EXECUTIVE SUMMARY

1

Executive summary

The report " Fundamental and Technical Analysis of Five Major Companies in the Information Technology Sector" is a study to analyze the strength and weakness of the scrip's of five major companies in the IT industry. The five major companies include Tata Consultancy Services, Infosys, Oracle, HCL and Wipro. The primary objective of the study to suggest the investors, whether to buy the scrip or not, based on the valuation (Under priced or Over priced) of shares. Also to analyze the trend (Bullish or Bearish) of this scrip's in the market. The secondary objective of the study is Analyze the company's performance, Understand the capital market and its functioning, and to compare theoretical knowledge with actual industry practice. To analyze the scrip, Fundamental and Technical analyses are used. In the fundamental analysis the method of intrinsic value of calculation is used. For the technical analysis, tools like Relative Strength Index (RSI), Moving Average convergence and divergence(MACD), Moving average crossover, Stochastic and Momentum are used. In the fundamental analysis the intrinsic value is compared with the current market value to suggest the investor to buy or sell the share. In the Technical Analysis, the movement of the corresponding graphs are studied to interpret whether to buy sell or hold the share.

2

1. INRODUCTION

3

In the financial jargon. If the market price is less than intrinsic value. then such shares are considered to be under priced and are suitable for investment. Today. Introduction An investor means people who invest savings. The fundamental forecast stock prices on the basis of economic industry and company statistics. increase in investment related publicity and so on. Savings are generated when a person abstains from present consumption for a future use. One of the primary assumptions of the fundamental analysis is the price of the stock market does not fully reflect a stocks real value. availability of large and attractive investment alternatives. Savings kept as cash are barren and do not earn anything. Hence the saver has to find a temporary for his savings until they are required for his future. The Return on Equity (ROE) is one measure of how efficiently a company uses its assets to produce earnings . Investment is an activity. Many investors use fundamental analysis alone or in combination with other tools to evaluate stocks for investment purpose. It is because of increase in working population. So this study also analyses the economy. investment has become a household word and is very popular with people from all walks of life. Thus the shares have to be held in hand or if necessary more shares can be brought as the share sis expected to move up in the future to match with 4 . This type of analysis examines key ratios of a business to detuning its financial health and gives you an idea of the value its stock. The goal is to determine the current wealth and more importantly. this true value is known as the intrinsic value. higher family incomes and consequent savings. which is different from savings. Fundamental analysis is the process of looking at a business at the basic or fundamental financial level. how the market values the stock. the industry and company analysis to know the behavior of stock performance of the IT industry. This results in investment.1.

If the market price is greater than the intrinsic value then such shares is considered to be overpriced and it is not suitable for investment. 5 . CSE promoted a 100% subsidiary called the “Cochin stock brokers ltd(CSBL)” and started trading in the national stock exchange(NSE) and Bombay Stock Exchange(BSE). The risk associated with the investment is relatively high compared to bank deposit and real estate.its intrinsic value. CSE was one of the promoters of interconnected stock exchange of India(ISE). 1.2 Secondary Objectives • • • Analyze the companies performance Understand the capital market and its functioning To compare theoretical knowledge with actual industry practice 1. Cochin stock exchange limited(CSE) is one of the premier stock exchange of India established in the year 1978. The market price of such shares may come down in future and the investors will sell such a share.2 Scope of the study The stock market is a major source of investment. Also to analyze the trend( bullish and bearish) of these scrip’s in the market. 1. This leads us to the second major assumptions of fundamental analysis: in the long run.1. the stock market will reflect the fundamentals.1 Objectives of the study 1. CSE: introduced the facility for computerized trading-“ Cochin Online Trading(COLT)”. with high yield.1.1 Primary Objective To carry out the fundamental analysis and technical analysis for five selected companies in the IT sector and to suggest whether to buy the scrip or not to invest based on the valuation(under priced or over priced) of shares. There is no point in buying a stock based on intrinsic value if the price never reflected that value.

. 1. These days IT index is highly volatile. The study includes the analysis of financial statement of 5 major companies in IT sector. evaluation of the shares that it posses. This study is an attempt to guide the investor to identify the best performing security in the IT sector. 6 .4 Statement of the problem Indian has a well developed capital market which provides huge investment opportunity for investors. The most suitable company to be invested and the performance of the company will be analyzed. Indian IT sector is the centre of attraction for many investors residing within and outside India.3 Limitations of the Study • • • • • The data collected is secondary in nature Only 5 widely traded securities of the IT sector were taken for the study The accuracy and correctness of the tools used depends on the accuracy of the published accounts A detailed study was not possible due to shortage of time The inherent limitations of the fundamental and technical analysis also exist here 1. The period of the study covers only 5 years starting from 2005 to 2009.e. IT sector. This study will cover % companies from the IT sector selected based on the highest market capital in the industry.Due to time restriction and resource constraints the study has been confined to only one sector i. So it is inevitable to evaluate the performance of each security before investing.

PROFILE 7 .2.

The 1850’s witnessed a rapid development in commercial enterprise and brokerage business attracted many men into the field and by 1860’s. there were only half a dozen brokers recognized by banks and merchants during 1840’s. In 1860-61. 8 . In 1887.1 Industry Profile 2.2. This increased the brokers in India to about 200 to 250. Its history dates back to nearly 200 years ago. The east Indian company was dominant institution in those days and business in its loan security used to be transacted towards close of the eighteenth century. However by the end of the American Civil war in 1965. disastarous slumps begain( for example.2850 could only be sold at Rs. the number of brokers increased into 60. The earliest record of security dealing in India is merger and obscure. By 18~0’s business on stock rates and shares initiated in Bombay. 87). Bank of Bombay share that had reached Rs. the American civil war broke out and cotton supply from United States to Europe was stopped. they finally established in Bombay. “The Native Share and stock Brokers Association”( which is attractively known as “The Stock Exchange”).1 Indian capital market an overview Indian stock market is one of the oldest market in Asia. Though the trading list was broader in 1839.1. At the end of Mexican civil war the brokers who thrived out of civil war in 1874 found a place in a street( now called the Dalal street) where they would conveniently assemble and transact business.

The business is done using a screen based trading technology through dually authorized members of the exchange. It is an essential component of the economy and indispensable for the proper functioning of corporate enterprise.3 National stock exchange National stock exchange(NSE) of India became operational in the capital market segment on 3rd November 1994 in Mumbai. The main objectives of NSE is • To establish a nation wide trading facility for equities. The joint stock company or corporate fund of organization is ideally suited for large amount of capital from all those who have surplus fund. regulating and controlling the business of buying. consolidated for the purpose of assisting . In modern capitalized economy almost all commodities even in small are produced in large scale and large scale means large amount of capital. surplus fund employed profitably in either of them according to convince and temperament. The only way in which the capital invested in stock and shares of a joint stock company may be realized by its owner is through the sale of those stock and shares to others. An investor. selling and sealing with securities.2. The stock changes . It is a market where stocks. when owners feel like. Apart from the NSE. shares and other securities are bought and sold and also to provide avenue for disposal of securities. The genesis ot the NSE lies in the recommendation of the Pherwani Committee. When a joint company issues stock and bonds. debt and hybrids. who put his saving in a companyby buying its securities. but it circulates within the market only.1. it had recommended for the establishment of the National Stock Market System. The stock exchange enables the investigating to shift from one business to another without any difficulty. 9 . 2.2 Stock Exchange “Stock Exchange means any body of individuals whether incorporated or not. cannot get the amount back from the company directly. The stock exchange is opened to anyone big or small with money to invest or securities to sell.1.

Bank of Baroda. corporate structure. Network management centre is setup to enable remote diagnosing and solving problems related to network through out the day. The exchange admits members separately to WDM segment and the Capital market segment.1. ICICI.4 Promoters of NSE IDBI. Punjab national bank. Communication is carried out with the help of satellites. 2.6 Trading System The software in the NSE trading system is known as National Exchange for automated trading(NEAT). Union bank of India. To meet current international standards of securities market. 2. efficient and transparent security market to investors by using an electronic communication network. This helps the traders to carry out their activities with minimum interruption.1. To provide fair. Oriental bank of commerce. Indian bank. Stock holding corporation of India and SBI capital market. The trading members computer is connected with the central computer at NSE through leased lines and VSAT. IFCI. SBI.• • • • To ensure equal access to investors all over the country through appropriate communication network. track record. Infrastructure leasing and financial service. To enable shorter settlement cycle and book entry system.1. OIC. 10 . Corporate members are admitted on the debt market segment whereas individual and firms are also eligible on the capital market segment. education.5 Membership criteria Membership is based on factor such as capital adequacy. which are small dish antenna. LIC. 2. Admission is a two stage process with the applicant need to go through a written examination followed by an interview. Canara Bank. experience etc. Corporation bank. The trade takes place through computers.

1. CSE introduced the facility for computerized trading 11 . CSE took various steps including trading in dematerialized shares. Is one of the premier stock exchanges in India.1. A stock market is created by selecting a group of stocks that are representative of the whole market or a specified sector or segment of the market. T bills and other forms of investments. commodities or any other markets. 2. bonds. In 1980 the exchange computerized its offices.1 Introduction COCHIN STOCK EXCHANGE LTD. established in the year 1978. The exchange had a humble beginning with just 5 companies listed in 1978~79 and had only 4 members.7 Stock market indices An Index is used to give information about the price movement of products in the financial. An indices is calculated with reference to a base period and a base index value.2.2.8 Important Indian stock market Indices • • • • • • • • S&P CNXNIFTY BSE Sensex CNXMIDCAP BSE 100 BSE 200 NYSE Indexes Dow Jones Industrial average NASDAQ Index 2. Today the exchange has more than 508 members and 240 listed companies. In order to keep pace with the changing scenario in the capital market.2 Company Profile 2. Stock market indices are meant to capture the overall behavior of equity market. Financial Indices are constructed to measure the price movement of stocks.

CSBL is the first subsidiary of a stock exchange to get membership in both NSE and BSE. To face this challenge CSE promoted a 100% subsidiary called the “Cochin Stock Brokers Ltd. Introduction of the fast track system made CSE the stock exchange with the shortest settlement cycle in the country at that time. (CSBL)’ and started trading in the National Stock Exchange and Bombay stock Exchange. Imparting capital market knowledge to all intermediates on a continuous basis. With enforcement of efficient margin system and surveillance. CSBL also became a depository participant in the Central Depository Services Ltd.–“Cochin Online Trading (COLT)” on March 17. the regional exchanges faced a serious challenge from the NSE and BSE. The CSE has been playing a vital role in the economic development of the country in general and Kerala in particular and striving hard to achieve the following goals: • • • • • • • Providing investors with high level of liquidity whereby the cost and time involved in the entry and exit from the market are minimized. 1997. The CE is directly under the control and supervision of Securities and Exchange Board of India (SEBI) and is today a demutualized entity in accordance with the CSE (Demutualization) scheme and notified by SEBI on 29th of august 2005. fragmented and less liquid markets into a national level liquid market. Bringing in high tech solution and making all operations transparent. Professional stock broking and management. Building infrastructure for capital market by turning CSE into a financial supermarket Serve the investors of the region. Demutualization essentially means de-linking and separation of ownership and trading rights and restructuring the board in 12 . CSE was one of the promoters of “Interconnected Stock Exchange of India (ISE)”. By the dawn of the new century. The objective was to consolidate the small. CSE has successfully prevented defaults.

The board is constituted with 12 members of whom less than one-fourth are elected from amongst the trading members of CSE.2. 2. 3.2.2 Management of CSE Ltd.accordance with the provision of the scheme. The policy decisions of the CSE are taken by the Board of Directors. The board appoints the executive director who functions as an ex-officio member of the board and takes charge of the administration of the Exchange. another one-fourth are public interested directors selected by SEBI from the panel submitted by the exchange and the remaining are share holder directors. The exchange has been demutualized and the notification thereof published in the Gazette.3 Organisatinal structure Board of Directors Executive director Legal Systems Settlement Surveillance Administration Personal Legal and Secretarial Listing Marketing & Public Relations Finance 13 .

Providing the necessary services to the settlement and surveillance departments. System The system department is the heart of the various operations of the CSE.2.4 Various departments at CSE Membership The membership department screens application from prospective members to ensure that they are eligible to be members of exchange as per provisions of the Securities Contracts Regulations Act. 14 . The changes in the status and constitution of the brokers are send for the approval of the governing board of the Exchange and thereafter send to SEBI and members are given necessary directions wherever required. The membership department also assist SEBI by ensuring proper delivery of notices and letters issued by SEBI to the concerned members. which enables online trading with NSE and BSE. The activities of the department includes: • • • • Development of software needed for the functions of the Exchange. Changes in address and contact information are updated in the finance and accounting system and SEBI intimated. The eligible application are processed and forwarded to SEBI for the purpose of obtaining registration with SEBI. The department continuously follows up the status of the applications with SEBI and provides necessary data if any required by SEBI. The members are informed of their fee liability as and when information in this regard is obtained from SEBI. Maintenance of an efficient computer network for the smooth working of the exchange. The department provides the necessary technical support for the screen based trading and the computerized functioning of all to other department.2. It is also verified they are ‘Fit and Proper’ persons eligible to be member as per SEBI Regulation 2004. Maintenance of Multex software.

• The support for maintenance of the depository participants accounts with the CSBL DP. The major office system software’s used are NESS and BOSS respectively for NSE and BSE trades calculations. Officer-Legal is the Compliance officer as per the provision of SEBI regulations and also functions as Secretary to the Board of Directors. Other major activities undertaken by the department relate to Investor Grievance Services. Relevant developments are brought to the notice of the members and the investing public. and the rules. The trading software used in CSBL is Multex. directives and circulars issued by SEBI with regards to trading in the capital market are consistently scrutinized and necessary directions are given to the concerned departments to ensure strict and continued compliance. regulations. the clients are connected by VPN. developed by CMC. 15 . The department consistently monitors the compliance parameters in the terms of Companies Act. Securities Contracts Regulation Act. These software’s are developed in-house by software professional at the exchange and are used to maintain the entire records of all trades that occur each day. VSAT etc. arbitration and Resolution of issue pertaining to declare defaulters. Legal Guided by the Officer-Legal. SEBI Act. Listing guidelines and related criteria stipulated by SEBI. and other related statutes. CSBL has trading facility in equities through Multex to a large number of their clients over the WAN. It also does all the required calculations for the deductions and also generates the reports required by the brokers and their clients. The advantage of using it is that both BSE and NSE scrips can be traded using this facility. the Legal Department is primarily responsible for advising the management about the merits and demerits of legal issues involving the Exchange. Currently.

This department is headed by a Deputy Manager assisted by two Senior Officer who take care of the operations involved in the settlement activities in CSE. monitoring the listing agreement and reviewing the provisions of the listing agreement from time to time with specific reference to SEBI regulation/circulars that are in force.Listing The listing department guides prospective companies desirous of being listed on the exchange by providing the knowledge base and information on the statutory requirements that have to be compiled with. The Exchange follows the T+2 settlement system. 16 . dealing with cash and securities. It assist the brokers in settling the matters related to their pay-in and payout. The activities of the department includes: • • • • • • • • Fund management Interaction with bankers Maintaining general account of the exchange Preparation of various financial statements Maintaining payrolls and cash registers Coordinating departments Taxations Budgeting and expense research accounting transactions of different branches and Settlement Settlement Department is a key department of the exchange. The major functions undertaken by the department include post-listing monitoring and compliance with the listing agreement. Finance The finance department controls the financial transactions of the exchange and is the life line of the organization. recovery of dues and settlement issues related to bad deliveries. The department also ensures diligence in scrutinizing listing applications and adhering t the listing norms. The department is headed by a Finance Officer.

SEBI has directed the exchange to set up a separate surveillance department with staff exclusively for this function. to avoid manipulation and to manage risk. clipping are displayed in theatres all with an intension to increase public awareness and motivate their interest in capital market. The surveillance functions at the exchange has assumed greater importance in the last few years. The surveillance department • • • Keeps a close watch on the price movement of the scrips Detects market manipulations like price riggings Monitors abnormal changes in price and volumes which are not consistent with normal trading pattern 17 . The main objective of the department is to ensure a free and fair market. The marketing wing also coordinates the of campus programmes of CSE. I addition the department conducts extensive surveys and campaigns in remote areas ad wherever necessary. trading both within the state and outside and collects their opinion and suggestions.Marketing The Marketing Department interacts with the brokers of the exchange. monitor abnormal prices and volumes which are not consistent with the normal trading patterns etc. Experts with sufficient experience in the trade brief the participants and address their queries. The efforts are aimed at improving the quality and efficiency of the services offered. conducts awareness programs about Capital Market. Surveillance The exchange has set up the surveillance department to keep a close watch on price movement of scrip and to detect market abuse like price rigging. These are brought to the notice of the committee constituted for the purpose and decisions of the committee are placed for approval of the governing of the exchange. Institutes and organizes regular classes at authorized centers after verifying the availability of suitable infrastructure and facilities. Talk shows and interviews are conducted on television channels.

Conducting investigation involves the following stages:• • • • • Identification of scrip based on the alerts thrown by the online system and offline reports Identification of members from whom the client details have to be called for. Preparation of company profile including Corporate news and Financial results.• Monitors the member brokers position to ensure that defaults do not occour The department conducts in-depth investigation based on preliminary enquires made into trading of the scrip as also at the instance of SEBI. Compilation of Client details Preparation of reports 18 .

Intel.2. IBM. is a public limited and India's second largest software exporter company incorporated in the year 1981 as Infosys consultants private limited by Mr. a universal banking solution to large and medium size banks across India and oversees. 2002 and 2003 company wins the National award for excellence in corporate governance conferred by the Govt of India. NSE and NASDAQ. Continuously the year 2001.Narayana Murthy at karnataka. It became public limited company in the year 1992. Infosys also forms a part of the NASDAQ-100 index. Infosys. The company has entered in marketing and technical alliance with FileNet.N. the country's second-biggest IT/ITES services companies. Oracle and System Application Products. who is chairman and chief mentor of the company. Microsoft.9 million. Infosys is a groundbreaking company in the field of information technology and it enjoys the privilege of being a dept free company. modular global sourcing and Business Process Outsourcing services.3. In the year 2004 company crosses US $ 1 billion in revenue. Infosys consultancy INC. In the year 2003 it acquired Expert Information Services in Australia for $22. It has developed finacle. Infosys is listed in BSE. a publication covering the needs 19 . 2005 was the year the largest international equity offering of US $ 1 billion from India by Infosys and in 2006 company celebrated 25th year. Infosys BPO SRO and Infosys BPO Ltd previously known as progeon.3 PROFILE OF THE SELECTED IT COMPANIES 3.1 INFOSYS Infosys technologies limited. which was the first Indian company to be listed on the NASDAQ at the year 1999. It's only the company to be part of the major global index. Infosys selected as 'Best Outsourcing Partner' by the readers of Waters. Infosys technologies Australia.R. It has received CMM-5 status and it functioning collaborated with ANALOG DEVICES INC of USA. process re-engineering. Company offers the services of consulting. Its has five wholly owned subsidiaries namely as Infosys technologies China. CRISIL assigned the ' CRISIL GVC level 1' rating for corporate governance.

Infosys had taken over Philips' finance and administration business process outsourcing (BPO) centers spread across India. Poland and Thailand for $28 million. It set up another Special Economic Zone unit in Chandigarh which will be eligible for 100 % deduction of profit from exports tax calculation for the first five years followed by 50% deduction for next five years.9 % after acquiring shares from Citicorp International Financial Company and a subsequent buy back offer to its share holders. A Finacle from Infosys completes Phase 1 of implementation in Stroyvestbank subsidiary structure of URALSIB BANK. it is in the process of expanding its operations by adding amount 32.of chief information officers in the capital market firms. The entire capital expenditure was funded out of internal cash flows. that provides a comprehensive set of financial tools to company's existing product line. The company scanning the markets of Europe and Japan for acquisitions in the price band of $200-$300 million to energies its non-linear business strategy as well as to expand its geographic reach. In 2007 it increased stake value in progeon to 98. Infosys set up various Special Economic Zone that for the company has an additional tax benefit.enabled application to improve efficiencies in the agro supply chain in India. Infosys Technologies has 47% of core business assets stagnating. As of April 2008 the company acquired Internet Protocol (IP) from an Australian company to add more functionality to finacle. The future enhancement of the company is to emerge the developing economies changing the business landscape with help of accessible talent pools and the adoption of non-linear growth model.967 seats to its completed 58. The IP. As of March 2007 it has a capital expenditure commitment of Rs 655 crs. Infosys Technologies Ltd has partnered with ACDI/VOCA for promotes broad-based economic growth and to develop information and communication technology. compiled by the International Association of Outsourcing Professionals (IAOP). it is a long term strategy. As on May 2008 the company ranked third in the largest 2008 Global Outsourcing 100. Infosys has been pursuing its expansion plans over the past few years. 20 .488 seats.

Chile. Telecom. In between 2005-06.2300 crores and the company went to public in the same year 2004. Financial Network Services (Holdings) Pty Ltd. During the year 2004-05 the company has acquired WTI Advanced Technology LTD and TCS Business Transformation Solutions Ltd (Previously.2. Australia (FNS) and Swedish Indian IT Resources AB (SITAR).A. subsequently these two companies have turned as the subsidiaries of the company.2 TCS Established in 1968. Apart from this the company made strategic alliances during the year with Diligenta Limited for Life Insurance business and entered into a Joint 21 . TCS Division of Tata Sons Ltd was transferred to TCS as on April 2004 for a consideration of Rs. Travel and Hospitality. collaborative partnerships. using the most rigorous assessment methodology. CMMI and P-CMM. SCAMPISM. Infrastructure Outsourcing. The company's major areas of business are comes under five services. Phoenix Global Solutions (India) LTD). Tata Infotech Limited and three wholly owned subsidiaries of the company. Government. Engineering and Industrial Services which covers the industries namely Banking and Financial Services. and operates in more than 50 countries and has more than 170 offices across the world. such as Consulting. In the year 1979 it established its first office in New York City. and corporate responsibility. Tata Consultancy Services has grown to its current position as the largest IT services firm in Asia based on its record of outstanding service. Manufacturing.. viz Airline Financial Support Services (India) Ltd (AFSL). Insurance. Hi Technology. innovation. the year covers the acquisitions of three companies Comicrom S. Healthcare and Life Sciences. Business Process Outsourcing. Retail. TCS is headquartered in Mumbai. It is the world's first organization to achieve an enterprise-wide Maturity Level 5 on quality improvement models. Information Technology Services.3. Aviation Software Development Consultancy India Ltd (ASDC) and TCS Business Transformation Solutions Ltd (TCS BTS) have amalgamated with the company on April 2005. Energy and Utilities.

.A. acquired 75% equity interest in Switzerland based TKS . 165. partnership with the Government of Madhya Pradesh. The new company was formulated and named C-Edge Technologies Limited (C-Edge) to provide advanced technology solutions and world-class domain consulting for the banking and financial services sector..75 crores. subscribed to 100 % share capital of Tata solution Center S. subscribed to 100% share capital of Financial Network Services Beijing Co. for a consideration of Rs. for a total consideration of Rs.06 crores The company. acquired 100% equity interest in an Australia based company TCS Management Pty Ltd. 15.Teknosoft S. a Company formed to provide BPO services in Ecuador. through its wholly owned subsidiaries Tata Consultancy Services BPO Chile S.Venture Agreement with the State Bank of India (SBI)... The Company. Through its wholly owned subsidiary Tata Consultancy Services Netherlands B. offering a wide range of computer enabled services in the State of Madhya Pradesh.A. a company formed to provide consulting and IT related services in China and the company has increased its investment in TCS Iberoamerica to Rs. Ltd. 2007 The company received International Credit Rating from Moody's Investors Service and has assigned an investment-grade issuer rating of A3 as well an indicative foreign currency debt rating of Baa1. The company. through its wholly owned subsidiary TCS FNS Pty Limited. and TCS Inversiones Chile Limitada. TCS formed a company as MP Online Limited. a Company formed to provide consulting and IT related services in Indonesia.23 crore as on March 31. through its wholly owned subsidiaries Tata Consultancy Services Asia Pacific Pte Ltd and Tata Consultancy Services Malaysia Sdn Bhd.A. Indonesia.. In the year of 2006. 368.. Another one of its wholly owned subsidiary TCS FNS Pty Limited. subscribed to 100% share capital of PT Tata Consultancy Services. TCS gathered various awards 22 . TCS's share capital of Tata Consultancy Services (China) Co. Ltd leads the company to frame a partnership with Chinese companies to provide IT outsourcing services and solutions.V.

Most Distinguished Achievement Award in Information Management (APAC) .2006 from the Economic Times. Golden Peacock Global Award for Corporate Social Responsibility. the facility sits on 220 wooded acres and is the largest TCS facility in North America. Eaton Premier Supplier Award 2007 for the Indirect Supplier for Information Technology Services category honored by Eaton Corporation.and recognitions. Tony Blair 'Outstanding Contribution to UK Knowledge Industry' in 2005. which is implemented by TCS.5 million transformational deal to design. In June of the year 2008. Located in Milford. Company of the Year . significant amongst which are Special Award by the UK Prime Minister. CII-EXIM Bank Award for Business Excellence 2006. lot of innovations and strategies to attain the vision of Global Top 10 by the year 2010. TCS is going with certainty. Ohio. Ranked among the Top 10 US application management services vendors India's largest egovernance initiative of the Ministry of Company Affairs. As on May 2008 the company ranked sixth in the largest 2008 Global Outsourcing 100. 23 . the company gets $11.2006' from IBM and Verizon's Supplier Excellence Award for the third consecutive year. compiled by the International Association of Outsourcing Professionals (IAOP). install and integrate a tax administration system for the Uganda Revenue Authority (URA). As on 2008 TCS has signed a new multi-year contract with Chrysler LLC to provide a comprehensive portfolio of IT services. a suburb of Cincinnati. in March 2008 opened its North America Delivery Center called TCS Seven Hills Park. Dataquest Best IT Employer for 2006.

MicroBanker becomes the 6th international banking product in the world to be used by 100 customers in 1998 and the FLEXCUBE starts gaining traction and international leadership. In addition. A complete banking product suite for retail. CITIL (Citicorp Information Technology Industries Limited). The Company also has strong alliance and/or implementation relationships with industry leaders such as Hewlett-Packard. consumer.3. corporate. including payments (SWIFTNet and SEPA) was launched in the year 1997 under the name of FLEXCUBE. OFSSL has 14 development centers across India. CITIL established the Center of Excellence during the year 1996 for business intelligence to provide specialized consulting and software products. as well as services in data warehousing and business intelligence. commences first year of operations in the year 1992. in the Netherlands. 30 corporate business partners and 32 implementation partners represent i-flex across the globe. IBM. investment and internet banking. Sun Microsystems and Intel. Singapore and the USA.v. becomes the first financial software firm in the world and one out of six companies worldwide to achieved this distinction at that time. consumer lending.2. IT services. i-flex solutions b. asset management and investor servicing. CITIL gains recognition for establishing world-class processes and quality Standards. With the experience of delivering value-based IT solutions to over 810 financial institutions across 130 countries. consulting and knowledge process outsourcing services. In 1995. i-flex solutions ltd. in the USA.3 ORACLE Oracle Financial Services Software Limited (erstwhile i-flex solutions) (OFSSL) is a world leader in providing IT solutions to the financial services industry. The Company was incorporated in September 27. 24 . The Company addressing the entire financial services space through a comprehensive portfolio of products. 1989 as Citicorp Information Technology Industries Ltd. marketing and support presence in 27 overseas locations operating across four subsidiaries (i-flex solutions inc. spun off from COSL (Citicorp Overseas Software Limited). in Singapore and iPSL in India). The Company has a strong global reach with a sales. It attained SEI CMM Level 4.

In the year 2003. Dotex International.. Waters Magazine ranked Mantas as the Best Anti-Money Laundering Solution and Best Compliance Solution for 2003. Germany. i-fl ex Consulting was launched. for made available to cooperative banks. The Netherlands. becomes operational. i-flex solutions b. a subsidiary of the Bangalore Stock Exchange. in Amsterdam. signed a memorandum of understanding (MoU) with BgSE Financials Ltd.700 equity shares. Inaugurated FLEXCUBE Support & Prime Sourcing Solutions Centre in London and acquisition of Super Solutions Corporation in all cash deal of . The Company entered into capital market with Initial Public Offering (IPO) of an issue of 3. CITIL was renamed as iflex solutions limited in the year 2000. The company's financial software development facilities were established in the year 2001 at Pune and Chennai and fully owned subsidiaries set up in USA and Singapore.v.961. I-flex sets up development centre in New York.IT and i-flex Solutions Ltd.5 million was made. Wins a major order from HypoVereinsbank Group (HVB Group).1 selling Universal Banking Solution and during the same year 2003. EBZ Online. the company's flagship product FLEXCUBE ranked the world's No. The Netherlands.During the year 1999. a joint venture company supported by NSE. Center of Excellence for e-services launched Separate business unit established to address the Applications Services Provider (ASP) market. I-flex opened its first Overseas Software Development Center in Singapore in the year 2002. a 100 percent subsidiary of the company opened in Amsterdam. i-fl ex solutions b. a software company was joined with the company during the year 2002 through which i-flex's product.v. a Web-enabled business intelligence system was launched along with a Center of Excellence for CRM and the Java Center for financial services also established. 25 . Flexcube. to give Internet trading service to the members of the exchange. During the same year 2000. FLEXCUBE Information Center.

During the year 2004. Reveleus was positioned in Gartner's 'Leaders Quadrant' in its 'Basel II Risk Management Application Software Magic Quadrant for 2005' and '2006 Basel II Software Applications Magic Quadrant'. The Black Book of Outsourcing. i-flex Solutions ties up with Barbados-based first Caribbean International for internet banking and e-finance platform of i-flex Solutions. The Golden Peacock National Quality Award was awarded to the company. a Toronto based provider of insurance systems for the global Property & Casualty (P&C) in the year 2005. The suite 26 .0 was released in 2007. iflex assessed at CMMi Level 5 also certified BS 7799 compliant. Entered into strategic alliance with Castek Software Inc. The Company and YES Bank has signed Global Strategic Memorandum to collaborate on technology led innovations to enhance quality and efficiency in banking products and delivery processes.. while ensuring compliance. In the same year i-flex and EDB Business Partner ASA had entered into an agreement to jointly offer comprehensive retail banking solutions to financial institutions in the Nordic region. Oracle Corporation bought Citigroup's 41 percent equity interest in i-flex and floated an open offer to purchase up to an additional 20 percent ownership from existing shareholders. i-flex joined hands with People Soft to develop and market an integrated solution for the banking industry.Waters Magazine ranked Mantas as the Best Anti-Money Laundering Solution for 2003 and also for 2004. it helps financial institutions respond faster to market dynamics and define and track processes. In August 2005. The decade-old relationship between Oracle and i-flex was further strengthened in 2005 at a strategic level. The core banking solution Flexcube had won The Banker Core Banking Solution of the Year and Application of the Year'' awards. i-flex opened its wholly owned holding company in US. BS 7799 is security standards and policies addressing information security. for carrying out all future acquisitions in the USA. namely i-flex America. Reveleus was also 'Highly Commended' for its Compliance Initiative Innovation in The Banker Technology Awards for 2006. ranked i-flex BPO as the top outsourcing vendor to the Mortgage Banking Industry in 2006. The FLEXCUBE 10.

New Version of FLEXCUBE Core Banking for IBM System z active from April 2008. Mantas. PrimeSourcing. Daybreak. Oracle and i-flex solutions offer financial services institutions the world's most comprehensive and contemporary banking applications and want to embark technology footprint that address their complex IT and business requirements. the company changed its name from I-flex solutions Limited to Oracle Financial Services Software Limited. Reveleus. Together. 27 . During August of the year 2008.also equipped with SWIFT 2007 enhancements and supports SEPA payment processing. i-flex Consulting and iPFB are trademarks of i-flex solutions and are registered in several countries. FLEXCUBE.

In the year of 2000 the company has set up a dedicated offshore development centre in Chennai for KLA-Tencor Corporation. the name of the Company was changed to HCL Consulting Limited. remote infrastructure management services and BPO.3. The Company launched the Nokia professional centre in New Delhi.4 HCL HCL Technologies Limited was incorporated in 1991. working with clients in areas that impact and re-define the core of their business after its IPO in 1999 with aim of foray into the global IT landscape and in the same year again the Company changed its name to HCL Technologies Limited. In 1996 the 50:50 joint venture with Perot Systems Corporation was formed to provide access to high value client base of Perot Systems under the name of HCL Perot Systems NV. The company encompasses global offshore infrastructure and its global network of offices in 18 countries to deliver solutions across selected verticals including Financial Services. HCL has the widest service portfolio among Indian IT service providers. 1994. as HCL Overseas Limited. On July 14. a supplier of process control and yield management solutions for the semiconductor and related microelectronics industry and HCL Comnet.2. The certificate of commencement of business was received on 10th February 1992. Retail & Consumer. The company provides software-led IT solutions. second among the chain of centres across the country. HCL Technologies has entered into a strategic alliance with Nasdaqlisted Vitesse Semiconductor to develop software solutions for global networking markets in the year 2001 and also entered into a strategic alliance with Toshiba 28 . HCL Technologies focuses on Transformational Outsourcing. Hi-Tech & Manufacturing. Life Sciences & Healthcare. Telecom and Media & Entertainment (M&E). the wholly owned subsidiary of HCL Technologies in association with its new partner Globeset Inc for scouting largest Internet Service Providers and payment gateways in India to introduce Net security management solutions. HCL Tech started to create wholly owned subsidiaries to cater specific geographic regions from the year 1999. with each of its services having attained critical mass.

Partners.A. a Fortune 500 Company in the same year and also entered into a joint venture with M. The software business of HCL Infosystems Limited was transferred to HCL Technologies Limited additionally. The Company has been conferred the prestigious Excellence in Education Award for 2004 by the Life Office Management Association (LOMA). The company has 29 . HCL Comnet.A. HCL Technologies sets up Insurance Solutions Center in Chennai and the company has entered into a strategic tie-up with IBM Rational Software. Partners brings a wealth of domain expertise and clients including many of the top Global Investment Banking firms to the JV. a management consulting firm to address software services opportunities in Global Finance Markets. Asset Management and Private Banking. BPO delivery centre in Chennai gets BS7799 certification. a whollyowned flagship of HC Technologies.. by the British Standards Institute (BSI) on August of the same year. a leading US based provider of technology enabled business transformation solutions to Global 2000 firms. secured Rs 31 crore network management order from National Insurance Corporation (NIC). a fully owned subsidiary of HCL Technologies was gone into the business of Web-enabling applications through the launch of demand-chain management solutions. Inc. In the year 2003. especially in the areas of Investment Banking. BT Group UK's telecom service provider gave a contract worth of $160 million for BPO service operations and the company has set up an exclusive centre in Noida for exeucting the orders given by BT Group.Information Systems (Japan) Corporation to set up a dedicated offshore software development centre for developing embedded software for the Japanese company. Inc. M. to strengthen its software development capabilities during the year 2004. Jones Apparel Group. A strategic technology joint venture was made with Jones Apparel Group. Inc. HCL Comnet Systems & Services Ltd. In 2002 the company acquired Gulf Computers Inc. USA and formed a JV with Answerthink.. a division of IBM.

a framework based Computer Systems Validation (CSV) methodology for the development of robust software applications in the Life Sciences arena.Introduced Cross View. In the year of 2006 the company launched RoHS Compliance Management System for Medical Device Users and entered $70 million outsourcing deal with Teradyne of US. During the year 2005 SEBI ties up with HCL Technologies for market surveillance and the company formed joint venture with NEC. Japan in same year. HCL's Infrastructure Services Division ranked a 'Strong Performer' in Remote Infrastructure Management by an International Research Firm and made a strategic partnership with EXA. Japan. to provide engineering services that will support the improvement of the C-27J Spartan production line. HCL Venture Capital Ltd. HCL developed Trusted ICT Infrastructure Platforms for BPO-ITE'S Segment and has linked pact with Canada based electronics manufacturing services company Celestica Inc to jointly design and manufacture electronic products for global original equipment manufacturers (OEMs). The company made US $15 million contract with Aleni Aeronautica. Shipara Technologies Ltd. HCL Technologies (Mumbai) Ltd. a company incorporated in United States of America and a down stream subsidiary of the company was 30 . HCL Technologies BPO Services Ltd. Aquila Technologies Ltd and HCL Enterprise Solutions (India) Ltd and the course of event the company acquired an Irish Call centre during February 2005 and this acquisition establishes HCL's position as the single largest BPO Centre operation on the Island of Ireland. The company has forayed into an alliance with $200 million Saudi Arabian company namely Advanced Electronics Company (AEC) to implement IT projects in West Asia in the year 2007 and formed a strategic alliance with Eckler to strengthen Insurance Domain expertise. a company incorporated in Bermuda and downstream subsidiary of the company was merged with HCL Bermuda Ltd and HCL Technologies (Mass) Inc.. The company amalgamated its six wholly owned subsidiaries with company itself. such subsidiaries are DSL Software Ltd..

Inc.at Software 2008 in Las Vegas and in the same month of the same year the company launched an innovative on-demand software testing lab at Software 2008 that allows Independent Software Vendors (ISVs) to reduce their software testing cycle times and lower their capital expenditure on testing hardware and software. As on February 2008 the acquired Capital Stream. During April 2008 HCL Technologies Ltd announced to launch of its new SaaS Service Delivery Platform (SDP) AGORA . 31 . HCL's Electro Magnetic Compatibility (EMC) and Durability Test Lab located in Chennai. the first of its kind private Technology facility sector to obtained the ISO/IEC 17025 Accreditation from NABL (National Board for Accreditation of Testing and Calibration Laboratories. As on January 2008. a US based leader in providing comprehensive end-to-end lending and straight through processing solutions to commercial banks and finance companies in North America worth about US $ 40 Million and in same month company expanded global services partnership with SAP AG (NYSE: SAP).. India) and a new partnership with Mark Logic Corporation. provider of the industry's leading XML content server was made on same month of the year.merged with HCL America Inc in the year 2007.

a US based company with a development center in Chennai and MPACT Technology Services which is also based in Chennai. Technology Infrastructure services. Wipro though started as a edible oil producer way back in 1945 under the name Western India Vegetable Products. NSE and Newyork . Wipro received the BEST award from American society for training & development (ASTD) for three consecutive years 2004. Azim H Premji who is promoter and chairman of the company. Middle East and Asia Pacific. they offer business value to clients through process excellence and service delivery innovation such as Information Technology services. Europe. Wipro became the first software technology and services company in India to be certified for ISO 14001 certification for complying with the international standards for Environmental Management System (EMS) in three major software development and technology centers in Bangalore and also achieved ISO 9000 certification and they are ISO 14000 certificate holder also for good citizenship. 2005 and 2006. Business Process Outsourcing services and consulting services. During December 2005 the company has signed a definitive agreement to acquire mPower Inc. This company is listed in BSE . Wipro Ltd is a largest 3rd party Research & Development service provider in the world. a private limited company has transformed itself into leading player in Fast Moving Consumer Goods and IT services & Products business. technology and process solution on a global delivery platform to customers across Americas. In February 2001. Product Engineering services. Wipro is among the top 3rd Indian BPO service providers by revenue identified 32 . Wipro Technologies has won the 'Banker Technology Award' for the year 2004 Instituted by the Financial Times in the 'Risk Management Award' category. 23 subsidiaries running under in Wipro. It was incorporated at Karnataka by Mr. Five of Wipro's manufacturing and development facilities secured the Indian Standard Organization (ISO) 9001 certification during 1994-95. Company provides the integrated business.2.3.5 WIPRO Wipro Limited. the successful company crossed six decade of years.

Wipro wants to make a geographical footprint in Germany. At the same time company invested Rs. Wipro is a first company to be assessed at level 5 on CMMi for process excellence as well as its a company to deploy six sigma in IT services at first. Wipro plans to set up a Global IT Services Center in Sydney. Enabler Informatica S A. Wipro has set up an overseas design center as Odyssey 21 for undertaking projects and product developments in advanced technologies for overseas clients. Wipro has been a pioneer in fostering a culture of Innovation.by NASSCOM. This culture manifested in small and big acts of Innovation of wiproites everyday. Second time Wipro has announced that it has been recognized winner of the 2007 global MAKE award. the 2007 Asian MAKE award fifth time in a row and also received the 2007 Indian MAKE award third time organized by CII (Confederation of Indian Industry). the companies future enhancement also to continued focus on Innovation has caught the attention of stakeholders and industry.16. Canada. the IDC India noted among the top 2nd domestic IT services companies in India. Japan and Middle East that is likely to become the next growth engines and wants to frame a end-to-end solutions for business needs of customer. Wipro partnered with Motorola to form a joint venture namely WMNETSERV. 2006-07 was the year for acquisition to Wipro. 33 . In the year 2000 itself Wipro launched Innovation Initiative for business development and right now they engaged across 55 CoE's and 30 innovation projects with over 500 peoples. Wipro is the world first PCMM level 5 company and it is a winner company of the Dale Carnegie Leadership award in 2007 for people excellence. during the year company acquired six companies namely Quntech Global Services. 3D Networks Pte Ltd. Saraware Oy. Its not a edge.684 million on fixed assets during the year. Hydrauto Engineering AB and Northwest Switchgear.

3. LITERATURE REVIEW 34 .

Each share is assumed to have an economics worth based on its present and future earning capacity. Security analysis is the initial phase of the portfolio management process. industries and the economy as a whole taking the investment decision. the economy fundamentals. industry and company fundamentals and there by asses the intrinsic value of the share. changes in government policies etc. This step consists of examining the risk-return characteristics of individual Securities. The investor can then compare the intrinsic value of the share with the prevailing market price to arrive 35 . The purpose of fundamental analysis is to evaluate the present and future earning capacity of a share based on the economy. Review of literature Fundamental analysis is a sock valuation method that uses financial and economic analysis to predict the movement of stock prices. industry and company.3. Fundamental analysis is really a logical and systematic approach to estimating in the future dividends by a number of fundamental factor relating to the economy. This is called its intrinsic value or fundamental value. and nonfinancial information such as estimates of the growth of demand for products sold by the company. It is in other words. industry comparisons. Hence. The fundamental information that is analyzed can include a company’s financial reports. a detailed analysis of the fundamental factors affecting the performance of companies.1 Fundamental analysis An investor who would like to be rational and scientific in his investment activity has to evaluate a lot of information about the past performance and the expected future performance of the companies. industry fundamentals and company fundamentals have to be considered while analyzing a security for investing purpose. 3. and economy-wide changes. Such evaluation or analysis is called fundamental analysis.

Growth rate of National Income The rate of growth of the National Economy is an important variable to be considered by an investor. GNP. NNP. The estimate of GNP. when the market price of a share is higher than its intrinsic values. Fundamental analysis thus involves three steps: 1. the performance of the company will be generally bad. The market price of such a share is expected to come down in future and hence the investor would decide to sell such a share. Industry analysis 3. Company analysis 3. 36 . This analytical framework known as E-I-C framework.1.at an investment decision. On the other and if the economy is in recession. If the market price of the share is lower than its intrinsic value. The growth rate of these measures indicate the growth rate of the economy. Fundamental analysis thus provides an analytical framework for rational investment decision-making . If the economy is booming.1 Economy analysis The performance of a company depends on the performance of the economy. or economy–industry company analysis. it is perceived to be over priced. the investor would decide to buy the share as it is under priced. incoming rise and demand for goodwill increase. the industries and companies in the general trend to be prosperous. On the contrary. Economy analysis 2. NNP and GDP are the different measures of the total income or total economic output of the country as a whole. The price of such a share is expected to move up in future to match with its intrinsic value. GDP and their growth rate are made available by the government from time to time.

Bad infrastructure leads to inefficiencies. The stage of economic cycle through which a country passes has different impact on the performance of industries and companies.The estimated growth of the economy would be pointed towards the prosperity of the economy. Hence the progress and adequacy of monsoon becomes a matter of great concern for an investor in Indian content. The adequacy of the monsoon detains the success or failure of the agriculture activities in India. recovery. road and railways to transport raw materials and finished goods. transportation and communication systems affect the performance of companies. Monsoon The Indian economy is essentially an agrarian economy and agriculture is a important sector of the Indian Economy. The four stages of the economic cycle are depression. 37 . An economy typically passes through different phases of prosperity known as the different stager of the economic or business cycle. performance of several industries and companies are dependent to the performance of agriculture to a very great extend that depends on monsoon. Infrastructure The development of an economy depends very much on the infrastructure available. wastage and delays. Industry needs electricity for its manufacturing activities. communication channels to keep in touch with suppliers and customers. louder productivity. Because of the strong forward and backward linkages between agriculture and industry. boom and recession. An investor should assess the status of the infrastructure facilities available in the economy before finalizing his investment plans. The availability of infrastructure facilities such as power.

An industry is generally described as a homogenous group of companies. However industry classification becomes difficult while dealing with firms having a diverse product line. At any stage in the economy. there are some industries which are fast growing while others are stagnating or declining. We may define an industry as a group of firms producing reasonably similar products which serve the same needs of a common set of buyers. 38 . cotton.2 INDUSTRY ANALYSIS An investor ultimately invests his money in the securities of one or more specific companies.1. No industry or company can grow and prosper in the midst of political turmoil. each country follows a standardized classification to facilitate data collection. Each company can be characterized as belonging to an industry. The performance of companies would therefore be influenced by the fortunes of the industry to which it belongs. If an industry is growing. Industries are traditionally classifies as cement industry. Industry analysis refers to an evaluation of the relative strength and weakness of weakness of particular industries. The reports can effect the growth of other industries. The performance of companies will also depend on the state of the company to which it belongs. Stable long term economic policies are what that is needed for industrial growth. Such stable policies can emanate only through stable political system. software industry and so forth. 3. And such firms are now on the trend. textile. steel. the companies within the industry may also be prosperous. Due to the difficulties that they suffer.Economic and political stability A stable political environment is necessary for steady and balanced growth. For this reason an analyst has to undergo an industry analysis so as to study the fundamental factors affecting the performance of different industries.

Some of there are discussed below: • Demand supply graph: The demand for a product. there are a number of key characteristics that should be considered by the analyst. Now he should find the company in which. If the labour in a particular industry is rebellious and is inclined to resort to strikes frequently. Excess supply reduces the profitability of the industry through a decline in the Unit prize realization. 3. They have a bearing on the prospects of the industry. Whereas.Industry characteristics In an industry analysis. These features broadly relate to the operational and structural aspects of the industry. The prospects of that industry cannot become bright. The government may encourage the growth of certain industries can assist such industries through favorable legislation. • Labour condition: The state of labour condition in the industry under analysis is an important consideration in an economy such as ours where the labour union are very powerful.1. usually tend to change at a steady rate.3 Company Analysis Company analysis is the final stage of fundamental analysis. Company analysis gives an answer to this question. The economy analysis provides the investors a broad outline of the prospects of growth in the economy. The industry analysis helps the investor to select the industry in which the investment would be rewarding. the capacity to produce the product tends to change at regular intervals. depending upon the installation of additional production capacity. • • Attitude of government The attitude of the government towards an industry has a significant impact on its prospects. he should invest his money. Company analysis deals with the estimation of returns and risk of individual 39 . As a result am industry is likely to experience undersupply and oversupply of capacity at different times.

External sources of information are those generated independently outside the company. etc. the companies financial statements. however depending upon a number of factors concerning the operations of the company. Investment services and the financial press prepares these. Internal information consist of data and events made public by companies concerning their operations. Information regarding companies can be broadly classified into two groups: internal and external. public and private statements of officers of the company. 40 .shares. This calls for information. In company analysis. trend and stability of earnings of a company. The internal information source includes annual reports to shareholders. Many pieces of information influences the investment decisions. the analyst tries to forecast the future earnings of the company because there is strong evidence and that earnings have a direct and powerful effect upon share prices level.

5 INTRINSIC VALUE CALCULATION Dividend Payout Ratio = Dividend Per Share(DPS) Earnings Per Share(EPS) Average DPOR for 5 years = Sum of DPOR for 5 years 5 Average Return on Equity = 1.4 FINANCIAL TOOLS Earnings Per Share (EPS) = Profit After Tax (PAT) No. of Equity shares Dividend Payout Ratio = Dividend Per Share (DPS) Earnings Per Share (EPS) Return on Equity = Profit After Tax (PAT) * 100 Net worth * 100 Price Earning Ratio = Market price per share EPS 3.3.1.Avg DPOR 41 .1. of Equity share Dividend Per Share (DPS) = Amount declared as Dividend No.

The two basic financial statement provided by the company are the balance sheet and profit and loss account.1. The short term liabilities which are expected to be paid off within the next 1 year are known as 42 . The outside liabilities are categorized as short term liabilities and long term liabilities. The balance sheet gives the list of assets and liabilities of a company on a specific date. Current assets are those assets that are intended to be converted into cash in the near future (within 1 year). The financial statements published by a company periodically helps us to assess the profitability and financial health of the company. The first gives us the picture of the companies asset and liabilities while the second gives us a picture of its earnings. The major categories of assets are fixed assets and current assets. which are intended to be used up over a period of years.Average return on Equity = Sum of ROE for years 5 Growth rate in Dividend and equity Normalized average = Avg retention ratio * Avg return on equity = Sum of price to equity ratio for 5 years 5 Projected earning per share Intrinsic value P/E ratio = EPS for current year * ( 1+ growth rate) = Projected EPS * normalized average Projected Dividend per share = DPS for current year * (1+ growth rate) 3. Fixed assets are those assets. The major categories of liabilities are outside liabilities and liabilities towards shareholders.6 Financial statements The prosperity of a company would depend upon its profitability and financial health.

the Cost incurred and the resulting profit or loss of the company for one accounting year. 43 . The profit after tax divided by the number of shares gives the Earnings per Share. The profit and loss account summarizes the activities of the company during an accounting year. reveals the revenue earned. the last date of the accounting year. which is a figure in which most investors are interested. The profit and loss account also called income statement.the current liabilities. The balance sheet indicates the financial position of a company on a particular date namely.

Technical Analyst believes that the share price movement are systematic and exhibit certain consistent patterns. Technical analysis really just studies the supply and demand in a market in an attempt to determine what direction. Price moves in trends 3. It is based on three assumptions. 1. In other words.3. Downward Trend 44 . The current market price is compared with the future predicted price to determine the extend of miss-pricing. • One of the most important concepts in technical analysis is that of a trend. which states that the market price is always the correct one. technical analysis attempts to understand the emotions in the market by studying the market itself. will continue in the future. and then try to predict the future price movements. • Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity.2 Technical Analysis Technical analysis is an alternative approach to fundamental analysis for the study of stock price behavior. The market discounts everything 2. which is the general direction that a security is headed. Technical analysis is an approach which concentrates on the price movements and ignores the fundamentals in the share. as opposed to its components. He studies past movements in the share price to identify trend and pattern. Upward trend 2. or trend. There are three types of trends: 1. Criticism of Technical analysis stems from the efficient market hypothesis. History tends to repeat itself • • • Technicians believe that all the information they need about a stock can found in its chart Technical traders take a short-term approach to analyze the market . making any historical analysis useless.

3. 2. Sideways or Horizontal trend • A trend line is a simple charting technique that adds a line to a chart to represent the trend in the market or a stock. 45 . Share price are determined by the demand and supply forces operating in the market. With this the future price movement is predicted. The combined impact of all these factors is reflected in the share price movement. These demand and supply factors are in turn influenced by a number of fundamental factors as well as psychological or emotional factors. Thus technical analysis is really a study of past or historical price volume so as to predict the future stock. Many of these factors cannot be quantified. The rationale behind the Technical Analysis is that share price moves in trend or waves which may be upward or downward.1 Steps in Technical Analysis: 1. Study the past movement in share price and identify the trends and establish patterns. It is believed that the present trends are influenced by the past trends. Look at the current movement in the share price and identify the trends and establish patterns. therefore analyses the price and volume movement of individual securities as well as the market index. The technical analyst.2. The technical analyst therefore concentrates on the movement of share price and analyses the price and volume of individual securities as well as market index.3.

3. Stochastic 5.2 The basic principle behind technical analysis: 1. 5. 3. 2. Trends in stock prices have been seen to change when there is shift in demand and supply. MACD 3. Relative Strength Index(RSI) 46 . There are both rational factors which surrounds the supply and demand factors of security. The market value of a share is related to the demand and supply factors operating in the market. Security prices behaves in a manner that their movements are continuous in particular direction for some length of time 4.2.3 TOOLS USED 1.2. 3. Momentum 4. The shift in demand and supply factors can be detected through charts prepared specially to show market action. Moving Average Crossover 2.

MOMENTUM Momentum is a simple technical analysis indicators showing the difference between today's closing price and the close N days ago. Momentum is the absolute difference:

Rate of change scales by the old close, so as to represent the increase as a fraction,

"Momentum" in general refers to prices continuing to trend. The momentum and ROC indicators show trend by remaining positive while an uptrend is sustained, or negative while a downtrend is sustained. A crossing up through zero may be used as a signal to buy, or a crossing down through zero as a signal to sell. How high (or how low when negative) the indicators get shows how strong the trend is?

STOCHASTIC The stochastic indicator has been developed by Georges Lane. This indicator has been build based on the following concept:

In a positive trend, if the price is close to his maximum value, the intra day closing price will tend to be closer and closer to his intra day high. In a negative trend, if the price is close to his minimum value, the intra day closing price will tend to be closer and closer to his intra day low.

47

This system uses two lines: %K and %D. With: n the chosen lag. Ct the stock price at the date t. Bn the lowest price during the last n days. Hn the highest price during the last n days. The stochastic %K is: %K= 100 * {(C-Bn)/(Hn-Bn)} The second step is to compute the %D. %D is the moving average at j days of the numerator of %K (Nj) divided by the moving average of the denominator of %K (Dj).

The stochastic indicator is interpreted like the RSI. The sale signal is given when both lines are over 80% and the purchase signal when both lines are under 20%. The lag used for n in %K is often 5 days but (9,11 and 14 days are used as well). The lag used for j in %D is often 3 MOVING AVERAGE CROSSOVER Moving average crossovers are a common way traders use Moving Averages. A crossover occurs when a faster Moving Average (i.e. a shorter period Moving Average) crosses either above a slower Moving Average (i.e. a longer period Moving Average) which is considered a bullish crossover or below which is considered a bearish crossover.

48

The chart below of the S&P Depository Receipts Exchange Traded Fund (SPY) shows the 50-day Simple Moving Average and the 200-day Simple Moving Average; this Moving Average pair is often looked at by big financial institutions as a long range indicator of market direction:

Note how the long-term 200-day Simple Moving Average is in an uptrend; this is a signal that the market is quite strong. Generally, a buy signal is established when the shorter-term 50-day SMA crosses above the 200-day SMA and contrasts, a sell signal is indicated when the 50-day SMA crosses below the 200day SMA. In the chart above of the S&P 500, both buy signals would have been extremely profitable, but the one sell signal would have caused a small loss. Keep in mind, that the 50-day, 200-day Simple Moving Average crossover is a very long-term strategy.

49

as the RSI does not compare the relative strength of two securities. For the calculation a 14 day RSI. The gains are added up and divided by 14 to get the average gain per day. • RSI for security is calculated by the following formulae: RSI = 100 – [100/(1+RS)] Where RS = Avg gain per day / Avg loss per day The most commonly used time period for calculation of RS is 14 days. The name “relative strength Index” is slightly misleading. MOVING AVERAGE CONVERGENCE DIVERGENCE(MACD) 50 . The average gain per day and average loss per day are used in the above formula for calculating the RSI for a day. It is a powerful indicator used to identify the inherent strength and weakness of a particular scrip or market. In fact crossovers are included in the most popular technical indicators including the Moving Average Convergence Divergence (MACD) indicator RELATIVE STRENGTH INDEX(RSI) The relative Strength Index is a financial technical analysis momentum oscillator measuring the velocity and magnitude of directional price movement by comparing upward and downward close to close movement. In this way RSI values can be calculated for a number of days. graph can be plotted. After calculating such data for a number of days.Moving Average crossovers are important tools in a traders toolbox. the gain per day or loss per day is arrived at by comparing the closing price of a day with that of the previous day for a period of 14 days. This is a powerful indicator that signals buying and selling opportunities ahead of the market. but rather the internal strength of a single security. It was first introduced by Wells Wilder.

to include some trend-following characteristics. and quoted in most technical analysis books on the subject. MACD is a centered oscillator and the guidelines for using centered oscillators apply. while using longer moving averages will produce a slower indicator. including SharpCharts. A bullish crossover occurs when MACD moves above its 9-day EMA. The Merrill Lynch (MER) chart below shows the 12-day EMA (thin blue line) with the 26day EMA (thin red line) overlaid the price plot. the 12-day EMA is the faster and the 26-day EMA is the slower. The histogram represents the difference between MACD and its 9-day EMA. more responsive indicator. we will address the use of different moving averages in calculating MACD. MACD uses moving averages. Of the two moving averages that make up MACD. and a bearish crossover occurs when MACD moves below its 9-day EMA. without any upper or lower limits. Closing prices are used to form the moving averages. Using shorter moving averages will produce a quicker. The resulting plot forms a line that oscillates above and below zero. Later in the indicator series. MACD appears in the box below as the thick black line and its 9-day EMA is the thin blue line. For our purposes in this article. Moving Average Convergence / Divergence (MACD) is one of the simplest and most reliable indicators available. Appel and others have since tinkered with these original settings to come up with a MACD that is better suited for faster or slower securities. The most popular formula for the "standard" MACD is the difference between a security's 26-day and 12-day Exponential Moving Averages (EMAs). The histogram is 51 .Developed by Gerald Appel. which are lagging indicators. This is the formula that is used in many popular technical analysis programs. less prone to whipsaws. These lagging indicators are turned into a momentum oscillator by subtracting the longer moving average from the shorter moving average. Usually. a 9-day EMA of MACD is plotted along side to act as a trigger line. the traditional 12/26 MACD will be used for explanations.

positive when MACD is above its 9-day EMA and negative when MACD is below its 9-day EMA 52 .

If MACD is positive and rising. A negative MACD indicates that the 12-day EMA is trading below the 26-day EMA. If MACD is negative and declining further. MACD centerline crossovers occur when the faster moving average crosses the slower moving average.MACD measures the difference between two Exponential Moving Averages (EMAs). A positive MACD indicates that the 12-day EMA is trading above the 26day EMA. 53 . indicating a bearish period of trading. Positive momentum is increasing. Downward momentum is accelerating. then the gap between the 12-day EMA and the 26-day EMA is widening. indicating a bullish period for the price plot. This indicates that the rate-of-change of the faster moving average is higher than the rate-of-change for the slower moving average. then the negative gap between the faster moving average (blue) and the slower moving average (red) is expanding.

RESEARCH METHODOLOGY 54 .4.

It demands accurate observation and experimental evidences.1 RESEARCH METHODOLOGY Research is a scientific and systematic search for pertinent information on a specific topic. A good research should be systematic. the method of defining the problem.Historical research is based on historical data. 4. type of data collected. There are various types of researches. The type of research used in the study is Historical research.4. HISTORICAL RESEARCH: . a recording and analysis of evidence for purpose of gaining knowledge. It also deals with objective of research study. Researcher has to design his methodology. method used for collecting and analyzing data. 55 . An extensive literature survey is undertaken to understand the concept of financial performance. logical.2 TYPES OF RESEARCH The purpose of research is to discover answer to question through the application of scientific procedures. It attempt to find out what happened in the past and to reveal reasons for why and how things happened. The main aim of it is to find out the truth which is hidden and which is to be discovered. empirical and replicable. Research methodology deals with and takes into consideration the logic behind the method. Research methodology is a scientific and systematic way to solve research problems. Research finds out the solution for the problem. Research considered as an effort to gain new knowledge. Research is an art of scientific investigation. Research is essentially an investigation. The collected data is used for the new purpose.

In this case researcher is certainly not confronted with the problem that usually associated with the collection of original data. Secondary data are those. The sources of secondary data in this project are: • • • Books Websites Magazines SAMPLING: The sample stocks were selected by considering various stocks having high market capitalization in the IT sector. 56 . which have already collected tabulated and presented in some forms by some one else for some other purpose. 2009. The five Banks selected for the study are: 1 Infosys Technologies 2 Tata Consultancy Services 3 Oracle 4 Wipro 5 HCL Technologies SOURCES: Market capitalization given in the official site of Bombay Stock Exchange as on 10thJan.3 METHODS OF DATA COLLECTION SECONDARY DATA: The nature of data collected for the data is secondary. Researchers have to modify such data for their individual requirement.4. Secondary data are already available data. The researchers have to scrutinize the secondary data.

DATA ANALYSIS AND INTERPRETATION 57 .5.

50 .00 2005 194.50 2006 249.33 2007 286 10876.00 17809.10 81.00 6897.89 3400.15 1572.50 .96 5.5 13.15 3039.74 23. PAY OUT RATIO ITEMS EPS DPS Pay-out ratio 2009 97.35 2005 135 5107.34 2006 138 6759.50 .00 4470 .18 2007 64.70 1850.74 23.41 7.00 1904 .50 2009 311.5 13.1 INFOSYS TECHNOLOGIES Fundamental analysis Table 1.18 2006 81.96 5.25 .00 68.41 7.00 13490.00 5819 .00 5242.90 1101.33 2008 286 13204.35 11.75 .00 1511.00 1040. RETURN ON EQUITY ITEMS 2009 Share Capital 286 Reserve and Surplus Net worth PAT ROE 17523.00 2008 235.08 Table 3.25 64. BOOK VALUE ITEMS Book Value(Rs) Market : High Low EPS DPS 97.00 3783 .14 2439.35 11.09 2005 68.50 72.00 2421 .00 2007 195.00 11162.21 58 .24 2008 72.5.75 Table 2.35 2614.84 2017.

Table 4.75 2006 2.00 6897.35 11.3510 .3267 .41 7. RETURN ON ASSET YEAR 2009 2008 2007 2006 2005 PAT 5819 4470 3783 2421 1904 TOTTAL ASSET 17809.3389 .25 2007 13149 3783 64.50 2005 6860 1904 68.74 23. RATIOS ITEMS Current Ratio Interest Coverage Ratio Debit Ratio 3370.00 5242.5 13.97 2008 3.50 2008 15648 4470 72.96 5. RATE OF GROWTH ITEMS Sales PAT EPS DPS Table 5.5 Equity 0 5118 0 4153 0 2737 0 2230 0 2009 3.3313 .85 2007 3.50 2006 9028 2421 81.19 2009 20264 5819 97.75 Table 6.77 2005 2.00 11162.00 13490.00 ROA .3632 59 .

The market price of shares in 5 years 3000 2500 2000 1500 1000 500 0 2005 2006 2007 2008 2009 Series1 Series2 60 .69 30.62 10050.16 4758.01 6977.08 2486. RETURN ON CAPITAL EMPLOYED YEAR 2009 2008 2007 2006 2005 EBIT 7435 5664 4622 3146 2498 TOTAL CAPITAL ROCE EMPLOYED 17262.Table 7.5 64.41 68.45 Fig 1.95 1528.60 13641.4599 .54 35.50 1975.96 MARKET PRICE PRICE EARNING PER SHARE 1857. PRICE EARNNG RATIO YEAR 2009 2008 2007 2006 2005 EPS 97.525 Table 8.4307 .74 72.01 21.4152 .85 RATIO 19.08 30.4509 .10 .35 81.05 2444.

CALCULATION OF INTRINSIC VALUE 1) Average dividend pay out ratio = .312 4) Growth in equity = 0.846 3) Average return on equity = .702872 61 .154 = 0.0.74 * (1+0.08+30.18 + .263952) = 123.846 = 0.33+.5 * (1+0.21/5 = 0.354* .53866848 8) Intrinsic value = 123.01+21.69+30.54+35.27673760192 9) Projected DPS = 23.53866848* 27.24 + .34+.09 + .33+.263952) = 29.846 = 23.354 = 3379.45/5 = 27.35+.354 6) Long term growth in dividend & equity = 27.312*.141484 7) Projected EPS = 97.263952 5) Normalized avg PE ratio =19.154 2) Average retention ratio = 1.18 + .08 / 5 = 0.

Technical analysis Fig 2. 62 . This forms the support line for the shares. PRICE CHART INTERPRETATION: The trend line is connecting November 09 low and January 10 low.

63 .Fig 3. MACD INTERPRETATION: MACD signals a long term bullishness for Infosys. It is in the high value and will tend to be in it for some time.

This signals the buy signal. 64 . MOMENTUM INTERPRETATION: Momentum was coming down but now is in the verge of climbing up.Fig 4.

red representing 20 days and black representing 50 days and blue is the share price. Here the red line is now over the blue line indicating price going up. 65 .Fig 5. MOVING AVERAGE CROSSOVER INTERPRETATION: The two line.

RELATIVE STRENGTH INDEX INTERPRETATION: The RSI line is coming down from over bought to neutral.Fig 6. Now the line is going to reverse signaling a buy signal. 66 .

Fig 7. STOCHASTICS INTERPRETATION: The graph is coming down from over bought. 67 . In a few days the price is going to go up signaling a buy signal after waiting for 2 to 3 days.

273.43 1078.30 4696.560.38 805.17 1750.5.55 68 .00 935.50 53.76 .29 .69 14.6 11.53 14.50 .53 14.39 13446.25 2005 36.99 3757.40 5609.00 43.31 2008 43.86 10.93 5.00 . PAY OUT RATIO ITEMS EPS DPS Pay-out ratio 2009 45.42 .13 8058.01 3.85 1091.86 4508.00 Table 10.00 36.50 36.31 Table 11.87 .63 13.2 TCS Fundamental analysis Table 9. BOOK VALUE ITEMS Book Value(Rs) Market : High Low EPS DPS 45.31 2006 53.248.00 2007 82.00 900.6 11.32 2007 36.00 .50 .961.50 2009 136.00 418.33 2716.35 1399.66 11. RETURN ON EQUITY ITEMS 2009 Share Capital 197.41 2007 97.48 2005 48.00 2006 114.806.25 2008 111.04 3321.50 .64 2099.66 11.86 7.00 2005 69.21 .00 355.63 13.86 Reserve and Surplus Net worth PAT ROE 13.69 14.05 1831.35 2008 197.47 2006 48.95 11004.

08 2006 1.08 4696.76 3757. RETURN ON ASSET YEAR 2009 2008 2007 2006 2005 PAT 4696.99 2007 2.89 2008 1.87 53.3482 . RATE OF GROWTH ITEMS Sales PAT EPS DPS 2009 22406.68 4508. RATIOS ITEMS Current Ratio Interest Coverage Ratio Debit Ratio 691.15 Table 14.00 2008 18292.6 11.09 3757.71 204.42 TOTTAL ASSET 13486.42 36.29 36.82 Equity 0 0 0.94 685.83 3441.Table 12.69 14.5321 69 .00 2007 14942.76 43.50 2005 8051.21 45.73 5644.11 1831.53 14.63 13.4633 .4090 .01 2716.4813 .87 1831.12 1216.79 ROA .01 0.67 11023.15 1464.29 2716.96 2005 1.02 0.50 Table 13.21 4508.09 2009 1.66 11.11 8109.50 2006 11236.

52 3336.42 .15 .5234 .74 17.00 1167. PRICE EARNNG RATIO YEAR 2009 2008 2007 2006 2005 EPS 45.6 MARKET PRICE PRICE EARNING PER SHARE 580.37 7443.02 10443.63 36.12 31.8 TOTAL CAPITAL ROCE EMPLOYED 13249.06 4517.69 36.82 Fig 8. The market price of shares in 5 years for TCS 2500 2000 1500 1000 500 0 2005 2006 2007 2008 2009 Series1 Series2 70 .53 43.13 748.6777 1.22 2255.6069 .95 38.66 53.0987 Table 16.93 RATIO 12.00 1499.00 1420.86 2053.60 4922.83 27.Table 15. RETURN ON CAPITAL EMPLOYED YEAR 2009 2008 2007 2006 2005 EBIT 5564.59 5466.

3 = 0.12+31.47+.935692 8) Intrinsic value = 59.7 = 17.55/5 = 0.3164) = 18.35+.31+.74+17.53 * (1+.48+.3164 5) Normalized avg PE ratio = 12.82/5 = 25.CALCULATION OF INTRINSIC VALUE 1) Average dividend pay out ratio = .452 * .935692*25.41+.87 9) Projected DPS = 14 * (1+.3164) = 59.692 * 0.31 /5 = 0.4296 71 .32+.692 = 1539.3 2) Average retention ratio = 1-.7 3) Average return on equity =.95+38.31+.452 4) Growth in equity = 0.692 6) Long term growth in dividend & equity = 25.9844 7) Projected EPS = 45.25+.7 = 0.83+27.

72 .Technical analysis Fig 9. This forms the support line for the price chart of TCS. If it comes down the support line then it would be a sell signal. PRICE CHART INTERPRETATION: Trend line is drawn connecting Oct 09 and Jan10.

73 .Fig 10. MACD INTERPRETATION: MACD signals a long term bullishness for TCS. It is in the high value and will tend to be in the same trend for a few days.

Fig 11. MOMENTUM INTERPRETATION: Momentum is now climbing so it is a buy signal for TCS. 74 .

75 . indicating share price going up. MOVING AVERAGE CROSSOVER INTERPRETATION: Here the red line is now over the black line for a long time.Fig 12.

76 . RELATIVE STRENGH INDEX INTERPRETATION: The RSI line is coming down from over bought to neutral. Now the line is going to reverse signaling a buy signal.Fig 13.

77 .Fig 14. STOCHASTICS INTERPRETATION: The graph is coming down from over bought. In a few days the price is going to go up signaling a buy signal after waiting for 2 to 3 days.

65 410.16 2005 25.00 2009 418.48 354.86 5.59 0 2006 1153. PAY OUT RATIO ITEMS EPS DPS Pay-out ratio 2009 83.86 5.10 Table 18.18 Table 20.87 2.69 5.59 0 30.15 2007 41.06 0 0 2007 42.00 541.5.87 49.59 1362.71 83.88 Reserve and Surplus Net worth PAT ROE 3.00 1225.18 2005 37.18 2630.00 .65 2068.467.53 3509.64 .86 197.20 2008 41.27 1088.64 2.87 .00 78 .44 1.71 .00 2008 335.64 25.75 1125.73 240. BOOK VALUE ITEMS Book Value(Rs) Market : High Low EPS DPS 83.00 405.67 42.70 428.97 410.19 197.00 25.69 5.67 2398.06 0 0 2008 49.087.316.06 0 2008 1792.00 2005 902.324.00 2005 150.82 240.00 2007 283.98 2364.69 5.3 ORACLE Fundamental analysis Table 17. RATE OF GROWTH ITEMS Sales PAT EPS DPS 2009 2212.770.42 695.67 .62 695.29 Table 19.06 0 2007 1552.14 1.8 30.90 840.8 .75 2812.00 .86 5.59 0 0 2006 30.00 2006 178. RETURN ON EQUITY ITEMS 2009 Share Capital 41.06 0 49.06 0 42.15 2006 38.34 354.88 1664.

1767 0.71 410.1982 0.69 Table 22. RATIOS ITEMS Current Ratio Interest Coverage Ratio Debit Ratio 0 Equity 0 0 0 0 0 0 0 0 0 2009 4.1757 79 .87 354.64 TOTTAL ASSET 3509.8 197.34 2006 3.19 ROA 0.58 2008 3.1479 0.1461 0.42 2812.29 2005 3.67 240.Table 21.99 2007 3. RETURN ON ASSET YEAR 2009 2008 2007 2006 2005 PAT 695.73 1125.65 2398.48 1362.

71 Fig.2295 .35 1034 1927.86 25.3 431.2317 .55 2605. RETURN ON CAPITAL EMPLOYED YEAR 2009 2008 2007 2006 2005 EBIT 732.1656 .23 1045.75 1244.2363 Table 24.5 1454.11 TOTAL CAPITAL ROCE EMPLOYED 3160.86 1880.04 285.53 381.06 49.55 247.59 30. 15 The market price of shares in 5 years for Oracle 2500 2000 1500 1000 500 0 2005 2006 2007 2008 2009 Series1 Series2 80 . PRICE EARNNG RATIO YEAR 2009 2008 2007 2006 2005 EPS 83.06 42.55 RATIO 16.15 31.26 47.69 MARKET PRICE PRICE EARNING PER SHARE 1396.08 45.75 .81 21.2026 .Table 23.95 814.

91 3) Average return on equity = .402 = 3112.71/5 = 32.0.0605512 * 32.172 = 0.48582 7) Projected EPS = 83.15+.08+45.15652) = 96.CALCULATION OF INTRINSIC VALUE 1) Average dividend pay out ratio = 0+0+0+.06*(1+0.09 = 0.16+.09 2) Average retention ratio = 1.402 * .15652 5) Normalized avg PE ratio = 16.26+47.29/5 = 0.18+.0605512 8) Intrinsic value = 96.15+31.172 4) Growth in equity = .91 * .402 6) Long term growth in dividend & equity = 32.18/5 = 0.91 = 29.15+.81+21.15652) =0 81 .20+.5539799824 9) Projected DPS = 0 *(1+0.

Technical analysis Fig 16. 82 . PRICE CHART INTERPRETATION: The trend line is connecting Feb 09 low and July09. This forms the support line for the shares.

It is at the highest values and will tend to be in it for some time. 83 .Fig 17. MACD INTERPRETATION: MACD signals a long term bullishness for Oracles.

84 . This signals the buy signal. MOMENTUM INTERPRETATION: Momentum was coming down but now is in the verge of climbing up.Fig 18.

85 .Fig 19. MOVING AVERAGE CROSSOVER INTERPRETATION: The red line has crossed over the blue line in December showing a price rise in the share.

86 .Fig 20. RELATIVE STRENGTH INDEX INTERPRETATION: The RSI shows a bent and will rise in two to three days indicating a buy signal for Oracle.

Fig 21. In a few days the price is going to go up signaling a buy signal after waiting for 2 to 3 days. STOCHASTIC INTERPRETATION: The graph is coming down from over bought. 87 .

32 2006 64.24 2007 132.292.4 HCL Fundamental analysis Table 25.12 88 .00 10.25 2006 79.00 .83 780.25 2005 63.69 7.37 8.5 16.27 .796.91 2005 8.00 2009 52.6 555.02 1101.19 9.00 8.00 1.80 102.05 Reserve and Surplus Net worth PAT ROE 3.00 17.00 .84 2.74 3.18 16.14 2859.87 638.27 3.28 3425.85 3214.65 362.51 2008 10. BOOK VALUE ITEMS Book Value(Rs) Market : High Low EPS DPS 13.65 .511. RETURN ON EQUITY ITEMS 2009 Share Capital 134.37 8.6 715.353.96 Table 27.00 .69 2.29 2008 133.22 333.04 377.98 329.72 3488.00 295.00 Table 26.18 16.69 7.50 2007 51.82 .31 .00 260.5.45 89.00 . PAY OUT RATIO ITEMS EPS DPS Pay-out ratio 2009 13.52 2006 17.00 15.10 2008 48.24 997.38 .5 16.00 2005 89.079.19 9.18 2575.88 2007 15.64 706.

08 0.39 780.24 2007 1.31 780.27 8.04 41.01 329.01 0.22 2006 0.2409 0.09 997.31 13.8 46.00 2005 1447.3 2009 1.25 2956.93 2005 0.92 638.00 2007 3768.38 17.37 2008 1.35 91.91 2589.02 0.01 0.42 Equity 0.2492 0.69 7.77 Table 30.1114 89 .16 3465.2466 0.65 1101.18 16.97 3240.67 ROA 0.27 TOTTAL ASSET 4001. RATIOS ITEMS Current Ratio Interest Coverage Ratio Debit Ratio 43.00 2008 4615.82 638.3179 0. RETURN ON ASSET YEAR 2009 2008 2007 2006 2005 PAT 997.00 2006 3032.82 15.38 329.62 1101.00 Table 29. RATE OF GROWTH ITEMS Sales PAT EPS DPS 2009 4675.Table 28.5 16.37 8.33 61.65 10.19 9.

RETURN ON CAPITAL EMPLOYED YEAR 2009 2008 2007 2006 2005 EBIT 1219. The market price of shares in 5 years 2500 2000 1500 1000 500 0 2005 2006 2007 2008 2009 Series1 Series2 90 .66 666. PRICE EARNNG RATIO YEAR 2009 2008 2007 2006 2005 EPS 13.37 17.53 51.3369 .36 3132.19 15.33 425 Fig 22.85 .2352 .Table 31.1289 Table 32.79 894.32 1190.5 8.28 218.2128 .63 3802.38 3027.15 487.3933 .04 21.38 2672.18 MARKET PRICE PRICE EARNING RATIO 17.53 TOTAL CAPITAL ROCE EMPLOYED 3620.41 31.63 534.73 30.69 10.96 PER SHARE 233.57 344.

534 = 418.343496 7) Projected EPS = 13.704697584*30.04+21.91+1.704697584 8) Intrinsic value = 13.244 4) Growth in equity = 0.CALCULATION OF INTRINSIC VALUE 1) Average dividend pay out ratio = .044 3) Average return on equity = .12/5 = 0.32+.69* (1+0.956 = 0.41+31.88+.534 6) Long term growth in dividend & equity = 30.29+.244 * .0010736 5) Normalized avg PE ratio = 17.73+30.0010736) = 7.96/5 = 30.52+.0044 = 0.534* .044 = 1.51+.459236029856 9) Projected DPS = 7 * (1+0.0010736) = 13.96/5 = 0.956 2) Average retention ratio = 1-0.24+.0075152 91 .25+.53+51.

Technical analysis Fig 23. PRICE CHART INTERPRETATION: The support line is drawn connecting Oct 09 low and Dec 09 low. 92 .

MACD INTERPRETATION: The MACD line is coming down from the high values but is still in the safe region of buying the share. 93 .Fig 24.

This signals the bullishness of the shares.Fig 25. 94 . MOMENTUM INTERPRETATION: Momentum was coming down but now is now climbing up.

This should sustain for some time.Fig 26. 95 . MOVING AVERAGE CROSSOVER INTERPRETATION: Here the red line is now over the blue line which has cut over in the month of December indicating price going up.

Fig 27. RELATIVE STRENGTH INDEX INTERPRETATION: The RSI line is coming down from over bought to neutral. 96 . Now the line is going to reverse signaling a buy signal in two to three days.

STOCHASTIC INTERPRETATION: The graph is coming down from over bought. 97 . In a few days the price is going to go up signaling a buy signal after waiting for 2 to 3 days.Fig 28.

BOOK VALUE ITEMS Book Value(Rs) Market : High Low EPS DPS 19.3009 2007 18.82 .00 20.15 6.31 98 .40 2842.892.55 5.05 Table 34.94 6.3 11.86 690.45 2020.47 5.320.751.44 1494.8 .610.025.514.00 18.73 4.42 699. RETURN ON EQUITY ITEMS 2009 Share Capital 293 Reserve and Surplus Net worth PAT ROE 12.00 .10 9.47 5.31 2005 140.70 3063.90 181.94 6.00 350.5.00 19.135.54 776.00 2006 45.24 2008 346.26 2007 291.70 2007 63.1 .5 WIPRO Fundamental analysis Table 33.00 2008 79.62 4.00 .220.00 13.2038 2008 19.3 .48 .2433 Table 35.00 2009 85.00 .8 9.90 2973. PAY OUT RATIO ITEMS EPS DPS Pay-out ratio 2009 19.61 6.30 2006 285.3224 2006 13.260.71 4.00 383.61 6.00 .3712 2005 20.00 425.420.00 2005 69.00 .00 195.30 6.55 5.40 12.03 614.62 4.05 537.40 11.

19 0.11 2008 2.10 9558.94 6.2973 0.61 4954.01 0.1 3063.1697 0.3 19.00 Table 37.18 1494.00 2006 10264.32 Table 38.47 5.5 2842.61 6.8 2973.48 13.29 2009 2. RATE OF GROWTH ITEMS Sales PAT EPS DPS 2009 21612.03 Equity 0.3123 0.00 2005 7276.71 442.02 0.8 19.5 316.00 2007 13758.00 2008 17658.55 5.09 2020.14 748.1 18. RATIOS ITEMS Current Ratio Interest Coverage Ratio Debit Ratio 19. RETURN ON ASSET YEAR 2009 2008 2007 2006 2005 PAT 2973.82 TOTTAL ASSET 17528.57 2006 1.1985 0.02 30.53 ROA 0.Table 36.37 0.3017 99 .80 15433.82 20.46 2005 1.8 3063.48 1494.1 2020.40 6470.62 4.3 2842.15 2007 1.

29 .7 3586.4115 Table 40.01 27. PRICE EARNNG RATIO YEAR 2009 2008 2007 2006 2005 EPS 19.52 8014.2272 .287 .62 19.60 5712.94 18.81 1761.5 498.3972 .47 20.8 557.96 37.04 29.55 MARKET PRICE PRICE EARNING PER SHARE 447 359.5 3183.5 563.78 4281.Table 39.95 12496.4 2342.78 18.40 Fig 29 The market price of shares in 5 years for Wipro 2500 2000 1500 1000 500 0 2005 2006 2007 2008 2009 Series1 Series2 100 .03 RATIO 22.61 13.75 TOTAL CAPITAL ROCE EMPLOYED 16481. RETURN ON CAPITAL EMPLOYED YEAR 2009 2008 2007 2006 2005 EBIT 3744.4101 .

04+29.284 4) Growth in equity = 0.28832 2) Average retention ratio = 1.31+.5831616 * 27.24240384 7) Projected EPS = 19.62*(1+.3712+.01+27.40/5 = 27.5831616 8) Intrinsic value = 33.2433/5 = 0.71168) = 33.20211712 5) Normalized avg PE ratio = 22.24+.71168 = 19.31/5 = 0.96+37.78+18.3224+.28832 = 0.84672 101 .71168 = 0.0.26+.71168) = 6.284* .038 * 0.CALCULATION OF INTRINSIC VALUE 1) Average dividend pay out ratio = 2038+.71168 3) Average return on equity = .3009+.30+.038 = 908.038 6) Long term growth in dividend & equity = 27.0215233408 9) Projected DPS = 4*(1+.

102 . PRICE CHART INTERPRETATION: The trend line is connecting Octobe 09 low and January 10 low. This forms the support line for the shares.Technical Analysis Fig 30.

It is in the high value and thus signals a bullishness of the share of Wipro. MACD INTERPRETATION: MACD signals a long term bullishness for Wipro. 103 .Fig 31.

Fig 32. MOMENTUM

INTERPRETATION: Momentum was coming down but now is in the verge of climbing up. This signals the buy signal.

104

Fig 33. MOVING AVERAGE CROSS OVER

INTERPRETATION: Here the red line is over the black line indicating price going up. This indicates a buy signals foe share of Wipro.

105

Fig 34. RELATIVE STRENGTH INDEX

INTERPRETATION: The RSI line is coming down from over bought to neutral. Now the line is going to reverse signaling a buy signal after 1 or 2 days.

106

107 .Fig 35. STOCHASTICS INTERPRETATION: The graph is coming down from over bought. In a few days the price is going to go up signaling a buy signal after waiting for 2 to 3 days.

SUMMARY FINDINGS AND CONCLUSION 108 .6.

87 3112. entrepreneurial flair. which gives a buy signal.6. investor attention has been gaining towards such companies This study is a humble attempt to identify the investment potential of five major IT sector companies from Indian capital market. Oracle.70 735. It has [proved that. These 109 . This achievement has been made possible by domestic regulation. Because of high level growth potential in the IT and ITE sector. For India. 6. India can compete globally.1 SUMMARY India has emerged as a leading offshore software development centre in little more than a decade.02 418. HCL and Wipro the intrinsic value is higher than the market value. I particular.45 Buy Buy Buy Buy Buy • For all the companies like Infosys.45 2. faced with a growing shortage of software engineers in the west. The success of India's software development industry reflects a number of factors. low cost software and services.55 908. the software industry has become a beacon of success.2 FINDINGS Company Name Infosys TCS Oracle Wipro HCL Intrinsic value 3379. hundreds o companies have turned to India's computer software and services companies for the IT skills they need to maintain and enhance their competitiveness. given the right framework.165.46 Market value as Interpretation on 29th Jan 2010 2476. and the soaring global demand for high quality.40 346.28 1539.20 647. TCS.

1. EPS is decreasing. It was seen that for all the major companies selected that is Infosys.96. Wipro Oracle and HCL is 2.5.3 Conclusion The IT industry plays a vital role in the growth of Indian industries. TCS. The share price of these companies may rise in the future as these securities have high intrinsic value. For Wipro it is a stable EPS. 6. EPS of Infosys. The current ratio of all companies is above the bench mark of 2:1.securities are under priced.46. • The Return on Equity of Infosys. • Current ratio of Infosys. and Oracle is increasing whereas for HCL. 6. Oracle. The Indian IT companies not only contributes to export but also attracts new forign investments in the country. This shows that the buying of such shares will be profitable for the investors.This indicates that liquidity and short term solvency of all companies are satisfactory. HCL and Wipro. and 3. For this study 5 major IT companies with the largest market capitalization was selected and their data was analysed. whereas for Oracle it is a decreasing trend in the past and now is in the state of increasing indicating an increase in profitability. HCL and Wipro is decreasing. It was expected that the IT industry would grow to take a major percent of export.77. TCS. TCS. 110 . the calculated intrinsic value was higher than the current market value.24 respectively. 1. The IT sector is a wonderful area for investors. TCS. Also the tools used in technical analysis shows that all the companies under study is in a state of growth.

1998. Vol. New Delhi: Tata Mc Graw.BIBLIGRAPHY REFERENCE BOOKS 1. Security Analysis and Management New Delhi: Prentice-Hall of India Private Publishing House. Prassana chandran.com •www.rediffmoney. 2002. December 2005.1998. Mumbai : Himalaya Donald E. Jordan.10. Fischer and Ronald.com •www. New Delhi: Prentice Hall of India Private Ltd.com •www.capitaline. 1998 Portfolio 4. S.com •www.com •www. J.com 111 . Investment analysis and Portfolio management.bseindia.Hill Publishing Company Limited Limited.nseindia. 8 Dalal Street WEB SITES • www. 6 The Hindu Business Line. Kevinn. Avadhani V A.wikepedia. Investment management.cochinstockexchange. 7 Economic Time.moneycontrol. NEWS PAPERS AND JOURNALS 5 Chartered Financial Analysis. 3. Portfolio Management.indiabulls.com •www. 2.com •www.

112 .

Sign up to vote on this title
UsefulNot useful