Mini Project Report

ON
“GETTING STARTED WITH INDIAN
STOCK MARKET”

Submitted in Partial Fulfillment of the award

of the degree of
MASTER OF BUSINESS ADMINISTRATION
PROGRAMME FROM
Dr. A.P.J ABDUL KALAM TECHNICAL
UNIVERSITY, LUCKNOW

Under the Guidance of Submitted

by
Mr. Neeraj shrivastava Pranjal
Dubey
Assistant Professor

1
 INSTITUTE OF CO-OPERATIVE &
CORPORATE MANAGEMENT RESEARCH
AND TRAINING, LUCKNOW, UTTAR
PRADESH, 226016
2023-2025
: iccmrt@satyam.net.in Phone: 271643, 2716092
Website: www.iccmrt.ac.inFax: [0522]27160

2
INSTITUTE OF CO-OPERATIVE CORPORATE MANAGEMENT
RESEARCH AND TRAINING 467 SECTOR 21, RING ROAD, INDIRA
NAGAR, LUCKNOW

CERTIFICATE

This is to certify that PRANJAL

DUBEY, a student of Master of business
administration (MBA) Programme
(Batch 2023-2025) at this institute has
conducted a mini project titled “ROLE
OF ARTIFICIAL INTELLIGENCE
IN FOOD AND BEVERAGE
INDUSTRIES" under my guidance during
1st semester. The mini project has been
prepared towards partial fulfillment for the
award of MBA degree from Dr. APJ
ABDUL KALAM TECHNICAL
UNIVERSITY. The mini project report is
the original contribution of the student.
The mini project report is hereby
3
recommended and forwarded for
evaluation.

MR. Neeraj Shrivastava

Assist
ant
Profes
sor

4
 D
e
c
l
a
r
a
t
i
o
n

I, PRANJAL DUBEY, a student of master

of business administration (MBA)
Programme at the Institute of Co-operative
& corporate management research and
training, Lucknow hereby declare that all
the information, fact and figures used in the
mini project titled “ROLE OF
ARTIFICIAL INTELLIGENCE IN
FOOD AND BEVERAGE
INDUSTRIES”

Have been collected by me. I also declare

5
that this mini project report has been
prepared by me and the same has never
been submitted by the under signed either
in part or in full to any other university or
institute or published earlier
This information is true to the best of my
knowledge and belief.

P
R
A
N
J
A
L
D
U
B
E
Y
M
B
A
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 (
B
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5
)
Semeste
1st Yea
202

Date-

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 ACKNOWLEDGEMENTS

I owe a great many thanks to a great

many people who helped and
supported me during the writing of
this project .Thanks and appreciation
to the employees of the organization
for their help and unbiased responses
regarding my queries. My deepest
thanks to director of our institute
Mr . Alok dixit
For his continued support. I express
my thanks to the Principal of
ICCMRT Lucknow, Dr .K.
Anbumani (Associate Professor) for
extending his support and valuable
guidance.
My deepest thanks to Mr. Neeraj
Shrivastava (Assistant Professor)
the Faculty Mentor for the project for
guiding and correcting various
8
documents of mine with attention
and care, he has taken pain to go
through the project and make
necessary corrections as and when
needed.

P
ra
nj
al
D
u
b
ey
M
B
A
1s
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 t
S
E
M
E
S
T
E
R

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11
 TABLE OF CONTENTS

Why do we need to invest? 5

Investment scenario in India 7
Investing in financial assets over physical
assets – a ground reality 9
Why should you have an investment
advisor? 11
Why do young Indians love to invest in the stock
market? Relevance and importance

13
How can one start investing in stock
markets? 14
How to choose a stockbroker 14
Documents required for opening a trading and
12
 Demat account

18
Step by Step practical process to buy shares in
primary and secondary market

21
Step By Step Practical Process to Buy or Sell
Shares and Derivatives in Secondary Market

24
Types of securities available for investment
in India 27
Invest directly in the stock markets is
better compared to the mutual fund route

31
Difference between a full-service
broker and a discounted service
broker and which type
of broking service suits you better 33
Basics of Fundamental analysis 35
Basics of Technical analysis 38
Conclusion 41
Top Articles from Gale.in 42
13
How not to use intuition in stock market
decisions?

43
SCAMS THAT RATTLE THE INDIAN
STOCK MARKET 46
How can I master the skill to predict the
behavior of Indian stock market? 49
Do you regret selling any stock? 51
Stock market basic tip. All stocks
that goes down will not be coming
back and vise
versa. 52

14
What’s this Ichimoku technique people are
talking about nowadays? 55
Priority Exclusive Content 59
[Priority Exclusive] Understanding Sector
leaders and Building a portfolio. 60
How to pick Stocks for maximum returns in
Indian Stock market? 64
Services and offers from Gale.in 67
Offers on Demat & Trading account: 68

15
Why do we need to invest?

As humans, we want financial security,

financial independence and increase our
wealth. Even if you have enough wealth to
last you a lifetime and attain all your goals,
you must take this one factor into account and
that is INFLATION.

Inflation means an increase in the price of

products or services or alternatively said, it
reduces your buying power. Historically
speaking, it is
observed

that inflation levels

were very high in
2014 and have
touched 12%.
However, these
days inflation

has
drastically fallen to 2% to 3% overall and appx
5% in some sectors. So, if we want to stay in
16
the same house and drive the same vehicle
and maintain the same standard of living, we
cannot afford to just save money and not
invest in financial assets. Now, not all of us
are born with a silver spoon and have enough
money, we do have dreams, ambitions and
want a decent sum of money for it and savings
alone cannot build your wealth.

17
Just try to synthesize this situation where you
have invested your money in a savings
account earning a return of 3.5% and the
inflation in the housing sector is 5% (assuming
you want to make a down payment for your
house you wish to buy). Do we realize that the
real return on this is actually -1.5% (negative).
So essentially even by investing in a savings
account, you are still losing money (1.5%) and
not earning 3.5% interest.

Real Return = annual return % - inflation

It is a proven fact that higher the return you

are seeking for, higher the risk you will need to
take. So, essentially, even if you are risk
averse person or have a lot of wealth, you are
forced to invest your money so that your
money earns more money

18
Investment scenario in India
As Indians, we were always taught how to
save money and we were never taught how to
invest money. Whatever little investment we
did, we invested only in physical assets like
gold and real estate and a very little portion of
it went into insurance and bank deposits as
well. This created a portfolio for us that was
heavily tilted on physical

19
assets and very safe financial products.
Investment in physical assets accounted for
more 66% of the total household savings in
2012-13.

Indian households in contrast to the rest of the

world are putting a huge portion of their
investments in non-financial assets like stocks,
bonds, debentures, mutual funds etc. It was
considered that high inflation

20
rates were the prime reason for households
ignoring investments in financial assets.
Recent trends have seen fall in interest rates,
stagnant or falling land prices, legal issues
with buying houses, gold not being a safe
haven anymore, black money issues
surrounding gold and land. All this has made
the Indian households think different and look
for other lucrative places of investment
especially in financial assets.

21
 Investing in financial assets over physical
assets – a ground reality

The long-awaited
shift in household
savings from physical
assets to financial
assets started a
couple of years ago.
According to RBI, the
share of financial
instruments such as
equity, mutual funds, bonds and bank deposits
in the household sector’s rose to 34.4% of
gross savings in 2015-2016. This is up from
31.3 % a year ago. Furthermore, investment in
22
households as a percentage of total physical
assets has dropped to 56.8%. A recent clean
money drive and

23
Demonetisation has actually helped and
kicked more household savings into financial
assets.

We can see that returns on investment in

financial assets over a longer period of time
will always be superior to returns on physical
assets. The above chart was prepared as per
July 2017 post which the Sensex has reached
record levels and has given returns in excess
of 20% this year. All this just points us to the
fact that we cannot ignore the financial
markets and have to invest in them to maintain
a decent standard of living.
24
Why should you have an investment advisor?

There are many events

in life that make us
nervous or make us
doubt ourselves if we
have the funds to cope
with the event. Events
like getting married,
having a baby, buying
a house or quitting a
job, are life-changing
decisions and in this
situation, if we get our
finances wrong it can lead

to disastrous consequences. Another reason

you may need an investment advisor is when
you are juggling multiple financial and dynamic
goals. If you are overwhelmed with finances or
just want to cross verify your understanding or
are unsure of things, you may want to take
help of an investment advisor.

“People who are confident and think they may

25
not need an investment advisor are intelligent
enough to use one”

The investment advisor is actually your

planning partner. It is always advisable to
have an investment

advisor who advises you at the holistic level

and not just at the financial level. There are a
lot of personal details you will need to share
with the investment advisor like how much you
earn, what are your expenses, assets,
liabilities, future expenses, family planning etc,
so choose someone carefully, trustworthy with
a good reputation. Try to avoid investment
advisors that have conflicts of interest as well.
The investment advisor is someone who will
discuss and inform you how he plans to
achieve your goal

26
27
 Why do young Indians love to invest in the stock
market? Relevance and importance

The mind-set of young Indians has changed

and they have adopted more of the western
culture. The young Indian today strives to
enjoy his life more and prefers to spend
money on a vacation or expensive hobbies
rather than build a house like the Indian
middle class people generally did. One thing
that has dramatically
changed is
their
willingness to take
risks. The young Indian
today is brave and not
afraid to take risks and
in return works harder
to enjoy the returns.

Young Indians have realized that investments

in traditional products like bank deposits and
gold is not the right way forward. The reason
being that interest rates have been falling
28
consistently, gold is not a safe haven like
before due to the returns and land prices are
stagnant with a long gestation period.
Investing in the stock markets have provided
handsome returns like in the graph we saw
earlier. This shift in mentality combined with
the ability to take risks has

29
made young Indians invest heavily in the
stock markets.

How can one start investing in stock

markets? First, you need to choose a
stockbroker and then submit documents for
opening a trading and Demat account and
then you can buy or sell shares in the primary
or secondary market.

How to choose a stockbroker

The regulator has made it mandatory that
buying and selling of stocks must be
conducted by a licensed Trading Member or a
stockbroker. But finding a good stockbroker
takes some evaluation, the correct choice
while choosing a correct stockbroker is
absolutely necessary. Few steps that one
needs to consider while making the choice
would be –

30
ℵ A thorough background check – this would
include the requirement of the broker to be
licensed and authorized as per the law and
regulations prescribed by the regulatory
authorities. In our case, the stockbroker has
to be registered with SEBI. The registration
number of a Stockbroker begins

31
 with IN, the third symbol is the segment in
which the stockbroker is registered, B –
Cash market, F – Futures and Options, E-
currency, S – sub broker. The fourth and
fifth will be a numeric number, Like 23 –
NSE, 01 – BSE, 26- MSEI etc. Next five
digits are the Stockbroker code and the last
2 digits are check digits.
ℵ Then a proper evaluation of the credentials,
relevant experience needs to be carried out.
One needs to get the past records checked,
if possible, have a word with the existing
clients.
ℵ With proper due diligence, you must try to
talk
with a few stockbrokers, this is important as
you need to be sure about entrusting
somebody with your money, which needs to
be judiciously invested. So the level of
comfort and transparency needs to be
established. This can be achieved through
proper communication with the
32
stockbrokers. During the communication,
few things need to be clarified like
a. Speed of order execution
b. Additional services like research,
IPO, mutual fund, advisory etc
c. Brokerage and other charges

33
 d. Depository services
e. Margin trading facility
f. Online and mobile trading options
g. Number of branches
h. Call and trade facility

ℵ In today’s fast world brokers’ should give

online access to their clients to check their
accounts and analyze their portfolio through
the online tools.
ℵ One can also rely on word of mouth, get
referrals from people who are into
investments through brokers, try to
understand their views and preferences and
on the basis of that shortlisted brokers can
be interviewed

These points can ensure that you can achieve

immense money growth but a wrong choice of
broker can make you lose your money too. So
you need to follow the steps carefully
mentioned above so that there is no financial
34
loss while investing.

In case you have issues or doubts in your

mind, SEBI has a toll free number 1800 22
7575 and 1800 266 7575. You may call this
number and clarify doubts. Also, if you have a
complaint against Stockbrokers, first

35
intimate their compliance officer in writing
giving 7 days’ time. If the complaint is
unresolved then escalate it to SEBI on their
dedicated portal for complaint called SCORES
(SEBI’s complaints redress System)

36
37
 Documents required for opening a trading and
Demat account

For any person to trade on the securities

market especially, in the equities market, they
need to open two accounts in order to start
trading. One is the trading account through
which a person can execute trades in his
account. Another account is the Demat
account. A Demat account is just like a bank
account but this is to keep your securities. You
can keep your shares, bonds, mutual funds,
ETF etc. in your Demat account.

38
39
Basic requirements required to open any account is
a
ℵ Proof of identity
ℵ Proof of address
ℵ Bank account and a PAN (Permanent
account number). You will also need a
passport size photo as well.
When you approach a Broker with these
documents, you will be given a booklet to sign.
Yes, you read it right, it’s not just a form, and
it’s a booklet. The technical name of the
booklet is the CLIENT REGISTRATION
FORM. Thanks to the ever vigorously
working regulator that it has narrowed to a
booklet, else in the early 2000’s it used to be a
book and not a booklet. This is the first step
for you to foray into the securities market. The
biggest and the most common mistake that
even the most experienced investor does is to
sign the form without reading and even worse
is signing the blank form.
We get to hear a lot of complaints that it’s a
booklet and who has the tie to read the entire
40
booklet before signing. My advice to you is to
take the form home, read it, understand it, ask
doubts if any and then sign the documents.
After you sign the documents, you are entitled
to get a free copy of the form within 7 days of
opening the account. If the broker prohibits
you to take the blank form or is in a rush (like

always) then

41
take a picture with your mobile phone but
please do not sign without reading.
To let you in on a little secret, the entire
booklet need not be signed to open the
account. If you just pay a little attention you
will realize that many pages of the booklet
have the clause voluntarily written very boldly.
But only if you give time, will you be able to
comprehend that those documents are
inserted for your convenience and are not
mandatory.
We will explain an important concept that you
need to be aware of. The Power of Attorney
(POA), this is a very important document.
Every time you sell a script, you have to sign
and provide the broker a DIS (Delivery
Instruction slip) that is like a cheque book for
shares and submit it to the broker. The broker
will then get the authority to take those shares
from your demat account and submit it to the
exchange you sold it on i.e NSE or BSE. Now
for the sake of convenience, you can provide a
power of attorney where the broker can

42
access only those securities that you have
sold on NSE or BSE and then submit it to the
exchange. For those who don’t trade
frequently, do not sign the POA. This is to
prevent any unauthorized trade on the
exchange and a subsequent transfer of shares
to the exchange without your knowledge.

43
 Step by Step practical process to buy shares in
primary and secondary market

A primary market is a market that deals with

issuance of
new
securities. It
is a place

where
corporate
entities

can raise
long-term
funds from
the
public. In a primary market, institutions can
raise funds through bond issues and
corporations can raise capital through the sale
of new stock through an initial public offering.
In the primary market, funds can be raised
through various issues such as
ℵ Public issue
44
ℵ Right issue
ℵ Preferential issue
ℵ Bonus issue
An issue that is made to the public and
either be Initial Public offering (IPO) or
further public offering (FPO). Both IPO and
FPO can either be a fresh issue of shares
or offer for sale shares. Step – 1 – Open a
Demat account

45
 Gone are the days where one used to get
share certificates and buying and selling
physical shares were allowed. These days,
shares can be bought or sold only in
dematerialized form. Dematerialization
means converting your physical shares to
electronic form. We need to understand
some basics here. There are two
depositories in India namely – Central
Depository Services Ltd (CDSL) and
National Securities Depository Ltd (NSDL).
Each depository has many participants
registered with them and they are called the
Depository participants (DP). For ease and
convenience, you may consider them as
banks. Just like you have a bank account to
keep your money, you have a Demat
account to keep your shares. Most of the
stockbrokers are also Depository
participants as well. So you need to open a
Demat account with the DP.

ℵ STEP – 2 – Application form and ASBA

46
ℵ You can generally find the application form
of the company with any broking house or
even at the street corner of a financial
market hub. Those who have trading
account with the brokers and trade online
will have an online access to place these

47
 orders. SEBI has introduced ASBA –
Application supported by blocked amount.
This means that the application money to
buy the shares does not get debited from
your account until the shares are issued.
Once you apply for the shares, a block is
put on the funds which you cannot withdraw.
Once the shares are issued, the amount is
debited and if the shares are not issued for
any reason the block is removed. So you do
not have to run-around for any refunds.

ℵ Step -3 – Allotment of shares, listing, and trading

• Allotment of made by the company on the
basis of certain rules formed by SEBI
• SEBI ensures every retail applicant gets
allotted a minimum bid lot, subject to
availability of shares in aggregate
• The rest is based on the proportion of the
number of shares applied
• If there is oversubscription, based on the
48
number of shares in the retail category, the
bidders shall be selected on basis of draw
of lots

49
 • Shares are then listed on the stock
exchange by the 12th day of close of the
issue and then trading starts. You may
hold the shares or sell it as per your
convenience.

Step By Step Practical Process to Buy or Sell Shares

and Derivatives in Secondary Market

A secondary market is a place where investors

can buy or sell shares, bonds and derivative
instruments that have already been issued by
the company or public institutions or the
government. The secondary market is also
called the aftermarket.

50
ℵ Step – 1 – Open a Demat account

51
ℵ Step – 2 – Open a trading account
To invest or trade in the secondary
market, one has to open a trading
account with a stockbroker. You cannot
buy or sell directly in the market; it has to
be through the stockbroker, also called
as the trading member. The Stockbroker
obtains registration from SEBI
(Securities and exchange board of India)
to ensure that they have a valid SEBI
registration number. There are largely
two exchanges on which you can buy or
sell the shares and bonds. They are the
National Stock Exchange (NSE) and
Bombay Stock Exchange (BSE). All the
stockbrokers get their SEBI registration
through the stock exchanges. Once you
open a trading account with the
stockbroker, you can start placing orders
either through telephone, by email, or by
visiting their branch. But these days’
people are internet savvy and for their
ease and convenience they can opt for
online trading through computer or

52
 mobile as well.

Caution
Unlike bank account opening forms that have
2 pages, the account opening form of the
trading and demat account is a booklet which
requires many signatures.
Do not sign blank on these forms. Read the
terms and conditions, understand them; ask
for doubts and only sign the forms. Also, in
case you choose not to opt for some services
or do not know how to use the internet, do not
leave blank spaces; do strike off those
particular details in the account opening form.
You are entitled to get a free copy of the
account opening form. Take your time to
understand fees/ charges etc. In Case you
wish to execute the power of attorney, please
understand it properly. Please do not opt for
electronic contract notes if you are not familiar
with computers. Ensure that you sign after
reading the voluntary clauses. Finally, ensure
that you fill the application form completely.

53
 Types of securities available for investment in
India

The securities market is a small part of the

entire financial market. Securities markets
would include but are not restricted to equity
markets, derivatives markets, currency
markets, bond markets etc. Securities market
is a place where securities are bought and
sold at prices that can be determined by
market forces.
Generally, we have heard people saying that if
you want handsome returns you must invest in
the securities market. Another spectrum of
investors will say that the securities market is
a gamble and it is risky. Let me tell you that
both of these facts are not true. Securities
market has a wide variety of investable
products with varying degrees of risks and
returns. Securities market has products that
are as safe as your savings account / fixed
deposits. On the other hand, you have very
high-risk products such as the derivative
market.
54
One thing is for sure that the securities market
is not a gamble at all. Equity markets are the
only place where all the participants can be
winners and earn wealth. It is not a zero-sum
game at all. If you have a view on anything i.e
the economy, the listed company, the

55
currency, etc; derivatives markets is a place
that provides you an opportunity to earn if you
have a view.
There are 2 main types of securities – Equity
and debt. Remember that the risk and returns
for each type of security vary. Both categories
have high to low-risk products and high to low
historical returns.

Equit Debt
y

Under Equity, we have

ℵ Equity shares - An equity share means
ownership of the shareholder to the extent
of money paid. The shareholder is entitled
to get any increase in share value, bonus,

56
dividends, and voting rights but has to
suffer losses if the company does not do
well.

57
ℵ Warrants - A warrant gives a person a right,
but not the obligation, to buy or sell a
security at a predetermined price
ℵ Mutual funds – A mutual funds collects
money on behalf of investors and invests in
securities. Investment can be done in any
of the securities or a combination of
securities for any tenure.
ℵ Exchange traded funds – An ETF is
basically a mutual fund that trades like a
share. Mutual funds can be bought and
sold at any time of the day but the value
you will get will be the day end price. They
do not fluctuate during the day like a share.
Shares on the other hand do not provide
the diversification and cost benefits. ETF
gives you both
ℵ Derivatives – It derives its price from
another underlying asset. It is a contract
between two parties to buy or sell
securities at predetermined prices. Here
the variety of products is endless.
Under Debt, we have

58
ℵ Government securities – It is a bond given
by the government with a promise to repay
you at maturity
ℵ Bonds – A bond is a debt instrument
wherein you loan money to a corporate or
government

ℵ Debentures - A debenture is also a debt

instrument wherein you loan money to a
corporate but it is not backed by any asset
whereas a bond is backed by a physical
asset.
ℵ Mutual fund - A mutual funds collects money
on behalf of investors and invests in
securities. Investment can be done in any
of the securities or a combination of
securities for any tenure
ℵ Security receipts - a receipt or security,
issued by a securitisation company to a
qualified institutional buyer pursuant to a
scheme, evidencing the purchase and
giving undivided right, title or interest in the
financial asset involved in the securitisation

59
Difference between a full-service broker and a discounted
service broker and which type of broking service suits you
better

In today’s world there

are two kinds of
brokers in the stock
markets and they are
full-service brokers
and discount brokers.
The name full-
service broker gives
you
a clue that they provide
a suite of all services you may require and
discounted brokers provide some important
services but charge less. So here is a full list
of details you need to know about them and
choose the one that fits your needs better.

Full-service Brokers
Brokera Brokerage is charged as a
ge % of turnover. Discount Brokers
Generally 0.1% to
0.5% of the turnover. 60
 Flat fee of Rs 10
to
Rs 20 per trade

Order Orders can be Orders can be

executi placed by offline placed only
on (telephone) and online online (mobile,
(mobile, app, trading app, trading
software) software)

Service Provides advisory Focuses mainly

services and research on trading
reports, research

calls,
recommendations,
funding,
etc
Branch Large number They do not
es of have many
branches in different branches.
cities.
Custom Physical presence Online
er of
61
service customer service presence of
customer service
Produc shares, Futures, shares,
ts to Options, Commodities,
trade currencies, mutual Futures, Options,
funds, IPOs, FDs, Commodities,
bonds, insurance, etc currencies,

mutual
funds, IPOs,
bonds
Accoun 3-in-1 Not available
t
type Account
(Saving+demat+trading
)
Suitabili Suitable for people Suitable for
ty who want advisory people who want
services, research to pay less
calls, personal touch, brokerage,
physical presence of
customer service, are are
not comfortable with comfortable
online trading and do
not have financial with online
advisor trading, have a
financial advisor
62
and do not worry
about physical
presence of
the broker

63
Basics of Fundamental analysis

Now, with most things set in place, the final

step you need to start trading is to analyze
your stocks through fundamental or technical
analysis.

Beginning with fundamental analysis, the main

aim of this analysis is to find out the intrinsic
value of the share or the bond which means to
see if the price of the stock or the bond in the
market is overpriced or under-priced. If the
stock is overpriced in the market then you will
sell the share or its future or the stock option
available in the market with the hope that the
share price will correct in the near term and
trade at lower price levels. If the stock is
under-priced in the market then you will buy
the share or its future or the stock option
available in the market with the hope that the
share price will increase in the near term and
trade at higher price levels.

There is no hard and fast rule to do

Fundamental analysis but everyone agrees
that there are some key components to doing
64
a good fundamental analysis that involves
many qualitative factors and quantitative
factors. From a top down approach, following
are the components

65
ℵ Economic forecast – Now, we all know that
if the economy of the country does well
then most of the sectors within the
economy and most of the companies within
the sectors will do well (barring
exceptions). So we must have a good idea
about the economy.

ℵ Interest Rates – Although there is no direct

co- relation between the stock markets and
the interest rates, there is definitely change
in the prices of the stocks due to change in
66
 interest rates.

ℵ Group selection – In every economy we

know that some sectors will do better than
other due to the
economic and political factors influencing
the sector.

ℵ Company selection – Some companies

have the great vision and better leaders
who foresee changing trends and
revolutionize the way the industry works.
We need to choose those types of
companies.

ℵ Business Plan - The business plan, model

or concept of the company you wish to
invest in must be sustainable for a long
period of time. We need to ask if the
business makes sense? Is it feasible? Is
there a market? Can a profit be made?
ℵ Management - To lead the business the
company must have top-quality
management who have a great track
record and are honest people. You must
judge their capabilities, strengths, and
weaknesses to see if they are the right
67
 people with the right mind-set and
leadership capacities that can run the
company.

ℵ Financial Analysis – The step will provide

you the means to calculate the intrinsic
value of the security. Ratios like Earnings
per Share, Price to Earnings Ratio,
Projected Earnings Growth, Price to Sales
ratio, Price to Book ratio, Dividend
Payout Ratio, Dividend Yield, Book Value,
Return on Equity, etc.

Do remember that this list is only inclusive and

not an exclusive list but this will lay a great
foundation for your foray into the stock
markets.

68
 Basics of Technical analysis

Another method of investing is technical

analysis. Technical Analysis is forecasting the
price of a share based on the examination of
previous price movements. Technical analysis
does not provide you with the exact future
price of the stock but it provides you the likely
price of the future price of the stock. Technical
analysis uses a wide variety of charts that
show price over time. Technical analysis can
be done for shares, indices, commodities,
futures, etc where price is subjected to the
forces of supply and demand.

The Dow Theory laid down the foundations of

modern technical analysis. Three theorems of
Dow stood out which are Price Discounts
Everything, Price Movements are not totally
random, “What” Is more important than “Why”.
A large part of the macroeconomic analysis that
we discussed during the fundamentals remains
constant for technical analysis as well. Once the
analysis gets down to the micro level of determining
the future price movement, that is when we do the
technical analysis.
69
he three important technical indicators to identify market
trends and predict future stock prices are charts,
moving averages and momentum indicators.

70
 CH
MO

MOMEN

ℵ Charts - Price and volume

charts are the most used

Technical Analysis
tools for technical analysis. A volume chart
shows the number of shares of a company
that were traded during the day. For the
purpose of technical analysis, you can
select a traditional line graph or a bar chart
or a candlestick chart. Charts are used
together with trend lines. Trend lines give
you a likely movement of a stock price.

ℵ Moving averages - They are calculated to

remove any sharp fluctuations in the price
of the stock chart and eliminate outliers, if
any. To make a smooth trend line an
average of a few days price is calculated

71
 like a five day moving average pattern etc.
This kind of moving average is called a
simple moving average (SMA). We can
also use exponential moving average
(EMA) or linear weighted average (LWA).
ℵ Momentum indicators - These are
statistical figures that are calculated based
on price and volume data of stocks. They
act as supporting tools to charts and
moving averages. After you have formed
an opinion about a stock price, you can
further use the momentum indicator to re-
check your analysis. Some momentum
indicators are leading indicators and others
are lagging indicators.
With this we have covered the very basics of
technical analysis. So, now you may take a
gauge of which type of analysis suits you
better, then study about them in depth and
then venture into the world of investing.

72
 Conclusion

Inflation and our mind-set to live a better

standard of living are the main triggers that
push us to invest. With physical assets
providing negative or low returns, investing in
financial assets has become imperative. With
the help of an investment advisor, our
willingness to take risks and get better returns
make investing in stock markets become a
natural choice. Wisely select a stockbroker,
open trading and demat accounts and be
careful of the traps that you may fall in. Armed
with the knowledge of fundamental and
technical analysis you are ready to embark on
the journey of making your financial dreams
come true.

!!! HAPPY INVESTING!!!

73
Top Articles from Gale.in

74
 How not to use intuition in stock market
decisions?

Simple algorithms are invariably better at

predictions than humans, whether it is health
diagnosis, the weather or workplace
performance. Would it be any different for
stock investment analysis?

A percentage of professional investors find it

hard to believe that an algorithmic system can
be a better predictor than years of investing
experience. Sometimes this may seem true,
but in the long run, the intuition system will
have more failures than the algorithm system.

Of course, investors will have to make

decisions along the way, as algorithms cannot
predict the changes in circumstances or
events outside the stock market that may
influence investor or even company decisions.

The biggest plus for not using intuition in stock

market decisions is that using an algorithm-

75
based approach takes all the emotion out of
the equation. Emotions play a part in every
aspect of our lives, so why should investing be
any different? It is no different when it comes
to investing in the stock market, but if you take
a rule-based approach using computer models
and algorithms then you relieve yourself
from making decisions under stressful
situations.

Taking emotions or intuition out of the process

of stock market investing will always be the
correct approach because most of the time it
is hard to see past our inbuilt

76
biases. This would be idealistic but
unfortunately, as humans, we bring emotion
into everything we do. The best advice that
can be offered in this argument would be to
look at the model predictions and then look at
the information that your intuition is telling you
and try to decide somewhere logically in the
middle.

Misplaced priorities can be the biggest

downside of using intuition in stock market
decisions. Humans invariably put more time
and effort into making small decisions and less
time and effort in the big decisions. Don’t buy
shares just because a friend or relative has
made a lot of money on those shares in the
past. Humans are overconfident and tend to
place too much bearing on the value of our
opinions compared to friends and
acquaintances. This is a form of intuition which
at best is misguided. You may be lucky and
have a win on the stock market this way but in
the long term, it will be a costly exercise. You
should have simple rules that you use for
investing, for example, buy when the stock
price is low, not because I like the company or
sell the stock when it exceeds a price that I
77
think is above its value.

Quite a lot has been written about the intuitive

powers of investment experts. The intuition of
experts is useless. Most of the time the
expert’s intuition is just plain expensive
guesswork, but backed by years of experience
can be successful, but not as often as a
computer model. If you want to invest in the
stock market, you should simply invest in
index fund stocks rather than follow the
intuition of an expert.

78
The stock market just by its very nature is
unpredictable. Algorithmic models can usually
be correct, but even a computer model will get
things wrong occasionally. Intuition can be just
as fickle because as humans we can only look
to the past for guidance and then guess what
may happen given a certain set of
circumstances. It is the same for an algorithm,
if this happens, then do that is the simplest
form of this. The difference is that algorithms
perform these tasks without emotion. In the
long term, this will save you money and
hopefully make you money as well, but who
knows, it is all guesswork.

79
80
 SCAMS THAT RATTLE THE INDIAN
STOCK MARKET

SCAMS THAT RATTLE THE INDIAN STOCK

MARKET Photo by Got Credit

Many Indians have begun to invest in

securities of business enterprises and
companies, with the aim of making profit.
Investing in securities such as stocks, bonds,
future etc is good as one can get to make a
living from it. However, there are times when
investing in such securities can go all wrong.
An example is the case stock exchange scam.
There are various scams in the Indian stock
81
market that have led various investors to lose
their money. Most of these scams are
common, yet people still fall prey to them.
Some of these scams that rattle the Indian
stock market include:

82
1. Tips and recommendation fraud: This is a
very common scam that rattles the Indian
stock market. Fraudsters try to attract
investors and traders by convincing them
that they are able to provide a profit of up to
10% per day and 40% per month.
Furthermore, they assure investors that they
would provide more than 90% accuracy on
tips and recommendations. One should take
note that it is quite infeasible for profit of
40% to be made in a month constantly.
Even Warren Buffet, who was a legendary
investor, only had 22% profit in a year and
was still among the richest persons in the
world.

The fraudsters also claim that they have

provided at least 40% return to their previous
clients. When investors demand for trial tips
before they subscribe to the tips and
recommendation program, they agree to it
easily. Most people that try out the trials
usually fall victim to the fraudsters. It should
be noted that the trial tips provided by the
fraudsters are usually accurate. This is to win
the assurance of the victims, hence making
them susceptible to their ploy. Victims would
83
later pay a high amount of money for the tips
and recommendations and later receive tips
that work nothing.

2. Pump and dump: This is a kind of fraud

whereby fraudsters try to increase the price
of micro cap stocks by feeding investors and
traders with wrong information. By feeding
investors with fake news, they try to inflate
the price of the stocks. The fraudsters would
purchase cheap penny stock in large
volumes. Afterwards, they would send
misleading messages to various investors
recommending them to purchase the stocks.
People

84
 begin to buy the stocks and because of the
high demand of the stocks, the price of the
stocks would increase. When the price of
the shares has gotten to a good price, the
fraudsters would sell their stocks and make
good money.

The fraudsters would stop sending misleading

messages after they have sold their stocks at
high prices.

3. Fake message in the name of brokers:

Many investors in India invest in stocks
upon the advice and recommendations of
brokers. Most investors do not do research
on the stocks as they blindly believe every
recommendation given to them. Fraudsters
realize this and send recommendations as
brokers to people, telling them to purchase
a particular stock. Due to the fact that the
recommendation is false, stock prices would
begin to fall and investors would lose
money.

Why do fraudsters send fake messages?

Beforehand, the fraudsters would send

85
recommendations to their paid subscribers to
purchase the same stock. Then they would try
to increase the prices of stocks by sending
misleading messages as brokers. When the
price of stock begins to increase, they would
suggest to their paid subscribers to sell their
stocks and receive good returns. The paid
subscribers would be satisfied with the
recommendation and continue with the
subscription. In the end, retail investors would
lose their money for following the fake
recommendations.

86
 How can I master the skill to predict the behavior
of the Indian stock market?

Short Answer: Technical Analysis.

Technical Analysis is the study of Market

Psychology. Market Prices are governed by
Greed and Fear. Most of the retail investors
are eaten up in the market due to greed and
fear.

87
You get a buy call on Breakout, but you will
not know to exit the stock on reversal before
the target is met. Sometimes you tend to sell
the stock very early out of fear.

88
When the market falls for 2 or 3 days, retail
investors sell off in panic just to watch the
market recover on the next day.

Learn Technical analysis and understand

candlesticks and indicators. Learn about
support and resistance, Learn about reversals
on support and resistance. Learn about
breakouts and Breakdowns. Learn to buy on
dips, learn to book profits on rallies. learn to
place the right stop-loss. Learn to manage
risk.

There is no need to master a special skill to

predict the market movement. Just learn to
understand the Technical charts and put
proper risk management in place.

“History will always repeat itself.”

89
90
Do you regret selling any stock?

Back in 2013, I was a half knowledge investor.

I had purchased TVS Motors at 32 and sold

some at 50, some at 70, some at 90. It’s near
600 now. (2000%)

I had purchased Ashok Leyland at 13 and

Sold at 19. It’s above 100 now.

I had purchased Aurobindo Pharma at 190 (95

post bonus 1:1), Sold at 30% profits. It peaked
near 900.

Gabriel was near 17 Rs. Sold at 50% profits. It

is now near 166.

In stocks, experience gained is more valuable than

profits.

Moral: Just don’t sell quality stocks until its

fundamentals really change. There is no peak
or bottom for a stock. Each stock has a value
based on its fundamentals.

91
92
 Basic tips on Stock market for retail investors. All
stocks that go down will not be coming back and vise-
versa.

A member had asked a question,

How do people lose money in the stock

market? If I buy stocks today, and after some
days the value of stocks goes low, then I can
wait for some more time until stocks go up.
What is the thing that makes people lose
money ?

Stock market is not a water tank, where the

level of water goes up and down when the
pump is on and while the water is used
respectively.

It is a demand for a portion of the business a

company does.

The value of the stock (PE, price to earnings

per share) is fixed based on numbers like BV
(Book Value), Profitability Ratio (like Margins,
Return on Capital Employed), Debt to Equity
ratio, etc and also has factors like the
industrial outlook in the future, the pricing

93
power, etc

The above arbitrary PE multiplied by the EPS

is the value of the stock. EPS is derived from
the quarterly results (profits/equity capital).

Let’s give an example:

Bhansali Engg:

94
Industrial P/E = 25.

EPS in the year 2014: 0.09

Fair value in 2014= 25×0.09 = 2.25

EPS in the year 2015: 0.33

Fair Value in 2015= 25×0.33= 8.25

EPS in the year 2016: 1.01

Fair Value in 2016= 25×1.01= 25

EPS in the year: 2017: 2.1

Fair Value in 2017= 25×2.1= 50

Do you think when you buy the stock in 2014

at 2.25, you can sell it now at 50 and buy back
when it goes to 2.25? No, the stock will never
go back to even 25.

Going through quarterly

results, EPS for Q4=

95
0.91

Suppose the company can post an EPS of

0.91 in all four of its upcoming quarters. The
EPS becomes 3.6.
Then the fair value of the stock in one year is
3.6 x 25 = 90. I had recommended buying
Bhansali Engg on June 5th.

96
Strong set of numbers from Bhansali Engg.
Buy at 40 & dips. Tgt 50. SL 35.

Target was hit in 4 days.

The stock is trading above 200 as on 10 th January

2018.

Sometimes such good companies create a

demand in the stock. The fair value in the
future can be attained in the short term. If the
stock reaches the value of 90 in 3 months, the
PE Ratio spikes to 45 from 25, then profits can
be booked and bought once PE Ratio corrects
to 30 and 25. We know the PE Ratio will drop
due to good results, still it is the gamble that
people take in the large capital stocks.

If the earnings are not as per expected the

stock will dip. If the stock is not performing for
life or if it is performing for life we ‘re never
going to see the stock prices again.

Penny stocks are not going back to 100s,

Penny stocks that have gone to 100s are not
going to come back.

97
Every quarterly result is important. Most of the
stocks will never see a new 52 week low and
some will never see a new 52 week high again
in life.

However, Performance matters.

98
 What’s this Ichimoku technique people are
talking about nowadays?

Ichimoku Technique is a kind of candlestick

indicator that helps in finding future support, trend
change, short term support, medium term support,
pullback and breakout.
There are few indicators in the charts whose
names are confusing and the way they are formed
are not much important if you have the indicator
and understand what they signify. You will break
your head understanding it for long hours and
even days.
I will try to explain the Ichimoku technique in less
than 15 mins with an example.

99
100
The below chart is the Latest NIFTY 15 mins
chart (15 mins chart for Short term traders) . It
has an Ichimoku Indicator overlayed on it.

There are 3 lines and a cloud in Ichimoku system:

1. Blueline (Short term support indicator): You
can find that the NIFTY is finding short term
support on this line.
2. Redline (Medium Term Support Indicator):
Redline is a medium term support indicator and
has lots of significance. If Redline is trending up
then the stock is bullish. If the Redline is facing
down, the stock is bearish. If the Redline is
straight for a while, It acts as a magnet to the
stock. Stock will be pulled to the Redline.
3. Greenline (Breakout Indicator): Greenline is
101
Breakout Indicator and it lags 14–21 sessions
on charts. You can see the greenline is running
one day late. If the Greenline is moving away
from the candle sticks into a fresh blank zone, it

102
 indicates breakout. If it moves down, it's a
breakdown indication. If it moves up, it's an
upside breakout Indicator. An upside Breakout
is shown the image above with a light green
arrow, Breakout is seen in 3 different places on
the chart but at the same price and time.
4. Cloud (Future support and resistance
cloud): We have seen that the Greenline lags
in the charts, Here The cloud leads in the chart
by 14–21 sessions. If the cloud is green, the
Stock is bullish and If the cloud is red, the stock
is Bearish. Cloud twist or the color change
indicate change in trend. Cloud provides strong
support to the stock. If the stock breaks past
the cloud, it indicates Stop Loss has been hit
and fresh trend reversal is happening.
You can see in the above charts, a Cloud twist,
Greenline breakout and Candlestick breakout
from the cloud around 10110. NIFTY has rallied
150 points since then. (Breakouts are indicated in
Light Green color.)

103
104
Example 2:
Another example to show Breakdown that was
happening in NIFTY at 10350 on 29th November
2017. NIFTY has corrected 300 points after the
breakdown.

Note: All the lines and clouds are formed based

on some formula of averages of highs and lows of
the last few candles.
I personally use Tradingview for technical charts.
(It’s free for End of Day analysis.)
Above charts are from Livestock, index, futures,
Forex and Bitcoin charts on TradingView with
Ichimoku indicator laid on 15 mins charts of
NIFTY.

105
To learn the depth of Ichimoku lines and clouds,
you can always buy this book from Amazon.How
to Make Money Trading the Ichimoku System.

106
Priority Exclusive Content

107
108
[Priority Exclusive] Understanding
Sector leaders and Building a
portfolio.

There is a common Myth in the stock market that

the bigger known brands with larger Market
Capital are the sector leaders and most of the
retail investors build a portfolio with such stocks
such as MRF, TCS, Infosys, Bata, HUL, SBI,
ICICI Bank, etc. I am not here to say it’s wrong. I
am here to say it can be done better. There are
lots of smaller stocks in the sector with better
fundamentals and better future outlook; there are
stocks in which the management is so good that
they care about investors.
Stocks with Better Margins and Growth in the
sector are the best bets.
I will try to explain it today with an example from Tyre
Space.
If you are to invest in the leader of Tyre space,
which stock will you choose?
Most of them will be named MRF. Stock has given
approx. 800% in the last 7-8 years.

109
If I say there is a stock in Tyre space that has
given approx. 1300% in the last 7-8 years!
Yes, it's Balkrishna Industries.

110
Comparing Returns from Balkrishna Ind and MRF over
a Period
of 7-8 years.

Basic fundamentals of Balkrishna Ind. You can

see its PE is trading with a
Premium to its Industrial

111
Average.

112
Profitability Ratio of Balkrishna Ind. Stunning
Margins in FY17. The company is gradually
reducing Debt to Equity ratio.

Valuation ratio is currently okay, little on the

higher side. You can see EV/EBITDA, Earning
Yield and Price to book at its best until FY17.

Find the best stocks within a sector by sorting it

113
out with Higher Margin%.

Then Check for

 PE closer to Industrial Average PE,

 Book value below 4 or lesser than its peers,

 any dividend% other than zero,

 Return on Networth/Equity and Return on
Capital Employed more than 15% or better
than its peers,
 Debt to Equity lesser than 2.

 EV/EBITDA Less than 8 or better than its peers.

 Earnings Yield above 0.07.

 Market cap above 200 Crores.

This article is not to recommend a buy in

Balkrishna Ind, it is to educate you to find the best
stock in a sector by finding stocks with better
margins% and good volume growth.
However, the stock had return close to 50% since
this article was published (as on First week of
January 2018)

114
 How to pick Stocks for maximum returns in the
Indian Stock market?

Make a portfolio of certain stocks with the

following criteria:

Stock must be in the top 3 Margin% in its

industry. (Stocks having strong margins are
the industrial leaders with demand for
investment.)

Stock must be in the top 3 ROCE/ROE in its

industry. (Stocks with better ROCE/ROE are
the stocks with best management and can
help investors with Good returns.)

Stock must have a low PE ratio in its industry.

(Stock with low PE ratio is not priced-in the
future returns of the company, more chances
to find quality investors and have more
chances to post multibagger returns on quality
results.)

Stock must have a low Price to Book in its

industry. (P/B is one of the evaluation factors
to identify if the stock has run up too much in
recent times. Avoid P/B above 10–12)
115
Stock must have low EV/EBITA (Stock given
multibagger returns in a short span will have
this value higher. Less the value, more space
the stock has to rally in the near future. Avoid
EV/EBITA above 20.)

The above Portfolio will give you maximum returns.

116
There are 3 phases in a stock’s multibagger rally.

 Rally to cover basic EPS of the share.

 Rally to cover the Next one year EPS of the
share.
 Rally to cover the next 3 years EPS of the
share.

Let me explain in Brief,

Let us assume a stock is trading at 120,

Industrial PE: 12 and EPS over last 4 quarters
as Rs. 3 each quarter. Annual EPS is 12.

Current Trailing PE is 120/12= 10 which is

cheaper compared to Industry. Stock can
rally 20%.

Once quarterly results come with an EPS of

4. Then Trailing EPS becomes 13.

Current Trailing PE becomes 120/13= 9.23.

Which is cheaper compared to other Stocks in
the industry with an upside of 30%.

Some investors think what if the stock can

post the same results for next 3 quarters with
117
EPS of 4 per quarter. Then Annual EPS
becomes 16.

PE after 9 months becomes= 120/16 = 7.5.

Which is cheaper compared to the industrial
PE of 12 and has an upside of 60%.

After 3 months:

If the results show growth in sales, profits and

EPS for the quarter is posted at 5.

PE for the annualized EPS of 5 become=

120/20=6. Which is cheaper to its industry and
has 100% upside.

Just in the 4th month, the stock has 100% upside.

This is how our stock picks like Bhansali Engg,

Sanwaria Agro, etc rallied more than 300%.

So, where should you invest? You should

invest in a fundamentally good stock where it
already has a 20% upside compared to the
industry.

We have done such research and have made

a list of stocks in our Priority list and are
118
making efforts to add at-least 2-3 such stocks
every month to our Priority list.

Our Priority Stocks are up at an average of

30% while the NIFTY is up just 7% and the
Small cap is up only 15%.

119
Services and offers from Gale.in

120
 Offers on Demat & Trading account:

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opening fee
from Gale.in, Cashback after account opening.)
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121
This book is Version 2018 Revision
0 (v2018r0). You can kindly email
your inputs to improve the book to
admin@gale.in.

122