Professional Documents
Culture Documents
Of
SIBACA, LONAVALA
1
DECLARATION
I, the undersigned, hereby declare that the project report entitled “STUDY ON EQUITY
MARKET” written and submitted by me to the University of Pune, in partial fulfillment for
the award of degree of Master of Business Administration under the guidance of Prof. Salim
Shamsher is my original work and the conclusions drawn therein are based on the materials
collected by myself .
Place : Lonavala
Date:
2
3
ACKNOWLEDGEMENT
“Accomplishment requires the effort of many People and this work is no different.
I would like to thank all those who helped me directly or indirectly and whose
diligent efforts made this project possible.”
I wish to express my sincere thanks to Mr. Nikhil Shah(Team Leader) and Miss.
Khushbu Kochar(Relationship Manager) IIFL for giving an opportunity to carry
out this internship in IIFL, Pune & guiding me throughout my training period.
I also thank Mr. Dinesh Chordiya & all executives and staff in the organization
and others who helped me to complete this internship.
Last but never the least I thank all my friends for their consistent motivation and
moral support all through the training. Thanks to all.
PLACE: LONAVALA
4
INDEX
1 EXECUTIVE SUMMERY
2 OBJECTIVES OF STUDY
3 COMPANY PROFILE
4 INTRODUCTION
5 RESEARCH METHODOLOGY
6 DATA ANALYSIS
7 FINDINGS
8 LIMITATIONS OF PROJECTS
9 RECOMMENDATION
10 CONCLUSIONS
11 BIBLIOGRAPHY
5
Chapter I
EXECUTIVE SUMMARY
6
EXECUTIVE SUMMARY
The project is done with IndiaInfoline which is one of the best brands amongst Indian domestic
broking houses enjoying an unmatched & unparalleled brand recall. This project gave me a
chance to get valuable insights from a hoard of vastly experienced people in this field and to get
various approaches each one adopts to evaluate various companies.
The project was carried out in the “Pune office” of with IndiaInfoline which is located near
“Chandanichowk”. The duration of the project was two months. These two months were not only
limited to learning and devoting time towards equity research but it also provided an insight of
working of a financial website and what efforts are required to manage such organizations.
IndiaInfoline is financially sound with an excellent track record of consistent market growth in
all key business segments.
According to the study of the markets, it is being observed that markets are very volatile for
equity market. In near future a proper financial planning is required to invest money in all type of
financial product because there is good potential in market to invest.
The term stock market for the overall market is in which shares are issued and traded on
exchanges or in over-the-counter markets. Also known as the equity market, it is one of the most
vital areas of a market economy because it provides companies with access to capital and allows
investors to own companies and participate in economic growth
As the trading in equity market in India is increasing and now more and more companies are
beginning on this market, so trading in equity market in future can go only in one direction that is
up. So this is the right time to know about equity market.
By Fundamental Analysis the most important information can be analyzed solid financial
reporting and non-financial information, for example, estimates of the growth in demand for
competing products, industrial comparisons, and the whole economy.
7
The methodology for carrying out the project was very simple that is through discussion with
expert primary data is obtained and secondary data obtained through various mediums like
weekly circulars, the Internet, Business magazines, Newspaper, etc.
8
Chapter II
OBJECTIVES OF STUDY
9
OBJECTIVE OF THE STUDY
• To understand the importance of fundamental and technical analysis and its benefits as an
investment avenue.
10
Chapter III
COMPANY PROFILE
INDIAINFOLINE LTD.
11
India Infoline is a one-stop financial services shop (Equity, Commodity, Mutual Funds, General
Insurance, Life Insurance), most respected for quality of its advice, personalized service and
cutting-edge technology. Keeping with its tradition of personalized service, India Infoline
provides customized and integrated equity solutions to Investors like you.
IndiaInfoline is one of the best brands amongst Indian domestic broking houses enjoying
an unmatched & unparalleled brand recall. Financially sound with an excellent track
record of consistent market growth in all key buisness segments.
The India Infoline group, comprising the holding company, India Infoline Ltd and its
wholly owned subsidiaries offers the entire gamut of investment products. The India
Infoline group has a significant presence across the country with over 596 branches in
over 345 cities across India.
It also undertakes equity Research which is acknowledged by none other than Forbes as “
Best of the Web “ & “ must read for investors in Asia “.
The group has memberships on BSE and NSE for equity trading, depository participant
with NSDL and CDSL and commodities trading with MCX and NCDX
Infoline group, comprising the holding company, India Infoline Ltd and its
subsidiaries, straddles the entire financial services space with offerings ranging
Government bonds and other small savings instruments to loan products and
Investment banking. India Infoline also owns and manages the websites,
India Infoline Ltd, being a listed entity, is regulated by SEBI (Securities and
12
by none other than Forbes as 'Best of the Web' and '…a must read for investors in
Asia'. India Infoline's research is available not just over the internet but also on
international wire services like Bloomberg (Code: IILL), Thomson First Call and
VISION of IndiaInfoline:
13
FINANCIAL SERVICES SPACE.
14
India Infoline Group :
15
The India Infoline group, comprising the holding company, India Infoline
Limited and its wholly-owned subsidiaries, straddle the entire financial services
space with offerings ranging from Equity research, Equities and derivatives
trading, Commodities trading, Portfolio Management Services, Mutual Funds, Life
Insurance, Fixed deposits, GoI bonds and other small savings instruments to loan
products and Investment banking.
India Infoline also owns and manages the websites www.indiainfoline.com and
www.5paisa.com
The company has a network of 596 branches spread across 345 cities and
towns. It has more than 500,000 customers.
17
subsidiaries.
(a) India Infoline Distribution Company Limited (distribution of retail loan
products)
(b) Moneyline Credit Limited (consumer finance)
(c) India Infoline Housing Finance Limited (housing finance)
Territorial
Manager
18
Sales Sales
Sales
HR Manager Manager
Manager
Team Team
Team
Leader Leader
Leader
Relationship Relationship
Relationship Manager Manager
Manager
RESEARCH
World class research reports, sector reports and update, corporate news, announcements,
Technical stocks Ideas on trader terminal, SMS (paid service), fundamental investment ideas in
Large Cap, Mid Cap, Small Cap, result updates, Daily market strategies (DMS), Weekly wrap,
Daily Derivatives Strategy, Daily Market watch (DMV) and Online recommendations.
BACK OFFICE
19
• Web and application based online back office, centralized data
processing.
• Contract notes through e-mails and courier.
• Online ledger accounts, DP accounts, trade information.
20
21
Chapter IV
INTRODUCTION
22
INTRODUCTION
FINANCIAL MARKETS:
A financial market can be defined as the market in which financial assets are created or transferred.
Financial assets represents represent a claim to the payments of a sum of money sometime in the future
and/or periodic payment in the form of interest or dividend. Financial Market performs an important
function of mobilization of savings and channeling them into the most productive uses. The participants in
the financial markets are financial institutions, agents, brokers, dealers, borrowers, lenders, savers and
others who are inter-linked by the laws, contracts and communication networks.
Financial markets consist of Primary and Secondary Markets. The Primary markets deal in new
financial claims and securities and hence are known as new issue markets. The secondary market
deals in securities already issued, existing or outstanding. Financial markets are also classified as
Money and Capital Markets. Money markets deals with transactions in short-term instruments
(with period of maturity one year or less, e.g. treasury bills), while capital market deals with
transactions in long-term instruments (with period of maturity above one year, e.g. corporate
debentures and government bonds). On the basis of the type of the financial claim, financial
markets are classified as Debt and Equity markets. By the timing of delivery, financial markets
are classified as Cash or Spot markets and Forward or Future market.
Financial instruments can be categorized by "asset class" depending on whether they are Equity
Based (reflecting ownership of the issuing entity) or Debt Based (reflecting a loan the investor
has made to the issuing entity). If it is debt, it can be further categorised into Short Term (less
than one year) or Long Term.
Foreign Exchange instruments and transactions are neither debt nor equity based and belong in
their own category
23
Categorization in Matrix
Instrument Type
Some instruments defy categorization into the above matrix, for example
repurchase agreements.
India Financial Market helps in promoting the savings of the economy - helping to adopt an
effective channel to transmit various financial policies. The Indian financial sector is well-
developed, competitive, efficient and integrated to face all shocks. In the India financial market
there are various types of financial products whose prices are determined by the numerous buyers
and sellers in the market. The other determinant factor of the prices of the financial products is
the market forces of demand and supply. The various other types of Indian markets help in the
functioning of the wide India financial sector.
o Money Market
o Debt Market
o Forex Market
o Capital Market
24
MON
FINANCIAL
marketma
MONEY FOREX
maMARKETCAPITAL DEBT
MARKET MARKET MARKET MARKET
EY MARKETS:
Money markets can be defined as a market for short term money and financial assets that are near
substitutes for money (any financial assets that can be quickly converted into money with
minimum transaction cost). One more important function of this market is to channel savings
into short term productive investments like working capital. Money market aids banking,
operates as a medium of integration between sub markets, promotes maintaining of minimum
reserve in the form of cash and liquidity and controls the interest rates.
DEBT MARKET:
Traditionally debt instruments are known for generating a predetermined income for a given
period of time, other than in cases of default. Hence they are also known as fixed income
instruments. The debt markets in advanced are significantly larger and deeper than equity
markets. But in India, the trend is just the opposite. The development of debt market in India has
not been as remarkable as in the equity market. However the debt markets in India have
undergone a considerable change in the last few years. Characterized by regulated interest rates,
limited players and lack of trading earlier, the markets have become more integrated and less
regulated. The debt market in India is divided into two categories:
25
FOREIGN EXCHANGE MARKET:
Foreign exchange or Forex market is the one where a country’s currency is traded for another.
The rate at which one currency is converted to another is known as the rate of exchange. Forex
market is the largest financial market in the world having a daily turn over of couple of trillion
dollars. The key participants in the forex market are importers (who need foreign currency to pay
off their imports), exporters (who want to convert their foreign currency receipts into domestic),
traders (who make a market in the foreign currency), foreign exchange brokers (who bring
together buyers and sellers), speculators (who tries to profit from exchange rate movements) and
portfolio managers who buy and sell foreign currency. Speculative transactions account for more
than 95% of the turnover on the Forex markets.
Capital Market
A Capital Market is a market for securities (debt or equity), where business enterprises
(companies) and governments can raise long-term funds. It is defined as a market in which
money is provided for periods longer than a year[1], as the raising of short-term funds takes place
on other markets (e.g., the money market). The capital market includes the stock market (equity
securities) and the bond market (debt). Financial regulators, such as the UK's Financial Services
Authority (FSA) or the U.S. Securities and Exchange Commission (SEC), oversee the capital
markets in their designated jurisdictions to ensure that investors are protected against fraud,
among other duties.
Capital markets may be classified as primary markets and secondary markets. In primary
markets, new stock or bond issues are sold to investors via a mechanism known as underwriting.
In the secondary markets, existing securities are sold and bought among investors or traders,
usually on a securities exchange, over-the-counter, or elsewhere.
26
Capital Market Segments
SEBI
Stock Exchange:
A place, whether physical or electronic, where stocks, bonds, and/or derivatives in listed
companies are bought and sold. A stock exchange may be a private company, a non-profit, or a
publicly-traded company (some exchanges have shares that trade on their own floors). A stock
exchange provides a regulated place where brokers and companies may meet in order to make
investments on neutral ground. The concept traces its roots back to medieval France and the Low
Countries, where agricultural goods were traded for cash or debt. Most countries have a main
exchange and many also have smaller, regional exchanges. A stock exchange is also called a
bourse or simply an exchange.
EQUITY MARKET
Equity is defined as stock or any other security representing an ownership interest in a company
listed on the stock exchange.
An equity share is a right to a share in the profits of a Company. If you want a share in the
company's profits, you can do so by buying an equity share.
27
Perhaps, the best way to create wealth, it is a means to achieve returns that beats inflation by a
wide margin.
Equity investment refers to buying a piece of a company. You do this by buying shares in that
company. There are two ways to acquire shares in a company: from the primary market, where
you buy a company's share when it first issues shares (or equity). This first share offering is
called an initial public offering (IPO). Or, you could buy equity in the secondary market, which
is the stock exchange.
When you buy or sell equity on a stock exchange, you have to do the transaction through an
exchange-certified broker/brokerage firm, who will now act as your agent whenever you want to
buy or sell equity.
Equity investments are high-risk high-return propositions. There is scope for serious erosion of
capital as well as considerable appreciation. This depends on many factors such as performance
of the company, general market conditions, state of the economy and so on...
In an investment portfolio, the equity portion represents one end of the risk-return spectrum, the
high end. No other investment tool gives you this much scope for capital appreciation.
Brokerage charges: You pay a nominal one-time account-opening fee and then brokerage charges
for every purchase and sale transaction undertaken thereafter.
28
Demat charges: These are charges levied for maintaining your demat account. These charges
include periodical charges for account maintenance, transaction charges for each debit and credit
of shares, and other incidental charges.
Payment of Securities Transaction Tax (STT): You pay the STT while buying or selling equity.
Payment of Service Tax (ST) and Education Cess (EC): You pay ST and EC, at present levied
together at a 12.24% rate, as a percentage of brokerage due to the broker
Dividend received on stock is free from tax for the investor. This is the good news. However,
you do have to pay short-term capital gains tax on any capital gains you might make in the short
term ('short term defined as any period less that one year)
Thus gains from selling equity shares that have been purchased and sold within a year are taxed
at 11.22% (10 per cent tax + 2 per cent education cess + 10 per cent surcharge, if applicable).
There is no tax on long-term capital gains.
All this is over and above the 12.24% service tax you pay on brokerage charges every time you
transact business in equity, i.e., buy and sell shares. In addition, you have to pay Securities
Transaction Tax (STT) on sale and purchase transactions of shares.
The STT rate for delivery-based transactions is 0.125% of the transaction value for both buyers
and sellers. For non-delivery based transactions, the STT is 0.025% of the transaction value.
Market risks: The risk of market collapse; or that you have invested at the peak of a particular
stock. Which means chances are returns on that investment could be minimal at best or worse,
will run at a loss.
It is quite strange as it goes against the normal approach. People tend to buy stuff when it is
cheap while in stocks people purchase stocks when the market is on a higher side. Such a concept
is known as the heard mentality, which indicates that since the market is ascending everybody is
thinking that it will rise all the more and begin purchasing.
If you are an experienced investor, you will not be getting into such an odd thing, you will be
applying something very different instead. You will be purchasing when the market is collapsing
and that will be against the market, which is also called contrarian theory.
As you are constructing your portfolio for the long term you don’t need to be bothered about the
present stock market falls. Every descending movement is a prospect for you to choose the stock.
Dollar cost averaging is an alternate way to view it. You will choose some more of the stock
every time the stock hits a low as overall price of holding will get minimized. This is the
advantage of stock market instability which is usually detested by many.
The key aspect that you need to be careful about while employing the stock market volatility for
your advantage is the fact that you need to do a decent research and analysis before venturing
into a particular stock. You should pick a stock that you consider is good enough to be held for a
minimum of ten years and will earn you money after the decade. Defensive stocks will usually
not come in this group.
Patience plays an important role in a long term investment. Besides, greediness should be
avoided and an investor should be ready to quit a stock in case it fails to deliver.
Don’t panic when things go awry. You can still turn the tide in your favor with prudence and
caution.
30
Risks inherent in equity investing
The risk factor in equity investments is appreciably higher than fixed income securities such as
fixed deposits or National Saving Certificates, or post office monthly income schemes.
Like any avenue of investment (except those whose returns are guaranteed by
the government, like the PPF), equity investing comes with risk. In fact, the risk factor in equity
investments is appreciably higher than fixed income securities such as fixed deposits or National
Saving Certificates (NSC), or post office monthly income schemes.
Company stocks are susceptible to risks, and these risks are carried forward to your investments
as well. Here are a few:
Business risks: The risks associated with the prosperity of a business and the demand for its
products. There is always a risk that buyer profile or habits might change suddenly and a
company's product goes from being the rage to an also-ran.
Financial risks: The skill with which a company's finances are managed to ensure that it has an
optimum level of debt, equity, reserves, etc. If a company's financials are ineptly handled, even
in the short term, chances are that the ineptness will show up as a run on the stock in the future.
Industry risk: Changes in technology, regulations, vogue, etc. can affect the performance of an
industry sector as a whole, and a company stock of that sector might take the fall along with all
its other competitors in that sector.
Management risks: The level of corporate governance, management skills and vision
determines the long term health of a company. Short term, ad hoc management decisions to ramp
up profit sheets invariably leads to long-term grief for that company.
Exchange rate risks: These factors affect a company but are outside its control, such as a
sudden strengthening of the rupee that might affect exports, having adverse effect on an export-
oriented company's stock.
Systemic risk:
31
Before setting out to invest in stocks, an individual should understand and learn about all sorts of
risks. There isn’t any investment without risk. It’s something that can’t be taken lightly.
Purchasing a stock means taking on risk. That’s the way it works. People take risk in order to be
rewarded eventually. Some win and some lose as they trade. It is essential that you know the key
risks, which you will have to face as a trader.
Knowing and understanding main risks allows you to offset forces, which are obstructive to the
costs of your shares and reduce the outcome of those forces on your investments’ success.
Systemic risk is the unavoidable outcome of working within any system. In such a case, the stock
market is the system. Traders could possibly safeguard against certain risks, however they cannot
safeguard against systemic risk. Therefore, involvement in the markets comprises implicit
approval of its systemic risk.
Systemic risk can involve stock market crunch with extensive outcomes. As it is said ‘A rising
tide floats all boats’. Inward tides definitely raise the whole stock market. Nevertheless the self-
same tide can also recoil and can leave the whole stock market deserted. Hedging is an effective
tool to offset the risk when the latter takes place.
So, as you know all about risks, you can work out its solution as well. It’s very important that
you know how to act in times of financial trouble and avoid making big losses.
32
Chapter V
RESEARCH METHODOLOGY
RESEARCH METHODOLOGY:
33
Research as a means for gaining knowledge can be carried out either arbitrarily or in a systematic
fashion. It is described as a “PURPOSIVE INVESTIGATION”. Research is a systematic,
controlled, empirical and critical investigation of hypothetical propositions about the presumed
relationship among natural phenomenon. Formulation of hypothesis may in itself be a topic of
research. At times research focuses itself on descriptive rather than on casual or experimental
aspects.
OBJECTIVES OF RESEARCH
• It helps to better understanding of the study conducted.
• It aids in purposive planning at different levels and enables testing of alternative
approaches to an issue of an interest.
• It helps in developing new tools, theories and concepts to make the study more effective.
Data Sources:
Primary Data
I. Discussions with experts & customers.
Secondary Data
I. Period ended performance
II. Data from internet sites
III. Data from weekly magazines
• Through discussions
34
• Through schedule
Researcher should select one of these methods of collecting the data taking into consideration the
nature of investigation, objective and scope of the inquiry, financial resources, available time and
the desired degree of accuracy.
Method adopted:
Discussion Method:
The researcher and the experts do come in contact with each other if this method of survey is
adopted. Questions are asked to the experts witch covers all aspects of the same subject. It is the
most extensively used method in various economic and business surveys.
Questions to be asked must be prepared very carefully so that it may prove to be effective in
collecting the relevant information.
35
Chapter VI
DATA ANALYSIS
36
DATA ANALYSIS
Fundamental Analysis
Fundamental analysis is a method of valuation of stocks from the economic and financial
analysis to predict the price movements of shares.
The most important information can be analyzed solid financial reporting and non-financial
information, for example, estimates of the growth in demand for competing products, industrial
comparisons, and the whole economy.
Basic Strategy
For the fundamentalists, the market share price tends to its intrinsic value. If the intrinsic value
of the population is higher than the current market price, the investor buys the population, and
whether the intrinsic value of the population was below the market price of the sale of shares to
investors.
To start doing fundamentalists study of present and future health of the economy as a whole. In
this step, you should try to determine the direction and level of interest rates.
After analyzing the economy as a whole, companies are considered individually. They must
analyze the factors that make us a competitive advantage in its sector, such as management
experience, the history of activity, growth potential, low-cost producer etc.
I. Sector Analysis:
The Indian telecommunications industry is the world's fastest growing telecommunications
industry, with 688.38 Million telephone (landlines and mobile) subscribers and 652.42 Million
mobile phone connections as of July 2010 It is also the second largest telecommunication
network in the world in terms of number of wireless connections after China. The Indian Mobile
subscriber base has increased in size by a factor of more than one-hundred since 2001 when the
number of subscribers in the country was approximately 5 million to 652.42 Million in July
2010.
37
A large population, low telephony penetration levels, and a rise in consumers' income and
spending owing to strong economic growth have helped make India the fastest-growing telecom
market in the world. The first operator is the state-owned incumbent BSNL. BSNL was created
by corporatization of the erstwhile DTS (Department of Telecommunication Services), a
government unit responsible for provision of telephony services. Subsequently, after the
telecommunication policies were revised to allow private operators, companies such as
Vodafone, Bharti Airtel, Tata Indicom, Idea Cellular, Aircel and Loop Mobile have entered the
space. See major operators in India. In 2008-09, rural India outpaced urban India in mobile
growth rate.
The following table gives details regarding the subscriber base of each Mobile Service Provider
in India as of 31 July 2010
Idea Cellular Limited was incorporated in 1995. The company is among the top four mobile
telephony players in India with an 11 per cent all-India subscriber’s market share. More
importantly, it ranks third in terms of wireless revenue market share at 12.7 per cent. Idea ranks
second with 20.8 per cent revenue market share in nine service areas where it holds 900MHz
spectrum and which derive 48 per cent of industry's gross revenues (based on gross revenues for
UAS and mobile licenses only, for December 2009 quarter, as released by TRAI).
Idea holds 16 per cent stake in Indus Towers, a joint venture with other telecom majors Bharti
Airtel and Vodafone. Indus Towers is the world's largest tower company with over one lakh
39
towers. In 2007, Idea was listed on the National Stock Exchange (NSE) and the Bombay Stock
Exchange (BSE).
Idea enjoys a market leadership position in many of its operational areas. It offers GPRS on all
its operating networks for all categories of subscribers, and was the first company in India to
commercially launch the next generation EDGE technology in Delhi in 2003. As a pioneer in
technology deployment, it has been at the forefront through the adoption of bio fuels to power its
base stations, and by employing satellite connectivity to reach inaccessible rural areas in Madhya
Pradesh.
Airtel comes to you from Bharti Airtel Limited, one of Asia’s leading integrated telecom services
providers with operations in 19 countries across Asia and Africa. Bharti Airtel since its inception,
has been at the forefront of technology and has pioneered several innovations in the telecom
sector.
The company is structured into four strategic business units - Mobile, Telemedia, Enterprise and
Digital TV. The mobile business offers services in India, Sri Lanka and Bangladesh. The
Telemedia business provides broadband, IPTV and telephone services in 89 Indian cities. The
Digital TV business provides Direct-to-Home TV services across India. The Enterprise business
provides end-to-end telecom solutions to corporate customers and national and international long
distance services to telcos.
40
III. Financial Research:
You should be aware of the company’s Financials in which you are investing. Some basic ratio
like PE and EPS should be known.
It is the process of analyzing the characteristics of company in order to estimate its value.
1. Cash flow statement.
2. Income statement.
3. Balance sheet.
You must have a clear idea of the shares you want to purchase, based on your investment
objective, risk appetite, and the fundamental parameters of the share (stock). Some fundamental
parameters are the earning per share (EPS) and the price to earning-per-share ratio (PE). The EPS
is found by dividing the profit after tax by the outstanding number of shares in the market.
Basically, do not just rely on recommendations received from your broker, friend, lover or
anyone else. You can use these as a starting point, but ensure that you do your own independent
bit of digging before you invest.
The proportion of company profits for each outstanding common share. The amount is calculated
by dividing the number of shares of common shares. For example, a company that earned $ 10
million last year and 10 million shares to report earnings per share of $ 1
Also known as “other income”, stock price divided by earnings per share. P / E ratio could either
reported gains of recent years, or use analysts forecasts next year result. P / E gives investors an
idea of how much they pay for the company to win.
3- Dividend
41
Dividend is the sum of the benefits that the company pays for people who own shares in the
company. If the company gets an advantage, some of this money often get them back into
society, and urged retained earnings, and some of them be paid to shareholders as dividends.
4- Value
The carrying value of the asset or group of assets, sometimes at the price they were originally
purchased (original cost), in many cases equal to the purchase price.
5- Growth Stocks
Analysts estimate the profitability of the company capital, net income and capital division of the
company. To classify as an increase in stocks, analysts expect that at least 15% return on capital.
6- Adjusted EPS
Adjusted EPS is calculated when there is Bonus issue, Right Issue or Share Split.
Tip is if you feel a stock price is high, do not buy it. Only buy stocks that have scope for
appreciation.
Yet another tip do not try to time purchases, as a matter of course. While seismic upheavals in
the stock market will give you obvious signs to either buy or sell, do not rely only on timing the
markets. This will turn you into a speculator rather than an investor.
And lastly, if your research shows that the prospects of the company you own stock in do not
look rosy in the long term, get rid of the stock. Do not hesitate to liquidate your portfolio even
42
before your targeted time horizon if you think that it isn't worth it. In the end, it is your money,
and above all, you must be comfortable in keeping it invested.
IDEA
(Rs.crore)
Common size-
Balance Sheet
Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06
Sources of funds
Owner's fund
Equity share capital 3,299.84 3,100.10 2,635.36 2,592.86 2,259.53
43
Less : revaluation reserve - - - - -
Less : accumulated
depreciation 7,907.34 4,739.86 3,123.83 2,637.18 1,157.63
Net block 14,927.06 10,822.89 9,667.39 5,592.43 2,817.48
44
Operating Profit 770.47 1,613.97 2,491.32 3,118.59 3,244.09
PBDIT 775.67 1,641.61 2,675.49 3,520.39 3,627.92
Interest 308.25 478.26 695.85 1,206.35 982.44
PBDT 467.42 1,163.35 1,979.64 2,314.04 2,645.48
Depreciation 262.88 563.67 756.85 1,096.72 1,366.61
Other Written Off 84.66 108.14 119.91 146.13 184.59
Profit Before Tax 119.88 491.54 1,102.88 1,071.19 1,094.28
Extra-ordinary items 8.61 5.23 13.97 15.68 91.61
PBT (Post Extra-ord Items) 128.49 496.77 1,116.85 1,086.87 1,185.89
Tax 2.9 6.99 72.5 85.65 115.08
Reported Net Profit 125.6 502.06 1,044.36 1,001.21 1,053.66
Total Value Addition 1,236.54 2,747.16 4,228.66 6,719.52 8,606.12
Preference Dividend 0 0 0 0 0
Equity Dividend 0 0 0 0 0
Corporate Dividend Tax 0 0 0 0 0
Per share data (annualised)
Shares in issue (lakhs) 22,595.27 25,928.61 26,353.61 31,000.95 32,998.38
Earning Per Share (Rs) 0.56 1.94 3.96 3.23 3.19
Equity Dividend (%) 0 0 0 0 0
Book Value (Rs) 3.03 8.4 13.44 36.37 34.59
BHARTI
AIRTEL
Common size- Balance
Sheet (Rs crore)
Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06
Sources of funds
Owner's fund
Equity share capital 1,898.77 1,898.24 1,897.91 1,895.93 1,893.88
45
Less : accumulated depreciation 16,187.56 12,253.34 9,085.00 7,204.30 4,944.86
Net block 28,022.84 25,011.23 19,028.52 19,303.51 13,004.75
Current assets, loans & advances 9,225.08 10,466.63 8,439.38 5,406.81 3,338.88
Less : current liabilities & provisions 12,842.00 14,466.89 14,362.33 11,042.67 7,272.80
Total net current assets -3,616.92 -4,000.26 -5,922.95 -5,635.86 -3,933.92
Income Statement of
Airtel
Particulars Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06
Income
35,609.5 34,048.3 25,761.1 17,851.6
Operating income 4 2 1 1 11,259.12
Expenses
Material consumed 313.63 281.65 33.85 22.08 67.4
11,882.4
Manufacturing expenses 1 8,627.13 7,339.01 5,017.27 3,299.73
Personnel expenses 1,401.66 1,397.54 1,297.88 1,076.95 734.2
Selling expenses 2,404.91 2,210.43 1,842.51 1,126.34 804.15
Adminstrative expenses 5,982.64 8,608.03 4,588.53 3,351.31 2,315.91
Expenses capitalised -293.31 -269.25 - - -
21,691.9 20,855.5 15,101.7 10,593.9
Cost of sales 3 4 8 6 7,221.40
13,917.6 13,192.7 10,659.3
Operating profit 1 8 4 7,257.65 4,037.72
Other recurring income 148.98 235.99 266.91 101.7 40.75
14,066.6 13,428.7 10,926.2
Adjusted PBDIT 0 7 4 7,359.35 4,078.47
Financial expenses 283.35 434.16 393.43 282.07 236.81
Depreciation 3,890.08 3,206.28 3,166.58 2,353.30 1,432.34
46
Other write offs 207.84 178.82 266.07 137.8 127.39
Adjusted PBT 9,685.32 9,609.50 7,100.16 4,586.17 2,281.93
Tax charges 1,177.87 321.78 632.43 566.79 273.68
Adjusted PAT 8,507.45 9,287.72 6,467.73 4,019.39 2,008.25
Non recurring items 969.48 -1,497.74 -162.87 3.92 -13.81
Other non cash adjustments -50.78 -46.15 -60.67 9.92 17.64
Reported net profit 9,426.15 7,743.84 6,244.19 4,033.23 2,012.08
27,928.9 19,541.0 11,778.1
Earnigs before appropriation 8 5 2 5,489.61 1,225.65
Equity dividend 379.79 379.65 - - -
Preference dividend - - - - -
Dividend tax 64.54 64.52 - - -
27,484.6 19,096.8 11,778.1
Retained earnings 5 9 2 5,489.61 1,225.65
Chapter VII
FINDINGS
47
FINDINGS
IDEA : PERFORMANCE CHART
AIRTEL:PERFORMANCE CHART
Fundamental Analysis
48
RATIOS:
1. ADJUSTED EARNINGS PER SHARE- Adjusted EPS
EPS = PAT
No of shares outstanding
Adjusted EPS = Bonus Adjustment factor * EPS
INTERPRETATION:
For Airtel from March 2006 to 2009 it has grown. There was a split in 2009-2010 a result of
which adjusted EPS has come to 22.4
For Idea there is a tremendous increase in adjusted EPS from March ’06 to ’10.
INTERPRETATION:
In comparison of Industry Average P/E Idea appears to be expensive and Airtel appears to be
cheap.
50
Debt to Equity Ratio for Idea(March,2010) = 6526.42
11457.24
= 0.57
INTERPRETATION:
In comparison of Industry Average P/E Idea appears to be expensive and Airtel appears to be
cheap.
INTERPRETATION:
For Idea it was continuously increasing from March 2006 to 2008 efficiently. But due to heavy
collapse in market the return on equity came down very quickly in March 2009 & stabilized by
March 2010 with slight growth.
Idea will grow fast in the coming one year. There is great support of RS. 100/- if idea cellular
crossed Rs. 100/- & there is no limitation to its profit.
As Airtel was in developing stage in March developing stage in March 2006 &it took peak till
2007. But it did not collapse with stock market in 2008 due to two reasons:
1. It was overpriced.
It kept growing & was overpriced in 2009. Little correction was showed in 2010.
52
ROCE for IDEA (March, 2010) = 1168.73+(-206.32) = 8.400%
11457.24
INTERPRETATION:
Idea has a potential to as ROCE is less (7.48). they should improve their profitability.
Airtel’s performance is stable over the years reflecting ROCE in the range of 22% to 29%.
53
INTERPRETATION:
Idea has not gained sufficient profits so we can not predict any dividend payout.
Airtel was in huge profits in 2009 and 2010 so it gave dividend to shareholder. Company has
good outlook in future.
54
INTERPRETATION:
Idea is underperformed .
In Airtel there is a decrease in Adjusted PAT from Rs.9287.72 Cr. in March 2009 to Rs.8507 Cr
in Mar 2010. It has been reflected in dividend payout ratio there is an approximately 18% down
fall.
Technical Analysis:
A method of evaluating future security prices and market directions based on statistical analysis
of variables such as trading volume, price changes, etc., to identify patterns.
55
Analysis applied to the price action of the market to develop trading decisions, irrespective of
fundamental factors.
Fibonacci, moving averages or candlestick charts. These are some of the basic tools of technical
analysis. Technical investors believe that all information about a given population can be
transformed into part of the review of its past and current statistics, as the trend of stock trading
volume and stock price chart (Chart value of shares changed over time). Then, mathematically
analyzed the behavior of graphics and use of statistical analysis can identify trends indicate that
the future behavior of prices.
There are three basic assumptions of technical analysis. The first is that stock prices reflect all
that you need to know; so that technical analysts believe that the main factors and market
psychology is already at a price in the price. Secondly, technical analysis suggests that the stock
price moves in trends. This means that following the trend of further development, are more
likely to continue in the same direction as against him.
Lastly, technical analysis, is largely based on the assumption that the historic nature as to
repeat it. In other word, this means that investors usually react more or less equally to similar
events in the market.
Although it may seem simple, there are almost an infinite number of mathematical methods and
tools of technical analysis. Most technicians will first try to determine the overall trend of price
changes, to determine whether this trend upwards or downwards. The mathematical model
describing such as moving averages, oscillators and other indicators are a tool with which
technical investor for the purposes of this analysis.
Then, investors are beginning to understand the smallest detail in the trend and see if there is
support or opposition to this trend. For example, the upward trend with support for the volume of
trade can be a good indicator of share prices continue to rise. This may be a good time to buy
shares. On the other hand, if there is strong resistance against the upward trend, this is a good
time to sell the stock.
Technical analysis is not easy and certainly not absolute. In addition to technical investors want
56
to know more details. They also want to know, for example, the particular form of graphic
design, but they can be considered as a form of head, shoulder, cup or even a pen.
There are many debates both in academia and the private world on the ability of these methods in
order to beat the market methods. Studies typically show that technical analysis does not work in
the long run, but it is much harder to prove that in the short term, since many of the technical
analysis of the findings are not conclusive.
Approaches of Technical Analysis
Supports
& Resistances
Pivot Analysis
Trend Channel Supports & Resistances
Trend
line theory
Fibonacci method
GANN Theory
Bollinger Band
Patterns
Continuation and Reversal
Market
Indicators
Volume indicators
Momentum indicators
Online trading is growing by leaps and bounds. Its no surprise, since advances in technology
give the average individual the ability to learn how to read stock charts and make their own
decisions on which stocks to purchase and when to sell. You too can get in on the investment
game. With just a little know-how, you can soon be reading the daily stock report and choosing
stocks to invest in. When you have the power to affect your financial future, why wait?
Technical analysis is the term for reading stock charts. Essentially, this analysis is a method of
forecasting the future price movements using price/volume movement history. Technical analysis
is not 100% accurate in forecasting financials, but it is a highly valuable tool for finding high
reward, low risk trade opportunities. While it may sound like jibberish for the newbie, learning
how to read stock charts is something anyone can learn to do.
Your first step in understanding how to read stock charts is to understand what a chart is and
what it can do. A chart is just a sequence of prices and values plotted over a period of time. On
the vertical axis of a chart is the price; with time being represented on the horizontal access.
Time is plotted oldest to newest from right to left. Any security (stock, option, commodity, or
future) with price data over a period of time can be charted to form an analysis.
In order to really delve confidently into investing, there are some things that you will need to
become familiar with. The daily stock report is one thing that will be a part of your routine if
you re serious about investing. You will likely want to learn how to read stock charts in order to
determine how you want to spend your investing dollars.
Of course, you re probably somewhat familiar with the daily stock report. It s the segment of
the news that we tend to tune out on. Why? Because too many Americans are not investing
58
their money. When you realize how simple buying and selling stocks really is, you ll want to
get in the game right away.
In days past, our mothers and fathers invested money through a professional trader. No average
Joe would dream of stepping into the chaos that is the trading floor. Now, thanks to the power
of the internet, the market has become accessible to everyone who is interested in learning its
happenings. Now, you can learn how to read stock charts right at your home computer. It can
get easier than that.
So why do you need to read stock charts and follow the daily stock report to begin with? Simply
because reading charts allows you to easily determine what the majority is doing. Learning how
to read a stock chart and analyze it properly will help you know what stocks are worth investing
in and which are just too risky.
Stock charts are useful in any form; but as an added benefit, charts come in various scopes and
sizes. One chart can track trends by the hour, focusing on a single stock. This type of chart is
especially valuable to the day trader who needs to keep a constant eye on happenings. Another
chart might go to the other extreme, displaying the performance of the Dow index over several
decades. This type of chart allows financial planners to project average annual returns over long
periods of time.
Because interactive charts are often available on the web, you can likely set up customized charts
to analyze yourself. This makes researching possible investments much easier. If you re not sure
where to start, you can first look into a stock trading course that will teach you the lingo of the
market as well as tips and tricks traders use.
When you re ready to start looking at stock charts, some of the questions you can ask are:
CHARTS:
A chart is simply a graphical representation of a series of prices over a set time frame.
A chart may show a stock's price movement over a one-year period, where each point on the
graph represents the closing price for each day the stock is traded.
Types of charts :
1. Line chart.
2. Bar chart.
3. Candlestick chart.
1.Line Charts
Supported by most charting software, Line Charts are used often. However, this type of stock
chart shows only one piece of trading information. A line chart can be structured to show you
any one of the following items: The Open, Close, High or Low of the trading time frame you are
searching. This is what makes them easy to use. While ease of use is nice, once you learn how to
read stock charts, you may desire more information than what a line chart can offer you.
It represents only the closing prices over a set period of time. The line is formed by connecting
the closing prices over the time frame.
Line charts do not provide visual information of the trading range for the individual points such
as the high, low and opening prices. Example of line chart.
60
2.Bar Charts
When you begin to need more than one piece of the puzzle at a time, a bar chart may give you
just what you need. Bar charts include all standard trading information. This means you will get
opening price, closing price, highs and lows all at a glance. Bar charts, while they give you more
than one piece of information at a time, are easy to read once you have a basic grasp on how to
read stock charts.
The chart is made up of a series of vertical lines that represent each data point.
This vertical line represents the high and low for the trading period, along with the closing
price.
The close and open are represented on the vertical line by a horizontal dash.
61
3.Candlestick Charts
Sitting right next to bar charts on the popularity table is the candlestick chart. The candlestick
chart, like the bar chart, contains opening and closing prices as well as the highs and lows of the
time period you are searching. Candlestick charts show whether the bar closed higher than it
opened (an upward candlestick) or closed lower than it opened (a downward candlestick). By
looking at the highs and lows of a candlestick chart, you can easily determine the range of the
bar; the distance between the high and the low.
The information here is the very basic of the stock charts that help traders go about their day to
day business. By learning how to read stock charts such as these, you can take a step toward
securing your financial future.
The candlestick chart is similar to a bar chart, but it differs in the way that it is visually
constructed.
Similar to the bar chart, the candlestick also has a thin vertical line showing the period's trading
range.
The difference comes in the formation of a wide bar on the vertical line, which illustrates the
difference between the open and close.
62
Trends
Trend length
63
3. Long term ( 1 yr)
Volume
Volume is an important aspect of technical analysis because it is used to confirm trends and chart
patterns.
Any price movement up or down with relatively high volume is seen as a stronger sense of
continuation of pattern
Chart patterns:
A chart pattern is a distinct formation on a stock chart that creates a trading signal, or a sign of
future price movements.
Analyst use these patterns to identify current trends and trend reversals and to trigger buy and
sell signals.
A continuation pattern signals that a trend will continue once the pattern is complete.
64
Continuation pattern is nothing but continuation of the trend.
A cup and handle chart is a bullish continuation pattern in which the upward trend has paused but
will continue in an upward direction once the pattern is confirmed.
1. Triangles.
Ascending
,
Descending
65
2. Symmetric
1. GAP Theory.
66
2] Reversal chart patterns
A reversal pattern signals that a prior trend will reverse upon completion of the pattern.
Head and shoulders is a reversal chart pattern that when formed, signals that the security is likely
to move against the previous trend.
67
68
69
MOVING AVERAGE:
Simple Moving Average (SMA) and the Exponential Moving Average (EMA).
S MA is formed by computing the average (mean) price of a security over a specified number
of periods. While it is possible to create moving averages from the Open, the High, and the Low
data points, most moving averages are created using the closing price.
EMA in order to reduce the lag in simple moving averages, technicians often use exponential
moving averages (also called exponentially weighted moving averages).
Market activity
Past Prices
Volume
Instead look for patterns and indicators on charts to determine future performance.
70
Assumptions on which T.A. based:
Most agree that technical analysis is much more effective when combined with fundamental
analysis.
As Idea is not a large cap. And its market share is very low thus less trade takes place in idea as
compare to other telecom stocks but due to new policies of TRAI it’s expected that the stock
price of this script will come down for the short term but we are bullish in telecom for a long
term (2 months for short term & 1 year for bullish)
72
INTERPRETATION:
With the movement of stock price over the period we can see that Airtel is the Market Performer.
73
INTERPRETATION:
As Airtel has a large market share and it is a large cap. Company thus lots of trading take place
for this script. This script the largest traded in telecom sector but due to new policies of TRAI
this stock is also bearish for short term but this script is very bullish for the long term (2 months
for short term & 1 year for bullish)
74
Chapter VIII
LIMITATIONS OF PROJECT
Limitations of project
• I had to work with the existing model for company analysis which the organization was
using and therefore I could not experiment with the other ways of company analysis.
• My project was concern with single sector which eliminates the benefits from
diversification of investment
• Limitations of fundamental and technical analysis are also concerned to the project.
75
Chapter IX
RECOMMENDATIONS
76
77
RECOMMENDATIONS:
We project a 28% subscriber CAGR over the next two years even as rev/min is likely to
touch a low of 40p. However, wireless tariff is likely to stabilize in H2 FY11 and rev/min
could see an upward tick next year. This would support 15% revenue CAGR over FY10-
12 along with stable operating margin.
Moreover, VAS share for Idea at 12.4% is better than that of Bharti Airtel which would
provide an incremental uplift to ARPUs via targeted 3G offerings. However, the recent
rally in stock price provides little valuation headroom as Idea now trades at 16x FY12
earnings. Retain Market Performer with a 9-month target price of Rs 69.
The 2.3% drop in ARPUs in Q1 FY11 was the smallest such decline since Q3 FY09,
driven by robust MOU growth. Moreover, newer players are more likely to focus on
revenue market share after unleashing a fierce price war which has commoditized voice
tariffs with little difference amongst operators. In its post earnings call, management
hinted that Zain has enough headroom to improve its current 27.5% EBIDTA margin as
integration with Bharti is likely to be completed within the next few months. The stock
currently trades at ~17x FY12 PER which supports our positive stance on the company;
retain BUY.
78
Chapter X
CONCLUSION
CONCLUSION
79
• Telecom Industry is about to witness strong upswings in near future to take advantage of
the swing investors should focus their investments in IDEA and Bharti Airtel.
• Though there is no massive change in Idea share price, investors should hold the
scripts as the company is getting strong at technical chart.
• Bharti Airtel is been the apple pie of the investors and will continue in that way by giving
good return. Stock seems to be expensive but further appreciation is expected in the value of
the stock.
80
Chapter XI
BIBLIOGRAPHY
81
BIBLIOGRAPHY
Websites:
• www.indiainfoline.com
• www.nseindia.com
• www.moneycontrol.com
• www.valueresearchonline.com
• www.investopedia.com
• www. bseindia.com
• www.idea.com
• www.bhartiairtel.com
Books :
• Financial Management - I M Pandey
• Technical Analysis – Charles D. Kirkpatrick.
82