Security Analysis & Portfolio Management
FUNDAMENTAL
Presentation on
ANALYSIS
Nam Roll No.
e
SAMEER PRASAD 82
SANKET JAIN 79
SAMSON NAIDU 84
RUPALI YADAV 78
RAVINDRA KHANDARE 72
YASMEEN SIDDQUE 117
AMAL NAIR 14
ASMITA BIRAJDAR 27
ADITYA SAHANE 05
Under the guidance of – Prof. Prasad Akolkar
2
Fundamental
Analysis
Fundamental analysis is really a logical and systematic approach to estimating
the future dividends and share price.
It is based on the basic premise that share price is determined by a number of
fundamental factors relating to the economy, industry and company.
It is a detailed analysis of the fundamental factors affecting the performance of
companies.
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.
Fundamental analysis of a business involves analyzing its Financial statement and
health, Its management and competitive advantage, and its competitors and markets.
When applied to futures and forex, it focuses on the overall state of the economy,
interested, production, earning and management.
1) To conduct a company stock valuation and predict its probable price evolution
2) To make a projection on its business performance, to evaluate its
management and make internal business decisions, to calculate its credit risk
INTERPRETATI
ON
Economic Analysis:The economy is studied to
determine if overall conditions are good for the stock
market.
Industry Analysis:The company's industry obviously
influences the outlook for the company.
Company Analysis: This is usually done by studying
the company's financial statements.
FUNDAMENTAL ANALYSIS OF STOCKS IN
INDIA
The process of fundamental analysis involves examining the
economic, financial & other qualitative as well as quantitative
factors related to a security so as to determine its intrinsic value.
Two approaches in fundamental analysis
Top-down approach: In this approach, an analyst investigates
both national and international economic indicators, like energy
prices, GDP growth rates, inflation and interest rates.
Bottom-up approach: In this method, an analyst starts the
search with specific businesses, irrespective of the industry or
region.
FUNDAMENTAL ANALYSIS
The Analysis of economy,
industry and company Company Analysis
constitute the main activity in
the fundamental approach to
security analysis. Industry analysis
And can be viewed as
different stages in investment
decision making process. Economy Analysis
Three tier analysis depict that
company performance
dependent not only on its own
effort but also on the general
industry and economy factor.
ECONOMY
ANALYSIS
Boom Economy:
Income rise and demand for goods will increase the industries
and companies in general tend to be prosperous.
Recession Economy:
Income decline and demand for goods will decrease the industries
and companies in general tend to be bad performance
FUNDAMENTAL ANALYSIS TOOL
Earning per share
Price earnings ratio (P/E ratio)
Dividend payout ratio
Dividend yield ratio
Price to book ratio
Book value
price to sale
INFLATION
Inflation prevailing significant impact on
company performance. High inflation
upset company plan. Demand goes down
because purchasing power fall, high
inflation impact company performance
adversely. Inflation is measured both in
WPI (Wholesale price index)
CPI (Consumer price index)
INTEREST
RATE
Interest rates determine the cost and availability
of credit for companies operating in an
economy.
Low interest rate => easily and cheaply available credit.
=> lower cost of finance
=> high profitability
High interest rate => higher cost of production
=>lower profitability
=>Lower demand
EXCHANGE RATE
• The balance of trade in import and export
determine the rate of exchange rate.
• Depreciation of local currency improve the
competitive position in foreign market the
performance of exported product but it would also
make the imported product more expensive.
• A foreign Exchange reserves is needed to meet several
commitments such as payment for import and servicing
of foreign depts.
INFRASTRUCTURE
• Development of a economy depends very much on the
infrastructure available. Industry needs electricity for its
manufacturing activities road and railways to transport
raw material and finished good. Communication
channels help supplier and customers.
• Good infrastructure is symptoms of development.
• Bad infrastructure lead to inefficiencies, low
productivity wastages and delay.
• Investors should analysis the infrastructure of any
economy.
FUNDAMENTAL ANALYSIS
QUALITATIVE FACTOR- THE
COMPANY
Business Model
Competitive Advantage
Management
Corporate Governance
a)Financial and Information
Transparency
b) Stakeholder Rights
FUNDAMENTAL ANALYSIS
QUALITATIVE FACTORS - THE
INDUSTRY
Customers
Market Share
Industry Growth
Competition
Regulation
FUNDAMENTAL ANALYSIS
INTRODUCTION TO FINANCIAL
STATEMENTS
The Major Statements
A)The Balance Sheet
B)The Income Statement
Statement of Cash Flows
10-K and 10-Q
Thank You