Euity Analysis

8/6/2019 Euity Analysis

1/535

SUMMARY

The automobile industry, one of the core sectors, has undergone metamorphosis with theadvent of new

business and manufacturing practices in the light of liberalization andglobalization. The sector seems to

be optimistic of posting strong sales in the couple ofyears in the view of a reasonable surge in demand.

The Indian automobile market isgearing towards international standards to meet the needs of the globalautomobile giantsand become a global hub.

A detailed analysis of Automobile industry has been covered in respect of past growthand performance.

Under this project to better understand the Industry I have usedFundamental tools to make it more

authentic and meaningful.

An economy-industry-company (E.I.C) approach has been followed under FundamentalAnalysis which

covers effect of Recession, the impact of inflation, FDIs, Export, andGDP etc. on Automobile Industry.

The Industry Analysis has been done with the help ofSWOT analysis and industry life cycle. For Company

Analysis as a part of Fundamentaltool we have undergone with the comparative analysis of TATA Motors

the leadingcompany, Maruti Suzuki Indias largest Car manufacturer and Mahindra and Mahindraalong

with the help of ratio analysis. The fundamental aspect consists of financial andNon-Financial analysis of

these companies.

At the end conclusion and recommendations have been specified so as to make the

project work more meaningful and purposeful


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INT

ROD


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UCT

ION


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India

is a

devel


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oping

count

ry.


7/535

Nowa

days

many


8/535

peopl

e are

intere


9/535

sted

to

invest


10/535

in

financ

ialma


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rkets

especi

ally


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on

equiti

es to


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get

high

return


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s, and

to

save


15/535

tax in

hones

t way.


16/535

Equiti

esare

playin


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g a

major

role


18/535

in

contri

butio


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n of

capita

l to


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the

busin

ess


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from

the

begin


22/535

ning.

Since

the


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introd

uction

of


24/535

shares

conce

pt,


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large

numb

ers of


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invest

ors

are


27/535


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stto

invest

in


29/535

stock

marke

t.


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In an

indust

ry


31/535

plagu

ed

with


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skepti

cism

and a


33/535

stock

marke

t


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increa

singly

diffic


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ult to

predic

tand


36/535

conte

nd

with,


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if one

looks

hard


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enoug

h

there


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may

still

be


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genui

ne aid

for


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the

DayT

rader


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and

Short

Term


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Invest

or.


44/535

The

price

of a


45/535

securi

ty

repres


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ents a

conse

nsus.


47/535

It is

the

price


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at

which

one


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perso

n

agree


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sto

buy

and


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anoth

er

agree


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s to

sell.

The


53/535

price

at

which


54/535

an

invest

or is


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willin

g to

buy


56/535

or

sellde

pends


57/535

prima

rily

on his


58/535

expec

tation

s. If


59/535

he

expec

ts the


60/535

securi

ty's

price


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to

rise,

he


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willb

uy it;

if the


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invest

or

expec


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ts the

price

to


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fall,

he

will


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sell it.

These

simpl


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e

state

ments


68/535

arethe

cause

of a


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major

challe

nge in


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foreca

sting

securi


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ty

prices

,


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becau

se

they


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refer

to

huma


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nexpe

ctatio

ns. As


75/535

we all

know

firsth


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and,

huma

ns


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expec

tation

s are


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neithe

r

easily


79/535

quanti

fiable

nor


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predic

table.

If


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prices

are

based


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on

invest

or


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expec

tation

s,


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then

knowi

ngwh


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at a

securi

ty


86/535

shoul

d sell

for


87/535

(i.e.,

funda

menta


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l

analy

sis)


89/535

beco

mes

less


90/535


91/535

nowin

g

what


92/535

other

invest

ors


93/535

expec

t it to

sell


94/535

for.

That's

not to


95/535

say

that

knowi


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ng

what

asecu


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rity

shoul

d sell


98/535

for

isn't

impor


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tant--

it is.

But


100/535

there

is

usuall


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y a

fairly

strong


102/535

conse

nsuso

f a


103/535

stock'

s

future


104/535

earnin

gs

that


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the

avera

ge


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invest

or

canno


107/535

t

dispro

ve


108/535

Funda

menta

l


109/535

analy

sis

and


110/535

techni

cal

analy


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sis

can

co-


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exist

in

peace


113/535

and

compl

ement


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eacho

ther.

Since


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all the

invest

ors in


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the

stock

marke


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t want

to

make


118/535

the

maxi

mum


119/535

profit

spossi

ble,


120/535

they

just

canno


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t

afford

to


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123/535

funda

menta

l or


124/535

techni

cal


125/535

analy

sis.


126/535

NEE

D


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OF

THE


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STU

DY


129/535

To

start

any


130/535

busin

ess

capita


131/535

l

plays

major


132/535

role.

Capit

al can


133/535

be

acquir

ed in


134/535

two

ways

byiss


135/535

uing

shares

or by


136/535

taking

debt

from


137/535

financ

ial

institu


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tions

or

borro


139/535

wing

mone

y


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fromf

inanci

al


141/535

institu

tions.

The


142/535

owner

s of

the


143/535

comp

any

have


144/535

topay

regula

r


145/535

intere

st

andpr


146/535

incipa

l

amou


147/535

nt at

the

end.


148/535

Stock

is

owner


149/535


150/535

any,

with

each


151/535

share

of

stock


152/535


153/535

piece

ofow

nershi


154/535

p.

The

more


155/535

shares

you

own,


156/535

the

more

of the


157/535

comp

any

you


158/535

own.

The

mores


159/535

hares

you

own,


160/535

the

more

divide


161/535

nds

you

earn


162/535

when

the

comp


163/535

any

make

s a


164/535

profit.

In

thefin


165/535

ancial

world

,


166/535

owner

ship

is


167/535

calledEq u

ity.


168/535

Adva

ntage

s of


169/535

sellin

g

stock:


170/535

A

comp

any


171/535

can

raise

more


172/535

capita

l than

it


173/535

could

borro

w.


174/535

A

comp

any


175/535

does

not

have


176/535

to

make

perio


177/535

dic

intere

st


178/535

paym

ents

to


179/535

credit

ors.

A


180/535

comp

any

does


181/535

not

have

to


182/535

make

princi

pal


183/535

paym

ents


184/535

Stock

/share

s play


185/535

a

major

role


186/535

in

acquir

ing


187/535

capita

l to

the


188/535

busin

ess in

return


189/535

invest

ors

arepai


190/535

d

divide

nds to


191/535

the

shares

they


192/535

own.

The

more


193/535

shares

you

own


194/535

the

more

divide


195/535

nds

youre

ceive.


196/535

The

role

of


197/535

equity

analy

sis is


198/535

to

provi

de


199/535

infor

matio

n to


200/535

the

marke

t. An


201/535

effici

ent

marke


202/535

trelies

on

infor


203/535

matio

n: a

lack


204/535

of

infor

matio


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n

create

s


206/535

ineffi

cienci

es


207/535

that

result

in


208/535

stocks

being

misre


209/535

prese

nted

(over


210/535

or

under

value


211/535

d).

This

is


212/535

valua

ble

becau


213/535

se it

fills

infor


214/535

matio

ngaps

so


215/535

that

each

indivi


216/535

dual

invest

or


217/535

does

not

need


218/535

to

analy

ze


219/535

every

stock

thereb


220/535

y

makin

gthe


221/535

marke

ts

more


222/535

effici

ent.


223/535

OBJ

ECT


224/535

IVE

S OF


225/535

THE

STU


226/535

DY


227/535

The

object

ive of


228/535

this

projec

t is to


229/535

deepl

y

analy


230/535

ze our

India

n


231/535

Auto

mobil

e


232/535

Indust

ry

forinv


233/535

estme

nt

purpo


234/535

se by

monit

oring


235/535

the

growt

h rate


236/535

and

perfor

manc


237/535

e on

the

basis


238/535

ofhist

orical

data.


239/535

The

main

object


240/535

ives

of the

Proje


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ct

study

are:


242/535

Detail

ed


243/535

analy

sis of

Auto


244/535

mobil

e

indust


245/535

ry

which

is


246/535

gearin

g


247/535

towar

ds


248/535

intern

ationa

l


249/535

stand

ards


250/535

Analy

ze the

impac


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t of

qualit

ative


252/535

factor

s on

indust


253/535

rys

and


254/535

comp

anys


255/535

prosp

ects


256/535

Comp

arativ

e


257/535

analy

sis of

three


258/535

tough

comp

etitors


259/535

TAT

A

Motor


260/535

s,

Marut

i


261/535

Suzuk

i and

Mahi


262/535

ndra

and

Mahi


263/535

ndra

throu

gh


264/535

funda

menta

l


265/535

analy

sis.


266/535

Sugge

sting

as to


267/535

which

comp

anys


268/535

shares

would

be


269/535

best

for an


270/535

invest

or to

invest


271/535

SCO

PE


272/535

OF

THE


273/535

STU

DY


274/535

The

scope

of the


275/535

study

is

identi


276/535


277/535

durin

g the

study


278/535

is

condu

cted.


279/535

Thepr

oject

is


280/535

based

on

tools


281/535

like

funda

menta


282/535

l

analy

sis


283/535

and

ratio

analy


284/535

sis.

Furth

er,


285/535

thestu

dy is

based


286/535

on

infor

matio


287/535

n of

last


288/535

five

years.


289/535

The

analy

sis is


290/535

made

by

taking


291/535

into

consi

derati


292/535

on

five

comp


293/535

anies

i.e.


294/535

TAT

A


295/535

Motor

s,

Marut


296/535

i

Suzuk

i and


297/535

Mahi

ndra

and


298/535

Mahi

ndra.


299/535

The

scope

of the


300/535

study

is

limite


301/535

d for

a

perio


302/535

d of

five

years.


303/535

The

scope


304/535

is

limite

d to


305/535

only

the

funda


306/535

menta

l

analy


307/535

sis of

the

chose


308/535

n

stocks


309/535

ME

THO


310/535

DOL

OG


311/535

Y


312/535

Resea

rch

desig


313/535

n or

resear

ch


314/535

metho

dolog

y is


315/535

the

proce

dure


316/535

of

collec

ting,


317/535

analy

zinga

nd


318/535

interp

reting

the


319/535

data

to

diagn


320/535

ose

the

probl


321/535

em

and

react


322/535

to the

oppor

tunity


323/535

in

sucha

way


324/535

where

the

costs


325/535

can

be

mini


326/535

mized

and

the


327/535

desire

d

level


328/535

of

accur

acy


329/535

can

beach

ieved


330/535

to

arrive

at a


331/535

partic

ular


332/535

concl

usion.


333/535

The

metho

dolog


334/535

y

used

in the


335/535

study

for

the


336/535

compl

etion

of the


337/535

projec

t and

the


338/535

fulfill

ment

of the


339/535

projec

t


340/535

object

ives.


341/535

The

sampl

e of


342/535

the

stocks

for


343/535

the

purpo

se of


344/535

collec

ting

secon


345/535

dary

data

has


346/535

beens

electe

d on


347/535

the

basis

of


348/535

Rand

om

Samp


349/535

ling.

The

stocks


350/535

are

chose

n in


351/535

an

unbia

sedm


352/535

anner

and

each


353/535

stock

is

chose


354/535

n

indep

enden


355/535

t of

the

other


356/535

stocks

chose

n.


357/535

The

stocks

are


358/535

chose

n

from


359/535

the

autom

obile


360/535

sector

.


361/535

The

sampl

e size


362/535

for

the

numb


363/535

erof

stocks

is


364/535

taken

as 3

for


365/535

funda

menta

l


366/535

analy

sis of


367/535

stocks

as

funda


368/535

menta

l

analy


369/535

sis is

very

exhau


370/535

stive

and

requir


371/535

es

detail


372/535

ed

study


373/535

LIM

ITA


374/535

TIO

NS


375/535

This

study

has


376/535

been

condu

cted


377/535

purel

y to

under


378/535

stand

Equit

y


379/535

analy

sis for


380/535

invest

ors.


381/535

The

study

is


382/535

restric

ted to

three


383/535

comp

anies

based


384/535

on

Funda

menta


385/535

l

analy

sis.


386/535

The

study


387/535

is

limite

d to


388/535

the

comp

anies


389/535

havin

g


390/535

equiti

es.


391/535

Detail

ed

study


392/535

of the

topic

was


393/535

not

possi

ble


394/535

due to

limite

d size


395/535

of the

projec

t.


396/535

There

was a


397/535

constr

aint

with


398/535

regar

d to

time


399/535

alloca

tion

for


400/535

the

resear

ch


401/535

study

i.e.

for


402/535

a

perio

d of


403/535

45

days.


404/535

Sugge

stions

and


405/535

concl

usion

s are


406/535

based

on the

limite


407/535

d data

of


408/535

five

years


409/535

CH

AP


410/535

TE

R


411/535

II -

RE


412/535

VI

EW


413/535

OF

LIT


414/535

ER

AT


415/535

UR

E


416/535

Equit

y


417/535

Analy

sis


418/535

SEC

URI


419/535

TY

ANA


420/535

LYS

IS


421/535

Invest

ment

succe


422/535

ss is

pretty

much


423/535

a

matte

r of


424/535

carefu

l

select


425/535

ion

and

timin


426/535

g of

stock

purch


427/535

ases

coupl

ed


428/535

with

perfec

t


429/535

match

ing to

an


430/535

indivi

duals

risk


431/535

tolera

nce.

In


432/535

order

to

carry


433/535


434/535

timin

g and

match


435/535

ing

action

s an


436/535

invest

or

must


437/535

condu

ct

deep


438/535

securi

ty ana

lysis.


439/535

Invest

ors

purch


440/535

ase

equity

shares


441/535

with

two

basic


442/535

object

ives;

1.To


443/535

make

capita

l


444/535

profit

s by

sellin


445/535

g

shares

at


446/535

highe

r

prices


447/535

.

2.To

earn


448/535

divide

nd


449/535

incom

e.


450/535

These

two

factor


451/535

s are

affect

ed by


452/535

a host

of

factor


453/535

s. An

invest

or has


454/535

to

carefu

llyun


455/535

dersta

nd

and


456/535

analy

ze all

these


457/535

factor

s.

There


458/535

are

basica

lly


459/535

two

appro

aches


460/535

to

study

securi


461/535

ty

prices

and


462/535

valuat

ion

i.e.


463/535

funda

menta

l


464/535

analy

sis

and


465/535

techni

cal


466/535

analy

sis


467/535

The

value

of


468/535

comm

on

stock


469/535

is

deter

mined


470/535

in

large

meas


471/535

ure

by the

perfor


472/535

manc

e of

thefir


473/535

m

that

issued


474/535

the

stock.

If the


475/535

comp

any is

health


476/535

y and

can

demo


477/535

nstrat

e

streng


478/535


479/535

the

value

of the


480/535

stock

will

increa


481/535

se.

When

value


482/535

s

increa

se


483/535

then

prices

follo


484/535

w

andret

urns


485/535

on an

invest

ment


486/535

will

increa

se.


487/535

Howe

ver,

just to


488/535

keep

the

savvy


489/535

invest

or on

theirt


490/535

oes,

the

mix is


491/535

compl

icated

by the


492/535

risk

factor

s


493/535

invol

ved.

Funda


494/535

menta

l

analy


495/535

sis

exami

nesall


496/535

the

dimen

sions


497/535

of

risk

expos


498/535

ure

and

the


499/535

proba

bilitie

s of


500/535

return

, and

merge


501/535

s

them

withb


502/535

roade

r

econo


503/535

mic

analy

sis


504/535

and

greate

r


505/535

indust

ry

analy


506/535

sis to

formu

late


507/535

the

valuat

ion of


508/535

astoc

k.


509/535

Equit

y


510/535

Analy

sis


511/535

FUN

DA


512/535

ME

NTA


513/535

L

ANA


514/535

LYS

IS


515/535

Funda

menta

l


516/535

analy

sis is

a


517/535

metho

d of

foreca


518/535

sting

the

future


519/535

price

move

ments


520/535

of

afinan

cial


521/535

instru

ment

based


522/535

on

econo

mic,


523/535

politi

cal,

envir


524/535

onme

ntal

and


525/535

other

releva

ntfact


526/535

ors

and

statistics that will affect


527/535

the basic supply and demand ofwhatever underliesthe financial instrument. It is the study of economic,

industry and company conditionsin an effort to determine the value of a companys stock. Fundamental

analysistypically focuses on key statistics in companys financial statements to determine if thestockprice

is correctly valued. The term simply refers to the analysis of the economicwell-being of a financial entity

as opposed toonly its price movements.

Fundamental analysis is the cornerstone of investing. The basic philosophy underlyingthe fundamental

analysis is that if an investor invests re.1 in buying a share of acompany, how much expected returns from

this investment he has.

The fundamental analysis is to appraise the intrinsic value of a security. It insists thatno one should

purchase or sell a share on the basis of tips and rumors. The fundamentalapproach calls upon the investors

to make his buy or sell decision on the basis of adetailed analysis of the information about the company,

about the industry, and theeconomy. It is also known as top-down approach. This approach attempts to

study theeconomic scenario, industry position and the company expectations and is also

knownaseconomic-industry-company approach (EIC approach).

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Thus the EIC approach involves three steps:

1. Economic analysis

2. Industry analysis

3. Company analysisEquity Analysis


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SECURITY ANALYSIS

Investment success is pretty much a matterof careful selection and timing of stockpurchases coupled with

perfect matching to an individuals risk tolerance. In order to carryout selection, timing and matching

actions an investor must conduct deep security analysis.

Investors purchase equity shares with two basic objectives;

1.To make capitalprofits by selling shares at higherprices.

2.To earn dividend income.

These two factors are affected by a host of factors. An investor has to carefullyunderstand and analyze all

these factors. There are basically two approaches to studysecurity prices and valuation i.e. fundamental

analysis and technical analysis

The value of common stock is determined in large measure by the performance of thefirm that issued the

stock. If the company is healthy and can demonstrate strength andgrowth, the value of the stockwill

increase. When values increase then prices follow andreturns on an investment will increase. However,

just to keep the savvy investor on theirtoes, the mix is complicated by the risk factors involved.

Fundamental analysis examinesall the dimensions of risk exposure and the probabilities of return, and

merges them withbroader economic analysis and greater industry analysis to formulate the valuation of

astock.

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FUNDAMENTAL ANALYSIS

Fundamental analysis is a method of forecasting the future price movements of afinancial instrument

based on economic, political, environmental and other relevantfactors and statistics that will affect the

basic supply and demand of whatever underliesthe financial instrument. It is the study of economic,

Euity Analysis

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