EXECUTIVE SUMMARY

This project is titled "A STUDY ON FUNDAMENTAL ANALYSIS OF BANKING

COMPANIES LISTED IN BSE WITH REFERENCE TO OUR INVESTMENTS ENTERPRISE
LIMITED (FORMERLY COCHIN STOCK EXCHANGE LIMITED)”

This study was conducted at Our investments enterprise limited (formerly cochin stock exchange
limited) Kaloor branch. This project involves the analysis of ten Banks which include both private
and public sector banks, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Federal
Bank, SBI, Bank of Baroda, IDBI, Canara Bank, Punjab National Bank using fundamental
analysis, which involves Analyzing the past five year's financial data to understand the firm's
financial conditions. This study also is an attempt to identify if the fundaments of firm are reflected
in the performance of the firm's stock.

The methodology of analysis is on the EIC frame-work, which includes understanding the
economic conditions, the attractiveness of the banking industry for an investor and finally
analyzing the performance of the banks based on the analysis of the company's financial
Performance.

It is found that the economic conditions are on a revival after the slow down on 2013.But the
growth is restricted by high levels of inflation. The banking sector is generals having lesser profits
due to the huge bad loans. But there is a huge potential for growth attributed increased push by the
government for financial inclusion. The company's financials are analyzed based on the CAMEL
frame-work, which issued world-wide in evaluating the performance of banks by central banks.
This CAMEL frame-work involves ranking the firms based on capital adequacy, asset quality,
management efficiency, earnings quality and liquidity, based on financial data of the past five
years (2011-2015).

The summary of finding of the study conducted to analyze the banking companies listed in BSE
with reference Our Investments Enterprise Limited based on indicators like fundamental ratios
analysis, camel rating and intrinsic value follows. Based on the highest intrinsic value, HDFC
Bank in top position followed by Kotak Mahindra Bank and Canara Banks. Study shows Investors
may buy and hold the shares of SBI, BOB, Canara Bank as the market price of shares of these
banks are lower than its intrinsic value and these shares are underpriced and can move up in future
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to match with its intrinsic value. Based on camel rating composite performance HDFC bank is
ranked first followed by Axis Bank and ICICI bank. Based on study in camel rating analysis it can
be found out private sector banks are performing better than public sector banks in area of capital
adequacy, asset quality, management efficiency and earning quality, but in case of liquidity public
sector banks is better.

In addition to these, a brief study about the Our Investments Enterprise Ltd Kaloor, was also
conducted, in which the operations, departments and the functioning of the company was analyzed.

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 CHAPTER 1

INTRODUCTION

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1.0 INTRODUCTION

A project entitled "A study on Fundamental analysis of banking companies listed in BSE with
reference to our investments enterprise limited [formerly cochin stock exchange limited]"

The selected banks are HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, Federal Bank,
State Bank of India, Bank of Baroda, Punjab National Bank, IDBI Bank, Canara Bank The study
is an attempt to analyze the financial strength and future investment prospective of the banks. The
performance of these banks is analyzed in terms of fundamental analysis. The fundamental
analysis highlights the intrinsic value of the shares based on the current and future earning capacity
of the company. Rational investors always focus on utmost return with bare minimum risk. Hence,
for him, well- diversified equity funds are the superlative opportunity available for the investment.
A potential investor always focuses on the upcoming affluence of the key players from highly
optimistic sectors of the economy. Hence the study concerned with these banks would be valuable
for the investors.

The importance of the stock exchanges has grown tremendously over the past several years. It has
become an important ingredient of economic growth in our country. The concept of stock market
evolved after the development of Wall Street in the US. Ever since it has grown and spread across
the world

Stock exchange provides an investment mechanism for savers of money. It offers several
investment avenues like shares, bonds or the so called mutual funds which a financial innovation
Investing in financial securities are considered to be one of the best avenues for investing one’s
savings, while it is acknowledged to be one of the riskiest avenues for investment. Hence a
thorough analysis is inevitable on the part of investors, be it individuals or stock broking companies
to reap the benefits later and to avoid some of the risks prevalent in the market. This is made
possible with the help of certain statistical and mathematical tools. The study is mainly based of
finding out whether particular share will be buy or not and the study help to set up a good portfolio.

A. STATEMENT OF PROBLEM

In the present state of the economy there is an imperative need for investors to protect their
investment. Though it is a well-known fact that investing in securities such as shares, debentures,

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bonds etc. are profitable and exciting, it is an avenue which involves a great deal of risk. Hence
the investing in financial securities is considered to be one of the best avenues for investing one's
savings, while it is acknowledged to be one of the riskiest avenues for investment. The Indian
Capital Market is regarded as the barometer for the country's economic health and performance.
Thus any development will reflect on the equity prices with positive and negative effects.
Therefore, the study on the fundamental analysis of S major players become relevant to appraise
the intrinsic value of a security aims at spotting out the future avenues and prospects in banking
sector thereby enabling the investors to make proper decisions at the right time.

B. OBJECTIVES

Primary objective

 Fundamental analysis of banking industry.

Secondary objectives

 To understand the performance, growth and financial analysis of selected

companies in banking sector.

 To determine the intrinsic value of the shares based on the current and future

earning capacity.

 To compare the financial performance of selected companies.

 To compare the intrinsic value with the market value for assessing whether the

shares are overvalued or undervalued.

 To recommend 'Buy' or 'Sell' option to the interested parties.

C.SCOPE AND SIGNIFICANCE OF WTUDY

The scope of study is limited to selected 10 banks. The significance of study is that it helps to make
decisions as regard to whether it is wise to invest in banking institution in India and decide whether

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to buy or sell scrip. The investment decisions are made on the basis of analysis of general trend on
banking sector. The study will help in maximizing yield and minimizing risk

D.LIMITATIONS

 Completely dependent on secondary sources. Therefore, not free from bias.

 Analysis is going to be done only on the basis of some factors therefore present accuracy
is not possible.
 Analysis on 5-year data, 2014- to 2018.

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 CHAPTER 2

REVIEW OF LITERATURE

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3.0THEORETICAL FRAMEWORK OF THE STUDY

Two analytical models

When the objective of the analysis is to determine what stock to buy and at what price, there are
two basic methodologies

1. Fundamental analysis maintains that markets may misprice a security in the short run but that
the "correct" price will eventually be reached. Profits can be made by purchasing the mispriced
security and then waiting for the market to recognize its "mistake" and reprice the security.

2. Technical analysis maintains that all information is reflected already in the stock price. Trends
'are your friend' and sentiment changes predate and predict trend changes. Investors' emotional
responses to price movements lead to recognizable price chart patterns. Technical analysis does
not care what the 'value' of a stock is. Their price predictions are only extrapolations from historical
price patterns.

Investors can use any or all of these different but somewhat complementary methods for stock
picking. For example, many fundamental investors use technical for deciding entry and exit points.
Many technical investors use fundamentals to limit their universe of possible stock to 'good'
companies. The choice of stock analysis is determined by the investor's belief in the different
paradigms for "how the stock market works". See the discussions at efficient market hypothesis,
random walk hypothesis, capital asset pricing model, Fed model Theory of Equity Valuation,
market-based valuation, and behavioral finance. Fundamental analysis of a business involves
analyzing its financial statements and health, its management and competitive advantages, and its
competitors and markets. When applied to futures and forex, it focuses on the overall state of the
economy, interest rates, production, earnings, and management. When analyzing a stock, futures
contract, or currency using fundamental analysis there are two basic approaches one can use;
bottom up analysis and top down analysis. The term is used to distinguish such analysis from other
types of investment analysis, such as quantitative analysis and technical analysis.

Fundamental analysis is performed on historical and present data, but with the goal of making
financial forecasts. There are several possible objectives:

 To conduct a company stock valuation and predict its probable price Evolution

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  To make a projection on its business performance,
 To evaluate its management and make internal business decisions
 To calculate its credit risk.

Fundamental analysis includes:

1. Economic analysis

2. Industry analysis

3. Company analysis

On the basis of these three analyses the intrinsic value of the shares is determined. This is
considered as the true value of the share. If the intrinsic value is higher than the market price it is
recommended to buy the share. If it is equal to market price hold the share and if it is less than the
market price sells the shares.

2.1REVIEW OF LITERATURE

Reviewing of all literature on the area of research is a preliminary step before attending to plan the
study. It is essential to review all the relevant materials connected with the problem chosen. It is
necessary to show how the problem under the study relates to the previous research studies. It is
also equally important to show how this work is differed from existing literature. The review of
previous literature is an existing task calling for deep insight and clear prospective of the entire
field. No experienced researcher can think of undertaking study without acquainting himself with
the contribution of previous investigators.

Nabhi Kumar Jain (1992) specified certain tips for buying shares for holding and also for selling
shares. He advised the investors to buy shares of a growing company of a growing industry. Buy
shares by diversifying in a number of growth companies operating in a different but equally fast
growing sector of the economy. He suggested selling the shares, the moment company has or
almost reached the peak of its growth. Also, sell the shares the moment you realize you have made
a mistake in the initial selection of the shares. The only option to decide when to buy and sell high
priced shares is to identify the individual merit or demerit of each of the shares in the portfolio and
arrive at a decision.

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Carter Randal (1992) offered to investors the underlying principles of winning on the stock
market. He emphasized on long term vision and a plan to reach the goals. He advised the investors
that to be successful, they should never be pessimists. He revealed that though there has been a
major economic crisis almost every year, it remains true that patient investors have consistently
made money in the equities market. He concluded that investing in the stock market should be an
un-emotional endeavor and suggested that investors should own a stock if they believe it would
perform well.

Bhalla V.K. (1997) reviewed the various factors influencing the equity price and price earnings
ratio. He is of the opinion that equity prices are affected primarily by financial risk considerations
that, in turn, affect earnings and dividends. He also stated that market risk in equity is much greater
than in bonds, and it influences the price also. He disclosed that many analysts follow Price
earnings (P/E) ratio to value equity, which is equal to market price divided by earnings per share.
He observed that inflationary expectations and higher interest rates tend to reduce P/E ratios
whereas growth companies tend to have higher P/E ratios. He suggested that an investor should
examine the trend of P/E ratios over time for each company.

Avijit Banerjee (1998) reviewed Fundamental Analysis and Technical Analysis analyses the
worthiness of the individual securities needed to be acquired for portfolio construction. The
Fundamental Analysis aims to compare the Intrinsic Value with the prevailing market price and to
take decisions whether to buy, sell or hold the investments. The fundamentals of the economy,
industry and company determine the value of a security. If the intrinsic value is greater than the
market price, the stock is underpriced and should be purchased. He observed that the Fundamental
Analysis could never forecast the M.P. of a stock at any particular point of time. Technical
Analysis removes this weakness. Technical Analysis detects the most appropriate time to buy or
sell the stock. It aims to avoid the pitfalls of wrong timing in the investment decisions. In order to
evaluate the financial performance of banking and financial sector the researchers, academicians
and policy makers have investigated several studies in different perspectives and in different time
periods.

BodlaandVerma (2006) recommended that such types of rating would help the Reserve Bank of
India to identify the banks whose performance needs special supervisory attention. The main

10
attempt of CAMEL system is to find out problems which are faced by the banks themselves and
catch up the comparative analysis of the performance of various banks.

Hirtleand Lopez (1999) stressed that the bank's CAMEL rating is highly confidential, and only
exposed to the bank's senior management for the purpose of projecting the business strategies, and
to appropriate supervisory staff. CAMEL is an acronym for five components of bank safety and
soundness: capital adequacy, asset quality, management quality, earning ability, liquidity. A study
conducted by Lace and Stephen (2001) showed that there is definitely a relationship between bank
efficiency scores and financial ratios used to proxy a bank's CAMEL rating.

Barr et al. (2002) viewed that "CAMEL rating criteria has become a concise and indispensable
tool for examiners and regulators". This rating criterion ensures a bank's healthy conditions by
reviewing different aspects of a bank based on variety of information sources such as financial
statement, funding sources, macroeconomic data, budget and cash flow.

Said and Saucier (2003) used CAMEL rating methodology to evaluate the liquidity, solvency and
efficiency of Japanese Banks, the study evaluated capital adequacy, assets and management
quality, earnings ability and liquidity position.

Similarly a study by Sarker (2005) in Bangladesh examined the CAMEL model for regulation
and supervision of Islamic banks by the central bank. This study enabled the regulators and
supervisors to get a Shariah benchmark to supervise and inspect Islamic banks and Islamic
financial institutions from an Islamic perspective.

In India Prasuna(2004) analyzed the performance of Indian banks by adopting the CAMEL
Model. The study concluded that the competition was tough and consumers benefited from better
services quality, innovative products and better bargains. Similarly, Kapil (2005) investigated the
relationship between the CAMEL ratings and the bank stock performance. The viability of the
banks was analyzed on the basis of the offsite supervisory model-CAMEL model. In Similar
Satish, Exam way.

JuturandSurender (2005) concluded that the Indian banking system looks sound and Information
Technology will help the banking system grow in strength in future. On the other hand, Singh and
Kohli (2006) undertook SWOT analysis of 20 old and 10 new private sector banks. These banks

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have also been ranked on the basis of financial data for the years 2003-2005 and the performance
was evaluated by using CAMEL model.

Similarly, Gupta and Kaur (2008) conducted the study with the main objective to assess the
performance of Indian Private Sector Banks on the basis of Camel Model and gave rating to top
five and bottom five banks.

Satish,sharath and Surrender(2005) analyzed the performance of 55 banks for the year 2004-
2005.they conducted that the Indian banking system looks sound and IT will help the banking
system growth in future. Bank IP0 will be hitting the market to increase their capital and gearing
up for Basel II norms.

Santi and Soma (2006) analyzed the productivity and profitability of 5 public and 5 private sector
banks during the period 1996-97 to 2003-2004 and revealed that except for few cases the
productivity index was greater than one of all the selected banks through definite trend was not
observed. SBI and PNB were the most successful banks followed by HDFC and ICICI BANK

A study on regional rural banks Reddy, Maheshwaraand Prasad (2011) discussed the financial
performance of selected regional rural banks during post reorganization period. The study adopted
CAMEL model to examine the overall performance of Andhra Pragathi Grameena Bank and
Sapthagir iGrameena Bank.

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 CHAPTER 3

INDUSTRY PROFILE AND COMPANY PROFILE

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3.0 Financial Services Sector

Companies in the financial services industry are in the business of managing money. Globally, the
financial services industry leads the world in terms of earnings and equity market capitalization.
Large conglomerates dominate this sector, but it also includes a diverse range of smaller
companies.

According to the Finance and Development department of the International Monetary Fund (IMF),
a financial service is best described as the process by which a consumer or business acquires a
financial good. For example, a payment system provider is providing a financial service when it is
able to accept and transfer funds from a payer to a recipient. This includes accounts that are settled
through credit and debit cards, checks and electronic funds transfers.

Financial goods, on the other hand, are not tasks; they are things. A mortgage loan may seem like
a service, but it's actually a product that lasts beyond the initial provision. Stocks, bonds, loans,
commodity assets, real estate and insurance policies are examples of financial goods.

The term “financial services” comprises many different things. There is a plethora of opportunities
in the financial sector for candidates to find the right fit. From banking to investments and beyond,
the options are vast and varied.

Here are the main types of financial services:

1. Banking Services
2. Foreign Exchange Services
3. Investment Services
4. Other Financial Services
5. Intermediation or Advisory Services
6. .Private Equity
7. Venture Capital
8. Conglomerates
9. Debt Resolution

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3.0.1 FINANCIAL MARKET

A financial market is a market in which people trade financial securities and derivatives at low
transaction costs. Securities include stocks and bonds, and precious metals.

MONEY MARKET

The money market is a component of the economy which provides short-term funds. The money
market deals in short-term loans, generally for a period of less than or equal to 365 days.

The money market is the trade in short-term debt investments. At the wholesale level, it involves
large-volume trades between institutions and traders. At the retail level, it includes money market
mutual funds bought by individual investors and money market accounts opened by bank
customers. In any case, the money market is characterized by a high degree of safety and a
relatively low return in interest.

There are several money market instruments in most Western countries, including treasury bills,
commercial paper, bankers' acceptances, deposits, certificates of deposit, bills of exchange,
repurchase agreements, federal funds, and short-lived mortgage- and asset-backed securities. The
instruments bear differing maturities, currencies, credit risks, and structures. Money markets,
which provide liquidity for the global financial system including for capital markets, are part of
the broader system of financial markets.

CAPITAL MARKET

A Capital market is a financial market in which long-term debt (over a year) or equity-backed
securities are bought and sold. Capital markets channel the wealth of savers to those who can put
it to long-term productive use, such as companies or governments making long-term investments.
Financial regulators like Securities and Exchange Board of India (SEBI), Bank of England (BoE)
and the U.S. Securities and Exchange Commission (SEC) oversee capital markets to protect
investors against fraud, among other duties.

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PRIMARY MARKET & SECONDARY MARKET

The term capital market refers to any part of the financial system that raises capital from bonds,
shares, and other investments. New stocks and bonds are created and sold to investors in the
primary capital market, while securities are traded by investors on the secondary capital market.

When a company publicly sells new stocks and bonds for the first time, it does so in the primary
capital market. This market is also called the new issues market. In many cases, the new issue
takes the form of an initial public offering (IPO). When investors purchase securities on the
primary capital market, the company that offers the securities hires an underwriting firm to review
it and create a prospectus outlining the price and other details of the securities to be issued.

The secondary market is where securities are traded after the company has sold its offering on
the primary market. It is also referred to as the stock market. The New York Stock Exchange
(NYSE), London Stock Exchange, and Nasdaq are secondary markets.

The secondary market has two different categories: the auction and the dealer markets. The auction
market is home to the open outcry system where buyers and sellers congregate in one location and
announce the prices at which they are willing to buy and sell their securities. The NYSE is one
such example. In dealer markets, though, people trade through electronic networks. Most small
investors trade through dealer markets.

INDIAN CAPITAL MARKET

The Indian capital market is the market for long term loanable funds as distinct from money market
which deals in short-term funds. It refers to the facilities and institutional arrangements for
borrowing and lending ‘term funds’, medium term and long term funds. In principal capital market
loans are used by industries mainly for fixed investment. It does not deal in capital goods, but is
concerned with raising money capital or purpose of investment.

Classification:

The capital market in India includes the following institutions (i.e., supply of funds tor capital
markets comes largely from these);

(i) Commercial Banks

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 (ii) Insurance Companies (LIC and GIC)
(iii) Specialized financial institutions like IFCI, IDBI, ICICI, SIDCS, SFCS, UTI etc.
(iv) Provident Fund Societies
(v) Merchant Banking Agencies
(vi) Credit Guarantee Corporations. Individuals who invest directly on their own in
securities are also suppliers of fund to the capital market.

Thus, like all the markets the capital market is also composed of those who demand funds
(borrowers) and those who supply funds (lenders). An ideal capital market at tempts to provide
adequate capital at reasonable rate of return for any business, or industrial proposition which offers
a prospective high yield to make borrowing worthwhile.

The Indian capital market is divided into gilt-edged market and the industrial securities market.
The gilt-edged market refers to the market for government and semi-government securities, backed
by the RBI. The securities traded in this market are stable in value and are much sought after by
banks and other institutions.

The industrial securities market refers to the market for shares and debentures of old and new
companies. This market is further divided into the new issues market and old capital market
meaning the stock exchange.

The new issue market refers to the raising of new capital in the form of shares and debentures,
whereas the old capital market deals with securities already issued by companies.

The capital market is also divided in primary capital market and secondary capital market. The
primary market refers to the new issue market, which relates to the issue of shares, preference
shares, and debentures of non-government public limited companies and also to the realizing of
fresh capital by government companies, and the issue of public sector bonds.

3.0.2 STOCK EXCHANGE

A stock exchange is a form of exchange which provides services for stockbrokers and traders to
trade stocks, bonds, and other securities. Stock exchange salso provide facilitics for issue and

17
redemption of securities and other financial instruments, and capital events including the payment
of income and dividends. Securities traded on a stock exchange include shares issued by
companies, unit trusts, derivatives, pooled investment products and bonds.

To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is
a central location at least for record keeping, but trade is increasingly less linked to such a physical
place, as modern markets are electronic networks, which gives those advantages of increased speed
and reduced cost of transactions. Trade on an exchange is by members only. The initial offering
of stocks and bonds to investors is by definition done in the primary market and subsequent trading
is done in the secondary market.

A stock exchange is often the most important component of a stock market. Supply and demand
in stock markets are driven by various factors that, as in all free markets, affect the price of stocks
(see stock valuation).

EXCHANGE PLATFORMS IN INDIA

Indian equities are traded on three major national exchanges: MCX Stock Exchange Limited
(MCX-SX), Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India
Limited (NSE).

1. MCX Stock Exchange

Metropolitan Stock Exchange of India Ltd. (MSEI), formerly known as MCX Stock
Exchange Ltd. (MCX-SX), is India's youngest and one of the three stock exchanges
recognized by country's securities market regulator Securities and Exchange Board of India
(SEBI). It offers an electronic, transparent and hi-tech platform for trading in capital
Market Futures & Options, Currency Derivatives, Interest Rate Futures (IRF) and Debt
Market segments market development guided by the philosophy of 'Information,
Innovation, Education and Research as the four cornerstones. Investors at the MSEI include
top domestic banks and financial institution. Products include currency future contracts.
Key people: The exchange was founded with commitment to financial literacy, social
inclusion and Thomas Mathew T(Chairman) and Udai Kumar (Interim MD & CEO)
2. Bombay Stock Exchange (BSE).

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 BSE is the oldest stock exchange in Asia. The extensiveness of the indigenous equity
broking industry in India led to the formation of the Native Share Brokers Association in
1875, which later became Bombay Stock Exchange Limited (BSE). BSE is widely
recognized due to its pivotal and pre-eminent role in the development of the Indian capital
market. BSE bas a nation-wide reach with a presence in more than 450 cities and towns of
India. BSE has always been at par with the international standards. It is the first exchange
in India and the second in the world to obtain an ISO 9001:2000certification. It is also the
first exchange in the country and second in the world to receive Information Security
Management System Standard BS 7799-2-2002certification for its BSE Online Trading
System (BOLT).
BSE Index-SENSEX
The S&P BSE SENSEX (S&P Bombay Stock Exchange Sensitive Index), also called the
BSE 30 or simply the SENSEX, is a free-float market capitalization weighted stock market
index of 30 well-established and financially sound companies listed on BSE Ltd. The 30
component companies which are some of the largest and most actively traded stocks are
representative of various industrial sectors of the Indian economy.
3. National Stock Exchange (NSE)
NSE was recognized as a stock exchange in April 1993 under the Securities Contracts
(Regulation) Act. It commenced its operations in Wholesale Debt Market in June 1994.
The capital market segment commenced its operations in November1994, whereas the
derivative segment started in 2000. NSE introduced a fully automated trading system called
NEAT (National Exchange for Automated Trading) that operated on a strict price time
priority. This system enabled efficient trade and the ease with which trade was done. NEAT
had lent considerable depth in the market ty enacting large number of members all over the
foundry trade simultaneously, narrowing the spreads significantly.

NSE Index – NIFTY

The derivatives trading on NSE commenced with SI'ENX Nifty Index futures on June 12,
2000. The futures contract on NSE is based on SAP UNX Nifty Index. The Futures and
Options trading system of NSE, called NtA1 1&O trading system provides a fully
automated screen based trading for S & P CNX Nifty futures on a nationwide basis and an

19
 online monitoring and surveillance mechanism. It supports an order driven market and
provides complete transparency of trading operations.

3.0.3 BROKERAGE FIRMS

A brokerage firm, or simply brokerage, is a financial institution that facilitates the buying and
selling of financial securities between a buyer and a seller. Brokerage firms serve as clientele of
investors who trade public stocks and other securities, usually through the firm's agent
stockbrokers. A traditional, or "full service", brokerage firm usually undertakes more than simply
carrying out a stock or bond trade. The staffs of this type of brokerage firm is entrusted with the
responsibility of researching the markets to provide appropriate recommendations and in so doing
they direct the actions of pension fund managers and portfolio managers alike. These firms also
offer margin loans for certain approved clients to purchase investments on credit, subject to agreed
terms and conditions. Traditional brokerage firms have also become a source of up-to date stock
prices and quotes.

The first stock brokerage house in the United States started in Philadelphia in 1800 While the
practice had been around since the early 1700s, the Philadelphia Stock Exchange was the first
organized body that brought brokers together and served to codify the rules and regulations under
which businesses had been conducted. The profession continued to expand with the growth of
corporations and the dawning of the industrial revolution.

3.0.4 HISTORY

During the 11th century, the French began regulating and trading agricultural debts on behalf of
the banking community, creating the first brokerage system, in thel300s, houses began to be set up
in the major cities like Flanders and Amsterdam in which commodity traders would hold meetings.
Soon, Venetian brokers began to trade in government securities, expanding the importance of the
firms.

3.0.5 CONSIDERATIONS

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During the 1900s, stock brokerage firms began to move in a direction of market makers. They
adopted the policy of quoting both the buying and selling price of a security. This allows a firm to
make a profit from establishing the immediate sale and purchase price to an investor. The conflict
with brokerage firms setting prices creates the concern that insider trading can result from the
sharing of information. Regulators have enforced a system called Chinese Walls to prevent
communication between different departments within the brokerage company. This has resulted
in increased profits and greater interconnection within the financial industry.

3.0.6 EFFECTS

The creation of high valued brokerage firms like Goldman Sachs and Bear Sterns created a system
of consolidation. Working with hundreds of billions of dollars, the larger firms began to merge
and take over smaller firms in the last half of the 20hcentury. Firms like Smith Barney were
acquired by Citigroup and other investment banks, creating massive financial institutions that
valued, held, sold, insured and invested in securities. This conglomeration of the financial sector
created an environment of volatility that caused a chain reaction when other firms like Bear Sterns
and Lehman Brothers filed for bankruptcy. Trillions of dollars of assets were tied together in
different companies and resulted in a large economic collapse in late 2008.

3.1 OUR INVESTMENTS ENTERPRISE LTD

FORMERLY COCHIN STOCKEXCHANGE LTD

3.1.1 INTRODUCTION

OUR INVESTMENT ENTERPRISE LTD which is formerly known as COCHIN STOCK

EXCHANGE LTD. was one of the premier Stock Exchanges in India, established in the year
1978. The exchange had a humble beginning with just 5 companies listed in 1978 -79, and had
only 14 members. In 1980 the Exchange computerized its offices. In order to keep pace with
the changing scenario in the capital market, CSE took various steps including trading in
dematerialized shares. CSE Introduced the facility for computerized trading Cochin Online
Trading (COLT) on March 17, 1997. CSE was one of the promoters of the "Interconnected
Stock Exchange of India (1SE)", The objective was to consolidate the small, fragmented and
less liquid markets into national level integrated liquid market. With the enforcement of

21
 efficient margin eye ten and surveillance, CSE has successfully prevented defaults.
Introduction of fast track system made CSE the stock exchange with the shortest settlement
cycle in the country at that time. By the dawn of the new century, the regional exchanges faced
a serious challenge from the MSE & BSE. To face this challenge CSE promoted a 100%
subsidiary called the Cochin Stock Brokers Ltd. (CSBL) and started trading in the National
Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

COCHIN STOCK BROKERS LIMITED

Cochin Stock Brokers Limited (CSBL) is the only one subsidiary of the Our Investment
Enterprise Ltd, a successful broking firm in Kerala since 2000. CSBL a SEBI registered
intermediary and a corporate Trading cum clearing member of the Capital Market

segment of the National Stock Exchange (NSE) & The Bombay Stock Exchange (BSE).
CSBL's trending and settlement functions are completely automated with state-of-art
technology, in addition to their well-experienced staff catering to client needs. CSBL bank
with Axis Bank, The South Indian Bank, HDFC Bank, The Federal Bank and The State Hank
of India to ensure a smooth funds transfer arrangement for trading operations and more
importantly to reassure that client payouts are prompt CABL is the first subsidiary of a stock
exchange to get membership in both NSE & BSE CSBL also became a depository participant
in the Central Depository Services Ltd. The CSE has been playing a vital role in the economic
development of the country in general, and Kerala in particular mnd striving hard to achieve
the following goals:

 Providing investors with high level of liquidity whereby the cost and time involved in
the entry into and exit from the market are minimized.
 Bringing in high tech solutions and make all operations absolutely transparent.
 Building infrastructure for capital market by turning CSE into a financial supermarket.
 Serve the investors of the region.
 Professional stock broking and investment management.
 Imparting Capital Market knowledge to all intermediaries on a continuous basis.

MANAGEMENT OF OUR INVESTMENTS ENTERPRISE LTD.

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The policy decisions of the company are taken by the Board of Directors. The Board isconstituted
with 12 members of whom less than one-fourth are elected from amongst the trading member of
Company, another one fourth are Public Interest Directors selected by SEBI from the panel
submitted by the Company and the remaining are Shareholder Directors. The Board appoints the
Executive Director who functions as an ex officio member of the Board and takes charge of the
administration of the Exchange.

DEPARTMENTS IN OUR INVENSTMENTS ENTERPRISE LTD

SYSTEMS

The Systems Department is the heart of the various operations of Company. The department
provides the necessary technical support for screen based trading and the computerized functioning
of all the other departments.

The activities of the department include: -

 Developments of software needed for the functions of the exchange.

 Maintenance of Multex software, which enables online trading with NSE and BSE.
 Maintenance of an effective network of computers for the smooth functioning ofthe
exchange.
 Providing the necessary services to the Settlement and Surveillance Departments.
 The support for maintenance of depository participants' accounts with the CSBL DP.

The major back office system software used are NESS and BOSS respectively for NSE and BSE
trades' calculations. This software is developed in-house by the software professionals at the
Company and are used to maintain the entire records of all the trades that occur each day. It also
does all the required calculations for deductions and also generates reports required by the brokers
and their clients. The trading software used in CSBL is Multex, developed by CMC. The advantage
of using Multex is that both BSE and NSE scrip can be traded using this facility. CSBL has
provided trading facility in equities through Multex to a large number of their clients over the Wide
Area Network. Currently, the clients are connected by VPN, ISDN, Dial-Up, Vsat etc.

FINANCE

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The Finance Department controls the financial transactions of the Company and is the life line of
the organization. The department is headed by a Finance Officer.

The activities of the department include;

 Fund Management
 Interaction with bankers
 Maintaining general accounts of the Exchange
 Preparation of various financial statements
 Maintaining payrolls and cash register.
 Coordinating accounting transactions of different branches and departments.
 Taxation
 Budgeting and Expense research.
 Maintenance of internal control system.
 Liaison with external and internal auditors
 Annual Report Generation

SETTLEMENT

Settlement Department is a key department of the Company, dealing with cash and securities, it
assists the brokers in settling the matters related to their pay-in and pay-out, recovery of dues and
settling issues related to bad deliveries. This department is headed by a Deputy Manager assisted
by two Senior Officers who take care of the operations involved in the settlement activities in
CSBL. The Company follows the T+2 settlement system.

MARKETING

The Marketing Department interacts with the brokers of the company trading both within the state
and outside and collects their opinions and suggestions. These are brought to the notice of the
Committee constituted for the purpose and decisions of the committee are placed for approval of
the Governing Board of the Exchange, the efforts are aimed at improving the quality and efficiency
of the service offered. In addition, the department conducts extensive surveys and campaigns in

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remote areas and where necessary organizes awareness programs about capital markets. Experts
with sufficient experience in the trade brief the participants and address their queries. Talk shows
and interviews are conducted on television channels, clippings are displayed in theatres all with a
view to increase public awareness and motivate their interest in the Capital Markets The marketing
wing also coordinates the off campus programs and organizes regular classes at authorized centers
after verifying the availability of suitable infrastructure and facilities.

SURVEILLANCE

The Company has set up the Surveillance Department to keep a close watch on price movements
of scrip and to detect market abuse like price rigging, monitor abnormal prices and volumes which
are not consistent with normal trading pattern etc. The main objective of the department is to ensure
a free and fair market, to avoid manipulations and to manage risks. The surveillance function at
the CSBL has assumed greater importance in the last few years. SEBI has directed the Company
to set up a separate surveillance department with staff exclusively assigned for this function. The
Surveillance Department Keeps a close watch on the price movement of scrip. Detects market
manipulations like price rigging. Monitors abnormal changes in prices and volumes which are not
consistent with normal trading pattern. Monitors the member brokers' positions to ensure that
defaults do not occur. The department conducts in-depth investigation based on preliminary
enquiries made into trading of the scrip as also at the instance of SEBI Conducting investigations
involves the following stages:

 Identification of scrip based on the alerts thrown by the online system and offline reports.
 Identification of Members from whom the client details have to be called for.
 Preparation of company profile including Corporate News and Financial results.
 Compilation of client details
 Preparation of reports, Board of Directors

CSBL Product Line

 NSE Cash
 BSE Cash
 NSE F&O

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 BSE F&O
 Currency Derivative
 Mutual Fund
 IPO
 Internet Trading
 Mobile Trading
 PAN Services

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 CHAPTER 4

OF THE STUDY-RESEARCH DESIGN

AND SAMPLING DESIGN

27
4.0RESEARCH DESIGN AND SAMPLING DESIGN

4.0.1 Types of research methodology

Research methodology is a way to systematically solve the research problem. The research
methodology using for find out the solution of the research problem is analytical research
methodology

4.0.2ResearchDesign

Analytical Research Design is used for the present study. Analytical Research uses facts and
information already available, and analyze these facts to make a critical evaluation of the problem

4.0.3Source of Data

The study primarily depends on secondary data

4.0.4Data collection

Secondary data has been collected from various sources like database of stock exchange, websites,
periodicals and Annual Reports:

Websites:

 www.moneycontrol.com
 www.nseindia.com
 www.money.rediff.comx
 www.rbi.org.in
 www.investopedia.com
 www.hdfcbank.com
 www.icicibank.com
 www.kotakmahindra.com
 www.axisbank.com
 www.federalbank.co.in
 www.statebankofindia.com
 www.bankofbaroda.com

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  www.pnbindia.in
 www.canarabank.in
 www.idbi.com

4.0.5 Sample Design

The population frame: The population frame consists of the private and public sector banks in the
industry

Sampling method: random sampling was used to select 10 banks Sample size: Selected ten banks.

1. HDFC

2. ICICI

3. Axis bank limited

4. Kotak Mahindra

5. Federal Bank

6. State bank of India

7. Bank of Baroda

8. Punjab National Bank

9. IDBI bank

10. Canara Bank

Sample selection: on the basis of their market capitalization

4.0.6Period of the Study

The period of the study is 45 days. . Company 5 years’ data has been taken for the analysis 2014
to 2018.

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4.0.7 Tools for Analysis

Fundamental Analysis Tools: Economic tools, Industrial tools, and Company Tools.

1.EARNINGS PER SHARE = PROFIT AFTER TAX

NUMBER OF EQUITY SHARES
2.DIVIDEND PER SHARE = DIVIDEND %* FACE VALUE OF SHARE

3.DIVIDEND PAOUT RATIO = DPS/EPS

4.RETURN ON EQUITY = PAT/ NET WORTH

5.DEBT EQUITY RATIO = LONG TERM DEBTS/EQUITY

6.NET PROFIT RATIO NET PROFIT AFTER TAX/ NET SALE

7.P/E RATIO = MPS/EPS

CAMEL Rating: CAMEL is, basically, a ratio-based model for evaluating the Performance of
banks. It is a model for ranking/rating of the banks.

1. Capital Adequacy
 Capital adequacy ratio
 Debt equity ratio
 Advances to assets
2. Asset Quality
 Net NPA to Net Advance
 Net NPA to Total Assets
 Total Investments to Total Assets
3. Management Efficiency
 Profit Per Employee
 Credit Deposit Ratio
 Return On Net Worth

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 4. Earning Quality

 Operating Profit to Total Assets

 Interest Income to Total Income
 Non Interest Income to Total Income

5.Liquidity

 Liquid Assets to Total Deposits

 Dividend payout ratio to net profit

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