Final Report

FINAL REPORT
ON
THE EQUITY RESEARCH BASED ON FUNDAMENTAL & TECHNICAL

ANALYSIS OF PHARMACUETICAL SECTOR.
By
Bhoomit Masani
(20BSPHH01C0302)
HDFC LIFE INSURANCE COMPANY LTD.
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FINAL REPORT
ON
THE EQUITY RESEARCH BASED ON FUNDAMENTAL & TECHNICAL

ANALYSIS OF PHARMACUETICAL SECTOR.
By
Bhoomit Masani
(20BSPHH01C0302)
HDFC LIFE INSURANCE COMPANY LTD.
A report submitted in partial fulfilment of the requirements of MBA Program of

IBS Hyderabad
Submitted To
Faculty Guide: Company Guide:
Dr. Musarrat Shaheen Mr. Mohd Yusuf khan
2021
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AUTHORISATION
This is to certify that the submission of project report titled ― “THE EQUITY RESEARCH
BASED ON FUNDAMENTAL & TECHNICAL ANALYSIS OF PHARMACUETICAL SECTOR.” is a
Bonafide work undertaken by Bhoomit Masani (20BSPHH01C0302), as a part of the
Summer Internship Program in a partial fulfilment for the requirement of MBA program
(2020-2022) 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. Satish D, IBS Hyderabad.
Faculty Guide: Company Guide:

Dr. Musarrat Shaheen Mr. Mohd. Yusuf Khan
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ACKNOWLEDGEMENT
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 express my sincere gratitude to Organizational Guide Mr. Yusuf Khan (Branch Manager) for
his exemplary guidance and constant encouragement throughout the course of this project.
Moreover, I am immensely grateful to Mr. Nikesh (Mentor) for lending me support,
imparting knowledge and offering me valuable insights all throughout the tenure of the
internship project. I express my sincere thanks to Faculty Mentor Prof. Satish D for guiding
me in this Project. I am very grateful for the constant support throughout the duration of
the entire project.
I sincerely express my thanks to our Professors for their valuable guidance. I thank each and
every one of them for their valuable suggestions, motivation, and encouragement. I wish to
express gratitude to all those, whom I have worked and interacted with and whose thoughts
and insights helped us to further increase our knowledge and understanding of the project. I
would also like to extend my thanks to various people, factors, and situations that
contributed to the successful accomplishment of the task.
Though I am unable to mention all of them individually, but the debt of gratitude to them is
no less. 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.
Bhoomit Masani
(20BSPHH01C0302)
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EXECUTIVE SUMMARY
This report starts with a working of HDFC Life which is a leading life insurance solution
provider in India. They offer a wide range of products like savings and investment,
retirement plan, term life insurance, etc.
The project report mainly deals into 3 important segments of finance. Firstly, talking about
the main project that is “EQUITY RESEARCH OF PHARMACEUTICAL SECTOR”. For the
analysis of stocks wherein a research on industry and company is required for which I have
taken larger capital stocks.
The work started with the Index calculation and maintained it on a daily basis that helps to
study the movement of shares. This report includes the study on the large cap companies
under Pharmaceutical Sector. This report is based on basic learning of all the concepts
mentioned in the title of the report. This report involves understanding of stock market
index of Pharmaceutical Sector and various calculations like no. of shares, market
capitalization, percentage change in price etc. and then calculating its actual impact on base
index.
The project in this report includes topics like sector analysis, Technical analysis. Moreover,
this report contains knowledge on mutual funds and how one can allocate them based on
risk factor and also what is life insurance and what are the different plans available.
HDFC LIFE has its own set of mutual funds and insurance policy that it offers which cater to
each individual investment needs. This report includes few topics and concepts which were
discussed during the internship training classes. It is important to elucidate these topics as
they create a basic understanding, in order to make the project pragmatic. All these topics
are discussed in detail in this report.
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TABLE OF CONTENTS
Sr. No. Topic Page No.
1 Company Introduction 7
2 Insurance Industry 8
3 Project 1 – Fundamental Analysis 9
Project 2 – Technical Analysis 19

4 i. Chart patterns 19
ii. Oscillators 26
5 Project 3 – Intraday Strategies 40
Project 4 – Derivative 48
6
• Option Strategies 50
7 Project 5 – Mutual Funds 60
8 References 70
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COMPANY INTRODUCTION
HDFC LIFE
Established in 2000, HDFC Life Insurance Company Ltd is a long-term life insurance provider in India. It has its
headquarters in Mumbai. It offers wide range of insurance services to both individuals and groups that meet
various customer needs such as Protection, Pension, Savings,
Investment, Annuity and Health. As on September 30, 2020, the
Company is offering a total of 36 individual and 13 group products
in its portfolio, along with them, it also had 7 optional rider
benefits, by which it made sure to cater to a diverse range of the
customer needs.
The company is a joint venture between, one of the India's leading

housing finance institutions and a global investment company i.e.,
Housing Development Finance Corporation Ltd (HDFC)and Standard
Life Aberdeen. As on 31 March 2020, the promoters of HDFC Ltd.
held 51.4% shares and Standard Life (Mauritius Holdings) 2006 Ltd. held a 12.3% stake in HDFC Life
respectively. The remaining equity is held by public shareholders.
HDFC Life is continuing to gain from its increased presence across the country as it has a wide reach of 420
branches and also has additional distribution touch-points through several new tie-ups and partnerships. The
total partnerships it has is more than 300, which comprises of traditional partners such as NBFCs, MFIs and
SFBs, and which also includes more than 50 new-ecosystem partners. The Company holds a very strong base of
financial consultants.
Products & Services
HDFC Life offers a wide range of products which include Protection, Pension, Savings, Investment, Health along
with Children and Women plans. To the customers, the company also gives an option of customizing the plans,
by giving optional benefits called riders, at an additional price. The company currently has 37 retail and 11
group products, along with 6 optional rider benefits (as on 24 March 2020).
• Protection Plans – insurance plans that provide protection and financial stability to the family in
case of any unforeseen events.
• Click2Protect life is their online term plan.
• Launched CSC Suraksha to be sold exclusive through the Common Services Centre network.
• Click2Invest is their online ULIP investment plan.
• Health Plan – offers financial security to meet health related contingencies.
• Savings & Investment plans – These plans help in investment to achieve financial goals.
• Retirement plans – financial security for life post retirement.
• Women's plans – plans catering to different financial needs of women.
• Children's plans – plans meant to secure children's future.
• Rural & social Plans – meant specifically for rural customers.
• Click2Retire completed their Click2 portfolio.
• ULIP Investment with more funds.
Vision
One of the most successful and admired life insurance company, which means that we are the one of the most
trusted company, the easiest to deal with, offer the best value for money and set the standards in the industry.
'The most obvious choice for all'.
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INSURANCE INDUSTRY
The insurance Industry is made up of organizations that offer risk management in the form of insurance
contracts. The essential idea behind insurance is that one party, the guarantor or the insurer, will guarantee
payment for an uncertain future event. Meanwhile, another party, the guaranteed or the insured, pays a more
modest premium to the insurer in exchange for that protection on that uncertain future occurrence.
Insurance industry in India has seen a significant development somewhat recently alongside an introduction of
a huge number of cutting - edge products. This has led to an intense competition with a positive and healthy
outcome. Insurance sector in India plays a powerful part in the prosperity of its economy. It considerably
expands the chances of savings amongst the individuals, safeguards their future and helps the insurance sector
form a massive pool of funds.
With the assistance of these funds, the insurance sector exceptionally contributes to the capital markets,
thereby increasing large infrastructure improvements in India. The Insurance sector in India comprises of total
57 insurance agencies. Out of which 24 organizations are the life insurance providers and the left over 33 are
non-life insurance providers. Out which there are seven public sector organizations.
Types of Life Insurance Policies
Life Insurance policies can be broadly categorized in to 2 types.

1)Traditional Plans
2)Unit Linked Insurance Plans
TRADITIONAL PLANS
They offer in-built guarantees and defined maturity benefits through assortment of products such as
guaranteed maturity value. The investment risk in traditional life insurance plans is covered by life insurance
companies. Moreover, the investment decisions are made in accordance with the IRDAI rules and regulations,
ensuring stable returns with minimal risk.
Investment income is disseminated amongst the policy holders through yearly bonus. These insurance policies
are ideal for those policy holders who are not market savvy and do not wish to take huge investment risks.
1.Term Life Insurance
2.Whole Life Insurance
3.Endowment Policy
UNIT LINKED INSURANCE PLANS
Unit Linked Insurance Policies or ULIPs are insurance policies which offer the capability of one’s wealth
creation while providing the security of a Life Cover. In ULIPs, a part of the premium is assigned towards one’s
Life Cover and the rest is appointed to a common pool of money, called fund, which is simultaneously invested
in equity, debt, or a combination of both. The returns on investments depend upon the performance of the
funds opted by the policyholder.
They provide a blend of risk cover and investment. All the more significantly they offer the flexibility to decide
one’s risk-taking profile. ULIPs offer a complete selection of high, medium and low risk investment options
under a similar approach. One can choose an appropriate policy according to their risk-taking appetite,
combined with the opportunity to switch between fund options without any additional cost for specified
number of switches.
ULIPs provide the flexibility to choose the sum assured and investment ratio in the yearly targeted premium. It
additionally offers the adaptability of one time increase in investment portfolio, through top-ups to avail
investment opportunity offered by external environment or own income flows.
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PROJECT 1- FUNDAMENTAL ANALYSIS
SECTOR INTRODUCTION
India is usually referred to as the “pharmacy to the world”, standing at 3rd place in total production volume
and 10th by value in the entire world. According to National Indian Promotion Agency, it is the biggest
producer of generic medicines and vaccines, occupying 20% volume share in generics and 62% in vaccines.
The Indian pharmaceutical sector is currently estimated at US$ 41 bn and is expected to grow to US$ 65
billion industry by 2024.
It can be classified into two categories – domestic and exports.
• The domestic market size stands at US$13 billion, with important medicines accounting for 66%
of the market share and chronic treatments accounting for 34% of the market share. In the
domestic market, anti-infectives (13.6%), cardiac (12.4%) & gastrointestinal (11.5%) have the
biggest market share in terms of revenue.
• The global market size stands at US$ 943 billion driven by the United States with a market size of
US$ 439 billion (47%), followed by Europe (15%), China (8%), and Japan (8%).
• The export business can be further classified into four segments – Active Pharmaceutical
Ingredients (APIs) (branded and generic), Formulations (branded and generic), Contract
Research and Manufacturing Services (CRAMS), and Biosimilars.
India’s ability to manufacture high-quality, low-priced medicines, presents a huge business opportunity for
the domestic industry. India’s cost of production is approximately 33% lower than that of the US.
Influx of first-time patients into the healthcare ecosystem from the National Health Protection Scheme
(NHPS)- a scheme providing free health coverage at the secondary and tertiary level to the poor and
vulnerable sections of the population, relaxation of regulations for patented drugs, and increasing spend on
preventive healthcare could emerge as major growth drivers for the sector over the next few years.
FUTURE PROSPECT
Medicine spending in India is projected to grow 12% over the next five years, leading India to become one of
the top 10 countries in terms of medicine spending.
The Indian Government has taken many steps to reduce costs and bring down healthcare expenses. Speedy
introduction of generic drugs into the market has remained in focus and is expected to benefit the Indian
pharmaceutical companies. In addition, the thrust on rural health programmes, lifesaving drugs and preventive
vaccines also augurs well for the pharmaceutical companies.
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STEPS INVOLVED IN FUNDAMENTAL ANALYSIS
• Selection of large cap companies from Pharma sector is done, with respect to the market
capitalization. i.e. stocks with market cap of more than INR 5000 Cr.
• 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.
• Dividing the stocks in our index into undervalued and overvalued stocks by comparing their P/E ratio
to the sector P/E. Stocks with P/E ratio more than sector categorised as overvalued stocks and stocks
with P/E ratio less than sector considered as undervalued stocks.
• Selection of value-picks from undervalued stocks through top line and bottom-line analysis and
selection of growth-picks from overvalued stocks through PEG ratio analysis.
• Determining five major ratios and their appropriate weightage for the analysis of the Pharma sector.
• Ranking of the selected value-pick and growth-pick on the basis of these weighted ratios.
• Allocation of Fund (10 Cr) on the basis of their ranking.
• Calculation of NAV done on daily basis, keeping number of units constant (1 Cr) to analyse the
performance of our carefully curated sector fund consisting of only value and growth pick stocks.
• Finally making of the fund sheet to determine the overall performance of our sector fund in
comparison to the overall Automobile sector. i.e., comparing NAV with the Benchmark Index.
A. SELECTION OF LARGE CAP PHARMA COMPANIES (> 5000 Cr)
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B. CREATING OUR OWN INDEX
Index is an answer to the question “How is market doing?” We can also say, Index is a thermometer to
measure temperature of market. Index is a portfolio (Bundle of securities) of some stocks selected from
various sector or form same sector listed on the exchange.
• Major Indices of India are:

- NIFTY 50
- SENSEX (S&P BSE SENSEX)
What is the Difference between Sensex and Nifty?
Despite the similarities they share by virtue of being broad-market indexes, there are a few pointers to Sensex
vs Nifty that one ought to note.
Parameters NIFTY SENSEX

Full Form National & Fifty Sensitive & Index
Aliases Nifty 50 and S&P CNX Fifty S&P BSE
Owned by Both owned & manged by IISL BSE
Base number 1000 100
Base period 3rd Nov 1995 1978
Base Capital Rs. 2.06 trillion N/A
No. of constituents 50 companies 30 companies
No. of sectors covered 25 sectors 13 sectors
How to calculate Index?
So, the project was to make the index of our own, in which we have made a sector index, the following steps
are taken to calculate and form a new Pharma Index. In which I have recorded and maintained the index on
daily basis.
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Step 1- Set a base value of say, 1000.
Step 2- Closing price of the stocks and percentage change in price of stocks of a particular company is noted
down on a daily basis.
Step 3- In this step market capitalisation is calculated by multiplying the number of shares outstanding with
the share price of the stock.
Step 4- Then each stock is assigned weight depending on the total market capitalisation.
Step 5-We calculate the percentage change by observing the price of the share with the current price.
Step 6- Now the percentage change is multiplied with the base value to find the new index price.
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C. DIVISION OF STOCKS INTO UNDERVALUED AND OVERVALUED
In this step we have to divide our 10 stocks 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
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D. SELECTION OF VALUE-PICK AND GROWTH-PICK STOCKS
Now we have to do the selection of value-picks from the Under-valued stocks and Growth-picks 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 Value pick stocks
We are analysing the undervalued stocks where we observe whether the company’s revenues and profits are
increasing over the year and is the company worth investing. Also, to find out whether company can beat its
competitors in near future.
There are four conditions for selecting and rejecting the undervalued stock. These are as follows:
• If both revenue and profit is increasing when compared to previous year then we will select that
stock.
• If revenue is more than its previous year’s revenue and if profit is less when compared to its previous
year then, we will select the stock as only revenue is increasing.
• If revenue is less than its previous year’s revenue and if profit is more when compared to its previous
year then, we will select the stock as only profit is increasing. If one is increasing and other is
decreasing then it will be considered by seeing top line factors.
• If both revenue and profit is decreasing when compared to previous year then we will reject that
stock.
As per my analysis, out of all the undervalued stocks only Bajaj Auto, Hero MotoCorp and Escorts are those
whose total revenue and total profits have increased from past 2 years implying that even though they are
undervalued they have a potential of fetching good returns in the near future and are hidden gems. Hence,
considered as value pick stocks.
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Finding Growth pick stocks
We are analysing the overvalued stocks where we observe the company’s P/E ratio and Earnings per Ratio.
With the help of these two ratios, we find out PEG ratio which indicates whether the stock is under-priced or
overpriced
There are three conditions to selecting and rejecting the overvalued stocks. These are as follows:
• If the PEG ratio is < 1 then one must buy the stock as it is considered as undervalued or below its fair
value.
• If the PEG ratio is > 1 then one must sell the stock as it is considered as overvalued or above its fair
value.
• If the PEG ratio is = 1 then it is considered as equal to growth rate.
As per my analysis since none of the stocks fulfil the above-mentioned criteria, all of them were rejected.
Therefore, we have 3 value picks and 0 growth picks in our SECTOR FUND.
E. RATIOS
After getting the value pick and growth pick companies, we then do the ratio analysis of the companies. The
five ratio which we have used for our study are:
➢ Asset turnover ratio

➢ Inventory turnover ratio
➢ Return on asset
➢ Current ratio
➢ Quick ratio
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F. RANKING
Ranking is essential as it would enable us to figure out which companies are suitable for investing and provide
more returns for a period
• The ranking is done for each ratio analysed for each company.
• Next step is to allocate weights to each ratio based on their weightage towards the sector.
• Final Ranking is given to the stocks on the basis of weighted ratios.
• Once the companies are ranked, the sum of the ranks for each company will be calculated. It is done
by adding all the ranks that each company has obtained in the 5 ratios.
• From the sum of the ranks the final ranking of the selected companies is determined. The lower the
sum, the higher in the ranks the company will be positioned. Hence the company with the lowest sum
will be Rank 1 and the company with the highest sum be ranked.
G. FUND ALLOCATION
The company with the highest rank will be allocated the most fund and allocation will gradually decrease to
the lesser ranked companies. The total allocation has to add up to ₹ 10 crores.
After the allocation of the funds the daily NAV (Net Asset Value) is calculated of portfolio according to the
changes in the prices of the stocks. The closing price and allocation of fund changes every day but the number
of shares remain unchanged.
Since, this is a long-term analysis so the result of it will be seen in a minimum of 1 year. The NAV is expected to
beat the index and showing the analysis to be accurate.
NAV = AUM/No. of shares
AUM = Asset under management
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RANK WISE ASSET ALLOCATION
Overview of NAV vs Benchmark Index
NAV Vs Index Curve

4.00%
3.00%
2.00%
1.00%
0.00%
-1.00%
-2.00%
-3.00%
Index % Change NAV% Change
From the above line graph, we can clearly see that the NAV (Orange) is above the Index (Blue) which says that
my NAV values are beating the INDEX values. This concludes that though my INDEX starts to fall because of the
fall in share price, my asset allocation would still be having good value. This is because of the proportion of
amount I have allocated for different stocks and can also say the fundamental and technical analysis
performed by me are up to the mark and will be fetching long term appreciation of the fund that the investor
will be investing.
The Fund Fact Sheet for my Pharma Sector Fund is illustrated on the following page.
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PHARMA LARGE CAP SECTOR FUND
About the Fund Date of Inception – 30th March 2020
OBJECTIVE: To provide long term wealth maximization by maintaining a well – diversified equity
portfolio predominantly comprising of deep value stocks with strong price and equity momentum.
STRATEGY: To build and manage a well – diversifies 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. The fund would seek to identify
companies, which have attractive business fundamentals, competent management and prospects of
robust future growth and are yet available at a discount to their intrinsic value and display good
momentum. The fund will also maintain reasonable levels of liquidity.
NAV as on 30th March 2020: 10 BENCHMARK: Pharma Index
Asset held as on 30th March 2020: 10cr FUND MANAGER: Bhoomit Masani
NAV Vs Index Curve

4.00%
3.00%
2.00%
1.00%
0.00%
-1.00%
-2.00%
-3.00%
30 March…
01 April 2021
03 April 2021
05 April 2021
07 April 2021
09 April 2021
11 April 2021
13 April 2021
15 April 2021
17 April 2021
19 April 2021
21 April 2021
23 April 2021
25 April 2021
27 April 2021
29 April 2021
Index % Change NAV% Change
SECURITIES HOLDING Companies Allocation
EQUITY 100%
Asset Allocation (CR)
30000000
25000000
20000000
15000000
10000000
5000000
0
Aurobindo…
Cipla
Laurus Labs
Pfizer
Ipca Labs
Ajanta Pharma
Cadila Health
Glenmark
Alkem Lab
Alembic Pharma
Torrent Pharma
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PROJECT 2 - TECHNICAL ANALYSIS
Technical Analysis is at the opposite end of the stock analysis rainbow. It uses candlestick charts instead of
financial data and Indicators instead of arriving at an intrinsic value of any stock.
Technical analysis does use the price, oscillators, volumes, charts, price actions, and moving averages of the
stock to predict future chart patterns and analyse historical patterns but does not concern itself with analysing
factors affecting the price of the market.
This analysis majorly focuses on quick buying and selling (short-term) and hence helps stock traders more.
CHART PATTERNS
There are hundreds of thousands of investors who are buying and selling securities for a wide variety of
reasons on a daily basis. Chart patterns is a pictorial representation of all buying and selling by consolidating
the forces of supply and demand. As a complete pictorial record of all trading, chart patterns help the trader to
analyse the battle raging between bulls and bears and thus make decision for taking position.
A chart pattern is a shape formed by the candles within a price chart that helps the trader to forecast the price
movement based on the past record. Chart patterns are the basis and one of the most integral aspect of
technical analysis Chart pattern analysis can be used to make short-term or long-term forecasts. The data can
be of any time period i.e., intraday, daily, weekly or monthly and the patterns made can be as short as one day
or as long as many years.
There is no one ‘best’ chart pattern in particular as all of them are used to highlight different trends in a
different variety of markets. Some patterns are more suited to a volatile market, while some are best used in
a bullish market, and others are best used at the time of bearish market.
Before understanding the chart pattern, it is very important for the trader to know about the support and
resistance levels. Support refers to the level at which the price of stock stops falling and bounces back up,
whereas Resistance is where the price of stock stops rising and falls back down.
Types of chart patterns:
Chart patterns fall broadly into three categories:
Continuation patterns: This pattern signals that a trend which is going on will keep continuing.
Reversal patterns: It indicates that a trend may be about to change its direction.
Bilateral patterns: Bilateral chart patterns let traders know that the price could move either way – meaning
the market is highly volatile
One of the most important things that a trader needs to remember while using chart patterns as part of the
technical analysis, is that they do not guarantee that a market will move in that predicted direction only, they
are simply an indication of what may happen to the price of the stock.
Few of the important chart patterns which a trader observes while doing the technical analysis are:
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• Rounding Bottom
A rounding bottom chart pattern signifies a continuation or a reversal in trend. For instance, when in an
uptrend the prices of a stock may fall back slightly before rising once more. This is a long-term reversal pattern
that represents a long period that turns from a bearish bias to a bullish bias. It graphically forms the shape of
“U” from the series of price movements.
It will signal a buy when the price will break the resistance and continue making the uptrend.
CIPLA LTD
• Cup with Handle

As the name implies, there are two parts to the pattern: the cup and the handle. The cup formed is exactly like
the rounding bottom. As the cup is completed, a trading range is developed on the right-hand side and is
called the handle. A subsequent breakout from the handle's trading range signals a trader to take a long
position.
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• Head and Shoulder
A head and shoulder pattern is made after an uptrend, and its completion marks a trend reversal. The pattern
consists of three successive peaks with the middle peak (head) being the highest and the other two outside
peaks (shoulders) being low and roughly equal. They will all fall back to the same level making a neckline
There are two types of head and shoulder:
Head and shoulder top: in this the after the third peak has fallen to the level of the neckline, known as support
in this case, it is likely that it will breakdown into a bearish downtrend and signals a sell position when the right
shoulder crosses the neckline.
Head and shoulder bottom: in this after the third peak rises back to the level of the neckline, resistance in this
case, it is likely to breakout into a bullish uptrend and signals to take a long position when right shoulder
crosses the neckline.
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• Bump and Run Reversal
As the name infers, the Bump and Run Reversal (BARR) is a tend reversal pattern that is formed after excessive
speculation makes the prices go up too far that to very fast.
The first portion of this chart pattern represents an uptrend. In this portion prices rise in a normal manner and
there is no excess speculation. The trend line would be moderately steep. The swing lows of the uptrend are
connected with a trendline which is made and they are referred to as the lead-in trendline.
The second part of the Bump and Run chart pattern is defined as the bump. The prices move further away
from the trendline in this phase. The prices of the stock rise rapidly in this stage. Then comes the Run phase
where the prices start to fall and reach back to the trendline. When the price breaks the trendline we take the
short position. The trend can change either sideways or in downward direction.
BUMP
• Double Top
Double top is yet another chart pattern that a trader uses to understand the trend reversal. As the name
indicates, there are two consecutive peaks that are roughly almost equal with a trough in between in this
pattern. An asset’s price will first experience a peak, and then come back to the level of support. It will then
climb up once more making another peek and then reverse back breaking the support and signalling to take a
short position for the trader.
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• Double Bottom
This is similar to the double top but just in different direction. This is a major trend reversal pattern which is
formed after a continuous downtrend. The pattern is made up of two consecutive troughs which are roughly
equal to each other, with a moderate peak in between. The prices of the stock will rise to the level of
resistance before falling again and then finally the trend will reverse to upward trend and once the prices
break the level of resistance, it indicates the trader to take the long position. Double bottom is a bullish
reversal pattern.
• Ascending Triangle
It is a bullish continuation pattern which indicates the continuation of the uptrend. Ascending triangles have
two or more identical peaks which allows to form a resistance. There is also an up trendline indicating the
trend. When the uptrend line crosses the resistance, it signals the trader to take the long position for the
stock.
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• Descending Triangle
Descending triangle is an opposite of the ascending triangle. It shows the bearish continuation of the
downtrend. In these two or more comparable lows are formed which create a support for the prices. Secondly
there is a downward trend line and when that trend line crosses the support, it indicates the trader to take a
short position for the stock.
• Symmetrical Triangle
This pattern can either be bullish or bearish depending on the market. It is basically a continuation pattern i.e.;
the trend will be in the same direction of the market. In this pattern the trend can either break the resistance
and go in the upward direction signalling a long position for the trader or it can break the support and go in the
downward trend signalling a short position.
DIVIS laboratories ltd.
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Wedges
This is a chart pattern formed with the two sloping trendlines made according to the price movements. The
upper trend line is made by joining the highs and the lower by joining the lows. There are two types of wedge:
rising or falling.
Rising Wedge: This indicates a trend reversal. This occurs when a securities prices have been continuously
rising but can now start to fall indicating a downward trend. Rising wedge, after the breakout of the lower
trend line, indicates a potential fall in prices. The traders then can take a short position in the market.
Falling Wedge: It occurs when the price action forms a downward cone. The prices of the security have been
continuously falling but at a point there can be a trend reversal and thus changing the downtrend to an
uptrend. Once the prices cut the upper trendline it indicates that rise in price will continue and the traders can
now take a long position in the market.
IPCA Laboratories- Falling wedge pattern.
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OSCILLATORS
If you look at the charts for the trade, you might see different lines all over the charts. These lines are referred
to as ‘technical indicators’. They help the trader to identify and analyze the price movement of the security.
Indicators are made by the successful traders to help the traders to make trading decisions by predicting the
trend.
Indicators are of two types: leading and lagging. A leading indicator leads the price, which means they usually
signals the occurrence of a trend reversal or a possibility of a new trend in advance. A majority of leading
indicators are called oscillators as they oscillate within a bounded range.
On the other hand, a lagging indicator is a one that lags the price; which means they usually signals the
occurrence of a reversal or a new trend after it has occurred .
What is an Oscillator?
Oscillators are considered as the momentum indicators which are used to conduct technical analysis of the
stocks. It constructs high and low bands in between 2 extreme values and create a trend indicator that changes
within these ranges.
This trend indicator allows the trader to discover short term overbought or oversold conditions in the market
and use it to plan their next move in the stock market. When the value of oscillator moves towards upper
extreme value it means that asset is overbought and if it moves towards lower extreme value it means that
asset is oversold.
Oscillators are usually most advantageous when the traders are not able to interpret the trend in the
company’s stock prices clearly and are typically used in conjunction with other technical analysis indicators to
make trading decisions.
The major oscillators explained are :
• Super Trend
• VWAP
• RSI
• Stochastic RSI
• Aroon 14
• Bollinger Band
• MACD
• Fibonacci Cross
• Pivot Point Standard
• Central Pivot Range
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1) Super Trend
‘Super Trend’, as the name suggests, it is a trend-following indicator This is an indicator which gives you a
precise buy or sell signal in a trending market. It basically indicates the direction of the price movement in a
trending market, that is following any particular path. This indicator is plotted in the stock price charts only for
the investors to see marked current trend. The indicator changes colour signalling the buying or selling
decision. It is shown in red when prices have fallen and green when prices have risen. It is one the most easy to
use indicators which also give an accurate reading for the ongoing trend.
The Super Trend indicator turns green showing a signal to enter the market i.e. buy the share and it turns red
to give a sell signal for the stock.
Below is the example of GLAND, where we Short it at 2840.41 following the direction of Super trend indicator
and also the target of 2% was achieved.
On the other hand we purchased the share of Cadilahc at a price of 572.85 when indicator signalled the buying
sign and we achieved our target of 2%.
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2) VWAP
VWAP or the volume weighted average price is a trading indicator which takes out the averages of the closing
price in the given period and also focuses on the periods with higher volume. As this indicator uses the values
from the past, it is considered to be a lagging indicator.
VWAP is a single curved line on the chart itself which indicates a long position when a candle cuts the VWAP
line from the below to up , it shows that there is a strong bullish move that has managed to break the average
value on the chart and the next candle made is of the same trend and is above the VWAP line.
Below is an example where we purchased the share of LaurusLabs at a price of 484.95 with the help of VWAP,
also the of 2% was achieved.
On the other hand we short a trade when a candle cuts the VWAP line from the above to below showing a
bearish breakout and the next candle made is in the same trend and far from the VWAP line. Following the
VWAP indicator below is an example of Lupin where the stock is short at a price of 1205.59, and the target of
2% achieved.
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3) RSI
The relative strength index (RSI) is a momentum indicator which is used in technical analysis which helps to
measures the magnitude of recent price changes to evaluate whether the stock is overbought or oversold. The
RSI is shown as an oscillator and it can have reading from 0 to 100.
When the value of RSI crosses the 70 band, it shows that the stock is overbought or overvalued, thus it is
suggested to short the stock in that situation as here is an expectation of trend reversal then.
Whereas when the value of RSI is below the 30 band, then the stock is considered to be oversold or
undervalued, thus it is suggested to long the stock in that situation.
Below is the example of Cipla where we Short at the price of 910.75 by using the RSI indicator and achieve the
target of 2%.
On the other hand, we also Long a stock of Gland Pharma at 2759.05 with the help of RSI and also achieved the
2%target.
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4) STOCHASTIC RSI
The Stochastic RSI indicator (Stoch RSI) is an indicator of an indicator. It helps to take out the stochastic
calculation to the RSI indicator during the technical analysis. This means that it’s s a measure of RSI which is
relative to its own high/low range over a user defined period of time.
The blue line represents the Stochastic and the re line shows the RSI. It is suggested to take the trade when it
is outside the purple range. We Short when Stochastic cuts RSI line from above showing that the stock is
overbought.
Below are the examples showing both Short and Long of a trade using the Stochastic RSI indicator.
Using the Stochastic RSI indicator, we had Short the stock of Sun pharma at a price of 696.8 and the target of
2% achieved.
On the other hand we long the stock when the Stochastic line cuts the RSI line from above showing that the
stock is oversold. We had Long the stock of Laurus Lab at a price of 514.35 which achieved its target of 2%.
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5) AROON 14
It is a technical indicator which is used to identify trend changes in the price of an asset, and also the strength
of that trend. The Aroon indicator is made of two lines Aroon up and Aroon down which measures the number
of periods since a high or a low respectively.
The crossover of both the lines represents the trend change. When Aroon up cuts Aroon down from the
below, it represents a uptrend, suggesting to Long the trade.
For instance in the below stock of Laurus labs, by using the Aroon 14 indicator we purchased the stock at the
price of 485.83 and achieved the target of 2% i.e. 163.49.
On the contrary when Aroon down line cuts the Aroon up line from above it is suggested to short the stock as
there will be a downtrend following it.
In the below stock of Cadilahc we have short it at 605.48 achieving the 2% target too.
NOTE : We do not take a trade when the crossover is exactly at the 50 period.
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6) BOLLINGER BAND
A Bollinger Band is a tool used for technical analysis which comprises of three trendlines which are
two standard deviations (positively and negatively) away from a simple moving average (SMA) of a stock’s
price, but it can be adjusted according to the preferences of the user. The two standard deviation lines are the
upper and lower band of the indicator.
This indicator suggests to short a trade when a candle touches the upper band and the next candle formed is
of downtrend. The first target will be the middle line i.e. the average line. If a candle touches the average line
it is assumed that the price of the stock will go more down.
Below we have short the stock of Cipla at a price of 931.98 using the Bollinger Band indicator and the target is
achieved
On the other hand when the candle cuts the lower band and the next candle shows an uptrend we long the
trade.
Just like in the stock of Lupin, we have purchased the stock at a price of 1052 and the first target is achieved
and also we see that the price of the stock has reached the other target too i.e. the upper band. After it
touches the upper band, a side trend is followed.
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7) MACD
MACD or the Moving Average Convergence Divergence indicator is a trend – following momentum indicator.
As the name suggests, it helps the user to understand the relationship between the two moving average of the
stock price. When the two moving average lines moves toward each other, Convergence occurs and when they
move away from each other, divergence occur.
Red line is called the signal line whereas the black line is called the MACD line and MACD line minus the signal
line is the zero line.
This indicator signals to short a trade when the MACD line cuts the signal line from above till the zero line, we
short at the zero line
For instance we have Short the CIPLA stock at a price of 955.18 with the help of this indicator and also we
achieve the target of 1.5%.
On the contrary when the MACD line cuts the signal line from below till the zero line, we long at the zero line.
For instance by using the MACD indicator we purchased the stock of Cadilahc at a price of 565.27 and also we
were able to meet the target of 2%
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8) FIBONACCI CROSS
This indicator helps the trader with the help of two moving average lines to understand the trend change. In
this indicator when the moving average line of 21 days cuts the moving average line of 55 days from below, it
is said the trend will go upward, thus targeting to take a long position. The intersection point at which moving
average of 21 days cuts the moving average of 55 days from below is called the Golden Cross.
In our trade we have taken the long position in the stock of CIPLA at the price of 829.69 but the target of 2%is
not achieved.
On the other hand when the moving average line of 21 days cuts the moving average line of 55 days from
above, it is said the trend will go downward, thus targeting to take a short position. The intersection point at
which moving average of 21 days cuts the moving average of 55 days from above is called the Death Cross.
For instance using this indicator we have short trade of IPCALAB at a price of 2078.51 and achieved the target
of 1.5%.
NOTE : In brown is the Moving Average line of 21 days and in blue is the Moving Average line of 55
days.
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9) PIVOT POINT STANDARD
Pivot Points Standard is a technical indicator used to determine the general trend of the market over various
time frames and detect future potential resistance/support levels which are estimated on the basis of high,
low and close of the previous time period.
It consists of a pivot point (PP) level and several support (S) and resistance (R) levels
Trading above the pivot point on the current day indicates ongoing bullish movement and trading below the
pivot point shows a bearish sentiment. Also, if the price goes through the resistance/support levels it tells the
trader that the price is trending in that direction.
Unlike other moving oscillators, they are static and stay at the same prices throughout the day. Hence,
investors can use these levels to plan out their trading in advance. For example, they will know well in advance
that, if the price goes down below the pivot point, they will should start short selling and If the price rises
above the pivot point, they should start holding long positions.
For instance we have purchased the share of Sunpharma at a price of 606.19 and the target is achieved.
The stock of Cipla is sold at 894.19 by using this indicator and the target has been achieved as the prices are
falling till resistance1.
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12) CENTRAL PIVOT RANGE
CPR indicator provides a range that incorporates 3 different levels, which are the pivot point, top central pivot
point, and bottom central pivot point.
The CPR lines indicate a bullish outlook if they continually move up and the closing price remains higher than
the TC value whereas if the CPR lines portray an overall downward movement and the closing prices remain
lower than the BC value, then it indicates a bearish outlook.
Breakout points occur when the price moves beyond the TC or BC level indicating an opportunity to buy/sell.
When the market price of the stock is higher than the TC level a trader should look for opportunities to buy.
Similarly, when the market price of stock is lower that BC a trader should look for selling opportunities.
For instance by using this indicator we have taken the trade of Cipla by short selling the stock at 888.99 and
the target of 2% achieved.
On the contrary we have bought the share of Sunpharma at the price of 604.97 and the target of 2% also
achieved.
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For all the oscillator we have conducted the backtest for a year on the stock of BPCL, results of which are as
follows:
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After conducting the back test for all the oscillators for the stock of BPCL, we have taken out the winning and
losing probability of them and ranked the oscillators according, which is as follows :
As we can see the winning probability of the oscillator “Bollinger Band” is the highest with 0.55, thus it is
considered to be the best options amongst the rest.
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PROJECT 3 - TECHNICAL INTRADAY STRATEGIES
• Bullish Engulfing
Bullish Engulfing pattern is an essential bottom reversal pattern. It emerges after a downtrend. so
basically, this pattern helps in identify the trend change from a downtrend to an uptrend. In this, a large
green/blue/white candle completely engulfs the previous small red/black candle more than 80% of the
candle. Though it is not necessary for the green/white/blue candle to engulf the wick or tail of the
preceding red/black candle, it should cover the entire body. It's an important uptrend reversal signal.
Heavy volume on the second day of the pattern creates a higher probability of trend reversal.
Kindly check the image below the black line shows the downtrend and the circled pattern is a bullish
engulfing pattern and after that trend changes.
Bullish engulfing pattern
• Bearish Engulfing
Bearish Engulfing pattern is an essential top reversal pattern. It emerges after an uptrend. so basically, this
pattern helps in identify the trend change from an uptrend to a downtrend. In this, a large red/black
candle completely engulfs the previous small green/blue/white candle more than 80% of the candle.
Though it is not necessary for the red/black candle to engulf the wick or tail of the preceding
green/blue/white candle, it should cover the entire body. It's an important downtrend reversal signal.
Heavy volume on the second day of the pattern creates a higher probability of trend reversal.
Kindly check the image below the black line shows the uptrend and the circled pattern is a bearish
engulfing pattern and after that trend changes.
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Bearish engulfing pattern
We applied these strategies in various charts and in different companies to check the probability of the
efficiency of these patterns.
As In the below image you can check out the recorded trades with profit and the loss in each transaction, all
these trades are taken on the basis of these engulfing strategies the bull 180 means bullish engulfing and all
the bear 180 is bearish engulfing.
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Bullish engulfing pattern screenshots
No.7 Heromoto corp trade
No. 28 Torent Pharma trade
Bearish engulfing pattern screenshots
No.3 UPL trade
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• Fibonacci Golden cross
The golden cross appears when a short-term moving average cross over an important long-term moving
average from downside to the upside than it is a signal of the trend change to an upward turn in a market.
Basically, the short-term moving average trends up faster than the long-term average, until they cross.
There are three stages to a golden cross:
o A downtrend that eventually ends as selling pressure is completed.

o A second stage where the shorter moving average crosses up through the longer moving average.
o Finally, the continuing uptrend, hopefully leading to higher prices.
• Fibonacci Death cross
Conversely, a related downside moving average crossover forms the death cross and is understood as a signal
of the decisive downturn in a market which will be a trend change from up to down.
The death cross appears when the short-term average goes down and crosses the long-term average, basically
going in the opposite direction of the golden cross.
We applied these strategies in various charts and in different companies to check the probability of the
efficiency of these patterns.
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As In the below image you can check out the recorded trades with profit and the loss in each transaction, all
these trades are taken on the basis of these golden cross and death cross strategies the buys mean golden
cross and all the shorts are death cross.
Fibonacci golden cross & death cross screenshot
No.7 ultra cement golden cross
No.5 HDFC life death cross
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• Opening Range Breakout
This strategy is based more on observing past data patterns than the pattern on the day itself. This strategy
suggests doing backtest on the stocks and checking whether the stock has broken its Opening Range during
the full day of trading itself. It basically means that during the opening hours of the Stock market i.e 9:15 to 10
A.M is the time when Intitutional buyers deal in huge volumes of stocks and generally the retail investor or an
individual investor waits till 10 A.M to deal in the market. The strategy asks the investors to pin down the
range of the opening 45 minutes and check whether the stock was able to break out its range. 15 minutes
candles are suggested for this purpose. Also a Trigger Price of 1.5% of the Buying Price and the Stop Loss at 1%
of the buying Price is suggested
We have taken the trade on daily basis. These trades were not actually done but they were just paper trades.
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Here are some of the screenshots for the trades :
No.6 shreecem
No. 9 ultracemco
No. 28 Dr. Ready
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Conclusion for intraday strategies
We have learnt and implied the various strategies explained above during the course of our internship. The
bullish engulfing, bearish engulfing, Fibonacci golden and death cross were the ones we actually took trades in
the live market but on the other hand opening range breakout strategy was performed on daily basis after the
market closed as just paper trade.
We observed that the success of each strategy was as follows:
Strategy Probability of Success

1. Bullish and Bearish Engulfing 59.45%
2. Fibonacci Golden and Death Cross 62.5%
3. Opening Range Breakout 67.5%
Out of all the trades taken, above mentioned are the probability of success for each strategy. Opening Range
Breakout gave the maximum success rate of 67.5% followed by Fibonacci Golden and Death Cross with 62.5%
and lastly Bullish and Bearish Engulfing Bullish and Bearish Engulfing with 59.45%.
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PROJECT 4 - DERIVATIVE
Derivative is an instrument or a product whose value is derived from the value of underlying asset.
Derivatives depend on wide range of underlying asset. These include:
• Metals, for example, Gold, Silver, Aluminum, Copper, Zinc, Nickel, Tin, Lead etc.
• Energy resources, for example, Oil (unrefined petroleum, items, breaks), Coal, Electricity,
petroleum gas etc.
• Agri-commodities, for example, wheat, Sugar, Coffee, Cotton, Pulses and so on and
• Financial assets, for example, Shares, Bonds and Foreign Exchange.
Importance of derivatives
• Like different portions of Financial Market, Derivatives Market serves following functions-
Improvement in price discovery dependent on actual valuations and desires is done with the
help of derivatives market.
• Derivatives market helps in transfer of different risk from those who are exposed to risk but
have generally low risk appetite to members with high risk appetite. For instance, hedgers need
to give away the risk whereas merchants are eager to take risk.
• Shifting of speculative trades from unorganized market to organized market is also done
through derivatives. Risk management mechanism of various participants in organized market
provide stability to the financial system.
PRODUCTS IN DERIVATIVES MARKET :

1)Forwards:
It is a legally binding contract between two parties to buy/sell an underlying asset at a specific future
date, at a specific cost that is pre‐decided on the date of agreement.
Both the contracting parties are committed and are obliged to execute the transaction regardless of
price of the underlying asset at the time of execution of the contract.
2)Futures:
A futures contract is like a forward, except that the agreement is made through an organized and
managed exchange instead of being negotiated directly between the parties. So, futures are
exchange traded forward contracts.
3)Options
An Option is an agreement that gives the right, yet not an obligation, to buy or sell the underlying on or
before a stated date and at a stated price. While buyer of option pays the premium and purchases the
right, seller of options gets the premium with obligation to sell/buy the underlying asset, if the buyer
exercises his right.
4)Swaps
A swap is an agreement made between two parties to exchange cash flows on as per a prearranged
formula. Swaps are, comprehensively, arrangement of forward contracts. Swaps help market
participants manage risk related with unpredictable or volatile interest rates, currency exchange
rates and commodity prices
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Futures contract
Futures markets came to beat the limitations of forwards. A future contract is an agreement
made through an organized exchange to buy or sell a fixed amount of a commodity or a financial
asset on a future date at a pre-decided cost. The clearinghouse related with the exchange
ensures settlement of these trades. A trader, who buys futures contract, takes a long position and the
one, who sells futures, takes a short position. The words purchase and sell are metaphorical simply
because there is no physical exchange of cash or underlying asset between buyer and seller.
Features of futures contract
In futures market, exchange decides all the agreement terms of the contract other than price. Futures
contracts have following highlights:
• Contract between two parties through Exchange
• Centralized exchanging platform i.e. exchange
• Price discovery through free interaction of buyers and sellers
• Margins are payable by both the parties
• Quality decided today (standardized)
• Quantity chose today (standardized)
Options contract
An Option is an agreement that gives the right, however not an obligation, to purchase or sell the
underlying asset on or before a fixed date/day, at a stated price, for a price. The party taking a long
position i.e. purchasing the option is called buyer/holder of the option and the party taking a
short position for example selling the option is known as the seller/writer of the option.
The option buyer has the right however no obligation with respect to buying or selling the
underlying asset, while the option seller has the obligation in the contract. Therefore, option buyer/
holder will exercise his option only when the situation seems favorable to him, but, when he decides to
exercise, option writer would be legally bound to honor the contract. Options may be categorized into
two main types: ‐
• Call Options
• Put Options
Options, which gives buyer a right to purchase the underlying asset, is called call option and the option
which gives buyer a privilege to sell the underlying asset, is called put option.
There are three players in the derivative market –Hedgers, Speculators, and Arbitrageurs. Hedgers
are there to hedge their risk, traders take the risk which hedgers intend to offload from their exposure
and arbitragers make profits by exploiting mis-pricing prevailing in markets.
Different participants in derivatives markets-

Hedgers
Organizations, Investing Institutions, Banks and Governments all use derivatives in order to reduce
their risk exposure to market factors, for example, interest rates, share values, bond price,
exchange rates and commodity prices.
Example-A farmer who sells futures contracts to fix the price for delivering a crop on a future date. The
buyer may be a food‐processing organization, which wishes to fix a price for taking delivery of the crop
later on.
Another case is of a company that has to receive a payment in foreign currency on a future
date. In both the examples, buyer and seller are reducing their risk by entering into a derivative contract.
Speculators/Traders
Derivatives are very appropriate to trade on the prices of commodities and financial assets and on key
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market factors, for example, interest rates, stock market indices and currency exchange rates. It is
significantly less costly to create a speculative position using derivatives than actually buying in the
equity markets and as a result, potential returns are also much greater.
Example-A trader who believes that increasing demand or decreasing production is likely to increase the
price of a commodity. He has two options ‐ first option is to buy and store the physical commodity
whereas other option is to go long futures contract. Trader chooses the second option to go long
futures contract on the underlying asset. If commodity price increases, the value of the contract will also
increase and he can reverse back position to book his profit.
Arbitrageurs
An arbitrage is a deal that produces risk free profits by exploiting the mis-pricing in the market. It
happens when a buyer purchases an asset at a lower price in one exchange/market and sell it at a higher
price at another exchange/market. But these opportunities do not persist for too long and therefore,
arbitrageurs do not keep the asset for too long as it will reduce the chances of making large profits.
OPTION STRATEGIES
1. Short Straddle
Short Straddle is one of the options strategies that comprises of selling both a put and a call option
with the similar strike and expiration date. It is applied when one believes that the underlying asset
will not move significantly higher or lower over the duration of the existence of the options contracts.
The maximum profit that can be earned is the amount of premium collected by writing the options
and the potential loss can be unlimited.
The pay off graph made by Opstra is as follows :
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2. Long straddle
Long Straddle is an option strategy wherein one purchases both a long call and a long put on the
same underlying asset with the similar strike price and expiration date. The strike price is usually At –
The – Money or as close to it as possible. Since call option profit from an upward move, and put
option profit by a descending move in the underlying asset, both of these parts offset little moves in
either direction, Therefore the objective of a long straddle is to benefit from a solid move, ordinarily
set off by a newsworthy occasion, in either direction by the underlying security.
3. Short Strangle
Short Strangle is more of a neutral option strategy wherein a slightly Out – The – Money Call and Put
Options are sold at the same time of same underlying security and expiry date. This technique can be
utilized when one expects that the underlying security will encounter a next to no volatility in the
near end. The maximum profit that can be earned is the amount of premium received by writing
options. The probability of the potential loss is unlimited in case the underlying stock moves
significantly in either direction at the expiration date.
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4. Long Strangle
Long Strangle is more of a neutral option strategy wherein a slightly Out – The – Money Call and Put
Options are purchased simultaneously of same underlying security and expiry date. This technique can be
utilized when one expects that the underlying security will encounter significant volatility in the near end. It
is an unlimited profit and limited risk strategy.
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5. Covered Call
A covered call is a strategy which involves trading in both the underlying security or asset and an options
contract. One buys or owns the underlying security or asset. Then they will sell call options i.e. the right to
purchase the underlying security and then wait for the contract to be expired or exercised.
Call that is sold is ordinarily Out – The - Money i.e. the option strike price is higher than the ongoing market
price of underlying security. This way one can earn profit on both option contract and stock if the market
price of the stock stays below the option strike price.
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6. Naked call
Naked call options strategy involves writing or selling call options. In this one expects the market to be very
bearish and in his view the price of the underlying security will go down in future. In other words, trader takes
a single position of selling call option of any type i.e. In- The – Money or Out – The – Money. This a highly risky
strategy with unlimited loss potential and limited rewards (Max profit earned is premium received).
7. Naked Put
A naked put is an options strategy wherein the option writer does not hold the underlying stocks, to cover
the agreement if there should arise an occurrence of task. The options seller receives the premium and
hopes that the underlying stock value remains something similar to the strike price or rises modestly in
which case the seller can retain the premium. A put option buyer will hope for a decrease in the underlying
stock value and upon exercise or expiry will gather cash representing the difference between the strike
price of the option and the price of the underlying stock.
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8. Iron condor
Iron Condor is a non-directional options technique, wherein an option trader consolidates a Bull Put spread
and Bear Call spread to produce profit. In this methodology, there is a high likelihood of limited profit. An
options trader retreats to this strategy in the event when he believes that the market will be rangebound.
The maximum gain possible in an Iron Condor strategy is equivalent to the net premium received adjusted
for commissions. The maximum loss that can occur in this strategy is when the underlying stock price is
higher than the strike price of the Long Call option or when the underlying stock price is less than the strike
of the long-put option.
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9. Calendar Spread
A calendar spread usually includes purchasing and selling a similar kind of option (calls or puts) for the
same underlying security at a similar strike price, but at different (though little contrasts in) expiration
dates. The target for a long call calendar spread is for the underlying security to be at or close, closest strike
price at expiration and exploit close to term time decay. Contingent upon where the stock is comparative
with the strike price when implemented the forecast can either be neutral, bullish or bearish.
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10. Vertical spread
A vertical spread options strategy involves the synchronous purchasing and selling of the options of a similar
kind (i.e., either puts or calls) and expiry, but at different strike prices. Bull vertical spreads increases in value
when the underlying stock rises, while bear vertical spreads benefit from a decline in price. Vertical spreads
limit both danger and the potential for return.
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11. Butterfly Spread
Butterfly Spread is an option strategy which is neutral and has limited risk. It is a combination of various
bull and bear spreads. A holder consolidates 4 option contracts having a similar expiry date at 3 different
strike price points, which makes an ideal range of prices and some profit for the holder. A trader purchases
2 option contracts one at a lower strike price and another at a higher strike price relative to the ongoing
price of the underlying stock. He then also sells 2 option contracts at a strike price in the middle, wherein
the variance between the high and low strike prices is same as the middle strike price. Both Calls and Puts
options can be used for creating a butterfly spread option strategy.
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12. Call Ratio Back Spread
Call ratio back spread is an options strategy that is used by the investors they believe the underlying
security or stock will have a bullish sentiment and rise by a significant amount. It consists of selling or
writing call options and afterward utilizing the gathered premium to buy greater number of call options
have similar expiration date at a higher strike price.
An investor using this strategy would sell lesser calls at a low strike price and purchase more calls at a
higher strike price. The most common ratios used in this strategy for long to short calls are typically 2:1, 3:2
or 3:1 i.e. one in-the-money short call combined with two out-of-the-money long calls, so on and so forth.
This strategy has the potential of unlimited gains based on the fact that the holder is holding more long
calls than short ones.
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PROJECT 5 – MUTUAL FUNDS
Introduction
Mutual fund is a unique fund pooling entity which allows the investors to put their money in a wide range of
securities, such as bonds, stocks or shares through a common platform. This corpus of funds is overseen by a
professional known as a fund manager or portfolio manager. The gains (or losses) on the investment are
shared together by the investors in proportion to their contribution to the fund.
Benefits of taking mutual fund

• Returns
Mutual fund gives an opportunity to the
investors to earn higher yields in contrast to
traditional investment alternatives. The
justification for creating better yield is that the
return on mutual fund is linked to the market
performance. Thus, if the market is on a bull run
and it does incredibly well, the impact would be
reflected in the net worth of your fund.
Accordingly, a poor performance in the market
could negatively affect your investments.
• Diversification
As popularly said, “Never put all your eggs in one
basket”. When an investor invests all of his/her
savings in a single investment, it might transform
into a total misfortune if the market slumps.
However, if an investor pools his/her
investments into diversified assets it may lead to
lower return but it’ll be safer.
• Tax Benefit
Mutual fund investors can claim a tax deduction
of up to Rs. 1.5 lakh by putting their resources into Equity Linked Savings Schemes (ELSS). The following tax cut
is indexation advantage accessible on debt funds. In case of conventional/traditional products, all interest
earned is subject to tax. However, in case of debt mutual funds, only the returns that are earned over and
above the inflation rate are subject to tax. This could help mutual fund investors to earn higher post tax
returns.
• Net Asset Value (NAV) – Net asset value indicates the net value of an entity which is calculated
through deducting net liabilities from net assets. It is used in the mutual funds and represents per
share/unit price of the funds registered with the US securities & exchange commission. Formula for
Mutual fund’s NAV calculation is
Net assets- Net liabilities / Total number of shares.
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Types of Mutual Fund
On the Basis of Investment:
• Growth funds
The principal objective of growth funds is capital appreciation. A significant portion of the money from these
funds are invested in stocks. Growth funds can be relatively riskier due to high exposure to equity and hence it
is good to invest in them for the long-term.
• Income funds
As the name proposes, income funds attempt to provide the investors with a stable income. These are debt
funds that are generally invested in bonds, government securities and certificate of deposits, commercial
papers, etc. They are suitable for investors with different – term goals and a lower-risk appetite.
On the basis of portfolio:

• Equity Funds
These are the funds which are invested in the equity shares of the different organizations. Since they provide
higher return, they are considered as high-risk funds. Equity fund are of following types:
Large Cap Fund:

It is a type of equity mutual fund that invests a large portion of their fund in blue chip companies i.e.,
companies that have a market capitalization of more than 20,000 crore. Example- UTI Flexi Cap Fund
Mid Cap Fund:

They invest in stocks of mid-size companies i.e., companies with market capitalization of 10,000-20,000 crore.
Example- L&T mid Cap Fund
Small Cap Fund:

They invest in stocks of small organizations with a growth potential The Market capitalization of these
companies is less than 10,000 crores. Ex- SBI Small Cap Fund
Multi Cap Fund:

They make investment in stocks of all Large Cap, Mid Cap and Small Cap organizations. These funds are
considered safer than the rest and therefore, returns are also low.
Sector Fund:
It exclusively invests in those business that operates in specific sectors of economy. The Portfolio is built from
investing in stocks of different sectors that can be Auto, Pharma, FMCG, Banking etc. The principal objective is
to benefit from sectors that are performing well keeping in mind the overall investment objective of the
scheme. Example - Financial Services Sector Fund.
Contrarian Fund:
It has contrary view to market view. In this, underperformed companies are recognized where funding is
furnished with conviction to create Long-term capital appreciation. They for the most part give negative
returns during bear market. Example- SBI Contra Fund.
Index Fund:
In this, movement of funds is according to the movement in market index in order to monitor the returns.
Charges of Index Funds are less. Ex- Purchasing shares from BSE Sensex.
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Foreign Funds:
Foreign Fund invests in companies in nations which is other than the one they reside. It is also called
international mutual funds. Investing in them implies more risk, but also chances of higher returns.
Fund of Funds:
It is a mutual fund scheme that invests in variety of other mutual fund schemes. In this, the fund supervisor
holds the portfolio of other mutual funds as an alternative to directly investing in equity or debt fund. The fund
manager may choose to invest in scheme of the identical fund house or some other Fund house.
• Debt mutual fund

These funds are invested in debt instruments like government bonds, company debentures and fixed income assets. Since
they offer fixed returns, they are known to be a safe investment instrument with minimal risk component.
Income Funds:
Income funds are a type of debt mutual fund that attempts to provide a steady rate of returns in all market
scenarios through active and dynamic portfolio management. While it is a debt fund, income funds also run
the risk of generating undesirable returns in many scenarios – such as – interest rates may drop drastically,
resulting in a drop of the underlying bond prices. It’s even possible that the fund manager could pick lower-
appraised instruments that might offer potentially higher returns.
Dynamic Bond Funds:

Through active and ‘dynamic’ portfolio management, dynamic bond funds allow to maximize the returns to
the investors by modifying their investment portfolio depending on market scenarios and fluctuations.
Liquid Funds:
The purpose of investing in a liquid fund is to maintain a high degree of liquidity in the investment. Securities
and instruments that are chosen to be invested in by liquid funds have a maximum maturity period of 91 days.
The reason these are chosen is that they give more significant yields than a savings accounts and provides a
comparable level of liquidity.
Credit Opportunities Funds:

These funds are more of the riskier type. They undertake calculated risks like investing in lower-appraised
instruments to create potentially better yields. Expecting a rise in ratings of papers through market analysis,
fund managers of such funds invest in instruments rated under even “AA”, with the expectation that they will
rise to become higher-rated over time, and thus, rise in value.
Short-Term and Ultra Short-Term Debt Funds:

These fund schemes are predominant among new investors who need a short-term investment with minimal
risk. The paper, instruments, securities, etc. that are invested in by these schemes have a maturity ranging
between 1- 3 years.
-Gilt Funds
These schemes invest fundamentally in government-issued securities which carry a very low level of risk and
are generally rated quite high (as the default rate is exceptionally low and some of the time non-existent). The
downside of these funds is that it lacks risk-taking capacity.
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Systematic Investment Plan
For investing in mutual funds, one need not have large amount of funds. Systematic Investment Plan is an
investment strategy wherein an investor needs to invest the same amount of money in a particular mutual
fund at every stipulated time period.
How do we use it?

Here’s an example to illustrate the SIP point:
Let’s imagine the investor invests Rs. 10,000 per month in an equity fund for 15 years. The fund offers an
annual return of 12%. At the end of the investment period, one would have earned a corpus of over Rs. 47
lakhs. Now, if the investor continues investing the same amount for another ten years (total 25 years), you
would get a total sum of almost Rs.1.6 crore! This is the power of compounding.
The returns the investors earn in turn begin to make profits for investors. So, when one invests for a longer
time frame, one’s gains also rise higher. But to gain the maximum benefit of compounding, one should start
investing as early as possible and invest for as long as possible. This can give one an extended investment
window to increase the return.
We have a project on mutual fund in which we have made our own sector fund, which is Pharma
fund which contains of a group of top performance companies of pharma industry and for
measuring the efficiency of this fund we have also made a benchmark.
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RISK PROFILING QUESTIONNAIRE
1. Name
2. Date of birth
3. Contact Number
4. E-mail
5. What is more important for you as a customer? *
• High risk, High return

• Low risk, Low return
• Moderate risk, Moderate return
6. What is your current stage of life? *
• Single - 8p
• Single with dependent Parents -7p
• Young Family -5p
• Mature Family -3p
• Retired -1p
7. What is your annual income? *
• < 2 Lakh
• 2 – 5 Lakh
• 5 – 10 Lakh
• >= 10 Lakh
• Other
8. How well do you understand investing in the markets? *
• I am new. I don’t understand the markets at all. (1)

• I have a basic understanding of investing. I understand the risks and basic
investment concepts like diversification. (3)
• I have an amateur interest in investing. I have invested earlier and I understand
how markets fluctuate and the pros and cons of each investment class. (5)
• I am an experienced investor. I have invested in different markets and understand
different investment strategies. I have my own investment philosophy. (7)
64 | P a g e
9. What is your investment objective? *
• Reserve Principal (0 pt.)

• Growth (9 pt.)
• Regular Income (3 pt.)
• Income and Growth (6 pt.)
• Exponential Growth (12 pt.)
10. How secure is your current and future income from sources such as salary, pension and
other investments? *
• Not secure (0 points)

• Somewhat secure (2 points)
• Fairly secure (4 points)
• Very secure (6 points)
11. What percentage of monthly income can be invested? *
• 0 to 10% (2 points)
• 11% to 20% (4 points)
• 21% to 30% (6 points)
• More than 30% (8 points)
• I currently have no income (0 points)
12. What levels of profits and losses are acceptable to you? *
• 15% -1% (1 pt.)

• 20% -5% (2 pts)
• 25% -10% (3 pts)
• 30% -14% (4 pts)
• 35% -18% (5 pts)
• 40% -21% (6 pts)
13. You would start to worry about investments if your portfolio value falls: *
• Less than 5% pa (1 pt.)

• 5%-15% pa (3pt)
• 15%-25% pa (5pt)
• More than 25% pa. (7 pt.)
14. What level of risk are you willing to accept on your Investments? *
• I want to protect my capital (1 pt.)

• I am comfortable with small degree of risk (3 pt.)
65 | P a g e
• I am comfortable in accepting the fact that investment could decline. (5 pt.)
• I am willing to tolerate putting my principal amount at risk by investing in volatile
investments. (7 pt.)
15. What would be your preferred duration of investment? *
• Less than 4 months (3 pts)

• 4-6 months (4pts)
• 6 months to 1 year (6pts)
• 1-3 year (7pts)
• More than 3 years (9pts)
16. How would you classify your overall financial situation? *
• No savings and large amount of debt (0pt)

• Small savings and large amount of debt (2 pt.)
• Some savings and some debt (5 pt.)
• Some savings and little or no debt (7 pt.)
• Huge savings and little or no debt (10 Pt)
17. what is preferred by customers? *
• Fund performance (5 pt.)

• Charges (2 pt.)
18. What sector would you choose to invest in? *
• Pharma sector
• Banking sector
• IT sector
• Infrastructure sector
• FMCG
• Energy Sector
19. How would you like to classify or diversify your investment portfolio?
• 70% Debt 30% Equity

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Portfolio Distribution
Sector Preference
Investment Preference
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The people who filled the questionnaire have been framed either conservative, moderate, balanced,
assertive or aggressive based on their individual scores and are advised accordingly to choose from
the large, mid and small cap funds to invest in. The framing has been done on following criteria: -
Investor profile Score Description

You are a conservative investor whose priority is
Conservative 0-15 points the safeguarding of your current investment capital over
the desire for increasing potential returns.
You are a moderate investor primarily seeking income
with some potential for capital growth. You prefer a low
Moderate 16-30 points level of investment value volatility and therefore you are
willing to accept lower potential investment returns.
You are a balanced investor with some understanding of
investment market behaviour. You prefer a balance
Balanced 31-50 points between capital growth and capital security. You are
prepared to accept some short-term risk in order to gain
longer term capital growth.
You are an assertive investor who understands the
movement of investment markets. You are most
interested in maximizing long-term capital growth,
Assertive 51-69 points although you do not wish to make unbalanced investment
decisions. You are happy to take calculated risks in order
to maximize long term capital growth. Tax advantaged
investments are a focus.
You are an aggressive investor with a strong bias towards
investments with high growth potential due to your
investment experience. You are willing to accept higher
Aggressive 70 + points performance fluctuations in return for potentially higher
long-term capital growth. You also have a greater focus
on tax advantaged investments and/or leverage of your
assets to further improve capital growth potential.
Risk Profile Conservative Moderate Balanced Assertive Aggressive

No. of 9 13 15 7 6
Investors
Suggesting the funds that they can choose from-Here are different types of funds that are being
analysed by their CAGR, NAV, AUM and EXPENSE RATIO.
The investors can invest their desired amount on the fund of their choice, within their risk profile
category, depending on the returns they want to gain and the charges they want to bear.
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References:
https://en.wikipedia.org/wiki/HDFC_Life
https://www.hdfclife.com/
https://www.ibef.org/
https://www.investopedia.com/
https://www.moneycontrol.com/
https://in.finance.yahoo.com/
https://www.bseindia.com/
https://in.tradingview.com/
https://www1.nseindia.com/products/content/equities/indices/sectoral_indices.htm
https://www.investopedia.com/
https://www.ig.com/en/trading-strategies/10-chart-patterns-every-trader-needs-to-know-190514
https://www.dailyfx.com/education/technical-analysis-chart-patterns/double-top-pattern.html
https://www.investopedia.com/terms/m/mutualfund.asp
https://www.moneycontrol.com/mutualfundindia/
70 | P a g e

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THE EQUITY RESEARCH BASED ON FUNDAMENTAL & TECHNICAL

HDFC LIFE INSURANCE COMPANY LTD.

THE EQUITY RESEARCH BASED ON FUNDAMENTAL & TECHNICAL

HDFC LIFE INSURANCE COMPANY LTD.

A report submitted in partial fulfilment of the requirements of MBA Program of

Faculty Guide: Company Guide:

Sr. No. Topic Page No.

3 Project 1 – Fundamental Analysis 9

Project 2 – Technical Analysis 19

5 Project 3 – Intraday Strategies 40

7 Project 5 – Mutual Funds 60

The company is a joint venture between, one of the India's leading

Products & Services

'The most obvious choice for all'.

Types of Life Insurance Policies

Life Insurance policies can be broadly categorized in to 2 types.

1.Term Life Insurance

2.Whole Life Insurance

UNIT LINKED INSURANCE PLANS

It can be classified into two categories – domestic and exports.

• Allocation of Fund (10 Cr) on the basis of their ranking.

A. SELECTION OF LARGE CAP PHARMA COMPANIES (> 5000 Cr)

• Major Indices of India are:

What is the Difference between Sensex and Nifty?

Parameters NIFTY SENSEX

How to calculate Index?

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

Finding Value pick stocks

• If the PEG ratio is = 1 then it is considered as equal to growth rate.

➢ Asset turnover ratio

• Final Ranking is given to the stocks on the basis of weighted ratios.

NAV = AUM/No. of shares

AUM = Asset under management

Overview of NAV vs Benchmark Index

NAV Vs Index Curve

Index % Change NAV% Change

About the Fund Date of Inception – 30th March 2020

NAV as on 30th March 2020: 10 BENCHMARK: Pharma Index

NAV Vs Index Curve

Index % Change NAV% Change

SECURITIES HOLDING Companies Allocation

Types of chart patterns:

Chart patterns fall broadly into three categories:

• Cup with Handle

There are two types of head and shoulder:

DIVIS laboratories ltd.

IPCA Laboratories- Falling wedge pattern.

The major oscillators explained are :

Bullish engulfing pattern

No.7 Heromoto corp trade

No. 28 Torent Pharma trade

Bearish engulfing pattern screenshots

No.3 UPL trade

There are three stages to a golden cross:

o A downtrend that eventually ends as selling pressure is completed.

• Fibonacci Death cross

Fibonacci golden cross & death cross screenshot

No.7 ultra cement golden cross

No.5 HDFC life death cross