Prashant Black Book PDF

SUMMMER INTERNSHIP REPORT
ON
“A STUDY ON FUNDAMENTAL AND TECHNICAL ANALYSIS OF
PHARMACEUTICAL SECTOR IN INDIA”
SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE OF
MASTER OF MANAGEMENT STUDIES (MMS)
(UNDER UNIVERSITY OF MUMBAI)
SUBMITTED BY:
“Prashant Kokare”
ROLL NO: 087
BATCH: 2022 - 24
UNDER THE GUIDANCE OF
Dr. (Prof.) Sandeep Chopde
MET IOM
MET INSTITUTE OF MANAGEMENT
BHUJBAL KNOWLEDGE CITY,
BANDRA RECLAMATION, BANDRA, MUMBAI - 400 050
PRASHANT KOKARE Ι
SUMMMER INTERNSHIP REPORT
ON
“FUNDAMENTAL AND TECHNICAL ANALYSIS OF PHARMACEUTICAL SECTOR
IN INDIA”
BY
PRASHANT KOKARE
SUMMER INTERNSHIP PROGRAM
AT
FINTECH EDUCATION
A report submitted in partial fulfilment of the requirements of MMS Program of MET Institute
of Management.
COMPANY GUIDE
Aniket Chandanshive
Date of Submission: 28/10/2023
II
PRASHANT KOKARE
CERTIFICATE
This is certified that Project titled “A STUDY ON FUNDAMENTAL AND TECHNICAL
ANALYSIS OF PHARMACEUTICAL SECTOR IN INDIA” is successfully completed by
PRASHANT KOKARE during the Ⅱ semester, in partial fulfilment of the Master’s Degree of
Management Studies recognized by the University of Mumbai for the academic year of 2022-24.
Bearing Roll No. 087. In the Ⅱ semester of academic year of 2022-24.
This project work is original and was not submitted earlier for any award of any degree/diploma
or associated with any other institution/university.
Date: 28/10/2023 Name: Prashant Kokare

Place: Mumbai
Signature: Signature:
Company Guide Faculty Guide
Aniket Chandanshive Dr. Sandeep Chopde
III
PRASHANT KOKARE
DECLARATION
I hereby declare that, this Project report submitted by me to the University of Mumbai is a
Bonafede work undertaken by me and it is not submitted to any other University or Institution for
the award of any degree/ diploma/ certificate or published any time before.
Place: Mumbai Name of the Student
Date: 28/10/2023 Prashant Kokare
IV
PRASHANT KOKARE
ACKNOWLEDGEMENT
I would like to express my heartfelt gratitude to "Fintech Education" for providing me with a
valuable platform to enhance my knowledge in the field of Financial Markets. Working with this
organization has been an enriching learning experience.
The Summer Internship program offered me comprehensive insights into the intricacies of the
stock market and the mechanics of transactions on the Exchange. Through live trading exercises,
I gained practical experience in trading stocks using various technical indicators. Additionally, I
had the opportunity to learn about different Derivative Instruments such as FUTURES,
FORWARDS, SWAPS, and OPTIONS.
The Summer Internship Project, titled "A STUDY ON FUNDAMENTAL AND TECHNICAL
ANALYSIS OF PHARMACEUTICAL SECTOR IN INDIA", provided me with a valuable
learning experience. Throughout the duration of this internship, I was fortunate to interact with
individuals who, in their respective roles, offered encouragement and guidance.
I extend my gratitude to my Company guide, Mr. Aniket Chandanshive, for giving me the
opportunity to be a part of this esteemed organization for two months and for providing me with
opportunities to showcase my potential.
I am also grateful to my B-School, MET Institute of Management, for giving me this opportunity
to work with such a wonderful organization where I could develop a deeper understanding of the
financial markets.
Regards,
Prashant P. Kokare
Date: 28/10/2023
Place: Mumbai
V
PRASHANT KOKARE
COMPANY CERTIFICATE
VI
PRASHANT KOKARE
TABLE OF CONTENT
Page
Title No.
Chapter 1 - Introduction of Company 1
1.1 Company Overview 1
1.2 Vision 1
1.3 Mission 1
Chapter 2 - Introduction of Project 2
2.1 Introduction on Pharmaceutical Sector in India 4
2.2 Literature Review 4
2.3 Scope of the Study 4
2.4 Objectives of the Study 5
2.5 Research Methodology 5
2.6 Porter’s Five Forces for Indian Pharma Industry 6
2.7 SWOT Analysis for Indian Pharma Industry 8
2.8 PESTLE Analysis of Pharmaceutical Sector 10
Chapter 3 - Fundamental Analysis 12
3.1 Fundamental Analysis of Pharmaceutical Sector in India 12
3.2 Fundamental Analysis Involves 12
3.3 Importance of Fundamental Analysis 13
3.4 Steps Involved in Carrying Out Fundamental Analysis 13
3.5 Quantitative and Qualitative Fundamental Analysis 15
3.6 Advantages of Fundamental Analysis 17
3.7 Disadvantages of Fundamental Analysis 18
3.8 Ratio Analysis 19
3.9 Calculation of Industry P/E 33
Chapter 4 - Technical Analysis 39
4.1 Technical Analysis 39
4.2 Key concepts and tools in technical analysis include 39
4.3 Long-Term Technical Analysis 40
4.4 Short-Term Technical Analysis 47
Suggestions 52
Conclusion 53
Bibliography 54
Plagiarism Report 55
VII
PRASHANT KOKARE
LIST OF FIGURES
Sr. No. Figures Page No.

1 Figure 2.1 Import-Export of Pharmaceuticals 3
2 Figure 2.2 Porter’s Five Forces for Indian Pharma Industry 6
3 Figure 2.3 SWOT Analysis of Pharmaceutical Industry 8
4 Figure 2.4 PESTLE Analysis of Pharmaceutical Sector 10
5 Figure 4.1 Rounding Bottom Pattern of CIPLA 40
6 Figure 4.2 Rounding Bottom Pattern of Suven Pharma 41
7 Figure 4.3 Cup with Handle Pattern of CIPLA 41
8 Figure 4.4 Cup with Handle Pattern of Aurobindo Pharma 42
9 Figure 4.5 Bump and Run Reversal Pattern of Divis Labs 43
10 Figure 4.6 Head and Shoulder Top Pattern of Sun Pharma 44
11 Figure 4.7 Head and Shoulder Bottom Pattern of Sun Pharma 44
12 Figure 4.8 Double Top Pattern of Sun Pharma 45
13 Figure 4.9 Double Bottom Pattern of Torrent Pharma 46
14 Figure 4.10 MACD Indicator in CIPLA 47
15 Figure 4.11 MACD Indicator in LUPIN 48
16 Figure 4.12 Bollinger Band Indicator in Sun Pharma 49
17 Figure 4.13 Bollinger Band Indicator in Aurobindo Pharma 49
18 Figure 4.14 RSI Indicator in Aurobindo Pharma 50
19 Figure 4.15 RSI Indicator in CIPLA 51
VIII
PRASHANT KOKARE
LIST OF TABLES
Sr. No. Tables Page No.

1 Table 2.1 Pharma Sector’s Growth at Current Prices 3
2 Table 3.1 Steps Involved in Carrying Out Fundamental Analysis 13
3 Table 3.2 Current Ratio of Pharmaceutical Sector in India 19
4 Table 3.3 Quick Ratio of Pharmaceutical Sector in India 20
5 Table 3.4 Debt-Equity Ratio of Pharmaceutical Sector in India 22
6 Table 3.5 EBIT of Pharmaceutical Sector in India 23
7 Table 3.6 Interest Coverage Ratio of Pharmaceutical Sector in India 25
8 Table 3.7 Asset Turnover Ratio of Pharmaceutical Sector in India 26
9 Table 3.8 Return on Total Asset of Pharmaceutical Sector in India 27
10 Table 3.9 Return on Net Worth of Pharmaceutical Sector in India 28
11 Table 3.10 Dividend Payout Ratio of Pharmaceutical Sector in India 30
12 Table 3.11 Earning Per Share of Pharmaceutical Sector in India 31
13 Table 3.12 Net Profit Margin of Pharmaceutical Sector in India 32
14 Table 3.13 P/E Ratio of Pharmaceutical Sector in India 34
15 Table 3.14 Undervalued Stocks 35
16 Table 3.15 Overvalued Stocks 35
17 Table 3.16 Valued Pick for Undervalued Stocks 36
18 Table 3.17 PEG ratio for overvalued shares 37
19 Table 3.18 Ranking of Companies according to Ratios 38
20 Table 3.19 Ranking in ascending order 38
IX
PRASHANT KOKARE
CHAPTER 1: INTRODUCTION OF COMPANY
1.1 Company Overview:
In India, the most important life skill that all need is Financial Literacy. Financial education, as of
date, is not taught in schools or colleges in India. However, it is needed at every stage of our life.
FINTECH EDUCATION is a leading institute in creating awareness on “Financial literacy &

Indian stock market”. FTA has created an impact, in this space of financial literacy since 2017and
educated over 2000 students at the University of Mumbai.
FINTECH EDUCATION consists of seasoned and veteran financial professionals who have
Hands-on knowledge of the various financial sectors. Fintech Education is offering various
training programs, certificate courses and workshops to enhance the quality of financial education
in India.
1.2 Vision:
To be a trusted education service provider and to promote financial literacy amongmillennials,
working professionals, homemakers and retirees.
1.3 Mission:
To inspire, educate, raise awareness, and instill the habit of saving and investing among our
community, as well as provide them with tools to achieve financial independence.
CEO:
Mr. Aniket Chandanshive
Mr. Aniket Chandanshive is the Founder and CEO of Fintech Education. He is also an IIM
Lucknow Executive Alumni, Ex. Walls Street Trader. Aditya Birla Capital, Future Generali,
RelianceNippon and Bajaj Allianz are just a few of the companies Aniket has worked for. For
projects like Internships, Free Workshops and Paid Courses, Aniket is associated with 110+
Business Schools, PAN INDIA.
Aniket is also responsible for educating 10k+ interns from various B-School across India.
PRASHANT KOKARE Ι
CHAPTER 2: INTRODUCTION OF THE PROJECT
2.1 Introduction:
The pharmaceutical sector in India is a critical component of the country's healthcare industry and
has evolved significantly over the years. It plays a vital role in providing affordable and accessible
healthcare solutions, not only to the Indian population but also to many other countries worldwide.
The Indian pharmaceutical industry has a rich history dating back to ancient times when traditional
systems of medicine like Ayurveda were practiced. However, the modern pharmaceutical industry
in India began to take shape in the mid-20th century. The industry has seen remarkable growth and
development, particularly in the last few decades. India is now considered one of the largest
pharmaceutical markets globally, both in terms of production and consumption. It has evolved
from a small, primarily domestic-focused industry to a global pharmaceutical powerhouse. The
regulatory framework for the pharmaceutical sector in India is governed by several authorities,
including the Central Drugs Standard Control Organization (CDSCO), which regulates the quality,
safety, and efficacy of drugs and medical devices. India also complies with international regulatory
standards, facilitating the export of pharmaceutical products to various countries. India is
renowned for its expertise in the production of generic drugs and active pharmaceutical ingredients
(APIs). It is often referred to as the "pharmacy of the world" due to its significant contribution to
the global generic drug market. Indian pharmaceutical companies have been increasingly investing
in research and development (R&D) to develop new and innovative drugs. This has led to a
growing number of patents and collaborations with international pharmaceutical companies. India
is a major exporter of pharmaceutical products to over 200 countries. It is a significant supplier of
affordable medicines to low and middle-income countries, contributing to global healthcare access.
The issue of intellectual property and patents has been a topic of international debate. India has
made efforts to balance the need for innovation with ensuring access to affordable medicines. The
introduction of the "Indian Patent Act" in 2005 brought Indian patent law in alignment with
international standards. India has a growing biotechnology sector and has been involved in the
development and production of vaccines, particularly for infectious diseases, including the
COVID-19 pandemic. The pharmaceutical sector in India faces various challenges, including
increasing competition, regulatory compliance, and the need for continuous innovation. However,
it also presents numerous opportunities for growth, both in the domestic and international markets.
The Indian pharmaceutical sector is expected to continue to expand, driven by a large and growing
population, increasing healthcare needs, and the potential for research and development
breakthroughs. It is likely to remain a key player in the global pharmaceutical industry.
2
PRASHANT KOKARE
Pharma Sector’s Growth at Current Prices:
Financial Year Turnover (Rs. In crores) Growth Rate

2017-18 2,26,423 3.03
2018-19 2,58,534 14.18
2019-20 2,89,998 12.17
2020-21 3,28,054 13.12
2021-22 3,44,125 4.89
Table 2.1 Pharma Sector’s Growth at Current Prices
The Indian pharmaceutical sector holds a position of great global significance due to its ability to
provide affordable generic drugs to a vast number of people worldwide. This industry is known
for delivering cost-effective medications while maintaining high quality standards, as evidenced
by India having the largest number of US Food and Drug Administration (USFDA) approved
pharmaceutical facilities outside the United States. Furthermore, it boasts a substantial number of
manufacturing plants compliant with the World Health Organization's Good Manufacturing
Practices (GMP) and approved by regulatory authorities from various countries.
India's pharmaceutical industry plays a vital role in the country's foreign trade, consistently
contributing to trade surpluses, as demonstrated by the following data. In the fiscal year 2021–22,
pharmaceutical exports amounted to Rs. 1,74,955 crore (equivalent to USD 23.5 billion), while
imports stood at Rs. 60,060 crore (approximately USD 8.06 billion), resulting in a trade surplus of
Rs. 1,14,895 crore (equivalent to USD 15.44 billion).
Import-Export Of Pharmaceuticals
200000
174064 174955
180000
160000
140537
140000
120000
Export (in Rs. Cr.)
100000
Import (in Rs. Cr.)
80000
60060
60000 46808
40139
40000
20000
0
2019-20 2020-21 2021-22
Figure 2.1 Import-Export of Pharmaceuticals
3
PRASHANT KOKARE
2.2 Literature Review:
In the realm of financial markets, two primary methods are commonly used: technical analysis and
fundamental analysis. Technical analysis relies on statistical data extracted from market activities,
such as historical stock prices and trading volume, to predict future price movements. On the other
hand, fundamental analysis examines economic factors to forecast upcoming changes in stock
prices.
In a 2015 publication by Suresh A.S., the author highlighted the significance of both fundamental
and technical analysis within the context of the Indian stock market. Regarding fundamental
analysis, the author stressed the need for investors to possess a deep understanding of the overall
economic landscape, the country's economic growth, industry prospects, and the expected
performance of individual companies. Concerning technical analysis, the author suggested a range
of tools and methods, including line charts, bar charts, point and figure charts, trend analysis,
moving averages, relative strength indicators, support and resistance levels, breakout strategies,
head and shoulders patterns, as well as double top and bottom formations to predict future stock
prices.
2.3 Scope of The Study:
The scope of the study is limited to only five companies in the pharmaceutical sector viz.
• Sun Pharmaceutical
• Dr Reddy’s Labs
• Lupin
• Cipla
• Glenmark
• Divis Laboratories
• Torrent Pharmaceuticals
• Aurobindo Pharma
• Alembic Pharmaceuticals
• Alkem Laboratories
4
PRASHANT KOKARE
2.4 Objectives of The Study:
➢ Assessing the financial performance of pharmaceutical firms operating in India.
➢ To analyse and identify key financial ratios specific to the pharmaceutical sector,
➢ Appraising the potential risks linked to investments in Indian pharmaceutical companies.
➢ Offering investment advice grounded in a fundamental analysis of the sector.
2.5 Research Methodology:

This study utilizes a two-pronged approach, combining both descriptive and analytical research
methods. The primary objective of the descriptive phase is to present an unbiased representation
of the current scenario, where the researcher does not exert any influence on the variables. This
non-intrusive method is especially suitable for examining fundamental and technical analyses,
which are employed to evaluate and appraise stocks.
2.5.1 Data Source:

Secondary Source:
Data was collected from secondary source. The data was mostly collected from the annual reports
of companies, some selected websites and company brochures.
2.5.2 Sampling Plan:
Sampling Size:
A total of twenty companies were selected from the pharmaceutical sector, which is listed in BSE
and NSE, and gathered data based on 2023 data.
5
PRASHANT KOKARE
2.6 Porter’s Five Forces for Indian Pharma Industry:
Figure 2.2 Porter’s Five Forces for Indian Pharma Industry
• Threat of New Entrants:
The threat of new entrant is low to moderate based on the following factors:
It has become very important for the pharmaceutical companies to focus on research and
development to sustain their position in market. The cost associated with research and
development is very high. Also, there are the stringent government regulations for approval of new
drugs which act as high barrier. Besides this, various other challenges such as drawing up
appropriate distribution strategies, selecting the right products, anticipating competition among
others are limiting the entry of new barrier in market.
6
PRASHANT KOKARE
Many pharmaceutical companies are progressing in the market by shifting from traditional
business approach to emerging new business approach. The new business technique includes
contract research (drug discovery and clinical trials), contract manufacturing and co-marketing
alliance. Many new companies to enter the market without burden of costly tasks such as research
and development, clinical trials and manufacturing of drugs. Moreover, patent expiry is one of the
reasons which is offering opportunities for lower cost generic manufacturer in terms of greater
market access. Additionally, the government has increased their focus on healthcare cost cutting.
It is creating pressure on the authority to allow early introduction of low-cost drugs in the market.
This, in turn, poses a big opportunity for pharmaceutical companies with approved facility and
sound knowledge of regulatory issues. Therefore, all these factors are responsible for the high
threat from a new entrant.
• The Threat of Substitutes:
The threat of substitute ranges from moderate to high. The demand for generic drugs compared to
branded drug has increased because of cost. Generic manufacturers do not incur the high cost
involved in research and development and regulatory activities such as FDA approval and clinical
trials. These are the reasons, they can offer their product at cheaper price. This increases the threat
of substitutes.
• Bargaining Power of Buyers:

The buyer's bargaining power is moderate. There are many companies in market providing
similar products. Because of this reason, buyers such as hospital and other healthcare
organization have an option to select. They generally pressurize the pharma companies to keep
prices of the drugs low.
Moreover, pharmaceutical industry has one unique feature that the buyer is different from
influencer who is a doctor. The consumer has no option but to buy drug as prescribed by
physician. Therefore, the bargaining power of patient is very low.
• Bargaining Power of Suppliers:
The bargaining power of suppliers in market is low. Pharmaceutical products require various types
of organic chemical. There are a number of chemical suppliers present in the market. Instead of
buying chemicals at the high cost, pharma companies can switch from one company to other.
• The Intensity of The Competitive Rivalry:

Due to increasing demand of high-quality drugs, low-to-moderate entry barrier to the new
entrant, the presence of a number of large and small firm this market is highly competitive.
7
PRASHANT KOKARE
2.7 SWOT Analysis for Indian Pharma Industry:
Every sector has its own set of strengths and weaknesses. Using SWOT analysis, we can identify
certain factors of strength and weakness of any subject. SWOT analysis is simple but useful to
analyze any sector.
Let’s analyze the pharma industry in India based on the four classifications of SWOT analysis:
• Strength
• Weakness
• Opportunities
• Threats
Figure 2.3 SWOT Analysis of Pharmaceutical Industry
8
PRASHANT KOKARE
• Strength:
Compared to other nations, the cost of manufacturing pharmaceutical goods in India is much lower
and more effective. India’s industrial sector is robust. India now has a highly-skilled workforce as
a result of technological advancements.
By communication development, India’s marketing and distribution system are likewise on the
higher side. The sector is additionally strengthened by its diversified ecosystem.
• Weakness:
Despite the liberalization of the FDI restrictions, there is still a lack of investment in research and
development, which must be addressed by industry and government.
The absence of collaboration between industry and academicians is a major flaw. When compared
to other household expenses, health-care costs are insignificant. The manufacturing of low-cost,
low-quality medications poses a challenge to the pharmaceutical business.
• Opportunities:
Despite the industry’s flaws, it is anticipated to develop rapidly because of greater export
possibilities. It is also anticipated that the export of generic medicines to developed markets would
also rise. There is a lot of potential for India to become a hub for international clinical trials.
India is also anticipated to play a major role in global pharmaceutical research & development
(R&D).
• Threats:
One of the greatest challenges to the domestic industry is the product patent policy. To combat this
danger, the sector must step up its R&D efforts. The Government of India’s Drug Price Control
Order put excessive pressure on product pricing, affecting pharmaceutical companies’
profitability.
Small businesses face a danger from the new MRP-based excise duty structure.
9
PRASHANT KOKARE
2.8 PESTLE Analysis of Pharmaceutical Sector:
Figure 2.4 PESTLE Analysis of Pharmaceutical Sector
A PESTLE analysis, which stands for Political, Economic, Social, Technological, Legal, and
Environmental factors, can provide a comprehensive assessment of the pharmaceutical sector in
India:
• Political Factors:
❖ Government Regulations: The pharmaceutical industry in India is heavily regulated by
government authorities, including the Central Drugs Standard Control Organization (CDSCO)
and the Ministry of Health and Family Welfare. Changes in regulations and policies can impact
drug pricing, manufacturing standards, and market access.
❖ Intellectual Property Rights (IPR): Stringent IP laws and patent regulations can affect the
ability of Indian pharmaceutical companies to produce and export generic drugs. International
trade agreements and negotiations can influence IPR rules.
10
PRASHANT KOKARE
• Economic Factors:
❖ Economic Growth: India's economic growth and stability play a significant role in the
pharmaceutical sector's performance. A growing middle class and increased healthcare
spending capacity can boost demand for pharmaceutical products.
❖ Pricing and Reimbursement Policies: Government policies on drug pricing and
reimbursement can affect the profitability of pharmaceutical companies and the accessibility
of medicines to the population.
• Social Factors:
❖ Demographics: India's large and diverse population, including a growing elderly population,
can drive pharmaceutical demand. Changing lifestyles and an increasing focus on health and
wellness can influence the types of pharmaceutical products in demand.
❖ Healthcare Awareness: Increasing awareness of health issues and access to healthcare
services can lead to higher demand for pharmaceuticals.
• Technological Factors:
❖ Research and Development (R&D): Advances in pharmaceutical R&D, including
biotechnology, genomics, and personalized medicine, can drive innovation and create
opportunities for the development of new drugs.
❖ Manufacturing Technology: Automation and advanced manufacturing technologies can
enhance the efficiency and quality of pharmaceutical production.
• Legal Factors:
❖ Intellectual Property Laws: Intellectual property protection is a critical issue, especially with
regard to patents. Changes in patent laws and international trade agreements can impact the
availability of generic drugs.
❖ Product Liability: Stringent product liability laws can impact pharmaceutical companies in
terms of quality control, safety, and liability for adverse effects.
• Environmental Factors:
❖ Environmental Regulations: Increasing environmental concerns and stricter environmental
regulations can impact manufacturing processes and waste management in the pharmaceutical
industry.
❖ Sustainability Initiatives: Growing emphasis on sustainability and green practices can drive
companies to adopt eco-friendly manufacturing processes and reduce their environmental
footprint.
11
PRASHANT KOKARE
CHAPTER 3 – FUNDAMENTAL ANALYSIS
3.1 Fundamental Analysis of Pharmaceutical Sector in India:
Fundamental analysis employs ratio analysis as its primary method. It assesses raw data using
percentage analysis and communicates the findings through the use of tables and charts. Ratios are
calculated using the most recent year's data and then compared to historical data from previous
years.
3.2 Fundamental analysis involves:
• Company Analysis
• Economic Analysis
• Industry Analysis
• Company Analysis:
Company analysis involves a comprehensive and in-depth assessment of a specific company's
overall performance, financial stability, and strategic standing. This thorough examination covers
various aspects of the company, such as its financial reports, leadership team, competitive position
within the industry, and other elements that influence its operations and future potential. This
evaluation can encompass both quantitative and qualitative analyses and serves the purpose of
making well-informed decisions related to investments, strategies, or day-to-day operations.
• Economic Analysis:
Economic analysis entails the systematic investigation and assessment of diverse economic
elements and variables with the aim of understanding economic trends, performance, and
consequences. This analytical process often centres on the examination of data associated with
specific countries, regions, industries, or markets. Essential elements of economic analysis
comprise the evaluation of economic indicators, market conditions, fiscal and monetary policies,
and their influence on factors like economic growth, inflation, employment, and other
macroeconomic aspects. Governments, businesses, financial institutions, and researchers employ
economic analysis as a valuable tool for informed decision-making and forecasting within a range
of economic scenarios.
• Industry Analysis:
Industry analysis is an extensive assessment of a specific sector, aimed at gaining insights into its
framework, dynamics, trends, and competitive environment. This evaluation is typically carried
out by businesses, investors, researchers, and policymakers with the goal of making well-informed
decisions, evaluating market potential, and formulating strategic approaches.
12
PRASHANT KOKARE
3.3 Importance of Fundamental Analysis:
Fundamental analysis is a vital methodology employed in the realm of finance and investment for
evaluating the inherent worth of a financial asset, be it stocks or bonds. Its significance lies in
offering valuable perspectives into the fiscal stability and future potential of a company or
investment.
3.4 Steps Involved in Carrying Out Fundamental Analysis:
Step 1: Step 2: Step 3:
First step an investor need to Investor need to analyse the Third step involves analysing
do is to decide upon industry sector taking into account that financial statement and
which an investor wants to the sector is rising. financial ratios of the
invest in by applying Top- company.
down approach and bottom
down approach.
Step 4: Step 5: Conclusion:
Investor should get the Investor should take into After getting the positive
knowledge of future growth account competitive analysis aspect investor is ready to
prospect of the company by of the company. invest in the desired company.
reading annual report,
presentation.
Table 3.1 Steps Involved in Carrying Out Fundamental Analysis

Step 1:
The first step for an investor is to choose the industry in which they want to invest. This choice is
made by assessing economic factors that are anticipated to have a favourable impact on the
industry's expansion. After this high-level evaluation of the industry, the investor can then move
on to examine particular companies within that selected industry for potential investment.
This approach to investment selection is referred to as the "Top-down approach." On the other
hand, an investor can opt for the "Bottom-up approach" by initially scrutinizing individual
companies they are keen on investing in and then proceeding to analyse the broader industry they
belong to.
Step 2:
Second step involves analysing the sector taking into account that the sector is favourable or not.
13
PRASHANT KOKARE
Step 3:
The third phase involves the scrutiny of a company's financial statements and financial ratios.
These ratios encompass metrics such as earnings per share, sales growth, and dividend payments
over the past five years, in addition to key ratios like price-to-earnings and debt-to-equity ratios.
Financial statements act as a guide for evaluating a company's expansion and its long-term
sustainability. Concurrently, financial ratios provide valuable insights into the company's
operational effectiveness and financial robustness.
Step 4:
To gauge a company's potential for future growth, it is imperative to conduct a thorough
examination of the annual report and the Management Discussion and Analysis section. These
documents are of particular significance because they furnish insights into the industry's prospects,
the company's future possibilities, and the obstacles and advantages it confronts. They are valuable
repositories of information concerning the company's growth potential and the quality of its
management.
Furthermore, delving into investor presentations, participating in conference calls, and reviewing
management interviews can deliver a comprehensive comprehension of the company's trajectory
for growth, its financial health, and its overall operational performance. Together, these sources
present a holistic perspective on the company's future outlook.
Step 5:
Investors should take into account the importance of conducting a competitive analysis of the
company to acquire a perspective on its performance in comparison to other companies within the
chosen sector. Furthermore, it's essential to scrutinize the company's shareholding structure.
Comprehending the allocation of shares across various categories, including promoters, foreign
institutional investors (FIIs), domestic institutional investors (DIIs), and the public, is of great
significance. Keeping an eye on activities like promoters buying their company's shares and share
buybacks can function as favourable signals for the company.
14
PRASHANT KOKARE
3.5 Quantitative and Qualitative Fundamental Analysis:
Quantitative and qualitative fundamental analysis represent two separate strategies employed to
evaluate the intrinsic worth and general condition of a company or investment. These approaches
offer a thorough comprehension of an asset by concentrating on diverse sets of data and
information. Below, we elaborate on both methods:
3.5.1 Quantitative Fundamental Analysis:
Quantitative analysis entails the utilization of numeric data and financial metrics for assessing an
investment. It centres on the numerical facets of a company's financial statements and its overall
performance. Essential components of quantitative fundamental analysis encompass:
• Financial Statements:
One of the main sources of information for quantitative analysis consists of a company's
financial statements, usually comprising the income statement, balance sheet, and cash flow
statement. These documents are scrutinized by analysts to evaluate the company's financial
performance throughout a specific period.
• Financial Ratios:
A range of financial ratios is computed to gauge a company's financial stability and
performance. These ratios encompass metrics such as the price-to-earnings (P/E) ratio, price-
to-sales (P/S) ratio, debt-to-equity ratio, and return on equity (ROE), among others.
• Historical Data:
Analysts delve into historical financial data to detect trends and patterns in revenue, profit
margins, and other financial indicators. This data aids in evaluating the company's past
performance.
• Valuation Models:
Quantitative analysis often incorporates the use of valuation models like the discounted cash
flow (DCF) model to estimate the inherent value of a company's shares based on future cash
flows.
• Quantitative Screens:
Some investors apply quantitative screens to sift through and pinpoint potential investment
prospects by considering specific quantitative criteria, such as earnings growth, dividend yield,
or debt levels.
15
PRASHANT KOKARE
3.5.2 Qualitative Fundamental Analysis:
In contrast, qualitative analysis relies on non-numeric data and subjective judgments. It delves into
the non-financial dimensions of a company and its broader operational context. Essential
components of qualitative fundamental analysis encompass:
• Management and Leadership:
Evaluating the competence and past performance of the company's leadership team, along with
their strategies and decision-making skills.
• Industry and Market Trends:

Gaining insight into the dynamics of the industry, market trends, competitive forces, and any
regulatory changes that could impact the company's future.
• Brand and Reputation:

Assessing the strength of the company's brand and its standing in the market, which can
influence customer loyalty and market positioning.
• Corporate Governance:
Scrutinizing the company's governance practices, including the composition and independence
of the board of directors and adherence to ethical and legal standards.
• Market Sentiment and Perception:

Considering how the company is perceived by investors, analysts, and the general public, as
this can have an impact on stock prices.
• Macroeconomic Factors:
Taking into account broader economic and geopolitical factors that may affect the company's
operations, such as inflation rates, interest rates, and global economic conditions.
16
PRASHANT KOKARE
3.6 Advantages of Fundamental Analysis:
Fundamental analysis is a method that centres on assessing companies and identifying investment
prospects through the examination of various market data, historical records, and current
information. This data encompasses financial statements, sector-specific details, and
macroeconomic indicators, among other factors.
However, when we distil it down to its essence, the primary benefit of fundamental analysis is
making informed investment choices. It involves gaining insights into a company's revenue,
expenses, product sales, and its vulnerability to external influences. Here are some more detailed
advantages of utilizing fundamental analysis:
• Broad Class of Information:

This approach empowers investors with comprehensive and pertinent insights about a specific
company. A comprehensive examination encompasses the utilization of both internal and external
data sources, encompassing financial statements, official corporate reports, publicly disclosed
business strategies, market research, updates concerning businesses and economic developments,
as well as macroeconomic indicators.
• Thorough Company Evaluation:
There are distinct advantages to conducting a comprehensive assessment of companies by
leveraging diverse market information sources. These advantages encompass identifying a
company's potential for growth or determining if it has already achieved its peak performance.
Moreover, through meticulous research, investors can also assess the overall quality of their stock
and corporate bond portfolios.
• Ideal For Long-Term Investors:
Fundamental analysis offers a significant advantage, particularly for investors with extended
investment timeframes. These investors often align with either growth or value investing
strategies. Furthermore, it can be seamlessly integrated into a defensive investing approach by
aiding in the identification of resilient, defensive companies. This approach is instrumental in
discerning the category of stocks a given company issues.
• Determining Valuation Level:
Additionally, this approach is instrumental in ascertaining whether a company's stock is currently
overpriced or underpriced, and if its valuation categorizes it as a growth, value, or speculative
stock. The ability to gauge a company's valuation relative to its intrinsic worth is valuable for
making well-informed investment decisions and tailoring specific investment strategies.
• Management of Investment Risks:
Fundamental analysis offers an additional benefit in risk management through several avenues.
This stems from its capacity to furnish a thorough comprehension of both internal and external
factors that influence a specific company's performance. Furthermore, it contributes to portfolio
diversification by facilitating the selection of companies with diverse fundamental characteristics.
17
PRASHANT KOKARE
3.7 Disadvantages of Fundamental Analysis:
Relying on market information for investment decisions does not provide an assurance of risk
elimination, and this represents a significant drawback of employing fundamental analysis.
Conducting an extensive fundamental analysis can also prove to be a complex and time-consuming
endeavour. To perform it effectively, an individual must possess the ability to interpret financial
statements and financial ratios, as well as have access to pertinent and trustworthy market data.
Consequently, some investors and traders may opt for technical analysis, as it offers a more
straightforward approach. Here are the specific downsides of this method:
• Requires Substantial Efforts:
It's important to keep in mind that conducting an in-depth examination of a company's fundamental
aspects necessitates the utilization of diverse market information sources. This process can be quite
time-consuming. Investors are required to seek, gather, and assess financial statements,
management competencies and strategies, economic patterns, as well as industry-specific trends
and sector dynamics.
• Subjective Interpretations:
The effectiveness of fundamental analysis is also contingent upon the expertise of the specific
analyst. Additionally, the outcomes are influenced by individual interpretation and inherent biases.
Distinct analysts may hold varying perspectives and offer diverse recommendations concerning
the same company. This discrepancy in viewpoints can result in perplexity, as it generates differing
conclusions regarding the present status and future potential of a particular company.
• Predictions Are Not Guaranteed:
Historical data, both past and recent, concerning a company's performance and its external
circumstances, should not be considered definitive indicators of positive outcomes in the future.
Certain situations and variables that fundamental analysis cannot foresee include shifts in the
political and geopolitical arena and the advent of groundbreaking businesses or innovative
products.
• Limitations of Applications:
Fundamental analysis possesses a constraint in its applicability, as it primarily pertains to the
assessment of the stock and bond markets. It is not suitable for evaluating other assets and
securities lacking accessible financial data and pertinent economic factors for analysis. This
limitation is evident in the cases of commodities and cryptocurrencies, which fall outside its
purview. Furthermore, fundamental analysis tends to be less effective in tumultuous and emerging
markets.
• Unsuitable for Short-Term Investing:
It's worth emphasizing that this approach is geared toward assessing long-term potential and is
particularly well-suited for long-term growth and value investing. It disregards the short-term
market fluctuations or the immediate value of a particular asset. Consequently, it may not align
with the objectives of investors with shorter investment horizons or traders aiming for brief holding
periods.
18
PRASHANT KOKARE
3.8 Ratio Analysis:
1. Current Ratio:
The current ratio is a financial metric used to evaluate a company's short-term liquidity and its
ability to meet its short-term financial obligations. It's a measure of a company's current assets
relative to its current liabilities. The formula for calculating the current ratio is as follows:
Current Ratio = Current Asset

Current Liabilities
Current Assets typically include cash, cash equivalents, accounts receivable, inventory, and other
assets that are expected to be converted into cash or used up within one year.
Current Liabilities include obligations that are expected to be settled within one year, such as
accounts payable, short-term debt, and other short-term obligations.
The current ratio provides insight into a company's ability to cover its short-term debts and
operational expenses. A higher current ratio (above 1) indicates a stronger short-term financial
position, while a lower ratio suggests potential liquidity problems. However, an excessively high
current ratio might also imply that a company is not efficiently utilizing its assets, so it's essential
to interpret the ratio in the context of the specific industry and company circumstances.
Rank
Company Current Ratio (1=Best,
10=Worst)
Sun Pharma 2 5
Dr Reddy’s Labs 2.38 3
Lupin 1.34 9
Cipla 3.38 2
Glenmark 1.96 6
Divis Laboratories 8.46 1
Torrent Pharmaceuticals 0.98 10
Aurobindo Pharma 1.87 7
Alembic pharmaceuticals 1.78 8
Alkem Laboratories 2.35 4
Table 3.2 Current Ratio of Pharmaceutical Sector in India
19
PRASHANT KOKARE
Interpretation:
Torrent Pharmaceuticals has a current ratio of 0.98, which indicates that the company may have
difficulty meeting its short-term obligations with its current assets. This could be a sign of financial
distress or potential liquidity issues. Others Company has a ratio greater than 1, which indicates
This is generally seen as a positive sign, indicating good short-term liquidity.
2. Quick Ratio:
The quick ratio, also known as the acid-test ratio, is a financial metric used to evaluate a company's
short-term liquidity or ability to meet its immediate financial obligations. It is a more stringent
measure of liquidity than the current ratio, as it excludes inventory from current assets. The
formula for calculating the quick ratio is:
Quick Ratio = Quick Asset

Quick Liabilities
Rank
Company Quick Ratio (1=Best,
10=Worst)
Sun Pharma 1.48 5
Lupin 0.86 9
Cipla 2.37 2
Glenmark 1.37 6
Table 3.3 Quick Ratio of Pharmaceutical Sector in India
Interpretation:
Lupin, Torrent Pharma and Alembic Pharmaceuticals Ratio is less than 1 Indicates that the
company is not well-prepared to cover its short-term obligations, which could be a cause for
concern and other companies’ ratio greater than 1 it indicates that the company has enough highly
liquid assets to cover its short-term liabilities without relying on the sale of inventory.
20
PRASHANT KOKARE
3. Debt-Equity Ratio:
The debt-equity ratio, often referred to as the D/E ratio, is a financial metric used to evaluate a
company's capital structure and financial leverage. It compares the total amount of debt used by a
company to the total amount of equity. This ratio is important for both investors and creditors, as
it provides insights into a company's financial risk and how it is funded.
Here's how you calculate the debt-equity ratio:
Debt-Equity Ratio = Total Debt

Total Equity
• Total Debt: This includes all of a company's interest-bearing liabilities, such as long-term
loans, bonds, and any other financial obligations that require regular interest payments.
Short-term debt may or may not be included, depending on the specific calculation.
• Total Equity: This represents the ownership interest in the company and is equal to the
total assets minus total liabilities. It includes common equity, retained earnings, and
potentially preferred stock.
A high debt-equity ratio indicates that a company relies more on debt financing to operate and
expand its business. This can increase the financial risk associated with the company because it
has a higher level of debt that needs to be serviced, which includes paying interest and potentially
repaying the principal amount.
Conversely, a low debt-equity ratio suggests that a company has a lower level of financial leverage
and relies more on equity financing. This can be seen as a safer financial position because the
company has less debt to service, but it might also indicate that the company is not taking full
advantage of leverage to potentially increase returns for its shareholders.
The ideal debt-equity ratio varies by industry and the specific circumstances of the company. Some
industries are naturally more capital-intensive and might have higher debt-equity ratios, while
others, such as technology or healthcare, may have lower ratios.
Investors and creditors use the debt-equity ratio as a tool to assess a company's financial stability,
creditworthiness, and risk. It's important to consider this ratio in conjunction with other financial
metrics and the context of the company's operations and industry when making investment or
lending decisions.
21
PRASHANT KOKARE
Rank
Debt-Equity
Company (1=Best,
Ratio
10=Worst)
Sun Pharma 0.11 4
Lupin 0.34 8
Cipla 0.02 2
Glenmark 0.46 9
Divis Laboratories 0 1
Table 3.4 Debt-Equity Ratio of Pharmaceutical Sector in India
Interpretation:
All companies have a debt-to-equity ratio less than 1, which indicates that the company has a
strong capital base and may be better positioned to weather financial downturns.
4. EBIT:
EBIT is an abbreviation for "Earnings Before Interest and Taxes." It is a financial metric that
represents a company's operating profit, also known as operating income. EBIT is often used by
analysts, investors, and businesses to evaluate a company's profitability from its core operations,
excluding the effects of interest expenses and income taxes.
The formula to calculate EBIT is:
EBIT = REVENUE – OPERATING EXPENSE
Operating expenses typically include costs such as the cost of goods sold (COGS), selling and
administrative expenses, and depreciation. EBIT is considered a useful measure because it
provides insight into a company's ability to generate profits from its primary business activities
before considering the impact of financing costs (interest) and income taxes.
22
PRASHANT KOKARE
EBIT is a key component in various financial ratios and metrics, such as EBIT margin (EBIT as a
percentage of revenue), which is often used to assess a company's operating efficiency and
profitability. It is also important for financial analysis, as it allows for comparisons between
companies and industries while eliminating the effects of differences in capital structure and tax
rates.
It's important to note that EBIT is distinct from EBITDA (Earnings Before Interest, Taxes,
Depreciation, and Amortization), which further excludes depreciation and amortization expenses.
EBITDA is used when analysts want to assess a company's cash flow potential more broadly
without accounting for non-cash expenses like depreciation and amortization.
Rank
Company EBIT (1=Best,
10=Worst)
Sun Pharma 40.64 8
Lupin 21.78 10
Cipla 53.65 6
Glenmark 70.31 4
Table 3.5 EBIT of Pharmaceutical Sector in India
Interpretation:
Dr Reddy’s Labs has more EBIT compared to all other companies. A high EBIT suggests that a
company's primary operations are running efficiently and profitably. It indicates that the company
is effectively managing its costs and generating substantial revenue from its core products or
services.
23
PRASHANT KOKARE
5. Interest Coverage Ratio:
The Interest Coverage Ratio, also known as the "times interest earned" ratio, is a financial metric
used to assess a company's ability to meet its interest obligations on its outstanding debt. It provides
insight into the company's financial health and risk. The formula for calculating the Interest
Coverage Ratio is:
Interest Coverage Ratio = EBIT

Fixed Interest Charges
Where:
Earnings Before Interest and Taxes (EBIT): This represents a company's operating profit before
considering interest and income tax expenses. It's a measure of a company's ability to generate
income from its core operations.
Interest Expense: This is the cost of the interest on a company's debt obligations, including loans
and bonds.
The Interest Coverage Ratio indicates how many times a company's earnings can cover its interest
payments. A higher ratio is generally considered better because it implies that the company has a
larger buffer to meet its interest obligations even if its earnings fluctuate.
A high Interest Coverage Ratio typically suggests that a company is financially stable and less
likely to default on its debt. Conversely, a low ratio indicates that a company may be at a higher
risk of not being able to cover its interest payments, which could lead to financial distress or
potential default.
The specific acceptable range for the Interest Coverage Ratio may vary by industry and the
company's financial circumstances, so it's important to compare it to industry benchmarks and
consider the company's unique situation. Investors and creditors use this ratio to assess a
company's creditworthiness and financial strength.
24
PRASHANT KOKARE
Rank
Interest Coverage
Company (1=Best,
Ratio
10=Worst)
Sun Pharma 71.40 2
Lupin 6.82 10
Cipla 50.23 4
Glenmark 7.42 9
Alkem Laboratories 17 6
Table 3.6 Interest Coverage Ratio of Pharmaceutical Sector in India
Interpretation:
Divis Laboratories has the highest interest coverage ratio among other companies, which
indicates that the company is less likely to default on its debt, which can be reassuring to
creditors and bondholders.
6. Asset Turnover Ratio:
The asset turnover ratio is a financial metric used to evaluate a company's efficiency in managing
its assets to generate revenue or sales. It measures how effectively a company is using its assets to
generate sales. The formula for calculating the asset turnover ratio is:
Asset Turnover Ratio = Net Sales

Total Asset
Here's a breakdown of the components of the formula:

• Net Sales: This is the total revenue a company generates from its primary operations after
deducting sales discounts, returns, and allowances. It represents the top line of a company's
income statement.
• Average Total Assets: This is typically the average value of a company's total assets over
a specific period, usually a year. Total assets include both current assets (e.g., cash,
accounts receivable, inventory) and non-current assets (e.g., property, plant, equipment).
The average is used to account for potential fluctuations in assets over the course of the
year.
25
PRASHANT KOKARE
The asset turnover ratio helps assess how efficiently a company is using its assets to generate sales.
A higher ratio suggests better asset utilization, indicating that the company is generating more
sales per unit of assets, which is generally considered favourable. Conversely, a lower ratio may
indicate that the company is not efficiently using its assets to generate revenue.
It's important to note that the ideal asset turnover ratio can vary between industries and types of
businesses. Some industries, like retail, tend to have higher asset turnover ratios because they rely
heavily on inventory turnover. In contrast, capital-intensive industries might have lower asset
turnover ratios due to the significant investments in fixed assets.
In summary, the asset turnover ratio is a useful metric for evaluating a company's operational
efficiency and asset utilization. It helps investors, analysts, and business owners assess how well
a company is making use of its assets to generate sales and revenue.
Rank
Asset Turnover
Company (1=Best,
Ratio
10=Worst)
Sun Pharma 0.38 10
Lupin 0.51 8
Cipla 0.58 6
Glenmark 0.61 4
Table 3.7 Asset Turnover Ratio of Pharmaceutical Sector in India
Interpretation:
All the companies have an asset turnover ratio that is less than 1, which indicates that the
company is generating less revenue than its total assets. This may suggest inefficiency in asset
utilization and could be a sign of underperforming or underutilized assets.
26
PRASHANT KOKARE
7. Return on Total Asset:
Return on Total Assets (ROTA) is a financial metric that measures a company's profitability and
efficiency in utilizing its assets to generate earnings. It is calculated by dividing a company's net
income by its total assets. The formula for calculating ROTA is as follows:
Return on Total Asset = Net Profit ×100

Total Asset
Where:
Net Income: This is the company's total earnings after deducting all expenses, including taxes and
interest.
Total Assets: This represents the total value of all assets owned by the company, including both
current and non-current assets.
The result is usually expressed as a percentage. ROTA measures how effectively a company is
using its assets to generate profits. A higher ROTA indicates that a company is generating more
profit for each dollar of assets it holds, which is a positive sign of efficiency. Conversely, a lower
ROTA suggests that the company may not be using its assets as efficiently and might need to
improve its operations or reduce asset investments.
ROTA is a key financial ratio used by investors and analysts to assess a company's financial
performance and management's ability to generate returns on the resources at its disposal. It's
important to compare ROTA to industry benchmarks and historical performance to gain
meaningful insights into a company's financial health and performance.
Rank
Return On
Company (1=Best,
Total Asset
10=Worst)
Sun Pharma 10.49 3
Lupin 1.87 9
Cipla 9.5 4
Glenmark 1.53 10
Table 3.8 Return on Total Asset of Pharmaceutical Sector in India
27
PRASHANT KOKARE
Interpretation:
Lupin, Glenmark, and Aurobindo Pharma have the lowest percentage of ROA, which indicates
that they're not efficiently using their assets to generate profit. This could be a sign of poor asset
management or low profitability. Other companies ROA is better than this, which indicates that
the company is efficiently using its assets to generate profit. It's often seen as a sign of strong
financial performance.
8. Return on Net worth:

Return on Net Worth (RONW), also known as Return on Equity (ROE), is a financial ratio that
measures a company's profitability relative to its shareholders' equity. It is a key performance
indicator that assesses how effectively a company is utilizing its equity to generate profits. RONW
is expressed as a percentage and is calculated using the following formula:
Return on Net Worth = Profit After Tax ×100
Net Worth
Net Income is the company's profit after taxes and other expenses.
Shareholders' Equity represents the residual interest in the assets of the company after deducting
liabilities. It includes common stock, retained earnings, and other equity-related items.
The RONW ratio provides insight into how efficiently a company is generating profits with the
capital invested by its shareholders. A higher RONW percentage generally indicates that a
company is more effective at generating profit from its equity, which is typically a positive sign
for investors and stakeholders. However, it's important to consider industry standards and the
company's specific circumstances when interpreting RONW, as what constitutes a good or bad
ratio can vary by industry and the company's growth stage.
Rank
Return on Net
Company (1=Best,
worth
10=Worst)
Sun Pharma 15.13 3
Lupin 3.45 9
Cipla 11.96 5
Glenmark 3.13 10
Table 3.9 Return on Net Worth of Pharmaceutical Sector in India
28
PRASHANT KOKARE
Interpretation:
Torrent Pharmaceuticals has the highest RONW among other companies, which indicates that
the company is generating significant returns for its shareholders in proportion to their equity
investment. This may be a sign of a well-managed, profitable, and efficient company.
9. Dividend Payout Ratio:

The Dividend Payout Ratio is a financial metric used by companies and investors to assess the
proportion of a company's earnings that are distributed to shareholders in the form of dividends. It
is expressed as a percentage and is calculated using the following formula:
Dividend Payout Ratio = Dividend Per Share

Earning Per Share
Where:
Dividends per Share is the total amount of dividends paid to shareholders, typically over a specific
period, divided by the number of outstanding shares.
Earnings per Share is the company's net income (profit) divided by the number of outstanding
shares.
The Dividend Payout Ratio provides insights into how much of a company's earnings it chooses
to distribute to its shareholders versus retaining for reinvestment in the business or for other
purposes. A higher payout ratio suggests that the company is distributing a larger portion of its
earnings as dividends, which can be appealing to income-oriented investors. On the other hand, a
lower payout ratio indicates that the company is retaining more of its earnings for growth, debt
reduction, or other uses.
Investors should consider the company's financial health, growth prospects, and dividend history
when interpreting the Dividend Payout Ratio. A very high or very low payout ratio may not always
be a good sign and should be analysed in the context of the company's overall financial situation
and its future capital needs.
29
PRASHANT KOKARE
Rank
Dividend Payout
Company (1=Best,
Ratio
10=Worst)
Sun Pharma 29.73 4
Lupin 42.28 3
Cipla 0 7
Glenmark 0 7
Divis Laboratories 0 7
Alkem Laboratories 0 7
Table 3.10 Dividend Payout Ratio of Pharmaceutical Sector in India
Interpretation:
Alembic Pharmaceutical has the highest dividend payout ratio. But Cipla, Glenmark, Divis
Laboratories, and Alkem Laboratories have a zero-dividend payout ratio, which doesn't
necessarily mean a company is not profitable or successful; it also indicates that all of the
company's earnings are being retained and reinvested back into the business.
10. Earning Per Share:

Earnings per share (EPS) and dividends per share (DPS) are both reflections of a company's
profitability, but that's where any similarities end. Earnings per share is a ratio that gauges how
profitable a company is per share of its stock. On the other hand, dividends per share calculates
the portion of a company's earnings that is paid out to shareholders.
Earning Per Share = Profit After Tax

No. Of Shares
30
PRASHANT KOKARE
Here's a breakdown of the components in this formula:
Net Income: This is the total profit a company has earned during a specific period, usually a
quarter or a year, after deducting all expenses, taxes, and interest payments. Net income is
sometimes referred to as "earnings" or "profit."
Preferred Dividends: If a company has issued preferred stock, it might have an obligation to pay
dividends on these shares. To calculate EPS for common shareholders, you subtract the preferred
dividends from the net income. Common shareholders are the ones who hold common stock.
Average Outstanding Shares: This represents the average number of common shares outstanding
during the period in question. It's usually calculated by taking the sum of the beginning and ending
shares for the period and dividing by 2. If there were any stock repurchases or issuances during
the period, those changes would need to be factored in.
EPS is reported on a per-share basis, which makes it easier for investors to compare the
profitability of different companies, especially when considering investments in the stock market.
Higher EPS generally indicates that a company is more profitable on a per-share basis, which is
often considered a positive sign by investors.
Rank
Earning Per
Company (1=Best,
Share
10=Worst)
Sun Pharma 35.3 5
Lupin 9.46 10
Cipla 34.72 6
Glenmark 10.53 9
Table 3.11 Earning Per Share of Pharmaceutical Sector in India
Interpretation:
Dr. Reddy’s Labs has the highest EPS as compared to all other companies, which indicates that
investors seek companies that can provide strong returns, and a high EPS suggests that the
company is doing well in this regard.
31
PRASHANT KOKARE
11. Net Profit Margin:
Net Profit Margin is a financial ratio that measures a company's profitability by expressing its net
profit as a percentage of its total revenue. It is one of the key performance indicators used to assess
a company's financial health and efficiency in converting revenue into profit. The formula for
calculating the net profit margin is as follows:
Net Profit Margin = Net Profit ×100

Net Sales
Rank
Net Profit
Company (1=Best,
Margin
10=Worst)
Sun Pharma 19.5 2
Lupin 2.69 10
Cipla 12.46 5
Glenmark 2.9 9
Table 3.12 Net Profit Margin of Pharmaceutical Sector in India
Interpretation:
Divis Laboratories has the highest net profit margin of all other companies, which indicates that
a company is efficiently managing its costs and generating a significant profit relative to its total
revenue. This suggests that the company is running its operations effectively and has a strong
pricing strategy, which is often viewed positively by investors and stakeholders.
32
PRASHANT KOKARE
3.9 Calculation of Industry P/E:
For calculating the industry P/E, I have considered
P/E Ratio:
The Price-to-Earnings ratio, often abbreviated as P/E ratio, is a financial metric used to evaluate a
company's valuation and is widely used by investors and analysts. It's a simple ratio that compares
a company's stock price to its earnings per share (EPS). The formula for calculating the P/E ratio
is:
Price-Earning Ratio = Current Market Price

Earning Per Share
Here's a breakdown of the components:

Stock Price: This is the current market price of a company's stock. It represents what investors
are willing to pay for a share of the company's ownership.
Earnings Per Share (EPS): This is the portion of a company's profit allocated to each
outstanding share of common stock
Valuation: It provides insight into whether a stock is overvalued or undervalued. A high P/E
ratio may indicate that investors have high expectations for future growth, while a low P/E may
suggest lower growth expectations or undervaluation.
Comparison: It allows investors to compare the relative valuations of different companies
within the same industry or sector.
Risk assessment: A high P/E ratio might indicate higher risk, as it implies higher expectations
that need to be met, while a low P/E ratio may imply lower risk but also lower growth
expectations.
It's essential to consider the context when using the P/E ratio. A high P/E ratio doesn't always
mean a stock is overvalued if the company is expected to have significant future growth.
Conversely, a low P/E ratio doesn't guarantee a good deal if the company's growth prospects are
weak. Investors often use P/E ratios in conjunction with other financial metrics and analysis to
make informed investment decisions.
33
PRASHANT KOKARE
Company Price EPS P/E
Sun Pharma 1145.6 35.3 32.45
Dr Reddy’s Labs 5475.15 271.47 20.17
Lupin 1188.9 9.46 125.68
Cipla 1165.2 34.72 33.56
Glenmark 796.6 10.53 75.65
Divis Laboratories 3738 68.69 54.42
Torrent Pharmaceuticals 1890 36.79 51.37
Aurobindo Pharma 917.7 32.9 27.89
Alembic pharmaceuticals 813.6 17.4 46.76
Alkem Laboratories 3592.1 82.31 43.64
Mankind Pharma 1785 32 55.78
Zydus Lifesciences 589.4 19.3 30.54
Gland Pharma 1624.7 47.44 34.25
Ajanta Pharma 1778.45 45.89 38.75
Laurus Labs 404.1 14.69 27.51
Ipca Laboratories 960.50 18.58 51.70
Natco Pharma 850.05 39.18 21.70
Suven Pharmaceutical 590.65 16.16 36.55
Granules India 352.1 21.05 16.73
Orchid Pharma 481 11.35 42.38
Average 42.76
Table 3.13 P/E Ratio of Pharmaceutical Sector in India
Note: Industry P/E is the average of all the stocks.

Here, Industry P/E of Pharmaceutical Sector is 42.76
34
PRASHANT KOKARE
Undervaluation/Overvaluation of Companies:
P/E > Sector P/E = Overvalued
P/E < Sector P/E = Undervalued
Undervalued Stocks
Below Avg Last Price EPS P/E

Sun Pharma 1145.6 35.3 32.45
Dr Reddy’s Labs 5475.15 271.47 20.17
Cipla 1165.2 34.72 33.56
Aurobindo Pharma 917.7 32.9 27.89
Zydus Lifesciences 589.4 19.3 30.54
Gland Pharma 1624.7 47.44 34.25
Ajanta Pharma 1778.45 45.89 38.75
Laurus Labs 404.1 14.69 27.51
Ipca Laboratories 960.50 18.58 51.70
Natco Pharma 850.05 39.18 21.70
Suven Pharmaceutical 590.65 16.16 36.55
Granules India 352.1 21.05 16.73
Table 3.14 Undervalued Stocks
Overvalued Stocks
Above Average Last Price EPS P/E

Lupin 1188.9 9.46 125.68
Glenmark 796.6 10.53 75.65
Divis Laboratories 3738 68.69 54.42
Torrent Pharmaceuticals 1890 36.79 51.37
Alembic pharmaceuticals 813.6 17.4 46.76
Alkem Laboratories 3592.1 82.31 43.64
Mankind Pharma 1785 32 55.78
Orchid Pharma 481 11.35 42.38
Table 3.15 Overvalued Stocks
35
PRASHANT KOKARE
Valued Pick for Undervalued Stocks:
Revenue Net Profit

Increas
P/E e/
Rati Decrea 202 202 Increase/Decr Selected/Reje
Company o 2023 2022 se 3 2 ease cted
4388 3865 856 340
Sun Pharma
32 6 4 5231 1 6 5155 Selected
2467 2154 447 211
Dr Reddy’s Labs
20 0 5 3125 0 2 2358 Selected
2275 2176 283 255
Cipla
34 3 3 990 5 9 276 Selected
Aurobindo 2485 2345 193 267
Pharma 28 5 5 1400 9 8 -739 Selected
Zydus 1723 1526 199 457
Lifesciences 31 7 5 1972 7 2 -2575 Rejected
121
Gland Pharma
34 3625 4401 -776 781 2 -431 Rejected
Ajanta Pharma 39 3743 3341 402 588 713 -125 Rejected
Laurus Labs 28 6041 4936 1105 797 832 -36 Selected
Ipca Laboratories 52 6244 5830 415 492 911 -419 Rejected
Natco Pharma 22 2707 1945 762 715 170 545 Selected
Suven
Pharmaceutical 37 1340 1320 20 411 413 -1 Rejected
Granules India 17 4512 3765 747 517 413 104 Selected
Table 3.16 Valued Pick for Undervalued Stocks
36
PRASHANT KOKARE
Growth pick for overvalued companies on basis of PEG ratio:
Calculation of PEG ratio for overvalued shares
PEG Ratio = PE/EPS Growth
EPS Growth = (New-Old)/Old*100
If PEG Ratio is between 0-1 – Accept or else Reject
EPS
PE EPS PEG
Companies 2023 2022 Ratio Growth Ratio Selected/Rejected
Lupin 9.46 -33.65 125.68 -128.11 -0.98 Rejected
Glenmark 10.53 33.37 75.65 -68.44 -1.11 Rejected
Divis Laboratories 68.69 111.52 54.42 -38.41 -1.42 Rejected
Torrent
Pharmaceuticals 36.79 45.93 51.37 -19.90 -2.58 Rejected
Alembic
pharmaceuticals 17.40 26.50 46.76 -34.34 -1.36 Rejected
Alkem Laboratories 82.31 137.63 43.64 -40.19 -1.09 Rejected
Mankind Pharma 32.00 35.78 55.78 -10.56 -5.28 Rejected
Orchid Pharma 11.35 -0.48 42.38 -2464.58 -0.02 Rejected
Table 3.17 PEG ratio for overvalued shares
37
PRASHANT KOKARE
Ranking of Companies according to Ratios:
Intere Retur
st Asset Retur n on Net
Company Debt- Cover Turn n on Net Profit
Current Equity age over Total wort Margi
Ratio Ratio Ratio Ratio Asset h n Total Ranks
Sun Pharma 5 4 2 10 3 3 2 29 4
Dr Reddy’s Labs 3 3 3 3 1 2 3 18 2
Lupin 9 8 10 8 9 9 10 63 10
Cipla 2 2 4 6 4 5 5 28 3
Glenmark 6 9 9 4 10 10 9 57 9
Divis Laboratories 1 1 1 7 2 4 1 17 1
Torrent
Pharmaceuticals 10 10 8 5 5 1 4 43 6
Aurobindo Pharma 7 7 5 9 8 8 7 51 8
Alembic
pharmaceuticals 8 5 7 2 7 7 8 44 7
Alkem Laboratories 4 5 6 1 6 6 6 34 5
Table 3.18 Ranking of Companies according to Ratios
Ranking in ascending order:
Company Ranks
Dr Reddy’s Labs 1
Divis Laboratories 2
Sun Pharma 3
Alkem Laboratories 4
Torrent Pharmaceuticals 4
Cipla 6
Alembic pharmaceuticals 7
Aurobindo Pharma 8
Glenmark 9
Lupin 10
Table 3.19 Ranking in ascending order
38
PRASHANT KOKARE
CHAPTER 4 – TECHNICAL ANALYSIS
4.1 Technical Analysis:
Technical analysis is a method of evaluating and predicting the future price movements of financial
assets, such as stocks, currencies, commodities, and cryptocurrencies, based on historical price and
trading volume data. It is one of the two primary methods of analysis in financial markets, with
the other being fundamental analysis.
4.2 Key concepts and tools in technical analysis include:
• Price Charts: Technical analysts primarily use price charts to visualize historical price
movements. Common chart types include line charts, bar charts, and candlestick charts.
• Support and Resistance Levels: Analysts look for levels at which prices have historically
stalled (resistance) or reversed direction (support). These levels can help predict future price
movements.
• Trends: Technical analysis often focuses on identifying trends, which can be upward (bullish),
downward (bearish), or sideways (range-bound). Trendlines are drawn on charts to visualize
these trends.
• Indicators and Oscillators: There are numerous technical indicators, such as moving
averages, relative strength index (RSI), and MACD, which provide additional information
beyond price and volume data. These indicators are used to identify potential buy or sell
signals.
• Volume Analysis: Trading volume, the number of shares or contracts traded in a given period,
is often analysed alongside price movements. High volume can indicate strong market interest,
while low volume can suggest weakening interest.
• Chart Patterns: Technical analysts look for specific chart patterns, like head and shoulders,
double tops and bottoms, flags, and triangles. These patterns may offer insights into future
price movements.
• Fibonacci Retracement: The Fibonacci sequence and its associated ratios are often used in
technical analysis to identify potential levels of support and resistance in price charts.
• Candlestick Patterns: Candlestick patterns provide visual representations of price
movements and can help identify potential reversals or continuations in trends.
• Elliot Wave Theory: This theory posits that financial markets move in cycles of five waves
upward (impulse) and three waves downward (corrective). Traders use this theory to predict
future price movements based on wave patterns.
• Market Sentiment: Some technical analysts consider market sentiment and psychology when
analysing charts. This can involve assessing the emotional state of market participants, often
through indicators like the put/call ratio.
It's important to note that technical analysis is often criticized for being subjective and lacking a
solid theoretical foundation. Critics argue that it doesn't take into account fundamental factors,
such as a company's financial health or economic conditions. Nonetheless, many traders and
investors find technical analysis to be a valuable tool for making trading decisions and managing
risk. It is often used in conjunction with fundamental analysis to form a more comprehensive view
of the market.
39
PRASHANT KOKARE
4.3 Long – Term Technical Analysis:
Long-term technical analysis is a method of evaluating financial assets, such as stocks,
commodities, or cryptocurrencies, over extended timeframes, typically spanning several months
to several years. It aims to identify long-term trends, potential support and resistance levels, and
make informed investment decisions based on historical price data and various technical
indicators.
• Rounding Bottom:
A rounding bottom is a chart pattern used in technical analysis and is identified by a series of price
movements that graphically form the shape of a "U". Rounding bottoms are found at the end of
extended downward trends and signify a reversal in long-term price movements. This pattern's
time frame can vary from several weeks to several months and is deemed by many traders as a rare
occurrence. Ideally, volume and price will move in tandem, where volume confirms the price
action.
A rounding bottom looks similar to the cup and handle pattern, but does not experience the
temporary downward trend of the "handle" portion. The initial declining slope of a rounding
bottom indicates an excess of supply, which forces the stock price down. The transfer to an upward
trend occurs when buyers enter the market at a low price, which increases demand for the stock.
Once the rounding bottom is complete, the stock breaks out and will continue in its new upward
trend. The rounding bottom chart pattern is an indication of a positive market reversal, meaning
investor expectations and momentum, otherwise known as sentiment, are gradually shifting from
bearish to bullish.
A rounding bottom chart can be divided into several main areas. First, the prior trend shows the
buildup to the stock's initial descent toward its low. Picturesquely, the trading volume would be
the heaviest at the start of the decline and then would decrease as the share price levels off and
approaches the bottom of the pattern formation. As the stock recovers and moves to complete the
pattern, volume increases as investors buy shares again. The rounding bottom breaks out of its low
point when the stock price closes above the price immediately prior to the start of the initial decline.
Figure 4.1 Rounding Bottom Pattern of CIPLA
40
PRASHANT KOKARE
Figure 4.2 Rounding Bottom Pattern of Suven Pharma
• Cup with Handle:
A "cup with handle" is a pattern often used in technical analysis to analyse stock charts and make
investment decisions, particularly in the context of trading stocks or other financial instruments.
This pattern is typically associated with a bullish trend reversal, indicating that a stock may be
poised for an upward price movement. It consists of two parts: the cup and the handle.
❖ Cup: The cup forms a rounded or U-shaped bottom on the price chart. This part of the pattern
signifies a period of consolidation, where the stock's price moves downward, then gradually
begins to rise. The cup shape can vary in terms of depth and duration but is generally a
semicircular or U-shaped formation.
❖ Handle: Following the cup formation, there is a smaller consolidation area referred to as the
"handle." This part looks like a downward-sloping channel or a small flag pattern, and it
typically occurs after the cup. The handle is a brief period of consolidation before the stock's
price is expected to break out to the upside.
Figure 4.3 Cup with Handle Pattern of CIPLA
41
PRASHANT KOKARE
Figure 4.4 Cup with Handle Pattern of Aurobindo Pharma
• Bump and Run Reversal:
The Bump and Run Reversal (BARR) pattern is a technical chart pattern used by traders and
analysts to identify potential trend reversal points in financial markets, such as stocks,
commodities, or forex. This pattern is also known as the Bump and Run Reversal Bottom (BARR
Bottom) and is primarily used in the context of identifying potential bearish reversals.
Here are the key characteristics of the Bump and Run Reversal pattern:
❖ Lead-in Phase: The pattern typically begins with a strong and sustained uptrend, where the
price of the asset moves steadily higher. This phase represents the initial enthusiasm and
optimism among traders and investors.
❖ Bump Phase: After the lead-in phase, there is a rapid price increase known as the "bump."
This is characterized by a steep and unsustainable upward move in the price. The bump is often
caused by excessive speculation and over-enthusiasm.
❖ Run Phase: Following the bump, there is a gradual decline in the price. This phase is known
as the "run." It indicates that the initial optimism has started to fade, and traders may become
more cautious.
❖ Bump-and-Run Line: This is an upward-sloping trendline that connects the low points of the
lead-in phase and the bump phase. It acts as support during the early stages of the pattern.
❖ Support Break: The most critical element of the BARR pattern is the violation of the bump-
and-run line, signalling a breakdown in the pattern. When the price falls below this trendline,
it indicates that the uptrend is weakening, and a reversal may be imminent.
42
PRASHANT KOKARE
❖ Reversal Potential: The pattern suggests that a significant trend reversal to the downside is
likely to occur after the support break. Traders may use this pattern as a signal to go short (sell)
or take other bearish positions.
❖ Volume: In addition to the price movement, volume analysis can be essential in confirming
the pattern. An increase in volume during the bump phase and a decrease in volume during the
run phase can further support the pattern's validity.
Figure 4.5 Bump and Run Reversal Pattern of Divis Labs

• Head and Shoulder Top and Bottom:
The Head and Shoulders pattern is a technical analysis pattern used by traders and analysts to
identify potential trend reversal points in financial markets, especially in stocks, currencies, and
commodities. There are two variations of this pattern: the Head and Shoulders Top (reversal from
an uptrend to a downtrend) and the Head and Shoulders Bottom (reversal from a downtrend to an
uptrend). Let's discuss both patterns:
❖ Head and Shoulders Top:
Formation: The Head and Shoulders Top pattern typically forms after an uptrend and is
considered a bearish reversal pattern. It consists of three peaks, with the middle peak being the
highest (the head), and the other two peaks on either side being lower (the shoulders).
Components:
Left Shoulder: The first peak, which forms after a significant price rise.
Head: The highest peak in the pattern, which represents a climax or a top in the price.
Right Shoulder: The third peak, usually lower than the head, forms after the head.
Neckline: A trendline drawn by connecting the lows of the left shoulder and the right shoulder.
The pattern is considered confirmed when the price breaks below this neckline.
Confirmation: The pattern is confirmed when the price breaks below the neckline, suggesting a
potential reversal from an uptrend to a downtrend. Traders often use this breakout as a signal to
enter short positions or exit long positions.
43
PRASHANT KOKARE
Figure 4.6 Head and Shoulder Top Pattern of Sun Pharma
❖ Head and Shoulders Bottom:
Formation: The Head and Shoulders Bottom pattern typically forms after a downtrend and is
considered a bullish reversal pattern. It also consists of three troughs, with the middle trough being
the lowest (the head), and the other two troughs on either side being higher (the shoulders).
Components:
Left Shoulder: The first trough, which forms after a significant price decline.
Head: The lowest trough in the pattern, which represents a possible market exhaustion point.
Right Shoulder: The third trough, typically higher than the head, forms after the head.
Neckline: A trendline drawn by connecting the highs of the left shoulder and the right shoulder.
The pattern is considered confirmed when the price breaks above this neckline.
Confirmation: The pattern is confirmed when the price breaks above the neckline, suggesting a
potential reversal from a downtrend to an uptrend. Traders often use this breakout as a signal to
enter long positions or exit short positions.
Figure 4.7 Head and Shoulder Bottom Pattern of Sun Pharma
44
PRASHANT KOKARE
• Double Top:
A "double top" is a technical chart pattern commonly used in financial markets, such as stocks,
currencies, and commodities, to analyse price movements and make trading decisions. It is
considered a bearish reversal pattern and can signal a potential trend change from an uptrend to a
downtrend. The double top pattern consists of two distinct peaks (or tops) on a price chart, with a
trough (a dip in price) in between. Here's how it typically forms:
First Peak: The price of the asset rises to a certain level and then starts to decline.
Trough: After the first peak, the price declines to a certain level, forming a trough or a valley.
This trough is often referred to as the "neckline" of the pattern.
Second Peak: Following the trough, the price may rally again but often fails to surpass the level
of the first peak. This second peak is roughly at the same price level as the first peak.
Figure 4.8 Double Top Pattern of Sun Pharma

• Double Bottom:
A "double bottom" is a chart pattern commonly used in technical analysis to identify potential
reversal points in the price of an asset, such as a stock, currency, or commodity. It is considered a
bullish reversal pattern and typically forms after a downtrend.
Key characteristics of a double bottom pattern:
Downtrend: The pattern forms after a sustained downtrend in the price of the asset.
First Bottom: The pattern starts with a significant price decline, leading to the formation of the
first bottom (the low point). This low is followed by a price bounce, indicating that selling pressure
has decreased.
Recovery: After the first bottom, the price typically rebounds, but it may face resistance at a
certain level (often referred to as the "neckline"). This resistance level is where the price had
previously encountered selling pressure.
45
PRASHANT KOKARE
Second Bottom: Following the initial rebound, the price starts to decline again, but it doesn't reach
the same low as the first bottom. Instead, it forms a higher low. This is the second bottom.
Breakout: The confirmation of the double bottom pattern occurs when the price breaks above the
neckline, which is often seen as a resistance level. The breakout is a signal that the downtrend may
be reversing, and a new uptrend may be beginning.
Figure 4.9 Double Bottom Pattern of Torrent Pharma
46
PRASHANT KOKARE
4.4 Short Term Technical Analysis:
• MACD:
MACD stands for Moving Average Convergence Divergence, and it is a popular technical
indicator used in the analysis of financial markets, particularly in trading stocks, cryptocurrencies,
and forex. The MACD indicator is designed to help traders and analysts identify potential trends,
reversals, and momentum in an asset's price movement. Here's a brief overview of how it works:
Calculation: The MACD indicator is calculated using two exponential moving averages (EMA)
of a security's price:
❖ The MACD line: This is the difference between a shorter-term EMA (usually 12 periods) and
a longer-term EMA (usually 26 periods).
❖ The signal line: This is typically a 9-period EMA of the MACD line.
Convergence and Divergence: The MACD line is used to identify potential trend changes. When
the MACD line crosses above the signal line, it's considered a bullish signal, suggesting that the
asset's price may be moving higher. Conversely, when the MACD line crosses below the signal
line, it's considered a bearish signal, indicating that the price may be moving lower.
Histogram: Some MACD indicators also include a histogram, which is the vertical bars that
represent the difference between the MACD line and the signal line. The histogram can help traders
gauge the strength of a trend. Positive histogram bars indicate a bullish trend, while negative bars
indicate a bearish trend.
Divergence: Traders also look for divergence between the MACD indicator and the price of the
asset. If the MACD indicator is making higher highs while the price is making lower highs (or vice
versa), it can signal a potential reversal in the price trend.
MACD is a versatile tool that can be used in various timeframes and with different assets. It's
important to note that while MACD can be a valuable tool in technical analysis, it should not be
used in isolation. Traders often use it in conjunction with other indicators and analysis techniques
to make informed trading decisions. Additionally, like all technical indicators, MACD has its
limitations, and it's not always foolproof in predicting market movements.
Figure 4.10 MACD Indicator in CIPLA
47
PRASHANT KOKARE
In the above image, we take the example of CIPLA.
Through MACD, we get to know that the MACD line (blue line) cuts the signal line (red line)
from below at the price of 414.35, so we get the signal that we can buy at 414.35, where the
green arrow indicates buy signal, and we can sell at 804.98 because the MACD line (blue line)
cuts the signal line (red line) from above at 804.98, where the red arrow indicates sell signal.
With the help of MACD, we can book a profit of $390.63, which is nearly 90% profit in nearly 6
months.
Figure 4.11 MACD Indicator in LUPIN
In the above image, we take the example of LUPIN.
For intraday, we can perform a short-sell strategy; for that, we can use the MACD indicator. In
the above example, it is shown that on October 5, 2023, at 9.30 a.m., we can short sell the stock
at a price of 1155.27, but at 1147.97 on the same date at 10.07 a.m., so it shows that with the
help of the MACD indicator in 37 minutes, we can book a profit of Rs. 7.3. Suppose we can
short sell a lot of 10, so we can book a profit of Rs. 73 in just 30 minutes.
• Bollinger Band:
Markets exhibit daily price fluctuations, even when they are generally moving in an upward or
downward trend. To anticipate how a stock's price may behave, technical analysts employ moving
averages in combination with support and resistance levels. This approach helps them gain insights
into the stock's trading patterns.
For instance, during a pronounced uptrend or downtrend, the market might experience periods of
consolidation. During these phases, the stock may trade in a narrow range, moving back and forth
above and below the moving average. Traders use moving averages to filter out some of this daily
price noise, allowing them to focus on the underlying trend. This smoothing effect helps identify
the broader trend direction.
48
PRASHANT KOKARE
In addition to moving averages, technicians also use support and resistance lines to predict how a
stock's price may move. These lines mark key price levels where the stock has historically found
either buying support or selling pressure. By considering moving averages, support, and resistance,
traders aim to make more informed decisions about market behaviour and potential price
movements.
Figure 4.12 Bollinger Band Indicator in Sun Pharma
In the above image, we take the example of Sun Pharmaceuticals:
In the above example, we use the Bollinger band indicator tool, and we get to know that when
we use both the Bollinger band and MACD indicator to analyse stock movement, we can buy
stock at 472.37 and sell at 623.39. So, with the help of these indicators, in 3 months we can book
a profit of nearly Rs. 151.02, which is nearly 30 percent
Figure 4.13 Bollinger Band Indicator in Aurobindo Pharma
49
PRASHANT KOKARE
In the above image, we take the example of Aurobindo Pharma:
In the above example, we can short-sell the stock on a particular day. As we see, we can short
sell these stocks on October 12, 2023, at 11.25 a.m. for Rs. 922.73 and buy them on the same
date at 3.05 p.m. for Rs. 914.50, so we can book a profit of Rs. 8.23 in just 3.5 hours. So, if we
short sell these stocks in a lot, we can earn Rs. 82.3 in one day.
• RSI:
RSI stands for Relative Strength Index, which is a popular technical indicator used in financial
markets, especially in stock trading and analysis. RSI is used to assess the momentum and
overbought or oversold conditions of an asset, such as a stock or a currency pair. It was
developed by J. Welles Wilder and first introduced in his 1978 book, "New Concepts in
Technical Trading Systems."
The RSI is typically calculated using the following formula:
RSI = 100 - (100 / (1 + RS))
Where:
RS (Relative Strength) is the average of the closing prices of up periods divided by the average
of the closing prices of down periods over a specified time period. The most common time
period used is 14 periods, but this can be adjusted to suit different trading strategies.
The RSI value ranges from 0 to 100, with the following general interpretations:
RSI values above 70: Indicate that the asset may be overbought, suggesting that it might be a
good time to sell or take profits.
RSI values below 30: Indicate that the asset may be oversold, suggesting that it might be a good
time to buy or enter a long position.
Figure 4.14 RSI Indicator in Aurobindo Pharma

50
PRASHANT KOKARE
In the above image, we take the example of Aurobindo Pharma:
So, we use RSI in the above example, and we get to know where the stock is overbought. But for
more confirmation, we use Bollinger Band and MACD, and we get to know that we can buy the
stock at 108.50 and sell it at 201.20. With the help of these indicators, we can book a profit of
Rs. 92.7 within 3 months of the period.
Figure 4.15 RSI Indicator in CIPLA

In the above image, we take the example of CIPLA:
With help of RSI, we get to know where the stock is oversold but for more confirmation, we use
Bollinger band and MACD. For short selling we short sell stock on 4 oct 2023 at 11.05am at Rs.
1171.20 and buy this stock on 4 oct 2023 at 12.25pm at 1163.26 with these we can book profit of
Rs. 7.94 in just nearly 1 hour. Suppose if we can take lot of 10 shares then our profit would be Rs.
79.4 in just one hour.
51
PRASHANT KOKARE
SUGGESTION
• Every investor is suggested to make a detailed analysis of the share market, about the company
and industry before making investment decisions.
• Investing in one security alone is not recommended as returns may not be favourable always.
Investing in multiple and diversified securities reduces the risk and provides a stable return.
• Stock market fluctuates from time to time; therefore, it is advised to check the market
conditions each time before investing
• Investing in share market using borrowed funds should be avoided as far as possible.
• Every person should have his own strategy for investments in the share market and his
decisions should not be influenced by others
• It is always better to hold good stocks than to engage in rapid-fire trading for quick returns.
• Remember that no single analysis method is foolproof, and it's essential to use a combination
of both fundamental and technical analysis to make well-informed investment decisions.
52
PRASHANT KOKARE
CONCLUSION
A comprehensive conclusion on the fundamental and technical analysis of the pharmaceutical
sector in India would require access to up-to-date data and a detailed analysis. In conclusion, the
pharmaceutical sector in India offers investment opportunities, but it also comes with its own set
of challenges. Fundamental analysis provides insights into the financial health and long-term
prospects of companies, while technical analysis helps traders make short-term decisions.
Investors should consider a combination of both approaches and stay updated with the latest
market developments and news to make informed investment decisions in this dynamic sector.
However, due to the dynamic nature of financial markets, it's crucial to base your decisions on the
most current and relevant information available.
53
PRASHANT KOKARE
BIBLIOGRAPHY
• Fundamental analysis of Pharma sector: An Empirical Analysis Rejimon A.V. 1 , Deepak

Ashokkumar2 and Madhusoodhanan C.K.3
• Reshmi Mannaa and Saurav Pathakb

IBS-Gurgaona and Transparent Value Pvt. Ltd.b
https://www.researchgate.net/
• https://www.investopedia.com/
• https://pharmaceuticals.gov.in/sites/default/files/Annual%20Report%202022-23%20Final-
3.pdf
• Annual Report of 20 Pharmaceutical Companies
54
PRASHANT KOKARE
PLAGIARISM REPORT
55
PRASHANT KOKARE

Prashant Black Book PDF

Uploaded by

Copyright:

Available Formats

You might also like

Prashant Black Book PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Prashant Black Book PDF

Uploaded by

Copyright:

Available Formats

SUMMMER INTERNSHIP REPORT

MET INSTITUTE OF MANAGEMENT

BHUJBAL KNOWLEDGE CITY,

BANDRA RECLAMATION, BANDRA, MUMBAI - 400 050

Date of Submission: 28/10/2023

Date: 28/10/2023 Name: Prashant Kokare

Place: Mumbai Name of the Student

Date: 28/10/2023 Prashant Kokare

Sr. No. Figures Page No.

Sr. No. Tables Page No.

FINTECH EDUCATION is a leading institute in creating awareness on “Financial literacy &

Financial Year Turnover (Rs. In crores) Growth Rate

Table 2.1 Pharma Sector’s Growth at Current Prices

Figure 2.1 Import-Export of Pharmaceuticals

2.5 Research Methodology:

2.5.1 Data Source:

Figure 2.2 Porter’s Five Forces for Indian Pharma Industry

• Threat of New Entrants:

• The Threat of Substitutes:

• Bargaining Power of Buyers:

• The Intensity of The Competitive Rivalry:

Figure 2.3 SWOT Analysis of Pharmaceutical Industry

Figure 2.4 PESTLE Analysis of Pharmaceutical Sector

3.4 Steps Involved in Carrying Out Fundamental Analysis:

Step 1: Step 2: Step 3:

Step 4: Step 5: Conclusion:

Table 3.1 Steps Involved in Carrying Out Fundamental Analysis

• Industry and Market Trends:

• Brand and Reputation:

• Market Sentiment and Perception:

• Broad Class of Information:

Current Ratio = Current Asset

Table 3.2 Current Ratio of Pharmaceutical Sector in India

Quick Ratio = Quick Asset

Table 3.3 Quick Ratio of Pharmaceutical Sector in India

Debt-Equity Ratio = Total Debt

Table 3.4 Debt-Equity Ratio of Pharmaceutical Sector in India

EBIT = REVENUE – OPERATING EXPENSE

Table 3.5 EBIT of Pharmaceutical Sector in India

Interest Coverage Ratio = EBIT

Table 3.6 Interest Coverage Ratio of Pharmaceutical Sector in India

6. Asset Turnover Ratio:

Asset Turnover Ratio = Net Sales

Here's a breakdown of the components of the formula:

Table 3.7 Asset Turnover Ratio of Pharmaceutical Sector in India

Return on Total Asset = Net Profit ×100

Table 3.8 Return on Total Asset of Pharmaceutical Sector in India

8. Return on Net worth:

Table 3.9 Return on Net Worth of Pharmaceutical Sector in India

9. Dividend Payout Ratio:

Dividend Payout Ratio = Dividend Per Share

Table 3.10 Dividend Payout Ratio of Pharmaceutical Sector in India

10. Earning Per Share:

Earning Per Share = Profit After Tax

Table 3.11 Earning Per Share of Pharmaceutical Sector in India

Net Profit Margin = Net Profit ×100

Table 3.12 Net Profit Margin of Pharmaceutical Sector in India

Price-Earning Ratio = Current Market Price