Finance Course

Responsibilities of investors

1. Understanding of Share Market

2. Study Economy & Business
3. Take Knowledge from profession
4. Keep eyes and ears open
5. Extract Information
6. Have Attitude after having knowledge and development of Skills
7. Keen money from time to time.

 Analysis

1. EIC ( Economy, Industry, Company )

2.CIE (Company, Industry, Economy )

 Indicator Tips

 Economy – IIP ( Idex of Industrial Product )

Inflation (CPI , WPI )
Interest Rates
Unemployment Rate ( CMIE ) -> Center for Monetary Indian Economy

 Industry – Sectors which are predominant in Nifty 50 Index.

 Company-

 Company have Niche business and maximum Market Share in it then it

is plus point
 Less Liabilities means Borrowing should be less compared with reserves
and if it is to be minimum equal to zero then it is Plus point
 Company Should be continuously profit making
  Important Ratios-

EPS - Earnings per share, or EPS, is an important number for shareholders and potential
investors because it tells them how much income is generated for each share of stock. The
formula for calculating earnings per share is: Earnings per Share = (Net Income - Preferred
Dividends) / Number of Common Shares Outstanding.

Book Value- An asset's book value is equal to its carrying value on the balance sheet, and
companies calculate it netting the asset against its accumulated depreciation. Book value is also
the net asset value of a company calculated as total assets minus intangible assets (patents,
goodwill) and liabilities.
It Tells to Investors How much a company is worth if it ceases operating today, Sold all
its assets and paid off all its debts.

ROE- Return on equity (ROE) is a measure of financial performance calculated by dividing net
income by shareholders' equity. Because shareholders' equity is equal to a company’s assets
minus its debt, ROE could be thought of as the return on net assets.
Relatively high or low ROE ratios will vary significantly from one industry group or sector
to another. When used to evaluate one company to another similar company the comparison
will be more meaningful. Even within the same industry group, comparing the ROE of a
company that pays a large dividend with a firm that doesn’t can also be misleading.

PE- The Price Earnings Ratio (P/E Ratio) is the relationship between a company’s stock price and
earnings per share (EPS). It is a popular ratio that gives investors a better sense of the value of the
company. The P/E ratio shows the expectations of the market and is the price you must pay per unit of
current earnings (or future earnings, as the case may be).

Earnings are important when valuing a company’s stock because investors want to know how
profitable a company is and how profitable it will be in the future. Furthermore, if the company
doesn’t grow and the current level of earnings remains constant, the P/E can be interpreted as
the number of years it will take for the company to pay back the amount paid for each share.

P/E = Stock Price Per Share / Earnings Per Share

Or P/E = Market Capitalization / Total Net Earnings
To Know More Visit -
https://corporatefinanceinstitute.com/resources/knowledge/valuation/price-earnings-ratio/

8 SUTRAS FOR INVESTING

 1. Revenue Should be ever increasing in general & Last 3 Years in Particulars
2. Profit Should be ever increasing in general & Last 3 Years in Particulars
3. EPS Should be more than 20
4. PE ratio between 5-15 & if you find higher PE ratio & all Other Condition Satisfied then
we will compare it with Industrial or Sector PE and Company PE should be at Par or
Lesser than Industrial PE
5. Debt / Borrowing should be as small as possible preferably ‘0’ and also compared it with
reserves.
6. P/B Ratio should be between 1-5
7. ROE Should be Minimum 15%
8. Total No of shares should be around 2 Crores in which promoters % of holding should be
maximum.

Important Points – 1,2,3,4,6,7 Criteria for selection :- 5-6 Out of 8 points

 Reserch

Fundamental Research – Suggested Website -> www. Screener.com ,

www.Moneycontrol.com
Technical Research -Suggested Website -> www.chartink.com

 Other Key Points –

 If Stock is near its 52 week High then it is possibly Bullish Stock.
 Check Dividend Yield - The Dividend Yield is a financial ratio that measures the annual
value of dividends received relative to the market value per share of an investment
security. In other words, the dividend yield formula calculates the percentage of a
company’s market price of a share that is paid to shareholders in the form of dividends.

Dividend Yield = Dividend per share / Market value per share

Where:

Dividend per share is the company’s total annual dividend payment

Market value per share is the current share price of the company
 Also Check Face value that indicates whether stock will Split in future or not.
Eg - if Face value is 1.00 then there is no possibility of Stock Split.
 Strategies

 Technical Analysis strategy

 Moving Average –
 Entry and exit to be taken on decided moving average only
 If price crossed moving average from below then BUY
 If price crossed moving average from above then SELL
 If moving average is going down or sideways then don’t enter in transaction
means don’t Buy.
 For short duration investment take help of decided Moving average
 For Long duration investment take help of 200 Days Moving average
 One can also combine above two strategy by Enter in transaction on entry signal
of decided moving average and Exit from transaction on exit signal of 200 Days
moving average.

 Statistics Strategy
 Check which Blue-chip Stock has gone below it's 52 weeks low by using below websites
 https://www.moneycontrol.com/stocks/marketstats/52-week-low/B|A|A%20Group/
 https://m.bseindia.com/52WeekHigh.aspx
 Select stock who is following our 8 Sutras
 Track that stock till it reaches to up 10% of Low price and after crossing 10% Then buy
that stock. It will possibly reaches more 20 % up.
Eg- if stock's 52 week low is RS 500 then if it moves up onwards next day then we will
track till it reaches RS 550 closing price and if it is moves up then we will buy it and once
it is reach RS 660 we will sold that stock
 Above strategy will apply only bluechip or large cap stock

Effect of Economy on stock market

 If Crude oil prices are increasing then US Dollar price also increase hence Import will
become costly and ultimately our stock market index goes down.
 If Crude oil prices are decreasing then US Dollar price also decrease hence Import will
become cheaper and ultimately our stock market index goes up.