Post on 08-Apr-2018
transcript
8/6/2019 Euity Analysis
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SUMMARY
The automobile industry, one of the core sectors, has undergone metamorphosis with theadvent of new
business and manufacturing practices in the light of liberalization andglobalization. The sector seems to
be optimistic of posting strong sales in the couple ofyears in the view of a reasonable surge in demand.
The Indian automobile market isgearing towards international standards to meet the needs of the globalautomobile giantsand become a global hub.
A detailed analysis of Automobile industry has been covered in respect of past growthand performance.
Under this project to better understand the Industry I have usedFundamental tools to make it more
authentic and meaningful.
An economy-industry-company (E.I.C) approach has been followed under FundamentalAnalysis which
covers effect of Recession, the impact of inflation, FDIs, Export, andGDP etc. on Automobile Industry.
The Industry Analysis has been done with the help ofSWOT analysis and industry life cycle. For Company
Analysis as a part of Fundamentaltool we have undergone with the comparative analysis of TATA Motors
the leadingcompany, Maruti Suzuki Indias largest Car manufacturer and Mahindra and Mahindraalong
with the help of ratio analysis. The fundamental aspect consists of financial andNon-Financial analysis of
these companies.
At the end conclusion and recommendations have been specified so as to make the
project work more meaningful and purposeful
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INT
ROD
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UCT
ION
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India
is a
devel
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oping
count
ry.
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Nowa
days
many
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peopl
e are
intere
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sted
to
invest
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in
financ
ialma
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rkets
especi
ally
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on
equiti
es to
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get
high
return
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s, and
to
save
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tax in
hones
t way.
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Equiti
esare
playin
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g a
major
role
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in
contri
butio
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n of
capita
l to
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the
busin
ess
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from
the
begin
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ning.
Since
the
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introd
uction
of
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shares
conce
pt,
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large
numb
ers of
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invest
ors
are
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stto
invest
in
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stock
marke
t.
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In an
indust
ry
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plagu
ed
with
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skepti
cism
and a
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stock
marke
t
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increa
singly
diffic
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ult to
predic
tand
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conte
nd
with,
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if one
looks
hard
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enoug
h
there
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may
still
be
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genui
ne aid
for
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the
DayT
rader
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and
Short
Term
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Invest
or.
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The
price
of a
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securi
ty
repres
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ents a
conse
nsus.
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It is
the
price
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at
which
one
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perso
n
agree
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sto
buy
and
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anoth
er
agree
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s to
sell.
The
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price
at
which
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an
invest
or is
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willin
g to
buy
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or
sellde
pends
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prima
rily
on his
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expec
tation
s. If
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he
expec
ts the
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securi
ty's
price
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to
rise,
he
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willb
uy it;
if the
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invest
or
expec
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ts the
price
to
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fall,
he
will
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sell it.
These
simpl
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e
state
ments
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arethe
cause
of a
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major
challe
nge in
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foreca
sting
securi
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ty
prices
,
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becau
se
they
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refer
to
huma
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nexpe
ctatio
ns. As
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we all
know
firsth
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and,
huma
ns
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expec
tation
s are
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neithe
r
easily
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quanti
fiable
nor
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predic
table.
If
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prices
are
based
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on
invest
or
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expec
tation
s,
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then
knowi
ngwh
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at a
securi
ty
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shoul
d sell
for
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(i.e.,
funda
menta
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l
analy
sis)
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beco
mes
less
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nowin
g
what
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other
invest
ors
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expec
t it to
sell
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for.
That's
not to
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say
that
knowi
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ng
what
asecu
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rity
shoul
d sell
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for
isn't
impor
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tant--
it is.
But
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there
is
usuall
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y a
fairly
strong
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conse
nsuso
f a
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stock'
s
future
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earnin
gs
that
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the
avera
ge
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invest
or
canno
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t
dispro
ve
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Funda
menta
l
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analy
sis
and
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techni
cal
analy
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sis
can
co-
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exist
in
peace
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and
compl
ement
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eacho
ther.
Since
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all the
invest
ors in
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the
stock
marke
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t want
to
make
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the
maxi
mum
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profit
spossi
ble,
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they
just
canno
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t
afford
to
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funda
menta
l or
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techni
cal
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analy
sis.
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NEE
D
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OF
THE
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STU
DY
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To
start
any
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busin
ess
capita
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l
plays
major
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role.
Capit
al can
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be
acquir
ed in
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two
ways
byiss
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uing
shares
or by
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taking
debt
from
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financ
ial
institu
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tions
or
borro
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wing
mone
y
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fromf
inanci
al
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institu
tions.
The
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owner
s of
the
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comp
any
have
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topay
regula
r
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intere
st
andpr
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incipa
l
amou
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nt at
the
end.
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Stock
is
owner
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any,
with
each
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share
of
stock
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piece
ofow
nershi
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p.
The
more
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shares
you
own,
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the
more
of the
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comp
any
you
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own.
The
mores
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hares
you
own,
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the
more
divide
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nds
you
earn
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when
the
comp
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any
make
s a
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profit.
In
thefin
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ancial
world
,
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owner
ship
is
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calledEq u
ity.
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Adva
ntage
s of
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sellin
g
stock:
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A
comp
any
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can
raise
more
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capita
l than
it
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could
borro
w.
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A
comp
any
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does
not
have
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to
make
perio
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dic
intere
st
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paym
ents
to
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credit
ors.
A
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comp
any
does
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not
have
to
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make
princi
pal
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paym
ents
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Stock
/share
s play
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a
major
role
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in
acquir
ing
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capita
l to
the
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busin
ess in
return
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invest
ors
arepai
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d
divide
nds to
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the
shares
they
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own.
The
more
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shares
you
own
8/6/2019 Euity Analysis
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the
more
divide
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nds
youre
ceive.
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The
role
of
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equity
analy
sis is
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to
provi
de
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infor
matio
n to
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the
marke
t. An
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effici
ent
marke
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trelies
on
infor
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matio
n: a
lack
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of
infor
matio
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n
create
s
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ineffi
cienci
es
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that
result
in
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stocks
being
misre
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prese
nted
(over
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or
under
value
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d).
This
is
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valua
ble
becau
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se it
fills
infor
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matio
ngaps
so
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that
each
indivi
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dual
invest
or
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does
not
need
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to
analy
ze
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every
stock
thereb
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y
makin
gthe
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marke
ts
more
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effici
ent.
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OBJ
ECT
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IVE
S OF
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THE
STU
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DY
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The
object
ive of
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this
projec
t is to
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deepl
y
analy
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ze our
India
n
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Auto
mobil
e
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Indust
ry
forinv
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estme
nt
purpo
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se by
monit
oring
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the
growt
h rate
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and
perfor
manc
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e on
the
basis
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ofhist
orical
data.
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The
main
object
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ives
of the
Proje
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ct
study
are:
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Detail
ed
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analy
sis of
Auto
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mobil
e
indust
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ry
which
is
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gearin
g
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towar
ds
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intern
ationa
l
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stand
ards
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Analy
ze the
impac
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t of
qualit
ative
8/6/2019 Euity Analysis
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factor
s on
indust
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rys
and
8/6/2019 Euity Analysis
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comp
anys
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prosp
ects
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Comp
arativ
e
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analy
sis of
three
8/6/2019 Euity Analysis
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tough
comp
etitors
8/6/2019 Euity Analysis
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TAT
A
Motor
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s,
Marut
i
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Suzuk
i and
Mahi
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ndra
and
Mahi
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ndra
throu
gh
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funda
menta
l
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analy
sis.
8/6/2019 Euity Analysis
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Sugge
sting
as to
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which
comp
anys
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shares
would
be
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best
for an
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invest
or to
invest
8/6/2019 Euity Analysis
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SCO
PE
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OF
THE
8/6/2019 Euity Analysis
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STU
DY
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The
scope
of the
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study
is
identi
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durin
g the
study
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is
condu
cted.
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Thepr
oject
is
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based
on
tools
8/6/2019 Euity Analysis
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like
funda
menta
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l
analy
sis
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and
ratio
analy
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sis.
Furth
er,
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thestu
dy is
based
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on
infor
matio
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n of
last
8/6/2019 Euity Analysis
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five
years.
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The
analy
sis is
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made
by
taking
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into
consi
derati
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on
five
comp
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anies
i.e.
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TAT
A
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Motor
s,
Marut
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i
Suzuk
i and
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Mahi
ndra
and
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Mahi
ndra.
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The
scope
of the
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study
is
limite
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d for
a
perio
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d of
five
years.
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The
scope
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is
limite
d to
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only
the
funda
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menta
l
analy
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sis of
the
chose
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n
stocks
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ME
THO
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DOL
OG
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Y
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Resea
rch
desig
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n or
resear
ch
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metho
dolog
y is
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the
proce
dure
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of
collec
ting,
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analy
zinga
nd
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interp
reting
the
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data
to
diagn
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ose
the
probl
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em
and
react
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to the
oppor
tunity
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in
sucha
way
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where
the
costs
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can
be
mini
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mized
and
the
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desire
d
level
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of
accur
acy
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can
beach
ieved
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to
arrive
at a
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partic
ular
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concl
usion.
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The
metho
dolog
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y
used
in the
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study
for
the
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compl
etion
of the
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projec
t and
the
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fulfill
ment
of the
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projec
t
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object
ives.
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The
sampl
e of
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the
stocks
for
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the
purpo
se of
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collec
ting
secon
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dary
data
has
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beens
electe
d on
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the
basis
of
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Rand
om
Samp
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ling.
The
stocks
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are
chose
n in
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an
unbia
sedm
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anner
and
each
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stock
is
chose
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n
indep
enden
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t of
the
other
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stocks
chose
n.
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The
stocks
are
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chose
n
from
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the
autom
obile
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sector
.
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The
sampl
e size
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for
the
numb
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erof
stocks
is
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taken
as 3
for
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funda
menta
l
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analy
sis of
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stocks
as
funda
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menta
l
analy
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sis is
very
exhau
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stive
and
requir
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es
detail
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ed
study
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LIM
ITA
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TIO
NS
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This
study
has
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been
condu
cted
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purel
y to
under
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stand
Equit
y
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analy
sis for
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invest
ors.
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The
study
is
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restric
ted to
three
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comp
anies
based
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on
Funda
menta
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l
analy
sis.
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The
study
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is
limite
d to
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the
comp
anies
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havin
g
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equiti
es.
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Detail
ed
study
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of the
topic
was
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not
possi
ble
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due to
limite
d size
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of the
projec
t.
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There
was a
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constr
aint
with
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regar
d to
time
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alloca
tion
for
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the
resear
ch
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study
i.e.
for
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a
perio
d of
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45
days.
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Sugge
stions
and
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concl
usion
s are
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based
on the
limite
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d data
of
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five
years
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CH
AP
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TE
R
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II -
RE
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VI
EW
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OF
LIT
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ER
AT
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UR
E
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Equit
y
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Analy
sis
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SEC
URI
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TY
ANA
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LYS
IS
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Invest
ment
succe
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ss is
pretty
much
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a
matte
r of
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carefu
l
select
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ion
and
timin
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g of
stock
purch
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ases
coupl
ed
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with
perfec
t
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match
ing to
an
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indivi
duals
risk
8/6/2019 Euity Analysis
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tolera
nce.
In
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order
to
carry
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8/6/2019 Euity Analysis
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timin
g and
match
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ing
action
s an
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invest
or
must
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condu
ct
deep
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securi
ty ana
lysis.
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Invest
ors
purch
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ase
equity
shares
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with
two
basic
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object
ives;
1.To
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make
capita
l
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profit
s by
sellin
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g
shares
at
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highe
r
prices
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.
2.To
earn
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divide
nd
8/6/2019 Euity Analysis
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incom
e.
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These
two
factor
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s are
affect
ed by
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a host
of
factor
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s. An
invest
or has
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to
carefu
llyun
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dersta
nd
and
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analy
ze all
these
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factor
s.
There
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are
basica
lly
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two
appro
aches
8/6/2019 Euity Analysis
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to
study
securi
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ty
prices
and
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valuat
ion
i.e.
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funda
menta
l
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analy
sis
and
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techni
cal
8/6/2019 Euity Analysis
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analy
sis
8/6/2019 Euity Analysis
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The
value
of
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comm
on
stock
8/6/2019 Euity Analysis
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is
deter
mined
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in
large
meas
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ure
by the
perfor
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manc
e of
thefir
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m
that
issued
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the
stock.
If the
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comp
any is
health
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y and
can
demo
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nstrat
e
streng
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the
value
of the
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stock
will
increa
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se.
When
value
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s
increa
se
8/6/2019 Euity Analysis
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then
prices
follo
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w
andret
urns
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on an
invest
ment
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will
increa
se.
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Howe
ver,
just to
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keep
the
savvy
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invest
or on
theirt
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oes,
the
mix is
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compl
icated
by the
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risk
factor
s
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invol
ved.
Funda
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menta
l
analy
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sis
exami
nesall
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the
dimen
sions
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of
risk
expos
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ure
and
the
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proba
bilitie
s of
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return
, and
merge
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s
them
withb
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roade
r
econo
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mic
analy
sis
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and
greate
r
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indust
ry
analy
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sis to
formu
late
8/6/2019 Euity Analysis
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the
valuat
ion of
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astoc
k.
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Equit
y
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Analy
sis
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FUN
DA
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ME
NTA
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L
ANA
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LYS
IS
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Funda
menta
l
8/6/2019 Euity Analysis
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analy
sis is
a
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metho
d of
foreca
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sting
the
future
8/6/2019 Euity Analysis
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price
move
ments
8/6/2019 Euity Analysis
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of
afinan
cial
8/6/2019 Euity Analysis
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instru
ment
based
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on
econo
mic,
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politi
cal,
envir
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onme
ntal
and
8/6/2019 Euity Analysis
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other
releva
ntfact
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ors
and
statistics that will affect
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the basic supply and demand ofwhatever underliesthe financial instrument. It is the study of economic,
industry and company conditionsin an effort to determine the value of a companys stock. Fundamental
analysistypically focuses on key statistics in companys financial statements to determine if thestockprice
is correctly valued. The term simply refers to the analysis of the economicwell-being of a financial entity
as opposed toonly its price movements.
Fundamental analysis is the cornerstone of investing. The basic philosophy underlyingthe fundamental
analysis is that if an investor invests re.1 in buying a share of acompany, how much expected returns from
this investment he has.
The fundamental analysis is to appraise the intrinsic value of a security. It insists thatno one should
purchase or sell a share on the basis of tips and rumors. The fundamentalapproach calls upon the investors
to make his buy or sell decision on the basis of adetailed analysis of the information about the company,
about the industry, and theeconomy. It is also known as top-down approach. This approach attempts to
study theeconomic scenario, industry position and the company expectations and is also
knownaseconomic-industry-company approach (EIC approach).
Equity Analysis
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Thus the EIC approach involves three steps:
1. Economic analysis
2. Industry analysis
3. Company analysisEquity Analysis
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SECURITY ANALYSIS
Investment success is pretty much a matterof careful selection and timing of stockpurchases coupled with
perfect matching to an individuals risk tolerance. In order to carryout selection, timing and matching
actions an investor must conduct deep security analysis.
Investors purchase equity shares with two basic objectives;
1.To make capitalprofits by selling shares at higherprices.
2.To earn dividend income.
These two factors are affected by a host of factors. An investor has to carefullyunderstand and analyze all
these factors. There are basically two approaches to studysecurity prices and valuation i.e. fundamental
analysis and technical analysis
The value of common stock is determined in large measure by the performance of thefirm that issued the
stock. If the company is healthy and can demonstrate strength andgrowth, the value of the stockwill
increase. When values increase then prices follow andreturns on an investment will increase. However,
just to keep the savvy investor on theirtoes, the mix is complicated by the risk factors involved.
Fundamental analysis examinesall the dimensions of risk exposure and the probabilities of return, and
merges them withbroader economic analysis and greater industry analysis to formulate the valuation of
astock.
Equity Analysis
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FUNDAMENTAL ANALYSIS
Fundamental analysis is a method of forecasting the future price movements of afinancial instrument
based on economic, political, environmental and other relevantfactors and statistics that will affect the
basic supply and demand of whatever underliesthe financial instrument. It is the study of economic,