CHAPTER-1 INTRODUCTION ABOUT THE INTERNSHIP: The internship program is designed to provide students engaged in field experience with an opportunity to share their insights, to explore the links between student’s academic preparation and field work, and to assist participants in developing and carrying out the major research project which will serve to culminate their internship experience. As a part of the internship experience, it helped me to have a participative and active role in the work assigned. Internship is an integral part of the academic curriculum of VTU MBA. It is an initiative to bridge the gap between knowledge and its applications through a series of interventions it will enable us as a student of VTU MBA program to gain insights and exposure to industry. The research was carried out to analyze the fundamental analysis of LKP Securities. and thereby to evaluate the overall performance of LKP Securities. In the competitive field of Stock. The research helped me to understand the process of identify the high performing stock in the market. And it also helped to analyze and help the company to invest in the high performing stocks. TITLE OF THE STUDY: A study on Fundamental Analysis of Five PSU Banks listed in the stock market in India at LKP Securities. NEED FOR THE STUDY: LKP Securities is into advisory services and broking have huge number of clients investing in banking sector. This fundamental analysis study covers five top PSU Banks listed in the stock market. It helps to analyse the present and future earning capacity of the stocks based on analysis as a whole thereby to determine the Fundamental ratio of the stocks. This analysis required to suggest the clients about the performance of the Banks listed in the stock market. It helps the company and the clients to make a wiser decision on selecting the profitable bank stocks. OBJECTIVE OF THE STUDY:
RESEARCH METHODOLOGY: RESEARCH DESIGN: Type of Research: The proposed research is purely explanatory.
Methodology: The study has been conducted with the assistance from the data collected through different sources. This research methodology requires gathering relevant data from the specified documents and compiling databases in order to analyze the material and arrive at a more complete understanding. Data Collection: Secondary Data Collection Method: collected the information’s of Financial details like Balance Sheet, Company Profit and Loss account and Current trading price from Annual reports, NSE website and money control website. STATISTICAL TOOLS USED: The statistical tool used here is Fundamental Analysis:
LITERATURE REVIEW: Literature review is a study involving a collection of literature in the selected area of research in which the researcher has limited experience, and critical examination and comparison of them to have a better understanding. It also helps the researchers to update the past data, data sources and results and identify the gaps, if any in the researchers. Thus, the reviews in the present study consist of the ones discussed below and they reveal that there are very scant studies in India emphasizing on the fundamental analysis of the banking sector. Mark P. Bauman (1996) conducted a study named, “A Review of Fundamental Analysis Research in Accounting”. This paper has outlined the development of different accounting valuation model and reviewed related empirical work. This paper identified three major issues associated with practical implementation of the model; the prediction of future profitability, the length of appropriate forecast horizon, and the determination of the appropriate discount rate. Rukmani Viswanath 54 (2001) reported that the Primary Dealers in Govt. securities are working on a new internal risk management model suited for the Indian market conditions. The attempt is to lay down general parameters for risk perception. The Primary Dealers Association of India (PDAI) is formulating a set of prudential norms for ‘risk management practices’. While internationally the principles of risk management may be the same everywhere, the Association is of the view that they have to identify the relevant issues and apply those principles in the Indian context. It strongly argues that it must work on a model that can help to manage liquidity and interest rate risk. While the existing RBI guidelines on risk management cover mainly statutory risk, the PDAI hopes that its new risk management model will be able to perceive ‘real risk’. These new norms are expected to help gauge several issues like, whether a fall in the prices of securities or yields is a temporary or permanent situation etc. The areas the new norms are likely to address are the assessment of the liquidity situation and envisaging investor appetite for a specific instrument and their appetite for risk. According to the govt. securities dealers, these norms are expected to help them hedge their risks better. The primary dealers are looking forward to these norms to help them manage their internal risks. Prakash Tiwari & Hemraj Verma (2009) conducted a study on “A Fundamental Analysis of Public sector Banks in India”. This article explains the position of the banks with reference to various ratios. Pramod Gupta, in his article titled, “Indian banks going Innovative”, published in ‘Professional Banker’ Oct. 2003, reviewed that both public and private banks are spending large amounts of money on technology to provide innovative products and services to their customers with more convenience and satisfaction. Technology is reducing the cost of transaction and helping to increase customer base and enable wider reach. Singla (2008) studied the financial performance of banks in India in view of increasing globalization and increased competition in the banking industry. He concluded that the financial position of banks is reasonable, debt equity ratio is maintained at an adequate level and NPA’s also witnessed a decline during the study period. Hirshleifer (Journal of Finance, 2001) provides a survey of research on investor psychology and asset pricing. He broadly covers 543 papers published up to the year 2001. Many “behavioral finance” papers began to be published around this time and 110 of the papers covered in his survey were either published or distributed in the years 2000 and 2001. Understandably, the vast majority of the papers in this survey are drawn from finance, economics and psychology journals. Fewer than 10 papers in the survey are from accounting journals. Fundamental analysis and other accounting-related topics with possible behavioral foundations are not highlighted in this survey. Schwert (Handbook of the Economics of Finance, 2003) surveys the finance literature on anomalies and market efficiency. He covers 107 papers published in finance and economics journals between 1933-2003, including 23 papers that were 5 published or distributed between 2000 and 2003. No accounting papers are included in the survey. In the same handbook, Barberis and Thaler (2003) survey the behavioral finance literature. They cover 204 papers between 1933-2003, including 66 papers published between 2000 and 2004. They only mention one paper published in an accounting journal (Bernard and Thomas, 1989). Subrahmanyam (European Financial Management, 2007) provides a review and synthesis of the behavioral finance literature. He reviews 155 papers published between the years 1979 and 2007, with the majority of the papers published in the year 2000 or later. The vast majority of the surveyed papers come from finance journals and only one cited working paper was eventually published in an accounting journal. Finally, Byrne and Brooks (Research Foundation of CFA Institute Monograph, 2008) provide a practitioner-focused survey of the current state of the art theories and evidence in behavioral finance. They review 79 papers published between the years 1979 and 2008, with the majority of the papers published in the year 2000 or later. They include 33 papers published in the Journal of Finance and 7 papers published in either the Journal of Financial Economics or the Review of Financial Studies. Only 1 reviewed paper come from an accounting journal (Journal of Accounting and Economics). Jack Clark Francis2 (1986) revealed the importance of the rate of return in investments and reviewed the possibility of default and bankruptcy risk. He opined that in an uncertain world, investors cannot predict exactly what rate of return an investment will yield. However he suggested that the investors can formulate a probability distribution of the possible rates of return. He also opined that an investor who purchases corporate securities must face the possibility of default and bankruptcy by the issuer. Financial analysts can foresee bankruptcy. He disclosed some easily observable warnings of a firm’s failure, which could be noticed by the investors to avoid such a risk. Preethi Singh (1986) disclosed the basic rules for selecting the company to invest in. She opined that understanding and measuring return md risk is fundamental to the investment process. According to her, most investors are ‘risk averse’. To have a higher return the investor has to face greater risks. She concludes that risk is fundamental to the process of investment. Every investor should have an understanding of the various pitfalls of investments. The investor should carefully analyse the financial statements with special reference to solvency, profitability, EPS, and efficiency of the company. LIMITATIONS OF THE STUDY:
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