Project Vijaya Bank Final

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PERFORMANCE OF EQUITY PORTFOLIO

1. INDUSTRY PROFILE

BANKING SECTOR IN INDIA

The growth in the Indian Banking Industry has been more qualitative than quantitative

and it is expected to remain the same in the coming years. Based on the projections made in

the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the

report forecasts that the pace of expansion in the balance-sheets of banks is likely to

decelerate. The total assets of all scheduled commercial banks by end-March 2010 is

estimated at Rs 40,90,000 crores. That will comprise about 65 per cent of GDP at current

market prices as compared to 67 per cent in 2002-03. Bank assets are expected to grow at an

annual composite rate of 13.4 per cent during the rest of the decade as against the growth rate

of 16.7 per cent that existed between 1994-95 and 2002-03. It is expected that there will be

large additions to the capital base and reserves on the liability side.

The Indian Banking Industry can be categorized into non-scheduled banks

and scheduled banks. Scheduled banks constitute of commercial banks and co-

operative banks. There are about 67,000 branches of Scheduled banks spread across India. As

far as the present scenario is concerned the Banking Industry in India is going through a

transitional phase.

The Public Sector Banks (PSBs), which are the base of the Banking sector in India

account for more than 78 per cent of the total banking industry assets. Unfortunately they are

burdened with excessive Non Performing assets (NPAs), massive manpower and lack of

modern technology. On the other hand the Private Sector Banks are making tremendous

progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs. As far

as foreign banks are concerned they are likely to succeed in the Indian Banking Industry.

In the Indian Banking Industry some of the Private Sector Banks operating are IDBI

Bank , ING Vyasa Bank , SBI Commercial and International Bank Ltd, Bank of Rajasthan Ltd.

and banks from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank,

Oriental Bank, Allahabad Bank among others. ANZ Grindlays Bank, ABN-AMRO Bank,

American Express Bank Ltd, Citibank are some of the foreign banks operating in the Indian

Banking Industry.

For the past three decades India's banking system has several outstanding achievements to its

credit. The most striking is its extensive reach. It is no longer confined to only metropolitans

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or cosmopolitans in India. In fact, Indian banking system has reached even to the remote

corners of the country. This is one of the main reasons of India's growth process.

The commercial banking structure in India consists of:

➢ Scheduled Commercial Banks in India

➢ Unscheduled Banks in India

Scheduled Banks in India constitute those banks which have been included in the Second

Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only those banks in

this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act.


http://finance.indiamart.com/investment_in_india/scheduled_commercial_banks.html











As on 30th June, 1999, there were 300 scheduled banks in India having a total network of

64,918 branches.The scheduled commercial banks in India comprise of State bank of India

and its associates (8), nationalised banks (19), foreign banks (45), private sector banks (32),

co-operative banks and regional rural banks."Non-scheduled bank in India" means a banking

company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of

1949), which is not a scheduled bank.

VISION OF BANKS IN INDIA

The banking scenario in India has already gained all the momentum, with the domestic and

international banks gathering pace. The focus of all banks in India has shifted their approach

to 'cost', determined by revenue minus profit. This means that all the resources should be used

efficiently to better the productivity and ensure a win-win situation. To survive in the long

run, it is essential to focus on cost saving. Previously, banks focused on the 'revenue' model

which is equal to cost plus profit. Post the banking reforms, banks shifted their approach to

the 'profit' model, which meant that banks aimed at higher profit maximization.

The Indian banks are hopeful of becoming a global brand as they are the major source of

financial sector revenue and profit growth. The financial services penetration in India

continues to be healthy, thus the banking industry is also not far behind. As a result of this,

the profit for the Indian banking industry will surely surge ahead. The profit pool of the

Indian banking industry is probable to augment from US$ 4.8 billion in 2005 to US$ 20

billion in 2010 and further to US$ 40 billion by 2015. This growth and expansion pace would

be driven by the chunk of middle class population. The increase in the number of private

banks, the domestic credit market of India is estimated to grow from US$ 0.4 trillion in 2004

to US$ 23 trillion by 2050.

SCOPE

The Banking sector is considered the most lucrative option in today’s job market. In the

industry, a position in Treasury or Forex is considered right on top and this is followed by

careers in Private Banking, Investment Banking and Retail Banking.

One could work in a variety of areas in banking industry including Recurring Deposit

account, banking officer, probationary officer, loan officer, assessor, personal loan officer,

home loan officer, home loan agent, loan manager, mortgage loan underwriter, loan

processing officer, accountant, product marketing and sales executive, and customer service

executive among others.










In the Financial Services, some of the important jobs include that of a stockbroker who is

essentially a person who buys and sells securities on behalf of individuals and institutions for

some commission. While some brokers like to practice with individual clients others work for

institutions. Brokers who work for institutional investors are often called securities traders.

Many prefer to work as dealers, advisors and securities analysts. Security analysts are those

who advise companies on floatation’s of shares as they are expected to have sound

knowledge of capital markets.

Investment analysts are the backbone of the financial services sector. They study the financial

reports of companies, assess various statistical information, profitability projections,

compare financial results, survey the industry as a whole and on the basis of the available

information, and finally conclude to a decision. Equity Analysts do jobs similar to investment

analysts and research the equity markets and make predictions.





1. COMPANY PROFILE

HISTORY

2.1 BACKGROUND AND INCEPTION OF THE COMPANY

Vijaya Bank was founded on 23rd October 1931 by late Shri A.B.Shetty and other

enterprising farmers in Mangalore, Karnataka. The objective of the founders was essentiallyto promote banking habit, thrift and enterpreneurship among the farming community of

Dakshina Kannada district in Karnataka State. The bank became a scheduled bank in 1958.

Vijaya Bank steadily grew into a large All India bank, with nine smaller banks merging with

it during the 1963-68. The credit for this merger as well as growth goes to late Shri M.Sunder

Ram Shetty, who was then the Chief Executive of the bank. The bank was nationalised on

15th April 1980. The bank has built a network of 1180 branches,47 Extention Counters and

500 ATMs as at 30.11.2010, that span all 28 states and 4 union territories in the country.

OVERVIEW

Vijaya Bank has the highest number of branches in its home state Karnataka. During the

financial Year 2010 -11, the bank so far has opened 22 Branches and 1 Extension Counters.

In line with the prevailing trends, the bank has been giving greater thrust towards

technological upgradation of its operations. Realising your constantly evolving and diverse

needs, the bank has diversified too. Entering several new areas such as credit card, merchant

banking, hire purchase and leasing, and electronic remittance services. Vijaya Bank is oneamong the few banks in the country to take up principal membership of VISA International

and MasterCard International. The driving force behind Vijaya Bank's every initiative has

been its 11565 strong dedicated workforce.





2.2 NATURE OF THE BUSINESS CARRIED

Vijaya Bank is a Public Sector company undertaking which is running under theAdministrative Control of Govt of India. Vijaya Bank is a commercial bank which was

nationalized in the year 1969. The total share capital is Rs 210 crores of which government

capital is 100 crores, others Rs 110 crores and, the total business of the Bank stood at Rs.

2,25,890 crore.

Vijaya Bank is a nationalized bank which is offering services to the industry,

NRI’s and all the classes of people such as Personal Banking, Corporate Banking, NRI

banking, Priority credit and other services which includes savings and deposits, LoanProducts, Technology products, Mutual Funds, Insurance business, International services,

Card services, Consultancy services, Depository services, Ancillary services, Accounts and

banking, Cash management services, Loans and services , Syndication Services, IPO,

Merchant banking, TUF schemes, Deposits services, consultancy services . The bank has also

carved a distinctive mark, in various corporate social responsibilities, namely serving national

priorities, promoting rural development, enhancing rural self-employment through several

training institutes and spreading financial inclusion objective.

2.3 VISSION AND MISSION STATEMENTS

The Corporate Mission

• To emerge as a prime national bank backed by modern technology.

• To meet customers aspirations with professional banking services.

• To achieve sustained growth contributing to national development.

CORPORATE GOALS

Profitable business growth driven by technology and core business .





2.4 PRODUCTS AND SERVICES

Vijaya Bank offers a range of financial products and services to its customers. It also has

services for the NRIs. Following are the products and services offered by Vijaya Bank to its

customers:

• Deposits

• Loans & Advances

• NRI Services

• Remittance / Collection

• Credit Cards

• Forex

• Other Services

Vijaya Bank also offers a few more services to its customers which can be listed as below:

• Merchant Banking

• Vijaya Raksha

• Service Charges

• Pension Payments

• Mobile Banking

1.5 AREA OF OPERATION





Global scenario

Having operations only in the domestic area, Vijaya Bank has a host of strategic

alliances abroad to further its international business. It has correspondent banking

arrangements with 154 international banks spreading across 67 countries. For swift

remittance business, the Bank has also tied up with the western union money Transfer. The

bank is also actively involved in export financing activities, with outstanding export credit

amounting to Rs. 1056 crore as at June 30th , 2010.

National and Regional

The organisational structure of the Bank consists of three tiers viz. Head office,

Regional Offices and branches. The bank has 21 Regional offices engaged in supervision and

control over the 1185 branches across the country. In addition to the branches in the field

level, there are 12 service branches, which handle the work relating to collection of

instruments drawn on branches in optimum cash management, the bank has setup 29 currency

chests. As the extended wings of Inspection Department at Head Office, the bank also has 12

Regional Inspection Department at Head Office, the bank also has 12 Regional Inspectorates

across the country.

1.6 OWNERSHIP PATTERN2. a. Table showing the ownership pattern of Viaya Bank





Category No. of shares held Percentage of

shareholding

A Promoter’s Holding

1 Promoters

-Indian Promoters (Govt. of India)

-Foreign Promoters

23,35,17,800

-

53.87

-

2 Persons Acting In Concert - -

Sub-Total 23,35,17,800 53.87

B Non-Promoters Holding

3 Institutional Investors

Mutual Funds & UTI 46,61,097 1.12

Banks, Financial Institutions,

Insurance Companies(Central/ State

Institutions/ Non-Government

Institutions)

5,59,16,177 12.88

FIIs/FMFs 194,69,959 4.49

Sub-Total 8,02,47,233 18.49

C Others

Private Corporate Bodies 1,64,01,559 3.78

Indian Public 10,04,79,721 23.20

NRIs/OCBs 28,71,487 0.66

Any Others -Nil- -Nil-

Sub-Total 11,97,52,767 27.64

GRAND TOTAL 43,35,17,800 100.00

2. b. List of Shareholders Holding more than 1% of the bank





SL.

NO.

Name of Shareholders Name of Shares

Held

Percentage of

Shareholding

Category

1 President of India 23,35,17,800 53.87 Indian promoter

2 LIC of Indian 52,83,784 1.22 Govt. SponsoredFinancial

Institution

3 LIC of India 1,99,85,814 4.61 Govt. Sponsored

Financial

Institution

4 LIC of Indian Money Plus 1,38,13,333 3.19 Govt. Sponsored

FinancialInstitution

2.7 COMPETITORS INFORMATION

1. State Bank of India: The State Bank group, with over 16000 branches, has the

largest branch network in India and the bank has 141 overseas offices spread over 32

countries. State Bank of India is one of the Big Four Banks of India with ICICI bank,Axis bank and HDFC Bank. The State bank of India is 29 th most reputable company

in the world according to Forbes. The products of the bank are Loans, Credit cards,

Savings, Investment, Vehicles, etc. It has employees of 205,896.

2. ICICI Bank : It is India’s largest private sector bank by market capitalization and

second largest overall in terms of assets. The bank also has a network of 1,640

branches and about 4,721 ATMs in India and presence in 18 countries, as well as

some 24 million customers. ICICI banks offers a wide range of banking products and

financial services to corporate and retail customers through a variety of delivery

channels. ICICI bank is also the largest issuer of credit cards in India.

3. HDFC Bank Ltd: It is commercial bank of India. HDFC Bank has 1,412 branches

and over 3,295 ATMs, in 528 cities in India, and all branches of bank are linked on

an online real-time basis. For the fiscal year 2009-2010, the bank has reported net





profit of Rs2,6798 crore, up 46% from the previous fiscal. Total annual earnings of

the bank increased by 58% reaching at Rs.20,100 crore in 2009-2010.

4. Central Bank of India: It is a government-owned bank, is one of the oldest and

largest commercial bank in India based in Mumbai. The bank currently has 3,168

branches and 270 extension counters across 27 Indian states. The net profit of the

bank in 2009-2010 went up to Rs. 600crore.

5. Corporation Bank : It is a public sector undertaking with 57.17% of share capital

held by the government of India. The products of the bank are loans, Credit cards,

investments, deposits etc. It has currently 12,724 full time employees, and operates

from several branches in India. The bank’s net worth stood at Rs. 3,054.92 crores.

6. Bank of Baroda: It is the third largest Public Sector bank in India, after State Bank

of India and Punjab National Bank. It has a network of over 3000 branches and

offices, and about 1100+ ATMs. It offers a wide range of banking products and

financial services to corporate and retail customers through a variety of delivery

channels and through its specialized subsidiaries and affiliates in the areas of

investment banking, credit cards and asset management. It has banking sales of

Rs.17, 754 crores and a net profit of Rs.2,227 crores.

7. Bank of India: It was established on 7 September 1906 is a bank with headquarters

in Mumbai. Government-Owned since nationalization in 1969. It is one of India’s

leading banks, with about 3101 branches including 27 branches outside India. Bank

of India is a founder member of SWIFT (Society for Worldwide Inter Bank Financial

Telecommunications) in India which facilitates provision of cost-effective financial

processing and communication services.

1.5 INFRASTRUCTURE FACILITIES

• Vijaya bank has around 1185 branches and more than 500 ATMs and 243 branches in

unbanked areas in 28 states and 4 union territories.





• Bank has sponsored Visveshvaraya Grameena Bank (VGB), a Regional Rural Bank

(RRB) which has a total network of 30 branches in Mandya District of Karnataka

state, has total deposits and advances of Rs.191.35 Crore and Rs.133.41 crore

respectively as on March 2010.VIBSETIs (Vijaya Bank Self-Employment Training

Institutes).

INFORMATION TECHNOLOGY (IT)

• The bank has Core banking system on a Centralized platform.

• RTGS and NEFT services are available to the bank customers from all branches.

• Online trading facilities are provided to the customers.

2.9 AWARDS

In recognition of performance in implementing Hindi Language, the bank was awarded 3 rd

prize under the prestigious INDIRA GANDHI RAJBHASHA PURASKAR for the year

2007-2008. The bank has also been awarded 2nd prize in region for progressive use of Hindi

under Reserve Bank Rajbhasha Shield Scheme for the year 2008-09.The bank was awarded

1st prize by Regional Implementation office (North-East), Ministry of home, Govt. of India in

North Eastern Region for progressive use of Hindi for the year 2008-09.

During the year, the bank received an award from the NABARD in recognition of the

highest share of SHG business to its overall business, under SHG bank linkage programme

for the year 2008-09, among Commercial Banks in the State of Karnataka.

The staff members working in Bangalore city participated in the Inter-Bank competitions

conducted under the aegis of TOLIC. 12 competitions were conducted, in which bank bagged

9 prizes, out which 2 were first prizes.

2.10 WORK FLOW MODEL

BOARD OF DIRECTORS

↓





CHAIRMAN & MANAGING DIRECTORS

↓

EXECUTIVE DIRECTOR

↓

HEAD OFFICE FUNCTIONAL DEPARTMENTS

(General/ Dy. General Manager, etc.)

↓

REGIONAL OFFICES (20)

↓

SL. NO. Region Branches ServiceBranches Currency Chests

1 Ahmadabad* 47 1 1

2 Bangalore(N)* 58 1 1

3 Bangalore(s)* 55 1

4 Chandigarh 55

5 Chennai* 77 1 3

6 Delhi* 75 1 2

7 Guwahati 25

8 Hassan 53 1

9 Hubli* 70 1 1

10 Hyderabad* 59 1 2

11 Kochi 69 1 3

12 Kolkata* 62 1 313 Lucknow 62 1 2

14 Mangalore* 71 1 2

15 Mumbai* 61 1 1

16 Mysore* 59 1 1

17 Nagpur 52

18 Shimoga 36 1

19 Udupi 69 1





20 Vijayawada 43 3

21 Total 1158 12 29

2.11 FUTURE GROWTH AND PROSPECTS

•For the year 2010-2011, the bank has envisaged a business goal of Rs. 1,26,000

Crore that works out to a 21% growth y-o-y, comprising Rs.74000 Crore under

deposits and Rs.52000 Crore under advances.

•The bank proposes to add further 100 branches and 215 ATMs during the current

year.

•The bank will continue the retail centric focus in our business mix so as to ensure

that the bank stays put on the profitable growth trajectory.

•The bank has proposed to re-enter third party business like insurance that would help

augment our other income and launch services like phone banking and online trading

portal.

•The bank has taken internal steps to improve the quality of customer service

provided.





CHAPTER 3

3.1 MCKINSEY 7S FRAMEWORK MODEL

What is 7S-Model?

The 7S-model is a tool for managerial analysis and action that provides a structure with

which to consider a company as a whole, so that the organization‘s problems may be

diagnosed and a strategy may be developed and implemented. The seven –Ss is a framework

for analyzing organizations and their effectiveness. It looks at the seven key elements that

make the organizations successful or not.

The 7S diagram illustrates the multiplicity interconnectedness of elements that

define an organizations’ ability to change. The theory helped to change managers’ thinking

about how companies could be improved. It says that it is not just a matter of devising a new

strategy and following it through. Nor is it a matter of setting up new systems and lettingthem generate improvements.





To be effective, their organization must have a higher degree of fit, or internal alignment

among the seven Ss. All Ss are interrelated, so a change in one has a ripple effect on all

others. It is impossible to make progress on one without making progress on all. Thus, to

improve the organization, one has to pay attention to all of the seven elements at the same

time.

STRUCTURE

The design of organization structure is a critical task of the top management of an

organization. It is the selection of the whole organization edifice. Organization structure

refers to the relatively more durable Organizational arrangements and relationships. It





prescribes the formal relationship, how an organizational member’s procedure exists. To

guide the various activities performed by member of all part of the organization.

Organizational Structure

Chairman

↓

M.D & CEO

↓

Sr.Executive

↓

Executive

VP/ Country Head

↓

Business Head

↓

HEAD/VP

↓

Associate VP

↓

Assistance VP

↓

Manager

↓

Asst. Manager

SKILL:

Classification of skill:





• Knowledge skills

• Regulation ship knowledge

• Regulations knowledge

• Industry knowledge

• Soft skills

Steps to impart skills

Primary module

This module is for welcoming a new staff to the bank. He will be briefed on the working

culture, products & services, duties & responsibilities and the liabilities & assets.

Secondary module

This is to provide soft training to the existing employees. Training is given to the employees

as per the needs of the branch. Information is provided on new technology, changing global

economy & economic uncertainties.

STYLE

Policy making style

The board of directors frames all the policies and plans. The top-level managers are also

asked for their suggestions on policy framing.

Decision Making Style

The top management executives make the decisions. All managers are given the choice to

take part in decision-making. Branch managers are given the freedom to take up decisions

related to their branch. Personal bankers deal with the day-to-day operations of the bank. The

managers are given 100% freedom for decision-making provided the decision is for the

interest and the profitability of the bank. For examples:

drilling down MIS for the profitability of the bank. Fee is what the bank earns. The staffs are

given the freedom to wave off the fees.

Working Style





The working hours is a 10-hour schedule starting from 9am to 7pm. The officers and

managers are given 100% freedom to take up decisions relating to the day-to-day operations

in the bank. The bank operates from Monday to Saturday in the case of car loans the usual

interest rate 11%, but for a customer who uses lot of products and has a long-standing

relationship with the bank the personal bankers have the choice of reducing the interest rate

to 9 or 8%.

STRATEGY:

One of the strategy adopted by the bank to face the competition is to compete in the niche

market where multi- national and foreign banks exists. Quality of assets and customer

orientation are another strategies adopted to stand out in the competition the around the

world. Vijaya bank uses technology to its fullest extent to be no;1 in the banking industry.

CMS is an example for that CMS stands for Cash Machine Services. With the help of these

services the customers can clear their cheques from any of the country within 3days, whereas

all other banks in India take 7days.

SHARED VALUE:

Quality is the key word and everything revolves around the word “quality” both in business

and in processes. Quality of assets and customer orientation are the trademarks of Vijaya

bank.

The bank is committed to maintain the highest level of ethical standards, professional

integrity, corporate governance and regulatory compliance. Vijaya bank’s business

philosophy is based on four core values-operational excellence, customer focus, product

leadership and people.

Values of Vijaya Bank

• Caring and Courtesy

• Initiatives and Innovation

• Integrity and Transparency





• Costumer Relationship

• Trustworthiness and Reliability

Vijaya Bank’s mission is to be lending, global, client-focused, innovation and Low-cost

provider of financial services through the distribution channels of the client’s preferences in

the markets where Vijaya can create value.

• Internal business models

• Wide product range

• Valuation of shares

• Key business initiative

SYSTEM:

A system refers to the processes used to manage the organization. It includes:

• Management information Systems

• Innovation Systems

• Performance Management System

• Financial System/Capital Allocation System

• Compensation System/Reward System

• Customer Satisfaction Monitoring System

Every organization has some systems or internal processes to support and implement the

strategy and run day-to-day affairs. For example, a company may follow a particular process

for recruitment. These processes are normally strictly followed and are designed to achieve

maximum effectiveness. Traditionally the organizations have been following a bureaucratic-

style process model where most decisions are taken at the higher management level and there

are various and sometimes unnecessary requirements for a specific decision (e.g.

procurement of daily use goods) to be taken. Increasingly, the organizations are simplifying

and modernizing their process by innovation and use of new technology to make the

decision-making process quicker. Special emphasis is on the customers with the intention to

make the processes that involve customers as user friendly as possible.

At Vijaya Bank we look for five key elements in our new recruits to ensure their

alignment with our ideals:

• Excitement to bring one’s knowledge to the table.

• Hunger for knowledge and desire to invest in one self.





• Diversify skill and capacity of innovative.

• Ability to thrive through teamwork.

• Strong sense of stewardship and commitment to nation building.

In addition to regular implementation of our organization's objectives, our employees provide

thought leadership to the industry in their specific area of expertise.

Internal job postings

To minimize talent attrition, we look at movement of talent from one place to another through

an internal job posting program. Through this, employees can apply to any new vacancy

within the organization. The program has ensured that we have one of the lowest rates of

employee attrition in any industry.

Compensation and benefits

The Vijaya bank has a formal process of compensation benchmarking where they have an

inbuilt process for annual review. The rigorous and transparent performance pay scale

program ensures that high performers are well-compensated both monetarily and in stock.

3.2 SWOT ANALYSIS

SWOT Analysis is a tool that identifies the strengths, weaknesses, opportunities and threats

of an organization. Specifically, SWOT is a basic, straightforward model that assesses what

an organization can and cannot do as well as its potential opportunities and threats.

The method of SWOT analysis is to take the information from an environmental analysis and





separate it into internal (strengths and weaknesses) and external issues (opportunities and

threats).

SWOT ANALYSIS OF VIJAYA BANK

STRENGTHS:

• Greater and superior technology.

• Good credit culture and policies.

• Well trained employees.

• Wide range of product and services.

• Retail products like savings accounts, current accounts and deposit account.

• Investment products like mutual fund advisory services and government securities.

• Value added services like debit card, demat services and western union money

transfer services.

• Consistent business track record with increasing turnover every year.

• Ideal participative management.

• Highly motivated employees.

WEAKNESS:

The weakness plays an important role in the growth of the company. The number

of existing players and likely new entrants will intensify the competition which will have

direct impact on the margin of profit.

• Non- expansion of branches in the north and eastern parts of India.





• Job attrition is high, because work recognition is less.

• Slow in adopting new things reluctance to change.

OPPORTUNITIES

As the economy is booming the banking sector has many opportunities to expand and grow:

• The bank has scope for expansion.

• Innovations and technological improvements.

• Availability of funds through supporting bank systems.

THREATS

• The cut throat competition from foreign companies

• The changing global economy and changes in economy rates and policies are major

threats.

• Staffing shortages in speciality areas.

• Increasing salaries and incentives.

• Changing government policies.

• Not adopting to modern style of working in all sections may cause hindrance in

future.

3.3 ANALYSIS OF FINANCIAL STATEMENTS

FINANCIAL ANALYSIS

3. a. Table showing the financial ratios of the bank

2010/03 2009/03 2008/03 2007/03 2006/03

Per Share

EPS 10.89 6.05 8.33 7.64 2.93





Book Value 61.44 53.47 48.59 42.70 37.37

Dividend/Share 2.50 1.00 2.00 2.00 1.00

Liquidity ratios

Debt/Equity 23.44 23.74 22.76 20.31 17.10

Current Ratio 0.56 0.36 0.33 0.32 0.39

Quick Ratio 16.40 10.43 10.02 10.72 11.93

Interest Cover 1.22 1.16 1.11 1.28 1.28

Earnings Per Share: EPS is the earnings after tax divided by the number of common

shares outstanding.

EPS= EAT Number of shares outstanding

We can see that the banks EPS is increasing over the period of 5 years which is a good for the

company.

Book value per share: The ratio indicates that the share of equity shareholders after the

company has paid all its liabilities, creditors, debenture holders and preference shareholder.

Book Value per share= equity share capital+ reserve

Total no. Of equity share outstanding

We can see a constant raise in the Book value of the company in 2010, it is more than the

market price.

Dividend to market price: dividend is the regular income received by the shareholder.

The shareholder would like to know the relationship between the market price and the

dividend.

Divided yield= dividend per share * 100





Market price per share

The bank provides dividend that is low because of the high market price. Whenever

companies plough back their profits to settle the loans or for expansion program, the yield

would be low.

Liquidity Ratios – measure a company’s ability to meet short term financial obligations

Debt to equity

A measure of a company's financial leverage calculated by dividing its total

liabilities by stockholders' equity. It indicates what proportion of equity and debt the

company is using to finance its assets.

High debt/equity ratio generally means that a company has been aggressive in financing its

growth with debt. This can result in volatile earnings as a result of the additional interest

expense.

Current ratio

Current Ratio = Current Assets/Current Liabilities

The ratio is mainly used to give an idea of the company's ability to pay back its short-term

liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The

higher the current ratio, the more capable the company is of paying its obligations. A ratio

under 1 suggests that the company would be unable to pay off its obligations if they came due

at that point. By analysing the ratios we can conclude that the bank is in bad position and

would not be able to pay off its obligations.

Quick Ratio

Quick Ratio (Acid Test Ratio) = Current Assets – Inventories/Current Liabilities

The quick ratio is a more conservative measure of liquidity than the current ratio as it

removes inventory from the current assets used in the ratio's formula. By excluding

inventory, the quick ratio focuses on the more-liquid assets of a company.

The basics and use of this ratio are similar to the current ratio in that it gives users an idea of

the ability of a company to meet its short-term liabilities with its short-term assets. Another





beneficial use is to compare the quick ratio with the current ratio. If the current ratio is

significantly higher, it is a clear indication that the company's current assets are dependent on

inventory.

Interest cover

This shows how many times the operating income covers the interest payment. Interest coverage ratio= EBIT/ Interest

We can see that in 2010, the bank’s earnings before interest and tax are sufficient to servicethe debt to the extent of 1.22.

The key short-term liquidity ratios are:

Current Ratio 0.56

Quick Ratio 16.40

Long term liquidity or gearing is concerned with the financial structure of the company. Long

term liquidity ratios measure the extent to which the capital employed in the business has

been financed either by shareholders through share capital and retained earnings, or through

borrowing and long-term finance.

3. b. Table showing stock performance

BSE NSE

period close price change period close price change

3 Months 106.90 -13.24 3 Months 106.90 -13.10

6 Months 69.95 32.59 6 Months 70.00 32.71

12 Months 51.65 79.57 12 Months 51.80 79.34





3.4 Learning experience

The time spent by me in Vijaya Bank has helped me a lot by bridging the gap between the

theoretical approaches and practical approach . As i spent more time in the organisation, the

concepts became more and more clear. Firstly there is a huge difference in the working

environment compared to the college environment.

Application to management was made known to us. The information which i learnt from

them is very useful. It was a perfect place to apply my theoretical knowledge to practical

aspects and gain some useful knowledge. Every day was a great learning process. It is always

believed that theories are being implemented in the day to day activities but in reality i saw

the other side of it where in theories were being adjusted as per the business activities.

Employees would suddenly react to the inadequacies caused in their work place, which would

be solved by practical negotiation rather than theoretical procedures. Learning always

supports in boosting our knowledge level. Meeting new people and adjusting to their work

environment has always been challenging to me and i feel a replica of it in my organisation

case. I learnt plenty from their behaviour, interpersonal skill, decision making skill,

knowledge base etc.





Benefits derived from in training:

• It involved exposure to the corporate environment by means of various facts of

corporate world.

• Enriched my skill of observation and interaction.

• It strengthened my vision and my self-confidence.

• A comparison between theoretical and practical knowledge can be made.

Finally i can say totally the company is excellent training facility, good co-operative

among the employees, excellent working environment.

This training was very much educative; it has definitely made me more prepared to face the

real world in the organization once we step out of college. I will be able to make our way

better in the organizational environment. It has prepared me in a definite manner to face the

challenges. I would like to conclude saying that “learning is never ending process”.

CHAPTER 4

4.1 GENERAL INTRODUCTION

INTRODUCTION TO TREASURY

Traditionally, the role of the Treasury in Indian banks was limited to ensuring the

maintenance of the RBI-stipulated norms for Cash Reserve Ratio (CRR) - which mandates

that a minimum proportion of defined liabilities known as net Demand and Time Liabilities

(NDTL) be kept as deposit with the central bank- and Statutory Liquidity Ratio (SLR)- which

obliges banks to invest a specified percentage of their liabilities in notified securities issued

by the government of India and state Governments or guaranteed by them.

Treasury forms a vital part of any commercial bank’s activities. It is the window through

which the bank raises funds from or places funds in markets.

Traditionally, in banks in India, the role of Treasury was limited to ensuring the maintenance

of RBI’s stipulated norms for cash reserve ratio (CRR)- which mandates that a minimum

proportion of defined liabilities must be kept on deposit with the central bank- and the

Statutory Liquidity Ratio(SLR) – which obliges banks to invest a specified percentage of

their liabilities in approved securities issued by the Government of India and State





Governments. Whereas activities in foreign exchange were mostly confined to meeting

merchants’ and customers’ requirements for imports, exports, remittances and deposits.

The deregulation of financial markets began with the shift to market- determined exchange

rates and moved ahead with the freeing of Bank deposit and lending rates. The RBI began

using monetary intervention tools such as LAF and Open Market Operations (OMOs) to

manage liquidity.

The volatility in interest rates (yields) is at the heart of the transformation of Bank Treasuries

from mere maintenance of CRR and SLR to become to a profit centre. Downwards and

upward movements in yields offer excellent scope and opportunities to trade in securities and

earn profits for the Bank, as also trading in forex to take advantage of currency variations.

Similarly, the rupee’s exchange rate has become volatile. There is sufficient fluctuation both

intraday and interday to earn trading profits on buying and selling the currency.

The forward market in India is another potential source of profits as more often it deviates

from interest parity conditions. An active Treasury also earns profit by doing arbitrages. New

products, such as derivatives, currency Futures enable spotting and capitalizing on such

opportunities. Another key (modern) function of Treasury is asset-liability management and

hedging (i.e. insulating) the bank’s balance sheet from interest and exchange ratefluctuations.

OBJECTIVES OF INTEGRATED TREASURY MANEGEMENT POLICY

• To maintain Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) in terms

of RBI guidelines.

• To achieve optimum level of return from the investment operation including forex

transactions keeping in mind the liquidity and risk aspects of the portfolio.

• To manage liquidity i.e to bridge temporary mismatch in fund position by resorting to

various options viz Call, CBLO etc.

• To maintain maturity pattern of investments consistent with the bank’s need for funds

and in line with Asset Liability management Policy of the Bank.

• To achieve Portfolio optimization by implementing various strategies and information

technology solutions to maximize the value and manage the risk of investment

portfolios over the near and medium to long-term.

•To manage credit risks, liquidity risk, market risk and operational risk in tune with

bank’s risk management policies.





• To maintain a healthy and well diversified portfolio of investments consisting of both

SLR and NON SLR categories in relation to pricing, maturity, coupon, market prices

etc.

4.2 STATEMENT OF THE PROBLEM

Treasury plays a vital role in the banks it is a form of security as well as investment. It

involves many factors and requires a deep study about the pattern, process, procedures and

performance. This study is intended to identify the various concepts of investments and

methods to help in the selection of script to create a portfolio. The study done at Vijaya Bank

is “A STUDY ON THE PERFOERMANCE OF INVESTMENTS IN EQUITYSECTOR”.

4.3 OBJECTIVES OF THE STUDY

• To study the operations in Treasury management (Domestic Treasury).

• To understand different portfolio of investments made by VIJYA BANK.

• To analyse the performance of the equity sectors and selection of portfolio.

4.4 SCOPE OF THE STUDY

The study encompasses only the domestic treasury (equity portfolio) . The study gives

an understanding of the performance of the investments made in equity sector and the

behaviour of such investments. The scope of the study is limited to the performance of the

industry for the limited period.

4.5 METHODOLOGY





The report is descriptive in nature. The analysis is based on the data collected from

the secondary sources.

For the purpose of study historical prices of the selected stocks, sensex (BSE) are

extracted for the calendar year 2010-2011 starting from 1st December 2010 to 31st January

2011. The criteria for selection of stocks were top 10 beta values and top five industries that

were identified for the purpose of study.

The returns are calculated based on the closing prices of the stocks and indices. The

returns do not include dividend received and concentrates only on capital gains.

SOURCES OF DATA

Primary Data

Observation & personal discussion with bank personnel, professional’s experts and

statutory loan monitoring formed the main sources of primary data.

Secondary Data

• Internal Secondary data

Accounting records like registers, annual records, auditor’s reports &

inspection files formed the sources of internal secondary data.

• External Secondary data

RBI circulars, manuals, journals & magazines, libraries and main sources of

secondary data.

4.6 LIMITATIONS OF THE STUDY

• Owing to the confidentiality enforced by the bank, some information not obtained.

• The current trend slightly affected due to changes in financial flexibilities.

• Time constraint is also one of the major limitations.

• The external factors such as fiscal’s policy, bank rate, government etc., are as

applicable to previous years and this impact may change from year to year.





THE OPERATIONS INVOLVED IN THE DOMESTIC TREASURY

• Ensuring strict compliance with statutory requirements of maintaining the stipulated

Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

• Liquidity management by ensuring the optimum utilisation of the residual resources

through investments and raising additional resources required for meeting credit

demands at optimal cost.

•

Profitable deployment of funds available at Vijaya Bank.

ORGANISATIONAL STRUCTURE OF TREASURY

Organisational structure of a commercial bank treasury should facilitate the handling of all

market operations, from dealing to settlement, custody and accounting, in both the domestic

and foreign exchange markets. In view of the voluminous and complex nature of transactions

handled by a treasury, various functions are segregated as under.

TREASURY ORGANISATION

FRONT-OFFICE Dealing and investment- Risk Taking

Mid-Office Risk management and management





information

Back-office Deal confirmations, settlements, accounting

and reconciliation.

The organisation of a treasury depends on the volume of activities handled. However,

notwithstanding the size or volume of transactions, it is important that the above three

functions are distinct and work in water-tight compartments. Accordingly the dealers are not

supposed to handle settlement or accounts or risk management. The back-office should not

perform dealing but may perform Back office functions.

TREASURY ORGANIZATION STRUCTURE









FRONT OFFICE

• The front office of a treasury has a responsibility to manage investment and market

risks in accordance with the instructions received from the bank’s ALCO. This is undertaken

through the Dealing room which acts as the banks interface to international and domestic

financial markets.

• It is a clearing house for risk and responsibility to manage treasury risks taken in all areas of

the bank, on behalf of customers, and on behalf of the bank, within the policies and limits

prescribed by the board and management committee.





• The dealers enter into transactions on the basis of current market price which is ascertained

by them through the information network made available.

• Reuters and Bloomberg are companies which make available market information on a real

time basis.

• In making deals, the dealers will have to adhere to the various limits such as counterparty

exposure, day dealing limit, etc., that have been prescribed.

MID-OFFICE

Mid office is responsible for onsite risk measurement, monitoring and management reporting.

The other functions of Mid-Office are:

• Limit setting and monitoring exposures in relation to limits.

• Evolving hedging strategies for assets and liabilities.

• Monitoring open currency positions.

• Calculating and reporting VAR.

• Risk-return analysis.

• Marking open positions to market to asses unrealised gain and losses.

BACK-OFFICE FUNCTIONS

The key functions of back-office are:➢ Deal slip verification

➢ Generation and dispatch of interbank confirmations

➢ Monitoring receipt of confirmations from counterparty banks

➢ Monitoring receipt of confirmations of forward contracts

➢ Statutory reports to the RBI

➢ Monitoring approved exposure and position limits

➢ THE DIFFERENT PORTFOLIO OF INVESTMENT MADE BY VIJAYA

BANK

Bank invests in many portfolios in accordance with the RBI guidelines. As mentioned before

the bank can invest in any of the following segments:

• Government Securities





• Other approved securities

• Shares

• Debentures and bonds

• Investments in Subsidiaries/joint ventures/ Associates

• Others (Commercial Paper, Units of Mutual Fund, NABARD-RIDF, Preference

Shares, Venture Capital Funds etc.)

NATURE OF TREASURY ASSETS AND LIABILITIES

Bank’s balance sheet consists of treasury assets and liabilities on the one hand and non-

treasury assets and liabilities on the other. There is clear distinction between the two groups.

List of Banks Treasury

1. DOMESTIC TREASURY

• Asset Products/Instruments

• Call/Notice Money Lending

• Term Money Lending/Inter-bank deposits

• Investments in CDs

• Commercial Paper

•

Inter-bank participation certificates• Reverse Repos/CBLO- backed leading through CCIL

1. SLR bonds (notified as such by the RBI)

• Issued by the Government of India as securities and T-bills

• Issued by State Governments

• Guaranteed by Government of India

• Guaranteed by State Governments

1. Bonds (Issued by)

• Financial Institutions

• Banks/NBFCs (Tier II capitals)

• Corporate

• State-level enterprises

• Infrastructure projects

1. Assets- backed securities (PTCs)

2. Private placements

3. Floating rate bonds4. Tax- free bonds





5. Preference shares

6. Listed/unlisted equity

7. Mutual funds

LIABILITY PRODUCTS/ INSTRUMENTS

• Call/ notice money borrowing

• Term money borrowing

• CD issues

• Inter-bank participation certificates

• Repos/CBLO- backed borrowing through CCIL

• Refinance (RBI, SIDBI, NABARD, EXIM BANK, NHB)

• Tier II bonds ( issued by bank)

PORTFOLIO

A combination of securities with different risk & return characteristics will constitute the

portfolio of the investor. Thus, a portfolio is the combination of various assets and/or

instruments of investments. The combination may have different features of risk & return,

separate from those of the components.

Types of portfolio for study:

In portfolio Design, we are considering only two types of portfolio.

They are as follow:

1. Random Portfolio





2. Sector Portfolio

1. Random portfolio

Random portfolio consists of the scripts that are randomly selected by the investor by its own

knowledge and preference of the stocks. Here there is no analysis is done of the script, they

are selected on the tips and buts received by the investors from the external sources.

Features of random portfolio

• There is no method used for selection of the script in the portfolio.

• Selection is based on the individual criteria for the scripts.

• The investment is made for higher return in short term.

• Generally in India most of the portfolios are selected according to this random method

as no investor himself in that much of analysis of the script.

Advantages of random portfolio

• Easier to keep a track on the market as not much time wasted in the analysis.

• This portfolio seems to have perform better in short term as script are generally which

are performing better at that time.

•

Tips are available everywhere for the investor to pouch.• It is the experience of the individual that can fetch him good return.

Disadvantages of random portfolio

• There is every chance that you may select a script that has a very bad background in

the market.

• Not every time the tips pay off for you. You need to have strong reason to select that

script.

• Such portfolios are not able to sustain when there is a crisis in the market.

• There is a very high risk and return involve in such portfolio.

The BETA factor is considered to design our Random Portfolio.

Interpretation of Beta





• When B = 1 means that the scrip has same volatility as compared to Index. Suitable

for moderate investor.

• When B>1 means that scrip is more volatile as compared to market suitable for

aggressive investors.

• When B<1 then scrip is less volatile as compared to market and suitable for defensive

investors.

Beta of scrips plays vital role in scrip selection in Portfolio management. Portfolio can be

created in many ways as sector wise, diversified in various sector, beta wise scrip portfolio.

So based on the beta we can prepare 3 portfolio, they are:

• AGGRESSIVE

• MODERATE

• DEFENSIVE

2. Sector specific portfolio

Sector specific portfolio includes securities of those companies which are in the same

business. Sector portfolios are very useful when there is a particular sector which is doing

very good and has a bright future a head. Sector portfolio has the securities of those

companies that engage in same kind of business.

Features of sector portfolio

• Script form the same group of companies that are in to the similar type of business.

• Maximum exposure to the industry/sector. So any news or event has the direct

effect on the portfolio.

• Risk regarding the portfolio increases as it is expose to sector specific ups and downs.

• Useful investment tools for speculator and short-sellers.

• It is better suited for the sectors which have been providing good revenue in the near

past.

Advantages of sector portfolio

• It is better suited to investors who are willing to take risk.





• It provides better short term return then other portfolios.

• It is easy to keep a watch on one sector rather than many. You can have a good

command over the things happening.

• Limited exposure to other sectors keeps the portfolio safe from the performance of

other sectors in the economy.

Disadvantages of sector portfolio

• It is a highly risky portfolio as risk associated with the sector directly affects the

performance of the portfolio.

• These types of portfolios are not suited for long-term investor as risk taken for the

return can be too high.

There is always the possibly many scripts in the sector may not be giving that

much good attractive return as others. They may eat the profits from other scripts.

RANDOM PORTFOLIO

DEFENSIVE PORTFOLIO

SL.NO SCRIPT BETA PRICE ON

1-12-2010

WI

1 BHARATI AIRTEL 0.7224 352.15 0.05

2 BHEL 0.7774 2235 0.33

3 Maruti Suzuki India LTD. 0.6889 1321 0.20

4 AMBUJA CEMENTS 0.8046 141 0.02





5 BRIGADE

ENTERPRISES LTD.

0.8042 120 0.02

6 Bank of Baroda 0.6897 966.3 0.13

7 GRINDWEL NORTON 0.6621 222 0.04

8 HATHWAY CABLE 0.6935 150 0.02

9 J K PAPER 0.8146 50 0.01

10 PUNJAB NATIONAL

BANK

0.8458 1102 0.18

TOTAL PORTFOLIO INVESTMENT= Rs.

TOTAL PORTFOLIO BETA= WI*BETA=0.752421

IN TERMS OF (%) = 75.42%

Based on the nature of beta i.e, beta in the range of 0.60-0.85 has been classified as defensive

in nature and the total portfolio beta is found to be 0.752421.

Calculation of Total Return of the PortfolioIn order to calculate the total return of the defensive portfolio the following steps are taken:

➢ Calculation of the return of individual script for the month of December 2010 and

January 2011.

➢ For the calculation of return the opening and closing price of that month is

considered.

➢ Return= (Market price- Purchase price)/ purchase price

➢ Using the above formula the return of each script is calculated.





RETURN ON INDIVIDUAL SCRIPTS

1ST MONTH

SL.NO SCRIPT BETA PRICE ASON

1-12-2010

PRICE ASON

31-12-2010

RETUN(%)

1 BHARATI AIRTEL 0.7224 352.15 358.40 1.77%

2 BHEL 0.7774 2235 2324.75 4.02%

3 Maruti Suzuki

India LTD.

0.6889 1321 1420.6 7.54%

4 AMBUJA

CEMENTS

0.8046 141 143.05 1.45%

5 BRIGADE

ENTERPRISES

0.8042 120 113.65 -5.29%

6 Bank of Baroda 0.6897 966.3 896.50 -7.22%

7 GRINDWEL

NORTON

0.6621 222 243.20 9.55%

8 HATHWAY

CABLE

0.6935 125 167.05 33.64%

9 J K PAPER 0.8146 50 56.65 13.30%

10 PNB 0.8458 1102 1221.85 10.88%

2ND MONTH

SL.NO SCRIPT BETA PRICE

AS ON

3-1-2011

PRICE

AS ON

31-1-2011

RETURN

(%)





1 BHARATI AIRTEL 0.7224 358.4 318.55 -11.12%

2 BHEL 0.7774 2346 2331 -0.6 4%

3 Maruti Suzuki India

LTD.

0.6889 1432 1390 -2.93%

4 AMBUJA CEMENTS 0.8046 143.05 128.05 -10.49%

5 BRIGADE

ENTERPRISES LTD.

0.8042 114.1 94.95 -16.78%

6 Bank of Baroda 0.6897 900 801 -11.00%

7 GRINDWEL

NORTON

0.6621 245 223 -8.98%

8 HATHWAY CABLE 0.6935 164 151 -7.93%

9 J K PAPER 0.8146 60 51 -15.00%

10 PUNJAB NATIONAL

BANK

0.8458 1230 1143 -7.07%

RETURN ON THE PORTFOLIO

TOTAL PORTFOLIO INVESTMENT= Rs 10,00,000

VALUE OF PORTFOLIO AS ON 31-01-2011=1041130.54

TOTAL RETURN ON PORTFOLIO

= 1166628.41 - 1000000

= 166628.41

TOTAL RETURN IN TERMS OF % = 16.67%

The Total return on portfolio is calculated by taking the difference between the total

investment made and the value of portfolio as on 31-01-2011.





MODERATE PORTFOLIO

SL.NO SCRIPT BETA PRICE ON

1-12-2010

WI

1 LARSEN & TOUBRO 0.9582 1845 0.43

2 TCS 0.8309 1084 0.25

3 TECH MAHINDRA 0.8902 680 0.15

4 TVS MOTORS 0.9893 84 0.02

5 T F C I LTD 0.9111 33 0.01

6 TANTIA

CONSTRUCTIONS

0.982 83 0.02

7 RAJESH EXPORTS 0.9117 102 0.03

8 RATHI STEEL &

POWER LTD

0.9978 20 0.005

9 RAYMOND LTD 1 340 0.08

10 MTNL 0.9636 55 0.01

TOTAL PORTFOLIO INVESTMENT= Rs 10,00,000

TOTAL PORTFOLIO BETA= WI*BETA=0.918645

INTERMS OF (%) = 91.86%





The Moderate portfolio is constructed by taking beta values between 0.80 to 1.00. The total

portfolio beta is found to be 0.918645.

For the calculation of the total returns the same method as Defensive is followed.


1ST MONTH

SL.NO SCRIPT BETA PRICE AS

ON

1-12-2010

PRICE AS

ON

31-12-2010

RETURN

(%)

1 LARSEN &

TOUBRO

0.9582 1845 1979.05 7.27%

2 TCS 0.8309 1084 1165.05 7.48%

3 TECH

MAHINDRA

0.8902 680 702.4 3.29%

4 TVS

MOTORS

0.9893 84 70.65 -15.89%

5 T F C I LTD 0.9111 33 36.2 9.70%

6 TANTIA

CONSTRUCT

IONS

0.982 83 83.35 0.42%

7 RAJESH

EXPORTS

0.9117 102 131.3 28.73%

8 RATHI

STEEL &

POWER LTD

0.9978 20 22.65 13.25%





9 RAYMOND

LTD

1 340 375.9 10.56%

10 MTNL 0.9636 55 54.85 -0.27%

2ND MONTH


ON

3-1-2011

PRICE AS

ON

31-1-2011

RETURN

(%)

1 LARSEN &

TOUBRO

0.9582 1878 1899 1.12%

2 TCS 0.8309 1165 1173 0.69%

3 TECH

MAHINDRA

0.8902 704 647 -8.10%

4 TVS

MOTORS

0.9893 73.1 52.5 -28.77%

5 T F C I LTD 0.9111 27 32 18.52%

6 TANTIA

CONSTRUC

TIONS

0.9978 85 75 -11.76%





7 RAJESH

EXPORTS

0.9117 100 90 -10.00%

8 RATHI

STEEL &POWER LTD

0.9978 30 25 -16.67%

9 RAYMOND

LTD

1 377 314 -16.71%

10 MTNL 0.9636 55.5 47.4 -14.59%

RETURN ON THE PORTFOLIOTOTAL PORTFOLIO INVESTMENT=Rs

VALUE OF PORTFOLIO AS ON 31-01-2011=786106.3


=786106.3-

=

TOTAL RETURN IN TERMS OF %= - 21.38%

The analysis shows that the Total return of the scripts with moderate beta is negative, this

contradicts the belief that higher the risk greater the return.

AGGRESSIVE PORTFOLIO

SL.NO SCRIPT BETA PRICE AS ON

1-12-2010

WI

1 RELIANCE

CAPITAL

1.2421 701 0.10

2 Reliance

Industries Ltd.

1.088 999 0.15

3 SBI 1.1537 3129 0.41

4 GMR Infra 1.194 49.8 0.01





5 Hindalco 1.8237 206.9 0.04

6 ICICI Bank 1.5027 1149 0.17

7 IDFC 1.2715 187.8 0.03

8 IFCI 1.2831 61.65 0.01

9 INDIA METAL& FERRO

ALLOY

1.1645 600 0.09

10 INDSWIFT 1.1321 30 0.01

TOTAL PORTFOLIO INVESTMENT= Rs. 544550245.4

TOTAL PORTFOLIO BETA= WI*BETA= 1.239823

IN TERMS OF (%) = 123.98%

The scripts selected have beta<1 , the total portfolio beta is found to be 1.239823.


1ST MONTH

SL.NO

SCRIPT BETA PRICE AS

ON

1-12-2010

PRICE AS

ON

31-12-2010

RETURN

(%)





1 RELIANCE

CAPITAL

1.2421 701 668.05 -4.70%

2 Reliance

IndustriesLtd.

1.088 999 1058.25 5.93%

3 SBI 1.1537 3129 2811.05 -10.16%

4 GMR Infra 1.194 49.8 45.85 -7.93%

5 Hindalco 1.8237 206.9 246 18.90%

6 ICICI Bank 1.5027 1149 1144.65 -0.38%

7 IDFC 1.2715 187.8 182.2 -2.98%

8 IFCI 1.2831 61.65 67.3 9.16%

9 INDIA

METAL &

FERRO

ALLOY

1.1645 600 612.3 2.05%

10 INDSWIFT 1.1321 30 34.9 16.33%





2ND MONTH


ON

3-1-2011

PRICE AS

ON

31-1-2011

RETURN

(%)

1 RELIANCE

CAPITAL

1.2421 673 524 -22.14%

2 Reliance

Industries

Ltd.

1.088 1062 909 -14.41%

3 SBI 1.1537 2830 2580 -8.83%

4 GMR Infra 1.194 46.5 39.35 -15.38%

5 Hindalco 1.8237 248 229 -7.66%

6 ICICI Bank 1.5027 1153 1020 -11.54%

7 IDFC 1.2715 184.9 147.45 -20.25%

8 IFCI 1.2831 68.2 53.2 -21.99%

9 INDIAMETAL &

FERRO

ALLOY

1.1645 620 597 -3.71%

10 INDSWIFT 1.1321 36 32 -11.11%

Based on the opening and closing price, the returns for each month are calculated.

RETURN ON THE PORTFOLIO

TOTAL PORTFOLIO INVESTMENT= RS 544550245.4





VALUE OF PORTFOLIO AS ON 31-01-2011= Rs 4423915.20


= 442391520 -544550245.4

= -102,158,725.4 RSIN terms of (%) = -1.02%

The total return of the portfolio is calculated after finding out the return of individual scripts.

The return of portfolio is -1.02% for the month of Dec 2010 and Jan 2011.

Interpretation of Random Portfolio

• As in the theoretical way we have seen that the Beta shows the movement or change

in the price of script vis-à-vis index. And a Beta >1 is more risky and hence should

give more return as compared to the script having Beta < 1. As the bank is taking

more risk they should get more return. But in our case we can see that defensive

portfolio having Beta < 1 has given more return as compared to Aggressive Portfolio.

• So we can easily say that the investment in equity market is subject to market risk and

anyone having long-term investment horizon should only enter into equity market.

This analysis that has been carried out was only for a period of two month there are

chances that in the long run aggressive portfolio would outperform the other portfolio.





SECTOR PORTFOLIO

Sector specific portfolio includes securities of those companies which are in the same

business. Sector portfolios are very useful when there is a particular sector which is doing

very good and has a bright future a head. Sector portfolio has the securities of those

companies that engage in same kind of business.

e.g. In 2000’s sector that was providing the highest return was BANK, IT

Investors who have invested their money in these securities had earned very high return.

The sectors considered for the analysis are:

• IT SECTOR

• BANK SECTOR

• POWER SECTOR





IT SECTOR

PRICE AS ON PARTICULAR DATE

COMPANY PRICE AS ON 1-12-2010 PRICE AS ON 31-1-2011

FINANCIAL

TECHNOLOGIES

843 850

HINDUJA VENTURES 360.25 313.75

SMARTLINK NETWORK 55 51.55

TCS 1084 1173


SL.NO SCRIPT RETURN(%)

1ST MONTH

RETURN(%)

2ND MONTH

AVG RET(%)

1 FINANCIAL

TECHNOLOGIES

6.04% 4.28% 5.16%

2 HINDUJA

VENTURES

1.68% 15.19% 8.44%

3 SMARTLINK

NETWORK

2.27% 8.76% 5.52%

4 TCS 7.48% -0.69% 3.40%

5 TECH MAHINDRA 3.29% 8.10% 5.70%




TECH MAHINDRA 680 647


=TOTAL MARKET VALUE- TOTAL BOOK VALUE

= 27647762- 27787280

= -139518

TOTAL RETURN IN %= -13.95%

The investments made in IT sector have given a total return of -13.95%. Though the IT sector

performance is consistent for past six months the return got is negative.

BANK SECTOR


1ST MONTH

RETURN(%)

2ND MONTH

AVG

RET(%)

1 AXIS BANK -1.36% -8.14% -4.75%

2 Bank of

Baroda

-7.22% -11.00% -9.11%

3 SBI -10.16% -8.83% -9.50%

4 HDFC BANK

LTD

2.11% -13.80% -5.85%

5 ICICI Bank -0.38% -11.54% -5.96%






COMPANY PRICE AS ON 1-12-2010 PRICE AS ON 31-1-2011AXIS BANK 1368.1 1246.75

Bank of Baroda 966.3 2580

SBI 3129 2580

HDFC BANK LTD 2298 2042

ICICI Bank 1149 1020


=TOTAL MARKET VALUE- TOTAL BOOK VALUE

= 118549974- 139570985

= -21021011


The top 5 companies in which the bank has made its investments are selected and there total

returns are analysed the total return for this sector is -2.102%

POWER SECTOR






1ST MONTH

RETURN(%)

2ND MONTH

AVG

RET(%)

1 JSW ENERGY

LTD

-1.44% -18.90% -10.17%

2 NHPC -0.88% -12.92% -6.90%

3 NTPC 9.02% -6.47% 1.28%

4 Power Grid 4.11% -1.73% 1.19%

5 RELIANCE

INFRA.LTD

17.93% -20.88% -1.48%


COMPANY PRICE AS ON 1-12-2010 PRICE AS ON 31-1-2011

JSW ENERGY LTD 101 81.1

NHPC 28.4 24.6

NTPC 184 188

POWER GRID 94.32 96.5

RELIANCE

INFRA.LTD

714 568.45






TOTAL RETURN ON PORTFOLIO =TOTAL MARKET VALUE- TOTAL BOOK VALUE=74347184- 82560804= -8213620


The investments made in power sector is mainly for a long term the returns for short term is

very less, the total return obtained for this period is -8.21%.

Interpretation of Sector Portfolio

• As we can see that sector specific portfolio has perform negatively during the period

of the report. That is due to the fact that there is a systematic risk involve with the

portfolio as lack of diversification. If we look at the performance of the Sensex during

this period than we will find that Sensex has perform better than the sector portfolio.

It is mainly due to diversification of risk as Sensex has the 30 script from different

sectors, so any ups and downs in a sector’s performance will not affect the overall

Sensex that badly that in the case of sector portfolio.





FINDING OF THE REPORT

Random portfolio

After understanding the various concepts about what treasury means and the various

investments option available. The analysis is done to see the movement of beta in equity.

• It is advisable to use the direct equity investment only if the investors have adequate

knowledge about selection of stocks. There task does not ends with the selection of

script but they are also required to pay close attention to the various happening in the

economy that have direct or indirect effect on stock market as we have learn that the

price of the script is affected by two factor, one is company specific news and the

other is economy specific news so any investor investing in the equity directly has to

keep the close track of the economy as well as the company in which they invest to

look out for any new development that take place.

• As in the theoretical way we have seen that the Beta shows the movement or change

in the price of script vis-à-vis index. And a Beta >1 is more risky and hence should

give more return as compared to the script having Beta < 1. As the person is taking

more risk then he should get more return. But in our case we have seen that defensive

portfolio having Beta < 1 has given more returned as compared to Aggressive

Portfolio.

• So we can easily say that the investment in equity market is subject to market risk and

anyone having long-term investment horizon should only enter into equity market.

This analysis that has been carried out was only for a period of two month there are

chances that in the long run aggressive portfolio would outperform the other portfolio.





• So if one does not have enough knowledge, expertise & analytical capabilities then

one should avoid going for direct equity investment as the chances of loss increases.

And the other very important aspect is the regular monitoring of the portfolio and

reviewing is also an important aspect that one needs to pay close attention to.

Sector portfolio

• Sector portfolio has given negative return in the month of the study as there is

systemic risk as very high in the sector portfolio because of non diversification. This

portfolio has given negative returns on the two month performance so it is advisable

for the investor not to go for such a high risky investment options.

• IT sector’s clients are mainly from foreign countries and as such there profitability

gets affected by the value of INDIAN rupees. Competition is expected from countries

like China who has got cheap labour when compared to India. IT sector for past year

has shown good return and will continue to do so.

• Banking sector’s profit is mainly depended on Rate of interest with higher rate of

interest its margin gets squeezed as the cost of borrowing becomes dearer. Banking

has shown good result and is expected to do reasonably well because of fast

developing economy.

• Power Sector is always a long term bet because power generation has got a long

gestation period to make it functional. As such there is not much of variation in the

prices of Power stocks.





RECOMMENDATION

From the above given findings and the conclusions of the study done by me, here are the list

of recommendations that comes out of the study.

• Form the study it is also proven that even in short run sector portfolio is highly risky

option for investment. Here in the study it is providing negative return. That shows

that investors who want to have safe return must think twice before selecting sector

portfolio for a long term investment.

• Though random portfolio is having scripts with highest return and volatility, but for a

long term prospect is becomes hard to fetch good return out of it as it is hard to make

use of high volatility.

• There is a requirement for frequent portfolio checking to maintain the higher return

and to make use of high volatility.





CONCLUSION


Documents

Project Vijaya Bank Final