Вы находитесь на странице: 1из 38





I feel myself privilege for having an opportunity thank all of them who cooperate me through the project work. I extent my thanks to Mr.pathak director of TAXILA BUSINESS SCHOOL & DEAN Mr.rajat bohra for providing the needed co-operations also acknowledge with deep sense of gratitude for valuable guidance and suggestion provided by my project guide Mr.rohan Sharma during the project work. I also extend my thank to Mr. Tarun kacholia, Branch Manager and Mr.Prem sagar of Share khan Securities ltd, jaipur. For providing me all the information, guidance and encouragement. Last but not least; I would like to thank staff of TAXILA BUSINESS SCHOOL, and friends who contributed in every possible way for completing the project.

Project guide Mr.rohan sharma


This is to state that the entitled STUDY OF FUNDAMENTLE ANALYSIS OF STOCK MARKET & PORTFOLIO MANAGEMENT SERVICE at Share khan securies ltd, Jaipur is the original work carried out by me under the guidance of Mr.Tarun kacholia (Share khan) and Mr. Rohan Sharma as internal project guide, programmed towards partial fulfillment of MBA course under IASE University during the year 2009-2010.

Project guide Mr.rohan sharma



CHAPTER NO. 1 1.1 1.2 1.3 1.4 2 2.1 2.2 2.3 3 3.1 3.2 3.3 3.4 3.5 4







Under two years of full time course of MBA degree, a student has to undergo different training programs so as establish himself capable of managing at the place of his job after the completion of the degree. One of such program is preparation of the Project Report, which a student has to take in joining a specific organization of the choice for a specific period depending upon specialization he has opted for.

to draft technical analysis of the trade & investment in share market. To study the scope of technical analysis in share market. To make the investment risk analysis. To analyze the factor affecting to technical analysis. To study the various theories which are comes under the technical analysis. To make technical analysis of share market. To analyze overall share market performance.


As a part of our syllabus whatever be study is going to be useful us in future. But today its time to have specialization, so according to my interest in share market, I have chosen to do a project in share market. Share market is raising trend in India. Now a days people also be aware with it and can be a best option for investor to invest in it. It is only the sector which gives high returns in short period. Now a days share market is most popular sector compared to all sectors and people also more aware with it. It has a bright prospective for the investor in India. The movements of share price are a huge quantum of information that is available to investors. Technical analysis also helps in timing investment. And my external project guide Mr. Rohan sharma also suggested to me to Choose this topic for project.

Methodology is process of collecting the information and helps to find out the solutions to the topic selected by the researcher. Where as research help to study and find the techniques with proper process. It is a systematic way of presenting information. In order to collect the required information for the project following methods were adapted. Primary Method:Source from where first hand information are gathered directly are Called primary method. It gives more detailed information, which is collected from following sources: 1. Interviews & discussions. 2. Observations. Secondary Method :Secondary data are collected by others. The degree of attachment with the original source is main difference between primary data and secondary data. The data that are collected for another purpose and already exists Somewhere is called secondary data. 1. References from News papers. 2. References from Web sites. 3. References from magazines.

Every study or analysis has limitations and thus my project at Share khan ltd. had some limitations. 1. This project focuses on only fundamental analysis of share market. 2. Study of the market for limited period 2 monthly only. 3. The analysis was purely based on historical data. The analysis does not involve the interaction with any Fund manager or technical analyst only the information from internet, news papers magazines are used.



Share khan, one of the Indian leading brokerage house , is the retail arm of SSKI with over 240 share shops in 110 cities, & Indias premier online trading portal www.sharekhan.com , customers enjoy multi channel access to the stock market. Get everything you needed a Share khan out let! All you have to do is walk in to organization of 588 share shop across 213 cities in India to get a host of trading related service its friendly customer service staff will also help you with any account related queries you may have. A Share khan outlet offers the following services. 1. Online BSE & NSE executives (Through bolt & NEAT terunals) 2. Free access to investment advice from Share khan research team. 3. Share khan value line a forthrightly publication with of recommendation, stocks to watch out for etc 4. Daily research report & market review (High noon, Eagle Eye) 5. Pre market report (Morning cuppa) 6. Daily trading calls based on technical analysis. 7. Cool trading product (During Derivatives, Trading fing & market strategy) 8. Personalized advice 9. Live market information 10. Depository services: Demat & Remat transaction.11.Derivatives trading (Future & options) 12. Internet based online trading: Speed trade, speed trade plus.


Given the clients risk profile, maximize performance by adhering to a disciplined investment approach backed by quality research.


We have SMS facility where you will be getting market Information as well as buy/sell calls. Existing sales support available across 30 branches & 134 Franchisees covering 87 cities. Dedicated RM / Dealer support through messenger. You will be Assisted as market information buy / sell recommendation & other Information to guide you through. Compliments the already existing derivatives related services Being offered by Share khan. Service of an acknowledged institutional & non institutional Research team already available


CEO Securities Broking Corporate Finance

Head of Research

Head of Sales



Independent Sector

Sales Manager



Independent Sector

Manager Dealing


The Organization structure is of Head office under which there are 240 branches in 110 cities all over India.



The primary motive of buying a share is to sell it subsequently at higher price. In many cases, dividends are also expected. Thus, dividend and price changes constitute the return from investing in share. Consequently, an investor would be interest to know the dividend to be paid on the share in the future as also the future price of the share These value can only be estimated and not predicted with certainty. These values are primarily determined by the performance of the company which in turn is influenced by the performance of the industry .to which the company belongs and general economic and socio-political scenario of the country. An investor who would like to be rational and scientific in his investment activity has to evaluate a lot of information about the past performance and the expected future performance of companies, industries and the economy as a whole before taking the investment decision. Such evaluation or analysis is called Fundamental Analysis


Fundamental analysis is really a logical and systematic approach to Estimating the future dividends and share price. It is based on the basic Premise that share price is determined by a number of fundamental Factors relating to the economy, industry and company. Hence, the Economy fundamental, industry fundamental and company fundamental have to be considered while analyzing the security for investment purpose. Fundamental analysis is, in other words, a detailed analysis of the fundamental factors affecting the performance of company. Each share is assumed to have an economic worth based on its presents and future earning capacity. This is called as intrinsic value or fundamental value. The purpose of fundamental analysis is to evaluate the present and future earning capacity of share based on the economy, Industry and company fundamental and thereby assess the intrinsic value of the share. Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess The present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient. By believing that prices do not accurately reflect all available information, fundamental analysts look to capitalize on perceived price discrepancies.

EIC Analysis Framework

he analysis of economy, industry and company fundamentals constitute the main activity in the in the fundamental approach to security analysis. These can be viewed as different stages in the investment decisionmaking process and can be depicted graphically with three concentric circles as shown in following figure.

EIC analysis framework

In this era globalization we may add one more circle to the diagram to represent the international economy.

The logic of this three tier analysis is that the company performance depends not only on its own efforts, but also on the general industry and economy factors. A company belongs to an industry and the industry operates within the economy. As such, industry and economic factors affect the performance of a company. The multitude of factors affecting the performance of a company can be broadly classified as: 1. Economy wide factors such as growth rate of the economy, inflation rate, foreign exchange rates, etc. which affect all companies. 2. Industry wide factors such as demand-supply gap in the industry,the emergence of substitute products, changes in government policy relating to the industry, etc. These factors affect only those companies belonging to a specific industry. 3. Company specific factors such as the age of its plant, the quality of management, brand image of its products, its labour management relations, etc. These factors are likely to make a companies performance quite different from that of its competitors in the same industry. Fundamental analysis thus involves three steps: 1. Economy Analysis 2. Industry Analysis 3. Company Analysis

Fundamental analysis studies reasons of price changes at the macroeconomic level and represents analysis of economic and political conditions in countries or separate industries. With the help of fundamental analysis influence of various events on currency, raw material or stock markets is estimated. The school of fundamental analysis appeared together with development of applied economic science. Knowledge of macroeconomic life of society and its influence on price dynamics of different commodities was taken as the basis. Generally all fundamental factors are estimated from two points of view: how this news will influence the official discount rate of this or that country; What are current conditions of the national economy Background data for fundamental analysis are supplied via information channels in the form of news. News may be divided in unexpected and planned (anticipated). Unexpected news include news of political (government dismissals, coups, wars, etc.) and natural origin (various natural disasters and climatic events). The market is severely affected by wars. As a rule, the currency of the country, on which territory military activities take place, is getting cheaper. Natural disasters also lead to a fall of the national currency, since finances are required for recovery, which may give rise to inflation. Anticipated news include meetings of commissions of central banks of different countries, where discount rates are discussed and changed, and issue of economical indicators. Economic conditions of the country are assessed by many indicators. Let us review influence of the most important of them.

Official discount rate

ODR or official discount rate is one of the key regulators of national monetary policy. ODR usually indicates at which rate the central bank issues credits to other banks. Besides ODR, Lombard rate and REPO rate are often used. Increase of ODR usually leads to tightening of monetary policy of the state and slowdown of the national economy growth, but it also causes increased foreign investments to the national economy. Thus, in the short-term outlook, ODR increase causes the national currency growth, but in the long-term outlook high rates hinder economic development of the country and leads to a fall of the national currency exchange rate.

FOMC and Meeting

Heads of central banks of the leading countries have regular meetings to discuss issues of economy regulation. Such meetings are called FOMC (Federal Open Market Committee), if the it is presided by the head of FED (Central Reserve System of the United States of America) or Meeting, if the meeting takes place on a neutral territory. The main issues of this meeting include: Change of ODR; Change of bank reserve rate; Mutual crediting of the coalition countries; FOMC or Meeting are held approximately once in two weeks, and many things in the financial world depend on results of their decisions. Thus, increase of ODR by 0.25% USD may lead to USD growth by 100 pips and more within 10-15 minutes. Dates and results of FOMC meetings have wide publicity in business press, the Internet, and you also can find links to information resources at our site.

Inflation is devaluation of paper money due to its emission in quantities, exceeding demands of commodity turnover, accompanied by increase of commodity prices and reduction of actual wages. Besides that, price increase is caused by credit appreciation. High inflation adversely affects economy, since high interest rates reduce production efficiency and determine redistribution of capital from production to intermediaries. With low inflation or the absence thereof, interests of intermediaries suffer. Financial institutions suffer from low interest rates. Inflation level should be optimal. With such a level, stable high production efficiency is observed, and intermediaries still can derive profits.

Budgetary deficit
Budgetary deficit is the state budget surplus. High budgetary deficit leads to the national depth growth and can cause inflation acceleration. Budgetary deficit level may be regulated by two methods. First increase of revenues. It can be achieved by increase of tax receipts, which will impose burden on taxpayers. Excessively high taxes adversely affect production and stimulate development of black economy. The second method is reduction of production costs at the expense of social programs. This leads to increased social tension and produces a general negative effect.

Economic indicators
Economic indicators provide the most complete idea of the current situation in the national economy, but require extensive experience and practice. Let us review some of them and estimate their effect on price dynamics.

Trade balance
Trade balance is the difference between export and import of commodities. If the amount of prices of exported commodities exceeds the amount of prices of imported commodities, trade balance is positive; if import exceeds export, trade balance is negative. Positive balance, as well as reduction of negative balance, lead to increase of the national currency value.

Consumer price index (CPI)

Consumer price index shows change of price level for commodities of the consumer goods basket. CPI growth may lead to interest rate increase, which consequently cause increase of the national currency exchange rate.

Producer price index (PPI)

Producer price index shows change of price level for industrial goods. Its effect on the exchange rate is similar with CPI. GDP - Gross domestic product Gross domestic product is one of the basic indicators, showing the current situation in the national economy. GDP = consumption + government expenditures + investments + export + import. GDP has a profound effect on the market. Its growth leads to increase of the national currency exchange rate.

Unemployment rate
Unemployment is a social-economic phenomenon, when a part of the population cannot find jobs. High unemployment level contributes to social tension, reduction of the middle class and lowering of the net mass of actual income of the population. With a low level of unemployment, workers lose motivation for conscientious work and interests of employers suffer. Unemployment growth, as a rule, is accompanied with a fall of the national currency rate. However, for each country there is an officially permissible level of effective unemployment.

Non-farm payroll
This indicator shows quantity of new jobs, excluding the agricultural sector of economy. Increase of this indicator characterizes employment growth and leads to growth of the currency rate.

Parliamentary, presidential and other elections also influence on currency rates. Change of rates depends on pre-election promises of candidates and historical preferences of winning political parties. Dynamics of prices of oil and energy sources The market is influenced by dynamics of prices of oil and energy sources. As a rule, when oil prices grow, currencies of energy-dependent countries (Japan, Germany, Switzerland) are depreciated. American dollar in such cases goes up, as a rule.

Stock market indices

Stock market indices represent average cost of stocks (or cost of a share portfolio) of the largest national companies or biggest companies of an industry, selected according to certain parameters. For example: S&P (S&P-500, Standard & Poors) - chares of the biggest US companies; DJIA (DJIA-24, Dow Jones Industrial Average) - cost of elite shares of the United States of America, Including General Motors, General Electric, Motorola, etc. DAX (DAX-30, XETRA DAX) - larges production companies of Germany; CAC - French Stock Index; FTSE (FTSE -500) - UK Stock Index; Nikkei-225 - index of 225 leading companies of Japan; TANKAN, TOPIX etc; Stock indices show the current situation at stock exchanges, which, therefore, influence the national currency rate. Growth of the stock market increases the national currency rate, since it reflects favorable conditions in the corporate sector and vice versa - a fall of indices moves quotations down. Growth of prices of state bonds (T-bills, T-bonds) leads to increase of the national currency value.

An investor ultimately invests his money in the securities of one or more specific companies. Each company can be characterized as belonging to an industry. The performance of companies would, therefore, be influenced by the fortune of the industry to which belongs. For this reason an analyst has to undertake an industry analysis so as to the study of fundamental factor affecting the performance of different industries. At any stage in the economy, there are some industries which are fast growing while other stagnating or declining. If an industry of growing,the companies within the industry may also prosperous. The performance of companies will depend, among among other things, upon the stage of the industry to which the belong. Industry aalysis refer to an evaluation of the relative strengths and weaknesses of particular industries.


Marketing experts believe that each product has a life cycle. They have identified four stage in the life of product, namely introduction stage, growth stage, maturity stage and decline stage. In the same way, an industry is also said to have a life cycle. This industry life cycle theory is generally attributed Julius Grodinsky.

This is first stage in the industrial life cycle of new indystry where the technology as well as the product are relatively new and have not reached a stage of perfection. The Pioneering stage is characterized by rapid growth in demand for the out put industry. As a result there is grate opportunity for profit. Many companies compete with each other vigorously.As large number of companies attempt to capture their share of the market, there arise high business mortality rates.Weah firm are eliminated and a lesser number of firms survive the pioneering stage.

Once an industry has established itself enters stage of expantion or growth. The industry now include only those companies that have survived the pioneerin stage.These companies continue to become stronger.Each economy finds market for itself and develops its owen

strategies to sell and maintain its position in the market. The competition among the surviving companies brings about improved product at lower price. Companies in the expansion stage of an industry are quite attractive for investment purposes. Investors can get high returns at low risk because demand exceeds supply in this stage. Companies will earn increasing amounts of profits and pay attractive dividends

In this stage, the growth of the industry stabilizes. The ability of the industry to growth appears to have been lost. Sales may be increasing but at a slower rate than that experienced by competitive industries or by overall economy. The industry begins stagnate. The transition of the industry from the expansion stage to the stagnation stage is often very slow. Two important reasons for this transition are change in social habits and development of improved technology. Sometimes an industry may stagnate only for a short period. By the introduction of a technological innovation or a new product, it may resume a process of growth, thereby starting a new cycle. Therefore, an investor or analyst has to monitor the industry developments constantly and with diligence.

From stagnation stage the industry passes to the decay stage. This occurs when the products of the industry are no longer in demand. New products and new technology have come to the market. Customer have change their habits, Style & liking. As a result, the industry becomes obsolete and gradually ceases to exist. Thus, changes in social habits, changes in technology and declining demand are the causes of decay of an industry. The industry life cycle approach has important implications for the investor. It gives an insight into the apparent merits of investment in a given industry at a given time. An industry usually exhibits low profitability in the pioneering stage, high profitability in the expansion stage, medium but steady profitability in the stagnation stage and declining profitability in the decay stage. The profit associated with the different stages in the life of an industry can be illustrated in the form of an inverted S curve as shown in following graph:

Company Analysis
With a shortlist of companies, an investor might analyze the resources and capabilities within each company to identify those companies that are capable of creating and maintaining a competitive advantage. The analysis could focus on selecting companies with a sensible business plan, solid management and sound financials.

Business Plan
The business plan, model or concept forms the bedrock upon which all else is built. If the plan, model or concepts stink, there is little hope for the business. For a new business, the questions may be these: Does its business make sense? Is it feasible? Is there a market? Can a profit be made? For an established business, the questions may be: Is the company's direction clearly defined? Is the company a leader in the market? Can the company maintain leadership?

In order to execute a business plan, a company requires top-quality management. Investors might look at management to assess their capabilities, strengths and weaknesses. Even the best-laid plans in the most dynamic industries can go to waste with bad management (AMD in semiconductors). Alternatively, even strong management can make for extraordinary success in a mature industry (Alcoa in aluminum). Some of the questions to ask might include: How talented is the management team? Do they have a track record? How long have they worked together? Can management deliver on its promises? If management is a problem, it is sometimes best to move on.

Financial Analysis
The final step to this analysis process would be to take apart the financial statements and come up with a means of valuation. Below is a list of potential inputs into a financial analysis.

Accounts Payable

Good Will

Accounts Receivable Acid Ratio Amortization Assets Current Assets Fixed Book Value Brand Business Cycle Business Idea Business Model Business Plan Capital Expenses Cash Flow Cash on hand Current Ratio Customer Relationships Days Payable Days Receivable Debt Debt Structure

Gross Profit Margin Growth Industry Interest Cover International Investment Liabilities - Current Liabilities - Long-term Management Market Growth Market Share Net Profit Margin Pageview Growth Pageviews Patents Price/Book Value Price/Earnings PEG Price/Sales Product

Debt:Equity Ratio Depreciation Derivatives-Hedging Discounted Cash Flow Dividend Dividend Cover Earnings EBITDA Economic Growth Equity Equity Risk Premium Expenses

Product Placement Regulations R&D Revenues Sector Stock Options Strategy Subscriber Growth Subscribers Supplier Relationships Taxes Trademarks Weighted Average Cost of Capital

The list can seem quite long and intimidating. However, after a while, an investor will learn what works best and develop a set of preferred analysis techniques. There are many different valuation metrics and much depends on the industry and stage of the economic cycle. A complete financial model can be built to forecast future revenues, expenses and profits or an investor can rely on the forecast of other analysts and apply various multiples to arrive at a valuation. Some of the more popular ratios are found by dividing the stock price by a key value driver.

Ratio Price/Book Value Price/Earnings

Company Type Oil Retail

Price/Earnings/Growth Price/Sales Price/Subscribers Price/Lines Price/Page views Price/Promises

Networking B2B ISP or cable company Telecom Web site Biotech

This methodology assumes that a company will sell at a specific multiple Of its earnings, revenues or growth. An investor may rank companies Based on these valuation ratios. Those at the high end may be considered Overvalued, while those at the low end may constitute relatively good Value.

Putting it All Together

After all is said and done, an investor will be left with a handful of Companies that stand out from the pack. Over the course of the analysis Process, an understanding will develop of which companies stand out as Potential leaders and innovators. In addition, other companies would be considered laggards and unpredictable. The final step of the fundamental Analysis process is to synthesize all data, analysis and understanding into Actual picks.

Advisory Products
Why Sharekhan Advisory Products
Wide product range to meet diverse needs of clients Disciplined Approach Dedicated Product manager backed by Research Performance track record

Share khan Advisory Products:

>Derivatives Portfolio >Nifty Portfolio >Mini Portfolio >123 Portfolio >Smart Trade Portfolio >Top Picks >Portfolio Doctor


Derivatives Portfolio Nifty Portfolio Mini Portfolio Smart Trade Portfolio

Top Picks Portfolio Mutual Funds 123 Portfolio Portfolio Doctoring

Derivatives Portfolio
A model portfolio run by the Sharekhan derivative Team centrally Ideal for Traders looking for aggressive returns with medium risk Aggressive leverage Actively managed Super Strike Rate

Portfolio Rules Call for Segment Min Investment per call Time frame of call Monitoring

Only Derivative Segment calls 20-25 % of corpus as Margin (Quantity also specified) Max : 1 month Derivative Team Min : 1 day

Nifty Portfolio
Nifty Portfolio Key facts/Rules Is a trading portfolio managed by Sharekhan Technical team which generated calls in Index(Both Nifty & Bank Nifty) Is meant for traders who wants to trade short & Long in Index
Nifty Portfolio Ticket Size Max EOD Exposure Min Exposure Expected Upside Stop Loss Reporting Drawdown Rs. 3 lakhs 6 Lots 0 Lots 1-8% 1-4% Shall be done to clients at the End of day & also a Monthly report will be sent 30%

Mini Portfolio
Nifty Portfolio Key facts/Rules Is a trading portfolio managed by Sharekhan Technical team which generated calls in Is meant for traders who wants to trade short & Long in Index Ideally For the Small Investors

Mini Portfolio Key facts/Rules Mini Portfolio

Ticket Size Min Exposure Expected Upside Stop Loss Reporting Drawdown Rs. 50,000 & above 0 Lots 1-8% 1-4% Shall be done to clients at the End of day & also a Monthly report 20% Max EOD Exposure 2 Lots

Strategy Used In MiniNifty One lot at a time ,Maximum Two lots when both portfolio have same opinion Once the price is 20-30 points above the position the stop loss is revised to the price position including brokerage & taxes Maximum Stop Loss is 50 points All profits earned are distribute at the end of the month No transaction if the portfolio reduced 15% first and next 20%.

123 Portfolio
Is a cash market delivery portfolio Calls will be generated by Advisory team in consultation with Research Team (Both Fundamental & technical)

Is meant for short term delivery clients with Time frame of 1-3 Months 123 Portfolio Key facts/ Rules
123 Portfolio - Rules Ticket size No of stocks in portfolio Upside returns potential Downside risk Stop loss Reporting Product draw down Rs. 3 lacs & above Max.5 10-20% 5-10% No stop loss will be given Shall be done to clients at the End of day & also a Monthly report will be sent 25% of clients corpus

Smart Trades Portfolio

A model portfolio run by the Sharekhan Advisory Team centrally Delivery calls are generated by the Advisors based on the market pulse (Not based on fundamental research) Ideal for Short-term Investor looking for aggressive returns with medium risk Aggressive No leverage Actively managed

STP: Trading Rules

Portfolio Rules Call for Segment Time frame of call Monitoring Only Cash Segment calls Max : 1 month Advisory Team Min : 1 day Min Investment per call 10 % of corpus

Top Picks Portfolio

A compilation of the Best Stock Ideas from the Sharekhan basket Released monthly Ideal for every Investor. Picked by the highly acclaimed Sharekhan Research Team Quality Stock Selection Effective for long term & medium term Excellent Track Record Good Strike Rate

Portfolio Doctor
Comprehensive analysis of your existing portfolio Recommendations for improvement on a continuous basis based on Market Outlook Analysis of your existing portfolio Recommendations from Sharekhan Creation of a Model Portfolio


Strengths of Fundamental Analysis
Long-term Trends
Fundamental analysis is good for long-term investments based on long-term Trends, very long-term. The ability to identify and predict long-term Economic, demographic, technological or consumer trends can benefit Patient investors who pick the right industry groups or companies.

Value Spotting
Sound fundamental analysis will help identify companies that represent a Good value. Some of the most legendary investors think long-term and Value. Graham and Dodd, Warren Buffet and John Neff are seen as the champions of value investing. Fundamental analysis can help uncover companies with valuable assets, a Strong balance sheet, stable earnings, and staying power.

Business Acumen
One of the most obvious, but less tangible, rewards of fundamental Analysis is the development of a thorough understanding of the business. After such painstaking research and analysis, an investor will be familiar With the key revenue and profit drivers behind a company. Earnings and Earnings expectations can be potent drivers of equity prices. Even some Technicians will agree to that. A good understanding can help investors Avoid companies that are prone to shortfalls and identify those that Continue to deliver. In addition to understanding the business, Fundamental analysis allows investors to develop an understanding of the Key value drivers and companies within an industry. A stock's price is Heavily influenced by its industry group. By studying these groups, Investors can better position themselves to identify opportunities that are High-risk (tech), low-risk (utilities), growth oriented (computer), value Driven (oil), non-cyclical (consumer staples), cyclical (transportation) or Income-oriented (high yield).

Knowing Who's Who

Stocks move as a group. By understanding a company's business, Investors can better position themselves to categorize stocks within their Relevant industry group. Business can change rapidly and with it the Revenue mix of a company. This happened to many of the pure Internet Retailers, which were not really Internet companies, but plain retailers. Knowing a company's business and being able to place it in a group can Make a huge difference in relative valuations.

Weaknesses of Fundamental Analysis

Time Constraints
Fundamental analysis may offer excellent insights, but it can be Extraordinarily time-consuming. Time-consuming models often produce Valuations that is contradictory to the current price prevailing on Wall Street. When this happens, the analyst basically claims that the whole Street has got it wrong. This is not to say that there are not misunderstood Companies out there, but it is quite brash to imply that the market price, And hence Wall Street is wrong.

Industry/Company Specific
Valuation techniques vary depending on the industry group and specifics Of each company. For this reason, a different technique and model is Required for different industries and different companies. This can get Quite time-consuming, which can limit the amount of research that can be? Performed. A subscription-based model may work great for an Internet Service Provider (ISP), but is not likely to be the best model to value an Oil Company.

Fair value is based on assumptions. Any changes to growth or multiplier Assumptions can greatly alter the ultimate valuation. Fundamental Analysts are generally aware of this and use sensitivity analysis to present A base-case valuation, a best-case valuation and a worst-case valuation. However, even on a worst-case valuation, most models are almost always Bullish, the only question is how much so. The chart below shows ho

>Working with Sharekhan was a great experience. >I pursued the knowledge in one of the upcoming segments of the market, which will b of great help to me in the future.. >Demat account is safe for trading of shares, as it is secured with password. People have a little knowledge about Demat, trading, but only by name. >We also learnt new thing and different marketing techniques which will definitely help us in brightening our future by applying it in our personal and professional life.

>My first suggestion is that Sharekhan should have to advise those people who want to invest their money. >Sharekhan should take a suitable step towards awareness of people to the Insurance and its importance in the life.

www.wikipedia.com www.google.com www.demat.com www.Sharekhan.com References from magazines