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I hereby declare that this dissertation report titled “Fundament Analysis of Equity Traded At
india infonian” has been prepared by me during the academic year 2018-19 under the guidance
of my faculty guide Prof. Radha Mahatme.
I also declare that this project is the result of my effort and has not been submitted to any other
university or institution for the award of any degree, or personal favor whatsoever. All the details
and analysis provided in the report hold true to the best of my knowledge.
GUIDE DECLARATION
It is certified that the dissertation report titled “Fundament Analysis of Equity Traded At india
infonian” Being submitted Nizam M Sheikh student of MBA (2017-19) is genuine and carried
out under my supervision and guidelines, this project is the partial fulfillment of the requirement
for the Degree of Master of Business Administration from Dr. D. Y. Patil Institute of
Management & Entrepreneur Development.
skills, expand their craniums by applying various theories, concepts and laws to real life scenario
Entrepreneur Development, which helps in overall development of the student and gives
him or her platform to understand the corporate environment as well as to implement the
theoretical knowledge.
I would like to thank my faculty guide Prof. Radha Mahatme for her valuable guidance and
1. Introduction to research
1.1 Introduction
1.2 Executive summary
1.3 Objectives of the study
1.4 Need/Purpose of the study
1.5 Scope of the study
2. Review of literature
2.1 Security analysis
2.2 Fundamental analysis
3. Industry profile
3.1 Financial market
3.2 Classification of financial market
3.3 Indian Financial market
3.4 Financial market regulations
3.5 Stock exchanges in India
4. Company Profile
5. Research Methodology
7. Learning of student
7.1 Findings
7.2 Suggestions
7.3 Conclusions
7.4 Limitations
8. References and bibliography
1. INTRODUCTION TO RESEARCH
1.1 Introduction
India is a developing country. Nowadays many people are interested to invest in financial markets
especially on equities to get high returns, and to save tax in honest way. Equities are playing a
major role in contribution of capital to the business from the beginning. Since the introduction of
shares concept, large numbers of investors are showing interest to invest in stock market.
In an industry plagued with skepticism and a stock market increasingly difficult to predict and
contend with, if one looks hard enough there may still be a genuine aid for the Day Trader and
Short Term Investor.
The price of a security represents a consensus. It is the price at which one person agrees to buy
and another agrees to sell. The price at which an investor is willing to buy or sell depends primarily
on his expectations. If he expects the security's price to rise, he will buy it; if the investor expects
the price to fall, he will sell it. These simple statements are the cause of a major challenge in
forecasting security prices, because they refer to human expectations. As we all know firsthand,
human’s expectations are neither easily quantifiable nor predictable. If prices are based on investor
expectations, then knowing what a security should sell for (i.e., fundamental analysis) becomes
less important than knowing what other investors expect it to sell for. That's not to say that knowing
what a security should sell for isn't important--it is. But there is usually a fairly strong consensus
of a stock's future earnings that the average investor cannot disprove
Fundamental analysis and technical analysis can co-exist in peace and complement each other.
Since all the investors in the stock market want to make the maximum profits possible, they just
cannot afford to ignore either fundamental or technical analysis.
1.2 Executive summary
The automobile industry, one of the core sectors, has undergone metamorphosis with the advent
of new business and manufacturing practices in the light of liberalization and globalization. The
sector seems to be optimistic of posting strong sales in the couple of years in the view of a
reasonable surge in demand. The Indian automobile market is gearing towards international
standards to meet the needs of the global automobile giants and become a global hub.
A detailed analysis of Automobile industry has been covered in respect of past growth and
performance. Under this project to better understand the Industry I have used Fundamental tools
which covers effect of Recession, the impact of inflation, FDI’s, Export, and GDP etc. on
Automobile Industry. The Industry Analysis has been done with the help of SWOT analysis and
industry life cycle. For Company Analysis as a part of Fundamental tool we have undergone with
the comparative analysis of TATA Motors the leading company, Maruti Suzuki India’s largest Car
manufacturer and Mahindra and Mahindra along with the help of ratio analysis. The fundamental
At the end conclusion and recommendations have been specified so as to make the project work
more meaningful and purposeful.
1.3 Objectives of the study
The objective of this project is to deeply analyze our Indian Automobile Industry for investment
purpose by monitoring the growth rate and performance on the basis of historical data.
Comparative analysis of three tough competitors TATA Motors, Maruti Suzuki and
Stock is ownership in a company, with each share of stock representing a tiny piece of ownership.
The more shares you own, the more of the company you own. The more shares you own, the more
dividends you earn when the company makes a profit. In the financial world, ownership is called
“Equity”.
Stock/shares play a major role in acquiring capital to the business in return investors are paid
dividends to the shares they own. The more shares you own the more dividends you receive.
The role of equity analysis is to provide information to the market. An efficient market relies on
information: a lack of information creates inefficiencies that result in stocks being misrepresented
(over or under valued). This is valuable because it fills information gaps so that each individual
investor does not need to analyze every stock thereby making the markets more efficient.
1.5 Scope of the study
The scope of the study is identified after and during the study is conducted. The project is based
on tools like fundamental analysis and ratio analysis. Further, the study is based on information of
The analysis is made by taking into consideration three companies i.e. TATA Motors,
The scope is limited to only the fundamental analysis of the chosen stocks.
2. REVIEW OF LITERATURE
2.1 Security analysis
Investment success is pretty much a matter of careful selection and timing of stock purchases
coupled with perfect matching to an individual’s risk tolerance. In order to carry out selection,
timing and matching actions an investor must conduct deep security analysis.
These two factors are affected by a host of factors. An investor has to carefully understand and
analyze all these factors. There are basically two approaches to study security prices and valuation
The value of common stock is determined in large measure by the performance of the firm that
issued the stock. If the company is healthy and can demonstrate strength and growth, the value of
the stock will increase. When values increase then prices follow and returns on an investment will
increase. However, just to keep the savvy investor on their toes, the mix is complicated by the risk
factors involved. Fundamental analysis examines all the dimensions of risk exposure and the
probabilities of return, and merges them with broader economic analysis and greater industry
instrument based on economic, political, environmental and other relevant factors and statistics
that will affect the basic supply and demand of whatever underlies the financial instrument. It is
the study of economic, industry and company conditions in an effort to determine the value of a
company’s stock. Fundamental analysis typically focuses on key statistics in company’s financial
statements to determine if the stock price is correctly valued. The term simply refers to the analysis
of the economic well-being of a financial entity as opposed to only its price movements.
Fundamental analysis is the cornerstone of investing. The basic philosophy underlying the
fundamental analysis is that if an investor invests re.1 in buying a share of a company, how much
The fundamental analysis is to appraise the intrinsic value of a security. It insists that no one should
purchase or sell a share on the basis of tips and rumors. The fundamental approach calls upon the
investors to make his buy or sell decision on the basis of a detailed analysis of the information
about the company, about the industry, and the economy. It is also known as “top-down approach”.
This approach attempts to study the economic scenario, industry position and the company
2. Industry analysis
3. Company analysis
COMPANY
ANALYSIS
INDUSTRY
ANALYSIS
ECONOMIC
ANALYSIS
1. Economic analysis
The level of economic activity has an impact on investment in many ways. If the economy grows
rapidly, the industry can also be expected to show rapid growth and vice versa. When the level of
economic activity is low, stock prices are low, and when the level of economic activity is high,
stock prices are high reflecting the prosperous outlook for sales and profits of the firms. The
analysis of macroeconomic environment is essential to understand the behavior of the stock prices.
Gross Domestic Product (GDP): GDP indicates the rate of growth of the economy. It represents
the aggregate value of the goods and services produced in the economy. It consists of personal
goods and services and net exports of goods and services. The growth rate of economy points out
the prospects for the industrial sector and the return investors can expect from investment in shares.
Savings and investment: It is obvious that growth requires investment which in turn requires
substantial amount of domestic savings. Stock market is a channel through which the savings are
made available to the corporate bodies. Savings are distributed over various assets like equity
shares, deposits, mutual funds, real estate and bullion. The savings and investment patterns of the
Inflation: Along with the growth of GDP, if the inflation rate also increases, then the real growth
would be very little. The effects of inflation on capital markets are numerous. An increase in the
expected rate of inflation is expected to cause a nominal rise in interest rates. Also, it increases
uncertainty of future business and investment decisions. As inflation increases, it results in extra
costs to businesses, thereby squeezing their profit margins and leading to real declines in
profitability
Interest rates: The interest rate affects the cost of financing to the firms. A decrease in interest
rate implies lower cost of finance for firms and more profitability. More money is available at a
lower interest rate for the brokers who are doing business with borrowed money. Availability of
Tax structure: Every year in March, the business community eagerly awaits the Government’s
announcement regarding the tax policy. Concessions and incentives given to a certain industry
encourage investment in that particular industry. Tax relief’s given to savings encourage savings.
The type of tax exemption has impact on the profitability of the industries.
Infrastructure facilities: Infrastructure facilities are essential for the growth of industrial and
agricultural sector. A wide network of communication system is a must for the growth of the
economy. Regular supply of power without any power cut would boost the production. Banking
and financial sectors also should be sound enough to provide adequate support to the industry.
similar products and Industry analysis is a type of business research that focuses on the status of
Irrespective of specific economic situations, some industries might be expected to perform better,
and share prices in these industries may not decline as much as in other industries. This
identification of economic and industry specific factors influencing share prices will help investors
Industry Life Cycle: The industry life cycle theory is generally attributed to Julius Grodensky.
The life cycle of the industry is separated into four well defined stages.
Pioneering stage: The prospective demand for the product is promising in this stage and
the technology of the product is low. The demand for the product attracts many producers
to produce the particular product. There would be severe competition and only fittest
companies survive this stage. The producers try to develop brand name, differentiate the
product and create a product image. In this situation, it is difficult to select companies for
Rapid growth stage: This stage starts with the appearance of surviving firms from the
pioneering stage. The companies that have withstood the competition grow strongly in
market share and financial performance. The technology of the production would have
improved resulting in low cost of production and good quality products. The companies
have stable growth rate in this stage and they declare dividend to the shareholders. It is
would be more or less equal to the industrial growth rate or the gross domestic product
growth rate. Symptoms of obsolescence may appear in the technology. To keep going,
The investors have to closely monitor the events that take place in the maturity stage of the
industry.
Decline stage: demand for the particular product and the earnings of the companies in the
industry decline. It is better to avoid investing in the shares of the low growth industry even
in the boom period. Investment in the shares of these types of companies leads to erosion
of capital.
Growth of the industry: The historical performance of the industry in terms of growth and
profitability should be analyzed. The past variability in return and growth in reaction to macro
Nature of competition: Nature of competition is an essential factor that determines the demand
for the particular product, its profitability and the price of the concerned company scrips. The
companies' ability to withstand the local as well as the multinational competition counts much. If
too many firms are present in the organized sector, the competition would be severe. The competi-
tion would lead to a decline in the price of the product. The investor before investing in the scrip
of a company should analyze the market share of the particular company's product and should
SWOT analysis: SWOT analysis represents the strength, weakness, opportunity and threat for an
industry. Every investor should carry out a SWOT analysis for the chosen industry. Take for
instance, increase in demand for the industry’s product becomes its strength, presence of numerous
players in the market, i.e. competition becomes the threat to a particular company. The progress in
R & D in that industry is an opportunity and entry of multinationals in the industry is a threat. In
company and evaluates the present and future values of the stock. The risk and return associated
with the purchase of the stock is analyzed to take better investment decisions. The present and
Competitive edge of the company: Major industries in India are composed of hundreds of
individual companies. Though the number of companies is large, only few companies control the
major market share. The competitiveness of the company can be studied with the help of the
following;
Market share: The market share of the annual sales helps to determine a company’s
relative competitive position within the industry. If the market share is high, the company
would be able to meet the competition successfully. The companies in the market should
be compared with like product groups otherwise, the results will be misleading.
Growth of sales: The rapid growth in sales would keep the shareholder in a better position
than one with stagnant growth rate. Investors generally prefer size and growth in sales
because the larger size companies may be able to withstand the business cycle rather than
Stability of sales: If a firm has stable sales revenue, it will have more stable earnings. The
fall in the market share indicates the declining trend of company, even if the sales are
stable. Hence the stability of sales should be compared with its market share and the
Earnings of the company: Sales alone do not increase the earnings but the costs and expenses of
the company also influence the earnings. Further, earnings do not always increase with increase in
sales. The company’s sales might have increased but its earnings per share may decline due to rise
in costs. Hence, the investor should not only depend on the sales, but should analyze the earnings
of the company.
Financial analysis: The best source of financial information about a company is its own financial
statements. This is a primary source of information for evaluating the investment prospects in the
particular company’s stock. Financial statement analysis is the study of a company’s financial
statement from various viewpoints. The statement gives the historical and current information
about the company’s operations. Historical financial statement helps to predict the future and the
current information aids to analyze the present status of the company. The two main statements
used in the analysis are Balance sheet and Profit and Loss Account.
The balance sheet is one of the financial statements that companies prepare every year for their
shareholders. It is like a financial snapshot, the company's financial situation at a moment in time.
It is prepared at the year end, listing the company's current assets and liabilities. It helps to study
the capital structure of the company. It is better for the investor to avoid a company with excessive
debt component in its capital structure. From the balance sheet, liquidity position of the company
can also be assessed with the information on current assets and current liabilities.
Ratio analysis: Ratio is a relationship between two figures expressed mathematically. Financial
ratios provide numerical relationship between two relevant financial data. Financial ratios are
calculated from the balance sheet and profit and loss account. The relationship can be either
expressed as a percent or as a quotient. Ratios summarize the data for easy understanding,
leverage ratios. Profitability ratios are the most popular ratios since investors prefer to measure the
present profit performance and use this information to forecast the future strength of the company.
The most often used profitability ratios are return on assets, price earnings multiplier, price to book
value, price to cash flow, and price to sales, dividend yield, return on equity, present value of cash
ROA is computed as the product of the net profit margin and the total asset turnover ratios.
This ratio indicates the firm's strategic success. Companies can have one of two strategies: cost
leadership, or product differentiation. ROA should be rising or keeping pace with the company's
competitors if the company is successfully pursuing either of these strategies, but how ROA rises
will depend on the company's strategy. ROA should rise with a successful cost leadership strategy
because the company’s increasing operating efficiency. An example is an increasing, total asset,
turnover ratio as the company expands into new markets, increasing its market share. The company
may achieve leadership by using its assets more efficiently. With a successful product
ROI is the return on capital invested in business, i.e., if an investment Rs 1 crore in men, machines,
land and material is made to generate Rs. 25 lakhs of net profit, then the ROI is 25%. The
As this ratio reveals how well the resources of a firm are being used, higher the ratio, better are
the results. The return on shareholder’s investment should be compared with the return of other
similar firms in the same industry. The inert-firm comparison of this ratio determines whether the
investments in the firm are attractive or not as the investors would like to invest only where the
return is higher.
c) Return on Equity
Return on equity measures how much an equity shareholder's investment is actually earning. The
return on equity tells the investor how much the invested rupee is earning from the company. The
higher the number, the better is the performance of the company and suggests the usefulness of
The ratio is more meaningful to the equity shareholders who are invested to know profits earned
by the company and those profits which can be made available to pay dividend to them.
This ratio determines what the company is earning for every share. For many investors, earnings
are the most important tool. EPS is calculated by dividing the earnings (net profit) by the total
The EPS is a good measure of profitability and when compared with EPS of similar other
companies, it gives a view of the comparative earnings or earnings power of a firm. EPS calculated
for a number of years indicates whether or not earning power of the company has increased.
The extent of payment of dividend to the shareholders is measured in the form of dividend per
share. The dividend per share gives the amount of cash flow from the company to the owners and
is calculated as follows:
The payment of dividend can have several interpretations to the shareholder. The distribution of
dividend could be thought of as the distribution of excess profits/abnormal profits by the company.
On the other hand, it could also be negatively interpreted as lack of investment opportunities. In
all, dividend payout gives the extent of inflows to the shareholders from the company.
From the profits of each company a cash flow called dividend is distributed among its shareholders.
This is the continuous stream of cash flow to the owners of shares, apart from the price differentials
(capital gains) in the market. The return to the shareholders, in the form of dividend, out of the
company's profit is measured through the payout ratio. The payout ratio is computed as follows:
The profits available for distribution are either paid as dividends or retained internally for business
growth opportunities. Hence, when dividends are not declared, the entire profit is ploughed back
g) Dividend Yield
Dividend yield is computed by relating the dividend per share to the market price of the share. The
market place provides opportunities for the investor to buy the company's share at any point of
time. The price at which the share has been bought from the market is the actual cost of the
investment to the shareholder. The market price is to be taken as the cum-dividend price. Dividend
yield relates the actual cost to the cash flows received from the company. The computation of
Dividend yield = (Dividend per share / Market price per share) * 100
High dividend yield ratios are usually interpreted as undervalued companies in the market. The
market price is a measure of future discounted values, while the dividend per share is the present
return from the investment. Hence, a high dividend yield implies that the share has been under
priced in the market. On the other hand a low dividend yield need not be interpreted as
overvaluation of shares. A company that does not pay out dividends will not have a dividend yield
and the real measure of the market price will be in terms of earnings per share and not through the
dividend payments.
This ratio is calculated to make an estimate of appreciation in the value of a share of a company
and is widely used by investors to decide whether or not to buy shares in a particular company.
Many investors prefer to buy the company's shares at a low P/E ratio since the general
interpretation is that the market is undervaluing the share and there will be a correction in the
market price sooner or later. A very high P/E ratio on the other hand implies that the company's
shares are overvalued and the investor can benefit by selling the shares at this high market price.
i) Debt-to-Equity Ratio
Debt-Equity ratio is used to measure the claims of outsiders and the owners against the firm’s
assets.
The debt-equity ratio is calculated to measure the extent to which debt financing has been used in
a business. It indicates the proportionate claims of owners and the outsiders against the firm’s
assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the
firm.
3. INDUSTRY PROFILE
3.1 Financial market
Finance is the pre-requisite for modern business and financial institutions play a vital role in the
economic system. It is through financial markets and institutions that the financial system of an
economy works. Financial markets refer to the institutional arrangements for dealing in financial
assets and credit instruments of different types such as currency, cheques, bank deposits, bills,
Financial market is a broad term describing any marketplace where buyers and sellers participate
in the trade of assets such as equities, bonds, currencies and derivatives. They are typically defined
by having transparent pricing, basic regulations on trading, costs and fees and market forces
Generally, there is no specific place or location to indicate a financial market. Wherever a financial
transaction takes place, it is deemed to have taken place in the financial market. Hence financial
markets are pervasive in nature since financial transactions are themselves very pervasive
throughout the economic system. For instance, issue of equity shares, granting of loan by term
lending institutions, deposit of money into a bank, purchase of debentures, sale of shares and so
on.
In a nutshell, financial markets are the credit markets catering to the various needs of the
individuals, firms and institutions by facilitating buying and selling of financial assets, claims and
services.
Organized Unorganized
markets markets
Money Lenders,
Capital Markets Money Markets Indigenuos
Bankers
Industrial
Call Money
Securities
Market
Market
Commercial Bill
Primary Market
Market
Government
Securities
Market
Long-term loan
market
Capital Market
The capital market is a market for financial assets which have a long or indefinite maturity.
Generally, it deals with long term securities which have a period of above one year. In the widest
sense, it consists of a series of channels through which the savings of the community are made
available for industrial and commercial enterprises and public authorities. As a whole, capital
2. Securing the foreign capital and know-how to fill up deficit in the required resources for
3. Effective allocation of the mobilized financial resources, by directing the same to projects
development.
Primary market: Primary market is a market for new issues or new financial claims. Hence it is
also called as New Issue Market. It basically deals with those securities which are issued to the
public for the first time. The market, therefore, makes available a new block of securities for public
subscription. In other words, it deals with raising of fresh capital by companies either for cash or
for consideration other than cash. The best example could be Initial Public Offering (IPO) where
Secondary market: Secondary market is a market where existing securities are traded. In other
words, securities which have already passed through new issue market are traded in this market.
Generally, such securities are quoted in the stock exchange and it provides a continuous and regular
market for buying and selling of securities. This market consists of all stock exchanges recognized
Money Market
Money marketsare the markets for short-term, highly liquid debt securities. Money market
securities are generally very safe investments which return relatively low interest rate that is most
appropriate for temporary cash storage or short term time needs. It consists of a number of sub-
markets which collectively constitute the money market namely call money market, commercial
Derivatives Market
The derivatives market is the financial market for derivatives, financial instruments like futures
contracts or options, which are derived from other forms of assets. A derivative is a security whose
price is dependent upon or derived from one or more underlying assets. The derivative itself is
merely a contract between two or more parties. Its value is determined by fluctuations in the
bonds, commodities, currencies, interest rates and market indexes. The important financial
Forwards: Forwards are the oldest of all the derivatives. A forward contract refers to an
agreement between two parties to exchange an agreed quantity of an asset for cash at a
certain date in future at a predetermined price specified in that agreement. The promised
Options: A financial derivative that represents a contract sold by one party (option
writer) to another party (option holder). The contract offers the buyer the right, but not the
obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon
price (the strike price) during a certain period of time or on a specific date (exercise date).
Call options give the option to buy at certain price, so the buyer would want the stock to
go up. Put options give the option to sell at a certain price, so the buyer would want the
stock to go down.
forwards by two counterparties. It is arranged to reap the benefits arising from the
fluctuations in the market – either currency market or interest rate market or any other
It is a market in which participants are able to buy, sell, exchange and speculate on
currencies. Foreign exchange markets are made up of banks, commercial companies, central
banks, investment management firms, hedge funds, and retail forex brokers and investors. The
forex market is considered to be the largest financial market in the world. It is a worldwide
decentralized over-the-counter financial market for the trading of currencies. Because the currency
markets are large and liquid, they are believed to be the most efficient financial markets. It is
important to realize that the foreign exchange market is not a single exchange, but is constructed
of a global network of computers that connects participants from all parts of the world.
Commodities Market
It is a physical or virtual marketplace for buying, selling and trading raw or primary products. For
investors' purposes there are currently about 50 major commodity markets worldwide that facilitate
investment trade in nearly 100 primary commodities. Commodities are split into two types: hard
and soft commodities. Hard commodities are typically natural resources that must be mined or
extracted (gold, rubber, oil, etc.), whereas soft commodities are agricultural products or livestock
The history of Indian capital markets dates back 200 years toward the end of the 18th century when
India was under the rule of the East India Company. The development of the capital market in
India concentrated around Mumbai where no less than 200 to 250 securities brokers were active
The financial market in India today is more developed than many other sectors because it was
organized long before with the securities exchanges of Mumbai, Ahmadabad and Kolkata were
By the early 1960s the total number of securities exchanges in India rose to eight, including
Mumbai, Ahmadabad and Kolkata apart from Madras, Kanpur, Delhi, Bangalore and Pune. Today
there are 21 regional securities exchanges in India in addition to the centralized NSE (National
However the stock markets in India remained stagnant due to stringent controls on the market
economy that allowed only a handful of monopolies to dominate their respective sectors. The
corporate sector wasn't allowed into many industry segments, which were dominated by the state
controlled public sector resulting in stagnation of the economy right up to the early 1990s.
Thereafter when the Indian economy began liberalizing and the controls began to be dismantled
or eased out; the securities markets witnessed a flurry of IPO’s that were launched. This resulted
in many new companies across different industry segments to come up with newer products and
services.
A remarkable feature of the growth of the Indian economy in recent years has been the role played
by its securities markets in assisting and fuelling that growth with money rose within the economy.
This was in marked contrast to the initial phase of growth in many of the fast growing economies
of East Asia that witnessed huge doses of FDI (Foreign Direct Investment) spurring growth in their
initial days of market decontrol. During this phase in India much of the organized sector has been
affected by high growth as the financial markets played an all-inclusive role in sustaining financial
resource mobilization. Many PSUs (Public Sector Undertakings) that decided to offload part of
their equity were also helped by the well-organized securities market in India.
The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange
of India) during the mid 1990s by the government of India was meant to usher in an easier and
more transparent form of trading in securities. The NSE was conceived as the market for trading
in the securities of companies from the large-scale sector and the OTCEI for those from the small-
scale sector. While the NSE has not just done well to grow and evolve into the virtual backbone
of capital markets in India the OTCEI struggled and is yet to show any sign of growth and
development. The integration of IT into the capital market infrastructure has been particularly
smooth in India due to the country’s world class IT industry. This has pushed up the operational
efficiency of the Indian stock market to global standards and as a result the country has been able
to capitalize on its high growth and attract foreign capital like never before.
The regulating authority for capital markets in India is the SEBI (Securities and Exchange Board
of India). SEBI came into prominence in the 1990s after the capital markets experienced some
turbulence. It had to take drastic measures to plug many loopholes that were exploited by certain
market forces to advance their vested interests. After this initial phase of struggle SEBI has grown
in strength as the regulator of India’s capital markets and as one of the country’s most important
institutions.
3.4 Financial market regulations
Regulations are an absolute necessity in the face of the growing importance of capital markets
throughout the world. The development of a market economy is dependent on the development of
the capital market. The regulation of a capital market involves the regulation of securities; these
rules enable the capital market to function more efficiently and impartially.
A well regulated market has the potential to encourage additional investors to partake, and
contribute in, furthering the development of the economy. The chief capital market regulatory
SEBI is the regulator for the securities market in India. It is the apex body to develop and regulate
the stock market in India It was formed officially by the Government of India in 1992 with SEBI
Act 1992 being passed by the Indian Parliament. Chaired by C B Bhave, SEBI is headquartered in
the popular business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern,
Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmadabad. In place
of Government Control, a statutory and autonomous regulatory board with defined responsibilities,
to cover both development & regulation of the market, and independent powers has been set up.
fulfillment of its objectives with commendable zeal and dexterity. The improvements in the
corporations etc. reduced the risk of credit and also reduced the market.
SEBI has introduced the comprehensive regulatory measures, prescribed registration norms, the
eligibility criteria, the code of obligations and the code of conduct for different intermediaries like,
bankers to issue, merchant bankers, brokers and sub-brokers, registrars, portfolio managers, credit
rating agencies, underwriters and others. It has framed bye-laws, risk identification and risk
management systems for Clearing houses of stock exchanges, surveillance system etc. which has
made dealing in securities both safe and transparent to the end investor.
Another significant event is the approval of trading in stock indices (like S&P CNX Nifty &
Sensex) in 2000. A market Index is a convenient and effective product because of the following
reasons:
Two broad approaches of SEBI is to integrate the securities market at the national level, and also
to diversify the trading products, so that there is an increase in number of traders including banks,
financial institutions, insurance companies, mutual funds, primary dealers etc. to transact through
the Exchanges. In this context the introduction of derivatives trading through Indian Stock
successively (e.g. the quick movement towards making the markets electronic and paperless
rolling settlement on T+2 bases). SEBI has been active in setting up the regulations as required
under law.
3.5 Stock exchanges in India
Stock Exchanges are an organized marketplace, either corporation or mutual organization, where
members of the organization gather to trade company stocks or other securities. The members may
act either as agents for their customers, or as principals for their own accounts.
As per the Securities Contracts Regulation Act, 1956 a stock exchange is an association,
organization or body of individuals whether incorporated or not, established for the purpose of
assisting, regulating and controlling business in buying, selling and dealing in securities.
Stock exchanges facilitate for the issue and redemption of securities and other financial
instruments including the payment of income and dividends. The record keeping is central but
trade is linked to such physical place because modern markets are computerized. The trade on an
exchange is only by members and stock broker do have a seat on the exchange.
A very common name for all traders in the stock market, BSE, stands for Bombay Stock Exchange.
It is the oldest market not only in the country, but also in Asia. In the early days, BSE was known
as "The Native Share & Stock Brokers Association." It was established in the year 1875 and
became the first stock exchange in the country to be recognized by the government. In 1956, BSE
obtained a permanent recognition from the Government of India under the Securities
Contract(Regulation)Act,1956.
In the past and even now, it plays a pivotal role in the development of the country's capital market.
This is recognized worldwide and its index, SENSEX, is also tracked worldwide. Earlier it was an
Association of Persons (AOP), but now it is a demutualised and corporatised entity incorporated
under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatizations and
Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).
BSE Vision
The vision of the Bombay Stock Exchange is to "Emerge as the premier Indian stock exchange by
BSE Management
Bombay Stock Exchange is managed professionally by Board of Directors. It comprises of eminent
professionals, representatives of Trading Members and the Managing Director. The Board is an
inclusive one and is shaped to benefit from the market intermediaries participation.
The Board exercises complete control and formulates larger policy issues. The day-to-day
operations of BSE are managed by the Managing Director and its school of professional as a
management team.
BSE Network
The Exchange reaches physically to 417 cities and towns in the country. The framework of it has
been designed to safeguard market integrity and to operate with transparency. It provides an
efficient market for the trading in equity, debt instruments and derivatives. Its online trading
system, popularly known as BOLT, is a proprietary system and it is BS 7799-2-2002 certified. The
BOLT network was expanded, nationwide, in 1997. The surveillance and clearing & settlement
BSE Facts
BSE as a brand is synonymous with capital markets in India. The BSE SENSEX is the benchmark
equity index that reflects the robustness of the economy and finance. It was the –
First in India to obtain ISO certification for Surveillance, Clearing & Settlement
'BSE On-Line Trading System’ (BOLT) has been awarded the globally
BS7799-2:2002.
BSE with its long history of capital market development is fully geared to continue its
contributions to further the growth of the securities markets of the country, thus helping India
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study
Stock Exchange by financial institutions (FI’s) to provide access to investors from all across the
country on an equal footing. Based on the recommendations, NSE was promoted by leading
Financial Institutions at the behest of the Government of India and was incorporated in November
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in
April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June
1994. The Capital Market (Equities) segment commenced operations in November 1994 and
NSE GROUP
operations in April 1996. It was formed to build confidence in clearing and settlement of securities,
to promote and maintain the short and consistent settlement cycles, to provide a counter-party risk
NSE.IT Ltd.
It is also a wholly owned subsidiary of NSE and is its IT arm. This arm of the NSE is uniquely
positioned to provide products, services and solutions for the securities industry. NSE.IT primarily
focuses on in the area of trading, broker front-end and back-office, clearing and settlement, web-
based, insurance, etc. Along with this, it also provides consultancy and implementation services in
Data Warehousing, Business Continuity Plans, Site Maintenance and Backups, Stratus Mainframe
It is a joint venture between NSE and CRISIL Ltd. to provide a variety of indices and index related
services and products for the Indian Capital markets. It was set up in May 1998. IISL has a
consulting and licensing agreement with the Standard and Poor's (S&P), world's leading provider
November 1996.
NSE Facts
It uses satellite communication technology to energize participation from around 400 cities
in India.
It is one of the largest interactive VSAT based stock exchanges in the world.
The NSE- network is the largest private wide area network in India and the first extended
Presently more than 9000 users are trading on the real time-online NSE application.
Today, NSE is one of the largest exchanges in the world and still forging ahead. At NSE, we are
constantly working towards creating a more transparent, vibrant and innovative capital market.
OTCEI was incorporated in 1990 as a section 25 company under the companies Act 1956 and is
recognized as a stock exchange under section 4 of the securities Contracts Regulation Act, 1956.
The exchange was set up to aid enterprising promotes in raising finance for new projects in a cost
effective manner and to provide investors with a transparent and efficient mode of trading Modeled
along the lines of the NASDAQ market of USA, OTCEI introduced many novel concepts to the
Indian capital markets such as screen-based nationwide trading, sponsorship of companies, market
making and scrip less trading. As a measure of success of these efforts, the Exchange today has
115 listings and has assisted in providing capital for enterprises that have gone on to build
successful brands for themselves like VIP Advantage, Sonora Tiles & Brilliant mineral water, etc.
Studies by NASSCOM, software technology parks of India, the venture capitals funds and the
government’s IT tasks Force, as well as rising interest in IT, Pharmaceutical, Biotechnology and
Media shares have repeatedly emphasized the need for a national stock market for innovation and
Innovative companies are critical to developing economics like India, which is undergoing a major
technological revolution. With their abilities to generate employment opportunities and contribute
to the economy, it is essential that these companies not only expand existing operations but also
set up new units. The key issue for these companies is raising timely, cost effective and long term
capital to sustain their operations and enhance growth. Such companies, particularly those that
have been in operation for a short time, are unable to raise funds through the traditional financing
methods, because they have not yet been evaluated by the financial world.
4. COMPANY PROFILE
India Infoline Limited
India Infoline is a one-stop financial services shop, most respected for quality of its information,
Vision
Our vision is to be the most respected company in the financial services space.
owned subsidiaries, include the entire financial services space with offerings ranging from Equity
research, Equities and derivatives trading, Commodities trading, Portfolio Management Services,
Mutual Funds, Life Insurance, Fixed deposits, GoI bonds and other small savings instruments to
India Infoline also owns and manages the websites www.indiainfoline.com and www.5paisa.com.
The company has a network of over 2100 business locations (branches and sub-brokers) spread
across more than 450 cities and towns. The group caters to approximately a million customers.
Founded in 1995 by Mr. Nirmal Jain (Chairman and Managing Director) as an independent
business research and information provider, the company gradually evolved into a one-stop
India Infoline received registration for a housing finance company from the National Housing
Bank and received the ‘Fastest growing Equity Broking House - Large firms’ in India by Dun &
Bradstreet in 2009. It also received the Insurance broking license from IRDA; received the venture
capital license; received in principle approval to sponsor a mutual fund; received ‘Best broker-
India’ award from Finance Asia; ‘Most Improved Brokerage- India’ award from Asia money.
Company structure
India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock
Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both
the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services and
Portfolio Management Services. It offers broking services in the Cash and Derivatives segments
of the NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL
as a depository participant, providing a one-stop solution for clients trading in the equities market.
It has recently launched its Investment banking and Institutional Broking business.
A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. These
services are offered to clients as different schemes, which are based on differing investment
by none other than Forbes as 'Best of the Web' and '…a must read for investors in Asia'. India
Infoline's research is available not just over the internet but also on international wire services like
Bloomberg (Code: IILL), Thomson First Call and Internet Securities where India Infoline is
India Infoline Commodities Private Limited is engaged in the business of commodities broking.
Their experience in securities broking empowered them with the requisite skills and technologies
enjoys memberships with the MCX and NCDEX, two leading Indian commodities exchanges, and
recently acquired membership of DGCX. It has a multi-channel delivery model, making it among
India Infoline Marketing and Services Limited is the holding company of India Infoline Insurance
India Infoline Insurance Services Limited is a registered Corporate Agent with the
Agent for ICICI Prudential Life Insurance Co Limited, which is India's largest private Life
Insurance Company. India Infoline was the first corporate agent to get licensed by IRDA
in early 2001.
India Infoline Insurance Brokers Limited India Infoline Insurance Brokers Limited is a
newly formed subsidiary which will carry out the business of Insurance broking.
Consolidated shareholdings of all the subsidiary companies engaged in loans and financing
activities under one subsidiary. Recently, Orient Global, a Singapore-based investment institution
invested USD 76.7 million for a 22.5% stake in India Infoline Investment Services. This will help
focused expansion and capital raising in the said subsidiaries for various lending businesses like
loans against securities, SME financing, distribution of retail loan products, consumer finance
business and housing finance business. India Infoline Investment Services Private Limited consists
IIFL (Asia) Private Limited is wholly owned subsidiary which has been incorporated in Singapore
to pursue financial sector activities in other Asian markets. Further to obtaining the necessary
regulatory approvals, the company has been initially capitalized at 1 million Singapore dollars.
IIFL Management
Kharagpur) and an MBA (IIM Bangalore). He joined the India Infoline board in
July 1999.
Apart from Nirmal Jain and R Venkataraman, the Board of Directors of India Infoline Ltd.
comprises:
HLB International, headed the audit department till 1990 and thereafter also
handles financial services, consultancy, investigations, mergers and acquisitions, valuations etc
is also a life trustee of SINDA, a non profit body, helping the under-privileged
Mr. Kranti Sinha — Board member since January 2005 — completed his masters
from the Agra University and started his career as a Class I officer with Life
Mr. A.K. Purvar – Board member since March 2008 – completed his Masters
Equities
India Infoline provided the prospect of researched investing to its clients, which was hitherto
restricted only to the institutions. Research for the retail investor did not exist prior to India
Infoline. India Infoline leveraged technology to bring the convenience of trading to the investor’s
location of preference (residence or office) through computerized access. India Infoline made it
possible for clients to view transaction costs and ledger updates in real time. The Company is
among the few financial intermediaries in India to offer a complement of online and offline
broking. The Companies network of branches also allows customers to place orders on phone or
Commodities
India Infoline’s extension into commodities trading reconciles its strategic intent to emerge as a
one stop solutions financial intermediary. Its experience in securities broking has empowered it
with requisite skills and technologies. The Companies commodities business provides a contra-
cyclical alternative to equities broking. The Company was among the first to offer the facility of
commodities trading in India’s young commodities market (the MCX commenced operations in
2003). Average monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs
20.02 bn.
Insurance
An entry into this segment helped complete the client's product basket; concurrently, it graduated
the Company into a one stop retail financial solutions provider. To ensure maximum reach to
customers across India, it has employed a multi pronged approach and reaches out to customers
via our Network, Direct and Affiliate channels. India Infoline was the first corporate in India to
Invest Online
India Infoline has made investing in Mutual funds and primary market so effortless. Only
registration is needed. No paperwork no queues and No registration charges. India Infoline offers
a host of mutual fund choices under one roof, backed by in-depth research and advice from
The key to achieving a successful Investment Portfolio is to have a carefully planned financial
strategy based on a thorough understanding of the client's investment needs and risk appetite. The
IIFL Private Wealth Management Team of financial experts will recommend an appropriate
Asset Management
India Infoline is a leading pan-India mutual fund distribution house associated with leading asset
management companies. It operates primarily in the retail segment leveraging its existing
distribution network to reach prospective clients. It has received the in-principle approval to set up
a mutual fund.
Portfolio Management
IIFL Portfolio Management Service is a product wherein an equity investment portfolio is created
to suit the investment objectives of a client. India Infoline invests the client’s resources into stocks
from different sectors, depending on client’s risk-return profile. This service is particularly
advisable for investors who cannot afford to give time or don't have that expertise for day-to-day
Newsletters
As a subscriber to the Daily Market Strategy, client’s get research reports of India Infoline research
team on a priority basis. The Indiainfoline Weekly Newsletter is the flashback for the week gone
by. A weekly outlook coupled with the best of the web stories from Indiainfoline and links to
important investment ideas, Leader Speak and features is delivered in the client’s inbox every
Friday evening.
5. RESEARCH METHODOLOGY
Research design or research methodology is the procedure of collecting, analyzing and interpreting
the data to diagnose the problem and react to the opportunity in such a way where the costs can be
minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion.
The methodology used in the study for the completion of the project and the fulfillment of the
project objectives.
The sample of the stocks for the purpose of collecting secondary data has been selected on the
basis of Random Sampling. The stocks are chosen in an unbiased manner and each stock is chosen
independent of the other stocks chosen. The stocks are chosen from the automobile sector.
The sample size for the number of stocks is taken as 3 for fundamental analysis of stocks as
growth through phases.With comparatively higher rate of economic growth rate index against that
of great global powers, India has become a hub of domestic and exports business. The automobile
sector has been contributing its share to the shining economic performance of India in the recent
years.
To understand this industry for the purpose of investment we need to analyze it by the following
approach:
a. Economy analysis
b. Industry analysis
c. Company analysis
Fundamental Analysis
Fundamental analysis is the study of economic, industry and company conditions in an effort to
determine the value of a company s stock. Fundamental analysis typically focuses on key statistics
1. ECONOMY ANALYSIS
Economic analysis is the analysis of forces operating the overall economy a country. Economic
analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic
employment. Directly and indirectly it employs more than 10 million people and if we add the
number of people employed in the auto-component and auto ancillary industry then the number
As the world economy slipped into recession hitting the demand hard and the banking sector takes
conservative approach towards lending to corporate sector, the GDP growth has downgraded it to
7.1 per cent for 2008-09 and it has increased to 8.6% in 2010 by overcoming the setbacks of
recession.
Recession
Auto industry in India had been hit hard by ongoing global financial recession. But it is in a good
shape now. Much of this optimism resulted from renewed interest being shown in India auto
industry by reputed overseas car makers. Nissan Motors which is a well known Japanese car
making company regarded India automobile market as a global car manufacturing hub for future
and invested huge amount in our market. There are some other automobile companies of world
who have shown interest in India auto market. Major names among these are General Motors,
Skoda Auto and Mercedes-Benz. These companies have major plans lined up for India auto
industry. These are few signs of the revolutionized auto industry after recession.
Inflation
The rise in inflation will have adverse impact on the industry that will not only see interest rates
getting further hardened but also a drop in demand due to the squeeze in purchasing power. The
effect of inflation has affected every sector which is related to car manufacturing and production.
The increase in the price of fuel and the steel due to inflation has led to a slower growth rate of the
The automobile sector in the Indian industry is one of the high performing sectors of the Indian
economy. This has contributed largely in making India a prime destination for many international
players in the automobile industry who wish to set up their businesses in India. Automatic approval
for foreign equity investment up to 100 per cent of manufacture of automobiles and component is
permitted.
Exports
Despite recession, the Indian automobile market continues to perform better than most of the other
industries in the economy in coming future; more and more MNC’s coming in India to setup their
ventures which clearly shows the scope of expansion. During April-January 2010, overall
The automobile industry inIndia is the ninth largest in the world with an annual production of over
2.3 million units in 2008. In 2009, India emerged as Asia's fourth largest exporter of automobiles,
behind Japan, South Korea and Thailand. The Automobile Industry is one of the fastest growing
sectors in India. The increase in the demand for cars, and other vehicles, powered by the increase
in the income is the primary growth driver of the automobile industry in India. In 2009, estimated
rate of growth of India Auto industry is going to be 9% .The Indian automobile sector is far from
The industrial life cycle is a term used for classifying industry life over time. Industry life cycle
classification generally groups industries into one of four stages: pioneer, growth, maturity and
decline.In the pioneer phase, the product has not been widely accepted or adopted. Business
strategies are developing, and there is high risk of failure. However, successful companies can
grow at extraordinary rates. The Indian automobile sector has passed this stage quite successfully.
The industry is growing rapidly, often at an accelerating rate of sales and earnings growth. Indian
AutomotiveIndustry is booming with agrowth rateof around 15 % annually. The growth rate of the
automobile industry in India is greater than the GDP growth rate of the economy, so the automobile
SWOT analysis:
A scan of the internal and external environment is an important part of the strategic planning
process. Environmental factors internal to the firm usually can be classified as strengths (S) or
weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats
(T). Such an analysis of the strategic environment is referred to as a SWOT analysis. SWOT
1. Strengths
2. Weaknesses
High interest costs and high overheads make the production uncompetitive
Infrastructure bottleneck
3. Opportunities
4. Threats
The company analysis shows the long-term strenght of the company that what is the financial
position of the company in the market, where it stands among its competitors and who are the key
drivers of the company, what are the future plans of the company, what are the policies of
government towards the company and how the stake of the company divested among different
groups of people.
Here, I have taken three companies namely TATA Motors, Maruti Suzuki and Mahindra and
is the leader in commercial vehicles in each segment, and among the top three in passenger
vehicles with winning products in the compact, midsize car and utility vehicle segments. The
company is the world's fourth largest truck manufacturer, and the world's second largest bus
manufacturer.
than half the numbers of cars sold in India wear Maruti Suzuki badge. They
offer a full range of cars – from entry level Maruti 800 & Alto to stylish hatchback Ritz, A star,
Swift, Wagon R, Estillo and sedans Dzire, SX4 and Sports Utility Vehicle Grand Vitara. Since
inception, it has produced and sold over 7.5 million vehicles in India and exported over 500,000
units to Europe and other countries. Its turnover for the fiscal 2017-18 stood at Rs. 203,583 Million
vehicles, including three-wheelers. It is the market leader in utility vehicles in India since
inception, and currently accounts for about half of India’s market for utility vehicles. The
Automotive Sector continues to be a leader in the utility vehicle segment with a diverse portfolio
that includes mass transport as well as new generation vehicles like Scorpio, Bolero and the
Mar '14 Mar '15 Mar '16 Mar '17 Mar '18
Sources of funds
Application of funds
Less:
AccumulatedDepreciation 3,454.28 4,401.51 4,894.54 5,443.52 6,259.90
Mar '14 Mar '15 Mar '16 Mar '17 Mar '18
Income
Expenditure
Mar '14 Mar '15 Mar '16 Mar '17 Mar '18
Sources Of Funds
Application Of Funds
Less: Accumulated
Depreciation 3,179.40 3,259.40 3,487.10 3,988.80 4,649.80
Mar '14 Mar '15 Mar '16 Mar '17 Mar '18
Income
Expenditure
Other Manufacturing
Expenses 215.70 302.40 392.40 523.30 716.10
Balance Sheet of
Mahindra and Mahindra
Mar '14 Mar '15 Mar '16 Mar '17 Mar '18
Sources Of Funds
Application Of Funds
Less: Accumulated
Depreciation 1,335.56 1,510.27 1,639.12 1,841.68 2,326.29
Net Block 1,340.95 1,348.98 1,541.45 1,710.96 2,567.60
Mar '14 Mar '15 Mar '16 Mar '17 Mar '18
Income
Expenditure
70
60
50 TATA
Rs 40
MARUTI
30
20 MAHINDRA
10
0
Mar'14 Mar'15 Mar'16 Mar'17 Mar'18
YEARS
Interpretations
EPS measures the profit available to the equity shareholders per share, that is the amount that they
can get on every share held. Till 2017 TATA and Maruti had a rising EPS but in 2018 both of them
fall and the effect is more on Tata motors because of the slump in domestic and international
markets and sharp fall in sales and net profits which resulted in low EPS. Mahindra is not much
affected as its sales have increased from the previous year. But as trend shows Mahindra motors
SALES
SALES
35,000.00
30,000.00
25,000.00 TATA
Rs 20,000.00
MARUTI
15,000.00
10,000.00 MAHINDRA
5,000.00
0.00
Mar'14 Mar'15 Mar'16 Mar'17 Mar'18
YEARS
Interpretations
Maruti and Mahindra show a positive trend in sales over the past five years. Though slowdown in
the economy brought hurdles but these companies have potential to grow in future as lots of
products are still to add in their portfolio. Moreover increased demand in foreign market also seems
to be a positive signal for better future. TATA has witnessed a decline in sales of each segment.
TATA 12.5 13 15 15 6
20
15 TATA
Rs
10 MARUTI
5 MAHINDRA
0
Mar'14 Mar'15 Mar'16 Mar'17 Mar'18
YEARS
Interpretations
Tata motors and Maruti Suzuki both the companies showed a positive trend in paying dividends
till 2017, but the scenario changed in 2018 as both the company’s dividend per share fell.
According to graph Tata’s dividend has fallen drastically while Maruti stick to below 5 per share.
Mahindra has made a slight reduction from rs.11.5 per share in 2017 to rs.10 per share this year.
Return on Investment
RETURN ON INVESTMENT
35
30
25 TATA
% 20 MARUTI
15
10 MAHINDRA
5
0
Mar'14 Mar'15 Mar'16 Mar'17 Mar'18
YEARS
Interpretations
ROI is one of the most important ratios used for measuring the overall efficiency of a firm and
determines whether the investments in the firms are attractive or not. According the graph, ROI of
TATA has declined to a large extent in 2018, making it a quite risky investment. Maruti’s ROI has
also declined but Mahindra’s ROI is showing a higher rate compared to TATA and Maruti in 2018.
As the investors would like to invest only where the return is higher, Mahindra would be attractive
for investment.
DIVIDEND PAYOUT RATIO
DIVIDEND PAYOUT
RATIO
50
40
TATA
% 30 MARUTI
20
MAHINDRA
10
0
Mar'14 Mar'15 Mar'16 Mar'17 Mar'18
YEARS
Interpretations
Dividend payout ratio is the percentage of earnings paid to shareholders in dividends. It provides
an idea to an investor of how well earnings support the dividend payments. Maruti has maintained
a stable payout ratio. Both TATA and Mahindra have increased their payout ratio in which
PRICE-EARNINGS
RATIO
50
40
TATA
30
% MARUTI
20
MAHINDRA
10
0
Mar'14 Mar'15 Mar'16 Mar'17 Mar'18
YEARS
Interpretations
This ratio is widely used by investors to decide whether or not to buy shares in a particular
company.As per the graph, in 2017, the P/E ratio of the three companies was the lowest compared
to the previous years. TATA has the highest P/E ratio in 2018 which indicates that it is overvalued,
so the investors can benefit by selling the shares. An investor can go for Mahindra as its P/E ratio
is the lowest in 2018 which indicates that it is undervalued and there is a scope for growth in the
future.
7. LEARNING OF STUDENT
7.1 Findings
From the data analysis and interpretations of the ratios of three companies’ viz. Tata Motors,
Maruti Suzuki and Mahindra and Mahindra, the following findings have been given:
The three companies were performing well till 2017 with a positive trend in the earnings
per share. But there was a downward trend in 2018. Especially, TATA has witnessed a
The sales trend has been upward and positive in case of all the three companies. The sales
growth looks positive but in the year 2018, TATA’s sales have declined whereas Maruti
In case of dividend per share, there were fluctuations during the period 2014-2018. Due to
recession, the dividends per share have declined in all the three companies. Tata’s dividend
has fallen drastically while Maruti stick to below 5 per share. Mahindra has made a slight
reduction from rs.11.5 per share in 2017 to rs.10 per share this year.
The return on investment has been fluctuating since 2014 and the year 2018 witnessed low
returns in case of all the companies amongst which TATA has the least rate of return.
Compared to the three companies, Mahindra has the highest ROI in 2018.
Maruti had a stable dividend payout ratio since 2014. TATA and Mahindra have increased
The three companies have witnessed a low price earnings ratio in 2017 compared to the
previous years. But the ratio increased in 2018 in three companies. TATA has the highest
P/E ratio in 2018 which indicates that it is overvalued and Mahindra’s P/E ratio is the
lowest in 2018 which indicates that it is undervalued and there is a scope for growth in the
future.
By analyzing the current trend of Indian Economy and Automobile Industry I have found that
being a developing economy there is lot of scope for growth and this industry still has to cross
many levels so there are huge opportunities to invest in and this is being proved as more and more
foreign investments are few of the opportunities which the industry has to explore for developing
the economy.
7.2 Suggestions
By analyzing the automobile industry with the help of fundamental analysis, it has been revealed
that this industry has a lot of potential to grow. So recommending investing in Automobile industry
with no doubt is going to be a good and smart option because this industry is booming like never
The three giants of Indian Automobile industry viz. TATA Motors, Maruti Suzuki and Mahindra
From the company analysis, we can know that Mahindra would be a better option for an
investor compared to TATA and Maruti. In view of the slump in the domestic and
international market, TATA has recorded a slowdown in sales and income level. Its
Earnings per share has also declined drastically. It has reduced its dividend per share from
rs.15 in the previous year to rs.6 in 2018. The return on investment is also very low. In
The global turmoil in financial markets has affected Maruti also. The company is
maintaining a stable position. Its sales have grown over past five years. Inspite of the
general economic slowdown, the sales of Maruti Suzuki increased from Rs 21200 Crore to
Rs 23381 Crore. As it is maintaining a stable position, it can be recommended that for now
Maruti share price shows that it’s a time to hold the position or buy more shares as there is
Despite the challenging business environment, Mahindra has maintained its upward sales
level. Its Return on Investment is much higher compared to TATA and Maruti. The
dividend per share is rs.10 which is higher amongst the three companies. The company has
Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors
there is a chance of getting correction, as it already went on high side in a very short period
Holding the shares for long time could be a wrong step and at this point of time those who
invested earlier can book their profits. As Mahindra’s shares are undervalued, the investor
can buy these shares. This is because a relatively lower P/E would save investors from
paying a very high price that does not justify the value of an investment.
There are three factors which an investor must consider for selecting the right stocks.
Business: An investor must look into what kind of business the company is doing, visibility
of the business, its past track record, capital needs of the company for expansion etc.
Balance Sheet: The investor must focus on its key financial ratios such as earnings per
share, price-earning ratio; debt-equity ratio, dividends per share etc and he must also check
Bargaining: This is the most important factor which shows the true worth of the company.
Investment rules
Align your thought process with the business cycle of the company.
Set the purpose for investment.
7.3 Conclusions
The Automobile industry in India is the seventh largest in the world with an annual production of
over 2.6 million units in 2018. In 2018, India emerged as Asia's fourth largest exporter of
The collapse in market place witnessed unprecedented turbulence in the wake of global financial
meltdown. A runaway inflation touching a high point of 12% early in the year, the tight monetary
policies followed by the authorities for most of the year to control inflation with the consequent
high interest rates and weak consumer demand, have collectively had a devastating effect on the
automotive sector.
Maruti Suzuki India LTD. company has a trend of growth from till 2017. During the financial year
2017-18the there is downfall in the growth of the company. The main reason behind this downfall
is because of theglobal recession. The downfallof net profit during the financial year 2017-18 is
TATA Motors, which was trying to consolidate its leadership position in the market, also had to
face the impact of global meltdown. Amid the crippling economic crisis, Tata purchased Britain’s
Jaguar Land Rover (JLR) fromFord Motor Company. Acquiring JLR saddled Tata with some
Inspite of it being a tough year for all the companies across the globe and in India, Mahindra has
given a satisfactory performance. At present its shares are undervalued giving it a potential for
growth.
Global recession had a dampener effect on the growth of automobile industry but it was a short
term phenomenon. The industry is bouncing back. One factor favoring this point is that India has
become a hot destination for companies of diverse nature to invest in. Cut throat competition
among top companies, lots of new car and vehicle model launches at regular intervals keeps the
A continuous effort at cost cutting and improving productivity will help the companies in making
reasonable profits despite the impact of higher commodity prices and weaker rupee.
The analysis gives an optimistic view about the industry and its growth which recommends the
investors to keep a good watch on the major players to benefit in terms of returns on their
investments.
7.4 Limitations
This study has been conducted purely to understand Equity analysis for investors.
The study is restricted to three companies based on Fundamental analysis.
Detailed study of the topic was not possible due to limited size of the project.
There was a constraint with regard to time allocation for the research study i.e. for a period
of 45 days.
Suggestions and conclusions are based on the limited data of five years.
8. REFERENCES ANDBIBLIOGRAPHY
Text Books
Security Analysis and Portfolio Management by Punithavathy Pandian, Vikas Publications.
Newspapers
Economic times
Business line
Websites
www.nseindia.com
www.bseindia.com
www.investopedia.com
www.moneycontrol.com
www.indiainfoline.com
www.sebi.gov.in
www.tatamotors.com
www.marutisuzuki.com
www.mahindra.com
www.yahoofinance.com
CNBC TV18 – “The Informed Investor” supported bySEBI and presented by NSE.