SUMMER INTERNSHIP REPORT FINAL ON

FUNDAMENTAL AND TECHNICAL ANALYSIS OF

HOSPITALITY SECTOR

AT

HDFC LIFE

Submitted To: Submitted By:

Prof. (Dr.) Musarrat Shaheen (Faculty Guide) Ankit Anand
Mohd.Yusuf Khan (Circle Head) Enroll No: 20BSPHH01C0168

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 AUTHORISATION

This is to certify that the submission of project report titled ― Fundamental

and Technical Analysis of Hospitality sector is a bonafide work undertaken
by Ankit Anand (20BSPHH01C0168), as a part of the Summer Internship
Program in a partial fulfillment for the requirement of MBA program (2019-
2021) of IBS - Hyderabad and is not submitted to any other institution or
university for award of any degree/ diploma certificate. This project work was
executed under the guidance of Mr. Mohd.Yusuf Khan, Circle Head at HDFC
LIFE. This report will be formally submitted to Prof. Dr. Musarrat Shaheen,
IBS- Hyderabad.

COMPANY GUIDE FACULTY GUIDE

Mr. Mohd.Yusuf Khan Prof. (Dr.) Musarrat Shaheen

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 ACKNOWLEDGEMENT

A report on Fundamental and Technical Analysis of Hospitality sector based on

Internship at HDFC LIFE. I would like to express my deepest appreciation to HDFC LIFE for
giving me an opportunity to do my project. I have put my efforts in the project. However, it
would not have been possible without the kind support and help of many individuals and the
organization. I would like to extend my sincere thanks to all of them. I would like to take this
opportunity to thank and express my deep sense of gratitude to my company guide Mr.
Mohd.Yusuf Khan (Circle Head) at HDFC LIFE for giving me the opportunity to work on
a project. I am greatly indebted to him for providing valuable guidance at all stages of the
study, constructive suggestions, positive and supportive attitude and continuous
encouragement, without which it would have not been possible to complete the project. I
would also like to thank and express my sincere gratitude to my faculty guide Prof. (Dr.)
Musarrat Shaheen whose continuous cooperation and valuable guidance has been certainly
indispensable for my project work. Last but not the least; I would like to thank IBS,
Hyderabad for giving me the opportunity to get this relevant exposure in the corporate sector.

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 INDEX

S.no Content Page No:

1. Aurthorisation 2

2. Acknowledgement 3

3. Executive Summary 5

4, Introduction 6-12
 About the company
 Products and Services
 About the Insurance sector
 About the Hospitality sector

5. Fundamental & Technical Analysis 13-31

 Intro to Stock Exchange
 Creating the Index
 Fundamental analysis
 Value pick and growth pic
 Asset Allocation
 Fund Sheet

6. Technical Analysis 32-40

 Introduction
 Trendlines
 Oscillators
7. Conclusion and References 41-42

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 Executive Summary
Report starts with the working of HDFC LIFE (HDFC Life Insurance Company Ltd.)
which is a insurance services provider with its headquarters in Mumbai, that offers individual
and group insurance. Firm serve a wide range of customers with different needs and
requirement. They offer wide range of products which ae mentioned in the report.

This report is Fundamental analysis of Hospitality sector in respect to equity and potential
growth with minimal risk involvement with the help of Fundamental analysis. First, we do a
market research on the equity markets, debts, mutual funds & derivatives, to understand the
framework of these markets and how they operate. It is then followed by live trading on
Nifty- intraday in order to practically implement how to manage a portfolio of shares, based
on the requirements on an investor.

For fundamental analysis of stocks, research on Industry and companies is required where the
large-cap fund have been taken for the purpose of analysing. A study has been undertaken to
analyse the large cap equity shares of companies of the industry. Initially it would be; Index
Formulation (of the large cap funds chosen from the sector) - this helps us in taking various
decision on based on the movement of the shares.

For the, Fundamental Analysis various steps include with various function like:- under-
valued stocks, over-valued stocks, ratio analysis and ratio ranking approach would be used
for shortlisting ‘growth-pick and value-pick stocks’. This would serve as the purpose of
recommendation for the company as well as for investors keen to invest in Oil and Gas
industry. In this research I will formulate strategy how to formulate equity market in order to
maintain balance between profit and loss.

Hence, this research would help the investors with the right direction for investing their
money. Therefore, in order to achieve the goal of maximizing returns and minimizing risk,
investors need to consider both the risk factors as well as the return factors of various stocks
of an industry. The outcome we get would be used for the purpose of making decision
regarding investment, asset allocation and coverage of risk while investing and a fund sheet
would be made accordingly.

And when the Fund is created it beats the benchmark (Sensex of our Index) that gives the
proof of the efficiency of our Fund.

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 INTRODUCTION

1. About the Company

Housing Development Finance Corporation Life (HDFC Life) is a long-term life

insurance provider with its headquarters in Mumbai, offering individual and group
insurance. It was founded in 2000, It is a joint venture between Housing Development
Finance Corporation Ltd. (HDFC), one of India’s leading housing finance institution and
Standard Life Aberdeen PLC, a global investment company.
Established in 2000, HDFC Life is a leading
long-term life insurance solutions provider in India, offering a range of individual and
group insurance solutions that meet various customer needs such as Protection, Pension,
Savings, Investment, Annuity and Health. As on September 30, 2020, the Company had
36 individual and 13 group products in its portfolio, along with 7 optional rider benefits,
catering to a diverse range of customer needs. HDFC Life continues to benefit from its
increased presence across the country having a wide reach with 420 branches and
additional distribution touch-points through several new tie-ups and partnerships. The
count of our partnerships is in excess of 300, comprising traditional partners such as
NBFCs, MFIs and SFBs, and includes more than 50 new-ecosystem partners. The
Company has a strong base of financial consultants.

History….

HDFC was incorporated as a public limited company on October 17, 1977 under the
Companies Act, 1956 and received a certificate of commencement of business on
December 3, 1977. HDFC received a certificate of registration dated July 31, 2001 from
the NHB under Section 29A of the NHB Act. Its registered office is situated at Ramon
House, 169 Backbay Reclamation, H. T. Parekh Marg, Mumbai 400 020, Maharashtra,
India. The equity shares of HDFC were listed on BSE in 1978 and NSE in 1996. The
equity shares of HDFC are currently listed on NSE and BSE.
As per the terms of the memorandum of association of HDFC, the main object is to, inter
alia, advance money to any person, company, association or society, either at interest or
without, and / or with or without any security, for the purpose of enabling the borrower to

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 erect or purchase or enlarge or repair any house or building or lease any property in India
on such terms and conditions as it may deem fit.

KEY PEOPLE:
The MD & CEO of the company is Vibha Padalkar, Executive Director is Suresh Badami,
Chief Financial Officer is Niraj Shah, Chief Operating Officer is Parvez Mulla, Chief
Actuary & Appointed Actuary is Srinivasan Parthasarathy, Chief Investment Officer is
Prasun Gajri, Bancassurance Alliances head and Chief Marketing Officer is Pankaj Gupta
& Vibhash Naik heads the human resources as Head HR, Admin and L&D.

Products and Services:

HDFC Life offers various kinds of insurance products which includes Protection,
Pension, Savings, Investment along with Women & Children plans. The company also
provides an option of customizing the plans, by adding optional benefits called riders, at
an additional price. The company currently has 37 retail and 11 group products, along
with 6 optional rider benefits. Following are it’s products and services that the company
offers:
Term insurance plan: Term plans are typically affordable insurance plans that provide
full protection and financial stability to your loved ones in case of any unforeseen events.
HDFC Life presents term insurance plans and policies in India to best meet your needs.
Following are the available HDFC Life products under Term insurance plan :
1) HDFC Life Click 2 Protect Plus
2) HDFC Life Click 2 Protect 3D Plus
3) Click to Protect Health-Combo Plan
Pension Plan for retirement planning:
Pension plans are investment plans that lets you allocate a part of your savings to
accumulate over a period of time and provide you with steady income after retirement.
Retirement & Pension Plans provide you with financial security so that when your
professional income starts to ebb, you can still live with pride without compromising on
your living standards. Given the high cost of living and rising inflation, Retirement
planning has become all the more important. Following are the pension plans of HDFC
Life:

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 1) HDFC Life Pension Guaranteed Plan
2) HDFC Life Guaranteed Pension Plan
3) HDFC Life New Immediate Annuity Plan
4) HDFC Life Assured Pension Plan- ULIP*
5) HDFC Life Personal Pension Plan
Saving and investment plan: Savings and Investment plans at HDFC Life are life
insurance plans that offer you multiple avenues to save and to grow your money. These
online investment plans help in systematic and disciplined investment ensuring that you and
your family achieve your financial goals. Following are the saving and investment plans
product:
1) HDFC Life Click 2 Wealth
2) HDFC Life Sanchay Plus
3) HDFC Life Sanchay Par Advantage
4) HDFC Life Classic One
5) HDFC Life Sanchay
6) HDFC Life Sampoorn Samriddhi Plus
Health Plans: HDFC Life provides a variety of Health Insurance Plans & Mediclaim
Policies that offer financial security to meet health related contingencies. Due to changing
lifestyles, health issues have not just escalated, they have increasingly become more complex
in nature. It becomes imperative therefore to have a health insurance plan in place, thus your
financial planning is incomplete if you have not accounted for health. Following are the
Health plans under HDFC Life:
A. HDFC Life Easy Health
B. Click 2 Protect Health
C. HDFC Life Cardiac Care
Children’s Plan: Child plans basically help in financial planning for your child's future
needs at the right age. As a parent you can secure your child’s future with plans that
encompass children insurance plans and children education plans. Following are the
children’s plan under HDFC Life:
1. HDFC Life YoungStar Udaan
2. HDFC Life Click 2 Invest
3. HDFC Life Cancer Care
4. HDFC Life Click 2 Retire

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 About the Insurance Sector
Insurance is a means of protection from financial loss. It is a form of risk management,
primarily used to hedge against the risk of a contingent or uncertain loss.

An entity which provides insurance is known as an insurer, an insurance company,

an insurance carrier or an underwriter. A person or entity who buys insurance is known as
an insured or as a policyholder. The insurance transaction involves the insured assuming a
guaranteed and known - relatively small - loss in the form of payment to the insurer in
exchange for the insurer's promise to compensate the insured in the event of a covered loss.
The loss may or may not be financial, but it must be reducible to financial terms, and usually
involves something in which the insured has an insurable interest established by ownership,
possession, or pre-existing relationship.

The insured receives a contract, called the insurance policy, which details the conditions and
circumstances under which the insurer will compensate the insured. The amount of money
charged by the insurer to the policyholder for the coverage set forth in the insurance policy is
called the premium. If the insured experiences a loss which is potentially covered by the
insurance policy, the insured submits a claim to the insurer for processing by a claims
adjuster. The insurer may hedge its own risk by taking out reinsurance, whereby another
insurance company agrees to carry some of the risks, especially if the primary insurer deems
the risk too large for it to carry. Following are the different types of insurance

Life insurance:

Life insurance is a contract between an insurer and a policyholder in which the insurer
guarantees payment of a death benefit to named beneficiaries upon the death of the insured.
The insurance company promises a death benefit in consideration of the payment of premium
by the insured. We have three types of life insurances : Term plan, Traditional plan, ULIP
plan. But in our internship, we dealt with only traditional plans.

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Term Plan:

Term life insurance or term assurance is life insurance that provides coverage at a fixed rate
of payments for a limited period of time, the relevant term. After that period expires,
coverage at the previous rate of premiums is no longer guaranteed and the client must either
forgo coverage or potentially obtain further coverage with different payments or conditions.
If the life insured dies during the term, the death benefit will be paid to the beneficiary. Term
insurance is typically the least expensive way to purchase a substantial death benefit on a
coverage amount per premium dollar basis over a specific period of time.

Traditional Plan:

A traditional whole life policy is a type of life insurance contract that provides for insurance
coverage of the contract holder for his/her entire life. Unlike term life insurance, which
covers the contract holder until a specified age limit, a traditional whole life policy never runs
out.

ULIP Plan: Unit Linked Insurance Plan:

It is a market linked product that aggregates the very best of investment and insurance. It is a
plan that is linked to the capital market and offers flexibility to trade in equity or debt funds
as per risk appetite. Such dual benefits backed by the flexibilities of the ULIP’s turn them
attractive in terms of investment.

Health Insurance:

Health Insurance is a kind of insurance that provides coverage for medical expenses to the
policy holder. Depending on the health insurance plan chosen the policy holder can get
coverage for critical illness expenses, surgical expenses, hospital expenses etc.

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Key Terms:

Premium:
A policy's premium is its price, typically expressed as a monthly cost. The premium is
determined by the insurer based on your or your business's risk profile, which may include
creditworthiness. For example, if you own several expensive automobiles and have a history
of reckless driving, you will likely pay more for an auto policy than someone with a single
mid-range sedan and a perfect driving record.

Pay term:
Premium paying term is the total number of years for the policy holder to pay the premium.
Definition: Policy term is normally equal to the premium paying term. However, some
insurance policies give the insured the autonomy to choose a premium paying term lower than
the policy term.

Policy Term:
Policy term is the duration for which the policy provides you cover. Policy paying term is the
duration for which you have to pay the premium. Example - policy term in whole life policy is
100 Yrs. but premium paying term can be 21.

Proposer:
Proposer or policyholder is the person or organization to which the insurer issues the policy.
He/she purchases the policy and pays the premium.

Life to be Insured:
Life assured or insured is the person(s) whose life is covered in the insurance contract. In the
event of a contingency, the insured can claim the amount or in the event of the death of the
assured, the nominee will receive the insurance amount.

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 Hospitality Sector: An Overview

Introduction
The Indian tourism and hospitality industry has emerged as one of the key drivers of growth
among the services sector in India. Tourism in India has significant potential considering the
rich cultural and historical heritage, variety in ecology, terrains and places of natural beauty
spread across the country. Tourism is also a potentially large employment generator besides
being a significant source of foreign exchange for the country. In FY20, 39 million jobs were
created in the tourism sector in India; this accounted for 8.0% of the total employment in the
country. The number is expected to rise by two% annum to 52.3 million jobs by 2028.
According to WTTC, India ranked 10th among 185 countries in terms of travel & tourism’s
total contribution to GDP in 2019. During 2019, contribution of travel & tourism to GDP was
6.8% of the total economy, ~ Rs. 13,68,100 crores (US$ 194.30 billion). Another way to
better understand hospitality is by looking at The Big Four: Food and beverage, travel and
tourism, lodging, and recreation. The food and beverage category includes restaurants, bars,
and lounges. Travel and tourism cover airlines and travel agencies. Lodging can be anything
from hotels to Airbnb. And recreation usually means activities such as golfing, fishing, and
tennis.

Market Size
India is the most digitally advanced traveller nation in terms of digital tools being used for
planning, booking, and experiencing a journey. India’s rising middle class and increasing
disposable income has supported the growth of domestic and outbound tourism.
During 2019, foreign tourist arrivals (FTAs) in India stood at 10.93 million, achieving a
growth rate of 3.5% y-o-y. During 2019, FEEs from tourism increased 8.6% y-o-y to Rs.
2,11,661 crores (US$ 30.06 billion). In 2019, arrivals through e-Tourist Visa increased by
23.6% y-o-y to 2.9 million.
International hotel chains are increasing their presence in the country, and it will account for
around 47% share in the tourism and hospitality sector of India by 2020 and 50% by 2022.

Objectives of the Industry:

Customer Service
Excellent service is one of the hospitality industry's primary objectives. Hotel visitors rely on
hospitality staff for many of their travel needs. Hotel staff comes through in a pinch when a
traveller forgets to pack his toothbrush or seeks a recommendation for a local hotel.
Similarly, diners often ask restaurant wait staff to recommend a particular meal or to
accommodate a dietary restriction. Hospitality providers often measure performance rates of
their customer objectives by surveying their customers. They encourage customers to visit a
survey website, and often provide incentives, such as discount coupons, for customers who
complete online surveys.

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Product Quality
Customers love good service, but the hospitality industry must also provide quality products
to satisfy customers. Goals based on this important objective vary from restaurant to
restaurant and from hotel to hotel. Patrons of a restaurant demand fresh, delicious food.
Customers also desire consistency. They want a cheeseburger from a fast-food chain to taste
the same in San Francisco as it does in their hometown. Hotel guests look for quiet, clean and
comfortable rooms where they can get a good night's sleep and spotless, spa-like bathrooms.

Volume
Another primary objective of the hospitality industry is customer volume. A restaurant owner
wants to see 100 percent of her tables filled during any given service period. Empty tables
mean fewer orders, and without sufficient table traffic, restaurant staff may have to throw
away perishable food items at the end of a shift. In the hotel business, 100 percent room
occupancy is a primary objective. If you see a "no vacancy" sign at a hotel, motel or resort,
management has achieved its volume goal for that day.

Ratings
Publicly available ratings can reflect the success of a hospitality-based company in meeting
its performance objectives. There are well-known trade-specific rating guides in both the
restaurant and hotel industries, and managers strive for recognition in them. Establishments
seek coveted mentions on the "best of" lists local newspapers and weekly magazines publish.
A positive reputation on Internet travel and restaurant review sites is as important as it is on
the high-profile rating systems, because Internet reviews are accessible to the entire world,
and reviews can remain online for years.

FUNDAMENTAL & TECHNICAL ANALYSIS OF THE

HOSPITALITY SECTOR

PROJECT’S OBJECTIVE

 To evaluate the performance of selected equity shares in terms of risk and future
returns that are anticipated by the investors.
 To evaluate the share’s pattern based on our own index performance.
 To help the company by making a portfolio of the stocks that have been shortlisted
after the analysis.
 To suggest investment decision by providing the proper proportion of shares to be
bought by the investor.
 To suggest a strategy to minimize the risk and maximize the return for the investment
made.

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STOCK EXCHANGE

A stock exchange is an exchange where stock brokers and traders can buy and sell shares of
stock, bonds, and other securities. Many large companies have their stocks listed on a stock
exchange. This makes the stock more liquid and thus more attractive to many investors. The
exchange may also act as a guarantor of settlement. Other stocks may be traded "over the
counter" (OTC), that is, through a dealer. Some large companies will have their stock listed
on more than one exchange in different countries, so as to attract international investors.
Stock exchanges may also cover other types of securities, such as fixed interest securities
(bonds) or (less frequently) derivatives which are more likely to be traded OTC.
Short sellers in the stock market are usually concerned with their expectations of a company's
future earnings (the main factor determining stock price), whereas short sellers of bonds are
most concerned with future bond yields, the determining factor of bond prices. Anticipating
bond prices requires careful attention to interest rate fluctuations. Essentially, as interest rates
jump, bond prices tend to fall (and vice versa). Therefore, a person anticipating interest rate
hikes might look to make a short sale.

Market Capitalization
Market capitalization refers to the total dollar market value of a company's outstanding
shares. Commonly referred to as "market cap," it is calculated by multiplying a company's
shares outstanding by the current market price of one share. The investment community uses
this figure to determine a company's size, as opposed to using sales or total asset figures.

Segment of companies based on Market Capitalization

 Large Cap: Greater than 5000 Cr

 Mid Cap: 500-5000Cr
 Small Cap: Less than 5000 Cr

Methodology
This study is descriptive and analytical in nature. The main motive for the descriptive
research is to describe the state of affairs which exist in the current scenario. However, the
analysis is conducted for the valuation of shares.

Data collection
This study is descriptive and analytical in nature. The main motive for the descriptive
research is to describe the state of affairs which exist in the current scenario. However, the
analysis is conducted for the valuation of shares.

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Data source

Data for fundamental analysis of stocks was collected from the company’s website. Data for
index updating was collected from money control, BSE
The data was also extracted from the company’s website.

In this project our mentor gave us individually different sectors to analyse them, I got the
Hospitality sector (large cap). In this project we have to analyse. Initially we have to choose
all the large cap companies i.e. companies which have market capitalization of more than $5
billion, in our sector which were listed in stock/share market, large cap companies are those
companies with large market capitalization. There I found 9 such stocks of companies all
those stocks are as follow :-

1. Indian Hotels
2. EIH Ltd.
3. Chalet Hotels
4. Lemon Tree Hotels
5. Westlife Development Ltd.
6. Mahindra Holidays
7. India Tourism Development Corporation
8. Taj GVK Hotels
9. EIH Assoc Hotel

Now after selecting these 9 large cap stocks in our sector, now we are going to trace the
activity of these stocks and the whole Hospitality sector with the help of our own Sensex
which were started on 30/03/2020 and started with base 1000. Tracking the movement of
the shares over time will let me know how each movement is affecting the stock market
and with further notice to the company about the index they would be able to know
whether the sector is going forward or not and whether it’s well to invest or not.

On the first day we just assign all the stocks weightage according to their market
capitalization on that date.

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 RECORDING THE CHANGES IN THE SENSEX:-

Now we have to maintain our index on regular basis and keep the record of changes in our
Sensex. For example on the next day on 30/03/2021 we follow these certain steps:-

1. First write the last price of all the companies at the closing of the day.

2. In the next row we find the % change in the last price from previous day.

3. Then in the next row we find % change in weightage by multiplying % change in price to
the weightage assigned on the previous day.

4. In the next row we multiply our base 1000 to the % change in weightage.

5. Then in the next row we find out the no. of shares by dividing market capitalization to the
last price.

6. Then in the next row we find out the market cap by multiplying no. of shares to the last
price of that day.

7. Then in the last row we again assign the weightage to all the company by calculating the
ratio of their market cap to the total market capitalization.

To calculate the change in our Sensex we simply add the fourth row in which we multiply the
base 1000 to the %change in weightage.

Like in this example on 30/03/2021 the sum comes to be 19.220

So now our base changes to the (1000+19.220) = 1019.220

So for the next day our Sensex base becomes 1019.220, further changes to be done in the
Sensex base 1019.220 based on the last price of all the stocks on that day.

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Here are the Screenshots of an example that we discuss:

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Now we have to maintain our index regularly with same steps and record all the changes in
our base, which helps us to maintain and analyse the performance of the each company and
of the whole sector.

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Based on our respective sector, we were taught about fundamental analysis which gives us
understanding in which stocks we need to invest and in which we shouldn’t. It also tells us
which stocks are hidden gems which can give good returns. Based on the fundamental
analysis, we will see that which stocks can grow and can fetch us return, according to that,
we will do asset allocation.

 FUNDAMENTAL ANALYSIS

This is the analysis which we were taught during our training period. Fundamental
analysis deals with the intrinsic value of the stock by analysing business financial
statements, health, competitor and market.

It also includes overall state of economy and factors including interest rates, production,
GDP, employment, earnings, manufacturing etc.

It is basically conducted to see the factors that affect the well-being of an economy,
industry and companies. The goal of most analysis is to forecast and to see the profit
movement of price. At company level, it involves examining the financial data,
management, business concept etc. At industry level, we see the demand and supply of
products. For economy, this analysis focuses on economic data to assess the present and
future growth of the economy.

To forecast future stock prices, fundamental analysis focuses on economy, company and
industry analysis to derive stock’s current fair price and forecast future of stock.

The outcome observed by performing fundamental analysis is to produce a value that

an investor can compare with the security’s current price, with the aim of figuring out
what sort of position to take with that security (under-priced= buy, overpriced= sell or
short)

 STEPS INVOLVED IN FUNDAMENTAL ANALYSIS

 Creating of our own index to keep the track of the companies in our sector and to
analyse the performance of the individual company or the sector as a whole.

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 Dividing the shares in our index into undervalued and overvalued stocks by
comparing their P/E ratio to the sector PE.

 Selection of value-pick from undervalued and growth-pick from overvalued stocks.

 Determining five major ratios important for the analysis of the Oil and Gas sector.

 Ranking of the value-pick and growth-pick on the basis of these ratios.

 Allocation of Fund on the basis of their ranking.

Finally making of the fund sheet for our sector

CREATING OUR OWN INDEX

This step is already discussed above in the section stock exchange. We created our own
index with taking all the large cap companies in it with starting Sensex base of 1000 and
keep recording changes in Sensex base on daily basis as the last price of the stocks changes.
All the companies(stocks) in our index are as follows:-

 Indian Hotels Ltd.

 EIH Ltd.
 Chalet Hotels
 Lemon Tree Hotels
 India Tourism Development Corp,
 Taj GVK Hotels
 EIH Assoc Hotel

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 DIVIDING OVERVALUED AND UNDERVALUED STOCKS

In this step we have to divide our 13 socks into over-valued and under-valued stocks for
differentiating them into under-valued and over-valued first we have to find out the P/E
ratio of all the stocks and compare it to the sector PE (or sector P/E ratio) if the stock’s ratio
is higher than the sector PE than it is over-valued stock or if it is lower than the sector PE
than it is under-valued stock.

To find out the P/E ratio of each stock we have apply the formula:

P/E ratio = market price of share / EPS

Where, Sector PE = Average of P/E ratio of all the stocks

IF, P/E ratio > Sector P = Over-valued

P/E ratio < Sector P = Under-valued

Now, we can distinguish the Overvalued and Undervalued stocks:

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  SELECTION OF VALUE-PICK AND GROWTH-PICK

Now we have to do the selection of value-pick from the Under-valued stocks and Growth-
pick from the Over-valued stocks. By doing so we can choose best stock from the under-
valued and over-valued stocks.

 Value-pick from the Under-valued stocks by comparing their revenue and profit of
last year to the current year.

 Similarly, Growth-pick from the Over-valued stock with the help of PEG ratio.

 FINDING OF VALUE – PICK

For finding of Value – pick from the Undervalued stocks we have to find out whether the
stocks are really undervalued or they have capacity to do better in future, for that we have
to analyse the company performance from past year to current year by comparing their
revenue and profit. If any one of them will increase than it will be selected for the Value –
pick from the undervalued stocks.

Reason for this analysis:

 To know the revenue of the company
 To know is company making profit

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  Is company able to beat its competitor
 Will company stock a good investment?

So, by the above analysis, we can say that either the stocks revenue or profit is growing or
either is increasing.

So, out of the 4 undervalued stocks, we select only 2 stock as they satisfy the conditions.

By this, we can interpret that although the above stocks are undervalued but they can fetch
good returns in the future as these are hidden gems and this is the time when we should buy
it and we can say that these stocks are a good investment for an investor.

 FINDING OF THE GROWTH – PICK

We will find Growth pick by PEG Ratio. (Price to earnings growth)

I have taken PEG ratio because I can determine whether the company will be expecting
earnings growth while the stock value is being determined and this would give me more
glance at the stocks that have been shortlisted using P/E ratio.

PEG ratio of 1 gives a perfect correlation between the company's market value and its
unfavourable, telling a stock is overvalued. If it is in between 0-1 the stock is having a scope
to perform well though it is overvalued.

Formula: PEG ratio = P/E ratio / EPS growth rate

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EPS growth rate can be calculated by comparing current year EPS to the last year EPS, if the
EPS decreases from last year than the growth rate comes to be negative than the stock
directly rejected for the growth pick.

1. PEG ratio = (P/E ratio)/EPS Growth Rate

2. EPS Growth rate = (Current year EPS – Previous year EPS)/Previous year
EPS*100
3. If EPS growth rate is negative, then the PEG ratio is N/A

The stock having PEG ratio between 0-1, is selected for Growth pick.

Therefore, ‘CHALET HOTELS LTD’ is selected for Growth pick.

Therefore, we have 2 value picks and 1 growth pick in our FUND.

ASSET ALLOCATION

Asset allocation is the rigorous implementation of an investment strategy that attempts to

balance risk versus reward by adjusting the percentage of each asset in an investment
portfolio according to the investor's risk tolerance, goals and investment time frame. The
focus is on the characteristics of the overall portfolio. Such a strategy contrasts with an
approach that focuses on individual assets.
Before allocating of the fund, we have to rank all the selected stocks through value pick and
growth pick on the basis of the ratios that were important for the sector by which we rank all
the stocks in order of the allocation.

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So, according to my industry, there are main 5 ratios which will have an impact on asset
allocation decision:

1. Current Ratio
The current ratio is a liquidity measure that shows how a company is able to meet all
its short-term liabilities with the short-term assets on hand. Assets considered short-
term are anything such as inventory and do not include long-term assets such as
property, plant, and equipment.

For the hospitality industry, companies have a lot of current liabilities in the form of
salaries and wages, short-term equipment leasing, and other short-term liabilities.
Additionally, it is a cyclical industry, making it imperative that companies have
enough current assets to cover current liabilities, even in an economic downturn.
Stakeholders want to see a high current ratio above one to determine a company
within the hospitality industry is strong.

Current Ratio = [ Current Assets/ Current Liabilities]

2. Debt-Equity Ratio
Companies within the hospitality industry have a lot of long-term liabilities in the
form of debt, along with current liabilities. This debt is used to finance large
properties such as hotels or large bus fleets for transportation companies. A lot of
long-term assets are needed to successfully run a hospitality company, and therefore
long-term debt financing is also normally needed.

Debt-Equity Ratio = [Total Debt/ Total Equity]

3. Gross Profit Ratio

Gross profit margin measures a company's gross profit earned on the revenue it
generates. For companies in the hospitality industry, most of the costs come from

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 operations and not the cost of goods sold, and the gross profit margin should be high
for those businesses that operate within the hospitality industry.

Gross profit margin = ((Sales - Cost of goods sold) / Sales)

4. Net Profit Ratio

The net profit margin is similar to the gross profit margin except that it measures the
amount of net profit earned on the revenue a company generates. For the companies in the
hospitality industry, profits are actually not very high, as there are high associated
operating costs to run a company in this industry. However, a stakeholder should always
look at a company's net profit margin and compare it to industry averages to ensure it
meets or exceeds the benchmark.

Net profit margin = (net profit) / (total sales)

5. Inventory Turnover Ratio

Inventory turnover is a financial ratio showing how many times a company has sold
and replaced inventory during a given period. A company can then divide the days in
the period by the inventory turnover formula to calculate the days it takes to sell the
inventory on hand.

Calculating inventory turnover can help businesses make better decisions on pricing,
manufacturing, marketing, and purchasing new inventory. In Hospitality Industry, it’s
an important ratio as it tells about how the inventory of the hotels is being used up or
utilised. If a hotel or hospitality business has a high inventory turnover ratio, it
indicates a positive sign and tells that the business is in a profitable position.

Inventory Turnover Ratio = [Cost of Goods Sold/ Average Inventory]

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(Ranks are given according to the nature of the Ratio)

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 After ranking all the stocks for all the five ratios on the basis of the ratio requirement
in a company (higher or lower). We assign the ranking in such a way that the lower
ranking is best for that ratio, therefore when we add all the rankings of all the stocks
individually than the stock having lowest sum would be the best on the basis of these
five ratios. And we can see there is a tie between two companies, so choosing one
over another in these won’t affect any changes in the fund.

As we earlier picks value-pick and growth-pick from undervalued and overvalued

stocks, these stocks have tendency to better in future, and now we filtered them on the
basis of the 5 major ratio in the sector and rank them accordingly. Now we are ready
for the asset allocation for our fund.

For the allocation of FUND initially we have total of 10cr of AUM (asset under
management). Initially we just allocate this fund to the stocks we found out after the
analysis.

For allocating this fund, we need to keep in mind these two rules.
1. More fund will be allocated to the stock having better rating(lower).
2. Total AUM is 10 crores

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Now, we have to calculate NAV of our fund

 CALCULATION OF Net Asset Value [NAV]

To find out the NAV:

NAV = AUM / No. of Units

Here, 1 Unit = Rs. 10

Therefore, for Rs.10 Cr. No. of Units = 10000000

Now, for the first day (on 19/05/2021):

NAV = AUM / No. of Units

= 100000000 / 10000000

NAV = 10

Now for the next day onwards:

No. of shares remains constant, but the last price keeps fluctuate so the actual allocation
keeps changing. So, the total AUM keeps changing daily but the No. of Units keeps always
constant, therefore NAV keeps updating on the daily basis as the closing price of the shares
changes.

For example,

For the next day

20/04/2021 NAV = 10.74

21/04/2021 NAV = 10.91

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Similarly, we keep updating the NAV for our Fund on the daily basis and keep the record
of changing in NAV for our FUND.

 Updating the NAV

 BEATING THE BENCHMARK:

Now, the 3 stocks to which we allocate the AUM is our Fund that we create after the
filtration of the Index that we have initially including all the large cap companies from our
sector.

Now our Fund includes the best stocks from our index because these all these stocks in the
Fund we found them after the fundamental analysis of the whole index and we allocate fund
to them through the rating that was given to them on the basis of the major ratios that affect
the company’s performance in the sector.

So now our own index that we created earlier that includes all the large cap companies now
act as a benchmark for our fund. If our fund beats the benchmark, it implies that we did the
proper analysis and our fund which includes the best stocks from the sector and the rating
on which the allocation depends is also efficient.

Beating the benchmark here signifies that if the Sensex goes down in our Index that the
NAV also goes down but less than the Sensex, similarly if the Sensex goes up that NAV
also goes up but with more impact or higher. For instance, if the Index rises by 10%, then
our fund must rise above 10% (say 11%) and vice-versa. This state our Fund gives more
return in favourable conditions and less risk in unfavourable conditions.

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 FUND SHEET
 Objective: To find out the best stocks in order to allocate to the fund in Hospitality
sector.

 Strategy: To build and manage a well-diversified equity portfolio of value and

momentum driven stocks by following a prudent mix of qualitative and quantitative
investment factors. This strategy has outperformed the broader market indices over
long-term.

 NAV as on 19th May: 10 BENCHMARK: HOSPITALITY ’s INDEX

 Asset held on 19th May: 10 CR FUND MANAGER: ANKIT ANAND

Securities Holdings
EIH Ltd 50%
Indian Hotels Ltd. 30%
Chalet Hotels Ltd 20%

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This is the FUND SHEET for our fund which clearly shows all the information of our fund
it provides the following information to the investor:

 It shows the objective and the strategy of our fund that what the objective of our
fund and what strategy we follow to achieve that.

 Information about the assets in this Fund asset allocation is assumed 100% equity
and no debt included.

 About the AUM that how much AUM we manage in this Fund.

 It also shows that how much % of asset allocated to each Fund in the Asset-Holding
table.

It also shows the efficiency of our Fund in the graph, it is clearly shown in the graph that
the NAV of our Fund beats the Sensex of our Index (Benchmark).

TECHNICAL ANALYSIS

Technical analysis is a means of examining and predicting price movements in the financial
markets, by using historical price charts and market statistics. It is based on the idea that if a
trader can identify previous market patterns, they can form a fairly accurate prediction of
future price trajectories.

It is one of the two major schools of market analysis, the other being fundamental analysis.
Whereas fundamental analysis focuses on an asset’s ‘true value’, with the meaning of
external factors and intrinsic value both considered, technical analysis is based purely on the
price charts of an asset. It is solely the identification of patterns on a chart that is used to
predict future movements.

Trendline: A trendline that is angled up, or an up trendline, occurs where prices are
experiencing higher highs and higher lows. The up trendline is drawn by connecting the
ascending lows. Conversely, a trendline that is angled down, called a down trendline, occurs
where prices are experiencing lower highs and lower lows.

Following are the major trendline tools used in stock market analysis:

 Uptrend and Downtrend: These are trendlines which show either the stock is going up
or is of bullish nature of stock is going down or of bearish nature. Below is the example
of them:

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 Rounding Bottom Pattern: Under this trendline pattern, the trendline is initially in
sideways, pattern then it falls below and gain the uptrend line crossing the breakout point.
Here is an example of this pattern:

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 Head and Shoulders (Top & Bottom): This Trendline shows the stock trend with a
mountain cap (Head) and two sideways trendline (Shoulders), This is known as Head and
shoulders top. On the other hand, when the peak trendline is below the sideways trendline
it’s known as the Head and Shoulders bottom. Below are the following examples:

Head and Shoulders (Top)

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 Head and Shoulders (Bottom)

 Cup with Handle: This trend shows how the stock starts with a bottom line, then there is
a huge fall in the graph, which leads to the downtrend line and making a u shape curve
when it reaches the breakout line, ultimately showing like a coffee mug. Below is the
example of this trend:

Cup with Handle

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 OSCILLATORS

An oscillator is a technical analysis tool that constructs high and low bands between two
extreme values, and then builds a trend indicator that fluctuates within these bounds. Traders
use the trend indicator to discover short-term overbought or oversold conditions. When the
value of the oscillator approaches the upper extreme value, technical analysts interpret that
information to mean that the asset is overbought, and as it approaches the lower extreme,
technicians consider the asset to be oversold.

How Oscillators Work

Oscillators are typically used in conjunction with other technical analysis indicators to make
trading decisions. Analysts find oscillators most advantageous when they cannot find a clear
trend in a company's stock price easily, for example when a stock trades horizontally or
sideways. The most common oscillators are the stochastic oscillator, relative strength (RSI),
rate of change (ROC), and money flow (MFI). In technical analysis, investors find oscillators
to be one of the most important technical tools to understand, but there are also other
technical tools that analysts find helpful in enhancing their trading, such as chart reading
skills and the technical indicators.

Following are the few types of oscillators one uses in stock marketing:

 Moving Average (MA): A moving average is a calculation used to analyse data

points by creating a series of averages of different subsets of the full data set. In finance, a
moving average (MA) is a stock indicator that is commonly used in technical analysis.
The reason for calculating the moving average of a stock is to help smooth out the price
data by creating a constantly updated average price.
By calculating the moving average, the impacts of random, short-term fluctuations on the
price of a stock over a specified time-frame are mitigated.
Below is an illustration:

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 In the above figure, we take two averages that is 21 & 55. When the blue line (21) cuts
the green line (55) from below, then we need to long the stock i.e. we need to buy it and
vice-versa.

 Supertrend: A super-trend indicator is plotted on either above or below the closing

price to signal a buy or sell. The indicator changes colour, based on whether or not you
should be buying.
If the super-trend indicator moves below the closing price, the indicator turns green, and
it signals an entry point or points to buy. If a super-trend closes above, then the indicator
shows a sell signal in red.
You will also note that at the point where buy or sell signal is generated is the crossover
point. At the point say, buy signal is made and the indicator turns green you will see, on
hovering the cursor at this point, the closing price is higher than indicator value.
Similarly, when a sell signal is generated, and the indicator turns red, the closing price
will be seen lower than the indicator value. Below is an illustration for it:

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 Relative Strength Index (RSI): The relative strength index (RSI) is a momentum
indicator used in technical analysis that measures the magnitude of recent price changes
to evaluate overbought or oversold conditions in the price of a stock or other asset. The
RSI is displayed as an oscillator (a line graph that moves between two extremes) and can
have a reading from 0 to 100. Traditional interpretation and usage of the RSI are that
values of 70 or above indicate that a security is becoming overbought or overvalued and
may be primed for a trend reversal or corrective pullback in price. An RSI reading of 30
or below indicates an oversold or undervalued condition. Below is an illustration of it:

In the above figure, when the indicator breaks the purple batch from below, we need to
buy and when it gets inside from above, we need to sell it.

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 Bollinger Bands: Bollinger Bands are envelopes plotted at a standard deviation level
above and below a simple moving average of the price. Because the distance of the bands
is based on standard deviation, they adjust to volatility swings in the underlying price.
Bollinger Bands use 2 parameters, Period and Standard Deviations, Std.Deviation. The
default values are 20 for period, and 2 for standard deviations, although you may
customize the combinations. Bollinger bands help determine whether prices are high or
low on a relative basis. They are used in pairs, both upper and lower bands and in
conjunction with a moving average. Further, the pair of bands is not intended to be used
on its own. Use the pair to confirm signals given with other indicators. Below is an
illustration of it.

In the above figure, the middle band is the determining band according to which one
shorts or long a call. If candle crosses below it, we need to short or sell and if the candles
crosses it from below to above we need to long the call.

 Aroon: The Aroon indicator is a technical indicator that is used to identify trend changes
in the price of an asset, as well as the strength of that trend. In essence, the indicator
measures the time between highs and the time between lows over a time period. The idea
is that strong uptrends will regularly see new highs, and strong downtrends will regularly
see new lows. The indicator signals when this is happening, and when it isn't. The
indicator consists of the "Aroon up" line, which measures the strength of the uptrend, and
the "Aroon down" line, which measures the strength of the downtrend. Below is the
illustration of it:

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 In the above figure, when the yellow line cuts the blue line from below then it’s a
confirmation that we need to long(buy) the stock. We need to wait till it crosses the 50%
level. After it crosses that level we need to buy it. The same rules apply for sell also in an
reverse manner. The 50% level is the main criteria which decides whether we need to
long or short (Buy or sell) the stock.

 Volume Weighed Average Price (VWAP): The volume weighted average price
(VWAP) is a trading benchmark used by traders that gives the average price a security
has traded at throughout the day, based on both volume and price. It is important because
it provides traders with insight into both the trend and value of a security. Below is an
illustration of it:

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In the above illustration, when the candlesticks forms on the vwap line, we need to wait
for the confirmation when the next candle forms above the vwap line, we buy and vice-
versa for sell.

CONCLUSION:

We begin our project with creating our own sector index fund as to compare it with with
our Asset fund which was created later. We got to know making the sector index fund as
our benchmark we can beat it with our top grinded companies The making of fund starts
with the distinguish between undervalued and overvalued stocks with the help of P/E
ratio and after that finding of the value-pick and growth-pick from undervalues and
overvalued stocks respectively. After the final selection of the stocks that are capable to
be in our fund we rank all these stocks on the basis of five major ratio those are important
for our sector and according to the rating given to them we assign the allocation of AUM
to them. Main aim of the fund was to create a portfolio with a higher profitability and
lower risk. After allocating them to our fund, we assigned the some investments out of the
total investment of 10 crores we had (virtual) to each company. Thereby, we divided the
current price from the asset value allocated to get number of equity shares. Then we
calculated NAV of our fund and compared it with the sector index we made. If our AUM
beats the Index then, it’s a profitable situation as we are able to beat the market and our
fund can be recommended to the company. This was the part of fundamental analysis.
In Technical analysis, we leant about the trendlines and Oscillators which play a role in
understanding the technicalities of the stock trading. Different trendlines help an investor
to make it more easy for him to buy or sell the shares, regarded he or she has a good
understanding of the technicality. Moreover, various oscillators also helps the user for the
same and they are find to be more correct and accurate when compared to trendlines

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 because one can not make the trendlines in the current graphs easily, whereby oscillators
are a built in feature in the broker firm you trade like Zerodha.
 Through Internship, we learnt how to make an Asset Fund and how we can beat the
index providing worth investing funds to the company. We also learnt about the basics of
stock market, stock trading, analogies related to stock market. Also, we learnt about other
financial securities or derivatives used in the market like derivatives and options. We
were also taught various strategies in options on how one can use it to make high profits
with less risk in options.
 Challenges in the internship were almost negligible as we had our SIP mentor by our side
all time. He used to guide us in every activity he taught and use to ask if we had any
doubts at anytime during our SIP.
 Contribution to Company: The Asset fund we made is our recommendation to the
company where they can invest or use these stocks in their ULIP fund.

REFERENCES:

www.hdfclife.com
www.investopedia.com
www.moneycontrol.com
www.topstockresearch.com
in.tradingview.com

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