ACKNOWLEDGEMENT

The project report on “Basic Principles for Choosing a Stock from a

Sector in the Equity Market” is the culmination of a whole sequence of
activities, events and thought processes that researcher faced in studying
about the dissertation topic, while pursuing his PGPBM from International
School of Business & Media, Noida. The project has been very important
and has groomed his skills and nourished his practical knowledge. The
project has been an excellent learning process for the researcher.

First of all researcher would like to thank the administration of the

International School of Business & Media, Noida for giving him the
opportunity to learn so much about the equity market. Researcher is
also very grateful to his mentor, Prof. Mayank Kumar, (Faculty, ISB&M) for
his valuable and timely guidance throughout the project.

This whole work, which is given to understand how to choose a stock from
a sector in the equity market, has been a wonderful exposure for the
researcher. The researcher is now more confident about the subject and
various concepts of research.

Researcher is also thankful to his parents, his friends and colleagues who
have in any way contributed towards this project.

(Vikas Keswani)

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 DECLARATION

I, Vikas Keswani, hereby declare that the project “Basic Principles for
Choosing a Stock from a Sector in the Equity Market” is written by
me. The empirical conclusion & findings in the project are based on the
data collected by me and the entire project work is not a reproduction of
any other source.

(Vikas Keswani)

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 CONTENTS

S.No. Particulars
Page

1) Abstract 4
2) General Introduction 5
3) Introduction to the Project 6
I) Objective of the Project
II) Hypothesis
III) Methodology
IV) Limitations
4) Stock Market 7
5) Trading 8
6) Importance of Stock Market 9
7) The Stock Market, Individual Investors, And
Financial Risk 10
8) The Behaviour of The Stock Market
11-12
9) Crashes 13
10) National Stock Exchange (NSE) &
Bombay Stock Exchange (BSE)
14-20
11) Concepts & Modes of Analysis
21-28
12) Findings and Analysis
29-43
13) Conclusions and Recommendations
44-45
14) Bibliography 46
15) Abbreviations 47

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 ABSTRACT

While dissertation the researcher used several factors to know about the
stock. Some of them can be summarising as:-

• Comparing Share Holding,

• Comparing Dividend Yield,
• Comparing EPS,
• Comparing P/E.

The project undertaken is to understand how to choose a stock from a

sector, which is quite interesting and useful. Beside it provides in depth
knowledge of an equity (stock) market, its importance and its application
in our life to be a prudent investor.

One can pick a stock from a sector to make their investment in the market
so that they can earn a profitable return as per one’s need and at an
appropriate time taking the prerequisites of investing.

India is growing by leaps and bounds. One of the fastest growing

economies in the world, India has got lot many opportunities in various
fields for all the strata of people. India's GDP crossed the trillion-dollar
mark and India has joined the elite club of 12 countries with a trillion
dollar economy.

Also, with the growth of the country, the investment opportunities of an

individual are also rising. Therefore, an individual in the country has got a
lot many opportunities to invest the money in various securities or other
sources, as they see their money growing.

This project is the basic step that will enable one to understand the equity
market and its operations better.

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General Introduction

SECURITIES

The definition of ‘Securities’ as per the Securities Contracts Regulation Act

(SCRA), 1956, includes instruments such as shares, bonds, scrip, stocks or
other marketable securities of similar nature in or of any incorporate
Company or body corporate, government securities, derivatives of
securities, Units of collective investment scheme, interest and rights in
securities, Security receipt or any other instruments so declared by the
Central Government. Securities Markets is a place where buyers and
sellers of securities can enter into transactions to purchase and sell
shares, bonds, debentures etc. Further, it performs an important role of
enabling corporate, entrepreneurs to raise resources for their companies
and business ventures through public issues. Transfer of resources from
those having idle resources (investors) to others who have a need for
them (corporate) is most efficiently achieved through the securities
market. Stated formally, securities markets provide channels for
reallocation of savings to investments and entrepreneurship. Savings are
linked to investments by a variety of intermediaries, through a range of
financial products, called ‘Securities’.

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Introduction to the Project

INTRODUCTION

Investment is the action or process of investing money for profit but

investing in equity is often considered as risky. This project makes a
stepwise approach to make one understand what an equity(stock) market
is, its importance and how one can pick a stock from a sector to make
their investment in the market so that they can earn a profitable return as
per one’s need and at an appropriate time taking the prerequisites of
investing.

OBJECTIVE
The objective behind this project is to tell how to pick a stock from a
sector. Investment avenues should always be treated as tools which will
generate good returns over a period of time. To speculate i.e. taking a
short term view would be fatal.

HYPOTHESIS
Investments are preferred by investors as per one’s needs and goals for
example, an investor who looks for continuous income will go for stock
having a track record of giving continuous dividend. A young investor of
age 25 will try to maximize profits even by taking risk. Now, here as we
see that the major influencing factor for the investor was ‘High Returns’,
but an investor whose investment motive is growth of his money with a
time horizon of 5 years, will not be looking for high returns at cost of high
risks.

METHODOLOGY
- Simple Interest.
- Principal, Interest rate & Time.
- Compound Interest
- Time Value of Money.
- Holding Period Return/Yield.
- Determinants of Required Return.
- Expected Rate of return.

LIMITATION
The principle followed in this project is restricted to major factors.

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Stock market
A stock market, or (equity market), is a private or public market for the
trading of company stock and derivatives of company stock at an agreed
price; these are securities listed on a stock exchange as well as those
only traded privately.

The size of the world stock market is estimated at about $51 trillion. The
world derivatives market has been estimated at about $480 trillion face or
nominal value, 30 times the size of the U.S. economy, and 12 times the
size of the entire world economy. It must be noted though that the value
of the derivatives market, because it is stated in terms of notional values,
and cannot be directly compared to a stock or a fixed inme security, which
traditionally refers to an actual value. Many such relatively illiquid
securities are valued as marked to model, rather than an actual market
price.

The stocks are listed and traded on stock exchanges which are entities a
corporation or mutual organization specialized in the business of bringing
buyers and sellers of stocks and securities together. The stock market in
the United States includes the trading of all securities listed on the NYSE,
the NASDAQ, the Amex, as well as on the many regional exchanges, e.g.
OTCBB and Pink Sheets. European examples of stock exchanges include
the London Stock Exchange, the Deutsche Borse and the Paris Bourse,
now part of Euronext.

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Trading
Participants in the stock market range from small individual stock
investors to large hedge fund traders, who can be based anywhere. Their
orders usually end up with a professional at a stock exchange, who
executes the order.

Some exchanges are physical locations where transactions are carried out
on a trading floor, by a method known as open outcry. This type of auction
is used in stock exchanges and commodity exchanges where traders may
enter "verbal" bids and offers simultaneously. The other type of exchange
is a virtual kind, composed of a network of computers where trades are
made electronically via traders.

Actual trades are based on an auction market paradigm where a potential

buyer bids a specific price for a stock and a potential seller asks a specific
price for the stock. (Buying or selling at market means you will accept any
ask price or bid price for the stock, respectively.) When the bid and ask
prices match, a sale takes place on a first come first served basis if there
are multiple bidders or askers at a given price.

The purpose of a stock exchange is to facilitate the exchange of securities

between buyers and sellers, thus providing a marketplace (virtual or real).
The exchanges provide realtime trading information on the listed
securities, facilitating price discovery.

Many years ago, worldwide, buyers and sellers were individual investors,
such as wealthy businessmen, with long family histories (and emotional
ties) to particular corporations. Over time, markets have become more
"institutionalized"; buyers and sellers are largely institutions (e.g., pension
funds, insurance companies, mutual funds, hedge funds, investor groups,
and banks). The rise of the institutional investor has brought with it some
improvements in market operations. Thus, the government was
responsible for "fixed" (and exorbitant) fees being markedly reduced for
the 'small' investor, but only after the large institutions had managed to
break the brokers' solid front on fees they then went to 'negotiated' fees,
but only for large institutions).

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Importance of stock market
The stock market is one of the most important sources for companies to
raise money. This allows businesses to be publicly traded, or raise
additional capital for expansion by selling shares of ownership of the
company in a public market. The liquidity that an exchange provides
affords investors the ability to quickly and easily sell securities. This is an
attractive feature of investing in stocks, compared to other less liquid
investments such as real estate.

History has shown that the price of shares and other assets is an
important part of the dynamics of economic activity, and can influence or
be an indicator of social mood. Rising share prices, for instance, tend to
be associated with increased business investment and vice versa. Share
prices also affect the wealth of households and their consumption.

Therefore, central banks tend to keep an eye on the control and behaviour
of the stock market and, in general, on the smooth operation of financial
system functions. Financial stability is the raison d'être of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning

that they collect and deliver the shares, and guarantee payment to the
seller of a security. This eliminates the risk to an individual buyer or seller
that the counterparty could default on the transaction.

The smooth functioning of all these activities facilitates economic growth

in that lower costs and enterprise risks promote the production of goods
and services as well as employment. In this way the financial system
contributes to increased prosperity.

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The Stock Market, Individual Investors, and
Financial Risk
Riskier long-term saving requires that an individual possess the ability to
manage the associated increased risks. Stock prices fluctuate widely, in
marked contrast to the stability of (government insured) bank deposits or
bonds. This is something that could affect not only the individual investor
or household, but also the economy on a large scale. The following deals
with some of the risks of the financial sector in general and the stock
market in particular. This is certainly more important now that so many
newcomers have entered the stock market, or have acquired other 'risky'
investments (such as 'investment' property, i.e., real estate and
collectables).

With each passing year, the noise level in the stock market rises.
Television commentators, financial writers, analysts, and market
strategists are all overtalking each other to get investors' attention. At the
same time, individual investors, immersed in chat rooms and message
boards, are exchanging questionable and often misleading tips. Yet,
despite all this available information, investors find it increasingly difficult
to profit. Stock prices skyrocket with little reason, then plummet just as
quickly, and people who have turned to investing for their children's
education and their own retirement become frightened. Sometimes there
appears to be no rhyme or reason to the market, only folly.

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The behaviour of the stock market
From experience we know that investors may temporarily pull financial
prices away from their long term trend level. Over-reactions may occur—
so that excessive optimism (euphoria) may drive prices unduly high or
excessive pessimism may drive prices unduly low. New theoretical and
empirical arguments have been put forward against the notion that
financial markets are efficient.

According to the efficient market hypothesis (EMH), only changes in

fundamental factors, such as profits or dividends, ought to affect share
prices. (But this largely theoretic academic viewpoint also predicts that
little or no trading should take place— contrary to fact—since prices are
already at or near equilibrium, having priced in all public knowledge.) But
the efficient-market hypothesis is sorely tested by such events as the
stock market crash in 1987, when the Dow Jones index plummeted 22.6
percent—the largest-ever one-day fall in the United States. This event
demonstrated that share prices can fall dramatically even though, to this
day, it is impossible to fix a definite cause: a thorough search failed to
detect any specific or unexpected development that might account for the
crash. It also seems to be the case more generally that many price
movements are not occasioned by new information; a study of the fifty
largest one-day share price movements in the United States in the post-
war period confirms this.

Moreover, while the EMH predicts that all price movement (in the absence
of change in fundamental information) is random (i.e., non-trending),
many studies have shown a marked tendency for the stock market to
trend over time periods of weeks or longer. Various explanations for large
price movements have been promulgated. For instance, some research
has shown that changes in estimated risk, and the use of certain
strategies, such as stop-loss limits and Value at Risk limits, theoretically
could cause financial markets to overreact.

Other research has shown that psychological factors may result in

exaggerated stock price movements. Psychological research has
demonstrated that people are predisposed to 'seeing' patterns, and often
will perceive a pattern in what is, in fact, just noise. (Something like
seeing familiar shapes in clouds or ink blots.) In the present context this
means that a succession of good news items about a company may lead
investors to overreact positively (unjustifiably driving the price up). A
period of good returns also boosts the investor's self-confidence, reducing
his (psychological) risk threshold.

Another phenomenon—also from psychology—that works against an

objective assessment is group thinking. As social animals, it is not easy to
stick to an opinion that differs markedly from that of a majority of the
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group. An example with which one may be familiar is the reluctance to
enter a restaurant that is empty; people generally prefer to have their
opinion validated by those of others in the group.

In one paper the authors draw an analogy with gambling. In normal times
the market behaves like a game of roulette; the probabilities are known
and largely independent of the investment decisions of the different
players. In times of market stress, however, the game becomes more like
poker (herding behaviour takes over). The players now must give heavy
weight to the psychology of other investors and how they are likely to
react psychologically.

The stock market, as any other business, is quite unforgiving of amateurs.

Inexperienced investors rarely get the assistance and support they need.
In the period running up to the recent Nasdaq crash, less than 1 per cent
of the analyst's recommendations had been to sell (and even during the
2000 - 2002 crash, the average did not rise above 5%). The media
amplified the general euphoria, with reports of rapidly rising share prices
and the notion that large sums of money could be quickly earned in the
so-called new economy stock market. (And later amplified the gloom
which descended during the 2000 – 2002 crash, so that by summer of
2002, predictions of a DOW average below 5000 were quite common)

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Crashes
A stock market crash is often defined as a sharp dip in share prices of
equities listed on the stock exchanges. In parallel with various economic
factors, a reason for stock market crashes is also due to panic. Often,
stock market crashes end speculative economic bubbles.

There have been famous stock market crashes that have ended in the loss
of billions of dollars and wealth destruction on a massive scale. An
increasing number of people are involved in the stock market, especially
since the social security and retirement plans are being increasingly
privatized and linked to stocks and bonds and other elements of the
market. There have been a number of famous stock market crashes like
the Wall Street Crash of 1929, the stock market crash of 1973–4, the
Black Monday of 1987, the Dotcom bubble of 2000. But those stock
market crashes did not begin in 1929, or 1987. They actually started
years or months before the crash really hit hard.

One of the most famous stock market crashes started October 24, 1929
on Black Thursday. The Dow Jones Industrial lost 50% during this stock
market crash. It was the beginning of the Great Depression. Another
famous crash took place on October 19, 1987 – Black Monday. On Black
Monday itself, the Dow Jones fell by 22.6% after completing a 5 year
continuous rise in share prices. This event not only shook the USA, but
quickly spread across the world. Thus, by the end of October, stock
exchanges in Australia lost 41.8%, in Canada lost 22.5%, in Hong Kong
lost 45.8%, and in Great Britain lost 26.4%. The names “Black Monday”
and “Black Tuesday” are also used for October 28-29, 1929, which
followed Terrible Thursday--the starting day of the stock market crash in
1929.

The crash in 1987 raised some puzzles-–main news and events did not
predict the catastrophe and visible reasons for the collapse were not
identified. This event raised questions about many important assumptions
of modern economics, namely, the theory of rational human conduct, the
theory of market equilibrium and the hypothesis of market efficiency. For
some time after the crash, trading in stock exchanges worldwide was
halted, since the exchange computers did not perform well owing to
enormous quantity of trades being received at one time. This halt in
trading allowed the Federal Reserve system and central banks of other
countries to take measures to control the spreading of worldwide financial
crisis. In the United States the SEC introduced several new measures of
control into the stock market in an attempt to prevent a re-occurrence of
the events of Black Monday. Computer systems were upgraded in the
stock exchanges to handle larger trading volumes in a more accurate and
controlled manner. The SEC modified the margin requirements in an
attempt to lower the volatility of common stocks, stock options and the
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futures market. The New York Stock Exchange and the Chicago Mercantile
Exchange introduced the concept of a circuit breaker. The circuit breaker
halts trading if the Dow declines a prescribed number of points for a
prescribed amount of time.

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Stock market index
The movements of the prices in a market or section of a market are
captured in price indices called stock market indices, of which there are
many, e.g., the S&P, the FTSE and the Euronext indices. Such indices are
usually market capitalization weighted, with the weights reflecting the
contribution of the stock to the index. The constituents of the index are
reviewed frequently to include/exclude stocks in order to reflect the
changing business environment.

National Stock Exchange of India

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National Stock Exchange of India
National Stock Exchange of India Limited (NSE), is a Mumbai-based stock
exchange. It is the largest stock exchange in India in terms of daily
turnover and number of trades, for both equities and derivative trading.
[1]. Though a number of other exchanges exist, NSE and the Bombay
Stock Exchange are the two most significant stock exchanges in India and
between them are responsible for the vast majority of share transactions.
The NSE's key index is the S&P CNX Nifty, known as the Nifty, an index of
fifty major stocks weighted by market capitalisation.

NSE is mutually-owned by a set of leading financial institutions, banks,

insurance companies and other financial intermediaries in India but its
ownership and management operate as separate entities. As of 2006, the
NSE VSAT terminals, 2799 in total, cover more than 1500 cities across
India. In October 2007, the equity market capitalization of the companies
listed on the NSE was US$ 1.46 trillion, making it the second largest stock
exchange in South Asia. NSE is the third largest Stock Exchange in the
world in terms of the number of trades in equities.[4]It is the second
fastest growing stock exchange in the world with a recorded growth of
16.6%.

Origin

The National Stock Exchange of India was promoted by leading Financial

institutions at the behest of the Government of India, and was
incorporated in November 1992 as a taxpaying company. In April 1993, it
was recognized as a stock exchange under the Securities Contracts
(Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt
Market (WDM) segment in June 1994. The Capital Market (Equities)
segment of the NSE commenced operations in November 1994, while
operations in the Derivatives segment commenced in June 2000.

Innovations

NSE has remained in the forefront of modernization of India's capital and

financial markets, and its pioneering efforts include:

• Being the first national, anonymous, electronic limit order book

(LOB) exchange to trade securities in India. Since the success of the
NSE, existent market and new market structures have followed the
"NSE" model.
• Setting up the first clearing corporation "National Securities Clearing
Corporation Ltd." in India. NSCCL was a landmark in providing
innovation on all spot equity market (and later, derivatives market)
trades in India.
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 • Co-promoting and setting up of National Securities Depository
Limited, first depository in India.
• Setting up of S&P CNX Nifty.
NSE pioneered commencement of Internet Trading in February 2000,
which led to the wide popularization of the NSE in the broker community.
• Being the first exchange that, in 1996, proposed exchange traded
derivatives, particularly on an equity index, in India. After four years
of policy and regulatory debate and formulation, the NSE was
permitted to start trading equity derivatives
• Being the first and the only exchange to trade GOLD ETFs
(exchange traded funds) in India.
• NSE has also launched the NSE-CNBC-TV18 media centre in
association with CNBCTV18.

Markets

Currently, NSE has the following major segments of the capital market:

• Equity
• Futures and Options
• Retail Debt Market
• Wholesale Debt Market

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Bombay Stock Exchange
The Bombay Stock Exchange Limited (formerly, The Stock Exchange,
Mumbai; popularly called The Bombay Stock Exchange, or BSE) is the
oldest stock exchange in Asia. It is also the biggest stock exchange in the
world in terms of listed companies with 4,800 listed companies as of
August 2007. It is located at Dalal Street, Mumbai, India. On 31 December
2007, the equity market capitalization of the companies listed on the BSE
was US$ 1.79 trillion, making it the largest stock exchange in South Asia
and the tenth largest in the world.

The Bombay Stock Exchange was established in 1875. Around 4,800

Indian companies list on the stock exchange,[3] and it has a significant
trading volume. The BSE SENSEX (Sensitive index), also called the "BSE
30", is a widely used market index in India and Asia. Though many other
exchanges exist, BSE and the National Stock Exchange of India account
for most of the trading in shares in India.

BSE indices

The BSE SENSEX (also known as the BSE 30 index) is a value-weighted

index composed of thirty scrips, with the base April 1979 = 100. The set
of companies which make up the index has been changed only a few
times in the last twenty years. These companies account for around one-
fifth of the market capitalization of the BSE. Apart from BSE SENSEX,
which is the most popular stock index in India, BSE uses other stock
indices as well:

* BSE 500
* BSE 100
* BSE 200
* BSE PSU
* BSE MIDCAP
* BSE SMLCAP
* BSE BANKEX
* BSE Teck
* BSE Auto
* BSE Pharma
* BSE Fast Moving Consumer Goods (FMCG)
* BSE Consumer Durables
* BSE Metal

BSE Broadcast

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The BSE Broadcast is a large ticker on the wall of the BSE, which
continuously displays the latest stock quotes from the market. It also
displays – on what is described as India's and South Asia's largest video
screen –one of the leading business-news channels in
India: NDTV Profit.

This new system was unveiled on December 15, 2006, when Dr Prannoy
Roy, the Managing Director of New Delhi Television (NDTV) Ltd, struck the
BSE's opening bell. Mr Damodaran, the Chairman of the Securities and
Exchange Board of India (SEBI), said that the ticker would provide
information and analysis of the financial world.

Following is the timeline on the rise and rise of the Sensex through Indian
stock market history.

1000, July 25, 1990 On July 25, 1990, the Sensex touched the magical
four-digit figure for the first time and closed at 1,001 in the wake of a
good monsoon season and excellent corporate results.

2000, January 15, 1992 On January 15, 1992, the Sensex crossed the
2,000-mark and closed at 2,020 followed by the liberal economic policy
initiatives undertaken by the then finance minister and current Prime
Minister Dr Manmohan Singh.

3000, February 29, 1992 On February 29, 1992, the Sensex surged past
the 3000 mark in the wake of the market-friendly Budget announced by
the then Finance Minister, Dr Manmohan Singh.

4000, March 30, 1992 On March 30, 1992, the Sensex crossed the 4,000-
mark and closed at 4,091 on the expectations of a liberal export-import
policy. It was then that the Harshad Mehta scam hit the markets and
Sensex witnessed unabated selling.

5000, October 8, 1999 On October 8, 1999, the Sensex crossed the 5,000-
mark as the BJP-led coalition won the majority in the 13th Lok Sabha
election.

6000, February 11, 2000 On February 11, 2000, the infotech boom helped
the Sensex to cross the 6,000-mark and hit and all time high of 6,006.

7000, June 20, 2005 On June 20, 2005, the news of the settlement
between the Ambani brothers boosted investor sentiments and the scrips
of RIL, Reliance Energy, Reliance Capital, and IPCL made huge gains. This
helped the Sensex crossed 7,000 points for the first time.

8000, September 8, 2005 On September 8, 2005, the Bombay Stock

Exchange's benchmark 30-share index -- the Sensex -- crossed the 8000
level following brisk buying by foreign and domestic funds in early trading.

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9000, November 28, 2005 The Sensex on November 28, 2005 crossed the
magical figure of 9000 to touch 9000.32 points during mid-session at the
Bombay Stock Exchange on the back of frantic buying spree by foreign
institutional investors and well supported by local operators as well as
retail investors.

10,000, February 6, 2006 The Sensex on February 6, 2006 touched 10,003

points during mid-session. The Sensex finally closed above the 10K-mark
on February 7, 2006.

11,000, March 21, 2006 The Sensex on March 21, 2006 crossed the
magical figure of 11,000 and touched a life-time peak of 11,001 points
during mid-session at the Bombay Stock Exchange for the first time.
However, it was on March 27, 2006 that the Sensex first closed at over
11,000 points.

12,000, April 20, 2006 The Sensex on April 20, 2006 crossed the 12,000-
mark and closed at a peak of 12,040 points for the first time.

13,000, October 30, 2006 The Sensex on October 30, 2006 crossed the
magical figure of 13,000 and closed at 13,024.26 points, up 117.45 points
or 0.9%. It took 135 days for the Sensex to move from 12,000 to 13,000
and 123 days to move from 12,500 to 13,000.

14,000, December 5, 2006 The Sensex on December 5, 2006 crossed the

14,000-mark to touch 14,028 points. It took 36 days for the Sensex to
move from 13,000 to the 14,000 mark.

15,000, July 6, 2007 The Sensex on July 6, 2007 crossed the magical
figure of 15,000 to touch 15,005 points in afternoon trade. It took seven
months for the Sensex to move from 14,000 to 15,000 points.

16,000, September 19, 2007 The Sensex scaled yet another milestone
during early morning trade on September 19, 2007. Within minutes after
trading began, the Sensex crossed 16,000, rising by 450 points from the
previous close. The 30-share Bombay Stock Exchange's sensitive index
took 53 days to reach 16,000 from 15,000. Nifty also touched a new high
at 4659, up 113 points. The Sensex finally ended with a gain of 654 points
at 16,323. The NSE Nifty gained 186 points to close at 4,732.

17,000, September 26, 2007 The Sensex scaled yet another height during
early morning trade on September 26, 2007. Within minutes after trading
began, the Sensex crossed the 17,000-mark. Some profit taking towards
the end, saw the index slip into red to 16,887 - down 187 points from the
day's high. The Sensex ended with a gain of 22 points at 16,921.

18,000, October 09, 2007 The BSE Sensex crossed the 18,000-mark on
October 09, 2007. It took just 8 days to cross 18,000 points from the

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17,000 mark. The index zoomed to a new all-time intra-day high of
18,327. It finally gained 789 points to close at an alltime high of 18,280.
The market set several new records including the biggest single day gain
of 789 points at close, as well as the largest intra-day gains of 993 points
in absolute term backed by frenzied buying after the news of the UPA and
Left meeting on October 22 put an end to the worries of an impending
election.

19,000, October 15, 2007 The Sensex crossed the 19,000-mark backed by
revival of funds-based buying in blue chip stocks in metal, capital goods
and refinery sectors. The index gained the last 1,000 points in just four
trading days. The index touched a fresh alltime intra-day high of 19,096,
and finally ended with a smart gain of 640 points at 19,059.The Nifty
gained 242 points to close at 5,670.

20,000, October 29, 2007 The Sensex crossed the 20,000 mark on the
back of aggressive buying by funds ahead of the US Federal Reserve
meeting. The index took only 10 trading days to gain 1,000 points after
the index crossed the 19,000-mark on October 15. The major drivers of
today's rally were index heavyweights Larsen and Toubro, Reliance
Industries, ICICI Bank, HDFC Bank and SBI among others. The 30-share
index spurted in the last five minutes of trade to fly-past the crucial level
and scaled a new intra-day peak at 20,024.87 points before ending at its
fresh closing high of 19,977.67, a gain of 734.50 points. The NSE Nifty
rose to a record high 5,922.50 points before ending at 5,905.90, showing
a hefty gain of 203.60 points.

21,000, January 8, 2008 the Sensex crossed the 21,000 mark in intra-day
trading after 49 trading sessions. This was backed by high market
confidence of increased FII investment and strong corporate results for
the third quarter. However, it later fell back due to profit booking.

15,200, June 13, 2008 The Sensex closed below 15,200 mark, Indian
market suffer with major downfall from January 21, 2008

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CONCEPTS & MODES OF ANALYSIS
Using basic principles and factors in comparing different shares of a
particular sector such as:

Holding Period Return/Yield

The total return received from holding an asset or portfolio of assets.

Holding period return/yield is calculated as the sum of all income and
capital growth divided by the value at the beginning of the period being
measured.
When evaluating two alternate investments, it is necessary to compare
them on an “apples to apples” basis.

For example, suppose you are weighing the stock of a high-tech start-up
company against an established blue chip stock. The stock of the high-
tech company sells for $20, and pays no dividends. The stock of the blue
chip company sells for $100 and pays annual dividends of $4. These two
stocks are wildly different, but which one is the better investment?

a. The first step is to derive the holding period return (HPR) of each
stock. The HPR is the change in wealth resulting from the
investment. The change in wealth can come from Interest or
dividend income arising from the investment, or
b. A change in the price of the investment. For the purpose of this
example, we are going to assume knowledge of the future, and
project the HPR/HPY of each investment at the end of the coming
year. (In real life, you could substitute this future-based analysis
with and analysis of past performance.)

Suppose that you spend $1000 on ten shares of the blue chip stock. At the
end of the year, you have $40 in dividends (10 shares x $4); and the price
of the stock rises to $110/share.

The HPR for this investment would be calculated as follows:

HPR = ending value of investment / beginning value of investment

= $1,140 / $1,000 = 1.14

Next, convert the HPR to an annual percentage: the holding period yield,
or HPY. The
HPY is the HPR minus 1:

HPY = 1.14 – 1 = 14%

Calculating the HPR / HPY of the High-Tech Stock

Page | 22
Now, let’s look at the HPR/HPY of $1000 spent on the high tech stock, in
the event that it rises to a price of $25/share. Since we were able to buy
50 shares of the stock with $1,000 at the original price, the value of the
stock at the end of the year would be 50 shares x $25 = $1,250:
HPR = $1,250 / $1000 = 1.25
HPY = 1.25 – 1 = 25%

So in this comparison, the high-tech stock would be a better investment

even though it pays no dividends, because of its increase in value.

Simple Interest

Simple Interest is the interest paid only on the principal amount borrowed.
No interest is paid on the interest accrued during the term of the loan.

There are three components to calculate simple interest: principal,

interest rate and time.

Formula for calculating simple interest:

I = Prt

Where,
I = interest
P = principal
r = interest rate (per year)
t = time (in years or fraction of a year)

Example:
Mr. X borrowed Rs. 10,000 from the bank to purchase a household item.
He agreed to repay the amount in 8 months, plus simple interest at an
interest rate of 10% per annum (year).
If he repays the full amount of Rs. 10,000 in eight months, the interest
would be:

P = Rs. 10,000 r = 0.10 (10% per year) t = 8/12 (this denotes fraction of a
year)

Applying the above formula, interest would be:

I = Rs. 10,000*(0.10)*(8/12) = Rs. 667.

This is the Simple Interest on the Rs. 10,000 loan taken by Mr. X for 8
months.

If he repays the amount of Rs. 10,000 in fifteen months, the only change
is with time.
Page | 23
Therefore, his interest would be:

I = Rs. 10,000*(0.10)*(15/12) = Rs. 1,250

Compound Interest

Compound interest means that, the interest will include interest

calculated on interest.
The interest accrued on a principal amount is added back to the principal
sum, and the whole amount is then treated as new principal, for the
calculation of the interest for the next period.

For example, if an amount of Rs. 5,000 is invested for two years and the
interest rate is
10%, compounded yearly:

• At the end of the first year the interest would be (Rs. 5,000 * 0.10) or Rs.
500.
• In the second year the interest rate of 10% will applied not only to Rs.
5,000 but also to the Rs. 500 interest of the first year. Thus, in the second
year the interest would be (0.10* Rs. 5,500) or Rs. 550.

For any loan or borrowing unless simple interest is stated, one should
always assume interest is compounded. When compound interest is used
we must always know how often the interest rate is calculated each year.

Generally the interest rate is quoted annually. E.g. 10% per annum.

Compound interest may involve calculations for more than once a year,
each using a new principal, i.e. (interest + principal). The first term we
must understand in dealing with compound interest is conversion period.
Conversion period refers to how often the interest is calculated over the
term of the loan or investment. It must be determined for each year or
fraction of a year.

E.g.: If the interest rate is compounded semiannually, then the number of

conversion periods per year would be two. If the loan or deposit was for
five years, then the number of conversion periods would be ten.

Formula for calculating Compound Interest:

C = P (1+i)n
Where

C = amount
P = principal
i = Interest rate per conversion period
Page | 24
n = total number of conversion periods

Example:
Mr. X invested Rs. 10,000 for five years at an interest rate of 7.5%
compounded quarterly
P = Rs. 10,000
i = 0.075 / 4, or 0.01875
n = 4 * 5, or 20, conversion periods over the five years

Therefore, the amount, C, is:

C = Rs. 10,000(1 + 0.01875)^20
= Rs 10,000 x 1.449948 = Rs 14,499.48
So at the end of five years Mr. X would earn Rs. 4,499.48 (Rs.14,499.48 –
Rs.10,000) as interest. This is also called as Compounding.

Compounding plays a very important role in investment since earning a

simple interest and earning an interest on interest makes the amount
received at the end of the period for the two cases significantly different.

If Mr. X had invested this amount for five years at the same interest rate
offering the simple interest option, then the amount that he would earn is
calculated by applying the following formula:
S = P (1 + rt),
P = 10,000
33
r = 0.075
t=5
Thus, S = Rs. 10,000[1+0.075(5)]
= Rs. 13,750
Here, the simple interest earned is Rs. 3,750.

A comparison of the interest amounts calculated under both the method

indicates that Mr.
X would have earned Rs. 749.48 (Rs.4,499.48 – Rs. 3,750) or nearly 20%
more under the compound interest method than under the simple interest
method.
Simply put, compounding refers to the re-investment of income at the
same rate of return to constantly grow the principal amount, year after
year. Should one care too much whether the rate of return is 5% or 15%?
The fact is that with compounding, the higher the rate of return, more is
the income which keeps getting added back to the principal regularly
generating higher rates of return year after year.

The single investment of Rs 10,000 will grow at various rates of return

with compounding. 5% is what you might get by leaving your money in a
savings bank account, 10% is typically the rate of return you could expect
from a one-year company fixed deposit, 15% - 20% or more is what you
might get if you prudently invest in mutual funds or equity shares.

Page | 25
The Impact of Power of Compounding:

The impact of the power of compounding with different rates of return and
different time periods:

Time Value of Money

Money has time value. The idea behind time value of money is that a
rupee now is worth more than rupee in the future. The relationship
between value of a rupee today and value of a rupee in future is known as
‘Time Value of Money’. A rupee received now can earn interest in future.
An amount invested today has more value than the same amount
invested at a later because it can utilize the power of compounding.
Compounding is the process by which interest is earned on interest. When
a principal amount is invested, interest is earned on the principal during
the first period or year. In the second period or year, interest is earned on
the original principal plus 68 the interest earned in the first period. Over
time, this reinvestment process can help an amount to grow significantly.

Let us take an example:

Suppose you are given two options:

(A) Receive Rs. 10,000 now OR
(B) Receive Rs.10,000 after three years.

Which of the options would you choose?

Rationally, you would choose to receive the Rs. 10,000 now instead of
waiting for three years to get the same amount. So, the time value of
money demonstrates that, all things being equal, it is better to have
money now rather than later. Let us take an another example:

If you choose option A and invest the total amount at a simple annual rate
of 5%, the future value of your investment at the end of the first year is
Rs. 10,500, which is calculated by multiplying the principal amount of Rs.
10,000 by the interest rate of 5% and then adding the interest gained to
the principal amount.

Thus, Future value of investment at end of first year:

= ((Rs. 10,000 X (5/100)) + Rs. 10,000
= (Rs.10,000 x 0.050) + Rs. 10,000
= Rs.10,500

You can also calculate the total amount of a one-year investment with a
simple modification of the above equation:
Original equation: (Rs.10,000 x 0.050) + Rs.10,000 = Rs.10,500
Modified formula: Rs.10,000 x [(1 x 0.050) + 1] = Rs.10,500

Page | 26
Final equation: Rs. 10,000 x (0.050 + 1) = Rs. 10,500
This can also be written as:
S = P (r+ 1)

Where,
S = amount received at the end of period
P = principal amount
r = interest rate (per year)
This formula denotes the future value (S) of an amount invested (P) at a
simple interest of (r) for a period of 1 year.

Time value of money computation

The time value of money may be computed in the following

circumstances:
1. Future value of a single cash flow
2. Future value of an annuity
3. Present value of a single cash flow
4. Present value of an annuity

(1) Future Value of a Single Cash Flow

For a given present value (PV) of money, future value of money (FV) after
a period ‘t’ for which compounding is done at an interest rate of ‘r’, is
given by the equation
FV = PV (1+r)t

This assumes that compounding is done at discrete intervals. However, in

case of continuous compounding, the future value is determined using the
formula
FV = PV * ert

Where ‘e’ is a mathematical function called ‘exponential’ the value of

exponential (e) = 2.7183. The compounding factor is calculated by taking
natural logarithm (log to the base of 2.7183).

Example 1: Calculate the value of a deposit of Rs.2,000 made today, 3

years hence if the interest rate is 10%.

By discrete compounding:
FV = 2,000 * (1+0.10)3 = 2,000 * (1.1)3 = 2,000 * 1.331 = Rs. 2,662

By continuous compounding:
FV = 2,000 * e (0.10 *3) =2,000 * 1.349862 = Rs.2699.72

2. Future Value of an Annuity

Page | 27
An annuity is a stream of equal annual cash flows. The future value (FVA)
of a uniform cash flow (CF) made at the end of each period till the time of
maturity‘t’ for which compounding is done at the rate ‘r’ is calculated as
follows:

FVA = CF*(1+r)t-1 + CF*(1+r)t-2 + ... + CF*(1+r)1+CF is referred as the

Future Value Interest factor for an annuity (FVIFA). The same can be
applied in a variety of contexts.
For example: to know accumulated amount after a certain period, to
know how much to save annually to reach the targeted amount, to know
the interest rate etc.

Example 1: Suppose, you deposit Rs.3,000 annually in a bank for 5 years

and your deposits earn a compound interest rate of 10 per cent, what will
be value of this series of deposits (an annuity) at the end of 5 years?
Assume that each deposit occurs at the end of the year.

Future value of this annuity is:

=Rs.3000*(1.10)4 + Rs.3000*(1.10)3 + Rs.3000*(1.10)2 + Rs.3000*(1.10)
+ Rs.3000
38
=Rs.3000*(1.4641)+Rs.3000*(1.3310)+Rs.3000*(1.2100)+Rs.3000*(1.10)
+ Rs.3000
= Rs. 18315.30

3. Present Value of a Single Cash Flow

Present value of (PV) of the future sum (FV) to be received after a period
‘t’ for which discounting is done at an interest rate of ‘r’, is given by the
equation In case of discrete discounting: PV = FV / (1+r)t

Example 1: What is the present value of Rs.5,000 payable 3 years hence,

if the interest
rate is 10 % p.a.
PV = 5000 / (1.10)3 i.e. = Rs.3756.57

In case of continuous discounting: PV = FV * e-rt

Example 2: What is the present value of Rs. 10,000 receivable after 2

years at a discount rate of 10% under continuous discounting?
Present Value = 10,000/(exp^(0.1*2)) = Rs. 8187.297

4. Present Value of an Annuity

The present value of annuity is the sum of the present values of all the
cash inflows of this annuity.
Present value of an annuity (in case of discrete discounting)
PVA = FV [{(1+r)t - 1 }/ {r * (1+r)t}]

Page | 28
The term [(1+r)t - 1/ r*(1+r)t] is referred as the Present Value Interest
factor for an annuity (PVIFA).
Present value of an annuity (in case of continuous discounting) is
calculated as:

PVa = FVa * (1-e-rt)/r

Example 1: What is the present value of Rs. 2000/- received at the end of
each year for 3 continuous years
= 2000*[1/1.10]+2000*[1/1.10]^2+2000*[1/1.10]^3
= 2000*0.9091+2000*0.8264+2000*0.7513
= 1818.181818+1652.892562+1502.629602
= Rs. 4973.704

Effective Annual return

Usually while applying for a fixed deposit or a bond it is stated in the

application form, that the annual return (interest) of an investment is
10%, but the effective annual return mentioned is something more,
10.38%. Why the difference? Essentially, the effective annual return
accounts for intra- year compounding and the stated annual return does
not. The difference between these two measures is best illustrated with an
example.

Suppose the stated annual interest rate on a savings account is 10%, and
say you put Rs 1,000 into this savings account. After one year, your
money would grow to Rs 1,100. But, if the account has a quarterly
compounding feature, your effective rate of return will be higher than
10%. After the first quarter, or first three months, your savings would
grow to Rs 1,025. Then, in the second quarter, the effect of compounding
would become apparent: you would receive another Rs 25 in interest on
the original Rs 1,000.

Holding Period Return/Yield

The total return received from holding an asset or portfolio of assets.

Holding period return/yield is calculated as the sum of all income and
capital growth divided by the value at the beginning of the period being
measured.

In other words holding period return is a very basic way to measure how
much return you have obtained on a particular investment. This

Page | 29
calculation is on a per-dollar-invested basis, rather than a time basis,
which makes it difficult to compare returns on different investments with
different time frames. When making comparisons such as this, the
annualized calculation shown above should be used.

Page | 30
Findings and Analysis

BANKING SECTOR

1. ICICI BANK

CEO: Ms.Chanda D Kochhar

Market Cap: Rs 103,669.98 Cr

ICICI Bank, a private sector bank under the house of ICICI was
incorporated in the year of 1994. It is a multi-specialist financial service
provider with leadership position across the spectrum of financial services
in India. ICICI Bank is the 2nd largest bank in India and Bank breaking into
the top 100 financial institutions in the world, in terms of market
capitalisation.

It got this position in short time, because the bank doing what customers
want. ICICI running its business with six principal groups, such as Retail
Banking, Wholesale Banking, International Banking, Rural, Micro Banking
and Agri-Business, Government Banking and Corporate Centre. The Bank
offers a wide spectrum of domestic and international banking services to
facilitate trade, investment banking, Insurance, Venture Capital, asset
management, cross border business & treasury and foreign exchange
services besides providing a full range of deposit and ancillary services for
both individuals and corporates through various delivery Channels and
specialized subsidiaries. ICICI Bank has 14 subsidiaries, out of that 10 in
domestic and rest of 4 in international level such as UK, Canada and
Russia.

To efficiently distribute its products and services, the bank has developed
multiple access channels comprising lean brick and mortar branches,
ATMs, call centres and Internet banking. The Bank has introduced the
concept of mobile ATMs in the remote/rural areas. It has also extended its
mobile banking services to all cellular service providers across India and
NRI customers in USA, UK, Middle-East and Singapore. The merger and
acquisition are the key kind to bank. The Bank of Madura (BOM) got
merged with ICICI Bank during the period 2000-01 and in 2001 ICICI
(Financial Institution) merged with ICICI Bank. The two subsidiaries of ICICI
Ltd viz ICICI Personal Financial Services and ICICI Capital Services were
also merged with the ICICI Bank on March 2002. During May, 2003 the
bank has acquired Transamerica Apple Distribution Finance Private Ltd
and renamed it to ICICI Distribution Finance Private Limited which is
primarily engaged in financing in the two-wheeler segment.

Scrip Information:

Page | 31
Security Name Face Value ISIN Code 52 week high price 52
week low price
ICICI Bank Ltd 10.00 INE090A01013 980.00
307.05

Page | 32
Page | 33
2. HDFC Bank Ltd

CEO: Mr. Aditya Puri

Market Cap: Rs 82,151.99 Cr

HDFC Bank, a private sector bank was incorporated in the year of 1994 by
Housing Development Finance Corporation Limited (HDFC), India's
premier housing finance company. HDFC was amongst the first to receive
an 'in principle' approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector.

The Bank commenced its operations as a Scheduled Commercial Bank in

January 1995 with the help of RBI's liberalisation. HDFC Bank deals with
three key business segments - Wholesale Banking Services, Retail
Banking Services, and Treasury. It has entered the banking consortia of
over 50 corporate for providing working capital finance, trade services,
corporate finance and merchant banking. It is also providing sophisticated
product structures, sound advice and fine pricing mainly in areas of
foreign exchange and derivatives, money markets and debt trading and
equity research through its state-of-theart dealing room. Notable event
was happened in the history of bank as well as Indian banking sector in
Feb. 2000, the Times Bank was amalgamated with HDFC bank.

HDFC Bank was the first Bank to launch an International Debit Card in
association with VISA (Visa Electron). The Bank launched its Credit Card
business in 2001. In the same year HDFC Bank has became the first
private sector bank to be authorised by the Central Board of Direct Taxes
(CBDT) as well as the RBI to accept direct taxes. The taxes accepted at
specified branches of the bank. Also it has announced a strategic tie-up
with a Bangalore-based business solutions software developer Tally
Solutions Pvt (TSPL) for developing and offering products and services
facilitating on-line accounting and banking services to SMEs (Small and
Medium Enterprises).

In 2001-02 the bank was listed on the New York Stock Exchange in the
form of ADS and bank had alliance with LIC for provide online payment of
insurance premium to the customers. Bank received plenty of awards to
its credit, in the year 2003 bank received 'Best Local Bank in India' by
Finance Asia, 'Best Domestic Bank in India Region' in The Asset Triple A
Country Awards 2003. Apart from this, 'Best Bank in the Private Sector' for
the year 2003 in the Outlook Express Awards, 'Best New Private Sector
Bank 2003' by the Financial Express in the FE-Ernst & Young Best Bank's
survey 2003. It was also figured in the 'Best Under a Billion, 200 Best
Small Companies for 2003' by Forbes Global and for use of information
technology the bank was awarded with 'Best IT user in Banking' at the IT
User Awards 2003 conferred by Economictimes.com & Nasscom.

Scrip Information:

Page | 34
Security Name Face Value ISIN Code 52 week high price 52
week low price
HDFC Bank Ltd 10.00 INE040A01018 1839.00 809.10

Page | 35
Page | 36
3. Axis Bank

CEO: Mrs. Shikha Sharma

Market Cap: Rs 34,802.78 Cr

AXIS Bank is one of the fastest growing bank in private sector. It was
incorporated in the year 1993 as ' The Bank (UTI BANK LIMITED) ', which
provided corporate and retail banking products and was among the few
banks to be granted a license under the new guidelines issued in 1993 to
carry on banking business in India.

AXIS Bank formerly known as UTI Bank is being promoted by Unit Trust of
India (UTI), Life Insurance Corporation of India (LIC), General Insurance
Corporation of India (GIC) and its four subsidiaries. The bank had two
subsidiaries namely UBL Sales Limited and UBL Asset Management
Company and was incorporated in the year 2005 and 2006 respectively.
The bank has restructured its business into four strategic profit centres
such as Corporate, Retail, Merchant & Treasury Banking and Further the
bank also provide mobile banking services and mobile refill facilities for
Airtel,Hutch, Orange and Idea cellular service providers. In fact the bank is
among the few Indian banks to have completely centralized its database
which enables possible for the bank to increasingly e-enable its
transaction processing capabilities.

In the year 2001, the bank along with Global Trust Bank (GTB) had a
merger proposal to create the largest private sector bank in swap ratio of
9 shares of UTI Bank for 4 shares of GTB but due to media's issues both
the banks withdraw he merger proposal. 2003 was the year to AXIS, the
bank was authorised to handle Government transactions such as
collection of Government taxes, to handle the expenditure related
payments of Central Government Ministries and Departments and pension
payments on behalf of Civil and Non-civil Ministries such as defence,
posts, telecom and railways and AXIS is the first private sector bank to be
authorised for collection of Commercial Taxes in twin cities of Hyderabad
& Secunderabad.

The bank has launched pre-paid Dollar denominated card which is useful
for outbound travellers and has tied up with 14 major full-fledged
moneychangers to market the cards and the 1st Indian bank to offer the
International Travel Currency Card and. The bank raised $239.3 million
through Global Depositary Receipts in 2005 and in the same year the
bank has won the award 'Outstanding Achievement Award' for the year
2005 from Indian Banks Association for IT Infrastructure, delivery
capabilities and innovative solutions. In the year of 2007 the bank again
raised $218.67 million through Global Depository Receipts. The bank has
rated 1st rank under new private sector banks in India's Best Banks for
the year 2007 by The Financial Express magazine (The Express Group). In
2007, the bank has opened 153 new branches. This includes 43 extension

Page | 37
counters that have been upgraded to branches and the setting up of 8
Service branches/CPCs.

Page | 38
Scrip Information:

Security Name Face Value ISIN Code 52 week high price 52

week low price
Axis Bank Limited 10.00 INE238A01026 1177.70 321.10

Page | 39
Dividend Details

Page | 40
4. IndusInd Bank Ltd.

CEO: Mr.Romesh Sobti

Market Cap: Rs 6,786.99 Cr

The bank was incorporated on January and obtained Certificate of

Commencement of Business in February 1994. The bank was promoted by
IndusInd Enterprises and Finance Ltd. (IEFL) and five Mauritius based
companies viz. IndusInd International Holdings Ltd. (IIHL) IndusInd
(Mauritius) Holdings Ltd. (IMHL) IndusInd Ltd. (IL) IndusInd Investments
Ltd. (IIL) DeFive Mauritius Holdings Ltd. (DFMHL). The bank commenced
commercial operation in April. It undertook all kinds of banking business.

The bank proposed to set up an investment bank as a subsidiary of the

bank for concentrating on various faces of investment banking viz. issue
management, corporate advisory service, infrastructure financing,
mergers and acquisitions, trading and depository services etc. It was also
proposed to introduce the concept of "investment boutique" at selected
branches viz. Ahmadabad, Chennai, Mumbai etc.

All operating outlets have direct access to Nostro Accounts through

sophisticated computerised system "SWIFT". 1995

1200,00,000 No. of Equity shares issued.

The Company joined hands with Kredietbank NV, (KB) - Brussels, Belgium
and a Memorandum of Understanding for strategic alliance has been
signed with them in order to enhance capability to global standards. - The
Bank has made a preferential offer of 2 crores equity shares of Rs. 10
each for cash at a premium of Rs. 40 per share aggregating Rs. 100 crores
on private placement basis to the shareholders of the Bank, (other than
promoters), shareholders of the promoter companies, and the employees
of the Bank and of the promoter companies.

Scrip Information:
Security Name Face Value ISIN Code 52 week high price 52
week low price

IndusInd Bank Limited 10.00 INE095A01012 168.40

29.80

Page | 41
Page | 42
Page | 43
5. Yes Bank Ltd.

CEO: Mr. Rana Kapoor

Market Cap : Rs 7,341.51 Cr

Yes Bank was incorporated as a Public Limited Company on November 21,

2003. Subsequently, on December 11, 2003, RBI was informed of the
participation of three private equity investors namely {Citicorp
International Finance Corporation, ChrysCapital II, LLC and AIF Capital
Inc.), to achieve the financial closure of the Bank. RBI by their letter dated
February 26, 2004 provided their no-objection to the participation of the
three private equity investors namely Citicorp International Finance
Corporation, ChrysCapital II, LLC and AIF Capital Inc. in the equity of the
Bank at 10%, 7,5% and 7.5%, respectively, and also advised the Bank to
infuse a sum of Rs. 2000 million as the paid up capital. Additionally, the
RBI advised the Bank to submit an application for final approval after
completion of all formalities for incorporation as a banking company and
setting out the capital structure of the Bank as approved by RBI.

RBI by their letter dated December 29, 2003 decided to further extending
`In Principle' approval for a period up to February 29, 2004 to allow the
Bank to complete all financial arrangements.

Yes Bank obtained its certificate of Commencement of Business on

January 21, 2004. Subsequently, in March 2004, the Bank achieved the
mobilization of the initial minimum paid up capital of Rs. 2,000 million.
Further, the Promoters by their letter dated March 29, 2004 made a final
application for a banking licence under Section 22 (1) of the Banking
Regulation Act, 1949 providing complete details of the capital structure,
the composition of Board of Directors, the proposed human resources,
information technology, premises and legal-policies and the business and
financial plan of the Bank.

RBI by their letter dated May 24, 2004, under Section 22 (1) of the
Banking Regulation Act, 1949, granted us the licence to commence
banking operations in India on certain terms and conditions including a
term that 49.0% of our pre-Issue share capital held by the Promoters
(domestic and foreign) was to be locked-in for five years from the
licensing of the Bank, being May 24, 2004. In our case, this 49.0% has
been met by locking-in Equity Shares representing 29.0% of the share
capital held by Mr. Rana Kapoor and Mr. Ashok Kapur and Equity Shares
representing 20.0% of the share capital held by Rabobank International
Holding. See Note 2 in the section titled "Capital Structure-Promoter
Contribution and Lock-In" on page 13 of this Red Herring Prospectus.
Further, the terms of the banking license granted to us by RBI require that
the promoter holding in excess of 49%, shall be diluted after one year of
the Bank's operation. It is also stipulated that the paid up capital (which

Page | 44
currently stands at 2,000 million) must be raised to Rs. 3,000 million
within three years of commencement of business.

Scrip Information:

Security Name Face Value ISIN Code 52 week high price 52

week low price

Yes Bank Limited 10.00 INE528G01019 287.75

43.60

Page | 45
Comparative Study
Page | 46
ICICI Bank HDFC Bank

ICICI Bank AXIS Bank

Page | 47
AXIS Bank IndusInd Bank

ICICI Bank YES Bank

Page | 48
ICICI Bank IndusInd Bank

HDFC Bank AXIS Bank

Page | 49
CONCLUSION AND RECOMMENDATIONS

Share Holding

A holding in the form of shares of corporations. Promoter shareholding

must be looked before buying any stock. Promoter shareholding refers to
the number of shares held by the promoter out of the total number of
shares available in the company. Generally, whenever promoters have a
higher stake, it signals they have confidence in their business. On the flip
side, if the promoter's stake is too high, the stock tends to become illiquid
as the amount available for trading is not huge. This results in the stock
appreciating very slowly.

Dividend Yield

Many investors like to watch the dividend yield, which is calculated as the
annualdividend income per share divided by the current share price. The
dividend yield measures the amount of income received in proportion to
the share price. If a company has a low dividend yield compared to other
companies in its sector, it can mean two things:

(1) The share price is high because the market reckons the company has
impressive prospects and isn't overly worried about the company's
dividend payments, or

(2) The company is in trouble and cannot afford to pay reasonable

dividends. At the same time, however, a high dividend yield can signal a
sick company with a depressed share price.

EPS

EPS (Earnings Per Share) is generally considered to be the single most

important variable in determining a share's price. It is also a major
component used to calculate the price-to earnings valuation ratio.

An important aspect of EPS that's often ignored is the capital that is

required to generate the earnings (net income) in the calculation. Two
companies could generate the same EPS number, but one could do so
with less equity (investment) - that company would be more efficient at
using its capital to generate income and, all other things being equal,

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would be a "better" company. Investors also need to be aware of earnings
manipulation that will affect the quality of the earnings number. It is
important not to rely on any one financial measure, but to use it in
conjunction with statement analysis and other measures.

P/E

In general, a high P/E suggests that investors are expecting higher

earnings growth in the future compared to companies with a lower P/E.
However, the P/E ratio doesn't tell us the whole story by itself. It's usually
more useful to compare the P/E ratios of one company to other companies
in the same industry, to the market in general or against the company's
own historical P/E. It would not be useful for investors using the P/E ratio
as a basis for their investment to compare the P/E of a technology
company (high P/E) to a utility company (low P/E) as each industry has
much different growth prospects. It is important that investors note an
important problem that arises with the P/E measure, and to avoid basing a
decision on this measure alone. The denominator (earnings) is based on
an accounting measure of earnings that is susceptible to forms of
manipulation, making the quality of the P/E only as good as the quality of
the underlying earnings number.

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BIBLIOGRAPHY

Books

• “Khan MY (1997) – Financial Services - Tata McGraw Hills”.

• “Malhotra Naresh (2002) Marketing Research - Prentice Hall of
India”.
• “The Portable MBA in Finance & Accounting. – Wiley E Book.”
• “Michael Violano (2001) Retail Banking Resources & Technologies”.
• “Love Lock Christopher (2001) – Service Marketing Pearson
Education Asia”.
• “Bhole LM, Financial Institutions and Markets - Tata McGraw Hills”.
• Investment Management by Avadhani.V.A.
• Introduction to Futures and Options Markets by John C Hull; Prentice
hall
• Statistical Methods by S.P.Gupta
• Business Research Methods by Donald R. Cooper & Pamela S.
Schindler

Web sites

• www.karvy.com
• www.nseindia.com
• www.bseindia.com
• www.rbi.org
• www.sebi.gov.in
• www.mcxindia.com
• www.ncdex.com
• www.nmce.com
• www.inlandrevenue.gov.uk

• www.bis.org
• www.investopedia.com
• www.investsmartindia.com
• www.icharts.com

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Abbreviations
NSE- National Stock Exchange of India Ltd.
SEBI - Securities Exchange Board of India
NCFM - NSE’s Certification in Financial Markets
NSDL - National Securities Depository Limited
CSDL - Central Securities Depository Limited
NCDEX - National Commodity and Derivatives Exchange Ltd.
NSCCL - National Securities Clearing Corporation Ltd.
FMC – Forward Markets Commission
NYSE- New York Stock Exchange
AMEX - American Stock Exchange
OTC- Over-the-Counter Market
LM – Lead Manager
IPO- Initial Public Offer
DP - Depository Participant
DRF - Demat Request Form
RRF - Remat Request Form
NAV – Net Asset Value
EPS – Earnings Per Share
DSCR - Debt Service Coverage Ratio
S&P – Standard & Poor
IISL - India Index Services & Products Ltd
CRISIL- Credit Rating Information Services of India Limited
CARE - Credit Analysis & Research Limited
ICRA - Investment Information and Credit Rating Agency of India
IGC – Investor Grievance Cell
IPF – Investor Protection Fund
SCRA - Securities Contract (Regulation) Act
SCRR – Securities Contract (Regulation) Rules.

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