A SUMMER INTERNSHIP REPORT
PRESENTED BY
ABHIJIT PATRA
REGD. NO – 032001016
MASTER OF COMMERCE
BIRLA GLOBAL UNIVERSITY
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A PROJECT REPORT ON
“FUNDAMENTAL AND TECHNICAL ANALYSIS”
At
SUBMITTED TO
BIRLA GLOBAL UNIVERSITY
This project report is prepared for a partial fulfillment of the requirement for award of degree of
MASTER OF COMMERCE
(2020-2022)
SUBMITTED BY
ABHIJIT PATRA
REGD. NO – 032001016
MASTER OF COMMERCE
BIRLA GLOBAL UNIVERSITY
Under the guidance of
CORPORATE GUIDE FACULTY GUIDE
Mr. Bipin B. Dutta Dr Hemant Bhanawat
Manager Of Professor of
Odisha Capital Market & Enterprises Ltd BIRLA GLOBAL UNIVERSITY
Bhubaneswar Bhubaneswar
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DECLARATION
I declare that this project report entitled “FUNDAMENTAL AND TECHNICAL
ANALYSIS” is original and bonafide work of my own in the partial fulfillment of the
requirements for the award of the Degree of MASTER OF COMMERCE and
submitted to the Department of Commerce, BIRLA GLOBAL UNIVERSITY,
BHUBANESWAR.
The data that has been collected by me is truly authentic and contains true and
complete information.
ABHIJIT PATRA
([Link] – FINANCE)
REGD NO – 032001016
BIRLA GLOBAL UNIVERSITY
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ACKNOWLEDGEMNET
I would like to express my gratitude towards “Odisha Capital Market & Enterprises
Ltd. (Bhubaneswar Stock Exchange), Bhubaneswar” for giving me the opportunity to
work with them. I would like to thank the entire staff of BhSE for their co- operation
during summer training which helped in the learning experience being enjoyable and
fruitful.
I shoulder the responsibility to acknowledge the following distinguished personalities
who graciously allowed me to carry out this project work successfully.
I am highly indebted to Mr. Bipin Dutta, Manager, Of Odisha Capital Market &
Enterprises Ltd and Dr Hemant Bhanawat (Professor, BGU) for providing the
opportunity to prepare the project report under the guidance. I wish & express my
heart- full gratitude to Mr. Bipin Dutta & Dr Hemant Bhanawat (Professor, BGU) for
the guidance and suggestions throughout the project, without which I could not have
been able to complete this project report successfully.
I extend my thanks to all my friends for their moral support and encouragement. Last
but not least I thank my parents and relatives, who inspired me always to do the best.
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CORPORATE CERTIFICATE
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EXECUTIVE SUMMARY
The unique nature of capital market instruments forces investors to depend strongly on fundamental
factors in their investment decision. These fundamental factors relate to the overall economy or a
specific industry or a company. Fundamental analysis examines the economic environment, industry
performance and company performance before making an investment decision.
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
focus on economic data to assess the present and future growth of the economy.
Technical analysis is really just studies supply and demand in an attempt to
determine what direction, or trend, will continue in the future. In other words, technical analysis is
attempts to understands the emotions in the market itself, as opposed to its components. If you
understand the benefits and limitations of technical analysis, it can give you a new set of tools or skills
that will enable you to be a better trader or investor.
Technical analysis is a method of evaluating securities by analysis the statistics
generated by market activity, such as past prices and volume. Technical analyses do not attempt to
measure a security’s intrinsic value, but instead use charts and other tools to identify patterns that can
suggest future activity
The art of technical analysis, for it is an art, is to identify a trend reversal at a
relatively early stage and ride on that trend until the weight of the evidence shows or proves the trend
has reversed.
The present market scenario has shown us the big fall in the stock market
because of covid-19. It is the right time to enter in the stock market. Even some of the research firms
showed that share market is fastest growing in India. Now it is possible for investors to trade from
their own place. As compare to last two years there is a growth in the number of share brokers and
market analysts. Now the common man is also thinking of some investment in the share market. Too
many investors invest their money for the short span, the intension is speculative.
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CONTENTS
1. Chapter 1 – Introduction
1.1. Introduction………………………………………………………………..8
1.2. Rational of study…………………………………………………………..10
1.3. Objective of study…………………………………………………………10
1.4. Scope of study……………………………………………………………..10
1.5. Research methodology…………………………………………………….11
1.6. Limitation of study………………………………………………………...11
2. Chapter 2 - Review of Literature......................................................................12
3. Chapter 3 - Theoretical Framework
3.1. Fundamental Analysis……………………………………………………..14
3.1.1. Components of Fundamental Analysis……………………………..15
3.1.2. Advantages of Fundamental analysis……………………………….15
3.1.3. Disadvantages of Fundamental analysis……………………………16
3.1.4. Importance of Fundamental Analysis………………………………17
3.1.5. Qualitative analysis…………………………………………………18
3.1.6. Quantitative analysis………………………………………………..19
3.2. Technical Analysis ………………………………………………………...22
3.2.1. Principles……………………………………………………………22
3.2.2. Charting terms and Indicators………………………………………23
4. Chapter 4 – Data collection
4.1. Company Profiles……………………………………………………….….32
5. Chapter 5 – Data analysis and interpretation
5.1. Cash flow…………………………………………………………………...35
5.2. Ratios……………………………………………………………………….36
5.3. Income statement…………………………………………………………...36
5.4. Balance sheet………………………………………………………………..37
6. Chapter 6 – Conclusion
6.1. Findings……………………………………………………………………38
6.2. Conclusion…………………………………………………………………38
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CHAPTER 1
1.1 INTRODUCTION:
STOCK MARKET
A stock market is a platform where investors come to trade in financial instruments like shares,
bonds, and derivatives. The stock exchange works as a facilitator of this transaction and enables
the buying and selling of shares.
Stock markets are among the largest avenues for investments. There are primarily two stock
exchanges in India, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
Companies list their shares for the first time on a stock exchange through an IPO. Investors may
then trade in these shares through the secondary market.
The two stock exchanges in India have on some occasions witnessed stocks worth INR 6,00,000
crores being traded. The uninitiated in India often consider investing in stocks markets gambling,
but a basic understanding of the share market can change that perception.
How do the Share Markets work
Understanding the Stock Exchange Platform
A stock exchange is precisely a platform that conducts the trading of financial instruments like
stocks and derivatives. The activities on this platform are regulated by the Securities and
Exchange Board of India. The participants have to register with SEBI and the stock exchange in
order to conduct trades. Trading activities include brokering, issuing of shares by companies, etc.
Listing of the Company in the Secondary Market
The shares of a company are listed on the secondary market for the first time through an Initial
Public Offer or IPO. The allotment of stocks takes place before listing and investors who bid for
the stocks get their share depending on the number of investors.
Trading in the Secondary Market
Once the company has been listed, stocks can be traded in the secondary market by the investors.
This is the marketplace for the buyers and sellers to transact and make profits or in some cases,
losses.
Stock Brokers
Because of the magnitude of investors who number in the thousands, it is difficult to have them
assemble at one location. Therefore, to conduct trade, stockbrokers and brokerage firms come
into the picture.
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These are entities that are registered with the Stock Exchange and serve as intermediaries
between the investors and the exchange itself. When you place an order to buy any share at a
given rate, the broker processes it at the exchange where there are multiple parties involved.
Passing of your order
Your buy order is passed on to the exchange by the broker, where it is matched for a sell order
for the same. The exchange takes place when the seller and the buyer agree upon a price and
finalize it; the order is then confirmed.
Settlement
Once you finalize a price, the exchange confirms the details to ensure that there is no default in
the transaction. The exchange then facilitates the transfer of ownership of the shares which is
known as Settlement. You receive a message once this takes place. The communication of this
message involves multiple parties like the brokerage order department, the exchange floor
traders, etc.
The settlement time earlier took weeks to materialize which now happens in T+2 days. This
means that if you trade today, the shares are reflected in your Demat account in two working
days time. Investing in the share market is subject to market risks. It is recommended you seek
expert guidance before investing. Visit ClearTax to browse through our handpicked mutual funds
and pick one based on your suitability.
Purposes of the Stock Market – Capital and Investment Income
The stock market serves two very important purposes. The first is to provide capital to
companies that they can use to fund and expand their businesses. If a company issues one million
shares of stock that initially sell for $10 a share, then that provides the company with $10 million
of capital that it can use to grow its business (minus whatever fees the company pays for an
investment bank to manage the stock offering). By offering stock shares instead of borrowing the
capital needed for expansion, the company avoids incurring debt and paying interest charges on
that debt.
The secondary purpose the stock market serves is to give investors – those who purchase stocks
– the opportunity to share in the profits of publicly-traded companies. Investors can profit from
stock buying in one of two ways. Some stocks pay regular dividends (a given amount of money
per share of stock someone owns). The other way investors can profit from buying stocks is by
selling their stock for a profit if the stock price increases from their purchase price. For example,
if an investor buys shares of a company’s stock at $10 a share and the price of the stock
subsequently rises to $15 a share, the investor can then realize a 50% profit on their investment
by selling their shares.
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1.2 RATIONAL OF STUDY
The capital gains of an investor are on the performance of a particular company’s stock in the stock
market. The stronger the company’s share, the more profit the investor gets. So it is necessary to
ascertain, analyze and interpret the share of various firms in order to know its position in the market.
Investors can make wise investment with the help of this analysis through this project, it tries to point
out the company which ensure maximum return and minimum risk in power sector where in
investment could be made.
1.3 OBJECTIVE/ PURPOSE OF THE REPORT
• The following are the objective of the study:
• To learn the fundamental and technical analysis.
• To study the Fundamental and Technical analysis of selected companies to recommend for better
choice of investment.
• To analyze the Intrinsic value and forecast the future value through fundamental analysis.
• To select the right time and right securities for the investment
1.4 SCOPE OF THE STUDY
The study is to analyze the financial strength and future investment prospective of the key players
from power sector of the economy. The fundamental analysis is to determine the value of the shares.
The technical analysis is to predict the future stock behavior. Rational investors always focus on
maximum return which bears minimum risk. Hence, for them, well diversified equity funds are the
superlative opportunity available for the investment.
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1.5 RESEARCH METHODOLOGY
RESEARCH TYPE
In this project mainly secondary data is used. Data are collected from sources such as
internet; website of selected companies, company balance sheet, annual reports etc.
analysis of data is done with the help of fundamental and technical analysis of
selected companies.
• Websites ([Link], [Link], etc.)
• Books – Security Analysis by Benjamin Graham, Value Investing and Behavioral
Finance by Parag Parikh
• Apps – Trading View
DATA COLLECTION METHODS
• Mostly Secondary data.
• Course books and Trader Journals
1.6 LIMITATION OF THE STUDY
• The data collected is secondary in nature.
• Detailed study of the topic was not possible due to covid-19.
• The accuracy and correctness of the tools used depends on the
accuracy of the published accounts.
• Only 1company were taken for the study.
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CHAPTER 2
LITERATURE REVIEW
A literature review has four main objectives:
• It surveys the literature in your chosen area of study
• It synthesizes the information in that literature into a summary
• It critically analyses the information gathered by identifying gaps in current knowledge;
by showing limitations of theories and points of view; and by formulating areas for
further research and reviewing areas of controversy
• It presents the literature in an organized way
A literature review shows your readers that you have an in-depth grasp of your subject; and that
you understand where your own research fits into and adds to an existing body of agreed
knowledge.
(JEVONSLEE, 1987) done fundamental analysis of securities .The fundamental analysis
approach assumes that each security has an intrinsic value that can be decided on the basis of
such information like accounting earnings, dividends, growth factors, and debt/equity ratios etc..
Technical expert determines the intrinsic value on the basis of these fundamentals and compares
this value with the current market price to determine if the security is underpriced or overpriced.
(Preeti, 2009) examines whether fundamental analysis involving two types of approaches like
traditional and growth. Fundamentally powerful firms earn excess mean returns in comparison to
fundamentally weak firms.
(Mishra, 2016) stated the extent to which trading profitability using technical analysis indicators
explains the ‗risk premium‘or ‗risk compensation‘for investing in equity markets as against
assets that are relatively risk-free using multiple regression analysis. It is advised that traders,
retail investors and fund managers, while evaluating portfolios, can rely on technical indicators-
based trading strategies other than fundamental analysis.
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(Pandya, 2013) conducted study for Information Technology sector companies and technical
analysis is done for them. He carried out detail research for Technical Analysis of the securities
of the selected companies from the Information Technology sector and to assist portfolio
decisions in this sector, since Information Technology sector is one of the most upcoming and
booming sectors in the Indian Market. It has proven to be one of the most important and fastest
growing sectors of the Indian Economy.
(Boobalan, 2014) carried out Technical Analysis of the securities of the selected companies
from Industry and to assist investment decisions in the Indian Market. Technical analysis through
this study does not result in absolute predictions about the future with regard to forecasting.
(Roy, 2015) done Fundamental analysis and stated that one should examine the economic
environment, industry performance and company performance before making an investment
decision. One of the livelier and long-lasting debates in securities research is the relative merits
of fundamental research and technical research.
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CHAPTER 3
3.1 Fundamental Analysis:
Fundamental analysis attempts to identify stocks offering strong growth potential at a good price
by examining the underlying company’s business, as well as conditions within its industry or in
the broader economy. Investors have traditionally used fundamental analysis for longer-term
trades, relying on metrics such as earnings per share, price-to-earnings ratio, price-to-earnings
growth, and dividend yield.
Fundamental analysis can also give you an idea of a company's stock trade value, compared to
similar companies. The analysis should take many factors into account, including revenue, asset
management, and the production of a business, as well as the interest rate
Many investors use strictly fundamental factors in their analysis of a company and its share
price. Others have found that they can create a more robust model of valuation and price
expectation using both fundamental and technical factors, such as relative price strength or
market sentiment.
The goal is to determine whether the current price of the stock reflects a value that is different
from what the fundamental factors and overall market sentiment might suggest. If such a
difference is found, then there's a chance that an investment opportunity exists.
Even if you don't plan to do an in-depth analysis on your own, learning the key ratios and terms
can help you follow stocks more closely and accurately.
Fundamental analysis uses three sets of data:
1. historical data to check how things were in the past
2. publicly known information about the company, including announcements made by the
management and what others say about the company
3. Information that is not known publicly but is useful, i.e., how the leadership handles
crises, situations, etc.
Basics of Fundamental Analysis
• Company’s structure and revenue
• Company’s profits over the years
• Revenue growth over the years
• Company’s debt
• Corporate governance
• Rate of turnover
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3.1.1Components of Fundamental Analysis
A few elements of quantitative fundamental analysis are EPS, P/E ratio, P/B ratio, Debt/Equity
ratio and RoE ratio. These are among the few fundamental indicators that help you understand
deeper about the company/stock.
• Earnings Per Share is called EPS. This is a measure of profitability.
• EPS = Net Profit of The Company divided Number of Outstanding Shares
• Price to Earnings Ratio is called P/E ratio. This is a measure of valuation.
• P/E = Price of Stock divided Earnings Per Share
• Price to Book ratio is called P/B ratio. This is a measure of valuation for banking and
financial companies.
• P/B = Price of Stock divided Book Value of Stock/Company
• Debt to Equity ratio is called D/E. This is a measure of indebtedness.
• Debt to Equity Ratio = Total Liabilities of the company divided Total shareholder’s
equity
• Return on Equity Ratio is called RoE. It is a profit measure that can be generated with the
money that has been invested by its shareholders.
• Return on equity = Net Income of company divided by Shareholder’s equity
3.1.2 ADVANTAGES OF FUNDAMENTAL ANALYSIS
Identification of Good Stocks
The biggest advantage of fundamental analysis is that it helps you in learning about the various
complexities of the stock market and thus helps an investor to identify goods stock having good
business model and future while avoiding bad stocks. In simple words just like a good soldier
knows about the landmines and avoids putting his foot on the landmine in the same way a good
investor through fundamental analysis can avoid the landmines of stock markets which are
nothing but fundamentally poor stocks.
Solid Base for Investment
Stock markets are like a tunnel and if you do not have any knowledge about fundamental
analysis or technical analysis then you can be lost in that tunnel and fundamental analysis is like
a torch that helps you in getting through the tunnel of the stock market with flying colors. In
simple words when you are spoilt for choice and have plenty of stocks to buy then fundamental
analysis can be of great help in the identification of choosing the best stock out of many good
stocks.
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Helpful During Panic
In case of panic when everyone is selling stocks an investor who has done a fundamental
analysis of his or her portfolio holdings will never panic because in case of panic every stock
falls whether it’s good or bad but in the case of fundamentally strong stocks they recover quickly
whenever stock markets recover. In simple words when you have an umbrella with you then you
will not worry about heavy rains as an umbrella will save you from heavy rains in the same way
fundamental analysis is that umbrella which saves you from bad weather which keeps happening
during the panic in stock markets.
3.1.3 Disadvantages of Fundamental Analysis
No Guarantee of Profit
The biggest disadvantage of fundamental analysis is that there is no sure shot guarantee that if an
investor has identified an undervalued stock that he or she will make a profit because there are
many examples where an undervalued stock keeps performing poorly for a very long period of
time and besides not all information is available in the public domain which results in the
fundamental analysis being incomplete and thus inaccurate.
Time Consuming
Fundamental analysis is not a walk in the park as it involves considerable effort and time on the
part of the person doing the analysis and hence it is a tradeoff between time spent on doing
fundamental analysis and profit due to fundamental analysis which for many is not feasible
option and hence people tend to avoid getting too much into the fundamental analysis.
Long Time Frame
In the case of fundamental analysis if one is able to identify an undervalued stock and purchase
that stock in the hope that it will rise then it is not a surety that stock will catch up with intrinsic
value quickly. In the case of stock markets, there are numerous examples where stocks traded
below their intrinsic value for several years and hence if you are putting money into the stock for
a very long term that is 10 to 20 years than fundamental analysis can be of good help otherwise
chances of you getting frustrated with non-movement of stock price are high.
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3.1.4 IMPORTANCE OF FUNDAMENTAL ANALYSIS
• Management Evaluation
Management is like the soul of the company. It plays a very crucial role in the growth and
success of a company. Fundamental analysis helps in understanding the structure of the
management and how it has been performing over the years.
• Analyzing company’s strength
No matter how good or bad the management or other factors are, at the end of the day financial
performance is what matters the most. Fundamental analysis is not a very easy task. People find
it difficult to do a stock research.
Fundamental analysis is basically “thinking out of the box” with no predetermined parameters.
• Determining company’s ability to beat the competitors
Even if company’s financial performance is good, what more is to be seen is that whether the
company is able to beat its competitors. If it is not able to outperform its peers, it will not be able
to survive in the long run. This peer comparison can be done with the help of fundamental
analysis.
• Determining fair value
With the help of fundamental analysis, one can easily determine the fair value of a company by
carefully analyzing the past and present performance of the company. Fair value helps in
deciding whether the company is overvalued or undervalued.
On the basis of this analysis, one can take decision on what action to take. Hence, fundamental
analysis is important in stock picking.
• Predicting future price movement
Even before an investor looks at a company’s financial statements or does any research, one of
the most important questions that should be asked is: ‘What exactly does the company do?’ This
is referred to as a company’s business model- it’s how a company makes money.
Fundamental analysis scans the industry and the overall economy, hence forecasts the movement
of the price of the security. Based on certain parameters, fundamental analyst tries to predict the
future price.
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3.1.5 Qualitative Fundamentals:
The qualitative analysis captures the company’s aspects or risks difficult to measure in numbers-
such as management competencies and credibility, competitive strategies, R&D capabilities,
brand recall, and others.
Investors usually ignore the qualitative analysis, which many a time costs them profoundly.
Here, we will focus on four key Qualitative aspects, which includes:
1. Business Model:
The first and foremost area where an investor should focus even before initiating any research is
to know what exactly the company does to earn its revenues.
A business model describes the company’s plans for earning revenues, its products and services,
the target market so as to maintain its profitability.
Companies need to constantly update, innovate and be able to withstand any technological
disruption, adopt efficient marketing and business strategies for their smooth functioning without
which they may run into losses and eventually get wiped out from the market.
2. Competitive Advantage:
Investors should usually prefer to invest in those companies that have been able to develop
competitive advantages for themselves in terms of cost advantage, quality, brand, distribution
network, etc.
This helps the company to create an economic moat around the business, thus helping the
company to keep competitors at bay and enjoy longevity, growth, profits, and dominate the
market share.
A company with a competitive advantage usually generates greater value not only for the
company but also for its shareholders, over the long term.
3. Management:
Sound management with strong credibility always works for the betterment of the company and
its employees and also generates wealth for the shareholders.
Thus, it is always in the interest of the shareholders to be associated with trustworthy and
competent management rather than with management having questionable credibility.
There is no sure shot method available to analyze management.
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However, investors can look into factors like management credentials, integrity, transparency,
the viability of strategies and goals, past execution skills, competitiveness and length of tenure,
etc.
4. Corporate Governance:
This is the framework of rules, practices, and processes which direct and control the firms as
well as involves balancing the interests between management, directors, and stakeholders.
Investors should always invest in companies that are run ethically, fairly, transparently, and
efficiently and whose management respects its shareholders’ rights and interests.
They should ensure that the communications made to them are clear, transparent, and
understandable.
They should avoid companies that refrain from such practices or are under SEBI or Government
lenses due to some misappropriation etc.
Investors should go through the Corporate Governance Report (available in the Annual Report)
as well as the Auditors Report to have a clear understanding of the company’s governance.
3.1.6 Quantitative analysis:
This is the aspect of fundamental analysis that allows you to understand the financial performance of a
company through few numerical values. You then compare them with performance data of other,
similar companies as well as historical performance of the same company.
These are the measurable factors that influence the value of a firm. The biggest source of quantitative
data is Financial Statements, analyzing which helps investors to make better investment decisions.
The three most important financial statements are:
1. The Balance Sheet:
This statement records a company’s assets, liabilities, and equity at a particular point in time.
It shows investors the financial structure of a company, listing down what a company owns and owes,
thus helping to determine a company’s real worth.
Investors can determine the growth of a company by comparing its balance sheet over a period of
time. It helps to understand a company’s worth like its Equity, debt, liquidity, asset base, and working
capital position, among others.
2. Income Statement-
It reports the financial performance of a company over a period of time. Publicly listed companies
present their Income Statements quarterly or annually.
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It provides investors with an insight into how the net revenues realized by a company are transformed
into net earnings (profit or loss).
Income Statement should be analyzed on a year-on-year and quarter-on-quarter basis, to understand a
company’s operations, the efficiency of its management, and its performance in comparison to its
peers.
Investors should also check areas like high expenses, depreciation, finance cost or any exceptional
loss that erodes a company’s profitability.
Thus, it helps an investor to understand whether the company will be able to sustain its earnings
growth and whether its performance will surpass its peers in the coming times.
3. Cash Flow Statement-
This is a very important financial statement, as it shows the true cash or liquidity position of a
company.
It provides information on the cash inflows and outflows over a period of time.
It is difficult to manipulate the cash position of a company; therefore it is used as a concrete measure
of a company’s performance. The statement focuses on three cash related activities:
I. Cash from Operations (CFO) :
This includes transactions from all the core or operational activities of a business.
Companies that manage their working capital requirements efficiently manage to generate positive
cash from operations.
This helps them to plan for Capex or Acquisitions for future wealth creation.
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II. Cash from Investing (CFI) :
This shows the cash flows that arise from investing gains or losses, It also provides information on
changes in the company’s capital expenditure (CAPEX).
If CFI is negative then that means the company is on a growth path and investing in future potential
and vice versa.
III. Cash from Financing (CFF) :
This reflects the cash required to fund the company’s work. This should always be positive as this
gives us an idea that the company is taking funds and utilizing it properly.
But this comes with a caveat that is its Fund requirement should not be more than the Industry
requirement. If it is then it’s a cause of concern.
You can use Fundamental scans to filter out fundamentally strong companies for investment using
Stock Edge App, now also available in the web version.
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3.2 TECHNICAL ANALYSIS
Technical analysis is the study of chart patterns and statistical figures to understand market
trends and pick stocks accordingly. Sounds complicated? Here is a simpler definition.
One day the share price is up, another day it may be down. But over time, if you look at the stock
price’s movement, you may see trends and patterns emerge. The study of these chart patterns and
trends in stock prices is called technical analysis of stocks. When you learn technical analysis of
stocks, you will understand the big role that technical indicators play.
Technical analysts believe that the fundamental elements of a stock’s value are already
represented in the stock price. In addition, they believe that stock prices move in identifiable
trends over a period of time.
3.2.1 Principles
• Market action discounts everything:- Technical analysts believe that everything from a
company's fundamentals to broad market factors to market psychology is already priced
into the stock. The only thing remaining is the analysis of price movements, which
technical analysts view as the product of supply and demand for a particular stock in the
market.
• Prices move in trends: -Technical analysts expect that prices, even in random market
movements, will exhibit trends regardless of the time frame being observed. In other
words, a stock price is more likely to continue a past trend than move erratically. Most
technical trading strategies are based on this assumption.
• History tends to repeat itself: -Technical analysts believe that history tends to repeat
itself. The repetitive nature of price movements is often attributed to market psychology,
which tends to be very predictable based on emotions like fear or excitement. Technical
analysis uses chart patterns to analyze these emotions and subsequent market
movements to understand trends. While many forms of technical analysis have been
used for more than 100 years, they are still believed to be relevant because they illustrate
patterns in price movements that often repeat themselves.
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3.2.2 Charting terms and indicators
Concept of charting terms and indicators: - Trading indicators are mathematical calculations, which
are plotted as lines on a price chart and can help traders identify certain signals and trends within the
market. A leading indicator is a forecast signal that predicts future price movements, while a lagging
indicator looks at past trends and indicates momentum.
• Types of charts: The main chart types used by technical analysts are the line chart, bar chart,
candlestick chart, Renko Chart, Point-and-Figure charts, etc. Charts can also be presented on an
arithmetic or logarithmic scale. The types of charts and the scale used depend upon what information
the technical analyst considers to be most important, and which charts and which scale ideally shows
that information.
Line Charts
Line charts are the most basic form of charts, They are composed of a single line from left to right that
links the closing prices. Generally, only the closing price is graphed, presented by a single point.
This is a popular type of chart used in presentations and reports to give a very general view of the
historical and current direction.
It is clear as well as a simple way of getting a general idea of the price movement’s direction in the
market, which is preferred by some traders.
While this kind of chart doesn’t provide much insight into intraday price movements, many traders
consider the closing price to be more important than the open, high, or low price within a given
period.
Bar Chart
One of the basic tools of technical analysis is the bar chart. Bar charts are also referred to as open-
high-low-close (OHLC) charts. They are comprised of a series of vertical lines that indicate the price
range during that Time Frame.
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Bar charts enable traders to discover patterns more easily as they consider all the prices, open, high,
low and close. The opening price is the horizontal dash on the left side of the horizontal line and the
closing price is located on the right side of the line. If the opening price is lower than the closing
price, the line is often colored black (or green) to represent a rising period. The opposite is true for a
falling period, which is represented by a red color.
Candlestick Chart
Another kind of chart used in the technical analysis is the candlestick chart, so-called because the
main component of the chart which represents prices looks like a candlestick, with a thick ‘body’ and
usually, a line extending above and below it, called the upper shadow and lower shadow,
respectively.
The top of the upper shadow represents the high price, while the bottom of the lower shadow shows
the low price. Patterns are formed both by the real body and the shadows. Candlestick patterns are
most useful over short periods of time, and mostly have significance at the top of an uptrend or the
bottom of a downtrend, when the patterns most often indicate a reversal of the trend.
The wider part of the candlestick is shown between the opening and closing price. It is usually colored
in black/red when the securities close on a lower price and white/green the other way around.
The thinner parts of the candlestick are commonly referred to as the upper/lower wicks or as shadows.
These show us the highest and/or lowest prices during that timeframe, compared to the closing as well
as opening price.
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The relationship between the bodies of candlesticks is important to candlestick patterns. Candlestick
charts make it easy to spot gaps between bodies.
A slight drawback of the candlestick chart is that candlesticks take up more space than OHLC bars. In
most charting platforms, the most you can display with a candlestick chart is less than what you can
with a bar chart.
Renko Chart
Unlike the other Charts, the Renko Chart is a noise-less charting technique that concentrates merely
on price movements, completely disregarding time and the usage of volumes.
This Chart consists of white/green and black/red bricks. These are placed depending on whether
the price rose or not compared with the previous brick. If it did by enough value, established by
the brick size, a new one is placed. White/Green bricks are used when the price of the security
goes up and black/red bricks when they go down.
It is important to mention the fact that a new brick is only placed under certain volatility criteria,
either resulting in a major advantage or disadvantage for traders. It can be placed in a matter of
minutes or take more than a day depending on market conditions. On the one hand, this may be
advantageous. Specifically for traders who desire a simple way of identifying supports and
resistances, the overall trend and filter noise. On the other hand, this can make market sentiment
hard to determine. Consequently rendering the usage of other analysis tools useless.
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Breadth indicators: - The breadth of market theory is used to measure the securities rising or
dropping in a market. In the breadth indicator is steady, it is an indication that there will be a rise
in the market. On the other hand, if the breadth indicator is weak, it is an indication that the
market will drop. For instance, if a market consists of 120 stocks and 90 stocks gains in terms of
price, while 50 stocks either experience no change or drops in price, then, as per the breadth of
market theory, this is an indication that the market is strong. As a prediction tool, the breadth of
market theory does give a hint of market momentum. There are usually market trend patterns
ranging from the strong economic climate, basics, or a promising market cycle. Potential
investors can make use of this trend to their advantage if they are able to recognize inflection
points soon.
Types of the breadth of market indicators
There are several numbers of the breath of market indicators, and each one of them has its own
calculation method. Others are cumulative while others are non-cumulative.
• Cumulative- This is where each day value is either added or subtracted from the earlier value.
• Non-cumulative-It means that each day or time provides its own data.
The following are different methods of breadth market indicators:
• Advance/Decline Ratio (ADR)
• Advance/Decline Line (A/D)
• One balance Volume
• Chaikin Oscillator
• McClellan Summation Index
• Arms Index (TRIN)
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Advance/Decline Ratio (ADR) and Advance/Decline Line (A/D) are the most popular methods
that dealers of market breadth theory work with.
Advance/Decline Ratio (ADR)
Advance Decline Ratio is used to compare the previous and current ratio of stocks. It looks at the
number of stocks that closed higher versus those that closed lower than their previous closing
price. In other words, we can say that ADR is a measure of stocks that are rising against those
that are dropping. The ADR, therefore, is a technical pointer of the breadth of market decline or
advance.
Calculating Advance/Decline Ratio
To calculate ADR, you are required to divide the number of advancing shares by the number of
declining shares. (Advance Decline Ratio = Stocks Advancing/Stocks Declining). Note that,
advance/decline ratio can be calculated on various time periods usually in one day, a week or
even one month.
Advance/Decline Line (A/D)
Advance/decline line also commonly known as A/D, measures the breadth of the markets trend.
It monitors changes in the value of the A/D index over a particular period of time. It enables
analysts to gauge if a rise or a fall in a market index, is determined by either a few or a larger
number of stocks.
Calculating the advance/decline line
To calculate A/D, you need to find the difference between the number of advancing/declining
issues, and then add the outcome to the previous periods value.
The Formula for Calculating A/D
A/D Line = (# of Advancing Stocks - # of Declining Stocks) + Previous Periods A/D Line
Value.
Interpreting A/D
Users of A/D ratio do interpret it in a number of ways as explained below:
• A ratio that is rising over time is a sign that the market trend is strong while a ratio that is
dropping is an indication of a weak market trend.
• A relatively high ratio may be a pointer of an overbought market (that which is nearly declining
and investors sell shares to get their profits).
• A relatively low ratio is a sign of an oversold market (that which is about to increase its price and
investors buy shares at a negotiable price.
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It is important to note that, business people use market breadth indicators together with other
forms of metrics such as chart patterns and technical indicators, to capitalize on their success.
Uses of Breadth of Market Theory
• The breadth of the market theory is able to show investor whether or not stocks in the market are
performing well. Traders can, therefore, be able to take caution so that they don't channel their
money in an already declining market.
• It can also be used by investors to assess the strengths and weaknesses in various stock indexes.
This way, they can be able to get ideas on what the index is likely to do in the future. It provides
information on whether the market uptrend or downtrend is expected to go on.
Limitations of Breadth of Market Theory
• Breath of market theory is unreliable. This is because it sometimes predicts index hitches too
early, and sometimes too late or not at all. This can be a setback to investors who want reliable
information to help them make an informed decision regarding their investment.
• Some breath indicators are likely to give odd results because of their working formula methods.
Inaccurate results may be catastrophic to an investor who is relying on breadth indicators to
make an investment decision.
• Also, some breath indicators may encounter situational variances which may result in anomalies
in the results being generated.
Moving Averages
Moving average is a technical analysis tool that smooths out price data by creating a constantly
updated average price. On a price chart, a moving average creates a single, flat line that
effectively eliminates any variations due to random price fluctuations.
The average is taken over a specific period of time–10 days, 20 minutes, 30 weeks, or any time
period the trader chooses. For investors and long-term trend followers, the 200-day, 100-day,
and 50-day simple moving average are popular choices.
There are several ways to utilize the moving average. The first is to look at the angle of the
moving average. If it is mostly moving horizontally for an extended amount of time, then the
price isn't trending, it is ranging. A trading range occurs when a security trades between
consistent high and low prices for a period of time.
If the moving average line is angled up, an uptrend is underway. However, moving averages
don't make predictions about the future value of a stock; they simply reveal what the price is
doing, on average, over a period of time.
Crossovers are another way to utilize moving averages. By plotting a 200-day and 50-day
moving average on your chart, a buy signal occurs when the 50-day crosses above the 200-day.
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A sell signal occurs when the 50-day drops below the 200-day.1 The time frames can be altered
to suit your individual trading timeframe When the price crosses above a moving average, it can
also be used as a buy signal, and when the price crosses below a moving average, it can be used
as a sell signal.
However, since the price is more volatile than the moving average, this method is prone to
more false signals, as the chart above shows.
Moving averages can also provide support or resistance to the price.
• Moving Average Convergence Divergence (MACD) :-
The moving average convergence divergence (MACD) is a kind of oscillating indicator. An
oscillating indicator is a technical analysis indicator that varies over time within a band (above
and below a centerline; the MACD fluctuates above and below zero). It is both a trend-
following and momentum indicator.
One basic MACD strategy is to look at which side of zero the MACD lines are on in the
histogram below the chart. If the MACD lines are above zero for a sustained period of time, the
stock is likely trending upwards. Conversely, if the MACD lines are below zero for a sustained
period of time, the trend is likely down.2 Using this strategy, potential buy signals occur when
the MACD moves above zero, and potential sell signals when it crosses below zero.
Signal line crossovers can also provide additional buy and sell signals. A MACD has two
lines—a fast line and a slow line. A buy signal occurs when the fast line crosses through and
above the slow line. A sell signal occurs when the fast line crosses through and below the slow
line.
• Relative Strength Index (RSI)
The relative strength index (RSI) is another oscillating indicator but its movement is contained
between zero and 100 so it provides different information than the MACD.
One way to interpret the RSI is by viewing the price as "overbought"—and due for
a correction—when the indicator in the histogram is above 70, and viewing the price as
oversold—and due for a bounce—when the indicator is below 30.3
In a strong uptrend, the price will often reach 70 and beyond for sustained periods of time. For
downtrends, the price can stay at 30 or below for a long time. While general overbought and
oversold levels can be accurate occasionally, they may not provide the most timely signals for
trend traders.
An alternative is to buy close to oversold conditions when the trend is up and place a short
trade near an overbought condition in a downtrend.
For example, suppose the long-term trend of a stock is up. A buy signal occurs when the RSI
moves below 50 and then back above it. Essentially, this means a pullback in price has
occurred. So the trader buys once the pullback appears to have ended (according to the RSI) and
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the trend is resuming. The 50-levels are used because the RSI doesn't typically reach 30 in an
uptrend unless a potential reversal is underway. A short-trade signal occurs when the trend is
down and the RSI moves above 50 and then back below it.
Trend lines or a moving average can help establish the trend direction and in which direction to
take trade signals.
Volume-based indicators
• On-Balance Volume (OBV)
Volume itself is a valuable indicator, and on-balance volume (OBV) takes a significant amount
of volume information and compiles it into a single one-line indicator. The indicator measures
cumulative buying and selling pressure by adding the volume on "up" days and subtracting
volume on "down" days.
Ideally, the volume should confirm trends. A rising price should be accompanied by a rising
OBV; a falling price should be accompanied by a falling OBV.
The figure below shows the shares of Netflix Inc. (NFLX) trending higher along with OBV.
Since OBV didn't drop below its trend line, it was a good indication that the price was likely to
continue trending higher even after the pullbacks.
If OBV is rising and the price isn't, it's likely that the price will follow the OBV in the future
and start rising. If the price is rising and OBV is flat-lining or falling, the price may be near a
top. If the price is falling and OBV is flat-lining or rising, the price could be nearing a bottom.
• Accumulation/distribution:
The Accumulation Distribution Line is a volume indicator which measures the cumulative flow
of money into and out of a stock.
A high positive multiplier with high volume indicates strong buying pressure which pushes the
indicator higher. On the other hand, a low negative number with high volume indicates strong
selling pressure which pushes the indicator lower.
This indicator tries to detect positive or negative divergences in price and volume data which
signals an advanced warning of future price movements.
• Money flow index:
Money Flow Index (MFI) is a movement as well as volume indicator which analyses both time
as well as the price for measuring the trading pressure – buying or selling.
It is also known as volume-weighted Relative Strength Index (RSI), as it also includes volume,
unlike RSI which only incorporates price.
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Formula for calculating MFI:
Typical Price = (High + Low + Close)/3
Raw Money Flow = Typical Price x Volume
Money Flow Ratio = (14-period Positive Money Flow)/(14-period Negative Money Flow)
Money Flow Index = 100 – 100/(1 + Money Flow Ratio)
The Money Flow Index (MFI) can be interpreted almost similarly to RSI. Trading signals are
generated by this indicator when the stock signals bullish or bearish divergence, crossovers and
when the stock is in the overbought or oversold zone
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CHAPTER 4
COMPANY PROFILE
ODISHA CAPITAL MARKET & ENTERPRISES LTD.
(Formerly Bhubaneswar Stock Exchange Ltd.) Background
Bhubaneswar Stock Exchange Ltd. (BhSE) which had been functioning as a recognized stock
exchange in the State of Odisha since the year 1989 has taken exit as a stock exchange w.e.f. February
09, 2015 pursuant to exit policy of Securities and Exchange Board of India (SEBI) for non-performing
stock exchanges in the country. In this context, SEBI has issued an order on February 09, 2015 for exit
of BhSE as a stock exchange after ensuring compliance of various formalities by BhSE associated
with such exit process. SEBI in its said order had directed BhSE, among other requirements, to change
its name and not to use the expression “Stock Exchange” or any variant of this expression in its name.
As it was required in the exit order issued by SEBI, the name of the Company has been changed from
“Bhubaneswar Stock Exchange Ltd.” to “Odisha Capital Market & Enterprises Ltd.” w.e.f. 9th
June, 2015 with the approval of the Registrar of Companies, Odisha in terms of provisions of the
Companies Act, 2013. Now, after exit of BhSE as a stock exchange, the Company of erstwhile BhSE
functions under a new name “Odisha Capital Market & Enterprises Ltd.” with an altered set of
Memorandum and Articles of Association in terms of provisions of the Companies Act, 2013.
Management
The affairs of the company are controlled and supervised by the Board of Directors under the
provisions of its Memorandum and Articles of Association. The duties and responsibilities of day to
day management and affairs of the company are now vested with Mr. Thomas Mathew, Director,
who is assisted by a team of managerial and other employees of the company.
Business Operation
Odisha Capital Market & Enterprises Ltd. in terms of its altered Memorandum of Association is now
taking steps to carry on different activities in the domain of capital market. More particularly, it is
committed to carry on campaigning financial literacy for financial inclusion in the State in addition to
working for assisting financial education as were discharged by the erstwhile BhSE as a stock
exchange.
Current Activities other than Business Operation
Apart from business operation, the company is engaged in promotion and development of other
activities in the interest of the investing public in capital market in a big way
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Investors’ Awareness Programmed
The company is conducting investors’ awareness programmed by way of seminars/workshop from
time to time for education and awareness of investing public in securities. The aim of the company is
to have as many as awareness programmers in a year at different locations of the State of Orissa.
Securities Market Training Programmed
The company is providing a Certificate Course, namely, “Basics of Capital Market.
With the expansion of capital market which includes the reach of its activities in the form of course
contents at various B-Schools and +2 Commerce level schools, practical oriented education
programmed in securities market activities is in increasing demand now days as it promises youth to
make career in the field of securities market. The company aims at undertaking practical oriented
training programmed for the students.
Commerce and B-Schools in a big way as well as for the youths who want to make their career in
securities market. At present, the company is engaged in imparting training to the students of various
management institutes.
Students Assistance Programmed
The students of various Institutes and B-Schools require preparing project papers on different topics
including the topics related to activities in Stock Exchange and securities market. The students of a
number of Institutes and B-Schools visit the company either directly or sponsored by their Institutes
every year for assistance in preparation of their project papers. The company assists and supports
those students in their research work by providing necessary guidance and securities market
information.
Vision:
To have a reliable presence in the country by giving services to the traders/investors.
Mission:
To provide an information resource to the investment and business community across the state and
country.
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SWOT ANALSIS of BHUBANESWAR STOCK
EXCHANGE
Strengths
Weakness
•Provides smooth clearing and settlement process • Only 46 companies are listed in the
exchange generating less revenue for
•Has adequate internal checks and internal control exchange
system which are commensurate with its size
and nature of the business
• Very few employees
•Provides other services like investors awareness
programmed, securities market training
programmed, students assistance programmed
Opportunities Threats
• Decrease in profit margin
•Business tie-up with other national level stock
exchange. • Making difficult for exchange to
survive
•Merger consolidation of the exchange with other
exchanges viz. Mcx-sx, Calcutta stock exchange, • Compete with national level stock
inter connected stock exchange of India. exchange with trading terminal
in every state including
Bhubaneswar.
•Alternate business plans for survival of the entity.
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CHAPTER 5
Tata Consultancy Services is an IT services, consulting and business solutions organization that
has been partnering with many of the world’s largest businesses in their transformation journeys
for the last fifty years. TCS offers a consulting-led, cognitive powered, integrated portfolio of IT,
business & technology services, and engineering. This is delivered through its unique location
independent agile delivery model, recognized as a benchmark of excellence in software
development.
The company has domain expertise in a broad set of industries, comprising Banking, Financial
Services and Insurance, Retail and CPG, Communication & Media, Manufacturing, Life
Sciences & Healthcare, Energy & Utilities, Travel & Hospitality, Technology & Services and
others.
Geographically, TCS operates in all five continents, with North America and Europe constituting
the largest markets for our services. We derive over a fifth of our revenues from emerging
markets such as India, Asia-Pacific, Latin America and Middle-East & Africa.
TCS’ equity shares are listed in India on the National Stock Exchange (NSE: TCS) and the
Bombay Stock Exchange (BSE: 532540).
As of September 30, 2021, TCS had 3,699,051,373 shares outstanding.
Fundamental analysis: -
Cash flow
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RATIOS
INCOME STATEMENT
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BALANCE SHEET
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CHAPTER 6
FINDINGS:
From the data analysis and interpretations of the ratios of TCS the following findings
have been given below:
Company Name Intrinsic value Market value as on 19th
JULY-2020
TCS 2062.38 2200.75
• TCS intrinsic value is lower than the market value, this shows that the share
price of this company is overvalued, so the stock value of share may fall in
future.
• The companies were performing well with a positive trend, in concern with
Earnings per share (EPS) all the companies are maintaining a constant
increase. Showing increasing trend throughout the five years. Increase in EPS
indicates good earnings.
• The P/E ratio of TCS is fluctuating year after year. TCS has the highest P/E ratio
which indicates that it is overvalued
CONLUSION
The study deals with share and share trading gives a general idea about the analysis of stocks. The
analysis carried on two basis, Fundamental analysis and technical analysis. Technical analysis
shows a short term trend based on historical data and fundamental analysis helpful for the decision
making for long term investment. From the analysis it is found that the charts prepared on the basis
of the share price, with the support of technical tools shows all the trends and variations as
interpreted in the theory. In the analysis using moving average it is found that if the price is lying
above the moving average, the scrip is in a bullish trend if the price lying below the moving
average the scrip is in bearish trend. Technical analysis ignores the actual nature of the company.
Technical analysis is based solely on the chart that is to say price and volume information. The
investor has to invest wisely on the scrip which gives high return with most possible risk.
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