A

Project Study Report

On

“ A STUDY OF INVESTMENT OPTIONS IN PUBLIC & PRIVATE SECTOR”

Submitted to R.T.U.Kota
in partial fulfilment for the
Award of degree of
Master of Business Administration

Submitted To:- Submitted By: -

Mrs. Jyotsana khandelwal Ankit jain
MBA Sem IV

Apex institute of management and science, JAIPUR

(Approved by AICTE, New Delhi & affiliated to university of
Rajasthan, JAIPUR)
(2011-2013

1
 DECLARATION

Hereby I declare that the project report entitled “STUDY OF INVESTMENT

OPTIONS IN PUBLIC & PRIVATE SECTOR, JAIPUR” submitted for the degree
of Master of Business Administration, is my original work and the project report
has not formed the basis for the award of any diploma, degree, associate ship,
fellowship or similar other titles. As best of my knowledge it has not been
submitted to any other university or institution for the award of any degree or
diploma.

Ankit Jain

2
 PREFACE

It is a matter of great satisfaction and privilege to present the esteemed readers

this report aimed at finding the Student’s selection criteria towards investment
decision in Jaipur.

This project report is a concrete form of the knowledge that was acquired during the
Project Study. During this Study, which is a part of full time two year Management
course, a student gets the opportunity to apply his theoretical knowledge in the
corporate world, in short it emphasizes on ‘Learning By Doing”. The training paves
the way for the student for his successful entrance in The Telecom Industry.

With the data that was collected from the sample and also the company, I have
tried my best to provide some fruitful suggestions that would be of great help for the
organizations.

This project report is made on the basis of Project Study program undertaken by
me. This report is design to introduce about the Students preferences and factors
which leads selection of telecom service provider. In this report I introduce all
investment company providing their services in Jaipur.

This report provides the complete description of all Companies and their services.
The report is made in such a way so that the readers may find it easy to develop a
clear-sighted understanding about student’s preference in Investment company.

3
 ACKNOWLEDGEMENT

Any research is never an individual effort. It is a contributing effort of many

hands, heads and hearts. The project would be incomplete without
mention of those, who have spared their valuable time and shared their
rich experience, in making this project a success.

Acknowledging the work and help of all those who have guided us for the
completion of the project on time is indeed a duty of ours knowledge the
fact that no words can measure their guidance to any extent.

First of all, I would like to thanks Mrs. Jyotsana khandelwal (HOD) of

Apex Institute of Management and Science JAIPUR for her immense
support; it would not be possible to complete this project successfully. Her
interaction with us was a great help.

Ankit jain
MBA IVth Sem.

4
 EXECUTIVE SUMMARY

In today arena the key to success in business is understanding what customers

wants and supplying it more efficiently and more conveniently, not for just
customer satisfaction only but to a level of customer delight . With this as a
premise this project is undertaken and is titled “A Study of INVESTMENT
OPTION PUBLIC AND PRIVATE SECTOR” towards various mobile service
providers in Jaipur”. The project aims to understand the current position of
Samsung vis-à-vis its competitors analyzing the underlying factors for the current
position. It then goes on to recommend certain structural changes and
improvements which may be incorporated to improve on the present position.
The reason of choosing private sector what I feel is the return because in last few
years the corporate sectors are doing well and giving the return on investment.
As we all know the investment methodology is just not for the organization
means company who is doing investment but it’s for all means individual, groups
and organization.
The reason of taking ICICI is they are inviting money in all sector of investment
and ICICI can be a best example of investment because they are touching all
sections of investment.
In last I can say today, the investors want good return within a short period of

time.

5
 TABLE OF CONTENTS
Chapter
No. Chapter Name Page no.

DECLARATION

PREFACE

ACKNOWLEDGEMNT
EXECUTIVE SUMMARY
1. INTRODUCTION TO THE INDUSTRY 7
2. INTRODUCTION TO INVESTMENT 12
3. PUBLIC SECTOR 19

4. PRIVATE SECTOR 21
5. GROWTH OF PRIVATE SECTOR 24
6. IMPORTANCE OF PRIVATE SECTOR 27
7. INVESTMENT METHODOLOGY 31
8. INTRODUCTION TO STOCK MARKET 37
9. RISK MANAGEMENT 43
10. RESERCH METHODOLOGY 66
11. DATA ANALYSIS 71
12. SWOT ANALYSIS 82
13. CONCLUSION 86
14. SUGGESTIONS & RECOMMENDATION 87
15. BIBLIOGRAPHY 90
16. ANNEXURE 91

6
 INTRODUCTION OF INDUSTRY

Finance is the set of activities dealing with the management of funds. More

specifically, it is the decision of collection and use of funds. It is a branch of

economics that studies the management of money and other assets.Finance is

also the science and art of determining if the funds of an organization are being

used properly. Through financial analysis, companies and businesses can take

decisions and corrective actions towards the sources of income and the

expenses and investments that need to be made in order to stay competitive.The

field of finance refers to the concepts of time, money and risk and how they are

interrelated. Banks are the main facilitators of funding through the provision of

credit, although private equity, mutual funds, hedge funds, and other

organizations have become important. Financial assets, known as investments,

are financially managed with careful attention to financial risk management to

control financial risk. Financial instruments allow many forms of securitized

assets to be traded on securities exchanges such as stock exchanges, including

debt such as bonds as well as equity in publicly-traded corporations.

7
 “Investment methodology In Public sector & private sector

A market is a place where buyers and sellers come together to execute trade and

satisfy their needs. There is a market for financial instruments similarly there are

different types of market such as cloth market, vegetable market and gold market

too.

This market provides a platform for and individual to invest their money in the

market and in return they get growth on their money. This market is further

segmented into two parts:-

1. Equity market

2. Debt market

This investment can be made under guidance of share and some other

companies like, Govt. securities, Insurance, Mutual Funds etc. Among all these

insurance is one of the major players for investment in equity & debt market.

Insurance company has a portfolio for investment through no, of funds, which

reveals growth of many company from different sectors.

8
 The main techniques and sectors of the financial industry :

Finance is used by individuals (personal finance), by governments (public

finance), by businesses (corporate finance), as well as by a wide variety of

organizations including schools and non-profit organizations. In general, the

goals of each of the above activities are achieved through the use of appropriate

financial instruments and methodologies, with consideration to their institutional

setting.

Finance is one of the most important aspects of business management. Without

proper financial planning a new enterprise is unlikely to be successful. Managing

money (a liquid asset) is essential to ensure a secure future, both for the

individual and an organization.

1) Personal finance: -

Questions in personal finance revolve around

 How much money will be needed by an individual (or by a family), and

when?

 Where will this money come from, and how?

 How can people protect themselves against unforeseen personal events,

as well as those in the external economy?

 How can family assets best be transferred across generations (bequests

and inheritance)?

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  How does tax policy (tax subsidies or penalties) affect personal financial

decisions?

Personal financial decisions may involve paying for education, financing

durable goods such as real estate and cars, buying insurance, e.g. health

and property insurance, investing and saving for retirement.Personal financial

decisions may also involve paying for a loan, or debt obligations.

2.) Corporate Finanace: -

Managerial or corporate finance is the task of providing the funds for a

corporation's activities. For small business, this is referred to as SME finance. It

generally involves balancing risk and profitability, while attempting to maximize

an entity's wealth and the value of its stock.

Long term funds are provided by ownership equity and long-term credit, often in

the form of bonds. The balance between these forms the company's capital

structure. Short-term funding or working capital is mostly provided by banks

extending a line of credit.

Another business decision concerning finance is investment, or fund

management. An investment is an acquisition of an asset in the hope that it will

maintain or increase its value. In investment management – in choosing a

portfolio – one has to decide what , how much and when to invest. To do this, a

company must:

10
  Identify relevant objectives and constraints: institution or individual goals,

time horizon, risk aversion and tax considerations;

 Identify the appropriate strategy: active v. passive – hedging strategy

 Measure the portfolio performance

Financial management is duplicate with the financial function of the Accounting

profession. However, financial accounting is more concerned with the reporting

of historical financial information, while the financial decision is directed toward

the future of the firm.

3) Capital: -

Financial capital

Capital, in the financial sense, is the money that gives the business the power to

buy goods to be used in the production of other goods or the offering of a

service.

11
 Introduction of investment

Investment or investing is a term with several closely-related meanings in

business management, finance and economics, related to saving or deferring

consumption. Investing is the active redirecting resources from being consumed

today so that they may create benefits in the future; the use of assets to earn

income or profit.

An investment is the choice by the individual to risk his savings with the hope of

gain. Rather than store the good produced, or its money equivalent, the investor

chooses to use that good either to create a durable consumer or producer good,

or to lend the original saved good to another in exchange for either interest or a

share of the profits.

In the first case, the individual creates durable consumer goods, hoping the

services from the good will make his life better. In the second, the individual

becomes an entrepreneur using the resource to produce goods and services for

others in the hope of a profitable sale. The third case describes a lender, and

the fourth describes an investor in a share of the business.

In each case, the consumer obtains a durable asset or investment, and accounts

for that asset by recording an equivalent liability. As time passes, and both prices

and interest rates change, the value of the asset and liability also change.

12
According to economic theories, “Investment is defined as the per-unit

production of goods, which have not been consumed, but will however, be used

for the purpose of future production. Examples of this type of investments are

tangible goods like construction of a factory or bridge and intangible goods like 6

months of on-the-job training. In terms of national production and income, Gross

Domestic Product (GDP) has an essential constituent, known as gross

investment.”

Investment in Terms of Business Management:

According to business management theories, investment refers to tangible

assets like machinery and equipments and buildings and intangible assets like

copyrights or patents and goodwill. The decision for investment is also known as

capital budgeting decision, which is regarded as one of the key decisions.

Investment in Terms of Finance:

In finance, investment refers to the purchasing of securities or other financial

assets from the capital market. It also means buying money market or real

properties with high market liquidity. Some examples are gold, silver, real

properties, and precious items. Financial investments are in stocks, bonds, and

other types of security investments. Indirect financial investments can also be

done with the help of mediators or third parties, such as pension funds, mutual

funds, commercial banks, and insurance companies.

13
 Types of Investment

The term "investment" is used differently in economics and in finance.

Economists refer to a real investment (such as a machine or a house), while

financial economists refer to a financial asset, such as money that is put into a

bank or the market, which may then be used to buy a real asset.

1. Business management

The investment decision (also known as capital budgeting) is one of the

fundamental decisions of business management: Managers determine the

investment value of the assets that a business enterprise has within its control or

possession. These assets may be physical (such as buildings or machinery),

intangible (such as patents, software, goodwill), or financial (see below). Assets

are used to produce streams of revenue that often are associated with particular

costs or outflows. All together, the manager must determine whether the net

present value of the investment to the enterprise is positive using the marginal

cost of capital that is associated with the particular area of business.

In terms of financial assets, these are often marketable securities such as a

company stock (an equity investment) or bonds (a debt investment). At times the

goal of the investment is for producing future cash flows, while at others it may

be for purposes of gaining access to more assets by establishing control or

influence over the operation of a second company (the investee).

14
2. Economics

In economics, investment is the production per unit time of goods which are not

consumed but are to be used for future production. Examples include tangibles

(such as building a railroad or factory) and intangibles (such as a year of

schooling or on-the-job training). In measures of national income and output,

gross investment (represented by the variable I) is also a component of Gross

domestic product (GDP), given in the formula GDP = C + I + G + NX, where C is

consumption, G is government spending, and NX is net exports. Thus investment

is everything that remains of production after consumption, government

spending, and exports are subtracted.

Both non-residential investment (such as factories) and residential investment

(new houses) combine to make up I. Net investment deducts depreciation from

gross investment. It is the value of the net increase in the capital stock per year.

Investment, as production over a period of time ("per year"), is not capital. The

time dimension of investment makes it a flow. By contrast, capital is a stock, that

is, an accumulation measurable at a point in time (say December 31).

Investment is often modeled as a function of Income and Interest rates, given by

the relation I = f(Y, r). An increase in income encourages higher investment,

whereas a higher interest rate may discourage investment as it becomes more

costly to borrow money. Even if a firm chooses to use its own funds in an

15
investment, the interest rate represents an opportunity cost of investing those

funds rather than loaning them out for interest.

3. Finance

In finance, investment is the commitment of funds by buying securities or other

monetary or paper (financial) assets in the money markets or capital markets, or

in fairly liquid real assets, such as gold, real estate, or collectibles. Valuation is

the method for assessing whether a potential investment is worth its price.

Returns on investments will follow the risk-return spectrum.

Types of financial investments include shares, other equity investment, and

bonds (including bonds denominated in foreign currencies). These financial

assets are then expected to provide income or positive future cash flows, and

may increase or decrease in value giving the investor capital gains or losses.

Trades in contingent claims or derivative securities do not necessarily have

future positive expected cash flows, and so are not considered assets, or strictly

speaking, securities or investments. Nevertheless, since their cash flows are

closely related to (or derived from) those of specific securities, they are often

studied as or treated as investments.

Investments are often made indirectly through intermediaries, such as banks,

mutual funds, pension funds, insurance companies, collective investment

schemes, and investment clubs. Though their legal and procedural details differ,

16
an intermediary generally makes an investment using money from many

individuals, each of whom receives a claim on the intermediary.

4. Personal finance

Within personal finance, money used to purchase shares, put in a collective

investment scheme or used to buy any asset where there is an element of capital

risk is deemed an investment. Saving within personal finance refers to money put

aside, normally on a regular basis. This distinction is important, as investment

risk can cause a capital loss when an investment is realized, unlike saving(s)

where the more limited risk is cash devaluing due to inflation.

In many instances the terms saving and investment are used interchangeably,

which confuses this distinction. For example many deposit accounts are labeled

as investment accounts by banks for marketing purposes. Whether an asset is a

saving(s) or an investment depends on where the money is invested: if it is cash

then it is savings, if its value can fluctuate then it is investment.\

17
5. Real estate

In real estate, investment money is used to purchase property for the purpose of

holding or leasing for income and there is an element of capital risk.

o Residential real estate

The most common form of real estate investment as it includes property

purchased as a primary residence. In many cases the buyer does not have the

full purchase price for a property and must engage a lender such as a bank,

finance company or private lender. Different countries have their individual

normal lending levels, but usually they will fall into the range of 70-90% of the

purchase price. Against other types of real estate, residential real estate is the

least risky.

o Commercial real estate

Commercial real estate consists of multifamily apartments, office buildings, retail

space, hotels and motels, warehouses, and other commercial properties. Due to

the higher risk of commercial real estate, loan-to-value ratios allowed by banks

and other lenders are lower and often fall in the range of 50-70%.

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 Public Sector

The public sector is the part of economic and administrative life that deals with

the delivery of goods and services by and for the government, whether national,

regional or local/municipal.

Examples of public sector activity range from delivering social security,

administering urban planning and organizing national defenses.

The organization of the public sector (public ownership) can take several

forms,including:

 Direct administration funded through taxation; the delivering organization

generally has no specific requirement to meet commercial success

criteria, and production decisions are determined by government.

 Publicly owned corporations (in some contexts, especially manufacturing,

"state-owned enterprises"); which differ from direct administration in that

they have greater commercial freedoms and are expected to operate

according to commercial criteria, and production decisions are not

generally taken by government (although goals may be set for them by

government).

 Partial outsourcing (of the scale many businesses do, e.g. for IT services),

is considered a public sector model.

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Public Sector of Indian Economy

 Bharat Refractories Limited

 Bharat Sanchar Nigam Limited

 Coal India Limited

 Electronics Corporation of India Limited

 Gas Authority of India Limited

 Hindustan Aeronautics Limited

 Hindustan Copper Limited

 Housing and Urban Development Corporation Limited

 Important Public Undertakings

 Life Insurance Corporation of India

 National Aluminum Company Limited

 National Hydroelectric Power Corporation

 National Industrial Development Corporation Limited

 National Small Industries Corporation Limited

 Oil India Limited

 Power Grid Corporation of India Limited

 Power Finance Corporation Limited

 Steel Authority of India Limited

 The Industrial Finance Corporation of India Limited

 The Jute Corporation of India Limited

 The Shipping Corporation of India

20
 Private Sector
The private sector of Indian economy is the past few years have delineated
significant development in terms of investment and in terms of its share in the
gross domestic product. The key areas in private sector of Indian economy that
have surpassed the public sector are transport, financial services etc.
Indian government has considered plans to take concrete steps to bring affect
poverty alleviation through the creation of more job opportunities in the private
sector of Indian economy, increase in the number of financial institutions in the
private sector, to provide loans for purchase of houses, equipments, education,
and for infrastructural development also. The private sector of Indian economy is
recently showing its inclination to serve the society through women
empowerment programs, aiding the people affected by natural calamities,
extending help to the street children and so on. The government of India is being
assisted by a number of agencies to identify the areas that are blocking the entry
of the private sector of Indian economy in the arena of infrastructural
development, like regulatory, policies, legal procedures etc.

The most interesting fact about the private sector of India economy is that though
the overall pace of its development is comparatively slower than the public
sector, still the investment of private sector in the recent past, i.e. in the first
quarter of 1990 registered approximately 56 % which rose to nearly 71 % in the
next quarter, accounting for an increase of 15 %. Certain steps taken by the
Indian government are acting as the stepping stone of the private sector
continued journey to success, include industrial deli censing, devaluation that
was implemented previously.
The private sector of Indian economy is also adversely affected by the huge
number of permits and enormous time required for the processing of documents
to initiate a firm, however the central government has decided to abolish MRTP
Act and incorporate a Competition Commission of India to bring the public sector
and the private sector at the same platform. .
The participation of the private sector of Indian economy is desired by the

21
government of India for infrastructural development including specific sectors like
power, development of highways and so on. As the contribution of public sector
in these sectors have been arrested due to the shift of the attention of the Indian
government to issues like population increase, industrial growth. .

The main reasons behind the low contribution of the private sector in
infrastructural development activities are that:

 The small and medium scale companies in the private sector of Indian
economy suffer from lack of finances to welcome the idea of extending
their business to other states or diversify their product range.

 The private sector of Indian economy also suffer from the absence of
appropriate regulatory structure, to guide the private sector and this
speaks for its unorganized framework

 The unorganized framework of the private sector is interrupting the proper

management of this sector resulting in the slowdown of its development.

22
 Growth of Private Sector

The phenomenal growth of private sector of India can be attributed to political

will, financial reforms, usage of more advanced technology, young and large

English speaking working class. The 7-8 % of annual GDP growth rate India is

the one of the highest growth rate in the world. The last 15 years witnessed a

phenomenal rise of the growth of private sector in India. The opening up of Indian

economy has led to free inflow of foreign direct investment (FDI) along with

modern cutting edge technology, which propelled India's economic growth.

Previously, the Indian markets were ruled by the government enterprises but the

scene in Indian market changed as soon as the markets were opened for

investments. This saw the rise of the Indian private companies which prioritized

customer's need and speedy service. This further fueled competition amongst

same industry players and even in government organizations. Further, the

government of India also divested some of its enterprises to ensure smooth

operation of these companies which was otherwise were loss making. It also

went further and forged joint venture private Indian companies, especially in

sectors like, telecommunication, petroleum, housing and infrastructure. This

inculcated healthy competition and benefited the end consumers, since the cost

of service or products come down substantially.

B grade private Indian companies are also offering lucrative and competitively

priced products or service, whose quality is at par with A grade companies. Big

players of Indian markets have been forced to lower their price bands to remain

23
alive in the competition. Further, these big private Indian companies are offering

mouth watering benefits in the form of gifts, rebates and even holding lucky

draws to stay ahead in the race of 'market supremacy'. Gone are the days when

'brand loyalty, accounted for big customer base. Today, general Indian

customers are trendy, flexible and are extremely flexible with their choice. Steady

growth of private sector has sent a sense of urgency and insecurity amongst

main market players. Defensive methods of protection of Brands against

competitors are becoming popular. Legal instruments like patents, trademarks,

industrial designs and copyrights filing has increased many fold and so is counter

claim and litigation. Further, Mergers and Acquisitions, collaborations and

licensing has become a popular amongst private Indian companies.

The best thing that has happened to the overall Indian market with the growth of

private sector is that it has helped to shed bureaucracy and lengthy official

process and supplemented it by customer eccentric service, good work ethics,

professionalism and transparency of accounts.

Some positive effects of the growth of private sector in India are as follows –

 Manufacturing registered 11.9% growth

 The passenger vehicles sector grew by 11.61% during April-May 2011

 Electricity, gas & water supply performed well and recorded an impressive
growth rate of 8.3%

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 Construction growth rate rose to 10.7%

 Trade, hotels, transport and communication registered a growth rate of

12%

 Financing, insurance, real estate and business services recorded an

impressive growth rate of at 11% during the 1st quarter of this fiscal

 Exports grew by 18.11% during the 1st quarter of 2011-12 and the imports
shoot up by 34.30% during the same period

 The food sector is estimated to be of US$ 200 billion and it is expected to

grow to $310 billion by 2015


25
 Importance of private sector in Indian economy

The importance of private sector in Indian economy over the last 15 years

has been tremendous. The opening up of Indian economy has led to free inflow

of foreign direct investment (FDI) along with modern cutting edge technology,

which increased the importance of private sector in Indian economy

considerably. Previously, the Indian market were ruled by the government

enterprises but the scene in Indian market changed as soon as the markets were

opened for investments. This saw the rise of the Indian private sector companies,

which prioritized customer's need and speedy service. This further fueled

competition amongst same industry players and even in government

organizations.

The post 1990 era witnessed total investment in favor of Indian private sector.

The investment quantum grew from 56% in the first half of 1990 to 71 % in the

second half of 1990. This trend of investment continued for over a considerable

period of time. These investments were especially made in sector like financial

services, transport and social services. The late 1990s and the period thereafter

witnessed investments in sector like manufacturing, infrastructure, agriculture

products and most importantly in Information technology and telecommunication.

The present trend shows a marked increase in investment in areas covering

pharmaceutical, biotechnology, semiconductor, contract research and product

research and development. The importance of private sector in Indian economy

26
has been very commendable in generating employment and thus eliminating

poverty. Further, it also effected the following –

Increased quality of life

 Increased access to essential items

 Increased production opportunities

 Lowered prices of essential items

 Increased value of human capital

 Improved social life of the middle class Indian

 Decreased the percentage of people living below the poverty line in India

 Changed the age old perception of poor agriculture based country to a

rising manufacturing based country

 Effected increased research and development activity and spending

 Effected better higher education facilities especially in technical fields

 Ensured fair competition amongst market players

 Dissolved the concept of monopoly and thus neutralized market

manipulation practices

The importance of private sector in Indian economy can be witnessed from the

tremendous growth of Indian BPOs, Indian software companies, Indian private

banks and financial service companies. The manufacturing industry of India is

flooded with private Indian companies and in fact they dominate the said

industry. Manufacturing companies covering sectors like automobile, chemicals,

textiles, agri-foods, computer hardware, telecommunication equipment, and

27
petrochemical products were the main driver of growth. The Indian BPO sector is

more concentrated with rendering services to overseas clients. The KPO sector

is engaged in delivering knowledge based high-end services to clients. It is

estimated, that out of the total US $ 15 billion KPO service business around US $

12 billion of business would be outsourced to India by the end of 2010.

Major Private Companies of India

The phenomenal growth of major private companies of India can be attributed to

political will, financial reforms, usage of more technology, young and English

speaking nation. With 7-8 % of Annual GDP growth rate India is the one of the

fastest growing economy. Over the last decade and half the meteorite rise of the

major private companies of India has propelled India's economic growth. Major

private companies of India prioritized customer's need and speedy service, which

has further fueled competition amongst same industry players. This healthy

competition has benefited the end consumers, since the cost of service or

products has come down substantially. B grade companies are also offering

lucrative and competitively priced products or service, whose quality is at par with

A grade companies. Big brothers of markets have been forced to lower their

prices to remain in the list of major private companies of India.

Further, the so called major private companies of India to stay ahead in the race

of 'market supremacy' are offering mouth watering benefits in the form of gifts,

rebates and even holding lucky draws. Gone are the days when 'brand loyalty,

accounted for big customer base. Today, customers are trendy, flexible and are

28
extremely mobile within their choice pool. All the major private companies of

India are innovating new products, services and schemes to lure consumers and

extend their market-life. Aggressive Mergers and Acquisitions, collaborations and

licensing have become a popular and effective way to be alive in the race for

bestIndiancompanies.

The lists of some of the major private companies of India are as follows –

 ACC
 Tata
 Wipro
 Infosys
 Hindustan Lever
 Reliance Industries
 ITC
 Bajaj Auto
 HDFC Bank
 Crompton Greaves
 Asian Paints
 Titan Industries
 Hero Honda Motors
 Ashok Leyland
 Voltas
 United Phosphorus
 Birla Corporation
 Cadila Healthcare
 HT Media
 Reliance Energy
 Gammon India
 Jet Airways
 Indiabulls
 Karvy
 Emami
 Britannia
 HCL Infosystems
 Raymond
 Apollo Tyre

29
 IG Petrochemicals
 TVS Motor Company
 NIIT Technologies
 Radico Khaitan
 Biocon
 Gillette India
 Max India
 Mastek
 Merck
 Punjab Tractor
 Eicher Motor
 Ranbaxy
 Torrent Pharmaceutical
 Patni computers
 Satyam computers
 Godrej

'Innovation' has become the main mantra for survival for Top Companies India

and this is also true for the second and third grade companies. It catalyzes

revenue growth by introducing more advanced product and technology into the

market. Steady growth of each and every grade and type of companies has sent

a sense of urgency and insecurity amongst main market players. Defensive

methods of protection against competitors are also becoming popular.

30
 Investment Methodology
The stock market is one of the most important sources for companies to raise

money. This allows businesses to be publicly traded, or raise additional capital

for expansion by selling shares of ownership of the company in a public market.

An economy where the stock market is on the rise is considered to be an up

coming economy. In fact, the stock market is often considered the primary

indicator of a country's economic strength and development. Rising share prices,

for instance, tend to be associated with increased business investment and vice

versa. Share prices also affect the wealth of households and their consumption.

Therefore, central banks tend to keep an eye on the control and behavior of the

stock market and, in general, on the smooth operation of financial system

functions. Financial stability is the raison d'être of central banks.

Participants in the stock market range from small individual stock investors to

large hedge fund traders, who can be based anywhere. Their orders usually end

up with a professional at a stock exchange, who executes the order.

Some exchanges are physical locations where transactions are carried out on a

trading floor, by a method known as open outcry. This type of auction is used in

stock exchanges and commodity exchanges where traders may enter "verbal"

bids and offers simultaneously. The other type of stock exchange is a virtual kind,

composed of a network of computers where trades are made electronically via

traders.

31
Many years ago, worldwide, buyers and sellers were individual investors, such as

wealthy businessmen, with long family histories (and emotional ties) to particular

corporations. Over time, markets have become more "institutionalized"; buyers

and sellers are largely institutions (e.g., pension funds, insurance companies,

mutual funds, index funds, exchange traded funds, hedge funds, investor groups,

banks and various other financial institutions). The rise of the institutional investor

has brought with it some improvements in market operations. Thus, the

government was responsible for "fixed" (and exorbitant) fees being markedly

reduced for the 'small' investor, but only after the large institutions had managed

to break the brokers' solid front on fees. (They then went to 'negotiated' fees, but

only for large institutions.)

However, corporate governance (at least in the West) has been very much

adversely affected by the rise of (largely 'absentee') institutional 'owners'.

1.Stocks Investing Methodology

Understanding and choose what investment methodology to used before you

start your stock market investment is crucial to your success in the long run. The

secret of successful stock market investment is start with analyze stock market

cycle and have a "big picture" in mind when you are in stock market.

There are various stock market investment methodology and the most famous

and gain more popularity are fundamental analysis, technical analysis and value

investing. Chart patterns analysis and technical indicators both are the topic

under technical analysis.

32
  Stock Market Analysis

 Efficient Market Theory

 Stock Fundamental Analysis

 Stock Technical Analysis

 Value Investing

 Chart patterns analysis

 Leading and Lagging Technical indicators

Stock Market Analysis,

Focus on the big picture; Trade with the big picture in mind by take a step

back from the market !

The secret of successful trading is don't follow the market closely by take a step

back, trade with the big picture in mind. Look at the whole forest from bird eye

view instead of focus on the individual tree.

Start with analyze Business Cycle and Asset Allocation; Stay on the alert for

events which could have a significant effect on the global (or US) economy only.

The usual suspects are: wars, Interest rates, oil prices, and currency collapses.

Develop a macroeconomic view of the world using Kondratieff Cycle, Business

Cycle, Federal Reserve interest rate policy, world economic trends and currency

33
movement. If the fundamentals are bullish then go long with the technical

analysis.

Market Cycle; The overall market has more influence to stock prices than other,

follow the bull market, when coming to bear market, even the best stocks also

decline, follow the market trend and not individual stock. The direction of the

overall market influences the behavior of individual securities. Study the overall

market first before looking at any stocks in isolation. It is worth repeating the

axiom that it is better to buy a poor or an unknown stock when the timing is right

than it is to buy a great stock when the timing is wrong. 

Efficient Market Theory

The market is always efficient but investors are not. As long as human

emotion is a factor in the stock market, some inefficiency will occur.

EMT (Efficient Market Theory) is the financial term use to measure the efficiency

of the stock market. The "strong form" definition of Efficient Market Theory is that

all information whether is public or private are reflected in market prices and that

investors who happen to beat the market do so by luck. The theory was

expanded and various levels of market efficiency were defined in the early

1970s. The market, it was argued, was efficient at three levels, based on what

information was reflected in prices. Opposite the strong form of EMT is the "weak

form" which states that prices of common stocks are independent. This means

that all past information and prices are irrelevant to future prices and that

34
technical analysis that uses past stock prices alone would not be useful in

predicting future performance.

The intermediate level of EMT is the "semi strong" form which states that all

public information will eventually reflected in the market price of a stock. As new

information is introduced whether is positive or negative to a companies

or industries, the capital markets and the economy will be translated into

stock prices. Overall market analysis of price behavior, should not be considered

an adequate substitute for fundamental analysis when selecting individual

companies in which to invest. The various levels of Efficient Market Theory may

have emerged to explain an element of the market that simply cannot be

explained: human emotion.

The market is always efficient but investors are not. As long as human emotion is

a factor in the stock market, some inefficiency will occur. Individuals should do

their homework when investing in individual securities or in mutual funds. An

investors need to put time into researching and study the company prospectus

when investing in individual securities or mutual funds. A company's value is

influenced by the underlying economics of its own business and not by the

fluctuations in the stock market.

35
stock fundamental analysis

If you are "long term" investor and looking for a way to build a "buy and

hold" portfolio of stocks, fundamental analysis will help to you make a

decision on what to buy or stock pick.

Fundamental analysis also known as quantitative analysis, is one of the most

popular stock valuation method used to evaluate the worth of a business by

studying the financial data of the company, it involves read and interpret financial

statements such as income statement, balance sheet and cash flows statement.

It looking at the company revenue, expenses, assets, liabilities, management and

operation efficiency and all the other financial aspects of a company by using

financial ratio as an analysis tool. In other words, it focuses on the "basics" of the

business.

Fundamental analysis require massive amount of numbers in a company's

financial statements and you will rely heavily on annual report also known as 10-

K report and quarterly report also known as 10-Q reports. Fundamentalist use

fundamental analysis to analyze the historical financial performance data to

estimate the future performance of a company and  looking for financial sound

companies with solid foundation before they make an investment decision. This

process also known as stock screening.

36
Fundamental Analysis transforms figures from financial statements into

meaningful ratios to evaluate company financial conditions and measure

business performance.

Fundamental Analysis using Accounting-based financial ratios as an analysis

tool to evaluate company financial health and measure business performance by

transforms financial statements numbers into meaningful ratios that highlight

strengths and weaknesses of a business. This fundamental analysis model does

not require a thorough understanding of accounting or finance to used.

Introduction to the Stock Market

Before start investing, understanding the stock market is the first step to learn in

investing. Introduction to stock market tell you what is stock market and why

stock market exist, this provide a foundation for stock market newbie on how they

should look at stock market from investor point of view.

Stock Market :

Most people think that the market is NASDAQ, NYSE or in New York, London.

The market is not physical. It is an invisible amalgamation of global mind. The

market exists in the minds of all the participants, from the smallest individual to

the largest institutional investors or traders. It is their perceptions of value and the

emotions accompanying fear and greed that give the market dynamic motion.

37
stock technical analysis :

If you are "short term" investor (trader) waiting for market sentiment to

change, then technical analysis will help you to timing the market and

make a decision on when to buy and when to sell.

Technical Analysis is a method used to study stocks price historical performance

statistics and predict  how they will perform in future by discards the company

fundamental stated in financial statements, market news, economic, politic etc...

Base on technical analysis theory, technical analyst believes that the market

prices reflects all the investors opinions, any information regarding that particular

stock and all public and insider information in the market. That's why only study

of price is require. They also believes that stocks movement in trends and the

trends continue on until something happen to change the trend, before this

changes happens, stock price are predictable. Technicians, chartists or market

strategists, believe that history tends to repeat itself. Technical analyst assume

that the investor emotions does not change, investor will react in a similar way

38
under certain circumstances where they did it in the past, thus result in the stock

princes movement are likely to be the same as well.

Market timing is one of the technical analysis that target to identify major market

turning points. Volume study, Moving average, technical indicators, line charts

over certain time period also fall under the scope of technical analysis.

The major assumption of technical analysis is stock market is driven more by

psychological factors instead of fundamental values. Technical analyst believe

the stock prices not only reflect the underlying value of the company but also the

emotional part of it such as greed and fears in the market. Technical Analysis is

one of the investment analysis process where it study all the factors that

influence the stock price.

Technical Analysis Trading Systems is a mechanical system which will react to

events when they occur, they are normally build up by a set of technical analysis

indicators based on a set of trading rules such as algorithm or formula. A trading

system generate buy and sell signals to helps investors make an investment

decision, and incorporating risk management into the system.  

Technical analysis require historical stock price and volume end of day (EOD)

data over certain period of time to plot a stock charts, construct indicators, spot

39
patterns and market trend. Trader or Technician use market timing strategy by

apply technical analysis to analyze the historical stock price performance over

certain period of time and looking for peaks, bottoms, trends, patterns and others

factors affecting the stock's price movement to help them make a decision on

enter and exit market or when to buy and when to sell.

1. Techno-Fundamentalist

Techno-Fundamentalist used both fundamental and technical analysis to help

them make an investment decision. Fundamental analysis tell them which

company has strong financial foundation for stock pick, or answer the question

on what to buy, technical analysis tell them about the broad market and stock

trend to determine "right" timing to buy or sell.

2.value investing

Value investing is the allocation of capital to those companies that "create

value" for shareholders and whose value can be measured with a high

degree of integrity.

Value investing is the allocation of capital to those companies that "create value"

for shareholders. Also known as intrinsic value investing; Value investing

emphasizes the valuation of individual companies and seeks long-term total

return on invested capital. Value investing is one of the valuation methods based

on the discounted cash flow of free cash flow to stock holders and expected

40
dividends to estimate the absolute intrinsic economic value of a company. In

other words, Intrinsic Value or Economic Value; It is the discounted value of

the cash that can be taken out of a business during the company remaining life.

The calculation of intrinsic value is very subjective due to it is sensitive to interest

rates and estimation of future cash flows, So, the intrinsic value of a company is

an estimation instead of a precise figure. Intrinsic economic value of a company

also know as "investment value" , "indicated value", "central value", "normal

value", "reasonable value", "fair value", or "appraised value".

Value is a misleading term, there are various value such as market value,

accounting value (or book value or net worth), economic value (or intrinsic value).

Market value or capitalization of a company is calculate using the stock price

multiplied by the number of shares outstanding.

Price is not equivalent to value. Pricing and stock screening method in

fundamental analysis and technical analysis is not valuation. Pricing models such

as conventional academic capital asset pricing model (CAPM) using beta

coefficient is measurement of investment risk but not valid in valuation model.

The methods of appraising intrinsic economic value is to selecting an appropriate

discount rate and forecasts the future cash flows to calculate how much the cash

returns from it internal business, this process is independent from the current

market price this is why the adjective "intrinsic" is using.

41
Chart Patterns Analysis

Market Cycle is Pattern of Human Behaviors (Buyers and Sellers) and

repetitive in given situation;

The switching of market emotions from optimism to  pessimism over certain time

period tends to repeat itself again, thus produce similar patterns in the market

cycle. In stock markets, the patterns repeat over and over again that allows you

to build a trading system to trade these repeating formations.

Chart Patterns reflect human behavior, which tends to be repetitive. Economic

conditions may change, interest rate may rise or fall, but human reactions to

events are somewhat predictable. This is why a chart pattern from 50 years ago

is just as relevant as the same chart pattern today. Time and technology may

change, but human behavior changes very little. Chart patterns repeat

themselves because people react reflexively over and over again. If met which a

challenge, human beings well exhibit similar responses to that challenge no

matter what their nationality. This is why technical analysis works in markets all

over the world-no matter what you are trading.

This lead to another important topic of technical analysis; Technical chart

analysis or chart patterns analysis, chart pattern analysis is one of the technical

analysis tools that help you to reveals the secrets of stock market investing.

42
When the fundamental look good, chart patterns signal whether a stock is in

bullish, bearish, or neutral mode before you pull the trigger. You do your

fundamental analysis on a stock, and bought it to watch it go nowhere for a year

or more where you can park your money somewhere else to earn better return

rate. Even worse, once you buy in, the stock tumbles. If you looked at the chart

the answer was always there.

To knowledgeable investors, chart patterns are footprints of the smart money and

they need to follow, chart patterns analysis give an investors a tools to spot the

trend. Use them wisely to bring you the greater wealth.

Risk Management

Understanding what type of risk you are facing when come to stock market

investment before you can know how to manage the risk. When come to

diversify, how many stocks you need to own in your investment portfolio in order

to minimize the risk? Asset Allocation is one of the most important step in your

risk management plan. Market risk premium or patience premium explain why

43
you need to hold on to the stock for long term in order to earn higher return

provided by bond.

All financial securities can be characterized by two important features

"Risk and Return". The definition of Risk is to measure the probability of

loss

Risk management enable an investor to preserve his capital to accumulated

capital. The best investment strategy will fail without risk management plan in

place. From the very beginning of our lives we are trained to be risk avoiders. In

fact, the word risk to most of us is synonymous with fear and loss. This further

reinforces feelings and social programming about risk. A constantly successful

traders and investors understands, manage and accepts risk.

44
Type of Investment Risk

National / International 
Risk Management Technique
Risk
Economic Risk
Industry Risk
Business Cycle Analysis
Tax Risk
Political Risk
Market Risk Risk Management Technique
Market Risk
Liquidity Risk
Interest Rate Risk
Business Cycle & Asset Allocation
Inflation Risk
Exchange Rate Risk
Reinvestment Risk
Company Risk Risk Management Technique
Financial Risk Fundamental Analysis
Management Risk Fundamental Analysis
Volatility Risk Beta Coefficients / Diversification
Personal Risk Risk Management Technique
Timing Risk Market Cycle, Technical Analysis
Tenure Risk Set maximum acceptable loss and do exceed it.
Set stop loss after trade is confirmed. Adjust stop
  level to protect profit.

Risk, is measure the probability of loss in an investment. There are many ways to

manage risk when come to stock market investing, the following list out the

popular risk management apply by majority of the investors and traders.

45
1. Diversify - Don put all your eggs in one basket. Minimum 10 to 30 stocks in

your portfolio.

2. Limit your losses - Use stop loses mechanism to protect your capital and

available funds.

3. Liquidity trap - Buy only liquid investments in liquid market.

4. Psychology trap - Trade with your "risk" capital only and investing in

businesses that you understand.

% Loss of capital   10       20      30        35        40        45      50

% Gain required to breakeven   11.1    25      42.9     53.8     66.7     81.8   100

Reason behind cutting Loss. Cutting loss preserving your capital, enabling you to

enter the next high-profitability trade. The table above shows the percentage gain

necessary to recover from a predetermined percentage loss. The potential for

loss is accelerated when leverage is used (margin, options, futures). For

example, 10% loss of capital only require 11.1% gain to recover from the

previous loss but 50% loss in capital require 100% gain in the next trading with

the remaining capital available.

46
How many stocks you need to hold in your portfolio to achieve diversification and

reduce the risk? is it more stocks in your portfolio will get you more

diversification? The chart showing that after 30 stocks in your portfolio, the

diversification is almost achieved, provided all of the stock have the same risk

and no correlation between all of them. The portfolio risk will be reduce by mixing

across several assets rather than just one or two.

47
 Financial Planning before the Start Stock Investing.....

Step 1: Assess your financial situation

How much money is coming in each month? This is your monthly income

How much is going out each month? This in your monthly expenses

How much net income is available each month (for investment)?

Net Income = Income – Expenses

Step 2: Analyze and managing your financial

Track your expenses and examining where you spend your money.

Adjust your spending to get positive cash flow (income more than expenses).

Control your debt level. (cut spending, pay debt)

48
Create emergency fund (3~9 months expenses)

Step 3: Controlling your money (means controlling your life)

 Ask yourself the following question:       

 What is important to me?

 What do you want to do in life?

 Do you have a life or you just alive?

 What do I want to accomplish before I die?

49
  What is your net worth?  

         Net Worth = Total Assets - Total Liabilities

Using your credit wisely is the best investment in your life. If you don't have the

cash to make a purchase, don't use your credit card to let yourself go into debt.

You control your credit and debt, and not let them control you.

Once you've got your money under control, then you can put it to work for you.

One of the best thing in life is let the money work for you instead of you work for

money

 Step 4: Find a financial plan that work for you (fit your life-style)

Learn the difference between spending money to achieve goals and enjoy life --

and spending money just to spend money.

Short-term goals: This is the day-to-day stuff, such as going out to the movies

once a month.

Mid-term goals: What would I be doing if I were financial freedom?

Long-term goals: Think of these as once-in-a-lifetime, such as buying a house,

retirement or a trip around the world.

 Step 5: Assessing Your Risk Profile and Planning Your Asset Allocation

Asset Allocation is a mixture of your portfolio into different proportions of stocks,

bonds, real estate and other investment vehicles and reallocation of the asset

50
when it is out of your original allocation percentage due to the market fluctuation

or expectation of better relative returns in other markets. This asset allocation

require macro forecasts of broad based market movement and follow by

stocks/bonds picks which require micro forecasts of individual securities to yield

better than average return.

Step 6: Action! Use your money to make money

Channel your additional money to buy assets that can generate passive

income. You will be at the state of financial freedom once your passive income

generated from your assets are enough to fund your expenses. Another way of

measure wealth is how much money you have in order to continue keep you

alive without work.

The magic of compound interest (rule of 72). The sooner you are able to start

the better. The one necessary ingredient to making money is time. So the sooner

you begin, the more time (and money) you'll have. If you want to be somewhere

better in the future, you have to put the money into it now.

Investing your time before investing your money. Start with some of the

easier books and then move on to deal with advanced theory on investing.

Reading is one of the more important things an investor can do. The more you

read and absorb, the better you are able to evaluate different investment

51
opportunities. Keep pressing to learn more and more. The more you learn the

more you will realize there is to learn. The total amount of wealth you are able

accumulate is proportional to the financial knowledge you have.

You've worked too hard to get control of your money. So, don't throw it at an

investment product you don't understand. Get yourself to be an investor or trader

as fast as possible if you are still not there yet!

Invest yourself or Mutual Fund? You have many choices to make when it

comes to investing. The first one is how involved you want to be in your investing

program. In these days of online stock-trading Web sites, you can handle your

investing yourself. It's exciting and keeps you in control of your financial future.

However, if your interests in life do not include numbers and stock market

analysis, you can pay someone else to help your money grow. Invest wisely, not

beyond your knowledge and capabilities. Don't be easily swayed by hot

stocks and get-rich-quick schemes. If you know nothing about investments, get

started by putting your long-term investment money in mutual fund (or unit trust).

Asset Allocation

52
Asset allocation referred to as market timing as investors try to reallocate

capital between equities, bonds and other investments.

Asset Allocation is a mixture of your portfolio into different proportions of stocks,

bonds, real estate and other investment vehicles and reallocation of the asset

when it is out of your original allocation percentage due to the market fluctuation

or expectation of better relative returns in other markets. This asset allocation

require macro forecasts of broad based market movement and follow by

stocks/bonds picks which require micro forecasts of individual securities to yield

better than average return.

53
 Total Asset Allocation Plan (Strategy Asset Allocation)
Age 30~35 35~40 40~45 45~50 50 & above
Fixed Asset 50% 50% 50% 50% 50%
Cash 10% 10% 10% 20% 30%
Investments 40% 40% 40% 30% 20%
Total 100% 100% 100% 100% 100%
Table 1
 
Investment Capital Allocation
% of total capital 30~35 35~40 40~45 45~50 50 and above
Stock Market 90% 90% 80% 70% 10%
  Bond Market 5% 10% 20% 30% 90%
  Mutual Fund 5% 0% 0% 0% 0%
  Total 100% 100% 100% 100% 100%
Table 2
 
Portfolio Allocation
% from Stock Market 30~35 35~40 40~45 45~50 50 and above
  Blue Chips 80% 80% 80% 35% 10%
  Small Caps 20% 20% 20% 15% 10%
  High dividend Stocks 0% 0% 10% 50% 80%
  Total 100% 100% 110% 100% 100%
Table 3

Asset allocation provide investors another way of managing risk by pouring all

they have into single particular investment vehicle, adjust asset allocation under

difference environment and time horizon accordingly.

Asset allocation into fixed asset (properties and real estate), cash in hand and

investment vehicles and the allocation change from difference age range depend

on your risk profile either conservative, moderate or aggressive. Table 1 illustrate

this with the sample figure, investor need to come out with their own allocation to

54
fit their own personality and risk level. The figure in table 1, 2 and 3 are just for

tutorial purposes.

Table 2 is an extension of table 1 where 40% of the total asset are allocated to

investments products and 90% is allocated into stock market during early year of

investment, 5% in bond market and 5% in mutual fund. Again the number in table

2 is just for tutorial purpose and not meant for any recommendation nor advise

on the asset allocation. Investors should seek professional consultation for their

own asset allocation.

Table 3 extent the 90% of the allocation into stock portfolio where certain

percentage will be go into blue chips, small caps or high dividend pay out stocks.

55
 Market Risk Premium!

Market risk premium also known as patience premium, the return for risk is

a premium for patience.

Investment in stock must often wait longer to earn a return that is higher than that

provided by bond, like as much as about 20 years longer, and the riskier the

investment the longer the wait is likely to be. The return for risk really is a

premium for patience. Research shows that the return from common stocks was

highly variable and uncertain over single-year intervals. The highest return and

garnered from the market in any one year was positive 52.3% and the lowest

was a negative 26.3% But once the time horizon for investing was stretched out

to even just 5 years, a remarkable central tendency began to appear. The

cumulative return began to converge in accordance with a statistical

phenomenon known as a regression toward the mean. Over the long run, annual

56
market swings tend to cancel each other out, making common stock investing

prudent for even the cautious investor.

Definition of Rates of Return

The investment return normally expressed in percentage is a measure of the

growth of initial invested capital over certain period of time. For instance, the

stock price purchase at time t, represented as Pt and the stock price

increase/decrease to Pt+1 after one year, the investment return Rt is calculated

as R t = [ P t+1 - Pt]/ Pt. If the dividends are paid, the calculation will adjusted to

Rt=[ P t+1 - Pt+Dt]/ Pt.

Investment arith.mean geom. Standard High Low

mean deviation Return Return
 
S&P total return 12 10 22 43 -30
U.S. Small Stock TR 17 12 36 74 -37
U.S. LT Govt TR 5 5 8 15 -8
U.S. LT Corp. TR 6 6 7 14 0
U.S. 30 day T-Bills 4 4 1 1 0

Arithmetic rates of return and  Geometric rates of return are two difference

methods of measuring average return and they rarely yield the same result from

each other. For example: r1 = -50% and r2 = +100%.  The geometric average is

calculated as: [(1+r1)(1+r2)]1/2-1=0% but the arithmetic average is calculated as

(100-50)/2 = 25%, From the result above, the geometric average is more closer

to the actual investment result which you did not make any money over the two

57
periods but arithmetic average shown 25% return. However, in many statistical

models, the arithmetic rate of return is employed.

Standard Deviation as a Measure of Risk . Stock returns may be riskier or more

volatile, standard deviation from statistics is a summary measure about the

average spread of observations. If the S&P return are normally distributed and

the standard deviation of one year return is 15%, then 2/3 of the S&P index

investors annual return should fall between the range (12+15)= 27 and (12-15)

= -3.

Develop a investment plan (for investor) or trading system (for trader) base

on stock investing strategies or methodologies that is best fit for your personal

risk profile (conservative, aggressive, risk taker etc...) will enable you to have

confidence to enter and exit stock market with razor-like precision.

Test your trading system before risk your money. After you develop your own

trading system, pick a stock you what to trade with the price you want to buy or

sell and paper trade with your trading system using daily data. Stick to to stop

loss level, if the stock price move up, move up your stop up or trailing stop to

protect your profit and if the stock price move against you, hold on to the stock

until you get stopped out. Keep this practice for few months to get a good feel

58
your trading system and indicators to see how well it work and build up your

confident to the trading system and indicators.

What to buy? When to Buy? &

When to Sell?

All you need to do in stock market investing is make a decision on what to

buy, when to buy and when to sell.

You've worked too hard to earn your money. So, don't throw it at the stock

market before you learn how to make a decision without emotions, what investing

strategy or  methodology to use and Risk Management Plan in place. Get

yourself there as fast as possible if you are still not there yet!

This website will guide you through the winning psychology to control your

emotions, stock investing strategy,  methodology and Risk Management. You will

also learn stock investing strategy/methodologies apply by fundamentalist (or

fundamental analyst), Technical Analyst or Traders, Techno-Fundamentalist,

Sophisticated Investors (also known as value investors) and internal investors.

This website is organized in such a way it's pull whatever is needed to help you

to make a decision on what to buy, when to buy and when to sell.

59
 Decision Making Matrix
Type of "players" in
What to buy?
Stock Market When to Buy? When to Sell?
(Stock Pick)
Speculator Rumors........ Greed........ Fear........

Technical Technical Technical

Trader or Technician
Analysis Analysis Analysis

Fundamental Fundamental Fundamental

Fundamentalist
Analysis Analysis Analysis

Techno- Fundamental Technical Technical

Fundamentalist Analysis Analysis Analysis

Sophisticated Investor Stock Valuation Stock Valuation Stock Valuation

60
  
Stock Investment Methodology Psychology &
Type of "players"
Fundamental Technical Stock Risk
in Stock Market
Analysis Analysis Valuation management
Speculator Not Apply Not Apply Not Apply Not Apply
Trader or
Not Apply Apply Not Apply Apply
Technician
Fundamentalist Apply Not Apply Not Apply Apply
Techno-
Apply Apply Not Apply Apply
Fundamentalist
Sophisticated
Apply Not Apply Apply Apply
Investor
 
If you have difficulty to make decision on stock investing, you will tend to listen to

rumors, News and start to follow the crowd, when you make money from stock

market, you will become more greedy and once you start losing money, fear will

cloud your mind and emotion start to take control of yourself. It's a sure way to

losing your hard earn money in stock market.

Investing your time to read and educate yourself before investing your money in

stock market. You've heard it before "Knowledge is power". Start with some

easier tutorial on stock fundamental analysis such as know how to interpret

financial statements and using Financial Ratios as an fundamental analysis tool

to assist you on stock pick and then move on to deal with advanced theory on

value investing for example Economic Value Added Model EVA, Return on

Invested Capital ROIC, Cash Conversion Cycle CCC, discounted cash flow etc....

Reading is one of the more important things an investor need to do.

The more you read and absorb, the better you are able to evaluate a business

and apply different strategies and tactics to improve your stock investing result.

61
Stock Market

Exist?

Almost all big corporation started out with a small operation and growth become

a giants company. Wal-Mart was originally a single-store business in Arkansas.

Dell computer started with Michael Dell selling self assembly PC from his house

garage. How did these small company end up become the financial giants in US

economy?

When a company is growing, company owners generally raised capital by selling

stock to investors in exchange for giving up a tiny stakeholder of the company, or

dividends to shareholders, they are given cash to fund growth and expand the

business instead of borrow money. Beside that, a company also can using their

own stock for acquisition another businesses instead of paying cash.

Stock Market Behaviors

Stock market behaviors discuss what make stock prices go up and down from

company fundamental factors, supply and demand on securities available on

market and speculator and investor perspective. It also discuss the Ben

Graham's Mr. Market concept.

62
 What Makes Stock Prices Go Up and Down?

1. Company Fundamental

An analysis and study on stock prices movement correlate to company

fundamental such as EVA, EPS growth, Sale growth are shown in the following

table. For example, if a company ROE increase by 35%, statistically, the market

value will be increase by 35% and the rest of the factors that affecting the stock

prices are speculators, supply and demand and market sentiment etc...

Correlations between market value & various measures 

1. EVA 50%
2. ROE 35%
3 Cash flow growth 22%
4 EPS growth 18%
5 Dividend growth 16%
6 Sales growth  9%
 

63
2. Speculators and Investors

The stock prices will drive by speculator to one extremes, the investor who

generally buys when the speculator sells and sells when the speculator buys. If

all the buyers in stock market are investors, the stock market would behave

much more rationally and the stock prices will reflect the underlying value of the

companies in the long run. In other words, stocks would be bought and sold

based on the company value.

3. Supply and Demand

Stocks like other commodity such as oil are following supply and demand

principle. There are only same number of stocks available at any given time,

more buys than seller will drive the price of these shares up and vice versa.

When the supply of shares is more the the demand, these shares are worth less.

These shares will worth more if the demand is more than the supply of these

particular shares.

4. Market Overreact

These are the opportunities when great businesses or company runs into short

term financial difficulty such as when a company wants to build a new

manufacturing plant or a wealthy individual selling his stock for an financial

reason. Wall Street overreacts and driven down the stock price to unjustifiable

lows. If you understand this, it is time to accumulate those company stock with

cheap price because eventually the company stock will go back to it value and

making profit from it.

64
 Role of Portfolio Manager/Advisor

An Portfolio Manger or investment advisor (or adviser) is an individual or firm that

advises clients on investment matters on a professional basis.

They tend to fall into two distinct categories:

 investment advisors offering direct financial advice to individuals or

businesses, or

 investment advisors offering asset management for (typically) corporate

clients, hedge funds and/or mutual funds.

Depending on the nature of the relationship, investment advisors charge fees

calculated as a percentage (e.g., 1%) of assets under management (see: fee-

only financial advisor), on an annual basis, an hourly or on a "flat fee" basis.

Financial Advice:

Financial Advice is advice given in relation to financial matters such as

investing, insurance, borrowing, saving and retirement planning. Professionally,

the advice is given only after the financial situation of the client is unveiled

through a thorough fact-finding and analysis exercise. Many financial advisers

also double-up as financial planners because their function is crossed in many

areas. This principle of understanding the client's situation before advice are

given is known as the 'know your client' rule. Once the client's actual financial

65
situation is known, a set of prescriptions are provided by the financial adviser to

solve those client's problems that are uncovered.

Financial advisers may or may not hold distribution contracts with financial

institutions as part of their business. Those who do not are often referred to as

Independent Financial Advisers (IFA) as they are not influenced by the

commissions they get for recommending financial products, and hence, are

considered less bias when advising their clients.

Assets Management:

Investment management is the professional management of various securities

(shares, bonds etc.) and assets (e.g., real estate), to meet specified investment

goals for the benefit of the investors. Investors may be institutions (insurance

companies, pension funds, corporations etc.) or private investors (both directly

via investment contracts and more commonly via collective investment schemes

e.g. mutual funds or Exchange Traded Funds) .

The term asset management is often used to refer to the Investment

management of collective investments, whilst the more generic fund

management may refer to all forms of institutional investment as well as

investment management for private investors. Investment managers who

specialize in advisory or discretionary management on behalf of (normally

wealthy) private investors may often refer to their services as wealth

66
management or Portfolio management often within the context of so-called

"private banking".

The provision of 'Investment management services' includes elements of

financial analysis, asset selection, stock selection, plan implementation and

ongoing monitoring of investments. Investment management is a large and

important global industry in its own right responsible for caretaking of trillions of

dollars, euro, pounds and yen. Coming under the remit of financial services many

of the world's largest companies are at least in part investment managers and

employ millions of staff and create billions in revenue.

Fund manager refers to both a firm that provides investment management

services and an individual who directs fund management decisions.

67
 Research Methodology

Title of the Study :

“Investment methodology in public and private sector”

Sample size : 100 (6-7 respondents per day)

Research refers to search for knowledge. We can also define research as

“scientific & systematic search for pertinent information on a specific topic”.

Research is careful investigation or enquires for new facts in any branch of

knowledge.

Research methodology is way to systematically solve the research problem. It

is systematic investigation to fund solutions to a problem. The investigation is

guided by previously collected information. The research will be carried out in

share market.

68
 R -Rational way of thinking

E - Expert & exhaustive treatment

S - Search for solution

E - Exactness

A - Analytical analysis of adequate data

R - Relationship of fact

C - Careful recording.

H - Honesty & hard work

TYPES OF RESEARCH:-

 Descriptive Research
 Analytical Research
 Quantitative Research
 Qualitative Research
 Conceptual Research
 Empirical Research
 Applied Research
 Fundamental Research
 Scientific Research
 Exploratory Research

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 Objectives of the study

 To understand the control system of finance and its management in an

investment industry.

 To go through some major aspects of investment related to the customer

point of view:

 Time

 Need

 Which tool

 Growth v/ s Risk

 Short term / long term

 Control

 Flexibility

 To understand when, how and much customers should invest in market.

 To understand the role of different faces of market in the growth of

customers investment.

 To understand the detail about the investment portfolio in government

sector / private sector.

 To learn about the returns and growth of investment in equity and debt

market.

 To understand the work of portfolio manager i. e designing of portfolio,

fixing the growth for the company and return so the customer.

70
.

METHOD OF SELECTING SAMPLE

Research methodology is a way through which the collection of date is being

done. Data can be collected in forms and in many ways. The various forms of

data are: -

1. Primary data

 For this questionnaire was prepared & survey was conducted to

collect the primary data for the needs of investment for a

customers.

 Universe

 The first step in developing any sample design in to clearly define

the set of objects, called the universe.

 For study of my project the universe is the AJMER city in which

researcher was covered the following areas complex & Malls,

Restaurants & Gardens, Banks etc.

Sample size- 100 investors

2. Secondary data :-

 Company profile

 Company website

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  Internet

 Books recommended for subjects

Limitation of Study

The various limitations which are found by me in market are:-

 Lack of awareness of stock market: - Since the area is not known before it
takes lot of time in convincing people to start investing in share primarily in IPO’s.

 Some respondents are unwilling to talk: - Some respondents either do not

have time or willing does not respond, as they are quite annoyed with the phone
call.

 Inaccurate leads: - Sometimes leads are provided which had error in it which
varies from only 5 digit phone number to wrong phone number.

 Misleading concepts: - some people think that shares are too risky and just
another name of gamble but they don’t know its not at all that risky for long
investors.

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 DATA ANALYSIS
1) Are you aware of the under mentioned investment options available in the

market?

No. of Respondents
1.Mutual Fund 18
2.Life Insurance 25
3.Equity share 15
4.Bank Deposit 35
5.Others 5
6.All of These 2

Customer Awareness
2%
5%
18% Mutual Fund
Life Insurance
Equity/Share
Bank Deposit
35%
Others
25% All Of These

15%

I found that mostly customers aware about bank deposit (35%) & 25% in life

insurance.

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2) Have you ever invested in any of these mentioned instruments?

No. of Respondents
1.Mutual Fund 5
2.Life Insurance 29
3.Equity share 6
4.Bank Deposit 53
5.Others 5
6.All of These 2

Customer Awareness
2%
5% 5%
Mutual Fund
Life Insurance
29% Equity/Share
Bank Deposit
Others
All Of These
53%
6%

According to my research that mostly customer invested in Bank Deposit(53%) &

29% in life insurance ,rest of them invested in other instruments.

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3) How much percentage of your income you invest ?

No. of Respondents
1. 0 - 20% 48
2. 20% - 40% 35
3. 40% - 60% 12
4. 60% - 100% 5

Investment
60%
50%
40%
Investment
30%
48%
20% 35%
10%
12%
0% 5%
0-20% 20%-40% 40%-60% 60%-100%

48% of the investors invest their income in 0-20% group,& 35% in 20-40% group.

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4) Which type of company you will opt while making investment ?

No. of Respondents
1. Public Sector 52
2. Private 28
3. Government 20

Sector

20%
Public Sector
Private
Government (Postal Life
Insurance)
52%

28%

Mostly investors give preference to public sector for investing (52%) &

28% in private & 20% in government.

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5) How many investments do you have?

No. of Respondents
1. one 41
2. two 14
3. three 19
4.four 26

Investment by customer
45%
40%
35%
30% Investment by customer
25%
41%
20%
15% 26%
10% 19%
14%
5%
0%
0ne Two Three Four

41% customers have only one investment & 14% have two , 19% have three ,26% have

four .

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6) What are the sources through which you get the information about

Investments?

No. of Respondents
1. Financial advisor 46
2. Friends & relatives 24
3. Media 11
4.Own analysis 19

Source of information about investment

50%
40%
Source of information about
30% investment
46%
20%
10% 24% 19%
11%
0%

46% of investors use financial advisor for investing the money.24% use

friends for receiving the information.

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7) Why do you prefer to invest?

No. of Respondents
1. High returns 21
2. Safety 52
3. Liquidity 13
4. Fast money 14

Reason of investment

14%
21% High returns
Safety
13% Liquidity
Fast money

52%

According to my servey most of the reason of investment is safety (52%) then

21% is High return ,14% is fast money ,13% is liquidity.

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8) Are you satisfied with the returns of your existing investment ?

No. of Respondents
1. Yes 77
2. No 23

Investment satisfaction
90%
80%
70%
60%
50% Investment satisfaction

40% 77%
30%
20%
10% 23%

0%
Yes No

77% of the investors are satisfied from returns of existing investment only 23% is
not satisfied.

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9) Are you aware of Portfolio Management of your investment company?

No. of Respondents
1. Yes 61
2. No 39

Awareness of portfolio management

39% Yes
No

61%

61% of the investors aware about the portfolio management of investment

company only 39% is not awared.

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10) Which type of sector adopted easy process of investing ?

No. of Respondents
1. Public Sector 33
2. Private 47
3. Government 20

Sector
20%
33%

Public Sector
Private
Government (Postal Life
Insurance)

47%

47% investors think that private sector adopted easy process of invest. 33% think
public sector ,and 20% think government sector.

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11) Do you get any information about the company before investing ?

No. of Respondents
1. Yes 87
2. No 13

Information before investing

13%

Yes
No

87%

I found that 87% of the investors get the information about the company before
investing only 13% do not get any information.

S.W.O.T ANALYSIS

STRENGTHS

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 First, we look at the company's strengths. What does the company do well? What
makes it better than others? What does the company have, or do, that sets it
apart from its competition?
These are important questions, and should include aspects of the company that
made you consider it for investment in the first place. Look at branding, image,
pricing power, size, market share, financial position (balance sheet strength), etc.
Here are some strengths to look for:

 The size of the company relative to others in the industry 

 Balance Sheet strength 

 Cash flows 

 Perception of the company's products 

 Perception of the company's brand(s) 

WEAKNESSES
Now that you've determined how wonderful the company is, it's time to look for
the weaknesses. The same questions should be asked when looking for
weaknesses. What does the company do poorly, or not so well? What are other
companies doing better? What is keeping the company from greater success.
It's important that you don't gloss over this section. SWOT analysis is a
brainstorming effort, so don't discount anything that comes to mind. If you
perceive a weakness, list it. The weakness you fail to list today could be why
your investment turns out poorly next year.
Some weaknesses to look for:
 
 Deteriorating balance sheet

 Poor perception of company's brand(s) and/or products 

 Advantages other company's have?

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 Lack of management or other employee talent

OPPORTUNITIES

We shift our focus to external factors when we look at opportunities. Here we try
to identify areas of business we think the company is looking to enter, or should
be looking to enter. We also look for opportunities to gain market share from
competitors, or grow the company's market to new customers.
But there are more than just external opportunities. There are opportunities within
a company that should be considered. Can the company combine product lines
to increase sales? Maybe the company has duplicate costs that can be
streamlined. Companies can always find ways to do things better.
Some opportunities to look for:

 New markets for products

 Financial or legal trouble for competitors

 New technologies the company could adopt

 Changes in regulatory / tax burdens

 Strategic investments

 Internal efficiencies

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 THREATS

Finally, we need to consider threats to the company. Again, threats can be

internal as well as external. In fact, I've found that internal threats usually come
first, which opens the door to external threats. Therefore, it's important to do a
good threat analysis.
Internal threats aren't usually classified as such, which I think is a mistake. Any
internal problem is a threat to the company's well-being and should be evaluated
alongside the external threats. For example, a company that relies on developing
innovative products, such as Microsoft or Intel, faces the threat of losing
engineering talent every day. This is an internal threat that could easily pave the
way for external threats.
Some possible threats are:
 
 Internal obstacles the company is facing.

 Financial constraints on the company.

 Cash flow problems.

 The relative position of the company's largest competitors.

 Technological advances in the industry.

 New technologies that threaten to displace the company's products.

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 Conclusion

In the conclusion I would like to tell about my experience toward investment in

stock market, insurance and other sector. I took an example of ICICI to

understand about the way of investment by portfolio managers. If we talk about

ICICI there we can easily understand that the company is mostly going with

Company and Corporate securities. And they invest money in government

securities but in small packages.

The reason of choosing private sector what I feel is the return because in last few

years the corporate sectors are doing well and giving the return on investment.

As we all know the investment methodology is just not for the organization

means company who is doing investment but it’s for all means individual, groups

and organization.

The reason of taking ICICI is they are inviting money in all sector of investment

and ICICI can be a best example of investment because they are touching all

sections of investment.

In last I can say today, the investors want good return within a short period of

time.

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RECOMMENDATIONS AND SUGGESTIONS

Suggestions included:

Best investments
Residential housing. Without question, the best overall investment for the
majority of Americans has been their homes. Residential housing has kept pace
with inflation; in addition, it has appreciated on the average approximately 4
percent annually. A simple investment plan to follow is to make the ownership of
your home your first investment priority.
Rental properties. It is often said that the thing you know best you do best. The
majority of Americans know how to evaluate rental properties, particularly
residential housing. Therefore, they are a logical investment. However, rental
properties are not for everybody. Unless you have a strong personality and are
willing to evict some nonpaying tenants from time to time, you need to avoid
becoming a landlord. However, one of the attractive aspects of rental property is
that the initial investment is not excessively large in many areas. In addition,
once the property is rented the tenants pay off the mortgage for you.
Mutual funds. The whole concept of mutual funds is designed to attract the
average investor. The pooling of a large number of small investors’ monies to
buy a broad diversity of stocks and other securities is a simple way of spreading
the risks. Mutual funds are good investments because (1) most allow small
incremental investments, (2) they provide professional investment management,
and (3) they allow great flexibility through the shifting of funds between a variety
of investment assets.

88
 Insurance products. With the dual benefit of insurance coverage plus higher
yields, insurance products such as annuities and whole-life insurance have
become viable products for long-term investors.
Company retirement plans. The investments available through a company
retirement plan are the same as those you might choose personally. One major
advantage with company-sponsored retirement plans is that usually the funds are
tax deferred. Additionally, many companies offer matching funds based on a
percentage of what you elect to invest yourself.
Government backed securities. Government backed investments are
considered to be absolute security. Although they may not be the best
performers, they are without a doubt the most secure.

Worst investments
Commodities speculation. Commodities trading is the buying and selling of
materials for future delivery. Unless you have the absolute conviction that
everything you own belongs to God and can go to bed at night with the
understanding that everything you have worked for most of your life can be lost
while you sleep and the thought of that possibility is irrelevant to you with regard
to your life and lifestyle, don’t trade commodities.

Precious metals. Most people who make any money at all on precious metals
are those who sell them. Unless you have a lot of money that you don’t mind
losing, don’t invest in precious metals. Investing in precious metals is like taking
a handful of money and throwing it into the wind and then hoping that some of it
will eventually return to you, along with more money that others have thrown to
the wind.
Gemstones. The diamond on your finger is not an investment; it’s a keepsake.
Most novice gem speculators usually buy high and sell low. Gem investing is for
those who have nerves of steel, the strong at heart, and the rich. Seldom do
investors make any money in gems, unless they are one of a small group of
international gem professionals of gem collectors.

89
 Collectibles. Coins, stamps, books, porcelain, works of art, and other unique
items can be good investments for knowledgeable buyers who take the time and
effort to become proficient at their trade or for those who collect such items as a
hobby or for leisure. However, for the average non-professional collectibles
investor, the market is extremely limited and slow moving—neither worth the time
nor the effort when compared to the limited financial rewards.

Stocks. Although the knowledgeable, professional investors can and do make

money regularly on common stock, average investors are not equipped to
accurately speculate on which stock will do well and which will not. If the average
investor would invest in a common stock, leave it for 10 years, and not touch it, it
probably would keep up with inflation and perhaps even gain 3 or 4 percent. But
seldom do average investors do that. They generally try to move their
investments from stock to stock in order to reap the maximum benefits. Since
they are not professionals and their knowledge is limited, most end up making
little and, in many cases, losing their initial investment.

Conclusion
Although we are not qualified to give professional investment advice, we can
present information that suggests what have been the best and worst investment
options, based on past performance. We are not suggesting that you invest in the
best and avoid the worst. We only propose that you consider these findings
(along with prayer and seeking counsel from a trusted investment professional)
before you make your investment decisions.

90
 Bibliography

 Kothari, C.R. , Research Methodology Management, 3 rd edition

 Kotler, Philip, Marketing Management , Pearson Prentice Hall,11th
Revised edition, 2002.
 Yadav, Surendra S, et. al, Foreign Exchange Markets, MacMillan India,
New Delhi, 2001
 Khan, M Y, Financial Services, Tata McGraw-Hill, New Delhi, 2001
 Capital market (Dealer) Module, NSE Ltd., Copyright, 2009

 http://www.economictimes.com

 http://news.moneycontrol.com/mf/glossary.php

 www.iciciprulife.com

 www.ppfas.com/Portfolio Management

 www.wikipedia.com

 www.vikalpafinvest.com

 finance.indiamart.com

 www.indiamoney.com

 kautilya.chhabra-inc.com

QUESTIONNAIRE

91
Dear Respondent, I Ankit jain a student of MBA and carrying a study on “Investment
methodology in public & private sector.”In this regard I would like to spare some time
to answer few questions. The Information provided by you will be kept confidential…
Name: _______________________________________

Occupation: ______________________________________

Contact No. ______________________________________

Address. _______________________________________

________________________________________________________________

1) Are you aware of the under mentioned investment options available in the

market?

(a) Mutual Fund (b) Life Insurance

(c) Equity/Share (d) Bank Deposits

(e) Others (f) All of these

2) Have you ever invested in any of the thease mentioned instruments?

(a) Mutual Fund (b) Life Insurance

(c) Equity/Share (d) Bank Deposits

(e) Others (f) All of these

3) How much percentage of your income you invest ?

(a) 0 - 20% [ ] (b) 20% - 40% [ ]

(c) 40% - 60% [ ] (d) 60% - 100% [ ]

5) Which type of company you will opt while making investment ?

(a) Public Sector [ ] (b) Private [ ]

(c) Government (Postal Life Insurance) [ ]

92
5) How many investments do you have?

(a) one [ ] (b) Two [ ]

(c) Three [ ] (d)Four [ ]

6) What are the sources through which you get the information about

Investments?

(a) Financial advisor [ ] (b) Friends & relatives [ ]

(c) Media [ ] (d) Own analysis [ ]

7) Why do you prefer to invest?

(a) High returns [ ] (b) Safety [ ]

(c) Liquidity [ ] (d) Fast money [ ]

8) Are you satisfied with the returns of your existing investment ?

(a) Yes [ ] (b) No [ ]

9) Are you aware of Portfolio Management of your investment company?

(a) Yes [ ] (b) No [ ]

10) Which type of sector adopted easy process of investing ?

(a) Public Sector [ ] (b) Private [ ]

(c) Government (Postal Life Insurance) [ ]

11) Do you get any information about the company before investing ?

(a) Yes [ ] (b) No [ ]

93