A REPORT

ON

EQUITY RESEARCH: FUNDAMENTAL & TECHNICAL ANALYSIS

OF ‘AUTO SECTOR’ IN INDIAN MARKETS

By

Sandeep Ramavtar Pal

(20BSP2090)

SUMMER INTERNSHIP PROGRAM

AT
 A REPORT

ON

EQUITY RESEARCH: FUNDAMENTAL & TECHNICAL ANALYSIS

OF ‘AUTO SECTOR’ IN INDIAN MARKETS

By

Sandeep Ramavtar Pal

(20BSP2090)

“A report submitted in partial fulfilment of

the requirement of

PGPM Program of

IBS Mumbai”.

Distribution List:

Faculty Guide Company Guide

Prof. Ganesh Mani Mr. Nikesh Ruparel

Faculty, IBS - Mumbai Executive Agency Partner

Aditya Birla Money Ltd.

Date of Submission: 25th May 2021

1
 1. AUTHORISATION

I have successfully completed the Project with Aditya Birla Money limited at Mumbai. The
summer internship programme was held for the period from 17th February 2021 to 31st
May 2021.
I, Sandeep Ramavtar Pal, hereby declare that my Summer Internship Report titled, Equity
Research in AUTO SECTOR submitted in partial fulfilment of Post Graduate Programme
in Management is original & is not substantially the same as one which has already been
submitted in part or in full for any such similar qualification to the University to the best of
my knowledge.

Date: Name: Sandeep Ramavtar Pal

Place: Mumbai Enrolment No.: 20BSP2090

Signature: Signature:

Company Mentor: Mr. Nikesh Ruparel. Faculty Mentor: Prof. Ganesh Mani

2
 2. ACKNOWLEDGEMENT

I take this opportunity to express my sincere thanks to Aditya Birla Money

Limited for providing a platform to gain knowledge in the field of Shares and Equities.
Working with one of the renowned organizations was a great learning experience.

The Summer Project on ‘Equity Research: Fundamental & Technical Analysis

of Auto Sector in Indian Markets’ offered a great learning experience. During the tenure
of this internship, I was fortunate to have interacted with people, who in their own
capacities have encouraged and guided me.

My sincere thanks go to Mr. Nikesh Ruparel (Executive Associate Partner), my

Mentor for giving me an opportunity to be a part of this esteemed organization and
providing me opportunities and understanding my potential.

I feel highly indebted towards my faculty guide Prof. Ganesh Mani for his constant
guidance and help without which this project would not have been possible.

I thank to ICFAI Business School, Mumbai for giving me this opportunity to work
with such a renowned organization and develop my understanding about equities and
financial market.

SANDEEP PAL
20BSP2090

3
 3. EXECUTIVE SUMMARY
Student Name Sandeep Pal
Enrolment no. 20BSP2090
Organization Name Aditya Birla Money Ltd.
Organization Description Stock Broking Industry

Title of the SIP Report:

“Equity Research: Fundamental & Technical Analysis of ‘Auto Sector’ In Indian Markets”

Objective of the SIP:

To study the trend of various companies in the AUTO sector for long as well as short
term. To learn and understand the candlesticks, various indicators and patterns. To trade
on a daily basis using the strategies taught i.e intraday trading strategies. Understanding
fundamental analysis by making own sectors fund and comparing it with sector index.

Methodology:

Primary and secondary research is used for the fundamental and technical analysis.

Conclusion:

As we can see Equity Research plays a very crucial role to make wise investment
decision. After having accessed your risk capacity and tolerance followed by time horizon
and intention of investment, the individual portfolio can fetch your systematic returns. One
can use long term and short-term technical analysis along with fundamental analysis to
determine a confirm trade signal.

It is always better and important to analyse, do continuous updating of funds invested

because it may happen that some of the stocks which were not there in our portfolio have
started performing well and can give better return as time goes on and some stocks may
start falling due to market situation, sector performance or company news. Which makes
it necessary to pull-out our investment and invest somewhere else.

Limitations:

This research report is restricted to only AUTO sector ignoring other booming sectors and
the research done has a time bound.

4
 4. ABSTRACT

As a part of my MBA Curriculum, I had the opportunity to be a part of an Internship

Program at Aditya Birla capital Limited. This report showcases the work done during the
3 months of the internship. The internship involved performing technical and fundamental
analysis on the Automobile sector.
The automobile is one of the most technologically advanced, keen to innovate, and fast-
growing industries with continuously changing trends. Though the industry was hit badly
by the Covid-19 pandemic as most of the players had to shut down their manufacturing
plants for almost half a year as well as there was a huge dip in sales, it was able to regain
a lot of its lost share in the Q3 and Q4 on FY 21.
The Report here acts as a Source of guide and information for an Investor who sees the
Automobile sector as a potential Investment Opportunity. This report compiles both the
Fundamental Analysis of the sector as well as the Technical which can suggest what
companies are the best suited for an investor for long term and short-term investment. It
also suggests whether the Automobile sector is a viable option to invest in or not right
now.
1) Fundamental Analysis - Fundamental analysis is a method of evaluating the intrinsic
value of an asset and analysing the factors that could influence its price in the future. This
form of analysis is based on external events and influences, as well as financial
statements and industry trends. Fundamental Analysis involves finding the undervalued
and overvalued stocks and then suggesting an investor which he should invest into for a
longer period. Though one of the cons associated with Fundamental analysis is that it can
be time-consuming, it requires multiple areas of analysis which can make the process
extremely complicated.
2) Technical Analysis – This Analysis involves analysing the chart patterns or the candle
patterns of a particular stock over some time. It is generally believed that the stocks move
in a similar pattern they did previously and hence this analysis becomes an important
indication for investors who are willing to invest in Swing trading. Technical Analysis is a
study of a stock’s price and volume and indicates the scenarios when the stock is
overbought or oversold. It also involves understanding the support level and resistance
level of a particular stock which helps an investor understand when to enter or exit a trade.

5
 Table of Contents
1. AUTHORISATION .............................................................................................................. 2
2. ACKNOWLEDGEMENT...................................................................................................... 3
3. EXECUTIVE SUMMARY .................................................................................................... 4
4. ABSTRACT ......................................................................................................................... 5
I. ABOUT THE COMPANY .................................................................................................... 8
II. INTRODUCTION TO EQUITY ...........................................................................................10
II.I WHAT IS EQUITY? ..........................................................................................................10
II.II EQUITY SHARES ...........................................................................................................11
II.III FEATURES OF EQUITY SHARES .................................................................................11
II.IV ADVANTAGES OF EQUITY SHARES ...........................................................................11
II.V DISADVANTAGES OF EQUITY SHARES ......................................................................11
II.VI WHAT IS EQUITY INVESTMENT? ................................................................................12
II.VII TYPES OF EQUITY INVESTMENTS ............................................................................12
II.VIII KEY RISKS ASSOCIATED WITH EQUITY INVESTMENT...........................................15
III. FUNDAMENTAL ANALYSIS ..............................................................................................18
1. ABOUT THE SECTOR-AUTOMOBILE ..............................................................................18
1.1 POST COVID SCENARIO ...............................................................................................19
1.2 AUTOMOBILE COMPANIES IN STOCK MARKET .........................................................20
2. BENCHMARK AUTOMOBILE INDEX ...................................................................................23
2.1 Steps to calculate Stock Market Index (Automobile Sector) .............................................23
2.2 RESULT OF THE INDEX ................................................................................................24
3. GROWTH AND VALUE PICKS .............................................................................................26
4. RATIO ANALYSIS.................................................................................................................30
4.1 Debt to Equity Ratio .....................................................................................................30
4.2 Inventory Turnover Ratio ..............................................................................................30
4.3 Return on Equity. .........................................................................................................31
4.4 Asset Turnover Ratio ...................................................................................................31
4.5 Current Ratio................................................................................................................32
5. CREATION OF NAV INDEX .................................................................................................33
IV. TECHNICAL ANALYSIS ......................................................................................................36
1. WHAT IS TECHNICAL ANALYSIS? ..................................................................................36
2. LONG TERM TREND ANALYSIS ......................................................................................37
SWING TRADING IN THE AUTOMOBILE SECTOR ..................................................40
6
 3. SHORT TERM TREND ANALYSIS ...................................................................................42
CHART PATTERNS IN AUTOMOBILE SECTOR .......................................................44
V. CONCLUSION......................................................................................................................47
VI. OVERALL LEARNINGS.......................................................................................................48
VII. REFERENCES ...................................................................................................................49

7
 I. ABOUT THE COMPANY
Aditya Birla Money Limited (ABML), a subsidiary of Aditya Birla Capital Limited, is listed
on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited
(NSE) since 2008. ABML is currently engaged in the business of securities broking and
is registered as a stockbroker with SEBI. It offers equity and derivatives trading through
NSE and BSE and holds PMS license from SEBI and offers portfolio management
services.

ABML is also registered as a Depository Participant with National Securities Depository

Limited (NSDL) and the Central Depository Services (India) Limited (CDSL). It also holds
SEBI license as a research analyst and an investment adviser. ABML also holds an ARN
code issued by AMFI and is registered with CDSL as an e-Repository for holding
insurance policies in electronic form. Aditya Birla Commodities Broking limited (a wholly
owned subsidiary of ABML), a member of Multi Commodity Exchange of India Limited
and National Commodity & Derivatives Exchange Limited and offering commodity broking
services, was amalgamated with ABML during Dec 2018.

ABML reported revenues from operations of over Rs. 1,285 million in nine months of
FY2018-19. It has a combined pan India distribution network of over 41 branches spread
across Andhra Pradesh, Chandigarh, Rajasthan, Chhattisgarh, Madhya Pradesh, UP,
West Bengal, Punjab, Maharashtra, Kerala, Karnataka, Delhi, Gujarat and Tamil Nadu
and 755 franchised offices. It also has a robust online and offline model with a strong
technological backbone to support a large, registered customer base of around 350,685
customers. It offers a wide range of solutions including broking, portfolio management
services, depository and e-insurance repository solutions and distribution of other
financial products.

8
Aditya Birla Capital Limited (ABCL) is the financial services platform of the Aditya Birla
Group. With a strong presence across the life insurance, asset management, private
equity, corporate lending, structured finance, project finance, general insurance broking,
wealth management, equity, currency and commodity broking, online personal finance
management, housing finance, pension fund management, and health insurance
business, ABCL is committed to serving the end-to-end financial services needs of its
retail and corporate customers. Anchored by more than 17,000 employees, ABCL has a
nationwide reach and more than 200,000 agents / channel partners.

➢ SWOT Analysis of Aditya Birla Capital

STRENGTH
1. company has a network of 850+ branches
and 20000 channel partners.

2. ABCL has a active customer base of 21

million through subsidiaries and joint ventures.

3.focuses on customer satisfaction

4. caters to all income groups with wide range

of financial services.

5. strong cash generating ability from core

business

WEAKNESS
1. Lower promotion in rural markets
2. Cost structure in the asset’s management
is higher than the competitors.
3. Low advertisement activities

9
 OPPORTUNITY
1. Promoters increase shareholdings.
2. Potential growth in rural market
3. Good presence & awareness of brand in
the market

THREAT
1. Rising number of new NBFCs in the market
2. Aggressive competition in retail loan
segment

Fig: Swot Analysis of Aditya Birla Capital Limited

II. INTRODUCTION TO EQUITY

II.I WHAT IS EQUITY?
Equity is typically referred to as shareholder equity (also known as shareholders' equity)
which represents the amount of money that would be returned to a company’s
shareholders if all the assets were liquidated and all of the company's debt was paid off.
Equity is found on a company's balance sheet and is one of the most common financial
metrics employed by analysts to assess the financial health of a company. Shareholder
equity can also represent the book value of a company. There are various types of equity
that extend beyond a corporation’s balance sheet. In this article, we will explore the
different types of equity including how investors can calculate a corporation’s equity or
net worth.

10
II.II EQUITY SHARES
Equity shares are the main source of finance of a firm. It is issued to the public. Equity
shareholders do not enjoy any preferential rights with regard to repayment of capital and
dividend. They are entitled to residual income of the company, but they enjoy the right to
control the affairs of the business and all the shareholders collectively are the owners of
the company.

II.III FEATURES OF EQUITY SHARES

1. Equity share capital remains permanently with the company. It is returned only
when the company is wound up.

2. Equity shareholders have voting rights and elect the management of the company.

3. The rate of dividend on equity capital depends upon the availability of surplus
funds. There is no fixed rate of dividend on equity capital.

II.IV ADVANTAGES OF EQUITY SHARES

1. Equity shares do not create any obligation to pay a fixed rate of dividend.

2. Equity shares can be issued without creating any charge over the assets of the
company.

3. It is a permanent source of capital, and the company has to repay it except under
liquidation.

4. Equity shareholders are the real owners of the company who have the voting rights.

5. In case of profits, equity shareholders are the real gainers by way of increased
dividends and appreciation in the value of shares.

II.V DISADVANTAGES OF EQUITY SHARES

1. If only equity shares are issued, the company cannot take the advantage of trading on
equity.
11
2. As equity capital cannot be redeemed, there is a danger of over capitalization.

3. Equity shareholders can put obstacles for management by manipulation and organizing
themselves.

4. During prosperous periods higher dividends have to be paid leading to increase in the
value of shares in the market and it leads to speculation.

5. Investors who desire to invest in safe securities with a fixed income have no attraction
for such shares.

II.VI WHAT IS EQUITY INVESTMENT?

In terms of investment options, there are two major ones available to an investor in India–
market linked and fixed return. Fixed return instruments, as the name suggests, offer
investors a predetermined fixed rate of return during the duration for which the investment
has been made. As a result of their consistent guaranteed returns, fixed return
instruments are preferred by risk-averse investors and the simplest example of fixed
return investments is the fixed deposit whether offered by a bank, post office or a
corporate entity. On the other side of the spectrum lie market linked investments which
are further subdivided into equity investment and debt investment. In case of equity
investment, the amount invested is channeled in equities i.e., shares and equity
derivatives. In case of debt investments, the amount is channeled into bonds (government
and corporate) as well as a range of money market instruments such as treasury bills,
certificate of deposits, commercial papers, repurchase agreements, etc. Obviously,
markets play a crucial role on the performance of equity investments and thus these
investments feature an element of risks. It is thus common for risk-averse investors to
prefer fixed return investments over any form of equity investment. In the following
sections, various aspects of investment made into equities will be discussed in greater
detail.

II.VII TYPES OF EQUITY INVESTMENTS

As mentioned in the previous section, equity investment is not a single type of investment
but in fact refers to a basket of investment options each with its unique benefits and

12
limitations. The following are some of the key types of equity investment options available
to investors in India.

i. SHARES

Shares have been around for over three centuries now (the first was issued by the Dutch
East India Company in the early 18th century). Each share represents a portion of the
company one is invested in no matter how small a portion and this represents the equity
of the company. Shares are traded on designated stock markets (exchanges) such as the
National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) if they belong to
listed companies. Shares can belong to unlisted companies too and may be privately
exchanged through off-market transactions. The performance of a company with respect
to its peers impacts the price of its shares either positively or negatively. As long the
investor manages to buy at a low price and sell at a higher price, shares can generate
profits, if the opposite happens, a loss is incurred. Though the potential profits are high in
case of this equity investment, the risks are often equally high. Shares of companies that
have assets featuring a higher valuation are termed as large capitalization (large cap)
companies. Smaller companies that have lower capitalization value are designated as
mid cap and small cap companies.

ii. EQUITY MUTUAL FUNDS

For investors who have limited idea about which stocks to invest in, equity mutual funds
offer an excellent middle ground. Mutual funds are a pool of capital created through
contributions made by multiple investors and subsequently this pool of capital is utilized
by a designated fund manager to create a portfolio that features shares of multiple
companies. An equity investment made through mutual funds features limited exposure
to a specific company share, hence, individual price movements tend to have only a
limited impact on the investment. But these investments being market-linked are not
completely risk free either and their rate of return is not predictable or constant. That said,
the transparency, professional fund management and ability of the scheme to invest bit
by bit through strategies such as SIP make equity mutual funds an ideal investment
opportunity for investors who have limited understanding of financial markets or do not
have the time to thoroughly analyses share before picking the investment that’s right for
them.

13
iii. FUTURES AND OPTIONS

Equities by themselves represent only part of the financial market and the broader
financial market includes derivatives of equities such as futures and options (F&O). Some
experts do not consider these to be true investments as futures contracts are valid for
only a limited period up to 3 months and are there not considered suitable for long term
wealth creation. Being a derivative, the performance of this equity investment is
specifically dependent on the performance of the underlying equity i.e., stock or index
they are derived from. Essentially, an F&O investor buys unit of a futures contract by
estimating whether the price/value of the underlying share/index will go up or down in the
future. Thus F&O is basically being a bet that the investor is making with respect to
movements of the underlying asset/index.

iv. ARBITRAGE SCHEMES

Arbitrage schemes are a type of equity-oriented hybrid fund that invest in equities, equity
derivatives (such as F&O) and various debt/money market instruments. In such cases,
equities and equity derivatives form a major portion of the scheme’s portfolio. As a result
of such a diversified portfolio, arbitrage and other equity-oriented hybrid schemes are
often better at controlling the downside as compared to pure equity investments. Arbitrage
schemes of course invest simultaneously in the equity and its derivative. This ensures
that the investor makes a profit no matter which way the market moves. When the price
of the equity increases, the fund makes a profit from the sale of shares, whereas if the
price of the equity decreases, the scheme profits from the increase in price of the futures
contract (equity derivative). It must however be pointed out that this type of equity
investment strategy often involves very thin net margins from individual transactions after
payment of charges such as securities transaction payments have been made. This
increases the expense ratio of this investment and reduces the potential returns that an
investor can receive.

v. ALTERNATIVE INVESTMENT FUNDS

Alternative investment funds are a relatively new equity investment opportunity in India.
As of now this type of equity investment is tightly regulated in India and only available as
an option for only select investor groups. Leading examples of these schemes include
hedge funds, angel investment schemes, real estate investment trusts (REITs) and

14
infrastructure funds. These are of course some of the riskiest investments currently
available in India with the potential to be the most lucrative too.

II.VIII KEY RISKS ASSOCIATED WITH EQUITY INVESTMENT

Almost every document that deals with equity investment talks of risk yet few, if any
discuss what those risks really are and how or if they can be mitigated. In the following
section some of the key risks related to investing in equities will be discussed along with
common mitigation strategies that mutual fund companies and/or individual investors tend
to utilize.

• MARKET RISK

Occasionally, the entire stock market faces an upheaval and all stocks irrespective of
their industry or capitalization gets impacted. This type of risk is termed as market risk or
systemic risk. In recent memory, demonetization in November 2016 was an event that
created such a situation and impacted all stocks adversely. Though a risk, such systemic
risk also provides equity investors with the opportunity to pick up quality stocks at
reasonable valuations that can potentially yield high returns in the long term. This is the
reason why those who attempt to time markets tend to make lump sum investments
during periods of upheaval caused by market risk, yet downside protection options are
limited for existing investors.

• PERFORMANCE RISK

Equity mutual funds invest in individual stocks and these stocks may or may not perform
according to expectations. This is the essence of performance risk and it affects both
individual stocks as well as entire sectors from time to time. Performance risk tends to
affect sectoral or thematic funds to the highest degree as they feature portfolios that focus
on a specific industry or industries related to a predetermined theme (consumption,
healthcare, energy, mining, etc.). The key strategy that mutual funds employ to mitigate
performance risk is diversification ideally across industries, themes, and market
capitalizations.

• ILLIQUIDITY RISK

15
Liquidity is the ability of a specific investment to be exchanged for cash/money at a fair
price and in sufficient quantities as and when required by the investor. Equity investments
are illiquid as when prices start going down, there tend to be more sellers than buyers for
equity shares and getting a fair price is nearly impossible in such a situation. In order to
control the illiquidity downside of equity investment, many mutual funds retain the option
of investing in various debt and money market instruments that feature a higher level of
liquidity as compared to equities. That said, an equity mutual fund will have to maintain a
higher allocation of equities in its portfolio as compared to its debt/money market
allocation.

• SOCIAL/POLITICAL/LEGISLATIVE RISK

Social, Political and Legislative changes can lead to changes in the performance of a
business. For example, if a country promotes its homegrown industry by increasing entry
barriers to foreign businesses, those local industries are bound to perform better till the
time these entry barriers are removed. After removal of restriction this advantage may be
lost by these protected businesses which might result in a downward move of their share
price. This type of risk exists in case of many businesses and the only strategy currently
implemented with respect to managing this type of risk involves diversification across
multiple industries as well as across national borders.

• CURRENCY/EXCHANGE RATE RISK

The basis of this risk is the international equity investment that can be made by an investor
or a mutual fund in order to benefit from businesses/industries that might be unavailable
or underdeveloped in the domestic economy. However, such investments are prone to
changes in the exchange rate of the currency that the scheme/individual is investing in
as compared to the local currency. One common strategy to mitigate this risk is the
maintenance of a cash reserve or holding highly liquid assets whose allocation can be
increased or decreased in order to offset the changing exchange rate or other currency-
related risks faced by the equity investor/ equity mutual fund scheme.

16
FUNDAMENTAL
ANALYSIS

17
 III. FUNDAMENTAL ANALYSIS

1. ABOUT THE SECTOR-AUTOMOBILE

Fig: Automobile sector briefly

India became the fourth largest auto market in 2019 displacing Germany with about
3.99 million units sold in the passenger and commercial vehicles categories. India is
expected to displace Japan as the third-largest auto market by 2021.

The two-wheeler 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.

18
India is also a prominent auto exporter and has strong export growth expectations for
the near future. Also, several initiatives by the Government of India and major
automobile players in the Indian market are expected to make India a leader in the two-
wheeler and four-wheeler markets in the world by 2020.

Domestic automobile production increased at 2.36% CAGR between FY16-20 with

26.36 million vehicles being manufactured in the country in FY20. Overall, domestic
automobile sales increased at 1.29% CAGR between FY16-FY20 with 21.55 million
vehicles being sold in FY20.

Two-wheelers and passenger vehicles dominate the domestic Indian auto market.
Passenger car sales are dominated by small and mid-sized cars. Two-wheelers and
passenger cars accounted for 80.8% and 12.9% market share, respectively, accounting
for a combined sale of over 20.1 million vehicles in FY20.

Passenger vehicle (PV) sales stood at 310294 units in October 2020, compared with
271737 units in October 2019, registering a 14.19% growth. As per the Federation of
Automobile Dealers Associations (FADA), PV sales in November 2020 stood at 291001
units, compared with 279365 units in November 2019, registering a 4.17% growth.

Overall, automobile export reached 4.77 million vehicles in FY20, growing at a CAGR
of 6.94% during FY16-FY20. Two-wheelers made up 73.9% of the vehicles exported,
followed by passenger vehicles at 14.2%, three-wheelers at 10.5%, and commercial
vehicles at 1.3%. EV sales, excluding E-rickshaws, in India witnessed a growth of 20%
and reached 1.56 lakh units in FY20 driven by two-wheelers.

Premium motorbike sales in India recorded a seven-fold jump in domestic sales,

reaching 13,982 units during April-September 2019. The sale of luxury cars stood in
between 15000 to 17000 in the first six months of 2019.

1.1 POST COVID SCENARIO

Auto dealers have been unable to deliver vehicles during the lockdown phase, and
have reported 30-45 days of finished goods inventory, likely to be heavily discounted
post lockdown. Further, with BS 6 sales mandated from 10 days after lockdown ends
(and sale of 10 % of existing BS 4 inventory until then), dealers face a significant burden
to liquidate unsold BS 4 inventory, worth Rs 6,300 crore. OEMs will need to financially
support dealer groups, further stressing their balance sheets. Auto suppliers have a
high dependence on migrant labor, whose absenteeism is expected to further delay
revival post-lockdown, resulting in a domino effect on the entire value chain. Suppliers
facing liquidity issues may succumb to deteriorating market conditions, causing
widespread disruption across the entire manufacturing ecosystem.

19
 Fig: Changes in Auto sector due to Covid

1.2 AUTOMOBILE COMPANIES IN STOCK MARKET

1. Bajaj Auto
1. Share in the domestic motorcycle market was 18.2% in H1/2020-21 as against
18.1% in H1/2019-20.
2. For Q2/2020-21:
• Brand “Pulsar” sold over 348,000 units in the domestic and export markets,
the highest ever!
• KTM and Husqvarna sold over 20,200 units in the domestic market, the
highest ever!
3. During H1/2020-21, Bajaj Auto introduced Platina 100 ES Disc and Pulsar 125
Split Seat along with refreshed versions of Platina 100 ES Drum and Duke 250.
4. Bajaj Auto continues to be a leader in the domestic market for Commercial
Vehicles with an overall share of 51%.
2. Hero MotoCorp
1. Hero MotoCorp was the number 1 two-wheeler manufacturer for the 19th year
in a row in FY 19-20. It had a 35.7 % Indian two-wheeler market share in FY20.
2. 51.9% FY20 Indian motorcycle market share.
3. Total income: ` 29,614 crore
• EBITDA: ` 3,958 crore
• PAT: ` 3,633 crore
• ROACE: 33.86%
• Total dividend declared: ` 90 per share.
20
 3. TVS Motors
1. The Company registered sales of 30.9 lakh units of two-wheelers in 2019-20. The 2W
industry declined by 14.4% majorly impacted by an on-road price increase in the domestic
market.
2. Exports of two-wheeler in 2019-20 were at 6.79 lakh units with a growth of 9.2% over 2018-
19. Three-wheeler sales grew by 11% in 2019-20 mainly on account of good acceptance
of the product from the international customer base.
3. Total revenue of the Company including other income was $ 16,455.44 Cr in the current
year as against $ 18,217.46 Cr in the previous year.
4. Profit before tax (PBT) was $ 754.41 Cr in the current year (after exceptional item of $
32.33 Cr) as against $ 960.96 Cr in the previous year.
5. Profit after tax (PAT) was $ 592.25 Cr in the current year as against $ 670.14 Cr in 2018-
19.
4. Mahindra & Mahindra
1. Leader in Domestic Tractor market with an increase of 1 % market share in FY20
which stood at 41.2 % compared to 40.2 in FY19.
2. Commercial Vehicle market share increased by 3.1 % to 27.7 % in FY 20
compared to 24.7 in FY 19.
3. Total Volume including domestic sales and Export –
Tractors – 301905 and Commercial Vehicles – 471141
5. Tata Motors

Fig: Annual result of Tata motors

21
6. Eicher Motors
1. 697582 commercial vehicles sold in FY19-20.
2. 96% market share in India’s mid-size motorcycle segment.
3. 29.5 % share in India’s light and medium-duty Commercial Vehicle segment.

Fig: Shareholding pattern of Eicher motors

7. Maruti Suzuki
1. Total cumulative production reached the target of 22 million on Feb 20
increased by 2 million from July 2018.
2. The annual sales including domestic and export combined dipped in FY 20
by close to 13 5 concerning FY19.

Fig: Financial result of Maruti Suzuki

Fig: Financial growth of Maruti Suzuki

22
8. ESCORTS

Fig: Financial results of ESCORTS Ltd.

2. BENCHMARK AUTOMOBILE INDEX

Stock market indexes measure the value of a segment of a country’s stock market by
the method of a weighted average of selected stocks. These indexes help investors
and analysts describe the market and compare different investments. Stocks in
numerical terms. As the stocks within an index change value, the index value also
changes accordingly.

The stocks could be selected based on the type of industry, market capitalization, or
the size of the company. The value of the stock market index is calculated using the
values of the underlying stocks. Any change taking place in the prices of underlying
stock impact the overall value of the index. If the prices of most of the underlying stocks
rise, then the index will also rise and vice-versa. In this way, a stock index reflects
overall market sentiment and direction of price movements of products in the financial,
commodities, or any other markets.

According to my project, I have chosen Automobile Sector. So, all the steps mentioned,
therefore, were performed on the mentioned sector under my project.

2.1 Steps to calculate Stock Market Index (Automobile Sector)

1. Note down the Daily closing price of the stocks (as per your sector).
2. Calculate the Market Capitalization by multiplying the closing price with No. of
shares.

23
 3. Next step in the process is to calculate the Weightage of all the stocks by dividing
the individual market cap with total market capitalization.
4. Percentage Change in price is calculated by - (Current Price- Base Price)/ Base
Price*100.
5. Change in weightage is calculated by multiplying Weightage with percent
change in price.
6. Last step is to calculate the Final Value - (Change in weightage*1000/100)
assuming the base to be 1000.

Fig: Benchmark index of auto stocks

2.2 RESULT OF THE INDEX

The motive of creating the index was to understand the daily percentage change in
terms of Weight and Price of the stocks. The data for the index is collected from the
period (23-03-21) to (14-05-21).

The end aim of the Index was to plot a line graph that will act as a benchmark to
compare with the Value Picks and Growth Picks. It was conducted to test whether the
Automobile sector, in general, has stocks that can beat its index and give more valuable
returns in comparison with the whole sector.

The Data for the Index is as follows:

Table 1: Daily change of benchmark index

Index Daily
Date Value change
23-03-21 1004.84
24-03-21 980.67 2.41%
25-03-21 950.17 3.11%
26-03-21 962.12 -1.26%
30-03-21 970.88 -0.91%
31-03-21 971.39 -0.05%
01-04-21 984.77 -1.38%
24
 05-04-21 959.59 2.56%
06-04-21 959.72 -0.01%
07-04-21 1020.08 -6.29%
08-04-21 1010.55 0.93%
09-04-21 1056.16 -4.51%
12-04-21 990.43 6.22%
13-04-21 1030.66 -4.06%
15-04-21 1016.4 1.38%
16-04-21 1026.37 -0.98%
19-04-21 1000.95 2.48%
20-04-21 1009.99 -0.90%
22-04-21 1010.98 -0.10%
23-04-21 1006.43 0.45%
26-04-21 1050.8 -4.41%
27-04-21 1034.82 1.52%
28-04-21 1053.6 -1.81%
29-04-21 1040.93 1.20%
30-04-21 1023.35 1.69%
03-05-21 1029.56 -0.61%
04-05-21 1018.13 1.11%
05-05-21 1025.66 -0.74%
06-05-21 1046.65 -2.05%
07-05-21 1045.65 0.10%
10-05-21 1059.08 -1.28%
11-05-21 1059.51 -0.04%
12-05-21 1063.32 -0.36%
14-05-21 1043.6 1.85%

This Data can act as a good indicator of the performance of the Automobile sector as
it was collected during the period when the stock market witnessed dramatic falls and
the later dates, starting from a week into May started to witness a gain back in the
Sensex and Nifty.

1. We witness that the prices of Automobile stocks got severely affected by close
to 2.6% on the day the lockdown in Delhi was announced.
2. We also witness a bullish run of the Automobile sector in the 2nd week of April.
3. The Volatility of the Index was between the range of (+- 6 %) with maximum
volatility both in positive and negative were witnessed on the first 2 days of
making the index itself.

25
This is how the data when plotted on a line chart looked like.

Daily change
0.08
0.06
0.04
0.02
0

20-04-21

14-05-21
23-03-21
25-03-21
27-03-21
29-03-21
31-03-21
02-04-21
04-04-21
06-04-21
08-04-21
10-04-21
12-04-21
14-04-21
16-04-21
18-04-21

22-04-21
24-04-21
26-04-21
28-04-21
30-04-21
02-05-21
04-05-21
06-05-21
08-05-21
10-05-21
12-05-21
-0.02
-0.04
-0.06
-0.08

Daily change

This line chart will used as a future reference to draw comparison with the Growth and
Value Picks from the Automobile Sector.

3. GROWTH AND VALUE PICKS

To understand from a long-term financial planning perspective, there is a need to
analyse what stocks will give better returns from the lot. These stocks are categorized
into 2 types:

1.) Value Picks – As the name suggests value stocks are the type of stocks that are
undervalued by the current stock market. There are many ways to understand
whether a stock is undervalued or overvalued. One of the most common ways is to
calculate the Alpha of the stock which is given by the security market line. A positive
Alpha reflects that the stock is undervalued and vice versa. Another way to check
whether a stock is undervalued or not is by checking the P/E Ratio of the company
and then comparing it with the Average P/E Ratio of the sector it is a part of.

• P/E ratios are used by investors and analysts to determine the relative value
of a company's shares in an apples-to-apples comparison. It can also be
used to compare a company against its historical record or to compare
aggregate markets against one another or over time.
• P/E Ratio is Given by,

26
 Fig: P/E Ratio

All the stocks which have a P/E Ratio less than the sector’s average are known as
Undervalued stocks and all the stocks with a P/E Ratio higher than the sector’s average
are known as Overvalued stocks. The reason why these stocks are known as value
stocks is that these stocks have not reached their potential yet as the market is
underestimating them which means they have an extremely high likely chance to grow
in the future and hence they become a viable option to hold onto.

To identify which stocks can be categorized as a value stocks, a 2-step procedure was
followed.

1- P/E Ratio of all the companies that were a part of the Index mentioned above
was taken into consideration. Then the sector average was found, and the stocks
were categorized into undervalued or overvalued, the results are given below.

Table 2: P/E Ratio Analysis of Auto Sector

Company Name P/E ratio Nature of stock

Bajaj Auto 24.61 Undervalued
Hero Motocorp 20.73 Undervalued
Eicher Motors 54.42 Overvalued
TVS Motor 49.28 Overvalued
Escorts 20.39 Undervalued
Maruti Suzuki 47.12 Overvalued
Ashok Leyland 17.12 Undervalued
Sector P/E 33.38

2- The second step involved observing the Revenue and Profit trends of all the
undervalued companies. Due to the pandemic situation FY20-21 was not taken
into consideration as it may not reflect the right trend for Revenue and Profit
thinking from a long-term perspective. Every stock was considered a value Pick
if at least one of its Revenue or Profit showed an Increasing trend. The stock
was only rejected when both its Revenue and Profit showed a negative trend.

27
 Here are the results of the analysis.

Table 3- Undervalued Stocks

Undervalued Companies
2019 2020 % change
Compani
es Revenue Profit Revenue Profit Reve Prof Select/r
(Rs.Cr) (Rs.Cr) (Rs.Cr) (Rs.Cr) nue it eject
Bajaj 9.1
Auto 30249 4675 29918 5099 -1.1% % Select
-
Hero 14.3 7.4
Motocorp 33650 3384 28836 3633 % % Select
0.4
Escorts 6196 483 5760 485 -7.0% % Select
- -
Ashok 39.9 87.9
Leyland 29054 1983 17467 239 % % Reject
Surprisingly 3 out of 4 Undervalued stocks turned out to be Growth picks. This
reflects that the Automobile sector is witnessing a good percentage of growth in the
economy. The chances of the companies growing in the future are high.

2.) Growth Picks – These are the stock that is chosen because of the value they offer.
These stocks are generally the stock that has an extremely high P/E Ratio and is
beating the sector average by quite a lot. The purpose of choosing these stocks is
to take advantage of their volumes and strong creditworthiness when it comes to
investing. According to the Alpha and P/E ratio both, these stocks are overvalued
by the exchanges, indicating that they are the hot favourites of the market, and they
hold great market value.
To identify the stocks which are Growth picks, 2 steps need to be followed.
1. First step is the same as in the case of value picks which involves taking into
consideration the P/E Ratio of the company and then comparing it with the sector
average. The only difference is here we take into consideration the stocks which
are overvalued by the market. These stocks hold a long-term future in the sense
that they are overpowered by the market and generally tend to show a bullish
run-in long run.
2. The second step is to consider the PE/G Ratio or the Price/earnings to Growth
Ratio.
• The PEG ratio is used to determine a stock's value while also factoring in the
company's expected earnings growth, and it is thought to provide a more

28
 complete picture than the more standard P/E ratio. A low PEG ratio reflects
that the stock is undervalued while a negative PEG ratio reflects that the
Price/Earnings and growth are heading in opposite directions. This simply
means that either the PE ratio of the company is negative, or its growth rate
is.
• PEG Ratio is given by:

Fig: PEG Ratio

For this research purpose, A PEG Ratio between 0-1 was considered an apt value for
a Growth pick. The test was performed on all the undervalued stocks by taking their
EPS from FY 19 and FY 20. FY21 was not considered as Annual reports for most of
the companies for this time frame was not available and the data from the year may
also act as an Outlier.

The Result of the Test is as followed.

Table 4- Overvalued Stocks

Overvalued conmpanies
P/E EPS (Rs.Cr) % Change in PEG
Companies
ratio 2019 2020 EPS ratio Select/reject
Eicher Motors 54.42 753.37 697.5 -7.42 -7.34 Reject
TVS Motor 49.28 14.11 12.47 -11.62 -4.24 Reject
Maruti Suzuki 47.12 248.3 187.06 -24.66 -1.91 Reject

Surprisingly all the overvalued stocks were rejected. The major reason for their
rejection was the negative growth rate in EPS. It dropped drastically.

The 3 stocks that were selected combining both Growth and Value picks are Bajaj Auto,
Hero MotoCorp, and Escorts.

29
 4. RATIO ANALYSIS
The Further step involved ranking these 3 stocks based on the below-mentioned 5
Ratios which are 5 of the most important ratios for the Automobile sector.

4.1 Debt to Equity Ratio

It is a measure of the degree to which a company is financing its operations through

debt versus wholly owned funds. More specifically, it reflects the ability of shareholder
equity to cover all outstanding debts in the event of a business downturn. Higher -
leverage ratios tend to indicate a company or stock with higher risk to shareholders. A
high D/E ratio is often associated with high risk; it means that a company has been
aggressive in financing its growth with debt. If a lot of debt is used to finance growth, a
company could potentially generate more earnings than it would have without that
financing.

Debt to Equity Ratio is given by,

Fig: Debt to Equity Ratio

4.2 Inventory Turnover Ratio

The inventory turnover ratio is an important evaluation metric specifically applied within
the auto industry to auto dealerships. It is usually considered a warning sign for auto
sales if auto dealerships begin carrying substantially more than about 60 days’ worth
of inventory on their lots. The inventory turnover ratio calculates the number of times
in a year, or another specified time frame, that a company's inventory is sold, or turned
over. It is a good measure of how efficiently a company manages ordering and
inventory, but more importantly for car dealerships, it is an indication of how rapidly
they are selling the existing inventory of cars on their lot.

Inventory Turnover Ratio is given by,

30
 Fig: Inventory turnover ratio

4.3 Return on Equity.

The ROE is a key financial ratio for evaluating almost any company, and it is certainly
considered an important metric for analysing companies in the auto industry. The ROE
is especially important to investors because it measures a company's net profit returned
to shareholder equity, essentially how profitable a company is for its investors. Ideally,
investors and analysts prefer to see higher returns on equity, and ROEs of 15% to 20%
are considered favourable.

ROE is given by,

Fig: Return on equity

4.4 Asset Turnover Ratio

The asset turnover ratio measures the value of a company's sales or revenues relative
to the value of its assets. The asset turnover ratio can be used as an indicator of the
efficiency with which a company is using its assets to generate revenue. The higher
the asset turnover ratio, the more efficient a company is at generating revenue from its
assets. Conversely, if a company has a low asset turnover ratio, it indicates it is not
efficiently using its assets to generate sales.

The Asset Turnover Ratio is given by,

Fig: Asset turnover ratio

31
4.5 Current Ratio

The current ratio is a liquidity ratio that measures a company's ability to pay short-term
obligations or those due within one year. It tells investors and analysts how a company
can maximize the current assets on its balance sheet to satisfy its current debt and
other payables.

The current Ratio is given by,

Fig: current ratio

Following are the five ratios we have selected sector wise. Only those companies we
have taken which are selected under overvalued and undervalued method.

Table 5: Ratios of all the companies

Debt to Inventory Return on Asset

Current
Companies equity Turnover Equity turnover
ratio
ratio (D/E) ratio (ROE) (%) ratio
Bajaj Auto 0 28.13 25.59 120.8% 1.55
Hero Motocorp 0.01 26.41 25.7 153.8% 2.08
Escorts 0 7.01 13.95 108.4% 1.66

The final ranking is,

Table 6: Final Ranking based on ratios.

Ranking
Debt to Return
Inventory Asset
equity on Current Average
Companies Turnover turnover
ratio Equity ratio ranking
ratio ratio
(D/E) (ROE)
Bajaj Auto 1 1 2 2 3 9
Escorts 2 3 3 3 2 13
Hero Motocorp 3 2 1 1 1 8

32
In the above table, we have ranked each ratio as per their best to worst financial
performance. There are total fiv ratio’s i.e., current ratio, asset turnover ratio, return on
equity ratio, debt-equity ratio, and inventory turnover ratio.

Also, the final ranking is done as worst to best performance of the ratio.

5. CREATION OF NAV INDEX

The Next step involves calculating daily NAV change. For this, a total budget of 10 crores
was taken and was distributed between the above-mentioned 5 companies based on their
ranks. The No. of units were assumed to be 1 crore so that the beginning NAV is 10.
AUM (Assets under management)
NAV = No.of Units.

10,00,00,000
= 1,00,00,000 =10

The NAV was calculated for the same period for which the Benchmark Automobile index
was made, (10th May 2021 – 25th May 2021).

The NAV for the given time is given below,

Table 7- NAV Daily Change Data

DATE AUM NAV % Change

10-05-21 100,000,000.00 10
11-05-21 99,937,011.72 9.99370 0.06%
12-05-21 99,883,117.74 9.98831 0.05%
14-05-21 98845298.96 9.88453 1.04%
17-05-21 99542607.39 9.95426 -0.71%
18-05-21 102707187.5 10.27072 -3.18%
19-05-21 103008267 10.30083 -0.29%
20-05-21 101812421.2 10.18124 1.16%
21-05-21 102462909.4 10.24629 -0.64%
24-05-21 103173660.3 10.31737 -0.69%
25-05-21 103165152.3 10.31652 0.01%

The line chart for the same data is given below. This line chart will be put in comparison
with the line chart of Benchmark given above. The aim is that the NAV line beat the
Benchmark line. If this happens the Fundamental analysis is a success or else the
sector is not giving a particular signal on whether to invest or not.

33
 % Change
0.015
0.01
0.005
0
-0.005
-0.01
-0.015
-0.02
-0.025
-0.03
-0.035

% Change

Fig: NAV Data Change Line Chart

34
TECHNICAL
ANALYSIS

35
IV. TECHNICAL ANALYSIS
1. WHAT IS TECHNICAL ANALYSIS?
Technical analysis which helps to study the market action, primarily using charts, for
the purpose of forecasting future price trends. The movement of the price and its
behavior can be explained in a more illustrative form by using the technical analysis.
It provides better insight and also to take decision on the investment. It considers only
the actual price behavior of the market or instrument.

Technical analysis is the examination of past price movements to forecast future price
movements where the price is influenced by the forces of supply and demand.

The objective of analysis is to forecast the direction of the future price. By focusing on
price and only price, technical analysis represents a direct approach while
Fundamentalists are concerned with why the price is what it is.

Based on the duration of analysis, technical analysis can be categorized into two
types:

1. Long term technical analysis (2-5 years)

2. Short term technical analysis (<1 year)

There are various patterns to analysis whether the movement of a particular stock is
in upward trend or downward trend.

➢ Upward trend: signifies when demand is greater than supply resulting in

increase in prices. An uptrend line has a positive slope and is formed by
connecting two of more low points. The second low must be higher than the
first for the line to have a positive slope.
➢ Downward trend: signifies when supply exceeds the demand resulting in
decrease in prices. A down trend line has a negative slope and is formed by
connecting two or more high points. The second high must be lower than the
first for the line to have a negative slope.
➢ Support: is the price level at which demand is thought to be strong enough to
prevent the price from declining further. The logic dictates that as the price
declines towards support and gets cheaper, buyers become more inclined to
buy and sellers become less inclined to sell. By the time the price reaches the
support level, it is believed that demand will overcome supply and prevent the
price from falling below support. A decline below support indicates a new
willingness to sell and/or a lack of incentive to buy.
➢ Resistance: is the price level at which selling is thought to be strong enough
to prevent the price from rising further. The logic dictates that as the price

36
 advances towards resistance, sellers become more inclined to sell and buyers
become less inclined to buy. By the time the price reaches the resistance level,
it is believed that supply will overcome demand and prevent the price from
rising above resistance.

2. LONG TERM TREND ANALYSIS

SWING TRADING STRATEGIES

Swing Trading is trading that is done to capture returns in the short to medium term. Swing
Traders usually use technical analysis to take their trades. Swing Trading usually involves
understanding the patterns in candle formation and taking trades when the candles
indicate the right time to buy or sell. Some of the usual techniques involved in Swing
Trading are given below:

1) Rounding Bottom

This is a pattern that is formed like a U shape. It gives a buy signal generally when the
downward extending period of a stock is about to end, and it is about to take a reversal
in its movement. The pattern could take a couple of weeks to a couple of months to
form. It could even be a rare occurrence. The Pattern is known to have given quite
profitable returns to the investors in the past and is one of the most widely looked after
patterns across the global stock markets. The Trading volume in this kind of pattern
is at the peak during the start of the descent and is at the lowest when it is hitting its
bottom. The volume is a great indicator of when to enter the trade, A rounding bottom
trade should be taken when the cup returns to its preceding position and crosses
above.

Fig: Rounding Bottom

37
 2) Cup with handle

This pattern involves a Rounding bottom with a downward shift at the end, like a
handle to the cup. This Pattern was given by William O. Niel in 1988. It is considered
a quite confusing and risky pattern as it may not give a concrete signal from a start.
The Trading volumes observed in this pattern are usually low as investors are unsure
about the movement of the stock. The pattern is known to give high returns if it breaks
the range of the handle. It may take 2 weeks or as far as 65 weeks to make.

Fig: Cup with Handle

3) Bump and Run Reversal

Bump and Run Reversal is a pattern that forms after excessive speculation which drives
the prices of the stock up too far. The strategy involves forming a Trendline connecting
all the lows of the recent months. The trend line is made in the lead-in phase of the
strategy which is approx. 1 month and is expected to be moderately steep. During this
phase, the price moves in an orderly manner and there is no speculation. The second
phase is Bump, here the prices move away from the trend line and form a bullish signal.
The third phase is Run Phase, the investor should exit the trade when the resistance
touches the trend line.

Fig: Bump and Run Reversal

38
 4) Head and Shoulder

The Head and Shoulder pattern appears with a baseline and three peaks out of which the
middle peak is the highest and the other 2 peaks are pretty much similar in height, making
it look like a head between 2 shoulders. It is believed to be one of the most highly reliable
trend reversal patterns. The Normal Head and Shoulder Pattern typically showcases an
end of a bullish run of stock. There is another term known as Universal Head and
Shoulder, which forms on the bearish side and gives an end to a bearish run of the stock..

Fig: Head and Shoulder

5) Double Top & Double Bottom

This pattern occurs when the stock’s price movement is like the shape of a W (Double
Bottom) or an M (Double Top). A double top generally includes 2 rounding tops which
indicate an end of a bullish trend and entry into a bearish trend. These patterns are not
the easiest to interpret as they may not form on the same height or the same trendline.
They can also be misinterpreted and lead to a fake breakout situation which might result
in a loss. A Double top signal is used to Sell the security or writing an option for the same.
The Double Top Pattern looks like this.

Figure 36- Double Top

39
A Double Bottom is the complete opposite of a Double Top, It is formed when 2 rounding
bottoms are formed on the bearish side and they give a signal of a Bullish reversal. This
again may be misinterpreted and give false signals. This strategy must be used with
utmost precision and with proper confirmation on when to enter the trade.

Here is an example of Double Bottom.

Fig: Double Bottom

➢ SWING TRADING IN THE AUTOMOBILE SECTOR

A task during the internship allowed us to check which patterns have the stocks in our
sector have witnessed both. For the same Purpose, All the stocks under Automobile were
checked for the last pattern they showed. A Day Chart was used for the same purpose
since it was Swing Trading. The results of the Task are as follows:

Fig: long term trend analysis in ashok leyland

40
 Fig: long term trend analysis in Hero MotoCorp

Fig: long term trend analysis in Mahindra CIE auto

41
 Fig: long term trend analysis in TVS motor

3. SHORT TERM TREND ANALYSIS

• Candlestick Chart: Originating in Japan over 300 years ago, candlestick chart
requires all the open, high, low and close prices. A daily candlestick is based on
the open price, the intraday high and low, and the close. A weekly candlestick is
based on Monday's open, the weekly high-low range and Friday's close.

Fig: Candlestick Patterns for Reversal of trend

42
• Doji: The relevance of a Doji depends on the preceding trend or preceding
candlesticks. Doji indicate that the forces of supply and demand are becoming
more evenly matched and a change in trend may be near.
• Hammer: The hammer is a bullish reversal pattern that forms after a decline. After
a decline, hammers signal a bullish revival. The low of the 41 long lower shadow
implies that sellers drove prices lower during the session.
• Hanging Man: The hanging man is a bearish reversal pattern that can also mark
a top or resistance level. Forming after an advance, a hanging man signals that
selling pressure is starting to increase. The low of the long lower shadow confirms
that sellers pushed prices lower during the session.
• Shooting Star: The shooting star is a bearish reversal pattern that forms after an
advance and in the star position, hence its name. A shooting star can mark a
potential trend reversal or resistance level.
• Inverted Hammer: The inverted hammer looks exactly like a shooting star, but
forms after a decline or downtrend. Inverted hammers represent a potential trend
reversal or support levels. After a decline, the long upper shadow indicates buying
pressure during the session.

Fig: Chart patterns

43
 ➢ CHART PATTERNS IN AUTOMOBILE SECTOR

The following are the chart patterns shown in the AUTO companies:

Fig: chart pattern in Ashok leyland

Fig: chart pattern in Eicher motor

44
 Fig: chart pattern in Hero motocorp

Fig: chart pattern in Mahindra CIE auto

45
Fig: chart pattern in TVS motor

46
 V. CONCLUSION
Fundamental analysis:

Comparison
0.03
0.02
0.01
0
-0.01
-0.02
-0.03
-0.04

benchmark line NAV line

Figure 22- Comparison of Line Charts

1. It is visible that almost both the trendlines have followed a similar path over the time
of the analysis. This suggests that the Growth and Value Picks are following the same
trend as the whole sector.
2. It also suggests that the influence of the Growth and Value picks on the sector is not
very influential as their sole analysis could not affect the Benchmark index in general.
3. This also suggests that there is an importance to Hedge here. An investor can hedge
by investing in the stocks which came overvalued and did not become a part of Growth
and Value Picks.
4. Hedging can also be done by diversifying into Debt and Mutual funds.
5. Hedging could also be performed by buying derivatives of the opposite trade and
holding onto them for a longer period.

Technical Analysis
1. Long term trend analysis
• The most common trend observed was Rounding Bottom and Cup with
Handle.
• Almost all the stocks were in the stage of recovering their dips which means
that all the stocks majorly had experienced a dip and are currently
recovering their price.
• Almost all the stocks experienced a downward trend because of the second
wave of Corona.

47
 VI. OVERALL LEARNINGS
As we can see Equity Research plays a very crucial role to make wise investment
decision. After having accessed your risk capacity and tolerance followed by time horizon
and intention of investment, the individual portfolio can fetch your systematic returns. One
can use long term and short-term technical analysis along with fundamental analysis to
determine a confirm trade signal.

It is always better and important to analyse, do continuous updating of funds invested

because it may happen that some of the stocks which were not there in our portfolio have
started performing well and can give better return as time goes on and some stocks may
start falling due to market situation, sector performance or company news. Which makes
it necessary to pull-out our investment and invest somewhere else. Derivatives market
investments are also one of the methods to reduce our risk and increase the profit. Under
this market we can invest by trading in futures and options. In this market, contracts are
purchased on a future date at a predefined price.

Mutual fund consisting of diverse sectors gives an idea about how the mutual fund NAV
can be calculated and how the performance of portfolio be analysed with respect to
market benchmark. If mutual fund is outperforming market, it indicates that stocks
selected for the portfolio are fruitful.

48
 VII. REFERENCES
➢ www.equitymaster.com
➢ What is technical analysis.PDF
➢ Options strategy.PDF
➢ https://www.investopedia.com/terms/m/mutualfund.asp
➢ http://www.yourarticlelibrary.com/shareholders/equity-shares-features-
advantages-anddisadvantages-of-equity-shares/42051
➢ https://www.paisabazaar.com/mutual-funds/equity-investment
➢ www.moneycontrol.com
➢ www.tradingview.com
➢ https://zerodha.com/varsity/chapter/background/

49