A

PROJECT
REPORT ON

EQUITY RESEARCHIN NON-BANKING FINANCIAL

COMPAIES AND ALUMINIUM SECTOR
A DETAILED STUDY IN

FINANCE
SUBMITTED IN PARTIAL FULFILLMENT OF THE AWARD OF DEGREE
OF MASTER OF MANAGEMENT STUDIES (MMS) UNDER THE
UNIVERSITY OF MUMBAI SUBMITTED BY
BY
VINIT SURESH SHELAR
ROLL NO: 65
BATCH :2014-2016
UNDER THE GUIDANCE OF
PROF.DR.MANISHA DUBEY
BHARATI VIDYAPEETHS
INSTITUTE OF MANAGEMENT STUDIES & RESEARCH
NAVI MUMBAI

CERTIFICATE OF APPROVAL

This is to certify that the summer internship project entitled EQUITY

RESEARCH

IN

NON-BANKING

FINANCIAL

COMPAIES

AND

ALUMINIUM SECTOR submitted by. A student of BharatiVidyapeeth Institute

of Management Studies And Research, as a part of the curriculum of Master of
Management Studies and Research has been approved.

Dr. Manisha Dubey

Dr. D .Y Patil

(Project Guide )

( Director )

CERTIFICATE
2

DECLARATION
I, Mr. VINIT SURESH SHELAR, MMS Student of BharatiVidyapeeths institute
of management studies and research hereby declare that I have completed the
projectentitled EQUITY RESEARCH IN NON-BANKING FINANCIAL
3

COMPAIES AND ALUMINIUM SECTOR during the academic year 20142016.

The report work is original and the information/data and the references included in
the report are true to the best of my knowledge.

__________________
Signature of Student

AKNOWLEDGEMENT

Whatever I do and whatever we achieve during the course of our limited life is just not done only
by our own efforts, but by efforts contributed by other people associated with us indirectly or
directly.
First of all I would like to thank our director Dr. D.Y. Patil(BharatiVidyapeeths institute of
management and entrepreneurship development), for providing me an opportunity to undertake a
project as a partly fulfillment of MMS course. I thank all those people who contributed to this
from the very beginning until its successful end.
I acknowledge my gratitude to Prof. DR. MANISHA DUBEY BharatiVidyapeeths institute of
management studies and research) for her extended guidance, encouragement, support and
reviews without whom this project would not have been a success.
I sincerely thank Mr. Nikesh Ruparel for assigning such a challenging project work which has
enriched my work experience and getting me acclimatized in a fit and final working ambience in
the premises of birla sun life insurance
Last but not the least I would like to extend my thanks to all the employees at Birla sun life
insurance co. and my friends for their cooperation, valuable information and feedback during my
project.
Place: CBD Belapur, Navi Mumbai.

(Signature of the student)

VINIT SURESH SHELAR.

Introduction
India is a developing country. Nowadays many people are interested to invest in
financial markets especially on equities to get high returns, and to save tax in
5

honest way. Equities are playing a major role in contribution of capital to

the business from the beginning. Since the introduction of shares concept,
large numbers of investors are showing interest to invest in stock market.
This project mainly focuses on equity analysis of selected NBFCs and Aluminium
Companies. The Fundamental analysis and Technical analysis gives the idea to us
which is the time to invest the money on which companies.
Fundamental analysis is the examination of the underlying forces that affect the
well being of the economy, industry groups and companies. 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
non-quantifiable and is the only figure that counts.

Literature Review
Technical analysis might sound enticing on paper but how does it actually perform
in reality? In a pioneering paper,
6

Fama and Blume (1966) found no evidence of significant profits using a class of
technical trading rules in the stock market. Their finds were backed up by Van
Horne and Parker (1967, 1968) and Jensen and Benington (1970).However, more
recent work by Brock, Lakonishok and LeBaron (1992) and Sullivan,
Timmermann and White (1999) have refuted the idea. Other studies that found
positive profits using technical analysis include studies by Menkhoff and
Schlumberger (1995), Lee and Mathur (1996a, 1996b), Maillet and Michel (2000),
Lee et al. (2001) and Martin (2001). In the paper by Park and Irvin (2007) they
conclude that a majority of modern studies showed that technical trading strategies
generated positive economic profits.
Most of the papers on technical analysis have focused on daily data while only a
handful has taken an intraday approach. These papers include Curcio et al (1997),
Neely and Weller (2003), Sager and Taylor (2004), Melvin, Sager and Taylor
(2006) and Kozhan and Salmon (2010). The former two studies found no evidence
of positive excess returns after transaction costs are considered. Using tick by tick
data, Kozhan and Salmon found that excess profits exists for a trading rule in 2003
but these profits disappeared by 2008.
In addition, almost all studies on technical analysis in the foreign exchange market
have focused on the majors with very few studies done on emerging markets/Asian
currencies. Anne D. Martin (2009) found statistically significant profits using the
moving average rule on currencies of developing countries. However the rule does
not outperform a risk free strategy after taking into account the Sharpe ratio.
Gerben de Zwart et al. (2009) took a holistic approach by combining both
fundamental and technical information to generate trading signals for 21 emerging
currency markets and found economically and statistically significant positive riskadjusted returns. Pukthuanthong-Le, Levich and Thomas (2007) found that while

excess profits using trend following rules have disappeared over time,
opportunities still exists in the exotic currencies.
One of the more significant paper relating central bank intervention to that of
excess profits using technical analysis is that by LeBaron (1999). Using simple
moving averages rules on 2 currencies (Deutsche Mark and Yen against the Dollar,
he found significant profits of more than 5% annually. He then excluded days in
his data where official interventions by the central bank took place and found out
that the profits were reduced significantly. This study was complimented by that of
Saacke (2002) who supplemented the earlier study by including interventions by
the Deutsche Bundesbank and by adding more technical analysis rules. The results
are consistent with the findings by Szakmary and Mathur (1997), where they also
found a day of the week effect, where trading profits are generally higher on
Fridays and Mondays, consistent with conjectures in previous studies where news
concerning intervention tends to be revealed over weekends. Silber (1994) took a
slightly different approach in that he linked markets where technical analysis
proved profitable to markets where central bank intervention exists.
However, the above findings have been challenged by Neely (1998), who came up
with a pertinent point most of the observed profits occur concurrently with the
period where intervention took place. This implies that there could be a positive
correlation between intervention and positive profits but not necessarily causation,
especially if interventions tend to occur during days when markets are trending or
when volatility is excessive. In a follow up study, Neely (2002) found that
intervention reacts to the same strong short-run trends from which the trading rules
have recently profited using high frequency data.
In another study, Sapp (2004) found that market volatility is higher before
interventions which in itself can be a plausible explanation for interventions. It also

implies that the positive returns earned by technical analyst during this period are
in fact an adequate compensation for risk bearing.
Finally, there has been some evidence that trading rule profits has been declining
over time. LeBaron (2002) discovered that returns from MA trading rules declined
during the 1990s. Olson (2004) found out that post 1970 returns declined to zero
by the 1990s, using MA rule portfolios tested in successive five-year periods.
Similarly, Schulmeister (2008) found that even profits from the best of 1024
technical trading rules has been declining since the 1980s and Pukthuanthong-Le,
Levich and Thomas (2007) find that currencies for emerging markets tend to have
more profit opportunities than developed nations. Finally, in a conclusive study,
Neely, Weller and Ulrich (2009) conducted out of sample test on a variety of
previously studied rules and concluded that simple technical trading rules were
profitable up to the 1990s but as knowledge of the usefulness of these rules
became more and more widespread, profitability disappeared. The decline in the
profitability of trading rule returns has been partly attributed to the rise in
algorithmic trading. Kozhan and Salmon (2010) found that returns to a genetic
algorithm that proved profitable in 2003 disappeared by 2008 and attributed the
declining profitability to a rise in algorithmic trading over the same period. Their
findings are backed up by Chaboud et al.(2009) who reported that algorithmic
traders accounted for 60% of total trading volume in 2008 (whereas in 2003 they
were almost nonexistent) in two currency markets.

OBJECTIVE OF THE STUDY

 To study about some of the major players in Non-Banking Financial

companies & Aluminium sector.
To compare the financial ratios of the major players and interpreting them.
To identify the top line and bottom line of both the sectors and the factors
that affects them.
To evaluate the shares of the Non-Banking Financial companies
&Aluminium sector.
To find out how the judgment is taken by the analyst on the basis of
fundamental analysis and technical analysis of the company.
To predict the future performance of the stocks and give suggestion on the
same.

Birla Sun Life Insurance Profile

10

An Overview of the Birla Sun Life Insurance(BSLI):

Established in 2000, Birla Sun Life Insurance Company Limited
(BSLI) is a joint venture between the Aditya Birla Group, a well-known and
trusted name globally amongst Indian conglomerates and Sun Life Financial Inc,
leading international financial services organization from Canada. The local
knowledge of the Aditya Birla Group combined with the domain expertise of Sun
Life Financial Inc., offers a formidable protection for its customers' future.
With an experience of over 10 years, BSLI has contributed
significantly to the growth and development of the life insurance industry in India
and currently ranks amongst the top 6 private life insurance companies in the
country. Known for its innovation and creating industry benchmarks, BSLI has
several firsts to its credit.
It was the first Indian Insurance Company to introduce "Free Look Period" and the
same was made mandatory by IRDA for all other life insurance companies.
Additionally, BSLI pioneered the launch of Unit Linked Life Insurance plans
amongst the private players in India. To establish credibility and further
11

transparency, BSLI also enjoys the prestige to be the originator of practice to

disclose portfolio on monthly basis.
These category development initiatives have helped BSLI be closer to
its policy holders expectations, which gets further accentuated by the complete
bouquet of insurance products (viz. pure term plan, life stage products, health plan
and retirement plan) that the company offers.

Vision:
To be a leader and role model in a broad based and integrated financial services
business.

Mission:
To help people mitigate risks of life, accident, health, and money at all
stages and under all circumstances.
Enhance the financial future of our customers including enterprises.

Values:

Integrity
Commitment
Passion
Seamlessness
Speed

About Birla Sun Life Insurance:

12

Birla Sun Life Insurance Company Limited (BSLI) is a joint venture

between the Aditya Birla Group, a well-known Indian conglomerate and Sun Life
Financial Inc, one of the leading international financial services organizations from
Canada. With an experience of over a decade, BSLI has contributed to the growth
and development of the Indian life insurance industry and currently is one of the
leading life insurance companies in the country. BSLI offers a complete range of
offerings comprising of protection solutions, children's future solutions, and wealth
with protection, health and wellness as well as retirement solutions and has an
extensive distribution reach over 500 cities through its network of around 600
branches, over 106,794 empanelled advisors and over 200 partnerships with
Corporate Agents, Brokers and Banks. The AUM of Birla Sun Life Insurance is
close to Rs 22,929crs and it has a robust capital base of over Rs. 2,450crs as on
Mar 31, 2013.

About Aditya Birla Group:

A US $35 billion corporation, the Aditya Birla Group is in the league
of Fortune 500. It is anchored by an extraordinary force of 133,000 employees,
belonging to 42 different nationalities. The group operates in 36 countries across
six continents truly India's first multinational corporation

Products and Services:

13

Wealth Creation
Tax Savings
Savings
Regular Income
Technology

Other Mutual Funds

Portfolio management services:
Future Business Continuity Plan:
BSLIs Business Continuity Management Policy
Business Continuity Management System Objectives (BCMS)

NON-BANKING FINANCIAL COMPANIES (NBFCS).

Non-banking financial companies (NBFCs) are fast emerging as an important
segment of Indian financial system. It is an heterogeneous group of institutions
14

(other

than

commercial

and

co-operative

banks)

performing

financial

intermediation in a variety of ways, like accepting deposits, making loans and

advances, leasing, hire purchase, etc. They raise funds from the public, directly or
indirectly, and lend them to ultimate spenders. They advance loans to the various
wholesale and retail traders, small-scale industries and self-employed persons.
Thus, they have broadened and diversified the range of products and services
offered by a financial sector. Gradually, they are being recognised as
complementary to the banking sector due to their customer-oriented services;
simplified procedures; attractive rates of return on deposits; flexibility and
timeliness in meeting the credit needs of specified sectors; etc.
The working and operations of NBFCs are regulated by the Reserve Bank of India
(RBI)within the framework of the Reserve Bank of India Act, 1934 (Chapter III B)
and the directions issued by it under the Act. As per the RBI Act, a 'non-banking
financial company' is defined as:1. A financial institution which is a company
2. Anon banking institution which is a company and which has as its principal
business the receiving of deposits, under any scheme or arrangement or in
any other manner, or lending in any manner
3. Such other non-banking institution or class of such institutions, as the bank
may, with the previous approval of the Central Government and by
notification in the Official Gazette, specify
Under the Act, it is mandatory for a NBFC to get itself registered with the RBI as a
deposit taking company. This registration authorises it to conduct its business as an
NBFC. For the registration with the RBI, a company incorporated under
the Companies Act, 1956 and desirous of commencing business of non-banking
financial institution, should have a minimum net owned fund (NOF) of Rs 25 lakh
15

(raised to Rs 200 lakh w.e.f April 21, 1999). The term 'NOF' means, owned funds
(paid-up capital and free reserves,minus accumulated losses, deferred revenue
expenditure and other intangible assets) less
1. Investments in shares of subsidiaries/companies in the same group/ all other
NBFCs
2. The book value of debentures/bonds/ outstanding loans and advances,
including hire-purchase and lease finance made to, and deposits with,
subsidiaries/ companies in the same group, in excess of 10% of the owned
funds.

16

TYPES OF NBFCs

lN
aB
bF
iC
y
b

i
l
t

a
s
e
c
a

s
d
f
c
a
i
n

t
o
17

NBFC Analysis
1. The major Non Banking Financial Companies (NBFCs) in India have their
relative

specializations,

for

e.g.

HDFC

(mortgage

loans),

IDFC

(infrastructure loans), Mahindra Finance, Power Finance Corporation (power

financer) &Shriram Transport Finance (auto loans). The trend of segmental
monopoly is changing as banks are entering long-term finance and FIs also
meeting the medium and short term needs of the business masses
2. NBFCs' growth had been constrained due to lack of adequate capital. Going
forward, we believe capital infusion and leverage thereupon would catapult
NBFCs' growth in size and scale. A number of NBFCs have been issuing
non-convertible debentures (NCDs) in order to increase their balance sheet
liquidity. Also to address this purpose, especially in the infrastructure
financing space, a new category of NBFCs was formed called Infrastructure
financing companies (IFCs).
3. NBFCs are not required to maintain cash reserve ratio (CRR) and statutory
liquid ratio (SLR). Priority sector lending norm of 40% (of total advances) is
also not applicable for them. While this is to their advantage, they do not
have access to low-cost demand deposits. As a result their cost of funds is
always high, resulting in thinner interest spread. However, the regulatory
arbitrage may soon change between the two entities with the help of the
UshaThorat committee recommendations, which call for stricter regulations
in the space.

18

Financial Year'14
FY14 proved to be a challenging year. The uneven political climate led to
stagnant economical scenario thereby leading to lower infusion of
investments in to infrastructure and core industries also leading to lower
capital expenditure and less job creation. The inflation remained on the
higher side, thereby reducing the disposable income and leading to lower
consumer spends.
It was also the most challenging year for the Indian commercial vehicles
sector. India's cycle-prone commercial vehicle industry is not new to
downturns. Thus the vehicle financiers too faced enormous challenges
during the year.
Despite the overall slowdown in the economy, the demand for individual
home loans continued to remain strong. The demand for affordable housing
remained robust with increased growth coming from tier II and tier III cities.
In an endeavor to further support home loans, the Finance Act, 2013
provided a one-time benefit of additional interest deduction up to Rs 1 lakh
for first-time home buyers, provided the loan amount and property cost did
not exceed Rs 25 lakhs and Rs 40 lakhs respectively. This, coupled with the
other fiscal benefits available on home loans has helped reduce the effective
rate of interest payable on a home loan. Thus, overall, FY14 turned out to be
a strong year in terms of home loan disbursements for housing financiers.

19

 During FY14 India continued to show a deceleration in growth with the

GDP growth rate at lower than 5 percent. The macroeconomic scenario was
difficult with a slowdown in the investment cycle, persistently high headline
inflation and a volatile currency and interest rates. The trend of declining
private investment in Infrastructure continued during the year. The issues
faced by the infrastructure sector are well known and the Government
initiated some steps to reduce the bottlenecks faced in project execution.
And FY14 proved to be an equally turbulent year for infrastructure
financiers.
The Reserve Bank of India granted branch licenses to two NBFCs; namely,
IDFC and Bandhan Financial services to set bank in the private space.
The retail focused NBFCs witnessed a surge in asset quality issues during
the fiscal ended March and the troubles are likely to continue in FY15 as
well. The agency stated delinquencies due for over 180 days, after which the
asset turns bad as per the existing reporting guidelines, for the retail focused
NBFCs increased to 1.9% for FY14 from 1.3% at the end of FY13. Going
by the 90-day due rule, which qualifies an asset as bad for commercial
banks, delinquencies increased to 4.5% as of March 2014 as against 3.6% in
the year-ago period.
The credit growth registered by retail focused NBFCs also declined
massively during the fiscal with such NBFCs reporting only 8% growth in
advances as against 19% rise in advances in the previous fiscal. A significant
part of the slowdown was due to de-growth in the commercial vehicle,
construction equipments and gold loan segments as reported by the agency.
20

Prospects
The economy has been seeing early signs of improvement in various
macroeconomic parameters. These events are expected to give further boost to the
economic growth of the nation.Factors like higher industrial growth and clearance
of stalled projects are likely to reduce cyclical pressure on major non-bank finance
companies from the second half of the next fiscal.While in FY15 delinquency level
for retail NBFCs could remain at elevated levels a possible pick-up in industrial
activity could result in some easing, although the same is expected only towards
the latter part of the year.The gross non-performing loan (gross NPL) ratio of
NBFCs to reach 4.2% by the end of March 2015 from 2.5% during the end of
fiscal year ended March 2013.

21

FUNDAMENTAL ANALYSIS
A method of evaluating a security that entails 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 company-specific factors (Like financial
condition and management)
The end goal of performing fundamental analysis is to produce a value that an
investor can compare with the security's current price, with the aim of figuring out
what sort of position to take with that security (underpriced = buyoverpriced=sell
or short)
This method of security analysis is considered to be the opposite of technical
analysis.

22

Fundamental Analysis of NBFC

In the fundamental analysis of NBFC sector I have taken mostly large sector. I
have taken top 5 NBFC companies on which I have done the analysis. Firstly I
have found out the Earnings per share (EPS) then P/E ratio of all the companies.
Formula of EPS is Profit / Number of outstanding shares and P/E ratio is Market
value per share / Earnings per share. After finding P/E ratio I have founded the
Sector P/E which is average of all the P/E ratio.
If P/E of Bank is less than Sector P/E then its a Value pick so out of 5 Bank I have
got 3 Value pick banks, name of those banks are Power Finance Corp., Reliance
Capital, Rural Electricity Corp. For remaining banks I have founded PEG ratio
formula for the same is P/E / EPS growth. If the PEG is less than 1 then its a
Growth pick. For all the 5 Bank I have computed Long Term Price Target (LTPT)
which is calculated by multiplying Sector P/E and EPS, LTPT is the target which is
likely to be achieved by the Banks in the near future. The illustration of the same is
as follows (Price is as date on 16th June 2015)
No
1
2
3

Company Name

P/E

Price

EPS

LTTP

HDFC
Power Finance Corp.
Reliance Capital

31.4
5.83
11.61

1193.50
263.95
345.45

38
45.27
29.75

514.9
613.40
403.11

Infrastructure

13.76

145

10.53

142.68

5.15
13.55

273.75

53.15

720.18

Price

EPS 2015

Growth

Development Finance
Company
Rural Electricity Corp.

5
Total Sector P/E

(source-www.moneycontrol.com)
Calculation for PEG
(Price is as date on 16th June 2015)
No

Company Name

P/E

EPS 2014
23

HDFC

31.4

1193.50

38

Infrastructure Development Finance

13.76

145

10.53

34.86
11.22

Company

(source-www.moneycontrol.com)
HDFC
PEG =

P/E
EPS Growth in %

EPS Growth in % =

38- 34.86

* 100

34.86
EPS Growth % = 9.007%
PEG =

31.4
0.09007

The PEG is less than 1 then its a Growth pick bt HDFC PEG is More then 1 so I
not select this company for Investment and Infrastructure Development Finance
Company the EPS of 2014 is more then EPS of 2015 So PEG will be more then 1
so no need to calculate.
Based on the Value and the Growth picks I have decided to invest more then 6 cr in
NBFC sector and less then 1.5 cr inaluminium. I have kept some of fund as cash in
hand which will be utilized for hedging of some of the companies the same is
explained in the further part.

24

Allocation of Fund
Date
Sector
16Jun15
NBFC

Aluminiu
m

Company Name
Rural Electricity Corp.
Reliance capital
Power Finance
Corporation

Quantity Price
95169
273.05
57190
349.5

Value
25985987
19987962

60325

264.4

15950000

Hindalco
NALCO
Total

112570
48209

115.35
41.3

12985000
1991051
76900000

(source-www.moneycontrol.com)

TOP LINE OF NBFCs

25

NET SALES

2015

2014

Power Finance Corporation

24,861.32
20,229.53
3,948.00

21,522.42
17,017.98
3,169.00

Rural Electrification Corporation

Reliance Capital

25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
0.00

2015
2014

(Price is as date on 16th June 2015)

26

(source-www.moneycontrol.com)

BOTTOM LINE OF NBFCs

(Price is as date on 16th June 2015)

NET PROFIT
Power Finance Corporation
Rural Electrification Corporation
Reliance Capital

Mar '15
5,959.33
5,259.87
757

Mar '14
5,417.75
4,683.70
409

27

6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00

Mar '15

0.00

Mar '14

(source-www.moneycontrol.com)

TECHNICALANALYSIS
Technical analysis is a financial term used to denote a security analysis discipline
for forecasting the direction of prices through the study of past market data,
primarily price and volume. Behavioral economics and quantitative analysis
incorporate technical analysis, which being an aspect of active management stands
in contradiction to much of modern portfolio theory.
Technical analysis employs models and trading rules based on price and volume
transformations, such as the relative strength index, moving averages, regressions,
28

inter- market and intra-market price correlations, business cycles, stock market
cycles or, classically, through recognition of chart patterns.
Technical analysis stands in contrast to the fundamental analysis approach to
security and stock analysis. Technical analysis analyzes price, volume and other
market information, whereas fundamental analysis looks at the actual facts of the
company, market, currency or commodity. Most large brokerage, trading group, or
financial institutions will typically have both a technical analysis and fundamental
analysis team.
CONCEPTS
A. Resistance - a price level that may prompt a net increase of selling activity
B. Support - a price level that may prompt a net increase of buying activity
C. Breakout - the concept whereby prices forcefully penetrate an area of prior
support or resistance, usually, but not always, accompanied by an increase in
volume.
D. Trending - the phenomenon by which price movement tends to persist in one
direction for an extended period of time
E. Average true range - averaged daily trading range, adjusted for price gaps
F. Chart patterns - distinctive pattern created by the movement of security
prices on a chart

CHARTTYPES:
There are three main types of charts that are used by investors and
traders depending on the information that they are seeking and their individual skill
levels. The chart types are: the line chart, the bar chart, the candlestick chart.

29

A. LINE CHART :
The most basic of the three charts is the line charts because it represents
only the closing prices over a set period of time. The line is formed by
connecting the closing prices over the time frame. Line charts do not provide
visual information of the trading range for the individual points such as the
high, low and opening prices. However, the closing price is often considered
to be the most important price in stock data compared to the high and low for
the day and this is why it is the only value used in line charts.

BAR CHARTS :
The bar chart expands on the line chart by adding several more key pieces of
information to each data point. The chart is made up of a series of vertical
lines that represent each data point. This vertical line represents the high and low
for the trading period, along with the closing price. The close and open are
represented on the vertical line by a horizontal dash.
The opening price on a bar chart is illustrated by the dash that is located on the
left side of the vertical bar. Conversely, the close is represented by the dash on
the right. Generally, if the left dash (open) is lower than the right dash (close)
30

then the bar will be shaded black, representing an up period for the stock, which
means it has gained value. A bar that is colored red signals that the stock has gone
down in value over that period. When this is the case, the dash on the right (close)
is lower than the dash on the left (open).

B. CA

NDL

ESTICKCHARTS :

The candlestick chart is similar to a bar chart, but it differs in the way that it is
visually constructed. Similar to the bar chart, the candlestick also has a thin
vertical line showing the period's trading range. The difference comes in the
formation of a wide bar on the vertical line, which illustrates the difference
between the open and close. And, like bar charts, candlesticks also rely heavily
on the use of colors to explain what has happened during the trading period.
There are two color constructs for days up and one for days that the price
31

falls. When the price of the stock is up and closes above the opening trade,
the candlestick will usually be white or clear. If the stock has traded down for
the period, then the candlestick will usually be red or black, depending on the
site. If the stock's price has closed above the previous days close but below the
day's open, the candlestick will be black or filled with the color that is used to
indicate an up day.

CHART PATTERNS :
1. HEAD AND SHOULDERS :
This is one of the most popular and reliable chart patterns in technical analysis.
Head and shoulders is a reversal chart pattern that when formed, signals that
the security is likely to move against the previous trend Head and shoulders top
is a chart pattern that is formed at the high of an upward movement and signals
that the upward trend is about to end. Head and shoulders bottom, also known

32

as inverse head and shoulders is the lesser known of the two, but is used to
signal a reversal in a downtrend.

2. Cup and Handle :

A cup with handle chart is a bullish continuation pattern in which the

upward trend has paused but will continue in an upward direction once the
pattern is confirmed. This price pattern forms what looks like a cup, which is
preceded by an upward trend. The handle follows the cup formation and is
formed by a generally downward/sideways movement in the security's price.
Once the price movement pushes above the resistance lines formed in the
handle, the upward trend can continue. There is a wide ranging time frame for
33

this type of pattern, with the span ranging from several months to more than a
year.

3.

DOUBLETOPS AND BOTTOMS :

34

This chart pattern is another well-known pattern that signals a trend reversal - it
is considered to be one of the most reliable and is commonly used. These
patterns are formed after a sustained trend and signal to chartists that the trend
is about to reverse. The pattern is created when a price movement tests
support or resistance levels twice and is unable to break through. This
pattern is often used to signal intermediate and long-term trend reversals.

4. TRIANGLES:

35

Triangles are some of the most well-known chart patterns used in technical
analysis. The three types of triangles, which vary in construct and implication,
are the symmetrical triangle, ascending and descending triangle. These chart
patterns are considered to last anywhere from a couple of weeks to several
months.

5.

FLAG AND PENNANT :

These two short-term chart patterns are continuation patterns that are formed
when there is a sharp price movement followed by a generally sideways price
movement. This pattern is then completed upon another sharp price movement
36

in the same direction as the move that started the trend. The patterns are
generally thought to last from one to three weeks

6.

WEDGE:
The wedge chart pattern can be either a continuation or reversal pattern. It is
similar to a symmetrical triangle except that the wedge pattern slants in an
upward

or

downward direction, while the symmetrical triangle generally

37

shows a sideways movement. The other difference is that wedges tend to form
over longer periods, usually between three and six months.

7.

TR
IPL
E

TOPS AND BOTTOMS :

Triple tops and triple bottoms are another type of reversal chart pattern in chart
analysis. These are not as prevalent in charts as head and shoulders and double
tops and bottoms, but they act in a similar fashion. These two chart patterns are
formed when the price movement tests a level of support or resistance three
times and is unable to break through; this signals a reversal of the prior trend.

38

8.
ROUNDING BOTTOM :
A rounding bottom, also referred to as a saucer bottom, is a long-term reversal
pattern that signals a shift from a downward trend to an upward trend. This
pattern is traditionally thought to last anywhere from several months to several
years.

39

TECHNICALANALYSIS OF NBFC
Power Finance Corp.
Prices
Date

Open

High

Low

Close

22-Sep-10

342

345.4

334.1

337.55

22-Sep-11

164

164

151.2

153.2

21-Sep-12

200

220

192.2

194.65

23-Sep-13

129.85

134

128

132

23-Sep-14

241.75

244.75

235.05

236.2

10-Jul-15

259.8

260.7

255.55

257.9

(source-www.moneycontrol.com)
Power Finance Corp.Chart

Rural Electrification Corporation

40

Prices
Date

Open

High

Low

Close

22-Sep-10

343.6

346.25

334.2

338.25

22-Sep-11

184.85

184.85

175.6

177.15

21-Sep-12

217.4

228

217.4

219.6

23-Sep-13

201.5

202.8

195.5

199.65

23-Sep-14

262.7

265.75

247.45

248.8

10-Jul-15

285.65

288

282.2

284.25

Rural Electrification Corporation Chart

Reliance Capital
41

Prices
Date

Open

High

Low

Close

22-Sep-10

841

844.4

817.4

823.8

22-Sep-11

417.7

418.1

394.1

397.55

21-Sep-12

369

403.4

368.25

399.7

23-Sep-13

353.8

362.8

343.25

345.95

23-Sep-14

515

519

492.3

495.6

10-Jul-15

368.95

372.9

363.5

367.55

Reliance Capital Chart

42

Aluminium Sector
The most commercially mined aluminium ore is bauxite, as it has the highest
content of the base metal. The primary aluminium production process consists of
three stages. First is mining of bauxite, followed by refining of bauxite to alumina
and finally smelting of alumina to aluminium. India has the fifth largest bauxite
reserves with deposits of about 3 bntonnes or 5% of world deposits. Indias share
in world aluminium capacity rests at about 3%. Production of 1 tonne of
aluminium requires 2 tonnes of alumina while production of 1 tonne of alumina
requires 2 to 3 tonnes of bauxite. The aluminium production process can be
categorized into upstream and downstream activities. The upstream process
involves mining and refining while the downstream process involves smelting and
casting & fabricating. Downstream-fabricated products consist of rods, sheets,
extrusions and foils. Power is amongst the largest cost component in
manufacturing of aluminium, as the production involves electrolysis.
Consequently, manufacturers are located near cheap and abundant sources of
electricity such as hydroelectric power plants. Alternatively, they could set up
captive power plants, which is the pattern in India. Indian manufacturers are the
lowest cost producers of the base metal due to access to captive power, cheap
labour and proximity to abundant supply of raw material, i.e., bauxite. The Indian
aluminium
sector
is
characterised
by
large
integrated
players
like Hindalco and National Aluminium Company (Nalco). The other producers of
primary aluminium include Vedanta Resources Plc The principal user segment in
India for aluminium continues to be electrical & electronics sector followed by the
automotive & transportation, building & construction, packaging, consumer
durables, industrial and other applications including defence.

43

Financial Year '14

The major commodity demand driver China, (that accounts for over 40% of
global demand in Aluminium and Copper) slowed down considerably on
fears of hard landing for the economy. India too, suffered on account of
monetary tightening and subdued investment and growth climate with
industry/GDP growth slowing down considerably.
Global Aluminum demand growth normalized to around 5% in 2012, after a
sharp growth in the preceding two years on the back of global recovery from
the 2009 crisis. Worlds leading manufacturer Alcoa expects demand growth
to be in the region of 7% in 2014. In 2014, Chinas, North Americas and
Europes growth is expected to be in the region of 10%,5% and 1%
respectively.
The industry continued to be plagued by high inventories, which has been a
huge overhang on the prices. Cost of production for most aluminium players
continued to remain high due to challenges pertaining to energy inputs and
resources.
India with its abundant supply of quality bauxite and low cost labour has
established itself as a low cost producer of primary aluminium. However, in
India, the production of primary aluminium has stagnated around the 1.6 to
1.7 MT mark for the last three years. The three primary aluminium
producers, viz. Hindalco, Vedanta and Nalco have expansion plans as well as
greenfield projects that should increase the production in the foreseeable
future.
44

Prospects
China has been a marginally surplus producer of aluminium, while India
turned aluminium deficit in 2011 after being a marginal surplus producer for
many years. However, commissioning of new capacities will make India
surplus in aluminum in the near future.
Long term outlook for aluminium continues to remain strong with Global
aluminium demand expected to increase at a CAGR of 6%, with expected
growth of 9% till 2020. This growth rate, though strong, pales in comparison
with the stupendous rate at which Chinese aluminium consumption has
grown over the last decade.
The supply is expected to remain strong as several producers continued to
produce despite low LME. High physical premiums too worked as an
incentive to continue production. Global Aluminium production is expected
to grow at a rate matching production increase which will come from China
and Middle East. Production from both these regions is expected to grow at
around 8-9%.

45

Fundamental Analysis of Aluminium

In the fundamental analysis of Aluminium sector I have taken mostly large
sector. I have taken top 2 Aluminium companies on which I have done the
analysis. Firstly I have found out the Earnings per share (EPS) then P/E ratio of
all the companies. Formula of EPS is Profit / Number of outstanding shares and
P/E ratio is Market value per share / Earnings per share. After finding P/E ratio
I have founded the Sector P/E which is average of all the P/E ratio.
If P/E of company is less than Sector P/E then its a Value pick so out of
2companies I have got 2 Value pick companies,name of those companies are
Hindalco Industries Ltd And National Aluminium Company.For all the 2
companies I have computed Long Term Price Target (LTPT) which is calculated
by multiplying Sector P/E and EPS, LTPT is the target which is likely to be
achieved by the companies in the near future. The illustration of the same is as
follows
No

Company

P/E

Price

EPS

LTTP

1
2
Total

Name
Hindalco
NALCO
Sector P/E

26.91
8.36
17.63

120.55
42.90

4.47
5.13

78.80
90.44

Growth

46

Based on the Value and the Growth picks I have decided to invest more then 6 cr in
NBFC sector and less then 1.5 cr in aluminium. I have kept some of fund as cash in
hand which will be utilized for hedging of some of the companies the same is
explained in the further part.

Date
16-Jun15

Sector
Aluminiu
m

Company Name
Hindalco
NALCO

Quantit
y

Price
115.3
112570
5
48209
41.3

Value
1298500
0
1991051
2598598
7
1998796
2
1595000
0

Rural Electricity Corp.

95169

273.0
5

Reliance capital

57190

349.5

Power Finance Corporation

60325

264.4

NBFC
Total

7690000
0

47

TOP LINE OF ALUMINIUM SECTOR

NET SALES

2015

Hindalco Industries
National Aluminium
Company

2014

34,525.0
3

27,850.93

7,382.81

6,780.85

35,000.00
30,000.00
25,000.00
20,000.00

2015
2014

15,000.00
10,000.00
5,000.00
0.00
Hindalco Industries

National Aluminium Company

48

BOTTOM LINE OF ALUMINIUM SECTOR

NET PROFIT
Hindalco Industries
National Aluminium
Company

2015

2014

925.16

1,413.33

1,321.85

642.35

1600
1400
1200
1000

2015

800

2014

600
400
200
0
Hindalco Industries

National Aluminium Company

49

TECHNICALANALYSIS OF ALUMINIUM SECTOR

Hindalco Industries
Prices
Date

Open

High

Low

Close

22-Sep-10

192

193.25

187.2

189.6

22-Sep-11

142.6

142.7

139

139.4

21-Sep-12

115.1

118.75

114.75

117.7

23-Sep-13

114

117.1

113.4

116.35

23-Sep-14

163.65

164

155.25

157.05

10-Jul-15

104.35

105.3

102.45

104.6

Hindalco Industries Chart

50

National Aluminium Company

Prices
Date

Open

High

Low

Close

22-Sep-10

102.49

102.61

101.06

101.58

22-Sep-11

63.95

64.9

62.75

64.6

21-Sep-12

54

55.2

52.5

52.75

23-Sep-13

32.1

32.55

31.9

32.15

23-Sep-14

65

65.65

60

60.5

10-Jul-15

39.35

40.1

39

39.05

National Aluminium Company Chart

51

52