Industry Profile

Origin and development of the industry
Everyone has similar, yet distinct, financial planning needs regarding their families' financial futures. While more wealthy people (think millions of dollars) have greater complexity to their financial affairs (caused largely by our incredibly convoluted U.S. personal tax codes), everyone needs sophisticated financial lifecycle planning. Whether wealthy or not yet wealthy, families need a personalized way to understand how their current financial behaviors could affect their families in the future. However, few people already own enough assets to justify the high cost of a competent and objective advisor. Only those who are already wealthy now can afford to pay directly for highly personalized, professional financial planning assistance. Direct client payments help to avoid the conflicts-of-interest that are inherent and pervasive in the structure of the financial services industry. The financial services and advisory industry is almost exclusively focused on the interests of those who already have substantial financial assets and not on the mass of Americans who were trying to become more secure financially. Using many hundreds of thousands of what the securities industry calls "producer" employees, the brokerage industry sells investment products and services to clients for transactional fees, asset holding charges, and many other more or less visible investment costs. Governed by the Securities and Exchange Act of 1934, as amended, and state laws, the legal standard of client care by these brokers is the "suitability" of an investment to a client. A business that provides investing advice or counsel to an investor in exchange for a fee. Investment advisory services may interact directly with a client — for example, by managing assets — or may provide passive, general advice on which securities or industries are bullish or bearish. Investment advisory services managing a certain amount of money must register with the SEC; the actions of all investment advisory services are governed by the Investment Advisors Act of 1940. Importantly, it is a criminal offense

for investment advisory services to provide false or misleading information, and to sell or buy their own securities to or from a client.

Growth and present status of the industry
The Indian capital markets have witnessed a transformation over the last decade during which various initiatives were taken. Depository and share de-materialization systems have enhanced the efficiency of the transaction cycle. Forward trading mechanism with rolling settlement has brought about transparency. India has a vibrant capital market comprising 23 stock exchanges with over 9000 listed companies. Market capitalization of stocks traded on the Indian bourse touched an all time high of USD 292 billion in April 2004. The independent regulator for the sector, Securities and Exchange Board of India (SEBI), with statutory powers is functioning effectively. . The Mumbai stock exchange being the second largest in the world after the NYSE, continues to be the premier exchange in the country with an increase in market capitalization from USD 40 billion in 1990-91 to over USD 250 billion in 2003. The stock exchange has about 5,600 listed companies and an average daily volume of approximately USD 1 billion. India has one of the lowest transaction costs based on screen based transactions, paperless trading and a T+2 settlements cycle. Many new instruments have been introduced in the markets, including index futures, index options, derivative, options and futures in select stocks. The volumes in derivatives trading have been increasing across the National Stock Exchange and Mumbai Stock Exchange.

Future of the industry
Future of the industry is very bright the world is shrinking down in the digital age the economic collaboration is increasing so the need to manage the wealth surplus is of at most priorities so, the scope of the financial services is increasing with leaps and bounds to present the future of the industry here is a glimpse of job potential and other things. Financial analysts and personal financial advisors held 397,000 jobs in 2006, of which financial analysts held 221,000. Many financial analysts work at the headquarters of large financial institutions, most of which are based in New York City or other major financial centers. More than 2 out of 5 financial analysts worked in the finance and insurance industries, including securities and commodity brokers, banks and credit institutions, and insurance carriers. Others worked throughout private industry and government. Personal financial advisors held 176,000 jobs in 2006. Jobs were spread throughout the country. Much like financial analysts, more than half worked in finance and insurance industries, including securities and commodity brokers, banks, insurance carriers, and financial investment firms. However, about 30 percent of personal financial advisors were self-employed, operating small investment advisory firms, usually in urban area Job Outlook Employment of financial analysts and personal financial advisors is expected to grow much faster than the average for all occupations. Growth will be especially strong for personal financial advisors, which are projected to be among the 10 fastest growing occupations. Despite strong job growth, keen competition will continue for these well paid jobs, especially for new ent

The study has to be conducted within a period of two months.  Study is time bounded.  Entire fundamental analysis is based on figures drawn from financial publications and websites. LIMITATIONS OF THE STUDY This study also has some limitations.  There may be chances of window-dressing effects on the study.  As the same information which are collected through this project will be very much useful to the new investor coming in future period and making good decisions to invest the shares which have better opportunity.NEED FOR THE STUDY Capital market in India is always uncertain. like all other surveys.  Only five securities were taken for the study. So far the investor to earn from the market. Anything can happen in the market. industries and economy as a whole before taking an investment decision. Some of them are as follows.  The data which are used in the study are mostly collected from secondary sources. an analytical mind is necessary. A stock picker carefully purchases securities based on a sense that they are worth more than the market price.  The share prices are very much volatile. An investor who would like to be rational and scientific in his investment activity has to evaluate a lot of information about the past performance and the expected future performance of companies. SCOPE OF THE STUDY  The only certain thing in share market is the uncertainty in the share price. .  Time was a major limitation.

 The present study uses ratios as an important tool of analysis which itself has a number of limitations on its applicability. .  This study is limited to Infosys Company only.

mortgages to real estates development.. Rajiv Ranjan and Saurabh Mittal. Over the years. To help the clients better Indiabulls Securities limited has located their offices in major towns. Indiabulls Securities Ltd is listed on NSE. Attracted more than Rs. Today Indiabulls Securities limited is India’s leading capital markets company with All India Presence and an extensive client base. the National Securities Depository Ltd and Central Depository Services (India) Limited. R R Capital Partners and Infinity Technology Trustee Pvt. the company has grown from strength to strength to become a major player in India's financial services sector. Transatlantic Corporation Ltd. A team of dynamic finance professionals with decades of experience leads them. but also make their clients earn the maximum from their hard-earned money. ISL offer ease. convenience and reliability in all our products ranging from securities trading to customers finance. private equity and institutional investors such as LNM India Internet Ventures Ltd. The Company was promoted by three engineers from IIT Delhi. and placed highly qualified and experienced financial experts to man them. Indiabulls group is leading financial services and Real estate player with a pan India presence. These professionals share a common vision not only to transform the company into a highly professional organization. Farallon Capital Partners. Indiabulls Securities is the first and only brokerage house in India to be assigned the highest rating BQ – 1 by CRISIL. Sameer Gehlaut. Started functioning in the stock market in 2000. Ltd. BSE & Luxembourg stock exchange.700 million as investments from venture capital. .CHAPTER 2 COMPANY PROFILE Security limited is a premier brokerage house in India on the fast growth trackIndiabulls Securities Limited is part of the Indiabulls group of companies... resp.

Subsequently. 1995. and related financial services.services and third party financial products and other services through a variety of channels to retail and . depositary services. to benefit the investors. “Creating a world of smart investors”. With effect from April 1. 1995. The name of the Company was changed to Orbis Securities Private Limited on December 15. under the Companies Act as a private limited company as GPF Securities Private Limited under certificate of incorporation bearing number 55-69631. our Company has also commenced the activity of providing credit facilities to retail customers.The name of the Company was again changed to Indiabulls Securities Limited on February 16. Our Company and our subsidiaries provide brokerage. 2004. 2004.ORIGIN OF THE ORGANIZATION Indiabulls Securities Limited was originally incorporated in India on June 9. Growth and development of the Organization: We have emerged as a diversified financial services company that offers a wide range of financial products and services under the brand “Indiabulls”. The Company was subsequently converted into a public limited company and its name was further changed to Orbis Securities Limited on January 5. debt and derivatives brokerage. Indiabulls Insurance Advisors Pvt. We operate through our three subsidiaries– Indiabulls Securities Limited. Ltd. and Indiabulls Commodities Pvt. 2004 Vision: Indiabulls Securities Limited was born out of a vision to explore the immense investment opportunities in the Indian financial market. 2001 our Company was registered as an NBFC under section 45-IA of RBI Act to carry on the business of NBFC. as our company is a holding company. not accepting public deposits. Ltd. access to third party insurance products from Birla Sunlife Insurance Company and mutual fund products of various asset management companies. The vision of the Indiabulls Securities Limited is to be a Financial Super Market. On March 30. with a presence in equity. It aims to provide all types of financial services to its clients at one place to save them from going from place to place to meet their investment needs. our Company has started investing and providing loans to our subsidiary companies engaged in different activities as mentioned in the above diagram.

Capital 19. the company raised its funds through the issue 50. people who are not on the rolls of the company. 137.69Crores equity. its subsidiary.41 cr ores as compared to Rs.69 2006 2007 Equity Share 2007 2008 Equity Share Share holder . In 2008. our Company and our subsidiaries are able to cross sell many financial products such as insurance and mutual funds.00 Issued Capital 17. This is an increase of more than 80% over the past previous year. generates volumes of Rs 1000020000 cr everyday through commodity futures transactions. ISL.39crores during the previous year. 248.2%. The indirect channel for business is through our network of marketing associates.83 50. ISL has invested heavily in building a strong sales team and as on April 30.83 50. Present status of the Company During 2007-08. With the sales and marketing team.institutional clients and operate nationally in India. the company earned an after tax profit of Rs. Capital Structure in Rupees(crores) From To Class of Shares Auth. Capital structure Indiabulls Securities Ltd. Our Company and our subsidiaries target the retail and the institutional segment of the market through direct and indirect channels. The total revenue also increased by 46. The direct channel for business is through our sales employees who operate out of our 70 offices in 55 cities.69 Paid-up Shares Face Value (No's) (Rs) 17834099 253426989 10 2 Paid-up Capital 17. We are headquartered in New Delhi with a network of 70 offices spread across 55 cities. which is into capital market operations generate a volume of Rs 40000-50000 crore everyday. 2004 it had over 476 relationship managers in its 70 offices spread all over the country.00 100.

00 0.11 68713425 27.18 30620217 31.44 6.00 24.11 0 68713425 0. and Insurance FII's Sub Total Other Investors Private Corporate Bodies NRI's/OCB's/Foreign Others GDR/ADR Directors/Employees Government Others Sub Total General Public GRAND TOTAL 0 87250 68553662 68640912 18280191 39185279 0 0 0 17164686 74630156 41442496 253426989 0.00 30/09/2008 2.31 25.00 0.Indiabulls Securities Ltd.01 0.45 78842986 16.00 27.03 25.05 27.77 18205319 29.00 68713425 27.00 0 6.36 30000 12600 61895898 61938498 17318889 38798087 0.11 68713425 27.31 0.11 0 68713425 0.03 27.00 % No.00 12.00 0 0.00 0.00 0 0.23 14.09 7.46 0 76200 64151842 64228042 21700178 38937489 0.35 41642536 100.00 No.22 100.00 0 0.08 34.43 36037873 100.00 0 0. Of % Holding Shares Holding Shares Holding PROMOTER'S HOLDING 0 0.83 15. Inst.00 0.00 0 0.00 0 0.11 0 68713425 0. : Share Holding Share Holding Pattern as on : FaceValue Share Holder Foreign Promoters Indian Promoters Person Acting in Concert Sub Total 31/03/2009 2.21 15.00 0.56 15.00 27.34 8.11 NON PROMOTER'S HOLDING Institutional Investors Mutual Funds and UTI Banks Fin.00 0 7. Of % No.00 253426989 Functional Departments of the Organization: . Of Shares 31/12/2008 2.00 253426989 0.11 86737193 16.00 27.42 24.

Our Company may be unable to use the proceeds of the Issue for the intended purpose. SALES DEVELOPMENT Responsible for making sure that customer is happy . unforeseen losses or potential legal liabilities. alternatives include matrix arrangements or business unit teams. marketing.A company organized with a functional structure groups people together into functional departments such as purchasing. Outstation business development. Our Company does not have a proven track record in handling businesses that it may enter through the acquisition route or otherwise and hence the success of new businesses in the overall growth strategy of our Company cannot be predicted. subscriptions. unplanned capital expenditure requirements. Book fairs and Seminar etc. due to unplanned acquisitions. sales. Functional structures are perhaps the most common organizational model used by companies. advertising. The failure to use the proceeds for the intended purposes will be harmful to us and would hamper our growth potential in the existing businesses. production. accounts.. These departments would normally have functional heads that may be called managers or directors depending on whether the function is represented at board level.

Pay bills on behalf of Organization.• • • Responsible for building a positive relationship with customer. HUMAN RESOURCE DEPARTMENT • • Recruitment and training employees. Communicate with customer all the time Process and monitor customer order PURCHASE DEPARTMENT Responsible for doing all the shopping of business • Establish and maintain an excellent Supplier relationship. Advertisement Department Bring a product or service to tension and attention of potential and current customers. FINANCE DEPARTMENT • • • Responsible for managing all the finance of the company. Works closely with HR department so the wages can be paid to employees. 2.5 Products and Services of the organization: • • • • • • • Equity and Derivatives Depository Services Margin Trading Equity Analysis IPO Financing Loan Against Shares Trading Platforms . Aims at profits as the advertising department generates resources for the company or institution. Calculate wages. • Manages stock.

They are providing through indiabulls • • • • Competitors: Major competitors for India bulls Securities Limited Include: • • • ICICI Direct Share khan Kotak Securities Limited Equity Research Commodities Internet Trading NRI Online Trading .. Indiabulls Securities Limited is today a power to reckon with in the financial services industry through the following Indiabulls Securities Limited of Companies: • • • • • Indiabulls Securities Limited Indiabulls financial Services Indiabulls real Estate Indiabulls Retail Services Indiabulls Power (2007 Sep) Indiabulls Securities Limited Indiabulls Securities Limited is a big player financial market that has put the brokerage business on fast growth track over the years.Power Indiabulls (PIB) .Browser Based Group of Companies: From a modest beginning a decade back.

Indiabulls Securities possesses state of the art trading platform. Indiabulls Financial is also part of CLSA’s model portfolio of 30 Best Companies in Asia. best broking practices and is the pioneer in trading product innovations. indiabulls is providing: • • • Commercial Residential Sezs .they are mentioning under below: • • • • • • • Business loan Home loan Loan against Property Commercial Credit Loan Commercial Vehicle Loan Loan against share Insurance distribution Indiabulls Real Estate: Indiabulls group is leading financial services and Real estate player with a pan India presence is India’s leading capital Markets Company with All-India Presence and an extensive client base. the insurance arm of Society General (SocGen) for its upcoming life insurance venture Indiabulls Securities Limited is now providing different level of financial service and loans etc.• • India infoline Limited Way 2 wealth Securities Limited Indiabulls financial Services: Indiabulls Financial Services Ltd is amongst 68 companies constituting MSCI Morgan Stanley India Index. Indiabulls Financial Services signed a joint venture agreement with Sogecap.

Aishwarya Katoch Mr.Indiabulls Retail Services: • • • Organized Retails Indiabulls Mega store Indiabulls Marts Indiabulls Power: • • • • Profile of Power Business Thermal Power Project Hydrogen Power Project Other Project Organization structure and Organization chart: Board of directors in Indiabulls Securities Limited: Sl.Labh Singh Sitara Mr.Saurabh K Mittal Mr.Prem Prakash Mirdha Mr.Divyesh B Shah Mrs.Rajiv Rattan Mr.Ashok Sharma Mr.no 1 2 3 4 5 6 7 8 Name Mr.Brig.Karan Singh Designation Director Director Director Director Director Director Director Director .

•Technology transforming desktop into NEAT like terminal for Internet trading. •One Screen for both Cash and Derivatives Trading. telephones and Internet account. Some of the unique feature are: •Trading via branch network.Sales Hierarchy & Branch Structure Securities Limited SENIOR VICE PRESIDENT BRANCH MANAGER/ Support System Sales Functions Back office Executive Local Compliance officer RM/SRM Dealer ARM . •Equity Research Department. which studies the market and provides information. data and analysis via Indiabulls. •Up-to-date news. •Integrated Trading and Depositary Account.com . •Customized products for lending against shares. •Facility to Buy Today & Sell Tomorrow itself .

both online and offline •Induction of new employees through an extensive computer based training module.1%) •Equity analysis report to support the investment decision of its clients •Trading via branch network. •It does not keep any condition as to collect minimum amount of brokerage from its clients •Most competitive BROKERAGE and DP charges (on delivery 0. Banking facility). •Commodities are not traded online. •It does not provide with the indices of major world markets. telephones and internet account i. •It should provide tips via SMS. Indiabulls does not provide a complete catalogue of financial services (e. •Real time online transfer fund and exposure updating facility with HDFC. some of the Relationship managers crack under pressure and thus leave the organization . •There should be a separate set of staff working in fields and trading on behalf of their clients: •Position to answer the questions of their clients relating to the current market position as they are on fields.g.•Customized Insurance services. ADR prices of Indian scripts. CITIBANK. •No custodial charge. •Unlike some of its competitors like ICICI and Kotak. •Diverse Branch Network provides ample opportunities to penetrate deep into the existing & untapped market. SWOT ANALYSIS OF INDIABULLS Strengths of Indiabulls – What makes Indiabulls better than it’s competitors? •Online trading platform. ICICI Weakness of Indiabulls: •It should have its own mutual funds as Indiabulls is providing advises in mutual fund.5% and on intraday 0. •Indiabulls offers its clients a pool of financial services and products: •No annual maintenance charges.e. •Due to the continuous need to meet the targets.

•Industry competitors vying for the same target segment. ICICI Direct. •Government Regulations. •Lack of co-operation from the employees of the Company because of their busy schedule. •Lack of data because of the Company certain constraint of data sharing. and Private Brokers are major threats to Indiabulls. fixed deposits etc. •Mostly people believe in saving a\c. they don’t want bear any risk. •Banks with demat facility jockeying for position.OPPURTUNITIES TO INDIABULLS •Market expansion i. opening branches at untapped areas •Indiabulls is registered with Luxembourg stock exchange and so can target other stock exchanges. LIMITATION •Most of people don’t know about the Share Market. •Indiabulls has tied up with other third party companies to sell their products. Nobody is having so much time to spend on people STUDY OF SELECTED RESEARCH . •Time constraint play important role. •The Capital market in the last few years has turned out to be one of the favorable avenues for the retail investors •Scope of online trading on BSE.e. Kotak. They want safety and security of their money. •Local brokers capable of charging lower brokerage. •ATM facility should be provided for easy withdrawals. •To understand the concept of Share Market is a very tough job. Due to the high client base of Indiabulls THREATS TO INDIABULLS Companies like Share khan. •Changes in SEBI guidelines & other tax implications.

. resulted in the increasing concentration in research and development activities of the IT companies. At this juncture.  To find out the earnings performance of companies.  To find out the most profitable company in IT industry. The new patent regime. it is worthwhile to analyze the stocks of IT companies.PROBLEM Statement of research problem: I have selected IT industry for this study because the IT industry in India has shown a rapid growth. This in turn has increased the market potential of these companies. It contributes to the growth and development of the economy. Statement of research objectives: Primary objective:  To compare the intrinsic value of the scrip with market value and recommend buy or sell option Secondary objectives:  To study the growth rate of Infosys company.  To find out the financial performance of major players in IT industry. since 2005.

Sources of Data: Company and BSE website Financial publications Annual Reports Methodology: To achieve the objectives of the study fundamental analysis and Technical analysis has been adopted the accounting figures collected from the company’s financial statements. company management and company finances and so on.RESAERCH METHODOLOGY: Methodology implies the science of the method of study. Fundamental analysis covers various financial and non financial aspects such as evaluation of economy and industry scenario. the intrinsic value of each scrip was found out. From the results drawn from the ratio analysis. Methodology is the concept of method used in carrying out the study. Analysis of financial statements included in-depth ratio analysis covering almost all aspects of financial health of any company. For the calculations of ratios MS Excel was used. From the literature survey Infosys Company in the IT industry is selected based on the market capitalization. Information regarding the industry and the various forces within it may have an impact on the companies’ performance. Various financial publications and websites were referred for this purpose. Data collection . The basic of any security analysis is that to find out whether the company is based on strong fundamentals. A detailed literature survey was done in order to identify the industries and their respective shares which brought the entire IT industry into limelight. The data in this regard were collected mainly from financial statements of the company.

Data analysis The fundamental analysis and Technical analysis is used to study the stock price movements. Ratio analysis is used to find out the profitability of the companies.Current Assets/Current Liabilities Leverage Ratio:-Long term debt/shareholder’s equity Proprietary Ratio:-shareholder’s equity/Total assets Profitability Ratios:• Profitability related to sales: Operating profit ratio=EBIT/Sales Net Profit Ratio=EAT/Sales Administrative expense ratio=administrative expenses/sales Selling expense ratio=selling expenses/sales Operating expenses ratio=(administrative expenses +selling expenses)/sales • Profitability related to investment: Return on assets=EAT/total assets Return on capital employed=EBIT/total capital employed Return on equity=EAT/shareholder’s equity . five years audited data of company is analyzed. Tools used: Liquidity Ratios: • • • Current Ratio:.the audit financial statements of the companies are the main source of data.The study is based on the secondary data .

• Profitability related to equity shares: EPS=net profit available to equity shareholders/no of equity shares Earning yield=EPS/market price per share Dividend yield=DPS/market price per share Dividend payout ratio=DPS/EPS P/E Ratio=Market price per ratio/EPS Overall profitability: Return on net worth=EAT/total assets Activity Ratio:Current assets turnover=sales/current assets Fixed assets turn over=sales/fixed assets Total assets turn over=sales/ total assets Intrinsic Value Calculation: Dividend payout ratio=DPS/EPS Average DPOR for years=DPOR for 5 years/5 Average retention ratio=1-average DPOR Average return on equity=return on equity for 5 years/5 FUNDAMENTAL ANALYSIS .

The investor can obtain this information through fundamental analysis. These are primarily determined by the performance of the industry to which the company belongs and the general economic and sociopolitical scenario of the country. industry and the economy as a whole before taking the investment decision. Thus dividends and price changes constitute the return from investing in shares. Industry analysis and Company analysis. The fundamental school of thought appraised the intrinsic value of shares through:  Economic Analysis  Industry Analysis  Company Analysis ECONOMIC ANALYSIS . an investor would be interested to know the dividend to be paid on the share in the future and also the future price of shares. The intrinsic value of equity shares depends on a multitude of factors. industrial environment and the factors related to the company. growth rate and risk exposure have a direct bearing on the prices of shares. The primary motive of buying a share is to sell it subsequently at a higher price.INTRODUCTION Fundamental analysis is the study of economic factors. The fundamental analysis appraises the intrinsic value of shares through Economic analysis. The earnings of the company. . These values can only be estimated and not predicted with certainty. Consequently. 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 company. dividends are also expected. On many cases.

9 per cent. which had declined significantly in . manufacturing growth has more than doubled from 3. over the span of the year. who had taken a calculated risk in providing substantial fiscal expansion to counter the negative fallout of the global slowdown. India’s fiscal deficit increased from the end of 2007-08. As per the advance estimates of GDP for 2009-10. there has been a recovery in the growth rate of gross fixed capital formation. as the full impact of the economic slowdown in the developed world worked through the system. The growth rate of the gross domestic product (GDP) in 2008-09 was 6. the industry can also be expected to show rapid growth and vice versa.2 and 8. with growth in the last two quarters hovering around 6 per cent. Inevitably. There was a significant slowdown in the growth rate in the second half of 2008-09. it foreshadows renewed momentum in the manufacturing sector. in terms of certain fundamentals. Second. which was the consequence of sub-normal monsoons. which justify optimism for the Indian economy in the medium to long term.2 per cent in 2008-09 to 8. stock prices are high reflecting the prosperous outlook. Yet. When the level of economic activity is low. There was apprehension that this trend would persist for some time. it has come about despite a decline of 0. not only in terms of overall growth figures but. reaching 6. Third. for the better part of 200910. It was also a year of reckoning for the policymakers. The study of these economic variables would give an idea about future corporate earnings and payment of dividends and interest to investors.This recovery is impressive for at least three reasons. The fiscal year 2009-10 began as a difficult one. the economy is expected to grow at 7. The continued recession in the developed world. stock prices are low. following the financial crisis that began in the industrialized nations in 2007 and spread to the real economy across the world. with the industrial and the servicesectors growing at 8. The real turnaround came in the second quarter of 2009-10 when the economy grew by 7. meant a sluggish export recovery and a slowdown in financial flows into the economy. BE) of GDP in 2009-10.2 percent in 2009-10. released by the Central Statistical Organisation(CSO).9 per cent in 2009-10. the economy posted a remarkable recovery.7 per cent respectively.8 per cent (budget estimate.First. Indeed.7 per cent. and when the level of economic activity is high. A delayed and severely subnormal monsoon added to the overall uncertainty.The level of economic activity has got an impact on the investment in many ways. more importantly. If the economy grows rapidly.2 percent in agricultural output. which had seen continuous decline in the growth rate for almost eight quarters since 2007-08.

which has been sustained in December 2009. a wide range of modern industries. as part of the policy response to the global slowdown.based nature of the recovery creates scope for a gradual rollback. There has also been a turnaround in merchandise export growth in November 2009. after a decline nearly twelve continuous months. reducing poverty by about 10 percentage points. While the growth rates of private and Government final consumption expenditure have dipped in private consumption demand. handicrafts.37 percent reaching an historical high of 10.2008-09as per the revised National Accounts Statistics (NAS). Country India Interest Rate 5. and a multitude of services.3 The fast-paced recovery of the economy underscores the effectiveness of the policy response of the Government in the wake of the financial crisis.50 percent in December of 2004. 1.00% Current account -13 Exchange Rate 45. there has been a pick-up in the growth of private investment demand. India's average quarterly GDP Growth was 8. This page includes: India GDP Growth Rate chart.10 percent in September of 2006 and a record low of 5. the broad. India's diverse economy encompasses traditional village farming.80% Inflation Rate 11.25% Jobless Rate 8. accounting for more than half of India's output with less than one third of its labor force. of some of the measures undertaken over the last fifteen to eighteen months.00% Growth Rate 8. Moreover.80 percent in the last reported quarter. modern agriculture.0150 . historical data and news. From 2004 until 2010. Services are the major source of economic growth. The economy has posted an average growth rate of more than 7% in the decade since 1997. so as to put the economy back on to the growth path of 9 per cent per annum. The Gross Domestic Product (GDP) in India expanded at an annual rate of 8. in due course.

60 5.7% according to 2008 estimates. It is estimated that India's GDP will grow by 6. The agriculture sector contributed 17. India's GDP is $1.10 India GDP Composition Sector Wise The Gross Domestic Product or GDP is the indicator of the performance of an economy.50 Dec 6.209 trillion and this is slated to make improvement in the coming times.80 8.2%.80 Sep 8.Year 2010 2009 2008 March 8.1% while the service sector had a contribution of 52.50 6.5% in the year 2009. In 2008 the country's GDP was 9%.50 June 8. A look at the India GDP composition sector wise throws up some interesting figures. the slowdown that has been witnessed this year in the estimates is largely due to the slowdown witnessed by the agriculture and the industrial sectors. industry contributed 29.00 7. According to the estimates of 2008. Various sectors falling under the India GDP composition includes food processing.transportation .60 7. Sectors contributing to India's GDP India is a vast country.80 6. so the sectors contributing to the country's GDP is also big in numbers.

The service sector accounts for employing more than 25% while the industrial sector accounts for more than 10%. mining.209 trillion (2008 Estimate) GDP GDP GDP Growth:6. software. machinery. chemicals. steel. cement and many others. provision of agriculture subsidies and credits.4% in 2006. The agricultural sector contributed around 18. Agriculture is the pre dominant occupation in India.2% Industry:29. petroleum. .09 trillion in 2007 and this makes the Indian economy the twelfth biggest in the whole world. the Growth Rate of Agriculture in India GDP in the share of the country's GDP remains the biggest economic sector in the country.7% Inflation: 7. This is due to the fact that the country is mainly based on the agriculture sector and employs around 60% of the total workforce in India.1% Services: 53. India's GDP Statistics GDP: $1. The Growth Rate of the Agriculture Sector in India GDP grew after independence for the government of India placed special emphasis on the sector in its five-year plans. agriculture. The growth rate of India GDP is 9. textiles.2007. India GDP means the total value of all the services and goods that are produced within the territory of the nation within the specified time period. The country has the GDP of around US$ 1. Further the Green revolution took place in India and this gave a major boost to the agricultural sector for irrigation facilities.6% to India GDP in 2005 Agriculture Growth Rate in India GDP in spite of its decline in the share of the country's GDP plays a very important role in the all round economic and social development of the country. and improved technology.equipment. employing more than 50% of the population.5 million (2008 Estimate) Agriculture Growth Rate in India GDP had been growing earlier but in the last few years it is Constantly declining. The agricultural sector has always been an important contributor to the India GDP.8% (2008 Estimate) Labor force: 523. This in turn helped to increase the Agriculture Growth Rate in India GDP. Still.7%(2009) per by capita: $1016 sector(2008Estimate): Agriculture:17.

As a result of this the farmers are dependent on rainfall. The Indian government must take steps to boost the agricultural sector for this in its turn will lead to the growth of Agriculture Growth Rate in India GDP. which is however very unpredictable. Also the Growth Rate of the Agricultural Sector in India GDP has declined due to the fact that the sector has not adopted modern technology and agricultural practices.2% in 2002.2004.2007.The agricultural yield increased in India after independence but in the last few years it has decreased. The Growth Rate of the Services Sector in India GDP has risen due to several reasons and it has also given a major boost to the Indian economy. The Indian economy is the second fastest major growing economy in the whole world with the growing rate of the GDP at 9. Agriculture Growth Rate in India GDP has also decreased due to the fact that the sector has insufficient irrigation facilities. . The total production Agriculture Growth Rate in India GDP declined by 5. insufficient finance. This in its turn has declined the Growth Rate of the Agricultural Sector in India GDP.7% each year between 2001.2002 and 2003. The Growth Rate of the Agriculture Sector in India GDP grew at the rate of 1. The Services Sector contributes the most to the Indian GDP. Agriculture Growth Rate in India GDP has slowed down for the production in this sector has reduced over the years. This shows that Agriculture Growth Rate in India GDP has grown very slowly in the last few years. The economy of India is the twelfth biggest in the world for it has the GDP of US$ 1. The agricultural sector has had low production due to a number of factors such as illiteracy. and inadequate marketing of agricultural products.4% in 2006.2003. Indian Economy India gross domestic product (GDP) means the total value of all the services and goods that are manufactured within the territory of the nation during the specified period of time. Further the reasons for the decline in Agriculture Growth Rate in India GDP are that in the sector the average size of the farms is very small which in turn has resulted in low productivity. Services Services Sector Growth Rate in India GDP has been very rapid in the last few years. Agriculture Growth Rate in India GDP has declined over the years.09 trillion in 2007.

and real estate. The contribution of the Services Sector in India GDP has increased a lot in the last few years. insurance. restaurant. The Growth Rate of the Infrastructure Sector in India GDP has grown due to several reasons and this in its turn has given a major boost to the country's economy. This has made sure that the services that are available in the country are of the best quality. The Sector of Services in India has the biggest share in the country's GDP for it accounts for around 53. social and personal services. This shows the Reasons for the growth of the Services Sector contribution to the India GDP. trade.8% in 2005. The foreign companies seeing this have started outsourcing their work to India specially in the area of business services which includes business process outsourcing and information technology services. The contribution of the Services Sector has increased very rapidly in the India GDP for many foreign consumers have shown interest in the country's service exports. The various sectors under the Services Sector in India are construction. Further the Indian Services Sector's share in the country's GDP has increased from 43. community. and educated workers in the country. The Indian government must take steps in order to ensure that Services Sector Growth Rate in India GDP continues to rise.1999. For this will ensure the growth and prosperity of the country's economy infrastructure Infrastructure Sector Growth Rate in India GDP has been on the rise in the last few years. The Services Sector in India must be given boost Services Sector Growth Rate in India GDP registered a significant growth over the past few years. The Services Sector contributed only 15% to the Indian GDP in 1950. . transport. Services Sector contribution to the Indian Economy The Services Sector contributes the most to the Indian GDP.Services Sector in India India ranks fifteenth in the services output and it provides employment to around 23% of the total workforce in the country. This has given a major boost to the Services Sector in India.16% in 1998. which in its turn has made the sector contribute more to the India GDP.695 in 1990. hotels. This is due to the fact that India has a large pool of highly skilled. business services.1991 to around 51. low cost. communication and storage. financing.

The government of India must continue to take steps to improve the Infrastructure Sector in the country. which is improving the main roads that connect the four cities of Chennai. and transportation prevented the country from sustaining very high rates of growth. and Kolkata. The rise in the service sector's share in GDP marks a structural shift in the Indian . This was done in order to boost the Infrastructure Sector in the country. The contribution of the Infrastructure Sector in the India GDP Infrastructure Sector Growth Rate in India GDP came to 3. power.6%. telecommunications. The Growth Rate of the Infrastructure Sector in India GDP increased after the Indian government opened the sector to 100% foreign direct investment (FDI).5% in 1996.5% between 2006 and 2010. India's less spending on real estate.1997 and the next year. The economy of India is the second major growing economy in the whole world for it has the GDP growing at the rate of 9. The Indian economy is the twelfth biggest in the whole world for it has the GDP of US$ 1. Highlights The service sector now accounts for more than half of India'sGDP: 51. this figure was 4. Mumbai.Economy of India India gross domestic product (GDP) means the total value of all the services and goods that are manufactured within the borders of the country within the specified period of time.2007. For this in its turn will help to boost the Indian economy in future. This sector has gained at the expense of both the agricultural and industrial sectors through the 1990s. The result of opening the sector to the private sector has been that Infrastructure Sector Growth Rate in India GDP has increased at the rate of 9%. The biggest ongoing project in the Infrastructure Sector in India is the Golden Quadrilateral. Delhi. construction. The Infrastructure Sector in India The Infrastructure Sector in India was after independence completely in the hands of the public sector and this hampered the growth of this sector. It is estimated that the Growth Rate of the Infrastructure Sector in India GDP will grow at the rate of 8.16 percent in 1998-99. The amount that India was spending on the Infrastructure Sector was 6% of GDP or US$ 31 billion in 2002. The Government of India must boost the Infrastructure Sector Infrastructure Sector Growth Rate in India GDP thus has increased over the last few years due to the efforts that have been made by the Indian government.4% in 2006.09 trillion in 2007.

Share of the service sector in India's GDP (in Rs. The fact that the service sector now accounts for more than half the GDP probably marks a watershed in the evolution of the Indian economy. crore). it is equally true that the industrial sector too has grown.69 per cent in 1990-91 to 51.93 per cent to 26. The share of construction has remained nearly the same during the period while that of financing.22 per cent to 11.2 per cent in 1997-98 to 5. the industrial and service sectors contribute a major share in GDP while agriculture accounts for a relatively lower share). and grown quite impressively through the 1990s (except in 1998-99). the service sector has grown at a higher rate than industry which too has grown more or less in tandem. Figures for 1994-95 onwards are on a changed base (1993-94=100).38 per cent to 22.68 per cent in 1998-99. insurance. so they show huge increases compared to the preceding period. the service sector's contribution in GDP has sharply risen and that of industry has fallen (as shown above). otherwise the service sector grown will not be sustainable. Within the services sector. The agricultural sector's share has fallen from 30. But. Three times between 1993-94 and 1998-99. industry surpassed the growth rate of GDP.economy and takes it closer to the fundamentals of a developed economy (in the developed economies. economic growth can be distorted.52 per cent in 1990-91 to 15. The rise of the service sector therefore does not distort the economy. Thus.61 per cent in the years under reference.26 per cent to 7. real estate and business services has risen from 10. the share of trade. . Some economists caution that if the service sector bypasses the industrial sector. storage and communications has grown from 5.16 per cent in 1998-99.83 per cent in the respective years. The service sector's share has grown from 43. It is true that. the industrial sector's share in GDP has declined from 25. according to a Nasscom-Deloitte study.01 per cent in 1990-91 and 1998-99 respectively. They say that service sector growth must be supported by proportionate growth of the industrial sector.2 per cent in 2006-07.44 per cent. The share of transport. in India. hotels and restaurants increased from 12. In contrast. Figures in brackets indicate percentage share of different sectors and subsectors. It sector The information technology (IT) industry has increased its contribution to the country's GDP from 1.

5 per cent of the gross domestic product (GDP) and 4. The reversal in major fiscal deficit indicators in 2008-09 and 2009-10 constitutes a conscious policy-driven stimulus to counter the demand slowdown.The report. following the Fiscal Responsibility Budget Management Act (FRBMA) mandate. such expansion could only be a shortterm measure and the Medium Term Fiscal Policy Statement presented along with the Budget for 2009. which resulted in a shoring up of the overall economic growth rate. Fiscal situation in India The fiscal space generated in the 2004-05 to 2007-08 period. further says that export earnings in 2007-08 will hit $40 billion. the macro economy-wide impact of the crisis underscored the importance of using national accounts data in tandem in such assessments. titled Indian IT Industry: Impacting the Economy and Society. while bringing forth the contribution of the IT sector.3 The Budget for 2009-10.3. Given the relative levels of shares of private final consumption expenditure and government consumption expenditure. In its Report. with fiscal deficit declining to 5. As the impact of the crisis continued through 2009-10. As per the national accounts data. The resumption of the path of fiscal prudence would complement the recovery process in the near term and lay the foundation for reviving the growth momentum in the long term. points out that the industry has been the trigger for many 'firsts' and has contributed not only to unleashing the hitherto untapped entrepreneurial potential of the middle class but also taking Indian excellence to the global market. . While traditionally the assessment of public finances was confined to analysis of fiscal indicators. albeit a gradual one. mitigated the knock on effects of global financial and economic crisis in 2008-09 through facilitation of an expansionary fiscal stance to boost aggregate demand. the expansionary fiscal stance was continued in the Budget for 2009-10. The report. the Thirteenth Finance Commission has traced the path of fiscal consolidation for the Centre and States.0 per cent of the GDP in 2010-11 and 2011-12 respectively. in 2008-09. Meanwhile.10 favoured a resumption of the fiscal consolidation process. growing at a CAGR of 26 per cent in the last decade. a growth of 36 per cent. direct employment is expected to be 2 million in 2007-08. the deceleration in growth in private final consumption expenditure was partly made up for by the growth in Government consumption expenditure (over 2007-08).

During 2009-10. 2009).2010 and to 5. Though the policy during 2009-10 continued to broadly underscore the accommodative stance.0 per cent of NDTL to a level of 5. were also withdrawn in the Second Quarter Review of Monetary Policy 2009.10 (October 27. 2010) the RBI announced that the CRR was being raised from 5. reverse repo rate.00. in the Third Quarter Review (January 29. The bulk of the expansion was also reflected in the rise in revenue deficit in 2008-09 and BE (budget estimate) 2009-10. In addition.4 per cent in 200809 as compared to 30. as against a decline of 3.With growth in nominal GDP at only 10.6 per cent. In absolute terms. as a proportion of the GDP.996 crore.75 per cent effective the fortnight beginning February 27 2010. the SLR was restored to its earlier level of 25 percent of NDTL with effect from November 7. 2009. The slew of measures introduced after September 2008 to enhance the liquidity in the system included a series of downward revisions in policy rates covering repo rate.7 per cent during the . this implied a growth of 21. led the RBI to maintain an accommodative monetary policy stance since September 2008 which continued during 2009-10. The higher estimated levels of fiscal deficit in 2009-10 owe largely to the fuller impact of the tax cuts announced as a part of the fiscal stimulus packages late in the second half of fiscal 2008-09.8 per cent (up to January 15.5 per cent in the level of fiscal deficit over2008-09 (provisional). and whose utilization was lower than expected. the growth rates in reserve money (M0) and narrow money (M1) have been higher as compared to the preceding year while broad money (M3) growth has been lower (Table 4.5 percent based on Advanced Estimates of GDP 2004-05 series). Keeping in view the comfortable liquidity position. equivalent of 6. The moderation in growth of broad money is largely on account of the deceleration in growth of bank credit to the commercial sector.13).8 per cent of the GDP (6. During 2009-10. M0 increased by 3. fiscal deficit was higher. These measures had a salutary effect on the overall liquidity situation. on financial-year basis. Reserve money grew by 6. The reversal of the trend of fiscal consolidation was thus marked in 2008-09 and BE 2009-10 Monetary and liquidity conditions The liquidity constraint that had emerged consequent to the global financial crisis. 2010). the monetary authority reviewed the emerging economic situation from time to time. A few sector-specific measures provided earlier by way of accommodative windows. besides providing specified windows for accommodating distressed sectors.9 per cent during 2007-08. CRR and SLR. envisaged a fiscal deficit of Rs 4.50 per cent effective the fortnight beginning February 13.continuing with the policy of fiscal expansion to boost aggregate demand.

2010 as against a decline of 13.19. On year-on-year basis. growth in demand deposits accelerated to 19. During 2009-10.6 percent during the corresponding period of the previous year.1 per cent during the period up to January 15. 2010. On year-on-year basis.increase in the net RBI credit to the Central Government. This was mainly on account of unwinding of Market Stabilization Scheme (MSS) balances and open market operations of the Reserve Bank.638 crore during the financial year (up to January 15. During the same period.3 per cent over end-March 2009. namely demand deposits with banks. On a year-on-year basis. was Rs1. M1 growth accelerated to 18.9 per cent during the corresponding period of the previous year. 2010) as against a decline of 1. During the current financial year (2009-10). 2010.4 per cent during 200708.4 per cent during end March-January 15. 2010. Narrow Money (M1) M1 growth decelerated in the second half of 2008-09 and staged a recovery in 2009-10.8 per cent during the corresponding period of . as against an increase of 12.7 percent increase in the previous year Net RBI credit to the Central Government increased by Rs 29. as on January 15. It increased by 8. as on January 15.3 per cent as compared with 17. 2010. M1 increased by 7. as on January 15.2 per cent as compared to 8. As on January 15.6 percent a year ago the components of narrow money are currency with the public and deposit money of the public.8 per cent on a financial-year basis (up to January 15. The main element of the other components. 2010. 2010.6 per cent during 2008-09. the NFA declined by 0.184 crore during the corresponding period a year ago. 2010). the NFA expanded by 4. currency with the public expanded by 12. 2010. up to January 15.4 per cent in 2008-09 as compared to an expansion of 19. the growth of currency with the public was marginally higher at 17.8 per cent as compared with a decline of 0. the growth in M3 was 10. as against a decline of 0.27. witnessed a modest increase of 3.1 per cent during the corresponding period of the previous year.2 per cent during the corresponding period of the preceding year.2 per cent on the corresponding date a year ago. as on January 15.895 crore as against an increase of Rs1. On financial-year basis.1 per cent as against a 9. offset by increase in the cash balances of the Central Government and reverse repo operations.8 per cent a year earlier Broad money (M3) increased by 18. On year-on-year basis .corresponding period of the preceding year Net foreign assets (NFA) of the RBI and net domestic assets (NDA) are the two main drivers of reserve money.8 per cent as compared to 12.

On year-on-year basis. . The increase in Government’s borrowing programme to finance the expansionary fiscal response to the economic slowdown was the underlying reason. which had been decelerating since October 2008. 2010. However. Within aggregate deposits. In end-March 2009. time deposits registered a growth (year-on-year) of 16. there has been gradual deceleration in the growth of time deposits.1 percent on the corresponding date of the previous year. Money multiplier During 2008-09. the increasing trend in the money multiplier continued.3 in end-March 2008. the major part of the government borrowing was completed in the first half of the year. Among the sources of M3.5 per cent as on January 15. the ratio of M3 to M0 (money multiplier) showed an increase. As on January 15. This owes to the fact that being front loaded. In 2009-10. the money multiplier was 5.8 as compared to 4. this ratio was higher at 4. The Reserve Bank continued its active policy of assuring liquidity during 2009-10 through Open Market Operations (OMO).the previous year. M3 grew by 16. Accordingly. a trend which has persisted since the third quarter of 2008-09. 2010. The growth in M3 was primarily reflected inthe expansion in aggregate deposits during this period. 2010.1 percent on the corresponding date of the previous year. has shown a revival since November 2009. demand deposits expanded by 19. the rate of expansion of M0 was lower than that of M3.4The monetary easing in the aftermath of the global financial crisis constituted the main theme of liquidity management during financial year 2009-10 with periodic fluctuations in cash balances of the Central Government providing temporary variations.8 per cent a year ago. bank credit to the commercial sector. with reserve money registering a lower growth than broad money supply. as compared to 23. the banking system’s credit to the Government was the major driver of growth in broad money. Liquidity Adjustment Facility (LAF) and also unwinding (including desequestering) of balances under the Market Stabilization Scheme (MSS) to maintain appropriate liquidity in the system. During 2009-10.0 per cent as on January 15. in contrast to the shift from demand to time deposits during the second half of 2008-09. with softening of interest rates. as compared to a decline of 0. On the other hand. M3 growth has shown signs of deceleration after September 2009.8 percent (year-on-year) as on January 15. 2010. as compared to 19. During the current financial year.

a daily facility hitherto.00. it is . notwithstanding advance tax collections around the middle of the month. Though the current spectre of double-digit inflation in food articles is ascribable to supply-side constraints.50. the upswing noticed in the first quarter of 2008-09.000 crore . As regards food inflation.During the year 2009-10. The subsequent global economic meltdown starting September 2008 reversed the trend and WPI inflation slipped into negative territory during June to August 2009. involves controlling the demand situation as well as reining in inflationary expectations through various monetary measures. 2009 to 4.215 crore on September 4.146 crore in April. the decline in MSS balances and de-sequestering of around Rs 28. liquidity was also facilitated through OMOs purchased aggregating Rs 57. The average weekly outstanding on account of the MSS reflected the situation. net LAF absorption declined by end December mainly on account of advance tax outflows. However.25 per cent respectively.68. 2009. This continued through July. was converted to a weekly facility effective April 27. the RBI had reduced the LAF repo and reverse repo rates by 25 basis points effective April 21.20. From a level of Rs 75.773 crore by November 2009.000 crore provided liquidity of around Rs 81. primarily due to the rise in global commodity and fuel prices. Liquidity conditions continued to remain in surplus mode in October and November 2009 with average absorption under the LAF being around Rs1. The first half of the financial year 2008-09 was marked by high wholesale price index (WPI)-based inflation. 2009. continued during 2009-10 due to unfavourable south-west monsoon. the 14-day term repo facility. In its Annual Policy Statement 2009-10. The average daily net absorption under the LAF continued to remain over Rs1. Additionally. On the supply side it would encompass various administrative and fiscal measures. 2009 it steadily declined to around Rs 18. In recognition of the easing liquidity conditions.000 crore during June 2009.August 2009 and the LAF absorption under reverse repo reached a peak of Rs1. liquidity conditions remained comfortable during 2009-10. Inflation management therefore. the ceiling for the MSS which was Rs 2. This was due to the decline in commodity prices globally and the base effect. Price situation The movements in the rate of inflation reflect changes in demand and supply conditions in the economy. the worst since 1972.000 crore.000 crore in July 2009.000 crore since November 2007 was scaled down to Rs 50.000 crore Consistent with the changed tempo of forex inflows.As a result.75 per cent and 3.

year. transportation.8 per cent. However. The subsequent decline in WPI inflation in the second half of 2008-09 was due to falling international fuel and commodity prices.54 per cent in the period April to December 2009. The RBI has. Apprehensions of shortages in agricultural production due to a deficient southwest monsoon this year are mainly responsible for\increasing inflation. namely(a) Services–travel. initiated calibrated changes in rates to mop up the prevalent excess liquidity in the system through the second and third quarter reviews wherein increases in statutory liquidity ratio (SLR) and cash reserve ratio (CRR) respectively were announced.77 per cent. however. yearon. measured in terms of the wholesale price index (WPI) exhibited significant volatility during financial year 2008-09 and varied from 1. and moved to negative zone from July to August 2009.20 per cent in March 2009 to 12. financial. both primary and manufactured. and nonfood agricultural items.necessary to ensure that the monetary policy stance does not lead to pressure on prices. construction.56 per cent during fiscal 2008-09 increased to 13. insurance.82 per cent in August 2008. 2009 onwards WPI inflation has been rising at a very fast clip largely because of increase in the prices of food items. Monthly changes in headline inflation. . it appears to have reached its peak in December 2009 and is expected to moderate here from and also stabilize overall WPI on account of the likely impact of several measures taken by the Government to contain food price inflation Balance of Payments Under current account of the BoP. therefore. The volatility continues during the current financial year (2009-10). WPI inflation. Suitable fiscal and administrative measures are also being taken by the Government to contain the food price inflation and preventing it from spilling over to generalized inflation. continued to fall during the first half of 2009-10 due to the high base achieved last year during this period. Invisible transactions are further classified into three categories. transactions are classified into merchandise (exports and imports) and invisibles. Average food inflation which was 7. The volatility observed in the first half of 2008-09 was due to increasing international fuel and commodity prices which pushed WPI inflation to a high of 12. Government not included elsewhere (GNIE) and miscellaneous. however. From September. There is. International fuel and commodity prices stabilized in the first half of 2009-10 but at a relatively lower level than in the corresponding period of the last year. which latter encompasses communication. Overall food inflation in December 2009 was 19. fundamental difference in the reasons for volatility observed last year and those seen this year.

Capital inflows can be classified by instrument (debt or equity) and maturity (short or long term). The main components of capital account include foreign investment.) which do not have any quid proquo. (b) Income. the invisible surplus declined and current account deficit widened vis-a-vis the corresponding period last year Inflation in India . gifts. India’s BoP exhibited considerable resilience during fiscal 2008-09 despite one of the severest external shocks. The current account balance [ (-) 2. despite massive decline in net capital flows to US$ 7. There has been improvement in the BoP scenario during H1 of 2009-10 over H1 of 2008-09. etc. exports and imports showed substantial decline during April-September (H1) of 2009-10 vis-àvis the corresponding period in 2008-09.software. news agency. remittances. while loans (external assistance.6 billion in 2007-08. management and business services. reflected in higher net capital inflows and lower trade deficit. external commercial borrowings and trade credit) and banking capital including non-resident Indian (NRI) deposits are debt liabilities. As per the latest BoP data for fiscal 2009-10. loans and banking capital. royalties. and (c) Transfers (grants.4 per cent of GDP in 2008-09 vis-à-vis (–) 1.3 per cent in 2007-08] remained well within the sustainable limits and there was limited use of foreign exchange reserves.2 billion in 2008-09 as against US$ 106. Foreign investment comprising foreign direct investment (FDI) and portfolio investment represents non-debt liabilities. However.

INDUSTRY ANALYSIS An industry is generally described as a homogeneous group of companies. It may be defined as a group of firms producing reasonably similar products that serve the same need of a common set of buyers. The profitability of an industry depends upon its stages of growth. At any stages of economy, there are some industries, which are growing while others are declining. The performance of a company is thus a function not only the industry and economy, but more importantly on its own performance. The market price of the company is empirically found to depend up to 50% on the performance of the industry and economy. Information technology (IT) is both a huge industry in itself, and the source of dramatic changes in business practices in all other sectors. The term IT covers a number of related disciplines and areas, from semiconductor design and production (also covered in the profile of the electronics sector), through hardware manufacture (mainframes, servers, PCs, and mobile devices), to software, data storage, backup and retrieval, networking, and, of course, the internet. On top of this, there has been a convergence between IT and telephony, driven by transforming voice traffic from an analogue signal to a digital packet, indistinguishable from other data packets travelling through a computer network. IT in the leisure sector is already about enabling interaction with video, movies, and TV, and this trend is increasingly carrying into the business space.Each of the major sub-areas in IT is itself capable of being divided into its component parts. Storage, for example, breaks down into disk drives, tape drives, and optical drives, and into attached storage and networked storage. PCs break down into utility-business desktop PCs, high-end work stations, and “extreme” gaming PCs for games enthusiasts—the computer and console games industry has already produced “blockbusters” that outsell top releases from Hollywood. Software subdivides into numerous specialist areas, from relational database technologies to enterprise applications, to “horizontal” office applications characterized by Microsoft Office 2007, for example. Somewhat off the main track of IT at present, but very much related to both increases in processor power, and to work in simulation and artificial intelligence, is the field of robotics. This lies outside the scope of this profile, but the linkages between robotics and IT are already transforming both manufacturing and defense.

In addition, the IT arena is characterized by a number of key trends and emerging technologies which, again, have the potential to transform the way businesses currently use IT, and carry out their operations. An example of a trend would be the outsourcing of IT services, such as desktop PC support, or whole IT supported functions, such as accounts processing. An example of a technology trend would be virtualization.This refers to the ability of large servers to be subdivided into a number of virtual machines, which can be either virtual PCs or virtual servers. Virtualization carries with it a number of benefits, including stopping what, at one stage, looked like an endless proliferation of servers inside companies. One large server can now be split into a number of virtual servers, enabling the organization to reduce the number of boxes it has to manage. Server virtualization should not be confused with another powerful trend, the creation of virtual environments inside the machine. The fact that desktop processors are now powerful enough to mimic real-world physics in computer space is transforming both design and entertainment. All these trends have enabled the IT industry to continue to generate a strong demand for the next generation of servers, PCs, and laptops. However, in a recession, companies of all sizes generally postpone upgrading their IT, or implementing major IT projects that are not already in hand. This makes the sector vulnerable to downturns in the economy, and the current global downturn is already having a major impact on revenues in the sector worldwide. Market Analysis According to the IT market analysis firm, Gartner, worldwide server shipments and revenues saw double digit declines in the fourth quarter of 2008. By comparison with the same quarter in 2007, shipment numbers declined by 11.7% while revenue dropped by 15.1%. Commenting on the figures, Heeral Kota, a senior research analyst at Gartner, said: “The weakening economic environment had a deep impact on server market revenues in the fourth quarter, as companies put a hold on spending across most market segments. Almost all segments exhibited similar behavior, as users sought to reduce costs and spending, deferring projects where possible Gartner said that the fall in shipments and revenue was reported across all regions apart from Japan, which managed a 4.7% revenue increase. Europe, the Middle East, and Africa (EMEA) suffered the worst decline, with revenues falling by 20.6%. Even the emerging regions of Latin America and Asia-Pacific suffered, with declines of 12.5% and 14.8%, respectively. North America server revenue declined by 14.6%. The scale of the IT server sector as an industry can

be seen from the fact that IBM, the market leader, ended 2008 with revenues of US$4 billion from server shipments, with almost exactly one-third of the global market. However, IBM saw revenues decline by 17.4% as a result of the downturn. Hewlett-Packard was next, with revenues of just under US$4 billion and with a 30% market share. The figures in server shipments for 2008 chart the impact of the downturn fairly starkly. The sector had been enjoying fairly strong results during the first half of 2008, but a severe decline in sales set in as the intensity of the downturn began to bite, Gartner said. If things are bleak on the server front, the outlook is just as bad for PCs. Gartner is predicting that the PC industry will suffer its sharpest unit decline in history in 2009. Gartner expects some 257 million PCs to ship worldwide through 2009. This would represent an 11.9% contraction on the numbers sold in 2008. Even after the dot.com bubble burst in 2001, global PC unit shipments only contracted 3.2%. To view these statistics in perspective, it is important to remember that setting up a new chipfabrication plant to make the next generation of PCs costs some US$3 billion. With margins on PCs being at an all-time low, it is very difficult for the industry to sustain itself if companies and households stop upgrading to the latest generation of PC. According to Gartner, both developed market economies and emerging markets are forecast to go through tremendous slowdowns. After the telecoms and dot.com crash in 2001, sales of PCs in mature markets contracted by 7.9%, Gartner says, while sales growth in emerging markets slowed to 11.1% in 2002. Both these low points will be substantially exceeded in 2009. The impact will be deepened by hardware suppliers, who will act prudently and maintain inventories at an all-time low to avoid losses. However, all is not total gloom. The trend for corporates and home users to switch to mobile PCs, rather than desktop units, will keep growth going for worldwide mobile PC shipments. Gartner is forecasting sales of 155.6 million units, up 9% from 2008. By way of contrast, desktop PC shipments will struggle to exceed 101 million, a drop of almost 32% on 2008. The most popular form in the mobile space will continue to be the mininotebook, Gartner says. In particular, users are moving to higher-specification notebook PCs with larger screens, of around 8.9 inches. Prices, however, will continue to fall. Gartner is predicting that the price of a mid-specification mini-notebook PC with a large screen will fall, from an average of US$450 in 2008 to under US$400 by the end of 2009.

the semiconductor industry took four years to get back to the revenues it had generated in 2000. the downturn is also hitting demand for chip production. there are positive trends that manufacturers. will drive sales of larger servers. or. Revenue from hosted virtual desktops (HVDs) is expected to more than triple. and is not going to be stopped by the recession. from US$74.9 billion in 2008 to US $2. when it was only predicting a contraction for the sector of 16%. modest single digit growth should return in 2010. when revenues peaked at US$256. which should push DRAM prices back up. and consultancies can focus on.Another plus point is that the industry as a whole learned some valuable lessons in the crash of 2001. Not surprisingly. large server than a number of smaller servers. it is more powerefficient to run a single. due to massive overcapacity in the market and soft pricing. The contraction predicted for 2009 is considerably more gloomy than a prediction made by Gartner six months ago. in turn. and is already demonstrating that it is much more agile. But many suppliers are now reducing supply. more specifically. While the industry is absorbing all this bad news.5 billion.6 million through . and put the industry on a better footing. There is a precedent for this prediction. In fact.4 billion. and greening up IT by lowering its carbon footprint is another unstoppable trend for 2009 and 2010. Apart from semiconductor chip manufacturers. so companies will press ahead with virtualization programs. Gartner’s prediction here is that it will be at least 2013 before the semiconductor industry sees revenues comparable to those it achieved in 2008. According to Gartner. from US$1. DRAM suppliers lost more than US$13 billion in 2007 and 2008. if the virtualization exercise extends to the desktop. the sector will see a drop in excess of 24%. the other huge area in the field is memory chips. It is a cost-saver and efficiency driver. First. Over the course of 2009. the manufacturing carbon footprint is lower. According to Gartner. with all this bad news about slowing demand on actual “built” hardware. worldwide virtualization software revenue will increase by 43%. third. The move to replace tens or even hundreds of individual servers with large virtual servers is picking up pace.1 million to US$298. and could drive applications upgrades as well. On the plus side. value-added resellers. and better able to react to changing market conditions in 2009. DRAM chips. Second. systems houses. then one server can replace dozens of PCs. Virtualization also plays well to the green agenda. This. with total global semiconductor revenues estimated to top out at US$194. in that after the 2001 recession.7 billion in 2009. Virtualization plays to this on a number of fronts. and.

a growth of just 27. and everything from storage to the processor power that drives the service is located remotely. and points to the fact that all the complexity of infrastructure that makes the service possible is hidden “in the cloud. with revenues totaling US$5. the worldwide external-disk storage market showed its first year-on-year fall for five years. IDC. Access to the service is via a web browser. some 11% said they were already using cloud-based solutions.5%. where the disks are being “managed” in some way independently of processor resources. It sees three phases of evolution for cloud computing going up to 2015 and beyond.3 billion that quarter. Gartner. Storage systems in IT tend to be divided into external disk storage. According to the market analysis company. demand for storage should be vastly ahead of this figure). as in the typical PC or low-end server that comes with one or two hard drives already installed. In summary. however. on the other hand. By 2015. and to have become the preferred solution for many kinds of corporate applications that are now run in-house on standard IT equipment. Gartner says. can be expected to continue spending through the downturn is on the new IT concept known as “cloud computing. A further 41% indicated that they are either evaluating cloud-based solutions. (The point here is that with e-mail and. Up to 2011. Gartner argues. now.” IDC expects worldwide spending on cloud computing and cloud services to reach US$42 billion by 2012.460 petabytes. or are piloting such solutions.” According to a survey IDC conducted with almost 700 IT executives across the Asia-Pacific region. instead of via a data centre located in the same building. IDC reports a fall of 0.3% on the volume shipped in 2007. Cloud computing is a term that essentially refers to the delivery of services to communities of users over the internet. one area where large and medium companies. the underlying innovation in the sector and its ability to transform mainstream . as well as some service providers. it expects cloud computing to have been commoditized. and attached storage. The term itself comes from the way the internet is depicted in computer network diagrams (a non-specific “cloud”). live video. applications will be mostly opportunistic and tactical in nature. claims that cloud-computing application infrastructure technologies will still need some seven years to mature.2009. the immediate future for IT looks like being a period of tough belt-tightening. However. for the last quarter of 2008. and will have little impact on mainstream IT. Total disk storage systems capacity shipped amounted to 2. Again on a positive note.

5% of Infosys’ Revenues. if any. as an opportunity for the IT players to instigate the US companies to flow more work offshore. close to 30%. The BSE IT index has been an underperformer for the second consecutive quarter in Q2FY08 by 23%.39 against a dollar. ➚ The rupee was however stable in the region of Rs. 1% in Wipro) to any of the large caps and is rather more intensive for a few BPO players in Mortgage segment. Asia-Pac and Middle East). and should reemerge to drive revenue growth once the global upturn starts to gain momentum. The real impact of this however will be well pronounced by the end of the third quarter FY08 during the annual budgeting sessions of the US companies. ➚ The subprime crisis affects minimally (0. Going forward. ➚ We see the US slowdown. ➚ Most of the Indian IT companies have a stable mechanism of an efficient hedging policy where almost 50% of the revenue for the quarter is hedged in dollars.business processes while enabling new kinds of business practice is undiminished. BSEIT has had a lackluster performance in H1FY08 when the sensex had gained 43% in the same period. we have estimated our projections with Rupee at Rs. It is also well known that the large caps have their revenues diversified across different geographies (Europe.The reason was a fluctuating currency in the first quarter of FY08 that has dampened spirits and a spiraling effect was witnessed in the second quarter of FY08. Outlook We therefore foresee a better second quarter for the IT sector with QoQ Revenue growth rates of 8-11%. thus mitigating the effect of an exchange rate fluctuation for the results in Q2FY08. Having underperformed the Sensex by 17% in Q1FY08.40-41 against a dollar in Q2FY08. Our sentiments for the sector remain positive in the long run. Share of invoices in various currencies Other US$ GBP Euro s 65% 16% 8% 11% 68% 14% 4% 14% 77% 80% 60% 15% 7% 25% 6% 5% 8% 2% 8% 7% TCS Infosys Wipro Tech Satyam HCLT .

We obtain a better indication of the direction in which a company is moving when several ratios are taken as a group . The internal information consists of data and events made by companies concerning their operations. We can use this information to make judgment as to which company is ready to take a better investment risk. By comparing the leverage ratios of two companies we can determine which company uses greater debt in the conduct of its business. Ratio Analysis: Ratio means numerical relationship between items or group of items. It includes annual report of shareholders. Eg: we would use a ratio of a company’s debt to its equity to measure a company’s leverage. Ratio analysis can provide valid information about a company’s financial health. Company analysis deals with the estimation of return and risk of individual shares. external sources of information are those generated independently outside the company. The industry analysis helps the investor to select the industry in which the investment would be rewarding. the company’s financial statements etc. we must be careful not to place too much importance on one ratio. Now he has to decide the company in which he should invest his money. Information regarding companies can be broadly classified as internal and external. A financial ratio measures a company’s performance in a specific area. public and private statements of officers of the company. This technique is called crosssectional analysis compares financial ratios of several companies from the same industry.COMPANY ANALYSIS Company analysis is the final stage of fundamental analysis. A ratio may be expressed either as a quotient or a percentage or a rate. However. The economy analysis provides the investor a broad outline of prospects of growth in the economy. A company whose leverage ratio is higher than a competitor’s has more debt per equity. This calls for information. These are prepared by investment services and financial press.

95 per share. as Infosys Consultants Private Limited. we made a private placement of 5. and the CBE by the British government. India. Indian Institute of Management Technology. All the above data is unadjusted for issue of stock split and bonus shares.Bangalore 560 100. a private limited company under the Indian Companies Act. compared to the IPO price of Rs. The Economist ranked Narayana Murthy among the ten most-admired global business leaders in 2005.50. we issued 20. We changed our name to Infosys Technologies Private Limited in April 1992 and to Infosys Technologies Limited in June 1992.INFOSYS Infosys was incorporated in Pune. we successfully completed secondary ADR issues of US $294 million.He serves on the boards of Unilever. Ford Foundation and the UN Foundation. Indian School of Business.1 billion and US $1. In July 2003. He topped the Economic Times list of India's most powerful CEOs for three consecutive years – 2004 to 2006. India. 10/. The address of registered office is Electronics City. We made an initial public offering in February 1993 and were listed on stock exchanges in India in June 1993. Trading opened at Rs. Karnataka. HSBC. 450 each to Foreign Institutional Investors (FIIs). 1956.Narayana Murthy articulated. He founded Infosys in 1981.35. when we became a public limited company.000 equity shares of par value of Rs. US $1. In October 1994. N. R. He is an IT advisor to several Asian countries.70. Singapore Management University. Bangalore and INSEAD.000 American Depositary Shares (ADSs) (equivalent to 10.000 shares at Rs.6 billion respectively. He has been awarded the Padma Vibhushan by the Government of India. a global software consulting company headquartered in Bangalore.each) at US $34 per ADS under the ADS Program and the same were listed on the NASDAQ National Market. Financial Institutions (FIs) and body corporate. Hyderabad. He has led key corporate governance initiatives in India. Hosur Road. Infosys was listed on NASDAQ in 1999. 145 per share. He also serves on the boards of Cornell University. in 1981. In March 1999. designed and implemented the Global Delivery Model (GDM) which has become the foundation for the huge success in IT services outsourcing from India. June 2005 and November 2006. Under his leadership. the Légion d'honneur by the Government of France. Wharton School. He is the first Indian winner of Ernst and Young's World Entrepreneur of the Year award and the . Narayana Murthy is the Founder-Chairman of Infosys Technologies Limited.

00 901. design. testing and infrastructure management services. L.51 1. de C.00 50.00 53.012.14 1.00 2005-06 59. The group of companies (‘the Group’) provides end-to-end business solutions that leverage technology thereby enabling clients to enhance business performance. de R. Fortune and Financial Times.25 1.00 2004-05 91 2. Table showing Earnings & Prices Book Value Market Value Market High Market Low EPS DPS 2007-08 126. maintenance.00 154.118.8 3. In addition.00 1.38 8. The Group provides solutions that span the entire software lifecycle encompassing technical consulting.00 990. He is a Fellow of the Indian National Academy of Engineering and a foreign member of the US National Academy of Engineering. V.00 55. business consulting and business process management services. re-engineering.00 147.8 8. Infosys Technologies S. Limited (‘Infosys China’).25 2006-07 78. Forbes.617. Infosys Technologies (Australia) Pty Limited (‘Infosys Australia’). USA (‘Infosys Public Servies’) and controlled trusts is a leading global technology services corporation.694. the Group offers software products for the banking industry. CNN.180.13 10. and has appeared in the rankings of businessmen and innovators published by India Today.045.00 42.56 10. Infosys BPO Limited (‘Infosys BPO’) and wholly-owned and controlled subsidiaries. package evaluation and implementation.Max Schmidheiny Liberty prize. Business Week.40 2003-04 73. Infosys Technologies (China) Co. Infosys Technologies Limited (‘Infosys’ or ‘the Company’) along with its majority owned and controlled subsidiary.06 6. Time.58 7.00 . (‘Infosys Mexico’). development.180. Infosys Consulting Inc (‘Infosys Consulting’). Business Standard. Infosys Tecnologia DO Brasil LTDA (‘Infosys Brazil’) and Infosys Public Services Inc. Infosys Technologies (Sweden) AB (‘Infosys Sweden’). systems integration.

68 55.00 14.25 Table showing P/E Ratio 2006-07 2005-06 3.03 23.38 2003-04 1.012.00 6.12 42.67 50.38 8.180.71 6.72 53.180.71 -9.00 901.92 54.Table showing Pay Out Ratio 2007-08 2006-07 2005-06 2004-05 2003-04 EPS DPS Payout Ratio (%) 147.68 283.06 6.13 27.84 32.04 191.78 2006-07 2.00 15.08 172.76 2007-08 Share Price High Low EPS P/E 7.38 340.23 2005-06 2.13 10.13 10.8 8.06 50.75 35.09 147.56 10.47 20.00 2004-05 2.28 229.694.80 53.59 2004-05 2.8 8.19 72.00 1.40 2003-04 1.00 14.617.06 21.00 990.00 147.00 14.8 27.4 42.56 10.05 77.35 50.99 Table showing ROE 2007-08 Net worth PAT ROE (%) 2006-07 2005-06 2004-05 2003-04 542.00 9.38 55.00 Table showing Ratios Current Ratio 2007-08 2.69 Average ROE = 28.77 53.00 22.74 .75 Average P/E = 35.56 50.38 8.78 167.84 31.82 70.118.00 1.00 19.88 55.00 18.66 66.06 6.39 25.9 32.25 1.045.87 Table showing Rate of Growth (%) 2007-08 Sales PAT EPS (Rs) DPS (Rs) 2006-07 2005-06 2004-05 2003-04 90.27 Average DPOR-13.00 154.34 42.

2411 lakhs on account of stock options granted to employees.13*0.147.87 Projected DPS 10*(1+0.87 24.98 last year on absolute basis and to Rs.56 last year on diluted basis.1399 Average ROE Normalized Average P/E Ratio Long-term growth rate in dividend and earnings Average Retention Ratio * Average ROE Projected EPS 147. 53. 54.19174 lakhs as against Rs. 38111 lakhs during the previous year reflecting a growth of 90%.99 0.52*35.25 21.28 22.2473 Intrinsic Value 183.12 0.54 per share as against Rs.47 PERFORMANCE AND OPERATIONS REVIEW During the year.76 35.72442 lakhs as against Rs.52 6582.99 86. .73 183.2473) 13. 1062 lakhs in the previous year.18 Table showing Intrinsic Value Calculation Average DPOR for 5 years Average Retention Ratio 1-0. 7047 lakhs during the previous year.44 17. Profit after Tax (PAT) grew by about 172% to Rs.1361 lakhs as against Rs. exports constituted 93% of total turnover and exports to advanced markets comprising Europe and America accounted for 75% of business.94 0.97 0.Debt Equity Ratio Net Profit Margin (%) 0.13 per share as against Rs.28 25. Other Income earned during the year stood at Rs. Expenses for the year included a charge of Rs. As has been the norm for NPIL. Divi’s achieved a turnover of Rs.01% 28. Earnings Per Share for the year works out to Rs.147.23 18.86 12.

95. 5/. Profit and Loss account The balance retained in the Profit and Loss account as at March 31.S. An amount of Rs. 287 crore and 286 crore respectively.674 crore.806 crore.Financial condition 1.573 crore in the previous year. General reserves An amount of Rs. 1. as compared to Rs. Share premium The addition to the share premium account of Rs. 48 crore. 2010 amounted to Rs. 2. 573 crore and Rs. 582 crore) was transferred to the general reserves account from the Profit and Loss account. 1. 10 crore (Rs. divided into 60 crore equity shares of Rs. 300 crore. Authorized share capital is Rs. after providing the interim and final dividend for the year of Rs. of Rs.149 equity shares. The addition to capital reserve account of Rs.each. on exercise of options under the 1998 and 1999 Stock Option Plans of Rs. subscribed and paid up capitals as at March 31. The issued. 2010 and March 31. 87 crore. which is included in the net profit. 2009 were Rs. The total amount of profits appropriated to dividend including dividend tax was Rs. 5/. 48 crore during the year is on account of transfer of profit on sale of investments in On Mobile Systems Inc. 10 crore in the previous year) was credited to the share premium account arising due to tax benefits in overseas jurisdiction of deductions earned on exercise of employees' stock options. Shareholder funds . 2010 is Rs. 2010 (previous year Rs. 580 crore representing 10% of the profits for the year ended March 31. 861 crore and dividend tax of Rs. Infosys has only one class of shares – equity shares of par value Rs. U. 240 crore thereon. in excess of compensation charged to the Profit and Loss account.each. 97 crore during the year is primarily on account of premium received on issue of 9. 54 crore. Share capital At present. 13. Reserves and surplus Capital reserve The balance as at March 31.

1507 crore during the previous year. The entire capital expenditure was funded out of internal accruals. compared to 16. 2010 amounted to Rs.809 crore as of the previous year end.8% of sundry debtors as at March 31. 2010. Loans and Advances Loans and advances as of 31st March. 105 crore) as at March 31. for a total consideration of Rs. Investments We made several strategic investments aimed at procuring business benefits and operational efficiency for us. Current Liabilities & Provisions Current Liabilities and provisions as of 31st March. 6.3% of revenues for the year ended March 31. 2009. During the year. Fixed assets Capital expenditure We incurred a capital expenditure of Rs. 2010 amounted to Rs. 1.036 crore as at March 31. 22. Sundry debtors Sundry debtors amounted to Rs.31. the Company sold 32. 4. 581 crore (Rs. net of taxes and transaction cost.01 as at March 31. 384. The book value per share increased to Rs.390 crore (net of provision for doubtful debts amounting to Rs. 51 crore during the previous year.S. 7. compared to Rs. 17.1763 crore as against Rs. Our largest client constituted 2. These debts are considered good and realizable. 787 crore offset by a decrease of Rs. 206 crore on account of decrease in capital work-in-progress.7% for the previous year. 2010. 2010. 3. 100 crore) as at March 31. representing a Days Sales Outstanding (DSO) of 56 days and 61 days for the respective years. 53 crore. compared to Rs. 2010 from Rs. 3.244 crore (net of provision for doubtful debts amounting to Rs. 3..151 shares of OnMobile Systems Inc. Debtors are at 15. 310.90 as of the previous year-end. 2010.177 crore in the previous year) comprising additions to gross block of Rs. U. 5. .46 crore as against Rs.The total shareholder funds increased to Rs.

5803 crore from Rs. 11. 2008 is at 0. there are also many different types of technical traders. reflecting an impressive growth of 90%.Debt-Equity Ratio Debt-equity ratio as of 31st March. such as past prices and volume. but instead use charts and other tools to identify patterns that can suggest future activity. 5819 crore during the previous year.101.100. 34. Earnings per Share Basic EPS declined by 1.e. 57. With the help of several indicators they analyse the relationship between price-volume and supply-demand for the overall market and the individual stock. Some rely on chart patterns.44 during the previous year. 38111 lakhs during the previous financial year. TECHNICAL ANALYSIS Technical Analysis is a process of identifying trend reversals at an earlier stage to formulate the buying and selling strategy. Just as there are many investment styles on the fundamental side.37 per share from Rs. 63. Profit after Tax Profit after Tax during the year declined by 0. based on total debt. as against 0. 72442 lakhs as compared to Rs.031 during the year from Rs. 57. Diluted EPS is Rs. the number of shares traded is greater than before and on the downside the number of shares traded dwindles.65 per share in the previous year. Sales Turnover: Divi’s has achieved a turnover net of taxes/duties of Rs. 16. Volume is favourable on the upswing i. Technical analysts do not attempt to measure a security's intrinsic value.3% to Rs.28. others use technical . Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity.3% during the year to Rs.181 in the previous year.

Unlike fundamental analysts. ignoring the fundamental factors of the company. which technical theory views as a product of the supply and demand for a particular stock in the market. along with broader economic factors and market psychology. at any given time. This only leaves the analysis of price movement. 3) The market always moves in trend 4) Any layman knows the fact that history repeats itself. price movements are believed to follow trends. technical analysts don't care whether a stock is undervalued . The field of technical analysis is based on these assumptions 1) The market value of the scrip is determined by the interaction of supply and demand. In any case. technical analysis assumes that. However. removing the need to actually consider these factors separately. are all priced into the stock. technical analysts' exclusive use of historical price and volume data is what separates them from their fundamental counterparts. 2) The market discounts everything. The market discounts everything A major criticism of technical analysis is that it only considers price movement.indicators and oscillators. and most use some combination of the two. The market always Moves in Trends In technical analysis. a stock's price reflects everything that has or could affect the company including fundamental factors.the only thing that matters is a security's past trading data and what information this data can provide about where the security might move in the future. This means that . Technical analysts believe that the company's fundamentals.

the future price movement is more likely to be in the same direction as the trend than to be against it. technical analysis is more frequently associated with commodities and forex. futures and commodities. Technical analysis uses chart patterns to analyze market movements and understand trends. market participants tend to provide a consistent reaction to similar market stimuli over time. This includes stocks. mainly in terms of price movement. Not Just for Stocks Technical analysis can be used on any security with historical trading data.after a trend has been established. forex. where the participants are predominantly traders. fixed-income securities. Moreover these concepts can be applied to any type of security. they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves. Although many of these charts have been used for more than 100 years. Most technical trading strategies are based on this assumption. . Another important idea in technical analysis is that history tends to repeat itself. History repeats itself. etc. in other words. In fact. The repetitive nature of price movements is attributed to market psychology.

.

The following basic types of price charts are the most commonly used. The use of charts and technical indicators provide the average investor with the only real edge available in trading the markets. Unlike the other basic charts.BASIC TYPES OF PRICE CHARTS Price charts provide the fundamental building block in the analysis of market action. See the discussion of the use of Trendlines and Three Simple Rules. Volume charts often accompany bar charts. These charts provide the "background" or "foundation" for most of the common indicators. . Point and figure charts plot only the direction of a price move and the change in value. Bar: each bar represents a day's trading showing the lowest to highest price. In most cases indicators are shown superimposed on the price chart itself or in a separate chart below the price chart. Point and figure: shows price changes with X columns for rising prices and O columns for declining prices. readily identifiable patterns will become apparent that can immediately give you a good notion of the profit potential for a particular stock. Time is factored into the price movements. Proponents believe this gives them a clearer view of the underlying actions of supply and demand. open & close. mutual fund or commodity. This is the most common type of chart used. As you become familiar with viewing and using charts. time itself is not a factor. Line: the line represents the closing prices only for a given time. sometimes giving a better picture of the overall trend. This tends to smooth out daily fluctuations in price. Most of the analytical tools compare the action of an indicator against that of the price.

there may be a benefit to using the logarithmic scale for long-term charts (2-3 years or more) since trendlines tend to fit better. considered by some as more effective for long range trend analysis.black for a decline and white for a rise. trendlines.Candlesticks: use a wider bar to represent the difference between open and closing prices . . There doesn't appear to be any overall benefit to using one over the other. 1) Arithmetic (linear): chart scale that shows equal vertical distance for each unit of price change. Bar Chart: This is likely the most common type of chart used. However. Patterns of black versus white (declining vs rising markets) readily become apparent with candlestick charts. Bar charts simply plot the change in price over time (daily. market patterns and indicators work with both of them. Chart Scales: Charts are graphed using two common types of scales: the arithmetic or linear scale and the logarithmic scale. 2) Logarithmic: chart scale that shows equal vertical distance for equal percentage moves. weekly. monthly or minuteby-minute).

The breaking of a major upward trendline might signal . or volume. the • price pattern should be questioned. established range.BREAKOUT SIGNALS A BREAKOUT IN PRICE THROUGH A LONG ESTABLISHED TREND LINE IS ALWAYS SIGNIFICANT. confirms the validity of the breakout. When the volume does not show a significant increase on the upside price breakout. which is only sometimes a trend reversal. the greater the potential move An upward surge in trading activity. the odds are high that it will continue to move in the same direction • • The longer the trend. Interpretation The breaking of an important trendline is often the first sign of an impending change in trend. for whatever reason. Overview • When a price breaks out of a stable.

BREAKOUT VALIDITY Not every move out of the price pattern constitutes a valid signal of a trend reversal. However. many short-term price movements barely exceed 3 percent in total. A wait for a 3 percent penetration of the boundaries is traditionally necessary before determining that the breakout is valid. of course. It's helpful to establish valid criteria to minimize the possibility of misinterpreting moves such as whipsaws. It gives us something tangible to look for when considering the hundreds and thousands of potential trades we could enter into. momentum characteristics and your own experience.the beginning of a sideways price pattern. or resumption if the price is in a narrow trading range. any pull strong enough to break a long term trendline and carry the price into new ground is usually strong enough to continue pulling the market in the new direction to establish a new trendline. which would be identified as a reversal or consolidation type later. We may not know what it is. Remember. Historically we know that if a strong or "well-tested" trendline is broken and the price moves out of an established range something important has happened to the psychology of the marketplace. The stronger the trendline broken the more significant. The resulting signals are less timely. volume. . and an additional 3 percent decline for a breakdown to sell. many times in the past and will be repeated many more times in the future. The 3 percent rate works well for longer-term price movements where the fluctuations are much greater. Deciding whether a breakout is valid or not depends on the type of trend being monitored. this is not a golden rule. there are no guarantees. The odds that a market will continue in the direction of a breakout are high but. but a considerable number of misleading moves are removed. it will probably be a combination of influences or events. In short term trades it will be difficult to make a profit if you wait for a 3 percent move to buy. whatever the reasons. it is a pattern which has been repeated many. But.

bank rates. In other words. A low volume breakout is suspicious and should be disregarded. until it demonstrates a reversal. and so on. This price increase is regularly accompanied by declining volume. Dow theory is interested in the direction of a trend and doesn't offer any forecasting ability for determining the ultimate duration of a trend. commodity prices. following the downside breakout.volume of trade. the daily closing price reflects the psychology of all players involved in a particular marketplace . as it is for an upside breakout. Increasing volume is not as essential for a valid signal with downside breakouts. fluctuations in exchange rates. The goal of the theory is to determine changes in the major trends or movements of the market.An upward surge in trading activity.or the combined judgment of all market participants. Prices will often reverse and put on a small recovery. DOW THEORY Dow Theory is based on the philosophy that the market prices reflect every significant factor that affects supply and demand . or volume. Much of today's technical analysis is based on Dow's original "trend following' system • • • • Classification of a trend Principles of confirmation or divergence Use of volume to confirm trends Use of percentage retracement . confirms the validity of the breakout. Markets tend to move in the direction of a trend once it becomes established.

most often fifty • The minor trends (short-term trends) or insignificant ripples last less than three weeks and represent fluctuations in the secondary trend. months and represents corrections of one third to two thirds of the previous movement . waves and ripples • The primary (major) trend or tide is a long term trend lasting from a year to years several • The secondary trend (or mid-term trend) or wave lasts three weeks to three percent of the movement.• • • Recognition of major bull and bear markets Signaling the large central section of important market moves Dow theory has been successful in identifying 68% the major trends over the years The three trends are: • • • Uptrend: successively higher peaks (highs) and higher troughs (lows) Downtrend: successively lower peaks and troughs Sideways Channel: peaks and troughs don't successively rise or fall Each market trend has three parts compared to tides. .

not the daily high or low (this provides the overall stock market trend) • • Should have volume increase/decrease in the direction of the trend Stays in effect until it gives definite reversal signals Shortcomings of the Dow Theory: • The major criticism of the Dow Theory is its slowness: It misses about 25% of a move before giving a signal. thereby leading the public A Major or Long-term Stock Market Trend: • Must be confirmed by the Dow Averages. calculated on closing prices only.The major trend has three phases: • • • Accumulation phase: knowledgeable investors buy issues with good potential Public Participation phase: Prices increasing rapidly and bullish markets are reported Distribution phase: Astute investors sell first. . primarily because it is a trend following system designed to identify existing trends.

.

Prices can only go in three directions. up. We can help spot this direction or trend by drawing in "trendlines". down. or sideways. . down. A long line of past price ranges together gives us a pattern. Downtrends consist of a series of successively lower highs and lows.TRENDLINES TRENDLINES ILLUSTRATE THE DIRECTION OF THE MARKET MOVEMENT AND PROVIDE A PRIMARY CONSIDERATION IN ANY ANALYSIS • • Uptrends consist of a series of successively higher highs and lows. and sideways. There will be plenty of dips and bumps along the line but you should still be able to discern a general direction up. 2006 2007 Drawing trendlines during an up trending market: The trendlines above have been drawn by connecting as many successive lows as possible (along the bottom of the price range). An up trending trendline represents major support for prices as long as it is not violated.

Trends can push and pull the price up or down. A sideways pattern represents stability between supply and demand in the marketplace.2006 2007 Trendlines connecting highs can also be drawn to indicate the top of the established trend or channel (blue lines). set the stage for a sharp move once the sideways trend is broken (signalled by a price break through a well-established trendline). often referred to as a narrow trading range or congestive phase. Trendlines in this type of market. Drawing trendlines in a down trending market. These trendlines indicate the major zones of resistance. however. Markets can also enter a period of quiet stability where the price forms a horizontal line sideways across the page. A sideways trending market is normally a difficult market to trade for a profit. It can. are drawn by connecting both the highs and lows. Prices In this type of market can break upward . Down trending trendlines are drawn by connecting the successive highs.

Similarly. there’s resistance to higher prices built into the market.or downward so it is valuable to establish the top and bottom of the range (see the report on Breakout signals) Support and Resistance An important concept in the use of trendlines is that of support and resistance. Any penetration through a trendline warns of a possible change in trend. as shown by a trendline. As long as the market stays within these zones of support and resistance. but we do know that for some reason the support or resistance for a market is changing. A continued trend is based on underlying support for prices in the market. We may not know the reason behind such a change. the trend is sustained. for whatever reason. 6000 5500 5000 4500 . The trendline is one way to capture and illustrate these zones of support and resistance.

it is less meaningful. the more significant any penetration will be. Think of it as an early warning system. however. Since the price reflects the psychology of the marketplace. may indicate the beginning of a move into new ground. rather than exactly on the round number (i. offering more and more resistance until either the rhino eases off or the wire snaps. The more points you can connect the more significant the resulting line. Round numbers Another aspect of resistance and support concerns the round numbers associated with price levels. Think of the prices as the rhino and the trendline as a barbed wire fence. Particularly if it crosses a medium or long term trend line. If a rhino leans against the wire.” With resistance and support common along these levels. And. If the rhino only leaned against the fence once before moving along. 75 and 100. 25. you’d place your order just above an important round number). A strong thrust. Rs 4. It also makes sense to place stop loss orders below the round numbers on long positions.90 rather than 5. (If buying on a short term dip in an uptrend. such as 10. Two highs or lows is the bare minimum. a sign to be prepared for a larger move. we will have more faith in the strength of the fence. the more significant the trendline. it makes sense to avoid placing orders right at these values. the fence will give a bit. Duration of Trend Short term trends are established over a few days.The Rhino Theory of Support and Resistance: The upper and lower trendlines contain the price the way a barbed wire fence might contain a rhino.e. In charting practice.00). these levels offer “natural boundaries or targets. It may be in any direction and has little potential over the long run (except if you’re a day trader). If the rhino has wandered along and leaned against the fence in several places without breaking through. 50. a line based on one high or one low means nothing. 20. .

a trend over three months is considered a long term trend. If an upward trendline holds. It can be thought of as the driving force behind the price and. . and of some significance. Some traders also use the price “bouncing” off a trendline as a signal. you may have a buying opportunity at a relatively low price. It may not necessarily be in the same direction as the mid or longterm trend.always the current trend. This is the trend to trade with in the majority of cases.Short term trend -.a trend that occurs over weeks to 2 or 3 months. All big moves must start with a short term thrust building to a medium term trend. for example. until a fundamental change occurs in the marketplace. Any trend which has continued unbroken for over 3 months is considered to be a long term trend. Medium term trend -. Signals Signals are generated primarily when trendlines are broken. Long term trend -. the other side of the channel can give you an approximate price target. A particularly strong signal is generated any time a long term trendline is broken. Long term trends show stability. it will continue to do so. If the price is in a well-established channel.

Good triangles are an intermediate pattern. Triangle patterns usually form part way through a strongly trending move and represent a congestive phase in the marketplace.symmetrical. the greater the following price change. The vertical line measuring the height of the pattern becomes the base of the triangle. and descending: • • . often forecasting a sharp subsequent movement when the price breaks out.2007 Triangle Patterns Triangles provide one of the most useful price pattern indicators. The apex is the point of intersection where the two lines meet. The wider the price fluctuations within the triangle. An established triangle pattern is a valuable signal prior to a relatively predictable price change. taking from one to three months to form. • When the top and bottom trendlines form a triangle a valuable indicator is formed. These patterns are important because they are typically followed by sharp increases or declines in price. There are typically 3 common types of triangles . The odds favour a continuation of the trend following a breakout from the triangle pattern. and the longer the triangle pattern holds. ascending.

whereas the ascending right triangle is bullish and the descending right triangle is bearish. . This bullish pattern usually results in an upward breakout. To complete the pattern. The ascending triangle has a rising lower line with a flat or horizontal upper line. like an unsprung coil. volume should pick up noticeably at the penetration of the trendline Ascending Triangle (Right Angle) The symmetrical triangle is a neutral pattern. This breakout should have a sharp increase in volume and the upper resistance line should act as support on subsequent dips after the breakout. It is also called a coil because fluctuation in price and volume decrease until both react sharply. indicating that buyers are more aggressive than sellers.Symmetrical Triangle The symmetrical triangle is formed by two converging trendlines encompassing at least two or more rallies and reactions with a breakout following the original trend. The minimum price target is equal to the height of the base of the triangle measured upward from the breakout point.

The ascending triangle sometimes also appears as a bottoming pattern. Frequently, an ascending triangle will develop toward the end of a downtrend.. Again, the pattern is considered bullish. When demand remains weaker than supply, a bearish ascending pattern may form and is confirmed with a breakout on the downside on good volume. Descending Triangle (Right Angle) The descending triangle is a flipped over ascending triangle with a flat bottom line and a declining upper line. A close under the lower trendline, usually on increased volume, resolves the pattern to the downside as bearish. Volume is less important on the downside than on the upside.If a rally occurs it usually meets resistance at the lower trendline. The descending triangle can also be found at the top of a market.

REVERSAL PATTERNS (Tops and Bottoms)
Reversal patterns, or tops and bottoms, signify a fundamental change in the long term trend. Overview
• • • •

Tops are usually less stable and shorter than bottoms. Bottoms usually have smaller price variations and are slower to establish. Volume is usually more important on the upside. Confirmation of a top or bottom is in a double top or bottom (or a short channel.)

The most popular Reversal Patterns include: head and shoulders, double tops and bottoms, triple tops and bottoms, and V-formations.

Interpretation & Signals
Head & Shoulders

The well known head and shoulders pattern is formed by three peaks; the center peak, or head, is slightly higher than two lower, and not necessarily symmetrical, shoulders. The line joining the bottoms of the two shoulders is called the neckline. Due to fluctuations, the neckline is rarely symmetrical or perfectly horizontal. The pattern isn't complete until the neckline is broken. It is often good to wait for confirmation - for example, two successive closes below the neckline.

Remember, markets often bounce back to the Neckline after the breakout and this becomes a new level of resistance. Volume should be assessed to confirm the validity of these patterns. Volume is normally heaviest during the formation of the left shoulder and also tends to be quite heavy as prices approach the peak. The real confirmation of a developing Head and Shoulders pattern comes with the formation of the right shoulder, which is invariably accompanied by distinctly lower volume. Some traders use the distance between the neckline and the top of the head to project a "price objective." The price objective is determined by measuring from is the top of the head to the neckline, and using this distance from the breakout point downwards.An Inverted Head and Shoulders pattern is a mirror image of the Head & Shoulders pattern (forming a market bottom).

Double Tops are another reliable and frequently used reversal pattern. This pattern consists of two tops of approximately equal height. A line is drawn below and parallel to the resistance line that connects the two tops. The neckline is a strong support for price level but eventually fails. As with a Head and Shoulders, after the two rallies and their respective reversals are completed the double tops is confirmed only when the neckline is broken. The support line then becomes a resistance line, which often holds a market rebound. A Double Bottom pattern is a mirror image of a double top pattern: The average height of the bottoms gives a good indication of the price objective.

which usually holds any market rebound. a market top or bottom is often difficult to identify. Further points Trend reversals offer some of the most important opportunities for entering a market with a good profit potential. However. A line is drawn below and parallel to the resistance line that connects the three tops. It is even more difficult to choose appropriate entry and exit points. Triple Bottom A triple bottom pattern is a cross between an inverted head and shoulders and double bottom pattern. V. This formation consists of three tops of approximately equal height. The neckline is a strong support for price level but eventually fails. One problem is distinguishing between an actual change in trend or merely a congestive phase in the middle of a move.Pattern The V pattern is an unusual pattern in that a sharp trend switches from one direction to the other without warning and with high volume at or just after the turn around.Triple Top A tnple top is a cross between a head and shoulders and double top. The support line then becomes a resistance line. The actual buy or sell signals are based on a breakout in the direction of the new trend. Here are some general observations about Reversal patterns: . It is usually advisable to wait for prices to actually confirm a trend reversal by developing one of these well-tested and reliable reversal patterns. They usually represent fundamental changes in the underlying character of a particular market and often go on to yield big moves.

the more substantial the coming price movement is likely to be. Candlestick Patterns Overview Candlestick charting has been in use in Japan for the last 300 years and has received world wide recognition.intraday patterns are not considered reliable. The high and the low of the day create the upper and lower shadows of the main candle body. open and close. the high. The advantage to this form of charting is that it provides more visual information about the trading day as well as many trading signals to help decision making. The body of the candlestick (or jittai) is the open and the close of the trading day.• A breakout through a trend line is used in conjunction with a price pattern to signals in terms of both price level and timing. low. . Each candlestick is composed of four values. The time frame is normally from several days to several months . yield • The longer the time required to form a pattern and the greater the price fluctuations within it.

This is where the open and close prices are similar to the high and low. A marabozu.Types of Candles With candlestick charting. . the size of the candles as well as the pattern the candles form. is a candlestick with no shadows. Significance is given to the size ot the shadows. there is quite a lot of terminology and meaning towards the types of patterns encountered. or "shaved head".

but if a Doji occurs after a large candle a stronger signal is generated (see bullish and bearish patterns). Size of Candles . Doji's are not very significant by themselves. A closing bozo in a white candlestick is when there is no upper shadow (it closes at the high) and in a black candle a closing buzo is when there is no lower shadow (it closes at the low).An opening bozu in a white candlestick is when there is no lower shadow (opens at the low) and in the case of the black candlestick an opening bozu has no upper shadow (opens at the high). The Doji signifies a balance of buyers and sellers and shows an indecisiveness in the price. Doji A Doji candlestick is one of the more common candlesticks.

This shows a balance of . this represents a weak trading day where prices had little movement.The size of the candlestick gives the trader an indication of buying (white candle) or selling (black candle) pressure. Short shadows show a balance of buyers and sellers (a consolidation). the more buying and selling pressure. Lower shadows represent seller action which pushes the price down. The larger the candle. short candlesticks on the other hand represent a period of consolidation and weak buying or selling pressure. If both shadows are short (as well as the candle). Size of Shadows Upper shadows represent buyer action which pushes the price up. The size of the shadows tells us the amount of price action that occured during the day as well as the activity of buyers and sellers.

Komas or spinning top This pattern refers to the idea that "the trend is not quite sure where to go". Candles with a long upper shadows and a small lower shadow represents a trading day were the buyers forced the price up during the trading day but sellers later won. Buyer and seller activity was equally matched throughout the trading day and neither the buyers or sellers have established a trend. Tonbo or dragonfly . If there is low volume with a short small candle. "Wait and See" Candlestick Patterns Certain signals give the trader an indication of a weak market or period of consolidation.sellers and buyers. Candles with long lower shadows and small upper shadows signifies that the sellers dominated the opening while the buyers pushed the price up at the end of the session. this shows a weak market day. Avoiding these situations can help traders avoid unnecessary exposure until a clear trend has formed. In this pattern the price did not move much and therefore shows a period of indecision/consolidation. these patterns are referred to as wait and see patterns.

This indicates a sign of trend reversal. This generates a "wait and see" signal since it appears that the market is focused on the first large day. Haramiyose candlestick This two day pattern is similar to the harami. On the second day a short opposite candle is formed. Harami candlestick The harami is a two day candle pattern. . the second day a doji candlestick appears. The doji in this case opens at a different price from the previous day's close. ! This pattern is often mistaken for an engulfing pattern but it is important to note the order of the candles. The tonbo or dragonfly differ from the hangman and hammer in that the open and close are the same. ! The tonbo or dragonfly differ from the hangman and hammer in that the open and close are the same. The first day of the pattern consists of a long bodied candle either black or white. This is also seen since there should be lower trading volume on the second day. The first day opens with a tall candle of either color. except it indicates a reverse in trend. and on the second is waiting for more information. yet it still may move either way. In a hammer or hangman there is a candle body.

The reasoning to wait when this signal occurs is that the market is unsure of where to go. except that the second candle gaps up. It also signifies a "wait and see" situation. it is identical to the hoshi except it has a long upper shadow. The third candle will help us confirm. . Waiting after this pattern is prudent since there should be a short correction to help fill the gap. Shooting Star In the case of a shooting star. Hoshi (star) candlestick The hoshi pattern has the same candlesticks as the Harami pattern.

The longer the body (jittai) the more bullish is the candle. daily candlestick reversal patterns are quite subjective with the exception of the "long-legged shadows' Doji" and the "hangman and hammer" which are more commonly used and provide more significance to the trader Yo-Sen (single white candle) Reliability Rating: Very Low The easiest type of signal is the single white candlestick (yo-sen). . Single day bullish patterns For the most part.Waiting after this pattern is prudent since there should be a short correction to help fill the gap.

When the pattern occurs at the top of a up trend it is called a hangman (when it is found at the bottom of a down trend it is called a hammer). consists of a small body (either color) with a very long lower shadow.The Hammer Reliability Rating: low/moderate The Hammer. . This pattern is typically found at the top or bottoms of trends. The hammer can be either a black or a white candle.

Bullish Candlestick Patterns Two day bullish patterns Bullish Doji Reliability Rating: moderate A bullish Doji starts with a large black candle and then a down gapping Doji. it shows many positions have changed and potential for a reversal. but below the black marubozu's opening price.) . Since on the second day is trades within a small range. Kirikomi or Kirihaeshi or Piercing Line candlestick pattern Reliability Rating: Low/moderate This two day candlestick opens with a black marubozu candlestick and is followed by a kirikomi candlestick ( a kirikomi candlestick is a marubozu candlestick which has opened lower than the previous low and closes above the 50% level. Waiting for the next day to open into a white candle would be prudent to confirm the trend however when the bullish Doji occurs it is worthwhile having a look.

This creates an "overnight price gap". the candle opens lower than the previous day's low. Bullish Meeting Lines Reliability Rating: Moderate The first candle in this pattern is a black candle. the second day a white candle gaps open with a lower body closes at the same price as the previous black candle. the market then fills the gap. Bullish Belt Hold Reliability Rating: Low The bullish belt hold pattern is when a white candle occurs in a downtrend with no lower shadow and opens at a new low. This signifies that the price has hit resistance and a short uptrend should ensure. On the second day. Typically the pattern does not weaken further (if it does it's marginal).The first candle shows a down. This pattern shows a rally from the buyers towards the end of the trading session and gives some indication of a potential trend reversal. the kirikomi candlestick is considered a stong bullish signal. . By closing above the 50% level.

" . This pattern is a strong sign that an uptrend will ensue.Bullish Kicking Pattern Reliability Rating: High This pattern consists of a black marabuzo followed by a gapped up white marabuzo. The major trend is not as important with this pattern as with other patterns and is considered a highly reliable signal Bullish Engulfing Pattern (Bullish Tsutsumi) Reliability Rating: Moderate This pattern composes of "a second day long white candlestick that opens lower and closes higher than the preceding small black body.

(This black candle occurs in an otherwise uptrending market).The name comes from the idea that the white candle "engulfs" the black candle. the profit taking during an uptrend where the bullish tasuki occurs Upside Gap Tasuki Candlestick Reliability Rating: Moderate . the candle opens lower than the previous close. Bullish Tasuki Candlestick Reliability Rating: Low The bullish tasuki candlestick comprises of "a long black candlestick that opens within the range of the previous day's long white body. and closes marginally below the previous day's low". (Candlesticks do not have to have long bodies if the two days ranges are about the same size). It is common to see a neutral period follow this pattern since it takes time for the market to react to the large one day movement. This move can be interpreted as profit taking. The second day of the formation. This can also be know as a "bullish key reversal" and is a signal to reverse and go bullish. At this point.

.The upside gap tasuki is "a second day black candle that closes an overnight gap opened on the preious day by a white candle. this signifies that the trend will continue. It provides a short term opportunity to sell to fill the gap. Three day bullish patterns Bullish Sanpei (three parallel candlesticks / three soldiers) Reliability Rating: high This pattern is intented to singal either a trend reversal or the trend continuation. The filling of the upside gap is an indication that the uptrend will resume. If the second and third day candlesticks open at or above the midrange of the previous day. It consists of three white candlesticks of similar increments and size. It signifies a continuation of the trend." The pattern is similar to a common gap.

Be concious of the gaps since this will give you information as to the strength of the signal. Many positions have changed for seller to buyer in this instance. Three River Morning Star Reliability Rating: High The three river morning star is the opposite of the three river evening star. It is the third white candle where the bullish signal can be confirmed. This pattern shows a potential rally. this is it's bullish equivalent.Three River Morning Doji Star Reliability Rating: High This pattern start with a long black candle (part of a downtrend). . it is followed by a gap down doji and finally on the third day a white candle is formed with a gap up.

Therefore this pattern is to indicate whether a trader should "pause" during the trend (a short term consolidation will occur with a direction opposite to that of the major trend).Complex Bullish patterns Bullish Sanpo (rising three methods) Reliability Rating: high The idea behind the sanpo pattern is that no price movement moves straight up or down. Bullish Formation (rising three methods) Bullish Breakaway Reliability Rating: Moderate . there always exists some retracement before the movement makes a new high or low.

daily candlestick reversal patterns are quite subjective with the exception of the "long-legged shadows' Doji" and the "hangman and hammer" which are more commonly used and provide more significance to the trader. an equally valid pattern is where days 1.This is a multiple day pattern. In-Sen (single black candle) Reliability Rating: Very Low The easiest type of signal is the single black candlestick (in-sen). and 5 occur. On the second day the stock gaps down with a smaller black candle.2. On the last day of the pattern a large white candle is formed. On day 3 and 4 the candles are small but closing downward. In this pattern. day 4 in not necessary. The longer the body (jittai) the more bullish is the candle. It starts with an established downtrend. This only shows the potential for a short term breakout and does not give indication about the strength of the breakout Bearish Candlestick Patterns Single day bearish patterns For the most part. .3.

The hangman can be either a black or a white candle. . When the pattern occurs at the top of a up trend it is called a hangman (when it is found at the bottom of a down trend it is called a hammer).The Hangman Reliability Rating: low/moderate The hangman (karakasa. or paper umbrella). consists of a small body (either color) with a very long lower shadow. This pattern is typically found at the top or bottoms of trends.

Bearish Candlestick Patterns Two day bearish patterns Bearish Doji Reliability Rating: moderate . the open and the close is identical. The trend will reverse quickly after this signal occurs. This signal shows that the trend has run it's course and it will reverse.Long-legged shadows' doji candlestick Reliability Rating: moderate This candle has no body. It is considered a reliable signal.

This pattern is considered a bearish reversal (sell). It is the black candle which negates the previous day's movement that gives the pattern it's name. Dark Cloud Cover (Kabuse Candlestick) Reliability Rating: Moderate The dark cloud cover (Kabuse candlestick) has an white candle followed on the second day by a black candlestick that opens at a higher price. it shows many positions have changed and potential for a reversal. Waiting for the next day to open into a black candle would be prudent to confirm the trend however when the bearish Doji occurs it is worthwhile having a look. Bearish Belt Hold Reliability Rating: Low The bearish belt hold pattern is when a black candle occurs in an uptrend with no upper shadow and opens at a new high. Since on the second day is trades within a small range.A bearish Doji starts with a large white candle and then an up gapping Doji. . The black candlestick should open approximately half way up the white candle's body. a dark cloud cover (or kabuse candlestick). This pattern shows a rally from the sellers towards the end of the trading session and gives some indication of a potential trend reversal.

This signal is seen most often in a down trend and the appearance of this signal indicates the down trend will continue.Atekubi (Ate) Candlestick Reliability Rating: Low The atkubi candlestick's second day small white candle which has opened lowed than the previous day's low and then closes at a high. Typically the volume is lower and the current close at the high is only equal to the previous day's low. .

This pattern is bearish an indicates futher selling ahead. . the difference is that the white candlestick's high can be marginally higher than the black candlestick low. Sashikomi Candlestick Reliability Rating: Low The sashikomi candlestick is a alteration of the irikubi candlestick. This is where the white candle opens lower than the black candle's low.Irikubi Candlestick Reliability Rating: Low The irikubi candlestick is a modified atekubi candlestick. This is considered a bearish signal. and closes at the daily high.

This pattern is a strong sign that a downtrend will ensue.Bearish Engulfing Pattern (Bearish Tsutsumi) Reliability Rating: Moderate This pattern is pretty much the opposite of the bullish engulfing pattern. The first day white candle is engulfed by the second day black candle. The major trend is not as important with this pattern as with other patterns and is considered a highly reliable signal Bearish Tasuki Candlestick . Volume tends to be high during this signal and indicates a change in sentiment. Bearish Kicking Pattern Reliability Rating: High This pattern consists of a white marabuzo followed by a gapped down black marabuzo.

Three day bearish patterns . This pattern is found in down trends and is viewed as a period of profit taking. The white candle then closes slightly above the black candle's low.Reliability Rating: Low The tasuki pattern has a second day white candle that has opened within the body of the first day black candle's body. It is typical for the down trend to continue after this pattern occurs. Downside Gap Tasuki Candlestick Reliability Rating: -This pattern has a second day white candle that closes an overnight gap from a black candle. This is a bearish signal. Either candle can have varying body sizes as long as the range of both candles are of similar size. This provides a very short term opportunity to buy to fill the gap. however. it has no other significance.

It signifies a continuation of the trend. If the second day gap is lower followed by a third candlestick which opens above the midrange of the second day. each black candlestick opens at the close of the previous day. It consists of three black candlesticks of similar increments and size. This pattern is extremely bearish and suggests a strong down trend. .Bearish Sanpei (three crows) Reliability Rating: high This pattern is intented to singal either a trend reversal or the trend continuation. In the last variation. (also known as a "down gap three wings"). this is also considered bearish.

it is followed by a gap up doji and finally on the third day a black candle is formed with a gap down. .Red three candlestick advance block or Skizumari Reliability Rating: low If the second and third day show decreasing higher high's following a long white marubozu. the trend is reaching it's end and signifies a sell. This sell pattern is also known as a red three candlestick advance block or skizumari. this indicates uncertainty and it would be advised to assume the trend will break. Three River Evening Doji Star Reliability Rating: High This pattern start with a long white candle (part of a uptrend).

Other variations of the sansen are . it gaps down and forms a black candle. This pattern is considered a bearish reversal. Sansen / Three Rivers / The Three River Evening Star Reliability Rating: Moderate The sansen is a three day pattern.The uptrend builds stength and gaps on on the second day of this pattern. followed by a small gapped white candle and ends with a long black candle. On the second day. The first day consists of a long white candle. there is a small trading range showing an erosion of the uptrend. Finally on the third day. It is the third day that gives the confirmation that the trend has reversed.

On the second day the stock gaps up with a smaller white candles. On the last day of the pattern a large black candle is formed. On day 3 and 4 the candles are small but closing upward. .Complex Bearish patterns Bearish Sanpo (falling three methods) Reliability Rating: high The idea behind the sanpo pattern is that no price movement moves straight up or down. there always exists some retracement before the movement makes a new high or low. Bearish Formation (falling three methods) Bearish Breakaway Reliability Rating: Moderate This is a multiple day pattern. It starts with an established uptrend. Therefore this pattern is to indicate whether a trader should "pause" during the trend (a short term consolidation will occur with a direction opposite to that of the major trend).

and 5 occur.3. This only shows the potential for a short term breakout and does not give indication about the strength of the breakout. Sanzan or Three Mountains Reliability Rating: moderate Similar to a triple top formation. day 4 in not necessary.2. Buddha top formation Reliability Rating: moderate/high . the Sanzan (or three mountains) have three peaks of all similar height. an equally valid pattern is where days 1.In this pattern.

The buddha top is similar to the sanzan except that the middle mountain is highter than the other two (head and shoulders pattern). .

When movements hit the support or resistance line. It was upgraded by the early twentieth century into point and figure. Point and Figure was developed towards the end of the nineteenth century. "reversal". There is also quite a few patterns where the third hit is when the signal is generated. and "wait and see" (trend continuation). . This new form of charting was referred to as the "book method". Overview • Andrews' Pitchfork is a method of channel identification in a trending market. not time. There is also a significance given to the number three in point and figure charting. Unlike the book method.POINT & FIGURE PATTERNS Overview Point and Figure charting differs from other charting techniques by the fact that it only requires price for analysis. Point and Figure patterns can be categorized by "bearish". extra attention should be spent on the third collision. • This technique. in effect. point and figure uses the symbol X or O to describe the price movement rather than writing the entire price into the field. Andrews' Pitchfork The lines formed by Andrews' Pitchfork can help predict channels of support and resistance in a trending market. It is also plotted differently by using columns and rows using price movement only. "bullish". Due to the accuracy of the signals provided by point and figure charting. interest in this form of analysis is continuously growing. The book method was applied by entering the actually prices into the rows and columns however this proved to be not very popular since it was time consuming to enter the entire price. splits a major channel into two minor equidistant channels.

Pt. B." this pattern is based on a set of lines drawn from peaks and valleys on a price chart. at . A. First. Andrews' median lines.• The lines in the Pitchfork tend to delineate lines of support and resistance. and the pitchfork pattern. Originally called the "Median Line Study. Draw a line (shown in red) from this point to the next significant reversal point. When linked together. 2. often indicate lines of support or resistance where prices tend to stall out or reverse. Andrews' Pitchfork was developed by Dr. Interpretation Andrews' Pitchfork is plotted on a price chart as follows: 1. identify a significant reversal point (high or low) and this becomes Pt. Alan Andrews. based on what he called his "Action/Reaction" techniques. the arrangement of lines closely resembles a farmer's pitchfork. Dr.

" Signals Watch for reversals when the price approaches or penetrates the lines of the Pitchfork. B. draw two lines parallel to the Median Line. the more often support or resistance is confirmed the more reliable the line can be considered. Now. Then plot a line from a significant point early in the trend (Pt. He also counted waves using what he called the "0-3/4 pivot count rule" and the "5 count probability rule.3. C) bisecting the first line (in red) half way between Pts.but enough to indicate that the channel was indeed providing important support and resistance. Dr. Andrews' price study methods were typically much more complex than what I've shown here. 4. the lower channel managed to contain most of the price activity . . These form the "tines" of the Pitchfork. As with any trendline. one starting from Pt. This is the Median Line or "handle" of the Pitchfork. A and B. In the example above.not perfectly . This is a quick introduction to the Pitchfork technique. A and the other from Pt.

Technically speaking. including confirmation of trend and an indication of volatility. moving average envelopes are plotted at a fixed percentage above and below a moving average. Two winding parallel lines above and below a central moving average (MA) create a band that contains the majority of price movements within a channel. The difference is that Bollinger Bands are also sensitive to volatility in the market. whereas Bollinger Bands are placed two standard deviations above and . Developed by John Bollinger. The bands spread further apart during volatile markets and come closer together during calmer markets. this technique is one of the most popular forms of envelope or channel indicator. based on the width of the band.BOLLINGER BANDS Bollinger Bands provide several useful signals. This is similar to moving average envelopes. Overview Bollinger Bands can provide an indication of: • • • whether prices are relatively high or low whether current trends are likely to continue or reverse the volatility of a market.

give absolute buy and sell signals based on price touching the bands." He goes on to say. . as is commonly believed. signals generated by Bollinger Bands should be confirmed using complimentary indicators. "Trading bands are one of the most powerful concepts available to the technically based investor. one of the biggest mistakes in technical analysis is the multiple counting of the same information. Using two standard deviations ensures that 95% of the price data will fall between the two outside bands. According to Bollinger. "It is the action of prices near the edges of the envelope that we are particularly interested in.based on price alone On-Balance Volume (OBV) -.below the moving average. Interpretation John Bollinger has written that.combining price range and volume. For example. which is usually 20 days." As with most indicators. What they do answer is the perennial question of whether prices are high or low on a relative basis.combining closing prices and volume Money Flow -. but they do not. The indicators he recommends to complement Bollinger Bands are: • • • RSI or MACD -. using different indicators all derived from the same series of closing prices to confirm one another.

Indicators are used in two main ways: to confirm price movement and the quality of chart patterns. giving them a predictive quality. A leading indicator is thought to be the strongest during periods of sideways or non-trending trading ranges. Indicators are used as a secondary measure to the actual price movements and add additional information to the analysis of securities. they are best used in conjunction with price movement. It is important to note that while some traders use a single indicator solely for buy and sell signals. several indicators have become fairly popular. As Technical analysis has become more & more computerized. Indicators that are used in technical analysis provide an extremely useful source of additional information. Indicators like MACD. It would be useful if we divide technical indicators into two categories. These indicators help identify momentum. RSI & momentum are now commonly used. while the lagging indicators are still useful during trending periods. volatility and various other aspects in a security to aid in the technical analysis of trends. while a lagging indicator is a confirmation tool because it follows price movement. trends. trends. & .VARIOUS TECHNICAL TOOLS (Indicators & Oscillators) INDICATORS Indicators are calculations based on the price and the volume of a security that measure such things as money flow. Stochastics. namely:  Trend following indicators . There are two main types of indicators: leading and lagging. and to form buy and sell signals. A leading indicator precedes price movements. chart patterns and other indicators. volatility and momentum.

 Oscillators. more than the nuances of various indicators. Relative Strength Index (RSI) Developed by J. what is more important to understand when to use indicators. the number of time periods to use in the calculation. MACD & moving averages form part of the trending indicators while stochastics. Welles Wilder and introduced in his 1978 book. Trend following indicators are used in trending markets & oscillators are used in trading markets. RSI. New Concepts in Technical Trading Systems. The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100. the Relative Strength Index (RSI) is an extremely useful and popular momentum oscillator. Calculation . Wilder recommends using 14 periods. It takes a single parameter. momentum etc are some of the trading indicators. In his book. Also.

See the "Smoothed RS" formula above for details.To simplify the formula. the total of those 5 gains (losses) is divided by the total number of RSI periods in the calculation (14 in this case). the RSI has been broken down into its basic components which are the Average Gain. Here's how lines 14 and 15 were calculated: . . Even if there are only 5 gains (losses). For a 14-period RSI. Calculation of the First RS value is straightforward: divide the Average Gain by the Average Loss. the Average Gain equals the sum total all gains divided by 14. The Average Loss is computed in a similar manner. and the subsequent Smoothed RS's. the Average Loss. The table on next page illustrates the formula in action. the First RS. All subsequent RS calculations use the previous period's Average Gain and Average Loss for smoothing purposes.

the RSI declines because RS will be less than 1. Overbought & Oversold  An oscillator becomes overbought when it reaches a high level associated with tops in the past. An Oscillator or oversold (near zero). have a range. much like a car slowing down to make a U-turn. when the average loss is greater than the average gain. for example between zero and 100. Professionals trade these extremes by betting against them. So long as oscillators keep making new highs .  An oscillator becomes oversold when it reaches a low level associated with bottoms in the past. Note: If the Average Loss ever becomes zero. RSI becomes 100 by definition. When the Average Gain is greater than the Average Loss. Oscillators: Oscillators identify the emotional extremes of market crowds.14 in this case. When an oscillator traces a lower peak. it is safe to hold long positions.Note: It is important to remember that the Average Gain and Average Loss are not true averages! Instead of dividing by the number of gaining (losing) periods. When an oscillator reaches a new high. the RSI rises because RS will be greater than 1. it mains that the trend has stopped accelerating and a reversal can be expected from there. it is safe to hold short positions. Conversely. so long as they keep touching new lows. total gains (losses) are always divided by the specified number of time periods . ie: they bet on a return to normalcy . They help in determining unsustainable levels of optimism & pessimism. and signal periods where the security is overbought (near 100) . The last part of the formula ensures that the indicator oscillates between 0 and 100. it shows that an uptrend is gaining speed and is likely to continue. Correspondingly.

it helps a trader to pick a top & bottom. giving buy signals. Lane in the late 1950s. Closing levels that are consistently near the top of the range indicate accumulation (buying pressure) and those near the bottom of the range indicate distribution (selling pressure). but they give premature & dangerous trading signals when a new trend erupts from a range.When an oscillator rises or falls beyond its reference line. Stochastic Oscillator Developed by George C. giving premature buy signals. Calculation: . the Stochastic Oscillator is a momentum indicator that shows the location of the current close relative to the high/low range over a set number of periods. Oscillators work splendidly in a trading range. It can also stay oversold for weeks in a steep downtrend. An oscillator can stay overbought for weeks at a time when a new . strong uptrend begins.

it will fluctuate between 0 and 100. or just above the mid-point. %K tells us that the close (115. The number of periods will vary according to the sensitivity and the type of signals desired. As with RSI. A 3-day simple moving average of %K is usually plotted alongside to act as a signal or trigger line. 14 is a popular number of periods for calculation.38) was in the 57th percentile of the high/low range. the highest high over the last 14 days and the lowest low over the last 14 days. Because %K is a percentage or ratio. called %D.A 14-day %K (14-period Stochastic Oscillator) would use the most recent close. Slow versus Fast versus Full .

let's look at Fast versus Slow. The Full Stochastic is discussed later. As shown above. which is found using the formula provided above. To alleviate some of these false breaks and smooth %K (fast). The driving force behind both Stochastic Oscillators is %K (fast). One method of smoothing data is to apply a moving average. %D (fast) is a smoothed version of %K (fast). In order to avoid confusion between the two. June and July. The thick black line represents %K (fast) and the thin red line represents %D (fast). Also called the trigger line. and Full. For now. the Fast Stochastic Oscillator is made up of %K and %D. I'll use %K (fast) and %D (fast) to refer to those used in the Fast Stochastic Oscillator.There are three types of Stochastic Oscillators: Fast. Notice how the %K (fast) line pierces the %D (fast) line a number of times during May. and %K (slow) and %D (slow) to refer to those used in the Slow Stochastic Oscillator. Slow. a 3period simple moving average was applied to %K (fast). . To smooth %K (fast) and create %D (fast). the Fast Stochastic Oscillator is plotted in the box just below the price plot. the Slow Stochastic Oscillator was developed. In the ANDHRA BANK example.

the first parameter is the number of periods used to create the initial %K line and the last parameter is the number of periods used to create the %D (full) signal line.The Slow Stochastic Oscillator is plotted in the lower box: the thick black line represents %K (slow) and the thin red line represents %D (slow). A close examination would reveal that %D (Fast). Just as in the Fast and Slow versions. a (14. the thin red line in the Fast Stochastic Oscillator. y is the second parameter and (in the case of Full stochastics). a 3-day SMA was applied to %K (Slow). the thick black line in the Slow Stochastic Oscillator. In the case of Fast and Slow Stochastics. What's new is the additional parameter. 3. For example. 1. z is the third parameter. a 3-day SMA was applied to %K (fast). The Full Stochastic Oscillator takes three parameters. 3) Full Stochastic and a (12. the one in the middle. The Full Stochastic Oscillator is more advanced and more flexible than it's Fast and Slow cousins. or %D (slow) in the Slow Stochastic Oscillator. The %K (full) line that gets plotted is a n-period SMA of the initial %K line (where n is equal to the middle parameter). To form the trigger line. 3) Fast Stochastic is equivalent to a (14. 2) Slow Stochastic is equal to a (12. x is typically 14 and y is usually set to 3. %K and %D Recap %K (fast) = %K formula presented above using x periods %D (fast) = y-day SMA of %K (fast) %K (slow) = 3-day SMA of %K (fast) %D (slow) = y-day SMA of %K (slow) %K (full) = y-day SMA of %K (fast) %D (full) = z-day SMA of %K (full) Where x is the first parameter. 2) Full Stochastic. . is identical to %K (Slow). You can even use it to duplicate the other versions. This 3-day SMA slowed (or smoothed) the data to form a slower version of %K (fast). To find %K (slow) in the Slow Stochastic Oscillator. It is a "smoothing factor" for the initial %K line.

A security can continue to rise after the Stochastic Oscillator has reached 80 and continue to fall after the Stochastic Oscillator has reached 20. the second break above 20 confirms the divergence and a buy signal is given. wait for a positive divergence to develop after the indicator moves below 20. Buy and sell signals can also be given when %K crosses above or below %D. For a buy signal. wait for a negative divergence to develop and then a cross below 80. This will usually require a trader to disregard the first break above 20. Lane believed that some of the best signals occurred when the oscillator moved from overbought territory back below 80 and from oversold territory back above 20. However.Use Readings below 20 are considered oversold and readings above 80 are considered overbought. . Once the oscillator reaches overbought levels. One of the most reliable signals is to wait for a divergence to develop from overbought or oversold levels. Lane did not believe that a reading above 80 was necessarily bearish or a reading below 20 bullish. After the positive divergence forms. This usually requires a double dip below 80 and the second dip results in the sell signal.

Relative Strength Index Stochastic Oscillator .

Sign up to vote on this title
UsefulNot useful