FIN F313 SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

By
Nikita Nawapet 2016A5PS0360P
Tiasha Mazumdar 2016A5PS0442P

TECHNICAL ANALYSIS

Analysis using RSI:

Traditional interpretation and usage of the RSI is that values of 70 or above indicate that a security
is becoming overbought or overvalued and may be primed for a trend reversal or corrective
pullback in price. An RSI reading of 30 or below indicates an oversold or undervalued condition.
According to previous data and volume of trading, RSI is likely to move down indicating a buy
signal.

2. Analysis using Simple Moving Average:

According to the short term 20 day simple moving average, the price shows an upward trend but
according to the 50 day (short term) and 200 day moving averages, the price shows a downward
trend. If a shorter-term simple moving average is above a longer-term average, an uptrend is
expected. On the other hand, a long-term average above a shorter-term average signals a
downward movement in the trend. This shows the stock is volatile and the short term investors
could sell whereas the long term investors, on the basis of 200 day moving average should buy the
stock.

3. Analysis using MACD

 A bullish crossover occurs when the MACD turns up and crosses above the signal line. A bearish
crossover occurs when the MACD turns down and crosses below the signal line. Crossovers can
last a few days or a few weeks, depending on the strength of the move. The MACD line is tending
to cross the signal line from below, indicating a buy signal.

COMPANY ANALYSIS
MAR-14 TO MAR-18
DIVIDEND DISCOUNT MODEL

According to the dividend discount model the average growth rate is calculated to be 7.01% which
is assumed to be constant for the next 5 years. Perpetual growth rate is assumed to be 6%.Interest
rate(6.25%) is obtained from the market index data.
Present value of all future dividends was calculated to be 3968.41 which is much higher than the
present market price of the company(967.6).Thus according to the dividend discount model
investors should invest in the company .Valuation of the stocks have positive P/E ratio.

FREE CASH FLOW TO EQUITY

According to present value of free cash flow to equity the company should be invested in as the
present value of cash flows considering a constant average growth of 7.01% for the next 5 years
and a perpetual growth rate of 6% comes out to be 14494.08 per share which is much greater than
967.6 per share;the present market value of the company.
PRESENT VALUE OF OPERATING FREE CASH FLOW

According to the operating free cash flow method , investors should invest in the company as the
present value of free operating cash flow per share came out to be 63177.09 which is way more
than 967.06 per share(present market value of the company).
PRICE RATIOS
CONCLUSION-According to company analysis investors should invest in the stocks of CESC
LTD. It has a growing profit margin and an increasing expected cash flows. This analysis is
appropriate for long term investments which shows stable increase in returns for CESC Ltd
whereas according to technical analysis, the company seems to be volatile in the long term
indicating sell signals by most technical indicators but also shows increasing returns for long term
investors as shown by 200 day moving averages.