Capital Market (Tushar)

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1.1 OBJECT OF THE PROJECT

Management consists of getting things done through others. A manager is one whoaccomplishes the objectives by directing the efforts of others. In todays competitive world,

management has to perform variety of functions and responsibilities. Theoretical

knowledge of such functions and responsibilities can be obtained in the institute. But

practically when this knowledge is applied in the corporate world, many difficulties are

faced by the managers.

Hence in order to get an insight into the practical knowledge, communication skills

and to develop the analytical aspects, the University has provided an opportunity to improve

in this corporate world.

Keep it simple. Keep it straight: that is the investment philosophy. Never wait till the

last rupee of profit comes in. Tops and bottoms are for the fools to catch, a top is the highest

price point of a stock, which is what greedy investors often wait for and bottom is just the

opposite, where one should buy into a stock. Even though investment condition, attitude and

opportunities often change overtime and vary greatly from place to place, but basic rules of

game nearly always remain the same.

Indian economy is on the roll with a growth rate of about 8% during the last years.

Indian companies are performing well in almost all sectors be it software, engineering,

information technology, automobiles, auto components or pharmaceuticals etc. thats the

reason, foreign investors are coming by hordes and showing a great interest in Indian

economy.

Investment in Indian economy primarily comes through: -

1. Direct Investments or Foreign Direct Investment and

2. Through the capital market where Foreign Institutional Investors (FIIs) are

allowed to invest Indian Economy.

A well-organized and developed Share Market is an essential pre-requisite of

economic development. An investor plays a vital role in the growth of Share Market by

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investing in Shares, Debentures, Government Bonds and Securities etc. because of this

equity Market affects the working of Indian Economy.

Thus, the researcher have selected the topic of Equity Research which has given

him the opportunity to study Indian capital market scenario and enabled to make thorough

analysis of Method used for Fundamental analysis and Technical analysis of stock prices of

the companies.

1.2 RATIONAL OF THE STUDY

The present market scenario has shown us the recovery from bottom level in Share

Market. Even some of the research firms showed that Share Market is the fastest growing in

India. Now it is possible for the investors to trade from their own place. As compare to last

two years there is a growth in the number of share brokers and market analysts. Media is

playing an important role in these regards. Now the common man is also thinking of some

investment in share market. Too many investors invest their money for the short span, the

intention is speculative. Thus this project has provided ample amount of scope which can

be given as follows

Utility to Researcher

a. To interact with the manager of the company and gain knowledge through their

experiences.

b. To gain the knowledge about the share market.

c. Practical knowledge about the equity analysis and how to analyze the stocks.

Utility to company:-

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a. The analysis done was beneficial to the company as additional information of their

Investor.

b. With this, company can recommend their clients to invest in particular companys

shares on the basis of analysis done and also try to attract more traders by giving more

services.

1.3 LIMITATIONS OF STUDY

a. To understand the overall working of share market, the period of 60 days is not

enough.

b. Moreover, very few investor have a detail knowledge of the study.

c. A study is conducted in Nasik only, which restrict the scope of the study.

d. This project does not give results to intraday traders.

e. Fundamental Analysis is to the extent is good for the Long term calls but Not that

much successful for the intraday calls .It is just the forecasting of the future, also it depends

on the fundamentalist i.e. How researcher analyze the data? , How he/she predict the future

base on that data?

f. No technical Analysis tool is also perfect, but it should be remembered that the

indices are measuring what has already taken place; it is up to the interpreter to provide a

meaningful forecast.

g. A chart does not provide with the means to predict future price action with certainty.

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CHAPTER 2

INDUSTRY PROFILE

2.1 INDIAN CAPITAL MARKET

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The capital market plays a very important role in promoting economic growth

through the mobilization of long-term savings and the savings get invested in the economy

for productive purpose. The capital market in India is a well integrated structure and its

components include stock exchanges, developed banks investment trusts, insurance

corporations and provident fund organization. It caters to the varied needs for capital of

agriculture, industrial and trading sectors of the economy. There are two important

operations carried on in these markets. The raising the new capital and Trading in the

securities already issued by the companies.

With the pace of economic reforms followed in India, the importance of capital

markets has grown in the last ten years. Corporate both in the private sector as well as in the

public sector raise crores of rupees in these markets. The governments, through Reserve

Bank of India, as well as financial institutes also raise a lot of money from these markets.

The capital market serves a very useful purpose by pooling the savings.

The capital markets encourage capital formation in the country. The capital markets

mobilize savings of the households and of the industrial concerns. Such savings are then

invested for productive purposes. Capital markets also facilitate the growth of the industrialsector, as well as the other sectors of the economy. The capital markets provide funds for

the projects in backward areas. Thus, Capital markets generate employment in the country.

They also facilitate the development of stock markets. Due to capital markets, the

public has alternative sources of investment. The public can invest not only in bank

deposits, but also in shares and debentures issued by public companies. The commercial

banks and FIs provide timely financial assistance to viable sick units to overcome their

industrial sickness. The banks and FIs may also write off a part of loan, or they re-schedule

the loan, so as to offer payment flexibility to the weak units, which in turn helps the weak

units to overcome financial crisis.

Capital market requires many intermediaries who are responsible to transfer funds

from those who save to those who require these funds for investments. The efficiency of the

markets is dependent on the specialization attained by these intermediaries. Some of them

are as follows:

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1. Stock Exchanges.

2. Banks.

3. Investment Trusts and Companies.

4. Specialized Financial Institutions or Development Banks.

5. Mutual Funds.

6. Non-Banking Financial Institutions.

7. International Financial Investors and Institutions.

The supply in this market comes from savings from different sectors of the

economy. These savings accrue from the following sources:

1. Individuals.

2. Corporate.

3. Government Institutions.

4. FII and DII.

5. Banks.

6. Provident Funds Houses.

7. Mutual fund houses.

All these entities contribute to savings in the economy part of these savings naturally

flow in the capital markets. Individuals invest in these markets directly by investing in

shares or debentures of companies through bond issues of public sector units or through

mutual funds. Corporate who have more savings than their requirement for funds also are

participants in this market.

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2.2 ROLE OF CAPITAL MARKET IN INDIA

1. CAPITAL FORMATION

The capital market encourages capital formation in the country. Rate of capital

formation depends upon savings in the country. Though the banks mobilize savings, they

are not sufficient to match the requirements of the industrial sector. The capital market

mobilizes savings of households and of the industrial concern. Such savings are then

invested for productive purposes. Thus savings and investment leads to capital formation in

country.

2. ECONOMIC GROWTH

Capital market facilitates the growth of the industrial sector as well as other sectors

of the economy. The main function of the capital market is to transfer resources (funds)

from masses to the industrial sector. The capital market makes it possible to lend funds to

various projects, both in the private as well as public sector.

3. GENERATES EMPLOYMENT

Capital market generates employment in the country:

a. Direct employment in the capital markets such as stock markets, financial

institutions etc.

b. Indirect employment in all sectors of the economy, because of the funds provided

for developmental projects.

4. LONG TERM CAPITAL TO INDUSTRIAL SECTOR

The capital market provides a permanent long-term capital for the companies. Once,

the funds are collected through issues, the money remains with the company. The company

is left free with the funds while investors exchange securities among themselves.

5. GENERATION OF FOREIGN CAPITAL

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The capital market makes possible to generate foreign capital. Indian firms are able

to generate capital from overseas markets by way of bonds and other securities. Such

foreign exchange funds are vital for the economic development of the nation.

6. DEVELOPING ROLE OF FINANCIAL INSTITUTIONS

The various agencies of capital market such as Industrial Financial Corporation of

India (IFCI), State Finance Corporations (SFC), Industrial Development Bank of India

(IDBI), Industrial Credit and Investment Corporation of India (ICICI), Unit Trust of India

(UTI), Life Insurance Corporation of India (LIC), etc. have been rendering useful services

to the growth of industries. They have been financing, promoting and underwriting the

functions of the capital market.

7. INVESTMENT OPPORTUNITIES

Capital markets provide excellent investment opportunities to the members of the

public. The public can have alternative source of investment i.e. in bonds, shares and

debentures etc.

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2.3 EQUITY MARKET

INTRODUCTION

The first company to issue shares of stock was the Dutch East India Company, in

1602. The innovation of joint ownership made a great deal of Europe's economic growth

possible following the Middle Ages. The technique of pooling capital to finance the

building of ships, for example, made the Netherlands a maritime superpower. Before

adoption of the joint-stock corporation, an expensive venture such as the building of a

merchant ship could only be undertaken by governments or by very wealthy individuals or

families.

Equity markets, the world over, grew at a great speed in the decade of the nineties.

After the bear markets of the late eighties, the world markets saw one of the largest ever

bull markets of more than ten years. The opening up of Indian economy in the 1990's led to

a series of financial sector reforms, prominent being the capital market reforms. These

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reforms have led to the development of the Indian equity markets to the standards of the

major global equity markets. All this started with the abolition of Controller of Capital

Issues and subsequent free pricing of shares.

The introduction of dematerialization of shares, leading to faster and cheaper

transactions and introduction of derivative products and compulsory rolling settlement has

followed subsequently. Despite a series of stock market scams and crises beginning from

1992 Harshad Mehta's scam to the Ketan Parekh's 2001 scam, the Indian equity markets

have transformed themselves from a broker dominated market to a mass market. The

introduction of online trading has given a much-needed impetus to the Indian equity

markets. However, over the years, reforms in the equity markets have brought the country

on par with many developed markets on several counts. Today, India boasts of a variety of

products, including stock futures, an instrument launched only by select markets.

The introduction of rolling settlement is the latest step in the direction of

overhauling the stock market. The equity market of the country will most likely becomparable with the world's most advanced secondary markets with regard to international

best practices. The market moved to compulsory rolling settlement and now all settlements

are executed on T+2 basis and market is gearing up for moving to T+1 settlement in 2011

while the Straight Through Processing (STP) is in place from December 2002.

The importance of equity market is increasing. Rightly, realizing the advantages of

resource allocation through market, Government of India and Reserve Bank of India have

been pushing reforms in equity markets. Series of steps are being taken to remove hurdles,

increase market efficiency and to make it attractive for the retail investors to take part in the

equity market. It may not be an exaggeration to say that the Indian markets are resourceful

to put themselves on par with the markets of the developed countries. The Indian markets

have assimilated in a relatively lesser time, many a developments that took long time in the

developed markets.

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2.4 MAJOR PLAYERS IN CAPITAL MARKET

Indian capital market is in its growing stage, apart from Indian corporate Investors

and HNIs, THE COMMON MAN has also started to invest in Capital market. Hence

capital market players are the most dependable entities to protect interest of the investors.

Following are the major players in Indian market:-

1. SHAREKHAN 2. INDIA INFOLINE

3. ICICI DIRECT 4. INDIABULLS

5. KARVY 6. ANGEL BROKING

7. KOTAK MAHINDRA SECURITIES 8. EDELWEISS

9. MOTILAL OSWAL 10. HDFC SECURITIES

MARKET SHARE OF MAJOR PLAYERS:

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Though Stock broking Institutions are facing very intense competition amongst each other,

SHAREKHAN is enjoying considerable market share over other players. Below given Pie

chart is showing the current position of various firms according to their Customer base.

(SOURCE: CMIE report March 2010)

CHART -1

2.5 TWIN TOWERS OF EQUITY MARKET

In India the main exchanges are the BSE and the NSE, which contribute to more

than 90% of the trade in the capital market. These two exchanges are the movers and

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MARKET SHARE OF STOCK BROKING FIRMS


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shakers of the equity market in India.

NSE-NATIONAL STOCK EXCHANGE

NSE was setup in November 1992, started its trading operation

effectively from June 30, 1994. Only the debt market segment of the

NSE was put into operation initially. The capital market segment of

the NSE commenced its operation on November 3, 1994. It provides

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facility for trading of equity instruments, warrants, debentures, preference shares etc. The

total turnover of capital market segment of NSE was higher at RS.2,94,504crores/- as

compared with RS.1,24,284crores/- of the Mumbai Stock Exchange in 1996-97. NSE has

adopted fully automated screen based trading system, which allows trading members to

trade from their offices through a communication network. The exchange has opened

membership to a number of cities.

BSE-BOMBAY STOCK EXCHANGE

Bombay Stock Exchange Limited (BSE)

which was founded in 1875 with six brokers has

now grown into a giant institution with over 874

registered Broker-Members spread over 380

cities across the country. Today, BSE's Wide

Area Network (WAN) connecting over 8000

BSE Online Trading (BOLT) System Trader

Work Stations (TWS) is one of the largest of its kind in the country. With a view to provideefficient and integrated services to the investing public through the members and their

associates in the operations pertaining to the Exchange, Bombay Stock Exchange Limited

(BSE) has set up a unique Member Services and Development to attend to the problems of

the Broker-Members.

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CHAPTER 3

COPMPANY PROFILE

3.1 INTRODUTION

A Kantilal Chhaganlal security is a name synonymous with wealth management.

Established in 1954; Kantilal Chhaganlal securities has stood the test of time which speaks

volume about the reliability, stability and expertise of the firm.

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Backed by a highly dedicated and professional team, Kantilal Chhaganlal offers its

60,000 plus clientele a bouquet of customized, end to end, wealth management solutions.

With its presence at more than 500 locations across India, the company ensures its clientele,

uncompromised performance and a focused approach.

Why Kantilal Chhaganlal?

Experience: With over 5 decades of experience in wealth management they enjoy

the trust of over 60,000 satisfied clients.

Client Centric Model: Client satisfaction is an asset. Hence clients interest

precedes their interest .Their stringent internal customer service standards ensure that client

enjoy the best in class service.

Technology: It has been their constant endeavor to harness the best of technologies

to ensure that clients get maximized returns.

Strong Operation and Research Desk: With over 54 years of experience, the

company has one of the best operations and research cells in the industry.

Wide network: Presence all across India with over 500 locations ensures that we

are never far away from you.

3.2 VALUES AT KANTILAL CHHAGANLAL SECURITIES

A. Unification of clients interest with the companys business interest.

B. Maintaining high level of integrity, transparency and ethical values.

C. A No Compromise attitude for quality with passion for excellence.

D. Client centric model with a clear focus on providing long term value added services

while maintaining the highest standards of professionalism.

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3.3 SUBSIDERIES OF KANTILAL CHHAGANLA SECURITIES

1. Kantilal Chhaganlal Securities Pvt. Ltd.

Member of NSE, NSE F&O, BSE, BSE F&O

Depository Participant CDSL

1. Kaycee Commodity Services Pvt. Ltd.

Member of NCDEX and MCX

1. Kaycee Advisory Services Pvt. Ltd.

AMFI Mutual Fund Distributor

1. Kaycee Insurance Agency & Consultancy Services Pvt. Ltd.

Life Insurance Distribution

1. Kaycee Finstock Pvt. Ltd.

Non Banking Finance Corporation (NBFC).

3.4 Reach, Access and membership of the KC

Reach and Access Membership

No. of employees:1080 Cash Market: NSE, BSENo. of Branches: 500 + Derivatives: NSE

No. of cities and towns: 46 Debt: NSE

No. of sub-brokers: 124 Commodities: MCX/NCDEX

3.5 Product and services

KANTILAL CHAGANLAL SECURITIES offer our clientele a bouquet of

products and services where each service is customized to benefit clients need.

1. 1.WEALTH MANAGEMENT

2.

Catering to individuals and corporate with investible corpus of Rs. 5 crores

and more.

3.

4. 2. COMMODITY

5.

Kaycee Commodity Services Pvt. Ltd a group company of Kantilal

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Chhaganlal Securities Pvt. Ltd is a Clearing cum Trading Member of MCX

& NCDEX. We rank amongst the top broker houses in Commodity. We

provide online as well as offline facility. We have the best in state of art

technology for our Business partners and clients. We also provide online

back office facility to business partners and all our clients.

Kaycee Commodity is also renowned for its research services. We provide

reports on daily and weekly basis; we also give commodity specific reports.

We send our research to our clients and Business Partner's via Email, Chat

and SMS services. We at Kaycee Commodity believe in long and entrusted

relationship and we remain true to our beliefs.

6. 3. INSTITUTIONAL BROKING

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Currently dealing with:

1. Dll's, Fll's

2. Life Insurance Corporation of

3.UTI Mutual Funds

4. Canararobeco Asset Management Co. Ltd.

5. Axis Bank

6. State Bank of India (SBI)

7. Vijaya Bank

8. Allahabad Bank

9. Central Bank of India

10.Bank of India

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1. 5. PRIVATE CLIENT GROUP

1. Broking

2. Equities

3. Derivatives

4. Commodities

5. Internet Trading

6. Depository Participant

7. PMS & Structured Products

8. Mutual Funds

9. Alternate Investment

10. Life Insurance

11. Margin Funding

CHAPTER 4

LITERATURE SURVEY

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4.1 EQUITY RESEARCH

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The investor should bear in mind that while he makes investment decision, he

should have idea of the companys break-even point and companys position in the stock

exchange. For this EQUITY RESEARCH is done. Equity Research does the research of

companys income and growth. In the process, it uses the various sources of financial

information available in the country and accordingly advises in which company an investor

should invest. Equity research consists of mainly:

A. FUNDAMENTAL ANALYSIS,

B. TECHNICAL NALYSIS.

4.2 FUNDAMENTAL ANALYSIS

The investor, while buying stock, has the primary purpose of gain. If he invests for ashort period of time, it is speculative but when he holds if for a fairly long period of time,

the anticipation is that he would receive some return on his investment. The fundamental

analysis is a method of finding out the future price of a stock, which an investor wishes to

buy. The method for forecasting the future behavior of investment and the rate of return on

them is clearly through an analysis of the broad economic forces, industry analysis, the

company analysis and ratio analysis.

OBJECTIVE & BELIEF OF FUNDAMENTAL ANALYSIS

Fundamental analysis is an approach to determine the what ought to be price. It has

objective to identify the underpriced and overpriced securities in the market place so that

the investment decision buying, selling and holding can be made.

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a. Calculation of intrinsic value

Intrinsic value = Expected EPS * P/E ratio

Where,

Expected EPS = EPS (current year)* (1 + growth rate)

Growth rate = average compounded rate last 5 years

P/E ratio = current Year P/E ratio.

b. INVESTMENT DECISION MATRIX:

PRICED DecisionCurrent market priceIntrinsic Value Overpriced Sell

C-I-E FRAMEWORK FOR FUNDAMENTAL ANALYSIS

A basis assumption of fundamental analysis is that market price and intrinsic value

can differ from time to time, but eventually investors will recognize the discrepancy and an

act to bring values together. Professional, do follow both the approaches for investment and

disinvestment decision making.

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1. ECONOMIC ANALYSIS

A study of economic trends as indicated by the rate of growth in gross

national product, employment, aggregate corporate profits, personal disposable income,

balance of payment position, inflation, government spending, money supply etc. A study ofeconomic policies of government including plan priorities, monetary policies, EXIM policy,

fiscal policy, industrial policy, regulation and control of prices, wages and production. An

analysis of the relationship between economic trends and economic policies and the stability

of such relationships. A study of world economic trends and their impact on Indian

economy.

2. INDUSTRY ANALYSIS

The objective of this analysis is to assess the prospect of various industrial

groupings. It is almost impossible to judge which industry will appreciate the most yet

careful analysis can suggest which industries have brighter future than the others. This

concerned with the basics of industry analysis this section is divided into four parts:

a. Sensitivity to the business cycle

b. Industry life cycle analysis

c. Study of structure and characteristics of an industry

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d. Profit potential of Industry.

3. COMPANY ANALYSIS

Company analysis is last leg in the C-I-E analysis sequence. It may be organized

into two parts (a) A study of financials and (b) Study of other qualitative factors. The

company analysis should take in to account the following factors as influence the

performance of the company, whose share prices are to be analyzed.

Product Line

It is also necessary to know the industries with a high growth potential likecomputers, electronics, chemicals, diamonds, textiles etc. and whether the industry is in the

priority sector of the key industry group of capital goods or consumers goods group.

Raw Material and Inputs

Under these head, we have to look in to industries depending on imports of scare

raw materials, competition from other companies and industries and the barriers to entry of

new company, protection from foreign competition, import and export restriction etc.

Capacity Installed and Utilized

The demand for industrial product in the economy is estimated by the planning

commission and the Government, and the units are given licensed capacity on the basis of

these estimates.

Industry Characteristics

It included whether the industry is cyclical, fluctuating of stable. It is also important

industry produce seasonal product or FMCG. It also included demand of product freight

charges, cost of production, advertisement cost

Demand and Market

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It includes demand of the product in the market and price of raw material and other

input cost like freight, electricity, season, monsoon, etc. if the nature of product is such as

drugs, fertilizer or other consumer goods, whose price and distribution control by

Government.

Government Policy with regard to Industry

Government Policy is announced in the industrial policy resolution and Subsequent

announcement from time to time by the Government. The Policy strategy as laid down in

the five years plans according to planning commission and expected demand in the

economy.

Management

If the promoters and the management are the efficient and capable of steering the

company through the difficult days such management likes TATA & BIRLA, who have

reputation, buildup their companies on the strong foundation. The management has to be

assessed in the terms of their capabilities, popularity, honesty and integrity.

Influence of the economy on the company

In addition to the above factors below given are the micro level factors which

influence the companys operations externally.

01. Economic Growth of country

02. Population

03. Monsoons and Agriculture Production

04. Natural resources and availability of raw material

05. Industrial Productions

06. Inflation

07. Interest rate

08. Foreign exchange reserve

09. Balance of payment position

10. Budget deficits

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11. Public debt and foreign debt

12. Domestic saving and capital output rate

13. Employments

14. Taxation policies

15. Infrastructure facilities

16. Government policies

17. Political Stability

18. International developments

19. Capital formations

20. Economic indicators

21. Foreign direct investments

22. Rupee-Dollar Fluctuation

23. Stock New.

4.3 TECHNICAL ANALYSIS

THE VISUAL CLUE

The technical approach to investing is essentially a reflection of the idea that

prices move in trends which are determined by the changing attitudes of investors towards

a variety of economic, political, monetary and psychological forces.

-Martin J. Pring.

Technical analysis takes a completely different approach; it doesnt care one bit

about the value of a company or a commodity. Technicians (some time called chartists)

are only interested in the price movement and volumes in the market.

Despite all the fancy and exotic tools it employs, technical analysis really just

studies supply and demand in a market in an attempt to determine what direction, or

trend, will continue in the future. In other words, technical analysis attempts to understand

the emotions in the market by studying the market itself, as opposed to its components. If

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you understand the benefits and limitation of technical analysis it can give you a new set of

tools or skills than will enable you to better trader or investor.

DEFINITION

Technical analysis is a method of evaluating the securities by analyzing the statistics

generated by the market activity, such as past price and volume. In technical analysis,

analysts use charts and other tools to identify patterns that can suggest future activity. Just

as there are many investment styles on fundamental side, there is also much different type

of technical traders. Some rely on chart patterns. In any case, technical analysts exclusiveuse of historical price and volume data is what separates them from their fundamental

counterparts. Unlike fundamental analysis technical analysts dont care whether a stock is

undervalued the only thing that matter is a securitys past trading data.

Technical analysis is based almost entirely on the analysis of price and volume. The

fields which define a security's price and volume are explained below.

Open - This is the price of the first trade for period (e.g., the first trade of the day).

When analyzing daily data, the Open is especially important as it is the consensus price

after all interested parties were able to "sleep on it."

High - This is the highest price that the security traded during the period. It is the point at

which there were more sellers than buyers (i.e., there are always sellers willing to sell at

higher prices, but the High represents the highest price buyers were willing to pay).

Low - This is the lowest price that the security traded during the period. It is the point at

which there were more buyers than sellers (i.e., there are always buyers willing to buy at

lower prices, but the Low represents the lowest price sellers were willing to accept).

Close - This is the last price that the security traded during the period. Due to its

availability, the Close is the most often used price for analysis. The relationship between the

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Open (the first price) and the Close (the last price) are considered significant by most

technicians.

Volume - This is the number of shares (or contracts) that were traded during the period.

The relationship between prices and volume (e.g., increasing prices accompanied with

increasing volume) is important.

Open Interest - This is the total number of outstanding contracts (i.e., those that have not

been exercised, closed, or expired) of a future or option. Open interest is often used as an

indicator.

Bid - This is the price a market maker is willing to pay for a security (i.e., the price you will

receive if you sell).

Ask- This is the price a market maker is willing to accept (i.e., the price you will pay to buy

the security).

These simple fields are used to create literally hundreds of technical tools that study pricerelationships, trends, patterns, etc.

ASSUMPTIONS

1. The Market Discounts Everything

A major criticism of technical analysis is that it only considers price movement,ignoring the fundamental factors of the company. However, technical analysis assumes that,

at any given a time, a stocks price reflects everything that has or could affect the company

including Fundamental Factors. Technical analysts believe that the companys

fundamentals, along with broader economic factors and market psychology, are all priced

into the stock, removing the need to actually consider these factors separately. This only

leaves the analysis of price movement, which technical theory views as a product of supply

and demand for a particular stock in the market.

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2. Price Moves In Trends

In technical analysis, price movements are believed to follow trends. This means

that after a trend has been established, the future price movement is more likely to be in the

same direction as the trend that to be against it. Most technical trading strategies are based

on this assumption.

3. History Tends To Repeat Itself

Another important idea in technical analysis is that history tends to repeat itself,

mainly in terms of price movement. The repetitive nature of price movement is attributed to

market psychology; in other words, market participants tend to provide a consistent reaction

to similar market stimuli over time. Technical analysis uses chats patterns to analyze market

movements and understand trends. Although many of these charts have been use for more

than 100 years they are still believed to be relevant because they illustrate patterns in price

movements that often repeat themselves.

Types of charts

In technical analysis there are three basic types of charts, given as follows

a. Line charts

A style of charts that is created by connecting a series of data points together with a

line. This is the most basic type of charts used in finance and connecting a series of past

prices together with a line generally creates it.

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b. Bar chart

A style of chart used by some technical analysts, on whom as illustrated below, the

top of the vertical line indicates the highest price a security traded at during the day, and the

bottom represents the lowest price. The closing price is displayed on the right side of the

bar, and the opening price is shown on the left side of the bar. A single bar like the one

below represents one day of trading.

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These are the most popular type of chart used in technical analysis. The visual representation of

price activity over a given period of time is used to spot trends and patterns.

c. Candlestick

A price chart that displays the high, low, open and close for a security each day over a

specified period of time.

There are many trading strategies based upon patterns in candlestick charting.

Trend Analysis

The use of trend one of the most important concepts in technical analysis is that of

trend. The meaning in finance isnt all that different from the general definition of the term-

a trend is really nothing more than the general direction in which a security or market is

headed.

The Importance of Trend

It is important to be able to understand and identify trends so that you can trade with

them rather than trade against them. Two important sayings in technical analysis are the

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trend is your friend and dont buck the trend Illustrating how important trend analysis is

for technical trade.

Types of Trend

1. Up Trends:-As the names imply, when each successive peakand trough is higher, its

referred to as an upward trend.

2. Downtrends:- If the peaks and troughs are getting lower. Its a downtrend.

3. Sideways/ Horizontal Trends: - When there is little movement up or down in the peaks

and troughs, its a sideways or horizontal trend.

If you want to get really technical, you might even say that a sideways trend is

actually not a trend on its own, but a lack of a well-defined trend in either direction. In any

case, the market can really only trend in these three ways: up, down or nowhere.

Trend Lengths:

Along with this trend direction, there is three-trend classification. A trend of any

direction can be classified as a long-term trend, intermediate trend or a short-term. In termsof the stock market, a major trend is generally categorized as one lasting longer than a year.

An intermediate trend is considered to last between one and three months and a near-term

trend is anything less than a month. A long-term trend is composed of several intermediate

trends, which obtain move against the direction of the major trend. If the major trend is

upward and there is a downward correction in price movement followed by a continuation

of the uptrend, the correction is considered to be an intermediate trend. The short term

trends are components both major and intermediate trends.

TECHNICAL INDICATOR

1. Exponential Moving Average (EMA)

A type of moving average that is similar to a simple moving average, except that

more weight is given to the latest data. The exponential moving average is also known as

"exponentially weighted moving average". his type of moving average reacts faster to recent

price changes than a simple moving average. The 12- and 26-day EMAs are the most

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popular short-term averages, and they are used to create indicators like the moving average

convergence divergence (MACD) and the percentage price oscillator (PPO). In general, the

50- and 200-day EMAs are used as signals of long-term trends.

CHART-2

2. Average Directional Index (ADX)

J. Welles Wilder developed the Average Directional Index (ADX) to evaluate the

strength of a current trend, be it up or down. It's important to determine whether the market

is trending or trading (moving sideways), because certain indicators give more useful results

depending on the market doing one or the other.

The ADX is an oscillator that fluctuates between 0 and 100. Even though the scale is from 0

to 100, readings above 60 are relatively rare. Low readings, below 20, indicate a weak trend

and high readings, above 40, indicate a strong trend. The indicator does not grade the trend

as bullish or bearish, but merely assesses the strength of the current trend. A reading above

40 can indicate a strong downtrend as well as a strong uptrend.

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ADX can also be used to identify potential changes in a market from trending to no

trending. When ADX begins to strengthen from below 20 and moves above 20, it is a sign

that the trading range is ending and a trend is developing .

CHART-3

3. MACD

The most popular formula for the "standard" MACD is the difference between a

security's 26-day and 12-day Exponential Moving Averages (EMAs). Using shorter moving

averages will produce a quicker, more responsive indicator, while using longer moving

averages will produce a slower indicator, less prone to whipsaws. For our purposes in this

article, the traditional 12/26 MACD will be used. Of the two moving averages that make up

MACD, the 12-day EMA is the faster and the 26-day EMA is the slower. Closing prices are

used to form the moving averages. Usually, a 9-day EMA of MACD is plotted alongside to

act as a trigger line. A bullish crossover occurs when MACD moves above its 9-day EMA,

and a bearish crossover occurs when MACD moves below its 9-day EMA. The Merrill

Lynch (MER) chart below shows the 12-day EMA (thin blue line) with the 26-day EMA

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(thin red line) overlaid the price plot. MACD appears in the box below as the thick black

line and its 9-day EMA is the thin blue line. The histogram represents the difference

between MACD and its 9-day EMA. The histogram is positive when MACD is above its 9-

day EMA and negative when MACD is below its 9-day EMA.

CHART-4

Interpretation

MACD measures the difference between two Exponential Moving Averages

(EMAs). A positive MACD indicates that the 12-day EMA is trading above the 26-day

EMA. A negative MACD indicates that the 12-day EMA is trading below the 26-day EMA.

If MACD is positive and rising, then the gap between the 12-day EMA and the 26-day

EMA is widening. This indicates that the rate-of-change of the faster moving average is

higher than the rate-of-change for the slower moving average. Positive momentum is

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increasing, indicating a bullish period for the price plot. If MACD is negative and declining

further, then the negative gap between the faster moving average (blue) and the slower

moving average (red) is expanding. Downward momentum is accelerating, indicating a

bearish period of trading. MACD centerline crossovers occur when the faster moving

average crosses the slower moving average.

1. RELATIVE STRENGTH INDEX

The Relative Strength Index (RSI) is a popular oscillator. It was first introduced

by Welles Wilder in an article in Commodities (now known as Futures) Magazine in June,

1978. Step-by-step instructions on calculating and interpreting the RSI are also provided in

Mr. Wilders book, New Concepts in Technical Trading Systems.

The name Relative Strength Index is slightly misleading as the RSI does not compare the

relative strength of two securities, but rather the internal strength of a single security. A

more appropriate name might be Internal Strength Index.

Relative strength charts that compare two market indices, which are often referred to as

Comparative Relative Strength.

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CHART-5

Interpretation

When Wilder introduced the RSI, he recommended using a 14-day RSI. Since then,

the 9-day and 25-day RSIs have also gained popularity. Because you can vary the number

of time periods in the RSI calculation, the fewer days used to calculate the RSI, the more

volatile the indicator.

The RSI is a price-following oscillator that ranges between 0 and 100. A popular

method of analyzing the RSI is to look for a divergence in which the security is making a

new high, but the RSI is failing to surpass its previous high. This divergence is an indication

of an impending reversal. When the RSI then turns down and falls below its most recent

trough, it is said to have completed a "failure swing." The failure swing is considered a

confirmation of the impending reversal.

Tops and Bottoms

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The RSI usually tops above 70 and bottoms below 30. It usually forms these tops and

bottoms before the underlying price chart.

5. VOLUME

Volume is simply the number of shares (or contracts) traded during a specified time

frame (e.g., hour, day, week, month, etc). The analysis of volume is a basic yet very

important element of technical analysis. Volume provides clues as to the intensity of a given

price move.

CHART-6

Interpretation

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1. Low volume levels are characteristic of the indecisive expectations that typically occur

during consolidation periods (i.e., periods where prices move sideways in a trading range).

Low volume also often occurs during the indecisive period during market bottoms.

2. High volume levels are characteristic of market tops when there is a strong consensus that

prices will move higher. High volume levels are also very common at the beginning of new

trends (i.e., when prices break out of a trading range). Just before market bottoms, volume

will often increase due to panic-driven selling.

3. Volume can help determine the health of an existing trend. A healthy up-trend should

have higher volume on the upward legs of the trend, and lower volume on the downward

(corrective) legs. A healthy downtrend usually has higher volume on the downward legs of

the trend and lower volume on the upward (corrective) legs.

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CHAPTER 5

OBJECTIVE AND SCOPE OF PROJECT

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5.1 OBJECTIVE

It was good opportunity to familiarize myself with the stock market i.e. the capital

market & their co-relation with economical environment through EQUITY

RESEARCH. The analysis of equity gives me the opportunity to understand thoroughly

this behavioral pattern of different equity & overall capital market.

The main objective of the project research is as follows.

1. To Study the equity research and obtain the knowledge of equity market by

A. Fundamental analysis,B. Technical analysis.

2. To Study the present behavior & to estimate the future behavior of equity in stock

market.

3. To review the procedure used by brokers to understand and analyze the factors that affect

the movement of stock prices in Indian Stock Markets.

5. To study the investment scenario of five companies selected for project purpose. Namely

a. RELIANCE INDUSTRIES LIMITED.

b. INFOSYS TECHNOLOGIES.

c. BANK OF INDIA.

d. DLF.

e. SUZLON.6. To make recommendations if any, to improve the investment portfolio of the investors.

5.2 SCOPE OF THE STUDY

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The study is divided in two parts:

a. Basics of Stock Market:

This part of the project deals with study of the stock market. All the basic concepts

and terminologies of the stock are discussed in the first part of the project. Also the

procedure used in Kantilal Chhaganlal Securities Pvt. Ltd. For guiding the investors is

carefully examined by researcher.

b. Data analysis and interpretation:

As per the need recognized by the firm of High Net worth Individuals (HNIs) to

study the investment scenario in various stocks, the researcher has done equity research of

five stocks selected by firm.

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CHAPTER 6

RESEARCH METHODOLOGY

6.1 RESEARCH METHODLOGY

Research is a careful investigation or inquiry especially through search for new facts

in any branch of knowledge. It is defined as a systematic effort to gain new knowledge.

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Research Methodology is defined as a highly intellectual human activity used in

the investigation of nature and matter and deals specifically with the manner in which the

data is collected, analyzed and interpreted. [C.R.Kothari, Research Methodology, Second

Edition, New Age International Publishers].

The research performed is analytical in nature. In analytical research, the researcher

has to use facts or information already available, and analyze these to make a critical

evaluation of the material.

During my project, I collected data through various sources primary & secondary.

Primary source includes:-

1) Discussion with branch manager,

2) Discussion with experts,

3) Live trading in the market,

Secondary source includes:-

1) Various books related to stock market,

2) Books related to Portfolio Management,

3) Web sites were used as the vital information source.

Kantilal Chhaganlal Securities Pvt. Ltd. felt need of evaluating the price patterns of five

randomly selected leading scripts as per Retail investors (HNI client) requirements and also

interested in determining the trends along with price performance in near future. This equity

analysis will facilitate to investor for profitable investment. The companies selected are:

1. RELIANCE INDUSTRIES

2. DLF

3. BANK OF INDIA

4. INFOSYS TECHNOLOGIES

5. SUZLON

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6.

DATA SOURCES

a. The data essential for analysis is collected from www.nseindia.com and

www.bseindia.com.

b. Calculate the intrinsic value of share with help of last five years

financial statements of companies

c. The period taken for carrying out Technical analysis is taken from 1st

Feb 2010 to 31st July2010.

d. The idea is to apply five Technical analysis tools selected for carrying out

technical analysis of these five Companies to define bullish or bearish trend.

e. These five Technical analysis tools selected are,

1. Exponential Moving Average (EMA),

2. Average directional Index (ADX),

3. Moving Average Convergence and Divergence (MACD),

4. Relative Strength Index (RSI),

5. VOLUME.

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CHAPTER 7

DATA ANLYSIS AND INTERPRETATION

FUNDAMENTAL & TECHNICAL ANALYSIS OF COMPANIES

1. RELINCE INDUSTRIES LTD.

FUNDAMENTAL ANALYSIS

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One of the favorite stocks of investors. Even a new entrant in stock market for

investment would look towards RIL as investment option. Many times investors would buy

this stock without looking into fundamentals of the company. Thus a deep view into

fundamentals of the stock is very important. Some of the basic parameters of fundamental

analysis are considered here.

INCOME STATEMENT

YEAR Mar10 Mar09 Mar08 Mar07 Mar06

Revenue 1,92,461.00 1,41,847.00 1,33,443.00 1,11,693.00 81,211.00

Other Income 2,460.00 2,060.00 895.00 478.00 683.00Total Income 1,94,921.00 1,43,907.00 1,34,338.00 1,12,171.00 81,894.00

Expenditure -1,61,880.00 -1,18,534.00 -1,05,404.00 -91,647.00 -66,912.00

Interest -1,997.00 -1,745.00 -1,077.00 -1,189.00 -877.00

PBDT 31,044.00 23,628.00 27,857.00 19,335.00 14,105.00

Depreciation -10,497.00 -5,195.00 -4,847.00 -4,815.00 -3,401.00

PBT 20,547.00 18,433.00 23,010.00 14,520.00 10,704.00

Tax -4,311.00 -3,124.00 -3,552.00 -2,577.00 -1,635.00

Net Profit 16,236.00 15,637.00 19,458.00 11,943.00 9,069.00

TABLE-1

CALCULATION OF INTRINSIC VALUE

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Reliance 2010 2009 2008 2007 2006

EPS 49.7 133.86 85.71 65.08 54.34

DPS 07 13 11 10 7.5

D/P ratio 14.88 9.71 12.83 15.37 13.80

Retention ratio (b) 85.03 90.29 87.17 84.63 86.20

ROE ( r ) 20.14 24.66 19.49 20.08 20.09

Growth (g) 0.17 0.22 0.17 0.17 0.17

% g = b*r 17.13 22.27 16.99 16.99 17.32

Sum = 90.7

Avg. growth rate = 18.14

P/E ratio in 2009 = 20.3

Intrinsic value = 1191.92

Current market price = Rs.1009.2

CMP < Intrinsic value, i.e. stock is undervalued then investor hold/buy this stock.

INDUSTRY ANALYSIS

1. Various Production Segments

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Refinery production: Refinery production in context of crude oil escalated

from 156.11 MT in FY 2007-08 to 160.67 MT in FY 2008-09. Indian Oil

Corporation Ltd is looking forward to elevate the capacity of its Haldia refinery and

Panipat refinery plants to 7.5 million tones and 15 million tones respectively in

2010.

Natural Gas Production: The natural gas production in 2008-09 increased

from the previous year's 32.40 billion cubic meters tones (BCM) to 32.84 BCM. In

2009 alone the Natural gas production was registered at 33,846 million cubic metres.

Crude Oil Production: The projected production of crude oil during the 11th

Five-Year Plan (2007-2012) is 206.76 MMT, while that of natural gas is 255.27

BCM. Cumulative production of crude oil between April-December 2009 was 25,152

MT, while cumulative production of refinery production during the same period was

119,283 MT.

1. India as an international refining destination

India is steadily emerging as an international destination for oil refining with

investment requirements lesser by 25% - 50% as compared to its Asian counterparts.

As per the analysis carried out by Deutsche Bank, India is expected to enhance its

refining competence by 45% in the next 5 years. Being the fifth biggest worldwide

nation in context of distillation capacity, India enjoys 3% of the international

capacity share. To move ahead in making its presence felt strongly in the global

market, Indian petroleum firms are planning to raise their distillation capacity from

the existing 149 mtpa to 243 mtpa by FY 2011-12.

2. Investments in India Petroleum Industry

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In 2010 the state-owned oil firms are expected to splurge US$ 11.34 billion

on developing supplies and constructing new shipping networks for petroleum and

natural gas.

Indian Oil Corporation is looking forward to establish a petroleum plant in

the state of West Bengal by bringing in investments worth US$ 596.63 million

ONGC will bring in US$ 694 million for raising services at its oil fields in

Assam and adjoining states to enhance the petroleum output. In addition it will also

splurge US$ 5.65 billion on capital expenses in the next two years.

GAIL (India) Limited and OVL, the international associate of leading oil and

gas player ONGC, are expected to bring in investments worth US$ 250 million.

1. Future of India Petroleum Industry

As per the latest CII-KPMG analysis, the energy industry of India will help

tin the expansion of the petroleum sector by bringing in investments worth US$ 120

billion-US$ 150 billion in the next 3-5 years. By 2012, the prospects in India

Petroleum Industry are estimated to accomplish US$ 35 billion to US$ 40.

Company analysis

1. Earnings per share show increasing trend from last four Quarters, it means profit

generation capacity is increasing.

2. Company has announced good result for last quarter, the reason behind good performance

in stock market over a long run.

3. Reliance has entered in Retail market they have already started RELIANCE FRESH out

lets.

4. Within a short span of six years as an E&P operator, the company has discovered a

hydrocarbons in the four offshore basin of India namely Krishna, Godavari, Mahanadi,

sourashtra and now Cauvery, basin with major commercial finds in deep water. This

discovery establishes the company as a pioneer in the challenging deep-water exploration.

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5. 2008

- Reliance Industries makes Another Gas Discovery in Shallow Water Block in the

Krishna Basin.

- RIL wins a Deep Water block in NELP VII

- Reliance Industries Strikes Eighth Gas Discovery in Block NEC - 25

in the Mahanadi Basin

6. 2009

- Reliance Industries has discovered natural gas reserves in a well drilled on its NEC-25

block in Mahanadi basin, off the Orissa coast.

- Reliance Industries has raised around Rs 3,188 crore through sale of 1.50 crore equity

shares of the company.

7. 2010

- Haryana Special Economic Zone (SEZ), Reliance Industries (RIL) has roped in a partner,

in a bid to re-energize its dormant.

- RIL has bought around 3 million barrels of spot crude from Brazilian company Petrobras.

The delivery is expected in the next two months.

TECHNICAL ANALYSIS

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TABLE-7

Technically Speaking

1. The stock is seen in short term downtrend; the short term EMA (20) is slightly

below EMA (50) which is further indication of bearishness of stock.

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2. The RSI line which indicates relative strength of stock is above value line 30 i.e.

32.53, which further indicates bearish signal in stock over the next three months.

3. MACD which is Reflection of downtrend of stock supporting the bearishness of

the stock the advice of technical analyst would be wait and watch policy.

2. DELHI LEASE AND FINANCE (DLF)


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Dealing in very interest sensitive sector of realty DLF has made very strong hold

position over the years in capital market. But recent recession in world has made this stock

very unattractive in investors mind. So it has become very need of investors interest that to

analyze future prospect of DLF in Indian stock market.

INCOME STATEMENT

YEAR Mar10 Mar09 Mar08

Revenue 2,419.21 2,827.90 5,532.84

Other Income 801.22 1,011.39 525.62

Total Income 3,220.43 3,839.29 6,058.46Expenditure -1,304.05 -1,106.77 -2,467.21

Interest -847.24 -809.86 -447.65

PBDT 1,069.14 1,922.66 3,143.61

Depreciation -126.05 -113.88 -25.69

PBT 943.09 1,808.78 3,117.92

Tax -171.65 -261.01 -543.52

Net Profit 765.06 1,547.77 2,574.59

TABLE-2

CALCULATION OF INTRISIC VALUE

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DLF 2010 2009 2008

EPS 4.51 9.08 15.1

DPS 2 2 4

D/P ratio 8.25 22.03 26.49

Retention ratio( b) 91.75 77.97 73.51

ROE ( r) 13.16 12.5 22.84

Growth (g) 0.11 0.10 0.17

% g = br 12.07 9.75 16.79

Sum = 38.61


P/E ratio in 2009 = 66.8


Current market price = Rs.301.3CMP < Intrinsic value, i.e. stock is undervalued then investor buy this stock.

Industry analysis

Realty stocks have rallied sharply by over 200 per cent since March, 2009. The

sectors earnings growth momentum has firmed up due to decline in interest rates and

strengthening of the rupee. The sectors forward earnings are expected to grow around 20 %

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in 2011 with DLF, Anant Raj industries, Sobha Developers and India bulls Real Estate

likely to post strong results.

Company Analysis

1. In 2008-DLF inked a memorandum of understanding with the infrastructure company

Gayatri Projects Ltd (GPL) to develop roads, highways and bridges across the country.

2. Company is dealing in real estate sector because of the recession in country this sector

face huge problem but in 2009 impact of recession will come down and so this sector havegood sing for long term prospective DLF is one of the leading company in real estate so

thus the company have good future

3. Percentage wise the net profit of the company is very favorable. The growth in return on

equity is also showing that the company is earning sufficiently for the shareholders.

4. Holders for long term are benefited from the capital appreciation.

5. The P/E ratio showing a down trend may be because of the price not increasing to the

proportion of the profit.

TECHNICAL ANALYSIS

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CHART-8


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1. The stock in short term down trend. The short term EMA (20) is above EMA (50)

which is further indication of bullishness of stock.

2. The Signal line of MACD indictor has made significant crossover over EMA (9) and

divergence is at-2., which indicates further bullishness.

3. The RSI line which indicate relative strength of stock in market is near 50 i.e. 47.44,

which further indicates strong uptrend in stock over next three months.

3. BANK OF INDIA (BOI)

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Countries fifth largest public sector bank, though not very popular in investors but

still shown long term interest by some of the corporate as well as retail investors. Looking

towards BOI as investment option it has strong fundamental base due to government

support. It is very interesting to analyze bank future stock market scenario and also to take

the deep looking onto banking sector of India which is showing constant growth over the

past decade.

INCOME STATEMENT

TABLE-3


59

YEAR 2009 10 2008 - 09 2007 - 08 2006 - 07 2005 - 06

Income Statement

Revenue 17,877.99 16,347.36 12,355.2 9,180.33 7,028.70

Other Income 2,616.63 3,051.86 2,116.93 1,562.95 1,184.38

Total Income 20,494.62 19,399.22 14,472.1 10,743.28 8,213.08

Expenditure -3,667.82 -3,093.97 -2,644.9 3,131.43 2,281.58

Interest -12,122.04 -10,848.45 -8,125.9 -5,739.86 -4,396.72

PBT 4,704.76 5,456.80 3,701.21 3,257.12 2,486.78

Tax -752.76 -1,157.08 -675.31 -409.69 -214.22

Net Profit 1,741.07 3,007.35 2,009.40 1,123.17 701.44


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CMP < Intrinsic value, i.e. stock is undervalued then investor hold/buy this stock.

Industry Analysis

Bank stocks have rallied a robust 120 per cent since their March 2009 lows. This

performance has brought the sectors valuing close to the higher end of trading brand. The

current valuations do not provide protection against probable negative surprises such as a

sharp rise in inflation, sudden increase in interest rates and slower growth in loan demand.

The Reserve Bank of India may increases provision and capital adequacy norms for banks

60

YEAR 2010 2009 2008 2007 2006

EPS 33.15 58.79 38.26 23.04 14.39

DPS 7 5 4 3.5 3.4

D/P ratio 24.62 8.50 10.45 15.19 23.63


ROE ( r) 30.2 25.51 22.76 19.54 14.53

Growth (g) 0.27 0.23 0.20 0.17 0.11

% g = br 22.76 23.34 20.38 16.57 11.10

Sum = 94.15


P/E ratio in 2009 = 12.38



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when better economic conditions take effect, which, in turn may impact the long term

sustainable return from equities of banks.

Company analysis

1. Percentage wise the net profit of the bank is very favorable. The growth in return on

equity is also showing that the bank is earning sufficiently for the shareholders.

2. The growing profits are leading towards the growth of the EPS.

3. The price trend also shows that the share is not much volatile and also shows an upward

trend.

4. Holders for long term are benefited from the capital appreciation.

5. The P/E ratio showing a down trend may be because of the price not increasing to the

proportion of the profit.

6. A lower P/E ratio is considered one of the most important criteria for investment purpose.

7. The growing book value indicates that the bank has huge reserves and can be a potential

for bonus.

1. BOI has shown strong surge in the profit margin in last two quarters ending Jun-2010.

TECHNICAL ANALYSIS

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CHART-9


1. The stock is seen in uptrend. The short term EMA (20) is above EMA (50) which is

further indication of bullishness of stock.

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2. The Signal line of MACD indictor has made significant crossover over EMA (9)

and divergence is at .5, which indicates further bullishness.

3. The RSI line which indicate overall trend in market is above 70 i.e. 70.99, which

further indicates strong uptrend in stock over next three months.

4. INFOSYS TECHNOLOGIES LTD.


Infosys One of the Trusted in Indian as well as International stock market. It has

given a new dimension to Indian stock market since the upward rally of stock market is

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supported by Indian Information technology sector. It is very important to understand the

fundamentals and technicals behind success story of Infosys stock performance.

INCOME STATEMENT

YEAR 2009 - 10 2008 - 09 2007 - 08 2006 - 07 2005 - 06

Revenue 21,140.00 20,264.00 15,648.00 13,149.00 9,028.00

Other Income 910.00 502.00 683.00 375.00 144.00

Total Income 22,050.00 20,766.00 16,331.00 13,524.00 9,172.00

Expenditure -13,771.00 -13,358.00 -10,685.00 -8,924.00 -6,039.00

Interest -- -- -- -- --

PBDT 8,279.00 7,408.00 5,646.00 4,602.00 3,133.00Depreciation -807.00 -694.00 -546.00 -469.00 -409.00

PBT 7,472.00 6,714.00 5,100.00 4,133.00 2,724.00

Tax -1,717.00 -895.00 -630.00 -352.00 -303.00

Net Profit 5,803.00 5,819.00 4,470.00 3,783.00 2,421.00

TABLE-4


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Year 2010 2009 2008 2007 2006

EPS 101.22 101.58 78.15 66.23 87.86

DPS 15 23.5 33.25 11.5 45

D/P ratio 24.71 23.13 42.55 17.36 51.21


ROE (r) 31.56 32.67 33.13 33.89 35.10

Growth (g) 0.24 0.25 0.19 0.28 0.17

% g = b*r 23.76 25.11 19.03 28.01 17.12

Sum =113.03

Avg. growth rate=22.61

P/E ratio in 2010=27.54

Intrinsic value =3449.93


CMP < Intrinsic value, i.e. stock is undervalued then investor buy this stock.

Industry analysis

Indian IT sector stocks have given an impressive 148 per cent returns since March

2009. The sectors P/E ratio has doubled to 20, though the net profit for the financial year

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2009-10 is expected to be flat. Though the earnings outlook is showing clear signs of

bottoming out, it remains far from poised to rebound strongly over the next few quarters.

The IT sectors strong market relative outperformance record over the past two quarters has

resulted in valuations hovering around the high end of recent multi-year levels.

Company analysis

1. Rupee Dollar Fluctuation- As most of software companies in India having their clients

in the abroad, mostly in USA. Therefore their earning is getting from of dollar. If the dollar

price increase its affect their revenue badly and recently dollar price has goes up from Rs.42.95

to Rs.48.87 it will affect forth-coming results, and currently fundamentally, it is looking strong.

2. In India, salary of software professional will be decreasing, and it will marginally affect

profit of companies and because of that, EPS will be increase.

3. Gross Profit Ratio of the Company is stable from last five years. It is a good sign of

consistency and smooth working of the company.

4. The Net Profit Ratio is constant for last four years. It means company has good Future.

TECHNICAL ANALYSIS

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CHART-10

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1. The stock is seen in long term uptrend. The short term EMA (20) is above EMA

(50) which is further indication of bullishness of stock.

2. The Signal line of MACD indictor has made crossover over EMA (9) , which

indicates further bullishness.

3. The RSI line which indicate overall trend in market is above 50 i.e. 50.74, which

further indicates strong bullishness in stock over next three months.

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5. SUZLON ENERGY LTD.


Dealing in the industry which will definitely flourish in coming years,

Suzlon unable to recover from recessional obstacles. Due to massive increase

in operational expenses, profit margins have been considerably decreasing.

Though stock has performed very good since it has listed in stock market, due

to recent down trend in price the importance of studying future trend in stock

value is vital from investors point of view.

INCOME STATEMENT

(in Cr.) 2009 10 2008 - 09 2007 - 08 2006 - 07 2005 - 06

Revenue 3,508.93 7,251.94 6,926.01 5,380.37 3,788.46

Other Income 222.89 160.78 125.61 88.10 69.28

Total Income 3,731.82 7,412.72 7,051.62 5,468.47 3,857.74

Expenditure -4,190.65 -7,473.40 -5,333.11 -4,186.07 -2,866.69

Interest -653.59 -380.12 -125.34 -89.33 -42.52

PBDT -1,112.42 -440.80 1,593.17 1,193.07 948.53

Depreciation -126.27 -99.16 -86.21 -73.49 -45.87

PBT -1,238.69 -539.96 1,506.96 1,119.58 902.66

Tax -175.40 70.69 -90.08 -58.44 -81.47Net Profit -1,414.09 -469.27 1,265.71 1,061.14 821.19

TABLE-5

CALCILATION OF INTRINSIC VALUE

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YEAR 2010 2009 2008 2007 2006

EPS 1.18 1.58 9.47 36.82 28.51

DPS 0 0 1 5 5

D/P ratio 0 63.29 10.56 13.58 17.54

Retention ratio(b) 0 36.71 89.44 86.42 82.46

ROE ( r) 0 25.51 22.76 19.54 14.53

Growth (g) 0 0.09 0.20 0.17 0.12

% g = b*r 0 9.36 20.36 16.89 11.98

Sum = 58.59


P/E ratio in 2010 = 25.8


Current market price =56.4

CMP >Intrinsic value, i.e. stock is overvalued then investor sell this stock.

Industry analysis

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1. The IEA predicts that by 2020, 327 GW of power generation capacity will be needed,

which would imply the addition of 16 GW per year. This urgent need is reflected in the

target the Indian government has set in its 11th Five Year Plan (2007-2012), which

envisages an addition of 78.7 GW in this period, 50.5 GW of which is coal, and 10.5 GW

new wind energy generation capacity, plus 3.5 GW other renewables.

2. The Indian Ministry of New and Renewable Energy (MNRE) estimates that there is a

potential of around 90 GW for power generation from different renewable energy sources in

the country, including 48.5 GW of wind power, 14.3 GW of small hydro power and 26.4

GW of biomass.

3. It seems likely that the wind power potential is considerably underestimated. The Indian

Wind Turbine Manufacturers Association (IWTMA) estimates that at hub heights of 5565

metres, potential for wind development in India is around 6570 GW.

4. The World Institute for Sustainable Energy, India (WISE) considers that with larger wind

turbines, greater land availability and expanded resource exploration, the potential could be

as great as 100 GW.

5. At the end of 2009, India had 10,926 MW of installed wind farm capacity, and 11,807

MW were reached by the end of the countrys financial year on 31 March 2010. However,

wind power in India is concentrated in a few regions, especially the southern state of Tamil

Nadu, which maintains its position as the state with the largest wind power installation.

6. It had 4.6 GW installed on 31 March 2010, representing close to 40% of Indias total

wind farm capacity. This is beginning to change as other states, including Maharashtra,

Gujarat, Rajasthan, Karnataka, West Bengal, Madhya Pradesh and Andhra Pradesh start to

catch up, partly driven by new policy measures.

7. India ratified the Kyoto Protocol in August 2002, and the possibility to register projects

under the Clean Development Mechanism (CDM) provided a further incentive to wind

energy development.

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Company analysis

1. Earnings per share shows decreasing trend from last four Quarters, it means profit

generation capacity is decreasing.

2. Company has announced good result for last quarter thats why it is looking bullish.

3. The price trend also shows that the share is not much volatile and also shows an upward

trend.

4. A higher P/E ratio is considered one of the most important criteria for investment

purpose.

5. Company has not declared dividend in year 08-09. There is no fixed policy regarding

payment of dividend.

6. But there is one positive news that Suzlon Energy Ltd has informed BSE that

Suzlon Energy Australia Pty Ltd., a step-down wholly owned subsidiary of Suzlon EnergyLtd has entered into an agreement with AGL Energy Ltd for supply of 54 units of Suzlon's

S88-2.1 MW wind turbine generators translating to113.4 MW capacities in Australia in

2009.

TECHNICAL ANALYSIS

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CHART-11


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1. The stock is seen in long term bearish. In medium term, the short term EMA (20) is just

below EMA (50) which is further indication of bearishness of stock.

2. The Signal line of MACD indictor has made crossover over EMA (9) and divergence is at

-0.349, which indicates further bearish signal.

3. The RSI line which indicate overall trend of stock is below 40 i.e. 37.76, which further

indicates bearish signal in stock over the next three months.

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CHAPTER 8

SUGGESTIONS AND CONCLUSIONS

8.1 SUGGESTIONS

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With a very little experience of Equity research and small study of Fundamental

analysis and Technical analysis, I would like to give following suggestions to investors in

stocks of companies studied in my research.

Reliance Industries Limited (RIL) looks fundamentally & technically. As the Intrinsic

value showing stock is undervalued, as a researcher I would suggest investors to buy it for

long term.

Though stock is still very far its all time high it is better to but good stock at Fair price

rather than buying fair stocks as good price.

DLF is looking fundamentally good company is dealing in real estate sector. In 2007 the

IPO of DLF Company was introduced to market to with price band Rs. 500 to 550. And

now it is dealing at around Rs.300 so to buy this stock at this range is good for investment.

Technically this stock is also looking good on the basis of some indicators like MACD,

Moving average etc.

Bank of India is one of the leading banks in Indian stock market. Script interprets that,

increasing pattern over period. Though Bank of India Fundamental analysis interprets thatEPS is increasing EPS is Rs.58.79 per Share. So this script should buy at Rs.410. Technical

indicators

also showing bullishness in trend which is further support for concluding Bank Of India as

good investment option for investor.

Infosys is fundamentally good but companys main income is dependent upon dollar ($)

fluctuations and dollar price will come down because of global recession & Infosys

technical chart says that it may come down so my suggestion is to wait & watch as

strategy for Infosys.

Suzlon is fundamentally good company is dealing in wind power Sector. But due to

addition in operational expenses of company stock price is not reflecting its strong

fundamentals and company has registered losses in last two quarters. Technically this stock

is showing bearish on the basis of some indicators like candlesticks, MACD, Moving

average, RSI etc. Suzlon energy fundamentally is shows that are much fluctuation in EPS.

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Company has decided the dividend but not declared. So this stock should sell and present

investor should move to other scrip.

8.2 CONCLUSION

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With the help of project I concluded that blue chip companies are playing very

important role in the share market. Lot of investors is investing their money in the blue chip

companies. And this is the reason that the volume of blue chip companies is high.

During this period of two months I came to know that in the process of equity

analysis of blue chip companys two weapons are playing a vital role i.e. Fundamental

Analysis and Technical Analysis.

The concept of Fundamental Analysis studies the performance of blue chip companies.

With the help of Fundamental Analysis can know the past performance of the blue chip

companies. Fundamental Analysis considers the long-term performance of companies and

this helps the investors to invest their money for long term as well as can get the good

returns.

Technical Analysis comprises short-term analysis of blue chip companies. Technical

Analysis really just studies supply and demand in the market in an attempt to determine

what direction or trend will continue in the future.

The study of technical as well as fundamental analysis can give detail information

about

the well running companies in the market. Before investing in any company one should

study these two concepts.

Also to increase the volume of equity investment, the stock exchanges

should strive to increase transparency, strictly enforce corporate governance norms, provide

more value-added services to investors, and take steps to increase investor confidence.

These stock exchanges will have to plan strategic tie-ups with their foreign counterparts to

get an international platform. A developed and vibrant secondary market can be an engine

for the revival and growth of the primary market. So, to encourage Indian investment and

face international competition every Indian stock exchange has to stress on innovation and

sustained investment in technology to remain ahead.

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WEBSITES

1. www.nseindia.com.

2. www.bseindia.com.

3. www.sebi.gov.in.

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http://www.nseindia.com/http://www.bseindia.com/http://www.sebi.gov.in/http://www.bseindia.com/http://www.sebi.gov.in/http://www.nseindia.com/


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4. www.icharts.comInvestment.

5. www.moneycontrol.com.

6. www.cmie.com.7. www.kcsecurities.com.

BOOKS

1. Investment analysis and Portfolio management

Author- Prasanna Chandra (Tata McGraw-Hill

publication).2. Research Methodology (Methods & Techniques)

Author- C.R. Kothari (New Age publication).

3. Security Analysis ICFAI publication book.

4. The Warren Buffet Way

Author- Kenneth L. Fisher (Wildey-India Publication).

MAGZINES

1. Capital market (Sep 04-17 2010)

2. Dalal Street (June, July, August Edition).

Capital Market (Tushar)

Documents

Transcript of Capital Market (Tushar)