ASSIGNMENTON

TECHNICAL ANALYSIS OF HDFC BANK BY USING

MOVING AVERAGE METHOD FOR TWO MONTHS

SUBMITTED TO :- SUBMITTED BY :-

Prof. Harjeet Kaur Daljeet SinghPG Department of M. Com 2nd (4th Sem)Commerce Roll No. - 8323

MATA GUJRI COLLEGE(FATEHGARH SAHIB)

TABLE OF CONTENT

S. No. PARTICULARS Pg. No.

1. INTRODUCTION 3

2. CAPITAL STRUCTURE & MANAGEMENT 4

3. CBoP & TIMES BANK AMALGAMATION 5

4. BANKING SERVICES 6

5. TECHNICAL ANALYSIS 8

6. ASSUMPTIONS OF TECHNICAL ANALYSIS 9

7. TECHNICAL V/S FUNDAMENTAL 10

8. TOOLS & TECHNIQUES 11

9. MOVING AVERAGE ANALYSIS 12

10. USE & PURPOSE OF TECHNICAL ANALYSIS 13

11. TYPES OF TECHNICAL ANALYSIS 14

12. HDFC BANK SMA CHART 15

13. HDFC BANK EMA CHART 16

14. CONCLUSION 17

15. BIBLIOGRAPHY 18

INTRODUCTION

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values - Operational Excellence, Customer Focus, Product Leadership and People.

CAPITAL STRUCTURE AND MANAGEMENT

As on 30th June, 2010 the authorized share capital of the Bank is Rs. 550 crore. The paid-up capital as on said date is Rs. 459,69,07,030/- (45,96,90,703 equity shares of Rs. 10/- each). The HDFC Group holds 23.63 % of the Bank's equity and about 17.05 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). 27.45% of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 4,33,078 shareholders.

The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.

Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th July 2010. Mr. Vasudev has been a Director of the Bank since October 2006. A retired IAS officer, Mr. Vasudev has had an illustrious career in the civil services and has held several key positions in India and overseas, including Finance Secretary, Government of India, Executive Director, World Bank and Government nominee on the Boards of many companies in the financial sector.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years, and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia. The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board. Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength.

CBoP & TIMES BANK AMALGAMATION

On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was formally approved by Reserve Bank of India to complete the statutory and regulatory approval process. As per the scheme of amalgamation, shareholders of CBoP received 1 share of HDFC Bank for every 29 shares of CBoP.

The merged entity will have a strong deposit base of around Rs. 1,22,000 crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity would be over Rs. 1,63,000 crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower.

In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banks in the New Generation Private Sector Banks. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank.

BANKING SERVICES

HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments :-

Wholesale Banking Services

The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corporate to small & mid-sized corporates and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery / service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporates including multinationals, companies from the domestic business houses and prime public sector companies. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.

Retail Banking Services

The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, NetBanking and Mobile Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been

designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form.

HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2010, the bank had a total card base (debit and credit cards) of over 14 million. The Bank is also one of the leading players in the “merchant acquiring” business with over 90,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.

Treasury

Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalisation of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio.

TECHNICAL ANALYSIS

Fundamental analysis and technical analysis are two main approaches to security analysis. Technical analysis is frequently used as a supplement to fundamental analysis rather than as a substitute to it. Fundamental analysis forecasts stock prices on the basis of economic, industry and company analysis. The stock value is judged with the help of a risk return framework based upon earning power and economic environment. However, according to technical analysis, the price of stock depends on demand and supply in the market place. It has little correlation with the intrinsic value. All financial data and market information of a given stock is already reflected in its market price. Technical analysis have developed tools and techniques to study past patterns and predict future price. Technical analysis is basically the study of markets only. Technical analysis study the technical characteristics which may be expected at may or market turning points and their objective assessment. The previous turning points are studied with a view to develop some characteristics that would help in identification of major market tops and bottoms. Human reactions are, by and large consistent in similar though not identical reaction; with his various tools, the technician attempts to correctly catch changes in trend and take advantage of them.

“Technical analysis is directed towards predicting the price of a security. The price at which a buyer and seller settle a deal is considered to be the one precise figure which synthesizes, weighs and finally expresses all factors, rational and irrational quantitable and is the only figure that counts”.

Thus, the technical analysis provides a simplified and comprehensive picture of what is happening to the price of a security. Like a shadow or reflection it shows the broad outline of the whole situation and it actually works in practice.

ASSUMPTIONS OF TECHNICAL ANALYSIS

There are some basic assumptions underlying the technical analysis. These assumptions are discussed as follows :

1. The market value of a security is solely determined by the interaction of demand and supply factors operating in the market.

2. The demand and supply factors of a security are surrounded by numerous factors; these factors are both rational as well as irrational.

3. The security prices move in trends or waves which can be both upward or downward depending upon the sentiments, psychology and emotions of operators or traders.

4. The present trends are influenced by the past trends and the projection of future trends is possible by an analysis of past price trends.

5. Except minor variations, stock prices tend to move in trends which continue to persist for an appreciable length of time.

6. Changes in trends in stock prices are caused whenever there is a shift in the demand and supply factors.

7. Shifts in demand and supply, no matter when and why they occur, can be detected through charts prepared specially to show market action.

8. Some chart trends tend to repeat themselves. Patterns which are projected by charts record price movements and these patterns are used by technical analysis for making forecasts about the future patterns.

TECHNICAL VS FUNDAMENTAL ANALYSIS

The major differences are :-

1. Technical analysis try to predict short term price movements whereas fundamental analysis try to establish long term values.

2. The focus of technical analysis is mainly on internal market data, particularly price and volume data whereas the focus of fundamental analysis is on the factors relating to the economy, industry and the company.

3. Speculators who want to make quick money mostly use results of technical analysis whereas investors who invest on long term basis use the results of fundamental analysis.

4. Fundamental analysis involves compilation and analysis of huge amount of data and is therefore, complex, time consuming and tedious in nature. On the other hand, technical analysis is a simple and quick method on forecasting behavior of stock prices.

5. According to the technical analysis, their method is far superior than the fundamental analysis, because fundamental analysis is based on financial statements which themselves are plagued by certain deficiencies like subjectivity, inadequate disclosure etc.

6. Fundamental analysis is a longer term approach. Even if an anlyst identifies an under priced security, market may take time to bid its price up. Technical analysis feel that their own techniques and charts are quicker and superior to fundamental analysis.

Thus, technical and fundamental analysis provide exactly opposite approaches to valuation. But in practice, generally, a judicious combination of both these approaches is used to arrive at better results.

TOOLS AND TECHNIQUES OF TECHNICAL ANALYSIS

There are numerous tools and techniques for doing technical analysis. Basically this analysis is done from the following four important points of view :-

1. Prices : Whenever there is change in prices of securities, it is reflected in the changes in investor attitude and demand and supply of securities.

2. Time : The degree of movement in price is a function of time. The longer it takes for a reversal in trend, greater will be the price change that follows.

3. Volume : The intensity of price changes is reflected in the volume of transactions that accompany the change. If an increase in price is accompanied by a small change in transactions, it implies that the change is not strong enough.

4. Width : The quality of price change is measured by determining whether a change in trend spreads across most sectors and industries or is concentrated in few securities only. Study of the width of the market indicates the extent to which price changes have taken place in the market in accordance with a certain overall trends.

MOVING AVERAGE ANALYSIS

A moving average is one of the most flexible as well as most-commonly used technical analysis indicators. It is highly popular among traders, mostly because of its simplicity. It works best in a trending environment.

In statistics, a moving average is simply a mean of a certain set of data. In case of technical analysis, these data are in most cases represented by closing prices of stocks for the particular days. However, some traders also use separate averages for daily minima and maxima or even an average of midpoint values (which they compute by summing up daily minimum and maximum and dividing by it two). Yet, you can construct a moving average also on a shorter time-frame, for example by using daily- or minute- data.

For example, if you want to make a 10-day moving average, you just add up all the closing prices during the last 10 days and then divide it by 10 (in this case it is a simple moving average). The next day we do the same, except that we again take the prices for the last 10 days, which means that the price that was the last in our computation for the previous day is no longer included in today's average - it is replaced by yesterday's price. The data shift in this manner with every new trading day, hence the term "moving average".

PURPOSE AND USE OF MOVING AVERAGE ANALYSIS

Moving average is a trend-following indicator. Its purpose is to detect the start of a trend, follow its progress, as well as to report its reversal if it occurs. As opposed to charting, moving averages do not anticipate the start or the end of a trend. They only confirm it, but only some time after the actual reversal occurs. It stems from their very construction, as these indicators are based solely on historical data. The less days a moving average contains, the sooner it can detect a trend's reversal. It is because of the amount of historical data, which strongly influences the average. A 20-day moving average generates the signal of a trend reversal sooner than the 50-day average. However, it is also true that the fewer days we use in the moving average's computation, the more false signals we get. Hence, most of the traders use a combination of several moving averages, which all have to yield a signal simultaneously, before a trader opens his position in the market. Nonetheless, a moving average's lag behind the trend cannot be completely eliminated.

TYPES OF MOVING AVERAGES

The most commonly used types of moving averages are Simple Moving Average (SMA) and Exponentially Weighted Moving Average (EMA, EWMA).

Simple Moving Average (SMA)

This kind of moving average is also known as arithmetic mean and represents the simplest and most commonly used type of moving average. We compute it by summing up all the closing prices for a given period, which we subsequently divide by the number of days in the period. However, two problems are associated with this kind of average: it takes into account only the data included in the selected period (e.g. a 10-day simple moving average takes into account only the data from the last 10 days and simply ignores all other data prior to this period). It is also often criticized for allocating equal weights to all the data in the data set (i.e. in a 10-day moving average a price from 10 days ago has the same weight as the price from yesterday - 10%). Many traders argue that the data from recent days should carry more weight than older data - which would result in reducing the average's lag behind the trend.

Exponentially Weighted Moving Average (EMA, EWMA)

This kind of moving average solves both problems associated with simple moving averages. Firstly, it allocates more weight in its computation to recent data. It also to some extent reflects all the historical data for the particular instrument. This kind of average is named according to the fact that the weights of data towards the past decrease exponentially. The slope of this decrease can be adjusted to the needs of the trader.

HDFC Bank Simple Moving Average(From 23-Feb-2012 to 23-Apr-2012)

Date Price 20-SMA 50-SMA 200-SMA23-Feb 533.15 511.83 474.63 47228-Feb 530.5 517.7 480.99 473.071-Mar 514 519.79 484.62 473.736-Mar 507.4 521.55 490.47 474.9712-Mar 518.95 522.02 495.7 475.9216-Mar 507.85 520.61 502.07 477.1422-Mar 504.25 515.57 506.16 477.7528-Mar 513.45 514.08 510.13 478.562-Apr 528.35 514.39 512.55 479.2410-Apr 524.85 516.7 515.55 480.3912-Apr 530.4 517.37 517.42 481.0317-Apr 530.25 519.5 519.47 481.8423-Apr 543.35 527.7 522.59 482.85

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Price

20-SMA

50-SMA

200-SMA

According to simple moving average analysis, HDFC bank is in a strong uptrend. Major support levels are 529.09, 522.98 and 483.0292.

HDFC Bank Exponentially Weighted Moving Average(From 27-Feb-2012 to 23-Apr-2012)

Date Price 20-EMA 50-EMA 200-EMA27-Feb 515.6 514.16 491.8 469.2629-Feb 517.1 515.85 494.25 470.341-Mar 514 515.67 495.02 470.775-Mar 510.95 515.77 497.42 472.1212-Mar 518.95 516.12 500.24 473.8516-Mar 507.85 516.4 502.79 475.5722-Mar 504.25 513.08 503.29 476.7727-Mar 518.85 513.57 504.6 477.8930-Mar 519.85 513.86 505.73 478.972-Apr 528.35 515.24 506.61 479.479-Apr 521.75 518 508.81 480.8412-Apr 530.4 520.45 510.9 482.2216-Apr 529.75 522.1 512.34 483.1519-Apr 554.05 527.12 515.58 484.8623-Apr 545.35 530.92 518.08 486.11

27-Feb1-M

ar4-M

ar7-M

ar

10-Mar

13-Mar

16-Mar

19-Mar

22-Mar

25-Mar

28-Mar

31-Mar3-Apr6-Apr9-Apr

12-Apr

15-Apr

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21-Apr

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Price

20-EMA

50-EMA

200-EMA

According to exponential moving average analysis, HDFC bank is in a strong uptrend. Major support levels are 531.9612, 519.0139 and 486.6645.

CONCLUSION

Technical Analysis shows that the technical strength of the HDFC Bank is 8.3 that is Strong.

Indicator Analysis Signal (0 - Strong Sell, 10 - Strong

Buy)

Chart

Simple Moving Average

According to simple moving average

analysis, hdfc bank is in a strong

uptrend. Major support levels are 529.09, 522.98,

483.0292.

10.0 Given Above

Exponential Moving Average

According to exponential moving

average analysis, hdfc bank is in a strong uptrend. Major support

levels are 531.9612, 519.0139, 486.6645.

10.0 Given Above

BIBLIOGRAPHY

http://techpaisa.com/stock/hdfcbank/

http://tutorials.topstockresearch.com/TutorialsOnMovingAverage/TutorialOnMovingAveragePage.html

http://finviz.com/help/technical-analysis/moving-averages.ashx