investment analsyis of 2 stocks.doc

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1.1 INTRODUCTION ABOUT THE TOPIC

The market for long term securities like bonds, equity stocks and

preferred stocks is divided into primary market and secondary market.

Primary market deals with the new issues of securities. Outstanding

securities are traded in the secondary market, which is commonly known

as stock market or stock exchange. In the secondary market, the investors

can sell or buy securities. tock markets predominantly deal in the equity

shares. !ell regulated and active stock market promotes capital

formation. The health of the economy is reflected by the growth of the

stock market. tock broking is a growing industry in India. The main

reason is that Indian economy is one of the strongest in the world. "s a

result of that both foreign and domestic investors are interested in

investing in Indian stock market.

The topic selected for the study is #Security Analysis of selected o!er

sector securities listed in Bo"#ay Stoc$ E%c&an'e(with reference to

$otilal Oswal securities %td, Thrissur.

The study is done for the purpose of conducting fundamental analysis

and technical analysis of leading securities in the stock market. In the

stock market share price of companies are determined by the demand and

supply forces operating in the market. These demand and supply forces in

turn are influenced by a number of fundamental factors as well as certain

psychological or emotional factors. The combined impact of all these

factors is reflected in the share price movement. The price movements of

securities follow systematic and certain consistent patterns. Past

movements in the prices of shares help to identify trends and pattern. It is

useful for the prediction of future price movements. The companies

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selected are 'TP(, )*%I"'(*, PO!*)+)I, '-P(, T"T"PO!*)

and ""'I PO!*).

Security analysisis conducted by analying both the fundamental andtechnical aspects. The technical analysis includes bar chart, $oving

"verage / )I 0)elative trength Index1.

Security analysis

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"n examination and evaluation of the various factors affecting the

valueof a securityis known as ecurity analysis. ecurity analysis

refers to the analysis of tradable financial instruments. 3inancial

instruments can be classified into debt securities, equities, or some

hybrid of the two,futures contractsand tradable credit derivatives

are sometimes included. ecurity analysis is typically divided into

fundamental analysis, which relies upon the examination of

fundamental business factors such as financial statements, and

technical analysis, which focuses upon price trends and momentum

. Two analytical models !hen the ob4ective of the analysis is to

determine what stock to buy and at what price, there are two basic

methodologies

)unda"ental analysis maintains that markets may misprice a security in

the short run but that the 5correct5 price will eventually be reached.

Profits can be made by trading the mispriced security and thenwaiting for the market to recognie its 5mistake5 and re6price the

security.

Technical analysis maintains that all information is reflected already in

the stock price, so fundamental analysis is a waste of time. Trends

7are your friend7 and sentiment changes predate and predict trend

changes. Investors7 emotional responses to price movements lead to

recogniable price chart patterns. Technical analysis does not care

what the 7value7 of a stock is. Their price predictions are only

extrapolations from historical price patterns.

Investors can use both these different but somewhat complementary

methods for stock picking. $any fundamental investors use techniques

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for deciding entry and exit points. $any technical investors use

fundamentals to limit their universe of possible stock to 7good7 companies

)unda"ental analysis

3undamental analysis of a business involves analying its financial

statementsand health, its management and competitive advantages, and

its competitorsand markets. !hen applied to futuresand forex, it focuses

on the overall state of the economy, interest rates, production, earnings,

and management. !hen analying a stock, futures contract, or currency

using fundamental analysis there are two basic approaches one can use9

bottom up analysis and top down analysis. The term is used to distinguish

such analysis from other types of investment analysis, such as

quantitative analysis and technical analysis." method of security

valuation which involves examining the company7s financials and

operations, especially sales, earnings, growth potential, assets, debt,

management, products, and competition. 3undamental analysis takes into

consideration only those variables that are directly related to the company

itself, rather than the overall state of the market or technical analysis data.

The end goal of performing fundamental analysis is to produce a value

that an investor can compare with the security7s current price in hopes of

figuring out what sort of position to take with that security

3undamental analysis is performed on historical and present data, but

with the goal of making financial forecasts. There are several possible

o#*ecti+es:

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To conduct a company stoc$ +aluationand predict its probable

price evolution,

To make a pro4ection on its business performance,

To evaluate its management and make internal business decisions,

To calculate its credit ris$

Tools forfunda"ental analysis

3or fundamental analysis, the following ratios are used:

*P < P"T = 'o of equity shares

P < "mount declared as dividend = 'o.

of equity shares

Pay out ratio < P = *P)O* < P"T = 'et worth

P=* ratio < $P = *P

P=* "verage < "verage of the P=* range

(urrent ratio < (urrent assets = (urrent liabilities

ebt6 *quity ratio < ebt capital = Owner>s capital

Interest coverage ratio < *?IT = Interest'=P $argin < P"T = 'et sales

TECHNICA, ANA,-SIS

Technical analysis is a study of the market data in terms of factors

affecting supply and demand schedules, namely, prices, volume of

trading, etc. The technical analysis believes that share prices are

determined by the demand and supply forces operating the market. These

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demand and supply forces are in turn influenced by a number of

fundamental factors as well as certain psychological and emotional

factors. The combined impact of all these factors is reflected in the share

price movement. The technical analysis therefore concentrates on the

movement of share price. Technical analysis is the name given to

forecasting techniques that utilie historical share price data.

Technical analysis is a method of evaluating securities by analying

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

Technical analysts do not attempt to measure a security7s intrinsic value,

but instead use charts and other tools to identify patterns that can suggest

future activity. Technical analysts believe that the historical performance

of stocks and markets are indications of future performance.

TOO,S O) TECHNICA, ANA,-SIS

)elative trength Index

imple $oving "verage

%ine (hart

?ar (hart

1. RE/IE0 O) ,ITERATURE

"ber Aohn0&BCD1 in his study found that numerous empirical studies have

tested the profitability of technical trading rules in a variety of markets

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for the purpose of either uncovering profitable trading rules or testing

market efficiency, or both. The technical trading studies simulated only

one or two trading systems. In these studies, although transaction costs

were deducted to compute net returns of technical trading strategies, risk

was not adequately handled, statistical tests of trading profits and data

snooping problems were often disregarded, and out6of6sample

verification along with parameter 0trading rule1 optimiation were not

considered in the testing procedure.

+oodman and Aohn ! Peavy 0&BE81 in their study found that there is no

way of making an expected profit by extrapolating past changes in the

futures price, by chart or any other esoteric devices of magic or

mathematics. The market quotation already contains in itself all that can

be known about the future and in that

sense has discounted future contingencies as much as is humanly

possible.

Philip O )egan 0&BEE1 explained that demonstrated that under a noisy

rational expectations model in which current prices do not fully reveal

private information 0signals1 because of noise 0unobserved current supply

of a risky asset1 in the current equilibrium price, historical prices 0i.e.,

technical analysis1 together with current prices help traders make moreprecise inferences about past and present signals than do current prices

alone

?rown and avid P 0&BEB1 in their article explained that results provide

evidence for a #predictive information linkF between non6earnings

numbers and future earnings changes. They indicate that some non6

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earnings numbers do contain information useful for predicting future

earnings changes that is not contained in either past or current earnings.

*dward 0&BB21 found that also extends her test to include a #valuation

linkF between the predicted future earnings changes and stock returns

during the annual report dissemination period. he finds evidence that

this valuation link does exist. The non6earnings accounting numbers are

therefore useful for predicting both future earnings and returns.

emark and Thomas ) 0&BB;1 explained that the history of technical

analysis dates back to at least the &Eth century when the Aapanese

developed a form of technical analysis known as candlestick charting

techniques. This technique was not introduced to the !est until the

&BCGs.

-ackel and Henneth 0&BBD1found thatit has been stated that #the task

of research is to discover what information pro4ects future earnings and,

from a financial statement analysis point of view, what information in the

financial statements does thisF

Aan ) 0&BBE1 explained that results show that receivables do provide

incremental information for the prediction of future sales, earnings andprofit margins.

quires 02GGG1 found that study the value relevance of capital

expenditures for explaining returns beyond the use of current earnings.

Their findings show that changes in the level of capital expenditure were

strongly and positively related to excess returns. This exhibits the fact

that current capital expenditure has good news for the future performance

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of a firm and supports the use of capital expenditures for predicting future

earnings or returns.

Thomas )obinson 02GG21 in their study explained that 3undamental

analysis involves assessing a firm>s equity value based on the analysis of

published financial statements and other information without reference to

the prices at which a firm>s securities trade in the capital markets.

Palepu and Hrishna 02GG;1 found that technical analysis has been

extensively used among market participants such as brokers, dealers, fund

managers, speculators, and individual investors in the financial industry. 8

'umerous surveys indicate that practitioners attribute a significant role to

technical analysis. 3or example, futures fund managers rely heavily on

computer6guided technical trading systems, and about 8G to ;G of

foreign exchange traders around the world believe that technical analysis

is the ma4or factor determining exchange rates in the short6run up to six

months.

Prasanna (handra 02GG@1 explained that "ctive portfolio management is

commonly partitioned into two types of activities: market timing, which

requires forecasts of broad6based market movements, and security

analysis, which requires the selection of individual stocks that areperceived to be underpriced by the market.

J H ?halla 02GGD1 explained that security analysis Psychological and

Institutional 3orces and the etermination of *xchange )ates,

'eoclassical economists, by their own admission, have had a terrible time

explaining foreign6currency prices. In large part, this is due to the fact

that they assume 5economic5 behavior to be independent of social and

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cultural influences. ?ut markets are social institutions. They 5organie

and guide human social behavior through sanctions 0formal and informal,

negative and positive1, mores, norms, status, and shared worldviews5.

(onsequently, explaining economic exchange requires an understanding

of the behavior associated with the subculture of those in question.

hanesh Humar Hhatri 02GGD1 in their article found that a leading

technical analyst, provides a more specific definition: #The technical

approach to investment is essentially a reflection of the idea that prices

move in trends that are determined by the changing attitudes of investors

toward a variety of economic, monetary, political, and psychological

forces. The art of technical analysis, for it is an art, is to identify a trend

reversal at a relatively early stage and ride on that trend until the weight

of the evidence shows or proves that the trend has reversed.F

tephan - Penman 02GGC1 in his study found that Technical analysis

includes a variety of forecasting techniques such as chart analysis, pattern

recognit ion analysis, seasonality and cycle analysis, and computeried

technical trading systems.-owever, academic research on technical

analysis is generally limited to techniques that can be expressed in

mathematical forms, namely technical trading systems, although some

recent studies attempt to test visual chart patterns using patternrecognition algorithms. " technical trading system consists of a set of

trading rules that result from parameteriations, and each trading rule

generates trading signals 0long, short, or out of market1 according to their

parameter values. everal popular technical trading systems are moving

averages, channels, and momentum oscillators.

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)an (anetti / I?$ )esearch 02GGE1 explained that (omposable 3ormal

ecurity "nalysis,a security property of a protocol is composable if it

remains intact even when the protocol runs alongside other protocols in

the same system. !e describe a method for asserting composable security

properties, and demonstrate its usefulness. In particular, we show how

this method can be used to provide security analysis that is formal,

relatively simple, and still does not make un64ustiKed abstractions of the

underlying cryptographic algorithms in use. It can also greatly enhance

the feasibility of automated security analysis of systems of realistic sie.

Prasanna (handra 02GGE1 in his study he explained that $otivated by an

obvious gap between the widespread use of ?loomberg terminals in the

finance industry and the scant resources available to an instructor on how

to incorporate the available information through the terminal into a

finance course, we illustrate our experience using the terminal in an

equity6focused security analysis and portfolio management course. Our

goal is to enable students inexperienced with the terminal to prepare an

analyst report. !e identify the most significant challenges we face and

provide the corresponding solutions. Our results are also applicable to

other finance courses including financial analysis, investments, and

student managed investment fund.

&.8 INTRODUCTION O) THE STUD-

1..1 OB2ECTI/ES O) THE STUD-

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To study fundamental and technical analysis of securities in the

power sector.

To evaluate the performance of the company. To analye the movement of stock.

To evaluate the risk and return of the selected securities.

1.. NEED O) THE STUD-

The capital gains of an investor are on the performance of a particular

company>s stock in the stock market. The stronger the company>s share,

the more profit the investor gets. o it is necessary to ascertain, analye

and interpret the share of various firms in order to know its position in the

market. Investors can make wise investment with the help of this analysis

Through this pro4ect, it tries to point out the company which ensure

maximum return and minimum risk in power sector where in investment

could be made.

1.. SCOPE O) THE STUD-

The study is to analye the financial strength and future investment

prospective of the key players from power sector of the economy.The

fundamental analysis is to determine the value of the shares. The

technical analysis is to predict the future stock behavior. )ational

investors always focus on maximum return which bears minimum risk.

-ence, for them, well diversified equity funds are the superlative

opportunity available for the investment. .

1..3 ,I4ITATIONS

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ata considered only for past few months.

Indian capital market is featured by the weak form of efficient

market hypothesis.

The research will be confined to only C securities in the power

sector.

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2.& INDUSTR- PRO)I,E

Caital 4ar$et

The market where investment funds like bonds, equities and

mortgages are traded is known as the capital market. The primal role of

the capital market is to channelie investments from investors who have

surplus funds to the ones who are running a deficit. The capital market

offers both long term and overnight funds. The financial instruments that

have short or medium term maturity periods are dealt in the money

market whereas the financial instruments that have long maturity periods

are dealt in the capital market. The different types of financial

instruments that are traded in the capital markets are equity instruments,

credit market instruments, insurance instruments, foreign exchange

instruments, hybrid instruments and derivative instruments.

" capital market is a marketfor securities0both debt and equity1,

where business enterprises 0companies1 and governmentscan raise long6

term funds. It is defined as a market in which money is lent for periods

longer than a year, as the raising of short6term funds takes place on other

markets 0e.g., the money market1. The capital market includes the stock

market0equity securities1 and thebond market0debt1.

Caital "ar$ets consist of

1 Primary market

2 Secondary markets

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Primary market

The primary market is that part of the capital marketsthat

deals with the issuance of new securities. Companies,governments or public sector institutions can obtain

fundingthrough the sale of a new stockor bondissue.

This is typically done through a syndicate of securities

dealers. The process of selling new issues to investors

is called underwriting. n the case of a new stock issue,

this sale is an initial public o!ering"P#$. %ealers earn

a commission that is built into the price of the security

o!ering, though it can be found in the prospectus.

The primary markets are where new stock and bonds

issues are sold "via underwriting$ to investors. The

secondary markets are where e&isting securities are

sold and bought from one investor or trader to another,

usually on a securities e&change, over the counter, or

elsewhere.

3eatures of primary markets are:

This is the market for new long term equity capital. The primary

market is the market where the securities are sold for the first time.

Therefore it is also called the new issue market 0'I$1.

In a primary issue, the securities are issued by the company

directly to investors.

The company receives the money and issues new security

certificates to the investors.

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Primary issues are used by companies for the purpose of setting up

new business or for expanding or moderniing the existing

business.

The primary market performs the crucial function of facilitating

capital formation in the economy.

The new issue market does not include certain other sources of new

long term external finance, such as loans from financial

institutions. ?orrowers in the new issue market may be raising

capital for converting private capital into public capital9 this is

known as 5going public.5

The financial assets sold can only be redeemed by the original

holder.

$ethods of issuing securities in the primary market are:

1 nitial public o!ering'

2 (ights issue"for e&isting companies$'

)n initial public stock o!ering "P#$ referred to simply as

an *o!ering* or *+otation,* is when a company issues

common stockor sharesto the public for the rst time.

They are often issued by smaller, younger companies

seeking capital to e&pand, but can also be done by

large privately-owned companies looking to become

publicly traded.

) rights issue is o!ered to all e&isting shareholders

individually and may be reected, accepted in full or

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accepted in part. (ights are often transferable, allowing

the holder to sell them on the open market. ) right to a

share is generally issued on a ratio basis "e.g. one-for-

three rights issue$. /ecause the company receives

shareholders0 money in e&change for shares, a rights

issue is a source of capital.

Secondary market

The secondary market, also known as the aftermarket, is

the fnancial market where previously issued

securitiesand fnancial instrumentssuch as stock,

bonds, options, and uturesare bought and sold. The

term *secondary market* is also used to refer to themarket for any used goodsor assets, or an alternative

use for an e&isting product or asset where the

customer base is the second market "for e&ample, corn

has been traditionally used primarily for food

production and feedstock, but a second- or third-

market has developed for use in ethanol production$.

Lnder a secondary market offeringor seasoned equity offeringof shares

to raise money, a company can opt for a rights issue to raise capital. The

rights issue is a special form of shelf offering or shelf registration. !ith

the issued rights, existing shareholders have the privilege to buy a

specified number of new shares from the firm at a specified price within a

specified time. " rights issue is in contrast to an initial public offering

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0primary market offering1, where shares are issued to the general public

through market exchanges. !ith primary issuances of securities or

financial instruments, or the primary market, investors purchase these

securities directly from issuerssuch as corporations issuing sharesin an

IPOorprivate placement, or directly from the federal government in the

case of treasuries.

"fter the initial issuance, investors can purchase from other investors in

the secondary market.The secondary market for a variety of assets can

vary from fragmented to centralied, and from illiquid to very liquid. The

ma4or stock exchanges are the most visible example of liquid secondary

markets 6 in this case, for stocks of publicly traded companies. .

*xchanges provide a centralied, liquid secondary market for the

investors who own stocks that trade on those exchanges. $ost bonds and

structured products trade #over the counter,F or by phoning the bond desk

of one>s broker6dealer.

Functions o Secondary market

Secondary marketing is vital to an ecient and modern

capital market. n the secondary market, securities are

sold by and transferred from one investor or

speculator to another. t is therefore important that

the secondary market be highly liquid"originally, the

only way to create this liuidity was for investors and

speculators to meet at a &ed place regularly' this is

how stock exchangesoriginated, see History o the

Stock Exchange$. )s a general rule, the greater the

number of investors that participate in a given

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marketplace, and the greater the centrali3ation of that

marketplace, the more liuid the market.

3undamentally, secondary markets mesh the investor7s preference forliquidity 0i.e., the investor7s desire not to tie up his or her money for a

long period of time, in case the investor needs it to deal with unforeseen

circumstances1 with the capital user7s preference to be able to use the

capital for an extended period of time

Stoc$ E%c&an'es

Stock e&changes are open markets that trade nancial

assets. 4hether associated with a company or acting

as an individual, a stock e&change is the place where

stocks are bought and sold. There are a number of

maor stock e&changes around the world and each of

these plays a part in determining the overall nancial

and economic condition of any economy. Stock

e&changes deal with a number of nancial instruments

such as stocks, bonds and euities. /oth corporate and

government bonds are traded in stock e&changes.

5uities include popular investment options, rights

issues, bonus issues, and all other forms of shares and

stocks. The actual trading of stocks takes place through

mediators such as nancial advisors, brokerage houses,

and stockbrokers ) stock e&change, "formerly a

securities e&change$ is a corporation or mutual

organization which provides *trading* facilities for

stock brokersand traders, to trade stocksand other

securities. Stock e&changes also provide facilities for

&B
http://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Mutual_organizationhttp://en.wikipedia.org/wiki/Mutual_organizationhttp://en.wikipedia.org/wiki/Stock_brokerhttp://en.wikipedia.org/wiki/Trader_(finance)http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Security_(finance)http://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Mutual_organizationhttp://en.wikipedia.org/wiki/Mutual_organizationhttp://en.wikipedia.org/wiki/Stock_brokerhttp://en.wikipedia.org/wiki/Trader_(finance)http://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Security_(finance)


20/76


21/76

"he role o stock exchanges

The main role of a stock e&change is to facilitate the

transactions associated with both the buying andselling of securities. /uyers and sellers of shares and

stocks can track the price changes of securities from

the stock markets in which they operate. The ups and

downs of stock inde&es help the investors to speculate

on the return on investment "(#$ of various

investment options. Stock e&changes also serve as a

source of capital formation for listed companies.

/usiness entities that are listed in a particular stock

e&change can issue shares to the public and sell those

shares in that market. To take part in these

transactions, listed companies need to abide by the

rules and reuirements of that market. The stock

e&changes protect the interests of both buyers and

sellers by assuring a timely transfer of money. The

participants of a stock market are reuired to operate

within the specied transaction limits &ed by the

regulatory authority of that stock market Speed and

transparency are vital for all stock market transactions.

The companies listed in a stock e&change need to

provide proper guidance regarding business

performance and prospects, mergers and acuisitions,

stock prices, dividends and other information at all

times. nvestors make their investment decisions based

on the information obtained from these companies, and

the comments of analysts who track those companies.

2&


22/76

Bo"#ay Stoc$ E%c&an'e

?ombay tock *xchange is the oldest stock exchange in "sia with a

rich heritage, now spanning three centuries in its &88 years of

existence. !hat is now popularly known as ?* was established as

5The 'ative hare / tock ?rokers7 "ssociation5 in &EC@

Stock Exchanges #perations5

4ith the help of stockbrokers, the buyers and sellers

participating in a stock market carry out their

transactions. The brokers representing selling parties

take their orders to the stock e&change +oor and then

nd brokers representing parties willing to invest in

similar stocks. f both parties agree to trade at the &ed

price, the transaction takes place. The si3e of the world

stock market was estimated at about 89:.: trillion 7S

at the beginning of #ctober 2;;1

trillion face or nominal value, 11 times the si3e of the

entire world economy. The value of the derivatives

market, because it is stated in terms of notional

values, cannot be directly compared to a stock or a

&ed income security, which traditionally refers to an

actual value. ?oreover, the vast maority of

derivatives 0cancel0 each other out "i.e., a derivative

0bet0 on an event occurring is o!set by a comparable

derivative 0bet0 on the event not occurring.$. ?any such

22
http://en.wikipedia.org/wiki/Notional_amounthttp://en.wikipedia.org/wiki/Notional_amounthttp://en.wikipedia.org/wiki/Actual_cash_valuehttp://en.wikipedia.org/wiki/Notional_amounthttp://en.wikipedia.org/wiki/Notional_amounthttp://en.wikipedia.org/wiki/Actual_cash_value


23/76

relatively illiuid securities are valued as marked to

model, rather than an actual market price.

The stocks are listed and traded on stock e&changeswhich are entities of a corporation or mutual

organi3ation speciali3ed in the business of bringing

buyers and sellers of the organi3ations to a listing of

stocks and securities together

) transaction on a stock exchange must be made

between two members of the e&change @ an ordinary

person may not walk into the $e %ork Stock

Exchange"for e&ample$, and ask to trade stock. Such

an e&change must be done through a broker.

There are three types of stock broking service.

5&ecution-only, which means that the broker will only

carry out the client0s instructions to buy or sell.

)dvisory dealing, where the broker advises the client

on which shares to buy and sell, but leaves the nal

decision to the investor.

%iscretionary dealing, where the stockbroker

ascertains the client0s investment obectives and

then makes all dealing decisions on the client0s

behalf

28
http://en.wikipedia.org/wiki/Mark_to_modelhttp://en.wikipedia.org/wiki/Mark_to_modelhttp://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/Mark_to_modelhttp://en.wikipedia.org/wiki/Mark_to_modelhttp://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://en.wikipedia.org/wiki/New_York_Stock_Exchange


24/76

(oles similar to that of a stockbroker include investment

advisor, and fnancial advisor. ) stockbroker may or

may not be also an investment advisor.

tockbrokers also sometimes or exclusively trade on their own

behalf, as a principal, speculating that a share or other financial

instrumentwill increase or decline in price. In such cases the term broker

makes little sense and the individuals or firms trading in principal

capacity sometimes call themselves dealers, stock traders or simply

traders.

. CO4PAN- PRO)I,E

4otilal Os!al Securities ,td

$otilal Oswal ecurities %td. 0$O%1 was founded in &BEC as asmall sub6broking unit, with 4ust two people running the show. 3ocus on

customer6first6attitude, ethical and transparent business practices, respect

for professionalism, research6based value investing and implementation

of cutting6edge technology has enabled us to blossom into an almost 2GGG

member team.

Today firm offering a well diversified financial services and a

range of financial products and services such as !ealth $anagement,

?roking / istribution, (ommodity ?roking, Portfolio $anagement

ervices, Institutional *quities, Private *quity, Investment ?anking

ervices and Principal trategies.

(ompany have a diversified client base that includes retail

customers 0including -igh 'et worth Individuals1, mutual funds, foreign

institutional investors, financial institutions and corporate clients.

2;
http://en.wikipedia.org/wiki/Investment_advisorhttp://en.wikipedia.org/wiki/Investment_advisorhttp://en.wikipedia.org/wiki/Financial_advisorhttp://en.wiktionary.org/wiki/principalhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Stock_traderhttp://en.wikipedia.org/wiki/Investment_advisorhttp://en.wikipedia.org/wiki/Investment_advisorhttp://en.wikipedia.org/wiki/Financial_advisorhttp://en.wiktionary.org/wiki/principalhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Stock_trader


25/76

co"any &ead6uartered in 4u"#aiand as of Aune 8Gth, 2GGB, had a

network spread over @@@ cities and towns comprising &,8GE ?usiness

%ocations .at Aune 8Gth, 2GGB, company had @,@C,8C8 registered

customers.

In 2GGD, the (ompany placed B.;E of its equity with two leading

private equity investors based out of the L M'ew Jernon Private *quity

%imitedand ?essemer Jenture Partners. The company gotlisted on BSE

and NSEon eptember B, 2GGC. The issue which was priced at )s.E2@

per share 0face value )s.@ per share1 got an overwhelming response and

was subscribed 2C.&E times in turbulent market conditions. The issue

gave a return of 2& on the date of listing. "s of end of financial year

2GGE, the group net worth was )s.C bn and market capitaliation as of

$arch 8&, 2GGE was )s.&B bn.

(redit rating agency (risil has assigned the highest rating of P&N to

the (ompany>s short6term debt program.

4ission of co"any

To be the most respected and preferred private equity manager in the mid

sie corporate segment

Products and ser+ices

E6uity

In keeping with its tradition of personalied service, $otilal Oswal

ecurities %imited provides (ustomied *quity "dvisory +roup to clients

based on their profile. *quity )esearch is an inherent strength of $Ot.

(onverting that research to advice is the main function of *quity

"dvisory. The investment ideas identified by the research team are

2@
http://www.newvernonassociates.com/http://www.newvernonassociates.com/http://www.bvp.com/http://www.newvernonassociates.com/http://www.newvernonassociates.com/http://www.bvp.com/


26/76

presented and communicated with conviction to clients by advisory team.

$Ot *quity "dvisor proactively helps you take informed equity

investment decisions and build a healthy portfolio giving the best fit to

your investment and trading needs.

Deri+ati+es

3utures / options are derivatives, which use equity as their

underlying. -ence *quity "dvisory +roup 0*"+1 will also act as

advisors for 3/O / help take informed decisions while trading in these

derivative instruments. ince derivatives instrument provide good

leverage opportunity, it is a great tool for speculation. %everage is a

double edge sword for which one requires an equity advisor. The advisors

will also help with various strategies like ?ull pread, ?ear pread,

(over call writing, hedging strategies etc. This is to help to make better

trading returns. Portfolio "ana'e"ent

$otilal Oswal ecurities %td brings with more than 2 decades of

experience / expertise in equity research and stock broking. $otilal

Oswal ecurities %td is one of the leading portfolio service providers,

with asset under management worth )s. @BG (rores.

Online tradin'

(lients trade online through #$y?roker platformF. ?roker with

complete research support from $O% which helps the clients to make

right decision at right time. They can choose trading a=c which suits their

trading habit>s / preference and trade anywhere, anytime. ?uying and

selling is as easy as click of a button.

7ey )eatures5

ingle platform for multiple exchange ?* / '* 0(ash / 3/O1,

$utual 3unds / IPO.

Tick by tick market watch 0?* = '* = 3/O1.

2D


27/76

ingle window Order placement with instant confirmation.

Instant funds transfer from any of our &B listed banks.

"fter $arket Order 0"$O1 can place orders in advance before

market opens.

(all and trade facility.

4utual funds

$utual funds offer the ideal platform to participate in the *quity /

ebt market indirectly through professional management. $utual fundsare becoming the most popular investment vehicles offering various kinds

of schemes with different investment ob4ectives

Co""odities

Over the years commodities markets have been experiencing

tremendous progress, which is evident from the fact that the trade in this

segment is standing as the boon for the global economy today. The

promising nature of these markets has made them an attractive investment

avenue for investors.

Initial Pu#lic Offerin's 8IPOs9

?ook ?uilding and 3ixed Price Issue are the two types of Initial

Public Offerings 0IPOs1 through which a public company can raise

money in the capital market.In a book building public issue the bids are

received at different price levels and the demand for the issue is built up

over a period of time.

4otilal Os!al Deository Ser+ices 84ODES9

Today $O* is available at all business locations of $otilal Oswal.

In terms of number of accounts $O* is the second biggest epository

Participant in (% with over &@G,GGG accounts. -older of a $O*

2C
http://www.motilaloswal.com/MOSL/Online_Trading/#a1%23a1http://www.motilaloswal.com/MOSL/Online_Trading/#a1%23a1


28/76

account get recommendations on their holdings based on $otilal Oswal

)esearch rated the 5$ost Independent )esearch 6 %ocal ?rokerage5 by

"sia $oney ?rokers Poll 2GGD.

4ar'inal fundin'

$otilal Oswal 3inancial ervices understand needs and help the

trader to meet their liquidity requirements. (ompany offer $argin

funding to individuals and corporate. (ompany provide finance for

investment in primary market issues and also possess expertise in

financing for short6term requirements, to buy securities from

secondary markets.

2E


29/76

RESEARCH 4ETHODO,O:-

.1 Reasearc& Tye

The segment identified for conducting the study is power ector in

India. The number of companies selected for the study is even.

"nalytical study is used to conduct the study.

. Data collection

secondary data is collected from websites, ?ooks and magaines.

. Tools for analysis

3undamental "nalysis

Technical "nalysis

)or funda"ental analysis; t&e follo!in' ratios are used5

*P

P

Payout ratio

)O*

P=* ratio

(urrent ratio ebt6 *quity ratio

Interest coverage ratio

'=P $argin and +=P ratio.

2B


30/76

)or tec&nical analysis; t&e follo!in' tools are used:

)elative strength index

@ day moving average

@G day moving average

%ine chart and candlestick chart

8G


31/76

Analysis and Interretation of data

"nalysis of data is a process of inspecting, cleaning, transforming, and

modeling data with the goal of highlighting useful information, suggesting

conclusions, and supporting decision making. ata analysis has multiple facts

and approaches, encompassing diverse techniques under a variety of names, in

different business, science, and social science domains.

ADANI PO0ER

Ta#le No53.1.1

S&are Price details of Adani Po!er

for t&e year ended , their dividend yield ratio is

also G>.

8&


32/76

Ta#le No5 3.1.

Return on E6uity of Adani Po!er

for t&e year ended


33/76

Interretation5The share price of "dani power is @G at the beginning of the study. "fter

that price move upto DE. The share price now showing bullish trend after

the fall from DE to ;G. The upward trend is a good signal to investors

C&art No 3.1.

Candlestic$ C&art of ADANI PO0ER

88


34/76

Interretation5

The chart shows a positive trend of share price of ""'I PO!*) after

the early fall of share price during the period of study. The share price of

"dani power is @G at the beginning of the study. "fter that price move

upto DE.

C&art No 3.1.4o+in' A+era'e C&art of ADANI PO0ER

8;


35/76

Interretation5

@ day moving average of ""'I PO!*) cut the @G day moving average

twice during the study period and maintains the critical level. 'ow it is

above the support line. ""'I PO!*) shows a positive trend in its

share price.

C&art No 3.1.3

RSI C&art of ADANI PO0ER

8@


36/76

Interretation5

)I chart of ""'I PO!*) shows the bullish buying trend of the

stock. tock is near to the )I point CG . it shows the strength of the

stock. This stock touch the CG level twice during the period of study.

RE,IANCE PO0ER

8D


37/76

Ta#le No5 3..1

S&are Price details of Reliance Po!er

for t&e year ended


38/76

'*T !O)T- &D&G8

P)O3IT "3T*) T" 0P"T1 8&G

)*TL)' O' '*T !O)T- 01 G.E@

Interretation5

The net worth of )eliance Power is )s.&D&G8. Their profit after tax is 8&G

and their return on net worth is .E@

Ta#le No5 3..3

7ey Ratios of Reliance Po!er

for t&e year ended


39/76

Interretation:

The reliance power stock shows bearish trend in the early stage of study.

'ow the movement of stock price shows a recovery trend. hare price of

)*%I"'(* PO!*) is &GG at the beginning of the study. "fter that price

down upto DG level. 'ow the stock shows recovery trend from the

massive fall.

C&art No 3..

Candlestic$ C&art of RE,IANCE PO0ER

8B


40/76

Interretation:

The reliance power stock shows down trend in the early stage of study.

The stock price fall from &G& to DG during the period of study. 'ow the

stock is in recovery trend.

C&art No 3..

4o+in' A+era'e C&art of RE,IANCE PO0ER

;G


41/76

Interretation:

)eliance power stock shows negative trend in the early stage. The share

price break @G "R $OJI'+ "J*)"+* only once during the period of

study.'ow the stock price is above the @G "R $OJI'+ "J*)"+*. It

shows positive trend in the end of study period.

C&art No 3..3

RSI C&art of RE,IANCE PO0ER

;&


42/76

Interretation:

)I chart of )eliance power shows the bullish buying trend . The tock

now move to the )I point of CG . it shows the buying trend of the stok.

The stock down upto DG point level twice during the period of study.

;2


43/76

TATA PO0ER

Ta#le No5 3..1

S&are Price details of Tata Po!erfor t&e year ended


44/76

Return on E6uity of Tata Po!er

for t&e year ended


45/76

Interretation:

Tata power stock shows bearish trend in its share price. The stock shows

a massive fall in its share price from &&2 to B2 during the study period.

3irst half of study period the stock shows a positive trend. "fter that the

stock fall upto BG level. 'ow stock trading at the maximum low level.

C&art No 3..

Candlestic$ c&art of TATA PO0ER

;@


46/76

Interretation:

3irst half of study period the stock shows a positive trend. "fter that the

stock fall upto BG level. 'ow stock trading at the maximum low

level.Tata power stock shows bearish trend in its share price. The stock

shows a massive fall in its share price from &&2 to B2 during the study

period.

C&art No 3..

4o+in' A+era'e C&art of TATA PO0ER

;D


47/76

Interretation:

@ day moving average of Tata power is below the @G day moving averageline. The price of this stock is below the support price .The stock price

will show a good trend only after it resist the @G day moving average line.

C&art No 3..3

RSI C&art of TATA PO0ER

;C


48/76

Interretation:

)I of T"T" PO!*) is ;G in the last period of study ,it shows the

bearish selling trend of stock. The chart shows negative trend of stock

price during the period of study. The stock only cut CG point level once

during the period of study.

;E


49/76

CESC

Ta#le No 3.3.1

S&are Price details of CESC for t&e year ended


50/76

Return on E6uity of CESC for t&e year ended


51/76

Interretation:

(*( stock shows bullish trend in its share price. The chart shows the

strength of the stock in its share price. The (*( stock now trading at

88G level after the recovery from 2CG.

C&art No 3.3.

@&


52/76

Candlestic$ C&art of CESC

Interretation:

The chart shows the trend of share price (*(. In the last stage, the stock

shows possative trend in its price. 'ow the stock trading at the maximum

level.

@2


53/76

C&art No 3.3.

4o+in' A+era'e C&art of CESC

Interretation:

hare price of (*( once cut the support and it lead to a fall in its price.

The support prices for the stock are 8&@ and 2EE. 'ow the share price is

above the @G day moving average line. The stock shows bullish trend in

its price.

C&art No 3.3.3

RSI C&art of CESC

@8


54/76

Interretation:

)I of (*( shows positive buying trend of stock. )I of stock is nowabove the CG level, shows the bullish trend in the stock price. The

company only reached 8G point level twice during the period of study.

NHPC

@;


55/76

Ta#le No 3.>.1

S&are Price details of NHPC for t&e year ended .

Return on E6uity of NHPC for t&e year ended


56/76

-")* ("PIT"% &28GG

)**)J* "' L)P%L &;G@2

'*T !O)T- 2D8@8

P)O3IT "3T*) T" 0P"T1 2CC&

)*TL)' O' '*T !O)T- 01 &G.EE

Interretation:

The net worth of '-P( is )s.2D8@8. Their profit after tax is 2CC& and

their return on net worth is &G.EE

Ta#le No 3.>.3

7ey Ratios of NHPC for t&e year ended


57/76

Interretation:

uring the period of study, the share price trend is downward. The share

price falls from 2B to &E. The first half of the study the stock price shows

upward trend after share price reached )s 8G, the share price down

sharply upto )s 2G. 'ow the stock trading at )s 2G.

C&art No 3.>.

Candlestic$ C&art of NHPC

@C


58/76

Interretation

The chart shows the bearish movement of stock during the period of

study. The first half of the study the stock price shows upward trend after

share price reached )s 8G, the share price down sharply upto )s 2G.

C&art No 3.>.

4o+in' A+era'e C&art of NHPC

@E


59/76

Interretation:

The chart shows the bearish trend of '-P( stock. The stock now moves

below the @G ay $oving average. The massive fall of share price from

2B to &E can>t recover in short time.

C&art No 3.>.3

RSI C&art of NHPC

@B


60/76

Interretation:

)I chart shows bearish selling trend of stock. )I point of last period

shows 8; point, it give the clear6cut idea of negative movement of that

particular stock.

PO0ER:RID

Ta#le No 3.?.1

DG


61/76

S&are Price details of Po!er'rid

for t&e year ended


62/76

'*T !O)T- 28;EC

P)O3IT "3T*) T" 0P"T1 82@;

)*TL)' O' '*T !O)T- 01 &;.@G

Interretation:

The net worth of PO!*)+)I is )s.28;EC. Their profit after tax is

82@; and their return on net worth is &;.@G

Ta#le No 3.?.1

7ey Ratios of Po!er'rid for t&e year ended


63/76

Interretation:

The share price of Powergrid shows a bullish trend during the last period

of study. The chart shows negative trend of price in the early period. The

upward trend in last period is good signal to investors.

C&art No 3.?.

Candlestic$ C&art of PO0ER:RID

D8


64/76

Interretation:

The price movement of stock shows down trend in the early stage. 'ow

the trend is positive for PO!*)+)I stock. The share price of

Powergrid shows a bullish trend during the last period of study. The

upward trend in last period is good signal to investors.

C&art No 3.?.

4o+in' A+era'e C&art of PO0ER:RID

D;


65/76

Interretation:

PO!*)+)I>s @ day moving average cut the support line only once

during the period of study. 'ow the share price of company is above the

support line. upport price for the stock is &GE. If it loss this strong

support there may be a fall in its price.

C&art No 3.?.3

RSI C&art of PO0ER:RID

D@


66/76

Interretation:

)I of powergrid stock is CG above during the Bthperiod, after that it

come down into ;@ level. Bth period is the idele time to buy

PO!*)+)I stock.The &Gth perid shows ;@ point level.that doesn>t

show eihter a possative or a negative trend.

DD


67/76

NTPC

Ta#le No [email protected]

S&are Price details of NTPC for t&e year ended


68/76

Return on E6uity of NTPC for t&e year ended


69/76

Interretation:

The stock price 'TP( falls in every rise. The stock shows negative trend

in its price in the early stage. The stock price fall from &CG to &;G during

the time of study. 'ow the stock trading at &@G level.

C&art No [email protected]$ c&art of NTPC

DB


70/76

Interretation:'TP( stock price shows a down trend in the early stage of study.The

stock shows a recovery trend in the last stage. The stock price 'TP( falls

in every rise. 'ow the stock trading at &@G level.

C&art No 3.@.

4o+in' A+era'e c&art of NTPC

CG


71/76

Interretation:

@ day moving average of 'TP( cut twice the resistance line of @G day

moving average. The stock shows positive trend in its price. The support

price of 'TP( is &;B. If the stock loss its support price it may lead to a

fall in its price.

C&art No [email protected]

RSI c&art of NTPC

C&


72/76

Interretation:

)I of 'TP( stock shows 8G point level in &G thperiod of study. It shows

bearish selling trend of that particular stock.)I of Bth period is above the

CG point level, so Bthperiod is idle time to buy that particular stock

C2


73/76

>.1 )INDIN:S

Table 'o ;.2.; shows that the profitability ratios are high in

)*%I"'(* PO!*) while considering other securities selected

for the study.

Table 'o ;.&.8 shows ""'I PO!*) have negative return on

equity.

Table 'o ;.&.& indicate that the (urrent share price of ""'I

PO!*) is affordable one to investors and it is low risk scrip.

Table 'o ;.8.; shows the %iquidity ratios are affordable in T"T"

PO!*) than any other stocks under study.

Table 'o ;.;.2 shows that the (*( have high *P 0;B.;D

rupees1 than other stocks followed by 'TP( .0&8.C@ rupees1

Table 'o ;.C.8 shows the )*TL)' O' '*T!O)T- high in

power grid followed by 'TP(

Table 'o ;[email protected] shows the ividend yield percentage high in '-P(

stock

(hart 'o ;.;.; shows the (*( and ""'I PO!*) stock shows

a bullish trend as per )I chart.

C8


74/76

(hart 'o ;.8.8 and ;[email protected] shows that the T"T" PO!*), and

'-P(, stocks now trading below the critical line of @G day moving

average.

Table 'o ;.8.& shows hare price of T"T" PO!*) shows

negative trend during the study period.

(hart 'o ;.&.8 shows 3IJ* "R $OJI'+ "J*)"+* shows a

bullish trend in ""'I PO!*), )*%I"'(* PO!*) / (*(

stocks.

$OJI'+ "J*)"+* shows mixed trend in all the stocks selected

for the study,so we can>t predict the share price trend of power

sector as a whole.

C;


75/76

>. SU::ESTIONS

3undamentals of all power stock are not strong, as per the financial

statement year ended 2G&2

$ovement of T"T" PO!*), and '-P( shows a weaker trend.

The stocks now trading below the critical line so that an investor

can move from these stocks.

""'I PO!*), )*%I"'(* and (*( shows bullish trend in

its share price and it is advisory to hold these shares.

Investor can buy (*( stock in a long term prospective.

It is better to book profit on 'TP( / PO!*) +)I stocks even

though they trading above the @G day moving average.0)I (hart

shows bearish trend1.

It is advisory to an investor, should not depend only on one tool,

rather one has gone for other chart patterns to get confirmation for

buy or sell signal.

The risk is common for all securities. The scrip that is having low

price may also be sub4ect to high risk. The main reason is that

market is unpredictable. o the investor must invest carefully.

ince the risk is involved in every scrip, greater emphasie is given

to return in each investment

C@


76/76

@.8 CON,USION

The study deals with share and share trading gives a general idea

about the analysis of stocks. The analysis carried on two basis,

3undamental analysis and technical analysis. Technical analysis shows a

short term trend based on historical data and fundamental analysis helpful

for the decision making for long term investment. 3rom the analysis it is

found that the charts prepared on the basis of the share price, with the

support of technical tools shows all the trends and variations as

interpreted in the theory. In the analysis using moving average it is found

that if the price is lying above the moving average, the scrip is in a

bullish trend if the price lying below the moving average the scrip is in

bearish trend. Technical analysis ignores the actual nature of the

company. Technical analysis is based solely on the chart that is to say

price and volume information. The investor has to invest wisely on the

scrip which gives high return with most possible risk.

Date post:	02-Mar-2018
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investment analsyis of 2 stocks.doc

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