It Stocks Nasreen

8/13/2019 It Stocks Nasreen

1/44

1.INTRODUCTION Investment management once seemed a simple process. Well-heeled

investors would hold portfolios composed of stocks and bonds of blue chip

industrial companies, treasury bonds, notes and bills. The choices available to less

well-off investors were much more limited, confirmed primarily to passbook

savings accounts. If the investment environment can be thought of as an ice cream

parlor, then the customers of past decades were offered only chocolate and vanilla.

Mirroring the diversity of modern society, the investment ice cream parlor

now makes available a myriad of flavours to the investing public. Investors face a

dizzying array of choices. The ability to purchase different securities has become

both less expensive and more convenient with the advent of advanced

communications and computer networks, along with the proliferating market for

mutual funds that has developed to serve large or small investors.

Investment environment encompasses the kinds of marketable securities

that exist and where and how they are bought and sold. Investment process is

concerned with how an investor should proceed in making decisions about what

marketable securities to invest in, how extensive the investments should be and

when the investments should made.


2/44

Investment means the sacrifice of current rupees for future rupees. Two

different attributes are involved time and risk. The sacrifice takes place in the

present and is certain. The reward comes later and the magnitude is uncertain. In

some cases, risk is the dominant attribute. These are two types of investments.

They are:

a) Real Investments

b) Financial Investments

Real investments involve some kind of tangible assets such as land,

machinery, factories.

Financial investments involve contracts written on pieces of paper such as

common stocks and bonds.

Investment in securities such as shares, debentures and bonds is profitable as

well as exciting, but it involves great deal of risk. Investing in financial

securities is considered to be one of the best avenues for investi ng ones savings

while it is acknowledged to be one of the most risky avenues of investment.

Even Indian government wants to encourage people in rural areas to invest in

equities. This will help the markets to stabilize by tapping the rural areas and

decreases the dependency on foreign institutional investors.


3/44

NEED FOR THE STUDY

PURPOSE OF THE STUDY

The purpose of the study is to know about stock markets in India, how they

work, fundamental requirements before entering the stock market, how to enter the

stock market, market design, stock selection, when to buy or sell a stock, how to

invest and knowing about market intermediaries.

OBJECTIVES OF THE STUDY

To take investment decisions cautiously after studying risks involved in the

same.

To gain knowledge of evaluating intrinsic value of a firm.

To acquire practical exposure of financial analysis of an enterprise.

To get familiarity of scheming comparative efficiency of different firms.

To analyze the profitability position of the sample.

SCOPE OF THE STUDY

For the purpose of study, one sector software is selected. Wipro, Info

Tech and TCS are the three companies that are taken for analysis.


4/44

HYPOTHESIS

The study tests whether the selected variables of sample companies

vary significantly during the study period. This specific hypothesis is tested at

appropriate time while analyzing and interpreting the results. The following

hypotheses have been taken to put on test;

H 1 : The Earning Per Share (EPS) positions of Wipro, Info Tech and TCS does

not differ significantly.

H 2: The Operating Profit Margin (OPM) position of Wipro, Info Tech and TCS

does not differ significantly.

H 3: The Net Profit Margin (NPM) position of Wipro, Info Tech and TCS does


H 4: The Debt Equity Ratio (DER) position of Wipro, Info Tech and TCS does


H 5: The Return on Equity (ROE) positions of Wipro, Info Tech and TCS does


H 6: The Return on Assets (ROA) positions of Wipro, Info Tech and TCS does



5/44

METHODOLOGY

The present study adopts an analytical and descriptive research design. The

data of the sample companies (for a period of five years 2006 to 2010) has

been collected from the annual reports and the balance sheet published by

the companies and the websites of the companies

A finite sample size of three software companies listed on the National

Stock Exchange (NSE) has been selected for the purpose of the study. They

are Wipro, TCS and Info Tech.

The Variables used in the analysis of the data are Earning Per Share (EPS),

Operating Profit Margin (OPM), Net Profit Margin (NPM), Debt Equity

Ratio (DER), Return on Equity (ROE), and Return on Assets (ROA).

While interpreting the results, the statistical tool of one-way Analysis of

Variance (ANOVA) has been used.


6/44

SAMPLE DESIGN

Sampling Technique: The study is done with special reference to software

sector. The reason being that the data or the financial statements are readily

available for them. Apart from this, software sector are the bound to

disclose all their facts and figures publicly. Thus, the technique of

Convenience Sampling is being adopted for the study. The election of

sample companies is made on the basis of market capitalization.

Sample Size: Three Indian Software Sector are chosen as sample size for

the study on account of having the highest market capitalization.


7/44

TOOLS USED FOR ANALYSIS

Ratio Analysis: Ratios have been calculated for the past five years for the

purpose of analysis. Ratios being designed are named as:

Earnings Per Share (EPS), Operating Profit Margin (OPM), Net Profit

Margin (NPM), Debt Equity Ratio (DER), Return on Equity (ROE), and

Return on Assets (ROA)

Analysis of Variance (ANOVA): The statistical tool that is used for testinghypothesis is one-way Analysis of Variance (ANOVA).


8/44

2.LITERATURE REVIEW:

INTRODUCTION TO STOCKS

The first step for you to understand the stock market is to understand stocks.

A share of stock is the smallest unit of ownership in a company. If you own a

share of a companys stock, you are a part owner of the company.

You have the right to vote on members of the board of directors and other

important matters before the company. If the company distributes profits to

shareholders, you will likely receive a proportionate share.

One of the unique features of stock ownership is the notion of limited liability.

If the company loses a lawsuit and must pay a huge judgment, the worse that can

happen is your stock becomes worthless. The creditors cant come after your

personal assets. Thats necessarily true in private -held companies.

There are two types of stock:

Common stock

Preferred stock

Most of the stock held by individuals is common stock.

Common Stock:

Common stock represents the majority of stock held by the public. It has

voting rights, along with the right to share in dividends.

Preferred Stock:

Despite its name, preferred stock has fewer rights than common stock,

except in one important are dividends. Companies that issue preferred stocks


9/44

usually pay consistent dividends and preferred stock has first call on dividends over

common stock.

Investors buy preferred stock for its current income from dividends, so look

for companies that make big profits to use preferred stock to return some of those

profits via dividends.


10/44

INVESTMENT PROCESS

Investment process describes how an investor should go about making

decisions with regard to what marketable securities to invest in, how extensive the

investment should be and when the investment should be made. An eight-step

procedure for making these decisions forms the basis for the investment process.

1) What is Investment

2) Understanding stocks

3) Finding a broker

4) Evaluation of stocks

5) Research tools

6) Investing strategy

7) Investing technique

8) What moves the market

Step 1: What is investment?

Investing is making your money work for you without taking any more risks

than necessary for your comfort.

Investing is the proactive use of your money to make more money.

How to calculate Risk Premium?

Risk premium is what a stock should return over a risk -free investment. It is

your reward for taking a risk with your money.


11/44

Weak demand is the important factor in stock pricing:

Despite high crude oil prices, its weak demand for gasoline that holds back oil

stock prices. Supply and demand is an important factor in determining price of

stocks.

Corrections are natural part of stock market cycle.

Dont be too conservative with stocks in retirement:

There is a danger you can be too conservative in your investment strategy as

you approach retirement dont back off stocks too soon.

Step 2: Understanding stocks

Stocks are the basic units of ownership in publicly traded companies. There are

two basic types of stocks.

a. Common Stock : Common stock represents the majority of stock held

by the public. It has voting rights, along with the right to share in

dividends.

b. Preferred Stock : Companies that issue preferred stocks usually pay

consistent dividends and preferred stock has first call on dividends over

common stock.

Bull and Bear stock markets are the two sides of same coin:

Bull and bear markets go together and are necessary for an efficient market.

Poll results show confidence in stocks:

The results of a poll on where the sensex be at the end of 2008 show stock

investors are positive.


12/44

Step 3: Finding a Broker

To decide which type of broker is right for you, you need to use these resources

to find the brokerage arrangement that best fits your needs.

Thirteen of the top online stock trading sites offer investors a wide variety of

services including research and advice.

Brokers offer different levels of service. A broker fills in the gaps in knowledge

and experience.

Broker explains what types of accounts are available and how to open an

account.

Financial advisers can map a blue print that will get you from where you are to

your financial goals.

Financial advisers come in a variety of flavours. Finding the one right for you

involve knowing how each is compensated and what they do.

The New Year poses many challenges for stocks, including high oil prices, the

credit crisis, and a potential recession.

Stock prices are driven by the relationship between buyers and sellers.

Attractive stocks have more buyers than sellers, which drives up prices, while

less attractive stocks feel the reverse effect.

Step 4: Evaluating stocks for investment

Fundamental analysis relies on several tools to give investors an accurate

picture of the financial health of a company and how the market values the stock.


13/44

The following are the most popular tools of fundamental analysis. They focus on

earnings, growth, and value in the market.

a) Earnings Per Share (EPS).

b) Operating Profit Margin (OPM).

c) Net Profit Margin (NPM).

d) Debt Equity Ratio (DER).

e) Return on Equity (ROE).

f) Return on Assets (ROA).

Step 5: Research Tools

The internet is a gold mine of information, but youll need some tools to get to

the nuggets. Research tools make the job easier if you know where to find them and

how to use them.

The better stock screens offer similar characteristics that give you greater

flexibility when looking for investment candidates and eliminate other

companies.

Stock screens will save time and help to build a thoughtful portfolio by

focusing on those companies that meet your investing requirements.

Stock screens can help any investor make better stock selections by reducing

the number of companies to research.

Dividend ratios can tell much about a stock and its future payout prospects.


14/44

One of the best sources of information on companies is free and as near as your

computer.

Step 6: Investing Strategies

What strategy to use as an investor? The different investment strategies and

how to develop personal investment strategy is explained below:

When and how to sell a winning stock?

Knowing when and how to sell a winning stock is as important as knowing

when to sell a losing stock.

Dont be too conservative with stocks:

Following a too conservative investment strategy in retirement may not protect

you from outliving your money.

Bottom-up investors focus on strong companies and believe they will perform

well in any market conditions.

Top-down investing looks at big picture before narrowing in on individual

stocks.

Step 7: Investing Techniques

Investing techniques offer powerful ways for investors to execute their

strategies. These techniques provide a structure for investing.

After-hours trading of stocks may seem like a great idea, but it is full of risks

for the average investor.


15/44

Diversify stocks by industry to avoid across-the-board losses on bad economic

news. Investments should not be correlated to achieve diversity.

Investing with expectations of high returns is not investing but gambling. Dont

try to double or triple your money quickly in the stock market youll be

disappointed and perhaps poorer.

Step 8: What moves the market?

What makes the market rise or fall? Sometimes it seems to have a mind of

its own that reacts poorly to good news and with enthusiasm to bad news. One

should learn the factors that are the major influences on the markets and how to use

this information.


16/44

Basic steps in how stock trading works

Trade = Buy or Sell

To trade means to buy and sell in the jargon of the financial markets.

How a system that can accommodate one billion shares trading in a single day

works is a mystery to most people. No doubt, our financial markets are marvels of

technological efficiency.

We dont need to know all of the technical details of how to buy or sell

stocks, however it is important to have a basic understanding of how the markets

work.

Important terms in stock market and in stock trading

Open - The first price at which the stock opens when market opens in the

morning.

High - The stock price reached at the highest level in a day.

Low - The stock price reached the lowest level in a day.

Close - The stock price at which it remains after the end of market timings or the

final price of the stock when the market closes for a day.

Volume - Volume is nothing but quantity.

Bid - The Buying price is called as Bid price.

Offer - The selling price is called offer price.

Bid Quantity - The total number of stocks available for buying is called Bid

Quantity.


17/44

Offer Quantity - The total number of stocks available for selling is called Offer

Quantity.

Buying and selling of stocks - Buy is also called as demand or bid and selling is

also called as supply or offer. First selling and then buying (this only happens in

day trading) is called as shorting of stocks or short sell.

Stock Trading - Buying and Selling of stocks is called stock trading.

Transaction - One complete cycle of buying and selling of stocks is called One

Transaction .

Squaring off - This term is used to complete one transaction. Means if we buy thenwe have to sell (means square-off) and if we sell then we have to buy (means

square-off).

Limit Order - In limit order the buying or selling price has to be mentioned and

when the stock price comes to that price then our order will get executed with the

mentioned price by us.

Market Order - When we put buy or sell price at market rate then the price get

executes at the current rate of market. The market order get immediately executed

at the current available price.


18/44

Success Mantra

There are two steps to achieve success in the stock market.

1) How not to loose

When you learn what to do and what not to do in order to loose nothing means

you have won the half battle. Only then you can learn how to gain or what to do in

order to win. A new investor should do paper trading in order to get the market

knowledge before actually entering into the market.

2) How to gain

How to gain requires deep understanding about the market trends and

fluctuations.

A new investor can take the route of mutual fund.

The average person generally falls into one of two categories.

The first believe investing is a form of gambling; they are certain that if

you invest, you will more than likely end up losing your money.

The second category consists of those who know they should invest for

the long- run, but dont know where to begin.

Their characteristics.

feel investing in some sort of black-magic that only a few people hold

the key to

they leave their financial decisions up to professionals


19/44

Cannot tell you why they own a particular stock / mutual fund.

Investment style i s blind faith or limited to this stock is going up. We

should but it.

This group is in far more danger than the first. They invest like the

masses and then wonder why their results are mediocre [or in some cases,

devastating.

FINACIAL ANALYSIS

This section of study embodies the calculation and analysis of selected

variables taken into reflection for the study purpose. The ratios are being calculated

by the aid of raw data available on the concerned website. The raw data

encompasses Yearly Results and Balance Sheet of the sample companies. After

calculation of ratios, analysis of individual ratio is being done. The statistical tool

used for analysis is one-way Analysis of Variance (ANOVA).

The ratios being calculated for the purpose of analysis of financial performance are:

Earnings Per Share (EPS).

Operating Profit Margin (OPM).

Net Profit Margin (NPM).

Debt Equity Ratio (DER).

Return on Equity (ROE).


20/44

Return on Assets (ROA).

The analysis and interpretation of the study is carried out by following thechronological order of the parameters mentioned above.


21/44

3.INDUSTRY PROFILE:

Wipro, TCS and Infotech are global IT services companies. It has been

acknowledged as an offshore provider of technology services by Gartner, Forrester

and other research and advisory firms. These companies provides a comprehensive

range of IT services, software solutions, IT consulting, business process

outsourcing, or BPO, services and research and development services in the areas

of hardware and software design to companies worldwide. The company combines

business knowledge and industry expertise of its domain specialists and the

technical knowledge and implementation skills of its delivery team in the

development centers located in India and around the world, to develop and

integrate solutions which enables its clients to leverage IT for achieving their

business objectives.

The range of its services includes IT consulting, custom application design,

development, re-engineering and maintenance, systems integration, package

implementation, technology infrastructure outsourcing, BPO services and research

and development services in the areas of hardware and software design.

The market for IT services is highly competitive and rapidly changing.

India and Asia Pac IT Services and Products segment focuses primarily on meeting

the IT products and services requirements of companies in India, Asia-Pacific and

the Middle East region.

The company sells and markets its consumer care products primarily

through distribution network in India, which has access to 2 million retail outlets


22/44

throughout the country. The primary raw materials for many of its soap and

hydrogenated oil products are agricultural commodities, such as vegetable oils.

As of March 31, 2006, Wipro had over 53,700 employees. Wipro Limited, which

had $1.2 billion in revenue for FY04, also has other interests in fluid power,

lighting, medical equipment products, and financial services. Wipro Technologies

makes up around 67% of the companys total revenue and is Wipros fastest -

growing business.

Information Communication Technology (ICT), the fastest growing industry of the

present era, has not only captured the imagination of the people but alsocontributed to foster the pace of globalization and bringing together humanity as

has never been before by breaking geographical, territorial and manmade barriers.

In the process, it has generated economic opportunities, social-closeness and

contributed to the overall growth process of the whole world.

Within a short span, ICT related exports have become the largest export

item of India surpassing a large number of traditional products and services

including dynamic ones. Information technology (IT) refers to the collection of

products and services that turn data into useful, meaningful, accessible information.

The U.S. is the world leader in information and communications technology

(ICT) products and services, representing almost 40 percent of global spending.

U.S. spending on ICT has increased almost 21 percent since 2000, to almost $1.13

trillion in 2005. Between 2000 and 2005, ICT in the U.S. has achieved a compound

annual growth rate of 4 percent, compared to 6.3 percent for all global economies.


23/44

To put U.S. ICT spending into context, member nations of the G-8

experienced CAGR of 4.5 percent for the same years. At $3,800, the U.S. is also

one of the worlds largest per capita ICT spending nations. The Information

Technology Sector has grown in size from Rs. 5,450 Crores in 1994-95 to about

Rs. 64,200 Crores in 2001-02 contributing 0.59% and 2.87% to G.D.P. growth

respectively in the corresponding periods.

Organizations must continuously innovate and transform themselves to stay ahead

of competition. TCS helps enterprises stay agile and respond better to changingmarket conditions by optimizing business processes, making their IT infrastructure

resilient and ensuring faster business results

Wipro provides solutions globally to help enterprises realize their product

development, production management and asset management strategies, using best-

in-class technologies, processes and competencies.

TCS leverages its years of domain and IT experience to bring in process

improvements, process automation and platform based solutions to enterprises

across industry.

The TCS has seen strong and profitable growth across all markets driven by

good performance in existing and new areas of business.

For the year ended march 31, 2010, the company earned a total income of

Rs.15156.52 crores an increase of 34.20% over previous years Rs.11,293.76

crores. TCS total income is 18914.26 crores. The net profit increased by 24.79% of

the total income. The company is amongst the leading IT companies in the world


24/44

and continues to retain its leadership position in the Indian IT industry. The

company has provided effective business solutions to Global and Indian companies

by leveraging its domain knowledge across industry verticals, excellence in

techn ology and robust processes. The companys continued investments in

innovation and technology have enabled it to undertake a number of large, end-to-

end, mission critical projects in diverse business areas and technology domains.

The company has 148 offices globally. TCS also has delivery centers in a number

of countries.


25/44

4.DATA ANALYSIS & PRESENTATION

E ARNING PER SHARE (EPS)

Earning Per Share is the measure of a companys ability to generate after

tax profits per share held by the investors. This ratio is computed with the help of

the following formula as expressed in rupee terms:

Earnings after taxes

Total number of equity shares outstanding

The Earning per share position of the sample companies is summarized in Table 1

and discussed below.

Table I : EPS (in rupees ) Position of sample companies

Years Wipro TCS InfoTech

2006 0.14 0.55 0.07

2007 0.19 0.38 0.11

2008 0.20 0.46 0.07

2009 0.20 0.47 0.15

2010 0.33 0.28 0.05

Total (TI) 1.06 2.14 0.44

Total(TI) 1.12 4.57 0.19


26/44

The EPS poison of sample companies is compared and tested using the following

hypothesis. The details are shown in Table2.

HYPOTHESIS TESTING

Ho: EPS of Wipro TCS and Info Tech does not differ significantly

H a: EPS of Wipro TCS and In fo Tech dif fer signi fi cantly.

Table II: One-Way ANOVA for EPS

Source of

Variation

Degrees of

Freedom

Sum of

Squares

Mean Sum of

Squares

Variance ratio

BSS ( K -1 ) ( 5-1 ) = 4 0.296 0.074 7.4

WSS ( N K ) (15 5 ) = 10 0.0704 0.01

Total ( N 1 ) (15 1 ) = 14

Inference: Calculation value at 5% I.O. S = 7.4 ~ F(4,10) since the calculation is

more than tabulated value i.e. (7.4 > 3.48). Therefore null-hypothesis (Ho) is

rejected at 5% level of significance.

OPERATING PROFIT MARGIN (OPM)

Operating Profit Margin indicate show effective a company is at controlling the

costs and expenses associated with their normal business operations. This ration I

found out using the following formulae and expressed in percentage terms.


27/44

Operating Profit * 100

Net Sales

The Operating Profit Margin position of the sample companies is depicted in Table

3 and discussed below.

Table III : OPM in( % ) of sample companies


2006 24.28 107.79 29.71

2007 23.86 99.99 28.79

2008 21.24 52.25 27.11

2009 22.12 27.99 26.87

2010 24.00 32.75 28.93

Total (TI) 115.5 320.77 141.41

Total(TI) 2 13340.25 102893.350 19996.780

The OPM position of sample companies are compared and tested using the

following hypothesis the details are shown in table4.


28/44

HYPOTHESIS TESTING

Ho: OPM position of Wipro TCS and Info Tech does not differ significantly

H a: OPM positi on of Wipro TCS and I nf o Tech diff er signif icantly.

Table IV : One-Way ANOVA for OPM

Source of

Variation

Degrees of

Freedom

Sum of

Squares

Mean Sum of

Squares

Variance ratio

BSS ( K -1 ) ( 5-1 ) = 4 4998.46 1249.6 2.216

WSS ( N K ) (15 5 ) = 10 5637.31 563.7

Total ( N 1 ) (15 1 ) = 14

Inference: Calculation value at 5% IOS = 2.216 ~ F(4,10) since the calculation

value of F is 2.216 which is less than the table value of 3.48. (calculation value 3.48) therefore null hypothesis

is rejected at 5% level of significance.


33/44

RETURN ON EQUITY (ROE)

Return on Equity is seen as a measure of how well a company used reinvested

earnings to generate additional earnings. This is computed using the following

formula and is expressed in percentage terms.

Earnings after Taxes and Preferred Dividends * 100

Net Worth

The Return on Equity position of sample companies is depicted in Table 9. And

discussed below.

Table IX : ROE in( % ) of sample companies


2006 31.43 48.43 10.55

2007 30.49 46.62 13.91

2008 26.38 40.97 14.80

2009 23.76 34.92 24.71

2010 27.68 37.16 -11.12

Total (TI) 139.74 208.1 52.85

Total(TI) 2 19527.27 43305.61 2793.12

The ROE position of sample companies are compared and tested using the

following hypothesis. The details are shown in Table 10.


34/44

HYPOTHESIS TESTING

Ho: ROE position of Wipro TCS and Info Tech does not differ significantly

H a: ROE positi on of Wipro TCS and I nf o Tech dif fer signi fi cantly.

Table X : One-Way ANOVA for ROE

Source of

Variation

Degrees of

Freedom

Sum of

Squares

Mean Sum of

Squares

Variance ratio

BSS ( K -1 ) ( 5-1 ) = 4 2421.69 605.42 6 92

WSS ( N K ) (15 5 ) = 10 874.67 87.47

Total ( N 1 ) (15 1 ) = 14

Inference: Calculation value 5% IOS is = 6.92 ~ F (4,10) since the calculation

value is more than tabulated value i.e. (6.92 > 3.48) therefore null hypothesis is


RETURN ON ASSETS (ROA)

Return on Assets measure the overall efficiency of capital invested in business. It

indicates what the yield is for every rupee invested in assets. This is computed

using the following formula and is expressed in percentage terms.


35/44

Earnings after Taxes and Preferred Dividends * 100

Total Assets

The Return on Assets position of sample companies is depicted in Table 11. And

discussed below.

Table XI : ROA (in % ) of sample companies


2006 31.18 48.13 20.25

2007 29.73 46.33 16.30

2008 19.84 49.90 10.25

2009 16.96 34.82 12.54

2010 21.09 37.08 0.01

Total (TI) 118.80 216.26 59.35

Total(TI) 14113.44 46768.39 3522.42

The ROA position of sample companies are compared and tested using the

following hypothesis. The details are shown in Table 12.


36/44

HYPOTHESIS TESTING

Ho: ROA position of Wipro TCS and Info Tech does not differ significantly

H a: ROA positi on of Wipro TCS and I nf o Tech dif fer signi fi cantly.

Table XII : One-Way ANOVA for ROA

Source of

Variation

Degrees of

Freedom

Sum of

Squares

Mean Sum of

Squares

Variance ratio

BSS ( K -1 ) ( 5-1 ) = 4 2510.23 627.56 10.83

WSS ( N K ) (15 5 ) = 10 579.67 57.97

Total ( N 1 ) (15 1 ) = 14

Inference: Calculation value 5 % IOS is = 10.83 ~ F (4,10) since the calculation

value is more than tabulated value i.e. (10.83 > 3.48) therefore null hypothesis is



37/44

SUMMARY

Investing in financial securities is now considered to be one of the best

avenues for investing ones savings while it is acknowledged to be one of the most

risky avenues of investment. Even Indian Government is planning to to encourage

people in rural areas to invest in equity. This will help the markets to stabilize by

tapping the rural areas and decreases the dependency on Foreign Institutional

Investors.

The factors which were studied under this are to know about stock markets

in India, how they work, prerequisites to enter the stock markets, market design,

stock selection, when to buy or sell a stock, how to invest, knowing about market

intermediaries.

For successful investment factors like timing, selection, setting targets,

avoiding speculation and constant review of portfolio is advised.


38/44

MAJOR FINDINGS

The Earning per share of TCS is substantially higher than the of

Wipro and Info Tech for the date taken from 2006 to 2010. On an

average, TCS has gendered EPS of Rs. 0.428 making TCS one of

the most efficient software companies in terms of generating

earnings.

Info Tech has sustained the highest operating profit margin of

64.15% Thus; it is found that Info Tech is most efficient company in

controlling costs and expenses as compared to other sample

companies.

TCS has outperformed other companies in terms of net profit margin

with an aggregate of 23.79% and followed up by Wipro and Info

Tech.

TCS has registered highest ROE 41.62% and is thus the most

efficient in generating additional earnings using invested earnings

than other two sample companies.


39/44

The average Return on Assets of TCS is 43.25% therefore, TCS is

the most efficient in generating yield over assets and hence their

overall efficiency is better than that of other tow companies.


40/44

SUGGESTIONS

Suggestions to an investor for reaping good returns in Equity Investment

Proper scientific way of investigation should be undertaken about sectorand its players before investment

Clear targets should be set before investment

Stock pickup should be always selective and should not depend on rumors

of the market

Define price range first before buying and selling shares

Before buying and selling shares latest price movement trends should be

analyzed

Speculation is not advised in the market

Individual Risk tolerance should be known and then be ready for

unexpected

Constant proper review of portfolio should be done and wherever required

buying and selling of shares should be done.


41/44

RECOMMEMDATION

After performing a profound analysis of the major players of the Indian

softwareCompanies the following suggestion might be looked over:

The investors with long term perspective of investment should invest their

riches in the company that registering high profit margins constantly. TCS

resolves this rationale of the investors.


42/44

CONCLUSIONS

Economic liberalization has accelerated the pace of development in the

securities market. In India, the role of securities market has undergone

structural transformation with the introduction of computerized online

trading and interconnected market system.

Investment in securities such as shares, debentures and bonds is

profitable, but also involves great deal of risk. Even Indian Government

wants to encourage Equity Investment.

Company Analysis:

In company analysis, history of the company and line of business, Product

portfolios strength, Market share, Top Management, Intrinsic Values like

Patents and Trademarks held, Foreign collaboration, its need and

availability for future, Quality of competition in the market, present and

future, Future business plans and projects, Level of trading of the

companys listed scrip, EPS, its growth and rating vis --vis other companies

in the industry, P/E Ratio, Growth in Sales are analyzed.

The fundamental analysis which aims at developing an insight into the

economic performance of the business is paramount important form the

view point of investment decision. Thus, the present study has been

conducted examine the economic sustainability of the three major software

companies there are Wipro, TCS and InfoTech. The study reveals that TCS

has performed better in terms of Earnings Per Share and price earning


43/44

Wipro and InfoTech. Therefore there is more responsiveness between the

earning capacity and the share price in case of TCS despite fact that is profit

margin ratios are not better than that of other companies. TCS has fared

better in terms of EPS, NPM, ROE and ROA


44/44

BIBILIOGRAPHY

BOOKS REFFERED:

Security Analysis and Portfolio Management

- Prasanna Chandra.

Investments

- William, Sharpe

WEBSITES:

www.about.stocks.com

www.nseindia.com

www.buzzingstocks.com

www.moneycontrol.com
http://www.about.stocks.com/http://www.about.stocks.com/http://www.nseindia.com/http://www.nseindia.com/http://www.buzzingstocks.com/http://www.buzzingstocks.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.buzzingstocks.com/http://www.nseindia.com/http://www.about.stocks.com/

It Stocks Nasreen

Documents