FUNDAMENTAL ANALYSIS

FUNDAMENTAL ANALYSIS  Fundamental Analysis consists of 1. 3. Economic Analysis Industry Analysis Company Analysis . 2.

2. Forex Reserves & Exchange Rates Monsoon and Agriculture Budget. 11. 3. 4. 5. 10. 9. Gross Domestic Product (GDP) growth Industrial Growth Rate Savings & Investment Infrastructure Demographic Factors Price Level & Inflation Interest Rates Foreign Investment Tax Structure Balance of Payment. 8. 6. 12.ECONOMIC ANALYSIS Commonly analysed factors are: 1. 7. Policies and Regulatory framework .

the bank rate.  Supply Side Policies . CRR & SLR norms for banks.Government Policies  Fiscal Policy  Fiscal policy is concerned with government spending and tax initiatives Monetary policy is concerned with making changes in the supply of money in the economy. direct credit controls.   Monetary Policy  Tools for influencing money supply are interest rates. open market operations.

Economic Analysis Economic Forecasting  Economic Indicators   Leading Indicators (capital investment. business profits. interest rate.) Coincidental Indicators  Lagging Indicators   Diffusion Index . etc. money supply.

Washing machines. independent of business cycle. Good growth during boom period and slack during depression (Eg. Expansion depends on technological change. Eg. IT industry Growth and profitablility of the industry move along the business cycle.) Defies movement of business cycle. They expand and earn income during depression also. Automobile industry – stagnation but grow tremendously with new technology Cyclical Industry Defensive Industry Cyclical growth Industry . Eg. Eg.INDUSTRY ANALYSIS Types of Industry Growth Industry High earnings rate and growth in expansion. etc. Fridge. Food and shelter industries Industry is cyclical and at the same time growing.

INDUSTRY ANALYSIS Industry Life Cycle Stage Pioneering Stage Rapid Growth Stage Maturity and stabilisation stage Declining stage Features / Characteristics New Technology. changes in consumer preferences Disinvest when decline signs are evident . Many Entrepreneurs. Chaotic Competition. growth in sales and profits which is above average Invest ? Utmost Caution Expand investment and respond quickly Stability in growth rates and Moderate comparable to economy growth rates Satiation in demand. new products. Survival of fittest Orderly growth.

9. Structure of the Industry The number of firms in the industry Entry barriers. 2. 11. 7. 6. 3. 2. 12. . Nature of Product. price appeal and functional performance Major customers and their demand Degree of cyclicality of demand Bargaining power of buyers Expected rate of growth Market share of the top few Pricing policies Degree of Competition from domestic and foreign players Threat of new entrants Rivalry between existing firms Pressure from substitute products 5. 8. 13. 4.INDUSTRY ANALYSIS  1.  1. Demand and Competition Degree of homogeneity or differentiation among products Availability of raw materials and other inputs Bargaining power of suppliers Comparison of the product of the industry with substitutes in terms of quality. 14. 10. if any Policies of the Govt. 3.

INDUSTRY ANALYSIS  Cost. 3. . 4. 4. 2. labour utilities and fuel Productivity of labour Inventory turnover. earning power Degree of technological stability Important technological changes in the horizon and their implications R & D outlays as a percentage of industry sales Proportion o sales growth attributable to new products  Technology & Research 1. Receivables turnover and Fixed Assets turnover Control over prices of outputs and input Behaviour of prices of inputs and outputs in response to inflationary pressures GP. materials. NP and Operating Profit Return on Assets. viz. Proportions of key cost elements. 2. ROE. 6. 7. Efficiency and Profitability 1.. 3. 5.

INDUSTRY ANALYSIS SWOT Analysis An analysis of the Strengths of the Industry the Weaknesses of the Industry Opportunities before the Industry the Threats faced by the Industry the .

COMPANY ANALYSIS  Study of Financials  Study of Other Factors .

DP Ratio. etc.COMPANY ANALYSIS Study of Financials Return on Equity (ROE. Price to Book Value)  . DPS.)  Risk (Beta. EPS. etc)  Valuation (PE Ratio. Volatility of Return on Equity.

COMPANY ANALYSIS         Study of Other Factors Evaluation of Management Human Resource & Personnel Availability and Cost of Inputs Order Position Technological and Production Capabilities Marketing & Distribution Competitiveness Product Portfolio .