Fundamental and Technical Analysis

September 6, 2017 | Author: Harshit Gandhi | Category: Technical Analysis, Market Trend, Car, Investing, Moving Average
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the project explain the fundamental and technical aspects of analysis in dept with case study...

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Fundamental and Technical Analysis of Portfolio Management MASTER OF COMMERCE BANKING & FINANCE SEMESTER 3 (2015-16)

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INDEX Sr. No.

PARTICULARS

Page No.

1

Executive Summary

6

2

Introduction

8

3

Fundamental Analysis

9

4

Technical Analysis

13

Case Study 5

   

Overview of Automotive Sector Company Fundamental Analysis Company Technical Analysis Findings and case conclusion

27

6

Conclusion

47

7

Bibliography

48

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EXECUTIVE SUMMARY SCOPE OF THE STUDY: This study is most important because both fundamental and technical analysis helps investors in better understanding the markets and gauges the direction in which their investments might be headed and its utility helps in estimating the future trends of the stock prices and to make a decent profit out of it. BACKGROUND OF THE PROJECT: In the recent past, the bank interest rates have been increased steadily. But the rate of Inflation has also been increased. There is no big difference between the interest rate and Inflation rate. Because of inflation, value of money has been decreased and cost of living has been increased. This has created panic among lower, middle and upper middle class families who considered keeping their savings in banks as safe as well as remunerative. So, the investors are searching for proper investment avenues. Here, an attempt is made to predict the future movement of scripts. This study helps the investors to invest in shares. The stock exchange comes in the secondary market. Stock exchange performs activities such as trading in share, securities, bonds, mutual fund & commodities. Stock Broking industry is growing at an enormous rate, as more and more people are attracted towards stock exchanges with the hope of making profits. To quote couple of examples, the Automobile industry in India has consistently registered strong performance. The automobile industry had a growth of 15.4 % during AprilJanuary 2007, with the average annual growth of 10-15% over the last decade or so. With the incremental investment of $35-40 billion, the growth is expected to double in the next 10 years. Consistent growth and dedication have made the Indian automobile industry the second- largest tractor and two-wheeler manufacturer in the world. It is also the fifth-largest commercial vehicle manufacturer in the world. The Indian automobile market is among the largest in Asia. The Indian automobile industry is going through a phase of rapid change and high growth. With new projects coming up on a regular basis, the industry is undergoing technological change. The major players are expanding their plants and focusing on mass customization, mass production, etc. Nearly every automobile company is investing at a higher rate than ever before to achieve a high growth trajectory. The overall investment in the sector has been increasing quite rapidly. It is expected that by the end of 2010 Indian automobile sector will be investing a huge amount as Rs. 30,000 crores. At present the industry is enjoying a growth rate of 14-17% per annum, with domestic sales growth at 12.8%. The growth rate is predicted to double by 2015.

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OBJECTIVES OF THE STUDY: 1) To analyze individual company scripts by considering the factors relating to the economy, industry and the respective company. 2) To predict investor positions (Buy, sell & hold). 3) To know the future trend of Stock Prices of Tata Motors and Maruti Suzuki Ltd. in capital market. 4) To know which securities to be bought and which securities not to be bought. 5) To know which securities to be sold and which securities not to be sold.

METHODOLOGY: The Secondary data is collected from the annual reports of the company, relevant text books on the subject matter and company’s official website.

TOOLS: 1. Moving Average Method. 2. Relative Strength Index (RSI). 3. Candlestick Charting.

LIMITATIONS OF THE STUDY: 1. The study is limited only to automobile sector and 2 companies 2.

I have used only 3 Technical tools to predict the movement of Scrip’s.

3. Fundamental Analysis is used to analyze only financial performance of the companies. 4. Only Technical Analysis is used to predict the stock prices of the companies.

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INTRODUCTION In India, Portfolio Management is still in its infancy. Barring a few Indian banks, and foreign banks and UTI, no other agency had professional Portfolio management until 1987. After the success of Mutual Funds in Mutual Funds, since /’ 1987, Professional Portfolio Management, backed by competent research staff became the order of the day. After the success of Mutual Funds in Portfolio Management, a number of brokers and Investment Consultants some of whom are also professionally qualified have become Portfolio Managers. They have managed the funds of clients on both discretionary and nondiscretionary basis. It was fou:1d that many of them, including Mutual Funds have guaranteed a minimum return or capital appreciation and adopted all kinds of incentives which are now prohibited by SEB!. They resorted to speculative over trading and insider trading, discounts, etc., to achieve their targeted returns to the clients, which are also prohibited by SEBI. The recent CBI probe into the operations of many market dealers has revealed the unscrupulous practices by banks, dealers and brokers in their Portfolio Operations. The SEBI has then imposed stricter rules, which included their registration, a code of conduct and minimum infrastructure, experience and expertise etc. It is no longer possible for. any unemployed youth, or retired person or self-styled consultant to engage in Portfolio Management without the SEBI’s licence. The guidelines of SEBI are in the direction of making Portfolio Manage-ment a responsible professional service to be rendered by experts in the field. Basically Portfolio Management involves a. A proper investment decision-making of what to buy and sell; b. Proper money management in terms of investment in a basket of assets so as to satisfy the asset preferences of investors; c. Reduce the risk and increase returns Portfolio Management Service As per the SEBI norms, it refers to professional services rendered for manage-ment of Portfolio of others, namely, clients or customers with the help of experts in Invesm1cnt Advisory Services. The latter involves the advice regarding the worthwhileness of any particular investment or advice of what to .buy and sell. Investment management on the other hand involves continuing relationship with client to manage investments with or without discretion for the client as per his requirements.

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Fundamental Analysis Fundamental analysis is the examination of the underlying forces that affect the well-being of the economy, industry groups and companies. As with most analysis, the goal is to develop a forecast of future price movement and profit from it. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces of the products. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock’s fair value called intrinsic value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued. As the current market price will ultimately gravitate towards fair value, the fair value should be estimated to decide whether to buy the security or not. By believing that prices do not accurately reflect all available information, fundamental analysts look to capitalize on perceived price discrepancies. Fundamental Analysis is a method of evaluating a security by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security’s value, including macroeconomic factors (like the overall economy and industry conditions) and individual specific factors (like the financial condition and management of companies).

OBJECTIVES OF FUNDAMENTAL ANALYSIS  To predict the direction of national economy because economic activity affects the corporate profit, investor attitudes and expectation and ultimately security prices.  To estimate the stock price changes by studying the forces operating in the overall economy, as well as influences peculiar to industries and companies.  To select the right time and right securities for the investment. THREE PHASES OF FUNDAMENTAL ANALYSIS 1) Understanding of the macro-economic environment and developments (Economic Analysis) 2) Analyzing the prospects of the industry to which the firm belongs (Industry Analysis) 3) Assessing the projected performance of the company (Company Analysis) The three phase examination of fundamental analysis is also called as an EIC (EconomyIndustry-Company analysis) framework or a top-down approach- Here the financial analyst first makes forecasts for the economy, then for industries and finally for companies. The Page | 6

industry forecasts are based on the forecasts for the economy and in turn, the company forecasts are based on the forecasts for both the industry and the economy. Also in this approach, industry groups are compared against other industry groups and companies against other companies. Usually, companies are compared with others in the same group. For example, a telecom operator (Spice) would be compared to another telecom operator not to an oil company. Thus, the fundamental analysis is a 3 phase analysis of a) The economy b) The industry and c) The company

Phase FIRST

Nature of Analysis Economic Analysis

SECOND

Industry Analysis

THIRD

Company Analysis

Purpose To access the general Economic situation of the Nation. To assess the prospects of Various industry groupings. To analyze the Financial and Nonfinancial aspects of a company to determine whether to buy, sell or hold the shares of a company.

Tools and techniques Economic indicators

Industry life cycle analysis, Competitive analysis of industries etc. Analysis of Financial aspects: Sales, Profitability, EPS etc. Analysis of Nonfinancial aspects: management, corporate image, product quality etc.

STRENGTHS OF FUNDAMENTAL ANALYSIS  Long-term Trends Fundamental analysis is good for long term investments based on long-term trends. The ability to identify and predict long-term economic, demographic, technological or consumer trends can benefit investors and helps in picking the right industry groups or companies.  Value Spotting Sound fundamental analysis will help identify companies that represent a good value. Some of the most legendary investors think for long-term and value. Fundamental analysis can help Page | 7

uncover the companies with valuable assets, a strong balance sheet, stable earnings, and staying power.  Business Acumen One of the most obvious, but less tangible rewards of fundamental analysis is the development of a thorough understanding of the business. After such painstaking research and analysis, an investor will be familiar with the key revenue and profit drivers behind a company. Earnings and earnings expectations can be potent drivers of equity prices. A good understanding can help investors avoid companies that are prone to shortfalls and identify those that continue to deliver.  Value Drivers In addition to understanding the business, fundamental analysis allows investors to develop an understanding of the key value drivers within the company. A stock’s price is heavily influenced by the industry group. By studying these groups, investors can better position themselves to identify opportunities that are high-risk (tech), low-risk (utilities), growth oriented (computer), value driven (oil), non-cyclical (consumer staples), cyclical (transportation) etc.  Knowing Who is Who Stocks move as a group. Knowing a company’s business, investors can better categorize stocks within their relevant industry group that can make a huge difference in relative valuations. The primary motive of buying a share is to sell it subsequently at a higher price. In many cases, dividends are also to be expected. Thus, dividends and price changes constitute the return from investing in shares. Consequently, an investor would be interested to know the dividend to be paid on the share in the future as also the future price of the share. These values can only be estimated and not predicted with certainty. These values are primarily determined by the performance of the company which in turn is influenced by the performance of the industry to which the company belongs and the general economic and socio-political scenario of the country. An investor who would like to be rational and scientific in his investment activity has to evaluate a lot of information about the past performance and the expected future performance of companies, industries and the economy as a whole before taking investment decision. Each share is assumed to have an economic worth based on its present and future earning capacity. This is called its intrinsic value or fundamental value. The purpose of fundamental analysis is to evaluate the present and future earning capacity of a share based on the economy, industry and company fundamentals and thereby assess the intrinsic value of the share. The investor can then compare the intrinsic value of the share with the prevailing market price to arrive at an investment decision. If the market price of the share is lower than its intrinsic value, the investor would decide to buy the share as it is underpriced. The price of such a share is expected to move up in future to match with its intrinsic value.

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On the contrary, when the market price of a share is higher than its intrinsic value, it is perceived to be overpriced. The market price of such a share is expected to come down in future and hence, the investor would decide to sell such a share. Fundamental analysis thus provides an analytical framework for rational investment decision-making. Fundamental analysis insists that no one should purchase or sell a share on the basis of tips and rumors. The fundamental approach calls upon the investor to make his buy or sell decision on the basis of a detailed analysis of the information about the company, the industry to which the company belongs, and the economy. This results in informed investing. The fundamental analysis can be valuable, but it should be approached with caution. If you are reading research written by a sell-side analyst, it is important to be familiar with the analyst behind the report. We all have personal biases, and every analyst has some sort of bias. There is nothing wrong with this, and the research can still be of great value. Learn what the ratings mean and track the record of an analyst before jumping to a conclusion. Corporate statements and press releases of a company offer good information, but they should be read with a healthy degree of skepticism to separate the facts from the spin. Press releases don’t happen by accident; they are an important PR tool for companies. Investors should become skilled readers to weed out the important information and ignore the hype.

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Technical Analysis Fundamental analysis and Technical analysis are the two main approaches to security analysis. Technical analysis is frequently used as a supplement to fundamental analysis rather than as a substitute to it. According to technical analysis, the price of stock depends on demand and supply in the market place. It has little correlation with the intrinsic value. All financial data and market information of a given stock is already reflected in its market price. Technical analysts have developed tools and techniques to study past patterns and predict future price. Technical analysis is basically the study of the markets only. Technical analysts study the technical characteristics which may be expected at market turning points and their objective assessment. The previous turning points are studied with a view to develop some characteristics that would help in identification of major market tops and bottoms. Human reactions are, by and large consistent in similar though not identical reaction; with his various tools, the technician attempts to correctly catch changes in trend and take advantage of them. Technical analysis is directed towards predicting the price of a security. The price at which a buyer and seller settle a deal is considered to be the one precise figure which synthesis, weighs and finally expresses all factors, rational and irrational, quantifiable and nonquantifiable and is the only figure that counts. Thus, the technical analysis provides a simplified and comprehensive picture of what is happening to the price of a security. Like a shadow or reflection it shows the broad outline of the whole situation and it actually works in practice. ASSUMPTIONS OF TECHNICAL ANALYSIS  The market value of a security is solely determined by the interaction of demand and supply factors operating in the market.  The demand and supply factors of a security are surrounded by numerous factors; these factors are both rational as well as irrational.  The security prices move in trends or waves which can be both upward or downward depending upon the sentiments, psychology and emotions of operators or traders.  The present trends are influenced by the past trends and the projection of future trends is possible by an analysis of past price trends.  Except minor variations, stock prices tend to move in trends which continue to persist for an appreciable length of time.  Changes in trends in stock prices are caused whenever there is a shift in the demand and supply factors.  Shifts in demand and supply, no matter when and why they occur, can be detected through charts prepared specially to show market action. Page | 10

 Some chart trends tend to repeat themselves. Patterns which are projected by charts record price movements and these patterns are used by technical analysis for making forecasts about the future patterns. TOOLS AND TECHNIQUES OF TECHNICAL ANALYSIS There are numerous tools and techniques for doing technical analysis. Basically this analysis is done from the following four important points of view:1) Prices: Whenever there is change in prices of securities, it is reflected in the changes in investor attitude and demand and supply of securities. 2) Time: The degree of movement in price is a function of time. The longer it takes for a reversal in trend, greater will be the price change that follows. 3) Volume: The intensity of price changes is reflected in the volume of transactions that accompany the change. If an increase in price is accompanied by a small change in transactions, it implies that the change is not strong enough. 4) Width: The quality of price change is measured by determining whether a change in trend spreads across most sectors and industries or is concentrated in few securities only. Study of the width of the market indicates the extent to which price changes have taken place in the market in accordance with a certain overall trends. DOW THEORY The Dow Theory, originally proposed by Charles Dow in 1900 is one of the oldest technical methods still widely followed. The basic principles of technical analysis originate from this theory. According to Charles Dow “The market is always considered as having three movements, all going at the same time. The first is the narrow movement from day to day. The second is the short swing, running from two weeks to a month or more and the third is the main movement, covering at least four years in its duration”. The Theory advocates that stock behaviour is 90% psychological and 10% logical. It is the mood of the Crowd which determines the way in which prices move and the move can be gauged by analysing the price and volume of transactions. The Dow Theory only describes the direction of market trends and does not attempt to forecast future movements or estimate either the duration or the size of such market trends. The theory uses the behaviour of the stock market as a barometer of business conditions rather than as a basis for forecasting stock prices themselves. It is assumed that most of the stocks follow the underlying market trend, most of the times. A trend should be assumed to continue in effect until such time as its reversal has been definitely signalled. The end of a bull market is signalled when a secondary reaction of Page | 11

decline carries prices lower than the level recorded during the earlier reaction and the subsequent advance fails to carry prices above the top level of the preceding recovery. The end of a bear market is signalled when an intermediate recovery carries prices to a level higher than the one registered in the previous advance and the subsequent decline halts above the level recorded in the earlier reaction.

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Moving Average: A Moving Average is an indicator that shows the average value of a security's price over a period of time. When calculating a moving average, a mathematical analysis of the security's average value over a predetermined time period is made. As the securities price changes, its average price moves up or down. There are several popular ways to calculate a moving average. Meta Stock for Java calculates a "simple" moving average--meaning that equal weight is given to each price over the calculation period. Interpretation: The most popular method of interpreting a moving average is to compare the relationship between a moving average of the security's price with the security's price itself. A buy signal is generated when the security's price rises above its moving average and a sell signal is generated when the security's price falls below its moving average. This type of moving average trading system is not intended to get you in at the exact bottom nor out at the exact top. Rather, it is designed to keep you in line with the security's price trend by buying shortly after the security's price bottoms and selling shortly after it tops. The critical element in a moving average is the number of time periods used in calculating the average. When using hindsight, you can always find a moving average that would have been profitable. The key is to find a moving average that will be consistently profitable. The most popular moving average is the 39-week (or 200-day) moving average. This moving average has an excellent track record in timing the major (long-term) market cycles. Advantages: The advantage of moving average system of this type (i.e., buying and selling when prices break through their moving average) is that you will always be on the "right" side of the market: prices cannot rise very much without the price rising above its average price. The disadvantage is that you will always buy and sell some late. If the trend does not last for a significant period of time, typically twice the length of the moving average, you will lose your money. Support and Resistance: Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. What Is Support? Page | 13

Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support. Support does not always hold and a break below support signals that the bears have won out over the bulls. A decline below support indicates a new willingness to sell and/or a lack of incentive to buy. Support breaks and new lows signal that sellers have reduced their expectations and are willing sell at even lower prices. In addition, buyers could not be coerced into buying until prices declined below support or below the previous low. Once support is broken, another support level will have to be established at a lower level. Where Is Support Established? Support levels are usually below the current price, but it is not uncommon for a security to trade at or near support. Technical analysis is not an exact science and it is sometimes difficult to set exact support levels. In addition, price movements can be volatile and dip below support briefly. Sometimes it does not seem logical to consider a support level broken if the price closes 1/8 below the established support level. For this reason, some traders and investors establish support zones. What Is Resistance? Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance. Resistance does not always hold and a break above resistance signals that the bulls have won out over the bears. A break above resistance shows a new willingness to buy and/or a lack of incentive to sell. Resistance breaks and new highs indicate buyers have increased their expectations and are willing to buy at even higher prices. In addition, sellers could not be coerced into selling until prices rose above resistance or above the previous high. Once resistance is broken, another resistance level will have to be established at a higher level. Where Is Resistance Established? Resistance levels are usually above the current price, but it is not uncommon for a security to trade at or near resistance. In addition, price movements can be volatile and rise above resistance briefly. Sometimes it does not seem logical to consider a resistance level broken if the price closes 1/8 above the established resistance level. For this reason, some traders and investors establish resistance zones. So, Here, Identification of key support and resistance levels is an essential ingredient to successful technical analysis. Even though it is sometimes difficult to establish exact support Page | 14

and resistance levels, being aware of their existence and location can greatly enhance analysis and forecasting abilities. If a security is approaching an important support level, it can serve as an alert to be extra vigilant in looking for signs of increased buying pressure and a potential reversal. If a security is approaching a resistance level, it can act as an alert to look for signs of increased selling pressure and potential reversal. If a support or resistance level is broken, it signals that the relationship between supply and demand has changed. A resistance breakout signals that demand (bulls) has gained the upper hand and a support break signals that supply (bears) has won the battle.

Price Oscillator: The Price Oscillator displays the difference between two moving averages of a security's price. The difference between the moving averages can be expressed in either points or percentages. The Price Oscillator is almost identical to the MACD, except that the Price Oscillator can use any two user-specified moving averages. (The MACD always uses 12 and 26-day moving averages, and always expresses the difference in points.) Interpretation: Moving average analysis typically generates buy signals when a short-term moving average (or the security's price) rises above a longer-term moving average. Conversely, sell signals are generated when a shorter-term moving average (or the security's price) falls below a longer-term moving average. The Price Oscillator illustrates the cyclical and often profitable signals generated by these one or two moving average systems.

Price Rate-Of-Change: The Price Rate-of-Change ("ROC") indicator displays the difference between the current price and the price x-time periods ago. The difference can be displayed in either points or as a percentage. The Momentum indicator displays the same information, but expresses it as a ratio. Interpretation: It is a well-recognized phenomenon that security prices surge ahead and retract in a cyclical wave-like motion. This cyclical action is the result of the changing expectations as bulls and bears struggle to control prices. The ROC displays the wave-like motion in an oscillator format by measuring the amount that prices have changed over a given time period. As prices increase, the ROC rises; as prices fall, the ROC falls. The greater the change in prices, the greater the change in the ROC.

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The time period used to calculate the ROC may range from 1-day (which results in a volatile chart showing the daily price change) to 200-days (or longer). The most popular time periods are the 12- and 25-day ROC for short to intermediate-term trading. These time periods were popularized by Gerald Appel and Fred Hitschler in their book, Stock Market Trading Systems. The 12-day ROC is an excellent short- to intermediate-term overbought/oversold indicator. The higher the ROC, the more overbought the security; the lower the ROC, the more likely a rally. However, as with all overbought/oversold indicators, it is prudent to wait for the market to begin to correct (i.e., turn up or down) before placing your trade. A market that appears overbought may remain overbought for some time. In fact, extremely overbought/oversold readings usually imply a continuation of the current trend. The 12-day ROC tends to be very cyclical, oscillating back and forth in a fairly regular cycle. Often, price changes can be anticipated by studying the previous cycles of the ROC and relating the previous cycles to the current market. RESISTANCE AND SUPPORT LEVELS The peak price of the stock is called the resistance area. Resistance level is the price level to which the stock or market rises and then falls repeatedly. This occurs during an uptrend or a sideway trend. It is a price level to which the market advances repeatedly but cannot break through. At this level, selling increases which causes the price fall. Support level shows the previous low price of the stock. It is a price level to which a stock or market price falls or bottom out repeatedly and then bounce up again. Demand for the stock increases as the price approaches a support level. The buying pressure or the demand supports the price of stock preventing it from going lower. The figure shows that if the share price persistently fails to rise above a certain level, this is known as resistance level. This is perhaps because at this price people who purchased previously, but then saw the share prices fall, took the opportunity to sell at the price they previously paid. Likewise, a support level is a price at which buyers constantly seem to come forward to prevent the share prices dropping any further. The support and resistance levels are important tools in confirming a reversal, in forecasting the course of prices, and in making appropriate price moves.

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BREAK-OUT THEORY Break out is also called as ‘confirmation’. This is indicated by drawing a line, which is a period of consolidation, when the share prices move sideways within a range of about 5% of the share price. Eventually a break out will occur and it is often suggested that the longer the period of consolidation, the greater will be the extent of ultimate rise or fall.

Breakout is a signal for the investors who wish to buy or sell their stocks.

Relative Strength Index (RSI): The Relative Strength Index ("RSI") is a popular oscillator. It was first introduced by Welles Wilder in an article in Commodities (now known as Futures) Magazine in June, 1978. The name "Relative Strength Index" is slightly misleading as the Relative Strength Index does not compare the relative strength of two securities, but rather the internal strength of a single security. A more appropriate name might be "Internal Strength Index." Interpretation: When Wilder introduced the Relative Strength Index, he recommended using a 14-day Relative Strength Index. Since then, the 9-day and 25-day Relative Strength Indexs have also gained popularity. The fewer days used to calculate the Relative Strength Index, the more volatile the indicator. The Relative Strength Index is a price-following oscillator that ranges between 0 and 100. A popular method of analyzing the Relative Strength Index is to look for a divergence in which the security is making a new high, but the Relative Strength Index is failing to surpass its previous high. This divergence is an indication of an impending reversal. When the Relative Strength Index then turns down and falls below its most recent trough, it is said to have completed a "failure swing." The failure swing is considered a confirmation of the impending reversal. In Mr. Wilder's book, he discusses five uses of the Relative Strength Index: 1. Tops and Bottoms. The Relative Strength Index usually tops above 70 and bottoms below 30. It usually forms these tops and bottoms before the underlying price chart. 2. Chart Formations. The Relative Strength Index often forms chart patterns such as head and shoulders or triangles that may or may not be visible on the price chart. Page | 17

3. Failure Swings (also known as support or resistance penetrations or breakouts). This is where the Relative Strength Index surpasses a previous high (peak) or falls below a recent low (trough). 4. Support and Resistance. The Relative Strength Index shows, sometimes more clearly than price themselves, levels of support and resistance. 5. Divergences. As discussed above, divergences occur when the price makes a new high (or low) that is not confirmed by a new high (or low) in the Relative Strength Index. Prices usually correct and move in the direction of the Relative Strength Index.

Trend lines: In the preceding section, we saw how support and resistance levels can be penetrated by a change in investor expectations (which results in shifts of the supply/demand lines). This type of a change is often abrupt and "news based." In this section, we'll review "trends." A trend represents a consistent change in prices (i.e., a change in investor expectations). Trends differ from support/resistance levels in that trends represent change, whereas support/resistance levels represent barriers to change. As shown in the following chart, a rising trend is defined by successively higher low-prices. A rising trend can be thought of as a rising support level--the bulls are in control and are pushing prices higher.

As shown in the next chart, a falling trend is defined by successively lower high-prices. A falling trend can be thought of as a falling resistance level--the bears are in control and are pushing prices lower.

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The Bar Chart: The Bar chart is one of the most popular types of charts used in technical analysis. As illustrated on the left, the top of the vertical line indicates the highest price at which a security traded during the day, and the bottom represents the lowest price. The closing price is displayed on the right side of the bar and the opening price is shown on the left side of the bar. A single bar like the one to the left represents one day of trading.

The chart below is an example of a bar chart for AT&T (T):

The advantage of using a bar chart over a straight-line graph is that it shows the high, low, open and close for each particular day.

Candle sticks Charting: Candlestick charts have been around for hundreds of years. They are often referred to as "Japanese candles" because the Japanese would use them to analyze the price of rice contracts. Similar to a bar chart, candlestick charts also display the open, close, daily high and daily low. The difference is the use of color to show if the stock went up or down over the day.

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The chart below is an example of a candlestick chart for AT&T (T). Green bars indicate the stock price rose, red indicates a decline:

Investors seem to have a "love/hate" relationship with candlestick charts. People either love them and use them frequently or they are completely turned off by them. There are several patterns to look for with candlestick charts - here are a few of the popular ones and what they mean.

This is a bullish pattern - the stock opened at (or near) its low and closed near its high

. The opposite of the pattern above, this is a bearish pattern. It indicates that the stock opened at (or near) its high and dropped substantially to close near its low.

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Known as "the hammer", this is a bullish pattern only if it occurs after the stock price has dropped for several days. A small body along with a large range identifies a hammer. This pattern indicates that a reversal in the downtrend is in the works.

Known as a "star”. For the most part, stars typically indicate a reversal and or indecision. There is a possibility that after seeing a star there will be a reversal or change in the current trend.

Point and Figure Chart: The point & figure (P&F) chart is somewhat rare. In fact, most charting services do not even offer it. This chart plots day-to-day increases and declines in price: increases are represented by a rising stack of "X"s, while decreases are represented by a declining stack of "O"s. This type of chart was traditionally used for intraday charting (a stock chart for just one day), mainly because it can be long and tedious to create a P&F chart manually over a longer period of time. The idea behind P&F charts is that they help you to filter out less significant price movements and to focus on the most important trends. Below is an example of a P&F chart for AT&T (T):

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POPULAR CHARTING PATTERNS: Technical analysts often use proven successful price patterns from great stocks as tools to find new great stocks. Let's look at a few examples



Cup and Handle - This is a pattern on a bar chart that can be as short as seven weeks and as long as 65 weeks. The cup is in the shape of a "U". The handle has a slight downward drift. The right-hand side of the pattern has low trading volume. As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for anywhere from four days to four weeks, then it will take off.

This pattern looks like a pot with a handle. It is one of the easier patterns to detect; and investors have made a lot of money using it.

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Head and Shoulders - This is a chart formation resembling an "M" in which a stock's price: Rises to a peak and then declines, then Rises above the former peak and again declines, and then Rises again but not to the second peak and again declines.

The first and third peaks are shoulders, and the second peak forms the head. This pattern is considered a very bearish indicator.

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Double Bottom - This pattern resembles a "W" and occurs when a stock price drops to a similar price level twice within a few weeks or months. You should buy when the price passes the highest point in the handle. In a perfect double bottom, the second decline should normally go slightly lower than the first decline to create a shakeout of jittery investors. The middle point of the "W" should not go into new high ground. This is a very bullish indicator.

The belief is that, after two drops in the stock price, the jittery investors will be out and the long-term investors will still be holding on.

Page | 24

CASE STUDY OVERVIEW OF AUTOMOBILE INDUSTRY IN INDIA The global automotive industry is a highly diversified sector that comprises of manufacturers, suppliers, dealers, retailers, original equipment manufacturers, aftermarket parts manufacturers, automotive engineers, motor mechanics, auto electricians, spray painters or body repairers, fuel producers, environmental and transport safety groups, and trade unions. United States, Japan, China, Germany and South Korea are the top five automobile manufacturing nations throughout the world. The United States of America is the world’s largest producer and consumer of motor vehicles and automobiles accounting for 6.6 million direct and spin-off jobs and represents nearly 10% of the S10 trillion US economy. The automobile is one of the important industries in the world, which provides employment to 25 million people in the world.

The Indian automobile industry is going through a technological change where each firm is engaged in changing its processes and technologies to sustain the competitive advantage and provide customers with the optimized products and services. Starting from the two wheelers, trucks, and tractors to the multi utility vehicles, commercial vehicles and the luxury vehicles, the Indian automobile industry has achieved tremendous amount of success in the recent years. As per Society of Indian Automobile Manufacturers (SIAM) the market share of each segment of the industry is as follows: The market shares of the segments of the automobile industry

Page | 25

The automobile industry had a growth of 15.4 % during April-January 2007, with the average annual growth of 10-15% over the last decade or so. With the incremental investment of $3540 billion, the growth is expected to double in the next 10 years. Consistent growth and dedication have made the Indian automobile industry the second- largest tractor and two-wheeler manufacturer in the world. It is also the fifth-largest commercial vehicle manufacturer in the world. The Indian automobile market is among the largest in Asia. The key players like Hindustan Motors, Maruti Udyog, Fiat India Private Ltd, Tata Motors, Bajaj Motors, Hero Motors, Ashok Leyland, Mahindra & Mahindra have been dominating the vehicle industry. A few of the foreign players like Toyota Kirloskar Motor Ltd., Skoda India Private Ltd., Honda Siel Cars India Ltd. have also entered the market and have catered to the customers’ needs to a large extent. Not only the Indian companies but also the international car manufacturing companies are focusing on compact cars to be delivered in the Indian market at a much smaller price. Moreover, the automobile companies are coming up with financial schemes such as easy EMI repayment systems to boost sales. There have been exhibitions like Auto-expo at Pragati Maidan, New Delhi to share the technological advancements. Besides, there are many new projects coming up in the automobile industry leading to the growth of the sector. The Government of India has liberalized the foreign exchange and equity regulations and has also reduced the tariff on imports, contributing significantly to the growth of the sector. Having firmly established its presence in the domestic markets, the Indian automobile sector is now penetrating the international arena. Vehicle exports from India are at their highest levels. The leaders of the Indian automobile sector, such as Tata Motors, Maruti and Mahindra and Mahindra are leading the exports to Europe, Middle East and African and Asian markets. The Ministry of Heavy Industries has released the Automotive Plan 2006-2016, with the motive of making India the most popular manufacturing hub for automobiles and its components in Asia. The plan focuses on the removal of all the bottlenecks that are inhibiting its growth in the domestic as well as international arena.

Growth in the Sector: At present the industry is enjoying a growth rate of 14-17% per annum, with domestic sales growth at 12.8%. The growth rate is predicted to double by 2015. As it is seen, the total sales of passenger vehicles - cars, utility vehicles and multiutility vehicles - in the year 2005 reached the mark of 1.06 million. The current growth rate Page | 26

indicates that by 2012 India will overtake Germany and Japan in sales volumes. Financing schemes have become an important factor in the growth of automobile sales. More and more financial schemes are coming up with easy installment plans to lure the customers. Apart from domestic production, the industry is consistently focusing on the automobile exports. The auto component segment is contributing a lot in the export arena. The liberalized policies of the government are now making the companies go for more and more exports. The automobile exports are increasing year by year. According to the Society of Indian Automobile Manufactures (SIAM) automobile exports in the last five years are as follows:

SWOT ANALYSIS OF INDIAN AUTOMOBILE INDUSTRY:

STRENGTHS: 

Globally cost competitive



Adheres to strict quality controls



Has access to latest technology Page | 27



Provides support to critical infrastructure and metal industries

WEAKNESSES: 

Industry has low level of research and development capability



Industry is exposed to cyclical downturns in the automotive industry



Most component companies are dependent on global majors for technology

OPPORTUNITIES: 

May serve as sourcing hub for global automobile majors



Significant export opportunities may be realised through diversification of export basket



Implementation of Value-Added-Tax (VAT) in FY2004 will negate the cascading impact of prices

THREATS: 

The presence of a large counterfeit components market poses a significant threat



Pressure on prices from OEMs continues



Imports pose price based competition in the replacement market

Page | 28

COMPANY ANALYSIS MARUTI SUZUKI INDIA LTD. Maruti Suzuki India Limited is a publicly listed automaker in India. It is a leading four-wheeler automobile manufacturer in South Asia. Suzuki Motor Corporation of Japan holds a majority stake in the company. It was the first company in India to mass-produce and sell more than a million cars. It is largely credited for having brought in an automobile revolution to India. It is the market leader in India. On 17 September, 2007, Maruti Udyog was renamed to Maruti Suzuki India Limited. The company's headquarters remain in Gurgaon, near Delhi. Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. Until recently, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan. The Indian government held an initial public offering of 25% of the company in June 2003. As of May 10, 2007, Govt. of India sold its complete share to Indian financial institutions. With this, Govt. of India no longer has stake in Maruti Udyog. Maruti Udyog Limited (MUL) was established in February 1981, though the actual production commenced in 1983. Through 2004, Maruti has produced over 5 Million vehicles. Marutis are sold in India and various several other countries, depending upon export orders. Cars similar to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki in Pakistan and other South Asian countries. The company annually exports more than 30,000 cars and has an extremely large domestic market in India selling over 500,000 cars annually. Maruti 800, till 2004, was the India's largest selling compact car ever since it was launched in 1983. More than a million units of this car have been sold worldwide so far. Currently, Maruti Alto tops the sales charts. Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti" is commonly used to refer to this compact car model. Till recently the term "Maruti", in popular Indian culture, was associated to the Maruti 800 model. Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, has been the leader of the Indian car market for over two decades. It’s manufacturing facilities are located at two facilities Gurgaon and Manesar south of New Delhi. Maruti’s Gurgaon facility has an installed capacity of 350,000 units per annum. The Manesar facilities, launched in February 2007 comprise a vehicle assembly plant with a capacity of 100,000 units per year and a Diesel Engine plant with an annual capacity of 100,000 engines and transmissions. Manesar and Gurgaon facilities have a combined capability to produce over 700,000 units annually. More than half the cars sold in India are Maruti cars. The company is a subsidiary of Suzuki Motor Corporation, Japan, which owns 54.2 per cent of Maruti. The rest is owned by

Page | 29

the public and financial institutions. It is listed on the Bombay Stock Exchange and National Stock Exchange in India. During 2006-07, Maruti Suzuki sold about 675,000 cars, of which 39,000 were exported. In all, over six million Maruti cars are on Indian roads since the first car was rolled out on December 14, 1983. Maruti Suzuki offers 10 models, ranging from the people’s car, Maruti 800, for less than Rs 200,000 ($ 5000) ex-showroom to the premium sedan SX 4 and luxury SUV, Grand Vitara. Suzuki Motor Corporation, the parent company, is a global leader in mini and compact cars for three decades. Suzuki’s technical superiority lies in its ability to pack power and performance into a compact, lightweight engine that is clean and fuel efficient. Maruti is clearly an “employer of choice” for automotive engineers and young managers from across the country. Nearly 75,000 people are employed directly by Maruti and its partners. The company vouches for customer satisfaction. For its sincere efforts it has been rated (by customers)first in customer satisfaction among all car makers in India for seven years in a row in annual survey by J D Power Asia Pacific. Maruti Suzuki was born as a government company, with Suzuki as a minor partner, to make a people’s car for middle class India. Over the years, the product range has widened, ownership has changed hands and the customer has evolved. What remains unchanged, then and now, is Maruti’s mission to motorise India.

FINANCIAL SUMMARY:

Maruti Suzuki India Ltd has announced the following Audited results for the quarter ended December 31, 2007: The Company has posted profit after tax of Rs 467.04 crores for the quarter ended December 31, 2007 as compared to Rs 376.41 crores for the quarter ended December 31, 2006 i.e., 24.08% increase in profit after tax in the year 2007. Total Income has increased from Rs 4451.47 crores for the quarter ended December 31, 2006 to Rs 5651.17 crores for the quarter ended December 31, 2007.

Page | 30

Quarterly Results

Rs. cr year

2007/12

2006/12

var %

Sales Income

5,480.50

4,323.04

26.77

Other Income

170.67

128.43

32.89

Expenditure

4,867.25

3,815.88

27.55

Interest

14.36

15.74

-8.77

Gross Profit

769.56

619.85

24.15

Depreciation

86.73

75.86

14.33

Tax

215.79

167.58

28.77

PAT

467.04

376.41

24.08

Equity

144.46

144.46

0.00

OPM (%)

11.19

11.73

-0.54

GPM (%)

10.93

11.37

-0.44

NPM (%)

8.52

8.70

-0.18

Balance Sheet Rs. cr Year

2007/03

2006/03

Equity Capital

144.50

144.50

Prefrential Capital

0.00

0.00

Reserves and Surplus

6,709.40

5,308.10

Secured Loans

63.50

71.70

Unsecured Loans

567.30

0.00

Total

7,484.70

5,524.30

Source of Funds

Page | 31

Application of Funds Gross Block

6,146.80

4,954.60

Accumulated Deprecation

3,487.10

3,259.40

Net Block

2,659.70

1,695.20

NetCurrentAssets

1,176.90

1,685.90

Total

7,484.70

5,524.30

Fundamentals of Maruti Suzuki India Ltd. Particulars

2003

2004

2005

2006

2007

Return on Equity

0.0473

0.1510

0.1949

0.2181

0.2279

Book Value

107.23

124.30

151.56

188.73

237.23

Debt Equity

0.14

0.08

0.07

0.01

0.09

P/E Ratio

14.58

DPS

1.50

1.50

2.00

3.50

4.50

EPS

5.07

18.76

29.55

41.16

54.07

RONW

3.93

17.10

19.03

23.24

22.63

Current Ratio

1.57

1.17

1.68

1.77

1.42

Quick Ratio

1.20

0.85

1.25

1.31

1.13

Interest Coverage Ratio

11.60

32.32

49.70

104.61

68.23

Retention Ratio

16.1755

5.2187

4.1530

3.7969

3.7101

Bonus Adjustment

1

1

1

1

1

Adjusted EPS

5.07

18.76

29.55

41.16

54.07

Price Chart:

Page | 32

TATA MOTORS Tata Motors Limited formerly known as TELCO (TATA Engineering and Locomotive Company), (NYSE: TTM) - is India's largest passenger automobile and commercial vehicle manufacturing company. It is a part of the Tata Group, and has its headquarters in Mumbai, Maharashtra. One of the world's largest manufacturers of commercial vehicles and known for its hatchback passenger vehicle Tata Indica, Tata Motors has its manufacturing base in Jamshedpur, Lucknow, Pune and Singur. The OICA ranked it as the world's 21st largest vehicle manufacturer, based on figures for2006. Tata Motors was established in 1945, when the company began making trains. Tata Motors was first listed on the NYSE in 2004. Tata Motors gained Rs. 320 billion during 2001-2006 which was among the top 10 corporate profits in India. In 2004 it also bought Daewoo's truck manufacturing unit, now known as Tata Daewoo Commercial Vehicle, in South Korea. In March 2005, it acquired a 21% stake in Hispano Carrocera SA, giving it controlling rights in the company. On 10 January 2008, Tata Motors launched their much awaited Tata Nano, noted for its Rs 100,000 price-tag, at Auto Expo 2008 in Pragati Maidan, Delhi. Tata Motors Limited is India's largest automobile company, with revenues of Rs. 32,426 crores (USD 7.2 billion) in 2006-07. It is the leader by far in commercial vehicles in each segment, and the second largest in the passenger vehicles market with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fifth largest medium and heavy commercial vehicle manufacturer, and the world's second largest medium and heavy bus manufacturer.

Page | 33

The company's 22,000 employees are guided by the vision to be "best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics." Tata Motors helps its employees realise their potential through innovative HR practices. The company's goal is to empower and provide employees with dynamic career paths in congruence with corporate objectives. All-round potential development and performance improvement is ensured by regular in-house and external training. The company has won several awards recognizing its training programmes. Tata Motors, the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. In 2004, it acquired the Daewoo Commercial Vehicles Company, Korea's second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market, while also exporting these products to several international markets. The Tata Group is one of India's largest and most respected business conglomerates, with revenues in 2006-07 of $28.8 billion, the equivalent of about 3.2 per cent of the country's GDP, and the international revenues of the Group in 2006-07 were US$ 10.8 billion, contributing to 38% of the total Group revenues. Tata companies together employ over 300,000 people. FINANCIAL SUMMARY: The Company has posted a net profit of Rs 499.05 crores for the quarter ended December 31, 2007 as compared to Rs 513.17 crores for the quarter ended December 31, 2006. Total Revenues has increased from Rs 8061.73 crores for the quarter ended December 31, 2005 to Rs 8456.18 crores for the quarter ended December 31, 2007.

Quarterly Results Rs. cr Year

2007/12

2006/12

var %

Sales Income

8,364.37

8,047.41

3.94

Other Income

91.81

14.32

541.13

Expenditure

7,531.80

7,123.86

5.73

Interest

91.77

85.17

7.75

Gross Profit

832.61

852.70

-2.36

Depreciation

167.51

143.50

16.73

Tax

166.05

195.57

-15.09 Page | 34

PAT

499.05

513.17

-2.75

Equity

385.54

385.32

0.06

OPM (%)

9.95

11.48

-1.53

GPM (%)

8.86

10.42

-1.56

NPM (%)

5.96

6.37

-0.41

Balance Sheet Rs. cr Year

2007/03

2006/03

Equity Capital

385.41

382.87

Prefrential Capital

0.00

0.00

Reserves and Surplus

6,458.39

5,127.81

Secured Loans

2,022.04

822.76

Unsecured Loans

1,987.10

2,114.08

Total

10,852.94

8,447.52

Gross Block

8,775.80

7,971.55

Accumulated Deprecation

4,894.54

4,401.51

Net Block

3,855.31

3,543.65

NetCurrentAssets

1,997.22

1,923.41

Total

10,852.94

8,447.52

Source of Funds

Application of Funds

Fundamentals of Tata Motors Particulars

2003

2004

2005

2006

2007

Return on Equity

0.1156

0.2257

0.3009

0.2774

0.2796

Book Value

81.22

101.71

113.65

143.94

177.59

Page | 35

Debt Equity

0.56

0.35

0.60

0.53

P/E Ratio

0.58 12.67

DPS

4.00

8.00

12.50

13.00

15.00

EPS

9.38

22.96

34.19

39.94

49.65

RONW

12.32

22.98

30.12

24.17

24.67

Current Ratio

0.84

0,72

0.99

1.24

1.24

Quick Ratio

0.52

0.47

0.76

0.96

0.91

Interest Coverage Ratio

3.82

8.69

10.24

8.08

7.62

Retention Ratio

0.5192

0.7599

0.8776

0.9986

1.0525

Bonus Adjustment

1

1

1

1

1

Adjusted EPS

9.38

22.96

34.19

39.94

49.65

Price Chart:

Page | 36

Technical analysis of Companies Company: Maruti Suzuki India Ltd. Sector: Automobile Sector Relative Strength Index: The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100.

A 14 day RSI is calculated for stock it is recommended by wilder that a 14 period will be a good indicator. By using the simple formula RSI = {100- [100 / (1+RS)]}.it states that if RSI is below 30 buy & if it crosses above 70 then sell it. From 2nd April 07 to 31st March 08 the RSI is calculated, the best time to sell the stock was between 12th July 07 to 31st July 07 and 9th October 07 to 18th October 07 since the RSI was above 70 & it had reached its peak level. The best time to buy the stock was between 2nd Jan 08 to 24th Jan 08 since the RSI was below 30 for these many days.

Page | 37

10 Days Moving Average of Maruti Suzuki India Ltd. Scrip

Interpretation: Here, the Moving Average is almost equal to the Actual line. So it indicates that it is a right time to buy the security. In this Graph, we can observe that moving Average of Maruti Suzuki Ltd. Stock has been decreased. So, it is giving clear picture of future movement of the scrip. This Graph provides a message to the investor that it is a right time to buy the Stock of Maruti Suzuki Ltd. And, if we observe the trend of this graph then we can also notice that Moving Average line has been decreased, so it is also a right time to buy the stock. Here, in this case, the Stock price of Maruti Suzuki Ltd. is just equal to its moving average line. But if we see the trend of Moving Average then it indicates that investors are becoming increasingly bullish from bearish pattern on the Stock Price of Maruti Suzuki Ltd.

Candle Stick Charting

Page | 38

Interpretation: Japanese Candle Stick is used to analyze the pattern of stock movement. Candle is same as bar chart but the color is different red candle is used to indicate the bearish trend and green candle is a indicator of bullish trend Japanese candle use historical prices of a stock in the prescribed manner i.e. Open, High, Low, Close. The size of the candle is known by its magnitude of open and close, and the size of the shadow is known by high and close. In the above Candle Stick Chart it is clear that Stock Price of Maruti Suzuki Ltd. has been decreased. Simply Share Prices of Maruti Suzuki Ltd is falling down. It indicates that the investors are becoming more bearish than bullish. Here, as far as Maruti Suzuki is concerned, bearish market trend is taking place. It is a right time to buy the Scrip.

Page | 39

Company: Tata Motors Sector: Automobile Sector Relative Strength Index: The RSI compares the magnitude of a stock's recent gains to the magnitude of its recent losses and turns that information into a number that ranges from 0 to 100

A 14 day RSI is calculated for stock it is recommended by wilder that a 14 period will be a good indicator. By using the simple formula RSI = {100- [100 / (1+RS)]}.It states that if RSI is below 30 buy & if it crosses above 70 then sell it. From 2nd April 07 to 31st March 08 the RSI is calculated, the best time to sell the stock was between 27th Sep 07 to 4th October 07 and 10th December 07 to 12th December 07 since the RSI was above 70 & it had reached its peak level. The best time to buy the stock was between 8th August 07 to 23rd August 07 and 23rd Jan 08 to 24th Jan 08 as well as between 7th March to 18th March 08 since the RSI was below 30 for these many days. 10 Days Moving Average of Maruti Suzuki India Ltd. Scrip

Page | 40

Interpretation: Here, In this case, Moving Average is above the Actual line. So it indicates that it is a right time to buy the security. In this Graph, we can see that the moving average of Tata Motors Stock has been decreased. So, it is giving clear picture of future movement of the scrip. This Graph provides a message to the investor that it is a right time to buy the Stock of Tata Motors. Here, in this case, the actual Stock price of Tata Motors is just below its moving average line. It indicates that investors are becoming increasingly bullish on the Stock Price of Tata Motors. Moreover, Stock price and moving Average of Tata Motors has been decreased. It indicates that investors are becoming increasingly bullish from bearish pattern on the Stock Price of Tata Motors.

Candle Stick Charting

Interpretation: From the above Candle Stick Chart it is clear that Stock Price of Tata Motors is falling down. Here, we can observe lot of volatility in stock price. Both the Bullish and Bearish trends are taking place. The Bullish trend is following by Bearish Trend. It indicates that the investors are becoming more bearish than bullish. At present Situation Bearish Trend is going on. It is a right time to buy the Scrip.

Page | 41

FINDINGS AND CONCLUSION Findings of the study: 

In case of RSI of Maruti Suzuki Scrip, the best time to sell the stock was between 12th July 07 to 31st July 07 and 9th October 07 to 18th October 07 since the RSI was above 70 & it had reached its peak level. The best time to buy the stock was between 2nd Jan 08 to 24th Jan 08 since the RSI was below 30 for these many days.



In case of RSI of Tata Motors, the best time to sell the stock was between 27th Sep 07 to 4th October 07 and 10th December 07 to 12th December 07 since the RSI was above 70 & it had reached its peak level. The best time to buy the stock was between 8th August 07 to 23rd August 07 and 23rd Jan 08 to 24th Jan 08 as well as between 7th March to 18th March 08 since the RSI was below 30 for these many days.



The 10 days moving average of Maruti Suzuki scrip, provides a message to the investor that it is a right time to buy the Stock and, the trend of the Moving Average line has been decreased, so it is also a right time to buy the stock.



In case of 10 days Moving Average of Tata Motors Ssrip, the actual Stock price is just below its moving average line. It indicates that investors are becoming increasingly bullish on the Stock Price of Tata Motors.



In Japanese Candle Stick Chart of Maruti Suzuki Ltd. we can see that the stock price has been decreased. Simply Share Prices of Maruti Suzuki Ltd is falling down. It indicates that the investors are becoming more bearish than bullish.



In case of Japanese Candle Stick Chart of Tata Motors, we can observe lot of volatility in stock price. Both the Bullish and Bearish trends are taking place. The Bullish trend is following by Bearish Trend



Fundamentally, financial performance of these companies in respect of sales and profit is good.



If an investor opts for long term investment then he will earn huge amount of return. Long term Investment is known to be less risky.



This study may not provide any guidelines to Speculators. It is useful to Long Term Investors.



Technical analysts evaluate securities by analyzing statistics generated by market activity, past prices and volume.



One of the most basic and easy to use technical analysis indicators is the moving average, which shows the average value of a security's price over a period of time. The most commonly used moving averages are 10 days, 20 days, 30 days, 50 days, 100 days and 200-days moving average.. Page | 42



One of the most important areas for any investor to look when researching a company is the financial statement. Financial reports are required by law and are published both quarterly and annually.



Indian Economy is consistently achieving a tremendous growth in these Sectors.



If we consider RSI then almost all the scrips of these companies are lying between 30 and 70. It means an investor should hold the scrips until it reaches 70 to sell and 30 to buy.



The stock prices always take a correction after a major climb.



Moving average is one of the best methods of predicting future movement of Stock Price. If we use 200 Day Moving Average for Analysis then volatility of stock will be less. It gives clear picture of movement of Stock.

Conclusion of the study: As we all know India is one of the fastest growing economies in the world. India is consistently achieving growth in automobile sector. The automotive industry is witnessing tremendous and unprecedented changes these days. On a global scale, the assets of the top ten automotive corporations accounts for 28% of the assets of the world’s top 50 companies, 29% of their employment and 30% of their total sales. The Indian automobile industry is going through a technological change where each firm is engaged in changing its processes and technologies to sustain the competitive advantage and provide customers with the optimized products and services. The automobile industry had a growth of 15.4 % during April-January 2007, with the average annual growth of 10-15% over the last decade or so. With the incremental investment of $3540 billion, the growth is expected to double in the next 10 years. Consistent growth and dedication have made the Indian automobile industry the second- largest tractor and two-wheeler manufacturer in the world. It is also the fifth-largest commercial vehicle manufacturer in the world. The Indian automobile market is among the largest in Asia. The Ministry of Heavy Industries has released the Automotive Plan 2006-2016, with the motive of making India the most popular manufacturing hub for automobiles and its components in Asia. The plan focuses on the removal of all the bottlenecks that are inhibiting its growth in the domestic as well as international arena. With comparatively higher rate of economic growth rate index against that of great global powers, India has become a hub of domestic and exports business. The automobile sector has been contributing its share to the shining economic performance of India in the recent years.

Page | 43

The Indian automobile industry is going through a phase of rapid change and high growth. With new projects coming up on a regular basis, the industry is undergoing technological change. The major players are expanding their plants and focusing on mass customization, mass production, etc Apart from domestic production, the industry is consistently focusing on the automobile exports. The auto component segment is contributing a lot in the export arena. The liberalized policies of the government are now making the companies go for more and more exports. Because of these reasons, the shares of automobile industry are performing well and therefore the share market is attracting people to invest their hard earned money and find fortune. But lack of knowledge about shares and stock market is making them cautious of investing in this market. They need to be educated as well as guided to minimize the risk and to assess the return on their investment.

Page | 44

CONCLUSION Investment is a financial activity that involves risk. It is the commitment of funds for a return expected to be realized in the future. Investments may be made in financial assets or physical assets. In either case there is the possibility that the actual return may vary from the expected return. That possibility is the risk involved in the investment. Risk and Return are the two most important characteristics of any investment. Safety and liquidity are also important for an investor. The objective of an investor is specified as maximization of return and minimization of risk. Investment is generally distinguished from speculation in terms of three factors, namely risk, capital gains and time period. Gambling is the extreme form of speculation. Investors may be individuals or institutions. Both types of investors combine to make investment activity dynamic and profitable. The investors in the financial market have different attitudes towards risk and varying levels of risk bearing capacity. Some investors are risk averse, while some may have an affinity to risk. The risk bearing capacity of an investor, on the other hand, is a function of his income. A person with higher income is assumed to have a higher risk bearing capacity. Each investor tries to maximise his welfare by choosing the optimum combination of risk and return in accordance with his preference and capacity. It is highly essential for the investor to do both fundamental and technical analysis for deciding the suitable stock. In stock market, trend is considered to be a man’s best friend.

Page | 45

BIBLIOGRAPHY

E-BOOKS REFERRED: 1

Security Analysis & Portfolio Management, By, Punithavathy Pandian.

2

Investment Analysis & Portfolio Management, By Prasanna Chandra

3

Financial Markets & Institutions, By, Dr. S. Guruswamy

4

Security Analysis And Portfolio Management, By, Donald E.Fisher And Ronald J. Jordan,

WEB SITES: 1

www.bseindia.com

2

www.nseindia.com

3

www.stockchart.com

4

www.icicidirect.com

5

www.marutisuzuki.com

6

www.tatamotors.com

7

www.investopedia.com

8

www.moneycontrol.com

9

www.equitymaster.com

MAGZINES AND JOURNALS: 1

Annual Reports of Companies.

Page | 46

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