Summer Internship Project Report

On
Equity Research of Pharmaceutical Industry
Completed At

By

Neha Prakash

FA21022

PGDM 20-22

Under Joint Supervision of

Dr. Neha Shukla and Md.Yusuf Khan

Presented in Partial Fulfillment of the Requirements of

Post Graduate Diploma in Management

3, Institutional Area, Rohini, Sector-5,

Delhi – 110085, India

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 Name of the Organization:
HDFC LIFE

Postal address: SAKET,

MADANGIRI

CERTIFICATE

Certified that the summer internship project report on “Equity Research on Public
Sector Banks” is the Bonafide work of “Neha Prakash, Roll No: FA21022”,
pursuing PGDM Batch (2021-23) of Jagan Institute of Management Studies, 3,
Institutional Area, Rohini, Sector 5, New Delhi -110085. The work has been done
under my supervision during 5/5/2022 –5/7/2022.

Date: Signature of the Mentor:

MENTOR Name: Dr. Neha Shukla

Designation:

professor

Organization:

JIMS Rohini

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 CERTIFICATE

This is to certify that the summer internship project report on “Equity Research on
Public Sector Banks” is a Bonafide work of “Neha Prakash, Roll No: FA21022”,
pursuing PGDM Batch (2021-23) of Jagan Institute of Management Studies, 3,
Institutional Area, Sec-5, Rohini, New Delhi – 110085. The report was prepared under
my supervision during 05/05/2022 – 05/07/2022.

Date: Signature of the Mentor:

MENTOR Name: Md. Yusuf Khan

Designation:

circle head

Organization:

HDFC LIFE

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 STUDENT’S DECLARATION

I declare that the Report on “Equity Research of Pharmaceutical Industry” is an

original work done by me in accordance with the guidelines prescribed by the Dean’s
office for preparation of Summer Internship Project Report and the work has not been
submitted anywhere else for review.

I understand that if the content of the work is found to be plagiarized at any time
of its evaluation, my report can be rejected, and disciplinary action may be initiated
against me.

Signature of the student:

Student Name: NEHA

PRAKASH

Roll. No.: FA21022

PGDM Batch: 21-23

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 ACKNOWLEDEGEMNT

I express my heartfelt gratitude to the management of HDFC Life Limited. for providing me this
fantastic opportunity as a part of my Summer Internship Program me to have a glimpse of the
Corporate World.

I take this opportunity to thank Professor NEHA SHUKLA (Faculty Member of JIMS
Rohini) who has always been there to support me and answer all my queries in difficult
times, she constantly supervised and provided necessary feedback that helped me steer in
right direction.

She has been a constant motivator and a good mentor to take care of all the requirements
that would have otherwise proved to be a hindrance in my path.

The program has been a great learning experience and would like to thank Mr. Nikesh
(Circle Head at HDFC Life) for assigning the project and helping me despite of his busy
schedule and teaching me about the Fundamental & Technical Analysis of stocks. His
valuable guidance and constructive suggestions, encouragement, and time, which helped me
in preparation of the Project

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Table of Contents
EXECUTIVE SUMMARY...………………………………………………………….08-09

CH-1 INTODUCTION.......................................................................................................10-16

1.1 OVERVIEW OF THE INDUSTRY...............................................................................10

1.2 ABOUT THE COMPANY.......................................................................................10-13

1.3 ABOUT PROJECT.........................................................................................................14

1.4 INTRODUCTION TO PHARMA SECTOR............................................................15-16

CH-2 RESEARCH METHODOLOGY..............................................................................18-19

2.3 METHODOLOGY.........................................................................................................18

2.4 FINDINGS......................................................................................................................19

2.5 LIMITATIONS OF THE PROJECT..............................................................................19

CH-3 CONCEPTUAL BACKGROUND...........................................................................19-23

3.1 INDEX.......................................................................................................................20-21

3.2 MUTUAL FUNDS....................................................................................................22-23

CH-4 FUNDAMENTAL ANALYSIS................................................................................23-36

4.1 RATIO ANALYSIS.......................................................................................................29

4.2 RANKINGS....................................................................................................................31

FINAL RANKING…………………………………………………………………...31-32

4.3 ASSET ALLOCATION.................................................................................................33

NAV SHEET.....................................................................................................................34

4.4 FUND FACT SHEET...............................................................................................35-36

CH-5 TECHNICAL ANALYSIS......................................................................................37-51

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 5.1 CANDLESTICKS PATTERN.......................................................................................41

5.2 INTRADAY TRADING STRATEGIES..................................................................42-47

5.3 PRICE ACTION STRATEGIES...............................................................................48-50

5.4 LONG TERM PRICE ACTION STRATEGIES……………………………………48-53

6 CONCLUSIONS:..................................................................................................................59

7. LEARNINGS FROM SIP....................................................................................................60

7
 Executive Summary

Name: Neha Prakash, Roll No – FA21022

Email Id: tiwaryneha775 @gmail.com

Name of the Organization: HDFC Life Insurance Company Limited

Title of SIP Report: Equity Research of Pharmaceutical Industry

Objectives

• To study the fundamental & technical analysis of pharma sector

• To perform live intraday trading with broking partner Zerodha.

Briefing of the work done/ Methodology:

This project is about “A Study on Equity Research of Pharma sector”. Fundamental and technical
analysis are used as methodology to analyze this sector. In this project valuation is done as a part of
fundamental analysis and certain stocks are selected as the “Value Picks” and “Growth Picks”.

The Value-Pick stocks have been selected as those stocks which are undervalued and have shown a
growth in revenue or profits on year-on-year basis. On the other hand, overvalued tocks have been
chosen as Growth-Pick stocks which have the P/E Growth ratio (PEG Ratio) between 0 to 1.

Further, using some financial ratios which are important to the pharma sector, the value pick and
growth pick stocks have been ranked. According to the ranks, funds have been allocated to these
selected stocks.

Finally, a portfolio consisting of the selected pharma sector stocks is created and the Net Asset Value
(NAV) of the portfolio is calculated. The NAV is calculated on the daily basis. Performance of the
entire portfolio is analyzed with respect to the Index and NAV on daily

8
basis of pharma sector stocks. It will be helpful for investors who are looking for an investment in
Pharma sector .

Also, I got to learn about Technical Analysis. In which there are two types of technical analysis and
that is “Short term technical analysis” & “Long term technical analysis” and both of the analysis have
been performed on selected pharma sector (Growth picks and Value picks).

Various Patterns have been observed as a part of Long-Term Technical Analysis and points at which
the investors can buy and sell the stocks have been spotted. Also, the current trend of the stocks has
been found out. Various Candlesticks have been used as a part of Short-Term Analysis and also
various Candlesticks positions have also been observed. The Candlesticks give us an idea regarding
trends and trend reversals for the selected Public Bank stocks (Growth Picks and Value Picks). Also
got to learn about various oscillators which can be used for trading and also done the back testing of
this oscillators.

Conclusion:

Fundamental and technical analysis are extremely important in making sound investment decisions.
The individual portfolio can provide systematic returns after assessing your risk capacity and
tolerance, as well as your time horizon and investment objective. One such method for value analysis
is the relative valuation model. To determine a confirm trade signal, one can utilize long and short-
term technical analysis, as well as fundamental analysis. By estimating long term target prices,
investors can maximize profits while also determining how long they should keep the stock.

The NAV of a portfolio of companies gives an overview of how the NAV is calculated and how the
portfolio's performance is compared to market benchmarks. If NAV outperforms the market, it means
the equities chosen for the portfolio are performing well.

9
 CH-1 INTODUCTION
1.1 OVERVIEW OF THE INDUSTRY

 The pharmaceutical industry discovers, develops, manufactures, and markets drugs or

pharmaceutical drugs for use as medications to be administered to patients (or self-
administered) in order to cure, vaccinate, or relieve symptoms. Pharmaceutical
companies typically sell generic or brand-name medications as well as medical devices.
They are subject to a variety of laws and regulations that govern drug patenting, testing,
safety, efficacy, and marketing. Vadodara, Ahmedabad, Ankleshwar, Vapi, Baddi,
Sikkim, Kolkata, Visakhapatnam, Hyderabad, Bangalore, Chennai, Navi Mumbai,
Mumbai, Pune, and Aurangabad are the four major pharmaceutical hubs in India
(clockwise from the northwest).

MARKET SIZE:
 The pharmaceutical industry is expected to be worth USD 65 billion by 2024, and USD
120-130 billion by 2030. Budget allocation for Health Schemes increased by 7.95
percent in 2021-22 compared to allocation in 2020-21. The Indian pharmaceutical
industry is the world's third largest by volume and the 14th largest by value. It accounts
for 3.5 percent of all drugs and medicines exported globally.

1.2 ABOUT THE COMPANY

HDFC Standard Life Insurance Company was established in 2000 as a Joint Venture between
Housing Development Finance Corporation Limited (HDFC Ltd) and Standard Life Aberdeen. It was
the first private company to get a license from IRDAI in 2001. As of March 2019, the company was
providing 38 individual and 11 group insurance products. After strong period of growth, the

10
company completed its initial public offer (IPO) in 2017. HDFC Life continues to benefit from its
presence across the country with 414 branches and additional distribution touchpoints through
several partnerships. The partnerships comprise 265 bancassurance partners including NBFCs (Non-
Banking Financial Companies), MFIs (Micro Finance Institutions), SFBs (Small Finance Banks), etc.
and 39 partnerships within non-traditional ecosystems.

Currently the company has the largest share in new business among private life insurers.

Company Website: www.hdfclife.com

HDFC Life – Sar Utah key jiyo!

Leading private sector life insurers in INDIA

• 6.1 cr live insured

• 20000 + employees across India

• Recognized amongst India’s top 25 best workplaces in BFSI

• 1295 crore profit after tax

• 400 + branches in 264 cities

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HDFC LIFE RATIO

Current Ratio 0.0066

Quick Ratio
PE Ratio
Debt To Equity 0.04
Return On Equity

COMPANY PERFORMANCE

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PRODUCTS INCLUDE

• Protection,

• Pension,

• Savings

• Investment,

• Health,

• Children and Women plans.

• The company also provides an option of customizing the plans, by adding optional benefits called
riders, at an additional price

COMPETITORS

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1.3 ABOUT PROJECT

In my Project, I have selected Pharma Sector Companies whose market cap. is more than 7500 Cr.
for the purpose of Fundamental & Technical analysis of the industry. The project deals with a brief
introduction about Fundamental and technical analysis of stock market like how to invest in stock
market as the investors are more concerned about their returns and they want to minimize the risk, So
the technical analysis is very helpful to decide which stock is preferred to buy &sell a particular point
of time.

This project contains secondary data & calculations with charts which help indrawing inferences.

The scope of my work comprises of tasks like:

Preparation of Index

Fundamental Analysis

Top performing stocks

Technical Analysis

Recommendations

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1.4 INTRODUCTION TO PHARMA SECTOR

Pharmaceutical industry in India has made

significant positive impact to health care
outcomes in India and other developing
as well as developed countries. Indian pharma
companies have used excellence in synthetic
organic chemistry and art of
reverse engineering to successfully develop
many cost-effective generic medicines. Signing
of TRIPS agreement and
protection of product patents led to evolution of
Indian pharma research. Detailed description of
all three major areas of
Indian pharma research, namely generic
research, biosimilars and drug discovery, has
been attempted with special focus on
drug discovery. Role of industry-academia
collaborations to further enhance innovation in
pharma industry has been
15
discussed and a working hypothesis to this affect
has been proposed
Pharmaceutical industry in India has made
significant positive impact to health care
outcomes in India and other developing
as well as developed countries. Indian pharma
companies have used excellence in synthetic
organic chemistry and art of
reverse engineering to successfully develop
many cost-effective generic medicines. Signing
of TRIPS agreement and
protection of product patents led to evolution of
Indian pharma research. Detailed description of
all three major areas of
Indian pharma research, namely generic
research, biosimilars and drug discovery, has
been attempted with special focus on
drug discovery. Role of industry-academia
collaborations to further enhance innovation in
pharma industry has been
discussed and a working hypothesis to this affect
has been proposed
16
 The pharmaceutical industry refers to the discovery, development, and production of drugs and
medications (pharmaceuticals) by both public and private organizations. The modern pharmaceutical
industry—of compound isolation and purification, chemical synthesis, and computer-aided drug design—is
thought to have begun in the nineteenth century, thousands of years after intuition and trial and error led
humans to believe that plants, animals, and minerals contained medicinal properties. The unification of
research in fields such as chemistry and physiology in the twentieth century increased understanding of basic
drug-discovery processes.

The Indian pharmaceutical industry has had a significant positive impact on health-care outcomes in both
developing and developed countries. The pharmaceuticals market in India is expected to grow at a CAGR of
16% to USD 55 billion by 2020.
Furthermore, due to the unique strengths of the Indian pharma industry, which includes over 3,000 pharma
companies, 10,500 manufacturing units, over 60,000 generic brands across 60 therapeutic categories, and
vaccines exported to 150 countries, India will be among the top ten pharma markets in absolute size by 2020.

HISTORICAL PROSPECTIVE

 Till 1980:
Govt control
Indian Patent control act 1970
Dominated by the foreign companies

 1980 -1900
Bulk manufacturing of the drugs
Cost effective process development

 1990-2010-
Liberalization lead Indian companies to launch operations in foreign countries

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 MARKET SIZE
 As of 2021, the majority of pharmaceuticals manufactured in India are low-cost generic
drugs that account for the majority of India's pharmaceutical exports. Imported
medicines with patents.

 The Indian pharmaceutical industry is the world's third largest by volume and the 14th
largest by value. It accounts for 3.5 percent of all drugs and medicines exported
globally. India supplied approximately 45 tones and 400 million tablets of
hydroxychloroquine to approximately 114 countries worldwide. The Indian
pharmaceutical industry is currently worth around USD 50 billion.

18
19
 CH-2 RESEARCH METHODOLOGY

2.1 OBJECTIVE OF THE PROJECT

 The main goal is to learn how the market works, what factors influence it, and when to take
trade by applying indicators & strategies
 Also, to understand how corporate life works, as well as the regulations and attitudes that
must be followed when working in the corporate sector.
 To analyze pharma sector for investment purposes
 To understand the primary and secondary market readily.

2.2 SCOPE OF THE PROJECT

 Portfolio management so that consumers can earn maximum profit in a short time
 Able to provide customized investment solutions to clients as per their financial needs
 In the fundamental analysis, Understanding the economic history, shares debts, and
competitors of the Company

2.3 METHODOLOGY
 Exploratory research method has been applied with help of secondary data, which can be
generated by applying different strategies on day-to-day trade and by maintaining records of
the same.
 Also, data sources will be the personal observation method through real time trading and
interactions with the mentors. Primary data has been collected for formation of Capital goods
sector index of all large cap companies.

20
2.4 FINDINGS
 To make profits in trading a good understanding of charts is important.
 Being patient is at utmost important in stock market
 There are multiple options strategies that can useful in trading.

2.5 LIMITATIONS OF THE PROJECT

 2 months of duration of internship may not be enough for a deep analysis of all the
strategies of intraday and market depth.
 Too much dependence on strategies while doing intraday trade may lead to some losses.
There are other limitations also but these three can be more affective.

CH-3 CONCEPTUAL BACKGROUND

3.1 INDEX
A stock market index is a basket of stocks reflective of an industry, sector, or the entire market
itself. It is a selection of stocks put together in a basket with a weighted average of their
aggregate prices being tracked as one. This cumulative price reflects the state of the underlying
class of stocks. So, for example the S&P BSE Sensex (or the 30 stock Sensex) is tracked widely
by institutions and FIIs and is often called the true reflection of the Indian stock markets. It is the
weighted average of 30 well established and financially sound stocks drawn from different
industrial sectors of the Indian economy. Similarly, in the same way I have calculated the index
of healthcare sector. The base value is considered as 1000 and the index is prepared. So, from
the particular sector that we have chosen we need to take the companies that have market cap
value above 7500 crores and make our own index to study the how much the particular sector is
growing. The sector I have chosen for the project is Healthcare Sector there are 8 companies
which have market cap above 7500 crores.

21
Method of Calculation of Index
Step 1: Calculation of New Market Capitalization New Market cap= Last traded price of the
previous day * Number of shares.

Step 2: Calculation of Weightage Weights = 𝑴𝒂𝒓𝒌𝒆𝒕 𝒄𝒂𝒑𝒊𝒕𝒂𝒍𝒊𝒛𝒂𝒕𝒊𝒐𝒏 𝒐𝒇 𝒆𝒂𝒄𝒉 𝒄𝒐𝒎𝒑𝒂𝒏𝒚

𝑻𝒐𝒕𝒂𝒍 𝒔𝒖𝒎 𝒐𝒇 𝑴𝒂𝒓𝒌𝒆𝒕 𝑪𝒂𝒑𝒊𝒕𝒂𝒍𝒊𝒛𝒂𝒕𝒊𝒐𝒏 *100

Step 3: Calculation of Percentage Change Percentage change =

(𝑵𝒆𝒘 𝑳𝒂𝒔𝒕 𝑷𝒓𝒊𝒄𝒆 – 𝑳𝒂𝒔𝒕 𝑷𝒓𝒊𝒄𝒆 𝒐𝒇 𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒅𝒂𝒚) /𝑳𝒂𝒔𝒕 𝑷𝒓𝒊𝒄𝒆 𝒐𝒇 𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒅𝒂𝒚
Step 4: Calculation of Percentage weightage Percentage weightage = 𝑾𝒆𝒊𝒈𝒉𝒕𝒂𝒈𝒆 ∗ 𝑷𝒆𝒓𝒄𝒆𝒏𝒕𝒂𝒈𝒆
𝒄𝒉𝒂𝒏𝒈𝒆*𝟏𝟎𝟎
Step 5: Calculation of Total change in Index Rupee change= 𝑷𝒆𝒓𝒄𝒆𝒏𝒕𝒂𝒈𝒆 𝒘𝒆𝒊𝒈𝒉𝒕𝒂𝒈𝒆 ∗ 𝑰𝒏𝒅𝒆𝒙
𝒐𝒇𝒑𝒓𝒆𝒗𝒊𝒐𝒖𝒔 𝒅ay

22
 17

880
900
920
940
960
980
1000
1020
1040
-M
18 ay
-M
19 ay
-M
20 ay
-M
23 ay
-M
24 ay
-M
25 ay
-M
26 ay
-M
27 ay
-M
28 ay
-M
31 ay
-M
a
1- y
Ju
2- n
Ju
3- n
Ju
6- n
Ju
7- n
Ju
8- n
Ju
9- n
INDEX

J
10 un
-Ju
13 n
-J
14 un
-J
15 un
-J
16 un
-J
17 un
-J
20 un
-J
21 un
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22 un
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23 un
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24 un
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25 un
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28 un
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29 un
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30 un
-Ju
n

23
3.2 MUTUAL FUNDS

A mutual fund is a form of financial vehicle that invests in securities such as stocks, bonds, money
market instruments, and other assets by pooling money from multiple investors. Professional
money managers manage mutual funds, allocating assets and attempting to generate capital gains
or income for the fund's investors. The portfolio of a mutual fund is built and managed to meet the
investment objectives indicated in the prospectus.

Banks, Asset Management Companies, and Brokers are all places where you can buy mutual funds.

NET ASSET VALUE (NAV) NAV or Net Asset Value is the unit price of a mutual fund scheme.
Mutual funds are bought or sold on the basis of NAV. NAV= Asset Under Management/No. of
units This helps us in understanding the value of our asset.

There are 3 types of Mutual Funds:

1. Equity funds

2. Debt funds

3. Balance funds (50%:50%)

The equity funds are further dividend into many types:

• Large Cap Funds: Large Cap Mutual Funds are equity funds that invest a bigger proportion of
their total assets in companies with a large market capitalization.

• Mid Cap Funds: A mid-cap fund is a pooled investment, such as a mutual fund, that focuses on
companies with a market capitalization in the middle range of listed stocks

. • Small Cap Funds: Small cap mutual funds are invested in companies that below top 250 stocks in
the exchange as per their market capitalization.

• Index Funds: An “index fund” is a type of mutual fund or exchange-traded fund that seeks to
track the returns of a market index.

24
• Sector Funds: Sector funds, also known as specialty funds, are mutual funds and ETFs (exchange-
traded funds) that concentrate on a specific industry or market.

• Fund of Funds: A fund of funds (FOF) is a pooled fund that invests in other funds. FOFs usually
invests in other hedge funds or mutual funds

. • Arbitrage Funds: Arbitrage fund is a type of mutual fund that leverages the price differential in the
cash and derivatives market to generate returns.

• Contra Funds: A contra fund is defined by its against-the-wind kind of investing style

• Foreign Funds: A foreign fund is a type of fund that invests in companies that are based
internationally, or outside the investor's country of residence.

CH-4 FUNDAMENTAL ANALYSIS

Fundamental analysis is a method of evaluating the intrinsic value of an asset and analyzing 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 is one of two major methods of market analysis, with the other being technical
analysis. While technical traders will derive all the information they need to trade from charts,
fundamental traders look at factors outside of the price movements of the asset itself.
Examples of Fundamental Analysis
There are various tools and techniques that can be used for fundamental analysis, but they have been
categorized into two types of fundamental analysis: top-down analysis and bottom-up analysis. Top-
down analysis takes a broader view of the economy, starting with the entire market before narrowing
down into a sector, industry and finally a specific company. Conversely, bottom-up analysis starts
with a specific stock and widens out to consider all the factors that impact its price.

25
Most fundamental analysis is used for evaluating share prices, but it can be used across a range of
asset classes, such as bonds and forex.

The tools that traders might choose for their fundamental analysis vary depending on which asset is
being traded. For example, share traders might choose to look at the figures in a company’s earnings
report: revenue, earning per share (EPS), projected growth or profit margins.

Steps in Fundamental Analysis

The process of fundamental analysis includes multiple steps which are explained below in various
sections;

26
Sector Price- Earnings Ratio
The price-earnings ratio (P/E ratio, P/E, or PER) is the proportion of a company's share price to its
earnings per share. This ratio is used to determine the worth of a company and whether it is
overpriced or undervalued.

P/E Ratio= Share Price/ Earnings per Share

On the basis of PE ratio certain companies were selected which had a decent PE ratio and according
to that the sector PE was calculated for Pharma Sector.

The Average PE Ratio of all the companies is the Sector PE Ratio. Hence the Sector PE of Pharma
Sector is 50.8.

Undervalued and Overvalued Companies

27
Companies are valued based on their sector P/E ratio. To assess if a stock is Undervalued or
Overvalued, the P/E ratio of each stock is compared to the sectorial P/E ratio.
For example, if a stock's P/E ratio is less than the sector P/E ratio, that stock is regarded
Undervalued; on the other hand, if a stock's P/E ratio is larger than the sector P/E ratio, that stock is
considered Overvalued.

28
If, Company P/E Ratio > Sector PE => Overvalued and
Company P/E Ratio < Sector PE => Undervalued

Value-Pick

Following the valuation process, the growth of the "Undervalued" stocks is examined using the Top
line and Bottom line for each stock. The "Value choices" are undervalued stocks with positive
percentage changes in revenue or profits or those show year-over-year growth, while those with
negative percentage changes in revenue and profit are rejected. The four factors for identifying an
undervalued company are as follows:

29
1. Select when both values are growing.
2. Select it when one value is increasing and the other is falling.
3. If one value is falling while the other is increasing, choose it as well.
4. Reject it if both values are dropping.

30
Growth Pick

Following the selection of Value Picks, the Overvalued stocks are analyzed and Growth Picks are
determined. P/E Growth value (PEG value) is determined for each Overvalued stock by dividing the
P/E ratio by the percentage change in earnings per share to determine the Growth Picks. Growth
Picks are equities that have a PEG value between 0 and 1. Stocks having negative PEG levels or PEG
values greater than 1 are rejected as overvalued.

The company that will be picked is Sun Pharma and Natco Pharma as it meets the required aspect.

4.1 Ratio Analysis

The stocks that are selected from overvalued & undervalued companies are then rated on the basis of
few common ratios. There are five such ratios which are suitable for the industry and helps them to
analyze them properly on an overall basis. It includes: -

Debt Equity Ratio

The debt to equity ratio compares a company's total debt to total equity to assess the riskiness of its
financial structure. The ratio reveals the proportions of debt and equity financing used by a company.
Lenders and creditors closely monitor it because it can provide early warning that an organization is so in
debt that it is unable to meet its payment obligations. This is a funding issue as well.

DEBT EQUITY = TOTAL LIABLITIES/ SHAREHOLDERS TOTAL EQUITY

31
Return on Equity (ROE)

The return on equity ratio is a financial metric that assesses a company's ability to make a profit off
the investments of its shareholders. This profitability aids in determining how successfully a business
uses equity investment to support its ongoing operations.
ROE = Net Income / Shareholders’ Equity

CAPITAL RATIO

The current ratio, also known as the working capital ratio, assesses a company's ability to meet short-
term obligations due within a year. The weight of total current assets versus total current liabilities is
taken into account in the ratio. It denotes a company's financial health and how it can maximise the
liquidity of its current assets to settle debt and payables
CURRENT = Current Assets/ Current Liablities

Net Profit Margin (NPM)

The amount of net income or profit earned as a percentage of revenue is expressed as the net profit
margin, or simply net margin. It is the proportion of a company's or business segment's net profits to
revenues.
Net Profit Margin = Net Profit/Revenue

32
 QUICK RATIO

The Quick Ratio, also known as the Acid-test or Liquidity ratio, assesses a company's ability to pay
short-term liabilities by having assets that are easily convertible into cash. Cash, marketable
securities, and accounts receivable are examples of these assets. These assets are referred to as
"quick" assets because they can be converted into cash quickly.
QUICK RATIO= (Current assets-inventory – prepaid expenses)/current
liabilities

Calculations of Ratios

4.2 RANKINGS

With the help of the financial ratios, we will find out the overall rankings of the companies selected
33
with the help of distribution method where the ratios will be assigned with percentage and
according to the values the final rankings will be available.

34
4.3 ASSET ALLOCATION

According to the rankings now the stocks must be assigned any amount with a total of 10 crores in
the end and the no. of shares needs to be calculated so that NAV can be calculated on daily basis with
respect to stock market. No. of shares can be calculated by dividing the stock’s last price with the
allocated amount.

35
NAV SHEET

Net Asset Value (NAV) of the portfolio of Healthcare Sector is determined by dividing the AUM of
the Healthcare Sector by number of units under consideration. We have taken the units under as 1
crore. Hence, base NAV of the portfolio of Healthcare Sector = 10 crore/ 1 crore = 10. NAV of
Healthcare.

Chart Title
12.00

10.00

8.00

6.00

4.00

2.00

0.00
n n n n n n n n n n n n n n n n n
Ju Ju Ju Ju -Ju 3-Ju 4-Ju 5-Ju 6-Ju 7-Ju 0-Ju 1-Ju 2-Ju 3-Ju 4-Ju 7-Ju 8-Ju
6- 7- 8- 9- 10 1 1 1 1 1 2 2 2 2 2 2 2

36
4.4
FUND FACT SHEET

Objective: To provide long-term wealth maximization by managing an equity portfolio comprised of

stocks in the bank PSU sector with a favorable price-to-earnings ratio.

Strategy: Using basic considerations, construct and manage an equity portfolio of bank PSU sector
firm equities. Throughout the Bank PSU Sector index, the given strategy has underperformed. The
fund would assist in identifying businesses with good fundamentals and potential for future growth.
This fund would aid in the preservation of liquidity.

NAV as on 6thth July, 2022: 9.92Rs. Benchmark- Pharma Sector

Fund Manager: Ms. Neha Prakash

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38
 CH-5 Technical Analysis

The study of past price movements in order to predict future price movements is known as
technical analysis. Technical analysis is a broad term that refers to a number of techniques that
rely on interpreting price movement in a stock. The majority of technological research is
concerned with deciding if a current pattern will continue and, if not, when it will reverse.
Trendlines are preferred by some technical analysts, while candlestick formations are preferred
by others, and bands and boxes formed through mathematical analysis are preferred by others.
Technical analysis can be used to analyses stocks, indexes, commodities, futures, or any other
tradable tool whose price is determined by supply and demand powers.

Any combination of the open, high, low, or close for a given security over a particular timeframe
is referred to as price. The time period can be dependent on intraday (tick, 5-minute, 15-minute,
or hourly) price data, as well as regular, weekly, or monthly price data, which can last anywhere
from a few hours to several years. Furthermore, some technical analysts use volume or open
interest estimates in their price analysis.

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)

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5.1 Candlesticks Pattern

1. Doji

A Doji is candle stick pattern which looks like a Cross as the opening price and the closing price are
equal or almost same. It concludes that neither buyer nor sellers are ga gaining.

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 1. Hanging Man

The hanging man is a bearish reversal pattern that can also mark a top or resistance level. Forming
after an uptrend, a hanging man signals that selling pressure is starting to increase

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 1. Shooting Star

The shooting star is a bearish reversal pattern that forms after an uptrend and in the star position,
hence its name. A shooting star can mark a potential trend reversal or resistance level.

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 2. Inverted Hammer

The inverted hammer looks exactly like a shooting star, but forms after a downtrend.
Inverted hammers represent a potential trend reversal or support levels.

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5.2 Intraday Trading Strategies

Intraday trading, also called day trading, is the buying and selling of stocks and other financial
instruments within the same day. In other words, intraday trading means all positions are squared-
off before the market closes and there is no change in ownership of shares as a result of the trades.
Following are the 7 Intraday Strategies

1. Bull 180: Bull 180 Strategy is a strategy which basically means when there is red candle
formation and the next candle is about to form it should be engulfing the last candlestick
and give a green candle with upwards bullish trend.

Time Frame: 5 Minutes Candle

2. Bear 180: Bear 180 Strategy is a strategy which basically means when there is green
candle formation and the next candle is about to form it should be engulfing the last
candlestick and give a red candle with downward bearish trend.

Time Frame: 5 Minutes Candle

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 1) Super trend

It is an indicator of which the position which we have taken that could be either long or short.
When the call appears, we need to wait for the second candle to make.

2) RSI

RSI is a momentum indicator which is used technical analysis to measure the magnitude of recent price
changes to evaluate oversold or overbought price of a stock. To interpret RSI particular values are set
70. When line crosses the upper limit (70/80) which indicates that security is becoming overbought
or overvalued

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 3) Stochastic RSI

A Stochastic RSI reading above 0.8 is considered overbought, while a reading below 0.2
is considered oversold. On the zero to 100 scale, above 80 is overbought, and below 20 is
oversold.
Overbought doesn't necessarily mean the price will reverse lower, just like oversold doesn't mean the
price will reverse higher. Rather the overbought and oversold conditions simply alert traders that the
RSI is near the extremes of its recent readings.

4) Fibonacci
Fibonacci requires Moving Averages of 21 and 55. The call for buy is called Fibonacci Golden Cross
and for sell Fibonacci Death Cross. When 21 line cuts the 55 lines from down to up, we will take for
Buy. When 21 line cuts the 55 from up to down will take for SELL.

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 5) VWAP

Volume Weighted Average Price VWAP is used as a benchmark to determine the quality of
executions in large orders. When the blue line crosses any of the Candles of Red or Green would
mean continuation of that candle. For example, if the cuts the red candle it would mean that stock
will continue to fall and then we can short the share.

6) Awesome Oscillator

Awesome Oscillator (AO) is an indicator that is non-limiting oscillator, providing insight into the
weakness or the strength of a stock. We need to look for this indicator at a 15-minute candle.
When there is continuation of uptrend from below 0 line to above 0 line and a green bar form
above 0 take long position

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 7) Pivot Points Standard

A pivot point is a technical analysis indicator, or calculations, used to determine the overall trend
of the market over different time frames. When a green candle is formed above the Pivot line, we
will take the trade for Buy and when a red candle is formed below the Pivot Line, we will take the
trade for Sell.

8) CPR (Central Pivot Range)

The Central Pivot Range (CPR) is an indicator to identify key price points to set up trades. When
CPR is formed above the green candle and it is narrow, we take the trade for buy and when CPR
is formed below the red candle and it is narrow, we will take the trade for sell. We will avoid the
trade when CPR is broad.

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 9) Aroon

The Aroon indicator is a technical indicator that is used to identify trend changes in the price of an
asset, as well as the strength of that trend. Orange Aroon up line is 14 days average high and Blue
Aroon down line is 14-day average low. When aroon up line crosses down line take the long
position above 50%. When Aroon down line crosses aroon up line take short position below 50%.

10) Bollinger Band

A Bollinger band is technical analysis tool defined by a set of trendlines plotted two standard
deviations away from a simple moving average of securities price. It consists of three lines A
simple moving average (middle band), upper limit and lower limit band. The upper and lower band
are typically 2 standard deviations from simple moving average

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5.3 Price Action Strategies

Price Action Strategies taking the call on the basis of reading the charts and understanding
the patterns of the particular stocks. The stocks tend to generally follow these patterns every
now and then. This strategy works for Medium- and Long-Term timeframe. We need to
look for candlesticks, understand the high price and low price, make trendline, understand
support and resistance these all fall under Price Action

During the course of Training, we needed to find these patterns in our own sector. Some of
these are as follows.

A. MEDIUM TERM PRICE ACTION STRATEGIES:

Medium Term Price Action are as follows:

1. Ascending Triangle

The ascending triangle is a bullish formation that usually forms during an uptrend as a
continuation pattern. There are instances when ascending triangles form as reversal patterns at the
end of a downtrend, but they are typically continuation patterns. Duration: One Day or one hour.

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 1. Descending Triangle

The descending triangle is a bearish formation that usually forms during a downtrend as a
continuation pattern. There are instances when descending triangles form as reversal patterns at the
end of an uptrend, but they are typically continuation patterns. Duration: One Day or one hour.

2. Rectangle Triangle

A rectangle is a continuation pattern that forms as a trading range during a pause in the trend. The
pattern is easily identifiable by two comparable highs and two comparable lows. The highs and
lows can be connected to form two parallel lines that make up the top and bottom of a rectangle.
Duration: One Day or one hour.

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3. Price Channel

A price channel is a continuation pattern that slopes up or down and is bound by an upper
and lower trendline. The upper trendline marks resistance and the lower trendline marks
support. Price channels with negative slopes (down) are considered bearish and those with
positive slopes (up) bullish. Duration: One Day or one hour.

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 5.5 LONG TERM PRICE ACTION STRATEGIES:

1. Rounding Bottom:

The rounding bottom is a long-term reversal pattern that is best suited for weekly charts. It is also
referred to as a saucer bottom, and represents a long consolidation period that turns from a bearish
bias to a bullish bias.
Duration: One Week

2. Bump and Run reversal:

As the name implies, the Bump and Run Reversal (BARR) is a reversal pattern that forms after
excessive speculation drives prices up too far, too fast. The pattern was originally named the Bump
and Run Formation, or BARF. Bukowski decided that Wall Street was not ready for such an
acronym and changed the name to Bump and Run Reversal.

Time Duration: One Week.

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 3. Head and Shoulder:

A head and shoulders reversal pattern forms after an uptrend, and its completion marks a trend
reversal. The pattern contains three successive peaks with the middle peak (head) being the highest
and the two outside peaks (shoulders) being low and roughly equal. The reaction lows of each
peak can be connected to form support, or a neckline.

Time Duration: One Week.

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 4. Double Top

The double top is a major reversal pattern that forms after an extended uptrend. As its name
implies, the pattern is made up of two consecutive peaks that are roughly equal, with a moderate
trough in between.

Time Duration: One Week.

2. Double Bottom:

The double bottom is a major reversal pattern that forms after an extended downtrend. As its name
implies, the pattern is made up of two consecutive troughs that are roughly equal, with a moderate
peak in between.

Time Duration: One Week

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5.6 PORTFOLIO BUILDING USING ALGORITHMS

In this project we used different Algorithms to filter out those stocks which can be

a Multibagger Stock. In the process of filtration, we applied different Ratios. For

Portfolio Building, I have taken those stocks whose Market Capitalization is more

than 7500Cr. We have 6 such methods which can guarantee that in future they are

going to do well. Methods are as follows-.

METHOD-1

1) ROE> 17%
Sales Growth > 17%
EPS Growth > 17%
Change in FII Holdings 1%

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Small case Returns as on 7thth July
2022

Method 2- Peter Lynch

1) PEG Ratio<1
2) Sales>500
3) Debt to Equity<0.2
4) PE Ratio<40
5) Profit Growth QoQ>20
6) Price to Cash Flows>5

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Method 4- Promoter Holding

1) Promoter holding percentage change>1%

2) Debtor Equity<0.2
3) Market Cap>1000 cr

Method 5- Warren Buffet and Benjamin Graham Strategy

1) Sales>250 Cr

2) PE<0.3

3) Interest Coverage Ratio EBIT/Interest)>5

4) PE Ratio< Industry PE

5) ROE> 15%

6) Dividend Yield >1

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Method 6 – High ROCE, low PE

1. P/E TTM < 15

2. Return on capital employed 3-year average percentage >= 15%
3. Net profit 2 years >= 20
4. Net profit growth Y-o-Y > 0
5. P/e TTM > 0

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Method 7 – Multi-bagger Stocks

1. Piotroski score > 6

2. Return on Capital Employed > 15
3. ROE > 15
4. Current ratio > 1
5. Price to book value < 3
6. Profit growth YOY > 7
7. Market cap < 20000
8. Dividend yield < 4%

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 6 CONCLUSIONS:

Shortly we can say Fundamental Analysis is used by investors to ensure that the value of their stocks
improves over time. Although Fundamental Analysis and Technical Analysis differ, both are vital in
achieving investment objectives.

Based on the above analysis and studies, there are multiple opportunities for an investor to invest, not
only in the field of stock markets but also multiple instruments such as derivatives, mutual funds,
insurance and many more.

 In terms of the index calculations, the Healthcare Sector from a base index of 1000 dated
February 28th ,2022, has fallen a low of 934.03 as on 06-07-2022 and has shown decline.
 In terms of the technical analysis different stocks have been displaying different patterns and
some of them even have already completed those phases too. The patterns as well as the
indicators come in very handy as they give out the exact point on where to invest and where
to exit.
 Mutual funds have multiple opportunities to invest in and based on how risk averse a
particular investor is, an appropriate decision can be taken that being complete
debt/combination of debt and equity/which type equity etc. And for this purpose, multiple
questions were asked to people to assess how risk averse a particular person is.
Putting together all the various aspects, after studying these for 2 months, I have understood how in
actual world scenario these are applied and seeing all the results, tracking the stocks, developing
sector funds, and finally coming to a conclusion, I can say that any person who is investing must
consider multiple aspects of a particular instrument and not make decisions for the short term or
intraday, Even though in the initial stages someone may face losses but through right understanding
of the market and thorough analysis the right call can be made.

For me personally I believe, investing in the value pick and growth pick companies would be
the best opportunities followed with the technical patterns and mutual funds at last.

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 7. LEARNINGS FROM SIP

So as far as the concern about actual learning then following are the things which I personally
developed in myself.

 I learnt about the corporate environment and the corporate ethics & values (discipline) & the
horizon of my knowledge also got broadened.

 I got to know about the work culture existing in HDFC LIFE Meeting with so many different
personalities working all together under one roof.

 I understood the philosophy of Market like how the market reacts in such economic crisis.
Some policy introduces or some big financial loss can change the market condition.

 As we all know that Time management is very important in handling a multiple task. Ability
to communicate with the other employee & to understand the work which provides more

information and clarity.

. Also, whatever strategies & Indicators that we had learned during the internship, plays an essential
role while taking any Intraday Trade

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