I) FUNDAMENTAL ANALYSIS:

The intrinsic value of an equity share depends on a multitude factors. The earning of the company, the growth rate and the risk
exposure of the company has a direct bearing on the price of the share. These factors in turn rely on the host of others factors like
economic environment in which they function, the industry they belong to, and finally company’s own performance. The study of
Fundamental Analysis can be made by dividing into three factors. They are
⮚ Economic Analysis
⮚ Industry Analysis
⮚ Company Analysis

ECONOMIC ANALYSIS:
The level of economic activity has an impact on investment in many ways. If the economy grows rapidly, the industry can also be expected
to show rapid growth and vice versa. When the level of economic activity is low, stock rice are low and when the level of economic activity
is high, stock price are high reflecting the prosperous outlook for sales and profits of the firms. The analysis of macro economic
environment is essential to understand the behavior of the stock prices. Following are the factors:

INDUSTRY ANALYSIS:
Following are the factors that should be taken into account while analyzing the industries to predict future course of action would
be undertaking in the particular sector. They are listed below:

Growth of the Industry:

The historical performance of the industry in terms of growth and profitability should be analyzed. The past variability in return and
growth in reaction to macro economic factors provide an insight into the future.

Cost structure and profitability:

The cost structure, that is the fixed and variable cost, affects the cost of production and profitability of the firm. Higher the fixed cost
component, greater sales volume is required to reach the firm’s break-even point. Hence, lower the fixed cost, adjustability to the changing
demand and reaching the break-even point are comparatively easier.

Nature of the product;

The products produced by the industries are demanded by the consumers and other industries. The investor has to analyze the
condition of related goods producing industry and the end user industry to find out the demand for industrial goods.

Nature of the competition:

Nature of competition is an essential factor that determines the demand for the particular product, its profitability and price of the
concerned scrips. The investors before investing in the scrip of a company, should analyze the market share of the particular company’s
product and should compare it with the top five companies.
COMPANY ANALYSIS:
In the company analysis the investors assimilates several bits of information related to the company and evaluates the present and future
value of the stock. The risk and return associated with the purchase of the stock is analyzed to take better investment decision. The valuation
process depends upon the investor’s ability to elicit information from the relationship and inter-relationship among the company related
variables.

Factors that affects Present and Future values of share

1. The competitive edge of the company
The competitive edge of company is studied with the help of following
a) Market share
b) Growth of annual sales
c) Stability of annual sales

2. Earning of the company

Sales alone do not increase the earning but the cost and expenses of the company also influence the earnings of the company. Hence,
the investors should not depend only on the sales but also should analyze the earning of the company. The investor should be aware that
income of the company might vary due to the following reason

⮚ Change in sales and cost.

⮚ Depreciation method adopted
⮚ Wages, salaries and fringe benefits
⮚ Income taxes and other taxes

3. Capital structure
The equity holder return can be increase manifold with the help of financial leverage i.e. using debt financing along with equity
financing the effect of financing leverage is measured by computing leverage ratios. The debt ratios indicate the position of the long term and
short term that in company finance.

4. Management
Good and capable management generates profits to the investors. The management of the firm should efficiently plan, organize,
actuate and control the activities of the company. If the objective of the company is achieved, investors will have profit.

5. Financial Analysis
The best source of financial information about a company is its own financial statements. Financial statement analysis is the study of a
company’s financial statement from various viewpoints. The statement gives the historical and current information about the company’s
operations. The historical financial statement helps to predict the future . the current information aids to analyze the present status of the
company. The main two statements used in the analysis are
⮚ Balance sheets
⮚ Profit and loss account

6. Analysis of financial statement

 The analysis of financial statements reveals the nature of relationship between income and expenditure and the sources and application of
funds. The investors determines the financial position and the progress of the company through analysis, they are
⮚ Comparative financial statements
⮚ Trend analysis
⮚ Common size statements
⮚ Fund flow statement
⮚ Cash flow statement
⮚ Ratio analysis

II) TECHNICAL ANALYSIS:

The technical analyst mainly studies the stock price movement of the security market. If there is an up trend in the price movement
investor may purchase the scrip, with the onset of fall in price he may sell it and move from the scrip. In other words, it is a process of
identifying trend reversal at an earliest stage to formulate the buying and selling strategy.

Technical Tools:
1) Dow Theory: Dow developed his theory to explain the movement of the indices of Dow Jones Average. He developed the theory on
the basis of certain hypothesis is that; no single individual or buyer can influence the major trend of the market. His second hypothesis
is that the market discounts everything. His third hypothesis is that the theory is not infallible. It is not a tool to beat the market but
provides a way to understand it better.

According to Dow Theory the trend is divided into primary, intermediate and short-term trend. The primary trend may be the
broad upward or downward movement that may last for a year or two.

The intermediate trends are corrective movement, which may last for three weeks to three months. The short-term trend refers
to the day-to-day price movement.

Primary Trend: The security price trend may either increasing or deceasing, when the market exhibits the increasing trend. It is
called bull market. The reverse is true with the bear market.

The Secondary Trend: The Secondary trend or the intermediate trend moves against the main trend and leads to correction. In the
bull market the secondary trend would reset in fall of about 33-66% of the earlier rise. In the bear market, the secondary trend earlier
the price upward and corrects the main trend. The correction would be 33%-66% of the earlier fall.

Minor trend: Minor trends moves are called random wriggles. They are simply the daily price fluctuations. Minor trend tries to
correct the secondary trend movement.

2) Moving Average:
The market indices do not rise or fall in straight line. The upward and down ward movements are interrupted by counter
moves. The underlying trend can be studied by smoothening of the data. To smooth the data moving average technique is used. The
word moving means that the body of data moves ahead to include the recent observation.

3) Relative Strength Index (RSI)

It is an oscillator used to identify the inherent technical strength and weakness of a particular scrip or market. RSI can be
calculated with the help of following formula; RSI=100 −( 100/ 1+Rs)
Rs= Average Gain Per Day/ Average Loss Per Day.
 4) Rate of Change (ROC):
Rate of change indicator or the ROC measures the rate of change between the current price and the price “n” number of days
in the past. ROC helps to find out the overbought and oversold position in scrip. It is also useful in identifying the trend reversal.
Daily closing prices are used for the daily ROC and weekly closing for prices for weekly ROC.

5) Charts:
Charts are the valuable and easiest tools in the technical analysis. The graphical presentation of the data helps the investors to find
out the trend of the price without any difficulty. The charts have the following uses.
⮚ Spots the current trend for buying and selling.
⮚ Indicates the probable future action of the market by projection
⮚ Shows the past historical movement.
⮚ Indicates the important areas of support and resistance

The following are important charts, which are commonly used

⮚ Line charts
⮚ Bar charts
⮚ Points and figure charts