Fundamental and Technical Analysis

1.1 INTRODUCTION

Fundamental analysis refers to the study of the core underlying elements that influence the
economy of a particular entity. It is a method of study that attempts to predict price action and
market trends by analyzing economic indicators, government policy and societal factors (to
name just a few elements) within a business cycle framework.

Fundamental Analysis: Two Approaches

While carrying out fundamental analysis, investors can use either of the following
approaches:

1. Top-down approach: In this approach, an analyst investigates both international and
national economic indicators, such as GDP growth rates, energy prices, inflation and interest
rates. The search for the best security then trickles down to the analysis of total sales, price
levels and foreign competition in a sector in order to identify the best business in the sector.

2. Bottom-up approach: In this approach, an analyst starts the search with specific
businesses, irrespective of their industry/region.

Fundamental Analysis: How Does It Work?
Fundamental analysis is carried out with the aim of predicting the future performance of a
company. It is based on the theory that the market price of a security tends to move towards
its 'real value' or 'intrinsic value.' Thus, the intrinsic value of a security being higher than the
security‘s market value represents a time to buy. If the value of the security is lower than its
market price, investors should sell it.

The steps involved in fundamental analysis are:

1. Macroeconomic analysis, which involves considering currencies, commodities and indices.
2. Industry sector analysis, which involves the analysis of companies that are a part of the
sector.
3. Situational analysis of a company.
4. Financial analysis of the company.
5. Valuation

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Fundamental Analysis: Benefits

Fundamental analysis helps in:

1. Identifying the intrinsic value of a security.

2. Identifying long-term investment opportunities, since it involves real-time data.

Fundamental Analysis: Drawbacks

The drawbacks of fundamental analysis are:

1. Too many economic indicators and extensive macroeconomic data can confuse novice
investors.

2. The same set of information on macroeconomic indicators can have varied effects on the
same currencies at different times.

3. It is beneficial only for long-term investments.

STEPS TO FUNDAMENTAL ANALYSIS:

1. Economic analysis

2. Industry analysis

3. Company analysis

ECONOMIC ANALYSIS:

To get an insight into the compexities of the stock market, one need to develop a sound
economic understanding and be able to interpret the impact of important economic indicators
on stock markets.Important economicanalysis indicators:- inflation,foreignexchange reserves,
government policy, interest rates, are some of the important economic indicators.

INDUSTRY ANALYSIS:

The second face of fundamental analysis consists of a detailed analysis of a specific industry;
its characteristics, its past record, its future prospects. The purpose of industry analysis is to
identify those industries which are likely to grow in the future and to invest in equity share of
companies seleccted from such industries.

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COMPANY ANALYSIS:

At the company level, fundamental analysis may involve examination of financial data,
management, business concept and competition. Financial statements are the medium by
which a company discloses information concerning its financial performance. The
fundamental analyst use the quantitative information gleaned from financial statements to
make investments decisisons.

TECHNICAL ANALYSIS:

Technical analysis is concerned with predicting future price trends from historical price and
volume data. The underlying axiom of technical analysis is that all fundamentals (including
expectations) are factored into the market and are reflected in exchange rates.

HOW IS TECHNICAL ANALYSIS DONE?

Technical analysis is based on the premise that price discounts every aspect and information
in the market. Technical analysis is also based on the belief that price movements are never
completely arbitrary and follow a trend. A technical analyst believes that it is possible to
identify an ongoing trend, trade based on the trend and generate profits as the trend unfolds.

The methods used for technical analysis are:

1. Moving averages: This method is used to identify various support and resistance levels for
the short and long term. The most commonly used moving averages are the 30-day moving
average (DMAs) and 200-day moving average (DMAs).

2. Charts and patterns: Extensive charts are made based on historical data on price
movements. These charts are used to identify patterns and shapes, such as double top, double
bottom, head and shoulders and triple bottom.

BENEFITS OF TECHNICAL ANALYSIS

The benefits of technical analysis are:

1. Helps to identify a trend, allowing investors to make predictions on future trends.

2. Allows investors to judge the direction of the current trend and enables them to gauge the
best time to takea position in the market.

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3. When it is used in conjunction with fundamental analysis and company and industry
related news, it minimizes the chances of an investor incurring losses.

DRAWBACKS OF TECHNICAL ANALYSIS

The drawbacks of technical analysis are:

1. It draws heavily on a person‘s opinion or interpretation.

2. It is more a study of probabilities than of actual value.

3. Useful only for short-term investments.

TECHNICAL INDICATORS:

There is a vast number of elaborated technical indicators:

MOVING AVERAGE –MA
RELATIVE STRENGTH INDEX — RSI : The Relative Strength Index Technical
Indicator (RSI) is a price-following oscillator that ranges between 0 and 100.
When Wilder introduced the Relative Strength Index, he recommended using a
14-day RSI.. Since then, the 9-day and 25-day Relative Strength Index indicators
have also gained popularity.
ADVANCE/DECLINE LINE: The ―advance/decline line‖ shows, for some
period, the cumulative difference between advancing and declining issues.
CLOSING TICK: ―Closing tick‖ is the difference between the number of shares
that closed on an uptick and those that closed on a downtick.
CLOSING ARMS: ―Closing arms‖ or ―trin‖ (trading index) is the ratio of average
trading volume in declining issues to average trading volume in advancing issues.
Z-BLOCK TRADES: ―zBlock trades‖ are trades in excess of 10,000 shares.
HI-LO-CLOSE CHART: A hi-lo-close chart is a bar chart showing, for each day,
the high price, low price, and closing price.
CANDLESTICK CHART: A candlestick chart is an extended version of the hi-lo-
close chart. It plots the high, low, open, and closing prices, and also shows
whether the closing price was above or below the opening price.
POINT AND FIGURE CHARTS: Point-and-figure charts are a way of showing
only major price moves and their direction. A ―major‖ up move is marked with an

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―X,‖ while a ―major‖ down move is marked with an ―O.‖ A new column starts
every time there is a change in direction
HEAD AND SHOULDERS FORMATION: Once a chart is drawn, analysts
examine it for various formations or pattern types in an attempt to predict stock
price or market direction in the case of head-and-shoulders formation. When the
stock price ―pierces the neckline‖ after the right shoulder is finished, it‘s time to
sell.
ODD-LOT: The ―odd-lot‖ indicator looks at whether odd-lot purchases are up or
down. HEMLINE: Followers of the ―hemline‖ indicator claim that hemlines
tend to rise in good times.
SUPER BOWL: The Super Bowl indicator forecasts the direction of the market
based on whether the National Football Conference or the American Football
Conference wins. A win by the National Football Conference is bullish.
BETA: Beta is a risk measure comparing the volatility of a stock's price
movement to the general market.
MOMENTUM: Momentum measures the speed of price change and provides a
leading indicator of changes in trend.

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1.2 INDUSTRY PROFILE

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 Bank of Hindustan, which started in 1790;
both 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 quasi-central
banks, as did their 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 in 1955.

STRUCTURE OF BANKING INDUSTRY:

Banking system plays an important role in a country‘s economy. It promotes growth and
development of the country. Indian money market comprises organized and the unorganized
institutions. The organized and unorganized institutions in the Indian banking system serve a
source of short term credit to agriculture, industry, trade and commerce.

In the Indian banking structure the Reserve Bank of India is the central bank. It regulates,
direct and controls the banking and financial institutions in the country. There are three high
banking institutions, namely, RBI, NABARD and EXIM Bank. There are separate financial
institutions catering to the needs of different sectors of the economy. Development Banks,
Investment Banks, Co-operative Banks, Land Development Banks, Commercial Banks in
public and private sectors, NABARD, RRBs, EXIM Bank, etc. The indigenous bankers and
moneylenders dominate unorganized sector.

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The Indian banking structure can be seen from the chart shown under:

Banking System in India

Reserve bank of India (Controlling Authority)

Development Financial institutions Banks

IFCI IDBI ICICI NABARD NHB IRBI EXIM Bank ISIDBI

Commercial Regional Rural Land Development Co-operative
Banks Banks Banks Banks

Public Sector Banks Private Sector Banks

SBI Groups Nationalized Banks Indian Banks Foreign Banks

The chart reveals that there are several apex banking institutions working at the national
level. RBI is the highest banking authority regulating, directing and controlling all the
banking and financial institutions in the country. There are development banks, namely IDBI,
SIDBI, ICICI at the national level and State Financial Corporations and State Industrial
Development Corporations which have been set-up.

There are 29 public sector banks. Co-operative banks have three tier system. At the village
level there is Primary Agriculture Co-operative Society(PACs), at the district level there is
Central Co-operative Bank and at the state level there is State Co-operative Bank. Co-
operative banks provide short term and medium loans to the agriculture sector. Land
Development Banks provide long term agriculture credit. It comprises Primary Land
Development Bank(PLDB) at ht district level and State Land Development Bank(SLDB) at

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the state level. RRBs provide loans and advances to the rural poor and NABARD is an apex
body regulating, directing and controlling the financial and banking institutions providing
finance for the agriculture and rural development.

TYPES OF BANKS

Modern age is the age of specialization with the changing situation worldwide, bank
functions have also undergone a major change. Economic conditions and financial needs of a
country are different than those of other countries throughout the world. Some financial
institutions deal in accepting deposits and making loans and advances to different sectors of
the economy. Some institution makes loans and advances for medium and short term, while
others are meant for long term advances. Some are financing industrial sector and foreign
trade while others are advancing loans to agriculture sector.

In broader sense of the term banks may be classified into following categories:

Central Bank
Commercial Banks
Development Banks
Investment Banks
Co-operative Banks
Foreign Exchange Banks
Savings Banks
Export-Import Bank
Specialized National Banks
Indigenous Bankers
International Financial Institutions

Indian Banking Sector: current status

The Rs 64 trillion (US$ 1.22 trillion) Indian banking industry has made exceptional progress
in last few years, even during the times when the rest of the world was struggling with
financial meltdown. Even today, financial institutions across the world are facing the
repercussions of the turmoil but the Indian ones are standing stiff under the regulator's
watchful eye and hence, have emerged stronger.

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Ratings agency Moody's believe that strong deposit base of Indian lenders and Government's
persistent support to public sector and private banks would act as positive factors for the
entire system amidst the negative global scenario.

The sector has undergone significant developments and investments in the recent past. Some
of them are discussed hereafter along with the key statistics and Government initiatives
pertaining to the same.

Indian Banking Sector: Key Statistics

According to the Reserve Bank of India (RBI)'s Quarterly Statistics on Deposits and Credit of
Scheduled Commercial Banks', March 2011, Nationalised Banks, as a group, accounted for
53.0 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates
accounted for 21.6 per cent. The share of New private sector banks, Old private sector banks,
Foreign banks and Regional Rural banks in aggregate deposits was 13.4 per cent, 4.6 per
cent, 4.4 per cent and 3 per cent respectively.

With respect to gross bank credit also, nationalised banks hold the highest share of 52.8 per
cent in the total bank credit, with SBI and its associates at 22.1 per cent and New Private
sector banks at 13.2 per cent. Foreign banks, Old private sector banks and Regional Rural
banks held relatively lower shares in the total bank credit with 4.9 per cent, 4.6 per cent and
2.4 per cent respectively.

Another statement from RBI has revealed that bank advances grew 17.08 per cent annually as
on December 16 while bank deposits rose 18.03 per cent.

RBI data shows that India raised US$ 1.6 billion through external commercial borrowings
(ECBs) in November 2011 for new projects, capital outlay et al. 78 companies raised US$ 1.3
billion under automatic route and US$ 253 million was raised under the approval route (it
requires case-by-case approval by the regulator).

India's foreign exchange reserves stood at US$ 297 billion as on December 30, 2011.

In recent years, deposits under non-resident Indians (NRI) schemes have witnessed an
upsurge. There was an inflow Rs 14,763 crore (US$ 2.83 billion) under NRI deposits in
2010-11, which was 6.5 per cent higher from 2009-10. In 2011, the total of NRI deposits was
Rs 2,30,812 crore (US$ 44.2 billion), compared to Rs 2,27,078 crore (US$ 43.5 billion) in
2010.

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Indian Banking Sector: Recent Developments

The US Export-Import Bank, with a commitment of US$ 7 billion, is on a way to diversify its
portfolio in India by financing projects in education, healthcare and agriculture. After
Mexico, India is the second biggest investment destination for the bank as the entity
anticipates the country to become the largest market in next 12-18 months.

India Infrastructure Finance Company Ltd (IIFCL) and IDBI Bank have inked a five-year
memorandum of understanding (MoU) to launch infrastructure debt fund (IDF) schemes. The
IDF, for which IDBI Bank and IIFCL would play strategic investors, is expected to get
launched by the end of February 2012.

With 'green power' projects getting highly popular in India, especially in the states of Gujarat
and Rajasthan, banks are increasingly opening up to projects from non-conventional (solar
and wind) energy space. After receiving project proposals that were meant for a particular
industry/consumer or group of industries/consumers for their own use, banks are now getting
projects that entail commercial viability (25-100 mega watt).

With an intension to strengthen its hold in Southern India, the Uco Bank is planning to add 11
more branches in Andhra Pradesh to its 66-branch-strong network in the state. The bank has
made exemplary progress in recent past with 2,004 branches in the country and four abroad.

Government Initiatives on banking sector:

Agreeing to Khandelwal Committee's recommendation, the Government has said that state-
run banks will get two Chief Executives and the large banks would get three Executive
Directors (EDs) in their management panel. Banks with a business of more than Rs 300,000
crore (US$ 57.44 billion) are considered to be large entities. The third ED, however, would
be responsible for human resource development (HRD) and technology in the bank.

"Non-resident Indians (NRIs) are crucial investors for banks as they form 10 per cent of total
personal segment deposits," said Samir Kumar Bhattacharya, General anager (NRI), State
Bank of India (SBI). In order to encourage them, the RBI had deregulated interest rates on
Non-Resident (External) Rupee Deposits and Ordinary Non-Resident Accounts (on
December 16, 2011) due to which banks are able to offer competitive rates to NRIs. This
move has further made India an attractive investment destination for them.

Further, the Government of India has decided to infuse Rs 6,000 crore (US$ 1.15 billion) in
public sector banks during the remaining 2011-12 to ensure that the entities meet regulatory

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requirements. In 2010-11, the Government had provided Rs 20,157 crore (US$ 3.86 billion)
as its capital support to public sector banks.

In order to prepare public sector banks for neck-to-neck competition ahead and improve their
performance in future, the Ministry of Finance has set new benchmarks for them to achieve.
The new benchmarks, that would calculate their functional and financial capability to qualify
for capital infusion, entail three performance indicators - savings and current deposit ratio,
employee-branch ratio and profit per employee.

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1.3 COMPANY PROFILE

Sharekhan Ltd. is one of the leading retail stock broking house of SSKI Group which is
running successfully since 1922 in the country. It is the retail broking arm of the Mumbai-
based SSKI Group, which has over eight decades of experience in the stock broking
business. Sharekhan offers its customers a wide range of equity related services including
trade execution on BSE, NSE, Derivatives, depository services, online trading, investment
advice etc. The firm‘s online trading and investment site - www.sharekhan.com –
was launched on Feb 8, 2000. The site gives access to superior content and transaction
facility to retail customers across the country. Known for its jargon-free, investor friendly
language and high quality research, the site has a registered base of over one lakh customers.
The content-rich and research oriented portal has stood out among its contemporaries
because of its steadfast dedication to offering customers best-of-breed technology and
superior market information. The objective has been to let customers make informed
decisions and to simplify the process of investing in stocks.

On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable
application that emulates the broker terminals along with host of other information relevant
to the Day Traders. This was for the first time that a net based trading station of this caliber
was offered to the traders. In the last six months Speed Trade has become a de facto standard
for the Day Trading community over the net.

Sharekhan‘s ground network includes over 331 centers in 137 cities in India which provide a
host of trading related services.Sharekhan has always believed in investing in technology to
build its business. The company has used some of the best-known names in the IT
industry, like Sun Microsystems, Oracle, Microsoft, Cambridge Technologies,
Nexgenix, Vignette, Verisign Financial Technologies India Ltd, Spider Software Pvt Ltd.
To build its trading engine and content. The Morakhiya family holds a majority stake in
the company. HSBC, Intel & Carlyle are the other investors. With a legacy of more than 80
years in the stock markets, the SSKI group ventured into institutional broking and corporate
finance 18 years ago. Presently SSKI is one of the leading players in institutional broking
and corporate finance activities. SSKI holds a sizeable portion of the market in each of these
segments. SSKI‘s institutional broking arm accounts for 7% of the market for Foreign

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Institutional portfolio investment and 5% of all Domestic Institutional portfolio
investment in the country. It has 60 institutional clients spread over India, Far East, UK
and US. Foreign Institutional Investors generate about 65% of the organization‘s
revenue, with a daily turnover of over US$ 2 million. The Corporate Finance section
has a list of very prestigious clients and has many ‗firsts‘ to its credit, in terms of the size of
deal, sector tapped etc. The group has placed over US$ 1 billion in private equity deals.
Some of the clients include BPL Cellular Holding, Gujarat Pipavav, Essar, Hutchison,
Planetasia, and Shopper‘s Stop.

PROFILE OF THE COMPANY

Name of the company : Sharekhan ltd.

Year of Establishment : 1925

Headquarter : Sharekhan SSKI A-206 Phoenix House
Phoenix Mills Compound Lower Parel Mumbai-
aharashtra, INDIA- 400013.

Nature of Business : Service Provider

Services : Depository Services, Online
Services and Technical Research.

Number of Employees : Over 3500

Website : www.sharekhan.com

Slogan : Your Guide to The Financial Jungle.

(VISION MISSION)

Future Plans:

 2, 00,000 plus retail customers being serviced through centralized call centers/ web
solutions.

 Branches / Semi branches servicing affluent / aggressive traders through high skill
financial advisor.

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 250 independent investment managers/ franchisee servicing 50,000 highly valued
clients.

 New initiatives Portfolio management Services and commodities trading.

PRODUCTS AND SERVICES OF SHAREKHAN LIMITED:

The different types of products and services offered by Sharekhan Ltd. are as follows:

• Equity and derivatives trading

• Depository services

• Online services

• Commodities trading

• Dial-n-trade

• Portfolio management

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FINANCIAL PRODUTS AVAILABLE AT SHAREKHAN:

SERVICES:

Always wanted help on what the stock market is all about? Been wondering about
how all this works? Well, you don't need to fret any more - the Sharekhan FirstStep is a
brand new program designed especially for those who are new to investing in shares. All
you have to do is open a Sharekhan FirstStep account and we'll guide you through the
investing process.

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1.4 NEED FOR THE STUDY

The investors who trade doesn‘t make much analysis before investing in a particular stock,
when comapared to other nations Indian investors make 90% loss, only 10% make profit
because they lack in analysing a stock. This study mainly helps the investors to analyse the
stocks fundamentally and technically, which provides an opportunity to know about the
position of the stocks for both longer and shorter duration of time. Thus analysing the stock
fundamentally and technically provides an opportunity to make profit when compared to
others who doesn‘t analyse it

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1.5 SCOPE OF THE STUDY

The project entitled ―Fundamental and technical analysis of banking sector in India‖ will
enable from the investors point of view to refer the performance of the Banks, their relative
growth and thereby decide on to buy or sell the particular stock. The project is limited to
fundamental and technicall analysis of selected banks for a particular period other analysis
and banks which are not in this list are not taken in to consideration

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1.6 OBJECTIVES OF THE STUDY

Primary Objective:

 To analyze the banking stocks fundamentally and technically.
 To find the intrinsic value of the banking stocks
 To analyze whether the shares of banking stocks are overpriced or underpriced in the
secondary market.
 To provide investment decisions.

Secondary-Objectives:

 To study the various theories of technical analysis and fundamental analysis for
banking stocks that are chosen
 To understand the movement and performance of stocks to take decision to invest.
 Understanding and analyzing the factors that affect the movement of stock prices in
the Indian Stock Markets

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1.7 LIMITATIONS OF THE STUDY

The scope of study was limited due to some constraints given below:-

1. Analysis is only a means not an end. The analysis has been done on the basis of my own
interpretations and up to my best knowledge but every analyst have his or her own
interpretations and suggestions.

2. It does not take into consideration the time taken for the completion of the jobs.

3. The non-monetary factors are not taken into consideration for the analysis

4. No personal contacts with stakeholders of companies also a limitation for analyzing the
project.

5. Error due to some oversight or misinterpretation.

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LITERATURE REVIEW

“Only buy something that you’d be perfectly happy to hold if the market shut down
for 10 years”

-Warren Buffet
Investment Guru

“Prevailing wisdom is that markets are always right, I assume they are always
wrong”

- George Soros,
Chairman, Soros Fund Management

According to Michal Parness, Founder & CEO
Investors don‘t Make Money in the Stock Market. One reason the institutions make so
much money is that they are trading. They make money every time you buy or sell.
They make money whether you win or lose. That means that when you‘re investing, you‘re
basically just sitting there. You‘re not going anywhere. You‘re not making money as an
investor.
Trading the Trend: The Only Way to Make Money in the
Market
If you don‘t know this already, ―Trend Trading‖ means trading trends based on
human emotions. Not lagging indicators. Not complex statistical analysis and not Ph.D.
level mathematical equations. With trend trading, you look for market movement. That
could mean stocks that are going to move up or down during the course of a day
(intraday). You‘ll play the gaps up and down, often several days a week.
The ―Trend trading‖ means being aware and taking advantage of trends like the run-ups
that happen around earning sessions. These are trends that have worked time and time again
in the market. They consistently yield results

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Australian National University
Stephen Sault
Australian National University - Faculty of Economics &
Commerce
March 28, 2006
While the fundamental and technical analysis literatures invest considerable
effort in assessing their respective ability to explain share prices, they invariably
do so without reference to each other. In this context, we propose an equity
valuation model integrating both fundamental and technical analysis and, in doing so,
recognize their potential as complements rather than as substitutes. Testing confirms the
complementary nature of fundamental and technical analysis by showing that, while each
performs well in isolation, models integrating both have superior explanatory power.
While our findings relate to the valuation of shares, they also have implications for other
valuation exercises.

Keywords: Equity valuation models, Fundamental information, Technical
information

JEL Classifications: G12, G14, M41

Although the fundamental and technical analysis literatures invest considerable effort in
assessing their respective ability to explain share prices, they invariably do so
without reference to each other. In this context, we propose an equity valuation
model integrating both fundamental and technical analysis and, in doing so, recognize
their potential as complements rather than as substitutes. Testing confirms the
complementary nature of fundamental and technical analysis by showing that, although
each performs well in isolation, models integrating both have superior explanatory power.
While our findings relate to the valuation of shares, they also have implications for other
valuation exercises.
Accepted Paper Series

Accounting & Finance, Vol. 49, No. 1, pp. 21-36, March 2009

ISSN 1822-6515 ISSN 1822-6515 EKONOMIKA IR VADYBA: 2009. 14 ECONOMICS
& MANAGEMENT:

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RELEVANCE OF FUNDAMENTAL ANALYSIS ON THE BALTIC EQUITY
MARKET
Julia Bistrova, Natalja Lace

Riga Technical University, Latvia,
The main target of the present research was to discover the importance of
fundamental analysis on the Baltic equity markets. The hypothesis that fundamental
analysis is not able to generate substantial additional value to the performance of the
portfolio comprised of Baltic enterprises stocks was proved.
The relevance and need of fundamental analysis was checked by analyzing the
performances of portfolios, which were created on the basis of key fundamental ratios:
ROE, equity ratio, ROIC, net debt to assets as well as PE and PB. Naturally,
the companies with better than average ratios were selected to form stock portfolios. The
findings of the conducted study demonstrate that neither of the mentioned ratios helped
in the creating portfolio, performance of which would beat market‘s performance. The
only exception was price to earnings ratio, which proved that cheap companies seem to
be attractive to the investors.
It was decided to look closer at the major performers and to find out whether there are
any common patterns among the winners and the losers of the Baltic equity markets.
Basically, equity investors ignored financial situation of the companies
(profitability, stability of balance sheets) and focused mainly on assessing their growth
opportunities and attractiveness of business model. So, investors were mainly
f o r w a r d -looking when making company selection. As a result, major sufferers
performance-wise were the companies with limited growth potential or total business
model erosion.

The authors of the research have also checked whether the trading volumes of the stock
have any impact on the performance. The study results show that in the phase of the
major capital inflows (2001-2006), indeed, most liquid companies tended to reward
investors with higher performances. However, the shareholders of these companies
suffered the most in financial years 2007 and 2008, when there was a major selling
across stock market all over the world.

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By Sandy Jadeja 9- Oct -2004

Should you use Technical or Fundamental analysis to make your
decisions?
Volumes have been written about the different ways to forecast or predict market
movement. Traditionally, there are two distinct schools of thought that an individual
may choose from, and that being Fundamental analysis or Technical analysis.
By choosing fundamental analysis, your decisions are based upon underlying
economic factors, cash flows, and price earnings. This information will aim to tell you
why a stock will move.
Technical analysis aims to show you how and when a stock will move. This
method discounts all news and information regarding the value of the stock. In other
words, you only pay attention to a chart. The saying ―a picture is worth a thousand
words‖ truly summarizes this concept nicely.
You can of course choose to use a combination of both if you prefer. This would imply
that when the stock you are looking at becomes undervalued fundamentally, you would
wait for a technical setup to get you in to the market.
Deciding on which method is appropriate and gives bigger returns is truly a
matter of opinion. Respectively, both methods have the same goal; to determined
market direction. I know of a number of individuals who only use one or the other and is
equally successful with phenomenal returns.
It becomes interesting when one speaks to traders from each school. The fundamental
traders believe that charts are a waste of time and provide no real sense as to why one
would make trading decisions based on indicators and repetitive patterns. This group
are essentially bargain hunters. They want to buy stocks which they feel are under priced
and will return to a normal value at a later stage. Fundamental traders often hold stocks
for longer periods of time compared to technical traders.
On the other hand, the technical traders believe that numbers do not lie and that
information based on value, supply and demand are already factored into the price.
They also argue that people can be predictable and that these behaviors‘ occur in the
form of price patterns.
These patterns repeat with a degree of predictability and therefore can be used to
forecast future price movements. Technical traders generally hold positions for shorter
periods of time compared to fundamental traders.

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Clearly both avenues are important, and one must make careful decisions before jumping
into trading without having an objective. I have always said that finding a method,
style or strategy depends on ones personality. If you are thinking of long term investing
then the fundamental approach may suit your needs whereas if you are looking for short
term market moves, then technical analysis can provide a myriad of systems to
accommodate your personal style. Some of which we shall take a look at further into the
course.

WHERE TO FINDTHE NUMBERS
Richard Seddon, head of Online Share Trading at the Standard

Online Share Trading is operated by Standard Financial Markets (Pty)
Ltd

IT‘S CLEAR THAT analysis – whether fundamental or technical – requires a suite of
tools. And though those tools are specialized, the good news is that most are readily
available to the novice investor. Richard Seddon, head of Online Share Trading at the
Standard, says that the discount broking website www.securities.co.za provides many of
those tools to its broking customers as part of its product offering. On the fundamental
analysis side the website carries top-down insights from Standard Bank‘s economic
research division, plus notes on individual companies from its rated research team. For
bottom-up fundamental analysis the website contains the financial statements for the past
10 years of every single company listed on the JSE. Over and above that raw data it also
provides key ratios, such as price: earnings (p:e) multiples, beta, return on equity (ROE)
and many others. We‘ll deal with those more fully in two weeks‘ time when we work
with bottom-up fundamental analysis. But the website isn‘t the only place where investors
can find some of those key ratios: the share price pages of the daily and weekly press
(including Fin week) publish information in addition to share prices, including p:e
ratios, dividend yields, market capitalization and share price changes over specific
time periods. The website can also provide more complex bottom-up analysis tools by
filtering shares that meet certain criteria. Those could include searching for shares that fall
within a prescribed p:e ratio or dividend yield range. In addition, it provides a database
of share movements for specified time periods, such as the past month, past three
months, past year and past 10 years. The website also provides forecast data. That‘s
provided by I-Net Bridge, a company that collates analysts‘ forecasts and

24

recommendations to determine the average (or consensus) projected earnings per share and
market view of the share: whether analysts recommend it as a buy, sell or hold. On the
technical analysis side, the Online Share Trading website provides full interactive
charting tools with 10 years‘ worth of data. In addition, customers receive a discount
when downloading third-party technical analysis data, paying as little as R90/month. Over
and above all that, the website provides other interesting information, such as
directors‘ dealings, 52-week highs and lows, exchange rates, international indices,
news from both Reuters and the JSE, key shareholders of each company, dividends
that are payable, as well as the biggest gainers and losers and the most active shares on
the JSE in any one trading day. It‘s everything that a full-service broker would provide
– plus more

25

RESEARCH METHODOLOGY
Research methodology is the systematic way to solve the research problem. It is a system of
models, procedures and techniques used to find the result of research problems. So the
research methodologies not only take about research methods but also consider the logic
behind the method we use in the context of our research study.

3.1 Research design:
Analytical research has been used for this study.

3.2 Nature of data:
Secondary data has been used for this study.

3.3 Sources of data:
Data are collected from the websites, the following websiteare used to get the
balance sheet details, ratios, historical prices, close price and to get the company information.
The websites are
www.yahoofinance.com
www.moneycontrol.com
www.nseindia.com
www.investopaedia.com

3.4 Tools for the analysis:
FUNDAMENTAL ANALYSIS:

Economic analysis:

 GDP
 Inflation Rate
 FDI

Industry analysis:

 SWOT Analysis of the industry
 Porters five force Analysis
 PEST Analysis

Company analysis:

26

 Comparative balance sheet
 Comparative income statement
 Ratio analysis

Forecasting analysis:

 Trend analysis

TECHNICAL ANALYSIS:

 Moving average
 Relative Strength Index
 Relative Momentum Index
 MACD

27

DATA ANALYSIS AND INTERPREITATION

4.1 FUNDAMENTAL ANALYSIS:

4.1.1 ECONOMIC ANALYSIS:

4.1.1.1 GROSS DOMESTIC PRODUCT (GDP):

The total market value of all final goods and services produced in a country in a
given year, equal to total consumer, investment and government spending, plus the value of
exports, minus the value of imports. The change in GDP is shown in percentage and it
implies the GDP growth rate.

Table-4.1.1.1 Analysis of GDP

Year March 08 March 09 March 10 March 11
GDP 9.7 6.1 6.5 8.4
Percentage - -3.6 0.4 1.9
change
Chart-4.1.1.1

12

10

8

6

4

2

0
2008 2009 2010 2011

INFERENCE:

It is clear from the above that the percentage of GDP was decreased from 9.7% to
6.1% from 2008 to 2009 & the same level has been increased from 6.1% to 6.5% from 2009
to 2010 respectively and again it steadly incresed to 8.4% in the year 2011.The increase &
decrease in the GDP was due to the change in the industrial production and services.

28

4.1.1.2 INFLATION RATE:

Inflation is a rise in the general level of prices of goods and services in an
economy over a period of time. When the price level rises, each unit of currency buys fewer
goods and services. Inflation is erosion in the purchasing of power of money, a loss of real
value in the internal medium of exchange and unit of account in the economy. A measure of
price inflation is the inflation rate and it is annualized from the price index. Inflation effects
on an economy with both positive and negative rates.

Table-4.1.1.2 Analysis of inflation rate

Year March08 March09 March10 March11
Rate 7.8 8 14.8 8.87
%change 1.1 0.2 6.8 5.93
Chart-4.1.1.2

16

14

12

10

8

6

4

2

0
2008 2009 2010 2011

INFERENCE:

It is clear from the above that the percentage of inflation rate was continuously
increasing from 7.8% & 8% from 2006 to 2007 & in the following years too, but due to the
effective control measures inflation rate has reduced to 8.87% in the year 2011. The
continuous growth of inflation rate is because of the decrease in the purchasing power of the
currency.

29

4.1.2 INDUSTRY ANALYSIS:

4.1.2.1 SWOT ANALYSIS FOR THE INDUSTRY

STRENGTH

 Indian banks have compared favourably on growth, asset quality and profitability with
other regional banks over the last few years. The banking index has growth at a
compounded annual rate of over 51% since April 2001 as compared to a 27% 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.
 The government‘s regular policy for Indian bank since 1969 has paid rich dividends
with the nationalization of 14 major private banks of India.
 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.
 India has 88 scheduled commercial banks (SCBS)-27 public sector banks (that is with
the Government of India holding a stake) after merger a NEW BANK of India in Punjab
National Bank in 1933, 29 private banks (these do not have government stake; they may
be publically listed and traded on stock exchanges) and 31 foreign banks. They have a
combined network of over 53,000 branches and 17,000 ATMs. According to a report by
ICRA Limited, a rating agency, the public sector banks hold over 75% of total assets of
the banking industry, with the private and foreign banks holding 18.2% and 6.5%
respectively.
 Foreign banks will have the opportunity to own up to 74% of India private sector banks
and 20% of government bonds.

30

WEAKNESS

 PSBs need to fundamentally strengthen institutions skill levels especially in sale and
marketing, service operations, risk management and overall organizational
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 segment and demographics.
 Structural weakness such 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.
 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 form 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 on the
retail side, and in fee-base income and investment banking on the whole sale banking
side. These require new skills in sales & marketing, credit and operations.
 Banks will no longer enjoy windfall treasury gains that the decade –long secular decline
in interest rates provided. This will expose the weaker banks.
 With increased interest in India, competition from foreign banks wills only intensity.
 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
profitability

31

 Serve segments like the rural/low income and affluent/HNI segment; actively adopting
acquisitions as a means to grow and reaching the next level of performance in their
service platforms. Attracting, developing and reaching 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 build a value-creating customer
franchise in advance of regulations potentially opening up post 2009. At the same time,
they should stay in the game for potential acquisition opportunities as and when they
appear in the near term. Maintaining a fundamentally long-term value creation mindset.
 Reach in rural India for the private sector and foreign banks.
 With the growth in the Indian economy expected to be strong for quite some time
especially in its services sector the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong.
 The Reserve Bank of India (RBI) has approached a proposal from the government to
amend the Banking Regulation Act to permit banks to trade in commodities and
commodity derivatives.
 Liberalization of ECB norms: The government also liberalized the ECB norms to permit
financial sector entities engaged in infrastructure funding to raise ECBs. This enables
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. Significantly, FII and NRI investment limits in these
securities have been fixed at 49%, compared to 20% foreign equity holdings allowed in
PSU banks
THREATS

 Threat of stability of the system failure of some weak banks often threatened the
stability of the system.
 Rise in inflation figures which would lead to increase in interest in interest rates.
 Increase in the number of foreign players would pas well as those a threat to the PSB
as well as the private players.

32

4.1.2.2 PORTER FIVE FORCE ANALYSIS:

Bargaining power of
suppliers is very low

Nature of suppliers
Few alternatives
RBI rules and
regulations
Suppliers are not
concentrated
forward integration

Threat of competitors

Barriers to entry Large no of banks Threat of
High market growth substitute
rate
Low switching costs
Product
Undifferentiated
differentiation very
services Non banking
difficult
High fixed cost financial sector
Licensing
High exit barriers increasing rapidly
requirement
Deposits in posts
Stock Market

Bargaining power of
consumer very high

Large no. of alternatives
Low switching costs
Undifferentiated services
Full information about the
market

33

RIVALRY AMONG COMPETING FIRMS

Rivalry among competitors is very fierce in Indian Banking Industry.

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

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

2. High market growth rate

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

3. Homogegeous product and services

The services banks offer is more of homogeneous which makes the company to offer the
same service at a lower rate and eat their competitor market‘s share.

4. Low switching cost

Costumers switching cost is very low, they can easily switch from one bank to another bank
and very little loyalty exist .

5. Undifferanciated services

Almost every bank provides similar services. Every bank tries to copy each other services
and technology which increase level of competition.

6. High fixed cost
Fixed cost is very high
7. High exit barriers

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

34

8. Low government regulations

There are low regulations exist to start a new business due lpg policy adopted by India.

BARGAINING POWER OF SUPPLIERS

Banking industry is governed by Reserve Bank of India. Reserve Bank of India is the
authority to take monetary action which leads to direct impact on circulation of money in the
Economy. The rules and regulation lay down by RBI.

Suppliers of banks are depositors .these are those people who have excess money and prefer
regular income and safety. In banking industry suppliers have low bargaining power.

1. Nature of suppliers
Suppliers of banks are those people who prefer low risk and those who need regular income
and safety as well. Banks best place for them to deposits theirs surplus money.

2. Few alternatives

Very few alternatives are available so the bargaining power is less

3. Rbi rules and regulations

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

4. Suppliers not concentrated

Banking industry suppliers sure not concentrated. There are numerous with negligible portion
of offer .so this reduce their bargaining power.

BARGAINING POWER OF CONSUMERS

In today world, Customer is the King. Banks offers different services According to clients
need and requirement. They offer loans at Prime Lending Rate (PLR) to their trust worthy
clients and higher rate to others clients.

Customers of banks are those who take loans and uses services of banks. Customers have
high bargaining power. These are

35

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

2. Low switching cost

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

3. Undiffenciated service

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

4. Full information about the market

Customers have full information about the market due to globalization and digitalization
Consumers have become advance and sophisticated .they are aware with each market
condition so banks have to be more competive and customer friendly to serve them.

For good creditworthy borrowers bargaining power is high due to the availability of large
number of banks

POTENTIAL ENTRY OF NEW COMPETITORS

Reserve Bank of India has laid out a stagnant rules and regulation for new entrant in Banking
Industry. We expect merger and acquisition in the banking industry in near future. Hence, the
industry is less porn of new competitor.

Barriers to an entry in banking industry no longer exist. So lots of privet and foreign banks
are entering in the market. Competitors can come from an industry to ‗disinter mediate‗bank
product differentiation is very difficult for banks and exit is difficult. So every bank strives to
survive in highly competitive market so we see intense competitive can mergers and
acquisitions. Government policies are supportive to start new bank. There is less statutory

36

requirement needed to start a new venture? Every bank to tries to achieve economics of scale
through use of technology and selecting and training manpower .

There are public sector banks, private sector and foreign banks along with non banking
finance companies competing in similar business segments.

POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCTS

Every day there is one or the other new product in financial sector.

Banks are not limited to tradition banking which just offers deposit and lending. In addition,
today banks offers loans for all products, derivatives, ForEx, Insurance, Mutual Fund,
Demit account to name a few. The wide range of choices and needs give a sufficient room
for new product development and product enhancement.

Substitute products or services are those, which are different but satisfy the same set of
customers. In private banking industry following are the substitutes:

 NBFC: Non-banking financial Institutions play an important role in giving financial
assistance. Mobilization of financial resources outside the traditional banking system has
witnessed a tremendous growth in recent years in the India. NBFC is a close substitute of
banking in respect of raising funds. Borrower can easily raise funds from NBFC because
it requires less formal procedure for getting funds compare to private banks.
 Post Office Products: Post office is also providing some service like fixed deposit
facility, saving account, recurring account etc. The interest rate of saving account is
higher than private banks. It is fully secured by the government so people who do not
want to take risk for them post office saving is good substitute.
 Government Bond: Govt. Bond also attracts savings from the general public. It is less
risky and more secured as compare to savings in private banks.
 Mutual Funds: Mutual funds are also now proving as good substitutes for banks. They
assure for providing high return with less time in comparison of banks. The
administrative expenses are also very low as compared to banks. Investment in Mutual
funds is more flexible than investment in banks.
 Stock Market: People who are ready to bear risk and wants a high return on their
investment, stock market is a good substitute for them. Day by day investors are moving
towards stock market as interest rate in banks are decreasing. So now stock market has
proved as a big competitor for baking sector.

37

 Debentures: Debentures is also proved as a good substitute of bank‘s fixed deposit as
return on debenture is fixed and high. There are different types of debentures, which
attract various classes of investors.
 Other Investment Alternatives: Now common people‘s attraction is shifting from banks
to other various alternatives such as gold, precious metals, land, small savings etc. As we
can see the growing trend in these alternatives in comparison of decreasing interest rates
in banks.

4.1.2.3 PEST ANALYSIS:

PEST Analysis for Banking Services

Political/ Legal

Influences which have an impact on banking services and consumer confidence include the
following:

 State provision of pensions
 Government encouragement of savings and investment (for e.g. via tax benefits)
 Regulatory control and protection (to prevent the collapse of financial institutions and
 protect investors money)

Economic

Economic factors are key variables which have an impact on the activity in the
banking services sector. The level of consumer activity is governed by income levels and
personal wealth. As income levels grow, more discretionary income is available to spend on
banking services. Consumer confidence in the economy and in job security also has a major
impact; if lean times are foreseen ahead, savings will take priority over loans and other forms
of expenditure. Consumers may also seek easy access savings and be willing to tie up their
money for longer periods with potentially more attractive investments.

The main economic factors that should be monitored with regard to banking services
marketing are as follows:

 Personal and household disposable income
 Discretionary income levels
 Employment levels

38

 The rate of inflation
 Income tax levels and taxation structures
 Savings and investment levels and trends
 Stock market performance
 Consumer spending & Consumer credit

Socio-cultural

Many demographic factors have an important bearing on banking services markets.

 Changing attitude towards consumer credit and debt
 Changing employment patterns
 Numbers of working women
 The ageing population
 Marriage/divorce/birth rates
 Consumption trends

Technological

Technology has a major impact on many industries including financial services and banking
in particular. ATM services which not only provide cash but also allow for bill payments,
deposits and instant statements are widely used. From the customers‘ viewpoint, technology
has played a major role in the development of the process whereby the service is delivered.
Automated queuing systems have made visits to the bank easier and more convenient.
Telephone Banking and insurance services are now being used in place of the traditional
branch-based service process. Technology has also played a major role within organizations,
bringing about far greater efficiency through computerized records and transaction systems
and also in business development, through the setting up of detailed customer databases for
effective segmentation and targeting.

The main technological developments fall within these categories;

 Process developments
 Information storage and handling
 Database system

39

4.1.3 COMPANY ANALYSIS

COMPARATIVE BALANCE SHEET

4.1.3.1 COMPARATIVE BALANCE SHEET OF ICICI BANK AS ON 31ST MARCH
2008 AND 2009

PARTICULARS ICICI(2008) ICICI(2009) INCREASE OR DECREASE IN
2008 OVER 2009
Liabilities AMT(crores) AMT(crores) AMT(crores) %
Share Capital 1,462.68 1,463.29 0.61 0.041704269
Reserves & 45,357.53 48,419.73 3,062.20 6.751249462
Surplus
Net Worth 46,820.21 49,883.02 3,062.81 6.541640885
Secured Loans 65,648.43 67,323.69 1,675.26 2.551866054
Unsecured Loans 2,44,431.05 2,18,347.82 -26,083.23 -10.67099699
TOTAL 3,56,899.69 3,35,554.53 -21,345.16 -5.980716879
LIABILITIES
ASSETS
Gross Block 7,036.00 7,443.71 407.71 5.794627629
(-) Acc. 2,927.11 3,642.09 714.98 24.42614046
Depreciation
Net Block 4,108.90 3,801.62 -307.28 -7.478400545
Capital Work in 0 0 0.00 0
Progress.
Investments. 1,11,454.34 1,03,058.31 -8,396.03 -7.533156627
Inventories 0 0 0.00 0
Sundry Debtors 0 0 0.00 0
Cash And Bank 38,041.13 29,966.56 -8,074.57 -21.22589418
Loans And 2,46,190.71 2,42,474.47 -3,716.24 -1.509496439
Advances
Total Current 2,84,231.84 2,72,441.03 -11,790.81 -4.148307241
Assets
Current 40,067.37 40,934.58 867.21 2.164379644

40

Liabilities
Provisions 2,828.02 2,811.85 -16.17 -0.571778135
Total Current 42,895.38 43,746.43 851.05 1.984013197
Liabilities
NET CURRENT 2,41,336.45 2,28,694.60 -12,641.85 -5.238267986
ASSETS
Misc. Expenses 0 0 0.00 0
TOTAL ASSETS 3,56,899.69 3,35,554.53 -21,345.16 -5.980716879
(A+B+C+D+E)

INFERENCE:

 The unsecured loans have been reduced by nearly 10.68% when compared to previous
year. The total liabilities have reduced by 5.98% for the financial year 08-09.
 The investments have been reduced by 7.5331%, when compared to previous year.
The cash and bank balance have reduced by 21.22% when compared to previous
financial year.
 The net current assets have reduced by 5.23% when compared to previous year.

2009 AND 2010

2009OVER 2010
Liabilities AMT(crores AMT(crores AMT(crores) %
) )
Share Capital 1,463.29 1,114.89 -348.40 -23.8093611
Reserves & 48,419.73 50,503.48 2,083.75 4.303514291
Surplus
Net Worth 49,883.02 51,618.37 1,735.35 3.478839092
Secured Loans 67,323.69 94,263.57 26,939.88 40.0154537
Unsecured Loans 2,18,347.82 2,02,016.60 -16,331.22 -7.479451821

41

TOTAL 3,35,554.53 3,47,898.53 12,344.00 3.67868674
LIABILITIES
ASSETS
Gross Block 7,443.71 7,114.12 -329.59 -4.427765187
(-) Acc. 3,642.09 3,901.43 259.34 7.120636777
Depreciation
Net Block 3,801.62 3,212.69 -588.93 -15.4915536
Progress.
Investments. 1,03,058.31 1,20,892.80 17,834.49 17.30524205
Cash And Bank 29,966.56 38,873.69 8,907.13 29.7235652
Loans And 2,42,474.47 2,00,420.53 -42,053.94 -17.34365684
Advances
Total Current 2,72,441.03 2,39,294.22 -33,146.81 -12.16659987
Assets
Current Liabilities 40,934.58 12,563.22 -28,371.36 -69.30902919
Provisions 2,811.85 2,937.96 126.11 4.484947632
Total Current 43,746.43 15,501.18 -28,245.25 -64.56584
Liabilities
NET CURRENT 2,28,694.60 2,23,793.04 -4,901.56 -2.143277541
ASSETS
Misc. Expenses 0 0 0.00

TOTAL ASSETS 3,35,554.53 3,47,898.53 12,344.00 3.67868674
(A+B+C+D+E)

INFERENCE:

 Share capital have reduced by nearly 24% when compared to the previous financial
year.
 Unsecured loan have reduced by 7.48% due to the reduced trust worthiness of the
bank of the loan secker, secured loan have increased by 40% this shows that the bank

42

relies more on the collateral securities rather than credit worthiness of the loan seeker,
which is exactly shown by reduction in unsecured loan.
 Total liabilities have increased due to the non payment of debts by the loan seekers.
 Investments have increased by 17% this shows a good sign of business opportunity
for the bank.
 Loans and advances have reduced by 17.35% due to the rise in interest rate.
 Current liablity have reduced by 64.56% this shows a good sign of effective asset
management,current assets have reduced by 2.14% this shows that the bank should
concentrate in recovering its debts with a year so that the money value doesn‘t get
reduced.

2010 AND 2011

2010OVER 2011
Share Capital 1,114.89 1,152.11 37.22 3.338445945
Reserves & 50,503.48 53,938.82 3,435.34 6.802184721
Surplus
Net Worth 51,618.37 55,090.94 3,472.57 6.727391818
Secured Loans 94,263.57 1,09,554.28 15,290.71 16.22122947
Unsecured Loans 2,02,016.60 2,25,602.11 23,585.51 11.67503562

TOTAL 3,47,898.53 3,90,247.32 42,348.79 12.17274186
LIABILITIES
ASSETS
Gross Block 7,114.12 9,107.47 1,993.35 28.01962857
(-) Acc. 3,901.43 4,363.21 461.78 11.83617289
Depreciation
Net Block 3,212.69 4,744.26 1,531.57 47.6725112
Progress.
Investments. 1,20,892.80 1,34,685.96 13,793.16 11.40941396

43

Cash And Bank 38,873.69 34,090.08 -4,783.61 -12.30552078
Loans And 2,00,420.53 2,32,713.37 32,292.84 16.11254097
Advances
Total Current 2,39,294.22 2,66,803.45 27,509.23 11.49598599
Assets
Current 12,563.22 12,691.89 128.67 1.024180107
Liabilities
Provisions 2,937.96 3,294.46 356.50 12.13427004
Total Current 15,501.18 15,986.35 485.17 3.129890757
Liabilities
NET 2,23,793.04 2,50,817.10 27,024.06 12.07546937
CURRENT
ASSETS

TOTAL 3,47,898.53 3,90,247.32 42,348.79 12.17274186
ASSETS
(A+B+C+D+E)

INFERENCE:

 Net worth has increased by 6.73% when compared to previous financial year this
shows a good sign of asset improvement.
 Secured loans have increased by 16.62% this shows a good sign in reling the security
of an individual rather than credit worthiness of an individual, but that doesn‘t affect
the unsecured loans, which has increased by 11.68%.
 Total liability has increased by 12.18% when compared to previous fiscal year.
 Investment made by the bank has considerably increased to 11.41% when compared
to previous year. cash and bank balance maintained by the bank have reduced by
12.31%.
 Current assets have increased by 12% when compared to previous financial year.

44

4.1.3.4 COMPARATIVE BALANCE SHEET OF HDFC BANK AS ON 31ST MARCH
2008 AND 2009

PARTICULARS HDFC(2008) HDFC(2009) INCREASE OR DECREASE IN
2008OVER 2009
Share Capital 1,114.89 1,152.11 37.22 3.338445945
Reserves & 50,503.48 53,938.82 3,435.34 6.802184721
Surplus
Net Worth 51,618.37 55,090.94 3,472.57 6.727391818
Secured Loans 94,263.57 1,09,554.28 15,290.71 16.22122947
Unsecured Loans 2,02,016.60 2,25,602.11 23,585.51 11.67503562
TOTAL 3,47,898.53 3,90,247.32 42,348.79 12.17274186
LIABILITIES
ASSETS

Gross Block 7,114.12 9,107.47 1,993.35 28.01962857
(-) Acc. 3,901.43 4,363.21 461.78 11.83617289
Depreciation
Net Block 3,212.69 4,744.26 1,531.57 47.6725112

Progress.
Investments. 1,20,892.80 1,34,685.96 13,793.16 11.40941396

Cash And Bank 38,873.69 34,090.08 -4,783.61 -12.30552078
Loans And 2,00,420.53 2,32,713.37 32,292.84 16.11254097
Advances
Total Current 2,39,294.22 2,66,803.45 27,509.23 11.49598599
Assets
Current 12,563.22 12,691.89 128.67 1.024180107
Liabilities

45

Provisions 2,937.96 3,294.46 356.50 12.13427004
Total Current 15,501.18 15,986.35 485.17 3.129890757
Liabilities
NET CURRENT 2,23,793.04 2,50,817.10 27,024.06 12.07546937
ASSETS

TOTAL ASSETS 3,47,898.53 3,90,247.32 42,348.79 12.17274186
(A+B+C+D+E)

INFERENCE:

 Secured loans have increased by 16.22%, unsecured loans has increased by 11.67%
when compared to previous financial year.
 Total liabilities have increased by 12.71% when compared to previous financial year.
 Investments made by the bank has 11.41% this shows a good sign of expansion of the
banking activity.
 Cash and bank balance maintained by the bank has been reduced by 12.31%.
 Current assets have increased by 11.50%,total assets have increased by 12.17% when
compared to previous year this shown a good sign of asset improvement activity.

2009 AND 2010

2009OVER 2010
Share Capital 826.3 457.74 -368.56 -44.60365485
Reserves & 14,226.43 21,064.75 6,838.32 48.06771622
Surplus
Net Worth 15,052.73 21,522.49 6,469.76 42.98064205
Secured Loans 2,685.84 12,915.69 10,229.85 380.8808417
Unsecured Loans 1,42,811.58 1,67,404.44 24,592.86 17.2204943
TOTAL 1,60,550.15 2,01,842.63 41,292.48 25.71936557

46

LIABILITIES
ASSETS

Gross Block 3,956.63 4,707.97 751.34 18.98939249
(-) Acc. 2,249.90 2,585.16 335.26 14.90110672
Depreciation
Net Block 1,706.73 2,122.81 416.08 24.37878282

Progress.
Investments. 58,817.55 58,607.62 -209.93 -0.356917281

Cash And Bank 17,506.62 29,942.40 12,435.78 71.03472858
Loans And 1,05,239.88 1,31,785.74 26,545.86 25.22414507
Advances
Total Current 1,22,746.50 1,61,728.14 38,981.64 31.75784238
Assets
Current 22,222.94 19,975.42 -2,247.52 -10.11351333
Liabilities
Provisions 497.68 640.52 142.84 28.70117344
Total Current 22,720.62 20,615.94 -2,104.68 -9.263303554
Liabilities
NET 1,00,025.87 1,41,112.20 41,086.33 41.07570372
CURRENT
ASSETS

TOTAL 1,60,550.15 2,01,842.63 41,292.48 25.71936557
ASSETS
(A+B+C+D+E)

I

47

NFERENCE:

 Networth have increased by nearly 43% when compared to previous financial year,
this shows a good sign that assets is more than liablities.
 Secured loans have increased by 380%, due to effective advertisement and increase in
trust worthiness of the bank.
 Total liabilit have increased by 25% when compared to previous financial year.
 Cash and bank balance maintained by the bank has increased by 71%, loans and
advances have increased by 25.22% when compared to previous financial year.
 Net current assets have increased by 41%, and total assets have increased by 25.71%,
this shows a good sign of effective asset quality management.

2010 AND 2011

2010 OVER 2011
Liabilities AMT(crores AMT(crores AMT(crores) %
) )
Share Capital 457.74 465.23 7.49 1.636300083
Reserves & 21,064.75 24,914.04 3,849.29 18.27360875
Surplus
Net Worth 21,522.49 25,379.27 3,856.78 17.91976672
Secured Loans 12,915.69 14,394.06 1,478.37 11.44631065
Unsecured Loans 1,67,404.44 2,08,586.41 41,181.97 24.60028539

TOTAL 2,01,842.63 2,48,359.73 46,517.10 23.0462217
LIABILITIES
ASSETS
Gross Block 4,707.97 5,244.21 536.24 11.39004709
(-) Acc. 2,585.16 3,073.56 488.40 18.89244766
Depreciation
Net Block 2,122.81 2,170.65 47.84 2.253616668
Progress.

48

Investments. 58,607.62 70,929.37 12,321.75 21.02414328
Cash And Bank 29,942.40 29,668.83 -273.57 -0.913654216
Loans And 1,31,785.74 1,74,583.74 42,798.00 32.47544082
Advances
Total Current 1,61,728.14 2,04,252.58 42,524.44 26.29377918
Assets
Current Liabilities 19,975.42 28,100.71 8,125.29 40.67644135
Provisions 640.52 892.15 251.63 39.28526822
Total Current 20,615.94 28,992.86 8,376.92 40.63321876
Liabilities
NET CURRENT 1,41,112.20 1,75,259.72 34,147.52 24.19884319
ASSETS

TOTAL ASSETS 2,01,842.63 2,48,359.73 46,517.10 23.0462217
(A+B+C+D+E)

INFERENCE:

 Net worth have increased by 17.92%, when compared to previous financial year.
 Secured loans have increased by 11.44%, while unsecured loans have increased by
24.61%, this shows a good sign of lending policy maintained by the bank.
 Total liabilities have increased by 23% when compared to previous financial year.
 Investments made by the bank have increased by 21% when compared to previous
financial year
 Current liablities have increased by 41%, this shows that the bank short term lialities
are getting higher year by year.
 Net current assets have increased by 24% and total assets have increased by 23%

49

4.1.3.7 COMPARATIVE BALANCE SHEET OF AXIS BANK AS ON 31ST MARCH
2008 AND 2009

PARTICULARS AXIS(2008) AXIS(2009) INCREASE OR DECREASE IN
2008 OVER 2009
Share Capital 359.9 360.22 0.32 0.088913587
Reserves & 8,410.79 9,854.58 1,443.79 17.16592615
Surplus
Net Worth 8,770.69 10,214.80 1,444.11 16.46518119
Secured Loans 5,624.04 10,185.48 4,561.44 81.10610878
Unsecured Loans 87,626.22 1,17,374.11 29,747.89 33.94861721

TOTAL 1,02,020.95 1,37,774.38 35,753.43 35.04518435
LIABILITIES
ASSETS

Gross Block 1,384.70 1,741.86 357.16 25.79331263
(-) Acc. 590.33 726.45 136.12 23.05828943
Depreciation
Net Block 794.37 1,015.40 221.03 27.82456538

Capital Work in 128.48 57.48 -71.00 0
Progress.
Investments. 33,705.10 46,330.35 12,625.25 37.45798114

Cash And Bank 12,504.24 15,016.90 2,512.66 20.09446396
Loans And 62,445.66 85,301.91 22,856.25 36.60182309
Advances
Total Current 74,949.90 1,00,318.81 25,368.91 33.84782368
Assets
Current 7,305.80 9,527.65 2,221.85 30.4121383
Liabilities

50

Provisions 251.1 420.02 168.92 67.27200319

Total Current 7,556.90 9,947.67 2,390.77 31.63691461
Liabilities
NET 67,393.00 90,371.14 22,978.14 34.09573695
CURRENT
ASSETS

TOTAL 1,02,020.95 1,37,774.38 35,753.43 35.04518435
ASSETS
(A+B+C+D+E)

INFERENCE:

 Reserves and surplus have increased by 17.16% when compared to previous financial
year.
 Secured loans have increased by 81%, while unsecured loans have increased by 34%,
which shows a effective lending policy of the bank.
 Total liabilities have increased by 35%.
 Investments made by the bank have increased by37.45% when compared to previous
financial year.
 Loans and advances have increased by 36%.
 Total assets have increased by 35%, when compared to previous financial year.

2009 AND 2010

2009 OVER 2010
Share Capital 360.22 405.35 45.13 12.52845483
Reserves & 9,854.58 15,639.27 5,784.69 58.70052301
Surplus
Net Worth 10,214.80 16,044.62 5,829.82 57.07228727

51

Secured Loans 10,185.48 17,169.55 6,984.07 68.56888433
Unsecured Loans 1,17,374.11 1,41,300.22 23,926.11 20.38448683
TOTAL 1,37,774.38 1,74,514.39 36,740.01 26.66679393
LIABILITIES
ASSETS

Gross Block 1,741.86 2,107.98 366.12 21.01891082
(-) Acc. 726.45 942.79 216.34 29.78043912
Depreciation
Net Block 1,015.40 1,165.18 149.78 14.75083711

Capital Work in 57.48 57.24 -0.24 0
Progress.
Investments. 46,330.35 55,974.82 9,644.47 20.81674324

Cash And Bank 15,016.90 15,206.44 189.54 1.262177946
Loans And 85,301.91 1,08,244.18 22,942.27 26.89537667
Advances
Total Current 1,00,318.81 1,23,450.62 23,131.81 23.05829784
Assets
Current 9,527.65 5,566.52 -3,961.13 -41.57509984
Liabilities
Provisions 420.02 566.94 146.92 34.9792867
Total Current 9,947.67 6,133.46 -3,814.21 -38.3427476
Liabilities
NET CURRENT 90,371.14 1,17,317.16 26,946.02 29.81706328
ASSETS

TOTAL ASSETS 1,37,774.38 1,74,514.39 36,740.01 26.66679393
(A+B+C+D+E)

52

INFERENCE:

 Reserves and surplus have increased by nearly 58%, when compared to previous
financil year.
 Secured loans have increased by 68%.
 Total liablity have increased by 26.67%, when compared to previous financial year.
 Investments have increased by 20.81%.
 Current liabalities have reduced by 41.57%, this shows a good sign of reduction in
current liabilities.
 Total assets have increased by 26.67%, due to effective asset management.

2010 AND 2011

2010 OVER 2011
Share Capital 405.35 410.55 5.20 1.282841988
Reserves & 15,639.27 18,588.28 2,949.01 18.85644279
Surplus
Net Worth 16,044.62 18,998.83 2,954.21 18.41246474
Secured Loans 17,169.55 26,267.88 9,098.33 52.99108014
Unsecured Loans 1,41,300.22 1,89,237.80 47,937.58 33.92604767
TOTAL 1,74,514.39 2,34,504.51 59,990.12 34.37545752
LIABILITIES
ASSETS

Gross Block 2,107.98 3,426.49 1,318.51 62.54850615
(-) Acc. 942.79 1,176.03 233.24 24.7393375
Depreciation
Net Block 1,165.18 2,250.46 1,085.28 93.1426904

Capital Work in 57.24 22.69 -34.55 0
Progress.

53

Investments. 55,974.82 71,991.62 16,016.80 28.61429478

Cash And Bank 15,206.44 21,408.66 6,202.22 40.78679822
Loans And 1,08,244.18 1,47,039.95 38,795.77 35.84097547
Advances
Total Current 1,23,450.62 1,68,448.61 44,997.99 36.45019361
Assets
Current 5,566.52 7,540.98 1,974.46 35.47027586
Liabilities
Provisions 566.94 667.88 100.94 17.80435319
Total Current 6,133.46 8,208.86 2,075.40 33.83734466
Liabilities
NET CURRENT 1,17,317.16 1,60,239.74 42,922.58 36.58678747
ASSETS

TOTAL ASSETS 1,74,514.39 2,34,504.51 59,990.12 34.37545752
(A+B+C+D+E)

INFERENCE:

 Secured loans have increased by 53%, while unsecured loans have increased by 34%,
 Total liabilities have increased by 34.57%.
 Investments have increased by 28.62% towards expansion activity of the business.
 Cash and bank balance have increased by 40.78% when compared to previous
financial year.
 Current liabilities have increased by 35.47%.
 Total assets have increased by 34.37%, when compared to previous financial year.

54

4.1.3.10 COMPARATIVE BALANCE SHEET OF BANK OF BARODA AS ON 31ST
MARCH 2008 AND 2009

PARTICULAR BARODA(200 BARODA(200 INCREASE OR DECREASE IN
S 8) 9) 2008 OVER 2009
Share Capital 365.53 365.53 0.00 0
Reserves & 10,678.40 12,470.01 1,791.61 16.77788807
Surplus
Net Worth 11,043.93 12,835.54 1,791.61 16.22257656
Secured Loans 3,927.05 5,636.09 1,709.04 43.51969035
Unsecured 1,52,034.13 1,92,396.95 40,362.82 26.54852565
Loans
TOTAL 1,67,005.10 2,10,868.58 43,863.48 26.26475479
LIABILITIES
ASSETS
Gross Block 3,787.14 3,954.13 166.99 4.409396009
(-) Acc. 1,360.14 1,644.41 284.27 20.90005441
Depreciation
Net Block 2,427.01 2,309.72 -117.29 -4.832695374
Progress.
Investments. 43,870.07 52,445.88 8,575.81 19.54820223
Cash And Bank 22,299.29 24,087.12 1,787.83 8.017430151
Loans And 1,11,003.15 1,48,564.01 37,560.86 33.83765235
Advances
Total Current 1,33,302.44 1,72,651.13 39,348.69 29.5183569
Assets
Current 12,594.41 16,538.15 3,943.74 31.31341603
Liabilities
Provisions 0 0 0.00 0

55

Total Current 12,594.41 16,538.15 3,943.74 31.31341603
Liabilities
NET 1,20,708.03 1,56,112.98 35,404.95 29.33106439
CURRENT
ASSETS
TOTAL 1,67,005.10 2,10,868.58 43,863.48 26.26475479
ASSETS
(A+B+C+D+E)

INFERENCE:

year.
26.54%, this shows the effective credit policy of the bank.
 Total liabilites have increased by 26.26%
 Investments made by the bank have increased by 19.54%, when compared to the
previous financial year.
 Loans and advances have increased by 33.83%
 Current liabilities have increased by 31.31%, when compared to previous financial
year.
 Total assets have increased by 26.26, due to effective assest management activity.

MARCH 2009 AND 2010

PARTICULAR BARODA(200 BARODA(201 INCREASE OR DECREASE IN
S 9) 0) 2009 OVER 2010
Share Capital 365.53 365.53 0.00 0
Reserves & 12,470.01 14,740.86 2,270.85 18.21049061
Surplus
Net Worth 12,835.54 15,106.38 2,270.84 17.69181507

56

Secured Loans 5,636.09 13,350.08 7,713.99 136.8677576
Unsecured 1,92,396.95 2,41,044.26 48,647.31 25.28486548
Loans
TOTAL 2,10,868.58 2,69,500.73 58,632.15 27.80506702
LIABILITIES
ASSETS
Gross Block 3,954.13 4,266.60 312.47 7.902370433
(-) Acc. 1,644.41 1,981.84 337.43 20.5198217
Depreciation
Net Block 2,309.72 2,284.76 -24.96 -1.080650468
Progress.
Investments. 52,445.88 61,182.38 8,736.50 16.65812453
Cash And Bank 24,087.12 35,467.06 11,379.94 47.24491762
Loans And 1,48,564.01 1,79,382.50 30,818.49 20.74425024
Advances
Total Current 1,72,651.13 2,14,849.56 42,198.43 24.44144443
Assets
Current 16,538.15 8,815.97 -7,722.18 -46.69313073
Liabilities
Provisions 0 0 0.00 0
Total Current 16,538.15 8,815.97 -7,722.18 -46.69313073
Liabilities
NET 1,56,112.98 2,06,033.59 49,920.61 31.97723213
CURRENT
ASSETS
TOTAL 2,10,868.58 2,69,500.73 58,632.15 27.80506702
ASSETS
(A+B+C+D+E)

57

INFERENCE:

year.
25.28%, this shows the effective credit policy of the bank.
 Total liablity have increased by 27.81%.
 Investments made by the bank have increased by 16.65%, when compared to the
previous financial year.
 Cash and bank balance have increased by 47.24%
 Net current assets have increased by 31.97%, when compared to previous financial
year, total assets have increased by 27.80% due to effective assest management
policy of the bank.

MARCH 2010 AND 2011

PARTICULA BARODA(201 BARODA(201 INCREASE OR DECREASE IN
RS 0) 1) 2010 OVER 2011
Share Capital 365.53 392.81 27.28 7.463135721
Reserves & 14,740.86 20,600.30 5,859.44 39.74964826
Surplus
Net Worth 15,106.38 20,993.11 5,886.73 38.96850205
Secured Loans 13,350.08 22,307.85 8,957.77 67.09899866
Unsecured 2,41,044.26 3,05,439.48 64,395.22 26.71510203
Loans
TOTAL 2,69,500.73 3,48,740.45 79,239.72 29.40241386
LIABILITIES
ASSETS
Gross Block 4,266.60 4,548.16 281.56 6.599165612
(-) Acc. 1,981.84 2,248.44 266.60 13.45214548
Depreciation
Net Block 2,284.76 2,299.72 14.96 0.654773368

58

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