Literature Review

1) Fundamental and Technical Analysis: Substitutes or Complements?

Although the fundamental and technical analysis literatures invest considerable effort in assessing their respective ability to explain share prices, they invariably do so without reference to each other. In this context, we propose an equity valuation model integrating both fundamental and technical analysis and, in doing so, recognize their potential as complements rather than as substitutes. Testing confirms the complementary nature of fundamental and technical analysis by showing that, although each performs well in isolation, models integrating both have superior explanatory power. While our findings relate to the valuation of shares, they also have implications for other valuation exercises.( Bettman, Jenni L)1

2) Investment analysis of investor by using fundamentals.

Jack Clark Francis2 (1986)2 revealed the importance of the rate of return in investments and reviewed the possibility of default and bankruptcy risk. He opined that in an uncertain world, investors cannot predict exactly what rate of return an investment will yield. However he suggested that the investors can formulate a probability distribution of the possible rates of return. He also opined that an investor who purchases corporate securities must face the possibility of default and bankruptcy by the issuer. Financial analysts can foresee bankruptcy. He disclosed some easily observable warnings of a firm's failure, which could be noticed by the investors to avoid such a risk.

3) FUNDAMENTAL AND TECHNICAL ANALYSES OF SHARE PRICES.

Trading with shares under the developed market conditions is fun for some people, for some other it is a way to preserve the real value of their property, and for many it is a challenge to make big money fast and easy. The dreams of stock exchange alchemy are based on the development and improvement of special systems, which ultimately aim to come to the bottom of secrets of share prices and their changes. What are the chances to make that happen?The chances are minimal according to the experiences acquired at the leading world stock exchanges in the past. (John Willey) The complexity of stock exchange activities, the number and unpredictability of factors on which the share prices depend and unexpected changes or stability do not offer much hope to those who know what will happen in the future. In such attempts, the chances are equal both for the stock exchange experts as for the complete

amateurs. Due to all this, if you cannot beat or deceive stock exchange market, then it is best to join it. This means to form a diversified portfolio of securities which would bring safe profit, a somewhat higher than the annual inflation with minimum risk. (PROFESSOR VEROLJUB DUGALIĆ, PhD)3

4) BY using fundamental analysis Profitable investment in shares.

Grewal S.S and Navjot Grewall (1984) 4 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, ie, 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.

5) Non-current accounts and Bombay Stock Exchange Sensitive (SENSEX) Index on month-to-month basis for the said period constituted the database. The company fundamentals and monthly share prices for 17 years of study period supported the conduct of the present study.Reports that industrial production, productivity, money supply and unemployment rates are consistently influencing the share returns, Chen et. al., (1996)5proposes that the unexpected inflation, industrial production, changes in risk premiums, etc., are crucial in Asset pricing. In a recent study Chen and Jorden (2002 )finds inflation, interest rates on government bonds, industrial production, oil prices, etc., are germane in asset prices. In Indian environment, the study conducted by Rajan Mookerjee (1998)6 observes weak linkages between changes in GDP and stock prices Malathy Prabhakaran, (1999), Rao and Bhole (2001), Choudhari (1998)7 andothers studied the impact of agriculture on stock prices and report conflicting results. A comprehensive study on these Economic variables is awaited in Indian context.

References

1) Accounting & Finance, Vol. 49, No. 1, pp. 21-36, March 2009.2) 2 ) Jack Clark Francis, lnzlestrrrents - Analysis and Management, MC Graw

Hill, International Editions, 1986.3) Dalton, J.: How the Stock Market Works, New York Institute of Finance, New

York, 1988.4) Dugalić, Veroljub. Fundamental and Technical Analyses of Share Prices.

2004.5) Grewal and Navjot Grewal, Profitable investments in shares, Vision Books

Pvt. Ltd. 36 Connaught Place, New Delhi 1984.6) Mangesh Soman and Arnav Pandya/ETIG, “Sensex MonsoonCorrelation is

Only Skin Deep”Economics Times, June-10-2003.7) “Economic Growth Projected 6.5%”, Vijay Times, July-12-2003.