Technical Analysis of IT and Phrma Industry

7/27/2019 Technical Analysis of IT and Phrma Industry

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7.0 INTRODUCTION TO THE CONCEPT:

TECHNICAL ANALYSIS:

It is important to form a view on the likely trend of the overall market, and it ishelpful to have some idea of how to go about selecting individual stocks. Naturally,

all investors would like their investments to appreciate rapidly in price, but stocks,

which may satisfy this wish, tend to accompanied by a substantially greater amount of

risk then many investors are normally willing to accept. However, it is important to

understand that investors can be very conscious when it comes to stock ownership.

Technical analysis is the use of numerical series generated by market activity, such

as price and volume, to predict future price trends. The techniques applied to any

market with a comprehensive price history.

According to the technical analysis the share prices are determined by the demand

supply forces in the market which are in turn influenced by the number of other

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

price movements .technical analyst claims that future share prices can be accurately

predicted, by examining past share movements.

BASIC PRINCIPLES:

Security prices behave in a manner that their movement is continuous in aparticular direction for some length of time.

Trends in stock prices change when there is a shift in demand and supply. Shifts in demand and supply can be detected through charts Patterns help in identifying trends to make forecasts.


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DOW THEORY

The roots of technical analysis were originated by dow theory which was

formulated by Charles. H. Dow the editor of the wall street journal during 1900 to

1902. He formulated a hypothesis that the stock does not move on a random basis, but

it is influenced by three distinct movements. They are:

Primarylong term cycle that carries up or down .it is the long term trend inthe market. It resembles the tides..

Secondary short term cycle that acts as a restraining force for the primarymovement. It is also called as corrections. They resemble the waves. They last

for only a short durations. This is called secondary reactions.

Tertiarythey are minor movements which are the day to day fluctuations inthe market. There are of very short term durarion and they are highly

fluctuating and insignificant. It resembles ripples.

Price movements can be identified by means of line chart. Closing price ofshare of index can be plotted and presented as follows for bullish and bearish

trends.

BULLISH TREND

During bullish trend each peak would be higher than the previous peak. Each

bottom will be higher than the previous bottom. Higher bottoms and higher tops will

indicate bullish trend.


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As soon as RSI crosses 70 mark line it signifies the overbought market.Now it is expected that the peak will be touched.

When RSI declines after the peak , it signifies the bearish market ahead When RSI crosses 70 mark line upward and continuously declines, but not

reached 30 mark line it indicates bearish market.

As soon as RSI crosses 30 mark line from upward, it signifies the oversoldmarket. Now it is expected that the bottom will be touched soon. This is

the early signal of bullish market

When RSI is above 30 mark line and progressing towards 70 mark, itsignifies a bullish market

MOVING AVERAGE CONVERGENCE AND DIVERGENCE(MACD)MACD is an oscillator that measures the convergence and divergence between

two exponential moving averages. A short term exponential moving average and a

long term exponential moving average are calculated with the help of the closing

price date. A 15 day and 40- day exponential moving averages constitute a

popular combination. The difference between the short- term EMA and the long

term EMA represents MACD.

Exponential moving average (EMA)

EMA is calculated by using the following formula:

EMA = (current closing priceprevious EMA)* factor +previous EMA

Where factor = 2/n +1

And n = number of days for which the average is to be calculated.

The MACD values for different days are derived by deducting the long- term

EMA for each day from the corresponding short- term EMA for the day.

The parameters used for identifying the trends:

Whenever the MACD line is above the zero mark line, it indicates the signal ofbullish market of the script.


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Whenever the MACD line is above the zero market line, but declining it isearly warning signal of a bearish market.

Whenever MACD line is below the zero mark line, it is the signal of a bearishmarket.

Whenever MACD line is below the zero mark line but raising it gives thesignal of the bullish market ahead.

Whenever the MACD line forms a peak at the top it gives signals that themarket will soon turn bearish, i.e. it represents overbought situation.

Whenever MACD line reaches its bottom it signifies oversold situation, i.e. themarket will start becoming bullish

STOCHASTIC OSCILLATORStochastic oscillator is a momentum indicator which shows the location of the close

relative to the high and low range over a set number of period .it is also used to

identify bull and bear setups to anticipate the future reversal .

Calculation :

%K=(current close-lowest low)/(highest highlowest low)*100

%D=3daySMA of %K.

Where ,

Highest high = Highest high of the look back period

Lowest low = Lowest low of the look back period

14 period is the default setting for the stochastic oscillator , the 14 period may be

days, weeks, months. For the calculation of %K recent closing value is taken for %D

3-day, week, month simple moving average of %K is done , both %K and %D will be

plotted along side , where %K acts as a trigger line

Low reading i.e. below 20 it indicates the price is near its low for the time period andoversold situation .High reading i.e. above 80 it indicates that the price is near its high

for the given period it shows overbought situation.


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8.0 RESEARCH METHODOLOGY

8.1 PROJECT TITLE:

A STUDY ON TECHNICAL ANALYSIS OF IT AND PHARMACEUTICAL

INDUSTRY WITH REFERANCE TO BSE AT RELIGARE SECURITES

LIMITD

8.2 STATEMENT OF THE PROBLEM:

The Indian pharmaceutical and IT sector are growth oriented sectors so this study is

conducted to analyse both the sectors performance using technical analysis. Securities

market has always have fluctuations, with these fluctuations several investors have

gained as well as lost in the stock market. In order to make the investment safe in

stock market, investor has to adopt technical analysis to make better investment

decision.

8.3 OBJECTIVES:

To assess the stock price movements of the selected companies. To analyse the performance of the selected companies using technical analysis. To determine the risk and return involved in the selected companies.

8.4 SCOPE OF THE STUDY:

The study covers only two sectors Pharmaceutical Information technology


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The study covers only 4 companies 2 in pharmaceutical and 2 companies in ITsector

Pharmaceutical

companies: IT companies:

CIPLA INFOSY

RANBAXY TATA COUNSULTANCY SERVICES

8.5 TYPE OF RESEARCH:

The study is an analytical study based on secondary data, question it asks analytical

research attempt to establish why it is that way, or why it came

8.6 STATISTICAL TOOLS USED:

Relative strength index moving average convergence and divergence(MACD) Stochastic oscillator.OTHER TOOLS USED FOR ANALYSIS:

Charts. Bar graphs. Line graph.

8.7 LIMITATIONS OF THE STUDY:

Due to time constraint, the study is confined to only few technical analysisindicators.

The forecasting of technical analysis is purely dependent on previous pricemovement irrespective of the news in the market will make major change

Only few pharmaceutical companies and I T companies are considered for thepurpose of calculation, which may not be enough to take the decision regarding the

whole sectors.


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TABLE 2: SHOWING RISK AND RETURN OF IT COMPANIES FOR THE

YEAR 2011.

COMPANY NAME RETURN BETA

1.INFOSYS -0.64 0.72

3.TCS 0.13 0.47

(Source: money control.com)

ANALYSIS: from the above graph we analyse that Infosys has got highest risk of

0.72% and negative returns of -0.64% compared to that TCS got moderate return of

0.13% and with risk of 0.47%.

GRAPH 2: SHOWING RETURN AND RISK OF I T COMPANIES FOR THE

YEAR 2011.

(Source: Table 2)

INTERPRETATION:

Change in the leadership and strategic decisions of the leader the Infosys company

faced lot of losses.TCS got affected by the low GDP/ high inflation in the country

affected the return in the year 2011.

-0.64

0.13

0.72

0.47

-0.8

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

INFOSYS TCS

RETURN 2011

RISK 2011


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TABLE 3: SHOWING RISK AND RETURN OF I . T COMPANIES FOR THE

YEAR 2012.


1.INFOSYS -1.27 0.65

2.TCS 1 0.67


ANALYSIS:

From the above graph TCS and Infosys has risk of 0.65 %and 0.67%, and Infosys has

got negative returns of -1.27% and TCS got return of 1%.

GRAPH 3: SHOWING RETURN AND RISK OF I . T COMPANIES FOR

THE YEAR 2012.

(Source: Table 3)

INTERPRETAION:

The negative returns for Infosys are due to exchange rate fluctuations and also

economic fluctuations in other markets, as Infosys is a globally operated firm. While

TCS got better returns of 1% as it has major operations in India.

-1.27

1

0.65 0.67

-1.5

-1

-0.5

0

0.5

1

1.5

INFOSYS TCS

RETURN 2012

RISK 2012


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TABLE 4: SHOWING RISK AND RETURN OF PHARMACEUTICAL

COMPANIES FOR THE YEAR 2010.


1. CIPLA 1.5 0.222. RANBAXY 2.7 0.72


ANALYSIS:

From the above graph of pharmaceutical companies, Ranbaxy got highest return of

2.7% and cipla has got return of 1.5%. Ranbaxy has got highest risk of 0.72% and

cipla got 0.22%

GRAPH 4: SHOWING RETURN AND RISK OF PHARMACEUTICAL


(Source: Table 4)

INTERPRETATION:

Ranbaxys global presence has contributed to the companies return. cipla has got less

global presence and it rely on exporting and strategic alliance with the other

companies for its operations so its returns are moderate .

1.5

2.7

0.22

0.72

0

0.5

1

1.5

2

2.5

3

CIPLA RANBAXY

RETURN 2010

RISK/BETA 2010


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1. CIPLA 0.13 0.592. RANBAXY -2.08 0.37


ANALYSIS:

From the above table we can analyse that cipla got a moderate return of 0.13% with

highest risk of 0.59% when compared with Ranbaxy it has got negative return of -

2.08% with a risk of 0.37.

GRAPH 5: SHOWING RETURN AND RISK OF PHARMACEUTICAL


(Source: Table 5)

INTERPRETATION:

The negative return for Ranbaxy company is due the issues with its US food and drug

administration on its operations this slowdown the companies operation. cipla also

had problem with logistics this slow down the operations it able to earn return of

0.13%.

0.13

-2.08

0.590.37

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

CIPLA RANBAXYRETURN 2011

BETA RISK 2011


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1. CIPLA 1.7 0.742. RANBAXY 1.15 0.95


ANALYSIS :

From the graph we can say cipla got highest return of 1.7% and moderate risk of

0.74% when compared to Ranbaxy with highest risk of 0.95% and return of 1.15%.

GRAPH 6: SHOWING THE RETURN AND RISK OF PHARMACEUTICAL


(Source: Table 6)

INTERPRETATION:

Ranbaxy Company resolved it problems with the US government and earned profits

of 1.15%in the year 2012. Cipla has overcome with the logistic problems and able to

earn profits of 1.7% higher than that of previous year.

1.7

1.15

0.74

0.95

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

CIPLA RANBAXY

RETURN 2012

RISK 2012


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TECHNICAL INDICATOR1.Relative strength index : IT COMPANIES:

TABLE 7: showing Calculations of R S IINFOSYS

MONTH

CLSG

PR

Avg

Gain Avg Loss

RSI MONT

H

CLSG

PR

Avg

Gain Avg Loss

RSI

Jan-10 99.55 Jul-11 84.05 349.25

-

1027.45 25.36864

Feb-10 95.55 Aug-11 66.85 349.25

-

1122.75 23.72622

Mar-10 92.6 Sep-11 70.2 540.25 -1009.5 34.86046

Apr-10 94.5 Oct-11 70.9 647.95 -1009.5 39.09319

May-10 86.75 Nov-11 65.75 647.95 -946.35 40.64166

Jun-10 91.15 Dec-11 64.9 805.45 -832.25 49.18178

Jul-10 86.4 Jan-12 73.45 689.9 -853.95 44.68698

Aug-10 79.8 390.65 -160.25 70.91124 Feb-12 68.65 821.95 -713.35 53.53677

Sep-10 90.1 599.65 -160.25 78.9117 Mar-12 80.2 821.95 -299.8 73.2739

Oct-10 78.9 586.15 -231.65 71.674 Apr-12 77.2 630.95 -702.15 47.32953

Nov-10 62.25 544.95 -231.65 70.17126 May-12 75.25 289.55 -724.9 28.54256

Dec-10 66.35 940.5 -153.15 85.99643 Jun-12 78.45 352.25 -457.25 43.51452

Jan-11 60.15 809.6 -481.85 62.68923 Jul-12 82 194.75 -732.4 21.00523

Feb-11 62.1 809.3 -595.1 57.62603 Aug-12 93.5 340.6 -710.7 32.39798

Mar-11 65.75 1043 -513.35 67.01577 Sep-12 110.75 369.3 -710.7 34.19444

Apr-11 75.25 709.1 -844.15 45.65266 Oct-12 109.05 369.3 -870.75 29.78106

May-11 84.75 709.1 -886.85 44.43122 Nov-12 101.75 442.4 -468.4 48.57268

Jun-11 83.8 744.8 -886.85 45.64704 Dec-12 106.9 442.4 -563.75 43.96959



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GRAPH 7: SHOWING RSI OF INFOSYS

(Source: Table 7)

INTERPRETATION OF RSI LINE OF INFOSYS STOCK:

RSI line of the Infosys stock is oscillating between 20-80. From the above graph RSI

line above is above the 70 line when the RSI line shows up trend hen the investor

should hold the scripts and it reached highest i.e. 80 between the month of November

2010 to January 2011 after that script shows down trend then its the signal for the

investor to sell the script then the script falls to the lowest i.e.to the point 30 between

the July 2011 and September due the currency rate fluctuation company operations

were affected and when it show the indication of uptrend and this is the signal for the

investor to buy the script and wait until it reaches to the next high i.e. between the

month January 2012-march 12 is because the Infosys tie up with galaxo smithkline

for optimise digital channel deal . after that the RSI give signal of the next down trend

after march 12 the script should be sold and wait till lowest point 30 and show up

trend then investor is advised to buy the script.

0

10

2030

40

50

60

70

80

90

100

Jan/10

Feb/10

Mar/10

Apr/10

May/10

Jun/10

Jul/10

Aug/10

Sep/10

Oct/10

Nov/10

Dec/10

Jan/11

Feb/11

Mar/11

Apr/11

May/11

Jun/11

Jul/11

Aug/11

Sep/11

Oct/11

Nov/11

Dec/11

Jan/12

Feb/12

Mar/12

Apr/12

May/12

Jun/12

Jul/12

Aug/12

Sep/12

Oct/12

Nov/12

Dec/12

RSI

RSI


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Table 8: showing Calculations of RSITata consultancy services

MONTHCLSGPR

AvgGain

AvgLoss RSI

MONTH

CLSGPR

AvgGain

AvgLoss RSI

Jan-10 735.45 Jul-11 1134.4591.1 -121.7 42.81015

Feb-10 761 Aug-11 1040.691.1

-

207.65 30.49372

Mar-10 780.8 Sep-11 1037.591.1

-

166.55 35.35804

Apr-10 766 Oct-11 1114.298.25

-

166.55 37.10347

May-10 742 Nov-11 1113.198.25

-

148.75 39.77733

Jun-10 751.15 Dec-11 1161.25146.4

-

143.95 50.4219

Jul-10 841.1 Jan-12 1130.5124.85 -174.7 41.67919

Aug-10 843.85147.2 -38.8 79.13978

Feb-12 1221.05215.4 -128.8 62.5799

Sep-10 922.55200.35 -38.8 83.77587

Mar-12 1167.85215.4 -88.15 70.9603

Oct-10 1051.8309.8 -38.8 88.86976

Apr-12 1244.9292.45 -85.05 77.4702

Nov-10 1076.7334.7 -24 93.30917

May12 1245.8216.65 -85.05 71.80974

Dec-10 1165.05423.05 0 50

Jun-12 1277.55248.4 -83.95 74.74048

Jan-11 1157.15413.9 -7.9 98.12707

Jul-12 1240.65200.25

-

120.85 62.36375

Feb-11 1112.95323.95 -52.1 86.14546

Aug-12 1347.3306.9 -90.1 77.30479

Mar-11 1182.5390.75 -52.1 88.23529

Sep-12 1294216.35 -143.4 60.13899

Apr-11 1163.6 312.05 -71 81.46456 Oct-12 1313.4 235.75 -90.2 72.32704


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May-11 1158.8182.8 -75.8 70.68832

Nov-12 1312.85158.7 -90.75 63.61996

Jun-11 1180.35179.45 -75.8 70.30362

Dec-12 1258.55103.5 -90.75 53.28185


Graph 8: showing RSI of Tata consultancy services

(Source: Table 8)

INTERPRETATION

From the above graph of TCS company RSI line oscillates between 80-30, In the

graph RSI line starts with a higher point and show higher trend and after certain time

it showed down trend due to some corrections in the market and then show up trend

and reaches highest point of 98 between the month January 2011 to march 2011andgives the signal of downtrend this is the signal for the investor to sell the script and

wait till the scrip reaches the lowest point 30 between the month of July2011-sept11

because of the currency rate fluctuations and shows up trend then it the signal to buy

and that script and the investor should be hold it till it reaches the next highest point

i.e. 77.4 between the month July2012-sept12 and when the script show down trend

its the signal to the investor to sell the script.

0

10

20

30

40

50

60

7080

90

100

110

Jan/10

Feb/10

Mar/10

Apr/10

May/10

Jun/10

Jul/10

Aug/10

Sep/10

Oct/10

Nov/10

Dec/10

Jan/11

Feb/11

Mar/11

Apr/11

May/11

Jun/11

Jul/11

Aug/11

Sep/11

Oct/11

Nov/11

Dec/11

Jan/12

Feb/12

Mar/12

Apr/12

May/12

Jun/12

Jul/12

Aug/12

Sep/12

Oct/12

Nov/12

Dec/12

RSI

RSI


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PHARAMASITICAL SECTORTABLE 9: showing Calculations of RSICipla Company

MONTH

CLSG

PR

Avg

Gain

Avg

Loss RSI

MONT

H CLSG PR

Avg

Gain

Avg

Loss RSI

Jan-10 317.3 Jul-11 307.85 42.85 -104.9 29.00169

Feb-10 315.3 Aug-11 280 42.85 -95.1 31.06198

Mar-10 337.1 Sep-11 282.7 45.55 -62.55 42.13691

Apr-10 342.55 Oct-11 294.55 36.05 -62.55 36.56187

May-10 318.95 Nov-11 327.95 69.45 -50.35 57.97162

Jun-10 337.75 Dec-11 319.55 52.2 -58.75 47.04822

Jul-10 326.6 Jan-12 349.15 77.55 -58.75 56.89655

Aug-10 303.35 46.05 -60 43.42291 Feb-12 316.8 77.55 -68.6 53.06192

Sep-10 321.65 64.35 -58 52.59501 Mar-12 304.55 77.55 -53 59.40253

Oct-10 352.25 73.15 -58 55.77583 Apr-12 311.85 82.15 -53 60.78431

Nov-10 343.7 67.7

-

66.55 50.42831 May-12 309.65 70.3 -55.2 56.01594

Dec-10 369.9 93.9

-

42.95 68.61527 Jun-12 316.4 43.65 -55.2 44.15781

Jan-11 332.25 75.1 -80.6 48.23378 Jul-12 338.55 65.8 -46.8 58.43694

Feb-11 299.7 75.1 -102 42.40542 Aug-12 378.15 75.8 -46.8 61.82708

Mar-11 321.05 96.45

-

78.75 55.05137 Sep-12 380.6 78.25 -14.45 84.41208

Apr-11 308.85 78.15

-

90.95 46.21526 Oct-12 363.5 78.25 -19.3 80.21527


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May-11 326.1 64.8

-

90.95 41.60514 Nov-12 414 121.45 -292.9 29.31097

Jun-11 330.35 69.05 -82.4 45.5926 Dec-12 414.1 121.55 -290.7 29.48454


GRAPH 9: SHOWING RSI OF CIPLA COMPANY

(Source: Table 9)

INTERPRETATION

RSI line of the cipla stock is oscillating between 30-80. Which indicates that the

investor has to sell at the points where the stock s reaching more than 70 between

November 2010 January 2010 and buy when the stock reaches below 30 are at 30

and show up trend then its a indication for the investor to sell the script . As it is

oscillating above 70 line only once, hence it is better for the investor if he holds forthe stock to be uptrend or downtrend and sell the scrip when it reaches highest above

80 and when it starting to show the down trend then the investor is advised to sell the

script. The company had had problem with logistics this slow down the operations in

the year February to July 2011.

0

10

20

30

40

50

60

70

80

90

Jan/10

Feb/10

Mar/10

Apr/10

May/10

Jun/10

Jul/10

Aug/10

Sep/10

Oct/10

Nov/10

Dec/10

Jan/11

Feb/11

Mar/11

Apr/11

May/11

Jun/11

Jul/11

Aug/11

Sep/11

Oct/11

Nov/11

Dec/11

Jan/12

Feb/12

Mar/12

Apr/12

May/12

Jun/12

Jul/12

Aug/12

Sep/12

Oct/12

Nov/12

Dec/12

RSI


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TABLE 10 : showing Calculations of RSIRanbaxy company

MONTH

CLSG

PR

Avg

Gain

Avg

Loss RSI MONTH

CLSG

PR

Avg

Gain

Avg

Loss RSI

Jan-10 453.15 Jul-11 539 115.05 -174.7 39.71

Feb-10 467.05 Aug-11 473.15 115.05 -187.3 38.05

Mar-10 474.9 Sep-11 513.9 155.8 -75.75 67.29

Apr-10 443.1Oct-11

501.1 145.6 -88.55 62.18

May-10 429.85 Nov-11 434.8 133.45

-

154.85 46.29

Jun-10 460.6 Dec-11 405.25 40.75 -184.4 18.10

Jul-10 449.3 Jan-12 450.35 85.85

-

175.85 32.80

Aug-10 490.25 93.45 -56.35 62.38 Feb-12 428.4 85.85

-

196.45 30.41

Sep-10 557.15 146.45 -56.35 72.21 Mar-12 469 126.45 -130.6 49.19

Oct-10 579.75 161.2 -56.35 74.10 Apr-12 504.1 120.8 -130.6 48.05

Nov-10 571.45 161.2 -32.85 83.07

May-

12 517.15 133.85 -117.8 53.19

Dec-10 598.65 188.4 -19.6 90.58 Jun-12 490.35 133.85 -78.3 63.09

Jan-11 545.4 157.65 -72.85 68.39 Jul-12 497.5 141 -48.75 74.31

Feb-11 433.85 157.65 -173.1 47.66 Aug-12 551.3 149.7 -48.75 75.43

Mar-11 444.05 126.9 -173.1 42.30 Sep-12 529.55 149.7 -48.55 75.51

Apr-11 456.2 72.15 -173.1 29.42 Oct-12 525.6 109.1 -52.5 67.51


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May-11 548.9 142.25 -173.1 45.11 Nov-12 503.25 74 -74.85 49.71

Jun-11 540.35 142.25

-

173.35 45.07 Dec-12 502.75 60.95 -75.35 44.72

(SOURCE: moneycontrol.com)

GRAPH 10: SHOWING RSI OF RANBAXY COMPANY

(Source: Table 10)

INTERPRETATION

The RSI line rises to the peak point that is 90 between the month November 2010-

jannuary 2011 and when it start to show down trend then its ideal time for the

investor to selling pressure then the script will be sold then the market will be bearish

,when the RSI line reaches 30 and bellow that den buying pressure will be more and

market turn to up trend then it is a indication for the investor to buy the scripts and the

market will be in bullish but the movement is gradually between march 2011 to

September 2011 and due to correction market become bearish and reaches lowest

between the month of nov2011 and January 2012 and market become bullish slowly .

The Ranbaxy Company is due the issues regarding a drug with US food and drug

administration on its operations in the year 2011 the effect of that we can observe in

the above graph.

0

10

20

30

40

50

6070

80

90

100

Jan/10

Feb/10

Mar/10

Apr/10

M

ay/10

Jun/10

Jul/10

Aug/10

Sep/10

Oct/10

Nov/10

Dec/10

Jan/11

Feb/11

Mar/11

Apr/11

M

ay/11

Jun/11

Jul/11

Aug/11

Sep/11

Oct/11

Nov/11

Dec/11

Jan/12

Feb/12

Mar/12

Apr/12

M

ay/12

Jun/12

Jul/12

Aug/12

Sep/12

Oct/12

Nov/12

Dec/12

RSI


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Jun-11 83.8 Dec-12 106.9 7.653141


GRAPH 11: SHOWING MACD OF INFOSYS

(Source: Table 11)

INTERPRETATION:

From the above graph the MACD line starts below the 0 line and show rising trend

between march 2012 to may 2012 it indicates bullish market ahead and it indicates the

investor to buy the script and hold it till it crosses above 0 mark line, when the MACD

line reaches highest point i.e. 7.65 point and show declining signal then investor is

advised to sell the script.

Infosys Company has global presence so the currency rate fluctuation and slow down

of the other economy , increasing rate of inflation rate home country and change in

the leader has affected the performance of the company and later the supporting

economies were stabilised and the strategic alliance with glaxo smitkline company for

optical digital channel deal the company has regained it market value .

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

MACD of Infosys


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Page 24

TABLE 12: showing Calculations of MACDTata consultancy services

MONTH CLSG PR MACD MONTH CLSG PR MACD

Jan-10 735.45 Jul-11 1134.45

Feb-10 761 Aug-11 1040.6

Mar-10 780.8 Sep-11 1037.5

Apr-10 766 Oct-11 1114.2

May-10 742 Nov-11 1113.1

Jun-10 751.15 Dec-11 1161.25

Jul-10 841.1 Jan-12 1130.5

Aug-10 843.85 Feb-12 1221.05

Sep-10 922.55 Mar-12 1167.85 121.8578

Oct-10 1051.8 Apr-12 1244.9 105.067

Nov-10 1076.7 May-12 1245.8 93.35256

Dec-10 1165.05 Jun-12 1277.55 82.72012

Jan-11 1157.15 Jul-12 1240.65 71.29235

Feb-11 1112.95 Aug-12 1347.3 63.20726

Mar-11 1182.5 Sep-12 1294 65.59492

Apr-11 1163.6 Oct-12 1313.4 68.78961

May-11 1158.8 Nov-12 1312.85 67.55023

Jun-11 1180.35 Dec-12 1258.55 68.39808



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Page 25

GRAPH 12: SHOWING MACD OF TATA COUNSULTANCY SERVICES

(Source: Table 12)

INTERPRETATION:

From the above graph we can interpret that MACD line of TCS company start from

the highest i.e. in the month of march 2012 i.e. 121.857 and then the MACD line is

above the zero mark line but it show declining in between July and august 2012 its a

early warning signal of bearish market and it declined to a low point i.e. 63.2 and

show little up tend this is an indicator next it show bullish market so, Investor has to

hold the script till it reaches next highest point to sell the script. .

TCS Company also got affected with the currency rate fluctuations to a little extent

and it managed that with its strong domestic business.

0

20

40

60

80

100

120

140

MACD OF TCS

MACD OF TCS


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Page 26

TABLE 13: showing Calculations of MACDcipla company.

MONTHCLSGPR MACD MONTH

CLSGPR MACD

Jan-10 317.3 Jul-11 307.85

Feb-10 315.3 Aug-11 280

Mar-10 337.1 Sep-11 282.7

Apr-10 342.55 Oct-11 294.55

May-10 318.95 Nov-11 327.95

Jun-10 337.75 Dec-11 319.55

Jul-10 326.6 Jan-12 349.15

Aug-10 303.35 Feb-12 316.8

Sep-10 321.65 Mar-12 304.55 -8.86295

Oct-10 352.25 Apr-12 311.85 -9.52885

Nov-10 343.7 May-12 309.65 -9.32467

Dec-10 369.9 Jun-12 316.4 -9.61198

Jan-11 332.25 Jul-12 338.55 -9.33376

Feb-11 299.7 Aug-12 378.15 -6.74215

Mar-11 321.05 Sep-12 380.6 -0.15657

Apr-11 308.85 Oct-12 363.5 5.546407

May-11 326.1 Nov-12 414 9.105837

Jun-11 330.35 Dec-12 414.1 12.91311



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Page 28

TABLE 14: showing Calculations of MACDRanbaxy company.

MONTH CLSG PR MACD MONTH CLSG PR MACD

Jan-10 453.15 Jul-11 539

Feb-10 467.05 Aug-11 473.15

Mar-10 474.9 Sep-11 513.9

Apr-10 443.1 Oct-11 501.1

May-10 429.85 Nov-11 434.8

Jun-10 460.6 Dec-11 405.25

Jul-10 449.3 Jan-12 450.35

Aug-10 490.25 Feb-12 428.4

Sep-10 557.15 Mar-12 469 -9.84971

Oct-10 579.75 Apr-12 504.1 -8.15036

Nov-10 571.45 May-12 517.15 -6.59332

Dec-10 598.65 Jun-12 490.35 -11.1057

Jan-11 545.4 Jul-12 497.5 -17.0384

Feb-11 433.85 Aug-12 551.3 -21.6651

Mar-11 444.05 Sep-12 529.55 -19.3942

Apr-11 456.2 Oct-12 525.6 -20.945

May-11 548.9 Nov-12 503.25 -19.4733

Jun-11 540.35 Dec-12 502.75 -11.2707



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Page 29

GRAPH 14: SHOWING MACD OF RANBAXY

(Source: Table 14)

INTERPRETATION:

From the above graph of MACD line of Ranbaxy company starts below the zero mark

line in the month of march 2012 and showed rising it shows bullish trend between

may 2012 to June 2012 and still its below the zero mark line and show a signal of

bearish market and reaches its bottom it shows the oversold situation this the point

where investor has to buy the script and the market become bullish slowly between

the month September 2012 to December 2012.

From the graph the major down trend is due to the issue of Ranbaxy Company with

the US food and drug administration in the year 2011 and in the year 2012 it cleared

all the issues with the US government and started improving its operations.

-25

-20

-15

-10

-5

0

MACD OF RANBAXY

MACD OF RANBAXY


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Page 30

INDIATOR 3 : STOCHASTICS

TABLE 15: showing calculation of stochastic for Infosys

MONTH

CLSG

PR

%K %D

MONTH

CLSG

PR

%K %D

Jan-10 2476.7 Jul-11 2766.8 63.1441 76.60359

Feb-10 2601.6 Aug-11 2342.8 1.426492 52.40774

Mar-102615.1

Sep-112533.8 29.22853 31.26638

Apr-10 2736.15 Oct-11 2875.2 78.92285 36.52596

May-10 2657.65 Nov-11 2607.55 39.96361 49.37166

Jun-10 2788.55 Dec-11 2765.05 62.88937 60.59195

Jul-10 2788.85 Jan-12 2743.35 59.73071 54.19457

Aug-10 2707.1 Feb-12 2875.4 78.95197 67.19068

Sep-10 3041 Mar-12 2864.95 77.43086 72.03785

Oct-10 2969.6 Apr-12 2462.6 32.02439 62.8024

Nov-10 3049.45 May-12 2439.85 29.25 46.23508

Dec-10 3445 Jun-12 2502.55 36.89634 32.72358

Jan-11 3116.3 Jul-12 2227.4 13.69304 26.61313

Feb-11 3003.05 57.71566 Aug-12 2373.25 29.57478 26.72139

Mar-11 3236.75 77.84573 Sep-12 2534 47.079 30.11561

Apr-11 2905.95 49.35182 61.63774 Oct-12 2363.5 28.51309 35.05563

May-11 2791.85 74.01403 67.07053 Nov-12 2436.6 36.47302 37.35504


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Page 31

Jun-11 2907.4 92.65263 72.00616 Dec-12 2318.5 23.613 29.53304


GRAPH 15: SHOWING STOCHASTIC OF INFOSYS

(Source: Table 15)

INTERPRETATION:

From the above stochastic graph %K started high and in march 2011 to may 2011 the

major situation in which %K cuts %D from the bellow this is the signal to buy the

script. The %K reaches the highest point 92.5 which is above the 80 mark line which

shows the overbought zone the script. In month of June 2011July 2011 the %K line

cuts the %D line from the above its a signal to sell the script and the sc ript reaches

below 20 mark line which indicates oversold zone . In august2011 to September 2011

the %K line cuts %D line from bellow it signals to buy the script by that the %K

reaches the point 80 which shows overbought zone. In the month of February to

march 2012 the %K line cut the %D line from the above this is the signal to sell the

script.

0

10

20

30

40

50

60

70

80

90

100

Feb/11

Mar/11

Apr/11

May/11

Jun/11

Jul/11

Aug/11

Sep/11

Oct/11

Nov/11

Dec/11

Jan/12

Feb/12

Mar/12

Apr/12

May/12

Jun/12

Jul/12

Aug/12

Sep/12

Oct/12

Nov/12

Dec/12

%K

%D


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Page 33

GRAPH 16: SHOWING STOCHASTIC OF TATA CONSULTANCY

SERVICES

(Source: Table 16)

INTERPRETATION:

From the above stochastic graph the %K started at the highest point, from the month

of February 2011 to march 2011 indicates overbought zone. In the month June 2011

to July 2011 the major situation, in which %K line cuts %D line from the above

which indicates to sell the script .In the month of august 2011 to September 2011the

major change i.e. the %K line cuts the %D line from the bellow which indicates to

buy the script.In between the January 2012 October 2012 the script is in overbought

zone and small amount of buying and selling of the script took place and in between

October 2012 to December 2012 the script reaches above the 80 mark line it is the

situation of overbought zone and %K line cuts %D line which indicates to sell the

script .

0

10

20

30

40

50

60

70

80

90

100

110

Feb/11

Mar/11

Apr/11

May/11

Jun/11

Jul/11

Aug/11

Sep/11

Oct/11

Nov/11

Dec/11

Jan/12

Feb/12

Mar/12

Apr/12

May/12

Jun/12

Jul/12

Aug/12

Sep/12

Oct/12

Nov/12

Dec/12

%K

%D


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Page 36

TABLE 18: showing calculation of stochastic of Ranbaxy

MONTH

CLSG

PR

%K %D

MONTH

CLSG

PR

%K %D

Jan-10 453.15 Jul-11 539 81.37803 83.12384

Feb-10 467.05 Aug-11 473.15 50.7216 71.36872

Mar-10 474.9 Sep-11 513.9 69.69274 67.26412

Apr-10 443.1 Oct-11 501.1 63.73371 61.38268

May-10 429.85 Nov-11 434.8 32.86778 55.43141

Jun-10 460.6 Dec-11 405.25 19.1108 38.57076

Jul-10 449.3 Jan-12 450.35 40.10708 30.69522

Aug-10 490.25 Feb-12 428.4 29.88827 29.70205

Sep-10 557.15 Mar-12 469 48.78957 39.59497

Oct-10 579.75 Apr-12 504.1 65.13035 47.93606

Nov-10 571.45 May-12 517.15 71.20577 61.70857

Dec-10 598.65 Jun-12 490.35 58.72905 65.02173

Jan-11 545.4 Jul-12 497.5 62.05773 63.99752

Feb-11 433.85 32.42551 Aug-12 551.3 87.10428 69.29702

Mar-11 444.05 37.17412 Sep-12 529.55 76.97858 75.3802

Apr-11 456.2 42.83054 37.47672 Oct-12 525.6 75.13966 79.74084

May-11 548.9 85.98696 55.33054 Nov-12 503.25 64.73464 72.2843

Jun-11 540.35 82.00652 70.27467 Dec-12 502.75 64.50186 68.12539

(Source: moneycontrol.com)


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Page 37

GRAPH 18: SHOWING STOCHASTIC OF RANBAXY

(Source: Table 18)

INTERPRETATION:

From the above stochastic graph the %K started low in the month of February 2011.In

between the month of march 2011 to April 2011the scrip line is above the 80 mark

line which shows overbought zone .In between the may 2011 to June 2011 the %K

line cuts the %D line from the above which indicates to sell the script. In between the

month of august 2011 to September 2011 the %k cuts the %D line form the bellow

which indicates to buy the script. The major situation in the month of September 2011

to October 2011 the %K line cuts the %D line from the above which give signal to

sell the script. The second major change is in the month of January 2012 to February

2012 %k cut %D from bellow which indicates to buy the script. In the month of July

2012 and august 2012 %K reaches highest point which is above the 80 mark line

which shows over bought zone.

0

10

20

30

40

50

60

70

80

90100

Feb/11

Mar/11

Apr/11

May/11

Jun/11

Jul/11

Aug/11

Sep/11

Oct/11

Nov/11

Dec/11

Jan/12

Feb/12

Mar/12

Apr/12

May/12

Jun/12

Jul/12

Aug/12

Sep/12

Oct/12

Nov/12

Dec/12

%K

%D


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Page 39

11.0 SUGGESTIONS:

The risk and return will provide a aerial view of the risk that is faced by theselected companies and the return what the investor will earn by investing on the

selected companies.

RSI and MACD indicator give ideal signals for investor to buy and sell the script. It is better to go for long term investment rather than short term investment.Because it is less risky and also provide sufficient return.

Pharmaceuticals sector is definitely a better arena when compared to the I T forthe investment. Pharmaceutical is a booming sector and is not highly volatile like

software sector.

Practically, stock market activities are very risky, so a good research of technicalanalysis could be done carefully while investing.

In case of stock market half knowledge is very dangerous. So, whenever a personwants to invest in stock market he should take necessary tips from the experts or the

technical analysts.

Investor always better to relay on two indicator rather than many indicators ifthey follow too many indicator there is a chance investors may be mislead in taking

decision .

Investor have to utilize the softwares provided by stock broking companybecause they contain different indicators and information source for taking the

appropriate decision.


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12.0 CONCLUSIONS:

Technical analysis is an approach which helps the investor to enter in to the market

and provide ideal guidance in buying and selling of the different script and reduce the

investor losses.

In technical analysis, they plot the previous closing prices on the graph, basedon the plotted graph analysis is done to know the trends to take decision.

It is stated that historical trend always repeat in the market so using oftechnical analysis will be helpful.

By the study, it is found that the pharmaceutical sector is the better sector forthe investments.

Information technology is more volatile in nature, amongst selected ITcompanies TCS is the best performer. For the long term investment IT sector

is best.

There are numerous theories in technical analysis, based on which indicatorinvestor use to identify the signals correctly and reap the benefit.

In technical analysis relaying on one indicator is good, and for confirmationof the market signal referring to second indicator is better. If the investor

follows more than two indicators they may be mislead in the process of

decision making.

From the study we can conclude that technical analysis is the power full and

reliable source, in providing technical signals for buying and selling of scripts.

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Technical Analysis of IT and Phrma Industry

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