INDIAN STOCK MARKETS

28 TH OCTOBER 2018

WEEK AHEAD FOR THE MARKETS

a) Continuing with the results season, around 800 companies would be declaring their results in the next week, notably
BPCL, HDFC AMC, Bank of Baroda, JK Tyre, Tata Motors, HDFC, etc.
b) Auto Sales data for the month of September will be coming out in this week.
c) Prices of Crude have fallen by 3.5 percent in the week gone by, any more fall will be taken as a positive cue by the
Indian market.
d) Italy going ahead with a budget deficit of 2.4 percent of GDP, which is not as per EU’s guidelines and might lead to
recession in the EU can weigh in on the market.
e) The Index of Industrial Production (IIP) will be out on 31st October.

FUNDAMENTAL ANALYSIS

Fundamental Analysis of a company is based on the concept of finding the true value of a company. The theory generates from
the Efficient Market Hypothesis which states that the market discounts all available information and reflects it in the price.

The Fundamental Analysis is of two types- Quantitative & Qualitative.

An Analyst to identify a company can either take a Top-Down approach or a Bottoms-Up approach. In a Top-Down approach we
first look at the economy, then a favourable industry and then find a company with the strongest fundamentals. In a Bottoms
down approach, first a company is identified on the basis of favourable news and then the industry and economy are analysed.

Some of the key documents to gain information about the company: Annual Reports, Investor Presentations, Conference Call
Transcripts and Broker Research Reports. An analyst can also attend Annual General Meetings & Analyst Calls of the company to
ask questions related to the company and find more information which he can use to analyse the company in a better way.
Renowned Asset Management Companies conduct primary research, wherein they interact with stakeholders like Customers,
Suppliers, Wholesalers to learn more about the business of the company and how this can affect the company.

Some of the factors to look for in a company are, Qualitative factors like Quality of Management, Quality of Business,
Sustainability of business, Management Guidance, etc. and Quantitative Factors like Profitability Margins (EBITDA,Gross,Net),
Capital Structure, Debt Repaying Capacity, Valuation Multiples, etc.

After doing the analysis a valuation modelling is done. Valuation is done by two factors- Intrinsic Valuation & Relative Valuation.
Intrinsic Valuation is a comprehensive concept where the entire Financial statements are projected for the next 3-5 years and
are discounted using the Weighted Average Cost of Capital of the firm. In Relative Valuation, a comparable company is found in
the market where the product or service overlap is generally around 60-70% and then the valuation multiple is used to value the
company.

Disclaimer: All the news has been collated from Internet. Views are personal and no guarantee is given for the views.