1.

1 INTRODUCTION

Banking in India originated in the first decade of 18th century with The General Bank of India coming
into existence in 1786. This was followed by Bank of Hindustan. Both I these banks are now defunct.
After this, the Indian government established. three presidency banks in India. The first of three was
the Bank of Bengal, which obtains charter in 1809, the other two presidency bank, viz., the Bank of
Bombay and the Bank of Madras, were established in 1840 and 1843, respectively. The three
presidency banks were subsequently amalgamated into the Imperial Bank of India (IBI) under the
Imperial Bank of India Act, 1920 which is now known as the State Bank of India.

With the potential to become the fifth largest banking industry in the world by 2020 and third
largest by 2025 according to KPMG-CII report, India’s banking and financial sector is expanding
rapidly. The Indian Banking industry is currently worth Rs. 81 trillion (US $ 1.31 trillion) and banks are
now utilizing the latest technologies like internet and mobile devices to carry out transactions and
communicate with the masses.The year, 2015, has been a not so great year for the banking industry
on account of various factors such as stressed asset quality, poor credit growth, depreciating rupee,
lower stock prices and so on. However, there was some improvement in the debt markets as bond
prices for banks rose as yields on the 10-year benchmark paper slid to the recent 7.75 per cent, from
7.86 per cent from the beginning of the year, after touching a low of 7.51 per cent.

Looking back this calendar year, the banking index slipped by almost 10 per cent this year, with
stocks of major public sector banks such as State Bank Of India (SBI), Bank of Baroda and Punjab
National Bank having fallen by almost 37 per cent, 35 per cent and 80 per cent, till date, respectively.
With the ongoing global turmoil, analysts believe there .could be an impact on the Indian banking
sector here, next year, but most should sail through Credit growth in the banking sector has
remained subdued and a cause of concern for most part of this year. During the first half of the
current fiscal year, credit growth stood at just about 8.4 per cent. According to Fitch Ratings, credit
growth for Indian banks is likely to be Moderately higher in financial year 2016 (FY16, to March
2016), but any sharp recovery in credit fundamentals appears unlikely with capital and asset quality-
related challenges acting as impediments to growth. The country’s leading bank, 881, is targeting a
credit growth of 16 per cent for the next fiscal year, may clock credit growth of 12-13 per cent for
this current fiscal, a tad lower than its earlier target of 14 per cent. As the GDP growth story for the
India looks positive and the Government helping to boost the , infrastructure sector, should help the
banking sector to do well.

The Indian banking sector consists of 26 public sector banks, 20 private sector banks and 43 foreign
banks along with 61 regional rural banks (RRBs) and more than 90,000 credit cooperatives.

After getting the real picture about these banking stocks and analyzing the behavior of investment in
banking stocks, certain conclusions have been drawn and recommendations can be done for the
clients of the ShareKhan Limited.
The current valuation certainly looks attractive from long term perspective. It will be good 7 for
investors to find out how the banks operate and learn about key parameters that impact banking
business and thus wealth of investors.

Nifty

Nifty is a major stock index in India introduced by the National Stock Exchange. Nifty was coined for
the two words, “National” and “FIFTY “. The word fifty is used because; the index consists of 50
actively traded stocks from various sectors.So the nifty index is a bit broader than the Sensex which
is constructed using 30 actively traded stocks in the BSE.Nifty is calculated using the same
methodology adopted by the BSE in calculating the Sensex -but with three differences.

They are;

The base year is taken as 1995

The base value is set to 1000

Nifty is calculated on 50 stocks actively traded in the NSE

50 top stocks are selected from 24 sectors

BANK NIFTY

Bank Nifty is the bank index traded in the F850 segment of NSE. It comprises of most liquid banking
stocks listed on NSEt This index provides investors and market intermediaries with a benchmark that
capture the capital market performance of Indian banks. The index has 12 stocks from the banking
sector which trade on the National Stock Exchange. Bank nifty index is a broad based benchmark
that is diversified across public and private banks that captures the performance of Indian banks.The
bank nifty index i composition do not remains same always as the stocks are replaced by some other
bank which performs and have their market cap more than the underperfonners.Few years ago, the
bank nifty index had a big weightage of public banks which were later replaced by the private
performing banks. The lists of stocks in Bank Nifty are the following;

1. State Bank of India.

2. HDFC Bank

3. ICICI Bank

4. Kotak Mahindra Bank

5. Axis Bank

6. Bank of Baroda

7. Punjab National Bank

8. Bank of India

9. Canara Bank

10. Induslnd Bank

11. Yes Bank

12. Union Bank

13. Federal Bank

1.2 NEED FOR THE STUDY

The need of the study is to understand performance evaluation of banking stocks of share \ market.
This analysis will identify the problem of selected stocks and enable them to be more profitable to
select shares for long term and short term investments

Today, stock exchanges operate around the world, and they have become highly regulated
institutions. Investors wanting to buy and sell shares must do so through a share a share broker, who
pays to own a seat on the exchange. Companies with shares traded on an exchange are said to be
listed and they must meet specific criteria, which varies across exchanges. Most stock exchanges
began as floor exchanges, where traders made deals faceto-face. The largest stock exchange in the
world, the New York Stock Exchange, continues to operate this way, but most of the world‘s
exchanges have now become fully electronic.

The secondary market or the stock exchanges consists of 23 stock exchanges including the NSE, BSE,
OTCI and interconnected stock exchange of India (ISIEL) where existing instrument including
negotiable debt are traded. Capital fomiation occurs in the primary market for the securities already
issue to be bought and sold in volume with little variation in the current market price.

1.3. OBJECTIVE OF THE STUDY

1.3.1. Primary objective

To analyze the performance of selected banking stocks with special reference to Bank Nifty

1.3.2.8econdary objective

To study the price movements of stocks of Bank Nifty

To analyze the risk-return characteristics of the selected banking stocks

To know whether the selected security is underpriced, overpriced or fairly priced

To suggest measures to reduce volatility

To suggest investors bank stocks for long term investments

1.4 SCOPE OF THE STUDY

The rapid growth of capital market in India has opened up new investment avenues for investors.
The stock markets have become attractive investment options for the common man. Stock is
ownership in a company, with each share of stock representing a tiny piece of ownership. The more
shares you own, the more dividends you earn when the company makes a profit. An investor may
also expect capital gains from the stocks. As we come across in day-to-day life, many investors are
losing their funds by investing without any fundamental knowledge. An efficient market relies on
information. A lack of information . creates inefficiencies that result in stocks being misrepresented
(over or under valued). The * role of equity analysis is to provide information to the market. This
analysis is valuable because it fills information gaps so‘that each individual investor does not need to
analysis every stock thereby making the markets more efficient

This study on the stocks of different banks can have following scopes;

Performance measurement of a bank

Valuation of securities

Investment decision in stock market

Risk assessment for selection of stock

1.5 RESEARCH METHODOLOGY

Research methodology means the scientific method of conducting a research. It is the research
design which can be selected for conducting a study according to the nature and scope of the
subject.

For the present study secondary data is used for collecting information’s.

1.5.1. Secondary data

The research is dependent on the secondary data collected from the different sources. They are;

Journals

Other articles and data provided by companies

Historical stock prices of banking sector companies from NSE websites

Historical index movement of Bank Nifty

1.5.2. Sampling Design

For the puipose of this study five bank stocks are selected from Bank Nifty on the basis of which are
the stocks in Bank Nifty have highest weight-age. The selected bank stocks are;

State Bank of India

HDFC Bank

ICICI Bank

Kotak Mahindra Bank

Axis Bank

1.5.3. Data Analysis Techniques

Beta

Beta measures volatility or systematic risk compared to the market or the benchmark index. It is a
measure of volatility or systematic risk of a security or a portfolio in comparison to the market as a
whole. It is also known as beta coefficient. Beta is calculated using regression analysis. A beta of less
than 1 indicates that the securities price will move the market. A beta greater than 1 Indicates that
the security’s price Will be more volatile than the market. For the present study Beta is used for to
know which are the selected bank stocks include high risk.

Formula

Alpha

Alpha measures risk relative to the market or benchmark index. Alpha is used along with beta and R-
square. Alpha tells you whether the fund has produced returns justifying the risks it is taken by
comparing its actual return to the one predicted by the beta. For the present study Alpha is used‘for
to know which are the selected bank stocks give moderate profitability.

Formula

Alpha: average (y) [B X average (x)]

Coefficient of Correlation

In securities analysis correlation is used for measuring whether two securities move in relation to
each other. Correlation is used in advanced portfolio management. For the present study Coefficient
of Correlation is used to measure the relationship between selected bank stocks and bank nifty.

Formula

Coefficient of correlation =

Coefficient of determination

Coefiicient of determination predicts future outcomes. It is indicative of the level of explained

variability. The coefficient, also commonly known as R-square, is used as a guideline to measure the
accuracy. For the present study coefficient of determination is used to predicts future outcome of
the selected bank stocks.

Formula

Co efficient of determination:

Variance

Variance is a mathematical expression of the average squared deviations from the mean. It is
computed by finding the profitability weighted average of squared deviations from the expected
value. Variance measures the variability from an average (volatility). Volatility is a measure of risk, so
this statistic can help determine the risk an investor might take on when purchasing a specific
security.

Formula

Variance =

Standard Deviation

Standard deviation is applied to the annual rate of return of an investment to measure the
investment’s volatility.
Standard deviation =

1.6. LIMITATIONS OF THE STUDY

Following are the limitations of the study;

Time is one of the important limitations of the study. Only two months are allotted for the study.

The research has been done with selection of only limited banking companies so the outcomes will
not be applicable for whole banking sector. It can be mere representative of the particular sector “

The study of stock market and making price projection can always have some uncertainties which
can limit this study

The accuracy is limited as the data collection was strictly confined to secondary soruces.
2.1. INDUSTRY PROFILE

2.1.1. Stock Exchanges

The size of the world stock market was estimated at about $36.6 trillion at the beginning of October
2008. The total world derivatives market has been estimated at about $791 trillion , face or nominal
value, 11 times the size of the entire world economy. The value of the derivatives market, because it
is stated in terms of notional values, cannot be directly. compared to a stock or a fixed income
security, which traditionally refers to an actual value.

Stocks are listed and traded on stock exchanges which are entities of a corporation or mutual
organization specialized in the business of bringing buyers and sellers of the organizations to a listing
of stocks and securities together.

Generally considered major stock exchanges are the Amsterdam Stock Exchange, London Stock
Exchange, New York Stock Exchange, Paris Bourse, Bursa Malaysia (formerly Kuala Lumpur Stock
Exchange) and the Deutsche Borse (Frankfurt Stock Exchange) and , E Toronto Stock Exchange. In
Africa, examples include Nigerian Stock Exchange, JSE 1 Limited, etc. Asian examples include the
Philippine Stock Exchange, the Singapore Exchange, the Tokyo Stock Exchange, the Hong Kong Stock
Exchange, the Shanghai Stock Exchange, and the Bombay Stock Exchange. In Latin America, there are
such exchanges as the BM&F Bovespa and the BMV Australia has a national stock exchange, the
Australian Securities Exchange, due to the size of its population The stock exchange is based in
Sydney.

Market participants include individual retail investors and traders, institutional investors such as
mutual funds, banks, insurance companies and hedge funds, and also publicly traded corporations
trading in their own shares. Some studies have suggested that institutional investors and
corporations trading in their own shares generally receive higher risk-adjusted returns than reta1l
investors.

History

The history of stock exchanges can be traced to 12th century France, when the first brokers are
believed to have developed, trading in debt and government securities. Unofficial share . markets
exist across Europe through the 16005, when brokers would meet outside or in cotiee houses to
make trades. The Amsterdam stock exchange created I 1602, became the . first official stock
exchange when it began trading shares of the Dutch East India Company. These were the first
company shares ever issued.

Today, Stock exchanges operate around the world, and they have become highly regulated
institutions. Investors wanting to buy and sell shares must do through a share broker, who pays to
own a seat on the exchange. Companies with shares traded on an exchange are said to be listed and
they must meet specific criteria, which varies across exchanges .Most stock exchanges began as floor
exchanges, where traders made deals face to face. The largest stock exchange in the world, the New
York Exchange, continues to operate this way, but most of the word’s exchanges have now become
fully electronic .In 12th century France the oountries do change were concerned with managing and
regulating the debts of agricultural communities on behalf of the banks. Because these men also
traded with debts, they could be oalied the first brokers. A common misbelieve is that in late l3thl
century Bruges I commodity traders gathered inside the house of a man called Van Der Beurze, and
in 1409 they became the “BiugseBeurse”, institutionalizing what had been ,until then, an informal
meeting, but actually, the family van Der Beurze had a building in Antwerp where those .Vgatherings
occurred; the van Der Beurze had Antwerp, as most of the merchants of that period 321s their
primary place for trading. The idea quickly spread around Flanders and neighbouring countries and
“Beurzen” soon opened in Ghent and Rotterdam.

In the middle of the 13th century, Venetian bankers began to trade in government . securities In
1351 the Venetian government outlawed spreading rumors intended to lower the price of
government funds Bankers in Pisa, Verona, Genoa and Florence also began trading in governinent
securities during the 14th century. This was only possible because these were independent city
states not ruled by a duke but a council of influential citizens. Italian companies were also the first to
issue shares. Companies in England and the Low Countries followed in the 16th century.

The Dutch East India Company (founded in 1602) was the first joint-stock company to get a fixed
capital stock and as a result, continuous trade in company stock occurred on the Amsterdam
Exchange. Soon thereafter, a lively trade in various derivatives, among which ' options and repos,
emerged on the Amsterdam market. Dutch traders also pioneered short selling “aE“ a practice which
was banned by the Dutch authorities as early as 1610.

There are now stock markets in virtually every developed and most developing economies, with the
world's largest markets being in the United States, United Kingdom. Japan, India. China, Canada,
Germany (Frankfurt Stock Dxchange), France, South Korea and the Netherlands.

2.1.2Behavior of the stock market

From experience it is known that investors may 'temporarily‘ move financial prices away from their
long term aggregate price 'trends'. (positive or up trends are referred to as bull markets; negative or
down trends are referred to as bear markets).Over reactions may occur-so that excessive optimism
(euphoria)may drive prices unduly high or excessive pessimism may drive prices unduly low.
Economists continue to debate whether financial markets are ‘generally’ efficient.

According to one interpretation of the efficient-market hypothesis (EMH), only changes in

fundamental factors, such as the outlook for margins, profits or dividends ,ought to affect share
prices beyond the short term, where random ‘noise’ in the system may prevail .(But this largely
theoretic academic viewpoint-known as ‘hard’ EMH-also predicts that little or no trading should take
place, contrary to fact, since prices are already at or near equilibrium , having priced in all public
knowledge.)The ‘hard’ efticient~market hypothesis is sorely . tested and does not explain the cause
of events such as the crash in 1987, when the Dow lones Industrial Average plummeted 22.6 percent
-the largest --ever one-day fall in the United States.

The event dernonsnated that share prices can fall dramatically even though, to this day, it is
impossible to fix a generally agreed upon dehnite cause: a thorough search failed to detect any
'reasonable' development that might have accounted for the crash (But note that such events are
predicted to occur strictly by chance, although very rarely.) It seems also to he the case more
generally that many price movements (beyond that which are predicted to occur ’randomly‘) are not
occasioned by new information; a study of the fifty largest oneday share price movements in the
United States in the post-war period seems to confirm this. Indian This event demonstrated that
share prices can fall dramatically even though, to ‘ this day, it is impossible to fix a generally agreed
upon definite cause: a thorough search failed to detect any 'reasonable' development that might
have accounted for the crash. (But note that such events are predicted to occur strictly by chance,
although very rarely.) it seems also to be the case more generally that many price movements
(beyond that which are predicted to occur 'randomly') are not occasioned by new infomation; :3
study of the fifty largest one-day share price movements in the United States in the post-war period
seems to confirm this.

Other research has shown that psychological factors may result in exaggerated (statistically '
anomalous) stock price movements (contrary to EMH which assumes such behaviors 'cancel out’).
Psychological research has demonstrated that people are predisposed to ’seeing‘patterns, and often
will perceive a pattern in what is, in fact, just noise. (Something like seeing familiar shapes in clouds
or ink blots.) In the pram! context this means that a succession of good news items about a company
may lead investors to overreact positively (unjustifiably driving the price up). A period of good
returns also boosts the investor’self confidence,reducing his (psychological) risk threshold.

2.1.3 History of Indian Stock Market

lndian stock market marks to be one of the oldest stock market in Asia. It dates back to the close of
18th century when the East India Company used to transact loan securities. to the 18305., trading on
corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading
was broad but the brokers were hardly half dozen during 1840 and 1850.

2.1ABombay Stock Exchange

Bombay Stock Exchange (ESE), (Bombay ShareBézaiir) is a stock exchange located on Dalal Street,
Mumbai, and Maharashtra, India. It is the llth largest stock exchange in the world by market
capitalization as on 31 December 2012. Established in 1875, ESE Ltd, (formerly known as Bombay
Stock Exchange Ltd), is the India’s oldest Stock Exchange, one of Asia's oldest stock exchange and
one of India‘s leading exchange groups. Over the past 137 years, BSE has facilitated the growth of
the Indian corporate sector by providing 51 2 an efficient capital-raising platform. Popularly known
as 83123, the bourse was established as “The Native Share & Stock Brokers' Association" in 1875.

BSE is a corporatizcd and demutualieed entity, with a broad shareholdenbsse which includes two
leading global exchanges, Dcutsche Bourse, Fuse and Singapore Exchange as strategic partners. BSE
provides an efficient and transparent market for trading in equity, debt instruments, derivatives,
mutual funds. It also has a platform for trading in equities of small-and-medium enterprises (SME).
More than 5000 companies are listed on BSE making it world's No. 1 exchange in terms of listed
members. The companies listed on ESE Ltd command a total market capitalization of USD Trillion
1.32 as of January 2013. 8813 Ltd is world‘s fifth most active exchange in terms of number of
transactions handled through its electronic trading system. It is also one of the world’s leading
exchanges (3rd largest in December 2012) for Index options trading (Source: World Federation of
Exchanges).
BSE also provides a host of other services to capital market participants including risk 1
management, clearing, settlement, market data services and education. It has a global reach 1 with
customers around the world and a nation-wide presence. BSE systems and processes are designed to
safeguard market integrity, drive the growth of the Indian capital market and stimulate innovation
and competition across all market segments. B35 is the first exchange in India and second in the
world to obtain an ISO 9001:2000 certifications. it is also the first Exchange in the country and
second in the world to receive Infannation

Security Management System Standard BS 7799-2-2002 certification for its BSE On-Line trading
System (BOLT).

It operates one of the most respected capital market educational institutes in the country (the BSE
Institute Ltd). BSE also provides depository services through its Central Depository Services Limited
(CDSL) arm. BSE’s popular equity index the S&P BSE SENSEX [Formerly SENSEX] ~ is India's most
widely tracked stock market benchmark index. It is traded internationally on the EUREX as well as
leading exchanges of the BRCS nations (Brazil, Russia, China and South Africa). On Tuesday, 19
February 2013 BSE has entered into Strategic Partnership with S&P DOW JONES INDICES and the
SENSEX has been renamed as "S&P BSE SENSEX".

2.1.5 National Stock Exchange

The National Stock Exchange of India Ltd (NSE) is the country’s leading stock exchange located in the
financial capital of Mumbai, India. National Stock Exchange (NSE) was established in the mid-19903
as a demutualized electronic exchange. NSE provides a modern, fully automated screen-based
trading system, with over two lakh trading terminals, through which investors in every nook and
comer of India can trade. NSE has played a critical role in reforming the Indian securities market and
in bringing unparalleled transparency, efficiency and market integrity. i

NSE has a market capitalization of more than US$989 billion and 1,635 companies listed as on July
2013. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two
most significant stock exchanges in India and between them are responsible for the vast majority of
share transactions. NSE's flagship index, the S&P CNX Nifty, is used extensively by investors in India
and around the world to take exposure to the Indian equities marketinvestors in India and around
the world to take exposure to the Indian equities market.

NSE was started by a clutch of leading Indian financial institutions. It offers trading, clearing and
settlement services in equity, debt and equity derivatives. It is India’s largest exchange, globally in
cash market trades, in currency trading and index options. NSE has diversified shareholding. There
are many domestic and global institutions and companies that hold stake in the exchange. Some of
the domestic investors include LIC, GIC, State Bank of India and IDF C Ltd. Foreign investors include
MS Strategic (Mauritius) Limited, Citigroup Strategic Holdings Mauritius Limited, Tiger Global Five
Holdings and Norwest Venture Partners X FII-Mauritius, who have a stake in NSE. As on June 2013,
NSE has 1673 VSAT terminals and 2720 lease lines, spread over more than 2000 cities across India.

Origin was started by a clutch of leading Indian financial institutions at the behest of the
Government of India to bring transparency to the Indian market, and has a diversified shareholding
comprising domestic and global investors. The domestic investors includes Life Insurance
Corporation of India, GIC, State Bank of India and Infrastructure Development Finance Company
(lDFC) Ltd, while the foreign investors include MS Strategic (Mauritius) Limited, Citigroup Strategic
Holdings Mauritius Limited, Tiger Global Five Holdings and Norwest Venture Partners X F II-
Mauritius. The exchange was incorporated in 1992 as a tax-paying company and was recognized as a
stock exchange in ' 1993 under the Securities Contracts (Regulation) Act, 1956, when Mr. P. V.
NarasimhaRao was the Prime Minister of India and Dr. Manmohan Singh was the Finance Minister.
NSE commencedd operations in the Wholesale Debt Market (WDM) segment in June 1994.
TheCapital market (Equities) segment of the NSE commenced operations in November 1994, while
operations in the Derivatives segment commenced in June 2000. In December 2013, NSE celebrated
its 20th anniversary in a glittering ceremony attended by the Chairman of the market regulator SEBI
Mr. U. K. Sinha, Finance Minister Mr. P. Chidambaram and a host of dignitaries from other regulatory
organizations, the market and the corporate world. The institution that has been a catalyst of
reforms since inception pledged to continue with this tradition on this solemn occasion, and set
even loftier goals for the future, while the market regulator announced that NSE had made India
proud in the global arena. Over the years, NSE has constantly re-invented itself, be it adapting to the
latest technology, introducing new products, or in its endeavor to promote financial literacy. The
spirit of the organization is aptly summed up in MD & CEO Ms. ChitraRamkrishna’s words when she
said, at heart NSE always wants to be young and always wants to be energetic. In the past 20years,
the exchange has set certain standards. As articulated by Ms. Ramkrishna, the endeavor now is not
only on ensuring that those standards are maintained, but also on being able to improve upon them.

Stock Broking Industries

Stock brokerage firms have been an established feature in the financial industry for nearly one
thousand years. Dealing in debt securities, brokers employ a variety of systems to aid investors with
the purchase and sales of stocks and bonds in a variety of markets. The firms have changed over the
years, growing to massive organizations that can affect the entire financial sector positively or
negatively with their performance. Changing with the times, the early twenty-first century saw a rise
of online trading that enabled the average investor to take part in the stock market for the first time.

History

During the llth century, the French began regulating and trading agricultural debts on behalf of the
banking community, creating the first brokerage system. In the 13003, houses began to be set up in
major cities like Flanders and Amsterdam in which commodity traders would hold meetings. Soon,
Venetian brokers began to trade in government securities, expanding the importance of the firms.

In 1602, the Dutch East India Company became the first publicly traded company in which
shareholders could own a portion of the business. The stocks improved the size of companies and
became the standard bearer for the modem financial system.

Purpose of a Brokerage Firm

A broker acts as a middleman in a financial transaction, between a buyer and seller of securities,
such as stocks and bonds. A brokerage firm consists of a number of brokers, working together in the
same company to service a larger pool of financial clients. Most individuals use brokerage firms to
manage their investments.

Connect Buyers and Sellers

Every financial instrument must have a buyer and a seller. Finding sellers on your own can be
difficult, which is why brokerage houses exist. For a commission, the brokerage house will connect
buyers and sellers, facilitating the transfer of securities. Brokerage firms also help manage
retirement plan investments. They manage government bonds, sucn as l certified deposits and
treasury inflation protected securities, which provide low rates of return on cash deposits.

Online Brokerage Firms

People may now manage their own financial portfolios without an advisor, although they still use the
services of a brokerage firm. One benefit is that they do not have a fee to I maintain their advisor.
Most online investment brokerages offer the ability to buy almost any type of security or investment
with the click of the mouse. Accounts may be easily viewed 24/7, in order to manage your
investment portfolio.

2.1.6 Duties of a Stock Broker

Stock brokers have a lot of responsibility because they are dealing with their clients’ money and
financial future. Brokers must be honest and conscientious individuals who strive to help their clients
achieve financial success. Brokers also must be friendly and trustworthy r in order to gain the trust of
their clients and prospects. If a broker possesses these qualities, he Will be successful in carrying out
the following varied duties required in his profession.

> Recruit New Clients

One of the main responsibilities of a stock broker is to recruit new clients. Brokers use several tactics
to attain new clients. They could call prospects, introduce themselves and offer a free consultation.
Brokers contact the people they know such as family members, friends and past co-workers. They
ask their current clients to refer their friends and family i to them. Brokers also hold free seminars in
their community where they offer advice on a ‘ financial topic such as planning for retirement. The
broker's hope when holding these seminars is that some attendees will become clients.

> Build Relationships with Clients

A major attribute of good stock brokers is that they know how to build relationships with their
clients. After a broker gets a new client he must learn about the client's financial situation and goals.
He also must understand the client's tolerance for risk. Brokers need to get to know their clients in
order to be able to give them appropriate advice and plan long term investment strategies that will
meet their financial goals. Brokers should build a trusting relationship with their clients so that they
remain clients for a long time.

> Advise Clients

After a broker understands a client's financial situation and the goals they are striving for she will
make recommendations regarding the client's investment portfolio. The broker will use her
knowledge and training to advise the client about portfolio changes and new investment
opportunities. Brokers must always have the client’s best interest in mind when making
recommendations. Also, they are required to only give advice that is suitable for the client’s goals,
financial situation and risk tolerance.

> Execute Trades

When a client decides to buy or sell an investment, the broker fills out the appropriate forms and
executes the trade. It is. the broker's responsibility to ensure that the trade was filled properly.

> Monitor Client’s Portfolios

It is the broker's duty to keep watch over his clients' investments. If market conditions shift or a
client's financial situation changes the broker must recommend the appropriate course of action. As
a result, it is important for a broker to keep in close communication with his clients. The broker also
must have a deep understanding of the markets and watch the market action on a daily basis.

> Warning

If a broker does not act in his client's best interest at all times he can face disciplinary action by the
Financial Industry Regulatory Authority, or FINRA. FINRA is the organization that is mandated by the
Securities and Exchange Commission to regulate the stock market and ensure that all stock brokers
and financial advisers obey all rules and regulations.

2.1.7 Top 10 stock brokers

l) ICICI Direct: By far the biggest and best know stock broker in India. They have decent service and
easy to use user interface but there brokerage is really high compared to what other discount
brokers are providing. There biggest selling point is there seamless integration with your ICICI bank
account which makes transfer/withdrawal of funds really easy and quick.

2) ShareKhan: Incorporated in February 2000, ShareKhan is India’s 2nd largest stock broker providing
brokerage services through its online trading website Sharekhan.eom and 1950 Share shops which
includes branches & Franchises in more than 575 cities across India. They are full service broker and
provide various other services like asset management etc. You can find my detailed review for
ShareKhan brokerage charges here.
3) Zerodha: They are one of the new stock brokers in India which have started discount trading in
India. They have a very competitive brokerage structure and decent customer service. These types of
discount brokers are new in India and providing tough competition to full service brokers. You can
find detailed review about Zerodha here.

4) HDF C Security: They are one of the larger broking houses in India and with their bank branches;
they have one of the largest network which is only after ICICI. Theyhave a vast ‘ network of bank
branch in even smaller town. You can find detailed review about HDFC security here.

5) Kotak Security: They are one more well know name in Financial services and with their bank
branches in big cities they are able to cater to clients in big cities. There online service is decent but
brokerage is not that competitive. You can find detailed review about Kotak Security here.

6) Reliance Money: They came with a bang but lately have lost a lot of sheen from their name. There
have been lots of question about their business practices. You can find detailed review about
reliance money here.

7) MotilalOswal: These are one of the decent brokers Operating in India.

8) Karvy: They are one of the oldest broking houses operating in India. They are the brokers which
your fathers used to use for buying there [PO and MF but there online service are not that great.
Lately they are upgrading their online platform and there brokerage is also comparable to other full
house brokers.

9) SBICapSec: This is the broking arm of State Bank of India but there broking service is not very
great. There brokerage structure is also not very competitive and being a public sector bank, there is
a lotto be desired as far as the customer service is concerned. You can find detailed review about SBI
Capital Security here.

10} RKSV: They are another discount broker from Mumbai. They also provide very competitive rates
and decent customer service.

2.2. Company profile

ShareKhan is one of the leading brokerage firms in the country. It is the retail broking arm of the
Mumbai-based SSKI (ShripalShewantilalKantilalIswarnath Limited). ShareKhan Ltd is a brokerage firm
which is established on 8th February 2000. ShareKhan is India’s 3rd largest stock broker (after ICICI
Direct and HDFC securities). ShareKhan provides E brokerage services through its online trading
website sharekhancom and 1800 offices which include branches and franchises in over 550 cities
across India. ShareKhan has seen incredible growth over last 10+ years through it’s very successful
online trading platform and the chain of franchises located in almost every part of India. ShareKhan
also has international presence in the UAE and Oman

ShareKhan offers its services to all kinds of customers including individual investors and traders,
corporate, institutional and NRls. As of December 2014, ShareKhan has over 13 lakh customers.
ShareKhan offers trade execution facilities for equity cash and derivative segments on BSE and NSE,
commodities trading facilities on MCX and NCDEX. ShareKhan also offers depository services (demat
account) and option to invest in mutual funds and IPOs

It has one of the largest networks in the country with 1200+ share shops in 550 cities. ShareKhan is a
trading member registered with the stock exchange according to the norms ‘ and guidelines given by
the SEBI. Two types of users access the NEAT F&O trading system. The trading members (TM) have
access to functions such as, order matching, order and trade management. The clearing members
(CM) use the trader workstation for the purpose of monitoring the trading members for whom he
clears the trade. Additionally, he can enter and set limits to position, which a trading member can
take. ShareKhan provides the services of derivatives trading on NEAT F&O to its clients

ShareKhan is a registered depository participant (DP) with National Securities Depository Ltd (NSDL).
The participants are required to enter into an agreement with beneficial owners. It is required that
separate shall be Opened by every participant in the name of each of the beneficial owner and the
securities of each beneficial owner shall be segregated and ' shall not be mixed up with the securities
of other beneficial owners or with the participant’s own securities. The participants are obliged to
reconcile with every depository on a daily basis. Participants are required to maintain the following
records for a period of hve years.

ShareKhan is a registered stock broker with the Bombay Stock Exchange and National Stock
Exchange to trade on behalf of clients. The screen-based trading is done on BOLT} BSE Online
Trading and NEAT-National Exchange Automated Trading, terminals. There are two types of
transactions executed on these terminals viz. intra-day and delivery based transactions. Intraday
transactions are those, in which the squaring up of deal is done on the same day, while in delivery
based transaction the squaring up is not done on the same day, but the stock is to be traded on the
basis of rolling settlement i.e. T+2. The brokerage of intraday transaction is 0.10% on both side, i.e.
while brokerage on delivery based transactions is 0.05% on both side, i.e. while purchasing as well as
selling.

Basically, the company is a market leader in providing broking services and has a top turnover in
trading and the high trading and the high tumover makes it the no. 1 in the market. The main
difference is the services that they provide to the investors who really need it. The services are
discussed in moral detail in the marketing activities. The clients are managed with a friendly
corporate culture to give him more benefited investment ideas and motivate him whenever he
needs. The company is providing as many tips to the clients for more and more trading ideas and the
manager helps each client to concentrate on a few so that he can manage the profit/loss.

In short, ShareKhan is currently having a good position in the market with the highest number of
transactions and also the highest turnover (buying/selling) in India and a leader in providing better
services to the investors. ShareKhan, India’s ,leading stock broker is the retail arm of SSKI, e offers
you depository services and trade execution facilities for equities, derivatives and commodities
backed with investment advice tempered by decades of broking experience. A research and analysis
team is constantly working to track performance and trends. That’s why ShareKhan has the trading
products which are having one of the highest success rates in the industry. ShareKhan is having 1800
share shops in 550 cities; the largest chain of retail share shops in India is of ShareKhan.

Sharekhancom is the finest portal for India stock market. The well designed website provides wide
range of investment Options, share market news, research reports, stock quotes, fundamental and
statistical information across equity, mutual iimds, IPOs and much more.

ShareKhan also offers ShareKhan Trade Tiger one of the most popular trading terminals, ' for retail
investors. The Trade Tiger is quite similar to broker terminal and allows frequent traders to place
and execute their orders at a high speed. It also provides live data and other tools on the same
screen to help the users with their trades. ShareKhan ‘Share Mobile’ platform offers trading facility
through mobile apps are available for popular iphone, ipad, Blackberry, Android and other phones. ;

ShareKhan offers verity of accounts to suite customer requirement. These accounts include
ShareKhan first step Account, ShareKhan Classic Account, ShareKhan Trade Tiger Account and
Portfolio Management Services (PMS) through ShareKhan Platinum Circle Account.

2.2.1Nature of business carried

ShareKhan is a stock broking company. The company offers a complete range of pre trade, trade and
post trade services on the BSE (Bombay Stock Exchange) and the NSE (National Stock Exchange).
Whether the client come in to the company’s conventionally located offices and trade in a dedicated
environment or issue instructions over the phone, the highly trained team and sophisticated
equipment ensure smooth transactions and prompt service.

Investment advisory services

Facilitation services to retail investors, corporate

Depository services

Investment options include;

Online trading (includes equity, derivatives)

Commodities trading

Mutual fund

Portfolio Management Services

Operations include;

Institutional broking

Investment banking

Retail broking
Through trading and settlement process the investor converted into the final product. The clearing
house of exchange may act as legal counter party to all dealers for all deals in equity derivatives
instruments on exchanges. Thus the both parties to an equity derivative met either by the party
itself or in the event of default on the part of the party, by clearing corporation. A client can trade
only through a trading member of the exchange. A clearing member can act as trading member. The
process of trading is similar to screen based trading in securities like shares on an exchange. The
exchange introduced standardized contract where settlement date, is specified by stock exchange
and the client can enter into contracts with different contract, strike price. In order to minimize the
risk of failure parties to contract in full filling their respective obligation under the contract, the
clearing corporation trading members. Margins are required to be paid by clearing, trading members
who in turn, collect margin from their respective clients.

2.2.2 Vision, mission and objectives

Vision

“To be the best retail broking in the Indian equities market”

Sharekhan practices customer centric approach to be the leading broking firm.

The company vision is to be the top most company for providing investment advisory and financial
planning service in india.

To be a leading investment intermediary for transaction both online and offline medium.

Enhance transaction handling capability.

Mission

“To educate and empower the individual investor to make better investment decisions through
equity advice and superior service”.

Objectives

To ensure satisfaction through teamwork and professional management

To provide good quality of services on a continuous basis to the satisfaction of clients

To extend effective guidance to brokers, to clearing house corporation, companies and investor in E-
Stock Trading

To eliminate paper work and bring in front of electronic stock market in India

To ensure user friendly online trading facility.

To increase the customer base of investors to invest in all kinds of securities.

To retain the existing consumers with research backed advice and personalized

care the needs of the consumer. "

SSKI Group Investments

SSKI Investor Services Ltd (ShareKhan)

SS, Kantilallshwarlal Securities

ShareKhan Commodities Pvt Ltd

Key strength

Fundamental research

Serving all customers profiles

Customer care and customer education

Highly qualified employees

Responsibility to customers

Responsibility to employees

2.2.3 ShareKhan range of products and services

> Equities:

Equities help to make better investment decisions.

> Derivatives:

Participate in the F&O segment through in depth research and product support on both futures as
well as options strategies.

> Commodities:

Commodities trading is imperative to grow ones business and with our membership with MCX and
NCDEX we are able to provide one of the most comprehensive and competitive platform.

> Currency:
The Currency Derivatives allows you to trade on the movement of conversion rate of USD I EUR /
GBP / JPY with INR. A currency derivative indeed commands the largest derivative market across the
world. With ShareKhan you can provide trading options to all your clients with online monitoring and
surveillance mechanism.

> Portfolio Management Services (PMS):

Portfoliox management schemes designed to meet the growing needs of your HNI customers. The
schemes are based on the risk-return appetite of your customers. PMS ProPrime is aimed at long-
term investors focuses on steady returns and PMS ProTech focusing on absolute returns in the stock
market.

> Mutual Funds & IPOs:

Give the freedom to customers to choose from over 30 fund houses while buying or redeeming
mutual funds and booking IPOs Online.

> Advisory Services:

For HNI clients who want to mnage their own accounts but want to expect advice, our Central
Advisory team backed by a range of services can guide with personalized investment advice

SIP or Top Picks: Secure recurring investments from customers by suggesting regular, Fixed
investments with a Systematic Investment Plan in the Equities or Mutual Funds of your choice or
follow the Top Picks basket recommended by our Research team.

3 Share khan’s Other Products and Services

> First Step

> Classic

> Trade Tiger

>ShareMobile

> Fortune Finder

>Advise line

> Active Training Cell

> FIRST STEP

The ShareKhanFirstStep program is a special, never-been-done-befbre program created by us for
new investors like you to the stock market. Despite being a beginner with a small amount to invest,
you ‘will still be able to benefit from our experience, technology-based tools and research.

>CLASSIC

ShareKhan Classic Account Presents the easiest way to control investor’s investments with a click of
a button. With live stock prices, online cash transfer and instant order executioninvestor get
complete freedom from boring paper work.Our friendly customer service representatives via toll
free phone,email and live online chat.

> TRADE TIGER

ShareKhan Trade Tiger is the blazing fast online Stock Trading Application.

Silent Features of Trade Tiger

> A single platform for multiple exchange BSE & NSE (Cash & F&O), MCX, NCDEX, Currency, Mutual
Funds, IPOs

> Multiple Market Watch available on a Single Screen

> Multiple Charts with Tick by Tick Intraday and End of Day Charting powered with various Studies

> Graph Studies include Average, Band-Bollinger, Know Sure Thing, MACD etc

> Apply studies such as Vertical, Horizontal, Trend, Retracernent & Free lines

>User can save his own defined screen as well as graph template, which is, saving the layout for
future use.

> SHARE MOBILE

Share Mobile is mobile application developed by ShareKhan for the investors and traders to trade
and invest in stock market through this platform.

> FORTUNE FINDER Presenting Fortune Finder, a stock intelligence system aimed to serve retail
investors dealing in financial instruments. Unlike other stock alert systems that provide alerts only
on price movement, the intelligence of Fortune Finder lies in its ability to understand the Up OR
Down trend changes of a stock and alert you instantly.

> ADVISE LINE With Advise line investors do not have to tune into the news or search through
endless pages of reports to know about the market movements or to decide on which are the best
stock investments to make. We continually keep investor updated on the global and local market
conditions. Investor are also, specially advised on the portfolio you build through ShareKhan.

> ACTIVE TRANING CELL

One of the best ways to learn to be a SELF TRADER in the markets is to sign up for Share khan’s
Active Training Cell. Through a series of ONLINE Trainings, ATC educates on various products, tools
and trading/investing strategies in Equity, Derivative, Currency and Commodity markets. Modules
are segregated in to 3 segments Modules which will train on how to trade, trainings on the products
fOr getting recommendations and trainings on ShareKhantrading platforms.

Customers Preference for ShareKhan

>EXPERIENCE:

SSKI has more than eight decades of trust and Credibility in the Indian stock market. in the Asia
Money broker’s poll held recently, ShareKhan won the ‘lndia best broking house for 2004? award.
Ever since it launched ShareKhan as its retail broking division in February 2000, it has been providing
institutional-level research & broking services to investors.

> TECHNOLOGY: With ShareKhan online trading account you can buy and sell shares in an instant
from any PC with an internet connection. You will get access to our powerful online trading tools
that will help you take complete control over your investment in shares.

> KNOWLEDGE: In a business where the right information at the right time can translate into direct
profits, you get access to a wide range of information on Share khan’s website www.sharekhan.com.
You will also get a useful set of Knowledge-based tools that will empower you to take informed
decisions,

> ACCESSIBILITY:

In addition to ShareKhan online and phone trading services also very useful.ShareKhan ; also have a
ground network of 640 share shops across 280 Cities in India where you can get personalize Services.

> CONVENIENCE:

You can call Share khan’s Dial-n-Trade number to get investment advice and execute your
transactions. ShareKhan have a dedicated Call Center to provide this service Via a toll-free , number
from anywhere in India.

> CUSTOMER SERVICE: Share khan’s customer service team will assist you for any help that you need
relating to transactions, billing, at and other queries. Share khan’s customer service can be
contacted via a toll-free number-mail or live chat on Sharekhan.com.

> INVESTMENT ADVICE: ShareKhan has dedicated research teams for fundamental and technical
research. Share khan’s analysts constantly track the pulse of the market and provide timely
investment advice to you in form of daily research e-mail, online chat, printed reports and SMS on
your phone.
3.1 Introduction

The Indian Capital market has changed dramatically over the last few years, especially since
1990.Changes have also been taking place in government regulation and technology. The
expectations of the investors are also changing. The only inherent feature of the capital market,
which has not changed is risk involved in investing in corporate securities. Managing the risk is
emerging as an important function of both large scale and small scale investors.

Risk management of investing in corporate securities is under active and extensive discussion among
academicians and capital market operators. Surveys and research analysis have been conducted
specific studies on the ‘risk element’ of investing in corporate securities.

Avijit Banerjee(l998) reviewed Fundamental Analysis and Technical Analysis to analyze the
worthiness of the individual securities needed to be acquired for portfolio construction. The
Fundamental Anlaysis aims to compare the intrinsic value with prevailing market price 9M.P) and to
take decision decision whether to buy, sell or hold the investments. The fundamentals of the
economy, industry and company determine the value of a security. If the I.V is greater than M.P, the
stock is under priced and should be purchased. He observed that the Fundamental Analysis could
never forecast the MP of a stock at any particular point of time. Techincal Analysis detects the most
appropriate time to buy or sell the stock .It aims to avoid the pitfalls of wrong timing in the
investment decisionsHe also stated that the modern portfolio literature suggests ‘beta’ value as the
most acceptable measure of risk of scrip.The securities having low beta should be selected for
constructing a portfolio in order to minimize the risks.

Kadiyala and Rau (2004) investigated investor reaction to corporate events.They conducted that
investors appear to under react to prior information as well as the events leading to the different
patterns.

Merikas (2003) adopted a modified questionnaire to analyse factors influencing Greek investor
behavior on the Athens Stock exchange. The results indicate that individuals take their stock
purchase decisions on economic criteria combined with other variables. They do not rely on a single
integrated approach but many factors and information they get from the equity research results.

Stiglitz (1985,1994) says stock market liquidity will not enhance incentives for acquiring information
about firms or exerting corporate governance. Moreover and Deverux and Smith (1994) emphasis
that sharing through internationally integrated stock markets can actually educe saving rates and
slow economic growth. Finally the analyses of shleifer and summers (1998) and morck, sheleifer, and
vishny (1990) suggest that stock market development can hurt economic growth by easing
counterproductive corporate takeovers.

Madhusudan (1998) found that BSE sensitivity and national indices did not follow random walk by
using correlation analysis on monthly stock returns data over the period January 1981 to December
1992.

Pandat(1980) has studied the role of stock exchanges in India before and after the independence.
The study reveals that listed stocks covered four-fifth of the joint stock ’ sector companies.
Investment securities was no longer the monopoly of any particular class or of a amall group of
people. It attracted the attention of a large number of small and , middle class individualslt was
observed that a large proportion of savings went in the first instance into purchase of securities
already issued.
Gupta(l981) in an extensive study titled ‘Return on New Equity Issues’ states that the ” investment
performance of new issues of equity shares, especially those of new companies, deserves separate
analysis. The factor significantly influencing the rate of return of new issues to the original buyer is
the ‘fixed price’ at which they are issued.

The research has been done on the equities of banking companies to understand the conditions of
banking stocks.

Ten banking stocks have been studied for the periods of last five year i.e FY 2013-FY 2018 on certain
parameters which are important for banking sector. The banking stocks have been evaluated on
their book values as well as market value. With the help of intrinsic value, certain recommendations
have been made.

It has been found public sector banks have been downgraded on NPA issue. CRAR norms have been
changed and now banks have to maintain 9% of CRAR level from 8%. Certain banking stocks like SBI,
PNB etc. have been losing market value in stock market. Private banking stocks are performing very
well. ShareKhan clients are very much attracted towards banking stocks and constitute one fourth of
their portfolios. They are expecting average 15-20% returns on the banking stocks. Product
innovativeness of private banks is attracting investors towards these stocks.

It has been found that banking sector is performing well in last five years. Certain problem of rising
NPAs and new nonns for CRAR can create some challenges for banking sector. But programs like
financial inclusion, high savings and IT capability are going to assist banking sector in long run.

Public banks stocks are good for long term but private bank stocks would be good for short term.
With the target price up to march 2013, it can be advised that Sharekhan advisory managers can
recommended the clients to buy the shares 88], PNB, Bank Of Baroda, lDBl AXIS, ICICI and Federal
Bank, South Indian Bank can be hold for long term.

Levine and Zervos (1996) drew a relationship between stock market development and economy.
However much work remains to understand the true relationship as the research was done on the
developed US economy and not on the emerging economies. Khan (2005) observed the existence of
close interconnection between undesirable trading practices in stock exchange and the type, nature
and structure of the key body governing the stock. It has been concluded that stock market trading
has witnessed radical changes at the dawn of new millennium. Prakash (2001) made a comparative
analysis of BSE and NSE. '

3.2 Nifty

Nifty is a major stock index in India introduced by the National Stock Exchange. Nifty was coined for
the two words, “National” and “FIFTY “. The word fifty is used because; the index consists of 50
actively traded stocks from various sectors.

So the nifty index is a bit broader than the Sensex which is constructed using 30 actively traded
stocks in the BSE.

Nifty is calculated using the same methodology adopted by the BSE in calculating the Sensex but
with three differences. They are;

The base year is taken as 1995

The base value is set to 1000

Nifty is calculated on 50 stOcks actively traded in the NSE

50 top stocks are selected from 24 sectors

3.3 Bank Nifty

Bank Nifty is the bank index traded in the F & 0 segment of NSE. It comprises of most liquid banking
stocks listed on NSE. This index provides investors and market intermediaries with a benchmark that
capture the capital market performance of Indian banks. The index has 12 stocks from the banking
sector which trade on the National Stock Exchange.

Bank Nifty to ratio is currently trading at 2.05 times, which is lower than the average 2.16, the level
which market participants follow. Traders are readying bets ahead of the Reserve Bank of India (RBI)
rate setting meeting early next month. A pair strategy involving future contracts of Nifty is popular
as expectations of a rate cut have heightened after the government’s fiscal deficit targets in the
budgets comforted markets and consumer inflation eased in February.

In the pair strategy, traders are constructing long positions on Bank Nifty and simultaneously going
short on Nifty .Some of them have also initiated fresh long positions in select interest rate smsitive
counters fi'om sector such as housing Enance companies and automobiles.

Traders who are executing the pair strategy have already made a killing over past two weeks. Bank
Nifty has surged 9.8 it; in March so far, Whaeas Nifty has gained 6.77% in the same period.

The market expectation of RBI lowering interest rate in the forthcoming policy meeting is very high.
The open interest during the inception of March series was at the highest level in 22 months, but
there has been 12% reduction in positions, which suggest short positions getting out of trade

Bank Nifty had dropped to lower trading zones. Traders taking hedging ratio as reference bought
Bank Nifty Index and sold Nifty. Bank Nifly has strong resistance near to lS7SO~ 15800. The Nifty
Bank index is likely to outperform the benchmark Nifiy 50 in the short term if one goes by the
historical statement pattern of price ratio between the two indices.

The ratio is calculated as value of the Nifty 50 index. It has reduced to 2.13 from the average of 2.18
in 2015.

The lower ratio means the bank index has lost relatively more value than the benchmark index. In
statistics, any deviation from average level should theoretically revert to average level which is
termed as mean reversion. In the past one year, the Nifty Bank index has fallen by 12% returns,
while Nifty has dropped by 7%

As a result, the price ratio has diverged significantly from its average. Over the last year, the price
ratio turned lower than average on four occasions, and each time it reverted to average levels in a
few days. Given the current level of the price ratio, a reversion to its mean value means the Nifty
Bank index is likely to outperform Nifty in the near term.

At present, the price ratio is one is one standard deviation below the mean level. Given the
prevailing uncertainty of the foreign flows allocation to emerging markets, some traders are taking
advantage of the lower price ratio by using pair trading. Traders are adopting strategy of buying
Nifty Bank and selling Nifty in the pair trade. When the price ratio gap between the two securities
temporarily weakens, one of them starts moving up while the other falls. The pair trade would then
be to sell the outperforming one, betting that the spread between the two would eventually
converge

The Nifty 50 trading crucial support level of 7700 weighed down by losses in oil & gas, consumer
durables, capital goods, IT, and Pharma stocks. The broader market traded mixed with the BSE
midcap index losing 0.06 percent and small cap gaining 0.15 percent extending its recent losses, the
rupee fell 6 paisa to 66.77 against the dollar.

The domestic currency had declined 18 paisa to close at 66.71 a dollar aimed persistent dollar
demand from banks and importers. Extending its recent losses, the rupee fell 6 paisa to 66.77
against the dollar.

The lists of bank Nifty

1. State Bank of India

2. HDFC Bank

3. ICICI Bank

4. Kotak Mahindra Bank

5. Axis Bank

6. Bank of Baroda

7. Punjab National Bank

8. Bank of India

9. Canara Bank

10. IndusInd Bank

11. Yes Bank

12. Union Bank

13. Federal Bank

In the above list first 5 stocks has the highest weight in bank nifty index, so most of the time trend of
these ten must be considered as trend of bank nifty index. For the present study the following stocks
are selected;

1. State Bank of India

State bank of India is a large cap company operating in banks sector.

States of India key products/revenues segments include interest and discount on advance and bills
which contributed Rs. 112343.91 Cr to interest income (73.71% of total interest income), income
from investment which contributed Rs. 37087.77Cr to interest income (23.33% of total interest
income), interest which contributed Rs. 2460.27Cr to interest income (1.61% of total interest
income), interest on balances with RBI and other inter-bank funds which contributed Rs. 505.12Cr to
interest income (0.33% of total interest income), for the year ending 31 March 2015. The bank has
reported a gross non-performing asset (Gross NPAs) of Rs. 0.00Cr (0.00% of total assets) and net non
perfOrming assets (Net NPAs) of Rs. 0.00Cr (0.000 o of total assets)

Shares of state bank of India (SBI) rallied nearly 20 percent after its December quarter , results, but
some experts think the rally might not be sustainable, even though the stock remains one of the top
bets in the public sector space. HSBC in its latest report downgraded 881 to hold with a 12 month
target price of Rs. 189.

The stocks has already outperformed nifty 50 and nifty bank by a wide margin after the Q3 results
supported partly by positive sentiment post the union budget and capital release due to RBI relaxing
the Basel lll requirements.RBI’s asset quality review impacted SBI as well. However, relative to its
size, the performance was better than its peers and that is one of thing which fuels optimism.

2. HDFC Bank

HDFC bank, the country’s second largest private sector lender, is set to raise up to Rs. 5000 Crore by
way of infrastructure bonds.

The ratings on HDFC bank’s debt instruments continue to reflect the bank’s established market
position, healthy capitalization supported by strong asset quality, comfortable resource profile, and
robust earnings performance said a note by rating agency CRISIL. It has assigned AAA/Stable rating
to the bond issuance and the rating on the bank‘s other debt instruments have been reaffirmed at
CRISIL AAA Stable. The management had earlier also stated that the lender will be looking at lending
to projects in the infrastructure space ~which approximately accounts for up to 15 percent of the
bank‘s book

Last year HDF C Bank had raised Rs. 3000 Crore by issuing bonds on a private placements basis. The
management had earlier said that the bank will be raising money to participate in the pickup in
credit demand that was expected both from the corporate and the retail sector.

In the last two months the industry has seen an uptick in credit demand which is now hovering
between 11-12 percent, higher than the 9-10 percent growth range that the industry had witnessed
in the last few quarters. The bank’s interest in raising money via long term bonds had made changes
in the regulation, announcing that such bonds would be exempted from cash and statutory reserve
requirements, if the proceeds were used to fund new long-term infrastructure projects and
affordable housing. Also, the loans funded via this process would be exempted from the
computation of adjusted net bank credit for the purpose of calculating priority sector lending
requirements

HDFC Bank Ltd. Key products/revenue segments include interest and discount on advance and bills
which contributed Rs. 37180.79Cr to interest income (76.70% of total interest income), income from
investment which contributed Rs. 10705.61Cr to interest income), (22.08% of total interest income),
interest on balances with RBI and other inter-bank funds which contributed Rs. 517.10 Cr to interest
income (1 06% of total interest)
They says currency market have been fairly range bound in the holiday shortened week, with the
dollar-rupee currency pair trading between 6650-67 per dollar, with portfolio floes pouring in but
well supported at lower levels, keeping the pair in a tight range.

In the banking space, ICICI Bank rose 019 percent at USD 6.84 and IIDFC Bank gained 0.75 percent at
USD 59.16. HDFC Bank rises on BSE index. HDFC Bank is set to raise up to Rs. 5000 Crore by way of
infrastructure bonds.

3.1CICI Bank

ICICI Bank is the first financial institution in the country to leverage the Host Card Emulation (HCE)
technology to bring forth this solution. The HCE technology creates virtual cards for physical credit or
debit cards of the bank, as selected by the customer. The virtual card resides in bank’s secure cloud
server. Using the virtual cards, an ICICI bank customer can initiate electronic payments from NFC
enabled smart phones by waving his/her phone near a contactless merchant terminal? while the
virtual card bears a different card number, the credit limit and expiry date remains same as the
original physical card.

The sensex rose over 100 points and Nifty closed near its crucial psychological level of 7500 led by
late buying in blue-chip stocks like ICICI Bank, Infosys, ITC and HDFC.

For the most part of the day, sensex and Nifty reeled under selling pressure. The sensex touched
high of 24707 and low of 24354.

From the nifty-50 basket of stocks, 26 stocks were advancing while 24 were declining. ICICI bank was
the top nifty gainer; the stock closed 2.3 percent higher at Rs. 226. Kotak Mahindra Bank, ITC,
Infosys, Lupin were also among the gainers, up 1-1.8 percent each.

The rupee continued its climb against the dollar and foreign funds made another big purchase of
local shares as a global stocks rally cheered markets. Benchmark indices ended with the third
successive week of gains, the longest such winning streak.

The bank nifty has risen over 300 in the last week and has surged over 12% in the last month.
Syndicate bank has gained over 2900 in the last month while other like Allahabad bank, ICICI bank
and SBI have all risen over 2000 during the same period. The market maintained its uptrend in noon
trade, mainly driven by banks after the RBI made charges in determining bank’s regulatory capital.
Bank nifty surged 4 percent, led by ICICI bank up 5 percent.

The sensex staged a late recovery and nifty managed to close above its crucial psychological level of
7700 led by gains in blue-chip stocks such as HDFC, Reliance industries and TCS.

For most part of the day. stock markets traded with a negative bias on the back of profit booking in
select IT, FMCG and banking stocks after the benchmark indices touched their highest level. From
the nifty-50 basket of stocks 26 ended higher while 24 closed lower. The broader markets
outperformed the benchmark indices. The BSE mid cap index closed 0.5 percent higher and the small
cap index closed 0.27 percent higher. CNX. bank nifty index registered its worst fall in a year and lost
around 3.34%. Banking index emerged as the biggest loser among sectoral indices largely due to less
than expected Q3 earnings from Bank of Baroda and ICICI Bank. ICICI bank cracked 5.600 to Rs.
217.20 on NSE. The bank’s asset quality saw a sharp decline with gross NPAs escalating to Rs. 6500
Crore as against an average of Rs. 2400Crore in the last four quarters.
4. kotak Mahindra Bank

Kotak Mahindra bank Ltd has informed BSE that the Reserve Bank of India, has initiated that
pursuant to the approval from the foreign investment promotion board, they are taking the foreign
investment limit in Kotak Mahindra Bank to 55° 0 on their record.

Losses for stocks of Pharma and IT companies and index heavyweight HDFC outweighed gains for
stocks of telecom firms, private sector banks and index heavyweight Reliance industries with the two
key benchmark indices registering small losses. The barometer index, the S&P BSE Sensex, fell 65.94
points or 0.26% to settle at 24900-46. The sensex failed to hold the psychological important 25000
mark after surpassing that level in intraday trade. The sensex and the nifty, both, hit their lowest
closing level in almost two weeks. The two key benchmark indices dropped for the second day in a
row.

Drug maker Lupin edged lower in volatile trade after media reports suggested that the United States
Food and Drug Administration (USFDA) has issued from 483 observations after concluding inspection
of Lupin’s Mandideep unit. Tata steel edged higher on reports, where it is widely expected to
announce restructuring or selling of some the European units and job cuts to save costs. In overseas
stock markets, European shares reserved initial gains as weakness in oil prices and uncertainty over
monetary policy in the United States prompted traders to lock in the gains. Earlier during the global
day Asian stocks ended on a mixed note. Markets globally expect yellen to drop hints about future
rate hike path. The sensex fell 65.94 points or 0.26% to settle at 24900.46, its lowest closing level.

Kotak Mahindra bank was trading higher by nearly 300 to Rs. 678 on the BSE, on back of heavy
volumes in otherwise weak market. The trading volumes on the counter more than doubled with a
combined 5.25 million shares changed hands on the BSE and NSE. The S&P BSE Sensex was down
nearly 100 or 188 points at 25150 while the banking index S&P BSE Bankex down 0.52%.

5. Axis Bank

The reason for axis bank won in the marketing category; the axis bank team comprised marketing
professionals, working in a financial service company-a bank, which possibly helped them with a
frugality in approach as Well as a customer focus and the agency background helped with the
creative chops.

India’s third largest private lenderAxis bank has bought 4.99% stake in Max Life Insurance for Rs.
995.75 Crore. The bank now owns 5.99% stake in max life insurance. Axis bought 3.99% stake from
max financial services and 190 stake from Mitsui Sumitomo Insurance Company.

As of now, axis bank is bane assurance partner to max life insurance for life insurance while Tata ai g
is bane assurance partner for general insurance. Max life is. a joint venture between max India ltd.
and mitsui sumitomo insurance. Max life has paid up capital of Rs. 2115 Crore and Rs. 31973 Crore
capital under management.

Max financial services own 68.01% in max life insurance while mitsu1 sumitomo insurance company
owns 25%.

6. Punjab National Bank

Punjab National Bank (PNB) is an Indian multinational banking and financial services company. It is a
state-owned corporation based in New Delhi, India. The bank was founded in 1894. As of 31 March
2017, the bank has over 80 million customers, 6,937 branches, and 10681 ATMs across 764 cities.

In February 2018, PNB was part of India’s biggest ever fraud in which two junior officers at a single
branch had illegally steered $1.77 billion in fraudulent loans to companies, most of them controlled
by billionaire jeweller Nirav Modi. Based on the data available with Reserve Bank of India, among
state run banks in India, PNB topped in the number of loan fraud cases across India with 389 cases
totaling Rs 65.62 billion over the last five financial years.

PNB has a banking subsidiary in the UK (PNB International Bank, with seven branches in the UK), as
well as branches in Hong Kong, Kowloon, Dubai, and Kabul. It has representative offices in Almaty
(Kazakhstan), Dubai (United Arab Emirates), Shanghai (China), Oslo (Norway), and Sydney (Australia).
In Bhutan it owns 51% of Druk PNB Bank, which has five branches. In Nepal PNB owns 20% of
Everest Bank Limited, which has 50 branches. Lastly, PNB owns 84% of JSC (SB) PNB Bank in
Kazakhstan, which has four branches.

Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act, with its office
in Anarkali Bazaar, Lahore, in present-day Pakistan. The founding board was drawn from different
parts of India professing different faiths and of varying back-ground with, the common objective of
creating a truly national bank that would further the economic interest of the country.PNB's
founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala
Harkishen Lal, Lala Lalchand, Kali Prosanna Roy, E. C. Jessawala, Prabhu Dayal, Bakshi Jaishi Ram, and
Lala Dholan Dass.Lala Lajpat Rai was actively associated with the management of the Bank in its
early years. The board first met on 23 May 1894.The bank opened for business on 12 April 1895 in
Lahore.

7. Bank Of Baroda

Bank of Baroda (BoB) is an Indian state-owned International banking and financial services company
headquartered in Vadodara (earlier known as Baroda) in Gujarat, India. It has a corporate office in
Mumbai.

Based on 2017 data, it is ranked 1145 on Forbes Global 2000 list.BoB has total assets in excess of ₹
3.58 trillion (making it India’s 2nd biggest bank by assets), a network of 5538 branches in India and
abroad, and 10441 ATMs as of July, 2017.

The bank was founded by the Maharaja of Baroda, Maharaja Sayajirao Gaekwad III on 20 July 1908
in the Princely State of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of
India, was nationalised on 19 July 1969, by the Government of India and has been designated as a
profit-making public sector undertaking (PSU).

As many as 10 banks have been merged with Bank of Baroda during its journey so far.

Hind Bank Ltd (1958)

New Citizen Bank of India Ltd (1961)

Surat Banking Corporation (1963)

Tamil Nadu Central Bank (1964)

Umbergaon People Bank (1964)

Traders Bank Limited (1988)

Bareilly Corporation Bank Ltd (1998)

Benares State Bank Ltd (2002)

South Gujarat Local Area Bank Ltd (2004)

Memon Cooperative Bank Limited (2011)

8. Indusind Bank

IndusInd Bank Limited is a Mumbai based Indian new generation bank, established in 1994. The bank
offers commercial, transactional and electronic banking products and services. IndusInd Bank was
inaugurated in April 1994 by then Union Finance Minister Manmohan Singh.Indusind Bank is the first
among the new-generation private banks in India.

The bank started its operations with a capital amount of Rs. 1 billion among which Rs. 600 million
was raised by the Indian Residents and Rs. 400 million was raised by the Non-Resident Indians. The
bank has specialized in retail banking services and continuously upgrades its support systems by
introducing newer technologies. It is also working on expanding its network of branches all across
the country along with meeting the global benchmark. According to the bank, its name is derived
from the Indus Valley Civilisation.

As on June 30, 2016, IndusInd Bank has 1,004 branches, and 1885 ATMs spread across 625
geographical locations of the country. It also has representative offices in London, Dubai and Abu
Dhabi. Mumbai has the maximum number of bank branches followed by New Delhi and Chennai.
The bank has also proposed to double the branches count to 1200 by March 2017.

9. Yes Bank

Yes Bank is India's fourth largest private sector bank, founded by Rana Kapoor and Ashok Kapur in
2004. Yes Bank is the only Greenfield Bank licence awarded by the RBI in the last two decades. YES
BANK is a “Full Service Commercial Bank”, and has steadily built a Corporate, Retail & SME Banking
franchise, Financial Markets, Investment Banking, Corporate Finance, Branch Banking, Business and
Transaction Banking, and Wealth Management business lines across the country.

As on 31 December 2017, the bank had 1050 branches and 1724 ATMs. It had a balance sheet size of
₹ 250,000 crore and Gross NPA of 1.72%. It is the fourth largest private sector bank in India.Yes bank
was listed in the stock exchanges of India post its IPO in May 2005 at an issue price of Rs.45.

In September 2016, Yes bank scrapped its proposed $1bn share sale due to market conditions.The
pull out of the deal caused all round embarrassment as miscommunication and misunderstanding
among various players led to a round of public blame game among various participants. The
company is looking to relaunch its failed capital raising exercise after appointing new set of bankers.

On 3 November 2017, Yes Bank signed a MoU with the government to provide Rs 1,000 crore
financing for food processing projects.BHIM YES PAY is the 1st Wallet to fully integrate the India
Stack APIs and National Payment Corporation of India (NPCI) Products supporting the national
agenda of making India Digital.On 1 February 2018, Yes Bank Signs MoU with Assam Rifles for
offering banking solutions to defense personnel.

10. Federal Bank

The Federal Bank is a major Indian commercial bank headquartered in Aluva, Kochi, Kerala. As of
2017, the Bank has 1252 branches and 1687 ATMs across the country.

The Federal Bank Limited is a banking company. The Company operates through four segments:
Treasury, Corporate or Wholesale Banking, Retail Banking and other banking operations. The
Treasury operations include trading and investments in government and corporate debt
instruments, equity and mutual funds, derivative trading and foreign exchange operations on
account and for customers. The Corporate/Wholesale Banking segment provides loans and other
banking services to corporate and other clients. The Retail banking segment provides lending and
other banking services to individuals/small business customers, other than corporate/wholesale
banking customers. The Other Banking Operations segment includes para banking activities, such as
third party product distribution and other banking transactions. It offers various accounts and
deposits; loans; cards; banking services, and insurance and investments. It operates over 1,250
branches and over 1,520 automatic teller machines (ATMs).
4.1. Data, analysis

Analysis of data is a process of inspecting, cleaning, transforming and modeling data with the goal of
discovering useful information, suggesting conclusions and supporting decision making. Data
analysis has multiple facts approaches, encompassing diverse techniques under a variety of names,
in different business, science and social science domains

4.2. Data Analysis Tools

1. Beta

2. Alpha

3. Coefficient of Correlation

4. Coefficient of Determination

5. Variance

6. Standard Deviation

7. Banking sector analysis

Banks play an important role in the economic development of the country. The entire commercial
and industrial activities are well knitted with the banks. One cannot imagine the cessation of the
activities even for a day. There may be an economic crisis in the country if the banks stop functioning
for some days; the banking business was confined to receiving of deposits and lending of money. But
the modern bankers undertake wide variety of functions to assist their customers.

Bank Nifty as Base

For the present study Bank Nifty was considered as a market index. Both the closing price of Bank
Nifty and selected 10 Banks were collected from the previous data source for a period between 1
April 2012 to 10 th March 2016 and calculated its average on a monthly basis. Here Bank Nifty
denotes as “X’s and Banks stock denote as “Y”.

1.HDFC

Average Rate of return of HDFC for the period of 2013

Year Average Return

2013 1.568219369
2014 2.757228588
2015 0.449043473
2016 2.453715556
2017 2.255112037
 Avrg Return Of HDFC Avrg Return Of Bank Nifty
2013 1.568219369 1.301193588
2014 2.757228588 3.007228251
2015 0.449043473 -0.938338307
2016 2.453715556 2.367524594
2017 2.255112037 0.933461406
Apr-17 3.802602 6.950207 26.42887

Mar-17 3.600433 3.301228 11.88585

Feb-17 5.55695 8.078059 44.88937
Jan-17 6.977464 6.383067 44.53762
Dec-16 -2.67472 0.324378 -0.86762
Nov-16 -4.85632 -4.49045 21.80705
Oct-16 0.659945 -2.16237 -1.42705
Sep-16 -2.626 -1.17624 3.08881
Aug-16 4.715688 3.378703 15.93291
Jul-16 5.180164 5.610169 29.0616
Jun-16 1.497098 -0.54947 -0.82262
May-16 6.060551 4.801596 29.10032
Apr-16 4.319038 5.945921 25.68066

Mar-16 14.7663 9.867173 145.7016

Feb-16 -10.2996 -8.14272 83.86646
Jan-16 -8.32777 -3.00721 25.04333
Dec-15 -3.06214 0.473516 -1.44997
Nov-15 0.455005 -1.57984 -0.71883
Oct-15 -0.04867 2.269345 -0.11044
Sep-15 1.368952 4.650935 6.366905
Aug-15 -8.7107 -7.66569 66.77354
Jul-15 2.485555 4.739247 11.77966
Jun-15 -2.27043 1.735068 -3.93935
May-15 1.64979 5.683819 9.377105
 ∑XY 2014.062401
∑X 80.05283438
∑Y 113.7998283
∑X^2 2854.431607
∑Y^2 1834.845372
Average(X) 1.334213906
Average(Y) 1.896663805
N 60

𝑛Σ𝑥𝑦−(Σ𝑥∗Σ𝑦)
BETA =
𝑛Σ𝑥 2 −(Σ𝑥)2

Where,

X=return of bank Nifty

Y=return of respective bank

N= number of months

Beta= 0.677759797

Interpretation

Beta measures the volatility or systematic risk of a security.During this period the bet value of HDFC
was found around 0.677

According to the definition of beta, a beta of greater than 1 indicates the security’s price will be
more volatile than the market price, so risk and return is High.

ALPHA=average(y)-[β*average(x)]

= 0.992387258

Interpretation

Alpha measures performance of risk.Alpha takes te volatility (price) risk of a security and compares
its risk adjusted performance to a benchmark index.

Negative alpha means the fund has underperformed its benchmark index,which shows that they are
less profitable. If it is -1 or less than beta value of stock, then the stock is more risky.

𝑛Σ𝑥𝑦−(Σ𝑥∗Σ𝑦)
Co-Efficient Of Corrilation=
√𝑛Σ𝑥 2 −(Σ𝑥)2 √𝑛Σ𝑦 2