DECLARATION

I, VIDHYA VIJAYAN, final year student, RAJAGIRI COLLEGE OF SOCIAL SCIENCES

(AUTONOMOUS) would like to declare that the project report entitled “A STUDY ON
FUNDAMENTAL ANALYSIS OF STATE BANK OF INDIA” at Hedge Equities Ltd,
submitted to Mahatma Gandhi University, in partial fulfillment of the requirements for the
awards of the MASTER OF BUSINESS ADMINISTRATION of original work done by me
under guidance of Prof. ABRAHAM JOSEPH .

VIDHYA VIJAYAN

Place: Ernakulam
Date: 03- 06 - 2019
 ACKNOWLEDGEMENT

At the outset, I bow before the, God the almighty for his bountiful blessings without which I would
not have completed this endeavor successfully.
I gratefully acknowledge my ineptness to my guide Prof. Abraham Joseph, Rajagiri College of Social
Sciences, for their meticulous guidance and encouragement throughout our project.
I remember with great pleasure and gratitude, the valuable suggestions given by Mr. Sreehari CK,
Managing Director of Hedge equities, Mr. Benil Dani Alexander, Director at Hedge School of
applied Economics, in the task of preparing report.
I am thankful to the Hedge Equities Organization for their co-operation and help. I am also extremely
thankful to my parents, friends who helped me during the course of our work.

VIDHYA VIJAYAN
Table of Contents
EXECUTIVE SUMMARY .......................................................................................................................... 7
COMPANY PROFILE ............................................................................................................................. 9
ABOUT HEDGE EQUITIES (P) LTD ................................................................................................. 9
PROMOTERS ..................................................................................................................................... 10
Management ........................................................................................................................................ 11
Mission .................................................................................................................................................... 13
Vision ...................................................................................................................................................... 13
LOCATION OF OFFICE: ...................................................................................................................... 13
BUSINESS VERTICALS ................................................................................................................... 13
CORPORATE SOCIAL RESPONSIBILITY ........................................................................................ 16
SERVICES OFFERED ....................................................................................................................... 16
INDUSTRY PROFILE ........................................................................................................................... 20
Financial Services ............................................................................................................................... 20
CHAPTER-1 ...............................................................................................................................................
PROBLEM FORMULATION ....................................................................................................................
INTRODUCTION OF THE STUDY: .................................................................................................... 28
TITLE OF THE STUDY ........................................................................................................................ 28
BACKGROUND OF STUDY ................................................................................................................ 28
CHAPTER-2 ...............................................................................................................................................
RESEARCH PROCESS .............................................................................................................................
OBJECTIVES OF THE STUDY: ........................................................................................................... 34
PURPOSE OF THE STUDY: ................................................................................................................. 34
SCOPE OF THE STUDY: ...................................................................................................................... 34
RESEARCH METHODOLOGY:........................................................................................................... 34
LIMITATIONS ....................................................................................................................................... 35
CHAPTER-3 ...............................................................................................................................................
 COMPANY PROFIE

ABOUT HEDGE EQUITIES (P) LTD

Hedge equities is an organization which provides financial services and one of the famous
broking firm in Kerala, established in 2008 and officially inaugurated in May 2008. They offer a
very wide range of financial products, which suits each customer. The global presence of
company was initiated by starting their operations in middle –east to cater to the vast Non-
resident Indian (NRI) population in that region. Till now they have spanned their presence all
over India through their research, high brand awareness, intellectual management and extensive
industry knowledge. Hedge equities, since their inception had been trying to assist the customers
to take vice investment decisions. The board comprises of six powerhouses in their respective
fields- FedEx Securities, Baby Marine Exports, Thakker Developers, Smart financial, SM Hedge
(CFO, Videocon Industries) and Lieutenant. Colonel Padmashree Mohan Lal.

History

Hedge Equities was incorporated under the Companies Act 1956 as Hedge Equities Private
Limited on 17th December 2007 with the registered office at 1205, Dalamal Tower, Nariman
Point. Later the company was converted into public limited company on 17th February, 2009.
Initially it started its service from the head office at Mamangalam, Ernakulum. Later it extended
its services to derivatives also. Recently it also received the permission to start a Non- Banking
Financial Company. The aim of the promoters was to establish financial supermarket which will
provide solution to all kinds of financial problems and they are in the process of achieving it

2008- Hedge Equities Ltd Established and started Operations

2008- Hedge Commodities Ltd. launched Operations

2009- Hedge School of applied Economics started

2010- Hedge Ohari and Hedge Portfolio management services launched

2012- Hedge house inauguration and Hedge Finance started

2013- Hedge Realty

2015- Hedge School got KSAE accreditation

PROMOTERS

 FEDEX SECURITIES

FedEx is a SEBI registered category I merchant banker that is managed by a team of ex-bankers.
The company concentrates on non-fund based activities like structuring, tie up of project
financing, financial restructuring, investment banking, corporate and advisory services. FedEx
has offices in Nariman point and Vile Parle East, Mumbai. The core management team consists
of bankers with rich experience in commercial and investment banking.

 BABY MARINE EXPORTS

Baby Marine Group, a leading Exporter of processed marine products, started its operations in
1977 from Kozhikode and has grown into three units and related industries that spans both the
west and east coasts of Indian. The three units namely, Baby Marine Exports, B.M products, and
Baby Marine (Eastern) Exports, are mainly aided by pre processing units, ice factories and a fleet
of insulated and refrigerated trucks for sea food transportation.

 SMART FINANCIAL

Smart Financial is a leading financial service provider that entered the financial market in1992.
The company offers guidance to investors as to equities, commodities, mutual funds, portfolio
management services and insurance. It offers a complete range of financial solutions that
encompasses every sphere of life.

 THAKKER GROUP

Thacker‟s group that started off as a land developer and builder in 1962, gradually diversified
into commercial production of agricultural and horticultural products, housing real estate
marketing, plantations etc. Thakker developer is the flagship company of the group. It was
established as a private limited in 1987 and later went on to become the only public limited
company in North Maharashtra that was engaged in housing, commercial construction and land
development.
  S. M. HEDGE

Mr S. M. Hedge, a chartered accountant by profession, is the Chief Finance Officer of the Indian
Multinational Videocon International and has been at the helm of affairs for the last 20 years.

 LT.Colonel MOHANLAL

Padmashree Bharat Mohanlal, the South Indian movie actor, has a few business ventures, which
include Vismaya Max Film Post production studio, college for dubbing artists at the Kinfra fill
and Video Park, Trivandrum. He is also the director of Uni Royal Marine Exports; a Kozhikode
based major Seafood Export Company.

Management

 Alex. K. Babu, Managing Director

Alex Babu is the Founder and Managing Director of Hedge Equities. He has over 9 years of
experience in equity research and fund management with considerable experience across all
market capitalizations. He is a specialist in mid-cap and infra stock selection. Ever since joining
the Hedge Family, he has been designing, developing and implementing the strategic plan for the
company in the most cost effective and time efficient manner. He was also instrumental in
establishing and assembling a strong research team with equal emphasis on macroeconomic,
industrial, and company level research.

Prior to joining Hedge Equities, Alex was at the helm of Baby Marine Exports, a leading
Seafood exports firm handling all aspects of finance and marketing. Alex Babu is a graduate in
Engineering from Cochin University of Science and Technology.

 N. Bhuvanendran, Chief Executive Officer

Professionalism augmented by profound vision” is a perfect phrase to describe Bhuvanendran.

His rich experience spanning 20 years with the leading names in the Indian financial services
industry, is often camouflaged by his youthful appearance, till Mr.Bhuvanendran opens up his
favorite subject-Money matters. Bhuvanendran is a talented and introspective writer whose
creativity has been capitalized by various financial journals. He is also in the limelight for a
market related show which aims at quenching the financial queries of professionals and investors
in a leading Malayalam television channel. He is one of the few investments professional who
have experience across both listed and unlisted equity space. He is an epitome of the fact that
honesty, transparency and moral integrity are not at variance with Business acumen.

 Bobby J Arakunnel, Chief Operating Officer

Mr. Bobby has been responsible for the entire operations of Hedge Equities ever since its
inception. He has proved his versatility by showcasing excellent Man-Management and
Marketing Activities and is well versed in all aspects of Indian Financial Markets. In the last 12
years, he has worked with all the major players in the financial service sector of the country
which has added oodles to his workmanship.

 Dr.Samuel George

He is a doctor and an entrepreneur and runs the successful and well reputed "City Clinic" in
Abudhabi since the 1970's. Having completed his Bachelors in Medicine from the Calcultta
Medical College, Dr. George commenced his career in government service and then
subsequently moved to Abu Dhabi in the 1970s. Today, their clinic offers specialized services in
General Medicine and Pediatrics.

 Mr. Pradeep Kumar C, Director

Director A leading Textile exporter of Kerala whose 20 years of experience in this field has
made him a veteran we all look up to. His vision, augmented by his hard work and commitment
has helped him to be a strong player in the field of Exporting. Starting from a root level, he has
travelled the hard way to reach this phenomenal position in Garment Industry which has
supplemented him to expand his domain to foreign locations as well.

 Mr. Joy Arackal-Director

Mr. Joy Arrackal is a successful natural born entrepreneur with varied business interests in Dubai
and India spread across Petrochemicals, Oil Trading, Telecom, Agriculture, Hospitality, and
Construction. He also owns and operates Oil Tankers in Dubai. Mr. Joy currently serves as the
Managing Director of Fringford Estates Ltd and is also a Director with Hill Track Construction
Pvt Ltd, Arun Hospitalities Ltd, and Arun Agri Farms India Pvt Ltd. The annual turnover of his
group companies are in excess of Rs 500 Crores..
Mission

To be a financial supermarket

Vision

Partnering with clients to build, manage, and grow their wealth.

The Hedge Equities has seen ups and downs in its past. The company uses family tree concept to
maintain relationship with all the clients. Various services including NBFC are provided so that a
person gets all financial services at his /her fingertip.

LOCATION OF OFFICE:

Head Office: Hedge Equities, Hedge House, Palarivattom, Cochin - 682025 Kerala,
India.Registered office: 1205, Dalamal Tower, Nariman Point- Mumbai.

Hedge Equities have Branches in Three states. Kerala, Tamil Nadu and Maharashtra are the
places of operations. In kerala itself the company has more than 36 branches. Apart from kerala
they have one Branch in Tamil Nadu (Pollachi) and one branch in (Andheri) Maharashtra.

Hedge Equities Ltd Corporate Identification Number is (CIN): U65990MH2007PLC176866

Registration number is: 17686

BUSINESS VERTICALS

Hedge finance

Hedge finance has chalked out extensive, long term plans for the comprehensive growth of the
company. With parent company’s wide client base and advanced infrastructure, Hedge Finance
is heading towards achieving a loan book position of Rs 100 Crore within the first three months
of operations.

Hedge equities a leading player in the financial markets is all set to leave its mark in the NBFC
sector with the launch of Hedge Finance. The Indian Non-Banking Finance Companies (NBFCs)
constitutes a reasonable big chunk of the country’s overall financial system. It is estimated that
the NBFCs as a whole account for 9.1% or Rs. 4 trillion of assets of the entire financial system in
India. NBFC industry today is a more mature, developed and promising since the days of
inception and is destined to shape the future of India. It is in such a time that Hedge Finance has
burst into the scene and creating waves in the sector. Backed by Hedge Equities, which is a
coming together of over 25 years of unparalleled experience of business leaders in various
industries, Hedge Finance is all set to be one of the top Non-Banking Finance Company in the
country.

Hedge Equities

Hedge Equities is the flagship company of the Hedge Group. The venture revolutionized and
popularized share trading culture in Kerala. Today, Hedge Equities enjoys the patronage of
35,000 satisfied customers who are reaping the benefits of professionally managed portfolios.

Hedge Commodities

Hedge Commodities offers a viable platform to engage in futures trading in agricultural and non-
agricultural commodities. The in-depth knowledge of the Indian and world markets help our
advisors to provide appropriate and timely assistance to our customers.

Hedge School of Applied Economics

The dire dearth of qualified share trading professionals in Kerala is what prompted the Hedge
Group to commence the Hedge School of Applied Economics. Present and potential stock
brokers are moulded to international standards under the guidance of veteran financial experts.
Live trading sessions and world class academic amenities are the highlights of the Hedge School.

Hedge Wealth Management Service (WMS)

The premium Wealth Management Services (WMS) was introduced by Hedge Equities. The
comprehensive financial package is intended at building, managing and growing the wealth of
the client. Service offerings of WMS include Portfolio Management Services (PMS), Portfolio
Advisory Services (PAS), Mutual Fund Advisory (MFA), Commodities, Foreign Exchange and
Derivatives. A specialized team of SEBI registered portfolio managers and dealers furnish each
investor with customized and research-oriented solutions to garner maximum possible returns.
Hedge Finance

With the inception of Hedge Finance, the Hedge Group entered the prestigious NBFC market of
India. The company adheres strictly to the RBI regulations and primarily focuses on the Loan
against Security sector. Hedge Finance has huge growth potential and intends to diversify its
services in the near future

Hedge OHARI- the magazine

Hedge Ohari is a monthly finance magazine that provides its readers comprehensive knowledge
and insight about the various aspects of financial planning and the entire spectrum of investment
and wealth creation methods, viz. stock market, mutual fund, real estate, gold, bonds, banking
and so on.

The magazine’s content includes articles, features and interviews about the diverse areas related
to finance and business. Sections such as industry, business management, agriculture, education,
automobile, brand equity, success mantras, insurance, lifestyle, gadgets, and cinema enrich the
magazine’s contents from cover to cover. They are mainly focusingon the read for those readers
of Malayalam who are on the lookout of rich advice to gain insights into the methods of
systematic financial planning and investment and follow a planned way of investing to realize
their objectives. Moreover, every issue of the magazine presents the best reading experience to
readers who like to follow the latest trends in finance and business they have the readership of
over two lakh Malayalees in Kerala and other parts of the country.

CORPORATE SOCIAL RESPONSIBILITY

Being a responsible corporate citizen, Hedge equities has initiated a non-profit movement,
“Hedge Yuva”, which focuses on educating the masses about Stock Market. The movement has
also formulated various scholarship programs for young and dynamic youth.
SERVICES OFFERED

Internet Trading

Hedge equities offer internet trading through their site. One can trade through the internet from
the comforts of your office or home, anywhere in the world. The dedicated IT systems ensure
service up time and speed, making internet broking through Hedge equities hassle-free. Using
the easiest facility provided by NSDL, our clients can transfer the shares sold by them online
without delivery instruction slips. Additionally, digitally signed contract notes can be sent to
clients through E-mail.

Equity Trading

Equity gives you the opportunity to have a partnership with all the leading Business tycoons
around the globe. Total capital contribution for a company comprises of investments through
equity share holdings by small and big investors. The investors who have a stake in a company
are referred to as shareholders.

Power of Equity shareholders lies in the optimum selection of the Industry, have a strong belief
in the Company's fundamentals and also having a confidence in the profit making capability of
the company. Equity Market, at present, is a rewarding field for the investors and investing in
Indian stocks are profitable for not only the long and medium-term investors, but also the
position traders, short-term swing traders and also very short term intra-day traders.
Fundamentally, stock market is an avenue for business people to meet shareholders. Other than
bank loans, they now have another option to finance their businesses. They did it by offering
their company's equities in exchange of shareholders cash.

The company is never required to repay the capital, but the new shareholders have a right to
future profits distributed by the company. For shareholders, they have alternatives to where they
should put their money into. In the same time, they get the opportunity to participate in capital
intensive businesses at an affordable price. Equity is an investment area which you can capitalize
on with proper assistance regardless of the market circumstances. Hedge Equities opens the door
to this highly lucrative investment opportunity that could provide a feasible solution to all your
financial queries.
Depository Services

Hedge offers trading in the futures and options segment of the National Stock Exchange
(NSE).Through the present derivative trading an investor can take a

short term view on the market for up to a three months‟ perspective by paying a

small margin on the futures segment and a small premium in the options segment. In the case of
options, if the trade goes in the opposite direction the maximum loss will be limited to the
premium paid.

Knowledge Centre

Knowledge centre activities are intended to provide systematic and structured services mainly to
new investors and also to young aspirant aiming for a career in financial markets. The centre has
three functional areas: the publication division, the training centre, and wealth management
advisory service which provides complete investment solutions to investments through
knowledge based personalized services.

Equity Research

Hedge equities constantly strive to deliver insightful research to enable pro-active investment
decisions. The research department is broadly divided into two divisions- Fundamental Analysis
Group (FAG) and Technical Analysis Group (TAG). Our fundamental analysts are continuously
scanning the entire economy for discovering what they call the hidden gems in stock market
terminology and present it to our clients for profitable investments. A good fundamental analysis
Team has the capability to identify emerging businesses before such businesses become the talk
of the street and we are proud to say we have one such fundamental analysis team. Timing the
market has always been the most difficult task for all analysts and our Technical Analysis Group
has merged to predict the market movements well in advance using complex analytical methods
including Elliot Wave Theory. We are equipped with cutting-edge technologies for technical
Charting which assist our technical analysts to predict both upside and downside movements
efficiently for the benefit of our clients.
Portfolio Management Services (PMS)

Hedge equity is a SEBI-approved portfolio manager offering discretionary and non-discretionary

schemes to its clients. Hedge equities‟ portfolio managementteam keeps track of the markets on
a daily basis and is exposed to a lot of information and analytic tools which an investor would
not normally have access to. Other technicalities pertaining to shares like dividends, rights,
bonus, buy-back, Mergers and Acquisitions and are also taken care of by us. Maximize your
returns by opting for our PMS scheme.

Commodity Trading

Commodity "futures" are contracts to buy or sell certain goods at set prices at a predetermined
time in the future. Futures trading plays a key role in the marketing of a number of important
agricultural and non-agricultural commodities as it provides the industrial and farming
communities with a transparent price discovery platform, which also enables them to hedge their
price risk and price volatility.

Besides the primary benefits of its twin economic functions of price discovery and price risk
management, commodity futures trading has also played an instrumental role in integrating
various fragmented components of the commodity ecosystem, thus developing the overall
infrastructure of agricultural commodities marketing in the country. At present, 24 commodity
futures exchanges are operational in India, which include 21regional bourses and the three
national-level players, with another three proposed exchanges on the cards. With the state-of the-
art technology-powered secure and efficient operational infrastructure, these national exchanges
are creating a near-perfect market situation with a much wider participation from the ecosystem
stakeholders in a large number of domestic and global commodities during local and
international timings.

While the trade in non-agricultural commodities, especially bullion and crude, has increased in
the past two financial years, the same in agricultural commodities has declined. The share of
agricultural commodities almost halved during 2008-09, due to the continued ban on several
commodities. The clients can trade in commodity futures like gold, silver, crude oil, rubber etc.
And take advantage of the extended trading hours (10 am to 11pm) in commodities trading.
Mutual Funds

A Mutual Fund is a trust that pools the savings of a number of investors who share acommon
financial goal. The money thus collected is invested by the fund manager in different types of
securities depending upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned through these investments and the
capital appreciations realized by the scheme are shared by its unit holder.

Thus, a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost.
Mutual fund is also called unit trust or open-ended trust a company that invests the funds of its
clients in diversified securities and in turn represent those holdings. They make continuous
offering of new shares atNAV (Net Asset Value) determined daily by the market values of the
securities they hold. In Hedge Equities the clients can select from a wide range of Mutual Funds
and Bonds available in the markets today.

Currency Trading

Currency derivatives can be described as contracts between the sellers and buyers, whose values
are to be derived from the underlying assets, the currency amounts. These are basically risk
management tools in force and money markets used for hedging risks and act as insurance
against unforeseen and unpredictable currency and interest rate movements. Any individual or
corporate expecting to receive or pay certain amounts in foreign currencies at future MONTH
can use these products to opt for a fixed rate- at which the currencies can exchanged now itself.
Currency derivatives serve the purpose of financial risk management encompassing various
market risks. An upfront premium is payable for buying a derivative. Currency futures will bring
in more transparency and efficiency in price discovery, eliminate counterparty credit risk,
provide access to all types of market participants, offer standardized products and provide
transparent trading platform.
INDUSTRY PROFILE

Financial Services

Financial services are the economic services provided by the finance industry, which
encompasses a broad range of businesses that manage money, including credit unions, banks,
credit-card companies, insurance companies, accountancy companies, consumer-finance
companies, stock brokerages, investment funds and some government-sponsored enterprises.
It is the presence of financial services that enables a country to improve its economic condition
whereby there is more production in all the sectors leading to economic growth. The benefit of
economic growth is reflected on the people in the form of economic prosperity wherein the
individual enjoys higher standard of living. It is here the financial services enable an individual
to acquire or obtain various consumer products through hire purchase. In the process, there are a
number of financial institutions which also earn profits. The presence of these financial
institutions promotes investment, production, saving etc.

Fig.1.1

Role and Importance of Financial Services

 Vibrant Capital Market.

 Expands activities of financial markets.
 Benefits of Government.
  Economic Development.
 Economic Growth.
 Ensures Greater Yield.
 Maximizes Returns.
 Minimizes Risks.
 Promotes Savings.
 Promotes Investments.
 Balanced Regional Development.
 Promotion of Domestic & Foreign Trade.

MARKET SIZE
The Mutual Fund (MF) industry in India has seen rapid growth in Assets Under Management
(AUM). Total AUM of the industry stood at Rs 23.16 trillion (US$ 321.00 billion) as of
February 2019. At the same time the number of Mutual fund (MF) equity portfolios reached a
high of 74.6 million as of June 2018.
Another crucial component of India’s financial industry is the insurance industry. The insurance
industry has been expanding at a fast pace. The total first year premium of life insurance
companies reached Rs 159,004 crore (US$ 22.04 billion) as of Jan 2019.
Along with the secondary market, the market for Initial Public Offers (IPOs) has also witnessed
rapid expansion. The total amount of Initial Public Offerings (IPO) stood at Rs 14,032 crore
(US$ 1.94 billion) as of Feb 2019..

FINANCIAL INTERMEDIARY

A financial intermediary is an establishment or an institution which acts as a third party between

investors and firms in trying to obtain funding. A general explanation would be the instance of a
saver who has extra money and a borrower who needs this extra capital. A typical example of a
financial intermediary is a bank, but there are more such as life insurance companies and
building societies. It is important to note that financial intermediaries do not use their own
money instead they use the money of its depositors.
To give a simple example of how a bank would act as a financial intermediary. Banks receive
funds for depositors and while they keep a percentage in of this cash in reserve in case they want
it back they lend a large percentage of it out or purchase bonds. Financial intermediaries
generally provide four important services. The first one is expert advice; they can provide the
best information for investing customer funds and alternative methods of obtaining finance. The
second service is that they provide expertise in channeling funds; they can provide specialist
advice on areas to channel funds to yield high results. The third service is maturity information
this is where the banks who have many depositors borrow small amounts from each one so they
are able to provide long term loans. The final area which this essay will pick up on is the risk
transformation. This service provides the know-how of how to allocate loans and money to other
money at the least possible risk to the institution.

FINANCIAL INSTITUTION

A financial institution is an establishment that conducts financial transactions such as

investments, loans and deposits. Almost everyone deals with financial institutions on a regular
basis. Everything from depositing money to taking out loans and exchanging currencies must be
done through financial institutions. Here is an overview of some of the major categories of
financial institutions and their roles in the financial system.

Commercial Banks
Commercial banks accept deposits and provide security and convenience to their customers. Part
of the original purpose of banks was to offer customers safe keeping for their money.
Commercial banks also make loans that individuals and businesses use to buy goods or expand
business operations, which in turn lead to more deposited funds that make their way to banks.

Investment Banks
An investment bank is a financial intermediary that performs a variety of services for businesses
and some governments. These services include underwriting debt and equity offerings, acting as
an intermediary between an issuer of securities and the investing public, making markets,
facilitating mergers and other corporate reorganizations, and acting as a broker for institutional
clients. They may also provide research and financial advisory services to companies. As a
general rule, investment banks focus on initial public offerings (IPOs) and large public and
private share offerings.

Insurance Companies
Insurance companies pool risk by collecting premiums from a large group of people who want to
protect themselves and/or their loved ones against a particular loss, such as a fire, car accident,
illness, lawsuit, disability or death. Insurance helps individuals and companies manage risk and
preserve wealth.

Brokerages
A brokerage acts as an intermediary between buyers and sellers to facilitate securities
transactions. Brokerage companies are compensated via commission after the transaction has
been successfully completed. For example, when a trade order for a stock is carried out, an
individual often pays a transaction fee for the brokerage company's efforts to execute the trade.

Investment Companies
An investment company is a corporation or a trust through which individuals invest in diversified
professionally managed portfolios of securities by pooling their funds with those of other
investors.

Non-Banking financial Institutions

A non-bank financial institution (NBFI) is a financial institution that does not have a full banking
license or is not supervised by a national or international banking regulatory agency. NBFIs
facilitate bank-related financial services, such as investment, risk pooling, contractual savings,
and market brokering.
 SECTION-II
PROBLEM CENTERED STUDY IN THE
ORGANIZATION
 CHAPTER-1
PROBLEM FORMULATION
INTRODUCTION

Fundamental analysis is one of the methods used to analyze securities and make investment
decisions. It is defined as the evaluation of a company’s internal and external forces to forecast
the earnings profit and loss with respect to the movement of the company’s stock price. It is one
of the most common tools to analyze whether one should invest in a stock or not

It is also known as quantitative analysis, involves delving into a company‘s financial statements
(such as profit and loss account and balance sheet) in order to study various financial indicators
(such as revenues, earnings, liabilities, expenses and assets). Fundamental analysis is carried out
with the aim of predicting the future performance of a company. It is based on the theory that the
market price of a security tends to move towards its 'real value' or 'intrinsic value. Thus, the
intrinsic value of a security being higher than the security‘s market value represents a time to
buy. If the value of the security is lower than its market price, investors should sell it.

TITLE OF THE STUDY

“A STUDY ON FUNDAMENTAL ANALYSIS OF STATE BANK OF INDIA

AT HEDGE EQUITIES LIMITED”

BACKGROUND OF THE STUDY

Anthony C.Greig (1989) in his paper, stated fundamental analysis identifies equity values not
currently reflected in stock prices and thus systematically predicts abnormal returns. Their
fundamental summary measures Profitability Ratio, the estimated probability of an earnings
increase, also proxies for firm size and CAPM risk.

After controlling cross sectional differences in CAPM beta and firm size, no significant
incremental predictive ability is attributable to profitability ratio. The profitability measure is
interpreted as a proxy for expected return differences rather than as new evidence of a systematic
market under reaction to the future earnings signal inherent in current financial statements.
Ken little, (1994) defined fundamental analysis is the process of looking at a business at the
basic or fundamental financial level. This type of analysis examines key ratios of a business to
determine its financial health and gives you an idea of the value its stock. The goal is to
determine the current worth and more importantly, how the market values the stock. In this
article he is also saying that return on equity (ROE) is one measure of how efficiently a company
uses its asset to produce earnings.

(Stephen H. Penman, 1996) says, financial statement analysis has traditionally been seen as part
of the fundamental analysis required for equity valuation.

(Matos, 1997) It allows the estimation of the intrinsic value or "real" value of the stocks. In fact,
as stock markets are not perfectly efficient, there is always an opportunity to find undervalued
stocks.

(Silva, 1998), the choice of which approach (fundamental or technical) should be applied is
determined by the investor's belief in different paradigms for "how the stock market actually
works". As noted above, the fundamental analysis bases itself on financial reports, which provide
fundamental data for calculating financial ratios. In this context, each ratio allows for evaluating
different aspects of the enterprises financial performance.

Sarkar and Das (1999) make a comparison of the performance of the three bank sectors - public,
private and foreign banks. These banks are compared in terms of profitability, productivity and
financial management. They find that the public sector banks are very poor in performance on the
basis of these variables than the other two sectors.

Gaganjot Singh (2002) in his study “New innovations in banking industry –a study of new private
sector banks” views that the new private sector banks in India are using better technology and are
offering better services to the customers. The new private banks have emerged as a model to the
banking industry in terms of service levels, ambience, technology etc. As the public sector banks
have already established a huge customer base, they become complacent and are slow to become
customer friendly. They are also less innovative in the use of technology assisted customer service.
Because of their huge customer base they feel that they can withstand competitions from new
generation banks.
(Menezes, 2005), Investors may use either fundamental analysis or technical analysis or combine
both of them. For example, as many fundamental investors use technical analysis to decide entry
and exit points, some technical investors use fundamentals to restrict their portfolios, only to
“good and financially healthy companies”

Bhaskaran (2010)in the article “Impact of financial crisis on banks in India” views that the impact
of financial crisis is more on private sector banks. Non-performing assets have increased in all
banking sectors. The increase in NPA preceded the financial crisis and coincided with the retail
boom.

D. Cibulskienė and M. Butkus (2011), fundamental analysis is the interpretation of the most
important economic indicators and evaluation of country’s activity factors.

S. Valentinavičius (2012) complements the conception of fundamental analysis stating that the
latter examines the movement of the prices, depending on macroeconomic factors: event or
conditions of political or economic origin, trade balance, interest rates and inflation size, various
other economic indicators.

J. Kartašova & D. Venclauskienė (2014),according to them, analysts and investors mainly use
two alternative fundamental analysis methods: “top-down approach” and “bottom-up approach).

Indian Brand Equity Foundation (2015)23has studied that Indian banks are focusing on adopting
an integrated approach to risk management. Banks have already embraced the international banking
supervision accord of Basel II. According to RBI, majority of the banks already meet with the capital
requirements of Basel III, which has a deadline of March 31, 2019. Most of the banks have put in
place the framework for asset-liability match, credit and derivatives risk management. As per their
report, rising incomes are expected to increase the need for banking services in rural areas which will
positively affect the growth of the banking sector. The RBI has relaxed its branch licensing policy
which emphasized the need to focus on spreading the reach of banking services to the un-banked
population of India.
 CHAPTER-2
RESEARCH PROCESS
OBJECTIVES OF THE STUDY

 To analyze the economy by using various economic indicators and industry to find out
the best time for investment.
 To determine the company's intrinsic value or its growth prospects.
 To evaluate the financial position of a firm in terms of profitability, solvency, leverage
ratio.
 To make suggestion for investment decision by using fundamental analysis.

PURPOSE OF THE STUDY

SCOPE OF THE STUDY

The project entitled “A STUDY ON FUNDAMENTAL ANALYSIS OF STATE BANK OF

INDIA” gives an overview of banking industry to the investors, the performance of the bank, their
relative growth and thereby decides to buy or sell the particular stock.

The study consists of Economy, industry and company framework of analysis with the following
aspects:

 Economy analysis of various variables such as GDP, inflation, interest rate etc...
 Industry analysis consist of demand potential market, growth and development etc
 Company analysis consists of financial statement analysis, companys prospects and growth.

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. The research is based
on the tools of fundamental analysis and involves the calculation of different financial ratios of the
bank. Financial ratios of last 5 years from April 2014 to May 2019 have been taken in this research.

Research design:

Analytical research and descriptive research has been used for this study.
Nature of data:

Secondary data has been used for this study.

Sources of data:

The main sources of data are collected through websites, various publication books, magazines,
newspapers and reports prepared by research scholars etc. The information on financial ratios of the
bank has been collected from various websites like moneycontrol.com, investing.com and
chartink.com.

Sample size:

Time period:

The study covers for a period of two months 2/04/2019 to 31/05/2019 has been used for analysis.

Tools of analysis:

The analysis of data is carried out for secondary data by the following tools:

 Ratio analysis
 Sensitivity analysis

LIMITATIONS

 Only secondary data is used for analysis.

 Time period given is of only two months, which was not sufficient to study the market. The
time period was very short.
 The report is based on historical data.
FUNDAMENTAL ANALYSIS

Fundamental Analysis involves examining the economic, financial and other qualitative and
quantitative factors related to a security in order to determine its intrinsic value. If a company’s
stock is trading above the intrinsic value or fair value, then the stock is overvalued. If a
company’s stock is trading below the intrinsic value, then the stock is undervalued. It attempt to
study everything that can affect the security's value, including macro-economic factors like the
overall economy and industry conditions and company specific factors like financial condition
and management. Fundamental analysis can help the shareholders by providing relevant
information in terms of profitability and growth which can, in turn, help them to take informed
investment decisions. It is also known as quantitative analysis, involves delving into a
company‘s financial statements (such as profit and loss account and balance sheet) in order to
study various financial indicators (such as revenues, earnings, liabilities, expenses and assets).

Fundamental analysis is carried out with the aim of predicting the future performance of a
company. It is based on the theory that the market price of a security tends to move towards its
'real value' or 'intrinsic value. Thus, the intrinsic value of a security being higher than the
security‘s market value represents a time to buy. If the value of the security is lower than its
market price, investors should sell it.

The steps involved in fundamental analysis are:

 Economic analysis, which involves considering currencies, commodities and indices.

 Industry sector analysis, which involves the analysis of companies that are a part of the
sector.
 Financial analysis of the company and
 Valuation
ECONOMIC ANALYSIS

Economic analysis deals with forces operating in the economy which influences the banking
sector. The development of any economy depends on the development of the financial sector of
that economy. The Banking industry is the key component of the financial system which
provides financial assistance not only to the industrial sector but also to the agriculture and
household sectors. Banks are the credit creators. The Indian Banking industry has contributed to
the economic growth of the country. This sector has undergone significant developments and
investments in the recent past. The Banking industry is a valuable contributor to the GDP, works
under a regulated environment and has government support. However, the Indian Banking
industry is facing formidable challenges. Increasing competition, increasing level of Non-
performing Assets (NPAs) and deteriorating asset quality have become major areas of concern
for the entire banking industry, and by extension, the Indian economy. The vicious cycle of
economic slowdown, corporate earnings slowdown, increase in NPAs, increase in the proportion
of restructured assets and depressed profitability of the Banking sector, has led to a situation
where banks, particularly Public Sector Banks (PSBs), will be severely challenged to raise the
required capital to comply with the Basel III requirements.

India's economy is in "a gradual recovery mode" as per State Bank of India report .According to
the SBI Ecowrap report, the 8.4 per cent Index of Industrial Production Growth in November "is
possibly no flash in the pan and a 6 per cent growth in December as per SBI Index may not be
ruled out". In January 2018, the IIP may continue to grow in excess of 4 per cent, indicating a
marginal moderation in month-to-month.

Factors affecting economic growth and development

 Any economy is best described by its GDP.. Gross Domestic product increases with the
buying power of the nation. India’s GDP is expected to grow at 7.3% in the fiscal year
2018-19 and average 7.5% in 2019-20120. India is keeping it's GDP growth at a
consistently good level and that has reflected in the growth.
 High inflation may lead to increased rate of interest and business people suffer as they
have to pay higher rate of interest for their borrowings. The risk of loan default will be
more as inflation rises. A lower interest rate will add to economic growth and beneficial
to the economy, provided inflation is under control. India's retail price inflation rate rose
to a five-month high of 2.86 percent year-on-year in March 2019 from 2.57 percent in the
previous month, slightly above market expectations of 2.8 percent

 Lending rates and deposits offered by banks are impacted by a rise or fall of Repo rate.
Banking is the first sector to get affected by any change in monetary policies. With the
dip in repo rate, banks can borrow from Reserve Bank of India at a cheaper rate. And as a
result, banks may offer credit to its end customer at a reduced rate. As bank loans get
cheaper, consumers can spend and borrow more while spending a lot less in borrowing.
Increased lending business will boost the profitability of the overall banking system.
 Rising per capita income will lead to increase in the fraction of the Indian population that
uses banking services. Growth of banking sector of India is 6.3 per cent per capita growth
(annually).

 During FY18, USD1 trillion was the total value of bank loans in India. The sector will
also benefit from economic stability and credibility of the monetary policy.
 Return on assets and loan to deposit ratio is showing an uptrend. Loan-to-Deposit ratio
for banks across sectors has increased over the year’s .Private and foreign banks have
posted high return on assets than nationalized and public banks. This has prompted most
of the foreign banks to start their operations in India.
 The government and the regulator have undertaken several measures to strengthen the
Indian banking sector. The government allocated Rs 22,915 crore (US$ 3.41 billion) as
capital infusion in 13 public sector banks, which is expected to improve their liquidity
and lending operations, and shore up economic growth in the country.
 The Reserve Bank of India (RBI) has released the Vision 2018 document, aimed at
encouraging greater use of electronic payments by all sections of society by bringing
down paper-based transactions, increasing the usage of digital channels, and boosting the
customer base for mobile banking.
INDUSTRY ANALYSIS

The Indian banking system consists of 27 public sector banks, 26 private sector banks, 46 foreign
banks, 56 regional rural banks, 1,574 urban cooperative banks and 93,913 rural cooperative
banks, in addition to cooperative credit institutions. Public-sector banks control more than 70 per
cent of the banking system assets, thereby leaving a comparatively smaller share for its private
peers. Public Sector Banks (PSBs) are banks, where a majority stake (more than 50%) is held
by a government. The shares of these banks are listed on stock exchanges. There are 21 public
sector banks in India. Out of these, 19 banks are nationalized and 2 banks which come under
PSUs are State Bank of India and IDBI Bank.

As per the Reserve Bank of India (RBI), India’s banking sector has sufficient capital and well-
regulated. Indian banks are increasingly focusing on adopting integrated approach to risk
management. Banks have already embraced the international banking supervision accord of
Basel II, and majority of the banks already meet capital requirements of Basel III.

BANKING IN INDIA

In India, the banking era was started from the year 1770. The first bank established in India was
Bank of Hindustan in the year 1770 and liquidated in 1829-1832.The largest and oldest bank still
in existence is State Bank of India. It was formed as the bank of Calcutta in June 1806 which was
renamed as state Bank of Bengal in 1809.Three banks which were funded by presidency
government were merged in 1921 to form Imperial Bank of India and in 1955 after India’s
independence it was renamed as State Bank of India. The three banks which were merged are
Bank of Bengal, Bank of Madras, Bank of Bombay. Reserve Bank of India was established on 1
st April 1935 under the RBI Act 1934.It was founded by Dr. Bheem Rao Ambedkar RBI is
considered as India’s Central Banking Institution which controls the monetary policy of the
Indian rupee. RBI was nationalized on 1 st January 1949.Some of the banks which were formed
before Independence and still existing are Allahabad Bank (1865), Punjab National Bank (1894),
Bank of India (1906), Bank of Baroda (1908) and Central Bank of India (1911).
MARKET SIZE
The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49
foreign banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural
cooperative banks, in addition to cooperative credit institutions. Public-sector banks control
nearly 80 per cent of the market, thereby leaving comparatively much smaller shares for its
private peers.

TYPES OF BANKS

The Indian Banking industry, headed by the Reserve bank of India is governed by the
Banking Regulation Act of India, 1949. It can be broadly classified into two major categories,
non- scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and
the co-operative banks. In terms of ownership, commercial banks can be further grouped into
nationalized banks, the State Bank of India, regional rural banks and private sector banks

Scheduled and Non Scheduled Banks

A scheduled bank, in India, refers to a bank which is listed in the 2nd Schedule of the
Reserve Bank of India Act, 1934. Banks not included under this Schedule are called non-
Scheduled banks. Scheduled banks are usually private, foreign and nationalized banks operating
in India.

Scheduled Banks can be further classified into commercial and co-operative banks. The main
difference between both is the holding pattern. Scheduled co-operative banks are Cooperative
credit institutions are registered under the Cooperative Societies Act.
Scheduled Commercial Banks can be further divided into four groups:
 Public Sector Banks
SBI
Nationalised Banks
Other Public Sector Banks
 Private Banks
  Foreign Banks
 Regional Rural banks

Public Sector Banks

A bank in which the government holds a major portion of the shares. Banking in India has
been dominated by public sector banks since the 1969 when all major banks were
nationalised by the Indian government. At present, there are 21 Public Sector Banks in India
including SBI and 19 nationalised banks.

Private Sector Banks

Private sector banks are owned by private bodies. The majority stake is with private
individuals or institutions. These banks management and controlled by private promoters.
The private sector banks are split into two groups by financial regulators in India, old and
new. The old private sector banks existed prior to the nationalization in 1969 and kept their
independence because they were either too small or specialist to be included in
nationalization. The new private sector banks are those that have gained their banking license
since the liberalization in the 1990s.

Source: www.blog.practicemock.com
Fig 1.2. Types of Banks
INVESTMENTS/DEVELOPMENTS

Key investments and developments in India’s banking industry include:

 As of September 2018, the Government of India launched India Post Payments Bank
(IPPB) and has opened branches across 650 districts to achieve the objective of
financial inclusion.
 Deposits under Pradhan Mantri Jan Dhan Yojana (PMJDY) increased to Rs 926.78
billion (US$ 12.85 billion) were deposited and 336.6 million accounts were opened in
India. In May 2018, the Government of India provided Rs 6 trillion (US$ 93.1 billion)
loans to 120 million beneficiaries under Mudra scheme
 The total value of mergers and acquisition during 2017 in NBFC diversified financial
services and banking was US$ 2,564 billion, US$ 103 million and US$ 79 million
respectively.
 In May 2018, total equity funding of microfinance sector grew at the rate of 39.88 to Rs
96.31 billion (Rs 4.49 billion) in 2017-18 from Rs 68.85 billion (US$ 1.03 billion).
 The RBI has allowed third-party white label automated teller machines (ATM) to
accept international cards, including international prepaid cards, and said white label
ATMs can now tie up with any commercial bank for cash supply.
 Reliance Industries Limited (RIL) has said that it has applied for a Payments Bank
licence, where the company will be the promoter and State Bank of India will be its
joint venture partner with an equity investment of up to 30 per cent.
 The RBI has allowed bonds issued by multilateral financial institutions like World
Bank Group, the Asian Development Bank and the African Development Bank in India
As eligible securities for internet banking. The move will further develop the corporate
bond market.
SWOT ANALYSIS

STRENGTH

 Source of employment & GDP growth : Banking industry is one of the major source of
employment and contributes to economic growth. It is this industry which continuously
works to secure financial stability, facilitate international trade, promote employment, &
reduce poverty around the world.
 Hedge from risk : Whether it is natural calamity or man-made calamity banks mitigate
the after effect of the destruction by providing financial support to the victims to stand –
up & lead a peaceful life again.
 Diversified services: Banking industry offer services from CASA to insurance, to loan, to
investment.
 Changing from mere savings & loan facilitator role: Top priorities of banks now days
include regulatory compliance, improving asset quality, enhancing customer centricity,
focusing on digital convergence, and tackling competition from non-banks. Banks are
therefore making business and technology investments to change their business models.

WEAKNESS

 Vulnerable to risk: Since this sector deals with finances, it is the most risky sector
which can change the fate of any business/Industry.
 High NPA’s: Rise in Retail & corporate NPA’s (Non-performing assets) is the single
major issue this sector is going through worldwide.
 Can’t reach to Under-penetrated market: Due to several conflicting objectives of
government & banks which goes hand in hand, rural areas of developing nations are still
not in the shadow of banks.
 Structural weaknesses such as a fragmented industry structure, restrictionson capital
availability and deployment, lack of institutional supportinfrastructure, restrictive labour
laws, weak corporate governance andineffective regulations beyond Scheduled
Commercial Banks.
OPPURTUNITIES

 Expansion: Penetrating to the rural markets & bringing the rural masses under the
purview of organized banking will be the objective of the Banks in decades to come.
 Changing Socio-cultural & demographic factors: Given the demographic shifts
resulting from changes in age profile and household income, consumers will increasingly
demand enhanced institutional capabilities and service levels from banks.
 Rise in private sector banking: Banking Industry across the world is highly regulated
&lead by PSU’s with their respective central banks. With the advent of private sector
banks this sector is going through structural & functional changes mainly due to the
adaptation of the advanced technologies & increased competition thereby benefiting to
the end customers.
 Growth of sme sector: Growing SME sector leading to greater demand of credit
facilities.

THREATS

 Competition: Competition from NBFC’s (Non-banking financial companies) like

insurance companies & mutual fund companies can affect the business of Banks.
 Economic Crisis – Due to the economic crisis the customers are not saving money in

the banks and hence this reduces the liquidity of banks and they cannot operate smoothly

due to lack of cash.

 Changing Policies – Banking policies are subject to the rules and regulation of RBI

and hence any changes from RBI have a direct impact on the operations of the bank
PORTER FIVE FORCES MODEL

 Bargaining power suppliers: It is high in the periods when there is tight liquidity. Being
a service sector, human capital is one of the most important supplies to the sector. Public
sector banks in India have big trade unions which are having high bargaining power.
Establishment of well functioning capital market in India has given a choice to the
depositors to invest instead of saving. Moreover, with the deregulation of the interest rate
suppliers bargaining power has considerably increased.
 Bargaining power of customers: With large number of banks operating in India, the
bargaining power of creditworthy borrowers is high. Development of capital markets in
India has given an additional option to the businesses in India to source their funds.
 Threat of substitute products: The banking industry’s largest threats of substitution are
not from rival banks but from non-financial competitors. With development well
functioning capital market in India, investors have an opportunity to direct their savings
into investment opportunities whenever they decide so. Even Corporate have an option of
raising their capital through public issues, than for taking debt from banking companies.
 Threat of new entrant: After changes made in the regulation of the banks, many new
private are coming up and foreign banks are considering entering India. Now RBI is
coming up with new guidelines for NBFC‘s who wishes to start commercial banking
operations.
 Competition Rivalry: Competition in banking sector is high due to presence of public
sector, private sector banks and foreign banks along with non banking financial
companies
COMPANY ANALYSIS

STATE BANK OF INDIA

The State Bank of India (SBI) is an Indian multinational, public sector banking and financial
services statutory body. It is a government corporation statutory body headquartered in Mumbai,
Maharashtra. SBI is ranked as 216th in the Fortune Global 500 list of the world's biggest
corporations of 2018. It is the largest bank in India with a 23% market share in assets, besides a
share of one-fourth of the total loan and deposits market. The bank descends from the Bank of
Calcutta, founded in 1806, via the Imperial Bank of India, making it the oldest commercial bank
in the Indian subcontinent. The Bank of Madras merged into the other two "presidency banks" in
British India, the Bank of Calcutta and the Bank of Bombay, to form the Imperial Bank of India,
which in turn became the State Bank of India in 1955. The Government of India took control of
the Imperial Bank of India in 1955, with Reserve Bank of India(India's central bank) taking a
60% stake, renaming it the State Bank of India. SBI provides a range of banking products
through its network of branches in India and overseas, including products aimed at non-resident
Indians(NRIs). SBI has 16 regional hubs and 57 zonal offices that are located at important cities
throughout India. On 15 February 2017, the Union Cabinet approved the merger of five associate
banks with SBI. The State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of
Mysore, State Bank of Patiala and State Bank of Travancore, and Bharatiya Mahila Bank were
merged with State Bank of India with effect from 1 April 2017.

 The Bank registered a Net Profit of Rs. 838 Cr during Q4FY19 as against Net Loss of Rs.
7,718 Cr in the corresponding period last year.

 Gross NPA Ratio at 7.53% down 338 bps YoY and 118 bps sequentially.

 Net NPA Ratio at 3.01% down 272 bps YoY and 94 bps sequentially.

 PCR improved significantly by 1256 bps from 66.17% as on March 2018 to 78.73% as
on March 2019.
  Net Interest Income grew by 14.92% YoY in Q4FY19 attributable mainly to growth in
Domestic Credit, Improved Spreads and Lower Slippages. As a result, the Domestic Net
Interest Margins increased to 3.02% in Q4FY19.

Non-banking subsidiaries

Apart from five of its associate banks, SBI's non-banking subsidiaries include:

 SBI Capital Markets Ltd

 SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)
 SBI Life Insurance Company Limited

PRODUCTS AND SERVICES

SBI presents a wide range of products and services for its customers. Products include -SBI
Term Deposits , SBI Loan For Pensioners ,SBI Recurring Deposits , Loan Against Mortgage Of
Property ,SBI Housing Loan , Loan Against Shares & Debentures , Car Loan, Rent Plus
Scheme, Educational Loan, Medi-Plus Scheme ,Personal Loan , Interest Rates ,e-Invest (ASBA)
– IPO,export credit, Deferred Payment Guarantees, Term Loans.
Services include broking services, revised service charges , ATM services ,internet banking , e-
pay, e-rail , safe deposit locker ,MICR codes , foreign inward remittances and DEMAT services.