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Security Analysis and Portfolio Management

Security Analysis and Portfolio Management

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SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

A PRESENTATION ON ECONOMY

Economy Analysis 

INDIA  UNITED STATES  UNITED KINGDOM

India- An economic overview 
Twelfth largest economy in the world by nominal value.  Fourth largest by purchasing power parity.  An emerging economic power.  By 2020, India will be among the leading economies of the world.

ECONOMIC FACTORS
‡ GDP
7.20% ($1.242 trillion) service industry: 62.6% industrial and agricultural sector: 20% and 17.5% India's per capita income is $1032

‡ INFLATION
10%(approx)

‡ AGRICULTURE
India ranks second worldwide in farm output. It accounts for 17.5% growth in GDP.

‡ MONSOON
Automobiles, FMCG and Cement.

TAX STRUCTURE 
Personal Tax  Domestic Tax  Foreign Company Tax

BUDGET
‡ To lead economy to high GDP growth rate of 9% p.a. ‡ To counter the negative fallout of the global slowdown on the Indian economy. ‡ Increase expenditure on public projects. ‡ Fringe Benefit Tax is scrapped. ‡ IT exemption limit for Women hiked is to Rs 1,90,000 .

INTEREST RATE
‡ India benchmark interest rate stands at 3.50 percent ‡ The repurchase rate was raised to 5% from 4.75%

Table showing the transitions

Year 2010 2009 2008 2007

Jan 3.25 4.05 6.00 6.00

Feb 3.25 4.00 6.00 6.00

Mar 3.34 3.55 6.00 6.00

Apr 3.50 3.39 6.00 6.00

May

Jun

July

Aug

Sep

Oct

Nov

Dec

3.25 6.00 6.00

3.25 6.00 6.00

3.25 6.00 6.00

3.25 6.00 6.00

3.25 6.00 6.00

3.25 6.00 6.00

3.25 6.00 6.00

3.25 5.24 6.00

US- AN ECONOMIC OVERVIEW
‡ World¶s largest nominal economy. ‡ Allows the private sector to make the majority of economic decisions. ‡ Services make up 78.5% of GDP, industry 20.5% and agriculture less than 1%.

ECONOMIC FACTORS
‡ GDP
5.50 %, $14.2 trillion per capita income $46,442

‡ INFLATION
2.39%

GDP RATE OF U.S.

NATURAL RESOURCES
Rich in mineral resources and fertile farm Fortunate to have a moderate climate Labour mobility Controls almost half of world grain exports

BUDGET
Budget totals $3.55 trillion Significant debt increases Projected to nearly double to $20 trillion by 2015 Real GDP growth (after inflation) ranging from 2.6% to 4.6%

TAX STRUCTURE 2010 Taxable Income $0 ± $8,375 $8,375 ± $34,000 $34,000 ± $82,400 $82,400 ± $171,850 $171,850 ± $373,650 $373,650 +

Rate 10% 15% 25% 28% 33% 35%

INTEREST RATE
‡ Benchmark interest rate stands at 0.25 percent. ‡ Fed Retains Pledge to Keep Rates Low for Extended Period

Table showing the transitions

Year 2010 2009 2008 2007

Jan 0.25 0.25 3.92 5.25

Feb 0.25 0.25 3.00 5.25

Mar 0.25 0.25 2.64 5.25

Apr 0.25 0.25 2.24 5.25

May

Jun

July

Aug

Sep

Oct

Nov

Dec

0.25 2.00 5.25

0.25 2.00 5.25

0.25 2.00 5.25

0.25 2.00 5.25

0.25 2.00 5.01

0.25 1.54 4.74

0.25 1.00 4.50

0.25 0.63 4.33

UK- AN ECONOMIC OVERVIEW
‡ Major developed capitalist economy. ‡ Currently the world's sixth largest by nominal GDP. ‡ The sixth largest by purchasing power parity. ‡ Third largest economy in Europe (nominal value). ‡ Second largest in terms of purchasing power parity. ‡ Per capita income $43,785 and is 18th highest in the world.

ECONOMIC FACTORS
‡ GDP 
3.1%, $2.674 trillion  one of the strongest EU economies in terms of inflation,

interest rates and unemployment 
Agriculture (1%), industry (23%), services (76%)

‡ INFLATION 
3%

TAX STRUCTURE
‡ based on a rate/band structure. ‡ contains a number of tax allowances. ‡ tax credits.

NATURAL RESOURCES
‡ The majority of electricity is generated by a mix of fossil fuels and nuclear power. ‡ Main commercial minerals-sand, gravel, limestone and gypsum. ‡ In 1970s, third largest producer of coal.

AGRICULTURE
‡ Most of the land is suitable for agriculture ‡ the largest area is reserved for pasture and grazing land ‡ Agriculture provides around 60 per cent on the country's food needs. ‡ Contributes 1% to the GDP

INTEREST RATES
‡ Interest rates have fallen significantly ‡ Base Interest rates could fall to 1.5%

BUDGET
‡ Increase in the top rate of income tax for high earners. ‡ Increased tax bills. ‡ Increased differential between income tax and capital gains. ‡ Removal of higher rate relief for pension contributors.

SECTORS
‡ AUTOMOBILE ‡ INFRASTRUCTURE SECTOR ‡ TECHNOLOGY SECTOR ‡ SERVICE SECTOR ‡ AGRICULTURE

AUTOMOBILE
‡ India has become one of the international players in the automobile market. ‡ India ranks 2nd in the global two-wheeler market. ‡ India is the 4th biggest commercial vehicle market in the world. ‡ India ranks 11th in the international passenger car market. ‡ It is expected that the Automobile Industry in India would be the 7th largest automobile market within the year 2016 .

INFRASTRUCTURE SECTOR
‡ Infrastructure Sector Growth Rate in India GDP has been on the rise in the last few years. ‡ Infrastructure Sector Growth Rate in India GDP came to 3.5% in 1996- 1997 and the next year, this figure was 4.6%.

‡ It contributes 8.5% to Indian GDP.

‡ Biggest project in this sector: Golden Quadrilateral.

Information Technology Sector
‡ Earlier IT was contributing 1.2% in 1998 in India GDP but now it has increased to 5.2% in 2007. ‡ Even after the recession period is expected to over IT is expected to grow around 26% in 2010-2011 thereby helping in the growth of India Sector.

SERVICE SECTOR
‡ India ranks fifteenth in the services output and it provides employment to around 23% of the total workforce in the country. ‡ It is one of the major contributors in India GDP. ‡ Accounts for around 53.5% of the net GDP in 2007. ‡ Major factors for this being highest sector are: ± Availability of skilled work-force in low price. ± Outsourcing of various projects to India
.

AGRICULTURE
‡ This sector has shown growth after independence but is in declining phase in last few years. ‡ The country GDP of around US$ 1.09 trillion in 2007 and this makes the Indian economy the twelfth biggest in the whole world. ‡ The major factor for its decline are: ± More dependence on rain. ± Less use of sophisticated tools and technologies.

AUTOMOBILE
‡ TATA MOTORS ‡ MARUTI SUZUKI LTD ‡ MAHINDRA & MAHINDRA ‡ BAJAJ AUTO LTD ‡ HERO HONDA

TATA MOTORS
‡ DIVIDEND PAID:

YEAR 2009 2008 2007 2006 2005

MONTH MAY MAY MAY MAY MAY

DIVIDEND 60 150 150 130 125

QUARTERLY REPORT:
Dec ' 09 Sales 8,979.90 Sep ' 09 7,978.82 1,050.27 285.64 1,185.56 14.18 Jun ' 09 6,404.63 716.79 253.45 782.70 9.99 Mar ' 09 6,894.88 535.91 244.65 372.83 11.51 Dec ' 08 4,758.62 77.93 168.42 9.02 -5.12

Operatin 1,129.29 g profit Interest Gross profit 286.14 843.36

EPS (Rs) 7.36

RATIOS AS OF MAR·09 PER SHARE RATIOS
E.P.S. Dividend per Share Operating Profit per Share Net Operating income per share Rs. 17.93 Rs. 6.00 Rs. 33.52 Rs. 499.23 Operating Ratio Gross Profit Ratio Net Profit Ratio 6.71 % 3.30% 3.77

PROFITABILITY RATIOS

LEVERAGE RATIOS
Long term debt/ Equity Ratio Total debt/Equity Ratio Fixed assets turnover Ratio 0.49 1.06 1.88

LIQUIDITY RATIOS
Current Ratio Quick Ratio Inventory Turnover ratio 0.84 0.58 13.47

MARUTI SUZUKI
DIVIDEND PAID:
Month Apr Apr Apr Jul May May Dividend (%) 70 100 90 70 40 30

Year 2009 2008 2007 2006 2005 2004

QUARTERLY REPORT:

Dec ' 09 Sales Operating profit Interest Gross profit EPS (Rs) 7,502.85 1,133.91 8.37 1,216.79 23.80

Sep ' 09 7,202.61 916.14 5.97 1,020.18 19.73

Jun ' 09 6,493.00 793.17 6.31 1,003.39 20.20

Mar ' 09 6,432.90 449.30 8.87 545.87 8.42

Dec ' 08 4,625.81 296.78 4.51 469.96 7.39

RATIOS AS OF MAR·09
PER SHARE RATIOS PROFITABILITY RATIOS

EPS Dividend per Share Operating Profit per share Net Operating income per share
LEVERAGE RATIOS Long term debt/Equity Total debt/Equity Fixed assets turnover ratio

Rs. 42.81 Rs. 3.50 Rs. 65.89 Rs. 717.50

Operating Ratios Gross Profit Ratio Net Profit Ratio
LIQUIDITY RATIOS

9.18% 5.77% 5.72%

0.06 0.07 2.38

Current Ratio Quick Ratio Inventory turnover Ratio

1.53 1.26 30.46

MAHINDRA & MAHINDRA
DIVIDEND PAID:

Year 2009 2008 2007 2007 2006 2005

Month May May May Mar May May

Dividend (%) 100 115 40 75 100 130

QUARTERLY REPORT:

Dec ' 09 Sales Operating profit Interest Gross profit EPS (Rs)

Sep ' 09

Jun ' 09

Mar ' 09 Dec ' 08

4,497.12 4,557.77 4,242.59 3,654.45 2,519.25 669.51 8.20 685.66 7.56 831.18 12.76 951.73 12.86 608.97 5.95 626.59 7.34 561.24 20.91 601.76 7.67 38.66 14.10 68.18 0.02

RATIOS AS OF MAR·09 PER SHARE RATIOS E.P.S. Dividend per Share Operating profit per share Net Operating income per share LEVERAGE RATIOS Rs. 28.35 Rs. 10.00 Rs. 40.07 Rs. 481.48 PROFITABILITY RATIOS Operating Ratio Gross Profit Ratio Net Profit Ratio 8.32 6.10 6.22

LIQUIDITY RATIOS

Long term debt/Equity Ratio Total debt/Equity ratio Fixed Assets turnover ratio

0.83 0.77 2.85

Current Ratio Quick Ratio Inventory turnover ratio

1.06 0.83 14.60

BAJAJ AUTO
DIVIDEND PAID:

Year 2009 2008 2007 2006 2005

Month May May May May May

Dividend (%) 20 10 30 40 75

QUARTERLY REPORT:

Dec ' 09 Sales 249.31

Sep ' 09 219.48 80.30 46.01 34.55 5.93

Jun ' 09 189.56 66.15 41.63 24.81 4.16

Mar ' 09 175.41 60.93 36.20 25.12 4.11

Dec ' 08 157.46 58.83 41.77 17.60 3.08

Operatin 100.30 g profit Interest Gross profit 55.29 45.32

EPS (Rs) 7.46

RATIOS AS OF MAR·09
PER SHARE RATIOS PROFITABILITY RATIOS Rs. 7.98 Rs. 2.00 Rs. 36.59 Rs. 139.23

E.P.S. Dividend per Share Operating profit per share Net Operating income per share LIQUIDITY RATIOS

Operating Ratio Gross Profit Ratio Net Profit Ratio

26.28 25.18 5.73

LEVERAGE RATIOS Long term debt/Equity Ratio Total debt/Equity ratio Fixed Assets turnover ratio 0.38 1.48 9.99

Current Ratio Quick Ratio

2.79 1.20

HERO-HONDA
DIVIDEND PAID:

Year 2010 2010 2009 2008 2007 2006 2005

Month Apr Mar Apr Apr May May Apr

Dividend (%) 1,500 4,000 1,000 950 850 1,000 1,000

QUARTERLY REPORT:

Mar ' 10 Sales 4,122.32

Dec ' 09 3,827.03 660.92 -4.59 720.46 26.83

Sep ' 09 4,059.44 744.17 -6.10 818.98 29.90

Jun ' 09 3,822.44 650.12 -5.46 698.06 25.04

Mar ' 09 3,422.52 549.08 -9.63 602.95 20.14

Operating 711.74 profit Interest Gross profit EPS (Rs) -4.47 785.70 29.99

RATIOS AS OF MAR·09
PER SHARE RATIOS E.P.S. Dividend per Share Operating profit per share Net Operating income per share LIQUIDITY RATIOS Rs. 58.50 Rs. 20.00 Rs. 87.79 Rs. 617.23 LEVERAGE RATIOS Long term debt/Equity Ratio Total debt/Equity ratio Fixed Assets turnover ratio 0.02 0.02 5.34 PROFITABILITY RATIOS Operating Ratio Gross Profit Ratio Net Profit Ratio 14.22% 12.75% 10.30%

Current Ratio Quick Ratio Inventory turnover ratio

0.46 0.31 47.53

RECENT TREND
COMPANY TATA MOTORS MARUTI SUZUKI MAHINDRA & MAHINDRA BAJAJ AUTO HERO HONDA 1841.45 1938.00 2107.35 1879.65 14.43 -3.01 17/03/2010 789.80 1465.00 23/04/2010 844.85 1361.35 (%) CHANGE 6.97 -7.07

TARGET COMPANY
‡ We have decided to invest in TATA Motors due to the following reasons: 

It is showing growth in the near future trend.  Unlike other companies TATA¶s distribute vehicles in

various sector also. 
TATA¶s are looking to invest in the manufacturing of their

own vehicles only.

The Coming Stock Market Crash?

‡ Decrease by 15%. ‡ Invest in powerful company. ‡ Weak company can crash.

PRESENTED BY: SHRIKANT KUMAR MANJRI VARU SHOUBHIK SEN MANISH SINGH ROUNIT ROY SUMIT THAKUR

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