Equity Research PDF

A REPORT
ON
EQUITY RESEARCH
BY:
CHIRASH
05116603909
AUTHORIZATION
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This is to certify that Mr. Chirash, a student of University School of management
Studies , GGSIPU has completed project work on “Equity Research” under my
guidance and supervision.
The report is submitted as partial fulfillment of the requirement of MBA Program of

USMS. I certify that this is an original work and has not been copied from any
source.
(Signature of Guide)
Name of Project Guide: Dr . Vijita Aggarwal
Date –
ACKNOWLEDGEMENT
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I owe a great many thanks to a great many people who helped and supported me during the
making of this project. My deepest thanks to Dr . Vijita Aggarwal,
the Guide of the project for guiding and correcting various documents of mine with attention and
care. He has taken pain to go through the project and make necessary correction as and when
needed.
I would also thank my Institution and my faculty members without whom this project would
have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.
Chirash
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Table of Contents
Table of Contents....................................................................................................... 4
LIST OF TABLES.......................................................................................................... 5
LIST OF FIGURES......................................................................................................... 6
EXECUTIVE SUMMARY................................................................................................. 7
INTRODUCTION........................................................................................................... 8
INTRODUCTION TO STOCKS:-.................................................................................. 8
INTRODUCTION TO STOCK MARKET:-......................................................................9
THE MARKET : WHY IT EXISTS?..............................................................................10
INTRODUCTION TO STOCK EXCHANGE:-................................................................11
RISKS INVOLVED IN STOCK MARKET:-....................................................................12
ANALYSIS TOOLS:-................................................................................................. 12
EQUITY RESEARCH : AN OVERVIEW.......................................................................14
INVESTMENT RATIONALE....................................................................................... 14
OBJECTIVE OF THE PROJECT:-................................................................................15
SCOPE OF THE STUDY:-......................................................................................... 15
METHODOLOGY:-................................................................................................... 16
LIMITATIONS OF THE STUDY:-................................................................................ 16
MAIN TEXT................................................................................................................ 17
FUNDAMENTAL EVALUATION:-...............................................................................18
ECONOMIC ANALYSIS................................................................................................ 18
INTRODUCTION...................................................................................................... 18
SENSEX : AN INDICATOR OF THE INDIAN ECONOMY..............................................20
FII’S INFLOW IN THE INDIAN ECONOMY:-...............................................................22
IMPACT OF UNION BUDGET 2010-11 ON SENSEX..................................................24

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INDUSTRY ANALYSIS................................................................................................. 26
PHARMACEUTICAL INDUSTRY................................................................................ 26
CONSTRUCTION INDUSTRY:-.................................................................................. 30
TELECOM INDUSTRY:-............................................................................................ 34
COMPANY ANALYSIS................................................................................................. 38
RATIO ANALYSIS.................................................................................................... 38
SNAPSHOT OF THE MARKET...................................................................................... 46
INTERPRETATION OF VARIOUS PARAMETERS IMPORTANT IN ANALYSING A STOCK. .47
ANALYSIS OF CIPLA:-............................................................................................. 51
ANALYSIS OF Bharti Airtel :-................................................................................... 52
ANALYSIS OF DLF LTD :-........................................................................................ 54
ANALYSIS OF L&T:-................................................................................................ 56
ANALYSIS OF JAIPRAKASH ASSOCIATES:-...............................................................57
FINDINGS AND CONLUSION...................................................................................... 59
REFERENCES............................................................................................................. 61
ANNEXURES.............................................................................................................. 62
LIST OF TABLES
1. India’s top7 drug comp 29
2. Snapshot of the market 48
3. Best top gainers of sensex 49
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4. Best top losers of sensex 50
5. Analysis of cipla 55
6. Analysis of Bharti airtel 56
7. Analysis of DLf ltd. 58
8. Analysis of L&T 60
9. Analysis of jaiprakash asso. 61
LIST OF FIGURES
1. Sensex chart from 2006-10 24
2. FII investment in Indian equities 25
3. Porter’s 5 forces model for industry analysis 28
4. Market share of pharma companies 31
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5. Share to GDP by construction industry- 35
6. Market share of telecom companies 38
7. Bar chart depicting the Current ratio 41
8. Bar chart depicting the debt equity ratio 42
9. Bar chart depicting the industry coverage ratio 43
10.Bar chart depicting the EBITDA margin 44
11.Bar chart depicting the ROCE 45
12.Bar chart depicting the total asset turnover ratio 46
13.Price chart of cipla 55
14.Price chart of Bharti airtel 57
15.Price chart of DLF ltd. 58
16.Price chart of L&T 60
17.Price chart of jaiprakash asso. 62
EXECUTIVE SUMMARY
Summer Internship Program is an essential component of the MBA curriculum. It gives

immense opportunity to learn about the working and culture of the corporate. The project
entitled “Equity Research” is dedicated to my SIP 2010 which is being accomplished through the
courtesy of Sharekhan Ltd.. The main aim of the project is to enhance the analytical skills with
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the help of fundamental analysis and addition of basic and advanced knowledge of finance for
better understanding of the market for its application in research.
Equity research is done through two analysis namely fundamental and technical analysis. The
analysis in this project is done through fundamental analysis which basically includes economic
analysis, industry analysis and the company analysis. There are two approaches to this, bottom
up and top down. I have adopted the top down approach to perform the study commencing with
economic, industry and company analysis.
The area of research given to me is sensex which is in a group of 2. So, I have been assigned 15
companies listed on sensex thereby covering 6 sectors. The economic analysis starts with a brief
of world economy statistics and then the Indian economic analysis. Also, the impact of budget
2010-11 is covered in the report. The analysis of 3 sectors was done till interim report and a
more detailed analysis of the remaining 3 sectors, that is, pharmaceutical industry, construction
industry and telecom industry is done now. The company analysis starts with the ratio analysis
which forms one of the most important tools of fundamental analysis used to analyze the
financial performance of the companies. Ratio analysis is carried out with the companies of
telecom sector so that it becomes easy to understand and explain and simultaneously analyzing
the telecom companies as well. A comparative analysis is also done against prominent private
market players. Various ratio analysis will help to judge the, liquidity, solvency, profitability and
overall efficiency of the firm.
Some of the important or key financials of a company are studied and explained which are useful
for an investor to invest in a firm. The analysis of some companies is shown at the end with these
parameters.
INTRODUCTION
INTRODUCTION TO STOCKS:-
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Stock is a share in the ownership of a company. Stock represents a claim on the
company's assets and earnings. As you acquire more stock, your ownership stake in the
company becomes greater. Whether you say shares, equity, or stock, it all means the same thing.
The importance of being a shareholder is that you are entitled to a portion of the company’s
profits and have a claim on assets. Profits are sometimes paid out in the form of dividends. The
more shares you own, the larger the portion of the profits you get. Your claim on assets is only
relevant if a company goes bankrupt. In case of liquidation, you'll receive what's left after all the
creditors have been paid. The importance of stock ownership is your claim on assets and
earnings.
Another extremely important feature of stock is its limited liability, which means that, as an
owner of a stock, you are not personally liable if the company is not able to pay its debts. Other
companies such as partnerships are set up so that if the partnership goes bankrupt the creditors
can come after the partners (shareholders) personally and sell off their house, car, furniture, etc.
Owning stock means that, no matter what, the maximum value you can lose is the value of
your investment. Even if a company of which you are a shareholder goes bankrupt, you can
never lose your personal assets.
INTRODUCTION TO STOCK MARKET:-
The fabulous category of financial instruments is, without a doubt, one of the greatest tools ever
invented for building wealth. Stocks are a part, if not the cornerstone, of nearly any investment
portfolio. When you start on your road to financial freedom, you need to have a solid
understanding of stocks and how they trade on the stock market.
Over the last few decades, the average person's interest in the stock market has grown
exponentially. What was once a toy of the rich has now turned into the vehicle of choice for
growing wealth. This demand coupled with advances in trading technology has opened up the
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markets so that nowadays nearly anybody can own stocks.
The stock market can be a great source of confusion for many people. The average person
generally falls into one of two categories. The first believe investing is a form of gambling; they
are certain that if you invest, you will more than likely end up losing your money. Often these
fears are driven by the personal experiences of family members and friends who suffered similar
fates or lived through the Great Depression. These feelings are not ground in facts and are the
result of personal experience. Someone who believes along this line of thinking simply does not
understand what the stock market is or why it exists.
The second category consists of those who know they should invest for the long-run, but don’t
know where to begin. Many feel like investing is some sort of black-magic that only a few
people hold the key to. More often than not, they leave their financial decisions up to
professionals, and cannot tell you why they own a particular stock or mutual fund. Their
investment style is blind faith or limited to “this stock is going up. We should buy it.” This group
is in far more danger than the first. They invest like the masses and then wonder why their results
are mediocre (or in some cases, devastating).
THE MARKET : WHY IT EXISTS?
When a company is growing, the biggest hurdle is often raising enough money to expand.
Owners generally have two options to overcome this. They can either borrow the money from a
bank or venture capitalist, or sell part of the business to investors and use the money to fund
growth. Taking out a loan is common, and very useful – to a point. Banks will not always lend
money to companies, and over-eager managers may try to borrow too much initially, wrecking
the balance sheet. Factors such as these often provoke owners of small businesses to issue stock.
In exchange for giving up a tiny fraction of control, they are given cash to expand the business.
In addition to money that doesn’t have to be paid back, “going public” [as its called when a
company sells stock in itself for the first time], gives the business managers and owners a new
tool: instead of paying cash for an acquisition, they can use their own stock.
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INTRODUCTION TO STOCK EXCHANGE:-
A stock exchange is an entity which provides "trading" facilities for stock brokers and traders, to
trade stocks and other securities. Stock exchanges also provide facilities for the issue and
redemption of securities as well as other financial instruments and capital events including the
payment of income and dividends. The securities traded on a stock exchange include:
shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.
To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there
is a central location at least for recordkeeping, but trade is less and less linked to such a physical
place, as modern markets are electronic networks, which gives them advantages of speed and
cost of transactions. Trade on an exchange is by members only.
The initial offering of stocks and bonds to investors is by definition done in the primary
market and subsequent trading is done in the secondary market. A stock exchange is often the
most important component of a stock market. There is usually no compulsion to issue stock via
the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is
said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are
traded. Increasingly, stock exchanges are part of a global market for securities.
There are two major stock exchanges in the country. One is SENSEX(BSE) and the other is
NIFTY(NSE). BSE stands for Bombay Stock Exchange and NSE stands for National Stock
Exchange.
The Sensex is an "index". An index is basically an indicator. It gives you a general idea about
whether most of the stocks have gone up or most of the stocks have gone down.
The Sensex is an indicator of all the major companies of the BSE and Nifty is an indicator of all
the major companies of the NSE.
If the Sensex goes up, it means that the prices of the stocks of most of the major companies on
the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the
major stocks on the BSE have gone down.
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Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of
the NSE.
RISKS INVOLVED IN STOCK MARKET:-
It must be emphasized that there are no guarantees when it comes to individual stocks. Some
companies pay out dividends, but many others do not. And there is no obligation to pay out
dividends even for those firms that have traditionally given them. Without dividends, an investor
can make money on a stock only through its appreciation in the open market. On the downside,
any stock may go bankrupt, in which case your investment is worth nothing.
Although risk might sound all negative, there is also a bright side. Taking on greater risk
demands a greater return on your investment. This is the reason why stocks have historically
outperformed other investments such as bonds or savings accounts. Over the long term, an
investment in stocks has historically had an average return of around 10-12%.
To make money in the stock market, one must assume high risks.
ANALYSIS TOOLS:-
There are two types of the analysis used by institutional and individual traders. Both
fundamental and technical analysis serve the same purpose to help to define possible future
stock trend, yet, at the same time they are completely different in the way they analyze stocks.
Both fundamental and technical analyses are important and depending on the trading style one or
another could be applied.
FUNDAMENTAL ANALYSIS:-
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Fundamental analysis is the process of looking at a business at the basic or fundamental financial
level. This type of analysis examines key ratios of a business to determine its financial health and
gives you an idea of the value its stock. Many investors use fundamental analysis alone or in
combination with other tools to evaluate stocks for investment purposes. The goal is to determine
the current worth and, more importantly, how the market values the stock.
TECHNICAL ANALYSIS:-
Technical analysis looks at past performance of an analyzed stock in order to find logical
patterns that could be applied to the current situation on the market and reveal possible future
stock trend. As a rule this type of the analysis is based on the analysis of the volume and price
charts, data, developing various technical indicators which. In the age of the computerization
many of the traders are choosing this type of the analysis mainly because of the availability and
fast results.
By comparing technical and fundamental analysis there is no straight answer which one of them
is better. However taking into account different traders we may say that:
• For intraday traders: if a trader intends to make 1-5 trades a day, most likely, they do
not care about fundamental analysis at all. It does not matter to intraday traders what is
going to happen to the company over the month, is it on the edge of filing bankruptcy or
it is strong and growing. All they are interesting in is how volatile and how liquid stock is
and where the price of the stock is going to be in 10-30 minutes. These traders rely solely
on technical analysis.
• For Short-Term Traders: The same as intraday traders this type of trading does not
assume holding position (own stocks) for a prolonged period of time. 1-2 trades a week
and even 2-3 trades a month is still a small timeframe to be bothered by complex
fundamental analysis.
• For Mid-Term Traders: By going into 2-3 trades a year a traders may start to be
interesting in some elements of the fundamental analysis. By holding a stock for more
than 6 month in your portfolio you suppose to know at least a little bit about the
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company. You still may use technical analysis, yet some company research could be
recommended for this type of traders.
• For Long-term Traders: If you intend to hold the stock of the company in your
portfolio for a several years it becomes essential to consult fundamental analysis. Those
who trade indexes still may use some elements of technical analysis, yet, when it comes
to stocks you have to be sure it is not broken when you are willing to sell it and has at
least the same value so you do not loose.
EQUITY RESEARCH : AN OVERVIEW
Information is the plank on which financial markets operate. Traders with better information and
forecasting ability will have an edge in the market place. Thus, there is a need for equity research
and sophisticated financial modeling.
Equity research is the publication by analysts of reports, notes, and emails that offer an
investment recommendation on the quoted stock of a company (typically buy, sell, or hold). The
recommendation is supported by an investment case, financial forecasts, and a valuation. Reports
vary enormously, from short updates of a page or less to substantial documents that analyze
whole industries and companies in great detail.
The role of research is to provide information to the market. An efficient market relies on
information. A lack of information creates inefficiencies that result in stocks being
misrepresented (over or under valued). Analysts use their expertise and spend a lot of time
analyzing a stock, its industry and peer group to provide earnings and valuation estimates.
Research is valuable because it fills information gaps so that each individual investor does not
need to analyze every stock. This division of labor makes the market more efficient.
INVESTMENT RATIONALE
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Each investment alternative has its own strengths and weaknesses. Some options seek to achieve
superior returns (like equity), but with corresponding higher risk. Other provide safety (like PPF)
but at the expense of liquidity and growth. Other options such as FDs offer safety and liquidity,
but at the cost of return. Mutual funds seek to combine the advantages of investing in arch of
these alternatives while dispensing with the shortcomings.
Indian stock market is semi-efficient by nature and, is considered as one of the most respected
stock markets, where information is quickly and widely disseminated, thereby allowing each
security’s price to adjust rapidly in an unbiased manner to new information so that, it reflects the
nearest investment value. And mainly after the introduction of electronic trading system, the
information flow has become much faster. But sometimes, in developing countries like India,
sentiments play major role in price movements, or say, fluctuations, where investors find it
difficult to predict the future with certainty. Some of the events affect economy as a whole, while
some events are sector specific. Even in one particular sector, some companies or major market
player are more sensitive to the event. So, the new investors taking exposure in the market
should be well aware about the maximum potential loss, i.e. Value at risk.
OBJECTIVE OF THE PROJECT:-
The objective of the project is to pick up 15 companies which are listed on the Bombay Stock
Exchange and conduct a research on their securities, the organization and operation of their
markets.
In the broadest terms, objective is to develop, and thereafter communicate to investors, insights
regarding the value, risk, and volatility of a covered security, and thus assist investors to decide
whether to buy, hold, sell, sell short or simply avoid the security.
SCOPE OF THE STUDY:-
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Equity research forms an integral part of the share trading experience. Equity research decides
the stance one would take in the share trading industry.
Forecasting scrip performance requires much more characteristics and skills than just advance
arithmetical ability. It requires split-hair analysis of the market. To do so one also needs to have
excellent understanding of the market.
Supported by valid, fact-based and reliable research inputs and published results, the research
picks out stocks, analyzes its future scope and give a timely recommendation.
METHODOLOGY:-
The data will be collected from the secondary sources such as company’s annual reports,
research reports, websites, news articles etc. Time horizon from 2007-08 to 2009-10 will be
taken into account for analysis.
There are various methods of research analysis like Ratio Analysis, CAPM Model, Discounted
Cash Flows (DCF), P/E ratio, EPS estimation, SWOT analysis, Economic Analysis, Industry
Analysis which would be used.
LIMITATIONS OF THE STUDY:-
• Equity research is done by highly experienced professionals. Therefore it requires

a very deep and thorough knowledge of the subject.
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• This research directly influences the decisions of the investors thereby making it
extremely important to be very precise and careful. The results found should be
very accurate which is not an easy task.
• Every analyst has his own methods of forecasting therefore the results can vary.
• The analyst has to take all factors into consideration and arrive at a probabilistic
estimate of the company’s stock price. Analyst will continuously upgrade or down
grade his estimates depending on evolving conditions of Economy, Industry and
Company plans.
MAIN TEXT
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FUNDAMENTAL EVALUATION:-
Fundamental evaluation employs a top-down approach that starts with the overall economy and
then works down from industry groups to specific companies. As part of the analysis process, all
information is relative. Industry groups are compared against other industry groups and
companies against other companies. Usually, companies are compared with others in the same
group. For example, a telecom operator (Bharti airtel) would be compared to another telecom
operator (reliance communication), not to an oil company (ONGC).
ECONOMIC ANALYSIS
INTRODUCTION
The Economy analysis is important to understand the macro-parameters for investment in a

particular country. The set of indictors that define the economy includes the Lagging, Leading
and the incident indicators. These define the overall health of economy under consideration.
The Global financial turmoil, was casted a big impact on the world. Entire world economy got
seriously affected by the crisis. Hence forth the world economy can be by and large segregated in
the 3 phases, primarily pre-Lehman debacle, the financial crisis and the latest being the recovery.
Some economists prefer to call this the ‘V’ shaped recovery. Whether the new phase can be
termed as Yellow weeds or green shoots remain to be seen.
WORLD ECONOMIC STATISTICS AT A GLANCE
World GDP (PPP): $65 trillion

GDP Growth Rate: 5.2%
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Growth Rate of Industrial Production: 5%
GDP By Sector: Services- 64% Industry- 32% Agriculture- 4%
GDP Per Capita (PPP): $9,774
Population: 6.65 billion
The Poor (Income below $2 per day): 3.25 billion (approximately 50%)
Millionaires: 9 million (approximately 0.15%)
Labor Force: 3.13 billion
Exports: $13.87 trillion
Imports: $13.81 trillion
Inflation Rate - Developed Countries: 1% - 4%
Inflation Rate - Developing Countries: 5% - 20%
Unemployment - Developed Countries: 4% - 12%
Unemployment & Underemployment - Developing Countries: 20% - 40%
INDIA ECONOMIC ANALYSIS

India economic analysis provides various inputs on economic condition of this south-east Asian
country. It can be done both at a microeconomic as well as a macroeconomic level. India
economic analysis could also be described as being an explanation of various economic
phenomena going on in this country.
Recent macroeconomic developments in India:

In April 2009, industrial sector in India had recorded a growth of 7 percent. However, this figure
is lesser than 11 percent development, which had been achieved in April 2008. Much of this
critical condition could be attributed to an increase in prices of oil. Measures that have been
taken by Reserve Bank of India, like upward revision of repo rate and CRR, have also
contributed to decrease in industrial production.
Manufacturing and electric sector have suffered as well in recent times. Their growth rates have
come down too. For manufacturing sector it was 7.5 percent and for electricity sector, rate of
development stood at 1.4 percent in April 2008. This rate is significantly low when compared to
statistics of April 2007, when rates of development for manufacturing and electricity were 12.4
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percent and 8.7 percent respectively.
In case of manufacturing sector much of this slump could be attributed to increase in input costs
like expenses of oil, raw materials, rates of interest and prices of goods and services. Mining
sector has been comparatively better off as it has managed to grow at a rate of 8 percent in April
2009 compared to 2.6 percent that was achieved in April 2008.
In core infrastructural industries, there has been deceleration as well, but it is still better off
compared to non infrastructural industries in India. Growth in April 2008 has been around 3.6
percent, which is less than 5.9 percent achieved in April 2007. Industries like crude oil
production, electricity and petroleum refinery have been performing below expectations but coal,
finished steel and cement have performed better than April 2007.
SENSEX : AN INDICATOR OF THE INDIAN ECONOMY
Sensex is the buzzword today that governs the activities of the investors in India. With
metamorphosis witnessed in all sectors and the country turning into a fast developing economy
there is no dearth of investors. Even overseas investors are attracted towards sensex India and it
has not been a decade that the stock market gained great momentum. The BSE index rose to such
an escalating level that thousands of shares were being traded every minute and more investors
being ready to invest. But the sudden downslide in the year 2008 left all in panic – reminding
one of the ‘snake & ladder’ game. Many turned bankrupt, a number of companies closed down,
and financial chaos were the order of the day for over six months at a stretch. The downslide
affected the BSE sensex, lowering the stock prices and investors were in a dilemma whether to
take the risk or not. But now market conditions have changed for the better; the BSE index, over
the last few months, has been displaying a rising figure. At present, the sensex index closed at
16844.20 up from the below-10,000 figure.
The global recession period is about to get over & the severely affected banks & equities are
slowly reverting back to their previous shape. All the investors trading in BSE stocks will feel
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glad to know that Bombay Stock Exchange (BSE) is also recovering from the massive effect that
economic slowdown has left on it. BSE is one of the Asia’s oldest stock exchanges operating the
stocks of a lot of companies from different sectors.
India is expanding at a rapid rate after China, but the upward trend is one of the steadiest
compared to the other foreign markets. India being diverse in many sectors will see more upside
due to the strong demand in information technology. The other sectors for future growth in India
are energy, oil, and commodities. The Sensex has had its way will continue to grow. India’s
economy is booming and the high return will reflect on its stock market.
The increase in sensex means lot of people who have invested and also persons invested in the
mutual funds will be benefited .so the earning per capita is increasing , companies will grow so
their branches will too so employment the foreign investors will also invest and we will be
benefited.
SENSEX is one of the major parameter by which growth of the indian companies and thus its
impact on economy can be found out. Increase in Sensex means that companies are improving,
thus unemployment will be decreased and also Income level of the people will also be leveled
up. Thus it will definitely have a positive impact on the Economy which will have a positive
flow or the positive impact on the country
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Sensex chart from 2006-10
FII’S INFLOW IN THE INDIAN ECONOMY:-
Foreign institutional investors (FIIs), one of the largest categories of investors in the local equity
markets, have bought Indian stocks worth $6.64 billion (Rs29,481 crore) in the year-to-date, the
highest in the first four months of a year since they were allowed entry into the country in 1992.
The money that FIIs have pumped in beats the previous record of $4.21 billion that came in
during January-April in 2004, when the markets were in the middle of a bull rally, according to
data released by the markets regulator, the Securities and Exchange Board of India (Sebi).
India’s industrial production grew at 15.1% in February over a year ago, and is seen at around
the same level in March. With company earnings growing at double-digit pace, the economy is
forecast to grow at 8.8% in 2010, according to the International Monetary Fund.
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However, others are not so optimistic and said that risk appetite might wane because of the
problems surrounding Greece and some other European economies such as Spain and Portugal.
To be sure, a slowing of foreign inflows may help alleviate the concerns of policymakers worried
about inflation that’s close to double-digit levels, and the rupee’s appreciation, which makes
Indian exports less competitive. The rupee has gained around 5% against the dollar since the start
of the year.
Equity markets around the world took a tumble recently, after credit rating agency Standard and
Poor’s cut the debt rating of Greece to junk status on Tuesday and downgraded Spain and
Portugal. While the US’ Dow Jones Industrial Average fell 1.75% in the week till 30 April, the
UK’s FTSE index shed 3.49%. Emerging markets were hit too, with the local benchmark, the
Sensex, losing 1% over the week.
The increase in FII inflows, however, hasn’t boosted the local markets much. The Sensex has
gained only 0.54% this year and the broader BSE 500 index 2.93%. Part of this is explained by
the fact that local mutual funds have sold shares worth Rs7,529 crore in the same period. The
Sebi data also includes fund flows to the primary market. So far, this year, 28 firms have raised
money worth Rs10,000 crore from new share sales.
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IMPACT OF UNION BUDGET 2010-11 ON SENSEX
The benchmark Sensex saluted Union Budget 2010 unveiled by Finance Minister Pranab
Mukherjee and rallied over 400 points during the same day. Experts say it was a effect of short
covering and positive reaction to budget.
The Nifty closed above the 4900 mark but the sell-off and profit booking in ITC on hike in
excise, BHEL, Tata Power, TCS, Infosys and ABB erased more than 50% gains from day's high.
Even heavyweights came off their day's high on profit booking at higher levels. It seemed that
the markets discouted the budget.
Pranab Mukherjee in his second budget announced some positives like gradual reduction in
fiscal deficit, cut in surcharge, more allocation for infrastructure development, increase in FY11
divestment target, increase in personal tax slab to Rs 8 lakh etc, which all these pushed
the sensex above. However, there were some negatives like hike in excise duties etc.
Closing
Index Chg (%)
Value
AUTO 7,170.99 4.74

METAL 16,401.52 2.58
BANKEX 9,828.68 2.26
PHARMA 4,912.98 1.55
MIDCAP 6,397.82 1.47
REALTY 3,236.69 1.26
OIL&GAS 9,596.24 1.08
SMALLCAP 8,067.40 1.08
CAP GOODs 13,474.86 1.06
POWER 2,961.56 0.26
TECk 3,179.21 0.03
IT 5,173.99 -0.29
FMCG 2,662.05 -2.25
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Positive global cues also helped the markets. European markets were trading 1% higher and US
index futures were marginally in green. Asian markets also recovered in late trade; Hang Seng
was up 1% and Kospi up 0.45%. Nikkei, Straits Times and Taiwan were marginally in green
while Shanghai fell 0.28%.
However, the markets shrugged off less-than-expected gross domestic product (GDP) data. The
Q3 GDP came in at 6% as against 7.9% in the previous quarter. For the period of nine-month
ended December 2009, GDP growth stood at 6.7% versus 7.1% on year-on-year basis. This was
despite negative growth in agriculture.
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INDUSTRY ANALYSIS
PHARMACEUTICAL INDUSTRY
This diagram provides a summary positional analysis of the pharmaceutical industry using
Porter’s Five Forces model :
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Figure: Porter’s Five Forces Model for Industry Analysis
• Barrier to entry: High (Pharmaceuticals). Cost of R&D and patent limitations

• Industry Competition: High. Advantages gained by first mover advantage (patents)
• Suppliers: supplier power is low
• Buyers: buyer power is low
• Substitutes: low (with patents) medium (after patent expiry)
Overall, the pharmaceutical industry shows an upward trend in its core markets. The industry
remains highly valued, has a favourable market position with strong financial make-up and
strong earnings growth. Its future potential demand trend is positive and despite increased
competition the industry still shows a continuing upward growth momentum. Forecast of the
leading 16 pharmaceutical companies for 2001 to 2009 suggests that combined sales will grow at
a minimum rate of 5.2 percent based on the potential of their product pipeline.
Cipla Laboratories continues to be the largest pharmaceutical company in the domestic market.
Cipla has topped the ORG-IMS rankings for the month of November with a market share of 5.42
per cent and sales of Rs 146.32 crore (Rs 1.463 million), edging out Ranbaxy which stood at
second position with 5.09 per cent market share and Rs 137.49 crore (Rs 1.374 million) sales.
Page | 27
In October, Cipla topped with Rs 152.04 crore (Rs 1.520 billion) sales and a market share of 5.23
per cent, ahead of Ranbaxy, which garnered Rs 148.40 crore (Rs 1.484 million) sales and 5.11
per cent market share, said sources.
Cipla overtook Ranbaxy and GlaxoSmithKline India to become the largest pharmaceutical
company in the domestic market for the first time in May 2007.
India's Top 7 Drug Cos

Rank Company
1 Cipla
2 Ranbaxy
3 GlaxoSmithKline
4 Zydus Cadila
5 Alkem Laboratories
6 Sun Pharma
7 Nicholas Piramal
While GSK has maintained its number three position in November, Zydus Cadila (fourth),
Alkem Laboratories (fifth) and Sun Pharma (sixth) have moved one rank up from October.
Nicholas Piramal, which faced raw material shortages for its largest selling codiene based
formulations, like Phensydyl, in recent months, slipped three positions to number seven in
November.
ORG-IMS, the largest market intelligence company in India focusing on the healthcare sector,
tracks sales of Indian pharmas on a monthly basis, through over 3,000 stockists and 6,000
doctors.
Indian companies are increasing their share in the domestic market mainly due to increased
number of high value new introductions, though the number of new introductions has reduced
recently.
Page | 28
Ranbaxy's growth has been largely driven by new introductions such as Volix, an anti-diabetes
drug launched recently, Oframax-Forte and anti-asthmatic drug Synasma, which it in-licensed
from Eurodrug Laboratories.
Ranbaxy's antibiotic Mox (amoxyllin), which was not among the top ten brands a year ago, has
grown to become the fourth largest brand in the domestic market with monthly sales at Rs 9.8
crore (Rs 98 million) in November, sources said.
Cipla's growth was powered by positive growth in their existing portfolio, especially its
respiratory products.
However, GSK has lost market share mainly in its main portfolios such as anti- infectives,
dermatologicals and pain management drugs which grew slower than the market for these
products.
KEY FINDIINGS:-
Page | 29
The Indian pharmaceutical market was valued at $7,743m in 2008, an increase of 4.0% over
2007. Business Insights anticipates that Indian pharmaceutical market will grow at a faster pace
than the global pharmaceutical market, approximately at a CAGR of 13.2% during 2009-14 to
reach a total value of $15,490m in 2014.
India has emerged as a key destination for global pharmaceutical companies due to its high
growth prospects led by ageing population, changing disease profile, and improving patent
regime and socio-economic conditions.
The Indian pharmaceutical market is highly competitive and fragmented with the top 10 players
accounting for 36.1% of the total R&H sales in 2008.
CONCLUSION:-
The Pharmaceutical industry has a lot of yet untapped potential and it will be interesting to see
how the industry matures over the long term. Undoubtedly, the long history and global expertise
of firms like cipla, GSK and ranbaxy will stand them in good stated to create and benefit from
emerging global opportunities. Notwithstanding its strengths, complacency must be guarded
against because smaller, agile and innovative firms are on the prowl and all it takes for the small
upstarts is a superdrug that can change the entire face of the industry. We’ve seen it in happen
in the Information & Communications industry, for all we know pharmaceuticals may just be
next.
CONSTRUCTION INDUSTRY:-
India is on the verge of witnessing a sustained investment in infrastructure build up. With
construction component accounting for 42% of the total investment in infrastructure, the
construction industry has been witness to a strong growth wave powered by large spends in
Page | 30
housing, road, ports, water supply and airports development. The construction sector has grown
at a CAGR of 16.5% during the last seven years and now accounts for 6.9% of India’s GDP
compared to 5.7% in FY00. The Planning Commission of India has proposed an investment of
around US$ 500 bn in the Eleventh five-year plan (2007-2012), which is nearly 2.3 times more
than the previous five-year plan.
• From a policy perspective, there has been a growing consensus that

a private-public partnership is required to remove difficulties
concerning the development of infrastructure in the country. During
the tenth five-year plan (2002-07), the share of private players in
the total investment was 18%, which has increased to 30% during
the eleventh five-year plan. The balance will be borne by the public
sector.
• • The real estate industry comprising of construction and

development of properties has grown from family based entities
with focus on single products and having one market presence into
corporate entities with multi-city presence having differentiated
products. The industry has witnessed considerable shift from
traditional financing methods and limited debt support to an era of
structured finance, private equity and public offering.
• The construction sector is a major employment driver, being the

second largest employer in the country, next only to agriculture.
This is because of the chain of backward and forward linkages that
the sector has with other sectors of the economy. About 250
ancillary industries such as cement, steel, brick, timber and building
material are dependent on the construction industry. A unit increase
in expenditure in this sector has a multiplier effect and the capacity
to generate income as high as five times.
KEY POINTS:-
Page | 31
Supply Past 2-3 years have seen a substantial increase in the
number of contractors and builders, especially in the
housing and road construction segment.
Demand Demand exceeds supply by a large margin. Demand

for quality infrastructure construction is mainly
emanating from the housing, transportation and urban
development segments.
Barriers to entry Low for road and housing construction. However,

high working capital requirements can create growth
problems for companies with weak financial muscle.
Bargaining Low. Due to the rapid increase in the number of

power of contractors and construction service providers,
suppliers margins have been stagnant despite strong growth in
volumes.
Bargaining Low. The country still lacks adequate infrastructure

power of facilities and citizens have to pay for using public
customers services.
Competition Very high across segments like road construction,

housing and urban infrastructure development.
Relatively less in airport and port development.
SHARE TO GDP:-
The Indian construction industry has been playing a vital role in overall
economic development, as its contribution to GDP at current market
prices has gone up from 5.3% in FY02 to around 7.8% during FY08. In
fact, during FY02-FY08, the sector grew at CAGR of 20.3%.
Page | 32
CONCLUSION:
Real estate investments account for about 60% of the total construction
investments. Demand-supply gap for residential housing, favourable
demographics, rising affordability levels, availability of financing
options as well as fiscal benefits available on availing of home loan are
the key drivers supporting the demand for residential construction. In
addition to this, demand for office space from IT/BPO segment is
expected to continue due to emergence of India as a preferred
outsourcing destination. Also, boom in organized retail is expected to
result in huge demand for real estate construction. According to industry
estimates, the Indian real estate industry is expected to grow at a
compounded rate of 33% between FY05 to FY10, mainly driven by the
residential segment.
Page | 33
TELECOM INDUSTRY:-
The Indian telecommunications industry is one of the fastest growing in the world and India is
projected to become the second largest telecom market globally by 2010.India added 113.26
million new customers in 2008, the largest globally. The country’s cellular base witnessed close
to 50 per cent growth in 2008, with an average 9.5 million customers added every month.
According to the Telecom Regulatory Authority of India (TRAI), approximately 14.25 million
telephone connections, including wireline and wireless, were added during July 2009, taking the
total number of telecom subscriber base at the end of July 2009 to 479.07 million from 464.82
million a month before.
According to Business Monitor International, India is currently adding 8-10 million mobile
subscribers every month. It is estimated that by mid 2012, around half the country's population
will own a mobile phone. This would translate into 612 million mobile subscribers, accounting
for a tele-density of around 51 per cent by 2012. It is projected that the industry will generate
revenues worth US$ 43 billion in 20010-11.
Moreover, according to a study conducted by Nokia, the communications sector is expected to

emerge as the single largest component of the country’s GDP with 15.4 per cent by 2014. The
Indian equipment market is estimated at US$ 24 billion in FY09.
GROWTH
According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are expected to
touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in India.
India has become the second country in the world to have more than 100 million CDMA-based
(code division multiple access) mobile phone subscribers after the US, which has 157 million
CDMA users.
RIVALRY AMONG EXISTING COMPETITORS
Page | 34
Competition in the Indian telecommunications industry is concentrated in the mobile segment,
where there are up to six operators in some circles. Despite intense competition, the rapid growth
of the market has allowed these players to expand their subscriber bases even as they lose market
share.
There are three types of players in telecom services:
• State owned companies (BSNL and MTNL).

• Private Indian owned companies (Reliance Infocomm, Tata Teleservices.
• Foreign invested companies (Vodafone, Bharti Tele-Ventures, Idea Cellular, Spice
Communications).
Key companies are:
BSNL:
• Incumbent service provider and world’s 7th largest telecommunication company, state
owned.
• Operates basic, cellular (GSM and CDMA) mobile, Internet and long distance services.
• Operates in 21 circles(except Delhi and Mumbai)
MTNL:
• State owned
• Operates in two circles Delhi and Mumbai
• Operates basic, cellular (GSM and CDMA) mobile, Internet and long distance services
BHARTI AIRTEL:
• Leads the mobile segment in the country

• Operates in 17 circles.
RELIANCE COMMUNICATIONS:
• Offers mobile and fixed line telephony including broadband, national and international
long distance services, data services and a wide range of value added services and
applications, new entrant in GSM.
Page | 35
• Pan India presence
TATA TELESERVICES:
• Offers mobile and fixed line telephony including broadband, national and international
long distance services, data services and a wide range of value added services and
applications, new entrant in GSM.
• Pan India presence.
IDEA CELLULAR:
• Offers mobile, national and international long distance services, data services and a wide
range of value added services and applications, uses GSM technology.
• Pan India presence
Competition has intensified with the entry of new cellular players in select circles. Reducing
tariffs will hurt the new entrants as they will be unable to recover their high capital investments.
The Wireless Industry crossed 391million subscribers mark at the end of the financial year 2008-
09. The total subscriber base of 391.76 million comprise of 297.26 (75.88%) million GSM and
94.50 (24.12%) million of CDMA subscribers. The market share of various service providers is
depicted in the figure:
Page | 36
Figure 1: Market Share of Wireless Operators (in %) as on 31st March 2009
It is clear that no service provider has a major share and there is intense rivalry among the
existing players in the market. Thus competitive rivalry is due to:
• Rush of new entrants

• Swift technology obsolescence due to new product innovations
• Margin pressures due to fierce competition
• High exit barriers due to specialized instruments making it a risky business.
Thus companies have to change their strategies, need to provide good services and penetrate the
market with low prices to survive in the cut throat competition.
CONCLUSION:-
Telecom stocks have undergone major value erosion on the bourses after the tariff war started in
late September last year. The scrip of sector leader Bharti Airtel has fallen by 36% since October
1, 2009. The market capitalization of Reliance Communications (RCOM), the second-largest ,
has nearly halved, while that of Idea Cellular has fallen by 23% during the same period.
Further, the customer loyalty has been reduced due to the entry of large numbers of players into
the market. Govt. policies & stiff competition has made the growth of this sector very slow.
Though there is still hope that the sectors will revive its full potential, it is better to invest in
other sectors if it is not a long term investment.
Page | 37
COMPANY ANALYSIS
Company analysis commences from ratio analysis which is explained through the telecom
companies. All the ratios, their interpretations, and the rationale have been explained through the
telecom companies which simultaneously analyzes these companies as well.
RATIO ANALYSIS
Ratio analysis tool is used to analyze the financial performance of the companies. Its
performance is also compared against prominent private market players like, Bharti
Airtel, Reliance Communications, and Idea Cellular for 2009. Various ratio analysis will
help to judge the, liquidity, solvency, profitability and overall efficiency of the firm.
CURRENT RATIO
The Current Ratio formula is:
The ratio is mainly used to give an idea of the company's ability to pay back its short-
term liabilities (debt and payables) with its short-term assets
(cash, inventory, receivables). The higher the current ratio, the more capable the
company is of paying its obligations
Page | 38
A ratio
under 1
suggests
that the
company would be unable to pay off its obligations if they came due at that point.
Rationale: The higher the current ratio, the larger is the amount of rupees available per rupee of
current liability, the more is the firm’s ability to meet current obligations and greater is the safety
of firms of short term creditors. The need to safety margin arises from the inevitable unevenness
in the flow of funds. The limitation of current ratio arises from the fact that it is quantitative
rather than qualitative.
Interpretation: Reliance communication has 2.72 rupees to meet every one rupee of current
liability, thus having sufficient safety margin ,and is good in short term liquidity. Bharti Airtel
has low short term liquidity .Current ratio of Idea cellular is appropriate as it is not too high and
has a right balance. Since the companies are all service oriented, they do not have much
inventories and hence the liquid ratios are almost similar to the current ratios calculated above
DEBTS TO EQUITY RATIO:
It is a measure of a company's financial leverage.
Debt-Equity ratio = Long term debt/Shareholder’s Equity
Page | 39
The relationship between borrowed funds and owners capital is a popular measure of the long
term financial solvency of the company.
Figure 2: Debt Equity Ratio
Rationale: if the ratio is greater than 1, the majority of assets are financed through debt. If it is
smaller than 1, assets are primarily financed through equity. For instance the debt equity ratio is
1:2,it implies that for every rupee of outside liability ,the firm has 2 rupees .If the D/E ratio is
high ,the owners are putting up relatively less money of their own, it is a danger signal for
creditors. Even a high proportion of debt leads to inflexibility in operation.
Interpretation: Tata Teleservices has a debt ratio of 0.43:1 that is for every 0.43 rupee of
outside liability there is 1 rupee of owners fund and assets are primarily financed by owners
fund. Reliance and Bharti Airtel have low debt equity ratio this is because of the company is
reinvesting the Profits into the business. This shows the strong confidence on the future outlook
of the business.
INTEREST COVERAGE RATIO:
Interest Coverage Ratio = PBIT / Interest Expense

A ratio used to determine how easily a company can pay interest on outstanding debt.
Page | 40
The lower the ratio, the more the company is burdened by debt expense. When a company's
interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable.
An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to
satisfy interest expenses.
Figure 3: Interest Coverage Ratio
Rationale: This ratio uses the concept of net profits before taxes because interest is tax
deductible .It indicates the extent to which a fall in EBIT is tolerable in that of the ability of the
firm to service its interest payments would not be adversely affected.
Interpretation: Tata Teleservices has negative interest coverage ratio, that is firm is not making
profits to cover its fixed charges. The firm also has high fixed income charges. The firm needs to
look after its finances to increase earnings. Bharti Airtel and Idea have apt interest coverage
capacity. Reliance high Interest coverage ratio signifies that it has unused debt capacity.
EBITDA MARGIN
Ebitda Margin = EBITDA/ Total Revenue
Page | 41
EBITDA margin measures the extent to which cash operating expenses use up revenue. EBITDA
margin is often more useful than operating margin as it excludes non-cash items such
as depreciation.
Figure 4: EBITDA Margin
Rationale: An approximate measure of a company's operating cash flow based on data from
the company's income statement ,it is calculated by looking at earnings before the deduction of
interest expenses, taxes, depreciation, and amortization. This earnings measure is of particular
interest in cases where companies have large amounts of fixed assets ,high investments and
significant amount of debt financing.. This measure is also of interest to a company's creditors,
since EBITDA is essentially the income that a company has free for interest payments
Interpretation: Telecom industry is expanding and thus has huge investments; it is

characterized by more of debt financing. EBITDA margin Of Bharti Airtel, Idea and Reliance
is good enough but Tata Teleservices EBITDA margin is not satisfactory. Company needs to
enhance its revenues and keep a watch on its expenses.
RETURN ON CAPITAL EMPLOYED:
A test of profitability related to the sources of long term funds.
Page | 42
ROCE = PBIT / (Capital + Reserve + Long Term Liability)
ROCE should always be higher than the rate at which the company borrows; otherwise any
increase in borrowing will reduce shareholders' earnings
Figure 5: Return on Capital Employed
Rationale: Return on Capital Employed (ROCE) is used in finance as a measure of

the returns that a company is realizing from its capital employed. It is commonly used as a
measure for compare assessing whether a business generates enough returns to pay for its cost of
capital. ROCE compares earnings with capital invested in the company. The higher the ratio the
more efficient is the use of capital employed.
Interpretation: Bharti Airtel is market leader and has high ROCE. Tata Teleservices is not
generating revenues from the capital invested in the company. As the company is late entrant in
the market and that also with CDMA technology and cut throat competition presently its
financial health is not good but with tie up with NTT Docomo it is expected to do well in future.
TOTAL ASSET TURNOVER RATIO:
Page | 43
Company Industry Last Change % Mkt Cap Weight
Name Price Chg (Rs cr)
ACC Cement - Major 882.05 -6.20 -0.70 16,577.25 0.65
Bharti Telecommunications - 286.40 -7.95 -2.70 108,761.2 4.27

Airtel Service 6
BHEL Engineering - Heavy 2,402.1 -38.90 -1.59 117,587.6 4.61

0 0
Cipla Pharmaceuticals 313.30 -6.55 -2.05 25,155.53 0.99
DLF Construction & Contracting - 295.10 -9.00 -2.96 50,090.01 1.97

Real Estate
Grasim Diversified 2,611.5 -56.20 -2.11 23,943.62 0.94

5
HDFC Finance - Housing 2,761.1 -31.35 -1.12 79,502.29 3.12

0
HDFC Bank Banks - Private Sector 1,937.1 3.20 0.17 88,669.45 3.48
0
Hero Honda Auto - 2 & 3 Wheelers 1,894.0 8.05 0.43 37,820.81 1.48
0
Page | 44
Hindalco Aluminium 171.05 -4.40 -2.51 32,729.78 1.28
HUL Personal Care 236.10 -0.95 -0.40 51,509.62 2.02
ICICI Bank Banks - Private Sector 913.90 -7.45 -0.81 101,885.7 4.00
Total Asset Turnover = Turnover/ Total Assets 1
The asset turnover ratio simply compares the turnover with the assets that the business has used
to generate that turnover.
Infosys Computers - Software 2,659.0 -16.10 -0.60 152,580.1 5.99
0 2
ITC Cigarettes 259.25 -2.60 -0.99 98,986.23 3.88
Jaiprakash Construction & Contracting - 133.85 -0.55 -0.41 28,400.84 1.11

Asso Civil
Larsen Engineering - Heavy 1,544.1 -3.00 -0.19 92,984.99 3.65

0
Mah and Auto - Cars &Figure

Jeeps 6: Total Asset Turnover
560.50 6.80 1.23 31,367.96 1.23
Mah
Rationale: The total assets turnover ratio measures the use of all assets in terms of sales, by
comparing sales with total assets .In capital-intensive industries Total Asset Turnover ratio is
typically
Maruti less than 1. A
Auto high&Total
- Cars JeepsAsset Turnover ratio might
1,274.9 -19.80imply that the
-1.53 firm does not
36,833.14 1.45
Suzuki 0
generate a sufficient volume of business (sales) given its total asset investment . Also, a high
Total Asset Turnover might be the result of using outdated, obsolete and fully depreciated assets
which does not generate high sales volumes.
NTPC Power - 203.60 -1.40 -0.68 167,877.6 6.59
Generation/Distribution 6
Interpretation: Telecom industry is capital intensive and thus its total asset to turnover ratio is
not high .Tata Teleservices has considerably fair turnover ratio.
ONGC Oil Drilling And Exploration 1,031.0 -20.40 -1.94 220,517.7 8.65
0 6
Reliance Refineries 1,067.1 -13.05 -1.21 348,998.0 13.69

5 0
Page | 45
Reliance Telecommunications - 147.20 -7.50 -4.85 30,382.48 1.19

Comm Service
Reliance Power - 1,015.7 -47.10 -4.43 24,872.70 0.98
Infra Generation/Distribution 5
SNAPSHOT OF THE MARKET

SBI Banks - Public Sector 2,293.0 -13.65 -0.59 145,581.7 5.71
5 6
BSE TOP
Sterlite IndGAINERS
Metals - OF
NonSENSEX
Ferrous 735.55 -20.50 -2.71 61,815.65 2.43
Change
Last w.r.t. Last
Last 43,544.00
Tata Motors Auto - LCVs/HCVs
Scrip Scrip Open High 800.50
Low -13.25 -1.63 1.71
Company Traded Closing Closing
Code Group Price Price Price Price
Price Price
(Rs.) (%)
Tata Power
MahindraPower
& - 1,328.0 -6.90 -0.52 31,514.40 1.24
500520 A 555.00 566.05 551.00
Generation/Distribution 0 558.00 553.70 4.30 0.78
Mahindra
500180 HDFC Bank A 1,940.00 1,950.00 1,917.00 1,947.20 1,933.90 13.30 0.69
532555 NTPC A 205.10 206.00 202.35 205.60 205.00 0.60 0.29
Tata Steel Steel - Large 585.65 -16.10 -2.68 51,971.17 2.04
TCS Computers - Software 757.00 -12.70 -1.65 148,161.6 5.81

3
BSE TOP LOSERS OF SENSEX
Wipro Computers - Software 666.15 -5.45 -0.81 97,804.89 3.84
Scrip Company Scrip Open High Low Last Last Change

Code Group Price Price Price Traded Closing w.r.t. Last
Price Price Closing
Price
(Rs.) (%)
500390 Reliance Infra A 1,065.20 1,067.15 1,006.00 1,010.15 1,062.85 -52.70 -4.96
Reliance
532712 A 155.00 156.00 146.25 147.05 154.70 -7.65 -4.95
Comm
500470 Tata Steel A 605.60 608.80 579.00 581.85 601.75 -19.90 -3.31
500440 Hindalco Inds A 178.00 178.00 168.70 169.70 175.45 -5.75 -3.28
532454 Bharti Airtel A 295.00 296.00 284.70 285.20 294.35 -9.15 -3.11
Page | 46
532868 DLF A 303.00 309.00 293.05 295.00 304.10 -9.10 -2.99
INTERPRETATION OF VARIOUS PARAMETERS

IMPORTANT IN ANALYSING A STOCK
EPS:-
The portion of a company's profit allocated to each outstanding share of common stock. Earnings
per share serves as an indicator of a company's profitability.
Calculated as:
Earnings per share is generally considered to be the single most important variable in
determining a share's price. It is also a major component used to calculate the price-to-earnings
Page | 47
valuation ratio. An important aspect of EPS that's often ignored is the capital that is required to
generate the earnings (net income) in the calculation. Investors also need to be aware of earnings
manipulation that will affect the quality of the earnings number. It is important not to rely on any
one financial measure, but to use it in conjunction with statement analysis and other measures.
P/E RATIO:-
A valuation ratio of a company's current share price compared to its per-share earnings.
Calculated as:
In general, a high P/E suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story
by itself. It's usually more useful to compare the P/E ratios of one company to other companies
in the same industry, to the market in general or against the company's own historical P/E. It
would not be useful for investors using the P/E ratio as a basis for their investment to compare
the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has
much different growth prospects.
The P/E is sometimes referred to as the "multiple", because it shows how much investors are
willing to pay per rupee of earnings. If a company were currently trading at a multiple (P/E) of
20, the interpretation is that an investor is willing to pay rs.20 for rs.1 of current earnings.
BETA:-
A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the

market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that
calculates the expected return of an asset based on its beta and expected market returns..
Beta is calculated using regression analysis, and one can think of beta as the tendency of a
security's returns to respond to swings in the market. A beta of 1 indicates that the security's
price will move with the market. A beta of less than 1 means that the security will be less volatile
Page | 48
than the market. A beta of greater than 1 indicates that the security's price will be more volatile
than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the
market.
DEBT/EQUITY RATIO:-
A measure of a company's financial leverage calculated by dividing its total

liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is
using to finance its assets.
A high debt/equity ratio generally means that a company has been aggressive in financing its
growth with debt. This can result in volatile earnings as a result of the additional interest
expense.
If a lot of debt is used to finance increased operations (high debt to equity), the company could
potentially generate more earnings than it would have without this outside financing. If this were
to increase earnings by a greater amount than the debt cost (interest), then the shareholders
benefit as more earnings are being spread among the same amount of shareholders. However, the
cost of this debt financing may outweigh the return that the company generates on the debt
through investment and business activities and become too much for the company to handle.
This can lead to bankruptcy, which would leave shareholders with nothing.
The debt/equity ratio also depends on the industry in which the company operates. For example,
capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2,
while personal computer companies have a debt/equity of under 0.5.
DIVIDEND PAYOUT RATIO:-
The percentage of earnings paid to shareholders in dividends.
Calculated as:
Page | 49
The payout ratio provides an idea of how well earnings support the dividend payments. More
mature companies tend to have a higher payout ratio.
MARKET CAPITALIZATION:-
The total market value of all of a company's outstanding shares. Market capitalization is
calculated by multiplying a company's shares outstanding by the current market price of one
share. The investment community uses this figure to determining a company's size, as opposed to
sales or total asset figures. Company size is a basic determinant of asset allocation and risk-
return parameters for stocks and stock mutual funds. The term should not be confused with a
company's "capitalization," which is a financial statement term that refers to the sum of a
company's shareholders' equity plus long-term debt.
52 WEEK HIGH/LOW:-
The highest and lowest price at which a stock has traded in the past 12 months, or 52 weeks.
Many investors see the 52-week high or low as an important indicator.
Page | 50
ANALYSIS OF CIPLA:-
EPS 9.99
P/E RATIO 23.92
BETA 0.48
DEBT/EQUITY RATIO 0.22
MARKET CAP 258861.85
DIVIDEND PAYOUT 23.41

RATIO
SALES 49606.00
CURRENT PRICE 313.05
52 WEEK HIGH/LOW 363/211
Page | 51
PRICE CHART OF CIPLA:-
For a medium to longer term investor, Cipla is still a decent and safe bet. The stock is at a 52
week high but there is lot of positive news flow that can come still into the stock. It is going to
commission a new factory next year. It has had a very big capital expenditure plan, which is
finally coming through. It is launching its inhaler in Europe and US and that is a very margin
business again for the company.
It has had good revenue growth over the last few years and it has done quite a lot better than
some of the other companies in its peer group. So from a fundamental prospective, one should
hold on and if one is looking to buy, so now is a good time as any considering there is lot of
positive news flow in pharma stocks as a whole. Market capitalization stands at Rs 258861.85
crore. The company's EPS was at Rs 9.99 per share( an increase from last year at rs. 9.02). The
stock's price-to-earnings (P/E) ratio was 23.92. The latest book value of the company is Rs 54.14
per share. At current value, the price-to-book value of the company was 6.37. The dividend yield
of the company was 0.58%.
The company touched its 52 week high Rs 363.00 and 52 week low Rs 211.
ANALYSIS OF Bharti Airtel :-
EPS 24.82
P/E RATIO 11.70
BETA 0.93
Page | 52

RATIO
SALES 340142.90
PRICE CHART OF BHARTI AIRTEL:-
Bharti Airtel has resistance at Rs 320-330. Bharti Airtel fell a lot, so it has gone through a normal
correction on the upside. There is a significant band of resistance at Rs 320-330 area and Bharti
Airtel could not cross it. That was only to be expected. It is now resuming its downtrend. Bharti
will see much lower levels and the telecom sector is going to see a lot of mayhem. It has not
even started. So one would be better off switching from Bharti to maybe a banking or even
technology or metals. Telecom is not a good idea.
Basically it has bought growth by going into Africa; it was going into a phase where the growth
was not likely to happen. So yes, it has got the new subscriber addition but at the end of the day,
Page | 53
it is going to take about two-three years for it to make money for it to be EPS accretive and that
also if they are able to bring down the operating cost substantially. So one should wait before
entering into the stock and let all the ups and downs happen and maybe six months time is a
good time to re-look at the story and enter into it.
ANALYSIS OF DLF LTD :-
EPS 8.61
P/E RATIO 34
BETA 1.61

RATIO
SALES 28225.93
CURRENT PRICE 295
PRICE CHART OF DLF LTD.
Page | 54
In a tough economic environment over the last few quarters, the company saw demand evaporate
in all segments of real estate business – residential and commercial, sale or leasing. In order to
weather the turbulent times, the Company affected a strategy which allowed itself to be liquid,
whilst it tested the right market conditions where it could attract significantly larger number of
end customers. Value proposition being a key element of this strategy, the Company launched 2
different projects across India in the residential space and demonstrated leadership position
within the industry to bring back demand.
The result of the above was that the Company made notable sales in its affordable housing
segment. In continuation of this strategy in April 2009, DLF also launched its “city-centre”
residential project in Delhi, which saw exuberant response with all 1,356 units booked in just one
day.
The share price has seen a 52-week high of Rs 490.80 and a low of Rs 221 on BSE. Current EPS
& P/E ratio stood at 8.61 and 34 respectively.
DLF has increased rates of its inaugural project in Bangalore named as DLF Westend Heights.
DLF has increased price to Rs 3000/sq ft from its previous price of Rs 1850sq/ft, which was set
up in April.
Page | 55
Increasing input costs was the cause of the price increase explains a company representative.
The project is being formulated in a land region of 27.5 acres.
The project comprises 1980 units spread across 19 towers, which are 18 floors high. Westend
Heights is the initial segment of New Town, with high-rise apartments.
ANALYSIS OF L&T:-
EPS 57.71
P/E RATIO 23.15
BETA 1.27
MARKET CAP 93930.44

RATIO
SALES 339263.70
52 WEEK HIGH/LOW 1800/963.80
PRICE CHART OF L&T:-
Page | 56
Larsen & Toubro Limited (L&T) is a technology-driven engineering and construction
company with a strong presence in manufacturing, services and IT. The company has a presence
in more than 50 countries, and the revenues exceed US $8.5 billion.
L&T is one of the most widely held listed companies in India with FII-holding of 16.4. It has an
uninterrupted Dividend payment record since 1946. In FY 09 it gave a dividend of Rs. 10.5 per
share.
Shares of engineering major Larsen & Toubro were beaten badly after its quarterly sales declined
6 per cent.
L&T's net sales fell to Rs 8139 crore in the December quarter, lower than the corresponding
period a year ago. Its net profit grew 15 per cent to Rs 696 crore over the same period a year
ago.
However, the Water Technology Business Unit of construction major Larsen & Toubro secured
an international order of Rs 850-crore from Public Works Authority, Qatar, for advanced waste
water treatment and urban reuse which makes it an interesting stock to watch.
ANALYSIS OF JAIPRAKASH ASSOCIATES:-
EPS 7.58
Page | 57
P/E RATIO 13.65
BETA 1.66

RATIO
SALES 57641.80
PRICE CHART OF JAIPRAKASH ASSOCIATES:-
JP Associates looks very interesting. It has spent one year in hibernation, so it seems to be
making all the right noises of breaking out upwards from here though it hasn’t yet broken out. It
will probably have a buy on the stock.
The share closed at Rs 157.15, up Rs 4.50, or 2.95%. Market capitalization stands at Rs
33,344.73 crore.
Page | 58
The company touched its 52 week high Rs 180.00 and 52 week low Rs 84.83 on 21 Oct, 2009
and 24 Apr, 2009, respectively. Currently, it is trading -12.69% below its 52-week high and
85.25% above its 52-week low.
The company's trailing 12-month (TTM) EPS was at Rs 8.72 per share. (Dec, 2009). The stock's
price-to-earnings (P/E) ratio was 18.02. The latest book value of the company is Rs 29.39 per
share. At current value, the price-to-book value of the company was 5.35. The dividend yield of
the company was 0.64%.
FINDINGS AND CONLUSION
Investors have been taking shelter with defensive stocks of fast-moving consumer goods
(FMCG) and pharmaceutical companies as the market turns weak in reaction to concerns that
Greece’s grave financial crisis could spread to the rest of the euro zone.
The strategy, according to analysts, is to cushion the fall in value of their portfolios by buying
FMCG and pharma stocks which are relatively less volatile. Shares of GlaxoSmithKline Pharma
(GSK), Lupin and Abbott India scaled new highs while Cipla and Hindustan Unilever (HUL)
were the top gainers among Sensex stocks in a choppy market on Thursday. The buying in some
of these stocks could have also been driven by the fact that they vastly underperformed the
broader market during the recent bull run, analysts say.
When risk-aversion increases in the market, investors tend to move away from high beta stocks
to defensive stocks. Institutional investors usually buy defensive stocks as part of a reshuffling of
their portfolios to minimise losses in a choppy market.
The stock of GSK pharma has gained 13% in the past months, compared to a 5% decline in the
benchmark Sensex. Lupin and Cipla are the other examples of outperformers in the pharma
sector.
Page | 59
A few leading FMCG stocks led by HUL also outperformed the market though analysts are of
the view it is more because of technical factors because, fundamentally, there have been some
concerns about the prospects of the industry.
Factors like growing price competition and high raw material prices have been putting pressure
on margins. Rural demand for consumer goods is also not picking up as expected.
Dalal Street is likely to see a subdued trade for sometime in the absence of any positive trigger
from domestic front and on weak cues from global markets.
Investor sentiment is low at this moment following the debt crisis in Europe that has spooked
markets across the globe. The domestic market has been under pressure in past few trades and in
coming days also the trend is likely to continue.
According to SMC Capitals Equity Head Jagannadham Thunuguntla

"There are a lot of pressure points in market and after a recent rally that has taken the equity
markets ahead of their valuations a correction was due. In the coming period, we will see
downward trading,"
Page | 60
REFERENCES
www.moneycontrol.com
www.yahoofinance.com
www.economictimes.indiatimes.com
www.stockmarkettipsindia.com
www.livemint.com
www.economywatch.com
Page | 61
ANNEXURES
Sample report of Bharti airtel
Page | 62
ANALYSIS OF
BHARTI AIRTEL
Page | 63
COMPANY DETAILS:-
Price Target: Rs.350
Market Cap: 113367.05
P/E : 11.69
52 week high/low: 495/229.50
BSE code : 532454
SHAREHOLDING PATTERN:-
PROMOTER’S HOLDING:
INDIAN PROMOTERS – 45.30%
FOREIGN PROMOTERS – 22.11%
NON PROMOTER’S HOLDING:
INSTITUTIONAL INVESTORS
BANKS FIN.INST. AND INSURANCE – 4.44%
FII’S – 19.58%
PUBLIC INVESTORS – 1.22%
OTHER INVESTORS – 3.90%
Page | 64
PRICE CHART:
Page | 65
FINANCIAL PERFORMANCE :-
PARTICULARS FY2007-08 FY2008-09 COMMENTS
CUSTOMERS 64,268,049 96,649,487 Growth of 50%Y-o-Y

GROSS REVENUE 270,122mn 373,521mn Growth of 38%Y-o-Y
EBITDA 114,018mn 152,858mn Growth of 34%Y-o-Y
PAT 63,954mn 78,590mn Growth of 23%Y-o-Y
GROSS ASSETS 423,224mn 586,616mn Increase by Rs 163,392mn
CAPITAL EXPENDITURE 218,043mn 166,945mn Decline of 25%Y-o-Y
CAPITAL PRODUCTIVITY 63.82% 63.67%
LIQUIDITY:-
As on march 31,2009, the company has cash and bank balance of Rs. 27,660mn and marketable
securities of Rs. 23,422 mn. The company actively manages its short term liquidity to generate
optimum returns via investments made in debt and money market instruments including bank
fixed deposits & certificates of deposits, liquid and income debt fund schemes, fixed maturity
plans and other similar instruments.
DIVIDEND:-
Company paid a final dividend of Rs. 2 per equity share of Rs.10 each(20% of face value) for the
FY 2008-09. The total dividend payout will amount to Rs 4442 mn, including Rs. 645mn as tax
on dividend.
Page | 66
KEY FINANCIALS:
MARCH ' 07MARCH'08 MARCH'09

NET SALES 17851.61 25761.11 34048.32
NET PROFIT 4033.23 6244.19 7743.84
SHARESIN ISSUE(LAKHS) 18959.34 18979.07 18982.4
EPS(Rs) 21.27 32.9 40.79
BOOK VALUE 60.19 106.34 145.01
RETURN ON CAP EMPLOYED(%) 29.06 27.95 28.4
RETURN ON NET WORTH(%) 35.35 30.94 28.13
NET DEBT TO EBITDA 0.58 0.36 0.55
COMPANY BACKGROUND:-
Bharti Airtel formerly known as Bharti Tele-Ventures LTD (BTVL) is the largest cellular
service provider in India, with more than 121 million subscribers as of January 2010. With this,
Bharti is now the world's third-largest, single-country mobile operator and sixth-largest
integrated telecom operator. It also offers fixed line services and broadband services. It offers its
TELECOM services under the Airtel brand and is headed by Sunil Bharti Mittal. The company
also provides telephone services and broadband Internet access (DSL) in top 95 cities in India. It
also acts as a carrier for national and international long distance communication services. The
company has a submarine cable landing station at Chennai, which connects the submarine cable
connecting Chennai and Singapore.
KEY POINTS:-
• INDIA’S MOST INNOVATIVE COMPANY:
According to a survey conducted by the Wall Street Journel Asia, Bharti Airtel is rated as the
most innovative company in India.
Page | 67
As part of the journal’s efforts to determine 200 most admired firms in Asia, Wall Street journal
released list of top 10 Innovative companies in the region. Bharti Airtel holds 4th position in the
region and stood first among the Indian companies in the innovative firms category.
The journal commented Bharti Airtel’s growth as a clear reflection of consumer boom in
the country and appreciated the company for creating unique products for the market and
importing smart ideas from overseas, extending their reach into Indian society and raising
standards of service.
• ACQUISITION BY BRITISH TELECOM:
In 1997, British Telecom acquired a 21.05% equity interest in bharti cellular. Bharti Telecom
and British Telecom formed a 51% : 49% joint venture, Bharti BT Internet for providing Internet
services.
• In 2002, bharti came out with issue of 18.53 crore equity shares through book building
route with a floor price of Rs 45 per share, received bid for 18.55 crore shares. Through
the issue, it becomes the first company in India to come out with 100% book building
issue.
INDUSTRY ANALYSIS:-
Last Price Market Cap. Sales Net Profit Total Assets

(Rs. cr.) Turnover
Bharti Airtel 289.05 109,759.66 34,014.29 7,743.84 35,357.62
Reliance Comm 163.05 33,653.96 13,610.58 2,352.93 82,593.93
Idea Cellular 62.30 19,315.91 9,916.45 1,008.21 18,873.79
Tata Comm 294.70 8,398.95 3,749.43 515.95 9,125.92
MTNL 74.00 4,662.00 4,576.53 214.83 12,059.38
TataTeleservice 24.15 4,581.73 2,041.88 -159.60 2,743.96
Spice Comm 57.20 3,946.37 1,585.34 -1,015.22 1,875.94
Tulip Telecom 919.95 2,667.86 1,608.28 249.58 1,802.84
Nu Tek India 33.25 114.77 159.09 14.48 171.93
Goldstone Infra 27.75 100.12 45.61 6.27 110.56
Page | 68
The Indian telecom sector has seen a phenomenal growth and currently has close to 430mn
telecom customers. The market surpassed the USA to become the second largest market in the
world after china.
Notwithstanding this, the telecom penetration is only 37% with a wireless penetration of 33.7%
and broadband penetration of 0.54%,thereby offering a good growth potential.
Bharti airtel ,with over 96mn customers as on march 31,2009, is the largest integrated telecom
operator in India with investment of Rs 23,489mn, revenues of Rs373,521mn and Rs 78,590mn
in net profits. It is among the top 5 companies in terms of market capitalization in India.
INVESTMENT POSITIVES:-
The Indian growth story continues and the revival of the economy is on its way. There are no
doubts that telecom sector will lead the economic revival and Bharti airtel will be at the
forefront. Bharti airtel is the first private mobile GSM operator to have an all india footprint and
operations in Sri Lanka.
STRONG SUBSCRIBER GROWTH CONTINUES:-
The company continues to focus on subscriber additions in order to increase its market
penetration. The company is currently adding about 46 subscribers every minute. This takes the
company’s total subscriber base to just under 90 million which is about 25% of the country’s
wireless users. The opportunity to increase this base is immense as the country’s tele density
currently is just over 30% as compared to developed countries where teledensity ranges around
80%. This approach by telecom companies to gain market share will boost top line growth as
well as profitability and is also the major growth driver in the industry.
FORAY INTO ELECTRONIC MEDIA BROADCASTING:-
The company provides DSL and telephone services in 15 circles spanning over 95 cities with
growing focus on new media and entertainment solutions such as DTH and IPTV. As on march
Page | 69
31,2009, the company had 2,726,239 customers , a growth of 19.3% , of which 39.3% were
subscribing to broadband/internet services. The revenue from the telemedia services were
Rs.33,426mn, a growth of 17% over the revenues in the previous financial year.
STRATEGIC ALLIANCES TO IMPROVE QUALITY:-
The company is constantly looking forward at providing value added services in order to retain
its subscribers. The company has entered into contracts and strategic alliances with several
market leaders in their respective areas of concentration. The company has a strategic alliance
with Infosys in order to manage its recently launched DTH service. The company has also an
alliance with IBN in order to service its operations in Sri Lanka.
OUTLOOK AND VALUATION:-
Considering the above mentioned investment rationale, the company can be rated an
outperformer. The stock currently trades at a P/E of 11.69.
GLOBAL EXPANSION:-
The telecom sector continues to play an important part in India’s growth story. Bharti airtel with
100 million customers is eminently placed to leverage the benefits of the strong customer trust
that they have been able to build. The addition of new services like DTH and IPTV will ensure
airtel retains and further strengthens its brand leadership.
As a first step towards pursuing the international aspirations, airtel commenced operations in Sri
Lanka. The run away success of the launch has justified the conviction that the airtel business
model can be effectively and profitably replicated in other countries.
Page | 70

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A REPORT

The report is submitted as partial fulfillment of the requirement of MBA Program of

Name of Project Guide: Dr . Vijita Aggarwal

INTRODUCTION TO STOCK MARKET:-......................................................................9

THE MARKET : WHY IT EXISTS?..............................................................................10

INTRODUCTION TO STOCK EXCHANGE:-................................................................11

RISKS INVOLVED IN STOCK MARKET:-....................................................................12

EQUITY RESEARCH : AN OVERVIEW.......................................................................14

OBJECTIVE OF THE PROJECT:-................................................................................15

SCOPE OF THE STUDY:-......................................................................................... 15

LIMITATIONS OF THE STUDY:-................................................................................ 16

SENSEX : AN INDICATOR OF THE INDIAN ECONOMY..............................................20

FII’S INFLOW IN THE INDIAN ECONOMY:-...............................................................22

IMPACT OF UNION BUDGET 2010-11 ON SENSEX..................................................24

SNAPSHOT OF THE MARKET...................................................................................... 46

INTERPRETATION OF VARIOUS PARAMETERS IMPORTANT IN ANALYSING A STOCK. .47

ANALYSIS OF Bharti Airtel :-................................................................................... 52

ANALYSIS OF DLF LTD :-........................................................................................ 54

ANALYSIS OF JAIPRAKASH ASSOCIATES:-...............................................................57

FINDINGS AND CONLUSION...................................................................................... 59

1. India’s top7 drug comp 29

2. Snapshot of the market 48

3. Best top gainers of sensex 49

6. Analysis of Bharti airtel 56

7. Analysis of DLf ltd. 58

9. Analysis of jaiprakash asso. 61

1. Sensex chart from 2006-10 24

2. FII investment in Indian equities 25

3. Porter’s 5 forces model for industry analysis 28

4. Market share of pharma companies 31

6. Market share of telecom companies 38

7. Bar chart depicting the Current ratio 41

8. Bar chart depicting the debt equity ratio 42

9. Bar chart depicting the industry coverage ratio 43

10.Bar chart depicting the EBITDA margin 44

11.Bar chart depicting the ROCE 45

12.Bar chart depicting the total asset turnover ratio 46

13.Price chart of cipla 55

14.Price chart of Bharti airtel 57

15.Price chart of DLF ltd. 58

16.Price chart of L&T 60

17.Price chart of jaiprakash asso. 62

Summer Internship Program is an essential component of the MBA curriculum. It gives

INTRODUCTION TO STOCK MARKET:-

THE MARKET : WHY IT EXISTS?

RISKS INVOLVED IN STOCK MARKET:-

EQUITY RESEARCH : AN OVERVIEW

OBJECTIVE OF THE PROJECT:-

SCOPE OF THE STUDY:-

LIMITATIONS OF THE STUDY:-

• Equity research is done by highly experienced professionals. Therefore it requires

The Economy analysis is important to understand the macro-parameters for investment in a

WORLD ECONOMIC STATISTICS AT A GLANCE

World GDP (PPP): $65 trillion

INDIA ECONOMIC ANALYSIS

Recent macroeconomic developments in India:

SENSEX : AN INDICATOR OF THE INDIAN ECONOMY