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CHAPTER-I 1-6

INTRODUCTION:

NEED OF THE STUDY

OBJECTIVE OF THE STUDY

METHODOLOGY

LIMITATIONS

CHAPTER-II 7-42

COMPANY PROFILE

CHAPTER-III 43-86

DATA ANALYSIS

CEMENT INDUSTRY

STEEL INDUSTRY

CHAPTER-IV 87-115

Annexure of Different Company

CHAPTER-V 115-123

SUGESSIONSFINDINGS & CONCLUSIONBIBILIOGRAPHY

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ABSTRACT

The project entitled Equity Analysis and Share Price Movement of four different

Indian industries is basically useful for the investors who invest in the stocks in

share market.

The findings of this study help an investor to evaluate a particular companys

performance in the industry and its share price movement in the market by using

simple techniques of Fundamental and Technical Analysis.

This analysis is done because the security (share) prices in an effective capital

market fully reflect their investment value as the market has the capability to

instantaneously impound the given set of information into pricing process.

The empirical findings would be useful to investors as it provides evidence of

time varying nature of the stock market volatility. Investors aim at making moreprofitable and less risky investments. Therefore, the need to study and analyze

stock market, among many other factors, before making investment decisions, but

it is impossible to consistently make abnormal returns using trading strategy based

on a given set of information when the markets are efficient.

Thus this study of Equity Analysis and Share Price Movement will be an effective

guide for an investor of stocks for the profitable investment return.

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1.1 INTRODUCTION

As the security market is on the process of an ongoing revolution with various

marketable securities traded in the stock exchange. One of the many things people

always want to know about the stock market is, How do I make money by

investing in the stock Market ? There are many different approaches; two basic

methods are classified as either fundamental analysis or technical analysis.

Fundamental analysis refers to analyzing companies by their financial statements

found in SEC Filings, business trends, general economic conditions, etc. Technical

analysis studies price actions in markets through the use of charts and quantitative

techniques to attempt to forecast price trends regardless of the companys financial

prospects.

Additionally, many choose to invest via the index method. In this method, one

holds a weighted or unweighted portfolio consisting of the entire stock market or

some segment of the stock market (such as the NIFTY or SENSEX). The principalaim of this strategy is to maximize diversification, minimize taxes from too

frequent trading, and ride the general trend of the stock.

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1.2 NEED OF THE STUDY

The main need of the study is to describe the techniques and planning in

todays investment environment. Apart from this the objective of this project

study is to keenly understand issues examines all the essential analysis and

teaches how to apply them successfully. It incorporates sections on

fundamental analysis and technical analysis in the contexts of companies

and markets. The purpose of this study is to give suitable guidance to retail

investor. For this purpose two different industries with two companies in

each industry are taken for analysis.For this study the data is collected using

Balance Sheet, Income Statement, Ratio Analysis and Market Price of

Shares of the Companies of past years.

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1.3 OBJECTIVES OF THE STUDY

Is to suggest the investor how to analysis the stock before investing into any

companys stock.

The objective of the study is to look into the scientific approach for selecting

a stock where Fundamental Analysis and Technical Analysis are looked

into.

The study deals with analysis of performance of the company, share price

fluctuations and profit of the company and comparing it with anothercompany from same sector.

The purpose of the study is to locating a stock which gives good returns with

minimum risk.

The purpose of the study is to give awareness about analysis part of the

stock before buying it.

1.4 RESEARCH METHODOLOGY

The study is mostly based on the secondary information from the records of Inter-

connected Stock Exchange of India Limited (ISE). Necessary primary information

has been collected from ISE. Part of the information is collected from the

Textbooks, Journals, Newspapers, different Websites, and from companies site

for an understanding of financial performance of the Cellular Companies.

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1.5 LIMITATIONS OF THE STUDY

All the limitations of Fundamental Analysis, Technical Analysis are applicable

to the study.

Due to time constraint, a comprehensive and meticulous study was not possible. As

a result, there might be change of errors creeping in.

Owing to the busy schedule of the executives and the staff in the company,

exhaustive primary data couldnt be collected. Which might affect the result ofthe study,.

Recommendations of the study are only personal options.

Hence judgments may not be considered as ultimate and standard solution.

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CHAPTER: 2

2.1 LITERATURE REVIEW2.2 INDUSTRY PROFILE

STOCK EXCHANGE

2.3COMPANY PROFILE

INTER-CONNECTED STOCK EXCHANGE OF

INDIA LIMITED [ISE]

2.1 LITERATURE REVIEW

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Title : How Stocks Trade & How Price Movement take Place

Author : Abhishek Parka

Journal : Fundamental of stock market

Keywords : Articles, BSE, EP knowledge center, Indian stock market, NSE

Abstract :

At the most fundamental level, supply and demand in the market determines stock prices.

Price times the number of shares outstanding (market capitalization) is the value of a company,

comparing just the share price of two companies is meaningless. Theoretically, earnings are what

affect investors valuation of a company, but there are other indicators that investors use to

predict stock price. Remember, it is investors sentiments, attitudes and expectations that

ultimately affect stock prices. There are many theories that try to explain the way stock prices

move the way they do. Unfortunately, there is no one theory that can explain everything.

Title : Effect of Mergers on the Share Price Movement of the Acquiring

Firms:

A UK study

Author : J.C Dodds*, J.P. Quek*

Journal : journal of business finance & accountingAbstract :

The profitability of mergers in Britain has not received the same attention as in the USA.

This study examines mergers for the UK industrial sector as a whole for a period (1974-76)

when merger activity was relatively slack. A standard methodology is used, but the size effects

and the activeness of acquirers as well as the financing of the acquisition are examined. The

conclusions contradict to some extent those found by other researchers in that the evidence was

incenses-tent with the efficient markets hypothesis. The effect of taking firm size into account

was found to reduce the standard deviations of the sample and it would appear that the cash

mergers were viewed as less desirable by the market compared to equity exchange. For the

separation of merger active Hon active firms it was found that there was less dispersion of the

residuals for non-merger active firms.

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Title : SEBI probing steel share price movements

Author : Dinesh Narayanan

Journal : The Hindu Business Line

Abstract :

The securities and exchange board of India has launched an investigation into the

unusual price movement of shares of about half dozen steel companies, including that of steel

authority of India ltd (SAIL), over the past few days. According to sources, the regulator has

asked stock exchanges to find out whether any of these companies or its officials has violated

listing agreements and whether there was concentrated trading in the shares.

2.2 INDUSTRY PROFILE

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STOCK EXCHANGE

HISTORY:

The only stock exchange operating in the 19 th century was Bombay Stock

Exchange set up in 1875 and Ahmadabad set up in 1894. There were organized as

voluntary non-profit making association of brokers to regulate and protect their

interests. Before the control on securities trading became a central subject under

the constitution in 1950, it was a state subject and the Bombay securities contracts

(control) Act if 1925 used to regulate trading in securities. Under this Act, the

Bombay Stock Exchange was recognized in 1927 and Ahmadabad in 1937.

During the war boom, a number of stock exchanges were organized even in

Bombay, Ahmadabad and other centers, but they were not recognized. Soon after

it became a central subject, central legislation was proposed and a committee

headed by A.D. Gorwala went into the bill for securities regulation. On the basis of

the committees recommendations and public discussion, the securities contracts

(regulation) Act became law in 1956.

DEFINITION OF STOCK EXCHANGE:

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Stock Exchange means anybody or individuals whether incorporated or not,

constituted for the purpose of assisting, regulating or controlling the business of

buying, selling or dealing in securities.

It is an association of member brokers for the purpose of self-regulation and

protecting the interests of its members.

It can operate only if it is recognized by the government under the securities

contacts (regulation) Act, 1956. The recognition is granted under section 3 of the

Act by the central government, Ministry of Finance.

REGULATION OF STOCK EXCHANGE:

The Securities contracts (regulation) act is the basis for operations of the Stock

Exchanges in India. No exchange can operate legally without the Government

permission or recognition. Stock Exchanges are given monopoly in certain areas

under section 19 of the above Act to ensure that the control and regulation are

facilitated. Recognition can also be withdrawn, if necessary where there are no

Stock Exchanges in its absence.

SECURITIES AND EXCHANGE BOARD OF INDIA [SEBI]:

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SEBI was setup as an autonomous regulatory authority by the Government of India

in 1988 to protect the interests of investors in securities and to promote the

development and to regulate the securities market and for matters connected there

with or incidental there to. It is empowered by two acts namely SEBI Act, 1992

and Securities Contract (regulation) Act, 1956 to perform the function of

protecting investors rights and regulating the capital markets. SEBI was given

statutory status by an Act of Parliament on April 4, 1992. SEBI was authorized.

1) To regulate all merchant banks on issue activity

2) To lay guidelines, and supervise and regulate the working of mutual funds,

and

3) To oversee the working of stock exchange of India.

Stock Market Index:

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The movements of the prices in a market or section of a market are captured in price

indices called stock market indices, of which there are many, e.g., the S&P, the FTSEand the

Euronext indices. Such indices are usually market capitalization (the total market value of

floating capital of the company) weighted, with the weights reflecting the contribution of the

stock to the index. The constituents of the index are reviewed frequently to include/exclude

stocks in order to reflect the changing business environment.

There are mainly two indices in India:1. Bombay Stock market (BSE):

2. National Stock Exchange (NSE):

Bombay Stock Exchange (BSE):-

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The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai;

popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia. It

is located at Dalal Street, Mumbai, India.

The Bombay Stock Exchange was established in 1875. There are around 4,800 Indian

companies listed with the stock exchange, and has a significant trading volume. As of August

2007, the equity market capitalization of the companies listed on the BSE was US $ 1.11 trillion.

The BSE SENSEX (Sensitive index), also called the "BSE 30", is a widely used market index in

India and Asia. It is located at Dalal Street, Mumbai, India.

National Stock Exchange (NSE):-

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The National Stock Exchange of India Ltd. (NSE), set up in the year 1993, is today the

largest stock exchange in India and a preferred exchange for trading in equity, debt and

derivatives instruments by investors. NSE has set up a sophisticated electronic trading, clearing

and settlement platform and its infrastructure serves as a role model for the securities industry.

The standards set by NSE in terms of market practices; products and technology have become

industry benchmarks and are being replicated by many other market participants.

NSE provides a screen-based automated trading system with a high degree of

transparency and equal access to investors irrespective of geographical location. The high level

of information dissemination through the on-line system has helped in integrating retail investors

across the nation.

The exchange has a network in more than 350 cities and its trading members are

connected to the central servers of the exchange in Mumbai through a sophisticated

telecommunication network comprising of over 2500 VSATs.

NSE has around 850 trading members and provides trading in equity shares and debt

securities. Besides this, NSE provides trading in various derivative products such as index

futures, index options, stock futures, stock options and interest rate futures.

In addition to these organizations there are other organizations highlighting on the share

trading in the Indian Stock Market are:

Securities and Exchange Board of India (SEBI)

NSDL

CDSL

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NSE-NIFTY

The NSE on April 22, 1996 launched a new equity Index. The NSE-50. The new

Index which replaces the existing NSE-100 Index is expected to serve as an

appropriate Index for the new segment of futures and options. NIFTY means

Nations Index for Fifty Stocks. The NSE-50 comprises 50 companies that

represent 20 broad industry groups with an aggregate market capitalization of

around Rs. 1,70000crs. All companies included in the Index have a market

capitalization excess of Rs. 500crs each and should have traded for 85% of tradingdays at an impact cost of less than 1.5%.

NSE- MIDCAP INDEX

The NSE midcap Index or the Nifty comprises 50 stocks that represent 21 boards

industry groups and will provide proper representation of the midcap segment of

the Indian Capital Market. All stocks in the Index should have market

capitalization of greater than Rs. 200crs and should have traded 85% of the trading

days at an impact cost of less 2.5%. The base period for the index is Nov 4, 1996

which signifies two years for completion of operations of the capital market

segment of the operations. The base value of the Index has been set at 1000.

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MISSION:

NSEs, mission is setting the agenda for change in the securities markets in India.

The NSE was set-up with the main objectives of:

Establishing a nationwide trading facility for equities, debt instruments and

hybrids.

Ensuring equal access to investors all over the country through an

appropriate communication network.

Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology has become

industry benchmarks and is being emulated by other market participants. NSE is

more than a mere market facilitator. Its that force which is guiding the industry

towards new horizons and greater opportunities.

PROMOTERS:

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NSE has been promoted by leading financial institutions, Banks, Insurance

companies and other financial intermediaries:

Industrial Development Bank of India Limited

Industrial Finance Corporation of India Limited

Life Insurance Corporation of India

State Bank of India

ICICI Bank Limited

IL & FS Trust Company Limited

Stock Holding Corporation of India Limited SBI Capital Markets Limited

The Administrator of the Specified Undertaking of Unit Trust of India

Bank of Baroda

Canara Bank

General Insurance Corporation of India

National Insurance Company India

The New India Assurance Company Limited

The Oriental Insurance Company Limited

Punjab National Bank

Oriental Bank of Commerce

Corporation Bank

Indian Bank

Union Bank of India

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At present, there are 24 Stock Exchanges recognized under the Securities Contract

(Regulation) Act, 1956. They are:

NAME OF THE STOCK EXCHANGE YEAR

Bombay Stock Exchange 1875Ahmadabad Share and Stock Brokers Association Ltd. 1957Calcutta Stock Exchange Association Ltd. 1957Delhi Stock Exchange Association Ltd. 1957Madras Stock Exchange Association Ltd. 1958Indore Stock Exchange Association Ltd. 1968Bangalore Stok Exchange 1943Hyderabad Stock Exchange 1978

Cochin Stock Exchange 1982Pune Stock Exchange 1982U.P. Stock Exchange Association Ltd. 1983Ludhiana Stock Exchange Association 1983Jaipur Stock Exchange Ltd. 1984Gauhathi Stock Exchange Ltd. 1985Mangalore Stock Exchange Ltd. 1986Maghad Stock Exchange Association Ltd. 1989Bhubaneshwar Stock Exchange Association Ltd. 1989

Over the Counter Exchange of India, Bombay1990

Saurashtra Kutch Stock Exchange Ltd. 1991C Stock Exchange Ltd. 1991Coimbatore Stock Exchange Ltd. 1991The Meerut Stock Exchange Ltd. 1991

National Stock Exchange Ltd. 1991Integrated Stock Exchange Ltd. 1999

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Saving:

Saving are excess of income over expenditure for any economic unit .

Thus ,S = Y E

Where, S is saving,

Y is income and E is expenditure.

Secondly, excess funds or surplus in profits or capital gains are also available for

investment. Thus,

S = W1 W2Where, W1 is wealth in period 2,

W2 is wealth in period 1,

So, the difference between them is capital gains or losses.

Thirdly, investment is also made by many companies and individuals by

borrowing, from others. Thus the Corporate Sector and Government Sector are always

net borrows, as they invest more than their savings. Thus,

S = B L

Where, B is borrowings

L is landings

Savings can be negative or positive.

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Why Saving:

Saving is abstaining from present consumption for a future use. Saving are

sometimes autonomous coming from households as a matter of habit. But bulk of the

savings come for specific objectives, like interest income, future needs, contingencies,

precautionary purposes, or growth in future wealth, leading to rise in the standard of

living etc.

Saving and Investment:

Investors are savers but all savers cannot be good investors, as investment is a

science and an art. Savings are sometimes autonomous and sometimes induced by the

incentives like fiscal concessions or income or capital appreciation. The number of

investors is about 50 million out of population of more than one billion in India. Savers

come from all classes except in the case of the population who are below the poverty

line. The growths of urbanization and literacy have activated the cult of investment.

More recently, since the eighties the investment activity has become more popular with

the change in the Government Polices towards liberalization and financial deregulation.

The process of liberalization and privatization was accelerated by the Government policy

changes towards a market oriented economy, through economic and financial reforms

stated in July 1991.

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What is Investment ?

Investment is the activity, which is made with the objective of earning some sort

of positive returns in the future. It is the commitment of the funds to earn future returns

and it involves sacrificing the present investment for the future return. Every person

makes the investment so that the funds he has increases as keeping cash with himself is

not going to help as it will not generate any returns and also with the passage of time the

time value of the money will come down. As the inflation will rise the purchasing power

of the money will come down and this will result that the investor who does not investwill become more poor as he will not have any funds whose value have been increased.

Thus every person whether he is a businessman or a common man will make the

investment with the objective of getting future returns.

Types of Investments :

There are basically three types of investments from which the investors can choose. The

three kinds of investment have their own risk and return profile and investor will decide

to invest taking into account his own risk appetite. The main types of investments are: -

Economic investments:-

These investments refer to the net addition to the capital stock of the society. The capital

stock of the society refers to the investments made in plant, building, land and machinerywhich are used for the further production of the goods. This type of investments are very

important for the development of the economy because if the investment are not made in

the plant and machinery the industrial production will come down and which will bring

down the overall growth of the economy.

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Financial Investments:-

This type of investments refers to the investments made in the marketable securities

which are of tradable nature. It includes the shares, debentures, bonds and units of the

mutual funds and any other securities which is covered under the ambit of the Securities

Contract Regulations Act definition of the word security. The investments made in the

capital market instruments are of vital important for the country economic growth as the

stock market index is called as the barometer of the economy.

General Investments:-

These investments refer to the investments made by the common investor in his own

small assets like the television, car, house, motor cycle. These types of investments are

termed as the household investments. Such types of investment are important for the

domestic economy of the country. When the demand in the domestic economy boost the

over all productions and the manufacturing in the industrial sectors also goes up and this

causes rise in the employment activity and thus boost up the GDP growth rate of the

country. The organizations like the Central Statistical Organization (CSO) regularly

takes the study of the investments made in the household sector which shows that the

level of consumptions in the domestic markets.

So from above we know the term investment. The savers become the investors in the

following term and invest in unique assets:

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Financial Assets

Cash , Bank DepositsPF , LIC Schemes

Pension scheme,

Post office Certificates

Becomes PHYSICAL ASSETS:

Save Investor House, Land, Building, Flats

Gold, Silver and Other Metals

Consumer Durables

MARKETABLE ASSETS:

Shares, Bonds

Government securities

Mutual Fund

UTI units etc.

Stock & Capital Market

New Issues Stock Market

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CHARACTERISICS OF INVESTMENT

Certain features characterize all investments. The following are the main characteristics

features if investments: -

1.Return: -

All investments are characterized by the expectation of a return. In fact, investments are

made with the primary objective of deriving a return. The return may be received in the

form of yield plus capital appreciation. The difference between the sale price & the

purchase price is capital appreciation. The dividend or interest received from the

investment is the yield. Different types of investments promise different rates of return.

The return from an investment depends upon the nature of investment, the maturity

period & a host of other factors.

2.Risk: -

Risk is inherent in any investment. The risk may relate to loss of capital, delay in

repayment of capital, nonpayment of interest, or variability of returns. While some

investments like government securities & bank deposits are almost risk less, others are

more risky. The risk of an investment depends on the following factors.

The longer the maturity period, the longer is the risk.

The lower the credit worthiness of the borrower, the higher is the risk.

The risk varies with the nature of investment. Investments in ownership securities like

equity share carry higher risk compared to investments in debt instrument like debentures

& bonds.

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3. Safety: -

The safety of an investment implies the certainty of return of capital without loss of

money or time. Safety is another features which an investors desire for his investments.

Every investor expects to get back his capital on maturity without loss & without delay.

4. Liquidity: -

An investment, which is easily saleable, or marketable without loss of money & without

loss of time is said to possess liquidity. Some investments like company deposits, bank

deposits, P.O. deposits, NSC, NSS etc. are not marketable. Some investment instrument

like preference shares & debentures are marketable, but there are no buyers in many

cases & hence their liquidity is negligible. Equity shares of companies listed on stock

exchanges are easily marketable through the stock exchanges.

An investor generally prefers liquidity for his investment, safety of his funds, a good

return with minimum risk or minimization of risk & maximization of return.

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IMPORTANCE

In the current situation, investment is becomes necessary for everyone & it is important

& useful in the following ways:

1. Retirement planning: -

Investment decision has become significant as people retire between the ages of 55 & 60.

Also, the trend shows longer life expectancy. The earning from employment should,

therefore, be calculated in such a manner that a portion should be put away as a savings.

Savings by themselves do not increase wealth; these must be invested in such a way that

the principal & income will be adequate for a greater number of retirement years.

Increase in working population, proper planning for life span & longevity have ensured

the need for balanced investments.

2. Increasing rates of taxation: -

Taxation is one of the crucial factors in any country, which introduce an element of

compulsion, in a persons saving. In the form investments, there are various forms of

saving outlets in our country, which help in bringing down the tax level by offering

deductions in personal income.

For examples: -

a. Unit linked insurance plan,

b. Life insurance,

c. National saving certificates,

d. Development bonds,

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e. Post office cumulative deposit schemes etc.

3. Rates of interest: -

It is also an important aspect for sound investment plan. It varies between investment &

another. This may vary between risky & safe investment, they may also differ due

different benefits schemes offered by the investments. These aspects must be considered

before actually investing. The investor has to include in his portfolio several kinds of

investments stability of interest is as important as receiving high rate of interest.

4. Inflation: -

Since the last decade, now a days inflation becomes a continuous problem. In these

years of rising prices, several problems are associated coupled with a falling standard of

living. Before funds are invested, erosion of the resource will have to be carefully

considered in order to make the right choice of investments. The investor will try &

search outlets, which gives him a high rate of return in form of interest to cover any

decrease due to inflation. He will also have to judge whether the interest or return will be

continuous or there is a likelihood of irregularity. Coupled with high rate of interest, he

will have to find an outlet, which will ensure safety of principal. Beside high rate of

interest & safety of principal an investor also has to always bear in mind the taxation

angle, the interest earned through investment should not unduly increase his taxation

burden otherwise; the benefit derived from interest will be compensated by an increase intaxation.

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For maintaining purchasing power stability, investors should carefully plan and

invest their funds by making analysis.

a. The rate of expected return and inflation rate.

b. The possibilities of expected gain or loss on their investment.

c. The limitation imposed by personal and family considerations.

5. Income: -

For increasing in employment opportunities in India., investment decisions have assumed

importance. After independence with the stage of development in the country a number

of organization & services came into being.

For example: -

The Indian administrative services, Banking recruitment services, Expansion in private

corporate sector, Public sector enterprises,

Establishing of financial institutions, tourism, hotels, and education

More avenues for investment have led to the ability & willingness of working people to

save & invest their funds.

6. Investment channels: -

The growth & development of country leading to greater economic activity has led to the

introduction of a vast array of investment outlays. Apart from putting aside saving in

savings banks where interest is low, investor have the choice of a variety of instruments.

The question to reason out is which is the most suitable channel? Which media will give

a balanced growth & stability of return? The investor in his choice of investment will

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give a balanced growth & stability of return? The investor in his choice of investment

will have try & achieve a proper mix between high rates of return to reap the benefits of

both.

For example: -

Fixed deposit in corporate sector

Unit trust schemes.

INVESTMENTS AVENUES:-

There are various investments avenues provided by a country to its people depending

upon the development of the country itself. The developed countries like the USA and

the Japan provide variety of investments as compared to our country. In India before the

post liberalization era there were limited investments avenues available to the people in

which they could invest. With the opening up of the economy the number of investments

avenues have also increased and the quality of the investments have also improved due to

the use of the professional activity of the players involved in this segment. Today

investment is no longer a process of trial and error and it has become a systematized

process, which involves the use of the professional investment solution provider to play a

greater role in the investment process.

Earlier the investments were made without any analysis as the complexity involved the

investment process were not there and also there was no availability of variety ofinstruments. But today as the number of investment options have increased and with the

variety of investments options available the investor has to take decision according to his

own risk and return analysis.

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An investor has a wide array of Investment Avenue. They are as under:

31

Investment

Financial Derivatives

Precious objects

Life Insurance

Deposits

Fixed Income

Real Estate

Tax Sheltered

Mutual Fund

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1. TYPES OF EQUITY INSTRUMENTS :

Ordinary Shares

Ordinary shareholders are the owners of a company, and each share entitles the holder to

ownership privileges such as dividends declared by the company and voting rights at

meetings. Losses as well as profits are shared by the equity shareholders. Without any

guaranteed income or security, equity shares are a risk investment, bringing with them

the potential for capital appreciation in return for the additional risk that the investor

undertakes in comparison to debt instruments with guaranteed income.

Preference Shares

Unlike equity shares, preference shares entitle the holder to dividends at fixed rates

subject to availability of profits after tax. If preference shares are cumulative, unpaid

dividends for years of inadequate profits are paid in subsequent years. Preference shares

do not entitle the holder to ownership privileges such as voting rights at meetings.

Equity Warrants

These are long term rights that offer holders the right to purchase equity shares in a

company at a fixed price (usually higher than the current market price) within a specified

period. Warrants are in the nature of options on stocks.

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Classification in terms of Market Capitalization

Market capitalisation is equivalent to the current value of a companyi.e. current market

price per share times the number of outstanding shares. There are Large Capitalisation

companies, Mid-Cap companies and Small-Cap companies. Different schemes of a fund

may define their fund objective as a preference for Large or Mid or Small-Cap

companies' shares. Large Cap shares are more liquid andhence easily tradable. Mid or

Small Cap shares may be thought of as having greater growth potential. The stock

markets generally have different indices available to track these different classes of

shares.

Classification in terms of Anticipated Earnings

Industries may have lower P/E ratios. The P/E analysis is sometimes supplemented with

ratios such as Market Price to Book Value and Market Price to Cash Flow per share.

Dividend Yield for a stock is the ratio of dividend paid per share to current In

terms of the anticipated earnings of the companies, shares are generally classified on

the basis of their market price in relation to one of the following measures:

Price/Earnings Ratio is the price of a share divided by theearnings per share, and

indicates what the investors are willing to pay for the company's earning potential.

Young and/or fast growing companies usually have high P/E ratios. Established

companies in mature market price. Low P/E stocks usually have high dividend yields. In

India, at least in the past, investors have indicated a preference for the high dividend

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paying shares.

Based on companies' anticipated earnings and in the light of the investment

management experience the world over, stocks are classified in the following groups:

Cyclical Stocks are shares of companies whose earnings are correlated with the

state of the economy. Their earnings (and therefore, their share prices) tend to go up

during upward economic cycles and vice versa. Cement or Aluminium producers fall

into this category, just as an example. These companies may command relatively lower

P/E ratios, and have higher dividend pay-outs.

Growth Stocks are shares of companies whose earnings areexpected to increase

at rates that exceed normal market levels. They tend to reinvest earnings and usually

have high P/E ratios and low dividend yields. Software or information technology

company shares are an example of this type. Fund managers try to identify the sectors or

companies that have a high growth potential.

Value Stocks are shares of companies in mature industries and are expected to

yield low growth in earnings. These companies may, however, have assets whose values

have not been recognised by investors in general. Fund managers try to identify such

currently under-valued stocks that in their opinion can yield superior returns later. A

cement company with a lot of real estate and a company with good brand names are

examples of potential value shares.

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2. FIXED INCOME SECURITIES

Many instruments give regular income. Debt instruments may be secured by the

assets of the borrowers as generally in case of Corporate Debentures, or be unsecured as

is the case with Indian Financial Institution Bonds.

A debt security is issued by a borrower and is often known by the issuer category,

thus giving us Government Securities and Corporate Securities or FI bonds. Debt

instruments are also distinguished by their maturity profile. Thus, instruments issued

with short-term maturities, typically under one year, are classified as Money Market

Securities. Instruments carrying longer than one-year maturities are generally called Debt

Securities.

Most debt securities are interest-bearing. However, there are securities that are

discounted securities or zero-coupon bonds that do not pay regular interest at intervals

but are bought at a discount to their face value. A large part of the interest-bearing

securities are generally Fixed Income-paying, while there are also securities that pay

interest on a Floating Rate basis.

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A Review of the Indian Debt Market

The Wholesale Debt Market segment deals in fixed income securities and is fast

gaining ground in an environment that has largely focused on equities.

The Wholesale Debt Market (WDM) segment of the Exchange commenced operations

on June 30, 1994. This provided the first formal screen-based trading facility for the debtmarket in the country.

This segment provides trading facilities for a variety of debt instruments including

Government Securities, Treasury Bills and Bonds issued by Public Sector Undertakings/

Corporates/ Banks like Floating Rate Bonds, Zero Coupon Bonds, Commercial Papers,

Certificate of Deposits, Corporate Debentures, State Government loans, SLR and Non-

SLR Bonds issued by Financial Institutions, Units of Mutual Funds and Securitized debt

by banks, financial institutions, corporate bodies, trusts and others.

Large investors and a high average trade value characterize this segment. Till recently,

the market was purely an informal market with most of the trades directly negotiated and

struck between various participants. The commencement of this segment by NSE has

brought about transparency and efficiency to the debt market, along with effective

monitoring and surveillance to the market.

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Instruments in the Indian Debt Market

Certificate of Deposit

Certificates of Deposit (CD) are issued by scheduled commercial banks excluding

regional rural banks. These are unsecured negotiable promissory notes. Bank CDs have a

maturity period of 91 days to one year, while those issued by FIs have maturities

between one and three years.

Commercial Paper

Commercial paper (CP) is a short term, unsecured instrument issued by corporate bodies

(public & private) to meet short-term working capital requirements. Maturity varies

between 3 months and 1 year. This instrument can be issued to individuals, banks,companies and other corporate bodies registered or incorporated in India. CPs can be

issued to NRIs on non-repatriable and non-transferable basis.

Corporate Debentures

The debentures are usually issued by manufacturing companies with physical assets, as

secured instruments, in the form of certificates They are assigned a credit rating by rating

agencies. Trading in debentures is generally based on the current yield and market values

are based on yield-to-maturity. All publicly issued debentures are listed on exchanges.

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Floating Rate Bonds (FRB)

These are short to medium term interest bearing instruments issued by financial

intermediaries and corporates. The typical maturity of these bonds is 3 to 5 years. FRBs

issued by financial institutions are generally unsecured while those from private

corporates are secured. The FRBs are pegged to different reference rates such as T-bills

or bank deposit rates. The FRBs issued by the Government of India are in the form of

Stock Certificates or issued by credit to SGL accounts maintained by the RBI.

Government Securities

These are medium to long term interest-bearing obligations issued through the RBI by

the Government of India and state governments. The RBI decides the cut-off coupon onthe basis of bids received during auctions. There are issues where the rate is pre-specified

and the investor only bids for the quantity. In most cases the coupon is paid semi-

annually with bullet redemption features.

Treasury Bills

T-bills are short-term obligations issued through the RBI by the Government of India at a

discount. The RBI issues T-bills for different tenures: now 91 -days and 364-days. These

treasury bills are issued through an auction procedure. The yield is determined on the

basis of bids tendered and accepted.

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Bank/FI Bonds

Most of the institutional bonds are in the form of promissory notes transferable by

endorsement and delivery. These are negotiable certificates, issued by the Financial

Institutions such as the IDBI/ICICI/ IFCI or by commercial banks. These instruments

have been issued both as regular income bonds and as discounted long-term instruments

(deep discount bonds).

Public Sector Undertakings (PSU) Bonds

PSU Bonds are medium and long term obligations issued by public sector companies in

which the government share holding is generally greater than 51%. Some PSU bonds

carry tax exemptions. The minimum maturity is 5 years for taxable bonds and 7 years for

tax-free bonds. PSU bonds are generally not guaranteed by the government and are in the

form of promissory notes transferable by endorsement and delivery. PSU bonds in

electronic form (demat) are eligible for repo transactions.

3. MUTUAL FUND SCHEMES

An investor can participant in various schemes floated by mutual fund instead of buying

equity shares. In mutual funds invest in equity shares & fixed income securities. There

are three broad types of mutual fund schemes.

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Growth schemes

Income schemes

Balanced schemes

4. DEPOSITS

It is just like fixed income securities earn a fixed return. However, unlike fixed income

securities, deposits are negotiable or transferable. The important types of deposits in

India are:

Bank deposits

Company deposits

Postal deposits.

5. TAX-SHELTERED SAVING SCHEMES

It provides benefits to those who participate in them. The most important tax sheltered

saving schemes in India is:

Employee provident fund scheme

Public provident fund schemes

National saving certificate

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6. LIFE INSURANCE

In a broad sense, life insurance may be viewed as an investment. Insurance premiums

represent the sacrifice & the assured sum the benefit. In India, the important types of

insurance polices are: Endowment assurance policy

Money back policy

Whole life policy

Premium back term assurance policy

7. REAL ESTATE

For the bilk of the investors the most important asset in their portfolio is a residential

house. In addition to a residential house, the more affluent investors are likely to be

interested in the following types of real estate:

Agricultural land

Semi-urban land

8. PRECIOUS OBJECTS

It is highly valuable in monetary terms but generally they are small in size. The

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important precious objects are:

Gold & silver

Precious stones

Art objects

9. FINANCIAL DERIVATIVES

A financial derivative is an instrument whose value is derived from the value of

underlying asset. It may be viewed as a side bet on the asset. The most import financial

derivatives from the point of view of investors are:

Options

Futures.

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CHAPTER: 3

THEORETICAL CONCEPT

3.1 EQUITY SHARES3.2 FUNDAMENTAL ANALYSIS

3.3 TECHNICAL ANALYSIS

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3.1 EQUITY SHARES

Equity represents an ownership position in a corporation. It is residual claim in the

sense that creditors and preference shareholders must be paid as scheduled before

equity shareholders can receive payment. In bankruptcy equity holders are

principle entitled only to assets remaining after all prior claimants has been

satisfied. Thus risk is highest with equity shares and so must be its expected return.

When investors buy equity shares, they receive certificates of ownership as proof

of their being part owners of the company. The certificate states the number of

shares purchased and their par value. The attitude towards equity shares varied

from extreme pessimism to optimism from time to time.

The main advantages of equity shares are listed below: Potential for Profit: The potential for profit is greater in equity shares than in

any other investment security. Current dividends yield may be low but potentialof capital gains is great. The total yield or yields to maturity may be substantial

over a period of time.

Limited Liability: In corporate form of organization, its owners have,

generally, limited liability. Equity shares is usually fully paid. Shareholders

may lose their investments, but no more. They are not further liable for any

failure in the part of corporation of meet its obligation.

Hedge against Inflation: The equity share is good hedge against inflation

though it does not fully compensate for the declining purchasing power as it is

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subject to money-rate risk. But when interest rates are high, shares tend to be

less attractive, and prices tend to be depressed.

Share in Growth: The major advantage of investment in equity shares is its

ability to increase in value by sharing in the growth of company profits over the

long run.

Tax Advantage: Equity shares also offers tax advantage to the investors. The

larger yield on equity shares results from an increase in principal of capital

gains, which are taxed at lower rate than other incomes in most of the countries.

EQUITY CAPITAL TERMINOLOGY:

The important terms used in equity capital are listed below: Authorized Capital: The authorized capital is the maximum number of

shares of each type that may be issued by the company. To change this

number, or provision of any class of shares, the company requires the formal

approval of shareholders.

Issued Capital: Issued capital is the part of the authorized capital that hasbeen issued for cash, property, or service.

Paid up Capital: Fully paid shares are those shares for which the

corporation has received full payment up to the par-value, or up to the

amount established as the selling price of no-par-shares. Partly paid shares

are those shares that have been issued for less than par-value or the agreed

subscription.

NATURE OF EQUITY SHARES:

Equity shares represent an ownership of a corporation. It is true that the equity

shares must bear first impact of any adversity, but it is also true that the equity

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shares is the only class of securities privileged to enjoy maximum participation in

an extensive growth of the company. The risk of the one may be regarded as

commensurate with the opportunity of the other. There is nothing certain about

earnings on equity shares, and the investor can lose as well as earn a profit.

Evidence of Ownership: When investor buys equity shares, they receive

certificates of ownership as a proof of their part as owners of the company.

This certificates state the number of shares purchased, their par value, if any,

and usually the transfer agent. When equity shares are purchased on the

market (that when it is not a new issue which is purchased from the

company), the new owner and the number of shares bought are noted in therecord book of the transfer agent.

Maturity of Equity Shares: Equity shares have no maturity date. Their life

is limited by the length of time stated in the corporate charter know as

Memorandum of Association. The corporate life might be for stated or

limited period, or it might be perpetual. Most corporations have a perpetual

character. For investment purpose, equity shares can be purchased and soldat any time.The date on which the equity is sold by the investor is the

maturity date, and the price at which the equity is sold is called the maturity

price. In fact, the investor is vitally concerned with the yield earned over the

period that the equity is owned, since the yield for the holding period

represents the total earnings to the investor and is a measure of performance

to be compared to those of other securities investments.

Par Value: Par value is the face value of the share. Equity shares have par

value, a nominal stated value. The par value of an equity shares indicates the

amount of capital originally subscribed by the shareholders. New shares

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cannot be sold less than par value. If the equity shares are sold for more than

par, the excess is transferred to Share Premium Account.

Net Asset Value and Book Value: Distrust of present value formulae, the

quest for objectivity and perhaps even nostalgia lead some analyst to place

greater emphasis on the asset value factor when evaluating investment worth

of a companys equity shares. Net assets or net worth can be calculated from

either the asset of liability side of balance sheet.

On the other hand, what if the price of the equity is significantly below book

value; dose it then represent under priced. The estimate of net assets per

shares reflects the accounting conventions used in drawing up the balance

sheet and the accounting practice deviates significantly from economic

theory.

Financial Analysis and Accounting Data: The historical numbers that

analyst uses to prepare rates and forecasting equations are generally based

on figures that have been taken from the published financial statements ofthe firm being analyzed. Although these statements may have been prepared

according to generally accept accounting principles, there may be

significant variation in real economic meaning of financial reports.

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INVESTMENT PROCESS IN EQUITY SHARES:

Investment process describes how an investor should go about making decisions

with regard to what marketable securities to invest in, how extensive the

investment should be and when the investment should be made. An eight-step

procedure for making these decisions forms the basis for the investment process.

1. What is Investment

2. Understanding Shares

3. Finding a Broker

4. Evaluation of Shares

5. Research Tools

6. Investing Strategy

7. Investing Technique

8. What Moves the Market

Step 1: What is Investment?

Investing is making your money work for you without taking any

more risks than necessary for your comfort.

Investing is the proactive use of your money to make more money.

How to calculate Risk Premium?

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Risk premium is what a stock should return over a risk-free investment. It

is your reward for taking a risk with your money.

Weak demand is the important factor in stock pricing:

Despite high crude oil prices, its weak demand for gasoline that holds back

oil stock prices. Supply and demand is an important factor in determining

price of stocks.

Corrections are natural part of stock market cycle.

Dont be too conservative with stocks in retirement:

There is a danger you can be too conservative in your investment strategy as

you approach retirement dont back off stocks too soon.

Step 2: Understanding Shares

Bull and Bear stock market are the two sides of same coin:

Bull and bear markets go together and are necessary for an efficient

market.

Poll results show confidence in stocks:

The results of a poll on where the sensex be at the end of 2009 show

stock investors are positive.

Step 3: Finding a Broker

To decide which type of broker is right for you, you need to use these

resources to find the brokerage arrangement that best fits your needs.

Thirteen of the top online stock trading sites offer investors a wide variety of

services including research and advice.

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Brokers offer different levels of service. A broker fills in the gaps in

knowledge and experience.

Broker explains what types of accounts are available and how to open an

account.

Financial advisers can map a blue print that will get you from where you are

to your financial goals.

Financial advisers come in a variety of flavors. Finding the one right for you

involve knowing how each is compensated and what they do.

The New Year poses many challenges for stocks, including high oil prices,

the credit crisis, and a potential recession.

Stock prices are driven by the relationship between buyers and sellers.

Attractive stocks have more buyers than sellers, which drives up prices,

while less attractive stocks feel the reverse effect.

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Step 4: Evaluating Stocks for Investment

Fundamental analysis relies on several tools to give investors an accurate

picture of the financial health of a company and how the market values the stock.

The following are the most popular tools of fundamental analysis. They focus on

earnings, growth, and value in the market.

a) Earnings Per Share EPS

b) Price to Earnings Ratio P/E

c) Projected Earnings Growth PEG

d) Price to Sales P/S

e) Price to Book P/B

f) Dividend Payout Ratio

g) Dividend Yield

h) Book Value

i) Return on Equity

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Step 5: Research Tools

The internet is a gold mine of information, but youll need some tools to get to the

nuggets. Research tools make the job easier if you know where to find them and

how to use them.

The better stock screens offer similar characteristics that give you greater

flexibility when looking for investment candidates and eliminate other

companies.

Stock screens will save time and help to build a thoughtful portfolio by

focusing on those companies that meet your investing requirements.

Stock screens can help any investor make better stock selections by reducing

the number of companies to research.

Dividend ratios can tell much about a stock and its future payout prospects.

One of the best sources of information on companies is free and as near as

your computer.

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Step 6: Investing Strategies

What strategy to use as an investor? The different investment strategies and how to

develop personal investment strategy is explained below:

When and how to sell a winning stock?

Knowing when and how to sell a winning stock is as important as knowing

when to sell a losing stock.

Dont be too conservative with stocks:

Following a too conservative investment strategy in retirement may not

protect you from outliving your money. Bottom-up investors focus on strong companies and believe they will

perform well in any market conditions.

Top-down investing looks at big picture before narrowing in on individual

stocks.

Step 7: Investing Techniques

Investing techniques offer powerful ways for investors to execute their strategies.

These techniques provide a structure for investing.

After-hours trading of stocks may seem like a great idea, but it is full of

risks for the average investor.

Diversify stocks by industry to avoid across-the-board losses on bad

economic news. Investments should not be correlated to achieve diversity.

Investing with expectations of high returns is not investing but gambling.

Dont try to double or triple your money quickly in the stock market youll

be disappointed and perhaps poorer.

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Step 8: What Moves the Market?

What makes the market rise or fall? Sometimes it seems to have a mind of its own

that reacts poorly to good news and with enthusiasm to bad news. One should

learn the factor that are the major influences on the markets and how to use this

information.

Major economic and political factors shape the market, but most of all the

market hates uncertainty.

EQUITY ANALYSIS

Equity valuation and analysis is done when problems faced with buying,

holding, or selling decisions are made. The analysis must be based on past

performance of the security and then coupled with personal experience, predicting

its future performance and relative market position. The Equity Analysis is based

upon two analysis they are

Fundamental Analysis

Technical Analysis

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3.2 FUNDAMENTAL ANALYSIS

Its a logical and systematic approach to estimating the future dividends & share

price, as these two constitute the return from investing in shares. According to this

approach, the share price of a company is determined by the fundamental factors

affecting the Economy/Industry/Company such as Earnings Per Share, D/P ratio,

Competition, Market Share, Quality of Management etc. it calculates the true

worth of the share based on its present and future earning capacity and compares

it with the current market price to identify the miss-priced securities. Fundamental

Analysis helps to identify fundamentally strong companies, whose shares areworthy to be included in the investors portfolio, by providing an analytical

framework, known as Economy Industry Company framework, for rational

investment decision making.

1. Economic Analysis:

Economic factors play major role in any investment decisional, which is made for

making a gain and better returns. Economic analysis and forecasting company

performance and of returns is necessary for making investments.

Any investment is risky and as such investment decision is difficult to make.

Investment decision is based on availability of money and information on the

economy.

Companies are a part of the industrial and business sector, which in return is a partof overall economy. Thus the performance of a company depends recession or

stagnation, the performance of the companies will be bed in general, with sum

exceptions however, on the other hand, if the economy is booming, incomes are

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raising and the demand is good, then the industries and the companies is general

may be prosperous, with some exceptions however.

In the Indian economy, the matters to be considered in the first place all the

behavior of the monsoon and the performance of agriculture. India has a mixed

economy, where the public sector plays a vital role. The government being the

biggest investor and spender, the trends in public investment and expenditure

would indicate the likely performance of the Indian economy. Concomitant with

this, the government budget policy, tone levies and government borrowing

program along with the extent of deficit financing will have a major influence on

the performance of the Indian economy. The monitory situation along with thebudgetary policy influences the movement in price inflation do have a major

influence on the economy.

The economy and political stability in the form of stable and long term economic

policies and a stable political with no uncertainty would also be necessary for a

good performance of the economy in general and of companies in particular.

All the above factor of the economy influences the corporate performance and the

industry in general.

2. Industry Analysis:

On the economic analysis is made and the forecast of the economy is known the

investor will then have some ides of the likely growth of the economy and its

trend. After that, the analyst would look into the industry groups that are promising

in the coming year or years and then only he will be able to choose the companies

in those industry groups.

At any point of time, there may be industries, which are on the up swing of the

cycle called sunshine industries and those, which are on the decline called sunset

industries. In India, there are some growth industries like electronics and Tele

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communications, which are the key industries. The engineering, petrol chemicals

and capital goods industries are in the core sector. A few industries like diamonds,

engineering etc. are in the export sector. Jute and cotton textiles are the decedent

industries. At present, Tele communications, energy etc., are some examples of

sunrise industries.

The key characteristics that are to be considered in the analysis, which have a

bearing on the prospects of the company are: -

Demand Supply Gap.

Competitive conditions in the industry.

Permanence.

Growth Rate of the Industry.

Attitude of Government towards the industry.

Labors Conditions.

Supply of Raw Materials.

Cost Structure.

Past Sales & Earnings Performance.

Growth Rate of the Industry etc.

The gap between Demand and Supply in an industry is a fairly good indicator of

its short-term or medium-term prospects. Excess supply reduces the profitability of

the industry through a decline in the unit-price realization. On the contrary,

insufficient supply tends to improve the profitability through higher unit-price

realization. In an industry where supply exceeds Demand and there are many

competing firms, the increased rivalry among the firms leads to price cuts and

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heavy advertising. In such a situation, the companies lose their competitive edge

and their profitability gets erode.

In this age or rapid technological change, the important factor to be considered is

the permanence of an industry, which is related to the products and the technology

used by the industry. Another factor to be observed is the Cost structure of the

Industry i.e., the proportion of the fixed costs to the variable costs that determines

the level of Break-even point. The industry with lower break-even point is to be

given more importance.

3. Company Analysis:

Company Analysis is the final stage of the Fundamental Analysis, which is to be

done to decide the company in which the investor should invest. The Economy

Analysis provides the investor a broad out line of the prospects of growth in the

economy. The industry analysis helps the investor to select the industry in which

the investment would be rewarding. Company Analysis deals with the estimation

of the Risks and Returns associated with individual shares.

The stock price has been found on depend on the intrinsic value of the companys

share to the extent of about 50% as per many research studies. Graharm and Dodd

in their book on security analysis have defined the intrinsic value as that value

which is justified by the facts of assets, earnings and dividends. These facts are

reflected in the earnings potentials of the company. The analyst has to project the

expected future earnings per share and discount them to the present time, which

gives the intrinsic value of the share. Another method to use is to take the

expected earnings per share and multiplying it by the industry average price

earning multiple.

By this method, let the analyst estimate the intrinsic value or fair value of share

and compare it with the market price to know whether the stock is over valued or

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under valued. The investment decision is to buy under valued stock and sell over

valued stock.

3.1. Financial Analysis:

Share price depends partly on its intrinsic worth for which financial analysis for a

company is necessary to help the investor to decide whether to buy or not the

shares of the company. The soundness and intrinsic worth of a company is known

only by such analysis. An investor needs to know the performance of the

company, its intrinsic worth as indicated by some parameters like book value,

EPS, P/E multiple etc., and come to a conclusion whether the share is rightlypriced for purchase or not. This, in short is the importance of financial analysis of

a company to the investor.

Financial analysis is analysis of financial statement of a company to assess its

financial health and soundness of its management. Financial statement analysis

involves a study of the financial statement of the company to ascertain its

prevailing state of affairs and the reasons there of. Such a study would enable the

public and investors to ascertain whether one company is more profitable than the

other and also to state the cause and factors that are probably responsible for this.

3.1.1. Method or devices of Financial Analysis:

The term Financial statement is used in modern business refers to the balance

sheet, or the statement of financial position of the company at a point of time and

income and expenditure statement or the profit and loss statement over a period.

Interpret the financial statement; it is necessary to analyze them with the object of

formation of an opinion with respect to the financial condition of the company.

The following methods of analysis are generally used.

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1. Comparative statement

2. Trend analysis

3. Common size statement

4. Fund flow analysis

5. Cash flow analysis

6. Ratio analysis

Fundamental Analysis has a very broad scope. One aspect looks at the general

(qualitative) factors of a company. The other side considers tangible and

measurable factors (quantitative). This means crunching and analyzing numbersfrom the financial statements. If used in conjunction with other methods,

quantitative analysis can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet,

income statement, and cash flow statement. It's comparing the number against

previous years, other companies, the industry, or even the economy in general.

Ratios look at the relationships between individual values and relate them to how a

company has performed in the past, and might perform in the future.

For example current assets alone don't tell us a whole lot, but when we divide them

by current liabilities we are able to determine whether the company has enough

money to cover short-term debts.

Efficient Market Hypothesis

This theory presupposes that the Stock Markets are so competitive and efficient in

processing all the available information about the securities that there is

immediate price adjustment to the changes in the economy, industry and

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company. The Efficient Market Hypothesis model is actually concerned with the

speed with which information is incorporated into the security prices.

The Efficient Market Hypothesis has three Sub-hypothesis:

Weakly Efficient: This form of Efficient Market Hypothesis states that the

current prices already fully reflect all the information contained in the past price

movements and any new price change is the result of a new piece of

information and is not related/independent of historical data. This form is a

direct repudiation of technical analysis.

Semi-Strongly Efficient: This form of Efficient Market Hypothesis states that

the stock prices not only reflect all historical information but also reflect all

publicly available information about the company as soon as it is received. So,

it repudiates the fundamental analysis buy implying that there is no time gap for

the fundamental analyst in which he can trade for superior gains, as there is an

immediate price adjustment.

Strongly Efficient: This form of Efficient Market Hypothesis states that using

both publicly available information as well as private or insider information

cannot beat the market.

But even though the Efficient Market Hypothesis repudiates both Fundamental and

Technical analysis, the market is efficient precisely because of the organized and

systematic efforts of thousands of analysts undertaking Fundamental and

Technical analysis. Thus, the paradox of Efficient Market Hypothesis is that both

the analyses are required to make the market efficient and thereby validate the

hypothesis.

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3.3 TECHNICAL ANALYSIS

INTRODUCTION

There are two major types of analysis for predicting the performance of a

company's stock - fundamental and technical. The latter looks for peaks, bottoms,

trends, patterns, and other factors affecting a stock's price movement and then

making a buy/sell decision based on those factors. It is a technique many peopleattempt, though very few are truly successful.

Today, the world of technical analysis is huge. There are literally hundreds

of different patterns and indicators investors claim to be successful. There are

different types of stock charts and the various technical analysis tools.

What is Technical Analysis?

Technical analysis is a method of evaluating securities by analyzing statistics

generated by market activity, past prices, and volume. Technical analysts do not

attempt to measure a security's intrinsic value; instead they look for patterns and

indicators on stock charts that will determine a stocks future performance.

Technical analysis has become popular over the past several years, as more and

more people believe that the historical performance of a stock is a strongindication of future performance. The use of past performance should not come as

a big surprise. People using fundamental analysis have always looked at the past

performance by comparing fiscal data from previous quarters and years to

determine future growth. The difference lies in the technical analysts belief that

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securities move with very predictable trends and patterns. These trends continue

until something happens to change the trend, and until this change occurs, price

levels are predictable.

Some technical analysts claim they can be extremely accurate a majority of the

time.

There are many instances of investors successfully trading securities with only the

knowledge of its chart and without even understanding what the company does.

Technical analysis is a terrific tool, but most agree that it is much more effective

when combined with fundamental analysis.

Let's now look at some of the major indicators technical analysts use.

The Bar Chart

Bar charts are some of the most popular type of

charts used in technical analysis. As illustrated

on the left, 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 to the left represents one day of

trading.

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The advantage of using a bar chart over a straight-line graph is that it shows the

high, low, open and close for each particular day. This is the type of chart we will

be using to display various indicators throughout this explanation. There are two

more types of charts that are also frequently used for technical analysis that are

similar to the bar chart. The first we will look at is called "Candlestick Charting".

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Candle Stick Charting

Candlestick charts have been around

for hundreds of years. They are often

referred to as "Japanese Candles"

because the Japanese would use

them to analyze the price of rice

contracts.

Similar to a bar chart, candlestick

charts also display the open, close,daily high, and daily low. A

difference is the use of color to show

if the stock was up or down over the

day.

The chart below is an example of a candlestick chart for AT&T (T), green bars

indicate the stock price rose, red indicates a decline:

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candlestick charts have a love or leave relationship with investors. People either

love candlesticks and use them frequently, or are completely turned off by them.

There are several patterns people look for with candlestick charts, here are a few of

the popular ones and what they mean:

This is a bullishpattern, the stock opened at (or near) its low and

closed near its high.

The opposite of the pattern above, this is a bearish pattern. This

indicates that the stock opened at (or near) its high and dropped

substantially to close near its low.

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Called "The Hammer", this is a bullish pattern only if it occurs

after the stock price has dropped for several days. A Hammer is

identified by a small body along with a large range. The theory is

that this pattern can indicate a reversal in the downtrend is in the

works.

Called a "star". This pattern is used in others such as the "doji star".

For the most part, stars typically indicate a reversal and or

indecision. There is the possibility that after seeing a star there will

be a reversal or change in the current trend.

Keep in mind there are over 20 other patterns used by technical analysts for

candlestick charting.

Now, let's take a look at a more traditional style of charting stock price

performancecalled "Point & Figure Charting.

THE POINT & FIGURE CHART

This type of chart is somewhat rare, in fact most charting services do not even

offer the point and figure chart. This is a chart that plots day-to-day increases and

declines in price. A rising stack of Xs represents increases while a declining stack

of Os represents decreases. These types of charts were traditionally used for intra-

day charting (a stock chart for just one day), mainly because it can be long and

tedious to create P&F charts over a longer period of time manually.

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The idea behing P&F charts is that they help you to filter out less-significant price

movements and let you focus more on the most important trends. Below is an

example of a Point and Figure Chart for AT&T (T):

There are two attributes that affect the appearance of a Point & Figure chart, boxsize and reversal amount. We won't get into much detail about these factors. Now

that we've taken a look at three different types of charts used by technical analysts,

let's look at various indicators.

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Here are a couple points to remember about Technical Analysis:

Technical Analysis is a method of evaluating securities by analyzing

statistics generated by market activity, past prices, and volume.

The advantage of using a bar chart over a straight line graph is that it shows

the high, low, open and close for each particular day.

One of the most basic and easy to use TA indicators is the moving average,

which shows the average value of a securitys price over a periodof time.

The most commonly used moving averages are the 20, 30, 50, 100, and 200

day.

Support and resistance levels are price levels at which movement should

stop and reverse direction. Think of Support/Resistance (S/R) as levels that

act as a floor or a ceiling to future price movements.

There are literally 100s of different price patterns and indicators.

Evaluation of Technical Analysis

Technical Analysis appears to be a highly controversial approach to security

analysis. It has its ardent votaries; it has its severe critics. The advocates of

technical analysis offer the following interrelated arguments in support of their

position.

1. Under the influence of crowd psychology, trends persist for quite some time.

Tools of technical analysis that help in identifying these trends early are

helpful aids in investment decision making.

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2. Shifts in demand and supply are gradual rather than instantaneous.

Technical Analysis helps in detecting these shifts rather early and hence

provides clues to future price movements.

3. Fundamental information about a company is absorbed and assimilated by

the market over a period of time. Hence, the price movement tends to

continue in more or less the same direction till the information is fully

assimilated in the stock price.

4. Charts provide a picture of what has happened in the past and hence give a

sense of volatility that can be expected from the stock. Further, the

information on trading volume which is ordinarily provided at the bottom of

a bar chart gives a fair idea of the extent of public interest in the stock.

The detractors of technical analysis believe that technical analysis is a useless

exercise. Their arguments run as follows:

1. Most technical analysts are not able to offer convincing explanations for the

tools employed by them.

2. Empirical evidence in support of the random-walk hypothesis casts its

shadow over the usefulness of technical analysis.

3. By the time an uptrend or downtrend may have been signaled by technical

analysis, it may already have taken place.

4. Ultimately, technical analysis must be a self-defeating proposition. As more

and more people enjoy it, the value of such analysis tends to decline.

5. The numerous claims that have been made for different chart patterns are

simply untested assertions.

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There is a great deal of ambiguity in the identification of configurations as well as

trend lines and channels on the charts. The same chart can be interpreted

differently.

What is the difference between Fundamental and Technical Analysis?

These terms refer to two different stock-picking methodologies used for

researching and forecasting the future growth trends of stocks. Like anyinvestment

strategy or philosophy, both have their advocates and adversaries. Here are the

defining principles of each of these methods of stock analysis:

Fundamental Analysis is a method of evaluating securities by attempting to

measure the intrinsic value of a stock. Fundamental Analysis study

everything from the overall economy and industry conditions to the financial

condition and management of companies.

Technical Analysis is the evaluation of securities by means of studying

statistics generated by market activity, such as past prices and volume.

Technical Analysis do not attempt to measure a securitys intrinsic value butinstead use stock charts to identify patterns and trendsthat may suggest what

a stock will do in the future.

In the world of stock analysis, Fundamental and Technical Analysis is on

completely opposite sides of the spectrum. Earnings, expenses, assets and

liabilities are all important characteristics to fundamental analysts, whereas

technical analysts could not care less about these numbers. Which strategy worksbest is always debated, and many volumes of textbooks have been written on both

of these methods. So, do some reading and decide for yourself which strategy

works best with your investment philosophy.

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DATA ANALYSIS

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About ULTRATECH

Company UltraTech Cement Limited

NSE Symbol ULTRACEMCO

Website www.ultratechcement.com

ULTRATECH CEMENT Ltd

73

YEAR SALES PROFITABILITY

AMT(Rs) Trend% AMT(Rs) Trend%

2006 3,785.29 100 229.76 100

2007 5,484.25 144.88 782.28 340.4

2008 6,286.24 166 1,007.61 438.5

2009 7,160.42 189.16 977.02 425.23

2010 7,729.13 204.18 1,093.24 475.8

Transfer

Agent

Address

Sharepro Services (India) Private Ltd.

13AB, Samhita Warehousing Complex,

Sakinaka Telephone Exchange Lane,

Off AndheriKurla Road, Sakinaka, Andheri (East)Mumbai - 400072

Telephone 022-67720300 / 677200400

Fax 022-28591568 / 28508927

Email [email protected], [email protected]

Registered

Address

Address

B-Wing, Ahura Centre,

2nd floor, Mahakali Caves Road,

Andheri (East),

Mumbai - 400093

Telephone 022-66917800/26571416/56917360/98204-59383

Fax 022-66928109/56917362

[email protected]/ ps-

[email protected]/[email protected]
http://www.nseindia.com/marketinfo/equities/quotesearch.jsp?companyname=ULTRACEMCOhttp://www.nseindia.com/marketinfo/equities/quotesearch.jsp?companyname=ULTRACEMCO


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Interpretation: - The above table & graph show the sales & profitability trend for5yrs company takes position in sales & profitability when compared to the othercompanys in the industry in current FY2010. The company's performance is good

because from 2006 to till 2010 it showed increase only.

About ACC

74

Company ACC Limited

NSE Symbol ACC

Website www.acclimited.com

Trend Analysis
http://www.acclimited.com/http://www.nseindia.com/marketinfo/equities/quotesearch.jsp?companyname=ACChttp://www.acclimited.com/http://www.nseindia.com/marketinfo/equities/quotesearch.jsp?companyname=ACChttp://www.acclimited.com/


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