PROJECT REPORTON

“A STUDY OF BEST PERFORMING SCRIPTS OF NIFTY IN LAST 5 YEAR IN BANKING SECTOR”

CONTENTS

1. Declaration (i) -

2. Mentor Certificate (ii) -

3. Acknowledgement (iii) -

4. Chapter 1 - Introduction 1 10

5. Chapter 2 - Objective/Research methodology/ Limitation/Scope

11 22

6. Chapter 3 - Organizational Profile 23 51

7. Chapter 4 - Data Analysis And Interpretation

52 62

8. Chapter 5 - Observations And Findings 63 64

9. Chapter 6 - Conclusion 65 -

10. Recommendations 66 -

11. Bibliography 67 -

12. Annexure 68 88

Chapter 1

Introduction

1

INTRODUCTION

My Topic “Best performing scripts of nifty in last 5 year in banking sector “Is a Comparative Analysis Of All the Banks Which are listed in Nifty In the

period of last five years. For this I have calculated beta separately for each bank as well as Risk & Return Relating to each of them. I made review of various Journals published by NSE and gone Through NSE INDIA web. As Showed in my Project The Banking sector Is one Of The Most performed During Last Five Year, which Inspired me To Select this topic.

To develop a more clear view about the topic we have to Understand Nifty and Banking

NIFTY & BANKING

NIFTY- The National Stock Exchange of India Limited has genesis in the

report of the High Powered Study Group on Establishment of New Stock Exchanges.

It recommended promotion of a National Stock Exchange by financial institutions

(FIs) to provide access to investors from all across the country on an equal footing.

Based on the recommendations, NSE was promoted by leading Financial Institutions

at the behest of the Government of India and was incorporated in November 1992 as

a tax-paying company unlike other stock exchanges in the country.

On its recognition as a stock exchange under the Securities Contracts

(Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale

Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment

commenced operations in November 1994 and operations in Derivatives segment

commenced in June 2000.

The following years witnessed rapid development of Indian capital market

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with introduction of internet trading, Exchange traded funds (ETF), stock

derivatives and the first volatility index - IndiaVIX in April 2008, by NSE.

August 2008 saw introduction of Currency derivatives in India with the launch

of Currency Futures in USD INR by NSE. Interest Rate Futures was introduced for

the first time in India by NSE on 31st August 2009, exactly after one year of the

launch of Currency Futures.

With this, now both the retail and institutional investors can participate in

equities, equity derivatives, currency and interest rate derivatives, giving them wide

range of products to take care of their evolving needs.

OUR GROUP Associate/Affiliate Companies

 

  

 

 

NSCCL

     

        NCCL NSETECH

IISL

  

DotEx Intl. Ltd.

NSE.IT

3

NIFTY 50 IN LAST 20 YEAR: ONE OF THE GREATEST WEALTH CREATER

Equity is the one of the most exotic asset class, it has given about 21%

average annualized return since 1990, investment in equity has seen sea change in

recent decade. Emergence of business channel sprayed the awareness about equity

among the investor community ,earlier to buy equity was not so easy as it is now,

today market is in pockets of investor in terms of access, technology has provided

the multiple way to access the market through internet, through cell phone and

WAP , now a day’s various expert advices trading and investment tips are available

with the investors, Many fund house are running their mutual fund and giving good

return to their investors and the asset under management of mutual fund industry is

approximately $ 6.7 lakh billion. Reliance capital is the largest mutual fund whose

asset under management is more than one lakh crore followed by HDFC MF, ICICI

Prudential MF, state run UTI Mutual Fund whose asset under management is 68,000

crore and Birla Sun Life MF are the five largest fund house of the country. Insurance

companies, HNI, FII, Retail investors are holding significant amount of equities in

their portfolio, although the allocation in equity is less than 5% of the total house hold

saving in the country however in totality it is a huge amount. In recent market selloff

where FII has sold 13.1billion US$ at one way and DII has bought more than 16.2

US$ at the same time in other way. Identification of investable share is the tuff job

even for the market participant and timing the market is even tougher for the expert,

but the fundamental analysis and technical analysis helps the people to identify the

cheap stocks at the right time to park their investments. But still

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the question remain same what and how much one should buy? The main

barometer which is index it

gives the diversity and credibility of the basket and also liquid to exit and enter at

desired time for the investor NIFTY 50 stocks reflects the appropriate behaviour of

equity because this is the broader index composed of 50 blue chips Company of

various sector having better corporate governance, credibility and profitability. Nifty

is claimed as the stocks of the nation gives the diversity and reliability .Reshuffling in

script is also an important phenomena because we have observed that time to time

the company who hasn’t followed the corporate governance and not adequately

performed have shown exit way from the index, similar incident happened with the

Satyam computers after the scam broke out in the company the script of the

company removed from the index and replaced by other company. The most

important characteristics of NIFTY is the diversity it is the basket of the shares who

represents the various sectors like Reliance and ONGC represents the

petrochemical sector, NTPC represents the power sector, ACC represents the

cement sector ,Infosys represent the IT sector and SBI and ICICI bank represents

the banking sectors and so on. The stocks in NIFTY gets proportionate weight age

according to their market capitalization so if money will allocated to the company

who are the component of index according to their proportion, then the capital

appreciation will be similar as the index fluctuation.

5

LIST OF COMPANIES IN THE NIFTY 50

Company Name Industry SymbolABB Ltd. ELECTRICAL EQUIPMENT ABB

ACC Ltd.CEMENT AND CEMENT PRODUCTS ACC

Ambuja Cements Ltd.CEMENT AND CEMENT PRODUCTS AMBUJACEM

Axis Bank Ltd. BANKS AXISBANKBharat Heavy Electricals Ltd. ELECTRICAL EQUIPMENT BHELBharat Petroleum Corporation Ltd. REFINERIES BPCL

Bharti Airtel Ltd.TELECOMMUNICATION - SERVICES BHARTIARTL

Cairn India Ltd.OIL EXPLORATION/PRODUCTION CAIRN

Cipla Ltd. PHARMACEUTICALS CIPLADLF Ltd. CONSTRUCTION DLFGAIL (India) Ltd. GAS GAILHCL Technologies Ltd. COMPUTERS - SOFTWARE HCLTECHHDFC Bank Ltd. BANKS HDFCBANK

Hero Honda Motors Ltd.AUTOMOBILES - 2 AND 3 WHEELERS HEROHONDA

Hindalco Industries Ltd. ALUMINIUM HINDALCOHindustan Unilever Ltd. DIVERSIFIED HINDUNILVRHousing Development Finance Corporation Ltd. FINANCE - HOUSING HDFCI T C Ltd. CIGARETTES ITCICICI Bank Ltd. BANKS ICICIBANK

Idea Cellular Ltd.TELECOMMUNICATION - SERVICES IDEA

Infosys Technologies Ltd. COMPUTERS - SOFTWARE INFOSYSTCHInfrastructure Development Finance Co. Ltd. FINANCIAL INSTITUTION IDFCJaiprakash Associates Ltd. DIVERSIFIED JPASSOCIAT

Jindal Steel & Power Ltd.STEEL AND STEEL PRODUCTS JINDALSTEL

Kotak Mahindra Bank Ltd. BANKS KOTAKBANKLarsen & Toubro Ltd. ENGINEERING LT

Mahindra & Mahindra Ltd.AUTOMOBILES - 4 WHEELERS M&M

Maruti Suzuki India Ltd.AUTOMOBILES - 4 WHEELERS MARUTI

NTPC Ltd. POWER NTPC

Oil & Natural Gas Corporation Ltd.OIL EXPLORATION/PRODUCTION ONGC

Power Grid Corporation of India Ltd. POWER POWERGRIDPunjab National Bank BANKS PNBRanbaxy Laboratories Ltd. PHARMACEUTICALS RANBAXY

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Reliance Capital Ltd. FINANCE RELCAPITAL

Reliance Communications Ltd.TELECOMMUNICATION – SERVICES RCOM

Reliance Industries Ltd. REFINERIES RELIANCEReliance Infrastructure Ltd. POWER RELINFRAReliance Power Ltd. POWER RPOWERSiemens Ltd. ELECTRICAL EQUIPMENT SIEMENSState Bank of India BANKS SBIN

Steel Authority of India Ltd.STEEL AND STEEL PRODUCTS SAIL

Sterlite Industries (India) Ltd. METALS STERSun Pharmaceutical Industries Ltd. PHARMACEUTICALS SUNPHARMASuzlon Energy Ltd. ELECTRICAL EQUIPMENT SUZLONTata Consultancy Services Ltd. COMPUTERS – SOFTWARE TCS

Tata Motors Ltd.AUTOMOBILES - 4 WHEELERS TATAMOTORS

Tata Power Co. Ltd. POWER TATAPOWER

Tata Steel Ltd.STEEL AND STEEL PRODUCTS TATASTEEL

Unitech Ltd. CONSTRUCTION UNITECHWipro Ltd. COMPUTERS – SOFTWARE WIPRO

7

BANKING- The Indian Banking industry, which is governed by the Banking

Regulation Act of India, 1949 can be broadly classified into two major categories,

non-scheduled banks and scheduled banks. Scheduled banks comprise commercial

banks and the co-operative banks. In terms of ownership, commercial banks can be

further grouped into nationalized banks, the State Bank of India and its group banks,

regional rural banks and private sector banks (the old/ new domestic and foreign).

These banks have over 67,000 branches spread across the country.

The banking section will navigate through all the aspects of the Banking System in

India. It will discuss upon the matters with the birth of the banking concept in the

country to new players adding their names in the industry in coming few years.

The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association

(IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well

defined under three separate heads with one page dedicated to each bank.

However, in the introduction part of the entire banking cosmos, the past

has been well explained under three different heads namely:

History of Banking in India

Nationalisation of Banks in India

Scheduled Commercial Banks in India

The first deals with the history part since the dawn of banking system in

India. Government took major step in the 1969 to put the banking sector into

systems and it nationalised 14 private banks in the mentioned year. This has been

elaborated in Nationalisation of Banks in India. The last but not the least explains

about the scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act

8

1934 lays down the condition of scheduled commercial banks. The description along

with a list of scheduled commercial banks is given on this page.

Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector

banks (that is with the Government of India holding a stake), 31 private banks (these

do not have government stake; they may be publicly listed and traded on stock

exchanges) and 38 foreign banks. They have a combined network of over 53,000

branches and 49,000 ATMs. According to a report by ICRA Limited, a rating agency,

the public sector banks hold over 75 percent of total assets of the banking industry,

with the private and foreign banks holding 18.2% and 6.5% respectively.

EARLY HISTORY

Banking in India originated in the last decades of the 18th century. The first banks

were The General Bank of India which started in 1786, and the Bank of Hindustan,

both of which are now defunct. The oldest bank in existence in India is the State

Bank of India, which originated in the Bank of Calcutta in June 1806, which almost

immediately became the Bank of Bengal. This was one of the three presidency

banks, the other two being the Bank of Bombay and the Bank of Madras, all three of

which were established under charters from the British East India Company. For

many years the Presidency banks acted as quasi-central banks, as did their

9

successors. The three banks merged in 1921 to form the Imperial Bank of India,

which, upon India's independence, became the State Bank of India.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The

Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in

Bombay in 1862; branches in Madras and Pondicherry, then a French colony,

followed. HSBC established itself in Bengal in 1869. Calcutta was the most active

trading port in India, mainly due to the trade of the British Empire, and so became a

banking center.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established

in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank,

established in Lahore in 1895, which has survived to the present and is now one of

the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing through a

relative period of stability. Around five decades had elapsed since the Indian Mutiny,

and the social, industrial and other infrastructure had improved. Indians had

established small banks, most of which served particular ethnic and religious

communities.

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LIBERALISATION

In the early 1990s, the then Narsimha Rao government embarked on a policy of

liberalization, licensing a small number of private banks. These came to be known as

New Generation tech-savvy banks, and included Global Trust Bank (the first of such

new generation banks to be set up), which later amalgamated with Oriental Bank of

Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move,

along with the rapid growth in the economy of India, revitalized the banking sector in

India, which has seen rapid growth with strong contribution from all the three sectors

of banks, namely, government banks, private banks and foreign banks.

Currently (2007), banking in India is generally fairly mature in terms of supply,

product range and reach-even though reach in rural India still remains a challenge

for the private sector and foreign banks. In terms of quality of assets and capital

adequacy, Indian banks are considered to have clean, strong and transparent

balance sheets relative to other banks in comparable economies in its region. The

Reserve Bank of India is an autonomous body, with minimal pressure from the

government. The stated policy of the Bank on the Indian Rupee is to manage

volatility but without any fixed exchange rate-and this has mostly been true.

Chapter 2

Objective

Research Methodology

Limitatins

Scope

11

OBJECTIVES OF THE PROJECT

1. To know the correlation between Nifty movement & Banks movement under Nifty 50.

2. To know the best bank in the Nifty 50 in terms of risk & return.

3. To guide the investors in framing the criteria for judging the best bank in terms

associated risk & returns generated.

4. To check the volatility of banking counter through Beta calculation.

ASSUMPTIONS

1. All the news related to banks is ignored in this calculation.

2. All the extra benefits given by these banks are also ignored in the calculation

like ESOP, Bonus Shares, and Right Issues, etc.

12

RESEARCH METHODOLOGY

For the project undertaken collecting Primary Data is very difficult so I use

Secondary Data for the project.

SAMPLE SIZE- For the project I have taken 4 banks of Nifty 50 i.e.

HDFC Bank

ICICI Bank

Punjab National Bank

State Bank of India

DATA ANALYSIS TOOLS

Calculation of Correlation.

Risk & Return Calculation.

Beta Calculation.

13

→WHAT IS CORRELATION?

The correlation coefficient a concept from statistics is a measure of how well trends

in the predicted values follow trends in past actual values.  It is a measure of how

well the predicted values from a forecast model "fit" with the real-life data.

The correlation coefficient is a number between 0 and 1.  If there is no relationship

between the predicted values and the actual values the correlation coefficient is 0 or

very low (the predicted values are no better than random numbers).  As the strength

of the relationship between the predicted values and actual values increases so

does the correlation coefficient.  A perfect fit gives a coefficient of 1.0. Thus, the

higher the correlation coefficient the better.

In statistics, correlation and dependence are any of a broad class of statistical

relationships between two or more random variables or observed data values.

Familiar examples of dependent phenomena include the correlation between the

physical statures of parents and their offspring, and the correlation between the

demand for a product and its price. Correlations are useful because they can

indicate a predictive relationship that can be exploited in practice. For example, an

electrical utility may produce less power on a mild day based on the correlation

between electricity demand and weather. Correlations can also suggest possible

causal, or mechanistic relationships; however, statistical dependence is not sufficient

to demonstrate the presence of such a relationship.

14

PEARSON'S PRODUCT-MOMENT COEFFICIENT

The most familiar measure of dependence between two quantities is the Pearson

product-moment correlation coefficient, or "Pearson's correlation." It is obtained by

dividing the covariance of the two variables by the product of their standard

deviations. Karl Pearson developed the coefficient from a similar but slightly different

idea by Francis Galton.

The population correlation coefficient ρX,Y between two random variables X and Y

with expected values μX and μY and standard deviations σX and σY is defined as:

where E is the expected value operator, cov means covariance, and, corr a widely

used alternative notation for Pearson's correlation.

The Pearson correlation is defined only if both of the standard deviations are finite

and both of them are nonzero. It is a corollary of the Cauchy–Schwarz inequality that

the correlation cannot exceed 1 in absolute value. The correlation coefficient is

symmetric: corr(X,Y) = corr(Y,X).

The Pearson correlation is +1 in the case of a perfect positive (increasing) linear

relationship, −1 in the case of a perfect decreasing (negative) linear relationship, and

some value between −1 and 1 in all other cases, indicating the degree of linear

dependence between the variables. As it approaches zero there is less of a

relationship. The closer the coefficient is to either −1 or 1, the stronger the

correlation between the variables.

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→RISK VERSUS RETURN

One Can't Have One Without the Other

Risk — Just the thought of it can give investors sleepless nights. However, through

careful planning for your financial future, you can help manage risk.

Risk is something you encounter every day. Even crossing a busy street involves

some risk. With investments, balancing risk and return can be a tricky operation. All

investors want to maximize their return, while minimizing risk.

Some investments are certainly more "risky" than others, but no investment is risk

free. Trying to avoid risk by not investing at all can be the riskiest move of all. That

would be like standing at the curb, never setting foot into the street. You'll never be

able to get to your destination if you don't accept some risk. In investing, just like

crossing that street, you carefully consider the situation, accept a comfortable level

of risk, and proceed to where you're going. Risk can never be eliminated, but it can

be managed. Let's take a look at the different types of risk, how different asset

categories perform, and the ways and means to help manage risk.

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TYPES OF RISK

However, there are many kinds of risk. Let's take a look at some of them:

Capital Risk: Losing your invested monies.

Inflationary Risk: Investment's rate of return doesn't keep pace with inflation

rate.

Interest Rate Risk: A drop in an investment's interest rate.

Market Risk: Selling an investment at an unfavorable price.

Liquidity Risk: Limitations on the availability of funds for a specific period of

time.

Legislative Risk: Changes in tax laws may make certain investments less

advantageous.

Default Risk: The failure of the institution where an investment is made.

The risk/return tradeoff could easily be called the "ability-to-sleep-at-night test."

While some people can handle the equivalent of financial skydiving without batting

an eye, others are terrified to climb the financial ladder without a secure harness.

Deciding what amount of risk you can take while remaining comfortable with your

investments is very important.

In the investing world, the dictionary definition of risk is the chance that an

investment's actual return will be different than expected. Technically, this is

measured in statistics by standard deviation. Risk means you have the possibility of

losing some, or even all, of our original investment.

17

Low levels of uncertainty (low risk) are associated with low potential returns. High

levels of uncertainty (high risk) are associated with high potential returns.

The risk/return tradeoff is the balance between the desire for the lowest possible risk

and the highest possible return. This is demonstrated graphically in the chart below.

A higher standard deviation means a higher risk and higher possible return.

WHAT DOES RISK-RETURN TRADE-OFF MEAN?

The principle that potential return rises with an increase in risk. Low levels of

uncertainty (low risk) are associated with low potential returns, whereas high levels

of uncertainty (high risk) are associated with high potential returns. According to

the risk-return trade-off, invested money can render higher profits only if it is subject

to the possibility of being lost.

The objective of risk and return analysis is to maximize the return by creating a

balance of risk. For example, in case of working capital management, the less

inventory you keep, the higher the expected return as less of your money is locked

as asset; but you also have a increased risk of running out of raw material when you

actually need it for production or maintenance. Which means you lose sale. Thus

all

18

companies tries very hard to maintain a minimum inventory as possible without

effecting smooth production. This is a very common example of risk return trade-off

→WHAT IS BETA CALCULATION?

In finance, the beta (β) of a stock or portfolio is a number describing the relation of

its returns with that of the financial market as a whole.

An asset with a beta of 0 means that its price is not at all correlated with the market.

A positive beta means that the asset generally follows the market. A negative beta

shows that the asset inversely follows the market; the asset generally decreases in

value if the market goes up and vice versa.

The beta coefficient is a key parameter in the capital asset pricing model (CAPM). It

measures the part of the asset's statistical variance that cannot be mitigated by the

diversification provided by the portfolio of many risky assets, because it is correlated

with the return of the other assets that are in the portfolio. Beta can be estimated for

individual companies using regression analysis against a stock market index.

The formula for the beta of an asset within a portfolio is

,

where ra measures the rate of return of the asset, rp measures the rate of return of

the portfolio, and cov(ra,rp) is the covariance between the rates of return. The

19

portfolio of interest in the CAPM formulation is the market portfolio that contains all

risky assets, and so the rp terms in the formula are replaced by rm, the rate of return

of the market.

Beta is also referred to as financial elasticity or correlated relative volatility, and

can be referred to as a measure of the sensitivity of the asset's returns to market

returns, its non-diversifiable risk, its systematic risk, or market risk. On an individual

asset level, measuring beta can give clues to volatility and liquidity in the

marketplace. In fund management, measuring beta is thought to separate a

manager's skill from his or her willingness to take risk.

SECURITY MARKET LINE

The SML graphs the results from the capital asset pricing model (CAPM) formula.

The x-axis represents the risk (beta), and the y-axis represents the expected return.

The market risk premium is determined from the slope of the SML.

The relationship between β and required return is plotted on the security market line

(SML) which shows expected return as a function of β. The intercept is the nominal

risk-free rate available for the market, while the slope is E(Rm)− Rf. The security

market line can be regarded as representing a single-factor model of the asset price,

where Beta is exposure to changes in value of the Market.

20

A beta value less than 1 indicates the investment is less volatile than the

benchmark.  A beta value equal to 1 means the investment's volatility is the

same as the benchmark, and a beta greater than 1 means the investment is

more volatile.

Beta is a measure of a stock's volatility in relation to the market. By definition, the

market has a beta of 1.0, and individual stocks are ranked according to how much

they deviate from the market. A stock that swings more than the market over time

has a beta above 1.0. If a stock moves less than the market, the stock's beta is less

than 1.0. High-beta stocks are supposed to be riskier but provide a potential for

higher returns; low-beta stocks pose less risk but also lower returns.

Beta is a key component for the capital asset pricing model (CAPM), which is used

to calculate cost of equity. Recall that the cost of capital represents the discount rate

used to arrive at the present value of a company's future cash flows. All things being

equal, the higher a company's beta is, the higher its cost of capital discount rate. The

higher the discount rate, the lower the present value placed on the company's future

cash flows. In short, beta can impact a company's share valuation.

21

Advantages of Beta

To followers of CAPM, beta is a useful measure. A stock's price variability is important to consider when assessing risk. Indeed, if you think about risk as the possibility of a stock losing its value, beta has appeal as a proxy for risk.

Intuitively, it makes plenty of sense. Think of an early-stage technology stock with a price that bounces up and down more than the market. It's hard not to think that stock will be riskier than, say, a safe-haven utility industry stock with a low beta.

Besides, beta offers a clear, quantifiable measure, which makes it easy to work with. Sure, there are variations on beta depending on things such as the market index used and the time period measured, but broadly speaking, the notion of beta is fairly straightforward to understand. It's a convenient measure that can be used to calculate the costs of equity used in a valuation method that discounts cash flows.

DISADVANTAGES OF BETA However, if you are investing in a stock's fundamentals, beta has plenty of shortcomings.

For starters, beta doesn't incorporate new information. Consider the electrical utility company American Electric Power (AEP). Historically, AEP has been considered a defensive stock with a low beta. But when it entered the merchant energy business and assumed high debt levels, AEP's historic beta no longer captured the substantial risks the company took on. At the same time, many technology stocks, such as Google, are so new to the market they have insufficient price history to establish a reliable beta. Another troubling factor is that past price movements are very poor predictors of the future. Betas are merely rear-view mirrors, reflecting very little of what lies ahead. Furthermore, the beta measure on a single stock tends to flip around over time, which makes it unreliable. Granted, for traders looking to buy and sell stocks within short time periods, beta is a fairly good risk metric. But for investors with long-term horizons, it's less useful.

LIMITATIONS

Sample size is of only 5 years.

Calculation is little bit time consuming.

Major Banks like Axis & Kotak Mahindra are not included because of

data unavailability.

22

Scope

With the help of this study An individual as well as organisational investor can select

the banking stock of their choice before investment. Also they can study the beta

distribution so calculated to gain better results from their stocks.

They can also judge the risk and return relation before going for a combination of

stocks.

Chapter 3

Organization Profile

23

I. HDFC BANK ( HOUSING DEVELOPMENT FINANCE

CORPORATION LIMITED)

HDFC Bank Ltd. (BSE: 500180, NYSE: HDB) is a major Indian financial

services company based in Mumbai, incorporated in August 1994, after the Reserve

Bank of India allowed establishing private sector banks. The Bank was promoted by

the Housing Development Finance Corporation, a premier housing finance company

(set up in 1977) of India. HDFC Bank has 1,412 branches and over 3,295 ATMs, in

528 cities in India, and all branches of the bank are linked on an online real-time

basis. As of September 30, 2008 the bank had total assets of INR 1006.82 billion.

For the fiscal year 2008-09, the bank has reported net profit of Rs.2,244.9 crore, up

41% from the previous fiscal. Total annual earnings of the bank increased by 58%

reaching at Rs.19,622.8 crore in 2008-09.

HISTORY

HDFC Bank was incorporated in the year of 1994 by Housing Development

Finance Corporation Limited (HDFC), India's premier housing finance company. It

was among the first companies to receive an 'in principle' approval from the Reserve

Bank of India (RBI) to set up a bank in the private sector. The Bank commenced its

operations as a Scheduled Commercial Bank in January 1995 with the help of RBI's

liberalization policies.

In a milestone transaction in the Indian banking industry, Times Bank Limited

(promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank

Ltd., in 2000. This was the first merger of two private banks in India. As per the

scheme of amalgamation approved by the shareholders of both banks and the

24

Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank

for every 5.75 shares of Times Bank.

In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total

branches to more than 1,000. The amalgamated bank emerged with a strong deposit

base of around Rs. 1,22,000 crore and net advances of around Rs. 89,000 crore.

The balance sheet size of the combined entity is over Rs. 1,63,000 crore. The

amalgamation added significant value to HDFC Bank in terms of increased branch

network, geographic reach, and customer base, and a bigger pool of skilled

manpower.

BUSINESS FOCUS

HDFC Bank deals with three key business segments - Wholesale Banking

Services, Retail Banking Services, Treasury. It has entered the banking consortia of

over 50 corporate for providing working capital finance, trade services, corporate

finance and merchant banking. It is also providing sophisticated product structures in

areas of foreign exchange and derivatives, money markets and debt trading and

equity research.

25

WHOLESALE BANKING SERVICES

The Bank's target market ranges from large, blue-chip manufacturing

companies in the Indian corp to small & mid-sized corporates and agri-based

businesses. For these customers, the Bank provides a wide range of commercial

and transactional banking services, including working capital finance, trade

services,transactional services, cash management, etc. The bank is also a leading

provider of structured solutions, which combine cash management services with

vendor and distributor finance for facilitating superior supply chain management for

its corporate customers. HDFC Bank has made significant inroads into the banking

consortia of a number of leading Indian corporate including multinationals,

companies from the domestic business houses and prime public sector companies.

It is recognised as a leading provider of cash management and transactional

banking solutions to corporate customers, mutual funds, stock exchange members

and banks.

RETAIL BANKING SERVICES

The objective of the Retail Bank is to provide its target market customers a full

range of financial products and banking services, giving the customer a one-stop

window for all his/her banking requirements. The products are backed by world-class

service and delivered to customers through the growing branch network, as well as

through alternative delivery channels like ATMs, Phone Banking, Net Banking and

Mobile Banking.

HDFC Bank was the first bank in India to launch an International Debit Card in

association with VISA (VISA Electron) and issues the MasterCard Maestro debit

card

26

as well. The Bank launched its credit card business in late 2001. By March 2009, the

bank had a total card base (debit and credit cards) of over 13 million. The Bank is

also one of the leading players in the “merchant acquiring” business with over

70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant

establishments. The Bank is well positioned as a leader in various net based B2C

opportunities including a wide range of internet banking services for Fixed Deposits,

Loans, Bill Payments, etc.

TREASURY

Within this business, the bank has three main product areas - Foreign

Exchange and Derivatives, Local Currency Money Market & Debt Securities, and

Equities. These services are provided through the bank's Treasury team. To comply

with statutory reserve requirements, the bank is required to hold 25% of its deposits

in government securities. The Treasury business is responsible for managing the

returns and market risk on this investment portfolio.

HDFC Ltd has the objective to enhance residential housing stock and

promote home ownership. Their offerings range from hassle-free home loans and

deposit products, to property related services and a training facility. They also offer

specialized financial services to the customer base through partnerships with some

of the best financial institutions worldwide.

HDFC Bank is a young and dynamic bank, with a youthful and enthusiastic

team determined to accomplish the vision of becoming a world-class Indian bank.

Our business philosophy is based on four core values - Customer Focus,

Operational Excellence, Product Leadership and People. We believe that the

27

ultimate identity and success of our bank will reside in the exceptional quality of our

people and their extraordinary efforts. For this reason, we are committed to hiring,

developing, motivating and retaining the best people in the industry.

MISSION AND BUSINESS STRATEGY

Our mission is to be "a World Class Indian Bank", benchmarking ourselves

against international standards and best practices in terms of product offerings,

technology, service levels, risk management and audit & compliance. The objective

is to build sound customer franchises across distinct businesses so as to be a

preferred provider of banking services for target retail and wholesale customer

segments, and to achieve a healthy growth in profitability, consistent with the Bank's

risk appetite. We are committed to do this while ensuring the highest levels of ethical

standards, professional integrity, corporate governance and regulatory compliance.

PROMOTER

HDFC is India's premier housing finance company and enjoys an impeccable

track record in India as well as in international markets. Since its inception in 1977,

the Corporation has maintained a consistent and healthy growth in its operations to

remain the market leader in mortgages. Its outstanding loan portfolio covers well

over a million dwelling units. HDFC has developed significant expertise in retail

mortgage loans to different market segments and also has a large corporate client

base for its housing related credit facilities. With its experience in the financial

28

markets, a strong market reputation, large shareholder base and unique consumer

franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

KEY PEOPLE

1-Deepak Parekh (Founder)

2-Jagdish Kapoor (Chairman)

3-Aditya Puri (MD)

29

II. ICICI BANK ( Industrial Credit and Investment

Corporation of India)

ICICI Bank (BSE: 532174, NYSE: IBN) (formerly Industrial Credit and

Investment Corporation of India) is a major banking and financial services

organization in India. It is the 4th largest bank in India and the largest private sector

bank in India by market capitalization. The bank also has a network of 1,700+

branches (as on 31 March 2010) and about 4,721 ATMs in India and presence in 18

countries, as well as some 24 million customers (at the end of July 2007). ICICI

Bank offers a wide range of banking products and financial services to corporate and

retail customers through a variety of delivery channels and specialization

subsidiaries and affiliates in the areas of investment banking, life and non-life

insurance, venture capital and asset management. (These data are dynamic.) ICICI

Bank is also the largest issuer of credit cards in India. ICICI Bank's shares are listed

on the stock exchanges at Kolkata and Vadodara, Mumbai and the National Stock

Exchange of India Limited; its ADRs trade on the New York Stock Exchange

(NYSE).

Founded in 1955 as Industrial Credit and Investment Corporation of India,

ICICI Limited was established by the Government of India in the 1960s as a

Financial Institution like Industrial Development Bank of India (IDBI) to finance large

industrial projects . ICICI then, was not a bank and hence could not take retail

deposits and was not required to comply with Indian banking requirements for liquid

reserves. ICICI borrowed funds from various agencies like the World Bank, often at

30

concessional rates. These funds were deployed in large corporate loans. However,

the scenario changed drastically in1990s when ICICI founded a separate legal entity

and named it "ICICI Bank". ICICI Bank, as the name would suggest, undertook

normal banking operations like accepting deposits, issuing credit cards, providing car

loans etc. The experiment was so successful that ICICI merged into ICICI Bank and

this "reverse merger" happened in 2002.

ICICI Bank (BSE: ICICI) (formerly Industrial Credit and Investment

Corporation of India) "ICICI Bank is India's second largest Bank with consolidated

total assets of over Rs. 470,000 crores and networth of over Rs. 50,000 crores. The

Bank's capital adequacy ratio of 15.6% is among the highest levels of capital

adequacy in large Indian banks and much higher than the regulatory requirement of

9.0%. ICICI Bank made a profit after tax of Rs. 4,158 crore (over US$ 850 million) in

FY2008 and Rs. 3,014 crore (US$ 619 million) in the nine months ended December

31, 2008."

ICICI Bank offers a wide range of banking products and financial services to

corporate and retail customers through a variety of delivery channels and specialised

subsidiaries and affiliates in the areas of investment banking, life and non-life

insurance, venture capital and asset management. ICICI Bank is also the largest

issuer of credit cards in India. Banks have also provide internet banking, phone

banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines

(ATMs) and combined various other services and integrated them into the

mainstream banking arena.

In a span of just four years, ICICI Bank has emerged as a consumer banking

behemoth. With a retail book of over Rs 56,000 crore (Rs 560 billion) and a market

31

share that is the envy of competition -- it has a share of over 30 per cent -- ICICI

Bank today has reached a commanding position. The bank boasts of the widest

integrated technology platform in the country and only a fourth of its business

takes place at its branches

The Bank is expanding in overseas markets and has the largest international

balance sheet among Indian banks. ICICI Bank now has wholly-owned subsidiaries,

branches and representative offices in 18 countries, including an offshore unit in

Mumbai. This includes wholly owned subsidiaries in Canada, Russia and the UK (the

subsidiary through which the his savings brand is operated), offshore banking units

in Bahrain and Singapore, an advisory branch in Dubai, branches in Belgium, Hong

Kong and Sri Lanka, and representative offices in Bangladesh, China, Malaysia,

Indonesia, South Africa, Thailand, the United Arab Emirates and USA. Overseas, the

Bank is targeting the NRI (Non-Resident Indian) population in particular.

HISTORY

1955 The Industrial Credit and Investment Corporation of India Limited (ICICI) was

incorporated at the initiative of World Bank, the Government of India and

representatives of Indian industry, with the objective of creating a development

financial institution for providing medium-term and long-term project financing to

Indian businesses.

32

1994 ICICI established Banking Corporation as a banking subsidiary. formerly

Industrial Credit and Investment Corporation of India. Later, ICICI Banking

Corporation was renamed as 'ICICI Bank Limited'. ICICI founded a separate legal

entity, ICICI Bank, to undertake normal banking operations - taking deposits, credit

cards, car loans etc.

2001 ICICI acquired Bank of Madura (est. 1943). Bank of Madura was a Chettiar

bank, and had acquired Chettinad Mercantile Bank (est. 1933) and Illanji Bank

(established 1904) in the 1960s.

2002 The Boards of Directors of ICICI and ICICI Bank approved the reverse merger

of ICICI, ICICI Personal Financial Services Limited and ICICI Capital Services

Limited, into ICICI Bank. After receiving all necessary regulatory approvals, ICICI

integrated the group's financing and banking operations, both wholesale and retail,

into a single entity.

Also in 2002, ICICI Bank bought the Shimla and Darjeeling branches that Standard

Chartered Bank had inherited when it acquired Grindlays Bank.

33

ICICI started its international expansion by opening representative offices in New

York and London.

2003 ICICI opened subsidiaries in Canada and the United Kingdom (UK), and in the

UK it established an alliance with Lloyds TSB. It also opened an Offshore Banking

Unit (OBU) in Singapore and representative offices in Dubai and Shanghai.

2004 ICICI opens a rep office in Bangladesh to tap the extensive trade between that

country, India and South Africa.

2005 ICICI acquired Investitsionno-Kreditny Bank (IKB), a Russia bank with about

US$4mn in assets, head office in Balabanovo in the Kaluga region, and with a

branch in Moscow. ICICI renamed the bank ICICI Bank Eurasia. Also, ICICI

established a branch in Dubai International Financial Centre and in Hong Kong.

2006 ICICI Bank UK opened a branch in Antwerp, in Belgium. ICICI opened

representative offices in Bangkok, Jakarta, and Kuala Lumpur.

34

2007 ICICI amalgamated Sangli Bank, which was headquartered in Sangli, in

Maharashtra State, and which had 158 branches in Maharashtra and another 31 in

Karnataka State. Sangli Bank had been founded in 1916 and was particularly strong

in rural areas.

ICICI also received permission from the government of Qatar to open a branch in

Doha.

ICICI Bank Eurasia opened a second branch, this time in St. Petersburg.

2008 The US Federal Reserve permitted ICICI to convert its representative office in

New York into a branch.

ICICI also established a branch in Frankfurt.

NATURE OF BUSINESS:

ICICI is a financial intermediary which brings together the savers and

borrowers in the economic system. It collects funds from surplus units and lends the

same to those units whose income exceeds its expenditure. In the pursuit of these

objectives the ICICI Bank Limited (ICICI Bank) offers products and services in the

35

areas of commercial banking to retail and corporate customers (both domestic and

international), treasury and investment banking and other products, such as

insurance and asset management. Its commercial banking operations for retail

customers consist of retail lending and deposits, distribution of third-party investment

products and other fee-based products and services, as well as issuance of

unsecured redeemable bonds. ICICI Bank provides a range of commercial banking

and project finance products and services, including loan products, fee and

commission-based products and services, deposits and foreign exchange and

derivatives products to corporations, growth-oriented middle market companies and

small and medium enterprises.

ONWNERSHIP TYPE

JOINT STOCK COMPANY:

ICICI BANK LIMITED, is the joint stock company which is incorporated under

the Companies Act, 1956 and licensed as a bank under the Banking Regulation Act,

1949 ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and

the National Stock Exchange of India Limited and its American Depositary Receipts

(ADRs) are listed on the New York Stock Exchange (NYSE).

36

VISION

To be the leading provider of financial services in India and a major

global bank.

To be the preferred brand for total financial and banking solutions for both corporate

and individuals

To be the dominant Life, Health and Pensions player built on trust by world-class

people and service.

MISSION

We will leverage our people, technology, speed and financial capital to:

be the banker of first choice for our customers by delivering high quality, world-class

products and services.

expand the frontiers of our business globally.

play a proactive role in the full realisation of India’s potential.

maintain a healthy financial profile and diversify our earnings across businesses and

geographies.

maintain high standards of governance and ethics.

contribute positively to the various countries and markets in which we operate.

create value for our stakeholders

Provide the social facilities to the society

37

SUBSIDIARIES

KEY PEOPLE

1. K.V. Kamath (Chairman)

2. Chanda Kochhar (MD & CEO)

3. N. S. Kannan (CFO)

38

III. PNB (Punjab National Bank)

Punjab National Bank (PNB) (BSE: 532461), was registered on May 19,

1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore.

Today, the Bank is the second largest government-owned commercial bank in India

with about 5000 branches across 764 cities. It serves over 37 million customers. The

bank has been ranked 248th biggest bank in the world by the Bankers Almanac,

London. The bank's total assets for financial year 2007 were about US$60 billion.

PNB has a banking subsidiary in the UK, as well as branches in Hong Kong, Dubai

and Kabul, and representative offices in Almaty, Dubai, Oslo, and Shanghai.

Punjab National Bank with 4497 offices and the largest nationalised bank is

serving its 3.5 crore customers with the following wide variety of banking services:

Corporate banking

Personal banking

Industrial finance

Agricultural finance

Financing of trade

International banking

Punjab National Bank has been ranked 38th amongst top 500 companies by The

Economic Times. PNB has earned 9th position among top 50 trusted brands in India.

Punjab National Bank India maintains relationship with more than 200 leading

international banks world wide. PNB India has Rupee Drawing Arrangements with 15

exchange companies in UAE and 1 in Singapore.

39

PNB ONLINE

Punjab National Bank of India is also a member of SWIFT and more than

150 PNB Branches are connected with terminals in Mumbai. It promotes "Any Time,

Any Where Banking".

PNB offers Internet Banking services for both to the Corporate and Individuals. It

provides 24 hours, 365 days banking from the PC of the user. A user can operate

anytime and from anywhere its accounts. The following are some of the services

available online:

Access to account

Complete details of transactions and statement of account

Online information of deposits, loans overdraft account etc.

Online Payment Facility for railway reservation through IRCTC Payment

Gateway Project

Online Utility Bill Payment Services which allows Internet Banking account

holders to pay their telephone, mobile, electricity, insurance and other bills anytime

from anywhere from their desktop.

Punjab National Bank Card user can buy goods and enable services from

45,000 merchant outlet in India and can withdraw cash from over 4500 ATMs with its

own 450 ATMs.

40

PUNJAB NATIONAL BANK BRANCHES

Punjab National Bank has its Branches in all the 7 metropolitan and

cosmopolitan cities in India namely New Delhi, Mumbai, Calcutta, Chennai,

Bangalore, Hyderabad and Ahmedabad. It even has its branches in small town in

both urban as well as rural areas.

PNB is always focussing on expanding abroad and till date has identified

some emerging economies abroad. They are in few of these places.

Almaty

Kazakhktan

Shanghai

China

London

Kabul

Afghanistan

PUNJAB NATIONAL BANK HOUSING LOAN

Any individual can avail Punjab National Bank Housing Loan for any of the

following purpose:

For construction of house.

For purchase of house/ flat.

For purchase of house/ flat from the original allottee, i.e. on First Power of

Attorney basis.

41

For carrying out repairs/ renovation/ additions/ alterations in the existing

house.

Approximately 80% of the cost of project is sanctioned by PNB Housing Finance,

subject to a maximum of Rs. 50 lac. In case of carrying out repairs/ renovation/

additions/ alterations in the existing house, the ceiling is Rs. 5 lac. The loan is

available for a period of 5 years to 20 years or before the borrowers attain the age of

65.

Interest of Punjab National Bank Home Loan is charged on reducing balance

and the amount to be sanctioned depends upon the repaying capability of the

borrower.

The following securities are required by the cell of PNB Housing Loan:

Mortgage of property for which finance is being given.

In case of purchase of house flat from housing board/ society where mortgage

cannot be created immediately, a tripartite agreement shall be executed amongst the

housing board/society, borrower and the Bank.

In case of purchase of house/ flat on first power of attorney, additional security by

way of mortgage of some other property or pledge of Bank's Fixed Deposit Receipt/

LIC policy/ Govt. securities has to be provided.

Suitable third party guarantee acceptable to the Bank which may include guarantee

from family members/ other relatives.

42

HISTORY

1895: PNB commenced its operations in Lahore. PNB has the distinction of being

the first Indian bank to have been started solely with Indian capital that has survived

to the present. (The first entirely Indian bank, the Oudh Commercial Bank, was

established in 1881 in Faizabad, but failed in 1958.) PNB's founders included

several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala

HarKishen Lal,Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri

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.

1904: PNB established branches in Karachi and Peshawar.

1940: PNB absorbed Bhagwan Dass Bank, a scheduled bank located in Delhi circle.

1947: Partition of India and Pakistan at Independence. PNB lost its premises in

Lahore, but continued to operate in Pakistan.

1951: PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat Bank

became Bharat Nidhi Ltd.

1961: PNB acquired Universal Bank of India.

1963: The Government of Burma nationalized PNB's branch in Rangoon (Yangon).

September 1965: After the Indo-Pak war the government of Pakistan seized all the

offices in Pakistan of Indian banks, including PNB's headoffice, which may have

moved to Karachi. PNB also had one or more branches in East Pakistan

(Bangladesh).

43

1960s: PNB amalgamated Indo Commercial Bank (est. 1933) in a rescue.

1969: The Government of India (GOI) nationalized PNB and 13 other major

commercial banks, on July 19, 1969.

1976 or 1978: PNB opened a branch in London.

1986 The Reserve Bank of India required PNB to transfer its London branch to State

Bank of India after the branch was involved in a fraud scandal.

1986: PNB acquired Hindustan Commercial Bank (est. 1943) in a rescue. The

acquisition added Hindustan's 142 branches to PNB's network.

1993: PNB acquired New Bank of India, which the GOI had nationalized in 1980.

1998: PNB set up a representative office in Almaty, Kazakhstan.

2003: PNB took over Nedungadi Bank, the oldest private sector bank in Kerala. At

the time of the merger with PNB, Nedungadi Bank's shares had zero value, with the

result that its shareholders received no payment for their shares.

PNB also opened a representative office in London.

2004: PNB established a branch in Kabul, Afghanistan.

PNB also opened a representative office in Shanghai.

PNB established an alliance with Everest Bank in Nepal that permits migrants to

transfer funds easily between India and Everest Bank's 12 branches in Nepal.

2005: PNB opened a representative office in Dubai.

44

2007: PNB established PNBIL - Punjab National Bank (International) - in the UK,

with two offices, one in London, and one in South Hall. Since then it has opened a

third branch in Leicester, and is planning a fourth in Birmingham.

2008: PNB opened a branch in Hong Kong.

2009: PNB opened a representative office in Oslo, Norway, and a second branch in

Hong Kong, this in Kowloon.

2010: PNB received permission to upgrade its representative office in the Dubai

International Financial Centre to a branch.

PRODUCTS OFFERED

Investment Banking

Consumer Banking

Commercial Banking

Retail Banking

Private Banking

Asset Management

Pensions

Mortgage Loans

Credit Cards

Life insurance

45

VISION

"To be a Leading Global Bank with Pan India footprints and become a household

brand in the Indo-Gangetic Plains providing entire range of financial products and

services under one roof"

MISSION

"Banking for the unbaked"

CHAIRMAN OF PNB

Mr. K.R. Kamath (Since 2009)

46

IV. SBIN (STATE BANK OF INDIA)

State Bank of India (SBI) (BSE: 500112, NSE: SBIN) is the largest banking

and financial services company in India, by almost every parameter - revenues,

profits, assets, market capitalization etc. The bank traces its ancestry to British India,

through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta,

making it the oldest commercial bank in the Indian Subcontinent. The Government of

India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India

taking a 60% stake, and renamed it the State Bank of India. In 2008, the

Government took over the stake held by the Reserve Bank of India.

The evolution of State Bank of India can be traced back to the first decade of

the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta,

on 2 June 1806. The bank was redesigned as the Bank of Bengal, three years later,

on 2 January 1809. It was the first ever joint-stock bank of the British India,

established under the sponsorship of the Government of Bengal. Subsequently, the

Bank of Bombay (established on 15 April 1840) and the Bank of Madras (established

on 1 July 1843) followed the Bank of Bengal. These three banks dominated the

modern banking scenario in India, until when they were amalgamated to form the

Imperial Bank of India, on 27 January 1921. 

An important turning point in the history of State Bank of India is the launch of the

first Five Year Plan of independent India, in 1951. The Plan aimed at serving the

Indian economy in general and the rural sector of the country, in particular. Until the

Plan, the commercial banks of the country, including the Imperial Bank of India,

confined their services to the urban sector. Moreover, they were not equipped to

respond to the growing needs of the economic revival taking shape in the rural areas

47

of the country. Therefore, in order to serve the economy as a whole and rural sector

in particular, the All India Rural Credit Survey Committee recommended the

formation of a state-partnered and state-sponsored bank. 

The All India Rural Credit Survey Committee proposed the takeover of the

Imperial Bank of India, and integrating with it, the former state-owned or state-

associate banks. Subsequently, an Act was passed in the Parliament of India in May

1955. As a result, the State Bank of India (SBI) was established on 1 July 1955. This

resulted in making the State Bank of India more powerful, because as much as a

quarter of the resources of the Indian banking system were controlled directly by the

State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959.

The Act enabled the State Bank of India to make the eight former State-associated

banks as its subsidiaries.  

The State Bank of India emerged as a pacesetter, with its operations

carried out by the 480 offices comprising branches, sub offices and three Local Head

Offices, inherited from the Imperial Bank. Instead of serving as mere repositories of

the community's savings and lending to creditworthy parties, the State Bank of India

catered to the needs of the customers, by banking purposefully. The bank served the

heterogeneous financial needs of the planned economic development.  

BRANCHES

The corporate centre of SBI is located in Mumbai. In order to cater to

different functions, there are several other establishments in and outside Mumbai,

apart from the corporate center. The bank boasts of having as many as 14 local

48

head offices and 57 Zonal Offices, located at major cities throughout India. It is

recorded that SBI has about 10000 branches, well networked to cater to its

customers throughout India.  

ATM SERVICES

SBI provides easy access to money to its customers through more than

8500 ATMs in India. The Bank also facilitates the free transaction of money at the

ATMs of State Bank Group, which includes the ATMs of State Bank of India as well

as the Associate Banks – State Bank of Bikaner & Jaipur, State Bank of Hyderabad,

State Bank of Indore, etc. You may also transact money through SBI Commercial

and International Bank Ltd by using the State Bank ATM-cum-Debit (Cash Plus)

card.  

SUBSIDIARIES

The State Bank Group includes a network of eight banking subsidiaries and

several non-banking subsidiaries. Through the establishments, it offers various

services including merchant banking services, fund management, factoring services,

primary dealership in government securities, credit cards and insurance.  

THE EIGHT BANKING SUBSIDIARIES ARE:

State Bank of Bikaner and Jaipur (SBBJ)

State Bank of Hyderabad (SBH)

49

State Bank of Indore (SBIR)

State Bank of Mysore (SBM)

State Bank of Patiala (SBP)

State Bank of Saurashtra (SBS)

State Bank of Travancore (SBT)

PRODUCTS AND SERVICES 

PERSONAL BANKING

SBI Term Deposits SBI Loan For Pensioners

SBI Recurring Deposits Loan Against Mortgage Of Property

SBI Housing Loan Loan Against Shares & Debentures

SBI Car Loan Rent Plus Scheme

SBI Educational Loan Medi-Plus Scheme

OTHER SERVICES

Agriculture/Rural Banking

NRI Services

ATM Services

Demat Services

Corporate Banking

Internet Banking

Mobile Banking

International Banking

Safe Deposit Locker

RBIEFT

50

E-Pay

E-Rail

SBI Vishwa Yatra Foreign Travel Card

Broking Services

Gift Cheques

INTERNATIONAL PRESENCE

The bank has 52 branches, agencies or offices in 32 countries. It has branches

of the parent in Colombo, Dhaka, Frankfurt, Hong Kong,Johannesburg, London and

environs, Los Angeles, Male in the Maldives, Muscat, New York, Osaka, Sydney,

and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore,

and representative offices in Bhutan and Cape Town.

SBI operates several foreign subsidiaries or affiliates. In 1990 it established

an offshore bank, State Bank of India (Mauritius). It has two subsidiaries in North

America, State Bank of India (California), and State Bank of India (Canada). In 1982,

the bank established its California subsidiary, which now has seven branches. The

Canadian subsidiary was also established in 1982 and also has seven branches,

four in the greater Toronto area, and three in British Columbia. In Nigeria, it operates

as INMB Bank . This bank was established in 1981 as the Indo-Nigerian Merchant

Bank and received permission in 2002 to commence retail banking. It now has five

branches in Nigeria. In Nepal SBI owns 50% of Nepal SBI Bank, which has branches

throughout the country. In Moscow SBI owns 60% of Commercial Bank of India,

with Canara Bank owning the rest. In Indonesia it owns 76% of PT Bank Indo

Monex. State Bank of India already has a branch in Shanghai and plans to open one

51

up in Tianjin.State Bank of India has presence in Dubai International Financial

Centre, Dubai, United Arab Emirates.

GROWTH

State Bank of India has often acted as guarantor to the Indian Government, most

notably during Chandra Shekhar's tenure as Prime Minister of India. With 11,448

branches and a further 6500+ associate bank branches, the SBI has extensive

coverage. State Bank of India has electronically networked all of its branches under

Core Banking System(CBS). The bank has one of the largest ATM networks in the

region. More than 8500 ATMs across India. The State Bank of India has had steady

growth over its history, though it was marred by the Harshad Mehtascam in 1992. In

recent years, the bank has sought to expand its overseas operations by buying

foreign banks. It is the only Indian bank to feature in the top 100 world banks in

the Fortune Global 500 rating and various other rankings.

Chapter 4

Data Analysis & Interpretation

52

CALCULATION OF CORRELATION

*Data is attached in annexure.

RESULT FROM THE CALCULATION OF CORRELATION

In the calculation I have seen that correlation coefficient of HDFC is higher than

other banks (0.930) in last 5 years which shows that it is highly correlated with nifty.

So, whenever Nifty 50 moves up usually the share price of HDFC also moves up and

vice-versa. It means that in last 5 years it moves according to Nifty. In second place

correlation coefficient of SBIN is good it shows that SBIN is also highly correlated

with the Nifty 50 up’s & down’s in last 5 years analysis.

Bank Names Correlation

HDFC 0.930206867

ICICI 0.877994998

PNB 0.702472868

SBIN 0.914815796

53

CALCULATION OF RISK & RETURN

1- HDFC BANK

DateHDFC Bank Closing Rate Yearly Return on HDFC Bank (in %age)

1st Year 01-Apr-

05 551.5 31-Mar-

06 774.25 1st Year 40.389845872nd Year

03-Apr-06 773.85

30-Mar-07 954.15 2nd Year 23.29908897

3rd Year 02-Apr-

07 901.35 31-Mar-

08 1331.25 3rd Year 47.695123984th Year

01-Apr-08 1309.55

31-Mar-09 945.5 4th Year -27.79962583

5th Year 01-Apr-

09 973.4 31-Mar-

10 1933.5 5th Year 98.63365523 Risk 45.57889548 Average Return 36.44361765

54

2- ICICI BANK

Date ICICI Bank Closing Rate

Yearly Return on ICICI Bank (in %age)

1st Year 01-Apr-

05 406.05 31-Mar-

06 589.05 1st Year 45.068341342nd Year

03-Apr-06 604

30-Mar-07 855.3 2nd Year 41.60596026

4th Year 02-Apr-

07 857 31-Mar-

08 843.95 3rd Year -1.5227537924th Year

01-Apr-08 834.55

31-Mar-09 375.05 4th Year -55.05961297

5th Year 01-Apr-

09 385.2 31-Mar-

10 952.5 5th Year 147.2741433 Risk 74.48828638 Average Return 35.47321563

55

3- PUNJAB NATIONAL BANK

Date PNB Bank Closing Rate Yearly Return on PNB Bank (in %age)

1st Year 01-Apr-

05 396.9 31-Mar-

06 470.4 1st Year 18.518518522nd Year

03-Apr-06 466.5

30-Mar-07 474.2 2nd Year 1.650589496

3rd Year 02-Apr-

07 426.7 31-Mar-

08 510.25 3rd Year 19.580501524th Year

01-Apr-08 438.6

31-Mar-09 411.45 4th Year -6.190150479

5th Year 01-Apr-

09 405.75 31-Mar-

10 1012.75 5th Year 149.5995071 Risk 64.10527498

Average Return 36.63179323

56

4- STATE BANK OF INDIA

Date SBIN Bank Closing Rate Yearly Return on SBIN Bank (in %age)

1st Year 01-Apr-

05 670.1 31-Mar-

06 968.5 1st Year 44.530667062nd Year

03-Apr-06 983.35

30-Mar-07 994.45 2nd Year 1.128794427

3rd Year 02-Apr-

07 930.5 31-Mar-

08 1600.25 3rd Year 71.977431494th Year

01-Apr-08 1623.2

31-Mar-09 1067.1 4th Year -34.25948743

5th Year 01-Apr-

09 1077.45 31-Mar-

10 2078.2 5th Year 92.8813402 Risk 51.84648463

Average Return 35.25174915

57

RESULT FROM THE CALCULATION OF RISK & RETURN

From the above calculation performance of HDFC Bank in last 5 years is better than

other banks because it is providing 36.44% of return at 45.58% risk. It means

providing good return at lower risk. At second place SBIN bank stand and provide

return of 35.25% at 51.85% risk.

In Risk & Return analysis we consider that script as best script which gave the

Maximum return at Minimum Risk. So from the data of 5 years HDFC bank is the

best script in terms of RISK & RETURN analysis.

58

CALCULATION OF BETA

DatesAvg. Closing Nifty(Six Month Basis)

Six Monthly %age change

Avg. Closing HDFC(Six Month Basis)

Six Monthly %age change

01-Apr-05 2067.65   551.55  

31-Oct-05 2242.98 7.816832963 615.375 10.37172456

01-Apr-06 2902.053 22.71057765 720.62 14.60478477

31-Oct-06 3330.201 12.85652127 826.618 12.82309362

01-Apr-07 3921.559 15.07966602 1034.44 20.0902904

31-Oct-07 4471.548 12.29974497 1174.977 11.96082987

01-Apr-08 5507.344 18.80754135 1570.683 25.19324396

31-Oct-08 4331.751 -27.13897913 1224.422 -28.27954741

01-Apr-09 2842.19 -52.40891707 931.748 -31.41128288

31-Oct-09 4384.67 35.17893023 1423.734 34.55603364

01-Apr-10 5051.0225 13.19242787 1724.95 17.46230326

1. HDFC BANK WITH NIFTY

Beta of HDFC Bank = 0.804697745

59

2. ICICI BANK WITH NIFTY

Dates

Avg. Closing Nifty(Six Month Basis)

Six Monthly %age change

Avg. Closing ICICI(Six Month Basis)

Six Monthly %age change

01-Apr-05 2067.65   406.05  

31-Oct-05 2242.98 7.816832963 458.748 11.48735253

01-Apr-06 2902.053 22.71057765 575.816 20.33080012

31-Oct-06 3330.201 12.85652127 588.253 2.114226362

01-Apr-07 3921.559 15.07966602 886.678 33.65652469

31-Oct-07 4471.548 12.29974497 938.134 5.484930724

01-Apr-08 5507.344 18.80754135 1155.242 18.7932918

31-Oct-08 4331.751 -27.13897913 693.453-

66.59268905

01-Apr-09 2842.19 -52.40891707 386.67-

79.33974707

31-Oct-09 4384.67 35.17893023 706.12 45.2401858

01-Apr-10 5051.0225 13.19242787 867.83 18.63383382

Beta of ICICI Bank = 1.8709125

DatesAvg. Closing Nifty(Six Month Basis)

Six Monthly %age change

Avg. Closing PNB(Six Month Basis)

Six Monthly %age change

01-Apr-05 2067.65   396.9  

31-Oct-05 2242.98 7.816832963 401.276 1.090521237

01-Apr-06 2902.053 22.71057765 448.238 10.47702337

31-Oct-06 3330.201 12.85652127 425.59-

5.321553608

01-Apr-07 3921.559 15.07966602 497.865 14.51698754

31-Oct-07 4471.548 12.29974497 509.119 2.210485171

01-Apr-08 5507.344 18.80754135 603.204 15.59754246

31-Oct-08 4331.751 -27.13897913 479.041-

25.91907582

01-Apr-09 2842.19 -52.40891707 426.348-

12.35915262

31-Oct-09 4384.67 35.17893023 668.98 36.26894675

01-Apr-10 5051.0225 13.19242787 913.3535 26.75563186

3. PUNJAB NATIONAL BANK WITH NIFTY

60

Beta of PNB = 0.381567483

4. STATE BANK OF INDIA WITH NIFTY

DatesAvg. Closing Nifty(Six Month Basis)

Six Monthly %age change

Avg. Closing SBIN(Six Month Basis)

Six Monthly %age change

01-Apr-05 2067.65   670.1  

31-Oct-05 2242.98 7.816832963 748.327 10.45358513

01-Apr-06 2902.053 22.71057765 903.008 17.12952709

31-Oct-06 3330.201 12.85652127 887.974 -1.69306759

01-Apr-07 3921.559 15.07966602 1156.044 23.18856376

31-Oct-07 4471.548 12.29974497 1493.534 22.59674035

01-Apr-08 5507.344 18.80754135 2188.263 31.74796631

31-Oct-08 4331.751 -27.13897913 1458.928-

49.99115789

01-Apr-09 2842.19 -52.40891707 1130.347-

29.06903809

31-Oct-09 4384.67 35.17893023 1752.056 35.48453931

01-Apr-10 5051.0225 13.19242787 2135.446 17.95362655

Beta of SBIN = 1.313855349

61

62

RESULT FROM BETA CALCULATION

Beta is a measure of a stock's volatility in relation to the market. By definition, the

market has a beta of 1.0, and individual stocks are ranked according to how much

they deviate from the market. A stock that swings more than the market over time

has a beta above 1.0. If a stock moves less than the market, the stock's beta is less

than 1.0. High-beta stocks are supposed to be riskier but provide a potential for

higher returns; low-beta stocks pose less risk but also lower returns. Therefore,

investing in PNB would be much saver for the investors who aim at investing for long

durations as its beta is lowest, HDFC is also a good option for the investors who are

looking for a stock which is less risky in comparison to the other competitors and

offers high and timely returns. Whereas, ICICI is an aggressive stock whose beta is

almost double than the market beta.

Chapter 5

Observations & Finding

63

Observations

TOOLS USED →↓

BANKS NAME

↓

1- The result of Correlation shows that in last 5 years HDFC Bank is highly

correlates with nifty. It means that this script positively moves according to the

Nifty movement. In second place State Bank of India correlates better with

Nifty-50.

2- In the analysis of Risk & Return I observe that HDFC bank is the best

performing bank in the Nifty in last 5 years because its risk level is low in

comparison of other banks stock taken into consideration and its average

return is also higher. In second place SBIN is the best stock in last 5 years.

Correlation Risk Vs. Return (in %age) Beta

HDFC 0.930206867 45.57:36.44 0.804698

ICICI 0.877994998 74.48:35.47 1.870913

PNB 0.702472868 64.10:36.63 0.381567

SBIN 0.914815796 51.84:35.25 1.313855

64

3- From the calculation of Beta I observe that Punjab National Bank is the best

stock in Nifty 50 in last 5 years because its Beta is less than 1 and it stands at

0.381. At the second place HDFC is best stock if we compare stock with Beta

calculation because its beta also less than 1 but little bit higher than PNB.

Chapter 6

Conclusion

65

CONCLUSION

It's important for investors to make the distinction between short-term risk--

where beta and price volatility are useful--and longer-term, fundamental risk,

where big-picture risk factors are more telling. High betas may mean price

volatility over the near term, but they don't always rule out long-term

opportunities.

Inflation rate Of the Economy should Also Be Considered While investing.

 The stock prices Hit the top At the end of the financial year(refer to annexure

chart) in comparison to begning of the year.

Chapter 7

Recommendations

66

Recommendations

Investors can invest in Share market for better returns but his investment view

should be long term.

Investment in HDFC Bank & SBIN Bank is more profitable in banking sector.

Chapter 8

Bibliography

67

BIBLIOGRAPHY

1. Websites

www.nseindia.com

www.google.com

www.wikipedia.com

www.moneycontrol.com

www.statistics-help-online.com

www.fundmanagersoftware

2. Books

Suresh C. Sinha and Anil K. Dhiman, Research Methodology

Himalaya publication house New Delhi

Jain S P, Narang K L Financial Accounting Kalyani Publication New

Delhi,2004

Gupta Sashi and Joshi Rosi Management Accounting

ANNEXURE