Ashis sip 2014 on fundamental analysis of i tsector

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ARYA SCHOOL OF MANAGEMENT AND IT PATRAPADA,
BHUBANESWAR
A PROJECT ON “FUNDAMENTAL ANALYSIS OF IT SECTOR”
(Report Submitted for Partial fulfillment of the Master of Finance and Control (MFC)
Under UTKAL UNIVERSITY, Odisha)
SESSION: 2013 - 15
Submitted By:
ASHIS KUMAR PATRA
ROLL NO. –13767U131001
Under The Guidance & Supervision Of
Internal Guide External Guide
MR. RASMI RANJAN PANIGRAHI MR. SUDHASIS BARALA
(FACULTY IN FINANCE, ASMIT) (FACULTY IN MODRIKA)
UTKAL UNIVERSITY, VANIVIHAR, BHUBANESWAR, ODISHA

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Declaration
I Ashis kumar Patra, a student of MFC perusing studies at Arya School of
Management and Information Technology, Bhubaneswar, do hereby declare
that the Summer Internship Project Titled “FUNDAMENTAL ANALYSIS OF
IT SECTOR “done by me towards the partial fulfillment of the degree is the
original work done by me and has not been submitted elsewhere for award of
any diploma and degree to any other university or Institution.
Date: Ashis Kumar Patra
Place: Bhubaneswar Roll no. – 13767U131001
Acknowledgment

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It is really a great pleasure to have the opportunity to describe the feeling of
gratitude imprisoned in the core of my heart to “MODRIKA”. It convey my
sincere gratitude to “Mr.Sudhasis Barala” for giving me the opportunity to
prepare my project work in “fundamental analysis of IT sector at Modrika”.
I express my sincere thanks to my guide “Mr. Rasmi Ranjan panigrahi, faculty
in finance (internal guide)” and staff members of the institute who have helped
me a lot. I am thankful to my course co-coordinator for his guidance during the
project work.
I express my sincere obligation and thanks to Dr. Manmath Kumar Nayak
(Director), all the faculties and staff for their valuable advice and guiding me in
every stage in bringing out this project report which cannot be seen in the light
of the day.
I am also thankful and indebted to my family members, friends and relatives for
their kind co- operation to prepare this project report.
Date: Ashis Kumar Patra
Place: Roll no. – 13767U131001
CONTENTS

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CHAPTER –1 PAGENO.
 Project Introduction 1
 Objective of the study 2
 Scope of the study 3
 Researchmethodology 4-7
 Limitations of the study 8
CHAPTER –2
 Company profile 10-23
Chapter– 3
 Literature review 25-58
CHAPTER –4
 Data analysis and interpretation 60-71
CHAPTER –5
 Finding 73
 Suggestion 74
 Conclusion 75-76
CHAPTER –6
 Bibliography 77
 Reference 77
 Annexure 78-90

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Chapter - 1
INTRODUCTION
A method of evaluating a security that entails attempting to measure its intrinsic value by
examining related economic, financial and other qualitative and quantitative factors.

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Fundamental analysts attempt to study everything that can affect the security's value,
including macroeconomic factors (like the overall economy and industry conditions) and
company-specific factors (like financial condition and management).
Fundamental analysis is the examination of the underlying forces that affect the well being of
the economy, industry groups, and companies. As with most analysis, the goal is to derive a
forecast and profit from future price movements. At the company level, fundamental analysis
may involve examination of financial data, management, business concept and competition.
At the industry level, there might be an examination of supply and demand forces for the
products offered. For the national economy, fundamental analysis might focus on economic
data to assess the present and future growth of the economy. To forecast future stock prices,
fundamental analysis combines economic, industry, and company analysis to derive a stock's
current fair value and forecast future value. If fair value is not equal to the current stock price,
fundamental analysts believe that the stock is either over or under valued and the market
price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of
the random walkers and believe that markets are weak form efficient. By believing that prices
do not accurately reflect all available information, fundamental analysts look to capitalize on
perceived price discrepancies.
Objective of the study
The objectives of the study are described below:
 To conduct a brief survey on IT sector stocks performance in India, which contain
leading public and private sector IT stocks

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 To ascertain whether the market value of a stock best describes its fundamental or
intrinsic value, so that conclusion can be made that research done on stock by equity
investment advisors stands valid.
 To find out whether the stock price is affected by the fundamental factors or not.
 To find out the key ratios and there relevance with the selection of securities.
 Comparison between the various IT stocks to identify the suitable investment avenue.
SCOPE OF THE STUDY
The research is based on traditional practice of ‘investment and return’. Among
various avenues of investments, stock investment has been lucrative even if it is risk
associated. A rational investor does perform or respond to (done by analysts) analysis may be
‘fundamental’, ‘technical’ or both. Fundamental analysis means evaluating a security that
entails attempting to measure its intrinsic value by examining related economic, financial and

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other quantitative and qualitative factors. In other words, it attempts to study everything that
can affect the security‘s value including macroeconomic factors and company-specific
factors.
Analysts believe that ‘Fundamental Analysis’ is done for long term investment and is
also regarded as a way of intelligent and literate investing. It represents the foundation for
equity valuation. And, that is why the study is aimed to make projection on business
performance and to conduct stock valuation and predict its probable market price by
undertaking fundamental analysis. Fundamental analysis involves application of various
techniques and methods specific to security, industry, stock and many more. Particularly, for
IT industry Dividend Discount Model (DDM) and Relative Valuation is best suited.
RESEARCH METHODOLOGY
During my project , I collected data through various sources – primary and
secondary
 Primary data :

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Primary data means data that are collected by different techniques like, questionnaire,
depth interview, survey; sehedules etc. in this project, primary data has been collected as
follows:
 Discussion with assistant manager
 Discussion with experts.
 Secondary data includes :
Secondary data means data that are already available i.e. they refer to the data which
have already been collected and analyzed by someone else. Usually published data are
available in various publication of company in the official site .in this project secondary data
has been collected as follows:
 Company Annual Report
 Books
 Internet source
 Period of study :
The period of the study is 5 years i.e. (2009-2013). Company 5 years data has been taken for
the analysis.

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METHODOLOGY:
The methodology to be followed for the study is as such: Analyzing the
financials through Dividend Discount Model and Relative Valuation Method, the equity
valuation techniques including fundamental analysis of each company.
Dividend Discount Model:
Dividend Discount Model is a method under Discounted Cash Flow method of equity
evaluation. Discounted Cash Flow method entails discounting the future cash flows of a
company using a discount rate.
Expected Cash Flow to Equity in period t
Value of Equity = ∑ __________________________________
(1 + Cost of Equity)
In case of IT sector the problem with the Expected Cash Flow to Equity method is that
the cash flows at IT Company are not easily estimated. Neither net capital expenditure nor
working capital of IT Company is well defined, and company expense many items (such as
training expenses) that can be viewed as the nature equivalent to capital expenditures. Facing
these difficulties in estimating cash flows, research is often stuck with the dividend discount
model as a model of last resort.
Dividend Discount Model is a procedure for valuing the price of a stock by using
predicted dividends and discounting them back to present value. The idea is that if the value
obtained from the DDM is higher than what the shares are currently trading at, then the stock
is undervalued.
Dividend per Share
Value of Stock = ________________________________
Discount Rate – Dividend Growth Rate

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In that direction, industry analysis, economic analysis and company analysis is to be
done to explore the current business environment of the IT sector. This would facilitate
estimation of expected growth rate and period of high growth rate. Then, estimate the
expected growth rate of the IT sector under these conditions including the expected dividends
for future periods and find out the ‘intrinsic value’ of each stock.
Relative Valuation Method:
In relative valuation, the objective is to value an asset, based upon how similar assets
are currently priced by the market. Consequently, there are two components to relative
valuation. The first is that to value assets on a relative basis, prices have to be standardized,
usually by converting prices into multiples of some common variable. While this common
variable will vary across assets, it usually takes the form of earnings, book value or revenues
for publicly traded stocks. The second is to find similar assets, which is difficult to do since
no two assets are exactly identical.
The multiples which are important for IT industry which are used in relative valuation
are: Price to Earnings (P/E), Price to Interest Earned, and Price to Book Value (P/BV). (The
Relative Valuation technique is used here to verify the intrinsic value of the stocks that has
been calculated through DDM approach and hence not depicted in the report.) The belief that
Relative Valuation is used to value a company relatively where it stands among its closest
peers is well taken care of. Contrary to DDM approach, Relative Valuation has very little to
do with the core financials of a company.

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Tools:
These are the most popular tools of fundamental analysis. They focus on earnings, growth,
and value in the market.
Earnings per Share – EPS
Price to Earnings Ratio – P/E
Dividend Payout Ratio
Book Value Ratio Analysis
Dividend per share-DPS
Return on equity-ROE
Techniques:
The technique used in the analysis of the company is excel sheets, graphs and tables of
financial statement for example balance sheet, profit loss a/c, cash flow statement, dividend
per share, ratio analysis, valuation ratio etc.

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Limitation of the study
Fundamental analysis has some limitation involved in it. This limitation can be
explained as under:
 Time Constrain:
Fundamental analysis may offer excellent insights, but it can be extraordinarily time-
consuming. Time-consuming models often produce valuations that are contradictory to the
current price prevailing on the exchange.
 Company Specific:
Valuation techniques vary depending on the industry group and specifics of each
company. For this reason, a different technique and model is required for different industries
and different companies. This can be quite time-consuming process, which can limit the
amount of research that can be performed. The sales and inventory ratio may be very
important for the cement sector company but these ratios are not very useful for the IT sector.
 Inadequacies of Data:
While making analysis one has to often wrestle with inadequate data. While deliberate
falsification of data may be rare, subtle misrepresentation and concealment are common.
 Future Uncertainties:
Future changes are largely unpredictable; more so when the economic and business
environment is buffeted by frequent winds of change. In an environment characterized by
discontinuities, the past record is a poor guide to future performance.
 Irrational Market Behavior:
The market itself presents a major obstacle while making analysis on account of neglect
or prejudice, undervaluation may persist for extended periods; likewise, overvaluations
arising from unsatisfied optimism and misplaced enthusiasm may endure for unreasonable
lengths of time.

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COMPANY PROFILE
MODRIKA is primarily training and technology solutions provider for capital markets, and
has been operating internationally for over half a decade Modrika is pioneer in financial
engineering education & training with huge organizational experience driven by science and
technology. Modrika also provide services & consultancy to brokers, hedger fund institution
and financial firms. It is promoted by alumni of Indian Institute of Technology, Indian
Institute of Management, Indian School of Business (India) etc. The promoter group,
Prophecies, manages assets, more than 6 billion USD with more than 300 employees across
four continents.
INNOVATIVE TECHNOLOGY CREATOR:
The increasing complexity of financial market puts growing demands on the quality of
education of finance professionals. MODRIKA has responded to this by selecting the leading
experts in their fields to teach in our courses in finance. These professionals are associated
with top business schools and financial institutions and have significant teaching as well as
consulting experience, ensuring they remain on top of the latest developments in finance.
Leading experts from renowned business schools such as IIT, IIM, ISB, A.N.U, John
Hopkins University, CHICAGO BUSINESS SCHOOL, University of Berkeley and
Imperial College.
Mr. Shivesh Kumar : Based out of Chicago and master from University of Berkeley.
He has done 5 year Integrated Masters of Technology in Mathematics and Computing from
IIT Delhi. He has worked in NOMURA SECURITIES Associate. He has extensive

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experience in developing portfolios and outlooks for global equity markets with emphasis on
US markets. Publishing reports and maintaining frameworks for external clients (Hedge
funds, Asset management firms). He has identified alpha using quantitative factors with the
objective of formulating regional and sectorial portfolio. He has determined the relative
attractiveness of different asset classes (equities/commodities/FX) and makes asset allocation
recommendations. He has also developed and test customized stock screens and investment
strategies for the firm’s institutional clients and assisted in the development, maintenance and
updating of databases for the Global Quantitative Strategy group. During his tenure at Tokyo
Quantitative Research Team, He has optimized and back-tested intraday trading strategies.
He was involved in Key projects: Limit order book modeling, Back testing of Nikkei index
arbitrage, Futures trading based on stocks’ bid/ask ratio & Sector based portfolio construction
also conceptualized and carried out tick level data based research to develop quant models
keeping market risk, execution risk and market microstructure in perspective.
Mr. Bhavya Arnav: ManagingDirector, Prophecies Analytics and Consulting Pvt.
Ltd. (www.prophecis.com) and Algowire Technologies. He is alumnus of IIT Delhi, ISB
and extensive experience in managing extensive asset class during his tenure at
HSBC. His experience includes Quantitative Analytics: Risk Management, Portfolio
Management, Financial Analytics, Monte Carlo Analysis, Algorithmic Trading, and
Automated Trading Systems. Business Analytics in Structured Products: Analysis and
Implementation of Quantitative models. Prior experience on calypso and calypso system
analysis (Credit Derivatives).Data Mining and Machine Learning: Knowledge Discovery,
Pattern Recognition, Adaptive Systems, Support Vector Machines. Specialties: Risk
Management, Algorithmic Trading, Quantitative Analysis , Applied Machine Learning , Data
Mining, Structured Credit Products,Calypso,Systems Analysis, Business Analytics. He
actively participates in aligning vision of MODRIKA to become no.1 brand in Algorithmic
Trading and High Frequency Trading.
Mr. Ayush: He is alumni of IIT Delhi and extensive experience in derivative trading
whiles his experience in Jaypee Capital. Currently as a senior analyst with Credit
Suisse world's leading investment bank working he is involved in quant trading
technologies. He has built and maintained automated global portfolio analysis tool covering

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stocks across 36 countries; being used by Tokyo sales team. With a team of Quant
Researchers trading on Equity/Cash portfolios in European Market. He has developed Style
Indices (Value, Growth, Earning & Price Momentum) covering over 35 fundamental and
technical indicators for enabling traders to understand what is being
priced/rewarded/penalized by the market and also established web based interactive research
platform integrating data from Bloomberg and Lehman databases.
Mr. Hari : Hari completed his undergraduate studies from Indian Institute of Technology
(IIT) and graduate studies from the Johns Hopkins University. Hari currently resides in
Chicago and has interests in financial engineering and computational finance.
Mr. Praveen Kumar: Based out of California and an undergraduate from Indian
Institute of Technology (IIT) Guwahati as rank holder. Over 13 years in high-end research
and development hardware acceleration and low latency data. Recently working on
Technology development in High Frequency trading.he is known as creator of technological
ideas.
Mr. Vipin Kumar : He is a Technopreneur, Innovator and Author. He also serves as
Executive Director of Prophecies Analytics and Consulting Pvt. Ltd. An undergraduate
from Indian Institute of Technology, Roorkee. At a young age he founded the
entrepreneurship cell in his college. His initiatives endorsed by Ex-President of India Dr.
A.P.J. Kalam for entrepreneurial spirits. He has rich corporate experience working in top
Multi National Companies like Honda and Sterlite Group. Vipin is a passionate
entrepreneur and believes in spreading the message of entrepreneurship. Currently heading as
Director of MODRIKA (Asia Pacific).
TESTIMONIALS:

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Kwame Gilbert-Arthur : London
"My four months with MODRIKA were trans formative
Modrika opened my eyes to the limitless educational
possibilities offered by a great Institute. The obstacles to
acquiring a quality education were everywhere apparent,
and remain just as formidable today. With online learning
we were able to overcome the significant financial hurdles
facing by candidates. That’s what most motivates me to
support the MODRIKA."
Prassna Kumar : Delhi College of Engineering.
"I would truly praise Modrika's courses in finance to
anyone starting a new finance career. In particular, the
capability of the program is that it concentrates on how
analytical work is actually conducted in real life rather than
the academic approach of few another competitors. In
addition, the faculty really knows what they are doing. The
most important thing is that they are willing to share their
knowledge. They keep it very simple and everyone can
understand it. The best part about Modrika's class is that
after you finish it there is continued mentorship. All in all,
Modrika Training presented its courses in finance in an
extremely professed and engaging manner.''

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Preeti Jain : DaulatRam, Delhi University
"When I enrolled myself in the Algorithm Trading
Program I was absolutely ignorant about the trading world
and my field (economics) requires a great deal of
knowledge about it. And now as I have completed my
course, my knowledge about trading and the stock market
have undergone a transformation. Before this program, I
always relied on what others had to say and paraphrased to
suit my taste. But now I'm my own source of information.
Its a great program for amateurs. You learn a great deal
about online trading, the trade station, strategy, coding and
everything related. I had a great experience. And this
program will be greatly helpful in my
future endeavors because it fits well in my existing work
schedule and my commitments."
Dheeraj Kumar : Delhi School of Economics
"It is difficult to know where to start when it comes to
thanking Modrika's faculty for all its assistance while
learning how to trade. It has been an absolute pleasure to
learn this Algorithmic Trading. This course can
accommodate anyone from beginner with absolutely no
trading experience to the experienced trader looking for
some insight and a fresh approach. Not only do they teach,
they supervise and mentor you as a trader. You are taught
to improve your mistakes, manage your risk and enter the
market with discipline. Not only do I understand the
trading basics now, I am also beginning to understand
some of the more advanced techniques.".

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Neeraj: ShaheedSukhdev Singh College ,Delhi
University.
"One thing I know for sure is that what I got out of this
Algorithmic Trading Course is definitely a lot more from
what I initially expected. This industry is not an easy
industry and it's definitely not easy to understand
everything, especially if you have never been dealing with
trading before. By the end of the course I am now able to
understand all the techniques to make my trading turn into
successful trading. I found faculty to be an experienced
and very helpful who teaches well and keeps aneye on his
students always. His long trading experience and
discipline on trading is an asset for trainee traders like me.
Thanks again for the great information Modrika offers in
its courses in finance, it really works."
Vimmy : Delhi School Of Economics.
"In Modrika, I learned not only how to make money
when the market goes up, but also when the market goes
down. It's been fantastic. The class is very helpful.
Faculty taught us the trading theories, strategies and
techniques deeply and completely. All these techniques
will help the beginners as well as the experienced traders
to learn how to stick to the rules and look at charts,
including how to enter and exit trading to take profit and
cut losses. The classes also have a lot of samples which
are very helpful for the students to understand the
theories and techniques. The faculty is so patient. He tried
to answer every single question from everyone in the
classroom so that nobody can complete the class with any
questions."

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PRESS AND MEDIA:
Financial Management considered as the Hottest and Highest Paid career
across the globe.
 Financial Management top 2 choices for hot career options in India by India Today.
 Careers in portfolio management, the financial planner offers a broad range of
services aimed at assisting individuals in managing and planning their financial
future. Rated among top 5 global careers across the globe.
 Account Manager & Financial Analyst are among the highest paying jobs at Google.
Financial analyst is ranked under the highest paying jobs at Apple.
 According to the Annual Survey of Hours and Earnings, Business/financial
broker; Commodity traders; Foreign exchange dealers; Insurance brokers considered
among the Britain's highest paying jobs in last year.
 Compliance officer, Prop traders, a hedge fund Researcher, Chief traders can make
$1-20 million.
 According to Bureau of Labor Statistics that the finance sector is expected to make
significant number of hires in the next few years shows promise for those entering or
re-entering the industry and showing great scope for jobs in the finance industry in
future
Modrika Coverage in National Media
 The Tribune Chandigarh, India. Admission open for Trading program for B.E., B-
Tech, MBA
 Admission Alert for 1 year guaranteed job program in Algorithmic and High
Frequency Trading along with XLRI and NASA program in The Financial Express,
The Times of India Sep 03, 2012
 Admission Alert for 1 year guaranteed job placement program comes with
unemployment insurance in The Deccan Herald Aug 16, 2012
 The Tribune Chandigarh, India. Enhancing Employability with new age courses in
Algorithmic and High Frequency Trading August 15, 2012
 The Pioneer, India August 14, 2012 Applications Invited for 1 year comprehensive
training program in Algorithmic and High Frequency Trading.

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 The Hindustan Times, Lucknow edition Sep 22, 2012 Applications invited for 1 year
comprehensive training program in Algorithmic and High Frequency Trading.
 The Financial Times, Times of India Sep 27, 2012 How to become Smart Investors
using technology Learn Art of Making Money.
 HT Campus, The Hindustan Times Oct 1, 2012 Applications invited for 6 month to 1
year comprehensive training program in Algorithmic and High Frequency Trading.
 The Pioneer, Oct 9, 2012 Applications invited for 6 month to 1 year comprehensive
training program in Algorithmic and High Frequency Trading.
 Business Today is India’s No. 1 Business Magazine with the highest readership
amongst all business magazines in the country. Oct 12, 2012 Rosy future for
Algorithmic Trading in India as a career.

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PLACEMENT COMPANIES:

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NEWS AND EVENTS:
High-frequency trading — known as H.F.T. — is the biggest thing to hit
Wall Street in years:
High-frequency trading — known as H.F.T. — is the biggest thing to hit Wall Street in years.
On any given day, this lightning-quick, computer-driven form of trading accounts for upward
of half of all of the business transacted on the nation’s stock markets.
How India will Benefit from Increased Algorithmic Trading:
Dr. Giles Nelson of Progress Software talks to Bloomberg about India's emerging economy.
With growing trade volume, Nelson explains how India can benefit from embracing
algorithmic trading.
MODRIKA Proudly Announce Tie up with Chicago Trading School:
Modrika proudly announces collaboration with one of the oldest and renowned Chicago
trading school based out of Chicago. Modrika aims to provide hand's on international trading
experience to their candidates via this collaboration.
Brokers upgrade to algorithmic trading for FI clients :
An increasing number of broking firms in India are offering algorithmic trading to lure large
institutional investors. Most big broking firms have updated their trading software to enable
algorithmic trading that allows investors to obtain the best possible price without significantly
affecting a stock's price and raising purchasing costs. About 18% of total trades on Indian
stock exchanges are done through algorithmic commands. This compares with about 60% of
the overall trades in Hong Kong and Singapore markets that are done using algorithmic
strategies, according to exchange sources.

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India's catching up with Asian peers in algorithm trade:
Algorithmic trading in shares listed on Indian stock exchanges could account for 30% of the
overall cash market volumes by 2012, compared with around 20% at present, according to
US-based consulting firm Celent, citing liquid stock exchanges, sophisticated technology and
connectivity as the enabling factors. Algorithmic Trading? Also commonly known as
programmed trading? Entails the use of a pre-written software code to execute transactions,
without manual intervention.
Credit Suisse launches algorithmic trading in India:
CreditSuisse's Advanced Execution Services (AES) unit has launched algorithmic trading in
Indian equities. With this Credit Suisse clients can now employ a comprehensive range of
AES algorithmic trading strategies for Indian equities, being able to trade more efficiently
and achieve best execution. Since the formation of the AES group in 2001, the bank has
pioneered new technology and brought it to as many markets as possible. In Asia Pacific,
Credit Suisse AES became the first foreign broker to launch Direct Market Access (DMA).
Worried, but no plans to ban algorithmic trading products: SEBI:
Capital markets regulator SEBI today ruled out a ban on algorithmic trading products, even
though it said is "worried" by the rapid adoption of these tools and called for appropriate risk
management systems to be put in place by market players using them. SEBI is not looking at
banning these products, SEBI Chairman U K Sinha told reporters on the sidelines of a CII
meet on capital markets.
Technology will phase out trades for arbitrage gains:
Arbitrage between different stock exchanges is a popular mode of trading in the stock
markets. The stock prices are volatile and keep changing continuously. There is always some
difference in price between different exchanges. Investors can make money using these price
differences. Such investors are generally day traders. Other than investors who buy for a long
term and traders who buy and sell on a daily basis to profit from minor movements, there's a
segment called arbitrageurs.

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Man vs machine The Future of Algorithmic Trading:
As of September 2010, 56% of daily NYSE trading volume was High Frequency Trading.
That included proprietary trading shops, market makers, and High Frequency Trading hedge
funds. Algorithmic trading has seen significantly greater adoption in various markets in the
last few years. But what's in store in the future?
Norway’s day traders take on the algos:
Nearly 40 per cent of all share orders in Europe are sent by algorithmic trading computers, up
from just 20 per cent five years ago, according to the Tabb Group, a capital markets
consultancy.
Markets need real-time surveillance technology to track trading glitches,
says expert:
Sharp market movements caused by algorithmic trading systems is nothing new and even
manual traders have made similar mistakes before, said Dr Giles Nelson , co-inventor of the
algorithmic trading software Apama , which is used by large institutions across the world.
Market participants need to put in place technology that can do real-time surveillance, said
DrNelson , who is currently CTO.

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AWARDS AND ACHIEVEMENT:
Touched over a million VIA TRAINING PROGRAMS AND SEMINARS
ETC
MODRIKA has touched over a million across the globe from India, US, UK, Singapore,
Australia setting a benchmark.
First one to launch technologydriven financial programs in India
Being driven by top technologists from IIT, ISB, John Hopkins, MIT and Chicago Business
School, Modrika is the only company which has included technology as a core part of
curriculum of Courses in Finance. We believe that only via technology the real profit margins
and volume will be achieved.
Only company with organizationalexperience
Modrika is the only company which have organizational experience of over 20,000 + Man
hours in enabling finance with technology. With direct placement tie-up with top investment
banks and top financial institutions.
PRODUCT AND SERVICES:
For young candidates there are bright lucrative opportunities in the fields of financial
advisory services, insurance and banking services, investment management, financial
analysis, stock market consultants, broking agents, financial planners and economists.
It includes following courses:
o Algorithmic Trading
o Quant Trading
o Arbitrageur
o High Frequency Trading
o Technical Analysis

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o Portfolio Management
o Statistician & Mathematician
o Trade Programmer Analyst
o Trading Psychology and performance
o Trading for Beginners
o Preparatory

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CHAPTER – 3
LITERATURE REVIEW

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FUNDAMENTAL ANALYSIS
What is analysis?
The examination and evaluation of the relevant information to select the best course of
action from among various alternatives. 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 doesn't care
one bit about the "value" of a company or a commodity. Technicians (sometimes called
chartists) are only interested in the price movement in the market.
What is technicalanalysis?
Technical analysis is a method of evaluating securities by analyzing the statistics
generated by market activity, such as past prices and volume. Technical analysts do not
attempt to measure a security's intrinsic value, but instead use charts and other tools to
identify patterns that can suggest future activity.
What is fundamentalanalysis?
Fundamental Analysis involves examining the economic, financial and other qualitative
and quantitative factors related to a security in order to determine its intrinsic value. It
attempts to study everything that can affect the security's value, including macroeconomic
factors (like the overall economy and industry conditions) and individually specific factors
(like the financial condition and management of companies). Fundamental analysis, which is
also known as quantitative analysis, involves delving into a company’s financial statements
(such as profit and loss account and balance sheet) in order to study various financial
indicators
(such as revenues, earnings, liabilities, expenses and assets). Such analysis is usually carried
out by analysts, brokers and savvy investors.
Many analysts and investors focus on a single number--net income (or earnings)--to
evaluate performance. When investors attempt to forecast the market value of a firm, they
frequently rely on earnings. Many institutional investors, analysts and regulators believe
earnings are not as relevant as they once were. Due to nonrecurring events, disparities in

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measuring risk and management's ability to disguise fundamental earnings problems, other
measures beyond net income can assist in predicting future firm earnings.
Fundamentalvs. TechnicalAnalysis:
Technical analysis and fundamental analysis are the two main schools of thought in the
financial markets. As we've mentioned, technical analysis looks at the price movement of a
security and uses this data to predict its future price movements. Fundamental analysis, on the
other hand, looks at economic factors, known as fundamentals
The Differences
Charts vs. .Financial Statements:
At the most basic level, a technical analyst approaches a security from the charts, while a
fundamental analyst starts with the financial statements.
By looking at the balance sheet, cash flow statement and income statement, a fundamental
analyst tries to determine a company's value. In financial terms, an analyst attempts to
measure a company's intrinsic value. In this approach, investment decisions are fairly easy to
make - if the price of a stock trades below its intrinsic value, it's a good investment. Although
this is an oversimplification (fundamental analysis goes beyond just the financial statements)
for the purposes of this tutorial, this simple tenet hold strue.
Technical traders, on the other hand, believe there is no reason to analyze a company's
fundamentals because these are all accounted for in the stock's price. Technicians believe that
all the information they need about a stock can be found in its charts.
TimeHorizon:
Fundamental analysis takes a relatively long-term approach to analyzing the market
compared to technical analysis. While technical analysis can be used on a timeframe of

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weeks, days or even minutes, fundamental analysis often looks at data over a number of
years.
The different timeframes that these two approaches use is a result of the nature of the
investing style to which they each adhere. It can take a long time for a company's value to be
reflected in the market, so when a fundamental analyst estimates intrinsic value, a gain is not
realized until the stock's market price rises to its "correct" value. This type of investing is
called value investing and assumes that the short-term market is wrong, but that the price of a
particular stock will correct itself over the long run. This "long run" can represent a
timeframe of as long as several years, in some cases.
Furthermore, the numbers that a fundamentalist analyzes are only released over long
periods of time. Financial statements are filed quarterly and changes in earnings per share
don't emerge on a daily basis like price and volume information. Also remember that
fundamentals are the actual characteristics of a business. New management can't implement
sweeping changes overnight and it takes time to create new products, marketing campaigns,
supply chains, etc. Part of the reason that fundamental analysts use a long-term timeframe,
therefore, is because the data they use to analyze a stock is generated much more slowly than
the price and volume data used by technical analysts.
TradingVersusInvesting:
Not only is technical analysis more short term in nature than fundamental analysis, but
the goals of a purchase (or sale) of a stock are usually different for each approach. In general,
technical analysis is used for a trade, whereas fundamental analysis is used to make an
investment. Investors buy assets they believe can increase in value, while traders buy assets
they believe they can sell to somebody else at a greater price. The line between a trade and an
investment can be blurry, but it does characterize a difference between the two schools
Two Approaches of fundamental analysis :
While carrying out fundamental analysis, investors can use either of the following
approaches:

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1 .Top-down approach:
In this approach, an analyst investigates first economy such as, economic indicators,
such as GDP growth rates, energy prices, inflation and interest rates. Search for the best
security then trickles down to the analysis of total sales, price levels and foreign competition
in an industry in order to identify the best company in the sector.
2.Bottom-up approach:
In this approach, an analyst starts the search with specific company, then industry then
economy.
Economic analysis
Industry analysis
companyanalysis

34 | P a g e
how doesfundamental analysis works?
Fundamental analysis is carried out with the aim of predicting the future performance of
a company. It is based on the theory that the market price of a security tends to move towards
its 'real value' or 'intrinsic value.' Thus, the intrinsic value of a security being higher than the
security’s market value represents a time to buy. If the value of the security is lower than its
market price, investors should sell it.
The stepsinvolvedin fundamentalanalysis are:
1. Economic analysis, which involves considering currencies, commodities and indices.
2. Industry sector analysis, which involves the analysis of companies that are a part of the
sector.
company analysis
industry analysis
economic analysis

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3. Situational analysis of a company.
4. Financial analysis of the company.
5. Valuation
The valuation of any security is done through the discounted cash flow (DCF) model, which
takes into consideration:
1. Dividends received by investors
2. Earnings or cash flows of a company
3. Debt, which is calculated by using the debt to equity ratio and the current ratio (current
assets/current liabilities)
FUNDAMENTALANALYSIS TOOLS:
These are the most popular tools of fundamental analysis.
Earnings per Share – EPS
Price to Earnings Ratio – P/E
Dividend Payout Ratio

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Book Value
Return on Equity (ROE)
Dividend per share (DPS)
Financial ratios are tools for interpreting financial statements to provide a basis for
valuing securities and appraising financial and management performance.
A good financial analyst will build in financial ratio calculations extensively in a
financial modeling exercise to enable robust analysis. Financial ratios allow a financial
analyst to:
Standardize information from financial statements across multiple financial years to allow
comparison of a firm’s performance over time in a financial model.
Standardize information from financial statements from different companies to allow
apples to apples comparison between firms of differing size in a financial model.
Measure key relationships by relating inputs (costs) with outputs (benefits) and facilitates
comparison of these relationships over time and across firms in a financial model.
In general, there are 4 kinds of financial ratios that a financial analyst will use most
frequently, these are:
 Performance ratios
 Working capital ratios
 Liquidity ratios

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 Solvency ratios
These 4 financial ratios allow a good financial analyst to quickly and efficiently address
the following questions or concerns:
Performance ratios
What return is the company making on its capital investment?
What are its profit margins?
Working capital ratios
How quickly are debts paid?
How many times is inventory turned?
Liquidity ratios
Can the company continue to pay its liabilities and debts?
Solvency ratios (Longer term)
What is the level of debt in relation to other assets and to equity?
Is the level of interest payable out of profits?
WHY ONLYFUNDAMENTALANALYSIS:
Long-term Trends:
Fundamental analysis is good for long-term investments based on long-term trends, very
long-term. The ability to identify and predict long-term economic, demographic,
technological or consumer trends can benefit patient investors who pick the right industry
groups or companies.

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Value Spotting:
Sound fundamental analysis will help identify companies that represent a good value.
Some of the most legendary investors think long-term and value. Graham and Dodd, Warren
Buffett and John Neff are seen as the champions of value investing. Fundamental analysis
can help uncover companies with valuable assets, a strong balance sheet, stable earnings, and
staying power.
Business insights:
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such pains taking research
and analysis, an investor will be familiar with the key revenue and profit drivers behind a
company. Earnings and earnings expectations can be potent drivers of equity prices. Even
some technicians will agree to that.
A good understanding can help investors avoid companies that are prone to shortfalls
and identify those that continue to deliver. In addition to understanding the business,
fundamental analysis allows investors to develop an understanding of the key value drivers
and companies within an industry. A stock's price is heavily influenced by its industry group.
By studying these groups, investors can better position themselves to identify opportunities
that are high-risk (tech), low-risk (utilities), growth oriented (computer), value driven (oil),
non-cyclical (consumer staples), cyclical (transportation) or income-oriented (high yield).
What Is The Intrinsic Value Of A Stock?
The Concept of Intrinsic Value
Before we get any further, we have to address the subject of intrinsic value. One of the
primary assumptions of fundamental analysis is that the price on the stock market does not
fully reflect a stock’s “real” value. After all, why would you be doing price analysis if the
stock market were always correct? In financial jargon, this true value is known as the intrinsic
value.

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For example, let’s say that a company’s stock was trading at ₹ 20. After doing extensive
homework on the company, you determine that it really is worth ₹ 25. In other words, you
determine the intrinsic value of the firm to be ₹ 25. This is clearly relevant because an
investor wants to buy stocks that are trading at prices significantly below their estimated
intrinsic value.
This leads us to one of the second major assumptions of fundamental analysis: in the
long run, the stock market will reflect the fundamentals. There is no point in buying a stock
based on intrinsic value if the price never reflected that value. Nobody knows how long “the
long run” really is. It could be days or years.
This is what fundamental analysis is all about. By focusing on a particular business, an
investor can estimate the intrinsic value of a firm and thus find opportunities where he or she
can buy at a discount. If all goes well, the investment will pay off over time as the market
catches up to the fundamentals.
Intrinsic value is a topic discussed in philosophy wherein the worth of an object or
endeavor is derived in-and-of-itself - or in layman's terms, independent of other extraneous
factors. A stock also is capable of holding intrinsic value, outside of what its perceived
market price is, and is often touted as an important aspect to consider by value investors
when picking a company to invest in.
Outside of this area of analysis, some buyers may simply have a "gut feeling" about the
price of a good without taking into deep consideration the cost of production, and roughly
estimate its value on the expected utility he or she will derive from it. Others may base their
purchase on the much publicized hype behind an asset ("everyone is talking positively about
it; it must be good!") However, in this article, we will look at another way of figuring out the
intrinsic value of a stock, which reduces the subjective perception of a stock's value by
analyzing its fundamentals and determining the worth of a stock in-and-of-itself (in other
words, how it generates cash).
For the sake of brevity, we will exclude intrinsic value as it applies to call and put options.

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Dividend Discount Model
when figuring out a stock's intrinsic value, cash is king. Many models that calculate the
fundamental value of a security factor in variables largely pertaining to cash: dividends and
future cash flows, as well as utilize the time value of money. One model popularly used for
finding a company's intrinsic value is the dividend discount model. The basic DDM is:
Where:
Div = Dividends expected in one period
r = Required rate of return
One variety of this model is the Gordon Growth Model, which assumes the company in
consideration is within a steady state - that is, with growing dividends in perpetuity. It is
expressed as the following:
Where:
DPS1= Expected dividends one year from the present
R = Required rate of return for equity investors
G = Annual growth rate in dividends in perpetuity
As the name implies, it accounts for the dividends that a company pays out to shareholders
which reflect on the company's ability to generate cash flows. There are multiple variations of
this model, each of which factor in different variables depending on what assumptions you
wish to include. Despite its very basic and optimistic in its assumptions, the Gordon Growth
model has its merits when applied to the analysis of blue-chip companies and broad indices.

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Residual Income Model
another such method of calculating this value is the residual income model, which expressed
in its simplest form, is:
Where:
B0= Current Per-Share Book value
Bn= Expected per-share book value of equity at n
ROEn= Expected EPS
r = Required rate of return on investment
If you find your eyes glazing over when looking at that formula - don't worry, we are not
going to go into further details. What is important to consider though, is how this valuation
method derives the value of the stock based on the difference in earnings per share and per-
share book value (in this case, the security's residual income), to come to an intrinsic value
for the stock. Essentially, the model seeks to find the intrinsic value of the stock by adding its
current per-share book value with its discounted residual income (which can either lessen the
book value, or increase it.)
Discounted Cash Flow
finally, the most common valuation method used in finding a stock's fundamental value is
discounted cash flow (DCF) analysis. In its simplest form, it resembles the DDM:

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Where:
CFn = Cash flows in period n.
d = Discount rate, Weighted Average Cost of Capital (WACC)
In Ben McClure tutorial DCF Analysis, he goes about using the model to determine a fair
value for a stock based on projected future cash flows. Unlike the previous two models, DCF
analysis looks for free cash flows - that is, cash flow where net income is added with
amortization/depreciation, and subtracts changes in working capital and capital expenditures.
It also utilizes WACC as a discount variable to account for the time value of money.
McClure's explanation provides an in-depth example demonstrating the complexity of this
analysis, which ultimately determines the stock's intrinsic value.
Why Intrinsic Value Matters
Why does intrinsic value matter to an investor? In the listed models above, analysts employ
these methods to see if whether or not the intrinsic value of a security is higher or lower than
its current market price - allowing them to categorize it as "overvalued" or "undervalued."
Typically, when calculating a stock's intrinsic value, investors can determine an appropriate
margin of safety, where the market price is below the estimated intrinsic value. By leaving a
'cushion' between the lower market price and the price you believe it's worth, you limit the
amount of downside that you would incur if the stock ends up being worth less than your
estimate.
For instance, suppose in one year you find a company that you believe has strong
fundamentals coupled with excellent cash flow opportunities. That year it trades at $10 per
share, and after figuring out its DCF, you realize that its intrinsic value is closer to $15 per
share - a bargain of $5. Assuming you have a margin of safety of about 35%, you would
purchase this stock at the $10 value. If its intrinsic value drops by $3 a year later, you are still
saving at least $2 from your initial DCF value and have ample room to sell if the share price
drops with it.
For a beginner getting to know the markets, intrinsic value is a vital concept to remember
when researching firms and finding bargains that fit within his or her investment objectives?

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Though not a perfect indicator of the success of a company, applying models that focus on
fundamentals provide a sobering perspective on the price of its shares.
The Bottom Line
Every valuation model ever developed by an economist or financial academic is subject to the
risk and volatility that exists in the market as well as the sheer irrationality of investors.
While calculating intrinsic value may not be a guaranteed way of mitigating all losses to your
portfolio, it does provide a clearer indication of a company's financial health, which is vital
when picking stocks you intend on holding for the long-term. Moreover, picking stocks with
market prices below their intrinsic value can also help in saving money when building a
portfolio.
Although a stock may be climbing in price in one period, if it appears overvalued, it may be
best to wait until the market brings it down to below its intrinsic value to realize a bargain.
This not only saves you from deeper losses, but allows for wiggle room to allocate cash into
other, more secure investment vehicles like bonds and T-bills.
ECONOMIC ANALYSIS
Indian Economy Overview:
fundamental
analysis
economic
analysis
industry
analysis
company
analysis

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The Indian economy after reporting fairly robust growth of over 9 per cent during 2005-
08,moderated to a growth of 6.7 percent in 2008-09 because of the global financial crisis.
Because there was fiscal and monetary space, timely stimulus allowed the economy to
recover fairly quickly to a growth of 8.4 per cent in 2009-10 and 2010-11. Since then,
however, the fragile global economic recovery and a number of domestic factors have led to a
slowdown once again.
The growth rate of the Indian economy (measured in terms of GDP at factor cost at 2004-
05prices) was 5.4 per cent in the first half (H1) of year 2012-13 as against 7.3 per cent in the
corresponding time period of the previous year. The growth for the full year of 2011-12 was
6.5 per cent vis-à-vis the growth rate of 8.4 per cent achieved in each of the previous two
years i.e. 2009-10 and 2010-11. The slowdown has been all pervasive and almost all the
sectors have been affected. The growth rate has been 2.1 per cent for agriculture and allied
sectors, 3.2 per cent for industry sector and 7.0 per cent for the services sector in the first half
of 2012-13. The growth rates were 3.4 per cent, 4.7 per cent and 9.5 per cent, for agriculture,
industry and services, respectively in H1 of 2011-12. The growth of GDP in the first and
second quarters of 2012-13 was 5.5 per cent and 5.3 per cent.
Sectoral Contribution of GDP at factor cost (per cent)
2011-12 2012-13 2011-12 2012-13
Q1 Q2 Q3 Q4 Q1 Q2 H1 H1

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1 Agriculture, forestry
&fishing
13.5 11.1 17.2 13.9 13.2 10.7 12.3 12.0
2 Industry 27.7 27.5 26.1 26.7 27.2 26.9 27.6 27.1
a Mining & quarrying 2.1 2.0 2.0 2.2 2.0 1.9 2.0 2.0
b Manufacturing 15.8 15.7 14.6 15.0 15.0 15.0 15.8 15.0
c Electricity, gas & water
supply
2.0 2.0 1.8 1.8 2.0 2.0 2.0 2.0
d Construction 7.8 7.9 7.6 7.8 8.2 8.0 7.9 8.1
3 Services 58.8 61.3 56.7 59.4 59.6 62.4 60.0 61.0
a Trade, hotels, transport
&communication
28.9 28.5 27.1 28.1 28.5 28.6 28.7 28.5
b Financing,insurance,
realestate & business
services
18.2 18.7 17.4 17.4 19.1 19.4 18.4 19.3
c Community,social &
personal services
11.7 14.1 12.1 13.9 12.0 14.4 12.9 13.2
Some of the other important economic developments in the country are as follows:
 Indian companies have invested US$ 1.65 billion abroad in February 2014, according
to data released by Reserve Bank of India (RBI)
 Non-resident Indians (NRIs) placed deposits aggregating to US$ 14.18 billion in the
financial year ended March 2014, registering an increase of 19 per cent over the
previous year. Non-resident (external) rupee account or NRE deposits with the
banking system jumped 85 per cent (rising by US$ 15.81 billion in FY13 compared to
US$ 8.53 billion in FY12), according to Reserve Bank of India data
 The cumulative amount of foreign direct investment (FDI) equity inflows into India
were worth US$ 191,757 million between April 2001 to February 2014, while FDI
equity inflow during April 2013 to February 2014 was recorded as US$ 20,899
million, according to the latest data published by Department of Industrial Policy and
Promotion (DIPP)
 Foreign institutional investors (FIIs) made a net investment (including equity and
debt) worth Rs 168,367 corer (US$ 30.72 billion) in 2013-14, according to data
published by Securities and Exchange Board of India (SEBI). Moreover, US$ 310.47

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million in the equity and US$ 41.32 million in the debt market were invested by FIIs,
as on May 16, 2014, as per the SEBI data
The Indian economy is estimated to grow at a higher rate of 6.7 per cent in 2013-14 due to
revival in consumption, according to a report by CRISIL.
“India is growing very rapidly in our portfolio,” said Mr. Fred Hochberg, Chief, US Exim
Bank, while highlighting India's strong long-term growth prospects.
 ECONOMIC FACTOR
There are various economic factors which affect the price of the security.
They might be global economic factor such as foreign exchange rate, trade policies,
exim policies, policies regarding FDI and FII. These particular factors affect the Indian
security prices because Indian is a open market in the world of globalization.
The economy of India is highly related with the global economy. It allows MNCs to
do business in India. And MNCs from India being there business across borders. The
favorable factors are increased in foreign trade; decrease in foreign exchange rate, lenient
EXIM policies and vice – versa.
 NATIONAL ECONOMIC FACTOR :
The factor affects investment to the maximum extent. The economic factors affecting
securities prices are as follows:-
GDP AND GROWTH RATE:
Gross domestic product indicate the total productivity of a country which helps the
measurement of growth rate, per capita income rate etc. an increase in GDP impacts positive
change in stock prices . it indicates the increase in growth rate and per capita income which
leads to increase in savings . The higher the saving the higher is the investment.
INFLATION:

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It is an economic condition which is characterized by increase in commodity prices,
decrease in money value, high supply of currencies and low supply of commodities. The
inflation has good as well as bad impact on the investment. During inflation currency supply
is higher which indicates higher amount of investment and at the same time company suffer
due to price risk and could not provide good return which harms investment.
ECONOMY SYSTEM:
There are three economic systems which are discussed below:
 Capitalistic economy
 Socialistic economy
 Mixed economy
A capitalistic economy is an economy where the economy is regulated by
industrialist. the government take decision about economic affairs taking into consideration
.the benefit of industrialist , such kind of environment is good for investment . However, as
the wealth is not distributed properly there are few investors in the market.
In a socialistic economy, the power to control economy lies with the socialistic
persons which reduce the scope for industrialist to growth.
The mixed economy is the most favorable condition for system of economy as the
wealth is properly distributed and the government is not biased by industrialist and socialist.
BALANCE OF PAYMENT (BOP):
It refers to the balance of foreign exchange inflow and outflow. When inflow is
more than outflow it impacts positively to the economy and the foreign exchange reserve
grows. It also positively affects investment.
ECONOMIC POLICIES:

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The economic policies are generally of three types:
 Monetary policy
 Fiscal policy
 EXIM policy
Monetary policies refer to policies formulated by RBI to regulate and control supply
of currency and credit. There are various techniques of controlling supply of currency such as
bank rate , open market operation , CRR etc.
Fiscal policy deals with revenue generation and generally formulated by the
government in the term of a tax rate, tax law etc.
EXIM policies is generally regulated the export and import policy of the country
and here export duty and import duty are maintained.
This kind of economic policies aims at economies stabilization. Hence, affect stock
price to a greater extent.
OTHER FACTORS:
It includes the market condition such as monopoly market, perfect competition
market, and monopolistic market etc,customers preferences,change in customer tastes, trends
of market , spending habits etc.
Industry analysis

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An industry is a combination of number of companies producing homogenous and
related products.
Industry analysis is done after economic analysis in a top done approach to ensure
which industry is potential for investment and which are not. Following factors to be
considered in industrial analysis:
1. Type of industry
2. Industry life cycle
3. Growth of industry
4. Cost structure and profitability
5. Nature of the product
6. Nature of competition
7. Government policies
8. Research and development
1. TYPE OF INDUSTRY:
There are various types of industries which can be summarized under four heads :
I. Growth industry
II. Cyclic industry
III. Defensive industry
IV. Cyclic growth industry
Growth industry:
These are characterized by high rate of earning, growth and expansion of
business and independent business cycle. This type of industries generally affected by
technological change. For example: beverage company.
Cyclic industry:

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These are characterized as there growth and profitability moves along with
business cycle or economic cycle. At the time where there is a boom the industries
perform well and during recession the scope of business reduces. For example: cosmetic
industry.
Defensive industry:
These industries perform against the business cycle. Generally the industry
dealing with food, shelter, clothes are not affected by the boom or recession of business
cycle. For example: sugar industry, pharmaceutical industry.
Cyclic growth industry:
This is a new type of industry which enjoys growth and also affected by the
business cycle. Industries like automobile industry, software industry, electronic industry
, they enjoy a growth at any point of twice in a business cycle. However, the growth rate
during boom period is very high than the recession.
2. INDUSTRYLIFECYCLE :
It can be described as the graphical presentation of an industry life with the
passage of time.Each industry passes through four stages:
a) Pioneering stage
b) Rapid growth stage
c) Maturity and stabilization
d) Declining stage

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Pioneering/Introduction stage:
 The technology of a product is very low.
 The prospective demand is very high which attracts the producers to produce the
particular product.
 The competition in the beginning is very high which result in survival of the fittest .
 Producer tends to achieve brand position name, creating different product and
developed products.
 In this stage, it is difficult to invest in the company as there is a high fluctuation in
terms of market share, earning per share etc.
Rapid growth stage:
 The surviving firms from the pioneering stage start growing by availing various
opportunity.
 The technology improves in a rapid action which results in lower product price and
good quality.
 They attend suitable growth rate, announce dividend to the shareholder and establish
their business in various geographical area.
 In this stage, as the growth rate is maximum the investor with high risk tolerance level
can invest for maximum growth.
 There is a risk of failure even for the fittest company if the growth strategy doesn’t
work.

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Maturity and stabilization stage:
 The stage results after a service of growth years. Here the product is proto type which
means that can’t be further develop. The growth rate becomes lower than the rapid
growth stage.
 After the particular time in the stability stage the growth rate equates with the industry
growth rate.
 Here the symptoms of obsolescence may appear in the technology hence, technical
innovations are conduct through elongate the maturity stage to some more year .
 Investors may invest in the company which is in maturity stage with thorough
analysis.
Decline stage:
 In this stage, the profitability, the demand of the product, the scope of the business
decreases, also suffers technical obsolescence. Hence, investor should not invest in
such companies.
3. COST STRUCTURE AND PROFITABILITY :
The cost structure which can be referred to the amount of fixed or variable cost
impacts on profitability. the companies like natural gas manufacturing companies , oil
refineries , steel and aluminum companies has high establishment cost which is fixed in
nature .likewise , in service industry specially hospital industry has high fixed expenditures
which extends the breakeven time which affect the profitability of the firm (gestation period
is lengthy). Once the breakeven point is achieved the high operating leverage results in high
profitability. Hence ,an investor must focus this factor

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4. MATURITYOF THE PRODUCT :
The product produced may be a high demanded, a product of basic needs,
luxuries product etc. an industrial potential can be reflected by the product
characteristics. Example:
The industrial metal producing companies depends upon the growth rate of the
industry. if the industry growth rate is high then the demand for the product will be
high.
5. NATURE OF THE COMPETITION :
As an essential factor competition plays a key role for analysis of industries. The
industries with high competition generally provide qualitative products which results
in customer satisfaction and goodwill. However, the excessive competition may ruin
the profitability.
6. GOVERNMENT POLICIES :
Government policies regarding industries are generally taxation policies. For
different kinds of industries the tax rates are different. A company paying higher tax can’t
provide high dividend .government provide tax holidays, tax shelter, tax subsidies to various
export industries which is not provided to any other industries .hence, discriminating
government policies have an impact on the profit potential of the industry.
7. RESEARCH AND DEVELOPMENT(R&D) :
R&D. Discovering new knowledge about products, processes, and services, and then
Applying that knowledge to create new and improved products, processes, and services that
fill Market needs.

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IT sector in India
Information technology in India is an industry consisting of two major components: IT
Services and business process outsourcing (BPO). The sector has increased its contribution to
India's GDP from 1.2% in 1998 to 7.5% in 2012. According to NASSCOM, the sector
aggregated revenues of US$100 billion in 2012, where export and domestic revenue stood at
US$69.1 billion and US$31.7 billion respectively, growing by over 9%.
Information technology is playing an important role in India today & has transformed India's
image from a slow moving bureaucratic economy to a land of innovative entrepreneurs.
The IT sector in India is generating 2.5 million direct employments. India is now one of the
biggest IT capitals of the modern world and all the major players in the world IT sector are
present in the country.
The New Telecommunications Policy, 1999" (NTP 1999) helped further liberalize India's
telecommunications sector. The Information Technology Act 2000 created legal procedures
for electronic transactions and e-commerce.Throughout the 1990s, another wave of Indian
professionals entered the United States. The number of Indian Americans reached 1.7 million
by 2000. This immigration consisted largely of highly educated technologically proficient
workers. Within the United States, Indians fared well in science, engineering, and
management. Graduates from growth. The Indian Institutes of Technology (IIT) became
known for their technical skills. The success of Information Technology in India not only had
economic repercussions but also had far-reaching political consequences. India's reputation
both as a source and a destination for skilled workforce helped it improve its relations with a
number of world economies. The relationship between economy and technology—valued in
the western world—facilitated the growth of an entrepreneurial class of immigrant Indians,
which further helped aid in promoting technology-driven

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COMPANY ANALYSIS
It is the third stage of fundamental analysis. After analyzing economy and industry
the investor get sure in which industry he is going to invest. The next step is to find out
the potential company within the potential industry. The investor’s estimates several beat
of information related to the company and evaluate present and future share prices. The
following factors helps in determining the investment potential of the company.
 The competition edge of company : in India there are several companies under
an industry. However, the investor always tends to invest in the best company
which depends upon the core competence or competitive edge of a particular
company over other. This can be further studied with the following basis :
The market share of the company :
It means the percentage of sale made by an individual company from the total sale in
the industry. Higher the market share high the core competence.
Growth of sales :
A company might get good market share but if it does not have subsequent growth
rate of sales than the company is less potential in terms of investment. In case, its growth rate
is in terms of sales is lower than the other company. Here is the chance of crossing market
share.
Stability of sales :
The company can have stable earnings if it has stable sales revenue. A small
fluctuation may not have the earning rather a wide variations.

56 | P a g e
In this project I took 5 IT companies for analysis and which company is suitable for
investment and an investor can earn maximum return on investment. IT companies are:
 WIPRO
 HCL TECHNOLOGIES
 TATA CONSULTANCY SERVICES
 INFOSYS
 REDINGTON (INDIA)

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 WIPRO
Wipro Infotech is a leading manufacturer of computer hardware and provider of IT
services in India and the Middle East region. Part of Wipro Ltd, the $6.98 billion
conglomerate and global leader in technology enabled solutions, the company
leverages on the parent's philosophy of 'Applying Thought' to enable business results
by being a transformation catalyst.
Backed by our strong quality processes and rich experience managing global clients
across various business verticals, we align IT strategies to your business goals. From
simple changes in process to innovative solutions, we help our customers harness the
power of IT to achieve profitable growth, market leadership, customer delight and
sustainability. Along with our best of breed technology partners, Wipro Infotech also
helps you with your hardware and IT infrastructure needs.
Our vast IT services portfolio includes consulting, systems integration, application
development and maintenance, technology infrastructure services, package
implementation and R&D services among others.
Wipro Infotech maintains offices across India, and has operations in Middle East. We
also have a joint venture with DAR Al Riyadh Group in Saudi Arabia.

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 HCL TECHNOLOGIES
Over the past decade, HCL has been one of the fastest growing technology companies not
only in India but in the world – even during the depths of the economic downturn.
What has been the source of HCL’s success during this period of economic turmoil? A
combination of technical expertise and an innovative management philosophy that unleashed
the innovative thinking of empowered employees.
As a $5.2 billion global company, HCL Technologies brings IT and engineering services
expertise under one roof to solve complex business problems for its clients. Leveraging our
extensive global offshore infrastructure and network of offices in 31 countries, we provide
holistic, multi-service delivery in such industries as financial services, manufacturing,
consumer services, public services and healthcare.
A micro-vertical strategy, built on strong domain expertise, ensures that no matter how
complex a company’s business problem is, we can offer an alternative approach that is
sustainable and innovation-driven.
That innovation is fueled by Employees First, a unique management approach that
unshackles the creative energies of our 90,190 plus employees, and puts this collective force
to work in the service of customers’ business problems.

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 TATA CONSULTANCY SERVICES
TATA Consultancy Services Limited (TCSL) is a multinational information
technology (IT) service, consulting and business solutions company headquartered in
India. TCS operates in 46 countries. It is a subsidiary of the Tata Group and is listed
on the Bombay Stock Exchange and the National Stock Exchange of India. TCS is the
largest Indian company by market capitalization and is the largest India-based IT
services company by 2013 revenues. TCS is now placed among the ‘Big 4’ most
valuable IT services brands worldwide.TCS is ranked 40th overall in the Forbes
World's Most Innovative Companies ranking, making it both the highest-ranked IT
services company and the top Indian company. It is the world's 10th largest IT
services provider, measured by revenues.
By 2008, TCS's e-business activities were generating over US$500 million in annual
revenues. On 25 August 2004, TCS became a company. In 2005, TCS became the
first India-based IT services company to enter the bioinformatics market. In 2006,
TCS designed an ERP system for the Corporation. In 2008, TCS undertook an
internal restructuring exercise which aimed to increase the company's agility.TCS
entered the small and medium enterprises market for the first time in 2011, with
cloud-based offerings. On the last trading day of 2011, TCS overtook RIL to achieve
the highest market capitalization of any India-based company. In the 2011/12 fiscal
year, TCS achieved annual revenues of over US$10 billion for the first time. In May
2013, TCS was awarded a six-year contract worth over 1100 corers to provide
services to the Indian Posts. In 2013 TCS moved from the 13th position to 10th
position in the League of top 10 global IT services companies

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 INFOSYS
Infosys is a global leader in consulting, technology, and outsourcing solutions. As a
proven partner focused on building tomorrow's enterprise, Infosys enables clients in
more than 30 countries to outperform the competition and stay ahead of the
innovation curve. With US$8.25bn in FY14 revenues and 160,000+ employees, they
provide enterprises with strategic insights on what lies ahead. It helps enterprises for
transform and thrive in a changing world through strategic consulting, operational
leadership, and the co-creation of breakthrough solutions, including those in mobility,
sustainability, big data, and cloud computing. In 1981, seven engineers started Infosys
Limited with just US$250. From the beginning, the company was founded on the
principle of building and implementing great ideas that drive progress for clients and
enhance lives through enterprise solutions. For over three decades, it has been a
company focused on bringing to life great ideas and enterprise solutions that drive
progress for the clients.
It recognizes the importance of nurturing relationships that reflect our culture of
unwavering ethics and mutual respect. It’ll come as no surprise, then, that 97 percent
(as of March 31, 2014) of our revenues come from existing clients.
Infosys has a growing global presence of more than 160,000+ employees worldwide,
73 offices and 93 development centers in the United States, India, China, Australia,
Japan, Middle East, and Europe.
At Infosys, we believe our responsibilities extend beyond business. That is why it
established the Infosys Foundation – to provide assistance to some of the more
socially and economically depressed sectors of the communities in which they work.
And that is why they behave ethically and honestly in all our interactions – with there
clients, our partners and our employees.

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 REDINGTON
Redington, commencing its Indian operations in 1993, is today positioned as the largest
Supply Chain Solution Provider in emerging markets. As a group, Redington is present in
India, Middle East, Africa, Turkey, Srilanka, Bangladesh and CIS countries.
With its corporate office in Chennai, it has 56 Sales locations, 70 owned service centers and
292 partner service centers across India. In addition, through its subsidiaries both in India and
overseas, Redington has 78 Sales offices, 104 warehouses and 109 own service centers and
310 partner centers. A team comprising of over 2200 highly skilled and committed
professionals helps the Company deliver its products and services to every corner of the
country. The team is supported by robust IT & Communication infrastructure connecting all
the locations of the company and a state of the art ERP and e-commerce back bone.
Redington has built its business on very strong ethical and commercial fundamentals which
has not only helped it to consistently exceed the industry growth rate, but has also enabled to
firmly establish it as the "partner of choice" with most of its vendors and business partners. A
compounded annual growth rate of more than 50% over the past 20 years has enabled
Redington generate a revenue of over Rs. 24210.38 crores during fiscal 2012 – 13,
underlining the very strong foundation and prudent practices on which the company's
business practices have been built.

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Ratioanalysis:
A tool used by individuals to conduct a quantitative analysis of information in a company's
financial statements. Ratios are calculated from current year numbers and are then compared
to previous years, other companies, the industry, or even the economy to judge the
performance of the company. Ratio analysis is predominately used by proponents of
fundamental analysis. There are many ratios that can be calculated
ROE:
Of all the fundamental ratios that investors look at, one of the most important is return on
equity. It's a basic test of how effectively a company's management uses investors' money -
ROE shows whether management is growing the company's value at an acceptable rate. ROE
is calculated as:
Formula:
Annual Net Income
Average Shareholders' Equity
DPS:
The sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is
the total dividends paid out over an entire year (including interim dividends but not including
special dividends) divided by the number of outstanding ordinary shares issued. DPS can be
calculated by using the following formula:
D - Sum of dividends over a period (usually 1 year)
SD - Special, one time dividends
S - Shares outstanding for the period

63 | P a g e
Dividend payout ratio: Dividend payout ratio is the ratio of dividend per share divided by
earnings per share. It is a measure of how much earnings a company is paying out to its
shareholders as compared to how much it is retaining for reinvestment
Formula:
Dividend Payout Ratio =
Dividend per Share
Earnings per Share
Dividend payout ratio can also be calculated as: total dividends/ net income.
EPS:
Earnings per Share (EPS) of a business are the portion of its net income of a period that can
be attributed to each share of its common stock.. Companies are required to show EPS with
their income statement. While comparing the profitability of stocks, their prices and the total
earnings of the respective companies do not help because we need to compare apples to
apples. Therefore we calculate the earnings per share of the stocks. But EPS still is not much
helpful if compared directly. It is used to calculate the price/earnings ratio of a stock which is
directly compared with the price/earnings ratio of other stocks.
Formula
Earnings per Share (EPS) =
Net Income − Dividends on Preferred Shares
Weighted Average Number of Common Shares Outstanding
Price/Earnings (P/E) Ratio:
Price/Earnings or P/E ratio is the ratio of a company's share price to its earnings per share. It
tells whether the share price of a company is fairly valued, undervalued or overvalued.
Formula:
P/E Ratio =
Current Share Price
Earnings per Share

65 | P a g e
Data analysis & Interpretation
CALCULATION:
INTRINSIC VALUE:
Before we get any further, we have to address the subject of intrinsic value. One of the
primary assumptions of fundamental analysis is that the price on the stock market does not
fully reflect a stock’s “real” value. After all, why would you be doing price analysis if the
stock market were always correct? In financial jargon, this true value is known as the intrinsic
value.
For example, let’s say that a company’s stock was trading at rs.20. After doing extensive
homework on the company, you determine that it really is worth Rs. 25. In other words, you
determine the intrinsic value of the firm to be rs.25. This is clearly relevant because an
investor wants to buy stocks that are trading at prices significantly below their estimated
intrinsic value.
Dividend Discount Model
When figuring out a stock's intrinsic value, cash is king. Many models that calculate the
fundamental value of a security factor in variables largely pertaining to cash: dividends and
future cash flows, as well as utilize the time value of money. One model popularly used for
finding a company's intrinsic value is the dividend discount model. The basic DDM is:
Where:
Div = Dividends expected in one period
r = Required rate of return

66 | P a g e
 wipro:
Interpretation:
 After the deep analysis of the data of WIPRO the intrinsic value of the company
security is calculated to be ₹469.85 and the closing price is ₹597.25 of the last
financial year.
 For the data analysis it is clear that the market price is higher than the intrinsic value
and it incising as the time passes.
 The securities are overpriced and an investor can sale the securities to retain the
economic value.
0
100
200
300
400
500
600
700
price
intrinsic value

67 | P a g e
 Hcltechnologies:
interpretation:
 From the accounting period the intrinsic value of HCL securities is calculated to be
₹1447.20 for the last one year.
 The market price has just crossed the intrinsic value in between jan-2014 to feb-
2014.
 It is an over value security.
 The investor should hold the security for some time and then sale it.
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
1,800.00
1-Jan-13
1-Feb-13
1-Mar-13
1-Apr-13
1-May-13
1-Jun-13
1-Jul-13
1-Aug-13
1-Sep-13
1-Oct-13
1-Nov-13
1-Dec-13
1-Jan-14
1-Feb-14
price
intrinsic value
Series 3

68 | P a g e
 Tata consultanceservice:
interpretation:
 From the financial report the intrinsic value of TCS securities is calculated to be
₹1716.32.
 The graph shows that the securities are over valued.
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
1-Jan-13
1-Feb-13
1-Mar-13
1-Apr-13
1-May-13
1-Jun-13
1-Jul-13
1-Aug-13
1-Sep-13
1-Oct-13
1-Nov-13
1-Dec-13
1-Jan-14
1-Feb-14
price
intrinsic value

69 | P a g e
 infosys:
Interpretation:
 After analyzing INFOSYS the above graph shows the intrinsic value is ₹ 2918.94.
 Hence in the above graph market price is higher then the intrinsic valur.
 The graph shows that it is highly overvalued security.
 The market price is supposed to be high due to their good will of the organization.
 Redington (india):
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
1-Jan-13
1-Feb-13
1-Mar-13
1-Apr-13
1-May-13
1-Jun-13
1-Jul-13
1-Aug-13
1-Sep-13
1-Oct-13
1-Nov-13
1-Dec-13
1-Jan-14
1-Feb-14
price
intrinsic value

70 | P a g e
INTERPRETATION:
 After analysis the above graph the intrinsic value of REDINGTON is to be
₹63.8 of the last one year.
 The pattern of market price is supposed to be in a head and shoulder reversal
pattern.
 The above graph shows that it is a highly overvalued security.
Earning per share(eps):
0
10
20
30
40
50
60
70
80
90
100
price
intrinsic value

71 | P a g e
Interpretation:
 After the analysis, it is clear from the above graph that the INFOSYS has higher
Earning per share ₹178.4 because its per share value is higher than the others.
 After INFOSYS, TCS has the higher earning per share ₹ 94.17 in 2014.
 All the IT companies have done well in 2014 better then the 2013.
 An investor can take a long position and can purchase securities of INFOSYS and
TCS.
 DIVIDENDPER SHARE(DPS):
0
20
40
60
80
100
120
140
160
180
200
2014 2013 2012 2011 2010
wipro
hcl
tcs
infosys
redington
company/year 2014 2013 2012 2011 2010
WIPRO 22.94 19.05 19.73 33.36 20.3
HCL 53.16 28.13 17.4 15.57 14.88
TCS 94.17 65.23 55.97 38.62 28.62
INFOSYS 178.4 158.75 147.5 112.22 101.13
REDINGTON 4.29 3.93 3.24 12.65 10.36

72 | P a g e
company/year 2014 2013 2012 2011 2010
WIPRO 7 6 6 6 4
HCL 12 12 7.5 4 7
TCS 32 22 25 14 20
INFOSYS 63 42 47 60 25
REDINGTON 0.4 0.4 1.1 5 4
Interpretation :
 In the above graph, it is clearly shown that INFOSYS has the higher dividend per
share ₹63 in 2014. And others sectors like HCL and TCS also done good in past
years.
 DIVIDENDPAYOUTRATIO:
0
10
20
30
40
50
60
70
2014 2013 2012 2011 2010
wipro
hcl
tcs
infosys
redington

73 | P a g e
company/year 2014 2013 2012 2011 2010
WIPRO 30.52 36.59 34.95 20.6 23.05
HCL 22.54 49.49 49.97 29.86 55.08
TCS 33.97 33.72 51.94 42.21 81.61
INFOSYS 35.49 26.45 31.86 53.46 28.84
REDINGTON 9.31 10.17 34.03 46.5 45.16
Interpretation:
 After the analysis of data, we find that EPS of INFOSYS and TCS is ₹178.4 and
94.14 respectively. Also INFOSYS has the higher percentage of dividend payout ratio
i.e., 35.49% as compared to TCS i.e., 33.97%.
 Hence, INFOSYS has the higher dividend payout ratio as compared to others because
Infosys provides long term and high amount of dividend.
 But here the TCS is a better option to invest because TCS has the better retention
percentage as compared to INFOSYS.
 Here the investor can take a long position and can purchase the securities of TCS.
 BOOK VALUE:
0
10
20
30
40
50
60
70
80
90
2014 2013 2012 2011 2010
wipro
hcl
tcs
infosys
redington

74 | P a g e
company/year 2014 2013 2012 2011 2010
WIPRO 98.38 99.04 86.86 120.49 85.42
HCL 146.84 95.25 85.06 72.69 52.04
TCS 224.9 165.86 126.49 99.53 76.72
INFOSYS 736.64 627.95 518.21 426.73 384.02
REDINGTON 26.69 22.81 19.28 85.96 78.9
Interpretation:
 In the above graph, the book value of INFOSYS is growing year by year.
 In case of REDINGTON, the book value from 2010 to 2011 is growing but after 2011
to 2014 there is a decrease in the book value.
 The book value of TCS shows a better growth but it is not better when it is compared
to INFOSYS.
 The above graph clearly shows that there is a constant growth in the book value of
INFOSYS as compared to others and for an investor it is a better option to invest.
 PRICEEARNING RATIO(p/e):
0
100
200
300
400
500
600
700
800
2014 2013 2012 2011 2010
wipro
hcl
tcs
infosys
redington

75 | P a g e
company/year 2014 2013 2012 2011 2010
WIPRO 19.0 20.1 24.3 25.4 21.8
HCL 15.2 18.2 30.5 24.5 13.6
TCS 23.6 25.5 22.5 32.6 30.9
INFOSYS 19.6 19.0 20.5 31.6 27.0
REDINGTON 13.4 19.1 22.7 25.4 31.4
interpretation:
 If we take in consideration the price earning ratio of all IT companies, it is observed
that after the year 2012 the price earning ratio of all the banks is decreasing except
TCS.
 The P/E ratio of TCS is comparatively higher than the others i.e., 23.6%.
 RETURNONEQUTY(roe):
0
5
10
15
20
25
30
35
2014 2013 2012 2011 201
wipro
hcl
tcs
infosys
redington

76 | P a g e
year/company 2014 2013 2012 2011 2010
WIPRO 22.70 23.38 19.53 22.10 23.42
HCL 33.99 30.7 24.6 21.5 20.0
TCS 43.61 39.0 36.1 35.3 37.2
INFOSYS 23.9 24.8 26.6 26.3 27.2
REDINGTON 18.39 19.7 22.1 18.0 17.1
Interpretation :
 The return on equity of TCS is growing continuously year by year but if we compare
this with HCL then it’s not a better option for an investor to invest. In the above
graph, TCS has the higher return on equity and an investor can take a long position
and can purchase the security.
0
5
10
15
20
25
30
35
40
45
50
2014 2013 2012 2011 2010
wipro
hcl
tcs
infosys
redington

77 | P a g e
Chapter – 5
Finding

78 | P a g e
In this project there are many facts which say an investor should invest in which IT
company for better return. For the conclusion on this part, we have analyzed economic,
industry as well as company i.e. WIPRO, INFOSYS, TCS, HCL and REDINGTON.
 In the Economic Analysis we can see that economic is booming after 2010 and
current position shows that this is the good time to invest after the recession because
GDP growth rate is increasing. And overall economy is growing.
 In the industry analysis here overall industry PAT is increasing over the years which
means IT sector is having much profit but on the other side IT industry Net Profit
growth has decreased very much so investor should invest carefully.
 In the analysis of INFOSYS we can see that EPS is increasing. And dividend is also
increasing so investor can invest in the company but on other side we company’s
intrinsic value is less than the current price it shows that the share price is overvalued
and investor should sell the share. But if investor want to invest in the company for
long term than he can have a good profit because company growing rapidly in terms
of profit and net sales and its EPS & DPS are increasing over the years.
Suggestion

79 | P a g e
The analysis carried out at on the INFOSYS and TCS, their profit and loss account, balance
sheet and ratios. I shall suggest the investors to invest in INFOSYS and TCS than the others
as a value investment.
Reasons:
 Largest private IT sector in India, second largest in entire IT Industry
 Strong increase in profit year-on-year basis.
 Increasing EPS indicate good earnings.
 Increase in sharing profit with shareholders in form of dividend.
CONCLUSION

80 | P a g e
Fundamental analysis holds that no investment decision should be without processing
and analyzing all relevant information. Its strength lies in the fact that the information
analyzed is real as opposed to hunches or assumptions. On the other hand, while fundamental
analysis deals with tangible facts, it does not tend to ignore the fact that human beings do not
always act rationally. Market prices do sometimes deviate from fundamentals. Prices rise or
fall due to insider trading, speculation, rumor, and a host of other factors.
Fundamental analysis is based on the analysis of the economic, industry as well as the
company and in this research we can see that the economic indicators have an effect on the IT
Company’s growth and assets.
Stock market is driven by attitude, perception, predictive capabilities, belief and
sentiment of investors towards the company and its stocks. People analyze the financials, the
market conditions, the economic situations and their own liquidity position to buy or sell a
stock in the market. These ‘buy’ or ‘sell’ decisions of the investors or brokers are reflected in
terms of demand and supply which determine the price of a share in the market. Hence, the
‘price’ which an exchange quotes is the market price and it is the reflection of such attitude,
perception, predictive capabilities, belief and sentiment of investors towards that stocks.
The fundamental value of a stock is that value which forms the significant basis to create
market forces and investors’ assumptions. It is the mere reflection of the fundamental value
of a company. A company’s earning capabilities, profitability, surplus, assets, paid-up capital,
value of creditors, debtors and many such parameters ascertain the company’s fundamental
value which is also called ‘intrinsic value’. Thus, if the intrinsic value of a stock is higher
than its market price, the stock is considered to be a good buying. On the other hand if the
intrinsic value of the stock is less than its market value the stock is considered as overpriced
in the market. While in case of former, the demand for the stock goes up in the market, it is
opposite in case of latter.
The question is ‘Does Market Appreciate the Intrinsic Value of a Stock?’ As analyzed taking
five categories of stocks from IT industry into account, it is observed that in most of the cases

81 | P a g e
market has rightly appreciated the intrinsic value of the stocks. Here comes the concept of
intelligent and literate investing, which is evident from the fact that the intrinsic value of a
stock is well appreciated by the market. And, that is why it is always said: Market is always
right.
The above report says that our economic is growing after the recession and it is the good
time for the one who want to invest. And according to the industry analysis investor can
invest in the IT sector but he/she should be careful for the investment. But according to
financial analysis of INFOSYS & TCS performance in the private industry is good and
expected to grow further in the near future which is a good sign for investment. EPS and
dividend both are increasing and it’s on the top in terms of profit and net interest income if
we compared it with the other companies in the same industry but we can’t ignore the
intrinsic value of the company which is lower than the current value which shows then
investor should sell the share of the company if he/she is investing for short term and for long
term it is good for investor to invest in the company.

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BIBILIOGRAPHY
1. V.K . Bhalla “Inve s t me nt Manage me nt : Securit y Analys i s And
Portfo li o Management”, S. Chand
2. S . Kevin “Security Analysis and Portfolio Management”, (PHI)
3. Fisher, Donald E. Jordan: “Security Analysis and Portfolio Management”.
4. Security Analysis & Portfolio Management – Punithavathy pandian
– Fischer and Jordan
5. Graham , Benjamin and Davia L. Dodd: Security analysis, M. Grow Hill
6. Russel, J. Farrel Jr, Modern Investment and Security Analysis, M.Grow Hill
7. Lee Chang, F .Joseph: Security Analysis and Portfolio Management
REFERENCE:
www.investopedia.com/ technical analysis
www.bseindia.com
www.nseindia.com
www.moneycontrol.com
www.accountingexplained.com
www.Indianfoline.com
www.Gurufocus.com
www.equtymarket.com

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