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PROJECT WORK REPORT-ROUGH COPY

NAME :- NAGADEEP MU

NAME OF THE COMPANY :- JWINGS MANIFEST WEALTH

PLACE: - 960/1, 5th cross, DM complex,


Opp. V.V Convention Hall,
Babusapalya, Kalyan Nagar,
Bangalore-560043

PROJECT TITLE:-

EQUITY RESEARCH OF AUTOMOBILE COMPANIES LISTED IN


INDIA.

COMPANY GUIDE NAME :- GOPAL KRISHNA

TEL NO.:- 7204234392

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ABSTRACT
Every individual always wishes to get a decent return on his/her investments
because investor makes the investment from the hard earned 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 analyse 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. This study is
conducted for a period of 5 years, covering from 2012 to 2017. It takes only 50%
of the total companies forming NIFTY Auto index as on 21st April 2017. That is 8
companies.
INTRODUCTION
Most of the investors commonly make poor investment decision caused by mental
biases 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 helps them to know about the 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 decision. In this background, a research has been carried out
to study the equity shares of sampled companies in Automobile Industry in Indian
stock market. The automobile industry in India is one of the largest in the world
and considered to be a fastest growing sector. The automotive industry has a strong
multiplier effect on the economic growth of a country. The industry accounts for a
7.1% of the countrys GDP and it has 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 this industry. The
main companies that present in Indian automobile market include Tata Motors

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Limited, Maruti Suzuki India Limited, Mahindra & Mahindra Limited, Ashok
Leyland Limited 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 any 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 analyse 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 exchange like NSE, BSE etc.)
2. Once you have the 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

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and income statement to form an opinion on how the company did in the
past.
4. Based on managements expectation, historical performances and industry
competition, project the financial statements like the balance sheet, IS and
cash flows of the company.
5. Use the Equity valuation models like Discounted Cash Flows, Relative
valuations, sum of parts valuation 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 critical 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.
Additionally, full information is not provided by the management due to
which further in-efficiencies 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.

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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 Bombay stock exchange has a significant trading volume.
This stock exchange, Mumbai, popularly known as 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 premiere stock exchange in the country. It may be noted that
the stock exchanges 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 the investors
and ensures redressed of their grievances, whether against the companies 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.

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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 using a market capitalization weighted 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 number
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 values 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

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used to describe the mood in the Indian Stock markets. Base year average is
changed as per the formula new base year average= old base year average*(new
value/old market value)

NATIONAL STOCK EXCHANGE

NSE was setup with the objectives 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 25crores. 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 system.
It has been set up 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 National Stock Exchange is Indias largest stock exchange
covering various cities and towns in the country. NSE set up 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 set up
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facilities that serve as a model for the securities industry in terms of systems,
practices and procedures.
NSE has played a catalytic role in reforming the Indian securities
market in terms of microstructure, market practices and trading volumes.
The market today uses 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 counterpart 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 50 companies that represent 20 broad
Industry group with an aggregate market capitalization of around
Rs.1,70,000crores. 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 operation on NSEs capital
market segment. The base value of the index has been set at 1000.

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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 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 258212(laces) and number of average daily
trades 2160(laces).

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
program 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:-

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1. Integrity

2. Pursuit of excellence

3. Accountability

4. Collaboration

5. Passion.

About J wings:- We are having a more than a year of experience in financial


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

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J WINGS company is a financial service provider. It provides the various services
as follows.
1. Financial Planning: To achieve your dreams and fulfil your future obligations,
you need to 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 investors future goals, 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 investors funds to produce
financial rewards over time

3. Risk Management: Risk management is the continuing process to identify,


analyze, evaluate, and treat loss exposures and monitor risk control to mitigate the
adverse effects of loss. While a variety of different strategies can mitigate or
eliminate risk, the process for identifying and managing the 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:

a) Avoidance of activities which cause loss

b) Reduction of the frequency of loss-risk prevention

c) Reduction of the severity of loss-risk reduction

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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 changes in the underlying economic factors, industry
performance and companys 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 a worlds 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:-


o The main objective of the study of project is to do fundamental analysis of a
automobiles of companies.
o To explain how the basics tools of fundamental and technical analysis may
be applied to arrive at investment decisions.
o It aims at analyzing the tools of technical analysis used for forecasting stock
prices and interpreting whether to buy or sell them.

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o To interpret the results 0f ratios and charts prepared using the above tools.
o To carry out financial and non- financial analysis of automobile sector.
o To give suitable investment suggestions to an investor.

LIMITATIONS OF THE STUDY:-

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

SCOPE OF THE STUDY:-


This study is most important because both Equity Research(both
Fundamental and Technical analysis) helps investors in better understanding the
markets and gauges the direction in which their investments might be headed and
its 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 such as GDP, Inflation, Exchange rate and Interest rates, etc., and

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industry analysis like industrial growth rate, sales, revenue, etc., and company
analysis through its profits, debt, etc., by using descriptive statistics, ratio analysis.

DATA COLLECTION
This study is completely based on secondary data mainly collected from the
website of NSE (https://www.nseindia.com/). In addition to that, the data has also
been collected from published sources and also from websites/newspapers
(Business Standard. Economic Times), and Report by Management, Scholars,
Researchers etc.

Introduction to the Companies -


i) Tata Motors Ltd.- Tata Motors Limited (formerly TELCO, short for Tata
Engineering and
Locomotive Company) is an Indian multinational automotive manufacturing
company
Head-quarter in Mumbai, Maharashtra, India and a subsidiary of the Tata Group.
Its
Products include passenger cars, trucks, vans, coaches, buses, construction
equipment and military vehicles. It is the world's seventeenth-largest motor vehicle
manufacturing company, fourth-largest truck manufacturer and second-largest bus
manufacturer by volume. Founded in1945 as a manufacturer of locomotives, the
company manufactured its first commercial vehicle in 1954 in collaboration with
Daimler-Benz AG, which ended in 1969. Tata Motors entered the passenger
vehicle market in 1991 with the launch of the Tata Sierra, becoming the first Indian
manufacturer to achieve the capability of developing a competitive indigenous
automobile. In 1998.

Maruti Suzuki Ltd.-Maruti Suzuki India Limited, commonly referred to as Maruti


and formerly known as Maruti Udyog Limited, is another automobile manufacturer
in India. It is a subsidiary of Japanese automobile and motorcycle manufacturer
Suzuki. As of November 2012, it had a market share of 37% of the Indian
passenger car market. About 35% of all cars sold in India are made by Maruti. The
company is 54.2% owned by the Japanese multinational Suzuki Motor Corporation
per cent of Maruti Suzuki. The rest is owned by public and financial institutions.

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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
information 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
year 1898 and liberalization and globalization policies has shown major impact on
Indian auto industry which leads to drastic changes in automobile industry of India.
According to this article, automobile industry is playing vital role in
Economical sector and Employment sector, which is offering wide range of
employment opportunities to the individuals. Competition is the major problem in
automobile industry and especially in Indian auto industry is facing tough
competition with global companies in global markets and local markets.
India is a place with different communities of people with wide range of
cultures and preferences. While comparing Indian auto industry with global auto
industry India still needs to make many developments in order to compete
themselves with major global competitors.

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, utility
vehicle, two and three wheelers vehicle of key players performance and also
analyze SWOT analysis and key factors influencing growth of automobile
industry.

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Sharma Nishi(2011) studied the financial performance of passenger and
commercial vehicle segment of the automobile industry in terms of four
financial parameters namely liquidity, profitability , leverage and managerial
efficiency analysis for the period of decade from 2001-02 to 2010-11. The
study concludes the profitability and managerial efficiency of Tata motors as
well as Mahindra and Mahindra ltd. Are satisfactory but their liquidity
position is not satisfactory. The liquidity position of commercial vehicles is
much better than passenger vehicle segment.

Singh Amarjit & Gupta Vinod (2012) explored an overview of


automobile industry. Indian automobile industry itself as a manufacturing
hub and many joint ventures have been setup in India with foreign
collaboration. SWOT analysis done there are some challenges by the virtue
of which automobile industry faces lot of problems and some innovative key
features are keyless entry, electrically controlled mechanisms enhanced
dividing control, soft feel interiors and also need to focus in future on like
fuel efficiency, emission reduction safety and durability.

Zafar S.M.Tariq & Khalid S.M (2012) the study explored that ratios
are calculated from financial statements which are prepared as desired
policies adopted on depreciation and stock valuation by the management.
Ratio is simple comparisons of numerator and a denominator that cannot
produce complete and authentic picture of business. Results are manipulated
and also may not highlight other factors which affect performance of firm by
promoters.

Ray Sabapriya (2012) studied the sample of automobile companies to


evaluate the performance of industry through indicators namely sales,
production and export trend etc. for period of 2003-04 to 2009-10. The study
that automobile industry has been passing through disruptive phases by over
debt burden, under- utilization of assets and liability instability. The

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researcher suggest to improving the labour productivity, labour flexibility
and capital efficiency for success of industry in future.

Dawar Varun (2012) study to analyze the effect of various fundamental


corporate policy variables like dividend, debit, capital expenditure on stock
prices of automobile companies of India. The study tends that dividend &
investment policy are relevant and capital structure irrelevant to stock prices.

Mistry Dharmendra S. (2012) understood a study to analyze the effect


of various determinants on the profitability of the selected companies. It
concluded that debt equity ratio, inventory ratio, total assets were important
determinants which effect positive or negative effect on the profitability. It
suggested improving solvency as to reduce fixed financial burden on the
company profit & give the benefit of trading on equity to the shareholders.

Murlidhar, A.Lok Hande & Rana Vishal S.(2013) the author tries
to evaluate the performance of Hyundai motors Company with respect to
export, Domestic Sales, Productions and profit after tax. Or this purpose, the
pie chart and bar graph are used to show the performance of company
various years.

Dharmaraj, A. & Kathirvel N. (2013) explored an overview of new


industrial policy act 1991, which allow 100% FDI. An attempt is made to
find out the effect of FDI on financial performance of automobile industry. It
is concluded that the liquidity ratios shows minor changes and profitability
shows an increasing trend during post FDI when compared to pre FDI. Post
FDI efficiency ratio shows that companies are efficiently using the available
resources.

Rapheal Nisha (2013) the author tries to evaluate the financial


performance of Indian tyre industry. The study was conducted for period
2003-04 to 2011-12 to analyze the performance with financial indicators,
sales, trends, export trend, production trend etc. The result suggests the key
to success in industry is to improve labour productivity and flexibility and
capital efficiency.
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Hotwani Rakhi (2013) the author examines the profitability position and
growth of company is light of sales and profitability of Tata motors for past
10 years Data is analyzed through ratios, standard deviations and coefficient
of variance. The study reveals that there not exists a strong relationship
between sales and profitability of company.

Sharma Rashmi, Pande Neeraj & Singh Avinash (2013) for


understanding how social media monitoring can help diving the consumer
decision and also study. The functions of social media i.e, monitor,
responses amplify and lead at Maruti Suzuki India ltd. The researcher had
discussion with social media team median managers for collecting data and
also visited the official social media sites of MSIL.

Daniel A. Moses Joshunar (2013) Investing the impact of price


moment of share on selected company performance. It advise due investors
consider various factors before choosing the better portfolio. Sentimental
factors do play a role in price moment only in short term but in long run
annual performance is sole factor responsible for price moment.

Dhole Madhavi (2013) Investing the impact of price movement of share


on selected company performance, It advice due investors consider various
factors before choosing the better portfolio. Sentimental factors do play a
role in price movement only in short term but in long run annual
performance is sole factor responsible for price movement.

Rana S Vishal (2013) Performance Evaluation of Maruti Suzuki India


Ltd., Maruti Suzuki India Ltd. is Indias leading & largest passenger car
manufacturer which accounting for nearly 50 % of the total industry sales.
With a view to cater the demand of all types of customer the company has
variety of brands in basket. The company has received ample awards and
achievements due to its continuous innovations and technological
upgradations. The company today is very conscious about safeguarding the
environment from vehicle pollution which resulted in launching of its
advanced K-series.
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Shende Vikram (2014) this research will be helpful for the new entrants
and existing car manufacturing companies in India to find out the consumer
expectations and their market offerings. The objective of study is the
identification of factors influencing customers performance for particular
segment of cars.

Azhagaiah R. & Gounasegaran (2014) recognized Indias per capita


real GDP growth as one key drivers of growth for countrys automobile
industry. The central government would set up various task forces on issue
related to taxation, land acquisitions, labour reform and skill development
for auto industry.

Buvaneswari R. &Kanimozhip (2014) to study the credit worthiness


of selected firms in Indian car industry, Trichy. Professor Edward Altman of
New York University developed method Z score analysis to predict the
company failure or bankruptcy. To measure the fiscal fitness of a company
combined a set of five financial ratios.

Idhayajyothi, Retal (2014) the main idea behind this study is to analyze
the financial performance of Ashok Leyland ltd. At Chennai. The result
shows that financial performance is sound and also suggested to improve
financial performance by reducing the various expenses.

Huda Salhe Meften & Manish Roy Tirkey (2014) have studied the
financial analysis of Hindustan petroleum corporation ltd. The study is based
on secondary data. The company has got excellent gross profit ratio and
trend is rising in with is appreciable indicating efficiency in production cost.
The net profit for the year 2010-11 is excellent and it is 8 times past year
indicating reduction in operating reduction in operating expenses and large
proportion of net sales available to the Share Holders of company.

Srivastava Anubha (2014) Data analysis has been done using the top
down approach i.e., Economic analysis, industry analysis, company and
technical analysis to find relationship between automobile sector index with
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market index. Mahindra and Mahindra have a great position on the stock
market and will attract investor and this could lead to expansion and growth.
Thus Tata motors and Maruti Suzuki need to take care of their stock and
expansion.

Sarangi Pradeepta Ketal (2014) undertook a study to forecast the


future trend of automobile industry. The study highlighted the six different
experiments have been carried out for period of 12 years data to estimate
values for next 3 years. In each experiment graph has been plotted using
spreadsheet and then linear trend has been drawn and expanded to calculate
future values.

Kumar Sumesh & kaur Gurbachan (2014) Automobile sector is the


dominant player in economy of the world. After liberalization Indian
automobile industry has emerged as a major contributor to Indias GDP. The
study identified that there is no significant in the means score of various
financial roles of Maruti Suzuki and Tata motors but in meeting their long
term obligations and efficacy of utilizing the assets show the significant
difference in the efficiency of both the firms.

Krishnaveni M. & Vidya R. (2015) find that Indian automobile


industry is a high flying sector these days and emerging as an export hub in
wake of liberalization and globalization. This paper revises the category
wise production, sales and exports of automobile industry in India. Industry
growth can be viewed in term of pre and post liberalization. As government
allows 100% FDI, increase 15% in customs duty on cars and MUVs to
encourage local manufacturer and concessional import duty on specified
parts of hybrid vehicles.

Sarwade Walmik Kachru (2015) analyzed the effect of liberalization,


government de-licensing and liberal trade policies on the growth of Indian
automobile industry. The study recommends that investing four-wheeler is
going to be smart potion not only in India but all around the world.

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Becker Dieter (2015) the report shows the current state and future
prospects of the worldwide automobile industry. This survey report the
manufacturer, executive and consumer views about four aspects, mobility
culture, technological fit, business model readiness and market share.

Surekha B. & Krishniah K.Rama (2015) this study reveals the


prosperity of Tata Motors Company. It can be concluded that inner strength
of company is remarkable. Company can further improve its profitability by
optimum capital gearing, reduction in administration and financial expenses
for the growth of company.

Anu B. (2015) made an attempt to examine the relationship between


capital structure indicators, market price per shares and also to test
relationship between debt-equity and market price per share of selected
companies in industry. The study concludes that all three companies support
the hypothesis that there is relation between debt-equity and MPS.

Maheswari V.(2015) made an attempt to analyze the financial


soundness of the Hero Honda motors ltd. The financial data and information
required for the study are drawn from the various annual reports of
companies. The liquidity and leverage analysis of both the firms are done.
To analyze the leverage position four ratios are considered namely capital
gearing, debt-equity, total debt and proprietary ratio. The result shows that
Tata motors ltd. has to increase the portion of proprietors fund in business
to improve long term solvency position.

Nandhini M. & Sivasalathi V (2015) have studied the impact of both


financial leverages as well as operating leverage on the profitability of TVS
motor company. The result shows that company suffers from certain
weakness and suggested to control fixed cost as well as variable cost to gain
adequate profit.

Jothi K, & Kalaivani P (2015) studied the comparative performance of


Honda Motors and Toyota Motors that both companies have satisfactory
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short term liquidity position. As for as cash ratio concerned Honda company
has upper hand in sound cash management practice during the study period.
In case of profitability it is rising from both the companies but remained
much higher earning potential in Honda motor ltd.

Krishnaveni M, & Vidya R(2015) author has selected 87 companies


out of 242 companies in capital line database to discuss the standard current
ratio of automobile industry is matched with tractor and four sectors like
Engine parts, Lamps, Gears, and ancillaries with standard norms. The study
concludes that current and liquidity ratio of automobile industry is matched
with tractor and the four sectors but other sectors have to improve the
repairing capacity to strengthen the financial aspects.

Takeh Ata & Navaprabha Jubiliy(2015) author has made


conceptual made to outline the impact of capital structure on the financial
performance i.e. capital structure is independent variable that value is
measured by using four ratios namely Financial debt, total debt equity, total
asset debt and Interest coverage ratio whereas financial performance is
dependent variable that value is measured by using four ratios as return on
asset, return on equity, operating profit margin and return on capital
employed. Researcher has selected 13 major steel industries and applied
various statistical tools like standard deviation; correlation matrix, anova etc.
are employed for testing hypothesis with help of SPS22.

Kumar Rakesh Rasilalajni & Bhatt Satyaki J (2015) the


proposed research is intended to examine the trend and pattern of financing
the capital structure of Indian companies. The study is to analyze the
determinants of total debt ratio as well as determinants of short term and
long term ratios.

Kumar Neeraj & Kaur Kuldeep (2016) made an attempt to test the
size and profitability relationship in the Indian Automobile industry. To
analyze the relationship linear regression model as well as cross-sectional
has been employed for the year 1998-2014. For profitability analysis two
different measures has been used: Ratio of net profit to total sales turnover,
22
Ratio of net income to net sales plus working capital and for form size two
indicators used namely: total sales turnover and net assets. The time series
analysis shows no relationship between firm size and profitability.

Ravichandran M & Subramanium M Venkata (2016) the main


idea behind this study is to assessment of viability, stability, and profitability
of Force motors limited. Operating position of the company can be measured
by using various financial tools such as Profitability ratio, Solvency ratio,
Comparative statements and Graphs etc. This study finds that company has
got enough funds to meet its debts and liabilities. Company can further
improve financial performance by reducing the administrative, selling and
operating expenses.

Mathur Shivam & Agarwal Krati (2016) Ratios are an excellent and
scientific way to analyze the financial performance of any firm. The
company has received many awards and achievements due to its new
innovations and technological advancement. These indicators help the
investors help to invest the right company for expected profits. The study
shows that Maruti Suzuki ltd. is better than Tata motors ltd.

Jothi K, & Geetha Lakshmi A(2016) this study tries to evaluate the
profitability and financial position of selected companies of Indian
Automobile Industry using statistical tools like Ratio analysis, Standard
deviation, Correlation etc. The study reveals the positive relationship
between Profitability, short term and long term capital.

Kumar Mohan M.S, & V. Narayana T (2016) the study has been
made through using different ratios, mean, standard deviation, and Altmans
Z scope approach to study the financial health of the company. The study
reveals there is a positive correlation between liquidity and profitability
ratios except return on total assets as well as Z score value indicate good
health of the company.

Kumar Harpreet (2016) the author tries to examine the qualities and
quantities performer of Maruti Suzuki co. and how both impact had on its
23
market share in India. For this study secondary data has been collected from
annual reports, journals, and report automobiles sites. Results shows that
MSL has been successfully leading automobile sector in India for last few
years.

T. Mallikarjunappa and Shaini Naveen (2016) conducted a study


on Comparative Analysis of Risk and Return with Reference to Stocks of
CNX Bank Nifty. This study analyzes the risk and returns in the banking
sector. They compare the performance of the 12 listed banks in the Nifty
Bank Index. The study also analyses the performance of banking stocks
mainly to understand the required rate of return and risk of a particular stock
based on different risk elements prevailing in the market and other economic
factors.
Dr. S. Krishnaprabha and Mr. M. Vijayakumar (2015)
conducted a study on Risk and Return Analysis of Selected Stocks in India.
Risk and return analysis play an important role in the decision-making
process of most of the investors. Long term investors were able to take
advantage of the market as it less volatile. As there is less fluctuation in the
shares when compared to the market as well as its prices, the long-term
investors are able to predict when the share will raise. The majority of
Information Technology, Fast Moving Consumer Goods, Pharmaceutical
Sectors give more return while compared to Banking and Automobile sector.
Dr. Anubha Srivastava (2014) conducted a comprehensive study of
Performance of Indian Automobile Industry. In that study the Researcher
analyses 3 major automobile companies in India that are Maruti, Mahindra,
and Tata. The study found that the performance of the auto sector is directly
related to the countrys economic trend. It is also found that Mahindra and
Mahindra are the most correlated to the auto index than the other two
companies. The increasing demands and sales numbers of Indian auto bring
many opportunities for these players.
Dr. M. Muthu Gopalakrisnan and Dr. K. V. Ramanathan
(2013) conducted a Study on Volatility in Indian Stock Market A Study
of Post and Prerecession Period. In this study, the Researchers try to analyse
price fluctuation in Indian stock market. Estimating the volatility in the
market will help the investors in estimating or calculating their risk. They
analyse the volatility of sectoral index listed in Nifty as on 28-03-2013 using
daily opening price, closing price, high and low prices of 31 selected

24
companies. This study helps in identifying volatility relationship during Pre-
Recession and Post-Recession period.
S.Nagarajan and K.Prabhakaran (2013) conducted a study on
Equity Analysis of Selected FMCG Companies Listed on NSE. They had
used standard deviation, co- efficient of variation and beta for analysing the
shares of various selected FMCG companies. They found that the Nestle
India Ltd share price has 53% relationship with nifty index. It was much
lower than other companies selected from the FMCG sector.
Dr. P Vikkreaman and P Varadharajan (2009) analysed the equity
of selected companies in the automobile industry for the period of 2004 to
2007. They use Beta and Alpha techniques for analysing risk and return of
the automobile companies. The calculation of the return indicator and
systematic risk provide a clear understanding regarding the investment
decisions on these companies.

International Review of Literature


Donald Jr. Smith F., 1994 Agglomeration and industrial location: An
econometric analysis of Japanese-affiliated manufacturing establishments in
automotive-related industries This paper examines the role of a particular
type of agglomeration, the co-location of backward-and-forward-linked
manufacturing enterprises, in the process of industrial location. We develop
econometric models to test this hypothesis in light of a series of measure of
characteristics such as manufacturing density, unionization, wages, minority
concentration and taxes.
Garcia-Pont Boschma Ron A. and Wenting Rik, 2007 The
spatial evaluation of the British automobile industry: does location matter?
This article aims to describe and explain the spatial evaluation of the
automobile sector in Great Britain from an evolutionary perspective. This
analysis is based on a unique database of all entries and exits in this sector
during the period 1895-1968, collected by the authors. Cox regression shows
that spinoff dynamics, agglomeration economies and time of entry have had
a significant effect on the survival rate of automobile firms during the period
1895-1968.
Songini Lucrezia, 2007 Performance measurement of the after sales-
service network Evidence from the automobile industry The after sales
activities are now a days acknowledges as a relevant source of revenue,
profit and competitive advantage in most manufacturing industries. Top and

25
middle management, therefore, should focus on the definition of a structured
business performance measurement system for the after-sales business. The
cases show that performance measurement system of different supply chain
actors should be aligned in order to achieve strategic consistency.
Daniel Moses Joshuva, 2012, Financial status of Tata motors Ltd.
company has stable growth and also suggested to reduce the expenditure.
Decrease in expenses will increase the profitability. He also suggested that
company should the profitability. He also suggested that company should
utilize its working capital efficiently.

Learnings from Literature Review:


To find out the profitability and managerial efficiency of the companies,
four financial parameters namely liquidity, profitability, leverage and
managerial efficiency analysis should be calculated.
Ratios are calculated from financial statements which are prepared as
desired policies adopted on depreciation and stock valuation by the
management. Ratio is simple comparisons of numerator and a denominator
that cannot produce complete and authentic picture of business. Results are
manipulated and also may not highlight other factors which affect
performance of firm by promoters.
Data analysis can be done using the top down approach i.e., Economic
analysis, industry analysis, company and technical analysis to find
relationship between automobile sector index with market index.
To outline the impact of capital structure on the financial performance
i.e. capital structure is independent variable that value is measured by using
four ratios namely Financial debt, total debt equity, total asset debt and
Interest coverage ratio whereas financial performance is dependent variable
that value is measured by using four ratios as return on asset, return on
equity, operating profit margin and return on capital employed.
To evaluate the profitability and financial position of selected companies
of Indian Automobile Industry can be done using statistical tools like Ratio
analysis, Standard deviation, Correlation etc. and the output reveals the
positive relationship between Profitability, short term and long term capital.

26
Operating position of the company can be measured by using various
financial tools such as Profitability ratio, Solvency ratio, Comparative
statements and Graphs etc. This finds that company has got enough funds to
meet its debts and liabilities. Company can further improve financial
performance by reducing the administrative, selling and operating expenses.

ANALYSIS:

TOOLS FOR DATA ANALYSIS


The collected data have properly been analyzed with the help of Microsoft
Excel by applying various statistical tools. The researcher has mainly used the
following techniques for analyzing the collected data.
Mean
Standard deviation
Variance
Co-efficient of variance
Correlation
Beta

TABLE No. 1

MEAN RETURN Name of the Mean


OF Company Return
AUTOMOBILE
COMPANIES
Sl. No.

1 Mahindra & -0.0617


Mahindra Ltd.
2 Maruti Suzuki -0.1362
India Ltd.

27
3 Tata Motors -0.0678
Ltd.

4 Ashok -0.1096
Leyland Ltd.

5 Bosch Ltd. -0.0957


6 Eicher Motors -0.2227
Ltd.

7 Apollo Tyres -0.1104


Ltd.
8 Hero -0.0488
MotoCorp Ltd.

It has been observed from Table 1 that during the study period that is 2012
to 2017, all the companies show a negative daily mean return. The daily mean
return is recorded as highest (0.0488) in the case of Hero Moto Corp Ltd. Eicher
Motors Ltd has the lowest daily mean return that is -0.2227.

TABLE No. 2

STANDARD Name of the Company Standard


DEVIATION Deviation
OF
AUTOMOBILE
COMPANIES
Sl. No
1 Mahindra & 1.6569
Mahindra Ltd.

2 Maruti Suzuki 1.7185


India Ltd.
3 Tata Motors Ltd. 2.2689
4 Ashok Leyland 2.3895
Ltd.
5 Bosch Ltd. 1.6045
28
6 Eicher Motors 2.0426
Ltd.
7 Apollo Tyres Ltd. 2.5157
8 Hero MotoCorp 1.5895
Ltd.

From the Table 2, it is inferred that the standard deviation is high for Apollo
Tyres Ltd (2.5157) and it is very low for Hero MotoCorp Ltd that is 1.5895. Ashok
Leyland, Tata Motors, and Eicher Motors Ltd have a standard deviation of more
than 2. Since the standard deviation of return denotes the total risk, it is found that
among the selected companies, Apollo Tyres Ltd has the highest risk.

TABLE No. 3
VARIANCE OF Name of the Variance
AUTOMOBILE Company
COMPANIES
Sl. No

1 Mahindra & 2.7455


Mahindra
Ltd.

2 Maruti 2.9532
Suzuki
India Ltd.

3 Tata Motors 5.1483


Ltd.

4 Ashok 5.7099
Leyland
Ltd.
5 Bosch Ltd. 2.5746

6 Eicher 4.1723
Motors Ltd.
7 Apollo 6.3289

29
Tyres Ltd.
8 Hero 2.5266
MotoCorp
Ltd.
It is clear from Table 3 that the variance is recorded to be the highest for
Apollo Tyres Ltd (6.3289) followed by Ashok Leyland (5.7099) and Tata Motors
(5.1483). It is recorded very low as 2.5266 for Hero MotoCorp Ltd. So it is found
that among the selected companies Hero MotoCorp Ltd has the lowest risk.

TABLE No. 4
Name of the Company Coefficient of
COEFFICIENT OF Variation
VARIATION OF
AUTOMOBILE
COMPANIES Sl. No

1 Mahindra & -2685.3010


Mahindra Ltd.
2 Maruti Suzuki -1261.0932
India Ltd.
3 Tata Motors Ltd. -3345.2011

4 Ashok Leyland -2179.0472


Ltd.

5 Bosch Ltd. -1675.8348

6 Eicher Motors -916.9067


Ltd.

7 Apollo Tyres -2276.8474


Ltd.
8 Hero MotoCorp -3255.2384
Ltd.

30
Table 4 shows that all the automobile companies have a negative Coefficient
of Variation and it is recorded a high coefficient of variation for Eicher Motors Ltd
(-916.9067). The lowest value of Coefficient of Variation is -3345.2011 that is for
Tata Motors Ltd.

TABLE No. 5
CORRELATION Name of the Correlation
COEFFICIENT OF Company Coefficient
AUTOMOBILE
COMPANIES Sl. No
1 Mahindra & 0.6580
Mahindra Ltd.
2 Maruti Suzuki 0.6151
India Ltd.
3 Tata Motors Ltd. 0.8168

4 Ashok Leyland 0.4917


Ltd.
5 Bosch Ltd. 0.4160

6 Eicher Motors 0.4234


Ltd.
7 Apollo Tyres 0.4461
Ltd.
8 Hero MotoCorp 0.5484
Ltd.
Table 5 exhibits the correlation coefficient between the daily return of
individual automobile companies and the return of NIFTY Auto index. It can be
understood that all the automobile companies return are positively correlated with
the return of NIFTY Auto index. The correlation is highest for Tata Motors Ltd as
compared to other company that is 0.8168 and it is very low for Bosch
Ltd(0.4160).

TABLE No. 6
BETA AND Name of the Beta Alpha
ALPHA OF Company
AUTOMOBI
LE
COMPANIES
Sl. No

1 Mahindra & 0.9082 0.0073


Mahindra Ltd.

31
2 Maruti Suzuki 0.8805 -0.0692
India Ltd.
3 Tata Motors 1.5437 0.0496
Ltd.

4 Ashok 0.9786 -0.0352


Leyland
Ltd.

5 Bosch Ltd. 0.5561 -0.0534

6 Eicher Motors 0.7204 -0.1679


Ltd.

7 Apollo Tyres 0.9348 -0.0393


Ltd.

8 Hero 0.7262 0.0064


MotoCorp
Ltd.

It is clearly understood from Table 6 that all automobile companies show a


positive volatile during the study period. Tata Motors Ltd shows the highest beta
value of 1.5437 followed by Ashok Leyland Ltd (0.9786). Bosch Ltd assumes a
very low Beta value among all sample companies (0.5561). The table also shows
the return indicator that is alpha. The highest alpha value is 0.0496 that is for Tata
Motors Ltd. except for Mahindra & Mahindra and Hero MotoCorp all other
companies have a negative alpha value.

Growth rate of Indian auto sector -


Year on year growth % of Indian automobile
industry.
Segments

Domestic Exports Total

FY09 0.2% 53.7% 6.8%

FY10 25.7% 32.9% 27.0%


FY11 28.2% -0.4% 22.9%
FY12 5.1% 14.5% 6.5%
FY13 2.2% 9.0% 3.3%

FY14 3 to 4% 9.0% 4.0%

32
Findings

During the study period, the average daily return of all the selected
companies in the automobile sector is negative. Among all the companies, Hero
MotoCorp Ltd (-0.0488) has the highest negative daily average return.
The correlation coefficient between the daily return of selected automobile
companies with the return of NIFTY Auto index is highest for Tata Motors Ltd as
compared to other company that is 0.8168 and it is very low for Bosch Ltd
(0.4160).
Tata Motors Ltd has a beta value of more than one (1.5437). It shows that
the market risk of Tata Motors is very high. On the other hand, the alpha value is
also high for Tata Motors (0.0496). Therefore it has a potential of gaining a high
return.
The beta values of all other companies are less than one. Therefore the risk
of such equity will be low. Similarly, their alpha values are also less. Therefore
such equities have a low return.

Types of Analysis:-
The methods used to analyze securities and make investment decisions fall into
two very broad categories: fundamental analysis and technical analysis.
Fundamental analysis involves analyzing the characteristics of a company in order
to estimate its value.
Technical analysis takes a completely different approach; it doesnt care
one bit about the value of a company or a commodity. Technicians (sometimes
called chartists) are only interested in the price movements in the market.

33
Despite all the fancy and exotic tools it employs, technical analysis really just
studies supply and demand in a market in an attempt to determine what direction,
or trend, will continue in the future. In other words, technical analysis attempts to
understand the emotions in the market by studying the market itself, as opposed to
its components. If you understand the benefits and limitations of technical analysis,
it can give you a new set of tools or skills that will enable you to be a better trader
or investor.

Fundamental Analysis:-

Fundamental analysis is the process of looking at a business at the basic or


fundamental financial level. This type of analysis examines key ratios of a business
to determine its financial health and gives you an idea of the value its stock. Many
investors use fundamental analysis alone or in combination with other tools to
evaluate stocks for investment purposes. The goal is to determine the current worth
and, more importantly, how the market values the stock. This article focuses on the
key tools of fundamental analysis and what they tell you. Even if you dont plan to
do in-depth fundamental analysis yourself, it will help you follow stocks more
closely if you understand the key ratios and terms.

The basic tools are:-


1) Earnings per Share
2) Price to Earnings Ratio
3) Dividend Payout Ratio

34
4) Dividend Yield
5) Book Value
6) Return on capital employed

Tools of financial analysis are:


1. Earnings per Share Basic earnings per share should be calculated by
dividing the net profit or loss for the period attributable to equity shareholders by
the weighted average number of equity shares outstanding during the period. For
the purpose of calculating basic earnings per share, the net profit or loss for the
period attributable to equity shareholders should be the net profit or loss for the
period after deducting preference dividends and any attributable tax thereto for the
period. For the purpose of calculating diluted earnings per share, the net profit or
loss for the period attributable to equity shareholders and the weighted average
number of shares outstanding during the period should be adjusted for the effects
of all dilutive potential equity shares.
2. Price to Earnings Ratio P/E is short for the ratio of a company's share
price to its per share earnings. As the name implies, to calculate the P/E, you
simply take the current stock price of a company and divide by its earnings per
share (EPS): P/E Ratio = Market Price per Share / Earnings per Share (EPS) Most
of the time, the P/E is calculated using EPS from the last four quarters. This is also
known as the trailing P/E. However, occasionally the EPS figure comes from
estimated earnings expected over the next four quarters. This is known as the
leading or projected P/E. Theoretically, a stock's P/E tells us how much investors
are willing to pay per rupee of earnings. For this reason it's also called the
"multiple" of a stock.
3. Projected Earnings Growth It is defined as a stock's price-to-earnings
ratio divided by the growth rate of its earnings for a specified time period. The
price/earnings to growth (PEG) ratio is used to determine a stock's value while
taking the company's earnings growth into account, and is considered to provide a
more complete picture than the P/E ratio. While a high P/E ratio may make a stock
look like a good buy, factoring in the company's growth rate to get the stock's PEG
ratio can tell a different story. The lower the PEG ratio, the more the stock may be
undervalued given its earnings performance. The calculation is as follows: P/E
ratio 4 Annual EPS Growth the PEG ratio that indicates an over or underpriced
stock varies by industry and by company type, though a broad rule of thumb is that
a PEG ratio below one is desirable. Also, the accuracy of the PEG ratio depends on
the inputs used. Using historical growth rates, for example, may provide an

35
inaccurate PEG ratio if future growth rates are expected to deviate from historical
growth rates. To distinguish between calculation methods using future growth and
historical growth, the terms "forward PEG" and "trailing PEG" are sometimes
used.
4. Price to Sales Ratio It is a valuation ratio that compares a company's stock
price to its revenues. The price-to-sales ratio is an indicator of the value placed on
each rupee of a company's sales or revenues. It can be calculated either by dividing
the company's market capitalization by its total sales over a 12- month period, or
on a per-share basis by dividing the stock price by sales per share for a 12-month
period. Like all ratios, the price-to-sales ratio is most relevant when used to
compare companies in the same sector. A low ratio may indicate possible
undervaluation, while a ratio that is significantly above the average may suggest
overvaluation. Abbreviated as the P/S ratio or PSR, this ratio is also known as a
"sales multiple" or "revenue multiple.' The 12-month period used for sales in the
price-to-sales ratio is generally the past four quarters (also called trailing 12
months), or the most recent or current fiscal year. A price-to sales ratio that is
based on forecast sales for the current year is called a forward ratio.
5. Price to Book It is a ratio used to compare a stock's market value to its book
value. It is calculated by dividing the current closing price of the stock by the latest
quarter's book value per share. It is calculated as follows: P/E Ratio = Market Price
per share / Book value per share Book value per share = Shareholder's Funds /
Number of shares A lower P/B ratio could mean that the stock is undervalued.
However, it could also mean that something is fundamentally wrong with the
company. As with most ratios, this ratio varies by industry. This ratio also gives
some idea of whether the investor is paying too much for what would be left if the
company went bankrupt immediately.
6. Dividend Payout Ratio It is the percentage of earnings paid to shareholders
in dividends. Dividend Payout Ratio = Dividend per share / Earnings per share. A
reduction in dividends paid is looked poorly upon by investors, and the stock price
usually depreciates as investors seek other dividend-paying stocks. A stable
dividend payout ratio indicates a solid dividend policy by the company's board of
directors.
7. Dividend Yield financial ratio that shows how much a company pays out
in dividends each year relative to its share price. Dividend yield is calculated as
follows: Dividend Yield = Dividend per share / Market Price per share. Dividend
yield is a way to measure how much cash flow investors are getting for each rupee
invested in an equity position. Investors who require a minimum stream of cash
flow from their investment portfolio can secure this cash flow by investing in
stocks paying relatively high, stable dividend yields.

36
8. Return on Capital Employed It is a financial ratio that measures a
company's Return on Capital Employed (ROCE) is calculated as: ROCE =
Earnings before Interest and Tax (EBIT) / Capital Employed "Capital Employed"
as shown in the denominator is the sum of shareholders' equity and debt liabilities;
it can be simplified as (Total Assets - Current Liabilities). Instead of using capital
employed at an arbitrary point in time, analysts and investors often calculate
ROCE based on "Average Capital Employed," which takes the average of opening
and closing capital employed for the time period. A higher ROCE indicates more
efficient use of capital. ROCE should be higher than the company's capital cost;
otherwise it indicates that the company is not employing its capital effectively and
is not generating shareholder value. ROCE is a useful metric for comparing
profitability across companies based on the amount of capital they use. Even
though there are clear differences between simple moving averages and
exponential moving averages, one is not necessarily better than the other.
Exponential moving averages have less lag and are therefore more sensitive to
recent prices - and recent price changes. Exponential moving averages will turn
before simple moving averages. Simple moving averages, on the other hand,
represent a true average of prices for the entire time period. As such, simple
moving averages may be better suited to identify support or resistance levels.

Technical analysis:-
Technical analysis is the examination of past price moments to forecast
future price moments. Technical analysts are sometimes referred to as chartists
because they rely almost exclusively on charts for their analysis.

Moving average:-
A moving average is an indicator that shows the average value of a
securitys price over a period of time. When calculating a moving average, a
mathematical analysis of the securitys average value over a predetermined time

37
period is made. As the securities price changes, its average price moves up or
down.
There are several popular ways to calculate a moving average. Meta stock
for Java calculates a simple moving average-meaning that equal weight is given
to each price over the calculation period.

SUPPORT AND RESISTANCE:-


Support and resistance represents key junctures where the forces of supply
and demand meet. In the financial markets, prices are driven by excessive supply
(down) and demand (up). Supply is synonymous with bearish, bears and selling.
Demand is anonymous with bullish, bulls and buying. These terms are used
interchangeably throughout this and other articles. As demand increases, price
advances and as supply increases, price decline. When supply and demand are
equal, prices move sideways as bulls and bears slug it out for control.

What is Support?
Support is the price level at which demand is though to be strong
enough to prevent the price from declining further. The logic dictates that as the
price declines towards support and gets cheaper, buyers become more inclined to
buy and sellers become less inclined to sell. By the time the price reaches the
support level, it is believed that demand will overcome supply and prevent the
price from falling below support.
Support does not always hold and a break below support signals that the
bears have won out over the bulls. A decline below support indicates a new
willingness to sell and / or a lack of incentive to buy. Support breaks and new lows
signal that sellers have reduced their expectations and are willing sell at even lower

38
prices. In addition, buyers could not be coerced into buying until prices declined
below support or below the previous low. Once support is broken, another support
level will have to be established at a lower level.
Where is support established?
Support levels are usually below the current price, but it is not uncommon
for a security to trade at or near support. Technical analysis is not an exact science
and it is sometimes difficult to set exact support levels. In addition, price moments
can be volatile and dip below support briefly. Sometimes it does not seem logical
to consider a support level broken if the price closes 1/8 below the established
support level. For this reason, some traders and investors establish support zones.

What is resistance?
Resistance is the price level at which selling is thought to be strong enough
to prevent the price from rising further. The logic dictates that as the price
advances towards resistance, sellers become more inclined to sell and buyers
become less inclined to buy. By the time the price reaches the resistance level, it is
believed that supply will overcome demand and prevent the price from rising
above resistance.
Resistance does not always hold and a break above resistance signals that
the bulls have won out over the bears. A break above resistance shows a new
willingness to buy and / or a lack of incentive to sell. Resistance breaks and new
highs indicate buyers have increased their expectations and are willing to buy at
even higher prices. In addition, sellers could not be coerced into selling until prices
rose above resistance or above the previous high. Once resistance is broken,
another resistance level will have to be established at a higher level.

39
Where is resistance established?
Resistance levels are usually above the current price, but it is not uncommon
for a security to trade at or near resistance. In addition, price moments can be
volatile and rise above resistance briefly. Sometimes it does not seem logical to
consider a resistance level broken if the price closes 1/8 above the established
resistance level. For this reason, some traders and investors establish resistance
zones.
So, here, Identification of key support and resistance levels is an essential
ingredient to successful technical analysis. Even though it is sometimes difficult to
establish exact support and resistance levels, being aware of their existence and
location can greatly enhance analysis and forecasting abilities. If a security is
approaching an important security level, it can serve as an alert to be extra vigilant
in looking for signs of increased buying pressure and a potential reversal. If a
security is approaching a resistance level, it can act as an alert to look for signs of
increased selling pressure and potential reversal. If a support or resistance level is
broken, it signs that a relationship between supply and demand has changed. A
resistance breakout signals that supply (bears) has won the battle.

RELATIVE STRENGTH INDEX:-


RSI, developed by J.Wells welder is a momentum oscillator that measures
the speed and change in price. The value of RSI oscillates between 0 to 100.
Traditionally, accordingly to wilder, when the RSI values reaches above 70, it is
said to be overbought and when RSI is below 30 it is oversold situation.

BOLLINGER BAND:-

40
Bollinger band In 1980s John Bollinger, a long time technician of the
market developed the technique of projecting the price of stock by indicating price
range of the stock based on the stock volatility. The Bollinger bands are calculated
based on the range of price movement relative to the moving average. Bollinger
Bands provide a range of high and low price. Bollinger Bands consists of a set of 3
lines drawn around the price structure. The middle band is a simple moving
average which serves as the central reference for the upper and lower bands. The
areas between the upper and lower bands and the middle band are determined by
the standard deviation. Overbought situation arises when the price reaches the
upper band which tends to fall back towards the central band. Similarly the prices
reach the lower band, it is considered to be oversold.

CANDLE STICK CHARTING:-


Japanese Candlesticks used for any Forex period, whether it be one day,
hourly, 30-minutes, weekly and monthly. They used to describe the price action
during the given period. Japanese Candle sticks are formed using the open, high,
low, and close of the chosen time period.

Green candle stick:- it is referring to Buy or Bull candle which specifies that
Opening at low price and closing at high price.

Red candle stick:- it is referring to Sale or Bearish candle which specifies that
Opening at high price and closing at low price.

41
Fundamental analysis:

1} E.P.S in brief:
Maruti Suzuki
(Rs crore)
Mar ' 17 Mar ' 16 Mar ' 15 Mar ' 14 Mar ' 13
Sales 68,034.80 57,538.10 49,970.64 43,700.63 43,587.93
Operating profit 10,353.00 8,884.40 6,712.97 5,095.91 4,229.68
Interest 89.40 81.50 206.02 175.85 189.82
Gross profit 12,543.40 10,263.90 7,338.53 5,742.96 4,852.23
EPS (Rs) 242.97 177.63 122.86 92.13 79.19

Tata motors
(Rs crore)
Mar ' 17 Mar ' 16 Mar ' 15 Mar ' 14 Mar ' 13
Sales 44,363.60 42,845.47 36,294.74 34,288.11 44,765.72
Operating profit 1,498.64 2,723.65 -1,237.48 -911.15 1,717.98
Interest 1,590.15 1,592.00 1,611.68 1,337.52 1,387.76
Gross profit 887.33 2,533.96 -967.75 1,584.36 2,418.42
EPS (Rs) -7.30 -0.18 -14.72 1.04 0.95

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2) Price to Earnings Ratio:

Maruti Suzuki
Current market price as on 30th September is 7978rs/-
EPS is 243/-
So, P/E Ratio is 7978/243=32.56/-
Tata Motors
Current market price as on 30th September is 401/-
EPS is -10.3/-
So, P/E Ratio is -39.98

9000
8000 Series1
7000
Series2
6000
5000 Series3

4000
Series4
3000
Series5
2000
1000
0
1 2 3 4 5 6
-1000

The above table shows the comparison of Profit Earnings ratio of Maruti
Suzuki and Tata motors.

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3) Dividend Payout Ratio
Maruti Suzuki

Maruti Suzuki India Ltd's dividend payout ratio for the months ended
in Mar. 2017 was 0.00.

During the past 13 years, the highest Dividend Payout Ratio of Maruti Suzuki
India Ltd was0.14. The lowest was 0.00. And the median was 0.09.

As of Today, the Dividend Yield % of Maruti Suzuki India Ltd is 0.00%.

During the past 13 years, the highest Trailing Annual Dividend Yield of Maruti
Suzuki India Ltd was 0.92%. The lowest was 0.00%. And the median was 0.46%.

Maruti Suzuki India Ltd's Dividends per Share for the months ended in Mar.
2017 was $0.00.

During the past 12 months, Maruti Suzuki India Ltd's average Dividends Per
Share Growth Rate was 40.00% per year. During the past 3 years, the average
Dividends per Share Growth Rate was 63.60% per year. During the past 5 years,
the average Dividends per Share Growth Rate was 39.80% per year. During
the past 10 years, the average Dividends per Share Growth Rate was 23.10% per
year.

During the past 13 years, the highest 3-Year average Dividends Per Share Growth
Rate of Maruti Suzuki India Ltd was 63.60% per year. The lowest was 0.00% per
year. And the median was 17.00% per year.

Tata motors

As of Today, the Dividend Yield % of Tata Motors Ltd is 0.00%.

During the past 13 years, the highest Trailing Annual Dividend Yield of Tata
Motors Ltd was10.92%. The lowest was 0.00%. And the median was 1.37%.

Tata Motors Ltd's Dividends per Share for the months ended in Mar.
2017 was $0.00.

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During the past 3 years, the average Dividends Per Share Growth Rate was -
53.40% per year.

During the past 13 years, the highest 3-Year average Dividends Per Share Growth
Rate of Tata Motors Ltd was 55.30% per year. The lowest was 0.00% per year.
And the median was -12.60% per year.

4) Dividend Yield
Maruti Suzuki

45
Tata motors
46
5) Book Value Per Share (Quarterly)
Maruti Suzuki
1197.72/-

Tata motors
61.26/-

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Technical Analysis of Automobile Sector

1. Closing prices movement comparisons

The closing prices of the Maruti Suzuki ltd have been consistent over the
years and that is the reason why we see the above graph of 1 year.

Tata motors

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Following is the graph showing the movement of the closing stock
prices of Tata motors ltd for the past 1 year

Comparison
MARUTI SUZUKI INDIA LTD
7904.25 -73.95 ( -0.92 % )

Market Cap 241005.47

BV 1227.33

P/E 40.70

Dividend Yield 0.94

EV/EBITDA 18.91

P/BV 6.50

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ROC 25.31

Debt to Equity Ratio 0.01

ROE 18.03

3 Year CAGR Sales 15.32

TATA MOTORS LTD


417.45 15.95 ( 3.972 % )

Market Cap 127231.05

BV 200.74

P/E 18.24

Dividend Yield 0.00

EV/EBITDA 6.60

P/BV 2.00

ROC 0.00

Debt to Equity Ratio 0.76

ROE 0.00

3 Year CAGR Sales 5.02

WEBSITES
https://www.nseindia.com/
www.moneycontrol.com
www.investopedia.com
www.economictimes.com
http://www.sebi.gov.in/investor/recog.html
www.ndtvprofit.com

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www.finance.yahoo.com.
www.macrotrends.net
www.nseindia.com
www.money.rediff.com
www.Investing.com

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