A

Summer Internship Program

Project Report

On

“Financial Markets: Analysis and Research”

Completed at

Submitted to

IILM-Academy of Higher Learning, Jaipur

in

Partial Fulfilment for award of

Post Graduate Diploma in Management (2015-2017)

Submitted to: Submitted by:

Sunil Sharma Arpit Soni

Placement Manager Roll. No. S01506

IILM-AHL, Jaipur PGDM 2015-17

IILM-AHL, Jaipur

Declaration

I, Arpit Soni S/o Mohan Lal Swarnkar, Roll no. S01506, student of Post Graduate Diploma in

Management (2015-2017) Batch at Integrated Institute of Learning Management- Academy of

Higher Learning, Jaipur, hereby declare that the Summer Internship Project Report entitled

“Financial Markets: Analysis and Research” is an original work and has been submitted to the

College.

A Summer Internship Presentation and Report was Presented and Submitted on 8 Aug. 2016 and the

suggestions as approved by the faculty were duly incorporated.

(Arpit Soni)

Signature of Candidate

Acknowledgement

My internship opportunity I had with Motisons Shares Pvt. Ltd. was a great chance for learning and

professional development. I am obliged to receive this opportunity of working with the

professionals who guided me through this internship period. It‟s been a good experience of learning

outside the classrooms and implementing the knowledge in a corporate environment.

I would like to express my deepest gratitude and special thanks to Mr. Kamal Jain, Marketing

Director, Motisons Shares Pvt. Ltd. who in spite of being busy with his duties, took time out and

allowed me to carry out my internship at their esteemed organisation.

I also express my sincere thanks to Mr. Rohan Sharma, Co-Founder of Motisons Financial

Academy and Company Mentor, who continuously guided me during this internship period and

gave his time for making me learn the corporate environment. I choose this moment to acknowledge

his contribution in sharing his pool of knowledge about Financial Markets with me.

I would also like to acknowledge Mr. Abhishek Kalla, Central Manager and Ms. Prachi Bhola,

Operational Central Manager, Motisons Financial Academy for her careful guidance and support

during my internship which eased my learning.

Last but not the least, I give my sincere thanks to my college Dean sir Dr. Vidhu Mathur, Assistant

Professor Mr. Jitendra Naruka (Finance Faculty), Mr. Sunil Sharma (Placement Manager) and other

faculty members of IILM- Academy of Higher Learning, Jaipur, who provided me with this

opportunity of Summer Internship.

I perceive this opportunity as a big milestone in my career development. I will strive to use my

gained knowledge and skills in the best possible way, and I will continue to work on their

improvement, in order to attain desired career objectives.

Preface

For a Management Student, Summer Internship is a golden chance for developing the capability and

learning the corporate environment so as to mingle with the professionals and receive the

opportunity to work with them in near future.

In this context, I received the opportunity to complete my Summer Internship Program in Motisons

Shares Pvt. Ltd, Jaipur under the guidance of Mr. Rohan Sharma (Co-founder of Motisons Financial

Academy).

This report shows and will guide the readers about the basics of Financial Market and knowledge of

Technical Analysis, Fundamental Analysis and Economic Analysis which I have gained during my

internship period. The report mainly focuses on Technical Analysis which was my core interest of

learning, during this period.

I tried to remain to the point in writing this report. Being a Management Student with Specialisation

in Finance, It‟s my interest in learning in deep the knowledge from Financial Domain. The

knowledge gained during this internship period is partial but really useful to understand the

Financial Markets.

The Research conducted by me during the second month of my internship is based on my personal

learning and knowledge which I have received during this internship period.

Contents

1. Objectives of Summer Internship

1

2. Abstract

2

3. Literature Review

3

4. Research Methodology

4

5. Introduction of Company

5

6. Learning’s from Summer Internship

a. Financial Market

7

b. Analysis of Financial Market

12

c. Technical Analysis

i. Introduction

14

ii. Basics of Charting

17

iii. Types of Charts

21

iv. Trade Cycle

24

v. Candlestick Patterns

26

vi. Trendline

32

vii. Support & Resistance

35

viii. Gap Theory

37

7. Research

40

a. Economic Analysis

40

b. Technical Analysis

41

c. Fundamental Analysis

43

8. Conclusions

46

9. Bibliography

47

1 | P a g e

Objectives of Summer Internship

The summer internship plays a crucial role in development of a Management Student. I did this

Summer internship with the following objectives in my mind :

To gain deep knowledge of Financial Markets.

To receive the opportunity to work with corporate Professionals in real Practical Situations.

To get oriented with corporate environment.

To understand the trading procedures in Share Markets.

To practically implement the knowledge of managerial concepts already learnt, during the

internship while working with the company.

To understand the corporate demands and assess my own abilities, so as to improve

accordingly.

The reason for doing my Summer Internship at Motisons Shares Pvt. Ltd. was that it‟s the company

which could fulfil my objectives and could provide me with required skills, knowledge and

corporate exposure.

As I am Management student with Finance specialisation, my core interest lies in understanding

Financial Markets in detail. At Motisons Shares Pvt. Ltd., I could gain the right exposure and decent

corporate environment to work with the professionals. I used this opportunity as my step to fulfil

my career objectives while learning about Financial Markets and implementing the same.

2 | P a g e

Abstract

Financial Market is the marketplace for traders and investors whether they are retail or institutional

investors. The financial securities comprising shares, debentures, bonds, derivatives are exchanged

among investors and the company.

Economic Analysis is studying the global market and Indian market economy simultaneously to

understand the impact of various factors on the selected company‟s share price movements.

Fundamental analysis is the study of financial reports and analysing the financial performance of

the company. It will help in finding out the intrinsic value of the company. The intrinsic value helps

to judge the future price movement of the company‟s share whether the current market price is

undervalued or overvalued.

Technical Analysis is the forecasting of future financial price movements based on an examination

of past price movements. Technical analysis does not result in absolute predictions about the future

with regard to forecasting. Instead, technical analysis can help investors anticipate what is

"possible" to happen to prices over time.

Technical analysis is study of predicting prices of securities for future the main aim of technical

analysis is to generate returns by charter person decide when to enter and when to exit in the

security.

Technical Analysis is of the stock market relating to factors affecting the supply and demand of

stocks. It helps in understanding the intrinsic value of shares and knowing whether the shares are

undervalued or overvalued.

This report aims at carrying out Economical, Fundamental and Technical Analysis of the securities

of the selected companies and to assist investment decisions in Indian Market.

3 | P a g e

Literature Review

The Indian capital market has changed dramatically over the last few years, especially since 1990.

Changes have also been taking place in government regulations and technology. The expectations

of the investors are also changing. The only inherent feature of the capital market, which has not

changed is the 'risk' involved in investing in corporate securities.

Many Researches have been conducted by academicians regarding the capital Markets and its

analysis.

Grewal S.S and Navjot Grewall (1984) revealed some basic investment rules and rules for selling

shares. They warned the investors not to buy unlisted shares, as Stock Exchanges do not permit

trading in unlisted shares.

Another rule that they specify is not to buy inactive shares, i.e., shares in which transactions take

place rarely. The main reason why shares are inactive is because there are no buyers for them. They

are mostly shares of companies, which are not doing well.

A third rule according to them is not to buy shares in closely-held companies because these shares

tend to be less active than those of widely held ones since they have a fewer number of

shareholders. They caution not to hold the shares for a long period, expecting a high price, but to

sell whenever one earns a reasonable reward.

Preethi Singh (1986) disclosed the basic rules for selecting the company to invest in. She opined

that understanding and measuring return md risk is fundamental to the investment process.

According to her, most investors are 'risk averse'. To have a higher return the investor has to face

greater risks.

According to research by Yasaswy J.N. (1993) , she evaluated the quantum of risks involved in

different types of stocks. Defensive stocks are low risk stocks and hence the returns are relatively

low but steady. Cyclical stocks involve higher risks and hence the rewards are higher when

compared to the growth stocks. Growth stocks belong to the medium risk category and they offer

medium returns which are much better than defensive stocks, but less than the cyclical stocks. The

market price of growth stocks does fluctuate, sometimes even violently during short periods of

boom and bust.

Mamaysky and Wang (2000) examines the effectiveness of technical analysis on US stocks from

1962 to 1996 and finds that over the 31-year sample period, several technical indicators do provide

incremental information and may have some practical value.

Lee and Swaminathan (2000) demonstrate the importance of past trading volume.

Researched have used genetic programming to show that technical trading rules can be profitable

during US foreign exchange intervention.(Neely and Weller ,2001)

Kavajecz and Odders-White (2004) show that support and resistance levels coincide with peaks in

depth on the limit order book 1 and moving average forecasts reveal information about the relative

position of depth on the book. They also show that these relationships stem from technical rules

locating depth already in place on the limit order book.

4 | P a g e

Research Methodology

The study aims at understanding the basics of Financial Market and the Technical analysis basics so

as to analyse a number of company‟s shares performance. As the study describes the existing facts

and figures given in the financial reports and price movements of the selected companies, the

research design followed is descriptive and analytical in nature.

The study also aims at studying the fundamental analysis and economic analysis.

The research has been conducted keeping in mind the knowledge of Fundamental, Economical and

Technical Analysis.

The companies have been selected on the basis of Economic analysis of the global market and

keeping in view the Indian perspective and impact of Global market on Indian market.

For technical analysis, the secondary data has been used to find out the price movements of the

company‟s shares. The data have been extracted from Sharekhan- Trade Tiger software as well as

from NSE websites.

The data used is from different time frames.

The primary source of investigation has been performed and analysis of the selected company‟

shares have been done.

The secondary source of data has been collected from records of the websites, software, and

published annual report of the companies because the primary data will not be possible to collect.

5 | P a g e

INTRODUCTION

Motisons Group was established in 1997, which made its debut in the business world as Jewellers

and soon emerged as one of the renowned Jewellers in Jaipur as well as across the country.

Motisons Group soon expanded and made its presence in different sectors of business world.

The different industrial presence being:

Motisons Jewellers Ltd.

Motisons Commodities Pvt. Ltd.

Motisons Shares Pvt. Ltd.

Motisons BuildTech Pvt. Ltd.

Motisons Townships Pvt. Ltd.

Motisons Hotels & Resorts India Pvt. Ltd.

Motisons Entertainment (India) Pvt. Ltd.

Motisons Financial Academy

Motisons Shares Pvt. Ltd.

Motisons Shares Pvt. Ltd. is one of the leading financial services companies in India with a

growing presence across the globe, serving a diverse customer base of retail and institutional

investors. Motisons Shares Pvt Ltd. has a vast experience in equity and commodity trading services

and has become synonymous with reliability and trust.

The company aims at changing the people‟s perceptions about investing in stock markets with their

user friendly equity trading solutions, exceptional research, competitive brokerage plans, robust

technology and centralised risk management system.

Priorities of Motisons Shares Pvt. Ltd.:

Rich User Experience

Exceptional Relationship approach

Superior Customer Service

6 | P a g e

Organisation Managing Team

Atul Sogani

Managing Director, Motisons Shares Private

Limited

Heading a team of 200+ employees with

devotion and commitment.

Kamal Jain

Marketing Director, Motisons Shares Private Ltd.

Founder, Motisons Financial Academy

Mentoring and monitoring the team of Motisons

Shares and Commodities.

Rohan Sharma

Co-Founder, Motisons Financial Academy

Heading institutional wing of Motisons Financial

Academy

7 | P a g e

Learning’s From Summer Internship Program

Financial Market

In my opinion, Financial Market is the place where Financial Securities like equity, bonds and

commodities etc. are traded on a regular basis.

It is a broad term describing the buying and selling of assets having financial nature such as

currency, equity, bonds and derivatives.

Intermediary functions of financial market: The intermediary functions of financial markets

include the following:

Transfer of resources: Financial markets facilitate the transfer of real economic resources from

lenders to ultimate borrowers.

Enhancing income: Financial markets allow lenders to earn interest or dividend on their

surplus invisible funds, thus contributing to the enhancement of the individual and the national

income.

Productive usage: Financial markets allow for the productive use of the funds borrowed. The

enhancing the income and the gross national production.

Capital formation: Financial markets provide a channel through which new savings flow to aid

capital formation of a country.

Price determination: Financial markets allow for the determination of price of the traded

financial assets through the interaction of buyers and sellers. They provide a sign for the

allocation of funds in the economy based on the demand and to the supply through the

mechanism called price discovery process.

Information: The activities of the participants in the financial market result in the generation

and the consequent dissemination of information to the various segments of the market. So as to

reduce the cost of transaction of financial assets.

Financial Functions of financial market:

Providing the borrower with funds so as to enable them to carry out their investment plans.

Providing liquidity in the market so as to facilitate trading of funds.

Providing liquidity to commercial bank

Facilitating credit creation

Promoting savings

Promoting investment

Facilitating balanced economic growth

Improving trading floors

8 | P a g e

Stock Market:

A stock Market is the aggregation of buyers and sellers of stocks, these may include stocks listed on

stock exchange as well as those only traded privately.

Stock market allows investors to trade shares of listed companies. They are the most vital areas of

market economy as they provide companies with access to capital and investors with a slice of

ownership in the company and the potential of gains based on the company's future performance.

Components of Financial Market:

Components of Financial Market (Source: Wikipedia)

On the Basis of Market Level

1. Primary Market: The market for Issue of new securities on the exchange. Companies,

governments and othe r groups obtain financing through debt or equity based securities. Primary

markets, also known as "new issue markets," are facilitated by underwriting groups, which consist

of investment banks that will set a beginning price range for a given security and then oversee its

sale directly to investors.

Fin

anci

al M

arke

t On the basis of Market Level

Primary Market

Secondary Market

On the basis of Security Types

Money Market

Capital Market

Equity Market

Debt Market

Commodity Market

Forex Market

Derivative Market

9 | P a g e

The primary markets are where investors have their first chance to participate in a new security

issuance. The issuing company or group receives cash proceeds from the sale, which is then used to

fund operations or expand the business.

2. Secondary market: It is the market where investors purchase securities or assets from other

investors, rather than from issuing companies themselves. The secondary market, also called

the aftermarket, is the financial market in which previously issued financial instruments such as

Stocks, bonds, options, and futures are bought and sold. The Securities are quoted in the stock

exchange and it provides the continuous and regular market for buying and selling of securities.

On the basis of Security Type:

1. Money Market

The money market is a segment of the financial market in which financial instruments with high

liquidity and very short maturities are traded. The money market is used by participants as a means

for borrowing and lending in the short term, from several days to just under a year. Eg. Treasury

Bill, Certificates of Deposits, Commercial Paper, Inter-bank Term Market, promissory note etc.

This market is exclusively for commercial and cooperative banks in India, which borrow and lend

funds for a period of over 14 days and upto 90 days without any collateral security at market-

determined rates.

2. Capital Markets

A capital market is the one in which individuals and institutions trade financial securities.

Organizations and institutions in the public and private sectors also often sell securities on the

capital markets in order to raise funds. Thus, this type of market is composed of both the primary

and secondary markets.

Any government or corporation requires capital (funds) to finance its operations and to engage in its

own long-term investments. To do this, a company raises money through the sale of securities -

stocks and bonds in the company's name. These are bought and sold in the capital markets.

(i) Equity Market

It‟s a market where ownership of securities are issued and subscribed.

Investing in the cash or "spot" market is highly sophisticated, with opportunities for both big losses

and big gains. In the cash market, goods are sold for cash and are delivered immediately. By the

same token, contracts bought and sold on the spot market are immediately effective. Prices are

settled in cash "on the spot" at current market prices.

10 | P a g e

(ii) Debt Market

The debt market is the market where debt instruments are traded. Debt instruments are assets that

require a fixed payment to the holder, usually with interest. Arrangements are made in such a way

that the borrowers agree to pay the lender the original amount of the loan plus some specified

amount of interest. Examples of debt instruments include bonds (government or corporate) and

mortgages.

3. Commodity Market

A commodity market is a physical or virtual marketplace for buying, selling and trading raw or

primary products.

Commodities are split into two types: hard and soft commodities. Hard commodities are typically

natural resources that must be mined or extracted (such as gold, rubber and oil), whereas soft

commodities are agricultural products or livestock (such as corn, wheat, coffee, sugar, soybeans and

pork).

4. Forex and the Interbank Market

An interbank market is the financial system and trading of currencies among banks and financial

institutions, excluding retail investors and smaller trading parties. While some interbank trading is

performed by banks on behalf of large customers, most interbank trading takes place from the

banks' own accounts.

The forex market is where currencies are traded. The forex market is the largest, most liquid market

in the world

5. Derivative Market

A derivative is a financial contract which derives its value from the performance of another entity

such as an asset, index, or interest rate, called the "underlying". Derivatives are one of the three

main categories of financial instruments, the other two being equities (i.e. stocks) and debt (i.e.

bonds and mortgages).

Derivatives can be used for risk management as well as for speculative purpose

Uses of derivative: Derivatives are used for:

1. Mitigate risk: it avoids risk by entering into derivative contract whose value moves in

opposite direction to underlying position and cancel part or all of it out.

2. Provide leverage: small movement in underlying variable movement can cause large

movement in derivative value, thus provides leverage

3. Creates option ability: value of derivative is linked to specific conditions. A call option

holder has an option to buy an underlying asset at specific price

4. Speculate and make profit: if speculation proved favorable, it help in making profit

5. To obtain exposure when it is directly possible to enter into a contract in underlying asset

11 | P a g e

Derivatives are mainly of 4 types: Forwards, Futures, Swaps and Options

Forwards: An agreement between buyer and seller to exchange a specified asset (commodity,

currency, instruments) at future date at a pre-determined price specified in agreement.

Futures: An agreement between two parties to buy or sell an asset (commodity, instruments) at a

particular price on a future date. Almost similar to forward contract, but futures are standardised

exchange traded contract whereas forwards are non-standardised.

Options: An option is a contract giving the buyer the right, but not the obligation, to buy or sell an

underlying asset (a stock or index) at a specific price on or before a certain date.

Options are of 2 types: Calls and Puts. Calls give the buyer the right but not the obligation to buy a

given quantity of an underlying asset, at a given price on or before a given future date. Puts gives

the buyer the right, but not the obligation to sell a given quantity of underlying asset at a given price

on or before a given date.

Swaps: Swaps are private agreement between two parties to exchange cash flows in the future

according to a pre-arranged formula. These are regarded as portfolios of forward contracts. The two

commonly used swaps are: Interest Rate Swaps, Currency Swaps

12 | P a g e

Analysis of Financial Market

Fundamental Analysis

Fundamental analysis is a stock valuation methodology that uses financial and economic

Analysis to envisage the movement of stock prices. The fundamental data that is analysed could

include a company‟s financial reports and non-financial information such as estimates of its growth,

demand for products sold by the company, industry comparisons, economy-wide changes, changes

in government policies etc.

The outcome of fundamental analysis is a value (or a range of values) of the stock of the company

called its „intrinsic value‟.

To a fundamental investor, the market price of a stock tends to revert towards its intrinsic value. If

the intrinsic value of a stock is above the current market price, the investor would purchase the

stock because he believes that the stock price would rise and move towards its intrinsic value. If the

intrinsic value of a stock is below the market price, the investor would sell the stock because he

believes that the stock price is going to fall and come closer to its intrinsic value.

An

alys

is

Technical Analysis

Quantitative

Data Filtering

Algorithm Trading

Behavioural Use of tools and

Technicals

Fundamental Analysis

Balance Sheet

Profit and Loss

Profitability

Predictions

Economic Analysis

Economic Cycle

Sectoral Analysis

Economic Indicators

Global Market

Asset Allocation

Currency and Bonds

(Source: Self Notes of

Internship Training)

13 | P a g e

To find the intrinsic value of a company, the fundamental analyst initially takes a top-down view of

the economic environment; the current and future overall health of the economy as a whole. After

the analysis of the macro-economy, the next step is to analyse the industry environment which the

firm is operating in. One should analyse all the factors that give the firm a competitive advantage in

its sector, such as, management experience, history of performance, growth potential, low cost of

production, brand name etc. This step of the analysis entails finding out as much as possible about

the industry and the inter-relationships of the companies operating in the industry. The next step is

to study the company and its products.

Economic Analysis

It is a systematic approach in which economists and other professionals will estimate the Economic

environment and its strengths and weaknesses. Economic analysis plays an important role in

determining how a trader will want to position themselves in a market.

It is a study of forces that determine the distribution of scarce resources. Economic analysis

provides insight into how markets operate, and offers methods for attempting to

predict future market behaviour in response to events, trends, and cycles. Economic analysis is also

used by governments to determine tax rates and evaluate the financial health of the nation or state.

Technical Analysis

Technical analysis is a security analysis methodology for forecasting the direction

of prices through the study of past market data, primarily price and volume.

Technical Analysis can be defined as an art and science of forecasting future prices based on an

examination of the past price movements. Technical analysis is not astrology for predicting prices.

Technical analysis is based on analysing current demand-supply of commodities, stocks, indices,

futures or any tradable instrument.

Technical analysis involve putting stock information like prices, volumes and open interest on a

chart and applying various patterns and indicators to it in order to assess the future price

movements. The time frame in which technical analysis is applied may range from intraday (1-

minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly

or monthly price data to many years.

Technical analysis works on Pareto principle. It considers the market to be 80% psychological

and 20% logical. Fundamental analysts consider the market to be 20% psychological and 80%

logical.

14 | P a g e

Technical Analysis

Technical analysis is a security analysis methodology for forecasting the direction

of prices through the study of past market data, primarily price and volume.

Technical Analysis can be defined as an art and science of forecasting future prices based on an

examination of the past price movements. Technical analysis is not astrology for predicting prices.

Technical analysis is based on analysing current demand-supply of commodities, stocks, indices,

futures or any tradable instrument.

Technical analysis involve putting stock information like prices, volumes and open interest on a

chart and applying various patterns and indicators to it in order to assess the future price

movements. The time frame in which technical analysis is applied may range from intraday

(1 minute, 5-minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or monthly

price data to many years.

Technical analysis works on Pareto principle. It considers the market to be 80% psychological

and 20% logical. Fundamental analysts consider the market to be 20% psychological and 80%

logical.

The basis of Technical Analysis

What makes Technical Analysis an effective tool to analyze price behavior is explained by

following theories given by Charles Dow:

• Price discounts everything

• Price movements are not totally random

• What is more important than why

Technical Analysis: The basic assumptions The field of technical analysis is based on three assumptions:

1. The market discounts everything.

2. Price moves in trends.

3. History tends to repeat itself.

1. The market discounts everything

Technical analysis is criticized for considering only prices and ignoring the fundamental analysis of

the company, economy etc. Technical analysis assumes that, at any given time, a stock‟s Price

reflects everything that has or could affect the company - including fundamental factors.

The market is driven by mass psychology and pulses with the flow of human emotions. Emotions

may respond rapidly to extreme events, but normally change gradually over time. It is believed that

the company‟s 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 the supply and

demand for a particular stock in the market.

15 | P a g e

2. Price moves in trends

“Trade with the trend” is the basic logic behind technical analysis. Once a trend has been

established, the future price movement is more likely to be in the same direction as the trend than to

be against it. Technical analysts frame strategies based on this assumption only.

3. History tends to repeat itself

People have been using charts and patterns for several decades to demonstrate patterns in price

movements that often repeat themselves. The repetitive nature of price movements 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 chart patterns to analyse market

movements and understand trends.

Strengths and Weakness of Technical Analysis

Strength of Technical Analysis

1. Not Just for stocks

Technical analysis has universal applicability. It can be applied to any financial instrument - stocks,

futures and commodities, fixed-income securities, forex, etc.

2. Focus on price Fundamental developments are followed by price movements. By focusing only on price action,

technicians focus on the future. The price pattern is considered as a leading indicator and generally

leads the economy by 6 to 9 months. To track the market, it makes sense to look directly at the price

movements.

More often than not, change is a subtle beast. Even though the market is prone to sudden

unexpected reactions, hints usually develop before significant movements. You should refer to

periods of accumulation as evidence of an impending advance and periods of distribution as

evidence of an impending decline.

3. Supply, demand, and price action

Technicians make use of high, low and closing prices to analyse the price action of a stock. A good

analysis can be made only when all the above information is present separately, these will not be

able to tell much. However, taken together, the open, high, low and close reflect forces of supply

and demand.

4. Support and resistance

Charting is a technique used in analysis of support and resistance level. These are trading range in

which the prices move for an extended period of time, saying that forces of demand and supply are

deadlocked. When prices move out of the trading range, it signals that either supply or demand has

started to get the upper hand. If prices move above the upper band of the trading range, then

demand is winning. If prices move below the lower band, then supply is winning.

5. Pictorial price history A price chart offers most valuable information that facilitates reading historical account of a

security‟s price movement over a period of time. Charts are much easier to read than a table of

numbers.

16 | P a g e

Weaknesses of Technical Analysis

1. Analyst bias

Technical analysis is not hard core science. It is subjective in nature and your personal biases can be

reflected in the analysis. It is important to be aware of these biases when analysing a chart. If the

analyst is a perpetual bull, then a bullish bias will overshadow the analysis. On the other hand, if the

analyst is a disgruntled eternal bear, then the analysis will probably have a bearish tilt.

2. Open to interpretation

Technical analysis is a combination of science and art and is always open to interpretation. Even

though there are standards, many times two technicians will look at the same chart and paint two

different scenarios or see different patterns. Both will be able to come up with logical support and

resistance levels as well as key breaks to justify their position.

3. Too late

Another criticism is for being too late. By the time the trend is identified, a substantial move has

already taken place. After such a large move, the reward to risk ratio is not great. Lateness is a

particular criticism of Dow Theory.

4. Always another level

Technical analysts always wait for another new level. Even after a new trend has been identified,

there is always another “important” level close at hand. Technicians have been accused of sitting on

the fence and never taking an unqualified stance. Even if they are bullish, there is always some

indicator or some level that will qualify their opinion.

17 | P a g e

Basics of charting

Chart:

A chart is simply a graphical representation of a series of prices over a set time frame.

Charts are working tools of technical analysts. They use charts to plot the price movement of a

stock over specific time frames. It‟s a graphical representation to show where the stock prices have

been in the past.

A chart gives us a complete picture of a stock‟s price history over a period of an hour, day, week,

month or many years. It has an x-axis (horizontal) and a y-axis (vertical). Typically, the x-axis

represents time; the y-axis represents price. By plotting a stock‟s price over a period of time, we end

up with a pictorial representation of any stock‟s trading history.

Chart of Ambuja Cement

18 | P a g e

The Time Scale The time scale refers to the range of dates at the bottom of the chart, which can vary from decades

to seconds. The most frequently used time scales are intraday, daily, weekly, monthly, quarterly and

annually. The shorter the time frame, the more detailed the chart. Each data point can represent the

closing price of the period or show the open, the high, the low and the close depending on the chart

used.

On the basis of Time scale

Tick on tick chart

A tick chart is made up of bars which are based off a number of market transactions (as opposed to

elapsed time). Since tick charts are made up of bars which form after X # of transactions the amount

of time it takes for each bar to close (or series of bars to form) tells us a lot about the volume of the

markets.

Periods when bars are forming faster indicates more volume moving the markets. When bars are

slower to form this is indication of lower volume.

It is used for algorithmic trading

Intraday chart

Intraday refers to “within a day” chart.

These are important for the short term traders who wish to trade over a course of a single trading

session. The analysis based prediction is valid for the same day or the next day morning hours.

The traders use real time charts in an attempt to get benefit from short term price fluctutations.

Short term traders typically use five minute, 15 minute, 30 minute or hourly charts when trading

within a day.

Daily charts:

It is a chart where each data point is comprised of the price movement for a single day of trading.

This type of chart typically shows high, low, open, and close for the whole day. The data used is

generally end of the day data. The prediction from the analysis of daily chart is valid for a week.

Weekly charts:

A chart where each data point is comprised of the price movement for a single week of trading. This

type of chart typically shows high, low, open, and close for the whole week and does not show the

day-to-day movements of the security. This type of chart is used by technical analysts to gauge the

long-term trend of a given asset. The prediction based on the analysis of the weekly charts is valid

for next month.

19 | P a g e

Monthly charts:

A chart where each data point is comprised of the price movement for a Single month of trading.

This type of chart typically shows high, low, open, and close for the whole month. This type of

chart is used by technical analysts to gauge the long-term trend of a given asset. The predictions

based on the analysis of the weekly charts are valid for either quarter or half year.

Yearly charts:

A chart where each data point is comprised of the price movement for a Single Year of trading. This

type of chart typically shows high, low, open, and close for the whole Year. This type of chart is

used by technical analysts to gauge the long-term trend of a given asset. The predictions based on

the analysis of the Yearly charts are valid for a decade.

The Price Scale

The price scale is on the right-hand side of the chart. It shows a stock's current price and compares

it to past data points. This may seem like a simple concept in that the price scale goes from lower

prices to higher prices as you move along the scale from the bottom to the top. The problem,

however, is in the structure of the scale itself. A scale can either be constructed in a

linear (arithmetic) or logarithmic way, and both of these options are available on most charting

services.

If a price scale is constructed using a linear scale, the space between each price point (10, 20, 30,

40) is separated by an equal amount. A price move from 10 to 20 on a linear scale is the same

distance on the chart as a move from 40 to 50. In other words, the price scale measures moves in

absolute terms and does not show the effects of percent change.

If a price scale is in logarithmic terms, then the distance between points will be equal in terms of

percent change. A price change from 10 to 20 is a 100% increase in the price while a move from 40

to 50 is only a 25% change, even though they are represented by the same distance on a linear scale.

On a logarithmic scale, the distance of the 100% price change from 10 to 20 will not be the same as

the 25% change from 40 to 50. In this case, the move from 10 to 20 is represented by a larger space

one the chart, while the move from 40 to 50, is represented by a smaller space because, percentage-

wise, it indicates a smaller move.

In Figure 1, the logarithmic price scale on the right leaves the same amount of space between 10

and 20 as it does between 20 and 40 because these both represent 100% increases.

20 | P a g e

Logarithmic Price Scale

Linear Price Scale

21 | P a g e

Types of Price charts

1. Line charts:

Formed by connecting the closing prices of a specific stock or market over a period

of time.

Useful for providing clear visual illustration of trend of stock price movement.

Only gives one information at one point of time.

Line Chart- Asian Paints

2. Bar charts:

Used to see price action in a stock over a given period of time.

Shows high price at the top and lowest price at the bottom of the bar.

Small lines on either of the vertical bar show opening price and closing price.

Small tick on the left side shows opening price

Small tick on the right side shows closing price.

22 | P a g e

Bar Chart- Asian Paints

3. Candlestick charts:

Provides visual insight to current market psychology.

Originated from Japan

Displays high, open, close and low price of the specific stock during a particular time

period.

Each candlestick represent one period of data.

These are represented in white or black combination colours or generally Green

colour for positive closing period and Red colour for negative closing period.

The thick coloured portion Red or Green is called as “Real Body”

The thin line above and below the Real Body is called as Shadows or Tails.

The Highest Price is marked by Top of the Upper Shadow.

The Lowest Price is marked by Bottom of the Lower Shadow.

If the Stock Price closes higher than its opening price, it is said to have a positive

closing for the period. It is coloured Green.

If the Stock Price closes lower than its opening price, it is said to have a negative

closing for the period. It is coloured Red.

Easy to decipher and interpret the open, high, low and close positions of the stock.

The green candle shows more buying pressure and red candle represents more selling

pressure.

23 | P a g e

CandleSticks Chart- Aurobindo Pharmaceuticals

24 | P a g e

Trade Cycle

4 Phases of Trade Cycle

1. Accumulation Phase:

This phase occurs after the market has bottomed and the innovators, value investors and insiders,

early adoptors enter to buy in large lot size. They figure out the worst has already happened.

2. Markup Phase: At this stage, the market has been stable for a while and is beginning to move

higher. The early majority are getting on the bandwagon. This group includes technicians who,

seeing that the market is putting in higher lows and higher highs, recognize that market direction

and sentiment have changed

As this phase matures, more investors jump on the bandwagon as fear of being in the market is

supplanted by greed and the fear of being left out.

As this phase come to an end, the late majority jump in and market volumes begin to increase

substantially.

120-130

•Extreme Positivity

•Profit Booking

80-85

•Bubble Burst

60-65

•Exit by Technical And Long term Investors

45-50

•Mass Exit

•News Outflow

45

•Entry of Value Investor/ Insider

65-70

•Technical Analysts Enter

90-100

•Mass Participation

•News outflow

25 | P a g e

While the late majority are getting in, the smart money and insiders are unloading. But as prices

begin to level off, or as the rise slows down, those laggards who have been sitting on the sidelines

see this as a buying opportunity and jump in en masse. Prices make one last parabolic move, known

in technical analysis as a selling climax, when the largest gains in the shortest periods often occur.

But the cycle is nearing the top of the bubble. Sentiment moves from neutral to bullish to

downright euphoric during this phase.

3. Distribution Phase: In the third phase of the market cycle, sellers begin to dominate. This

part of the cycle is identified by a period in which the bullish sentiment of the previous phase turns

into a mixed sentiment. Prices can often stay locked in a trading range that can last a few weeks or

even months investors are gripped by periods of complete fear interspersed with hope and even

greed as the market may at times appear to be taking off again. Valuations are extreme in many

issues and value investors have long been sitting on the sidelines. Sentiment slowly but surely

begins to change, but this transition can happen quickly if accelerated by a strongly negative

geopolitical event or extremely bad economic news. Those who are unable to sell for a profit settle

for a breakeven or a small loss.

4. Mark Down Phase: The fourth and final phase in the cycle is the most painful for those who

still hold positions. Many hang on because their investment has fallen below what they paid for it.

It is only when the market has plunged 50% or more that the laggards, many of whom bought

during the distribution or early mark-down phase, give up or capitulate.

Phases of Trade Cycle (source: stockcharts)

26 | P a g e

Candle Stick Patterns

One candle Pattern

The one candle patterns are also known as “Umbrella Lines”

Hammer :

The lower shadow should be at least two

times the length of the body.

No or very small upper shadow.

The real body is at the end of trading range.

Colour – not of much significance.

Hammer- At the 52 week Low

Next day confirmation required.

If Volume is Low on formation of Hammer, this implies only profit booking been done. The

volume should rise on upcoming days

If volume is high on formation of Hammer, this implies both profit booking and new buying

have been done. The volumes should fall on upcoming days.

If volume is low on hammer formation of hammer and also on next 2-3 days, it implies it

will make another low

(Source: Steve Nison “The Candlestick Course”)

27 | P a g e

Hanging Man:

The lower shadow should be at least two times the

length of the body.

No or very small upper shadow.

The real body near the highest top of trading range.

Colour – not of much significance.

Volume is average on Hanging Day, on upcoming

days the volume should decrease.

Next day confirmation required.

Hanging Man- 52 week high within next 2-3 days.

Forms because of News Outflow and value investor‟s selling test

Shooting Star:

Upper Shadow at least twice of body.

No or very small lower shadow.

The real body is at the end of trading range.

Colour – not much significant.

Shooting star- at the end of uptrend

Next day confirmation required.

Should be formed at 52 week high

Shooting Star forms with a gap

On the day of shooting star, the volume is low, but on next

day it should be high and then should decrease on upcoming

days.

If the volume is high on day of shooting star, it should decrease on upcoming days.

28 | P a g e

Inverted Hammer:

Upper Shadow at least twice of body.

No or very small lower shadow.

The real body is at the end of trading

range.

Colour – not much significant.

Inverted Hammer- at the end of

downtrend.

Next day confirmation required.

If the volume is high on day of shooting

star, it should decrease on upcoming

days.

Should be formed at 52 week low

Inverted Hammer forms without a gap

Two candles Pattern:

Bullish Engulfing:

The candlestick body of previous day overshadowed by next day‟s candlestick.

The colour of first candle is Red which is similar to previous one and body of second candle

is of Green colour.

Large volume on the engulfing day.

Full Read Body to Real Body Coverage is called

Engulfing

Next day confirmation of reversal required.

Bullish engulfing- end of downtrend

Shape and Size Matters

Position of the candle should be such that the Lower shadow on day of engulfing should be

making 52 week Low.

29 | P a g e

Bearish Engulfing:

The candlestick body of previous day

overshadowed by next day‟s candlestick.

The colour of first candle is Green which is

similar to previous one and body of second

candle is Red.

Large volume on the engulfing day.

Next day confirmation of reversal required.

Bearish engulfing- end of uptrend

Shape and Size matters.

Position of the candle should be such that the

Upper shadow on day of engulfing should be

making 52 week High

Piercing:

Opens lower than previous close; closes at least 50% of previous real body.

Piercing : At the end of downtrend.

Large volume during these 2 trading days is a

significant confirmation.

Colour should be Green on the day of piercing

The body of Red candle should be atleast 50%

covered with lower volume.

Confirmation on next day is required

The volume should be increasing on upcoming days.

Forms in a downtrend

30 | P a g e

Dark Cloud Cover:

Dark Cloud Cover: Opens higher than previous close; closes at least 50% of previous real

body.

Dark Cloud Cover: At the end of Uptrend.

Large volume during these 2 trading days is a significant

confirmation.

Forms in Uptrend

Colour should be Red on the day of Dark Cloud Cover.

The body of Green candle should be atleast 50% covered with

Higher volume.

Confirmation on next day is required

Volume Should be Decreasing on upcoming days.

Bullish Harami:

Large candlestick followed by a small candle that is within the

previous session‟s large real body.

Bullish Harami- Second day opens higher than close of

previous day and closes lower than open of prior session

Next day reversal confirmation is required.

Bullish Harami- at the end of Uptrend.

Volume should be low on day on Bullish Harami day, it should

be increasing on upcoming days.

Bearish Harami:

Large candlestick followed by a small candle that is within the

previous session‟s large real body.

Bearish Harami- Second day opens lower than close of previous

day and closes higher than open of prior session

Next day reversal confirmation is required.

Bearish Harami- at the end of Downtrend.

Reversal will be more forceful, if the size of candles is large.

31 | P a g e

Three Candle Pattern:

Evening star: Formed by tall Green body candle followed by

a small real body that gaps above the first real body to form a

“star” and a third red candle that closes well into first session‟s

green real body.

Morning Star: Formed by tall Red body candle followed by a small

real body that gaps above the first real body to form a “star” and a third

Green candle that closes well into first session‟s Red real body.

Evening Star- at end of Uptrend

Morning Star- at end of Downtrend

A gap between first and second session adds to probability of

reversal.

Gap before and after the star day is more desirable.

Doji:

Same opening and closing price.

Likelihood of a reversal increases if subsequent

candlesticks confirm the doji‟s reversal potential.

Period of indecision.

Next day confirmation required for reversal

32 | P a g e

Trendline

Trend refers to any repetitive action in price movement.

Trendline refers to the direction and the speed of the price during a time series within a chart.

Trend Lines are an important tool in technical analysis for both trend identification and

confirmation. A trend line is a straight line that connects two or more price points and then extends

into the future to act as a line of support or resistance. Many of the principles applicable to support

and resistance levels can be applied to trend lines as well.

Uptrend

Price movements are in uptrend if 1 Higher Bottom + 2 Higher Tops are noticed.

Uptrend Line: An uptrend line has a positive slope and is formed by connecting two or

more low points. The second low must be higher than the first for the line to have a positive slope.

Uptrend lines act as support and indicate that net-demand (demand less supply) is increasing even

as the price rises. A rising price combined with increasing demand is very bullish, and shows a

strong determination on the part of the buyers. As long as prices remain above the trend line, the

uptrend is considered solid and intact. A break below the uptrend line indicates that net-demand has

weakened and a change in trend could be imminent.

Chart of JSW Steel

33 | P a g e

Downtrend

Price movements are in downtrend if 1 Lower Bottom + 2 Lower tops are noticed.

Downtrend line: A downtrend line has a negative slope and is formed by connecting two or

more high points. The second high must be lower than the first for the line to have a negative slope.

Downtrend lines act as resistance, and indicate that net-supply (supply less demand) is increasing

even as the price declines. A declining price combined with increasing supply is very bearish, and

shows the strong resolve of the sellers. As long as prices remain below the downtrend line, the

downtrend is solid and intact. A break above the downtrend line indicates that net-supply is

decreasing and that a change of trend could be imminent.

Chart of Justdial

Sideways: Price movements are in Sideways when No higher Bottom and No Lower Bottom are

noticed during a period. It means the price movements form same Top and same Bottom series.

Chart of HDFC

34 | P a g e

General rule of drawing a trendline:

The general rule in technical analysis is that it takes two points to draw a trend line and the third

point confirms the validity.

At the time of breakout the volume should be high

Angle of trendline:

The best considered angle is 45°. Too steep trendline is not considered as a meaningful support or

resistance levels. Even if the trendline is formed with three valid points but trading on the basis of

such steep trendline may prove to be difficult.

35 | P a g e

Support and Resistance

Support and resistance represent key junctures where the forces of supply and demand meet.

These lines appear as thresholds to price patterns. They are the respective lines which stops

the prices from decreasing or increasing.

A support line refers to that level beyond which a stock‟s price will not fall. It denotes that

price level at which there is a sufficient amount of demand to stop and possibly, for a time,

turn a downtrend higher. Similarly a resistance line refers to that line beyond which a stock‟s

price will not increase. It indicates that price level at which a sufficient supply of stock is

available to stop and possibly, for a time, head off an uptrend in prices. Trend lines are often

referred to as support and resistance lines on an angle.

Support: A support is a horizontal floor where interest in buying a commodity is strong enough to

overcome the pressure to sell. Support level is the price level at which sufficient demand

exists to, at least temporarily, halt a downward movement in prices. Logically as the price

declines towards support and gets cheaper, buyers become more inclined to buy and sellers

become less inclined to sell. By the time the price reaches the support level, it is believed that

demand will overcome supply and prevent the price from falling below support.

Chart of HDFC

36 | P a g e

Resistance: A resistance is a horizontal ceiling where the pressure to sell is greater than the pressure to buy.

Thus a Resistance level is a price at which sufficient supply exists to; at least temporarily, halt an

upward movement. Logically as the price advances towards resistance, sellers become more

inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance

level, it is believed that supply will overcome demand and prevent the price from rising above

resistance.

Support can turn into resistance: Once the price penetrates below the support level, the

earlier or the broken support level can turn into resistance. The break of support level signals that

the forces of supply have overcome the forces of demand. Therefore, if the price returns to this

level, there is likely to be an increase in supply, and hence resistance

Resistance turning into support: As the price increases above resistance, it signals changes

in demand and supply. The breakout above resistance proves that the forces of demand have

overcome the forces of supply. If the price returns to this level, there is likely to be an increase in

demand and support can be established at this point.

Chart of M&M

37 | P a g e

Gap Theory

A gap is an area on a price chart in which there were no trades. Normally this occurs after the close

of the market on one day and the next day‟s open. Lots of things can cause this, such as an earnings

report coming out after the stock market had closed for the day. If the earnings were significantly

higher than expected, this could result in the price opening higher than the previous day‟s close. If

the trading that day continues to trade above that point, a gap will exist in the price chart. Gaps can

offer evidence that something important has happened to the fundamentals or the psychology of the

crowd that accompanies this market movement.

Gaps appear more frequently on daily charts, where every day is an opportunity to create an

opening gap. Gaps can be subdivided into four basic categories:

• Common gap

• Breakaway gap

• Runaway/ Continuation gap

• Exhaustion gap

Common Gaps:

Sometimes referred to as a trading gap or an area gap, the common gap is usually uneventful.

This gap occurs characteristically in nervous markets and is generally closed within few days.

Getting closed means that the price action at a later time (few days to a few weeks) usually

retraces to at the least the last day before the gap. This is also known as filling the gap.

A common gap usually appears in a trading range or congestion area and reinforces the

apparent lack of interest in the stock at that time.

Chart of Tata Steel

38 | P a g e

Breakaway Gaps:

They occur when the price action is breaking out of their trading range or congestion area.

A congestion area is just a price range in which the market has traded for some period of time,

usually a few weeks or so. The top of the congestion area is usually resistance, the area near

the bottom of the congestion area is support.

To break out of these areas requires market enthusiasm and either many more buyers than sellers for

upside breakouts or more sellers than buyers for downside breakouts.

Runaway Gaps:

Runaway gaps are also called measuring gaps and are best described as gaps that are caused

by increased interest in the stock

Increased buying interest happens all of a sudden and the price gaps above the previous day‟s close.

This type of runaway gap represents an almost panic state in traders. Also, a good uptrend can have

runaway gaps caused by significant news events that cause new interest in the stock.

Runaway gaps can also happen in down trends. This usually represents increased liquidation

of that stock by traders and buyers who are standing on the sidelines

39 | P a g e

Chart of Wipro

Exhaustion Gap:

Exhaustion gaps are those that happen near the end of a good up or down trend. They are

many times the first signal of the end of that move. They are identified by high volume and large

price difference between the previous day‟s close and the new opening price. They can

easily be mistaken for runaway gaps if one does not notice the exceptionally high volume.

Chart of Maruti

40 | P a g e

Research (Conducted on 23 June, 2016)

Economic Analysis

Brief about Brexit: Britain has been a member of European Union since 1973. But a series of crisis

have shaken the British confidence in the EU. In 2014, Prime Minister David Cameron to mollify

anti-immigration voters in his party, promised a referendum on Britain‟s exit from EU if he won the

2015 elections. After the votings, 52% of voters voted for exit of Britain from EU. As the result

came in, the value of British Pound fell by 10%. Stock Market around the world fell on 23rd

June,

2016.

Analysis:

The Brexit has impacted the financial markets of almost every big nation. The Indian Market has

also suffered because of it but not to the higher magnitude. Majorly the impact has shown its

devastating power on the shares of the companies who were in trade with Britain and had major

source of revenue from European Union.

The market will go into risk off mode for sometime and money will move out of riskier assets to

safer assets. The suffered companies will be automobile companies and IT companies who derive

portions of their revenues from Eurozone.

IT giants TCS, Infosys, HCL Tech derives 25-30% of revenue from Eurozone. Tata Motor‟s Jaguar

Land Rover derives 24% sales volume and 35-40% component supplies from Europe. Britain‟s exit

from EU can make JLR expensive as compared to other luxury Cars.

The investors‟ sentiments will move from trading in riskier asset to moving on for defensive stocks.

Defensive Stocks: A defensive stock is one that investors tend to want to own during uncertain

times, and one that they definitely want to own during hard times. These are also deemed as non-

cyclical stocks, so they are not as dependent on the overall economic cycle

Defensive stocks accommodate greed by offering a higher dividend yield than can be made in low

interest rate environments. They also alleviate fear because they are not usually as risky as regular

stocks and it usually takes a major catastrophe to derail their business model.

In Indian Financial Market defensive stocks are mainly Pharmaceutical companies and FMCG

sector Companies.

Narrowing down the research, I preferred to focus on Pharmaceutical Companies.

41 | P a g e

Technical Analysis

Under Pharmaceutical Sector, the companies I preferred to perform technical analysis were Pfizer,

Cipla, Dr. Reddy‟s Laboratories, Sunpharma Industries Ltd.

Pfizer:

Seeing the chart of Pfizer as on 23rd

June, 2016. The chart show very less volume. It means less

investors are interested in trading with this stock. So this stock may not be give appropriate returns

after investments. So it‟s not a good option to invest in such company‟s shares.

Dr. Reddy’s laboratories:

Company‟s volumes are high as compared to Pfizer. It means more investors trade with the share of

this company. The Closing price of Company‟s shares stands at Rs. 3171.55.It has taken the support

of the trendline recently. So it has the possibility of rising up. The upper trendline can act as the

resistance level for the share price, but it‟s possible to earn returns if more investor shifts to

Dr.Reddy‟s shares and a break of trendline can occur with higher volume.

42 | P a g e

Sun Pharmaceutical Industries:

Company‟s volumes are high enough, indicating more trading occurs with it‟s shares. The chart

shows the formation of Dragonfly Doji candlestick on 22nd

June 2016. But overall trend as shown

in the chart is Downward sloping. The downward trendline is also acting as a resistance for the

share‟s price movement. To break through this downward trendline, it would require very high

volume on upcoming days. On 9 June 2016, It has made the lowest closing price of 8-9 months.

Cipla:

Company‟s volumes are high. It has recently made more than 52 week‟s low candlestick on 25th

may, 2016. The downward trendlline is also acting as the resistance level for the share price. The

support for the price is far beneath. There may be chances of free fall in prices or it‟s also possible

to break the resistance level if the more buyers come into picture, as it‟s a defensive stock there are

high chances of increase in buyers which can increase the prices further.

43 | P a g e

Fundamental Analysis

Cipla:

March'16 Dec.'15 Sept.'15 June'15 March'15

Net Profit/(Loss) For

the Period

34.62 265.98 407.38 690.05 213.9

Net Sales/Income

from operations

2,682.52 2,603.66 2,982.09 3,466.91 2,607.32

Increase/Decrease in

Stocks

263.19 32.06 49.74 -116.64 -205.92

Consumption of

Raw Materials

754.54 890.15 926.97 1,061.68 1,043.90

Depreciation 114.74 111.65 108.3 106.12 111.48

Other Expenses 849.32 720.46 788.29 928.91 824.16

Basic EPS 0.43 3.31 5.08 8.59 2.66

(source: Moneycontrol)

Analysis of March 2016 quarterly result:

Profit- Minimum

Sales- Average

Increase in Inventory- Maximum

Consumption of Raw Material- Minimum

Depreciation- Average

Other Expenses- Increased

EPS- Minimum

The profits have decreased regularly in past three quarters. The sales have remained nearly the same

as of previous quarter. The other expenses have increased with a higher increment in the inventory

levels. So there seems no extraordinary item which has led to continuous decrease in profits of the

company. So it can be said that the company is performing below expectations.

Sun Pharmaceutical Industries: (source: Moneycontrol)

March'16 Dec.'15 Sept.'15 June'15 March'15

Net Profit/(Loss) For

the Period

61.71 -146.65 -601.32 -387.1 -78.01

Net Sales/Income

from operations

1,674.87 1,809.95 1,774.05 1,871.10 1,672.85

Other Operating

Income

223.01 44.35 46.65 168.42 72.39

Other Income 349.59 28.49 -143.17 -17.67 214.6

Basic EPS 0.3 -0.6 -2.5 -1.6 -0.32

44 | P a g e

Analysis:

Profit- First time Profit

Sales Income- Nearly same as March 2015, but minimum of the year

Other operating Income- Maximum

Other Incomes- Maximum

EPS- Minimum

The profits of the company have been seen for the first time in whole year. But its source of profit is

not due to increment in sales. The sales are lowest of the whole year. The revenue has come from

other operating activities of the company. The company may have chances of declining profits

again as the company is not performing well in its core business.

Dr.Reddy’s Laboratories:

March'16 Dec.'15 Sept.'15 June'15 March'15

Net Profit/(Loss) For

the Period

-5.7 236.8 647.52 475.85 571.42

Net Sales/Income

from operations

2,346.20 2,418.10 2,873.47 2,512.89 2,671.28

Increase/Decrease in

Stocks

46.1 -18.3 -18.55 -38.07 130.07

Depreciation 181.1 167.2 159.43 141.39 136.77

Other Expenses 746.1 664.1 672.16 576.03 591.62

Other Income 121.9 34.8 59.42 90.97 87.26

Exceptional Items -355.9 -- -- -- --

(source: Moneycontrol)

Analysis:

Profits- First time Loss

Sales Income- Decreased

Inventory- Increased

Depreciation- Increased

Other Expenses- Increased

Other Income- Maximum

Exceptional Item- Maximum loss of 355 crore

Company has seen first time loss in the last quarter. The reason was mainly loss because of

exceptional item. The sales are nearly same as of previous quarter. Other expenses of the company

have increased but with it other incomes have also increased. There is also an increment in the

inventory levels of the company. So the company has chances of increase in its profits again, as the

exceptional loss has already been adjusted in this quarter.

45 | P a g e

Research Conclusion:

Based on the research of pharmaceutical sector in Indian Market and according to application of

economic, technical and fundamental analysis, in my opinion the shares of Dr. Reddy‟s

Laboratories can give higher returns as compared to other Pharmaceutical companies. The

fundamental analysis clearly shows chances of increase in the company‟s profitability in next

quarter. The increase in profitability as well as it being a defensive stock, it will bring positivity in

the minds of the investors towards its shares.

The Other pharmaceutical companies can also give earnings as they are also defensive stocks.

According to economic analysis, the IT sector and sectors having high exposure to European

Market will be among the sufferers. So it will be much better to invest in safe stocks rather than

riskier assets.

In Accordance with the research paper published by Yasaswy J.N. (1993), “The risk return trade

off in shares”, The Hindu Daily, Vol. 116, Feb 12,1993 the research conducted by me also shows

that defensive stocks are much helpful in case of instability in the economy. Whenever a country

suffers any instability due to any event or any news, the mass moves their investments from growth

or riskier assets to defensive stocks to receive a regular and steady income.

46 | P a g e

SIP Learning’s and Conclusions

The Summer Internship Program helped me in learning the depth of Financial Markets. I also

understood the general terminologies frequently used while trading and analysis.

The Technical and Fundamental Analysis is what I was always eager to learn about, at Motisons

Shares Pvt. Ltd., I received this opportunity to gain knowledge about the same.

The live exposure to the market on daily basis gave me an understanding of how the Market

pressures feels like.

The Technical Analysis is a vast and extensive field in core Finance, which requires a higher

dedication, discipline and regular practical implication of learning‟s. It helps the person in analysing

the performance of any company in terms of its market price of shares, managing the funds

properly, so that the funds can be utilised as and when the opportunity occurs & also maintain the

profitability by investing in right stocks at the right time.

I have always been fond of learning the Financial Markets in depth, that‟s exactly the same what I

have learned during this internship at Motisons Shares Pvt. Ltd.

The corporate exposure, the polishing of concepts and real trading environment was all I wished for

& I received that during my internship.

I am obliged to receive the opportunity of working with Motisons Shares Pvt. Ltd. as my first step

into corporate world.

47 | P a g e

Bibliography

References Books:

NSE-NCFM Technical Analysis Module

NSE- NCFM Fundamental Analysis Module

The CandleStick Course- Steve Nison

Reference Websites:

Wikipedia

Investopedia

Stockcharts

Moneycontrol

Economic Times

NSE

Reference Software:

Sharekhan- Trade Tiger

Reference Articles:

1. Grewal S.S and Navjot Grewall (1984), “Profitable investment in shares”, Vision Books Pvt.

Ltd. 36 Connaught Place, New Delhi 1984.

2. Preethi Singh3(1986), “ Investment Management”, Himalaya Publishing House , Bombay

Nagpur and Delhi ,1986.

3. Yasaswy J.N. (1993), “The risk return trade off in shares”, The Hindu Daily, Vol. 116, Feb

12,1993.

4. C. Boobalan (2014) “Technical Analysis in Selected Stocks of Indian Companies”, PG and

Research Department of Commerce, SVM College, ISSN no. 2347-856X, 2014.