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Project on Fundamental and Technical Analysis of Icici Bank

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   ACKNOWLEDGEMENT                            3
   BREIF COMPANY PROFILE                      4
   INVESTMENT PORTFOLIO                       7
   CHAPTER1: INTRODUCTION                     11
       INTRODUCTION                           12
       RATIONALE                              13
       OBJECTIVES                             14
   CHAPTER 4: BANKING SECTOR                  31
       BANKING IN INDIA                       32
       CURRENT SCENARIO                       33
       FUTURE OUTLOOK                         34
       BANKING STRUCTURE                      35
   CHAPTER 4: ANALYSIS                        38
       ICICI BANK ANALYSIS                    39
       HDFC BANK ANALYSIS                     43
       UNION BANK OF INDIA ANALYSIS           48
   FINDINGS & CONCLUSION                      54
   BIBLIOGRAPHY                               55

                                 Company Profile

Kotak Life Insurance is a joint venture between Kotak Mahindra Bank Ltd., along
with its affiliates and Old Mutual plc. Kotak Mahindra Old Mutual Life Insurance is
one of the fastest growing insurance companies in India and has shown remarkable
growth since its inception in 2001.

Kotak Mahindra believes in offering its customers a lifetime of value. Established in
1984, the Kotak Mahindra group has long been one of the India’s most reputed financial
organizations. Kotak Mahindra today is one of India’s leading financial institutions
offering complete financial solutions that encompass every sphere of life. The group has
a net worth of over Rs. 3,380 crore, employs around 12,300 people in its various
businesses and has a distribution network of branches, franchisees, representative offices
and satellite offices across 320 cities and towns in India and offices in New York,
London, Dubai, Mauritius and Singapore. The Group services around 2.9 million
customer accounts.

Old Mutual, a company with 160 years experience in life insurance, is the 37th largest
company in the FTSE100 with a market cap of approx. £10 billion and listed on London,
Stockholm and Johannesburg stock exchanges. Its fund under management exceeded
$468 billion as on 31st December, 2006. For customers, this joint venture translates into a
company that combines international expertise with the understanding of the local


   Kotak Eternal Life Plans
   Kotak Platinum Advantage Plan
   Kotak Headstart Child Plans
   Kotak Sukhi Jeevan Plan
   Kotak Privileged Assurance Plan
   Kotak Term Plan
   Kotak Preferred Term Plan
   Kotak Money Back Plan
   Kotak Child Advantage Plan
   Kotak Endowment Plan
   Kotak Capital Multiplier Plan
   Kotak Retirement Income Plan
   Kotak Retirement Income Plan(Unit-linked)
   Kotak Safe Investment Plan II
   Kotak Flexi Plan
   Kotak Easy Growth Plan
   Kotak Premium Return Plan

                               Investment Rationale

Each investment alternative has its own strengths and weaknesses. Some options seek to
achieve superior returns (like equity), but with corresponding higher risk. Other provide
safety (like PPF) but at the expense of liquidity and growth. Other options such as FDs
offer safety and liquidity, but at the cost of return. Mutual funds seek to combine the
advantages of investing in arch of these alternatives while dispensing with the

Indian stock market is semi-efficient by nature and, is considered as one of the most
respected stock markets, where information is quickly and widely disseminated, thereby
allowing each security’s price to adjust rapidly in an unbiased manner to new information
so that, it reflects the nearest investment value. And mainly after the introduction of
electronic trading system, the information flow has become much faster. But sometimes,
in developing countries like India, sentiments play major role in price movements, or say,
fluctuations, where investors find it difficult to predict the future with certainty. Some of
the events affect economy as a whole, while some events are sector specific. Even in one
particular sector, some companies or major market player are more sensitive to the event.
So, the new investors taking exposure in the market should be well aware about the
maximum potential loss, i.e. Value at risk.

Investment Portfolio of Kotak Life Insurance

Investment Portfolio of Aggressive Growth Fund

Investment Portfolio of Dynamic Growth Fund

                 Investment in Banks

      Name                       Investment % (avg)
STATE BANK OF INDIA                     5.15
    ICICI BANK                          4.60
    HDFC BANK                           2.48
UNION BANK OF INDIA                     0.95



     - 10 -
                             1.1 INTRODUCTION

Investing, like marriage, isn't something that should be entered into lightly. Investing in
equities gives high returns but they correspondingly have higher risk also. Before we
invest in a company, there are more than a few things we need to know about it.

Securities Analysis

An analysis of securities and the organization and operation of their markets. The
determination of the risk reward structure of equity and debt securities and their
valuation. Special emphasis on common stocks. Other topics include options, mutual
fluids and technical analysis.

Technical analysis is a method of predicting price movements and future market trends
by studying charts of past market action which take into account price of instruments,
volume of trading and, where applicable, open interest in the instruments.

Fundamental analysis is a method of forecasting the future price movements of a
financial instrument based on economic, political, environmental and other relevant
factors and statistics that will affect the basic supply and demand of whatever underlies
the financial instrument.

Main differences between the two types of analysis:

            Fundamental analysis              Technical analysis

            Focuses on what ought to Focuses on what                  actually
            happen in a market       happens in a market

            Factors involved in price Charts are based on market
            analysis:                     action involving:
                   1. Supply and demand           1.Price
                   2.Seasonal      cycles         2.Volume
                   3.Weather                      3. Open interest (futures
                   4. Government policy           only)

                                           - 11 -
                   1.2 RATIONALE FOR THE STUDY

In an industry plagued with skepticism and a stock market increasingly difficult to predict
and contend with, if one looks hard enough there may still be a genuine aid for the Day
Trader and Short Term Investor.

The price of a security represents a consensus. It is the price at which one person agrees
to buy and another agrees to sell. The price at which an investor is willing to buy or sell
depends primarily on his expectations. If he expects the security's price to rise, he will
buy it; if the investor expects the price to fall, he will sell it. These simple statements are
the cause of a major challenge in forecasting security prices, because they refer to human
expectations. As we all know firsthand, humans expectations are neither easily
quantifiable nor predictable.

If prices are based on investor expectations, then knowing what a security should sell for
(i.e., fundamental analysis) becomes less important than knowing what other investors
expect it to sell for. That's not to say that knowing what a security should sell for isn't
important--it is. But there is usually a fairly strong consensus of a stock's future earnings
that the average investor cannot disprove

Fundamental analysis and technical analysis can co-exist in peace and complement each
other. Since all the investors in the stock market want to make the maximum profits
possible, they just cannot afford to ignore either fundamental or technical analysis.

                                             - 12 -
                  1.3 OBJECTIVES OF THE STUDY

Primary Objective:
   To do equity analysis of chosen securities.


a) To justify the current investment in the chosen securities.
b) To understand the movement and performance of stocks.
c) To recommend increase/decrease of investment in a particular security.

                                          - 13 -

The research has been based on secondary data analysis. The study has been exploratory
as it aims at examining the secondary data for analyzing the previous researches that have
been done in the area of technical and fundamental analysis of stocks. The knowledge
thus gained from this preliminary study forms the basis for the further detailed
Descriptive research. In the exploratory study, the various technical indicators that are
important for analyzing stock were actually identified and important ones short listed.

The sample of the stocks for the purpose of collecting secondary data has been selected
on the basis of Random Sampling. The stocks are chosen in an unbiased manner and each
stock is chosen independent of the other stocks chosen. The stocks are chosen from the
Banking Sector.

The sample size for the number of stocks is taken as 3 for technical analysis and
fundamental analysis of stocks as fundamental analysis is very exhaustive and requires
detailed study.

                                          - 14 -
      CHAPTER- 2

         - 15 -
                          TECHNICAL ANALYSIS
Technical analysis can be conditionally divided into some main parts such as:

      Types of charts
      Graphical methods
      Analytical methods

Technical analysis is concerned with predicting future price trends from historical price
and volume data. The underlying axiom of technical analysis is that all fundamentals
(including expectations) are factored into the market and are reflected in exchange rates.

A technical analysis is based on three axioms:

      Movement of the market considers everything
      Movement of prices is purposeful
      History repeats itself


Support is a level at which bulls (i.e., buyers) take control over the prices and prevent
them from falling lower.

Resistance, on the other hand, is the point at which sellers (bears) take control of prices
and prevent them from rising higher. The price at which a trade takes place is the price at
which a bull and bear agree to do business. It represents the consensus of their

                                           - 16 -
Support levels indicate the price where the most of investors believe that prices will move
higher. Resistance levels indicate the price at which the most of investors feel prices will
move lower.

Role Reversal

When a resistance level is successfully broken through, that level becomes a support
level. Similarly, when a support level is successfully broken through, that level becomes
a resistance level.

The ideas of Charles Dow, the first editor of the Wall Street Journal, form the basis of
technical analysis. The Dow theory is a method of interpreting and signaling changes in
the stock market direction based on the monitoring of the Dow Jones Industrial and
Transportation Averages. Dow created the Industrial Average, of top blue chip stocks,
and a second average of top railroad stocks (now the Transport Average). He believed
that the behavior of the averages reflected the hopes and fears of the entire market. The
behavior patterns that he observed apply to markets throughout the world.

                                           - 17 -
Three Movements
Markets fluctuate in more than one time frame at the same time:
Nothing is more certain than that the market has three well defined movements which fit
into each other.
      The first is the daily variation due to local causes and the balance of buying and
       selling at that particular time.
      The secondary movement covers a period ranging from ten days to sixty days,
       averaging probably between thirty and forty days.
      The third move is the great swing covering from four to six years.

      Bull markets are broad upward movements of the market that may last several
       years, interrupted by secondary reactions. Bear markets are long declines
       interrupted by secondary rallies. These movements are referred to as the primary
      Secondary movements normally retrace from one third to two thirds of the
       primary trend since the previous secondary movement.
      Daily fluctuations are important for short-term trading, but are unimportant in
       analysis of broad market movements.
Various cycles have subsequently been identified within these broad categories.
Primary Movements have Three Phases
The general conditions in the market:
Bull markets
      Bull markets commence with reviving confidence as business conditions improve.
      Prices rise as the market responds to improved earnings

                                          - 18 -
        Rampant speculation dominates the market and price advances are based on hopes
         and expectations rather than actual results.
Bear markets
        Bear markets start with abandonment of the hopes and expectations that sustained
         inflated prices.
        Prices decline in response to disappointing earnings.
        Distress selling follows as speculators attempt to close out their positions and
         securities are sold without regard to their true value.

Bull Trends
A bull trend is identified by a series of rallies where each rally exceeds the highest point
of the previous rally. The decline, between rallies, ends above the lowest point of the
previous decline.
Successive higher highs and higher lows.

The start of an up trend is signaled when price makes a higher low (trough), followed by
a rally above the previous high (peak):

                     Start = higher Low + break above previous High.

The end is signaled by a lower high (peak), followed by a decline below the previous low

                    End = lower High + break below previous Low.

                                              - 19 -
A bear trend starts at the end of a bull trend: when a rally ends with a lower peak and then
retreats below the previous low. The end of a bear trend is identical to the start of a bull


Breaking through support or resistance levels results in a change of traders’ expectations
(which causes supply/demand lines to shift).
An Uptrend is defined by successively higher low-prices. A rising trend can be thought of
as a rising support level: the bulls are in control and are pushing prices higher. A

                                            - 20 -
Downtrend is defined by successively lower high-prices. A falling trend can be thought
of as a falling resistance level: the bears are in control and are pushing prices lower.

Moving averages are one of the oldest and most popular technical analysis tools. A
moving average is the average price of a financial instrument over a given time.

The moving average represents the consensus of investor’s expectations over the
indicated period of time.

The classic interpretation of a moving average is to use it in observing changes in prices.
Investors typically buy when the price of an instrument rises above its moving average
and sell when the it falls below its moving average.

                                            - 21 -
     CHAPTER- 3

         - 22 -
Fundamental analysis refers to the study of the core underlying elements that influence
the economy of a particular entity. It is a method of study that attempts to predict price
action and market trends by analyzing economic indicators, government policy and
societal factors (to name just a few elements) within a business cycle framework.


No industry or company can exist in isolation. It may have splendid managers and a
tremendous product. However, its sales and its costs are affected by factors, some of
which are beyond its control - the world economy, price inflation, taxes and a host of
others. It is important, therefore, to have an appreciation of the politico-economic factors
that affect an industry and a company.

The importance of industry analysis is now dawning on the Indian investor as never

New entrants increase the capacity in an industry and the inflow of funds. The question
that arises is how easy is it to enter an industry ?
There are some barriers to entry:
a) Economies of scale
b) Product differentiation
c) Capital requirement
d) Government policy

New inventions are always taking place and new and better products replace existing
ones. An industry that can be replaced by substitutes or is threatened by substitutes is
normally an industry one must be careful of investing in. An industry where this occurs

                                             - 23 -
constantly is the packaging industry -bottles replaced by cans, cans replaced by plastic
bottles, and the like. To ward off the threat of substitution, companies often have to spend
large sums of money in advertising and promotion.

In an industry where buyers have control, i.e. in a buyer's market, buyers are constantly
forcing prices down, demanding better services or higher quality and this often erodes

An industry unduly controlled by its suppliers is also under threat.

Rivalry among competitors can cause an industry great harm. This occurs mainly by price
cuts, heavy advertising, additional high cost services or offers, and the like.


At the final stage of fundamental analysis, the investor analyzes the company. This
analysis has two thrusts:
How has the company performed vis-à-vis other similar companies and
How has the company performed in comparison to earlier years
It is imperative that one completes the politico economic analysis and the industry
analysis before a company is analyzed because the company's performance at a period of
time is to an extent a reflection of the economy, the political situation and the industry.
What does one look at when analyzing a company?
The different issues regarding a company that should be examined are:
The Management
The Company
The Annual Report

                                            - 24 -

The single most important factor one should consider when investing in a company and
one often never considered is its management.
In India management can be broadly
divided in two types:
Family Management
Professional Management


An aspect not necessarily examined during an analysis of fundamentals is the company.
A company may have made losses consecutively for two years or more and one may not
wish to touch its shares - yet it may be a good company and worth purchasing into. There
are several factors one should look at.

1. How a company is perceived by its competitors?
One of the key factors to ascertain is how a company is perceived by its competitors. It is
held in high regard. Its management may be known for its maturity, vision, competence
and aggressiveness. The investor must ascertain the reason and then determine whether
the reason will continue into the foreseeable future.

2. Whether the company is the market leader in its products or in its segment
Another aspect that should be ascertained is whether the company is the market leader in
its products or in its segment. When you invest in market leaders, the risk is less. The
shares of market leaders do not fall as quickly as those of other companies. There is a
magic to their name that would make individuals prefer to buy their products as opposed
to others.

                                           - 25 -
3. Company Policies
The policy a company follows is also important. What is its plans for growth? What is its
vision? Every company has a life. If it is allowed to live a normal life it will grow upto a
point and then begin to level out and eventually die. It is at the point of leveling out that it
must be given new life. This can give it renewed vigour and a new lease of life.


The primary and most important source of information about a company is its Annual
Report. By law, this is prepared every year and distributed to the shareholders. Annual
Reports are usually very well presented. A tremendous amount of data is given about the
performance of a company over a period of time.
The Annual Report is broken down into the following specific parts:
A) The Director's Report,
B) The Auditor's Report,
C) The Financial Statements, and
D) The Schedules and Notes to the Accounts.

A. The Director’s Report
The Director’s Report is a report submitted by the directors of a company to its
shareholders, advising them of the performance of the company under their stewardship.
1. It enunciates the opinion of the directors on the state of the economy and the political
situation vis-à-vis the company.
2. Explains the performance and the financial results of the company in the period under
review. This is an extremely important part. The results and operations of the various
separate divisions are usually detailed and investors can determine the reasons for their
good or bad performance.
3. The Director’s Report details the company's plans for modernization, expansion and
diversification. Without these, a company will remain static and eventually decline.
4. Discusses the profit earned in the period under review and the dividend.
Recommended by the directors. This paragraph should normally be read with some

                                             - 26 -
skepticism, as the directors will always argue that the performance was satisfactory. If
adverse economic conditions are usually at fault.
5. Elaborates on the directors' views of the company's prospects in the future.
6. Discusses plans for new acquisition and investments. An investor must intelligently
evaluate the issues raised in a Director’s Report. Industry conditions and the
management's knowledge of the business must be considered.

B. The Auditor's Report
The auditor represents the shareholders and it is his duty to report to the shareholders and
the general public on the stewardship of the company by its directors. Auditors are
required to report whether the financial statements presented do, in fact, present a true
and fair view of the state of the company. Investors must remember that the auditors are
their representatives and that they are required by law to point out if the financial
statements are not true and fair..

C.Financial Statements
The published financial statements of a company in an Annual Report consist of its
Balance Sheet as at the end of the accounting period detailing the financing condition of
the company at that date, and the Profit and Loss Account or Income Statement
summarizing the activities of the company for the accounting period.

The Balance Sheet details the financial position of a company on a particular date; of the
company's assets (that which the company owns), and liabilities (that which the company
owes), grouped logically under specific heads. It must however, be noted that the Balance
Sheet details the financial position on a particular day and that the position can be
materially different on the next day or the day after.

Sources of funds
Shareholders Funds
Share Capital

                                            - 27 -
(i) Private Placement
(ii) Public Issue
iii) Rights issues
i) Capital Reserves
ii) Revenue Reserves
i) Secured loans:
ii) Unsecured loans
Fixed Assets
i) Raw materials
ii) Work in progress
iii) Finished goods

The Profit and Loss account summarizes the activities of a company during an
accounting period which may be a month, a quarter, six months, a year or longer, and the
result achieved by the company. It details the income earned by the company, its cost and
the resulting profit or loss. It is, in effect, the performance appraisal not only of the
company but also of its management- its competence, foresight and ability to lead.

Ratios express mathematically the relationship between performance figures and/or
assets/liabilities in a form that can be easily understood and interpreted.
No single ratio tells the complete story
Ratios can be broken down into four broad categories:

                                             - 28 -
(A) Profit and Loss Ratios
These show the relationship between two items or groups of items in a profit and loss
account or income statement. The more common of these ratios are:

(B) Balance Sheet Ratios
These deal with the relationship in the balance sheet such as :
1. Current assets to current liabilities.
2. Liabilities to net worth.

(C) Balance Sheet and Profit and Loss Account Ratios.
These relate an item on the balance sheet to another in the profit and loss account such as:
1. Earnings to shareholder's funds.
2. Net income to assets employed.

(D) Financial Statements and Market Ratios
These are normally known as market ratios and are arrived at by relative financial figures
to market prices:
1. Market value to earnings and
2. Book value to market value.
(a) Market value
(b) Earnings
(c) Profitability

The major ratios that are considered:
(i) Market value
(ii) Price- earnings ratio
(iii) Market-to-book ratio
(iv) Earnings
(v) Earning per share
(vi) Dividend per share

                                            - 29 -


      - 30 -

    The Indian banking scenario witnessed a significant development in the recent years with
the entry of private banks and their focus on retail banking and convergence of services. The
business models of the leading players are adapting to this impending change as banks widen the
spectrum of savings and loan products they offer. Private Banks are the best positioned to
acquire market share in the emerging scenario: A change is expected to make mergers between
banks and Foreign Institutional Investors possible, which will. Benefit large private bank

A significant milestone in Indian Banking happened in the late 1960s when the then Indira
Gandhi government nationalized, on 19th July, 1969, 14 major commercial Indian banks,
followed by nationalization of 6 more commercial Indian banks in 1980. The stated reason for the
nationalization was more control of credit delivery. After this, until the 1990s, the nationalized
banks grew at a leisurely pace of around 4%-also called as the Hindu growth of the Indian
After the amalgamation of New Bank of India with Punjab National Bank, currently there are 19
nationalized banks in India.

In the early 1990s the then Narasimha Rao government embarked on a policy of liberalisation and
gave licenses to a small number of private banks, which came to be known as New Generation
tech-savvy banks, which included banks like ICICI Bank and HDFC Bank. This move along with
the rapid growth in the economy of India, kick started the banking sector in India, which has seen
rapid growth with strong contribution from all the three sectors of banks, namely, government
banks, private banks and foreign banks. However there had been a few hiccups for these new
banks with many either being taken over like Global Trust Bank while others like Centurion Bank
have found the going tough.

The next stage for the Indian banking has been setup with the proposed relaxation in the norms
for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights
which could exceed the present cap of 10%.

                                              - 31 -
Current scenario
Currently, overall, banking in India is considered as fairly mature in terms of supply, product
range and reach-even though reach in rural India still remains a challenge for the private sector
and foreign banks. Even in terms of quality of assets and capital adequacy, Indian banks are
considered to have clean, strong and transparent balance sheets as compared to other banks in
comparable economies in its region. The Reserve Bank of India is an autonomous body, with
minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to
manage volatility without any stated exchange rate and this has mostly been true.

Indian economy is expected to be strong for quite some time especially in its services sector, the
demand for banking services-especially retail banking, mortgages and investment services are
expected to be strong.

Currently, India has 88 scheduled commercial banks (SCBs), 2& public sector banks (that is with
the Government of India holding a stake), 29 private banks (these do not have government stake;
they may be publicly listed and traded on stock exchanges) and 31 foreign banks.

                                              - 32 -
                             FUTURE OUTLOOK

   Total banking assets are expected to double and grow to $915 billion by 2010 - a CAGR
    of 15%
   $70 billion additional equity needed for growth plus Basel II compliance
   Mutual Funds: Assets Under Management (AUM) are expected to grow by 15% till 2010
   Retail Finance is expected to grow at an annual rate of 18%, from $27.6 billion in 2003-
    04 to $64.2 billion by 2008-09


   Demographic profile favours higher retail offtake - 54% of the population is in the 15-35
    years age group
   Capital expenditure by the Government and private industry is expected to grow at a high
   Economic growth of about 12% p.a. in nominal terms
   SME lending, a largely untapped market, presents a significant opportunity - SMEs
    account for 40% of the industrial output and 35% of direct exports
   Regulatory and technological enablers leading to high growth:
   The Banking system is technologically enabled with RTGS and cheque truncation in
   Improved asset management practices - Gross NPAs to Advances ratio reduced from 24-
    25% in 1993 to 7-8% in 2006

                                          - 33 -

The banking institutions in the organized sector, commercial banks are the oldest institutions,
some them having their genesis in the nineteenth century. Initially they were set up in large
numbers, mostly as corporate bodies with shareholding with private individuals. In the sixties of
the 20th century a large number of smaller and weaker banks emerged in the country.
Subsequently there has been a drift towards state ownership and control. Today 27 banks
constitute a strong Public Sector in Indian Commercial Banking.

Commercial Banks operating in India fall under the different sub categories on the basis of their
ownership and control over management.

    1. Public Sector Banks: Public Sector Banks emerged in India in three stages. First the
        conversion of the then existing Imperial Bank of India into State Bank of India in 1955,
        followed by the taking over of the seven associated banks as its subsidiary. Second the
        nationalization of 14 major commercial banks in 1969and last the nationalization of 6
        more commercial Bank in 1980. Thus 27 banks constitute the Public Sector Banks.

    2. New Private Sector Banks: after the nationalization of the major banks in the private
        sector in 1969 and 1980, no new bank could be setup in India for about two decades,
        though there was no legal bar to that effect. The Narasimham Committee on financial
        sector reforms recommended the establishment of new banks of India. RBI thereafter
        issued guidelines for setting up of new private sector banks in India in January 1993.

        These guidelines aim at ensuring that new banks are financially viable and
        technologically up to date from the start. They have to work in a professional manner, so
        as to improve the image of commercial banking system and to win the confidence of the

        Eight private sector banks have been established including banks sector by financially
        institutions like IDBI, ICICI, and UTI etc.

                                               - 34 -
                                    RESERVE BANK OF INDIA

                                         SCHEDULED BANKS

COMMERCIAL BANKS                                             CO-OPERATIVE BANKS

              PUBLIC SECTOR BANKS (27)                                      URBAN CO-OPERATIVE (52)

                                        SBI AND ASSOCIATES (8)               STATE CO-OPERATIVE (16)

                                   NATIONALIZED BANKS (19)

                   PRIVATE BANKS (29)

                                           OLD BANKS (21)

                                            NEW BANKS (8)

                              Fig 1: Banking Structure in India

                                             - 35 -
3. Local Area Banks: Such Banks can be established as public limited companies in the
   private sector and can be promoted by individuals, companies, trusts and societies. The
   minimum paid up capital of such banks would be 5 crores with promoters contribution at
   least Rs. 2 crores. They are to be set up in district towns and the area of their operations
   would be limited to a maximum of 3 districts. At present, four local area banks are
   functional, one each in Punjab, Gujarat, Maharashtra and Andhra Pradesh.

4. Foreign Banks: foreign commercial banks are the branches in India of the joint stock
   banks incorporated abroad. There number was 31 as on 31.03.2005.

5. Cooperative Banks: Besides the commercial banks, there exists in India another set of
   banking institutions called cooperative credit institutions. These have been made in
   existence in India since long. They undertake the business of banking both in urban and
   rural areas on the principle of cooperation. They have served a useful role in spreading
   the banking habit throughout the country. Yet, there financial position is not sound and a
   majority of cooperative banks has yet to achieve financial viability on a sustainable basis.

   The cooperative banks have been set up under various Cooperative Societies Acts
   enacted by State Governments. Hence the State Governments regulate these banks. In
   1966, need was felt to regulate their activities to ensure their soundness and to protect the
   interests of depositors. Consequently, certain provisions of the Banking Regulation
   Act1949 were made applicable to the cooperative Banks as well. These Banks have thus
   fallen under dual control viz., that of the State Government and tat of the RBI which
   exercises control over them so far as their banking Operations are concerned.

                                          - 36 -


    - 37 -
                      Brief Company Profile : ICICI BANK

ICICI Bank (formerly Industrial Credit and Investment Corporation of India) is India's largest
private sector bank in market capitalization and second largest overall in terms of assets. ICICI
Bank has total assets of about USD 79 Billion (end-Mar 2007), a network of over 950 branches
and offices, about 3500 ATMs, and 24 million customers(as of end July '07). 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 specialised subsidiaries and affiliates in the areas of
investment banking, life and non-life insurance, venture capital and asset management. ICICI
Bank's equity shares are listed in India on stock exchanges at Kolkata and Vadodara, the Stock
Exchange, Mumbai and the National Stock Exchange of India Limited and its ADRs are listed on
the New York Stock Exchange (NYSE).

Key Executives
Mr. Kundapur Vaman Kamath
Chief Exec. Officer

Smt. Vishakha Mulye
Chief Financial Officer

Mrs. Chanda Kochhar
Exec. Director of Retail Banking Bus., Deputy Managing Director

Ms. Madhabi Puri-Buch
Head of Operations

                                               - 38 -
Equity Research                                      ICICI BANK Ltd
Aug 2006                                          ( Rs 920, P/E: 26.6, BUY )

                                                              Price Target: Rs. 1100

 ISIN Code      : INE090A01013       India’s largest private sector bank ICICI Bank had
                                     hit the market with an offer size of Rs200bn, with
 Face Value : 10.00                  half the offering scheduled in the domestic
                                     market. This offering is estimated to sustain the
 52 Week Low : 672.30                company’s growth rate over the next three years
                                     after factoring in Basel II impact. Unlocking of
 52 Week Hi        : 1069.90         subsidiary value is likely to be the biggest driver
                                     for the Bank's valuation.

Stock performance ( Rel to Nifty )
                                     Investment summary

                                     Positive outlook, despite the huge dilution
                                     Positive outlook for the Bank stems from the
                                     company’s good market positioning and high pricing
                                     power, demonstrated over the past 6 months. While
                                     ROE would remain compressed at ~11%, normalized
                                     for investments in subsidiaries it stands at a
                                     respectable ~15%.

                                     Capital sufficient for the next two-three years
                                     The current capital raising would be sufficient for the
                                     Bank for the next 2-3 years supporting an asset
                                     growth of 22%. Given RBI’s recent guidelines, many
                                     banks are likely to tap the capital markets, giving
                                     ICICI Bank the early mover advantage.

                                     FIPB gives approval Financial Services Co
                                     ICICI Bank obtained the FIPB (foreign investment
                                     promotion board) approval for selling upto 24%
                                     stake in its financial services company to foreign
                                     investors. The proposed finco (still subject to RBI
                                     approval) would be the holding company for its life
                                     insurance, general insurance and asset management

                                     Finco approval positive for valuations
                                     ICICI bank had earlier proposed sale of 5.9% stake in
                                     finco to few investors (subject to approvals) for
                                     Rs26.5bn. This values the finco at US$11bn and the
                                     3 businesses at US$15bn. The approval is very
                                     positive for valuations and could provide benchmarks
                                     for the subsidiaries

                                         - 39 -

   - 40 -
Key risk
Asset quality deterioration
Rising interest rates and consequently deteriorating asset quality remains the key risk to
valuations. Further management's decision to move from mortgage products to other high yield
assets could impact asset quality in the medium term.

                                           - 41 -
                  Brief Company Profile : HDFC BANK

HDFC Bank, one of the commercial banks of India, was incorporated in August 1994, after the
Reserve Bank of India allowed setting up of Banks in the private sector. The Bank was promoted
by the Housing Development Finance Corporation Limited, a premier housing finance company
(set up in 1977) of India. Net Profit for the year ended March 31, 2006 was Rs. 1,141 crores.
Currently HDFC Bank has 753 branches, 1,716 ATMs, in 320 cities in India, and all branches of
the bank are linked on an online real-time basis. The bank offers many innovative products &
services to individuals, corporates, trusts, governnments, partnerships, financial institutions,
mutual funds, insurance companies.

Key Executives
Jagdish Capoor
Chairman / Chair Person

Aditya Puri Managing

Keki Mistry
Vineet Jain

                                             - 42 -
Equity Research                                     HDFC BANK Ltd
Aug 2006                                          ( Rs 1188, P/E: 33.2, BUY )

                                                               Price Target: Rs. 1435

 ISIN Code      : INE040A01018       Investment summary

 Face Value : 10.00                  1QFY07 earnings 3-4% higher than estimated
                                     HDFC Bank’s 1QFY07 earnings were about 3-4%
 52 Week Low : 801.30                higher than estimated, driven principally by stronger
                                     non-interest income. While top line (net interest
 52 Week Hi        : 1248.50         income) was a tad lower, it was owing to a mismatch
                                     of balance sheet and revenue growth and the higher
                                     funding costs of the previous quarter, which was
                                     expected. Asset quality remains steady with gross
Stock performance ( Rel to Nifty )
                                     NPLs at 1.3% of customer assets and net NPLs at
                                     0.4%. Loan growth at 33% was few notches higher
                                     as the results reinforce that the bank continues to be
                                     on a strong growth trajectory.

                                     Earnings raised by 2-3%; to grow at 30% CAGR
                                     through FY09
                                     Building in the equity infusion by HDFC Ltd (USD 330
                                     million), margins are likely to be steady, resulting in
                                     stronger earnings growth. This assumes high NPL
                                     coverage after factoring in an uptick in the NPL cycle.
                                     Net NPLs forecast at <0.5% through FY10.

                                     Looking ahead – FY08; earnings growth at 30%
                                     A 30% CAGR growth in earnings through FY08-09 on
                                     the back of greater visibility on the bank’s ability to
                                     generate loan growth of +34-35%. Key earnings
                                     drivers are likely to be:

                                     Loan growth of around 35% v/s earlier estimates
                                     of 30-31% yoy
                                     Fee revenues are likely to be higher at +35% yoy
                                     (and would show the expected rebound) supported
                                     by enhanced customer acquisition especially as the
                                     bank has expanded its distribution network very
                                     aggressively in the past 6 months.

                                     Strong volume growth with easing margin
                                     Loan growth could be a few notches higher at +34%
                                     owing to the enhanced penetration of its products
                                     and ongoing buoyancy in its retail (non-auto)
                                     business and sustained uptick in the corporate loan
                                     growth cycle. Moreover, margins may be steady
                                     owing to the equity infusion by HDFC and the share
                                     of low cost deposits sustaining at +50% levels v/s 47-
                                     48% assumed earlier.

                                         - 43 -
Holding Pattern of HDFC Bank
Description                                                                                % of Holding

Total Foreign                                                                                      51.46

Total Institutions                                                                                   5.59

Total Govt. Holding                                                                                  0.79

Total Non-Promoter Corporate Holdings                                                                7.92

Total Promoters                                                                                    21.56
Total Public & Others                                                                              12.68

Total                                                                                             100.00

                                    Income Statement

As On (Months)                     31-Mar-07                     31-Mar-06               31-Mar-05
Profit / Loss A/c                Rs. mn         % BT           Rs. mn     % BT      Rs. mn        % BT
Interest Income                 68890.20         81.29         44753.40    78.67    30934.90       82.92
Other Income                    15856.90         18.71         12136.40    21.33        6373.60    17.08
Operating Income (OI)           84747.10        100.00         56889.80   100.00    37308.50      100.00
Interest Expenses               31794.50         37.52         19295.00    33.92    13155.60       35.26
Employee Expenses                 7768.60          9.17         4868.20      8.56       2766.70      7.42
OPBDT                           18587.50         21.93         14324.00    25.18    11236.60       30.12
OPBT                            16391.50         19.34         12538.10    22.04        9795.90    26.26
Extraordinary / Prior period            0.00       0.00            0.00      0.00          0.00      0.00
Tax                               4977.00          5.87         3830.30      6.73       3140.30      8.42
PAT                             11414.50         13.47          8707.80    15.31        6655.60    17.84
Dividend                          2235.70          2.64         1722.30      3.03       1400.70      3.75

Share Statistics
As on                                          31-Mar-07                  31-Mar-06               31-Mar-05
EPS (Rs.)                                           35.74                     27.81                    21.48
CFPS (Rs.)                                          42.61                     33.51                    26.13
Book Value (Rs.)                                   201.42                    169.24                  145.86
DPS (Rs.)                                               7.00                     5.50                    4.52

                                               - 44 -
                                 Balance Sheet (Rs in Cr.)

                                          2007       2006       2005       2004       2003
Owners' Fund
Equity Share Capital                        319.39     313.14     309.88     284.79     282.05
Share Application Money                       0.00       0.07       0.43       1.45       6.91
Peference Share Capital                       0.00       0.00       0.00       0.00       0.00
Reserves & Surplus                        6,113.76   4,986.39   4,209.97   2,407.09   1,962.78
Loan Funds
Deposits                                 68,297.94 55,796.82 36,354.25 30,408.86 22,376.07
Borrowings made by the bank               2,815.39 4,560.48 5,290.01 2,907.82 2,284.65
Other Liabilities & Provisions           13,689.13 7,849.49 5,264.46 6,296.98 3,511.62
Total                                    91,235.61 73,506.39 51,429.00 42,306.99 30,424.08

Cash & Balances with RBI                  5,182.48   3,306.61   2,650.13   2,541.98   2,081.96

Money at call and Short Notice            3,971.40   3,612.39   1,823.87   1,115.57   1,087.26

Investments                              30,564.80 28,393.96 19,349.81 19,256.79 13,388.08

Advances                                 46,944.78 35,061.26 25,566.30 17,744.51 11,754.86

Fixed Assets
Gross Block                               1,917.56   1,589.47   1,290.51   1,061.33    854.11
Less: Revaluation Reserve                     0.00       0.00       0.00       0.00      0.00
Less: Accumulated Depreciation              950.89     734.39     582.19     444.42    325.53
Net Block                                   966.67     855.08     708.32     616.91    528.58
Capital Work-in-progress                      0.00       0.00       0.00       0.00      0.00

Other Assets                              3,605.48   2,277.09   1,330.57   1,031.23   1,583.34

Miscellaneous Expenses not written off        0.00      0.00      0.00      0.00      0.00
Total                                    91,235.61 73,506.39 51,429.00 42,306.99 30,424.08

                                            - 45 -
- 46 -
         Brief Company Profile : UNION BANK OF INDIA

Union Bank of India (UBI), is the 5th largest state owned bank in India, with a balance sheet size
of >US$25bn as on Mar-07. It has a vast distribution network with over 2,206 branches and 770
ATMS. While the bank has a pan India presence, western region accounts for >40%of its loans
and 30% of its deposit base. With >60 of its total lending to the corporate sector, UBI is highly
leveraged to the rising demand for corporate credit.
It serves approximately 15 million customers. All its branches are computerized, and as its 1,000
branches are under the network of core banking solution, which covers 85% business of the bank.
The bank is providing e-banking services and other online services through all these CBS

Key Executives

Chairman & Managing Director

Executive Director

Executive Director

Government of India Nominee

                                               - 47 -
Equity Research                              Union Bank of India
Jul 2006                                     ( Rs 131.6, P/E: 7.8, BUY )

                                                           Price Target: Rs. 180

 ISIN Code    : INE692A01016    Offering the best risk reward ratio among
                                government banks, Union Bank of India
 Face Value : 10.00             ranks in the top tier on all operating
                                parameters and trades at the lowest end of
 52 Week Low : 142.00           the valuation range at <0.9x FY09CL adj book

 52 Week Hi         :   80.50   Investment summary

                                Top-tier ranking on all parameters
Stock performance               It ranks in the top tier on all operational measures
                                with 30% earnings growth in FY08CL and among the
                                highest FY09CL ROEs at 21%. It is effectively
                                leveraging     its    leadership     in      technology
                                implementation to achieve the highest growth in fee
                                revenue, improve the percentage of low-cost demand
                                deposits and attain the best operating efficiency.

                                Moving to a higher growth trajectory
                                With the excess of 75% of its lending to the non-retail
                                sector, Union Bank is a key beneficiary of rising
                                corporate credit demand. With management
                                strategically reducing its lending to large corporates
                                and focusing on the SME segment, the margins are
                                expected to expand by 4-7bps over next two years.
                                Strategic initiatives like a life-insurance venture in
                                collaboration with Bank of India and Dai-chi of Japan,
                                can drive next leg of growth.

                                Earnings to grow +25% in FY08-09
                                UBI’s earnings are expected to grow 30% in FY08,
                                25% in FY09 led by:
                                     A pick up in loan growth led by rising
                                        corporate credit demand
                                     20% sustained growth in fee revenue
                                     Marginal improvement in operating efficiency
                                     Sharp decline in investment hits
                                Asset quality to remain stable with gross non-
                                performing loans at 2.9%, and a coverage ratio
                                should improve to 100% as the bank maintains its
                                aggressive provisioning policy.

                                Attractive valuations
                                Given >30% earnings growth in FY08 and high ROE
                                of 20% in FY08(21% in FY09), Union Bank could
                                trade up to 1.2-1.3x one-year forward(FY09CL)
                                adjusted book, underpinning price target of 180.

                                    - 48 -
Year to 31 Mar           05A                06A          07A     08CL            09CL
Op income (Rsm)         28307              29994        36320    41570           48852
Net profit (Rsm)         7191              6752          8454    11032           13812
   EPS (Rs)              15.6               14.0         16.7    21.8            27.3
Pex (@Rs 118.7)          7.6                8.5           7.1     5.4             4.3
Dividend yield %         3.0                3.0           3.0     3.8             4.6
  Price/book             1.5                1.3           1.2     1.0             0.8
    ROAA                 1.10               0.83         0.88    0.98            1.04
    ROAE                 21.4               16.5         17.3    19.6            21.0

                                       Shareholding Pattern



                                                                Govt. Of India


                                              - 49 -
Leveraging Technology efficiently
Union bank is amongst the leaders in technology implementation with >80% of its business being
on a common banking platform (CBS). While many other state owned banks have been
implementing CBS, Union bank seems to be amongst the few banks which have effectively
leveraged these initiatives to:
a) drive fee income growth
b) increase the proportion of low cost demand deposits and
c) improve operating efficiency

Fee income growth
UBI’s fee revenues have grown 23% in FY06 and 26% in FY07, one of the highest across state
owned banks, as it leveraged its technology platform to roll out new retail products (depository,
credit card/debit card), increase cross selling to its vast client base and gain market share in areas
like foreign exchange business ( + 33%yoy) etc.

C/I ratio has declined
The bank has re-deployed its surplus staff (outcome of CBS implementation) in new business
initiatives like marketing of retail products, etc. Hence while the bank’s top line has grown +20%,
related costs haven’t increased so much resulting in a significant decline in the C/I ratio(from
49% in FY05 to 42% in FY07) making itone of the best amongst all state owned banks.

Asset quality to remain stable
Union bank has seen a sharp improvement in asset quality over the past two years with its gross
NPLs declining to <3% of advances in FY07 (v/s 7.6% in FY04) and net NPLs to <0.5%. The
improvement has been led by lower incremental delinquencies, higher recoveries and aggressive
provisioning. In FY07 Union Bank’s total NPL provisioning, at around 0.8% of advances, was at
the higher end of all state-owned banks.

                                                - 50 -
      Income Statement
  Income (Rs Mn)         FY05A         FY06A         FY07A         FY08CL         FY09CL
Interest income             49698         58637         73822         89621         108189
Interest Expense            29052         34894         45920         56595          68961
Net Interest income         20646         23743         27902         33026          39228
Other income                 7661          6251          8418          8545           9624
- Treasury Gains             2603           954          1085           750            600
Total income                28307         29994         36320         41570          48852
Operating expenses          12575         14024         14759         16812          18744
Pre-provision profit        15732         15970         21561         24758          30107
Total provision              9616          7023          7757          8293           9493
-Provision for NPL           2391          2567          5044          6250           7500
- for investments            5712          4338          2714          2043           1993
- Other                      1513           118           000           000            000
PBT                          6116          8947         13804         16466          20614
PAT                          7191          6752          8454         11032          13812

      Key Ratios
                         FY05A         FY06A         FY07A         FY08CL         FY09CL
EPS                          15.6          13.4          16.7           21.8           27.3
Earnings Growth              1.0%        -14.5%         25.2%         30.5%          25.2%
Capital Adequacy            12.3%         11.4%         12.8%         11.4%          11.5%
Cost-Income ratio            49%           48%           42%            41%            39%
Loan Growth                  36%           33%           17%            22%            20%
Yield on Investments         8.4%          8.0%          7.8%          7.9%           8.0%
Dividend per share               3.5           3.5           3.5            4.5            5.5
Dividend payout              25%           29%           24%            23%            23%
Dividend yield               2.9%          2.9%          2.9%          3.8%           4.6%
P/E                              7.7           9.0           7.2            5.5            4.4

                                           - 51 -
   Balance sheet
( Rs bn)              FY04          FY05A         FY06          FY07E         FY08E
Cash balances                38.5       65.7             63.9       84.3          87.8
Advances                 294.3         401.1         533.8         623.9         761.1
Investments              224.4         227.9         259.2         279.8         318.6
Fixed assets                  7.7           8.2           8.1           8.2           7.8
Current Assets               18.3       21.2             26.3       30.6          35.2
Total Assets             583.2         724.1         891.3        1026.8        1210.6
Equity capital                4.6           4.6           5.1           5.1           5.1
Reserves & Surplus           26.3       31.5             40.5       46.8          55.3
Shareholder’s funds          30.9       36.1             45.6       51.9          60.4
Deposits                 505.6         618.3         740.9         851.8        1003.8
Borrowings                    9.3       20.2             39.7       42.2          48.5
Subordinated debt            15.2       19.7             27.7       34.2          42.8
Current liabilities          22.2       29.8             37.3       46.7          55.1
Total Liabilities        583.2         724.1         891.3        1026.8        1210.6

                                        - 52 -
                                  Findings & Conclusion

            Stock                         Target Price (Rs)            Recommendation
         ICICI Bank                             1100                            BUY
         HDFC Bank                              1435                            BUY
     Union Bank Of India                        180                             BUY

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 and UBI are going to
perform well, with huge potential of earnings for equity holders.

It is recommended to increase the investment in Banks.

                     Stock                                          P/E ratio
                  ICICI Bank                                          26.6
                 HDFC Bank                                            33.2
             Union Bank of India                                       7.8

Investment in Union Bank of India should be increased from current 0.95% to at least 2% of the
total investments in the equity market.

                                                - 53 -

Websites Referred:

Reports Referred:
CLSA – Asia Pacific Markets analysis of Union Bank of India
Merril Lynch analysis of HDFC Bank
India Infoline report on ICICI Bank’s FPO

                                            - 54 -

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