CONTENTS
SI.n
o
Contents
Page no
1
Executive Summary
1-4
2
Introduction to the capital market
5-14
3
Company Profile
15-37
Theoretical Framework
4
Fundamental analysis
38
4.1
Economic Analysis
39-46
4.2
Industry Analysis
47-51
4.3
Company analysis
52-59
5
Technical analysis
60-76
6
Findings
77-78
7
Recommendations
79
8
Conclusions
80
9
Bibliography
81
Executive Summary
Project Title : Fundamental Analysis and Technical Analysis of Unitech
Ltd.
Company and Place: KARVY Stock Broking Ltd. Dharwad
Research Process:
KARVY Stock Broking Ltd. Is a premier financial services provider & ranked top five in the country. Recently the capital market crashed because of many reasons investors lost heavy amount But fundamental & Macro factors Indian market is good. Stability in market is not there currently therefore some of the investor who lost money in market crash, so many of them are shaky to enter into market again. Therefore getting investor confidence is more important which will happen when the market stabilizes. So for that matter broking firms should provide proper guidance to their investors for facilitating their decision making in investments.
Research Objectives:
Main Objective: To know the future increase and decrease of stock price in selected company stocks through Fundamental And Technical Analysis.
Sub Objectives:
To understand how best we can use this analysis is to meet the financial goal of the investors.
To understand the effect of Industry specific factors on the stock prices through Industry Analysis.
To know which securities to be bought and when to be bought.
To provide investors with a basket of securities to be stay invested to have a sound portfolio.
Research Plan:
The data collected for the study is secondary data. The data I have used for the study is 1. Historical shares value of the stocks collected from www.nseindia.com
2. The balance sheet and Income statement got from companies web site. 3. Some of the information about the industry is collected from the web site.
The Measurement Techniques
The following techniques are used for the study. 1. The bar chart
2. Candlestick charting 3. Point & figure chart 4. Moving average.
5. Exponential moving average (EMA) 6. The relative strength index (RSI)
7. Oscillators (ROC, RSI, MACD,STOCHASTICS)
Analysis: Using MS-Excel
Findings:
General:
One of the most important areas for any investor to look when researching a company is the financial statement. Financial reports are required by law and are published both quarterly and annually.
Management discussion give investors a better understanding of what the company does and usually points out some key areas where they did well.
Audited financial reports have much more credibility than unaudited ones.
The income statement takes into account some non-cash items such as depreciation. The cash-flow statement strips away all non-cash items and tells you how much actual money the company generated.
For Stock:
First, the projected MPS of the stock next three years are Rs.231.05, Rs.286.03 and Rs.352.68.
Short term support for scrip: 265-275; Next support has been established at 150-165.
Long term target by technical analysis is 620-40 but this is unlikely to happen in the medium term because short term trend has been bearish and long term trend has been flat and undergoing long consolidation
For market:
Short term support or intermediate support: 4500-4600; next long term support lies at3100-3150
Resistance for Nifty is at present is at 6000
Short term and intermediate trend has been bearish and long term trend is still bullish.
Long term nifty target is a 6980- 7020.
Recommendations:
Long term investors can include Unitech, because the growth rates and earnings are good compared to others stocks. Therefore investors can include this in their portfolio to earn the higher return on their investment.
The Long term investors should buy the stocks fair value found out by the fundamental analysis.
Short term investors should look on various support and resistance of stocks to buy or sell and make profit.
Stock market or capital market provides the industry with a lot of capital needed by the industry, which leads to the growth of the industry and economy as a whole; hence the stock market plays an important role in the development of the industry. Some times Using Technical and fundamental analysis individually leads to
incorrect results hence both Fundamental and technical analysis should be used at a time to get the desired result.
Fundamental analysts study everything from the overall economy and industry conditions, to the financial condition and management of companies before deciding on any particular stock.
Technical analyst’s look for peaks, bottoms, trends, patterns and other factors affecting a stock's price movement and then make buy/sell decisions based on those factors.
INTRODUCTION TO CAPITAL MARKETS
Introduction to Capital Markets
Transfer of resources from those with idle resources to others who have a productive need for them is perhaps most efficiently achieved through the securities markets. Stated formally, securities markets provide channels for allocation of savings to investments and thereby decouple these two activities. As a result, the savers and investors are not constrained by their individual abilities, but by the economy’s abilities to invest and save respectively, which inevitably enhances savings and investment in the economy.
Market Segments
The securities market has two interdependent and inseparable segments, the new issues (primary market) and the stock (secondary) market. The primary market provides the channel for sale of new securities while the secondary market deals in securities previously issued. The price signals, which subsume all information about the issuer and his business including associated risk, generated in the secondary market, help the primary market in allocation of funds. The issuers of securities issue (create and sell) new securities in the primary market to raise funds for investment and/or to discharge some obligation. They do so either through public issues or private placement. There are two major types of issuers who issue securities. The corporate entities issue mainly debt and equity instruments (shares, debentures, etc.), while the governments (central and state governments) issue debt securities (dated securities, treasury bills).
The secondary market enables participants who hold securities to adjust their holdings in response to changes in their assessment of risk and return. They also sell securities for cash to meet their liquidity needs. A variant of secondary market is the forward market, where securities are traded for future delivery and payment. Pure forward is out side the formal market. The versions of forward in formal market are futures and options. In futures market, standardized securities are traded for future delivery and settlement. These futures can be on a basket of securities like an index or an individual security. In
case of options, securities are traded for conditional future delivery. There are two types of options – a put option permits the owner to sell a security to the writer of options at a predetermined price while a call option permits the owner to purchase a security from the
writer of the option at a predetermined price. These options can also be on individual stocks or basket of stocks like index. Two exchanges, namely NSE and BSE provide trading of derivatives of securities.
Products and Participants
Savings are linked to investments by a variety of intermediaries through a range of complex financial products called “securities” which is defined in the Securities Contracts (Regulation) Act, 1956. Which includes shares, scrip’s, stocks, bonds, debentures, debenture stock, or other marketable securities of like nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, security receipts, interest and rights in securities, or any other instruments so declared by the central government These demand for and supply of securities and funds determine, under competitive market conditions in goods and securities market, the prices of securities.
Securities Market and Economic Growth
A well functioning securities market is conducive to sustained economic growth. There have been a number of studies, starting from World Bank and IMF to various scholars, which have established robust relationship not only one way, but also the both ways, between the development in the securities market and the economic growth.
The securities market fosters economic growth to the extent that
it-• Augments the quantities of real savings and capital formation from any given level of national income,
• Increases net capital inflow from abroad,
• Raises the productivity of investment by improving allocation of investible funds, and (d) Reduces the cost of capital.
International Linkage
The securities market facilitates the internationalization of an economy by linking it with the rest of the world. This linkage assists through the inflow of capital in the form of portfolio investment. Moreover, a strong domestic stock market performance forms the basis for well performing domestic corporate to raise capital in the international market. This implies that the domestic economy is opened up to international competitive pressures, which help to raise efficiency. It is also very likely that existence of a domestic securities market will deter capital outflow by providing attractive investment opportunities within domestic economy.
There are also other developmental benefits associated with the existence of a securities market.
• The securities market provides a fast-rate breeding ground for the skills and judgment needed for entrepreneurship, risk bearing, portfolio selection and management.
• An active securities market serves as an ‘engine’ of general financial development and may, in particular, accelerate the integration of informal financial systems with the institutional financial sector. Securities directly displace traditional assets such as gold and stocks of produce or, indirectly, may provide portfolio assets for unit trusts, pension funds and similar FIIs that raise savings from the traditional sector. • The existence of securities market enhances the scope, and provides institutional
mechanisms, for the operation of monetary and financial policy
A Profile of Indian Securities Market
The past decade in many ways has been remarkable for securities market in India. It has grown exponentially as measured in terms of amount raised from the market, number of stock exchanges and other intermediaries, the number of listed stocks, market capitalization, trading volumes and turnover on stock exchanges, and investor population. The market has witnessed fundamental institutional changes resulting in drastic reduction in transaction costs and significant improvements in efficiency, transparency and safety.
With the objectives of improving market efficiency, enhancing transparency, checking unfair trade practices and bringing the Indian market up to international standards, a package of reforms consisting of measures to liberalize, regulate and develop the securities market was introduced during the 1990s. This has changed corporate securities market beyond recognition in this decade. The practice of allocation of resources among different competing entities as well as its terms by a central authority was discontinued. The secondary market overcame the geographical barriers by moving to screen-based trading. Trades enjoy counterparty guarantee.
Bombay Stock Exchange (BSE)
Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. With Demutualisation, the trading rights and ownership rights have been de-linked effectively addressing concerns regarding perceived and real conflicts of interest. The Exchange is professionally managed under the overall direction of the Board of Directors. The Board comprises eminent professionals, representatives of Trading Members and the Managing Director of the Exchange.
The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth. The Exchange provides an efficient and transparent market for trading in equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietary system of the Exchange and is BS 7799-2-2002 certified. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified.
BSE as a brand is synonymous with capital markets in India. The BSE SENSEX is the benchmark equity index that reflects the robustness of the economy and finance. At par with international standards,
• First in India to introduce Equity Derivatives • First in India to launch a Free Float Index
• First in India to launch US$ version of BSE Sensex
First in India to launch Exchange Enabled Internet Trading Platform
• First in India to obtain ISO certification for Surveillance, Clearing & Settlement • 'BSE On-Line Trading System’ (BOLT) has been awarded the globally
recognized the Information Security Management System standard • First to have an exclusive facility for financial training
• Moved from Open Outcry to Electronic Trading within just 50 days
• An equally important accomplishment of BSE is the launch of a nationwide investor awareness campaign - Safe Investing in the Stock Market -
• In 2002, the name The Stock Exchange, Mumbai, was changed to BSE.
National Stock Exchange (NSE)
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FII’s) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000.
NSE has been promoted by leading financial institutions, banks, insurance companies and other financial intermediaries. NSE is one of the first de-mutualised stock exchanges in the country, where the ownership and management of the Exchange is completely divorced from the right to trade on it. Though the impetus for its establishment came from policy makers in the country, it has been set up as a public limited company, owned by the leading
institutional investors in the country.
The NSE model however, does not preclude, but in fact accommodates involvement, support and contribution of trading members in a variety of ways. Its Board comprises of senior executives from promoter institutions, eminent professionals in the fields of law, economics, accountancy, finance, taxation, etc, public representatives.
NSE Milestones
Nov-92 Incorporation
Apr-93 Recognition as a stock exchange May-93 Formulation of business plan
Jun-94 Wholesale Debt Market segment goes live Nov-94 Capital Market (Equities) segment goes live Mar-95 Establishment of Investor Grievance Cell
Apr-95 Establishment of NSCCL, the first Clearing Corporation
Jun-95 Introduction of centralised insurance cover for all trading members Jul-95 Establishment of Investor Protection Fund
Oct-95 Became largest stock exchange in the country
Apr-96 Commencement of clearing and settlement by NSCCL Apr-96 Launch of S&P CNX Nifty
Jun-96 Establishment of Settlement Guarantee Fund Nov-96
Setting up of National Securities Depository Limited, first depository in India, co-promoted by NSE
Nov-96 Best IT Usage award by Computer Society of India
Dec-96 Commencement of trading/settlement in dematerialised securities Dec-96 Dataquest award for Top IT User
Dec-96 Launch of CNX Nifty Junior Feb-97 Regional clearing facility goes live
Nov-97 Best IT Usage award by Computer Society of India
May-98 Promotion of joint venture, India Index Services & Products Limited (IISL) May-98 Launch of NSE's Web-site: www.nse.co.in
Jul-98 Launch of NSE's Certification Programme in Financial Market Aug-98 CYBER CORPORATE OF THE YEAR 1998 award
Feb-99 Launch of Automated Lending and Borrowing Mechanism Apr-99 CHIP Web Award by CHIP magazine
Oct-99 Setting up of NSE.IT
Feb-00 Commencement of Internet Trading
Jun-00 Commencement of Derivatives Trading (Index Futures) Sep-00 Launch of 'Zero Coupon Yield Curve'
Nov-00
Launch of Broker Plaza by Dotex International, a joint venture between NSE.IT Ltd. and i-flex Solutions Ltd.
Dec-00 Commencement of WAP trading
Jun-01 Commencement of trading in Index Options
Jul-01 Commencement of trading in Options on Individual Securities Nov-01 Commencement of trading in Futures on Individual Securities
Dec-01 Launch of NSE VaR for Government Securities Jan-02 Launch of Exchange Traded Funds (ETFs)
May-02 NSE wins the Wharton-Infosys Business Transformation Award in the Organization-wide Transformation category Oct-02 Launch of NSE Government Securities Index
Jan-03 Commencement of trading in Retail Debt Market Jun-03 Launch of Interest Rate Futures
Aug-03 Launch of Futures & options in CNXIT Index Jun-04 Launch of STP Interoperability
Aug-04 Launch of NSE’s electronic interface for listed companies Mar-05 ‘India Innovation Award’ by EMPI Business School, New Delhi
Jun-05 Launch of Futures & options in BANK Nifty Index Dec-06 'Derivative Exchange of the Year', by Asia Risk magazine
Jan-07 Launch of NSE – CNBC TV 18 media centre
Mar-07 NSE, CRISIL announce launch of IndiaBondWatch.com Jun-07 NSE launches derivatives on Nifty Junior & CNX 100 Oct-07 NSE launches derivatives on Nifty Midcap 50
Jan-08 Introduction of Mini Nifty derivative contracts on 1st January 2008 Mar-08 Introduction of long term option contracts on S&P CNX Nifty Index
Depository System
The Depositories Act, 1996 was passed with the objective of ensuring free transferability of securities with speed, accuracy and security. It does so by
• Making securities of public limited companies freely transferable subject to certain exceptions
• Dematerializing the securities in the depository mode
• Providing for maintenance of ownership records in a book entry form.
In order to streamline both the stages of settlement process, the Act envisages transfer ownership of securities electronically by book entry without making the securities move from person to person. The Act has made the securities of all public limited companies freely transferable, restricting the company's right to use discretion in effecting the transfer of securities, and the transfer deed and other procedural requirements under the Companies
Act have been dispensed with. Two depositories, viz., NSDL and CDSL, have come up to provide instantaneous electronic transfer of securities.
Capital Market Intermediaries
There are several institutions, which facilitate the smooth functioning of the securities market. They enable the issuers of securities to interact with the investors in the primary as well as the secondary arena.
• Merchant Bankers • Credit Rating Agencies
• R& T Agents - Registrars to Issue • Stock Brokers
• Custodians • Mutual Funds • Depositories
• Depository Participants
Players (investors) in securities market
• Individual investors • Institutional investors • FII’s
• Mutual fund investor
Capital Market Instruments
The changes in the regulatory framework of the capital market and fiscal policies have also resulted in newer kinds of financial instruments (securities) being introduced in the market. Also, a lot of financial innovation by companies who are now permitted to undertake treasury operations, has resulted in newer kinds of instruments - all of which can be traded – being introduced. The variations in all these instruments depend on the
tenure, the nature of security, the interest rate, the collateral security offered and the trading features, etc.
• Debentures • Bonds
• Equity Shares
• Government securities
Capital Market Processes
There are various processes that Issuers of securities follow or utilize in order to tap the savers for raising resources. Some of the commonly used processes and methods are described below.
• Initial Public Offering (IPO) • Private Placement
• Preferential Offer/Rights Issue • Internet Broking
Dependence on Securities Market
Three main sets of entities depend on securities market. While the Corporates and governments raise resources from the securities market to meet their obligations, the households invest their savings in securities. While the corporate sector and governments together raised a sum of Rs. 226,911 crore during 2001-02, the household sector invested 4.3% of their financial savings through the securities market during 2000-01.
Corporate Sector
The 1990s witnessed emergence of the securities market as a major source of finance for trade and industry. The share of capital market based instruments in resources raised externally increased to 53% in 1993-94, but declined thereafter to 31% by 2000-01.
Governments
Along with increase in fiscal deficits of the governments, the dependence on market borrowings to finance fiscal deficits has increased over the years. The state governments and the central government financed about 14% and 18% respectively of their fiscal deficit by market borrowings during 1990-91. In percentage terms, dependence of the state governments on market borrowing did not increase much during the decade 1991-2002. In case of central government, it increased to 69.4% by 2001-02.
Household
According to the RBI data, the household sector accounted for 84.8 % of gross domestic savings in Fixed income investment instruments during 2006-07; which has increased in comparison to 83.9% in 2005-06. In fiscal 2006-07, the household sector has invested 55.7 % of financial savings in deposits, 24.2 % in insurance/provident funds, 4.9 % in small savings, and 6.5 % in securities market including government securities , units of mutual funds and other securities.
Investor population and profile
According to the SEBI-NCAER survey of Indian investors conducted in early 1999, an estimated 12.8 million, or 7.6% of all Indian households representing 19 million individuals had directly invested in equity shares and/or debentures as at the end of financial year 1998-99. The investor households increased at a compound growth rate of 22% between 1985-86 and 1998-99. About 35% of investor households became investors in equity shares prior to 1991, while 47% of the investors entered the market between 1991 and 1995 and 17% after 1995. More than 156 million or 92% of all Indian households were non-investor households who did not have any investments in equity/debentures. Low per capita income, apprehension of loss of capital, and economic insecurity, which are all inter-related factors, significantly influenced the investment attitude of the households. The lack of awareness about securities market and absence of a dependable infrastructure and distribution network coupled with aversion to risk inhibited non-investor households from investing in the securities market.
About
KARVY
The Karvy group was formed in 1983 at Hyderabad, India. Karvy ranks among the top player in almost all the fields it operates. Karvy Computer share Limited is India’s largest Registrar and Transfer Agent with a client base of nearly 500 blue chip corporate, managing over 2 crore accounts. Karvy Stock Brokers Limited, member of National Stock Exchange of India and the Bombay Stock Exchange, ranks among the top 5 stock brokers in India. With over 6, 00,000 active accounts, it ranks among the top 5 Depositary Participant in India, registered with NSDL and CDSL. Karvy COM trade, Member of NCDEX and MCX ranks among the top 3 commodity brokers in the country. Karvy Insurance Brokers is registered as a Broker with IRDA and ranks among the top 5 insurance agent in the country. Registered with AMFI as a corporate Agent, Karvy is also among the top Mutual Fund mobilizer with over Rs. 5,000 crores under management. Karvy Realty Services, which started in 2006, has quickly established itself as a broker who adds value, in the realty sector. Karvy Global offers niche off shoring services to clients in the US.
Karvy has 575 offices over 375 locations across India and overseas at Dubai and New York. Over 9,000 highly qualified people staff Karvy.
Karvy – Early Days
Karvy the name comes from the names of the directors:
K - Mr. V. Kutumba Rao A - Mr. K Ajay Kumar R - Mr. M S Ramakrishna V - Mr. Vikram Singh Y - Mr. M Yugandhar
The birth of Karvy was on a modest scale in 1979. It began with the vision and enterprise of a small group of practicing Chartered Accountants who founded the flagship company …Karvy Consultants Limited. Karvy started with consulting and financial accounting automation, and carved inroads into the field of registry and share accounting by 1985. Since then, Karvy have utilized its experience and superlative expertise to go from strength
to strength…to better its services, to provide new ones, to innovate, diversify and in the process, evolved Karvy as one of India’s premier integrated financial service enterprise.
GROWTH AND DEVELOPMENT OF KARVY
Over the last 20 years Karvy has traveled the success route, towards building a reputation as an integrated financial services provider, offering a wide spectrum of services. And Karvy have made this journey by taking the route of quality service, path breaking innovations in service, versatility in service and finally…totality in service. Karvy’s highly qualified manpower, cutting-edge technology, comprehensive infrastructure and total customer-focus has secured for Karvy the position of an emerging financial services giant enjoying the confidence and support of an enviable clientele across diverse fields in the financial world.
Karvy’s values and vision of attaining total competence in its servicing has served as the building block for creating a great financial enterprise, which stands solid on its fortresses of financial strength - its various companies.
With the experience of years of holistic financial servicing behind it and years of complete expertise in the industry to look forward to, Karvy have now emerged as a premier integrated financial services provider.
And today, Karvy can look with pride at the fruits of its mastery and experience comprehensive financial services that are competently segregated to service and manage a diverse range of customer requirements.
BABASAB PATIL 17
KARVY-Milestones
AT PRESENT STATUS OF KARVY
Presently Karvy is a member of National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and The Hyderabad Stock Exchange (HSE). Market analysis and market predictions are done by professional management team.
KARVY is covering the entire spectrum of financial services such as Stock Broking Services, Advisory Services, Stock broking, Depository Participants, Distribution of financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking, Commodities Broking, Personal Finance Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs, among others.
It is the largest mobiliser of funds as per PRIME DATABASE. It is among the top 5 stock brokers in India (4% of NSE volumes). India's No. 1 Registrar & Securities Transfer Agents (Ranked as “The Most Admired Registrar" by MARG). Among the top 3 Depository Participants. Largest Network of Branches & Business Associates. First ISO - 9002 Certified Registrar in India. Among top 10 Investment bankers. Largest Distributor of Financial Products are
--Every 50th Indian is serviced by KARVY --Every 20th trade in stock market is done through KARVY. Every 6th Investor in India invests through KARVY India's No.1 Registrars and Transfer agent : KARVY Every 10th Demat Account is held at KARVY.
BABASAB PATIL 18
ORGANISATION STRUCTURE OF KARVY
LEVEL-I
Board of Directors
CMD, MD, & other Directors
Karvy Consultants Limited Karvy Investor Service Limited Karvy Global Service Limited Karvy Stock Broking Limited Karvy Computershare Pvt. Limited Karvy Insurance Broking Private Limited Karvy Inc. Karvy Commodities Broking Private Limited Karvy Regional HQs / Branches
Level-II
Regional Branch Head
ISO CELL Operations Divisions Support Functions Branches ACCOUNTS HRD SYSTEM ADMN, PURCHASE, & STORES BRANCHES Operations Divisions Support Functions RIS FPD BROKING DP
STUDY OF COMPANY PROFILE WITH RESPECT TO
Mc KINSEY’S 7S MODEL
STRATEGY:
In modern times the word strategy has found its way into the management field. In the context of a business concern, strategy indicates specific program of action for achieving the organization objectives by employing the firm’s resources efficiently and economically. It involves preparing oneself for meeting unforeseen factor. It is also concerned with meeting the challenges posed by the policies and actions of other competitors in the market.
Quality Policy
To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by combining its human and technological resources, to provide superior quality financial services. In the process, Karvy will strive to exceed Customer's expectations.
Quality Objectives are to:
• Build in-house processes that will ensure transparent and harmonious relationships with its clients and investors to provide high quality of services.
• Establish a partner relationship with its investor service agents and vendors that will help in keeping up its commitments to the customers.
• Provide high quality of work life for all its employees and equip them with adequate knowledge & skills so as to respond to customer's needs.
• Continue to uphold the values of honesty & integrity and strive to establish unparalleled standards in business ethics.
• Use state-of-the art information technology in developing new and innovative financial products and services to meet the changing needs of investors and clients. • Strive to be a reliable source of value-added financial products and services and
constantly guide the individuals and institutions in making a judicious choice of same.
• Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and regulatory authorities) proud and satisfied.
STRUCTURE:
Board of Directors
Mr. C Parthasarathy (Chairman and Managing Director), Mr. M Yugandhar (Managing Director ), Mr. M S Ramakrishna (Director ), Mr. Prasad V Potluri (Director), William Stuart Crosby (Chairman – Karvy Computer share Pvt Ltd.), Chandra Balaraman(Director– Karvy Computer share Pvt Ltd.), Mark Davis(Director– Karvy Computer share Pvt Ltd.), Mr. Uday Raval(Director - Karvy Inc. )
Karvy’s organization structure can be viewed as accomplishing departments Operations
Divisions and Support Function Division.
Below the Operations Divisions there are sub divisions namely Registry and Investor Services (RIS), Depository Participant (DP), Broking Services, Financial Product Distribution (FPD).
Below the Support Functions, there are sub divisions namely Accounts, System, Human Resource Development, and Administration, Purchase & Stores.
These department heads controls the day-to-day affairs of the company. These department heads are directly reports to the director. Board of Directors directly appoints department heads. The departmental heads does locations of responsibilities among various positions. In Karvy Departments are inter related. Majority of decisions are taken by the top management. While taking important decision the department managers are also consulted
and their suggestions are also considered. Hence Participative style of management is followed in Karvy.
SYSTEM:
KARVY covers the entire spectrum of financial services such as Stock broking, Depository Participants, Distribution of financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking, Commodities Broking, Personal Finance Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs.
A link called ‘Resource Center’, devoted solely to research. Karvy’s highly skilled research team, comprising of technical analysts as well as fundamental specialists, secure result-oriented information on market trends, market analysis and market predictions. This crucial information is given as a constant feedback to its customers, through daily reports delivered thrice daily; The Pre-session Report, where market scenario for the day is predicted, The Mid-session Report, timed to arrive during lunch break, where the market forecast for the rest of the day is given and The Post-session Report, the final report for the day, where the market and the report itself is reviewed. To add to this repository of information, Karvy publish a monthly magazine The Finapolis, which analyzes the latest stock market trends and takes a close look at the various investment options, and products available in the market, while a weekly report, called Karvy Bazaar Baatein, gives more information on the immediate trends in the stock market. In addition, its specific industry reports give comprehensive information on various industries.
Karvy’s Stock Broking services are widely networked across India, with the number of trading terminals providing retail stock broking facilities. To empower the investor further Karvy have made serious efforts to ensure that its research calls are disseminated systematically to all our stock broking clients through various delivery channels like email, chat, SMS, phone calls etc.
STYLE:
An activity like forecasting and planning are made by top level managers. Major policies and plans are made by top management and it is implemented and administered by employees. In the organization the style of informal communication and meetings with employees has created workers to a friendly environment.
STAFF:
The term staff refers to manpower planning, recruitment, performance appraisal, motivation and morale.
SKILLS:
The managers and workers in each department are skilled to the extent of functions they perform. Directors of the company are skilled in every activities and disciplines of organization.
A 1600 team of highly qualified and dedicated professionals drawn from the best of academic and professional backgrounds are committed to maintaining high levels of client service delivery. This has propelled Karvy to a position among the top distributors for equity and debt issues with an estimated market share of 15% in terms of applications mobilized, besides being established as the leading procurer in all public issues.
A link called ‘Resource Center’, devoted solely to research. Karvy’s highly skilled research team, comprising of technical analysts as well as fundamental specialists, secure result-oriented information on market trends, market analysis and market predictions.
Achievements
• Largest mobiliser of funds as per PRIME DATABASE • Among the top 5 stock brokers in India (4% of NSE volumes)
• India's No. 1 Registrar & Securities Transfer Agents (Ranked as " The Most Admired Registrar" by MARG)
• A Category- I -Merchant banker.
• Among the to top 3 Depository Participants
• Largest Network of Branches & Business Associates • First ISO - 9002 Certified Registrar in India
• Among top 10 Investment bankers • Largest Distributor of Financial Products • Full Fledged IT driven operations
• Handled the largest- ever Public Issue - IDBI • Handled over 500 Public issues as Registrars.
• Handling the Reliance Account which accounts for nearly 10 million account holders
Major issues managed as arrangers
• Kerala State Electricity Board. • Power Finance Corporation
• A.P. Water Resources Development Corporation. • A.P. Roads Development Corporation.
• A.P. State Electricity Board. • Haldia Petrochemicals Ltd.
Major issues managed as Co-Managers
• IndusInd Bank Ltd • ICICI Bonds – March 97 • ICICI Bonds – Dec 97
• ICICI Safety Bonds March 98
• ICICI Safety Bonds – April 98. July 98, Oct 98, Dec 98, Jan 99. • The Jammu and Kashmir Bank Ltd
Major issue handled as Registrars to Issues
• IDBI Equity
• Morgan Stanley Mutual Fund • Bank of Baroda
• Bank of Punjab Ltd • Corporation Bank • IndusInd Bank Ltd
• Jammu and Kashmir Bank Ltd
• Housing and Urban Development Corporation (HUDCO) Ltd • Madras Refineries Ltd
• Tamil Nadu Newsprint & Paper Ltd • BPL Ltd
• Birla 3M Ltd • Essar Shipping Ltd • Essar Steels Ltd.
• Infosys Technologies Ltd. • Jindal Vijayanagar Steels Ltd.
• Nagarjuna Fertilizers & Chemicals Ltd. • Rajshree Polyfil Ltd.
Karvy Securities Ltd.
Karvy has secured over Rs. 500 crore in the following debt issues. • Andhra Pradesh Road Development Corporation Ltd • ICICI Bonds ( Private Placement)
• ICICI Bonds – 96 • ICICI Bonds – 97- I • ICICI Bonds – 97 – II
• ICICI Safety Bonds March 98. • IDBI Bonds 96.
• IDBI Flexi Bonds I • IDBI Flexi Bonds II • IDBI Flexi Bonds III
• Kerala State Electricity Board • Krishna Bhagya Jala Nigam Ltd • Power Finance Corporation Ltd
• Andhra Pradesh Water Resources Development Corporation • Andhra Pradesh State Electricity Board
SHARED VALUES:
Employees at each level of organization are conscious about delivering customer value for his money. Each and every employee understands the mission and vision of the company. Employees of company are committed towards the quality aspects in service. The employees of Karvy themselves put forward in fulfilling the organizational principles for betterment of organization.
STUDY OF FUNCTIONAL DEPARTMENTS OF KARVY
In Karvy the functions are mainly divided into two parts namely Operational Functions and the Supporting Functions.
OPERATING FUNCTIONS:
Registry and Investor Services (RIS) in which Karvy carry out functions as Registrar &
transfer Agent (RTA), and Registrar to the Issues. Financial Product Distribution (FPD), Here financial products include Mutual Funds, Fixed income securities, bonds, fixed deposits, Tax-saving Products, Insurance, etc. Stock Broking Services and Depository
Participant (DP), which are explained in Service Profile of the Karvy group of companies.
SUPPORTING FUNCTIONS:
Administration - Purchase and Stores Department
Responsibilities
• To ensure preventive breakdown of equipment/accessories including computer hardware
• To ensure speedy breakdown maintenance
• To ensure that the maintenance status of all equipment/ accessories is entered in the service
• To ensure that the maintenance is carried out efficiently
HOD
Assistant HOD
Administration Team
Maintenance includes preventive, breakdown and general maintenance. Preventive
maintenance shall be done as per the prefixed time schedule by the subcontractors for the
purpose. The administration incharge shall make necessary arrangements for this purpose. In Breakdown / General maintenance admi9nistration team receive information regarding any breakdown or general repairs. On receipt of the same, the administrative team shall maintain a record of all maintenance done.
The Procedure involves identification of subcontractors which will be done through Newspaper, advertisements, word of mouth. Both the parties meet to their requirements and enter into agreement. Subcontractors are appointed for providing services Preventive maintenance, Breakdown maintenance, Courier services and any other services.
2.62 Accounts Department
Finance operations in Karvy are centralized at the Head Office Account. Periodic fund requirement at the regional level will be sort as and when required. But all cheques and such instruments would be signed by the local regional manager.
System Administration Department
In this department the functions include Trouble shooting, desktop queries, Network problems, Software and Hardware problems, Installation of new systems, creating new networks.
Human resource Department
The human resource Department (HRD) caters to the entire recruitment and employee upbringing in the company. The HR functions and practices, which are practiced at the Karvy, are:
Manpower Planning: The departmental heads are entrusted with the responsibility of
assessing the present and the future manpower requirement in their departments. Manpower planning is being done in the company in order to secure a confidence and capability
Recruitment: Advertising in newspaper and other media, private employment agencies,
personal contacts, colleges and universities are the sources used by Karvy.
Training: The personnel department gives training for all new employees.
Performance Appraisal: The HOD of the department, to which the employees belongs,
presents a report of the employees, to be appraised. In addition to that other managers to whom the employee is associated is also evaluating the performance of the employee.
Motivation: The Company provides both extrinsic and intrinsic motivation to the
employees. Extrinsic motivation is considered with external motivators which employees get through pay, promotion, fringe benefits, holiday’s etc. Intrinsic motivation is concerned with the feeling of having accomplished something worthwhile i.e. the satisfaction one gets after doing one’s work well, praise, responsibility, recognition, participation are the
Dy. General Manager
Dy.Manager
examples. Job rotation is undertaken to reduce the monitoring and burden of the employees.
Morale: For improving employee’s morale positive measures like job rotation, building
responsibility into job etc are introduced. Both upward and downward communication takes place within the company. Participation is the key to commitment.
SERVICE PROFILE OF THE
KARVY GROUP OF COMPANIES
Karvy Stock Broking Limited
Member - National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and the
Hyderabad Stock Exchange (HSE). Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely towards attaining diverse goals of the customer through varied services.
Stock Broking Services
It is an undisputed fact that the stock market is unpredictable and yet enjoys a high success rate as a wealth management and wealth accumulation option. The difference between unpredictability and a safety anchor in the market is provided by in-depth knowledge of market functioning and changing trends, planning with foresight and choosing one & other options with care. Karvy offer trading on a vast platform; National Stock Exchange, Bombay Stock Exchange and Hyderabad Stock Exchange. Karvy’s highly skilled research team, comprising of technical analysts as well as fundamental specialists, secure result-oriented information on market trends, market analysis and market predictions. This crucial information is given as a constant feedback to its customers, through daily reports delivered thrice daily; The Pre-session Report, where market scenario for the day is predicted, The Mid-session Report, timed to arrive during lunch break, where the market forecast for the rest of the day is given and The Post-session Report, the final report for the day, where the market and the report itself is reviewed. To add to this repository of information, Karvy publish a monthly magazine The Finapolis, which analyzes the latest stock market trends and takes a close look at the various investment options, and products available in the market, while a weekly report, called Karvy Bazaar Baatein, gives more information on the immediate trends in the stock market. In addition, it’s specific industry reports give comprehensive information on various industries. Karvy’s Stock Broking services are
widely networked across India, with the number of trading terminals providing retail stock broking facilities.
To empower the investor further Karvy have made serious efforts to ensure that its research calls are disseminated systematically to all our stock broking clients through various delivery channels like email, chat, SMS, phone calls etc.
Depository Participants
The onset of the technology revolution in financial services Industry saw the emergence of Karvy as an electronic custodian registered with National Securities Depository Ltd (NSDL) and Central Securities Depository Ltd (CSDL) in 1998. Karvy set standards enabling further comfort to the investor by promoting paperless trading across the country and emerged as the top 3
Depository Participants in the country in terms of customer serviced. Offering a wide
trading platform with a dual membership at both NSDL and CDSL, Karvy have established live DPMs, Internet access to accounts and an easier transaction process in order to offer more convenience to individual and corporate investors. A wide national network makes its efficiencies accessible to all.
Distribution of Financial Products
A 1600 team of highly qualified and dedicated professionals drawn from the best of academic and professional backgrounds are committed to maintaining high levels of client service delivery. This has propelled Karvy to a position among the top distributors for equity and debt issues with an estimated market share of 15% in terms of applications mobilized, besides being established as the leading procurer in all public issues.
Advisory Services
Under its retail brand ‘Karvy – the Finapolis', it delivers advisory services to a cross-section of customers. The service is backed by a team of dedicated and expert professionals with varied experience and background in handling investment portfolios. They are continually engaged in designing the right investment portfolio for each customer according to individual needs and budget considerations with a comprehensive support system that focuses on trading customers' portfolios and providing valuable inputs, monitoring and managing the portfolio through varied technological initiatives. ‘Karvy -
the Finapolis', covers the latest of market news, trends, investment schemes and research-based opinions from experts in various financial fields.
Mutual Fund Services
Karvy has attained a position of immense strength as a provider of across-the-board transfer agency services to AMCs, Distributors and Investors. Nearly 40% of the top-notch AMCs including prestigious clients like Deutsche AMC and UTI swear by the quality and range of services that Karvy offers. Besides providing the entire back office processing, Karvy provides the link between various Mutual Funds and the investor, including services to the distributor, the prime channel in this operation. Carrying the ‘limitless' ideology forward, Karvy has explored new dimensions in every aspect of Mutual Fund servicing right from volume management, cost effective pricing, delivery in the least turnaround time, efficient back-office and front-office operations to customized service.
Karvy has been with the AMCs every step of the way, helping them serve their investors better by offering them a diverse and customized range of services. The ‘first to market' approach that is Karvy’s anthem has earned the reputation of an innovative service provider with a visionary bent of mind.
Karvy’s service enhancements such as ‘Karvy Converz', a full-fledged call center, a top-line website (www.karvymfs.com), the ‘m-investor' and many more, creating a galaxy of customer advantages.
Karvy Consultants Limited
As the flagship company of the Karvy Group, Karvy Consultants Limited has always remained at the helm of organizational affairs, pioneering business policies, work ethic and channels of progress. Today, Karvy service over 6 lakhs customer accounts in this business spread across over 250 cities/towns in India and are ranked amongst the largest Depository Participants in the country. With a growing secondary market presence, Karvy have transferred this business to Karvy Stock Broking Limited (KSBL), Karvy’s associate and a member of NSE, BSE and HSE.
Karvy Investor Service
Merchant Banking
Recognized as a leading merchant banker in the country, Karvy registered with SEBI as a Category I merchant banker. This reputation was built by capitalizing on opportunities in corporate consolidations, mergers and acquisitions and corporate restructuring. Karvy’s quality professional team and our work-oriented dedication have propelled it to offer value-added corporate financial services and act as a professional navigator for long term growth of its clients, who include leading corporates, State Governments, foreign institutional investors, public and private sector companies and banks, in Indian and global markets. Its financial advice and assistance in restructuring, divestitures, acquisitions, de-mergers, spin-offs, joint ventures, privatization and takeover defense mechanisms have elevated its relationship with the client to one based on unshakable trust and confidence.
Karvy Global Services Limited
The specialist Business Process Outsourcing unit of the Karvy Group. Here Karvy offer several delivery models on the understanding that business needs are unique and therefore only a customized service could possibly fit the bill. Be it in re-engineering and managing processes or delivering new efficiencies, Karvy’s service meets up to the most stringent of international standards. Karvy’s outsourcing models are designed for the global customer and are backed by sound corporate and operations philosophies, and domain expertise. Providing productivity improvements, operational cost control, cost savings, improved accountability and a whole gamut of other advantages. Karvy’s wide market coverage includes Banking, Financial and Insurance Services (BFIS), Retail and Merchandising, Leisure and Entertainment, Energy and Utility and Healthcare.
Karvy Computershare Pvt. Limited
Karvy have traversed wide spaces to tie up with the world’s largest transfer agent, the leading Australian company, Computershare Limited. The company that services more than 75 million shareholders across 7000 corporate clients and makes its presence felt in over 12 countries across 5 continents has entered into a 50-50 joint venture with Karvy. Excellence has to be the order of the day when two companies with such similar ideologies of growth, vision and competence, get together.
Issue Registry
Karvy has emerged as the largest transaction-processing house for the Indian Corporate sector. With an experience of handling over 700 issues, Karvy today, has the ability to execute voluminous transactions and hard-core expertise in technology applications have gained the No.1 slot in the business. Karvy is the first Registry Company to receive ISO
9002 certification in India that stands testimony to its stature.
It is actively coordinating with both the main depositories to develop special models to enable the customer to access depository (NSDL, CDSL) services during an IPO.
Karvy Insurance Broking Private Limited
At Karvy Insurance Broking Pvt. Ltd., it provide both life and non-life insurance products to retail individuals, high net-worth clients and corporates. With the opening up of the insurance sector and with a large number of private players in the business, Karvy is in a position to provide tailor made policies for different segments of customers. With Indian markets seeing a sea change, both in terms of investment pattern and attitude of investors, insurance is no more seen as only a tax saving product but also as an investment product. By setting up a separate entity, Karvy would be positioned to provide the best of the products available in this business to its customers. Karvy’s wide national network, spanning the length and breadth of India, further supports these advantages. Further, personalized service is provided here by a dedicated team committed in giving hassle-free service to the clients.
Karvy Commodities Broking Private Limited
At Karvy Commodities, Karvy is focused on taking commodities trading to new dimensions of reliability and profitability. Karvy has made commodities trading, an essentially age-old practice, into a sophisticated and scientific investment option. Here Karvy enable trade in all goods and products of agricultural and mineral origin that include lucrative commodities like gold and silver and popular items like oil, pulses and
cotton through a well-systematized trading platform.
Regular trading workshops and seminars are conducted to hone trading strategies to perfection. Karvy’s commitment to excel in this sector stems from the immense importance that commodity broking has to a cross-section of investors – farmers, exporters, importers, manufacturers and the Government of India itself.
Karvy Inc.
With its growing ambitions of reaching out to investors across the shores of this country, Karvy’s has set up Karvy Inc. in the US located in New York to provide various financial products and information on Indian equities to potential Foreign Institutional Investors (FIIs) in the region. This entity soon would be ACC registered and would also become a member of various important stock exchanges in the US. This entity would extensively facilitate various businesses of Karvy viz., stock broking (Indian equities), research and investment by (Qualified Institutional Buyer) QIBs in Indian markets for both secondary and primary offerings, outsourcing of various assignments for the multiple streams of business in Karvy Global Services Ltd (KGSL).
THEROTICAL FRAMEWORK
FUNDAMENTAL ANALYSIS:
Fundamental analysis is the examination of the underlying forces that affect the well
being of the economy, industry groups, and companies. The goal is to derive the forecasted earning growths for future price movements.
Fundamental analysis is the method of evaluating securities by attempting to measure the intrinsic value of a particular stock. It is the study of everything from the overall economy and industry conditions, to the financial condition and management of specific companies (i.e., using real data to evaluate a stock’s value). The method utilizes items such as revenues, earnings, return on equity and profit margins to determine a company’s underlying value and potential for future growth.
One of the major assumptions under fundamental analysis is that, even though things get mis priced in the market from time to time, the price of an asset will eventually gravitate toward its true value. This seems to be a reasonable bet considering the long upward march of quality stocks in general despite regular setbacks and periods of irrational exuberance. The key strategy for the fundamentalist is to buy when prices are at or below this intrinsic value and sell when they got overpriced.
Fundamental analysis consists of:
• For the national economy we focus on economic data to assess the present and
future growth of the economy.
• At the industry level, there might be an examination of supply and demand forces
for the products offered.
• At the company level, may involve examination of financial data, management,
Economy analysis
The economy is the overall economic environment in which all firms operate. The key variables used to describe the state of economy are:
• World economy • Asian economy • Indian economy
1. Growth rate of GDP 2. Industry growth rate 3. Agriculture and monsoons 4. Savings and investment 5. Inflation
6. Interest rates
7. Balance of payments 8. Infrastructure
World economy
According to the recent statistics, the world GDP (comprising 180 economies) has reached at a sum of US $ 46,747 Billions. Top 15 contributors to the world GDP are USA, Japan, Germany, China, UK, France, Italy, Canada, Spain, Brazil, Russia, Korea, India, Mexico
and Australia.
Percentage share of USA to the total world GDP is 28.3. While both the emerging economies such as India and China have a share of 1.82 and 5.41 respectively.
Asian Economy
Asian Economies have brought tremendous success in the recent years. Economic growth rate in China crossed a two-digit number, while economic growth in India’s Economy is near to 10 percent. Apart from those two emerging Asian Economic giants, economies such as Philippines, Indonesia and Malaysia are growing at a faster pace. Find below various economic indicators on the Asian Economies.
GDP growth projections among various Asian Economies over years are as follows:
GDP Growth Projection on Asian Economies Country Name 2007 2008
Japan 2.3 1.9
Hong Kong SAR 5.5 5
Korea 4.4 4.4 Singapore 5.5 5.7 China 10 9.5 India 8.4 7.8 Indonesia 6 6.3 Malaysia 5.5 5.8 Philippines 5.8 5.8 Thailand 4.5 4.8
The output over the world increased by 4.4% in the year 2005. The largest contributors of the world output were India, China and Russia. The Gross World Product (in purchasing
power parity) as to the 2005 estimated data has reached at $ 60.71 trillions with a real growth rate of 4.7%.
The services sector contributes a largest share to the world GDP. As to the 2004 estimated data, the services sector accounted for 64% followed by industries at 32% and Agriculture 4%.
The level of exports and imports over the world has reached at $10.33 trillion and 10.3 trillions f.o.b. as to 2004 estimation.
World inflation:
Inflation, which can be simply stated to be a state of economic activities with rising price level and falling purchasing power of money, has become global phenomenon. Fast rising oil prices over the world has pressurized the general price level in countries of the world. Present world economy is experiencing higher economic growth with some inflationary pressure.
The stabilized countries have the inflation level ranging between 1-3% and the developing countries have inflation between 3-6%.
Indian economy: Indian primary sector
Agriculture is the mainstay of Indian economy because of its high share in employment and livelihood creation notwithstanding its reduced contribution to the nation’s GDP. The share of agriculture in the gross domestic product has registered a steady decline from 36.4 per cent in 1982-83 to 17 per cent in 2007-08. Yet this sector continues to support more than half a billion people providing employment to 52 per cent of the workforce. It is also an important source of raw material and demand for many industrial products, particularly fertilizers, pesticides, agricultural implements and a variety of consumer goods. This is first time after green revolution that the India has become dependent in satisfying its own food need. Growth pattern of Indian agriculture has been so irregular, because of over dependency on the monsoon. This year we could achieve dismal growth of 2.5%.India is expecting its agriculture to grow at least 4% (CAGR) in the 11th plan to have sustainable
and consistent growth of overall GDP. Industrial sector (secondary sector)
Industrial growth in India has been inspired by the LPG in 1991. in the 10th plan we could
achive growth rate of 8-9%. At present industry sector is contributing 28% to country’s GDP. Though at present India is experiencing slowdown in growth of industry production, the long term growth of 8-10% is still intact. The first eight months of the current fiscal, till November 2007, witnessed a moderate slowdown in the growth of the industrial sector. The slowdown has mainly been on account of the manufacturing sector. The mining and quarrying sector grew at a faster pace, while the growth in electricity remained unchanged from November 2006. Nonetheless, the 9.2 per cent growth achieved during April-November 2007 by the industrial sector, when seen against the backdrop of the robust growth during the preceding four years, suggests that the buoyancy in this sector has continued, albeit with a degree of moderation. Two important changes have occurred in the growth pattern of the use-based industrial categories:
First, capital goods have grown at an accelerated pace, over a high base attained in the previous years, which augurs well for the required industria capacity addition. Secondly, the consumer durables basket that forms part of the Index of Industrial Production (IIP) showed a negative growth during the period, thereby forcing a visible decline in the growth of the total consumer goods basket, despite reasonable growth in the non-durables.
Dimension of Indian Economy
Gross domestic product: measure of the total production of final goods and services in the
economy during a specified period usually a year. Higher the growth rate, the other things being equal, the more favorable it is for the stock market.
GDP Composition
28% 55% 17% Manufacturing Service AgricultureThe growth rate of GDP is more important indicator of the performance of the economy. The average growth rate of Indian economy during 1950-1980 was around 3.5% in real terms. In 1980 it was 5% and 6.2% in 2004. At present it is 8.7 and estimated to cross 9%.
Industrial growth rate: stock market analysts mainly focus on the industrial sector.
Higher the growth rate, more favorable is the things for stock market. The industrial sector witnessed a slowdown in the first nine months of the current financial year. The growth of 9 per cent during April-December 2007, when viewed against the back drop of the robust growth witnessed in the preceding four years, suggests that there is a certain degree of moderation in the momentum of the industrial sector. At the product group level, the moderation in growth has been selective. Industries like chemicals, food products, leather, jute textiles, wood products and miscellaneous manufacturing products witnessed acceleration in growth, while basic metals, machinery and equipments, rubber, plastic and petroleum products and beverages and tobacco recorded lower but strong growth during April-December 2007.
Agriculture and monsoons: agriculture accounts for about a quarter of the Indian economy and has important linkages both direct and indirect with the industry. There has been a loss of dynamism in the agriculture and allied sectors in recent years. A gradual degradation of natural resources through overuse and inappropriate use of chemical fertilizers has affected the soil quality resulting in stagnation in the yield levels. Public investment in agriculture has declined and this sector has not been able to attract private investment because of lower/unattractive returns.
Savings and investment: A notable feature of the recent GDP growth has been a sharply rising trend in gross domestic investment and saving, with the former rising by 13.1 per cent of GDP and the latter by 11.3 per cent of GDP over five years till 2006-07. The
average investment ratio for the Tenth Five Year Plan at 31.4 per cent was higher than that for the Ninth Five Year Plan, while the average saving rate was also 31.4 per cent of GDP higher than the average ratio of 23.6 per cent during the Ninth Five Year Plan.
Money supply: For policy purposes for 2007-08, the RBI assumed a real GDP growth of 8.5 per cent with inflation close to 5 per cent, and targeted the monetary expansion in the range of 17-17.5 per cent and credit expansion in the range of 20 to 24 per cent as
consistent with envisaged growth and inflation.
Interest rates: interest rates affect the cost of financing to the firms. Higher the interest
rates, higher will be the cost and if lower, lower the cost and more will be the profitability. Below table shows that interest rates are decreasing year after year which is a good sign for the growth.
Year Interest(bank) rates % p.a. April 1997 11 April 1998 10 March 1999 8 March 2001 7 April 2003 6
Inflation: The Wholesale Price Index (WPI), which is available on a weekly basis, continues to be the most popular measure of headline inflation in India.
Balance of payments: The strength, resilience and stability of the country’s external sector is reflected by various indicators. These include a steady accretion to reserves, moderate levels of current account deficit, changing composition of capital inflows, flexibility in exchange rates, sustainable external debt levels with elongated maturity profile and an increase in capital inflows. The current account has followed an inverted “U” shaped pattern during the period from 2001-02 to 2006-07, rising to a surplus of over 2 per cent of GDP in 2003-04. Thereafter it has returned close to its post-1990s reform average, with a current account deficit of 1.2 per cent in 2005-06 and 1.1 per cent of GDP in 2006-07.Capital inflows, as a proportion of GDP, have been on a clear uptrend during the six years (2001-02 to 2006-07) of this decade. They reached a high of 5.1 per cent of GDP in 2006-07 after a somewhat modest growth rate of 3.1 per cent in 2005-06.The net result of these two trends has been a gradual rise in reserve increase to reach 4 percent of GDP in 2006-07 (Figure 6.1). With capital inflows exceeding financing requirements, foreign exchange reserve increase was of the order of US$ 15.1 billion in 2005-06 and US$ 36.6 billion in 2006-07 (Table 6.2). As a proportion of GDP, external debt was 17.2 per cent and 17.9 per cent in 2005-06 and 2006-07 respectively.
Infrastructure: with the rapid growth of the economy in recent years the importance and the urgency of removing infrastructure constraints have increased. Traditionally, power, railways, roads, ports, airports and telecommunications were the exclusive domain of the government. Policy has changed gradually over the past two decades under the pressure of rising gaps between demand and supply of infrastructure and deteriorating quality of assets.