Date post: | 13-Apr-2018 |
Category: |
Documents |
Upload: | arjunmba119624 |
View: | 234 times |
Download: | 0 times |
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 1/21
A project report
on
A study on Equity Analysis
at
India-Infoline .
Submitted in partial fulfillment of the
Requirements for the award of the Degree
of
MASTER OF !S"#ESS ADM"#"STRAT"O#
Submitted $
Elizebeth
13BK1E00
!nder the %uidance of
DEPARTE!T "# B$%I!E%% ADI!I%TRATI"!
%T PETER% E!&I!EERI!& '"((E&E
&Affiliated to 'awaharlal #ehru Technological !ni(ersit$ )$derabad*
)$derabad
+,-. / +,-0
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 2/21
1)A2TER "
"#TROD!1T"O#
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 3/21
I!TR"D$'TI"!
"ndia is a de(eloping countr$3 #owada$s man$ people are interested to in(est in financial
mar4ets especiall$ on equities to get high returns5 and to sa(e ta6 in honest wa$3 Equities
are pla$ing a major role in contribution of capital to the business from the beginning3
Since the introduction of shares concept5 large numbers of in(estors are showing interest
to in(est in stoc4 mar4et3
"n an industr$ plagued with s4epticism and a stoc4 mar4et increasingl$ difficult to predict
and contend with5 if one loo4s hard enough there ma$ still be a genuine aid for the Da$
Trader and Short Term "n(estor3
The price of a securit$ represents a consensus3 "t is the price at which one person agrees
to bu$ and another agrees to sell3 The price at which an in(estor is willing to bu$ or sell
depends primaril$ on his e6pectations3 "f he e6pects the securit$7s price to rise5 he will
bu$ it8 if the in(estor e6pects the price to fall5 he will sell it3 These simple statements are
the cause of a major challenge in forecasting securit$ prices5 because the$ refer to human
e6pectations3 As we all 4now firsthand5 humans e6pectations are neither easil$
quantifiable nor predictable3 "f prices are based on in(estor e6pectations5 then 4nowing
what a securit$ should sell for &i3e35 fundamental anal$sis* becomes less important than
4nowing what other in(estors e6pect it to sell for3 That7s not to sa$ that 4nowing what a
securit$ should sell for isn7t important99it is3 ut there is usuall$ a fairl$ strong consensus
of a stoc47s future earnings that the a(erage in(estor cannot dispro(e
Fundamental anal$sis and technical anal$sis can co9e6ist in peace and complement each
other3 Since all the in(estors in the stoc4 mar4et want to ma4e the ma6imum profits
possible5 the$ just cannot afford to ignore either fundamental or technical anal$sis
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 4/21
:"TERAT!RE
RE;"E<
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 5/21
%E'$RIT) A!A()%I%
"n(estment success is prett$ much a matter of careful selection and timing of stoc4
purchases coupled with perfect matching to an indi(iduals ris4 tolerance3 "n order to carr$
out selection5 timing and matching actions an in(estor must conduct deep securit$
anal$sis3
"n(estors purchase equit$ shares with two basic objecti(es8
-3 To ma4e capital profits b$ selling shares at higher prices3
+3 To earn di(idend income3
These two factors are affected b$ a host of factors3 An in(estor has to carefull$
understand and anal$=e all these factors3 There are basicall$ two approaches to stud$
securit$ prices and (aluation i3e3 fundamental anal$sis and technical anal$sis
The (alue of common stoc4 is determined in large measure b$ the performance of the
firm that issued the stoc43 "f the compan$ is health$ and can demonstrate strength and
growth5 the (alue of the stoc4 will increase3 <hen (alues increase then prices follow and
returns on an in(estment will increase3 )owe(er5 just to 4eep the sa(($ in(estor on their
toes5 the mi6 is complicated b$ the ris4 factors in(ol(ed3 Fundamental anal$sis e6aminesall the dimensions of ris4 e6posure and the probabilities of return5 and merges them with
broader economic anal$sis and greater industr$ anal$sis to formulate the (aluation of a
stoc43
#$!DAE!TA( A!A()%I%
Fundamental anal$sis is a method of forecasting the future price mo(ements of a
financial instrument based on economic5 political5 en(ironmental and other rele(ant
factors and statistics that will affect the basic suppl$ and demand of whate(er underlies
the financial instrument3 "t is the stud$ of economic5 industr$ and compan$ conditions in
an effort to determine the (alue of a compan$>s stoc43 Fundamental anal$sis t$picall$
focuses on 4e$ statistics in compan$>s financial statements to determine if the stoc4 price
is correctl$ (alued3 The term simpl$ refers to the anal$sis of the economic well9being of a
financial entit$ as opposed to onl$ its price mo(ements3
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 6/21
Fundamental anal$sis is the cornerstone of in(esting3 The basic philosoph$ underl$ing
the fundamental anal$sis is that if an in(estor in(ests re3- in bu$ing a share of a compan$5
how much e6pected returns from this in(estment he has3
The fundamental anal$sis is to appraise the intrinsic (alue of a securit$3 "t insists that no
one should purchase or sell a share on the basis of tips and rumors3 The fundamental
approach calls upon the in(estors to ma4e his bu$ or sell decision on the basis of a
detailed anal$sis of the information about the compan$5 about the industr$5 and the
econom$3 "t is also 4nown as ?top9down approach@3 This approach attempts to stud$ the
economic scenario5 industr$ position and the compan$ e6pectations and is also 4nown as
*e+ono,i+-industy-+o,any aoa+h /EI' aoa+h3
Thus the EI' aoa+h in(ol(es three steps
-3 Economic anal$sis
+3 "ndustr$ anal$sis
.3 1ompan$ anal$sis
-3 E'"!"I' A!A()%I%
The le(el of economic acti(it$ has an impact on in(estment in man$ wa$s3 "f the
econom$ grows rapidl$5 the industr$ can also be e6pected to show rapid growth and (ice
(ersa3 <hen the le(el of economic acti(it$ is low5 stoc4 prices are low5 and when the
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 7/21
le(el of economic acti(it$ is high5 stoc4 prices are high reflecting the prosperous outloo4
for sales and profits of the firms3 The anal$sis of macro economic en(ironment is
essential to understand the beha(ior of the stoc4 prices3
The commonl$ anal$=ed macro economic factors are as follows
&oss Do,esti+ Podu+t /&DP2 %D2 indicates the rate of growth of the econom$3 "t
represents the aggregate (alue of the goods and ser(ices produced in the econom$3 "t
consists of personal consumption e6penditure5 gross pri(ate domestic in(estment and
go(ernment e6penditure on goods and ser(ices and net e6ports of goods and ser(ices3
The growth rate of econom$ points out the prospects for the industrial sector and the
return in(estors can e6pect from in(estment in shares3 The higher growth rate is more
fa(orable to the stoc4 mar4et3
%ain4s and inest,ent2 "t is ob(ious that growth requires in(estment which in turn
requires substantial amount of domestic sa(ings3 Stoc4 mar4et is a channel through
which the sa(ings are made a(ailable to the corporate bodies3 Sa(ings are distributed o(er
(arious assets li4e equit$ shares5 deposits5 mutual funds5 real estate and bullion3 The
sa(ings and in(estment patterns of the public affect the stoc4 to a great e6tent3
Inflation2 Along with the growth of %D25 if the inflation rate also increases5 then the real
growth would be (er$ little3 The effects of inflation on capital mar4ets are numerous3 An
increase in the e6pected rate of inflation is e6pected to cause a nominal rise in interest
rates3 Also5 it increases uncertaint$ of future business and in(estment decisions3 As
inflation increases5 it results in e6tra costs to businesses5 thereb$ squee=ing their profit
margins and leading to real declines in profitabilit$3
Inteest ates2 The interest rate affects the cost of financing to the firms3 A decrease in
interest rate implies lower cost of finance for firms and more profitabilit$3 More mone$ is
a(ailable at a lower interest rate for the bro4ers who are doing business with borrowed
mone$3 A(ailabilit$ of cheap funds encourages speculation and rise in the price of shares3
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 8/21
Ta5 stu+tue2 E(er$ $ear in March5 the business communit$ eagerl$ awaits the
%o(ernment>s announcement regarding the ta6 polic$3 1oncessions and incenti(es gi(en
to a certain industr$ encourage in(estment in that particular industr$3 Ta6 relief>s gi(en to
sa(ings encourage sa(ings3 The t$pe of ta6 e6emption has impact on the profitabilit$ of
the industries3
Infastu+tue fa+ilities2 "nfrastructure facilities are essential for the growth of industrial
and agricultural sector3 A wide networ4 of communication s$stem is a must for the
growth of the econom$3 Regular suppl$ of power without an$ power cut would
boost the production3 an4ing and financial sectors also should be sound enough to
pro(ide adequate support to the industr$3 %ood infrastructure facilities affect the stoc4
mar4et fa(orabl$3
6. I!D$%TR) A!A()%I%
An industr$ is a group of firms that ha(e similar technological structure of production
and produce similar products and "ndustr$ anal$sis is a t$pe of business research that
focuses on the status of an industr$ or an industrial sector &a broad industr$ classification5
li4e BmanufacturingB*3 "rrespecti(e of specific economic situations5 some industries might be e6pected to
perform better5 and share prices in these industries ma$ not decline as much as in other industries3 This identification of
economic and industr$ specific factors influencing share prices will help in(estors to identif$ the shares that fit
indi(idual e6pectations
Industy (ife 'y+le2 The industr$ life c$cle theor$ is generall$ attributed to 'ulius
%rodens4$3 The life c$cle of the industr$ is separated into four well defined stages3
• Pioneering stage: The prospecti(e demand for the product is promising in this
stage and the technolog$ of the product is low3 The demand for the product
attracts man$ producers to produce the particular product3 There would be se(ere
competition and onl$ fittest companies sur(i(e this stage3 The producers tr$ to
de(elop brand name5 differentiate the product and create a product image3 "n this
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 9/21
situation5 it is difficult to select companies for in(estment because the sur(i(al
rate is un4nown3
• Rapid growth stage: This stage starts with the appearance of sur(i(ing firms from
the pioneering stage3 The companies that ha(e withstood the competition grow
strongl$ in mar4et share and financial performance3 The technolog$ of the
production would ha(e impro(ed resulting in low cost of production and good
qualit$ products3 The companies ha(e stable growth rate in this stage and the$
declare di(idend to the shareholders3 "t is ad(isable to in(est in the shares of these
companies3
• Maturity and stabilization stage: the growth rate tends to moderate and the rate
of growth would be more or less equal to the industrial growth rate or the gross
domestic product growth rate3 S$mptoms of obsolescence ma$ appear in the
technolog$3 To 4eep going5 technological inno(ations in the production process
and products should be introduced3 The in(estors ha(e to closel$ monitor the
e(ents that ta4e place in the maturit$ stage of the industr$3
• Decline stage: demand for the particular product and the earnings of the
companies in the industr$ decline3 "t is better to a(oid in(esting in the shares of
the low growth industr$ e(en in the boom period3 "n(estment in the shares of
these t$pes of companies leads to erosion of capital3
&o7th of the industy2 The historical performance of the industr$ in terms of growth
and profitabilit$ should be anal$=ed3 The past (ariabilit$ in return and growth in reaction
to macro economic factors pro(ide an insight into the future3
!atue of +o,etition2 #ature of competition is an essential factor that determines the
demand for the particular product5 its profitabilit$ and the price of the concerned
compan$ scrips3 The companies7 abilit$ to withstand the local as well as the multinational
competition counts much3 "f too man$ firms are present in the organi=ed sector5 the
competition would be se(ere3 The competition would lead to a decline in the price of the
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 10/21
product3 The in(estor before in(esting in the scrip of a compan$ should anal$=e the
mar4et share of the particular compan$7s product and should compare it with the top fi(e
companies3
%8"T analysis2 S<OT anal$sis represents the strength5 wea4ness5 opportunit$ and
threat for an industr$3 E(er$ in(estor should carr$ out a S<OT anal$sis for the chosen
industr$3 Ta4e for instance5 increase in demand for the industr$>s product becomes its
strength5 presence of numerous pla$ers in the mar4et5 i3e3 competition becomes the threat
to a particular compan$3 The progress in R C D in that industr$ is an opportunit$ and
entr$ of multinationals in the industr$ is a threat3 "n this wa$ the factors are to be
arranged and anal$=ed3
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 11/21
.3 '"PA!) A!A()%I%
"n the compan$ anal$sis the in(estor assimilates the se(eral bits of information related to
the compan$ and e(aluates the present and future (alues of the stoc43 The ris4 and return
associated with the purchase of the stoc4 is anal$=ed to ta4e better in(estment decisions3
The present and future (alues are affected b$ a number of factors3
'o,etitie ed4e of the +o,any2 Major industries in "ndia are composed of hundreds
of indi(idual companies3 Though the number of companies is large5 onl$ few companies
control the major mar4et share3 The competiti(eness of the compan$ can be studied with
the help of the following8
• Market share: The mar4et share of the annual sales helps to determine a
compan$>s relati(e competiti(e position within the industr$3 "f the mar4et share is
high5 the compan$ would be able to meet the competition successfull$3 The
companies in the mar4et should be compared with li4e product groups otherwise5
the results will be misleading3
• Growth of sales: The rapid growth in sales would 4eep the shareholder in a better
position than one with stagnant growth rate3 "n(estors generall$ prefer si=e and
growth in sales because the larger si=e companies ma$ be able to withstand the
business c$cle rather than the compan$ of smaller si=e3
• Stability of sales: "f a firm has stable sales re(enue5 it will ha(e more stable
earnings3 The fall in the mar4et share indicates the declining trend of compan$5
e(en if the sales are stable3 )ence the stabilit$ of sales should be compared with
its mar4et share and the competitor>s mar4et share3
Eanin4s of the +o,any2 Sales alone do not increase the earnings but the costs and
e6penses of the compan$ also influence the earnings3 Further5 earnings do not alwa$s
increase with increase in sales3 The compan$>s sales might ha(e increased but its earnings
per share ma$ decline due to rise in costs3 )ence5 the in(estor should not onl$ depend on
the sales5 but should anal$=e the earnings of the compan$3
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 12/21
#inan+ial analysis2 The best source of financial information about a compan$ is its own
financial statements3 This is a primar$ source of information for e(aluating the
in(estment prospects in the particular compan$>s stoc43 Financial statement anal$sis is
the stud$ of a compan$>s financial statement from (arious (iewpoints3 The statement
gi(es the historical and current information about the compan$>s operations3 )istorical
financial statement helps to predict the future and the current information aids to anal$=e
the present status of the compan$3 The two main statements used in the anal$sis are
alance sheet and 2rofit and :oss Account3
The balance sheet is one of the financial statements that companies prepare e(er$ $ear for
their shareholders3 "t is li4e a financial snapshot5 the compan$7s financial situation at a
moment in time3 "t is prepared at the $ear end5 listing the compan$7s current assets and
liabilities3 "t helps to stud$ the capital structure of the compan$3 "t is better for the
in(estor to a(oid a compan$ with e6cessi(e debt component in its capital structure3 From
the balance sheet5 liquidit$ position of the compan$ can also be assessed with the
information on current assets and current liabilities3
Ratio analysis2 Ratio is a relationship between two figures e6pressed mathematicall$3
Financial ratios pro(ide numerical relationship between two rele(ant financial data3
Financial ratios are calculated from the balance sheet and profit and loss account3 The
relationship can be either e6pressed as a percent or as a quotient3 Ratios summari=e the
data for eas$ understanding5 comparison and interpretations3
Ratios for in(estment purposes can be classified into profitabilit$ ratios5 turno(er ratios5
and le(erage ratios3 2rofitabilit$ ratios are the most popular ratios since in(estors prefer
to measure the present profit performance and use this information to forecast the future
strength of the compan$3 The most often used profitabilit$ ratios are return on assets5
price earnings multiplier5 price to boo4 (alue5 price to cash flow5 and price to sales5
di(idend $ield5 return on equit$5 present (alue of cash flows5 and profit margins3
a Retun on Assets /R"A
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 13/21
ROA is computed as the product of the net profit margin and the total asset turno(er
ratios3
R"A 9 /!et Pofit:Total in+o,e 5 /Total in+o,e:Total Assets
This ratio indicates the firm7s strategic success3 1ompanies can ha(e one of two
strategies cost leadership5 or product differentiation3 ROA should be rising or 4eeping
pace with the compan$7s competitors if the compan$ is successfull$ pursuing either of
these strategies5 but how ROA rises will depend on the compan$7s strateg$3 ROA should
rise with a successful cost leadership strateg$ because the compan$>s increasing
operating efficienc$3 An e6ample is an increasing5 total asset5 turno(er ratio as the
compan$ e6pands into new mar4ets5 increasing its mar4et share3 The compan$ ma$
achie(e leadership b$ using its assets more efficientl$3 <ith a successful product
differentiation strateg$5 ROA will rise because of a rising profit margin3
b Retun on Inest,ent /R"I
RO" is the return on capital in(ested in business5 i3e35 if an in(estment Rs - crore in men5
machines5 land and material is made to generate Rs3 +0 la4hs of net profit5 then the RO" is
+03 The computation of return on in(estment is as follows
Retun on Inest,ent /R"I 9 /!et ofit:Equity inest,ents 5 100
As this ratio re(eals how well the resources of a firm are being used5 higher the ratio5
better are the results3 The return on shareholder>s in(estment should be compared with
the return of other similar firms in the same industr$3 The inert9firm comparison of this
ratio determines whether the in(estments in the firm are attracti(e or not as the in(estors
would li4e to in(est onl$ where the return is higher3
+ Retun on Equity
Return on equit$ measures how much an equit$ shareholder7s in(estment is actuall$
earning3 The return on equit$ tells the in(estor how much the in(ested rupee is earning
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 14/21
from the compan$3 The higher the number5 the better is the performance of the compan$
and suggests the usefulness of the projects the compan$ has in(ested in3
The computation of return on equit$ is as follows
Retun on equity 9 /!et ofit to o7nes:alue of the se+ifi+ o7ne;s
'ontibution to the business 5 100
The ratio is more meaningful to the equit$ shareholders who are in(ested to 4now profits
earned b$ the compan$ and those profits which can be made a(ailable to pa$ di(idend to
them3
d Eanin4s e %hae /EP%*
This ratio determines what the compan$ is earning for e(er$ share3 For man$ in(estors5
earnings are the most important tool3 E2S is calculated b$ di(iding the earnings &net
profit* b$ the total number of equit$ shares3
The computation of E2S is as follows
Eanin4s e shae 9 !et ofit:!u,be of shaes outstandin4
The E2S is a good measure of profitabilit$ and when compared with E2S of similar other
companies5 it gi(es a (iew of the comparati(e earnings or earnings power of a firm3 E2S
calculated for a number of $ears indicates whether or not earning power of the compan$
has increased3
e Diidend e %hae /DP%
The e6tent of pa$ment of di(idend to the shareholders is measured in the form of
di(idend per share3 The di(idend per share gi(es the amount of cash flow from the
compan$ to the owners and is calculated as follows
Diidend e shae 9 Total diidend ay,ent : !u,be of shaes outstandin4
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 15/21
The pa$ment of di(idend can ha(e se(eral interpretations to the shareholder3 The
distribution of di(idend could be thought of as the distribution of e6cess profitsabnormal
profits b$ the compan$3 On the other hand5 it could also be negati(el$ interpreted as lac4
of in(estment opportunities3 "n all5 di(idend pa$out gi(es the e6tent of inflows to the
shareholders from the compan$3
f Diidend Payout Ratio
From the profits of each compan$ a cash flow called di(idend is distributed among its
shareholders3 This is the continuous stream of cash flow to the owners of shares5 apart
from the price differentials &capital gains* in the mar4et3 The return to the shareholders5 in
the form of di(idend5 out of the compan$7s profit is measured through the pa$out ratio3
The pa$out ratio is computed as follows
Payout Ratio 9 /Diidend e shae : Eanin4s e shae < 100
The percentage of pa$out ratio can also be used to compute the percentage of retained
earnings3 The profits a(ailable for distribution are either paid as di(idends or retained
internall$ for business growth opportunities3 )ence5 when di(idends are not declared5 the
entire profit is ploughed bac4 into the business for its future in(estments3
4 Diidend )ield
Di(idend $ield is computed b$ relating the di(idend per share to the mar4et price of the
share3 The mar4et place pro(ides opportunities for the in(estor to bu$ the compan$7s
share at an$ point of time3 The price at which the share has been bought from the mar4et
is the actual cost of the in(estment to the shareholder3 The mar4et price is to be ta4en as
the cum9di(idend price3 Di(idend $ield relates the actual cost to the cash flows recei(ed
from the compan$3 The computation of di(idend $ield is as follows
Diidend yield 9 /Diidend e shae : a=et i+e e shae < 100
)igh di(idend $ield ratios are usuall$ interpreted as under(alued companies in the
mar4et3 The mar4et price is a measure of future discounted (alues5 while the di(idend per
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 16/21
share is the present return from the in(estment3 )ence5 a high di(idend $ield implies that
the share has been under priced in the mar4et3 On the other hand a low di(idend $ield
need not be interpreted as o(er(aluation of shares3 A compan$ that does not pa$ out
di(idends will not ha(e a di(idend $ield and the real measure of the mar4et price will be
in terms of earnings per share and not through the di(idend pa$ments3
h Pi+e:Eanin4s Ratio /P:E
The 2E multiplier or the price earnings ratio relates the current mar4et price of the share
to the earnings per share3 This is computed as follows
Pi+e:eanin4s atio 9 'uent ,a=et i+e : Eanin4s e shae
This ratio is calculated to ma4e an estimate of appreciation in the (alue of a share of a
compan$ and is widel$ used b$ in(estors to decide whether or not to bu$ shares in a
particular compan$3 Man$ in(estors prefer to bu$ the compan$7s shares at a low 2E ratio
since the general interpretation is that the mar4et is under(aluing the share and there will
be a correction in the mar4et price sooner or later3 A (er$ high 2E ratio on the other hand
implies that the compan$7s shares are o(er(alued and the in(estor can benefit b$ selling
the shares at this high mar4et price3
i Debt-to-Equity Ratio
Debt9Equit$ ratio is used to measure the claims of outsiders and the owners against the
firm>s assets3
Debt-to-equity atio 9 "utsides #unds : %haeholdes #unds
The debt9equit$ ratio is calculated to measure the e6tent to which debt financing has been
used in a business3 "t indicates the proportionate claims of owners and the outsiders
against the firm>s assets3 The purpose is to get an idea of the cushion a(ailable to
outsiders on the liquidation of the firm3
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 17/21
RE%EAR'> &AP
To start an$ business capital pla$s major role3 1apital can be acquired in two wa$s b$
issuing shares or b$ ta4ing debt from financial institutions or borrowing mone$ from
financial institutions3 The owners of the compan$ ha(e to pa$ regular interest and
principal amount at the end3
Stoc4 is ownership in a compan$5 with each share of stoc4 representing a tin$ piece of
ownership3 The more shares $ou own5 the more of the compan$ $ou own3 The more
shares $ou own5 the more di(idends $ou earn when the compan$ ma4es a profit3 "n the
financial world5 ownership is called *Equity.
Ad(antages of selling stoc4
• A compan$ can raise more capital than it could borrow3
• A compan$ does not ha(e to ma4e periodic interest pa$ments to creditors3
• A compan$ does not ha(e to ma4e principal pa$ments
Stoc4shares pla$ a major role in acquiring capital to the business in return in(estors are
paid di(idends to the shares the$ own3 The more shares $ou own the more di(idends $ou
recei(e3
The role of equit$ anal$sis is to pro(ide information to the mar4et3 An efficient mar4et
relies on information a lac4 of information creates inefficiencies that result in stoc4s
being misrepresented &o(er or under (alued*3 This is (aluable because it fills information
gaps so that each indi(idual in(estor does not need to anal$=e e(er$ stoc4 thereb$ ma4ing
the mar4ets more efficient3
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 18/21
"B?E'TI@E% "# T>E %T$D)
The objecti(e of this project is to deepl$ anal$=e our "ndian Automobile "ndustr$ for
in(estment purpose b$ monitoring the growth rate and performance on the basis of
historical data3
The main objecti(es of the 2roject stud$ are
• Detailed anal$sis of Automobile industr$ which is gearing towards
international standards
• Anal$=e the impact of qualitati(e factors on industr$>s and compan$>s
prospects
• 1omparati(e anal$sis of three tough competitors TATA Motors5 Maruti Su=u4i
and Mahindra and Mahindra through fundamental anal$sis3
• Suggesting as to which compan$>s shares would be best for an in(estor to
in(est3
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 19/21
>)P"T>E%I%
>yothesis 1
), The sample Equit$ of automobile industr$ ma$ not influence the whole industr$5)- The sample Equit$ of automobile industr$ will influence the whole industr$
>yothesis 6
), The ris4 and return of the Equit$ are not considered while in(estors ma4ing
decisions on their in(estment securit$5
)- The ris4 and return of the Equit$ are considered while in(estors ma4ing decisions
on their in(estment
>yothesis 3
The null h$pothesis of the stud$ assumes5
), There is no significant impact of Equit$ anal$sis while in(estor in(esting in a
securit$5
)- There is a significant impact of Equit$ anal$sis while in(estor in(esting in a
securit$53
>yothesis
), The sample Equit$ ma$ not influence the whole industr$5
)- The sample Equit$ will influence the whole industr$
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 20/21
%'"PE "# T>E %T$D)
The scope of the stud$ is identified after and during the stud$ is conducted3 The
project is based on tools li4e fundamental anal$sis and ratio anal$sis3 Further5 the
stud$ is based on information of last fi(e $ears3
• The anal$sis is made b$ ta4ing into consideration fi(e companies i3e3 TATA
Motors5 Maruti Su=u4i and Mahindra and Mahindra3
• The scope of the stud$ is limited for a period of fi(e $ears3
• The scope is limited to onl$ the fundamental anal$sis of the chosen stoc4s3
Peiod of the study
The duration of the project is 0da$s
7/26/2019 Elize Beth
http://slidepdf.com/reader/full/elize-beth 21/21
ET>"D"("&)
Research design or research methodolog$ is the procedure of collecting5 anal$=ing and
interpreting the data to diagnose the problem and react to the opportunit$ in such a wa$ where
the costs can be minimi=ed and the desired le(el of accurac$ can be achie(ed to arri(e at a
particular conclusion3
The methodolog$ used in the stud$ for the completion of the project and the fulfillment of the
project objecti(es3
The sample of the stoc4s for the purpose of collecting secondar$ data has been selected on the
basis of Random Sampling3 The stoc4s are chosen in an unbiased manner and each stoc4 is
chosen independent of the other stoc4s chosen3 The stoc4s are chosen from the automobile
sector3
The sample si=e for the number of stoc4s is ta4en as . for fundamental anal$sis of stoc4s as
fundamental anal$sis is (er$ e6hausti(e and requires detailed stud$3