A Review Of Technical And Fundamental Analysis in Indian Stock Markets Submitted To Ms. Parul Grover Centre of Management and Humanities Punjab Engineering College Submitted By Devansh Kandpal 15103004 Nischit Pradhan 15103011 Amav Vohra 15103057 Ivy Raina 15103058 Mehak Kawatra 15103064 Rohan Garg 15103082SUMMARY 1. INTRODUCTION 2, LITERATURE REVIEW 3, NEED OF STUDY 4, OBJECTIVE OF STUDY 5, RESEARCH METHODOLOGY 6. DISCUSSION AND ANALYSIS 7. FINDINGS AND CONCLUSION 8, BIBLIOGRAPHY 13 14 15, 23 30 32SUMMARY Investment is putting money into something with the expectation of profit. More specifically, investment is the commitment of money or capital to the purchase of financial instruments or other assets so as to gain profitable retums in the form of interest, dividend capital gain sends, or appreciation of the value of the instrument (capital gains). An investment involves the choice by an individual or an organization, such as a pension fund, after some analysis or thought, to place or lend money ina vehicle, strument or asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility capital gainsay of generating retums over a period of time, Investment comes with the risk of the loss of the principal sum. The investment that has not been thoroughly analyzed can be highly risky with respect to the investment owner because the possibility of losing money is not within the owner's control. The difference between speculation and investment can be subtle. It depends on the investment owner's mind whether the purpose is for lending the resource to someone else for economic purpose or not. The analysis would be based on secondary data collected from various organizational databases, websites, newspapers and other necessary official records, books & magazines. Monthly closing prices would been taken for technical analysis purpose from a specific time frame. Statistical measures like mean, deviation, correlation moving averages would be used to find out the conclusion for the technical analysis. Besides Tables & Charts are used to present and analyze data, Whereas, to predict price action and market trends by analyzing economic indicators and societal factors would be carried out for the fundamental study. In the view of fundamental analysis, stock valuation based on fundamentals aims to give an estimate of their intrinsic value of the stock, based on predictions of the future cash flows and profitability of the business. Fundamental analysis may be replaced or augmented by market criteria, An approach to invest analysis, technical analysis is radically different from fundamental analysis. Technical analysis don’t evaluate a large number of fundamental factors relating to the ‘company the industry and the economy, instead they analyze market generated data like price and volume to determine the future direction of price movement. Here we conduct fundamental and technical analysis of RELIANCE as a company from the oil and gas i dustry.1, INTRODUCTION The development of any economy depends on the largest industries of that economy, The oil and gas sector constitutes of a key part of the Indian economy. The oil and gas industry in India dates back to 1889 when the first oil deposits in the country were discovered near the town of Digboi in the state of Assam, The natural gas industry in India began in the 1960s with the discovery of gas fields in Assam and Gujarat. As on 31 March 2018, India had estimated crude oil reserves of 594.49 million tonnes and natural gas reserves of 1339.57 billion cubic meters (BCM). India imports 82% ofits oil needs and aims to bring that down to 67% by 2022 by replacing it with local exploration, renewable energy and indigenous ethanol fuel. India was the third top net erude oil (including crude oil products) importer of 189 Mt in 2017. The largest Indian crude oil reserves are found in the Western Offshore (39.60%), and natural gas in India as on 31 March 2017 was 1,227.40 bil 5.08% from the previous year. The largest reserves of natural gas are located in the Easter Offshore (39.37%) and the Western Offshore (23.44%). sam (26.48%). The estimated reserves of n cubic meters (BCM), increasing by India is heavily dependent on crude oil and LNG imports with 82.8% import dependence for crude oil and 45.3% for natural gas/LNG. The net foreign exchange outgo is 63.305 billion US$ in the financial year 2017-18 on account of crude oil imports. India generated 35.2 million tons of petroleum products from indigenous crude oil production whereas the consumption of petroleum, products is 204.9 million tons. Similarly India generated 31.7 bem natural gas locally against the consumption of 58.1 bem. LNG price is linked to the prevailing crude oil price in global markets, India is the third biggest oil importer after US and China in 2017. In the year 2019, US is going to become net exporter of LNG, LPG, crude oil and its products from its shale oil production boom. Shale oil produ n cost would be the lower ceiling price for the crude oil in international trade as its substantial production is consumed internally in US. Due to lack of adequate petroleum reserves, India has to depend mostly on crude oil imports in near future till its renewable energy resources such as solar, wind, hydro and biomass are exploited adequately to achieve energy security by replacing the petroleum products consumption which are also major contributors to the air pollution. In such adverse situations, India has to proactively play a major role in global crude oil trade as swing oil producer by using its limited crude oil productionbase to bring down the high price of crude oil fixed by OPEC and the multinational crude oil production companies. Intemational crude oil prices vary steeply for a small mismatch between global supply and global demand. To become swing oil producer, India should enhance crude oil extraction rate twice of the normally designed rate for continuous extraction from its developed oil fields and extract crude oil on intermittent basis only when crude oil prices exceed a preset upper ceiling value instead of continuously extracting oil, Also, India and China being major oil importers, both countries should coordinate for mutual benefit while trading in global oil markets to moderate the crude oil price and nullify the oil pricing, power of OPEC, etc. Normally, crude oil pricing and gold pricing exhibit opposite trends in global trading (i.e. while one appreciates the other depreciates). India should also procure crude oil in futures market by hedging gold. Reliance Industries Limited (“Reliance Industries” or the “Company”) , together with its subsidiaries, engages in exploration, development, and production of crude oil and natural gas in India and internationally. The Company operates through three segments: petrochemicals, refi 1g, and oil and gas. Petrochemicals segment produces and markets petrochemical products, such as polyethylene, polypropylene, poly butadiene rubber, polyester yarn, polyester fibre, ethylene glycol, butadiene, caustic soda, and polyethylene terephthalate. Refining segment engages in the production and marketing of petroleum products, Oil and Gas segment is involved in the exploration, development, and production of crude oil and natural gas. ‘The Company also offers textile products, including suitings, shirtings, and readymade garments; and ready-to-stitch and take away fabrics. In addition, RIL operates retail outlets comprising Reliance retail, food and grocery specialty stores, hypermarkets, and wholesale stores. On 18 October 2007, Reliance Industries became the first Indian company to breach $100 billion ‘market capitalization. The company is ranked 148th on the Fortune Global 500 list of the world’s biggest corporations as of 2018. It is ranked 8th among the Top 250 Global Energy Companies by Platts as of 2016. Reliance continues to be India’s largest exporter, accounting for 8% of India's total merchandise exports with a value of Rs 147,755 crore and access to markets in 108 countries.Reliance is responsible for almost 5% of the government of India's total revenues from customs and excise duty. It is also the highest income taxpayer in the private sector in India. It is often said that investing is a complicated process and requires you to make decisions that could seemingly result in losses. At the same time, you are also provided with an opportunity to make huge profits if you make the right investment decision, Hence, the most important question here is: How do you pick the perfect stock and make the ultimate investment decision? For this we will look at Technical and Fundamental Analysis of Stock Markets especially focusing on Indian Stock Markets. These terms refer to two different stock-picking methodologies. They are used for research, which helps you forecast the future growth and stock trends. Like any investment strategy, both have their advantages and disadvantages. Here are the defining principles of each of these methods of stock analysis 1, Fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock. Fundamental analysis studies everything from the overall economy to industry conditions to the financial condition and management of companies. 2. Technical analysis is the evaluation of securities, which involves studying. statistics generated by market activity, such as past prices and volume, Technical analysts use stock charts to identify patterns and trends that may suggest how a stock will move in the future. Which strategy works best is always debated, and many volumes of textbooks have been written on both of these methods.2. LITERATURE REVIEW Silpa K.S., Arya Mol J., and A.S. Ambily conducted a study on Fundamental analysis of selected IT companies listed at NSE. According to the study, Fundamental analysis is studied in three parts: (1) Economic analysis, that deals with fundamental factors like GDP, IIP, fiscal deficit, inflation, current account deficit ete, (2) Industry analysis, Indian IT sector is analyzed based on entry barriers, type of industry, government interference, Porter’s five foree model. (3) Company analysis, which deals with various ratios such as dividend payout ratio, EPS, P/E ratio, Debt-Equity ratio are used. The study helped us know what strategies the investor can adopt while trading in equity market with the help of fundamental analysis, and that this kind of analysis is the upcoming tool and helps the investor to know how the company is fundamentally strong and who want to invest in a systematic manner in the competitive world, the study reveals the importance for the investment, decision which acts as guidance and helps them in decision making and predicts the figure price of the scrips. Same was done with the help of studying the growth and performance of IT sector, the Fundamental Analysis for five company scrips to recommend for better choice of investment, and by analyzing the Intrinsic value and forecast the future value through fundamental analysis. ‘Through this study, the following conclusions were made: (1) It is recommended to buy and hold the shares which are undervalued such as Wipro, TCS, and Infosys as their share prices have a propensity to raise in the future (2) Investors are recommended to make a thorough analysis of the capital market, about the company and industry before making any investment decisions. (3) It is suggested to sell the overvalued shares such as HCL Technologies and Mindtree as their shares prices have a tendeney to decrease in the future. (4) Investing in one share alone is not suggested as returns may not be favorable always. (5) Investing in multiple or diversified shares reduces the risk and provides a stable return. The Information Technology sector companies are one most promising platform of investment in capital market and in turns give considerable return for the risk taken by investors.Dr. Pravit Choudhary and Prof. Apoorva Bhatnagar in the paper titled “A Study on Technical analysis of selected PSUs and their market movements with relation to BSE” aimed to test the movement of selected PSUs securities in relation to Market Indices. The following was done with the help of research that was fully based upon secondary data that ‘was collected from internet ie. PSUs which are listed in Bombay Stock Exchange. The movement of BSE and the movement of shares were recorded on a monthly basis. This study provided the impact of market indices on Top PSUs and concluded that only one (out of five) PSU (NTPC) was not affected from market indices for a particular year. It gives better insights in terms of understanding the impact of BSE Indices and PSUs in India. Hence, this work could be used as a impact of BSE Indices on the Top PSUs. Nitha K. P., Dr. $. Sivakumari in their publication “Survey on Factors Determining the Share Price Movement in Indian Stock Market - A Big Data Approach” presented a framework on share price movement and investigated the factors determining and predicting the share prices in Indian stock market through big data approach. This study also tried to focus on the fundamental factors, technical factors and sentimental factors that stimulate the share price movement. The methodology used mainly focuses on the implications of the theory of financial markets and features affecting the share price movement Industry specific factors such as EPS, book value, P/E ratio and dividend yield influence the share price movement of Indian companies a lot. The study was undertaken with an objective to review the existing literature by examining the relationship between stock prices and company specific intrinsic factors or fundamental factors such as book value per share, dividend per share, earning per share, price earnings ratio, dividend yield, and dividend payout. The study also examined the importance of technical factors, like mo 1g averages, simple moving averages, Relative Strength Index and exponentially moving averages and sentimental factors, which highly influence the share price movement of Indian companies, Nada Petrusheva, and Igor Jordanoski in their paper titled “Comparative Analysis between the Fundamental and Technical Analysis of Stocks” studied the differences between the fundamental and technical analysis in their way of working, time horizon, tools of analysis, i.e. Charts vs. Financial statements.‘The following conclusions were made in each of the point of difference. (1) In terms of way of working, Fundamental analysis attempts to calculate the future value of a share through various economic variables, known as fundamentals. The analysis consists of studying the economy as a whole, the industry in which the company operates and the company itself. The basic premise of this analysis is that in the short term, the share price does not correspond to its value, but in the long run it will correct itself. Whereas, Technical analysis attempts to predict the share price in the future, It does not deal with all the economic factors that may affect it, but only with the share price’s movements. The purpose of technical analysis is to forecast the stock price in order to establish favorable moments for buying and selling stocks. Accordingly, it focuses only on the share price and trading volume, which are measured and presented at various tables and graphs. (2) Both kinds of analysis work on different time horizons, Fundamental analysis uses longer periods when analyzing stocks than technical analysis. Technical analysis uses relatively short periods, that may be days, weeks or months, while fundamental analysis uses periods of several years, Therefore, that implies that the fundamental analysis is used by investors who are trying to pick stocks whose value will increase in the future, over several years. (3) Tools of analysis used are different as fundamental analysts have the financial statements as the main source of information, while technical analysts use charts with price movements as the almost only source of data. (4) In general, the purpose of the technical analysis is trading, and the goal of fundamental analysis is investment, Fundamental analysis is primarily used by investors who buy and hold stocks for a period of time, while technical analysis is most frequently used by traders looking to make short-term profits. Investors buy certain stocks because they believe that their value will inerease in the future, while traders buy certain stacks because they think they will be able to sell them at a higher price in a relatively short period of time. From the study it can be concluded that technical and fundamental analysis are seen as total ‘opposites in the world of investments. However, many investors and traders have managed to combine them and achieve successful results. Investors who apply mainly fundamental analysis, s can use technical analysis to determine the exact time when to make a transaction, whether it buying or selling. Since technical analysis is primarily a market timing tool, it can be implementedeffectively in conjunction with fundamental analysis. The proper assessment of the time to enter into the investment opportunity can sometimes be more important and the investment itself. ‘Therefore, the best advice would be to study the fundamental factors, make the investment dei ion and use the technical analysis to determine the ti ¢ of purchase or sale. Hence, it is undeniable that there are certain advantages in combining them or at least having a deeper knowledge of both types of investment strategies, since technical and fundamental analysis are the most important and the most powerful tools in the realm of finance and investing, and both analysis have their advantages and disadvantages that can be combined to give optimum results. Mr. Suresh A.S. in his study on fundamental and technical analysis aim to predict the direction of national economy because economic activity affects the corporate profit, investor attitudes and expectation and ultimately security prices, estimate the stock price changes by studying the forces operating in the overall economy, as well as influences peculiar to industries and companies, and select the right time and right securities for the investment by analyzing Long-term Trends, Value Spotting, Business Acumen, Value Drivers and knowing who is who, as part of Fundamental Analysis. Fundamental analysis and Technical analysis are the two main approaches to security analysis. Technical analysis is frequently used as a supplement to fundamental analysis rather than as a substitute to it, According to technical analysis, the price of stock depends on demand and supply in the market place. It has little correlation with the intrinsic value. All financial data and market information of a given stock is already reflected in its market price. Technical analysts have developed tools and techniques to study past patterns and predict future price. Technical analysis is basically the study of the markets only. Technical analysts study the technical characteristics which may be expected at market turning points and their obj assessment. There are numerous tools and techniques for doing technical analysis. Basi ly, this analysis is done from the following four important points of view of namely, Prices, Time, Volume, and Width. The quality of price change is measured by determining whether a change in trend spreads across most sectors and industries or is concentrated in few securities only. Study of the width of 10the market indicates the extent to which price changes have taken place in the market in accordance with a certain overall trend, And thus, it was concluded that It is highly essential for the investor to do both fundamental and technical analysis for deciding the suitable stock. In stock market, trend is considered to be a man’s, best friend. Naveen Kumar Baradi, Sanjay Mohapatra conducted a study to examine the importance that brokers” personally give to fundamental and technical analysis over seven forecasting horizons: intraday, 1 week, | month, 3 months, 6 months, I year and beyond 1 year. Attempt was made to understand the relative importance brokers attach to chartist / technical analysis versus fundamental analysis of stocks over seven forecasting horizons. The next idea was to examine the importance of brokers’ views of the degree of complementarity of fundamental and technical analysis in stock price forecasting. Attempt was made to understand the degree to which brokers view chartist/ technical analysis and fundamental analysis to be complementary tools of analysis in stock exchange trading. The results presented in the paper were based on a well-structured online questionnaire survey conducted among stock brokers of Bombay stock exchange, India. In the questionnaire, brokers ‘were asked background information about their professional and personal status, location of the institution, professional rank, work area, age, years of work experience, and gender. Ina later part of the questionnaire, participants were asked to evaluate the importance they attach to chartist versus technical analysis on a series of forecasting horizons ranging from intraday to longer than 1 year. The survey also included questions about complementarity of technical and fundamental techniques. From the overall means of seven forecasting horizons, it was interpreted that at shorter time periods (Intraday, 1 week and 1 month), there exists a skew towards reliance on technical analysis as compared to fundamental analysis, but as the length of time period increases (6 months, | year and > 1 year) the skew shifts to fundamental analysis. This suggests that models that focus on fundamentals may perform poorly over short horizons because they miss the effect of technical analysis-based decision on the market in the short period. As professional traders do not trade purely on the basis of the economic fundamentals, but also take into account market movements ngenerated by other factors (noise trading), hence it is recommended that knowledge of technical signals is important to anyone who would like to participate successfully in the stock market. w3. NEED OF STUDY The aim of this study is to evaluate the performance of Reliance Industries Limited in Petrochemical Industry. The study is also conducted to find out the direction and magnitude of oil and gas industry. The analysis of the past performance will help to predict the future behavior of the scrip. This study may help the investors to take decisions regarding investments. The study also helps the trends in economic market. Stock selection criteria is a strategy in which an analyst or investor uses a systematic form of analysis to determine if a particular stock constitutes a good investment which should be added to their portfolio. There are many different ways to value stocks. The key is to take each approach into account while formulating an overall opinion of the stock. The objective of stock selection criteria is maximizing total return on investment for the target holding period, subject to li risk to acceptable level, and maintaining a targeted degree of portfolio diversification. Problem Statement To understand the fundamental and technical analysis of different equity. To study the stock market trends of various stocks, evaluate the economy, industry & companies in the banking industry using fundamental and to know how the entry and exit point work with technical analysis. 34, OBJECTIVE OF STUDY Primary Objectives of the project: To understand the economic indicators supporting the oil and gas industry To evaluate and analyze the growth, trends and financial performance of companies in the chosen industry, To know the movements (upward or downward) of stock prices of selected firm. ‘To analyze tools of technical analysis can be used in stock prices movement. To analysis & understand trends and pattems in stock price movements using technical tools. To determine the future direction of the stocks by technical analysis. Secondary Objectives of the project: 4 To match the financial theory with practice. To explore the financial position of the chosen company. To understand the share practice movement with the help of technical analysis. To understand the fundamental analysis.5. RESEARCH METHODOLOGY Research Parameters A, For Fundamental Analysis ‘We tried to analyse the company on some of the following parameters to deduce and arrive at our conclusions. Parameter Rationale Financial Financial statements are reports prepared by a company's Data/Financial | management to present the financial performance and position at a Statements point in time. A general-purpose set of financial statements usually includes a balance sheet, income statements, statement of owner's equity, and statement of cash flows. Industry Trends | Industry analysis involves reviewing the economic, political and ‘market factors that influence the way the industry develops. Major factors can include the power wielded by suppliers and buyers, the condition of competitors, and the likelihood of new market entrants. Competitors Competitor analysis in marketing and strategie management is an Performance assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. ityReturn on Equity (RoE) Return on equity (ROE) is @ measure of financial performance calculated by dividing net income by shareholders’ equity. Because sharcholders' equity is equal to a company’s assets minus its debt, ROE could be thought of as the return on net assets. ROE is considered a measure of how effectively management is using a company’s assets to create profits. Return on Assets (RoA) Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets, ROA gives a manager, investor, or analyst an idea as to how efficient a company's management is at using its assets to generate earings. Return on assets is displayed as a percentage. Company ‘Management The functions of management include planning, or deciding upon business goals and the methods to achieve them; organizing, or determining the best allocation of people and resources; directing, or motivating, instructing, and supervising workers assigned to the activity; and control, or analyzing metrics during business activities to ensure completion of tasks and identify areas for improvement. Promoters and Public Shareholding The division of assets between the promoter, investors and publie (in case of a listed company). Higher percentage of shares with promoter indicate that company management is likely to focus more on ‘maximizing growth and valuation while higher percentage with investors indicates a slight shift towards dividend and buyback strategies. 16Dividend The frequency and amount issued as dividends by a company affect Frequency and | its stock price. For a company issuing frequent dividends, stock price Data usually tends to be higher. Apart from these listed parameters we recommend using the below table to understand the fundamental basics about a company and understand and evaluate the company in a better way. TROY 1 | What does the company do? Who are its promoters? What are their backgrounds? To get a basic understanding of the business To know the people behind the business. A sanity check to eliminate criminal background, intense political affiliation ete What do they manufacture (in case To know their products better, helps us get a sense of and where are they located? 3 it is a manufacturing company)? the product's demand supply dynamics To get a sense of their geographic presence. Also at times their plants could be located in a prime How many plants do they have 4 location, and the value of such location could go off balance sheet, making the company highly undervalued Are they running the plant in full capacity? Gives us an idea on their operational abilities, demand for their products, and their positioning for future demand 7What kind of raw material is required? Helps us understand the dependency of the company. For example the raw material could be regulated by Govt (like Coal) or the raw material needs to be imported either of which needs further investigation Who are the company’s clients or end users? By knowing the client base we can get a sense of the sales cycle and efforts required to sell the company’s, products Who are their competitors? Helps in knowing the competitors. Too many competing companies means margin pressure. In such a case the company has to do something innovative, Margins are higher if the company operates in — monopoly, duopoly, or oligopoly market structure Who are the major shareholders of the company? Besides the promoter and promoter group, it helps to know who else owns the shares of the company. Ifa highly successful investor holds the shares in the company then it could be a good sign 10 Do they plan to launch any new products? Gives a sense on how ambitious and innovative the company is. While at the same time a company launching produets outside their domain raises some red flags — is the company losing focus? i Do they plan to expand to different countries? Same rational as above 1‘Whaat is the revenue mix? Which product sells the most? Helps us understand which segment (and therefore the product) is contributing the most to revenue. This in turns helps us understand the drivers for future revenue growth 13 Do they operate under a heavy regulatory environment? This is both good and bad ~ Good because it acts a natural barrier from new competition to enter the market, bad because they are limited with choices when it comes to being innovative in the industry ‘Who are their bankers, auditors? Good to know, and to rule out the possibility of the companies association with scandalous agencies, 15 How many employees do they have? Does the company have labor issu Gives us a sense of how labor intensive the company’s operations are. Also, if the company requires a lot of people with niche skill set then this could be another red flag 16 What are the entry barriers for new participants to enter the industry? Helps us understand how easy or difficult it is for new companies to enter the market and eat away the margins 17 Is the company manufacturing products that can be casily replicated in a country with cheap labor? Ifyes, the company maybe sitting on a time bomb — think about companies manufacturing computer hardware, mobile handsets, garments etc 18B. For Technical Analysis 1. Support and Resistance Level MSFT Mcroson Corp. naséag 6s estockctarscom © 20.0e02096 Open:26s Wh e206: Lower Laste1.77 Volume 267m Chy-07801210" SER epangt77 Goro ih “f= : ale i ! (AgO-S6S4 HESTSS L588 C572 VISIONS VeBr Jon Jul Au Sep Oct Nov Dee Figure 5.1: Price Chanel, otom tein represents key support lvl, upper trendline opeseats key resistance evel Source: nvestopedi om Support and resistance levels are a critical part of trend analysis because it can be used to make specific trading decisions and identify when a trend is about to reverse. For example, a trader might identify an upcoming support level and decide to start buying the stock as it approaches knowing that it will likely rebound higher. These levels both test and confirm trends and should be closely monitored by anyone using technical analysis. As long as the price remains between these two levels, the trend is likely to continue in the prevailing direction, Support and resistance levels are psychologically-important levels where a lot of buyers and/or sellers are willing to trade the stock. When the trendlines are broken, the market psychology shifts and new levels of support and resistance are established. 20H. Flag Pattern Breakout and Continued Rally Sharp Rise. Source: Investopedia som Flags and pennants are continuation patterns. The terms flag and pennant are often used interchangeably. ‘A flag or pennant pattern forms when the price rallies sharply, then moves sideways or slightly to the downside. This sideways movement typically takes the form or a rectangle (flag) or a small triangle (pennant), hence their names. Draw trend lines along the highs and lows of the sideways price action, The sharp price rise preceding the flag or pennant is called the flagpole. The sideways period is often followed by another sharp rise. This is where the trading opportunity comes in. Once the flag pole and a flag or pennant have formed, traders watch for the price to breakout above the upper flag/pennant trendline. When this occurs, enter a long trade. alI Wedge Pattern ho A ial. Figure 53: Breakout and Falling wedge pate Source: nvesopedin om ‘Wedges are a multiple price wave reversal pattern. Wedges form when the waves ofan asset move within a narrowing range, angled either up or down. Whereas triangles are formed by the price moving sideways, wedges can make significant progress either up or down, When the pattern completes, and the price breaks out of wedge, it is usually in the opposite direction the wedge was pointed. This is why it is called a reversal pattern. For example, iff wedge is angled downward called a "falling wedge" the price will often break above the top of the pattern and rally. In the case of a wedge angled upwards a "rising wedge" the breakout is typically to the downside, indicating lower prices to come 26. DISCUSSION AND ANALYSIS A. Fundamental Analysis of Reliance Industries Limited (RELIANCE ) I. Market Benchmarks Past 1 Year Retum for Reliance is 45.13% which has outperformed its sector by 32.34% and Sensex by 31.04%, With this rate of growth Reliance is expected to be bullish in near term, Figure: Reliance’s Price and Volume Chart ‘Source: tpss/wwsereener.infcompany RELIANCE consolidated chart, 2. Company Financials a. Margin Ratios ‘The Gross margin and operating profit margin indicates the profitability of a company. Higher profitability ratios are better, as they convey that the business is healthy and sound. With decent profitability percentages Reliance seems to be a good bet. (ross Prot Margin (2) 1835 145 28 1098 0s operaing Prot ari (2) va wa 2 na an ere arin) a 06 one 60 08 Figure 62: Marin Ratios ‘Source: ps:/wur delves nlquoelequyelince industri td-476 3b. Return Ratios Increasing return on Equity suggests that company is using is assets in a fruitful way and retum. ‘on capital says that firm is headed on path of growth and these ratios suggest that Reliance is healthy buy. ees on ty (8) 9 nm na 38 no tron Capt Employed) no ose ww or 100 Figure 63: Retum Ratios Sours: inqutesqiyeincesndsie 476 c. Leverage Ratios Decreasing Debt to Equity ratios suggest that company is reducing its debt burden indicating capital inflow and the interest coverage ratio estimates a company’s ability to repay its debt. A high interest coverage ratio means that the company generates enough earnings before interest and taxes to repay its debt. eo Ey Rat) ose ose ost a ass meet Coven a nan na wos ts Figure 64+ Leverage Ratios ‘Source: tps:/www edelvsssniquoesequtytelianee-ndustis 476 Competitor Performance Analysis ‘Comparing with peers Reliance has outperformed its peers in past one year and is expected to give better retums over its competitors 2Reliance Industries Ut REUANCE) share rice movement in SEin ast ear Compaen expe Coyeo) YC By coated to te sree 15 Fre nanos Figure 65: Compstior Graph Source: ntps:/www elwsissniquoosoquty liane industri 476 ion of Shareholdings ‘Shareholding Pattern In our opinion as still a lot of shareholding lies © romoiers ex with the promoter, Mukesh Ambani can influence oman the internal decisions of the company towards better growth prospects but Mukesh Ambani does not enjoy full leverage due to less than 51% © omer 1 holding, Figure 6 6: Division of Shareholuing Pie Chart, f. Company Balance Sheet Analysis The company balance sheets tells us about the assets and liabilities of the company. Looking at the balance sheet comparison across last 5 years the value of fixed assets have constantly at least 13% risen along with other investments, There is also increasing inflow of share capital but liabilities and debts have risen only by 9-10% indicating a net growth making reliance a positive buy. eme Oo me ms rm Shae cpt 92200 291300 aon 298.00 204800 eases aarsino ——2enusod—=—asongo == assongo grea teromgs amacoy —ayvarsoo = taurugo = tags. =e. oer uses ozo asso cau ssn00 zone ‘elites Sasson ysamacogssimaosaneesm anne Fed asses saosuro —szagesoo = arasor90 © sazgananzazonca bveomens s2g0200 exas9.0 anise asin coma Ne werkg capa sag7s.o0—-azra00 090 asec asso elas sausskon ——_aysamnco_—_gssmeao——ssneesao——sansacen Figure 67: Balance Sheet Source: htps:www edelvcssniquotesequtyteliaee-ndusties 476 Hence we predict that Reliance Industries Ltd (RELIANCE) is a healthy buy and is likely to give positive returns in future but is currently overpriced or overvalued and one can either enter the markets now ( with possibility on some loss) or ean wait for the price to correct itself. 2B. T Ay inl ih Figure 6. Reliance Stock Price Movement The Breakout from the Symmetric Wedge was the most textbook breakout. It had a very good amount of volume indicating that a lot of people were anticipating the movement. The price rose thereafter to a high of 1264.70. Since no price can continue at such speedy rise, the price consolidated to a minor expected pullback. This now forms the well known Flag pattern. Horizontal lines can be drawn from previous highs and consolidations to resemble potential target points i.e Resistance levels, ‘Two levels can be drawn here: - Resistance Level at 1276.05 - Resistance Level at 1319.95 We expect the uptrend to continue from the Flag and reach the first level of 1276.05. If there is a breakout with a high volume, wewe expect the price to go as high as 1319.95. After reaching this, alevel, the price will either fall down and have a pullback or consolidate right away. The reason for this is because, the level at 1319.95 is form the previous all time high which was touched only once. te iM oval id ih 4 hut t__. Figure 69: Reliance Stock Price Movement The price moved exactly as analyzed. The price went up to the first noted level. Notice the long bullish candle that broke the level followed by a long tailed bodiless hammer candle. This indicates a strong excitement from buyers side in the market, There were some profit takers and some who thought that the price might return and drove the price down. But quickly buyers pushed the price up, This action does two things. First it indicates the absolute necessary retest of the resistance as a support level and second, the buyers still exists to push the price even further up and reach our second level at 1319.95. The price moves as expected and reaches to our second level. Since this level was a strong one and k and consolidation follows where again, since the price cannot always trend, it had a minor pull 2a lot of people who participated in the run took profits and an opportunity for new traders to enter. This prevented the price from both rising and falling. Consolidation helps build a sound base for price trends, It acts like a spring board where longer and narrower the consolidation, greater the effect of the breakout. 27. FINDINGS AND CONCLUSION A, Fundamental Analysis Fundamental analysis generally is applied to longer term investment opportunities the fundamental analysis is a method that attempts to predict the intrinsic value of an investment. It is based on a theory that the security can be overvalued or undervalued and such securities tends to move towards their ‘intrinsic value’ or the “fair value’. 1. Fundamental Analysis is a good tool for long-term investments that try to achieve a growth of capital as it will help to identify assets that represent a good value in longer-term investment. 2. One of the most notable but less obvious rewards of fundamental analysis is the development of solid understanding of the business and industry due to the in-depth, extensive research and analysis required to conduct fundamental analysis. 3. Intrinsic or Fair Value is based on assumptions. Any changes in the key fundamental factors such as growth can greatly alter the achievable result of the analysis, 4. Being useful for revealing an undervalued company or a company with a high future growth prospects, it does not provide us with any kind of information that would help with timing the entry and purchase of the assets. In other words, you might find an undervalued stock which prices has been below its intrinsic value, and it could very well hold at that level for substantial period of time before showing any sign of meeting your expectations for near-term growth. 0B. Technical Analysis Technical analysis use charts and other tools to identify patterns in historic price data that can suggest future activity so when using technical analysis one must assume that the historical performance of securities and markets are indications of the future performance. ‘The amount data required to conduct technical analysis is considerably less than we would need for fundamental analysis. 2. As technical analysis mostly focuses on identifying new trends and trend reversals it is easier to time the entries and exits for trades using technical analysis 3. On some occasions you can get mixed signals, two different indicators will shot contradictory information; meaning one indicator could show a Buy signal while the other one would be showing a Sell signal. This could potentially cause confusion in trading decisions. 4. For technical analysis to work as a major strategy it must be able to accurately predict future trends, which it does not do well with explosive trends and highly volatile and illiquid markets and securities. i% 8. BIBLIOGRAPHY hitps://www.hdfesee.com/blog/details hitps://www.investopedia.com/university/technical hitps://www.investopedia.com/university/charts hitps://www.sereener.in/ hitps://www.edelweiss.in/quotes/equity hitps:/www.marketsmojo.com/Stocks