5/5/12

Technical Analysis of Automobile Sector
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know the movements (upward or downward) of stock prices of selected company stocks through Technical analysis.5/5/12 Objectives & Scope of the Study OBJECTIVES  To analyze tools of technical analysis can be used in forecasting stock prices.  To  To  To SCOPE . know how best we can utilize these analyses to meet the financial goals. find out expected rate of return using CAPM model.

can’t predict the prices of the stocks for long term. study depends more on secondary data rather then on primary data.  The  We  This   . technical analysis can’t be applicable to newly listed companies shares.5/5/12 Limitations of the Study  Analysis tools. involves using of limited technical  The study is restricted only to five selected stocks.

     Bajaj Auto limited Hero Honda Motors limited Maruti Udyog limited TVS Motors Company limited Tata Motors limited Chart patterns  Line charts candlestick chart  Japanese .5/5/12 The stocks so selected are as follows.

5/5/12 DOW THEORY  Ripple  Wave  Tide Primary Phases of Movements .

To Calculate the MACD subtract the 26day EMA from a 12-day EMA. There are 3 common methods to interpret the MACD:  Crossover  Divergence  Overbought/Oversold . the “MACD” is a trend following. momentum indicator that shows the relationship between two moving averages of prices. A 9-day dotted EMA of the MACD called the signal line is then plotted on top of the MACD.5/5/12 MACD Common.

1    ROC   . The ROC has to be used along with price chart.5/5/12 ROC – Rate of Change Indicator  It is a very popular oscillator which measures the rate of change of the current price as compared to the price a certain number of days or weeks back. = (Current Price / Price ‘n’ period ago) . The buying and selling signals indicated by the ROC should also be confirmed by the price chart.

When the RSI is in the oversold region. It is one of the powerful and popular indicators. It also shows the strength and weakness of a particular scrip or market. which identifies overbought and oversold market conditions along with the signals of buying and selling opportunities in the market. If the RSI is rising in the overbought zone.5/5/12 RSI  Relative strength index was developed by Wells Wilder. Divergence indicates the turning point of the market. If the share price is falling and RSI is rising. . it would indicate the downfall of the price. a divergence is said to have occurred. it generates the buy signal.

5/5/12 Findings 1. BAJAJ AUTO LIMITED TECHNICAL INDICATOR MACD RSI ROC BUY SIGNAL SELLING SIGNAL March May January &April February February &January & April May 2. TECHNICAL INDICATOR MACD RSI ROC BUY SIGNAL SELLING SIGNAL April January February April April January . HERO HONDA MOTORS LTD.

3. TVS MOTOR COMPANY TECHNICAL INDICATOR MACD RSI ROC BUY SIGNAL Mar Jan. TATA MOTORS LTD. May 5/5/12 4. May 5. Feb Feb SELLING SIGNAL May Apr. TECHNICAL INDICATOR MACD RSI ROC BUY SIGNAL SELLING SIGNAL April May Jan & Feb Mar. Apr Jan. TECHNICAL INDICATOR MACD RSI ROC BUY SIGNAL SELLING SIGNAL March April February April February April . MARUTI UDYOG LTD.

5/5/12 CAPM Model • Capital asset pricing model (CAPM) allows for the calculation of the required rate of return for any risky asset based on the security’s beta  An asset’s covariance with the market portfolio is the relevant risk measure (helps in beta calculation) can be used to determine an appropriate required rate of return on a risky asset  This .

5/5/12 Determining the Expected Return E(R i ) = RFR + β i (R M .RFR)  The expected rate of return of a risk asset is determined by the RFR plus a risk premium for the individual asset risk premium is determined by the systematic risk of the asset (beta) and the prevailing market risk premium (RM-RFR)  The .

graphical version of CAPM is Security Market Line.  The .5/5/12 The Security Market Line (SML)  The CAPM model is linear and when plotted on a graph paper gives a straight line called SML.

90524100 0.1298848 97 7%   11.42% BETA Expected Market Return Risk Free Rate   Expected rate of return of stock 0.07     Expected rate of return of stock 12.9236516 BETA Expected Market return Risk free rate   Expected rate of return of stock 0.6673765 24 0.71% •TVS Motors Beta Expected Market Return Risk Free Rate   Expected rate of return of stock 0.77% Expected rate of return of stock •Bajaj 15.12988 7.0% Beta 0.00% .53% 0.1298849 Risk Free Rate 0.12988489 7%   10.45494 0.5/5/12 Findings from CAPM model applied on the stocks of Automobile sector •Tata Motots •Maruti •HERO HONDA BETA Expected Market Return Risk Free Rate 1.12988489 7 7%   12.62873352 Market Return 0.

5/5/12 Thank You .

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