Submitted By


Summer Internship for Academic Year 2009-2010

Specialization: FINANCE

Submitted in fulfilment of requirement of Masters in Management Studies (MMS)



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


Dr. A.R.Phopaley

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.

Conclusion Bibliography

UTI-Offshore. is to cater to services in Capital Market Operations to Institutional Investors. IDBI. SUN F&C. PNB-MF. Punjab & Sind Bank. Pioneer ITI. ICICI Can bank MF. the clients of the company greatly benefit by its strong research capability. (RFSL). The Company is a member of the National Stock Exchange (NSE) and OTCEI. BOI-MF. The primary focus of Religare Securities Ltd. SBI. . RELIGARE was founded with the vision of providing integrated financial care driven by the relationship of trust. Punjab National Bank. Depository Participant Service.INTRODUCTION :COMPANY PROFILE RELIGARE Securities Ltd. IDBI Principal. a Company promoted by the late Dr. GIC. ING Baring and J M Mutual Fund. Oriental Insurance. Parvinder Singh. IFCI. (RSL) is a wholly owned subsidiary of RELIGARE Financial Services Ltd. The growing list of financial institutions with whom RSL is empanelled as approved Broker is a reflection of the high levels of services maintained by the Company. Prudential ICICI. Ex-CMD of Ranbaxy Laboratories Ltd. As on date the Company is empanelled with UTI. RELIGARE is a pioneer in the concept of partnership to reach multiple Locations in order to effectively service its large base of individual clients. Advisory on Mutual Fund Investments and Portfolio Management Services. The bouquet of services offered by RELIGARE includes Broking (Stocks and Commodities). which encompasses fundamentals as well as technical knowledge. Besides the reach of RELIGARE.

depository services etc. A SEBI approved Portfolio Manager. The ARN No. Member of National Stock Exchange of India and Bombay Stock Exchange of India. of the Religare Securities Ltd. Commodity and Financial Services business & Religare Insurance Advisory Ltd. The ARN No. 3. Depository Participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). is required by to be available with the broker who deals on behalf of investors or sell the mutual funds of the different companies present in the market. 2. portfolio management services. . RELIGARE financial services group comprises of Religare Securities Limited. RSL provides platform to all segments of the investor to leverage the immense opportunity offered by equity investing in India either on their own or through managed funds in Portfolio Management. is 33764. RELIGARE SECURITIES LIMITED 1. RELIGARE Comdex Limited and RELIGARE Finvest Limited which provide services in Equity.GROUP : RELIGARE in recent years has expanded its reach in health care and financial services wherein it has multiple specialty hospital and labs which provide health care services and multiple financial services such as secondary market equity services.

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plotting of CHARTS to extremely sophisticated indicators.WHAT’S THIS EQUITY ANALYSIS? Professional investor will make more money & less loss than. Assumptions for the Equity Analysis. Be ruthless & calculating. who let their heart rule. 1. The financial analysts always need yardsticks to evaluate the efficiency & performances of any business unit at the time of investment.e. Fundamental analysis is useful in long term investment decision. turnover. A general investor can apply the principles by using the simplest of tools: pocket calculator. i. In Equity Analysis anticipated growth. pencil. Greed must be avoided patience may be a virtue. ruler. Decision should be based on actual movement of share price measured both in money & percentage term & nothing else. you are out to make money. Works only in normal share-market conditions with great reliability. but does discuss a method which enables the investor to arrive at buying & selling decision. Equity analysis is basically a combination of two independent analyses. In Fundamental analysis a company s goodwill. this equity analysis does not discuss how to buy & sell shares. namely fundamental analysis & Technical analysis. i. but with low reliability. chart paper & your cautious mind. profitability & financial health was checked & analysis with the help of ratio analysis for the purpose of long term successful investment. . its performances. The subject of Equity analysis. liquidity. Technical analysis mainly seeks to predict the short term price travels. watchful attention.e. it also works in abnormal share-market conditions. Technical analysis refers to the study of market generated data like prices & volume to determine the future direction of prices movements. the attempt to determine future share price movement & its reliability by references to historical data is a vast one. calculations are based on considered FACTS & not on HOPE. It should be pointed out that. The focus of technical analysis is mainly on the internal market data. Their head eliminate all emotions for decision making. but impatience can frequently be profitable. covering many aspect from the calculating various FINANCIAL RATIOS. prices & volume data. leverage. It is the oldest approach to equity investment dating back to the late 19th century. It appeals mainly to short term traders.

6. so don t be curious or panic to do postmortem of companies performances. Capital market has a typical market psychology along with other issues like.I. it also has some exceptions. so the investment object has vital importance associated to return along with risk.2. the crowd Vc the individual. With comparatively higher rate of economic growth rate index against that of great global powers. 3. whether it is short run or long run. risk management was up to the investor s knowledge. Capital market trend is always a friend. Industry c. ENVIRONMENT & ECONOMICAL ANALYSIS. Although the equity analysis is art as well as sciences so. 5. To understand this industry for the purpose of investment we need to analyze it by following two approaches: 1). Fundamental Analysis (E. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. An individual perceptions about the investment return & associated risk may differ from individual to individual. India has become a hub of domestic and exports business. because the scenario of equity analysis is revolving around the term money 4. tradition s & trust.Technical Analysis EQUITY ANALYSIS. 10. Equity analysis is purely based on the INVESTMENT PHILOSOPHY . . 7. Company 2). perceptions. ANALYSIS OF AUTOMOBILE INDUSTRY Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. Cash management gets the magnitude role. 9. History repeats: investors & speculators react the same way to the same types of events homogeneously. Portfolio management. 8. You are buying stock & not companies. Economy b.C Approach) a.

India is 16th in the world in terms of nominal factory output. the GDP growth has downgraded it to 7. Most fundamental information focuses on economic. industry and company conditions in an effort to determine the value of a company s stock. The typical approach to analyzing a company involves four basic steps : 1 Determine the condition of the general economy. The per capita Income is near about Rs38.FUNDAMENTAL ANALYSIS Fundamental Analysis. The service sector is growing rapidly in the past few years. GDP and Automobile Industry In absolute terms. automobile sector in India is one of the key sectors of the economy in terms of the employment. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed. Fundamental analysis typically focuses on key statistics in company s financial statements to determine if the stock price is correctly valued. As the world economy slips into recession hitting the demand hard and the banking sector takes conservative approach towards lending to corporate sector. 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.1 per cent for 2008-09 and predicted it to be 6.5 per cent for FY 2009-10 Mr. industry and company statistics. . Montek Singh (Planning Commission of India). 4 Determine the value of the company s stock a). Following is the graph showing a trend of Indian GDP trend in past 3 years. Economic analysis is important in order to understand exact condition of an economy.000 reflecting improvement in the living standards of an average Indian. Today. ECONOMY Economic analysis is the analysis of forces operating the overall economy a country.chart showing contributions of different sectors in Indian economy. 3 Determine the condition of the company. 2 Determine the condition of the industry. This is the pie. TECHNICAL ANALYSIS Fundamental analysis is the study of economic.

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. The fall in wholesale prices from a year earlier is mainly due to a statistical base effect and doesn’t suggest contraction in demand. commercial vehicles. higher interest rates.31% growth while Commercial Vehicles segment slumped 21. 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 .17 million vehicles in 2008-09. overall production fell by 22 % over the same month last year.Source :India Central Statistical Organization The market value of Automobile Industry is more than US$8 bl. India is strong and growing industry but the impact of recession is evident now on industry as sales & growth of automobile companies have declined.7%. two wheelers and three wheelers) increased from 10.86% over December 2007 Two Wheelers registered minor growth of 1.7% with passenger car sales shows 1. In December 2008. two-wheelers and threewheelers in 2008-09 was 9. However. overall production (passenger vehicles. However.83 million while two-wheelers increased from 8.oil price hike. Inflation Despite of negative inflation these days (-.21% on 22-Aug-09) we saw an increasing trend of sales in auto sector.41 million. One of its supporting facts is that the sales in December 2008 for passenger vehicles fell by 13. Two Wheelers sales recorded 15.72 million as compared to 9. commercial vehicles. The automotive industry in India grew at a computed annual growth rate (CAGR) of 11. the effect of inflation has affected every sector which is related to car manufacturing and production.85 million vehicles in 2007-08 to 11. and Contribution in Indian GDP is near about 5% and will be double by 2016. In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to $20 per barrel five years back). while revising its inflation forecast for the FY through March to around 5% from 4%. Total number of vehicles sold including passenger vehicles.85 % during April – December 2008. Indian automobile Industry was not as much affected and experts think that Indian automobile industry will continue to grow this year despite all obstacles.77 million to 1. Global recession has hit the Indian auto industry.65 million in 2007-08.5 percent over the past five years. Recession All the major auto companies enjoyed the high growth ride till the mid 2008. Passenger vehicles increased marginally from 1. industry had to face the hard truth and witnessed the fall in sales compared to last year. But at the end of the year.02 million to 8. Although the sector was hit by economic slowdown. the Reserve Bank of India said few week back. but growth rate in last FY2008-09 was only 0. A moderate amount of inflation is important for the proper growth of an economy like India because it attracts more private investment.43 percent fall in December 2008 over the same month last year. Passenger Vehicles segment registered negative growth.

FDI inflows in Automobile Industry 2008-09 was Rs.739 units in 2008-09.212 Cr an increase of 47.401 in 2007-08 to 335. Being one of the fastest growing sectors in the world its dynamic growth phases are explained by the nature of competition.497 Cr. automobile sales (including passenger r vehicles.FDI Statistics Govt. In 2009. which has led to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industry. has been permitted under automatic route to this sector.53 million units in 2008-09 from 1. leaving ample opportunity for volume growth.The Indian automobile sector is far from being saturated. more and more MNC’s coming in India to setup their ventures which clearly shows the scope of expansion. FDI’s In India FDI up to 100 percent.5 per cent by 2015. two-wheelers and three-wheelers) in the overseas markets increased to 1. . Source. b. Product Life Cycle and consumer demand. Export of passenger vehicles increased from 218. while in April-May 2009 it was around Rs. the Indian automobile market continues to perform better than most of the other industries in the economy in coming future.5. have been consistently registering higher growth rates every passing year for their domestic flourishing domestic automobile markets. except for the decline in the export of commercial vehichles in the financial year 200809. whereas the automobile industry in the developing nations. The industry is at the crossroads with global mergers and relocation of production centers to emerging developing countries.) 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 the rise in price of the raw materials to build a car. The car market and the car industry witnessed a fall of 8-9%.23 million units in 2007-08.25% compare to 200708. estimated rate of growth of India Auto industry is going to be 9% . 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. Despite recession.9 per cent to 2. commercial vehicles. There is a continuous increase in the export of automobiles since the financial year 200203. of India Export Society of Indian Automobile Manufacturers (SIAM). which may be attributed to the global economic recession.

and Three-wheelers. and there is high risk of failure. the product has not been widely accepted or adopted. Following is the segmentation that how much each sector comprises of whole Indian Automobile Industry.Segmentation of Automobile Industry The automobile industry comprises of Heavy vehicles (trucks. Two-wheelers. maturity and decline.17 percent. Light . often at an accelerating rate of sales and earnings growth. The Commercial Vehicles segment grew marginally at 4. Indian Automotive Industry is booming with a growth rate of around 15 % annually. tempos.) Industrial Life Cycle The industrial life cycle is a term used for classifying industry vitality over time. tractors). Commercial Vehicles. Utility Vehicles by 10. Industrial Analysis of any industry can be done based on the following headings: 1. Industrial Life Cycle 2. Industry life cycle classification generally groups industries into one of four stages: pioneer.57 percent and Multi Purpose Vehicles by 21. buses. Passenger Cars grew by 11. The Indian automobile sector has passed this stage quite successfully.66 percent. Industry Specific Index 1. However. successful companies can grow at extraordinary rates. Business strategies are developing. passenger cars. In the pioneer phase.79 percent.07 percent. SWOT Analysis 3. the product market has been established and there is at least some historical guide to ground demand estimates. The cumulative growth of the Passenger Vehicles segment during April 2007 – March 2008 was 12. While Medium & Heavy Commercial Vehicles declined by 1.39 percent in this period. The industry is growing rapidly. growth. In the growth phase.

As the product matures. with motorcycles and electric two wheelers segments declining by 11. 2. growth slows as penetration reaches practical limits.49 percent and Passenger Carriers declined by 2. 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.March 2008 compared to the last year.71 percent with sales of Goods Carriers declining drastically by 20.Commercial Vehicles recorded a growth of 12.63% respect. Such an analysis of the strategic environment is referred to as a SWOT analysis. 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.13 percent during April. However.93% respect. 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 . Industry demand tends to follow the overall economy. Three Wheelers sales fell by 9.29 percent. Two Wheelers registered a negative growth rate of 7.90 percent and 44.92 % during this period. The growth rate of the automobile industry in India is greater than the GDP growth rate of the economy. Scooters and Mopeds segment grew by 11. and those external to the firm can be classified as opportunities (O) or threats (T).64% and 16. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W).) SWOT Analysis A scan of the internal and external environment is an important part of the strategic planning process.

) Industry Specific Index Industry specific index also called as sectoral index are those indices. Hence an index like the BSE auto index is made of auto stocks.• • • • 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. All stocks in a sectoral index belong to that sector only. which represent a specific industry sector. BSE Auto Index comprises all the major auto stocks in the BSE 500 Index. BSE AUTO Index 5 Year Chart .

We have also saw a fall in FDI’s in automobile Above is the Indian Auto Industry Index(BSE) shows the up’s and down’s over the period of 5 years. c. 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 . indian auto industry start picking up growth slowly in the first end of 1st quarter index reaches to its highest in his history. production came down because of less demand in the economy. Also no further launches were made in mid or late 2008 and postponed to next year. And this growth of industry will be carry further as festive season still to come. so there is a lot of scope to growth in this industry. 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. 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. Maruti Suzuki. Most of the company even shut down their manufacturing units for more than a week.• Automobile Industry Index at BSE for 5 Year COMPANY Source:Google finance. Intially in 2003 when major giants got listed on stock exchange TATA Motors. etc.) 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 .

41 crores in 2007-08. what are the policies of government towards the company and how the stake of the company divested among different groups of people. The company is the world’s fourth largest truck manufacturer. compared to 54.3% to 69. what is the future plans of the company.629 units. Total passenger car sales in August 2009 increased 30. has sold a total of 84. 18.28599. compared to 59.808 vehicles in August 2009. a decline of 50.7%.2576. of India no longer has stake in Maruti Udyog.5% to 69. midsize car and utility vehicle segments.583 Million & Profit After Tax at Rs. 203. The Profit after Tax for the year was Rs.93 crores) in 2008-09. 25660. With this.who are the key drivers of the company. both in terms of volume of vehicles sold and revenue earned. of India sold its complete share to Indian financial institutions.1001.92 crores.28% of the company was owned by the Indian government. 12. a decline of 10. Govt.47 crores in 2007-08. The Profit before Tax was Rs.187ml. compared to 5. Govt. It is the leader in commercial vehicles in each segment. Fundamental Analysis consist of following Study of Balance sheet Study of Profit and Loss a/c Study of Ratios Balance Sheet : .2% to 14.76 crores compared to Rs. reported gross revenue (stand-alone) of Rs.2% by Suzuki of Japan. 2007.28739. compared to 53.7%.113 vehicles in August 2008. Until recently. The company's domestic sales in August 2009 increased 29.6%. a year marked by severe demand contraction in the automobile industry.26 crores compared to Rs.Maruti Suzuki India Ltd.351 units in August 2008 The company's exports increased 156. and the world’s second largest bus manufacturer.847 units.908 vehicles in the same period of 2008.1013. Profile of Tata Motors Tata Motors Limited is India’s largest automobile company.795 units in August 2008. and among the top three in passenger vehicles with winning products in the compact. a decline of 60. and 54. As of May 10.7%.33093. The turnover for the fiscal 2008-09 stood at Rs.2028.79 crores compared to Rs. Profile of Maruti Suzuki Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car segment. Revenues (net of excise) for the year were Rs.961 vehicles. an increase of 41.27 crores (2007-08: Rs.

inventory and property are on the asset side of the balance sheet. while on the liability side there are accounts such as accounts payable or long-term debt. promises to pay cash or provide goods and services in future. It's called a balance sheet because the two sides balance out. as there is no one set template that accurately accommodates for the differences between different types of businesses. The exact accounts on a balance sheet will differ by company and by industry. The format prescribed in the Companies Act classifies liabilities as follows : Share Capital: Share capital includes equity capital and preference capital. Equity capital represents the contribution of equity shareholders who are the owners of the firm. 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 financial statements are built to be used together to present a complete picture of a company's finances. liabilities and shareholders' equity at a specific point in time. shows how much revenue and profit a company has generated over a certain period. The balance sheet shows the financial condition of a business at a given point of time. 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 . Neither statement is better than the other rather. . A liability arises when a firm receives benefits or services and . on the other hand. The income statement. defined very broadly. the balance sheet of a company shall be in either the account form or the report form. As per the Companies Act. in turn. loans & advances Miscellaneous expenditure Liabilities Liabilities. as well as the amount invested by the shareholders. These three balance sheet segments give investors an idea as to what the company owns and owes. Accounts such as cash. represent what the firm owes others. The balance sheet is one of the most important pieces of financial information issued by a company.A financial statement that summarizes a company's assets.

Reserve and Surplus: Reserve and Surplus comprise retained earnings as well as non earnings items like share premium and capital subsidy. Current liabilities and Provisions: current liabilities and provisions represent obligations that are expected to mature within a year. Secured loan: Secured loan are loans that are secured by a charge on the assets of the firm. buildings. The major components of current assets. This process is called appropriation. Preference capital represents the contribution of preference shareholders and the dividend rate payable on it is general fixed. other current assets and loans and advances. patents. Current liabilities include items such as bills payable. unsecured loans are loans which are not secured by a charge on the assets of the firm. furniture. They are divided into two categories. are assets that are expected to produce benefits for more that one year. Tangible fixed assets include items such as land. carries no fixed rate of dividend. Assets are classified as follows under the Companies Act: Fixed Assets: fixed assets. being the risk capital. long term investment and current investment. and other exp. also called non current assets. Miscellaneous Exp : this comprise of items such as preliminary exp. loans and advances are: inventories. building. Current Assets: this category consists of cash and other assets which get converted into cash or which result in cash savings. and development expenditure to the extent not written off or adjusted. during the operating cycle of the firm. discount allowed on issue of securities. Intangible assets include goodwill. by way of higher cash inflows or lower outflows. 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. Unsecured loans: in contrast to secured loans. plant and machinery. debtors. interest paid out of capital during construction. Assets Assets are resources which are expected to provide a firm with future economic benefits. In common practice for companies to transfer from the profit and loss account to various reserve accounts. and copyrights. and plant and machinery. and provisions include items such as provision for taxes. interest accrued etc.Equity capital. dividend. sundry creditors. . Investment: investments represent financial securities owned by the firm. These assets may be tangible or intangible. cash and bank balances.

• Financial Analysis a. 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. However. it presents proft measures at intermediate stages as summarizing revenues and expenses. Further. but none for the profit loss account.) Motors Balance Sheets Maruti Suzuki TATA . Following is the financial and Non-Financial analysis of Maruti Suzuki & TATA Motors.Profit and Loss a/c : A financial report that . 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.depicts a business entity s financial performance due to operations as well as other activities rendering gains or losses. The companies act has prescribed a standard form for the balance sheet. a multi step profit and loss account provides disaggregated information. and showing the net profit or loss in a specified accounting period . the profit after tax figure. It displays how well the company can assure success for both itself and its shareholders through the earnings from operations. The income statement is the most analyzed portion of the financial statements. Also known as the "profit and loss statement" or "statement of revenue and expense". instead of showing only the final profit measure.

) Income Statements Maruti Suzuki TATA Motors .b.

that is.RATIO ANALYSIS OF TATA MOTORS AND MARUTI SUZUKI EPS measures the profit available to the equity shareholders per share.Dividends onPreferredStock . 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. the amount that they can get on every share held. EPS = Net income. But as trend shows TATA motors have potential so an shareholder expect better in future.

1 car manufacturer Maruti Suzuki shows a negative trend from 2007 onwards.77 in 2009. Maruti is always showing a positive trend as its ratio is always greater than 1 except in 2008.Average Outstanding shares The trend shows that Tata’s net profit margin is quite stable until it falls to 3. A general rule of thumb suggests that the quick ratio should be around 1. while TATA motors was doing good till 2007. Net profit Ratio = (Net profit) × 100 (Net sales) Both giants of Automobile industry shows positive trend in Sales Revenue over the past 5year. The quick ratio is a very stringent measure of solvency. However recession brought hurdles but both companies have potential to grow in future as lots of products are still to add in their portfolio. but the performance decreased from . Profit margins come down as recession hits economy badly hence sales get reduced and cost get increased very much. 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. While the net profit of India’s no.

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. .2008 onwards as shortage of cash was there and current liabilities and provision increased by Rs800Cr. Both the companies possess a good ratio but the ratio which is close to 2 is desirable. We see that the debt –equity ratio of TATA motors is very high compared to that of Maruti. Maruti is more successful in paying off its liabilities. the ratio indicates whether the firm is likely to be a going concern. Tata motors and Maruti Suzuki both the companies showed a positive trend in paying dividends till 2008. so we see in graph that Maruti has more strong liquidity than TATA Motors as its current ratio is always greater than 1. A high debt to equity ratio suggests that a company has financed its growth mostly via debt. The ratio acts as an indication that the firm is able to generate funds to make all needed payments in the future. thus. Maruti is going very swiftly in this field. Expansion plans of TATA brought down its cash & Bank Balance and increase of outside liabilities. It means that a lot of debt is used by TATA’s to finance its increased operations. Debt-Equity Ratio= Total Debt Total Equity The current ratio is a convenient and reliable tool for measuring a company's level of liquidity.

but the scenario changed in 2009 as both the company’s dividend per share fell. even though the fall in dividend in 2009. According to graph TATA’s dividend was much higher than that of Maruti. it always provided dividend of above 10 per share to its shareholders while maruti stick to below 5 per share. Share Holding Pattern for Quarter Ended 30-June-09 . still both the companies are earning good profit. Dividend Per Share = Total amount of Dividend Share Outstanding • Financial Analysis 1.

As part of its expansion plans in Southeast Asia. is searching options to pump approximately Rs. The company plans to increase the number of service stations and workshops to over 3800 from about 2800 currently. Nano.000 one tone pickup trucks a year over the next 3-5 years. They have also been coming with . Tata also apparently has its eye on the European and U. Tata Motors had inked a joint venture with Thailand’s Thonburi Auto Assembly’s to manufacture up to 35. The company hopes to have a version for Europe by 2011 and one for the U. Maruti Suzuki Maruti Suzuki has expanded the capacity at its Manesar plant to 1. 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. towards neighboring Myanmar to boost its sales by setting up a truck manufacturing plant. 2. During the next 3-4 years on capital expenditure and product development.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. Company already raised huge money by selling their large stake to institutional investors about 27%. Tata Motors is looking east.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.7 lakhs unit per annum from January 2009. This is a step to increase their sales to one million units as well as for a better position in the Indian auto market. After launching the world’s cheapest car. The expansion is estimated to cost $ 3.000 cr. 8. After the launch of Nano. 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. Tata Motors. TATA Motors Tata Motors is try to be in a position to dominate the Indian Auto industry. at least in fourwheeler segment.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. out of which a quarter will be assigned for amplifying leadership network to 1000 in number. Suzuki Motors plan to increase their dealership in India. markets. As Maruti Suzuki eyes one million sales by 2010. Tata Motors have announced that they are interested in the idea of designing electric cars. By the year 2010. is now aiming to launch its cars in Indonesia and is also planning to sell Nano in South America with the help of Fiat. General Public also have quite large stake in the company compare to its competitors.S.S perhaps by 2012.S. Tata Motors.

• Specific component of excise duty applicable to large cars and utility vehicles will be reduced to 15. subject to approval of the board of directors and of the members by way of a special resolution. the overall R&D facilities will be progressively completed by 2015.000 rupees earlier. .000 cr. The move is aimed at helping India emerge as a hub for global manufacturing and sourcing for auto parts. The policies adopted by Government will increase competition in domestic market. 1. 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. This ensured that vehicles produced in India conformed to the standards of the developed world. • • • 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. • The Proposal by the Govt. While the development of the allotted land and construction of the test tracks will be completed in the first phase by 2012.500 cr. among them is the “Mera Sapna Meri Maruti: New Panchayati Scheme”. to set up an expert group to advise on a viable and sustainable system of pricing petroleum products. The upcoming facility. motivate many foreign commercial vehicle manufactures to set up shops in India. • . will see an investment in the range of Rs.000 rupees per vehicle from 20.specific sales promotion programmes targeted at interior regions. And will introduce world class R&D facilities into India. 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. Though it has an advantage in India. The announced reduction on the basic customs on bio-diesel is great news for all companies working on environmental saving technologies. 2. as this will surely had an impact on the Automobile Industry. The Haryana government has allotted 700 acres of land to Maruti Suzuki for hi – tech Research & Development complex at Rohtak. 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. whom will make India as a production hub and export to nearest market. to 1.

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 .

It is the oldest approach to equity investment dating back to the late 19th century. 6. 3. This shift s can be detected with the help of charts of manual & computerized action. Supply & demand are influenced by variety of supply & demand affiliated factors both rational & irrational. 3 The technical analysis must be a self defeating proposition.seeks to predict the short term price travels. Shifts in demand & supply bring about change in trends. 4. Market prices are determined by the interaction of supply & demand forces. As more & more people use. Technical analysis involves the use of various methods for charting. It appeals mainly to short term traders. It is important criteria for selecting the company to invest. 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. 5. This Technical analysis is helpful to general investor in many ways. Basic premises of technical analysis: 1. The focus of technical analysis is mainly on the internal market data. because of the persistence of trends & patterns analysis of past market data can be used to predict future prices behaviors. prices & volume data. 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. It is the tool of financial analysis. Usually the following tools & instruments are used to do the technical analysis: . calculating & interpreting graph & chart to assess the performances & status of the price. which not only studies but also reflecting the numerical & graphical relationship between the important financial factors. i. employ it the value of such analysis trends to reduce. It also provides the base for decision-making in investment. These include fundamental factors as well as psychological factors. 2 The technical analysis failed to signal an uptrend or downtrend in time. For that matter a verity of tools was consider.e. Barring minor deviations stock prices tend to move in fairly persistent trends. 2.

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 .Price Styles Price in a chart can be displayed in three styles: bar. mutual funds or that is even with the equity in case of base price. Line: A line chart simply connects the closing prices from one period to the next. line. This type of chart is ideal for securities with no high or low price data i.e.

opening price. . A candlestick is white if the closing price is higher than the opening price.

. volume should increase during each rally. the more dramatic the ensuing prices move. Chart patterns can last from a few days to many months or even years. It gets its name from the resemblance of a head with two shoulders on either side. They eventually change direction and when they do. The trend is broken when this upward climb ends. The right shoulder is created as the bulls try to push prices higher. A sign that the trend is weakening occurs when the volume accompanying rallies is less than the volume accompanying the preceding rally. shift the security's supply/demand. An up-trend is formed as prices make higher-highs and higher-lows in a stair-step fashion. they rarely do so on a dime. pause. Head and Shoulders: The Head-and-Shoulders price pattern is the most reliable and well-known chart pattern. 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. it is very common for prices to return to the neckline in a last effort to continue the up-trend. We also know that trends do not last forever. During a healthy up-trend. the longer a pattern takes to form. Instead. These phases occur as investors form new expectations and by doing so. As you can see in the illustration (Intel. Predictable price behavior often follows these price patterns. Following the penetration of the neckline. This signifies the end of the up-trend. The changing of expectations often causes price patterns to emerge. and then reverse. Although no two markets are identical. volume decreases on the head and is especially light on the right shoulder. . but are unable to do so. Confirmation of a new down-trend occurs when the "neckline" is penetrated. Generally speaking.Price Patterns: Overview: A basic principle of technical analysis is that security prices move in trends. INTC). In a typical Head-and-Shoulders pattern. the "left shoulder" and the "head" are the last two higher-highs. their price patterns are often very similar. prices typically decelerate.

An inverse (or upside-down) Head-and-Shoulders pattern often coincides with market bottoms. which was high during the previous trend. they usually decline rapidly on increased volume. yet steady shift forms a rounded top. decreases as expectations shift and traders become indecisive. The gradual. and subsequently return to the resistance level on decreased 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. retreat. 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. As with a normal Head-and-Shoulders pattern. .above the neckline. A double bottom has the same characteristics as a double top except it is upside is down. Volume.Volume during both rounding tops and rounding bottoms often mirrors the bowl-like shape of prices during a rounding bottom. Prices then decline marking the beginning of a new down-trend.

. measure the distances between the intervening top & the double bottom. Bottom B1 & B2 are almost at the same level & trend violated the resistances level formed with the help of top T1 hence. a Double top reversal pattern has been formed. To measure the likely downward reaction. Deduct these distances from the intervening bottom & that will be the downward target of the double top reversal pattern. To measure the likely upward reaction. 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. a Double bottom reversal pattern has been formed. measure the distances between the intervening bottom & the double tops.

measure the distances between the intervening bottom & the triple tops. Deduct these distances from the intervening bottom & that will be the downward target of the triple top reversal pattern. 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. measure the distances between the intervening top & the triple bottom. To measure the likely downward reaction. 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.Tops T1. Bottom B1. a triple top reversal pattern has been formed. . Deduct these distances from the intervening top & that will be the upward target of the triple bottom reversal pattern. a triple bottom reversal pattern has been formed. To measure the likely upward reaction.

The public participation phase. but then started increasing again. Public participation and Excess. Downtrends. but it then suddenly decreased near the month of June’2009. The accumulation phase is one in which the expert traders are actively taking positions which are against the majority of people in the market. which are defined as when the market makes lower lows and lower highs and Corrections. but also price philosophy. 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. In the graph shown above.Implication of DOW THEORY The Dow Theory is valid even in today’s volatile and technology driven market.Dow Theory is broken down into six basic tenets. Accumulati on Public Excess Upstrea m The first tenet of Dow Theory is that the market has three trends. . The Dow Theory addresses not only technological analysis and price action. Accumulation. The second tenet of Dow Theory is that trends have three phases. where rampant speculations occur and the “smart money” starts to exit their positions. Up trends are defined as a time when successive rallies in a security price close at levels higher than those achieved in previous rallies. it is shown that the share prices of Tata motors were increasing in the year 2009. 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.

.3bl panelty. In the case of Tata motors. In the case of Tata motors. the stock price even increased once. 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. the share prices started increasing but they again saw a decline. which says that trends exist until definitive signals prove that they have ended.Upstrem Primary trend Deviati The third tenet of Dow Theory is that the market counts all news. which may be attributed to the news of breach of JLR contract with Ford Motors which may cause Rs. meaning that once news is released it is quickly reflected in the price of an asset. The above graph also illustrates the sixth tenet. when the prices were decreasing during recession. as the market started recovering after December’2008. but the market then again followed its prior trend of declining prices. 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.

prices went down and after recession. In case of Tata motors. and TATA motors also comes down. when people came back to the market. When the performances diverge.SENSEX AND TATA MOTORS Tenet four of Dow Theory is that the averages must confirm each other. it is warning that change is in the air. One thing which very clear is TATA motors react very badly whenever there is a negative sentiments comes in market results SENSEX comes down. Tenet five is that Trends are confirmed by volume. . when the people stopped investing during recession. that means that the performance of related industries should move in one direction for the health of a particular industry. However. prices also increased. Different sets of colored line in above chart prove this fact. we can see that the movement of stock prices of Tata motors and SENSEX are more or less in the same direction.

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.490 approx. (1-Jul-09 to 7-Sept- Resistance Level Rs.1425 Support level RS.430 approx. 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. Support Level Rs.1275 approx.1. . 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.

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. 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.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. Maruti respectively. In above figure we have compare the share price of Tata Motor and Maruti with moving average of 50 period of Tata Motors. It is designed to keep you in line with the security's price trend by buying shortly after the .

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 shows that an investor can kept a hold position or can buy for longer period . In the near future both the companies show Buy signal as their security prices rises above its moving average. Maruti respectively by taking share prices of 5 year to take out the Moving average for 200 periods. 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's price bottoms and selling shortly after it tops. 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. 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. 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. 3. It shows that both companies are performing better.

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. . TATA MOTORS MACD Sell Overboug Overso Buy Above graph shows the MACD of TATA motors for the period of 6 months. here are three popular ways to use the MACD: crossovers. 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. overbought/oversold. The MACD is the difference between a 26-day and 12-day exponential moving average. 4. and divergences. A 9-day exponential moving average(EMA).

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 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. a longer period Moving Average-50 periods) which is considered a bullish crossover or below which is considered a bearish crossover. 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. 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. 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.e. 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. M. 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 crossover occurs when a faster Moving Average (i.e.A. 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.

BOLLINGER BAND Bollinger bands are used to measure a market’s volatility. this little tool tells us whether the market is quiet or whether the market is LOUD! When the market is quiet. It’s also seen that the volatility increased to new highs after July because the bands started to widen. Suzuki When the stock is outside the upper end of the Bollinger band it is considered as ‘OVERBOUGHT’. and when the market is LOUD. . i. It’s better to buy stocks when it touches the lower band. The prices fell too fast and are susceptible to bargain hunting. 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. the bands expand. the bands contract. while in mid of July the stock went below the lower band. An oversold stock has gone down too fast. During the months of April. 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. which means that stock has gone up too fast and when a stock is outside the lower band it is ‘OVERSOLD’. 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. May.e. but in regards all other technical factors should be considered while buying.5. The overbought and oversold stocks are apt to reverse course. Basically.

and it can assist with timing issues in trading. there is a possibility of trend reversal. Such levels merely indicate that prices are high or low on a relative basis. The buy and sell signals are not given when prices reach the upper or lower bands. 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.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. Knowing whether or not prices are high or low on a relative basis can enhance the interpretation of other indicators. . A security can become overbought or oversold for an extended period of time. 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. The stock also shows overbought many times during the six months but it did not show any oversold trend. During the june month the bands contracted very much which shows low volatility. because when price is trading near the upper or lower Bollinger band line.

490 if certain correction made in the market. 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. moreover in two wheeler segment many companies like Mahindra and Mahindra grow even more than expectations.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. 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. I have also come to know that share price movement of TATA Motors is just according to the movement of SENSEX. The Indian auto market is still untapped.7% and the above facts and figures in our study also support this truth.g. . as we seen in last 3-4 months TATA recovers approx.1425 and that of TATA Motors will move in the range of Rs. 430 to Rs.90% after downfall. From the Technical Analysis of both companies i come to know that the share price of Maruti will move in the band of Rs. 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. 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.1275 to Rs. www.moneycontrol.BIBLIOGRAPHY FDI statistic government of India India Central Statistical Organization Economic Times .com www.