Investment Analysis & Equity Research

8/13/2019 Investment Analysis & Equity Research

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Investment Analysis & Equity Research

By Dr.Anup Raj


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Nucleus & Protoplasm of Investment

IncomeExpense = Saving(Passive in Nature)

Saving is the root of Investment

Saving-Investment =Idle Capital or Fund


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Saving

It is all about sacrifice of your current

consumption capacity to obtain a return

latter


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Investment

If a man is proud of his wealth, he should not

be praised until it is known how he employs it.

Socrates


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Investment

The commitment of funds to one or more assets that will be held over

some future time period


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Forms of Investment

Physical Form of Investment

Gold,Real Estate,Base Metals,Antiques etc.

Financial Form of Investments:-

Shares,Debentures,Bonds,Derivatives & other

financial Securities


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Investment Decision

Personal Level or Individual Level

Orgnisational Level or Corporate Level


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Investment as a Profession

Certified Financial Planner

Chartered Financial Consultant

Chartered Financial Analyst

Financial Advisor

Risk Analyst


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Investment Decision Process

Return(Expected)

Return(Realized)

Risk(Expected Variance in Expected Return)

Risk-Return Trade Off


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Structuring the Decision Process

Security Analysis:-The first part of the investment decisionprocesss,involving valuation and analysis of individual securities

Portfolio Management:-It involves the management of agroup of assets i.e. portfolio as a unit


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Important considerations in the investment decision process for Todays

Investors

The Great Unknown:-Uncertainty:- Risk

At best estimates are imprecise; at worst they are

completely wrong


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Organizing Financial Assets

Direct Investment:- Investors buy or sell

securities by themselves typically through

brokerage accounts/house

Indirect Investment:-Buy and sell take place

through an expert such as Mutual

Fund,Fund Houses etc.


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Major types of Financial Assets

Non Marketable:- Saving Deposits,C.Ds,Bond

Money market :-Treasury

Bills,NCD,CPs,Repurchase

Agreements,Bankers acceptance, etc.

Capital Market Instruments:- Fixed

Income,Equities,Treasuries etc.


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Risk Return Relationship


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The nature of the relationship is that as the level of expected risk

increases, the level of expected return also increases.

The opposite is true as well. Lower levels of expected risk are

associated with lower expected returns.


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This risk-return relationship is characterized

as being a direct relationship or a positive

relationship.


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Risk

Risk = the possibility of something unexpected happening

or

Risk = the possibility of an unexpected outcome occurring


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LIVE EXAMPLES

Strike at Marutis manesar plants has

stopped the production of much sought

after segment of SWIFT

Ultimately the rival group are having its

benefits by wooing buyers


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LIVE EXAMPLES

Interest rate hike is killing interest rate

sensitive companies such as Infrastructure

and Construction


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Expected Return

The expected rate of return on a investment

or stock represents the mean of a probability

distribution of possible future returns on thestock

Investment Analysis & Equity Research

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