investment management..

1. BY,
M.HIMABINDU
FUNDAMENTAL ANALYSIS:-

2. FUNDAMENTAL ANALYSIS:-
 Introduction:-
Fundamental analysis examines the economic
environment ,industry performance and company
performance before making an investment decision.
 The three components of fundamental analysis are:
1. Economic analysis
2. Industry analysis
3. Company analysis

3. Economic analysis:-
 Influence of economy:
companies are a part of the industrial and business
sector, which in turn is a part of the overall economy.
 In the Indian economy ,the first place are
considered are the behavior of monsoon and the
performance of agriculture.
 Secondly , India has a mixed economy, where the public
sector plays a vital role.
 Thirdly , the monetary policy and trends in money supply
which mainly depend on government’s budget policy.

4. Economic analysis:-
 Fourthly , the general business conditions in the form of
business cycles or the level of business activity.
 Fifthly , the economic and political stability in the form of
stable and long term economic policies and a stable
political system with no uncertainty would also necessary.
All of the above factors of the economy influence the
corporate performance and in forecasting the growth of
the economy and of industry.

5. Economic analysis:-
 Economic analysis aims at determining if the
economic climate is conductive and is capable of
encouraging the growth of business sector, especially
the capital market.
 When the company expands ,most industry groups
and companies are expected to benefit and grow.
 When the company declines most sectors and
companies usually face survival problems.

6. Tools for economic analysis:-
 The most used tools for economic analysis are:
1. Gross domestic product
2. Monetary policy and liquidity
3. Inflation
4. Interest rates
5. International influence
6. Consumer sentiment
7. Fiscal policy
8. Influences on long term expectations
9. Influences on short term expectations

7. Gross domestic product:-
 Gross domestic product is one measure of economic
activity.
 Major components of GDP are;
 Consumer spending
 Investment spending
 Government expenditure
 Goods and services produced domestically for
export
 Consumption in the process of import distribution

8.  Monetary policy and liquidity:-
A good monetary policy and liquidity is
essential for the economy ,excess liquidity can be
harmful. Excess money supply can lead to inflation,
higher interest rates and higher risk premiums
leading to costly sources of capital and slow growth.
 Inflation:-
Inflation can be defined as a trend of rising prices
caused by demand exceeding supply.

9.  Interest rates:-
Interest rate is the price of credit. It is the
percentage of fee received or paid by individuals or
organizations when they lend or borrow money. there
are many kinds of interest rates bank primary lending
rate ,treasury bill rate and so on.
 International influence:-
One of the important measure of influence is
the exchange rate. The PPP derives from the
assumption that identical goods should be sold at
identical prices.

10.  Consumer sentiment:-
consumer sentiment is usually expressed in
terms of future expenditures planed and the feeling
about future economy.
 Fiscal policy:-
The fiscal policy of the government involves the
collection and spending of revenue. In particular,
fiscal policy refers to efforts by the government to
stimulate the economy directly, through spending.

11.  Long term growth expectations:-
The long term growth path of the economy is
determined by supply factors.
The rate of growth of output can be seperated in to two
distinct categories
1. Growth from an increase in the factor inputs to
production
2. Growth in output relative to the growth of all factor
inputs
Cobb-Douglas production function is
Y=T*L*K*E

12. Influences on short term
expectations:
 Short terms expectations are mainly caused by demand
factors.
 Fluctuations in demand relative to long term supply
constraints create fluctuations in real GDP which are
known as business cycles.
 Short term economic forecasting focuses on sources of
demand as a means to predict future trends in economic
variable.

13. THANK
YOU