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A STUDY ON TECHNICAL ANALYSIS ON EQUITY SHARES
IN
INTER CONNECTED STOCK EXCHANGE
A Project report submitted to Jawaharlal Nehru Technological
University,
Hyderabad, in partial fulfillment of the requirements for the
award of the
degree of
MASTER OF BUSINESS ADMINISTRATION
By
K.RADHIKA DEVI
Reg. No. 10241E0021
Under the Guidance of
Dr.P.B.APPA RAO
Professor
Department of Management Studies
Gokaraju Rangaraju Institute of Engineering & Technology
(Affiliated to Jawaharlal Technological University,
Hyderabad)
Hyderabad
2010-2012
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CERTIFICATE
This is to certify that the project entitled A STUDY ON
TECHNICAL
ANALYSIS ON EQUITY SHARES has been submitted by Ms. K.RADHIKA
DEVI
(Reg. No. 10241E0021) in partial fulfillment of the requirements
for the award of theDegree of Master of Business Administration
from Jawaharlal Nehru Technological
University, Hyderabad. The result embodied in the project has
not been submitted to any
other University or Institution for the award of any other
Degree or Diploma.
Internal guide Head of Department
Dr.P.B.APPA RAO K.V.S. RAJU
Professor Professor & HODDepartment of Management Studies
Department of Management StudiesGRIET GRIET
S. RAVINDRA CHARYProject CoordinatorAssociate
ProfessorDepartment of Management StudiesGRIET
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DECLARATION
I hereby declare that the project entitled A study on
TTEECCHHNNIICCAALLAANNAALLYYSSIISS
OONNEEQQUUIITTYYSSHHAARREESSsubmitted in partial fulfillment of
the requirements for award
of the degree of MBA at Gokaraju Rangaraju Institute of
Engineering and
Technology,affiliated to Jawaharlal Nehru Technological
University, Hyderabad, is an
authentic work and has not been submitted to any other
University/Institute for award of
any degree/diploma.
K.RADHIKA DEVI(10241E0021)MBA, GRIET
HYDERABAD
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ACKNOWLEDGEMENTS
Firstly I would like to express our immense gratitude towards
our institution
Gokaraju Rangaraju Institute of Engineering &
Technology,which created a great
platform to attain profound technical skills in the field of
MBA, thereby fulfilling our
most cherished goal.
I would thank all employees of INTER CONNECTAD STOCK EXCHANGE
and
Ms. SIRISHA,for guiding and helping me in successful completion
of the project.
I sincerely express my gratitude to the principal Dr. J. N.
MURTHYand for his
inspiration and timely support in successful completion of my
project work.
I am very much thankful to Dr. P.B.APPA RAO, Professor of
Management
Studies, for extending his guidance and cooperation in doing
this project.
I am also thankful to our project coordinator Mr. S. Ravindra
Chary for
extending his cooperation in completion of Project.
I convey my thanks to my beloved parents, friends and my
facultywho helped
me directly or indirectly in bringing this project
successfully.
K. RADHIKA DEVI
(10241E0021)
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CONTENTS
LIST OF TABLES i
LIST OF FIGURES ii
CHAPTERS PARTICULARS PAGE NO.
1 INTRODUCTION
1.1 INTRODUCTION TO THE TOPIC
1.2 OBJECTIVES OF THE STUDY
1.3 SCOPE AND LIMITATION OF THE STUDY
1.4 RESEARCH METHODOLOGY
1.5DATA COLLECTION
2 SUBJECT LITERATURE
3 INDUSTRY PROFILE
4 COMPANY PROFILE
5 DATA ANALYSIS AND INTERPRETATION
6 FINDINGS, SUGGESTIONS & CONCLUSION
5.1 FINDINGS
5.2 SUGGESTIONS
5.3 CONCLUSION
BIBLIOGRAPHY
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LIST OF FIGURES
S.NO PARTICULARS PAGENO.
1 MONTH-WISE MARKET PRICES FROM JANUARY2012 TO MARCH-2012
2 MONTH-WISE MARKET PRICES FROM JANUARY2012 TO MARCH-2012
3 MONTH-WISE SBI PRICES FROM JANUARY 2012 TOMARCH-2012
4 MONTH-WISE SBI PRICES FROM APRIL-2012 TOJUNE-2012
5 MONTH-WISE ICICI PRICES FROM JANUARY -2012TO MARCH-2012
6 MONTH-WISE ICICI PRICES FROM APRIL-2012 TOJUNE-2012
7 MONTH-WISE HDFC PRICES FROM JANUARY-2012TO MARCH-2012
8 MONTH-WISE HDFC PRICES FROM APRIL-2012 TOJUNE-2012
9,10 CALCULATION OF CO-RELATION BETWEEN SBIAND MARKET
RETURNS
11,12 CALCULATION OF CO-RELATION BETWEEN ICICIAND MARKET
RETURNS
13,14 CALCULATION OF CO-RELATION BETWEEN HDFCAND MARKET
RETURNS
15 CALCULATION OF BETA
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LIST OF FIGURES
SNO PARTICULARS PAGE NO.
1.BANK-WISE HALF-YEARLY AVERAGE RETURNS
AND STANDARD DEVIATION
2.CO-RELELATION BETWEEN
BANKS(SBI,ICICI,HDFC) AND MARKET
3. BETA VALUES OF SBI ,ICICI, HDFC BANKS
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CHAPTER - 1
INTRODUCTION
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INTRODUCTION OF THE STUDY:
The methods used to analyze securities and make investment
decisions fall
into two very broad categories: fundamental analysis and
technical analysis. Fundamental
analysis involves analyzing the characteristics of a company in
order to estimate its value.
Technical analysis takes a completely different approach; it
doesnt care one bit about the
value of a company or a commodity. Technicians (sometimes called
chartists) are only
interested in the price movements in the market.
Despite all the fancy and exotic tools it employs, technical
analysis really
just studies supply and demand in a market in an attempt to
determine what direction, or
trend, will continue in the future. In other words, technical
analysis attempts tounderstand the emotions in the market by
studying the market itself, as opposed to its
components. If you understand the benefits and limitations of
technical analysis, it can
give you a new set or skills that will enable you to be a better
trader or investor.
Technical analysis is a method of evaluating securities by
analyzing the
statistics generalized by market activity, such as past prices
and volume. Technical
analysis does not attempt to measure a securitys intrinsic
value, but instead use charts
and other tools to identify patterns that can suggest future
activity.
Just as there are many investment styles on the fundamental
side, there are
also many different types of technical traders. Some rely on
chart patterns; others use
technical indicators and oscillators, and most use some
combination of the two. In any
case, technical analysts exclusive use of historical price and
volume data is what
separates them from their fundamental counterparts. Unlike
fundamental analysis,
technical analysts dont care whether a stock is undervalued the
only thing that matters
is a securitys past trading data and what information this data
can provide about where
the society might move in the future.
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The field of technical analysis is based on three
assumptions:
The market discounts everything.
Price moves in trends.
History tends to repeat itself.
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OBJECTIVES OF THE STUDY:
To analyze the price movements of shares of SBI, ICICI, and HDFC
interpret the
corrections and trends by using Technical Analysis tools.
To forecast the future trends and provide suitable suggestions
to the investors.
To calculate the risk associated with the Investment
To find out systematic risk of securities
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SCOPE OF THE STUDY:
The study covers a period of six months from January 2012 to
June 2012.
The study helps to find out the future trends in the prices of
SBI, ICICI, HDFC equity
shares. Valuable hints can be identified by the investors for
their future buying and
selling.
LIMITATIONS OF THE STUDY:
One of the most important limitations for most technical
analysis methods is the fact
that there are so many people using the basic technical analysis
methods already, and the
number is increasing every day, making it harder for a single
trader to make money on
the market with the methods.
Because of these methods are so widely spread and there is so
much money riding on
the methods, some also claim that technical analysis has become
self-fulfilling prophecy,
as people trend to enter the market and put their stops on the
same places, increasing the
volatility towards the technical analysis method being
correct.
Technical analysis systems usually do not take into account
correlation between
different markets. If you are analyzing several markets and they
all give similar signals,
they may have close correlations, meaning that the risk profile
for each is very similar,
and that the prices of the assets move in close steps with each
other.
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Research Methodology:
Research methodology is a way to systematically solve the
research problem. Itmay be understood as a science of studying how
research is done scientifically. Thevarious steps that are
generally adopted by a researcher in studying research problem
along with the logic behind them. It is necessary for the
researcher to know not only theresearch methods/ techniques but
also the methodology.
Analytical Research:
Research Design was based on analytical research, on the other
hand, the
researcher has to use facts or information already available,
and analyze these
to make these to make a critical evaluation of the material.
Sources of Data:
The main sources of data are collected through website,
various
Publication books, magazines, newspaper and reports prepared by
research
Scholars etc.
Data Collection:
Data required for the purpose of the study have been collected
from the
Websites of the banks concerned.
Data Analysis:
The data required so collected have been analyzed by using
MS-EXCEL.
In the process of analysis Average rate of return, Standard
deviation,
Co-efficient of correlation, Covariance and beta values have
been collected
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Research tools used:
Returns:
A major purpose of investment is to set a return or income on
the funds invested. On a
bond an investor expects to receive interest. On a stock,
dividends may be anticipated.
The investor may expect capital gains from some investments and
rental income from
house property return may take several forms
Returnsfor the collected data is calculated using the following
formula
Pt = current price
Po = previous price
Average of the Returns calculated as follows:
Standard Deviation:
1. A measure of the dispersion of a set of data from its mean.
The more spread apart the
data, the higher the deviation. Standard deviation is calculated
as the square root of
variance.
2. In finance, standard deviation is applied to the annual rate
of return of an investment to
measure the investment's volatility. Standard deviation is also
known as historical
volatility and is used by investors as a gauge for the amount of
expected volatility.
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Standard deviation is a statistical measurement that sheds light
on historical volatility.
For example, a volatile stock will have a high standard
deviation while the deviation of a
stable blue chip stock will be lower. A large dispersion tells
us how much the return on
the fund is deviating from the expected normal returns.
Risk is calculated as follows:
D = deviation; N=No. of days
Beta:
Measures volatility or systemic risk compared to the market or
the benchmark index
Beta Value Calculated as follows:
BETA= COVARIANCE OF MARKET AND SBI / VARIANCE OF MARKET
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CHAPTER - 2
REVIEW OF LITERATURE
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EQUITY SHARES
Equity represents an ownership position in a corporation. It is
residual claim in
the sense that creditors and preference shareholders must be
paid as scheduled before
equity shareholders can receive payment. In bankruptcy equity
holders are principle
entitled only to assets remaining after all prior claimants has
been satisfied. Thus risk is
highest with equity shares and so must be its expected return.
When investors buy equity
shares, they receive certificates of ownership as proof of their
being part owners of the
company. The certificate states the number of shares purchased
and their par value. The
attitude towards equity shares varied from extreme pessimism to
optimism from time to
time.
The main advantages of equity shares are listed below:
Potential for Profit : The potential for profit is greater in
equity shares than in any
other investment security. Current dividends yield may be low
but potential of
capital gains is great. The total yield or yields to maturity
may be substantial over
a period of time.
Limited Liability: In corporate form of organization, its owners
have, generally,
limited liability. An equity share is usually fully paid.
Shareholders may lose their
investments, but no more. They are not further liable for any
failure in the part of
corporation of meet its obligation.
Hedge against Inflation: The equity share is good hedge against
inflation though it
does not fully compensate for the declining purchasing power as
it is subject to
money-rate risk. But when interest rates are high, shares tend
to be less attractive,and prices tend to be depressed.
Share in Growth: A share is its ability to The major advantage
of investment in
equity increase in value by sharing in the growth of company
profits over the long
run.
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Tax Advantage: Equity shares also offers tax advantage to the
investors. The
larger yield on equity shares results from an increase in
principal of capital gains,
which are taxed at lower rate than other incomes in most of the
countries.
EQUITY CAPITAL TERMINOLOGY:
The important terms used in equity capital are listed below:
Authorized Capital: The authorized capital is the maximum number
of shares
of each type that may be issued by the company. To change this
number, or
provision of any class of shares, the company requires the
formal approval of
shareholders.
Issued Capital: Issued capital is the part of the authorized
capital that has been
issued for cash, property, or service.
Paid up Capital: Fully paid shares are those shares for which
the corporation
has received full payment up to the par-value, or up to the
amount established
as the selling price of no-par-shares. Partly paid shares are
those shares that
have been issued for less than par-value or the agreed
subscription.
NATURE OF EQUITY SHARES:
Equity shares represent an ownership of a corporation. It is
true that the equity shares
must bear first impact of any adversity, but it is also true
that the equity shares is the only
class of securities privileged to enjoy maximum participation in
an extensive growth of
the company. The risk of the one may be regarded as price. In
fact, the investor is vitally
concerned with the yield earned over the commensurate with the
opportunity of the other.
Evidence of Ownership: When investor buys equity shares, they
receive certificates
of ownership as a proof of their part as owners of the company.
This certificates state the
number of shares purchased, their par value, if any, and usually
the transfer agent. When
equity shares are purchased on the market (that when it is not a
new issue which is
purchased from the company).
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Maturity of Equity Shares: Equity shares have no maturity date.
Their life is limited
by the length of time stated in the corporate charter know as
Memorandum of
Association. The corporate life might be for stated or limited
period, or it might be
perpetual. Most corporations have a perpetual character. The
date on which the equity is
sold by the investor is the maturity date, and the price at
which the equity is sold is called
the maturity period that the equity is owned.
Par Value: Par value is the face value of the share. Equity
shares have par value, a
nominal stated value. The par value of an equity shares
indicates the amount of capital
originally subscribed by the shareholders. New shares cannot be
sold less than par value.
If the equity shares are sold for more than par, the excess is
transferred to Share
Premium Account.
Net Asset Value and Book Value: Distrust of present value
formulae, the quest for
objectivity and perhaps even nostalgia lead some analyst to
place greater emphasis on the
asset value factor when evaluating investment worth of a
companys equity shares. Net
assets or net worth can be calculated from either the asset of
liability side of balance
sheet.
Financial Analysis and Accounting Data: The historical numbers
that analyst uses
to prepare rates and forecasting equations are generally based
on figures that have been
taken from the published financial statements of the firm being
analyzed. Although these
statements may have been prepared according to generally accept
accounting
principles, there may be significant variation in real economic
meaning of financial
reports.
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INVESTMENT PROCESS IN EQUITY SHARES:
Investment process describes how an investor should go about
making decisions with
regard to what marketable securities to invest in, how extensive
the investment should be
and when the investment should be made. An eight-step procedure
for making these
decisions forms the basis for the investment process.
1. What is Investment
2. Understanding Shares
3. Finding a Broker
4. Evaluation of Shares
5. Research Tools
6. Investing Strategy
7. Investing Technique
8. What Moves the Market
Step 1: What is Investment?
Investment in broad sense means the sacrifice of current rupees
for further rupees.
Investing is making your money work for you without taking any
more risks than
necessary for your comfort.
Investing is the proactive use of your money to make more
money.
How to calculate Risk Premium?
Risk premium is what a stock should return over a risk-free
investment. It is
your reward for taking a risk with your money.
Weak demand is the important factor in stock pricing:
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Despite high crude oil prices, its weak demand for gasoline that
holds back oil
stock prices. Supply and demand is an important factor in
determining price of
stocks. Corrections is natural part of stock market cycle.
Step 2: Understanding Shares
Bull and Bear stock market are the two sides of same coin: Bull
and bear
markets go together and are necessary for an efficient
market.
Poll results show confidence in stocks: The results of a poll on
where the sensex
be at the end of 2009 show stock investors are positive.
Step 3: Finding a Broker
To decide which type of broker is right for you, you need to use
these resources to
find the brokerage arrangement that best fits your needs.
Thirteen of the top online stock trading sites offer investors a
wide variety of
services including research and advice.
Brokers offer different levels of service. A broker fills in the
gaps in knowledge
and experience.
Stock prices are driven by the relationship between buyers and
sellers. Attractive
stocks have more buyers than sellers, which drives up prices,
while less attractive
stocks feel the reverse effect.
Step 4: Evaluating Stocks for Investment
Fundamental analysis relies on several tools to give investors
an accurate picture
of the financial health of a company and how the market values
the stock. The following
are the most popular tools of fundamental analysis. They focus
on earnings, growth, and
value in the market.
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a) Earnings Per Share EPS
b) Price to Earnings Ratio P/E
c) Projected Earnings Growth PEG
d) Price to Sales P/S
e) Price to Book P/B
f) Dividend Payout Ratio
g) Dividend Yield
h) Book Value
i) Return on Equity
Step 5: Research Tools
The internet is a gold mine of information, but youll need some
tools to get to the
nuggets. Research tools make the job easier if you know where to
find them and how to
use them.
The better stock screens offer similar characteristics that give
you greater
flexibility when looking for investment candidates and eliminate
other
companies.
Stock screens will save time and help to build a thoughtful
portfolio by
focusing on those companies that meet your investing
requirements.
Stock screens can help any investor make better stock selections
by reducing
the number of companies to research.
Dividend ratios can tell much about a stock and its future
payout prospects.
One of the best sources of information on companies is free and
as near as
your computer.
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Step 6: Investing Strategies
What strategy to use as an investor? The different investment
strategies and how to
develop personal investment strategy is explained below:
When and how to sell a winning stock?
o Knowing when and how to sell a winning stock is as important
as
knowing when to sell a losing stock.
Dont be too conservative with stocks:
o Following a too conservative investment strategy in retirement
may not
protect you from outliving your money.
Step 7: Investing Techniques
Investing techniques offer powerful ways for investors to
execute their strategies. These
techniques provide a structure for investing.
After-hours trading of stocks may seem like a great idea, but it
is full of risks
for the average investor.
Diversify stocks by industry to avoid across-the-board losses on
bad economic
news. Investments should not be correlated to achieve
diversity.
Investing with expectations of high returns is not investing but
gambling.
Dont try to double or triple your money quickly in the stock
market youll
be disappointed and perhaps poorer.
Step 8: What Moves the Market?
What makes the market rise or fall? Sometimes it seems to have a
mind of its own that
reacts poorly to good news and with enthusiasm to bad news. One
should learn thefactors that are the major influences on the
markets and how to use this information.
Major economic and political factors shape the market, but most
of all the market hates
uncertainty.
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Technical Analysis
Technical analysis is a security analysis discipline for
forecasting the future
direction of prices through the study of past market data,
primarily price and volume.
History
The principles of technical analysis derive from the observation
of financial
markets over hundreds of years. The oldest known hints of
technical analysis appear in
Joseph de la Vega's accounts of the Dutch markets in the 17th
century. In Asia, the oldest
example of technical analysis is thought to be a method
developed by Homma Munehisaduring early 18th century which evolved
into the use of candlestick techniques, and is
today a main charting tool.
Dow Theory is based on the collected writings of Dow Jones
co-founder and
Editor Charles Dow, and inspired the use and development of
modern technical analysis
from the end of the 19th century. Other pioneers of analysis
techniques include Ralph
Nelson Elliott and William Delbert Gann who developed their
respective techniques in
the early 20th century.
Many more technical tools and theories have been developed and
enhanced in
recent decades, with an increasing emphasis on computer-assisted
techniques.
General Description
Technical analysts seek to identify price patterns and trends in
financial markets
and attempt to exploit those patterns. While technicians use
various methods and tools,the study of price charts is primary.
Technicians especially search for archetypal patterns, such as
the well-known head and
shoulders or double top reversal patterns, study indicators such
as moving averages, and
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look for forms such as lines of support, resistance, channels,
and more obscure
formations such as flags, pennants or balance days.
Technical analysts also extensively use indicators, which are
typically
mathematical transformations of price or volume. These
indicators are used to help
determine whether an asset is trending, and if it is, its price
direction. Technicians also
look for relationships between price, volume and, in the case of
futures, open interest.
Examples include the relative strength index, and MACD. Other
avenues of study include
correlations between changes in options (implied volatility) and
put/call ratios with price.
Other technicians include sentiment indicators, such as Put/Call
ratios and Implied
Volatility in their analysis.
Technicians seek to forecast price movements such that large
gains from
successful trades exceed more numerous but smaller losing
trades, producing positive
returns in the long run through proper risk control and money
management.
There are several schools of technical analysis. Adherents of
different schools (for
example, candlestick charting, Dow Theory, and Elliott wave
theory) may ignore the
other approaches, yet many traders combine elements from more
than one school. Some
technical analysts use subjective judgment to decide which
pattern a particular instrumentreflects at a given time, and what
the interpretation of that pattern should be. Some
technical analysts also employ a strictly mechanical or
systematic approach to pattern
identification and interpretation.
Technical analysis is frequently contrasted with fundamental
analysis, the study
of economic factors that influence prices in financial markets.
Technical analysis holds
that prices already reflect all such influences before investors
are aware of them, hence
the study of price action alone. Some traders use technical or
fundamental analysis
exclusively, while others use both types to make trading
decisions.
Users of technical analysis are most often called technicians or
market
technicians. Some prefer the term technical market analyst or
simply market analyst. An
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In the foreign exchange markets, its use may be more widespread
than
fundamental analysis. While some isolated studies have indicated
that technical trading
rules might lead to consistent returns in the period prior to
1987, most academic work has
focused on the nature of the anomalous position of the foreign
exchange market. It is
speculated that this anomaly is due to central bank
intervention. Recent research suggests
that combining various trading signals into a Combined Signal
Approach may be able to
increase profitability and reduce dependence on any single
rule.
Principles
Technicians say that a market's price reflects all relevant
information, so their
analysis looks at the history of a security's trading pattern
rather than external drivers
such as economic, fundamental and news events. Price action also
tends to repeat itself
because investors collectively tend toward patterned behavior
hence technicians' focus
on identifiable trends and conditions.
Market action discounts everything
Based on the premise that all relevant information is already
reflected by prices,
pure technical analysts believe it is redundant to do
fundamental analysis they say news
and news events do not significantly influence price, and cite
supporting research such as
the study by Cutler, Poterba, and Summers titled "What Moves
Stock Prices?"
On most of the sizable return days [large market moves]...the
information that the
press cites as the cause of the market move is not particularly
important. Press reports on
adjacent days also fail to reveal any convincing accounts of why
future profits or discount
rates might have changed. Our inability to identify the
fundamental shocks that accounted
for these significant market moves is difficult to reconcile
with the view that such shocks
account for most of the variation in stock returns.
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Prices move in trends
Technical analysts believe that prices trend directionally,
i.e., up, down, or
sideways (flat) or some combination. The basic definition of a
price trend was originally
put forward by Dow Theory.
An example of a security that had an apparent trend is AOL from
November 2001
through August 2002. A technical analyst or trend follower
recognizing this trend would
look for opportunities to sell this security. AOL consistently
moves downward in price.
Each time the stock rose, sellers would enter the market and
sell the stock; hence the
"zig-zag" movement in the price. The series of "lower highs" and
"lower lows" is a tell
tale sign of a stock in a down trend. In other words, each time
the stock moved lower, it
fell below its previous relative low price. Each time the stock
moved higher, it could not
reach the level of its previous relative high price.
Note that the sequence of lower lows and lower highs did not
begin until August.
Then AOL makes a low price that doesn't pierce the relative low
set earlier in the month.
Later in the same month, the stock makes a relative high equal
to the most recent relativehigh. In this a technician sees strong
indications that the down trend is at least pausing
and possibly ending, and would likely stop actively selling the
stock at that point.
History tends to repeat itself
Technical analysts believe that investors collectively repeat
the behavior of the
investors that preceded them. "Everyone wants in on the next
Microsoft," "If this stock
ever gets to $50 again, I will buy it," "This company's
technology will revolutionize itsindustry, therefore this stock
will skyrocket" these are all examples of investor
sentiment repeating itself. To a technician, the emotions in the
market may be irrational,
but they exist. Because investor behavior repeats itself so
often, technicians believe that
recognizable (and predictable) price patterns will develop on a
chart.
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Technical analysis is not limited to charting, but it always
considers price trends.
For example, many technicians monitor surveys of investor
sentiment. These surveys
gauge the attitude of market participants, specifically whether
they are bearish or bullish.
Technicians use these surveys to help determine whether a trend
will continue or if a
reversal could develop; they are most likely to anticipate a
change when the surveys
report extreme investor sentiment. Surveys that show
overwhelming bullishness, for
example, are evidence that an uptrend may reverse the premise
being that if most
investors are bullish they have already bought the market
(anticipating higher prices).
And because most investors are bullish and invested, one assumes
that few buyers
remain. This leaves more potential sellers than buyers, despite
the bullish sentiment. Thissuggests that prices will trend down,
and is an example of contrarian trading.
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CHAPTER 3
INDUSTRY PROFILE
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STOCK MARKETS IN INDIA
Stock exchanges are the perfect type of market for securities
whether of
government and semi-government bodies or other public bodies as
also for shares and
debentures issued by the joint-stock companies. In the stock
market, purchases and sales
of shares are affected in conditions of free competition.
Government securities are traded
outside the trading ring in the form of over the counter sales
or purchase. The bargains
that are struck in the trading ring by the members of the stock
exchanges are at the fairest
prices determined by the basic laws of supply and demand.
Definition of a stock exchange:
Stock exchange means anybody or individuals whether incorporated
or not,
constituted for the purpose of assisting, regulating or
controlling the business of buying,selling or dealing in
securities. The securities include:
Shares of public company.
Government securities.
Bonds
Functions of Stock Exchanges:
Stock exchanges provide liquidity to the listed companies. By
giving quotations tothe listed companies, they help trading and
raise funds from the market. Over the hundred
and twenty years during which the stock exchanges have existed
in this country and
through their medium, the central and state government have
raised crores of rupees by
floating public loans. Municipal corporations, trust and local
bodies have obtained from
the public their financial requirements, and industry, trade and
commerce- the backbone
of the countrys economy-have secured capital of crores or rupees
through the issue of
stocks, shares and debentures for financing their day-to-day
activities, organizing new
ventures and completing projects of expansion, diversification
and modernization. By
obtaining the listing and trading facilities, public investment
is increased and companies
were able to raise more funds. The quoted companies with wide
public interest have
enjoyed some benefits and assets valuation has become easier for
tax and other purposes.
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Various Stock Exchanges in India:
At present there are 23 stock exchanges recognized under the
securities contracts
(regulation), Act, 1956. Major of them:
Ahmadabad Stock Exchange Association Ltd.
Bombay stock Exchange
Bangalore Stock Exchange
Calcutta Stock Exchange
Cochin Stock Exchange Ltd.
Coimbatore Stock Exchange
Delhi Stock Exchange Association
Guwahati Stock Exchange Ltd
Hyderabad Stock Exchange Ltd.
Jaipur Stock Exchange Ltd
Kanara Stock Exchange Ltd
Madras Stock Exchange
Madhya Pradesh Stock Exchange Ltd.
Meerut Stock Exchange Ltd.
National Stock Exchange of India
Pune Stock Exchange Ltd.
Uttar Pradesh Stock Exchange Association
Vadodara Stock Exchange Ltd.
Out of these major stock exchanges were:
National Stock Exchange (NSE):
The National Stock Exchange of India Limited has genesis in the
report of the
High Powered Study Group on Establishment of New Stock
Exchanges, which
recommended promotion of a National Stock Exchange by financial
institutions (FIs) to
provide access to investors from all across the country on an
equal footing. Based on the
recommendations, NSE was promoted by leading Financial
Institutions at the behest of
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the Government of India and was incorporated in November 1992 as
a tax-paying
company unlike other stock exchanges in the country. On its
recognition as a stock
exchange under the Securities Contracts (Regulation) Act, 1956
in April 1993, NSE
commenced operations in the Wholesale Debt Market (WDM) segment
in June 1994.
The Capital Market (Equities) segment commenced operations in
November 1994 and
operations in Derivatives segment commenced in June 2000.
NSE's mission is setting the agenda for change in the securities
markets in India. The
NSE was set-up with the main objectives of:
Establishing a nation-wide trading facility for equities and
debt instruments.
Ensuring equal access to investors all over the country through
an appropriate
communication network.
Providing a fair, efficient and transparent securities market to
investors using
electronic trading systems.
Enabling shorter settlement cycles and book entry settlements
systems, and
Meeting the current international standards of securities
markets.
The standards set by NSE in terms of market practices and
technology, have become
industry benchmarks and are being emulated by other market
participants. NSE is more
than a mere market facilitator. It's that force which is guiding
the industry towards new
horizons and greater opportunities.
Bombay Stock Exchange (BSE):
The Stock Exchange, Mumbai, popularly known as "BSE" was
established in
1875 as "The Native Share and Stock Brokers Association". It is
the oldest one in Asia,
even older than the Tokyo Stock Exchange, which was established
in 1878. It is a
voluntary non-profit making Association of Persons (AOP) and is
currently engaged in
the process of converting itself into demutualised and corporate
entity. It has evolved
over the years into its present status as the premier Stock
Exchange in the country. It is
the first Stock Exchange in the Country to have obtained
permanent recognition in 1956
from the Govt. of India under the Securities Contracts
(Regulation) Act 1956.The
Exchange, while providing an efficient and transparent market
for trading in securities,
debt and derivatives upholds the interests of the investors and
ensures redresses of their
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grievances whether against the companies or its own
member-brokers. It also strives to
educate and enlighten the investors by conducting investor
education programmers and
making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which
decides the
policies and regulates the affairs of the Exchange. The
Governing Board consists of 9
elected directors, who are from the broking community (one third
of them retire ever year
by rotation), three SEBI nominees, six public representatives
and an Executive Director
& Chief Executive Officer and a Chief Operating Officer.
The Executive Director as the Chief Executive Officer is
responsible for the day-
to-day administration of the Exchange and the Chief Operating
Officer and other Heads
of Department assist him.
The Exchange has inserted new Rule No.126 A in its Rules,
Byelaws pertaining
to constitution of the Executive Committee of the Exchange.
Accordingly, an Executive
Committee, consisting of three elected directors, three SEBI
nominees or public
representatives, Executive Director & CEO and Chief
Operating Officer has been
constituted. The Committee considers judicial & quasi
matters in which the Governing
Board has powers as an Appellate Authority, matters regarding
annulment of
transactions, admission, continuance and suspension of
member-brokers, declaration of a
member-broker as defaulter, norms, procedures and other matters
relating to arbitration,
fees, deposits, margins and other monies payable by the
member-brokers to the
Exchange, etc.
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REGULATORY FRAME WORK OF STOCK EXCHANGE:
A comprehensive legal framework was provided by the Securities
Contract
Regulation Act, 1956 and Securities Exchange Board of India
1952. Three tier
regulatory structure comprising
Ministry of finance
The Securities And Exchange Board of India
Governing body
Members of the stock exchange:
The securities contract regulation act 1956 has provided uniform
regulation for
the admission of members in the stock exchanges. The
qualifications for becoming a
member of a recognized stock exchange are given below:
The minimum age prescribed for the members is 21 years.
He should be an Indian citizen.
He should be neither a bankrupt nor compound with the
creditors.
He should not be convicted for fraud or dishonesty.
He should not be engaged in any other business connected with a
company.
He should not be a defaulter of any other stock exchange.
The minimum required education is a pass in 12th
standard examination.
SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI):
The securities and exchange board of India was constituted in
1988 under a
resolution of government of India. It was later made statutory
body by the SEBI act
1992.according to this act, the SEBI shall constitute of a
chairman and four other
members appointed by the central government. With the coming
into effect of the
securities and exchange board of India act, 1992 some of the
powers and functions
exercised by the central government, in respect of the
regulation of stock exchange were
transferred to the SEBI.
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OBJECTIVES AND FUNCTIONS OF SEBI:
To protect the interest of investors in securities.
Regulating the business in stock exchanges and any other
securities market.
Registering and regulating the working of intermediaries
associated with
securities market as well as working of mutual funds.
Promoting and regulating self-regulatory organizations.
Regulating substantial acquisition of shares and takeover of
companies.
SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK
EXCHANGES):
Board of Directors of Stock Exchange has to be reconstituted so
as to include
non-members, public representatives and government
representatives to the extent of
50% of total number of members.
Capital adequacy norms have been laid down for the members of
various
stock exchanges depending upon their turnover of trade and other
factors.
All recognized stock exchanges will have to inform about
transactions within
24 hrs.
Buying and selling shares:
To buy and sell the shares the investor has to locate register
broker or sub broker
who render prompt and efficient service to him. The order to buy
or sell specifying the
number of shares of the company of investors choice is placed
with the broker. The
order may be of any type. After receiving the order the broker
tries to execute the order in
his computer terminal. Once matching order is found, the order
is executed. The broker
then delivers the contract note to the investor. It gives the
details regarding the name of
the company, number of shares bought, price, brokerage, and the
date of delivery of
share. In this physical trading form, once the broker gets the
share certificate through the
clearing houses he delivers the share certificate along with
transfer deed to the investor.
The investor has to fill the transfer deed and stamp it. The
stamp duty is one of the
percentage considerations, the investor should lodge the share
certificate and transfer
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deed to the register or transfer agent of the company. If it is
bought in the DEMAT form,
the broker has to give a matching instruction to his depository
participant to transfer
shares bought to the investors account. The investor should be
account holder in any of
the depository participant. In the case of sale of shares on
receiving payment from the
purchasing broker, the broker effects the payment to the
investor.
Share groups:
The scripts traded on the BSE have been classified into
A,B1,B2,C,F and
Z groups. The A group represents those, which are in the carry
forward system. The
F group represents the debt market segment (fixed income
securities). The Z group
scripts are of the blacklisted companies. The C group covers the
odd lot securities in
A, B1&B2 groups.
ROLLING SETTLEMENT SYSTEM:
Under rolling settlement system, the settlement takes place n
days (usually 1, 2, 3
or 5days) after the trading day. The shares bought and sold are
paid in for n days after the
trading day of the particular transaction. Share settlement is
likely to be completed much
sooner after the transaction than under the fixed settlement
system.
The rolling settlement system is noted by T+N i.e. the
settlement period is n days
after the trading day. A rolling period which offers a large
number of days negates theadvantages of the system. Generally
longer settlement periods are shortened gradually.
SEBI made RS compulsory for trading in 10 securities selected on
the basis of the
criteria that they were in compulsory demats list and had daily
turnover of about Rs.1
crore or more. Then it was extended to A stocks in Modified
Carry Forward Scheme,
Automated Lending and Borrowing Mechanism (ALBM) and Borrowing
and lending
Securities Scheme (BELSS) with effect from Dec 31, 2001.
SEBI has introduced T+5 rolling settlement in equity market from
July 2001 and
subsequently shortened the cycle to T+3 from April 2002. After
the T+3 rolling
settlement experience it was further reduced to T+2 to reduce
the risk in the market and
to protect the interest of the investors from 1stApril 2003.
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Activities on T+1:
Conformation of the institutional trades by the custodian is
sent to the stock
exchange by 11.00 am. A provision of an exception window would
be available for late
confirmation. The time limit and the additional changes for the
exception window are
dedicated by the exchange.
The exchanges/clearing house/ clearing corporation would process
and download the
obligation files to the brokers terminals late by 1.30 p.m on
T+1. Depository participants
accept the instructions for pay in securities by investors in
physical form up to 4 p.m and
in electronic form up to 6 p.m. the depositories accept from
other DPs till 8p.m for same
day processing.
Activities on T+2:
The depository permits the download of the paying in files of
securities and funds
till 10.30 am on T+2 from the brokers pool accounts. The
depository processes the pay
in requests and transfers the consolidated pay in files to
clearing House/clearing
Corporation by 11.00am/on T+2. The exchange/clearing
house/clearing corporation
executes the pay-out of securities and funds latest by 1.30 p.m
on T+2 to the depositories
and clearing banks. In the Demat mode net basis settlement is
allowed. The buy and sale
positions in the same scrip can be settled and net quantity has
to be settled
The analysis makes a separation between operating and financing
items in the
financial statements. This is inspired by the Modigliani and
Miller notion that it is the
operating activities that generate value, not the (zero
net-present-value) financing
activities. The separation also arises from an appreciation that
financial assets and
liabilities are typically close to market value in the balance
sheet and thus are already
valued, but not so the operating assets and liabilities.
The distinction is a feature of the accounting-based valuation
model in Feltham
and Ohlson (1995) and of economic profit versions of the
residual income model.
Recent FASB statements have required many financial assets to be
marked to market.
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But, correspondingly, unrealized gains and losses are now
recognized in comprehensive
income and these, like all income line items, have to be
considered in a ratio analysis.
Our structured approach to identifying ratios contrasts to the
purely empirical
approach in Ou and Penman (1989). That paper identified ratios
that predicted earnings
changes in the data.
No thought was given to the identification; indeed there was no
justification that
earnings changes are the appropriate attribute to forecast for
valuation. The approach here
also contrasts to that in Lev and Thiagarajan (1993) who defer
to expert judgment and
identify ratios that analysts actually use in practice.
1. Sauda details
A. Cash segments:
In this reports client will get transaction statement for
settlement and exchange wise. First
select the date of transactions then exchange by doing drop down
and then GO to get
the reports.
B. Derivatives segments:
In this reports client will get transaction statement for the
day and exchange. First select
the date of transactions then exchange by doing drop down and
then GO to get the
Reports.
2. Delivery details:
A. Delivery information:
In this reports client will get pay in or payout for all the
scrip. Whether its NSDL, CDSL
or PHYSICAL entry.
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B. Delivery + shares details:
In this reports client will get the inward (pay in), outward
(payout). Actual inward shows
you the pay in done from client actual BO id. Actual outward
shows the payout from the
client actual BO id and mismatch position.
3. Demats details:
In this reports client will get the Demat confirmation. We have
also defined the meaning
and colour description on header.
4. Clients bills:
A. Cash Segment:
In this reports client will get the bill confirmation for cash
segments. First select the date
of transactions then exchange by doing drop down and then GO to
get the reports.
While zooming in this report, client can get the cash
transaction for that particular bill.
B. Derivatives Segment:
In this reports client will get the bill confirmation for
Derivatives segments. First select
the date of transactions then exchange by doing drop down and
then go to get the reports.
While zooming in these reports, client can get the Derivatives
transaction for that
particular bill.
5. Financial statement:
In this reports client will get the financial statement for the
entire year. Client can get the
statement date wise, exchange wise, including margin, across the
company after selecting
start and end date, selecting exchange, clicking on include
margin, ignore firm number
respectively. While zooming client can get the details for that
particular bills, receipt,
payment and voucher. Green highlights show u the entry is
unreconcile on that bank.
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BSE started trading in the equities segment (Capital Market
segment) on
November 3, 1994 and within a short span of 1 year became the
largest exchange in India
in terms of volumes transacted. Trading volumes in the equity
segment have grown
rapidly with average daily turnover increasing from Rs.17 crores
during 1994-95 to
Rs.6,253 crores during 2005-06. During the year 2005-06, BSE
reported a turnover of
Rs.1,569,556 crores in the equities segment. The Equities
section provides you with an
insight into the equities segment of BSE and also provides
real-time quotes and statistics
of the equities market. In-depth information regarding listing
of securities, trading
systems & processes, clearing and settlement, risk
management, trading statistics etc are
available.
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CHAPTER - 4
COMPANY PROFILE
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COMPANY PROFILE
Inter-connected stock exchange of India limited [ISE] has been
promoted by 14
Regional stock exchanges to provide cost-effective trading
linkage/connectivity to all the
members of the participating Exchanges, with the objective of
widening the market for
the securities listed on these Exchanges. ISE aims to address
the needs of small
companies and retail investors with the guiding principle of
optimizing the existing
infrastructure and harnessing the potential of regional markets,
so as to transform these
into a liquid and vibrant market through the use of
state-of-the-art technology andnetworking.
The participating Exchanges of ISE in all about 4500 stock
brokers, out of which
more than 200 have been currently registered as traders on ISE.
In order to leverage its
infrastructure and to expand its nationwide reach, ISE has also
appointed around 450
Dealers across 70 cities other than the participating Exchange
centers. These dealers are
administratively supported through the regional offices of ISE
at Delhi [north], kolkata
[east], Coimbatore, Hyderabad [south] and Nagpur [central],
besides Mumbai.
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ISE has also floated a wholly-owned subsidiary, ISE securities
and services
limited [ISS], which has taken up corporate membership of the
National Stock Exchange
of India Ltd. [NSE] in both the Capital Market and Futures and
Options segments and
The Stock Exchange, Mumbai In the Equities segment, so that the
traders and dealers of
ISE can access other markets in addition to the ISE markets and
their local market. ISE
thus provides the investors in smaller cities a one-stop
solution for cost-effective and
efficient trading and settlement in securities.
With the objective of broad basing the range of its services,
ISE has
started offering the full suite of DP facilities to its Traders,
Dealers and their clients.
OBJECTIVES OF THE COMPANY:
Create a single integrated national level solution with access
to multiple
markets for providing high cost-effective service to millions of
investors
across the country.
Create a liquid and vibrant national level market for all listed
companies in
general and small capital companies in particular.
Optimally utilize the existing infrastructure and other
resources of
participating Stock Exchanges, which are under-utilized now.
Provide a level playing field to small Traders and Dealers by
offering an
opportunity to participate in a national markets having
investment-oriented
business.
Reduce transaction cost.
Provide clearing and settlement facilities to the Traders and
Dealers across the
Country at their doorstep in a decentralized mode.
Spread de-mat trading across the country
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SAILENT FEATURES
Network of intermediaries:
As at the beginning of the financial year 2003-04, 548
intermediaries (207
Traders and 341 Dealers) are registered on ISE. A broad of
members forms the bedrock
for any Exchange, and in this respect, ISE has a large pool of
registered intermediaries
who can be tapped for any new line of business.
Robust Operational Systems:
The trading, settlement and funds transfer operations of ISE and
ISS are
completely automated and state-of-the-art systems have been
deployed. The
communication network of ISE, which has connectivity with over
400 trading members
and is spread across46 cities, is also used for supporting the
operations of ISS. The
trading software and settlement software, as well as the
electronic funds transfer
arrangement established with HDFC Bank and ICICI Bank, gives ISE
and ISS the
required operational efficiency and flexibility to not only
handle the secondary market
functions effectively, but also by leveraging them for new
ventures.
Skilled and experienced manpower:
ISE and ISS have experienced and professional staff, who have
wide experience
in Stock Exchanges/ capital market institutions, with in some
cases, the experience going
up to nearly twenty years in this industry. The staff has the
skill-set required to perform a
wide range of functions, depending upon the requirements from
time to time.
Aggressive pricing policy:
The philosophy of ISE is to have an aggressive pricing policy
for the various
products and services offered by it. The aim is to penetrate the
retail market and
strengthen the position, so that a wide variety of products and
services having appeal for
the retail market can be offered using a common distribution
channel. The aggressive
pricing policy also ensures that the intermediaries have
sufficient financial incentives for
offering these products and services to the end-clients.
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Trading, Risk Management and Settlement Software Systems:
The ORBIT (Online Regional Bourses Inter-connected Trading)
and
AXIS (Automated Exchange Integrated Settlement) software
developed on the Microsoft
NT platform, with consultancy assistance from Microsoft, are the
most contemporary of
the trading and settlement software introduced in the country.
The applications have been
built on a technology platform, which offers low cost of
ownership, facilitates simple
maintenance and supports easy up gradation and enhancement. The
soft wares are so
designed that the transaction processing capacity depends on the
hardware used; capacity
can be added by just adding inexpensive hardware, without any
additional software work.
Vibrant Subsidiary Operations:
ISS, the wholly owned subsidiary of ISE, is one of the biggest
Exchange
subsidiaries in the country. On any given day, more than 250
registered intermediaries of
ISS traded from 46 cities across the length and breadth of the
country.
Name of the Board of directors
1. Prof. P. V. Narasimham Public Interest Director
2. Shri V. Shankar Managing Director
3. Dr. S. D. Israni Public Interest Director
4. Dr. M. Y. Khan Public Interest Director
5. Mr. P. J. Mathew Shareholder Director
6. M. C. Rodrigues Shareholder Director
7. Mr. M. K. Ananda Kumar Shareholder Director
8. Mr. T.N.T Nayar Shareholder Director
9. Mr. K. D. Gupta Shareholder Director
10. Mr. V. R. Bhaskar Reddy Shareholder Director
11. Mr. Jambu Kumar Jain Trading Member Director
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State Bank of India(SBI) is the largest bank in India.
The bank traces its ancestry back through the Imperial Bank of
India to the
founding in 1806 of the Bank of Calcutta, making it the oldest
commercial bank in the
Indian Subcontinent. The Government of India nationalized the
Imperial Bank of India in
1955, with the Reserve Bank of India taking a 60% stake, and
renamed it the State Bank
of India. In 2008, the Government took over the stake held by
the Reserve Bank of India.SBI provides a range of banking products
through its vast network in India and overseas,
including products aimed at NRIs. The State Bank Group, with
over 16000 branches, has
the largest branch network in India. With an asset base of $250
billion and $195 billion in
deposits, it is a regional banking behemoth. It has a market
share among Indian
commercial banks of about 20% in deposits and advances, and SBI
accounts for almost
one-fifth of the nations loans.
SBI has tried to reduce its over-staffing through computerizing
operations and Golden
handshake schemes that led to a flight of its best and brightest
managers. These managers
took the retirement allowances and then went on the become
senior managers at new
private sector banks.
The State bank of India is 29th most reputable company in the
world according to Forbes.
History:
The roots of the State Bank of India rest in the first decade of
19th century, when
the Bank of Calcutta, later renamed the Bank of Bengal, was
established on 2 June 1806.The Bank of Bengal and two other
Presidency banks, namely, the Bank of Bombay
(incorporated on 15 April 1840) and the Bank of Madras
(incorporated on 1 July 1843).
All three Presidency banks were incorporated as joint stock
companies, and were the
result of the royal charters. These three banks received the
exclusive right to issue paper
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currency in 1861 with the Paper Currency Act, a right they
retained until the formation of
the Reserve Bank of India.
The Presidency banks amalgamated on 27 January 1921, and the
reorganized
banking entity took as its name Imperial Bank of India. The
Imperial Bank of Indiacontinued to remain a joint stock
company.
Pursuant to the provisions of the State Bank of India Act
(1955), the Reserve
Bank of India, which is India's central bank, acquired a
controlling interest in the
Imperial Bank of India. On 30 April 1955 the Imperial Bank of
India became the State
Bank of India. The Govt. of India recently acquired the Reserve
Bank of India's stake in
SBI so as to remove any conflict of interest because the RBI is
the country's banking
regulatory authority
Branches
The corporate center of SBI is located in Mumbai. In order to
cater to different functions,
there are several other establishments in and outside Mumbai,
apart from the corporate
center. The bank boasts of having as many as 14 local head
offices and 57 Zonal Offices,
located at major cities throughoutIndia. It is recorded that SBI
has about 10000 branches;
well networked to cater to its customers.
ATM Services
SBI provides easy access to money to its customers through more
than 8500
ATMs in India. The Bank also facilitates the free transaction of
money at the ATMs of
State Bank Group, which includes the ATMs of State Bank of India
as well as the
Associate Banks State Bank of Bikaner & Jaipur, State Bank
of hyd, State Bank of
Indore, etc. You may also transact money through SBI Commercial
and International
Bank Ltd by using the ATM-cum-Debit(Cash+Plus)card.
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Subsidiaries
The State Bank Group includes a network of eight banking
subsidiaries and
several non-banking subsidiaries. Through the establishments, it
offers various services
including merchant banking services, fund management, factoring
services, primary
dealership in govt securities, credit cards and insurance.
The eight banking subsidiaries are:
State Bank of Bikaner and Jaipur (SBBJ)
State Bank of Hyderabad (SBH)
State Bank of India (SBI)
State Bank of Indore (SBIR)
State Bank of Mysore (SBM)
State Bank of Patiala (SBP)
State Bank of Saurashtra (SBS)
State Bank of Travancore (SBT)
Products and Services
Personal Banking
SBI Term Deposits SBI Loan For Pensioners
SBI Recurring Deposits Loan Against Mortgage Of Property
SBI Housing Loan Loan Against Shares & Debentures
SBI Car Loan Rent Plus Scheme
SBI Educational Loan Medi-Plus Scheme
Other Services
Agriculture/Rural BankingNRI Services
ATM Services
Demat Services
Corporate Banking
Internet Banking
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HistoryICICI Bank was originally promoted in 1994 by ICICI
Limited, an Indian
financial institution, and was its wholly-owned subsidiary.
ICICI's shareholding in ICICI
Bank was reduced to 46% through a public offering of shares in
India in fiscal 1998, an
equity offering in the form of ADRs listed on the NYSE in fiscal
2000, ICICI Bank's
acquisition of Bank of Madura Limited in an all-stock
amalgamation in fiscal 2001, and
secondary market sales by ICICI to institutional investors in
fiscal 2001 and fiscal 2002.
ICICI was formed in 1955 at the initiative of the World Bank,
the Government of India
and representatives of Indian industry.
The principal objective was to create a development financial
institution for
providing medium-term and long-term project financing to Indian
businesses.
In the 1990s, ICICI transformed its business from a development
financial institution
offering only project finance to a diversified financial
services group offering a wide
variety of products and services, both directly and through a
number of subsidiaries and
affiliates like ICICI Bank. In 1999, ICICI become the first
Indian company and the first
bank or financial institution from non-Japan Asia to be listed
on the NYSE.
After consideration of various corporate structuring
alternatives in the context of the
emerging competitive scenario in the Indian banking industry,
and the move towards
universal banking, the managements of ICICI and ICICI Bank
formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic
alternative for both
entities, and would create the optimal legal structure for the
ICICI group's universal
banking strategy.
The merger would enhance value for ICICI shareholders through
the merged
entity's access to low-cost deposits, greater opportunities for
earning fee-based income
and the ability to participate in the payments system and
provide transaction-banking
services.
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The merger would enhance value for ICICI Bank shareholders
through a large
capital base and scale of operations, seamless access to Icecaps
strong corporate
relationships built up over five decades, entry into new
business segments, higher market
share in various business segments, particularly fee-based
services, and access to the vast
talent pool of ICICI and its subsidiaries.
In October 2001, the Boards of Directors of ICICI and ICICI Bank
approved the
merger of ICICI and two of its wholly-owned retail finance
subsidiaries, ICICI Personal
Financial Services Limited and ICICI Capital Services Limited,
with ICICI Bank. The
merger was approved by shareholders of ICICI and ICICI Bank in
January 2002, by the
High Court of Gujarat at Ahmadabad in March 2002, and by the
High Court of
Judicature at Mumbai and the Reserve Bank of India in April
2002. Consequent to themerger, the ICICI group's financing and
banking operations, both wholesale and retail,
have been integrated in a single entity. ICICI Bank has
formulated a Code of Business
Conduct and Ethics for its directors and employees
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History
Housing Development Finance Corporation Limited, more popularly
known asHDFC Bank Ltd, was established in the year 1994, as a part
of the liberalization of theIndian Banking Industry by Reserve Bank
of India (RBI). It was one of the first banks toreceive an 'in
principle' approval from RBI, for setting up a bank in the private
sector.The bank was incorporated with the name 'HDFC Bank Limited',
with its registeredoffice in Mumbai. The following year, it started
its operations as a ScheduledCommercial Bank. Today, the bank
boasts of as many as 1412 branches and over 3275ATMs across
India.
Amalgamations
In 2002, HDFC Bank witnessed its merger with Times Bank Limited
(a privatesector bank promoted by Bennett, Coleman & Co. /
Times Group). With this, HDFC andTimes became the first two private
banks in the New Generation Private Sector Banks tohave gone
through a merger. In 2008, RBI approved the amalgamation of
CenturionBank of Punjab with HDFC Bank. With this, the Deposits of
the merged entity becameRs. 1,22,000 crore, while the Advances were
Rs. 89,000 crore and Balance Sheet sizewas Rs. 1,63,000 crore.
Tech-Savvy
HDFC Bank has always prided itself on a highly automated
environment, be it interms of information technology or
communication systems. All the braches of the bankboast of online
connectivity with the other, ensuring speedy funds transfer for the
clients.At the same time, the bank's branch network and Automated
Teller Machines (ATMs)allow multi-branch access to retail clients.
The bank makes use of its up-to-datetechnology, along with market
position and expertise, to create a competitive advantageand build
market share.
Capital Structure
At present, HDFC Bank boasts of an authorized capital of Rs 550
crore (Rs5.5billion), of this the paid-up amount is Rs 424.6 crore
(Rs.4.2 billion). In terms of equityshare, the HDFC Group holds
19.4%. Foreign Institutional Investors (FIIs) have around28% of the
equity and about 17.6% is held by the ADS Depository (in respect of
thebank's American Depository Shares (ADS) Issue). The bank has
about 570,000shareholders. Its shares find a listing on the Stock
Exchange, Mumbai and National Stock
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Exchange, while its American Depository Shares are listed on the
New York StockExchange (NYSE), under the symbol 'HDB'.
Products & Services
Personal Banking
Savings Accounts
Salary Accounts
Current Accounts
Fixed Deposits
Demat Account
Safe Deposit Lockers
Loans
Credit Cards
Debit Cards
Prepaid Cards Investments & Insurance
Forex Services
Payment Services
NetBanking
InstaAlerts
MobileBanking
InstaQuery
ATM
PhoneBanking
NRI Banking
Rupee Savings Accounts
Rupee Current Accounts
Rupee Fixed Deposits
Foreign Currency Deposits
Accounts for Returning Indians
Quickremit (North America, UK, Europe, Southeast Asia)
IndiaLink (Middle East, Africa) Cheque LockBox
Telegraphic / Wire Transfer
Funds Transfer through Cheques / DDs / TCs
Mutual Funds
Private Banking
Portfolio Investment Schemes
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CHAPTER 5
DATA ANALYSIS
AND
INTERPRETATION
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Table: 01Month-Wise Market Prices
January 2012 February 2012 March 2012
DateClosing
PriceReturn Date
Closing
PriceReturn Date
Closing
PriceReturn
02 5785.83 2.5484 01 6605 0.8503 01 6809.48 -0.6971
03 5942.39 2.7059 02 6650.48 0.6886 02 6836.27 0.3934
04 5934.43 -0.134 03 6717.47 1.0073 03 6826.9 -0.1371
05 5934.77 0.0057 06 6779.41 0.9221 05 6807.03 -0.2911
06 5934.4 -0.0062 07 6738.02 -0.6105 06 6697.43 -1.6101
07 5942.19 0.1313 08 6788.91 0.7553 07 6635.39 -0.9263
09 5947.54 0.09 09 6847.44 0.8621 09 6730.09 1.4272
10 6080.88 2.2419 10 6825.15 -0.3255 12 6838.04 1.604
11 6110.26 0.4832 13 6839.78 0.2144 13 6887.91 0.7293
12 6097.16 -0.2144 14 6878.82 0.5708 14 6997.7 1.59413 6146.5
0.8092 15 7023.11 2.0976 15 6953.12 -0.6371
16 6155.78 0.151 16 7032.08 0.1277 16 6866.66 -1.2435
17 6258.4 1.6671 17 7076.99 0.6386 19 6796.42 -1.0229
18 6227.93 -0.4869 21 7129.67 0.7444 20 6698.24 -1.4446
19 6311.34 1.3393 22 6960.61 -2.3712 21 6722.51 0.3623
20 6344.09 0.5189 23 6933.15 -0.3945 22 6842.24 1.781
23 6346.06 0.0311 24 6871.91 -0.8833 23 6708.88 -1.9491
24 6444.56 1.5521 27 6678.83 -2.8097 26 6729.12 0.3017
25 6497.43 0.8204 28 6831.83 2.2908 27 6683.31 -0.6808
27 6554.58 0.8796 29 6857.28 0.3725 28 6660.81 -0.3367
30 6417.22 -2.0956 29- 6575.18 -1.2856
31 6549.31 2.0584 30 6647.77 1.104
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Table: 02Month-Wise Market Prices
Half-yearly average rate of returns of a Market = 0.1393
Variance of a Market = 1.2098
Standard deviation of a Market = 1.0999
April 2012 May 2012 June 2012
Date Closing
PriceReturn
Date Closing
PriceReturn
Date Closing
PriceReturn
02 6806.09 2.3816 02 6687.94 -0.1578 01 6177.22 -1.6373
03 6864.24 0.8544 03 6622.15 -0.9837 04 6178.64 0.023
04 6835.13 -0.4241 04 6496.99 -1.89 05 6194.73 0.260409 6730.78
-1.5267 07 6534.95 0.5843 06 6345.26 2.43
10 6734.03 0.0483 08 6406.07 -1.9722 07 6406.54 0.9658
11 6707.13 -0.3995 09 6358.22 -0.7469 08 6429.05 0.3514
12 6760.98 0.8029 10 6348.82 -0.1478 11 6407.76 -0.331213
6689.94 -1.0507 11 6300.73 -0.7575 12 6476.48 1.0724
16 6718.82 0.4317 14 6262.7 -0.6036 13 6481.45 0.0767
17 6788.99 1.0444 15 6306.76 0.7035 14 6399.89 -1.2584
18 6806.86 0.2632 16 6214.37 -1.4649 15 6487.13 1.3631
19 6833.46 0.3908 17 6222.92 0.1376 18 6396.6 -1.395520 6777.81
-0.8144 18 6241.2 0.2938 19 6440.74 0.6901
23 6662.83 -1.6964 21 6263.56 0.3583 20 6474.67 0.5268
24 6679.96 0.2571 22 6209.65 -0.8607 21 6530.9 0.8685
25 6650.58 -0.4398 23 6176.39 -0.5356 22 6513.78 -0.2621
26 6629.67 -0.3144 24 6263.39 1.4086 25 6483.63 -0.462927
6622.89 -0.1023 25 6272.97 0.153 26 6500.12 0.2543
28 6650.25 0.4131 28 6350.89 1.2422 27 6525.5 0.3905
30 6698.51 0.7257 29 6352.29 0.022 28 6530.99 0.0841
30 6290.01 -0.9804 29 6682.47 2.319431 6280.04 -0.1585
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Table: 03
Month-Wise SBI Prices
January 2012 February 2012 March 2012
DateClosing
PriceReturn Date
Closing
Price ReturnDate
Closing
PriceReturn
021629.65 0.6267
012077.1 0.7787
012219.75
-1.0542
03 1706.5 4.7157 02 2072.65 -0.2142 02 2245.7 1.1691
041695.15
-0.6651
032103.1 1.4691
032250.75 0.2249
051691.7
-0.2035
062163.05 2.8506
052174.15
-3.4033
061676.15
-0.9192
072152.05 -0.5085
062151
-1.0648
071669.75
-0.3818
082175.4 1.085
072141.05
-0.4626
091637.75
-1.9165
092181.95 0.3011
092222.3 3.7949
10 1702.05 3.9261 10 2172.5 -0.4331 12 2310.25 3.9576
11 1725.75 1.3924 13 2129 -2.0023 13 2327.65 0.7532
12 1760.7 2.0252 14 2198.45 3.2621 14 2351.5 1.0246
131777.15 0.9343
152250.5 2.3676
152299.45
-2.2135
161816.65 2.2227
162349.05 4.379
162227.95
-3.1094
171842.85 1.4422
172416.75 2.882
192159.65
-3.0656
18 1863.6 1.126 21 2451.75 1.4482 20 2184.15 1.1344
19 1883.7 1.0786 22 2257.8 -7.9107 21 2233.55 2.2617
201931.8 2.5535
232261.25 0.1528
222160.6
-3.2661
23 1940.65 0.4581 24 2206.8 -2.408 23 2165.25 0.2152
242041.3 5.1864
272125.1 -3.7022
262118.3
-2.1683
25 2056.6 0.7495 28 2229.55 4.9151 27 2129.8 0.5429
27 2042.6
-
0.6807 29 2243.4 0.6212 28 2081.15
-
2.2843
301990.7
-2.5409
29-2061.6
-0.9394
31 2061.05 3.5339 30 2095 1.6201
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Table: 04Month-Wise SBI Prices
Half-yearly average rate of returns of a SBI =0.2525
Variance of a SBI = 5.1858
Standard deviation of a SBI = 2.2772
April 2012 May 2012 June 2012
Date ClosingPrice
ReturnDate Closing
PriceReturn
Date ClosingPrice
Return
02 2129.4 1.642 02 2139.45 0.0702 01 2026.2 -1.4302
03 2170.9 1.9489 03 2085.2 -2.5357 04 2046.2 0.9871
04 2164.3 -0.304 04 1993.6 -4.3929 05 2080.25 1.6641
09 2101.3 -2.9109 07 2026.15 1.6327 06 2159.45 3.8072
10 2151 2.3652 08 1958.95 -3.3166 07 2167.85 0.389
11 2160.3 0.4324 09 1887.6 -3.6423 08 2180.05 0.5628
12 2224.1 2.9533 10 1843.75 -2.3231 11 2164.55 -0.711
13 2211.45 -0.5688 11 1852.2 0.4583 12 2206.9 1.956516 2265.4
2.4396 14 1840.2 -0.6479 13 2222.25 0.6955
17 2299.95 1.5251 15 1859.95 1.0733 14 2154.25 -3.06
18 2289.6 -0.45 16 1829.2 -1.6533 15 2182.8 1.3253
19 2271.3 -0.7993 17 1848.1 1.0332 18 2087.65 -4.3591
20 2260.45 -0.4777 18 1942 5.0809 19 2103.1 0.7401
23 2192.1 -3.0237 21 2007.4 3.3677 20 2116.7 0.6467
24 2188.45 -0.1665 22 1938.5 -3.4323 21 2177.95 2.8937
25 2171.7 -0.7654 23 1956.45 0.926 22 2156.75 -0.9734
26 2159.2 -0.5756 24 1970.8 0.7335 25 2114.9 -1.9404
27 2125.7 -1.5515 25 2005 1.7353 26 2116.1 0.0567
28 2131.05 0.2517 28 2100.35 4.7556 27 2113.4 -0.1276
30 2137.95 0.3238 29 2120.3 0.9498 28 2095.45 -0.8493
30 2097.5 -1.0753 29 2159.15 3.0399
31 2055.6 -1.9976
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Table: 06Month-Wise ICICI Prices
Half-yearly average rate of returns of a ICICI = 0.2388
Variance of a Market = 4.7498
Standard deviation of a Market = 2.1793
April 2012 May 2012 June 2012
Date Closing
PriceReturn
Date Closing
PriceReturn
Date Closing
PriceReturn
02 890.85 0.4057 02 881.7 0.0284 01 781.7 -0.3315
03 907.55 1.8746 03 857.55 -2.739 04 790.3 1.1002
04 890.45 -1.8842 04 833.95 -2.752 05 790.25 -0.0063
09 870.05 -2.291 07 847.7 1.6488 06 807.1 2.1322
10 864.45 -0.6436 08 830.3 -2.0526 07 829.95 2.8311
11 864.9 0.0521 09 821.8 -1.0237 08 829 -0.1145
12 878.15 1.532 10 812.8 -1.0952 11 825.5 -0.4222
13 864.65 -1.5373 11 812.95 0.0185 12 838.8 1.611116 873.45
1.0178 14 799.1 -1.7037 13 849.1 1.2279
17 885.65 1.3968 15 816.7 2.2025 14 819.4 -3.4978
18 882.15 -0.3952 16 794.1 -2.7672 15 844.9 3.112
19 877.8 -0.4931 17 787.25 -0.8626 18 816.7 -3.3377
20 860.5 -1.9708 18 805.05 2.261 19 826.4 1.1877
23 843.45 -1.9814 21 810.8 0.7142 20 833.3 0.8349
24 847.5 0.4802 22 800.85 -1.2272 21 850.55 2.0701
25 838.65 -1.0442 23 795.7 -0.6431 22 852.05 0.1764
26 841.55 0.3458 24 819.9 3.0413 25 847.35 -0.5516
27 860.75 2.2815 25 815.9 -0.4879 26 845.45 -0.2242
28 868.9 0.9468 28 834.55 2.2858 27 852.45 0.828
30 881.45 1.4444 29 838.95 0.5272 28 856.5 0.4751
30 817 -2.6164 29 899.6 5.0321
31 784.3 -4.0024
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Table: 07
Month-Wise HDFC Prices
January 2012 February 2012 March 2012
DateClosing
PriceReturn Date
Closing
Price ReturnDate
Closing
PriceReturn
02427.2 0.0351
01496.7 1.1815
01514.15
-0.7049
03 439.15 2.7973 02 497.8 0.2215 02 518.3 0.8072
04 443.25 0.9336 03 506.35 1.7176 03 518.9 0.1158
05442.55
-0.1579
06506.7 0.0691
05511.3
-1.4646
06452.5 2.2483
07509.65 0.5822
06507.6
-
0.7236
07451.1
-0.3094
08508 -0.3238
07515.3 1.5169
09 454.9 0.8424 09 522.15 2.7854 09 522.85 1.4652
10459.45 1.0002
10516.2 -1.1395
12519.85
-0.5738
11 462.25 0.6094 13 522 1.1236 13 524.8 0.9522
12 466.6 0.941 14 517.7 -0.8238 14 527.05 0.4287
13469.3 0.5787
15532.95 2.9457
15510.95
-3.0547
16
461.15
-
1.7366
16
526.2 -1.2665
16
507.7
-
0.636117
467.25 1.322817
527.55 0.256619
498.65-
1.7825
18 480.3 2.7929 21 531.1 0.6729 20 504.85 1.2434
19 485 0.9786 22 531.75 0.1224 21 515.4 2.0897
20488.7 0.7629
23531.8 0.0094
22502.6
-2.4835
23483.9
-0.9822
24524.5 -1.3727
23513.85 2.2384
24488.5 0.9506
27513.3 -2.1354
26510.55
-0.6422
25 490.1 0.3275 28 530.2 3.2924 27 518.05 1.46927
483.6-
1.326329
517.8 -2.338728
513.3-
0.9169
30479.05
-0.9409
29-510.7
-0.5065
31 490.9 2.4736 30 520.05 1.8308
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Table: 08Month-Wise HDFC Prices
Half-yearly average rate of returns of a HDFC bank = 0.2290
Variance of a HDFC bank =2.1141
Standard deviation of a HDFC bank = 1.4539
April 2012 May 2012 June 2012
Date Closing
PriceReturn
Date Closing
PriceReturn
Date Closing
PriceReturn
02 527.1 1.3556 02 549.8 1.4017 01 491.45 -2.8659
03 529.8 0.5122 03 552.55 0.5002 04 496.8 1.0886
04 526.6 -0.604 04 536.75 -2.8595 05 501.8 1.0064
09 522.95 -0.6931 07 532.15 -0.857 06 519.35 3.4974
10 524.5 0.2964 08 515.45 -3.1382 07 537.25 3.4466
11 526.25 0.3337 09 512.45 -0.582 08 538.3 0.1954
12 530.4 0.7886 10 516.75 0.8391 11 539.55 0.2322
13 530.25 -0.0283 11 510.8 -1.1514 12 549.55 1.853416 529.6
-0.1226 14 500.5 -2.0164 13 542.7 -1.2465
17 530.85 0.236 15 499.05 -0.2897 14 534.4 -1.5294
18 536.9 1.1397 16 495.15 -0.7815 15 547.85 2.5168
19 554.2 3.2222 17 497.35 0.4443 18 533 -2.7106
20 551.1 -0.5594 18 500.45 0.6233 19 537.1 0.7692
23 544.9 -1.125 21 497.45 -0.5995 20 534.5 -0.4841
24 541.7 -0.5873 22 489.05 -1.6886 21 543 1.5903
25 546.9 0.9599 23 487 -0.4192 22 544.15 0.2118
26 540.55 -1.1611 24 499.05 2.4743 25 537.25 -1.268
27 540.55 0 25 500.35 0.2605 26 544.1 1.275
28 543.15 0.481 28 507.95 1.5189 27 548.7 0.8454
30 542.2 -0.1749 29 504.6 -0.6595 28 547 -0.3098
30 500.65 -0.7828 29 563.5 3.0165
31 505.95 1.0586
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0
0.5
1
1.5
2
2.5
SBI ICICI HDFC
AVG RETURNS
STANDARD DEVIATION
Fig: 1 Bank wise half yearly average rate of return and standard
deviation
INTERPRETATION:
An average rate of return of SBI bank ltd is 0.25. Where as the
risk (i.e. standard
deviation) is 2.28. The risk is higher than that of the
returns.
An average rate of return of ICICI bank ltd is 0.24. Where as
the risk (i.e.
standard deviation) is 2.08. The risk is higher than that of the
returns.
An average rate of return of SBI bank ltd is 0.23. Where as the
risk (i.e. standard
deviation) is 1.45. The risk is higher than that of the
returns.
BANKS AVG
RETURNS
STANDARD
DEVIATION
SBI 0.2525 2.28
ICICI 0.2388 2.18HDFC 0.2290 1.45
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Table: 10
Month-Wise SBI Bank and Market Returns
April 2012 May 2012 June 2012
DateSBI
Return
MRK
ReturnDate
SBI
Return
MRK
ReturnDate
SBI
Return
MRK
Return
02 1.642 2.3816 02 0.0702 -0.157 01 -1.43 -1.637
03 1.9489 0.8544 03 -2.536 -0.983 04 0.9871 0.023
04 -0.304 -0.424 04 -4.393 -1.89 05 1.6641 0.2604
09 -2.910 -1.527 07 1.6327 0.5843 06 3.8072 2.43
10 2.3652 0.0483 08 -3.317 -1.972 07 0.389 0.9658
11 0.4324 -0.399 09 -3.642 -0.746 08 0.5628 0.351412 2.9533
0.8029 10 -2.323 -0.147 11 -0.711 -0.331
13 -0.568 -1.051 11 0.4583 -0.757 12 1.9565 1.0724
16 2.4396 0.4317 14 -0.648 -0.603 13 0.6955 0.0767
17 1.5251 1.0444 15 1.0733 0.7035 14 -3.06 -1.258
18 -0.45 0.2632 16 -1.653 -1.464 15 1.3253 1.3631
19 -0.799 0.3908 17 1.0332 0.1376 18 -4.359 -1.396
20 -0.477 -0.814 18 5.0809 0.2938 19 0.7401 0.6901
23 -3.023 -1.696 21 3.3677 0.3583 20 0.6467 0.5268
24 -0.166 0.2571 22 -3.432 -0.860 21 2.8937 0.8685
25 -0.765 -0.44 23 0.926 -0.535 22 -0.973 -0.26226 -0.575 -0.314
24 0.7335 1.4086 25 -1.94 -0.463
27 -1.551 -0.102 25 1.7353 0.153 26 0.0567 0.2543
28 0.2517 0.4131 28 4.7556 1.2422 27 -0.128 0.3905
30 0.3238 0.7257 29 0.9498 0.022 28 -0.849 0.0841
30 -1.075 -0.980 29 3.0399 2.3194
31 -1.998 -0.158
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Table: 11
Month-Wise ICICI Bank and Market Returns
January 2012 February 2012 March 2012
Date ICICIReturn
MRKReturn
Date ICICIReturn
MRKReturn
Date ICICIReturn
MRKReturn
02 1.7309 0.1237 01 -1.53 0.8503 01 -2.4435 -0.697
03 4.1568 2.7059 02 1.565 0.6886 02 2.08062 0.393404 2.4262
-0.134 03 1.4078 1.0073 03 0.31016 -0.137
05 0.572 0.0057 06 1.4265 0.9221 05 -3.8761 -0.291
06 0.5487 -0.006 07 0.9754 -0.611 06 -1.9817 -1.610
07 -0.785 0.1313 08 -1.809 0.7553 07 0.92593 -0.926
09 0.0402 0.09 09 2.136 0.8621 09 6.2246 1.427210 3.8485 2.2419
10 -1.213 -0.326 12 1.63442 1.604
11 0.665 0.4832 13 0.6895 0.2144 13 -0.0054 0.7293
12 0.2501 -0.214 14 0.8078 0.5708 14 2.60865 1.59413 1.0364
0.8092 15 4.028 2.0976 15 -2.4742 -0.637
16 0.2406 0.151 16 -1.148 0.1277 16 -1.4243 -1.24317 -0.752
1.6671 17 1.3108 0.6386 19 -0.916 -1.022
18 -2.068 -0.486 21 0.9679 0.7444 20 -0.1156 -1.444
19 3.5095 1.3393 22 -3.421 -2.371 21 3.0687 0.3623
20 5.814 0.5189 23 -1.395 -0.395 22 -3.8433 1.781
23 1.7979 0.0311 24 -1.293 -0.883 23 1.28412 -1.94924 3.305
1.5521 27 -4.798 -2.81 26 -4.2975 0.3017
25 -0.852 0.8204 28 2.6891 2.2908 27 0.476 -0.680
27 1.0813 0.8796 29 -0.467 0.3725 28 -1.9292 -0.336
30 -4.07 -2.095 29- -0.355 -1.28531 5.8748 2.0584 30 3.64465
1.104
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Table: 12
Month-Wise ICICI Bank and Market Returns
April 2012 May 2012 June 2012
Date ICICIReturn
MRKReturn
Date ICICIReturn
MRKReturn
Date ICICIReturn
MRKReturn
02 0.4057 2.3816 02 0.0284 -0.157 01 -0.332 -1.637
03 1.8746 0.8544 03 -2.739 -0.983 04 1.1002 0.023
04 -1.884 -0.424 04 -2.752 -1.89 05 -0.006 0.2604
09 -2.291 -1.527 07 1.6488 0.5843 06 2.1322 2.4310 -0.643 0.0483
08 -2.053 -1.972 07 2.8311 0.9658
11 0.0521 -0.399 09 -1.024 -0.746 08 -0.114 0.3514
12 1.532 0.8029 10 -1.095 -0.147 11 -0.422 -0.331
13 -1.537 -1.051 11 0.0185 -0.757 12 1.6111 1.0724
16 1.0178 0.4317 14 -1.704 -0.603 13 1.2279 0.