLIOGRAPHY

1. Websites

www.nseindia.com www.google.com www.wikipedia.com www.moneycontrol.com www.statistics-help-online.com www.fundmanagersoftware

2. Books
Suresh C. Sinha and Anil K. Dhiman, Research Methodology Himalaya publication house New Delhi

Jain S P, Narang K L Financial Accounting Kalyani Publication New Delhi,2004

Gupta Sashi and Joshi Rosi Management Accounting

 ANNEXURE