Investments in the Shares of Axis Bank and Icici Bank - a Comparative Study J.Abdul Khader1 & Dr.M.Sirajudeen2 1Part Time Research Scholar, (Ref.No

International Journal of Disaster Recovery and Business Continuity Vol.11, No. 2, (2020), pp. 1463–1471

Investments In The Shares Of Axis Bank And Icici Bank - A Comparative Study J.Abdul Khader1 & Dr.M.Sirajudeen2 1Part time research scholar, (Ref.No. 07863/Ph.D.K4/Commerce/Part Time/April 2017) PG & Research Department of Commerce, Jamal Mohamed College (Autonomous) , Affiliated to Bharathidasan University, Tiruchirappalli. 2Assistant Professor, PG & Research Department of Commerce, Jamal Mohamed College (Autonomous) , Affiliated to Bharathidasan University, Tiruchirappalli. ABSTRACT

This study aims to bring out the investment climate in private sector banks in India by analyzing the most prominent private sector banks namely Axis bank Ltd and ICICI Bank. ICICI Bank and Axis Bank are the two major private sector banks that attracts the customers across the country. Private sector banks are offering a great service to the individual and corporate customers. The Public sector banks are the biggest challenge to private sector banks in building confidence among the people. The recent economic slowdown in our country due to crash in the demand side and global economic slowdown due to pandemic spread results in the poor banking and leading to bank insolvency. The bankruptcy is the important term that are found in daily newspapers due to increase in the Non-Performing Assets of the banks in the country. This study attempts to analyze the performance of private sector banks in the recent economic situation prevailing in India.

Keywords: ICICI Bank, Axis Bank, Nifty fifty, stock exchange, Bankruptcy, Nifty returns, beta, SEBI, etc.,

INTRODUCTION Share market is a place for buying and selling of securities. It is not just a place for buying and selling and it acts as an indicator of the economy. According to technical analysts, the share markets are very sensational to emotions, here says, economic situations across the globe and within the country. Natural disaster and epidemic may also affect the trading activities in the market. The hopes and common beliefs on politics also brings the market to a new place. The share market is also known as secondary market or stock exchanges. Investments in the banking companies may help to understand the current economic scenario and also we can predict the future. Banking sector plays a crucial role in the development of the country in all directions. Banking means basically accepting the deposits from the public and lending the money to the needy people. Banking assists the business people for easy mobilization of money from one place to another and from country to country. Lending activity of Banking companies are building the country both economically and non-economically. Both Public sector and Private sector banks are the major players in the lending market and contribution to the development of the economy. Recent crash in banking companies arises panic among the public towards the safety of their investments. This study may help to understand the accountability of the banking companies and the situation prevailing in the sector. Without banking there is no business today. BANKING SECTOR IN INDIA Accepting of deposits from the public and lending the money to needy people is the basic concept and function of a banking company. At present, the banking function has been diversified into all fields and sector. Banks plays a vital role in the development of every industry by way of lending the money in their development to the consumers and also financing the companies. Banking is also having their contribution in share market through issue of share application and collecting the fees. This function is known as 1463 ISSN: 2005-4289 IJDRBC Copyright ⓒ2020 SERSC International Journal of Disaster Recovery and Business Continuity Vol.11, No. 2, (2020), pp. 1463–1471 merchant banking. Likewise, they are also partner with educational institutions, Insurance companies, automobile companies, Home appliances products companies, Electric and electronic product companies, technological products etc. In India, On the basis of ownership the banking sector is classified into two namely public sector and private sector banks. Public sector banks are also known as nationalized banks in which the majority of the capital is contributed by the government of India. In British India, the number of private banks are high and government controlled bank were called as Imperial bank of Madras, Imperial bank of Bombay and Imperial Bank of Calcutta. In the year 1935, The Reserve Bank of India was set up under Reserve Bank of India Act 1934 and started its operations and was nationalized in January 1, 1949. Reserve Bank of India is the central bank or the apex bank of the country. It has powers and control over all the banking activities including Private banks, Foreign banks, nationalized banks and non-commercial banks in the country. Reserve Bank of India is also controlling the money supply through various qualitative and quantitative measures. The headquarters of RBI is located in Mumbai and regional head offices are situated in New Delhi for north, Mumbai for west, Kolkata for east and Chennai for south regions. Shaktikanta Das is the present governor of RBI. State Bank of India (SBI) came into existence on July 1, 1955 through the nationalization of Imperial Bank of India. Imperial Bank of India was established in 1921 by amalgamation of Bank of Bombay, Bank of Madras and Bank of Bengal. SBI Act was passed in the year 1955. State Bank of India is the largest bank of the country with over 24000 branches, 60000 ATMs and with over 420million customers all over the world. SBI is the India’s leading bank and also having the branches in nearly 36 foreign countries. In 1969, the Government of India nationalized 14 banks and other 6 banks were nationalized in 1980, These nationalized banks are having nearly 80 per cent of deposits in the country. Earlier, these banks were owned by private individuals. The nationalization of Banks had increased the level of confidence among the public towards the banking companies. Gradually, the people came under the umbrella of banking only because of nationalization took place. The reliability and confidence level is high for the nationalized banks because the Government of India is taking responsibility towards the safety of funds invested by the public. Hence, the nationalized banks are holding the lion’s share in the banking economy in India. In all, there are 21 private sector banks are operating in India. The existences of some private sector banks are traced to even before independence and nationalization. Some of the oldest private banks are:

S.No Names of bank Year of establishment 1 City Union Bank 1904 2 Karur Vysya Bank 1916 3 Catholic Syrian Bank 1920 4 Tamilnad Mercantile Bank 1921 5 Nainital Bank 1922 6 Karnataka Bank 1924 7 Lakshmi Vilas Bank 1926

The later established Housing and Development Finance Corporation (HDFC) Bank, Axis Bank and Industrial Credit and Investment Corporation of India (ICICI) Bank are the largest banks among the private sector banks. With increase in relaxation of norms by RBI to enter in banking sector allowed many players in the private sector banking. The latest private bank that was allowed its operation in 2004 is Yes Bank and Kotak Mahindra Bank. The public are also gradually moving to private sector banks for their good service. The public sector bank employees are not offering their best services this drawback has led many

1464 ISSN: 2005-4289 IJDRBC Copyright ⓒ2020 SERSC International Journal of Disaster Recovery and Business Continuity Vol.11, No. 2, (2020), pp. 1463–1471 customers to choose for private sector banks. Private sector banks are providing faster service when comparing to nationalized banks.

At present, many foreign players are also allowed to have branches in the country. So, Indian banking system is surrounded by nationalized banks, private sector banks, foreign private banks and other small co- operative banks. With public sector is holding the gear and private sector is trying to grab the market.

STOCK EXCHANGES IN INDIA

The stock exchange is also known as secondary market or share market. It is a place where already issued shares are traded. Stock exchanges are also an indicator of predicting economy of the country. Stock exchanges are very sensational to the emotions, beliefs, global economy, natural disaster, epidemic diseases, political changes, etc., There are now 23 recognized stock exchanges are in India. Bombay Stock Exchange and National Stock exchanges are the biggest stock exchange in India. Bombay Stock Exchange established in 1875 is the Asia’s oldest stock exchange and 10th largest stock exchange in the world. New York stock exchange is the largest stock exchange in the world.

Investors are the persons who are investing their money for a long term and speculators are the persons engaging in the market for a short term. Investor accepts moderate risk and expects a regular return but speculators are the persons who are ready to face high risk and get high return. There is association between the risk and return. If the risk is higher, the return will also be higher and when the risk is limited the return will also be lesser. Investors must carefully analyze the stock before making the investment.

Nowadays, Investment avenues are more in numbers. Investors can choose the venue of their investment according to their wish and capability. Bank deposits, Life Insurance policies, Post office Savings schemes, Shares, Bonds, Real estate, Gold and silver etc.. Bank deposits are the most commonly used investment method. One can invest their money in savings account or fixed deposit account whichever is beneficial. Banks are providing interest rate varies between 6 per cent and 7 per cent for the savings bank account holders. Life Insurance Policies are the endowment policies which is beneficial to the investors after the retirement or after the maturity period. It is investors choice to opt the best investment according to their conditions. Post offices are also offering various investment programs which enables the investors for a fixed return with high safety. Real estate and Gold are the emerging investment avenues that brings high returns to the investors.

Trading in equities i.e. investment in the shares is highly risky with high return earning capable comparing to other fixed return bearing bonds and other avenues. Investments in the debentures are safety in nature as it bears fixed return to the debenture holders. The more number of active investors are engaging in the day to day activities of the stock trading.

National Stock Exchange has a total market capitalization of more than US$2.27 trillion, taking as world’s 11th largest stock exchange and the market capitalization of Bombay Stock Exchange stands at US$2.21 trillion as on April 2018. Hence, Indian stock exchanges are active in trading and have more opportunities to enlarge their market size and are able to add more investors into the market. Securities Exchange Board of India (SEBI) is apex body for financial market in the country. SEBI is the authority for stock exchanges, stock brokers, sub- brokers and other financial market. SEBI plays an significant role in regulating the share market and protecting the interest of investors is the primary objective.

CRISIS IN BANKING SECTOR

Bankruptcy is the banks are becoming insolvent due to increase in the Non-Performing Assets. When the borrowers failed to pay the due money of borrowings in the due time it becomes bad debts. The principal and interest amount due unpaid for a long time period is known as Non-Performing Assets. Crisis in banking sector will affect every industry as every industry depends on banks. The global financial crisis in the year 2008 affected the whole banking system across America, Europe and Asia. The reason behind the financial crisis was bankruptcy. When the borrowers are failed to repay the due money the banks become insolvent. This affected the great American economy, Europe economy and other developed countries in the world. India escaped from global financial crisis because of not much dependence of banks. India’s economy is substantially much depend on informal sector. Informal sector is the business enterprises that are functioning without much dependence banks. Otherwise, informal sector runs through cash transactions are known as Informal sector. Informal businesses helped the Indian economy from global financial crisis. We are US$2.6 trillion economy with world’s seventh largest economy.

The numbers of defaulters among the borrowers are increasing day to day. The increases in number of defaulters are because of fall in the business. The business scenarios are getting worse for the past ten years. After the implementation of Demonitisation and Goods and Services Tax, the business environment has been affected very seriously. It starts with the insolvency of King fisher airlines which became bankrupt and unable to pay off their debts borrowed from banks. The founder of kingfisher group Mallaya also escaped from the country for not paying the debts arose anger among the public. The diamond merchant Nirav Modi was caught red handed in banking scandal. Anil Ambani’s reliance also locked in the bad situation and unable to pay their debts.

Banking sector has been corrupted. The branch managers are not scrutinizing the loan application on the ethical basis and fail to follow the norms. The branch managers are getting the bribe from the borrowers for sanctioning of loans is an unproven fact prevailing in the society. The creditworthiness of the borrowers are not thoroughly verified is the basic reason for increase in Non-Performing Assets. Most of the loans provided to big corporates are not paid in due time and also becomes due for a long after the maturity period completes. Both Public sector and private sector banks are in trouble. There is no differences on the corruption takes place between public sector banks and private sector banks. The corruption in the banking sector is the bottleneck to be removed and basis for every failures in banking business. The credit rating agencies must also do the assessment effectively in order to keep the defaulters in check. The credit rating of individuals can also be assessed before providing loan to the corporates.

Yes Bank trapped into bankrupt in March 2020. Yes Bank started its operation in the year 2004. In the span of 16 years the bank become insolvent and Reserve Bank of India intervened. The major reason for the Yes Bank insolvent was three defaulters namely Reliance (Anil Ambani), Deevan Housing Finance Ltd and IL & FS. These three defaulters bought huge some of borrowings from the bank and the loan was unpaid for a long time as their business got lost. Yes Bank founder Rana Kapoor is held charge for 3000 crores of loan amount as these amount were provided as loan to the kith and kin companies of Rana Kapoor. The restrictions were imposed for customers not to withdraw more than Rs.50,000/- and the maximum of Rs.5,00,000/- can be withdrawn with prior permission from RBI in certain circumstances like education, medical and marriage functions. These restrictions are affecting the business people and individuals in the day to day life as their money has been locked in. The insurance coverage for private sector banks are upto Rs.5,00,000/-. More than this amount may not be recovered until the bank gets bail. The RBI called on State Bank of India to intervene in this matter and advised to invest around Rs.26,000 crores inorder to bail out the bank. The founder of Yes Bank Rana Kapoor has been remanded in custody. This case allowed widespread fear among private sector bank customers. The customers of private sector banks are started withdrawing their money in the fear of loss of deposits in case the bank becomes insolvent. The fall in Yes Bank also affected other private sector banks like HDFC Bank, Axis Bank, ICICI Bank and many others.

This recent crisis in Yes Bank affects entire Banking sector in the country in Investments as their share of profits are declining due to increase in the bad debts.

SIGNIFICANCE OF THE STUDY

An Investor looking for investment in share market has to analyze economy, industry and company in particular. Shares of banking companies are highly traded in both National Stock Exchange and Bombay Stock Exchange. Private sector banks are very essential and high performing shares in the stock exchanges in India. There is a scope for high return in the shares of financial sector before the bank crisis hit in the country. Private sector banks shares are very important and high yielding in the stock exchange. Axis Bank and ICICI Bank are very prominent bank among the private sector bank that are expanding the branches and activities. Investments in the shares of Axis bank and ICICI Bank may help to understand the investment climate in financial companies.

STATEMENT OF THE PROBLEM

This study examines the investment opportunities that are existence in the shares of private sector banks. The Financial companies are in dangerous position as the business climate is worsening. Financial companies shares contribute much to entire stock trading in volume. The shares of Private banks are playing the key role in both the BSE and NSE. The recent crash in the economy lead to fall in every industries especially automobile industry was the worst hit. Banks determines the performance of other industries too as every sector is based on determines. Hence, the health of Banking companies are very essential for achieving the good economic growth.

OBJECTIVES AND SCOPE OF THE STUDY

The following are the objectives framed in the study:

 To examine the investments in Financial sector.  To know the performance of Axis Bank and ICICI Bank.  To identify possibilities of short-term investment in the market.  To find out the relationship between the returns of nifty 50 and Axis Bank  To find out the association between returns of nifty 50 and ICICI Bank.

This study covers on the Banking sector in India and the recent crisis that held the banks at low. The chances of investment and their effect on the gain or loss made from such investment have been taken up. This study covered on 5 years of share prices data from 16/03/2015 to 13/03/2020 which is long term in nature. The long term analysis are very helpful the investors rather than speculators.

SOURCES & COLLECTION OF DATA

This study is wholly dependent on secondary data. Secondary data is already published information. The researcher gathered information of share opening price, closing price, high price and low price from the recognized websites.

ANALYTICAL TOOLS

In this study, the researcher used β beta analysis to evaluate and interpret the data. Beta helps to find volatility between a particular stock and market. It is an indicator of know the risk level and expected rate of return. Beta is one of the basics that technical analysts consider when choosing stocks for their portfolios. Beta analysis is the common analysis that the portfolio managers are using. Regression analysis also taken

place in this study. Regression analysis is a statistical tool used to determine the probable change in one variable for the given variables.

LIMITATIONS

The constraints of the study are:

 This study covered for a period of 5 years in which we predict the primary trend but secondary trend are based on monthly basis.  The external factors which may control the market like government policies, epidemics, natural causalities are not taken into account.

REVIEW OF LITERATURE

Intaz Ali (2016) concluded in his study on volatility in the BSE Sensex and NSE Nifty return series exhibits the characteristics like volatility clustering, asymmetry effect and persistence of volatility in their daily return. The study found that there exists a significant presence of volatility clustering and degree of volatility is persistent which implies the recent news as well as past news both has an impact on volatility. The study also found the existence of leverage effect indicating that the negative emotions or bad news have more impact on volatility than that of positive shocks or good news.

John William et al (2015) concluded that Banking in India on growth path meanwhile global crisis took place. The alterations were both favorable and adverse to the sector. Such sector works for the development of economy on all angles. Thus, the earning capacity of each and every banks must be made transparent in order to make investors get market knowledge. The study was an attempt and examined the volatility of selected private banking companies in India listed in NSE for providing important data to investors to succeed.

NIFTY FIFTY

The Nifty 50 is a diversified portfolio index from National Stock Exchange. The top fifty companies from Services to Media comes under Nifty 50 index. Axis Bank, Bajaj Finance, Induslnd Bank Ltd, Kotak mahihra Bank Ltd, ICICI Bank ltd and State Bank of India are the players in the banking among Nifty 50 index.

Nifty 50 measures the top companies that are from every industry.. NIFTY 50 is perfect for derivatives exchanging

DATA ANALYSES AND INTERPRETATIONS

The researcher used Microsoft excel to find out the value of beta analysis and regression analysis. The output of variance between Axis bank returns and Nifty returns are given in the following.

SUMMARY OUTPUT OF AXIS BANK RETURNS WITH NIFTY RETURNS

Regression Statistics Multiple R 0.6248136 R Square 0.390392 Adjusted R Square 0.3880383 1468 ISSN: 2005-4289 IJDRBC Copyright ⓒ2020 SERSC International Journal of Disaster Recovery and Business Continuity Vol.11, No. 2, (2020), pp. 1463–1471

Standard Error 0.032294 Observations 261

ANOVA Significance df SS MS F F Regression 1 0.17297876 0.1729788 165.8632 1.14979E-29 Residual 259 0.270111152 0.0010429 Total 260 0.443089912

Standard Lower Upper Coefficients Error t Stat P-value Lower 95% Upper 95% 95.0% 95.0% - - Intercept 3.89E-05 0.002000485 0.0194429 0.984503 0.003900391 0.003978182 0.003900391 0.003978182 X Variable 1 1.3184045 0.102370229 12.878789 1.15E-29 1.116820607 1.519988465 1.116820607 1.519988465

INTERPRETATIONS

From the above output table we can understand that the calculated value of beta between the nifty returns and Axis bank returns is 1.3184045. The beta value is above one. Hence, the stock is more volatile than the market. As the market rises, this stock should rise at a higher rate. Likewise, a more severe loss is anticipated in the event of the market falls.

From the above output table, The calculated value of R2 is 0.390392. The R2 value is the relationship of variance of the Axis bank returns to the variance of the overall market returns. Hence, indicates a less related variance between the two variables.

SUMMARY OUTPUT OF ICICI BANK RETURNS WITH NIFTY RETURNS

Regression Statistics Multiple R 0.675567723 R Square 0.456391748 Adjusted R Square 0.454292875 Standard Error 0.032802093 Observations 261

ANOVA df SS MS F Significance F Regression 1 0.233967013 0.23396701 217.446 3.82635E-36 Residual 259 0.27867813 0.00107598 Total 260 0.512645142

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Intercept 0.001756641 0.002031962 0.864505 0.38811 -0.002244628 0.0057579 X Variable 1 1.533308751 0.103980969 14.7460518 3.83E-36 1.328553008 1.7380645

INTERPRETATIONS

From the above output table we can understand that the calculated value of beta between the nifty returns and ICICI Bank returns is 1.533308751. The beta value is above one. Hence, the stock of ICIC Bank ltd is more volatile than the market. As the market rises, this stock should rise at a higher rate. Likewise, a severe loss is expected in the event of the market falls.

From the above output table, The calculated value of R2 is 0.456391748. The R2 value is the relationship of variance of the ICIC bank returns to the variance of the overall market returns. Hence, indicates a less related variance between the two variables.

FINDINGS

1. The beta value (1.3184045) between Axis Bank returns and Nifty returns shows the Axis bank stock is more volatile than the Nifty market. More rises is expected in the bullish trend and severe loss is expected in the bearish trend. 2. The beta value (1.533308751) between ICICI Bank returns and Nifty returns shows the ICICI bank stock is more volatile than the Nifty market. More rises is expected in the bullish trend and severe loss is expected in the bearish trend. 3. The R2 value (0.390392) of variance between Axis bank returns and Nifty returns is less significant. 4. The R2 value (0.456391748) of variance between ICICI bank returns and Nifty returns is less significant. 5. The market is in bearish trend due to government policies, global crisis and pandemic factors. 6. The top three players of private banks in the National Stock exchange are ICICI Bank, HDFC Bank and Axis Bank.

SUGGESTIONS

1. The investor should carefully watch the primary trend of the market than the secondary and minor movements for choosing banking companies share. 2. Investments in the banking shares are advisable in the bullish trend can bring more gains and the risk level is high in the bearish trend. 3. Investors wish to invest in financial sector shall very well prefer the shares of State Bank of India in public sector. 4. Investors wish to invest in financial sector shall very well prefer the shares of ICICI bank in private sector. 5. Government must take necessary steps to stop the corruption in banking sector for controlling the Non-Performing Assets.

CONCLUSION

The Banking sector played a significant role in the development of the economy by providing financial assistance to different industries and consumers. The high level of corruption and unethical practices among the managers and top level in the banks has lead to rampant increase in the Non-Performing Assets. The Private bank shares are highly volatile compared to other industries. Housing Development and Finance Corporation (HDFC) Bank, Industrial Credit and Investment Corporation of India (ICICI) Bank and Axis Bank are the top three players in the market and largest private operators. State Bank of India is the leading bank among the public sector banks and the leading among both the private and public sector banks. ICICI bank shares are more volatile than Axis bank which means investor shall choose the former for investment. Both Bombay Stock Exchange and National Stock Exchange are in bearish trend due to failed economic policies of government, Global crisis and spread of Epidemic in the beginning of the year 2020. Yes Bank crisis dragged the entire market into a new low particularly it affected the shares of both the public sector banks and private sector banks in large. The shares of financial sector especially the State Bank of India and Private bank shares are highly preferred by the investors in the bullish market.

References:

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