Equity Research1

7/31/2019 Equity Research1

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EQUITY RESEARCH IN BANKING SECTOR

Research Project submittedIn Part Completion of

Masters of Management Studies University of Mumbai

ByAmit Kanowjia

Under the guidance of

Mr. Nikesh Ruparel

Vidyalankar Institute of Technology

Wadala (E), Mumbai 400 037

JULY 2010


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DECLARATION

I hereby declare that the project work entitled Equity Research inBanking Sector submitted to Vidyalankar Institute of Technology,wadala(E), Mumbai-400037 is a record of an original work done byme under the guidance of Mr. Nikesh Ruparel and this project work issubmitted in partial fulfillment of the requirement for the award of thedegree of Masters of Management Studies (MMS) . The resultsembodied in this report have not been submitted to any other Universityor Institute for the award of any degree or diploma.

Amit Kanowjia


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ACKNOWLEDGEMENT

I take this opportunity to sincerely thanks and express my gratitude tomy project guide Mr. Nikesh Ruparel for guiding me throughout myentire project.

The experience and the knowledge acquired over the interactions withthe guide have been invaluable to say the least and will help me a greatdeal in my future education and career.

I would also like to thank my co-guide Mr. Jitendra Bapna for valuableinput on coordination in my project.

My project was completed in a very supportive and interactiveenvironment and has been great learning experience. Last but not theleast I would like to thanks my family and friends for all the supportthey have provided me.

Amit Kanowjia


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TABLE OF CONTENT

Sr. No. Contents Page No.

1 Introduction to Equity 62 Fundamental Analysis 82.1 Qualitative Factor- Industry 102.2 Qualitative Factor- Company 122.3 Quantitative Factor-Ratios 143 Technical Analysis 213.1 Introduction to Technical Charts 233.2 Introduction to Trendline 273.3 Introduction to Support & Resistance 293.4 Introduction to Indicators 313.5 Moving Averages 324 Analysis of Banking Sector 334.1 The Indian Banking Sector 344.2 Recent development in Banking sector 364.3 SWOT Analysis of Banking sector 384.4 Banking Structure in India 414.5 Types of Banks & Banking activities 424.6 Income & Expenses profile of Banks 455 Analysis of Banks 485.1 Analysis of Punjab National Bank 505.2 Analysis of Union Bank of India 57

5.3 Analysis of Kotak Mahindra Bank 655.4 Analysis of Yes Bank 72 6 Recommendations 807 Conclusion 818 Bibliography 82


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EXECUTIVE SUMMARY

Indian Economy being one of the fastest developing economies in the world,Companies in India are growing at farter rate as compared to their growth rate a decadeback. Many Indian companies are expanding their business globally with mergers andacquisitions.

As companies grow their shareholders are benefitted with good dividend and capitalappreciation on investment in equity shares of such companies. Number of companieslisted in stock exchange (BSE & NSE) has been increasing every year with new IPOscoming in the market.

In India people are realizing that equity has potential to give highest return as comparedto other investment avenues however people are not aware how to do equity valuation,they just invest in shares based on tips given by brokers, friends or family members.

Investing in equity shares based on tips is not the true investment but it is clear gambling with your money which many of us would not like to do with our hard earnedmoney.

Equity valuation begins with analysis of the sector in which you want make investment;if the sector looks positive then analyze various companies in the sector. A Company isanalyzed fundamentally to check its performance and financial strength. Technicalanalysis is used to decide the right price to buy a stock so that higher return oninvestment can be generated.

In this report I have explained How to do fundamental analysis & technical analysis withanalysis of banking sector and few banks in the sector.


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INTRODUCTION TO EQUITY

What is Equity?

In accounting and finance, equity is the residual claim or interest of the most junior classof investors in assets, after all liabilities are paid. If valuations placed on assets do notexceed liabilities, negative equity exists. In an accounting context, Shareholders' equity(or stockholders' equity, shareholders' funds, shareholders' capital or similar terms)represents the remaining interest in assets of a company, spread among individualshareholders of common or preferred stock.

At the start of a business, owners put some funding into the business to finance assets.This creates liability on the business in the shape of capital as the business is aseparate entity from its owners. Businesses can be considered to be, for accountingpurposes, sums of liabilities and assets; this is the accounting equation. After liabilitieshave been accounted for, the positive remainder is deemed the owner's interest in thebusiness.

This definition is helpful to understand the liquidation process in case of bankruptcy. Atfirst, all the secured creditors are paid against proceeds from assets. Afterward, a seriesof creditors, ranked in priority sequence, have the next claim/right on the residualproceeds. Ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such cases where even creditors could not get enoughmoney to pay their bills, nothing is left over to reimburse owners' equity. Thus owners'equity is reduced to zero. Ownership equity is also known as risk capital, liable capitaland equity.

What is Equity Shares?Total equity capital of a company is divided into equal units of small denominations,each called a share. For example, in a company the total equity capital of Rs2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 iscalled a Share. Thus, the company then is said to have 20, 00,000 equity shares of Rs10 each. The holders of such shares are members of the company and have votingrights.

EQUITY INVESTMENT

Equity investments generally refers to the buying and holding of shares of stock on astock market by individuals and firms in anticipation of income from dividends andcapital gain as the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a companybeing created or newly created). When the investment is in infant companies, it isreferred to as venture capital investing and is generally understood to be higher riskthan investment in listed going-concern situations.


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How to invest in Equity Shares?

Investors can buy equity shares of a company from Security market that is from Primarymarket or Secondary market.

The primary market provides the channel for sale of new securities. Primary marketprovides opportunity to issuers of securities; Government as well as corporate, to raiseresources to meet their requirements of investment and/or discharge some obligation.Investors can buy shares of a company through IPO (Initial Public Offering) when it isfirst time issued to the public. Once shares are issued to the public it is traded in thesecondary market. Stock exchange only acts as facilitator for trading of equity shares.

Anyone who wishes to buy shares of a company can buy it from an existing shareholder of a company.

Why should one invest in Equity in particular?

When you buy a share of a company you become a shareholder in that Company.Equities have the potential to increase in value over time. It also provides your portfoliowith the growth necessary to reach your long term investment goals. Research studieshave proved that the equities have outperformed most other forms of investments in thelong term.

Equities are considered the most challenging and the rewarding, when compared toother investment options. Research studies have proved that investments in someshares with a longer tenure of investment have yielded far superior returns than anyother investment. However, this does not mean all equity investments would guaranteesimilar high returns. Equities are high risk investments. One needs to study themcarefully before investing.

It is important for investors to note that while equity shares give highest return ascompared to other investment avenues it also carries highest risk therefore it isimportant to find real value or intrinsic value of the security before investing in it.The intrinsic value of a security being higher than the securitys market value representsa time to buy. If the value of the security is lower than its market price, investors shouldsell it.

To be able to value equity , we need to first understand how equity is to be analyzed.

Equity Share of any company can be analyzed through

1. Fundamental Analysis

2. Technical Analysis


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FUNDAMENTAL

ANALYSIS


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Introduction

Fundamental analysis is a technique that attempts to determine a securitys value byfocusing on underlying factors that affect a Companys actual business and its futureprospects. Fundamental analysts attempt to study everything that can affect

the security's value, including macroeconomic factors (like the overall economy andindustry conditions) and company-specific factors (like financial condition andmanagement).

Fundamental analysis of a business involves analyzing its financial statements andhealth, its management and competitive advantages, and its competitors and markets.Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. A fundamental analyst believes that analyzing strategy,management, product, financial stats and many other readily and not-so-readilyquantifiable numbers will help choose stocks that will outperform the market.

There are several possible objectives: To conduct a company stock valuation and predict its probable price evolution, To make a projection on its business performance, To evaluate its management and make internal business decisions, To calculate its credit risk.

Fundamental analysis serves to answer questions, such as: Is the companys revenue growing?

Is it actually making a profit?Is it in a strong-enough position to beat out its competitors in the future?

Is it able to repay its debts? Is management trying to "cook the books"?

Fundamentals: Quantitative and Qualitative

As mentioned in the introduction, fundamentals can include anything related to theeconomic well-being of a company. Obvious items include things like revenue and profit,but fundamentals also include everything from a companys market share to the q ualityof its management.

The various fundamental factors can be grouped into two categories: quantitative andqualitative.

Qualitative related to or based on the quality or character of something, oftenas opposed to its size or quantity.Quantitative capable of being measured or expressed in numerical terms.


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QUALITATIVE FACTOR THE INDUSTRY

Each industry has differences in terms of its customer base, market share amongfirms, industry-wide growth, competition, regulation and business cycles.Learning about how the industry works will give an investor a deeper

understanding of a company's financial health.

Customers

Some companies serve only a handful of customers, while others serve millions.In general, it's negative if a business relies on a small number of customers for alarge portion of its sales because the loss of each customer could dramaticallyaffect revenues. For example, think of a military supplier who has 100% of itssales with the Indian government. One change in government policy couldpotentially wipe out all of its sales. For this reason, companies will alwaysdisclose in their annual report if any one customer accounts for a majority of

revenues.

Market Share

Understanding a company's present market share can tell volumes about thecompany's business. The fact that a company possesses an 85% market sharetells you that it is the largest player in its market by far. Furthermore, this couldalso suggest that the company possesses some sort of "economic moat," inother words, a competitive barrier serving to protect its current and futureearnings, along with its market share. Market share is important because of

economies of scale. When the firm is bigger than the rest of its rivals, it is in abetter position to absorb the high fixed costs of a capital-intensive industry.

Industry Growth

One way of examining a company's growth potential is to first examine whether the amount of customers in the overall market will grow. This is crucial becausewithout new customers, a company has to steal market share in order to grow. Insome markets, there is zero or negative growth, a factor demanding carefulconsideration. For example, a manufacturing company dedicated solely tocreating audio compact cassettes might have been very successful in the '70s,

'80s and early '90s. However, that same company would probably have a roughtime now due to the advent of newer technologies, such as CDs and MP3s. Thecurrent market for audio compact cassettes is only a fraction of what it wasduring the peak of its popularity.


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Competition

Simply looking at the number of competitors goes a long way in understanding the competitive landscape for a company. Industries that have limited barriers to entry and a large number of competing firms create a difficult operating

environment for firms. One of the biggest risks within a highly competitiveindustry is pricing power. This refers to the ability of a supplier to increase pricesand pass those costs on to customers. Companies operating in industries withfew alternatives have the ability to pass on costs to their customers. A greatexample of this is Wal-Mart. They are so dominant in the retailing business, thatWal-Mart practically sets the price for any of the suppliers wanting to do businesswith them. If you want to sell to Wal-Mart, you have little, if any, pricing power.

Regulation

Certain industries are heavily regulated due to the importance or severity of the

industry's products and/or services. As important as some of these regulationsare to the public, they can drastically affect the attractiveness of a company for investment purposes. In industries where one or two companies represent theentire industry for a region (such as utility companies), governments usuallyspecify how much profit each company can make. In these instances, while thereis the potential for sizable profits, they are limited due to regulation. In other industries, regulation can play a less direct role in affecting industry pricing. For example, the drug industry is one of most regulated industries. And for goodreason - no one wants an ineffective drug that causes deaths to reach themarket. As a result, the Food and Drug Administration (FDA) requires that newdrugs must pass a series of clinical trials before they can be sold and distributedto the general public. However, the consequence of all this testing is that itusually takes several years and millions of dollars before a drug is approved.Keep in mind that all these costs are above and beyond the millions that the drugcompany has spent on research and development.

All in all, investors should always be on the lookout for regulations that couldpotentially have a material impact upon a business' bottom line. Investors shouldkeep these regulatory costs in mind as they assess the potential risks andrewards of investing.


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QUALITATIVE FACTOR THE COMPANY

Before diving into a company's financial statements, lets take a look at some of thequalitative aspects of a company.

Following are the qualitative factors of the company that investor should be aware of

Business Model

One of the most important questions that should be asked is what exactly does thecompany do? This is referred to as a company's business model. Its how a companymakes money? You can get a good overview of a company's business model bychecking out its website or annual report.

Competitive Advantage

Another business consideration for investors is competitive advantage. A company'slong-term success is driven largely by its ability to maintain a competitive advantage -and keep it. Powerful competitive advantages, such as Reliances brand name andMicrosoft's domination of the personal computer operating system, create a moat around a business allowing it to keep competitors at bay and enjoy growth and profits.When a company can achieve competitive advantage, its shareholders can be wellrewarded for decades.

Management

A company relies upon management to steer it towards financial success. Some

believe that management is the most important aspect for investing in a company. Itmakes sense - even the best business model is doomed if the leaders of the companyfail to properly execute the plan.Every public company has a corporate information section on its website. Usually therewill be a quick biography on each executive with their employment history, educationalbackground and any applicable achievements. Don't expect to find anything useful here.Let's be honest: We're looking for dirt, and no company is going to put negativeinformation on its corporate website.

Instead, here are a few ways for you to get a feel for management:

1. Management Discussion and Analysis (MD&A)

The Management Discussion and Analysis is found at the beginning of the annualreport. In theory, the MD&A is supposed to be frank commentary on the management'soutlook. Sometimes the content is worthwhile, other times it's boilerplate. One tip is tocompare what management said in past years with what they are saying now. Is it thesame material rehashed? Have strategies actually been implemented? If possible, sitdown and read the last five years of MD&As.


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2. Ownership and Insider Sales

Just about any large company will compensate executives with a combination of cash,restricted stock and options. It is a positive sign that members of management are alsoshareholders. The ideal situation is when the founder of the company is still in charge.

Examples include Mukesh Ambani & Ajim Premji When you know that a majority of management's wealth is in the stock, you can have confidence that they will do the rightthing. As well, it's worth checking out if management has been selling its stock. This hasto be filed with the Securities and Exchange Board of India (SEBI), so it's publiclyavailable information. Talk is cheap - think twice if you see management unloading all of its shares while saying something else in the media.

3. Past Performance

Another good way to get a feel for management capability is to check and see how

executives have done at other companies in the past. You can normally find biographiesof top executives on company web sites. Identify the companies they worked at in thepast and do a search on those companies and their performance.

4. Conference Calls

Some of the big market capitalisation companies have conference calls do thatmanagement can address critical issues such as performance review, criticaldevelopments etc. The excerpts of these are later displayed on the companys websites so as to enable investors to access these.


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QUANTITATIVE FACTOR

Now as we know the qualitative factor of fundamental analysis, lets proceed to thequantitative factor of fundamental analysis. Quantitative factor include analysis of financial statement of the company.

RATIO ANALYSIS

Financial ratios are tools for interpreting financial statements to provide a basis for valuing securities and appraising financial and management performance.

In general, there are 4 kinds of financial ratios that a financial analyst will use mostfrequently, these are:

Performance ratios Working capital ratios Liquidity ratios Solvency ratios

These 4 financial ratios allow a good financial analyst to quickly and efficiently addressthe following questions or concerns:

Performance ratios

What return is the company making on its capital investment? What are its profit margins?

Working capital ratios

How quickly are debts paid? How many times is inventory turned?

Liquidity ratios

Can the company continue to pay its liabilities and debts?

Solvency ratios (Longer term)

What is the level of debt in relation to other assets and to equity? Is the level of interest payable out of profits?


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Following are some ratios which are used to analyze companies performance

1 . Current Ratio: Current ratio is calculated in order to work out firms ability to pay off its short-term liabilities. This ratio is also called working capital ratio. This ratio explainsthe relationship between current assets and current liabilities of a business. Where

current assets are those assets which are either in the form of cash or easily convertibleinto cash within a year. Similarly, liabilities, which are to be paid within an accountingyear, are called current liabilities.

Current Ratio = Current Assets/Current Liabilities

Current Assets include Cash in hand, Cash at Bank, Sundry Debtors, BillsReceivable, Stock of Goods, Short-term Investments, Prepaid Expenses, AccruedIncomes etc.

Current Liabilities include Sundry Creditors, Bills Payable, Bank Overdraft,

Outstanding Expenses etc.Objective and Significance: Current ratio shows the short-term financial position of thebusiness. This ratio measures the ability of the business to pay its current liabilities. Theideal current ratio is supposed to be 2:1 i.e. current assets must be twice the currentliabilities. In case, this ratio is less than 2:1, the short-term financial position is notsupposed to be very sound and in case, it is more than 2:1, it indicates idleness of working capital.

2. Liquid Ratio: Liquid ratio shows short-term solvency of a business in a true manner.It is also called acid-test ratio and quick ratio. It is calculated in order to know howquickly current liabilities can be paid with the help of quick assets. Quick assets meanthose assets, which are quickly convertible into cash.

Liquid Ratio = Liquid Assets/Current Liabilities

Where liquid assets include Cash in hand, Cash at Bank, Sundry Debtors, BillsReceivable, Short-term Investments etc. In other words, all current assets are liquidassets except stock and prepaid expenses.

Current liabilities include Sundry Creditors, Bills Payable, Bank Overdraft, OutstandingExpenses etc


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3. Debt-Equity Ratio: Debt equity ratio shows the relationship between long-term debtsand shareholders funds. It is also known as External -Internal equity ratio.

Debt Equity Ratio = Debt/Equity

Where Debt (long term loans) include Debentures, Mortgage Loan, Bank Loan,Public Deposits, Loan from financial institution etc.

Equity (Shareholders Funds) = S hare Capital (Equity + Preference) + Reserves andSurplus Fictitious Assets

Objective and Significance: This ratio is a measure of owners stock in the business.Proprietors are always keen to have more funds from borrowings because:

(i) Their stake in the business is reduced and subsequently their risk too

(ii) Interest on loans or borrowings is a deductible expenditure while computing taxableprofits. Dividend on shares is not so allowed by Income Tax Authorities.

The normally acceptable debt-equity ratio is 2:1.

4. Fixed Assets Ratio: Fixed Assets Ratio establishes the relationship of Fixed Assetsto Long-term Funds.

Fixed Assets Ratio = Long-term Funds/Net Fixed Assets

Where Long-term Funds = Share Capital (Equity + Preference) + Reserves and Surplus+ Long- term Loans Fictitious Assets

Net Fixed Assets means Fixed Assets at cost less depreciation. It will also include tradeinvestments.

Objective and Significance: This ratio indicates as to what extent fixed assets arefinanced out of long-term funds. It is well established that fixed assets should befinanced only out of long-term funds. This ratio workout the proportion of investment of funds from the point of view of long-term financial soundness. This ratio should be equal

to 1. If the ratio is less than 1, it means the firm has adopted the impudent policy of using short-term funds for acquiring fixed assets. On the other hand, a very high ratiowould indicate that long-term funds are being used for short-term purposes, i.e. for financing working capital.


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5 . Working Capital Turnover Ratio: Working capital turnover ratio establishes arelationship between net sales and working capital. This ratio measures the efficiency of utilization of working capital.

Working Capital Turnover Ratio = Net Sales or Cost of Goods Sold/Net Working

Capital Where Net Working Capital = Current Assets Current Liabilities

Objective and Significance: This ratio indicates the number of times the utilisation of working capital in the process of doing business. The higher is the ratio, the lower is theinvestment in working capital and the greater are the profits. However, a very highturnover indicates a sign of over-trading and puts the firm in financial difficulties. A lowworking capital turnover ratio indicates that the working capital has not been usedefficiently .

6. Stock Turnover Ratio: Stock turnover ratio is a ratio between cost of goods sold andaverage stock. This ratio is also known as stock velocity or inventory turnover ratio.

Stock Turnover Ratio = Cost of Goods Sold/Average Stock

Where Average Stock = [Opening Stock + Closing Stock]/2

Cost of Goods Sold = Opening Stock + Net Purchases + Direct Expenses ClosingStock

Objective and Significance: Stock is a most important component of working capital.This ratio provides guidelines to the management while framing stock policy. Itmeasures how fast the stock is moving through the firm and generating sales. It helps tomaintain a proper amount of stock to fulfill the requirements of the concern. A proper inventory turnover makes the business to earn a reasonable margin of profit.


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7. Debtors Turnover Ratio: Debtors turnover ratio indicates the relation between netcredit sales and average accounts receivables of the year. This ratio is also known asDebtors Velocity.

Debtors Turnover Ratio = Net Credit Sales/Average Accounts Receivables

Where Average Accounts Receivables = [Opening Debtors and B/R + Closing Debtorsand B/R]/2

Credit Sales = Total Sales Cash Sales

Objective and Significance: This ratio indicates the efficiency of the concern to collectthe amount due from debtors. It determines the efficiency with which the trade debtorsare managed. Higher the ratio, better it is as it proves that the debts are being collectedvery quickly.

8. Capital Turnover Ratio: Capital turnover ratio establishes a relationship between netsales and capital employed. The ratio indicates the times by which the capital employedis used to generate sales. It is calculated as follows: -

Capital Turnover Ratio = Net Sales/Capital Employed

Where Net Sales = Sales Sales Return

Capital Employed = Share Capital (Equity + Preference) + Reserves and Surplus +

Long-term Loans Fictitious Assets.

Objective and Significance: The objective of capital turnover ratio is to calculate howefficiently the capital invested in the business is being used and how many times thecapital is turned into sales. Higher the ratio, better the efficiency of utilisation of capitaland it would lead to higher profitability .

9. Net Profit Ratio: Net Profit Ratio shows the relationship between Net Profit of theconcern and Its Net Sales. Net Profit Ratio can be calculated in the following manner: -

Net Profit Ratio = Net Profit/Net Sales x 100

Where Net Profit = Gross Profit Selling and Distribution Expenses Office and Administration Expenses Financial Expenses Non Operating Expenses + NonOperating Incomes.

And Net Sales = Total Sales Sales Return


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Objective and Significance: In order to work out overall efficiency of the concern NetProfit ratio is calculated. This ratio is helpful to determine the operational ability of theconcern. While comparing the ratio to previous years ratios, the increment shows theefficiency of the concern.

10 . Return on Investment or Return on Capital Employed: This ratio shows therelationship between the profit earned before interest and tax and the capital employedto earn such profit.

Return on Capital Employed

= Net Profit before Interest, Tax and Dividend/Capital Employed x 100

Where Capital Employed = Share Capital (Equity + Preference) + Reserves and Surplus

+ Long-term Loans Fictitious Assets

Or

Capital Employed = Fixed Assets + Current Assets Current Liabilities

Objective and Significance: Return on capital employed measures the profit, which afirm earns on investing a unit of capital. The profit being the net result of all operations,the return on capital expresses all efficiencies and inefficiencies of a business. This ratiohas a great importance to the shareholders and investors and also to management. Toshareholders it indicates how much their capital is earning and to the management as to

how efficiently it has been working. This ratio influences the market price of the shares.The higher the ratio, the better it is .

11 . Return on Equity: Return on equity is also known as return on shareholdersinvestment. The ratio establishes relationship between profit available to equityshareholders with equity shareholders funds.

Return on Equity

= Net Profit after Interest, Tax and Prefe rence Dividend/Equity ShareholdersFunds x 100

Where Equity Shareholders Funds = Equity Share Capital + Reserves and Surplus Fictitious Assets

Objective and Significance: Return on Equity judges the profitability from the point of view of equity shareholders. This ratio has great interest to equity shareholders. The


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return on equity measures the profitability of equity funds invested in the firm. Theinvestors favour the company with higher ROE.

12 . Earning Per Share: Earning per share is calculated by dividing the net profit (after interest, tax and preference dividend) by the number of equity shares.

Earning Per Share

= Net Profit after Interest, Tax and Preference Dividend/No. Of Equity Shares

Objective and Significance: Earning per share helps in determining the market priceof the equity share of the company. It also helps to know whether the company is ableto use its equity share capital effectively with compare to other companies. It also tellsabout the capacity of the company to pay dividends to its equity shareholders.

13. Price/Earning Ratio: This ratio shows the relationship between market price per share and earning per share. In other words, if a company is reporting a profit of Rs.200per share, and the stock is selling for Rs.2000 per share, the P/E ratio is 10 becauseyou are paying ten-times earnings (Rs.2000 per share divided by Rs.200 per shareearnings = 10 P/E.)

This ratio is calculated to find out the possibility of capital appreciation in future.

Price Earning Ratio = Market Price per Equity Share/ Earning per Share.


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TECHNICAL

ANALYSIS


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INTRODUCTION

Should I buy today? What will prices be tomorrow, next week, or next year? Wouldn'tinvesting be easy if we knew the answers to these seemingly simple questions?technical analysis has the answers to these questions.

Technical analysis is the process of analyzing a security's historical prices in an effort todetermine probable future prices. This is done by comparing current price action (i.e.,current expectations) with comparable historical price action to predict a reasonableoutcome.

Simply put, technical analysis is the study of prices, with charts being the primary tool.Technical analysts are sometimes referred to as chartists because they rely almostexclusively on charts for their analysis.

Technical analysis is applicable to stocks, indices, commodities, futures or any tradable

instrument where the price is influenced by the forces of supply and demand. Pricerefers to any combination of the open, high, low or close for a given security over aspecific timeframe. The time frame can be based on intraday (tick, 5-minute, 15-minuteor hourly), daily, weekly or monthly price data and last a few hours or many years.

Technicians, as technical analysts are called, are only concerned with two things:

1. What is the current price?

2. What is the history of the price movement?

The price is the end result of the battle between the forces of supply and demand for thecompany's stock. The objective of analysis is to forecast the direction of the future price.By focusing on price and only price, technical analysis represents a direct approach.Technicians believe it is best to concentrate on what and never mind why. Why did theprice go up? It is simple, more buyers (demand) than sellers (supply). After all, the valueof any asset is only what someone is willing to pay for it.


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What is Chart?

A price chart is a sequence of prices plotted over a specific timeframe. In statisticalterms, charts are referred to as time series plots.

(Current Chart for Minnesota Mining & Manufacturing)

On the chart, the y-axis (vertical axis) represents the price scale and the x-axis(horizontal axis) represents the time scale. Prices are plotted from left to right across thex-axis with the most recent plot being the furthest right. The price plot for MMM extendsfrom January 1, 1999 to March 13, 2000.


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What are the different Charts used in Technical Analysis?

1. Line Chart

The line chart is one of the simplest charts. It is formed by plotting one pricepoint, usually the close, of a security over a period of time. Connecting the dots,or price points, over a period of time, creates the line.

(Current Chart for Sun Microsystems)

Some investors and traders consider the closing level to be more important than theopen, high or low. By paying attention to only the close, intraday swings can be ignored.Line charts are also used when open, high and low data points are not available.Sometimes only closing data are available for certain indices, thinly traded stocks andintraday prices


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2. Bar Chart

Perhaps the most popular charting method is the bar chart. The high, low andclose are required to form the price plot for each period of a bar chart. The highand low are represented by the top and bottom of the vertical bar and the close is

the short horizontal line crossing the vertical bar. On a daily chart, each bar represents the high, low and close for a particular day. Weekly charts would havea bar for each week based on Friday's close and the high and low for that week.


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3. Candlestick Chart

Originating in Japan over 300 years ago, candlestick charts have become quitepopular in recent years. For a candlestick chart, the open, high, low and closeare all required. A daily candlestick is based on the open price, the intraday high

and low, and the close. A weekly candlestick is based on Monday's open, theweekly high-low range and Friday's close.

Many traders and investors believe that candlestick charts are easy to read, especiallythe relationship between the open and the close. White (clear) candlesticks form whenthe close is higher than the open and black (solid) candlesticks form when the close islower than the open. The white and black portion formed from the open and close iscalled the body (white body or black body). The lines above and below are calledshadows and represent the high and low.


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INTRODUCTION TO TRENDLINE

Trendlines are an important tool in technical analysis for both trend identification andconfirmation. A trendline is a straight line that connects two or more price points andthen extends into the future to act as a line of support or resistance.

Trends in charts are found to take decision regarding buying, selling or holding thestock. When a stock is in uptrend it is good stock to buy and when a stock is in downtrend it is advisable to sell that particular stock or wait for trend in the stock to changebefore taking buying decision.

Following charts show Uptrend and Downtrend movement in stocks

The above chart of GoodYear Tire shows uptrend movement in stock. The trendline isformed by joining previous lowest closing prices of the stock.


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The above chart of MERK&CO shows downtrend movement in stock. The trendlineis formed by joining previous highest closing prices of the stock.Note: Trendline as it shows the uptrend or downtrend movement in stock, breakoutin the trendline indicates the trend reversal in the stock. Breakout in downtrend linegive bullish signal and it is the time to buy that particular stock whereas breakout inuptrend line give bearish signal, it is advisable to sell the stock as the trend in thestock has changed and the stock may further fall in price.


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INTRODUCTION TO SUPPORT AND RESISTANCE

Support and resistance represent key junctures where the forces of supply and demandmeet. In the financial markets, prices are driven by excessive supply (down) anddemand (up). Supply is synonymous with bearish, bears and selling. As demand

increases, prices advance and as supply increases, prices decline. When supply anddemand are equal, prices move sideways as bulls and bears slug it out for control .

What is Support?

Support is the price level at which demand is thought to be strong enough to prevent theprice from declining further. The logic dictates that as the price declines towards supportand gets cheaper, buyers become more inclined to buy and sellers become less inclinedto sell. By the time the price reaches the support level, it is believed that demand willovercome supply and prevent the price from falling below support.

What is Resistance?

Resistance is the price level at which selling is thought to be strong enough to preventthe price from rising further. The logic dictates that as the price advances towardsresistance, sellers become more inclined to sell and buyers become less inclined to buy.By the time the price reaches the resistance level, it is believed that supply willovercome demand and prevent the price from rising above resistance.


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The above chart of PHILLIP MORRIS shows that the stock has Resistance at 51.5 withdouble top confirmation and it has Support at 45.5 with double bottom confirmation.Breakout in the resistance level gives bullish signal, it is the right time to buy the stockas the stock is expected to rise further whereas breakout in the support level is bearishsign for the stock and investors are advised to sell the stock when its price goes belowsupport level as it is expected that the stock may further fall in price.

Note: When a resistance level is successfully penetrated, that level becomes a supportlevel. Similarly when a support level is successfully penetrated, that level becomes aresistance level.


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INTRODUCTION TO INDICATORS

An indicator is a series of data points that are derived by applying a formula to the pricedata of a security. Price data includes any combination of the open, high, low or closeover a period of time. Some indicators may use only the closing prices, while others

incorporate volume and open interest into their formulas. The price data is entered intothe formula and a data point is produced. An indicator offers a different perspective from which to analyze the price action.Regardless of the complexity of the formula, indicators can provide unique perspectiveon the strength and direction of the underlying price action.

Why use indicators?

Indicators serve three broad functions: to alert, to confirm and to predict.An indicator can act as an alert to study price action a little more closely. If momentum is waning, it may be a signal to watch for a break of support. Or, if

there is a large positive divergence building, it may serve as an alert to watch for a resistance breakout.Indicators can be used to confirm other technical analysis tools. If there is abreakout on the price chart, a corresponding moving average crossover couldserve to confirm the breakout. Or, if a stock breaks support, a corresponding lowin the On-Balance-Volume (OBV) could serve to confirm the weakness.Some investors and traders use indicators to predict the direction of future prices.

Following are various indicators used in Technical Analysis

Average Directional Index (ADX)Average True Range (ATR)Bollinger BandsCommodity Channel Index (CCI)Moving AverageMoving Average Convergence Divergence (MACD)Relative Strength Index(RSI)Stochastic Oscillator


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Moving Averages

Moving averages are one of the most popular and easy to use tools available to thetechnical analyst. By using an average of prices, moving averages smooth a data seriesand make it easier to spot trends. This can be especially helpful in volatile markets.

Moving Averages like other indicators are mainly used to confirm the trend reversal andtake decision regarding Buying, Selling or Holding the stock.If current stock price is above Moving Average Line then it is good stock to buy or hold.Breakout in the Moving Average Line gives indication of buying or selling the stock.

The above chart of Sun Microsystems, Inc. shows 50 day SMA (Simple Moving Average) and 200 day SMA line. The chart shows breakout in 200 day SMA line at 50which gives bearish signal. Investors are advised to sell the stock at 50 as it is enteringthe bearish zone.

Note: For long term investment horizon use 200 day SMA and for short or medium terminvestment horizon use 50 day SMA.


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ANALYSIS OFBANKING SECTOR


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THE INDIAN BANKING SECTOR

Without a sound and effective banking system in India it cannot have a healthy

economy. The banking system of India should not only be hassle free but it should be

able to meet new challenges posed by the technology and any other external and

internal factors.

For the past three decades India's banking system has several outstanding

achievements to its credit. It is no longer confined to only metropolitans or

cosmopolitans in India; in fact, Indian banking system has reached even to the remote

corners of the country. This is one of the main reasons of India's growth process. The

government's regular policy for Indian bank since 1969 has paid rich dividends with the

nationalization of 14 major private banks of India. Not long ago, an account holder hadto wait for hours at the bank counters for getting a draft or for withdrawing his own

money. Today, he has a choice. Gone are days when the most efficient bank transferred

money from one branch to other in two days. Now it is simple as instant messaging or

dial a pizza. Money has become the order of the day.

Post IndependenceIn 1948, the Reserve Bank of India, India's central banking authority, was

nationalized, and it became an institution owned by the Government of India.

In 1949, the Banking Regulation Act was enacted which empowered the Reserve

Bank of India (RBI) "to regulate, control, and inspect the banks in India."

The Banking Regulation Act also provided that no new bank or branch of an existing

bank may be opened without a license from the RBI, and no two banks could have

common directors.


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Liberalization

The new policy shook the Banking sector in India completely. Bankers, till this time,

were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of

functioning. In the early 1990s the then Narsimha Rao government embarked on a

policy of liberalization and gave licenses to a small number of private banks, which

came to be known as New Generation tech-savvy banks, which included banks such as

Global Trust Bank (the first of such new generation banks to be set up) which later

amalgamated with Oriental Bank of Commerce, UTI Bank (now re-named as Axis

Bank), ICICI Bank and HDFC Bank.
http://en.wikipedia.org/wiki/Narsimha_Raohttp://en.wikipedia.org/wiki/Liberalisationhttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/UTI_Bankhttp://en.wikipedia.org/wiki/Liberalisationhttp://en.wikipedia.org/wiki/Narsimha_Rao


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RECENT DEVELOPMENT IN BANKING SECTOR

A retrospect of the events clearly indicates that the Indian banking sector has come far away from the days of nationalization. The Narasimhan Committee laid the foundationfor the reformation of the Indian banking sector. Constituted in 1991, the Committee

submitted two reports, in 1992 and 1998, which laid significant thrust on enhancing theefficiency and viability of the banking sector. As the international standards becameprevalent, banks had to unlearn their traditional operational methods of directed credit,directed investments and fixed interest rates, all of which led to deterioration in thequality of loan portfolios, inadequacy of capital and the erosion of profitability.

The recent international consensus on preserving the soundness of the banking systemhas veered around certain core themes. These are: effective risk management systems,adequate capital provision, sound practices of supervision and regulation, transparencyof operation, conducive public policy intervention and maintenance of macroeconomicstability in the economy.

Until recently, the lack of competitiveness vis--vis global standards, low technologicallevel in operations, over staffing, high NPAs and low levels of motivation had shackledthe performance of the banking industry.

However, the banking sector reforms have provided the necessary platform for theIndian banks to operate on the basis of operational flexibility and functional autonomy,thereby enhancing efficiency, productivity and profitability. The reforms also broughtabout structural changes in the financial sector and succeeded in easing externalconstraints on its operation, i.e. reduction in CRR and SLR reserves, capital adequacynorms, restructuring and recapitulating banks and enhancing the competitive element in

the market through the entry of new banks.

The reforms also include increase in the number of banks due to the entry of newprivate an d foreign banks, increase in the transparency of the banks balance sheetsthrough the introduction of prudential norms and increase in the role of the marketforces due to the deregulated interest rates. These have significantly affected theoperational environment of the Indian banking sector.

To encourage speedy recovery of Non-performing assets, the Narasimhan committeelaid directions to introduce Special Tribunals and also lead to the creation of an AssetReconstruction Fund. For revival of weak banks, the Verma Committee

recommendations have laid the foundation. Lastly, to maintain macroeconomic stability,RBI has introduced the Asset Liability Management System.

The competitive environment created by financial sector reforms has nonethelesscompelled the banks to gradually adopt modern technology to maintain their marketshare. Thus, the declaration of the Voluntary Retirement Scheme accounts for a positivedevelopment reducing the administrative costs of Public Sector banks. Thedevelopments, in general, have an emphasis on service and technology; for the first


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time that Indian public sector banks are being challenged by the foreign banks andprivate sector banks. Branch size has been reduced considerably by using technologythus saving manpower.

The deregulation process has resulted in delivery of innovative financial products at

competitive rates; this has been proved by the increasing divergence of banks in retailbanking for their development and survival.

In order to survive and maintain strong presence, mergers and acquisitions has beenthe most common development all around the world. In order to ensure healthycompetition, giving customer the best of the services, the banking sector reforms havelead to the development of a diversifying portfolio in retail banking, and insurance, trendof mergers for better stability and also the concept of virtual banking.


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SWOT ANALYSIS OF BANKING SECTOR

STRENGTH

Indian banks have compared favorably on growth, asset quality and profitability with

other regional banks over the last few years. The banking index has grown at a

compounded annual rate of over 51 per cent since April 2001 as compared to a 27

per cent growth in the market index for the same period.

Policy makers have made some notable changes in policy and regulation to help

strengthen the sector. These changes include strengthening prudential norms,

enhancing the payments system and integrating regulations between commercial and

co-operative banks.

Bank lending has been a significant driver of GDP growth and employment.

Extensive reach: the vast networking & growing number of branches & ATMs. Indian

banking system has reached even to the remote corners of the country.

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.

WEAKNESS

Public Sector Banks need to fundamentally strengthen institutional skill levelsespecially in sales and marketing, service operations, risk management and the

overall organisational performance ethic & strengthen human capital.

Old private sector banks also have the need to fundamentally strengthen skill levels.

The cost of intermediation remains high and bank penetration is limited to only a few

customer segments and geographies.

Structural weaknesses such as a fragmented industry structure, restrictions on capital

availability and deployment, lack of institutional support infrastructure, restrictive

labour laws, weak corporate governance and ineffective regulations beyond

Scheduled Commercial Banks (SCBs), unless industry utilities and service bureaus.


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Refusal to dilute stake in PSU banks: The government has refused to dilute its

stake in PSU banks below 51% thus choking the headroom available to these banks

for raining equity capital.

Impediments in sectoral reforms: Opposition from Left and resultant cautious

approach from the North Block in terms of approving merger of PSU banks may

hamper their growth prospects in the medium term.

OPPORTUNITY

The market is seeing discontinuous growth driven by new products and services that

include opportunities in credit cards, consumer finance and wealth management onthe retail side, and in fee-based income and investment banking on the wholesale

banking side. These require new skills in sales & marketing, credit and operations.

With increased interest in India, competition from foreign banks will only intensify.

Given the demographic shifts resulting from changes in age profile and household

income, consumers will increasingly demand enhanced institutional capabilities and

service levels from banks.

New private banks could reach the next level of their growth in the Indian banking

sector by continuing to innovate and develop differentiated business models to

profitably serve segments like the rural/low income and affluent/HNI segments;

actively adopting acquisitions as a means to grow and reaching the next level of

performance in their service platforms. Attracting, developing and retaining more

leadership capacity

Foreign banks committed to making a play in India will need to adopt alternative

approaches to win the race for the customer and bu ild a value-creating customer

franchise in advance of regulations potentially opening up post 2009.


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Reach in rural India for the private sector and foreign banks.

Liberalization of ECB norms: The government also liberalised the ECB norms to

permit financial sector entities engaged in infrastructure funding to raise ECBs. This

enabled banks and financial institutions, which were earlier not permitted to raise

such funds, explore this route for raising cheaper funds in the overseas markets.

Hybrid capital: In an attempt to relieve banks of their capital crunch, the RBI has

allowed them to raise perpetual bonds and other hybrid capital securities to shore up

their capital. If the new instruments find takers, it would help PSU banks, left with little

headroom for raising equity.

THREATS

Threat of stability of the system: failure of some weak banks has often threatened the

stability of the system.

Rise in inflation figures which would lead to increase in interest rates.

Increase in the number of foreign players would pose a threat to the Public Sector

Bank as well as the private players.


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BANKING STRUCTURE IN INDIA

According to the RBI in March 2009, number of all Scheduled Commercial Banks

(SCBs) was 171 of which, 86 were Regional Rural Banks and the number of Non-

Scheduled Commercial Banks including Local Area Banks stood at 5. Taking into

account all banks in India, there are overall 56,640 branches or offices, 893,356employees and 27,088 ATMs. Public sector banks made up a large chunk of the

infrastructure, with 87.7 per cent of all offices, 82 per cent of staff and 60.3 per cent of

all automated teller machines (ATMs).

RESERVE BANK OF INDIA

SCHEDULED BANKS

COMMERCIAL BANKS

PUBLIC SECTOR BANKS (27)

SBI AND ASSOCIATES (8)

NATIONALIZED BANKS (19)

PRIVATE BANKS (31)

OLD BANKS (23)

NEW BANKS (8)

CO-OPERATIVE BANKS

URBAN CO-OPERATIVE(52)

STATE CO-OPERATIVE (16)


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TYPES OF BANKS AND BANKING ACTIVITIES

Scheduled And Non-Scheduled Banks

In India the central banking authority is the Reserve Bank of India. It is also referred toas the Apex Bank. It functions under an act called The Reserve Bank of India Act, 1934.

All the banks and other financial institutions operating in India come under themonitoring and control of RBI. RBI controls the banking sector in India through an Actcalled The Banking Regulations Act 1949. In the past, when there were very few banks,RBI used to include all the scheduled banks in its schedule. Now a day, when thenumber of banks has gone up substantially, RBI has to change the schedule every nowand then, hence irrespective of whether a bank finds its name in the schedule to the RBI

Act or not, its schedule status can be found out from its banking license. A Bank that isnot a scheduled bank is referred to as non scheduled bank even in it is having banking

license.

The difference lies in the type of banking activities that a bank can carry out in India. Inthe case of a scheduled bank, it is licensed by the RBI to carry on extensive bankingoperations including foreign exchange operations, whereas, a non-scheduled bank cancarry out only limited operations. There are a number of factors considered by RBI todeclare a bank as a scheduled bank, like the amount of share capital, type of bankingactivities that the bank is permitted to carry out etc. An example of difference between ascheduled and non-scheduled bank is dealing in Foreign Exchange.

Commercial and Co-operative Banks

Commercial banks are by far the most widespread banking institutions in India. Theyprovide major products and services in India. A commercial bank is run on commerciallines, for profits of the organization.

A co-operative bank on the other hand is run for the benefit of a group of members of the co-operative body. A co-operative bank distributes only a very small portion of itsprofit as dividend, retaining a major portion of it in business.

All the nationalized banks in India and almost all the private sector banks arecommercial scheduled banks. There are a large number of private sector co-operativebanks and most of them are non-scheduled banks. In the public sector also, within astate, starting from the State capital, there are State Co-operative Banks and DistrictCentral Co-operative Banks at the District level. Under the District Central Co-operativeBank, there are Co-operative Societies.


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At present, In India, the banks can be bifurcated into following categories .

Public Sector Banks or Nationalized Banks, which are commercial and

scheduled. Examples: State Bank of India, Bank of India etc.

Public Sector Banks, which are co-operative and non-scheduled: These arestate owned banks like the Maharashtra State Co-operative Bank, Junnar Co-operative Society etc.

Private Sector Banks, which are commercial and scheduled - These could beforeign banks, as well as Indian Banks.Examples: Foreign Banks- CITI Bank, Standard Chartered Bank etc.Indian Banks - Bank of Rajasthan Limited, VYSYA Bank Limited etc.

Private Sector Banks, which are co-operative and scheduled- These arelarge co-operative sector banks but which are scheduled banks. Examples:Saraswat Co-operative Bank Limited, Cosmos Co-operative Bank Limited etc.

Private Sector Banks, which are co-operative and non-scheduled -These aresmall co-operative banks but which are non-scheduled. Examples: Local co-operative banks which operate within a town or a city. Example: MaheshSahakari Bank Limited.

Regional Rural Banks. These are state owned. These banks have beenestablished with a view to developing the rural economy by providing, for thepurpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly tothe small and marginal farmers, agricultural labourers and artisans and smallentrepreneurs

Gramin Banks, that are also state owned. They operate at still smaller level thanRRBs and serve at village level.

Foreign banks, These banks have Head Office outside India and branch inIndia, Besides, the Reserve Bank of India (hereinafter referred to as RBI) acts asthe central bank of the country. RBI is responsible for development andsupervision of the constituents of the Indian financial system (which comprisesbanks and non-banking financial institutions) as well as for determining, inconjunction with the central Government, the monetary and credit policies. Theyare also controlled by RBI.


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Retail Banking Vs Wholesale Banking

Whole sale banking typically involves a small number of very large customers such asbig corporations and governments, whereas retail banking consists of a large number of small customers who consume personal banking and small business services.

Wholesale banking is largely inter-bank; banks use the inter-bank markets to borrowfrom or lend to other banks/ large customers, to participate in large bond issues and toengage in syndicated lending. Retail banking is largely intra-bank; the bank itself makesmany small loans.

Most of the Indian public sector banks practice retail banking; they are slowly practicingthe concept of wholesale banking. On the other hand, most of the well establishedforeign banks in India and the recent private sector banks practice wholesale bankingalongside retail banking.

As a result of this difference, the composition of income for a public sector bank is

different. While a major portion of the income for large public sector banks is fromlending operations, in the case of any private sector bank in India, the amount of non-operating income (other than interest income) is substantially higher. The composition of other income is commission on bills/ guarantees/ letters of credit, counseling fees,syndication fees, credit report fees, loan processing fees, correspondent bank chargesetc.

Global Banking

Global Banking activities are an extension of various activities listed above into theinternational market. Global banking primarily consists of trade in international banking

services and establishment of branches and subsidiaries in foreign countries.Special kinds of Bank branches

Most Banks in India have special kind of branches. This is done to reap benefits of specialisation as activities done by these braches are quite complex and requirespecialised knowledge and attention.

Types of some special branches are

1. Foreign exchange branches2. NPA recovery branches3. Service branches dealing in Clearing house operations/Corporate banking and

Industrial finance branches4. Personal banking branches5. Housing finance branch6. SSI branches7. Agricultural finance branches


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What are the sources of funds for banks in India?

The banks in India generate their funds from two types of sources:

Long-Term Sources:

1. Tier one and Tier two Capital in the form of equity/subordinatedebts/debentures/preference shares.

2. Internal accrual generated out of profits.3. Long-term fixed deposits generated from public and corporate clients, financial

institutions, and mutual funds, etc.4. Long-term borrowings from financial institutions like NABARD/SIDBI.

Short-Term Sources:

1. Call money market, i.e., funds generated among inter banking transactionswhere there is online trading of money between bankers.

2. Fixed deposits generated from public and corporate clients, FIs, and MFs, etc.3. Market-linked borrowings from RBI.4. Sale of liquid certificate deposits in the open market.5. Borrowing from RBI under Repo (Repurchase option).6. Short and medium-term fixed deposits generated from public and corporate

clients, mutual funds, and financial institutions, etc.7. Floating in current and saving accounts.8. Short-term borrowings from FIs by way of rated papers placed, etc.


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Key players

Andhra Bank State Bank of India

Allahabad Bank Vijaya Bank

Punjab National Bank HDFC Bank

Axis Bank ICICI Bank

Kotak Mahindra Bank ABN AMRO

Citibank Standard Chartered Bank

HSBC Bank State Bank of Mysore

Bank of Baroda Union Bank of India

Bank of India Yes Bank


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ANALYSIS OF BANKS


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Punjab National Bank

Union Bank of India

KOTAK MAHINDRA BANK

YES BANK


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PNB (Punjab National Bank)


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Profile of PNB

With over 56 million satisfied customers and 5002 offices, PNB has continued toretain its leadership position amongst the nationalized banks. The bank enjoysstrong fundamentals, large franchise value and good brand image. Besides being

ranked as one of India's top service brands, PNB has remained fully committedto its guiding principles of sound and prudent banking. Apart from offeringbanking products, the bank has also entered the credit card & debit cardbusiness; bullion business; life and non-life insurance business; Gold coins &asset management business, etc.

Since its humble beginning in 1895 with the distinction of being the first Indianbank to have been started with Indian capital, PNB has achieved significantgrowth in business which at the end of March 2010 amounted to Rs 435931crore. Today, with assets of more than Rs 2,96,633 crore, PNB is ranked as the3rd largest bank in the country (after SBI and ICICI Bank) and has the 2nd

largest network of branches (5002 offices including 5 overseas branches ).

Punjab National Bank continues to maintain its frontline position in the Indianbanking industry. In particular, the bank has retained its NUMBER ONE positionamong the nationalized banks in terms of number of branches, Deposit,

Advances, total Business, Assets, Operating and Net profit in the year 2009-10.The impressive operational and financial performance has been brought about byBanks focus on customer based business with thrust on CASA depos its, Retail,SME & Agri Advances and with more inclusive approach to banking; better assetliability management; improved margin management, thrust on recovery andincreased efficiency in core operations of the Bank.

SHAREHOLDING PATTERN (%)

57.814.7

19.11

0.880.02

0.014.12

Indian Promoters

Banks,Financial Institutions &Insurance

FII's

Private Corporate Bodies

NRI's/Foreign Others


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Description Details

Industry Bank - Public

House Government

BSE Code 532461

NSE Code PNB

Incorporation Year 1895

Registered Office 7 Bhikaiji Cama Place, New Delhi, New Delhi-110066.

ISINNO INE160A01014

Phone 91-11-26102303/26108205/26196487

E-mail [email protected]

URL www.pnbindia.com


Chairman K.R.KAMATH

Managing Director K.R.KAMATH

Executive Director M.V.TANKSALE & NAGESH PYDAH

Listing BSE,NSE


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Profit & Loss

(Rs. in Crores)Particulars Mar-09 Mar-08 Mar-07 Mar-06 Mar-05 Mar-04

INCOME :Interest Earned 19,326.16 14,265.02 11,236.14 9,584.15 8,459.85 7,778.95Other Income 3,224.42 2,026.46 1,932.71 1,901.00 2,186.36 2,057.16Total I 22,550.58 16,291.48 13,168.85 11,485.15 10,646.21 9,836.11II. Expenditure Interest expended 12,295.30 8,730.86 6,022.91 4,917.39 4,453.11 4,154.99Payments to/Provisions forEmployees 2,924.38 2,461.54 2,352.45 2,114.98 2,121.23 1,654.06

Operating Expenses &Administrative Expenses 663.76 563.61 485.00 455.22 384.44 321.56

Depreciation 191.06 170.23 194.80 186.64 183.28 181.45Other Expenses, Provisions &Contingencies 1,712.66 1,072.78 1,945.94 1,777.05 1,457.07 1,754.57

Provision for Tax 1,701.32 1,264.75 739.21 412.83 494.64 660.79Fringe Benefit tax 12.68 10.45 8.96 9.00 0.00 0.00Deferred Tax -41.46 -31.50 -120.50 172.73 142.32 0.00Total II 19,459.70 14,242.72 11,628.77 10,045.84 9,236.09 8,727.42III. Profit & LossReported Net Profit 3,090.88 2,048.76 1,540.08 1,439.31 1,410.12 1,108.69

Extraordinary Items 1.18 0.70 -254.38 1.89 0.46 0.15Adjusted Net Profit 3,089.70 2,048.06 1,794.46 1,437.42 1,409.66 1,108.54Prior Year Adjustments 0.00 0.00 -13.27 0.00 0.00 0.00Profit brought forward 0.00 15.52 183.49 0.00 0.00 0.00IV. AppropriationsTransfer to Statutory Reserve 772.72 512.19 385.02 359.83 352.53 277.17Transfer to Other Reserves 1,572.74 1,072.54 850.03 680.28 859.93 711.80Trans. to Government

/Proposed Dividend 737.78 479.55 459.73 215.71 197.66 119.72

Balance carried forward toBalance Sheet 7.64 0.00 15.52 183.49 0.00 0.00

Equity Dividend % 200.00 130.00 100.00 90.00 60.00 40.00Earnings Per Share-Unit Curr 94.63 62.77 47.26 44.81 43.98 41.28Earnings Per Share(Adj)-UnitCurr 94.63 62.77 47.26 44.81 43.98 41.28

Book Value-Unit Curr 416.74 341.98 321.65 287.79 248.93 176.81


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Balance Sheet(Rs. in Crores)

Particulars Mar-09 Mar-08 Mar-07 Mar-06 Mar-05 Mar-04

SOURCES OF FUNDS

Capital315.30 315.30 315.30 315.30 315.30 265.30

Reserves Total14,338.33 12,003.04 10,120.16 9,061.06 7,846.00 4,746.50

Deposits209,760.50 166,457.23 139,859.67 119,684.92 103,166.89 87,916.40

Borrowings4,374.36 5,446.56 1,948.86 6,664.87 2,718.29 1,289.06

Other Liabilities & Provisions18,151.15 14,826.64 10,285.14 9,623.64 12,222.24 8,155.88

TOTAL LIABILITIES 246,939.64 199,048.77 162,529.13 145,349.79 126,268.72 102,373.14

APPLICATION OF FUNDS

Cash & Balances with RBI17,058.25 15,258.15 12,372.03 23,394.55 9,460.20 6,742.28

Balances with Banks & money at Call4,354.89 3,572.57 3,273.49 1,397.14 1,628.83 2,078.23

Investments63,385.18 53,991.71 45,189.84 41,055.31 50,672.83 42,125.49

Advances154,702.99 119,501.57 96,596.52 74,627.37 60,412.75 47,224.72

Fixed Assets 2,397.11 2,315.52 1,009.82 1,030.23 965.23 899.84

Other Assets5,041.22 4,409.25 4,087.43 3,845.19 3,128.88 3,302.58

Miscellaneous Expenditure not writtenoff 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL ASSETS 246,939.64 199,048.77 162,529.13 145,349.79 126,268.72 102,373.14 Contingent Liability

103,650.26 96,951.50 66,758.42 53,035.43 43,001.29 32,230.03

Bills for collection 7,561.84 7,104.56 7,942.25 5,704.17 4,046.07 4,813.08


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Key Ratios

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

Per share ratios

Adjusted EPS (Rs) 123.78 97.97 64.94 48.82 45.56 Adjusted cash EPS (Rs) 130.85 104.03 70.34 55.00 51.48 Reported EPS (Rs) 123.86 98.03 64.98 48.84 45.65 Reported cash EPS (Rs) 130.93 104.09 70.38 55.02 51.57 Dividend per share 22.00 20.00 10.00 10.00 6.00 Operating profit per share (Rs) 191.63 151.48 109.81 74.53 57.00 Book value (excl rev res) per share (Rs) 514.77 41.28 341.98 321.65 287.79 Book value (incl rev res) per share (Rs.) 562.09 10.23 390.68 330.97 297.38 Net operating income per share (Rs) 777.82 694.81 505.09 383.89 310.53

Free reserves per share (Rs) 63.79 64.04 63.79 64.29 69.61

Profitability ratios

Operating margin (%) 24.63 21.80 21.74 19.41 18.35 Gross profit margin (%) 23.72 20.93 20.67 17.80 16.44 Net profit margin (%) 15.64 13.76 12.68 12.53 14.50 Adjusted cash margin (%) 16.52 14.60 13.72 14.10 16.35 Adjusted return on net worth (%) 24.04 23.50 18.99 15.17 15.83 Reported return on net worth (%) 24.06 23.52 19.00 15.18 15.86 Return on long term funds (%) 116.11 129.83 111.52 80.76 74.57

Leverage ratios

Long term debt / Equity - - - - - Total debt/equity 15.36 15.96 15.44 13.79 13.19 Owners fund as % of total source 6.11 5.89 6.08 6.76 7.04 Fixed assets turnover ratio 5.89 5.64 4.35 5.48 4.75

Liquidity ratios

Current ratio 0.61 0.27 0.29 0.39 0.39 Current ratio (inc. st loans) 0.02 0.02 0.02 0.02 0.02 Quick ratio 20.47 9.75 9.40 11.10 10.69 Inventory turnover ratio - - - - -

Payout ratios

Dividend payout ratio (net profit) 20.74 23.86 23.40 30.71 14.98 Dividend payout ratio (cash profit) 19.62 22.47 21.61 27.26 13.26 Earning retention ratio 79.25 76.12 76.59 69.28 84.99


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he above chart of Punjab National Bank shows uptrend in stock. The stock is current(25/6/2010) trading at Rs.1045. It has resistance at Rs.1046 and Support at Rs. 836. As the stock is in uptrend it is good stock to buy but investors are advised to wait for some correction in the stock as stock is trading near the resistance level or Buy theStock above Rs. 1046.


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UBI (Union Bank of India)


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Profile of UBI

The dawn of twentieth century witnesses the birth of a banking enterprise par excellence- UNION BANK OF INDIA- that was flagged off by none other than the Father

of the Nation, Mahatma Gandhi. Since that the golden moment, Union Bank of India hasthis far unflinchingly traveled the arduous road to successful banking........ a journey thatspans 88 years.

Union Bank of India is firmly committed to consolidating and maintaining its identity as aleading, innovative commercial Bank, with a proactive approach to the changing needsof the society. This has resulted in a wide gamut of products and services, madeavailable to its valuable clientele in catering to the smallest of their needs. Today, withits efficient, value-added services, sustained growth, consistent profitability anddevelopment of new technologies, Union Bank has ensured complete customer delight,living up to its image of, GOOD PEOPLE TO BANK WITH . Anticipative banking- the

ability to gauge the customer's needs well ahead of real-time - forms the vital ingredientin value-based services to effectively reduce the gap between expectations anddeliverables.

The key to the success of any organization lie with its people. No wonder, Union Bank'sunique family of about 26,000 qualified / skilled employees is and ever will be dedicatedand delighted to serve the discerning customer with professionalism andwholeheartedness.

Union Bank is a Public Sector Unit with 55.43% Share Capital held by the Governmentof India. The Bank came out with its Initial Public Offer (IPO) in August 20, 2002 and

Follow on Public Offer in February 2006. Presently 44.57 % of Share Capital ispresently held by institutions, individuals and others.

Over the years, the Bank has earned the reputation of being a techno-savvy and is afront runner among public sector banks in modern-day banking trends. It is one of thepioneer public sector banks, which launched Core Banking Solution in 2002. Under thissolution umbrella, All Branches of the Bank have been 1135 networked ATMs, withonline Telebanking facility made available to all its Core Banking Customers - individualas well as corporate. In addition to this, the versatile Internet Banking providesextensive information pertaining to accounts and facets of banking. Regular bankingservices apart, the customer can also avail of a variety of other value-added services

like Cash Management Service, Insurance, Mutual Funds and Demat.


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55.43

4.02

17.03

4.370.04

10.37

Indian Promoters


FII's



General Public


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Description Details


House Government

BSE Code 532477

NSE Code UNIONBANK


Registered Office239 Vidhan Bhavan Marg, Nariman Point Union Bank Bhavan,

Mumbai,Maharashtra-400021

ISINNO INE632A01016

Phone 91-22-22024647/22892000/6643/6636

E-mail [email protected]

URL www.unionbankofindia.co.in


Chairman M.V.NAIR

Managing Director M.V.NAIR

Executive Director S.C.KALIA & S.RAMAN

Listing BSE,NSE


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Profit & Loss


INCOME :Interest Earned 13,302.68 11,889.38 9,214.63 7,382.18 5,863.71 4,969.79Other Income 2,092.72 1,521.55 1,349.57 1,221.18 819.67 766.71Total I 15,395.40 13,410.93 10,564.20 8,603.36 6,683.38 5,736.50II. Expenditure Interest expended 9,110.27 8,075.81 6,360.95 4,591.96 3,489.42 2,905.24Payments to/Provisions forEmployees 1,354.50 1,151.88 845.28 873.68 866.79 806.42

Operating Expenses &Administrative Expenses 586.27 576.99 387.11 305.68 278.02 239.66

Depreciation 160.14 136.58 101.82 86.37 86.13 73.29Other Expenses, Provisions &Contingencies 1,351.30 1,113.12 1,008.64 1,365.28 1,068.39 1,100.30

Provision for Tax 758.00 618.00 477.15 527.54 187.00 -107.47Fringe Benefit tax 0.00 12.00 10.00 7.46 32.45 0.00Deferred Tax 0.00 0.00 -13.78 0.00 0.00 0.00Total II 13,320.48 11,684.38 9,177.17 7,757.97 6,008.20 5,017.44III. Profit & LossReported Net Profit 2,074.92 1,726.55 1,387.03 845.39 675.18 719.06

Extraordinary Items -0.47 6.82 -0.22 -0.24 0.69 -0.61Adjusted Net Profit 2,075.39 1,719.73 1,387.25 845.63 674.49 719.67Prior Year Adjustments 0.00 0.00 0.00 0.00 0.00 0.00Profit brought forward 0.83 0.65 0.48 0.55 40.99 77.44IV. AppropriationsTransfer to Statutory Reserve 625.00 518.00 418.00 254.00 203.00 216.00Transfer to Other Reserves 1,124.09 912.89 732.47 386.87 311.04 357.42Trans. to Government /ProposedDividend 325.03 295.48 236.39 204.59 201.58 182.09

Balance carried forward toBalance Sheet 1.63 0.83 0.65 0.48 0.55 40.99

Equity Dividend % 55.00 50.00 40.00 35.00 35.00 35.00Earnings Per Share-Unit Curr 40.14 33.33 26.78 16.19 12.88 15.17Earnings Per Share(Adj)-UnitCurr 40.14 33.33 26.78 16.19 12.88 15.17



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Balance Sheet

(Rs. in Crores)Particulars Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05SOURCES OF FUNDS

Capital 505.12 505.12 505.12 505.12 505.12 460.12

Reserves Total 9,918.66 8,235.24 6,842.58 4,684.75 4,053.04 3,154.32

Deposits 170,039.74 138,702.83 103,858.64 85,180.22 74,094.30 61,830.59

Borrowings 9,215.31 8,774.89 4,760.49 4,215.53 3,974.40 2,020.95

Other Liabilities & Provisions 5,830.61 5,119.56 8,319.87 8,194.06 6,547.02 4,976.65

TOTAL LIABILITIES 195,509.44 161,337.64 124,286.70 102,779.68 89,173.88 72,442.63APPLICATION OFFUNDS

Cash & Balances with RBI 12,468.24 8,992.05 9,454.74 5,917.57 4,387.27 3,647.18

Balances with Banks &money at Call 3,308.45 6,992.88 643.10 2,508.87 2,003.24 2,924.79

Investments 54,403.53 42,996.96 33,822.63 27,981.77 25,917.65 22,792.79

Advances 119,315.30 96,534.23 74,266.91 62,386.43 53,379.96 40,105.08

Fixed Assets 2,305.44 2,335.16 2,200.40 825.00 810.42 823.79

Other Assets 3,708.48 3,486.36 3,898.92 3,160.04 2,675.34 2,149.00

Miscellaneous Expenditurenot written off 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL ASSETS 195,509.44 161,337.64 124,286.70 102,779.68 89,173.88 72,442.63Contingent Liability

72,338.05 81,147.10 62,517.40 41,703.76 40,508.44 39,379.41Bills for collection 4,565.80 3,231.72 3,177.02 1,728.81 4,116.48 9,519.12


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Key Ratios

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

Per share ratios

Adjusted EPS (Rs) 41.09 34.00 27.47 16.74 13.35 Adjusted cash EPS (Rs) 44.26 36.70 29.48 18.45 15.05 Reported EPS (Rs) 41.08 34.18 27.46 16.74 13.37 Reported cash EPS (Rs) 44.25 36.89 29.48 18.45 15.07 Dividend per share 5.50 5.00 4.00 3.50 3.50 Operating profit per share (Rs) 49.70 43.59 33.38 27.32 25.69 Book value (excl rev res) per share (Rs) 174.37 1.07 111.33 93.71 81.02 Book value (incl rev res) per share (Rs.) 206.36 1.08 145.47 102.75 90.24 Net operating income per share (Rs) 290.37 255.42 200.42 152.27 123.92

Free reserves per share (Rs) 58.38 47.04 41.91 41.33 26.15

Profitability ratios

Operating margin (%) 17.11 17.06 16.65 17.94 20.73 Gross profit margin (%) 16.02 16.00 15.65 16.81 19.35 Net profit margin (%) 13.47 12.88 13.20 10.62 10.51 Adjusted cash margin (%) 14.52 13.83 14.17 11.72 11.84 Adjusted return on net worth (%) 23.56 24.34 24.67 17.86 16.47 Reported return on net worth (%) 23.55 24.47 24.66 17.86 16.49 Return on long term funds (%) 135.60 147.75 146.45 126.18 107.10

Leverage ratios

Long term debt / Equity - - - - - Total debt/equity 19.31 19.66 18.47 18.00 18.10 Owners fund as % of total source 4.92 4.83 5.13 5.26 5.23 Fixed assets turnover ratio 4.34 4.04 3.45 5.19 4.57

Liquidity ratios

Current ratio 0.61 0.32 0.44 0.37 0.40 Current ratio (inc. st loans) 0.01 0.02 0.03 0.03 0.03 Quick ratio 24.65 11.26 10.78 8.82 9.29 Inventory turnover ratio - - - - -

Payout ratios

Dividend payout ratio (net profit) 15.66 17.11 17.04 24.20 29.85 Dividend payout ratio (cash profit) 14.54 15.85 15.87 21.95 26.47 Earning retention ratio 84.35 82.80 82.97 75.82 70.11


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The above chart of Union Bank of India shows support at Rs.284, It has brokenresistance at Rs.276. The stock is currently trading at Rs.315 (on 23/6/2010).It isa good stock to buy at current price.


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KOTAK MAHINDRA BANK


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Profile of Kotak Mahindra Bank

The Kotak Mahindra group is a financial organization established in 1985 in India. Itwas previously known as the Kotak Mahindra Finance Limited, a non-banking financialcompany. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship companywas given the license to carry on banking business by the Reserve Bank of India (RBI).Kotak Mahindra Finance Ltd. is the first company in the Indian banking history toconvert to a bank.

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management FinanceLimited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak &Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, andthat's when the company changed its name to Kotak Mahindra Finance Limited.

Kotak Mahindra Bank Limited. The Group's principal activity is to provide banking andrelated services. The Group operates in four business segments: Treasury and BalanceSheet Management Unit (BMU), which includes dealing in money market, forex market,derivatives, investments and primary dealership of government securities; RetailBanking, which includes lending, commercial vehicle finance, personal loans,agriculture finance, other loans and home loans, branch banking, which includes retailborrowings covering savings, current, term deposit accounts and branch bankingnetwork/services including distribution of financial products, and credit cards; CorporateBanking, which comprises wholesale borrowings and lendings and other relatedservices to the corporate sector; As of 31-Mar-2010, it had a network of 249 branches.


48.4

4.13

29.4

2.641.29

0.27

13.87

Indian Promoters


FII's



Others


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Description Details

Industry Bank - Private

House Private

BSE Code 500247

NSE Code KOTAKBANK


Registered Office36-38 A Nariman Bhavan, 227 Nariman Point,Mumbai,Maharashtra-400021

Phone 91-22-66581100

Email [email protected], [email protected]

Web www.kotak.com

ISINNO INE237A01010

Industry Bank - Private

Chairman SHANKAR ACHARYA (Part Time)

Executive viceChairman & MD

UDAY KOTAK

Director ANAND MAHINDRA & ASIM GHOSH

Listing BSE,NSE


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Profit & Loss


INCOME : Interest Earned 3,255.62 3,065.14 2,535.36 1,319.10 718.89 420.30 Other Income 733.79 575.49 601.08 360.65 293.77 143.70 Total I 3,989.41 3,640.63 3,136.44 1,679.75 1,012.66 564.00

II. Expenditure Interest expended 1,397.47 1,546.60 1,309.56 699.24 338.92 194.82 Payments to/Provisions for Employees 583.48 583.63 519.23 292.98 171.39 85.86 Operating Expenses & Administrative Expenses 465.65 502.98 445.48 264.41 177.50 107.99 Depreciation 90.00 69.56 50.86 34.74 29.60 23.46 Other Expenses, Provisions & Contingencies 641.72 511.83 413.58 185.14 121.66 33.48 Provision for Tax 281.39 190.28 171.79 91.77 65.36 38.55 Fringe Benefit tax 0.00 5.70 5.50 3.50 2.50 0.00 Deferred Tax -31.41 -46.05 -73.49 -33.40 -12.50 -5.05 Total II 3,428.30 3,364.53 2,842.51 1,538.38 894.43 479.11

III. Profit & Loss Reported Net Profit 561.11 276.10 293.93 141.37 118.23 84.89 Extraordinary Items -1.92 0.15 0.64 0.30 0.17 0.42 Adjusted Net Profit 563.03 275.95 293.29 141.07 118.06 84.47 Prior Year Adjustments 0.00 0.00 0.00 216.76 0.00 -0.03

Profit brought forward 648.94 528.17 354.18 286.36 194.42 182.04

IV. Appropriations Transfer to Statutory Reserve 140.28 69.03 73.50 35.50 29.75 21.25 Transfer to Other Reserves 72.19 58.48 16.18 228.06 -25.65 33.65 Trans. to Government /Proposed Dividend 31.67 27.82 30.26 26.75 22.19 17.58 Balance carried forward to Balance Sheet 965.91 648.94 528.17 354.18 286.36 194.42 Equity Dividend % 8.50 7.50 7.50 7.00 6.00 12.50 Earnings Per Share-Unit Curr 16.06 7.93 8.40 4.22 3.73 6.71 Earnings Per Share(Adj)-Unit Curr 16.06 7.93 8.40 4.22 3.73 2.68



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Balance Sheet


SOURCES OF FUNDS

Capital348.14 345.67 344.67 326.16 309.29 123.32

Reserves Total4,191.77 3,559.86 3,249.03 1,307.34 543.45 627.55

Deposits23,886.47 15,644.00 16,423.65 11,000.09 6,565.92 4,299.54

Borrowings6,140.51 6,734.01 5,119.25 5,099.75 1,609.23 901.81

Other Liabilities &

Documents

Equity Research1