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Fundamental and Technical Analysis of

Portfolio Management
MASTER OF COMMERCE
BANKING & FINANCE
SEMESTER 3
(2015-16)

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INDEX
Sr. No.

PARTICULARS

Page No.

Executive Summary

Introduction

Fundamental Analysis

Technical Analysis

13

Case Study
5

Overview of Automotive Sector


Company Fundamental Analysis
Company Technical Analysis
Findings and case conclusion

27

Conclusion

47

Bibliography

48

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EXECUTIVE SUMMARY
SCOPE OF THE STUDY:
This study is most important because both fundamental and technical analysis helps investors
in better understanding the markets and gauges the direction in which their investments might
be headed and its utility helps in estimating the future trends of the stock prices and to make a
decent profit out of it.
BACKGROUND OF THE PROJECT:
In the recent past, the bank interest rates have been increased steadily. But the rate of
Inflation has also been increased. There is no big difference between the interest rate and
Inflation rate. Because of inflation, value of money has been decreased and cost of living has
been increased. This has created panic among lower, middle and upper middle class families
who considered keeping their savings in banks as safe as well as remunerative. So, the
investors are searching for proper investment avenues. Here, an attempt is made to predict the
future movement of scripts. This study helps the investors to invest in shares.
The stock exchange comes in the secondary market. Stock exchange performs activities such
as trading in share, securities, bonds, mutual fund & commodities. Stock Broking industry is
growing at an enormous rate, as more and more people are attracted towards stock exchanges
with the hope of making profits.
To quote couple of examples, the Automobile industry in India has consistently
registered strong performance. The automobile industry had a growth of 15.4 % during AprilJanuary 2007, with the average annual growth of 10-15% over the last decade or so. With the
incremental investment of $35-40 billion, the growth is expected to double in the next 10
years. Consistent growth and dedication have made the Indian automobile industry the
second- largest tractor and two-wheeler manufacturer in the world. It is also the fifth-largest
commercial vehicle manufacturer in the world. The Indian automobile market is among the
largest in Asia.
The Indian automobile industry is going through a phase of rapid change and high
growth. With new projects coming up on a regular basis, the industry is undergoing
technological change. The major players are expanding their plants and focusing on mass
customization, mass production, etc. Nearly every automobile company is investing at a
higher rate than ever before to achieve a high growth trajectory. The overall investment in the
sector has been increasing quite rapidly. It is expected that by the end of 2010 Indian
automobile sector will be investing a huge amount as Rs. 30,000 crores. At present the
industry is enjoying a growth rate of 14-17% per annum, with domestic sales growth at
12.8%. The growth rate is predicted to double by 2015.

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OBJECTIVES OF THE STUDY:


1) To analyze individual company scripts by considering the factors relating to the
economy, industry and the respective company.
2) To predict investor positions (Buy, sell & hold).
3) To know the future trend of Stock Prices of Tata Motors and Maruti Suzuki Ltd. in
capital market.
4) To know which securities to be bought and which securities not to be bought.
5) To know which securities to be sold and which securities not to be sold.

METHODOLOGY:
The Secondary data is collected from the annual reports of the company, relevant text books
on the subject matter and companys official website.

TOOLS:
1. Moving Average Method.
2. Relative Strength Index (RSI).
3. Candlestick Charting.

LIMITATIONS OF THE STUDY:


1. The study is limited only to automobile sector and 2 companies
2.

I have used only 3 Technical tools to predict the movement of Scrips.

3. Fundamental Analysis is used to analyze only financial performance of the


companies.
4. Only Technical Analysis is used to predict the stock prices of the companies.

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INTRODUCTION
In India, Portfolio Management is still in its infancy. Barring a few Indian banks, and foreign
banks and UTI, no other agency had professional Portfolio management until 1987. After the
success of Mutual Funds in Mutual Funds, since / 1987, Professional Portfolio Management,
backed by competent research staff became the order of the day. After the success of Mutual
Funds in Portfolio Management, a number of brokers and Investment Consultants some of
whom are also professionally qualified have become Portfolio Managers. They have managed
the funds of clients on both discretionary and nondiscretionary basis. It was fou:1d that many
of them, including Mutual Funds have guaranteed a minimum return or capital appreciation
and adopted all kinds of incentives which are now prohibited by SEB!. They resorted to
speculative over trading and insider trading, discounts, etc., to achieve their targeted returns
to the clients, which are also prohibited by SEBI. The recent CBI probe into the operations of
many market dealers has revealed the unscrupulous practices by banks, dealers and brokers in
their Portfolio Operations. The SEBI has then imposed stricter rules, which included their
registration, a code of conduct and minimum infrastructure, experience and expertise etc. It is
no longer possible for. any unemployed youth, or retired person or self-styled consultant to
engage in Portfolio Management without the SEBIs licence. The guidelines of SEBI are in
the direction of making Portfolio Manage-ment a responsible professional service to be
rendered by experts in the field.
Basically Portfolio Management involves
a. A proper investment decision-making of what to buy and sell;
b. Proper money management in terms of investment in a basket of assets so as to satisfy the
asset preferences of investors;
c. Reduce the risk and increase returns
Portfolio Management Service As per the SEBI norms, it refers to professional services
rendered for manage-ment of Portfolio of others, namely, clients or customers with the help
of experts in Invesm1cnt Advisory Services. The latter involves the advice regarding the
worthwhileness of any particular investment or advice of what to .buy and sell. Investment
management on the other hand involves continuing relationship with client to manage
investments with or without discretion for the client as per his requirements.

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Fundamental Analysis
Fundamental analysis is the examination of the underlying forces that affect the well-being of
the economy, industry groups and companies. As with most analysis, the goal is to develop a
forecast of future price movement and profit from it. At the company level, fundamental
analysis may involve examination of financial data, management, business concept and
competition. At the industry level, there might be an examination of supply and demand
forces of the products. For the national economy, fundamental analysis might focus on
economic data to assess the present and future growth of the economy. To forecast future
stock prices, fundamental analysis combines economic, industry, and company analysis to
derive a stocks fair value called intrinsic value. If fair value is not equal to the current stock
price, fundamental analysts believe that the stock is either over or under valued. As the
current market price will ultimately gravitate towards fair value, the fair value should be
estimated to decide whether to buy the security or not. By believing that prices do not
accurately reflect all available information, fundamental analysts look to capitalize on
perceived price discrepancies.
Fundamental Analysis is a method of evaluating a security by attempting to measure its
intrinsic value by examining related economic, financial and other qualitative and
quantitative factors. Fundamental analysts attempt to study everything that can affect the
securitys value, including macroeconomic factors (like the overall economy and industry
conditions) and individual specific factors (like the financial condition and management of
companies).

OBJECTIVES OF FUNDAMENTAL ANALYSIS


To predict the direction of national economy because economic activity affects the
corporate profit, investor attitudes and expectation and ultimately security prices.
To estimate the stock price changes by studying the forces operating in the overall
economy, as well as influences peculiar to industries and companies.
To select the right time and right securities for the investment.
THREE PHASES OF FUNDAMENTAL ANALYSIS
1) Understanding of the macro-economic environment and developments (Economic
Analysis)
2) Analyzing the prospects of the industry to which the firm belongs (Industry Analysis)
3) Assessing the projected performance of the company (Company Analysis)
The three phase examination of fundamental analysis is also called as an EIC (EconomyIndustry-Company analysis) framework or a top-down approach- Here the financial analyst
first makes forecasts for the economy, then for industries and finally for companies. The
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industry forecasts are based on the forecasts for the economy and in turn, the company
forecasts are based on the forecasts for both the industry and the economy. Also in this
approach, industry groups are compared against other industry groups and companies against
other companies. Usually, companies are compared with others in the same group. For
example, a telecom operator (Spice) would be compared to another telecom operator not to
an oil company.
Thus, the fundamental analysis is a 3 phase analysis of
a) The economy
b) The industry and
c) The company

Phase
FIRST

Nature of Analysis
Economic Analysis

SECOND

Industry Analysis

THIRD

Company Analysis

Purpose
To access the general
Economic situation
of the Nation.
To assess the
prospects of Various
industry groupings.
To analyze the
Financial and Nonfinancial aspects of a
company to
determine whether to
buy, sell or hold the
shares of a company.

Tools and techniques


Economic indicators

Industry life cycle


analysis, Competitive
analysis of industries
etc.
Analysis of Financial
aspects: Sales,
Profitability, EPS etc.
Analysis of Nonfinancial aspects:
management,
corporate image,
product quality etc.

STRENGTHS OF FUNDAMENTAL ANALYSIS


Long-term Trends
Fundamental analysis is good for long term investments based on long-term trends. The
ability to identify and predict long-term economic, demographic, technological or consumer
trends can benefit investors and helps in picking the right industry groups or companies.
Value Spotting
Sound fundamental analysis will help identify companies that represent a good value. Some
of the most legendary investors think for long-term and value. Fundamental analysis can help
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uncover the companies with valuable assets, a strong balance sheet, stable earnings, and
staying power.
Business Acumen
One of the most obvious, but less tangible rewards of fundamental analysis is the
development of a thorough understanding of the business. After such painstaking research
and analysis, an investor will be familiar with the key revenue and profit drivers behind a
company. Earnings and earnings expectations can be potent drivers of equity prices. A good
understanding can help investors avoid companies that are prone to shortfalls and identify
those that continue to deliver.
Value Drivers
In addition to understanding the business, fundamental analysis allows investors to develop
an understanding of the key value drivers within the company. A stocks price is heavily
influenced by the industry group. By studying these groups, investors can better position
themselves to identify opportunities that are high-risk (tech), low-risk (utilities), growth
oriented (computer), value driven (oil), non-cyclical (consumer staples), cyclical
(transportation) etc.
Knowing Who is Who
Stocks move as a group. Knowing a companys business, investors can better categorize
stocks within their relevant industry group that can make a huge difference in relative
valuations. The primary motive of buying a share is to sell it subsequently at a higher price.
In many cases, dividends are also to be expected. Thus, dividends and price changes
constitute the return from investing in shares. Consequently, an investor would be interested
to know the dividend to be paid on the share in the future as also the future price of the share.
These values can only be estimated and not predicted with certainty. These values are
primarily determined by the performance of the company which in turn is influenced by the
performance of the industry to which the company belongs and the general economic and
socio-political scenario of the country.
An investor who would like to be rational and scientific in his investment activity has to
evaluate a lot of information about the past performance and the expected future performance
of companies, industries and the economy as a whole before taking investment decision. Each
share is assumed to have an economic worth based on its present and future earning capacity.
This is called its intrinsic value or fundamental value. The purpose of fundamental analysis is
to evaluate the present and future earning capacity of a share based on the economy, industry
and company fundamentals and thereby assess the intrinsic value of the share. The investor
can then compare the intrinsic value of the share with the prevailing market price to arrive at
an investment decision. If the market price of the share is lower than its intrinsic value, the
investor would decide to buy the share as it is underpriced. The price of such a share is
expected to move up in future to match with its intrinsic value.

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On the contrary, when the market price of a share is higher than its intrinsic value, it is
perceived to be overpriced. The market price of such a share is expected to come down in
future and hence, the investor would decide to sell such a share. Fundamental analysis thus
provides an analytical framework for rational investment decision-making. Fundamental
analysis insists that no one should purchase or sell a share on the basis of tips and rumors.
The fundamental approach calls upon the investor to make his buy or sell decision on the
basis of a detailed analysis of the information about the company, the industry to which the
company belongs, and the economy. This results in informed investing.
The fundamental analysis can be valuable, but it should be approached with caution. If you
are reading research written by a sell-side analyst, it is important to be familiar with the
analyst behind the report. We all have personal biases, and every analyst has some sort of
bias. There is nothing wrong with this, and the research can still be of great value. Learn what
the ratings mean and track the record of an analyst before jumping to a conclusion. Corporate
statements and press releases of a company offer good information, but they should be read
with a healthy degree of skepticism to separate the facts from the spin. Press releases dont
happen by accident; they are an important PR tool for companies. Investors should become
skilled readers to weed out the important information and ignore the hype.

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Technical Analysis
Fundamental analysis and Technical analysis are the two main approaches to security
analysis. Technical analysis is frequently used as a supplement to fundamental analysis rather
than as a substitute to it. According to technical analysis, the price of stock depends on
demand and supply in the market place. It has little correlation with the intrinsic value. All
financial data and market information of a given stock is already reflected in its market price.
Technical analysts have developed tools and techniques to study past patterns and predict
future price. Technical analysis is basically the study of the markets only. Technical analysts
study the technical characteristics which may be expected at market turning points and their
objective assessment. The previous turning points are studied with a view to develop some
characteristics that would help in identification of major market tops and bottoms. Human
reactions are, by and large consistent in similar though not identical reaction; with his various
tools, the technician attempts to correctly catch changes in trend and take advantage of them.
Technical analysis is directed towards predicting the price of a security. The price at which a
buyer and seller settle a deal is considered to be the one precise figure which synthesis,
weighs and finally expresses all factors, rational and irrational, quantifiable and nonquantifiable and is the only figure that counts.
Thus, the technical analysis provides a simplified and comprehensive picture of what is
happening to the price of a security. Like a shadow or reflection it shows the broad outline of
the whole situation and it actually works in practice.
ASSUMPTIONS OF TECHNICAL ANALYSIS
The market value of a security is solely determined by the interaction of demand and
supply factors operating in the market.
The demand and supply factors of a security are surrounded by numerous factors;
these factors are both rational as well as irrational.
The security prices move in trends or waves which can be both upward or downward
depending upon the sentiments, psychology and emotions of operators or traders.
The present trends are influenced by the past trends and the projection of future trends
is possible by an analysis of past price trends.
Except minor variations, stock prices tend to move in trends which continue to persist
for an appreciable length of time.
Changes in trends in stock prices are caused whenever there is a shift in the demand
and supply factors.
Shifts in demand and supply, no matter when and why they occur, can be detected
through charts prepared specially to show market action.
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Some chart trends tend to repeat themselves. Patterns which are projected by charts
record price movements and these patterns are used by technical analysis for making
forecasts about the future patterns.
TOOLS AND TECHNIQUES OF TECHNICAL ANALYSIS
There are numerous tools and techniques for doing technical analysis. Basically this analysis
is done from the following four important points of view:1) Prices: Whenever there is change in prices of securities, it is reflected in the changes in
investor attitude and demand and supply of securities.
2) Time: The degree of movement in price is a function of time. The longer it takes for a
reversal in trend, greater will be the price change that follows.
3) Volume: The intensity of price changes is reflected in the volume of transactions that
accompany the change. If an increase in price is accompanied by a small change in
transactions, it implies that the change is not strong enough.
4) Width: The quality of price change is measured by determining whether a change in trend
spreads across most sectors and industries or is concentrated in few securities only. Study of
the width of the market indicates the extent to which price changes have taken place in the
market in accordance with a certain overall trends.
DOW THEORY
The Dow Theory, originally proposed by Charles Dow in 1900 is one of the oldest technical
methods still widely followed. The basic principles of technical analysis originate from this
theory.
According to Charles Dow The market is always considered as having three movements, all
going at the same time. The first is the narrow movement from day to day. The second is the
short swing, running from two weeks to a month or more and the third is the main movement,
covering at least four years in its duration.
The Theory advocates that stock behaviour is 90% psychological and 10% logical. It is the
mood of the Crowd which determines the way in which prices move and the move can be
gauged by analysing the price and volume of transactions.
The Dow Theory only describes the direction of market trends and does not attempt to
forecast future movements or estimate either the duration or the size of such market trends.
The theory uses the behaviour of the stock market as a barometer of business conditions
rather than as a basis for forecasting stock prices themselves. It is assumed that most of the
stocks follow the underlying market trend, most of the times.
A trend should be assumed to continue in effect until such time as its reversal has been
definitely signalled. The end of a bull market is signalled when a secondary reaction of
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decline carries prices lower than the level recorded during the earlier reaction and the
subsequent advance fails to carry prices above the top level of the preceding recovery. The
end of a bear market is signalled when an intermediate recovery carries prices to a level
higher than the one registered in the previous advance and the subsequent decline halts above
the level recorded in the earlier reaction.

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Moving Average:
A Moving Average is an indicator that shows the average value of a security's price over a
period of time. When calculating a moving average, a mathematical analysis of the security's
average value over a predetermined time period is made. As the securities price changes, its
average price moves up or down.
There are several popular ways to calculate a moving average. Meta Stock for Java
calculates a "simple" moving average--meaning that equal weight is given to each price over
the calculation period.
Interpretation:
The most popular 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.
This type of moving average trading system is not intended to get you in at the exact
bottom nor out at the exact top. Rather, it is designed to keep you in line with the security's
price trend by buying shortly after the security's price bottoms and selling shortly after it tops.
The critical element in a moving average is the number of time periods used in calculating the
average. When using hindsight, you can always find a moving average that would have been
profitable. The key is to find a moving average that will be consistently profitable. The most
popular moving average is the 39-week (or 200-day) moving average. This moving average
has an excellent track record in timing the major (long-term) market cycles.
Advantages:
The advantage of moving average system of this type (i.e., buying and selling when prices
break through their moving average) is that you will always be on the "right" side of the
market: prices cannot rise very much without the price rising above its average price. The
disadvantage is that you will always buy and sell some late. If the trend does not last for a
significant period of time, typically twice the length of the moving average, you will lose
your money.
Support and Resistance:
Support and resistance represent key junctures where the forces of supply and demand meet.
In the financial markets, prices are driven by excessive supply (down) and demand (up).
Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish,
bulls and buying. These terms are used interchangeably throughout this and other articles. As
demand increases, prices advance and as supply increases, prices decline. When supply and
demand are equal, prices move sideways as bulls and bears slug it out for control.
What Is Support?
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Support is the price level at which demand is thought to be strong enough to prevent the price
from declining further. The logic dictates that as the price declines towards support and gets
cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the
time the price reaches the support level, it is believed that demand will overcome supply and
prevent the price from falling below support.
Support does not always hold and a break below support signals that the bears have won out
over the bulls. A decline below support indicates a new willingness to sell and/or a lack of
incentive to buy. Support breaks and new lows signal that sellers have reduced their
expectations and are willing sell at even lower prices. In addition, buyers could not be
coerced into buying until prices declined below support or below the previous low. Once
support is broken, another support level will have to be established at a lower level.
Where Is Support Established?
Support levels are usually below the current price, but it is not uncommon for a security to
trade at or near support. Technical analysis is not an exact science and it is sometimes
difficult to set exact support levels. In addition, price movements can be volatile and dip
below support briefly. Sometimes it does not seem logical to consider a support level broken
if the price closes 1/8 below the established support level. For this reason, some traders and
investors establish support zones.
What Is Resistance?
Resistance is the price level at which selling is thought to be strong enough to prevent the
price from rising further. The logic dictates that as the price advances towards resistance,
sellers become more inclined to sell and buyers become less inclined to buy. By the time the
price reaches the resistance level, it is believed that supply will overcome demand and
prevent the price from rising above resistance.
Resistance does not always hold and a break above resistance signals that the bulls have won
out over the bears. A break above resistance shows a new willingness to buy and/or a lack of
incentive to sell. Resistance breaks and new highs indicate buyers have increased their
expectations and are willing to buy at even higher prices. In addition, sellers could not be
coerced into selling until prices rose above resistance or above the previous high. Once
resistance is broken, another resistance level will have to be established at a higher level.
Where Is Resistance Established?
Resistance levels are usually above the current price, but it is not uncommon for a security to
trade at or near resistance. In addition, price movements can be volatile and rise above
resistance briefly. Sometimes it does not seem logical to consider a resistance level broken if
the price closes 1/8 above the established resistance level. For this reason, some traders and
investors establish resistance zones.
So, Here, Identification of key support and resistance levels is an essential ingredient to
successful technical analysis. Even though it is sometimes difficult to establish exact support
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and resistance levels, being aware of their existence and location can greatly enhance analysis
and forecasting abilities. If a security is approaching an important support level, it can serve
as an alert to be extra vigilant in looking for signs of increased buying pressure and a
potential reversal. If a security is approaching a resistance level, it can act as an alert to look
for signs of increased selling pressure and potential reversal. If a support or resistance level is
broken, it signals that the relationship between supply and demand has changed. A resistance
breakout signals that demand (bulls) has gained the upper hand and a support break signals
that supply (bears) has won the battle.

Price Oscillator:
The Price Oscillator displays the difference between two moving averages of a security's
price. The difference between the moving averages can be expressed in either points or
percentages.
The Price Oscillator is almost identical to the MACD, except that the Price Oscillator can use
any two user-specified moving averages. (The MACD always uses 12 and 26-day moving
averages, and always expresses the difference in points.)
Interpretation:
Moving average analysis typically generates buy signals when a short-term moving
average (or the security's price) rises above a longer-term moving average. Conversely, sell
signals are generated when a shorter-term moving average (or the security's price) falls below
a longer-term moving average. The Price Oscillator illustrates the cyclical and often
profitable signals generated by these one or two moving average systems.

Price Rate-Of-Change:
The Price Rate-of-Change ("ROC") indicator displays the difference between the current
price and the price x-time periods ago. The difference can be displayed in either points or as
a percentage. The Momentum indicator displays the same information, but expresses it as a
ratio.
Interpretation:
It is a well-recognized phenomenon that security prices surge ahead and retract in a
cyclical wave-like motion. This cyclical action is the result of the changing expectations as
bulls and bears struggle to control prices.
The ROC displays the wave-like motion in an oscillator format by measuring the amount that
prices have changed over a given time period. As prices increase, the ROC rises; as prices
fall, the ROC falls. The greater the change in prices, the greater the change in the ROC.

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The time period used to calculate the ROC may range from 1-day (which results in a volatile
chart showing the daily price change) to 200-days (or longer). The most popular time periods
are the 12- and 25-day ROC for short to intermediate-term trading. These time periods were
popularized by Gerald Appel and Fred Hitschler in their book, Stock Market Trading
Systems.
The 12-day ROC is an excellent short- to intermediate-term overbought/oversold indicator.
The higher the ROC, the more overbought the security; the lower the ROC, the more likely a
rally. However, as with all overbought/oversold indicators, it is prudent to wait for the
market to begin to correct (i.e., turn up or down) before placing your trade. A market that
appears overbought may remain overbought for some time. In fact, extremely
overbought/oversold readings usually imply a continuation of the current trend.
The 12-day ROC tends to be very cyclical, oscillating back and forth in a fairly regular
cycle. Often, price changes can be anticipated by studying the previous cycles of the ROC
and relating the previous cycles to the current market.
RESISTANCE AND SUPPORT LEVELS
The peak price of the stock is called the resistance area. Resistance level is the price level to
which the stock or market rises and then falls repeatedly. This occurs during an uptrend or a
sideway trend. It is a price level to which the market advances repeatedly but cannot break
through. At this level, selling increases which causes the price fall. Support level shows the
previous low price of the stock. It is a price level to which a stock or market price falls or
bottom out repeatedly and then bounce up again. Demand for the stock increases as the price
approaches a support level. The buying pressure or the demand supports the price of stock
preventing it from going lower.
The figure shows that if the share price persistently fails to rise above a certain level, this is
known as resistance level. This is perhaps because at this price people who purchased
previously, but then saw the share prices fall, took the opportunity to sell at the price they
previously paid. Likewise, a support level is a price at which buyers constantly seem to come
forward to prevent the share
prices dropping any further.
The support and resistance levels
are important tools in confirming
a reversal, in forecasting the
course of prices, and in making
appropriate price moves.

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BREAK-OUT THEORY
Break out is also called as confirmation. This is indicated by drawing a line, which is a
period of consolidation, when the share prices move sideways within a range of about 5% of
the share price. Eventually a break out will occur and it is often suggested that the longer the
period of consolidation, the greater will be the extent of ultimate rise or fall.

Breakout is a signal for the investors who wish to


buy or sell their stocks.

Relative Strength Index (RSI):


The Relative Strength Index ("RSI") is a popular oscillator. It was first introduced by Welles
Wilder in an article in Commodities (now known as Futures) Magazine in June, 1978.
The name "Relative Strength Index" is slightly misleading as the Relative Strength Index
does not compare the relative strength of two securities, but rather the internal strength of a
single security. A more appropriate name might be "Internal Strength Index."
Interpretation:
When Wilder introduced the Relative Strength Index, he recommended using a 14-day
Relative Strength Index. Since then, the 9-day and 25-day Relative Strength Indexs have also
gained popularity. The fewer days used to calculate the Relative Strength Index, the more
volatile the indicator.
The Relative Strength Index is a price-following oscillator that ranges between 0 and 100. A
popular method of analyzing the Relative Strength Index is to look for a divergence in which
the security is making a new high, but the Relative Strength Index is failing to surpass its
previous high. This divergence is an indication of an impending reversal. When the Relative
Strength Index then turns down and falls below its most recent trough, it is said to have
completed a "failure swing." The failure swing is considered a confirmation of the
impending reversal.
In Mr. Wilder's book, he discusses five uses of the Relative Strength Index:
1. Tops and Bottoms. The Relative Strength Index usually tops above 70 and bottoms
below 30. It usually forms these tops and bottoms before the underlying price chart.
2. Chart Formations. The Relative Strength Index often forms chart patterns such as
head and shoulders or triangles that may or may not be visible on the price chart.
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3. Failure Swings (also known as support or resistance penetrations or breakouts). This


is where the Relative Strength Index surpasses a previous high (peak) or falls below a
recent low (trough).
4. Support and Resistance. The Relative Strength Index shows, sometimes more
clearly than price themselves, levels of support and resistance.
5. Divergences. As discussed above, divergences occur when the price makes a new
high (or low) that is not confirmed by a new high (or low) in the Relative Strength
Index. Prices usually correct and move in the direction of the Relative Strength
Index.

Trend lines:
In the preceding section, we saw how support and resistance levels can be penetrated by a
change in investor expectations (which results in shifts of the supply/demand lines). This
type of a change is often abrupt and "news based."
In this section, we'll review "trends." A trend represents a consistent change in prices (i.e., a
change in investor expectations). Trends differ from support/resistance levels in that trends
represent change, whereas support/resistance levels represent barriers to change.
As shown in the following chart, a rising trend is defined by successively higher low-prices.
A rising trend can be thought of as a rising support level--the bulls are in control and are
pushing prices higher.

As shown in the next chart, a falling trend is defined by successively lower high-prices. A
falling trend can be thought of as a falling resistance level--the bears are in control and are
pushing prices lower.

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The Bar Chart:


The Bar chart is one of the most popular types of charts used in technical analysis. As
illustrated on the left, the top of the vertical line indicates the highest price at which a security
traded during the day, and the bottom represents the lowest price. The closing price is
displayed on the right side of the bar and the opening price is shown on the left side of the
bar. A single bar like the one to the left represents one day of trading.

The chart below is an example of a bar chart for AT&T (T):

The advantage of using a bar chart over a straight-line graph is that it shows the high, low,
open and close for each particular day.

Candle sticks Charting:


Candlestick charts have been around for hundreds of years. They are often referred to as
"Japanese candles" because the Japanese would use them to analyze the price of rice
contracts.
Similar to a bar chart, candlestick charts also display the open, close, daily high and daily
low. The difference is the use of color to show if the stock went up or down over the day.

Page | 19

The chart below is an example of a candlestick chart for AT&T (T). Green bars indicate the
stock price rose, red indicates a decline:

Investors seem to have a "love/hate" relationship with candlestick charts. People either love
them and use them frequently or they are completely turned off by them. There are several
patterns to look for with candlestick charts - here are a few of the popular ones and what they
mean.

This is a bullish pattern - the stock opened at (or near) its


low and closed near its high

.
The opposite of the pattern above, this is a bearish pattern.
It indicates that the stock opened at (or near) its high and
dropped substantially to close near its low.

Page | 20

Known as "the hammer", this is a bullish pattern only if it


occurs after the stock price has dropped for several days. A
small body along with a large range identifies a hammer.
This pattern indicates that a reversal in the downtrend is in
the works.

Known as a "star. For the most part, stars typically


indicate a reversal and or indecision. There is a possibility
that after seeing a star there will be a reversal or change
in the current trend.

Point and Figure Chart:


The point & figure (P&F) chart is somewhat rare. In fact, most charting services do not even
offer it. This chart plots day-to-day increases and declines in price: increases are represented
by a rising stack of "X"s, while decreases are represented by a declining stack of "O"s. This
type of chart was traditionally used for intraday charting (a stock chart for just one day),
mainly because it can be long and tedious to create a P&F chart manually over a longer
period of time.
The idea behind P&F charts is that they help you to filter out less significant price
movements and to focus on the most important trends. Below is an example of a P&F chart
for AT&T (T):

Page | 21

POPULAR CHARTING PATTERNS:


Technical analysts often use proven successful price patterns from great stocks as
tools to find new great stocks. Let's look at a few examples

Cup and Handle - This is a pattern on a bar chart that can be as short as seven weeks
and as long as 65 weeks. The cup is in the shape of a "U". The handle has a slight
downward drift. The right-hand side of the pattern has low trading volume. As the
stock comes up to test the old highs, the stock will incur selling pressure by the people
who bought at or near the old high. This selling pressure will make the stock price
trade sideways with a tendency towards a downtrend for anywhere from four days to
four weeks, then it will take off.

This pattern looks like a pot with a handle. It is one of the easier patterns to detect; and
investors have made a lot of money using it.

Page | 22

Head and Shoulders - This is a chart formation resembling an "M" in which a stock's
price:
Rises to a peak and then declines, then
Rises above the former peak and again declines, and then
Rises again but not to the second peak and again declines.

The first and third peaks are


shoulders, and the second peak forms
the head. This pattern is considered a
very bearish indicator.

Page | 23

Double Bottom - This pattern resembles a "W" and occurs when a stock price drops
to a similar price level twice within a few weeks or months. You should buy when the
price passes the highest point in the handle. In a perfect double bottom, the second
decline should normally go slightly lower than the first decline to create a shakeout of
jittery investors. The middle point of the "W" should not go into new high ground.
This is a very bullish indicator.

The belief is that, after two drops in the stock price, the jittery investors will be out
and the long-term investors will still be holding on.

Page | 24

CASE STUDY
OVERVIEW OF AUTOMOBILE INDUSTRY IN INDIA
The global automotive industry is a highly diversified sector that comprises of
manufacturers, suppliers, dealers, retailers, original equipment manufacturers, aftermarket
parts manufacturers, automotive engineers, motor mechanics, auto electricians, spray painters
or body repairers, fuel producers, environmental and transport safety groups, and trade
unions. United States, Japan, China, Germany and South Korea are the top five automobile
manufacturing nations throughout the world. The United States of America is the worlds
largest producer and consumer of motor vehicles and automobiles accounting for 6.6 million
direct and spin-off jobs and represents nearly 10% of the S10 trillion US economy. The
automobile is one of the important industries in the world, which provides employment to 25
million people in the world.

The Indian automobile industry is going through a technological change where each firm is
engaged in changing its processes and technologies to sustain the competitive advantage and
provide customers with the optimized products and services. Starting from the two wheelers,
trucks, and tractors to the multi utility vehicles, commercial vehicles and the luxury vehicles,
the Indian automobile industry has achieved tremendous amount of success in the recent
years. As per Society of Indian Automobile Manufacturers (SIAM) the market share of each
segment of the industry is as follows:
The market shares of the segments of the automobile industry

Page | 25

The automobile industry had a growth of 15.4 % during April-January 2007, with the average
annual growth of 10-15% over the last decade or so. With the incremental investment of $3540 billion, the growth is expected to double in the next 10 years.
Consistent growth and dedication have made the Indian automobile industry the
second- largest tractor and two-wheeler manufacturer in the world. It is also the fifth-largest
commercial vehicle manufacturer in the world. The Indian automobile market is among the
largest in Asia.
The key players like Hindustan Motors, Maruti Udyog, Fiat India Private Ltd, Tata
Motors, Bajaj Motors, Hero Motors, Ashok Leyland, Mahindra & Mahindra have been
dominating the vehicle industry. A few of the foreign players like Toyota Kirloskar Motor
Ltd., Skoda India Private Ltd., Honda Siel Cars India Ltd. have also entered the market and
have catered to the customers needs to a large extent.
Not only the Indian companies but also the international car manufacturing companies
are focusing on compact cars to be delivered in the Indian market at a much smaller price.
Moreover, the automobile companies are coming up with financial schemes such as easy EMI
repayment systems to boost sales.
There have been exhibitions like Auto-expo at Pragati Maidan, New Delhi to share the
technological advancements. Besides, there are many new projects coming up in the
automobile industry leading to the growth of the sector.
The Government of India has liberalized the foreign exchange and equity regulations
and has also reduced the tariff on imports, contributing significantly to the growth of the
sector. Having firmly established its presence in the domestic markets, the Indian automobile
sector is now penetrating the international arena. Vehicle exports from India are at their
highest levels. The leaders of the Indian automobile sector, such as Tata Motors, Maruti and
Mahindra and Mahindra are leading the exports to Europe, Middle East and African and
Asian markets.
The Ministry of Heavy Industries has released the Automotive Plan 2006-2016, with
the motive of making India the most popular manufacturing hub for automobiles and its
components in Asia. The plan focuses on the removal of all the bottlenecks that are inhibiting
its growth in the domestic as well as international arena.

Growth in the Sector:


At present the industry is enjoying a growth rate of 14-17% per annum, with domestic
sales growth at 12.8%. The growth rate is predicted to double by 2015.
As it is seen, the total sales of passenger vehicles - cars, utility vehicles and multiutility vehicles - in the year 2005 reached the mark of 1.06 million. The current growth rate
Page | 26

indicates that by 2012 India will overtake Germany and Japan in sales volumes.
Financing schemes have become an important factor in the growth of automobile
sales. More and more financial schemes are coming up with easy installment plans to lure the
customers.
Apart from domestic production, the industry is consistently focusing on the
automobile exports. The auto component segment is contributing a lot in the export arena.
The liberalized policies of the government are now making the companies go for more and
more exports.
The automobile exports are increasing year by year. According to the Society of
Indian Automobile Manufactures (SIAM) automobile exports in the last five years are as
follows:

SWOT ANALYSIS OF INDIAN AUTOMOBILE INDUSTRY:

STRENGTHS:

Globally cost competitive

Adheres to strict quality controls

Has access to latest technology


Page | 27

Provides support to critical infrastructure and metal industries

WEAKNESSES:

Industry has low level of research and development capability

Industry is exposed to cyclical downturns in the automotive industry

Most component companies are dependent on global majors for technology

OPPORTUNITIES:

May serve as sourcing hub for global automobile majors

Significant export opportunities may be realised through diversification of export


basket

Implementation of Value-Added-Tax (VAT) in FY2004 will negate the cascading


impact of prices

THREATS:

The presence of a large counterfeit components market poses a significant threat

Pressure on prices from OEMs continues

Imports pose price based competition in the replacement market

Page | 28

COMPANY ANALYSIS
MARUTI SUZUKI INDIA LTD.
Maruti Suzuki India Limited is a publicly listed automaker in India. It is a leading
four-wheeler automobile manufacturer in South Asia. Suzuki Motor Corporation of Japan
holds a majority stake in the company. It was the first company in India to mass-produce and
sell more than a million cars. It is largely credited for having brought in an automobile
revolution to India. It is the market leader in India. On 17 September, 2007, Maruti Udyog
was renamed to Maruti Suzuki India Limited. The company's headquarters remain in
Gurgaon, near Delhi.
Maruti Suzuki is one of India's leading automobile manufacturers and the market
leader in the car segment, both in terms of volume of vehicles sold and revenue earned. Until
recently, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki
of Japan. The Indian government held an initial public offering of 25% of the company in
June 2003. As of May 10, 2007, Govt. of India sold its complete share to Indian financial
institutions. With this, Govt. of India no longer has stake in Maruti Udyog.
Maruti Udyog Limited (MUL) was established in February 1981, though the actual
production commenced in 1983. Through 2004, Maruti has produced over 5 Million vehicles.
Marutis are sold in India and various several other countries, depending upon export orders.
Cars similar to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki in
Pakistan and other South Asian countries.
The company annually exports more than 30,000 cars and has an extremely large
domestic market in India selling over 500,000 cars annually. Maruti 800, till 2004, was the
India's largest selling compact car ever since it was launched in 1983. More than a million
units of this car have been sold worldwide so far. Currently, Maruti Alto tops the sales charts.
Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti"
is commonly used to refer to this compact car model. Till recently the term "Maruti", in
popular Indian culture, was associated to the Maruti 800 model.
Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, has
been the leader of the Indian car market for over two decades.
Its manufacturing facilities are located at two facilities Gurgaon and Manesar south
of New Delhi. Marutis Gurgaon facility has an installed capacity of 350,000 units per
annum. The Manesar facilities, launched in February 2007 comprise a vehicle assembly plant
with a capacity of 100,000 units per year and a Diesel Engine plant with an annual capacity
of 100,000 engines and transmissions. Manesar and Gurgaon facilities have a combined
capability to produce over 700,000 units annually.
More than half the cars sold in India are Maruti cars. The company is a subsidiary of
Suzuki Motor Corporation, Japan, which owns 54.2 per cent of Maruti. The rest is owned by

Page | 29

the public and financial institutions. It is listed on the Bombay Stock Exchange and National
Stock Exchange in India.
During 2006-07, Maruti Suzuki sold about 675,000 cars, of which 39,000 were
exported. In all, over six million Maruti cars are on Indian roads since the first car was rolled
out on December 14, 1983.
Maruti Suzuki offers 10 models, ranging from the peoples car, Maruti 800, for less
than Rs 200,000 ($ 5000) ex-showroom to the premium sedan SX 4 and luxury SUV, Grand
Vitara.
Suzuki Motor Corporation, the parent company, is a global leader in mini and
compact cars for three decades. Suzukis technical superiority lies in its ability to pack power
and performance into a compact, lightweight engine that is clean and fuel efficient.
Maruti is clearly an employer of choice for automotive engineers and young
managers from across the country. Nearly 75,000 people are employed directly by Maruti and
its partners.
The company vouches for customer satisfaction. For its sincere efforts it has been
rated (by customers)first in customer satisfaction among all car makers in India for seven
years in a row in annual survey by J D Power Asia Pacific.
Maruti Suzuki was born as a government company, with Suzuki as a minor partner, to
make a peoples car for middle class India. Over the years, the product range has widened,
ownership has changed hands and the customer has evolved. What remains unchanged, then
and now, is Marutis mission to motorise India.

FINANCIAL SUMMARY:

Maruti Suzuki India Ltd has announced the following Audited results for the quarter
ended December 31, 2007: The Company has posted profit after tax of Rs 467.04 crores for
the quarter ended December 31, 2007 as compared to Rs 376.41 crores for the quarter ended
December 31, 2006 i.e., 24.08% increase in profit after tax in the year 2007. Total Income has
increased from Rs 4451.47 crores for the quarter ended December 31, 2006 to Rs 5651.17
crores for the quarter ended December 31, 2007.

Page | 30

Quarterly Results

Rs. cr
year

2007/12

2006/12

var %

Sales Income

5,480.50

4,323.04

26.77

Other Income

170.67

128.43

32.89

Expenditure

4,867.25

3,815.88

27.55

Interest

14.36

15.74

-8.77

Gross Profit

769.56

619.85

24.15

Depreciation

86.73

75.86

14.33

Tax

215.79

167.58

28.77

PAT

467.04

376.41

24.08

Equity

144.46

144.46

0.00

OPM (%)

11.19

11.73

-0.54

GPM (%)

10.93

11.37

-0.44

NPM (%)

8.52

8.70

-0.18

Balance Sheet
Rs. cr
Year

2007/03

2006/03

Equity Capital

144.50

144.50

Prefrential Capital

0.00

0.00

Reserves and Surplus

6,709.40

5,308.10

Secured Loans

63.50

71.70

Unsecured Loans

567.30

0.00

Total

7,484.70

5,524.30

Source of Funds

Page | 31

Application of Funds
Gross Block

6,146.80

4,954.60

Accumulated Deprecation

3,487.10

3,259.40

Net Block

2,659.70

1,695.20

NetCurrentAssets

1,176.90

1,685.90

Total

7,484.70

5,524.30

Fundamentals of Maruti Suzuki India Ltd.


Particulars

2003

2004

2005

2006

2007

Return on Equity

0.0473

0.1510

0.1949

0.2181

0.2279

Book Value

107.23

124.30

151.56

188.73

237.23

Debt Equity

0.14

0.08

0.07

0.01

0.09

P/E Ratio

14.58

DPS

1.50

1.50

2.00

3.50

4.50

EPS

5.07

18.76

29.55

41.16

54.07

RONW

3.93

17.10

19.03

23.24

22.63

Current Ratio

1.57

1.17

1.68

1.77

1.42

Quick Ratio

1.20

0.85

1.25

1.31

1.13

Interest Coverage Ratio

11.60

32.32

49.70

104.61

68.23

Retention Ratio

16.1755

5.2187

4.1530

3.7969

3.7101

Bonus Adjustment

Adjusted EPS

5.07

18.76

29.55

41.16

54.07

Price Chart:

Page | 32

TATA MOTORS
Tata Motors Limited formerly known as TELCO (TATA Engineering and
Locomotive Company), (NYSE: TTM) - is India's largest passenger automobile and
commercial vehicle manufacturing company. It is a part of the Tata Group, and has its
headquarters in Mumbai, Maharashtra. One of the world's largest manufacturers of
commercial vehicles and known for its hatchback passenger vehicle Tata Indica, Tata Motors
has its manufacturing base in Jamshedpur, Lucknow, Pune and Singur. The OICA ranked it as
the world's 21st largest vehicle manufacturer, based on figures for2006.
Tata Motors was established in 1945, when the company began making trains. Tata
Motors was first listed on the NYSE in 2004. Tata Motors gained Rs. 320 billion during
2001-2006 which was among the top 10 corporate profits in India. In 2004 it also bought
Daewoo's truck manufacturing unit, now known as Tata Daewoo Commercial Vehicle, in
South Korea. In March 2005, it acquired a 21% stake in Hispano Carrocera SA, giving it
controlling rights in the company. On 10 January 2008, Tata Motors launched their much
awaited Tata Nano, noted for its Rs 100,000 price-tag, at Auto Expo 2008 in Pragati Maidan,
Delhi.
Tata Motors Limited is India's largest automobile company, with revenues of Rs.
32,426 crores (USD 7.2 billion) in 2006-07. It is the leader by far in commercial vehicles in
each segment, and the second largest in the passenger vehicles market with winning products
in the compact, midsize car and utility vehicle segments. The company is the world's fifth
largest medium and heavy commercial vehicle manufacturer, and the world's second largest
medium and heavy bus manufacturer.

Page | 33

The company's 22,000 employees are guided by the vision to be "best in the manner
in which we operate, best in the products we deliver, and best in our value system and ethics."
Tata Motors helps its employees realise their potential through innovative HR practices. The
company's goal is to empower and provide employees with dynamic career paths in
congruence with corporate objectives. All-round potential development and performance
improvement is ensured by regular in-house and external training. The company has won
several awards recognizing its training programmes.
Tata Motors, the first company from India's engineering sector to be listed in the New
York Stock Exchange (September 2004), has also emerged as an international automobile
company. In 2004, it acquired the Daewoo Commercial Vehicles Company, Korea's second
largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has
launched several new products in the Korean market, while also exporting these products to
several international markets.
The Tata Group is one of India's largest and most respected business conglomerates,
with revenues in 2006-07 of $28.8 billion, the equivalent of about 3.2 per cent of the
country's GDP, and the international revenues of the Group in 2006-07 were US$ 10.8 billion,
contributing to 38% of the total Group revenues. Tata companies together employ over
300,000 people.
FINANCIAL SUMMARY:
The Company has posted a net profit of Rs 499.05 crores for the quarter ended December 31,
2007 as compared to Rs 513.17 crores for the quarter ended December 31, 2006. Total
Revenues has increased from Rs 8061.73 crores for the quarter ended December 31, 2005 to
Rs 8456.18 crores for the quarter ended December 31, 2007.

Quarterly Results
Rs. cr
Year

2007/12

2006/12

var %

Sales Income

8,364.37

8,047.41

3.94

Other Income

91.81

14.32

541.13

Expenditure

7,531.80

7,123.86

5.73

Interest

91.77

85.17

7.75

Gross Profit

832.61

852.70

-2.36

Depreciation

167.51

143.50

16.73

Tax

166.05

195.57

-15.09
Page | 34

PAT

499.05

513.17

-2.75

Equity

385.54

385.32

0.06

OPM (%)

9.95

11.48

-1.53

GPM (%)

8.86

10.42

-1.56

NPM (%)

5.96

6.37

-0.41

Balance Sheet
Rs. cr
Year

2007/03

2006/03

Equity Capital

385.41

382.87

Prefrential Capital

0.00

0.00

Reserves and Surplus

6,458.39

5,127.81

Secured Loans

2,022.04

822.76

Unsecured Loans

1,987.10

2,114.08

Total

10,852.94

8,447.52

Gross Block

8,775.80

7,971.55

Accumulated Deprecation

4,894.54

4,401.51

Net Block

3,855.31

3,543.65

NetCurrentAssets

1,997.22

1,923.41

Total

10,852.94

8,447.52

Source of Funds

Application of Funds

Fundamentals of Tata Motors


Particulars

2003

2004

2005

2006

2007

Return on Equity

0.1156

0.2257

0.3009

0.2774

0.2796

Book Value

81.22

101.71

113.65

143.94

177.59

Page | 35

Debt Equity

0.56

0.35

0.60

0.53

P/E Ratio

0.58
12.67

DPS

4.00

8.00

12.50

13.00

15.00

EPS

9.38

22.96

34.19

39.94

49.65

RONW

12.32

22.98

30.12

24.17

24.67

Current Ratio

0.84

0,72

0.99

1.24

1.24

Quick Ratio

0.52

0.47

0.76

0.96

0.91

Interest Coverage Ratio

3.82

8.69

10.24

8.08

7.62

Retention Ratio

0.5192

0.7599

0.8776

0.9986

1.0525

Bonus Adjustment

Adjusted EPS

9.38

22.96

34.19

39.94

49.65

Price Chart:

Page | 36

Technical analysis of Companies


Company: Maruti Suzuki India Ltd.
Sector: Automobile Sector
Relative Strength Index:
The RSI compares the magnitude of a stock's recent gains to the magnitude of its
recent losses and turns that information into a number that ranges from 0 to 100.

A 14 day RSI is calculated for stock it is recommended by wilder that a 14 period will
be a good indicator. By using the simple formula RSI = {100- [100 / (1+RS)]}.it states that if
RSI is below 30 buy & if it crosses above 70 then sell it.
From 2nd April 07 to 31st March 08 the RSI is calculated, the best time to sell the stock
was between 12th July 07 to 31st July 07 and 9th October 07 to 18th October 07 since the RSI
was above 70 & it had reached its peak level. The best time to buy the stock was between 2nd
Jan 08 to 24th Jan 08 since the RSI was below 30 for these many days.

Page | 37

10 Days Moving Average of Maruti Suzuki India Ltd. Scrip

Interpretation:
Here, the Moving Average is almost equal to the Actual line. So it indicates that it is a right
time to buy the security. In this Graph, we can observe that moving Average of Maruti Suzuki
Ltd. Stock has been decreased. So, it is giving clear picture of future movement of the scrip.
This Graph provides a message to the investor that it is a right time to buy the Stock of
Maruti Suzuki Ltd. And, if we observe the trend of this graph then we can also notice that
Moving Average line has been decreased, so it is also a right time to buy the stock.
Here, in this case, the Stock price of Maruti Suzuki Ltd. is just equal to its moving average
line. But if we see the trend of Moving Average then it indicates that investors are becoming
increasingly bullish from bearish pattern on the Stock Price of Maruti Suzuki Ltd.

Candle Stick Charting

Page | 38

Interpretation:
Japanese Candle Stick is used to analyze the pattern of stock movement. Candle is same as
bar chart but the color is different red candle is used to indicate the bearish trend and green
candle is a indicator of bullish trend
Japanese candle use historical prices of a stock in the prescribed manner i.e. Open,
High, Low, Close. The size of the candle is known by its magnitude of open and close, and
the size of the shadow is known by high and close.
In the above Candle Stick Chart it is clear that Stock Price of Maruti Suzuki Ltd. has been
decreased. Simply Share Prices of Maruti Suzuki Ltd is falling down. It indicates that the
investors are becoming more bearish than bullish. Here, as far as Maruti Suzuki is concerned,
bearish market trend is taking place. It is a right time to buy the Scrip.

Page | 39

Company: Tata Motors


Sector: Automobile Sector
Relative Strength Index:
The RSI compares the magnitude of a stock's recent gains to the magnitude of its
recent losses and turns that information into a number that ranges from 0 to 100

A 14 day RSI is calculated for stock it is recommended by wilder that a 14 period will
be a good indicator. By using the simple formula RSI = {100- [100 / (1+RS)]}.It states that if
RSI is below 30 buy & if it crosses above 70 then sell it.
From 2nd April 07 to 31st March 08 the RSI is calculated, the best time to sell the stock
was between 27th Sep 07 to 4th October 07 and 10th December 07 to 12th December 07 since
the RSI was above 70 & it had reached its peak level. The best time to buy the stock was
between 8th August 07 to 23rd August 07 and 23rd Jan 08 to 24th Jan 08 as well as between 7th
March to 18th March 08 since the RSI was below 30 for these many days.
10 Days Moving Average of Maruti Suzuki India Ltd. Scrip

Page | 40

Interpretation:
Here, In this case, Moving Average is above the Actual line. So it indicates that it is a right
time to buy the security. In this Graph, we can see that the moving average of Tata Motors
Stock has been decreased. So, it is giving clear picture of future movement of the scrip. This
Graph provides a message to the investor that it is a right time to buy the Stock of Tata
Motors.
Here, in this case, the actual Stock price of Tata Motors is just below its moving average line.
It indicates that investors are becoming increasingly bullish on the Stock Price of Tata
Motors.
Moreover, Stock price and moving Average of Tata Motors has been decreased. It indicates
that investors are becoming increasingly bullish from bearish pattern on the Stock Price of
Tata Motors.

Candle Stick Charting

Interpretation:
From the above Candle Stick Chart it is clear that Stock Price of Tata Motors is falling down.
Here, we can observe lot of volatility in stock price. Both the Bullish and Bearish trends are
taking place. The Bullish trend is following by Bearish Trend. It indicates that the investors
are becoming more bearish than bullish. At present Situation Bearish Trend is going on. It is a
right time to buy the Scrip.

Page | 41

FINDINGS AND CONCLUSION


Findings of the study:

In case of RSI of Maruti Suzuki Scrip, the best time to sell the stock was between 12th
July 07 to 31st July 07 and 9th October 07 to 18th October 07 since the RSI was above
70 & it had reached its peak level. The best time to buy the stock was between 2nd Jan
08 to 24th Jan 08 since the RSI was below 30 for these many days.

In case of RSI of Tata Motors, the best time to sell the stock was between 27th Sep 07
to 4th October 07 and 10th December 07 to 12th December 07 since the RSI was above
70 & it had reached its peak level. The best time to buy the stock was between 8th
August 07 to 23rd August 07 and 23rd Jan 08 to 24th Jan 08 as well as between 7th
March to 18th March 08 since the RSI was below 30 for these many days.

The 10 days moving average of Maruti Suzuki scrip, provides a message to the
investor that it is a right time to buy the Stock and, the trend of the Moving Average
line has been decreased, so it is also a right time to buy the stock.

In case of 10 days Moving Average of Tata Motors Ssrip, the actual Stock price is just
below its moving average line. It indicates that investors are becoming increasingly
bullish on the Stock Price of Tata Motors.

In Japanese Candle Stick Chart of Maruti Suzuki Ltd. we can see that the stock price
has been decreased. Simply Share Prices of Maruti Suzuki Ltd is falling down. It
indicates that the investors are becoming more bearish than bullish.

In case of Japanese Candle Stick Chart of Tata Motors, we can observe lot of
volatility in stock price. Both the Bullish and Bearish trends are taking place. The
Bullish trend is following by Bearish Trend

Fundamentally, financial performance of these companies in respect of sales and


profit is good.

If an investor opts for long term investment then he will earn huge amount of return.
Long term Investment is known to be less risky.

This study may not provide any guidelines to Speculators. It is useful to Long Term
Investors.

Technical analysts evaluate securities by analyzing statistics generated by market


activity, past prices and volume.

One of the most basic and easy to use technical analysis indicators is the moving
average, which shows the average value of a security's price over a period of time.
The most commonly used moving averages are 10 days, 20 days, 30 days, 50 days,
100 days and 200-days moving average..
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One of the most important areas for any investor to look when researching a company
is the financial statement. Financial reports are required by law and are published both
quarterly and annually.

Indian Economy is consistently achieving a tremendous growth in these Sectors.

If we consider RSI then almost all the scrips of these companies are lying between 30
and 70. It means an investor should hold the scrips until it reaches 70 to sell and 30 to
buy.

The stock prices always take a correction after a major climb.

Moving average is one of the best methods of predicting future movement of Stock
Price. If we use 200 Day Moving Average for Analysis then volatility of stock will be
less. It gives clear picture of movement of Stock.

Conclusion of the study:


As we all know India is one of the fastest growing economies in the world. India is
consistently achieving growth in automobile sector. The automotive industry is witnessing
tremendous and unprecedented changes these days. On a global scale, the assets of the top ten
automotive corporations accounts for 28% of the assets of the worlds top 50 companies, 29%
of their employment and 30% of their total sales.
The Indian automobile industry is going through a technological change where each firm is
engaged in changing its processes and technologies to sustain the competitive advantage and
provide customers with the optimized products and services.
The automobile industry had a growth of 15.4 % during April-January 2007, with the average
annual growth of 10-15% over the last decade or so. With the incremental investment of $3540 billion, the growth is expected to double in the next 10 years.
Consistent growth and dedication have made the Indian automobile industry the
second- largest tractor and two-wheeler manufacturer in the world. It is also the fifth-largest
commercial vehicle manufacturer in the world. The Indian automobile market is among the
largest in Asia.
The Ministry of Heavy Industries has released the Automotive Plan 2006-2016, with the
motive of making India the most popular manufacturing hub for automobiles and its
components in Asia. The plan focuses on the removal of all the bottlenecks that are inhibiting
its growth in the domestic as well as international arena.
With comparatively higher rate of economic growth rate index against that of great global
powers, India has become a hub of domestic and exports business. The automobile sector has
been contributing its share to the shining economic performance of India in the recent years.

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The Indian automobile industry is going through a phase of rapid change and high growth.
With new projects coming up on a regular basis, the industry is undergoing technological
change. The major players are expanding their plants and focusing on mass customization,
mass production, etc
Apart from domestic production, the industry is consistently focusing on the automobile
exports. The auto component segment is contributing a lot in the export arena. The liberalized
policies of the government are now making the companies go for more and more exports.
Because of these reasons, the shares of automobile industry are performing well and therefore
the share market is attracting people to invest their hard earned money and find fortune. But
lack of knowledge about shares and stock market is making them cautious of investing in this
market. They need to be educated as well as guided to minimize the risk and to assess the
return on their investment.

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CONCLUSION
Investment is a financial activity that involves risk. It is the commitment of funds for a return
expected to be realized in the future. Investments may be made in financial assets or physical
assets. In either case there is the possibility that the actual return may vary from the expected
return. That possibility is the risk involved in the investment. Risk and Return are the two
most important characteristics of any investment. Safety and liquidity are also important for
an investor. The objective of an investor is specified as maximization of return and
minimization of risk. Investment is generally distinguished from speculation in terms of three
factors, namely risk, capital gains and time period. Gambling is the extreme form of
speculation. Investors may be individuals or institutions. Both types of investors combine to
make investment activity dynamic and profitable. The investors in the financial market have
different attitudes towards risk and varying levels of risk bearing capacity. Some investors are
risk averse, while some may have an affinity to risk. The risk bearing capacity of an investor,
on the other hand, is a function of his income. A person with higher income is assumed to
have a higher risk bearing capacity. Each investor tries to maximise his welfare by choosing
the optimum combination of risk and return in accordance with his preference and capacity. It
is highly essential for the investor to do both fundamental and technical analysis for deciding
the suitable stock. In stock market, trend is considered to be a mans best friend.

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BIBLIOGRAPHY

E-BOOKS REFERRED:
1

Security Analysis & Portfolio Management, By, Punithavathy Pandian.

Investment Analysis & Portfolio Management, By Prasanna Chandra

Financial Markets & Institutions, By, Dr. S. Guruswamy

Security Analysis And Portfolio Management, By, Donald E.Fisher And Ronald J.
Jordan,

WEB SITES:
1

www.bseindia.com

www.nseindia.com

www.stockchart.com

www.icicidirect.com

www.marutisuzuki.com

www.tatamotors.com

www.investopedia.com

www.moneycontrol.com

www.equitymaster.com

MAGZINES AND JOURNALS:


1

Annual Reports of Companies.

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