1 Equity Research through Technical Analysis CORPORATE INTERNSHIP PROGRAM PROJECT REPORT SUBMITTED IN PARTIAL FULFILMENT OF PGDM PROGRAM 2014-16 Submitted By Name: Deepesh Sharma Roll No: 108 Company Mentor Faculty Mentor Name: Mr. Raj Bardhan Kr. Singh Name: Dr Sharad Chaturvedi Designation: Sr. Manager- Research Designation: Associate Professor (Technical & Derivatives) Company: Bajaj Capital Delhi
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Equity Research through Technical Analysis
CORPORATE INTERNSHIP PROGRAM PROJECT REPORT
SUBMITTED IN PARTIAL FULFILMENT OF PGDM PROGRAM 2014-16
Submitted By
Name: Deepesh Sharma
Roll No: 108
Company Mentor Faculty Mentor
Name: Mr. Raj Bardhan Kr. Singh Name: Dr Sharad Chaturvedi
Designation: Sr. Manager- Research Designation: Associate Professor
(Technical & Derivatives)
Company: Bajaj Capital
Delhi
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Certificate from Company
This is to certify that Deepesh Sharma, a student of PGDM
Programme, (2014-16) Batch of Fortune Institute of International
Business, and Delhi has undertaken the Corporate Internship
Training at Bajaj Capital during 20/04/2015 to 20/06/2015 under my
supervision & guidance. He has conducted a study & completed the
Project on “Equity Research through Technical
Analysis________________________
During Training his/her work was ___________________
Seal of Organization Signature of Company
Mentor
Date: Name of Company Mentor
Designation of Company
Mentor
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Certificate from Faculty Mentor
This is to certify that the Project Report titled “Equity Research
through Technical Analysis is a bonfire work carried out by
Deepesh Sharma of PGDM (2014-16) Batch of Fortune Institute of
International Business, Delhi as a fulfillment of PGDM Programme.
He has worked under my guidance and satisfactorily completed
his/her project work.
Date:
Name and Signature of Faculty Mentor
Dr Sharad Chaturvedi
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Declaration by the Student
I, hereby, declare that the work presented in this report, entitled “Equity Research through
Technical Analysis” in fulfillment of the requirements for PGDM Programme, submitted
to Fortune Institute of International Business, Delhi is an authentic record of my own work
and is free from any type of plagiarism, carried out under the supervision of Mr. Raj
Bardhan Kr. Singh
I also declare that the work embodied in the present report
(i) Is my original work and has not been copied from any source, and
(ii) Has not been submitted for any other Degree or Diploma of any university/Institution.
Name and Signature of Student
Roll No.
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Acknowledgement
“It is not possible to prepare a project report without the assistance & encouragement of
other people. This one is certainly no exception.”
On the very outset of this report, I would like to extend my sincere & heartfelt obligation
towards all the personages who have helped me in this endeavor. Without their active
guidance, help, cooperation & encouragement, I would not have made headway in the
project.
I am ineffably indebted to Mr. Raj Bardhan Kumar Singh for conscientious guidance and
encouragement to accomplish this assignment. I am also thankful to Miss ITI Verma
I am extremely thankful and pay my gratitude to my faculty Dr. Sharad Chutervedi for her
valuable guidance and support on completion of this project.
I extend my gratitude to Fortune Institute of International Business for giving me this
opportunity.
I also acknowledge with a deep sense of reverence, my gratitude towards my parents and
member of my family, who has always supported me morally as well as economically.
At last but not least gratitude goes to all of my friends who directly or indirectly helped me
to complete this project report.
Deepesh Sharma (108)
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Executive Summary
The Indian Equity market is divided in to two parts Primary market - where the share is
first issued in the form of IPO and after issuing the share it gets listed on exchange and
these share are traded on exchange where shares can be bought and sold this is secondary
market. In India mainly there are two exchange -NSE (National Stock Exchange) BSE
(Bombay Stock Exchange). BSE is the oldest exchange in India that started in 1875
whereas NSE started operation on 1994.
The equity market is studied in types i.e. technical analysis looks at the price movement of
a security and uses this data to predict its future price movements. Fundamental analysis,
on the other hand, looks at economic factors, known as fundamentals. Technical analysis
really just studies supply and demand in a market in an attempt to determine what
direction, or trend, will continue in the future. In other words, technical analysis attempts
to understand the emotions in the market by studying the market itself, as opposed to its
components. If you understand the benefits and limitations of technical analysis, it can give
you a new set of tools or skills that will enable you to be a better trader or investor.
Technical analysis is a method of evaluating securities by analyzing the statistics generated
by market activity, such as past prices and volume. Technical analysts do not attempt to
measure a security's intrinsic value, but instead use charts and other tools to identify
patterns that can suggest future activity The Technical Approach to investment is
essentially a reflection of the idea that prices moves in a trend that are determined by the
changing attitude of investor’s toward a variety of economic, monetary, political and
psychological forces. The art of technical analysis, for it is an art, is to identify a trend
reversal at a relatively early stage and ride on that trend until the weight of the evidence
shows or proves the trend has reversed. Charts are often used to ease understanding of
large quantities of data and the relationships between parts of the data. Charts can usually
be read more quickly than the raw data that they are produced from. The foundation of
technical analysis is the charts. Financial market is a head on head battle between the Bulls
(buyers) and the Bears (Sellers), bulls pushes the prices higher and bears pushes the prices
lower. The direction of price movement revels who’s winning the battle. Support and
resistance represent key points where the demand and supply meet. The market generally
moves in two directions i.e. uptrend and downtrend.
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Technical analysis really just studies supply and demand in a market in an attempt to
determine what direction, or trend, will continue in the future. In other words, technical
analysis attempts to understand the emotions in the market by studying the market itself, as
opposed to its components. If you understand the benefits and limitations of technical
analysis, it can give you a new set of tools or skills that will enable you to be a better trader
or investor. Technical analysis is a method of evaluating securities by analyzing the
statistics generated by market activity, such as past prices and volume. Technical analysts
do not attempt to measure a security's intrinsic value, but instead use charts and other tools
to identify patterns that can suggest future activity The Technical Approach to investment
is essentially a reflection of the idea that prices moves in a trend that are determined by the
changing attitude of investor’s toward a variety of economic, monetary, political and
psychological forces. The art of technical analysis, for it is an art, is to identify a trend
reversal at a relatively early stage and ride on that trend until the weight of the evidence
shows or proves the trend has reversed.
During the period of one month the buy calls were based on strong support level,
Indicators buy signal, chart patterns and candlestick patterns. Some of the shares were
picked on basis of news, quarterly result announcement, government announcements.
Technical analysis helped to predict the future price movement of share to an accuracy of
69%. As warren buffet implies that we can’t predict the future price movements but this
study proves that the market can be studied with the help of technical analysis. Technical
analysis is used to do trading i.e. investment for short term and fundamental analysis is
used for investment purpose i.e. for long term.
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Table of Contents
S.No. Chapter
No.
Contents Page
No.
1 Title Page
2 Company Certificate
3 Faculty Mentor Certificate
4 Declaration
5 Acknowledgement
6 Executive Summary I-II
7 Table of Contents / List of Illustrations III-V
8 Chapter 1 Introduction to the Sector/ Company 1-32
9 Company profile 1-2
10 Introduction- Equity Market India 2-3
12 Introduction Equity Market Analysis 4-5
13 Technical analysis and fundamental analysis 6-7
14 Introduction-Charts 8-9
15 Introduction- Support & Resistance 10-12
16 Introduction-Trend 12-13
17 Technical Analysis Chart Patterns 13-18
18 Japanese candlestick Introduction 18-26
19 Technical Analysis Indicators 27-32
11 Chapter 2 Review of Literature 33-34
20 Chapter 3 Project Objectives 35
21 Chapter 4 Project Methodology Adopted 36-37
22 Chapter 5 Data Analysis & Interpretation / Description of the Work
Performed
38-51
23 Chapter 6 Findings 52
24 Chapter 7 Recommendations 53
25 Chapter 8 References 54
26 Annexures 55-57
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List of Illustrations
Figures
S.No. Title of the Figure/Photograph Page No.
Figure 1.1 Price moves in a trend 4
Figure 1.2 History tend to repeat itself 5
Figure 1.3 Line Charts 8
Figure 1.4 Bar charts 8
Figure 1.5 Volume bar charts 9
Figure 1.6 Candlestick diagram 9
Figure 1.7 Support 10
Figure 1.8 Resistance 11
Figure 1.9 Support and resistance 12
Figure 1.10 Uptrend 12
Figure 1.11 Downtrend 13
Figure 1.12 Head and shoulder 14
Figure 1.13 Triangle formation 16
Figure 1.14 Flag formation 17
Figure 1.15 Gaps 17
Figure 1.16 Round Bottom 18
Figure 1.17 Hammer candlestick 19
Figure 1.18 Engulfing pattern 20
Figure 1.19 Dark Cloud and Piercing pattern 21
Figure 1.20 Stars 22
Figure 1.21 Morning Star 22
Figure 1.22 Evening Star 23
Figure 1.23 Inverted hammer and Shooting star 24
Figure 1.24 Harami Pattern 25
Figure 1.25 Belt hold pattern 26
Figure 1.26 MACD 27
Figure 1.27 RSI 29
Figure 1.28 Momentum 30
Figure 1.29 Stochastic oscillator 31
Figure 1.30 Volume Graph 31
Figure 1.31 Bollinger bands 32
Figure 5.1 ONGC 26/05/2015 38
Figure 5.2 BHARTIARTL 26/05/2015 39
Figure 5.3 BHEL 26/05/2015 40
Figure 5.4 TCS 26/05/2015 41
Figure 5.5 BANKBARODA 27/05/2015 42
Figure 5.6 UCOBANK 28/05/2015 43
Figure 5.7 RAMCOIND 28/05/2015 44
Figure 5.8 M&M 29/05/2015 45
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Figure 5.9 IDFC 29/05/2015 46
Figure 5.10 BAYERCROPS 03/06/2015 47
Figure 5.11 BIOCON 05/06/2015 48
Figure 5.12 CASTROLIND 10/06/2015 49
Figure 5.13 CHENNPETRO 10/06/2015 50
Figure 5.14 CIPLA 15/06/2015 51
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Chapter-1
Introduction to the Sector/ Company
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Chapter 1
Introduction to the Sector/ Company
Company profile
Bajaj Capital Limited ("Bajaj Capital") is India's premier "Investment Services" Company,
with nearly 50 years of experience in helping people protect and grow their wealth. We've
helped to create more millionaires than any other firm in India. But it's our deep personal
relationships with clients that truly sets us apart.
No other firm can match the depth of our experience and our dedication to personal
service. The markets may fluctuate, but our dependability never does.
Bajaj Capital holds the Certificate of Registration to act as Merchant Banker (Cat-I),
Underwriter, Stock Broker of BSE Limited [Cash Segment], Depository Participant of
NSDL, granted by the Securities and Exchange Board of India. Further, Bajaj Capital is an
AMFI Registered ARN holder and has also been granted the Certificate of Registration to
act as Point of Presence by the Pension Fund Regulatory Authority for the NPS Schemes.
Mission Statement: - Bajaj Capital aims to be the most useful, reliable and efficient
provider of Financial Services. It is our continuous endeavor to be a trustworthy partner to
our clients, helping them protect and grow their wealth, and achieve their life goals.
Aim:-Bajaj capital aim are as
To serve our clients with utmost dedication and integrity so that we exceed their
expectations and build enduring relationships
To offer unparalleled quality of service through complete knowledge of products,
constant innovation in services and use of the latest technology.
To always give honest and unbiased financial solutions and earn our client’s
everlasting trust.
To serve the community by educating individuals on the merits of investments and
in turn help shape a financially responsible citizen
To create value for all stake holders by ensuring profitable growth.
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To build an amicable environment that accords respect to every individual and
permits their personal growth.
To utilize the power of teamwork to function as a family and build a seamless
organization.
Vision Statement:- Our vision is to be the most preferred Investment Services Company
in India by providing clients with informed choices of lasting value, protect and grow
wealth for them, to make their tomorrow better than today.
Introduction- Equity Market India
The Indian Equity market is divided in to two parts Primary market - where the share is
first issued in the form of IPO and after issuing the share it gets listed on exchange and
these share are traded on exchange where shares can be bought and sold this is secondary
market. In India mainly there are two exchange -NSE (National Stock Exchange) BSE
(Bombay Stock Exchange). BSE is the oldest exchange in India that started in 1875
whereas NSE started operation on 1994.
Before 2000 shares was held in Physical form but the main difficulty with Physical shares
is method of transaction which is open outcry system and process is not transparent to
investor also Physical shares were prone to duplication and fraud. So in 2000 NSE
introduced the electronic screen based trading system further the introduction of
Dematerialization (Conversion of physical share in to electronic form) and depository
(where the electronic form of share is kept) revolutionized the Indian Stock market.
Currently there are mainly two Depository (DP) -NSDL and CDSL and these DP are like
bank of share. Individual/Firm can deal through Broker (who is registered and have
membership in Exchanges and Depository) for buying and selling securities. Today NSE
outpaced BSE in volume of trade.
Index is the barometer of stock exchange for e.g. in NSE there are about 1350 listed
companies listed and it cannot be said in general form market was up or down without
fully looking all companies. INDEX serve this purpose. INDEX is constructed by taking
top companies across different sector in different weightage and INDEX movement will
reflect the overall movement of market. So if NIFTY or SENSEX is up we can generally
assume market was up (does not mean all shares was up) and vice versa. Now there are
index in some sectors which can catch the movement of that sector like CNXIT-IT sector,
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BANKNIFTY-Banking sector etc. General purpose of Stock Market is for Investment but
bulk of activities done in market is day trading. Day trading means Buying/selling of
shares and offsetting the position on same day. Day traders serves the purpose of bringing
the liquidity to market and they help the market movement and more than 80% of the
volume from market is coming from day trading. Introduction of derivative market had
made the day trading to grow more and introduction of advanced day trading technique.
The main tool for Stock market investment/trading are Fundamental analysis -which
studies about the fundamental of companies and economy and Technical Analysis-which
studies the market by analyzing the past movement of share and market. The investment
scenario in India is now is at par with global Market. The introduction of Derivative,
Currency, Commodity market now helped the Indian Investor to Invest in almost anything
like Share, Commodity, Currency, Bonds and complex thing like Interest rate future,
Weather Derivative, Volatility Index and more and Stock market are giving various
product to invest in with various amount of risk like bonds, Gold ETF, Equity and
Preference Share, Commodities (metal and Agriculture) Currency to high risk Derivative
product.
What really Stock market does is it serves the company by providing company the finance
for long term needs and for investor an opportunity to park their savings in corporate world
and in turn give their hand in Nation's development so stock exchange have a very vital
role in country's economic development.
SENSEX and NIFTY are Index of BSE and NSE Blue chip share. SENSEX consist of 30
share and NIFTY 50 share (of top most companies). NSE has a market capitalization of
more than US$1.65 trillion, making it the world’s 12th-largest stock exchange as of 23
January 2015. NSE's flagship index, the CNX Nifty, the 50 stock index, is used extensively
by investors in India and around the world as a barometer of the Indian capital markets.
BSE was established in 1875, BSE is considered to be one of Asia’s fastest stock
exchanges, with a speed of 200 microseconds and one of India’s leading exchange groups
and the oldest stock exchange in the South Asia region. Bombay Stock Exchange is the
world's 10th largest stock market by market capitalization at $1.7 trillion as of 23 January
2015. More than 5,174 companies are listed on BSE.
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Introduction Equity Market Analysis
The Method to analyze securities and make decision fall into two very broad categories
fundamental analysis and technical analysis. Fundamental analysis involves analyzing the
characteristics of a company in order to estimate its value. Technical analysis takes a
completely different approach, it doesn’t care a bit about the value of the company or the
commodity. Technicians are only interested in the price movements in the market.
Technical analysis studies the supply and demand in the market in an attempt to determine
what direction, or trend will continue in the future. In other words it attempts to understand
the emotions in the market by study the market.
The study is based on three assumptions
1. Market discounts everything- The major criticism of technical analysis is that it
only considers price movement ignoring the fundamental factor of the company.
However, technical analysis assumes that at any given time, a stock price reflects
everything that has or could affect the company- including fundamental factors.
Technical analysts believe that 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 the supply and
demand for a particular stock in the market.
2. Price move in trends- 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.
Figure 1.1 Price moves in a trend Source: www.bazarternd.com