Pim Project 2008

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EXECUTIVE SUMMARY

India's economy is on the ever increasing growth curve. With positive indicators

such as a stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming

capital market and a rapid rise in FDI in the last year, India has emerged as the Secondfastest growing major economy in the world. The economy has been growing at around 9

percent in the past two years recording a growth rate of 9.4 per cent and 8 per cent in

2006-07 and 2007-08 respectively and 6.5 percentages in 2008-09. Investment in the

equity market is very risky compare to the other instruments like mutual fund and

insurance. So it needs in depth analysis of the scripts. With the intention of understanding the best trading p ractices and to understand

the basics of investment study highlights on points to be considered before investing. The study of the stock market has become divided in to two kinds of thought:

Fundamental analysis and technical analysis. Fundamental analysis focuses on theeconomic forces of supply and demand that cause prices to move higher and lower as to

stay the same.

Basically it has three parts:a)Economic analysis b) Industry analysis c) Company analysis

Economic analysis concentrates on macro environmental factors which affect

economy as a whole. Some of those factors are growth domestic product, Balance of

payment, balance of trade, inflation, FDI, FII, rate of savings and investment, industrial

growth, Agricultural development etc.

Industry analysis concentrates on general trend of industries in a country. Theyalso consider growth prospects, competition, structure, and different strategies adopted by

industries.Company analysis consists of analyzing the strength of each individual company.

It consists of ratio analysis, comparative balance sheet, Trend analysis; common size

financial statement, etc. It also uses management efficiency, cost structure, growth

prospects for its analysis. For the purpose of analysis I have taken ratio analysis as a main

criterion.

The companies that I have taken for my project are:Automobile Industry : Tata Motors, MaruthiSuzuki, HeroHonda

pharmaceutical industry : Cipla, Sun Pharma, Dr.Reddys


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Telecommunication industry : Rcom, Airtel, IdeaBanking industry : HDFC, ICICI, SBIOil and Gas industry : BPCL, GAIL, ONGCInformation Technology industry : Infosys, Wipro, TCS

Technical analysis is the study of market action primarily through the use of

charts for the purpose of forecasting future price trends. The term market action

includes the two principle sources of information available to the technicians-price and

volume.I have chosen the technical analysis for the purpose of analyzing the scripts. I have

studied basic theories of technical analysis which are applicable to this analysis which

includes various indicators and oscillators. I have used:

y RSI for analyzing scriptsy Yearly Highs and Lowsy Monthly advances and Declinesy Candle stick chartsy Volume indicatorTrading through Technical Analysis from my research, I found that it is really a

nice approach to estimate the future. It really helps to catch the small moves and gives the

opportunity to investor to get returns in the small and long run also. The selection of the company:-

Here companies have been selected on the basis of market capitalization. Those

companies which have high market capitalization have been selected. In some casescompanies have also been selected on the basis of their performance (their recent net

profits, etc.). As per Technical Analysis active trading strategy should be adopted.

The data sourced has been analyzed and interpreted and on the basis of such

analysis the results and findings were obtained. It is found from the research that active

trading strategy is more useful then the passive trading strategy.

RESEARCH METHODOLOGYRESEARCH OBJECTIVES:

Objective:

To find out appropriatetimeto buy and sell securities based on selectedindicator and charts


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Understanding thetechnical analysis theories and methods to analyze charts ofthecompanies using technical analysis.

Tohelp suggest investment decision by suggesting buyi ng and sellingsignals.

Tocompare activetrading strategy with passivetrading strategytomeasure, which is more beneficial and profitable?

Tounderstand the macroeconomic factors that influenceeconomy aswhole.

Tounderstand the strengthofthecompany byusing financialtools.RESEACH DESIGN: A research design specifies the methods and procedures for

conducting survey Research design is the plan and structureof investigation so

conceived as toobtain answer to research questions. The plan is overall s chemeofthe

research.

DATA COLLECTION METHOD:

For this study, I havecollected lotof data from the different sources of data. Mainly I

haveused two methods for data collection.

y Primary Data: the sources of Primary data were mainly through personalconsultation with broker as well as my mentor at JRJ Securities,Udupi. I have

consulted with my mentor abouthow to getthe data which would help me in my

analysis. My Mentor has also given meknowledge about various techniques used

in thetechnical analysis.

y Secondary Data: Thecollection of secondary data was done mainlythroughtheInternet. Various sources of information and data relating tothetopic were

referred to. Ithas helped meout in understanding various techniques and graphs

used in analyzing the data. Data has also been collected from reading books and

journals.

LIMITATION OF THE STUDY:

a) COST: -There werecostconstraints in undertaking various field works and analyzing

data with software. There were researchorganizations which would s elltheir data at a

cost. Thecostof data would be veryhuge in suchcircumstances. However,through


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various efforts, it was possibletoobtain mostofthe relevant information required by

the project.

(b) TIME: -The scopeof study is vast and thetimethatcould be allocated was very

limited. Hence it was not possibleto do a very in depth industry analysis and company

analysis.

(c) Resistanceto revealthe real investment information and strategies bythe broker.

(d) I had to rely fullyon secondary da ta on various occasions. These are not very reliable

sometimes.

Introduction to the Stock Market

Stock market is a secondary market. It is the financial market for trading of

securities that have already been issued in an initial private or public offering. Once a

newly issued stock is listed on a stock exchange, investors and speculators can easily

trade on the exchange, as market makers provide bids and offers in the new stock.

Stock market is the barometer of the state of economic conditions prevailing in the

country. It is very sensitive to the changes that take place in both the domestic and

international general economic conditions. A boom in the stock market reflects the

promising economic conditions and crash in the stock market reflects the weak economic

conditions.

Secondary market is vital to an efficient and modern capital market.

Fundamentally, secondary markets meshthe investor's preference for liquidity withthe


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capitaluser's preference to be able touse thecapital for an extended period of time.

Under traditionallending and partnership arrangements, investors may be less likelyto

puttheir money intolong -term investments, and morelikelytocharge a higher interest

rate ifthey do. With secondary markets,however, investors know thattheycan recoup

someoftheir investment quickly, iftheir own circumstances change.

Functions of stock exchanges:

Maintaining active trading Providing Liquidity and marketability of securities Ensuring safe and fair dealing Aids in financing industry Dissemination of information Inducing better corporate performance Monitoring the integrity of members

Stock market in India:

India has well established stock market. The origin of the stock market in India

goes back to the end of the eighteenth century when long-term negotiable securities were

first issued. However for all practical purposes the real beginning occurred in the middle

of the nineteenth century after the establishment of the Companies Act in 1956, which

introduced the feature of limited liability and general investor interest in corporate

securities.

An important early event in the development of stock market in India was the

formation of the Native Share and Stock Brokers Association at Bombay 1875, the

precursor of the present day Bombay Stock Exchange (BSE). This was followed by

formation of associations/exchanges in Ahmadabad (1894), Calcutta (1908), and Madras(1937). In addition, a large number of ephemeral exchanges emerged mainly in buoyant

periods to recede into oblivion during depressing times subsequently.


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The most important development in the Indian stock market was the establishment

of the national Stock Exchange (NSE) in 1994. Within a short period, it emerged as the

largest stock exchange in the country surging ahead of Bombay Stock Exchange which

was historically the dominant stock exchange in India.

Thus BSE and NSE are the two major stock exchanges in which majority of

trading takes place in India. The securities activities are controlled by Securities and

Exchange Board of India (SEBI) which was established in the year 1992 with the

objective of protecting interests of the investors, promoting the development of securities

market and regulating the securities market.

To mitigate the costs and risks associated with physical delivery, security

transactions are settled through electronic delivery facilitated by depositories. The

National Securities Depository Limited (NSDL), Indias first depository was set up in

1996. It was followed by the Central Depositories Limited (CSDL). Both the depositories,NSDL in particular, have recorded a significant growth in their operations.

Bombay Stock Exchange:

The origin of BSE dates back to 1875 when it was organised under the name of

The Native Stock and Share Brokers Association as a voluntary non-profit making

association. It was recognised on a permanent basis in 1957. The premier stock exchange

is the oldest stock exchange in Asia.

An investor can choose from more than 4,700 listed companies, which for easy

reference, are classified into A, B, S, T and Z Groups.

SENSEX the index of BSE is calculated on the basis of Free-float methodology

taking into account 30 securities. Apart from the SENSEX, BSE offers 21 indices,

including 12 sectoral indices.

In March 1995, BSE introduced screen based trading called BOLT (BSE On-LineTrading). The BOLT has nationwide network through which the trading in BSE takes

place. The capacity of the Tandem hardware of BOLT 500000 trades per day(for 6

hours).BSE provides an efficient and transparent market for trading in equity, debt

instruments and derivatives.


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BSE has always been at par with the international standards. The systems and

processes are designed to safeguard market integrity and enhance transparency in

operations. BSE is the first exchange in India and the second in the world to obtain an

ISO 9001:2000 certifications. It is also the first exchange in the country and second in the

world to receive Information Security Management System Standard BS 7799-2-2002certification for its BOLT.

In 2006, BSE launched the Directors Database and ICERS (Indian Corporate

Electronic Reporting System) to facilitate information flow and increase transparency in

the Indian capital market. While the Directors Database provides a single-point access to

information on the boards of directors of listed companies, the ICERS facilitates the

corporate in sharing with BSE their corporate announcements.

National Stock Exchange:

The NSE became operational in the capital market segment on 3rd November

1994 in Mumbai. The genesis of NSE lies in the recommendations of the Pherwani

Committee. It was established with the following objectives.

To establish nationwide trading facility for equities, debt instruments andhybrids

To ensure equal access to investors all over the country throughappropriate communication network

To provide a fair, efficient and transparent securities market to investorsusing an electronic communication network

To enable shorter settlement cycle and book entry settlement systemTo meet current international standards of securities market

The promoters of NSE are IDBI, ICICI, IFCI LIC GIC, SBI, Bank of Baroda,Canara Bank, Corporation Bank, Indian Bank, and Oriental Bank of Commerce Union

Bank of India, Punjab National Bank, IL&FS, and SHCIL.


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Till 1994, the trading on the stock market in India was based on the open outcr y

system .with establishment of NSE, India entered the era of screen-based trading. The

clearing and settlement of the exchange are managed by its wholly owned subsidiary the

National Securities Clearing Corporation Ltd (NSCCL).

The index of NSE, NIFTY is wide based than SENSEX as it takes into account 50

securities for computing it. Membership is based on factors such as capital adequacy,

corporate structure, track record etc. Admission is a two stage process with applicants

requiring through a written test followed by interview. The exchange admits members

separately to wholesale Debt Market segment and capital market segment. Only corporate

members are admitted on the Debt market segment whereas individuals and firms are also

eligible on the capital market segment. Individuals, registered firms, companies and other

persons may be permitted under the Security contract regulation act, 1957

JRG SECURITIES

COMPANY PROFILE

JRG Securities Limited is a leading Companycarrying outthe business of broking

on the Indian capital and commodity markets. It was founded in 1992 as a partnership

firm. Later in 1994 it was graduated into a private limited company and became a

corporate member atThe Cochin Stock Exchange Ltd. . In 2003 it got converted into

public limited and changed its name to JRG Securities Ltd. (JRGSL). In 1999 JRG recited

with the inclusion of four prominent members of Cochin Stock Exchange Ltd. And

acquired NSE (National Stock Exchange) membership and became a trader at theBombay Stock Exchange Ltd.

JRG is one among theleading players in the Indian Capital Market, a full - fledged

Depository Participant with National Securities Depository Ltd. (NSDL) and a trading

Central Depository Services (India) Limited and a member of the National Multi

Commodity Exchangeof India Ltd (NMCEIL),the Multi Commodity Exchangeof India Ltd

(MCX), the National Commodities Derivatives Exchange Ltd (NCDEX) and the Indian

Pepper and Spices Trades Association (IPSTA). JRG is alsooneof south Indias leading

Insurance Brokers. Company is also empanelled with top ten mutual fund houses in

India under its mutual fund operations.

Currently JRG Securities Limited has its presence in 325 trading centers in India,

which are supervised by 12 regional offices. Company has developed the new

technology to trade in commodities called Mtrade. Using Mtrade JRGSLs clients can


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tradeon thecommodityexchanges in real timeusing their Nokia mobile phones. This

service gives company a competitiveedgeover others. Catering to institutional investors

and individual investors, JRG Securities Ltd, with its team of qualified,experienced and

highly motivated professionals monitor and ensurethe safetyof investment withthe aid

of state-of-the-art information technology. The operations are streamlined with anequity research wing, CTCL facility and an NRI services wing.

JRG Securities ltd is headquartered in Kochi, in the stateof Kerala in the southern

partof India. Thecompanytooklife as partnership firm called JRG associates, started by

Mr. Reji Jacob, Mr. Giby Mathew and Mr. Jiji Antony in 1992.

In April 2006, JRG Securities Limited, the flagship companyof JRG Group,came

out with a Rs 14.50 crore public issueof 36,25,000 equity shares with a face valueof Rs

10 at a premium of Rs 30 per share.

In July 2007, Baring India Private Equity Fund II Ltd (Baring India) announced an

investmentofup to $35 million in JRG Securities Ltd. through a preferential issue and

warrants for a minimum 44.8 per cent stake in thecompany, subject to the approvals

from Securities and Exchange Board of India and shareholders among others.

GROUP OF COMPANIES

Your search ends with us, the JRG Group, a leading financial and investment

Service Company in India.

From a modest beginning a decade back, JRG is today a power to reckon with in

the financial services industry through the following JRG Group of Companies:

1. JRG Securities Ltd2. JRG Wealth Management Ltd3. JRG Insurance Broking Pvt Ltd 4. JRG Metal & Commodities DMCC, Dubai5. JRG FinCorp LimitedNature of Business:

JRG Securities is a broking company. The company offers a complete range of pre

trade and post trade service on the BSE (Bombay Stock Exchange) and the NSE (NationalStock Exchange). Whether the client come in to the companys conventionally located

offices and trade in a dedicated ambience or issue instructions over the phone, our highly

trained team and sophisticated equipment ensure smooth transactions and prompt service.


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JRG Branches are conceptualized to be place where investors can come in contact

with investment opportunities in an atmosphere of convenience and comfort. Our services

are available through our network of 310 trading centers in the country, supervised by 12

regional offices. Professional seeks to educate clients & end their confusion by custom an

Investment Plan according to the needs of clients and is also today a part of companiesinduction program advising employees on how to plan their investments.

Vision of the company:

JRG Securities Limited was born out of a vision to explore the immense

investment opportunities in the Indian financial market, to benefit the investors. The

company is builton the pillars of financialexpertise, professionalism,exemplaryethics

and a commitmentto provideultimatecustomer satisfaction.

JRG constantly strives to meet thechanging market needs and trends. We take

pride to tell the world that wehad a modest beginning. We began as a sub -brokerage

house in theyear 1992. Our financialexpertise and professionalism coupled withethics

and a commitmenthas made JRG oneofthe major players in Indian financial market.

Wecater efficientlytothe diverse and complex needs ofover 200,000 customers,

mostof whom are individualtraders, institutions and money managers.

The vision ofthe JRG Group is to be a Financial Super Market. It aims to provide all

types of financial services to its clients atone placeto savethem from going from place

to placeto meettheir investment needs.

Withtheopening up ofthe Indian economy and the adventof ITenabled trading,

the Indian capital markethas become a whole new ball game. From floor trading, the

custom is fast shifting to Internettrading. Equally fast is the roleoft he financial service

provider, which is being redefined. Earlier, a financial service providers responsibility

was limited to executing customers instructions to buy and sell. Now, the whole

operational paradigm has progressively shifted with the opening of more and more

avenues tooffer strategiccustomer supports.

Milestones achieved

1992 Started secondary Stock Market Operations1994 Became a member of The Cochin Stock Exchange Ltd.


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1995 Sub Broker of National Stock Exchange Ltd. 1999 Became a member of Inter Connected Stock Exchange Ltd.1999 Became a member of The National Stock Exchange Ltd.2000 Depository Participant of the National Securities Depository ltd

2000 Became a Sub-Broker of Bombay Stock Exchange2000 Derivatives Trading Membership.2000 Developed Branches across Kerala.2001 Established Branch in Bangalore.2003 Established Branch at Chennai2005 Became a member of The Bombay Stock Exchange Ltd.2005 Started operations in Maharashtra, UP, AP, Delhi & Punjab.

ORGANISATION CHART


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Fundamental Analysis


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Fundamental Analysis is a time-honoured, value- oriented approach based on a

careful assessment of the fundamentals of the economy, the industry, and the company. A

fundamental analyst is not unduly influenced by what happens on a particular day on the

stock exchange. He studies the general economic situation, makes an evaluation of

industry and finally does an in-depth analysis, both financial and non-financial of thecompany of his choice.

The intrinsic value of an equity share depends on a multitude of factors. The

earnings of the company, the growth rate and the risk exposure of the company have a

direct bearing on the price of the share. These factors in turn rely on the host of other

factors like economic environment in which they function, the industry they belong to and

finally the companys own performance.

Fundamental Analysis appeals to long-term investors. It tries to establish long

term values to scrips. It is not concerned with the short-term movements that occur in thestock market.

The fundamental school of thought appraises the intrinsic value of shares through

Economic Analysis study of the state of macroeconomic factors thathave the influence on the performance of the companies

Industry Analysis study of the industry which the company belongs to Company Analysis study of financial and non-financial factors

pertaining to the particular company

Economic Analysis

The level of economic activity has an impact on investments in many ways. If the

economy grows rapidly, the industry can be expected to show rapid growth and vice


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versa. When the economic activities are low stock prices are low, and when the level of

economic activities is high, stock prices are high reflecting the prosperous outlook for

sales and profits of the firm. The analysis of macroeconomic environment is essential to

understand the behaviour of the stock prices. Following are the economic factors that are

considered in the fundamental analysis.GDP:

GDP is defined as total market value of final goods and services produced within a

country during a given period of time. Indias GDP crossed the trillion dollar mark for the

first time in 2007 and with this India has joined the elite club of 12 countries with trillion

dollar economy. India is the second fastest growing economy after China. Growth rate in

Gross Domestic Production of India has been satisfactory in the past few years. But it

reduced in 2008-09 drastically due to financial crisis and the global economic slowdown.

Growth Rate of GDP of India: Table 1

year GDP Growth05-06 9.506-07 9.707-08 9.908-09 6.7

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 it is of long term in nature. The latter is in the form of purchase of

outstanding securities in the capital market. Foreign investment flows to the countries in

which there is good growth. Since India has been growing at a higher rate there has been

increase in the foreign investment. This increase in the foreign investment depicts the

profitable opportunities in India.


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YEAR FDI(US$ MILLION) FPI(US$ MILLION)

2005-06 3034 12494

2006-07 7693 70602007-08 15893 27433

2008-09 17498 -14030

April-sep08

13897 -5518

April-sep09

14142 17946

Foreign Trade:

Indias foreign trade increased to a considerable extent after 1991 when the economy was

liberalised. India is a net importer. But there has been massive growth in the exports from

India. Indias trade balance is increasing year after year.

EXPORTS OF INDIA


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YEAR Figures (US MILLION)

2005-2006 105152

2006-2007 128888

2007-2008 166162

2008-2009 189001

April-sep 08 111085

April-sep 09 81139

IMPORTS :

YEAR Figures(US MILLIONS)

2005-2006 157056

2006-2007 190670

2007-2008 257629

2008-2009 307651

April-sep 08175483

April-sep 09 139356

Foreign Exchange Reserves:


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Indias Foreign Exchange Reserves have seen tremendous growth in the past few

years. But recently it reduced due to dollar selling by RBI in order to prop up falling

Indian Rupee and supply foreign exchange to oil companies to meet their import

payments. It also reduced due to heavy FII withdrawal from Indian stock market.

Foreign exchange reserve: Table 5

Year Value(US $ BILLIONS)05-06 151.606-07 199.207-08 309.708-09 252

Inflation

Inflation in India is at an acceptable level and remains much lower than in many otherdeveloping countries. But off late prices of essential commodities such as food grain,

edible oil, vegetables etc have risen sharply and in the process driving up the inflation

rate. The rate went above 13%, highest in last 13 years in the second half of 2008 but has

come down below 7% after fall in the oil prices and RBI policy measures.

Weights 22.02 14.23 63.75 100

Year Primary Power and

fuel

Manufactured

commodity

All commodity

05-06 2.9 9.5 3.1 4.4

06-07 7.9 5.6 4.4 5.4

07-08 7.6 0.9 5 4.7

08-09 10.1 7.5 8.1 8.4

08-09(apr-dec)

10.93 11.32 9.74 10.20

Industrial Output:


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Indias industrial production has grown satisfactorily as seen in the table. Industry

accounts for more than 25% of the Indian GDP. But in the second quarter of 2008 -09 the

industrial growth rate has fallen due to prevailing economic conditions.

Industrial Production growth rate:

Year Percentage05-06 8.206-07 11.607-08 8.508-09 2.4

Agricultural growth:

YEARS OVERALLGROWTH

AGRICULTUREGROWTH

2002-03 3.8 -7.2

2003-04 8.5 10

2004-05 7.5 0

2005-06 9.4 6.0

2006-07 9.2 2.7

2007-08 9 4.5

Agriculture is directly and indirectly linked with industries. For example sugar,cotton, textiles, and food processing industries depend upon agriculture for raw -materials.Fertiliser and insecticide industries are supplying inputs to the agri culture.


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Savings and Investment

A notable feature of the recent GDP growth has been a sharply rising trend in gross

domestic investment and saving, with the former rising by 13.1 per cent of GDP and thelatter by 11.3 per cent of GDP over five years till 2006-07. The average investment ratio

for the Tenth Five Year Plan at 31.4 per cent was higher than that for the Ninth Five Year

Plan, while the average saving rate was also 31.4 per cent of GDP higher than the average

ratio of 23.6 per cent dur ing the Ninth Five Year Plan.

Both private and public savings have contributed to higher overall savings. Private

savings have risen by 6.1 per cent points of GDP over the Tenth Five Year Plan period

while public sector savings increased by 5.2 per cent of GDP.

The increase in private savings is due to a doubling of the rate of corporate savingover the plan period. Savings of the household sector were stable at 23 to 24 per cent of

GDP, averaging 23.7 per cent during the Tenth Five Year Plan.

Year Gross domestic savings Gross domestic investment2004-05 32.2 28.82005-06 33.1 30.42006-07 34.4 31.42007-08 36.4 332008-09 32.5 33


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Trade balance: Trade balance is the difference between imports and exports

YEAR Figures(US MILLION)

2005-2006 -51904

2006-2007 -61782

2007-2008 -91467

April-sep 09 -58217

Chart of Economic survey 2009-2010

INDUSTRY ANALYSIS

The objective of industry analysis is to assess the prospects of various industrialgroupings. These factors are studies as they affect the performance of the companies

belonging to that industry.

Techniques used to Industry Analysis


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SWOT Analysis: It helps an organisation to match its strength andweakness with an opportunities and threats operating in the environment.

Porters 5 Force model: 5 force models mainly help to understand, howenvironmental factors operate in an industry and how they affect t he

company in its particular situation.

Contribution to the GDP (2009)

REFINARY 18.4 STEEL 5.7

IT 3.9 CONSRUCTION 2.1

TELECOM 2.8 POWER 3.8

BANK 13.2 OTHERS 45

AUTO 5

Automobile Industry

The automobile industry in India is the tenth largest in the world with an annual

production of approximately 2 million units. A number of domestic companies produce

automobiles in India and the growing presence of multinational investment, too, has ledto an increase in overall growth, following production of over 2.3 million units in 2008.

In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan,

South Korea and Thailand.


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Specialties of Indian automobile industryThe automobile industry in India is the ninth largest in the world with an annualIndia ranks 1st in the global two-wheeler market India is the 4th biggest commercial vehicle market in the world

India ranks 11th in the international passenger car market India ranks 5th pertaining to the number of bus and truck sold in the wor ld India is the second largest tractor manufacturer in the world.

PORTERS 5 FORCE MODEL:Degree of Rivalry

Despite the high concentration ratio seen in the automotive sector, rivalry in the

Indian auto sector is intense due to the entry of foreign companies in the market. The

industry rivalry is extremely high with any being product being matched in a few months

by the competitorsLARGEST MANUFACTURERS IN EACH SEGMENT WITHIN THE AUTOMOTIVE INDUSTRY

Passenger

carCommercial

vehicleTwo wheelers Three wheelers

MARUTHISUZUKI

ASHOKLEYLAND

Hero Honda TATA MOTORS

M&M VOLVO BAJAJ PIAGGIOHONDA TATA MOTORS TVS M&MTATAMOTORS

EICHER KINETIC TVS

TOYOTA SCANTA ROYAL ENFIELD TATA MOTORS

Barriers to entryThe barriers to enter automotive industry are substantial. For a new company, the

startup capital required to establish manufacturing capacity to achieve minimum efficient

scale is ProhibitiveSuppliers power:

The automobile supply business is quite fragmented (there are many firms). Many

suppliers rely on one or two automakers to buy a majority of their products. If an

automaker decided to switch suppliers, it could be devastating to the previous supplier's

business. As a result, suppliers are extremely susceptible to the demands and

requirements of the automobile manufacturer and hold very little power.

Buyers Power:


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Consumer however, became disenchanted with many of the products being

offered by certain automakers and began looking for alternatives, namely foreign cars. On

the other hand, while consumers are very price sensitive, they don't have much buying

power as they never purchase huge volumes of cars.

Threat of SubstitutesWe need to also look at the likelihood of people taking the bus, train or airplane to

their destination. The higher the cost of operating a vehicle, the more likely people will

seek alternative transportation options. The price of gasoline has a large effect on

consumers' decisions to buy vehicles. Trucks and sport utility vehicles have higher profit

margins, but they also guzzle gas compared to smaller sedans and light trucks.

SWOT ANALYSIS:

STREN

GTSIn next 5 years total investment of 220000 crore is envisaged in strengthening roadnetwork

Large untapped marketIncreasing demand for vehicle

WEAKNESSLow level of infrastructureFake components thriving the industryFluctuation in raw material pricesOPPURTUNITIES

Government special packages to fight recessionHigh spending towards development of infrastructure Drastic reduction in REPO and REVERSE REPOINDIA as a global hub for small carsTHREATSIncreasing level of competition in the industry China as a main competitor in global marketBrazil, Mexico, as favorite emerging destinations.

Pharmaceutical Industry

The Indian pharmaceutical industry has portrayed tremendous progress with

reference to infrastructure development, technology base creation and a wide range of


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production. The progressive trend in this sector is expected to continue, due to increased

integration with global trade, which began with the signing of the General Agreement on

Tariffs and Trade (GATT) in January 2005. India started to recognise global patents and

the growing significance of the country in terms of contract research and clinical trials.

The pharmaceutical industry produces bulk drugs belonging to major therapy groups.Globally the Indian pharmaceutical industry ranks 4th in terms of volume (with an 8 per

cent share in global sales), 13th in terms of value (with a share of 1 per cent in global

sales) and produces 20-24 per cent of the world's generic drugs (in terms of value).

The substantial growth in India during this period is obvious from the fact that,

while in 1972, there were only three Indian companies in the top ten ,the rest being

subsidiaries of MNCs in top ten. in 2004 there were only three MNCs in the top ten. In

2004-05 the top 25 companies in the India had a total turnover of Rs. 22132 crores, an 8.9

per cent growth over 2003-2004.subsequent years have seen similar growth.

Porter Analysis 5 force analysisDegree of Rivalry

The industry is having 2400 players within the organized sectors and around 15000

in the unorganized sector. The major manufacturers of the product are Ranbaxy, Cipla,

Cadilla, Dr.Reddys lab, Sun Pharma, and Lupin.

Apart from internal competition, the industry is facing international competition

too. There are large imports of drugs from china. Multinational companies like Pfizer,

Novartis, and abbot labs also pose threat to the local products Niche market

concentrations have been used to provide higher returns by some competitors but the

majority of manufacturers have an extensive assortment of products to offer users.

Substitute products

A strong force affecting branded pharmaceutical products is the increasing

demand for generic pharmaceuticals as a way to contain cost. Generic drug companies do

not have the costs associated with research and development. As a result, generic drugs

typically sell for retail prices 60-90% belowbranded prices.

Potential New EntrantsThis is a weak competitive force. The pharmaceutical market in India is among the

highest ranking in terms of barriers to entry. The cost associated with years of research


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and development, government regulatory compliance and risk associated with the

industry discourages new entrants from entering the market.

Buyers

This is a moderate competitive force. Recent pressure has been put onpharmaceutical manufacturers to contain price increase. The power of large bulk buyers

such as managed care organizations and hospitals has had some pressure on manufactures

to contain costs. However, recent price increases in alternatives such as generic drugs

have reduced buyer's bargaining leverage. Branded pharmaceuticals continue to be a cost-

effective treatment.Suppliers

The concentration of the majority of industry sales among 10 large

pharmaceutical companies has decreased the bargaining power of suppliers. The

pharmaceutical industry is a major customer of the chemical industry. The chemical

industry has an incentive to maintain competitive pricing practices which enhance the

competitiveness of the major player's products in the pharmaceutical industry.

SWOT ANALYSIS

STRENGTS

Third largest scientific pool in the world Indian pharmaceutical industry growing at a speed of 13.7%

Net exporter of bulk drug and formulations. WEAKNESS

Increasing product safety issuesOnly three out of ten Indian companies have access to allopathic drugs.Declining productivity of in-house R&D

OPPURTUNITIES India and China to be the biggest contributor to the 1.5 trillion USD worth globalmarket

With increase in purchasing power, health care expenditure would increase Patent law will lead to consolidation of industry

THREATSIncreasing regulatory framework


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Popular molecules going off patentIncreasing competition

Information Technology:

Information Technology (IT) industry in India is one of the fastest growing

industries. Indian IT industry has built up valuable brand equity for itself in the global

markets. IT industry in India comprises of software industry and information technology

enabled services (ITES), which also includes business process outsourcing (BPO)

industry. India is considered as a pioneer in software development and a favourite

destination for IT-enabled services.

Over the years, Indian IT service companies have established themselves firmly on the

global stage. More than two-thirds of Fortune 500 firms turn to them for part of their IT

and business process outsourcing needs. Some, such as Tata Consultancy Services (TCS),Infosys Technologies and Wipro Technologies, have become global brands, competing

head-to-head with multinational IT service providers.

SWOT ANALYSIS:

STRENGTS:

y Huge growth potential both in terms of domestic and global market y There has been steady increase in the annual contract valuey

Highly competitive work force at cheap ratey Provides huge employment opportunity WEAKNESS

y High dependence on US markety Absence of practical knowledgey Less Research and Developmenty Contribution of IT sector to Indias GDP is still rather small.OPPURTUNITY

y Penetration to north America and UK markety Shift of business model like shift towards Global remote delivery modelTHREATS

y Exposed highly to business cycles y Rising tariff barriers, antidumping safeguards etc


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y china emerging as a favorite IT destinationy changing competitive landscapey currency devaluation trendPORTERS 5 FORCE MODEL:

Degree of RivalryThere is a tuff competition in the industry. Each one is competing for others

market share. There are plenty of software companies in India which have been doing

well. However, some of the top Indian software companies can be listed as:

y Tata Consultancy Servicesy Wipro Limitedy Infosysy HCL Technologiesy Tech Mahindra

Barriers to entryThere are no barriers for the entry of players. That is why thousands of players are

operating in now in India. Suppliers power:

If a talented individual is working in a smaller company than there is every chance

that he may shift his job for the purpose of getting higher salary. So retaining talented

workforce is a real challenge. Other than these suppliers bargaining power is

comparatively less.

Buyers Power:

Buyers enjoy bargaining power in this sector. Huge foreign buyers enjoy the best

possible service in India. China as a emerging destination has enhanced the buyers

powers. But the job is more sort of a technical one so companies can charge high. Threat of Substitute

Threat of substitute is not a significant thing in this industry. China, emerging as a

global hub might cause some problem for Indian IT firms. More advanced technologies

have made advanced countries to depend on countries like India and it is expected to

grow at a faster rate in future.


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Banking IndustryIndian banking has undergone tremendous changes in the past decade in terms of

factors like technology, asset liability structure and competitive scenario. Today, many

Indian banks are on par with their leading Asian counterparts Shift of business model like

shift to, with as many as nine Indian banks, lead by HDFC Bank and ICICI Bank, having

made it to the list of top 50 Asian banks. However the cost of banking intermediation and

the extent of banking penetration in India are still low. As per a technical paper on

differentiated bank licenses released by the Reserve Bank of India less than 59% of adult

population has a loan account with a bank.

The banking industry in India is global in many ways. Most of the banks have

international offices and branches, and almost all the banks have excellent correspondentarrangements with leading banks abroad.

The positive factor about the Indian banking sector is the survival from the US

subprime crisis which has resulted in global liquidity crunch. While the domestic banking

sector did not remain totally unscathed, the extent of hit or damage was negligible as

compared to the banks in the US, which were hit maximum, as well as those in Europe

and even China.

y Infrastructure Software: These include OS, middleware and databases.y Enterprise Software: These automate business process in diverse verticals likesales finance and marketing, production and logistics.

y Security Softwarey Industry-specific Softwarey Contract Programming

PORTERS 5 FORCE MODEL:

Degree of RivalryThe banking sector witnessed immense competition in the adoption and

implementation of new technology. In the post-reform period, technology has not just

brought fundamental changes in product differentiation and delivery, but also influenced

productivity efficiency and profitability of banks.

TOP BANKS OPERATING IN INDIA


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Government

banksPrivate banks Foreign banks

SBI ICICI JSC VBT BANK

CANARA

BANK

HDFC BANK OF CEYLONE

ANDRA BANK AXIS BANK BANK OF AMERICA

PNB KARURVYSYA BANK STANDARDCHARTERD

Barriers to entryThe average person can't come along and start up a bank, but there are services,

such as internet bill payment, on which entrepreneurs can capitalize. Banks are fearful of

being squeezed out of the payments business, because it is a good source of fee-based

revenue. Another trend that poses a threat is companies offering other financial services.Also, when analyzing a regional bank possibility of a mega bank entering into the market

poses a real threat.

Suppliers power:The suppliers of capital might not pose a big threat, but the threat of suppliers

luring away human capital does. If a talented individual is working in a smaller regional

bank, there is the chance that person will be enticed away by bigger banks, investment

firms, etc.Buyers Power:

Buyers enjoy well diversified range of services. With intense competition banks are

offering services like ATM, mobile banking, online banking at a very cheaper rate.

Threat of Substitutes:Banks offer a suite of services over and above taking deposits and lending money,

but whether it is insurance, mutual funds or fixed income securities, chances are there is a

non-banking financial services company that can offer similar services. On the lending

side of the business, banks are seeing competition rise from unconventional companies.

SWOT ANALYSIS

STRENGTHS

Proven asses quality resilience in past downturns.


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Prove management teams, track recordStable industry dynamicsWell established regulatory frame work

OPPORTUN

ITIES

Improving secular GDP growth prospectusRapid financial deepening, i.e. loan growth as multiple of nominal GDP growth Rising consumer spending, consumer credit business Rising corporate capital exchange investmentsM&A optimality.

THREATSPotentially hawkish RBI stand on inflation/monetary policy potential rise in long bond yields, MTM risk for banks Potential for valuation pullback, should earnings delivery disappointexpectations.

WEAKNESSESContinued crowding out effect form Govt. budget deficit, combined with

accelerating private credit demandsExistence of huge loss making co-operative banksEmployee issues regarding merger of state owned ban

Oil and Gas IndustryThe role of Oil and Gas industry is very important in Indian GDP as it is one of the

biggest contributors to both Central and State treasure. Oil and Gas industry has been

instrumental in fuelling the rapid growth of the Indian economy. The petroleum and

natural gas sector which includes transportation, refining and marketing of petroleum

products and gas constitutes over 15 per cent of the country's gross domestic product

(GDP).

As per an Investment Commission report, petroleum exports have also emerged as

the single largest foreign exchange earner, accounting for 11.5 per cent and 15 per cent of

the total exports in 2005-06 and 2006-07.

India ranks sixth in the world in terms of petroleum demand and by 2010, India is

projected to replace South Korea and emerge as the fourth-largest consumer of energy,

after the United States, China and Japan.


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PORTERS 5 FORCE MODEL:

Degree of Rivalry

Slow industry growth rates and high exit barriers are a particularly troublesome situation

for this industry. Until quite recently, oil refineries were a particularly good example. Fora period of almost 20 years, no new refineries were built.Main operators in Indian oil and gas industry are:

Operators Market capitalization(cr)IOC group 73276BPC group 18885ONGC/MRPL 225876Reliance industries 358135Essar oil 16726

HPC 10863Barriers to entry

There are many barriers to enter this industry. The main is the requirement of huge

capital so it is not easy to invest such huge sums. To operate in this industry special

licenses are required. One such license is new exploration licensing policy of 1999. Power of suppliers:

While there are plenty of oil companies, much of the oil and gas business is

dominated by a small handful of powerful companies. The large amounts of capital

investment tend to weed out a lot of the suppliers of rigs, pipeline, refining, etc. There

isn't a lot of cut-throat competition between them, but they do have significant power oversmaller drilling and support companies. Buyers Power:

Enhancing citizens satisfaction is a prime issue before the industry. The oil and

gas companies have initiated a number of measures in the recent past. For redressing

customer grievances quickly companies have provided toll-free numbers, as well as

electronic feedback system through company websites, to lodge complaints

Threat of Substitutes:Oil and gas industry is well established one. But the only alternative for these are

the renewable energy sources. But at present these sources neither dependable noraffordable for the general public.

SWOT ANALYSIS


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Strengths:Healthy competitionEntering global marketConcentration towards cost reduction

WeaknessMounting losses of oil and gas marketing companies Failure towards domestic exploration and production

ThreatsFluctuations in global oil prices High regulation and intervention of government Shrinking oil reserves throughout the world Geo political risks and uncertainty

Opportunity:

Exploration and production of oil at the global level Bilateral ties between India, Pakistan, Iran towards gas pipelineMore simplification of licensing norms

TELECOM INDUSTRY

Amidst all the talk of slowdown in the Indian economy, telecom industry has had

a fairly good year in terms of subscribers addition and revenue growth in 2008.mobile

service companies have managed to add subscribers at the rate of 8 million subscribers a

month in 2008.this makes India the second fastest growing market for mobile services in

the world. But an analysis of the top four telecom players ,which account for nearly 80%

of the mobile market shows that while subscribers growth is phenomenal, revenue growth

has not kept in pace. While subscribers have grown at 48 -80 percent for different

operators in calendar year 2008-09, revenue has grown only by 21-49 percent. Reflecting

this trend, the average revenue per user has fallen by 4-26 percent over the years for top 4

players.


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A variety of reasons could explain this lag. One, as metros and cities reach

saturation in terms of mobile penetration-close to 100 percent in metros such as Delhi,

Mumbai, Chennai, operators are now looking increasing their presence in rural and sun-

urban areas where penetration is as low as 6-50 percent. For this tariff has to be lowered

significantly to tap volumes in this new market. Another interesting aspect of thissubscribers driven growth has been that it has not led to any substantial increase in the

minutes of usage or talk time for subscribers.

3G services are expected to offer sound, data video application at faster

throughput. This would allow operators to offer high end value added services, which

would improve the realizations of mobile operators

5 FORCE MODEL:

Degree of Rivalry:There is a tough competition in telecom sector. With the entry of new and new

player into the market, each one is trying to grab others share. Top Players in Indian Telecom industry-2008:Company Subscribers(in millions)Bharti 85.6Vodafone 60.9Idea 38.0Rcom 61BSNL 55.24

Barriers to entryTRAI controls the telecom operators in India. A new entrant can obtain the

permission of TRAI, that is not difficult but to enter as the eighth or ninth player in a

circle is an unenviable proposition. Even if they are able to get the towers from rent,

network expenditure runs to billions of dollars. Adjusting funds in this competition and in

tight credit environment is not easy. Power of Suppliers:

Without high-tech broadband switching equipment, fiber-optic cables, and mobile

handsets and billing software, telecom operators would not be able to do the job of

transmitting voice and data from place to place. But there are actually a number of large

equipment makers around. There are enough vendors, arguably, to dilute bargaining

power. The limited pool of talented managers and engineers, especially those well versed


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in the latest technologies, places companies in a weak position in terms of hiring and

salaries.Buyers Power:Buyers enjoy good bargaining power in this market. Low call rates, decreased recharge

value, substantial increase in the minutes of usage or talk value for subscribersThreat of Substitutes:Products and services from non-traditional telecom industries pose serious substitution

threats. Cable TV and satellite operators now compete for buyers. The cable guys, with

their own direct lines into homes, offer broadband internet services, and satellite links can

substitute for high-speed business networking needs.SWOT ANALYSIS

Strengths:The telecommunication sector is the major contributory in India's GDP

growth which is presently over 7%.Despite the financial slowdown, the industry continued its high growth rate India has become second largest wireless network in the world after China but also

witnessed massive growth in tele- density.Weakness:It would be difficult to make in-roads into the semi-rural and rural areas because of

the lack of infrastructure. The sector requires players with huge financial resources

entry fees and bank guarantees represent a sizeable share of initial investments.Problem of limited spectrum availability and the issue of interconnection charges

between the private and state operators.Threats:Heavy competitions between the playersFailed merger deals demotivated the others to some extentCutting-Edge Technologies

Opportunity:An attractive trade and investment policy and lucrative incentives for foreign

collaborations have made India one of the world's most attractive markets for thetelecom equipment suppers and service providers

The telecom sector has been successful in attracting significant domestic andglobal investment.

There is still huge potential for growth lying pending in rural areas.


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Overseas investment opportunitiesOVERALL INDUSTRY CHART

Industry PE(2009) Growth

(%)

Value Drivers Contribution to

GDP (%)Automobile 38.39 15-27 Production in

SEZ5

Telecom 13.24 30-45 2.8

pharmaceutical 23.01 15-18 Deployingcaptive power

plants, patents

3.2

Oil and Gas 32.01 3-5 Capacityutilization

18.4

Banking 9.77 15-22 Cost reduction 13.2IT 24.43 35-38 Cost reduction 3.9

Recent strategies:Recent strategies Auto

mobilesTelecom

Launching of newproducts

Yes Yes

New market Yes Yes

Increase no. Of branches - -

Subscribers - Yes

FDA approvals, patents - -

COMPANY ANALYSIS


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In the company analysis the investor assimilates the several bits of information

related to the company and evaluates the present and future values of the stock. The risk

and return associated with the purchase of the stock is analysed to take better investment

decisions. The valuation process depends upon the investors ability to elicit information

from the relationship and inter-relationship among the company related variables.In this report the financial aspects of the companies are studied with the help of

following ratios.

Earnings per Share: This indicates the post-tax profits earned per share.Earnings per share are measure of a companys ability to generate after tax profits per

share held by the investors. This ratio is computed with the help of following formula:

Earnings per share= Profit after tax

No. of equity sharesPE Ratio: This ratio indicates the relationship between the market price of a shareand the earnings per share.

PE Ratio= current Market price per shareEPS

Price earnings ratio highlights the connection between the price and the recent companys

performance. It is also a multiplying factor that the market is willing to offer to the

companys future earnings. The investors generally compare the PE ratio of the company

with that of the industry and market. A P/E ratio lower than that of industry means that

the stock is underpriced

Return on Net worth: This indicates the post-tax return on shareholders funds.Return on Net worth= Profit after tax

Shareholders fundsReturn on net worth is seen as a measure of how well a company used reinvested earnings

to generate additional earnings.

Net Profit Ratio: This ratio shows the percentage of Net Profits to the total sales. Net profit margin indicates how much a company is able to earn after accounting for allthe direct and indirect expenses to every rupee of revenue.

Net Profit Margin = Net Profit/ Turnover*100


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Dividend Payout Ratio: This ratio shows the percentage of profits that aredistributed as dividends.

Dividend Payout Ratio=Dividend paid*100After tax profits

Debt equity ratio=It compares the creditors funds with owners funds. It indicateshow much money is being placed by creditors as that of equity holders. It

represents the borrowed funds in the total capital of the company.

Debt equity ratio= Total debtNet worth

Return on capital employed = the return on capital should be computed beforeaccounting for the interest on borrowed capital. Here income tax is also not

considered.

Return on capital employed= Earnings before interest and taxesTotal capital employed

Information Technology Industry

EPS of Information Technology companies

COMPANY 2004-05 2005-06 200


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Infosys 70.38 87.86 66.23

TCS 38.15 55.53 38.39

Wipro 21.25 14.17 19.48

Interpretation:

Earnings and sales of the company are related. Growth in earnings also influences value

of the stock. It depends also on the earnings retained and reinvested in the firm. In its


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industry Infosys EPS is increasing on y-o-y basis, and its EPS is highest among its peers.

Compared to Wipro TCS has a very fluctuating EPS.

Oil and gas industry

EPS of Oil and Gas companies:

Companies 2004-05 2005-06

ONGC 91.05 101.20

BPCL 32.19 9.72

GAIL 23.11 27.32

Interpretation:

Among the selected Oil and Gas companies ONGCs performance in EPS is the best.

The EPS of ONGC is substantially higher than that of BPCL and GAIL from 2005 to

2009.ONGC has generated average EPS of 83.7, highest among all, followed by BPCL

and GAIL. EPS shows ONGC is efficient of all oil majors.

Banking industry

EPS of Banking Industry


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Companies 2004-05 2005-06 2006-07

ICICI 27.22 28.55 34.59

SBI 81.79 83.73 86.29

HDFC 41.61 50.38 62.07

Interpretation:

EPSof ICICI, SBI, and HDFC have shown an increasing trend. Because of market

fluctuation ICICI performance has come down compared to its peers. But the decline is

not that significant. Analysis reveals that SBI is most efficient bank in terms of generating

EPS.EPS of SBI increased by almost 35% in 2008-09.

Pharmaceutical industry

EPS of Pharma companies:

Companies 2004-05 2005-06


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Dr.Reddy's 8.55 27.53

Cipla 13.66 20.26

Sun Pharma 16.48 24.83

Interpretation:

Among the three Sun Pharma has substantially high EPS.but if we observe the average of

last 5years, EPS of Dr.Reddys and Sun pharma,it shows that they dont differ

significantly. It also shows that Sun Pharma had been fluctuated a lot in EPS.Table shows

that Sun Pharma is most efficient of all in the industry.

Automobile industry


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EPS of Automobile companies:

Companies 2004-05 2005-06

Tata Motors 34.19 39.94

Hero Honda 40.59 48.64

Maruti Suzuki 29.55 41.16

Interpretation:

The above table shows that there has been increase in the Earning per Share of the

selected automobile companies. Tata Motors and Maruthi Suzuki have continuous growth

in their EPS except in the year 2008-09, whereas Hero Honda leads the rally with

maximum EPS in 2008-09. Maruthi Suzuki has registered a constant growth except 08-09. The increase in the Net Profits of these companies is the reason for such increase in

the EPS.

Telecom industry


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EPS of Telecom companies:

Companies 2004-05 2005-06

Airtel 6.53 10.52 21.27

Rcom 11.38

Idea .10 .56 1.94

Interpretation:

Among the three Airtel which has posted better results, has better EPS.Airtel has been

registering good EPS in the last three years. This is followed by Rom and Idea. Idea has

posted decreased EPS.If we go by trend Rcom has better prospects because growth in its

EPS is almost 85% for the year 2008-09.

PE Ratio:

Automobile Industry: PE Ratio of Automobile companies

Companies 2004-05 2005-06


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Maruthi Suzuki 14.33 13.88

Interpretation:

PE ratios compare the PE of individual companies with that of industry. Among

the selected companies in the automobile sector Maruthi has better PE followed by Tata

motors and Hero Honda. Almost all have registered healthy increase in their PE in the

year 2008-09.

Information Technology Industry:

PE Ratio of IT companies

Companies 2004-05 2005-06


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Infosys 37.20 28.06

TCS 21.88 25.79

Wipro 38.33 36.82

Interpretation:

All the selected companies have found decrease in their Price to Earnings ratio in

the 2007-08.but all of them successfully increased their PE in 08-09. Wipro has better

aggregate PE than other two. PE ratios of individual IT companies are slightly above the

PE of industries which is a good sign.

Pharmaceutical Industry:

PE Ratio of Pharmaceutical companies

Companies 2004-05 2005-06

Dr.Reddys 89.97 32.65


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Cipla 18.60 18.57


Interpretation:

Comparatively Dr. Reddys has the highest PE Ratio in the pharmaceutical

industry (aggregate).sun Pharma has the highest PE in the year 2008-09.From the

investors point of view, all the companies have higher PE than that of industry. Thisshows that company shares are overpriced.

Oil and Gas Industry:

PE Ratio of Oil and Gas companies

Companies 2004-05 2005-06 2006-0

ONGC 7.47 9.29 13.57

BPCL 10.97 38.14 6.80


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GAIL 7.81 8.25 8.89

Interpretation:

Among the oil and Gas sector companies BPCL has better PE ratio followed by

ONGC and GAIL.BPCLs PE ratio fluctuated a lot in the past that to in the year 2006-07

from its previous year. But compared to other industries PE of this industry is far higher

than that of individual companies which shows that stocks are underpriced.

Banking Industry:

PE Ratio of Banking companies

Companies 2004-05 2005-06 20

ICICI 10.79 17.23 20.29

SBI 6.29 9.40 11.42

HDFC 15.47 18.16 20.81


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Interpretation:

PE Ratios of Banking sector has been increasing continuously over the years. HDFC has

maintained highest PE Ratio in all the previous five years among the selected banks.ICICI (20.15) is in the second position followed by SBI (11.586).In this industry

investors have good potential because majority of banks have lower PE than that of their

industry.

TELECOM INDUSTRY

PE Ratio of Banking companies

Companies 2004-05 2005-06 2006-

Airtel 11.23 10.11 12.12

Rcom 13.23 11.24

Idea 12.23 13.34 9.34


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Interpretation:

Among the three Rcom has highest PE ratio in 2009.but Idea has better PE than that of

other two (12.514). Rcom has registered high increase in its PE in the year 2008-09

from its previous year. In case of Rcom its PE is far higher than that of industry which

shows that the stock is overpriced.

Automobile Industry:

Return on Net worth:

Return on Net worthof Automobilecompanies (%)

Companies 2004-05 2005-06

Tata Motors 30.21 27.81 28.00

Hero Honda 54.27 48.34 34.73

Maruthi Suzuki 19.49 21.80 22.78


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Interpretation:

Return on net worth or return on equity shows the efficiency of the management in

utilising shareholders fund. According to this table Hero Honda has been showing betterreturn on net worth (agg 40.694).Followed by Tata motors and Maruthi. Through this

chart we can also observe that RONW of all the companies have declined over the years.

The reason could be decline in overall performance.


Return on Net worthof ITcompanies (%)

Companies 2004-05 2005-06

Infosys 35.29 36.21

TCS 55.14 48.43

Wipro 30.55 31.43

Interpretation:


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Among all the companies TCS had made the highest return on net worth of 55.14 in the

year 2005.which is maximum RONW by individual company in this sector.TCS also has

the highest aggregate return on net worth of 45.334 followed by Infosys (34.556) and

Wipro (28.54).


Return on Net worthofPharmaceuticalcompanies (%)

Companies 2004-05 2005-06 2006

Dr.Reddys 3.15 9.33 26.

Cipla 26.53 30.78 20.

Sun Pharma 26.55 29.25 23.

Interpretation:

Among all the companies Sun Pharma has the highest return on net worth and considered

as most efficient company. Cipla had registered the highest return on net worth in the year

2005-06. Dr Reddys had made the highest RONW in the year 06-07. but it came down

drastically in the very next year which shows that its RONW fluctuated a lot over the

years for Dr.Reddys.



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Return on Net worthof Oil and Gas companies (%)

Companies 2004-05 2005-06 2

ONGC 28.03 26.92

BPCL 15.11 3.21

GAIL 22.65 23.16

Interpretation:

Return on net worth of ONGC is highest among all the selected companies. Followed by

GAIL, Whereas BPCL has the lowest aggregate RNOW.BPCL had registered lowest

return on net worth of 3.21 in the year 2005-06.thus ONGC is the most efficient company

in generating additional earnings by using invested earnings.

Banking industry:

Return on Net worthof banking companies (%)

Companies 2004-05 2005-06 2006-07


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ICICI 18.66 14.33 13.17

SBI 17.88 15.94 14.50

HDFC 26.69 28.14 28.29

Interpretations:

Among the selected Banks HDFC has the highest RONW of (aggregate 24.17).

RONW of HDFC and ICICI had decreased in the year 08-09.Whereas RONW of SBI has

increased in the same year and now it is also showing the positive trend. RONW of ICICI

is not favourable.

TELECOM

Return on Net worthoftelecom companies (%)

Companies 2004-05 2005-06 2006-07


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Airtel 27.08 27.47 35.35

Rcom .04 11.52

Idea 2.55 10.74 23.04

Interpretations:

Airtels return on net worth is far better than that of its competitors, and can be

considered as most efficient telecom company from the point of view of investors.

Rcoms return on net worth is comparatively lowest among all the players in the

industry and company should work more towards improving it .

Net Profit Ratio:

Automobile industry:

NetProfit Ratioof automobilecompanies : (%)

Companies 2004-05 2005-06



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Maruthi Suzuki 7.57 9.53

Interpretations:

Net profit ratio of Hero Honda is highest among all the selected players(10.01%).followed by Maruthi and Tata Motors. Profit percentage of Tata motors has

come down drastically for in the year 2008-09, whereas Maruthi has been showing

fluctuating profit percentages.


Companies 2004-05 2005-06

Infosys 18.48 58.32

TCS 22.63 24.05


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Wipro 20.45 19.53

NetProfit Ratioof ITcompanies : (%)

Interpretations:

Net profit ratio of Infosys is highest among all the selected companies

(27.27%).but its been a bumpy ride for Infosys with 45.7% decrease in its profits in the

year 2008-09 from 2007-08.TCS has maintained a stable net profit ratio with very

impressive results. Decline in net profit margin of all could also be due to market

condition.


NetProfit RatioofPharmaceuticalcompanies (%)

Companies 2004-05 2005-06 200

Dr.Reddy's 4.06 10.08 2

Cipla 18.02 20.12 1

Sun Pharma 24.78 25.85 2


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Interpretations:

Among the selected pharmaceutical companies Sun Pharma has seen growth in its

Net Profit margin and in the last two years its margin is much better than that of other two

companies. Cipla has maintained its Net Profit margin above 14% though it has found

decrease in its margin in the last two years. Margin of Dr. Reddys has been very much

volatile.


NetProfit Ratioof Oil and Gas companies (%)

Companies 2004-05 2005-06

ONGC 27.26 28.93

BPCL 1.65 0.38

GAIL 14.00 13.74


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Interpretation:

Among the selected Oil and Gas companies ONGC has Net Profit margin of above

20% and it is much better than other two companies. Its margin (aggregate) is also above

25% .GAIL has maintained its margin between 11% and 15%. But BPCL has very low

margin compared with other two companies. By widening its operations beyond the

national boundaries ONGC has ensured not only high growth but also consistency. The

one reason could also be decreased net profit because of increasing oil subsidy.

Banking Industry:

NetProfit Ratioof Banking companies (%)

Companies 2004-05 2005-06

ICICI16.32 14.12

SBI 11.56 11.21

HDFC 14.72 16.43

Interpretation:


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SBI is in the first place in Net Profit margin among the selected Banks (11.312).

ICICIs margin has been decreasing since 2005-06 and is showing downward trend. Its

margin has come down to below 10% in the year 2008-09. SBI has maintained its margin

between 10% and 12.5% in the last five years

TELECOM

NetProfit Ratioof Banking companies (%)

Companies 2004-05 2005-06

Idea 1.63 6.24 10.82

Airtel 14.13 17.68 22.46

Rcom - - 18.15

Interpretation:

Net Profit ratio of Rcom (22.02) is better than other two players. In the year 2008 -

09 ROMs net profit ratio has increased by almost 75% from its previous year. Airtel

which is second in the race is also performing well with slightly decreased net profit


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margin in the year 2008-09. But ideas net profit has come down drastically in the year

2008-09 by almost 33%.

Dividend Payout Ratio:

Dividend Payout Ratioof Automobilecompanies

Companies 2004-05 2005-06



MaruthiSuzuki 7.73 9.69



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Interpretation:

Among the selected companies Hero Honda has paid more dividends out of its

profits. Its Dividend Payout Ratio has come down by 52% in 2008 -09 compared to 2007-08. Tata Motors DP ratio has come down gradually and is in the second position.

Maruthi has been paying fewer dividends out of its profits and it has kept it below 10%.


Dividend Payout Ratioof ITcompanies

Companies 2004-05 2005-06 200

Infosys 18.48 58.32 1

TCS 34.21 27.72 3

Wipro 26.83 40.23 3

Interpretation:

IT industrys Dividend Payout Ratio has seen variations over the years. They paid

good dividends in the past. Infosys and Wipro had paid the highest dividend in the year


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2005-06, whereas TCS in the year 2007-08.Aggarage dividend payout ratio of Infosys is

highest (34.69) followed by TCS and Wipro.


Dividend Payout RatioofPharmaceuticalcompanies Companies 2004-05 2005-06

Dr.Reddys 66.64 20.71

Cipla 29.27 29.17


Interpretation:

In the selected Pharmaceutical companies Cipla and Dr.Reddys are in first and

second position with aggregate 26.99 and 26.272. Dr.Reddys had the record of paying

maximum dividend in the year 2004-05. Sun Pharma DP ratio has increased gradually

over the years.


Dividend Payout Ratioof Oil and Gas companies


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Companies 2004-05 2005-06 2

ONGC 49.91 50.70

BPCL 44.21 35.33

GAIL 39.35 41.74

Interpretation:

The above table shows that ONGC has the highest dividend payout ratio amongthe selected companies of Oil and gas industry. Its ratio is more than 45 in all the years

and its consistency in payment of dividend is noteworthy. GAIL has maintained its

payout ratio between 38% and 42%. GAIL had paid more than 35 of its profits as

dividend till 2006-07 but the ratio has drastically come down to 9.72 in 07-08 and 12%in

08-09.

Banking Industry:

Dividend Payout Ratioof banking industry


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Companies 2004-05 2005-06 2006

ICICI 36.05 34.08 33.

SBI 17.46 19.06 18.9

HDFC 46.58 45.26 41.4

Interpretation:

Dividend Payout ratios of Indian banks are in upward trend as depicted in the

table. HDFC has been in first position among the selected banks. It has also maintained

consistency in dividend payment, and its ratio increased from 34.10 to 43.55% in 08-09.

In the last year Payout ratios of SBI and ICICI also have increased.

TELECOM INDUSTRY:

Dividend Payout Ratiooftelecom industry

Companies 2004-05

2005-06 2006-07 2007-08 2008-09 Average

Airtel - - - - 5.73 5.73


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Rcom - - 4.96 7.00 4.02 5.26

IDEA - - - - - -

Interpretation:

In telecom sector track record of payment of dividend is not that good.

Comparatively Rcom has been paying good dividends to its shareholders. Idea never paid

the dividend in last five years. In the year 2008-09 Airtel paid the highest dividend in the

year 2008-09.

RETURN ON CAPITAL EMPLOYED

Return on capitalemployed of banking industry (%)

Banking Industry:

Companies 2004-05 200

ICICI 70.54 56.24

SBI 105.35 97.89

HDFC 50.77 60.06


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Interpretation:

Return on capital employed of SBI is highest. It has provided more than 100% return to

its stakeholders. It has given the return of 100.35 in the year 2008 -09.which is more than

14% increase than its previous year. But ICICI and HDFCs return is too less compare to

SBI.ICICI and HDFCs RNOW (aggregate) is almost similar.



Companies 2004-05 2005-06

ONGC 40.38 37.46 37.12

BPCL 14.94 04.53 16.67

GAIL 28.31 29.20 23.23

Interpretations


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Return on investment of ONGC is highest among the industry players. ONGCs

aggregate return is more than 35, which is far higher than BPCL.ONGC has performed

not only consistently but also effectively.



Companies 2004-05 2005-06

Tata Motors 24.49 26.47 25.82

Hero Honda 67.12 60.31 43.48

Maruthi Suzuki 28.08 33.46 30.56

Interpretation:

Among the selected automobile companies Hero Honda has the record of paying

maximum return to its share holders. Tata motors return on investment has decreased


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considerably in 2008-09.The decrease in the year 2008-09 is more than 66%. which is a

worrisome factor from the investors point of view.


Companies 2004-05 2005-06 2006-07

Dr.Reddys 5.34 8.90 30.74

Cipla 26.93 26.67 23.40

Sun Pharma 60.93 50.28 49.87


Interpretation:

Among the selected companies Sun Pharma has maximum aggregate of

49.43.eventhough return of Sun Pharma has come down drastically compared to 2004 -05

it successfully remained on the Top list. Dr.Reddys ROC has come down by almost56.21% compared to 2006-07.comparatively Cipla, performed more consistently.


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Companies 2004-05 2005-06

InfosysTCS 67.25 55.70 49.87

Wipro 22.72 28.70 39.72

Interpretation:

Return on investment of TCS is more than that of other players in the industry. But

at the same time return on Wipro has been increasing year after year which is a good sign

for the stakeholders of Wipro.

Telecom industry



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Companies 2004-05 2005-06

Airtel 19.27 20.74 29.06

Rcom - - 10.96

IDEA 7.52 10.44 14.96

Interpretation:

Return on capital employed of telecom industry has been showing fluctuating

results. Airtel has shown good returns for the stakeholders than Rcom and idea with an

aggregate of 25.084.In ROCE Idea stands second, and Rcom third. Rcom ROCE has

come down drastically by 69%.That is not good news for the stake h olders of Rcom

DEBT-EQUITY RATIO


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Telecom industry

Companies 2004-05 2005-06 2006-07

Airtel 1.10 .65 .47

Rcom .41

Idea 2.58 4.98 1.95

Interpretation:

In the above table Idea has the highest debt-equity ratio. Usually debt should be

less than two times of equity. Here both Rcom and Airtel have better position in this

regard. But Airtel ratio is too less compared to other two. If the debt -equity ratio is ideal it

will minimise the overall cost of equity. Idea has high Debt-equity ratio.

Pharmaceutical industry:

Debtequity ratioofPharmaceutical industry

Companies 2004-05 2005-06 2006-07


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Dr.Reddys .13 .41 .08

Cipla .13 .24 .04

Sun Pharma 1.64 1.19 .44

Interpretation:

Among the three in 2009 Cipla has better debt-equity ratio. Sun Pharma has been

showing decreasing debt-equity ratio over the years. Actually it shows its decreasing debt in

its balance sheet which is not always good. But in net aggregate Debt equity ratio sun Pharma

stands first.

Banking industry:

Debtequity ratioof banking industry

Companies 2004-05 2005-06


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ICICI 9.78 9.027 11.42

SBI 15.25 13.75 13.92

HDFC 9.44 10.46 10.30

Interpretation:

Debt equity ratio of banking industry has been very fluctuating. Among the three SBI

has the highest debt-equity ratio followed by ICICI.ICICIs debt equity ratio has been

decreasing since 2007-08. The same thing happened for HDFC also .But it successfully

increased its DP ratio in the year 2008-09.


Debtequity ratioofoil and gas industry

Companies 2004-05 2005-06


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ONGC.21 .24 .24

BPCL .61 .92 1.05

GAIL .23 .19 .12

Interpretation:

Among the three BPCL has better debt-equity ratio. This is moderate one where as

Gail and BPCL have very less debt in their capital structure. BPCL has been increasing debt

portion in its capital structure, at the same time GAILs debt equity ratio has been decreasing.


Companies 2004-05 2005-06 2006-07

Tata Motors .61 .53 .59


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Hero Honda .14 .09 .07

Maruthi Suzuki .07 .01 .09

Debtequity ratioof automobile industry

Interpretation:

Compared to its competitors Tata motors debt-equity ratio has increased

drastically in the year 2008-09 compared to previous years. Tata motors has highest

aggregate debt equity ratio of .718.whereas Hero Honda and Maruthi Suzuki have very

less debt equity ratio. Maruthis debt equity ratio is lowest among all the players in the

industry.


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TECHNICAL ANALYSISTechnical analysis is a security analysis technique that claims the ability to forecast the

future direction of prices through the study of market data, primarily price and Volume.

In its purest form, technical analysis considers only the actual price and volume Behavior

of the market or instrument. Technical analysts, sometimes called "chartists", mayemploy models and trading rules based on price and volume transformations, such as the

relative strength index, moving averages, regressions, inter-market and intra-market price

correlations, cycles or, classically, through recognition of chart patterns. Technical analysis stands in distinction to fundamental analysis. Technical analysis

ignores" the actual nature of the company, market, currency or commodity and is based

solely on "the charts," that is to say price and volume information, whereas fundamental

analysis does look at the actual facts of the company, market, currency or commodity. For

example, any large brokerage, trading group, or financial institution will typically have

both a technical analysis and fundamental analysis team. Just as there are many investment styles on the fundamental side, there are also

many different types of technical traders. Some rely on chart patterns; others use technical

indicators and oscillators, and most use some combination of the two. In any case,

technical analysts' exclusive use of historical price and volume data is what separates,

them from their fundamental counterparts. Unlike fundamental analysts, technical

analysts don't care whether a stock is undervalued - the only thing that matters is a

security's past trading data and what information this data can provide about where the

security might move in the future.

ASSUMPTIONS1. The Market Discounts EverythingA major criticism of technical analysis is that it only considers price movement, ignoring

the fundamental factors of the company. However, technical analysis assumes that, at any

given time, a stock's price reflects everything that has or could affect the company

including fundamental factors. Technical analysts believe that the company's

fundamentals, along with broader economic factors and market psychology, are all priced

into the stock, removing the need to actually consider these factors separately. This only

leaves the analysis of price movement, which technical theory views as a product of thesupply and demand for a particular stock in the market.

2. Price Moves in Trends


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In technical analysis, price movements are believed to follow trends. This means that

after a trend has been established, the future price movement is more likely to be in the

same direction as the trend than to be against it. Most technical trading strategies are

based on this assumption.

3. History Tends To Repeat ItselfAnother important idea in technical analysis is that history tends to repeat itself, mainly in

terms of price movement. The repetitive nature of price movements is attributed to market

psychology; in other words, market participants tend to provide a consistent reaction to

similar market stimuli over time. Technical analysis uses chart patterns to analyze market

movements and understand trends. Although many of these charts have been used for

more than 100 years, they are still believed to be relevant because they illustrate patterns

in price movements that often repeat themselves.Not Just for Stocks

Technical analysis can be used on any security with historical trading data. This includesstocks, futures and commodities, fixed-income securities, Forex, etc. In this tutorial, we'll

usually analyze stocks in our examples, but keep in mind that these concepts can be

applied to any type of security. In fact, technical analysis is more frequently associated

with commodities and Forex, where the participants are predominantly traders.The CriticsSome critics see technical analysis as a form of black magic. Don't be surprised to see

them, question the validity of the discipline to the point where they mock its supporters.

In fact, technical analysis has only recently begun to enjoy some mainstream credibility.

While most analysts on Wall Street focus on the fundamental side, just about any majorbrokerage now employs technical

Pim Project 2008

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