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CERTIFICATE
This is to certify that the project entitled INVESTMENT IN EQUITIESIN CD EQUISEARCH LTD submitted to the OU in partial fulfillment for the award of degree of Master of Business Administration has been carried out by MR.S.RAMPRASAD, HallTicket Number 2122-10-672-095 who is a bonafide student of AURORAS MANAGEMENT AND RESEARCH INSTITUTE, HYDERABAD .for the academic year 2010-2012.
CERTIFICATE
This is to certify that the project report titled INVESTMENT IN EQUITIES IN CD EQUISEARCH LTD submitted in partial fulfillment for the award of MBA Programme of Department of Business Management,OU, Hyderabad, was carried out by
MR.S.RAMPRASAD,under my guidance. This has not been submitted to any other university or institution for the award of any degree / diploma / certificate.
DECLARATION
I hereby declare that this project report titled INVESTMENT IN EQUITIES IN CD EQUISEARCH LTD submitted by me to the Department of Business Management, Hyderabad, is a bonafide work undertaken by me and it is not submitted to any other university or institution for the award of any degree / diploma / certificate or published any time before.
Place: Date:
(S.RAMPRASAD)
ACKNOWLEDGEMENT
I express my gratitude to Mr. Shiva Kumar for giving me this opportunity to carry out the project work on INVESTMENT IN EQUITIES in CD EQUISEARCH LIMITED.
I also express my sincere thanks to the StaffOf CD EQUISEARCH LIMITED. who were of ready help in answering my various quires related to the project work.
It is with great pleasure that I Express my gratitude to Mr.Shiva Kumar, under whose inspiring guidance and advice this study has been carried out.
S.RAMPRASAD
CONTENTS
Chapter no I
Name of the concept Introduction to study Objectives Need of the study Scope of the study Research Methodology Limitations
II III
IV V VI VII
Bibliography
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Introduction
INTRODUCTION
Investment management once seemed a simple process. Well-heeled investors would hold portfolios composed of stocks and bonds of blue chip industrial companies, treasury bonds, notes and bills. The choices available to less well-off investors were much more limited, confirmed primarily to passbook savings accounts. If the investment environment can be thought of as an ice cream parlor, then the customers of past decades were offered only chocolate and vanilla. Mirroring the diversity of modern society, the investment ice cream parlor now makes available a myriad of flavors to the investing public. Investors face a dizzying array of choices. The ability to purchase different securities has become both less expensive and more convenient with the advent of advanced communications and computer networks, along with the proliferating market for mutual funds that has developed to serve large or small investors. Investment environment encompasses the kinds of marketable securities that exist and where and how they are bought and sold. Investment process is concerned with how an investor should proceed in making decisions about what marketable securities to invest in, how extensive the investments should be and when the investments should made.
Investment means the sacrifice of current rupees for future rupees. Two different attributes are involved time and risk. The sacrifice takes place in the present and is certain. The reward comes later and the magnitude is uncertain. In some cases, risk is the dominant attribute. These are two types of investments. They are:
Real investments involve some kind of tangible assets such as land, machinery, factories.
Financial investments involve contracts written on pieces of paper such as common stocks and bonds. Investment in securities such as shares, debentures and bonds is profitable as well as exciting, but it involves great deal of risk. Investing in financial securities is considered to be one of the best avenues for investing ones savings while it is acknowledged to be one of the most risky avenues of investment. Even Indian government wants to encourage people in rural areas to invest in equities. This will help the markets to stabilize by tapping the rural areas and decreases the dependency on foreign institutional investors.
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RESEARCH METHODLOGY
The scrip selection is done on random and the scrip selected is ICICI bank and (SBI)State bank of india.
2. DATA COLLECTION :
The data of the ICICI bank and SBI have been collected from Business line and the internet. The data consist of the November 1st to MAY 31th.
3.ANALYSIS: The analysis consists of the tabulation of the data assessing the profitability positions of the equity buyer, representing the data with graphs and making the interpretation using data.
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INTRODUCTION TO STOCKS
The first step for you to understand the stock market is to understand stocks. A share of stock is the smallest unit of ownership in a company. If you own a share of a companys stock, you are a part owner of the company. You have the right to vote on members of the board of directors and other important matters before the company. If the company distributes profits to shareholders, you will likely receive a proportionate share. One of the unique features of stock ownership is the notion of limited liability. If the company loses a lawsuit and must pay a huge judgment, the worse that can happen is your stock becomes worthless. The creditors cant come after your personal assets. Thats necessarily true in private-held companies. There are two types of stock: Common stock Preferred stock
Most of the stock held by individuals is common stock. Common Stock: Common stock represents the majority of stock held by the public. It has voting rights, along with the right to share in dividends. Preferred Stock:
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Despite its name, preferred stock has fewer rights than common stock, except in one important are dividends. Companies that issue preferred stocks usually pay consistent dividends and preferred stock has first call on dividends over common stock. Investors buy preferred stock for its current income from dividends, so look for companies that make big profits to use preferred stock to return some of those profits via dividends.
DEMAT ACCOUNT
What is Demat account and why it is required? Securities and Exchange Board of India (SEBI) is a board (corporate body) appointed by the Government of India in 1992 with its head office at Mumbai. Its one of the function is helping the business in stock exchanges and any other securities markets. Demat (short form of Dematerialization) is the process by which an investor can get stocks (also called as physical certificates) converted into electronic form maintained in an account with the Depository Participant (DP). DP could be organizations involved in the business of providing financial services like banks, brokers, financial institutions etc. DPs are like agents of Depository. Depository is an organization responsible to maintain investor's securities (securities can be stocks or any other form of investments) in the electronic form. In India there are two such organizations called NSDL (National Securities Depository Ltd.) and CDSL (Central Depository Services India Ltd.) Investors wishing to open Demat account has to go DP and open the account. Opening the Demat account is as simple as opening the bank account with any bank. As we need bank account to save our money, make cheque payments etc, likewise we need to open a demat account if we want to buy or sell stocks. All stocks what we possess will show in our 14
demat account. So we don't have to possess any physical certificates. They are all held electronically in our demat account. As we buy and sell the stocks, accordingly our stocks will get adjusted in our account.
Is a demat account must? The market regulator, the Securities and Exchange Board of India (SEBI), has made it compulsory to open the demat account if you want to buy and sell stocks. So a demat account is a must for trading and investing. How to start to open a Demat account? We have to approach a DP to open a Demat account. Most banks are DP participants so we may approach them. A broker and a DP are two different people. A broker is a member of the stock exchange, who buys and sells stocks on his behalf and also on behalf of his customers. Following are the documents required to open Demat account. When we approach any DP, we will be guided through the formalities of opening an account. The DP will ask to provide some documents as proof of our identity and address. Below PAN is card, a Voter's list but we may not require all of credit them. card
card, Drivers
license, Photo
Employee ID card, IT returns, Electricity/ Landline phone bill etc. Do we need any stocks to open a Demat account? No. We need not need any stocks to open a demat account. A demat account can be opened with no balance of stocks. And there is no minimum balance to be maintained either. You can have a zero balance in your account. How much it cost to open a Demat account? The charges for account opening, annual account maintenance fees andtransaction charges vary between various DPs.
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.Finally After successfully opening the demat account, the DP will allot Beneficial Owner Identification Number, which will be needed to mention for all our future transactions. If we want to sell our stocks, we need to place an order with our broker and give a 'Delivery Instruction' to your DP. The DP will debit our account with the number of stocks sold. We will receive the payment from our broker. If we want to buy stocks, inform our broker about our Depository Account Number, so that the stocks bought are credited into our account. Points to remember while opening online account : a) Make multiple enquiries and try getting low brokerage trading and dematting account. b) Also discuss about the margin they provide for day trading. c) Discuss about fund transfer. The fund transfer should be reliable and easy. Fund transfer from our bank account to trading account and visa versa. Some online share trading account has integrated savings account which makes easy for us to transfer funds from our saving account to trading account. d) Very important is about service they provide, the research calls, intraday or daily trading tips. e) Also enquire about their services charges and any other hidden charges if any. f) And also see how reliable and easy is to contact them in case if any emergency.
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Literature Review
Investment process Fundamental analysis Technical analysis
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INVESTMENT PROCESS
Investment process describes how an investor should go about making decisions with regard to what marketable securities to invest in, how extensive the investment should be and when the investment should be made. An eight-step procedure for making these decisions forms the basis for the investment process. 1) What is Investment 2) Understanding stocks 3) Finding a broker 4) Evaluation of stocks 5) Research tools 6) Investing strategy 7) Investing technique 8) What moves the market
Investing is making your money work for you without taking any more risks than necessary for your comfort. Investing is the proactive use of your money to make more money. How to calculate Risk Premium? Risk premium is what a stock should return over a risk-free investment. It is your reward for taking a risk with your money. Weak demand is the important factor in stock pricing:
Despite high crude oil prices, its weak demand for gasoline that holds back oil stock prices. Supply and demand is an important factor in determining price of stocks. Corrections are natural part of stock market cycle. Dont be too conservative with stocks in retirement:
There is a danger you can be too conservative in your investment strategy as you approach retirement dont back off stocks too soon.
Step 2: Understanding stocks Stocks are the basic units of ownership in publicly traded companies. There are two basic types of stocks. a. Common Stock: Common stock represents the majority of stock held by the public. It has voting rights, along with the right to share in dividends. b. Preferred Stock: Companies that issue preferred stocks usually pay consistent dividends and preferred stock has first call on dividends over common stock. Bull and Bear stock markets are the two sides of same coin: Bull and bear markets go together and are necessary for an efficient market. Poll results show confidence in stocks:
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The results of a poll on where the sensex be at the end of 2008 show stock investors are positive.
Step 3: Finding a Broker To decide which type of broker is right for you, you need to use these resources to find the brokerage arrangement that best fits your needs. Thirteen of the top online stock trading sites offer investors a wide variety of services including research and advice. Brokers offer different levels of service. A broker fills in the gaps in knowledge and experience. Broker explains what types of accounts are available and how to open an account. Financial advisers can map a blue print that will get you from where you are to your financial goals. Financial advisers come in a variety of flavors. Finding the one right for you involves knowing how each is compensated and what they do. The new year poses many challenges for stocks, including high oil prices, the credit crisis, and a potential recession. Stock prices are driven by the relationship between buyers and sellers. Attractive stocks have more buyers than sellers, which drives up prices, while less attractive stocks feel the reverse effect.
Step 4: Evaluating stocks for investment Fundamental analysis relies on several tools to give investors an accurate picture of the financial health of a company and how the market values the stock. The following are the
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most popular tools of fundamental analysis. They focus on earnings, growth, and value in the market. a) Earnings per Share EPS b) Price to Earnings Ratio P/E c) Projected Earnings Growth PEG d) Price to Sales P/S e) Price to Book P/B f) Dividend Payout Ratio g) Dividend Yield h) Book Value i) Return on Equity
Step 5: Research Tools The internet is a gold mine of information, but youll need some tools to get to the nuggets. Research tools make the job easier if you know where to find them and how to use them. The better stock screens offer similar characteristics that give you greater flexibility when looking for investment candidates and eliminate other companies. Stock screens will save time and help to build a thoughtful portfolio by focusing on those companies that meet your investing requirements. Stock screens can help any investor make better stock selections by reducing the number of companies to research. Dividend ratios can tell much about a stock and its future payout prospects. One of the best sources of information on companies is free and as near as your computer.
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Step 6: Investing Strategies What strategy to use as an investor? The different investment strategies and how to develop personal investment strategy is explained below: When and how to sell a winning stock? Knowing when and how to sell a winning stock is as important as knowing when to sell a losing stock. Dont be too conservative with stocks: Following a too conservative investment strategy in retirement may not protect you from outliving your money. Bottom-up investors focus on strong companies and believe they will perform well in any market conditions. Top-down investing looks at big picture before narrowing in on individual stocks.
Step 7: Investing Techniques Investing techniques offer powerful ways for investors to execute their strategies. These techniques provide a structure for investing. After-hours trading of stocks may seem like a great idea, but it is full of risks for the average investor. Diversify stocks by industry to avoid across-the-board losses on bad economic news. Investments should not be correlated to achieve diversity. Investing with expectations of high returns is not investing but gambling. Dont try to double or triple your money quickly in the stock market youll be disappointed and perhaps poorer.
What makes the market rise or fall? Sometimes it seems to have a mind of its own that reacts poorly to good news and with enthusiasm to bad news. One should learn the factors that are the major influences on the markets and how to use this information.
Open - The first price at which the stock opens when market opens in the morning. High -The stock price reached at the highest level in a day. Low - The stock price reached the lowest level in a day. Close - The stock price at which it remains after the end of market timings or the final price of the stock when the market closes for a day. Volume - Volume is nothing but quantity. Bid - The Buying price is called as Bid price. Offer - The selling price is called offer price. Bid Quantity - The total number of stocks available for buying is called Bid Quantity.
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Offer Quantity - The total number of stocks available for selling is called Offer Quantity. Buying and selling of stocks - Buy is also called as demand or bid and selling is also called as supply or offer. First selling and then buying (this only happens in day trading) is called as shorting of stocks or short sell. Stock Trading Buying and Selling of stocks is called stock trading.
Transaction - One complete cycle of buying and selling of stocks is called One Transaction.
Squaring off - This term is used to complete one transaction. Means if we buy then we have to sell (means square-off) and if we sell then we have to buy (means square-off). Limit Order - In limit order the buying or selling price has to be mentioned and when the stock price comes to that price then our order will get executed with the mentioned price by us. Market Order- When we put buy or sell price at market rate then the price get executes at the current rate of market. The market order get immediately executed at the current available price.
Success Mantra
There are two steps to achieve success in the stock market. 1) How not to loose When you learn what to do and what not to do in order to lose nothing means you have won the half battle. Only then you can learn how to gain or what to do in order to win. A new investor should do paper trading in order to get the market knowledge before actually entering into the market. 2) How to gain How to gain requires deep understanding about the market trends and fluctuations. 24
A new investor can take the route of mutual fund. The average person generally falls into one of two categories. The first believe investing is a form of gambling; they are certain that if you invest, you will more than likely end up losing your money. The second category consists of those who know they should invest for the longrun, but dont know where to begin. Their characteristics. feel investing in some sort of black-magic that only a few people hold the key to they leave their financial decisions up to professionals cannot tell you why they own a particular stock / mutual fund. investment style is blind faith or limited to this stock is going up. We should but it. This group is in far more danger than the first. They invest like the masses and then wonder why their results are mediocre [or in some cases, devastating.
FUNDAMENTAL ANALYSIS
To determine the intrinsic value of an equity share, the security analyst must forecast the earnings and dividends expected from the stock and choose a discount rate which reflects the riskiness of the stock. This is what is involved in fundamental analysis, perhaps the most popular method used by investment professionals. The earnings potential and riskiness of a firm are linked to the prospects of the industry to which it belongs. The prospects of various industries, in turn, are largely influenced by the developments in the macro economy. Researchers have found that stock price changes can be attributed to the following factors: Economy-wide factors: 30-35 percent 25
Industry factors: 15-20 percent Company factors: 30-35 percent Others factors: 15-25 percent Based on the above evidence, a commonly advocated procedure of fundamental
analysis involves a three-step examination, which calls for: 1) Understanding of the macro-economic environment and developments. 2) Analyzing the prospects of the industry to which the firm belongs. 3) Assessing the projected performance of the company and the intrinsic value of its shares.
A. MACRO-ECONOMIC ANALYSIS
The macro-economy is the overall economic environment in which all firms operate. The key variables commonly used to describe the state of the macro-economy are:
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The GDP growth rate represents the average of the growth rates of the three principal sectors of the economy, viz. the services sector, the industrial sector and the agricultural sector. Publicly listed companies play a major role in the industrial sector but only a minor role in the services sector and the agricultural sector. Hence stock market analysts focus more on the industrial sector. They look at the overall industrial growth rate as well as the growth rates of different industries. The higher the growth rate of the industrial sector, other things being equal, the more favorable it is for the stock market.
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In India, as in many other countries, the domestic savings is the dominant component in this expression. In addition to knowing what the savings are we should also know how the same are allocated over various instruments like equities, bonds, bank deposits, small savings schemes, and bullion. Other things being equal, the higher the level of savings and investments and the greater the allocation of the same to equities, the more favorable it is for the stock market.
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f) Money Supply
There are several definitions of money. The two more commonly used ones are: M1 = currency with public + demand deposits with bank + other
deposits with RBI. M3 = M1 + time deposits with banks When we talk of money supply, we usually refer to M3. The growth rate of M3 in India has been around 15 percent per year. This growth can be explained by three factors in the main: growth in the real economy, monetization of a portion of deficit financing and financial deepening of the economy. Monetization of a portion of deficit financing means the RBI buys the securities issued by the government.
h) Interest Rate
Interest rates vary with maturity, default risk, inflation rate, and productivity of capital and so on. The interest rates on money market instruments which are virtually risk free tend to be the lowest. Long dated government securities generally carry slightly higher interest rates. Corporate debentures which have some default risk associated with them carry still higher interest rates.
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A rise in interest rates depresses corporate profitability and also leads to an increase in the discount rate applied by equity investors, both of which have an adverse impact on stock prices.
i) Foreign Investment
Foreign investment in India comes in two forms: foreign direct investment and foreign portfolio investment. The former represents investment for setting up new projects and hence is long term in nature; the latter is in the form of purchase of outstanding securities in the capital market and hence can be reversed easily.
k) Sentiments
The sentiments of consumers and businessmen can have an important bearing on economic performance. Higher consumer confidence leads to higher expenditure on big ticket items. Higher business confidence gets translated into greater business investment that has a stimulating effect on the economy. Thus, sentiments influence consumption and investment decisions and have a bearing on the aggregate demand for goods and services.
A. INDUSTRY ANALYSIS
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The objective of industry analysis is to assess the prospects of various industrial groupings. It is almost impossible to forecast exactly which industrial groupings will appreciate the most. Yet careful analysis can suggest which industries have a brighter future than others and which industries are plagued with problems that are likely to persist for a while. Industrial analysis is divided into three parts namely, I. Industry life cycle analysis II. Structure and characteristics of an industry III. Profit potential of industries: Porter model.
I. Industry Life Cycle Analysis Many industrial economists believe that the development of almost every industry may be analyzed in terms of a life cycle with four well-defined stages: a. Pioneering Stage b. Rapid Growth Stage c. Maturity and Stabilization Stage d. Decline Stage a. Pioneering Stage: During this stage, the technology and or the product is relatively new. Lured by promising prospects, many entrepreneurs enter this field. As a result, there is keen, and often chaotic, competition. Only a few entrants may survive this stage. b. Rapid Growth Stage: Once the period of chaotic developments is over, the rapid growth stage arise. Firms which survive the intense competition of the pioneering stage, witness significant expansion in their sales and profits. c. Maturity and Stabilization Stage: During this stage, when the industry is more or less fully developed, its growth rate is comparable to that of the economy as a whole.
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d. Decline Stage: With the satiation of demand, encroachment of new products, and changes in consumer preferences, the industry enters the decline stage, relative to the economy as a whole. In this stage, the industry may grow slightly during prosperous periods, stagnate during normal periods and decline during recessionary periods. The experience of most industries suggests that they go through the 4 phases of the industry life cycle though there are considerable variations in terms of the relative duration of various stages and the rates of growth during these stages. II. Structure and Characteristics of an Industry Since each industry is unique, a systematic study of its specific features and characteristics must be an integral part of the investment decision process. Industry analysis should focus on the following: a. Structure of the industry and nature of competition: The number of the firms in the industry and market share of the top few firms in the industry. Licensing policy of the government. Entry barriers, if any. Pricing policies of the firm. Differentiation among products. Competition from foreign firms.
b. Nature and prospects of demand: Major customers and their requirements. Key determinants of demand. Degree of cyclicality in demand. Expected rate of growth in the foreseeable future.
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Proportions of the key cost elements raw materials, labor, utilities and fuel.
Productivity of labor. Turnover of inventory, receivables and fixed assets. Control over prices of outputs and inputs. Gross profit, operating profit and net profit margins. Return on assets, earning power and return on equity.
d. Technology and research: Degree of technological stability. Important technological changes on the horizon and their implications. Research and development outlays as a percentage of industry sales. Proportion of sales growth attributable to new products.
I.
Michael Porter has argued that the profit potential of an industry depends on the combined strength of the following five basic competitive forces: a. Threat of new entrants b. Rivalry among the existing firms c. Pressure from substitute products d. Bargaining power of buyers e. Bargaining power of sellers 33
Following figure shows the forces that drive competition and determine industry profit potential:
a. Threat of new entrance New entrants add capacity, inflate costs, push prices down, and reduce profitability. If an industry faces the threat of new entrants, its profit potential would be limited. The threat of new entrants is low if the entry barriers confer an advantage on existing firms and deter new entrants. Entry barriers are high when: The new entrants have to invest substantial resources to enter the industry. Economies of scale are enjoyed by the industry. Existing firms control the distribution channels, benefit from product differentiation in the form of brand image and customer loyalty. 34
Switching costs these are essentially onetime cost of switching from the products of one supplier to another-are high.
b. Rivalry between existing firms Firms in an industry compete on the basis of price quality, promotion, service, warranties, and so on if the rivalry between the firms in an industry is strong, competitive moves and counter moves dampen the average profitability of the industry. The intensity of rivalry in an industry tends to be high when: The number of competitors in an industry is large. At least a few firms are relatively balanced and capable of engaging in a sustained competitive battle. The industry growth is sluggish, prodding firms to strive for a higher market share. There is chronic over capacity in the industry. The industry confronts high exit barriers.
c. Pressure from substitute products All firms in an industry face competition from industries producing substitute products. Substitute products may limit a profit potential of the industry by imposing a ceiling on the prices that can be charged by the firms in the industry. The threat from substitute products is high when: The price- performance trade off offered by the substitute products is attractive. The switching costs for prospective buyers are minimal The substitute products are being produced by industries earning superior profits.
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Buyers are competitive force. They can bargain for price cut, ask for superior quality and better service and induce rivalry among competitors. If they are powerful, they can depress the profitability of the supplier industry. The bargaining power of a buyer group is high when: Its purchases are large relative to the sales of the seller. Its switching costs are low. It poses a strong threat of back ward integration.
e. Bargaining power of suppliers: Suppliers can exert a competitive force in an industry as they can raise prices, lower quality and curtail the range of free services they provide. Suppliers have strong bargaining power when; There is hardly any viable substitute for the products supplied. Few suppliers dominate and the supplier group is more concentrated than the buyer group. The switching cost for the buyers is high. Suppliers do present a real threat of forward integration.
B. COMPANY ANALYSIS
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Company analysis is concerned with fundamental analysis of equity shares. Fundamental analysts take two somewhat different approaches in their search for mispriced securities. The first approach involves estimating the intrinsic value and comparing the same with the prevailing market price to determine whether the security is underpriced or fairly priced or overpriced. The second approach involves estimating a securitys expected return, given its current price and intrinsic value, and then comparing it with the appropriate return for securities with similar characteristics. Company analysis is the last leg in the economy-industry-company analysis sequence. It may be organized into two parts (a) a study of financials, and (b) a study of other factors. Investment analysts start with a historical analysis of earning (and dividends), growth, risk, and valuation and use company analysis as a foundation for developing the forecasts required for estimating the intrinsic value.
TECHNICAL ANALYSIS
Technical analysis is radically different from fundamental analysis. While the fundamental analyst believes that the market is 90 percent logical and 10 percent psychological, the technical analyst assumes that it is 90 percent psychological and 10 percent logical. Technical analysts dont evaluate a large number of fundamental factors relating to the company, the industry and the economy. Instead, they analyze internal market data with the help of charts and graphs. Subscribing to the castles-in-the-air approach, they view the investment game as an exercise in anticipating the behavior of market participants. They look at charts to understand what the market participants have been doing and believe that this provides a basis for predicting future behavior.
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The technical approach is the oldest approach to equity investment, dating back to the late 19th century. It continues to flourish in modern times as well. As an investor, we will often encounter technical analysis because newspapers cover it, television programmes routinely call technical experts for their comments, and investment advisory services circulate technical reports. Technical analysis can be applied to commodities, currencies, bonds, and equity stocks, our studies are restricted to equity stocks. Technical analysis involves a study of market generated data like prices and volumes to determine the future direction of price movement. Martin J. Pring explains: The technical approach to investing is essentially a reflection of the idea that prices move in trends which are determined by the changing attitudes of investors toward a variety of economic, monetary, political and psychological forces. The art of technical analysis--for it is artis to identify trend changes at an early stage and to maintain an investment posture until the weight of the evidence indicates that the trend has been reversed.
Proponents of the Dow Theory refer to the three movements as: (a) daily fluctuations that are random day-to-day wiggles; (b) secondary movements or corrections that may last for a few weeks to some months; and (c) primary trends representing bull and bear phases of the market. An upward primary trend represents a bull market, whereas a downward primary trend represents a bear market. A major upward move is said to occur when the high point of each rally is higher than the low point of the preceding decline. Likewise, a major downward move is said to occur when the high point of each rally is lower than the low point of the preceding decline. The secondary movements represent technical correction. They represent adjustments to the excesses that may have occurred in the primary movements. These movements are considered quite significant in the application of the Dow Theory. The daily fluctuations are considered to be minor significance. Even zealous technical analysts do not usually try to forecast day-to-day movements in the market.
Bar and Line Charts The bar chart, one of the simplest and most commonly used tool of technical analysis, depicts the daily price range along with the closing price. In addition, it may show the daily volume of transactions. The upper end of each bar represents the days highest price and the lower end the days lowest price. The small cross across the bar marks the days closing price. Technical analysts believe that certain formations or patterns observed on the bar char or line chart have predictive value. The more important formations and their indications are described below:
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Head and Shoulders Top (HST) Pattern: As the name suggests, the HST formation has a left shoulder, a head, and a right shoulder. The HST formation represents a bearish development. It the price falls below the neckline (the line drawn tangentially to the left and right shoulders), a price decline is expected. Hence, it is a signal to sell.
Inverse Head and Shoulders Top (IHST) Pattern: As the name indicates, the IHST formation is the inverse of the HST formation. Hence, it reflects a bullish development. It the price rises above the neck line, a price rise is expected. Hence, it is a signal to buy.
Triangle or Coil Formation: This formation represents a pattern of uncertainty. Hence, it is difficult to predict which way the price will break out.
Flags and Pennants Formation: It typically signifies a pause after which the previous price trend is likely to continue.
Double Top Formation: It represents a Bearish Development, Signaling that the price is expected to fall.
Double Bottom Formation: It reflects a bullish development, signaling that the price is expected to rise.
Point and Figure Chart More complex than a bar chart, a Point and Figure Chart (PFC) has the following features:
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Company Profile
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CD Equi has established Brokerage house with over 30 years of rich experience in financial services. It has the Professional Management Its Guiding principles Trust, Transparency and Thought leadership and It Empanelled with large number of FIIs and DII One of the most reputed names in fundamental research
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CD has been set up to engage in Stock Broking Equity Derivatives Depository Services Distribution of Investment Products Distribution of Insurance Commodities Broking Currency
Headquartered inMumbai, CD has a growing network of offices across several states to ensure easy accessibility to our clients wherever they are. CD has Branch Offices spread across the country to offer better reach and service to the investor. The company currently marks its presence in the following regions: Mumbai Kolkata Delhi Hyderabad Jaipur Vijayawada
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Expansion Plans
Setting up Regional Offices/Branch Office in 25 Metros/ Tier II cities in next 24 months Expansion at 1000+ locations through Sub Brokers in the next 24 months IPO / PE in another 3-4 years To be amongst the top 10 broking house in India by 2012
Access to clients
User friendly back office software All segments through single login Client Position 1. Segment wise ledger balance 2. DP stock position DP, pool, BTST 3. Open position in FNO and commodities. Viewing and printing of bills Viewing and printing of ledger for all the segments Sauda summary Risk Management report Brokerage report User friendly back office software All segments through single login
MANAGEMENT CD Equisearch is managed by professionals who have years of experience in financial service industry
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Mr. Chandravadan Desai Chairman Mr. Pranay Desai Director Mr. VikashKalani COO Mr. JayeshVora CFO
GUIDING PRINCIPLE
At CD Equisearch, the selection and recommendations of wealth creating opportunities are primarily based on the 3C Principles:
Conservation of capital Consistent growth in value of investment over a period of time Continual cash inflow through handsome dividends
PRODUCTS AND SERVICES We are a one-stop financial services shop, most respected for quality of its advice, personalized service and cutting-edge technology. Equities CD provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to CD. CD leveraged technology to bring the convenience of trading to the investors location of preference (residence or office) through computerized access. CD made it possible for clients to view transaction costs and ledger updates in real time.
PMS Our Portfolio Management Service is a product wherein an equity investment portfolio is created to suit the investment objectives of a client. We at CD invest your resources into stocks from different sectors, depending on your risk-return profile. This service is particularly
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advisable for investors who cannot afford to give time or don't have that expertise for day-today management of their equity portfolio.
Research Sound investment decisions depend upon reliable fundamental data and stock selection techniques. CD Equity Research is proud of its reputation for, and we want you to find the facts that you need. Equity investment professionals routinely use our research and models as integral tools in their work. They choose Ford Equity Research when they can clear your doubts.
Commodities CD extension into commodities trading reconciles its strategic intent to emerge as a one-stop solutions financial intermediary. Its experience in securities broking has empowered it with requisite skills and technologies. The Companys commodities business provides a contracyclical alternative to equities broking. The company was among the first to offer the facility of commodities trading in Indias young commodities market (the MCX commenced operations only in 2003). Average monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs 20.02 bn. The commodities market has several products with different and noncorrelated cycles. On the whole, the business is fairly insulated against cyclical gyrations
Invest Online CD has made investing in Mutual funds and primary market so effortless. All you have to do is register with us and thats all. No paperwork no queues and No registration charges.
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Insurance An entry into this segment helped complete the clients product basket; concurrently, it graduated the Company into a one-stop retail financial solutions provider. To ensure maximum reach to customers across India, we have employed a multi pronged approach and reach out to customers via our Network, Direct and Affiliate channels. Following the opening of the sector in 1999-2000, a number of private sector insurance service providers commenced operations aggressively and helped grow the market. The companys entry into the insurance sector de risked the company from a predominant dependence on broking and equity-linked revenues. The annuity based income generated from insurance intermediation result in solid core revenues across the tenure of the policy. Wealth Management Service Imagine a financial firm with the heart and soul of a two-person organization. A world-
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leading wealth management company that sits down with you to understand your needs and goals. We offer you a dedicated group for giving you the most personal attentionat every level.
We will give updates to customers in Economic Outlook and Updates Sector & Company Reports Technical Recommendations Daily Market Report Daily Technical Outlook Reports on New Fund Offerings Weekly analysis of mutual funds Fund Focus Weekly debt report: Debt Dose Offer daily technical calls through SMS to our clients. KEY LEARNINGS IN ORGANISATION: EQUITY MUTUAL FUNDS TAX SAVINGS SCHEMES IN MUTUAL FUNDS ONLINE AND OFFLINE TRADING IPO (INITIAL PUBLIC OFFER) DERIVATIVES FOREX MARKET CURRENCY
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Data Analysis
ANALYSIS
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History:
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal 51
structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.
Board of Directors:
ICICI Bank's Board members include eminent individuals with a wealth of experience in international business, management consulting, banking and financial services. Director's Profiles
ChandaKochhar Managing Director and Chief Executive Officer N.S. Kannan Executive Director & CFO Board Members: Mr. K. V. Kamath, Chairman Mr. SridarIyengar Mr. Homi R. Khusrokhan Dr. Anup K. Pujari Mr. M.S. Ramachandran 52 K. Ramkumar Executive Director Rajiv Sabharwal Executive Director
Dr. Tushaar Shah Mr. M.K. Sharma Mr.V.Sridar Mr. V. PremWatsa Ms.ChandaD.Kochhar, Managing Director & CEO Mr.N.S.Kannan, Executive Director & CFO Mr.K.Ramkumar, Executive Director Mr.RajivSabharwal, Executive Director
Investor Relations:
All the latest, in-depth information about ICICI Bank's financial performance and business initiatives. ICICI Bank disseminates information on its operations and initiatives on a regular basis. The ICICI Bank website serves as a key investor awareness facility, allowing stakeholders to access information on ICICI Bank at their convenience. ICICI Bank's dedicated investor relations personnel play a proactive role in disseminating information to both analysts and investors and respond to specific queries.
BALANCE SHEET AS AT MARCH 31, 2011 PARTICULARS As at March 31, 2011 53 As at March 31, 2010
Rs. in crores
Share Capital Share warrants and outstanding Total reserve Deposits Borrowings Other liabilities and provisions TOTAL LIABILITIES
11148.89
4062336.69 APPLICATION OF FUNDS: Cash and balance with reserve bank of india Balance with banks and money at call and short notice Investments Advances (a) Gross Block (b) Less:- Accumulated Depreciation Less: impairment of assets (c) Net Block Lease adjustment 0 47442.55 0 (d) Capital Work-in-Progress 0
3633997.15
32126.90 0 0
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Bills of collection
85300.27
64749.54
CLOSING PRICE
696.55 725.8 743.1 748.1 751.7 745.2 747.8
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10-Jan-12 11-Jan-12 12-Jan-12 13-Jan-12 16-Jan-12 17-Jan-12 18-Jan-12 19-Jan-12 20-Jan-12 23-Jan-12 24-Jan-12 25-Jan-12 27-Jan-12 30-Jan-12 31-Jan-12
774.5 780.15 781.4 789.45 791.6 785.55 769.65 797.2 842.45 856.75 888.05 880.05 887.95 852.2 902.15
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INFERENCE: The above graph represents the daily fluctuations n the Market
which is one of the major proponent in Dow Theory. It is difficult to forecast day-to-day movements in the market. In the above 20 days of trading, the share price of ICICI lowest was on 2nd JAN.Rs.696.55 and the highest was on 23rd MAY. Rs. 902.15.
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DATE
2-Jan-12 3-Jan-12 4-Jan-12 5-Jan-12 6-Jan-12 7-Jan-12 9-Jan-12 10-Jan-12 11-Jan-12 12-Jan-12 13-Jan-12 16-Jan-12 17-Jan-12 18-Jan-12 19-Jan-12 20-Jan-12 23-Jan-12 24-Jan-12 25-Jan-12 27-Jan-12 30-Jan-12 31-Jan-12
CLOSING PRICE
696.55 725.8 743.1 748.1 751.7 745.2 747.8 774.5 780.15 781.4 789.45 791.6 785.55 769.65 797.2 842.45 856.75 888.05 880.05 887.95 852.2 902.15
SUM OF YEARS.
THREE
AVERAGE
2165.45 2217 2242.9 2245 2244.7 2267.5 2302.45 2336.05 2351 2362.45 2366.6 2346.8 2352.4 2409.3 2496.4 2587.25 2624.85 2656.05 2620.2 2642.3
721.81 739 747.63 748.33 748.23 755.83 767.48 778.68 783.66 787.48 788.86 782.26 784.13 803.1 832.13 862.41 874.95 885.35 873.4 880.76
moving average of daily prices may be used to detect a short term trend. This stock price line stands as an indicator to an investor whether to buy the share or to sell it. In the above 20-day average the highest 3-year moving average is on 25th JAN.
The evolution of State Bank of India can be traced back to the first decade of the 19th century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806. The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was the first ever joint-stock bank of the British India, established under the sponsorship of the Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840) and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form the Imperial Bank of India, on 27 January1921 State Bank of India is an India-based bank. In addition to banking, the Company, through its subsidiaries, provides a range of financial services, which include life insurance, merchant banking, mutual funds, credit card, factoring, security trading, pension fund management and primary dealership in the money market. It operates in four business segments: Treasury, Corporate/Wholesale Banking, Retail Banking and Other Banking Business. The Treasury segment includes the investment portfolio and trading in foreign exchange contracts and derivative contracts. The Corporate/Wholesale Banking segment comprises the lending activities of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management Group. The Retail Banking segment consists of branches in National Banking Group, which primarily includes personal banking activities, including lending activities to corporate customers having banking relations with branches in the National Banking Group.
History:
An important turning point in the history of State Bank of India is the launch of the first Five Year Plan of independent India, in 1951. The Plan aimed at serving the Indian economy in general and the rural sector of the country, in particular. Until the Plan, the commercial banks of the country, including the Imperial Bank of India, confined their services to the urban sector. Moreover, they were not equipped to respond to the growing needs of the economic revival taking shape in the rural areas of the country. Therefore, in order to serve the economy as a whole and rural sector in particular, the All India Rural Credit Survey Committee recommended the formationof a state-partnered and state-sponsoredbank.
The All India Rural Credit Survey Committee proposed the take over of the Imperial Bank of 59
India, and integrating with it, the former state-owned or state-associate banks. Subsequently, an Act was passed in the Parliament of India in May 1955. As a result, the State Bank of India (SBI) was established on 1 July 1955. This resulted in making the State Bank of India more powerful, because as much as a quarter of the resources of the Indian banking system were controlled directly by the State. Later on, the State Bank of India (Subsidiary Banks) Act was passed in 1959. The Act enabled the State Bank of India to make the eight formerState-associated banks as its subsidiaries.
The State Bank of India emerged as a pacesetter, with its operations carried out by the 480 offices comprising branches, sub offices and three Local Head Offices, inherited from the Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to creditworthy parties, the State Bank of India catered to the needs of the customers, by banking purposefully. The bank served the heterogeneous financial needs of the planned economic development.
INVESTOR RELATIONS : State Bank of India, the countrys largest commercial Bank in terms of profits, assets, deposits, branches and employees, welcomes you to its Investors Relations Section. SBI, with its heritage dating back to the year 1806, strives to continuously provide latest and up to date information on its financial performance. It is our endeavour to walk on the path of transparency and allow complete access to all the stakeholders enabling total awareness about the Bank. The Bank communicates with the stakeholders through a variety of channels, such as through e-mail, website, conference call, one-on-one meeting, analysts meet and attendance at Investor Conference throughout the world. Please find below Banks financial results, analysis of performance and other highlights which will be of interest to Investors, Fund Managers and Analysts. SBI has always been fundamentally strong in its core business which is mirrored in its results year after year.
Board of directors:
1 2 Mr. P Bhatt Dr.AshokJhunjhunwala 60 Chairman / Chair Person Director
3 4 5 6 7 8 9 10
Dr.(Mrs.)VasanthaBharucha Mrs.ShyamalaGopinath Mr.SVenkatachalam Mr.AshokChawla Mr.DSundaram Mr.Dileep C Choksi Dr.Rajiv Kumar Mr.RSridharan
Branches:
The corporate centre of SBI is located in Mumbai. In order to cater to different functions, there are several other establishments in and outside Mumbai, apart from the corporate centre. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices, located at major cities throughout India. It is recorded that SBI has about 10000 branches, well networked to cater to its customers throughout India.
ATMServices: SBI provides easy access to money to its customers through more than 8500 ATMs in India. The Bank also facilitates the free transaction of money at the ATMs of State Bank Group, which includes the ATMs of State Bank of India as Well as the Associate Banks State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, etc. You may also transact money through SBI Commercial and International Bank Ltd by using the State Bank ATM-cum-Debit (Cash Plus) card.
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Subsidiaries: The State Bank Group includes a network of eight banking subsidiaries and several nonbanking subsidiaries. Through the establishments, it offers various services including merchant banking services, fund management, factoring services, primary dealership in government securities, credit cards and insurance. The eight banking subsidiaries are:
State Bank of Bikaner and Jaipur (SBBJ) State Bank of Hyderabad (SBH) State Bank of India (SBI) State Bank of Indore (SBIR) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Saurashtra (SBS) State Bank of Travancore (SBT)
Personal Banking:
SBI Term Deposits SBI Loan For Pensioners SBI Recurring Deposits Loan Against Mortgage Of Property SBI Housing Loan Against Shares & Debentures SBI Car Loan Rent Plus Scheme SBI Educational Loan Medi-Plus Scheme
Other Services:
Agriculture/Rural Banking NRI Services ATM Services Demat Services Corporate Banking Internet Banking Mobile Banking International Banking Safe Deposit Locker RBIEFT E-Pay E-Rail SBI VishwaYatra Foreign Travel Card 62
PARTICULARS
SOURCES OF FUNDS: Share Capital Share warrants and outstanding Total reserve Deposits Borrowings Other liabilities and provisions TOTAL LIABILITIES APPLICATION OF FUNDS: Cash and balance with reserve bank of india Balance with banks and money at call and short notice Investments Advances (a) Gross Block (b) Less:- Accumulated Depreciation Less: impairment of assets (c) Net Block Lease adjustment 63 943955.02 284786.46 2956005.69 7567194.48 131892.85 87575.29 0 44317.56 2.03 612908.65 348929.76 2857900.71 6319141.52 118316.27 77141.07 0 41175.20 2.03 6349.99 0.00 643510.44 9339358.13 1195689.55 1052483.89 12237362.01 6348.83 0.00 653143.16 8041162.27 1030116.01 803367.04 10534137.31
(d) Capital Work-in-Progress Other assets Total assets Contingent liability Bills of collection
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CLOSING PRICE
1,627.65 1,705.65 1,696.05 1,692.45 1,672.75 1,669.10 1,637.25 1,702.60 1,726.95 1,764.40 1,776.10 1,816.40 1,844.00 1,865.35 1,884.30 1,932.85 1,940.50 2,040.80 2,058.00 2,040.60
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INFERENCE: The above graph represents the daily fluctuations in the market which is one of the major proponent in Dow Theory. It is difficult to forecast day-to-day movements in the market. In the above 20 days of trading, the share price of SBIN lowest was on 2nd JAN. Rs. 1627.65 and the highest was on 25th JAN. Rs. 2058.60.
DATE
2-Jan-12 3-Jan-12 4-Jan-12 5-Jan-12 6-Jan-12 7-Jan-12 9-Jan-12 10-Jan-12 11-Jan-12 12-Jan-12
CLOSING PRICE
1,627.65 1,705.65 1,696.05 1,692.45 1,672.75 1,669.10 1,637.25 1,702.60 1,726.95 1,764.40
SUM OF THREE YEARS 5029.35 5094.15 5061.25 5034.3 4979.1 5008.95 5066.8 5193.95 5267.45 66
AVERAGE
13-Jan-12 16-Jan-12 17-Jan-12 18-Jan-12 19-Jan-12 20-Jan-12 23-Jan-12 24-Jan-12 25-Jan-12 27-Jan-12
1,776.10 1,816.40 1,844.00 1,865.35 1,884.30 1,932.85 1,940.50 2,040.80 2,058.00 2,040.60
INFERENCES: A 18-day moving average of daily prices may be used to detect a short term trend. This stock price line stands as an indicator to an investor whether to buy the share or to sell it. In the above 18-day average the highest 3-year moving average is on 25th Jan.
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Summary
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SUMMARY
Investing in financial securities is now considered to be one of the best avenues for investing ones savings while it is acknowledged to be one of the most risky avenues of investment. Even Indian Government is planning to encourage people in rural areas to invest in equity. This will help the markets to stabilize by tapping the rural areas and decreases the dependency on Foreign Institutional Investors.
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The factors which were studied under this are to know about stock markets in India, how they work, prerequisites to enter the stock markets, market design, stock selection, when to buy or sell a stock, how to invest, knowing about market intermediaries. For successful investment factors like timing, selection, setting targets, avoiding speculation and constant review of portfolio is advised.
FINDINGS
From the above analysis, it is found that: ICICI has the worlds best way of delivering banking services and investment options.ICICI has worldwide branches Due to this, its services are of world class.Total assets of company have shown an 4.19 percent increase in FY 2010-2011. SBI has recorded an 9.22 percent of increase in its total assets. In comparison to ICICI and SBI share price analysis, it is found out that SBI has the 70
highest share price value because of its wide spread coverage of market. If the stock price line falls below the moving average line, the investor should purchase the stock because the intrinsic value is more than the market price. That means that is undervalued. If the stock price line rises above the moving average line, the investor should sell the stock as the intrinsic value is more than the market price. Therefore, the stock is overvalued.
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Suggestions
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SUGGESTIONS
Suggestions to an investor for reaping good returns in Equity Investment Proper scientific way of investigation should be undertaken about sector and its players before investment Clear targets should be set before investment Stock pickup should be always selective and should not depend on rumors of the market Define price range first before buying and selling shares Before buying and selling shares latest price movement trends should be analyzed Speculation is not advised in the market Individual Risk tolerance should be known and then be ready for unexpected Constant proper review of portfolio should be done and wherever required buying and selling of shares should be done.
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Conclusions
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CONCLUSIONS
Economic liberalization has accelerated the pace of development in the securities market. In India, the role of securities market has undergone structural transformation with the introduction of computerized online trading and interconnected market system. Investment in securities such as shares, debentures and bonds is profitable, but also involves great deal of risk. Even Indian Government wants to encourage Equity Investment.
According to Fundamental Analysis: Economy: While analyzing stock, investor should consider GNP, Price conditions, Economy, Housing, Construction Activity, Employment, Accumulation of inventories, Personal Disposable Income, Personal savings, Interest rates, Balance of Trade, Strength of the Rupee in Forex market and Corporate Taxation (Direct and Indirect)
Sector Analysis: It is advised to invest in a sector that is either in a pioneering stage or in its expansion stage. It is advisable to quickly get out of sectors which are in the stagnation stage prior to its lapse
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into the decline stage. The particular phase or stage of a sector can be determined in terms of sales, profitability and their growth rates amongst other factors.
Company Analysis: In company analysis, history of the company and line of business, Product portfolios strength, Market share, Top Management, Intrinsic Values like Patents and Trademarks held, Foreign collaboration, its need and availability for future, Quality of competition in the market, present and future, Future business plans and projects, Level of trading of the companys listed scrip, EPS, its growth and rating vis--vis other companies in the industry, P/E Ratio, Growth in Sales are analyzed.
According to technical analysis: The fundamental analysis is the determination of price based on future earnings;where as the price of a security represents a consensus. The price at which an investor is willing to buy or sell depends primarily on his expectations. For this purpose technical analysis also forms a strong tool in analyzing a company where the price movements are recorded in charts and analyzed.
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Bibliography
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BIBILIOGRAPHY
BOOKS REFFERED: Security Analysis and Portfolio Management - Mr. Prasanna Chandra. Investment - William, Sharpe
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