01-08-2012, 04:49 PM
A STUDY on EQUITY ANALYSIS At INDIA INFOLINE LIMITED
1A STUDY on EQUITY ANALYSIS.docx (Size: 477.73 KB / Downloads: 56)
SUMMARY
The automobile industry, one of the core sectors, has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization. The sector seems to be optimistic of posting strong sales in the couple of years in the view of a reasonable surge in demand. The Indian automobile market is gearing towards international standards to meet the needs of the global automobile giants and become a global hub.
A detailed analysis of Automobile industry has been covered in respect of past growth and performance. Under this project to better understand the Industry I have used Fundamental tools to make it more authentic and meaningful.
An economy-industry-company (E.I.C) approach has been followed under Fundamental Analysis which covers effect of Recession, the impact of inflation, FDI’s, Export, and GDP etc. on Automobile Industry. The Industry Analysis has been done with the help of SWOT analysis and industry life cycle. For Company Analysis as a part of Fundamental tool we have undergone with the comparative analysis of TATA Motors the leading company, Maruti Suzuki India’s largest Car manufacturer and Mahindra and Mahindra along with the help of ratio analysis. The fundamental aspect consists of financial and Non-Financial analysis of these companies.
INTRODUCTION
India is a developing country. Nowadays many people are interested to invest in financial markets especially on equities to get high returns, and to save tax in honest way. Equities are playing a major role in contribution of capital to the business from the beginning. Since the introduction of shares concept, large numbers of investors are showing interest to invest in stock market.
In an industry plagued with skepticism and a stock market increasingly difficult to predict and contend with, if one looks hard enough there may still be a genuine aid for the Day Trader and Short Term Investor.
The price of a security represents a consensus. It is the price at which one person agrees to buy and another agrees to sell. The price at which an investor is willing to buy or sell depends primarily on his expectations. If he expects the security's price to rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple statements are the cause of a major challenge in forecasting security prices, because they refer to human expectations. As we all know firsthand, humans expectations are neither easily quantifiable nor predictable. If prices are based on investor expectations, then knowing what a security should sell for (i.e., fundamental analysis) becomes less important than knowing what other investors expect it to sell for. That's not to say that knowing what a security should sell for isn't important--it is. But there is usually a fairly strong consensus of a stock's future earnings that the average investor cannot disprove .
METHODOLOGY
Research design or research methodology is the procedure of collecting, analyzing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion.
The methodology used in the study for the completion of the project and the fulfillment of the project objectives.
The sample of the stocks for the purpose of collecting secondary data has been selected on the basis of Random Sampling. The stocks are chosen in an unbiased manner and each stock is chosen independent of the other stocks chosen. The stocks are chosen from the automobile sector.
The sample size for the number of stocks is taken as 3 for fundamental analysis of stocks as fundamental analysis is very exhaustive and requires detailed study.
FUNDAMENTAL ANALYSIS
Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. It is the study of economic, industry and company conditions in an effort to determine the value of a company’s stock. Fundamental analysis typically focuses on key statistics in company’s financial statements to determine if the stock price is correctly valued. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements.
Fundamental analysis is the cornerstone of investing. The basic philosophy underlying the fundamental analysis is that if an investor invests re.1 in buying a share of a company, how much expected returns from this investment he has.
The fundamental analysis is to appraise the intrinsic value of a security. It insists that no one should purchase or sell a share on the basis of tips and rumors. The fundamental approach calls upon the investors to make his buy or sell decision on the basis of a detailed analysis of the information about the company, about the industry, and the economy. It is also known as “top-down approach”. This approach attempts to study the economic scenario, industry position and the company expectations and is also known as “economic-industry-company approach (EIC approach)”.