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Securities Analysis

A security is analyzed by two important methods:

1. Technical Analysis2. Fundamental Analysis

Technical analysis is a method of predicting price movements and future market trends by

studying charts of past market action which take into account price of instruments, volume of

trading and, where applicable, open interest in the instruments.

Fundamental analysis is a method of forecasting the future price movements of a financial

instrument based on economic, political, environmental and other relevant factors and statisticsthat will affect the basic supply and demand of whatever underlies the financial instrument.

Main differences between the two types of analysis:

1.2 RATIONALE FOR THE STUDY

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Fundamental analysis Technical analysis

Focuses on what ought to happen in a market Focuses on what actually happens in a market

Factors involved in price analysis:1. Supply and demand2.Seasonal cycles3.Weather 4. Government policy

Charts are based on market action involving:1. Price2.Volume3. Open interest (futures only)



In an industry plagued with skepticism and a stock market increasingly difficult to predict, if one

looks hard enough there may still be a genuine aid for the Day Trader and Short Term Investor.

The price of a security represents a consensus. It is the price at which one person agrees to buy

and another agrees to sell. The price at which an investor is willing to buy or sell depends

primarily on his expectations. If he expects the security's price to rise, he will buy it; if the

investor expects the price to fall, he will sell it. These simple statements are the cause of a major

challenge in forecasting security prices, because they refer to human expectations. As of now,

human’s expectations are neither easily quantifiable nor predictable.

If prices are based on investor expectations, then knowing what a security should sell for (i.e.,

fundamental analysis) becomes less important than knowing what other investors expect it to sell

for. That's not to say that knowing what a security should sell for isn't important--it is. But there

is usually a fairly strong consensus of a stock's future earnings that the average investor cannot

disprove.

Fundamental analysis and technical analysis can co-exist in peace and complement each other.

Since all the investors in the stock market want to make the maximum profits possible, they just

cannot afford to ignore either fundamental or technical analysis.

1.3 SCOPE OF THE STUDY

Due to time and resource constraint the study has been confined to five sectors, i.e., Automobile,

Telecom, IT, Banking and Pharmaceutical industry. The period of study covers only 3 financial

years, from 2007 to 2010. This study covered 5 companies from 5 sectors, i.e., Tata motors,

Bharti Airtel, Infosys, SBI, and Ranbaxy Laboratories. In this study technical and fundamental

analysis of these companies lead to long term investment prospects.

1.4 TOOLS USED FOR THE STUDY

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Tools used for fundamental analysis are

1. SWOT ANALYSIS Strength

WeaknessOpportunitiesThreats

2. PESTLE ANALYSIS

PoliticalEconomicSocialTechnologicalLegal

Environmental

3. PORTERS FIVE FORCES MODEL

Threat from New EntrantsPower of the Buyer Supplier Bargaining Power Rivalry among Existing CompetitorsThreats of Substitutes

4. VARIABLE ANALYSIS

MeanVarianceStandard DeviationCo-Variance

Tools used for Technical analysis are

1. Daily Moving Average

1.5 TECHNICAL ANALYSIS A CONCEPTUAL OVERVIEW

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TECHNICAL ANALYSIS can be conditionally divided into some main parts such as:

1. Types of charts

2. Graphical methods

3. Analytical methods

4. Technical indicators

Technical analysis is concerned with predicting future price trends from historical price and

volume data. The underlying axiom of technical analysis is that all fundamentals (including

expectations) are factored into the market and are reflected in exchange rates.

A technical analysis is based on three axioms:

1. Movement of the market considers everything

2. Movement of prices is purposeful

3. History repeats itself

SUPPORT AND RESISTANCE

Support is a level at which bulls (i.e., buyers) take control over the prices and prevent them from

falling lower.

Resistance, on the other hand, is the point at which sellers (bears) take control of prices and

prevent them from rising higher. The price at which a trade takes place is the price at which a

bull and bear agree to do business. It represents the consensus of their expectations.

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Support levels indicate the price where the most of investors believe that prices will move

higher. Resistance levels indicate the price at which the most of investors feel prices will move

lower.

Role Reversal

When a resistance level is successfully broken through, that level becomes a support level.

Similarly, when a support level is successfully broken through, that level becomes a resistance

level.

DOW THEORY– TRENDS

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The ideas of Charles Dow, the first editor of the Wall Street Journal, form the basis of technical

analysis. The Dow Theory is a method of interpreting and signaling changes in the stock market

direction based on the monitoring of the Dow Jones Industrial and Transportation Averages.

Dow created the Industrial Average, of top blue chip stocks, and a second average of top railroad

stocks (now the Transport Average). He believed that the behavior of the averages reflected the

hopes and fears of the entire market. The behavior patterns that he observed apply to markets

throughout the world.

Three Movements

Markets fluctuate in more than one time frame at the same time

1. Nothing is more certain than that the market has three well defined movements which fit into

each other.

2. The first is the daily variation due to local causes and the balance of buying and selling at that

particular time.

3. The secondary movement covers a period ranging from ten days to sixty days, averaging

probably between thirty and forty days.

The third move is the great swing covering from four to six years.

Bull markets are broad upward movements of the market that may last several years,

interrupted by secondary reactions. Bear markets are long declines interrupted by secondary

rallies. These movements are referred to as the primary trend.

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Secondary movements normally retrace from one third to two thirds of the primary trend

since the previous secondary movement.

Daily fluctuations are important for short-term trading, but are unimportant in analysis of

broad market movements.

Various cycles have subsequently been identified within these broad categories.

Primary Movements have Three Phases

The general conditions in the market:

Bull markets

1. Bull markets commence with reviving confidence as business conditions improve.

2. Prices rise as the market responds to improved earnings

3. Rampant speculation dominates the market and price advances are based on hopes and

expectations rather than actual results.

Bear markets

1. Bear markets start with abandonment of the hopes and expectations that sustained

inflated prices.

2. Prices decline in response to disappointing earnings.

3. Distress selling follows as speculators attempt to close out their positions and securities

are sold without regard to their true value.

Ranging Markets

A secondary reaction may take the form of a ‘line’ which may endure for several weeks. Price

fluctuates within a narrow range of about five per cent.

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Breakouts from a range can occur in either direction.

1. Advances above the upper limit of the line signal accumulation and higher prices;

2. Declines below the lower limit indicate distribution and lower prices;

3. Volume is used to confirm price breakouts.

TRENDS

Bull Trends

A bull trend is identified by a series of rallies where each rally exceeds the highest point of the

previous rally. The decline, between rallies, ends above the lowest point of the previous decline.

Successive highs and higher lows

The start of an uptrend is signaled when price makes a higher low (trough), followed by a rally

above the previous high (peak):

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Start = higher Low + break above previous High.

The end is signaled by a lower high (peak), followed by a decline below the previous low

(trough):

End = lower High + break below previous Low.

A bear trend starts at the end of a bull trend: when a rally ends with a lower peak and then

retreats below the previous low. The end of a bear trend is identical to the start of a bull trend.

Large Corrections

A large correction occurs when price falls below the previous low (during a bull trend) or where

price rises above the previous high (in a bear trend).

1. A bull trend starts when price rallies above the previous high,

2. A bull trend ends when price declines below the previous low,

3. A bear trend starts at the end of a bull trend (and vice versa).

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I. ECONOMIC ANALYSIS

POLITICO-ECONOMIC ANALYSIS

No industry or company can exist in isolation. It may have splendid managers and a tremendous

product. However, its sales and its costs are affected by factors, some of which are beyond its

control - the world economy, price inflation, taxes and a host of others. It is important, therefore,

to have an appreciation of the politico-economic factors that affect an industry and a company.

The political equation

A stable political environment is necessary for steady, balanced growth. If a country is ruled by a

stable government which takes decisions for the long-term development of the country, industry

and companies will prosper.

Foreign Exchange Reserves

A country needs foreign exchange reserves to meet its commitments, pay for its imports and

service foreign debts.

Foreign Exchange Risk

This is a real risk and one must be cognizant of the effect of a revaluation or devaluation of the

currency either in the home country or in the country the company deals in.

Restrictive Practices

Restrictive practices or cartels imposed by countries can affect companies and industries.

Foreign Debt and the Balance of Trade

Foreign debt, especially if it is very large, can be a tremendous burden on an economy. India

pays around $ 5 billion a year in principal repayments and interest payments.

Inflation

Inflation has an enormous effect in the economy. Within the country it erodes purchasing power.

As a consequence, demand falls. If the rate of inflation in the country from which a company

imports is high then the cost of production in that country will automatically go up.

The Threat of Nationalization

The threat of nationalization is a real threat in many countries – the fear that a company may

become nationalized.

Interest Rates

A low interest rate stimulates investment and industry. Conversely, high interest rates result in

higher cost of production and lower consumption.

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Taxation

The level of taxation in a country has a direct effect on the economy. If tax rates are low, people

have more disposable income.

Government Policy

Government policy has a direct impact on the economy. A government that is perceived to be

pro-industry will attract investment.

THE ECONOMIC CYCLE

It affects investment decisions, employment, demand and the profitability of companies.

The four stages of an economic cycle are:

1. Depression

At the time of depression, demand is low and falling. Inflation is high and so are interest rates.

Companies, crippled by high borrowing and falling sales, are forced to curtail production, close

down plants built at times of higher demand, and let workers go.

2. Recovery

During this phase, the economy begins to recover. Investment begins anew and the demand

grows. Companies begin to post profits. Conspicuous spending begins once again.

3. Boom

In the boom phase, demand reaches an all time high. Investment is also high. Interest rates are

low. Gradually as time goes on, supply begins to exceed the demand. Prices that had been rising

begin to stabilize and even fall. There is an increase in demand. Then as the boom period

matures prices begin to rise again.

4. Recession

The economy slowly begins to downturn. Demand starts falling.. Interest rates and inflation are

high. Companies start finding it difficult to sell their goods. The economy slowly begins to

downturn.

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II. INDUSTRY ANALYSIS

The importance of industry analysis is now dawning on the Indian investor as never before.

Cycle

The first step in industry is to determine the cycle it is in, or the stage of maturity of the industry.

All industries evolve through the following stages:

1. Entrepreneurial, sunrise or nascent stage

2. Expansion or growth stage

3. Stabilization, stagnation or maturity stage, and

4. Decline or sunset stage to properly establish itself. In the early days, it may actually make

losses.

The Entrepreneurial or Nascent Stage

At the first stage, the industry is new and it can take some time for it to properly establish itself.

The Expansion or Growth Stage

Once the industry has established itself it enters a growth stage. As the industry grows, many

new companies enter the industry.

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The Stabilization or Maturity Stage

After the halcyon days of growth, an industry matures and stabilizes. Rewards are low and so too

is the risk. Growth is moderate. Though sales may increase, they do so at a slower rate than

before. Products are more standardized and less innovative and there are several competitors.

The Decline or Sunset Stage

Finally, the industry declines. This occurs when its products are no longer popular. This may be

on account of several factors such as a change in social habits The film and video industries.

III. COMPANY ANALYSIS

At the final stage of fundamental analysis, the investor analyzes the company. This analysis has

two thrusts:

1. How has the company performed vis-à-vis other similar companies

2. How has the company performed in comparison to earlier years

It is imperative that one completes the politico economic analysis and the industry analysis

before a company is analyzed because the company's performance at a period of time is to an

extent a reflection of the economy, the political situation and the industry. What does one look at

when analyzing a company?

The different issues regarding a company that should be examined are:

1. The Management

2. The Company

3. The Annual Report

4. Ratios

5. Cash flow

BALANCE SHEET

The Balance Sheet details the financial position of a company on a particular date; of the

company's assets (that which the company owns), and liabilities (that which the company owes),

grouped logically under specific heads. It must however, be noted that the Balance Sheet details

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the financial position on a particular day and that the position can be materially different on the

next day or the day after.

SOURCES OF FUNDS

SHAREHOLDERS FUND LOAN FUND

SHARE CAPITAL

(i) Private Placement

(ii) Public Issue

iii) Rights issues

RESERVES

i) Capital Reserves

ii) Revenue Reserves

i) Secured loans:

ii) Unsecured loans

PROFIT AND LOSS ACCOUNT

The Profit and Loss account summarizes the activities of a company during an accounting period

which may be a month, a quarter, six months, a year or longer, and the result achieved by the

company. It details the income earned by the company, its cost and the resulting profit or loss. It

is, in effect, the performance appraisal not only of the company but also of its management- its

competence, foresight and ability to lead.

RATIOS

Ratios express mathematically the relationship between performance figures and/or

assets/liabilities in a form that can be easily understood and interpreted. No single ratio tells the

complete story.

The major ratios that are considered

(i) Market value (ii) Price- earnings ratio (iii) Market-to-book ratio

(iv) Earnings (v) Earnings per share (vi) Dividend per share

(vii) Dividend payout ratio (viii) Leverage ratios (ix) Return on investments

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CASH FLOW

A statement of sources and uses begins with the profit for the year to which are added the

increases in liability accounts (sources) and from which are reduced the increases in asset

accounts (uses). The net result shows whether there has been an excess or deficit of funds and

how this was financed. Investors must examine a company's cash flow as it reveals exactly where

the money came from how it was utilized. Investors must be concerned if a company is financing

either its inventories or paying dividends from borrowings without real growth as that shows

deterioration.

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CHAPTER -II

Review of Literature

“Only buy something that you’d be perfectly happy to hold if the market shut down for

10 years”

- Warren Buffet

Investment Guru

“Prevailing wisdom is that markets are always right, I assume they are always wrong”

- George Soros,

Chairman, Soros Fund Management

Investors don’t Make Money in the Stock Market. One reason the institutions make so much

money is that they are trading. They make money every time you buy or sell. They make money

whether you win or lose. That means that when you’re investing, you’re basically just sitting

there. You’re not going anywhere. You’re not making money as an investor.

Trading the Trend: The Only Way to Make Money in the MarketIf you don’t know this already, “Trend Trading” means trading trends based on human emotions.

Not lagging indicators. Not complex statistical analysis and not Ph.D. level mathematical

equations. With trend trading, you look for market movement. That could mean stocks that are

going to move up or down during the course of a day (intraday). You’ll play the gaps up and

down, often several days a week.

The “Trend trading” means being aware and taking advantage of trends like the run-ups that

happen around earning sessions. These are trends that have worked time and time again in the

market. They consistently yield results.

Michal Parness, Founder & CEO

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Fundamental and Technical Analysis: Substitutes or Compliments?

While the fundamental and technical analysis literatures invest considerable effort in assessing

their respective ability to explain share prices, they invariably do so without reference to each

other. In this context, we propose an equity valuation model integrating both fundamental and

technical analysis and, in doing so, recognize their potential as complements rather than as

substitutes. Testing confirms the complementary nature of fundamental and technical analysis by

showing that, while each performs well in isolation, models integrating both have superior

explanatory power. While our findings relate to the valuation of shares, they also have

implications for other valuation exercises.

Jenni L. Bettman

Australian National University

Stephen Sault

Australian National University - Faculty of Economics & Commerce

Keywords: Equity valuation models, Fundamental information, Technical information

JEL Classifications: G12, G14, M41

Although the fundamental and technical analysis literatures invest considerable effort in

assessing their respective ability to explain share prices, they invariably do so without reference

to each other. In this context, we propose an equity valuation model integrating both fundamental

and technical analysis and, in doing so, recognize their potential as complements rather than as

substitutes. Testing confirms the complementary nature of fundamental and technical analysis by

showing that, although each performs well in isolation, models integrating both have superior

explanatory power. While our findings relate to the valuation of shares, they also have

implications for other valuation exercises.

Accepted Paper Series

Accounting & Finance, Vol. 49, No. 1, pp. 21-36, March 2009

ISSN 1822-6515 ISSN 1822-6515 EKONOMIKA IR VADYBA: 2009. 14 ECONOMICS &

MANAGEMENT: 2009. 14

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RELEVANCE OF FUNDAMENTAL ANALYSIS ON THE BALTIC EQUITY MARKET

The main target of the present research was to discover the importance of fundamental analysis

on the Baltic equity markets. The hypothesis that fundamental analysis is not able to generate

substantial additional value to the performance of the portfolio comprised of Baltic enterprises

stocks was proved. The relevance and need of fundamental analysis was checked by analyzing

the performances of portfolios, which were created on the basis of key fundamental ratios: ROE,

equity ratio, ROIC, net debt to assets as well as PE and PB. Naturally, the companies with better

average ratios were selected to form stock portfolios. The findings of the conducted study

demonstrate that neither of the mentioned ratios helped in the creating portfolio, performance of

which would beat market’s performance. The only exception was price to earnings ratio, which

proved that cheap companies seem to be attractive to the investors. It was decided to look closer

at the major performers and to find out whether there are any common patterns among the

winners and the losers of the Baltic equity markets. Basically, equity investors ignored financial

situation of the companies (profitability, stability of balance sheets) and focused mainly on

assessing their growth opportunities and attractiveness of business model. So, investors were

mainly forward-looking when making company selection. As a result, major sufferers

performance-wise were the companies with limited growth potential or total business model

erosion.

Julia Bistrova, Natalja Lace

Riga Technical University, Latvia,

Should you use Technical or Fundamental analysis to make your decisions?

Volumes have been written about the different ways to forecast or predict market movement.

Traditionally, there are two distinct schools of thought that an individual may choose from, and

that being Fundamental analysis or Technical analysis. By choosing fundamental analysis, your

decisions are based upon underlying economic factors, cash flows, and price earnings. This

information will aim to tell you why a stock will move

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Technical analysis aims to show you how and when a stock will move. This method discounts all

news and information regarding the value of the stock. In other words, you only pay attention to

a chart. The saying “a picture is worth a thousand words” truly summarizes this concept nicely.

You can of course choose to use a combination of both if you prefer. This would imply that

when the stock you are looking at becomes undervalued fundamentally, you would wait for a

technical setup to get you in to the market.

Deciding on which method is appropriate and gives bigger returns is truly a matter of opinion.

Respectively, both methods have the same goal; to determine market direction. I know of a

number of individuals who only use one or the other and is equally successful with phenomenal

returns. It becomes interesting when one speaks to traders from each school. The fundamental

traders believe that charts are a waste of time and provide no real sense as to why one would

make trading decisions based on indicators and repetitive patterns. This group is essentially

bargain hunters. They want to buy stocks which they feel are under priced and will return to a

normal value at a later stage. Fundamental traders often hold stocks for longer periods of time

compared to technical traders.

On the other hand, the technical traders believe that numbers do not lie and that information

based on value, supply and demand are already factored into the price. They also argue that

people can be predictable and that these behaviors’ occur in the form of price patterns. These

patterns repeat with a degree of predictability and therefore can be used to forecast future price

movements. Technical traders generally hold positions for shorter periods of time compared to

fundamental traders.

Clearly both avenues are important, and one must make careful decisions before jumping into

trading without having an objective. I have always said that finding a method, style or strategy

depends on ones personality. If you are thinking of long term investing then the fundamental

approach may suit your needs whereas if you are looking for short term market moves, then

technical analysis can provide a myriad of systems to accommodate your personal style. Some of

which we shall take a look at further into the course.

Sandy Jadeja

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2.2 INDUSTRY PROFILE

Introduction

In general, the financial market divided into two parts, Money market and capital market.

Securities market is an important, organized capital market where transaction of capital is

facilitated by means of direct financing using securities as a commodity. Securities market can

be divided into a primary market and secondary market.

PRIMARY MARKET

The primary market is an intermittent and discrete market where the initially listed shares are

traded first time, changing hands from the listed company to the investors. It refers to the process

through which the companies, the issuers of stocks, acquire capital by offering their stocks to

investors who supply the capital. In other words primary market is that part of the capital

markets that deals with the issuance of new securities. Companies, governments or public sector

institutions can obtain funding through the sale of a new stock or bond issue. This is typically

done through a syndicate of securities dealers. The process of selling new issues to investors is

called underwriting. In the case of a new stock issue, this sale is called an initial public offering

(IPO). Dealers earn a commission that is built into the price of the security offering, though it

can be found in the prospectus.

SECONDARY MARKET

The secondary market is an on-going market, which is equipped and organized with a place,

facilities and other resources required for trading securities after their initial offering. It refers to

a specific place where securities transaction among many and unspecified persons is carried out

through intermediation of the securities firms, i.e., a licensed broker, and the exchanges, aspecialized trading organization, in accordance with the rules and regulations established by the

exchanges.

The Indian stock market rose out of a need to strengthen the economy of the country and create a

space for the mobilization and allocation of savings and for bringing the investor and the

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entrepreneur together. Today, the Indian stock market lists the largest number of companies,

second only to the United States of America. The market has become increasingly important in

the global financial sphere - drawing the interest of an increasing number of international

investors. The Indian Stock Market has opened itself up to international investors and with the

relative ease that has come into dealing in the stock-exchange today, with the advent of the

electronic age, more and more investors are pouring their savings into the Indian stock market,

discouraged by the low returns from bank deposits. Altogether, the Indian Stock Market is

growing at a steady rate and has come a long way since its relatively humble beginnings in 1875

A bit about history of stock exchange they say it was under a tree that it all started in

1875.Bombay Stock Exchange (BSE) was the major exchange in India till 1994.National Stock

Exchange (NSE) started operations in 1994.

NSE was floated by major banks and financial institutions. It came as a result of Harshad Mehta

scam of 1992. Contrary to popular belief the scam was more of a banking scam than a stock

market scam. The old methods of trading in BSE were people assembling on what as called a

ring in the BSE building. They had a unique sign language to communicate apart from all the

shouting. Investors weren't allowed access and the system was opaque and misused by brokers.

The shares were in physical form and prone to duplication and fraud.

NSE was the first to introduce electronic screen based trading. BSE was forced to follow suit.

The present day trading platform is transparent and gives investors prices on a real time basis.

With the introduction of depository and mandatory dematerialization of shares chances of fraud

reduced further.

A trading day starts at 9am ending at 3.30pm. Monday to Friday. BSE has 30 stocks which make

up the Sensex .NSE has 50 stocks in its index called Nifty. FII s Banks, financial institutions

mutual funds are biggest players in the market. Then there are the retail investors and

speculators. The last ones are the ones who follow the market morning to evening; Market can be

very addictive like blogging though stakes are higher in the former.

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Stock & Exchange Board of India

REGULATION OF BUSINESS IN THE STOCK EXCHANGES

Under the SEBI Act, 1992, the SEBI has been empowered to conduct inspection of stock exchanges. The SEBI has been inspecting the stock exchanges once every year since 1995-96.

During these inspections, a review of the market operations, organizational structure and

administrative control of the exchange is made to ascertain whether:

The exchange provides a fair, equitable and growing market to investors

1. the exchange's organization, systems and practices are in accordance with the Securities

Contracts (Regulation) Act (SC(R) Act), 1956 and rules framed there under

2. the exchange has implemented the directions, guidelines and instructions issued by the

SEBI from time to time

3. The exchange has complied with the conditions, if any, imposed on it at the time of

renewal/ grant of its recognition under section 4 of the SC(R) Act, 1956.

During the year 1997-98, inspection of stock exchanges was carried out with a special focus on

the measures taken by the stock exchanges for investor's protection. Stock exchanges were,

through inspection reports, advised to effectively follow-up and redress the investors' complaintsagainst members/listed companies. The stock exchanges were also advised to expedite the

disposal of arbitration cases within four months from the date of filing.

During the earlier years' inspections, common deficiencies observed in the functioning of the

exchanges were delays in post trading settlement, frequent clubbing of settlements, delay in

conducting auctions, inadequate monitoring of payment of margins by brokers, non-adherence to

Capital Adequacy Norms etc. It was observed during the inspections conducted in 1997-98 that

there has been considerable improvement in most of the areas, especially in trading, settlement,

collection of margins etc.

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INDIAN STOCK MARKET IN 2010 : The prevailing economic conditions, both domestic and

global, suggest the Indian stock market is poised to continue to rally in 2010 even though US and

European Markets have yet to recover from recession effect. Key factor remains the impact of Q4

results and strong GDP growth of around 8%. However point of caution needs to be the phase

wise withdrawal of financial support given by Indian government to the market. So far, the recovery

in India has been driven by domestic consumption and government expenditure. However,

corporate investment is expected to surge in 2010 due to the strong GDP growth which will

increase capacity utilization.

Stocks in the infrastructure and power sectors may be the front runners in 2010 as they receive

strong policy support from the Indian government. But one must be cautious that the interest rate

cycle might start moving up with the strong GDP performance and relatively high inflation. If it

does, banking stocks will be affected severely as was seen in the past. We have witnessed a

global financial crisis in 2008-09 which is still very much an unforgettable incident and taught us

good lessons.

2.2 INTRODUCTION TO COMPANY PROFILE

KARVY STOCK BROKING LTD

A leading player in the financial services industry in India, Karvy Stock Broking Limited was

founded in 1990 and is based in Hyderabad, India. It began with the vision and enterprise of a

small group of practicing Chartered Accountants who founded the flagship company Karvy

Stock Broking Limited is a subsidiary of Karvy Consultants Limited. Karvy Stock Broking

Limited provides stock broking and research advisory services in India. The company offers

portfolio analysis, depository participant, and financial planning and management services for

individuals and institutional clients. It also provides a monthly magazine, Finapolis, whichprovides up-dated market information on market trends, investment options, and opinions.

Computershare has over 6000 experienced professionals, Computershare operates in five

continents, providing services and solutions to listed companies, investors, employees,

exchanges and other financial institutions while Karvy has handled over 675 issues as Registrar

to Issues servicing over 16 million investors from multiple locations across India.

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Products / Services:

KARVY is a premier integrated financial services provider which covers the entire spectrum of

financial services such as:

1. Stock broking

2. Depository Participants

3. Distribution of financial products - mutual funds, bonds, fixed deposit, equities

4. Insurance Broking

5. Commodities Broking

6. Personal Finance Advisory Services

7. Merchant Banking & Corporate Finance

8. Placement of equity

9. IPOs

Thus over the last 20 years Karvy has traveled the success route, towards building a reputation as

an integrated financial services provider, offering a wide spectrum of services. And the company

have made this journey by taking the route of quality service, path breaking innovations in

service, versatility in service and finally…totality in service. Karvy’s highly qualified manpower,

cutting-edge technology, comprehensive infrastructure and total customer-focus has secured for

us the position of an emerging financial services giant enjoying the confidence and support of an

enviable clientele across diverse fields in the financial world.

VALUES AND VISION

Karvy’s values and vision of attaining total competence in our servicing has served as the

building block for creating a great financial enterprise, which stands solid on our fortresses of

financial strength - our various companies.With the experience of years of holistic financial

servicing behind us and years of complete expertise in the industry to look forward to, we have

now emerged as a premier integrated financial services provider. And today, we can look with

pride at the fruits of our mastery and experience – comprehensive financial services that are

competently segregated to service and manage a diverse range of customer requirements.

27



JOINT VENTURE

Karvy Computershare Private Limited is a joint venture between Computershare, Australia

and Karvy Consultants Limited, India in the registry management services industry.

Computershare, Australia is the world’s largest and only global share registry providing financial

market services and technology to the global securities industry.

The 50:50 ventures would bring together global capabilities and local expertise in carrying

forward the legacy of comprehensive registry management services in India and across the globe.

Karvy Corporate and Mutual Fund Share Registry and Investor Services business, India's No. 1

Registrar and Transfer Agent and rated as India's "Most Admired Registrar" for its overall

excellence in volume management, quality processes and technology driven services.

The combination of local knowledge and global expertise with technological innovations is

going to mark the emergence of a fully integrated services provider with cross border capabilities

Key Personnel

Board of Directors of company

1. Mr. C Parthasarathy, Managing Director

2. Mr. M Yugandhar, Managing Director

3. Mr. M S Ramakrishna, Director 4. Mr. Stuart Crosby, Chairman

5. Mr. Mark Davis, Director

6. Mr. Chandra Balaraman, Director

Major competitors of Karvy Stock Broking Ltd

SHARE KHAN LTD INDIA INFOLINE LTD

ICICI DIRECT GEOGIT PNB PARIBAS RELIGARE HDFC SECURITIES

INDIA BULLS SUCURITIES LTD ANGEL BROKING LTD

28



CHAPTER-III

RESEARCH METHODOLOGY

TYPE OF RESEARCH STUDY

The research has been based on secondary data analysis. The study has been exploratory as it

aims at examining the secondary data for analyzing the previous researches that have been done

in the area of technical and fundamental analysis of stocks. The knowledge thus gained from this

preliminary study forms the basis for the further detailed Descriptive research. In the exploratory

study, the various technical indicators that are important for analyzing stock were actually

identified and important ones short listed.

SAMPLE DESIGN

The sample of the stocks for the purpose of collecting secondary data has been selected on the

basis of Convenience Sampling. The stocks are chosen in an unbiased manner and each stock is

chosen independent of the other stocks chosen.

SAMPLE SIZE

The sample size of stocks is taken as 5 for technical and fundamental analysis of stocks as

fundamental analysis is very exhaustive and requires detailed study.

SOURCES OF DATA

Secondary source:

- Annual Reports of selected stocks

- Financial Statements- Internet

- Books and Magazines

29



3.2 OBJECTIVES OF THE STUDY

Primary Objective

1.) To analyze technical and fundamental performance of chosen securities

Secondary-Objectives

1.) To study the various theories of technical and fundamental analysis.

2.) To understand the movement and performance of stocks to take decision to invest.

3.) To understand and analyze the factors that affect the movement of stock prices in the

Indian Stock Markets

3.3 LIMITATIONS OF STUDY

The scope of study was limited due to some constraints given below:-

1. Analysis is only a means not an end. The analysis has been done on the basis of my own

interpretations and up to my best knowledge but every analyst have his or her own

interpretations and suggestions.

2. As the study depends on human perceptions so there are chances of study getting biased.

3. It does not take into consideration the time taken for the completion of the jobs.

4. No personal contacts with stakeholders of companies also a limitation for analyzing the

project.

5. Error due to some oversight or misinterpretation

30



CHAPTER IV

FUNDAMENTAL ANALYSIS

TATA MOTORS LTD

I Market/ economy analysis

It covers the macro economy analysis and the various macro economic factors on the national

level like GDP, Monetary policies of India, Fiscal Policies and Inflation and money supply etc.

Present Indian Economy

After almost 7% growth in 2008/09 fiscal year, in the first three months of 2010 India's economy

expanded 8.6% boosted by industrial production and services. But, is the third largest economy

in Asia able to keep its high rate of growth?

Indeed, the better than expected performance of Indian economy in the last few quarters had a lot

to do with a significant fiscal stimulus and loose monetary policy. In fact, two stimulus packages

providing tax cuts and increasing infrastructure spending in connection with lower interest rates

have supported significantly domestic demand. Yet, with demand growing at a faster pace than

supply, inflation is becoming a growing concern. Not surprising, the Reserve Bank of India has

raised its benchmark interest rates twice to 3.75%. And it is expected that by the end of June the

rate may increase as much as 100 basis points. However, India's central bank should be more

cautious in shifting its monetary policy. Tightening too much or too early is likely to squeeze

credit availability and weight on growth which is essential in keeping fiscal deficit at sustainable

levels.

Looking further, stimulus spending had expanded fiscal deficit from 2.6% of GDP in 2007-08 to

10% in 2009-10. And although due to strong growth numbers the shortfall is more than

sustainable, Indian government should be able to better control its expenditure. In fact, while

Union Budget for 2011 increases infrastructure spending raises taxes for petroleum products and

reduces for middle-income families it fails to slash inefficient subsidies on fertilizer, fuel and

31



food. More importantly, the new administration is slow in implementing economic reforms

promised investors after last year's wider-than-expected election victory. The government has

made progress in new tax laws, disinvesting state run companies; it formed an expert’s panel to

ease foreign investment in the financial sector. Yet, labor reforms and farm prices release are far

from being executed.

India’s demographic advantage

In contrast to developed Countries, India will have a younger population for the next 50 years.

Hence India would be the hub for R&D.

India GDP

The India GDP is a combination of all the differential factors, contributing to the welfare of the

India economy. The GDP of India over the past two fiscals (2008-09 and 2009-10) experienced

considerable slowdown. This moderate growth of the India economy has given rise to moderate

expectations with respect of India GDP, various rating agencies, economists, business houses

predict a healthy growth in India GDP in the next two years, yet skepticism is still the order of

the day. Achieving a 9% GDP growth by 2012 is immensely impractical, looking at the rate at

which things are improving.

Table No 1

Table showing Indian GDP Rates adjusted with Inflation

Year Mar Average

2010 7.20 7.20

2009 6.70 6.70

2008 9.20 9.20

2007 9.70 9.70

32





Strengths of Indian Economy

After several decades of sluggish growth, the Indian economy is now amongst the fastest

growing economy in the world. Economic growth is currently 8-9%, second only to China.

Despite several problems facing the Indian economy many economists point to potentialstrengths of the Indian economy which could enable it to continue to benefit from high levels of

economic growth in the future.

1. Demographics of India are favorable

India still has a positive birth rate meaning that the size of the workforce will continue

to grow for the foreseeable future. (Unlike India) A rising workforce helps to increase

saving and investment. It also enables increased productivity.

2. There is much scope for increases in efficiency

The infrastructure of India is so bad in places that even moderate improvements could

lead to significant improvements in the productive capacity of the economy.

3. India is well placed to benefit from globalization and outsourcing

A legacy of the British Empire is that India has one of the largest English speaking

populations in the world. For labor intensive industries like call centers India is an

obvious target for outsourcing. This is an economic development likely to continue in the

future

4. Positive Growth Forecasts

A recent study from Goldman Sachs, forecast that India could growth at a sustainable rate

of 8% growth until 2020.However it is worth noting that this assumed Indian would make

several supply side policies such as labor market deregulation and improvements in

education and training.

34



Indian Inflation

On March 19, 2010, the Reserve Bank of India raised its benchmark reverse

repurchase rate to 3.5% percent, after this rate touched record lows of 3.25%. The repurchase

rate was raised to 5% from 4.75% as well, in an attempt to curb Indian inflation. India’s 2009-10

Economic Survey Report suggests a high double-digit increase in food inflation, with signs of

inflation spreading to various other sectors as well. The Deputy Governor of the Reserve Bank of

India, however, expressed his optimism in March 2010 about an imminent easing of Indian

wholesale price index-based inflation, on the back of falling oil and food prices.

For 2009, Indian inflation stood at 11.49% Y-o-Y. This rate reflects the general increase in

prices, taking into account the purchasing power of the common man.

The Indian method for calculating inflation, the Wholesale Price Index, is different from the rest

of world. Each week, the wholesale price of a set of 435 goods is calculated by the Indian

government. Since these are wholesale prices, the actual prices paid by consumers are far higher.

In times of rising inflation, this also means that the cost of living increases are much higher for

the populace. With most of India’s vast population living close to or below the poverty line,

inflation acts as a ‘Poor Man’s Tax’. This effect is amplified when food prices rise, since foodrepresents more than half of the expenditure of this group.

Money supply

1. Money supply growth for 2009-10 is seen at 17%

2. Monetary and credit aggregates have witnessed deceleration since their peak levels in

October 2008.

3. The liquidity overhang emanating from the earlier surge in capital inflows hassubstantially moderated in 2008-09.

4. Money supply (M3) growth for 2009-10 is placed at 17.0 per cent, said RBI.

5. Consistent with this, aggregate deposits of scheduled commercial banks are projected to

grow by 18.0 per cent.

35

http://www.economywatch.com/indianeconomy/india-inflation.html

http://www.economywatch.com/indianeconomy/india-inflation.html



6. The growth in adjusted non-food credit, including investment in bonds/ debentures/

shares of public sector undertakings and private corporate sector and CPs, is placed at

20.0 per cent.

7. Given the wide dispersion in credit growth noticed across bank groups during 2008-09,

banks with strong deposit base should Endeavour to expand credit beyond 20per cent.

II Industry Analysis

Since, 1991 opening of the economy has changed the face of auto industry. Today, it is amongst

the main drivers of growth of Indian economy with an output multiplier of 2.24(for every Re.1

invested, auto sector gives back Rs.2.24 to the economy). In recent years we have seen

increasing number of global players entering Indian market by way of Joint ventures,

collaborations or wholly owned subsidiary

The automobile industry is torn between trying to reduce costs on the one hand and, on the other,

dealing with the high price of performance-enhancing technology and environmental

compliance. Key drivers in the automotive industry are:

1. Reducing air pollution

2. Reduction of weight

3. Recyclability4. Safety

5. Better performance and engine efficiency

6. Longer service Life

Industry life cycle

The automobile market is at the maturity stage of the life cycle, locally and globally, due to an

increased number of competitors from domestic and foreign markets. The automobile market is

characterized by a low potential for market growth, but high sales and profit potential as the

products have still not saturated the market as a whole.

36



Present Industry condition

Indian Automobile industry is facing a stiff competition from both domestic and outside

companies, as overseas players gathering the same momentum as the domestic participants. The

automobile industry in India happens to be the ninth largest in the world. Following Japan, South

Korea and Thailand, in 2009, India emerged as the fourth largest exporter of automobiles.

Several Indian automobile manufacturers have spread their operations globally as well, asking

for more investments in the Indian automobile sector by the Multi National Companies.

Every other day, we have been hearing about some new launches, some low cost cars – all

customized in a manner such that the common man is not left behind. In 09-10, the automobile

industry is expected to see a growth rate of around 9%, with the disclaimer that the auto industry

in India has been hit badly by the ongoing global financial crisis.

Role of Automobile Industry in India

The Role of Automobile Industry in India GDP has been phenomenon. The Automobile Industry

is one of the fastest growing sectors in India.

The increase in the demand for cars, and other vehicles, powered by the increase in the income is

the primary growth driver of the automobile industry in India. The introduction of tailor made

finance schemes, easy repayment schemes has also helped the growth of the automobile sector.

37







With the help of its associates, Tata Motors offer high end manufacturing and automotive

solutions to its customers. It's foremost indigenously made car was Tata Indica, followed by a

mini-truck Tata Ace in 2005. In the year 2009, the firm marked its name in the pages of

automotive history by introducing the world's fuel efficient and cheapest car - Tata Nano.

Key Officials of Tata Motors

40

NAME DESIGNATION

Ratan N Tata Chairman/Chairperson

Carl-Peter Forster Managing Director

Prakash M Teleng Managing Director

H K Sethna Co Seceretary & Compl.Officer

Carl-Peter Forster Group Chief Executive Officer



Tata motors product portfolio

Tata Indica Tata Land Rover Tata Indigo

Tata Sumo Victa Tata Jajuar Tata Indigo Marina

Indica V2 Xeta Tata Manza Tata Safari

Tata Indigo SX Indica vista Indica Dicor

MAJOR COMPETITORS OF TATA MOTORS ARE

↓ ↓Passenger car Segment Light – Medium- Heavy Commercial Segment

Maruti Udyog ltd Ashok Leyland

Hyundai Mahindra & Mahindra

Ford Eicher Motors

General motors AMW

Hindustan Motors MAN

Mahindra & Mahindra Mercedes Benz

VolksWagen Force Motors

Nissan Swaraj Mazda

Skoda Bajaj

Examination of the Truck Industry in India using Porter's analysis helps us understand the

threats that Tata Motors faces.

Overview of the Truck Industry in India

41





1. The issue of Cyclicality is plaguing the automotive sector and the future outlook in

India is not great considering the robust performance of the past years. Tata Motors has

countered this by increasing the share of exports in the sources of revenue.

2. Rising interest rates in the economy is a cause of concern as it dampens both capitals

investments and softens the domestic demand.

3. The cash flow from operations has grown 11 times compared to last year despite a

huge CAPEX. Tata Ace single handedly raised the market share of Tata Motors in LCV

segment by 5%. The operating leverage for Tata Motors is higher due to the high fixed

costs of CAPEX. But still the overall financial leverage of Tata Motors is well under

control when compared to Ashok Leyland Internationalization

SWOT Analysis of Tata Motors Limited

STRENGTHS

Internationalization Strategy.

The next stage of its expansion

programme of intensive management

development.

Successful alliance with Italian mass

producer Fiat.

WEAKNESS

Passenger car are based upon 3rd and

4th generation platforms.

Not got a foothold in the luxury car

segment in its domestic.

English the word 'tat' means rubbish.

43



OPPERTUNITIES

Successful purchase of Land Rover

and Jaguar have been added luxury

segment

Tata Nano is the cheapest car in the

World

New global truck platform launched

from its Korean plant (World is looking

for environment friendly transport

alternatives)

Super Milo fuel efficient buses are

powered by super-efficient; eco-

friendly engines (reduce fuel

consumption by up to 10 %.)

THREATS

Competing car manufacturers have

been in the passenger car business for

40, 50 or more years

The price of steel and aluminium is

increasing putting pressure on the costs

of production

Many of Tata's products run on Diesel

fuel which is becoming expensive

globally and within its traditional home

market

Market Performance – 2010

The Financial Year 2009-10 witnessed the highest sale of Tata Motors vehicles

registering at 642,686 units,in March 2010, Tata Motors' total sales were recorded at

75,151 against 54,452 units vended in March 2009.

Collective sales of Tata Motors commercial vehicles in the Indian market for 2010 are

373,615 units; the company registered a growth of 41% considering its previous year's

sales.

Collective sales of Tata Motors passenger vehicles for 2010 are 234,930 units and are

estimated the highest ever for the firm.

The firm's trade from exports for March 2010 was at 4,105 units against 1,799 units in

the previous fiscal.

Tata Motors Financials

44



Face Value Market Capitalization P/E Ratio

10 44,432.62 Cr 19.84

Table No 2

Table

showing

Share

Holding

pattern of

Tata

Motors

45

Share Holding Pattern as on 31/03/2010

Face Value 10.00

No. Of

Shares

% Holding

PROMOTER'S HOLDING

Indian Promoters 187376876 37.00

Sub Total 187376876 37.00

NON PROMOTER'S HOLDING

Institutional Investors

Mutual Funds and UTI 10880291 2.15

Banks Fin. Inst. and Insurance 79506752 15.70

FII's 90736036 17.92

Sub Total 181123079 35.77

Other Investors

Private Corporate Bodies 2978660 0.59

NRI's/ OCB's/ Foreign Others 27471578 5.43

Government 407181 0.05

Directors/Employees 239972 0.08

Others 62719713 12.39

Sub Total 93817104 18.53

General Public 44064111 8.70GRAND TOTAL 506381170 100.00



Chart No 2

Chart showing Share Holding pattern of Tata Motors

46



Indian Promoters

36%

Mutual Funds

2%FII'S

18%

Banks & Insurance

16%

Other Investors

19%

General Public

9%

Table No 3

Table showing Sources of Funds

Mar ' 10 Mar ' 09 Mar '08 Mar ' 07 Mar ' 06

47



SOURCES OF FUNDS

Owner's Fund

Equity Share Capital 514.05 385.54 385.41 382.87 361.79

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves & Surplus 11855.15 7428.45 6458.39 5127.81 3749.60

Loan Funds

Secured Loans 5251.65 2461.99 2022.04 822.76 489.81

Unsecured Loans 7913.91 3818.53 1987.10 2114.08 2005.61

Total 25534.76 14094.51 10852.94 8447.52 6606.81

Chart No 3

Chart showing Sources of Funds

0

2000

4000

6000

8000

10000

12000

14000

Mar ' 10 Mar ' 09 Mar '08 Mar ' 07 Mar ' 06

Owner's Fund Loan Fund

Comparison of Profit & Loss Account of TATA Motors

48



Table NO. 4

Table showing Variable Analysis on profit and loss account 2008-2010 of Tata motors

49

Mar '08 Mar '09 Mar '10Income

Sales Turnover 33,123.54 28,538.20 38,364.10Excise Duty 4,355.63 2,877.53 2,800.10Net Sales 28,767.91 25,660.67 35,564.00Other Income 734.17 921.29 933.00Stock Adjustments -40.48 -238.04 606.63Total Income 29,461.60 26,343.92 37,103.63

Expenditure

Raw Materials 20,891.33 18,801.37 25,366.12Power & Fuel Cost 325.19 304.94 362.62

Employee Cost 1,544.57 1,551.39 1,836.13Other Manufacturing Expenses 904.95 866.65 76.70Selling and Admin Expenses 2,197.49 1,652.31 81.72Miscellaneous Expenses 964.78 1,438.89 5,009.60Preoperative Exp Capitalized -1,131.40 -916.02 -740.54Total Expenses 25,696.91 23,699.53 31,992.35

Operating Profit 3,030.52 1,723.10 4,178.28PBDIT 3,764.69 2,644.39 5,111.28Interest 471.56 704.92 1,103.84PBDT 3,293.13 1,939.47 4,007.44Depreciation 652.31 874.54 1,033.87

Other Written Off 64.35 51.17 144.03Profit Before Tax 2,576.47 1,013.76 2,829.54Extra-ordinary items 0.00 15.29 0.00PBT (Post Extra-ord Items) 2,576.47 1,029.05 2,829.54Tax 547.55 12.50 589.46Reported Net Profit 2,028.92 1,001.26 2,240.08

Total Value Addition 4,805.58 4,898.16 6,626.23Preference Dividend 0.00 0.00 0.00Equity Dividend 578.43 311.61 859.05Corporate Dividend Tax 81.25 34.09 132.89Per share data (annualized)Shares in issue (lakhs) 3,855.04 5,140.08 5,705.58Earnings Per Share (Rs) 52.63 19.48 39.26

Equity Dividend (%) 150.00 60.00 150.00Book Value (Rs) 202.70 240.64 262.30



PARTICULARS MEAN VARIANCE STANDARD

DEVIATION

C0-VARIANCE

INCOME 30969.72 20432227.97 4520.20 14.59

EXPEDITURE 27129.587 12474212.07 3531.89 13.02

NETPROFIT 1756.73 292898.5 541.20 30.81

EPS 37.12 185.69 13.63 36.72

Chart No. 4

Chart showing Variable Analysis of Tata motors

1

10

100

1000

10000

100000

1000000

10000000

100000000

MEAN VARIANCE STANDARD

DEVIATION

CO-VARIANCE

INCOME EXPENDITURE NETPROFIT EPS

Interpretation

The above analysis states that the average income for three years is 30969.72, average

expenditure is 27129.587, and average net profit of 1756.73, Earnings per Share is 37.12.

RATIOS ANALYSIS

Table No. 5

Table showing Ratio Analysis

50



Ratios 2010 2009 2008

Current ratio 0.61 0.84 0.89

Operating profit margin % 11.74 6.71 10.53

Gross profit margin 8.84 3.30 8.26

Total assets turnover ratio 0.76 0.71 0.58

Retention Ratio 27.00 62.49 60.13

DPS (Rs.) 15.00 6.00 15.00

EPS (Rs.) 39.26 19.48 52.63

Dividend Payout Ratio 44.28 34.52 32.52

Calculation of Intrinsic value for March FY2010

Earnings per share (EPS) = Net profit available to equity holders

Number of ordinary shares outstanding

Price Earnings (P/E) Ratio = Market price of share

Earnings per share

INTRINSIC VALUE = EPS * PE RATIO

EPS = 59.91

PE RATIO= 19.84

INTRINSIC VALUE FOR MARCH 2010=1180

BHARTI AIRTEL LTD

1. Market Analysis

51



India is currently the fastest growing and second-largest mobile market in the world in terms of

mobile subscribers. It is also expected that by 2012, fixed line revenues will reach US$ 12.2

billion and mobile revenues will reach US$ 39.8 billion. Several foreign companies are making

large investments in India. Total Consumer base is 510 million and revenue for (FY09-10) is $43

billion. Estimated contribution in GDP is 15% by 2014. Growing at a CAGR of 21 %.Total Tele-

density is 44.87

Recent Mergers and Acquisitions by Indian Telecom Industry

NTT DoCoMo – Tata Teleservices: NTT Do Como, the Japanese phone company bought26 per

cent stake in Tata Teleservices by paying US$ 2.7billion.

RCom – Yipes Holdings: Reliance Communications Ltd. acquired US-based Yipes Holdings

Inc., a leading provider of Ethernet services in US for US$ 300 million.

Idea – Spice: Idea Cellular acquired 48.2 per cent stake in Spice Communications in order to

expand its services in Punjab.

India an Ideal Investment Destination for Telecom

a. Fifth-largest telecom network in the world; second largest among the emerging

economies after China

b. On an average, approximately 8 million users are added per month, making India

the world’s fastest growing wireless services market

c. Liberal Foreign Investment Regime: FDI limit increased from 49 per cent to 74

per cent; the rural telecom equipment market also opens to large investments

d. Among the countries offering the highest rates of return on investment the large

untapped potential in India’s rural markets revealed by 9.21 per cent tele-density

in rural markets as compared to the national level of 28 per cent.

e. The government promoting telecom manufacturing by providing tax sops and

establishing telecom-specific Special Economic Zones

52



f. Fully reparable dividend income and capital invested in telecom equipment

manufacturing

Chart 5 showing Market share of Indian Telecom Industry

II. Industry Analysis

Indian Telecom sector, like any other industrial sector in the country, has gone through many

phases of growth and diversification. Starting from telegraphic and telephonic systems in the

19th century, the field of telephonic communication has now expanded to make use of advanced

technologies like GSM, CDMA, and WLL to the great 3G Technology in mobile phones. Day by

day, both the Public Players and the Private Players are putting in their resources and efforts to

improve the telecommunication technology so as to give the maximum to their customers. There

are

a. Fixed-line Telephony

b. Mobile Telephony

Fixed Line Telephony

53

http://www.naukrihub.com/india/telecom/overview/fixed-line-telephony/


http://www.naukrihub.com/india/telecom/overview/mobile/






Fixed Line Telephony can be fixed wire line telephony and fixed wireless telephony (known as

WLL). Fixed Line Telephony provides services such as local calls and long distance calls-

national and international. Both Public Players and Private Players are competing hard to capture

more market share. MTNL and BSNL are the leading public sector players, whereas Reliance

Infocomm, Tata Teleservices and Touchtel are the leading private sector players.

Chart No 6

Chart showing Market share of public and private players

Private Players are providing services to the whole of India. The companies are serving both

urban and rural areas. Tata Teleservices, HFCL, Shyam, Reliance, Touchtel are the leading

Private Players in fixed line segment.

With more than 80% share with Public Players, Private Players are now striving hard to capture

more and more customers.

Mobile Telephony

Mobile telephony was introduced in Indian markets in mid- 1990s. In the last few years, the

sector has witnessed tremendous growth. The subscriber base is adding more and more

customers every year. Mobile telephony exceeds fixed line telephone subscriber base. Also,

mobile segment has welcomed more and more players every year. Liberalized policies have

54



ensured lower tariffs and reduced roaming rentals; second billing this will lead to increased

usage of mobile phones. Mobile telephony can be further categorized into WLL, CDMA and

GSM. The 3G mobile technology has entered in Indian telecom which will add more customer

base to the sector.

Chart No.7

Chart showing Market shares of private and Public Players in mobile telephony

Chart 7 showing Market shares of Private and Public Players in mobile telephony

Private Players are dominating the mobile segment with 78% market share. Now the 3G

technology have been brought by private players in India.

Bharti Airtel, Reliance Infocomm, Tata Teleservices, Idea Cellular, Hutchison Essar, etc, are the

leading Private Players in Indian mobile telephony. With more than 70% share in market, Private

Players are introducing more schemes and tariff plans and to capture more and more customer

base.

55



PORTERS FIVE FORCES ANALYSIS ON TELECOM INDUSTRY

Threat from New Entrants

Demand Side Benefits

Supply Side Economies of Scale

Capital Requirement

Incumbent Advantages

Uneven access to Distribution Channels

Restrictive Government Policy

Power of the buyer

Lack of differentiation among the service

provider

Cut throat competition

Customer is price sensitive

Low switching costs

Number portability to have negative impact

Supplier Bargaining Power Rivalry among Existing Competitors

56



Large numbers of suppliers.

Shared towers infrastructure.

Limited pool of skilled managers and

engineers especially those well versed in

the latest technologies.

Medium cost of switching since changing

their hardware would lead to additional

cost in modifying the architecture.

Overall influence on the industry – medium

High Exit Barriers

High Fixed Cost

6-7 players in each region

3 out of 4 BIG-Four present in each region

Very less time to gain advantage by an

innovation (E.g. Caller tunes, life time

card)

Price wars

Threat of Substitutes

Some Substitutes:

VOIP (Skype, Messenger etc.)

Online Chat

Email

Satellite phones

III. Company Analysis

Incorporated on July 7, 1995, Bharti Airtel Ltd is a division of Bharti Enterprises.

The businesses of Bharti Airtel are structured into two main strategic groups - Mobility and

Infotel. The Mobility business provides GSM mobile services in all 23 telecommunication

circles in India, while the Infotel business group provides telephone service and Internet access

over DSL in 15 circles.

Bharti Airtel Limited is an Indian company offering telecommunication services in 18 countries,

is the largest cellular service provider in India, with more than 135 million subscriptions as of

May 2010. Bharti Airtel is the world's third largest, single-country mobile operator and fifth

largest telecom operator in the world in terms of subscriber base The company also provides

57

http://en.wikipedia.org/wiki/India




telephone services and broadband Internet access in over 89 cities in India The company has a

submarine cable landing station at Chennai, which connects the submarine cable connecting

Chennai and Singapore.

It is known for being the first mobile phone company in the world to outsource everything except

marketing and sales. Its network (base stations, microwave links, etc) is maintained by Ericsson

and Nokia Siemens Network , business support by IBM and transmission towers by another

company.

The company is structured into four strategic business units - Mobile, Tele media, Enterprise and

Digital TV. The mobile business offers services in Indian Subcontinent and Africa. The Tele media

business provides broadband, IPTV and telephone services. The Digital TV business provides

Direct-to-Home TV services across India. The Enterprise business provides end-to-end telecom

solutions to corporate customers and national and international long distance services to telcos.

Globally, Bharti Airtel is the 3rd largest in-country mobile operator by subscriber base, behind

China Mobile and China Unicom. In India, the company has a 24.6% share of the wireless

services market, followed by 17.7% for Reliance Communications and 17.4% for Vodafone

Essar.

Key Officials

NAME DESIGNATION

Mr. Sunil Bharti Mittal Chairman and Managing director

Mr. Manoj Kohli Joint Managing Director & CEO

Mr. Ajay Chitkara Chief Operating Officer

Mr. Srikanth Balachander Chief Financial Officer

58

http://en.wikipedia.org/wiki/Chennai

http://en.wikipedia.org/wiki/Singapore

http://en.wikipedia.org/wiki/Ericsson

http://en.wikipedia.org/wiki/Nokia_Siemens_Network


http://en.wikipedia.org/wiki/IBM


http://en.wikipedia.org/wiki/Indian_Subcontinent

http://en.wikipedia.org/wiki/Africa


http://en.wikipedia.org/wiki/Chennai

http://en.wikipedia.org/wiki/Singapore

http://en.wikipedia.org/wiki/Ericsson







Worldwide presence: Airtel is the 5th largest mobile operator in the world in terms of subscriber

base.

3 countries in Indian Sub continent including Bangladesh, India and Sri Lanka.

15 countries in Africa

Joint Ventures and Acquisitions

Airtel owns 70 % of Warid Telecom in Bangladesh through a joint venture.

Bharti Airtel, in the largest ever telecom takeover by an Indian firm, buys Kuwait-based

Zain Telecom's businesses in 15 African countries for $10.7 billion.

59


http://en.wikipedia.org/wiki/Bangladesh


http://en.wikipedia.org/wiki/Sri_Lanka


http://en.wikipedia.org/wiki/Warid_Telecom_(Bangladesh)





http://en.wikipedia.org/wiki/Sri_Lanka


http://en.wikipedia.org/wiki/Warid_Telecom_(Bangladesh)






Financials of Bharti Airtel

Table No.6

Table

showing

Share

HoldingPattern of

Bharti

Airtel

61


Rs. 5.00 100,634.55 Cr 10.68


Face Value Rs. 5.00

No. Of

Shares

% Holding

PROMOTER'S HOLDINGForeign Promoters 850280286 22.39


Sub Total 2575793342 67.83




Banks Fin. Inst. and Insurance 187904568 4.95FII's 684578088 18.03

Sub Total 985548058 25.95

Other Investors


NRI's/ OCB's/ Foreign 15633396 0.41

Others 4945805 0.13

Sub Total 153069721 4.03

General Public 83118975 2.19

GRAND TOTAL 3797530096 100.00



Chart No. 8

Chart showing Share holding pattern

Indian promoter

46%

Mutual funds & UTI

3%

Others

6%

Foreign promoters

22%

Banks&Insurance

5%

FII's

18%

Comparison Profit & Loss Account of Bharti Airtel

62



Table No 7

Table showing Variable Analysis profit and loss account 2008-2010 Bharti Airtel

63

Income Mar '08 Mar '09 Mar '10

Sales Turnover 25,761.11 34,048.32 35,609.54

Excise Duty 0.00 0.00 0.00Net Sales 25,761.11 34,048.32 35,609.54

Other Income 104.04 -1,261.75 1,118.46

Stock Adjustments 9.05 5.29 -34.91

Total Income 25,874.20 32,791.86 36,693.09

Expenditure

Raw Materials 42.90 286.94 278.72

Power & Fuel Cost 0.00 0.00 0.00

Employee Cost 1,297.88 1,397.54 1,401.66

Other Manufacturing Expenses 7,339.01 8,627.13 11,882.41

Selling and Admin Expenses 5,892.50 9,385.68 6,856.42

Miscellaneous Expenses 535.46 1,409.89 1,482.39

Preoperative Exp Capitalized 0.00 -269.25 -293.31

Total Expenses 15,107.75 20,837.93 21,608.29

Operating Profit 10,662.41 13,215.68 13,966.34

PBDIT 10,766.45 11,953.93 15,084.80

Interest 393.43 434.16 283.35

PBDT 10,373.02 11,519.77 14,801.45

Depreciation 3,166.58 3,206.28 3,890.08

Other Written Off 266.07 178.82 207.84

Profit Before Tax 6,940.37 8,134.67 10,703.53

Extra-ordinary items -60.67 -46.15 -50.78

PBT (Post Extra-ord Items) 6,879.70 8,088.52 10,652.75

Tax 632.43 321.78 1,177.87

Reported Net Profit 6,244.19 7,743.84 9,426.15

Total Value Addition 15,064.84 20,551.00 21,329.56

Preference Dividend 0.00 0.00 0.00

Equity Dividend 0.00 379.65 379.79

Corporate Dividend Tax 0.00 64.52 64.55Per share data (annualised)

Shares in issue (lakhs) 18,979.07 18,982.40 37,975.30

Earning Per Share (Rs) 32.90 40.79 24.82

Book Value (Rs) 106.34 145.01 96.24




DEVIATION

C0-VARIANCE

INCOME 31786.39 -302578593.1 -17394.79 -54.72EXPEDITURE 19184.66 -147230033.7 -12133.84 -63.25NETPROFIT 7804.73 1689279.81 1299.72 16.65EPS 32.84 42.28 6.50 19.79

Chart No. 9

Chart showing Variable Analysis of Bharti Analysis

1

100

10000

1000000

100000000


DEVIATION

CO-VARIANCE

INCOME EXPENDITURE NETPROFIT EPS

Interpretation



RATIO ANALYSIS

Table No. 8

Table showing Ratio Analysis

64



Ratios 2010 2009 2008






DPS (Rs.) 1.00 2.00 0.00

EPS (Rs.) 24.82 40.79 32.90






Earnings per share

Intrinsic Value = EPS * PE ratio

EPS = 24.82

PE RATIO= 10.68

INTRINSIC VALUE FOR MARCH 2010 = 24.82*10.68 = 265.07

65



INFOSYS TECNOLOGIES

Market Analysis

Scope of IT Industry in India:

The IT industry has great scope for people as it provides employment to technical and non-

technical graduates and has the capability to generate huge foreign exchange inflow for India.

India exports software’s and services to approximately 95 countries in the world. By outsourcing

to India, many countries get benefits in terms of labor costs and business processes. Also, the

Indian companies are broadening the range of services being provided to the customers, which is

resulting in more off shoring. Talent acquisition, development and retention initiatives taken by

the companies have brought down the employee attrition rates, thereby providing more stabilityto the employees and increasing their job commitment.

Many financial institutions are providing funds for the expansion of IT and ITeS businesses. In

order to support IT and ITES, the Indian Government is also taking many steps.

1. The Govt. has provided incentives including tax holiday up to 2010 and competitive duty

structures.

2. The Govt. is trying to reduce the international communication cost.

3. It is providing infrastructure support through organizations such as software technology

parks.

All these factors collectively create a number of opportunities in the IT sector.

Future of Information Technology

IT will continue to gain momentum; telecom and wireless will follow the trend. The immense

expansion in networking technologies is expected to continue into the next decade also. IT will

bring about a drastic improvement in the quality of life as it impacts application domains and

global competitiveness. Technologies that are emerging are Data Warehousing and Data Mining.

They involve collecting data to find patterns and testing hypothesis in normal research. Software

services that are being used in outsourcing will go a long way.

66



Strengths of Indian IT Sector

Large Human Resource: Every year, approximately 19 million students are enrolled in high

schools and 10 million students in pre-graduate degree courses across India. Moreover, 2.1

million graduates and 0.3 million post-graduates pass out of India's non-engineering colleges.

While 2.5-3 percent of them find jobs in other fields or pursue further studies abroad, the rest opt

for employment in the IT industry. If the flow from high schools to graduate courses increases

even marginally, there will be a massive increase in the number of skilled workers available to

the industry.

Indian Education System: The Indian education system places strong emphasis on mathematics

and science, resulting in a large number of science and engineering graduates. Mastery over

quantitative concepts coupled with English proficiency has resulted in a skill set that has enabled

the country to take advantage of the current international demand for IT.

Quality Manpower: Indian programmers are known for their strong technical skills and their

eagerness to accommodate clients. In some cases, clients outsource work to get access to more

specialized engineering talent, particularly in the area of telecommunications. India also has one

of the largest pools of English-speaking professionals. Strengths at a Glance

1. Great history in software development

2. English Language proficiency

3. Government Support and policies

4. Cost advantage

5. Strong tertiary education

6. Process quality focus

7. Skilled workforce

8. Expertise in new technologies

9. Entrepreneurship

10. Reasonable technical innovations

11. Reverse brain drain

67



12. Existing long term relationships

13. Creation of global brands

14. BPO & Call center offerings

15. Expansion of existing relationships

16. Chinese domestic & export market

17. Leverage relationships in West to access overseas markets

18. Indian domestic-market growth

ROLE OF IT INDUSTRY

The IT industry can serve as a medium of e-governance, as it assures easy accessibility to

information. The use of information technology in the service sector improves operational

efficiency and adds to transparency. It also serves as a medium of skill formation.

1. Economies of scale for the information technology industry are high. The marginal cost

of each unit of additional software or hardware is insignificant compared to the value

addition that results from it.

2. Unlike other common industries, the IT industry is knowledge-based.

3. Efficient utilization of skilled labor forces in the IT sector can help an economy achieve a

rapid pace of economic growth.

4. The IT industry helps many other sectors in the growth process of the economy including

the services and manufacturing sectors.

Future Outlook of IT Industry

With small and midsized businesses driven by the increased use of technology the country's

information and communication technology market is estimated to grow 20.3 per cent annually

to reach US$ 24.3 billion by 2011.

A survey carried out to assist business heads of major outsourcers to identify reliable, innovative

and tech savvy firms had listed twenty-nine India based companies amongst the best 100 IT

service providers including Tata Consultancy Services, HCL Technologies, Genpact, and WNS

68



Global Services amongst others. According to the global InfoTech analyst International Data

Corporation, the Indian IT and ITeS market is estimated to grow at the rate of over 16 per cent to

become a US$ 132 billion industry, significantly, the domestic market alone is expected to

become over US$ 50 billion, with a CAGR of about 18.4 per cent. Simultaneously, the IT and

ITeS exports are estimated to more than double to US$ 78.62 billion in 2012.

Sufficient demand, strong fundamentals and a favorable environment support a positive outlook

for Indian IT-BPO exports as well as the domestic market, going forward. The Indian IT-BPO

industry is on track to reach USD 60 billion in exports and USD 73-75 billion in overall software

and services revenue, by 2011. At the aspired levels of growth, the sector would, by 2011,

employ around 2.5-3 million

Professionals, directly, account for direct investment of about USD 10-15 billion, and contribute

7-8 per cent of the national GDP.

However, the scope of the opportunity is significantly larger. At USD 52 billion (excluding

hardware), India accounts for around 4 per cent of the worldwide spend on IT software and

services. The global sourcing penetration is estimated to be growing at nearly four times the rate

of absolute technology spends. Together these two trends signify a huge opportunity for the

Indian IT-BPO industry.

In order to sustain India’s edge in the global markets and improve revenues, Indian IT-BPO

service providers need to shift towards more market-facing breakthroughs. They could

additionally, foray new customer segments in intellectual asset-intensive service lines like

engineering and R&D services, creating IP in emerging technology areas, developing and

codifying specific domain expertise to target consulting and system integration services,

technical innovations to develop their own standards for next generation of technologies.

Finally, providers could enhance the role they are already playing in helping improve the quality

of education, by working closely with the Government and academia to facilitate changes in the

curriculum and pedagogy, which directly influence the quality of graduate output.

69



PESTLE ANALYSIS ON IT SECTOR

POLITICAL FACTORS - This is political factors which affect a business which can be

government rules and regulation toward that particular business environment. For IT industry the

Indian political structure is stable, but there are fears of hung parliament due to a lack of clear

majority in parliament creating fear of wrong investing in the minds of investor thereby reducing

capital. U.S government has declared that U.S firm that outsource IT works outside the U.S will

not get tax benefits, this has caused reduction in U.S BPO contract, thereby reducing revenue

from the U.S. Indian government has decided to contract IT job to Indian IT companies creating

more opportunities for the company and the industry at large. In software development different

countries is configuration rules and regulation are considered since client demand differs because

of different system requirement. NASSCOM and DELIOTTE study (impacting economy and

society), states that Indian government has strengthened the IT act, 2000 to provide a sound legal

environment for companies to operate related to security of data in transmission and storage etc

this has served as a positive factor. Infosys has to put Indian relationship with different countries

of business into consideration before investing. Other factors to be considered are customer

protection law, competitive regulations, and terrorist attacks.

Hence, political risk in India is practically non-existent.

Likewise the IT sector does not have any influence of political stability on industry. And if the

government changes, there are small effects on the industry of that political step.

70



ECONOMICAL FACTORS - These includes factors affecting IT industry ranging from rising

working pay, global recession, competition, contract availability and fee. Domestic IT spending

grew by 20% and reached $20 billion in 2009. Currency fluctuations caused by the devaluation

of the dollar has affected the industry during the last global recession. Real estate prices decline

resulted in rental expenditure forcing customer to leave luxuries goods such as electronic and

computers that need software to work. Recession cause low attribute rate due to job layouts and

job cuts. India economic attraction has helped in convincing investors due to low cost advantage.

With India’s global IT spending yet to decline due to entry of new IS companies and the cause of

the recession. With clients industry faced with reduction of work force due to job layoffs and

unsuitable balance sheet most companies have decided not to make much expenditure in

purchase, but make optimum use of existing facilities to make profits. With the decline of

banking and financial sectors, the revenue from there is expected to decline, hurting the bottom

line of IT majors.

DOMESTIC IT SPENDING India's domestic IT market will grow around 14% this year,

showing a minor decline as compared to last year's growth of 16-18%.

"Compared to other countries, India is in a better position. Its domestic market is expected to

grow around 14% this year. We also expect that IT spend in India will see a minor decline as

compared to last year, research analyst at Gartner.

ECONOMIC ATTRACTION There is a lot of economic attraction towards IT sector due to

low cost advantage and other factors. India, with its low cost advantage and emergence of

several private players, represents the fastest growing market.Further the geographical location

of India serves it the advantage of being exactly halfway round the world from the US west

coast, which is another reason why India is preferred destination of many big brands. Cities like

Bangalore have become the favorite destinations of all the big banners like HSBC, Dell,

Microsoft, GE, Hewlett Packard, and several Indian multi national firms like Infosys

Technologies, Wipro, and Micro land who have set up their offices in the city.

71



SOCIAL FACTORS These are social factors affecting IT industry which ranges from employee

right, language barriers, race nationality of company or other issues. English language being

widely spoken in India has help in fostering the industry’s relationship and interaction in India

and on the global stage. India is one of the few countries to have an increasing share of working

population, since there is great availability of both skilled and unskilled labour force. Great

number of institute and universities offer IT course creating room for availability of IT

professional at lower cost since there is job competition. India has to produces great numbers of

IT professional each year to meet its demand. India continue to produce IT professionals each

year, this has help industry for IT professionals inwards.

SOCIAL ISSUES Industry is concerned with the issue of global warming and affected by many

government laws regarding it like in china, where company with great amount of carbon

emission are charge great amount of tax. Likewise being a major player in the global IT market

Infosys has introduced measure to help in the reduction of carbon emission by trying to reduce

its water consumption, electricity utilization, carbon emission and partnering with other

companies in troubleshooting this global dilemma...

EDUCATION There are large number of universities and institutes in India offering IT

education. And there are large numbers of students which ever year passed these courses and join

the IT industry.The Indian labor is not only cheap but is technically skilled too to the world class

level. It is due to the Indian Education System that includes in its course curriculum the practical

knowledge of the latest technology that is developed in world along with the fluency in English

Language that imparts compatibility in an Indian technician to communicate and work

throughout the world.

CAREER PROSPECTS

1. Designing

2. Research and Development in Peripheral Integration

3. Product Quality Control and Reliability Testing

72



4. Computer Manufacturing

5. Maintenance Service

6. System Developing /Programming /Software Engineering

7. Networking

8. Application Programming

9. EDP/ E- Commerce

10. Enterprise Resource Planning (ERP)

11. Database Warehousing and Management

12. Operating jobs, Computer operators, Data Entry

WORKING AGE POPULATION Working age population also affects the industry a lot because

every person has different value, lifestyle, attitude, and also the satisfaction level.

TECHNOLOGICAL FACTORS

TELEPHONE Cellular mobile telephony tariffs in India are the lowest in the world. A

comparison of Indian cellular tariffs vis-à-vis the tariffs prevailing in comparative emerging

economies in South America & Asia-Pacific region, clearly brings out the affordability of Indian

cellular mobile telephone services.

Indian telecom industry is expected to have total subscriber base of about 500 million by the end

of 2010.

1. APRU FOR GSM IS USD 6.6 MONTH.

2. INDIA HAS THE SECOND LARGEST TELEPHONE NETWORK AFTER CHINA.

3. TELEDENSITY - 19.86 %

4. ENTERPRISE TELEPHONE SERVICES, 3G, WI-MAX AND VPN ARE POISED TO

GROW.

73



INTERNET India had as on September 2009 53.3 million active internet users.This is an

internationally accepted benchmark for enumerating internet users. Urban users continue to

dominate internet usage contributing to 48 million of the 43 million odd users.

LEGAL ASPECTS AND POLICIES The speedy growth of IT Sector is undoubtedly due to

the efforts of Indian government and the other developments that took in the other parts of the

globe

IT Act 2000 The arrival of the Internet and the World Wide Web made it possible for people to

communicate and transact over cyber space. It was a revolutionary step for humanity, but it also

created a significant need for the regulation and governance of these activities, a requirement that

lead to the creation and implementation of cyber laws across the globe. India became the 12th

nation in the world to adopt a cyber law during 2000.

The IT Act 2000 and its provisions Contain many positive aspects

1. For the e-businesses email would now be a valid and legal form of communication in our

country that can be duly produced and approved in a court of law.

2. Companies shall now be able to carry out electronic commerce using the legal

infrastructure provided by the Act.

3. Digital signatures have been given legal validity and sanction in the Act.

4. The Act throws open the doors for the entry of corporate companies in the business of

being Certifying Authorities for issuing Digital Signatures Certificates.

5. The Act now allows Government to issue notification on the web thus heralding e-

governance.

6. The Act enables the companies to file any form, application or any other document with

any office, authority, body or agency owned or controlled by the appropriate Government

in electronic form by means of such electronic form as may be prescribed by the

appropriate Government.

7. The IT Act also addresses the important issues of security, which are so critical to the

success of electronic transactions.

74



8. Under the IT Act, 2000, it shall now be possible for corporate to have a statutory remedy

in case if anyone breaks into their computer systems or network and causes damages or

copies data. The remedy provided by the Act is in the form of monetary damages, not

exceeding Rs.1 core

ENVIRONMENTAL FACTORS Environmental conservation and protection is an issue which

has gained prominence because of deteriorating environmental balance which is threatening the

sustainability of life and nature. Largely, business is also held responsible for such situations as

emissions from industries polluting the air, excessive chemical affluent drained out in water

making it poisonous and unfit for use, usage of bio non-degradable resources affecting the bio-

chain adversely and exposure of employees to hazardous radiations bring their life in danger. All

these have been taken very seriously by different stakeholders in the society including the

government and legislations and movements are creating pressure for an environment friendly

business.

IT Sector - Top Players

TCS Cisco

Infosys Kanbay

Wipro Microsoft HP Dell

IBM Larsen and Toubro

Satyam Compare Infobase

HCL Accenture

Patni i-Flex Solutions

Polaris Cognizant

KPIT Cummins Sapient

SWOT Analysis on Indian IT Sector

75

http://www.naukrihub.com/india/information-technology/top-players/tcs.html

http://www.naukrihub.com/india/information-technology/top-players/cisco.html

http://www.naukrihub.com/india/information-technology/top-players/infosys.html


http://www.naukrihub.com/india/information-technology/top-players/kanbay.html

http://www.naukrihub.com/india/information-technology/top-players/wipro.html


http://www.naukrihub.com/india/information-technology/top-players/microsoft.html

http://www.naukrihub.com/india/information-technology/top-players/hp.html

http://www.naukrihub.com/india/information-technology/top-players/dell.html


http://www.naukrihub.com/india/information-technology/top-players/ibm.html

http://www.naukrihub.com/india/information-technology/top-players/l-and-t.html


http://www.naukrihub.com/india/information-technology/top-players/satyam.html


http://www.naukrihub.com/india/information-technology/top-players/compare-infobase.html


http://www.naukrihub.com/india/information-technology/top-players/hcl.html


http://www.naukrihub.com/india/information-technology/top-players/accenture.html


http://www.naukrihub.com/india/information-technology/top-players/patni.html

http://www.naukrihub.com/india/information-technology/top-players/I-flex.html


http://www.naukrihub.com/india/information-technology/top-players/polaris.html


http://www.naukrihub.com/india/information-technology/top-players/cognizant.html

http://www.naukrihub.com/india/information-technology/top-players/kpit-cummins.html


http://www.naukrihub.com/india/information-technology/top-players/sapient.html

http://www.naukrihub.com/india/information-technology/top-players/tcs.html

http://www.naukrihub.com/india/information-technology/top-players/cisco.html


http://www.naukrihub.com/india/information-technology/top-players/kanbay.html


http://www.naukrihub.com/india/information-technology/top-players/microsoft.html

http://www.naukrihub.com/india/information-technology/top-players/hp.html


http://www.naukrihub.com/india/information-technology/top-players/ibm.html






http://www.naukrihub.com/india/information-technology/top-players/patni.html



http://www.naukrihub.com/india/information-technology/top-players/cognizant.html


http://www.naukrihub.com/india/information-technology/top-players/sapient.html



Strengths

1. Highly skilled human resource

2. Low wage structure

3. Quality of work

4. Initiatives taken by the

Government.

5. Many global players have set-up

operations in India like Microsoft,

Oracle, Adobe, etc.

6. Quality Standards like ISO 9000,

SEI and CMM etc.

7. English-speaking professionals

8. Cost competitiveness

9. Quality telecommunications

infrastructure

Weaknesses

1. Absence of practical knowledge

2. Death of suitable candidates

3. Less Research and Development

4. Contribution of IT sector to India’s

GDP is still rather small.

5. Employee salaries in IT sector are

increasing tremendously. Low wages

benefit will soon come to an end

Opportunities

1. High quality IT education market

2. Increasing number of working age

people

3. India 's well developed soft

infrastructure

4. Upcoming International Players in

the market

Threats

1. Lack of data security systems

2. Countries like China and

Philippines with qualified

workforce making efforts to

overcome the English language

barrier

3. IT development concentrated in a

few cities only

Company Analysis

76



About Infosys On July 2nd 1981 the company was incorporated as Infosys Consultants Private

Limited at Mumbai. INFOSYS was promoted by software professionals, Mr.S.Gopalakrishnan,

Mr.K.Dinesh,Nandan M Nilekani, Mr.S.D.Shibulal, Mr. N.R. Narayana Murthy & Mr. N S

Raghavan.Name changed to Infosys Technologies Private Limited, on April 21st 1992the

company was converted into a Public Limited Company under the name Infosys Technologies

Ltd.

The company products

1. Software maintenance.

2. Re-engineering.

3. Downsizing of software applications in these market segments.

4. It also markets internationally, two well-known packages, one for the distribution

industry (DMAP) and one for retail banking (Bancs 2000).

The first Indian company to get a US listing, Infosys Technologies has emerged as one of the

most precious companies listed on NASDAQ in terms of market capitalization in its category of

software consulting and services companies.

Key Officials of Infosys

Financials of Infosys Technologies

77

Name Designation

Mr. N R Narayana Murthy Chairman & Chief Mentor

Mr. S Gopalakrishnan Managing Director & CEO

Mr. K Parvatheesam Co. Secretary & Compliance Officer

Mr. V Balakrishnan Chief Financial Officer

Mr. S D Shibulal Director & COO

Mr. T V Mohandas Pai Director and Head



Table No. 9

Table showing Share Holding pattern of Infosys

78


5.00 158,949.58 Cr 27.39


Face Value 5.00

No. Of Shares % Holding

PROMOTER'S HOLDINGIndian Promoters 92084978 16.05

Sub Total 92084978 16.05





FII's 208637229 36.36

Sub Total 254138105 44.29

Other Investors



Others 109741924 19.12

Sub Total145381315 25.34


GRAND TOTAL 573825192 100.00



Chart No. 10

Chart showing Share Holding pattern of Infosys

79



Comparison of Profit & Loss Account of Infosys

80



Table No 10

81

Mar '08 Mar '09 Mar '10

Income

Sales Turnover 15,648.00 20,264.00 21,140.00Excise Duty 0.00 0.00 0.00Net Sales 15,648.00 20,264.00 21,140.00Other Income 683.00 502.00 958.00Stock Adjustments 0.00 0.00 0.00Total Income 16,331.00 20,766.00 22,098.00Expenditure

Raw Materials 18.00 20.00 0.00Power & Fuel Cost 106.00 125.00 0.00Employee Cost 7,771.00 9,975.00 10,356.00Other ManufacturingExpenses

1,443.00 1,697.00 2,317.00

Selling and AdminExpenses

1,214.00 1,367.00 215.00

Miscellaneous Expenses 132.00 172.00 883.00Preoperative ExpCapitalized

0.00 0.00 0.00

Total Expenses 10,684.00 13,356.00 13,771.00

Operating Profit 4,964.00 6,908.00 7,369.00PBDIT 5,647.00 7,410.00 8,327.00Interest 1.00 2.00 0.00PBDT 5,646.00 7,408.00 8,327.00Depreciation 546.00 694.00 807.00

Other Written Off 0.00 0.00 0.00Profit Before Tax 5,100.00 6,714.00 7,520.00Extra-ordinary items 0.00 -1.00 0.00PBT (Post Extra-ordItems)

5,100.00 6,713.00 7,520.00

Tax 630.00 895.00 1,717.00Reported Net Profit 4,470.00 5,819.00 5,803.00

Total Value Addition 10,666.00 13,336.00 13,771.00Preference Dividend 0.00 0.00 0.00Equity Dividend 1,902.00 1,345.00 1,434.00Corporate Dividend Tax 323.00 228.00 240.00

Per share data(annualized)Shares in issue (lakhs) 5,719.96 5,728.30 5,728.30Earning Per Share

(Rs)78.15 101.58 101.30




Table showing Variable Analysis profit and loss account 2008-2010 of Infosys


DEVIATION

C0-VARIANCE

INCOME 19731.67 6077839.37 2465.33 12.49EXPEDITURE 12603.67 1871180.23 1367.91 10.85

NETPROFIT 5364 399660.67 632.19 11.79

EPS 93.68 119.93 10.95 11.69

Chart No 11

Chart showing Variable Analysis

1

10

100

1000

10000

100000

1000000

10000000

MEAN VARI ANCE STANDARD

DEVIATION

CO-

VARIANCE

I NCOME EXPENDI TURE NETPROFIT EPS

Interpretation


expenditure is 12603.67, and average net profit of 5364, Earnings per Share is 93.68.

RATIO ANALYSIS

Table No. 11

Table showing ratio Analysis

82



Ratios 2010 2009 2008






DPS (Rs.) 25.00 23.50 33.25

EPS (Rs.) 101.30 101.58 78.15






Earnings per share

Intrinsic Value = EPS * PE ratio

EPS = 101.30

PE RATIO= 27.39

INTRINSIC VALUE FOR MARCH 2010= 2774.6

State Bank of India

I. Economy/Market Analysis

83



The Indian banking industry: sector overview with the economic growth picking up pace and

the investment cycle on the way to recovery, the banking sector has witnessed a transformation

in its vital role of intermediating between the demand and supply of funds

Public sector banks have been very proactive in their restructuring initiatives be it in technology

implementation or pruning their loss assets. Windfall treasury gains made in the falling interest

rate regime were used for writing off the doubtful and loss assets. Apart from streamlining their

processes through technology initiatives such as ATMs, telephone banking, online banking and

web based products, banks also resorted to cross selling of financial products such as credit

cards, mutual funds and insurance policies to augment their fee based income.

Porter’s five forces model of competition for Indian Banking Industry

84



Rivalry among Competing Firms

1. A large no of banks

2. High market growth rate

3. Homogeneous product and

services

4. Low switching cost

5. Undifferentiated services

6. High fixed cost

7. High exit barriers

8. Low government regulations

Bargaining Power of the suppliers

1. Nature of suppliers

2. Few alternatives

3. RBI rules and regulations

4. Suppliers not concentrated

Bargaining Power of buyer

1. Large no of alternatives

2. Low switching cost

3. Undifferentiated service

4. Full information about the

market

Potential Entry of new competitors

1. Merger and acquisition in banking

industry

2. Barriers to an entry in banking industry

no longer exist

3. Lots of private and foreign banks are

entering in the market

4. Government policies are supportive to

start new bank

Potential development of Substitutes products

1. Non-banking financial Institutions(NBFC)2. Post office products3. Government Bonds4. Mutual Funds5. Stock Market6. Debentures

7. Other Alternatives available

85




Indian Banking Industry

Banking business has a history of over 200 years. From the times of the Bank of Bengal (1806)the sector has been witnessing qualitative and quantitative changes. Main players during the

pre-independence period were Credit Lyonnais, Allahabad Bank, Punjab National Bank and

Bank of India. With 1935 regulation the Reserve Bank of India was proclaimed the Central

Bank of India and was vested with controlling powers over the commercial banks.

The drastic development taken place during the first 25 years since independence was

Nationalization of many private banks. With this, the central government became major

policy maker for these nationalized banks.

With economic liberalization measures many private and foreign banking companies were

allowed to operate in the country. Favorable economic climate and a variety of other factors such

as demand for wide range of financial

Products from various sections of the society led to mutually beneficial growth to the banking

sector and economic growth process. This was coincided by technology development in the

banking operations. Today most of the Indian cities have networked banking facility as well as

Internet banking facility. A customer is empowered to operate his account from any part of the

country. UTI Bank, ICICI, HDFC Bank and Bank of Punjab are the main winners of the race.

The financial sector in India has become stronger in terms of capital and the number of

customers. It has become globally competitive and diverse aiming, at higher productivity and

efficiency.

Exposure to worldwide competition and deregulation in Indian financial sector has led to the

emergence of better quality products and services. Reforms have changed the face of Indian

banking and finance. The banking sector has improved manifolds in terms of capital adequacy,

asset classification, profitability, income recognition, provisioning, exposure limits, investmentfluctuation reserve, risk management, etc.

86



TOP PLAYERS IN BANKING

STATE BANK OF INDIA PUNJAB NATIONAL BANK

HDFC BANK AXIS BANK

ICICI BANK KODAK MAHINDRA BANK

CITI BANK ORIENTAL BANK OF COMMERCE

III-Company Analysis

State Bank of India is the largest banking and financial services company in India, by almost every

parameter - revenues, profits, assets, market capitalization, etc. The bank traces its ancestry to British

India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the

oldest commercial bank in the Indian Subcontinent. The Government of India nationalized the Imperial

Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State

Bank of India. In 2008, the Government took over the stake held by the Reserve Bank of India.

SBI provides a range of banking products through its vast network of branches in India and

overseas, including products aimed at NRIs. The State Bank Group, with over 16,000 branches,

has the largest banking branch network in India. With an asset base of $ 260 billion. It is a

regional banking behemoth. It has a market share among Indian commercial banks of about 20%

in deposits and advances, and SBI accounts for almost one-fifth of the nation's loans.

SBI has tried to reduce over-staffing by computerizing operations and "golden handshake"

schemes that led to a flight of its best and brightest managers. These managers took the

retirement allowances and then went on to become senior managers in new private sector banks.

The State bank of India is the 29th most reputed company in the world according to Forbes.

87

http://en.wikipedia.org/wiki/Bank


http://en.wikipedia.org/wiki/Financial_service



http://en.wikipedia.org/wiki/Market_capitalization

http://en.wikipedia.org/wiki/British_Raj


http://en.wikipedia.org/wiki/Imperial_Bank_of_India

http://en.wikipedia.org/wiki/Bank_of_Calcutta




http://en.wikipedia.org/wiki/Government_of_India

http://en.wikipedia.org/wiki/Reserve_Bank_of_India

http://en.wikipedia.org/wiki/Non-resident_Indian

http://en.wikipedia.org/wiki/Golden_handshake

http://en.wikipedia.org/wiki/Forbes




http://en.wikipedia.org/wiki/Market_capitalization



http://en.wikipedia.org/wiki/Imperial_Bank_of_India



http://en.wikipedia.org/wiki/Government_of_India

http://en.wikipedia.org/wiki/Reserve_Bank_of_India

http://en.wikipedia.org/wiki/Non-resident_Indian

http://en.wikipedia.org/wiki/Golden_handshake




The subsidiaries of SBI are

State Bank of

Indore

State Bank of

Bikaner & Jaipur

State Bank of

Hydrabad

State Bank of

Mysore

State Bank of

Patiala

State Bank of

Travancore

Group companies of SBI

1. SBI Capital Markets Ltd

2. SBI Mutual Fund (A Trust)

3. SBI Factors and Commercial Services Ltd

4. SBI DFHI Ltd

5. SBI Cards and Payment Services Pvt Ltd

6. SBI Life Insurance Co. Ltd - Banc assurance (Life Insurance)

7. SBI Funds Management Pvt Ltd

8. SBI Canada

Branches of SBI

1. SBI has 21000 ATMs.

2. SBI has 26500 branches, inclusive of branches that belong to its Associate banks.

3. SBI alone has 18500 branches.

4. SBI is the only bank consisting 26% participation in public sector banks and 39%

participation in commercial banks in India.

Symbol and slogan of SBI

1. With you all the way

2. Pure banking nothing else

3. The Banker to every Indian

4. The Nation banks on

Main Competitors of SBI

88

http://en.wikipedia.org/w/index.php?title=SBI_Capital_Markets_Ltd&action=edit&redlink=1


http://en.wikipedia.org/w/index.php?title=SBI_Mutual_Fund&action=edit&redlink=1


http://en.wikipedia.org/w/index.php?title=SBI_Factors_and_Commercial_Services_Ltd&action=edit&redlink=1


http://en.wikipedia.org/w/index.php?title=SBI_DFHI_Ltd&action=edit&redlink=1


http://en.wikipedia.org/w/index.php?title=SBI_Cards_and_Payment_Services_Pvt_Ltd&action=edit&redlink=1


http://en.wikipedia.org/w/index.php?title=SBI_Life_Insurance_Co._Ltd&action=edit&redlink=1


http://en.wikipedia.org/wiki/Bancassurance

http://en.wikipedia.org/w/index.php?title=SBI_Funds_Management_Pvt_Ltd&action=edit&redlink=1


http://en.wikipedia.org/w/index.php?title=SBI_Canada&action=edit&redlink=1








http://en.wikipedia.org/wiki/Bancassurance





1. ICICI Bank

2. AXIS Bank

3. HDFC Bank

Objective of SBI: “Purposeful banking sub serving the growing and diversified financial needs

of planned economic development of the country”

Key Officials of SBI

Name Designation

O P Bhatt Chairman / Chair Person

S K Bhattacharyya Managing Director

R Sridharan Managing Director

SWOT ANALYSYS OF SBI

89

http://en.wikipedia.org/wiki/ICICI_Bank

http://en.wikipedia.org/wiki/Axis_Bank

http://en.wikipedia.org/wiki/HDFC_Bank

http://remorph.blogspot.com/2008/09/swot-sbi.html

http://en.wikipedia.org/wiki/ICICI_Bank

http://en.wikipedia.org/wiki/Axis_Bank

http://en.wikipedia.org/wiki/HDFC_Bank

http://remorph.blogspot.com/2008/09/swot-sbi.html



STRENGTHS

Brand Name

Market Leader

Wide Distribution Network

Diversified Portfolio

Government Owned

Low Transition Costs

WEAKNESS

Existence Hierarchical managementstructure

Highest Non Performing Assets

Lags in Modernisation

OPPERTUNITIES

Merger of associate banks with SBI

Planning to add 2000 branches and

3000 ATMs

Increasing trade and business relations

and ever increasing populations

THREATS

Advent of MNC banks

Increasing Consumer expectations

Private Banks

Employee Strike

State Bank of India Financials

90



Face Value Market

Capitalization

P/E Ratio

10 150,010.07 Cr 16.37

Table No 12

Table showing Share Holding Pattern of SBI


Face Value 10.00

No. Of

Shares

% Holding

PROMOTER'S HOLDING


Sub Total 377207200 59.41





FII's 64200731 10.11

Sub Total 175038970 27.57

Other Investors



Government 123328 0.02

Others 23218837 3.66

Sub Total 43817237 6.90


GRAND TOTAL 634882644 100.00

91



Chart No 12

Chart showing Share Holding pattern of SBI

Promoters Holding

60%

Mutual Funds

4%

Other Investors

7%

General Public

6%

Banks & Insurance

13%

FII's

10%

Comparison of Profit & Loss Account of SBI

92



Table No 13 showing Analysis profit and loss account 2008-2010 Bharti Airtel

93

Mar '08 Mar '09 Mar '10

Income

Interest Earned 48,950.31 63,788.43 70,993.92Other Income 9,398.43 12,691.35 14,968.15Total Income 58,348.74 76,479.78 85,962.07Expenditure

Interest expended 31,929.08 42,915.29 47,322.48Employee Cost 7,785.87 9,747.31 12,754.65Selling and AdminExpenses

4,165.94 5,122.06 7,898.23

Depreciation 679.98 763.14 932.66

Miscellaneous Expenses 7,058.75 8,810.75 7,888.00Preoperative ExpCapitalized

0.00 0.00 0.00

Operating Expenses 14,609.55 18,123.66 24,941.01Provisions & Contingencies 5,080.99 6,319.60 4,532.53Total Expenses 51,619.62 67,358.55 76,796.02Net Profit for the Year 6,729.12 9,121.23 9,166.05

Extra ordinary Items 0.00 0.00 0.00Profit brought forward 0.34 0.34 0.34Total 6,729.46 9,121.57 9,166.39Preference Dividend 0.00 0.00 0.00

Equity Dividend 1,357.66 1,841.15 1,904.65Corporate Dividend Tax 165.87 248.03 236.76Per share data (annualized)Earnings Per Share (Rs) 106.56 143.67 144.37

Equity Dividend (%) 215.00 290.00 300.00Book Value (Rs) 776.48 912.73 1,038.76AppropriationsTransfer to StatutoryReserves

5,205.69 6,725.15 6,495.14

Transfer to Other Reserves -0.10 306.90 529.50Proposed Dividend/Transfer

to Government

1,523.53 2,089.18 2,141.41

Balance c/f to Balance Sheet 0.34 0.34 0.34


DEVIATION

C0-VARIANCE

INCOME 73596.86 131238760.1 11455.95 15.57EXPEDITURE 65258.06 107848310 10385 15.91

NETPROFIT 8338.8 1295869.66 1138.36 13.65

EPS 131.53 312.79 17.69 13.45



Chart No 13

Chart showing of Variable Analysis SBI

1

100

10000

1000000

100000000


DEVIATION

CO-VARIANCE

INCO ME EXPENDITUR E NETPR OFIT EPS

Interpretation







Earnings per share

Intrinsic value = EPS * PE RATIO

94



EPS = 144.37

PE RATIO= 16.37


RANBAXY LABORATARIES

I. Market analysis

Accounting for two percent of the world's pharmaceutical market, the Indian pharmaceutical

sector has an estimated market value of about US $8 billion. It's at 3rd rank in terms of total

pharmaceutical production and 14th in terms of value. It is growing at an average rate of 7.2 %

and growth of US $ 12.3 billion. The industry is typically growing at around 1.5-1.6 times the

country's gross domestic product (GDP) growth. Approximately Pharmaceutical industry has

given employment to 2.86 million people.

95



India is emerging as a global leader in the area of outsourced clinical research and contract

manufacturing & research. Contract research is increasing at the rate of 25% per year, and is

expected to touch US $380 billion. The domestic pharma market is likely to touch US$ 20 billion

by 2015, making India a lucrative destination for clinical trials for global giants.

Indian pharmaceutical industry exports its products to more than 200 countries, including highly

regulated markets of Europe, Japan, USA and Australia. The Good Manufacturing Practices

(GMP) developed by the industry facilitates the production of different dosage forms.

Indian multinational companies like Dr.Reddy's Lab, Cipla, Ranbaxy, etc have created awareness

about the Indian market prospects in the international pharmaceutical market. Approvals given

by Foods and Drugs Administration (FDA) and ANDA (Abbreviated New Drug

Application)/DMF (Drug Master File) have played an important role in making India a cost-

effective and high quality product manufacturer. MNCs are entering the market with ambitious

plans.

By revising its R&D policies the government is trying to boost R&D in domestic pharma

industry. It is giving tax exemption for a period of ten years and relieving customs and excise

duties of all the drugs and material imported or exported for clinical trials to promote innovative

R&D.

The FDI in pharmaceutical sector is estimated to have touched US$ 172 million, thereby

showing a compounded annual growth rate of about 62.6%. Drugs and pharmaceuticals sector is

at 8th rank in India's top 10 FDI attracting sectors. According to the Economic Survey the value

of pharma output has increased ten times over the last 15 years.

The Growth scenario: India's pharmaceutical industry is growing at the rate of 14 percent per

year. It is one of the largest and most advanced among the developing countries.

The future of Indian pharmaceutical sector: is very bright because of the following factors:

96



Clinical trials in India cost US$ 25 million each, whereas in US they cost between US$ 300-

350 million each.

Indian pharmaceutical companies are spending 30-50% less on custom synthesis services as

compared to its global costs.

In India investigational new drug stage costs around US$ 10-15 million, which is almost 1/10th

of its cost in US (US$ 100-150million).

According to a new report published by PricewaterhouseCoopers (PwC) in April 2010, India will

join the league of top 10 global pharmaceuticals markets in terms of sales by 2020 with the total

value reaching USD 50 billion.

Factors contributing to the growth of the Pharmaceutical Market: India today has the

distinction of producing high quality generic medicines that are sold around the world. Further,

India is poised to be one of the fastest growing pharmaceutical markets in the world. The

following factors have fuelled the growth.

The growing population of over a billion;

1. A huge patient base;

2. Increasing incomes;

3. Improving healthcare infrastructure;

4. An increase in lifestyle-related diseases such as diabetes, cardiovascular

diseases, and central nervous system;

5. Penetration of health insurance;

6. Adoption of patented products;

7. Patent expiries and aging population in the US, Europe, and Japan


97



The Indian pharmaceutical industry is a success story providing employment for millions and

ensuring that essential drugs at affordable prices are available to the vast population of this sub-

continent.

The Indian Pharmaceutical Industry today is in the front rank of India’s science-based

industries with wide ranging capabilities in the complex field of drug manufacture and technology.

A highly organized sector, the Indian Pharmacy Industry is estimated to be worth $ 8 billion,

growing at about 8 to 9 percent annually. It ranks very high in the third world, in terms of

technology, quality and range of medicines manufactured. From simple headache pills to

sophisticated antibiotics and complex cardiac compounds, almost every type of medicine is now

made indigenously.

Playing key role in promoting and sustaining development in the vital field of medicines, Indian

Pharmacy Industry boasts quality producers and many units approved by regulatory authorities in

USA and UK. International companies associated with this sector have stimulated, assisted and

spearheaded this dynamic development in the past 53 years and helped to put India on the

pharmaceutical map of the world.

The Indian Pharmaceutical sector is highly fragmented with more than 20,000 registered units. It

has expanded drastically in the last two decades. The leading 250 pharmaceutical companies

control 70% of the market with market leader holding nearly 7% of the market share. It is an

extremely fragmented market with severe price competition and government price control

The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs,

drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles.

There are about 250 large units and about 8000 Small Scale Units, which form the core of the

pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce

the complete range of pharmaceutical formulations, i.e., medicines ready for consumption by

patients and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for

production of pharmaceutical formulations.

98

http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-industry/







Following the de-licensing of the pharmaceutical industry, industrial licensing for most of the

drugs and pharmaceutical products has been done away with. Manufacturers are free to produce

any drug duly approved by the Drug Control Authority. Technologically strong and totally self-

reliant, the pharmaceutical industry in India has low costs of production, low R&D costs,

innovative scientific manpower, strength of national laboratories and an increasing balance of

trade. The Pharmaceutical Industry, with its rich scientific talents and research capabilities,

supported by Intellectual Property Protection regime is well set to take on the international

market

Top pharmaceutical companies of the country:

1.RANBAXY 2.CIPLA

3.Dr.REDDY’S 4.ASHWIN DALVI INDIA

5.PIRAMAL 6.AUROBINDO PHARMA

7.GLAXO SMITHKLINE 8.LUPIN

9.CADILA 10.WOCKHARD

Advantages of India

Competent workforce: India has a pool of personnel with high managerial and technical

competence as also skilled workforce. It has an educated work force and English is commonly

used. Professional services are easily available.

Cost-effective chemical synthesis: Its track record of development, particularly in the area of improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides

a wide variety of bulk drugs and exports sophisticated bulk drugs.

Legal & Financial Framework: India has a 53 year old democracy and hence has a solid legal

framework and strong. There is already an established international industry and business

99





community.

Information & Technology: It has a good network of world-class educational institutions and

established strengths in Information Technology.

Globalization: The country is committed to a free market economy and globalization. Above all,

it has a 70 million middle class market, which is continuously growing.

Consolidation: For the first time in many years, the international pharmaceutical industry is

finding great opportunities in India. The process of consolidation, which has become a

generalized phenomenon in the world pharmaceutical industry, has started taking place in India.

Industry Strengths

Capital Investment in Technology: Owing to the availability of advanced technology at low

costs, the companies can produce drugs at lower costs.

Cost Effective: The filing cost of ANDAS and DMFs is comparatively low for the Indian

companies.

Manpower: There is a large pool of technical experts available at modest salaries.

Contract Research & Contract Manufacturing: There is a good scope for contract research

and contract manufacturing.

Infrastructure: There is a well-developed infrastructure for the pharmaceutical industry.

Generic Drugs: In the last few years, the generic drug-manufacturing segment has received huge

investments, in the process making it more competitive and efficient.

SWOT Analysis of Pharma Sector

100



It is often said that the pharma sector has no cyclical factor attached to it. Irrespective of whether

the economy is in a downturn or in an upturn, the general belief is that demand for drugs is likely

to grow steadily over the long-term. It is true in some sense. But are there risks? This article

gives a perspective of the Indian pharma industry by carrying out a SWOT analysis.

Strengths

1. Cost effective technology

2. Strong and well-developed manufacturing

base

3. Clinical research and trials

4. Knowledge based, low- cost manpower in

science & technology

5. Proficiency in path-breaking research

6. High-quality formulations and drugs

7. High standards of purity

8. Future growth driver

9. World-class process development labs

10. Excellent clinical trial centers

11. Chemical and process development

competencies12. Increasing liberalization of government

policies

Weaknesses

1. Low Indian share in world pharmaceutical

market (about 2%)

2. Lack of strategic planning

3. Fragmented capacities

4. Low R&D investments

5. Absence of association between institutes

and industry

6. Low healthcare expenditure

7. Very low level of Biotechnology in India

and also for New Drug Discovery Systems

8. Production of duplicate drugs

101



Opportunities

1. Incredible export potential

2. Increasing health consciousness

3. New innovative therapeutic products

4. Globalization

5. Drug delivery system management

6. Increased incomes

7. Production of generic drugs

8. Contract manufacturing

9. Clinical trials & research

10. Drug molecules

Threats

1. Small number of discoveries

2. Competition from MNCs

3. Transformation of process patent to

product patent (TRIPS)

4. Outdated Sales and marketing methods

5. Non-tariff barriers imposed by

developed countries

6. Stricter registration procedures

7. Containment of rising health-care cost

8. High cost of sales and marketing

Strategic Issues Facing the Pharmaceutical Industry

Industry Consolidation: Merger activity has been intense within the industry in the last decade.

Science and Innovation: Over the last decade the knowledgebase of the pharmaceutical

sciences has changed dramatically and continues to change at a fairly high rate. As new

technologies and bodies of scientific knowledge emerge, whole new sets of opportunities and

threats are being introduced.

Increased Competition: A major issue facing the industry is the intense competition and the

changing face the pharmaceutical market. The industry has seen a legion of new market entrants,

increased competition among key players and industry consolidation.

Changing Consumer Profile: The profile of the pharmaceutical consumer has changed.

Consumers are now better informed and there are expectations on the industry to show that their

products deliver better health and greater economic value.

102



Ageing Populations: Due to ageing global population external pressure on the industry to

reduce the price and there is long-term dependence on pharmaceuticals.

Changing Geo-political Environment: The political environment worldwide has become a

major force. Due to the socio-political consequences of healthcare and medicines, the

pharmaceutical industry is facing increasing political pressure to reduce prices and control costs.

In developing economies, government is increasing pressure on pharmaceutical firms to act in

the social interest and this is likely to intensify in the future.

Decreasing Consumer Influence: A unique feature of the pharmaceutical market is that the

final consumer has little or no say in the choice of medicines and treatments. Medical doctors,

general practitioners and pharmacists usually act as agents of the final consumer and they are

largely responsible for the consumer’s purchasing decisions.

III. Company Analysis

About company : Ranbaxy Laboratories Limited is India's largest pharmaceutical company.

Incorporated in 1961, Ranbaxy exports its products to 125 countries with ground operations in

46 and manufacturing facilities in seven countries. The company went public in 1973.In 1998

Ranbaxy entered the United States, the world's largest pharmaceuticals market and now the

biggest market for Ranbaxy, and Japanese company Daiichi Sankyo gained majority control in

2008.,

Most of Ranbaxy's products are manufactured by license from foreign pharmaceutical

developers, though a significant percentage of their products are off-patent drugs that are

manufactured and distributed without licensing from the original manufacturer.

Key officials

103

http://en.wikipedia.org/wiki/Pharmaceutical

http://en.wikipedia.org/wiki/United_States


http://en.wikipedia.org/wiki/Daiichi_Sankyo

http://en.wikipedia.org/wiki/Patent



http://en.wikipedia.org/wiki/Daiichi_Sankyo




Name Designation

Tsutomu Une Chairman / Chair Person

Atul Sobti Managing Director & CEO

S K Patawari Co. Secretary & Compl. Officer

Atul Sobti CEO & Managing Director

Acquisition

Daiichi-Sankyo takes over the company from the Singh family in a deal worth $4.6 billion by

acquiring a 63.92% stake in Ranbaxy.

Major competitors of Ranbaxy Laboratories

1. Sun Pharmaceuticals 2. Dr. Reddy's Laboratories

3. Cipla 4. Ashwin Dalvi India

5. Aurobindo Pharma 6. Nicholas Piramal

7. GlaxoSmithKline 8. Lupin Laboratories

9. Cadila Healthcare 10.Wockhardt

104

http://en.wikipedia.org/wiki/Daiichi-Sankyo

http://en.wikipedia.org/wiki/Daiichi-Sankyo



Financials of Ranbaxy Laboratories

Table No. 14

Table

showing

Share

Holding

Pattern of

Ranbaxy

Laboratories

105

Face Value Market

Capitalization

P/E Ratio

Rs. 5.0019,214.02 Cr 33.59


Face Value Rs. 5.00

No. Of Shares % Holding

PROMOTER'S HOLDING

Foreign Promoters 268711323 63.90

Sub Total 268711323 63.90




Banks Fin. Inst. and Insurance 37584942 8.94FII's 31925100 7.59

Sub Total 80875595 19.23

Other Investors


NRI's/ OCB's/ Foreign 212165 0.05

Others 5281881 1.26

Sub Total 18520741 4.40


GRAND TOTAL 420523246 100.00



Chart No.14

Chart showing share holding pattern of Ranbaxy Laboratories

106



Foreign Promoters

64%Mutual Funds & UTI

3%

Banks&Insurance

9%

FII's

8%

Others Investors

4%

Genral Public

12%

107



Comparison of Profit & Loss account of Ranbaxy Laboratories

Table No.15

108

Dec '07 Dec '08 Dec '09

Income

Sales Turnover 4,344.39 4,676.21 4,797.49

Excise Duty 51.37 24.17 15.90Net Sales 4,293.02 4,652.04 4,781.59Other Income 551.13 -1,587.64 485.66Stock Adjustments 40.66 115.59 33.96Total Income 4,884.81 3,179.99 5,301.21Expenditure

Raw Materials 1,861.17 2,049.30 2,083.29Power & Fuel Cost 90.35 108.83 136.80Employee Cost 420.04 472.65 728.40Other ManufacturingExpenses

82.60 94.65 94.37

Selling and AdminExpenses

1,341.03 1,402.77 884.89

Miscellaneous Expenses 123.90 383.26 235.16Preoperative ExpCapitalized

0.00 0.00 0.00

Total Expenses 3,919.09 4,511.46 4,162.91

Operating Profit 414.59 256.17 652.64PBDIT 965.72 -1,331.47 1,138.30Interest 93.43 145.83 39.47PBDT 872.29 -1,477.30 1,098.83Depreciation 118.73 154.47 148.20

Other Written Off 0.00 0.00 0.00Profit Before Tax 753.56 -1,631.77 950.63Extra-ordinary items 35.46 17.76 111.42PBT (Post Extra-ordItems)

789.02 -1,614.01 1,062.05

Tax 156.69 -574.24 488.86Reported Net Profit 617.72 -1,044.80 571.98

Total Value Addition 2,057.93 2,462.16 2,079.62Preference Dividend 0.00 0.00 0.00Equity Dividend 317.15 0.00 0.00Corporate Dividend Tax 53.90 0.00 0.00

Per share data(annualized)Shares in issue (lakhs) 3,730.71 4,203.70 4,204.17Earnings Per Share (Rs) 16.56 -24.85 13.61




Table showing Variable Analysis on Profit and loss account 2007-2009 Ranbaxy


DEVIATION

C0-VARIANCE

INCOME 4455.35 842123.01 917.67 20.59

EXPEDITURE 4197.82 59093.06 243.09 5.79NETPROFIT -744.83 45096.69 212.36 -28.51

EPS -18.34 22.63 4.76 -25.95

Chart No.15

Chart showing Variable Analysis of Ranbaxy Laboratories

1

10

100

1000

10000

100000

1000000


DEVIATION

C0-VARIANCE

INCOME EXPEDITURE NETPROFIT EPS

Interpretation

The above analysis states that the average income for three years is 4455.35, average expenditure

is 4197.82, and average net profit of -744.83, Earnings per Share is -18.34.

RATIO ANALYSIS

Table No. 16

Table showing Ratio Analysis of Ratio Analysis

109



Ratios 2009 2008 2007





Retention Ratio 100.00 0.00 -668.18

DPS (Rs.) 0.00 0.00 8.50

EPS (Rs.) 13.61 -24.85 -16.56





Price Earnings (P/E) Ratio = Market price of share Earnings per share

Intrinsic value = EPS * P/E RATIO

EPS = 13.61

PE RATIO= 33.59


TECHNICAL ANALYSIS

Tata Motors Ltd

Three Months Daily Moving Average Chart

110



ANALYSIS

Trend

The stock after correcting to 30% of the long bull Run [Bottom 720 – Top 1028] prices reversed

back and are now in intermediary upward trend.

Moving Averages

The stock is currently trading above all the important trading moving averages. The Moving

Average is observed on 30-08-2010 and it is buyable at current levels.

5 days: =1001.52 15 days: = 1002.75

22 days: = 956.48 30 days: = 923.24

Volumes

The stock is trading with average volumes. Volumes should ideally expand for the advance

together steam.

111

Bottom 720

Top 1028



On the basis of above analysis price movement can be projected as follows

Target: ---1050

Stop Loss: --996

Support: ---981.3—971--956

Resistance: ---1006—1021--1030

How to trade according to the data mentioned above

• If an entry is made in front of support and the close is above the support, it means that

one can buy the stock intraday during market hours at support and put an appropriate stop

loss mentioned below. Once you have bought the stock intraday, put the Stop Loss

accordingly mentioned and sell it before the market closes.

• If an entry is made in front of resistance and the close is less then resistance, it means that

one can short the stock intraday during market hours at resistance and put an appropriate

stop loss mentioned below. At close one should cover if one is an intraday trader.

Bharthi Airtel


112



ANALYSIS

Trend



Moving Averages



5 days: = 319.03 15 days: = 318.573

22 days: =319.089 30 days: = 316.368

Volumes: The stock is trading with lack luster volumes. Volumes should ideally expand for the

advance together steam.

113

Bottom 254

Top 324




Target: ---335

Stop Loss: --- 318

Support: --- 312 – 309 – 303

Resistance: --- 322 – 328 – 331









Infosys Technologies


114



ANALYSIS

Trend



Moving Averages



5 days: = 2762.97 15 days: = 2784.88

22 days: =2799.25 30 days: = 2796.39

Volumes

The stock is trading with lack luster volumes. Volumes should ideally expand for the advance

together steam.

115

Bottom 2616

Top 2833





ANALYSIS

Trend

The stock after correcting to 28% of the long bull Run [Bottom 2202 – Top 2823] prices

reversed back and are now in intermediary upward trend.

Moving Averages



5 days: = 2830.63 15 days: = 2781.0

22 days: =2715.37 30 days: = 2645.63

Volumes

117

Bottom 2202

Top 2823



The stock is trading with low volumes. Volumes should ideally expand for the advance together

steam.


Target: ---2985

Stop Loss: --2814

Support: --- 2764—2734 --2683

Resistance: ---2844—2895--2925









Ranbaxy Laboratories

118




ANALYSIS

Trend



Moving Averages



5 days: = 485.76 15 days: = 466.923

22 days: =460.968 30 days: = 457.633

119

Top 495

Bottom 413



Volumes

The stock is trading with average volumes. Volumes should ideally expand for the advance

together steam.


Target: --- 538

Stop Loss: ---482

Support: --- 475 — 470 -- 462

Resistance: ---487 — 494 -- 499









120



CHAPTER VI

FINDINGS

Tata Motors Ltd1. Interest rates are at its peak (experiencing a 6-year high), thus consumer spending has

gone down considerably and in a way investments have also reduced.

2. After several decades of sluggish growth, the Indian economy is now amongst the fastest

growing economy in the world. Economic growth is currently 8-9%, second only to

China.

3. The Automobile Industry is one of the fastest growing sectors in India.

4. The increase in the demand for cars, and other vehicles, powered by the increase in the

income is the primary growth driver of the automobile industry in India.

5. It is expected that the Automobile Industry in India would be the 7th largest automobile

market within the year 2016.

6. Tata Motors is currently India's largest automobile company with revenues of $7.2

billion; about 18% of its revenues come from international business.

7. Tata Motors is also ranked as fifth highest in the category of medium and heavy

commercial vehicles at international level.

8. The Financial Year 2009-10 witnessed the highest sale of Tata Motors vehicles

registering at 642,686 units,in March 2010, Tata Motors' total sales were recorded at

75,151 against 54,452 units vended in March 2009.

9. Comparing the last three years in 2010 it reported the highest net profit 2240.08.

10.Currently the scrip is trading above all the important moving averages.

Bharti Airtel Ltd

121



1. India is currently the fastest growing and second-largest mobile market in the world in

terms of mobile subscribers. It is also expected that by 2012, fixed line revenues will reach US$

12.2 billion and mobile revenues will reach US$ 39.8 billion.

2. India is Fifth-largest telecom network in the world; second largest among the emerging

economies after China.

3. The Mobility business provides GSM mobile services in all 23 telecommunication circles in

India, while the Infotel business group provides telephone service and Internet access over DSL

in 15 circles.

4. Bharti Airtel Limited is an Indian company offering telecommunication services in 18

countries, is the largest cellular service provider in India, with more than 135 million

subscriptions as of May 2010.

5. Bharti Airtel is the world's third largest, single-country mobile operator and fifth largest

telecom operator in the world in terms of subscriber base.

6. The company is structured into four strategic business units - Mobile, Tele media, Enterprise

and Digital TV.

7. In India, the company has a 24.6% share of the wireless services market, followed by 17.7%

for Reliance Communications and 17.4% for Vodafone Essar.

8. Bharti Airtel, in the largest ever telecom takeover by an Indian firm, buys Kuwait-based Zain

Telecom's businesses in 15 African countries for $10.7 billion.

9. Comparing three years company had reported highest net profit of Rs. 9,426.15 Crs

10. Currently the scrip is trading above all the moving averages.

Infosys Technologies

1. India exports software’s and services to approximately 95 countries in the world.

2. The immense expansion in networking technologies is expected to continue into the next

decade also.

3. With small and midsized businesses driven by the increased use of technology the

country's information and communication technology market is estimated to grow 20.3

per cent annually to reach US$ 24.3 billion by 2011.

122





4. The domestic market alone is expected to become over US$ 50 billion, with a CAGR of

about 18.4 per cent, exports are estimated to more than double to US$ 78.62 billion in

2012.

5. Compared to last year this year the net profit has reduced from 5819-5803.

6. The scrip is trading all the above daily moving averages.

State Bank of India

1. State Bank of India is the largest banking and financial services company in India.

2. SBI provides a range of banking products through its vast network of branches in

India and overseas, with an asset base of $ 260 billion.

3. A market share among Indian commercial banks of about 20% in deposits and

advances, and SBI accounts for almost one-fifth of the nation's loans.

4. The State bank of India is the 29th most reputed company in the world according to

Forbes.

5. Comparing three years company had reported highest net profit of Rs9166.05crs.

6. The scrip is trading above all the important moving averages.

Ranbaxy Laboratories

1. The Indian pharmaceutical sector has an estimated market value of about US $8 billion:

It's at 3rd rank in terms of total pharmaceutical production.

2. The industry is typically growing at around 1.5-1.6 times the country's gross domestic

product (GDP) growth. Approximately Pharmaceutical industry has given employment to

2.86 million people.

3. The domestic pharmaceutical market is likely to touch US$ 20 billion by 2015, making

India a lucrative destination for clinical trials for global giants.

123











4. Indian pharmaceutical industry exports its products to more than 200 countries, including

highly regulated markets of Europe, Japan, USA and Australia.

5. The FDI in pharmaceutical sector is estimated to have touched US$ 172 million, thereby

showing a compounded annual growth rate of about 62.6%.

6. India's pharmaceutical industry is growing at the rate of 14 percent per year. It is one of

the largest and most advanced among the developing countries.

7. Ranbaxy Laboratories Limited is India's largest pharmaceutical company.

8. Most of Ranbaxy's products are manufactured by license from foreign pharmaceutical

developers, though a significant percentage of their products are off-patent drugs that are

manufactured and distributed without licensing from the original manufacturer.

9. Company has made a good recovery after making a huge loss in the previous year.

CHAPTER VI

RECOMMENDATIONS

ALL THE STOCKS SELECTED IN THIS PROJECT ARE GOOD FOR ANY

PORTFOLIO

TATA MOTORS LTD

At current levels, it is advised to buy the scrip even the moving averages are above all the

trading averages. Since our economy is fast recovering and our GDP rates are increasing

tremendously, shows a confidence of stability.

Tata motors performed well in the FY10 and witnessed a highest sale ever, highest net profit

reported in last three years.

The volumes are in an average, if more FIIs enter into our market it increases liquidity and takes

the scrip even higher.

BHARTI AIRTEL

124







At current levels, it is advised to hold the scrip since the scrip is trading above all the moving

averages. As the acquisition of ZAIN telecom in South Africa has added more expenses for the

company. So it takes time to get a clear idea about the company’s new operations. When

everything is settled down it has a high potential to go upward.

Since Airtel is the market leader it adds advantage to the company.

INFOSYS TECHNOLOGIES

At current levels it is advised to hold the scrip since the scrip is trading above all the moving

averages. The scrip has not made big corrections and therefore it is better to hold for the next

move.

STATE BANK OF INDIA

At current levels it is advisable to buy since the scrip is trading above all the important moving

averages. It has made a major correction and bounced back and now the scrip is very bullish.

The scrip has an advantage of India’s largest banking sector and for its fundamental advantages.

Year after year company gives good returns and confidence for its investors.

RANBAXY LABORATARIES

At current levels it is advisable to buy the scrip even it is trading above all the important moving

averages. The scrip has an advantage of India’s largest pharmaceutical company and the scrip is

very bullish.

The company has made good recovery after making a huge loss in previous financial year.

125



CONCLUSION

After the study on “TECHNICAL AND FUNDAMENTAL ANALYSIS OF SELECTED

STOCKS OF INDIAN STOCK MARKET”. I conclude that sectors and the stocks chosen are

fundamentally and technically strong. The stocks are in good performance and have recovered

from the recession. It is the right time to enter into markets since our economy is stable and

financially strong. Every investor should consider the importance of fundamental and technical

of a firm.

126



BIBLIOGRAPHY

1) John L. Person, “A Complete Guide to Technical Trading Tactics”, Ninth Edition (March 26,

2004)

2) Colby, Robert W. and Thomas A. Meyers, “The Encyclopedia of Technical Market

Indicators” (Tenth Edition 2000)

3) Nison, Steve, “Beyond Candlesticks” (John Wiley & Sons, 1994), Fourth Edition 1998

4) Edwards, Robert D., and John Magee, Technical Analysis of Stock Trends (John Magee, 1997;first edition, 1948).

4) Geoffrey Poitras, “Security Analysis and Investment Strategy” (2001)

127



5) Benjamin Graham and David Dodd, “Security Analysis” (November, 1999)

6) Erich A. Helfert, D.B.A., “Financial Analysis: Tools and Techniques” (2000)

7) Peter J. Klien, “Getting Started in Security Analysis” (April, 2002)

8) Richard A. Brealey, Stewart C. Myers, Alan J. Marcus ”Fundamentals of Corporate Finance”

Third Edition, McGraw-Hill, Section A

WEBSITES:

www.nseindia.com

www.bseindia.com

www.tradingday.com

www.marketscreen.com

www.karvy.com

www.nseindia.com

www.investopedia.com

www.moneycontol.com

www.economictimes.com

www.tradingeconomics.com

www.quickmba.com

www.business.mapsofindia.com

www.economywatch.com

www.tatamotors.com

www.ranbaxy.com

www.infosys.com

www.airtel.in

www.statebankofindia.com

www.en.wikipedia.org

www.hedgeequities.com

128

http://www.nseindia.com/


http://www.investopedia.com/

http://www.economictimes.com/

http://www.tradingeconomics.com/

http://www.quickmba.com/

http://www.economywatch.com/

http://www.tatamotors.com/

http://www.ranbaxy.com/

http://www.infosys.com/

http://www.airtel.in/

http://www.statebankofindia.com/

http://www.en.wikipedia.org/

http://www.hedgeequities.com/



http://www.investopedia.com/

http://www.economictimes.com/

http://www.tradingeconomics.com/

http://www.quickmba.com/

http://www.economywatch.com/

http://www.tatamotors.com/

http://www.ranbaxy.com/

http://www.infosys.com/

http://www.airtel.in/

http://www.statebankofindia.com/

http://www.en.wikipedia.org/

http://www.hedgeequities.com/



www.economictimes.indiatimes.com

www.pharmaceutical-drug-manufacturers.com

www.financialexpress.com

www.intradaytradingtechniques.com

www.business.rediff.com

www.indiaautomotive.net

www.indiainbusiness.nic.in

www.profit.ndtv.com

TV Channels

CNBC TV18

NDTV PROFIT

GLOSSARY

There are a vast number of elaborated technical indicators:

MOVING AVERAGE –MA

• RELATIVE STRENGTH INDEX — RSI : The Relative Strength Index Technical Indicator

(RSI) is a price-following oscillator that ranges between 0 and 100. When Wilder introduced

the Relative Strength Index, he recommended using a 14-day RSI... Since then, the 9-day and

25-day Relative Strength Index indicators have also gained popularity.

• ADVANCE/DECLINE LINE: The “advance/decline line” shows, for some period,

the cumulative difference between advancing and declining issues.

• CLOSING TICK: “Closing tick” is the difference between the number of shares that

closed on an uptick and those that closed on a downtick.

• CLOSING ARMS: “Closing arms” or “trin” (trading index) is the ratio of average

trading volume in declining issues to average trading volume in advancing issues.

• Z-BLOCK TRADES: “zBlock trades” are trades in excess of 10,000 shares.

• HI-LO-CLOSE CHART: A hi-lo-close chart is a bar chart showing, for each day, the

high price, low price, and closing price.

129

http://www.pharmaceutical-drug-manufacturers.com/

http://www.financialexpress.com/

http://www.indiaautomotive.net/

http://www.indiainbusiness.nic.in/

http://www.profit.ndtv.com/

http://www.metaquotes.net/techanalysis/indicators/moving_average


http://www.metaquotes.net/techanalysis/indicators/relative_strength_index


http://www.pharmaceutical-drug-manufacturers.com/

http://www.financialexpress.com/

http://www.indiaautomotive.net/

http://www.indiainbusiness.nic.in/

http://www.profit.ndtv.com/





• CANDLESTICK CHART: A candlestick chart is an extended version of the hi-lo-

close chart. It plots the high, low, open, and closing prices, and also shows whether the closing

price was above or below the opening price.

• POINT AND FIGURE CHARTS: Point-and-figure charts are a way of showing only

major price moves and their direction. A “major” up move is marked with an “X,” while a

“major” down move is marked with an “O.” A new column starts every time there is a change

in direction

• HEAD AND SHOULDERS FORMATION: Once a chart is drawn, analysts examine

it for various formations or pattern types in an attempt to predict stock price or market

direction in the case of head-and-shoulders formation. When the stock price “pierces the

neckline” after the right shoulder is finished, it’s time to sell.

• ODD-LOT: The “odd-lot” indicator looks at whether odd-lot purchases are up or

down. HEMLINE: Followers of the “hemline” indicator claim that hemlines tend to rise in

good times.

• SUPER BOWL: The Super Bowl indicator forecasts the direction of the market based

on whether the National Football Conference or the American Football Conference wins. A

win by the National Football Conference is bullish.

• BETA: Beta is a risk measure comparing the volatility of a stock's price movement to

the general market.

• MOMENTUM: Momentum measures the speed of price change and provides a

leading indicator of changes in trend.

• UPSIDE/DOWNSIDE: Measures of Upside/Downside separate the volumes for

rising markets from those in falling markets. Since volume is independent of price, it makes a

valuable tool for measuring the quality of a price trend.

130



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