Exchange Ratio Ratio

Technical and fundamental analysis of exchange ratio based on UAE Exchange
CHAPTER- 1
INTRODUCTION
INTRODUCTION
Investing, like marriage, isn't something that should be entered into lightly. You
wouldn't get married on a first date, would you? Ok, maybe some of us would, but
that's not really very Foolish. Before we marry... er, I mean invest in a company, there
are more than a few things we need to know about it.
Exchange Ratio
The share exchange ratio is very important in merger transactions. The share of
benefits for shareholders of merging parties depends on the value of the coefficient.
As a consequence of a merger 4 situations may occur:
1. owners of both companies benefit from the merger;
2. owners of the acquiring company lose, owners of the acquired company gain;
3. shareholders of both companies lose;
4. owners of the acquiring company gain and owners of the acquired company lose.
The declared aim of a merger is to make all participating parties benefit.
However, it is possible that one of merging firms has shares of the second entity, in an
amount sufficient to vote for a merger. Then, the merger can be voted through even if
the target's shareholders lose, at the expense of the shareholders of the acquiring
company. To avoid such situations, firms are required to obtain an opinion of an
independent auditor on a merger plan. However, the possibility of deliberate efforts
leading to a situation in which one of the companies lose, whilst the other gains
cannot be completely excluded. The situation in which 2merging companies lose is
not rational economically, and can only occur as a consequence of the transaction,
whereas ex ante benefits from the merger were expected. The aim of this study is to
determine whether in the case of transactions that took place in Poland shareholders
of merging companies gained from those transactions.

The research was based on the analysis of the results of the Larson-Gonedes exchange
ratio determination model. If the transaction is economically beneficial, and improves
the return on equity of joining companies, the share of benefits among the
shareholders of the acquiring and target companies depends on the share exchange
ratio. Depending on the distribution of shares in the new entity, all shareholders or
only one of the parties will benefit. Therefore, the share exchange ratio is of
paramount importance for merger transaction. The time scope of the analysis is the
first decade of the XXI century. Main differences between the two types of analysis:
Fundamental analysis
Technical analysis
Focuses on what ought to happen in a Focuses on what actually happens in a

market
market
Factors involved in price analysis:
Charts are based on market action
1. Supply and demand
involving:
2. Seasonal cycles
1. Price
3. Weather
2. Volume
4. Government policy
3. Open interest (futures only)
BACK GROUND OF THE PROBLEM

In an industry plagued with skepticism and a stock market increasingly difficult to
predict and contend with, if one looks hard enough there may still be a genuine aid for
the Day Trader and Short Term Investor.
The price of a security represents a consensus. It is the price at which one person
agrees to buy and another agrees to sell. The price at which an investor is willing to
buy or sell depends primarily on his expectations. If he expects the security's price to
rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple
statements are the cause of a major challenge in forecasting security prices, because
they refer to human expectations. As we all know firsthand, humans expectations are
neither easily quantifiable nor predictable.
STATEMENT OF THE PROBLEM

If prices are based on investor expectations, then knowing what a security should sell
for (i.e., fundamental analysis) becomes less important than knowing what other
investors expect it to sell for. That's not to say that knowing what a security should
sell for isn't important--it is. But there is usually a fairly strong consensus of a stock's
future earnings that the average investor cannot disprove
OBJECTIVES
Primary Objective:
a) To do technical and fundamental analysis of exchange ratio
Secondary Objectives:
a) To study the various theories of technical analysis and fundamental analysis
b) understand the movement and performance of stocks
c) understanding and analyzing the factors that affect the movement of stock prices in
the Indian Stock Markets
SIGNIFICANE OF THE STUDY

Fundamental analysis and technical analysis can co-exist in peace and complement
each other. Since all the investors in the stock market want to make the maximum
profits possible, they just cannot afford to ignore either fundamental or technical
analysis.
RESEARCH METHODOLOGY
TYPE OF STUDY
The research has been based on secondary data analysis. The study has been
exploratory as it aims at examining the secondary data for analyzing the previous
researches that have been done in the area of technical and fundamental analysis of
stocks. The knowledge thus gained from this preliminary study forms the basis for the
further detailed Descriptive research. In the exploratory study, the various technical
indicators that are important for analyzing stock were actually identified and
important ones short listed.
SAMPLE DESIGN
The sample of the stocks for the purpose of collecting secondary data has been
selected on the basis of Random Sampling. The stocks are chosen in an unbiased
manner and each stock is chosen independent of the other stocks chosen.
SAMPLE SIZE
The sample size for the number of stocks is taken as 10 for technical analysis and 4
for fundamental analysis of exchange ratio as fundamental analysis is very exhaustive
and requires detailed study.
LIMITATIONS
Like all studies based on samples, this study also suffers from some limitations.
1. As the study depends on human perceptions so there are chances of study getting
biased.
2 Error due to some oversight or misinterpretation.
3 The scope of study was limited due to some constraints.
4. Any other error which could have crept in the course of the Project.
CHAPTER- 2
INDUSTRY PROFILE AND COMPANY
PROFILE
INDUSTRY PROFILE
Financial services are the economic services provided by the finance industry, which
encompasses a broad range of organizations that manage money, including credit
unions, banks, credit
card companies, insurance, companies, consumer finance
companies, stock brokerages, investment funds and some government sponsored

enterprises.
A financial market is a market in which people and entities can trade financial
securities, commodities, and other fungible items of value at low transaction costs and
at prices that reflect supply and demand. Securities include stocks and bonds, and
commodities include precious metals or agricultural goods.
HISTORY OF FINANCIAL SERVICES

The term "financial services" became more prevalent in the United States partly as a
result of the Gramm-Leach-Bliley Act of the late 1990s, which enabled different types
of companies operating in the U.S. financial services industry at that time to merge.
Companies usually have two distinct approaches to this new type of
business. One approach would be a bank which simply buys an insurance company or
an investment bank, keeps the original brands of the acquired firm, and adds the
acquisition to its holding company simply to diversify its earnings. Outside the U.S.
(e.g., in Japan), non-financial services companies are permitted within the holding
company. In this scenario, each company still looks independent, and has its own
customers, etc. In the other style, a bank would simply create its own brokerage
division or insurance division and attempt to sell those products to its own existing
customers, with incentives for combining all things with one company.
The financial sector is a component of a nation's economy created by the ebb
and flow of capital in the financial industry. Financial services include everything
from personal banking to the insurance industry, and they can make up a sizable
portion of a nation's economy. Evaluation of the true value of the financial sector can
be complicated, as the financial industry involves a great deal of paper pushing which
can sometimes be difficult to track and pin down.
Financial institutions like banks, insurance companies, brokerage houses,
investment firms, and so forth are all part of the financial sector.

They can trade capital in a variety of ways, including funds, derivatives, investments;
debt instruments, and so forth, with much of the financial sector being dependent on
the extension of credit.
Consumers interact directly with the financial sector every time they apply for a credit
card, deposit a paycheck in a bank, or take out a home loan, and these actions occur
on a much larger scale between institutions and companies.
TYPES OF FINANCIAL MARKETS

The financial markets can be divided into different subtypes:
Capital markets which consist of:
-
Stock markets, which provide financing through the issuance of shares or

common stock, and enable the subsequent trading thereof.
Bond markets, which provide financing through the issuance of bonds, and
enable the subsequent trading thereof.
Commodity markets, which facilitate the trading of commodities.

Money markets, which provide short term debt financing and investment.
Derivatives markets, which provide instruments for the management of financial
risk.
Futures markets, which provide standardized forward contracts for trading products
at some future date; see also forward market.
Insurance markets, which facilitate the redistribution of various risks.
Foreign exchange markets, which facilitate the trading of foreign exchange.
The capital markets may also be divided into primary markets and secondary markets.
Newly formed (issued) securities are bought or sold in primary markets, such as
during initial public offerings. Secondary markets allow investors to buy and sell
existing securities. The transactions in primary markets exist between issuers and
investors, while in secondary market transactions exist among investors.
Liquidity is a crucial aspect of securities that are traded in secondary markets.
Liquidity refers to the ease with which a security can be sold without a loss of value.
Securities with an active secondary market mean that there are many buyers and
sellers at a given point in time. Investors benefit from liquid securities because they
can sell their assets whenever they want; an illiquid security may force the seller to
get rid of their asset at a large discount.
10
COMPANY PROFILE
UAE Exchange is a remittance and currency exchange company headquartered in
the United Arab Emirates with operations in a number of countries. .
UAE
EXCHANGE is a leading global remittance and foreign exchange brand trusted by

millions of customers and partners, across the world. A peoples brand, UAE
EXCHANGE is known for quality and customer centric approach. Started over 30
years ago, UAE EXCHANGE provides world class services and earned trust of over
3.5 million customers, worldwide. With 570 + direct offices in 30 countries across
five continents makes the company the only brand in the segment to own a global
network of this magnitude. It is the largest remittance companies and has extensive
network in the Middle East and Asia.
HISTORY
UAE Exchange was started operations in 23rd October, 1980 with a single office in
Abu Dhabi, United Arab Emirates, by Indian born entrepreneur BavaguthuShetty and
former United Arab Emirates Minister of Justice H.E. Abdulla Humaid Al Mazroei.
From then on it was on an expansion spree, building a global network of over 570
direct offices in close to 30 countries across five continents.
In 1993 UAE Exchange became a SWIFT (Society for Worldwide Interbank
Financial Telecommunication)member and the following two years opened
Operations in Oman and Kuwait as well as well as launching an express transfer, gold
card and bank notes service.
In 1999 it launched retail operations in India, which was to become the largest
operation outside its home base. It followed this with opening offices in Bangladesh,
the UK and Sri Lanka in the following three years.
By 2003, it has also added Australia when it acquired a local exchange house. The
same year it opened its 100th branch in India.
Between 2005 and 2009 it continued to expand, opening offices in Hong Kong,
Uganda, Jordan, Canada, New Zealand and China, as well as purchasing Money Dart
Global Services in the United States. It also launched a online money transfer portal,
Money2anywhere. X Pay, the bill payment solution using mobile phone was also
brought out in India.
Based in Abu Dhabi with Mr. Y Sudhir Kumar Shetty, COO Global Operations, at
the helm, UAE Exchange has been setting new standards in the global remittance
11

industry with diversified product and service offerings supported by the deployment
of latest technologies, resulting in excellent customer service and unmatched market
presence.
Constantly striving to provide more value to customers and in the process growing
exponentially has earned UAE Exchange the recognition as a Super brand for 2009
and 2010. The Super brands Council, the independent authority that honors branding
excellence and achievements in various sectors across the world has conferred this
honors on UAE Exchange.
Quality-driven approach with a customer-centric perspective has been the benchmark
of UAE Exchange operations. And it is this same penchant for excellence that has
won the global remittance major various global business excellence and quality
awards including the esteemed ISO 9001:2008 certification, Dubai Quality Award
and Sheikh Khalifa Excellence Award (SKEA) for the Finance sector in 2009.
Winning the prestigious UAE Emiratisation Award from the HRD committee in the
Banking & Financial Sector was yet another feather in its colourful cap. The DHDA
Award under the patronage of HH Sheikh Mohammed bin Rashid Al Maktoum for
efforts and achievements in the development of UAE Nationals added more lustre.
Over 6,500 trained multi-cultural UAE Exchange personnel representing more than
40 nationalities, across the globe, strive to ensure customer delight. So every
customer, no matter which part of the globe he walks in from, will get the same
attention and quality service to his complete satisfaction. This customer-centric
approach makes UAE Exchange a peoples brand. And its safe and fast transaction
process makes it the Worlds Trusted Money Transferred, which is an acclaim that the
brand earned from its relentless service of thirty years.
A prominent link in the prestigious conglomerate NMC Group, UAE Exchange stands
on three values Knowledge, Integrity, Commitment. The brand is driven by People,
Product and Process, which are in tandem with the vision set by its founders, guiding
it in its pursuit for excellence. And, in the process, delivering more value to its
esteemed customers worldwide.
1999 UAE Exchange became fully operational with its branch at MG Road,
Bangalore and the first Xpress Money payment given out on 1 September 1999 at P T
Usha branch Kochi.
12

2000 UAE Exchange started Money Exchange, later renamed as Foreign
Exchange, as per specific licenses received from the apex bank of the country, The
Reserve Bank of India.
2001 UAE Exchange added one more service Travel and Ticketing services. The
company is an IATA accredited passenger sales agent and also an active member of
TAAI. UAE Exchange has 7 IATA locations in India. The company also opened the
50th branch in Surat, Gujarat.
2002 a separate wing for Agency Business was formed. UAE Exchange also
included another service, Insurance, in 2003 partnering with LIC and United India
Assurance company.
2004 the company opened the 100th branch in Mattannur Kerala. In 2005 UAE
Exchange also started Tours along with Travel services.
2006 UAE Exchange opened its 200th branch at Mangalore.
2006 was a landmark year in the history of Indian operations of UAE Exchange.
The RBI elevated the company to Authorized Dealer II category, thus becoming the
first FFMC in Indian history to get the status.
2008 UAE Exchange entered into the realm of another service Gold Loan and
provides EMI repayment option for customers.
2009 the company received the license under payment and settlement acts from RBI
to operate a debit mode of payment system and thus introduced XPAY, an
indigenously developed mobile based payment system.
UAE Exchange is now present in the metros, semi-urban as well as rural areas of
India with over 240 own branches. The Country Head of UAE Exchange and
Financial Services Ltd is Mr. V George Antony and there are 10 Department Heads,
50 Divisional Heads, 8 Zonal Heads, 23 Regional Heads and 8 Regional Audit Heads
monitoring the operations of the companys branches across India.
VISSION STATEMENT OF UAE EXCHANGE

To be an ever-dependable friend, the link that emotionally connects people across the
globe through technology-driven, professional, dedicated and timely services
delivered with a personal touch.
13
MISSION STATEMENT OF UAE EXCHANGE

To stay ahead of the times in providing customer-friendly services delivered with
warmth; full fill the aspirations of the employees and the entire community; serve and
flourish in an environment of mutual trust and transparency.
AWARDS
Quality is a way of life at UAE Exchange.
UAE Exchange wins the Dubai Quality Award-2009
Sheikh Khalifa Excellence Award (SKEA) in 2009
Noted for Super Brands in 2008, 2009, 2010, 2011
STP Excellence Award from Deutsche Bank- 2007, 2008,2009
Dubai Quality Appreciation Programme (DQAP)- 2007
Mohammed Bin Rashid Al Maktoum Business Award- 2008
Human Resource Development Award from HRD Committee in 2009
Best Performance Outlet under DSES- 2006, 2007, 2008, 2009, 2010,2011,2012
Dubai Human Resource Development Appreciation Award from Department of
Economy,
Government of DubaiBest Exchange House in Dubai by Show Case 500
ENDP Best Partner Award for 2007
FOUNDERS
DR. B. R. SHETTY, Managing Director & CEO, UAE Exchange, is an entrepreneur
par excellence. His success story has been paved by humility and deep commitment
towards the people and the society.
Armed with a degree in clinical pharmacy, Dr. Shetty set foot in UAE in 1972 and
founded the healthcare facility New Medical Centre (NMC) in 1975. After realising
the immense potential of the remittance sector and with a deep sense of yearning to
help the expatriate community, he established UAE Exchange in 1980 with its head
office located in Abu Dhabi.
Today, Dr. Shetty is among the top business icons in the Gulf region and a living
testimony of Corporate Social Responsibility. He has numerous awards to his credit
including the Padmashri, one of the highest civilian honours of the
14

Government of India bestowed on him for his outstanding achievements and
contributions to business and trade. The Abu Dhabi Government has also recognised
his contributions to the society by conferring on him the highest honors of the Abu
Dhabi Government the Order of Abu Dhabi. He was conferred with a Doctorate by
Georgia State University, Atlanta, USA.
Dr. Shetty has, during his highly successful business career, forayed into many sectors
including pharmaceuticals, healthcare, finance, FMCG, IT, hospitality, cosmetics,
jewellery, advertising, PR and real estate with astounding success in each one of
them. Dr. Shetty is also a member of various international business councils.
H. E. Abdulla Humaid Ali Al Mazroei, Chairman, NMC Group a conglomerate
dealing in a wide range of business activities and which include many leading brands
like UAE Exchange. He is a dynamic leader with visionary qualities and indefatigable
zeal, and his eventful life has been an absorbing journey through the labyrinths of
governance, politics, business, commerce and industry.
H.E. Mazroei joined the government of uae in 1968.his rise in the government
hierarchy was meteoric as he was promoted to the post of under secretary at the
ministry of foreign affairs.
He entered the higher corridors of power in 1977 with induction into the cabinet as
the minister of labour and social affairs. His tenure as advisor to the presidential
Court culminated after joining the league of pre-eminent ranks with his appointment
as the UAE minister of justice. H.E Mazroei is the member of the board of the general
authority for pension and social security, chairman of union insurance and member of
the board of Abu Dhabi international school. H.E Mazroeis entrepreneurial initives
found matching synergy in the business acumen of Dr B R Shetty, to signal the
beginning of a strong relationship as a business mentor and trusted partner. His
ongoing quests towards creating successful business concepts and organizational
evolution have created a benchmark for professionals, who are in pursuit of
excellence across the globe. In his capacity as chairman of NMC Group H.E Mazroei
has always given vision and direction to the varied activities of the business group.
15
UAE EXCHANGE STANDS FOR

The customers-by delivering quality products and services which meets their diverse
money transfer and foreign exchange needs, and providing them the best experience
with our quality service and support systems.
The people-by treating them with dignity and respect, fostering an environment for
them to brow and develop on tyrannically and extrinsically, and to provide a reward
structure which motivates them to contribute optimally to the organization and
themselves.
The investors-by aggressively pursuing our financial goals and ensuring stable
growth in economic profit, and keeping all our organizational systems and processes
viable for contributing to increasing returns on investment.
The environment-by responsibly utilizing our resources and help protecting it for
future generation, and doing business fairly and with integrity in the best interests of
the marketplace.
The communities-by facilitating meaningful contributions of a financial and nonfinancial nature which would help address the problems and impediments, and being a
responsible neighbor, by contributing to the cultural and social integration of the
communities we serve.
CUSTOMER
TOUCH
POINTS
AVALIABLE
WITH
UAE
EXCHANGE
a.
SMS 6000 Etisalat and Du Mobiles
b.
Telephone 04 3535350
c.
Customer Suggestion form
d.
Fax- 043530200
e.
Email- customer.care@uaeexchange.com
f.
Website www.uaeexchange.com
g.
Social Medias like facebook, Linked In
16
CHAPTER- 3
REVIEW LITERATURE
17
REVIEW LITERATURE
1. owners of both companies benefit from the merger;
2. owners of the acquiring company lose, owners of the acquired company gain;
3. shareholders of both companies lose;
4. owners of the acquiring company gain and owners of the acquired company lose.
The declared aim of a merger is to make all participating parties benefit.
the target's shareholders lose, at the expense of the shareholders of the acquiring company. To avoid such situations, firms are required to obtain an opinion of an independent auditor on a merger plan. However, the possibility of deliberate efforts leading to a situation in which one of the companies lose, whilst the other gains cannot be
completely excluded. The situation in which 2 merging companies lose is not rational economically, and can only occur as a consequence of the transaction, whereas ex
ante benefits from the merger were expected. The aim of this study is to determine
whether in the case of transactions that took place in Poland shareholders of merging
companies gained from those transactions.
first decade of the XXI century.
The theoretical aspects of the determination of the relevant share exchange ratio. The
model approach of determining the share exchange ratio was developed by Larson
and Gonedes (1969) and Yagil (1987). The starting point of the Larson-Gonedes
model is to determine the minimum and maximum share exchange ratios, which are
18

acceptable to the shareholders of the acquiring and target companies, which can be
defined as the product of the price/earnings ratio and earnings per share of companies:
1)
owners of both companies benefit from the merger;
2)
owners of the acquiring company lose, owners of the acquired company gain;
3)
shareholders of both companies lose;
4)
owners of the acquiring company gain and owners of the acquired company
lose. The declared aim of a merger is to make all participating parties benefit.
the target's shareholders lose, at the expense of the shareholders of the acquiring company. To avoid such situations, firms are required to obtain an opinion of an independent auditor on a merger plan. However, the possibility of deliberate efforts leading to a situation in which one of the companies lose, whilst the other gains cannot be
completely excluded. The situation in which 2 merging companies lose is not rational economically, and can only occur as a consequence of the transaction, whereas ex
ante benefits from the merger were expected. The aim of this study is to determine
whether in the case of transactions that took place in Poland shareholders of merging
companies gained from those transactions.
first decade of the XXI century.
The theoretical aspects of the determination of the relevant share exchange ratio.
Themodel approach of determining the share exchange ratio was developed by Larson
and Gonedes (1969) and Yagil (1987). The starting point of the Larson-Gonedes
model is to determine the minimum and maximum share exchange ratios, which are
19

acceptable to the shareholders of the acquiring and target companies, which can be
defined as the product of the price/earnings ratio and earnings per share of companies:
where P1, P2 prices, respectively, of the acquiring company 1 and the target company 2; PE1, PE2 price/earnings ratios for companies 1 and 2; EPS1, EPS2 earnings per share for companies 1 and 2.
Thus, the share prices are defined as the value of price/earnings ratio multiplied by the
value of earnings per share. The authors assume that the price/earnings ratio
takesinto account investors' expectations as to the future growthofprofit of the company. Under this assumption, the current decline in income may result in only a slight
decrease in the share price if investors believe that future profits of the company will
grow significantly. This situation increases the price/earnings ratio. The expected
price of the shares after the merger depends on the expected value of the price/earnings ratio after the merger, the combined profits of 2 companies and the number of
shares, which is the number of shares of the acquiring company and the shares issued
in exchange for shares of the target company, the number of which is equal to the
number of target's shares, multiplied by the exchange ratio:
where P12 expected price of the shares after the merger; PE12 expected value of
price/earnings ratio after the merger; E1 profit of the acquiring company; E2 profit of the acquired company; S1 the number of shares of the acquiring company; S2
the number of shares of the acquired company; ER the share exchange ratio.
From the shareholders' point of view it is important that the merger does not reduce
the wealth of shareholders, but rather increases it. For the shareholders of the
acquiring company, this condition can be written as:
20

Substituting dependencies on the value of shares and the expected value of the
coefficient of price/earnings ratio to the condition that ensures that the shareholders of
the acquiring company at least do not lose, the equation can be obtained: which after
transformation gives the maximum value of the share exchange ratio, which does not
result in the loss of wealth by the shareholders of the acquiring company as a result
of business combination
Literature review:
Empirical results of the share exchange ratio determination model for mature stock
markets. The presented Larson-Gonedes (1969) model was highly acclaimed, both
theoretically (Lev, 1970; Gonedes and Larson, 1971) and empirically (Conn and
Nielsen, 1977; Conn, 1980; Cooke et al., 1994; Bae and Sakthivel, 2000). The
Larson-Gonedes theoretical model was used for empirical studies by Conn and
Nielsen (1977). Conn and Nielsen conducted the study on the sample of 131 mergers
in 19601969 for the companies listed at New York Stock Exchange or American
Stock Exchange. The companies in the sample were listed at the stock exchange at
least one year prior to the merger, to find the mutual relation between values of
companies before the period when the valuation was influenced by information on the
merger. As the expected price of the new entity P12 was taken the price of the
acquiring company for the periods: the merger announcement period, the merger
completion moment and a month after the merger.
Grewal S.S and Navjot Grewall (1984) revealed some basic investment
rules and rules for selling shares. They warned the investors not to buy
unlisted shares, as Stock Exchanges do not permit trading in unlisted shares.
Another rule that they specify is not to buy inactive shares, ie, shares in
which transactions take place rarely. The main reason why shares are
inactive is because there are no buyers for them. They are mostly shares of
companies, which are not doing well.
A third rule according to them is not to buy shares in closely-held
companies because these shares tend to be less active than those of widely
held ones since they have a fewer number of shareholders. They caution not
to hold the shares for a long period, expecting a high price, but to sell
whenever one earns a reasonable reward.
21
Jack Clark Francis2 (1986) revealed the importance of the rate of return in
investments and reviewed the possibility of default and bankruptcy risk. He
opined that in an uncertain world, investors cannot predict exactly what rate
of return an investment will yield. However he suggested that the investors
can formulate a probability distribution of the possible rates of return.
He also opined that an investor who purchases corporate securities must

face the possibility of default and bankruptcy by the issuer. Financial
analysts can foresee bankruptcy. He disclosed some easily observable
warnings of a firm's failure, which could be noticed by the investors to avoid
such a risk.
Preethi Singh3(1986) disclosed the basic rules for selecting the company to
invest in. She opined that understanding and measuring return md risk is
fundamental to the investment process. According to her, most investors are
'risk averse'. To have a higher return the investor has to face greater risks.
She concludes that risk is fundamental to the process of investment. Every
investor should have an understanding of the various pitfalls of investments.
The investor should carefully analyse the financial statements with special
reference to solvency, profitability, EPS, and efficiency of the company.
David.L.Scott and William Edward4 (1990) reviewed the important risks of
owning common stocks and the ways to minimise these risks. They
commented that the severity of financial risk depends on how heavily a
business relies on debt. Financial risk is relatively easy to minimise if an
investor sticks to the common stocks of companies that employ small
amounts of debt. They suggested that a relatively easy way to ensure some
degree of liquidity is to restrict investment in stocks having a history of
adequate trading volume. Investors concerned about business risk can
reduce it by selecting common stocks of firms that are diversified in several
unrelated industries.
Lewis Mandells (1992) reviewed the nature of market risk, which according
to him is very much 'global'. He revealed that certain risks that are so global
22
that they affect the entire investment market. Even the stocks and bonds of
the well-managed companies face market risk. He concluded that market
risk is influenced by factors that cannot be predicted accurately like
economic conditions, political events, mass psychological factors, etc.
Market risk is the systemic risk that affects all securities simultaneously and
it cannot be reduced through diversification.
Nabhi Kumar Jain6 (1992) specified certain tips for buying shares for
holding and also for selling shares. He advised the investors to buy shares of
a growing company of a growing industry. Buy shares by diversifying in a
number of growth companies operating in a different but equally fast
growing sector of the economy. He suggested selling the shares the moment
company has or almost reached the peak of its growth. Also, sell the shares
the moment you realise you have made a mistake in the initial selection of
the shares. The only option to decide when to buy and sell high priced
shares is to identify the individual merit or demerit of each of the shares in
the portfolio and arrive at a decision.
Carter Randal7 (1992) offered to investors the underlying principles of
winning on the stock market. He emphasised on long term vision and a plan
to reach the goals. He advised the investors that to be successful, they
should never be pessimists. He revealed that though there has been a major
economic crisis almost every year, it remains true that patient investors have
consistently made money in the equities market. He concluded that investing
in the stock market should be an un-emotional endeavour and suggested that
investors should own a stock if they believe it would perform well.
L.C.Gupta8 (1992) revealed the findings of his study that there is existence
of wild speculation in the Indian stock market. The over speculative
character of the Indian stock market is reflected in extremely high
concentration of the market activity in a handful of shares to the neglect of
the remaining shares and absolutely high trading velocities of the
23
speculative counters. He opined that, short- term speculation, if excessive,

could lead to "artificial price". An artificial price is one which is not justified
by prospective earnings, dividends, financial strength and assets or which is
brought about by speculators through rumours, manipulations, etc. He
concluded that such artificial prices are bound to crash sometime or other as
history has repeated and proved.
Yasaswy N.J.9 (1993) disclosed how 'turnaround stocks' offer big profits to
bold investors and also the risks involved in investing in such stocks.
Turnaround stocks are stocks with extraordinary potential and are relatively
under priced at a given point of time. He also revealed that when the
economy is in recession and the fundamentals are weak, the stock market,
being a barometer of the economy, also tends to be depressed. A depressed
stock market is an ideal hunting ground for 'bargain hunters', who are
aggressive investors. Sooner or later recovery takes place which may take a
very long time. He concluded that the investors' watch work is 'caution' as
he may lose if the turnaround strategy does not work out as anticipated.
Sunil Damodar'o (1993) evaluated the 'Derivatives' especially the 'futures' as
a tool for short-term risk control. He opined that derivatives have become an
indispensable tool for finance managers whose prime objective is to manage
or reduce the risk inherent in their portfolios. He disclosed that the overriding feature of 'financial futures' in risk management is that these
instruments tend to be most valuable when risk control is needed for a shortterm, ie, for a year or less. They tend to be cheapest and easily available for
protecting against or benefiting from short term price. Their low execution
costs also make them very suitable for frequent and short term trading to
manage risk, more effectively.
Yasaswy J.N." (1993) evaluated the quantum of risks involved in different
types of stocks. Defensive stocks are low risk stocks and hence the returns
are relatively low but steady. Cyclical stocks involve higher risks and hence
the rewards are higher when compared to the growth stocks. Growth stocks
24
belong to the medium risk category and they offer medium returns which
are much better. than defensive stocks, but less than the cyclical stocks. The
market price of growth stocks does fluctuate, sometimes even violently
during short periods of boom and bust. He emphasised the financial and
organisational strength of growth stocks, which recover soon, though they
may hit bad patches once in a way.
Donald E Fischer and Ronald J. Jordan12 (1994) analysed the relation
between risk, investor preferences and investor behaviour. The risk return
measures on portfolios are the main determinants of an investor's attitude
towards them. Most investors seek more return for additional risk assumed.
The conservative investor requires large increase in return for assuming
small increases in risk. The more aggressive investor will accept smaller
increases in return for large increases in risk. They concluded that the
psychology of the stock market is based on how investors form judgements
about uncertain future events and how they react to these judgements.
R.Venkataramani.l"l994) disclosed the uses and dangers of derivatives. The
derivative products can lead us to a dangerous position if its full implications
are not clearly understood. Being off balance shekt in nature, more and more
derivative products are traded than the cash market products and they suffer
heavily due to their sensitive nature. He brought to the notice of the
investors the 'Over the counter product' (OTC) which are traded across the
counters of a bank. OTC products (eg. Options and futures) are tailor made
for the particular need of a customer and serve as a perfect hedge. He
emphasised the use of futures as an instrument of hedge, for it is of low cost.
K.Sivakumar. '"1994) disclosed new parameters that will help investors
identify the best company to invest in. He opined that Economic Value
Added (EVA) is more powerful than other conventional tools for investment
decision making like EPS and price earning ratio. EVA looks at how capital
raised by the company from all sources has been put to use. Higher the
EVA, higher the returns to the shareholder. A company with a higher EVA
25
is likely to show a higher increase in the market price of its shares. To be

effective in comparing companies, he suggested that EVA per share
(EVAPS) must be calculated. It indicates the super profit per share that is
available to the investor. The higher the EVAPS, the higher is the likely
appreciation in the value in future. He also revealed a startling result of
EVA calculation of companies in which 200 companies show a negative
value addition that includes some blue chip companies in the Indian Stock
Market.
Pattabhi Ram.V.15 (1995) emphasised the need for doing fundamental
analysis'and doing Equity Research (ER) before selecting shares for
investment. He opined that the investor should look for value with a margin
of safety in relation to price. The margin of safety is the gap between price
and value. He revealed that the Indian stock market is an inefficient market
because of the absence of good communication network, rampant price
rigging, the absence of free and instantaneous flow of information,
professional broking and so on. He concluded that in such inefficient
market, equity research will produce better results as there will be frequent
mismatch between price and value that provides opportunities to the longterm value oriented investor. He added that in the Indian stock market
investment returns would improve only through quality equity research.
Philippe Jhorion and Sarkis Joseph Khouryl6 (1996) reviewed international
factors of risks and their effect on financial markets. He opined that
domestic investment is a subset of the global asset allocation decision and
that it is impossible to evaluate the risk of domestic securities without
reference to international factors. Investors
26
CHAPTER- 4
TECHNICAL ANALYSIS
27
A CONCEPTUAL OVERVIEW
TECHNICAL ANALYSIS:
Technical analysis can be conditionally divided into some main parts such as:
Types of charts
Graphical methods
Analytical methods
Technical indicators
Technical analysis is concerned with predicting future price trends from historical
price and volume data. The underlying axiom of technical analysis is that all
fundamentals (including expectations) are factored into the market and are reflected in
exchange rates.
A technical analysis is based on three axioms:
Movement of the market considers everything
Movement of prices is purposeful
History repeats itself
SUPPORT AND RESISTANCE

Support is a level at which bulls (i.e., buyers) take control over the prices and prevent
them from falling lower.
28

Resistance, on the other hand, is the point at which sellers (bears) take control of
prices and prevent them from rising higher. The price at which a trade takes place is
the price at which a bull and bear agree to do business. It represents the consensus of
their expectations.
Support levels indicate the price where the most of investors believe that prices will
move higher. Resistance levels indicate the price at which the most of investors feel
prices will move lower.
Role Reversal
When a resistance level is successfully broken through, that level becomes a support
level. Similarly, when a support level is successfully broken through, that level
becomes a resistance level.
29

DOW THEORY TRENDS:
The ideas of Charles Dow, the first editor of the Wall Street Journal, form the basis of
technical analysis. The Dow theory is a method of interpreting and signaling changes
in the stock market direction based on the monitoring of the Dow Jones Industrial and
Transportation Averages. Dow created the Industrial Average, of top blue chip stocks,
and a second average of top railroad stocks (now the Transport Average). He believed
that the behavior of the averages reflected the hopes and fears of the entire
market. The behavior patterns that he observed apply to markets throughout the
world.
Three Movements
Markets fluctuate in more than one time frame at the same time:
Nothing is more certain than that the market has three well defined movements which
fit into each other.
The first is the daily variation due to local causes and the balance of buying
and selling at that particular time.
The secondary movement covers a period ranging from ten days to sixty days,
averaging probably between thirty and forty days.
The third move is the great swing covering from four to six years.
Bull markets are broad upward movements of the market that may last several
years, interrupted by secondary reactions. Bear markets are long declines
interrupted by secondary rallies. These movements are referred to as the
primary trend.
30
Secondary movements normally retrace from one third to two thirds of the
primary trend since the previous secondary movement.
Daily fluctuations are important for short-term trading, but are unimportant in
analysis of broad market movements.
Various cycles have subsequently been identified within these broad categories.
Primary Movements have Three Phases
The general conditions in the market:
Bull markets
Bull markets commence with reviving confidence as business conditions improve.
Prices rise as the market responds to improved earnings
Rampant speculation dominates the market and price advances are based on hopes
and expectations rather than actual results.

Bear markets
Bear markets start with abandonment of the hopes and expectations that
sustained inflated prices.
Prices decline in response to disappointing earnings.
Distress selling follows as speculators attempt to close out their positions and
securities are sold without regard to their true value.
Ranging Markets
A secondary reaction may take the form of a line which may endure for several
weeks. Price fluctuates within a narrow range of about five per cent.
31
Breakouts from a range can occur in either direction.
Advances above the upper limit of the line signal accumulation and higher
prices;
Declines below the lower limit indicate distribution and lower prices;
Volume is used to confirm price breakouts.
Trends
Bull Trends
A bull trend is identified by a series of rallies where each rally exceeds the highest
point of the previous rally. The decline, between rallies, ends above the lowest point
of the previous decline.
Successive higher highs and higher lows.
The start of an up trend is signaled when price makes a higher low (trough), followed
by a rally above the previous high (peak):
32

Start = higher Low + break above previous High.
The end is signaled by a lower high (peak), followed by a decline below the previous
low (trough):
End = lower High + break below previous Low.
A bear trend starts at the end of a bull trend: when a rally ends with a lower peak and
then retreats below the previous low. The end of a bear trend is identical to the start of
a bull trend.
Large Corrections
A large correction occurs when price falls below the previous low (during a bull
trend) or where price rises above the previous high (in a bear trend).
A bull trend starts when price rallies above the previous high,
A bull trend ends when price declines below the previous low,
A bear trend starts at the end of a bull trend (and vice versa).
33
ELLIOT WAVES THEORY BASICS

TRENDLINES
Breaking through support or resistance levels results in a change of traders

expectations (which causes supply/demand lines to shift).
An Uptrend is defined by successively higher low-prices. A rising trend can be
thought of as a rising support level: the bulls are in control and are pushing prices
higher. A Downtrend is defined by successively lower high-prices. A falling trend can
be thought of as a falling resistance level: the bears are in control and are pushing
prices lower.
34

MOVING AVERAGES
Moving averages are one of the oldest and most popular technical analysis tools. A
moving average is the average price of a financial instrument over a given time.
The moving average represents the consensus of investors expectations over the
indicated period of time.
The classic interpretation of a moving average is to use it in observing changes in

prices. Investors typically buy when the price of an instrument rises above its moving
average and sell when the it falls below its moving average.
TECHNICAL INDICATORS
There is a vast number of elaborated technical indicators:
MOVING AVERAGE MA
RELATIVE STRENGTH INDEX RSI :The Relative Strength Index Technical

Indicator (RSI) is a price-following oscillator that ranges between 0 and 100. When
Wilder introduced the Relative Strength Index, he recommended using a 14-day
RSI.. Since then, the 9-day and 25-day Relative Strength Index indicators have also
gained popularity.
35
ADVANCE/DECLINE LINE: The advance/decline line shows, for some period,

the cumulative difference between advancing and declining issues.
CLOSING TICK: Closing tick is the difference between the number of shares that
closed on an uptick and those that closed on a downtick.
CLOSING ARMS: Closing arms or trin (trading index) is the ratio of average
trading volume in declining issues to average trading volume in advancing issues.
Z-BLOCK TRADES: zBlock trades are trades in excess of 10,000 shares.
HI-LO-CLOSE CHART: A hi-lo-close chart is a bar chart showing, for each day,
the high price, low price, and closing price.
CANDLESTICK CHART: A candlestick chart is an extended version of the hi-loclose chart. It plots the high, low, open, and closing prices, and also shows whether
the closing price was above or below the opening price.
POINT AND FIGURE CHARTS: Point-and-figure charts are a way of showing only
major price moves and their direction. A major up move is marked with an X,
while a major down move is marked with an O. A new column starts every time
there is a change in direction
HEAD AND SHOULDERS FORMATION: Once a chart is drawn, analysts

examine it for various formations or pattern types in an attempt to predict stock
price or market direction in the case of head-and-shoulders formation. When the
stock price pierces the neckline after the right shoulder is finished, its time to
sell.
ODD-LOT: The odd-lot indicator looks at whether odd-lot purchases are up or

down.
HEMLINE: Followers of the hemline indicator claim that hemlines tend
to rise in good times.
SUPER BOWL: The Super Bowl indicator forecasts the direction of the market
based on whether the National Football Conference or the American Football
Conference wins. A win by the National Football Conference is bullish.
BETA: Beta is a risk measure comparing the volatility of a stock's price movement
to the general market.
MOMENTUM: Momentum measures the speed of price change and provides a

leading indicator of changes in trend.
UPSIDE/DOWNSIDE: Measures of Upside/Downside separate the volumes for

rising markets from those in falling markets. Since volume is independent of price,
it makes a valuable tool for measuring the quality of a price trend.
36
CHAPTER- 5
FUNDAMENTAL ANALYSIS
A CONCEPTUAL OVERVIEW
37

Fundamental analysis refers to the study of the core underlying elements that
influence the economy of a particular entity. It is a method of study that attempts to
predict price action and market trends by analyzing economic indicators, government
policy and societal factors (to name just a few elements) within a business cycle
framework.
I. ECONOMIC ANALYSIS:
POLITICO-ECONOMIC ANALYSIS:
No industry or company can exist in isolation. It may have splendid managers and a
tremendous product. However, its sales and its costs are affected by factors, some of
which are beyond its control - the world economy, price inflation, taxes and a host of
others. It is important, therefore, to have an appreciation of the politico-economic
factors that affect an industry and a company.
The political equation

A stable political environment is necessary for steady, balanced growth. If a country
is ruled by a stable government which takes decisions for the long-term development
of the country, industry and companies will prosper.
Foreign Exchange Reserves

A country needs foreign exchange reserves to meet its commitments, pay for its
imports and service foreign debts.
Foreign Exchange Risk

This is a real risk and one must be cognizant of the effect of a revaluation or
devaluation of the currency either in the home country or in the country the company
deals in.
Restrictive Practices
Restrictive practices or cartels imposed by countries can affect companies and
industries.
crystallizing the exposure.
38

Foreign Debt and the Balance of Trade
Foreign debt, especially if it is very large, can be a tremendous burden on an economy.
India pays around $ 5 billion a year in principal repayments and interest payments.
Inflation
Inflation has an enormous effect in the economy. Within the country it erodes
purchasing power. As a consequence, demand falls. If the rate of inflation in the
country from which a company imports is high then the cost of production in that
country will automatically go up.
The Threat of Nationalization

The threat of nationalization is a real threat in many countries the fear that a
company may become nationalized.
Interest Rates
A low interest rate stimulates investment and industry. Conversely, high interest rates
result in higher cost of production and lower consumption.
Taxation
The level of taxation in a country has a direct effect on the economy. If tax rates are
low, people have more disposable income.
Government Policy
Government policy has a direct impact on the economy. A government that is
perceived to be pro industry will attract investment.
THE ECONOMIC CYCLE:

It affects investment decisions, employment, demand and the profitability of
companies.
The four stages of an economic cycle are:
Depression
Recovery
Boom
Recession
39

Depression
At the time of depression, demand is low and falling. Inflation is high and so are
interest rates. Companies, crippled by high borrowing and falling sales, are forced to
curtail production, close down plants built at times of higher demand, and let workers
go.
Recovery
During this phase, the economy begins to recover. Investment begins anew and the
demand grows. Companies begin to post profits. Conspicuous spending begins once
again.
Boom
In the boom phase, demand reaches an all time high. Investment is also high. Interest
rates are low. Gradually as time goes on, supply begins to exceed the demand. Prices
that had been rising begin to stabilize and even fall. There is an increase in demand.
Then as the boom period matures prices begin to rise again.
Recession
The economy slowly begins to downturn. Demand starts falling.. Interest rates and
inflation are high. Companies start finding it difficult to sell their goods. The
economy slowly begins to downturn.
II. INDUSTRY ANALYSIS

The importance of industry analysis is now dawning on the Indian investor as never
before.
40
Cycle
The first step in industry is to determine the cycle it is in, or the stage of maturity of
the industry. All industries evolve through the following stages:
1. Entrepreneurial, sunrise or nascent stage
2. Expansion or growth stage
3. Stabilization, stagnation or maturity stage, and
4. Decline or sunset stage to properly establish itself. In the early days, it may actually
make losses.
The Entrepreneurial or Nascent Stage

At the first stage, the industry is new and it can take some time for it to properly
establish itself.
The Expansion or Growth Stage

Once the industry has established itself it enters a growth stage. As the industry grows,
many new companies enter the industry.
The Stabilization or Maturity Stage

After the halcyon days of growth, an industry matures and stabilizes. Rewards are low
and so too is the risk. Growth is moderate. Though sales may increase, they do so at a
slower rate than before. Products are more standardized and less innovative and there
are several competitors.
41

The Decline or Sunset Stage
Finally, the industry declines. This occurs when its products are no longer popular.
This may be on account of several factors such as a change in social habits The film
and video industries.
1. BARRIER TO ENTRY
New entrants increase the capacity in an industry and the inflow of funds. The
question that arises is how easy is it to enter an industry ?
There are some barriers to entry:
a) Economies of scale
b) Product differentiation
c) Capital requirement
d) Switching costs
e) Access to distribution channels
f) Cost disadvantages independent of scale
g) Government policy
h) Expected retaliation
j) International cartels
2. THE THREAT OF SUBSTITUTION

New inventions are always taking place and new and better products replace existing
ones. An industry that can be replaced by substitutes or is threatened by substitutes is
normally an industry one must be careful of investing in. An industry where this
occurs constantly is the packaging industry -bottles replaced by cans, cans replaced by
plastic bottles, and the like. To ward off the threat of substitution, companies often
have to spend large sums of money in advertising and promotion.
3. BARGAINING POWER OF THE BUYERS

In an industry where buyers have control, i.e. in a buyer's market, buyers are
constantly forcing prices down, demanding better services or higher quality and this
often erodes profitability. The factors one should check are whether:
a) A particular buyer buys most of the products (large purchase volumes). If such
buyers withdraw their patronage, they can destroy an industry. They can also force
prices down.
42

b) Buyers can play one company against another to bring prices down.
4. BARGAINING POWER FOR THE SUPPLIERS

An industry unduly controlled by its suppliers is also under threat. This occurs when:
a) The suppliers have a monopoly, or if there are few suppliers.
b) Suppliers control an essential.
c) Demand for the product exceeds.
d) The supplier supplies to various industries.
e) The switching costs are high.
f) The supplier's product does not have a substitute.
g) The supplier's product is an important input for the buyer's.
h) The buyer is not important to the supplier.
i) The supplier's product is unique.
5. RIVALRY AMONG COMPETITORS

Rivalry among competitors can cause an industry great harm. This occurs mainly by
price cuts, heavy advertising, additional high cost services or offers, and the like. This
rivalry occurs mainly when:
a) There are many competitors and supply exceeds demand. Companies resort to price
cuts and advertise heavily in order to attract customers for their goods.
b) The industry growth is slow and companies are competing with each other for a
greater market share.
c) The economy is in a recession and companies cut the price of their products and
offer better service to stimulate demand.
d) There is lack of differentiation between the product of one company and that of
another. In such cases, the buyer makes his choice on the basis of price or service.
e) In some industries economies of scale will necessitate large additions to existing
capacities in a company. The increase in production could result in over capacity &
price cutting.
f) Competitors may have very different strategies in selling their goods and in
competing they may be continuously trying to stay ahead
43

III. COMPANY ANALYSIS:
At the final stage of fundamental analysis, the investor analyzes the company. This
analysis has two thrusts:
How has the company performed vis--vis other similar companies and
How has the company performed in comparison to earlier years
It is imperative that one completes the politico economic analysis and the industry
analysis before a company is analyzed because the company's performance at a period
of time is to an extent a reflection of the economy, the political situation and the
industry. What does one look at when analyzing a company?
The different issues regarding a company that should be examined are:
The Management
The Company
The Annual Report
Ratios
Cash flow
THE MANAGEMENT:
The single most important factor one should consider when investing in a company
and one often never considered is its management.
In India management can be broadly
divided in two types:
Family Management
Professional Management
THE COMPANY:
An aspect not necessarily examined during an analysis of fundamentals is the
company. A company may have made losses consecutively for two years or more and
one may not wish to touch its shares - yet it may be a good company and worth
purchasing into. There are several factors one should look at.
1. How a company is perceived by its competitors?
One of the key factors to ascertain is how a company is perceived by its competitors.
It is held in high regard. Its management may be known for its maturity, vision,
competence and
aggressiveness. The investor must ascertain the reason and then
determine whether
44

the reason will continue into the foreseeable future.
2. Whether the company is the market leader in its products or in its segment
Another aspect that should be ascertained is whether the company is the market leader
in its products or in its segment. When you invest in market leaders, the risk is less.
The
shares of market leaders do not fall as quickly as those of other companies. There is a
magic to their name that would make individuals prefer to buy their products as
opposed to others.
3. Company Policies
The policy a company follows is also important. What is its plans for growth? What is
its vision? Every company has a life. If it is allowed to live a normal life it will grow
upto a point and then begin to level out and eventually die. It is at the point of leveling
out that it must be given new life. This can give it renewed vigour and a new lease of
life.
4. Labour Relations
Labour relations are extremely important. A company that has motivated, industrious
work force has high productivity and practically no disruption of work. On the other
hand, a company that has bad industrial relations will lose several hundred mandays
as a consequence of strikes and go slows.
5. Where the company is located and where its factories are?
One must also consider where the companies Plants and Factories are located..
THE ANNUAL REPORT:

The primary and most important source of information about a company is its Annual
Report. By law, this is prepared every year and distributed to the shareholders. Annual
Reports are usually very well presented. A tremendous amount of data is given about
the performance of a company over a period of time.
The Annual Report is broken down into the following specific parts:
A) The Director's Report,
B) The Auditor's Report,
C) The Financial Statements, and
D) The Schedules and Notes to the Accounts.
45

A. The Directors Report
The Directors Report is a report submitted by the directors of a company to its
shareholders, advising them of the performance of the company under their
stewardship.
1. It enunciates the opinion of the directors on the state of the economy and the
political situation vis--vis the company.
2. Explains the performance and the financial results of the company in the period
under review. This is an extremely important part. The results and operations of the
various separate divisions are usually detailed and investors can determine the reasons
for their good or bad performance.
3. The Directors Report details the company's plans for modernization, expansion
and diversification. Without these, a company will remain static and eventually
decline.
4. Discusses the profit earned in the period under review and the dividend.
Recommended by the directors. This paragraph should normally be read with some
skepticism, as the directors will always argue that the performance was satisfactory. If
adverse economic conditions are usually at fault.
5. Elaborates on the directors' views of the company's prospects in the future.
6. Discusses plans for new acquisition and investments.
An investor must
intelligently evaluate the issues raised in a Directors Report. Industry conditions and
the management's knowledge of the business must be considered.
B. The Auditor's Report

The auditor represents the shareholders and it is his duty to report to the shareholders
and the general public on the stewardship of the company by its directors. Auditors
are required to report whether the financial statements presented do, in fact, present a
true and fair view of the state of the company. Investors must remember that the
auditors are their representatives and that they are required by law to point out if the
financial statements are not true and fair..
C.Financial Statements
The published financial statements of a company in an Annual Report consist of its
Balance Sheet as at the end of the accounting period detailing the financing condition
46

of the company at that date, and the Profit and Loss Account or Income Statement
summarizing the activities of the company for the accounting period.
BALANCE SHEET
The Balance Sheet details the financial position of a company on a particular date; of
the company's assets (that which the company owns), and liabilities (that which the
company
owes), grouped logically under specific heads. It must however, be noted that the
Balance Sheet details the financial position on a particular day and that the position
can be materially different on the next day or the day after.
SOURCES OF FUNDS
SHAREHOLDERS FUNDS
SHARE CAPITAL
(i) Private Placement
(ii) Public Issue
iii) Rights issues
RESERVES
i) Capital Reserves
ii) Revenue Reserves
LOAN FUNDS
i) Secured loans:
ii) Unsecured loans
FIXED ASSETS
INVESTMENTS
STOCK OR INVENTORIES
i) Raw materials
ii) Work in progress
iii) Finished goods
47

CASH AND BANK BALANCES
LOANS AND ADVANCES
PROFIT AND LOSS ACCOUNT
The Profit and Loss account summarizes the activities of a company during an
accounting period which may be a month, a quarter, six months, a year or longer, and
the result achieved by the company. It details the income earned by the company, its
cost and the resulting profit or loss. It is, in effect, the performance appraisal not only
of the company but also of its management- its competence, foresight and ability to
lead.
RATIOS:
Ratios express mathematically the relationship between performance figures and/or
assets/liabilities in a form that can be easily understood and interpreted.
No single ratio tells the complete story
Ratios can be broken down into four broad categories:
(A) Profit and Loss Ratios

These show the relationship between two items or groups of items in a profit and loss
account or income statement. The more common of these ratios are:
1. Sales to cost of goods sold.
2. Selling expenses to sales.
3. Net profit to sales and
4. Gross profit to sales.
(B) Balance Sheet Ratios

These deal with the relationship in the balance sheet such as :
1. Shareholders equity to borrowed funds.
2. Current assets to current liabilities.
3. Liabilities to net worth.
4. Debt to assets and
5. Liabilities to assets.
48

(C) Balance Sheet and Profit and Loss Account Ratios.
These relate an item on the balance sheet to another in the profit and loss account such
as:
1. Earnings to shareholder's funds.
2. Net income to assets employed.
3. Sales to stock.
4. Sales to debtors and
5. Cost of goods sold to creditors.
(D) Financial Statements and Market Ratios

These are normally known as market ratios and are arrived at by relative financial
figures to market prices:
1. Market value to earnings and
2. Book value to market value.
(a) Market value
(b) Earnings
(c) Profitability
(d) Liquidity
(e) Leverage
(f) Debt Service Capacity
(g) Asset Management/Efficiency
(h) Margins.
The major ratios that are considered:

(i) Market value
(ii) Price- earnings ratio
(iii) Market-to-book ratio
(iv) Earnings
(v) Earning per share
(vi) Dividend per share
(vii) Dividend payout ratio
(viii) Leverage ratios
(ix) Return on investments/total assets
49

CASH FLOW:
A statement of sources and uses begins with the profit for the year to which are added
the increases in liability accounts (sources) and from which are reduced the increases
in
asset accounts (uses). The net result shows whether there has been an excess or deficit
of funds and how this was financed. Investors must examine a company's cash flow as
it reveals exactly where the money came from how it was utilized. Investors must be
concerned if a company is financing either its inventories or paying dividends from
borrowings without real growth as that shows deterioration.
50
CHAPTER-6
DATA ANALYSIS AND
INTERPRETATIONS
51
FUNDAMENTAL ANALYSIS OF STOCKS

Basically fundamental analysis is covered in 3 parts :
1. Market/ economy analysis
2. Industry Analysis
3. Company Analysis
UAE EXCHANGE
The Indian banking industry: sector overview
With the economic growth picking up pace and the investment cycle on the way to
recovery, the banking sector has witnessed a transformation in its vital role of
intermediating between the demand and supply of funds
Public sector banks have been very proactive in their restructuring initiatives be it in
technology implementation or pruning their loss assets. Windfall treasury gains made
in the falling interest rate regime were used for writing off the doubtful and loss
assets.
Retail lending (especially mortgage financing) formed a significant portion of the
portfolio for most banks and they customized their products to cater to the diverse
demands.
Apart from streamlining their processes through technology initiatives such as ATMs,
telephone banking, online banking and web based products, banks also resorted to
cross selling of financial products such as credit cards, mutual funds and insurance
policies to augment their fee based income.
52

PORTERS FIVE FORCES MODEL FOR THE BANKING INDUSTRY
1) BARRIERS TO ENTRY:
a. Economies of scale: Since the existing players in the market are well
established and already have a customer base, they are able to bear the cost
of using the advantages of technology to their maximum advantage.
b. Capital requirement for entry:
i. The Banking Regulation Act prescribes the minimum capital requirements for
a bank Moreover, banks have to maintain a capital adequacy ratio of 9%
under the Basel I norms.
ii. Government has declared that the foreign banks will be permitted to establish
their presence in India by way of setting up a wholly owned banking
subsidiary (WOS) with a minimum capital of Rs.300 crore.
c. Access to distribution channels: Since banks have to set up their own
distribution channels, all the cost has to be directly born by them.
d. Cost advantage independent of size: Existing banks have huge databases of
customers which they use when they want to sell a new product launched by
them.
e. Legislation or Government action: Banks are governed by Banking
Regulation Act, 1949 which specifies the rules and regulations applicable to
banks. RBI is the governing body of banks in India.
2) BARGAINING POWER OF BUYERS:

Due to increased competition, the services offered by banks to customers have
improved considerably.
3) BARGAINING POWER OF THE SUPPLIERS:
Suppliers to banks can be both - the customers and RBI.

a. Customers of banks provide money to banks in the form of deposits
and in return earn some interest on that.
b. RBI acts as a supplier to banks by selling govt. securities, treasury
bills, govt. bonds, etc.
53

c. Call money market: Banks sometimes have to borrow from other banks
to meet CRR and SLR requirements, or other capital requirements as
provided by RBI.
4) THREAT OF SUBSTITUTES:
a. Product-for-product substitution:
i.
Banks provide interest on deposits made by people. Similar services

are offered by post offices which may act as substitutes to the
deposit schemes of banks.
ii. Some banks offer locker services to customers for yearly rates.
Similar services are provided by many post offices.
b. Generic substitution: People who deposit their savings in banks can
invest their money in other sources like mutual funds, shares and other
securities and life insurance schemes.
5) COMPETITIVE RIVALRY:
a. Extent of competitor balance:

b. Market growth rates:.
c. High Exit Barriers
PEST Analysis for Banking Industry.
1. Political factors-: The major factors affecting the banking sector are the
following.
Banking sector reforms As per the RBI roadmap for reforms in the first
stage from 2005 to 2009 foreign banks will be allowed to set up wholly owned
subsidiaries as well as get greater freedom to set up new branches.
Fulfilling the minimum priority sector credit -The government mandation of
fulfilling the minimum priority sector credit (of which 18 per cent is food
credit) has forced the domestic banks to cater to this segment despite the low
profitability and vulnerability of asset quality.
Banks have also been allowed to set up Offshore Banking Units in SEZs
54
2. Economic factors-:
Basell II norms for the risk management in banking sector - The new Basel
Accord has its foundation on three mutually reinforcing pillars. The first pillar
is compatible with the credit risk, market risk and operational risk. The second
pillar gives the bank responsibility to exercise the best ways to manage the
risk specific to that bank.
Concurrently, it also casts responsibility on the supervisors to review and
validate banks risk measurement models. .
Consolidation and merger and acquisitions in the banking sector-. HDFC

bank also acquired TIMES BANK in 2001 which increased its customer base
by 3 lakh customers.
Universal Banking has been introduced. ICICI Bank ,HDFCs closest

competitor is already into Universal Banking so HDFC is also getting into it
as now it is providing retail banking and also depository facilities in the form
of demat account.
3. Social factorsBig and growing middle class in India -: This has been a major factor in the
growth of the retail loans like consumer loans in the form of home loans, car
loans, education loans, auto loans etc. Retail loans have grown from 19% in
FY99 to 51% FY06.Consumer credit accounts for a meager 28.6 per cent of
the country's GDP and the buoyancy in the economy offers sufficient scope for
it to grow.
Geographical and Cultural diversity- This is leading to a greater demand for
financial products and customization by the customers.
4. Technical factorsThe Indian Financial Network (INFINET) was inaugurated in June 1999. It is
based on satellite communication using VSAT technology and would enable
faster connectivity within the financial sector.
55
Banks (All): No of players = 40
Sector statistics:
We see the sector aggregates and make a financial comparison for the major banks
Top Players
FY2014
Based on Total Income
Based on OPBDT
Total
Income
Change
OPBDT Change
(Rs Mn)
(%)
(Rs Mn) (%)
ICICI BANK
63161.9
54.50
ICICI BANK
37174
19.36
PNB
29218
14.91
PNB
22205.2
39.36
16882.5
19.53
76352.8
-1.29
14324
27.48
WESTER UNION
WESTER UNION
MONEY
MONEY
TRANSFER
27709.5
23.78
BANK OF
INDIA
BANK OF
23317
25.43
UAE
EXCAHNGE
TRANSFER
INDIA
UAE
18550.8
60.24
EXCHANGE
% change - indicates the change between current and corresponding quarter.
56
TOP FOREIGN REGIONAL BANKS COMPANIES BY MARKET CAP

Company
Symbol Price Change Market Cap P/E
Banco Bilbao Vizcaya Argentaria BBV
22.40 0.09% 75.96B
14.83
Lloyds TSB Group plc
LYG
39.59 0.13% 55.45B
21.52
ABN AMRO Holding NV
ABN
27.72 1.65% 52.45B
12.89
SanPaolo IMI SpA
IMI
40.95 2.38% 32.40B
N/A
Banco Bradesco S.A.
BBD
31.22 1.51% 30.50B
10.10
Vs
UAE Excahnge
UAE
55.58 0.79% 5.83B
30.04
Indu
UAE
Exch
ange
Quarterly
Aggregates
No: of Players - 29
Previous Quarter
Latest Quarter
Total Income (Rs Mn)
317927
305290
OPBDT (Rs Mn)
74296.8
81622.6
PAT (Rs Mn)
30481.7
32705.4
Equity Capital (Rs Mn)
126435
77730.1
stry Leaders
Statistic
Industry Leader UAE
UAEBank
Market Capitalization
BBV 75.96B
5.83B
13 / 24
P/E Ratio (ttm)
BMA 84.36
30.04
2 / 24
PEG Ratio (ttm, 5 yr expected) BCA 3.22
0.64
16 / 24
Revenue Growth (Qtrly YoY) BFR
29.70%
45.60% 4 / 24
EPS Growth (Qtrly YoY)
154.00% 33.90% 6 / 24
IRE
Long-Term Growth Rate (5 yr) KB
44.5%
30.0% 2 / 24
Return on Equity (ttm)
91.21%
N/A
BFR
Long-Term Debt/Equity (mrq)

Dividend Yield (annual)
N/A
N/A
LYG 6.20%
0.70% 18 / 24
57

Company Analysis :
1.
UAE Exchange (UAE)
Key Highlights
Symbol: UAE
Sector: Financial
Industry: Foreign Regional Banks
Market Cap: 43882 Cr
Data Since: 2014-01-02
Last close: 2710
Full time employees: 10030
UAE Exchange is a remittance and currency exchange company

headquartered in the United Arab Emirates with operations in a number
of countries. .
UAE EXCHANGE is a leading global remittance and
foreign exchange brand trusted by millions of customers and partners,

across the world. A peoples brand, UAE EXCHANGE is known for
quality and customer centric approach. Started over 30 years ago, UAE
EXCHANGE provides world class services and earned trust of over 3.5
million customers, worldwide. With 570 + direct offices in 30 countries
across five continents makes the company the only brand in the segment
to own a global network of this magnitude. It is the largest remittance
companies and has extensive network in the Middle East and Asia.
HISTORY
A prominent link in the prestigious conglomerate NMC Group, UAE
Exchange stands on three values Knowledge, Integrity, Commitment.
The brand is driven by People, Product and Process, which are in tandem
with the vision set by its founders, guiding it in its pursuit for
excellence. And, in the process, delivering more value to its esteemed
customers worldwide.
1999 UAE Exchange became fully operational with its branch at MG
Road, Bangalore and the first Xpress Money payment given out on 1
September 1999 at P T Usha branch Kochi.
58

2000 UAE Exchange started Money Exchange, later renamed as
Foreign Exchange, as per specific licenses received from the apex bank
of the country, The Reserve Bank of India.
2001 UAE Exchange added one more service Travel and Ticketing
services. The company is an IATA accredited passenger sales agent and
also an active member of TAAI. UAE Exchange has 7 IATA locations in
India. The company also opened the 50th branch in Surat, Gujarat.
2002 a separate wing for Agency Business was formed. UAE
Exchange also included another service, Insurance, in 2003 partnering
with LIC and United India Assurance company.
2004 the company opened the 100th branch in Mattannur Kerala. In
2005 UAE Exchange also started Tours along with Travel services.
2006 UAE Exchange opened its 200th branch at Mangalore.
2006 was a landmark year in the history of Indian operations of UAE
Exchange. The RBI elevated the company to Authorized Dealer II
category, thus becoming the first FFMC in Indian history to get the
status.
2008 UAE Exchange entered into the realm of another service Gold
Loan and provides EMI repayment option for customers.
2009 the company received the license under payment and settlement
acts from RBI to operate a debit mode of payment system and thus
introduced XPAY, an indigenously developed mobile based payment
system.
UAE Exchange is now present in the metros, semi-urban as well as
rural areas of India with over 240 own branches. The Country Head of
UAE Exchange and Financial Services Ltd is Mr. V George Antony and
there are 10 Department Heads, 50 Divisional Heads, 8 Zonal Heads, 23
Regional Heads and 8 Regional Audit Heads monitoring the operations
of the companys branches across India.
59
2. TATA MOTORS
Market/ Economy Analysis
It covers the macro economy analysis and the various macro economic factors on the
national level like GDP, Monetary policies of India, Fiscal Policies and Inflation and
money supply etc.
GDP
Real GDP growth accelerated from 7.5 per cent during 2011-12 to 8.4 per cent during
2012-13 on the back of buoyant manufacturing and services activity supported by a
recovery in the agricultural sector. Real GDP growth has, thus, averaged over eight
per cent during the last three years and over seven per cent in the first four years
(2002-03 to 2005-06) of the Tenth Five Year Plan.
Strengths of India today are:
A well diversified industrial base which profits from self-reliance in all core industries
.A large & sophisticated financial architecture - The robust capital Markets today
have over 9000 listed companies and boast of a massive Market capitalization.
A healthy GDP composition with agriculture contributing 22%, Industry 22% and
services, which have gone strength to strength, accounting. For 56% of the GDP an
acknowledged strength in knowledge driven industries like Information technology,
biotechnology, entertainment Software etc
India has Over 3 million scientific & technical manpower, Over 0.6 million S&T post
graduates, Over 0.7 million graduate engineers, Over 3500 doctorates in sciences
every year.
Assuming trend growth in agriculture under normal monsoon conditions and barring
domestic or external shocks, the Reserve Bank in its Annual Policy Statement for
2014-15 (April 2014) placed real GDP growth, for policy purposes, in the range of
7.5-8.0 per cent during 2014-15 Growth prospects are, however, subject to a number
60

of downside risks. The risks emanating from the global economy are: potential
escalation and volatility in international crude oil prices, firming up of overall
inflationary pressures and expectations, and a hardening of international interest rates
along with the withdrawal of monetary accommodation.
Indias demographic advantage In contrast to developed Countries, India will
have a younger population for the next 50 years. Hence India would be the hub for
R&D.
Inflation
Inflation was contained to 6.3 per cent by end-March 2014 within the indicative
trajectory of 5.0-5.5 per cent during 2014-15. The actual inflation was considerably
lower than the indicative trajectory and this could be mainly attributed to the deferred
pass-through of even the cognisable permanent component of international crude oil
prices.
Money Supply
Monetary and liquidity conditions remained largely comfortable during 2013-14
reflecting proactive liquidity management operations by the Reserve Bank under the
liquidity adjustment facility, flexible management of issuances under the market
stabilisation scheme, and some private placement of Government securities
In short, the Indian economy is exhibiting strong fundamentals and displaying

considerable resilience. At the same time, there are continuing signs of demand
pressures, especially high credit growth, that could exert upward pressure on prices
when associated with supply shocks such as from oil. These pressures have the
potential for impacting stability and inflation expectations. While domestic
developments continue to dominate the economy, global factors tend to gain more
attention now than before. The global outlook for growth is positive but downside
risks in regard to inflation also RBI is applying new repo and reverse repo for the
balance of inflation and monetary policies.
The following are macroeconomic policies, generally found as part of governmentdirected industrial auto policies
(a) Restrictions on domestic and foreign investment.
(b) Domestic content requirements
61

(c) High tariff walls
(d) Auto export requirements
(e) National production to sales ratios
(f) Distribution controls
(g) Quotas and licensing requirements that significantly restrict imports
(h) Government approval for product related decisions, including vehicle make,
body type, engine size, etc.
(i) Special government categories for auto taxes
INDUSTRY ANALYSIS
Since, 1991 opening of the economy has changed the face of auto industry. Today, it
is amongst the main drivers of growth of Indian economy with an output multiplier of
2.24(for every Re.1 invested, auto sector gives back Rs.2.24 to the economy). In
recent years we have seen increasing number of global players entering Indian market
by way of Joint ventures, collaborations or wholly owned subsidiary
The automobile industry is torn between trying to reduce costs on the one hand and,
on the other, dealing with the high price of performance-enhancing technology and
environmental compliance. Key drivers in the automotive industry are:
Reducing air pollution
Reduction of weight
Recyclability
Safety
Better performance and engine efficiency
Aesthetics
Longer service Life
INDUSTRY LIFE CYCLE:

The automobile market is at the maturity stage of the life cycle, locally and globally,
due to an increased number of competitors from domestic and foreign markets. The
automobile market is characterized by a low potential for market growth, but high
sales and profit potential as the products have still not saturated the market as a whole.
62
MAJOR COMPETITORS OF TATA MOTORS ARE
Maruti Udyog Ltd.

General Motors India
Ford India Ltd.
Eicher Motors
Bajaj Auto
Hero Motors
Hindustan Motors
Hyundai Motor India Ltd.
Royal Enfield Motors
Telco
TVS Motors
Opportunities and Threats
a) Opportunities
Road Development: The ongoing road development program would improve
connectivity to ports, cities and villages through a network of highways and
interconnecting roads by 2013-14. Improved road network would help in faster
movement of goods between various cities and towns. The Company launched TATA
63

Novus range of vehicles in the heavy segment and TATA ACE for last mile
distribution.
Car penetration in India: Car penetration in India is 7 cars per 1,000 persons.
International: In FY 2013-14, the Company increased share of its overseas vehicle
sales from 7.6% last year to record high of 11.1% (as % of its total sales) and has
planned further increase in this year.
b) Threats
Global Competition: India is increasingly attracting global players to set up
manufacturing facility for producing cars, especially small cars. Global automobile
manufacturers are also entering India in commercial vehicle segment to leverage
Indias low cost production advantage to their favor.
Fuel Prices: The continuing fuel price increase in the domestic market could
significantly impact demand of commercial and passenger vehicles.
Input costs: Commodity items particularly steel, non-ferrous metals, rubber and
engineering plastics have witnessed huge price increases in the past. These prices are
expected to increase further affecting the Companys profitability.
Interest rate hardening and other inflationary trends: With interest rates hardening
and liquidity crunch in the system, growth in sales may be adversely impacted.
Government Regulations: Stringent emission and safety requirements could bring
new complexities for automotive and component manufacturers impacting the
Companys business.
Risks and Concerns:

Interest Rates: FY 2013-14 started with increasing interest rate regime and
tightening liquidity position in the economy. Increasing interest rates could further
affect vehicle demand which could have an adverse impact on the Companys
revenues and profits.
Exchange rates: The Company exports vehicles to many countries and exchange
rate fluctuations in the order execution period could impact the Companys business.
Freight rates: In FY 2012-13 freight rates in road transport sector moved up mainly
due to surge in construction activity, ongoing road development projects and severe
64

restriction on over-loading. Demand for commercial vehicles could be impacted by
further change in freight rates and change in fuel prices.
Domestic market: The Company plans to reduce the impact of this cyclicality on its
business, by strengthening its less cyclical businesses like buses, light trucks, small
commercial vehicles.
Overseas market: In overseas markets, the Company competes with global players
which have multiple vehicle platforms, large financial capability and global branding.
Manufacturing: The Company manufactures vehicles at multiple locations and
given the geographical dispersion of its suppliers it faces Logistics Problems.
New Competition: Competitive activity is expected to increase in commercial
vehicle and passenger vehicle domestic market in coming years.
New projects: The Company currently is in midst of executing many new projects
ranging from launch of new car platforms to development of new Truck models.
III Company Analysis

Key Highlights
Symbol: TTL
Sector: Consumer Goods
Industry: Auto Manufacturers Major
Market Cap: Rs.29232 crores
Data Since: 1945
Last close: Rs. 742.90
Brief Summary of the company
Tata Motors is one of the largest companies in the Tata Group with a total income of
US$ 2.35 billion*. More than 3 million Tata vehicles ply on Indian roads making Tata
a dominant force in the Indian automobile industry.
65

Joint Venture with Fiat and Hitachi
Tata Motors has decided to enter into a 50-50 JV with Fiat, at Pune, for
manufacturing passenger vehicles, engines and transmissions for both, domestic and
international markets.. The Company has also entered into a JV with Hitachi, to set up
a new plant in Kharagpur
Product Mix
Tata Motors is India's only fully integrated automobile manufacturer with a portfolio
that covers trucks, buses, utility vehicles and passenger cars. It would be no
exaggeration to say that Tata Motors provides the wheels for India's growth.
Segmental Overview
Commercial Vehicle Segment
The Company registered 69.6% volume growth in the domestic CV segment during
4QFY13 from 37,228 units in Q3FY12 to 63,082 units in Q3FY06. The market share
in this segment was 65.8% in Q4FY06, as compared to 55.2% in Q1FY13. The
M/HCV goods-carrier segment registered a 54.4% growth YoY, with sale of 33,515
units and a market share of 64.5%, up by around 410 bps, driven by infrastructure
development and increase in international trade.
Passenger Vehicle Segment
The Company reported a growth of 21.2% YoY, to 49,907 vehicles, in the domestic
passenger vehicle segment and a market share of 16.2% in the quarter. The passenger
vehicle industry registered a volume growth of 20.4% during Q4FY13
Plants
Tata Motors owes its leading position in the Indian automobile industry to its strong
focus on in digenisation. Their manufacturing plants are situated at Jamshedpur in the
East, Pune in the West and Lucknow in the North.
Charts showing Key Statistics of tata motors.
66

SOURCS OF REVENUE
20013-14
2012-13
67

Share holding pattern as on 31-Mar
shareholding pattern
10%
17%
promotors
34%
MF Banks, Fis
FIIs
Others
Public
25%
14%
RATIO ANALYSIS
Ratios
2014
2013
2012
Debt/equity
0.56
0.49
0.44
Current ratio
1.08
0.87
0.76
Operating profit margin %
12.11
11.51
12.38
Gross profit margin
10.87
10.43
11.04
ROCE %
31.25
32.76
33.77
total assets turnover ratio
3.15
3.53
3.43
ROE %
27.61
30.09
22.57
Dividend-equity
497.94
453.73
282.11
Retention Ratio
67.43
63.32
65.19
DPS (Rs.)
13.01
12.5
7.99
EPS (Rs.)
25
34
41
Dividend Payout Ratio
0.39
0.42
0.37
0.177
68

CAGR of EPS
CAGR of Dividend Payout Ratio
-0.017
Average ROE
25.74
average retention
63.54
Growth % (g = Avg. RR Avg. ROE )
16.36
Market return
14.54%
P/E ratio (on the basis of historical analysis) = 18.12

Therefore, the Weighted P/E ratio =(18.12+24.24)/2 = 21.181
Projected EPS = EPS OF 2006 + CAGR of EPS*EPS OF 2006
= Rs.48.271
Value of Share at the end of financial year 06-07
= Projected EPS * Weighted P/E Ratio
= Rs.1022
HPCL
Globalization and the Indian Petroleum Industry
Indian petroleum industry in the post independent period (1947-2001) it may be
divided into three distinct phases
(i) early phase (1947 to 1969)- when the government consolidated its control
over the industry with Soviet assistance;
(ii) development phase (1970 to 1989)- in this period the US companies

played dominant role replacing the Soviets and
(iii) the economic liberalisation phase of 1990s.
69

PORTERS MODEL
SWOT ANALYSIS
STRENGHS
Favourable production sale mix.
Entry on petrochemicals and gas sector will reduce dependence on R&M

sector.
Second largest refining capacity and pipeline infrastructure in the industry.
Good presence in high demand regions of west and north India.
WEAKNESSES
Dependence on refining function high.
Moderate share in high profitable retail segment.
Diversifications in petrochemicals could trouble the company.
High burden of subsidy loss on cooking gas and kerosene.
70

OPPORTUNITIES
Per capita energy consumption low in country.
Deficiency of coal will benefit oil and gas sector.
Growing domestic market for gas.
Overseas presence in upstream and downstream will determine growth.
THREATS
Rising oil prices could dampen demand.
High regulatory risk.
Loss of market share to private players.
Entrance of private players in pipelines will take away monopoly of company

in north India.
COMPANY ANALYSIS
The Annual Report is broken down into the following specific parts:
A) The Director's Report,

B) The Auditor's Report,
C) The Financial Statements, and
D) The Schedules and Notes to the Accounts.
.
A.THE DIRECTORS REPORT
The Directors Report is a report submitted by the directors of a company to its
shareholders, advising them of the performance of the company under their
stewardship.
Fundamental Analysis
B. THE AUDITOR'S REPORT
The auditor represents the shareholders and it is his duty to report to the shareholders
and the general public on the stewardship of the company by its directors
71

C. FINANCIAL STATEMENTS
It comprises of Balance Sheet, Profit and Loss account, Cash Flows. Its analysis
would be discussed later.
D.SCHEDULES
The schedules detail pertinent information about the items of Balance Sheet and Profit
& Loss Account. It also details information about sales, manufacturing costs,
administration costs, interest, and other income and expenses
1. THE MANAGEMENT
HPCL is a public sector undertaking. Thus it is a professionally managed
company. There are some parameters of management on which a company is
analysed :
a. integrity of management
b. past record of management
c. how highly is the management rated by its peers in the same industry
d. how the management fares in adversity
e. the depth of the knowledge of management
f. open and innovative management
on all these parameters HPCL scores good.
2. COMPANY
Many times a company has made losses in the previous years but that does not
mean that the company is bad to invest. Thus many factors are studied while
studying a company.
a) perception of competitors
HPCL is the second largest petroleum company after IOCL. Thus it is a
competitor of IOCL and it is trying hard to compete with IOCL on every front.
That is why now it has decided to diversify itself in the oil exploration sector
b) company policies
As this is a PSU thus the policies are made by the government. The oil sector is
one which is highly regulated by government. Thus from time to time it is
required to watch out the various policies changed.
72
3. ANNUAL REPORT
The most primary and most important source of information about a company is
its
Annual Report. This is prepared every year and distributed to its shareholders.
Ratio Analysis
Evaluation of Intrinsic Value of the Security
STDEV MKT
0.011934
STDEV SEC
0.03831
Average
RETENTION
RATIO
0.60504
CORRELATION 0.485958 ROE
0.19842
BETA
0.120052
RISK
1.56765
FREE
RATE
6.50%
MKT RATE
14%
18.26%
73
Hence we see that here our g is less than k .Thus we see that as per Dividend
Discount Model our Intrinsic value is div=22(1+.012)=24/.0626= 387
Price= Projected EPS + Weighted P/E ratio

Using CAGR EPS = 43.468
Weighted P/E Ratio = 7.5+665/2=336.25
Price = 43.468+336.25 = 381
JET AIRWAYS
MARKET
Currently the market scenario is as shown :
The Domestic Aviation Market Share
8%
2%
6%
Jet Airways
0%
Indian
34%
8%
Deccan
Sahara
KingFisher
GoAir
21%
1) ACC LIMITED
AIRLINE
SpiceJet
21%
Chartered Flights
CURRENT ACQUISITION INVESTMENTS

FLEET
PLANS
US $Bn
Jet Airways
53
30 by 2019
Air Deccan
29
79 by 2018
2.7
Kingfisher
11
100 by 2017
4.5
Spice Jet
38 by 2016
1.9
GoAir
33 by 2015
2.4
74
STATE OF THE INDUSTRY
High growth potential due to economic boom and highly under penetration in
the market
0.02 trips per capita per annum
Long-term GDP growth at 8% annually
It is forecasted that India would be the second fastest growing travel and
tourism economy in the world
ATF (Aviation Turbine Fuel) prices and airport charges in India are among the
highest in the world
Regulatory and infrastructure bottlenecks have prevented accelerated growth

in the industry
The government is proactively looking to address the bottlenecks
MACRO ENVIRONMENT
Refers to the factors which influence an industry but are beyond its control.Main
factors are:
P OLITICAL
E CONOMIC
S OCIO-CULTURAL
T ECHNOLOGICAL
Other Factors
DEMOGRAPHIC
NATURAL ENVIRONMENT
POLITICAL
OPEN SKY POLICY

DEREGULATIONS IN DIFFERENT SPHERES
LESS ENTRY BARRIERS
REDUCTION IN FDI LIMIT: 49% for airlines
100% for airport
75
SOCIO-CULTURAL
Growing Middle Class

1997to 2003 : 39.5 million to 56.7m households
2009 : 300 million
2014 : 400 million estimates
Increase in leisure travel by tourists by 15% in 2014
3.2 million foreign tourists visited India last year ; tourism industry grew 8.8
per cent over 2003, the highest growth rate in the world.
76

SOCIAL
TECHNOLOGICAL
MODERNISATION OF AIRPORTS
ILS-INSTRUMENT LANDING SYSTEMS
DEMOGRAPHIC
CHANGING STRUCTURE OF CONSUMERS

HIGHEST % PEOPLE IN 20-50 AGE GROUP
EDUCATIONAL GROUPS
SHIFT TOWARDS NUCLEAR FAMILIES
(Source NCAER)
MIDDLE CLASS INCOME OVER RS. 90,000 P.A.
NATURAL ENVIRONMENT
HIGH ENERGY COSTS
77
The cost of aviation turbine fuel ATF in india for domestic airlines is almost
double for international market.
Govt. increased prices by 7.5%. From 32.56 to 35/litre.
ATF price in feb soared by 3.5% to the price in jan 06.
PORTERS FIVE FORCE ANALYSIS
THREAT OF NEW ENTRANTS
Easy entry but execution doubtful
The capital requirement-a min of 30cr capitalization before takeoff
Network & time slots of existing players
Expected retaliation
Legislation or government action: equity capital for floating an airline
Differentiation
Exit barriers
Inadequate airport infrastructure, shortage of pilots, high fuel costs
Compulsion to operate on uneconomical routes, no subsidy
POWER OF BUYERS
Large number of buyers: Business travelers sector intensified by GDP

growth, leisure customer market too a huge growth opportunity
Alternative source- large number of options available
Cost of switching- Minimal
No differentiation among the players in the same segment
POWER OF SUPPLIERS
ATF AIRCRAFT MFG PILOT
Switching costs- options of switching is very limited
Brand value- high
Forward integration- no history in past but possible
Shortage of pilots
78
High fuel costs
AVAILABILITY OF SUBSTITUTE
Product for product substitution- consumers can choose between the

various options such as road and rail.
Substitution for need- with technology the need to travel has reduced
but it is not possible to totally do away with it. It is marginally possible.
COMPETITIVE RIVALRY
Increased competitive pressures due to new entrants
Growth rates- high projected to be 22%
High fixed costs
Extra capacity
Acquisition of weaker companies
High exit barriers
Differentiation
79

S.W.O.T of The Industry
Key Attractions:
Low entry barrier.
Attraction of foreign shores.
Foreign equity allowed.
Rising income levels and demographic profile.
Key Problems:
Crippling Oil Shock .
Absence to Institutionalized Funding.
Acute shortage of trained Pilots, severely limiting growth prospects.
Unplanned location of Airports.
Key Developments that may Influence the future:
Average growth of about 25%-30%
Air Freight segment is growing faster than the Passengers segment.
Duties slashed on ATF and IATT.
Pilot license applications have tripled.
Expecting investments - US $30 billion by 2012 and about US $50 billion by

2015.
Expected Market Size is projected to be about 50 million by 2010.
JET AIRWAYS
Market Share: 35%
#Strengths
Virtual monopoly on Corporate Accounts
Membership of IATA
One of the Youngest Fleets in the World
Debt-Equity Ratio of almost one is to one

#Weaknesses
Required 1000 pilots in next two years.
Concentrates only most profitable routes.
80
Failed attempts at Merger.

#Opportunities
Hugh untapped international sectors
Increase in domestic flight density
Expanding operations into Air Freight business
Integrate more long haul aircrafts

#Threats
Stiff competition in the Economy class from Low Cost Carriers.
Competition in the Business Class form newcomers like KingFisher
Hugh investments locked in future fleet expansion plans
Single source of revenue

Growth Forecast
World Passenger traffic grew to 52.12 million in the last fiscal, from 43.47
million in 2008-09, to register a growth of 19.9 percent.
In the last fiscal, the Indian aviation industry logged a robust growth of 24
percent and experts say the sector will expand by at least 16 percent annually
for the next five years, riding on the overall economic growth of eight percent.
The Positive Steps

Greenfield airports Bangalore/Hyderabad
J/Vs for Ground Handling and MRO facilities
Highly advanced GPS aided Geo augmented
navigation (GAGAN) system operational this year.
AAI set up more radar stations to bring entire
Indian airspace under radar monitoring.
Training more Pilots and Air Traffic Controllers.
Raising retirement age of pilots to 65 from 61.
New Entrants
The aviation sector is likely to see the launch of many new airlines, including:
Premier Airways
Star Air
East West Airlines
Indigo
81
II TECHNICAL ANALYSIS OF STOCKS
1) ACC LIMITED
ANALYSIS: Trend:The stock after correcting to 50% of the long bull run [Bottom 676 Top 1197] prices
reversed back and are now in intermediary upward trend.
Moving Averages :The stock is currently trading above all the important trading moving averages. The
moving average rossover of 13 days & 40 days is observed on 22nd Dec. 2013
triggering price trend reversal and buyat current levels.
13 days: = 1037.70 40 days: = 1060.84
30 days: = 1078.65 100 days: = 991.62
82

Moving Average Channels: The stock on giving a close above 1070 levels has given a breakout above the
moving averagechannel signaling buy at current levels.
Relative Strength Index (RSI): RSI on falling to 34 levels in the profit booking mode bounced back to bull zone at
53.46 showing synchronization with price movement.
Pitchfork: The stock have broken the upper arms and moved out (at 1072) of the corrective
trend
pitchfork signaling positive trend & buy at current levels.
The stock is now moving towards the median of the major pitchfork which is
around 1160 levels.
Oscillators: Osc (10,70) trading favorably in positive zone indicating presence of long term
traders.
Osc (5,35) are pulling back to zero from negative, indicating entry of short term
traders.
Volumes:-
83
CHAPTER 7
FINDINGS, CONCLUSION AND
SUGGESTIONS
84
FINDINGS
The stock is trading with lack luster volumes. Volumes should ideally expand for the
advance togather steam.
27 Dec. 2013 28 Dec. 2013
On the basis of above analysis price movement can be projected as follows :Target : --- 1167
Stop Loss: --- 1040
Support: --- 1066 1063 1057 1046
Resistance: --- 1087 1093 1115 1122 1156
1) INFOSYS TECHNOLOGIES LIMITED
INFOSYS TECH
12th
Date
February
2014
Close
2351.25
Trend
Up
Support
2340
Resistance 2380
Stop loss
2317
The Trend refers to the daily trend of the stock and not intraday but one may trade
intraday based on it. If you are a slightly longer term investor, you may go on holding
the stock in long if trend is up or you may go on holding the stock in short position if
trend is down. If you are a short term trader you may use the below paragraph
information and play for small moves.
85
How to trade according to the data mentioned above

If an entry is made in front of support and the close is above the support, it means
that ne can buy the stock intraday during market hours at support and put an
appropriate stop loss mentioned below. Once you have bought the stock
intraday, put the Stop Loss accordingly mentioned and sell it before the
market closes.
If an entry is made in front of resistance and the close is less then resistance, it
means that one can short the stock intraday during market hours at resistance
and put an appropriate stop loss mentioned below. At close one should cover if
one is an intraday trader.
If we do not find the stock giving clear signal for intraday trading, than we will
leave the support or resistance field empty.
2) CIPLA LIMITED
CIPLA
12th
Date
February
2014
Close
248.35
Trend
Not Clear
Support
220
Resistance 260
Stop loss
205
86

If an entry is made in front of support and the close is above the support, it means that
one can buy the stock intraday during market hours at support and put an appropriate
stop loss mentioned below. Once you have bought the stock intraday, put the Stop
Loss accordingly mentioned and sell it before the market closes.
If an entry is made in front of resistance and the close is less then resistance, it means
that one can short the stock intraday during market hours at resistance and put an
appropriate stop loss mentioned below. At close one should cover if one is an intraday
trader.
If we do not find the stock giving clear signal for intraday trading, than we will leave
the support or resistance field empty.
If you are a slightly longer term investor, you may go on holding the stock in long if
trend is up or you may go on holding the stock in short position if trend is down. If
you are a short term trader you may use the below paragraph information and play for
small moves.
3) BHARAT PETROLEUM CORPORATION LIMITED
BPCL
Date
12th February 2014
Close
331.85
Trend
Down
Support
355
Resistance
390
Stop loss
347
87

If an entry is made in front of support and the close is above the support, it
means that one can buy the stock intraday during market hours at support and
put an appropriate stop loss mentioned below. Once you have bought the stock
market closes.
If we do not find the stock giving clear signal for intraday trading, than we
will leave the support or resistance field empty.
4) RANBAXY LABORATORIES LIMITED

RANBAXY
12th
Date
February
2014
Close
409.15
Trend
Not Clear
Support
360
Resistance
420
Stop loss
350
88

market closes.
5) TATA MOTORS LIMITED

TATAMOTORS
12th
Date
February
2014
Close
875.05
Trend
Down
Support
810
Resistance 895
Stop loss
795
89

market closes.
6)RELIANCE INDUSTRIES LIMITED
RELIANCE
12th
Date
February
2014
Close
1358.85
Trend
Not Clear
Support
1290
Resistance 1370
Stop loss
1280
90

market closes.
7) MAHINDRA & MAHINDRA LIMITED

M&M
12th
Date
February
2014
Close
880.80
Trend
Down
Support
930
Resistance 980
Stop loss
918
91

market closes.
8) STATE BANK OF INDIA

SBIN
12th
Date
February
2007
Close
1183.70
Trend
Not Clear
Support
1120
Resistance 1170
Stop loss
1105
92

market closes.
10) MARUTI UDYOG LIMITED

MARUTI
Date
12th
February
2014
Close
912
Trend
Down
Support
950
Resistance
990
Stop loss
940
market closes.
93
94
CONCLUSION
1) UAE EXCHANGE: Growing stock and its advisable to invest in this stock for
long term.
UAE Exchange in 2013 which increased its customer base by 30 lakh customers.
Growth in net revenues of 42.2%. Net profit up by 32%. Total customer asset
increased by 44.9%
2) ACC- At current price it is not advisable to buy the stock. Reasons for not
buying the stock:
The stock is currently trading above all the important trading moving averages.
The moving average crossover of 13 days & 40 days is observed on 22nd Dec. 2013
triggering price trend reversal and buy at current levels.
The stock is trading with lack luster volumes. Volumes should ideally expand for the
advance to gather steam.
3) INFOSYS TECHNOLOGIES- At current market price ,its advisable to buy the
share. Reasons:
The stock is currently trading below all the important moving averages.
The stock is trading with good volumes. Volumes are ideal and are set to gather
further steam.
4) TATA MOTORS- At current market price , we should buy the share because of
the
following reasons:
Since, 1991 opening of the economy has changed the face of auto industry.
Today, it is amongst the main drivers of growth of Indian economy with an output
95

multiplier of 2.24(for every Re.1 invested, auto sector gives back Rs.2.24 to the
economy).
Tremendous Growth -Tata Motors has decided to enter into a 50-50 JV with Fiat,
at Pune, for manufacturing passenger vehicles, engines and transmissions for both,
domestic and international markets.. The Company has also entered into a JV with
Hitachi, to set up a new plant in Kharagpur
5) HPCL:
Strengths:
Favourable production sale mix
Entry on petrochemicals and gas sector will reduce dependence on R&M sector
Second largest refining capacity and pipeline infrastructure in the industry
Good presence in high demand regions of west and north India
Growth potential:
Per capita energy consumption low in country
Deficiency of coal will benefit oil and gas sector
Growing domestic market for gas
Overseas presence in upstream and downstream will determine growth
6) JET AIRWAYS: We should not invest in the stock because of the following
reasons:
ATF (Aviation Turbine Fuel) prices and airport charges in India are among the
highest in the world
96

Regulatory and infrastructure bottlenecks have prevented accelerated growth in the
industry
7) RELIANCE INDUSTRIES: Good stock for any Portfolio.

Very high GRM thus it will continue to produce Positive Cash Flow.
Charts show good volume with positive uptrend.
8) STATE BANK OF INDIA: Should be Sold.
Due to tight monetary policies it will remain under pressure.
Very low volumes plus twenty day moving average both indicate that it should not be
held.
9)MARUTI UDYOG: Can be held.
Being market leader it has best chances but high input costs are putting pressure on
margins plus rising interest costs are going against the stock.
It has taken a sharp run in the last rally and now there is a dip in the volumes in the
past.
10)RANBAXY PHARMACEUTICALS: Should be bought.
Due to latest permission from USFDA FOR 180 Day exclusive marketing rights for
its
Diabetees molecule.
Its participation in the last rally was not very significant but this USFDA news it
appears is acting as a trigger.
Volumes are increasing so it appears there is a upside left to this stock.
97

11)MAHINDRA & MAHINDRA: Should be held.
In the auto pack it is one of the companies which can bear the rising input cost plus
higher interest rates.
Twenty day moving average plus it is around a very strong support so it seems that it
can show a rally.
SUGGESTIONS
Meanwhile, some have cooked up new indexes that track arcane
segments of the market.
As a long-term investor, you want to avoid newfangled exchange ratio
that track esoteric benchmarks.
Consider your costs before investing.
An expense ratio tells you how much an exchange ratio costs.
On the flip side, theres been a proliferation of more narrowly-focused
and exotic exchange ratio many of which are not only unproven, but more
expensive.
If youre thinking about investing in a life-cycle fund that invests in
exchange ratio check to see if it will charge an extra management fee.
Consider the tax consequences of your investment. Most ETFs are pretty
tax-efficient because of the special way they are built. However, some
ETFs are mimicking newer, less-static indexes that trade more often.
These funds may trigger more capital gains costs.
Dont forget that trading in and out of shares can generate taxable gains,
just like stocks.
98

GLOSSARY
SECURITY ANALYSIS: stands for the proposition that a well-disciplined investor
can determine a rough value for a company from all of its financial statements,
make purchases when the market inevitably under-prices some of them, earn a
satisfactory return, and never be in real danger of permanent loss.
FUNDAMENTAL ANALYSIS: is the analysis of a stock on the basis of core
financial and economic analysis to predict the movement of stocks price.
TECHNICAL ANALYSIS: is the study of prices and volume, for forecasting of
future stock price or financial price movements.
DOW JONES THEORY: The Dow theory is a method of interpreting and signaling
changes in the stock market direction based on the monitoring of the Dow Jones
Industrial and Transportation Averages.
ELLIOT WAVES BASICS: Breaking through support or resistance levels results in a
change of traders expectations
SUPPORT: Support is a level at which bulls (i.e., buyers) take control over the prices
and prevent them from falling lower.
RESISTANCE: is the point at which sellers (bears) take control of prices and prevent
them from rising higher
ROLE REVERSAL: When a resistance level is successfully broken through, that
level becomes a support level. Similarly, when a support level is successfully
broken through, that level becomes a resistance level.
BULL TREND: The start of an up trend is signaled when price makes a higher low
(trough), followed by a rally above the previous high (peak)
BEAR TREND: when a rally ends with a lower peak and then retreats below the
previous low. The end of a bear trend is identical to the start of a bull trend.
LARGE CORRECTION: A large correction occurs when price falls below the
previous low (during a bull trend) or where price rises above the previous high (in a
bear trend).
MOVING AVERAGE: A moving average is the average price of a financial
instrument over a given time.
RELATIVE STRENGTH INDEX: The Relative Strength Index Technical Indicator
(RSI) is a price-following oscillator that ranges between 0 and 100
ADVANCE/DECLINE LINE: The advance/decline line shows, for some period,
the cumulative difference between advancing and declining issues.
99

CLOSING TICK: Closing tick is the difference between the number of shares that
closed on an uptick and those that closed on a downtick.
CLOSING ARMS: Closing arms or trin (trading index) is the ratio of average
trading volume in declining issues to average trading volume in advancing issues.
Z-BLOCK TRADES: zBlock trades are trades in excess of 10,000 shares.
HI-LO-CLOSE CHART: A hi-lo-close chart is a bar chart showing, for each day, the
high price, low price, and closing price.
CANDESTICK CHART: A candlestick chart is an extended version of the hi-lo-close
chart. It plots the high, low, open, and closing prices, and also shows whether the
closing price was above or below the opening price
POINT AND FIGURE CHARTS: Point-and-figure charts are a way of showing only
major price moves and their direction. A major up move is marked with an X,
while a major down move is marked with an O. A new column starts every time
there is a change in direction
HEAD AND SHOULDERS FORMATION: Once a chart is drawn, technical analysts
examine it for various formations or pattern types in an attempt to predict stock
price or market direction in the case of head-and-shoulders formation.
ODD-LOT: The odd-lot indicator looks at whether odd-lot purchases are up or
down.
HEMLINE: Followers of the hemline indicator claim that hemlines tend to rise in
good times.
SUPER BOWL: The Super Bowl indicator forecasts the direction of the market based
on whether the National Football Conference or the American Football Conference
wins.
BETA: Beta is a risk measure comparing the volatility of a stock's price movement to
the general market.
MOMENTUM: Momentum measures the speed of price change and provides a
leading indicator of changes in trend.
100

UPSIDE/DOWNSIDE: Measures of Upside/Downside separate the volumes for rising
markets from those in falling markets. Since volume is independent of price, it
makes a valuable tool for measuring the quality of a price trend.
SWING INDEX: Is a swing or wave system used to capitalize on breakout patterns.
ASI is commonly used to confirm trend line breakouts on price charts.
ARMS INDEX (TRIN): Short term breadth indicator showing whether volume is
flowing into advancing or declining issues.
101
BIBLIOGRAPHY
BIBLIOGRAPHY
1. John L. Person, A Complete Guide to Technical Trading Tactics, Ninth

Edition (March 26, 2004)
2. Colby, Robert W. and Thomas A. Meyers, The Encyclopedia of Technical
Market Indicators (Tenth Edition 2000)
3. Nison, Steve, Beyond Candlesticks (John Wiley & Sons, 1994), Fourth
Edition 1998
4. Edwards, Robert D., and John Magee, Technical Analysis of Stock Trends
(John Magee, 1997; first edition, 1948).
5. Geoffrey Poitras, Security Analysis and Investment Strategy (2001)
6. Benjamin Graham and David Dodd, Security Analysis (November, 1999)
7. Erich A. Helfert, D.B.A., Financial Analysis: Tools and Techniques (2000)
8. Peter J. Klien, Getting Started in Security Analysis (April, 2002)
9. Richard A. Brealey, Stewart C. Myers, Alan J. Marcus Fundamentals of
Corporate Finance Third Edition, McGraw-Hill, Section A
10. Sharekhan, Fundamental Analysis: Which Company? (October, 2004)
11. Grewal and Navjot Grewal, Profitable lnz?estrnent in shares, Vision
12. Books Pvt. Ltd. 36 Connaught Place, New Delhi 1984.
13. Jack Clark Francis, lnzlestrrrents - Analysis and Management, MC
14. Graw Hill, International Editions, 1986.
15. Preethi Singh, lirz~estnzent Mnnageiizent, Himalaya Publishing
16. House, Bombay Nagpur and Delhi, 1986
17. David. L. Scott and William Edward, Ulzderstrrrldilzg and Managing
lnz?estr~rerrrt lsk and rettrrn, MC. Graw Hill Book Co. (U.K.) Ltd.,London
1990.
18. Lewis Mandell, Inz?estnlerlts, Macmillan Publishing Company, New York,
1992.
19. Nabhi Kumar Jain, Horrr to errrrr irzore froin sl~rrres, Nabhi Publications,
Delhi, 1992.
102

20. Carter Randall Norr-stop ~i~iil~zi0i1r1 gt he stock innrket Vision Books, New
Delhi, Bombay (1992).
21. L.C.Gupta., "Stock Trading in India", Society for Capital Market Research
and Development, Delhi, 1992.
22. Yasaswy.N.J., Tzlrnnrotrrzd Stocks, Big Profits for Bold Bargain Htinfers,
Vision Books, New Delhi, Bombay, 1993.
23. Sunil Bamodar, An Introduction to Derivatives and Risk Management in
Financial Markets", State Bank of India, Monthly Review Vol. XXXII No. 8,
August 1993.
24. Yasaswy J.N. "The Risk Return Trade-off in shares" Tlze Hindu Daily
Vol.116, February 12,1993
25. Dona1d.E. and Fisher Rona1d.J. Jordan, Security Annlysis and Portfolio
Mnnngeli~ent,P rentice Hall of India (Pvt.) Ltd. New Delhi 110001,1994.
26. R.Venkataraman.., "Risk Management in International Treasury Operations",
SfnfrB nnk ofli~~iiMn,o nthly Review, Vol. XXXIII, No. 12,April 1994,
p.577.
27. K.Sivakumar., "Is your company creating Wealth for you", Tlze Hindu,
Business Line, Daily, Vol. 117, February 13,1994, p.12.
28. Pattabhi Raman.V. "Wanna Do Equity Research, Annlyst, Monthly, October
1995, p.22.
29. Philippe Jorion & Sarkis Joseph Khoury, Fiiznncinl Risk Mnnngeiizeizt
Doriresfic nnd lr~ferr~ntioD~~iioi~le r~sioirBs,l ack Well Publishers, Basil
Blackwell, Cambridge, Massachusetts 1996.
30. S.Rajagopal,. "Bank Risk Management - A risk pricing model", Stnte Bnnk of
indin, Monthly Review, VoI. XXXV, No.11, November 1996, p.555.
31. Charles.P.Jones, Irlr~est~neilAt nnlysis nnd nlnnngeiirerzt, John Wiley and
sons Inc. New York, Toronto, Singapore, 1996.
WEBSITES:
www.uae exchange.com
www.marketscreen.com
103

www.icicidirect.com
www.nseindia.com
www.investopedia.com
www.indiainfoline.com
www.economictimes.com
104

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Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Focuses on what ought to happen in a Focuses on what actually happens in a

Factors involved in price analysis:

Charts are based on market action

1. Supply and demand

3. Open interest (futures only)

Technical and fundamental analysis of exchange ratio based on UAE Exchange

BACK GROUND OF THE PROBLEM

Technical and fundamental analysis of exchange ratio based on UAE Exchange

STATEMENT OF THE PROBLEM

Technical and fundamental analysis of exchange ratio based on UAE Exchange

SIGNIFICANE OF THE STUDY

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

card companies, insurance, companies, consumer finance

companies, stock brokerages, investment funds and some government sponsored

HISTORY OF FINANCIAL SERVICES

Technical and fundamental analysis of exchange ratio based on UAE Exchange

TYPES OF FINANCIAL MARKETS

Stock markets, which provide financing through the issuance of shares or

Commodity markets, which facilitate the trading of commodities.

Technical and fundamental analysis of exchange ratio based on UAE Exchange

EXCHANGE is a leading global remittance and foreign exchange brand trusted by

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

VISSION STATEMENT OF UAE EXCHANGE

Technical and fundamental analysis of exchange ratio based on UAE Exchange

MISSION STATEMENT OF UAE EXCHANGE

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

UAE EXCHANGE STANDS FOR

SMS 6000 Etisalat and Du Mobiles

Customer Suggestion form

Social Medias like facebook, Linked In

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

owners of both companies benefit from the merger;

shareholders of both companies lose;

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

He also opined that an investor who purchases corporate securities must

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

speculative counters. He opined that, short- term speculation, if excessive,

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

is likely to show a higher increase in the market price of its shares. To be

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Movement of the market considers everything

Movement of prices is purposeful

History repeats itself

SUPPORT AND RESISTANCE

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

Technical and fundamental analysis of exchange ratio based on UAE Exchange

and expectations rather than actual results.

Prices decline in response to disappointing earnings.