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VISHAL S NABDE Roll. No. 18
Summer Internship for Academic Year 2009-2010
Submitted in fulfilment of requirement of Masters in Management Studies (MMS)
GUIDED BY PROF: DR. A.R.PHOPALEY
TO IBSAR INSTITUTE OF MANGEMENT KARJAT
IBSAR Institute of Management Studies Dahivali, Karjat. (Affiliated to Mumbai University) Summer Internship Project Academic Year 2009-2010
This is to certify that the project work titled “EQUITY ANALYSIS ” “is a Bonafide work carried out by VISHAL S. NABDE, a candidate for the MMS Examination direction. of UNIVERSITY OF MUMBAI, under my guidance and
Advisor Place: IBSAR, Karjat Karjat
ACKNOWLEDGEMENT At the outset I take opportunity to place on record my sincere obligation towards our respected Lt. Col. J. L. Ram, Dr. Phopaley, whose dedicated initiative and encouragement were source of inspiration and prime focus in the successful completion of my project work. I take this opportunity to thank all those who have been instrumental in bringing out this Report and who have made it possible to finish my Summer Training successfully at RELIGARE SECURITIES LIMITED(RSL), LATUR. I am thankful to respected BRANCH MANAGER MR. VINOD PANDHARE & finance dept. of RSL for giving there valuable and precious suggestions and guidelines and encouragement extended to me for successful completion of this project. I would also like to thank the library staff for providing me with the required books It gives me immense pleasure in thanking Mr. Amol Kulkarni for giving me this opportunity to take up Summer Placement in the esteemed Organization and also for giving me the opportunity to associate myself with the Company. It was a pleasure to be associated with the Organization and the people in various other Departments of the Organization.
I Mr. Vishal Nabde student of master in management studies II nd year (3rd sem) at “IBSAR” hereby declare that I have completed my research project titled “equity analysis” as partial fulfilment of the requirement of the course curriculum for the academic year 2009-10 under the guidance of Branch Manager Mr. Vinod Pandhare & members of finance dept. The data that has been collected by me is truly authentic and is not borrowed or copied from any dissertation report. The project contains true and complete information
Signature of student Vishal nabde
S.NO. Chapter 1. Chapter 2. Chapter 3. PARTICULARS
Introduction Company Profile Equity Analysis
Analysis of Indian Automobile Industry • Fundamental Analysis
a. Economy b. Industry c. Company
• Technical Analysis
a. b. c. d. e.
- Financial & Non-Financial
Share Price Analysis Moving Average Moving Average Crossover Bollinger Band M.A.C.D
Chapter 4. Chapter 5.
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but impatience can frequently be profitable. Technical analysis mainly seeks to predict the short term price travels. covering many aspect from the calculating various FINANCIAL RATIOS. It should be pointed out that. plotting of CHARTS to extremely sophisticated indicators. Technical analysis refers to the study of market generated data like prices & volume to determine the future direction of prices movements.e. liquidity. Greed must be avoided patience may be a virtue. It is the oldest approach to equity investment dating back to the late 19th century. calculations are based on considered FACTS & not on HOPE. chart paper & your cautious mind. leverage. watchful attention. who let their heart rule. Equity analysis is basically a combination of two independent analyses. Fundamental analysis is useful in long term investment decision.WHAT’S THIS EQUITY ANALYSIS? Professional investor will make more money & less loss than. but with low reliability. Works only in normal share-market conditions with great reliability. A general investor can apply the principles by using the simplest of tools: pocket calculator. In Equity Analysis anticipated growth. the attempt to determine future share price movement & its reliability by references to historical data is a vast one. its performances. Be ruthless & calculating. but does discuss a method which enables the investor to arrive at buying & selling decision. i. profitability & financial health was checked & analysis with the help of ratio analysis for the purpose of long term successful investment. The focus of technical analysis is mainly on the internal market data. this equity analysis does not discuss how to buy & sell shares.e. Decision should be based on actual movement of share price measured both in money & percentage term & nothing else. 1. . The financial analysts always need yardsticks to evaluate the efficiency & performances of any business unit at the time of investment. it also works in abnormal share-market conditions. Their head eliminate all emotions for decision making. Assumptions for the Equity Analysis. ruler. The subject of Equity analysis. turnover. prices & volume data. In Fundamental analysis a company s goodwill. pencil. namely fundamental analysis & Technical analysis. It appeals mainly to short term traders. i. you are out to make money.
C Approach) a. With comparatively higher rate of economic growth rate index against that of great global powers. You are buying stock & not companies.Technical Analysis EQUITY ANALYSIS. India has become a hub of domestic and exports business. Capital market has a typical market psychology along with other issues like. the crowd Vc the individual. Equity analysis is purely based on the INVESTMENT PHILOSOPHY . because the scenario of equity analysis is revolving around the term money 4. Capital market trend is always a friend. 7. Industry c. Fundamental Analysis (E. perceptions.I. so don t be curious or panic to do postmortem of companies performances. History repeats: investors & speculators react the same way to the same types of events homogeneously. 10. risk management was up to the investor s knowledge. Company 2). . 3. 5. 8. To understand this industry for the purpose of investment we need to analyze it by following two approaches: 1). 6. Portfolio management. Economy b. ENVIRONMENT & ECONOMICAL ANALYSIS. An individual perceptions about the investment return & associated risk may differ from individual to individual. so the investment object has vital importance associated to return along with risk. it also has some exceptions. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. Cash management gets the magnitude role. Although the equity analysis is art as well as sciences so.2. 9. ANALYSIS OF AUTOMOBILE INDUSTRY Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. whether it is short run or long run. tradition s & trust.
000 reflecting improvement in the living standards of an average Indian. Following is the graph showing a trend of Indian GDP trend in past 3 years. 3 Determine the condition of the company. automobile sector in India is one of the key sectors of the economy in terms of the employment. Economic analysis is important in order to understand exact condition of an economy. As the world economy slips into recession hitting the demand hard and the banking sector takes conservative approach towards lending to corporate sector.1 per cent for 2008-09 and predicted it to be 6. Fundamental analysis typically focuses on key statistics in company s financial statements to determine if the stock price is correctly valued. . The typical approach to analyzing a company involves four basic steps : 1 Determine the condition of the general economy. ECONOMY Economic analysis is the analysis of forces operating the overall economy a country. TECHNICAL ANALYSIS Fundamental analysis is the study of economic. The per capita Income is near about Rs38. This is the pie. Montek Singh (Planning Commission of India). India is 16th in the world in terms of nominal factory output. Directly and indirectly it employs more than 10 million people and if we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher. industry and company conditions in an effort to determine the value of a company s stock. Today. 2 Determine the condition of the industry. GDP and Automobile Industry In absolute terms. The service sector is growing rapidly in the past few years. 4 Determine the value of the company s stock a). Most fundamental information focuses on economic.5 per cent for FY 2009-10 Mr.chart showing contributions of different sectors in Indian economy. the GDP growth has downgraded it to 7.FUNDAMENTAL ANALYSIS Fundamental Analysis. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed. industry and company statistics.
industry had to face the hard truth and witnessed the fall in sales compared to last year. higher interest rates.21% on 22-Aug-09) we saw an increasing trend of sales in auto sector. A moderate amount of inflation is important for the proper growth of an economy like India because it attracts more private investment.83 million while two-wheelers increased from 8. The increase in the price of fuel and the steel due to inflation has led to a slower growth rate of the car industry in India. overall production fell by 22 % over the same month last year. The effect of inflation has taken the rise in the price rate of the cars by 3-4% which in turn suffices the need to . but growth rate in last FY2008-09 was only 0. two-wheelers and threewheelers in 2008-09 was 9.85 % during April – December 2008.oil price hike. The automotive industry in India grew at a computed annual growth rate (CAGR) of 11. the Reserve Bank of India said few week back.43 percent fall in December 2008 over the same month last year. commercial vehicles.85 million vehicles in 2007-08 to 11. Indian automobile Industry was not as much affected and experts think that Indian automobile industry will continue to grow this year despite all obstacles. But at the end of the year.86% over December 2007 Two Wheelers registered minor growth of 1. One of its supporting facts is that the sales in December 2008 for passenger vehicles fell by 13. Total number of vehicles sold including passenger vehicles.02 million to 8.65 million in 2007-08.17 million vehicles in 2008-09.72 million as compared to 9. India is strong and growing industry but the impact of recession is evident now on industry as sales & growth of automobile companies have declined. and Contribution in Indian GDP is near about 5% and will be double by 2016.41 million. overall production (passenger vehicles.Source :India Central Statistical Organization The market value of Automobile Industry is more than US$8 bl. two wheelers and three wheelers) increased from 10. the effect of inflation has affected every sector which is related to car manufacturing and production. Recession All the major auto companies enjoyed the high growth ride till the mid 2008. In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to $20 per barrel five years back).7%.7% with passenger car sales shows 1.31% growth while Commercial Vehicles segment slumped 21. Global recession has hit the Indian auto industry. In December 2008.5 percent over the past five years. commercial vehicles. Passenger vehicles increased marginally from 1. Although the sector was hit by economic slowdown.77 million to 1. However. while revising its inflation forecast for the FY through March to around 5% from 4%. Passenger Vehicles segment registered negative growth. However. Two Wheelers sales recorded 15. The fall in wholesale prices from a year earlier is mainly due to a statistical base effect and doesn’t suggest contraction in demand. Inflation Despite of negative inflation these days (-.
automobile sales (including passenger r vehicles. FDI inflows in Automobile Industry 2008-09 was Rs. Export of passenger vehicles increased from 218.meet the rise in price of the raw materials to build a car. Being one of the fastest growing sectors in the world its dynamic growth phases are explained by the nature of competition. which has led to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industry. whereas the automobile industry in the developing nations. b. There is a continuous increase in the export of automobiles since the financial year 200203. The industry is at the crossroads with global mergers and relocation of production centers to emerging developing countries. Despite recession. two-wheelers and three-wheelers) in the overseas markets increased to 1.5. In 2009.The Indian automobile sector is far from being saturated.497 Cr. commercial vehicles.53 million units in 2008-09 from 1. of India Export Society of Indian Automobile Manufacturers (SIAM).5 per cent by 2015. Source.) INDUSTRY ANALYSIS (AUTOMOBILE) The current trends of the global automobile industry reveal that in the developed countries the automobile industries are stagnating as a result of drooping markets. while in April-May 2009 it was around Rs.401 in 2007-08 to 335. estimated rate of growth of India Auto industry is going to be 9% . which may be attributed to the global economic recession.9 per cent to 2.FDI Statistics Govt. .23 million units in 2007-08. leaving ample opportunity for volume growth. the Indian automobile market continues to perform better than most of the other industries in the economy in coming future. The car market and the car industry witnessed a fall of 8-9%. has been permitted under automatic route to this sector. FDI’s In India FDI up to 100 percent.25% compare to 200708. Product Life Cycle and consumer demand.212 Cr an increase of 47.739 units in 2008-09. India enjoys a cost advantage with respect to casting and forging as manufacturing costs in India are 25 to 30 per cent lower than their western counterparts the Investment Commission has set a target of attracting foreign investment worth US$ 5 billion for the next seven years to increase India's share in the global auto components market from the existing 0. except for the decline in the export of commercial vehichles in the financial year 200809. have been consistently registering higher growth rates every passing year for their domestic flourishing domestic automobile markets. more and more MNC’s coming in India to setup their ventures which clearly shows the scope of expansion.
79 percent.39 percent in this period. the product market has been established and there is at least some historical guide to ground demand estimates.66 percent. Industrial Life Cycle 2. SWOT Analysis 3. The Indian automobile sector has passed this stage quite successfully.57 percent and Multi Purpose Vehicles by 21.) Industrial Life Cycle The industrial life cycle is a term used for classifying industry vitality over time. The cumulative growth of the Passenger Vehicles segment during April 2007 – March 2008 was 12.Segmentation of Automobile Industry The automobile industry comprises of Heavy vehicles (trucks. In the pioneer phase. In the growth phase. the product has not been widely accepted or adopted. Business strategies are developing. Industry Specific Index 1. Following is the segmentation that how much each sector comprises of whole Indian Automobile Industry. While Medium & Heavy Commercial Vehicles declined by 1. Utility Vehicles by 10. Two-wheelers. Indian Automotive Industry is booming with a growth rate of around 15 % annually. The Commercial Vehicles segment grew marginally at 4. Commercial Vehicles. However. buses. and there is high risk of failure. maturity and decline.17 percent. Light . growth.07 percent. and Three-wheelers. Passenger Cars grew by 11. often at an accelerating rate of sales and earnings growth. passenger cars. The industry is growing rapidly. tempos. Industrial Analysis of any industry can be done based on the following headings: 1. Industry life cycle classification generally groups industries into one of four stages: pioneer. successful companies can grow at extraordinary rates. tractors).
) SWOT Analysis A scan of the internal and external environment is an important part of the strategic planning process.13 percent during April. but the scope of growth of the automobile sector is very much possible in India due to the increasing income of the middle class and their income as well as standard of living.71 percent with sales of Goods Carriers declining drastically by 20. 2. As the product matures. Three Wheelers sales fell by 9.63% respect.93% respect.92 % during this period.64% and 16.Commercial Vehicles recorded a growth of 12. However. Such an analysis of the strategic environment is referred to as a SWOT analysis.90 percent and 44. growth slows as penetration reaches practical limits. SWOT analysis of the Indian automobile sector gives the following points: Strengths • Large domestic market • Sustainable labor cost advantage • Competitive auto component vendor base • Government incentives for manufacturing plants • Strong engineering skills in design etc Weaknesses • Low labor productivity • High interest costs and high overheads make the production uncompetitive • • • Various forms of taxes push up the cost of production Low investment in Research and Development Infrastructure bottleneck Opportunities • Commercial vehicles: SC ban on overloading . with motorcycles and electric two wheelers segments declining by 11. Scooters and Mopeds segment grew by 11. Two Wheelers registered a negative growth rate of 7. Companies began to focus on market share rather than growth. so the automobile sector can be very well be said to be in the growth phase. Industry demand tends to follow the overall economy.49 percent and Passenger Carriers declined by 2. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W). The growth rate of the automobile industry in India is greater than the GDP growth rate of the economy.29 percent.March 2008 compared to the last year. and those external to the firm can be classified as opportunities (O) or threats (T).
Hence an index like the BSE auto index is made of auto stocks. BSE Auto Index comprises all the major auto stocks in the BSE 500 Index. BSE AUTO Index 5 Year Chart .• • • • Heavy thrust on mining and construction activity Increase in the income level Cut in excise duties Rising rural demand Threats • Rising input costs • Rising interest rates • Cut throat competition 3. Sectoral Indices are very useful in tracking the movement and performance of particular sector.) Industry Specific Index Industry specific index also called as sectoral index are those indices. which represent a specific industry sector. All stocks in a sectoral index belong to that sector only.
indian auto industry start picking up growth slowly in the first end of 1st quarter index reaches to its highest in his history. Intially in 2003 when major giants got listed on stock exchange TATA Motors. And this growth of industry will be carry further as festive season still to come. c. Maruti Suzuki. production came down because of less demand in the economy.) COMPANY ANALYSIS (Maruti Suzuki & TATA Motors) The company analysis shows the longterm strenght of the company that what is the financial Position of the company in the market where it stand among its competitors and . Most of the company even shut down their manufacturing units for more than a week. But in the beginning of 2009 right from 1 st quarter auto industry again start regaining and we saw a tremondous growth in auto industry which never seen before not in india but all over the world. Also no further launches were made in mid or late 2008 and postponed to next year. etc. The demand of 2 and 4 Wheelers start increasing rapidly which also force auto industry to employ more workers to meet demand and with in the 2nd quarter of FY2009-10 Auto index reaches to its highest ever crossed mark of 6000. so there is a lot of scope to growth in this industry.com Above is the Indian Auto Industry Index(BSE) shows the up’s and down’s over the period of 5 years. Than we saw a steady fall in the index and in the mid 2006 reaches to years lowest point it again start booming and than year on year we saw a up and down movement in the index as lots of new players came in Indian market with foreign colaboration but when 2008 came with global slowdown it brings the demand of automobile so low that index reaches to its lowest in past 5year .• Automobile Industry Index at BSE for 5 Year COMPANY Source:Google finance. We have also saw a fall in FDI’s in automobile Industry.
351 units in August 2008 The company's exports increased 156. The Profit after Tax for the year was Rs. Until recently.92 crores.629 units. The company's domestic sales in August 2009 increased 29. Revenues (net of excise) for the year were Rs. reported gross revenue (stand-alone) of Rs. what are the policies of government towards the company and how the stake of the company divested among different groups of people. 25660. The turnover for the fiscal 2008-09 stood at Rs.26 crores compared to Rs. Govt. 18.7%. Govt.6%.2576.79 crores compared to Rs.76 crores compared to Rs. The company is the world’s fourth largest truck manufacturer.Maruti Suzuki India Ltd.187ml.7%. and among the top three in passenger vehicles with winning products in the compact. Total passenger car sales in August 2009 increased 30.847 units.27 crores (2007-08: Rs. midsize car and utility vehicle segments. compared to 53.3% to 69. both in terms of volume of vehicles sold and revenue earned. of India no longer has stake in Maruti Udyog.113 vehicles in August 2008.5% to 69. an increase of 41. of India sold its complete share to Indian financial institutions. It is the leader in commercial vehicles in each segment.908 vehicles in the same period of 2008. compared to 5.2% by Suzuki of Japan. Profile of Maruti Suzuki Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car segment. Fundamental Analysis consist of following Study of Balance sheet Study of Profit and Loss a/c Study of Ratios Balance Sheet : . a decline of 50. what is the future plans of the company.93 crores) in 2008-09.28739.808 vehicles in August 2009. a decline of 60.28% of the company was owned by the Indian government. With this.961 vehicles. and 54. compared to 54. 12.1001. compared to 59.who are the key drivers of the company.7%.28599.2% to 14. a decline of 10.41 crores in 2007-08.33093.583 Million & Profit After Tax at Rs. Profile of Tata Motors Tata Motors Limited is India’s largest automobile company.2028. 2007. and the world’s second largest bus manufacturer. 203. a year marked by severe demand contraction in the automobile industry. As of May 10. The Profit before Tax was Rs. has sold a total of 84.47 crores in 2007-08.1013.795 units in August 2008.
. The income statement. Equity capital represents the contribution of equity shareholders who are the owners of the firm. represent what the firm owes others. as there is no one set template that accurately accommodates for the differences between different types of businesses. the financial statements are built to be used together to present a complete picture of a company's finances. shows how much revenue and profit a company has generated over a certain period. loans & advances Miscellaneous expenditure Liabilities Liabilities. inventory and property are on the asset side of the balance sheet. It's called a balance sheet because the two sides balance out. promises to pay cash or provide goods and services in future. The exact accounts on a balance sheet will differ by company and by industry. A liability arises when a firm receives benefits or services and . Accounts such as cash. on the other hand. defined very broadly.A financial statement that summarizes a company's assets. liabilities and shareholders' equity at a specific point in time. The balance sheet shows the financial condition of a business at a given point of time. in turn. The balance sheet must follow the following formula: Assets = Liabilities + Shareholders' Equity Each of the three segments of the balance sheet will have many accounts within it that document the value of each. This makes sense: a company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders' equity). The format prescribed in the Companies Act classifies liabilities as follows : Share Capital: Share capital includes equity capital and preference capital. Neither statement is better than the other rather. It is a snapshot of what a company owns and owes at that point in time. Liabilities Share Capital Reserves and Surplus Secured loans UnSecured loans Current liabilities and provisions Assets Fixed Assets investments Current assets . These three balance sheet segments give investors an idea as to what the company owns and owes. the balance sheet of a company shall be in either the account form or the report form. as well as the amount invested by the shareholders. The balance sheet is one of the most important pieces of financial information issued by a company. As per the Companies Act. while on the liability side there are accounts such as accounts payable or long-term debt.
furniture. and plant and machinery. carries no fixed rate of dividend. unsecured loans are loans which are not secured by a charge on the assets of the firm. and provisions include items such as provision for taxes. Investment: investments represent financial securities owned by the firm. Preference capital represents the contribution of preference shareholders and the dividend rate payable on it is general fixed. long term investment and current investment. plant and machinery. and copyrights. discount allowed on issue of securities. being the risk capital. Secured loan: Secured loan are loans that are secured by a charge on the assets of the firm. In common practice for companies to transfer from the profit and loss account to various reserve accounts. These assets may be tangible or intangible. sundry creditors. Assets are classified as follows under the Companies Act: Fixed Assets: fixed assets. Miscellaneous Exp : this comprise of items such as preliminary exp. This process is called appropriation. . dividend. Assets Assets are resources which are expected to provide a firm with future economic benefits. and development expenditure to the extent not written off or adjusted. Tangible fixed assets include items such as land. Current Assets: this category consists of cash and other assets which get converted into cash or which result in cash savings. and other exp. interest paid out of capital during construction. are assets that are expected to produce benefits for more that one year. Unsecured loans: in contrast to secured loans. cash and bank balances. Intangible assets include goodwill. debtors. The charge may be created in the form of pledge or hypothecation of movable assets such as inventories and debtors and or in the form of mortgage of immovable assets such as land. Current liabilities include items such as bills payable. interest accrued etc. buildings. patents. The major components of current assets. by way of higher cash inflows or lower outflows. loans and advances are: inventories. during the operating cycle of the firm. also called non current assets. Current liabilities and Provisions: current liabilities and provisions represent obligations that are expected to mature within a year.Equity capital. other current assets and loans and advances. Reserve and Surplus: Reserve and Surplus comprise retained earnings as well as non earnings items like share premium and capital subsidy. They are divided into two categories. building.
instead of showing only the final profit measure. it presents proft measures at intermediate stages as well. a multi step profit and loss account provides disaggregated information. The income statement is the most analyzed portion of the financial statements. Following is the financial and Non-Financial analysis of Maruti Suzuki & TATA Motors. It displays how well the company can assure success for both itself and its shareholders through the earnings from operations. Further. the companies act does require that the information provided should be adequate to reflect a true and fair picture of the operations of the company for the accounting period. and showing the net profit or loss in a specified accounting period . • Financial Analysis a.Profit and Loss a/c : A financial report that .) Motors Balance Sheets Maruti Suzuki TATA .depicts a business entity s financial performance due to operations as well as other activities rendering gains or losses. but none for the profit loss account. Also known as the "profit and loss statement" or "statement of revenue and expense".by summarizing revenues and expenses. The companies act has prescribed a standard form for the balance sheet. However. the profit after tax figure. Structure of Profit and Loss a/c Income Sales Expenditure Material and other expenditure Interest Depreciation Profit before tax Provision for tax Profit after tax While a single step profit and loss account aggregates all revenues and expenses.
b.) Income Statements Maruti Suzuki TATA Motors .
EPS = Net income.RATIO ANALYSIS OF TATA MOTORS AND MARUTI SUZUKI EPS measures the profit available to the equity shareholders per share. that is. But as trend shows TATA motors have potential so an shareholder expect better in future. Till 2008 both the companies had a rising EPS but in 2009 both of them fall and the effect more on Tata motors as they bought two brands Ford Motors and fall in sales results in low EPS.Dividends onPreferredStock . the amount that they can get on every share held.
77 in 2009. But the future prospect for both the company’s profit is higher. Moreover increased demand in foreign market also seems to be a positive signal for better future.1 car manufacturer Maruti Suzuki shows a negative trend from 2007 onwards. However recession brought hurdles but both companies have potential to grow in future as lots of products are still to add in their portfolio. Profit margins come down as recession hits economy badly hence sales get reduced and cost get increased very much. A general rule of thumb suggests that the quick ratio should be around 1. but the performance decreased from . The quick ratio is a very stringent measure of solvency.Average Outstanding shares The trend shows that Tata’s net profit margin is quite stable until it falls to 3. While the net profit of India’s no. Net profit Ratio = (Net profit) × 100 (Net sales) Both giants of Automobile industry shows positive trend in Sales Revenue over the past 5year. Maruti is always showing a positive trend as its ratio is always greater than 1 except in 2008. while TATA motors was doing good till 2007.
Tata motors and Maruti Suzuki both the companies showed a positive trend in paying dividends till 2008. thus. Maruti is going very swiftly in this field.2008 onwards as shortage of cash was there and current liabilities and provision increased by Rs800Cr. A high debt to equity ratio suggests that a company has financed its growth mostly via debt. so we see in graph that Maruti has more strong liquidity than TATA Motors as its current ratio is always greater than 1. Expansion plans of TATA brought down its cash & Bank Balance and increase of outside liabilities. the ratio indicates whether the firm is likely to be a going concern. Debt-Equity Ratio= Total Debt Total Equity The current ratio is a convenient and reliable tool for measuring a company's level of liquidity. . Both the companies possess a good ratio but the ratio which is close to 2 is desirable. The ratio acts as an indication that the firm is able to generate funds to make all needed payments in the future. Maruti is more successful in paying off its liabilities. We see that the debt –equity ratio of TATA motors is very high compared to that of Maruti. It means that a lot of debt is used by TATA’s to finance its increased operations. Sometimes the cost of the debt financing may outweigh the return that the company generates on the debt through investment and business activities and can lead to bankruptcy.
Dividend Per Share = Total amount of Dividend Share Outstanding • Financial Analysis 1. According to graph TATA’s dividend was much higher than that of Maruti. still both the companies are earning good profit. Share Holding Pattern for Quarter Ended 30-June-09 .but the scenario changed in 2009 as both the company’s dividend per share fell. it always provided dividend of above 10 per share to its shareholders while maruti stick to below 5 per share. even though the fall in dividend in 2009.
By the year 2010.Above is the updated share holding pattern of TATA motors which shows that Indian promoter share in the company is 41% that means if they are not in the position to raise further money from general public. Company already raised huge money by selling their large stake to institutional investors about 27%. They have also been coming with . out of which a quarter will be assigned for amplifying leadership network to 1000 in number. 2. at least in fourwheeler segment. Suzuki Motors plan to increase their dealership in India. markets. Tata Motors. Tata Motors is looking east.S perhaps by 2012. The company hopes to have a version for Europe by 2011 and one for the U.7 lakhs unit per annum from January 2009. The company plans to increase the number of service stations and workshops to over 3800 from about 2800 currently.5 billion. However institutional investors also held 39% major stake in the company but general public have very small part which shows that less presence of share in the secondary market hence low volume trading in stock market. As part of its expansion plans in Southeast Asia. This is a step to increase their sales to one million units as well as for a better position in the Indian auto market. they have firmed up a massive expansion plan of its service network and plans to expand it to 1700 towns and cities from the current of about 1200. 8. The expansion is estimated to cost $ 3. General Public also have quite large stake in the company compare to its competitors. After launching the world’s cheapest car.000 cr. TATA Motors Tata Motors is try to be in a position to dominate the Indian Auto industry. towards neighboring Myanmar to boost its sales by setting up a truck manufacturing plant. is searching options to pump approximately Rs. As Maruti Suzuki eyes one million sales by 2010. Nano.000 one tone pickup trucks a year over the next 3-5 years. Tata Motors. During the next 3-4 years on capital expenditure and product development.S.S.Ventures & Products Being a venture of Japanese company Suzuki big stake of the company is held by foreign promoters which shows that they can divest their part(small part) to raise money in future. Tata Motors have announced that they are interested in the idea of designing electric cars. Maruti Suzuki Maruti Suzuki has expanded the capacity at its Manesar plant to 1. After the launch of Nano. Tata also apparently has its eye on the European and U. is now aiming to launch its cars in Indonesia and is also planning to sell Nano in South America with the help of Fiat. Tata Motors had inked a joint venture with Thailand’s Thonburi Auto Assembly’s to manufacture up to 35. To take it a step further Tata has also initialized plans for the manufacture of a hybrid car which it will market with Chryster in the U.
1. the overall R&D facilities will be progressively completed by 2015. to set up an expert group to advise on a viable and sustainable system of pricing petroleum products. whom will make India as a production hub and export to nearest market. Though it has an advantage in India. Government Policies Towards Indian Automobile Industry Automobile industry in India also received an unintended boost from stringent government auto emission regulations over the past few years. The policies adopted by Government will increase competition in domestic market. This ensured that vehicles produced in India conformed to the standards of the developed world. will see an investment in the range of Rs. The Haryana government has allotted 700 acres of land to Maruti Suzuki for hi – tech Research & Development complex at Rohtak.000 cr. • Specific component of excise duty applicable to large cars and utility vehicles will be reduced to 15. Investments in making auto parts by a foreign vehicle maker will also be considered a part of the minimum foreign investment made by it in an auto-making subsidiary in India. The announced reduction on the basic customs on bio-diesel is great news for all companies working on environmental saving technologies.000 rupees earlier. to 1.000 rupees per vehicle from 20. as this will surely had an impact on the Automobile Industry. . • . • • • Bring in a minimum foreign equity of US $ 50 Million if a joint venture involved majority foreign equity ownership Automatic approval for foreign equity investment upto 100% of manufacture of automobiles and component is permitted FIIs including overseas corporate bodies (OCBs) and NRIs are permitted to invest up to 49 per cent of the paid-up equity capital of the investee company. thanks to low costs and government policies it soon faces stiff competition from it multinational competitors all eyeing for a share in the ever growing Indian auto sector. And will introduce world class R&D facilities into India.specific sales promotion programmes targeted at interior regions. subject to approval of the board of directors and of the members by way of a special resolution. • The Proposal by the Govt. 2. The upcoming facility. among them is the “Mera Sapna Meri Maruti: New Panchayati Scheme”. While the development of the allotted land and construction of the test tracks will be completed in the first phase by 2012. motivate many foreign commercial vehicle manufactures to set up shops in India.500 cr. The move is aimed at helping India emerge as a hub for global manufacturing and sourcing for auto parts.
Technical analysis Technical analysis refers to the study of market generated data like prices & volume to determine the future direction of prices movements. Technical analysis mainly .
6. It appeals mainly to short term traders. because of the persistence of trends & patterns analysis of past market data can be used to predict future prices behaviors. Basic premises of technical analysis: 1. These include fundamental factors as well as psychological factors.e. The focus of technical analysis is mainly on the internal market data. Usually the following tools & instruments are used to do the technical analysis: . It is important criteria for selecting the company to invest. It is the tool of financial analysis. 2 The technical analysis failed to signal an uptrend or downtrend in time. Shifts in demand & supply bring about change in trends. This shift s can be detected with the help of charts of manual & computerized action. Market prices are determined by the interaction of supply & demand forces. Barring minor deviations stock prices tend to move in fairly persistent trends. 5. As more & more people use.seeks to predict the short term price travels. calculating & interpreting graph & chart to assess the performances & status of the price. It is the oldest approach to equity investment dating back to the late 19th century. Supply & demand are influenced by variety of supply & demand affiliated factors both rational & irrational. Drawbacks / limitations of technical analysis: 1 Technical analysis does not able to explain the rezones behind the employment or selection of specific tool of Technical analysis. It provides important & vital information regarding the current price position of the company. The one of the most frequently used yardstick to check & analyze underlying price progress. 3 The technical analysis must be a self defeating proposition. employ it the value of such analysis trends to reduce. prices & volume data. which not only studies but also reflecting the numerical & graphical relationship between the important financial factors. 4. This Technical analysis is helpful to general investor in many ways. For that matter a verity of tools was consider. It also provides the base for decision-making in investment. i. Technical analysis involves the use of various methods for charting. 2. 3.
Line: A line chart simply connects the closing prices from one period to the next. and candlestick. Bar: It gives the detailed information about every aspect. Japanese Candlestick: A candlestick is black if the closing price is lower than the . This type of chart is ideal for securities with no high or low price data i. line..Price Styles Price in a chart can be displayed in three styles: bar.e. mutual funds or that is even with the equity in case of base price.
. A candlestick is white if the closing price is higher than the opening price.opening price.
They eventually change direction and when they do. Chart patterns can last from a few days to many months or even years. As you can see in the illustration (Intel. volume decreases on the head and is especially light on the right shoulder. The changing of expectations often causes price patterns to emerge. Generally speaking. Predictable price behavior often follows these price patterns. INTC). . it is very common for prices to return to the neckline in a last effort to continue the up-trend. the "left shoulder" and the "head" are the last two higher-highs. A sign that the trend is weakening occurs when the volume accompanying rallies is less than the volume accompanying the preceding rally. An up-trend is formed as prices make higher-highs and higher-lows in a stair-step fashion. In a typical Head-and-Shoulders pattern. The right shoulder is created as the bulls try to push prices higher. During a healthy up-trend. the longer a pattern takes to form. their price patterns are often very similar. Following the penetration of the neckline. Confirmation of a new down-trend occurs when the "neckline" is penetrated. volume should increase during each rally.Price Patterns: Overview: A basic principle of technical analysis is that security prices move in trends. The trend is broken when this upward climb ends. . Head and Shoulders: The Head-and-Shoulders price pattern is the most reliable and well-known chart pattern. It gets its name from the resemblance of a head with two shoulders on either side. If prices are then unable to rise . The reason this reversal pattern is so common is due to the manner in which trends typically reverse. We also know that trends do not last forever. These phases occur as investors form new expectations and by doing so. they rarely do so on a dime. prices typically decelerate. This signifies the end of the up-trend. Instead. Although no two markets are identical. and then reverse. shift the security's supply/demand. but are unable to do so. pause. the more dramatic the ensuing prices move.
Prices then decline marking the beginning of a new down-trend. they usually decline rapidly on increased volume. A double bottom has the same characteristics as a double top except it is upside is down. Volume. volume usually decreases as the pattern is formed and then increases as prices rise above the neckline Rounding Tops and Bottoms: Rounding tops occur as expectations gradually shift from bullish to bearish. . Rounding bottoms occur as expectations gradually shift from bearish to bullish. Volume then increases as the new trend is established Double Tops and Bottoms A double top occurs when prices rise to a resistance level on significant volume. decreases as expectations shift and traders become indecisive. yet steady shift forms a rounded top.above the neckline.Volume during both rounding tops and rounding bottoms often mirrors the bowl-like shape of prices during a rounding bottom. The gradual. and subsequently return to the resistance level on decreased volume. As with a normal Head-and-Shoulders pattern. An inverse (or upside-down) Head-and-Shoulders pattern often coincides with market bottoms. retreat. which was high during the previous trend.
. Deduct these distances from the intervening top & that will be the upward target of the double bottom reversal pattern.Tops T1 & T2 are almost at the same level & trend violated the support line formed with the help of bottom B1 hence. To measure the likely upward reaction. measure the distances between the intervening top & the double bottom. a Double bottom reversal pattern has been formed. To measure the likely downward reaction. a Double top reversal pattern has been formed. measure the distances between the intervening bottom & the double tops. Deduct these distances from the intervening bottom & that will be the downward target of the double top reversal pattern. Bottom B1 & B2 are almost at the same level & trend violated the resistances level formed with the help of top T1 hence.
T2 & T3 are almost at the same level & trend violated the support line formed with the help of bottom B1 because the B1 is the lowest bottom hence. To measure the likely upward reaction.Tops T1. To measure the likely downward reaction. . Deduct these distances from the intervening top & that will be the upward target of the triple bottom reversal pattern. measure the distances between the intervening bottom & the triple tops. measure the distances between the intervening top & the triple bottom. Bottom B1. B2 & B3 are almost at the same level & trend violated the resistances level formed with the help of top T1 because the T1 is the heights top hence. Deduct these distances from the intervening bottom & that will be the downward target of the triple top reversal pattern. a triple bottom reversal pattern has been formed. a triple top reversal pattern has been formed.
Downtrends.Dow Theory is broken down into six basic tenets. but then started increasing again. but also price philosophy. Accumulation. The public participation phase. The Dow Theory addresses not only technological analysis and price action. but it then suddenly decreased near the month of June’2009.Implication of DOW THEORY The Dow Theory is valid even in today’s volatile and technology driven market. . The second tenet of Dow Theory is that trends have three phases. Accumulati on Public Excess Upstrea m The first tenet of Dow Theory is that the market has three trends. The accumulation phase is one in which the expert traders are actively taking positions which are against the majority of people in the market. Public participation and Excess. Up trends are defined as a time when successive rallies in a security price close at levels higher than those achieved in previous rallies. where rampant speculations occur and the “smart money” starts to exit their positions. which is when the public at large catches on to what the experts know and begin to trade in the same direction and in the Excess phase. which are defined as a move after the market makes a move sharply in one direction where the market recedes in the opposite direction before continuing in its original direction. it is shown that the share prices of Tata motors were increasing in the year 2009. which are defined as when the market makes lower lows and lower highs and Corrections. In the graph shown above.
meaning that once news is released it is quickly reflected in the price of an asset. The market may show moves which are against the primary trend but this do not mean that the trend is over and the market will normally resume its prior trend. In the case of Tata motors. The above graph also illustrates the sixth tenet. In the case of Tata motors.Upstrem Primary trend Deviati The third tenet of Dow Theory is that the market counts all news. when the prices were decreasing during recession. but the market then again followed its prior trend of declining prices.3bl panelty. which may be attributed to the news of breach of JLR contract with Ford Motors which may cause Rs. . as the market started recovering after December’2008. which says that trends exist until definitive signals prove that they have ended. the stock price even increased once. the share prices started increasing but they again saw a decline. The sales of Tata motors decreased by 4% in June end’ 2009 which can be one more reason for the decline in stock prices of Tata motors.
When the performances diverge. when people came back to the market. and TATA motors also comes down. In case of Tata motors. when the people stopped investing during recession. Tenet five is that Trends are confirmed by volume. we can see that the movement of stock prices of Tata motors and SENSEX are more or less in the same direction. prices went down and after recession. . prices also increased. that means that the performance of related industries should move in one direction for the health of a particular industry. One thing which very clear is TATA motors react very badly whenever there is a negative sentiments comes in market results SENSEX comes down. However. it is warning that change is in the air.SENSEX AND TATA MOTORS Tenet four of Dow Theory is that the averages must confirm each other. Different sets of colored line in above chart prove this fact.
Support Level Rs.1425 Support level RS. (1-Jul-09 to 7-Sept- Resistance Level Rs.1.1275 approx.490 approx. As it is seen in the past 4 months TATA share price moved up and it keeps making on new level so perfect resistance level for this share is not easy to predict as performance of this share is very good The above band of resistance and support level shows that the price compare of shares will in to move all scrips of between this range only until unless any wrong reaction came out in economy or when any correction takes place the prices will move in between this band only. . Resistance Level shows the price above which share price will not move in normal case on the other hand Support level shows the minimum share price which can be touched by share or crossing of this share will not be there in normal market condition Following is the Resistance & Support level of Maruti Suzuki & TATA Motors for the period of 2 months: Resistance Level Rs. Resistance & Support Level This Technical tool helps in telling that what would be the price band of share price in which it move in near future on the basis of past high and low levels made by a particular scrip.430 approx.
In above figure we have compare the share price of Tata Motor and Maruti with moving average of 50 period of Tata Motors. A buy signal is generated when the security's price rises above its moving average and a sell signal is generated when the security's price falls below its moving average. Maruti respectively. It is designed to keep you in line with the security's price trend by buying shortly after the . The method of interpreting a moving average is to compare the relationship between a moving average of the security's price with the security's price itself.2. Simple Moving Average (50 periods)-Medium Term A Moving Average is an indicator that shows the average value of a security's price over a period of time.
A buy signal is generated when the security's price rises above its moving average and a sell signal is generated when the security's price falls below its moving average. This Tool of 200 Periods tells us about the position of share to buy or sell for a long period say for 9-12 months. This shows that an investor can kept a hold position or can buy for longer period .security's price bottoms and selling shortly after it tops. 3. so industry as whole is also performing outstanding. In the near future both the companies show Buy signal as their security prices rises above its moving average. So keeping a hold position for the companies would be profitable in future. Yellow area in the graph indicates buy signal and Green area indicates sell signal. Long Term Simple Moving Average (200 periods) In the above chart Moving Average is an indicator that shows the average value of a security's price over a period of time. Maruti respectively by taking share prices of 5 year to take out the Moving average for 200 periods. In the near future both the companies show buy signal as their security prices rises above its moving average. It shows that both companies are performing better. We have compare the share price of Tata Motor and Maruti with moving average of 200 period of Tata Motors. Yellow area in the graph indicates Buy signal and Green area indicates Sell signal.
here are three popular ways to use the MACD: crossovers. 4. and divergences. called the "signal" (or "trigger") line is plotted on top of the MACD to show buy/sell opportunities. . The trend of buying is seems to be over here or in coming few days and a selling or booking of profit could be seen hence MACD line could fall below EMA in coming time. The MACD is the difference between a 26-day and 12-day exponential moving average. overbought/oversold. TATA MOTORS MACD Sell Overboug Overso Buy Above graph shows the MACD of TATA motors for the period of 6 months. A 9-day exponential moving average(EMA). Crossovers: Yellow area shows that there was situation when sell position occurred in the end of month June till mid of July as MACD curve below EMA or Signal line shows a sell situation otherwise we saw a buy position of TATA Motors most of the time Light Green area shows that investor want to buy and wan to be in hold position.of time but as we can see in case of Maruti the moving average line is also rising which shows that Buy n hold position for very long period could be unprofitable a minor correction in the share price can bring down the share price line and then moving average line will easily cross the share price line.
For both TATA Motors & Maruti Suzuki Overbought/Oversold: The amount of green lines in above graph on the up side shows the overbought situation by the investor which mean that investor buy more shares at this time and oversold situation occurs when green line is on the downside.MARUTI SUZUKI MACD Overboug Overso Crossover: The above graph shows the MACD of Maruti Suzuki. here Yellow area shows the selling position as MACD line is below EMA line the Light Green area shows the buy position which occur last time in the end of July but now buy position for Maruti is created as EMA or signal line seems to be below MACD line and it will probably continue in near future. Moving Average Crossover 20 Periods S B 50 Periods .
A crossover occurs when a faster Moving Average (i.A.e. The increasing trend in the prices after buy signal of shares shows that good amount of profit could be achieved in future if stick with hold position. above yellow circle shows that area when price fall below average price and then it move onto lower side. Bu No Sell Position or Always Position of . A cross above a moving average suggests that the bulls are is in control and that the price may be getting ready to make a move higher and Maruti Share Prices show that trend of moving up prices. Below is the MAC graph of Maruti Suzuki for past 6 months in which we haven’t see any sell position till yet the movement of share price is always on the positive side that is increasing so we can say that buying opportunities is always there in case of Maruti Suzuki. a longer period Moving Average-50 periods) which is considered a bullish crossover or below which is considered a bearish crossover. Following is the MAC of TATA Motors & Maruti Suzuki to understand the position of both companies average share movement Above is the MAC graph of TATA Motors for the period of 6 months in which ‘S’ denote the selling situation or position whereas ‘B’ is the point after approx 1 month when we saw a bounce back in share prices hence a buy signal occurs which is because. longer moving average of 50 periods cut shorter moving average from the lower side and shows a holding position of shares in coming future also. a shorter period Moving Average20 periods) crosses either above a slower Moving Average (i.C helps in telling buying opportunities when the shorter moving average crosses above the longer moving average and selling opportunities when the shorter moving average crosses below the longer moving average.e. A move below the moving average suggests that the bears are in control of the price action and that the asset will likely move lower. M.
5. . The overbought and oversold stocks are apt to reverse course. May. but in regards all other technical factors should be considered while buying. As we can see in the graph is that the at most of the time the graph lies between the middle band and the upper band Maruti which shows an increasing price trend in the market and it’s called Riding the Band. It’s better to buy stocks when it touches the lower band.e. mid July and mid august the stock of TATA motors crossed the upper band which means that during these periods the prices rose very fast. BOLLINGER BAND Bollinger bands are used to measure a market’s volatility. the bands expand. Suzuki When the stock is outside the upper end of the Bollinger band it is considered as ‘OVERBOUGHT’. the bands contract. It’s also seen that the volatility increased to new highs after July because the bands started to widen. The prices fell too fast and are susceptible to bargain hunting. which means that stock has gone up too fast and when a stock is outside the lower band it is ‘OVERSOLD’. An oversold stock has gone down too fast. Basically. while in mid of July the stock went below the lower band. and when the market is LOUD. During the months of April. this little tool tells us whether the market is quiet or whether the market is LOUD! When the market is quiet. TATA Motors On the graph it can be seen the overall trend of the market and quick reference for supply and demand as well as support and resistance areas by using a 20 days moving average and 2 standard deviation in calculating the Bollinger Bands. i.
During the june month the bands contracted very much which shows low volatility. but then onwards the bands started to widen which creates high volatility and looking at the future scenario it may be analysed that the stock will see a fall as at the end of august the band was overbought. there is a possibility of trend reversal. because when price is trading near the upper or lower Bollinger band line. and it can assist with timing issues in trading. The stock also shows overbought many times during the six months but it did not show any oversold trend. therefore it becomes an important factor in determining the price trend as it tells that the prices have not fallen very fast in these six months. Knowing whether or not prices are high or low on a relative basis can enhance the interpretation of other indicators. . The buy and sell signals are not given when prices reach the upper or lower bands. A security can become overbought or oversold for an extended period of time.Initially the bands show slight slope and lie approximately parallel to each other. this means that the price of the stock is oscillating up and down between the bands through a channel. Such levels merely indicate that prices are high or low on a relative basis.
90% after downfall. I have also come to know that share price movement of TATA Motors is just according to the movement of SENSEX.7% and the above facts and figures in our study also support this truth. 430 to Rs.g. whenever there is a negative sentiment in the market regarding TATA Motors there is a steep fall in the stock price of TATA Motors but we have seen quick recovery in its share prices to regain its primary trend E. Like TATA has launch NANO the people’s car and now TATA motors is also planning to come out with an electric car as well as hybrid car. as we seen in last 3-4 months TATA recovers approx. By analyzing the current trend of Indian Economy and Automobile Industry I can say that being a developing economy there is lot of scope for growth and this industry still have to cross many levels so there is huge opportunities to invest in and this is proving as more and more foreign Companies setting up there ventures in India.CONCLUSION Indian Automobile Industry is in the growth phase and the expected growth rate is 9-10% for FY2009-10 as compared to last year growth rate which was just 0. From the Technical Analysis of both companies i come to know that the share price of Maruti will move in the band of Rs.1275 to Rs. The majority of the people in country don’t own a four wheeler and all the major auto companies are trying to increase their sales by several moves. 490 if certain correction made in the market. The Indian auto market is still untapped. moreover in two wheeler segment many companies like Mahindra and Mahindra grow even more than expectations.1425 and that of TATA Motors will move in the range of Rs. .
com www.googlefinance.yahoofinance.bseindia.com www.co.org.com www.rbi.google.in www.BIBLIOGRAPHY www.worldfact.moneycontrol.com www.com www.in FDI statistic government of India India Central Statistical Organization Economic Times .
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