Fundamental &Technical Analysis of Banking stocks” is the systematic study of the performance of banking companies stock’s in stock market and future value of the share price with help of fundamental analysis and technical analysis. While decision in share price based on actual movement of shares price measured more in money & percentage term & nothing else. In the Analysis, calculations are based on FACTS & not on HOPE. The subject of Analysis is to determine future share price movement with the help of RATIO ANALYSIS, STUDY OF GRAPH.
This analysis does not discuss how to buy & sell shares, but does discuss the methods, which enables the investor to arriving at buying & selling decision. The Technical Approach to investment is essentially a reflection of the idea that prices moves in a trend that are determined by the changing attitude of investor’s toward a variety of economic, monetary, political and psychological forces. Theart of technical analysis, for it is an art, is to identify a trend reversal at a relatively early stage and ride on that trend until the weight of the evidence shows or proves the trend has reversed.
And the Technical analysis states that the support and resistance is enough for price prediction untill the new high or low occurs. OBJECTIVE It was good opportunity to familiarize myself with the stock market i. e. the capital market & their co-relation with economical environment through “Fundamental and Technical analysis of BANK NIFTY Stocks. ” The analysis of banking stock gives me the opportunity to understand thoroughly this behavioural pattern’s of different stocks in industry & overall capital market. The main objective of the project research is as follows. 1.
The Essay on Stock Exchange Market Shares Buy Stockbroker
A stock exchange is a place where you can buy and sell shares. We call people who buy or sell small numbers of shares small investors. Organizations, who buy or sell large numbers of shares, are institutional investors. A stock exchange is the place where companies can raise money to expand their businesses. Companies raise this money by selling shares to investors. At the same time the stock ...
To Study the Analysis and obtain the knowledge of stock market and banking industry. 2. To Study the present behaviour & predicting the future behaviour of bank stocks in Capital market. 3. To perform Technical analysis based on charts using support and resistance. 4. To compare other banking stock with Bank Nifty Index. To analyze the performance of company’s through Balance Sheet & Technical graph for particular shares. SCOPE The fundamental & technical analysis of banking stocks ? Study on the economical, industrial and company analysis for the project. ? Selecting the sample from the available banking stock.
? Evaluating each bank and its stock in the market. ? Analysing each bank fundamentally and interpretation. ? Technical analysis for its share traded in NSE and BSE. ? Comparison of stock with Bank nifty. ? Interpretation and concluding. RESEARCH METHODLOGY During my project, I collected data through various sources primary & secondary. Primary source includes:- 1) Discussion with branch manager 2) Discussion with experts 3) Questionnaires for investors 4) Live trading in the market Secondary source includes:- 1) Various books related to stock market 2) Books and journals related to Banks.
3) Web sites were used as the vital information source. Reliance Money felt need of evaluating the price patterns of leading scripts mainly from the five main blue chip companies and also interested in determining the trends along with price performance in near future. This equity analysis will facilitate to investor for profitable investment. Sampling technique The sample is taken from the population of 89 schedule bank where the information available in hand and most of the stocks are selected from the bank nifty, the sample size is 5 such as 1. State Bank Of India 2. Hdfc Bank 3. Panjab National Bank 4.
Yes Bank Sample selection methods Sample is taken based on public and private sector bank mix. Large cap mid cap and mix. This sample will give the clear picture of the bank nifty. HDFC SECURITIES LTD. Company’s Mission “To create reputation synonymous with quality, competitiveness, fairness and transparency dealings and be a responsible corporate citizen”. We are one of the leading stock broking companies in India and a subsidiary of HDFC Bank- a renowned private sector bank. As a stock broking company, we have completed 10 years of operation serving a diverse customer base of retail and institutional investors.
The Essay on Stock Trading Market Company Money
Stock Trading or Gambling? "The stock market is a great cauldron of the hopes, desires, and despairs of speculators, or traders. If it were not for the speculators, there would be no active stock market. If it not for speculators, America would not stand where she does, as the leading industrial country in the world. We may deplore speculation, but if it were not for this outpouring of money for ...
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The Business plan on Global Financial Market Regulations
The Global Financial Crisis (GFC) is over. Many banks have repaid the bailout dollars and bonus payments are back. What was all the fuss about anyway? Nothing will change because the market will always find a way to overcome attempts to regulate it and the behavior of market participants. This paper attempts to address the authenticity of the above scathing opinion on the apparent apathy with ...
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Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. Organizational Goals HDFC’s main goals are to a) develop close relationships with individuals, b) maintain its position as the premier housing finance institution in the country, c) transform ideas into viable and creative solutions, d) provide consistently high returns to shareholders, and e) to grow through diversification by leveraging off the existing client base. Their housing needs. HDFC was promoted with an initial share capital of Rs.
100 million. HDFC Securities, A trusted financial service provider promoted by HDFC Bank and JP Morgan Partners and their associates, is a leading stock broking company in the country, serving a diverse customer base of institutional and retail investors. HDFCsec. com provides investors a robust platform to trade in Equities in NSE and BSE, and derivatives in NSE. Our website will support you with the highest standards of service,convenienceand hassle-free trading tools. Our research team tracks the economy, industries and companies to provide you the latest information and analysis.
The Term Paper on Financial Accounting Costs Capital Information
The quote shows a strong relation to the efficient market hypothesis (EMH), as it implies that the costs of capital are dependent from the amount of information given by the company. According to my opinion, agency theory is a good explanation for costs of capital. Agency theory defines contracts as under which one party - called principal - engages another party - called the agent - to perform ...
Our content offers financial information, analysis, investment guidance, news & views, and is designed to meet the requirements of everyone from a beginner to a savvy and well-informed trader. HDFC GROUP HDFC Ltd HDFC Bank HDFC Financial Service HDFC Life HDFC ERGO HDFC AMC SHARE HOLDINGS FOR HDFC SECURITIES KEY PEOPLE IN THE ORGANIZATION INTRODUCTION TO CAPITAL MARKETS Financial System The financial system of every economy consists of various constituents such as 1Financial Institutions 2Financial Companies 3Financial Markets 4Financial Instruments 5Financial Services 6Financial regulations
The financial market in India comprised of capital market and money market whereas the financial system of the country comprised of institutions, which operate the financial markets and the financial instruments with which the financial system is put into operation. Tax anomy of financial markets can be understood on functional, sectoral and institutional basis. On a functional basis we can divide financial markets into 1Money market (short term) 2Capital market (long term) The institutional classification can be made into 1 Organized financial market 2 Non-Organized financial market Capital Market Scenario
The stock market in India dates back to the 18th century when the East India Company was ruling the roost in the country and was perhaps the most dominant and powerful institution and its securities were traded. The securities trading were done in an unorganized form at Bombay and Calcutta in early 19th century. The decade of 90’s has witnessed several changes in reformation of capital market. Automation, transparency,. Strict surveillance, depository system, on line trading, investor’s protection, new rules and regulations, etc. are some of the activities which only reflect the growth of Indian capital market.
The Term Paper on Stock Market Firms Banks Financial
The question touches to two important and obviously interrelated issues, that of the need and form of corporate control and that of the role of the financial system in resource allocation. During the last two decades the Modigliani - Miller proposition which stated that there is no relationship between corporate capital structure and the real performance of firms, has been increasingly disputed as ...
By any reckoning Indian corporate sector has grown very significantly in the last couple of decades whether to look at it in terms of public and private limited companies, their share capitalization, their sales turnover or their contribution to capital formation with this came the legislation of SEBI to act as a regulatory body to protect investors What is Capital Market? A Capital Market deals in financial assets, excluding coins and currency. The financial assets comprise of banking accounts, pension funds, provident fund, mutual fund, insurance policy, shares, debentures, and other securities.
If the stock exchanges are well regulated and function smoothly, then it is an indication of healthy capital market. Stock exchange provide a good leverage of the capital market and their relationship is directly proportional. India has multi-stock exchange system with 24 stock exchanges functioning across the country. In our country, capital markets are generally also known as security/stock market. The Indian capital market currently provides excellent investment opportunities to domestic and foreign investors in both equity and fixed income Segments.
The Indian Capital Markets can be broadly classified into three types of markets. 1Money market 2Primary market 3Secondary market Money market The money market is part of overall financial system and securities or capital market. It deals in short term financial assets whish can be readily converted into cash. Money market is a place for trading in money and short tern financial assets that are as liquid as money. It provides a platform for short term surplus funds of lenders or investors and short term requirements of borrowers, the instruments can be traded at low cost and are highly liquid.
Primary market Primary market is generally referred to the market of issues or market for new mobilization of resources by the companies and the government undertakings, for new projects as also for expansion, modernization, addition, and diversification and up gradation. Primary market operations include new issues of shares by new and existing companies, further and right issues to existing share holders, public offers, and issue of debt instruments such as debentures, bonds, etc. Raising money from capital market is cheap for the company and involves a low servicing cost.
The Term Paper on Ratio Analysis Of Financal Statements
The Company has been set up with the primary objective of producing and selling ordinary portland cement. The finest quality of cement is available for all types of customers whether for dams, canals, industrial structures, highways, commercial or residential needs using latest state of the art dry process cement manufacturing process. A longtime leader in the cement manufacturing industry, Fauji ...
The investors benefit by way of dividend and or capital appreciation. The following are the market intermediaries associated with the primary market 1 Merchant banker/book building lead manager 2 Registrar and transfer agent Underwriter/broker to the issue 4Advisor to the issue 5Banker to the issue 6Depository 7. Depository participant Defects in Indian Primary Market 1. Aggressive pricing and over pricing. 2. Price rigging before and during issues. 3. Poor, wrong and vague disclosures in offer documents. 4. Poor information accessibility.
5. Misleading projections subject to vague assumptions. 6. Delay in penal actions against the erring market intermediaries. 7. SEBI not assuming any responsibility for disclosure/offer documents. 8. Bunching of issues. 9. Existence of grey or unofficial market. 10. Lack of transparency 11. Uninformed and uneducated investors. Delay in listing and trading permission. The Secondary Market The secondary market is the market where scrips are traded. It is a market place, which provides liquidity to the scrips issued in the primary market.
Thus, the growth of secondary market is dependent upon primary market. More the number of companies entering the primary market, the greater is the volume at the secondary market. Trading activities in the secondary market are done through recognized exchanges, which are 24 in number including Over the Counter Exchange of India, National Stock Exchange of India, and Inter-connected Stock Exchange of India. Secondary market operations involves buying and selling of securities on the stock exchange through its members. The following intermediaries are involved in the secondary marker.
1Broker/member of Stock Exchange- buyer broker and selling broker 2Portfolio manager 3Investment advisor 4Share transfer agent 5Depository 6Depository participant. WORKING OF A BROKING FIRM Stock Broker According to SEBI Stock Broker is a member of a recognized stock exchange(s) and is engaged in buying, selling and dealing in securities. In other words broker is an intermediary who arranges to buy and sell securities on behalf of clients i. e. the buyer and the seller. A broker can deal in securities only after getting registered with SEBI. through stock exchanges.
The constitution of a broking firm may be a Proprietary Concern, a Partnership firm or a Corporate. Dematerialization and Rematerialization Dematerialization It is the process in which the physical form of holding securities is replaced with electronic (book-entry) form of holding. The securities held in dematerialized form are fungible. They do not bear any distinguishable features like distinctive number, certificate number. Once the shares are dematerialized they lose their identification feature in terms of share certificate distinctive number and folio numbers.
Each security is identified in the depository system by ISIN (International Securities) Identification number) this is a convenient method for preventing all the problems that occur with physical securities through dematerialization. Pre-requisites for dematerialization request 1. The registered holder of the securities should make the request 2. The request should be made in the prescribed dematerialization request form 3. Securities to be dematerialized must be recognized by a Depository as eligible. In other words only those securities whose ISIN has been activated by a Depository, can be dematerialized.
4 . The company/issuer should have established connectivity with any Depository like NSDL, CDSL, Stock Holding Corporation ltd, only after this connectivity is established that the securities of the company/issuer are recognized to be “available for dematerialization” 5. The holder of securities should have a beneficiary account in the same name as it appears on the security certificates to be dematerialized INTRODUCTION BANK NIFTY Bank nifty is calculated on the basis of liquidity of stock and on the basis of market capailization. it is calculated by free flot method.
Bank Nifty consists of a list of 12 Banking stocks which are part of Bank Nifty. Bank Nifty is the second most popular index on National Stock Exchange of India after Nifty. CNX Bank Index is popularly known as Bank Index. Stocks weightage in bank nifty is determined based on their free float market cap outstanding. Bank Nifty index stocks are selected from banking stocks which are traded on National Stock Exchange of India, which are highly liquid and large capitalized. These banks consistent of 12 banks both public sector banks and private sector banks.
Bank Nifty Index provides investors a bench mark of banking stocks performance in Indian capital markets. CNX Bank Index (Bank Nifty) value is calculated on free float market capitalization method. Base date of calculation of Bank Nifty is January 01, 2000 and the starting index value of bank nifty is 1000. Bank Nifty is now highly represented in total market movement. After 2008-09, weight age of bank stocks started to increase even in nifty replacing earlier dominant Information Technology Stocks. Facts about market representation of Bank Nifty The CNX Bank Index represent about 15. 89%of the free float market
capitalization of the stocks listed on NSE and 89. 06% of the free float market capitalization of the stocks forming part of the Banking sector universe as on June 28, 2013. The total traded value for the last six months ending June 2013 of all the Index constituents is approximately 15. 55% of the traded value of all stocks on the NSE and 84. 49% of the traded value of the stocks forming part of the Banking sector universe. source : National Stock Exchange of India To be included in the bank index, a stock should be a banking stock with a free float market capitalization & company turnover of top 500 stocks.
It should also have a trading frequency of atleast 90%. Such Banking stock should also have positive net worth. Bank Index is rebalanced with changes, if any twice a year. The dates of re balancing are 31 January and 31 July . A six week prior notice is given to market if any changes are effected during such semi-annual bank nifty re-balancing reviews. Weightage of bank nifty stocks picture Name Market Cap(cr) Net Profit (cr) EPS P/E ratio Book Value Devidend payout ratio Axis Bank Ltd 50,781. 33 5,179. 43 120. 92 8. 97 151. 39 0. 1488587 Bank of Baroda 25,748. 38 4,480. 72 103. 58 5. 88 756. 64 0. 2075691 Bank of India
12,505. 57 2,749. 35 52. 73 3. 98 400. 88 0. 1896453 Canara Bank 10,496. 89 2,872. 10 64. 42 3. 68 561. 58 0. 1707544 HDFC Bank Ltd 153,624. 36 6,726. 28 31. 66 20. 29 151. 39 4. 3430195 ICICI Bank Ltd 117,831. 00 8,325. 47 79. 51 12. 85 578. 21 0. 2515406 IDBI Bank Ltd 8,449. 78 1,360. 72 14. 82 5. 74 137. 47 0. 0236167 Kotak Mahindra Bank Ltd 55,092. 05 1,360. 72 20. 2 35. 45 123 0. 1386138 Yes Bank 12,411. 28 1,300. 68 40. 95 8. 41 161. 14 0. 146501 Punjab National Bank 18,263. 97 4,747. 67 119. 31 4. 33 924. 45 0. 2263012 State Bank of India 118,881. 68 14,104. 98 179.. 98 9. 67 1445. 6 0. 23058117 Union Bank of India
7,119. 75 2,157. 93 31. 17 3. 83 287. 96 0. 256657 FUNDAMENTAL ANALYSIS Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets. When applied to futures and forex, it focuses on the overall state of the economy, and considers factors including interest rates, production, earnings, employment, GDP, housing, manufacturing and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis.
[1] The term is used to distinguish such analysis from other types of investment analysis, such as quantitative analysis and technical analysis. Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are several possible objectives: to conduct a company stock valuation and predict its probable price evolution, to make a projection on its business performance, to evaluate its management and make internal business decisions, to calculate its credit risk. Two analytical models
When the objective of the analysis is to determine what stock to buy and at what price, there are two basic methodologies 1. Fundamental analysis maintains that markets may misprice a security in the short run but that the “correct” price will eventually be reached. Profits can be made by purchasing the mispriced security and then waiting for the market to recognize its “mistake” and reprice the security. 2. Technical analysis maintains that all information is reflected already in the stock price. Trends ‘are your friend’ and sentiment changes predate and predict trend changes.
Investors’ emotional responses to price movements lead to recognizable price chart patterns. Technical analysis does not care what the ‘value’ of a stock is. Their price predictions are only extrapolations from historical price patterns. Investors can use any or all of these different but somewhat complementary methods for stock picking. For example many fundamental investors use technicals for deciding entry and exit points. Many technical investors use fundamentals to limit their universe of possible stock to ‘good’ companies. Fundamental analysis includes: 1. Economic analysis 2.
Industry analysis 3. Company analysis The analysis of a business’ health starts with financial statement analysis that includes ratios. It looks at dividends paid, operating cash flow, new equity issues and capital financing. The earnings estimates and growth rate projections published widely by Thomson Reuters and others can be considered either ‘fundamental’ (they are facts) or ‘technical’ (they are investor sentiment) based on your perception of their validity. The fundamental analysis consist of financial ratios to gauge the company’s over all performance. 1. Price/Earnings (P/E) Ratio
Price/Earnings or P/E ratio is the ratio of a company’s share price to its earnings per share. It tells whether the share price of a company is fairly valued, undervalued or overvalued. Formula P/E Ratio = Current Share Price Earnings per Share Leading and Trailing P/E Ratio If the EPS is the figure for the current period the P/E ratio is called trailing P/E ratio. For better analysis the EPS should be the one expected to prevail in the next reporting period, say next year. P/E ratio calculated based on expected P/E ratio is called leading P/E and is a more meaningful estimate of the company’s justified P/E ratio.
Analysis For financial analysis justified P/E ratio is calculated using dividend discount method. P/E Ratio = Expected Payout Ratio Required Rate of Return ? Dividend Growth Rate If the justified P/E calculated using dividend discount analysis is higher than the current P/E ratio the share is undervalued and should be purchased. If the justified P/E is lower than P/E ratio the share is overvalued and should be sold. 2. Dividend Payout Ratio Dividend payout ratio is the ratio of dividend per share divided by earnings per share.
It is a measure of how much earnings a company is paying out to its shareholders as compared to how much it is retaining for reinvestment. Formula Dividend Payout Ratio = Dividend per Share Earnings per Share Dividend payout ratio can also be calculated as total dividends divided by net income. 3. Return On Equity (ROE) Ratio Return on equity or return on capital is the ratio of net income of a business during a year to its stockholders’ equity during that year. It is a measure of profitability of stockholders’ investments. It shows net income as percentage of shareholder equity. Formula
The formula to calculate return on equity is: ROE = Annual Net Income Average Stockholders’ Equity Net income is the after tax income whereas average shareholders’ equity is calculated by dividing the sum of shareholders’ equity at the beginning and at the end of the year by 2. The net income figure is obtained from income statement and the shareholders’ equity is found on balance sheet. You will need year ending balance sheets of two consecutive financial years to find average shareholders’ equity. Analysis Return on equity is an important measure of the profitability of a company.
Higher values are generally favorable meaning that the company is efficient in generating income on new investment. Investors should compare the ROE of different companies and also check the trend in ROE over time. However, relying solely on ROE for investment decisions is not safe. It can be artificially influenced by the management, for example, when debt financing is used to reduce share capital there will be an increase in ROE even if income remains constant. 4. Return On Assets (ROA) Ratio Return on assets is the ratio of annual net income to average total assets of a business during a financial year.
It measures efficiency of the business in using its assets to generate net income. It is a profitability ratio. Formula The formula to calculate return on assets is: ROA = Annual Net Income Average Total Assets Net income is the after tax income. It can be found on income statement. Average total assets are calculated by dividing the sum of total assets at the beginning and at the end of the financial year by 2. Total assets at the beginning and at the end of the year can be obtained from year ending balance sheets of two consecutive financial years. Analysis Return on assets indicates the number of cents earned on each dollar of assets.
Thus higher values of return on assets show that business is more profitable. This ratio should be only used to compare companies in the same industry. The reason for this is that companies in some industries are most asset-insensitive i. e. they need expensive plant and equipment to generate income compared to others. Their ROA will naturally be lower than the ROA of companies which are low asset-insensitive. An increasing trend of ROA indicates that the profitability of the company is improving. Conversely, a decreasing trend means that profitability is deteriorating.
CAGR Compounded Annual Growth Rate. The YOY growth rate of an investment over a specified period of time. The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered. This can be written as follows: Capital Adequacy Ratio (CAR), also known as Capital to Risk (Weighted) Assets Ratio (CRAR), is a ratio of a bank’s capital to its risk. National regulators track a bank’s CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements. Formula
Capital adequacy ratios (CARs) are a measure of the amount of a bank’s core capital expressed as a percentage of its risk-weighted asset. Capital adequacy ratio is defined as: TIER 1 CAPITAL = (paid up capital + statutory reserves + disclosed free reserves) – (equity investments in subsidiary + intangible assets + current & b/f losses) TIER 2 CAPITAL = A) Undisclosed Reserves + B) General Loss reserves + C) hybrid debt capital instruments and subordinated debts where Risk can either be weighted assets () or the respective national regulator’s minimum total capital requirement. If using risk weighted assets, ? 10%. [1]
The percent threshold varies from bank to bank (10% in this case, a common requirement for regulators conforming to the Basel Accords) is set by the national banking regulator of different countries. Two types of capital are measured: tier one capital ( above), which can absorb losses without a bank being required to cease trading, and tier two capital ( above), which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors. Capital adequacy ratio is the ratio which determines the bank’s capacity to meet the time liabilities and other risks such as credit risk, operational risk etc.
In the most simple formulation, a bank’s capital is the “cushion” for potential losses, and protects the bank’s depositors and other lenders. Banking regulators in most countries define and monitor CAR to protect depositors, thereby maintaining confidence in the banking system. [1] CAR is similar to leverage; in the most basic formulation, it is comparable to the inverse of debt-to-equity leverage formulations (although CAR uses equity over assets instead of debt-to-equity; since assets are by definition equal to debt plus equity, a transformation is required).
Unlike traditional leverage, however, CAR recognizes that assets can have different levels of risk. TECHNICAL ANALYSIS 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 doesn’t care one bit about the “value” of a company or a commodity. Technicians (some time called chartists) are only interested in the price movement 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 attemptsto understand the emotions in the market by studying the market itself, as opposed to its components. If you understand the benefits and limitation of technical analysis it can give you a new set of tools or skills than will enable you to better trader or investor.
Definition: Technical analysis is a method of evaluating the securities by analyzing the statistics generated by themarket activity, such as past price and volume. In technical analysis, analyst use charts and othertools to identify patterns that can suggest future activity. Just as there are many investment styles on fundamental side, there is also much different type of technical traders. Some rely on chart patterns. In any case, technical analysts exclusive use of Assumptions: 1. The Market Discounts Everything
A major criticism of technical analysis is that it only considers price movement, ignoring thefundamental factors of the company. However, technical analysisassumes that, at any given a time,a stocks price reflects everything that has or couldaffect the company- including Fundamental Factors. Technical analysts believe that the company’s fundamentals, along with broader economic factors and market psychology, are all priced into the stock, removing the need to actually consider these factors separately.
This only leaves the analysis of price movement, which technical theory views as a product of supply and demand for a particular stock in the market. 2. Price Moves In Trends In technical analysis, price movements are believed to follow trends. This means that after a trend has been established, the future price movement is more likely to be in the same direction as the trend that to be against it. Most technical trading strategies are based on this assumption. 3. History Tends To Repeat Itself Another important idea in technical analysis is that history tends to repeat itself, mainly in terms o
