INDEX

S.NO. CONTENTS P.NO

CHAPTER 1 INTRODUCTION
Need for the study
Objectives of the study
Scope of the study
Limitations of the study
Research Methodology

CHAPTER 2 REVIEW OF LITRATURE

CHAPTER 3 COMPANY PROFILE

CHAPTER 4 DATA ANALYSIS &

INTERPRETATION
CHAPTER 5 CONCLUSION
SUGGESTION &
RECOMMANDATIONS
ANNEXURE

BIBILIOGRAPHY
CHAPTER-1
Introduction
 INTRODUCTION

The stock market plays a crucial role in the financial system. It is considered as one of the
best ways to increase their funds. But before you make any investment into the stock
market, you should know how to get started. It may turn out to be a profitable affair as
long as you know the tricks of the trade. To start with, you must have an account in your
preferred brokerage. You need to pay the corresponding transaction fee as they will be
acting on your behalf. Primarily the stock market offer liquidity which empowers the
financiers to trade efficiently on their securities. This is regarded as one of the best
features of stock market investment. Also the exchange rates are vital in financial
dealings as it eradicates the risk to personal purchaser or supplier.

The first part gives an insight about Share market and financial system and its various
aspects, the Company Profile, Objectives of the study, Research Methodology. One can
have a brief knowledge about share market and its basics through the Project.
The second part of the Project consists of data and its analysis collected through stock
market quotation five years data. For the collection of Primary data I made a 5years data
of bank share price. I also taken interview of many People those who were coming at the
Angel broking where I done my Project. I visited other Stock broking companies in
Hyderabad to get some knowledge related to my topic. I studied about the products and
strategies of other Stock broking companies in Hyderabad to know why people prefer to
invest in those share market. This Project covers the topic “Equity share price behavior”
The data collected has been well organized and presented. I hope the research findings
and conclusion will be of use.
Objectives of Study

 The purpose of doing study is to analyze the factor that equity share price
behavior

 To examine the internal and external factors affecting the future price of company

 The purpose includes assessing the future market strength of company

 The purpose also serves the investors to decide whether to invest in company
shares to gain returns

Limitations of Study

 The study is based on information which is secondary

 The study is basically on Indian stockmarket

 For analysis purpose two pharmaceutical companies are taken into consideration

 The sample size is restricted to Three companies

Research methodology

The study for “Fundamental and Technical analysis” is done by taking

P&L a/c, balance sheet &key financial ratios of three companies for four years form
2006-2011. The key ratios taken are average price and average volume from various
websites, for technical analysis graphs have been constituted accordingly.

Stock Exchange Meaning:

Stock Exchange is a market for the purchase and sale of second

hand securities. I t is the central place where industrial and financial securities are
bought and sold. It is the place where a buyer of a security can find a seller, or a seller
can find a buyer. Thus, an important problem of an investor namely, marketability of
securities is removed. It provides capital to industry and commerce, it provides finances
to government .It provides an opportunity for the utilization of the savings of the
individuals. The securities dealt in at a stock exchange include the shares and debentures
of public companies, government securities, and the bonds issued by municipal bodies or
port rusts.
A stock exchange is organized by a body or an association of individuals. The
association may or may not be incorporated as a company. It is established for the
purpose of assisting, regulating and controlling business in securities. Thus, the securities
contract(regulation) act, 1956 defines a Stock Exchange as “an association , organization
or body of individuals, whether incorporated or not, established for the purpose of
assisting, regulating and controlling business in buying, selling and dealing in
securities”. Today Stock exchange constitutes a vital organ of a free modern society.

FEATURES OF STOCK EXCHANGE

 It is a place where securities are purchased and sold.

 it is an association of persons, whether incorporated or not
  The trading in exchange is strictly regulated. rules and regulations prescribed for
various transactions
 Genuine Investors and speculators buy and sell shares
 The securities of corporations, trusts, Governments, Municipal corporations etc,
are allowed to be dealt on stock exchange.

The stock market occupies an important position in the financial system. It performs
services to economy in general and to the investors and companies in particular. The
functions/services of the stock exchange may be summarized as follows

 Liquidity: the stock exchanges provide liquidity to securities since securities can
be converted into cash at any time according to the desire of the investor by
selling them at the listed prices. This advantage is not available to the investors in
other investment avenues.

 Marketability: The continuous buying and selling of securities at the stock

exchange creates marketability to the investors in respect of securities they hold
or intend to hold. Thus they create a ready outlet for dealing in securities.

 Safety of funds: Stock exchanges ensure safety of funds invested because they
have to function under strict rules and regulations and the bye-laws are meant to
ensure safety of investments. Over trading, illegimate speculation etc is
prevented through carefully designed set of rules. This would strengthen the
investor’s confidence and promote larger investment.
 Supply of long term funds: The securities traded in the stock exchange are
negotiated and transferable in character and such they can be transferred with
minimum of formalities. So, when a security is transacted, one investor is
substituted by another, but the company is assured of long term availability of
funds.

 Flow of capital to profitable ventures: The prices of the shares quoted in the
stock exchanges are the direct reflection of the performance of the company.
Funds tent to move towards securities of profitable companies and this facilitates
the flow of capital into profitable channels.

 Marketing of new issues: if the new issues are listed they are readily acceptable
to the public, since, listing presupposes their evaluation by the stock exchange
authorities.

 Promotion of Investments: Stock exchanges mobilize the savings of the public

and promote investments through capital formation. Thus the surplus funds
available with individuals and institutions will be utilized for productive purposes.

 Motivation for improved performance: The performance of a company is

reflected n the prices quoted in the stock market. These prices are more visible in
the eyes of the public. This public exposure makes a company conscious of it s
status in the market and it acts as a motivation to improve its performance.
 Mirror of the economy: The changing business conditions in the economy are
immediately reflected on the stock exchanges. Economic boom and recession can
be identified through the dealings on the stock exchanges and suitable monetary
and fiscal policies can be taken by the government. Thus the stock market
portrays the prevailing economic situation to all concerned so that suitable actions
can be taken.
 Chapter-2
Review of literature
Fundamental analysis

Fundamental analysis is a stock valuation method that uses financial analysis - that is,
an analysis of a company's financial data - to predict the movement of that company's
stock price. A potential (or current) investor uses fundamental analysis to examine a
company's operations and the market in which the company is operating to understand
half the stability and growth potential of that company. Company factors to examine
include the dividends that company issues, the way a company manages its cash, the
amount of debt a company has, and the growth of a company's costs and income.
The theory underpinning fundamental analysis is that, to truly make money in the
long run, an investor must focus on the company itself rather than merely on the
movement of its stock price. As Benjamin Graham and David Dodd say in their classic
work "Security Analysis", in the short run, the market is a voting machine, not a
weighing machine. An investor uses fundamental analysis to find the companies that are
built to last .Fundamental analysis adherents believe a company's "intrinsic value" will be
eventually be reflected in the stock price through market forces, but that, while the
market is efficient, some stocks (for any number of reasons) are either over- or under-
valued in the short run.
Therefore, the use of fundamental analysis can be viewed as a type of arbitrage.
To this end, earnings multiples, such as the P/E ratio, are used to determine value,
where cash flows are relatively stable and predictable.Theobvious caveat hereis that the
P/E ratio is ultimately not an objective. measure, because it must be interpreted. A high
P/E ratio might be an overvalued stock, or it might be a company with high potential for
growth. Other techniques include discounted cash flow, book value, and dividend yield
analysis
One method for combatting this interpretation problem is to use the valuation
equations in the works of Aswath Damodaran or on web sites like ValueTool that
interpret equations such as P/E, P/BV, or FCFE as dollar values, so that they may be
easily compared to the stock price. Fundamental analysis is the process of looking at a
business at the basic or fundamental financial level. This type of analysis examines key
ratios of a business to determine its financial health and gives you an idea of the value its
stock.
Many investors use fundamental analysis alone or in combination with other tools
to evaluate stocks for investment purposes. The goal is to determine the current worth
and, more importantly, how the market values the stock. This article focuses on the key
tools of fundamental analysis and what they tell you. Even if you don’t plan to do in-
depth fundamental analysis yourself, it will help you follow stocks more closely if you
understand the key ratios and terms.

Earnings

It’s all about earnings. When you come to the bottom line, that’s what investors want to
know. How much money is the company making and how much is it going to make in the
future. Earnings are profits. It may be complicated to calculate, but that’s what buying a
company is about. Increasing earnings generally leads to a higher stock price and, in
some cases, a regular dividend. When earnings fall short, the market may hammer
the stock. Every quarter, companies report earnings. Analysts follow major companies
closely and if they fall short of projected earnings, sound the alarm. While earnings are
important, by themselves they don’t tell you anything about how the market values the
stock. To begin building a picture of how the stock is valued you need to use some
fundamental analysis tools. These ratios are easy to calculate, but you can find most of
them already done on sites like cnn.money.com or MSN MoneyCentral.com.
The intrinsic value of an equity shares depends on a multitude of factors. The
earnings of the company, the growth rate and the risk exposure of the company have a
direct bearing on the price of share. These factors in turn rely on the host of other factors
like economic environment in which they function, the industry they belong to, and
finally companies own performance. The fundamental school of thought appraised the
intrinsic value of shares through

Economic Analysis
Industry Analysis
 Company Analysis

Economic Analysis

The level of economic activity has an impact on investment in many ways. If the
economy grows rapidly, the industry can also be expected to show rapid growth and vice
versa. When the level of economic activity is low, stock price are low, and when the
economic activity is high, stock prices are reflecting the prosperous out look for sales and
profit of the firm. The analysis of Macro Economic environment is essential to
understand the behavior of the stock prices. The economically analyzed the macro
economic factors are as follows

 Gross Domestic product (GDP):

GDP indicates the rate of growth of the economy. GDP represents the aggregate
value of goods and services produced in the economy. GDP consist of personal
consumption expenditure, gross private domestic investment and government
Expenditure on goods and services and net exports of goods and services. The growth
rate of economy points out the prospects for the industrial sector and the return investor
can expect from investment in shares. The higher the growth rate is more favorable stock
market.

 Savings & Investment:

It is obvious that growth requires investment, which in turn requires substantial

amount of domestic savings. Stock market is a channel through which the savings of the
investors are made available to the corporate bodies. Savings are distributed over various
assets like equity shares, deposits, mutual funds units, real estate and bullion. The savings
and Investment patterns of the public affect the stock to a great extent.

Inflation
 Along with the growth of GDP, if the inflation rate also increases then real rate of
growth would be very little. The demand in the consumer product industry is significantly
affected. The industries that come under the Government price control policy may loose
the market, for example sugar. The government control over this industry, affects the
price of the sugar and there by the profit ability of the industry itself. If there is a mild
level of inflation, it is good to the stock market but high rate of inflation is harmful to the
stock market.

Interest rates

Interest rates affect the cost of financing to the firms. A decrease in interest rate
implies lower cost of finance and more profitability resulting in companies taking more
finances for their expansion plans. More money is available at a lower interest rate for the
brokers who are doing business with borrowed money. Availability of cheap funds
encourages speculation and raises the share prices. Further it also encourages new people
to come into business generally. In the recent past, Indian economy has been
experiencing low interest rates which have been encouraging for the industrial
development. The primary lending rate or bank rate was 11% p.a has been reduced to 8 %
P.a in 1999.

 Budget

Another important of the economy analysis is budget. Budget can be defined as a

draft providing an elaborate account of the government revenues and expenditure. A
deficit Budget may lead to high rate of inflation and adversely affect the cost of
production. Surplus budget may result in deletion. Hence, balanced budget is highly
favorable to the stock market.

 The Tax Structure

Tax structure of a country also plays a major role in the development of a country
and its industrialization. It is well known fact that high tax rate of a country makes it an
unattractive destination for investments, then it has to maintain every flexible and low tax
structure. For example it is widely accepted fact that tax rate in the industrialized nations
is far more less than the tax structures in the developing countries. For instance, tax rate
in India are reportedly highest for corporate when compared to some of the developed
nations.

The Balance of Payment

The Balance of Payment is the record of a countrys receipt from and payment
abroad. The difference between receipts and payments may be surplus or deficit. Balance
of payment is a measure of the strength of rupee on external account. If the deficit
increases, the rupee may depreciate against other currencies, there by affecting the cost of
imports. The industries involved in the export and import are considerably affecting by
the changes in foreign exchange rate. The volatility of the foreign exchange rate affects
the investment of the foreign exchange rate. The volatility of the foreign exchange rate
affects the investments of the foreign institutional investors in the Indian stock market. A
favorable balance of payment renders a positive effect on the stock market.

Monsoon and Agriculture

Agriculture is directly linked with the industries. For example sugar, cotton,
textile and food processing industries depend upon agriculture for raw material.
Fertilizers and insecticide industries are supplying inputs to the agriculture. A good
monsoon leads to higher demand for input and results in bumper crop. This would lead to
buoyancy in the stock market. When the monsoon is bad, agriculture and hybel power
production would suffer. They cast a show on the share market.

Infrastructure facilities

Infrastructural facilities are essential for the growth of industrial and agricultural
sector. A wide network of communication system is a must for the growth of the
economy. Regular supply of power without any power cut would boost the production.
Banking and Financial sector also would be sound enough to provide adequate support to
the industry and agriculture. Good infrastructure facilitates affect the stock market
favorably. In India even through infrastructural facilities have been developed, still they
are not adequate. The Government has liberalized its policies regarding the
communications, transport and power sector. For example, power sector has been up to
foreign investors with assured rates of returns.

Demographic factors

The Demographic date provides details about the population by age, occupation,
literacy and geographic location. This is needed to forecast the demand for the consumer
goods. The population indicates the availability of workforce. The cheap labor force in
India has encouraged many multinationals to start their venture. Indian labor is cheaper
compared to western labor force. Population, which provides labor and demand for
products, affects the industry and stock market.

Industry Analysis
An industry is a group of firm that has similar technology structure of
production and produce similar products. For the convenience of the investor the
board classification of the industry is given in financial dailies and magazines.
Companies are directly classified to give a clear picture about their manufacturing
process and products. For example food products, textiles, wood and wood products,
leather and leather products, chemical products and there are many other industries.
These industries can be again classified on the basis of the business cycle i.e.
classified according to their reactions to the different phases of the business cycle.
They are classified into growth, cyclical, defensive and cyclical growth industry.

Growth industry
The growth industries have special features of high rate of earnings and growth in
expansion, independent of the business cycle. The expansion of the industry mainly
depends on the technological change. For instance, in spite of the recession in the
Indian economy in 1997-1998, there was a spurt in the growth of information
technology industry. It defined the business cycle and continued to grow. Like wise in
every phase of the history certain industries like color televisions, pharmacy and
telecommunication industries have shown remarkable growth.

Cyclical industry
The growth and the profitability of the industry move along with the business
cycle. During the boom period they enjoy growth depression they suffer a set back.
For example, the white goods like fridge, washing machine and kitchen range
products command a good market in the boom period and the demand for them
slackens during the recession.

 Defensive industry
Defensive industry defines the movement of the business cycle. for example food
and shelter are basic requirements of humanity. The industry withstand recession
period too, under the government’s umbrella of protection and counter-cyclical in
nature

 Cyclical growth industry

This is new type of industry that is cyclical and at the same time growing. For
example, the automobiles industry experiences period of stagnation, decline but they
grew tremendously. The changes in the technology and introduction of new models
help the automobiles industry to resume their growth path.

 Industry life cycle

This life cycle theory is generally attributed to Julius geodesy. The life cycle of
the industry is separated into four well-defined stages such as
1. Pioneering stage
2. Rapid growth stage
 3. Maturity and stabilization stage
4. Declining stage.

 Pioneering stage
The prospective demand for the product is promising in this stage and the
technology of the product is low. The demand of the product attracts many
producers to produce the particular product. There would be severe
competition and only fittest companies survive in this stage. The
producers try to develop the brand name, differentiate the product and
create a product image. This would lead to non-price competition too. The
sever competition always leads to the change of position of the firms in
terms of market shares and profit. In this situation, it is difficult to select
companies for investment because the survival rate is unknown.

 Rapid growth stage

This stage starts with the appearance of surviving firms from the
pioneering stage. The companies that have withstood the competition
grow strongly in market-share and financial performance. The technology
of the production would have improved resulting in low cost of production
and good quality products. The companies have stable rate and they
declare dividend to the shareholder. It is advisable to invest in the shares
of these companies.

 Maturity and stabilization stage

In this stage the growth rate tends to moderate and the rate would be more
or less equal to the industrial growth rate or the GDP growth rate.
Symptoms of obsolescence may appear in the technology. To keep going,
technological innovations in production process and products should be
 introduced. The investors have to closely monitor the events that take
place in the maturity stage of the industry.

 Decline stage
In this stage, the demand for the particular product and the earnings of the
companies in the industry declines. Now a days very few consumers
demand black and white TV. Innovations of the new products and changes
in consumer preferences lead to this stage. The specific feature of the
declining stage is that even in boom period. The growth of the industry
would be low and decline at a higher rate during the recession. It is better
to avoid investing in these shares of the low growth industry even in the
boom period. Investment in the shares of these types of companies leads to
erosion of capital.

Factors to be considered: a part from industry life cycle analysis, the investor has to
analyze some other factors too. They are as listed below

 Growth of the industry

The historical performance of the industry in terms of growth and profitability
should be analyzed. Industry wise growth is published periodically by the c.m.i.e
(center for monitoring Indian economy). The past variability in return and growth in
reaction to macro economic factors provide an insight into the future. Even though
history may not repeat in the exact manner, looking into the past growth of the
industry, the analysis can predict the future.

 Cost structure and profitability

The cost structure that is fixed and variable cost, affects the cost of production
and profitability of the firm. In the case of oil and natural gas industry and steel
industry the fixed cost portion is high and the required to reach the firms break-even
point. Once the break-even point is reached and the production is on the track, the
profitability can be increased by utilizing the capacity to full. Once the maximum
capacity is reached, again capital has to be invested in the fixed equipment. Hence,
lower the fixed cost, adjustability to the changing demand and reaching the breakeven
point are comparatively easier.

 Nature of the product

The consumers and other industries demand the product produced by the
industries. If industrial goods like pig iron, iron sheet and coils are produced, the
demand for them depends on the construction industry. Like wise, textile industry and
the entire demand depends upon the health of the textile industry. Several such
examples can be citing. The investor has to analyze the condition of related goods
producing industry and the end user industry to find out the demand for industrial
goods.
In the case of consumer goods industry, the change in the consumer’s preference,
technological innovations and substitute’s products affect the demand. A simple
example is that the ball point pen affects the demand for the ink pen with the change
in the consumer preference towards the easy usage of pen.

 Nature of competition
Nature of competition is an essential factor that determines the demand for the
particular product, its profitability and the price of the concerned company script. The
supply may arise form indigenous manufactures and distributed locally at a
comparative price. This possess a threat to the company made products; the
multinational are also entering into the filed with sophisticated product process and
better quality product. Now the companies ability to with stand the local as well as
multinational competition counts much. I f too many firms were present in the
organized sector, the competition would lead to a decline in the price of the product.
The investor before investing in the script of a company should analyzed the market
share of the particular company’s product and should compare it with the top five
companies.
 Government policy
The government policies affect every nerve of the industry and the affects differ
from the industry to industry. Tax subsidies and tax holidays are provided export
oriented product. Government regulates the size of the production and the pricing of
certain products. The sugar, fertilizers and pharma industries are often affected the
profitability of the sugar industry. In some cases the government places entry barriers.
In the airways, private corporate are permitted to operate the domestic flights only.
When selecting an industry, the government policy regarding the particular industry
should be carefully evaluated. Liberalization and deli censing have brought immense
threat to the existing domestic industries in several sectors.

 Labor
The analysis of labor scenario in a particular industry is of great importance. The
number of trade union and their operating mode has impact on the labor productivity
and modernization of industry. Textile industry is known for it militant trade unions.
If the trade unions are strong and strikes occur frequently, it would lead to fall in
production. In an industry of high fixed costs, the stoppage of production may lead to
loss. When trade unions oppose the introduction of automation, in the product market
the company may stands to lose with high cost of production. The UN healthy labor
relationship leads to loss of customer’s goodwill too. Skilled labor is needed for
certain industries. In case of Indian labor market, even in computer technology or in
any other industry skilled and well-qualified labor is available at a cheaper rate. This
is one of the many reasons attracting the multinational to set up companies in India.

 Research and development

For any industry to survive the competition in the national and international
markets, product and production process have to be technically competitive. This
depends on the R&D in the particular company or industry. Economies of scale and
new market can be obtained only through R&D. The % expenditure made on R&D
should diligently before making an investment.
  Pollution standards
Pollution standards are very high and strict in the industrial sector. For some
industries it may be heavier than others; for example, in leather, chemical and
pharmaceutical industries the industrial effluents are more.

 Swot analysis
The above mentioned factors themselves would become strength, weakness,
opportunity and threat (swot) for the industry. Hence, the investor should carry out a
swot analysis for the chosen industry. Take for instance, increase in demand for the
industry’s product becomes its strength, presence numerous players in the market, I.e.
competition in R&D that particular industry is an opportunity and entry of
multinationals in the industry and the cheap imports of the particular products are
threat to that industry. In the industry and the cheap imports of the particular products
are threats to that industry. In this way the factor has to be arranged and analyzed.

Indian Pharmaceutical Industry

The Indian pharmaceutical industry is a success story providing employment for millions
and ensuring that essential drugs at affordable prices are available to the vast population
of this sub-continent.”
Richard Gerster

The Indian Pharmaceutical Industry today is in the front rank of India’s science-based
industries with wide ranging capabilities in the complex field of drug manufacture and
technology. A highly organized sector, the Indian Pharma Industry is estimated to be
worth $ 4.5 billion, growing at about 8 to 9 percent annually. It ranks very high in the
third world, in terms of technology, quality and range of medicines manufactured. From
simple headache pills to sophisticated antibiotics and complex cardiac compounds,
almost every type of medicine is now made indigenously.

Playing a key role in promoting and sustaining development in the vital field of
medicines, Indian Pharma Industry boasts of quality producers and many units
approved by regulatory authorities in USA and UK. International companies associated
with this sector have stimulated, assisted and spearheaded this dynamic development in
the past 53 years and helped to put India on the pharmaceutical map of the world.

The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered
units. It has expanded drastically in the last two decades. The leading 250 pharmaceutical
companies control 70% of the market with market leader holding nearly 7% of the market
share. It is an extremely fragmented market with severe price competition and
government price control.

The pharmaceutical industry in India meets around 70% of the country's demand for bulk
drugs, drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules,
orals and injectibles. There are about 250 large units and about 8000 Small Scale Units,
which form the core of the pharmaceutical industry in India (including 5 Central Public
Sector Units). These units produce the complete range of pharmaceutical formulations,
i.e., medicines ready for consumption by patients and about 350 bulk drugs, i.e.,
chemicals having therapeutic value and used for production of pharmaceutical
formulations.

Following the de-licensing of the pharmaceutical industry, industrial licensing for most of
the drugs and pharmaceutical products has been done away with. Manufacturers are free
to produce any drug duly approved by the Drug Control Authority. Technologically
strong and totally self-reliant, the pharmaceutical industry in India has low costs of
production, low R&D costs, innovative scientific manpower, strength of national
laboratories and an increasing balance of trade. The Pharmaceutical Industry, with its rich
scientific talents and research capabilities, supported by Intellectual Property Protection
regime is well set to take on the international market.

ADVANTAGE INDIA
Competent workforce: India has a pool of personnel with high managerial and technical
competence as also skilled workforce. It has an educated work force and English is
commonly used. Professional services are easily available.

Cost-effective chemical synthesis: Its track record of development, particularly in the

area of improved cost-beneficial chemical synthesis for various drug molecules is
excellent. It provides a wide variety of bulk drugs and exports sophisticated bulk drugs.

Legal & Financial Framework: India has a 53 year old democracyand hence has a solid
legal framework and strong financial markets. There is already an established
international industry and business community.

Information & Technology: It has a good network of world-class educational

institutions and established strengths in Information Technology.

Globalisation: The country is committed to a free market economy and globalization.

Above all, it has a 70 million middle class market, which is continuously growing.

Consolidation: For the first time in many years, the international pharmaceutical
industry is finding great opportunities in India. The process of consolidation, which has
become a generalized phenomenon in the world pharmaceutical industry, has started
taking place in India.

THE GROWTH SCENARIO

India's US$ 3.1 billion pharmaceutical industry is growing at the rate of 14 percent per
year. It is one of the largest and most advanced among the developing countries.

Over 20,000 registered pharmaceutical manufacturers exist in the country. The domestic
pharmaceuticals industry output is expected to exceed Rs260 billion in the financial year
2002, which accounts for merely 1.3% of the global pharmaceutical sector. Of this, bulk
drugs will account for Rs 54 bn (21%) and formulations, the remaining Rs 210 bn (79%).
In financial year 2001, imports were Rs 20 bn while exports were Rs87 bn.
STEPS TO STRENGTHEN THE INDUSTRY
Indian companies need to attain the right product-mix for sustained future growth. Core
competencies will play an important role in determining the future of many Indian
pharmaceutical companies in the post product-patent regime after 2005. Indian
companies, in an effort to consolidate their position, will have to increasingly look at
merger and acquisition options of either companies or products. This would help them to
offset loss of new product options, improve their R&D efforts and improve distribution to
penetrate markets.

Research and development has always taken the back seat amongst Indian
pharmaceutical companies. In order to stay competitive in the future, Indian companies
will have to refocus and invest heavily in R&D.

The Indian pharmaceutical industry also needs to take advantage of the recent advances
in biotechnology and information technology. The future of the industry will be
determined by how well it markets its products to several regions and distributes risks, its
forward and backward integration capabilities, its R&D, its consolidation through
mergers and acquisitions, co-marketing and licensing agreements
The Indian pharmaceutical industry is highly regulated. The Government controls prices
of a large number of bulk drugs and formulations. Profit margins of players vary widely
in both domestic and export sales due to many factors.

Domestic Trade

More than 85% of the formulations produced in the country are sold in the domestic
market. India is largely self-sufficient in case of formulations. Some life saving, new
generation under-patent formulations continue to be imported, especially by MNCs,
which then market them in India. Overall, the size of the domestic formulations market is
around Rs160bn and it is growing at 10% p.a.
Exports

Over 60% of India’s bulk drug production is exported. The balance is sold locally to
other formulators. India’s pharmaceutical exports are to the tune of Rs87bn, of which
formulations contribute nearly 55% and the rest 45% comes from bulk drugs. In financial
year 200, exports grew by 21%. India’s pharmaceuticals imports were to the tune of
Rs20.3bn in FY2001. Imports have registered a CAGR of only 2% in the past 5 years.
Import of bulk drugs have slowed down in the recent years.

The exports of Pharmaceuticals during the year 1998-97 were Rs 49780 million. From a
meager Rs 46 crores worth of Pharmaceuticals, Drugs and Fine Chemicals exports in
1980-81, pharmaceutical exports has risen to approximately Rs 6152 Crores (Prov.1998-
99), a rise of 11.91% against the last year exports. Amongst the total exports of India, the
percentage share of Drugs, Pharmaceuticals and Fine Chemicals during April-October
(2000-2001) was 4.1%, an increase of 7%.

Future Prospects

As per WTO, from the year 2005, India will grant product patent recognition to all new
chemical entities (NCEs) i.e., bulk drugs developed then onwards. The Indian
Government's decision to allow 100 percent foreign direct investment into the drugs and
pharmaceutical industry is expected to aid the growth of contract research in the country.
Technology transfer to 100 percent Indian subsidiaries of MNCs is expected only in
2005.

Indian pharmaceutical interests in making a mark on the global scene got a boost when
Dr. Reddy's licensed two of its anti-diabetic molecules to Novo Nordisk and when
Ranbaxy licensed its Novel Drug Delivery System (NDDS) of ciprofloxacin to Bayer.
MNCs in India faced the problem of having a very high DPCO coverage, weakening their
bottom lines as well as hindering their growth through the launch of new products. DPCO
coverage is expected to be diluted further in the near future benefiting the MNCs. New
legislation is also expected in the OTC segment increasing the number of brands in the
Over the Counter (OTC) segment.

The Indian pharmaceutical industry is also getting increasingly U.S. FDA compliant to
harness the growth opportunities in areas of contract manufacturing and research. Indian
companies such as Ranbaxy, Sun Pharma, and Dr. Reddy's are increasingly focusing on
tapping the U.S. generic market, projected to be around $18 billion by 2004.

Research & Development is the key to the future of pharmaceutical industry. The
pharmaceutical advances for considerable improvement in life expectancy and health all
over the world are the result of a steadily increasing investment in research. There is
considerable scope for collaborative R & D in India. India can offer several strengths to
the international R & D community. These strengths relate to availability of excellent
scientific talents who can develop combinatorial chemistry, new synthetic molecules and
plant derived candidate drugs.

R & D in the pharmaceutical industry in India is critical to find answers for some of the
diseases peculiar to a tropical country like India and also for finding solutions for unmet
medical needs. Industrial R & D groups can carry out limited primary screening to
identify lead molecules or even candidate drugs for further in vivo screening, pre-clinical
pharmacology, toxicology, animal and human pharmacokinetics and metabolic studies
before taking them up for human trials. In such collaborations, harmonized standards of
screening can be assured following established good laboratory practices.

The R & D expenditure by the Indian pharmaceutical industry is around 1.9% of the
industry’s turnover. This obviously, is very low when compared to the investment on R &
D by foreign research-based pharma companies. They spend 10 - 16% of the turnover on
R & D. However, now that India is entering into the Patent protection area, many
companies are spending relatively more on R & D.

When it comes to clinical evaluation at the time of multi-center trials, India would
provide a strong base considering the real availability of clinical materials in diverse
therapeutic areas. Such active collaboration will be mutually beneficial to both partners.
According to a survey by the Pharmaceutical Outsourcing Management Association and
Bio/Pharmaceutical Outsourcing Report, pharmaceutical companies are utilizing
substantially the services of Contract Research Organizations (CROs).

Indian Pharmaceutical Industry, with its rich scientific talents, provides cost-effective
clinical trial research. It has an excellent record of development of improved, cost-
beneficial chemical syntheses for various drug molecules. Some MNCs are already
sourcing these services from their Indian affiliates.

The Pharmaceutical and Biotechnology Industry is eligible for weight deduction for R&D
expense upto 150%. These R&D companies will also enjoy tax holiday for 10 years. A
promotional research and development fund of Rs.150 crores is set up by the Government
to promote research and development in the pharmaceuticals sector.

Company Analysis
In the company analysis the investor assimilates the several bits of
information related to the company and evaluates the present value of the stocks. The
risk and return associated with the purchase of the stock in analyzed to take better
investment decisions. The valuation process depends upon investor’s ability to elicit
information form the relationship and inter relationship among the company related
variables. The present and future values are affected by a number of factors and they
are as follows

 The competitive edge of the company

 Major industries in India are composed of hundreds of individual companies. In
the information technology industry even though the no of companies like NIIT,
SATYAM computers etc., controls the major market share. Like wise in all
industries, some companies rise to the position of eminence and dominance. The large
companies are successful in meeting the competition. Once the companies obtain the
leadership position in the market, they rarely lose it. Over the time they would have
proved their ability to withstand competition and to have a sizeable share in the
market. The competitiveness of the company depends upon the following factors
 The market share
 The growth of annual sales
 The stability of annual sales

The market share

The market share of the annual sales helps to determine a company’s relative
competitive position within the industry. If the market share is high, the company
would be able to meet the competition successfully. In the information industry, NIIT
and TATA InfoTech topped the list in terms of sales in 1997. While analyzing the
market share, the size of the company also should be considered because the smaller
companies may find it difficult to survive in the future. The leading companies of
today’s market, should be compared with like product groups otherwise, the result
would be mis leading. A software company should be compared with other software
company to select the best in that industry.

Growth of sales
The company may be a leading company, but if the growth in sales is
comparatively lower than other company, it indicates the possibility of the company
losing the leadership. The rapid growth in sales would keep the shareholder in a better
position than one with the stagnant growth rate. Growth in sales is usually followed
by growth in profits. Investor generally prefers size and
the growth in sales because the larger size companies may be able to withstand the
business cycle rather than the company of smaller size. The growth in sales of the
company is analyzed both in rupee terms in physical terms. Physical term is very
essential because it shows the growth in real terms. Here the rupee term is affected by
the inflation. Companies with diversified sales are compared in rupee terms and
percentage of growth over time.

The stability of sales

If a firm has stable revenues, other things being constant, will have more stable
earnings. Wide variations in sales lead to variations in capacity utilization, financial
planning dividend. Periodically all the financial newspapers provide information
about the market price of the share of the different companies in an industry. The fall
in the market price of the share indicates the declining trend of the company, even if
the sales are stable in absolute terms. Hence, the stability of sales also should be with
its market share and the competitors market shares.

Earnings of the company

Sales alone do not increase the earning but the costs and expenses of the company
also influence the earnings of the company. Further, earnings do not always increase
with the increase in the sales. The company’s sales might have increased but its
earnings per share EPS) may decline due to the rise in costs. The rate of change in
earnings differs from the rate of change of sales. Sales may increase by 10% in a
company but earnings per share may increase only by 5%. Even though there is a
relationship between sales and earnings, it is not perfect one. Sometimes, the volume
of sales may decline but the earnings may improve due to rise in unit price of the
article. Hence, the investor should depend only on the sales, but should analyze the
earnings of the company.
The income of the company may be generated through operating sources and non
operating sources. The sources of operating income may vary form industry to
industry. For service industry no tangible product is involved and income and income
is generated through sales of services. Take the case of commercial bank; its income
is the interest on loan and investment. If Interest income is referred to opening
income. But in case of industries producing tangible goods earnings arise from the
sales of goods.The companies in addition to the revenue form his wife sales may get
revenue form other sources too. The non-operating income may be generated from
interest from bonds, rentals from lease; dividends form securities and sale of assets.
The investor should analyze the income source directly whether it is from the sale of
asset or it is from investments. Sometimes EPS may seem to be attractive in a
particular year but in actual case the revenue is generated through sale s may be
comparatively lower than in previous year. The earnings might have been generated
through the sale of assets. The investors should be aware that income of the company
may vary due to the following reasons:
 Changes in sales
 C1hanges in cost
 Depreciation method adopted
 Depletion of resources in the case of oil, mining, forest products,
gas etc
 Inventory accounting method
 Replacement cost of inventories
 Wages, salaries and fringe benefits
 Income taxes and other taxes

Capital structure
The equity holder’s return can be increased manifold with the help of financial
leverage, i.e. using debt financing along with equity financing. The effect of financial
leverage is measured by computing leverage ratios. The debt ration indicates the
position of the long-term and short term debt in the company finance. The debt may
be in the form of debentures for an term loans from financial institutions.

 Preference shares: In the early days preference share capital was never a
significant source of capital. At present, many companies resort to preference
 shares. The preference shares induct some degree of leverage in finance. The
leverage effects of the preference shares are comparatively lesser than the debt
because the preference share dividends are not ax deductible. If the portion of
preference share in the capital is larger, it tends to create instability in the
earnings of the equity shares when the earnings of the company fluctuate.
Sometimes the preference shares may be convertible; in that case it diluted the
EPS. So the preference shares may be convertible; in that case it diluted the
EPS. So the investor should look into the preference share component on the
capital structure.

 Debt: Long term debt is an important source of finance. It has the specific
benefit of low cost of capital interest is tax deductible. The leverage effect of
debt is highly advantageous to the equity holders. During the boom period the
+ve side of the leverage effect increases the earnings of the share holders. At
the same time, during recession the leverage effect inducts instability in EPS
and can lead to bankruptcy. Hence, it is important to limit the debt component
of the capital to a reasonable level. The limit depends on the firms earning
capacity and its fixed assets.
 Earnings limit of debt: The Earning determine whether the debt is excessive
or not. The earnings indicate the probability of insolvency. The ratio used to
find out the limit of the debt is the interest coverage ratio i.e. the ratio of the
net income after taxes to inter paid bank on debt. The ratio shows the firms
ability to pay the interest charges, the number of times the interest is covered
by earnings.

 Asset limit to debt: Fixed assets to debt ratio will find out the asset limit. The
financing of fixed assets by the debt should be within a reasonable limit. For
industrial units the recommended level is below 0.5.
 Management: Good and capable management generates profit to the
investors. The management of the firm should efficiently plan, organize,
actuate and control the activities of company. The basic objective of the
management is to attain the stated objectives of the company for the good of
equity holders, the public and employees. If the objectives of the company are
achieved, investors will have a profit. A management that ignores that one that
over emphasizes it. The good management depends on the qualities of the
manager. Koontz and O’Donnell suggest the following as special traits of a
able manager.
>Ability to get along with people
>Leadership
>Analytical competence
>Industry
>Judgment
>Ability to get things done

Since the traits are difficult to measure, managerial performance is evaluated

against setting and accomplishing verifiable objectives. If the investor needs
greater proof of excellence of management, he has to analyze management ability.
The analysis can be carried out on the following ways:

1. The background of managerial personal contributes much of the

success of the management. The manager’s age, education
background, advancement within the company, levels of responsibility
achieved and the activities in the social sphere can be studied.
2. The record of management over the past years has to be reviewed. For
several companies what the top management has done during its tenure
in office is given financial weekly and monthly along with critical
comments. This gives an insight into the ability of top management.
 3. The management skill to have market share ahead of other as proof of
managerial success. The investor can rely on this type of management
and choose the stock

4. The next criterion the investor should analyze is the company’s

strength to expand. A firm may expand from within and diversify
products in the known lines. Sometimes it may acquire another
company to expand its` market. The management should adopt a
realistic policy of dividend in relation to earnings. A realistic dividend
policy boosts the image of the company’s stock in market.

5. The functional ability of management to work with employees and

union is another area of concern. Unions pose a threat to the smooth
functioning of a firm. In this context the management should be able to
maintain harmonious relationship with the employees and inions.

6. The management’s adaptability of scientific management and quality

control techniques should be analyzed. The management should be
able to give due weight age to maintain technical competence.

After analyzing the above mentioned factors, the investor

should select a company that poses excellent management and maintain the
competitive position of the company in the market. The investor should also
remember that the individual traits of a single manager alone cannot make the
company profitable and there should be a strong management system to do so.

Financial Analysis
Investment prospects in a company’s stock can be evaluated through
financial analysis of the company. The financial analysis provides better insight into
historical and current information about company’s operations. The historical
financial statement of a company enable in forecasting the future results of that
company. The main components of financial analysis are as follows

>Balance sheet
>Profit and loss account

Balance sheet: The b/s is the statement of company’s sources of funds and uses at a
given point of time. The B/s allows one to get quick view of the business, whether it
will be able to expand and handle the financial problems. The B/s contains of two
segments Liabilities and Assets represent financial strength of a company. The
balance sheet provides an account of the capital structure.
The net worth and the outstanding long term debt are known from the
balance sheet from the observation of the balance sheet an investor can avoid a
company that has an excessive debt component in its capital structure. From the
balance sheet, liquidity position of the company can also be assessed with the
information on current assets and current liabilities. The overall ability to pay its short
term obligations can be found out.

Profit & loss account: Analysis of the financial condition of the company requires a
report on the flow of funds too. The income statement reports the flow of funds from
business operations that take place in between two points of time. It lists down the
items of income and expenditure. The difference between the income and expenditure
represent profit or loss for period. It is also called income and expenditure statement.
The investor should be aware of the limitation of the financial statements.

Limitations of financial statements:

1. The financial statement contains historical information. This information

is useful; but an investor should be concerned more about the present and
future.
 2. Financial statements are prepared on the basis of certain accounting
concepts and conventions. An investor should know them.

3. The statements contain only information that can be measured in monetary

units. For example, the loss incurred by a firm due to flood or fire is
included because it can be expressed in monetary terms. The loss incurred
by the company due to the loss of reputation is not given in the statement
because it cannot be measured in monetary units.

4. Sometimes management may resort to manipulation of data and widow

dressing. This can be carried out by

a) Method of charging depreciation

b) Valuation of inventory

c) Revaluation of fixed assets

d) Changing the accounting year

An investor should scrutinize the financial statements to find out the

manipulations, if any the auditors report and notes to that balance sheet gives vital clue to
the investor n this regard. Analysis of financial statements should be undertaken only
after nullifying the effects of any such manipulation.

Analysis of financial statements:

Financial statements analysis helps an individual to understand the relationship

between income and expenditure, and sources and application of funds. It also helps an
investor to understand the financial position and the strength of a company through this
analysis. An investor can do financial analysis through following simple analysis:

Comparative financial statements

Trend analysis

Common size statements

Funds flow analysis

Cash flow analysis

Ratio analysis

>Comparative financial statements:This provides balance sheet figures for more than
one year and allows an investor to compare the performance of company over the years.
The comparative statements analysis provides time perspective to the B/S figures.

>Trend analysis
As the name suggests, trend analysis enables an investors to find out trend over a
period for time. In this analysis, percentages are calculated with base year, which
provides details about growth or decline of various components such as profits or sales
etc.

>Common size statement

This shows the % of each asset item to the total assets and each liability item to
the total liabilities. Further it also shows each item of expense as a % of net sales. With
this comparison can be made between to different size firms belonging to the same
industry.

>Fund flow analysis Funds

flow analysis presents static picture of a company on any given date, however it does not
provide any clue about financial position of a company. But investors would be able to
know following.

How are the profits utilized?

Financial source of dividend

Source of finance for repayment of debt

Source of finance for capital expenditure

The density of the sale proceeds of the fixed assets and

Use of the proceeds of the share or debenture issues or fixed deposits rose
from public

Funds flow statement is a statement of the sources and application of

funds. It enables investor to know changes in the financial condition of a
company between two balance sheet dates. It also allows an investor to
notice amount of funds generated or lost in operations.

>Cash flow statement

the investor is interested in knowing the cash inflows and outflow of the
enterprise. The cash flow statement is prepared with the help of balance sheet,
income statement and some additional information. It can be either prepared in the
vertical form or in the horizontal form. Cash flows related to operations and other
transactions are calculated. The statements show the causes of change in cash
balances between two balance sheet dates. With the help of this statement the
investor can review the cash movements over an operating cycle. The factor
responsible for the reduction of cash balance in spite of increase in profit or vice
versa can be found.

>Ratio analysis
Ratio is relationship between two figures expressed mathematically. Financial
ratio provides numerical relationship between two relevant financial data. Financial ratios
are calculated from the balance sheet and the profit and loss account. The relationship can
be either expressed as a present or a quotient. Ratios summarize the data for easy
understanding, comparison and interpretation. Financial ratios may be divided into six
groups. They are listed as below.

 Liquidity ratios
 Turnover ratios

 Leverage ratios

 Profit margin ratios

 Return on investment ratios

 Valuation ratios

Fundamental Analysis Tools

These are the most popular tools of fundamental analysis. They focus on earnings,
growth, and value in the market. For convenience, I have broken them into separate
articles. Each article discusses related ratios.

The articles are:

1. Earnings per Share – EPS

2. Price to Earnings Ratio – P/E
3. Projected Earning Growth – PEG
4. Price to Sales – P/S
5. Price to Book – P/B
6. Dividend Payout Ratio
7. Dividend Yield
8. Book Value
9. Return on Equity

No single number from this list is a magic bullet that will give you a buy or sell
recommendation by itself, however as you begin developing a picture of what you want
in a stock; these numbers will become benchmarks to measure the worth of potential
investments.

Understanding Earnings per Share

One of the challenges of evaluating stocks is establishing an “apples to apples”
comparison. What I mean by this is setting up a comparison that is meaningful so that the
results help you make an investment decision. Comparing the price of two stocks is
meaningless .comparing the earnings of one company to another really doesn’t make any
sense, if you think about it. Using the raw numbers ignores the fact that the two
companies undoubtedly have a different number of outstanding shares. For example,
companies A and B both earn $100, but company A has 10 shares outstanding, while
company B has 50 shares outstanding. Which company’s stock do you want to own? It
makes more sense to look at earnings per share (EPS) for use as a comparison tool. You
calculate earnings per share by taking the net earnings and divide by the outstanding
shares.

EPS = Net Earnings / Outstanding Shares

Using our example above, Company A had earnings of

$100 and 10 shares outstanding, which equals an EPS of 10 ($100 / 10 = 10). Company B
had earnings of $100 and 50 shares outstanding, which equals an EPS of 2 ($100 / 50 =
2). So, you should go buy Company A with an EPS of 10, right? Maybe, but not just on
the basis of its EPS. The EPS is helpful in comparing one company to another, assuming
they are in the same industry, but it doesn’t tell you whether it’s a good stock to buy or
what the market thinks of it. For that information, we need to look at some ratios. Before
we move on, you should note that there are three types of EPS numbers:

 Trailing EPS – last year’s numbers and the only actual EPS
 Current EPS – this year’s numbers, which are still projections
 Forward EPS – future numbers, which are obviously projections

Understanding Price to Earnings Ratio

If there is one number that people look at than more any other it is
the Price to Earning Ratio (P/E). The P/E is one of those numbers that investors throw
around with great authority as if it told the whole story. Of course, it doesn’t tell the
whole story (if it did, we wouldn’t need all the other numbers.) .The P/E looks at the
relationship between the stock price and the company’s earnings. The P/E is the most
popular metric of stock analysis, although it is far from the only one you should consider.

You calculate the P/E by taking the share price and dividing it by the company’s EPS.

P/E = Stock Price / EPS

For example, a company with a share price of $40 and an EPS of 8 would have a P/E of 5
($40 / 8 = 5).

What does P/E tell you? The P/E gives you an idea of what the
market is willing to pay for the company’s earnings. The higher the P/E the more the
market is willing to pay for the company’s earnings. Some investors read a high P/E as an
overpriced stock and that may be the case, however it can also indicate the market has
high hopes for this stock’s future and has bid up the price. Conversely, a low P/E may
indicate a “vote of no confidence” by the market or it could mean this is a sleeper that the
market has overlooked. Known as value stocks, many investors made their fortunes
spotting these “diamonds in the rough” before the rest of the market discovered their true
worth. What is the “right” P/E? There is no correct answer to this question, because part
of the answer depends on your willingness to pay for earnings. The more you are willing
to pay, which means you believe the company has good long term prospects over and
above its current position, the higher the “right” P/E is for that particular stock in your
decision-making process. Another investor may not see the same value and think your
“right” P/E is all wrong.

Understanding the PEG

In my article on Price to Earnings Ratio or P/E , I noted that this number gave you an idea
of what value the market place on a company’s earnings. The P/E is the most popular
way to compare the relative value of stocks based on earnings because you calculate it by
taking the current price of the stock and divide it by the Earnings Per Share (EPS). This
tells you whether a stock’s price is high or low relative to its earnings.
Some investors may consider a company with a high P/E overpriced and they may
be correct. A high P/E may be a signal that traders have pushed a stock’s price beyond
the point where any reasonable near term growth is probable. However, a high P/E may
also be a strong vote of confidence that the company still has strong growth prospects in
the future, which should mean an even higher stock price. Because the market is usually
more concerned about the future than the present, it is always looking for some way to
project out. Another ratio you can use will help you look at future earnings growth is
called the PEG ratio. The PEG factors in projected earnings growth rates to the P/E for
another number to remember. You calculate the PEG by taking the P/E and dividing it by
the projected growth in earnings.

PEG = P/E / (projected growth in earnings)

For example, a stock with a P/E of 30 and projected earning growth next
year of 15% would have a PEG of 2 (30 / 15 = 2). What does the “2” mean? Like all
ratios, it simply shows you a relationship. In this case, the lower the number the less you
pay for each unit of future earnings growth. So even a stock with a high P/E, but high
projected earning growth may be a good value.
Looking at the opposite situation; a low P/E
stock with low or no projected earnings growth, you see that what looks like a value may
not work out that way. For example, a stock with a P/E of 8 and flat earnings growth
equals a PEG of 8. This could prove to be an expensive investment.

A few important things to remember about PEG:

 It is about year-to-year earnings growth

 It relies on projections, which may not always be accurate

Understanding Price to Sales Ratio

You have a number of tools available to you when it comes to evaluating
companies with earnings. The first three articles listed at the bottom of this article, in
particular deal with earnings directly. You can add the two others on dividends and the
one on return on equity to the list as specific to companies that are or have made money
in the past. Does that mean companies that don’t have any earnings are bad investments?
Not necessarily, but you should approach companies with no history of actually making
money with caution.
The Internet boom of the late 1990s was a classic example of hundreds of
companies coming to the market with no history of earning – some of them didn’t even
have products yet. Fortunately, that’s behind us. However, we still have the problem of
needing some measure of young companies with no earnings, yet worthy of
consideration. After all, Microsoft had no earnings at one point in its corporate life. One
ratio you can use is Price to Sales or P/S ratio. This metric looks at the current stock price
relative to the total sales per share. You calculate the P/S by dividing the market cap of
the stock by the total revenues of the company. You can also calculate the P/S by
dividing the current stock price by the sales per share.

P/S = Market Cap / Revenues

or
P/S = Stock Price / Sales Price per Share

Much like P/E, the P/S number reflects the value placed on sales by the market. The
lower the P/S, the better the value, at least that’s the conventional wisdom. However, this
is definitely not a number you want to use in isolation. When dealing with a young
company, there are many questions to answer and the P/S supplies just one answer.

Understanding Price to Book Ratio

Investors looking for hot stocks aren’t the only ones trolling the markets.
A quiet group of folks called value investors go about their business looking for
companies that the market has passed by. Some of these investors become quite wealthy
finding sleepers, holding on to them for the long term as the companies go about their
business without much attention from the market, until one day they pop up on the
screen, and some analyst “discovers” them and bids up the stock. Meanwhile, the value
investor pockets a hefty profit.
Value investors look for some other indicators besides earnings growth and so on.
One of the metrics they look for is the Price to Book ratio or P/B. This measurement
looks at the value the market places on the book value of the company. You calculate the
P/B by taking the current price per share and dividing by the book value per share.

P/B = Share Price / Book Value per Share

Like the P/E, the lower the P/B, the better the value. Value investors would use a low P/B
is stock screens, for instance, to identify potential candidates.

Understanding Dividend Payout Ratio

There are some metrics used in fundamental analysis that fall into what
I call the “ho-hum” category. The Dividend Payout Ratio (DPR) is one of those
Numbers. It almost seems like a measurement invented because it looked like it
Was important, but nobody can really agree on why. The DPR (it usually doesn’t
even warrant a capitalized abbreviation) measures what a company’s pays out to
Investors in the form of dividends.
You calculate the DPR by dividing the annual dividends per share by the
Earnings Per Share.
DPR = Dividends Per Share / EPS

For example, if a company paid out $1 per share in annual

dividends and had $3 in EPS, the

DPR would be 33%. ($1 / $3 = 33%)

The real question is whether 33% is good or bad and that

Is subject to interpretation.

Growing companies will typically retain more profits to fund growth and
Pay lower or no dividends. Companies that pay higher dividends may be in mature
industries where there is little room for growth and paying higher dividends is
the best use of profits (utilities used to fall into this group, although in recent
Years many of them have been diversifying). Either way, you must view the
Whole DPR issue in the context of the company and its industry.

By itself, it tells you very little.

Understanding Dividend Yield

Not all of the tools of fundamental analysis work for every investor on every stock. If you
are looking for high growth technology stocks, they are unlikely to turn up in any stock
screens you run looking for dividend paying characteristics. However, if you are a value
investor or looking for dividend income then there are a couple of measurements that are
specific to you. For dividend investors, one of the telling metrics is Dividend Yield.
This measurement tells you what percentage return a company pays out to
shareholders in the form of dividends. Older, well-established companies tend to payout a
higher percentage then do younger companies and their dividend history can be more
consistent. You calculate the Dividend Yield by taking the annual dividend per share and
divide by the stock’s price.
Dividend Yield = annual dividend per share / stock's price per share

For example, if a company’s annual dividend is $1.50 and the stock trades at $25, the
Dividend Yield is 6%. ($1.50 / $25 = 0.06)

Understanding Book Value

How much is a company worth and is that value reflected in the stock price? There are
several ways to define a company’s worth or value. One of the ways you define value is
market cap or how much money would you need to buy every single share of stock at
the current price. Another way to determine a company’s value is to go to the balance
statement and look at the Book Value. The Book Value is simply the company’s assets
minus its liabilities.

Book Value = Assets - Liabilities

In other words, if you wanted to close the doors, how much would be left after you
settled all the outstanding obligations and sold off all the assets.

A company that is a viable growing business will always be worth more than its book
value for its ability to generate earnings and growth. Book value appeals more to value
investors who look at the relationship to the stock's price by using the Price to Book
ratio. To compare companies, you should convert to book value per share, which is
simply the book value divided by outstanding shares.

Understanding Return on Equity

If you give some management teams a couple of boards, some glue, and a ball of
string, they can build a profitable growing business, while other teams can’t make a profit
with several billion dollars worth of assets. Return on Equity (ROE) is one measure of
how efficiently a company uses its assets to produce earnings. You calculate ROE by
dividing Net Income by Book Value. A healthy company may produce an ROE in the
13% to 15% range. Like all metrics, compare companies in the same industry to get a
better picture.
 While ROE is a useful measure, it does have some flaws that can give you a false
picture, so never rely on it alone. For example, if a company carries a large debt and
raises funds through borrowing rather than issuing stock it will reduce its book value. A
lower book value means you’re dividing by a smaller number so the ROE is artificially
higher. There are other situations such as taking write-downs, stock buy backs, or any
other accounting slight of hand that reduces book value, which will produce a higher
ROE without improving profits.
It may also be more meaningful to look at the ROE over a period of the past five
years, rather than one year to average out any abnormal numbers. Given that you must
look at the total picture, ROE is a useful tool in identifying companies with a competitive
advantage. All other things roughly equal, the company that can consistently squeeze out
more profits with their assets, will be a better investment in the long run.

Criticisms

>There is very little evidence that fundamental analysis is useful to investors in

developed financial markets.

>Some experts suggest that a monkey throwing darts at the financial pages of a
newspaper may do just as well
Technical analysis

Technical analysis refers to the study of price action in securities markets,

primarily, but not exclusively, through charts in order to forecast future prices. There are
many different methods and tools utilized in technical analysis (some of which are listed
below) but they all rely on the same principles, namely that price patterns and price
trends, that can be identified and exploited, exist in the market. The premises of technical
analysis were derived from empirical observations of financial markets. Charles Dow's
Dow Theory is considered the foundation of technical analysis. New theories and tools
have been produced and existing tools have been enhanced at a rapidly increasing rate in
recent decades. Technical analysis is less concerned with why a price is moving
(poor earnings, difficult business environment, poor management, etc. or other
[fundamentals] than it is on the fact that the price is moving in a particular direction. To a
technical analyst, profits can be made in any market by positioning oneself in the
direction of the price trend. If the price trend is up, then look for opportunities to buy, if
the price trend is down, then look for opportunities to sell.
Similarly, if a particular price pattern was identified in the market, a technical
analyst would position himself to take advantage of the expected move that follows that
pattern.Technical analysis is occasionally at odds with fundamental analysis. Essentially,
fundamental analysis maintains that it is possible that markets misprice and that a
security's current price can be overvalued or undervalued, therefore revealing an
opportunity to buy or sell. Contrastingly, a technical analyst is interested in only the price
action and is less concerned with the fundamentals driving the price. A cliche among
technical analysts is, "Forget the fundamentals and follow the money”.
The effectiveness of technical analysis is hotly debated. Many academics and
market participants believe it has no predictive power except as a self-fulfilling
prophecy. Yet, technical analysis has a loyal and dedicated following, especially
amongst active traders who defend the practice and believe it can be profitable. Some
research concludes that technical analysis is effective as well
Fundamentalists forecast stock prices on the basis of economic, industry, and
company statistics. The principal decisions variables ultimately take the form of earnings
and dividends. The fundamentalist makes the judgment of stock’s value with a risk return
frame work based upon earning power and the economic environment.

Technical analysis is peace usually used to supplement to fundamental analysis

rather than as a substitute for it. Thus, technical analysis can, and frequently does,
confirm findings based on fundamental analysis. Technician does not consider if value in
the sense he in which the fundamentalists use it. The technicians believes the forces of
supply and demand are reflected in If patterns of price and volume of trading. By
examination of these patterns, he predicts whether prices are moving higher or lower, and
even by how much. In the narrowest sense, the technician believes that the price
movements, whatever their cause, once in force persists for some period of time and can
be detected.
The technical analysis may be used for more than a supplement to fundamental
analysis. Fundamental analysis allows the analyst to forecast holding period yield and
the risk ness of achieving that the yield, but these figures alone do not necessarily
prompt a buy or sell action. Technical analysis, however, may be useful in timing a buy
or sell order- an order that may be implied by the forecasts of risk and return. For
example, the technical analysis may reveal that a drop in price is warranted.
Postponement of a purchase, then, if the technical analysis is correct, will raise the
forecast holding period yield (hyp). Conversely, a sell order might be postponed because
the charts reveal a rise in the price of the security in question.
The technicians must (1) identify trend, and (2) recognize when one trend comes
to an end and prices start in the opposite direction. His central problem is to distinguish
between reversals within a trend and real changes in the trend itself. This problem of
sorting out is critical because prices do not change in a smooth, uninterrupted fashion.
The technician’s views price changes and their significance mainly through price and
volume statistics. His bag of tools, or indicators, helps him measure price-volume,
supply-demand relationships for the overall market as well as for individual stocks.
Technicians seldom rely upon reinforcement provided by groups of indicators. There are
some of major technical indicators employed to assess the direction of the general market
and the direction of individual stocks.

Assumptions of technical analysis

 Market value is determined solely by the interaction of supply and demand
 Supply and demand are governed by numerous factors, both rational and irrational
 Ignoring minor fluctuations in the market, stock prices tend to move in trends
which persist for an appreciable length of time
 Shifts in supply and demand, no matter why they occur, can be detected sooner or
later in charts of market value
  some chart patterns repeat themselves
 The market discounts everything. The price of the security quoted represents the
hopes, fear, and inside information received by the market players.

TOOLS OF TECHNICAL ANALYSIS

>Daily fluctuation or volatility: open, high, low and close are quoted. Changes between
open and close or high and low can be taken in absolute points or in percentages to reflect
the daily volatility. such fluctuation can be worked out on weekly, monthly or yearly
basis also to reflect the daily volatility of the market

High High
High
Open Close
Close Close Open

Low/open Low Low

An yearly high-low indicates the possible levels within a range that the price may move
which helps to locate entry and exit points.

>Floating stock and volume of trade: Floating stock is the total no of shares available
for trading with the public volume of trade is any part of that floating stock. The higher
this proportion, the higher is the liquidity of a share which is to be purchased or sold.
Volume tends are also a supporting indicator to the price trends to interpret the market.

>Price trends and volume trends: The charist method and moving average method can
be used to depict these trends.
>Rate of change of prices and volumes or the roc method: This is useful like the
moving average method to indicate more clearly the buy and sell signals. The charist
method is useful to indicate the directions and the trend reversals. ROC is calculated by
dividing the today’s price by the price of five days back or few days back. It can be
expressed as percentage or positive or negative change. Thus they can be moving around
100, in the case of % or zero line, in the case of positive and negative % changes.
>Japanese candle stick methods: There are three main type of candlesticks with each
day’s trade being shown in the forms of candlesticks. Each stick has the body of the
candle and a shadow. The body shows the open and close prices while the shadow shows
the high prices and low prices. The three main types are as follows:
a) Closing price is higher than open price (white candlestick)
b) Closing price is lower than the open price (Black stick)
c) Open and close are at the same level (Doji candlestick)
This method will indicate any likely changes in trends in the
short run.

>Elliot wave theory: The market is unfolded by a basic rhythm or pattern of 5 waves up
to be corrected by three waves down with a total of 8 waves- a philosophy of price trends.
>Theory of gaps: Gaps in price between any two days causing a discontinuity is called a
gap. The high of one day may be lower than the low of previous day when prices are
falling. Gaps indicate the likely accelerated of the trend or reversal.

Gaps are of different categories, namely:

1. Common gaps: When prices move in a narrow range, a gap can occur in prices.
2. Break out gaps: When a price trend is likely to change, a gap can occur in
either direction. This gives a break to congestion in any direction.
3. Runaway gaps: These gaps occur continuously in a downward phase or an
upward phase, accelerating or decelerating the trends.
4. Exhaustion gaps: These occur when the rally is getting exhausted. When the
runway gap is coming to an end, there can be exhausted gap to indicate the
likely completion of the uptrend.

>Advance decline line or spread of the market: The ratio between advances to
declines will indicate the relative strength of upward or downward phases. When the
advances are increasing over declines it is an upward phase and the reverse indicates the
downward phase.

>Relative strength index: It is an oscillator used to identify the inherent strength or

weakness of particular scrip’s.

Thus RSI=100-100/1+rs where

Rs= Average gain per day/average loss per day
RSI is calculated for one scrip while RSC or the relative strength comparative, is the ratio
of two prices of two different scrip’s, used or consumption of two or more scrip’s. RSI
can be calculated for any no of days say 5 or 10 etc. to indicate the strength of price
trend.

Market indicators
 The use of market “indicators” to measure the direction of overall market
should precede any technical analysis of individual stocks because of the systematic
influence of the general market on stock prices. In addition, some technicians feel that
forecasting aggregates is more reliable because individual errors can be filtered out.
First, we will examine the seminal theory from which much of the substance of
technical analysis has been developed- the Dow theory- after which other key indicators
of market activity will be examined in turn.

Dow Theory

Around the turn of the century, Charles h. Dow formulated a hypothesis that the
stock market does not perform on a random basis but is influenced by three distinct
cyclical trends that guide its general direction. By following these trends, he said, the
general market conditions can be predicted. Dow classified these cycles as primary,
secondary, and minor trends. The primary trend is a long range cycle that carries the
entire market up or down. The secondary act as a restraining force on the primary trend,
tending to correct deviations from its general boundaries. Secondary trends last from
several weeks to several months in length. The minor trends are day to day fluctuations in
the market. These have little analytical value because of their short duration and
variations in amplitude. Primary and secondary trends are depicted in figure.
The basic proportion in the Dow Theory is relatively simple. A bull market is in process
when successive highs are reached after secondary corrections and when secondary
upswings advance beyond previous secondary downswings. Such a process is illustrated.
The theory also requires that the secondary downswing corrections will be of shorter
duration than the secondary upswings. The reverse of these propositions would be true of
a bear market. The classical Dow Theory utilizes both industrial average and the
transportation average in determining the market position. When both averages are
moving in the same direction, valid indicators of a continuing bull or bear market are
implied.

Price indicators
The two variables concerning group of stocks or individual stocks that
technicians watch with the most interest are the behavior of prices and the volume of
trading contributing to and influenced by changing prices. It was amply noted earlier that
the change in a security’s price is probably the most important component in the total rate
of return resulting from holding a security. This fact has not escaped the technicians any
more than it has the fundamentalist. In examining the influence of the market on stock
prices in general, technicians particularly note certain signals, or price indicators: price
advances versus declines, new highs versus new lows, and the prices patterns of the
“most active” stocks.

Advances and Declines

Looking only at the popular stock averages such as the Dow Jones industrial
average (djia) can often be misleading. A relatively few stocks may be moving ahead
while the majority of stocks either are making no progress or are actually moving down.
The average may be behaving contrary to the larger population of stocks.
The basic idea behind the measurement of advances and declines is to determine
what the main body of the stocks is really doing. Comparison of advances and declines is
a means of measuring the dispersion, or breadth, of a general price rise or decline. “The
phrase often used is breadth if the market”
Many measures could be used. The most common is to calculate the daily net
difference between the numbers of New York stock exchange (NYSE) stocks that
advance and the number of those that decline. The net difference is added to the next
day’s difference, and so on, to forms a continuous cumulative index. The index is plotted
in line form and compared with the DJIA.
For example:

ADVANCES DECLINES BREADTH(CUMMULATIVE

ADVANCES LESS
DECLINES)
Monday 1000 400 +600
Tuesday 650 800 +450
Wednesday 500 1100 -150
Thursday 900 700 +50
Friday 1200 400 +850

The technician is more interested in change in breadth than in absolute level.

Further, breadth is compared with a stock-market index, such as the DJIA. Normally,
breadth and the DJIA will move in unison. The key signals occur when a divergence
occurs between the two. When they diverge, the advance-decline line will show the truer
direction of the market. The DIJA cannot move contrary to the market as a whole- at
least, not for long. The longer the resistance, the greater the expected reversal. During a
bull market. If breadth declines to new lows while the DJIA makes new highs, a peak in
the averages is suggested. This peak will be followed by major downturn in stock prices
generally. Breadth can also be used to detect recovery. The advance-decline line will
begin rising a the DJIA is reaching new lows.

New highs and new lows

A supplementary measure to accompany breadth of the market is the high-low
differential or index. The theory is that a rising market will generally accompanied by an
expanding number of stocks attaining new highs and a dwindling number of new lows.
The reverse is that a rising market will generally be accompanies new lows. The reverse
holds true for a declining market. The number of NYSE stocks making new highs for the
year minus the number making new loans is averaged for a five –day period. A moving
average smoothes out erratic daily fluctuations and exposes the trend. Such a high-low
index would normally move with the market. Again, divergence from the market trend is
a clue to future price movements.

The most- active list

most major weekly market newspapers in the united states publish the twenty
most active stocks for the week, by it self, this segment of the market is at first glance
relatively useless because the makeup of the list changes from week to week. However,
these issues taken as a whole represent only 1% of the total issues traded but account
almost 15% of the total volume. Viewed in this way, the list tends to have a recognizable
pattern if certain dimensions are assigned.
The no of issues each week showing a net gain cannot exceed twenty, nor can
they exceed twenty for a net loss. because random variations often occur in the stock
market, an additional time dimension of several weeks will tend to smooth an other wise
erratic curve. If three weeks of activity are added together to act as a stabilizer, then the
upper and lower limits of the most-active list becomes +60 and-60. The experience of the
past decade has shown that the most active indicator should approach -50 following and
continuous decline that results in a selling climax, but in the case of an eroding decline,
the indicator should move towards versed, and oscillations around +35 are indications of
strength in a rising market. A warning signal is flashed when the market continues to rise
in the face of subsequent declines in the indicator.

Volume indicators
Volume changes are believed by most technicians to be prerequisite to any
change in price. Volume is a function of the demand for and the supply of the stocks and
can signal turning points for the market as well as for individual stocks.
A Dow Theory tenet is that during bull markets, volume increases with price
advances and decreases with price declines. In a major downward price trend, the on
reverse will hold true; volume will generally increase as the prices decline and dwindle
on price rallies. Further, volume generally falls in advance of major declines in the stock
price averages and rises sharply during market bottoms. Thus, forecasting price changes
requires examination of the trend of price changes as well as fluctuations in volume of
transactions.
The financial press publishes daily data on upside and downside volume, and the
technicians can look closely at volume generated when the market was rising or falling
during a given trading day. These data provide insight that is not available when net
figures are utilized.

New York and American exchange volume

The American stock exchange (AMEX) has long been identified as listing
smaller, more fledging companies than those listed on NYSE. An estimate three- fouths
of the shares traded on the AMEX are accounted for by the public, and three-fourth of the
trading volume on the NYSE is institutional. Therefore, the AMEX is, rightly or not,
viewed as a market for more speculative securities. Many technicians regard the relative
volume on the NYSE and the AMEX as a measure or index of changes in the trend of
prices.
Daily volume on each exchange is compared most often by dividing AMEX
volume bys NYSE volume. AMEX volume in excess of NYSE volume is rare, so the
index would assume values between zero and 1.00. Values closer to 1.0 indicate that
activity is high on the AMEX (more speculative stocks). High % values in excess of 0.6
are thought to represent a zone of high speculation and an eventual change in trend form
bullish to bearish as speculative excesses bring about a collapse. % values below .30 are
considered healthy and representative of buying opportunities. Historically, when the
index has gone above 60%, the market top was generally reached several months latter.

SHORT SELLING
Around the 20th of each month, the AMEX and NYSE makes the no of shares pf
key stocks that have been sold short. Recall that short selling refers to selling shares that
are not owned. The seller has behaved in this way because he feels the stock will fall in
price. He hopes to purchase the shares at a latter date (cover his short position) below the
selling price and reap a profit.
As a technical indicator short selling is called as a short interest. The theory is
that short sellers must eventually cover their positions. This buying activity increases the
potential demand for stocks. In effect, short interest has significance for the market as a
whole, as well as for individual stocks.
Monthly short interest for the market can be related to average daily volume for
the preceding month. Thus, monthly short interest divided by average daily volume gives
a ratio. The ratio indicates how many days of trading it would take to use up total short
interest. Historically, the ratio has varies between one-third of a day and four days.
In general, when the ratio is less than 1.0, the market is considered weak or
weakening. It is common to say that the market is “overbought.” A decline should follow
sooner or later. The zone between 1.0 and 1.5 is considered a neutral indicator. Values
above 1.5 indicate bullish territory with 2.0 and above highly favorable. This market is
said to be “oversold.” The most bullish effect would occur when the market is turning up
and the short- interest ratio is high.
Data are now being made public regarding short selling by stock specialists.
Specialists are permitted to use short selling as one of their tools to promote orderly
markets in the stocks they specialize in. Increasing and high levels of specialist short
selling tends to signal important market tops. Conversely, low levels of specialist short
selling tend to signal market bottoms.

Odd-lot trading
The small investor more often than not buys fewer than 100 shares of a given
stock-an odd lot- and such buyers and sellers are called odd lotters. Many find reason to
watch the buying and selling activities of the odd lotters very closely.
Odd lotters try to the right thing most of the time; that is, they tend to buy stocks
as the market retreats and sell stocks as the market advances. However, technicians feel
that the odd lotter is inclined to do the wrong thing at critical turns in the market.
If we relate odd-lot purchases to odd-lot sales (purchases/sales), we get an odd-lot
index. An increase in the index suggests relatively more buying; a decrease indicates
relatively more selling. During most of the market cycle, odd lotters are selling the
advances and buying the declines. During advances, the odd-lot index is falling.
However, at or near the market peak, the index begins to rise as odd lotters sell
proportionately less. The volume of odd lot purchases increases noticeably just before a
decline in the market. Similarly, during declines, the index is rising just before a rise in
the market, the volume of odd-lot sales increases greatly and the index begins to fall.

Odd-lot short shares

The presumed lack of sophistication on the part of odd lotters is often further
verified by looking at their activities in short selling. A ratio can be calculated by
dividing odd- lots short sales by total odd-lot sales. This short sales/sales ratio is gauging
the speculative activities of the man on the street, who, as a speculator, is presumed to be
more wrong than the average odd lotter. Odd-lot short sellers tend to increase their short
sales sharply near the bottom of a declining market. As soon as the market turns around,
they tend to lose faith and reduce creasing bearishness; a falling ratio indicates decreasing
bearishness. Normally, a short-sale ratio of 0.5 % suggests high optimism. A ratio in
excess of 3 % suggests high pessimism.

Other market indicators

The no of indicators technicians use to predict a change in the trend of the overall
market is almost limitless. In the following paragraphs we will try to capture the essence
of some other popular market indicators.

Mutual-fund Activity
Mutual funds represent one of the most potent institutional forces in the market,
and they are a source of abundant data that are readily available. The cash position of
funds and their net subscriptions are followed closely by technicians.
Mutual funds keep cash to take advantage of favorable market opportunities
and/or to provide for redemption of shares by holders. It is convenient to express mutual-
fund cash as a % of net assets on a daily, monthly, or annual basis. In theory, a low cash
ratio would indicate a reasonably fully invested position, with the implication that not
much reserve buying power remains in the hands of funds as a group. Low ratios (on the
order of 5 to 5 ½ %) are frequently equated with market highs. A t market bottoms, the
cash ratio would be high to reflect heavy redemptions, among other things. Such a
buildup of the cash ratio at the market lows.

'Three Beliefs of Technical Analysis'

>Price action in the market discounts everything

>Prices move in trends

> History tends to repeat itself & price action in the market discounts
everything

Technical analysis holds that because every possible bit of information is

eventually included in the price of a security, it is not necessary to explicitly
analyze the fundamental, economic, political, etc. factors that might
influence that price. Because all available information influences the price
movement, only a study of the price movement is required. (This is somewhat
of a simplification, as modern technical analysis encompasses multi-market
analysis and non-price data such as volume, open interest, and market
breadth)

Price moves in Trends

While it is not explicitly provable that prices must trend, technical analysis
relies on empirical evidence and simple common sense to assert that prices do
trend. In most traded markets, it is a simple matter to show statistically that
prices trend on many time scales, although this tendency is generally quite a
 modest one.For example, if homeowners believed that interest rate increases
will erode the value of their homes, they will be inclined to sell. If there were
three similar homes in a neighborhood up for sale, the first house could be
sold for $100,000, the second could be sold for $97,500 and perhaps the third
could sell for $95,000. Rather than immediately drop down to some formulaic
price based on interest rates and other inputs, prices will move consistently
over time in one direction. (In a large market like global equities with many
participants, prices will move in a zig-zag fashion in one direction.) Prices
will continue to decline until there is a balance between buyers and sellers.
This gradual (but sometimes quick) directional movement in prices (the trend)
is what technical analysis attempts to identify and exploit. If a technical
analyst could enter this market, he or she would likely sell short a house
because the price trend is downward. A person who does not believe that
prices move in trends will find little use of technical analysis. The idea that
prices trend is probably the most important concept in technical analysis.
Moreover, a person who disagrees with Dow Theory will also likely find fault
with technical analysis.

An example of a security that is trending is AOL from November 2001 through August
2002. A technical analyst or trend follower recognizing this trend would look for
opportunities to sell this security. AOL consistently moves downward in price. Each time
the stock attempted to rise, sellers would enter the market and sell the stock; hence the
"zig-zag" movement in the price.
The series of "lower highs" and "lower lows" is a tell tale
sign of a stock in a down trend. In other words, each time the stock edged lower, it went
lower than its previous relative low price. Each time the stock moved higher, it couldn't
reach the level of its previous relative high price Note that it is not until August that the
sequence of lower lows and lower highs is broken. In August, the stock makes a low
price that doesn't pierce the relative low set earlier in the month. Later in the same month,
the stock makes a relative high equal to the most recent relative high. To a technical
analyst, those are strong indications that the down trend is at least pausing and possibly
ending. A technical analyst would likely stop actively selling the stock at this point.

History tends to repeat itself

Technical analysis believes that investors en masse display much of the same
behavior as the investors that preceded them. "Everyone wants in on the next Microsoft,"
"If this stock ever gets to $50 again, I will buy it," "This company's technology will
revolutionize its industry, therefore this stock will skyrocket,"--these are all examples of
investors' attitudes repeating. To a technical analyst, the human characteristics of the
market might be irrational but nonetheless they exist. Because investors' attitudes often
repeat, investors' actions in the marketplace often repeat as well. I.e., patterns of price
movement will develop on a chart that a technical analyst believes have predictive
qualities. Technical analysis is not limited to charting. Technical analysis is always
primarily concerned with price trends. Anything that can influence the price trend is of
interest to a technical analyst. As an example, many technical analysts monitor surveys of
investor enthusiasm. These surveys attempt to gauge the general attitude of the
investment community to determine whether investors are bearish or bullish. Technical
analysts use these surveys to help determine whether a trend will reverse or whether a
new trend will develop.
 A technical analyst would be alerted that a trend might change when these
surveys report extreme investor reactions. When surveys are overly bullish, for example,
a technical analyst will look for evidence that an uptrend will reverse. The logic being
that if most investors are bullish, then they would have already bought the market
(anticipating that the market will move higher). But because most investors are bulllish
and have invested, it is safe to assume that there are few buyers remaining in the market.
With most investors long, there are more potential sellers in the market than buyers
despite the fact that the overall attitude of investors is bullish. This implies that the
market is set to trend down and is an example of a technical analysis concept called
contrarian trading.

>Trend: Trend is the direction of the movements. The share prices can either increases
or fall or remains flat. The three directions of the share movements are called as rising,
falling and flat trends. The point to be remembered is that share prices do not rise or fall
in a straight line. Every rise or fall in price experiences a counter move. If a share price is
increasing, the counter move will be a fall in the price and vice versa. The share prices
move in a zigzag manner. The trend lines are straight lines drawn connecting either the
tops or bottom of the share price movement. To draw a trend line, the technical analyst
should have at least to top or bottoms. The following figures shows the tend lines.

>Trend reversal: The rise or fall of the share price cannot go on forever. The share
price movement may reverse its direction. Before the change of direction, cretin patter in
price movement emerges the change in the direction of the trend is shown by violation of
the trend line. Violation of the trend line means the penetration of the trend line. If a scrip
price cuts the rising trend line from above, it is a violation of the trend line and signals
the possibility of fall in the prices. Like-wise if the scrip pierces the tend line form below,
this signals the rise in price.

>Primary trend: The security price trend may be either increasing or decreasing. When
the market exhibits the increasing trend, it is called bull market. The bull market shows
three clear cut peaks. Each peak is higher than the previous bottoms. The revival period
encourages more and more investors to buy scrip’s their expectations about the future
being high. In the second phase, increased profits of corporate would result in further
price rise. In the third phase, prices advances due to inflation and speculation.

The reverse is the true with the bear market. Here, the first phase starts with the
abandonment of hopes. The chances of prices moving back to the previous high level
seemed to be low. This would result in the sales of shares. In the second phase,
companies are reporting lower profits and dividends. This would lead to selling phase;
companies are reporting lower profits and dividends. This would lead to selling pressure.
The final phase is characterized the discuss sale of shares. During the bear phase of 1996,
in the BSE more than 2/3 of stocks were inactive. Most of the scrip’s were sold below
their par values.

>secondary trend: The secondary trend or the intermediate trend moves against the
main trend and leads to correction. In the bull market the secondary trend would result in
the fall of about 33-66% of the earlier rise. In the bear market, the secondary trend carries
the price upward and corrects the main trend. The correction would be33% or^^% of the
earlier fall. Intermediate trend corrects the overbought and oversold and oversold
condition. IT provides the breathing space to the market. Compared to the time taken for
the primary trend, secondary trend swift and quicker.

>Minor trends: Minor trends or territory are called random wriggles. They are simply
the daily price fluctuations. Minor trend tries to correct the secondary trend movements.
It is better for the investor to concentrate on the primary or secondary trends that on the
minor trends chariest plots the scrip’s price of the market index each day trace the
primary and secondary trends.

>Odd lot trading: Shares generally sold in a lot of hundred. Shares, sold in smaller lots,
fewer than 100 are called odd lot. Such buyers and sellers are called odd lotters. An odd
lot purchase to odd lot sales (purchase% sales) is the odd lot index. Relatively more
selling leads to fall in the index. It is generally considered that the professional investor is
more informed and stronger than the odd lotters. When the professional investors
dominate the market, the market is technically strong. If the odd lot purchases is
concentrated at the top of the market cycle and selling at the bottom. High odd purchases
forecasts fall in the market price and low purchase/sales ratio are presumed to occur
toward the end of bear market.

>Moving averages: The market indices do not rise or fall in straight line. The upward
and downward movements are interrupted by counter moves. The underlying trend can
be studied by smoothing of the data. To smooth the data moving average technique is
used. The word moving means that the body of data moves ahead to include the recent
observation. If it is five day moving average, on the sixth day the body of data moves to
include the sixth day observation eliminating the first day’s observation. Likewise it
continues. In the moving average calculation, closing price of the stock is used. The
moving averages are used to study the movement of the market as well as the individual
scrip price. The moving average indicates the underlying trend in the scrip. The period of
average determines the period of the trend that is being identified. For identifying short-
trend, 10 day to 30 day moving average are used. In the case of medium term trend 50
day to 125 day are adopted. 200 day moving average is used to identify long term.

>Index and stock price moving average: individual stock price is compared with the
stock market indices. The moving average of the stock and index are plotted in the same
sheet and trend is compared. If NSE or BSE index is above stock’s moving average line,
the particular stock has bullish trend. The price may increase above the market average. If
the Sensex or nifty is below the stock moving average, the bearish market can be
expected for the particular stock.

>Index and stock price moving average: Buy and sell signals are provided by the
moving averages. Moving averages are used along with the price of the scrip. The stock
price may intersect the moving average at a particular point. Downward penetration of a
rising average indicates the possibility of a further fall. Upward penetration of a falling
average would indicate the possibility of the further rise and gives the buy signal. As the
average indicates the underlying trend, its violation may signal trend reversal.
>Comparison of the moving average: When long-term and short-term moving average
is drawn, the intersection of two moving averages generates buy or sell signal. When the
scrip price is falling and if the short-term average intersects the long term moving
average form the above and falls below it, the sell signal is generated. If the price were
rising, the short-term average moves above the long term average and the long term
averages are falling, investor should treat intersection with suspicion. The short term
movement may not hold long. Hence, the investor should wait for the long-term average
to turn up before buying the scrip. Similarly, if the short-term average moves below the
long term average before the long term average has flattened out or before it reverses its
direction, the investor should wait for the fall in the long term average for reversal of
direction before moving out of the scrip.

>Oscillators: Oscillators indicates the market momentum or scrip momentum. Oscillator

shows the share price movement across a reference point form one extreme to another.
the momentum indicates

-Over bought and over sold conditions of the scrip or the market. -
Signaling the possible trend reversal. - Rise or
decline in the momentum

Generally, oscillator is analyzed along with the price chart. They indicate trend
reversal that has to be confirmed with the price movements of the scip’s. Changes in the
price should be correlated to changes in the movement, and the only buy and sell signals
can be generated. Actions have to be taken only when the price and momentum agree
with each other. With the daily, weekly or monthly closing price oscillator are built. For
short trading, daily price oscillators are use full.

>Charts: charts are the valuable and easiest tools in technical analysis. The graphic
presentation of the data helps the investors to find out the trend of the price without any
difficulty. The charts also have the following uses.

 sports the current trend for buying and selling

 Indicates the probable future action of the market by projection
  shows the past historic movement
 Indicates the important areas of support and resistance

>Point and figure chart: Technical analyst to predict the extend and direction of the
price movement of a particular stock or the stock market indices uses and figure charts.
The Pf chart is of one-dimensional and there is no indication of time or volume. The
price changes in relation to previous prices are shown. The change of price direction can
be interpreted. The charts are drawn on a ruled paper. The main De-merit are they do not
show the intra-day price movement. Whole numbers are only taken into consideration to
represent the price of the stock. This may result in the loss of information regarding the
major fluctuation. Volume is not mentioned in the chart. Volume and trend of transitions
is an important guide to make investment decision. In a bull market, price rise is
accompanied by high volume of trading. The bear market is related to low volume of
trading.
>Bar and line charts: The bar chart, one of the simplest and most commonly used tools
of technical analyst. To build a bar a dot is entered to represent the highest price at which
the stock is traded on that Day, week or month. Then another dot is entered to indicate
the lowest price on the particular date. A line is drawn to connect both the points; a
horizontal nub is drawn to mark the closing price. Line charts are used to indicate the
price movements. The line chart is a simplification of the bar chart. Here a line is drawn
to connect successive closing prices. Technical analysts believe that certain formation or
patterns observed on the bar chart or line chart have predictive value. The more important
formations and their indications are described below.
>Chart patterns: A chart reveals certain patterns that are predictive value. Chart patterns
are used as a supplement to other information and confirmation of signals provided by
trend lines. Some of the most widely used and easily recognizable chart patterns are
discussed below.

>V-formation: The name itself indicates that in the “v” formation there is along sharp
decline and a fast reversal. The “v” pattern occurs mostly in popular stocks where the
market interest changes quickly from the hope to fear and vice-versa. In the case of
inverted “v” the rise occurs first and declines. There are extended v’s in it. The bottom or
top moves more slowly over a broad area.

>Top and bottoms: Top and bottom formation is interesting to watch but what is more
important is the middle portion of it. The investor has to buy after up trend has started
and exit before the top is reached. Generally the tops and bottoms are formed at the
beginning or end of the new trend. The reversal from the tops and bottoms indicates sell
and buy signals.

>Double Top and Bottoms: This type of formation signals the end of one trend and the
beginning of another. If the double top is found when the stock prices rises to a certain
level, falls rapidly, again rises to same height or more, and turns down. It pattern
resembles the letter “M”. The double top may indicate the onset of the bear market. But
the results should be confirmed with volume and trend. In a double bottom, the price of
the stock falls to a certain level and increases with diminishing activity. It falls again to
the same or to lower price turn up to higher level. Its pattern resembles the letter “w”.

Double Bottoms
Double bottoms formations are generally seen at the end of down trends and it is an
early signal for a rally.

Double Tops

Double tops point out a weakness of the uptrend and warn for a change of trend.
Generally a selling crazy starts when this formation is indicated.
>Head & shoulder top (HST) approach: As the name suggests, the HST formation has
a left shoulder, a head, and a right shoulder. The HST formation represents a bearish
development. If the price falls below the neckline (the line drawn tangentially to the left
and right shoulders), a price decline is expected. Hence, it is signaling to sell.
>Inverse head and shoulder top pattern: As the name indicates, the IHST formation is
the inverse of the HST formation. It reflects the bullish development. If the price rises
above the neckline, a price rise is expected. Hence, it is a signal to buy.

>Triangle or coil formation: The triangle formation is easy to identify and popular in
technical analysis. The triangles are symmetrical, ascending, descending and inverted.

>Symmetrical Triangle: This pattern is made up of series of fluctuation, each

fluctuation smaller than the previous one. Tops do not attain the height of the previous
tops. He Likewise bottoms are higher than the previous bottoms. Connecting the lower
tops that are slanting downwards form a symmetrical triangle. If connecting rising
bottoms, which is slanting upwards, becomes the lower trend line. It is not easy to credit
the break away either ways. The symmetrical triangle does not have a bias towards the
bull and bear operators. It indicates the slow down or temporary halt in the direction of
the original trend.

All triangle formations are consolidation formations. In symmetrical triangle direction of

the trend is not known. It is only can be identified after one of the line broken. Prices go
up if upper line broken, and go down if lower line broken.
Volume is very important for triangle formations. Volume should decrease during the
formations.

>Ascending Triangle: Here the upper trend is almost a horizontal trend line connecting
the tops and the bottoms and lower trend line is a rising trend line connecting the rising
bottoms. When the demand overcomes the supply for it, then will be a break out. The
break will be in favor of the bullish trend. This pattern is generally spotted during an up
move and the probability of the upward move is high here.

It is a signal for uptrend. By drawing a parallel line to descending line, price target
can be calculated approxi
 mately.

>Descending Triangle: Here connecting the lower tops forms the upper trend line. The
upper trend line would be falling one. The lower trend line would be almost horizontal
trend line connecting the bottoms. The lower line indicates the support level. The
possibility for a downward breakout is high in this pattern. This pattern indicates that the
bear operators are more powerful than the bull operations. This pattern is seen during the
downtrend.

It is a signal for down trend. Price target can be found approximately by drawing a
parallel line to descending line.
>Flags: Flags pattern is commonly seen on the price charts. These patterns emerge either
before a fall or rise in the value of scrip’s. These patterns show the market corrections of
the overbought and over sold situations. The time taken to form this pattern is quick.
Easy rally and setback may last only three to four days. If the pattern is wide it may take
the tree week to complete the pattern. A Flag resembles a parallelogram. Two trend lines
that stoop downwards from bullish flag. The break out would occur on the upper side of
the trend line. In a bearish flag both the trend lines would be stooping upwards. The
breakout occurs in the downward trend line.

>Pennant: Pennant looks like a symmetrical triangle. Here also there are bullish and
bearish pennants. In the bullish pennant, the lower tops form the upper trend line. The
lower trend line connects the rising bottoms. This bullish trend occurs when the values of
scrip moves above the upward trend line. Likewise in the bearish pennant, upward trend
line is falling and the lower trend is rising.

Technical Analysis V/s Fundamental Analysis

 1. Fundamental analyst’s analyses the stock based on the specific goals of the
investors. They study the financial strength of corporate, growth of sales,earnings
and profitability. They also take into account the general industry and economic
conditions.Technical analyst mainly focuses the attention on the past history of
prices. Generally technical analyst choose to study two basis market data-prices
and volume.
2. Fundamental analyst’s estimate the intrinsic value of the shares and purchase
them when they are undervalues. They dispose the share when they are over
priced and earn profits. They try to find out the long term value to shares.
Technical analyst’s mainly predicts the short term price movement rather than
long-term movement. They are not committed to buy and hold policy.
3. Fundamentalists are of the opinion that supply and demand on the underlying
factors. The forecasts of supply and demand depends upon various factors.
Technician opines that they can forecast supply and demand by studying the
prices and volume of trading. In both of these
approaches supply and demand factors are considered to be critical. Business,
economic, social and political concerns affects the supply and demand for
securities. They underlie factors in the form of supply and demand come together
in the securities market to determine security prices.

Criticism of Technical Analysis

The question of documented evidence

Although chartists believe that their techniques provide excess returns over time,
not all research agrees with this conclusion. In fact, according to some studies, after
trading costs are factored in, the returns generated by many technical analysis strategies
may underperform a simple buy and hold strategy.Proponents of technical analysis,
however, maintain that academic research has validated their theories Many large
financial institution employ technical analysts to aid them in making investments
 Some scrutinies of the methods technical analysts
use have failed to substantiate their claims. This has lead many to reject charting as folly.
Critics of technical analysis include some major investors. Warren Buffett once
exclaimed, "If past history was all there was to the game, the richest people would be
librarians." Most economists do not use technical analysis, but rather rely on analyzing
such factors as production, distribution, supply and demand, capital, competition, and
resource allocation

Inconsistencies with Popular MarketTheories

The efficient market hypothesis concludes that technical analysis is ineffective.

According to this hypothesis, all available relevant information is quickly reflected in a
security's price. Thus, it is impossible to "beat the market," and technical analysis cannot
work. Advocates of EMH have produced many studies that reject the efficacy of
technical analysis.Some proponents of technical analysis counter that technical analysis
does not completely contradict the efficient market hypothesis. Technicians agree with
EMH in that that all available information is reflected within a security's price.That is
why technicians say a study of the price movement is necessary. Technicians further
argue however, that EMH ignores the realities of the market place, namely that many
investors base their future expectations on past earnings, track records, etc. Because
future stock prices can be strongly influenced by investor expectations, technicians claim
it only follows that past prices can influence future prices.Also, technicians point to the
new field of behavioral finance.Behavioral finance essentially says that people are not
the rational participants EMH makes them out to be. Market participants can act
irrationally. Technicians have long held that irrational human behavior influences stock
prices and claim to have ways of predicting probable outcomes based on this
behavior.The random walk hypothesis is also at odds with technical analysis and
charting. Essentially, the hypothesis claims that stock price moments are a Brownian
Motion. with either independent or uncorrelated increments. In this model, future stock
prices are not dependent on past stock prices so trends cannot exist and technical analysis
has no basis. Again, proponents of this theory have generated substantial research in
support of the hypothesis.Technical analysts maintain that trends are identifiable in the
market and that it is impractical to believe that market prices move in a random fashion.
To a technician, over time prices will trend in a direction until supply equals demand.
Therefore, there cannot be any pure random price movement. As stated earlier, one of the
cornerstones of technical analysis is that prices trend. If one does not believe this concept,
one will not agree with technical analysis

 
 CHAPTER-3
COMPANY PROFILE
ICICI BANK OVERVIEW:

ICICI Bank is India's second-largest bank with total assets of about Rs.1,676.59 bn(US$
38.5 bn) at March 31, 2005 and profit after tax of Rs. 20.05 bn(US$ 461 mn) for the year
ended March 31, 2005 (Rs. 16.37 bn(US$ 376 mn) in fiscal 2004). ICICI Bank has a
network of about 573 branches and extension counters and over 2,000 ATMs. ICICI
Bank offers a wide range of banking products and financial services to corporate and
retail customers through a variety of delivery channels and through its specialized
subsidiaries and affiliates in the areas of investment banking, life and non-life insurance,
venture capital and asset management. ICICI Bank set up its international banking group
in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic
banking strengths to offer products internationally. ICICI Bank currently has subsidiaries
in the United Kingdom, Canada and Russia, branches in Singapore and Bahrain and
representative offices in the United States, China, United Arab Emirates, Bangladesh and
South Africa.

ICICI Bank's equity shares are listed in India on the 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).

ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and
employees.

At September 20, 2005, ICICI Bank, with free float market capitalization* of about
Rs. 400.00 billion (US$ 9.00 billion) ranked third amongst all the companies listed
on the Indian stock exchanges.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition
of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses. In the 1990s, ICICI transformed its business from a development financial
institution offering only project finance to a diversified financial services group offering a
wide variety of products and services, both directly and through a number of subsidiaries
and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the
first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both
entities, and would create the optimal legal structure for the ICICI group's universal
banking strategy. The merger would enhance value for ICICI shareholders through the
merged entity's access to low-cost deposits, greater opportunities for earning fee-based
income and the ability to participate in the payments system and provide transaction-
banking services. The merger would enhance value for ICICI Bank shareholders through
a large capital base and scale of operations, seamless access to ICICI's strong corporate
relationships built up over five decades, entry into new business segments, higher market
share in various business segments, particularly fee-based services, and access to the vast
talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of
ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail
finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital
Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI
and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March
2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in
April 2002. Consequent to the merger, the ICICI group's financing and banking
operations, both wholesale and retail, have been integrated in a single entity.

Board Members:

Mr. N. Vaghul, Chairman

Mr. Sridar Iyengar

Mr. R.K.Joshi

Mr. Lakshmi N. Mittal

Mr. Narendra Murkumbi

Mr. Anupam Puri

Mr. Vinod Rai

Mr. M.K. Sharma

Mr. P.M. Sinha

Prof. Marti G. Subramanian

Mr. T.S. Vijayan

Mr. V. Prem Watsa

Mr. K.V. Kamath, Managing Director & CEO

Ms. Lalita D. Gupte, Joint Managing Director

Ms. Kalpana Morparia, Deputy Managing Director

Ms. Chanda Kochhar, Executive Director

Dr. Nachiket Mor, Executive Director

Board Committees:

Audit Committee   Board Governance &

 Remuneration
Committee

Mr. Sridar Iyengar Mr. N. Vaghul

Mr. Narendra Murkumbi Mr. Anupam Puri
Mr. M. K. Sharma Mr. M. K. Sharma
Mr. P. M. Sinha
Prof. Marti G.
Subrahmanyam

Business Strategy Committee Credit Committee

Mr. N. Vaghul Mr. N. Vaghul

Mr. Anupam Puri Mr. M .K. Sharma
Mr. M. K. Sharma Mr. P. M. Sinha
Mr. P. M. Sinha Mr. K. V. Kamath
Mr. K. V. Kamath

Fraud Monitoring Committee Risk Committee

Mr. M. K. Sharma Mr. N. Vaghul

Mr. Narendra Murkumbi Mr. Sridar Iyengar
Mr. K. V. Kamath Prof. Marti G.
Ms. Kalpana Morparia Subrahmanyam
Ms. Chanda D. Kochhar Mr. V. Prem Watsa
Mr. K. V. Kamath

Share Transfer & Shareholders'/ Committee of

Investors' Grievance Committee Directors

Mr. M. K. Sharma Mr. K. V. Kamath

Mr. Narendra Murkumbi Ms. Lalita D. Gupte
Ms. Kalpana Morparia Ms. Kalpana Morparia
Ms. Chanda D. Kochhar
 Ms. Chanda D.
Kochhar
Dr. Nachiket Mor

Asset-Liability Management
 
Committee

Ms. Lalita D. Gupte

Ms. Kalpana Morparia
Ms. Chanda D. Kochhar
Dr. Nachiket Mor

ICICI RESULTS:

Q3-FY2006

Analyst call on January 20, 2006 - transcript

Performance Review Nine Months ended December 31, 2005
Audited Financial Results for the Nine Months ended
December 31, 2005
Investor Presentation on Performance Review - 9M-FY2006

H1- 2006

Performance Review Six Months ended September 30, 2005

Audited Financial Results for the Six Months ended September
30, 2005
Investor Presentation on Performance Review - Q2-FY2006

Q1-FY2006

Analyst call on July 30, 2005 - transcript

Performance Review Quarter ended June 30, 2005
 Audited Financial Results for the Three Months ended June 30,
2005
Investor presentation on performance Review - Q1 - FY2006

FY2005

Performance Review - Year ended March 31, 2005

Audited Financial Results for the year ended March 31, 2005
Presentation - FY2005 Results
Web cast of the Presentation - FY2005 Results
Indian GAAP Auditors Report
Indian GAAP Profit & Loss Account
Indian GAAP Balance Sheet
Indian GAAP Schedules
2005-06-Standalone Notes to accounts
Indian GAAP Cash Flow Statement

Q3-FY2005

Analyst call on January 17, 2005 - transcript

Performance Review Nine Months ended December 31, 2004
Audited Financial Results for the Nine Months ended
December 31, 2004
Investor Presentation on Performance Review - 9M-FY2005

H1- 2005

Analyst call on October 21, 2004 - transcript

Performance Review Six Months ended September 30, 2004
Audited Financial Results for the Six Months ended September
30, 2004
 Investor Presentation on Performance Review - H1-FY2005

Q1- 2005

Analyst call on July 23, 2004 - transcript

Press Release - Performance Review - Three Months ended
June 30, 2004
Audited Financial Results for the Three Months ended June 30,
2004
Investor presentation on performance Review - Q1 - FY2005

FY2004

Press Release - Performance Review - Year ended March 31,

2004
Audited Financial Results for the year ended March 31, 2004
Indian GAAP Auditors Report
Indian GAAP Profit & Loss Account
Indian GAAP Balance Sheet
Indian GAAP Schedules
Indian GAAP Notes to Accounts
Indian GAAP Cash Flow Statement
Press Release - US GAAP accounts FY2004
Web cast of the Presentation - FY 2003-04 Results
Presentation - FY 2003-04 Results

Q3-FY2004

Press Release - Performance Review - Nine Months ended

December 31, 2003
Audited Financial Results for the Nine Months ended
 December 31, 2003
Investor presentation on Performance Review - Q3 - FY2004

H1-FY2004

Analyst call on October 31, 2003 - transcript

Press Release - Performance Review - Half-year ended
September 30, 2003
Audited Financial Results for the half-year ended September
30, 2003
Investor presentation on Performance Review - H1 - FY2004

Q1-FY2004

Press Release - Performance Review - Three Months ended

June30, 2003
Audited Financial Results for the Three Months ended June 30,
2003
Investor presentation on Performance Review - Q1 - FY2004
Investor presentation on Insurance - Q1- FY2004
Investor presentation on Insurance - Q1- FY2004
Analyst call on July 25, 2003 – transcript

FY2003

Analyst call on June 28, 2003 - transcript

Press release - US GAAP accounts FY2003; RBI approval for
dividend
Indian GAAP Auditors Report
Indian GAAP Profit & Loss Account and Balance Sheet
Indian GAAP Schedules
 Indian GAAP Notes to Accounts
Indian GAAP Cash Flow Statement
Press Release - Performance Review - Year ended March 31,
2003
Audited Financial Results for the year ended March 31, 2003
Presentation - FY 2002-03 Results

Q3-FY2003

Analyst call on January 31, 2003 - transcript

Press Release - Performance Review - Nine Months ended
December 31, 2002
Audited Financial Results for the Nine Months ended
December 31, 2002
Investor presentation on Performance Review - Q3 - FY2003

Q2-FY2003

Press Release - Performance Review - Half year ended

September 30, 2002
Audited Financial Results for the Half year ended September
30, 2002
Investor presentation - H1- FY2003

Q1-FY2003

Errata in results release issued on July 31st, 2002

Press Release - Performance Review - Quarter ended June 30,
2002
Audited Financial Results for the Quarter ended June 30, 2002
Investor Presentation - Q1 - FY 2003
FY2002

Press Release - Performance Review - Year ended March 31,

2002
Audited Financial Results for the year ended March 31, 2002
Presentation - FY 2001-02 Results
Presentation - FY2001-02 - Details of financials
US GAAP Financials - Year ended March 31, 2002
Indian GAAP Profit & Loss Account, Balance Sheet and
Schedules
Indian GAAP Notes to Accounts
Indian GAAP Cash Flow Statement

ICICI Prudential Life Insurance Company Limited

Introduction :

ICICI Prudential Life Insurance Company Limited was incorporated on July 20, 2000.
The authorized capital of the company is Rs.2300 Million and the paid up capital is Rs.
1500 Million. The Company is a joint venture of ICICI (74%) and Prudential plc UK
(26%).

The Company was granted Certificate of Registration for carrying out Life Insurance
business, by the Insurance Regulatory and Development Authority on November 24,
2000. It commenced commercial operations on December 19, 2000, becoming one of the
first few private sector players to enter the liberalized arena. 

The Company is now operational in Mumbai, New Delhi, Pune, Chennai, Kolkata,
Bangalore, Chandigarh, Ahmedabad, Hyderabad, Lucknow, Nasik, Jaipur, Cochin,
Meerut, Mangalore and Ludhiana.

Till March 31,2002 the Company has issued 100,000 polices translating into a Premium
Income of around Rs. 1,200 Million and a sum assured of over Rs.15,000 Million. 

The Company recognizes that the driving force for gaining sustainable competitive
advantage in this business is superior customer experience and investment behind the
brand. The Company aims to achieve this by striving to provide world class service levels
through constant innovation in products, distribution channels and technology based
delivery. The Company has already taken significant steps to achieve this goal.

Vision and Mission:

Their vision is to make ICICI Prudential Life Insurance Company the dominant new
insurer in the life insurance industry. This they hope to achieve through their commitment
to excellence, focus on service, speed and innovation, and leveraging our technological
expertise.

The success of the organization will be founded on its strong focus on values and clarity
of purpose. These include:

  Understanding the needs of customers and offering them superior products and
service
  Building long lasting relationships with their partners

  Providing an enabling environment to foster growth and learning for their

employees

And above all building transparency in all our dealings.

They believe that they can play a significant role in redefining and reshaping the sector.
Given the quality of their parentage and the commitment of their team, they feel that tere
will be no limits to their growth.

Sponsors:

ICICI Ltd was established in 1955 by the World Bank, the Government of India and the
Indian Industry, to promote industrial development of India by providing project and
corporate finance to Indian industry.

Since inception, ICICI has grown from a development bank to a financial conglomerate
and has become one of the largest public financial institutions in India. ICICI has
financed all major sectors of the economy, covering 6,848 companies and 16,851
projects. In the fiscal year 2000-2001, ICICI had disbursed a total of Rs 319.65 billion.

ICICI has now developed a whole range of activities to become a Universal Bank. Some
of ICICI's spectrum of activities include: 
* Commercial Banking - ICICI Bank, India's first internet bank. 
* Information Technology - ICICI InfoTech, transaction processing, software
development 
* Investment Banking - ICICI Securities, one of the key players in the Indian Capital
Markets 
* Mutual Fund - Prudential ICICI AMC, leading private sector mutual fund player in
India 
* Venture Capital - ICICI Venture, leading private equity investor with focus on IT and
HealthCare 
* Retail Services - ICICI PFS, Marketing and Distribution of Retail Asset Products 
* Distribution - ICICI Capital, Distribution and Servicing of Retail Liability Products 
ICICI is listed on the Indian Stock Exchanges and on the New York Stock Exchange
(NYSE). On September 22, 1999, it became the first Indian company to be listed on the
NYSE (symbol: IC and IC.D). This has been followed by the listing of ICICI Bank on
NYSE (symbol: IBN) on March 28, 2000.

Prudential plc:

Prudential plc was founded in 1848. Since then it has grown to become one of the largest
providers of a wide range of savings products for the individual including life insurance,
pensions, annuities, unit trusts and personal banking. It has a presence in over 15
countries, and caters to the financial needs of over 10 million customers. It manages
assets of over US$ 259 billion (Rupees 11, 39,600 crores approx.) as of December 31,
1999. Prudential plc. Has had its presence in Asia for the past 75 years catering to over 1
million customers across 11 Asian countries. 

Prudential is the largest life insurance company in the United Kingdom (Source: S&P's
UK Life Financial Digest, 1998). Asia has always been an important region for
Prudential and it has had a presence in Asia for over 75 years. In fact Prudential's first
overseas operation was in India, way back in 1923 to establish Life and General Branch
agencies.

In the US, Prudential owns Jackson National Life, one of the leading life insurance
companies. Prudential controls approximately 4% of all the listed shares on the second
largest stock exchange in the world, the London Stock Exchange, making it one of the
largest institutional investors in the UK. Prudential is focused on the internet generation
and is one of the first financial service organizations to use the internet on a fully
integrated basis. 

In October 1998, Prudential launched a "branchless" bank based on the internet.

Unusually titled as " egg:|". The bank has in a short span of its existence become a
leading banking service provider in the UK. Infect in the first six months of its existence
it garnered over 5 billion (US$ 8 billion) in deposits from over 500,000 customers. 

Development of superior products and services that offer value for money and security
while producing superior financial returns enables Prudential to maximise the value of its
shareholder's investment and to establish lasting relationships with customers and policy
holders.

ICICI and Prudential came together in 1993 to provide mutual fund products in India and
today are the largest private sector mutual fund company in India. The two companies
bring together two of the strongest financial service brands in Asia known for their
professionalism, excellent quality of service and long term commitment to YOU. 

Management:

Board of Directors:

The ICICI Prudential Life Insurance Company Limited Board comprises reputed people
from the finance industry both from India and abroad. 

Shri K.V. Kamath, Chairman 

Mr. Mark Tucker 
Smt. Lalita D. Gupte 
Mr. Danny Bardin 
Mrs. Kalpana Morparia 
Shri M.P. Modi 
Mr. John Caouette 
Shri S.P.Subhedar, (Alternate Director to Mr. Danny Bardin) 
Mr. Derek Stott, (Alternate Director to Mr. Mark Tucker) 
Smt. Shikha Sharma, Managing Director 
Management Team

Ms. Shikha Sharma, Managing Director

Mr. Kevin Wright, Executive Vice President - Sales & Distribution
Ms. Madhavi Soman, Chief - Strategic Initiatives
Mr. V. Rajagopalan, Appointed Actuary 
Mr. Sandeep Batra, Chief Financial Officer & Company Secretary
Mr. Saugata Gupta, Chief - Marketing & Service
Mr. Shubhro J. Mitra, Chief - Human Resources

Corporate Office:

ICCI Prulife Towers,

1089, Appasahab Marathe Marg,
Prabhadevi,
Mumbai 400 025.
Telephone Number: 022-462 1600
Website: http://www.iciciprulife.com/
DISTRIBUTION:

ICICI Prudential has one of the largest distribution networks amongst private life insurers
in India, having commenced operations in 69 cities and towns in India. These are: Agra,
Ahmedabad, Ajmer, Allahabad, Amritsar, Aurangabad, Bangalore, Bareilly, Bhatinda,
Bhopal, Durgapur, Faridabad, Goa, Guntur, Gurgaon, Guwahati, Gwalior, Hyderabad,
Lucknow, Ludhiana, Madurai, Mangalore, Meerut, Mumbai, Mysore, Nagpur, Nasik,
Noida, New Delhi, Patiala, Pune, Raipur, Rajkot, Ranchi, Rourkela, Salem, Siliguri,
Surat, Thane, Thrissur, Trichy, Trivandrum, Udaipur, Vadodara, Vapi, Varanasi, Vashi,
Vijayawada and Vizag.

The company has seven banc assurance tie-ups, having agreements with ICICI Bank,
Federal Bank, South Indian Bank, Bank of India, Lord Krishna Bank and some co-
operative banks, as well as over 160 corporate agents and brokers. It has also tied up with
organizations like Dhan for distribution of Salaam Zindagi, a policy for the socially and
economically underprivileged sections of society. ICICI Prudential has recruited and
trained about 50,000 insurance advisors to interface with customers. Further, it leverages
its state-of-the-art IT infrastructure. It infrastructure to provide superior quality of service
to customers.

PROFILE:
About PruICICI

Prudential ICICI Asset Management Company, (55%: 45%) a joint venture between Prudential Plc,
UK's leading insurance company and ICICI Bank Ltd, India's premier financial institution.

The joint venture was formed with the key objective of providing the Indian investor
mutual fund products to suit a variety of investment needs. The AMC has already
launched a range of products to suit different risk and maturity profiles. Click here to
learn more about the products.
Prudential ICICI Asset Management Company Limited has a net worth of about Rs.
80.14 crore (1 crore = 10 million) as of March 31, 2004. Both Prudential and ICICI Bank
Ltd have a strategic long-term commitment to the rapidly expanding financial services
sector in India.

Foreign Partner:

Established in 1848, Prudential plc. Of U.K. has grown to be the largest life insurance
and mutual fund Company in U.K. Prudential plc. Has had its presence in Asia for the
past 75 years catering to over 1 million customers across 11 Asian countries.
Prudential is the largest life insurance company in the United Kingdom (Source: S&P's
UK Life Financial Digest, 1998).
ICICI and Prudential came together in 1993 to provide mutual fund products in India and
today are the largest private sector mutual fund company in India.
Their latest venture ICICI Prudential Life plans to take care of the insurance needs at
various stages of life.

Key Indicators:
  As of May 1998 As on Feb 28,2005

Assets under Management Rs. 160 crore Rs.16, 314.96 crore

Number of Funds Managed 2 20

ICICI Guiding Principle:

 PruICICI will conduct its business with honesty and trustworthiness in all interactions.
 A pioneering spirit and excellence in action.

 Collaboration and teamwork.

 An understanding of customer needs and the desire to satisfy them.

 The highest service standards. A consistently above average performance.

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 CHAPTER 4
DATA ANALYSIS AND
INTERPRETATION

SBI BANK
 Date Open High Low Close % CHANGE

1 Jan, 2013 2,404.90 2,434.05 2,397.55 2,426.45

0.89608
7
2 Jan, 2013 2,450.00 2,464.00 2,438.15 2,450.55
0.02244
9
3 Jan, 2013 2,460.00 2,482.40 2,436.20 2,471.60
0.47154
5
4 Jan, 2013 2,460.00 2,492.95 2,450.65 2,486.70
1.08536
6
7 Jan, 2013 2,490.00 2,499.00 2,461.75 2,467.60
-0.8996
8 Jan, 2013 2,468.00 2,500.00 2,463.00 2,493.35
1.02714
7
9 Jan, 2013 2,494.00 2,540.00 2,494.00 2,522.80
1.15477
1
10 Jan, 2013 2,539.95 2,551.70 2,522.50 2,539.10
-0.03347
11 Jan, 2013 2,549.00 2,550.00 2,483.25 2,491.05
-2.27344
14 Jan, 2013 2,491.00 2,519.95 2,475.20 2,499.75
0.35126
5
15 Jan, 2013 2,505.00 2,517.40 2,470.20 2,489.85
-0.60479
16 Jan, 2013 2,480.00 2,493.50 2,424.00 2,432.40
-1.91935
17 Jan, 2013 2,425.50 2,482.45 2,423.00 2,469.85
1.82848
9
18 Jan, 2013 2,485.00 2,517.65 2,478.10 2,492.05
0.28370
2
21 Jan, 2013 2,495.00 2,511.40 2,490.10 2,499.45
0.17835
7
22 Jan, 2013 2,490.00 2,509.00 2,454.40 2,464.45
-1.0261
23 Jan, 2013 2,471.00 2,492.05 2,452.15 2,480.40
0.38041
3
24 Jan, 2013 2,480.00 2,484.35 2,440.55 2,459.15
-0.84073
25 Jan, 2013 2,459.70 2,524.80 2,448.00 2,513.70
2.19539
28 Jan, 2013 2,525.00 2,533.80 2,483.00 2,491.55
-1.32475
29 Jan, 2013 2,490.55 2,535.00 2,455.05 2,462.45
-1.12826
30 Jan, 2013 2,477.00 2,487.00 2,426.60 2,436.10
-1.65119
31 Jan, 2013 2,436.00 2,456.65 2,416.15 2,438.00
0.08210
2
1 Feb, 2013 2,431.00 2,452.10 2,401.00 2,412.35
-0.76717
 4 Feb, 2013 2,417.50 2,429.25 2,345.00 2,352.60
-2.68459
5 Feb, 2013 2,350.00 2,380.60 2,328.10 2,371.50
0.91489
4
6 Feb, 2013 2,385.00 2,387.90 2,342.00 2,348.70
-1.52201
7 Feb, 2013 2,334.00 2,364.00 2,320.15 2,326.60
-0.31705
8 Feb, 2013 2,320.00 2,342.90 2,276.10 2,286.15
-1.45905
11 Feb, 2013 2,289.90 2,311.90 2,277.35 2,294.35
0.19433
2
12 Feb, 2013 2,301.00 2,307.60 2,278.80 2,296.40
-0.19991
13 Feb, 2013 2,302.00 2,323.25 2,242.50 2,254.70
-2.05474
14 Feb, 2013 2,250.00 2,269.00 2,175.00 2,215.75
-1.52222
15 Feb, 2013 2,207.00 2,247.70 2,205.15 2,233.45
1.19845
9
18 Feb, 2013 2,235.00 2,268.80 2,235.00 2,262.70
1.23937
4
19 Feb, 2013 2,268.85 2,280.00 2,237.00 2,273.50
0.20495
20 Feb, 2013 2,285.00 2,287.15 2,246.60 2,252.05
-1.44201
21 Feb, 2013 2,239.40 2,242.95 2,200.15 2,210.55
-1.28829
22 Feb, 2013 2,211.00 2,225.45 2,190.05 2,196.00
-0.67843
25 Feb, 2013 2,210.00 2,239.00 2,201.05 2,220.90
0.49321
3
26 Feb, 2013 2,208.00 2,216.00 2,188.65 2,198.40
-0.43478
27 Feb, 2013 2,212.45 2,232.65 2,197.00 2,213.40
0.04293
9
28 Feb, 2013 2,234.00 2,236.70 2,051.00 2,080.90
-6.85318
Interpretation:- :-for analysis purpose I have taken 1 Jan, 2013 to feb 28 2013,
on 28 the feb the state bank of India is very volatile -6% negative returns are given on
that day. during this session state bank of India is given most negative results
 HDFC BANK

Date Open High Low Close % CHANGE

1 Jan, 2013 682.10 685.10 679.65 684.50

-0.35062
2 Jan, 2013 689.90 690.00 683.05 687.35
0.37099
3 Jan, 2013 690.00 690.00 680.40 683.35
0.97314
7
4 Jan, 2013 685.00 685.00 672.80 679.35
0.83167
7
7 Jan, 2013 683.70 683.70 666.00 668.20
2.31966
5
8 Jan, 2013 668.00 673.40 665.70 670.25
-0.3357
9 Jan, 2013 672.00 672.55 666.05 667.50
0.67415
7
10 Jan, 2013 669.50 678.00 666.50 675.80
-0.93223
11 Jan, 2013 676.90 676.90 666.70 669.30
1.13551
 5
14 Jan, 2013 668.15 670.50 667.10 669.30
-0.17182
15 Jan, 2013 670.80 675.45 665.00 668.30
0.37408
3
16 Jan, 2013 665.55 669.20 657.60 660.50
0.76457
2
17 Jan, 2013 657.70 670.85 654.05 666.80
-1.36473
18 Jan, 2013 670.00 674.00 655.30 662.85
1.07867
5
21 Jan, 2013 660.00 663.40 654.75 658.55
0.22018
1
22 Jan, 2013 658.50 661.00 647.55 653.75
0.72657
7
23 Jan, 2013 657.00 663.00 654.35 656.60
0.06092
24 Jan, 2013 655.60 662.75 655.25 660.30
-0.7118

25 Jan, 2013 660.30 667.00 655.55 665.05

-0.71423

28 Jan, 2013 665.25 672.00 664.45 670.35

-0.7608
29 Jan, 2013 670.75 670.90 650.00 652.45
2.80481
3
30 Jan, 2013 653.00 658.40 644.00 656.65
-0.55585
31 Jan, 2013 656.60 657.90 640.10 643.05
2.10714
6
1 Feb, 2013 644.80 644.85 636.20 640.15
0.72639
2
4 Feb, 2013 641.15 649.50 640.00 646.90
-0.88885
5 Feb, 2013 636.35 647.20 636.35 644.15
-1.2109
6 Feb, 2013 646.60 646.90 637.20 639.50
1.11024
2
7 Feb, 2013 636.30 643.00 634.55 641.50
-0.8106
8 Feb, 2013 640.50 653.40 640.50 650.05
-1.46912
11 Feb, 2013 650.00 659.95 650.00 656.95
-1.05792
12 Feb, 2013 655.65 667.00 655.65 665.20
-1.43566
13 Feb, 2013 663.30 667.40 659.50 664.20
-0.1355
14 Feb, 2013 664.00 678.40 662.00 674.80
-1.60047
15 Feb, 2013 671.70 680.80 668.20 676.75
-0.74621
18 Feb, 2013 678.00 680.90 674.00 676.00
0.29585
8
19 Feb, 2013 674.50 677.40 671.55 674.80
-0.04446
20 Feb, 2013 677.50 680.80 674.90 676.95
0.08124
7
21 Feb, 2013 675.00 677.45 664.05 666.25
1.31332
1
22 Feb, 2013 662.20 666.40 657.55 659.30
0.43986
25 Feb, 2013 663.25 665.20 654.10 656.45
1.03587
5
26 Feb, 2013 654.80 663.00 645.40 651.25
0.54510
6
27 Feb, 2013 652.30 654.00 640.90 642.75
1.48580
3
28 Feb, 2013 646.95 654.95 619.35 625.35
3.45406
6

Interpretation:-for analysis purpose I have taken 1 Jan, 2013 to feb 28 2013, on 28 the
feb the HDFC bank is very volatile -1% negative returns are given on that day. During
this session state bank of India is given most negative results. On 4 Jan, 2013 is given
2% positive returns overall returns of HDFC bank
 ICICI BANK

Date Open High Low Close % CHANGE

1 Jan, 2013 1,146.40 1,161.95 1,143.10 1,158.45

1.05111
7
2 Jan, 2013 1,170.00 1,177.00 1,165.00 1,174.00
0.34188
3 Jan, 2013 1,177.05 1,178.00 1,165.30 1,172.05
-0.42479
4 Jan, 2013 1,172.90 1,184.90 1,165.05 1,182.40
0.80995
8
7 Jan, 2013 1,188.00 1,188.00 1,177.00 1,182.15
-0.49242
8 Jan, 2013 1,179.15 1,182.00 1,170.25 1,179.55
0.03392
3
9 Jan, 2013 1,178.25 1,187.90 1,173.70 1,180.45
0.18671
8
10 Jan, 2013 1,186.25 1,188.00 1,161.25 1,179.50
-0.56902
11 Jan, 2013 1,184.00 1,184.40 1,159.10 1,163.55
-1.7272
14 Jan, 2013 1,165.00 1,192.00 1,165.00 1,185.15
1.72961
4
15 Jan, 2013 1,183.20 1,211.15 1,174.10 1,204.35
1.78752
5
16 Jan, 2013 1,204.35 1,207.00 1,176.40 1,179.85
-2.03429
17 Jan, 2013 1,177.25 1,187.20 1,158.20 1,162.50
-1.25292
18 Jan, 2013 1,165.50 1,186.20 1,165.50 1,176.20
0.91806
1
21 Jan, 2013 1,180.00 1,182.45 1,165.00 1,177.55
-0.20763
22 Jan, 2013 1,176.20 1,194.85 1,164.00 1,170.15
-0.51437
23 Jan, 2013 1,175.00 1,192.00 1,161.60 1,181.00
0.51063
8
24 Jan, 2013 1,179.85 1,186.65 1,157.60 1,164.50
-1.30101
25 Jan, 2013 1,170.20 1,180.00 1,163.60 1,172.95
0.23500
3
28 Jan, 2013 1,173.60 1,194.40 1,172.15 1,190.25
1.41871
2
29 Jan, 2013 1,195.85 1,228.00 1,182.00 1,201.20
0.44738
1
30 Jan, 2013 1,205.00 1,222.55 1,203.85 1,212.70
0.63900
4
31 Jan, 2013 1,207.00 1,232.00 1,186.30 1,191.15
-1.31317
1 Feb, 2013 1,194.00 1,203.30 1,167.65 1,171.15
-1.91374
4 Feb, 2013 1,184.00 1,202.80 1,178.00 1,181.75
-0.19003
5 Feb, 2013 1,166.00 1,179.30 1,162.05 1,166.05
0.00428
8
6 Feb, 2013 1,173.00 1,173.00 1,150.80 1,155.25
-1.51321
7 Feb, 2013 1,152.35 1,166.95 1,136.55 1,144.85
-0.65084
8 Feb, 2013 1,146.05 1,149.75 1,124.80 1,130.15
-1.38737
11 Feb, 2013 1,132.30 1,134.35 1,117.05 1,122.70
-0.84783
12 Feb, 2013 1,121.50 1,134.00 1,114.10 1,128.85
0.65537
2
13 Feb, 2013 1,137.00 1,146.40 1,131.40 1,142.60
0.49252
4
14 Feb, 2013 1,148.00 1,149.80 1,120.60 1,126.20
-1.89895
15 Feb, 2013 1,126.00 1,131.00 1,111.10 1,121.85
-0.36856
18 Feb, 2013 1,124.40 1,130.00 1,119.50 1,122.00
-0.21345
19 Feb, 2013 1,123.25 1,134.00 1,114.60 1,131.40
0.72557
3
20 Feb, 2013 1,136.00 1,137.85 1,118.70 1,121.55
-1.27201
21 Feb, 2013 1,112.25 1,114.35 1,076.00 1,079.60
-2.93549
22 Feb, 2013 1,077.05 1,099.00 1,077.05 1,092.55
1.43911
 6
25 Feb, 2013 1,099.00 1,101.85 1,081.20 1,093.90
-0.46406
26 Feb, 2013 1,088.00 1,088.85 1,052.55 1,064.00
-2.20588
27 Feb, 2013 1,069.55 1,088.95 1,069.00 1,083.15
1.27156
3
28 Feb, 2013 1,092.00 1,094.80 1,030.00 1,040.40
-4.72527

Interpretation:-for analysis purpose I have taken 1 Jan, 2013 to feb 28 2013, on 28 the
feb the state icici bank is closed at 1131.40% negative returns are given on that day.
during this session icici bank is showing negative trend.
 BANK OF BARODA

Date Open High Low Close % CHANGE

1 Jan, 2013 345.35 362.85 345.00 359.60 4.126249

2 Jan, 2013 361.00 366.85 357.30 360.30 -0.19391
3 Jan, 2013 362.40 365.00 356.40 362.10 -0.08278
4 Jan, 2013 362.80 365.60 358.60 364.60 0.496141
7 Jan, 2013 364.95 369.45 361.80 364.30 -0.17811
8 Jan, 2013 363.15 367.40 360.00 365.05 0.5232
9 Jan, 2013 367.55 372.00 366.60 368.80 0.34009
10 Jan, 370.05 371.00 360.15 365.80
2013 -1.14849
11 Jan, 365.50 369.50 361.05 363.90
2013 -0.43776
14 Jan, 364.50 382.95 357.05 381.05
2013 4.540466
15 Jan, 382.00 388.75 376.60 384.85
2013 0.746073
16 Jan, 383.95 385.25 378.00 379.45
2013 -1.17203
17 Jan, 379.95 386.00 377.25 381.85
2013 0.500066
18 Jan, 382.35 393.00 381.90 385.50
2013 0.823852
21 Jan, 387.05 390.25 377.30 381.15
2013 -1.52435
22 Jan, 379.05 384.75 370.75 372.55
2013 -1.71481
23 Jan, 381.05 381.05 351.15 359.20 -5.73416
 2013
24 Jan, 358.95 361.00 342.10 348.00
2013 -3.05056
25 Jan, 346.00 364.90 341.75 363.75
2013 5.130058
28 Jan, 364.00 377.80 353.45 355.25
2013 -2.40385
29 Jan, 356.00 361.30 339.10 340.95
2013 -4.22753
30 Jan, 342.00 344.90 332.40 334.00
2013 -2.33918
31 Jan, 334.50 354.90 333.40 353.00
2013 5.530643
1 Feb, 2013 354.00 358.50 349.00 353.75 -0.07062
4 Feb, 2013 358.05 358.05 337.70 340.65 -4.85966
5 Feb, 2013 340.70 346.00 314.00 341.75 0.308189
6 Feb, 2013 344.45 352.20 344.25 349.05 1.335462
7 Feb, 2013 348.15 350.00 340.40 343.70 -1.27818
8 Feb, 2013 341.25 347.50 340.15 341.80 0.161172
11 Feb, 345.30 350.50 341.10 346.90
2013 0.463365
12 Feb, 347.70 352.00 335.80 341.05
2013 -1.91257
13 Feb, 338.00 344.90 335.00 336.90
2013 -0.32544
14 Feb, 336.00 343.30 333.00 337.95
2013 0.580357
15 Feb, 338.60 340.85 333.60 339.40
2013 0.236267
18 Feb, 340.15 347.00 339.80 343.60
2013 1.014258
19 Feb, 329.65 350.00 329.65 349.20
2013 5.930532
20 Feb, 351.05 353.40 341.80 344.55
2013 -1.85159
21 Feb, 342.75 347.50 337.15 340.10
2013 -0.77316
22 Feb, 338.90 345.80 337.00 343.45
2013 1.342579
25 Feb, 344.95 346.50 334.20 338.80
2013 -1.78287
26 Feb, 339.00 339.00 326.50 327.90
2013 -3.27434
 27 Feb, 327.85 339.80 326.05 337.35
2013 2.897667
28 Feb, 345.35 362.85 345.00 359.60
2013 4.126249

Interpretation:-for analysis purpose I have taken 1 Jan, 2013 to feb 28 2013, on 28 the
feb the state BANK OF BARODA is closed at 349.50 negative returns are given on that
day. during this session bank of baroda is showing negative trend.
Interpretation:-the above bank performance sbi, hdfc,icici
and bank of Baroda.
 BANKS 2011 2012 % Change
(In Rs. Cr)
SBI 47641893 54665492 14.7424

HDFC 146010773 217216401 48.7673

ICICI 54895477 54319822 -1.0486

BOB 60904363 102247302 67.8817

TOTAL ASSETS:

Interpretation:-
The total assets of bank of baroda is inceresed from 67.88
from the year 2011 to 2012.
During the year of 2012 the icici bank total assets is
decreased -1.0486
The govt sector is given positive results and private sector
banks are showing negative results
CAPITAL:
BANKS 2011 2012 % Change
(In Rs. Cr)

SBI 12237362005 13355192307 9.1345

HDFC 4652257 4693377 0.8838
 ICICI 11518200 11527683 0.0823
BOB 3928073 4123846 4.9839

Interpretation:- in the year of 2012 the capital amount is

grown by 9.13%
The lowest increased bank is icici 0.08% for the year of
2012 compare to the 2011.
The government sector bank showing positive results and
good growth in their capital amount
DEPOSITS:
BANKS 2011 2012 % Change
(In Rs. Cr)

SBI 9339328130 10436473623 11.7475

HDFC 2085864054 2467064459 18.2754
ICICI 2591060049 2819504736 8.8166
BOB 3054394819 3848711059 26.0056

Interpretation:- the above table showing the deposits data of

selected banks.
The average growth in government banks is 37.74
Private sector banks is only 27.08% of growth in their
deposits
RESERVES & SURPLUS:
BANKS 2011 2012 % Change
(In Rs. Cr)

SBI 643510442 832801610 29.4153

HDFC 249111291 294550358 18.2404
ICICI 541503823 601213423 11.0266
BOB 206507258 270644661 31.0581

Interpretation:- the above table showing the RESERVES &

SURPLUS data of selected banks.
The average growth in RESERVES & SURPLUS for
government banks is the average 30.74
Private sector banks average RESERVES & SURPLUS is
only 14.63% of growth in their deposits
INVESTMENTS:
BANKS 2011 2012 % Change
(In Rs. Cr)

SBI 2956005690 3121976103 5.6146

HDFC 709293656 974829094 37.4366
ICICI 2096527791 2398640912 14.4101
BOB 713965921 832094001 16.5453

Interpretation:- the above table showing the their

investment performance comparison for previous year and
this years.
The average growth in government banks is 11.07%
average investment performance for the years of 2011-2012
comparison
Private sector banks is only 25.90% of growth in their
investments
PROFIT:
BANKS 2011 2012 % Change
(In Rs. Cr)

SBI 82648583 117133394 41.7246

HDFC 84591957 113413323 34.0710
ICICI 63181941 79376344 25.6313
BOB 42416797 50069562 18.0418

Interpretation:- the above table showing the their profit comparison for
previous year and this years. The average growth in government banks is 29.38%
average profit for the years of 2011-2012 comparison Private sector banks is only 29.85
% of growth in their profits
INCOME:
BANKS 2011 2012 % Change
(In Rs. Cr)

SBI 972189580 1208728991 24.3305

HDFC 242633649 325300466 34.0706
ICICI 615947044 666582764 8.2207
BOB 246951016 330960524 34.0186

Interpretation:- the above table showing the their income

comparison for previous year and this years for different
banks .
The average growth in government banks is 29.17%
average profit for the years of 2011-2012 comparison
Private sector banks is only 21.14 % of growth in their
income
EXPENDITURE:
BANKS 2011 2012 % Change
(In Rs. Crore)

SBI 889544390 1091656105 22.7208

HDFC 203369640 273629559 34.5478
ICICI 552765103 587206421 6.2307
BOB 204534219 280890962 37.3320

Interpretation:- the above table showing the their

EXPENDITURE comparison for previous year and this
years for different banks .
The average growth in government banks is 30.02%
average profit for the years of 2011-2012 comparison.
Private sector banks are 20.38 % of increased in their
EXPENDITURE.
TOTAL LIABILITIES:
BANKS 2011 2012 % Change
(In Rs. Crore)

SBI 1052483893 809150946 -23.1198

HDFC 289928565 374318690 29.1072
ICICI 276802280 320106314 15.6443
BOB 96063056 114004592 18.6768

The above table showing the their LIABILITIES

comparison for previous year and this years for different
banks .
The average LIABILITIES in government banks is -2.2%
average profit for the years of 2011-2012 comparison.
Private sector banks are 22.38 % of increased in their
LIABILITIES.
Findings Suggestions
The major finding As many of the people With Out awareness of Fundamental analysis
and technical analysis Investor should be follow equity Analysis.
More People are investing blindly With Out knowledge, Need To Educate Investors
Most if the people are not finding any spare time to trading their shares electronically.
Most of People Are Following Fundamental Analysis but it’s Not For Short Term
Trading Sebi have to more preference to Investor educations

There are three factors which an investor must consider for selecting the right stocks.

 Business: An investor must look into what kind of business the company is doing,
visibility of the business, its past track record, capital needs of the company for
expansion etc.
 Balance Sheet: The investor must focus on its key financial ratios such as
earnings per share, price-earning ratio; debt-equity ratio, dividends per share etc
and he must also check whether the company is generating cash flows.

 Bargaining: This is the most important factor which shows the true worth of the
company. An investor needs to choose valuation parameters which suit its
business.

Investment rules

 Invest for long term in equity markets

 Align your thought process with the business cycle of the company.

 Set the purpose for investment.

 Long term goals should be the objective of equity investment.

 Disciplined investment during market volatility helps attains profits.

 Planning, Knowledge and Discipline are very crucial for investment.

Conclusion
Current scenario suggests, markets are on a bullish run, especially in case of Banking
Industry. Analysis suggests that all the chosen stocks ie ICICI Bank, HDFC Bank, bank
of baroda and SBI are going to perform well, with huge potential of earnings for equity
holders. Better may exit from private banks is recommended to increase in investment in
banks.