MOCK STOCK REPORT Assignment 1

BANKING & IT SECTOR ANALYSIS

Submitted To

SUBMITTED BY:

Indrajeet Sahani MMS SEM II DIV. A ROLL NO: 39

1

Indian Economy Analysis of 2011

In 2011, Inflation, high interest rates, gloomy global economy, poor performance of SMEs and stretched government finances have led Indian growth to slide to a two year low . The provisional inflation figure was 9.1 per cent in May 2011 and 9.4 per cent in June. Indias GDP grew at 6.9% in the July to September quarter. The biggest problem is industrial production, which grew merely 1.9% for the quarter ended September 30. Among the major problems are mining and manufacturing sectors. Biggest problem with higher interest rates is that, companies particularly SMEs, and individuals are finding it difficult to repay loan instalments. This adds to the NPAs of lenders Huge withdrawal from FII in India affected the Indian economy in 2011 a lot. Rising price of crude oil has played a major role in increasing the price of many items, by it many people suffered a lot Export growth slows down 10.8% to US$19.9 billion in October 2011 Fiscal deficit crosses 74% of Budget estimates Industrial growth was affected tremendously due to high interest rate and also because of increasing in total cost of manufacturing any item As rupee has depreciated a lot in 2011 the importers end up by paying more money which make many items more costlier and also foreign exchange earnings were reduced

 Despite raising interest rate 13 times in the past 2 years by RBI, Inflation has refused to come down even while growth has taken a hit. The increase in the IIP by 5.7 per cent in April-May 2011 was lower as compared with the increase of 10.8 per cent in the corresponding period of last year. Merchandise trade, however, registered strong growth with exports expanding by 46 per cent during Q1 of 2011-12. Economy of India depending on many sectors like manufacturing industries Banking, agriculture, textiles, IT, handicrafts and services. To attract foreign currency inflow, the NRI interest rates were increased also done no tax on interest earned in Indian market Rupee has lost over 20% of its value against the dollar in the last 3 months. Indian airlines Co made a huge loss because of incurring high operational cost, rising petrol prices, not able to repay the loan taken and the interest goes on accumulating Indias budget deficit could widen to 5.8% of GDP in FY 2012 as against the govt. target of 4.8% BSE stock exchange is also close to its lowest market cap in the last 2 years.

Banking Sector
o In 2011 global banks were under pressure due to sovereign debt crisis afflicting many euro zone countries. Indian banks too suffered because of it. It had affected indirectly to Indian banks. o Poor asset quality and rising non performing assets keep profitability of Indian banks mostly low as compared to previous years. As a result, global ratings firm Moodys downgraded the entire Indian banking systems ratings from stable to negative in November o In September, Standard & Poors also downgraded the credit rating of the country largest lender, the State bank of India, by one notch after it posted unusually low profits in the first quarter o The BSE banking index has lost over 30% in the last 1 year o There has been a fall in NPAs (Non performing assets) in the past 12 months o Main reasons behind the growth in deposits in 2011 o The CRR ratio was reduced to 5.5% ie 0.5 % reduction so the share price of most of the bank rise for few days

IT SECTOR
Software and services revenues (excluding Hardware), comprising over 86 per cent of the total industry revenues. More than 2.5 million people in India are employed in this sector either directly or indirectly IT in India has grown at twice the GDP pace: Steve Mills, IBM. IBM has become India's most successful MNCs. It is currently India's second largest employer behind TCS TCS expands US operation with new facility in Silicon Valley The apex body of Indian technology companies is likely to forecast a slowdown in software exports in 2012-13, as corporations keep a wary eye on the global economic uncertainty and control expenses on information technology outsourcing. Infosys to invest Rs 600 cr on Indore facility The Indian Information Technology industry accounts for nearly 5.19% of the country's GDP Outsourcing from American co in IT sector has reduced in India HCL 51% growth in its revenue per employee from five years ago, HCL far outstrips its larger peers, including TCS, Cognizant, Infosys and Wipro. IBM has emerged as perhaps the most successful MNC in India. More than 2.5 million people in India are employed in this sector either directly or indirectly Wipro has become India's No. 3 software services exporter, is also expected by industry analysts to catch up with its bigger rivals in earnings growth rates in the next few quarters after undertaking a wide-ranging restructuring.

 IT-BPO sector in India aggregated revenues of USD 88.1 billion in FY2011, generating direct employment for over 2.5 million people. The domestic ITBPO market witnessed the Indian consumers going up the IT maturity curve, return of economic growth, efforts by organisations and the government to increase technology adoption, and emergence of new delivery platforms thus driving growth. As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 6.4 per cent in FY 2011.