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CHAPTER-I

INTRODUCTION

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EQUITY ANALYSIS

Equity Analysis refers to the analysis of trading securities from the point

of view of their prices, returns and risks. All investments are risky and the

expected return is related to the risk. Their analysis will help in understanding

the behavior of security prices and the market and in decision making for

investment. If it is an analysis of only scrip, it is called micro-analysis of a

company. If its is an analysis of market of securities, it is referred to as a micro-

picture of the behavior of the market.

Origin of Markets :

The security markets emerge out of the new issues made by companies,

Government, local bodies and public undertakings. These issuers of securities

borrow in the form of ownership capital or debt capital for financial their

operations. They issue IOUs of promissory notes with a promise to pay the

funds at later date. All securities are in this form of IOUs except those of

ownership shares. Securities of more than one year come into the categories of

capital and stock markets. The shares of ownership category are transferable

and tradable which will impart liquidity to these instruments.

Information Flows :

Markets are influenced by information flows, on the one hand, and

money flows, one the other. If the information flows are perfect and free, and

the markets adjust to these flows quickly and effectively, the markets are said

to be perfect. If the information is imperfect of partial, the markets will be

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Imperfect and the \price formation will be unpredictable, haphazard and

volatile. The information whether perfect or imperfect has to be analyzed to

know its impact on the market prices and forecast trades. For this purpose,

analytical tools and forecasting ability are necessary. If information is not

perfect, a few with inside information is free and unbiased, the markets behave

rationally and nobody can gain extra profits and normal returns are available to

all whenever they enter the market.

Savings or Money Flows :

The markets are also influenced by the flows of savings or money. The

micro level flows would depend on the following objectives income, capital

appreciation, hedge against inflation, liquidity and safety to investors, etc. these

are the criteria by which individual savers would enter the market for

investment At macro level, savings flows determine the level of investment in

the corporate sector and in the economy and lead to capital formation and

growth of fixed assets. The introduction of technology would also depend on

these investment flows. The fixed capital formation would promote growth of

out put and income by a multiplier process. This leads to the theory of savings

and investment of keynesand also to Modern Monetarist Theory linking money

flows to the growth of output and income in the economy.

Factors Influencing the Market Behaviour :

Many of these factors relate to the economy, industry and company,

which constitute the fundamental factors.

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Factors external to the company like environmental factors, economic and

political development.

Internal factors of the company or of the market. These relate to the

physical and financial performance of the company or companies.

Size of paid-up capital and pattern of distribution of shareholding among

the public.

Investment habits and trading habits of the people.

A host of other factors, psychological and emotional also play a role in the

market Operations.

Trading :

The market in securities is influenced by the forces of supply and

demand which in turn are influenced by the above factors. These forces of

supply and demand determine the volume of trading turnover and also the

prices. These two indicators for studying the market behaviour used in the

technical analysis.The volume of trading is reflected in the number of deals per

day or hour, number of days in a year in which the companys share is traded or

the number of shares traded in a day or a year. Our empirical studies show that

the liquidity of shares, which depends on trading, is confined to a few scripts

on the stock exchange, namely, 20-30% of the total. The liquidity is closely

related the spread of shareholding, size of capital and pattern of holding of

share capital. It is also related to the intrinsic worth of the company and other

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financial indicators like P/E ratio. Nearly 50% of the performance of the share

price is explained by the internal factors of the company like its earnings per

share, debt servicing, book value etc. the rest of the factors ate external to the

company such as demand conditions, government policy, environmental factors

etc.

The main constituents of and players in the markets are as follows:

(1) Instruments traded.

(2) Institutions and investors.

(3) Intermediaries.

The indicators of the market operations are as follows :

1. Quantity raised from the new issues market and quantity traded in the

Secondary market.

2. Prices of instruments.

3. Velocity of price changes.

4. Intensity of trading and turnover of trading.

Instruments :

The instruments traded and their characteristics are set out in an earlier

chapter. There are equity and preference shares in the category of ownership

capital and debentures, bonds and P.S.U. Bonds, and Government securities in

category of debt capital in the hybrid variety, there are convertible debentures

and cumulative convertible preference shares which although have the

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characteristics of debt capital would eventually be ownership capital, a number

of new instruments like warrants, Rights, Flexibonds, Discount Bonds, Indexed

Bonds, Zero Coupon Bonds etc, are also being issued at present.

Players :

The institutions or players in the markets are the issuers of capital,

namely corporate units, government and semi-government bodies and public

sectors undertakings which are the major borrowers, the investors and

intermediaries such as banks, financial institutions and brokers, After 1992, a

number of Mutual Funds FFIs, NRIs, OCBs have also started as players in the

markets.

Intermediaries :

As referred to earlier the intermediaries are the brokers, merchant

bankers, financial institutions, financial and investment consultancy firms etc.

these are active in both the primary and secondary markets.

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RESEARCH AND METHODOLOGY :

1. Need for the Study

2. Objectives of the Study

3. Methodology of the Study

4. Limitations of the Study

Need for the study :

The study is conducted to analyze the internal and external factors which
effect the EPS of the company

To evaluate the various factors which effect the performance of the


company using technical tools

To analyzing the market standing of the company.

To compare and conclude and decide a particular company for best


investment purpose.

These analysis is beneficial to the investors, shareholders and the creditors


for rating of the company

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OBJECTIVES OF THE STUDY

The major objectives of the study are as follows :

An Equity Analysis of Capital IQ, United Health Group, THOMSON

REUTERS, Cognizent and find out the EPS to future EPS of the stock

prices.

To Analyze key financial profitability ratios of the firm.

To Analyze the ROE of the firm.

To study the P/E ratio of the firm.

This study is conducted to evaluate the performance of the stock prices of

the company using technical tools.

METHODOLOGY

The present study has been adopting the following methodology in both

c0llection of necessary data and analyses of the selected objectives.

Sources of the data :

The study carries both the primary ands secondary data. Primary data

was collected from the financial statements of the firm. Secondary datas was

collected from the newspapers, multimedia, fund managers, some mutual funds

advisors and Karvy Ltd.

Period of study :

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The data collected from statements for a period of 4 years.
Data collection :

The data required for equity analysis is collected from newspapers,

company websites, recent announcements of results, and fund managers

advisories.

Data analysing tools :

Equity analysis and its effectiveness in the organization has been

analyzed by the researcher percentages and ratio analysis, Trend Analysis

methods.

SCOPE OF THE STUDY

As the study of equity analysis is very vast, It is risky taks to cover all

aspects of all categories of operations of stock exchange therefore the study is

restricted to four companies share movements. Share praise movements of one

year.

LIMITATIONS OF THE STUDY


1. Availability of accurate financial information and analytical reports of

the company may limit the analysis of the researcher to some extent.

2. We have limit to take only A group stock which maintain study growth

and take IT stocks which is actively traded in the stock markets.

3. Which stocks are perfectly utilizing their resources to research and

Development process.

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CHAPTER - II

REVIEW OF LITERATURE

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EQUITY ANALYSIS

The analysis of movement of share prices is known as equity analysis has

two main approaches, which are used in the analysis of movement of shares.

Fundamental analysis

Technical analysis

FUNDAMENTAL ANALYSIS

It analyses the stock based on the specific goals of the investors. They

study the financial strength of the corporate growth of sales, earnings and

profitability. They also take into account the general industry and economic

condition. Fundamentalists are if the opinion that supply and demand for stocks

depends on the underlying factors.

According to the classical investment theory, fundamental analysis is

based on the theory that the price of share is affected by the dividends that that

the shareholders expect to receive from the company in future. Fundamental

analysis is aimed at estimating the future price of the share. This future price is

dependent on the future EPS of the company as well as on how the market

perceives the risk of the share.

Future Price = Future EPS *Future P/E

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ESTIMATING FUTURE EPS :

Future EPS can be estimated when we estimate the future earnings of

the company. There are number of factors which determine the earnings they

are classifies as

1. ECONOMIC FACTOR

2. INDUSTRY FACTORS

3. COMPANY FACTORS

ECONOMIC FACTORS :

The level of economic activity has an impact on the investments in

many ways. If the economy grows rapidly, the industry can also be expected to

shown rapid growth and vise versa. The analysis of macroeconomic

environment is essential to understand the behavior of the stock prices. The

commonly analyzed macro economy factors are as follows.

a) Gross Domestic Product (GDP): GDP indicates the growth rate of the

b) economy. GDP represents the aggregate value of goods and services.

GDP = Personal consumption expenditure +gross private domestic

investment and government expenditure a goods and services + net exports of

goods and services. The growth of the economy points out the prospects for the

industrial sector and the return the investors can expect from investment in

shares.

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c) Savings and Investment: Stock market is a channel through which the

savings of investors are made available to the corporate bodies. The

savings and investment patterns, of the public affect the stock to a great

extent.

d) Inflation: If the inflation rate increases, the demand in the consumer

product industry is significantly affected. The industries, which come

under government price policy, will lose the market. High rate of

inflation is harmful to the market.

e) Interest Rate: A decrease in the interest rate implies low cost of

financing and more profitability. More money is available at low interest

rate for the broker who doing business with borrowing money.

Availability of cheap funds. Encourages speculation and rise in the price

of shares.

f) Budget: The budget draft provides an elaborate account of government

revenues and expenditures, A budget deficit may lead to high rate of

inflation and adversely and adversely affect the cost of production.

Surplus budget may result deflation. Hence, balanced budget is highly

favorable to the stock market.

g) Balance of Payment (BOP): The balance of payment is the record of a

countrys money receipts from and payments abroad. The difference

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between receipts and payments may be surplus or deficit. Balance of

payment is a measure of the strength of rupee on external account.

h) Monsoon and agriculture: Agriculture is directly or indirectly linked

with industry. A good monsoon yield to higher demand of inputs and

result in bumper crop. This would lead buoyancy in stock market. When

the monsoon is bad agriculture and hoyden power production would

suffer. They cast a shadow on the stock market.

i) Tax structure: Tax reliefs given to savings encourages savings. The

type of tax exemption has impact on the profitability of the industry.

j) Infrastructure: Infrastructure facilities are essential for growth of

industrial and agricultural sectors. A wide network of communication

system is a must for the growth of the economy. Regular supply power

without any power cut would boost the production. Good infrastructure

facilities effect the stock market favorably.

ECONOMIC FORECASTING :

To estimate the Stock Price changes an analyst has to analyze the macro

economic environment and the factors peculiar to the industry he is concerned

with the economic activities affect the corporate profits attitudes and the share

prices. An economic analyst should be familiar with the forecasting techniques.

The common techniques used are analysis of key economic indicators,

Diffusion index, Survey and econometric model building. These technicians

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help him to decide the right time to invest the type of security he has purchased

i.e., stocks or bonds or some combination of stocks and bonds.

ECONOMICINDICATORS :

The Economic indicators are factors that indicate the present status,

Progress slowdown of the economy. They are Capital investments, business

profits: money supply, GNP, interest rates, unemployment rate etc., and the

economic indicators are grouped into leading, coincidental and lagging

indicators. The indicators are selected on the following criteria.

1) Economic Significance

2) Statistical adequacy

3) Timing

4) Conformity

The leading indicators what is going to happen in the economy The

popular leading are the fiscal policy, monitory policy, Productivity, rainfall,

capital investment and the Stock indices.

The coincidental indicators indicate what the economy is the

coincidental indicators are Gross National Product. Industrial Production,

Interest rates and reserve funds. The changes that are occurring in the leading

and coincidental indicator are reflected in the lagging indicators. Lagging

indicators are identified as unemployment rate, consumer price index and flow

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of foreign funds. These leading coincidental and lagging indicators provide an

insight in to the economys current and future position.

DIFFUSION INDEX :

Diffusion index is a composite or consensus index. The Diffusion index

consists of leading, coincidental and lagging indicators. The National Bureau of

Economic research in U.S.A. has constructed this type of index but the

Diffusion index is complex in nature to calculate and irregular movements that

occur in individual indicators cant be completely eliminated.

ECONOMETRIC MODEL BUILDING :

For Model building several variables are taken into consideration. The

assumptions underlying the analysis are specified. The relationship between the

independent and dependent variables is given mathematically. While using the

model, the analyst has to think clearly all the inter relationship between the

variables. When these inter relationship are specified, he can forecast not only

the direction but also the magnitude.

INDUSTRY FACTORS :

An industry is group of firms that have similar Technological Structure

of the production and produce similar products. These industries can be

classified on the basis of the business cycle i.e., classified according to their

reaction of different phases of the business cycle They are classified into

growth, cyclical, defensive and cyclical growth industry. The factors to be

considered are as follows:

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a) Growth of the Industry: Historical performance of the industry in

terms of growth and profitability should be analyzed. Industry wise

growth is published periodically by the center for monitoring Indian

Economy. The past variability in the return and growth in reaction to

macro economic factors provide an insight into the future. The

information technology industry has witnessed tremendous growth in

the past so also, the script prices of the IT industry.

b) Cost Structure and Profitability: The cost structure, that is fixed and

variable cost. Affects the cost of production and profitability of the firm.

In case of oil and Natural Gas Industries and Iron and Steel Industry is

also lengthy, higher the fixed cost component, greater sales volume is

required to reach the firm Break Even point.

c) Nature of the Product: The Consumer and the other Industries demand

The products produced by the Industries. If Industrial goods like pig

Iron Sheet and Coals are produced the demand for them depends on the

condition or related goods producing industries and the end user

Industry to fine out the demand for industrial goods.

d) Nature of Competition: Nature of competition is an essential factor

that determines the demand for particular product, its profitability and

the price of the concerned companys scripts. The supply may arise

from indigenous producers and multinationals, if too many firms are

present in the organized sector, the competition will be severe. The

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competition would lead to the decline in the script of the company

should analyze the market share of the particular companys product and

should compare it with the top five companies.

e) Government policies: The Government Policies affect the very nerve of

the Industry and the effect differ industry to industry, tax subsidiaries

and tax holidays are provided for export oriented products. In some

cases, entry barriers are placed by the government. In the Airways,

private Corporate are permitted to operate the domestic rights only.

When selecting an industry the government policy regarding the

particular industry should be carefully evaluated.

f) Labor: The analysis of labor scenario in particular Industry is of great

importance. The number of trade unions and their operation modes have

impact on Labor Productivity and Modernization of Industry. Textile

Industry is known for its militant Trade Union. When Trade unions

oppose the introduction of automation, in the product marker the

company may stand to loose with high cost of production. The

unhealthy labor relationship leads to loss of consumer goodwill, The

skilled is needed for certain industries. This is one many reason

attracting the multinational to set up companies in India.

g) Research and Development: For any Industry to survive the

competition in the national and international markets, product and

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production process have to be technically competitive, This depends on

the R&D in the particular company or Industry.

COMPANY ANALYSIS :

Major industries in India are composed of hundreds of individual

companies. In the information technology industry even though the number of

companies is large, few companies like Capital IQ, Cognizent Tech, Capital IQ,

THOMSON REUTERS etc., controls the major markets share. Like-wise in all

industries, some companies rise to the competition of eminence and

dominance.

THE MARKET SHARE

THE GROWTH OF ANNUAL SALES

THE STABILITY OF ANNUAL SALES

THE MARKET SHARE :

The Company may be a leading company, but if growth in sales is

comparatively lower than other company, it indicates the possibility of the

company losing the leadership. The rapid growth in sales would keep the

shareholders in a better position than one with the stagnant in sales. Growth in

sales is usually followed by the growth in profits.

THE STABILITY OF SALES :

If a firm has stable sales revenue, other things being remaining constant,

will have more stable earning. Wide variation is sales leads to variation in

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capacity utilization, financial planning and dividend. Periodically all the

financial newspaper provide information about the market share of different

companies in an industry. The fall in the market share indicates the declining

trend of the company, even if the sales are stable in obsolute terms. Hence, the

stability of sales also should be with its market share and the competitors

market share.

EARNINGS OF THE COMPANY :

Sales alone do not increase the earnings but the costs and expenses of

the company also influence the earning of the company. Further, earnings do

not always increase with the increase in sales. The companys sales might have

increased but its earnings per share (EPS) may decline due to the rise in costs.

The rate of change in earnings differ from the rate of change of sales. Sales

may increase by 10% in a company but earning per share may increase only

5%. Hence the investors should not depend only on sales, but should analyze

the earning of the company. The investor should be aware that income of the

company might vary due to the following reasons.

Change in Sales

Change in Costs

Depreciation method adopted

Depletion of resources in the case of oil, mining, forest products, gas etc.

Inventory accounting method

Replacement cost of inventories

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Wages, salaries and fringe benefits

Income taxes and other taxes

MANAGEMENT :

Good and capable management generates profit to the investors. The

management of the firm should efficiently plan, organize, actuate and control

the activities of the company. The basic objective of the management is to

attain the stated objective of the company for the good of the equity holder. The

good management depends on the qualities of the manager. Koontz and

ODonnell suggest the following as special trails of am able manager.

-Ability to get along with people

-Leadership

-Analytical competence

-Industry

-Judgment

-Ability to get thing done

OPERATING EFFICIENCY :

The operating efficiency of a company directly affects the earnings of

the company. An expanding company that maintain high operating efficiency

with a low break even point earns more that the company with high break

even point. If a firm has a stable-operating ratio, the revenues also would lead 0

more income from sales.

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OPERATING LEVERAGE :

If the firms fixed cost is high in total cost the firm is said to have a high

degree of operating leverage. Leverage means the use of a lever to raise a

heavy object with a small force. High degree of operating leverage implies,

other factors being held constant, a relatively small change in return on equity.

FINANCIAL ANALYSIS :

Investor prospects in a companys stock can be evaluated through

financial analysis of that company. The financial analysis provides better into

historical and current information about companys operations. The historical

statement of a company enable in forecasting the future results of that

company. The main components of financial analysis are as follows.

Balance sheet

Profit and loss Account

THE BALANCE SHEET (B/S) :

The (B/S) is the statement of the companys sources of funds and uses of

funds at a given point of time. The B/S allows one get quick view of the

financial strength and its capabilities. The B/S provides analyst to know exact

position of the business, whether it will be able to expand and handle the

financial problems. The b/S contain of two segments Liabilities and Assets.

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While Liabilities let us know financial obligations on the part of the company,

Assets represent financial strength of a company. The balance sheet provides as

account of the capital structure. The net worth and the outstanding long-term

debt are known from the balance sheet. From the observation op balance sheet

an investor can avoid a company that has excessive debt component in its

capital structure. From the balance sheet, liquidity position of the company can

also be assessed with information on current asset and current liabilities. The

overall ability to pay its short-term obligation can be found out.

PROFIT AND LOSS ACCOUNT (P&LA/C) :

Analysis of the financial condition of the company requires on the flow

of found too. The income statement reports the flow of funds from business

operations that take place in between two points of time. It lists of income and

expenditure. The difference represents profit or loss for the period. It is also

called income and expenditure statement. The investor should be aware of the

limitation of the financial statement.

LIMITATION OF FINANCIAL STATEMENT:

1. The financial statements contain historical information. This information


is useful but an investor should be concerned more about the present and
future.

2. Financial statements are prepared on the basis of certain accounting


concept and Conventions. An investor should know them.

3. The statements contain only information that can be measured in


monetary units. For example, the loss incurred by a firm due to flood of

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fire is included because it can be expressed in monetary terms. The loss
incurred by the company due to the loss of reputation is not given in the
statement because it cannot measure in monetary units.

Some times management may resort to manipulation of data window dressing.

This can be carried out by

a) Method of charging depreciation

b) Valuation of inventory

c) Revaluation of fixed assets

d) Changing the accounting year

An investor should scrutinize the financial statement to find out the

manipulations, if any. The auditors report and notes to the balance sheet vital

clue to the investor in this regard. Analysis of financial statement should be

undertaken only after nullifying the effects of any such manipulation.

ANALYSIS OF FINANCIAL STATEMENTS :

Financial statement analysis help an individual to understand the

relationship between income and expenditure, and source and application os

funds. It also help and investors to understand the financial position and the

strength of a company through this analysis. An investor can do financial

analysis through following simple analysis.

Comparative financial statements

Common size statements

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Trend Analysis

TECHNICAL ANALYSIS :

It is a process of identifying trend reversals at an earlier stage to

formulate the buying and selling strategy. With the help of several indicators

they analyze the relationship between price volume and demand supply for

overall market and the individual stock. Volume is favorable on the upswing

i.e. the number of share traded is greater than before and on the downside the

number of share traded dwindles. If it is the other way round. Trend reversals

can be expected.

ASSUMPTIONS :

1. The market value of the script is determined by the interaction of supply


and demand.

2. The market discount everything the price of the security quotes the
hopes, fears, insider information received by the market players. These
factors may cause the shift in the demand and supply, changing the
direction of the market.

3. The market always moves in trend.

4. Any layman knows the fact that history repeats itself.

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HISTORY OF TECHNICAL ANALYSIS

The technical analysis is based on the doctrine given by Charles H Dow

in 1984 in the wall Street Journal. He wrote a series of articles in the wall street

journal, A.J. Netlson, a close friend of Charles Dow formulized Dow theory for

economic forecasting. The analysis used charts of individual stocks and moving

averages in the early 1920s Later on, with the aid of calculators and

computers, sophisticated techniques came into vogue.

TECHNICAL TOOLS :

Dow developed his theory to explain the movement of indices of Dow

Jones Averages. He developed the theory on the basis of certain hypothesis.

The first hypothesis is that, no single individual or buyer can influence the

major trend of the market. However, an individual investor can affect the daily

price movement by buying or selling huge quantum of particular script. The

intermediate price movement also can be affected to a lesser degree by an

investor.

PRIMARY TREND :

The security trend may be either increasing or decreasing. When the

market exhibits the increasing trend, it is called bull market. The bull markets

shows three clear cut peaks. Each peak is higher than the previous peak. The

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bottoms are also higher than the previous bottoms. The reactions following the

peak used to halt before the previous bottoms. The phases leading to the three

peaks are revival, improvement in corporate profit and speculation. The revival

period encourage more and more investors to buy scrips their expectation

about the future being high. In the second phase, increased profits of corporate

would result in further price rise. In the third phase, prices advance due to

inflation and speculation. The reverse is true with the bear market. Here, the

first phase of fall with the abandonment of hopes. The chances of prices

moving back to the previous high level seems to be low, these would result in

the sale of shares. This lead to selling pressure. This final phase of 1996 in the

Bombay stock exchange, More than 2/3 of stock were inactive. Most of the

scrips were sold below their par values. Thus comes the bear markets. Here the

tops and bottoms are lower than the previous ones. The bull and bear phases of

the Indian market are give below.

When the market exhibits increasing trend, it is called bull market. The

bull market shows three clear cut peaks. Each peak is higher than the previous

peak. The bottoms are also higher than the previous bottoms.

1) The revival period encourages more and more investors to but scripts,
their expectations about the future being high.

2) In the second phase, increased profits of corporate would result in


further price rise.

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3) In the third phase, price advances due to inflation and speculation when
the market exhibits decreasing trend, it is called the bear market.

THE SECONDARY TREND :

The secondary trend or the intermediate trend moves against the main

trend and leads to correction. In the bull market, the secondary trend would

result in the fall of about 32-66% of earlier rise. In the bear market, the

secondary trend carries the price upward and corrects the main trend. The

secondary trend carries the price upward and corrects the main trend , the

correction would be 33% to 66% of the earlier fall. Intermediate trend correct

the over bought and oversold condition. It provides the breathing space to the

market, compared to the time taken for the primary trend, secondary trend is

swift and quicker.

MINOR TRENDS :

Minor trends or tertiary moves are called random wriggle. They are

simply the daily fluctuations, minor trend tries to correct the secondary trend

movement. It is better for the investors to concentrate on the minor trend the

chartists plots the scrips price or the market index each day to trace the

primary and secondary trend. Theoretically speaking, as long as the index

exhibits the formation of the higher tops and higher bottoms, the trend would

be termed as bullish and when the index starts exhibiting the formation of

lower-ups and lower-bottoms, the trend of the market can be said to have

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turned bearish. Thus it is the price action that determines the trend of the

market.

Another important phenomena described by this theory are the

formation of accumulation and distribution zone. These zones are called line

movements and narrow range movements during the accumulation and

distribution phase, the indices would be moving narrowly and neither gaining

nor losing noticeable ground from the line movement. If the indices were to be

moved upwards, their line movement or the narrow range movement would be

termed as cumulation phase/ if the indices were to move downward the narrow

range movements would be termed as distribution phase.

The Accumulation phase would gain significance if it were to occur at

the end of the Bull market. Distribution phase is also possible after the

completion of the first and second leg of the market.

SUPPORT AND RESISTENCE LEVELS :

A support level is expected at a price where considerable demand for

that stock is expected to prevent further fall in the price level. The fall in the

price may be halted for the time being or it may result even in price reversal in

the support level and for the particular scrip is expected.

In the resistance level, the supply of the scrip would be greater than the

demand and further rise in the price is prevented. The selling pressure is greater

and the increase in price is halted for the time being.

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Support and resistance usually occur whenever the turnover of large

number of shares tends to be concentrated at several price levels. When the

stock touches a certain level and then drops, then it is called resistance and if

the stock reaches down to a certain level and then rises, there exists a support.

INDICATORS :
The Technical indicators are used to find out the direction of the overall

market. The overall market movements affect the individual share prices.

Aggregate forecasting is considered to be more reliable than the individual

forecasting. The indicators are price and volume of trade. The volume of trade

is influence by the behavior of price.

VOLUME OF TRADE :

Dow gave special emphasis on volume. Volume expands along with the

bull market and narrow s down in the bear market. If the volume falls with rise

in price or vice-versa, it is a matter of concern for the investor and trend may

not persist for a longer time. Technical analyst used volume as an excellent

method of confirming the trend. The market is said to be bullish when small

volume of trade and large volume of trade follow the fall in prices and rise in

prices.

Large rise in price or large fall in price leads to large increase in volume.

Large volume with rise in price indicates bull market and the large volume with

fall in price indicates bear market. If the volume decline for five consecutive

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days, then it will continue for another four days and same is true in the case of

increasing volume.

THE BREADTH OF THE MARKET :

The breadth of the market is the terms often used to study the advances

and declines that have occurred in the stock market. Advances mean the

number of shares whose prices have increased from the previous days trading.

Declining indicate the number of shares whose prices have fallen from the

previous days trading. The net difference between the number of stocks

advanced and declined during the same period is the breadth of the market. The

advance/decline can be drawn as a graph. If the A/D line slopes downwards

wile the index is rising, it gives a bearish signal and vive-versa.

SHORT SALES :

Short selling is a technical indicator known as short interest. Short sales

refer to selling of the shares that are not owned the bears are the short sellers

who sell now in the hope of purchasing at a lower price in the future to make

profits. The short sellers have to cover up their positions. When the demand for

a particular share increases, the outstanding short positions also increase and it

indicates future rise in prices.

ODD LOT TRADING :

Shares are generally sold in lots of tens and hundreds. Shares sold in

smaller lots, fewer than tens and hundreds are called Odd Lots. Such buyers

31
and sellers are called Odd Lotters. Odd lot purchase to Odd lot sales

(purchase/sales) is the odd lot index. The increase in odd lot purchases result in

an increase in the index. Relatively more selling leads to fall in the Index. It is

generally considered that the professional investor is more informed the

market, the stock market is technically strong. If the Odd lotters dominate the

market, the market is considered to be technically weak. The notion behind this

is that odd lot purchase is concentrated at the top market cycle and selling at

the bottom. High odd lot purchase forecasts fall in the market price and low

purchase/sales ratio are presumed to occur towards end of the bear market.

MOVING AVERAGE :

The market indices do not rise or fall in straight line. The upward and

downward movements are interrupted by counter moves. The underlying trend

can be studied by smoothing of beta. To smoothening of the data. To smooth

the data, moving average technique is used.

The word moving means that the body of data moves ahead to include

the recent observation. If it is five day moving average, on the sixth day the

body of the data moves to include sixth day observation eliminating the first

days observation. Likewise it continues in the moving averages are used to

study the movement of the market as well as the individual scrip price. The

moving average indicates the underlying trend in the scrip. The moving

average indicates the underlying trend in the scrip. The period of average

determines the period of trend that is being identified. For identifying short-

32
term trend, 10 to 30 days moving average are used. In the case of medium term

trend, 50 to 125 days are adopted. 200 days moving average is used to identify

long term trend.

INDEX AND STOCK PRICE MOVING AVERAGE :

Individual stock price is compared with the stock market indices. The

moving average of the stock and the index are plotted in the same sheet and

trends are compare. If NSE or BSE index is above stocks moving average line,

the particular stock has bullish trend. The price may increase above the market

average. If the Senses or Nifty is below the stocks moving average the bearish

market can be expected for the particular stock. If the moving average of the

stock penetrates the stock market index from the above. It generates sell signal.

Unfavorable market conditions prevail for the particular scrip. If the stock line

pushes up through the market average, it is a buy signal.

STOCK PRICE AND STOCK PRICES MOVING AVERAGE :

Buy and sell signal is provided by the moving averages. Moving

averages are used along with the prices of the scrip. The stock price may

intersect the moving average at a particular point. Downward penetration of the

rising average indicates the possibility further fall and gives the sell signal.

Upward penetration of the falling average would indicate the possibility of the

further rise and gives the buy signal.

OSCILLATORS :

33
Oscillators indicate the market momentum or scrip momentum.

Oscillators show the share price movement across a reference point from one

extreme to another, the momentum indicates.

a) Over bought and over sold conditions of the scrip or the market

b) Signaling the possible trend reversal

c) The rise or decline in the momentum.

Generally, Oscillators are analyzed along with price chart. Oscillator

indicate trend reversals that have to be confirmed with the price movement or

the scrip changes in the price should be correlated to changes in momentum

and then only buy and sell signal can be generated. Actions have to be taken

only when the price and momentum agree with each other with the daily,

weekly and monthly closing prices, oscillators are built. For short term trading,

daily price oscillators are useful. For long term trading, monthly price

oscillators are useful.

34
CHAPTER-III
INDUSTRY PROFILE & COMPANY
PROFILE

35
INDUSTRY PROFILE
STOCK BROKING OPERATIONS AN OVER VIEW

As capital market operations is a complex activity which require an in depth


knowledge of stock market and about the company performance, security analysis of
the stock. A full time practicing firm/person is needed to advise for our investment; in
fact a broker can also invest his own money to make profit out of stock market
operations.

A stockbroker invests in the stock market for individuals or corporations so


whenever individuals or corporations want to buy or sell stocks they must go through
a brokerage house. Stockbrokers often advise and counsel their clients on appropriate
investments. Brokers explain the workings of the stock exchange to their clients and
gather information from them about their needs and financial ability, and then
determine the best investments for them. The broker then sends the order out to the
floor of the securities exchange by computer or by phone. When the transaction has
been made, the broker supplies the client with the price. The buyer pays for the stock
and the broker transfers the title of the stock to the client and performs clearing and
settlement procedures. The settlement process is discussed in subsequent pages. The
beginning stockbrokers first priority is learning the market. One broker said, First
you have to decide whether you have an interest in the stock market. This will
determine how well you will do. If you are just interested in making money you
wont get very far. Stockbrokers spend their time in a fast-paced office, usually
working from nine to five, unless they are just starting out or have to meet with
clients. The new broker spends many hours on the phone building up a client base.
Sometimes brokers teach financial education classes to expose themselves to potential
investors who may then become their clients.

36
Brokerage clerks handle much of the day-to-day operations of brokerages,
performing a number of different jobs with a wide range of responsibilities; all
involve computing and recording data pertaining to securities transactions.

Brokerage clerks also may contact customers, take orders, and inform clients
of changes to their accounts. Some of these jobs are more clerical. Brokerage clerks,
who work in the operations departments of securities firms, on trading floors, and in
branch offices, also are called margin clerks, dividend clerks, transfer clerks, and
brokers assistants.

Brokerage clerks in the operations areas of securities firms perform many


duties to facilitate the sale and purchase of stocks, bonds, commodities, and other
kinds of investments. These clerks produce the necessary records of all transactions
that occur in their area of the business. Job titles for many of them depend upon the
type of work that they perform. Purchase-and-sale clerks, for example, match orders
to buy with orders to sell. They balance and verify trades of stock by comparing the
records of the selling firm with those of the buying firm. Dividend clerks ensure
timely payments of stock or cash dividends to clients of a particular brokerage firm.
Transfer clerks execute customer requests for changes to security registration and
examine stock certificates to make sure that they adhere to banking regulations.
Receive-and-deliver clerks facilitate the receipt and delivery of securities among firms
and institutions. Margin clerks record and monitor activity in customers accounts to
ensure that clients make payments and stay within legal boundaries concerning their
purchases of stock.

Technology is changing the nature of many of these jobs. A significant and


growing number of brokerage clerks use custom-designed software programs to
process transactions more quickly. Only a few customized accounts are still handled
manually. Furthermore, the rapid expansion of online trading reduces the amount of
paperwork because brokerage clerks are able to make trades electronically.

Stockbroker and the investor:

37
The stockbroker should provide adequate information regarding the stocks.
He should be capable of giving short term and long-term investment suggestions to
the investor and able to confirm the purchase and sale of securities quickly. He should
have adequate experience in the market to take correct decision. He should have
contact with other stock exchanges to execute the orders profitably and also offer
incidental service like arranging for financing the clients transaction.

Types of stockbrokers

The stock brokers the key players in secondary market. There are various
categories of brokers as stated below.

Floor Brokers: They are representatives of the brokers, who enter the
trading floor and execute orders for their clients of for members.

Commission Broker: A commission broker is a broker who buys and sells


securities on behalf of his clients for a commission. He does not purchase or
sell his own name. A broker act for the large number of his clients, and
therefore, he deals in a large variety of securities.

Jobbers: A jobber is an independent broker who deals in securities as a


owner, keeps them for a very short period and sells them for profit known as
the jobbers turn.

Thus a jobber does not work for commission but works for profits. A
jobber transacts in the market for quick returns. In the London Stock
Exchange even member has to act as a broker or as a jobber. In India, there
is no such rigid classification.

Badla Financiers/Badliwallas: Badliwallas are the intermediaries who


finance the forward deals in specified securities in return for interest. This
interest is called Badla rate.

Arbitragers: They are brokers who buy securities in one market and sell
them in another market to take the advantages of the price differences
prevailing in different markets for same scripts.

38
Wolves: They are clever speculators. They perceive the changing trends in
the market and trade fast and make a fast duck.

Buying and selling of shares:


To buy and sell the script the investor has to locate register broker or a sub
broker who render prompt and efficient services to him. The order to buy of sell
specified number of scrip of the company of investors choice ate laced with the
broker, the order may be of any of the below mentions type after receiving the
order the broker tries to execute the order in his computer terminal. Once
matching order is found, the order is executed. The broker delivers the contract
note.

To the investor, it gives the details regarding the name of the


company, number of scripts bought, price, brokerage, and the date of delivery of
share. In the physical trading form, once the broker gets the script certificate
through the clearing houses the stock broker delivers the share certificate along
with transfer deed to the investor. The investor has to fill the transfer deed and
stamp it. The stamp duty is one of the percentage consideration, the investor
should lodge the share certificate and transfer deed to the register or transfer agent
of the company if it is bought in the demit form the broker has to give a matching
instruction to his depository participant to transfer shares bought to the investor
account. The investor should be account holder in any of depository participant.
In the case of sell of shares on receiving payment from the purchasing broker, the
broker effects the payment to the investor

Orders:
Buy and sell orders placed with members of the stock exchange by the
investor. The broker is responsible for getting the best price for his customer at the
time the order is placed.

Online Trading:
The Net is used as a medium of trading in Internet trading. Orders are
communicated to the stock exchange through website. Internet trading started in
India on 1st April 2000 with 79 members seeking permission for online trading. The
SEBI committees on Internet based securities trading services trading services has

39
allowed the net to be used as an Order Routing System (ORS) through registered
stock brokers on behalf of their clients for execution of transaction.

The user should have the user id and password to enter into the electronic
ring. He should also have a demat account and bank account. The system permits
only a registered client to log in using user ID and password. Order can be placed
using place order window of the website.

The client has to enter stock code and other parameters such as quantity and
price of the scrip on the place order window.

The client can review the order placed by clicking the review option. He can
also reset to clear the values

Satisfactory orders are sent by clicking the send option.

The client receives an order confirmation message with order number and
value of the order.

If the order is rejected by the broker or stock exchange of r certain reasons


such as invalid price limit, a related message appears at the bottom of the
screen. The time taken to execute the order is 10 seconds.

When the trade is executed, the broker asks for the transfer of funds by the
investor to his account. Stocks are credited/debited according to the buy/sell
order in the demat accounts.

Regulatory Framework

The securities and Exchange Board of India was constituted in 1998 under a
resolution of government of India. It was later made statutory body by the SEBI act
1992. According to this act, the SEBI shall constitute of a chairman and five other
members appointed by the central government with the coming into effect of the
Securities and Exchange Board of India act, 1992. Some of the power and functions
exercised by the central government, in respect of the regulation of stock exchange
were transferred to the SEBI.

Objects and functions of SEBI:

I. To protect the interest of investors in securities.

40
II. Regulation the business in stock exchange and any other securities market.

III. Registering and regulation the working of intermediaries associated with


securities market as well as working of mutual fund.

IV. Promoting and regulating self-regulating organizations.

V. Prohibiting insides trading in securities.

VI. Regulation substantial acquisition of share and take over of companies.

VII. Performing such functions and exercising such powers under the provisions of
capital issues (control) act, 1947 and the securities to it by the central
government.

Securities and Exchange Board of India (Stock Brokers And Sub-Brokers)

Regulations, 1992,

In respect of stockbroker and sub-broker, SEBI has made 12 amendments from


November 28, 1995 to September 27,2002.

SEBI has been setup to ensure that the stock exchanges discharge their self-
regulatory role properly. Even since SEBI began to monitor brokers, stock broker.

Stock broking is emerging as a professional advisory service, in tune with the


requirements of a mature, sophisticated, screen-based, ring less, automated stock
exchanges in the country.

New Membership -CM and F&O segment

Eligibility

The following persons are eligible to seek membership of the Exchange


as Trading Members (Brokers):

a. Individuals

b. Partnership Firms registered under the Indian Partnership Act, 1932.

41
c. Corporations, Companies or institutions or subsidiaries of such
Corporations, Companies or institutions set up for providing financial
services.

d. Such other persons or entities as may be permitted from time to time by


RBI/SEBI under the securities Contracts (Regulations) Rules, 1957.

General Eligibility Conditions:

Criteria Individuals Firms Corporate


AGE Minimum age: Minimum age: Minimum age:
21 years 21 years 21 years

Maximum age: (applicable for (applicable for

60 years partners) directors)


STATUS Indian Citizen Registered Corporate
partnership firm registered under
under Indian The Companies
partnership Act, Act, 1956 (Indian)
1932

42
COMPANY PROFILE
- Yours online personal Finance Advisor -

KARVY BACKGROUND:

In 1982, a group of Hyderabad based practicing Chartered Accountants


started Karvy Consultants Limited with a capital of Rs. 1,50,000 offering auditing and
taxation services initially. Later, it forayed into the Registrar and Share Transfer
activities and subsequently into financial services. All along, Karvys strong work
ethic and professional background leveraged with Information Technology enabled it
to deliver quality to the individual.
A decade of commitment, professional integrity and vision helped Karvy
achieve a leadership position. In its field when it handled the largest number of issues
ever handled in the history of the Indian stock Market in a year. Thereafter, Karvy
made inroads into a host of capital-market services, - corporate and Retail which
proved to be a sound business synergy.

Today, Karvy has access to millions of Indian shareholders, besides


companies, banks, financial institutions and regulatory agencies. Over the past one
and half decades, Karvy has evolved as a veritable link between Industry, finance and
people. In January 1998, Karvy became the first Depository Participant in Andhra
Pradesh. An ISO 9002 company, Karvys commitment to quality and retail reach has
made it an integrated Financial Services Company.

43
CORE VALUES:

Karvys adherence to its core values integrity, enterprise and innovation has
earned it an enviable reputation amongst all the intermediaries and regulatory
authorities of the capital and financial markets.
Karvy capability has now been extended service global customers. The foray
into global processing services began in 1999 to cater to health care industry needs.
The first step Medical Transcription a service then required capability in
understanding a customers voice, conversion to text with timeliness and accuracy and
completion to a legally acceptable framework will now provide its service globally.

VISION:

Karvys aspiration of establishing itself as an integrated financial services


company is propelled by a vision that is shared by its entire work force. Towards this
end, Karvy has dedicated itself to:
To have a single minded focus on investor services;
To establish Karvy as a household name for financial services;
To set industry standards;
To establish a leadership position in all chosen areas of business.

KARVYS PHILOSOPHY:

Karvys core activities provide insights into the reasons for its consistent,
positive performance.
Assistance beyond service
Leadership through Quality

44
Innovation & Market Creation
Relationship Building
Integrity & Transparency

KARVYS COMPETITIVE EDGE:

Human Resources
Training
Technology
Software
Mailroom

RANGE OF SERVICES:

Issue Servicing
Corporate Shareholder Servicing
Mutual Fund Investor Service
Asset Financing
Merchant Banking & Underwriting Services
Corporate Advisory Financing & Project Financing
Retail Financial Products
Karvy Depositor Services
Electronic Custodial Services
Depository Participant
Investor Services
Karvy - The OTCEI Dealer
Medical Transcription
Financial Products Marketed Through Karvy:
Initial Public Offerings
Fixed Income Products
Fixed Deposits
Debt Instruments

45
Bonds
Mutual Funds
Tax Saving Schemes
Personal Banking Products
Personal Loans & insurance

GROUP COMPANIES & DIVISIONS:

KARVY CONSULTANTS LIMITED: Deals in Registrar and Investment


Services
KARVY SECURITIES LIMITED: Deals in distribution of various
investment products, viz., equities, mutual funds, bonds and debentures, Fixed
deposits, insurance policies for the investor
KARVY INVESTOR SERVICES LIMITED: Deals in Issue management,
Investment Banking and Merchant Banking,
KARVY STOCK BROKING LIMITED: Deals in buying and selling equity
shares and debentures on the National Stock Exchange (NSE), the Hyderabad Stock
Exchange (HSE) and the Over-The-Counter Exchange of India (OTCEI),

ALLIANCES:

Karvy has a strategic alliance with Jardine Fleming India Securities Limited
(JFISL) one of Asias most prestigious investment bankers to leverage on the
latters investment banking expertise. This would augment the retail distribution
reach and provide the Indian access to the best global and local insights on financial
markets. Jardine is a respected investment banker with a demonstrated track-record
of delivering value to its clients spread over 43 countries. It is ranked amongst the
worlds TOP 3 Foreign Institutional Investors (FIIs).

QUALITY POLICY:

46
To achieve and retain leadership, Karvy shall aim for complete customer
satisfaction, by combining its human and technological resources, to provide superior
quality financial services. In the process, Karvy will strive to exceed Customers
expectations.

QUALITY OBJECTIVES:

As per the Quality Policy, Karvy will:


Build in-house processes that will ensure transparent and harmonious
relationships with its clients and investors to provide high quality of services.
Establish a partner relationship with its investor service agents and vendors that
will help in keeping up its commitments to the customers.
Provide high quality of work life for all its employees and equip them with
adequate knowledge & skills so as to respond to customers needs.
Continue to uphold the values of honesty & integrity and strive to establish
unparalleled standards in the business ethics.
Use state-of-the art information technology in developing new and innovative
financial products and services to meet the changing needs of investors and clients.
Strive to be a reliable source of value-added financial products and services and
constantly guide the individuals and institutions in making a judicious choice of same.
Strive to keep all stake-holders (shareholders, clients, investors, employees,
suppliers and regulatory authorities) proud and satisfied.

KARVYKEY PEOPLE:

Board of Directors Karvy Consultants Limited

C. Parthasarathy - Chairman And Managing Director


M. Yugandhar - Managing Director
M.S. Ramakrishna - Director

47
Prasad V Potluri - Director
Dr. P.V.S. Jaganmohan Rao Company Secretary
Price Water House, Hyderabad Auditors
Bankers: UCO Bank, Bank Of Baroda, HDFC Bank, Standard Chartered Grindlays
Bank.
Registered Office: Karvy House, 46, Avenue 4, Street No.1, Banjara Hills,
Hyderabad, Andhra Pradesh, India.

KARVY MUTUAL FUND SERVICES (MFS DIVISION)


- building a heritage of confidence

There is a wide range of mutual fund services available at KARVY MUTUAL


FUND SERVICES to the various categories like Asset Management Companies,
Investors, Distributors and General Users. We can use mutual fund services through
web also, the web site is karvymfs.com, with a click of the mouse we can enter into
the karvy mutual fund services, this provides Interactive Fund Service to query for
account related details and register specific services requests.

Since its inception in 1982, Karvy has demonstrated a dedication coupled with
dynamism that has inspired trust for various segments corporate, government bodies
and individuals. Karvy has since been performing a pivotal role as the intermediary
the interface between these players.

With Mutual Funds emerging as a distinct asset class, Karvy has made a
strategic choice to leverage the power of latest technology to provide a cutting edge to
its services. This, today, service nearly 40% of the asset management companies
(AMCs) across an extensive network of service centers with assets under service in
excess of Rs.10,000 crores.

Karvys ability to mass customize and offer a diverse range of products for
diverse range of customers has helped mutual fund companies to uniquely position
themselves in the market place. These diverse range of services cut across multiple
delivery channels service centers, web, mobile phones, call center has brought
hone the benefits of technology to investors, distributors, and the mutual funds.

48
Going forward, it shall strive to create new products and services, which
would address the needs of the end customer. Its single-minded focus in delivering
products for customers has given the distinguished position of being the preferred
provider of financial services in the country. These services can be broadly
categorized as below:

Investor Services
Distributor Services
AMC Services
General Services or Information Services

a) INVESTOR SERVICES:
- Keeping ahead with the changing investor expectations -

Investor is a person who invests in the mutual funds in the mutual funds
concept. He placed in the bottom of the structure, but he plays a pivotal role, without
investor we cannot imagine the mutual funds. There is a wide range of investor
services provided by karvy mutual fund services to the investors and also Mutual
Fund Investors have the convenience of logging on to the web site and utilize various
account related services. To utilize these web services the investor has to first register
himself with the karvymfs.com in the investor services with the web site, the
karvymfs.com gives authorized ID and Password to the registered user, with a click of
the mouse he can gets the services, without authorized ID and Password he cannot get
the services. The major online services for investors can be categorized as below:
View their account statements online
Get a snapshot of all their investment serviced by Karvy:
Portfolio Valuation Services
NAV Broadcast Services
NAV Alert Services
Receive Account statements by email

Apart from the afore-mentioned services, any visitor from the web site has the
option to know Mutual Fund Concepts, check out the latest NAVs of his/her favorite

49
Mutual Funds, etc., obtain dividend information, get the latest load structure
information etc.

b) DISTRIBUTOR SERVICES:
- Re-defining service -

Karvy recognizes the distributor, as on invaluable customer, in the Mutual Fund


transaction chain. Keeping this in mind, Karvy has engineered several initiatives for
the distributors and for the benefit of his clients.

AMC SERVICES:
- Your partners in progress -

There is wide range of AMC Services provided by Karvy Mutual Fund Services
to the registered Asset Management Companys (AMCs).The AMC can now viewing
investor information and requesting various reports related to the investor, is possible
through the web site also, just by the click of the mouse. In order to use the respective
AMC services on the site, Mutual Fund AMCs must enter into agreement with Karvy
Consultants Limited, whereby users are assigned a User ID and Password at the fund
level. AMC may use this ID and Password to access all the site services. It provides
registered AMCs can check out various ONLINE and MAIL-BACK services and gets
an update on the investments of its investors.

Online Services:
1. Investor Account Statements

2. Query on application number

3. Query on investors name

50
Mail-Back Services:

1. Transaction Reports

2. Net Assets Under Management Report

3. Asset Movement Report

4. Slab Report

5. Status-wise holdings report

c) GENERAL/INFORMATION SERVICES:
In addition to the afore-mentioned services Karvy mfs provides general or
information services to the users. These services can be broadly classified as below:

1. Dividend History

2. Fund Information

3. Load Structures

4. Special Products

5. Karvy Network

UTUAL FUNDS AT KARVY

The Mutual Fund umbrella of Karvy consists both Open-ended and Close-ended

Mutual Funds. The following are the various mutual fund AMCs for which Karvy

acts as a Registrar.

1) BOB Mutual Fund

2) BOI Mutual Fund

3) DEUTSCHE Mutual Fund

4) GIC Mutual Fund

5) IDBI Mutual Fund

6) IL & FS Mutual Fund

51
7) MORGAN STANLEY Growth Fund

8) PNB Mutual Fund

9) RELIANCE Capital Mutual Fund

10) SBI Mutual Fund

11) UTI Mutual Fund

INDUSTRY PROFILE:
INFORMATION TECHNOLOGY
Information technology, and the hardware and software associated with the
IT industry, are an integral part of nearly every major global industry.

The information technology (IT) industry has become of the most robust
industries in the world. IT, more than any other industry or economic facet, has an
increased productivity, particularly in the developed world, and therefore is a key
driver of global economic growth. Economies of scale and insatiable demand from
both consumers and enterprises characterize this rapidly growing sector.

The Information Technology Association of America (ITAA) explains


'information technology' as encompassing all possible aspects of information systems
based on computers.

Both software development and the hardware involved in the IT industry


include everything from computer systems, to the design, implementation, study and
development of IT and management systems.

Owing to its easy accessibility and the wide range of IT products available, the
demand for IT services has increased substantially over the years. The IT sector has
emerged as a major global source of both growth and employment.

52
THE ROLE OF IT INDUSTRY:

The IT industry can serve as a medium of e-governance, as it assures easy


accessibility to information. The use of information technology in the service sector
improves operational efficiency and adds to transparency. It also serves as a medium
of skill formation.
VISION:

The Development council for Electronics Industry has formulated an India


Information Technology vision 2012 plan to make India a global information
technology force and one of the largest generators and exporters of software in the
world. The council has put India's software export target at $9.35bn by 2001 and
domestic software consumption at $5.07bn.

This would represent a growth of 50% annually. Vision 2012 has a 25-point action
plan to be implemented in three phases in a time bound manner

IT INDUSTRY OUTLOOK
Information Technology (IT) industry in India is one of the fastest growing industries.
Indian IT industry has built up valuable brand equity for itself in the global markets.
IT industry in India comprises of software industry and information technology
enabled services (ITES), which also includes business process outsourcing (BPO)
industry. India is considered as a pioneer in software development and a favorite
destination for IT-enabled services.

The origin of IT industry in India can be traced to 1974, when the mainframe
manufacturer, Burroughs, asked its India sales agent, Tata Consultancy Services
(TCS), to export programmers for installing system software for a U.S. client. The IT
industry originated under unfavorable conditions. Local markets were absent and
government policy toward private enterprise was hostile. The industry was begun by
Bombay-based conglomerates which entered the business by supplying programmers
to global IT firms located overseas.

53
During that time Indian economy was state-controlled and the state remained hostile
to the software industry through the 1970s. Import tariffs were high (135% on
hardware and 100% on software) and software was not considered an "industry", so
that exporters were ineligible for bank finance. Government policy towards IT sector
changed when Rajiv Gandhi became Prime Minister in 1984. His New Computer
Policy (NCP-1984) consisted of a package of reduced import tariffs on hardware and
software (reduced to 60%), recognition of software exports as a "deli censed
industry", i.e., henceforth eligible for bank finance and freed from license-permit raj,
permission for foreign firms to set up wholly-owned, export-dedicated units and a
project to set up a chain of software parks that would offer infrastructure at below-
market costs. These policies laid the foundation for the development of a world-class
IT industry in India.

Today, Indian IT companies such as Tata Consultancy Services (TCS), Wipro, Infosys,
HCL et al are renowned in the global market for their IT prowess. Some of the major
factors which played a key role in India's emergence as key global IT player are:

Indian Education System


The Indian education system places strong emphasis on mathematics and science,
resulting in a large number of science and engineering graduates. Mastery over
quantitative concepts coupled with English proficiency has resulted in a skill set that
has enabled India to reap the benefits of the current international demand for IT.

High Quality Human Resource


Indian programmers are known for their strong technical and analytical skills and
their willingness to accommodate clients. India also has one of the largest pools of
English-speaking professionals.

Competitive Costs
The cost of software development and other services in India is very competitive as
compared to the West.

Infrastructure Scenario
Indian IT industry has also gained immensely from the availability of a robust

54
infrastructure (telecom, power and roads) in the country.

In the last few years Indian IT industry has seen tremendous growth. Destinations
such as Bangalore, Hyderabad and Gurgaon have evolved into global IT hubs. Several
IT parks have come up at Bangalore, Hyderabad, Chennai, Pune, Gurgaon etc. These
parks offer Silicon Valley type infrastructure. In the light of all the factors that have
added to the strength of Indian IT industry, it seems that Indian success story is all set
to continue.

CHAPTER - IV
DATA ANALYSIS AND
INTERPRETATION

55
ANALYSIS AND INTERPRETATION
BALANCE SHEET OF COGNIZENT

2013 2014 2015 2016


Source of fund
Total share holder 33.32 135.00 138.00 286.00
Equity share capital 33.32 135.00 138.00 286.00
Preference share capital 0.00 0.00 0.00 0.00
Reserves 3,220.11 5,17.00 6,759.00 1,876.00
Revaluation reserves 0.00 0.00 0.00 0.00
Networth 3,253.43 5,242.00 6,897.00 11,462.00
Secured loans 0.00 0.00 0.00 0.00
Unsecured loans 0.00 0.00 0.00 0.00
Total debt 0.00 0.00 0.00 0.00
Total liabilities 3,253.43 5,242.00 6,897.00 11,162.00

Application of fund
Gross block 1,570.23 2,183.00 2,837.00 3,889.00
Less: Accumulated depreciation 803.41 1,006.00 1,275.00 1,739.00
Net block 766.82 1,177.00 1,562.00 2,150.00
Capital work-in-progress 203.48 318.00 571.00 957.00

Investment 1,027.38 1,329.00 876.00 839.00


Investors 0.00 0.00 0.00 0.00
Sundry debtors 632.51 1,253.00 1,518.00 2,292.00
Cash & bank balance 1,638.01 1,481.00 3,279.00 5,507.00
Total current assets 2,270.52 2,734.00 4,797.00 7,799.00
Loans & advance 728.85 1,030.00 1,308.00 1,241.00
Total CA, loans advances 2,999.37 3,764.00 6,105.00 9,040.00

56
Deferred credit 0.00 0.00 0.00 0.00
Fixed deposit 0.00 0.00 0.00 0.00
Current liabilities 501.03 461.00 642.00 881.00
Provisions 1,242.59 885.00 1,575.00 943.00
Total CL & provisions 1,743.62 1,346.00 2,217.00 1,824.00
Net current assets 1,255.75 2,418.00 3,888.00 7,216.00
Miscellaneous expenditure 0.00 0.00 0.00 0.00
Total assets 3,253.43 5,242.00 6,897.00 11,162.00
Contingent liabilities 659.69 1,568.00 1,434.00 1,945.00
Book value (Rs) 488.21 194.15 249.89 195.14
FINANCIAL ANALYSIS OF COGNIZENT
PROFIT & LOSS A/C
2013 2014 2015 2016
Income
Sales Turnover 4,760.89 6,860.00 9,028.00 13,149.00
Excise duty 0.00 0.00 0.00 0.00
Net Slaes 4,760.89 6,860.00 9,028.00 13,149.00
Other income 127.39 172.00 227.00 381.00
Stock adjustment 0.00 0.00 0.00 0.00
Total income 4,888.28 7,032.00 9,255.00 13,530.00

Expenditure
Raw material 0.00 0.00 0.00 0.00
Power & fuel cost 28.72 40.00 62.00 88.00
Employee cost 2,362.64 3,177.00 4,257.00 6,293.00
Other manufacturing expenses 256.19 527.00 717.00 1,163.00
Selling & administrative 496.26 721.48 967.49 1,299.53
expenses
Miscellaneous expenses 42.35 68.52 105.51 64.47
Pre-operative exp capitalized 0.00 0.00 0.00 0.00
Total expensses 3,186.16 5,534.00 6,109.00 8,908.00

Operating profit 1,574.73 2,326.00 2,919.00 4,241.00


PBDIT 1,702.12 2,498.00 3,146.00 4,622.00
Interest 0.75 1.00 1.00 1.00
PBDT 1,701.37 2,497.00 3,145.00 4,621.00
Depreciation 230.90 268.00 409.00 469.00
Profit before tax 1,470.47 2,229.00 2,736.00 4,152.00
Extra ordinary items 0.00 -4.51 0.00 -1.00
PBT (post extra ordinary items) 1,470.47 2,233.51 2,736.00 4,153.00
Tax 227.00 325.00 315.00 369.00
Net profit 1,243.47 1,909.00 2,421.00 3,783.00

57
Total value addition 3,186.16 4,534.00 6,109.00 8,908.00
Preference dividend 0.00 0.00 0.00 0.00
Equity dividend 862.46 310.00 1,238.00 653.00
Corporate dividend 110.50 42.00 174.00 102.00
Per share data annualized
Share in issue (lakhs) 666.40 2,700.00 2,760.00 5,720.00
Earning per share (Rs) 170.01 68.96 81.41 64.35
Equity dividend 2,590.00 230.00 900.00 230.00
Book value 488.21 194.15 249.88 195.14

FINANCIAL RATIOS OF COGNIZENT

Basic Ratios 2013 2014 2015 2016

(1) Profitability Ratios


Adjusted Net profit Margin 26.12 27.76 26.82 28.77
Gross Profit Margin 35.75 36.41 32.33 32.25
Operating Profit Margin 35.74 36.44 34.84 35.14
EBITDA Profit Margin 30.90 32.51 30.32 31.58
Return on Capital employed 48.41 47.65 45.61 37.99
Return on Equity (%) 18.65 7.58 8.77 6.61
EPS 170 68.96 81.41 64.35
P/E ratio 3.63 16.37 18.31 30.41

(II) Management Efficiency Ratio

Debtor Turnover Ratio 8.32 7.28 6.65 6.90

Fixed asset Turnover Ratio 3.23 3.18 3.14 2.95

(III) Liquidity & Solvency Ratios

58
Current Ratio 1.72 2.79 2.75 4.9
Debt Equity Ratio - - - -

Book value Per Share 488.21 194.15 249.89 195.14

Interpretation :

The firm EPS will be 170 in 2013, 68.96 in 2014, 81.41 in 2015, and 64.35
in 2016. The firm EPS will be decreasing year by year. It will not good for
any company.

The firm profitability position will be the net profit margins are 26.12 in
2013, 27.76 in 2014, 26.82 in 2015, 28.77 in 2016. So they have no
constant growth in net profit margins.

The Gross Profit margins are very high in total sales those are
5.74,36.40,34.84, 35.14 respectively from 2013 to 2016.

The ROCE will be 48.13 in 2013, 52.50 in 2014, 45.09 in 2015, and 45.99
in 2016. So that the Return on Capital Employed will be constant.

The firm P/E ratio of the firm will be at 3.63,16.37,18.31,30.41 respectively


from 2013 to 2016. So the firm P/E ratio will be very low to compare
Industry P/E ratio.

59
BALANCE SHEET OF' UNITED HEALTH GROUP

2013 2014 2015 2016

Source of fund
Total share holder 63.25 63.85 64.89 133.44
Equity share capital 63.25 63.85 64.89 133.44
Preference share capital 0.00 0.00 0.00 0.00
Reserves 2,517.51 3,153.17 4,268.75 5,648.07
Revaluation reserves 0.00 0.00 0.00 0.00
Networth 2,580.76 3,217.02 4,333.64 5,781.51
Secured loans 7.30 9.87 12.57 13.79
Unsecured loans 0.00 0.00 0.00 0.00
Total debt 7.30 9.87 12.57 13.79
Total liabilities 2,588.06 3,226.89 4,346.21 5,795.30

Application of fund
Gross block 838.80 937.70 1,153.16 1,280.40
Less: Accumulated depreciation 589.40 685.41 803.74 930.45
Net block 249.40 252.29 349.42 349.95
Capital work-in-progress 22.17 64.68 76.84 290.05

Investment 74.75 78.48 155.74 201.15


Investors 0.00 0.00 0.00 0.00
Sundry debtors 592.82 765.17 1,122.81 1,649.86
Cash & bank balance 1,815.36 2,363.31 3,052.33 3,959.82
Total current assets 2,408.18 3,128.48 4,175.14 5,609.68
Loans & advance 198.09 167.92 323.50 394.07
Total CA, loans advances 2,606.27 3,296.40 4,498.64 6,003.75

Deferred credit 7.30 9.87 12.57 13.79


Fixed deposit 0.00 0.00 0.00 0.00

60
Current liabilities 205.48 276.19 462.87 629.15
Provisions 159.05 188.77 271.56 420.45
Total CL & provisions 364.53 464.96 734.43 1,049.60
Net current assets 2,241.74 2,831.44 3,764.21 4,954.15
Miscellaneous expenditure 0.00 0.00 0.00 0.00
Total assets 2,588.06 3,226.89 4,346.21 5,795.30
Contingent liabilities 216.15 1,345.09 1,236.65 2,262.31
Book value (Rs) 81.61 100.77 133.57 86.65

FINANCIAL ANALYSIS OF UNITED HEALTH GROUP

2013 2014 2015 2016


Income
Sales Turnover 2,501.54 3,464.22 4,634.31 6,228.47
Excise duty 0.00 0.00 0.00 0.00
Net Sales 2,541.54 3,464.22 4,634.31 6,228.47
Other income 113.40 102.42 380.17 181.61
Stock adjustment 0.00 0.00 0.00 0.00
Total income 2,654.94 3,566.64 5,014.48 6,410.08

Expenditure
Raw material 0.00 0.00 0.00 0.00
Power & fuel cost 13.43 18.68 86.98 34.68
Employee cost 1,337.92 1,997.71 2,700.75 3,706.04
Other manufacturing expenses 47.53 64.25 67.70 86.71
Selling & administrative 388.70 438.78 577.73 787.36
expenses
Miscellaneous expenses 93.06 75.52 69.90 84.56
Pre-operative exp capitalized 0.00 0.00 0.00 0.00
Total expenses 1,880.64 2,594.94 3,443.06 4,699.35

Operating profit 660.90 896.28 1,191.25 1,529.12


PBDIT 774.30 971.70 1,571.42 1,710.73
Interest 0.75 0.76 2.72 7.61
PBDT 773.55 970.94 1,568.70 1,703.12
Depreciation 111.61 103.94 122.81 129.89
Profit before tax 661.94 867.00 1,445.89 1,573.23
Extra ordinary items 0.00 0.00 -1.23 0.56
PBT (post extra ordinary items) 661.94 867.00 1,447.12 1,572.67
Tax 106.15 116.74 206.14 150.00
Net profit 555.79 750.26 1,239.75 1,423.23

Total value addition 1,880.64 2,594.94 3,443.06 4,699.35

61
Preference dividend 0.00 0.00 0.00 0.00
Equity dividend 126.72 159.63 228.33 232.54
Corporate dividend 16.24 20.86 32.02 37.55
Per share data annualized
Share in issue (lakhs) 3,162.50 3,192.50 3,244.50 6,672.00
Earning per share (Rs) 17.06 22.85 37.22 20.77
Equity dividend 200.00 150.00 350.00 175.00
Book value 81.61 100.77 133.57 86.65

KEY FINANCIAL RATIOS OF UNITED HEALTH GROUP

Basic Ratios 2013 2014 2015 2016


(1) Profitability Ratios

Adjusted Net profit Margin 21.87 21.66 26.75 22.85


Gross Profit Margin 30.44 28.03 33.91 27.47
Operating Profit Margin 30.47 28.20 33.91 27.47
EBITDA Profit Margin 26.07 25.05 31.26 25.38
Return on Capital employed 27.95 29.85 31.34 31.18
Return on Equity (%) 17.57 23.50 38.21 21.33
EPS 17.06 22.85 37.22 20.77
P/E RATIO 8.60 8.95 11.35 22.62

(II) Management Efficiency Ratio

Debtor Turnover Ratio 4.74 5.10 4.91 4.49

Fixed asset Turnover Ratio 3.15 3.90 4.43 5.12

(III) Liquidity & Solvency Ratios

Current Ratio 6.42 7.12 6.50 5.89


Debt Equity Ratio 0.01 - - -

62
Book value Per Share 81.61 100.77 133.57 86.55

Interpretation :

The firm EPS will be 17.06 in 2013, 22.85 in 2014, 37.22 in 2015, and
20.77 in 2016. The firm EPS will be increased in first three years and
decreased in last one year.

The firm profitability position will be the net profit margins are
21.87,21.66,26.75, 22.85 respectively from 2013 to 2016. So they no
constant growth in net profit margins.

The Gross Profit margins are 30.47 in 2013, 28.03 in 2014, 33.91 in 2015,
and 27.47 in 2016. So they have no constant growth in G.P margins.

The firm ROCE will be 27.95,29.85,31.34.31.18 respectively from 2013 to


2016. So the Return on Capital Employed will be increased year by year.

The firm P/E ratio will be at 8.60,8.95,11.35,22.62 respectively from 2013


to 2016. So the firm P/E ratio will be very low to compared with Industry
P/E ratio.

63
BALANCE SHEET OF THOMSON REUTERS

Balance Sheet
2013 2014 2015 2016
Source of fund
Total share holder 36.44 48.01 48.93 97.86
Equity share capital 36.44 48.01 48.93 97.86
Preference share capital 0.00 0.00 0.00 0.00
Reserves 10.64 3,273.05 5,560.40 7,961.93
Revaluation reserves 0.00 0.00 0.00 0.00
Networth 47.08 3,321.05 5,609.33 8,058.99
Secured loans 0.00 111.01 26.52 41.76
Unsecured loans 375.00 9.73 8.93 8.98
Total debt 375.00 120.74 35.50 50.74
Total liabilities 422.08 3,441.79 5,644.83 8,109.73

Application of fund
Gross block 226.50 1,041.09 1,695.13 2,315.36
Less: Accumulated depreciation 0.95 132.93 525.35 854.75
Net block 225.55 908.16 1,169.78 1,460.61
Capital work-in-progress 0.00 120.28 280.00 757.85

Investment 417.39 1,404.42 1,963.52 3,252.04


Investors 0.00 0.00 22.94 12.06
Sundry debtors 0.25 1,468.05 2,325.83 2,799.80
Cash & bank balance 2.25 120.74 171.17 557.14
Total current assets 2.50 1,588.79 2,519.94 3,369.00
Loans & advance 9.77 731.15 1,497.51 1,932.13
Total CA, loans advances 12.27 2,319.94 4,017.45 5,301.13

Deferred credit 0.00 0.00 0.00 0.00


Fixed deposit 0.00 0.00 0.00 0.00
Current liabilities 228.20 783.43 1,245.38 1,756.85

64
Provisions 4.93 527.58 540.54 905.05
Total CL & provisions 233.13 1,311.01 1,785.92 2,661.90
Net current assets -220.86 1,008.93 2,231.53 2,639.23
Miscellaneous expenditure 0.00 0.00 0.00 0.00
Total assets 422.08 3,441.79 5,644.83 8,109.73
Contingent liabilities 0.00 152.38 335.06 2,253.51
Book value (Rs) 12.92 69.17 114.64 82.35

FINANCIAL ANALYSIS OF THOMSON


REUTERS

2013 2014 2015 2016


Income
Sales Turnover 0.00 8,051.11 11,236.01 14,942.09
Excise duty 0.00 0.00 5.51 2.12
Net Sales 0.00 8,051.11 11,230.50 14,939.97
Other income 17.74 95.22 63.26 216.55
Stock adjustment 0.00 0.00 4.14 -2.79
Total income 17.74 8,146.33 11,297.90 15,153.73

Expenditure
Raw material 0.00 0.00 160.33 21.50
Power & fuel cost 0.00 44.59 66.85 93.89
Employee cost 0.00 1,863.86 5,108.84 7,059.94
Other manufacturing expenses 0.00 3,049.89 1,541.47 2,198.17
Selling & administrative 0.01 578.32 866.90 1,090.19
expenses
Miscellaneous expenses 0.02 353.87 217.29 172.52
Pre-operative exp capitalized 0.00 0.00 0.00 0.00
Total expensses 0.03 5,890.53 7,961.68 10,636.21

Operating profit -0.03 2,160.58 3,272.96 4,300.97


PBDIT 7.71 2,255.80 3,336.2 4,517.52
Interest 0.20 10.40 4.49 3.43
PBDT 17.51 2,245.40 3,331.73 4,514.09
Depreciation 0.84 133.22 257.38 343.41
Profit before tax 16.67 2,112.18 3,074.35 4,170.68
Extra ordinary items 0.00 0.00 136.16 0.00
PBT (post extra ordinary items) 16.67 2,112.18 2,938.19 4,170.68
Tax 1.49 286.76 357.48 413.39
Net profit 15.18 1,831.42 2,716.87 3,757.29

Total value addition 0.03 5,890.53 7,801.35 10,614.71


Preference dividend 0.00 0.00 0.00 0.00

65
Equity dividend 4.38 552.13 660.56 1,125.39
Corporate dividend 0.56 74.46 92.64 169.48
Per share data annualized
Share in issue (lakhs) 364.40 4,801 4,893.00 9,786.00
Earning per share (Rs) 4.01 36.60 53.63 36.66
Equity dividend 12.00 1,150.00 1,350.00 1,300.000
Book value 12.92 69.17 114.64 82.35

KEY FINANCIAL RATIOS OF THOMSON REUTERS

Basic Ratios 2013 2014 2015 2016


(1) Profitability Ratios

Adjusted Net profit Margin --- 22.75 24.18 25.15


Gross Profit Margin --- 27.89 29.65 30.21
Operating Profit Margin --- 28.02 29.69 30.23
EBITDA Profit Margin 20.36 27.40 27.94
Return on Capital employed 1.46 109.87 67.77 60.69
Return on Equity (%) 4.16 38.14 55.52 38.39
EPS 4.01 36.60 53.63 36.66
P/E ratio -- 19.56 17.86 31.64

(II) Management Efficiency Ratio

Debtor Turnover Ratio 10.97 5.92 5.83

Fixed asset Turnover Ratio 12.70 8.21 7.45

(III) Liquidity & Solvency Ratios

Current Ratio 0.02 1.15 1.96 2.06


Debt Equity Ratio 4.47 0.15 0.02 0.01

66
Book value Per Share 12.92 69.17 114.64 82.35

Interpretation:

The firm EPS will be 4.01 in 2013, 36.60 in 2014, 53.63 in 2015, and 36.66
in 2016. So they have no constant growth in firm EPS.

The profitability position of company the net profit margins is


22.75,24.18,25.15 respectively from 2014 to 2016. So the company net
profit margins are increasing year by year.

The firm Gross Profit margins are 27.89 in 2014, 29.65 in 2015, 30.21 in
2016. So the company gross profit margins are increasing year by year in
total net sales .

The ROCE of the firm are 1.46 in 2013, 109.87 in 2014, 67.77 in 2015, and
60.67 in 2016. So the Return on Capital Employed will be fluctuated.

The P/E ratio of the firm will be 19.56,17.86,31.64 respectively from 2014
to 2016. Therefore the firm P/E ratio will be very low in first two years and
in present it will be high to compare with Industry P/E ratio.

67
BALANCE SHEET OF CAPITAL IQ

2013 2014 2015 2016


Source of fund
Total share holder 46.51 46.55 140.71 285.15
Equity share capital 46.51 46.55 140.71 285.15
Preference share capital 0.00 0.00 0.00 0.00
Reserves 3,283.70 3,461.04 4,751.73 6,135.30
Revaluation reserves 0.00 0.00 0.00 0.00
Networth 3,330.21 3,507.59 4,892.44 6,420.45
Secured loans 52.56 94.75 21.59 55.06
Unsecured loans 17.19 5.94 40.50 5.10
Total debt 69.75 100.69 62.09 50.16
Total liabilities 3,399.96 3,608.28 4,954.53 6,470.61

Application of fund
Gross block 1,161.71 1,333.68 1,763.49 2,364.52
Less: Accumulated depreciation 597.39 678.66 855.53 1,246.27
Net block 564.32 655.02 907.96 1,118.25
Capital work-in-progress 94.83 139.71 250.24 612.36

Investment 1,440.72 2,456.03 2,859.51 3,459.20


Investors 77.31 102.08 127.37 148.65
Sundry debtors 792.59 1,059.26 1,386.64 1,968.07
Cash & bank balance 409.70 290.47 536.90 823.00
Total current assets 1,279.66 1,451.81 2,050.91 2,939.72
Loans & advance 687.98 583.90 595.49 1,136.96
Total CA, loans advances 1,967.64 2,035.71 2,646.40 4,076.68

Deferred credit 2.82 0.00 0.00 0.00

68
Fixed deposit 0.00 0.00 0.00 0.00
Current liabilities 591.19 817.88 491.67 559.81
Provisions 76.36 860.31 1,217.91 2,236.07
Total CL & provisions 667.55 1,678.19 1,709.58 2,795.88
Net current assets 1,300.09 357.52 936.82 1,280.80
Miscellaneous expenditure 0.00 0.00 0.00 0.00
Total assets 3,399.96 3,608.28 4,954.53 6,470.61
Contingent liabilities 187.57 524.34 788.59 631.88
Book value (Rs) 143.20 150.70 69.54 45.03

FINANCIAL ANALYSIS OF CAPITAL IQ

2013 2014 2015 2016


Income
Sales Turnover 4,040.29 5,188.19 7,276.18 10,264.09
Excise duty 55.48 55.51 43.02 36.97
Net Sales 3,984.81 5,132.69 7,233.16 10,227.12
Other income 118.42 126.99 93.53 152.41
Stock adjustment 9.87 11.79 9.29 24.21
Total income 4,113.10 5,271.46 7,335.98 10,403.74

Expenditure
Raw material 734.17 832.66 1,119.85 1,350.69
Power & fuel cost 28.84 35.91 46.63 86.46
Employee cost 634.19 2,088.64 3,011.16 4,271.52
Other manufacturing expenses 296.73 360.39 479.26 847.16
Selling & administrative expenses 1,251.33 640.40 601.24 997.23
Miscellaneous expenses 108.49 90.39 130.12 215.61
Pre-operative exp capitalized 15.60 14.00 0.00 0.00
Total expensses 3,038.15 4,034.39 5,388.26 7,768.67

Operating profit 956.53 1,110.08 1,854.19 2,482.66


PBDIT 1,074.95 1,237.07 1,947.72 2,635.07
Interest 2.93 3.52 5.57 3.13
PBDT 1,072.02 1,233.55 1,942.15 2,631.94
Depreciation 137.94 151.64 185.97 292.26
Profit before tax 934.08 1,081.95 1,756.18 2,339.68
Extra ordinary items 0.00 0.00 0.00 0.00
PBT (post extra ordinary items) 964.08 1,081.95 1,756.18 2,339.68
Tax 125.85 167.07 261.36 319..20
Net profit 813.23 914.88 1,494.82 2,020.48

Total value addition 2,319.58 3,215.73 4,268.41 6,417.98

69
Preference dividend 0.00 0.00 0.00 0.00
Equity dividend 23.26 675.00 351.79 712.88
Corporate dividend 2.98 86.48 49.34 99.98
Per share data annualized
Share in issue (lakhs) 2,325.50 2,327.50 7,035.50 14,257.50
Earning per share (Rs) 34.84 35.59 20.55 13.47
Equity dividend 50.00 1,450.00 250.00 250.00
Book value 143.20 150.70 69.54 45.03

KEY FINANCIAL RATIOS OF CAPITAL IQ

Basic Ratios 2013 2014 2015 2016

(1) Profitability Ratios


Adjusted Net profit Margin 20.13 17.63 20.54 19.68
Gross Profit Margin 26.53 23.78 26.69 25.64
Operating Profit Margin 26.61 23.84 26.77 25.67
EBITDA Profit Margin 23.19 20.92 24.21 22.83
Return on Capital employed 31.45 30.98 41.15 41.01
Return on Equity (%) 34.97 39.30 21.25 14.17
EPS 34.84 35.59 20.55 13.47
P/E RATIO 7.29 9.42 27.24 38.71

(II) Management Efficiency Ratio

Debtor Turnover Ratio 5.64 5.60 5.95 6.12

Fixed asset Turnover Ratio 3.81 4.16 4.70 4.97

(III) Liquidity & Solvency Ratios

70
Current Ratio 2.97 1.60 1.32 1.46
Debt Equity Ratio 0.02 0.02 0.02 0.01

Book value Per Share 143.20 150.70 69.54 45.03

Interpretation :

The firm EPS per share will be 34.84 in 2013, 35.59 in 2014, 20.55 in 2015,
and 13.47 in 2016. So the firm EPS will have been decreasing year by year
and it is not good for any company.

The firm profitability position will be the net profit margins are 20.13,
17.63, 20.54, 19.68 respectively from 2013 to 2016. So they have no
constant growth in net profit margins.

The gross profit margins are 26.53 in 2013, 23.78 in 2014, 26.69 in 2015,
and 25.64 in 2016.

The Return on Capital Employed will be 31.45,30.9841.15,41.01,


respectively from 2013 to 2016. So that the ROCE will be decline in 2014
and increase in last two years and perform well.

The firm P/E ratio of the firm will be at 7.29, 9.42, 27.24, 38.71
respectively from 2013 to 2016. So the firm P/E ratio will be very low in
first three years and after it has been showed high to compare with Industry
P/E ratio.

71
TREND ANALYSIS :

The trend analysis is constructed taking the volume as an indicator. The

Graph is plotted taking the month on the X-axis and the average volume and

average Closing price per month on the Y-axis, the graph is plotted for the

following Companies.

SHARE PRICE OF COGNIZENT TECHNOLOGY


(From 19-5-2015 to 19-4-2016)

Open Close Traded


Price Date
Price Price Quantity
1560.00 19.5.2015 1487.23 225,14,406

1400.00 19.6.2015 1435.60 21,97,980

1661.00 19.7.2015 1604.55 14,48,682

1765.00 19.8.2015 1762.00 5,52,392

1818.00 19.9.2015 1816.40 12,13.027

2070.00 19.10.2015 2068.50 9,66,427

2202.00 19.11.2015 2186.40 5,39,331

2210.05 19.12.2015 2157.60 22,41,204

2225.00 19.1.2016 2202.35 14,43,893

72
2382.00 19.2.2016 2376.10 3,85,831

2070.00 19.3.2016 2087.25 6,82,727

2050.15 19.4.2016 2039.90 15,86,206

TREND ANALYSIS OF COGNIZENT

73
SHARE PRICE OF UNITED HEALTH GROUP
(From 19.5.2015 to 19.4.2016)

Traded
Price Data Open Price Close Price
Quantity
19.5.2015 355.00 333.13 1,04,82,518

19.6.2015 336.50 334.95 49,65,292

19.7.2015 349.50 328.45 1,04,39,230

19.8.2015 397.00 396.00 33,62,536

19.9.2015 412.13 419.65 71,11,064

19.10.2015 443.00 440.85 44,90,477

19.11.2015 438.50 434.25 23,84,032

19.12.2015 475.15 463.30 35,02,020

19.1.2016 517.00 489.10 1,19,77,888

19.2.2016 487.00 481.80 13,73,167

19.3.2016 434.00 433.15 19,56,616

19.4.2016 459.00 447.80 44,90,173

74
TREND ANALYSIS OF UNITED HEALTH GROUP

Interpretation:

The stock performance shows the above table is the first six months has

been fluctuate, After four months the stock has been shown increasing trend

and lost three months of the year it has been decreasing trend. Therefore in last

three months the stock was showing under performed. So it indicate buying

opportunity to the Investor.

75
SHARE PRICE OF THOMSON REUTERS LTD
(from 19.5.2015 to 19.4.2016)

Price Date Traded


Open Price Close Price
Quantity
19.5.2015 957.00 946.18 12,17,054

19.6.2015 840.00 834.18 10,73,522

19.7.2015 941.00 878.78 35,11,596

19.8.2015 965.00 969.70 4,50,910

19.9.2015 997.00 1010.05 9,93,486

19.10.2015 1106.00 1092.15 7,75,905

19.11.2015 1094.00 1095.15 5,55,421

19.12.2015 1181.00 1141.85 9,05,907

19.1.2016 1315.45 1296.45 7,20,514

19.2.2016 1301.40 1309.80 11,84,674

19.3.2016 1216.30 1260.90 3,03,424

19.4.2016 1230.00 1242.90 7,91,163

76
TREND ANALYSIS OF T C S

Interpretation:

The stock has been volatile in first three months and after it shown

Increasing trend upto 19-2-07 and last two months it has been showing

decreasing trend.

77
SHARE PRICE OF CAPITAL IQ

(From 19.5.2015 to 19.4.2016)

Traded
Price Date Open Price Close Price
Quantity
19.5.2015 520.00 487.70 16,60,219

19.6.2015 435.15 435.85 12,69,100

19.7.2015 491.15 458.35 30,89,987

19.8.2015 515.00 512.20 5,37,690

19.9.2015 513.80 512.20 8,48,910

19.10.2015 574.30 550.60 31,63,224

19.11.2015 554.90 550.25 6,00,212

19.12.2015 584.00 566.75 10,55,709

19.1.2016 637.00 620.65 8,23,438

19.2.2016 681.00 681.25 7,48,895

19.3.2016 570.00 578.25 4,67,617

19.4.2016 576.00 575.85 9,89,959

78
TREND ANALYSIS OF CAPITAL IQ

Interpretation:

The stock has been showing completely volatile in this year and this

stock was overvalued, there by future is uncertainty. Therefore it indicate not

good for buying this stock.

79
CHAPTER-V

FINDINGS ,SUGGESTION AND


CONCLUSIONS

80
FINDINGS :

The firms EPS are 64.35 in Cognizent, 20.77 in Capital IQ, 36.66 in
Cognizent, and 13.47 in Capital IQ, Comparison of all companies EPS
Cognizent was well Performed

This analysis shows the profitability ratios of the four companies net profit
margins are 28.77 in Cognizent, 22.85 in Capital IQ , 25.15 in THOMSON
REUTERS and 19.68 in Capital IQ.

The Gross Profit are 35.14% in Cognizent, 22.85% in Capital IQ, 30.21% in
THOMSON REUTERS and 25.64% in Capital IQ, with this Cognizent was
developing financially year by year.

The operating profit ration of four companies 35.15, 27.47, 30.23 and 25.67
respectively. The comparison of all companies Cognizent operating profit
will be high.

The ROCE of four companies are 37.99 in Cognizent, 31.18 in Capital IQ,
60.61 in THOMSON REUTERS and 41.01 in Capital IQ.

The P/E ratios of Capital IQ & Cognizent was low i.e. , 22.62% and 30.41%
with comparison of remaining companies are Capital IQ 38.72% and
31.64% in THOMSON REUTERS.

81
SUGGESTIONS :

Earning Per Share of the four companies are well performed but some cases
there was low EPS because of low net profit, if sales increased then
automatically profits are increased.

The Profitability position of COGNIZENT, CAPITAL IQ are indicates the


marginal profits, because of market was moving good position and the
strategies adopted by COGNIZENT and CAPITAL IQ, should not
implemented by other companies there by to enjoy more profits.

Comparing with the operating profits of the COGNIZENT and CAPITAL


IQ, the remaining companies will be reduce their operating expenses while
automatically increased their profits.

The above finding P/E ratio of COGNIZENT and CAPITAL IQ was less
then the Industry P/E ratio [30.74%]. So those two companies are earned
more profits and remaining companies can follow the future market values
automatically get more profits.

To suggest the all companies can maintain good management efficiency,


then goodwill will be automatically increased and get more profits in future.

82
CONCLUSION

The Pattern of investment is a crucial decision for an investor to get

more return and minimize the risk. From the above analysis it can be concluded

that the investor can be benefited more if he invest in Capital IQ and the next

option he can choose to make investment Cognizent.

83
BIBLOGRAPHY

INVESTMENTS AND SECURITIES MARKETS IN INDIA

- V.A.Avadani

SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

- Punithavathy Pandian

INVESTMENT ON ECONOMIC INDICATORS

- www.indiaeconomystat.com

PROFILE OF THE COMPANIES :

Financial Analysis www.moneycontrol.com

Share Price Movements www.nseindia.com

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