EQUITY RESEARCH OF AUTOMOBILE COMPANIES LISTED

IN INDIA
Submitted in Partial fulfillment of the requirement for the award of the Degree of

Master of Business Administration.

Name of the Candidate : Nagadeep.M.U

Reg. No. : 16MB1130

Name of the Specialization : MBA Finance

Partner Institution : National School of Business

Under the guidance of

Swarnadeep Maity

Faculty National School of Business

Mysore University

2016-18
 CERTIFICATE

This is to certify that the project work entitled

..submitted to University of Mysore in

partial fulfillment of the requirements for the award of the degree of Master of Business
Administration in ..is a record of the original work done by
.under my supervision and
guidance and this project work has not formed the basis for the award of Degree or
similar title to any candidate of any University.

Signature of Director. Signature of Guide.

 ACKNOWLEDGEMENT

This project is a product of the valuable insights, facts, and gained lots of experience within the
organization.

It's my pleasure to express my deep sense of gratitude to Mr.Gopal Krishna for permitting me to
undergo training in their esteemed organization and being my external guide and thank him for his
cooperation and valuable suggestions throughout the period of internship.

I convey my heart full thanks to internal guide Mr. Swarnadeep Maity, my parents and all my friends for
their support, encouragement and help, without which this report could not have been successfully
completed. Also grateful to the entire staff and Professionals of Jwings Manifest Wealth for their
guidance and constructive cooperation in completion of this project.
 TABLE OF CONTENTS

Chapter Topics Page

No. Nos.
EXECUTIVE SUMMARY
ABSTRACT
Every individual always wishes to get a decent return on his/her
investments because investors makes the investment from the hard
earning savings. Among the various schemes of investment, the equity
market is considered to be one of the most rewarding avenues even
though it involves more risk. Since the risk is very high in equity
investment, the investors need to make equity analysis that helps them to
know about the risk-return characteristics of those equity shares and
those industries in which he/she wishes to park the savings. In this
outlook, a study has been undertaken to analyze the equity shares of
companies in the automobile industry of Indian stock market. Indian
automobile industry is one of the largest in the world and considered to
be one of the fastest growing sectors. In order to maintain the growing
demand, many automakers have started to invest in this industry. So the
study on equity analysis of this industry will help the potential investors
in taking informed and rational investment decision.

INTRODUCTION
Most of the investors commonly make poor investment
decisions caused by mental biases, greed and emotions. All the
investors make their investment with an avowed objective of
increasing their wealth. Among the various investment
opportunities equity market is said to be one of the most
rewarding investment options even though it involves more risk.
Since the risk is very high on such investment, the investors
need to make equity analysis that help them to know about tye
nature of those equity shares and those industries where they
park their money. Therefore the equity analysis will help the
potential investors in taking a rational and informed investment
decisions. In the background, a research has been carried out to
study the equity share of sample companies in Automobile
Industry in Indian stock market. The automotive industry has a
strong multiplier effect on the economic growth of a country.
The industry accounts for a 7.1% of the country's GDP and it
has a strong export growth expectations for the near future.
Moreover, the emerging interest of the companies in exploring
the rural markets further aided the growth for this sector. And in
order to maintain the growing demand, many auto makers have
started to invest in the industry. The main companies that
present in Indian automobile market include Maruti Suzuki India
ltd., Tata Motors, Mahindra and Mahindra Ltd., Ashok Leyland
Ltd., etc.
STATEMENT OF THE PROBLEM
The investment made in any security involves the element
of risk which may be very high or low. But such risk depends
upon the nature of the equity shares and the industry which the
company belongs to. Therefore before taking an rational
investment decision, it is good for the investors to analyse the
equity in terms of risk and return that provides a clear idea
regarding the risk return characteristics of the equity. This study
is undertaken to analyze the equity of selected automobile
companies listed in Indian stock market.
EQUITY RESEARCH:-
Equity research primarily means analyzing
companies financials, perform ratio analysis, forecast the
financial modeling and explore scenarios with an objective of
making buy/sell stock investment recommendation.
Equity analysts discuss their research and analysis
in their equity research reports.

Equity research in simple steps: -

1. Equity research is all about finding the valuation of a
listed company (Listed companies trade on stock
exchanges like NSE, BSE etc.)
2. Once you have a company under consideration, you
look at the economic aspects like GDP, Growth rates,
market size of the industry and the competition
aspects etc.
3. Once you understand the economics behind the
business, perform the financial statement analysis of
the historical balance sheet, cash flows and income
statement to form an opinion on how the company did
in the past.
4. Based on management's expectation, historical
performances and industry competition, project the
financial statements like Balance sheet, IS and Cash
flows of the company.
 5. Use the equity evaluation models like Discounted
cash flows, Relative valuations, sum of parts
valuation of the company.
6. Calculate the Fair price based on the above models
and compare the Fair price with the Current market
price.
7. If the Fair price is less than Current market price, then
the company stocks are overvalued and should be
recommended as a SELL.
8. If the Fair price is greater than Current market price,
then the company shares are undervalued and should
be recommended as a BUY.

Role of Equity Research: -

Equity research plays a very crucial role that fills the
information gap between the buyers and sellers of
shares.
Reason is that at all levels (Individual or
Institutional) may not have the resources or the
capabilities to analyze every stock.
Additional, full information is not provided by the
management due to which further inefficiencies are
created and stocks trade below or above the Fair
value.
Equity research analysts spend lot of time, energy
and expertise to analyze stocks, follow news, talking
 to the management and provide an estimate of stock
valuations.
Also, equity research tries to identify the value stocks
out of the massive ocean of stocks and help the
buyers to generate profits.

INDUSTRY PROFILE

BOMBAY STOCK EXCHANGE

Bombay stock Exchange(BSE) is located in Dalal
street on Mumbai and is oldest stock exchange in Asia. The
equity market capitalization of the companies listed on the BSE
was US$1 trillion as on December 2011, making in the 6th
largest stock exchange in Asia and 14th largest stock exchange in
the world. The BSE has the largest no. of listed companies in the
world. As of December 2011, there are 5,112 Indian companies
and over 8,196 scrips on the stock exchange, the BSE has a
significant trading volume.
BSE was established in 1875 as "The Native
Share and Stock brokers association", as a voluntary non-profit
making association. It has an evolved over the years into its
present status as the premier stock exchange in the country. It
may be noted that the stock exchange is the oldest one in Asia,
even older than Tokyo stock exchange which was founded in
1878. The exchange, while providing an efficient and
transparent market for trading in securities, upholds the interest
of investors and ensure redressed of their grievances, whether
against the company or its own member brokers. It also strives
to educate and enlighten the investors by making available
necessary informative inputs and conducting investor education
programs.

BSE INDICES
In order to enable the market participants, analysts
etc., to track the various ups and downs in the Indian stock
markets, the exchange has introduced in 1986 an equity stock
index called BSE-SENSEX that subsequently became the
barometer of the moments of the share price in the Indian stock
market. It is a "market capitalization weighted index" of 30
component stocks representing a sample of large, well-
established and leading companies. The base year of Sensex is
1978-79. The Sensex is widely reported in both domestic and
international markets through print as well as electronic media.
Sensex is calculated by using a market
capitalization market method. As per this methodology, the level
of the index reflects the total market value of all 30 component
stocks from different industries related to particular base period.
The total market value of a company is determined by
multiplying the price of its stock by the no. of shares
outstanding. Statisticians call an index as a set of variables (such
as price and no. of shares) a composite index. An Indexed no. is
used to represent the results of this calculation in order to make
the value easier to work with and track over a time. It is a much
easier to graph a chart based on indexed values than one based
on actual values world over majority of the well-known indices
are constructed using "market capitalization weighted method".
In practice, the daily calculation of sensex is done
by dividing the aggregate market value of the 30 companies in
the index by a number called the Index Divisor. The Divisor is
the only link to the original base period value of the Sensex. The
Divisor keeps the Index comparable over a period of time and if
the reference point for the entire Index maintenance
adjustments. Sensex is widely used to describe the mood in the
Indian Stock markets. Base year average is changes as per the
formula: - New base year average=old base year average*(new
value/old market value)

NATIONAL STOCK EXCHANGE

NSE was set with the objective of:-
1. Establishing a nationwide trading facility for all type of
securities.
2. Ensuring equal access to investors all over the country
through an appropriate communication network.
3. Providing a fair, efficient and transparent securities market
using electronic trading system.

The NSE was incorporated in November 1992

with an equity capital of Rs.25 crores. The international
securities consultancy (ISC) of Hong Kong has helped in
setting up NSE. ISE has prepared the detailed business
plans and installation of hardware and software systems.
It has been setup to strengthen the move towards
professionalization of the capital market as well as provide
nationwide securities trading facilities to investors. NSE is
not an exchange in the tradition sense where brokers own
and manage the exchange.
The NSE is the India's largest stock exchange
covering various cities and towns in the country. NSE setup
by leading institutions to provide a modern, fully
automated screen-based trading system with national reach.
The exchange has bought about un-parallel transparency,
speed and efficiency, safety and market integrity. It has
setup facilities that serve as a model for the securities
industry in terms of systems, practices and procedures.
NSE has plays a catalytic role in reforming Indian
securities market in terms of microstructure, market
practices and trading volumes. The market today uses a
state-of-art information technology to provide an efficient
and transparent trading, clearing and settlement
mechanism, and has witnessed several innovations in
 products and services viz. demutualization of stock
exchange governance, screen based trading, compression of
settlement cycles, dematerialization and electronic transfer
of securities, securities lending and borrowing
professionalization of trading members, fine-tuned risk
management systems, emergence of clearing corporations
to assume contemporary risks, market of debt and
derivative instrument and intensive use of information
technology.

NSE NIFTY:-
The NSE on April 22, 1996 launched a new equity
index. The NSE-50. The new index, which replaces the
existing NSE-100 index, is expected to serve as an
appropriate Index for the new segment of futures and
"Nifty" means national Index for Fifty stocks.
The NSE-50 companies that represent 20 board
Industry group with an aggregate market capitalization of
around 1,70,000 crores. All companies included in the
Index have a market capitalization in excess of Rs.
500crores each and should have traded for 85% of trading
days at an impact cost of less than 1.5%.
The base period for the Index is the close of prices
on November 3, 1995, which makes one year of completion of
operations on NSE's capital market segment. The base value of
the index has been set at 1000.
NSE-MIDCAP INDEX: -
The NSE MIDCAP INDEX or the junior Nifty
comprises 50 stocks that represents 21 abroad industry groups
and will provide proper representation on the midcap segment of
the Indian capital market. All stocks in the Index should have
market capitalization of greater than Rs.200 crores and should
have traded 85% of the trading days at an impact cost of less
than 2.5%.
The base period for the Index is November 4,
1996, which signifies two years for completion of operations of
the capital market segment of the operations. The base value of
the index has been set at 1000. Average daily turnover of the
present scenario 2,58,212 (lakhs) and number of average daily
trades 2,160 (lakhs).

COMPANY PROFILE
Introduction about internship in J wings Company:-
J wings focuses in training and educating individuals about
global market and to sharpen their skills to participate in the
financial world. J wings came alive with the intention to provide
support and guidance to new comers to the trading world. With
our knowledge and years of experience in trading we have
customized the training and made it simple for a layman to
understand the financial market.
Mission Statement: - To develop a meaningful and life long
relationship with the clients by providing them the highest
quality service and address every aspect of their financial related
issues.
Vision Statement: -To be the most trusted and respected
professional services firm recognized by our clients delivering
excellent services, which is value for money and more than their
expectations.
Values:-
1. Integrity.
2. Pursuit of excellence.
3. Accountability.
4. Collaboration.
5. Passion.

About J wings: - They are having a more than a year of

experience in financial service sectors. They offer technology
based services for their clients to effectively monitor their
portfolio and help them in reaching their financial goals. They
focus at being the most reliable prompt and efficient provider of
financial services. They endeavor to be one stop solutions for
financial boutique and to be immense help to investors, leaners
and provide help regarding stock market, advisory services,
training, investment planning, wealth creation and insurance.

Service profile:-
J Wings Company is a financial service provider.
It provides the various services as follows: -
1. Financial Planning:- To achieve your dreams and fulfill
your future obligations, you need to be carefully plan your
finances. This can be done via sound financial planning that
takes into account your current and future needs, your
individual risk profile and your income to chart out a
roadmap to meet these anticipated needs.
2. Investment Planning: - Placing of funds into the proper
investment vehicles based on the investor's future goal,
time horizon and priorities. This also takes into account the
safety of the investments as well as liquidity and level of
return. Ideally, proper investment planning will allow the
investor's funds to produce financial rewards over time.
3. Risk Management:- Risk management is the continuous
process to identify, analyze, evaluate and treat loss
exposures and monitor risk control to mitigate the adverse
effect of loss. While a variety of different strategies can
mitigate or eliminate risk, the process for identifying and
managing risk is fairly standard. First, threats or risks are
 identified, and then the vulnerability of key assets like
information to the identified threats is assessed.
4. Risk Control Techniques:-
Avoidance of activities which cause loss.
Reduction of the frequency of loss-risk
prevention.
Reduction of the severity of loss-risk
reduction.

NEED OF THE STUDY: -

Stock markets are the place to trade stock and
securities, it operates as facilitator between investors and
barrowers of capital by means of polling of funds, sharing
business risk and transferring their wealth. Prices of the shares
are changing in stock market on a daily basis. These changes in
share price may associate with the change in the underlying
economic factors, industry performance and company's growth.
Large numbers of foreign investors are coming and investing in
Indian Automobile sector due to its high potential growth in
future. Indian automobile industry is one of the most preferred
sectors by the investors since it is considered as the world's
largest and fastest growing sector. Many automakers have
started to invest in this sector. Among the equities listed on
Indian stock exchange, the equity of automobile industry is
considered to be one of the most rewarding securities. Similar to
its reward it involves high-risk characteristics also. Therefore
while making an investment in the automobile sector; a clear
equity analysis is needed. This research on equity analysis of
automobile industry in Indian stock market provides sufficient
information for the potential investors in taking a rational and
informed investment decision.
OBJECTIVES OF THE STUDY:-
1. The main objective of the study of this project is to do
fundamental analysis and technical analysis of an
automobile sector in India.
2. To explain how the basic tools of fundamental and
technical analysis may be applied to arrive at
investment decisions.
3. It aims at analyzing the tools of technical analysis
used for forecasting stock prices and interpreting
whether to buy or sell them.
4. To interpret the results of ratios and charts prepared
using the tools.
5. To carry out financial and non-financial analysis of
automobile sector.
6. To give suitable investment suggestions to an investor.

LIMITATIONS OF THE STUDY: -

1. The data available to me has been taken from the
secondary sources. It is not sure that all collected data
are accurate and complete.
2. The discussion of the tools of fundamental and
technical analysis is restricted by the time available
and size considerations for the project.
3. The interpretation of ratios and charts may vary from
one analyst to another.
4. Due to lack of experience and knowledge of the
automobile industry, it can't be said that the projection
has been made totally correct and accurate.
5. This study focused only on quantitative factors such as
GDP, Inflation rates etc. and it does not include
qualitative factors.

SCOPE OF THE STUDY: -

This study is most important because both Equity
research (fundamental and technical analysis) helps
investors in better understanding the markets and gauges
the direction in which their investments might be headed
and it's utility helps in estimating the future trends of the
stock prices and to make a decent profits out of it. This
study is established to gain knowledge about the
economic factors and industry analysis like industrial
growth rate, sales, revenue etc., and company analysis
through its profits, debt etc., by using descriptive
statistics and ratio analysis.
 LITERATURE REVIEW
Literature review on automobile Industry
This chapter presents a review of previous studies
relating to the research problem selected for the present study
and enables the researcher to have an in-depth knowledge over
the various concepts of research problem. A review of the
important studies and different concepts relating to the financial
performance has been presented.
Literature review is the significant aspect in the
research process because it is the only aspect that can be used to
find the research data from published informed sources.
Different ideas and opinions of scholars can be considered and
analyzed in a critical manner in order to fill the research gaps.
According to research and market report(2010),
Indian Automobile Industry has a bright history and the first car
in India came into the roads in the year1898 and liberalization
and globalization policies has shown major impact on Indian
auto industry which leads to drastic change in automobile
industry of India.
According to this article, automobile industry is
playing vital role in Economic sector and Employment sector,
which is offering wide range of employment opportunities to
individuals. Competition is the major problem in automobile
industry and especially in Indian auto industry is facing tough
competition with global companies in global and local markets.
Review of Literature: -
Some important research works undertaken in
recent years which are closely connected with the present study
are reviewed.
Shinde Govind p. & Dubey Manisha(2011) the study has been
conducted considering the segments such as passenger vehicle,
two and three wheelers vehicle of key player performance and
also analyze key factors influencing growth of automobile
industry.
:-Dr. Govind P. Shinde and Dr.Manisha Dubey Asian
Journal of Technology and management research Vol. 01-
Issue:01(Jan-Jun 2011)