A REPORT ON EQUITY RESEARCH

BY: CHIRASH 05116603909

AUTHORIZATION
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This is to certify that Mr. Chirash, a student of University School of management Studies , GGSIPU has completed project work on Equity Research under my guidance and supervision. The report is submitted as partial fulfillment of the requirement of MBA Program of USMS. I certify that this is an original work and has not been copied from any source.

(Signature of Guide) Name of Project Guide: Dr . Vijita Aggarwal Date

ACKNOWLEDGEMENT
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I owe a great many thanks to a great many people who helped and supported me during the making of this project. My deepest thanks to

Dr

Vijita

Aggarwal,

the Guide of the project for guiding and correcting various documents of mine with attention and care. He has taken pain to go through the project and make necessary correction as and when needed. I would also thank my Institution and my faculty members without whom this project would have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.

Chirash

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Table of Contents
Table of Contents....................................................................................................... 4 LIST OF TABLES.......................................................................................................... 5 LIST OF FIGURES......................................................................................................... 6 EXECUTIVE SUMMARY................................................................................................. 7 INTRODUCTION........................................................................................................... 8 INTRODUCTION TO STOCKS:-.................................................................................. 8 INTRODUCTION TO STOCK MARKET:-......................................................................9 THE MARKET : WHY IT EXISTS?..............................................................................10 INTRODUCTION TO STOCK EXCHANGE:-................................................................11 RISKS INVOLVED IN STOCK MARKET:-....................................................................12 ANALYSIS TOOLS:-................................................................................................. 12 EQUITY RESEARCH : AN OVERVIEW.......................................................................14 INVESTMENT RATIONALE....................................................................................... 14 OBJECTIVE OF THE PROJECT:-................................................................................15 SCOPE OF THE STUDY:-......................................................................................... 15 METHODOLOGY:-................................................................................................... 16 LIMITATIONS OF THE STUDY:-................................................................................ 16 MAIN TEXT................................................................................................................ 17 FUNDAMENTAL EVALUATION:-...............................................................................18 ECONOMIC ANALYSIS................................................................................................ 18 INTRODUCTION...................................................................................................... 18 SENSEX : AN INDICATOR OF THE INDIAN ECONOMY..............................................20 FIIS INFLOW IN THE INDIAN ECONOMY:-...............................................................22 IMPACT OF UNION BUDGET 2010-11 ON SENSEX..................................................24 Page | 4

INDUSTRY ANALYSIS................................................................................................. 26 PHARMACEUTICAL INDUSTRY................................................................................ 26 CONSTRUCTION INDUSTRY:-.................................................................................. 30 TELECOM INDUSTRY:-............................................................................................ 34 COMPANY ANALYSIS................................................................................................. 38 RATIO ANALYSIS.................................................................................................... 38 SNAPSHOT OF THE MARKET...................................................................................... 46 INTERPRETATION OF VARIOUS PARAMETERS IMPORTANT IN ANALYSING A STOCK. .47 ANALYSIS OF CIPLA:-............................................................................................. 51 ANALYSIS OF Bharti Airtel :-................................................................................... 52 ANALYSIS OF DLF LTD :-........................................................................................ 54 ANALYSIS OF L&T:-................................................................................................ 56 ANALYSIS OF JAIPRAKASH ASSOCIATES:-...............................................................57 FINDINGS AND CONLUSION...................................................................................... 59 REFERENCES............................................................................................................. 61 ANNEXURES.............................................................................................................. 62

LIST OF TABLES

1. Indias top7 drug comp 2. Snapshot of the market 3. Best top gainers of sensex Page | 5

29 48 49

4. Best top losers of sensex 5. Analysis of cipla 6. Analysis of Bharti airtel 7. Analysis of DLf ltd. 8. Analysis of L&T 9. Analysis of jaiprakash asso.

50 55 56 58 60 61

LIST OF FIGURES
1. Sensex chart from 2006-10 2. FII investment in Indian equities 3. Porters 5 forces model for industry analysis 4. Market share of pharma companies 24 25 28 31

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5. Share to GDP by construction industry6. Market share of telecom companies 7. Bar chart depicting the Current ratio 8. Bar chart depicting the debt equity ratio 9. Bar chart depicting the industry coverage ratio 10.Bar chart depicting the EBITDA margin 11.Bar chart depicting the ROCE 12.Bar chart depicting the total asset turnover ratio 13.Price chart of cipla 14.Price chart of Bharti airtel 15.Price chart of DLF ltd. 16.Price chart of L&T 17.Price chart of jaiprakash asso. 60 62 55 57 58 45 46 38 41 42

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EXECUTIVE SUMMARY
Summer Internship Program is an essential component of the MBA curriculum. It gives immense opportunity to learn about the working and culture of the corporate. The project entitled Equity Research is dedicated to my SIP 2010 which is being accomplished through the courtesy of Sharekhan Ltd.. The main aim of the project is to enhance the analytical skills with

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the help of fundamental analysis and addition of basic and advanced knowledge of finance for better understanding of the market for its application in research. Equity research is done through two analysis namely fundamental and technical analysis. The analysis in this project is done through fundamental analysis which basically includes economic analysis, industry analysis and the company analysis. There are two approaches to this, bottom up and top down. I have adopted the top down approach to perform the study commencing with economic, industry and company analysis. The area of research given to me is sensex which is in a group of 2. So, I have been assigned 15 companies listed on sensex thereby covering 6 sectors. The economic analysis starts with a brief of world economy statistics and then the Indian economic analysis. Also, the impact of budget 2010-11 is covered in the report. The analysis of 3 sectors was done till interim report and a more detailed analysis of the remaining 3 sectors, that is, pharmaceutical industry, construction industry and telecom industry is done now. The company analysis starts with the ratio analysis which forms one of the most important tools of fundamental analysis used to analyze the financial performance of the companies. Ratio analysis is carried out with the companies of telecom sector so that it becomes easy to understand and explain and simultaneously analyzing the telecom companies as well. A comparative analysis is also done against prominent private market players. Various ratio analysis will help to judge the, liquidity, solvency, profitability and overall efficiency of the firm.

Some of the important or key financials of a company are studied and explained which are useful for an investor to invest in a firm. The analysis of some companies is shown at the end with these parameters.

INTRODUCTION
INTRODUCTION TO STOCKS:-

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Stock is a share in the ownership of a company. Stock represents a claim on the company's assets and earnings. As you acquire more stock, your ownership stake in the company becomes greater. Whether you say shares, equity, or stock, it all means the same thing. The importance of being a shareholder is that you are entitled to a portion of the companys profits and have a claim on assets. Profits are sometimes paid out in the form of dividends. The more shares you own, the larger the portion of the profits you get. Your claim on assets is only relevant if a company goes bankrupt. In case of liquidation, you'll receive what's left after all the creditors have been paid. The importance of stock ownership is your claim on assets and earnings. Another extremely important feature of stock is its limited liability, which means that, as an owner of a stock, you are not personally liable if the company is not able to pay its debts. Other companies such as partnerships are set up so that if the partnership goes bankrupt the creditors can come after the partners (shareholders) personally and sell off their house, car, furniture, etc. Owning stock means that, no matter what, the maximum value you can lose is the value of your investment. Even if a company of which you are a shareholder goes bankrupt, you can never lose your personal assets.

INTRODUCTION TO STOCK MARKET:The fabulous category of financial instruments is, without a doubt, one of the greatest tools ever invented for building wealth. Stocks are a part, if not the cornerstone, of nearly any investment portfolio. When you start on your road to financial freedom, you need to have a solid understanding of stocks and how they trade on the stock market.

Over the last few decades, the average person's interest in the stock market has grown exponentially. What was once a toy of the rich has now turned into the vehicle of choice for growing wealth. This demand coupled with advances in trading technology has opened up the

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markets

so

that

nowadays

nearly

anybody

can

own

stocks.

The stock market can be a great source of confusion for many people. The average person generally falls into one of two categories. The first believe investing is a form of gambling; they are certain that if you invest, you will more than likely end up losing your money. Often these fears are driven by the personal experiences of family members and friends who suffered similar fates or lived through the Great Depression. These feelings are not ground in facts and are the result of personal experience. Someone who believes along this line of thinking simply does not understand what the stock market is or why it exists. The second category consists of those who know they should invest for the long-run, but dont know where to begin. Many feel like investing is some sort of black-magic that only a few people hold the key to. More often than not, they leave their financial decisions up to professionals, and cannot tell you why they own a particular stock or mutual fund. Their investment style is blind faith or limited to this stock is going up. We should buy it. This group is in far more danger than the first. They invest like the masses and then wonder why their results are mediocre (or in some cases, devastating).

THE MARKET : WHY IT EXISTS?

When a company is growing, the biggest hurdle is often raising enough money to expand. Owners generally have two options to overcome this. They can either borrow the money from a bank or venture capitalist, or sell part of the business to investors and use the money to fund growth. Taking out a loan is common, and very useful to a point. Banks will not always lend money to companies, and over-eager managers may try to borrow too much initially, wrecking the balance sheet. Factors such as these often provoke owners of small businesses to issue stock. In exchange for giving up a tiny fraction of control, they are given cash to expand the business. In addition to money that doesnt have to be paid back, going public [as its called when a company sells stock in itself for the first time], gives the business managers and owners a new tool: instead of paying cash for an acquisition, they can use their own stock.

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INTRODUCTION TO STOCK EXCHANGE:A stock exchange is an entity which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

There are two major stock exchanges in the country. One is SENSEX(BSE) and the other is NIFTY(NSE). BSE stands for Bombay Stock Exchange and NSE stands for National Stock Exchange. The Sensex is an "index". An index is basically an indicator. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down. The Sensex is an indicator of all the major companies of the BSE and Nifty is an indicator of all the major companies of the NSE. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down.
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Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE.

RISKS INVOLVED IN STOCK MARKET:It must be emphasized that there are no guarantees when it comes to individual stocks. Some companies pay out dividends, but many others do not. And there is no obligation to pay out dividends even for those firms that have traditionally given them. Without dividends, an investor can make money on a stock only through its appreciation in the open market. On the downside, any stock may go bankrupt, in which case your investment is worth nothing. Although risk might sound all negative, there is also a bright side. Taking on greater risk demands a greater return on your investment. This is the reason why stocks have historically outperformed other investments such as bonds or savings accounts. Over the long term, an investment in stocks has historically had an average return of around 10-12%. To make money in the stock market, one must assume high risks.

ANALYSIS TOOLS:There are two types of the analysis used by institutional and individual traders. Both fundamental and technical analysis serve the same purpose to help to define possible future stock trend, yet, at the same time they are completely different in the way they analyze stocks. Both fundamental and technical analyses are important and depending on the trading style one or another could be applied. FUNDAMENTAL ANALYSIS:-

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Fundamental analysis is the process of looking at a business at the basic or fundamental financial level. This type of analysis examines key ratios of a business to determine its financial health and gives you an idea of the value its stock. Many investors use fundamental analysis alone or in combination with other tools to evaluate stocks for investment purposes. The goal is to determine the current worth and, more importantly, how the market values the stock. TECHNICAL ANALYSIS:Technical analysis looks at past performance of an analyzed stock in order to find logical patterns that could be applied to the current situation on the market and reveal possible future stock trend. As a rule this type of the analysis is based on the analysis of the volume and price charts, data, developing various technical indicators which. In the age of the computerization many of the traders are choosing this type of the analysis mainly because of the availability and fast results. By comparing technical and fundamental analysis there is no straight answer which one of them is better. However taking into account different traders we may say that:

For intraday traders: if a trader intends to make 1-5 trades a day, most likely, they do not care about fundamental analysis at all. It does not matter to intraday traders what is going to happen to the company over the month, is it on the edge of filing bankruptcy or it is strong and growing. All they are interesting in is how volatile and how liquid stock is and where the price of the stock is going to be in 10-30 minutes. These traders rely solely on technical analysis.

For Short-Term Traders: The same as intraday traders this type of trading does not assume holding position (own stocks) for a prolonged period of time. 1-2 trades a week and even 2-3 trades a month is still a small timeframe to be bothered by complex fundamental analysis.

For Mid-Term Traders: By going into 2-3 trades a year a traders may start to be interesting in some elements of the fundamental analysis. By holding a stock for more than 6 month in your portfolio you suppose to know at least a little bit about the

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company. You still may use technical analysis, yet some company research could be recommended for this type of traders.

For Long-term Traders: If you intend to hold the stock of the company in your portfolio for a several years it becomes essential to consult fundamental analysis. Those who trade indexes still may use some elements of technical analysis, yet, when it comes to stocks you have to be sure it is not broken when you are willing to sell it and has at least the same value so you do not loose.

EQUITY RESEARCH : AN OVERVIEW

Information is the plank on which financial markets operate. Traders with better information and forecasting ability will have an edge in the market place. Thus, there is a need for equity research and sophisticated financial modeling.

Equity research is the publication by analysts of reports, notes, and emails that offer an investment recommendation on the quoted stock of a company (typically buy, sell, or hold). The recommendation is supported by an investment case, financial forecasts, and a valuation. Reports vary enormously, from short updates of a page or less to substantial documents that analyze whole industries and companies in great detail. The role of research is to provide information to the market. An efficient market relies on information. A lack of information creates inefficiencies that result in stocks being misrepresented (over or under valued). Analysts use their expertise and spend a lot of time analyzing a stock, its industry and peer group to provide earnings and valuation estimates. Research is valuable because it fills information gaps so that each individual investor does not need to analyze every stock. This division of labor makes the market more efficient.

INVESTMENT RATIONALE

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Each investment alternative has its own strengths and weaknesses. Some options seek to achieve superior returns (like equity), but with corresponding higher risk. Other provide safety (like PPF) but at the expense of liquidity and growth. Other options such as FDs offer safety and liquidity, but at the cost of return. Mutual funds seek to combine the advantages of investing in arch of these alternatives while dispensing with the shortcomings. Indian stock market is semi-efficient by nature and, is considered as one of the most respected stock markets, where information is quickly and widely disseminated, thereby allowing each securitys price to adjust rapidly in an unbiased manner to new information so that, it reflects the nearest investment value. And mainly after the introduction of electronic trading system, the information flow has become much faster. But sometimes, in developing countries like India, sentiments play major role in price movements, or say, fluctuations, where investors find it difficult to predict the future with certainty. Some of the events affect economy as a whole, while some events are sector specific. Even in one particular sector, some companies or major market player are more sensitive to the event. So, the new investors taking exposure in the market should be well aware about the maximum potential loss, i.e. Value at risk.

OBJECTIVE OF THE PROJECT:-

The objective of the project is to pick up 15 companies which are listed on the Bombay Stock Exchange and conduct a research on their securities, the organization and operation of their markets. In the broadest terms, objective is to develop, and thereafter communicate to investors, insights regarding the value, risk, and volatility of a covered security, and thus assist investors to decide whether to buy, hold, sell, sell short or simply avoid the security.

SCOPE OF THE STUDY:-

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Equity research forms an integral part of the share trading experience. Equity research decides the stance one would take in the share trading industry. Forecasting scrip performance requires much more characteristics and skills than just advance arithmetical ability. It requires split-hair analysis of the market. To do so one also needs to have excellent understanding of the market. Supported by valid, fact-based and reliable research inputs and published results, the research picks out stocks, analyzes its future scope and give a timely recommendation.

METHODOLOGY:The data will be collected from the secondary sources such as companys annual reports, research reports, websites, news articles etc. Time horizon from 2007-08 to 2009-10 will be taken into account for analysis. There are various methods of research analysis like Ratio Analysis, CAPM Model, Discounted Cash Flows (DCF), P/E ratio, EPS estimation, SWOT analysis, Economic Analysis, Industry Analysis which would be used.

LIMITATIONS OF THE STUDY:-

Equity research is done by highly experienced professionals. Therefore it requires a very deep and thorough knowledge of the subject.

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This research directly influences the decisions of the investors thereby making it extremely important to be very precise and careful. The results found should be very accurate which is not an easy task.

Every analyst has his own methods of forecasting therefore the results can vary.

The analyst has to take all factors into consideration and arrive at a probabilistic estimate of the companys stock price. Analyst will continuously upgrade or down grade his estimates depending on evolving conditions of Economy, Industry and Company plans.

MAIN TEXT

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FUNDAMENTAL EVALUATION:Fundamental evaluation employs a top-down approach that starts with the overall economy and then works down from industry groups to specific companies. As part of the analysis process, all information is relative. Industry groups are compared against other industry groups and companies against other companies. Usually, companies are compared with others in the same group. For example, a telecom operator (Bharti airtel) would be compared to another telecom operator (reliance communication), not to an oil company (ONGC).

ECONOMIC ANALYSIS
INTRODUCTION
The Economy analysis is important to understand the macro-parameters for investment in a particular country. The set of indictors that define the economy includes the Lagging, Leading and the incident indicators. These define the overall health of economy under consideration. The Global financial turmoil, was casted a big impact on the world. Entire world economy got seriously affected by the crisis. Hence forth the world economy can be by and large segregated in the 3 phases, primarily pre-Lehman debacle, the financial crisis and the latest being the recovery. Some economists prefer to call this the V shaped recovery. Whether the new phase can be termed as Yellow weeds or green shoots remain to be seen.

WORLD ECONOMIC STATISTICS AT A GLANCE

World GDP (PPP): $65 trillion GDP Growth Rate: 5.2%
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Growth Rate of Industrial Production: 5% GDP By Sector: Services- 64% Industry- 32% Agriculture- 4% GDP Per Capita (PPP): $9,774 Population: 6.65 billion The Poor (Income below $2 per day): 3.25 billion (approximately 50%) Millionaires: 9 million (approximately 0.15%) Labor Force: 3.13 billion Exports: $13.87 trillion Imports: $13.81 trillion Inflation Rate - Developed Countries: 1% - 4% Inflation Rate - Developing Countries: 5% - 20% Unemployment - Developed Countries: 4% - 12% Unemployment & Underemployment - Developing Countries: 20% - 40%

INDIA ECONOMIC ANALYSIS

India economic analysis provides various inputs on economic condition of this south-east Asian country. It can be done both at a microeconomic as well as a macroeconomic level. India economic analysis could also be described as being an explanation of various economic phenomena going on in this country.

Recent macroeconomic developments in India:

In April 2009, industrial sector in India had recorded a growth of 7 percent. However, this figure is lesser than 11 percent development, which had been achieved in April 2008. Much of this critical condition could be attributed to an increase in prices of oil. Measures that have been taken by Reserve Bank of India, like upward revision of repo rate and CRR, have also contributed to decrease in industrial production. Manufacturing and electric sector have suffered as well in recent times. Their growth rates have come down too. For manufacturing sector it was 7.5 percent and for electricity sector, rate of development stood at 1.4 percent in April 2008. This rate is significantly low when compared to statistics of April 2007, when rates of development for manufacturing and electricity were 12.4
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percent and 8.7 percent respectively. In case of manufacturing sector much of this slump could be attributed to increase in input costs like expenses of oil, raw materials, rates of interest and prices of goods and services. Mining sector has been comparatively better off as it has managed to grow at a rate of 8 percent in April 2009 compared to 2.6 percent that was achieved in April 2008. In core infrastructural industries, there has been deceleration as well, but it is still better off compared to non infrastructural industries in India. Growth in April 2008 has been around 3.6 percent, which is less than 5.9 percent achieved in April 2007. Industries like crude oil production, electricity and petroleum refinery have been performing below expectations but coal, finished steel and cement have performed better than April 2007.

SENSEX : AN INDICATOR OF THE INDIAN ECONOMY

Sensex is the buzzword today that governs the activities of the investors in India. With metamorphosis witnessed in all sectors and the country turning into a fast developing economy there is no dearth of investors. Even overseas investors are attracted towards sensex India and it has not been a decade that the stock market gained great momentum. The BSE index rose to such an escalating level that thousands of shares were being traded every minute and more investors being ready to invest. But the sudden downslide in the year 2008 left all in panic reminding one of the snake & ladder game. Many turned bankrupt, a number of companies closed down, and financial chaos were the order of the day for over six months at a stretch. The downslide affected the BSE sensex, lowering the stock prices and investors were in a dilemma whether to take the risk or not. But now market conditions have changed for the better; the BSE index, over the last few months, has been displaying a rising figure. At present, the sensex index closed at 16844.20 up from the below-10,000 figure. The global recession period is about to get over & the severely affected banks & equities are slowly reverting back to their previous shape. All the investors trading in BSE stocks will feel
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glad to know that Bombay Stock Exchange (BSE) is also recovering from the massive effect that economic slowdown has left on it. BSE is one of the Asias oldest stock exchanges operating the stocks of a lot of companies from different sectors. India is expanding at a rapid rate after China, but the upward trend is one of the steadiest compared to the other foreign markets. India being diverse in many sectors will see more upside due to the strong demand in information technology. The other sectors for future growth in India are energy, oil, and commodities. The Sensex has had its way will continue to grow. Indias economy is booming and the high return will reflect on its stock market. The increase in sensex means lot of people who have invested and also persons invested in the mutual funds will be benefited .so the earning per capita is increasing , companies will grow so their branches will too so employment the foreign investors will also invest and we will be benefited. SENSEX is one of the major parameter by which growth of the indian companies and thus its impact on economy can be found out. Increase in Sensex means that companies are improving, thus unemployment will be decreased and also Income level of the people will also be leveled up. Thus it will definitely have a positive impact on the Economy which will have a positive flow or the positive impact on the country

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Sensex chart from 2006-10

FIIS INFLOW IN THE INDIAN ECONOMY:Foreign institutional investors (FIIs), one of the largest categories of investors in the local equity markets, have bought Indian stocks worth $6.64 billion (Rs29,481 crore) in the year-to-date, the highest in the first four months of a year since they were allowed entry into the country in 1992. The money that FIIs have pumped in beats the previous record of $4.21 billion that came in during January-April in 2004, when the markets were in the middle of a bull rally, according to data released by the markets regulator, the Securities and Exchange Board of India (Sebi). Indias industrial production grew at 15.1% in February over a year ago, and is seen at around the same level in March. With company earnings growing at double-digit pace, the economy is forecast to grow at 8.8% in 2010, according to the International Monetary Fund.

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However, others are not so optimistic and said that risk appetite might wane because of the problems surrounding Greece and some other European economies such as Spain and Portugal. To be sure, a slowing of foreign inflows may help alleviate the concerns of policymakers worried about inflation thats close to double-digit levels, and the rupees appreciation, which makes Indian exports less competitive. The rupee has gained around 5% against the dollar since the start of the year. Equity markets around the world took a tumble recently, after credit rating agency Standard and Poors cut the debt rating of Greece to junk status on Tuesday and downgraded Spain and Portugal. While the US Dow Jones Industrial Average fell 1.75% in the week till 30 April, the UKs FTSE index shed 3.49%. Emerging markets were hit too, with the local benchmark, the Sensex, losing 1% over the week. The increase in FII inflows, however, hasnt boosted the local markets much. The Sensex has gained only 0.54% this year and the broader BSE 500 index 2.93%. Part of this is explained by the fact that local mutual funds have sold shares worth Rs7,529 crore in the same period. The Sebi data also includes fund flows to the primary market. So far, this year, 28 firms have raised money worth Rs10,000 crore from new share sales.

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IMPACT OF UNION BUDGET 2010-11 ON SENSEX

The benchmark Sensex saluted Union Budget 2010 unveiled by Finance Minister Pranab Mukherjee and rallied over 400 points during the same day. Experts say it was a effect of short covering and positive reaction to budget. The Nifty closed above the 4900 mark but the sell-off and profit booking in ITC on hike in excise, BHEL, Tata Power, TCS, Infosys and ABB erased more than 50% gains from day's high. Even heavyweights came off their day's high on profit booking at higher levels. It seemed that the markets discouted the budget. Pranab Mukherjee in his second budget announced some positives like gradual reduction in fiscal deficit, cut in surcharge, more allocation for infrastructure development, increase in FY11 divestment target, increase in personal tax slab to Rs 8 lakh etc, which all these pushed the sensex above. However, there were some negatives like hike in excise duties etc.

Index AUTO METAL BANKEX PHARMA MIDCAP REALTY OIL&GAS SMALLCAP CAP GOODs POWER TECk IT FMCG

Closing Value 7,170.99 16,401.52 9,828.68 4,912.98 6,397.82 3,236.69 9,596.24 8,067.40 13,474.86 2,961.56 3,179.21 5,173.99 2,662.05

Chg (%) 4.74 2.58 2.26 1.55 1.47 1.26 1.08 1.08 1.06 0.26 0.03 -0.29 -2.25

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Positive global cues also helped the markets. European markets were trading 1% higher and US index futures were marginally in green. Asian markets also recovered in late trade; Hang Seng was up 1% and Kospi up 0.45%. Nikkei, Straits Times and Taiwan were marginally in green while Shanghai fell 0.28%. However, the markets shrugged off less-than-expected gross domestic product (GDP) data. The Q3 GDP came in at 6% as against 7.9% in the previous quarter. For the period of nine-month ended December 2009, GDP growth stood at 6.7% versus 7.1% on year-on-year basis. This was despite negative growth in agriculture.

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INDUSTRY ANALYSIS
PHARMACEUTICAL INDUSTRY
This diagram provides a summary positional analysis of the pharmaceutical industry using Porters Five Forces model :

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Figure: Porters Five Forces Model for Industry Analysis Barrier to entry: High (Pharmaceuticals). Cost of R&D and patent limitations Industry Competition: High. Advantages gained by first mover advantage (patents) Suppliers: supplier power is low Buyers: buyer power is low Substitutes: low (with patents) medium (after patent expiry)

Overall, the pharmaceutical industry shows an upward trend in its core markets. The industry remains highly valued, has a favourable market position with strong financial make-up and strong earnings growth. Its future potential demand trend is positive and despite increased competition the industry still shows a continuing upward growth momentum. Forecast of the leading 16 pharmaceutical companies for 2001 to 2009 suggests that combined sales will grow at a minimum rate of 5.2 percent based on the potential of their product pipeline. Cipla Laboratories continues to be the largest pharmaceutical company in the domestic market. Cipla has topped the ORG-IMS rankings for the month of November with a market share of 5.42 per cent and sales of Rs 146.32 crore (Rs 1.463 million), edging out Ranbaxy which stood at second position with 5.09 per cent market share and Rs 137.49 crore (Rs 1.374 million) sales.
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In October, Cipla topped with Rs 152.04 crore (Rs 1.520 billion) sales and a market share of 5.23 per cent, ahead of Ranbaxy, which garnered Rs 148.40 crore (Rs 1.484 million) sales and 5.11 per cent market share, said sources. Cipla overtook Ranbaxy and GlaxoSmithKline India to become the largest pharmaceutical company in the domestic market for the first time in May 2007. India's Top 7 Drug Cos Rank Company 1 2 3 4 5 6 7 Cipla Ranbaxy GlaxoSmithKline Zydus Cadila Alkem Laboratories Sun Pharma Nicholas Piramal

While GSK has maintained its number three position in November, Zydus Cadila (fourth), Alkem Laboratories (fifth) and Sun Pharma (sixth) have moved one rank up from October. Nicholas Piramal, which faced raw material shortages for its largest selling codiene based formulations, like Phensydyl, in recent months, slipped three positions to number seven in November. ORG-IMS, the largest market intelligence company in India focusing on the healthcare sector, tracks sales of Indian pharmas on a monthly basis, through over 3,000 stockists and 6,000 doctors. Indian companies are increasing their share in the domestic market mainly due to increased number of high value new introductions, though the number of new introductions has reduced recently.

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Ranbaxy's growth has been largely driven by new introductions such as Volix, an anti-diabetes drug launched recently, Oframax-Forte and anti-asthmatic drug Synasma, which it in-licensed from Eurodrug Laboratories. Ranbaxy's antibiotic Mox (amoxyllin), which was not among the top ten brands a year ago, has grown to become the fourth largest brand in the domestic market with monthly sales at Rs 9.8 crore (Rs 98 million) in November, sources said. Cipla's growth was powered by positive growth in their existing portfolio, especially its respiratory products. However, GSK has lost market share mainly in its main portfolios such as anti- infectives, dermatologicals and pain management drugs which grew slower than the market for these products.

KEY FINDIINGS:-

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The Indian pharmaceutical market was valued at $7,743m in 2008, an increase of 4.0% over 2007. Business Insights anticipates that Indian pharmaceutical market will grow at a faster pace than the global pharmaceutical market, approximately at a CAGR of 13.2% during 2009-14 to reach a total value of $15,490m in 2014. India has emerged as a key destination for global pharmaceutical companies due to its high growth prospects led by ageing population, changing disease profile, and improving patent regime and socio-economic conditions. The Indian pharmaceutical market is highly competitive and fragmented with the top 10 players accounting for 36.1% of the total R&H sales in 2008.

CONCLUSION:The Pharmaceutical industry has a lot of yet untapped potential and it will be interesting to see how the industry matures over the long term. Undoubtedly, the long history and global expertise of firms like cipla, GSK and ranbaxy will stand them in good stated to create and benefit from emerging global opportunities. Notwithstanding its strengths, complacency must be guarded against because smaller, agile and innovative firms are on the prowl and all it takes for the small upstarts is a superdrug that can change the entire face of the industry. Weve seen it in happen in the Information & Communications industry, for all we know pharmaceuticals may just be next.

CONSTRUCTION INDUSTRY:India is on the verge of witnessing a sustained investment in infrastructure build up. With construction component accounting for 42% of the total investment in infrastructure, the construction industry has been witness to a strong growth wave powered by large spends in
Page | 30

housing, road, ports, water supply and airports development. The construction sector has grown at a CAGR of 16.5% during the last seven years and now accounts for 6.9% of Indias GDP compared to 5.7% in FY00. The Planning Commission of India has proposed an investment of around US$ 500 bn in the Eleventh five-year plan (2007-2012), which is nearly 2.3 times more than the previous five-year plan. From a policy perspective, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. During the tenth five-year plan (2002-07), the share of private players in the total investment was 18%, which has increased to 30% during the eleventh five-year plan. The balance will be borne by the public sector. The real estate industry comprising of construction and

development of properties has grown from family based entities with focus on single products and having one market presence into corporate entities with multi-city presence having differentiated products. The industry has witnessed considerable shift from traditional financing methods and limited debt support to an era of structured finance, private equity and public offering. The construction sector is a major employment driver, being the second largest employer in the country, next only to agriculture. This is because of the chain of backward and forward linkages that the sector has with other sectors of the economy. About 250 ancillary industries such as cement, steel, brick, timber and building material are dependent on the construction industry. A unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times. KEY POINTS:Page | 31

Supply

Past 2-3 years have seen a substantial increase in the number of contractors and builders, especially in the housing and road construction segment.

Demand

Demand exceeds supply by a large margin. Demand for quality infrastructure construction is mainly emanating from the housing, transportation and urban development segments.

Barriers to entry Low for road and housing construction. However, high working capital requirements can create growth problems for companies with weak financial muscle. Bargaining power suppliers Low. Due to the rapid increase in the number of of contractors volumes. Bargaining power customers Competition Low. The country still lacks adequate infrastructure of facilities and citizens have to pay for using public services. Very high across segments like road construction, housing and urban infrastructure development. Relatively less in airport and port development. and construction service providers, margins have been stagnant despite strong growth in

SHARE TO GDP:The Indian construction industry has been playing a vital role in overall economic development, as its contribution to GDP at current market prices has gone up from 5.3% in FY02 to around 7.8% during FY08. In fact, during FY02-FY08, the sector grew at CAGR of 20.3%.

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CONCLUSION: Real estate investments account for about 60% of the total construction investments. Demand-supply gap for residential housing, favourable demographics, rising affordability levels, availability of financing options as well as fiscal benefits available on availing of home loan are the key drivers supporting the demand for residential construction. In addition to this, demand for office space from IT/BPO segment is expected to continue due to emergence of India as a preferred outsourcing destination. Also, boom in organized retail is expected to result in huge demand for real estate construction. According to industry estimates, the Indian real estate industry is expected to grow at a compounded rate of 33% between FY05 to FY10, mainly driven by the residential segment.

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TELECOM INDUSTRY:The Indian telecommunications industry is one of the fastest growing in the world and India is projected to become the second largest telecom market globally by 2010.India added 113.26 million new customers in 2008, the largest globally. The countrys cellular base witnessed close to 50 per cent growth in 2008, with an average 9.5 million customers added every month. According to the Telecom Regulatory Authority of India (TRAI), approximately 14.25 million telephone connections, including wireline and wireless, were added during July 2009, taking the total number of telecom subscriber base at the end of July 2009 to 479.07 million from 464.82 million a month before. According to Business Monitor International, India is currently adding 8-10 million mobile subscribers every month. It is estimated that by mid 2012, around half the country's population will own a mobile phone. This would translate into 612 million mobile subscribers, accounting for a tele-density of around 51 per cent by 2012. It is projected that the industry will generate revenues worth US$ 43 billion in 20010-11. Moreover, according to a study conducted by Nokia, the communications sector is expected to emerge as the single largest component of the countrys GDP with 15.4 per cent by 2014. The Indian equipment market is estimated at US$ 24 billion in FY09.

GROWTH
According to a Frost & Sullivan industry analyst, by 2012, fixed line revenues are expected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in India. India has become the second country in the world to have more than 100 million CDMA-based (code division multiple access) mobile phone subscribers after the US, which has 157 million CDMA users.

RIVALRY AMONG EXISTING COMPETITORS

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Competition in the Indian telecommunications industry is concentrated in the mobile segment, where there are up to six operators in some circles. Despite intense competition, the rapid growth of the market has allowed these players to expand their subscriber bases even as they lose market share. There are three types of players in telecom services: State owned companies (BSNL and MTNL). Private Indian owned companies (Reliance Infocomm, Tata Teleservices. Foreign invested companies (Vodafone, Bharti Tele-Ventures, Idea Cellular, Spice Communications). Key companies are: BSNL: Incumbent service provider and worlds 7th largest telecommunication company, state owned. Operates basic, cellular (GSM and CDMA) mobile, Internet and long distance services. Operates in 21 circles(except Delhi and Mumbai)

MTNL: State owned Operates in two circles Delhi and Mumbai Operates basic, cellular (GSM and CDMA) mobile, Internet and long distance services

BHARTI AIRTEL: Leads the mobile segment in the country Operates in 17 circles.

RELIANCE COMMUNICATIONS: Offers mobile and fixed line telephony including broadband, national and international long distance services, data services and a wide range of value added services and applications, new entrant in GSM.
Page | 35

Pan India presence

TATA TELESERVICES: Offers mobile and fixed line telephony including broadband, national and international long distance services, data services and a wide range of value added services and applications, new entrant in GSM. Pan India presence.

IDEA CELLULAR: Offers mobile, national and international long distance services, data services and a wide range of value added services and applications, uses GSM technology. Pan India presence

Competition has intensified with the entry of new cellular players in select circles. Reducing tariffs will hurt the new entrants as they will be unable to recover their high capital investments. The Wireless Industry crossed 391million subscribers mark at the end of the financial year 200809. The total subscriber base of 391.76 million comprise of 297.26 (75.88%) million GSM and 94.50 (24.12%) million of CDMA subscribers. The market share of various service providers is depicted in the figure:

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Figure 1: Market Share of Wireless Operators (in %) as on 31st March 2009

It is clear that no service provider has a major share and there is intense rivalry among the existing players in the market. Thus competitive rivalry is due to: Rush of new entrants Swift technology obsolescence due to new product innovations Margin pressures due to fierce competition High exit barriers due to specialized instruments making it a risky business.

Thus companies have to change their strategies, need to provide good services and penetrate the market with low prices to survive in the cut throat competition. CONCLUSION:-

Telecom stocks have undergone major value erosion on the bourses after the tariff war started in late September last year. The scrip of sector leader Bharti Airtel has fallen by 36% since October 1, 2009. The market capitalization of Reliance Communications (RCOM), the second-largest , has nearly halved, while that of Idea Cellular has fallen by 23% during the same period. Further, the customer loyalty has been reduced due to the entry of large numbers of players into the market. Govt. policies & stiff competition has made the growth of this sector very slow. Though there is still hope that the sectors will revive its full potential, it is better to invest in other sectors if it is not a long term investment.

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COMPANY ANALYSIS
Company analysis commences from ratio analysis which is explained through the telecom companies. All the ratios, their interpretations, and the rationale have been explained through the telecom companies which simultaneously analyzes these companies as well.

RATIO ANALYSIS
Ratio analysis tool is used to analyze the financial performance of the companies. Its performance is also compared against prominent private market players like, Bharti Airtel, Reliance Communications, and Idea Cellular for 2009. Various ratio analysis will help to judge the, liquidity, solvency, profitability and overall efficiency of the firm. CURRENT RATIO

The Current Ratio formula is:

The ratio is mainly used to give an idea of the company's ability to pay back its shortterm liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations

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ratio

under 1 suggests that the

company would be unable to pay off its obligations if they came due at that point. Rationale: The higher the current ratio, the larger is the amount of rupees available per rupee of current liability, the more is the firms ability to meet current obligations and greater is the safety of firms of short term creditors. The need to safety margin arises from the inevitable unevenness in the flow of funds. The limitation of current ratio arises from the fact that it is quantitative rather than qualitative. Interpretation: Reliance communication has 2.72 rupees to meet every one rupee of current liability, thus having sufficient safety margin ,and is good in short term liquidity. Bharti Airtel has low short term liquidity .Current ratio of Idea cellular is appropriate as it is not too high and has a right balance. Since the companies are all service oriented, they do not have much inventories and hence the liquid ratios are almost similar to the current ratios calculated above

DEBTS TO EQUITY RATIO: It is a measure of a company's financial leverage. Debt-Equity ratio = Long term debt/Shareholders Equity
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The relationship between borrowed funds and owners capital is a popular measure of the long term financial solvency of the company.

Figure 2: Debt Equity Ratio

Rationale: if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity. For instance the debt equity ratio is 1:2,it implies that for every rupee of outside liability ,the firm has 2 rupees .If the D/E ratio is high ,the owners are putting up relatively less money of their own, it is a danger signal for creditors. Even a high proportion of debt leads to inflexibility in operation. Interpretation: Tata Teleservices has a debt ratio of 0.43:1 that is for every 0.43 rupee of outside liability there is 1 rupee of owners fund and assets are primarily financed by owners fund. Reliance and Bharti Airtel have low debt equity ratio this is because of the company is reinvesting the Profits into the business. This shows the strong confidence on the future outlook of the business. INTEREST COVERAGE RATIO:

Interest Coverage Ratio = PBIT / Interest Expense A ratio used to determine how easily a company can pay interest on outstanding debt.
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The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses.

Figure 3: Interest Coverage Ratio

Rationale: This ratio uses the concept of net profits before taxes because interest is tax deductible .It indicates the extent to which a fall in EBIT is tolerable in that of the ability of the firm to service its interest payments would not be adversely affected. Interpretation: Tata Teleservices has negative interest coverage ratio, that is firm is not making profits to cover its fixed charges. The firm also has high fixed income charges. The firm needs to look after its finances to increase earnings. Bharti Airtel and Idea have apt interest coverage capacity. Reliance high Interest coverage ratio signifies that it has unused debt capacity. EBITDA MARGIN

Ebitda Margin = EBITDA/ Total Revenue

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EBITDA margin measures the extent to which cash operating expenses use up revenue. EBITDA margin is often more useful than operating margin as it excludes non-cash items such as depreciation.

Figure 4: EBITDA Margin

Rationale: An approximate measure of a company's operating cash flow based on data from the company's income statement ,it is calculated by looking at earnings before the deduction of interest expenses, taxes, depreciation, and amortization. This earnings measure is of particular interest in cases where companies have large amounts of fixed assets ,high investments and significant amount of debt financing.. This measure is also of interest to a company's creditors, since EBITDA is essentially the income that a company has free for interest payments Interpretation: Telecom industry is expanding and thus has huge investments; it is characterized by more of debt financing. EBITDA margin Of Bharti Airtel, Idea and Reliance is good enough but Tata Teleservices EBITDA margin is not satisfactory. Company needs to enhance its revenues and keep a watch on its expenses. RETURN ON CAPITAL EMPLOYED:

A test of profitability related to the sources of long term funds.

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ROCE = PBIT / (Capital + Reserve + Long Term Liability) ROCE should always be higher than the rate at which the company borrows; otherwise any increase in borrowing will reduce shareholders' earnings

Figure 5: Return on Capital Employed

Rationale: Return on Capital Employed (ROCE) is used in finance as a measure of the returns that a company is realizing from its capital employed. It is commonly used as a measure for compare assessing whether a business generates enough returns to pay for its cost of capital. ROCE compares earnings with capital invested in the company. The higher the ratio the more efficient is the use of capital employed. Interpretation: Bharti Airtel is market leader and has high ROCE. Tata Teleservices is not generating revenues from the capital invested in the company. As the company is late entrant in the market and that also with CDMA technology and cut throat competition presently its financial health is not good but with tie up with NTT Docomo it is expected to do well in future.

TOTAL ASSET TURNOVER RATIO:

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Company Name ACC

Industry Cement - Major

Last Change Price 882.05 -6.20

% Chg -0.70

Mkt Cap Weight (Rs cr) 16,577.25 0.65

Bharti Airtel

Telecommunications Service

286.40

-7.95

-2.70

108,761.2 6

4.27

BHEL

Engineering - Heavy

2,402.1 0

-38.90

-1.59

117,587.6 0

4.61

Cipla

Pharmaceuticals

313.30

-6.55

-2.05

25,155.53

0.99

DLF

Construction & Contracting Real Estate

295.10

-9.00

-2.96

50,090.01

1.97

Grasim

Diversified

2,611.5 5

-56.20

-2.11

23,943.62

0.94

HDFC

Finance - Housing

2,761.1 0

-31.35

-1.12

79,502.29

3.12

HDFC Bank

Banks - Private Sector

1,937.1 0

3.20

0.17

88,669.45

3.48

Hero Honda

Auto - 2 & 3 Wheelers

1,894.0 0

8.05

0.43

37,820.81

1.48

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Hindalco

Aluminium

171.05

-4.40

-2.51

32,729.78

1.28

HUL

Personal Care

236.10

-0.95

-0.40

51,509.62

2.02

ICICI Bank Banks - Private Sector 913.90 Total Asset Turnover = Turnover/ Total Assets to generate that turnover. Infosys Computers - Software 2,659.0 0

101,885.7 4.00 1 The asset turnover ratio simply compares the turnover with the assets that the business has used -16.10 -0.60 152,580.1 2 5.99

-7.45

-0.81

ITC

Cigarettes

259.25

-2.60

-0.99

98,986.23

3.88

Jaiprakash Asso

Construction & Contracting Civil

133.85

-0.55

-0.41

28,400.84

1.11

Larsen

Engineering - Heavy

1,544.1 0

-3.00

-0.19

92,984.99

3.65

Figure Turnover Mah and Auto - Cars & Jeeps 6: Total Asset 560.50 6.80 1.23 31,367.96 1.23 Mah Rationale: The total assets turnover ratio measures the use of all assets in terms of sales, by

comparing sales with total assets .In capital-intensive industries Total Asset Turnover ratio is typically 1. A high& Total ratio might imply that the firm does not Maruti less than Auto - Cars JeepsAsset Turnover 1,274.9 -19.80 -1.53 36,833.14 1.45 Suzuki 0 generate a sufficient volume of business (sales) given its total asset investment . Also, a high Total Asset Turnover might be the result of using outdated, obsolete and fully depreciated assets which does not generate high sales volumes. NTPC Power 203.60 -1.40 -0.68 167,877.6 6.59 Generation/Distribution 6 Interpretation: Telecom industry is capital intensive and thus its total asset to turnover ratio is not high .Tata Teleservices has considerably fair turnover ratio. ONGC Oil Drilling And Exploration 1,031.0 0 -20.40 -1.94 220,517.7 6 8.65

Reliance
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Refineries

1,067.1 5

-13.05

-1.21

348,998.0 0

13.69

Reliance Comm

Telecommunications Service

147.20

-7.50

-4.85

30,382.48

1.19

Reliance Infra

Power Generation/Distribution

1,015.7 5

-47.10

-4.43

24,872.70

0.98

SNAPSHOT OF THE MARKET

SBI Banks - Public Sector 2,293.0 5 -13.65 -0.59 145,581.7 6 5.71

Sterlite Ind Metals - OF NonSENSEX Ferrous BSE TOP GAINERS

735.55

-20.50

-2.71

61,815.65

2.43

Change w.r.t. Last Last Last 43,544.00 Tata Motors Auto - LCVs/HCVs -13.25 -1.63 1.71 Scrip Scrip Open High 800.50 Low Company Traded Closing Closing Code Group Price Price Price Price Price Price (Rs.) (%) Tata Power Power 1,328.0 -6.90 -0.52 31,514.40 1.24 Mahindra & 500520 A 555.00 566.05 551.00 558.00 553.70 4.30 0.78 Generation/Distribution 0 Mahindra 500180 HDFC Bank 532555 NTPC Tata Steel A 1,940.00 1,950.00 1,917.00 1,947.20 1,933.90 13.30 0.69 205.10 206.00 202.35 205.60 205.00 0.60 0.29 585.65 -16.10 -2.68 51,971.17 2.04 A Steel - Large

TCS

Computers - Software

757.00

-12.70

-1.65

148,161.6 3

5.81

BSE TOP LOSERS OF SENSEX

Wipro Computers - Software Scrip Open Group Price High Price 666.15 Low Price -5.45 -0.81 97,804.89 3.84

Scrip Company Code

Last Last Change Traded Closing w.r.t. Last Price Price Closing Price (Rs.) (%)

500390 Reliance Infra 532712 Reliance Comm

A A A A A

1,065.20 1,067.15 1,006.00 1,010.15 1,062.85 -52.70 -4.96 155.00 605.60 178.00 295.00 156.00 608.80 178.00 296.00 146.25 579.00 168.70 284.70 147.05 581.85 169.70 285.20 154.70 -7.65 -4.95 601.75 -19.90 -3.31 175.45 -5.75 -3.28 294.35 -9.15 -3.11

500470 Tata Steel 500440 Hindalco Inds 532454 Bharti Airtel

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532868 DLF

303.00

309.00

293.05

295.00

304.10 -9.10 -2.99

INTERPRETATION OF VARIOUS PARAMETERS IMPORTANT IN ANALYSING A STOCK

EPS:The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. Calculated as:

Earnings per share is generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings
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valuation ratio. An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.

P/E RATIO:A valuation ratio of a company's current share price compared to its per-share earnings. Calculated as:

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself. It's usually more useful to compare the P/E ratios of one company to other companies in the same industry, to the market in general or against the company's own historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E of a technology company (high P/E) to a utility company (low P/E) as each industry has much different growth prospects. The P/E is sometimes referred to as the "multiple", because it shows how much investors are willing to pay per rupee of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay rs.20 for rs.1 of current earnings.

BETA:A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns.. Beta is calculated using regression analysis, and one can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile
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than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market.

DEBT/EQUITY RATIO:A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.

A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5.

DIVIDEND PAYOUT RATIO:The percentage of earnings paid to shareholders in dividends. Calculated as:
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The payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio.

MARKET CAPITALIZATION:The total market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determining a company's size, as opposed to sales or total asset figures. Company size is a basic determinant of asset allocation and riskreturn parameters for stocks and stock mutual funds. The term should not be confused with a company's "capitalization," which is a financial statement term that refers to the sum of a company's shareholders' equity plus long-term debt.

52 WEEK HIGH/LOW:The highest and lowest price at which a stock has traded in the past 12 months, or 52 weeks. Many investors see the 52-week high or low as an important indicator.

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ANALYSIS OF CIPLA:-

EPS P/E RATIO BETA DEBT/EQUITY RATIO MARKET CAP DIVIDEND PAYOUT RATIO SALES CURRENT PRICE 52 WEEK HIGH/LOW

9.99 23.92 0.48 0.22 258861.85 23.41 49606.00 313.05 363/211

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PRICE CHART OF CIPLA:-

For a medium to longer term investor, Cipla is still a decent and safe bet. The stock is at a 52 week high but there is lot of positive news flow that can come still into the stock. It is going to commission a new factory next year. It has had a very big capital expenditure plan, which is finally coming through. It is launching its inhaler in Europe and US and that is a very margin business again for the company. It has had good revenue growth over the last few years and it has done quite a lot better than some of the other companies in its peer group. So from a fundamental prospective, one should hold on and if one is looking to buy, so now is a good time as any considering there is lot of positive news flow in pharma stocks as a whole. Market capitalization stands at Rs 258861.85 crore. The company's EPS was at Rs 9.99 per share( an increase from last year at rs. 9.02). The stock's price-to-earnings (P/E) ratio was 23.92. The latest book value of the company is Rs 54.14 per share. At current value, the price-to-book value of the company was 6.37. The dividend yield of the company was 0.58%. The company touched its 52 week high Rs 363.00 and 52 week low Rs 211.

ANALYSIS OF Bharti Airtel :-

EPS P/E RATIO BETA DEBT/EQUITY RATIO

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24.82 11.70 0.93 0.28

MARKET CAP DIVIDEND PAYOUT RATIO SALES CURRENT PRICE 52 WEEK HIGH/LOW

1102612.86 5.73 340142.90 285.20 495/230

PRICE CHART OF BHARTI AIRTEL:-

Bharti Airtel has resistance at Rs 320-330. Bharti Airtel fell a lot, so it has gone through a normal correction on the upside. There is a significant band of resistance at Rs 320-330 area and Bharti Airtel could not cross it. That was only to be expected. It is now resuming its downtrend. Bharti will see much lower levels and the telecom sector is going to see a lot of mayhem. It has not even started. So one would be better off switching from Bharti to maybe a banking or even technology or metals. Telecom is not a good idea. Basically it has bought growth by going into Africa; it was going into a phase where the growth was not likely to happen. So yes, it has got the new subscriber addition but at the end of the day,
Page | 53

it is going to take about two-three years for it to make money for it to be EPS accretive and that also if they are able to bring down the operating cost substantially. So one should wait before entering into the stock and let all the ups and downs happen and maybe six months time is a good time to re-look at the story and enter into it.

ANALYSIS OF DLF LTD :-

EPS P/E RATIO BETA DEBT/EQUITY RATIO MARKET CAP DIVIDEND PAYOUT RATIO SALES CURRENT PRICE 52 WEEK HIGH/LOW

8.61 34 1.61 0.78 511763.35 23.79 28225.93 295 491/221

PRICE CHART OF DLF LTD.

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In a tough economic environment over the last few quarters, the company saw demand evaporate in all segments of real estate business residential and commercial, sale or leasing. In order to weather the turbulent times, the Company affected a strategy which allowed itself to be liquid, whilst it tested the right market conditions where it could attract significantly larger number of end customers. Value proposition being a key element of this strategy, the Company launched 2 different projects across India in the residential space and demonstrated leadership position within the industry to bring back demand. The result of the above was that the Company made notable sales in its affordable housing segment. In continuation of this strategy in April 2009, DLF also launched its city-centre residential project in Delhi, which saw exuberant response with all 1,356 units booked in just one day. The share price has seen a 52-week high of Rs 490.80 and a low of Rs 221 on BSE. Current EPS & P/E ratio stood at 8.61 and 34 respectively. DLF has increased rates of its inaugural project in Bangalore named as DLF Westend Heights. DLF has increased price to Rs 3000/sq ft from its previous price of Rs 1850sq/ft, which was set up in April.

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Increasing input costs was the cause of the price increase explains a company representative. The project is being formulated in a land region of 27.5 acres. The project comprises 1980 units spread across 19 towers, which are 18 floors high. Westend Heights is the initial segment of New Town, with high-rise apartments.

ANALYSIS OF L&T:-

EPS P/E RATIO BETA DEBT/EQUITY RATIO MARKET CAP DIVIDEND PAYOUT RATIO SALES CURRENT PRICE 52 WEEK HIGH/LOW
PRICE CHART OF L&T:-

57.71 23.15 1.27 0.53 93930.44 20.58 339263.70 1559.80 1800/963.80

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Larsen & Toubro Limited (L&T) is a technology-driven engineering and construction company with a strong presence in manufacturing, services and IT. The company has a presence in more than 50 countries, and the revenues exceed US $8.5 billion. L&T is one of the most widely held listed companies in India with FII-holding of 16.4. It has an uninterrupted Dividend payment record since 1946. In FY 09 it gave a dividend of Rs. 10.5 per share. Shares of engineering major Larsen & Toubro were beaten badly after its quarterly sales declined 6 per cent. L&T's net sales fell to Rs 8139 crore in the December quarter, lower than the corresponding period a year ago. Its net profit grew 15 per cent to Rs 696 crore over the same period a year ago. However, the Water Technology Business Unit of construction major Larsen & Toubro secured an international order of Rs 850-crore from Public Works Authority, Qatar, for advanced waste water treatment and urban reuse which makes it an interesting stock to watch.

ANALYSIS OF JAIPRAKASH ASSOCIATES:-

EPS
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7.58

P/E RATIO BETA DEBT/EQUITY RATIO MARKET CAP DIVIDEND PAYOUT RATIO SALES CURRENT PRICE 52 WEEK HIGH/LOW

13.65 1.66 2.00 283957.42 15.90 57641.80 131.70 180/87

PRICE CHART OF JAIPRAKASH ASSOCIATES:-

JP Associates looks very interesting. It has spent one year in hibernation, so it seems to be making all the right noises of breaking out upwards from here though it hasnt yet broken out. It will probably have a buy on the stock. The share closed at Rs 157.15, up Rs 4.50, or 2.95%. Market capitalization stands at Rs 33,344.73 crore.
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The company touched its 52 week high Rs 180.00 and 52 week low Rs 84.83 on 21 Oct, 2009 and 24 Apr, 2009, respectively. Currently, it is trading -12.69% below its 52-week high and 85.25% above its 52-week low. The company's trailing 12-month (TTM) EPS was at Rs 8.72 per share. (Dec, 2009). The stock's price-to-earnings (P/E) ratio was 18.02. The latest book value of the company is Rs 29.39 per share. At current value, the price-to-book value of the company was 5.35. The dividend yield of the company was 0.64%.

FINDINGS AND CONLUSION

Investors have been taking shelter with defensive stocks of fast-moving consumer goods (FMCG) and pharmaceutical companies as the market turns weak in reaction to concerns that Greeces grave financial crisis could spread to the rest of the euro zone. The strategy, according to analysts, is to cushion the fall in value of their portfolios by buying FMCG and pharma stocks which are relatively less volatile. Shares of GlaxoSmithKline Pharma (GSK), Lupin and Abbott India scaled new highs while Cipla and Hindustan Unilever (HUL) were the top gainers among Sensex stocks in a choppy market on Thursday. The buying in some of these stocks could have also been driven by the fact that they vastly underperformed the broader market during the recent bull run, analysts say. When risk-aversion increases in the market, investors tend to move away from high beta stocks to defensive stocks. Institutional investors usually buy defensive stocks as part of a reshuffling of their portfolios to minimise losses in a choppy market. The stock of GSK pharma has gained 13% in the past months, compared to a 5% decline in the benchmark Sensex. Lupin and Cipla are the other examples of outperformers in the pharma sector.

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A few leading FMCG stocks led by HUL also outperformed the market though analysts are of the view it is more because of technical factors because, fundamentally, there have been some concerns about the prospects of the industry. Factors like growing price competition and high raw material prices have been putting pressure on margins. Rural demand for consumer goods is also not picking up as expected.

Dalal Street is likely to see a subdued trade for sometime in the absence of any positive trigger from domestic front and on weak cues from global markets. Investor sentiment is low at this moment following the debt crisis in Europe that has spooked markets across the globe. The domestic market has been under pressure in past few trades and in coming days also the trend is likely to continue. According to SMC Capitals Equity Head Jagannadham Thunuguntla "There are a lot of pressure points in market and after a recent rally that has taken the equity markets ahead of their valuations a correction was due. In the coming period, we will see downward trading,"

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REFERENCES

www.moneycontrol.com www.yahoofinance.com www.economictimes.indiatimes.com www.stockmarkettipsindia.com www.livemint.com www.economywatch.com

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ANNEXURES Sample report of Bharti airtel

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ANALYSIS OF BHARTI AIRTEL

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COMPANY DETAILS:-

Price Target: Rs.350 Market Cap: 113367.05 P/E : 11.69 52 week high/low: 495/229.50 BSE code : 532454

SHAREHOLDING PATTERN:-

PROMOTERS HOLDING: INDIAN PROMOTERS 45.30% FOREIGN PROMOTERS 22.11%

NON PROMOTERS HOLDING: INSTITUTIONAL INVESTORS BANKS FIN.INST. AND INSURANCE 4.44% FIIS 19.58%

PUBLIC INVESTORS 1.22% OTHER INVESTORS 3.90%

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PRICE CHART:

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FINANCIAL PERFORMANCE :P AR T ICUL AR S CUSTOMERS GROSS REVENUE EBITDA PAT GROSS ASSETS CAPITAL EXPENDITURE CAPITAL PRODUCTIVITY F Y2 0 0 7 -0 8 64,268,049 270,122mn 114,018mn 63,954mn 423,224mn 218,043mn 63.82% 373,521mn 152,858mn 78,590mn 586,616mn 166,945mn F Y2 0 0 8 -0 9 COMMENTS 96,649,487 Growth of 50%Y-o-Y Growth of 38%Y-o-Y Growth of 34%Y-o-Y Growth of 23%Y-o-Y Increase by Rs 163,392mn Decline of 25%Y-o-Y 63.67%

LIQUIDITY:As on march 31,2009, the company has cash and bank balance of Rs. 27,660mn and marketable securities of Rs. 23,422 mn. The company actively manages its short term liquidity to generate optimum returns via investments made in debt and money market instruments including bank fixed deposits & certificates of deposits, liquid and income debt fund schemes, fixed maturity plans and other similar instruments.

DIVIDEND:Company paid a final dividend of Rs. 2 per equity share of Rs.10 each(20% of face value) for the FY 2008-09. The total dividend payout will amount to Rs 4442 mn, including Rs. 645mn as tax on dividend.

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KEY FINANCIALS:

MARCH ' 07MARCH'08 MARCH'09 NET SALES 17851.61 25761.11 34048.32 NET PROFIT 4033.23 6244.19 7743.84 SHARESIN ISSUE(LAKHS) 18959.34 18979.07 18982.4 EPS(Rs) 21.27 32.9 40.79 BOOK VALUE 60.19 106.34 145.01 RETURN ON CAP EMPLOYED(% ) 29.06 27.95 28.4 RETURN ON NET WORTH(% ) 35.35 30.94 28.13 NET DEBT TO EBITDA 0.58 0.36 0.55

COMPANY BACKGROUND:-

Bharti Airtel formerly known as Bharti Tele-Ventures LTD (BTVL) is the largest cellular service provider in India, with more than 121 million subscribers as of January 2010. With this, Bharti is now the world's third-largest, single-country mobile operator and sixth-largest integrated telecom operator. It also offers fixed line services and broadband services. It offers its TELECOM services under the Airtel brand and is headed by Sunil Bharti Mittal. The company also provides telephone services and broadband Internet access (DSL) in top 95 cities in India. It also acts as a carrier for national and international long distance communication services. The company has a submarine cable landing station at Chennai, which connects the submarine cable connecting Chennai and Singapore.

KEY POINTS:-

INDIAS MOST INNOVATIVE COMPANY:

According to a survey conducted by the Wall Street Journel Asia, Bharti Airtel is rated as the most innovative company in India.

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As part of the journals efforts to determine 200 most admired firms in Asia, Wall Street journal released list of top 10 Innovative companies in the region. Bharti Airtel holds 4th position in the region and stood first among the Indian companies in the innovative firms category. The journal commented Bharti Airtels growth as a clear reflection of consumer boom in the country and appreciated the company for creating unique products for the market and importing smart ideas from overseas, extending their reach into Indian society and raising standards of service. ACQUISITION BY BRITISH TELECOM:

In 1997, British Telecom acquired a 21.05% equity interest in bharti cellular. Bharti Telecom and British Telecom formed a 51% : 49% joint venture, Bharti BT Internet for providing Internet services. In 2002, bharti came out with issue of 18.53 crore equity shares through book building route with a floor price of Rs 45 per share, received bid for 18.55 crore shares. Through the issue, it becomes the first company in India to come out with 100% book building issue.

INDUSTRY ANALYSIS:-

Last Price Bharti Airtel Reliance Comm Idea Cellular Tata Comm MTNL TataTeleservice Spice Comm Tulip Telecom Nu Tek India Goldstone Infra 289.05 163.05 62.30 294.70 74.00 24.15 57.20 919.95 33.25 27.75

Market Cap.
(Rs. cr.)

Sales Turnover 34,014.29 13,610.58 9,916.45 3,749.43 4,576.53 2,041.88 1,585.34 1,608.28 159.09 45.61

Net Profit 7,743.84 2,352.93 1,008.21 515.95 214.83 -159.60 -1,015.22 249.58 14.48 6.27

Total Assets 35,357.62 82,593.93 18,873.79 9,125.92 12,059.38 2,743.96 1,875.94 1,802.84 171.93 110.56

109,759.66 33,653.96 19,315.91 8,398.95 4,662.00 4,581.73 3,946.37 2,667.86 114.77 100.12

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The Indian telecom sector has seen a phenomenal growth and currently has close to 430mn telecom customers. The market surpassed the USA to become the second largest market in the world after china. Notwithstanding this, the telecom penetration is only 37% with a wireless penetration of 33.7% and broadband penetration of 0.54%,thereby offering a good growth potential. Bharti airtel ,with over 96mn customers as on march 31,2009, is the largest integrated telecom operator in India with investment of Rs 23,489mn, revenues of Rs373,521mn and Rs 78,590mn in net profits. It is among the top 5 companies in terms of market capitalization in India.

INVESTMENT POSITIVES:-

The Indian growth story continues and the revival of the economy is on its way. There are no doubts that telecom sector will lead the economic revival and Bharti airtel will be at the forefront. Bharti airtel is the first private mobile GSM operator to have an all india footprint and operations in Sri Lanka.

STRONG SUBSCRIBER GROWTH CONTINUES:The company continues to focus on subscriber additions in order to increase its market penetration. The company is currently adding about 46 subscribers every minute. This takes the companys total subscriber base to just under 90 million which is about 25% of the countrys wireless users. The opportunity to increase this base is immense as the countrys tele density currently is just over 30% as compared to developed countries where teledensity ranges around 80%. This approach by telecom companies to gain market share will boost top line growth as well as profitability and is also the major growth driver in the industry.

FORAY INTO ELECTRONIC MEDIA BROADCASTING:The company provides DSL and telephone services in 15 circles spanning over 95 cities with growing focus on new media and entertainment solutions such as DTH and IPTV. As on march
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31,2009, the company had 2,726,239 customers , a growth of 19.3% , of which 39.3% were subscribing to broadband/internet services. The revenue from the telemedia services were Rs.33,426mn, a growth of 17% over the revenues in the previous financial year.

STRATEGIC ALLIANCES TO IMPROVE QUALITY:The company is constantly looking forward at providing value added services in order to retain its subscribers. The company has entered into contracts and strategic alliances with several market leaders in their respective areas of concentration. The company has a strategic alliance with Infosys in order to manage its recently launched DTH service. The company has also an alliance with IBN in order to service its operations in Sri Lanka.

OUTLOOK AND VALUATION:Considering the above mentioned investment rationale, the company can be rated an outperformer. The stock currently trades at a P/E of 11.69.

GLOBAL EXPANSION:The telecom sector continues to play an important part in Indias growth story. Bharti airtel with 100 million customers is eminently placed to leverage the benefits of the strong customer trust that they have been able to build. The addition of new services like DTH and IPTV will ensure airtel retains and further strengthens its brand leadership. As a first step towards pursuing the international aspirations, airtel commenced operations in Sri Lanka. The run away success of the launch has justified the conviction that the airtel business model can be effectively and profitably replicated in other countries.

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