Fundamental Analysis for Investment Decisions on Five Major Banks

Abstract

It is felt that the Share market is fluctuating very quickly and the real worth of the shares also is unstable. The investors need to know the trend of the share value fluctuations and the stability of share price movements. In banking industry, the intrinsic value of the shares is to be computed to ascertain the share values of the banks which may either be undervalued or overvalued based on the performance of the banks. In this study, an analysis is done to help make decision as regard to whether it is wise to invest in banking institutions in India or not. Five of the banks have been selected for the analysis of investment decision over banking companies whether it is wise to hold or to sell the shares. The investment decision is made on the basis of analysis of general trend on banking sector. The study helps to select securities which maximizes the yield and minimizes risk. Fundamental analysis involves finding the intrinsic value of the selected banks and their share value. It provides additional strength to the investor in choosing the option of buy / sell strategy. The analysis incorporates with various financial ratios and their calculations to arrive out the intrinsic value of the shares of the banks finally. The intrinsic value is the yardstick to measure the financial performance of any bank. Real worth of the share may not always be reflecting in the market price. Banking companies are selected for investment based on the real worth of the shares and the intrinsic value of the shares will be calculated thus. In this way, we can make appropriate investment decisions with the help of intrinsic value of shares. Fundamental analysis is always the proper method to arrive at the results of the company or industry on its financial performance. If the company is fundamentally strong, that will help the investor to get a very good return in the long run. Hence, before making an investment decision the investor has to check the results of the fundamental analysis of the companies. The study has thrown more light on the strength of banking sector performance and as a tool for generating and distributing the wealth of nation.