A STUDY ON FUNDAMENTAL ANALYSIS OF INDIAN BANKING INDUSTRY WITH REFERENCE TO ITI FINANCIAL SERVICES. By P.B.PRABHU Reg.

no:11507631023 SRIRAM ENGINEERING COLLEGE A PROJECT REPORT Submitted to the FACULTY OF MANAGEMENT SCIENCES In partial fulfillment of the requirements For the award of the degree OF MASTER OF BUSINESS ADMINISTRATION IN FINANCE & MARKETING AUGUST 2008

BONAFIDE CERTIFICATE

Certified that this project report title A STUDY ON FUNDAMENTAL ANALYSIS OF INDIAN BANKING INDUSTRY in ITI Financial Services Ltd Chennai, is the bonafide work of PRABHU.P.B (Reg. No.11507631023) who carried out the research under my supervision. Certified further, that to the best of my knowledge the work reported here in does not form part of any other project report or dissertation, on the basis of which a degree or award was conferred earlier occasion on this or any other candidate.

DIRECTOR MBA Dr.K.KARUPPIAH

PROJECT GUIDE Mrs.LAVANYA

EXTERNAL EXAMINER

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ACKNOWLEDGEMENT
I take this opportunity to express my gratitude to all the persons who has held hands with me till the successful completion of my project report. I acknowledge my heart felt thanks to Dr.K.KARUPPIAH Director Head Department Of Management Studies Sriram Engineering College for the encouragement to take up this project. I extend my sincere thanks to Mrs.Lavanya, Project Guide and Non-Teaching Staffs, for their support. I express my sincere thanks to Miss.Kavya Murali, Research Analyst for giving me an opportunity to do a project in their organization. I am immensely grateful to Mr.C.Boobalan, Officer Risk- ITI Financial Services for his continues support and encouragement. Finally, my warmest thanks to all the respondents for venturing the relevant information required for presenting this dissertation. Thanks to other members of the organisation who helped me out in carrying the project successfully.

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TABLE OF CONTENTS
CHAPTER NO TABLE OF CONTENTS Abstract Acknowledgement List of tables/charts List of abbrevations INTRODUCTION 1.1 General 1.2 Company profile 1.3 Industry profile 1.4 Literature Review RESEARCH METHODOLOGY 2.1 Statement of objectives 2.2 Need for study 2.3 Scope of the study 2.4 Period of the study 2.5 Tools applied in the study 2.6 Limitations of the study DATA ANALYSIS & INTREPRETATION 3.1 Expected Return and Interpretation 3.2 Weighted Average Cost of Capital and Interpretation 3.3 Market Capitalization and Interpretation 3.4 Long Term Growth Rate and Interpretation 3.5 Economic Value Added and Market Value Added 3.6 Ratio Analysis and Interpretation 3.7 Forecasting IV V VI SUMMARY OF FINDINGS SUGGESTIONS & RECOMMENDATION CONCLUSION ANNEXURE BIBILIOGRAPHY PAGE NO vii iii v vi 1 9 16 19 21 21 21 22 23 31 33 34 35 36 37 38 48 50 51 54 55 65

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LISTS OF TABLES
TABLE NO 3.1.1 3.2.1 3.3.1 3.3.2 3.4.1 3.5.1 3.6.1.1 3.6.2.1 3.6.3.1 3.6.4.1 3.6.5.1 3.7.1 3.7.2 TITLE Expected Rate of Return Weighted Average Cost of Capital Classification of Companies based on Market Capitalization Market Capitalization of Five Banks Long term Growth Rate EVA and MVA of Five Banks Ratios of Indian Overseas Bank Ratios of Housing Development and Finance Corporation Ratios of Industrial Credit and Investment Corporation of India Ratios of State Bank of India Ratios of Bank of India Forecasted growth rate for five banks in NIFTY and SENSEX Forecasted growth rate for five banks in NIFTY and SENSEX PAGE NO 33 34 35 35 36 37 38 40 42 44 46 48 49

LISTS OF CHARTS
CHART.NO 3.1.1 3.2.1 3.4.1 TITLE Expected Rate of Return Weighted Average Cost of Capital Long term growth Rate PAGE NO 33 34 36

LIST OF ABBREVATIONS

NSE BSE ITIFSL ICICI HDFC SBI IOB SENSEX S&P CNX NIFTY

National Stock Exchange Bombay Stock Exchange Investment Trust of India Financial Services Industrial Credit and Investment Corporation of India Housing Development Finance Corporation of India State Bank of India Indian Overseas Bank Sensitive Index Standard & Poors CRISIL NSE Index 50

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ABSTRACT
Investment decisions, in all sectors, have been gaining paramount importance, warranting the investors to be continuously cautious of risk and return involved in the same. The faculty investment analysis calls for planned and meaningful appraisal of both internal and external factors affecting the returns. Ever since Indian economy opened its doors to MNCs, the Indian banking sector has been witnessing bizarre changes in the terms of new products and services and stiff competition as well. The sort of IPOs that have been taking place in banking sector are amazing. In the light of these recent developments, a careful analysis of the probability of Indian banking sector is inevitable. The present study attempts to analyze the profitability of the five major banks in India: SBI, ICICI, HDFC BANK, IOB and BANK OF INDIA. The variables taken for the study are Operating Profit Margin (OPM), Net Profit Margin (NPM), Return on Equity (ROE), Earnings per Share (EPS), Price Earnings Ratio (PER), Dividends per Share (DPS), and Dividends Payout Ratio (DPR). The study brings out the comparative efficiency of SBI, ICICI, HDFC, IOB, and BANK OF INDIA.

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