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Executive summary
The report" Fundamental and Technical Analysis of Five Major Companies in the
Information Technology Sector" is a study to analyze the strength and weakness
of the scrip's of five major companies in the IT industry. The five major
companies include Tata Consultancy Services, Infosys, Oracle, HCL and Wipro.
The primary objective of the study to suggest the investors, whether to buy the
scrip or not, based on the valuation (Under priced or Over priced) of shares. Also
to analyze the trend (Bullish or Bearish) of this scrip's in the market. The
secondary objective of the study is Analyze the company's performance,
Understand the capital market and its functioning, and to compare theoretical
To analyze the scrip, Fundamental and Technical analyses are used. In the
fundamental analysis the method of intrinsic value of calculation is used. For the
technical analysis, tools like Relative Strength Index (RSI), Moving Average
convergence and divergence(MACD), Moving average crossover, Stochastic and
Momentum are used. In the fundamental analysis the intrinsic value is compared
with the current market value to suggest the investor to buy or sell the share. In
the Technical Analysis, the movement of the corresponding graphs are studied to
interpret whether to buy sell or hold the share.
1. INRODUCTION
1. Introduction
Today, investment has become a household word and is very popular with
people from all walks of life. It is because of increase in working population,
higher family incomes and consequent savings, availability of large and attractive
investment alternatives, increase in investment related publicity and so on.
One of the primary assumptions of the fundamental analysis is the price of the
stock market does not fully reflect a stocks real value. In the financial jargon, this
true value is known as the intrinsic value. If the market price is less than intrinsic
value, then such shares are considered to be under priced and are suitable for
investment. Thus the shares have to be held in hand or if necessary more shares
can be brought as the share sis expected to move up in the future to match with
its intrinsic value. If the market price is greater than the intrinsic value then such
shares is considered to be overpriced and it is not suitable for investment. The
market price of such shares may come down in future and the investors will sell
such a share. This leads us to the second major assumptions of fundamental
analysis: in the long run, the stock market will reflect the fundamentals. There is
no point in buying a stock based on intrinsic value if the price never reflected that
value.
To carry out the fundamental analysis and technical analysis for five selected
companies in the IT sector and to suggest whether to buy the scrip or not to
invest based on the valuation(under priced or over priced) of shares. Also to
analyze the trend( bullish and bearish) of these scrip’s in the market.
The stock market is a major source of investment. The risk associated with the
investment is relatively high compared to bank deposit and real estate, with high
yield. Cochin stock exchange limited(CSE) is one of the premier stock exchange
of India established in the year 1978. CSE: introduced — the facility for
computerized trading-“ Cochin Online Trading(COLT)”. CSE was one of the
promoters of interconnected stock exchange of India(ISE). CSE promoted a
100% subsidiary called the “Cochin stock brokers Itd(CSBL)” and started trading
in the national stock exchange(NSE) and Bombay Stock Exchange(BSE).
Due to time restriction and resource constraints the study has been confined to
only one sector i.e., IT sector. The period of the study covers only 5 years
starting from 2005 to 2009. This study will cover % companies from the IT sector
selected based on the highest market capital in the industry. The most suitable
* Only 5 widely traded securities of the IT sector were taken for the study
e The accuracy and correctness of the tools used depends on the accuracy
of the published accounts
exist here
Indian has a well developed capital market which provides huge investment
opportunity for investors. Indian IT sector is the centre of attraction for many
investors residing within and outside India. These days IT index is highly volatile.
So it is inevitable to evaluate the performance of each security before investing.
This study is an attempt to guide the investor to identify the best performing
security in the IT sector. The study includes the analysis of financial statement of
Indian stock market is one of the oldest market in Asia. Its history dates back to
nearly 200 years ago. The earliest record of security dealing in India is merger
and obscure. The east Indian company was dominant institution in those days
and business in its loan security used to be transacted towards close of the
eighteenth century.
By 18~0’s business on stock rates and shares initiated in Bombay. Though the
trading list was broader in 1839, there were only half a dozen brokers recognized
by banks and merchants during 1840's. The 1850's witnessed a rapid
development in commercial enterprise and brokerage business attracted many
men into the field and by 1860's, the number of brokers increased into 60. In
1860-61, the American civil war broke out and cotton supply from United States
to Europe was stopped. This increased the brokers in India to about 200 to 250.
However by the end of the American Civil war in 1965, disastarous slumps
begain( for example, Bank of Bombay share that had reached Rs.2850 could
only be sold at Rs. 87).
At the end of Mexican civil war the brokers who thrived out of civil war in 1874
found a place in a street( now called the Dalal street) where they would
conveniently assemble and transact business. In 1887, they finally established in
Bombay, “The Native Share and stock Brokers Association’( which is attractively
The business is done using a screen based trading technology through dually
authorized members of the exchange. The stock exchange is opened to anyone
big or small with money to invest or securities to sell. In modern capitalized
economy almost all commodities even in small are produced in large scale and
large scale means large amount of capital. The joint stock company or corporate
fund of organization is ideally suited for large amount of capital from all those
who have surplus fund. When a joint company issues stock and bonds, surplus
fund employed profitably in either of them according to convince and
temperament. The stock exchange enables the investigating to shift from one
business to another without any difficulty. An investor, who put his saving in a
companyby buying its securities, cannot get the amount back from the company
directly. The only way in which the capital invested in stock and shares of a joint
stock company may be realized by its owner is through the sale of those stock
and shares to others. The stock changes , but it circulates within the market only.
¢ Toestablish a nation wide trading facility for equities, debt and hybrids.
* To ensure equal access to investors all over the country through
appropriate communication network.
IDBI, ICICI, IFCl, LIC, OIC, SBI, Bank of Baroda, Canara Bank, Corporation
bank, Indian bank, Oriental bank of commerce, Union bank of India, Punjab
national bank, Infrastructure leasing and financial service, Stock holding
corporation of India and SBI capital market.
The software in the NSE trading system is known as National Exchange for
automated trading(NEAT). The trade takes place through computers. The trading
members computer is connected with the central computer at NSE through
leased lines and VSAT, which are small dish antenna. Communication is carried
out with the help of satellites. Network management centre is setup to enable
remote diagnosing and solving problems related to network through out the day.
This helps the traders to carry out their activities with minimum interruption.
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2.1.7 Stock market indices
An Index is used to give information about the price movement of products in the
financial, commodities or any other markets. Financial Indices are constructed to
measure the price movement of stocks, bonds, T bills and other forms of
investments. Stock market indices are meant to capture the overall behavior of
equity market. A stock market is created by selecting a group of stocks that are
representative of the whole market or a specified sector or segment of the
market. An indices is calculated with reference to a base period and a base index
value.
e BSE Sensex
« CNXMIDCAP
* BSE 100
e BSE 200
e NYSE Indexes
* NASDAQ Index
2.2.1 Introduction
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—"Cochin Online Trading (COLT)" on March 17, 1997. CSE was one of the
promoters of “Interconnected Stock Exchange of India (ISE)”. The objective was
to consolidate the small, fragmented and less liquid markets into a national level
liquid market. With enforcement of efficient margin system and surveillance, CSE
has successfully prevented defaults. Introduction of the fast track system made
CSE the stock exchange with the shortest settlement cycle in the country at that
time. By the dawn of the new century, the regional exchanges faced a serious
challenge from the NSE and BSE. To face this challenge CSE promoted a 100%
subsidiary called the “Cochin Stock Brokers Ltd. (CSBL)’ and started trading in
the National Stock Exchange and Bombay stock Exchange.
CSBL is the first subsidiary of a stock exchange to get membership in both NSE
and BSE. CSBL also became a depository participant in the Central Depository
Services Ltd. The CSE has been playing a vital role in the economic
development of the country in general and Kerala in particular and striving hard
to achieve the following goals:
e Providing investors with high level of liquidity whereby the cost and time
involved in the entry and exit from the market are minimized.
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accordance with the provision of the scheme. The exchange has been
demutualized and the notification thereof published in the Gazette.
The policy decisions of the CSE are taken by the Board of Directors. The board
is constituted with 12 members of whom less than one-fourth are elected from
amongst the trading members of CSE, another one-fourth are public interested
directors selected by SEBI from the panel submitted by the exchange and the
remaining are share holder directors. The board appoints the executive director
who functions as an ex-officio member of the board and takes charge of the
administration of the Exchange.
Board of Directors
Executive director
¥q¥q
Legal Systems Settlement Surveillance
‘¥¥
Administration Legal and Listing Marketing & Finance
Personal Secretarial Public Relations
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2.2.4 Various departments at CSE
Membership
System
The system department is the heart of the various operations of the CSE. The
department provides the necessary technical support for the screen based
trading and the computerized functioning of all to other department.
The activities of the department includes:
e Development of software needed for the functions of the Exchange.
® Maintenance of Multex software, which enables online trading with NSE
and BSE.
« Maintenance of an efficient computer network for the smooth working of
the exchange.
« Providing the necessary services to the settlement and surveillance
departments.
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« The support for maintenance of the depository participants accounts with
the CSBL DP.
The major office system software’s used are NESS and BOSS respectively for
NSE and BSE trades calculations. These software's are developed in-house by
software professional at the exchange and are used to maintain the entire
records of all trades that occur each day.
It also does all the required calculations for the deductions and also generates
the reports required by the brokers and their clients.
The trading software used in CSBL is Multex, developed by CMC. The
advantage of using it is that both BSE and NSE scrips can be traded using this
facility.
CSBL has trading facility in equities through Multex to a large number of their
clients over the WAN. Currently, the clients are connected by VPN, VSAT etc.
Legal
defaulters.
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Listing
Finance
The finance department controls the financial transactions of the exchange and is
the life line of the organization. The department is headed by a Finance Officer.
The activities of the department includes:
e Fund management
departments
« Taxations
Settlement
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who take care of the operations involved in the settlement activities in CSE. The
Exchange follows the T+2 settlement system.
Marketing
The Marketing Department interacts with the brokers of the exchange, trading
both within the state and outside and collects their opinion and suggestions.
These are brought to the notice of the committee constituted for the purpose and
decisions of the committee are placed for approval of the governing of the
exchange. The efforts are aimed at improving the quality and efficiency of the
services offered. | addition the department conducts extensive surveys and
campaigns in remote areas ad wherever necessary, conducts awareness
programs about Capital Market. Experts with sufficient experience in the trade
brief the participants and address their queries. Talk shows and interviews are
conducted on television channels, clipping are displayed in theatres all with an
intension to increase public awareness and motivate their interest in capital
market. The marketing wing also coordinates the of campus programmes of
CSE. Institutes and organizes regular classes at authorized centers after
Surveillance
The exchange has set up the surveillance department to keep a close watch on
price movement of scrip and to detect market abuse like price rigging, monitor
abnormal prices and volumes which are not consistent with the normal trading
patterns etc. The main objective of the department is to ensure a free and fair
market, to avoid manipulation and to manage risk. The surveillance functions at
the exchange has assumed greater importance in the last few years. SEBI has
directed the exchange to set up a separate surveillance department with staff
exclusively for this function.
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* Monitors abnormal changes in price and volumes which are not
consistent with normal trading pattern
* Monitors the member brokers position to ensure that defaults do not
occour
made into trading of the scrip as also at the instance of SEBI. Conducting
e Identification of scrip based on the alerts thrown by the online system and
offline reports
e Preparation of reports
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2.3 PROFILE OF THE SELECTED IT COMPANIES
3.3.1 INFOSYS
Infosys, the country's second-biggest IT/ITES services companies, which was the
first Indian company to be listed on the NASDAQ at the year 1999. Infosys also
forms a part of the NASDAQ-100 index. Continuously the year 2001, 2002 and
2003 company wins the National award for excellence in corporate governance
conferred by the Govt of India. In the year 2003 it acquired Expert Information
Services in Australia for $22.9 million. Its has five wholly owned subsidiaries
namely as Infosys technologies China, Infosys technologies Australia, Infosys
consultancy INC, Infosys BPO SRO and Infosys BPO Ltd previously known as
progeon. CRISIL assigned the ' CRISIL GVC level 1' rating for corporate
governance. In the year 2004 company crosses US §$ 1 billion in revenue. 2005
was the year the largest international equity offering of US $ 1 billion from India
by Infosys and in 2006 company celebrated 25th year. Infosys selected as ‘Best
Outsourcing Partner' by the readers of Waters, a publication covering the needs
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of chief information officers in the capital market firms. In 2007 it increased stake
value in progeon to 98.9 % after acquiring shares from Citicorp International
Financial Company and a subsequent buy back offer to its share holders. Infosys
had taken over Philips' finance and administration business process outsourcing
(BPO) centers spread across India, Poland and Thailand for $28 million. A
Finacle from Infosys completes Phase 1 of implementation in Stroyvestbank
subsidiary structure of URALSIB BANK.
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2.3.2 TCS
Established in 1968, Tata Consultancy Services has grown to its current position
as the largest IT services firm in Asia based on its record of outstanding service,
collaborative partnerships, innovation, and corporate responsibility. TCS is
headquartered in Mumbai, and operates in more than 50 countries and has more
than 170 offices across the world. In the year 1979 it established its first office in
New York City. It is the world’s first organization to achieve an enterprise-wide
Maturity Level 5 on quality improvement models, CMMI and P-CMM, using the
most rigorous assessment methodology, SCAMPISM. TCS Division of Tata Sons
Ltd was transferred to TCS as on April 2004 for a consideration of Rs.2300
crores and the company went to public in the same year 2004.
The company's major areas of business are comes under five services, such as
Consulting, Information Technology Services, Business Process Outsourcing,
Infrastructure Outsourcing, Engineering and Industrial Services which covers the
industries namely Banking and Financial Services, Energy and_ Uililities,
Government, Healthcare and Life Sciences, Hi Technology, Insurance,
During the year 2004-05 the company has acquired WTI Advanced Technology
LTD and TCS Business Transformation Solutions Ltd (Previously, Phoenix
Global Solutions (India) LTD), subsequently these two companies have turned as
the subsidiaries of the company. In between 2005-06, the year covers the
acquisitions of three companies Comicrom S.A., Chile, Financial Network
Services (Holdings) Pty Ltd, Australia (FNS) and Swedish Indian IT Resources
AB (SITAR). Tata Infotech Limited and three wholly owned subsidiaries of the
company, viz Airline Financial Support Services (India) Ltd (AFSL), Aviation
Software Development Consultancy India Ltd (ASDC) and TCS Business
Transformation Solutions Ltd (TCS BTS) have amalgamated with the company
on April 2005. Apart from this the company made strategic alliances during the
year with Diligenta Limited for Life Insurance business and entered into a Joint
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Venture Agreement with the State Bank of India (SBI). The new company was
formulated and named C-Edge Technologies Limited (C-Edge) to provide
advanced technology solutions and world-class domain consulting for the
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and recognitions, significant amongst which are Special Award by the UK Prime
Minister, Tony Blair ‘Outstanding Contribution to UK Knowledge Industry’ in 2005,
Company of the Year - 2006 from the Economic Times, Dataquest Best IT
Employer for 2006, Cll-EXIM Bank Award for Business Excellence 2006, Golden
Peacock Global Award for Corporate Social Responsibility, Ranked among the
Top 10 US application management services vendors India's largest e-
governance initiative of the Ministry of Company Affairs, which is implemented by
TCS, Most Distinguished Achievement Award in Information Management
(APAC) - 2006' from IBM and Verizon's Supplier Excellence Award for the third
consecutive year. Eaton Premier Supplier Award 2007 for the Indirect Supplier
for Information Technology Services category honored by Eaton Corporation.
As on 2008 TCS has signed a new multi-year contract with Chrysler LLC to
provide a comprehensive portfolio of IT services, in March 2008 opened its North
America Delivery Center called TCS Seven Hills Park. Located in Milford, Ohio, a
suburb of Cincinnati, the facility sits on 220 wooded acres and is the largest TCS
facility in North America. As on May 2008 the company ranked sixth in the largest
2008 Global Outsourcing 100, compiled by the International Association of
Outsourcing Professionals (IAOP). In June of the year 2008, the company gets
$11.5 million transformational deal to design, install and integrate a tax
administration system for the Uganda Revenue Authority (URA). TCS is going
with certainty, lot of innovations and strategies to attain the vision of Global Top
10 by the year 2010.
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2.3.3 ORACLE
CITIL (Citicorp Information Technology Industries Limited), spun off from COSL
(Citicorp Overseas Software Limited), commences first year of operations in the
year 1992. In 1995, CITIL gains recognition for establishing world-class
processes and quality Standards, It attained SE! CMM Level 4, becomes the first
financial software firm in the world and one out of six companies worldwide to
achieved this distinction at that time. CITIL established the Center of Excellence
during the year 1996 for business intelligence to provide specialized consulting
and software products, as well as services in data warehousing and business
intelligence. A complete banking product suite for retail, consumer, corporate,
investment and internet banking, consumer lending, asset management and
investor servicing, including payments (SWIFTNet and SEPA) was launched in
the year 1997 under the name of FLEXCUBE. MicroBanker becomes the 6th
international banking product in the world to be used by 100 customers in 1998
and the FLEXCUBE starts gaining traction and international leadership.
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During the year 1999, FLEXCUBE Information Center, a Web-enabled business
intelligence system was launched along with a Center of Excellence for CRM and
the Java Center for financial services also established. CITIL was renamed as i-
flex solutions limited in the year 2000. During the same year 2000, Center of
Excellence for e-services launched Separate business unit established to
address the Applications Services Provider (ASP) market. i-fl ex solutions b.v., a
100 percent subsidiary of the company opened in Amsterdam, The Netherlands.
The company’s financial software development facilities were established in the
year 2001 at Pune and Chennai and fully owned subsidiaries set up in USA and
Singapore, i-flex solutions b.v. in Amsterdam, The Netherlands, becomes
operational, i-fl ex Consulting was launched. EBZ Online, a software company
was joined with the company during the year 2002 through which i-flex's product,
Flexcube, for made available to cooperative banks. Dotex International, a joint
venture company supported by NSE.IT and i-flex Solutions Ltd, signed a
memorandum of understanding (MoU) with BgSE Financials Ltd, a subsidiary of
the Bangalore Stock Exchange, to give Internet trading service to the members
of the exchange. The Company entered into capital market with Initial Public
Offering (IPO) of an issue of 3,961,700 equity shares. I-flex opened its first
Overseas Software Development Center in Singapore in the year 2002.
In the year 2003, the company's flagship product FLEXCUBE ranked the world's
No.1 selling Universal Banking Solution and during the same year 2003, I-flex
sets up development centre in New York, Wins a major order from
HypoVereinsbank Group (HVB Group), Germany, Inaugurated FLEXCUBE
Support & Prime Sourcing Solutions Centre in London and acquisition of Super
Solutions Corporation in all cash deal of .5 million was made. Waters Magazine
ranked Mantas as the Best Anti-Money Laundering Solution and Best
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Waters Magazine ranked Mantas as the Best Anti-Money Laundering Solution for
2003 and also for 2004. During the year 2004, i-flex opened its wholly owned
holding company in US, namely i-flex America, for carrying out all future
acquisitions in the USA. The Golden Peacock National Quality Award was
awarded to the company. i-flex Solutions tiles up with Barbados-based first
Caribbean International for internet banking and e-finance platform of i-flex
Solutions. The core banking solution Flexcube had won The Banker Core
Banking Solution of the Year and Application of the Year" awards. The Company
and YES Bank has signed Global Strategic Memorandum to collaborate on
technology led innovations to enhance quality and efficiency in banking products
and delivery processes. i-flex joined hands with People Soft to develop and
market an integrated solution for the banking _ industry.
Entered into strategic alliance with Castek Software Inc., a Toronto based
provider of insurance systems for the global Property & Casualty (P&C) in the
year 2005. The decade-old relationship between Oracle and i-flex was further
strengthened in 2005 at a strategic level. In August 2005, Oracle Corporation
bought Citigroup's 41 percent equity interest in i-flex and floated an open offer to
purchase up to an additional 20 percent ownership from existing shareholders. i-
flex assessed at CMMi Level 5 also certified BS 7799 compliant. BS 7799 is
security standards and policies addressing information security. In the same year
i-flex and EDB Business Partner ASA had entered into an agreement to jointly
offer comprehensive retail banking solutions to financial institutions in the Nordic
region. Reveleus was positioned in Gartner's ‘Leaders Quadrant’ in its ‘Basel II
Risk Management Application Software Magic Quadrant for 2005' and ‘2006
Basel Il Software Applications Magic Quadrant. Reveleus was also ‘Highly
Commended’ for its Compliance Initiative Innovation in The Banker Technology
Awards for 2006. The Black Book of Outsourcing, ranked i-flex BPO as the top
outsourcing vendor to the Mortgage Banking Industry in 2006. The FLEXCUBE
10.0 was released in 2007, it helps financial institutions respond faster to market
dynamics and define and track processes, while ensuring compliance. The suite
26
also equipped with SWIFT 2007 enhancements and supports SEPA payment
processing. New Version of FLEXCUBE Core Banking for IBM System z active
from April 2008. During August of the year 2008, the company changed its name
27
2.3.4 HCL
28
Information Systems (Japan) Corporation to set up a dedicated offshore software
development centre for developing embedded software for the Japanese
company. HCL Comnet Systems & Services Ltd., a fully owned subsidiary of
HCL Technologies was gone into the business of Web-enabling applications
In 2002 the company acquired Gulf Computers Inc, USA and formed a JV with
Answerthink, Inc., a leading US based provider of technology enabled business
transformation solutions to Global 2000 firms. A strategic technology joint venture
was made with Jones Apparel Group, Inc. Jones Apparel Group, Inc. a Fortune
500 Company in the same year and also entered into a joint venture with M.A.
Partners, a management consulting firm to address software services
opportunities in Global Finance Markets, especially in the areas of Investment
Banking, Asset Management and Private Banking. M.A. Partners brings a wealth
of domain expertise and clients including many of the top Global Investment
Banking firms to the JV. In the year 2003, BT Group UK's telecom service
provider gave a contract worth of $160 million for BPO service operations and
the company has set up an exclusive centre in Noida for exeucting the orders
given by BT Group. The software business of HCL Infosystems Limited was
transferred to HCL Technologies Limited additionally. HCL Comnet, a wholly-
owned flagship of HC Technologies, secured Rs 31 crore network management
order from National Insurance Corporation (NIC).
Standards Institute (BSI) on August of the same year. The company has
29
Introduced Cross View; a framework based Computer Systems Validation (CSV)
methodology for the development of robust software applications in the Life
Sciences arena.
During the year 2005 SEBI ties up with HCL Technologies for market
surveillance and the company formed joint venture with NEC, Japan. The
company amalgamated its six wholly owned subsidiaries with company itself,
such subsidiaries are DSL Software Ltd, Shipara Technologies Ltd, HCL
Technologies BPO Services Ltd, HCL Technologies (Mumbai) Ltd, Aquila
Technologies Ltd and HCL Enterprise Solutions (India) Ltd and the course of
event the company acquired an Irish Call centre during February 2005 and this
acquisition establishes HCL's position as the single largest BPO Centre operation
on the Island of Ireland. HCL's Infrastructure Services Division ranked a ‘Strong
Performer’ in Remote Infrastructure Management by an International Research
Firm and made a strategic partnership with EXA, Japan in same year. In the year
of 2006 the company launched RoHS Compliance Management System for
Medical Device Users and entered $70 million outsourcing deal with Teradyne of
US. HCL developed Trusted ICT Infrastructure Platforms for BPO-ITE'S Segment
and has linked pact with Canada based electronics manufacturing services
company Celestica Inc to jointly design and manufacture electronic products for
global original equipment manufacturers (OEMs). The company has forayed into
an alliance with $200 million Saudi Arabian company namely Advanced
Electronics Company (AEC) to implement IT projects in West Asia in the year
2007 and formed a strategic alliance with Eckler to strengthen Insurance Domain
expertise. The company made US $15 million contract with Aleni Aeronautica, to
provide engineering services that will support the improvement of the C-27J
Spartan production line. HCL Venture Capital Ltd., a company incorporated in
Bermuda and downstream subsidiary of the company was merged with HCL
Bermuda Ltd and HCL Technologies (Mass) Inc., a company incorporated in
United States of America and a down stream subsidiary of the company was
30
merged with HCL America Inc in the year 2007.
times and lower their capital expenditure on testing hardware and software.
31
2.3.5 WIPRO
Wipro Limited, the successful company crossed six decade of years. Wipro
though started as a edible oil producer way back in 1945 under the name
Western India Vegetable Products, a private limited company has transformed
itself into leading player in Fast Moving Consumer Goods and IT services &
Products business. It was incorporated at Karnataka by Mr. Azim H Premji who is
promoter and chairman of the company. Five of Wipro's manufacturing and
development facilities secured the Indian Standard Organization (ISO) 9001
certification during 1994-95. Company provides the integrated business,
technology and process solution on a global delivery platform to customers
across Americas, Europe, Middle East and Asia Pacific, they offer business value
to clients through process excellence and service delivery innovation such as
Information Technology services, Product Engineering services, Technology
Infrastructure services, Business Process Outsourcing services and consulting
services. 23 subsidiaries running under in Wipro. This company is listed in BSE ,
NSE and Newyork .
In February 2001, Wipro became the first software technology and services
company in India to be certified for ISO 14001 certification for complying with the
international standards for Environmental Management System (EMS) in three
major software development and technology centers in Bangalore and also
achieved ISO 9000 certification and they are ISO 14000 certificate holder also for
good citizenship. Wipro Technologies has won the 'Banker Technology Award’
for the year 2004 Instituted by the Financial Times in the 'Risk Management
Award’ category. During December 2005 the company has signed a definitive
agreement to acquire mPower Inc, a US based company with a development
center in Chennai and MPACT Technology Services which is also based in
Chennai. Wipro received the BEST award from American society for training &
development (ASTD) for three consecutive years 2004, 2005 and 2006. Wipro
Ltd is a largest 3rd party Research & Development service provider in the world,
Wipro is among the top 3rd Indian BPO service providers by revenue identified
32
by NASSCOM, the IDC India noted among the top 2nd domestic IT services
companies in India. Wipro is the world first PCMM level 5 company and itis a
winner company of the Dale Carnegie Leadership award in 2007 for people
excellence. Wipro is a first company to be assessed at level 5 on CMMi for
process excellence as well as its a company to deploy six sigma in IT services at
first. Second time Wipro has announced that it has been recognized winner of
the 2007 global MAKE award, the 2007 Asian MAKE award fifth time in a row
and also received the 2007 Indian MAKE award third time organized by Cll
2006-07 was the year for acquisition to Wipro, during the year company acquired
six companies namely Quntech Global Services, Saraware Oy, Enabler
Informatica S A, 3D Networks Pte Ltd, Hydrauto Engineering AB and Northwest
Switchgear. Wipro partnered with Motorola to form a joint venture namely
WMNETSERYV, At the same time company invested Rs.16,684 million on fixed
assets during the year. Wipro has set up an overseas design center as Odyssey
21 for undertaking projects and product developments in advanced technologies
33
3. LITERATURE REVIEW
34
3. Review of literature
An investor who would like to be rational and scientific in his investment activity
has to evaluate a lot of information about the past performance and the expected
future performance of the companies, industries and the economy as a whole
taking the investment decision. Such evaluation or analysis is called fundamental
analysis.
Each share is assumed to have an economics worth based on its present and
future earning capacity. This is called its intrinsic value or fundamental value. The
purpose of fundamental analysis is to evaluate the present and future earning
capacity of a share based on the economy, industry and company fundamentals
and there by asses the intrinsic value of the share. The investor can then
compare the intrinsic value of the share with the prevailing market price to arrive
35
at an investment decision. If the market price of the share is lower than its
intrinsic value, the investor would decide to buy the share as it is under priced.
The price of such a share is expected to move up in future to match with its
intrinsic value.
On the contrary, when the market price of a share is higher than its intrinsic
values, it is perceived to be over priced. The market price of such a share is
expected to come down in future and hence the investor would decide to sell
such a share. Fundamental analysis thus provides an analytical framework for
rational investment decision-making . This analytical framework known as E-I-C
framework, or economy—industry company analysis.
Fundamental analysis thus involves three steps:
1. Economy analysis
2. Industry analysis
3. Company analysis
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The estimated growth of the economy would be pointed towards the prosperity of
the economy. An economy typically passes through different phases of prosperity
known as the different stager of the economic or business cycle. The four stages
of the economic cycle are depression, recovery, boom and recession. The stage
of economic cycle through which a country passes has different impact on the
Infrastructure
plans.
Monsoon
37
Economic and political stability
An investor ultimately invests his money in the securities of one or more specific
companies. Each company can be characterized as belonging to an industry.
The performance of companies would therefore be influenced by the fortunes of
the industry to which it belongs. For this reason an analyst has to undergo an
industry analysis so as to study the fundamental factors affecting the
At any stage in the economy, there are some industries which are fast growing
while others are stagnating or declining. If an industry is growing, the companies
within the industry may also be prosperous. The performance of companies will
also depend on the state of the company to which it belongs. Industry analysis
refers to an evaluation of the relative strength and weakness of weakness of
particular industries.
to facilitate data collection. The reports can effect the growth of other industries.
38
Industry characteristics
The demand for a product, usually tend to change at a steady rate. Whereas,
the capacity to produce the product tends to change at regular intervals,
depending upon the installation of additional production capacity. As a result
am industry is likely to experience undersupply and oversupply of capacity at
different times. Excess supply reduces the profitability of the industry through
a decline in the Unit prize realization.
« Labour condition:
« Attitude of government
39
shares. This calls for information. Many pieces of information influences the
investment decisions. Information regarding companies can be broadly classified
into two groups: internal and external. Internal information consist of data and
events made public by companies concerning their operations. The internal
information source includes annual reports to shareholders, public and private
statements of officers of the company, the companies financial statements, etc.
External sources of information are those generated independently outside the
In company analysis, the analyst tries to forecast the future earnings of the
company because there is strong evidence and that earnings have a direct and
powerful effect upon share prices level, trend and stability of earnings of a
company, however depending upon a number of factors concerning the
EFS
41
Average return on Equity = Sum of ROE for years
5
Growth rate in Dividend = Avg retention ratio * Avg return on equity
and equity
Normalized average = Sum of price to equity ratio for 5 years
5
Projected earning per share = EPS for current year * ( 1+ growth rate)
Intrinsic value P/E ratio = Projected EPS * normalized average
Projected Dividend per share = DPS for current year * (1+ growth rate)
The prosperity of a company would depend upon its profitability and financial
health. The financial statements published by a company periodically helps us to
assess the profitability and financial health of the company. The two basic
financial statement provided by the company are the balance sheet and profit
and loss account. The first gives us the picture of the companies asset and
liabilities while the second gives us a picture of its earnings.
The balance sheet gives the list of assets and liabilities of a company on a
specific date. The major categories of assets are fixed assets and current assets.
Fixed assets are those assets, which are intended to be used up over a period of
years. Current assets are those assets that are intended to be converted into
cash in the near future (within 1 year). The major categories of liabilities are
outside liabilities and liabilities towards shareholders. The outside liabilities are
categorized as short term liabilities and long term liabilities. The short term
liabilities which are expected to be paid off within the next 1 year are known as
42
the current liabilities. The balance sheet indicates the financial position of a
company on a particular date namely, the last date of the accounting year.
The profit and loss account also called income statement, reveals the revenue
eamed, the
Cost incurred and the resulting profit or loss of the company for one accounting
year. The profit after tax divided by the number of shares gives the Earnings per
Share, which is a figure in which most investors are interested. The profit and
loss account summarizes the activities of the company during an accounting
year.
3.2 Technical Analysis
Technical analysis really just studies the supply and demand in a market in an
attempt to determine what direction, or trend, will continue in the future. In other
words, technical analysis attempts to understand the emotions in the market by
studying the market itself, as opposed to its components.
e Technical analysis is a method of evaluating securities by analyzing the
statistics generated by market activity. Itis based on three assumptions.
1. The market discounts everything
2. Price moves in trends
3. History tends to repeat itself
e Technicians believe that all the information they need about a stock can
found in its chart
1. Upward trend
2. Downward Trend
3. Sideways or Horizontal trend
¢ A trend line is a simple charting technique that adds a line to a chart to
Share price are determined by the demand and supply forces operating in the
market. These demand and supply factors are in turn influenced by a number of
fundamental factors as well as psychological or emotional factors. Many of these
factors cannot be quantified. The combined impact of all these factors is reflected
in the share price movement.
The technical analyst therefore concentrates on the movement of share price and
analyses the price and volume of individual securities as well as market index.
1. Study the past movement in share price and identify the trends and
establish patterns.
2. Look at the current movement in the share price and identify the trends
and establish patterns. With this the future price movement is predicted.
The rationale behind the Technical Analysis is that share price moves in
trend or waves which may be upward or downward. It is believed that the
present trends are influenced by the past trends. The technical analyst,
therefore analyses the price and volume movement of individual securities
as well as the market index. Thus technical analysis is really a study of
1. The market value of a share is related to the demand and supply factors
operating in the market.
2. There are both rational factors which surrounds the supply and demand
factors of security.
4. Trends in stock prices have been seen to change when there is shift in
demand and supply.
5. The shift in demand and supply factors can be detected through charts
prepared specially to show market action.
Momentum
Stochastic
of of oF
MOMENTUM
absolute difference:
momentum = cloS€reday — ClOSEN days ago
fraction,
rate of change =
close N days ago
is?
STOCHASTIC
The stochastic indicator has been developed by Georges Lane. This indicator
has been build based on the following concept:
e Ina positive trend, if the price is close to his maximum value, the intra day
closing price will tend to be closer and closer to his intra day high.
e In anegative trend, if the price is close to his minimum value, the intra day
closing price will tend to be closer and closer to his intra day low.
47
This system uses two lines: %K and %D.
both lines are over 80% and the purchase signal when both lines are under 20%.
The lag used for n in %K is often 5 days but (9,11 and 14 days are used as well).
The lag used for j in %D is often 3
Moving average crossovers are a common way traders use Moving Averages. A
crossover occurs when a faster Moving Average (i.e. a shorter period Moving
Average) crosses either above a slower Moving Average (i.e. a longer period
Moving Average) which is considered a bullish crossover or below which is
Sell when
50-day SMA
Crosses
Under
‘ 200-day
MA SMA yA
AS iA 1
Buy when
50-day SMA
upwer® Crosses Over
Serple Mowing
Average
(200-day)
x
| Buy when 50-day SMA
Crosses Over 200-day SMA
ware Cline radingConcepte com - All Righte Reesrved “EEE
Note how the long-term 200-day Simple Moving Average is in an uptrend; this is
a signal that the market is quite strong. Generally, a buy signal is established
when the shorter-term 50-day SMA crosses above the 200-day SMA and
contrasts, a sell signal is indicated when the 50-day SMA crosses below the 200-
day SMA.
In the chart above of the S&P 500, both buy signals would have been extremely
profitable, but the one sell signal would have caused a small loss. Keep in mind,
that the 50-day, 200-day Simple Moving Average crossover is a very long-term
strategy.
49
Moving Average crossovers are important tools in a traders toolbox. In fact
crossovers are included in the most popular technical indicators including the
Moving Average Convergence Divergence (MACD) indicator
securily.
The most commonly used time period for calculation of RS is 14 days. For the
calculation a 14 day RSI, the gain per day or loss per day is arrived at by
comparing the closing price of a day with that of the previous day for a period of
14 days. The gains are added up and divided by 14 to get the average gain per
day. The average gain per day and average loss per day are used in the above
formula for calculating the RSI for a day. In this way RSI values can be
calculated for a number of days. After calculating such data for a number of days,
50
Developed by Gerald Appel, Moving Average Convergence / Divergence
(MACD) is one of the simplest and most reliable indicators available. MACD uses
moving averages, which are lagging indicators, to include some trend-following
characteristics. These lagging indicators are turned into a momentum oscillator
by subtracting the longer moving average from the shorter moving average. The
resulting plot forms a line that oscillates above and below zero, without any upper
or lower limits. MACD is a centered oscillator and the guidelines for using
The most popular formula for the "standard" MACD is the difference between a
security's 26-day and 12-day Exponential Moving Averages (EMAs). This is the
formula that is used in many popular technical analysis programs, including
SharpCharts, and quoted in most technical analysis books on the subject. Appel
and others have since tinkered with these original settings to come up with a
MACD that is better suited for faster or slower securities. Using shorter moving
averages will produce a quicker, more responsive indicator, while using longer
moving averages will produce a slower indicator, less prone to whipsaws. For our
purposes in this article, the traditional 12/26 MACD will be used for explanations.
Later in the indicator series, we will address the use of different moving averages
in calculating MACD.
Of the two moving averages that make up MACD, the 12-day EMA is the faster
and the 26-day EMA is the slower. Closing prices are used to form the moving
averages. Usually, a 9-day EMA of MACD is plotted along side to act as a trigger
line. A bullish crossover occurs when MACD moves above its 9-day EMA, and a
bearish crossover occurs when MACD moves below its 9-day EMA. The Merrill
Lynch (MER) chart below shows the 12-day EMA (thin blue line) with the 26-
day EMA (thin red line) overlaid the price plot. MACD appears in the box below
as the thick black line and its 9-day EMA is the thin blue line. The histogram
represents the difference between MACD and its 9-day EMA. The histogram is
51
positive when MACD is above its 9-day EMA and negative when MACD is below
its 9-day EMA
D2
MACD measures the difference between two Exponential Moving Averages
(EMAs). A positive MACD indicates that the 12-day EMA is trading above the 26-
day EMA. A negative MACD indicates that the 12-day EMA is trading below the
26-day EMA. If MACD is positive and rising, then the gap between the 12-day
EMA and the 26-day EMA is widening. This indicates that the rate-of-change of
the faster moving average is higher than the rate-of-change for the slower
moving average. Positive momentum is increasing, indicating a bullish period for
the price plot. If MACD is negative and declining further, then the negative gap
between the faster moving average (blue) and the slower moving average (red)
is expanding. Downward momentum is accelerating, indicating a bearish period
of trading. MACD centerline crossovers occur when the faster moving average
crosses the slower moving average.
53
4. RESEARCH METHODOLOGY
54
4.1 RESEARCH METHODOLOGY
analyzing data.
attempt to find out what happened in the past and to reveal reasons for why and
55
4.3 METHODS OF DATA COLLECTION
SECONDARY DATA:
The nature of data collected for the data is secondary. Secondary data are
those, which have already collected tabulated and presented in some forms by
some one else for some other purpose. Secondary data are already available
data. Researchers have to modify such data for their individual requirement. In
this case researcher is certainly not confronted with the problem that usually
associated with the collection of original data. The researchers have to scrutinize
the secondary data. The sources of secondary data in this project are:
* Books
« Websites
e Magazines
SAMPLING:
The sample stocks were selected by considering various stocks having high
market capitalization in the IT sector. The five Banks selected for the study are:
1 Infosys Technologies
Tata Consultancy Services
Oracle
Wipro
no & WwW ND
HCL Technologies
SOURCES:
10"Jan, 2009.
56
5. DATA ANALYSIS AND INTERPRETATION
57
5.1 INFOSYS TECHNOLOGIES
Fundamental analysis
Book
Low 1572.10
Reserve and
ROE 33 33 34 35 21
58
Table 4. RATE OF GROWTH
Coverage
3000
2500
2000
1500
1000
500
>>
—e Seriesi
—m— Series2
2007
2009
60
CALCULATION OF INTRINSIC VALUE
1- 0.154
= 0.846
.33+.33+,34+.35+.2U/5
= 0.312
= 23.141484
= 3379.27673760192
61
Technical analysis
Jan Feb Mar Apr May dun Jul Aug Sep Oct Now Dec Jan
INTERPRETATION:
The trend line is connecting November 09 low and January 10 low. This forms
the support line for the shares.
62
Fig 3. MACD
2500.0
2250.0
2000.0
1750.0
1500.0
1250.0
4.0m
3.0m
ih 2.0m
Jan Feb Mar Apr May dun dul Aug Sep Oct how Dec Jan
INTERPRETATION:
MACD signals a long term bullishness for Infosys. Itis in the high value and will
L=25180
INTERPRETATION:
Momentum was coming down but now is in the verge of climbing up. This signals
64
Fig 5. MOVING AVERAGE CROSSOVER
Jun
INTERPRETATION:
The two line, red representing 20 days and black representing 50 days and blue
is the share price. Here the red line is now over the blue line indicating price
going up.
65
Fig 6. RELATIVE STRENGTH INDEX
60.0
50.0
2500.0)
2250.0
2000.0
1750.0
1600.0)
1250.0)
40m
3.0m
| | 20m
il bball lids ane
Jan Feb Mar Ape May lun Jul Aug Sep Oct Nov Dec Jan
INTERPRETATION:
The RSI line is coming down from over bought to neutral. Now the line is going to
66
Fig 7. STOCHASTICS
50.0
25.0
2500.0
2250.0
2000.0
1750.0
1500.0
1250.0
4.0m
20m
Jan Feb har Apr hiay Jun Jul Aug Sep Ort Now Dec Jan
INTERPRETATION:
The graph is coming down from over bought. In a few days the price is going to
67
5.2 TCS
Fundamental analysis
Book
Low
Pay-out ratio 31 a2 fe 25 31
Table 11. RETURN ON EQUITY
Reserve and
ROE 35 41 AT 48 55
68
Table 12. RATE OF GROWTH
Coverage
2500
2000
1500
1000
>
>
>
ae
—e Seriest
—m— Series2
500
—“—,
2007
2009
70
CALCULATION OF INTRINSIC VALUE
.31+,32+,31+.25+.31/5
= 0.3
2) Average retention ratio = 1-.3
= 0.7
3) Average return on equity =.35+.41+.47+.48+.55/5
= 0.452
4) Growth in equity = 0.452 * 7
= 0.3164
5) Normalized avg PE ratio = 12.74+17.12+31.83+27.95+38.82/5
= 25.692
= 17.9844
9) Projected DPS
14 * (1+.3164)
= 18.4296
71
Technical analysis
Jan Feb har Apr May Jun Jul Aug Sep Oct Now Dec Jan
INTERPRETATION:
Trend line is drawn connecting Oct 09 and Jan10. This forms the support line for
the price chart of TCS. If it comes down the support line then it would be a sell
signal.
72
Fig 10. MACD
+ 20.0
; 00.0
- 600.0
+ 500.0
+ 400.0
+ 300.0
+ 20.0
+ 15.0m
- 100m
+ 5.00mi
Jan Feb hilar Apr bay Jun dul Aug Sep Oct how Dec dan
INTERPRETATION:
MACD signals a long term bullishness for TCS. Itis in the high value and will
T=105.851
INTERPRETATION:
74
120.0
110.0
100.0
700.0
600.0
500.0
400.0
300.0
20.0m
15.0m
10.0m
40m
Fig 12. MOVING AVERAGE CROSSOVER
- 800.0
+ 750.0
+ 700.0
; 650.0
- 600.0
; 550.0
+ 500.0
+ 450.0
+ 400.0
+ 350.0
+ 300.0
+ 250.0
+ 20.0m
+ 15.0m
+ 10.0m
1 f 7 5.0m
Jan Feb Mar Apr May dun Jul Aug Sep Oct Nov Dec dan
INTERPRETATION:
Here the red line is now over the black line for a long time, indicating share price
going up.
73
Fig 13. RELATIVE STRENGH INDEX
(70.0
+ 60.0
50.0
; F000
+ 600.0
+ 500.0
- 400.0
+ 300.0
+ 20.0m
+ 15.0m
+ 10.0m
+ 5.0m
mh ed oh lll ll
Jan Feb Mar Apr May dun Jul Aug Sep Oct Nov Bec Jar
INTERPRETATION:
The RSI line is coming down from over bought to neutral. Now the line is going to
reverse signaling a buy signal.
76
Fig 14. STOCHASTICS
- 700.0
- 600.0
+ 500.0
+ 400.0
+ 300.0
- 20.0m
+ 15.0m
+ 10.0m
+ 5.0m
Jan Feb Mar Apr May dun Jul Aug Sep et Nov Dec dan
INTERPRETATION:
The graph is coming down from over bought. In a few days the price is going to
77
5.3 ORACLE
Fundamental analysis
78
Table 21. RATIOS
Coverage
Ratio 0 0 0 0 0
Debit Equity
Ratio 0 0 0 0 0
Table 22. RETURN ON ASSET
79
Table 23. RETURN ON CAPITAL EMPLOYED
2500
2000 “ aN s cs
1500
—— Seriesi
—a— Series2
1000
500
2005 2006 2007 2008 2003
80
CALCULATION OF INTRINSIC VALUE
.20+.15+.15+.18+.18/5
= 0.172
= 29.48582
7) Projected EPS = 83.06*(1+0.15652)
= 96.0605512
8) Intrinsic value = 96.0605512 * 32.402
= 3112.5539799824
81
Technical analysis
7250.0)
-2000.0)
1750.0)
1500.0)
1250.0)
1000.0
750.0
75000
Jan Feb bar Apr May dun Jul Aug Sep Oct Now Dec Jan
INTERPRETATION:
The trend line is connecting Feb 09 low and July09. This forms the support line
82
Fig 17. MACD
: ul a:
I re .
Hill lin Tl IN | | bi ii Wits. Il a
Jul
25000
INTERPRETATION:
MACD signals a long term bullishness for Oracles.It is at the highest values and
83
Fig 18. MOMENTUM
A “Ht
25000
dan Feb Mar Apr May Jun ul Aug Sep Oct Nov Dec Jan
INTERPRETATION:
Momentum was coming down but now is in the verge of climbing up. This signals
84
Fig 19. MOVING AVERAGE CROSSOVER
100z109 O=18.0 He19e8.0 Le iB650 CISA Y= 322855.0 T1804. 547
2250.0
2000.0
1750.0
1500.0
1250.0
1000.0
750.0
25000
INTERPRETATION:
The red line has crossed over the blue line in December showing a price rise in
the share.
85
Fig 20. RELATIVE STRENGTH INDEX
70.0
60.0
50.0
2250.0)
2000.0)
1750.0
1500.0
1250.0)
1000.0)
760.0
75000
Jan Feb har Apr hiay Jun Jul Aug Sep Oct hlow Dec Jan
INTERPRETATION:
The RSI shows a bent and will rise in two to three days indicating a buy signal for
Oracle.
86
Fig 21. STOCHASTIC
05/28/09 10=1150.9
H=11990
E=1115.0
Ve1355640 TE61183
50.0
2250.0
2000.0
1760.0
1500.0
1250.0)
1000.0
760.0
May
Jun
Jul
75000
Sep Oct Now Dec Jan
INTERPRETATION:
The graph is coming down from over bought. In a few days the price is going to
87
5.4 HCL
Fundamental analysis
Book
Low
Reserve and
ROE 29 24 33 25 i?
88
Table 28. RATE OF GROWTH
ITEMS 2009 2008 2007 2006 2005
Sales 4675.09 4615.39 3768.62 3032.92 1447.01
PAT 997.31 780.65 1101.82 638.38 329.27
EPS 13.69 10.19 15.37 17.5 8.18
DPS 7.00 9.00 8.00 16.00 16.00
Table 29. RATIOS
Coverage
89
Table 31. RETURN ON CAPITAL EMPLOYED
2500
2000
1500
1000
500
—o— Series1
—m— Series2
2006
2009
90
CALCULATION OF INTRINSIC VALUE
.51+.88+.52+.91+1.96/5
= 0.956
1-0.956
= 0.044
.29+.24+,.32+,25+,12/5
= 0.244
91
Technical analysis
7250.0)
7000.0)
1750.0)
1500.0)
1250.0)
1000.0
750.0
75000
Jan Feb Mar Apr May dun Jul Aug Sep Oct Now Dec Jan
INTERPRETATION:
The support line is drawn connecting Oct 09 low and Dec 09 low.
92
Fig 24. MACD
[=2213:3
: att a:
I re .
wall A is A Mm Nf Widsemetlfll) [25°
hay
Jun
Jul
25000
INTERPRETATION:
The MACD line is coming down from the high values butis still in the safe region
93
Fig 25. MOMENTUM
A “Ht
25000
dan Feb Mar Apr May Jun ul Aug Sep Oct Nov Dec Jan
INTERPRETATION:
Momentum was coming down but now is now climbing up. This signals the
94
Fig 26. MOVING AVERAGE CROSSOVER
2260.0
2000.0
1750.0
1500.0
1250.0
1000.0
750.0
25000(
Jan Feb Mar Apr May Jun dul Aug Sep Oct Nov Dec dan
INTERPRETATION:
Here the red line is now over the blue line which has cut over in the month of
December indicating price going up. This should sustain for some time.
95
n* 27. RELATIVE STRENGTH INDEX
70.0
60.0
50.0
2250.0)
2000.0)
1750.0
1500.0
1250.0)
1000.0)
760.0
75000
INTERPRETATION:
The RSI line is coming down from over bought to neutral. Now the line is going to
96
Fig 28. STOCHASTIC
05/28/09 10=1150.9
H=11990
E=1115.0
Ve1355640 TE61183
50.0
2250.0
2000.0
1760.0
1500.0
1250.0)
1000.0
760.0
May
Jun
Jul
75000
Sep Oct Now Dec Jan
INTERPRETATION:
The graph is coming down from over bought. In a few days the price is going to
97
5.5 WIPRO
Fundamental analysis
Book
Low
Reserve and
ROE 24 26 30 31 31
98
Table 36. RATE OF GROWTH
ITEMS 2009 2008 2007 2006 2005
Sales 21612.8 17658.1 13758.5 10264.09 | 7276.18
PAT 2973.8 3063.3 2842.1 2020.48 1494.82
EPS 19.62 19.94 18.61 13.47 20.55
DPS 4.00 6.00 6.00 9.00 9.00
Table 37. RATIOS
Coverage
99
Table 39. RETURN ON CAPITAL EMPLOYED
2500
2000
1500
1000
500
—— Series1
—B— Series2
—————
Fee er
2009
100
CALCULATION OF INTRINSIC VALUE
2038+ .3009+.3224+.3712+.2433/5
= 0.28832
1- 0.28832
= 0.71168
.24+.26+,30+.31+.3U/5
0.284
"
4) Growth in equity
0.284* .71168
0.20211712
= 908.0215233408
101
Technical Analysis
700.0
650.0
600.0
550.0
500.0
450.0
400.0
350.0
300.0
250.0
74m
5.0m
25m
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Navy Dec Jan
INTERPRETATION:
The trend line is connecting Octobe 09 low and January 10 low. This forms the
102
Fig 31. MACD
hi hs Ill in ination lh °°
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Now Dec Jan
INTERPRETATION:
MACD signals a long term bullishness for Wipro. It is in the high value and thus
103
Fig 32. MOMENTUM
120.0
110.0
100.0
Jan Feb Nar Apr Miay Jun Jul Aug Sep Oct Nov Dec Jan
INTERPRETATION:
Momentum was coming down but now is in the verge of climbing up. This signals
104
Fig 33. MOVING AVERAGE CROSS OVER
Sep
Oct
Dec
Jan
r00.0
650.0
600.0
550.0
500.0
450.0
400.0
950.0
300.0
260.0
fim
5.0m
25m
INTERPRETATION:
Here the red line is over the black line indicating price going up. This indicates a
buy signals foe share of Wipro.
105
Fig 34. RELATIVE STRENGTH INDEX
183109 O=55785 H=597.85_L=s480 C=5H995 FaSNSSAL 0 18.499
70.0
60.0
Wea 50.0
Jan Feb Mar Apr May = Jun Jul Aug Sep Ort Mow Dec Jan
INTERPRETATION:
The RSI line is coming down from over bought to neutral. Now the line is going to
106
Fig 35. STOCHASTICS
50.0
Jan Feb tar Apr May Jun dul Aug Sep Oct Nov Dec Jan
INTERPRETATION:
The graph is coming down from over bought. In a few days the price is going to
107
6. SUMMARY FINDINGS AND CONCLUSION
108
6.1 SUMMARY
compete globally.
6.2 FINDINGS
* For all the companies like Infosys, TCS, Oracle, HCL and Wipro the intrinsic
value is higher than the market value, which gives a buy signal. These
109
securities are under priced. The share price of these companies may rise in
the future as these securities have high intrinsic value.
* Current ratio of Infosys, TCS, Wipro Oracle and HCL is 2.77, 1.96, 1.46, 6.5,
and 3.24 respectively. The current ratio of all companies is above the bench
mark of 2:1.This indicates that liquidity and short term solvency of all
companies are satisfactory.
6.3 Conclusion
The IT industry plays a vital role in the growth of Indian industries. The Indian IT
companies not only contributes to export but also attracts new forign investments
in the country. It was expected that the IT industry would grow to take a major
For this study 5 major IT companies with the largest market capitalization was
selected and their data was analysed. It was seen that for all the major
companies selected that is Infosys, TCS, Oracle, HCL and Wipro, the calculated
intrinsic value was higher than the current market value. This shows that the
buying of such shares will be profitable for the investors. Also the tools used in
technical analysis shows that all the companies under study is in a state of
growth.
110
BIBLIGRAPHY
REFERENCE BOOKS
1.
on Dm
Economic Time.
Dalal Street
WEB SITES
www.capitaline.com
www.nseindia.com
www.bseindia.com
www.indiabulls.com
www.cochinstockexchange.com
www.rediffmoney.com
www.moneycontrol.com
www.wikepedia.com
111
112