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Vinod Pandey Project
Vinod Pandey Project
Vinod Pandey Project
#46, 1st Floor, Y.M.S. Complex, HMT Main Road, Mathikere, Bangalore
Centre Code: 00023 A study on fundamental analysis and its impact on Indian stock market By (VINOD PANDEY)
A project report submitted in partial fulfillment of the requirements for the degree of Master of Business Administration during 2011 of Sikkim Manipal University, INDIA
Sikkim-Manipal University of Health, Medical and Technological Sciences, Distance Education Wing Syndicate House, Manipal 576104
STUDENT DECLARATION
(A study on fundamental
analysis and its impact on Indian stock market) Submitted in partial fulfillment
of the requirements for the degree of Masters of Business Administration to Sikkim-Manipal University, India, is my original work and not submitted for the award of any other Degree, Diploma, Fellowship, or any other similar title or prizes
EXAMINERS CERTIFICATION
The project report of (Vinod Pandey)
analysis and its impact on Indian stock market) Submitted in partial fulfillment
of the requirements for the degree of Masters of Business Administration of Sikkim-Manipal University of Health, Medical and technological sciences
(Vinod Pandey)
has worked under my supervision and guidance and that no part of this report has been submitted for the award of any other Degree, Diploma, Fellowship or other similar titles or prizes and that the work has not been published in any journal or magazine. (Reg No- 520931835) Certified Guides Name and Qualification
ACKNOWLEDGEMENT
I would like to express my immense gratitude to -----------------, for his/her guidance, continuous encouragement and valuable suggestion at every stage of my project.
I would like to thank --------------, Manager-HR, ------------- (Place) for giving me the opportunity to conduct the study and for his valuable suggestions and comments.
I extend my deep sense of gratitude to all my Friends and Family who have directly or indirectly encouraged and helped me to complete my project successfully.
CHAPTER
1 2
CONTENTS
Executive Summary Introduction Design of the study 2.1 Title of the study 2.2 Statement of the problem 2.3 Background of the study 2.4 Review of the Literature 2.5 Objectives of the study 2.6 Scope of the study 2.7 Operational Definitions 2.8 Research Methodology 2.9 Sources of data 2.10 Sample Design 2.11 Limitations of the study 2.12 Overview of the study 2.13 Chapter Scheme Profile of the Industry and Company 3.1 Profile of the Industry 3.2 Profile of the Company Data Analysis and Interpretation 4.1 Economic Analysis 4.2 Company Analysis Summary of Findings, Conclusions & Suggestions 5.1 Findings 5.2 Conclusions 5.3 Suggestions BIBLIOGRAPHY ANNEXURE
PAGE NO
1 2-6 7 - 16 7 7 8 9 10 11 11 12 13 13 14 15 16 17 - 45 17 26 46 - 97 46 56 98 - 100 98 99 100
List of Tables
Chapter 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 Table Showing brief introduction of Infosys Technologies Ltd. Showing Shareholding Pattern of Infosys Technologies Ltd. Showing brief introduction of Wipro Ltd. Showing the Shareholding Pattern of Wipro Ltd. Showing brief introduction of Tata Steel Ltd. Showing the shareholding Pattern of Tata Steel Ltd. Showing brief introduction of JSW Steel Ltd. Showing Shareholding Pattern of JSW Steel ltd. Showing brief introduction of Sun Pharmaceutical Industries Ltd. Showing Shareholding Pattern of Sun Pharmaceutical Industries Ltd. Showing brief introduction of Dr. Reddys Laboratories Showing Shareholding Pattern of Dr. Reddys Laboratories Showing Brief introduction of Maruti Suzuki India Ltd Showing Shareholding Pattern of Maruti Suzuki India Ltd. Showing brief introduction of Hero Honda Motors Ltd. Showing Shareholding Pattern of Hero Honda Motors Ltd. Showing brief introduction of ACC Ltd. Showing Shareholding Pattern of ACC Ltd. Showing brief introduction of Grasim Industries Ltd. Showing Shareholding Pattern of Grasim Industries Ltd. Showing Co-relation between Growth rate of GDP and Sensex returns Showing Co-relation between Agricultural growth rate and Sensex returns Showing Co-relation between Fiscal Deficit and Sensex returns. Showing Co-relation between growth rate of industrial production and Sensex returns. Showing Co-relation between Trends in Inflation and Sensex returns Showing Co-relation between growth rate of savings and Sensex returns. Showing Co-relation between Foreign Exchange Rates and Sensex returns. Showing Co-relation between trends in Money Supply and Sensex returns. Showing CAGR-sales of various companies in Steel Industry Showing CAGR-sales of various companies in Automobile industry Showing CAGR-sales of various companies in Software industry Showing CAGR-sales of various companies in Pharmaceutical Industry Showing CAGR-sales of various companies in Cement Industry Showing CAGR-EPS of various companies in Steel Industry Showing CAGR-EPS of various companies in Automobile Industry Showing CAGR-EPS of various Companies in Software Industry Showing CAGR-EPS of various Companies in Pharmaceutical Industry Showing CAGR-EPS of various companies in Cement Industry Page No 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 47 48 50 51 52 53 54 55 56 56 57 57 58 59 59 60 60 61
4.19 4.20 4.21 4.22 4.23 4.24 4.25 4.26 4.27 4.28 4.29 4.30 4.31 4.32 4.33 4.34 4.35 4.36 4.37 4.38 4.39 4.40 4.41 4.42 4.43 4.44 4.45 4.46 4.47 4.48 4.49 4.50 4.51 4.52 4.53 4.54 4.55 4.56 4.57 4.58 4.59
Showing Current ratio of various companies in steel industry for four years Showing Current ratio of various companies in Automobile Industry for four years Showing Current ratio of various companies in software industry for four years Showing Current ratio of various companies in Pharmaceuticals industry for four years Showing Current ratio of various companies in Cement Industry for 4 years Showing Debt Equity ratio of various companies in Steel Industry for four years Showing Debt Equity ratio of various companies in Automobile industry for four years Showing Debt Equity ratio of various companies in Software Industry for four years Showing Debt Equity ratio of various companies in Pharma Industry for four years Showing Debt Equity ratio of various companies in Cement Industry for four years Showing Dividend payout ratio of various companies in Steel Industry for four years Showing Dividend payout ratio of various companies in Automobile Industry Showing Dividend payout ratio of various companies in Software Industry Showing Dividend payout ratio of various companies in Pharmaceutical Industry Showing Dividend payout ratio of various companies in Cement Industry Showing Earnings per Share of various companies in Steel Industry Showing Earnings per Share of various companies in Automobile Industry Showing Earnings per Share of various companies in Software Industry Showing Earnings per Share of various companies in Pharmaceutical Industry Showing Earnings per Share of various companies in Cement Industry Showing Interest Coverage ratio of various companies in Steel Industry Showing Interest Coverage ratio of various companies Automobile Industry Showing Interest Coverage ratio of various companies in Software Industry Showing Interest Coverage ratio of various companies in Pharmaceutical Industry Showing Interest Coverage ratio of various companies in Cement Industry Showing Price Earnings ratio of various companies in Steel Industry Showing Price Earnings ratio of various companies in Automobile Industry Showing Price Earnings ratio of various companies in Software Industry Showing Price Earnings ratio of various companies in Pharmaceutical Industry Showing Price Earnings ratio of various companies in Cement Industry Showing Return on Equity of various companies in Steel Industry Showing Return on Equity of various companies in Automobile Industry Showing Return on Equity of various companies in Software Industry Showing Return on Equity of various companies in Pharmaceutical Industry Showing Return on Equity of various companies in Cement Industry Showing Growth rate of Net sales for various companies in Steel Industry Showing Growth rate of Net sales for various companies in Automobiles Industry Showing Growth rate of Net sales for various companies in Software Industry Showing Growth rate of Net sales for various companies in Pharmaceutical Industry Showing Growth rate of Net sales for various companies in Cement Industry Showing Growth rate of Net profit for various companies in steel Industry
62 62 63 63 64 65 65 66 66 67 68 68 69 69 70 71 71 72 72 73 74 74 75 75 76 77 77 78 78 79 80 80 81 81 82 83 84 85 86 87 89
Showing Growth rate of Net profit for various companies in Automobiles Industry Showing Growth rate of Net profit for various companies in Software Industry Showing Growth rate of Net profit for various companies in Pharmaceutical Industry Showing Growth rate of Net profit for various companies in Cement Industry Showing Beta values for various companies in Steel Industry Showing Beta values for various companies in Automobile Industry Showing Beta values for various companies in Software Industry Showing Beta values for various companies in Pharmaceutical Industry Showing Beta values for various companies in Cement Industry
90 91 92 93 95 95 96 96 97
List of Graphs
Chapter 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 Graphs Showing the Shareholding Pattern of Infosys Technologies Ltd. Showing the Shareholding Pattern of Wipro Ltd. Showing the Shareholding Pattern of Tata Steel Ltd. Showing the Shareholding Pattern of JSW Steel Ltd Showing the Shareholding Pattern of Sun Pharmaceutical Industries Ltd. Showing the Shareholding Pattern of Dr. Reddys Laboratories Showing the Shareholding Pattern of Maruti Suzuki India Ltd. Showing the Shareholding Pattern of Hero Honda Motors Ltd Showing the Shareholding Pattern of ACC Ltd. Showing the Shareholding Pattern of Grasim Industries Ltd. Showing Growth rate of GDP and Sensex returns. Showing the growth rate of Agriculture and Sensex returns. Showing the growth rate of Net Sales for four companies in Steel Industry Showing the growth rate of Net Sales for four companies in Automobile Industry Showing the growth rate of Net Sales for four companies in Software Industry Showing the growth rate of Net Sales for four companies in Pharmaceutical Industry Showing the growth rate of Net Sales for four companies in Cement Industry Showing the growth rate of Net Profit for four companies in Steel Industry Showing the growth rate of Net Profit for four companies in Automobile Industry Showing the growth rate of Net Profit for four companies in Software Industry Showing the growth rate of Net Profit for four companies in Pharmaceutical Industry Showing the growth rate of Net Profit for four companies in Cement Industry Page No 27 29 31 33 35 37 39 41 43 45 47 49 83 84 85 86 87 89 90 91 92 93
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EXECUTIVE SUMMARY
The Indian scenario is changing day by day. The earnings of individuals have reached imaginary heights. People are able to earn more, save more and thereby can invest more. Indian capital market is one of the most preferred investment destinations for whole world. This fact encourages domestic individual investors to indulge in this activity. But looking at the volatility in Indian secondary market its very important to do a better analysis before going for investment to ensure expected earnings on there investment. Many investors use fundamental analysis wholly or in combination with other tools like Technical analysis, Sharps Single Index Model and DUPONT model to evaluate stocks for investment purposes. The goal is to determine the current worth and more importantly how the market values the stock. Fundamental analysis is the process of looking at a business at the basic or fundamental financial level. This type of analysis examines key ratios of a business like EPS, Debt-Equity ratio, Interest coverage ratio etc, to determine financial health and value its stock. The major objectives of the study are to facilitate scientific investment decision, to understand the impact of economy on the stock market, to find out the major threats of stock market, to know the impact of company performance on stock price and to find out the best industry to invest in. Based on the analysis done some major findings are arrived at the economic factors the global economies are getting interrelated. The Indian market will no longer be limited to domestic situation. When we compare the ratios of IT, Automobile, Cement, Pharmaceutical and Steel industries, the cement industry provides handsome returns to the investors. All the companies under study are financially strong and performance reveals the same. Keeping in line with analysis it is suggested that the investors should consider the budget decisions and present years forecast of different sectors. Comparisons between different industry is also necessary because of companies perform well when potential opportunity exists for industry.
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CHAPTER 1 INTRODUCTION
12
13
14
A) Fundamental Approach
The concept of time value of money is the business of this approach. Money has a time value. A rupee now is worth more than rupee a year from now. For different securities, future benefits may be received at different times. Even when the amount of future payment is the same, differences in the speed of their receipt may create differences in value. Time value of money suggests that earlier receipt may create differences in value. Time value of money suggests that earlier receipt is more desirable than later receipt, even when the both are equal in the amount of certainty. Because, earlier receipt can be re invested to generate additional returns before later receipt come in. The force operating is the principal of compound interest. Framework: The proper order in which to proceed in Fundamental analysis is, first to analyze the overall economy and securities markets. Second, analyze the industry with in which a particular company operates. Finally, analysis of the company should be considered. The above analysis involves making a careful estimate of expected stream of benefits and required return of common stock. The intrinsic value then can be obtained through the present value analysis that is, the dividend discounts model. An alternative method of valuation is the P/E ratio or earning multiplier approach.
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Economic Analysis:
The level of economic activity has an impact on investment in many ways. If the economy grows rapidly, the industry can also be expected to show rapid growth. When the level of economic activity is low, stock prices are low, and when the level of economic activity is high, stock prices are high reflecting the prosperous outlook for sales and profits of the firms. The analysis of macro economic environment is essential to understand the behavior of the stock prices.
Industry Analysis:
An industry is a group of firms that have similar technological structure of production and produce similar products. Companies are distinctly classified to give a clear picture about their manufacturing process and products. Industries can be classified on the basis of the business cycle i.e. classified according to their reactions to the different phases of the business cycle. They are classified in to growth, cyclical, defensive and cyclical growth industry.
Company Analysis:
In the company analysis the investor assimilates the several bits of information related to the company and evaluates the present and future value of the stock. The risk and return associated with the purchase of the stock is analyzed to take better investment decisions. The valuation process depends upon the investors ability to elicit information from relationship and inter-relationship among the company related variables.
B) Technical Approach
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Technical analysis is an alternative approach to predicting the stocks price behavior. Technical analysis is frequently used as a supplement to fundamental analysis rather than as a substitute for it. Thus technical analysis can frequently does, confirm findings based on fundamental analysis. Technical analysis is viewed mainly through price and volume statistics. It helps in measuring price- volume, supply-demand relationship for overall market as well as for individual sticks. Technicians seldom rely upon a single indicator, as no one indicator is infallible; they place reliance upon reinforcement provided by groups of indicators.
C) Modern Approach
Markovitize led down the foundation for this approach in 1951. He studied capital market with the help of fairly sophisticated method of investigation and in general arrived at the following conclusions.
Stock markets are reasonably efficient in reacting quickly and rationally to the flow of
information.
Successive price changes are independent. As a result past price behavior cannot be used to
in general investment in several securities would reduce the variability of return and hence the riskless of a portfolio.
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Chapter 2
18
find out financial literacy of U.S. Managers. According to this IQ test US Mangers and C-level executives to supervisors scored an average of only 38%. A majority were unable to distinguish profit from cash. Many didnt know the difference between an income statement and balance sheet. About 70% couldnt pick the correct definition of free cash flow, now the measure of choice for many Wall Street investors. Many investors invest in securities by their emotional forces and many invest without analyzing economic conditions, budget decisions, industry growth rates and company factors. Finally, they end up with losses. Of course, no one can predict the uncertainty factors like 26/11 attack at 26th, November 2008. Despite these factors investors could reduce the risk associated with securities through analyzing the security properly. How much the economic factors could influence the stock market? Whether positively or negatively have the relationship with the stock market movements. Answering these questions enables the investors to have the perspective about the overall economy and stock markets.
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20
Abstract
This paper quarterly U.S. data from 1953to 2000 to investigate the effects of share price changes on investment. We focus on the distinction between speculative and fundamental components of share price movements and we contribute to the literature by evaluating four alternative methods of decomposing share-price movements into these two components. The four methods are 1) a decomposition based on regressing share returns on a set of variables designed to capture fundamentals: 2) the use of the price- earnings ratio: 3) the use of dividend yield and 4) a structural vector-autoregressive model based on dividend discount equation. We find that, no matter what the method of decomposition is, shocks to both fundamental and speculative components have positive effects on investment and that, in contrast to the earlier literature, the effect of the speculative shock is at least as large as that of a shock to fundamentals.
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OBJECTIVES OF THE STUDY: The main purpose of this study is to comparatively analyze the different industry
performance and selecting the appropriate security by considering potentiality of the industry.
To identify the returns of the securities in considering the risk, growth and other related
variables.
To understand the factors influencing the security prices in different industries. To evaluate the true worth of the securities. To know the impact of macro economic indicators on stock market returns. SCOPE OF THE STUDY:
An effective fundamental analysis facilitates investment decision of individual investors. It helps investors to understand in which industry stock they should invest in. It also helps investors to minimize their risk through effective investment decisions.
Industry Analysis:
Industry analysis refers to analyze the plan, priorities and vulnerability of an industry for government regulations. The competitive conditions as reflected in any barriers to industry also taken in to consideration.
22
Company Analysis:
In the company analysis the investor assimilates the several bits of information related to the company and evaluates the present and future values of the stock. The risk and return associated with the purchase of the stock is analyzed to take better investment decisions.
Co-relation:
Correlation is another measure designed to indicate the similarity or dissimilarity in the behavior of two variables. It ranges between -1 and +1 (+1 perfectly correlated, 0 uncorrelated and -1 perfectly negatively correlated).
RESEARCH METODOLOGY:
a) Since the study is principally intended to examine the potential growth of securities, which
might be affected by different risk variables on security returns, a sample of 5 industries, and selecting the profitable shares through selecting potential growth industries, whose shares are actively traded during the period 2006 to 2009 has been considered. In order to identifying the influence of exogenous variables of economy and market in security prices information on different indicators like Gross domestic product, Industrial production, Savings and Investment, Agricultural Production, Money supply, Fiscal deficit etc.
b) For analyzing the relationship between economic indicators and stock market movement,
the correlation tools has been used, and selecting the industry by comparing their sales growth, dividend and its ratios has been comparatively analyzed. On the other hand, groups of 10 financial ratios capturing the Size, Dividend Policy, Leverage, Productivity, Liquidity, Profitability, Earnings Variability, P/E ratios and Certain Growth Variables constituted the company specific fundamentals of financial risk variables. The estimation of Accounting Beta. (the ratio of EPS of a firm in relation to the average EPS of all firms), Sales, and Earnings have been measured as linear growth rates the testing period of most recent fouryear period.
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SOURCES OF DATA:
Primary data: Since the study is mainly based on the financial results of the industries and the company and the facts of the economic factors, no such primary data has been collected. Secondary data: All the data has been collected through secondary sources only. These data are Various magazines, books and news papers. Companys websites, ministry of finance, BSE & NSE exchanges.
Sample size:
All the five industries under the study are randomly selected reconsidering differentialities in the new way they do business and the product they produced has been considered as sample and the four companies in that particular industry has been considered as representative sample.
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India accounts around 5 percent of global steel consumption, Almost 70% of the total steel used is for kitchenware. Indias Steel Consumption rose by 608% during April- November 2009 over the same period a year ago on account of improvement demand from sectors like automobile and consumer durables. A Credit Suisse Group study states that Indias steel consumption will continue to grow by 16% annually till 2012, fuelled by demand for construction projects worth US$ 1 trillion. The scope for raising the total consumption of steel is huge, given that per capita steel consumption is only 35 Kg compared to 150 Kg across the world and 2580 Kg in China.
Exports: Out of Indias annual iron ore production of more than 200 MT, about 50% is exported. Indias iron ore exports more than doubled to 9.3 million tonne in October 2009 as compared to 4.4, million tonne in the same month a year ago on the back of increase in demand from Chinese steel producers, as per a joint study by a group of iron ore exports. The countrys iron ore exports during April October 2009 period grew 20% over the year ago period to 53 million tonne, as per the study. Investments: The domestic steel sector has attracted a staggering investment of about US$ 236 billion, according to the Minister of State for Steel Sai Prathap. A host of steel companies have lined up major investment proposals. Furthermore, with an expanding consumer market, the Indian steel industry is likely to receive huge domestic and foreign investments.
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PHARMACEUTICALS:
Market Size: Indias pharmaceutical industry is now the third largest in the world in terms of volume and accounts for 10% of the worlds production. India ranks 14 in terms of value. The country ranks 4 th in terms of generic production and 17th in terms of export value of bulk actives and dosage forms, according to Mr. Jena. Exports: Indias exports of drugs, pharmaceuticals and fine chemicals grew by 29% in 2008-09 to US$ 8.25 billion compared to 2007-08. A report by industry research firm, RNCOS, forecasts that pharmaceutical exports will grow at a compound annual growth rate (CAGR) of 18.5% between 2007-08 and 2011-12. This growth will be fuelled by multi billion dollar patent expirations and growth in the global generics market. Government Initiative: The government has offered tax breaks to the pharmaceutical sector. The government has offered tax breaks to the pharmaceutical sector. Units are eligible for weighted tax deduction at 150% for the research and development (R&D) expenditure incurred. The government has launched two new schemes New Millennium Indian Technology Leadership Initiative and the Drugs and pharmaceuticals Research programme especially targeted at drugs and pharmaceutical research. According to Mr. Ashok Kumar, Pharmaceutical Secretary the government is planning to set up a US$ 439.94 million corpus fund for the Pharma industry soon. Investment: According to the ministry of Commerce, domestic investment in the pharmaceutical sector is estimated at US$ 6.31 billion. The drugs and pharmaceuticals sector has attracted foreign direct investment (FDI) worth US$1.43 billion between April 2000 and December 2008.
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Road Ahead: The Indian pharmaceutical industry will see tremendous growth in the coming years as consumer spending on healthcare increases in India. Consumer spending on healthcare is expected to increase to 13% of GDP by 2015, up from 7% in 2007.
INFORMATION TECHNOLOGY:
Market Size: According to the National Association of software and services companies (NASSCOM), the apex body for software services in India, the revenue of the information technology sector has risen from 1.2% of the gross domestic product (GDP) in FY 1997-98 to an estimated 5.8% in FY 200809. Further, the industry body expects the sector to grow between 4% and 7% during 2009-10 and return to over 10% growth next year. Moreover, according to a study by springboard Research, the Indian IT services market is estimated to remain the fastest growing in the Asia-Pacific region with a compound annual growth rate (CAGR) of 18.6%. At present there are 60 million internet users in the country. According to the Manufacturers Association of IT (MAT), the number of active internet entities rose to 8.6 million by March 2009 from 7.2 million units in March 2008. A study of MAIT estimated that the total PC sale in India is likely to grow by 7% in 2009-10, with total sales expected to cross 7.3 million units. Outsourcing: According to NASSCOM, software and services exports reached US$ 47 billion in FY 200809, contributing nearly 78% to the total software and services revenue of US$ 59.6 billion. Domestic Market: Indias domestic market has also become a force to reckon with, as the existing IT infrastructure evolves both in terms of technology and depth of penetration.
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According to NASSCOM, domestic IT market reached US$ 24.3 billion in FY 2008-09 as against US$ 23.1billion in FY 2007-08, a growth of 5.3%. Investments: The Andhra Pradesh Government expects the IT-related SEXs and software Technology Parks of India (STPI) in the nest five years. San Francisco-based virtualization solutions provide VMware Inc Plans to invest US$ 100 million. The total investments of EMC Corporation, a leading global player of information infrastructure solutions, in India will touch US$ 2 billion by 2014. Rural Penetration: According to a report of the internet and mobile Association of India rural India has 3.3 million active internet users as on March 2008. The research also notes there are 5.5 million people who claim to have used internet at some point in time. Government Initiatives: The government set up the National Taskforce on information Technology and software Development with the objective of farming a long term National IT Policy for the country. Enactment of the information Technology Act, which provides a legal framework to facilitate electronic commerce and electronic transactions. Road Ahead: According to a report prepared by Mckinsey for NASSCOM, the exports component of the Indian industry is expected to reach US$ 175 billion in revenue by 2020. The domestic component will continue US$ 50 billion in revenue by 23020. Together, the export and domestic markets are likely to bring in US$ 225 billion in revenue, as new opportunities emerge in areas such as public sector and healthcare and as geographies including Brazil, India, China and Japan opt for grater outstanding.
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AUTOMOBILES:
The growth of the Indian middle class along with the growth of the economy over the past few years has attracted global auto majors to the Indian market Moreover; India provides trained manpower at competitive costs making India a favored global manufacturing hub. The attractiveness of the Indian markets on one hand and the stagnation of the auto sector in markets such as Europe, US and flow of capital to the Indian automobile industry. Global auto majors such as Japanese auto majors Suzuki, Honda and Korean car giant Hyundai are increasingly banking on their Indian operations to add weight to their business, even as numbers stay uncertain in developed markets due to economic recession and slowdown. Moreover, according to a study released by global by global consultancy firm Deloitte, at least one Indian company will be among the top six carmakers that would dominate the global auto industry by 2020. According to the study, the car industry would see a massive capacity building in low cost locations like India and China as manufacturers shift base from developed regions. Production: Although the sector was hit by economic slowdown, overall production (passenger vehicles, commercial vehicles, two wheelers and three wheelers) increased from 10.85 million vehicles in 2007-08 to 11.17 million vehicles in 2008-09. P passenger vehicles increased marginally from 1.77 million to 1.83 million while two-wheelers increased from 8.02 million to 8.41 million. In recent times, India has emerged as one of the favorite investment destinations for automotive manufactures. German car major AUDI will start assembling its sports utility vehicle AUDI Q5 fommid-2010. The company plans to assemble more cars locally at its Aurangabad plant instead of importing completely built units.
Ford India commenced commercial production of its compact car Figo, and diesel and petrol
engines at a new factory in Chennai. The Figo will be built exclusively in India and exported to Asian countries and South Africa.
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Domestic Market: According to figures released by the society of Indian Automobile Manufactures (SIAM), domestic passenger car sale have increased 32.28% to reach 145,905 units in January 2010 from 110,300 units in the same month last year. Across all categories, total sale of vehicles increased 44.94% to 1,114,157 units in January 2010, against 768,698 units in the January 2009. Road Ahead: The Indian auto industry is likely to see a growth of 10-12% in sales in 2010, according to a report by the global rating firm, Fitch. According to its report, Indian Auto sector is likely to increase due to increase increasing penetration of global original equipment manufactures (OEM).
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CEMENT:
Market Size: India is the worlds second largest producer of cement after China, with cement companies adding nearly 11 million tones (MT) capacity during April-September 2009, taking the total installed capacity to around 231 MT by September 2009. With the boost given by the government to various infrastructure projects, road networks and housing facilities, growth in the cement consumption is anticipated in the coming years. According to Jyotiraditya Scindia, Minister of state, Ministry of Commerce and industry, cement production could rise to 236.16 MT in FY 2011 and touch 262.61 MT in FY 2012. With almost total capacity utilization levels in the industry, cement dispatches have maintained 10% growth rate. Total dispatches grew to 170 MT during 2007-08 against 155 MT in 2006-07. Technological Change: Continuous technological upgrading and assimilation of latest technology has been going on in the cement industry. Presently, 93% of the total capacity in the industry is based on modern and environment friendly dry process technology and only 7% of the capacity is based on old wet and semi-dry process technology. There is tremendous scope for waste heat recovery in cement plans and thereby reduction in emission level. New Investments: Dalmia Cement, South Indias second largest cement maker will invest over US$ 652.6 million to ass 10MT capacity over the next 2-3 years. India Cements Ltd will invest US$ 104 billion to set up two thermal power plants in the southern states of Tamil Nadu and Andhra Pradesh.
Anil Ambani Group Company Reliance Infrastructure will invest US$ 2.1 billion to setup
cement plants with a total capacity of 20 MTPA over the next five years. Swiss cement company Holcim plans to invest US$ 1 billion in setting up 2-3 Greenfield manufacturing plants in India in the next five years. The expansion will take the companys total cement-making capacity to 60 MTPA from 50 MTPA currently.
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Government Initiatives: Government initiatives in the manufacturing sector, coupled with the housing sector boom and urban development, continue being the main drivers of growth for the Indian cement industry.
Increased infrastructure spending has been a key focus area over the last five years indicating good times ahead for cement manufactures.
The government has increased budgetary allocation for roads under National Highways Development Project (NHDP). Appointing a coal regulator is looked upon as a positive move as it will facilitate timely and proper allocation of coal (a key raw material) blocks to the core sectors, cement being one of them. Keeping in mind the global meltdown which is impacting the cement companies in India, the government re-imposed the counter-veiling duty (CVD) and special CVD on imported cement in January. This is likely to provide a level playing field to domestic companies. Road Ahead: According to a report by the ICRA Industry Monitor, the installed capacity is expected to increase to 241 MTPA by 2010 end. Indias cement industry is likely to record an annual growth of 10% in the coming years with higher domestic demand resulting in increased capacity utilization.
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BSE Group A
Registered Address No. 44, Hosur Road, Electronic City, Bangalore 560-100
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Share Holding Pattern As on 31-March-2010 Table 3.2: Showing Shareholding Pattern of Infosys Technologies Ltd. Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding Shares held by Custodians and against which Depository Receipts have been issued Graph 3.1: Showing the Shareholding Pattern of Infosys Technologies Ltd. 374864267 106875947 65.32% 18.63% Total no of Shares 92084978 Percentage 16.05 %
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WIPRO LIMITED:
House Name BSE Scrip code ISIN Face Value : :
:
BSE Group A
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Share Holding Pattern As on 31-March-2009 Table 3.4: Showing Shareholding Pattern of Wipro Ltd. Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding 275058920 18.75 Total no of Shares 1168382260 Percentage 79.61
Shares held by Custodians and against which Depository Receipts have been issued
24130902
1.64
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Chairman R N Tata
BSE Group A
Registered Address Bombay House, 24 Homi Mody Street, Fort Mumbai Maharashtra 400-001
Registers T R S Darashaw Ltd. No. 610, Haji Moosa Patrawala Industrial Estate,20, Dr. E Moses Road, Mahalaxmi, Mumbai 400-011
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Share Holding Pattern As on 31-March-2010 Table 3.6: Showing the shareholding Pattern of Tata Steel Ltd. Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding 605162261 68.20 Total no of Shares 277833893 Percentage 31.32
Shares held by Custodians and against which Depository Receipts have been issued
4218042
0.48
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BSE Group
A
Industry: Iron & Steel/ Interm. Products
Registered Address Jindal Mansion 5A, Dr. G Deshmukh Marg, Mumbai Maharashtra 400-026
Registers Karvy Computershare Private Ltd. Plot No. 17-24, Vittal Rao Nagar, Madhapur, Hyderabad 500-081
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Share Holding Pattern As on 31-March-2010 Table 3.8: Showing Shareholding Pattern of JSW Steel ltd. Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding Shares held by Custodians and against which Depository Receipts have been issued 102873009 0 55.01% 0 Total no of Shares 84175673 Percentage 45.01%
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BSE Group
A
Industry: Pharmaceuticals
Registered Address Sun Pharma Advanced Research Centre Tandaija, Akota Road Vadodra Gujarat 390-020
Registers Link Intime India Pvt Ltd C-13, Pannalal Silk Mills Compound, LBS Marg, Bhandup (West), Mumbai -400 078
45
Share Holding Pattern As on 31-March-2010 Table 3.10: Showing Shareholding Pattern of Sun Pharmaceutical Industries Ltd. Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding Shares held by Custodians and against which Depository Receipts have been issued 75150451 0 36.29% 0 Total no of Shares 131965940 Percentage 63.71%
Graph 3.5: Showing the Shareholding Pattern of Sun Pharmaceutical Industries Ltd.
46
BSE Group
A
Industry: Pharmaceuticals
Registers Bigshare Services Pvt Ltd G 10 Amrutha Ville, Opp. Yashodha Hospital, Rajbhavan Road, Somajiguda, Hyderabad 500082
47
Share Holding Pattern As on 31-March-2010 Table 3.12: Showing Shareholding Pattern of Dr. Reddys Laboratories Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding Shares held by Custodians and against which Depository Receipts have been issued 100778704 24548869 59.69% 14.54% Total no of Shares 43517812 Percentage 25.77%
48
Chairman R C Bhargava
BSE Group
A
Industry: Auto - Cars & Jeeps
Registered Address Plot No. 1, Vasant Kunj, Nelson Mandela Marg, New Delhi 110070
Registers Karvy Computershare Pvt Ltd Plot No. 17-24, Vittalrao Nagar, Madhapur, Hyderabad - Andhra Pradesh - 500081
49
Share Holding Pattern As on 31-March-2010 Table 3.14: Showing Shareholding Pattern of Maruti Suzuki India Ltd. Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding 132291620 45.79% Total no of Shares 156618440 Percentage 54.21%
Shares held by Custodians and against which Depository Receipts have been issued
Graph 3.7: Showing the Shareholding Pattern of Maruti Suzuki India Ltd.
50
BSE Group
A
Industry: Auto - 2 & 3 Wheelers
Registered Address Basant Lok, Community Centre, 34, Vasant Vihar, New Delhi 110057
Registers Karvy Computershare Pvt Ltd Plot No. 17-24, Vithalrao Nagar, Madhapur, Hyderabad 500 081
51
Share Holding Pattern As on 31-March-2009 Table 3.16: Showing Shareholding Pattern of Hero Honda Motors Ltd. Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding Shares held by Custodians and against which Depository Receipts have been issued 89938195 0 45.04% 0 Total no of Shares 109749305 Percentage 54.96%
Graph 3.8: Showing the Shareholding Pattern of Hero Honda Motors Ltd.
52
ACC LTD:
House Name BSE Scrip code ISIN Face Value : :
:
Chairman N S Sekhsaria
BSE Group
A
Industry: Cement - Major
Registered Address 121, Cement House, Maharshi Karve Road, Mumbai 400020
53
Share Holding Pattern As on 31-March-2010 Table 3.18: Showing Shareholding Pattern of ACC Ltd. Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding Shares held by Custodians and against which Depository Receipts have been issued 101012889 0 53.79% 0 Total no of Shares 86732067 Percentage 46.20%
54
BSE Group
A
Industry: Cement - Major
55
Share Holding Pattern As on 31-March-2010 Table 3.20: Showing Shareholding Pattern of Grasim Industries Ltd. Category of Shareholder Shareholding of Promoter and Promoter Group Public Shareholding Shares held by Custodians and against which Depository Receipts have been issued Graph 3.10: Showing the Shareholding Pattern of Grasim Industries Ltd. 58400900 9901495 63.70% 10.80% Total no of Shares 23381176 Percentage 25.51%
56
57
58
In 2009, Indias PPP Gross Domestic Product stood at $3.548 trillion, and was the fourth largest economy by volume. The service sector, backed by the IT revolution, remained the biggest contribute to the national GDP, with a contribution of 58.4%. The industry sector contributed 24.1% and agriculture sector contributed 17.5% to the GDP.
59
Year
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Co-relation
0.7069
60
INFERENCE:
GDP has become most crucial variable affecting the stock market. As the graph shows, there has been positive correlation of 0.7069 between GDP and Sensex.
ANALYSIS:
It clearly iindicates that GDP has direct influence on stock market, so both the variables are moving in the same direction.
Year
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Co-relation
0.7582
61
Graph 4.2: Showing the growth rate of Agriculture and Sensex returns.
INFERENCE:
The above figure shows the relationship between agriculture and Sensex returns. The Corelation between above two variables is positive i.e. 0.7582.
ANALYSIS:
As could be seen easily from the graph, the growth rate of both variables is moving in the same direction. It indicates that the agriculture production has direct impact on stock market.
62
Year
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Co-relation
-0.7561
INFERENCE:
The above table shows the relationship between Fiscal Deficit and Sensex returns. Corelation between these two variables is negative i.e. -0.7561.
ANALYSIS:
It clearly indicates that both the variables moving in the opposite direction. It has indirect impact on stock market returns.
63
Year
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Co-relation
0.7841
INFERENCE:
The above table shows the relationship between Industrial production and Sensex returns. Industrial Production has a positive relationship (0.7841) with Sensex.
ANALYSIS:
It shows that both the variables are moving in the same direction. So it has direct impact on stock market returns.
64
TRENDS IN INFLATION:
Table 4.5: Showing Co-relation between Trends in Inflation and Sensex returns
Year
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Inflation (%)
7.2 3.6 3.4 5.5 6.5 4.4 5.4 4.7 8.4
Co-relation
-0.4267
INFERENCE:
There has been negative relationship between Inflation rate and Sensex returns (-0.4267). So it clearly indicates that Inflation has negative impact on the stock market.
ANALYSIS:
It clearly indicates that both the variables are moving in the opposite direction. It shows clearly when inflation is moving up at that time Sensex returns will fall.
65
Year
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Savings (%)
23.5 23.5 26.4 29.8 32.2 33.1 34.4 36.4 32.5
Co-relation
0.4780
INFERENCE:
The above table shows that relationship between individual savings in the country and Sensex returns. Correlation between the above mentioned variables is positive i.e. 0.4780.
ANALYSIS:
It indicates that both the variables are moving in the same direction. So it shows that individual savings has a direct impact on stock market returns.
66
Year
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Co-relation
-0.6586
INFERENCE:
The above table shows that relationship between foreign exchange rate and sensex returns. There has been negative relationship between exchange rate and Sensex (-0.6586).
ANALYSIS:
As above table indicates initially value of money was decreased and the Sensex return increased. In the year 2009 rupee exchange rate moved to 51.23 at the same time Sensex returns moved to negative side (-52.45%).
67
Year
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Co-relation
0.2936
INFERENCE:
The above table shows that the relationship between Money supply and Sensex returns. It has a positive co-relationship i.e. 0.2936.
ANALYSIS:
It indicates that both the variables are moving in the same direction. So it has a positive impact on stock market returns.
68
CAGR (%)
31.83 % 15.38 % 17.11 % 26.79 %
Automobile Industry
69
CAGR (%)
12.35 % 20.05 % -2.61 % 4.92 %
70
Software Industry
Table 4.11: Showing CAGR-sales of various companies in Software industry
CAGR (%)
15.52 % 30.93% 25.94 % 26.99 %
Pharmaceutical Industry
Table 4.12: Showing CAGR-sales of various companies in Pharmaceutical Industry
CAGR (%)
20.75 % 6.81 % 31.21 % 27.94 %
Cement Industry
Table 4.13: Showing CAGR-sales of various companies in Cement Industry
71
CAGR (%)
10.82 % 16.70 % 3.40 % 23.67 %
INFERENCE:
CAGR Measures Companys year-over-year growth rate of an investment. The above table gives clear picture about compounded growth rate of sales from past four years.
ANALYSIS:
Companys like JSW Steel, Maruti Suzuki, Infosys Technologies, Sun Pharmaceuticals and Ultratech Cements is growing rapidly in terms of operating activities (sales) in the four year period. So it is a good sign for growth of a company.
72
CAGR
-25.80 % 15.43 % 3.11 % -56.96 %
Automobile Industry
Table 4.15: Showing CAGR-EPS of various companies in Automobile Industry
CAGR (%)
9.69 % 0.82 % -16.61 % -35.71 %
73
Software Industry
Table 4.16: Showing CAGR-EPS of various Companies in Software Industry
CAGR (%)
-9.11 % 4.66 % -4.80 % 12.46 %
Pharmaceutical Industry
Table 4.17: Showing CAGR-EPS of various Companies in Pharmaceutical Industry
CAGR (%)
-20.67 % 9.49 % 34.88 % 6.51 %
74
Cement Industry
Table 4.18: Showing CAGR-EPS of various companies in Cement Industry
CAGR (%)
9.17 % 24.05 % -13.14 % 61.97 %
INFERENCE:
CAGR is a business and investing specific term for the smoothed annualized gain of an investment over a given time period. In the above table CAGR of Earnings per Share is calculated for past four years.
ANALYSIS:
Companies like SAIL, Hero Honda, Wipro, Sun Pharmaceuticals and Ultratech Cements CAGR- Earnings per Share rates are growing rapidly from the past four years. So investor has to careful about other than these companies for investment.
75
Current Ratio Current Ratio = Current Assets /Current Liabilities Steel Industry
Table 4.19: Showing Current ratio of various companies in steel industry for four years
2008-09
2007-08
2006-07
2005-06
Automobile Industry
Table 4.20: Showing Current ratio of various companies in Automobile Industry for four years
2008-09
2007-08
2006-07
2005-06
76
Software Industry
Table 4.21: Showing Current ratio of various companies in software industry for four years
2008-09
2007-08
2006-07
2005-06
1.258 8.247
0.838 7.137
1.141 6.711
0.905 5.936
1.758 1.552
2.147 2.165
2.303 1.585
2.435 1.737
Pharmaceutical Industry
Table 4.22: Showing Current ratio of various companies in Pharmaceutical industry for four years
2008-09
2007-08
2006-07
2005-06
3.269 1.212
3.017 0.604
4.096 2.927
2.973 2.652
4.310
3.364
8.116
10.719
77
2.417
3.047
4.565
3.027
Cement Industry
Table 4.23: Showing Current ratio of various companies in Cement Industry for 4 years
2008-09
2007-08
2006-07
2005-06
INFERENCE:
Current Ratio indicates the extent of current assets available to meet current liabilities. The satisfactory level is considered as 2:1. It means company has Rs.2 cash for paying every Rs.1 of liabilities.
ANALYSIS
The above tables shows current ratio of NMDC is highest. Other Companies like Sun Pharmaceutical Industries, Cipla Ltd from Pharmaceutical Industry, Infosys Technologies from Software industry, Maruti Suzuki from Automobile Industry is satisfactory, followed by JSW Steel, Tata steel, Bajaj Auto is very less than the standard level in cement industry where it will face a problem in meeting current obligation.
78
Debt Equity Ratio D/E ratio = Total Debt / Equity Capital Steel Industry
Table 4.24: Showing Debt Equity ratio of various companies in Steel Industry for four years
2008-09
2007-08
2006-07
2005-06
Automobile Industry
Table 4.25: Showing Debt Equity ratio of various companies in Automobile industry for four years
2008-09
2007-08
2006-07
2005-06
0.020 0.079
0.044 0.108
0.067 1.40
0.092 1.77
79
0.839 1.118
0.840 0.811
0.293 0.782
0.307 0.502
Software Industry
Table 4.26: Showing Debt Equity ratio of various companies in Software Industry for four years
2008-09
2007-08
2006-07
2005-06
0.147 -
0.007 -
0.011 -
0.005 -
0.003 0.400
0.001 0.329
0.006 0.025
0.006 0.007
Pharmaceutical Industry
Table 4.27: Showing Debt Equity ratio of various companies in Pharma Industry for four years
2008-09
2007-08
2006-07
2005-06
0.216 0.85
0.143 1.052
0.038 1.380
0.236 1.353
80
0.004
0.024
0.436
1.191
0.121
0.096
0.075
1.408
Cement Industry
Table 4.28: Showing Debt Equity ratio of various companies in Cement Industry for four years
2008-09
2007-08
2006-07
2005-06
INFERENCE:
Debt-equity ratio enables the investors to analyze the long term solvency of the company. According to the greatest investor Benjamin Graham (Author of The Intelligent Investor) a company which is having a low Debt- Equity ratio or zero debt in their capital structure is very much appropriate for investment. So the above analysis shows Infosys in a zero debt company.
ANALYSIS:
81
In the above table Debt-Equity ratio of the TCS Ltd, Hero Honda and SAIL is good. On the other hand Ranbaxy and NMDC Steel are quite high, normally high Debt will force companies to pay more interest as a cash outflows.
82
DIVIDEND PAYOUT RATIO Div Payout ratio = Dividend Per share / Earnings Per share Steel Industry
Table 4.29: Showing Dividend payout ratio of various companies in Steel Industry for four years
2008-09
2007-08
2006-07
2005-06
Automobile Industry
Table 4.30: Showing Dividend payout ratio of various companies in Automobile Industry
2008-09
2007-08
2006-07
2005-06
83
Software Industry
Table 4.31: Showing Dividend payout ratio of various companies in Software Industry
2008-09
2007-08
2006-07
2005-06
33.534 23.118
85.106 47.591
59.241 18.401
60.422 49.058
25.046 19.569
30.388 18.948
33.862 40.160
24.311 34.794
Pharmaceutical Industry
Table 4.32: Showing Dividend payout ratio of various companies in Pharmaceutical Industry
2008-09
2007-08
2006-07
2005-06
20.020 -
22.172 -
23.474 50.867
9.995 81.967
22.504
20.628
20.149
22.088
84
18.757
13.264
5.051
18.129
Cement Industry
Table 4.33: Showing Dividend payout ratio of various companies in Cement Industry
2008-09
2007-08
2006-07
2005-06
INFERENCE:
Dividend Payout ratio shows what percentage share of the net profits after taxes and preference dividend is paid out as dividend to equity shareholders. The above tables show D/P ratio of various companies from five industries has been interpreted.
ANALYSIS:
In the above table Dividend payout ratio of Tata steel, HCL Technologies, Sun Pharmaceutical Laboratories, Ambuja Cement and Bajaj Auto is good. On the other hand companies namely Infosys, ACC Ltd, Ranbaxy Labs is quite attractive.
Steel Industry
Table 4.34: Showing Earnings per Share of various companies in Steel Industry
2008-09
2007-08
2006-07
2005-06
Automobile Industry
Table 4.35: Showing Earnings per Share of various companies in Automobile Industry
2008-09
2007-08
2006-07
2005-06
86
87
Software Industry
Table 4.36: Showing Earnings per Share of various companies in Software Industry
2008-09
2007-08
2006-07
2005-06
14.91 101.65
11.75 78.27
16.88 67.93
19.86 88.67
47.91 20.44
46.07 21.11
38.39 19.92
55.53 14.37
Pharmaceutical Industry
Table 4.37: Showing Earnings per Share of various companies in Pharmaceutical Industry
2008-09
2007-08
2006-07
2005-06
9.99 13.61
9.02 -27.29
8.52 16.71
20.01 10.37
61.1
50.9
33.5
24.9
33.32
28.27
74.23
27.58
88
Cement Industry
Table 4.38: Showing Earnings per Share of various companies in Cement Industry
2008-09
2007-08
2006-07
2005-06
INFERENCE:
It measures the profit available to the equity shareholders on a per share basis, i.e. the amount that they can get on every share held. In the above tables earnings per share has been calculated for four years.
ANALYSIS:
In the above tables NMDC, Bajaj Auto, Infosys, Sun pharmaceuticals and Grasim Industries is generating good profits on the other hand companies like ACC Ltd, Dr. Reddy Labs, TCS, Hero Honda and Tata Steel also quite attractive.
89
INTEREST COVERAGE RATIO: Formula: Interest Coverage Ratio = PBIT/ Interest Steel Industry
Table 4.39: Showing Interest Coverage ratio of various companies in Steel Industry
2008-09
2007-08
2006-07
2005-06
Automobile Industry
Table 4.40: Showing Interest Coverage ratio of various companies Automobile Industry
2008-09
2007-08
2006-07
2005-06
90
Software Industry
Table 4.41: Showing Interest Coverage ratio of various companies in Software Industry
2008-09
2007-08
2006-07
2005-06
52.47 -
58.32 -
105.54 -
63.21 -
747.92 7.36
1598.26 34.611
1317.06 492.11
743.03 850.29
Pharmaceutical Industry
Table 4.42: Showing Interest Coverage ratio of various companies in Pharmaceutical Industry
2008-09
2007-08
2006-07
2005-06
32.56 10.01
83.89 -0.63
131.01 10.84
69.83 10.99
459.14
206.27
67.31
41.57
91
50.90
74.21
32.25
18.51
Cement Industry
Table 4.43: Showing Interest Coverage ratio of various companies in Cement Industry
2008-09
2007-08
2006-07
2005-06
INFERENCE:
It measures the debt servicing capacity of a firm insofar as fixed interest on long term loan is concerned.
ANALYSIS:
In the above table Tata Steel, Bajaj Auto, TCS, Sun Pharmaceuticals and ACC Ltd Companies ratios very good on the other hand SAIL, Maruti Suzuki, Wipro, Cipla and Ambuja Cements ratios also quite attractive. Infosys does not have any debt.
92
PRICE EARNING RATIO (P/E) Formula: P/E Ratio = Market price of share / EPS Steel Industry
Table 4.44: Showing Price Earnings ratio of various companies in Steel Industry
2008-09
2007-08
2006-07
2005-06
Automobile Industry
Table 4.45: Showing Price Earnings ratio of various companies in Automobile Industry
2008-09
2007-08
2006-07
2005-06
93
Software Industry
Table 4.46: Showing Price Earnings ratio of various companies in Software Industry
2008-09
2007-08
2006-07
2005-06
24.90 25.58
9.81 14.25
19.52 26.05
32.30 25.28
15.65 33.26
10.37 11.05
28.06 26.38
22.00 42.16
Pharmaceutical Industry
Table 4.47: Showing Price Earnings ratio of various companies in Pharmaceutical Industry
2008-09
2007-08
2006-07
2005-06
33.53 38.05
20.68 -9.24
24.95 25.46
12.56 37.78
24.69
20.90
35.93
39.45
94
34.41
16.57
9.86
29.41
Cement Industry
Table 4.48: Showing Price Earnings ratio of various companies in Cement Industry
2008-09
2007-08
2006-07
2005-06
INFERENCE:
The P/E Ratio reflects the price currently being paid by the market for each rupee of currently reported Earnings per Share. According to Peter Lynch Author of One up on Wall Street, P/E Ratio of the company should be between 9 to12 for good investment.
ANALYSIS:
In the above tables Tata Steel, Hero Honda Motors, TCS, Cipla and ACC Ltd is attractive for investment.
95
RETURN ON EQUITY (ROE) Formula: ROE= PAT / Share Capital + Reserves Steel Industry
Table 4.49: Showing Return on Equity of various companies in Steel Industry
2008-09
2007-08
2006-07
2005-06
Automobile Industry
Table 4.50: Showing Return on Equity of various companies in Automobile Industry
2008-09
2007-08
2006-07
2005-06
96
Software Industry
Table 4.51: Showing Return on Equity of various companies in Software Industry
2008-09
2007-08
2006-07
2005-06
28.59 % 32.67 %
24.28 % 33.13 %
32.16 % 33.83 %
24.77 % 35.10 %
34.92 % 23.76 %
40.97 % 26.38 %
46.62 % 30.49 %
48.43 % 31.43 %
Pharmaceutical Industry
Table 4.52: Showing Return on Equity of various companies in Pharmaceutical Industry
2008-09
2007-08
2006-07
2005-06
17.85 % 14.44 %
18.67 % -29.50 %
20.64 % 24.34 %
30.78 % 16.19 %
24.56 %
24.10 %
25. 67 %
31.48 %
97
10.66 %
9.87 %
26.90 %
9.33 %
98
Cement Industry
Table 4.53: Showing Return on Equity of various companies in Cement Industry
2008-09
2007-08
2006-07
2005-06
INFERENCE:
It Measures the profitability of a firm from the owners point of view. Worlds greatest investor Mr. Warren Buffetts one of the famous quote is Focus on Return on Equity not on Earnings per Share.
ANALYSIS:
In the above tables SAIL, Hero Honda, TCS, Sun Pharmaceuticals, Ambuja Cements ratios are very much attractive since from past four years.
99
Year
JSW Steel Tata Steel NMDC SAIL
2006
6,092.39 15,132.09 3,710.92 49.1
2007
8,595.03 17,452.66 4,185.84 265.58
2008
11,391.05 19,654.41 5,711.31 374.94
2009
14,006.59 24,348.32 7,564.03 386.52
Graph 4.3: Showing the growth rate of Net Sales for four companies in Steel Industry
100
Graph 4.4: Showing the growth rate of Net Sales for four companies in Automobile Industry
101
Graph 4.5: Showing the growth rate of Net Sales for four companies in Software Industry
102
Year
2006
2007
1,662.56 3,561.99 4,293.02 3,783.26
2008
2,368.51 4,203.29 4,652.04 3,343.89
2009
2,774.65 5,234.29 4,781.59 3,999.50
Graph 4.6: Showing the growth rate of Net Sales for four companies in Pharmaceutical Industry
103
Year
ACC
2006
5,731.75
2007
6,894.79 5,671.39 8,643.24 4,909.05
2008
7,229.97 6,182.09 10,241.97 5,512.43
2009
8,021.59 7,083.21 10,877.98 6,385.50
Graph 4.7: Showing the growth rate of Net Sales for four companies in Cement Industry
104
INFERENCE:
The above tables and graphs showing that net sales growth rate of various companies in five different industries. It clearly shows that year by year growth in terms of net sales.
ANALYSIS:
By observing above tables and graphs we found that Grasim Industries in Cement, Ranbaxy in pharmaceuticals, TCS in software, Maruti Suzuki in Automobiles and Tata steel in Steel Industry growth rates of net sales is attractive.
105
year
JSW Steel Tata Steel NMDC SAIL
2006
864.29 3,506.38 1,827.80 4,012.97
2007
1,292.00 4,222.15 2,320.21 6,202.29
2008
1,728.19 4,687.03 3,250.98 7,536.78
2009
458.5 5,201.74 4,372.38 6,174.81
Graph 4.8: Showing the growth rate of Net Profit for four companies in Steel Industry
106
year
Hero Honda Maruti Suzuki Bajaj Auto TVS Motors
Graph 4.9: Showing the growth rate of Net Profit for four companies in Automobile Industry
107
year
HCL Technologies Ltd Infosys Technologies Ltd. TCS Wipro Ltd.
2006
638.38 2,421.00 2,716.87 2,020.48
2007
1,101.82 3,783.00 3,757.29 2,842.10
2008
780.65 4,470.00 4,508.76 3,063.30
2009
997.31 5,819.00 4,696.21 2,973.80
Graph 4.10: Showing the growth rate of Net Profit for four companies in Software Industry
108
year
Sun-Pharmaceuticals Cipla Ranbaxy Dr. Reddy's
2006
461.29 607.64 380.54 211.12
2007
628.93 668.03 617.72 1,176.86
2008
1,014.04 701.43 -1,044.80 475.22
2009
1,265.29 776.81 571.98 560.9
Graph 4.11: Showing the growth rate of Net Profit for four companies in Pharmaceutical Industry
109
year
ACC Ambuja Cements Grasim Industries Ultratech Cements
2006
1,231.84 1,503.25 1,535.81 229.76
2007
1,438.59 1,769.10 1,535.81 782.28
2008
1,212.79 1,402.27 2,047.57 1,007.61
2009
1,606.73 1,218.37 1,647.96 977.02
Graph 4.12: Showing the growth rate of Net Profit for four companies in Cement Industry
110
INFERENCE:
The above table and graphs showing that growth rate of net profit for four companies in five various industries. In above graphs X axis indicates that years and Y axis indicates that Rs. in crores.
ANALYSIS:
By observing above tables companies like Steel Authority of India Limited from Steel industry, Maruti Suzuki from Automobile industry, Infosys Technologies from Software industries, Sun Pharmaceutical Industries from Pharmaceutical Industry, Grasim Industries from Cement industries, growth rates are very much attractive.
111
Companies
JSW Steel Tata Steel NMDC SAIL
Beta
2.23 1.93 1.69 1.54
Automobiles Industry
Table 4.65: Showing Beta values for various companies in Automobile Industry
Companies
Hero Honda Maruti Suzuki Bajaj Auto TVS Motors
Beta
0.53 0.78 1.21 1.1
112
Software Industry
Table 4.66: Showing Beta values for various companies in Software Industry
Companies
HCL Technologies Ltd Infosys Technologies Ltd. TCS Wipro Ltd.
Beta
1.17 0.65 0.84 1.11
Pharmaceutical Industry
Table 4.67: Showing Beta values for various companies in Pharmaceutical Industry
Companies
Sun-Pharmaceuticals Cipla Ranbaxy Dr. Reddy's
Beta
0.35 0.53 0.83 0.57
113
Cement Industry
Table 4.68: Showing Beta values for various companies in Cement Industry
Companies
ACC Ambuja Cements Grasim Industries Ultratech Cements
Beta
0.86 1.00 0.95 0.86
INFERENCE:
Beta refers measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. In others the beta of a stock or portfolio is a number describing the relation of its returns with that of the financial market as a whole. An asset with a beta of 0 means that its price is not at all co-related with the market. A positive beta means that the asset generally follows the market. A negative beta shows that the asset inversely follows the market.
ANALYSIS:
The above tables showing clearly Beta values of various companies in five different industries. By observing above tables, companies like Hero Honda (0.53) from Automobile industry, Infosys technologies (0.65) from Software industry, Sun Pharmaceutical (0.35) from Pharmaceutical industry and ACC ltd (0.86) from Cement industry companies Beta values are positive and less than one. So these companies are less volatile compared to other companies in those industries.
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CHAPTER 5
FINDINGS, SUGGESTIONS & CONCLUSIONS
CHAPTER- 5
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FINDINGS:
Now at the final the following facts emerge from the study security analysis for selecting appropriate security through analyzing economy. As far as the Indian economy is concerned, the GDP is primary factor, has the positive corelation with the sensex/Nifty, which directly affects the overall market and followed by other factor.
Agricultural growth rate has direct influence on stock market and responsible for the
economy to become prospers. It has the co-relation of 0.758 with the sensex indicates the stock market would be prospers only when the agriculture grows well.
A change in inflation has indirect impact on stock market. It has a co-relation of -0.426 with
the sensex which indicates that an inflation rates has indirectly co-related to the stock market returns. The savings rate has a positive co-relation with the sensex. In recent years savings rate is growing rapidly in India, which is good sign for growth of the stock market.
When came to the industrial factors Automobiles, Pharmaceuticals and Software industries
the Infosys, Sun Pharmaceuticals and Ultratech cements are doing good, Sales EPS and P/E ratios are encouraging
CONCLUSION:
Fundamental Analysis always holds good only if the company statements are revealed clearly and analyzed properly. Investment is serious business and not making decision on vague. Fundamental analysis has direct impact on the stock market. Because it is the performance of the company that affects the stock prices. Better performance raises the value of the stocks where as
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poor performance reduces the value of stocks. The overall study on fundamental analysis of selected five industries gives the conclusion that, the investors can rate the performances for investment in the following sequence.
SUGGESTIONS:
After a close look of economy industries and companies in considering the risk it may be recommended that international economy might affects the firms export prospects, the price competition it faces from competitors, or the profit it makes from abroad. The investors also should consider the budget decision and present years forecast of different sectors. Comparisons between the different budget allocations is also necessary because of companies perform well when potential opportunity exists for industry.
Even though the industry may perform well, the companies in the particular industry may
suffer from lack of ability or any other factor; one should scrutinize the performance of the company, in considering importantly, sales growth, leverages, beats, P/E ratio and Return on Equity ratios.
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However, there are such things as a final answer to security values, a dozens experts arrive at twelve different conclusions. Market values are fixed only in part by balance sheet and income statement: much more by hops and fears of humanity: by greed, by act of god, where the investor should carefully consider the emotional factors influence the market. Of all the systems, the researcher is of the view that fundamental analysis even today holds good. It demands, may insist on information about the company. It requires subjecting Companys performance and its financial statement to in depth scrutiny. It also calls for the company and industry in which the company operates.
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PBT Tax Net Profit Equity Reserves EPS CEPS OPM % NPM %
7,315.61 7,066.36 6,413.75 -2,113.87 -2,379.33 -2,039.50 5,201.74 4,687.03 4,222.15 730.79 730.78 580.67 23,972.81 21,097.43 13,368.42 69.45 67.17 73.76 84.5 75.56 -38.83 44.58 42.2 21.39 23.8 24.06
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-32.73 15.03
-33.45 13.86
-34.51 13.03
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Revenue Other Income Total Income Expenditure Interest PBDT Depreciation PBT Tax Net Profit Equity Reserves EPS CEPS OPM % NPM %
12,052.24 429.19 12,481.43 -10,425.63 -20.39 2,035.41 -285.42 1,749.99 -560.94 1,189.05 144.46 5,308.11 41.16 -17.06 9.87
25,668.72 19,020.46 15,692.91 -12,663.48 -33.5 -50.98 -59.62 -37.63 4,417.55 2,382.42 3,071.22 2,551.19 -825.02 -706.54 -568.17 -271.36 3,592.53 1,675.88 2,503.05 2,279.83 -1,094.91 -457.14 -772.23 -717.85 2,497.62 1,218.74 1,730.82 1,561.98 144.46 144.46 144.46 144.46 11,690.60 9,200.37 8,270.94 6,709.39 86.45 42.18 59.91 54.06 115 66.64 79.57 -15.03 11.67 17.53 17.67 8.43 5.84 9.69 10.66
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Income Statement
TCS (in Cr.) Revenue Other Income Total Income Expenditure Interest PBDT Depreciation PBT Tax Net Profit Equity Reserves EPS CEPS OPM % NPM % 2009 - 10 2008 - 09 2007 - 08 23,044.45 22,404.00 18,533.72 177.6 -456.24 445.95 23,222.05 21,947.76 18,979.67 16,372.78 16,383.17 13,513.61 -9.54 -7.44 -3.42 6,839.73 5,557.15 5,462.64 -469.35 -417.46 -458.78 6,370.38 5,139.69 5,003.86 -751.87 -443.48 -495.1 5,618.51 4,696.21 4,508.76 --97.86 14,820.90 13,248.39 10,806.95 28.61 47.91 46.07 --50.76 29.72 24.84 29.49 24.38 20.96 24.33 2006 - 07 14,939.97 216.55 15,156.52 10,639.00 -3.43 4,514.09 -343.41 4,170.68 -413.39 3,757.29 97.86 7,961.13 38.39 -30.24 25.15 2005 - 06 11,214.86 67.95 11,282.81 -7,946.59 -4.49 3,331.73 -257.38 3,074.35 -357.48 2,716.87 48.93 5,560.40 55.53 -29.75 24.23
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BIBLIOGRAPHY:
BOOKS
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Prasanna Chandra, 2007, Investment Analysis and Portfolio Management, Second Edition. Security Analysis by Benjamin Graham and David L. Dood, Sixth edition. Security Analysis and Portfolio Management by Punithavathy Pandian.
NEWS PAPERS AND JOURNALS: Business standard Business line. Business standard WEBSITES: www.wikipedia.com www.ibef.com www.rbi.org www.sebi.gov.in www.moneycontrol.com www.bseindia.com www.bseindia.com
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