MBA Project on Fundamental and Technical Analysis of Kotak Bank

Description
In the recent past, the bank interest rates have been increased steadily. But the rate of Inflation has also been increased. There is no big difference between the interest rate and Inflation rate.

Fundamental And Technical Analysis
EXECUTIVE SUMMARY:
In the recent past, the bank interest rates have been increased steadily. But the
rate of Inflation has also been increased. There is no big difference between the
interest rate and Inflation rate. Because of inflation, value of money has been
decreased and cost of living has been increased. This has created panic among lower,
middle and upper middle class families who considered keeping their savings in banks
as safe as well as remunerative. So, the invertors are searching for proper investment
avenues. ere, an attempt is made to predict the future movement of scrips. This
study helps the investors to invest in shares.
India has registered a growth rate of !." percent in F# $%%&'%! and is
e(pected to grow at the rate of )%* plus in this fiscal year, and is one of the fastest
growing economies in the world. It is one of the ma+or attractions for FI,s and FII,s.
FII,s invest in India through secondary -arkets. There is a great scope for India for
becoming member of .'! nations committee.
The stock e(change comes in the secondary market. Stock e(change performs
activities such as trading in share, securities, bonds, mutual fund / commodities.
Stock Broking industry is growing at an enormous rate, as more and more people are
attracted towards stock e(changes with the hope of making profits.
But during this period the country also registered a fairly high industrial
growth. The old industries and business establishments who wanted to e(pand the
activities as well as the new industries and the business establishments floated shares
in the market to raise capital for their activities. The companies, which registered
steady growth, earned confidence of the people and their shares, were rated high in
the market.
Fundamental And Technical Analysis
This pro+ect report helps the reader to understand the techni0ues of investing
in the stock market particularly in the secondary market. Some of the proven
techni0ues have been used in this report to help the reader or investor.
Fundamental Analysis is the study of everything from the overall economy
and industry conditions, to the financial condition and management of specific
companies 1i.e., using real data to evaluate a stock,s value2.
Technical analysis is the e(amination of past price movements to forecast
future price movements. Technical analysts are sometimes referred to as chartists
because they rely almost e(clusively on charts for their analysis.
Objecties !" the study:
To know the future movement of selected companies shares through fundamental and
technical analysis.
Sub ob+ectives
o To predict the future price of the selected companies shares.
o To study the strategies to be adopted by the retail investors based on the technical
and fundamental analysis.
o To know the floor and cap price of the stock.
o To analy3e individual company scrips by considering the factors relating to the
economy, industry and the respective company.
o To predict investor positions 1Buy, sell / hold2 based on historical price trends
and the likely company prospects.
Fundamental And Technical Analysis
Findings and suggestion:
EXPECTED MARKET PRICE OF BHEL
particulars
year
2008 200 20!0
F"#DAME#TAL A#ALI$I$ 2!%2&%0 2'0'&(2 %(2&)2
TECH#ICAL A#AL*$I$ $4%% 5&4%
curre+t ,ar-et price.%!/0%/080 210)!&%2

EXPECTED MARKET PRICE OF L3T
Particulars
year
2008 200 20!0
F"#DAME#TAL A#ALI$I$ 2%22&%% 2(2!&%8 228(&(!
TECH#ICAL A#AL*$I$ 664% 2800
curre+t ,ar-et price %102(&80
I78IA7 ST9:; -A<;=T
OVERVIE# OF E$UITY MAR%ET I& I&'IA
Fundamental And Technical Analysis
BS= 1Bombay Stock =(change2
SENSEX - THE BAROMETER OF INDIAN CAPITAL MARKETS
Int(!ducti!n:
For the premier Stock =(change that pioneered the stock broking activity in India,
)$! years of e(perience seems to be a proud milestone. A lot has changed since )!&4
when 5)! persons became members of what today is called >The Stock =(change,
-umbai> by paying a princely amount of <e).
Since then, the country?s capital markets have passed through both good and bad
periods. The +ourney in the $%th century has not been an easy one. Till the decade of
eighties, there was no scale to measure the ups and downs in the Indian stock market.
The Stock =(change, -umbai 1BS=2 in )@!" came out with a stock inde( that
subse0uently became the barometer of the Indian stock market.
S=7S=A is not only scientifically designed but also based on globally
accepted construction and review methodology. First compiled in )@!", S=7S=A is a
basket of 5% constituent stocks representing a sample of large, li0uid and
representative companies. The base year of S=7S=A is )*+,-+* and the base value is
)... The inde( is widely reported in both domestic and international markets through
print as well as electronic media.
The Inde( was initially calculated based on the >Full -arket :apitali3ation>
methodology but was shifted to the free'float methodology with effect from
September ), $%%5. The >Free'float -arket :apitali3ation> methodology of inde(
construction is regarded as an industry best practice globally. All ma+or inde(
providers like -S:I, FTS=, ST9AA, S/B and 8ow Cones use the Free'float
methodology.
8ue to its wide acceptance amongst the Indian investors, S=7S=A is regarded
to be the pulse of the Indian stock market. As the oldest inde( in the country, it
provides the time series data over a fairly long period of time 1From )@&@ onwards2.
Small wonder, the S=7S=A has over the years become one of the most prominent
brands in the country.
Fundamental And Technical Analysis
The growth of e0uity markets in India has been phenomenal in the decade
gone by. <ight from early nineties the stock market witnessed heightened activity in
terms of various bull and bear runs. The S=7S=A captured all these events in the
most +udicial manner. 9ne can identify the booms and busts of the Indian stock
market through sense(.
&SE /&ATIO&A0 STOC% EXC1A&2E3
The O(4ani5ati!n:
The 7ational Stock =(change of India Dimited has genesis in the report of the
igh Bowered Study .roup on =stablishment of 7ew Stock =(changes, which
recommended promotion of a 7ational Stock =(change by financial institutions 1FIs2
to provide access to investors from all across the country on an e0ual footing. Based
on the recommendations, 7S= was promoted by leading Financial Institutions at the
behest of the .overnment of India and was incorporated in 7ovember )@@$ as a ta('
paying company unlike other stock e(changes in the country.
9n its recognition as a stock e(change under the Securities ntracts 1<egulation2
Act, )@4" in April )@@5, 7S= commenced operations in the Eholesale 8ebt -arket
1E8-2 segment in Cune )@@6. The :apital -arket 1=0uities2 segment commenced
operations in 7ovember )@@6 and operations in 8erivatives segment commenced in
Cune $%%%.
&IFTY:
The 7ifty is relatively a new comer in the Indian market. S/B :7A 7ifty is a
4% stock inde( accounting for $5 sectors of the economy. It is used for purposes such
as benchmarking fund portfoliosF inde( based derivatives and inde( funds. The base
period selected for 7ifty is the close of prices on 7ovember 5, )@@4, which marked
the completion of one'year of operations of 7S=?s capital market segment. The base
value of inde( was set at )%%%. S/B :7A 7ifty is owned and managed by India
Inde( Services and Broducts Dtd. 1IISD2, which is a +oint venture between 7S= and
:<ISID. IISD is a speciali3ed company focused upon the inde( as a core product. IISD
Fundamental And Technical Analysis
have a consulting and licensing agreement with Standard / Boor?s 1S/B2, who are
world leaders in inde( services.
FII in Indian stock market
As part of its initiative to liberali3e its financial markets, India opened her
doors to foreign institutional investors in September, )@@$. This event represents a
landmark event since it resulted in effectively globali3ing its financial services
industry.
*ear +et i+4est,e+t 5y FII
!2/% (&2'
!%/( 2(((&)
!(/2 ('')&)
!2/) )'20&
!)/' '%8)&2
!'/8 208&(2 /
!8/ '2&!!
!/00 ')2&!%
2000/0! )82&22
200!/02 82'2&
2002/0% 2))8&
200%/0( ((000&0%
200(/02 (!(!)&(2
2002/0) )'(%2&%(
200)/0' (%2'&8'
Ehat does India 7eed ' F8I or FII
F8I usually is associated with e(port growth. It comes only when all the
criteria to set up an e(port industry are met. That includes, reduced ta(es, favorable
labor law, freedom to move money in and out of country, government assistance to
ac0uire land, full grown infrastructure, reduced bureaucratic involvement etc. IT,
BB9, Auto Barts, Bharmaceuticals, une(plored service sectors including accountingF
drug testing, medical care etc are key sectors for foreign investment. -anufacturing
is a brick and mortar investment. It is permanent and stays in the country for a very
long time. uge investments are needed to set this industry. It provides employment
potential to semi skilled and skilled labor. 9n the other hand the service sector
re0uires fewer but highly skilled workers. Both are needed in India. nventional
wisdom is that :hina will have an upper hand in manufacturing for a long time. If
Fundamental And Technical Analysis
India plays its cards right India may be the hub for the service sector. Still high end
manufacturing in auto parts and pharmaceuticals should be India,s target.
The FII 1Foreign Institutional Investor2 is monies, which chases the stocks in
the market place. It is not e(actly brick and mortar money, but in the long run it may
translate into brick and mortar. Sudden influ( of this drives the stock market up as too
much money chases too little stock. In last four months an influ( of about G).4 Billion
has driven the Indian stock market $%* higher.
Ehere F8I is a bit of a permanent nature, the FII flies away at the shortest
political or economical disturbance. The late nineties economic disaster of Asian
Tigers is a key e(ample of the latter. 9nce this money leaves, it leaves ruined
economy and ruined lives behind. ence FII is to be welcomed with strict political
and economical discipline.
:hina receives mainly the F8I. They do not have instruments to receive the FII i.e.
laws, institutions and political and +udicial framework. 9n the contrary, India should
welcome both and work hard to retain both.
I&TRO'UCTIO& TO %OTA% SECURITIES
Fundamental And Technical Analysis
T1E %OTA% MA1I&'RA 2ROU6:
The ;otak -ahindra .roup was born in )@!4 as ;otak :apital -anagement
Finance Dimited. This company was promoted by Hday ;otak, Sidney A. A. Binto
and ;otak / mpany. Industrialists arish -ahindra and Anand -ahindra took a
stake in )@!", and that?s when the company changed its name to ;otak -ahindra
Finance Dimited.
;otak -ahindra is one of India?s leading financial institutions, offering
complete financial solutions that encompass every sphere of life. From commercial
banking, to stock broking, to mutual funds, to life insurance, to investment banking,
the group caters to the financial needs of individuals and corporates.
As on 8ecember 5), $%%", the group has a net worth of over <s.5, )%% crore,
and the AH- across the group is around <s. $$4 billion and employs over @,"%%
employees in its various businesses. Eith a presence in $!$ cities in India and offices
in 7ew #ork, Dondon, 8ubai and -auritius, it services a customer base of over
around $.$ million.
The group speciali3es in offering top class financial services, catering to every
segment of the industry. The various group companies includeI
). ;otak -ahindra :apital mpany Dimited
$. ;otak -ahindra Securities Dimited
5. ;otak -ahindra Inc
6. ;otak -ahindra 1International2 Dimited
4. .lobal Investments 9pportunities Fund Dimited
". ;otak -ahindra 1H;2 Dimited
&. ;otak Securities Dimited
!. ;otak -ahindra 9ld -utual Dife Insurance mpany Dimited
@. ;otak -ahindra Asset -anagement mpany Dimited
)%. ;otak -ahindra Trustee mpany Dimited
)). ;otak -ahindra Investments Dimited
)$. ;otak Fore( Brokerage Dimited
)5. ;otak -ahindra Brivate'=0uity Trustee Dimited
)6. ;otak -ahindra Brime Dimited
Fundamental And Technical Analysis
;otak -ahindra has international partnerships with .oldman Sachs 1one of
the world?s largest investment banks and brokerage firms2, Ford :redit 1one of the
world?s largest dedicated automobile financiers2 and 9ld -utual 1a large insurance,
banking and asset management conglomerate2.
%!ta7 Secu(ities, an affiliate of ;otak -ahindra Bank, is the stock'broking
and distribution arm of the ;otak -ahindra .roup. The institutional business
division, which provides A;S=SS, primarily covers secondary market broking. It
caters to the needs of foreign and Indian institutional investors in Indian e0uities 1both
local shares and .8<s2. The division also has a comprehensive research cell with
sectoral analysts covering all the ma+or areas of the Indian economy.
;otak Securities Dtd. is India?s leading stock broking house with a market
share of around !.4 * as on 5)st -arch. ;otak Securities Dtd. has been the largest in
IB9 distribution.
The accolades that ;otak Securities has been graced with includeI
). Brime <anking Award 1$%%5'%62' Dargest 8istributor of IB9?s
$. Finance Asia Award 1$%%62' India?s best =0uity ouse
5. =uro money Award 1$%%42'Best =0uities ouse In India
6. Finance Asia Award 1$%%42'Best Broker In India
4. Finance Asia Award 1$%%"2' Best Broker In India
". =uro money Award 1$%%"2 ' Best Brovider of Bortfolio -anagementI =0uities
The company has a full'fledged research division involved in -acro
=conomic studies, Sectorial research and mpany Specific =0uity <esearch
combined with a strong and well networked sales force which helps deliver current
and up to date market information and news.
;otak Securities Dtd is also a depository participant with 7ational Securities
8epository Dimited 17S8D2 and :entral 8epository Services Dimited 1:8SD2,
providing dual benefit services wherein the investors can use the brokerage services
of the company for e(ecuting the transactions and the depository services for settling
Fundamental And Technical Analysis
them.
;otak Securities has )@4 branches servicing more than $,$%,%%% customers
and a coverage of $5) :ities. ;otaksecurities.com, the online division of ;otak
Securities Dimited offers Internet Broking services and also online IB9 and -utual
Fund Investments.
;otak Securities Dimited manages assets over $4%% crores of Assets Hnder
-anagement 1AH-2 .The portfolio -anagement Services provides top class service,
catering to the high end of the market. Bortfolio -anagement from ;otak Securities
comes as an answer to those who would like to grow e(ponentially on the crest of the
stock market, with the backing of an e(pert.
I#TROD"CTIO# TO THE TOPIC
FU&'AME&TA0 A&' TEC1&ICA0 A&A0YSIS:
Fundamental And Technical Analysis
Fundamental analysis
The basic purpose of buying a security is to earn dividends and ultimately sell
it at higher price. An investor therefore is interested in obtaining estimates of future
prices of the share. These in turn will depend upon the performance of the industry to
which the company belongs and the general economic situation of the country. The
multitude of factors affecting a company,s profitability can be broadly classified asI
). =conomic wide factorsI these includes the factors like growth rate of the
economy, the rate of inflation, foreign e(change rates etc which affects
profitability of all companies.
$. Industry wide factorsI these include factors which are specific to
industry to which the company belongs. For instance the demand supply gap
in the industry, the emergence of substitutes, and changes in government
policies towards industry affects the company belonging to an industry.
5. mpany wide factorI these factors are specific to a firm. The firm
specific factors like plant and machinery, the brand image of the product, and
ability of the management to affect the profitability.
Fundamental analysis considers the financial and economic data that may
influence the viability of a company. There are many flavors of fundamental analysis
centered on such concepts as value, growth and turnarounds. Technical analysis is the
study of the price chart. It assumes that by looking at the progress of that little
s0uiggly line you can forecast the future trend of a stock. Fundamental analysis is
essential to most investors, and technical analysis is essential to most traders and
speculators.
An investor with rational and scientific approach will therefore be interested in
analy3ing the influence of the e(pected performance of the company, industry and
Fundamental And Technical Analysis
economy as a whole on share prices, even before taking the investment decision such
analysis is called fundamental analysis.
Fundamental analysis is the method of evaluating securities by attempting to
measure the intrinsic value of a particular stock. It is the study of everything from the
overall economy and industry conditions, to the financial condition and management
of specific companies 1i.e., using real data to evaluate a stock,s value2. The method
utili3es items such as revenues, earnings, return on e0uity and profit margins to
determine a company,s underlying value and potential for future growth.
9ne of the ma+or assumptions under fundamental analysis is that, even though
things get mis priced in the market from time to time, the price of an asset will
eventually gravitate toward its true value. This seems to be a reasonable bet
considering the long upward march of 0uality stocks in general despite regular
setbacks and periods of irrational e(uberance. The key strategy for the fundamentalist
is to buy when prices are at or below this intrinsic value and sell when they got
overpriced.
TEC1&ICA0 A&A0YSIS:
Technical analysis is the e(amination of past price movements to forecast
future price movements. Technical analysts are sometimes referred to as chartists
because they rely almost e(clusively on charts for their analysis.
Fundamental And Technical Analysis
M!in4 Ae(a4e:
A -oving Average is an indicator that shows the average value of a security?s
price over a period of time. Ehen calculating a moving average, a mathematical
analysis of the security?s average value over a predetermined time period is made. As
the securities price changes, its average price moves up or down.
There are several popular ways to calculate a moving average. -eta Stock for
Cava calculates a >simple> moving average''meaning that e0ual weight is given to
each price over the calculation period.
Inte(8(etati!n:
The most popular method of interpreting a moving average is to compare the
relationship between moving averages of the security?s price with the security?s price
itself. A buy signal is generated when the security?s price rises above its moving
average and a sell signal is generated when the security?s price falls below its moving
average.
This type of moving average trading system is not intended to get you in at the
e(act bottom nor out at the e(act top. <ather, it is designed to keep you in line with
the security?s price trend by buying shortly after the security?s price bottoms and
selling shortly after it tops.
The critical element in a moving average is the number of time periods used in
calculating the average. Ehen using hindsight, you can always find a moving average
that would have been profitable. The key is to find a moving average that will be
consistently profitable. The most popular moving average is the 5@'week 1or $%%'
day2 moving average. This moving average has an e(cellent track record in timing
the ma+or 1long'term2 market cycles.
Adanta4es:
Fundamental And Technical Analysis
The advantage of moving average system of this type 1i.e., buying and selling
when prices break through their moving average2 is that you will always be on the
>right> side of the marketI prices cannot rise very much without the price rising above
its average price. The disadvantage is that you will always buy and sell some late. If
the trend does not last for a significant period of time, typically twice the length of the
moving average, you will lose your money.
Su88!(t and Resistance:
Support and resistance represent key +unctures where the forces of supply and
demand meet. In the financial markets, prices are driven by e(cessive supply 1down2
and demand 1up2. Supply is synonymous with bearish, bears and selling. 8emand is
synonymous with bullish, bulls and buying. These terms are used interchangeably
throughout this and other articles. As demand increases, prices advance and as supply
increases, prices decline. Ehen supply and demand are e0ual, prices move sideways
as bulls and bears slug it out for control.
#hat Is Su88!(t9
Support is the price level at which demand is thought to be strong enough to
prevent the price from declining further. The logic dictates that as the price declines
towards support and gets cheaper, buyers become more inclined to buy and sellers
become less inclined to sell. By the time the price reaches the support level, it is
believed that demand will overcome supply and prevent the price from falling below
support.
Support does not always hold and a break below support signals that the bears
have won out over the bulls. A decline below support indicates a new willingness to
sell andJor a lack of incentive to buy. Support breaks and new lows signal that sellers
have reduced their e(pectations and are willing sell at even lower prices. In addition,
buyers could not be coerced into buying until prices declined below support or below
the previous low. 9nce support is broken, another support level will have to be
established at a lower level.
Fundamental And Technical Analysis
#he(e Is Su88!(t Established9
Support levels are usually below the current price, but it is not uncommon for
a security to trade at or near support. Technical analysis is not an e(act science and it
is sometimes difficult to set e(act support levels. In addition, price movements can be
volatile and dip below support briefly. Sometimes it does not seem logical to consider
a support level broken if the price closes )J! below the established support level. For
this reason, some traders and investors establish support 3ones.
#hat Is Resistance9
<esistance is the price level at which selling is thought to be strong enough to
prevent the price from rising further. The logic dictates that as the price advances
towards resistance, sellers become more inclined to sell and buyers become less
inclined to buy. By the time the price reaches the resistance level, it is believed that
supply will overcome demand and prevent the price from rising above resistance.
<esistance does not always hold and a break above resistance signals that the
bulls have won out over the bears. A break above resistance shows a new willingness
to buy andJor a lack of incentive to sell. <esistance breaks and new highs indicate
buyers have increased their e(pectations and are willing to buy at even higher prices.
In addition, sellers could not be coerced into selling until prices rose above resistance
or above the previous high. 9nce resistance is broken, another resistance level will
have to be established at a higher level.
#he(e Is Resistance Established9
<esistance levels are usually above the current price, but it is not uncommon
for a security to trade at or near resistance. In addition, price movements can be
volatile and rise above resistance briefly. Sometimes it does not seem logical to
consider a resistance level broken if the price closes )J! above the established
resistance level. For this reason, some traders and investors establish resistance 3ones.
Fundamental And Technical Analysis
So, ere, Identification of key support and resistance levels is an essential
ingredient to successful technical analysis. =ven though it is sometimes difficult to
establish e(act support and resistance levels, being aware of their e(istence and
location can greatly enhance analysis and forecasting abilities. If a security is
approaching an important support level, it can serve as an alert to be e(tra vigilant in
looking for signs of increased buying pressure and a potential reversal. If a security is
approaching a resistance level, it can act as an alert to look for signs of increased
selling pressure and potential reversal. If a support or resistance level is broken, it
signals that the relationship between supply and demand has changed. A resistance
breakout signals that demand 1bulls2 has gained the upper hand and a support break
signals that supply 1bears2 has won the battle.
6(ice Oscillat!
The Brice 9scillator displays the difference between two moving averages of a
security?s price. The difference between the moving averages can be e(pressed in
either points or percentages.
The Brice 9scillator is almost identical to the -A:8, e(cept that the Brice
9scillator can use any two user'specified moving averages. 1The -A:8 always uses
)$ and $"'day moving averages, and always e(presses the difference in points.2
Inte(8(etati!n:
-oving average analysis typically generates buy signals when a short'term
moving average 1or the security?s price2 rises above a longer'term moving average.
nversely, sell signals are generated when a shorter'term moving average 1or the
security?s price2 falls below a longer'term moving average. The Brice 9scillator
illustrates the cyclical and often profitable signals generated by these one or two
moving average systems.
6(ice Rate-O"-Chan4e:
Fundamental And Technical Analysis
The Brice <ate'of':hange 1><9:>2 indicator displays the difference between
the current price and the price ('time periods ago. The difference can be displayed in
either points or as a percentage. The -omentum indicator displays the same
information, but e(presses it as a ratio.
Inte(8(etati!n:
It is a well'recogni3ed phenomenon that security prices surge ahead and retract
in a cyclical wave'like motion. This cyclical action is the result of the changing
e(pectations as bulls and bears struggle to control prices.
The <9: displays the wave'like motion in an oscillator format by measuring
the amount that prices have changed over a given time period. As prices increase, the
<9: risesF as prices fall, the <9: falls. The greater the change in prices, the greater
the change in the <9:.
The time period used to calculate the <9: may range from )'day 1which
results in a volatile chart showing the daily price change2 to $%%'days 1or longer2.
The most popular time periods are the )$' and $4'day <9: for short to intermediate'
term trading. These time periods were populari3ed by .erald Appel and Fred
itschler in their book, Stock -arket Trading Systems.
The )$'day <9: is an e(cellent short' to intermediate'term
overboughtJoversold indicator. The higher the <9:, the more overbought the
securityF the lower the <9:, the more likely a rally. owever, as with all
overboughtJoversold indicators, it is prudent to wait for the market to begin to correct
1i.e., turn up or down2 before placing your trade. A market that appears overbought
may remain overbought for some time. In fact, e(tremely overboughtJoversold
readings usually imply a continuation of the current trend.
The )$'day <9: tends to be very cyclical, oscillating back and forth in a
fairly regular cycle. 9ften, price changes can be anticipated by studying the previous
cycles of the <9: and relating the previous cycles to the current market
Fundamental And Technical Analysis
Relatie St(en4th Inde: /RSI3:
The <elative Strength Inde( 1><SI>2 is a popular oscillator. It was first
introduced by Eelles Eilder in an article in mmodities 1now known as Futures2
-aga3ine in Cune, )@&!.
The name ><elative Strength Inde(> is slightly misleading as the <elative
Strength Inde( does not compare the relative strength of two securities, but rather the
internal strength of a single security. A more appropriate name might be >Internal
Strength Inde(.>
Inte(8(etati!n:
Ehen Eilder introduced the <elative Strength Inde(, he recommended using a
)6'day <elative Strength Inde(. Since then, the @'day and $4'day <elative Strength
Inde(s have also gained popularity. The fewer days used to calculate the <elative
Strength Inde(, the more volatile the indicator.
The <elative Strength Inde( is a price'following oscillator that ranges between
% and )%%. A popular method of analy3ing the <elative Strength Inde( is to look for a
divergence in which the security is making a new high, but the <elative Strength
Inde( is failing to surpass its previous high. This divergence is an indication of an
impending reversal. Ehen the <elative Strength Inde( then turns down and falls
below its most recent trough, it is said to have completed a >failure swing.> The
failure swing is considered a confirmation of the impending reversal.
In -r. Eilder?s book, he discusses five uses of the <elative Strength Inde(I
). T!8s and ;!tt!ms< The <elative Strength Inde( usually tops above &% and
bottoms below 5%. It usually forms these tops and bottoms before the
underlying price chart.
$. Cha(t F!(mati!ns< The <elative Strength Inde( often forms chart patterns
such as head and shoulders or triangles that may or may not be visible on the
price chart.
Fundamental And Technical Analysis
5. Failu(e S=in4s 1also known as support or resistance penetrations or
breakouts2. This is where the <elative Strength Inde( surpasses a previous
high 1peak2 or falls below a recent low 1trough2.
6. Su88!(t and Resistance< The <elative Strength Inde( shows, sometimes
more clearly than price themselves, levels of support and resistance.
4. 'ie(4ences< As discussed above, divergences occur when the price makes a
new high 1or low2 that is not confirmed by a new high 1or low2 in the <elative
Strength Inde(. Brices usually correct and move in the direction of the
<elative Strength Inde(.
T(end lines:
In the preceding section, we saw how support and resistance levels can be
penetrated by a change in investor e(pectations 1which results in shifts of the
supplyJdemand lines2. This type of a change is often abrupt and >news based.>
In this section, we?ll review >trends.> A trend represents a consistent change in
prices 1i.e., a change in investor e(pectations2. Trends differ from supportJresistance
levels in that trends represent change, whereas supportJresistance levels represent
barriers to change.
Fundamental And Technical Analysis
As shown in the following chart, a rising trend is defined by successively
higher low'prices. A rising trend can be thought of as a rising support level''the bulls
are in control and are pushing prices higher.
As shown in the ne(t chart, a falling trend is defined by successively lower
high'prices. A falling trend can be thought of as a falling resistance level''the bears
are in control and are pushing prices lower.
The ;a( Cha(t:
The Bar chart is one of the most popular types of charts used in technical
analysis. As illustrated on the left, the top of the vertical line indicates the highest
price at which a security traded during the day, and the bottom represents the lowest
price. The closing price is displayed on the right side of the bar and the opening price
is shown on the left side of the bar. A single bar like the one to the left represents one
day of trading.
Fundamental And Technical Analysis
The chart below is an e(ample of a bar chart for AT/T 1T2I
The advantage of using a bar chart over a straight'line graph is that it shows
the high, low, open and close for each particular day.
Candle stic7s Cha(tin4:
:andlestick charts have been around for hundreds of years. They are often
referred to as >Capanese candles> because the Capanese would use them to analy3e the
price of rice contracts.
Similar to a bar chart, candlestick charts also display the open, close, daily
high and daily low. The difference is the use of color to show if the stock went up or
down over the day.
Fundamental And Technical Analysis
T6e c6art 5el78 is a+ e9a,ple 7: a ca+;lestic- c6art :7r AT3T .T0&
<ree+ 5ars i+;icate t6e st7c- price r7se1 re; i+;icates a ;ecli+e=
I+4est7rs see, t7 6a4e a >l74e?6ate> relati7+s6ip 8it6 ca+;lestic-
c6arts& Pe7ple eit6er l74e t6e, a+; use t6e, :re@ue+tly 7r t6ey are
c7,pletely tur+e; 7:: 5y t6e,& T6ere are se4eral patter+s t7 l77- :7r 8it6
ca+;lestic- c6arts / 6ere are a :e8 7: t6e p7pular 7+es a+; 86at t6ey ,ea+&
&
This is a bullish pattern ' the stock opened at 1or near2 its low and
closed near its high
Fundamental And Technical Analysis
6!int and Fi4u(e Cha(t:
The point / figure 1B/F2 chart is somewhat rare. In fact, most charting
services do not even offer it. This chart plots day'to'day increases and declines in
priceI increases are represented by a rising stack of >A>s, while decreases are
represented by a declining stack of >9>s. This type of chart was traditionally used for
intraday charting 1a stock chart for +ust one day2, mainly because it can be long and
tedious to create a B/F chart manually over a longer period of time.
The idea behind B/F charts is that they help you to filter out less significant
price movements and to focus on the most important trends. Below is an e(ample of a
B/F chart for AT/T 1T2I
The opposite of the pattern above, this is a bearish pattern. It
indicates that the stock opened at 1or near2 its high and dropped
substantially to close near its low.
;nown as >the hammer>, this is a bullish pattern only if it occurs
after the stock price has dropped for several days. A small body along
with a large range identifies a hammer. This pattern indicates that a
reversal in the downtrend is in the works.
;nown as a >starK. For the most part, stars typically indicate a
reversal and or indecision. There is a possibility that after seeing a
star there will be a reversal or change in the current trend.
Fundamental And Technical Analysis
6O6U0AR C1ARTI&2 6ATTER&S:
Fundamental And Technical Analysis
Technical analysts often use proven successful price patterns from great stocks
as tools to find new great stocks. Det?s look at a few e(amples
• Cu8 and 1andle ' This is a pattern on a bar chart that can be as short as seven
weeks and as long as "4 weeks. The cup is in the shape of a >H>. The handle
has a slight downward drift. The right'hand side of the pattern has low trading
volume. As the stock comes up to test the old highs, the stock will incur
selling pressure by the people who bought at or near the old high. This selling
pressure will make the stock price trade sideways with a tendency towards a
downtrend for anywhere from four days to four weeks, then it will take off.
This pattern looks like a pot with a handle. It is one of the easier
patterns to detectF and investors have made a lot of money using it.
• 1ead and Sh!ulde(s ' This is a chart formation resembling an >-> in which a
stock?s priceI
' <ises to a peak and then declines, then
' <ises above the former peak and again declines, and then
' rises again but not to the second peak and again declines.
The first and third peaks are shoulders, and the second peak forms the head.
This pattern is considered a very bearish indicator.
Fundamental And Technical Analysis
• '!uble ;!tt!m ' This pattern resembles a >E> and occurs when a stock price
drops to a similar price level twice within a few weeks or months. #ou should
buy when the price passes the highest point in the handle. In a perfect double
bottom, the second decline should normally go slightly lower than the first
decline to create a shakeout of +ittery investors. The middle point of the >E>
should not go into new high ground. This is a very Bullish indicator.
The belief is that, after two drops in the stock price, the +ittery investors will
be out and the long'term investors will still be holding on.
Fundamental And Technical Analysis
Importance of pro+ect
). The pro+ect gives thorough knowledge of fundamental and technical analysis
$. In this pro+ect report the =ngineering sector is analy3ed by considering budget
and demand and supply of the industry.
5. In the pro+ect report the $ companies have selected and analy3ed the
company,s future market price by two distinct theories.
6. <eader of this pro+ect comes to know the e(pected future market prices and
can invest into the scripts.
4. This gives the full information of calculation of intrinsic value.
Fundamental And Technical Analysis
9b+ective of the study
Main !bjectie:
To know the future movement of selected companies shares through fundamental and
technical analysis.
Sub !bjecties
o To predict the future price of the selected companies shares.
o To study the strategies to be adopted by the retail investors based on the technical
and fundamental analysis.
o To know the floor and cap price of the stock.
o To analy3e individual company scrips by considering the factors relating to the
economy, industry and the respective company.
o To predict investor positions 1Buy, sell / hold2 based on historical price trends
and the likely company prospects.
'ata c!llectin4 meth!d!l!4y
The data collected for the study is secondary data. The data I have used for the study
is
). istorical shares value of the stocks collected from I:I:I 8I<=:T<:9-.
$. The balance sheet and Income statement got from companies web site.
5. Some of the information about the industry is collected from other financial
web site.
Fundamental And Technical Analysis
T1E MEASUREME&T TEC1&I$UE
The following techni0ues are used for the study.
). Simple moving average.
4. =(ponential moving average 1=-A2
". The relative strength inde( 1<SI2
&. Lalue anchor.
0IMITATIO&S OF T1E STU'Y:
). The study is limited only to these $ sectors and 6 companies.
$. ere, an attempt is made to predict the future movement stock. It contains an
element of guess work
5. ere, I have used only 5 Technical tools to predict the movement of Scrips
Fundamental And Technical Analysis
Technical analysis !" selected sect!( s!c7s is as "all!=s
ere you can see the charts of B=D, D/T and 7IFT# which is designed
1derived2 by -S =(cel sheet. For calculating of <SI, S-A and =-A $ years
historical closing prices are used. The respective formulas of S-A, =-A and <SI is
as follows
SMA /Sim8le M!in4 Ae(a4e3
A simple moving average is formed by computing the average 1mean2 price of a
security over a specified number of periods. Ehile it is possible to create moving
averages from the 9pen, the igh, and the Dow data points, most moving averages
are created using the closing price. For e(ampleI a 4'day simple moving average is
calculated by adding the closing prices for the last 4 days and dividing the total by 4.
=(I if the closing prices are as followsI )%, )), )$, )5, )6, )&, )$MMMMM
)%N))N)$N)5N)6O"%
1"%J42O)$
ere )$ is a first moving average obtained from the given closing prices, ne(t moving
average can be calculated by deducting first cl price i.e )% and adding ne(t cl. Brice i.e )& and
again dividing it by 4.
E:8!nential M!in4 Ae(a4e /EMA3
In order to reduce the lag in S-A, technicians often use =-A. =-A?s reduce the lag by
applying more weight to recent prices relative to older prices. The weighting applied to the
most recent price depends on the specified period of the moving average. The shorter the
=-A?s period, the more weight that will be applied to the most recent price. For e(ampleI a
)%'period =-A weighs the most recent price )!.)!* while a $%'period =-A weighs the
most recent price @.4$*. As such, it will react 0uicker to recent price changes than a S-A.
ere?s the calculation formula
Fundamental And Technical Analysis
EMA /cu((ent3 > //8(ice /cu((ent3-EMA /8(e33 : multi8lie(? EMA/8(e3
Ehere, -ultiplier P $JnN)
n' 7umber of days for which =-A is calculated
If we take the same e(ample of S-A 4 day =-A is calculated as follows.
=-AO 1)$'))2 A %.""" N )) O )).""
Ehere multiplier O $J 14 N)2 O %."""
For ne(t =-A ))."" acts as previous =-A and so on
Relatie St(en4th Inde:<
AnsI 8eveloped by C. Eelles Eilder and introduced in his )@&! book, 7ew ncepts
in Technical Trading Systems the <elative Strength Inde( is an e(tremely useful and
popular momentum oscillator.
Calculation

Fundamental And Technical Analysis
BHEL Company Charts
Fundamental And Technical Analysis
). Short term moving averages of B=D mpany.
$. Dong'term moving averages of B=D mpany.

Fundamental And Technical Analysis
Interpretation for short term moving averagesI
). The above chart of B=D is of short term analysis say for e(ample )4 days to
"% days.
$. The above chart shows support and resistance level which is shown by arrow
mark above.
5. The chart shows the buying and selling signals which is shown in red green
and red arrow marks and circle is the point which specifies the e(act price to
buy or sell the stock.
6. And from above chart one can see the trend line violation which is shown by
black arrow mark.
Interpretation for long term moving averagesI
). As we can see from the above chart the buy and sell levels are <s ))5% and
<s. $)%%.
$. In the long term chart also we can see a trend violation at the stage of +an
$%%!.
Fundamental And Technical Analysis
5. ere in long term moving average chart one can see that the $4 days S-A
going upwards and )$4 days =-A coming downwards. So if in future the $4
days S-A goes upwards and crosses the )$4 days =-A then again the bull
run rally start.
Target price for B=D according to Technical chartsI
). At the beginning of the chart the support level is around <s. @%% in the month
of Cune $%%" and resistance level is at <s. ))%% in the month of August $%%".
$. after its resistance in august $%%" at <s ))%% the stock has under gone for
consolidation for $ months
5. After breaking its resistance of <s. ))%% the stock again under gone for
consolidation up to Feb $%%&.
6. 9n Fab $%%& the stock had resistance of <s. )$%% and fell down in march id
for <s. )%%% there for the new support become <s. )%%% and resistance again
<s. )$%%.
4. 9n April $%%& end it crossed its resistance and started rally.
". In the month of Culy $%%& it achieved 4$ weeks high and created a new
resistance of <s. )!%% and new support become <s. )&%%
&. The stock was on its life time high of <s. $!&% on 7ovember $%%&.
!. In the 7ovember $%%& the stock had resistance of <s. $@%% and support was
<s. $)%% in the year $%%& of 9ctober.
@. In the month of Can $%%! it has broken its previous support and started a
bearish run.
)%. In the month of 8ec mid $%%& the stock violated its trend line.
)). the present support is )!4% and previous resistance is $$%%
Short term target
Ta(4et 8(ices "!( ;1E0
Su88!(t- ),..
Resistance- @)A.
Ta(4et 8(ice- @)A.-),..>BA.
Fundamental And Technical Analysis
The(e "!( > BA. ? @)A.> @A..
0!n4 te(m ta(4et
Su88!(t- ),A.
Resistance- @,..
Ta(4et 8(ice- @,..-),A.>*A.
The(e "!( > *A. ? @,..> B+A.
5. )6 days <SI 9F B=D :9-BA7#
InterpretationI
). ere we can see that the stock has gone for correction over a period and the
present <SI is around 4% and which is very attractive.
$. From the above chart we can say that the stock is under consolidation and it is
a best time to enter into this script at present market price.
Fundamental And Technical Analysis
L&T company Charts
Fundamental And Technical Analysis
). Short term moving average of D/T mpany
Fundamental And Technical Analysis
$. Dong term moving averages of D/T
Interpretation for short term moving averageI
). The stock is showing upward trend line from Aug $%%" to Cune $%%&.
$. There is a buy signal on -arch $%%& at <s. )4%% level.
5. Ee can see the aggressive Bull <un from -ay $%%& to 7ov $%%& the stock has
almost double on 7ov $%%&.
6. There is a selling signal when )% days S-A came below 6% days =-A.
4. From Can $%%! to -arch $%%! there is a declining trend line.
". At the end of 5).5 $%%! it seems to be violation of trend line.
Interpretation for long term moving averageI
). The long term moving average of D/T stock is bit attractive which is showing
5 phases of Bull <un.
$. The stock has shown a accumulation for the period from -ay $%%" to -y
$%%& and immediately the upward break out happened and the stock started
rally.
Target price for D/T according to Technical chartsI
Fundamental And Technical Analysis
Sh!(t te(m ta(4et
Su88!(t- @,..
Resistance- BCA.
Ta(4et 8(ice- BCA.-@,..>,A.
The(e "!( > ,A.?BCA.>DDA.
0!n4 te(m ta(4et
Su88!(t- @,..
Resistance- DB..
Ta(4et 8(ice- DB..-@,..>)A..
The(e "!( > DB..-)A..>A,..
5. )6 8A#S <SI 9F D/T
Fundamental And Technical Analysis
<SI of D/T mpany
). At present the D/T mpany <SI is very reasonable and started rally so one
should see the market condition and invest in the script.
$. The <SI going upward and at present the <SI is around 64 levels.
So one should invest at current market price.
Fundamental And Technical Analysis
Fundamental And Technical Analysis
Nifty Charts
). 7IFT# moving averages
Fundamental And Technical Analysis
$. <SI :alculation for 7ifty
Analysis: /Sh!(t te(m !( inte(mediate3
). If we look at @% day =-A of 7ifty chart, for the past one and half year the
trend has been Bullish.
$. From $%th Can $%%! onwards there has been shift in the trend towards Bearish.
5. The )!day =-A / S-A of 7ifty has broken down below @% day =-A. So
this is one more conclusive evidence for reversal of trend from Bull to Bear.
Immediate Futu(e:
As we can see from the graph it is clear that market is finding support at 664% to
6"%%1which is previous resistance for the market2. At this level market is likely to
consolidate for the medium time period.
Si4ni"icance !" Futu(e T(end:
In future unless and until market finds re0uired strengths to come to the previous level
i.e. resistance at 4"5% P 4%, there will be no signs of market turning Bullish.
Fundamental And Technical Analysis
And if in future market breaks the resistance level i.e. 4"5%'4% then it will rally up to
C*,.-+.@.< 1Target2
0!n4 te(m analysis
). -arket is sentiment driven and swings and hypes in market are so strong that
they prevail even for years that have happened at present.
$. There has been shift in market trend and it has turned bearish though there is
no clear sign of bear trend 1it,s a long term correction not e(actly bearish2 but present
situation is of complete chaos has left market in a state of volatility so we should wait
and see market movement closely.
5. -arket,s long term support is at 5))!'5)5% and ne(t support is at 64%% level
so ne(t rally from that level 64%% is )5!%')6%%164%%'5))%2 and we can see some )4%'
$%% points abortive rally has been occurred and has reached "%4%.
6. At that level market was waiting for correction. Bad clues from HS slow down
had made market to take DT correction and market has turned to be volatile and has
yet to settle down at previous support of 64%%.
Sh!(t te(m analysis:
)2 T(end sh!(t te(m !( inte(mediate t(end "!( the sc(i8 has been "lat< &!=
tu(nin4 in t! bea(ish<
$2 %ey sh!(t te(m su88!(t and (esistance leels "!( the sc(i8<
As we can see from the )% day =-A /S-A graph the scrip has established
strong support at )5%')6% price band.
6(ice m!ementE the scrip has undergone ma+or consolidation 1sideway
movement2 phase. And it seems that the scrip has made abortive attempt to
breach the flat trend and start rally, but in vain and the obvious reason for this
failure is market crash.
In the month Feb $%%! the scrip has broken the key support 1)5%')6%2 and
turned out to be bearish
Fundamental And Technical Analysis
Futu(eE as the scrip has already broken the key support, the short term traders
should sell it and the fresh buy signal for the stock is known only when scrip
establishes support.
If in case scrip regains the strength to come back to the level of )5%')6%,
investors should still wait till it clearly breaches above that level but with
e(panding volume.
T(adin4 tactics "!( sh!(t te(m inest!(s:
As it can be clearly seen from the graph, the stock is purely a trading stock. So
to trade in the scrip one should look for key support and also look for cue from
<SI. If the stock is at support and selling pressure is high i.e. <SI value 5% and
below, it should be bought and sold at high buying pressure i.e. at <SI value
&% / above.
ere the identifying future target price 1for the short term2 is very difficult as
scrip was undergoing phase of consolidation and has no established resistance
level.
Fundamental analysis of selected sector socks is as fallows
Fundamental analysis
The basic purpose of buying a security is to earn dividends and ultimately sell
it at higher price. An investor therefore is interested in obtaining estimates of future
prices of the share. These in turn will depend upon the performance of the industry to
which the company belongs and the general economic situation of the country. The
multitude of factors affecting a company,s profitability can be broadly classified asI
). =conomic wide factorsI these includes the factors like growth rate of the
economy, the rate of inflation, foreign e(change rates etc which affects
profitability of all companies.
Fundamental And Technical Analysis
$. Industry wide factorsI these include factors which are specific to
industry to which the company belongs. For instance the demand supply gap
in the industry, the emergence of substitutes, and changes in government
policies towards industry affects the company belonging to an industry.
5. mpany wide factorI these factors are specific to a firm. The firm
specific factors like plant and machinery, the brand image of the product, and
ability of the management to affect the profitability.
=conomic wide factors
The following are the some of the important economic factors which influence the
investment of investor over a period of time.
Indian Ec!n!my Oe(ie=
India?s economy is on the fulcrum of an ever increasing growth curve. Eith
positive indicators such as a stable !'@ per cent annual growth, rising foreign
e(change reserves, a booming capital market and a rapidly e(panding F8I inflows,
India has emerged as the second fastest growing ma+or economy in the world.
The economy has been growing at an average growth rate of !.! per cent in
the last four fiscal years 1$%%5'%6 to $%%"'%&2, with the $%%"'%& growth rate of @."
per cent being the highest in the last )! years. Significantly, the industrial and service
Fundamental And Technical Analysis
sectors have been contributing a ma+or part of this growth, suggesting the structural
transformation underway in the Indian economy.
For e(ample, industrial and services sectors have logged in a )%."5 and )).)!
per cent growth rate in $%%"'%& respectively, against !.%$ per and )).%) cent in $%%4'
%". Similarly, manufacturing grew by !.@! per cent and )$ per cent in $%%4'%" and
$%%"'%& and transport, storage and communication recorded a growth of )6."4 and
per cent )"."6 per cent, respectively.
Another significant feature of the growth process has been the consistently
increasing savings and investment rate. Ehile the gross saving rate as a proportion of
.8B has increased from $5.4 per cent in $%%)'%$ to 56.! per cent in $%%"'%&, the
investment rate'reflected as the gross capital formation as a proportion of .8B'has
increased from $$.! per cent in $%%)'%$ to 54.@ per cent in $%%"'%&.
The Cu((ent Fiscal Yea(
The process continues in the current fiscal year. 9n the back of @.@ per cent growth in
the first half of $%%"'%&, .8B grew by @.) per cent during April'September $%%&.
• Ehile overall industrial production grew by @ per cent during April'8ecember
$%%&, importantly capital goods production rose by $%.$ per cent compared to
)!." per cent during same period in $%%".
• Services grew by )%.4 per cent in April'September $%%&, on the back of ))."
per cent during the corresponding period in $%%"'%&.
• -anufacturing grew by @." per cent during April'8ecember $%%&, on the back
of )$.$ per cent growth during same period in $%%"'%&.
• re infrastructure sector continued its growth rate recording " per cent
growth in April'7ovember $%%&.
Fundamental And Technical Analysis
• Ehile e(ports grew by $).&" per cent during April'8ecember $%%&, imports
increased by $4.@& per cent in the same period.
• -oney Supply 1-52 has grown by a robust $$.! per cent growth 1year'on'
year2 as of 8ecember $), $%%& compared to )@.5 per cent last year.
• The annual inflation rate in terms of EBI was 5.4 per cent for the week ended
8ecember $@, $%%& as compared to 4.!@ per cent a year ago.
• Fiscal and revenue deficit decreased by )) per cent and )&.$ per cent,
respectively, during April'7ovember $%%&'%! over corresponding period last
year.
Eith such a robust growth rates, the advance estimates of the :entral Statistical
9rgani3ation 1:S92 e(pects the economy to grow by !.& per cent in $%%&'%!.
6e( Ca8ita Inc!me
Along this significant acceleration in the growth rate of Indian economy, India?s per
capita income has increased at a rapid pace, e(ceeding an earlier forecast made by
.oldman Sachs B<I: report which estimated India?s per capita to touch HSG !%% by
$%)% and HSG ))6@ by $%)4.
Ber capita income has increased from HSG 6"% in $%%%'%) to almost double to HSG
&@& by the end of $%%"'%&. In $%%&'%!, India?s per capita income is estimated to be
over HSG !$4.%&, according to the advance estimates of the :entral Statistical
9rganisation 1:S92. Further, India?s per capita income is e(pected to increase to HSG
$%%% by $%)"')& and HSG 6%%% by $%$4. This growth rate will, conse0uently, propel
India into the middle'income category.
S!me 1i4hli4hts
Fundamental And Technical Analysis
<eflecting the favorable prospect of growth rate of Indian economy, the orders
received Indian companies have increased by a whopping "!." per cent to HSG 5$.6!
billion during Canuary'9ctober $%%& compared to HSG )@.$" billion in the same
period last year.
• India is among the five countries sharing 4% per cent of the world production
1or .8B2.
• F8I inflows have +umped by almost three times to HSG )4.& billion in $%%"'%&
as against HSG 4.4 billion in $%%4'%".
• The aggregate income of the top 4%% companies rose by $!.6 per cent in $%%"'
%& to total HSG 6"@.4) billion.
• India?s 7ational Stock =(change 17S=2 ranks first in the stock futures and
second in inde( futures trade in the world.
• Twenty Indian firms have made it to the list of Boston nsulting .roup?s )%%
7ew .lobal :hallenger .iants list.
• According to a study by the -c;insey .lobal Institute 1-.I2, India?s
consumer market will be the world?s fifth largest 1from twelfth2 in the world
by $%$4.
• The number of companies incorporated has increased at an annual average of
44,%%% companies in the last two years to !"4,%%%, from &)$,%%% companies at
the end of $%%4.
• Four Indians and seven Indian microfinance companies make it to the Forbes
list of Top)% world?s wealthiest :=9s Eorld?s Top 4% -icrofinance
Institutions, respectively.
• India has the most number of private e0uity 1B=2 funds operating amongst the
B<I: markets.
• -umbai has been ranked tenth among the world?s biggest centers of
commerce in terms of the financial flow volumes by a survey compiled by
-aster:ard Eorldwide.
Another significant aspect has been the broad'based nature of the growth process.
Ehile new economy industries like Information Technology and biotechnology have
Fundamental And Technical Analysis
been growing around 5% per cent, significantly old economy sectors like steel have
also been ma+or contributors in the Indian growth process. For e(ample, India has
moved up two places to become the fifth largest steel producer in the world.
And with its manufacturing and service sectors on a searing growth path, Dehman
Brothers Asia estimates India to grow by as much as )% per cent every year in the ne(t
decade.
)< 2(!=th (ate !" indust(ial sect!
The growth of industrial sector is an important contributor to the growth of
national income. The performance and the growth of industry is measured through an
Inde( of industrial product. The industrial growth rate is further disaggregated into
growth rates of different sectors like electricity basic goods consumer goods and so
Indust(y
Indust(y
Y!Y F chan4e FY.. FY.) FY.@ FY.B FY.D FY.A FY.C FY.+
-ining /
Quarrying ) 5.& %.4 4.! 4.5 6.6 ) 4
=lectricity &.5 6 5.) 5.$ 4 4.$ 4.$ ".4
-anufacturing &.$ 4.6 $.@ " &.6 @.) @.) )%.&
II6 C<C A<) @<C A<, + ,<D ,<@ *<+
@< In"lati!n
Inflation prevailing in the economy has considerable impact on the
performance of the companies high rates of inflation upsets business plans, results in
high input costs and hence reduction in profit margins. 9n the other hand the inflation
erodes purchasing power of buyer and results in reduction in demand for goods. The
demand for consumer goods will particularly be affected adversely.
Inflation is measured by sustainable price inde( number. The whole sale price
inde( number is generally used for this purpose.
Fundamental And Technical Analysis
Yea( In"lati!n (ate /c!nsume( 8(ices3 Ran7 6e(cent Chan4e 'ate !" In"!(mati!n
$%%5 4.6% * "6 $%%$ est.
$%%6 5.!% * @$ '$@."5 * $%%5 est.
$%%4 6.$% * )56 )%.45 * $%%6 est.
$%%" 6.$% * )$4 %.%% * $%%4 est.
$%%& 4.5% * )5@ $".)@ * $%%" est.
B< Inte(est (ates
Interest rates reflect the cost and availability of credit to the companies
operating in the economy. The interest rates and the volume as well as direction of the
credit supply in the economy is influenced by monitory policy of the reserve bank of
India 1<BI2. If the cheap money policy is pursued the interest rates are likely to be
lower and larger volume of money supply is e(pected to be there in the economy.
The lower rate of interest implies lower cost of financing the company,s
operations and assures higher profitability, higher the rate of interest higher will be the
costs of manufacturing and sale, which is e(pected to lead lower profit.
Interest <ates
/F 8e( annum3 @-A8( B-A8( D-A8( A-A8( C-A8( C-'ec
:ash <eserve <atio 4.4 6.! 6.4 4 4 4.5
Bank <ate ".4 ".5 " " " "
<everse <epo rate
1Absorption rate2 " 4 6.4 6.! 4.4 "
<epo rate 1In+ection rate2 ! & " " ".4 &.5
I8BI -T lending rate )$.4 )$.4 )%.5 )%.5 )%.5 )%.5
BD< of 4 ma+or banks )).%')$.% )%.!')).4 )%.5')).% )%.5')%.! )%.5')%.! )).%')).4
8eposit rate of 4 ma+or &.%'!.4 4.5'".$ 4.%'4.4 4.5'".5 ".%'&.% ".!'!.%
Fundamental And Technical Analysis
banks 1maturityR)year2
Average call money rate 5."'&.4 $.%'4.) $.)'6.4 5.5'4.4 6.$'".$ 4.6')$.%
D< F!(ei4n e:chan4e (ates
If company is ma+or e(porter or importer its performance and profitability are
likely to be affected considerably by the e(change rates of rupee against other
currencies. A depreciation of rupee against HS or other currency will make Indian
products more competitive price wise. In the foreign markets, thereby stimulating
e(port from India
A< 2!e(nment bud4et<
The government budget provides detailed information on each of components
of government spending and revenues. The deficit is essentially the e(cess of
government spending on revenues. A budget deficit is often incurred for creating
infrastructural facilities in the economy tends to create inflationary pressure. 8ue to
this there is a strong public opinion against the governments creating of deficit
without e(panding the revenue.
C< Sain4s and inestment.
The capital market is channel through which the savings of households are
made available to corporate for investment. Therefor the trends in saving and
investment are significant in studying their impact on capital market.
Savings and Investment
F t! 2'6 at c!nstant
8(ices FY.) FY.@ FY.B FY.D FY.A FY.C
B! "ector
ousehold Savings $).5 $).$ $$ $5.) $5.4 $$
Brivate rporate Sector 6.4 6.) 5." 6.) 6.6 6.!
Fundamental And Technical Analysis
Bublic Sector '%.@ ').& '$ '%.& ) $.$
B! t!#e" o$ a""et"
Bhysical Assets )%.& )) )).$ )$.& )$ )).&
Financial Assets )%.4 )%.$ )%.! )%.6 )).4 )%.5
2(!ss '!mestic Sain4s @D<* @B<C @B<C @C<A @,<* @*<)
7et :apital Inflow ).) %." %.$ ').$ ')." )
.ross 8omestic Investment $6.5 $6 $6.! $4.5 $&.$ 5%.)
=rrors and 9mission ) ).) '$.) %.) ) )."
2(!ss Ca8ital F!(mati!n @B<B @B<, @@<@ @A @+<D B.<@

Indust(ial analysis
En4inee(in4:
=ngineering is a diverse industry with a number of segments. A company from
this sector can be a power e0uipment manufacturer 1like transformers and boilers2,
e(ecution specialist or a niche player 1like providing environment friendly solutions2.
It can be an electrical, non'electrical machinery and static e0uipment manufacturer
too
The sector is relatively less fragmented at the top, as competencies re0uired
are high. But it is highly fragmented at the lower end 1like unbranded transformers for
the retail segment2 and is dominated by smaller players. The user industries in broad
terms are power utilities 1generation, transmission and distribution2, industrial ma+ors
1refining, automotive and te(tiles2, government 1public investment2 and retail
consumers 1pumps and motors2.
9rder book si3e determines the performance of the company in the short to
medium'term. In order to bag big contracts, companies need to have a big balance
sheet si3e and proven e(ecution capabilities. They need huge working capital in order
Fundamental And Technical Analysis
to e(ecute bigger contracts, as initially they receive only part payment and the
remaining comes as pro+ects get e(ecuted.
Tariffs that earlier offered protection to Indian capital goods manufacturers,
have been removed. Import duties on a range of e0uipments have also been reduced.
This coupled with the high cost of capital in India puts Indian manufacturers at a
disadvantage against overseas competition.
Bower sector contributes the largest to the engineering companies? revenues.
For instance, ABB and B=D derive "%* and &$* of their revenues from supplying
e0uipments to the power sector. And with the government planning to add large
generation capacities in the eleventh 1$%%&')$2 five'year plan, the potential seems
huge for the engineering ma+ors. This is because, apart from the investment in
generation capacity buildup, an e0uivalent amount is likely to be spent in the
transmission and distribution space as well.
Infrastructure is another key area of operation for ma+or Indian engineering
companies. D/T, for e(ample, garners around 5%* of its sales from infrastructure
activities like engineering, design and construction of industrial pro+ects and social /
physical pro+ects like housing, hospitals, IT parks, e(pressways, bridges, ports, and
water / effluent treatment pro+ects.
The high global crude prices on account of growing demand has led to increased
activities in the e(ploration and development space. This has helped the engineering
companies in this space. -ore importantly, this segment of the engineering business
has relatively higher margins than infrastructure, owing to more comple( tasks
involved.
%ey 6!ints
Fundamental And Technical Analysis
Su88ly: Abundant supplies available across most segments, e(cept for technology
intensive e(ecutions
'emand: 8emand growth in this sector is fuelled by e(penditure in core sectors such
as power, railways, infrastructure development, private sector investments and the
speed at which the pro+ects are implemented.
;a((ie(s t! ent(y: Barriers to entry are high at upper end of the industry as skilled
manpower and technologies, and ability to fund large pro+ects are a prere0uisite
;a(4ainin4 8!=e( !" su88lie(s: Bargaining power of suppliers is low because of
intense competition. owever, in technology driven high'end segments, suppliers
have the upper hand.
;a(4ainin4 8!=e( !" cust!me(s: Bargaining power for technology driven segments
is low.
C!m8etiti!n: -a+ority of the companies compete in terms of pricing, e(perience in
specific field, product differentiation and timely completion of pro+ects.
Financial Yea( G.+
F#%& proved to be yet another good year for the Indian engineering and
capital goods industry. Strong growth in industrial and manufacturing industries
reflected in the picking up of investment activities in areas like power, infrastructure
and processes. The capital goods inde( recorded strong growth during the entire year,
though with some blips during the months September and 9ctober $%%".
The order books of almost all companies witnessed healthy growth. For
engineering ma+ors like B=D and D/T, at the end of -arch $%%&, the value of
outstanding orders stood at nearly 5 times and $ times respective F#%& revenues. In
general, the growth in order book came from both power and industrial businesses.
Fundamental And Technical Analysis
The companies were able to bag international orders. The topline of the engineering
ma+ors witnessed double'digit growth during the fiscal.
Ehile the industry continued the trend of cost cutting through reducing debt
and restructuring operations and manpower rationali3ation, rising input costs dented
pared the improvement in profitability. Sharp rise in costs of steel and crude on the
back of buoyant global demand and inade0uate supplies, was the biggest dampener to
profit growth
The fiscal also witnessed ma+ors like Su3lon and :rompton .reaves chart out
aggressive ac0uisitions in the international arena. The ma+or focus area for these
companies was to fill in the niches by way of ac0uiring new technologies and clients
and having a diversified geographical presence.
;ud4et @..,-.*:
Eorld'class infrastructure has emerged as one of the most important
necessities for unleashing high and sustained growth and alleviation of poverty in any
economy. And with poor infrastructure to support other growth initiatives, the Indian
economy continues to be a laggard when compared to its developing peers. From a
policy perspective, however, there has been a growing consensus that a private'public
partnership is re0uired to remove difficulties concerning the development of
infrastructure in the country. The realisation finally seems to be setting in. This makes
the future of the Indian engineering sector e(tremely bright. Apart from highway
development and construction and modernisation of airports, the potential for the
sector lies in the oil and gas space, where high global demand has led to increased
action in e(ploration and production activities. owever, scale and e(ecution
capabilities remain the mantras for success
;ud4et Measu(es
Fundamental And Technical Analysis
). Fourth H-BB at Tilaiya to be awarded shortlyF :hhattisgarh, ;arnataka,
-aharashtra, 9rissa and Tamilnadu urged to bring five more H-BBs to the
bidding stage by e(tending the re0uired support
$. <a+iv .andhi .rameen Lidyutikaran #o+ana to be continued during the
=leventh Blan period with a capital subsidy of <s $!% bnF allocation of <s 44
bn for F#%@.
5. <s ! bn to be provided for Accelerated Bower 8evelopment and <eforms
Bro+ect 1AB8<B2 in F#%@
6. Broposal to set up a national fund for transmission and distribution 1T/82
reform in the power sector
4. =(emption from 6* additional duty of customs has been withdrawn on power
generation pro+ects 1other than mega power pro+ects2, transmission, sub
transmission and distribution pro+ects, and specified goods for high voltage
transmission pro+ects
". :ustom duty on pro+ect imports reduced from &.4* to 4*
&. Initiatives like skill development programme and setting up of industrial
training institutes to be taken
!. 8efense allocation to be increased by )%*
@. =(cise duty being e(empted on end'use basis, on refrigeration e0uipment
1consisting of compressor, condenser units, evaporator, etc2 above $ T< 1tonne
refrigeration2 utilising power of 4% ;E and above
)%. Barent company allowed to set'off the dividend received from its subsidiary
company against dividend distributed by the parent companyF provided that
the dividend received has suffered 88T and the parent company is not a
subsidiary of another company.
;ud4et Im8act
)< Aggressiveness in allotting H-BBs to prospective bidders e(pected to be
helpful for engineering companies providing e0uipments and =B: services for
power plants.
Fundamental And Technical Analysis
@< Setting up of a national fund for T/8 reforms to aid growth prospects of
e0uipment suppliers and T/8 pro+ect developers.
B< <emoval of e(emption from additional customs duty on power generation,
transmission and distribution pro+ects to increase cost for companies importing
such pro+ects, which shall conse0uently be beneficial for domestic pro+ect
developers. owever, on the other hand, reduction in custom duty on pro+ect
imports to nullify the impact.
D< Initiatives like skill development programme and setting up of industrial
training institutes to reduce talent crunch for engineering companies, which
are reporting high levels of attrition
A< Increase in defense allocation to aid prospect of companies providing defense
e0uipments and technologies
C!m8any Im8act:
). Allocation of H-BBs to support growth if e0uipment and service providers
like B=D, D/T.
$. .reater focus on the T/8 front to be beneficial for ABB, Siemens, :rompton
.reaves, =mco, Bharat Bi+lee. Also, companies providing T/8 pro+ect
services like Cyoti Structures and ;alpataru Transmission to benefit.
5. <emoval of e(emption from additional customs duty on power generation,
transmission and distribution pro+ects to benefit domestic companies i.e
B=D and D/T.
6. Skill development initiatives to pare pressure of attrition from companies like
D/T and B=D.
4. Increase in defense allocation to aid prospects of D/T and Bharat =lectronics.
Fundamental And Technical Analysis
;ud4et !e( the yea(s:
;ud4et @..A-.C ;ud4et @..C-.+ ;ud4et @..+-.,
A special purpose vehicle
1SBL2 to be launched to
finance infrastructure
pro+ects that are
financially viable.
Investment limit for
$%%4'%" is fi(ed at <s
)%% bn.
=stimated outlay for Cawaharlal
7ehru 7ational Hrban <enewal
-ission to be <s "$.4 bn during
$%%"'%&, including a grant
component of <s 64.@ bn.
Through this mission, the
government intends to promote
establishment of new towns,
preferably focused on a specific
industry 1IT2 or a specific theme
1education or health2.
ike in corpus of <ural
Infrastructure
8evelopment Fund'AIII
and <a+iv .andhi
.rameen Lidyutikaran
#o+ana 1<..L#2
78B'III to be launched
in F#%" to target selected
high density highways
not forming part of the
.Q or the 7'S, ='E
corridorF <s )6 bn
provided in F#%" to
four'lane 6,%%% kms.
Budget support for 7ational
ighway 8evelopment
Brogramme 178B2 enhanced
from <s @5.$ bn to <s @@.4 bn in
$%%"'%&.
Brivate sector
participation in
transmission pro+ects and
hike in budgetary support
for AB8<B
=(cise duty on AJ:s has
been reduced from $6*
to )"*.
Special accelerated road
development programme for the
7orth =astern region proposed
at an estimated cost of <s 6".$
bn approved with allocation of
<s 4.4 bn in $%%"'%&
<eduction in customs
duty on imports of
medical e0uipments from
)$.4* to &.4*
),%%% kms of access'controlled
=(pressways to be developed on
the 8esign, Build, Finance and
9perate 18BF92 model.
Increase in allocation to
defense to <s @"% bn,
including <s 6$% bn for
capital e(penditure
:apital e(penditure on defense
proposed at <s 5&4 bn.
ncessions under
section !%IA for
infrastructure facilities
e(tended to cross country
natural gas distribution
network, including gas
pipeline and storage
facilities integrated to the
network
Beak rate of customs duty on
non'agricultural products has
been reduced from )4* to
)$.4* with a few e(ceptions.
:ustoms duty on
sprinklers and drip
irrigation systems for
agricultural /
horticultural purposes is
Fundamental And Technical Analysis
reduced from &.4* to 4*
=(emption to specified goods
for making capital goods for
setting up a unit with an
investment of <s 4% m or more
withdrawn.
ncessional customs
duty of 4* on specified
plantation machinery
e(tended by two years to
April $%%@
<esin binders used for
manufacture of rotor blades for
wind operated electricity
generators e(empted from
e(cise duty.
:ustoms duty on food
processing machinery
and parts reduced from
&.4* to 4*
Hnder 7=DB LI, 44 blocks and
area of 544,%%% s0 kms offered.
Investment of <s $$% bn
e(pected in the refinery sector
in the ne(t few years.
8ividend distribution ta(
to be hiked from )$.4*
to )4*
Fi4e ultra ,eAa p78er pr7Bects 7:
(1000 MC eac6 t7 5e a8ar;e; 5e:7re
Dece,5er %!1 200)
A;;iti7+al e;ucati7+ cess 7:
!D t7 :u+; sec7+;ary a+;
6iA6er e;uca
%ey 6!sities !" bud4et @..,-.*:
6!=e( 8lay: Since power utilities are one of the biggest consumers 1generation,
transmission and distribution2 for engineering companies, reforms introduced in the
power sector like privatisation of S=Bs will help in strengthening the order book si3e.
uge addition in power generation capacity, in order to meet the demand supply gap
will be a big positive for the sector.
In"(ast(uctu(e deel!8ment: The government is focusing on development of
infrastructure like housing, airports, roads and ports. This will be big positive for
engineering and construction companies
Fundamental And Technical Analysis
Indust(ial HactI: Industrial divisions of engineering companies are likely to benefit
from the increased focus on automation and capacity addition plans drawn by the
India Inc.
%ey &e4aties !" bud4et @..,-.*
Ca8tie c!m8etiti!n: 8uty free import of T/8 e0uipments by captive power
generation units, if allowed by government, can have some impact on margins of the
T/8 ma+ors because of competition
6e!8le 8(!blem: =ngineering companies, across the board, are facing troubled times
retaining key employees. This is due to increased levels of competition for talent from
-7:s, who have deep pockets and thus better paying capabilities. As a result of
increasing levels of attrition, some companies are facing e(ecution issues.
6(!s8ects:
Eorld'class infrastructure has emerged as one of the most important necessities for
unleashing high and sustained growth and alleviation of poverty in any economy. And
with poor infrastructure to support other growth initiatives, the Indian economy
continues to be a laggard when compared to its developing peers. From a policy
perspective, however, there has been a growing consensus that a private'public
partnership is re0uired to remove difficulties concerning the development of
infrastructure in the country. The realisation finally seems to be setting in. This makes
the future of the Indian engineering sector e(tremely bright. Apart from highway
development and construction and modernisation of airports, the potential for the
sector lies in the oil and gas space, where high global demand has led to increased
action in e(ploration and production activities. nsidering these factors, we e(pect
the sector to grow strongly into the future. owever, scale and e(ecution capabilities
will be the key mantras for success for the engineering companies
Impetus given for growth of infrastructure and core industry in the last two budgets of
the central government is e(pected to increase capacity utilisation of producers of
coal, cement, iron ore and likely to increase demand for construction and mining
Fundamental And Technical Analysis
e0uipments. Industrial growth and capital investment levels have improved and this
will drive the growth in the coming years.
The government?s initiative to bring clarity to the power sector reforms is a welcome
sign for the industry. -ore coordination between the :entre and states for
infrastructure development is a step in the right direction. The =lectricity Act $%%5
has introduced a lot of reforms in the power sector. The unbundling in the sector will
definitely boost private investment. BSHs like 7TB: are e(pected to almost double
their generation capacity in ne(t few years, which is a good sign for the engineering
companies.
The shift in focus towards reducing T/8 losses will further increase the order book
si3e of the companies operating in this realm. Eith power generation and distribution
looking up, power e0uipment companies can look forward to a promising future
8eregulation combined with high global demand for crude has led to a surge in
e(ploration and production activities in India and globally. Also, there has been a
radical change in the government,s approach to =/B 1e(ploration and production2
activities in the country. This thrust in development of new wells and improvement of
output from old wells promises bright prospects for engineering companies
Automation business has perked as the user industries started realising its benefits.
Eith increasing competition among the power companies, the consumers will demand
better 0uality and uninterrupted power supply. In such a scenario automation will play
an important role. Eith the automation technologies gaining momentum, companies
like ABB and Siemens will benefit a lot going forward.
:apacity addition and de'bottlenecking e(ercise being carried by various industries
like steel, power, refineries, chemicals etc is likely to provide a fillip to the industrial
segment of the engineering companies
6e("!(mance !" Indust(y
The industrial sector recorded a healthy growth of )%.5* 1measured in terms of the
Inde( of Industrial Broduction2 during the period April'9ct. $%%"'%& as compared to
!." percent achieved during the corresponding period last year. :apital goods sector,
which posted a robust growth of )".@ per cent in $%%4'%", has maintained its growth
momentum during the current year as well. According to the Inde( of Industrial
Fundamental And Technical Analysis
Broduction, capital goods sector posted a growth of )4.% per cent during April'9ct.
$%%"'%&. The growth trends during Apr'9ct $%%"'%& as compared to Apr'9ct $%%4'%"
are given in the table belowI
Sect!( #ise 2(!=th Rates /in F3
Eeight
$%%4'
%" $%%4'%"
1Apr' 9ct2
$%%"'%&
1Apr'9ct2
Oe(all )%%.%
!.$
!." )%.5
Minin4 and
$ua((yin4
)%.4
).%
%.@ 5.6
Manu"actu(in4 &@.6
@.)
@.& )).$
Elect(icity )%.$
4.$
4.$ &.)
Use-;ased Classi"icati!n
Oe(all )%%.% !.$ !." )%.5
;asic 2!!ds 54." ".& ".5 @.%
Ca8ital 2!!ds @.5 )4.! )".@ )4.%
C!nsume(
2!!ds
$!.& )$.% )5.4 @.!
I2 8urables 4.6 )4.5 )5.@ )5.$
II2 7on'
durables
$5.5 )).% )5.4 !.4
Broduction and growth rates of some of the industries being dealt within the
8epartment of eavy Industry for the period April'9ctober $%%"'%& as compared to
April'9ctober $%%4'%" are given below
Indust(y Unit 6(!ducti!n 2(!=th
Fundamental And Technical Analysis
Rate /F3 A8(-Oct
@..A-.C
A8(-Oct
@..C-.+
Industrial -achinery <s. lakhs )&"6"6.&@ )6&4&!.&$ )".5&
-achine Tools <s. lakhs )4)66@.!" )455&).&% ).$&
Boilers <s. lakhs )!)@64.64 $"$$!".$6 66.)"
Turbines
1SteamJydro2
<s. lakhs 5!665.65 4"@6&.55 6!.)5
=lectric .enerators <s. lakhs 6)""$.%4 4!64!.)& 6%.5$
Bower 8istribution
Transformers
-ill.
;LA
54.65 [email protected]% )).4)
Telecommunication
Tables
-ill.
-tr.
&&&!.&@ 6!)5.%@ '5!.$%
mmercial Lehicles 7umbers $)64)% $&&!%! [email protected])
Bassenger :ars 7umbers 4!%@4$ "!@"6@ )!.&)
Fundamental And Technical Analysis
1eay En4inee(in4 Indust(y
Te:tile Machine(y
There are over "%% units engaged in the manufacture of Te(tile -achineries,
their components, accessories and spares,and out of these about )%% units are
manufacturing the complete te(tile machinery. The range includes te(tile machinery
re0uired for sorting, cording,processing of yarnsJ fabrics and weaving. The industry is
gearing itself to avail the opportunities of supplying machines re0uired to cater the
e(port target of garment manufacturers post -ulti Fibre Agreement 1-FA2.Eith a
capital investment of <s. )4%% crore and an installed capacity of <s. 5%4% crore per
annum.
Their current production as well as e(ports and imports are as underI '
1<s. in crore2
Yea( 6(!ducti!n E:8!(ts Im8!(ts
$%%5'$%%6 )55@ 454 $)&@
$%%6'$%%4 )"!4 64& 5$@@
$%%4'$%%" $$)$ 6&" "&"!
Cement Machine(y
:ement plants based on dry processing and precalcination technology for capacities
upto &4%% TB8 are being manufactured in the country.-odern cement plants are
designed for 3ero downtime, high product 0uality and better output with minimum
energy consumed per unit of cement production etc. At present, there are )! units in
the organi3ed sector for the manufacture of complete cement plant machinery. Eith an
installed capacity of around <s. "%% croreJannum, the industry is fully capable to meet
the domestic demand.
Fundamental And Technical Analysis
Su4a( Machine(y
8omestic manufacturers occupy predominant position in the global scenario and are
capable of manufacturing from concept to commissioning stage sugar plants of latest
design for a capacity upto )%,%%% T:8 1tons crushing per day2. There are presently $&
units in the organised sector for the manufacture of complete sugar plants and
components with an installed capacity of around <s. $%% crore per annum.
1<s. in lakh2
@[email protected] @[email protected] @[email protected]
Import 6$& )$4@ @%4
=(port ))5@ $"!$ 5&"&
Rubbe( Machine(y
There are at present )@ units in the organi3ed sector for the manufacture of
rubber machinery mainly re0uired for tyreJtube industry. The range of e0uipments
manufactured in the country includes inter'mi(er, tyre curing presses, tube splicers,
bladder curing presses, tyre moulds, tyre building machines, turnet servicer, bias
cutters, rubber in+ection moulding machine,bead wires etc.
1<s.in crore2
@[email protected] @[email protected] @[email protected]
Import $4.@) 5".&4 )$.%$
=(port $$.$@ 6".)4 4%.5$
Fundamental And Technical Analysis
Mate(ial 1andlin4 EJui8ment
The range of e0uipment manufactured includes crushing and screening plants,
coalJoreJash handling plant and associated e0uipment such as stackers, reclaimers,
ship loadersJ unloaders,wagon tipplers, feeders etc. catering to the growing and
rapidly changing needs of the core industries such as al, :ement, Bower, Bort,
-ining, Fertili3ers and steel plants. There are 4% units in the organised sector for the
manufacture of material handling e0uipment.Besides, there are number of units
operating in the small'scale sector. The industry is self sufficient in meeting domestic
demand and is also capable of meeting global competition.
1<s.in crore2
@[email protected] @[email protected] @[email protected]
Import $6$.4! $").66 464.46
=(port 6).46 !%.)" &&.@)
Oil Field EJui8ment
The petroleum industry in India is undergoing a ma+or change. Eith the ongoing
process of liberalisation, the industry has been thrown open for private sector in all
ma+or areas of e(ploration,production, refining and marketing, and this has resulted in
increased demand for the oil field and related e0uipments. 8omestic production
covers mainly the on'shore drilling e0uipment.Hnder 9ffshore drilling only offshore
platforms and some other technological structures are being produced locally. The
ma+or producers of these e0uipments are B=D,industan Shipyard, -a3agaon 8ock
and Darsen / Toubro.

Fundamental And Technical Analysis
1<s.in crore2
@[email protected] @[email protected] @[email protected]
Import )6$.6@ "5!.$% 54$.!6
=(port )"4.!) 5%%.6& &).!&
Metallu(4ical Machine(y
-etallurgical machinery includes e0uipment for mineral beneficiation, ore
dressing, si3e reduction, steel plant e0uipments, foundry 5% Indian Bublic Sector
aiming global heights e0uipments and furnaces. At present, there are 5@ units in the
organi3ed sector engaged in the manufacture of various types of metallurgical
machinery. The e(isting production capacity in the country is sufficient to meet the
demand of these e0uipment in the country. Indigenous manufacturers are in a position
to supply ma+ority of the e0uipment for steel plants e.g. blast furnaces, sinter plants,
coke ovens, steel melting shop e0uipment, continuous casting e0uipment, rolling mills
/ finishing line.owever, there is a technological gap in the basic design and
engineering for plant and e0uipment re0uired in the ferrous and non'ferrous sector for
which the domestic manufacturers are dependent on imported know'how. Since the
process of making ferrous and non'ferrous metal is linked up with the design of the
e0uipment, there is a need for close interaction between the process know'how,
designers and e0uipment manufacturers.
1<s.in crore2
@[email protected] @[email protected] @[email protected]
Import 6@4.$! 646.6% )$%%."4
=(port 656.$5 5&%.&% 454.%6
Fundamental And Technical Analysis
Minin4 Machine(y
The ma+or mining e0uipments are Dongwall -ining =0uipment, <oad eader,
side discharges Doader 1S8D2, aulage Einder, Lentilation Fan,Doad aul dumper
1D82, al :utter,nveyors, Battery Docos, Bumps, Friction Brop,etc. At present
there are 5$ manufacturers in the organi3ed sector both in public and private sector for
underground and surface mining e0uipment of various types. 9ut of these, )& units
manufacture underground mining e0uipment.-a+ority of the re0uirement of the
mining industry is being met by the indigenous manufacturers.
1<s.in crore2
@[email protected] @[email protected] @[email protected]
Import )".!% 5@.%) 6).@@
=(port ).)4 ).44 4.@%
'ai(y Machine(y
At present, there are )" units in the organi3ed sector, both in private and public
sector, manufacturing 8airy -achinery e0uipments such as evaporators, milk
refrigerators andstorage tanks, milk and cream deodori3ers, centrifuges, clarifiers,
agitators , homogenisers, spray dryers and heat e(changers. Small Scale units are also
contributing to the indigenous production. The spray dryers, plate type heat e(changer
and other core e0uipment for milk powder plant call for high degrees of polish
re0uirement on the e0uipment because the presence of any micro crevices resulting
from inade0uate polish tends to be the incubation and breeding ground for the
bacteria. The technology gaps e(ist for handling e0uipments such as self cleaning
cream, separator, aseptic processing systems, and for the e0uipment re0uired for
manufacture of yoghurt and traditional Indian sweets.
Fundamental And Technical Analysis
/Rs<in c(!(e3
@[email protected] @[email protected] @[email protected]
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E:8!(t ).<AD ,<., A<*A
Machine T!!ls
-achine Tool Industry is in a position to e(port general purpose and a
standard machine tool to even industrially advanced countries. 8uring last four
decades, the machine tool industry in India has established a sound base and there are
around )"% machine tool manufacturers in the organi3ed sector as also around 6%%
units in the small ancillary sector. The industry, however,lacks in design and
engineering capability to undertake very high precision :7: -achines.Some
companies have taken up manufacture of :7: -achines, but there is a need to
upgrade research and development in this field. Indian machine tools are
manufactured to the international standard of 0uality J precision and reliability. A
number of collaborations have also been approved for bringing in the latest
technology in this field of modern machine tools and the industry is now e(porting
conventional as well as 7:J:7: high ' tech machine tools. In the field of </ 8,
:entral -anufacturing Technology Institute, Bangalore has been doing research for
more appropriate designed machine tools. There is gap in technology for Special
Burpose -achines and even in some categories of :7:s. Import of technology is
encouraged to bridge the gap.
Fundamental And Technical Analysis
6e("!(mance !" the indust(y du(in4 the last th(ee yea(s is tabulated bel!=:
/Rs< in c(!(e3
@[email protected] @[email protected] @[email protected]
6(!ducti!n
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mpany analysis
The company analysis is the last step in =I: analysis framework of
fundamental analysis. The industry analysis helps the investor in selecting the
industry in which the investments are better rewarded. The investor now has to decide
in which of the companies belonging to chosen industries he should invest. This
re0uires the company analysis.
The company analysis has to be made in three different parts
). Study of financial information and asses the financial health of the company.
$. Si3ing up present situation and prospects. This re0uires an analysis of the
present business of the company and its future prospects.
5. =volution of management.

Fundamental And Technical Analysis
BHEL COMPANY ANALYSIS
Fundamental And Technical Analysis
). mpany financial health
The financial statements of the company can be used to understand and
evaluate the financial performance and health of the company. <atio analysis helps an
investor to determine the financial strengths and weakness of the company.
The "!ll!=in4 is the (ati! analysis !" the ;1E0 C!m8any
Balance sheet of BHEL
Mar E0% Mar E0( Mar E02 Mar E0) Mar E0'
$7urces O: Fu+;s
T7tal $6are Capital 2((&') 2((&') 2((&') 2((&') 2((&')
E@uity $6are Capital 2((&') 2((&') 2((&') 2((&') 2((&')
$6are Applicati7+ M7+ey 0 0 0 0 0
Pre:ere+ce $6are Capital 0 0 0 0 0
Reser4es (1228&! 2102!&!8 21'82&!% '102)&)2 812(%&20
Re4aluati7+ Reser4es 0 0 0 0 0
#et87rt6 (180%&)' 2122&( )102)&8 '1%0!&%8 81'88&2)
$ecure; L7a+s 200 200 200 200 0
"+secure; L7a+s %!&0 (0&0% %)&8 28&2( 8&%%
T7tal De5t 2%!&0 2(0&0% 2%)&8 228&2( 8&%%
T7tal Lia5ilities 21%%(&') 218%2&' )12)%&8' '182&)2 818''&2
Applicati7+ O: Fu+;s
<r7ss Bl7c- %1%('&82 %1(2&!) %1)28&20 %182!&)2 (1!%(&)!
Less= Accu,& Depreciati7+ 21!'8&8! 21%)2&() 2128(&'0 218%&' %1!()&%!
#et Bl7c- !1!)&0! !10%&'0 !10(%&80 8!&8% 88&%
Capital C7r- i+ Pr7Aress )'&22 !0&2' 8&!2 !!&2' %0)&28
I+4est,e+ts !0&%% 28&8 8&2 8&2 8&2
I+4e+t7ries 2100!&0) 21!0%&88 21!)&!! %1'((&%' (12!'&)'
$u+;ry De5t7rs (10'2&'8 (1)08&(8 21'2&!( '1!)8&0) 1)2&82
Cas6 a+; Ba+- Bala+ce !1!!&(( !120(&)% !1%2&8) !1(8%&' 210)8&!
T7tal Curre+t Assets '1!)&28 812!)& !0128!&!! !21%)&(0 !2182&(0
L7a+s a+; A;4a+ces !1(2&2) !1)%&% !12!&%% (1!8)&2' 212!'&2
Fi9e; Dep7sits 20!&(' !1!22&0! !1'82&0! 21)20&0! %1'(0&00
T7tal CA1 L7a+s 3 A;4a+ces 818%&0! !!10)2&% !%18'&(2 !12%2&)8 2212%&
Curre+t Lia5ilities (10(&!8 21%%&)) '12(8& 8102&!( !!12'&%2
Pr74isi7+s 80)&() !1!%&( !1%22&(2 %1)(&%2 21'08&22
T7tal CL 3 Pr74isi7+s (100&)( )1('&)0 812'(&(( !2122(&() !'1))2&2'
#et Curre+t Assets %12&%' (1282&' 21(!%&0! )1)'8&22 '12'(&(2
Miscella+e7us E9pe+ses 2&2 !'&2 0 0 0
T7tal Assets 21%%(&') 218%2&) )12)%&88 '182&)! 818''&2
C7+ti+Ae+t Lia5ilities !102(&28 8!2&' )0&)8 ')&2 ')&02
B77- Falue .Rs0 !)&2) 2!)&%' 2()&2( 28&%! %2&0)
Profit & Loss account
Mar E0% Mar E0( Mar E02 Mar E0) Mar E0'
Fundamental And Technical Analysis
I+c7,e
$ales Tur+74er '1'2'&' 818%&!' !01)82&!2 !(1'%&() !1028&%%
E9cise Duty '28&( 82)&(( !10(%&!2 !128&0! !1)2&((
#et $ales )1&%0 810%)&'% 1)%&00 !%1((!&(2 !'1%)2&8
Ot6er I+c7,e )&08 !(&)! 22&8 %(2&00 (82&%2
$t7c- A;Bust,e+ts /(2&%2 /%0&)% 2%&'' %8)&0! !8!&%'
T7tal I+c7,e '102%&0) 81020&'! !01(%8&'2 !(1!)&() !8102)&28
E9pe+;iture
Ra8 Materials %1!)0&%8 %1)%(&)) 210'&)8 '10&(0 812)!&(!
P78er 3 Fuel C7st !&) !)&8! 220&2( 22&0! 22&08
E,pl7yee C7st !120(&)( !1)%&2! !1)20&%8 !18'8&2! 21%))&%
Ot6er Ma+u:acturi+A E9pe+ses ('8&!0 28&)' '8%&(( !102(&)' !1'%%&2
$elli+A a+; A;,i+ E9pe+ses 2%2&8 888&8 !100)&%8 !12!)&00 88'&22
Miscella+e7us E9pe+ses 8!&2) !%&28 !!)&8 !2)&2' !0&20
Pre7perati4e E9p Capitalise; 0&00 0&00 0&00 0&00 0&00
T7tal E9pe+ses 212'&)2 '1!22&!2 818'2&(0 !!1)0%&8) !%1&0)
Operati+A Pr7:it )&%) 82%&8 !1%0%&%' 2122%&)0 %12(2&20
PBDIT !10)2&(( 8)8&2 !12)%&%2 212)2&)0 (102'&22
I+terest 2(&'8 )0&08 8!&(! 28&'2 (%&%%
PBDT !10!0&)) 808&2! !1(8!&( 2120)&82 %18(&!
Depreciati7+ !82&%2 !8&00 2!8&8' 2(2&% 2((&)!
Ot6er Critte+ O:: 0&00 0&00 0&00 0&00 0&00
Pr7:it Be:7re Ta9 822&%! )!0&2! !12)%&0' 212)0&2 %1'%&28
E9tra/7r;i+ary ite,s /(&0! %)&2 %0)&)0 2&8) /!%&'
PBT .P7st E9tra/7r; Ite,s0 '')&%0 !100'&!0 !12)&)' 212)0&'8 %1'22&'
Ta9 2!&2! %(8&% )!)&%0 88!&)! !1%!!&0
Rep7rte; #et Pr7:it (((&2! )28&!2 2%&(0 !1)'&!) 21(!(&'0
T7tal Falue A;;iti7+ 21''&2( %12!'&() %1'''&'! (120(&() 21(%'&)2
Pre:ere+ce Di4i;e+; 0&00 0&00 0&00 0&00 0&00
E@uity Di4i;e+; '&0 !()&8) !2&8! %2(&0 2&))
C7rp7rate Di4i;e+; Ta9 !2&2( !&00 2)&)( (&'8 2&8%
Per s6are ;ata .a++ualise;0
$6ares i+ issue .la-6s0 21(('&)0 21(('&)0 21(('&)0 21(('&)0 21(('&)0
Ear+i+A Per $6are .Rs0 !8&!) 2)&8 %8&2 )8&)0 8&))
E@uity Di4i;e+; .D0 (0&00 )0&00 80&00 !(2&00 2(2&00
B77- Falue .Rs0 !)&2) 2!)&%' 2()&2( 28&%! %2&0)
BHEL Ratios calculations
sl&+7 rati7 :7r,ula
year
200' 200) 2002
! #et 87r-i+A capital CA/CL '2'(&(2 ))'8&22 2(!%&0!
2 curre+t rati7 CA?CL !&(% !&2% !&)%
% @uic- rati7 CA/.st7c-Gprepai; e9p0?CL !&!% !&!' !&22
Fundamental And Technical Analysis
( i+4e+t7ry tur+74er rati7 CO<$?a4A I#F %&%2 %&!0 %&0(
2 ;e5t e@uity rati7 l7+A tr, DBT? $6 67l;ers e@ 0&0! 0&0' 0&08
) i+terest c74eraAe rati7 EBIT?I#TER$T %&(2 (%&() !&8
' Ar7ss pr7:it ,arAi+ <r7ss pr7:it ? sales ! !(&'! !!&22
8 #et pr7:it rati7 EAT? #et sales !%&2! !2&! &28
c7st 7: A77;s s7l; rati7 CO<$? +et salesH!00 80&)% 8)&%% 2&08
!0 Operati+A pr7:it rati7 EBIT? #et sales 20&(! !)&2( !%&22
!! retur+ 7+ e@uity #et pr7:it? s6are 67l;ers e@uity 2'&(8 2%&00 !2&82
!2 retur+ 7+ assets #et pr7:it?t7tal assets 2'&) 22&!! !2&''
!% retur+ 7+ capital e,pl7ye; EBIT? T7tal capital ((&!8 %0&28 20&82
!( EP$ #et pr7:it a4aila5le e@ s6? #O s6ares 8&)) )8&) %8&2
!2 DP$ Di4 pai; t7 7r; s6 ? #7 7: s6ares 2(&2 !(&2 8
!) P?E MP$?EP$ 22&! %2&'2 !&'0
!' price t7 577- 4alue rati7 MP$?BP$ )&%0 '&2% %&!2
!8 577- 4alue per s6are #et 87rt6 ? +7 7: s6ares %2&0) 28&%! 2()&2(
! ;i4i;e+; pay7ut rati7 DP$?EP$H!00 2(&8% 2!&!( 20&2(
20 ear+i+A yiel; EP$?MP$ H!00 (&%) %&02 2&08
2! ;i4i;e+; yiel; DP$?MP$H!00 !&08 0&)2 !&0(
22 t7tal asset tur+74er rati7 CO<$?t7tal asst !&28 !&(8 !&%2
2% capital tur+74er rati7 CO<$?capital e,pl7ye; !&2 !&2 !&('
Inte(8(etati!n:

&et =!(7in4 ca8ital:
7E: represents the e(cess of current assets over current liabilities. mpanies
should have sufficient 7E: in order to be able to meet the claims of the creditors and
Fundamental And Technical Analysis
the day to day needs of business. The greater is the amount of 7E: greater is the
li0uidity of the firm. In B=D company the three year 7E: is as follows.
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
) 7et working capital :A' &4&6.6$ ""&!.$$ 46)5.%)
The company from $%%4 to $%%& has increased its 7E: which shows that the
company has good li0uidity to its creditors.
Cu((ent (ati!:
The :urrent <atio e(presses the relationship between the firm,s current assets and its
current liabilities. The rule of thumb says that the current ratio should be at least $ that
is, the current a""et" "%ou&' (eet current &ia)i&itie" at &ea"t t*ice+
sl.no <atio Formula
#ear
$%%& $%%" $%%4
$ current ratio :AJ ).65I) ).45I) )."5I)
ere we can see that the company,s current ratio decreasing gradually.
$uic7 (ati!:
The 0uick ratio, also referred to as acid test ratio, e(amines the ability of the business
to cover its short'term obligations from its S0uickK assets only 1i.e. it ignores stock2.
:learly this ratio will be lower than the current ratio, but the difference between the
two 1the gap2 will indicate the e(tent to which current assets consist of stock.
sl.no <atio Formula
year
$%%& $%%" $%%4
5 Quick ratio :A - 1stock N prepaid e(p2J ).)5I) ).)&I) ).$$I)
ere we can see that the company,s 0uick ratio is bit constant for three years and
company is able to satisfy its creditors with this ratio.
Inent!(y tu(n !e( (ati!:
This ratio measures the stock in relation to turnover in order to determine how often
the stock turns over in the business. It indicates the efficiency of the firm in selling its
product.
sl.no <atio Formula
year
$%%& $%%" $%%4
6 inventory turnover ratio :9.SJavg I7L 5.5$ 5.)% 5.%6
In $%%&I )$J 5.5$O 5.") months
Fundamental And Technical Analysis
In $%%"I )$J5.)O5.!& months
In $%%4I )$J5.%6O 5.@4 months. ere we can see that the company,s working
efficiency increased over a period of time. They are able to convert their inventory
into sale in 5.") months.
'ebt eJuity (ati!:
This ratio indicates the e(tent to which debt is covered by shareholders, funds. It
reflects the relative position of the e0uity holders and the lenders and indicates the
company,s policy on the mi( of capital funds. The ratio reflects the relative
contribution of creditors and owners of business in its financing.
sl.no <atio Formula
year
$%%& $%%" $%%4
4 debt e0uity ratio Dong trm 8BTJ Sh holders e0 %.%) %.%& %.%!
ere we can see that the company gradually decreased its debt combination from its
finance.
Inte(est C!e(a4e Rati!:
This ratio indicates how well the firm,s earning can cover the interest payments on its
debt.
sl.no <atio Formula
year
$%%& $%%" $%%4
" interest coverage ratio =BITJI7T=<ST @5.6$ 65.6" )@.!
2(!ss 6(!"it Ma(4in:
7ormally the gross profit has to rise proportionately with sales. It can also be useful to
compare the gross profit margin across similar businesses although there will often be
good reasons for any disparity.
sl.no <atio Formula
year
$%%& $%%" $%%4
& .ross profit margin .ross profit J sales )@ )6.&) )).$4
The ratio above shows the increasing trend in the gross profit since the ratio has
improved from )).$4* in $%%4 to )@.%%* on $%%&. This indicates that the rate in
increase in cost of goods sold are less than rate of increase in sales, hence the
increased efficiency.
Fundamental And Technical Analysis
&et 8(!"it (ati!:
sl.no <atio Formula
year
$%%& $%%" $%%4
! 7et profit ratio =ATJ 7et sales )5.4)* )$.)@* @.4!*
a high net profit margin would ensure ade0uate return to the owners as well as enable
a firm to withstand adverse economic conditions when selling price is declining cost
of production is rising and demand for the product falling.
C!st !" 4!!ds s!ld (ati!:
sl.no <atio Formula
year
$%%& $%%" $%%4
@ cost of goods sold ratio :9.SJ net salesT)%% !%."5 !".55 @$.%!
This is one of the e(penses ratios it is computed by e(penses by net sales. The cost of
goods sold ratio shows what percentage share of sales is consumed by cost of goods
sold and conversely what proportion is available for meeting e(penses such as selling
and general distribution e(penses as well as financial e(penses consisting of ta(es
interest and dividend and so on.
O8e(atin4 8(!"it (ati!:
This ratio reveals the profitability of sales resulting from regular business as well as
buying, selling, and manufacturing operations.
sl.no <atio Formula
year
$%%& $%%" $%%4
)% operating profit ratio =BITJ 7et sales $%.6) )".46 )5.4$
Retu(n !n EJuity:
This ratio shows the profit attributable to the amount invested by the owners of the
business. <9= measures the amount of money that the company has managed to
generate for its shareholders.
sl.no <atio Formula
year
$%%& $%%" $%%4
)) return on e0uity 7et profitJ share holders e0uity $&.6! $5.%% )4.!$
Fundamental And Technical Analysis
ere we can see that the companies return on e0uity is increasing constantly so we
can say that the profitability to ordinary shareholders is strong and showing an
upward trend.
Retu(n !n assets:
This ratio gives you an idea on the company?s management effectiveness in utili3ing
its assets to make a profit for its shareholders.
sl.no <atio Formula
year
$%%& $%%" $%%4
)$ return on assets 7et profitJtotal assets $&."@ $$.)) )4.&&
The company <9A has increased constantly which its management efficiency in
getting good returns from its assets.
Retu(n !n ca8ital em8l!yed:
sl.no <atio Formula
year
$%%& $%%" $%%4
)5
return on capital
employed =BITJ Total capital 66.)! 5%.$! $%.!$
This ratio shows how efficiently the long term funds of owners and lenders are being
used.
Ea(nin4 6e( Sha(e:
For an e0uity investor, a company,s =BS is the most important indicator of its
performance. If the =BS is good, the company can pay dividends, plough back the
surplus into reserves and issue bonus shares in the future. For these reasons, the
market price of any company,s share is largely influenced by its pro+ected =BS
Sl.no ratio Formula
year
$%%& $%%" $%%4
)6 =BS
7et profit available e0 shJ 79
shares @!."" "!." 5!.@4
Ee can see here the company,s =BS gone three times higher from three year.
Fundamental And Technical Analysis
'iidend 8e( Sha(e:
Sl.no ratio Formula
#ear
$%%& $%%" $%%4
)4 8BS div paid to ord sh J 7o of shares $6.4 )6.4 !
This indicates the dividend paid for each share. Shareholders would, naturally like to
receive the ma(imum possible dividends from a company, consistent with its profits
and need for retained earnings.
6KE Rati!:
BJ= ratio is a useful indicator of what premium or discount investors are prepared to
pay or receive for the investment. The higher the price in relation to earnings, the
higher the BJ= ratio which indicates the higher the premium an investor is prepared to
pay for the share. This occurs because the investor is e(tremely confident of the
potential growth and earnings of the share.
sl.no <atio Formula
year
$%%& $%%" $%%4
)" BJ= -BSJ=BS $$.@) 5$.&4 )@.&%
The above ratio shows that the shares were traded at a much higher premium in
$%%& than were in $%%4. In $%%4 the price was )@.& times higher than earnings
while in $%%&, the price is $$.@) times higher.
6(ice t! b!!7 alue (ati!:
sl.no <atio Formula
year
$%%& $%%" $%%4
)& Brice to book value ratio -BSJBBS ".5% &.45 5.)$
It measures the relationship between the market price of an e0uity share with book
value per share. The BJB ratio is significant in predicting future stock return. Firms
Fundamental And Technical Analysis
with low BJB ratio had consistently higher returns compared to the firms with high
BJB ratio.
;!!7 alue 8e( sha(e:
sl.no <atio Formula
year
$%%& $%%" $%%4
)! Book value per share 7et worth J no of shares 54@.%" $@!.5) $6".$6
This ratio indicates the net asset value of a company,s share. A high book value
indicates that the company has strong reserves, indicating scope for bonus shares, of
course sub+ect to necessary guidelines of the S=BI.
'iidend 8ay!ut (ati!:
This ratio looks at the dividend payment in relation to net income and can be
calculated as followsI
sl.no <atio Formula
year
$%%& $%%" $%%4
)@ dividend payout ratio 8BSJ=BST)%% $6.!5 $).)6 $%.46
Ea(nin4 yield:
This ratio highlights as a percentage a company,s earnings vis'a'vis the current
market value of its share. For blue chip companies this ratio tends to be around 4 per
cent to " per cent.
sl.no <atio Formula
#ear
$%%& $%%" $%%4
$% earning yield =BSJ-BS T)%% 6.5" 5.%4 4.%!
'iidend yield:
The dividend yield ratio indicates the return that investors are obtaining on their
investment in the form of dividends. This yield is usually fairly low as the investors
are also receiving capital growth on their investment in the form of an increased share
price.
sl.no <atio Formula
#ear
$%%& $%%" $%%4
$) dividend yield 8BSJ-BST)%% ).%! %."4 ).%6
Fundamental And Technical Analysis
T!tal asset tu(n!e( (ati!:
sl.no <atio Formula
#ear
$%%& $%%" $%%4
$$ total asset turnover ratio :9.SJtotal asst ).4! ).6! ).54
Total asset turnover ratio measures the efficiency of a firm in managing and utili3ing
its assets. The higher ratio indicates the more efficient management.
Ca8ital tu(n!e( (ati!:
sl.no <atio Formula
#ear
$%%& $%%" $%%4
$5 capital turnover ratio :9.SJcapital employed ).4@ ).4@ ).6&
:apital turnover ratio measures the efficiency of a firm in managing and utili3ing its
capital. The higher ratio indicates the more efficient management.
Fundamental And Technical Analysis
Bharat Heavy Electricals Limited:
Bharat eavy =lectricals Dimited 1B=D2 is one of the largest
engineering enterprises of its kind in India. B=D is the largest domestic capital
goods manufacturer in India and the )$th largest in the world. The international
competitors of B=D are .eneral =lectric, Siemens, Alstom and ABB. B=D offers a
wide spectrum of e0uipment, systems and services in the field of power, transmission,
industry, transportation, oil / gas, non'conventional energy sources and
telecommunication. Bower sector constitutes over half of its total business. The
company has )6 manufacturing divisions, ! service centres and 6 power sector
regional centres. Its first plant was set up at Bhopal in )@4" under technical
collaboration with A=I, H; followed by three more ma+or plants at ardwar,
yderabad and Tiruchirapalli with <ussian and :3echoslovak assistance.
6(!ducts L se(icesM
B=D manufactures over $%% products under 5% ma+or product groups.
The company has installed e0uipment for over )%%,%%% mw of power generation for
utilities, captive and industrial users. Its strengths are comparable product range and
cost competitiveness with foreign manufacturers. The c!m8any en+oys a crucial
advantage of depreciated assets. The company is cost'competitive when it comes to
power plant e0uipment and has bagged a number of power pro+ect orders placed in
India against open international competitive bidding.
The company has +oint venture with Siemens for servicing old Indian
fossil fuel power plants and with .= for designing of heavy'duty gas turbines. Thirty'
two thermal power stations e0uipped with Bhel,s generating sets have been given
productivity awards by the power ministry. 9f these power stations, eight have
Fundamental And Technical Analysis
received gold medals. The awards have been given for meritorious and efficient
performance based on account of reduced inputs.
The company already manufactures products re0uired by the
distribution systems like transformers, switchgears etc. The company is planning
towards becoming an application service provider. The company will continue to
focus on pro+ect management, reducing cycle time and cost control. In the power
sector, the company plans to obtain a part of the business generated by independent
power producers through a combination of approaches including consortium route,
e0uity participation and limited financial syndication.
I It has e0uipped itself with the new type of once'through design boiler
technology, and for pollution control ' bag filter technology. B=D entered into new
business in integrated gasification combined cycle systems, coal washeries, and D<T
systems. In it?s e(isting businesses of transportation, transmission / industry. B=D
is pursuing opportunities in =-H coaches, loco refurbishment, gas'insulated switcher,
L8: insulators, and electronic meters. The company will continue to focus on
product developments in order to foster its growth strategy. The electronics division
has forayed into traction business and received a large order from 8oT for switching
e0uipment.
B=D has developed a new series compensation scheme Fle(ible A:
Transmission System 1FA:TS2 for reducing power losses and speedy transmission.
The FA:TS will enhance power transfer capability of the system and reduce
transmission losses in 6%% kL lines considerably. The company has also developed an
automatic device that ad+usts itself to the system,s re0uirement in less than )%
milliseconds. It reduces system losses and improves power system stability in high'
voltage transmission lines.
Fundamental And Technical Analysis
;ey <isks
'elay in ca8acity e:8ansi!n
The company,s 5&,%%% -E of order flow for B=D over F#%@')$=, in addition to
the e(isting strong order backlog. Any delay in second phase of e(pansion from
)%,%%% -E to )4,%%% -E could severely impact B=D,s earnings, given the strong
deliverables over ne(t three'four years. The first phase of e(pansion from ",%%% -E
to )%,%%% -E had been delayed by nine months.
Sl!=d!=n in 8ace !" 8!=e( (e"!(ms
.iven the recent momentum in power reforms, it is e(pected the balance =leventh
Blan orders and &%* of Twelfth Blan orders to be placed by F#)$. Any significant
delay in the awarding activity could be a huge dampener for B=D,s outlook going
ahead, given that the company is the market leader 1"4* market share in country,s
installed capacity as in F#%&2.
Inc(ease in 8(iate sect!( inestments in 8!=e( 8(!jects > intensi"yin4
c!m8etiti!n
As per :=A, 54* of the power capacity addition in the Twelfth Blan will be
undertaken by the private sector. Any subse0uent change in the mi(, in favour of the
private sector, could result in lower order intake for B=D. Ehile central and state
sector pro+ects are B=D,s forte 1&%* plus market share2, the company,s market share
in private sector pro+ects has been lower 1$%'$4*2 on account of stiff competition.
Sti"" in8ut 8(ices c!uld a""ect ma(4ins
Although it have not built in benefits on account of raw material pricing over F#%@
)$=, any unprecedented rise in input costs above F#%&'%!= levels could dampen
B=D,s margins. =(ecution delays could lead to de'rating The re'rating in B=D,s
Fundamental And Technical Analysis
valuations over the past one year builds in strong visibility over the ne(t few years.
The key concern now is B=D,s ability to e(ecute this huge opportunity, failing
wherein could lead to the stock being de'rated.
Lalue anchor
ris- :ree rate Beta EMRP
A4eraAe Di4i;e+; pay7ut rati7 22&28
Re@uire; rate 7: rate !8&) 8 !&! &2
E9pecte; Ar78t6 rate i+ ;i4i;e+; !)&02
P/E Ratio &8!
AF< PE rati7 2%&'(
CeiA6te; PE rati7 !)&'8
=(pected future price of the B=D mpany
*ear 2008 2009 2010
Falue a+c6er 2!%2&%0 2'0'&(2 %(2&)2
Calculati!n !" Int(insic alue
Ae(a4e 'iidend 8ay!ut (ati!> sum !" A yea(s '6RK A
ReJui(ed (ate !" (ate> (is7 "(ee (ate ?/betaNEM6R3
Period & months 2008/03 2009/03 2010/03 CA<R
INCOME
#et Operati+A I+c7,e 20822&)2 2('!&'( 2('&) !&20
EXPENSES
Material C7+su,pti7+ !0!22&'2 !2%0'&)) !(!2&28 !&2!
Ma+u:acturi+A E9pe+ses 2('2&!!) %0))&! %80(&8%( !&2(
Pers7+el E9pe+ses 22!&(0 28%'&!'8 %!0)&222 !&0
$elli+A E9pe+ses 2(8&2'%2 2''&(%!( %!0&0!%8 !&!2
A;,i+istrati4e E9pe+ses (2&% !0%8&8() !!((&2!8 !&!0
C7st 7: $ales 16,410.45 19,528.03 23,281.20
Rep7rte; PBDIT 4,412.17 5,443.70 6,666.41
Ot6er Recuri+A I+c7,e '8%&(%28 !220&2'' !0!&)( !&2)
A;Buste; PBDIT 5,195.60 6,664.28 8,568.05
Depreciati7+ 228&2)22 2'%&%!'! 288&!0( !&0)
A;Buste; PBIT 4,937.04 6,390.96 8,279.14
Fi+a+ical E9pe+ses (!&%((! %&(20') %'&)(%% 0&2
A;Buste; PBT 4,895.69 6,351.51 8,241.49 !&%'
Ta9 C6arAes !''!&0( 2%2&%(' %2%!&)!' !&%2
A;Buste; PAT 3,124.65 3,959.17 5,009.88
#7+/recurri+A Ite,s /!%&()0% /8&8220) /2&'8)02 0&))
Ot6er #7+/cas6 A;Bust,e+ts 0&'8
REPORTED PAT 3,111.19 3,950.34 5,004.09
+7& 7: s6ares 2(&(8 2(&(8 2(&(8
Expecte EPS !OR " #E$R %&'()* %+%("' &),(,&
Fundamental And Technical Analysis
E:8ected 4(!=th (ate in diidend> a4 !" (etenti!n (ati!N a4 !"
ROE
6KE RATIO> AV2 '6R K /(eJui(ed (ate !" (is7-e:8 4(!=th (ate in
di3
AV2 6E (ati!> A yea(s 6E (ati!K A
#ei4hted 6E (ati!> calculated 6E (ati!?AV2 6E (ati!K@
Value anch!( > =ei4hted 6E (ati!N e:8ected ma(7et 8(ice
L&T COMPANY ANALYSIS
Fundamental And Technical Analysis
). mpany financial health
The financial statements of the company can be used to understand and
evaluate the financial performance and health of the company. <atio analysis helps an
investor to determine the financial strengths and weakness of the company.
The "!ll!=in4 is the (ati! analysis !" the ;1E0 C!m8any
D/T mpany balance sheet and profit and loss account
Balance Sheet
Mar E0% Mar E0( Mar E02 Mar E0) Mar E0'
$7urces O: Fu+;s
T7tal $6are Capital 2(8&)' 2(&88 22&8 2'&(8 2)&)2
E@uity $6are Capital 2(8&)' 2(&88 22&8 2'&(8 2)&)2
$6are Applicati7+ M7+ey 0&0( 0&00 0&00 0&00 0&00
Reser4es %12'&2% 21'!'&22 %1%!2&22 (128%&%2 21)8%&82
Re4aluati7+ Reser4es %(&%( %2&)! %0&0 2&%' 2'&%
#et 87rt6 %12)2&28 21''2&0( %1%)&!% (1)(0&!' 21')8&(%
$ecure; L7a+s 21'0%&!! !10(2&22 '%&'2 ()2&' 2(2&(0
"+secure; L7a+s ('2&8 2'&!0 !10)2&%( 8'&'8 !18%2&%2
T7tal De5t %1!')&00 !1%2(&%2 !182&0) !1(2%&2' 210''&'2
T7tal Lia5ilities )1'%8&28 (10&% 21228&! )10%&'( '18()&!8
Applicati7+ O: Fu+;s
<r7ss Bl7c- )12%!&' 210%8&!2 21!0)&22 21%00&)8 218')&%0
Fundamental And Technical Analysis
Less= Accu,& Depreciati7+ 2122)&!2 !10(&)% !108&2( 82&22 !1!22&8%
#et Bl7c- %1'2&)' 88&22 !10!'&0! !1%!8&() !1'2%&('
Capital C7r- i+ Pr7Aress '2&)0 2)&2% )2&82 28)&0) ('!&22
I+4est,e+ts !1!)0&%' )2&88 )0&'0 !1!&22 %1!0(&((
I+4e+t7ries 2120&0! !18!2&%0 21%!0&8( 212!0&2' %100!&!(
$u+;ry De5t7rs !1820&%' %1%!(&28 %1)%&)0 (18!(&!) 2120(&)(
Cas6 a+; Ba+- Bala+ce 2'&!! 282&02 %2(&)' %8&'! %&)8
T7tal Curre+t Assets (1'!&( 21(08&% )1)2&!! '1(2%&!( 1(&()
L7a+s a+; A;4a+ces !1(8(&2% !1(2%&%( !18)0&!8 210)!&20 21((&!(
Fi9e; Dep7sits (!&(2 %&22 ('%&%2 !8(&( !00&'2
T7tal CA1 L7a+s 3 A;4a+ces )12(2&(( )122&( 81)2&)( 1))&!% !210(&%2
Curre+t Lia5ilities (1%)0&'% (1!!&2 2102%&2% )1!0)&0( 81%)2&0!
Pr74isi7+s (2(&'2 ))0& '(&)( !10!2&%' !1!80&!%
T7tal CL 3 Pr74isi7+s (1'82&(8 (1822&( 218!'&8' '1!2!&(! 12(2&!(
#et Curre+t Assets !1(2&) 210'2&22 %1!((&'' 212('&'2 2120'&2!
Miscella+e7us E9pe+ses )&8 ()&2! %&8 2!&8 &8(
T7tal Assets )1'%8&28 (10&% 21228&! )10%&'( '18()&!8
C7+ti+Ae+t Lia5ilities 2)2&' )22&8) )22&!0 %02&2 2'0&22
B77- Falue .Rs0 !(!&88 220&(2 22)&( %%2&)! 202&)2
Profit & Loss account
Mar E0% Mar E0( Mar E02 Mar E0) Mar E0'
I+c7,e
$ales Tur+74er 1%!&8 1!'&22 !%1(0(&2' !210%0&8! !'18%&%'
E9cise Duty 2!8& 2'2&20 2!(&2) 22%&8) %%8&08
#et $ales 1(!2& 1)(2&%2 !%1!8&'! !(1'')&2 !'1)(2&2
Ot6er I+c7,e 2(8&2! %!&!2 )%(&( 22'&22 (2&80
$t7c- A;Bust,e+ts /!&!2 (%2&2 8)&8( /!0%&2( !2!&')
T7tal I+c7,e 1))0&02 !01()&0) !%1!!&( !2120!&2% !8122)&82
E9pe+;iture
Ra8 Materials %1000&2 %1'2&0) 212!!&8 (12!0&'8 21%20&8
P78er 3 Fuel C7st )2)&( )&! 0&%% 22!&20 %08&!%
E,pl7yee C7st ))8&(0 )'8&08 ')(&2! 80&0% !1228&2!
Ot6er Ma+u:acturi+A E9pe+ses 2180!&'' (100&)( 21!'0&22 )1)('&'0 '1(2!&0'
$elli+A a+; A;,i+ E9pe+ses !1!((&!2 ))2&2! 8''&)0 )&2 !1222&80
Miscella+e7us E9pe+ses 2!(&(0 !!&! !('&20 !22&00 !))&!2
Pre7perati4e E9p Capitalise; /!&8 /0&'( /%&!2 /!&8 /%&%0
T7tal E9pe+ses 81(8(&2' 1%%&%2 !21228&) !%1%8&'! !21'2(&0(
Operati+A Pr7:it 2'&2' '%8&2) !10!'&8) !128(&00 210(%&0!
PBDIT !1!'2&(8 !1!2&'! !1)22&80 !18!!&22 21202&8!
I+terest %88&!% 2'%&!2 280&2! %2!&%( %%!&()
PBDT '8'&%2 82)&2) !1%'2&2 !1(0&!8 21!'!&%2
Depreciati7+ %0(&2' 8(&2% 8'&22 !0'&!2 !)0&!%
Ot6er Critte+ O:: 0&00 0&00 0&00 0&00 0&00
Pr7:it Be:7re Ta9 (82&'8 ''2&0% !128(&'' !1%8%&0) 210!!&22
E9tra/7r;i+ary ite,s (&%2 (&2% 8&02 /!&82 /2&%(
PBT .P7st E9tra/7r; Ite,s0 (8'&!% '')&2) !122&' !1%8!&2! 21002&88
Ta9 ''&!0 2%)&08 %02&2 %))&!2 )0!&8'
Rep7rte; #et Pr7:it (%%&!0 2%2&'2 8%&82 !10!2&!( !1(0%&02
Fundamental And Technical Analysis
T7tal Falue A;;iti7+ 21(8%&)2 21)!0&2 '10()&'! 818'8&% !01(0%&0)
Pre:ere+ce Di4i;e+; 0&00 0&00 0&00 0&00 0&00
E@uity Di4i;e+; !8)&80 !&0( %2'&2! %02&22 %)8&22
C7rp7rate Di4i;e+; Ta9 2%&% 22&2( (&(! (2&% 2%&%(
Per s6are ;ata .a++ualise;0
$6ares i+ issue .la-6s0 21(8)&) !12((&02 !12&2( !1%'%&8) 218%2&'!
Ear+i+A Per $6are .Rs0 !'&(2 (2&82 '2&'2 '%&)' (&2%
E@uity Di4i;e+; .D0 '2&00 800&00 !1%'2&00 !1!00&00 )20&00
B77- Falue .Rs0 !(!&88 220&(2 22)&( %%2&)! 202&)2
Rati!s calculati!ns
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
) 7et working capital :A' $,4%&.$) $,46&.&$ 5,)66.&&
$ :urrent ratio :AJ ).$" ).5" ).46
5 Quick ratio :A'1stockNprepaid e(p2J %.@5 ).%5 ).)$
6 Inventory turnover ratio :9.SJavg I7L 4.$6 ".%" 4.5%
4 8ebt e0uity ratio Dong trm 8BTJ Sh holders e0 %.5" %.5) %.44
" Interest coverage ratio =BITJI7T=<ST &.4$ 4.%5 6.65
& .ross profit margin .ross profit J sales )%.") &.@) &
! 7et profit ratio =ATJ 7et sales &.&6 "."@ &.55
@ st of goods sold ratio :9.SJ net salesT)%% !@.)) @%.") @$.@6
)% 9perating profit ratio =BITJ 7et sales )).4$ !."5 &.""
)) <eturn on e0uity
7et profitJ share holders
e0uity $6.66 $).@4 [email protected]&
)$ <eturn on assets 7et profitJtotal assets $$.)) $).!! $6.)!
)5
<eturn on capital
employed =BITJ Total capital 46.@! 66.%! 5&.")
)6 =BS
7et profit available e0 shJ
79 shares [email protected] &5."& &4.&$
)4 8BS
8iv paid to ord sh J 7o of
shares )5 $$ $&.4
)" BJ= -BSJ=BS 5$."@ 55.%$ )5.)6
)& Brice to book value ratio -BSJBBS &.@@ &.$4 5.!&
)! Book value per share 7et worthJ no of shares $%$."4 554.") $4".@6
)@ 8ividend payout ratio 8BSJ=BST)%% $".$4 $@.!" 5".5$
$% =arning yield =BSJ-BS T)%% 5.%" 5.%5 &.")
$) 8ividend yield 8BSJ-BST)%% %.!% %.@% $.&"
Fundamental And Technical Analysis
$$ Total asset turnover ratio :9.SJtotal asst $.%% $.$% $.56
$5 :apital turnover ratio :9.SJcapital employed $.&6 $.@% 5."&
). 7et working capitalI
Sl.n
o <atio Formula
#ear
$%%& $%%" $%%4
) 7et working capital :A'
$,4%&.
$)
$,46&.
&$
5,)66.
&&
ere we can see that the D/T company has maintained a constant 7E: which is a
good sign it implies that the company is able to good li0uidity to its creators
$. :urrent ratio
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
$ :urrent ratio :AJ ).$" ).5" ).46
The short term creditors prefer high current ratio since it reduces their risk. As a share
holder one should prefer low current ratio so that the company may use its current
assets for e(pansion purpose. ere we can see that the company,s current ratio has
reduced over a period of time so we can say that the companies using its current assets
for e(pansion purpose.
5. Quick ratio
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
5 Quick ratio :A'1stockNprepaid e(p2J %.@5 ).%5 ).)$
-easures assets that are 0uickly converted into cash and they are compared with
current liabilities. This ratio reali3es that some of current assets are not easily
convertible to cash e.g. inventories. In the ratio above we can see that the company,s
0uick ratio reduced over a period of time.
6. Inventory turn over ratio.
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
6 Inventory turnover ratio :9.SJavg I7L 4.$6 ".%" 4.5%
Fundamental And Technical Analysis
This ratio measures the stock in relation to turnover in order to determine how often
the stock turns over in the business. This ratio should be higher because it indicates
that the company is efficiently converting its inventory into sales.
$%%&I )$J4.$6 O $.$@ times
$%%"I )$J".%" O ).@! times
$%%4I )$J4.5% O $.$" times
4. 8ebt e0uity ratio.
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
4 8ebt e0uity ratio long trm 8BTJ Sh holders e0 %.5" %.5) %.44
The debt to e0uity ratio shows that for every ) rupee of shareholders funds in $%%&
there was %.5" rupee of debt. This compares to %.44 rupee in $%%4.
". Interest coverage ratio.
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
" Interest coverage ratio =BITJI7T=<ST &.4$ 4.%5 6.65
This ratio, as the name suggests indicates the e(tent to which a fall in =BIT is
tolerable in that the ability of the firm to service its interest payments would not be
adversely affected. ere the company,s Interest coverage ratio has increased which is
dangerous sign.
&. .ross profit margin
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
& .ross profit margin .ross profit J sales )%.") &.@) &
The ratio above shows the increasing trend in the gross profit since the ratio has
improved from &* in $%%4 to )%.")* on $%%&. This indicates that the rate in increase
in cost of goods sold are less than rate of increase in sales, hence the increased
efficiency.
!. 7et profit margin
Fundamental And Technical Analysis
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
! 7et profit ratio =ATJ 7et sales &.&6 "."@ &.55
The net margin ratio shows that the margin is fairly stable over time with slight
improvement to &.&6* in $%%&. owever, to know how well the firm is performing
one has to compare this ratio with the industry average or a firm dealing in a similar
business
@. st of goods sold
Sl.n
o <atio Formula
#ear
$%%& $%%" $%%4
@
st of goods sold
ratio :9.SJ net salesT)%% !@.)) @%.") @$.@6
The cost of goods sold ratio shows what percentage share of sales is consumed by
cost of goods sold and conversely what proportion is available for meeting e(penses
such as selling and general distribution e(penses as well as financial e(penses
consisting of ta(es interest and dividend and so on.
)% 9perating profit ratio
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
)% 9perating profit ratio =BITJ 7et sales )).4$ !."5 &.""
ere operating profit ratio has increased over a period of time which shows firms
ability to withstand adverse economic conditions when selling price is declining.
)). <eturn on e0uity
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
)) <eturn on e0uity 7et profitJ share holders e0uity $6.66 $).@4 [email protected]&
Fundamental And Technical Analysis
ere the profitability to ordinary shareholders is bit weaker and showing an
downward trend.
)$. <eturn on assets
Sl.n
o <atio Formula
#ear
$%%& $%%"
$%
%4
)$ <eturn on assets 7et profitJtotal assets $$.)) $).!!
$6.
)!
This ratio gives you an idea on the company?s management effectiveness in utili3ing
its assets to make a profit for its shareholders
)5. <eturn on capital employed
Sl.n
o <atio Formula
#ear
$%%& $%%" $%%4
)5
<eturn on capital
employed =BITJ Total capital 46.@! 66.%! 5&.")
This ratio shows how efficiently the long term funds of owners and lenders are being
used.
)6. =arnings Ber Share
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
)6 =BS
7et profit available e0 shJ 79
shares [email protected] &5."& &4.&$
Ehatever income remains in the business after all prior claims, other than owners
claims 1i.e. ordinary dividends2 have been paid, will belong to the ordinary
shareholders who can then make a decision as to how much of this income they wish
to remove from the business in the form of a dividend, and how much they wish to
retain in the business. The shareholders are particularly interested in knowing how
much has been earned during the financial year on each of the shares held by them.
For this reason, an earning per share figure must be calculated.
Fundamental And Technical Analysis
)4. 8ividend per Share
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
)4 8BS 8iv paid to ord sh J 7o of shares )5 $$ $&.4
This indicates the dividend paid for each share. Shareholders would, naturally like to
receive the ma(imum possible dividends from a company, consistent with its profits
and need for retained earnings. But the company,s 8BS has reduced drastically in
D/T mpany,s case.
)". B= ratio
Sl.n
o <atio Formula
#ear
$%%& $%%" $%%4
)" BJ= -BSJ=BS 5$."@ 55.%$ )5.)6
The BJ= ratio reflects the price currently being paid by the market for each rupee of
currently reported =BS. igh BJ= generally reflects lower risk andJor higher growth
prospects for earnings.
The above ratio shows that the shares were traded at a much higher premium in $%%&
than were in $%%4. In $%%4 the price was )5.)6 times higher than earnings while in
$%%&, the price is 5$."@ times higher.
)&. Brice to book value
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
)& Brice to book value ratio -BSJBBS &.@@ &.$4 5.!&
It measures the relationship between the market price of an e0uity share with book
value per share. The BJB ratio is significant in predicting future stock return. Firms
with low BJB ratio had consistently higher returns compared to the firms with high
BJB ratio.
Fundamental And Technical Analysis
)!. Book value per share
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
)! Book value per share 7etworthJ no of shares $%$."4 554.") $4".@6
This ratio indicates the net asset value of a company,s share. A high book value
indicates that the company has strong reserves, indicating scope for bonus shares, of
course sub+ect to necessary guidelines of the S=BI.
)@. 8ividend payout ratio
Sl.n
o <atio Formula
#ear
$%%& $%%" $%%4
)@ 8ividend payout ratio 8BSJ=BST)%% $".$4 $@.!" 5".5$
This ratio looks at the dividend payment in relation to net income and can be
calculated
$%. =arning yield
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
$% =arning yield =BSJ-BS T)%% 5.%" 5.%5 &.")
This ratio highlights as a percentage a company,s earnings vis'a'vis the current
market value of its share. For blue chip companies this ratio tends to be around 4 per
cent to " per cent.
$). 8ividend yield
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
$) 8ividend yield 8BSJ-BST)%% %.!% %.@% $.&"
7otice here there is a decrease in the yield from $%%4 to $%%&. The main reason for
this is that the dividend per share decreased while at the same time, the price of a
share increased.
$$. Total asset turnover ratio
Fundamental And Technical Analysis
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
$$ Total asset turnover ratio :9.SJtotal asst $.%% $.$% $.56
Total asset turnover ratio measures the efficiency of a firm in managing and utili3ing
its assets. The higher ratio indicates the more efficient management.
$5. :apital turn over ratio
Sl.no <atio Formula
#ear
$%%& $%%" $%%4
$5 :apital turnover ratio :9.SJcapital employed $.&6 $.@% 5."&
Fundamental And Technical Analysis
:apital turnover ratio measures the efficiency of a firm in managing and utili3ing its
capital. The higher ratio indicates the more efficient management.
Value anch!( !" the 0LT C!m8any is in the ne:t 8a4e<
Fundamental And Technical Analysis
6e(i!d L m!nths @..,K.B @..*K.B @.).K.B :A.<
I&COME
7et 9perating Income $%4$).5@ $5!"".$@ $&&4".5@ ).)"
EX6E&SES
-aterial nsumption 4!$".46 "[email protected] &5)&.5& ).)$
-anufacturing =(penses @))$.6@ )%&%).!$ )$4"!.56 ).)&
Bersonnel =(penses )6"!.6@ )&)5.@) $%%%.5" ).)&
Selling =(penses $5$.!4 $"@.@" 5)$.@@ ).)"
Administrative =(penses )56&.6" )4)4.4@ )&%6."@ ).)$
:apitali3ed =(penses '6.!% '".@& ')%.)5 ).64
st of Sales )&,@!5.%6 $%,&$5.!" $5,!@5.")
<eported BB8IT $,45!.54 5,)6$.65 5,!"$.&&
9ther <ecurring Income 6@5.@5 45$.%$ 4&5.%4 ).%!
Ad+usted BB8IT 5,%5$.$! 5,"&6.64 6,654.!$
8epreciation )!&.!" $$%.6% $4!.4" ).)&
Ad+usted BBIT $,!66.6$ 5,646.%" 6,)&&.$"
Finanical =(penses 56&.!@ 5"4.)5 5!5.$$ ).%4
Ad+usted BBT $,6@".45 5,%!!.@5 5,&@6.%5
Ta( :harges &$4.&" !&4.)4 )%44.$! ).$)
Ad+usted BAT ),&&%.&& $,$)5.&! $,&5!.&4
7on'recurring Items %.4@ %.$! %.)5 %.6!
9ther 7on'cash
Ad+ustments
4.4$ '4.&% 4.!@ ').%5
<=B9<T=8 BAT ),&&".!! $,$%!.5" $,&66.&!
no. of shares 55.6% [email protected]& 6".6$ ).)!
ea(nin4s 8e( sha(e AB<@. AC<.* A*<)B
L3T C7,pa+y i+c7,e state,e+t
6e(i!d L m!nths @..+K.B @..CK.B @..AK.B @..DK.B @..BK.B
I&COME
7et 9perating Income )&,"64.$@ )6,&&".@4 )5,)!@.&) @,"64.5$ @,6)$.@@
EX6E&SES
-aterial nsumption 4,)@@.$$ 6,")6.%$ 4,)$4.)6 5,$@".6& 5,%%$.%&
-anufacturing =(penses &,&4@.$% ",!"@.$% 4,$"%.44 6,%&!.!5 5,64!.&)
Bersonel =(penses ),$4!.$) !@%.%5 &"6.4) "&!.%! ""!.6
Selling =(penses $%%.!6 )4".&6 )&%.)! ))).)" "%@.5@
Administrative =(penses ),)@&.@@ @&$.$$ !").$& &6!.4) &6@.)5
:apitalised =(penses '5.5 ').!@ '5.)4 '%.&6 ').@!
st of Sales )4,")$.)" )5,4%%.5$ )$,)&!.4% !,@)$.5) !,6!4.&$
<eported BB8IT $,%55.)5 ),$&"."5 ),%)).$) &55.%) @$&.$&
9ther <ecuring Income 64!.4" [email protected]! $5%.@) 56%."& 5!!.)5
Ad+usted BB8IT $,6@)."@ ),")".)) ),$6$.)$ ),%&5."! ),5)4.6%
8epreciation )"%.)5 )%&.)$ !&.4$ !6.45 5%6.4&
Ad+usted BBIT $,55).4" ),4%!.@@ ),)46."% @!@.)4 ),%)%.!5
Finanical =(penses 55).6" 5$).56 $!%.4) $&5.)4 5!!.)5
Ad+usted BBT $,%%%.)% ),)!&."4 !&6.%@ &)".%% "$$.&%
Ta( :harges "%).!& 5"".)$ 5%$.$@ $5".%! &&.)
Ad+usted BAT ),5@!.$5 !$).45 4&).!% 6&@.@$ 464."%
7on'recurring Items ).$6 )!!.%6 6%6.%5 4%.6! $".@)
9ther 7on'cash Ad+ustments '4.56 ').!4 !.%$ 6.45 6.54
<=B9<T=8 BAT ),5@6.)5 ),%%&.&$ @!5.!4 456.@5 4&".!"
no. of shares $!.55 )5.&6 )$.@@ )$.66 $6.!&
ea(nin4s 8e( sha(e D*<@) +B<BD +A<+D DB<.. @B<@.
<etained =arnings ),%$!.$6 &)!.&% "$!."$ 5"%.@4 $4$.&!
8ividendJShare )5.%% $$.%% $&.4% !%.%% &.4%
total dividend 5"!.$@ 5%$.$! 54&.$$4 @@4.$ )!".4$4
<etention ratio %.&6 %.&) %."6 %."& %.66
<eserves / Surplus 4,"!5.!4 6,4!5.5$ 5,5)$.$4 $,&)&.44 5,$&@.45
<9= $5.5" $).54 $!.4! )!.!$ )".54
market price ),")@.)4 $,65$.&% @@@.4 4&6.54 )!6.44
B= ratio 5$.@% 55.)& )5.$% )5.5" &.@"
Fundamental And Technical Analysis
ris- :ree rate 5eta EMRP
Di4i;e+; pay7ut rati7 )&)
re@uire; rate 7: rate !' 8 !
e9pecte; Ar78t6 rate i+ ;i4i;e+; !2&2
p/e ratio )(&2)
AF< PE rati7 2%&!)
8eiA6te; pe rati7 (%&'!
The "!ll!=in4 table sh!=s the e:8ected ma(7et 8(ices !" 0LT
C!m8any<
year 2008 200 20!0
4alue a+c67r 2%22&%% 2(2!&%8 228(&(!
The following is the D/T company management review
The following lines e(plain the chairman,s speech of D/T mpany it tells
about the company,s strategy of future e(pansion and development strategy.
6e("!(mance !e(ie=:
India is one of the fastest growing economies globally with .8B growing at
@.6* last year. igh capacity utilisation across various sectors is fuelling an up trend
in capital e(penditure. The scale of investment in infrastructure envisaged in the ))th
Five #ear Blan 1$%%&'$%)$2 will call for greater engagement by the private sector and
international institutions. All these are lead indicators for growth.
The conducive business environment coupled with a slew of measures taken by the
mpany for improvement of operational efficiency, institutionali3ation of a risk
management framework and more +udicious selection of pro+ects, have yielded
significant benefits. In Financial #ear $%%"'$%%&, the mpany?s order inflows /
Fundamental And Technical Analysis
sales have grown by 5&* and )@* respectively. The mpany bagged its largest ever
order in domestic / international markets such as e(pansion / modernisation of
8elhi International Airport and an offshore platform pro+ect in Qatar. The order book
as on -arch 5), $%%& stood at <s. 5"@ Bn including <s. ") Bn from international
business. The mpany has achieved improvement in margins in all its business
segments for the second year. The Subsidiary and Associate mpanies have also
performed well. 8uring the year, the mpany issued bonus shares in the ratio of )I)
and recommendedJpaid dividend of'<s. )5 per share on a face value of <s. $ per
share. The market capitali3ation of the mpany has increased further from <s. 556
Bn to <s. 64" Bn during the year and has outperformed the Sense(.
Inestin4 "!( 8(!"itable 4(!=th:
Investments are the o(ygen of growth. Eithin the larger conte(t of the
country?s increasing investments in building a brighter future, the mpany is also
investing in multiple spheres ' people, technology, capacity e(pansion both
domestically / internationally and brand building. This is essential for sustaining the
growth momentum and continuous value creation.
6e!8le - Talent mana4ement:
Talent ac0uisition and retention is one of the key result areas for our senior
managers. 9n an on'going basis, the mpany renews, re+uvenates and adds uman
<esource -anagement / 8evelopment systems, processes and practices to its
repertoire and periodically does compensation benchmarking so as to ensure a vibrant
and motivated workforce. The mpany is constantly honing people management
leadership skills of the employees and is increasingly investing in training centers
across India. Innovative human resource initiatives like ?:ampus to rporate?, launch
of an e'learning portal ' ?Any Time Dearning?, buddy referrals for talent ac0uisition,
have been launched. As a result, the mpany has been able to substantially increase
its human resource.
Fundamental And Technical Analysis
Techn!l!4y - ;uildin4 !n c!(e en4inee(in4 st(en4th:
.iven our commitment to becoming a knowledge'based premium
conglomerate, investments in technology across all businesses continue to remain at
the forefront of the mpany?s business strategy. The mpany has set up
=ngineering design centers at -umbai, Baroda, :hennai, Bangalore, and 8elhi as
well as in the -iddle =ast. In line with our ob+ective of emerging as a player with
end'to'end capabilities in the power sector, the mpany has signed an agreement
with -itsubishi eavy Industries Dimited, Capan for super critical boiler technology
and is close to achieving a similar tie'up in the field of turbines.
Inte(nati!nal ;usiness - St(en4thenin4 8(esence bey!nd India:
The mpany continues to forge alliances and to invest in international
business for enhancing capabilities and achieving its vision of becoming an Indian
multinational with focus in the -iddle =ast and :hina. Coint ventures have been set
up in ;uwait and Saudi Arabia for electromechanical construction in oil / gas, power
and infrastructure sectors. The -odular Fabrication yard being set up at Sohar, 9man
will strengthen the mpany?s presence in the .ulf region. The mpany is receiving
encouraging response from clients for pro+ect e(ecution and 8esign / =ngineering
services. The mpany has set up manufacturing facilities in :hina for high' end
switchgear / rubber processing machinery and a factory is also being built for
industrial valves. These initiatives will accelerate the mpany?s thrust towards its
UDakshya? target of achieving $4* revenues from international business.
Ca8acity E:8ansi!n:
The mpany is e(panding capacity internationally and within India.
Substantial capacity augmentation at a3ira will help us address the growing demand
in oil / gas industry. The =lectrical / =lectronics division is e(panding its capacity at
-ysore, Ahmednagar and -ahape to take care of rapid growth in the sector. The
mpany crossed a ma+or milestone with the inauguration of the first two units at its
5%%'acre campus in imbatore. The facilities for the manufacture of industrial valves
Fundamental And Technical Analysis
and switchboards are already accomplished. The campus will progressively see the
establishment of manufacturing facilities for advanced tooling and high precision
components in aerospace, nuclear power, defence sectors etc. The mpany is
building a state of the art eavy Dift'cum'Bipelay vessel in partnership with
Sapura:rest Betroleum Berhad, -alaysia that will give offshore installation capability
and achieve significant competitiveness. All the divisions of the mpany have
planned increased investments in ac0uisition and installation of new e0uipment and
manufacturing facilities.
0!!7in4 Ahead:
As we move on, the mpany is well positioned to e(ploit the opportunities
that will emerge from hydrocarbon, infrastructure, power, minerals / metals and
other industrial sectors.
The Bublic Brivate Bartnership model is going to be the way forward for infrastructure
pro+ects in the country. D/T Infrastructure 8evelopment Bro+ects Dimited has already
consolidated its position with some completed pro+ects and several under
implementation across various sectors. Eith its capabilities augmented through the
recent tie'up for manufacture of super critical boilers and the proposed collaboration
for turbines, the mpany will be in a position to set up complete power pro+ects.
D/T Infrastructure Finance mpany Dimited has initiated funding in the
infrastructure segment.
The mpany has commenced building ships at its a3ira Eorks. Ee are also
scouting for a suitable site in India to set up a world'class facility for shipbuilding and
repair, comparable to the best worldwide. The defence, nuclear power and aerospace
sectors show potential and promise. The <aksha Hdyog <atna 1<H<2 status, when
granted to the mpany, will facilitate increased business in 8efence sector.
Deveraging its proven capabilities in construction and electrification for the railways,
the mpany envisages e(panding its presence in this sector. .iven the healthy order
book position and the opportunities available, the mpany believes that it will be
able to achieve sustained growth.
Fundamental And Technical Analysis
I am happy to share that the mpany was ranked number ) in two critical attributes '
?Quality? and ?<eputation? over a host of other corporates, in The Eall Street Cournal
Asia?s nationwide survey of Indian companies.
To conclude, I wish to place on record my appreciation for the outstanding
commitment and smart work of all our employees. I am also grateful for the
continuing support of my colleagues, our customers, business associates, shareholders
and members of the Board. It is this collective effort and support of each member of
D/T .roup?s e(tended family that instills confidence in our ability for building on the
profitable growth momentum into the future.
Fundamental And Technical Analysis
Findin4 and su44esti!n:
)< The "!ll!=in4 table sh!=s the e:8ected ma(7et !" the ;1E0 st!c7 "!( the
8e(i!d !" B yea(s i<e @.., t! @..*
Analysis:
At present the company share price is very attractive and fundamentally
undervalued
Because the intrinsic value of the share is $)&%.!4 and current market price is $%").54
So one can have buy view on this stock from long term point of view.
SuggestionI ;uy for long term point of view.

EXPECTED MARKET PRICE OF BHEL
particulars
year
2008 200 20!0
F"#DAME#TAL A#ALI$I$ 2!'0&82 2'2)&%' %(!&)2
TECH#ICAL A#AL*$I$ $4%% 5&4%
curre+t ,ar-et price.%!/0%/080 210)!&%2
Fundamental And Technical Analysis
@< The "!ll!=in4 table sh!=s the e:8ected ma(7et !" the 0LT st!c7 "!( the 8e(i!d
!" B yea(s i<e @.., t! @..*
EXPECTED MARKET PRICE OF L3T
Particulars
year
2008 200 20!0
F"#DAME#TAL A#ALI$I$ 2%22&%% 2(2!&%8 228(&(!
TECH#ICAL A#AL*$I$ 664% 2800
Curre+t ,ar-et price %102(&80
Analysis:
Above table shows the company script is mainly technical driven there is less scope
for fundamental analysis. mpany,s intrinsic value is <s. $5$4.55 but the current
market price is <s. 5%$6.!. By this we can say that the company is overvalued
according to fundamental analysis.

But when we analy3e by technically the stock is having good support and resistance
so we can say that the stock moves upto 664% in short run and in long term the stock
is predicted to go around 4!%%.
SuggestionI If investor at present holding this stock should wait for some time to get
good return in short term the stock may go for <s. 664% and in the long run the stock
may go to <s. 4!%%.
SuggestionI old for time being and sell when stock breaks its previous
support.
C!nclusi!n
Fundamental And Technical Analysis
=ngineering is a diverse industry with a number of segments. A company from
this sector can be a power e0uipment manufacturer 1like transformers and boilers2,
e(ecution specialist or a niche player 1like providing environment friendly solutions2.
It can be an electrical, non'electrical machinery and static e0uipment manufacturer
too
The economy has been growing at an average growth rate of !.! per cent in
the last four fiscal years 1$%%5'%6 to $%%"'%&2, with the $%%"'%& growth rate of @."
per cent being the highest in the last )! years. Significantly, the industrial and service
sectors have been contributing a ma+or part of this growth, suggesting the structural
transformation underway in the Indian economy.
Technical and fundamental analysis is the strong theory accepted world wide
some investor strongly believes on fundamentals of company and some believe
technical plays very important role in investing. But it is mainly depends on demand
and supply for the stocks in the stock market.
An effort is made to make understand the reader of this pro+ect what is
fundamental analysis and what is technical analysis. By this pro+ect report one can
strive to calculate intrinsic value of the shares and understanding what graphs are
showing about the script.
;ibli!4(a8hy
Fundamental And Technical Analysis
)< %!ta7 secu(ities<c!m
@< eJuitymaste(<c!m
B< icicidi(ect<c!m
D< nseindia<c!m
A< bseindia<c!m
C< bhel<c!m
+< la(sentab(!<c!m
Re"e(ence ;!!7s
o Secu(ity Analysis and 6!(t"!li! Mana4ement<
6(asanna Chand(a
o Financial mana4ement<
%han and jain

S!"t=a(e used
Ms-O""ice @..B
? -icrosoft =(cel
? -icrosoft Eord
? - S power point
? Baint

doc_318360330.doc