A REPORT

ON
FUNDAMENTAL ANALYSIS
AND
TECHNICAL ANALYSIS
OF
PHARMACEUTICAL SECTOR

SUBMITTED BY: -
AKASH GIRI
21BSP1353
 HDFC LIFE INSURANCE CO. LTD

A report submitted in partial fulfilment of the

requirements of PGPM Program of IBS
MUMBAI.

Company Guide Faculty Guide

Mr. Mohammed Yusuf Khan Dr. Madhu Lyenger
Circle Head Mumbai Faculty Member
HDFC Life Company Ltd. IBS Mumbai

AUTHORIZATION

This is to inform that this project report titled

“FUNDAMENTAL ANALYSIS AND TECHNICAL
ANALYSIS OF PHARMACEUTICAL SECTOR is an
 original research work done by Mr. Akash Giri, bearing
Enrollment No. 21BSP1353, Batch of 2021-2023,
ICFAI Business School Mumbai during his course of
Summer Internship at HDFC Life Insurance Co. Ltd,
Mumbai. The results embodied in this report have not
been submitted to any other University or Organization
for assessment or award.

Date: 20th May 2022 Name: Akash Giri

Place: Mumbai Enrollment. No:21BSP1353

Signature: Signature:
Company Guide Faculty Guide
Mr. Mohammed Yusuf Khan Dr. Madhu Lyengar

ACKNOWLEDGEMENT

The internship opportunity that I got in HDFC LIFE Insurance Co.

LTD was very great and excellent experience that I got in this
company. I got excellent knowledge about market while doing the
internship in HDFC Life Insurance Co. LTD.

I express my gratitude towards my Company Guide Mr.

Mohammed Yusuf Khan (Circle Head), HDFC LIFE for allowing
me to work under his guidance. Without his help, guidance and
support this project would not have been possible.

I would like to thank my college guide, Prof. Madhu Lyengar for

her special support and guidance throughout this project. I really
appreciate her efforts for guiding me for making this project.

And finally, I would also like to thank the whole Placement

Committee of IBS Mumbai and all the Staff Members who have given
me this wonderful opportunity to work within this organization and
learning during the Summer Internship Program.

TABLE OF CONTENT
SR.NO CONTENT PAGE.NO

1 Authorization 2

2 Acknowledgement 3

3 Executive Summary 5

4 Introduction 6

5 About Company 6

6 SWOT Analysis 7

7 Economic Analysis 9

8 About Sector 13

9 Porter’s Five Force Analysis 14

10 Mutual Funds 16

11 Index Calculation 18

12 Fundamental Analysis 19

13 Technical Analysis 27

14 Backtesting Result 38

15 Conclusion 39

16 References 40
 Executive Summary

NAME: AKASH GIRI ENROLLMENT NO:

21BSP1353
EMAIL ID: CAMPUS: IBS
akashgiri7666@gmail.com MUMBAI
NAME OF THE ORGANIZATION: HDFC LIFE Insurance Co.
LTD
A) About Company:
HDFC Life insurance company limited (‘HDFC Life’/’Company’) is a
joint venture between HDFC ltd, India’s leading housing finance
institution and aberdn Plc. (formerly standard life Aberdeen plc.) a global
investment company. It offers a range of individual and group insurance
solutions that meets various customer’s needs.

B) Title of the Report:

“Fundamental & Technical Analysis of Pharmaceutical Sector”.

C) Objectives:

 To understand stock market and trend of stocks in Pharmaceutical

Sector.
 To maintain and track one sector index and maintain in proper
format.
 To identify the best strategy to make profits by taking the
advantage of stock market movements.
 To maintain index for fundamental and technical analysis of the
chosen sector.
 To implement and analyse different strategies for intraday trading.

D) Methodology:
  Learning and analysing the strategies of intraday trading such as
trend patterns of a stock.
 Movement of trend based on previous closing, candlestick
formation, etc.
 Implementation of the same for identifying the best profitable
strategy between top 5 stocks under Pharma sector.

E) Findings:
 Market index of Pharmaceutical sector increases slowly then
suddenly started decreasing gradually which indicates sudden
fluctuations in the market.
 The Share price of Cipla Ltd is quite good as compared to all other
companies.

INTRODUCTION

Equity Research:

It is the zone which manages the live economy. Equity Research is a field that has
advanced and changed the Financial Sector in the course of recent decades.
Equity Research helps the investor to know about the value, risk &volatility of the
covered security, and thus assist investors to decide whether to buy, hold, sell, sell short,
or simply avoid the security in question.

About Company

HDFC Life Insurance Company Ltd.is a long-term life insurance provider

with its headquarters in Mumbai, offering individual and group insurance
services and incorporated on 14 August 2000.
The company is a joint venture between Housing Development Finance
Corporation Ltd (HDFC), one of India's leading housing finance institutions
and
Abrdn, a global investment company. As on 31 March 2020, the promoters;
HDFC Ltd. and Standard Life (Mauritius Holdings) 2006 Ltd. hold a 51.69%
and 34.75% stake in HDFC Life respectively. The remaining equity is held by
public shareholders.
It obtained the certificate of commencement of business on 12 October 2000
and certificate of registration from Insurance Regulatory and Development
Authority of India (IRDAI) to undertake the life insurance business on 23
October 2000. HDFC Life has 421 branches and is present in 980+ cities,
villages and towns in India and supported by 16,544 employees. The company
has also established a liaison office in Dubai.
HDFC Life distributes its products through a multi-channel network
consisting of Insurance agents, Bancassurance partners (HDFC Bank,
Saraswat Bank, RBL Bank), a Direct channel, Insurance Brokers, MFIs
(Micro Finance Institutions), SFBs (Small Finance Banks), etc. and 39
partnerships within non-traditional ecosystems and an Online Insurance
Platform and currently one of the leading financial service providers in India
offering finance in varied sectors like housing, banking, life insurance and
general insurance, asset management and education loans and many other
products.
Vision:
'The most successful and admired life insurance company, which means that
we are the most trusted company, the easiest to deal with, offer the best value
for money, and set the standards in the industry'.

Mission:
We at HDFC Life are committed to offer innovative products and services that
enable individuals live a 'Life of Pride' .

Value:
It’s who we are. It’s what we do and how we do it. It’s what’s made us
household name is Life Insurance. Our strong corporate culture is rooted in
excellence, progress, innovation and integrity.
 SWOT ANALYSIS

Strength:

1. Customized Packages – The business offers its customers with

customized insurance plans based on the needs of the customer. This is
an interesting feature because everyone needs an insurance plan
according to their requirements and offering that clearly creates a
differentiating factor in the market.

2. Brand Image – HDFC life insurance has a very well established

domestic image in the Indian market. Supported by
the international image of Standard Life insurance which further ads up
to the credibility of the brand.

3. Well established Networks – The business has a well-established

network in the country who further sells the policies to customers. It has
a network of over 500 branches in over 700 cities.

4. The base is Strong – HDFC insurance has a very strong base in capital
and reserve.

5. Customer Service – The customer service offered by the business is

exceptionally good and hence it helps in building brand reputation.

Weakness:

1. High Cost of operations – The business involves high administration

cost and management expenses. As selling needs some investment and
hence there is a continuous cash flow going out in order to do
business development.

2. Retention of the network is poor – Thought the business has a well-

established network but there is a high churn in the network and hence it
further adds to the cost of operations.

Opportunities:
 1. Population – The population of India is increasing at a rapid pace and
also the insurable population is too high and not yet covered completely
and hence there is a huge potential for the business in Indian market.

2. Liberalization in Laws – The liberalization of the insurance laws in

India will help the business to further expand the new avenues which
were earlier restricted due to the stringent policies and laws of the
insurance sector.

Threats:

1. Instability in Economy – There is a high instability in the economy

which impacts the business to great extent. Global crisis
inhibits people from investing in such policies as the guarantee of
getting the returns or even the principal amount is not known.

2. NBFC’s Entry in the industry – There is a high competition in the

market owing to the fact that many new players are entering the market
and biggest threat is from NBFC’s.

3. Movement of Employees – The industry experiences high churn ratio

and hence the employees who are successful in the industry keeps on
moving from one company to another which puts a lot of pressure on
hiring and also the candidates who are driven for sales and increasing
the business in terms of new insurances issued for the brand.

Economic analysis:
Pestle analysis:

 Importance of Pestle analysis of HDFC Life:

Pestle analysis means which help in making company making strategic
decisions correctly, keeping in perspective the external trends and factors of
external environment. The PESTEL Analysis of HDFC LIFE INSURANCE
BUILDING a SERVICE BRAND will take into account the most important
aspects of the external environment that impact the business
1.Political factor:
 Government stability:
Government stability also allows businesses like HDFC LIFE INSURANCE
BUILDING A SERVICE BRAND to expand regionally as well as
internationally
Government stability also attracts investors for businesses and companies such
as HDFC LIFE INSURANCE BUILDING A SERVICE BRAND – which
leads to growth and development in the infrastructure as well as enhances
international image
 Tax policy:
Desirable tax policies that support business growth and development will allow
businesses like HDFC LIFE INSURANCE BUILDING A SERVICE BRAND
to expand, and thereby add to creating economic value for the country as well
Government subsidies and favourable tax rates will also allow HDFC LIFE
INSURANCE BUILDING A SERVICE BRAND to maintain competitiveness
by controlling its costs of doing business
 Competition regulation:
It is important for government and political institutions and bodies to monitor
competition in the industry
Competition regulation is important for the protection of all groups and
stakeholders, as well as for maintaining the rights and interests of the related
stakeholders

2.Economic factor:
 Inflation rate:
A moderate inflation rate is needed in the economy for companies like HDFC
LIFE INSURANCE BUILDING A SERVICE BRAND to flourish.
A moderate inflation rate will also help the business grow and work positively
towards increasing the consumer confidence, and consumer spending trends
A lower inflation rate will lead to a high increase in the disposable income, and
thereby could increase competitiveness, especially through pricing strategies
which could lead to unethical price wars that take undue advantage of the
consumer.
 Interest rate:
A moderate interest rate will help businesses sand companies like HDFC LIFE
INSURANCE BUILDING A SERVICE BRAND in taking loans from the
banks.
This business loan would be used for purposes of growth and development.
Moderate to interest rates would also allow individuals to take personal loan.
 Consumer spending trends:
Higher consumer spending trends are preferred as they lead to higher
purchases and consumption of products sold by HDFC LIFE INSURANCE
BUILDING A SERVICE BRAND.
These higher consumer trends can be positively influenced through product
quality and marketing strategies.
In addition, these trends are also influenced by other economic indicators such
as inflation rate, interest rate, and unemployment trends.
 Unemployment trends:
Higher unemployment trends will lead to lower overall disposable income in
the economy, which in turn would directly affect the performance of
companies.

3.Social factor:
 DEMOGRAPHICS:
A higher portion of the younger population is beneficial for HDFC LIFE
INSURANCE BUILDING A SERVICE BRAND as it will allow the company
a larger consumer population base
In addition a younger population will also promise HDFC LIFE INSURANCE
BUILDING A SERVICE BRAND with more skilled and educated workers
and human resources, thereby adding breadth and depth to the talent pool
A moderate to high middle class is also important for HDFC LIFE
INSURANCE BUILDING A SERVICE BRAND as its current consumers, and
advocates
 EDUCATION:
A higher education in the population is desirable for multiple reasons that will
benefit HDFC LIFE INSURANCE BUILDING A SERVICE BRAND
As a result, they will focus on positive consumption which will give HDFC
LIFE INSURANCE BUILDING A SERVICE BRAND an advantage because
of its unique competitive positioning and placement.
 Family size and structure:
The family structure and size determines the frequency and nature of purchase
made
This is also important for understanding consumption patterns
The key decision makers are eth parents, though they take into consideration
the suggestions and requests of their children
As a result, HDFC LIFE INSURANCE BUILDING A SERVICE BRAND
applies push and pull strategies for its appeal

4.Technological:
 Technological infrastructure:
The country has a strong infrastructure with regards to technology
There is a high rate of technological development and advancement
There is high rate of innovation across all industries, which makes companies
including HDFC LIFE INSURANCE BUILDING A SERVICE BRAND
competitive as well as progressive
There is high rate of innovation across all industries, which makes companies
including HDFC LIFE INSURANCE BUILDING A SERVICE BRAND
competitive as well as progressive
 Use of social media:
There is a higher portion in the population of the youth, as well as middle ages
persons
These population segments widely make use of social media for connectivity
Increasingly, social media is also being used by businesses like HDFC LIFE
INSURANCE BUILDING A SERVICE BRAND for gathering consumer data
and information
HDFC LIFE INSURANCE BUILDING A SERVICE BRAND also interacts
with, gathers feedback, and communicates promotions to customers through
official social media channels
 Investments in R&D:
The high investment helps in advancing industries, and equipping them with
new, and more flexible as well as effective ways for business operation and
other business processes
The higher investment, and related research has also allowed for an increased
rate of innovation

5.ENVIRONMENTAL:
 RECLYING:
Consumers are becoming more aware, and demanding ways for recycling
products to be disposed off
HDFC LIFE INSURANCE BUILDING A SERVICE BRAND has launched
specific sites for disposing off products to be recycled
Consumers are also increasingly demanding recycled products for
consumption
  Waste management:
HDFC LIFE INSURANCE BUILDING A SERVICE BRAND should
associate itself with, and register with the waste management authorities and
institutions to be able to follow regulations, maintain checks, and avoid any
future hassles
The country has high regulations for waste management and control

 Green consumption:
The increased awareness of environmental sustainability has also given way to
an increase in the green lifestyle
Consumers in the country, and across all markets are increasingly preferring
products and services that are green i.e. produced and marketed using
environmentally friendly and sustainable ways and methods
 Renewable energy investment:
The country as a whole it all its industries is gradually moving towards the use
of renewable energy for operations and business processes.
The country as a whole it all its industries is gradually moving towards the use
of renewable energy for operations and business processes.

6.Legal:
 Health and safety law:
The safety and health involves not only physical wellbeing, but also the
emotional and mental wellbeing if employees.
The safety and health involves not only physical wellbeing, but also the
emotional and mental wellbeing if employees.
 Employment laws:
Country wide regulations demand businesses to form legal contracts pertaining
to employment.
These contracts are authorized by the respected governmental bodies, and
involve all aspects of employment.

About Sector
(Pharmaceutical Sector)
 The Pharmaceutical industry discovers, develops, produces, and
markets drugs or pharmaceutical drugs for use as medications to be
administered to patients (or self-administered), with the aim
to cure them, vaccinate them, or alleviate symptoms. Pharmaceutical
companies usually deal in generic or brand medications and medical
devices. They are subject to a variety of laws and regulations that
govern the patenting, testing, safety, efficacy using drug testing
and marketing of drugs. The global pharmaceuticals market produced
treatments worth $1,228.45 billion in 2020 and showed a compound
annual growth rate (CAGR) of 1.8%.
 So if specifically talk about the growth of this sector in India, then by
statistical studies, we find that The pharmaceutical industry in India was
valued at an estimated US$42 billion in 2021. India is the world's third
largest provider of generic medicines by volume, with a 20% share of
total global pharmaceutical exports. It is also the largest vaccine
supplier in the world by volume, accounting for more than 50% of all
vaccines manufactured in the world. With industry standards compliant
mega production capabilities and large number of skilled domestic
workforce, Indian exports meet the standards and requirements of
highly regulated markets of USA, UK, European Union and Canada.
 As of 2021, most of pharmaceuticals made in India are low cost generic
drug which comprise most of pharmaceutical export of India. Patented
medicines are imported.
 Major pharmaceutical hubs in India are (clockwise from
northwest): Vadodara, Ahmedabad, Ankleshwar, Vapi, Baddi, Sikkim,
Kolkata, Visakhapatnam, Hyderabad, Bangalore, Chennai, Navi
Mumbai, Mumbai, Pune and Aurangabad.

Porter’s Five Forces Analysis

One model for examining an industry and a company's strategic position
within its industry is Porter's Five Forces analysis. The analysis looks at
five competitive forces that influence an industry: threat of new entrants,
power of suppliers, power of buyers, availability of substitutes, and
competitive rivalry in the industry. How these five forces interact provides
a good picture of the sector's dynamics and whether an individual company
is properly positioned for survival in the sector.

Threat of New Entrants:

The big payoffs available in the Pharmaceutical industry lead to a steady
flow of new companies being created. A team of researchers with a hot
idea or newly granted patents can find venture capital funds eager to
provide millions of dollars in startup funding. These smaller companies
pose no serious threat to big pharma. In fact, one of a startup investor's
main exit strategies is to sell out to a big pharma firm when new products
are through the initial development phase.

Power of Suppliers:
Pharma is unique among industries because the medical patient has an
absolute lack of power regarding pricing. The prescriber of the drugs, the
physician, ethically is not allowed to profit from the sale of drugs. The
entity that pays for the drugs, the insurance company, only has a say in how
much it will pay to the distributor of the drugs, meaning it has little power
with the drug manufacturers. The insurer can refuse to pay for treatments it
believes are overpriced.

The only entities with any negotiating power are the pharmacies and
medical institutions that fulfill the medical patients’ prescriptions. Even
these entities have little power over newer drugs under patent or drugs with
only one manufacturer. Pharmacies focus on their profit margins and have
little incentive to provide patients with the lowest possible pricing.

Availability of Substitutes:
The effect of substitutes is dependent on the individual drug. A new FDA-
approved blockbuster drug that has patent protection, treats a major health
condition, and is first to market in its category has a license to print billions
of dollars. The development of a new drug that cures a major disease could
be worth tens of billions of dollars per year. However, the 30th drug to treat
a common condition could take years to recoup the R&D costs.

Once a drug loses its patents, generic drug manufacturers start selling
copycat versions at substantially lower prices. A drug that netted $100
million a year in profit could become one that earns only $1 million a year
in profit overnight. Additionally, there is a major international problem
with counterfeit drugs. The best of these counterfeits duplicate a real drug's
formula and sell it at a lower price, which hurts corporate profits. The
worst counterfeits are made with low-grade materials and can destroy the
reputations of legitimate products.

Competitive Rivalry:
 With more than $1 trillion in global sales, the pharmaceutical business can
be cutthroat.1 The huge importance of intellectual property results in strong
competition for high-level workers and leading researchers. Even strong
nondisclosure and non-compete clauses cannot prevent the leaking of
competitive information.

Any potential new drug has its public information analyzed for the
possibility of creating a similar drug to market as a substitute. The industry
exhibits a pattern of firms merging and larger firms buying smaller firms
that have promising research or new drugs.

Mutual Funds

A mutual fund is a type of financial vehicle made up of a pool of money

collected from many investors to invest in securities like stocks, bonds, money
market instruments, and other assets. Mutual funds are operated by
professional money managers, who allocate the fund's assets and attempt to
produce capital gains or income for the fund's investors. A mutual fund's
portfolio is structured and maintained to match the investment objectives stated
in its prospectus. Mutual Funds can be purchased from the Banks, Asset
Management Company and Brokers.

NET ASSET VALUE (NAV)

NAV or Net Asset Value is the unit price of a mutual fund scheme. Mutual
funds are bought or sold on the basis of NAV.
NAV= Asset Under Management/No. of units This helps us in understanding
the value of our asset.
There are 3 types of Mutual Funds:
1. Equity funds
2. Debt funds
3. Balance funds (50%:50%)
The equity funds are further dividend into many types:
• Large Cap Funds: Large Cap Mutual Funds are equity funds that invest a
bigger proportion of their total assets in companies with a large market
capitalization.
• Mid Cap Funds: A mid-cap fund is a pooled investment, such as a
mutual fund, that focuses on companies with a market capitalization in the
middle range of listed stocks.
• Small Cap Funds: Small cap mutual funds are invested in companies
that below top 250 stocks in the exchange as per their market capitalization.
• Index Funds: An “index fund” is a type of mutual fund or exchange-
traded fund that seeks to track the returns of a market index.
• Sector Funds: Sector funds, also known as specialty funds, are mutual
funds and ETFs (exchange-traded funds) that concentrate on a specific
industry or market.
• Fund of Funds: A fund of funds (FOF) is a pooled fund that invests in
other funds. FOFs usually invests in other hedge funds or mutual funds.
• Arbitrage Funds: Arbitrage fund is a type of mutual fund that leverages
the price differential in the cash and derivatives market to generate returns.
• Contra Funds: A contra fund is defined by its against-the-wind kind of
investing style
• Foreign Funds: A foreign fund is a type of fund that invests in
companies that are based internationally, or outside the investor's country of
residence.

MUTUAL FUND AUM WISE AND CAGR WISE REPORT:

 AUM WISE
SECTOR NAME AUM(CR)
Axis Blue-chip Fund - Direct Plan - Growth 34,069.34
Large Cap Fund

SBI Blue Chip Fund - Direct Plan - Growth 30,679.47

Large Cap Fund

ICICI Prudential Blue-chip Fund - Growth 30,387.79

Large Cap Fund

Maree Asset Large Cap Fund - Direct Plan - 30,348.97

Growth Large Cap Fund

Aditya Birla Sun Life Frontline Equity Fund - 21,004.00

Direct Plan - Growth Large Cap Fund

 CAGR WISE
SECTOR CAGR RETURN
Invesco India Large Cap Fund - Direct Plan - 16.07%
Growth Large Cap Fund
IDBI India Top 100 Equity Fund - Direct Plan 15.86%
- Growth Large Cap Fund

Nippon India Large Cap Fund - Direct Plan - 14.29%

Growth Large Cap Fund

ICICI Prudential Blue-chip Fund - Direct Plan 13.50%

- Growth Large Cap Fund

Sundaram Large Cap Fund - Direct Plan - 13.09%

Growth Large Cap Fund

Index Calculation

An index is an indicator or measure of something, and in finance, it typically

refers to a statistical measure of change in a securities market.
It signifies how the market moves and how much the index fluctuates.
Following, there is updated index till now.
Method of Calculation of Index:
1. Calculation of weight of each stock as per the total market capital.
2. Calculation of % age change i.e., changes in stock price compared
to previous day. (Current price – previous price) /Previous price.
3. % age of change in accordance with weight of the stock.
4. Also, Index calculation is always been start with base Benchmark
Number 1000.
5. So, every day we need to update market cap, price and maintain
record of change in index.
Line Chart below shows the Index update from 20 th April 2022 till 20th
May 2022

Index
1140
1120
1100
1080
1060
1040
1020
1000
980
960
940
28th 11th 23rd 29th 30th 8th 11th 25th 26th 6th 9th 10th 11th 17th 18th 19th 20th
Feb March March March March April April April April May May May May May May May May
2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022

Fundamental Analysis

Fundamental analysis is a method of assessing the intrinsic value

of a stock. It combines financial statements, external influences,
events, and industry trends. It is important to note that the intrinsic
value or a fair value of a stock does not change overnight. Such
analysis helps you identify key attributes of the company and
analyse its actual worth, taking into account macro and
microeconomic factors.
Fundamental analysis uses three sets of data:

1. Historical data to check how things were in the past

2. Publicly known information about the company, including
announcements made by the management and what others
say about the company
3. Information that is not known publicly but is useful, i.e., how
the leadership handles crises, situations, etc.

Selection of Large Cap Companies:

Following are the companies whose Market Cap is more than
10,000 Crores are listed below :-

Sun Pharma
Divis Labs
Cipla
Dr Reddys Labs
Gland
Torrent Pharma
Alkem Lab
Aurobindo
Pharm
Abbott India
Zydus Life
Lupin
Laurus Labs
GlaxoSmithKline
Ipca Labs
Pfizer
Sanofi India
Suven Pharma

Price to Earnings Ratio (P/E Ratio):

 The Price - Earnings Ratio, also known as P/E ratio, is the
ratio of a company’s share price to the company’s
earnings per share.
 The ratio is used for valuing companies and to find out
whether they are overvalued or undervalued .
 A high P/E ratio could mean that a company’s stock is
overvalued, or else that investors are expecting high
growth rate in the future.

Sector PE

 The total of all the companies P/E ratio that are

taken in this sector divided by the number of
companies that are their will gives the average
P/E ratio of the sector.
 If Sector P/E > Company P/E = Undervalued
 If Sector P/E < Company P/E = Overvalued
 Sector P/E = Total PE of all companies / No of
Companies.

Company Name P/E

Ratio
Sun Pharma 35.1
Divis Labs 46.51
Cipla 31.94
Dr Reddys Labs 27.07
Gland 44.28
Torrent Pharma 39.56
Alkem Lab 23
Aurobindo 13.94
Pharm
Abbott India 51.14
Zydus Life 34.39
Lupin -
Laurus Labs 36.25
GlaxoSmithKline 56.99
 Ipca Labs 14.46
Pfizer 34.41
Sanofi India 17.79
Suven Pharma 34.03

Sector P/E 33.80

VALUE PICK:

 Value pick stocks are the stocks that appear to be trading for
less than their intrinsic or book value. They are appealing to
long-term investors. They are selected from the Undervalued
Stocks.
 Here we will take all the undervalued stocks and analyse
their revenue and profit.
 If the revenue and profit both are increasing, then we will
accept the stock.
 If the revenue and profit both are decreasing, then we will
reject the stock.
 If one is decreasing and other one is increasing, then we will
hold the stock but anyway will select it.

Name P/E Profit Revenue Result

Cipla 9.88 ↑ ↑ Accept

Dr Reddys 9.3 ↑ ↓ Accept

Labs
Alkem Lab 9.09 ↑ ↑ Accept

Aurobindo 19.67 ↑ ↑ Accept

Pharm
Ipca Labs 6.97 ↑ ↑ Accept

Sanofi India 8.22 - - Reject

GROWTH PICK:
  Companies whose earnings are expected to increase at a
steady, above average rate when compared to the whole
sector. Growth Pick stocks are selected from the Overvalued
Stocks.
 Here we will take all the overvalued stocks and analyse their
EPS Growth.
 The criteria to select the stock based on PEG ratio is 0 to1.5.
 If the PEG ratio is in between 0 to1.5, then we will accept
the stock & If the PEG ratio is below or above 0 to 1.5, then
we will reject the stock.
 Formula for calculating the PEG ratio is :- PE/EPS Growth.

Name P/E PEG RATIO Result

Sun Pharma 25.1 - Reject

Divis Labs 46.51 2.12 Reject

Gland 44.28 3.36 Reject

Torrent Pharma 39.56 3.36 Reject

Abbott India 51.14 0.53 Accept

Zydus Life 34.39 55.47 Reject

Laurus Labs 36.25 - Reject

GlaxoSmithKline 56.99 3.90 Reject

Pfizer 34.41 - Reject

Suven Pharma 34.03 - Reject

 Ratio Analysis

Ratio analysis is a quantitative method of gaining

insight into a company's liquidity, operational
efficiency, and profitability by studying its
financial statements such as the balance sheet and
income statement. Ratio analysis is a cornerstone
of fundamental equity analysis.

Following are the ratios which I had included are

as follows :-

 Return on Capital Employed (ROCE) – ROCE is a financial ratio that

can be used to assess a company’s profitability and capital efficiency. In
other words, this ratio can help to understand how well a company is
generating a profits from its capital as it is put to use.
 Asset Turnover Ratio – The Asset Turnover ratio measures the value
of a company’s sales or revenues, relative to the value of its asset. It can
be used as an indicator of the efficiency with which a company is using
its assets to generate revenue.
 Current ratio – The Current ratio is a liquidity ratio that measures a
company’s ability to pay short-term obligations or those due within one
year.
 Interest Coverage Ratio – The Interest Coverage ratio measures a
company’s ability to handle its outstanding debt. It is one of a number of
debt ratios that can be used to evaluate a company’s financial position.
 Return on Equity – Return on equity is a ratio that provides investors
with insight into how efficiently a company is handling the money that
shareholders have contributed to it.

Ranking of Companies as per Ratio

 Return
on Asset Interest Return
Company Capital Turnover Current Coverage on
Name Employed Rank Ratio Rank Ratio Rank Ratio Rank Equity Rank

Cipla 16.75 6 60.53 6 3.79 1 75.34 2 12.38 6

Dr Reddys
Labs 18.17 5 61.71 5 2.4 4 56.56 4 14.65% 5

Alkem
Lab 24.67 4 67.01 4 1.94 5 44.89 6 22.09 3

Aurobindo
Pharm 25.69 3 68.23 3 1.83 6 62.54 3 19.54 4

Ipca Labs 28.07 2 85.5 2 3.08 3 124.99 1 24 2

Abbott
India 33.6 1 112.22 1 3.41 2 51.65 5 26.54 1

Final Ranking & Allocation

Company Name Rank Asset Allocation

Dr Reddys Labs 1 3,00,00,000

Alkem Lab 2 2,50,00,000

Cipla 3 2,00,00,000

Aurobindo Pharm 4 1,50,00,000

 Ipca Labs 5 50,00,000

Abbott India 6 50,00,000

Total = 10,00,00,000

NET ASSET VALUE (NAV)

Net asset value (NAV) represents a fund's market value. The NAV is important
because it tells us how much one share of the fund is worth. Market value of
assets is simply the price that an asset is currently worth in the market.

Calculation :-
No. of Shares = Asset Allocation/ closing price
Asset under management (AUM) = No. of shares * closing price
NAV = AUM/ No. of units (No. of units assumed to be 1 crore)

Line Chart below shows the NAV from 20th April 2022 till 20th May 2022
 NAV
10
9.8
9.6
9.4
9.2
9
8.8
8.6
8.4
8.2
20th 21st 22nd 25th 26th 27th 28th 29th 2nd 4th 5th 6th 9th 10th 11th 12th 13th 17th 18th 19th 20th
April April April April April April April April May May May May May May May May May May May May May
2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022 2022

Short Term Technical Analysis

1. Candlestick Chart: Originating in Japan over 300 years ago,

candlestick chart requires all the open, high, low and close prices. A
daily candlestick is based on the open price, the intraday high and low,
and the close. A weekly candlestick is based on Monday's open, the
weekly

2. High-low range and Friday's close.

3. Doji: The relevance of a Doji depends on the preceding trend or

preceding candlesticks. Doji indicate that the forces of supply and
 demand are getting more evenly matched and a change in trend could
also be near. Hammer: The hammer may be a bullish reversal pattern
that forms after a decline. After a decline, hammers signal a bullish
revival. The low of the long lower shadow implies that sellers drove
prices lower during the session.

4. Hanging Man: The hanging man may be a bearish reversal pattern

which will also mark a top or resistance level. Forming after an
advance, a dangling man signals that selling pressure is beginning to
increase. The low of the long lower shadow confirms that sellers
pushed prices lower during the session.
5. Shooting Star: The shooting star may be a bearish reversal pattern that
forms after an advance and within the star position, hence its name. A
shooting star can mark a possible trend reversal or resistance level.

6. Inverted Hammer: The inverted hammer looks exactly sort of a meteor,

but forms after a decline or downtrend. Inverted hammers represent a
possible trend reversal or support levels. After a decline, the long upper
shadow indicates buying pressure during the session.

TECHNICAL INDICATORS
RSI (RELATIVE STRENGTH INDEX):
RSI is a momentum indicator which is used technical analysis to measure
the magnitude of recent price changes to evaluate oversold or overbought
price of a stock. The RSI is shown as a line graph that moves between two
extreme points.
To interpret RSI particular values are set 70-30 (generally for long term)
80- 20 (generally for short term). When line crosses the upper limit (70/80)
which indicates that security is becoming overbought or overvalued. When
line touches the lower limit (30/20) which indicates the security is oversold
or undervalued condition.
When line is touches upper limit that is when security is overvalued it is
right to sell the security and when the line touches the lower limit it
is call to buy the security.

BOLLINGER BAND:
A Bollinger band is technical analysis tool defined by a set of trend lines
plotted two standard deviations away from a simple moving average of
securities price. It consists of three lines A simple moving average (middle
band), upper limit and lower limit band.
 The upper and lower band are typically 2 standard deviations from simple
moving average (SMA).
Bollinger Band shows general trend of a security. It can be set for different
sets of time. When Candle stick cuts the upper limit generally it is right to
sell the security and when candle stick crosses the lower limit it is right to
buy the security. Bollinger band also shows the volatility of the security.

MOVING AVERAGE CONVERGENCE DIVERGENCE (MACD):

MACD indicator is trend following momentum indicator which shows

relationship between two moving averages of security’s price. It consists of
two lines, red line which is market trend and blue line which is of Stock line.
When these two lines intercept each other, it gives call for buy or sell
security.
When Red line cuts blue line from below it calls for sell the security and when
blue line crosses red line from upper side it calls for buy the security. The
speed of crossover indicates stock is overbought or oversold.
MACD also helps in understanding whether the stock is Bullish or bearish.
VOLUME WEIGHTED AVERAGE PRICE (VWAP):
It is an indicator often used by traders which shows the average of the share
price throughout the day on the basis of volume and price.
When the trend line overlaps and crosses the candle downward, then short
selling of share is done.
When the trend line overlaps and crosses the candle upwards, then buying of
share is done.
The profit target should be 2% and stop loss at 1%.
STOCHASTIC RSI:
Stochastic RSI is an indicator of RSI indicator.
Red line is RSI and Blue line is stochastic RSI.
The profit percentage is 2% and stop loss is 1%.
FIBONACCI:
A golden cross indicates a long-term bull market going
forward, while a death cross signals a long-term bear market.
Both refer to the solid confirmation of a long-term trend by
the occurrence of a short-term moving average crossing over
a major long-term moving average.
Once the crossover occurs, the long-term moving average is
considered a major support level (in the case of the golden
cross) or resistance level (in the instance of the death cross)
for the market from that point forward.
Either cross may occur as a signal of a trend change, but they
more frequently occur as a strong confirmation of a change in
trend that has already taken place.

Super trend:
First we go to Trading View and select any share then we select 5 min candle
then Go to indicators and type Super Trend (domenicosilletti -9364). We see 2
lines forming for long and Short.
Call- Long tells us to buy at that particular Candle and Short tells us to Short
sell at that particular Candle. Target is recommended at 2% and Stop loss is
1%.

Pivot Point Standard:

• We go to Trading View and select any share
• Select 5 min candle
• Go to indicators
• Type and Select – Pivot point Standard
• P line is the Pivot line, R line is Resistance line, S line is Support line we
will only take the call when the candles open/closes at Pivot Line.
Call for Buy – when Green Candle opens at Pivot line, we will take the call for
Buy Target- R1, Stop loss- P line
Call for Short sell- when red Candles opens at Pivot line we will take the call
for Short sell Target – S1, Stop loss – P line
 Aroon:
• We go to Trading View and select any share
• Select 5 min candle
• Go to indicators 31
• Type and Select- Aroon
Aroon Gives us 2 lines 1. Aroon Up gives Average of 14 Days high (Orange
line) 2. Aroon Down gives Average of 14 Days Low (Blue line)
Call for Buy- 1st confirmation when the Orange line Cuts the Blue line from
below 2nd confirmation when the after cutting Blue line the orange above 50%
Call for short sell- 1st confirmation when the Orange line Cuts the Blue line
from above 2nd confirmation when the after cutting Blue line the orange below
50% .
Awesome Oscillator:
• We go to Trading View and select any share
• Select 15 min candle
• Go to indicators
• Type and Select- Awesome Oscillator
• We see candles forming with a zero line
Call For Buy- When the Green candle crosses the Zero line and moves above the
Zero line than we will take the call for Buy
Call for Short Sell- When the Red candle crosses the Zero line and moves below
the Zero line than we will take the call for Short sell.

Williams Alligator:
This is an indicator which includes three lines of three different colours wherein
Blue stands for Jaw, Red-Teeth, Green-Lips.
This indicator needs to be watched on a 5minute candlestick formation
When the GREEN Line crosses the other two lines from down then here it gives
us the confirmation for a BUY CALL.
Whereas on the other hand when BLUE Line crosses other two line this is the
indication of a short sell call.

Ichimoku Cloud:
• Select 5 min candle
• Go to indicators
• Type and Select- Ichimoku clouds
• We see a Cloud Forming which is because of the Leading Span, Base line
is Red line and Conversion Line is Blue Line .
Call for Buy 1st confirmation when blue line cut red line from below 2 nd
confirmation when the Clouds are below the Candles.
Call for Short Sell 1st confirmation when blue line cut red line from above 2 nd
confirmation when the Clouds are above the Candles.
 BACKTESTING OF THE INDICATORS

Back testing assesses the viability of a trading strategy or pricing model by

discovering how it would have played out retrospectively using historical
data.
The underlying theory is that any strategy that worked well in the past is likely
to work well in the future, and conversely, any strategy that performed poorly
in the past is likely to perform poorly in the future.
When testing an idea on historical data, it is beneficial to reserve a time period
of historical data for testing purposes. If it is successful, testing it on alternate
time periods or out-of-sample data can help confirm its potential viability.

PROBABILITY PROBABILITY
NAME OF WIN OF LOSS RANKING
SUPERTREND 51.69% 46.61% 1
RSI 46.46% 52.76% 7
AROON 47.12% 52.33% 6
BOLLINGER
BAND 47.21% 50.56% 5
CPR 45.69% 53.18% 8
FIBONACCI 48.00% 52.00% 2
MACD 42.46% 56.98% 10
PIVOT 45.16% 53.98% 9
STOCHASTIC RSI 47.95% 50.77% 3
VWAP 47.54% 51.18% 4

I would recommend "SUPERTREND" indicator to all the

investors who wants to invests in Pharma sector as it gives the
Recommendation:- highest winning probability i.e. 51.69%.

Conclusion:

Equity research plays a very crucial role in order to make wise investment
decisions. After having accessed your risk capacity and tolerance followed by
time horizon and intention of investment, the individual portfolio can fetch us
systematic returns.
Relative valuation model is one such method for value analysis. One can use
long term and short term technical analysis along with fundamental analysis to
determine a confirm trade signal. By calculating long term target price investor
one can achieve maximum profit and also get an idea for how much period they
should hold the stock.
I had also learned the basic of Zerodha platform and new strategy had been
implemented on daily basis.
Moving towards the technical indicators I could brief up by saying that
Awesome Oscillator can also be considered to trade in intraday but the
drawback is that we have to keep monitoring the same stock for long and wait
for booking profits or taking the trades. They are mostly recommended for stock
which generally consolidate sideways in a lower high and lows.
Lastly to talk about the index and the indices I could say that this certainly
depends on the level of fluctuations that the market can face. Its effect is
administered on the entire sector and it’s beneficial from learning perspective of
becoming a trader even though it would come under the fundamental analysis of
the stock market yet it is something to draw a light on.

References:

https://www.moneycontrol.com/stocks/marketinfo/marketcap/bse/finance-
investments.html
https://en.m.wikipedia.org/wiki/Pharmaceutical_industry
https://en.m.wikipedia.org/wiki/Pharmaceutical_industry_in_india
https://in.tradingview.com/