CONTENTS

• RELATIVE VALUATION MODELS

• TECHNICAL ANALYSIS
• PRICE INDICATORS
• VOLUME INDICATORS
RELATIVE VALUATION
MODELS
R E L AT I V E VA L U AT I O N M O D E L S A R E U S E D B Y I N V E S TO R S A N D
A N A LY S T S TO D E T E R M I N E T H E VA L U E O F A C O M PA N Y B Y
C O M PA R I N G I T TO S I M I L A R C O M PA N I E S O R I N D U S T R Y B E N C H M A R K S .
Two commonly used relative valuation metrics are the Price-to-Earnings (P/E) ratio and the
Book Value to Market Value ratio .
PR I C E -TO - E A R NI NG S ( P/ E )
R ATI O :
• The P/E ratio compares a company's
stock price to its earnings per share
(EPS). It indicates how much investors
are willing to pay for each dollar of a
company's earnings.
• P/E Ratio = Stock Price / Earnings per
Share
• A high P/E ratio may suggest that
investors expect higher earnings growth
in the future, while a low P/E ratio may
indicate the stock is undervalued or that
there are concerns about future growth
prospects.
B O O K VA L U E TO M A R K E T
VA L U E R ATI O :
• The book value represents the net asset value
of a company, which is calculated by
subtracting liabilities from assets on the
balance sheet.
• Market value is the current market
capitalization of the company, calculated by
multiplying the current stock price by the
total number of shares outstanding.
• Book Value to Market Value Ratio = Book
Value of Equity / Market Value of Equity
• A ratio greater than 1 suggests that the
market values the company more than its net
assets (book value), indicating investor
confidence in future growth or intangible
assets not captured in the book value. A ratio
less than 1 might indicate potential
undervaluation
 EXAMPLE

• Company A has a P/E ratio of 20, while its industry peers have an average
P/E ratio of 15. This might indicate that Company A is relatively more
expensive compared to its peers.
• If Company B has a Book Value to Market Value ratio of 1.5, while similar
companies have an average ratio of 1.2, it might suggest that investors
are willing to pay a premium for Company B's assets or growth prospects.
• However, it's essential to consider other factors beyond these ratios, such
as growth prospects, industry trends, management quality, and
economic conditions, to make a comprehensive assessment of a
company's value. These ratios serve as initial indicators and should be
used in conjunction with other valuation methods for a more accurate
evaluation.
TECHNICAL ANALYSIS
T E CHNI CA L ANA LYS I S I S A F O R M O F M A R K E T A N A LYS I S T HAT
U S ES PR ICE A ND VO L U M E D ATA , D I S PL AYE D O N CHA R T S ,
W HI CH AR E U SE D TO M A K E I N V E S T M E N T D E CI S I O N S .
• The Price is the value at which the market is traded,
and The Volume is the total number of units in
market are traded in a given period of time.
• The objective of technical analysis is to find the
market trend and how long the market trend will
continue in order make right investment decision.
ASSUMPTIONS OF TECHNICAL ANALYSIS

• Price Discounts Everything :- Technical analyst maintain that any

fundamental information relevant to a given financial market, known or
rumored, is already factored into the underlying price.
• Price Moves in Trend :- Technical analysts also maintain that price changes
are not random. Instead, they follow a given trend, which can be either
uptrend or down trend, following identifiable patterns that tend to repeat
over time.
• History Repeats Itself :- The basic idea in technical analysis is that history
will always repeat itself, be it in the short term or long term. For this
reason, technical analysts spend most of their time trying to understand
past price movements to try and accurately predict future price
movements.
Difference Between Technical and Fundamental Analysis
Fundamental Analysis
 In this value calculated using
Definition various economic factor.
 Economic reports, news, industry
Data From
statistics
 In this when price falls
Asset bought/sold below/above intrinsic value.
 Usually long term positional
trader.
Trader Type
 It is weekly/monthly/yearly
holding.
Asset Holding Period
 Report expectation vs actual
outcome, current news event
compared to historical events
Concept Utilisation
Technical Analysis
 It uses price and volume on charts
to predict future price
movements.
 Chart analysis using trend lines,
support and resistance , indicators
 In this when a trader sees a high
probability setup which can give
profits in future.
 Swing or Intraday trader
 In this traders square off their
positions within
minutes/hours/days/weeks.
 Trendlines, support and resistance
, technical indicators, price
patterns
PRICE INDICATORS

I N T E CHNICA L A N A LYS I S , PR I CE I N D I CATO R S A R E TO O L S T HAT

T R A D ER S A ND A N A LY S T S U S E TO A N A LYZ E HI S TO R I CA L PR I CE
D ATA A ND ID ENT I F Y POT E N T I A L T R E N D S O R R E V E R S A L S I N T HE
M A R K E T.
 DOW THEORY
• The Dow Theory is a foundational principle in
technical analysis of financial markets, particularly in
stock trading. It was developed by Charles H. Dow,
who, along with Edward Jones, founded Dow Jones
& Company and started the Wall Street Journal.
• The market discounts all available information.
• The Market Has Three Movements
• The Primary Trend Has Three Phases
• Indexes Must Confirm Each Other
• Volume Should Confirm the Trend
• A Trend Is Assumed to Be in Effect Until It Gives
Definite Signals that It Has Reversed
ADVANCES AND DECLINES

The advance/decline index is a

market breadth indicator that
represents the cumulative
difference between the number of
advancing and declining stocks
within a given index. A rising A/D
index value suggests that the
market is gaining momentum
, whereas a falling value suggests
that the market may be losing
momentum
NEW HIGHS AND LOW S

New highs and lows are important

price indicators that can be used to
identify potential trend changes in
the market. A new high occurs
when a security's price reaches its
highest level in a specified period of
time, while a new low occurs when
the price reaches its lowest level in
the same period
 CIRCUIT FILTERS

• In financial markets, a circuit filter, also known as a circuit breaker, is a

mechanism used to prevent excessive volatility and sharp price
movements. Circuit filters are implemented to temporarily halt or
restrict trading in a security or market if prices move beyond a
predefined threshold. These thresholds are set by exchanges or
regulatory bodies to maintain market stability and prevent panic
selling or buying.
VOLUME INDICATORS

VO L U M E I N D I C ATO R S I N D I C AT E T H E P E R C E P T I O N O F I N V E S TO R S
A B O U T A S P E C I F I C S TO C K B Y M E A S U R I N G T H E N U M B E R O F T R A D E R S
T H AT A R E I N T E R E S T E D I N B U Y I N G O R S E L L I N G I T AT A G I V E N P O I N T.
COMMON VOLUME INDICATORS USED IN
TECHNICAL ANALYSIS INCLUDE
• On-Balance Volume (OBV)
• Chaikin Money Flow (CMF)
• Accumulation/Distribution Line
• Volume Price Trend (VPT)
• Money Flow Index (MFI)
• Relative Volume
• Up/Down Volume Ratio
 DOW THEORY

• It focuses on market trends and provides insights into market

movements
• It is a helpful tool for determining the relative strength of the stock
market.
• The movements of the market are divided into three classifications,
all going at the same time; the primary movement, the secondary
movement, and the daily fluctuations.
• Here, An increase in trading volume during an uptrend suggests
strong buying interest, confirming the trend's strength
• Conversely, rising volume in a downtrend indicates strong selling,
reinforcing the downtrend.
• In summary, Dow Theory suggests that price movements should be
confirmed by corresponding changes in trading volume for a more
reliable analysis of market trends
THANK YOU