A STUDY ON PORTFOLIO ANALYSIS AT ZEBU E-TRADE

Project Report

Submitted in partial fulfillment of requirements for the award of the degree of

Master of Business Administration

SUBMITTED BY
PANDIARAJAN T
(ROLL NO: 17560)
Under the guidance of
MR. D.ABRAHAM PRADEEP
Assistant Professor

RL INSTITUTE OF MANAGEMENT STUDIES

Madurai – 625 022
MARCH 2019

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 R L INSTITUTE OF MANAGEMENT STUDIES

(A Unit of Subbalakshmi Lakshmipathy College of Science)

TVR Nagar, Aruppukottai Road, MADURAI 625 022

An Autonomous Institution and approved by AICTE, New Delhi

BONAFIDE CERTIFICATE

This is to certify that the project report entitled “A STUDY ON PORTFOLIO ANALYSIS AT

ZEBU E-TRADE” is a bonafide record of the project work done by T.PANDIA RAJAN

(ROLL NO: 17560) in partial fulfillment of requirements for the award of Degree of M.B.A

(Master Business Administration)

I certify that the project work carried out by him is an independent work under my
supervision and guidance and this project has not formed the basis for the award of any
Degree / Diploma / Associate ship / Fellowship or similar nature to any Candidate in any
University / Institution earlier.

Submitted for the viva-voce to be held on _____________.

Internal Guide External Examiner

DIRECTOR PRINCIPAL

Place:

Date:

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 DECLARATION

I hereby declare that the project work entitled “A STUDY ON PORTFOLIO ANALYSIS AT

ZEBU E-TRADE” submitted to R.L. Institute of Management Studies, Madurai-22 is a

Record of original work done by me in Madurai and this project has not formed the basis for the

Award of any Degree/Diploma/Associate ship/Fellowship or similar nature to any candidate

in any University/Institution earlier.

Signature of candidate

Course/Year: MBA-2017-2019

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 ACKNOWLEDGEMENT

At the very outset, I dedicate my deepest sense of gratitude to my Parents for

showering on me that blessing and love which have induced me to make this subject as
success.

I would like to express my grateful thanks to our Respected President Dr. R.

Lakshmipathy and our beloved Principal Dr . P.SARAVANAN , for permitting me to do
this project and for their encouragement in my academic career.

I take this opportunity to acknowledge my thanks to Deputy Director Dr. S.

Pugalanthi for all the help to complete the project successfully.

I express my deepest sense of gratitude to MR. D.ABRAHAM PRADEEP for her guidance
and moral support during the project period, because their keen interest and valuable
suggestions have helped me throughout the project. I express my sincere thanks to Zebu E-
Trade. providing me all facilities to carry out my project work in this Organization.

I am thankful to My Friends who are the real supporters of my academic career.

(T.PANDIARAJAN)

Reg.No.17560

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 SYNOPSIS:

S.NO CONTENT PAGE NO

1 Introduction 6
2 Objectives for the Study 8
3 Statement of the problem 9
4 Company profile 10

5 Profile of the Study Area 11

o Fundamental Analysis
i. Economy
ii. Industry
iii. Company
o Technical Analysis
i. RSI
ii. Bollinger Band
iii. Fibonacci Retracement

o Diversified the stocks

6 Methodology 42
7 Findings 74
8 Suggestions 77
9 Conclusion 78
10 Bibliography 79

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1. INTRODUCTION

Now we analysis a Portfolio of investment in only the equity stock basis. An equity
market is a market in which shares are issued and traded, either through exchanges or over-
the-counter markets. Also known as the stock market, it is one of the most vital areas of a
market economy because it gives companies access to capital and investors a slice of
ownership in a company with the potential to realize gains based on its future performance.

Equity markets are the meeting point for buyers and sellers of stocks. The securities
traded in the equity market can be either public stocks, which are those listed on the stock
exchange, or privately traded stocks. Often, private stocks are traded through dealers, which
is the definition of an over-the-counter market.

Trading in the Equity Market

In the equity market, investors bid for stocks by offering a certain price, and sellers
ask for a specific price. When these two prices match, a sale occurs. Often, there are many
investors bidding on the same stock. When this occurs, the first investor to place the bid is the
first to get the stock. When a buyer will pay any price for the stock, he or she is buying
at market value; similarly, when a seller will take any price for the stock, he or she is selling
at market value.

Companies sell stocks in order to get capital . to grow their businesses. When a
company offers stocks on the market, it means the company is publicly traded, and each stock
represents a piece of ownership. This appeal to investors, and when a company does well, its
investors are rewarded as the value of their stocks rise. The risk comes when a company is
not doing well, and its stock value may fall. Stocks can be bought and sold easily and quickly,
and the activity surrounding a certain stock impacts its value. For example, when there is high
demand to invest in the company, the price of the stock tends to rise, and when many
investors want to sell their stocks, the value goes down.

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 The purpose of this text is to provide an overview of the equity market and its role
in the financial system. We start with a brief introduction to the financial system, and then
contrast the equity market with the money and debt markets. A definition of the equity
market is presented and dissected into its elements. The statutory backdrop to equities and the
equity market is presented in brief and the equity derivatives are merely mentioned for the
sake of completeness.

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 2.Objectives for the Study

o To make an analysis on portfolio management

o To arrive a simple procedures to compile a portfolio for retail investors
o To research an risk factors involved in portfolio building
o To understand the returns on the portfolio.

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3.Statement of the Problem

o Portfolio analysis is the most important tool of the investment objectives. The analysis
helps for a proper diversification in selecting the portfolio
o After diversification the stocks to build the portfolio should analysis the fundamental
And technical view we get a more accurate probability of how much taken the risk
Level and obviously the best return also.
o A Technical analysis and the fundamental analysis is been done to select the stocks in a
diversified manner taking into the consideration of this factor and return.
o As a diversification is the key important the unsystematic risk also consider to
curtail risk

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4.Company Profile

Incorporated in 2017, Zebu e-trade is one of India's fast growing financial services

company provides stock broking and research advisory services.

They offer Customized investment solutions to corporate, institutions and individual investors

through its wide network of offices. Using their combine account facility one can trade

in Equities, Derivatives, Currency, Commodity, invest in IPOs, Mutual funds, Insurance under one roof.

At Zebu, we are groomed to play by the rules. We respect wealth as much as you do.

Application Name: NEST ( Terminal)

Our Registration Number: NSE / BSE / MCX / SEBI : INZ000174634

CDSL : 12080400

AMFI ARN : 113118

Research Analyst : INH200006044

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5.Profile of the Study Area

Fundamental Analysis

1. Economy analysis

Let we start the part of fundamental analysis Economy analysis. That means we analysis the our

country economy.

The Indian economy expanded 7.7 percent year-on-year in the first three months of 2018, higher

than a downwardly revised 7 percent advance in the previous quarter and beating market forecasts

of a 7.3 percent growth. It is the highest growth rate since the second quarter of 2016, boosted

by a jump in investment.

GDP : $2.948 TRILLION (7.2% (Q4, 2018-19))

PPP: 10.685 TRILLION ( THIRD PLACE IN THE WORLD)

Seven of the world’s top 10 economies by 2030 will likely be current emerging markets.

The prediction for a shake-up of the world’s gross domestic product rankings comes in new
long-term forecasts by Standard Chartered Plc, which includes a for China to become the
largest economy by 2020,using purchasing power parity exchanges rate and nominal GDP
India will likely be larger than the U.S. in the same time period while Indonesia will break
into the top 5 economies.

They project trend growth for India to accelerate to 7.8 percent by the 2020s while China’s
will moderate to 5 percent by 2030 reflecting a natural slowdown given the economy’s size.

Asia’s share of global GDP, which rose to 28 percent last year from 20 percent in 2010, will
likely reach 35 percent by 2030 -- matching that of the euro area and U.S. combined.

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Here are some other findings from Standard Chartered’s economists:

o Waning reform momentum in emerging markets weighs on productivity growth.

o The end of the quantitative easing era may mean more pressure on economies to
reform and revive productivity trends.
o The middle-class is at a tipping point, with a majority of the world’s population
entering that income group by 2020.
o Middle-class growth driven by urbanization and education should help counter the
effects of the rapid population aging trend in many economies, including Chi…

o In the first 40 years of independence, the country hardly grew at 3.5 per cent and
today, 7-8 per cent is the norm, Garg said at a function to mark the platinum jubilee
celebrations of the Institute of Cost Accountants of India.
o “Eight per cent growth is very much achievable... If we keep that... we can look
forward to be an Indian economy of $10 trillion, which will be the third-largest
economy in the world," Garg said.
o What Garg said is a possibility, at least theoretically. According to the World
Bank data, India had a GDP of $2.59 trillion in 2017, higher than $2.58 trillion of
France.
o If India grows at 8 per cent a year at constant prices on average, the economy could
expand to over 10 trillion by 2028 itself. This would be subject to the assumption of 4
per cent inflation rate a year, which is also the target range of the Reserve Bank of
India.
o The 4 per cent inflation rate would make the economy grow by 12 per cent a year at
the current prices. If the inflation rate turns out to be higher, then the target would be
met sooner.
o If the economy grows by 7 per cent a year on average, it would cross 10- trillion mark
by 2030, subject to 4 per cent inflation rate a year.

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 INDIAN ECONOMIC DEVELOPMENT & GROWTH REPORT

During November 2018, production of eight core infrastructure industries grew by 3.5 per
cent year-on-year, as compared to 6.9 per cent growth in November 2017. The growth of
eight core industries during April–November 2018 was 5.1 per cent, as compared to 3.9 per
cent growth during April-November 2017.
Overall year-on-year growth in the Index of Industrial Production (IIP) was 0.5 per cent in
November 2018, which was at 8.5 per cent in November 2017. During April–November
2018, IIP growth stood at 5.0 per cent as compared to growth of 3.1 per cent during April–
November 2017.
Foreign exchange reserves stood at US$ 393.4 billion as on December 28, 2018, as compared
to US$ 424.5 billion at end March 2018.
For the fortnight ended on December 21, 2018, Broad money supply (M3) grew by 10.2 per
cent year-on-year, as compared to a growth of 10 per cent recorded in the corresponding
period in the previous year.
Wholesale Price Inflation (WPI) decreased to 3.8 per cent in December 2018 from 4.6 per
cent in November 2018. Consumer Price Inflation (CPI) as per new series (combined)
decreased to 2.2 per cent in December 2018 from 2.3 per cent in November 2018.
Gross Tax Revenue (GTR) collection grew by 7.1 per cent year-on-year in April-November
2018 to Rs 1,164,685 crore (US$ 166.55 billion).
Provision estimates of (GDP) released by the Central Statistics Office (CSO), estimated the
growth rate of GDP at constant (2011-12) market prices for Q2 FY 2018-19 at 7.1 per cent.
As per the quarterly estimates, the growth of Gross Domestic Product (GDP) at constant
(2011-12) market prices stood at 7.1 per cent, during July-September 2018.
The growth of Gross Value Added (GVA) at constant (2011-12) basic prices for agriculture
and allied sectors, industry sector and services sector are estimated at 3.8 per cent, 7.8 per
cent and 7.3 per cent respectively for 2018-19.

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IMF REPORT FOR THE WORLD GDP

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15
INFLATION

Inflation is a quantitative measure of the rate at which the average price level of a basket

of selected goods and services in an economy increases over a period of time. Often expressed

as a percentage, inflation indicates a decrease in the purchasing power of a nation’s currency.

As prices rise, they start to impact the general cost of living for the common public and the

appropriate monetary authority of the country, like the central bank, then takes the necessary

measures to keep inflation within permissible limits and keep the economy running smoothly.

Inflation is measured in a variety of ways depending upon the types of goods and services

considered, and is the opposite of deflation which indicates a general decline occurring in prices

for goods and services when the inflation rate falls below 0 percent.

Definition and Example of Inflation

Inflation is an economic term that refers to an environment of generally rising prices

of goods and services within a particular economy. As general prices rise, the purchasing
power of the consumer decreases. The measure of inflation over time is referred to as the
inflation rate. In common terminology, many people may refer to inflation as "the cost of
living."

For example, prices for many consumer goods are double that of 20 years ago. When you
hear your grandparents recall, "A movie and a bag of popcorn only cost $1.00 when I was
your age," they are making an observation about inflation--the cost of goods and services--
over time.

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The inflation of the our country :

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Monetary Policy:

Monetary policy is the process by which the monetary authority of a country, typically
the central bank or currency board, controls either the cost of very short-term borrowing or
the monetary base, often targeting an inflation rate or interest rate to ensure price stability and
general trust in the currency. Further goals of a monetary policy are usually to contribute to
the stability of gross domestic product, to achieve and maintain low unemployment, and to
maintain predictable exchange Statutory liquidity ratio (SLR) is the Indian government term
for the reserve requirement that the commercial banks in India are required to maintain in the
form of cash, gold reserves, RBI approved securities before providing credit to the customers.
Statutory liquidity ratio is determined by Reserve Bank of India maintained by banks
in order to control the expansion Go to the safe zone The SLR is determined by a
percentage of total demand and time liabilities. Time liabilities refer to the liabilities
which the commercial banks are liable to pay to the customers after a certain period
mutually agreed upon, and demand liabilities are such deposits of the customers which are
payable on demand. An example of time liability is a six month fixed deposit which is
not payable on demand but only after six months. An example of demand liability is a
deposit maintained in a saving account or current account that is payable on demand
through a withdrawal form such as a cheque rates with other currencies.

Monetary economics provides insight into how to craft an optimal monetary policy.
In developed countries, monetary policy has generally been formed separately from fiscal
policy, which refers to taxation, government spending, and associated borrowing.

Monetary policy is referred to as being either expansionary or contractionary. Expansionary

policy occurs when a monetary authority uses its tools to stimulate the economy. An
expansionary policy maintains short-term interest rates at a lower than usual rate or increases
the total supply of money in the economy more rapidly than usual. It is traditionally used to
try to combat unemployment in a recession by lowering interest rates in the hope that less
expensive credit will entice businesses into expanding. This increases aggregate demand (the
overall demand for all goods and services in an economy), which boosts short-term growth as
measured by gross domestic product (GDP) growth. Expansionary monetary policy usually
diminishes the value of the currency relative to other currencies (the exchange rate). The
opposite of expansionary monetary policy is contractionary monetary policy, which maintains
short-term interest rates higher than usual or which slows the rate of growth in the money

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supply or even shrinks it. This slows short-term economic growth and lessens inflation.
Contractionary monetary policy can lead to increased unemployment and depressed
borrowing and spending by consumers and businesses, which can eventually result

in an economic recession if implemented too vigorously

The central bank influences interest rates by expanding or contracting the monetary base,
which consists of currency in circulation and banks' reserves on deposit at the central bank.
Central banks have three main tools of monetary policy: open market operations, the discount
rate and the reserve requirements.

Repo Rate:

Definition of 'Repo Rate' Definition: Repo rate is the rate at which the central bank of
a country (Reserve Bank of India in case of India) lends money to commercial banks in the
event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.

Reverse Repo Rate:

Definition of 'Reverse Repo Rate' Definition: Reverse repo rate is the rate at which the central

bank of a country (Reserve Bank of India in case of India) borrows money from commercial

banks within the country. It is a monetary policy instrument which can be used to control the

money supply in the country.

Bank Rate

The bank rate, also known as the discount rate, is the rate of interest charged by the RBI for

Providing funds or loans to the banking system. This banking system involves commercial and

Co-operative banks, Industrial Development Bank of India, IFC, EXIM Bank, and other approved

financial institutions. Funds are provided either through lending directly or discounting or buying

money market instruments like commercial bills and treasury bills. Increase in bank rate increases

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the cost of borrowing by commercial banks which results in the reduction in credit volume to the

banks and hence the supply of money declines. Increase in the bank rate is the symbol of

tightening of RBI monetary policy. As of 1st August 2018, the bank rate is 6.5 percent.

SLR

SLR is used by bankers and indicates the minimum percentage of deposits that the bank has
to maintain in form of gold, cash or other approved securities. Thus, we can say that it is ratio
of cash and some other approved liability (deposits). It regulates the credit growth in India.

The liabilities that the banks are liable to pay within one month's time, due to completion of
maturity period, are also considered as time liabilities. The maximum limit of SLR is 40%
and minimum limit of SLR is 0 In India, Reserve Bank of India always determines the
percentage of SLR.

There are some statutory requirements for temporarily placing the money in government
bonds. Following this requirement, Reserve Bank of India fixes the level of SLR. However,
as most banks currently keep an SLR higher than required (>26%) due to lack of credible
lending options, near term reductions are unlikely to increase liquidity and are more
symbolic.

The SLR is fixed for a number of reasons. The chief driving force is increasing or decreasing
liquidity which can result in a desired outcome. A few uses of mandating SLR are:

 Controlling the expansion of bank credit. By changing the level of SLR, the Reserve
Bank of India can increase or decrease bank credit expansion.
 Ensuring the solvency of commercial banks
 By reducing the level of SLR, the RBI can increase liquidity with the commercial banks,
resulting in increased investment. This is done to fuel growth and demand.
 Compelling the commercial banks to invest in government securities like government
bonds

If any Indian bank fails to maintain the required level of the statutory liquidity ratio, then it
becomes liable to pay penalty to Reserve Bank of India. The defaulter bank pays penal
interest at the rate of 3% per annum above the bank rate, on the shortfall amount for that
particular day. However, according to the Circular released by the Department of Banking
Operations and Development, Reserve Bank of India, if the defaulter bank continues to

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default on the next working day, then the rate of penal interest can be increased to 5% per
annum above the bank rate. This restriction is imposed by RBI on banks to make funds
available to customers on demand as soon as possible. Gold and government securities (or
gilts) are included along with cash because they are highly liquid and safe assets.

The RBI can increase the SLR to control inflation, suck liquidity in the market, to tighten the
measure to safeguard the customers' money. Decrease in SLR rate is done to encourage
growth. In a growing economy banks would like to invest in stock market, not in government
securities or gold as the latter would yield less returns. One more reason is long term
government securities (or any bond) are sensitive to interest rate changes. However, in an
emerging economy, interest rate change is a common activity.

CRR

In order to determine the base rate, the Cash Reserve Ratio acts as one of the reference rates.
Base rate means the minimum lending rate which is determined by the Reserve Bank of India
(RBI) and no bank is allowed to lend funds below this rate. This rate is fixed to ensure
transparency with respect to borrowing and lending in the credit market. The Base Rate also
helps the banks to cut down on their cost of lending so as to be able to extend
affordable loans.

Apart from this, there are two main objectives of Cash Reserve Ratio:

1. Cash Reserve Ratio ensures that a part of the bank’s deposit is with the Central Bank and is
hence, safe

2. Another objective of CRR is to keep inflation under control. During high inflation in the
economy, RBI raises the CRR to lower the bank’s loanable funds.

How does Cash Reserve Ratio work?

When the RBI decides to increase the Cash Reserve Ratio, the amount of money that is
available with the banks reduces. This is the RBI’s way of controlling the excess supply of
money. The cash balance that is to be maintained by scheduled banks with the RBI should not
be less than 4% of the total NDTL, which is the Net Demand and Time Liabilities. This is
done on a fortnightly basis.

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NDTL refers to the total demand and time liabilities (deposits) that is held by the banks. It
includes deposits of the general public and the balances held by the bank with other
banks. Demand deposits consist of all liabilities which the bank needs to pay on demand like
current deposits, demand drafts, balances in overdue fixed deposits and demand liabilities
portion of savings bank deposits.

Time deposits consist of deposits that need to be repaid on maturity and where the depositor
can’t withdraw money immediately; instead, he is required to wait for a certain time period to
access the funds. It includes fixed deposits, time liabilities portion of savings bank deposits
and staff security deposits. The liabilities of a bank include call money market borrowings,
certificate of deposits and investment in deposits other banks.

In short, higher the Cash Reserve Ratio, lesser is the amount of money available to banks for
lending and investing.

How does CRR affect the economy?

Cash Reserve Ratio (CRR) is one of the components of the monetary policy of the RBI which
is used to regulate the money supply, level of inflation and liquidity in the country. The
higher the CRR, the lower is the liquidity with the banks and vice-versa.

During high levels of inflation, attempts are made to reduce the money supply in the
economy. For this, RBI increases the CRR, sucking the loanable funds available with the
banks. This, in turn, slows down investment and reduces the supply of money in the
economy. As a result, the growth of the economy is negatively impacted. However, this also
helps bring down inflation.

On the other hand, when the RBI needs to pump funds into the system, it lowers CRR which
increases the loanable funds with the banks. The banks thus extend a large number of loans to
the businesses and industry for different investment purposes. It also increases the overall
supply of money in the economy. This ultimately boosts the growth rate of the economy.

Difference between CRR & SLR

Both CRR & SLR are the components of the monetary policy. However, there are a few
differences between them. The following table gives a glimpse into the dissimilarities:

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Statutory Liquidity Ratio (SLR) Cash Reserve Ratio (CRR)

In case of SLR, banks are asked to have reserves of liquid The CRR requires banks to have only
assets which include both cash and gold. cash reserves with the RBI

Banks earn returns on money parked as SLR Banks don't earn returns on money parked
as CRR

SLR is used to control the bank's leverage for credit The Central Bank controls the liquidity in
expansion. the Banking system with CRR.

In case of SLR, the securities are kept with the banks In CRR, the cash reserve is maintained by
themselves which they need to maintain in the form of the banks with the Reserve Bank of India.
liquid assets.

Why is Cash Reserve Ratio changed regularly?

In accordance with the RBI guidelines, every bank is decreed to maintain a ratio of their total
deposits that can also be held with currency chests. This is considered to be the same as it is
kept with the RBI. This ratio can be changed by the RBI from time to time in regular
intervals. When this ratio is changed, it impacts the economy.

For banks, profits are made by lending. In pursuit of this goal, banks may lend out to the max
to make higher profits and have very less cash with them. In such a scenario, if there is an
unexpected rush by the customers to withdraw their deposits, the banks will not be in a
position to meet all the repayment needs. Therefore, CRR is vital to ensure that there is
always a certain fraction of all the deposits in every bank, kept safe with them. RBI curbs
these issues with the help of the CRR.

While ensuring liquidity against deposits is the prime function of the CRR, it has an equally
important role in controlling interest rates in the economy. The RBI controls the short-term
volatility in the interest rates by adjusting the amount of liquidity available in the system. Too

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much availability of cash leads to the fall in rates while the scarcity of it leads to a sudden rise
in rates, both of which are unhealthy for the economy.

Thus, as a depositor, it is good for you to know of the CRR prevailing in the market that
ensures that regardless of the performance of the bank, a certain percentage of your cash is
safe with the RB

FII activity in our country:

In our stock market has rise a volatility FII contribution is big role because FII invest in huge

Money In our market. The FII investment details can such as:

INR crores
Financial Year
Equity Debt Hybrid Total

1992-93 13 0 0 13

1993-94 5127 0 0 5127

1994-95 4796 0 0 4796

1995-96 6942 0 0 6942

1996-97 8546 29 0 8575

1997-98 5267 691 0 5958

1998-99 -717 -867 0 -1584

1999-00 9670 453 0 10122

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2000-01 10207 -273 0 9933

2001-02 8072 690 0 8763

2002-03 2527 162 0 2689

2003-04 39960 5805 0 45765

2004-05 44123 1759 0 45881

2005-06 48801 -7334 0 41467

2006-07 25236 5605 0 30840

2007-08 53404 12775 0 66179

2008-09 -47706 1895 0 -45811

2009-10 110221 32438 0 142658

2010-11 110121 36317 0 146438

2011-12 43738 49988 0 93726

2012-13 140033 28334 0 168367

2013-14 79709 -28060 0 51649

2014-15 111333 166127 0 277461

2015-16 -14172 -4004 0 -18176

2016-17 55703 -7292 0 48411

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2017-18 25635 119036 11 144682

2018-19 -49249 -50271 -116 -99636

Total 837340 364003 -105 1201235

INDUSTRY ANALYSIS:

Industry analysis is a tool that facilitates a company's understanding of its position relative to
other companies that produce similar products or services. Understanding the forces at work
in the overall industry is an important component of effective strategic planning. Industry
analysis enables small business owners to identify the threats and opportunities facing their
businesses, and to focus their resources on developing unique capabilities that could lead to
a competitive advantage.

An industry analysis consists of three major elements:

o The underlying forces at work in the industry;

o The overall attractiveness of the industry;
o The critical factors that determine a company's success within the industry.

THE IMPORTANCE OF INDUSTRY ANALYSIS

A comprehensive industry analysis requires a small business owner to take an

objective view of the underlying forces, attractiveness, and success factors that determine the
structure of the industry. Understanding the company's operating environment in this way can
help the small business owner to formulate an effective strategy, position the company for
success, and make the most efficient use of the limited resources of the small business. "Once
the forces affecting competition in an industry and their underlying causes have been
diagnosed, the firm is in a position to identify its strengths and weaknesses relative to the
industry," Porter wrote. "An effective competitive strategy takes offensive or defensive action
in order to create a defendable position against the five competitive forces." Some of the
possible strategies include positioning the firm to use its unique capabilities as defense,
influencing the balance of outside forces in the firm's favor, or anticipating shifts in the

26
underlying industry factors and adapting before competitors do in order to gain a competitive
advantage.

Porter's five forces

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Company Analysis

Company analysis is a process carried out by investors to evaluate securities,

collecting info related to the company’s profile, products and services as well as profitability.
It is also referred as ‘fundamental analysis.’ A company analysis incorporates basic info
about the company, like the mission statement and apparition and the goals and values.
During the process of company analysis, an investor also considers the company’s history,
focusing on events which have contributed in shaping the company.

Also, a company analysis looks into the goods and services proffered by the company.
If the company is involved in manufacturing activities, the analysis studies the products
produced by the company and also analyzes the demand and quality of these products.
Conversely, if it is a service business, the investor studies the services put forward.

The company analysis can such as

 Balance Sheet analysis
 Financial statement analysis
 Business evolution
 EPS
 P/E Ratio
 Book value
 Dividend yield
 Return on Capital Employed.

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TECHNICAL ANALYSIS
Technical analysis is a trading discipline employed to evaluate investments
and identify trading opportunities by analyzing statistical trends gathered from trading
activity, such as price movement and volume. Unlike fundamental analysts, who attempt to
evaluate a security's intrinsic value, technical analysts focus on patterns of price movements,
trading signals and various other analytical charting tools to evaluate a security's strength or
weakness.

Technical analysis can be used on any security with historical trading data. This
includes stocks, futures, commodities, fixed-income, currencies, and other securities. In this
tutorial, we’ll usually analyze stocks in our examples, but keep in mind that these concepts
can be applied to any type of security. In fact, technical analysis is far more prevalent in
commodities and forex markets where traders focus on short-term price movements.

Technical analysis is we have using in indicators can such as:

i. Relative Strength Index
ii. Bollinger band
iii. Fibonacci Retracement

RELATIVE STRENGTH INDEX

The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum

oscillator that measures the speed and change of price movements. The RSI oscillates
between zero and 100. Traditionally the RSI is considered overbought when above 70 and
oversold when below 30. Signals can be generated by looking for divergences and failure
swings. RSI can also be used to identify the general trend.

RSI = 100 – [100 / (1 + (Average of Upward Price Change / Average of Downward Price
Change ) ) ]

The formula using in a stock price model below…

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30
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Bollinger band
Bollinger Bands are a powerful technical indicator created by John Bollinger. Some
traders will swear trading a Bollinger Bands strategy is key to their success (if you meet
people like this be wary). There are no holy grails or free lunches in the business of
trading).

The bands encapsulate the price movement of a stock. It provides relative boundaries of
highs and lows. The crux of the Bollinger Band indicator is based on a moving average
that defines the intermediate-term "trend" based on the time frame you are viewing.

This trend indicator is known as the middle band. Most stock charting applications use a
20-period moving average for the default settings. The upper and lower bands are then a
measure of volatility to the upside and downside. They are calculated as two standard
deviations from the middle band.

Bollinger Bands Calculation:

Upper Band = Middle band + 2 standard deviations

Middle Band = 20-period moving average (most charting packages use the simple
moving average)

Lower Band = Middle band - 2 standard deviations.

A Bollinger Band® is a technical analysis tool defined by a set of lines plotted two standard
deviations(positively and negatively) away from a simple moving average (SMA) of the
security's price, but can be adjusted to user preferences. Bollinger Bands® were developed
and copyrighted by famous technical trader John Bollinger,

In the chart depicted below, Bollinger Bands bracket the 20-day SMA of the stock with an
upper and lower band along with the daily movements of the stock's price. Because standard

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deviation is a measure of volatility, when the markets become more volatile the bands widen;
during less volatile periods, the bands contract.

Key Takeaways

 Bollinger Bands are a technical analysis tool developed by John Bollinger.

 There are three lines that compose Bollinger Bands: A simple moving average
(middle band) and an upper and lower band.
 The upper and lower bands are typically 2 standard deviations +/- from a 20-day
simple moving average, but can be modified.

How To Calculate Bollinger Bands

The first step in calculating Bollinger Bands is to compute the simple moving average
of the security in question, typically using a 20-day SMA. A 20-day moving average would
average out the closing prices for the first 20 days as the first data point. The next data point
would drop the earliest price, add the price on day 21 and take the average, and so on. Next,
the standard deviation of the security's price will be obtained. Standard deviation is a
mathematical measurement of average variance and features prominently in statistics,
economics, accounting and finance. For a given data set, the standard deviation measures how
spread out numbers are from an average value. Standard deviation can be calculated by taking
the square root of the variance, which itself is the average of the squared differences of
the mean. Next, multiply that standard deviation value by two and both add and subtract that
amount from each point along the SMA. Those produce the upper and lower bands.

The Squeeze
The squeeze is the central concept of Bollinger Bands. When the bands come close
together, constricting the moving average, it is called a squeeze. A squeeze signals a period of
low volatility and is considered by traders to be a potential sign of future increased volatility
and possible trading opportunities. Conversely, the wider apart the bands move, the more
likely the chance of a decrease in volatility and the greater the possibility of exiting a trade.

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However, these conditions are not trading signals. The bands give no indication when the
change may take place or which direction price could move.

Breakouts
Approximately 90% of price action occurs between the two bands. Any breakout
above or below the bands is a major event. The breakout is not a trading signal. The mistake
most people make is believing that that price hitting or exceeding one of the bands is a signal
to buy or sell. Breakouts provide no clue as to the direction and extent of future price
movement.

Limitations of Bollinger Bands

Bollinger Bands are not a standalone trading system. They are simply one indicator
designed to provide traders with information regarding price volatility. John Bollinger
suggests using them with two or three other non-correlated indicators that provide more direct
market signals. He believes it is crucial to use indicators based on different types of data.
Some of his favored technical techniques are moving average
divergence/convergence (MACD), on-balance volume and relative strength index (RSI).

Because they are computed from a simple moving average, they weight older price
data the same as the most recent, meaning that new information may be diluted by outdated
data. Also, the use of 20-day SMA and 2 standard deviations is a bit arbitrary and may not
work for everyone in every situation. Traders should adjust their SMA and standard deviation
assumptions accordingly and monitor them.

The bottom line is that Bollinger Bands are designed to discover opportunities that
give investors a higher probability of success.

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Bollinger Band curve:

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FIBONACCI RETRACEMENT

Fibonacci sequence

Fibonacci retracement is a very popular tool used by many technical traders to

help identify strategic places for transactions to be placed, target prices or stop losses.
The notion of retracement is used in many indicators such as Tirone levels, Gartley
patterns, Elliott Wave theory and more. After a significant price movement up or
down, the new support and resistance levels are often at or near these lines.

The Fibonacci sequence is simply beginning with the numbers 0 and 1, and then each
number after that is the sum of the previous two. So …

0+1=1

Then you take the sum of the last 2 numbers of the above equation and add them:

1+1=2

Then you take the sum of the last 2 numbers of the above equation and add them:

1+2=3

Then you take the sum of the last 2 numbers of the above equation and add them:

2+3=5

Then you take the sum of the last 2 numbers of the above equation and add them:

3+5=8

Then you take the sum of the last 2 numbers of the above equation and add them:

5 + 8 = 13

Then you take the sum of the last 2 numbers of the above equation and add them:

8 + 13 = 21

… and on it goes to infinity!

The Fibonacci sequence of numbers is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89,
144, etc.

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 Each term in this sequence is simply the sum of the two preceding terms and sequence
continues infinitely. One of the remarkable characteristics of this numerical sequence
is that each number is approximately 1.618 times greater than the preceding number.
This common relationship between every number in the series is the foundation of the
common ratios used in retracement studies.

Retracements

A retracement is a pullback within the context of a trend

Dip

After a rise from 0 to 1, short term market participants start to take profit. This
drives the price lower until such a point that the bulls, sensing the price is better
value, enter the market again at point 2 and hence “Buy the Dip” enabling the
market to continue in the direction of the trend.

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Rally

Conversely, after a fall from 0 to 1, the shorts take profits thus causing a brief rally
taking the price higher until point 2. At point 2, fresh shorts enter the market
overcoming the shorter term bulls and driving the price lower in the direction of the
main trend. Hence the term “Sell on Rally”.

The most popular type of retracement used in the Forex market is,
undoubtedly, the Fibonacci retracement. Popular Fibonacci retracements are
25%, 38.2%, 50%, 61.2% and 78.6%.

Fibonacci ratios

Fibonacci ratios are mathematical relationships, expressed as ratios, derived from the
Fibonacci sequences.

The key Fibonacci ratios are 0%, 23.6%, 38.2%, 50%, 61.8% and 100%.

Notice how the down leg retraces 61.8% of the first up leg, 1.2970-1.3470, before
continuing with the trend upwards.

In general, the larger retracements are found at the start and end of a trend as the
market is deciding whether or not the previous trend has finished, maybe ranging a
little before starting the next trend. Once more and more market participants realise
that a new trend is in place, the retracements of the previous leg become smaller in

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depth with 38.2% and 50% being the most common. As the trend appears to run
out of steam, the market becomes undecided and starts to take profit thus causing a
deeper retracement of the previous leg eg. 61.8% or 78.6%

Extensions

Extensions are used to project where a price may go to and are useful for
calculating target prices when entering a trade

As with retracements, the most popular type of extension used in the Forex market
is the Fibonacci extension. The extensions that provide the most commonly used
projections are 61.8%, 100%, 161.8% and 261.8%

How to Use

In the example below, each one of the Fibonacci extensions represents a potential
target when entering a trade. Once a pullback is in place at point 2, we can
calculate the potential targets using Fibonacci extensions. Our initial targets will be
100% at 103.85 and 161.8% at 104.78. Further out our target will be 261.8% at
106.28. The stronger the trend, the greater the chance that the targets will be
achieved

In a trending market, the shallower the retracement the stronger the trend.

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40
DIVERSIFIED STOCKS:

o Infosys
o LIC Housing Finance Ltd
o Hindustan Aeronautics Ltd
o Ashok Leyland
o Tata Motors
o Apollo tyres
o Ultra tech cement
o Britannia Industries Ltd
o ONGC Ltd
o TATA Steel Ltd

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6.METHODOLOGY
Diversified stocks:

INFOSYS
 P/E Ratio- 21.46
 Book value – 148.75
 Dividend yield – 2.96%
 Return on Capital Employed – 29.52%

Profit and loss statement:

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Balance sheet

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Technical analysis of INFOSYS

Stock Recommendation :
Fundamental and technical view of the stock is good. As the industry is IT Sector the stock
prize depends on the US DOLLOR
The stock is recommended fora buy and hold for minimum period of one year. According to
the fundamental analysis and technical analysis is the stock prize can grow upward for more
than around Rs.150 to 200 in a year

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LIC HOUSING FINANCE:
 P/E Ratio- 10.34
 Book value – 301
 Dividend yield – 1.46%
 Return on Capital Employed – 9.6%

Profit and Loss statement:

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46
Technical Analysis:

Stock Recommendation:
In the view of fundamental and technical analysis short term and long term investment in this
stock may give a very good return in the future.
The stock is recommended for a buy and hold for a minimum period of one year according to
the fundamental analysis and technical analysis is the stock prize can increase around 20 to 25
% in a year

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Hindustan Aeronautics Ltd

 P/E Ratio- 9.86

 Book value – 377.45
 Dividend yield – 4.90%
 Return on Capital Employed –25.16 %
Profit and Loss statement:

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Balance sheet

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Technical Analysis:
Graph in weekly

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Graph in day basic

Stock Recommendation :
Through the stock looks fundamentally good the technical view is not favoring the uptrend in
the recent time. But the stock now had won a major order from a government to make 126
aircraft which gives a positive outlook for a near term uptrend which may yield around
20 to 25 % growth in the stock value in a year.

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ASHOK LEYLAND LTD

 P/E Ratio- 12.60

 Book value – 24
 Dividend yield – 2.86%
 Return on Capital Employed – 28.40%

Profit and Loss statement:

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53
Technical Analysis:

Stock Recommendation:
When analyzing the RSI, Bollinger Band and Fibonacci Retracement the stock shows a strong
support level at Rs.80
The stock may be included in this Portfolio and expect a decent return in one year period.

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TATA MOTORS:

 P/E Ratio- 53.28

 Book value – 302.81
 Dividend yield – 0%
 Return on Capital Employed – 80.55%

Profit and Loss statement:

55
Balance Sheet:

56
Technical Analysis:

Stock Recommendation:
Fundamentally the TATA group management is well acclaimed management in our country
TATA vehicles are in a benchmark position in our country But the management facing loss in
Jaguar Limited sales which poses a huge fall in the market. Despite the situation there are
huge investments by the FIIs and DIIs seen in the stock.
Hence a buy in this stock to be added in the portfolio, will get good returns in the future

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APOLLO TYRES:

 P/E Ratio- 13.26

 Book value – 176.20
 Dividend yield – 1.40%
 Return on Capital Employed – 9.45%

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Balance Sheet:

Cash Flows:

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Technical Analysis:

Stock Recommendation:
When analyzing the RSI, Bollinger Band and Fibonacci Retracement the stock shows a strong
support level at Rs.200
The stock may be included in this Portfolio and expect a decent return in one year period.

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ULTRA TECH CEMENT:

 P/E Ratio- 52.30

 Book value – 988.65
 Dividend yield – 0.27%
 Return on Capital Employed – 12.11%
Profit and Loss Statement:

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Balance sheet

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Technical Analysis:

Stock Recommendation:
The RSI indicator had never breached below 40 in the past 10 years. Now since the
stock once again touched the 40 levels there is a definite up trend is envisaged. Also the
fundamental and technical analysis show a positive trend in the stock. A positive return
around 25 to 30% is seen if the stock is purchased at the current level and kept for one year.

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BRITANNIA INDUSTRIES LTD:

 P/E Ratio- 65.34

 Book value – 152.08
 Dividend yield – 0.41%
 Return on Capital Employed – 47.47%
Profit and Loss Statement:

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Balance Sheet:

65
Technical Analysis:

Stock Recommendation:
The stock belongs to FMCG industry and a MNC. The stock has a world wide
presence and fundamentally good. Though the expected return will be less compared to the
other stocks in this portfolio, the stock is included as the downside risk is very limited and for
better diversification.

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ONGC LTD:

 P/E Ratio- 6.64

 Book value – 158.71
 Dividend yield – 4.46%
 Return on Capital Employed – 15.03%
Profit and Loss Statement:

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Balance Sheet:

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Technical Analysis:

Situation Recommendation:
Though the stock looks Technically weak, fundamentally it is in a strong position
The stock has a potential for a up move of minimum 25 percent in one year.

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TATA STEEL LTD:

 P/E Ratio- 9.34

 Book value – 568.22
 Dividend yield – 2.01%
 Return on Capital Employed – 12.78%
Profit and Loss Statement:

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Balance Sheet:

71
Technical Analysis:

Stock Recommendation
The stock is recommended for a buy and hold for a minimum period of one year.
Based on the fundamental analysis and technical analysis the stock prize can move upward
more than around Rs.150 to 200 in a year

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7.FINDINGS
Portfolio Structure
The client have a 1cr they have invest in equity market
We assign the portfolio format in this case:

No Stock Investment percentage Investing Amount

1 Infosys 15 15L

2 LIC Housing Finance Ltd 15 15L

3 Hindustan Aeronautics Ltd 8 8L

4 Ashok Leyland 5 5L

5 Tata motors 5 5L

6 Apollo tyres 12 12L

7 Ultra tech cement 10 10L

8 Britannia Industries Ltd 10 10L

9 ONGC 8 8L

10 TATA Steel 12 12L

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We expected the possible return in the Portfolio

No Stock Possible Return After one year we

get the Amount(Rs)

1 Infosys 25 1875000

2 LIC Housing Finance Ltd 25 1875000

3 Hindustan Aeronautics Ltd 15 920000

4 Ashok Leyland 50 750000

5 Tata motors 50 750000

6 Apollo tyres 25 1500000

7 Ultra tech cement 10 1100000

8 Britannia Industries Ltd 10 1100000

9 ONGC 15 920000

10 TATA Steel 25 1500000

Total = Rs.12290000

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The Model Portfolio
o The model portfolio is constructed for a value of Rs.1 crore.
o The 10 stocks analyzed are recommended for one year term of investment
o Based on the return pattern the investment amount is arrived on individual stock
o According to the above strategy a return of around 23% is expected.

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8.Suggestion
1. The systematic risk cannot be changed
2. When an unsystematic risk takes place, the stocks of a company can be rebalanced
to another company
3. Proper rebalancing is mandatory for the portfolio

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9.Conclusion
To increase the wealth of a client, equity market is the finest option available.
Particularly in that, an investor can easily acquire high return at minimum amount of risk. It is
also applicable in unpredictable market situation.

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10.Bibliography
www.screener.in
www.investing.com
www.economicstime.com

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