A Study of Impact of Leverage on the Profitability of Indian Banking Industry

Dr S.M.Tariq Zafar, Dr Adeel Maqbool and Anju Fortyal 85-99 Abstract With increasing Industrialization, investment decisions in banking sector becoming more critical. Ever since Indian economy adopted globalization and opened its doors to MNCs, the Indian banking industry has been witnessing new products, efficient services and stiff competition. Its survival in competitive environment largely depends on its efficient fund generation policies, profitability and efficient management which requires a careful analysis of the profitability, competitive policies and massive investment which can be achieved with reliable saving and investors durability to absorb competitive market risks. Thus in the light of recent developments, a careful analysis of the profitability of Indian banking sector is inevitable. The present study attempts to analyze the leverage position of Indian banking industry and its impact on EPS, its risk and return and profitability. For the purpose10 year data from 2000-01-20009-10 of ten Indian banks SBI, BOB, AB, SB, ICICI, HDFC, DB, CB, IDBI, and OBC have been taken, the value of leverages has been calculated and on the calculated leverages value Mean, Standard deviation, Skewness and Kurtosis has been calculated. After the calculation of the leverages relationship has been calculated of all leverage with EPS value. Keywords: DFL, OL, CL, EPS, Correlation, SBI, BOB, AB, SB, ICICI, HDFC, DB, CB, IDBI, and OBC.

Economic Value Added vis--vis Thinking of Indian Corporate Managers: A Survey Analysis

Dr. Karam Pal, Jitender Kumar 19-32 Abstract The main rationale of this study is to explore the managers thoughts towards the hottest idea of fi nancial performance measurement i.e. economic value added or EVA. Debate is going on in corporate world of fi nance regarding the intrinsic worth and rarity of EVA. EVA was promoted profoundly by Stern Stewart, a New York based consulting fi rm, during 1990s. The proponent of EVA presented it as the wonder remedy of the millennium in overcoming all corporate ills at one stroke and ultimately helps in raising the wealth of the shareholders, which is identical with the maximization of the fi rm value. But till date, EVA is the generally misapprehended phrase among the academicians and practitioners of corporate fi nance. For assessing the ingenious thinking of corporate managers of select industries, this study has been carried on the basis of primary data. For this purpose data has been collected from managers working in information technology (IT) and pharmaceutical industries through a well structured questionnaire. Managers opinion towards important attributes like

perception towards EVA, views regarding superiority, existing status of different financial measurement tools, expected outcomes of EVA, causes of reluctance for applying EVA , heterogeneous perception towards EVA among managers working in select industries and Respondents opinion towards EVA: without boundaries are essentially measured by using five point interval scales. Out of the 81 valid responses only 3.4% respondent organizations are using Economic Value Added (EVA) as a financial performance measurement tool. Most of the respondents agreed that it is the better financial tool than traditional tools. But, yet Indian corporate is not very sure about its cost, effect and implementation in the organization. They still feel that they should wait and watch. Moreover, there is significant difference between the thinking of the managers of Information Technology and Pharmaceutical industries regarding enthusiastic application of economic value added. Keywords: Value based management, Economic value added, Market Value Added, NOPAT and Financial performance Measurement tools.

Performance Evaluation of Public and Private Sector Banks: A Multivariate Analysis

K.V.N. Prasad and D. Maheshwara Reddy 55-62 Abstract Profit is the key indicator for any business organization. The survival growth and development of business depends on profit. The profitability is the ratio which helps to measure the actual performance of the business and indicates how far it has been successful. The present study attempts to analyze the profitability of the five major banks in India; SBI, PNB, canara bank, ICICI and HDFC. The variables taken for the study are operating profit margin (OPM), Gross Profit margin (GPM), Net profit margin (NPM), Earning per share (EPS), Dividend per share, Return on Equity (ROE), Return on Assets (ROA), Price Earnings Ratio (PER), Dividend payout ratio (DPR).The study brings out the comparative efficiency of SBI, PNB, canara bank, ICICI and HDFC. Keywords: Public & Private sector banks, profitability ratios, performance analysis, Tukey HSD test.

Construction of Appropriate Benchmark Index for Mutual Funds An Empirical Analysis with Specific Reference to Tax Saver Funds (ELSS)

Venkatesh Kumar and Ashwini Kumar 74-90 Abstract Evaluating the performance of mutual funds in the light of increased competition has become more significant in the capital market. Proper identification of investment style and performance measurement of mutual funds have been analysed to facilitate the investment decisions of investors. The performance of mutual funds are analysed by considering various risk related characteristics and also evaluated against the performance of a benchmark index that typically represent the investment style of the mutual funds. If the fund performance is evaluated against an inappropriate benchmark index then the augmentation derived from the analysis may not be appropriate. Hence, the prominent objective is to determine the appropriate Benchmark Index that consists of appropriate asset classes of securities pave the way for precise estimation. The study considers Tax Planning (Equity Linked Savings Scheme-ELSS) funds and selected indices of National Stock Exchange and Bombay Stock Exchange. The methodology focuses on estimating the risk adjusted abnormal return generated by the fund that exhibits the predictive ability (Jensens Alpha) of the fund manager through Capital Asset Pricing Model (CAPM) and estimating the Tracking Error Volatility (TEV) of excess daily returns between fund and benchmark. The study revealed that broad based indices that consist of Large cap, Mid cap, and Small cap asset classes would be a appropriate benchmark for evaluating the performance of ELSS funds. Keywords: CAPM, ELSS, Fund performance, Jensens Alpha, TEV.

The Assets Utilisation and Firms Profitability: Empirical Evidence From Indian Automobile Firms

A.Vijayakumar 32-44 Abstract Appraising asset utilization is a multi-task exercise conceived and performed because it measures how efficiently an organization uses its resources. The success of any enterprise ratios tied to its ability to manage and leverage its assets. Assets utilization ratios (turnover ratios) provide measures of management effectiveness. Hence, in this study a detailed analysis of assets turnover has been made for better understanding the factors responsible for changes in profitability in the Indian Automobile industry. The analysis of all the assets utilization ratios registered a fluctuating trend during the study period, which may be due to the difference into growth rate of sales because of the factors such as market conditions, pricing policy, government policy and competition. Comparatively, the companies under two and three wheelers sector out performed then commercial vehicles and passenger cars and multi utility vehicles sector with respect to their asset utilization. Keywords: Assets utilisation, profitability, turnover ratios, factor analysis and automobile industry

A Comparative Study of Mutual Fund Performance during Recession in India

Subrata Roy and Shantanu Kumar Ghosh 53-64 Abstract This study has sought to examine the comparative performance of the open-ended gilt schemes of three types of companies which have been separated according to their ownership styles (Public sector, Indian private sector & foreign private sector). This study is related with financial recession that had been occurred in the year of 2008-2009 (January 2008 to February 2009). In this study the month end net asset values of the open-ended gilt mutual fund schemes have been taken into account and the data have been obtained from the website of Association of Mutual Funds in India (AMFI). This paper has examined the riskadjusted performance, selectivity performance, diversification performance and markettiming performance of the open-ended gilt mutual fund schemes in the period of recession. In this study, Sharpe and Treynor measures have been applied to measure the risk-adjusted performance and along with these, different coefficients have been estimated to examine the selectivity, market-timing and diversification performances of the open-ended gilt schemes offered by Indian public & private sector mutual fund companies as well as the firms belonging to foreign private sector. It has been observed that the performance of the openended gilt schemes of different types of companies is not satisfactory during the recession period. However, the returns of all but one of the selected open-ended gilt schemes are seen to have been positive. However, the observed positive performances of the selected schemes are not statistically significant. Keywords: Mutual Fund, Performance, Recession, Sharpe model, Treynor model.