A Report ON "Fundamental & Technical Analysis OF Automobile Sector"

A REPORT
ON
“FUNDAMENTAL & TECHNICAL ANALYSIS
OF
AUTOMOBILE SECTOR”
YEAR 2019-20
BY-
KANWALJIT SINGH BHULLAR
(18BSP0505)
Future Generali India Insurance Company Limited
i
REPORT
ON
“FINANCIAL & TECHNICAL ANALYSIS

OF
AUTOMOBILE SECTOR”
SUBMITTED BY –
KANWALJIT SINGH BHULLAR
(18BSP0505)
“Future Generali India Insurance Company Limited”
A report submitted in partial fulfilment of the requirement of

PGPM Program of IBS Mumbai
ICFAI BUSINESS SCHOOL - IBS MUMBAI
ii
Chapter 1 Authorisation
This project entitled “Fundamental & Technical Analysis of Automobile

Sector” submitted to IBS Business School, Mumbai, is a record of an original
work done during the period 19th February 2019 to 17th May 2019, under the
guidance of Mr. Iqbal Singh Bansal, Senior Branch Manager, Future Generali
Life India Insurance Ltd, Mumbai, and Prof. Swapna Tamhankar, IBS
Mumbai.
This project work is submitted in the partial fulfilment of the requirements for
the award of the certificate of Post- Graduate Programme in Management
(PGPM).
Kanwaljit Singh Bhullar

(18BSP0505)
iii
Chapter 2 Acknowledgement
I wish to express my heartfelt gratitude to the following individuals who have

played a crucial role in the research for this project. Without their active
cooperation the preparation of this report could not have been completed within
the specified time limit.
Firstly, I would like to acknowledge my company guide Mr. Iqbal Singh Bansal,
who co-operated with me during the course of the project patiently. He ensured
that I was provided with all the necessary and correct information. It is my
profound privilege to express my sincere thanks to Prof. Swapna Tamhankar,
for giving me an opportunity to work on the project & giving me full support in
completing this project. I am very thankful to Ms. Rehanna Baig, who has given
me valuable suggestions and cleared my doubts throughout the project.
I am highly indebted to Future Generali India Life Insurance Co. Ltd. and
IBS Mumbai for guidance and constant supervision as well as for providing
necessary information required & for their support in completion the project.
iv
Chapter 3 Abstract
I started my Summer Internship Program at “Future Generali India Life Insurance

Company Limited” from 19th February 2019. For the initial days I was given training
sessions at the organization, the training included briefing about Stock Markets,
Derivatives, Mutual Funds and how to carry out research work using Fundamental and
technical analysis.
After the initial day of trainings, I was asked to conduct financial analysis of the top 10
companies of a particular sector/sectors and technical analysis based on different charts
& graphs, to find out the best opportunities to do the investments in the market.
All the technical tools which we taught were put to use, which were good for the
investment purpose, as we traded on intraday basis. So, that I can see and experience
how the stock market reacts to the emotions and sentiments and how volatile it is.
I later studied about the automobile industry & choose 8 companies which are listed on
NSE based on their market capitalisation. Then conducted the fundamental and
technical analysis of the selected companies to get a fair idea about the companies in
which we can invest or disinvest based on ranking method (Fundamental Tool) &
Technical Analysis.
v
Chapter 4 Executive Summary
In this report I have talked about the automobile sector, its market size, investments
which have been made in the Indian automobile industry, the government policies
which are been ruled out about this sector and the future planning’s to improve the
automobile industry. Automobile Sector Composition is discussed as in how much
percentage of two wheelers, three wheelers, passenger vehicles or commercial vehicles
are in the market. The report also discusses about how the automobile sector is
connected with the insurance sector. Later the report look into the various fundamental
and technical tools which are there, which help to find out the best companies to invest
in or disinvest. Lastly the report about all the analysis and the findings of the research
done. To do so I have studied about the automobile industry and then I have chosen
companies from automobile industry which are listed in NIFTY Auto. The top 8
companies among 16 companies which are listed on NSE are selected on the basis of
market capitalisation. Fundamental analysis is done to determine the number one
company to invest in and rest of them are ranked so making it easier to invest. In the
later part technical analysis of the companies in the portfolio is done to determine
whether to buy, sell or short sell a particular stock using various technical parameters
like MACD, ATR, RSI & Bollinger’s Band. The final part of the research analysis tells
us that Hero Motocorps is the best company in the portfolio to invest in according to
the fundamental analysis. Whereas according to the technical analysis currently we can
trade on stocks of Bajaj & Mahindra as the market trend is favourable for these two.
vi
TABLE OF CONTENTS
Chapter 1 Authorisation...................................................................................................................... iii
Chapter 2 Acknowledgement ............................................................................................................. iv
Chapter 3 Abstract ............................................................................................................................... v
Chapter 4 Executive Summary ........................................................................................................... vi
Chapter 5 Introduction ......................................................................................................................... 2
5.1 About the company: ...................................................................................................................... 2
5.1.1 Vision ..................................................................................................................................... 3
Company’s vision is to actively protect and enhance people lives ..................................................... 3
5.1.2 Mission ................................................................................................................................... 3
5.1.3 Values .................................................................................................................................... 4
5.2 SWOT Analysis of Future Generali India Insurance Company Ltd. ............................................ 5
Chapter 6 About Automobile Sector (IBEF, n.d.) ............................................................................... 6
6.1 Automobile Sector Composition ................................................................................................... 8
6.2 Porter Five Forces Model of Automobile Industry (IBEF, n.d.) ................................................. 10
6.3 The connecting link between Automobile Sector & Insurance Sector ....................................... 11
6.4 Porter Five Forces Model of Insurance Sector (IBEF, n.d.) ....................................................... 12
Chapter 7 Brief about the topic. ......................................................................................................... 13
7.1.1 Fundamental Analysis .......................................................................................................... 13
7.1.2 Technical Analysis ............................................................................................................... 16
Chapter 8 Introduction to Research Companies ................................................................................ 23
Chapter 9 Analysis & Findings.......................................................................................................... 25
9.1 Fundamental Analysis ................................................................................................................. 25
9.2 Technical Analysis ...................................................................................................................... 26
Chapter 10 Conclusion .................................................................................................................... 34
Chapter 11 Bibliography ................................................................................................................ 35
1
Chapter 5 Introduction
5.1 About the company:
Company Name – Future Generali India Insurance Company Limited.
Company Logo -
Future Generali India Life Insurance Company Limited is a joint venture between two leading
groups: Future Group – A leading retailer in India, Generali Group- A global insurance group
that features among top 50 smartest companies in the world and Industrial Investment Trust
Limited (IITL) – A leading investment company. It commenced business in September 2007
and achieved its break even in its 6th year of operation.
The objective of the company is to cater an under insured country and provide financial security
to people. The company offers a comprehensive range of products across savings, protection,
unit linked policies, retirement plans as well as group products. The company reaches out to
customers through more than 20,000 advisors and FG Direct channels across the country.
In a span of 7 years, the Company has 98 branches across the country. The company has
sourced over 11 lakh policies, and today insures over 450 marquee corporates in India and
internationally such as Cadbury, Coca-Cola, Intel, Philips, DuPont, Reebok, Jet Airways,
Morgan Stanley to name a few.
The Company is managed under the principles of good corporate governance with overall
superintendence of the board of directors. The Company’s investment team received the ISO
9001:2008 certification for its investment processes in January 2014. (Future Generali Total
Insurance Solutions, n.d.)
2
5.1.1 Vision
Company’s vision is to actively protect and enhance people lives
 Actively: We play a proactive and leading role in improving people lives

through insurance.
 Protect: We are dedicated towards managing and mitigating risks of
individuals and institutions.
 Enhance: Generali is also committed to creating value.
 People: We deeply care about our customer and our employee lives and their
future.
 Lives: Ultimately, we have an impact on the quality of people lives-wealth,
safety, advice and service are instrumental in improving a person chosen
way of life in the long term.
5.1.2 Mission
Company’s mission is to be the first choice by delivering relevant and accessible insurance
solutions
 First choice: Logical and natural action that acknowledges the best offer in
the market based on clear advantages and benefits.
 Delivering: We ensure achievement striving towards better performance.
 Relevant: Anticipating or fulfilling a real life need or opportunity, tailored
to local and personal needs and habits, perceived as valuable.
 Accessible: Simple and easy to find, understand and use; always available,
at a competitive value for money.
 Insurance solutions: We aim to offer and tailor a combination of protection,
advice and service.
3
5.1.3 Values
Deliver on the promise
 We tie a long-term contract of mutual trust with our people, customers and
stakeholders; all of our work is about improving the lives of our customers.
 We commit with discipline and integrity to bringing this promise to life and
making an impact within a long lasting relationship.
Value our people

 We value our people, encourage diversity and invest in continuous learning
and growth by creating a transparent, cohesive and accessible working
environment. Developing our people will ensure our Company's long term
future.
Live the community

 We are proud to belong to a global Group with strong, sustainable and long
lasting relationships in every market in which we operate. Our markets are
our homes.
Be open
 We are curious, approachable and empowered people with open and diverse
mind-sets who want to look at things from a different perspective.
4
5.2 SWOT Analysis of Future Generali India Insurance Company Ltd.
Strengths:-
1. Known for its prudent investment management
2. Wide range of policies
3. International expertise and reputation of Generali group
4. Aggressive Marketing
5. Generali group is present in over 68 countries with over 85,000 employees
6. Future group operates over 12 million square feet of retail space in 71 cities and towns and
65 rural locations
Weakness:-
1. Small branch base
2. Low Marketing
3. Insurance companies have a poor image when it comes to payment of dues
Opportunities:-
1. Growing rural market
2. Earning Urban Youth
3. Cross selling through financial services such as banking
Threats:-
1. Stringent Economic measures by Government and RBI
2. Entry of new NBFCs in the sector
5
Chapter 6 About Automobile Sector (IBEF, n.d.)
Introduction
The Indian auto industry became the 4th largest in the world with sales increasing 9.5 per cent
year-on-year to 4.02 million units (excluding two wheelers) in 2017. It was the 7th largest
manufacturer of commercial vehicles in 2017.
The Two Wheelers segment dominates the market in terms of volume owing to a growing
middle class and a young population. Moreover, the growing interest of the companies in
exploring the rural markets further aided the growth of the sector.
India is also a prominent auto exporter and has strong export growth expectations for the near
future. Automobile exports grew 15.54 per cent during April 2018-February 2019. It is
expected to grow at a CAGR of 3.05 per cent during 2016-2026. In addition, several initiatives
by the Government of India and the major automobile players in the Indian market are expected
to make India a leader in the two-wheeler and four wheeler market in the world by 2020.
Market Size
Domestic automobile production increased at 7.08 per cent CAGR between FY13-18 with
29.07 million vehicles manufactured in the country in FY18. During April 2018-January 2019,
automobile production increased 9.84 per cent year-on-year to reach 26.26 million vehicle
units.
Overall domestic automobiles sales increased at 7.01 per cent CAGR between FY13-18 with
24.97 million vehicles getting sold in FY18. During April 2018-January 2019, highest year-
on-year growth in domestic sales among all the categories was recorded in commercial vehicles
at 22.79 per cent followed by 14.79 per cent year-on-year growth in the sales of three-wheelers.
Premium motorbike sales in India crossed one million units in FY18. During January-
September 2018, BMW registered a growth of 11 per cent year-on-year in its sales in India at
7,915 units. Mercedes Benz ranked first in sales satisfaction in the luxury vehicles
segment according to J D Power 2018 India sales satisfaction index (luxury).
Sales of electric two-wheelers are estimated to have crossed 55,000 vehicles in 2017-18.
6
Investments
In order to keep up with the growing demand, several auto makers have started investing
heavily in various segments of the industry during the last few months. The industry has
attracted Foreign Direct Investment (FDI) worth US$ 20.85 billion during the period April
2000 to D
ecember 2018, according to data released by Department of Industrial Policy and Promotion
(DIPP).
Some of the recent/planned investments and developments in the automobile sector in India
are as follows:
 Ashok Leyland has planned a capital expenditure of Rs 1,000 crore (US$ 155.20
million) to launch 20-25 new models across various commercial vehicle categories in
2018-19.
 Hyundai is planning to invest US$ 1 billion in India by 2020. SAIC Motor has also
announced to invest US$ 310 million in India.
 Mercedes Benz has increased the manufacturing capacity of its Chakan Plant to 20,000
units per year, highest for any luxury car manufacturing in India.
 As of October 2018, Honda Motors Company is planning to set up its third factory in
India for launching hybrid and electric vehicles with the cost of Rs 9,200 crore (US$
1.31 billion), its largest investment in India so far.
 In November 2018, Mahindra Electric Mobility opened its electric technology
manufacturing hub in Bangalore with an investment of Rs 100 crore (US$ 14.25
million) which will increase its annual manufacturing capacity to 25,000 units.
Government Initiatives
The Government of India encourages foreign investment in the automobile sector and allows
100 per cent FDI under the automatic route.
Some of the recent initiatives taken by the Government of India are -
 The government aims to develop India as a global manufacturing centre and an R&D
hub.
 Under NATRiP, the Government of India is planning to set up R&D centres at a total
cost of US$ 388.5 million to enable the industry to be on par with global standards
 The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in the
country for introduction of electric vehicles (EVs) in their public transport systems
7
under the FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric
Vehicles in India) scheme. The government will also set up incubation centre for start-
ups working in electric vehicles space.
 In February 2019, the Government of India approved the FAME-II scheme with a fund
requirement of Rs 10,000 crore (US$ 1.39 billion) for FY20-22.
Road Ahead
The automobile industry is supported by various factors such as availability of skilled labour
at low cost, robust R&D centres and low cost steel production. The industry also provides great
opportunities for investment and direct and indirect employment to skilled and unskilled
labour.
Indian automotive industry (including component manufacturing) is expected to reach Rs
16.16-18.18 trillion (US$ 251.4-282.8 billion) by 2026. Two-wheelers are expected to grow 9
per cent in 2018.
6.1 Automobile Sector Composition
Sector Composition
3%
13%
3%
81%
Passenger Vehicle Commercial Vehicle Two Wheelers Three Wheelers
Passenger Vehicles:
The passenger vehicle segment, sale increased by a slower rate of 6% y-o-y. While new
launches, reduction in interest rates and improvement in the economic scenario boosted the
industry demand, higher crude oil prices restricted this growth. Crude oil, prices increased by
over 15% y-o-y in FY18.
8
As estimated, a strong sales growth of about 19% was registered in sales of multi utility
vehicles (MUVs) followed by a growth of 5.5% in sales of van. Passenger cars segment,
however, registered only a marginal growth of 1.9% while the quadric-cycle sales grew by
about 3% during the year.
Two & Three Wheelers:
Of all the auto OEM categories, TW is a high-volume vehicle segment which is largely driven
by extent of disposable income available, which in turn is a function of the state of economic
turnaround especially in the rural areas that contribute to over 50% of the overall TW demand.
On account of near normal monsoon in most parts of the country for 2017, the two & three
wheeler segment sales witnessed a sharp double-digit growth of 16%.
This growth was supported by 30% y-o-y higher sales of three wheelers and over 15% y-o-y
growth in sales of two wheelers. Exports of three wheeler segment increased by over 40% y-
o-y led by overall improvement in global economies. Also, two wheeler segment sales grew
by about 15.4% where scooters sales grew at a faster pace of over 19% y-o-y followed by
motorcycle sales that registered a growth of little over 15% y-o-y. On the other hand, sales of
moped declined by 3.7% y-o-y during the year.
Commercial vehicles:
This sector sales grew up by 15% y-o-y after the release of pent up demand led by uncertainty
revolving around the migration of CV manufacturers to Bharat Stage (BS) IV emission norms
from April 2017 by the government.
Demand for commercial vehicles recovered back infrastructure development along with stream
lining of logistics and e-commerce sector after GST led to disruptions. M&HCVs demand got
a push with barriers on truck overloading in some states.
9
6.2 Porter Five Forces Model of Automobile Industry (IBEF, n.d.)
Threat of Substitutes:
The threat from substitute products continues to be low, with public transportation being
under developed even in cities.
Competitive Rivalry:
The competition has turned more intense after the entry of foreign players like Volkswagen
and Ford with their changed designs to cater to Indian market.
Bargaining Power of Suppliers:

Bargaining power of suppliers is low as most of the auto component manufacturers are
specialised in some segments related to only one client.
Bargaining Power of Buyers:

In a market, like India there is lot of bargaining power available to the customers as there
are variety of products available in the same range, by different manufacturers.
Threat of New Entrants:

The threat of new entrants is generally medium because of the brand equity and capital
intensive nature of the business.
10
6.3 The connecting link between Automobile Sector & Insurance
Sector
Motor insurance accounted for 39.4 per cent of non-life insurance premiums earned in India in
FY18, followed by 25.2 per cent share of health insurance.
Major Private Players are ICICI Lombard, Bajaj Allianz, IFFCO Tokio, HDFC Ergo, Tata-
AIG, Reliance, Cholamandalam, Royal Sundaram and other regional insurers.
11
 Strong growth in the automotive industry over the next decade will be a key driver of
motor insurance. Automobiles sales in India increased at 7.01 per cent CAGR between
FY13-18 to reach 24.97 million vehicles.
 Proposed IRDA draft envisages a 10–80 per cent rise in premium rates for the erstwhile
loss-making 3rd party motor insurance.
 In FY18, Motor insurance constituted 39.40 per cent of the non-life insurance market
in India
This shows that boost in the automobile sector has backed the insurance sector. As with the
tremendous increase in demand/sale of vehicles whether it’s a two wheeler, four wheeler
or heavy vehicle it has been linked with the growth in insurance sector because all vehicles
on the roads must be insured according to Motor Vehicles Act, 1988.
6.4 Porter Five Forces Model of Insurance Sector (IBEF, n.d.)
Threat of Substitutes:
 Similarity in services makes switchover a potent threat.

 Investment oriented customers have switched to other avenues
Bargaining Power of Suppliers:

Supplier being the distributor or agent have high bargaining power because they have
customer database and can influence customers in making choices.
Competitive Rivalry:
 Insurance industry is becoming highly competitive with 52 players operating in the

industry.
 Companies are competing on price and also using low price and high returns strategy
for customers to lure them
Threat of New Entrants:
 Other financial companies can enter the industry.

 Overall threat is medium given that entry is subject to license and regulations
Bargaining Power of Buyers:

Bargaining power of customers especially corporate is very high because they pay huge
amount of premium.
12
Chapter 7 Brief about the topic.
7.1.1 Fundamental Analysis

Fundamental analysis is the method of analysing a stock by measuring its intrinsic value. It is
done by taking into study all the things that can influence this value such as the company’s
financial and management condition of that industry and the overall economic condition. The
main objective of doing this kind of analysis is to produce the value, which can be compared
to the current price so that the investor can decide that he/she will buy or sell the security. If
the value is lower than the current price, the stock is said to be overpriced and an investor can
decide to sell. In addition, if the value is more than the current price it is said to be under-
priced and an investor can decide to buy. When the price is lower than the intrinsic value
investor is thinking of buying as because he tries to capture those gains once market realizes
and adjusts upward. In financial analysis, company’s financial statement is the point of
interest. If the investor is interested in bonds, the analysis is conducted by studying the interest
rates, information about the bond issuer, possible adjustments in the credit rating and overall
economic condition.
Fundamental analysis is divided in 2 categories:
 Quantitative analysis
 Qualitative analysis
Qualitative Analysis
Qualitative analysis is done using EIC analysis i.e. Economy, Industry, Company. It is a top
down approach, in this; we go macro to micro aspects.
 Economy: In this, we look at the economic health of the country, which includes GDP
data, Foreign Institutional Investors, Fiscal, and Monetary Policy, Forex reserves,
Union Budget, Political scenario, etc.
 Industry: In this, we look this we look the potential of the industry. In addition, support
given by the Govt. to the industry. Example: 100% deduction in profits for affordable
housing construction, interest subsidy for first time house buyers, etc.
 Company: In this, we look at the competitive advantage that the company have over
competitors in respect to its peer, management team & CEO record of accomplishment,
the future prospect of the company and the range of products and services offered by
the company.
13
Quantitative Analysis
Quantitative analysis is done by analysing the Financials of the company, i.e. Profit and Loss
statement, Balance Sheet, Cash Flow Statement & Financial Ratios. In addition, for broader
view about the company and its performance we look at the previous year’s statements.
 Financial Ratios: it includes the following ratios
1. Price to Earnings Ratio: P/E ratio is the ratio of the market price to earnings per share.
It shows how much the market is willing to pay a company’s earnings. A higher P/E
means market is more willing to pay for the earnings of the company.
Industry P/E refers to the average P/E of all the companies in the industry. If company
P/E is higher than the industry P/E means it is overvalued and company needs more
funds to earn 1 rupee against the industry requirements. If company P/E is, lower than
the industry P/E means it is undervalued and company needs fewer funds to earn 1
rupee against industry requirements.
2. Price to Book Ratio: It is an investment valuation ratio used to compare market value
of a company’s share to its book value. This ratio shows how much a shareholder is
paying for company’s net assets. Low ratio represents good sign for the company. As
it states that stock is undervalued and have better future prospects. Rather higher ratio
states the stock is overvalued and future prospects are not too good. Ideal Price to Book
ratio is 1.
3. Earnings per Share: Earnings per share are portion of the company’s which is
allocated to each outstanding share. It serves as an indicator of company’s profitability.
Two companies can generate same EPS, but the one with less investment will be
considered as a better performer. Higher the EPS the better the growth prospects of the
company.
4. Return on Equity (ROE): It is a profitability ratio, which measures the ability of a

firm to generate profits from shareholders investments in the company. Higher the ratio
percentage, the more efficient management is in utilizing its equity base and the better
return to its investors.
5. Return on Assets (ROA): It is a profitability ratio, which measures how efficiently a

company can manage its assets to produce profits during a period. Higher the ratio
percentage, more effectively the company manages its assets to produce greater amount
of net income. A positive ROA usually indicates an upward trend as well.
6. Return on Capital Employed: It measures how efficiently a company can generate

profits from its capital employed by comparing net operating profit to capital employed.
Higher the ratio percentage, more favorable it is as more rupee of profits are generated
by each rupee of capital employed.
14
7. Total Debt to Equity Ratio (D/E): It measures a company’s financial leverage, which
is typically called Debt-Equity ratio. It shows how much a company is using debt funds
to finance its assets. Higher Debt/Equity ratio states that company has been aggressive
in financing its growth with debt, which indicates high level of risk.
8. Current Ratio: It shows the ability of a firm to pay its short term and long-term
obligations. The ratio under one indicates that a company’s liabilities are more than its
assets and indicates that maybe company would not be able to pay off its obligations.
The higher the current ratio, more capable the company is of paying its obligations.
 Profit & Loss Statement: The income statement presents information about revenues,
expenses and profit generated from the business operation during that period. In
fundamental analysis, we look at previous 5 years income statement and try to analyse
the sales, expenses and profit figures.
 Balance Sheet: It represents record of the company’s assets liabilities and equity at a
point of time. In fundamental analysis we look at various heads of balance sheet and
look at the figures if they are increasing or decreasing and whether they are justified or
not.
 Cash Flow Statement: The statement of cash flow represents a record of business cash
inflows and outflows over a period. A good cash flow is that in which operating activity
is positive and financing and investing activity are negative. In fundamental analysis,
we analyse cash flow statement for last 5 years.
15
7.1.2 Technical Analysis
Technical Analysis is the forecasting of future financial price movements based on an

examination of past price movements. Like weather forecasting, technical analysis does not
result in absolute predictions about the future. Instead, technical analysis can help investors
anticipate what is “likely” to happen to prices over time. Technical analysis uses a wide variety
of charts that show price over time.
It includes followings things:
1. Candlesticks: Candlestick is the style of financial chart used to describe the

movements of a security. It is used to display the high, low, opening price and closing
price of a security for a specific period. It has a thin vertical line, which shows the price
range for a specific period. The wider bar represents the difference between the opening
and closing. Long white/green candlesticks indicate strong buying pressure; this
indicates typically that the price is bullish. Moreover, long black/red candlestick
indicates strong selling pressure; this indicates typically that the price is bearish.
16
 Types of candlesticks
1. One candlestick pattern
 Hammer
 Hanging man
 Gravestone Doji
 Dragonfly Doji
 Shooting Star
 Inverted Hammer
 Marubozu
2. Two candlestick pattern
 Bullish and Bearish Engulfing

 Bullish and Bearish Piercing
 Bullish and Bearish Harami
3. Three candlestick pattern
 Morning Star
 Evening Star
 Three White soldiers
 Three Black soldiers
17
2. Indicators:
1. Relative Strength Index (RSI): The RSI is the momentum oscillator speed and change
of price movements. RSI oscillates between 0 and 100. RSI is considered overbought
when above 70 and oversold when below 30. When it is overbought or we can say
above 70 short selling should be done and when it below 30 or we can say oversold the
investor should start buying. Signals can be generated by looking for divergences and
failure swings.
18
2. Bollinger Band: Bollinger Bands are a type of price envelope. (Price envelopes define
upper and lower price range levels.) Bollinger Bands are envelopes plotted at a standard
deviation level above and below a simple moving average of the price. Because the
distance of the bands is based on standard deviation, they adjust to volatility swings in
the underlying price. Bollinger Bands use two parameters, Period and Standard
Deviations, StdDev. The default values are 20 for period, and 2 for standard deviations,
although you may customize the combinations. Bollinger bands help determine whether
prices are high or low on a relative basis. They are used in pairs, both upper and lower
bands and in conjunction with a moving average. Further, the pair of bands is not
intended to be used on its own. Use the pair to confirm signals given with other
indicators.
19
3. Average True Range: Average True Range (ATR) is the average of true ranges over
the specified period. ATR measures volatility, considering any gaps in the price
movement. Typically, the ATR calculation is based on 14 periods, which can be
intraday, daily, weekly, or monthly. To measure recent volatility, use a shorter average,
such as 2 to 10 periods. For longer-term volatility, use 20 to 50 periods.
20
4. MACD (Moving Average Convergence Divergence): Moving Average Convergence
Divergence (MACD) is a trend-following momentum indicator that shows the
relationship between two moving averages of a security’s price. Traders may buy the
security when the MACD crosses above its signal line and sell - or short - the security
when the MACD crosses below the signal line.
21
Research Objectives
 To find out the best companies to invest in from the chosen portfolio using
fundamental analysis
 To find out the when to buy, sell, short sell the stocks of the companies in the
portfolio based of technical analysis.
Research Methodology
All the data used in this report are secondary data sourced from various websites & reports.
Based on research objectives two different themes were formulated namely best companies to
invest in, from the portfolio & best time to buy, sell, and short sell a stock from the portfolio.
The collected secondary data were collated under the aforementioned themes, the content was
analysed to reach to the result. Researched according to the theme to answer the objectives of
this report.
22
Chapter 8 Introduction to Research Companies
1) Ashok Leyland: Ashok Leyland, flagship of the Hinduja group, is the 2nd largest
manufacturer of commercial vehicles in India, the 4th largest manufacturer of buses in
the world, and the 10th largest manufacturers of trucks. Headquartered in Chennai, 9
manufacturing plants gives an international footprint - 7 in India, a bus manufacturing
facility in Ras Al Khaimah (UAE), one at Leeds, United Kingdom and a joint venture
with the Alteams Group for the manufacture of high-press die-casting extruded
aluminium components for the automotive and telecommunications sectors, Ashok
Leyland has a well-diversified portfolio across the automobile industry. Ashok
Leyland has recently been ranked as 38th best brand in India. Ashok Leyland has a
product range from 2.5T GVW (Gross Vehicle Weight) to 49T GTW (Gross Trailer
Weight) in trucks, 16 to 80 seater buses, vehicles for defense and special applications,
and diesel engines for industrial, genset and marine applications. Ashok Leyland
launched India’s first electric bus and Euro 6 compliant truck in 2016. Over millions
of passengers use Ashok Leyland buses to get to their destinations every day and 7,
00,000 trucks keep the wheels of the economy moving. (Ashok Leyland, n.d.)
2) Bajaj Auto Ltd.: Bajaj Auto Limited is a global two-wheeler and three-wheeler
manufacturing company based in India. It
manufactures motorcycles, scooters and auto rickshaws. Bajaj Auto is a part of
the Bajaj Group. It was founded by Jamnalal Bajaj in Rajasthan in the 1940s. It is based
in Pune, Maharashtra, with plants in Chakan (Pune), Waluj (near Aurangabad)
and Pantnagar in Uttarakhand. The oldest plant at Akurdi (Pune) now houses
the R&D centre 'Ahead'. Bajaj Auto is the world's third-largest manufacturer of
motorcycles and the second-largest in India. It is the world's largest three-wheeler
manufacturer. On May 2015, its market capitalisation was ₹640
billion (US$9.3 billion), making it India's 23rd largest publicly traded company
by market value.[7] The Forbes Global 2000 list for the year 2012 ranked Bajaj Auto at
1,416. (Bajaj Auto, n.d.)
3) Eicher Motors: Eicher Motors Limited (EML) (Bloomberg: EIM IN Reuters:

EICH.NS) is the listed parent of Royal Enfield, the global leader in middleweight
motorcycles. The world’s oldest motorcycle brand in continuous production, Royal
Enfield has made its distinctive motorcycles since 1901. In addition to motorcycles,
Eicher has a joint venture with Sweden’s AB Volvo - Volvo Eicher Commercial
Vehicles Limited (VECV) - which is driving modernization in India's commercial
vehicle space, and in other developing countries. VECV has a complete range of trucks
and buses from 5-55 tonnes, and its integrated manufacturing plant in Pithampur,
Madhya Pradesh is the global hub for medium duty five- and eight-litre engines for
Volvo Group. (Eicher, n.d.)
23
4) Hero Motocorp Ltd.: It is formerly known as Hero Honda, is an
Indian motorcycle and scooter manufacturer based in New Delhi, India. The company
is the largest two-wheeler manufacturer in the world, and also in India, where it has a
market share of about 46% in the two-wheeler category. The 2006 Forbes list of the
200 World's Most Respected Companies has Hero Honda Motors ranked at #108.
(Hero, n.d.)
5) Mahindra & Mahindra Limited:

It is an Indian multinational car manufacturing corporation headquartered
in Mumbai, Maharashtra, India. It was established in 1945 as Mohammad & Mahindra
and later renamed as Mahindra and Mahindra. It is one of the largest vehicle
manufacturers by production in India and the largest manufacturer of tractors in the
world. It was ranked 17th on a list of top companies in India by Fortune India 500 in
2018. Its major competitors in the Indian market include Maruti Suzuki and Tata
Motors. (Mahindra Rise, n.d.)
6) Maruti Suzuki India Limited: It is formerly known as Maruti Udyog Limited, is an

automobile manufacturer in India. It is a 56.21% owned subsidiary of the Japanese car
and motorcycle manufacturer Suzuki Motor Corporation. As of July 2018, it had a
market share of 53% of the Indian passenger car market. The company is headquartered
at New Delhi. In May 2015, the company produced its fifteen millionth vehicle in India,
a Swift Dzire. (Maruti Suzuki, n.d.)
7) Tata Motors Limited: It is formerly Tata Engineering and Locomotive

Company (TELCO), is an Indian multinational automotive manufacturing company
headquartered in Mumbai, Maharashtra, India. It is a subsidiary of Tata Group, an
Indian conglomerate. Its products include passenger cars, trucks, vans, coaches, buses,
sports cars, construction equipment and military vehicles. Tata Motors has auto
manufacturing and assembly plant
in Jamshedpur, Pantnagar, Lucknow, Sanand, Dharwad, and Pune in India, as well as
in Argentina, South Africa, Great Britain and Thailand. (Tata Motors, n.d.)
8) TVS Motor Company: It is a multinational motorcycle company headquartered

at Chennai, India. It is the third largest motorcycle company in India with a revenue
of over ₹15,000 crore (US$2.2 billion) in 2017-18. The company has an annual sales
of 3 million units and an annual capacity of over 4 million vehicles. TVS Motor
Company is also the 2nd largest exporter in India with exports to over 60 Countries.
TVS Motor Company Ltd (TVS Motor), a member of the TVS Group, is the largest
company of the group in terms of size and turnover. (TVS Motor Company, n.d.)
24
Chapter 9 Analysis & Findings
9.1 Fundamental Analysis
Ranking of Stocks in the Portfolio

After selecting the companies that are to be in the portfolio, we rank the companies according
to their P/E Ratio, Stock Turnover, Return on capital employed, Return on equity, Debt
Equity Ratio & Dividend Pay-out Ratio.
Stock
Dividend Debt to Total
Companies P/E Turnover ROE ROCE Rank
Payout Ratio Equity Ratio Points
Ratio
Value Points Value Points Value Points Value Points Value Points Value Points
Ashok
13.2 8 15.35 2 25.95 6 21.8 5 28.46 5 0.07 4 30 4
Leyland
Baja Auto 19.77 5 33.89 7 36.31 7 21.29 4 29.5 6 0.01 6 35 2
Eicher
27.8 3 23.62 5 16.38 4 31.88 8 52.91 8 0.02 5 33 3
Motors
Hero Moto
15.48 6 39.13 8 39.91 8 31.41 7 42.35 7 0 8 44 1
Corp
Mahindra &
15.39 7 18.02 4 15.85 3 14.37 2 16.95 2 0.09 3 21 5
Mahindra
Maruti
27.01 4 25.23 6 21.61 5 18.49 3 25.83 4 0 8 30 4
Suzuki
Tata Motors 36.09 1 10.38 1 0 1 -5.13 1 5.04 1 0.81 1 6 7
TVS
33.35 2 15.69 3 15.65 2 23 6 19.48 3 0.36 2 18 6
Motors
The companies which I have considered from Automobile sector, which are listed in Nifty
Auto. The companies are ranked based on ROCE, ROE, P/E Ratio, Dividend pay-out, Stock
Turnover and Debt Equity ratio. So according on that ranking, investment in the portfolio is
made. This is done for diversifying the funds and risk. As we can see from the above table
that two companies carries same rank so we will invest in these two equally.
25
9.2 Technical Analysis
1) Ashok Leyland
Figure 1 (Chart Link, n.d.)
Analysis:
Interpretation - The above figure represents a 6 months daily Candlestick chart of Ashok
Leyland Dated 3rd December 2018 to 23 May 2019. The indicators used for technical analysis
here are Relative Strength Index (RSI), MACD, Average True Range (ATR) & Bollinger
Bands.
 RSI (14): 63.54 which is near 70 level which suggest short sell/sell signal for the
stock in the current trend.
 MACD (26, 12): The MACD shows the level of (-0.13) which is a bearish signal
indicating SELL for the stock. The blue MACD line and the pink average line the
difference are increasing which suggest an exit signal from the stock.
 ATR (14): 3.54, which is below its true range of 6.15, which interprets that, it is less
volatile than its average of past 14 days.
26
 Bollinger bands (20, 2): The current price of the stock is above moving average of 20
days, this candlestick is inverted hammer which is a bearish candlestick, which
indicates downtrend so it is suggested to short sell, or not to enter the market.
2) Bajaj Auto
Analysis:
Interpretation - The above figure represents a 6 months daily Candlestick chart of Bajaj
Auto Dated 3rd December 2018 to 23 May 2019. The indicators used for technical analysis
Bands.
 RSI (14): 59.37 which is not near 70 level which suggest short sell/sell signal for the
stock in the current trend or nor near 30 which suggests buy signal.
 MACD (26, 12): The MACD shows the level of (16.33) on the indicator. The blue
MACD line and the pink average line the difference are increasing which suggest an
exit signal from the stock.
27
 ATR (14): 82.38, which is below its true range of 93.90, which interprets that, it is
less volatile than its average of past 14 days.
days, this candlestick is hammer which is a bullish candlestick, which indicates
uptrend so it is suggested to buy or to enter the market.
3) Eicher Motors
Analysis:
Interpretation - The above figure represents a 6 months daily Candlestick chart of Eicher
Motors Dated 3rd December 2018 to 23 May 2019. The indicators used for technical analysis
Bands.
MACD line and the pink average line are meeting which suggest an entry signal for
the stock.
28
 ATR (14): 774.03, which is above its true range of 726.35, which interprets that, it is
more volatile than its average of past 14 days.
days, this candlestick is inverted hammer which is a bearish candlestick, which
indicates downtrend so it is suggested to short sell, or not to enter the market.
4) Hero Motocorp
Analysis:
Interpretation - The above figure represents a 6 months daily Candlestick chart of Hero
Motocorp Dated 3rd December 2018 to 23 May 2019. The indicators used for technical
analysis here are Relative Strength Index (RSI), MACD, Average True Range (ATR) &
Bollinger Bands.
 RSI (14): 69.05 which is near 70 level which suggest short sell/sell signal for the
stock in the current trend.
MACD line and the pink average line are not meeting which suggest an exit signal for
the stock.
29
 Bollinger bands (20, 2): The current price of the stock has crossed Bollinger width so
will not invest in it.
5) Mahindra & Mahindra
Analysis:
Interpretation - The above figure represents a 6 months daily Candlestick chart of
Mahindra & Mahindra Dated 3rd December 2018 to 23 May 2019. The indicators used for
technical analysis here are Relative Strength Index (RSI), MACD, Average True Range
(ATR) & Bollinger Bands.
 MACD (26, 12): The MACD shows the level of (-4.34) on the indicator. The blue
30
days, this candlestick is hammer which is a bullish candlestick, which indicates
uptrend so it is suggested to buy, or to enter the market.
6) Maruti Suzuki
Analysis:
Interpretation - The above figure represents a 6 months daily Candlestick chart of Maruti
Suzuki Dated 3rd December 2018 to 23 May 2019. The indicators used for technical analysis
Bands.
31
 Bollinger bands (20, 2): The current price of the stock has crossed Bollinger width so
will not invest in it.
7) Tata Motors
Analysis:
Interpretation - The above figure represents a 6 months daily Candlestick chart of Tata
Bands.
MACD line and the pink average line are meeting which suggest an entry signal from
the stock.
 ATR (14): 9.87, which is above its true range of 8.35, which interprets that, it is more
volatile than its average of past 14 days.
 Bollinger bands (20, 2): The current price of the stock is below moving average of 20
days, but it is better to wait for the next candle to form and take the decision
32
8) TVS Motors
Analysis:
Interpretation - The above figure represents a 6 months daily Candlestick chart of TVS
Bands.
 ATR (14): 16.52, which is above its true range of 13.95, which interprets that, it is
more volatile than its average of past 14 days.
 Bollinger bands (20, 2): The current price of the stock is moving with the moving
average of 20 days, but it is better to wait for the next candle to form and take the
decision.
33
Chapter 10 Conclusion
As seen above the sector in Indian origin is performing well and as the automobile industry is
growing at a very good pace it will provide good return if invested smartly. According to
current prediction the contribution of automobile sector in India’s GDP is expected to grow
from 7.1% to 12% by the year 2026. This brings a very good opportunity for investor to make
a move and get super returns. In this situation any investor would be like to include automobile
stock into their portfolio. So, as to clear the uncertainty and to suggest them a best company of
the industry and diversify their portfolio, this research report has been conducted by analyzing
various key ratios which influence the stock price, by the use of fundamental analysis approach,
although this approach solely cannot determine the price movement of the stock and the
suggestions or forecast made using this approach is majorly based on the previous or past data
and like has already mentioned in the limitations, the stock price may fluctuate due to some
extraneous factors.
All the ratios have been analysed, rankings have been given to them for their best performance
when compared to their peers and based on that, suggestions have been made regarding on
which stock the investment must be made.
According to the fundamental analysis done Hero Motocorps is the best company in the
portfolio to invest in. Whereas according to the technical analysis currently we can trade on
stocks of Bajaj & Mahindra as the market trend is favourable for these two.
But still the stock markets are as volatile as ever and unpredictable with uncertainty. However,
the long-term investors will create wealth from the stock market.
34
Chapter 11 Bibliography
(n.d.). Retrieved from Ashok Leyland: https://www.ashokleyland.com/en/about-us
(n.d.). Retrieved from Bajaj Auto: https://en.wikipedia.org/wiki/Bajaj_Auto
(n.d.). Retrieved from Eicher: http://www.eicher.in/about-us
(n.d.). Retrieved from Hero: https://www.heromotocorp.com/en-in/about-us.php
(n.d.). Retrieved from Mahindra Rise: https://www.mahindra.com/about-us
(n.d.). Retrieved from Maruti Suzuki: https://www.marutisuzuki.com/corporate/about-us
(n.d.). Retrieved from Tata Motors: https://www.tatamotors.com/about-us/company-profile/
(n.d.). Retrieved from TVS Motor Company: https://www.tvsmotor.com/tvs-in-brief
Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/bajaj-auto.html
Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/eichermot.html
Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/heromotoco.html
Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/m%26m.html
Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/maruti.html
Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/tatamotors.html
Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/tvsmotor.html
Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/ashokley.html
Future Generali Total Insurance Solutions. (n.d.). Retrieved from

https://general.futuregenerali.in/about-us
IBEF. (n.d.). Retrieved from https://www.ibef.org/download/Insurance-Report-May-2018.pdf
IBEF. (n.d.). Retrieved from https://www.ibef.org/download/Automobiles-January-2018.pdf
IBEF. (n.d.). Retrieved from https://www.ibef.org/download/Automobiles-January-2018.pdf
35

A Report ON "Fundamental & Technical Analysis OF Automobile Sector"

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

A Report ON "Fundamental & Technical Analysis OF Automobile Sector"

Uploaded by

Copyright:

Available Formats

A REPORT

Future Generali India Insurance Company Limited

“FINANCIAL & TECHNICAL ANALYSIS

A report submitted in partial fulfilment of the requirement of

ICFAI BUSINESS SCHOOL - IBS MUMBAI

This project entitled “Fundamental & Technical Analysis of Automobile

Kanwaljit Singh Bhullar

I wish to express my heartfelt gratitude to the following individuals who have

I started my Summer Internship Program at “Future Generali India Life Insurance

 Actively: We play a proactive and leading role in improving people lives

Value our people

Live the community

6.1 Automobile Sector Composition

Passenger Vehicle Commercial Vehicle Two Wheelers Three Wheelers

Two & Three Wheelers:

Bargaining Power of Suppliers:

Bargaining Power of Buyers:

Threat of New Entrants:

6.4 Porter Five Forces Model of Insurance Sector (IBEF, n.d.)

 Similarity in services makes switchover a potent threat.

Bargaining Power of Suppliers:

 Insurance industry is becoming highly competitive with 52 players operating in the

Threat of New Entrants:

 Other financial companies can enter the industry.

Bargaining Power of Buyers:

7.1.1 Fundamental Analysis

 Financial Ratios: it includes the following ratios

4. Return on Equity (ROE): It is a profitability ratio, which measures the ability of a

5. Return on Assets (ROA): It is a profitability ratio, which measures how efficiently a

6. Return on Capital Employed: It measures how efficiently a company can generate

Technical Analysis is the forecasting of future financial price movements based on an

1. Candlesticks: Candlestick is the style of financial chart used to describe the

1. One candlestick pattern

2. Two candlestick pattern

 Bullish and Bearish Engulfing

3. Three candlestick pattern

3) Eicher Motors: Eicher Motors Limited (EML) (Bloomberg: EIM IN Reuters:

5) Mahindra & Mahindra Limited:

6) Maruti Suzuki India Limited: It is formerly known as Maruti Udyog Limited, is an

7) Tata Motors Limited: It is formerly Tata Engineering and Locomotive

8) TVS Motor Company: It is a multinational motorcycle company headquartered

9.1 Fundamental Analysis

Ranking of Stocks in the Portfolio

Baja Auto 19.77 5 33.89 7 36.31 7 21.29 4 29.5 6 0.01 6 35 2

Figure 1 (Chart Link, n.d.)

Figure 2 (Chart Link, n.d.)

Figure 3 (Chart Link, n.d.)

Figure 4 (Chart Link, n.d.)

5) Mahindra & Mahindra

Figure 5 (Chart Link, n.d.)

Figure 6 (Chart Link, n.d.)

Figure 7 (Chart Link, n.d.)

Figure 8 (Chart Link, n.d.)

(n.d.). Retrieved from Bajaj Auto: https://en.wikipedia.org/wiki/Bajaj_Auto

(n.d.). Retrieved from Eicher: http://www.eicher.in/about-us

(n.d.). Retrieved from Hero: https://www.heromotocorp.com/en-in/about-us.php

(n.d.). Retrieved from Mahindra Rise: https://www.mahindra.com/about-us

(n.d.). Retrieved from Maruti Suzuki: https://www.marutisuzuki.com/corporate/about-us

(n.d.). Retrieved from Tata Motors: https://www.tatamotors.com/about-us/company-profile/

(n.d.). Retrieved from TVS Motor Company: https://www.tvsmotor.com/tvs-in-brief

Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/bajaj-auto.html

Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/eichermot.html

Chart Link. (n.d.). Retrieved from https://chartink.com/stocks/heromotoco.html