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SECURITY ANALYSIS OF MAJOR FIVE AUTOMOBILE COMPANIES LISTED IN INDIAN IN STOCK EXCHANGE
CHAPTER-1 INTRODUCTION
PGI SOM, Anna Universty Page 1
1.1 INTRODUCTION: A security purchased for investment purposes, rather than
for resale to customers. Investment securities refer to certificates or documents that indicate that you have an interest in a business or have lent money to a company or a government entity. Investment securities are of two types, namely equity securities (such as common stocks) and debt securities (such as bank notes, Treasury bills and bonds). An entity or corporation that issues securities is known as the issuer. Securities that are purchased in order to be held for investment. This is in contrast to securities that are purchased by a broker-dealer or other intermediary for resale, simply investment of securities is the employment of funds with the aim of achieving additional income or growth value. It involve the commitment of recourses which gas been saved or put away form the current consumption in the hope that some benefit will acquire in future. Investing in securities such as shares, debentures and bonds are profitable as well as exciting. It is indeed rewarding, but involves a great deal of risk and calls for scientific knowledge as well as artistic skill. In such investments, both rational as well as emotional responses are involved. India, today, is one of the fastest growing economies of the world. Far reaching measures introduced by the government over the past few years to liberalize the Indian market and integrate it with the global economy are widely acknowledged. The capital market consists of primary and secondary markets. The primary market or new issue market is one in which long term capital is raised by corporations directly from the public. The secondary market refers to the stock market where the financial instruments/ securities which are used for raising long term capital are traded.
1.2 INDUSTRY PROFILE: Capital Market: The capital market is the market for securities, where companies and governments can raise long term funds. The capital market includes the stock market and the bond market. Financial regulators, such as the U.S. Securities and Exchange Commission, oversee the capital markets in their designated countries to ensure that investors are protected against fraud. The capital markets consist of the primary market and the secondary market. The primary market is where new stock and bonds issues are sold (underwritten) to investors. The secondary markets are where existing securities are sold and bought from one investor or speculator to another, usually on an exchange (e.g.: - New York Stock Exchange). Significance of Capital Market: Capital market promotes capital formation and thereby economic It mobilizes savings of the people for investments. It channelizes the funds to the most productive sector. It increases production and productivity and enhances economic welfare of the society. It helps the corporate sector expand and grow and diversify leading to the growth of the economy. Capital market participants: There are several major players in the primary market. These include the merchant bankers, mutual funds, financial institutions, foreign institutional investors (FIIs) and individual investors. In the secondary market, there are the stock brokers (who are members of the stock exchange), registrars and transfer agents, custodian and depositories are growth.
PGI SOM, Anna Universty
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capital market intermediaries that provide important infrastructure services for both primary and secondary market. Market Regulation: It is important to ensure smooth working of capital market, as it is the area where the players in the economic growth of the country. Various laws have been passed from time to time to meet this objective; the financial market in India was highly segmented until the initiation of reforms in 1992 93 on account of a variety of regulations and administered prices including barriers to entry. The reform process was initiated with the establishment of securities and exchange board of India (SEBI). Securities Market: The security market is the market for equity, debt and derivatives. The debt market in turn may be divided into three parts the Government securities market, the corporate debt market and the money market. The derivatives in turn may be divided into two parts- the options market and the futures market. Except the derivatives market, each of the above market has two components the primary market and the secondary market. The market where the new securities where traded are called secondary market. Primary Market: The primary is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus.
Secondary Market: The secondary market is the financial market for trading of securities those have already been issued in an initial private or public offering. Alternatively, secondary market can refer to the market for any kind of used goods. The market that exists in a new security just after the new issue is often referred to as the aftermarket. Once a newly issued stock is listed on a stock exchange, investors and speculators can easily trade on the exchange, as market makers provide bids and offers in the new stock. A stock market, or equity market, is a private or public market for the trading of company stock and derivatives of company stock at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market is estimated at about $36.6 trillion US at the beginning of October 2008. The world derivatives market has been estimated at about $480 trillion face or nominal value, 12 times the size of the entire world economy. Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order. Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders.
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INDIAN STOCK MARKET: Indian stock markets are one of the oldest in Asia. The origin of stock exchanges in India can be traced back to the later half of 19th century. After the American civil war (1860-61) due to the share mania of the public, the number of brokers dealing in shares increased. The brokers organized as informal associations in Mumbai named The Native Stock and Share Brokers Association in 1875. Increased activity in trade and commerce during the First World War and Second World War resulted in an increased share trading. Stock exchanges were established in different centers like Chennai, Delhi, Nagpur, Kanpur, Hyderabad and Bangalore. The growth of stock exchanges suffered a setback after the end of World War. Worldwide depression affected them. Most of the stock exchanges in the early stages had a speculative nature of working without technical strength. Securities Contracts regulation act 1956 gave powers to the central government to regulate the stock exchanges. Till recent past, floor trading took place in all the stock exchanges. In the floor trading system, the trade takes place through open outcry system during the official trading hours. Trading posts are assigned for different securities where buy and sell activities of securities took place. This system needs a face to face contact among the traders and restricts the trading volume. The speed of the new information reflected on the prices was rather slow. The deals were also not transparent and the system favored the brokers rather than the investors. The setting up of NSE and OTCEI with the screen based trading facility resulted in more and more stock exchanges turning towards the computer based trading. Bombay Stock Exchange introduced the screen based trading system in 1995, which is known as Bombay On-line Trading System (BOLT). Madras
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Stock Exchange introduced Automated Network Trading System on 7 th October, 1996. In terms of legal structure, the stock exchanges in India could be segregated into two broad groups 20 stock exchanges were set up as companies, either limited by guarantees or by shares, and the 3 stock exchanges which are functioning as Associates Of Persons (AOP) viz ,BSE, ASE and Madhya Pradesh Stock Exchange. The 20 stock exchanges which are companies are, the stock exchanges of Bangalore, Bhubaneswar, Calcutta, Cochin, Coimbatore, Delhi, Gauhati, Hyderabad, interconnected stock exchange, Jaipur, Ludhiana, Madras, Magadh, Mangalore, NSE-Pune, OTCEI, Sourashtra- Kutch, Uttar Pradesh and Vadodara. Apart from NSE, all stock exchanges whether established as corporate bodies or AOPs, are non profit making organizations. STOCK EXCHANGE: Stock exchange is the place where buyers and sellers of stocks meet. The prices of the shares are decided by demand and supply of the shares. The buyers and sellers are represented by the brokers. Hence, the stock exchange is an association of individual members called member brokers (or simply members or brokers), formed for the express purpose of regulating and facilitating the buying and selling of securities by the public and institutions at large. A stock exchange in India operates with due recognition from the government under the Securities and Contracts (Regulations) Act, 1956. The member brokers are essentially the middlemen, who carry out the desired transactions in securities on behalf of the public (for a commission) or on their own behalf. Some exchanges are formed and managed by limited companies whose shareholders may be the member of the exchange and thereby license to offer brokerage service to members of public. Some exchanges which are formed by
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limited companies may have brokers who are not necessarily shareholders of the exchange company. Bombay Stock Exchange BSE: The Bombay/Mumbai Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called The Bombay/Mumbai Stock Exchange, or BSE) has the greatest number of listed companies in the world, with 4700 listed as of August 2007. It is located at Dalal Street, Mumbai, India. On 31 December 2007, the equity market capitalization of the companies listed on the BSE was US$ 1.79 trillion, making it the largest stock exchange in South Asia and the world. Around 6,000 Indian companies list on the stock exchange, and it has a significant trading volume. The BSE SENSEX (SENSitive indEX), also called the "BSE 30", is a widely used market index in India and Asia. Though many other exchanges exist, BSE and the National Stock Exchange of India account for most of the trading in shares in India. BSE Sensex or Bombay Stock Exchange Sensitive Index is a valueweighted index composed of 30 stocks started in April, 1984. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE. The base value of the Sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79. National Stock Exchange NSE: The National Stock Exchange of India Limited or S&P CNX NIFTY (NSE) is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading. The NSE was incorporated in November 1992 with an equity capital of RS.25 crs. The International securities consultancy (ISC) of Hong Kong has helped in setting up NSE.
NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. In October 2007, the equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%. The NSE on April 22, 1996 launched a new equity Index. The NSE50, the new index, which replaces the existing NSE-100 index, is expected to serve as an appropriate Index for the new segment of futures and options. Nifty means National Index for Fifty Stocks. The NSE-50 comprises 50 companies that represent 20 broad Industry groups with an aggregate market capitalization of around Rs. 170,000 crs. All companies included in the Index have a market capitalization in excess of Rs 500 crs each and should have traded for 85% of trading days at an impact cost of less than 1.5% .The Nifty is a well diversified 50 stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index fund. OVER THE COUNTER EXCHANGE OF INDIA (OTCEI): Promoted by a consortium of leading Financial Institutions of India including Unit Trust of India (UTI), Industrial Credit & Investment Corporation of India (ICICI), Industrial Development Bank of India (IDBI), Industrial Financial Corporation of India (IFCI), Life Insurance Corporation of India (LIC) and others, OTCEI is a recognized stock Exchange under the Securities Contracts (Regulation) Act, 1956. It is set up to provide small and medium sized companies access to the capital markets and to investors a convenient mode of investments. It is ring less electronic
national exchange listing an entirely new set of companies which companies will not be listed on other stock exchanges. The companies listed on any other exchanges cannot be listed on OTCEI. The OTCEI Exchange can list companies with issued capital from Rs. 30lakhs to Rs.25 cores. ABOUT AUTOMOBILE INDUSTRY: Automobile industry is one of the fastest growing industries of the world. With more than 2 million new automobiles rolling out each year, on roads of India, the industry is set to grow further. Automobile industry made its silent entry in India in the nineteenth century. Since the launch of the first car in 1897, India automobile industry has come a long way. Today India is the largest three wheeler market in the world and is expected to take over China as the second largest automobile market, in the coming years. Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, The Automobile Industry of India has come a long way. During its early stages the auto industry was overlooked by the then Government and the policies were also not favorable. The liberalization policy and various tax reliefs by the Govt. of India in recent years has made remarkable impacts on Indian Automobile Industry. Indian auto industry, which is currently growing at the pace of around 18 % per annum, has become a hot destination for global auto players like Volvo, General Motors and Ford. A well developed transportation system plays a key role in the development of an economy, and India is no exception to it. With the growth of transportation system the Automotive Industry of India is also growing at rapid speed, occupying an important place on the 'canvas' of Indian economy. Today Indian automotive industry is fully capable of producing various kinds of vehicles and can be divided into 03 broad categories: Cars, two-wheelers and heavy vehicles.
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Indian automobile industry; manufacturing cars, buses, three wheelers, two wheelers, commercial vehicles, heavy vehicles, provides employment to a large number of workforce. The abolition of license raj in 1991opened the doors for international automobile manufacturers. A number of leading global automotive companies entered into joint ventures with domestic manufacturers of India and thus started the largescale production of automobiles in India. Some of the well-known players of Indian automobile industry include: Hindustan Motors, Maruti Udyog, Fiat India Private Ltd, Ford India Ltd., General Motors India Pvt Ltd, Toyota Kirloskar Motor Ltd among others. The production of automobiles in India is mainly for the domestic customers. Carswith79%ofautomobilesinIndia, dominate the automobile industry in India. Some facts on Automobile industry in India: India has the fourth largest car market in the world India has the largest three wheeler market in India India is the second largest producer of two wheelers in the world India ranks fifth in the production of commercial vehicles. Following Indias economic liberalization in 1991, the automobile industry was opened for 100 percent foreign direct investment. A surge in the countrys economic growth rate and purchasing power has fuelled a 17% annual growth rate in the Indian automobile industry since 1991. The automotive industry generates direct and indirect employment to about 13.1million people as of 2006-07. The automotive parts and cars export has grown at an annual rate of 30 % per year in the 21st century. However, the Indias share of the overall global automotive industry remains low as of 2007. Increased competition amongst automobile manufacturers provides for a variety of competitive options for the consumer.
INDUSTRY TODAY:
India was one of the largest manufacturers of tractors in the world in 2005-06, when it produced 293,000 units. India produced 65 Million tyres during the financial year 2005-06. Indias tyre production meets domestic demand, as well as is exported to over 60 countries. Indias car market has emerged as one of the fastest growing in the world. The number of cars sold domestically is projected to double by 2010, and domestic production is skyrocketing as foreign makers are setting up their own production plants in India. The governments 10-year plan aims to create a $145 billion auto industry by 2016. According to McKinsey&Company, the automotive sectors drive for lowering costs will lead to outsourcing. The global automotive industrys sourcing from emerging markets will reach $375 billion by 2015, up from $65 billion in 2002. McKinsey thinks India can capture $25 billion of this export potential. Out of 400 Indian suppliers, 80 % are ISO 9000 certified the international standard for quality management. Most of Indias current automobile production meets domestic demand. Forecasts predict sales of 4.2 Million four wheel automobiles in India by 2015. But, several manufactures are now focusing on exports, and a diverse range of automotive components are now built and exported from Indias passenger vehicle exports are forecast to rise from 170,000 in 2006 to 500,000 in 2010.
1.3 STATEMENT OF THE PROBLEM:
Security analysis is done on the five automobile companys securities from the objective of finding their investment attractiveness with respect to their risk and return, so that investors can use the information for better management of portfolios and also for the profitable investment.
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1.4 OBJECTIVES OF THE STUDY:
Objective of the study classified in two heads of primary and secondary. They are;
PRIMARY OBJECTIVES:
Security analyzes of major five automobile companies listed in Indian stock Exchange.
SECONDARY OBJECTIVES:
To select the profitable portfolio for the investors. To find out intrinsic value of five companies. To analyze the share price movements of companies. To identify weather the share of companies are mispriced.
To measure the risk. 1.5 SCOPE OF THE STUDY:
The study helpful to identify how risk involved in the high volatile market and also can identify the risk involved in the each shares. It is also help to compare the risk and return of five years.
1.6 RESERCH METHODOLOGY: DATA COLLECTION:
The data is mainly collected by means of secondary data provided form Cochin Stock Exchange and websites.
RESERCH DESIGN:
The research design adopted was descriptive in nature, Descriptive studies aims at portraying accurately the characteristics of a particular group or situation. Descriptive research is concerned with describing the characteristics of a particular individual or a group. Here the researcher attempts to present the existing facts by collecting data the method used for analysis and interpretation is intrinsic value calculation and alpha, beta.
SAMPLING METHOD:
Sampling technique used in this study is Convenient sampling which comes under the purposive sampling which is also called as NonRandom sampling.
1.7 TOOLS & TECHNIQUES:
The collected data has been analyzed using basic statistical tools like ratios, charts and formulas.
FUNDAMENTAL ANALYSIS:
Ratio relates to fundamental analysis are follows: Earnings Per Share(EPS) Dividend Per Share(DPS) Dividend Payout Ratio Return on Equity(ROE) Price Earnings Ratio (PER)
Net Worth INTRINSIC VALUE CALACULATION:-
Average Dividend payout Ratio Average Retention Ratio Average Return on Equity Long term growth rate in dividend earning Normalized Average Price Earnings Ratio Projected Earnings Per Share Intrinsic Value
RISK MEASURING TOOLS:
Beta
Alpha TECHNICAL ANALYSIS:
Exponential Moving Average (EMA) Moving Average Convergence and Divergence(MACD)

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Relative Strength Index (RSI)
1.8PERIOD OF THE STUDY:
The study was done for a period of five years datas (2007 to 2011).
1.9 DURATION OF THE STUDY:
This study conducted at Cochin Stock Exchange Ltd, The duration considered for the purpose of the study was 45 days, starting 1 st April 2010 to 15th May 2010.
1.10 LIMITATIONS OF THE STUDY:
The entire analysis was based on figures drawn from various secondary sources whose accuracy cannot be fully assured. Convenient sampling was used and hence all the limitations pertaining to this may also become part of the findings of the study. The sample size is restricted to 5 securities.
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CHAPTER-2 REVIEW OF LITERATURE

SECURITY ANALYSIS: Security analysis is the initial phase of the portfolio management process. This consists of examining the risk-return characteristics of individual securities. A basic strategy in securities investment is to buy underpriced securities and sell overpriced securities. But the problem is how to identify underpriced and overpriced securities, or, in other words, mispriced securities. Security analysis is about valuing the assets, debt, warrants, and equity of companies from the perspective of outside investors using publicly available information. The security analyst must have a thorough understanding of financial statements, which are an important source of this information. As such, the ability to value equity securities requires cross-disciplinary knowledge in both finance and financial accounting.While there is much overlap between the analytical tools used in security analysis and those used in corporate finance, security analysis tends to take the perspective of potential investors, whereas corporate finance tends to take an inside perspective such as that of a corporate financial manager. Security analysis is the analysis of tradable financial instruments called securities. These can be classified into debt securities, equities, or some hybrid of the two. More broadly, futures contracts and tradable credit derivatives are sometimes included. Security analysis is typically divided into fundamental analysis, which relies upon the examination of fundamental business factors such as financial statements, and technical analysis, which focuses upon price trends and momentum. Quantitative analysis may use indicators from both areas. There are two alternative approaches to security analysis, namely fundamental analysis and technical analysis. They are based on different
premises and follow different techniques. Fundamental analysis, the older of the two approaches, concentrates on the fundamental factors affecting the company such as the EPS of the company, the dividend pay-out ratio, the competition faced by the company, the market share, quality of management, etc. A Fundamental analyst studies not only the fundamental factors affecting the industry to which the company belongs as also the economy fundamentals. Fundamental analysis helps to identify fundamentally strong companies whose shares are worthy to be included in the investors portfolio. The second alternative approach to security analysis is Technical analysis. A technical analyst believes that share price movements are systematic and exhibit certain consistent patterns. He, therefore, studies past movements in the price of shares to identify trends and patterns. He then tries to predict the future price movements. The current market price is compared with the future predicted price to determine the extent of mispricing. Technical analysis is an approach which concentrates on price movements and ignores the fundamentals of the shares. Function of Security Analysis: Marketing Research: Managers need information in order to introduce products and services that create value in the mind of the customer. But the perception of value is a subjective one, and what customers value this year may be quite different from what they value next year. As such, the attributes that create value cannot simply be deduced from common knowledge. Rather, data must be collected and analyzed. The goal of marketing research is to provide the facts and direction that managers need to make their more important marketing decisions. To maximize the benefit of marketing research, those who use it need to understand the research process and its limitations.
Investment Management: Investment management is about attaining investment objectives under specified constraints; for example, achieving the best possible return for a given level of risk. To meet these objectives, the investor may buy equity in an asset such a stock, a fund, or real estate, or buy debt issued by governments and corporations. By effectively managing such investments the investment manager can achieve a higher return for a specified acceptable level of risk. There are many tools for reaching this goal. Information security audit: An information security audit is an audit on the level of information security in an organization. Within the broad scope of auditing information security there are multiple type of audits, multiple objectives for different audits, etc. Most commonly the controls being audited can be categorized to technical, physical and administrative. Auditing information security covers topics from auditing the physical security of data centers to the auditing logical security of databases and highlights key components to look for and different methods for auditing these areas. FUNDAMENTAL ANALYSIS: Fundamental analysis is really a logical and systematic approach to estimating the future dividends and share price. It is based on the economic premises that shares price is determined by a number of fundamental factors relating to the economy, industry and company. Hence, the economy fundamentals, industry fundamentals and company fundamentals have to be considered while analyzing a security for investment purpose. Fundamental analysis is, in other words, a detailed analysis of the fundamental factors affecting the performance of companies. Each of the shares is assumed to have an economic worth based o its present and future earning capacity. This is called its intrinsic value or fundamental value. The purpose of fundamental analysis is to evaluate the
present and future earning capacity of the share based on the economy, industry and company fundamentals and there by assess the intrinsic value of the share with the prevailing market price to arrive at an investment decision. If the market price of the share is lower than the intrinsic value, then the investor will buy the share as it is under priced. The price of such share is expected to move up in future to match with its intrinsic value. On the contrary, when the market price of the share is higher than its intrinsic value, it is perceived to be over priced the market price of such share is expected to come down in the future and hence the investor would decide to sell such a share. Fundamental Analysis thus provides an analytical frame work for investment decision making. This analytical frame work is known as EIC framework (Economy-Industry-Company Analysis). Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form
efficient. By believing that prices do not accurately reflect all available information, fundamental analysts look to capitalize on perceived price discrepancies. Fundamental analysis is a stock valuation method that uses financial and economic analysis to predict the movement of stock prices. The fundamental information that is analyzed can include a company's financial reports, and non-financial information such as estimates of the growth of demand for products sold by the company, industry comparisons, and economy-wide changes, changes in government policies etc.. Strengths of Fundamental Analysis: Long-term Trends: Fundamental analysis is good for long-term investments based on long-term trends, very long-term. The ability to identify and predict longterm economic, demographic, technological or consumer trends can benefit patient investors who pick the right industry groups or companies. Value Spotting: Sound fundamental analysis will help identify companies that represent a good value. Some of the most legendary investors think longterm and value. Graham and Dodd, Warren Buffett and John Neff are seen as the champions of value investing. Fundamental analysis can help uncover companies with valuable assets, a strong balance sheet, stable earnings, and staying power. Business Acumen: One of the most obvious, but less tangible, rewards of fundamental analysis is the development of a thorough understanding of the business. After such painstaking research and analysis, an investor will be familiar
with the key revenue and profit drivers behind a company. Earnings and earnings expectations can be potent drivers of equity prices. Even some technicians will agree to that. A good understanding can help investors avoid companies that are prone to shortfalls and identify those that continue to deliver. In addition to understanding the business, fundamental analysis allows investors to develop an understanding of the key value drivers and companies within an industry. A stock's price is heavily influenced by its industry group. By studying these groups, investors can better position themselves to identify opportunities that are high-risk (tech), low-risk (utilities), growth oriented (computer), value driven (oil), non-cyclical (consumer staples), cyclical (transportation) or income-oriented (high yield). Knowing Who's Who: Stocks move as a group. By understanding a company's business, investors can better position themselves to categorize stocks within their relevant industry group. Business can change rapidly and with it the revenue mix of a company. This happened to many of the pure Internet retailers, which were not really Internet companies, but plain retailers. Knowing a company's business and being able to place it in a group can make a huge difference in relative valuations. Weaknesses of Fundamental Analysis: Time Constraints: Fundamental analysis may offer excellent insights, but it can be extraordinarily time-consuming. Time-consuming models often produce valuations that are contradictory to the current price prevailing on Wall Street. When this happens, the analyst basically claims that the whole
street has got it wrong. This is not to say that there are not misunderstood companies out there, but it is quite brash to imply that the market price, and hence Wall Street, is wrong. Industry/Company Specific: Valuation techniques vary depending on the industry group and specifics of each company. For this reason, a different technique and model is required for different industries and different companies. This can get quite time-consuming, which can limit the amount of research that can be performed. A subscription-based model may work great for an Internet Service Provider (ISP), but is not likely to be the best model to value an oil company. Subjectivity: Fair value is based on assumptions. Any changes to growth or multiplier assumptions can greatly alter the ultimate valuation. Fundamental analysts are generally aware of this and use sensitivity analysis to present a base-case valuation, an average-case valuation and a worst-case valuation. However, even on a worst-case valuation, most models are almost always bullish, the only question is how much so Analyst Bias: The majority of the information that goes into the analysis comes from the company itself. Companies employ investor relations managers specifically to handle the analyst community and release information. As Mark Twain said, "there are lies, damn lies, and statistics." When it comes to massaging the data or spinning the announcement, CFOs and investor relations managers are professionals. Only buy-side analysts tend to venture past the company statistics. Buy-side analysts work for mutual
funds and money managers. They read the reports written by the sell-side analysts who work for the big brokers (CIBC, Merrill Lynch, Robertson Stephens, CS First Boston, Paine Weber, DLJ to name a few). These brokers are also involved in underwriting and investment banking for the companies. Even though there are restrictions in place to prevent a conflict of interest, brokers have an ongoing relationship with the company under analysis. When reading these reports, it is important to take into consideration any biases a sell-side analyst may have. The buy-side analyst, on the other hand, is analyzing the company purely from an investment standpoint for a portfolio manager. If there is a relationship with the company, it is usually on different terms. In some cases this may be as a large shareholder. The fundamental Analysis insists that no one should purchase or sell a share on the basis of tips or rumors. The fundamental approach calls up on the investor to make his buy or sell decision on the basis of a detailed analysis of the information about the company, industry to which the company belongs, and economy. This results in informed investing. For this the fundamental analysis makes use of EIC framework of analysis. Fundamental Analysis involves three steps: Economy Analysis Industry Analysis Company Analysis
ECONOMY ANALYSIS:
The performance of the company depends on the performance of
the economy. If the economy is booming, incomes rise and demand for goods will increase, the industries and companies in general tend to be prosperous. On the other hand, if the economy is in recession, the performance of companies will be generally bad.
Investors are considered with those variables in the economy, which affect the performance of the company in which they tend to invest. A study of these economic variables would give an idea about future corporate earnings and payment of dividend and interest to investors.
MACRO ECONOMIC ANALYSIS:
The macro economy is the overall economic environment in which all firms operate. The key variables commonly used to describe the state of the macro economy are: Growth rate of gross domestic product Industrial growth rate and interest rates Agriculture and monsoons Savings and investments Government and deficit Price level and inflation Balance of payments, Forex reserves and exchange rate Infrastructural facilities and arrangements
INDUSTRY ANALYSIS:
An industry is generally described as a homogenous group of companies. We may define an industry as a group of firms producing reasonably similar products which serve the same needs of a common set of buyers. An investor ultimately invests his money in the securities of one or more specific companies. Each company can be considered as belonging to an industry. The performance of the companies would therefore, be influenced by the fortunes of the industry to which it belongs. At any stage of economy, there are some industries, which are fast growing and others are stagnating or declining. If an industry is growing the companies within the industries may also be prosperous. The performance of the companies will depend, among other things, upon the
state of industry to which they belong. Industry analysis refers to the evaluation of the relative strength and weakness of particular industries.
COMPANY ANALYSIS:
Company analysis is the final stage of fundamental analysis. The economy analysis helps the investor a broad outline of the prospectus of the growth in the economy. The industry analysis helps the investor to select in which investment would be rewarding. Now the investor has to decide the company in which he should invest his money. Company analysis provides the answer to this question. It deals with the estimation of return and risk of individual shares. This calls for information. Many pieces of information influence investment decisions. Information regarding companies can be broadly classified into two broad categories: Internal & External. Internal information consists of data and events made public by companies concerning their operations. The internal information sources include annual reports to shareholders, public and private statements of officers of the company, the companys financial statements etc. external sources of information are those generated independently outside the company. These prepared by investment services and the financial press. In company analysis, the analyst tries to forecast the future earnings of the company because there is strong evidence those earnings have a direct and powerful effect upon share prices. The level, trend and stability of earnings of a company, however, depend upon a number of factors concerning the operations of the company. With a shortlist of companies, an investor might analyze the resources and capabilities within each company to identify those companies that are capable of creating and maintaining a competitive advantage. The analysis could focus on selecting companies with a sensible business plan, solid management and sound financials.
FINANCIAL STATEMENTS:
The prosperity of a company would depend upon its profitability and financial health. The financial statements published by a company periodically help us to assess the profitability and financial health of the company. The two basic financial statements provided by a company are the Balance Sheet and the Profit and Loss Account. The first gives us a picture of the companys assets and liabilities while the second gives us a picture of its earnings. The balance sheet gives the list of assets and liabilities of a company on a specific date. The major categories of assets are fixed assets and current assets. Fixed assets are those assets which are intended to be used up over a period of several years. Current assets are those assets which are intended to be converted into cash in the near future (within one year). The major categories of liabilities are outside liabilities and liability towards share holders. The outside liabilities are categorised as short term and long term liabilities. The short term liabilities which are expected to be paid off with in next one year are known as current liabilities. The balance sheet indicates the financial position of a company on a particular date, namely the last day of the accounting year. The profit and loss account, also called income statement, reveals the revenue earned, the cost incurred and the resulting profit or loss of the company for one accounting year. The profit after tax (PAT) divided by the number of shares gives the earnings per share (EPS) which is a figure in which most investors are interested. The profit and loss account summarizes the activities of a company during account year.
ANALYSIS OF FINANCIAL STATEMENTS:
The financial statements of a company can be used to evaluate the financial performance of the company. Financial ratios are most extensively used for the purpose. Ratio analysis helps an investor to determine the strengths and weaknesses of a company. It also helps him to
assess whether the financial performance and financial strength are improving or deteriorating. Ratios can be used for comparative analysis either with other firms in the industry through a cross sectional analysis or with the past data through a time series analysis. Different ratios measure different aspects of a companys performance or health. Four groups of ratios may be used for analyzing the performance of a company.
Liquidity Ratios:
These measure the companys ability to fulfill its short term obligations and reflect its short term financial strength or liquidity. Current Assets Current Ratio = Current Liabilities A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in tile as and when they become due. On the other hand, a relatively low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time without any difficulties. An increase in the current ratio represents that improvement in the liquidity position of a firm and vice-versa.
Leverage Ratios:
These ratios are also known as capital structure ratios. They measure the companys ability to meet its long term obligations. They throw light on the long term solvency of a company. Debt Equity Ratio = Debt Capital Owners Capital Debt equity ratio is calculated to measure the extent to which debt financing has been used in business. A low ratio is considered as favorable from the long term creditors point of view because a high proportion of
owners funds provide a larger margin of safety for them. A debt equity high ratio, which indicates that the claims of outsiders are greater than those of the owners, may not be considered by the creditors because it gives a lesser margin of safety for them at the time of liquidation of the firm. But caution should be taken, as a very high ratio may be unfavorable from the point of view of them because the firm may not be able to get the credit without paying very high interest rates without accepting under pressures and conditions of the creditors. In the same way a low ratio is not considered satisfactory for the shareholders because it indicates that the firm has not been able to use low cost outsiders funds to magnify their earnings.
Profitability Ratios:
These ratios are measure the results of business operations or overall performance and effectiveness of the firm. These ratios are calculated by relating the profits either to sales, or investments, or to the equity shares. Earnings per Share = Profit after Tax (PAT) No. of Equity Shares EPS gives a view of the comparative earnings or earning power of a firm. EPS calculated for a number of years indicates whether or not earning power of the company has increased or not. Dividend per Share = Amount declared as dividend No. of Equity Shares Dividend Payout Ratio (DPOR) = Dividend per Share Earnings per Share
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Dividend payout ratio is calculated to find out the extent to which earnings per share have been retained in the business. A high ratio indicates that a huge amount is paid as dividend by ploughing back of profits which enables a company to grow. Return on Equity = Profit after Tax (PAT) Net Worth Return on equity is more meaningful to the equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividend to them. Higher the ratio better it is. Price Earnings Ratio = Market price of share Earning per Share
Price earnings ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company. Higher the ratio better it is. Operating Profit Margin = Operating Profit Net Sales Net Profit Ratio= Profit after Tax (PAT) Net Sales Net profit ratio indicates the efficiency of the management in manufacturing, selling, administrative and other activities of the firm. Higher the ratio better is the firms profitability.
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Intrinsic Value Calculation:
The intrinsic value calculation of variables such as brand name, trademarks and copyrights are often difficult to calculate and sometimes not accurately reflected in the market price. One way to look at it is that the market capitalization is the price (i.e. what investors are willing to pay for the company) and intrinsic value is the value (i.e. what the company is really worth). Different investors use different techniques to calculate intrinsic value. Dividend Payout Ratio = DPS EPS Average Dividend Pay-Out Ratio= Dividend pay-out ratio for 5 years 5 Average Retention Ratio= 1- Average Dividend Pay-out Ratio Average Return on Equity (%) = Sum of ROE for 5 years/5 Long Term Growth Rate in Equity (g) =Average Retention Ratio*Average ROE Normalized Average P/E Ratio= Sum of P/E Ratio for 5 years 5 Projected EPS for current year= EPS for CurrentYear*(1+Growthrate/100) Intrinsic Value= Projected EPS* Normalized Average P/E Ratio Projected Dividend per Share=Dividend for Current Year*(1+g %) Intrinsic value of a share represents the true worth or the future earning capacity of share. It is the present value of all future amounts to be received in respect of the ownership of that share at an appropriate discount rate. When the intrinsic value of share is higher than its market value, the share is under priced and the investor should sell the shares. If the intrinsic value of share is lower than its market value, the share is overpriced and is recommended to buy the shares.
RISK MEASURING TOOLS
Beta& Alpha The systematic risk of a security is measured by statistical measure called beta& alpha. The input data required for the calculation of beta& alpha are the historical of all returns of a representative stock market index. The formula used for the calculation of beta is: (nXY)-(XY) nX- (X) =Y- X
TECHNICAL ANALYSIS:
Technical analysis is an alternative approach to fundamental analysis for the study of stock price behavior. Technical analyst believes that the share price movements are systematic and exhibit certain consistent patterns. The analyst studies past movements in the share price to identify trend and pattern, and then try to predict the future price movements. The current market price is compared with the future predicted price to determine the extent of mis-pricing. Technical analysis is an approach which concentrates on price movements and ignores the fundamentals of the share. Share prices are determined by the demand and supply forces operating in the market. These demand and supply factors are in turn are influenced by a number of fundamental factors as well as psychological or emotional factors. Many of these factors cannot be quantified. The combined impact of all these factors is reflected in the share price movement. The technical analyst therefore Concentrates on
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the movement of share prices and analyses the price and volume of movement of individual securities as well as the market index. A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. In finance, technical analysis is a security analysis discipline for forecasting the future direction of prices through the study of past market data, primarily price and volume. Technical analysis includes the study of chart patterns, candlesticks, moving averages, and other indicators. It is easy to apply in any market, in which the raw data (prices and volume) is available. With the help of technical analysis, it is easy to understand the sentiments (psychology) of the market and to forecast the prices, without looking at the fundamental factors of a particular currency. Technical analysis is helpful for short term trading, swing trading, and long term investing. Technical Analysis as a study of the stock market considering factors related to the supply and demand of stocks. Technical Analysis doesnt look at underlying earnings potential of a company while evaluating stocks {unlike fundamental Analysis}.It uses charts and computer programs to study the stocks trading volume and price movements in the hope of identifying a trend. In fact the decision made on the basis of technical analysis is done only after inferring a trend and judging the future movement of the stock on the basis of the trend. Technical Analysis assumes that the market is efficient and the price has already taken into consideration the other factors related to the company and the industry. It is because of this assumption that many think technical analysis is a tool, which is effective for short-term investing.
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Scope and Advantages Technical Analysis: Technical analysis is widely used by forex, equity, and commodity traders, to determine the short term as well as the long term trends of the market. The scope of technical analysis is increasing every day, as more and more people are trying to learn the skills of technical analysis to earn good returns. Trend Analysis: The biggest advantage of technical analysis is that is helps investors and traders predict the trend of the market. Up trend, downtrend, and sideways moves of the market are easy to predict, with the help of chart analysis. Entry/Exit Point: Timing plays an important role in trading and investing. With the help of technical analysis, traders and investors can predict the right time to enter and exit a trade thereby enabling good returns. Chart patterns, candlesticks, moving averages, Elliot wave analysis, and other indicators are very useful for traders to make entry and exit points. Provides Early Signal: Technical analysis gives early signals and also paints a picture about the psychology of investors and traders regarding what they are doing. Price-volume analysis also indicates the movement of market makers and their activities related to a particular market. Another main advantage of technical analysis is that it gives an early signal when it comes to trend reversal. Quick and Less Expensive: In currency trading, technical analysis is less expensive as compared to the fundamental analysis and there are so many companies that provide free charting software. Technical analysis gives a quick result for traders who use 1 minute, 5 minutes, 30 minutes, and 1 hour charts. For instance,
the formation of a head and shoulder on 1 minute and 5 minutes chart gives fast results, as compared to the daily chart. Provides Lots of Information: Technical charts provide a lot of information that helps the traders and investors build their positions and take trades. Information like support, resistance, and chart pattern, momentum of the market, volatility, and traders psychology are just some examples of types of information provided by technical analysis and used by traders in the Forex market.
Who uses Technical Analysis?
Investors for their short-term trading decisions use Technical Analysis. This short-term may is further divided in day trading, short-term investment and for hedging purposes. The role played by Technical Analysis in each case is as follows:
1) Day Traders: A day trader is one who takes and squares off his position
both on the same day. Mostly a day trader counts on turnover rather than margin. A day trader will interpret the market movement.
2) Short term investors: These people form the biggest clientele base of
both the brokers and the Technical Analyst.

3. Hedgers: These are generally big investors, who have lot of money at
stake and hence they look to have some hedging of their risk. The strategy followed by this section of investors is that they compare the stock in consideration with the index and on the basis of the result of this comparison they take their position in the stock.
Steps in Technical Analysis:
1. Study the past movements in the share price and identify the trends and establish patterns. 2. Look at the current movement in the share price and identify whether the trends and established patterns are applicable, if yes; make extrapolations to predict the future price movements. The rationale
behind the technical analysis is that the share prices move in trends or waves which may be upward or downward. It s believed that the present trends are influenced by the past trends. The technical analyst, therefore, analyses the price and volume movements of individual securities as well as the market index. Thus technical analysis is really a study of past or historical price volume movements so as to predict the future stock price behavior.
The Basic Principles of Technical Analysis:
The basic principles on which technical analysis is based may be summarized as follows: 1. The market value of a security is related to demand and supply factors operating in the market. 2. There are both rational and irrational factors which surround the supply and demand factors of a security. 3. Security prices behave in a manner that their movement is continuous in a particular direction for some length of time. 4. Trends in stock prices have been seen to change when there is a shift in the demand and supply factors. 5. The shifts in demand and supply can be detected through charts prepared specially to show market action. 6. Patterns which are projected by charts record price movements and these recorded patterns are used by analysts to make forecasts about the movement of prices in future.
TOOLS USED: EXPONENTIAL MOVING AVERAGE (EMA):
A moving average is a summary measure of price movement which reduces the distortions to a minimum by evening out the fluctuations in prices. The underlying trend in prices is thus clearly discernible when
moving averages are used. A weighted moving average is weighted in favor of the most recent observations and therefore, earns than simple moving average. EMA= (Closing price- Previous EMA)*Factor + Previous EMA. Where Factor=2/ (n+1) n= Number of days for which the average is to be calculated. The EMA for the first day is taken the closing price of that day itself. A 12 day average would indicate the short trends; a 48 day average would indicate medium term trend; and a 200 day average would represent the long term trend. The moving average is plotted on the prize charts. The curved line joining these moving average represent the trend line, it may taken as the first sign of trend reversal.
RELATIVE STRENGTH INDEX (RSI):
The Relative Strength Index (RSI) is a popular oscillator which measures movement, used by the commodity trades. It was first introduced by Wells Wilder. It is a powerful indicator used to identify the inherent strength and weakness of a particular scrip or market. This is a powerful indicator that signals buying and selling opportunities ahead of the market. The name Relative Strength Index is slightly misleading, as the RSI does not compare the relative strength of two securities, but rather the internal strength of a single security. RSI for security is calculated by the following formulae: RSI=100-[100/ (1+RS)] Where, RS= Average gain per day Average loss per day
The most commonly used time period for the calculation of RSI is 14 days. For the calculation a 14 day RSI, the gain per day or loss per day is arrived at by comparing the closing price of a day with that of previous day for a period of 14 days. The gains are added up and divided by 14 to get the average gain per day. The average gain per day and average loss per day are used in the above formula for calculating the RSI for a day. In this way RSI values can be calculated for a number of days. After such data for a number of days, graphs can be plotted. The graph can tell the rise or fall and time for buying or selling.
MOVINGAVERAGE CONVERGENCE AND DIVERGENCE (MACD):
MACD is an oscillator that measures the convergence and divergence between two exponential moving averages. A short term exponential moving average and long term exponential moving average are calculated with the help of the closing price data. A 12 day and 48 day exponential moving averages constitute a popular combination. The difference between the short term EMA and the long term EMA represents MACD. The MACD values for different days are derived by deducting the long term EMA for each day from the corresponding short term EMA for the day. These MACD values are plotted on an XY graph with MACD values on the Y-axis and time periods on X-axis. The MACD line would oscillate across the zero line. If the MACD line crosses to zero line from above, the trend can be considered to have turned bearish, signaling a selling opportunity. On the other hand, if the MACD line moves above the zero line from below, the trend can be said to have turned bullish and indicates a buying opportunity.
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CHAPTER -3 COMPANY PROFILE

COMPANY PROFILE: SHAREKHAN LIMITED Sharekhan is one of the top retail brokerage houses in India with a strong online trading platform. The company provides equity based products (research, equities, derivatives, depository, margin funding, etc.). It has one of the largest networks in the country with 704 share shops in 280 cities and Indias premier online trading portal www.sharekhan.com. With their research expertise, customer commitment and superior technology, they provide investors with end-to-end solutions in investments. They provide trade execution services through multiple channels - an Internet platform, telephone and retail outlets. Sharekhan was established by Morakhia family in 1999-2000 and Morakhia family, continues to remain the largest shareholder. It is the retail broking arm of the Mumbai-based SSKI [SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED] Group. SSKI which is established in 1930 is the parent company of Sharekhan ltd. With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and corporate finance over a decade ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. Sharekhan offers its customers a wide range of equity related services including trade execution on BSE, NSE, and Derivatives. Depository services, online trading, Investment advice, Commodities, etc. Sharekhan Ltd. is a brokerage firm which is established on 8th February 2000 and now it is having all the rights of SSKI. The company was awarded the 2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote. It is first brokerage Company to go online. The Company's online trading and investment site www.sharekhan.com- was also launched on Feb 8, 2000. This site gives access to superior content and transaction facility to retail customers across the country. Known for its jargon-free, investor friendly language and high quality research, the content-rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best-of-breed technology and superior market information. Share khan has one of the best states of art web portal providing fundamental and statistical information across equity, mutual funds and IPOs. One can surf across 5,500 companies for in-depth information, details about more than 1,500 mutual fund schemes and IPO data. One can
also access other market related details such as board meetings, result announcements, FII transactions, buying/selling by mutual funds and much more. Sharekhan's management team is one of the strongest in the sector and has positioned Sharekhan to take advantage of the growing consumer demand for financial services products in India through investments in research, pan-Indian branch network and an outstanding technology platform. Further, Sharekhan's lineage and relationship with SSKI Group provide it a unique position to understand and leverage the growth of the financial services sector. We look forward to providing strategic counsel to Sharekhan's management as they continue their expansion for the benefit of all shareholders." SSKI Corporate Finance Private Limited (SSKI) is a leading Indiabased investment bank with strong research-driven focus. Their team members are widely respected for their commitment to transactions and their specialized knowledge in their areas of strength. The team has completed over US$5 billion worth of deals in the last 5 years - making it among the most significant players raising equity in the Indian market. SSKI, a veteran equities solutions company has over 8 decades of experience in the Indian stock markets. If we experience their language, presentation style, content or for that matter the online trading facility, we'll find a common thread; one that helps us make informed decisions and simplifies investing in stocks. The common thread of empowerment is what Sharekhan's all about! "Sharekhan has always believed in collaborating with like-minded Corporate into forming strategic associations for mutual benefit relationships" says Jaideep Arora, Director - Sharekhan Limited. Sharekhan is also about focus. Sharekhan does not claim expertise in too many things. Sharekhan's expertise lies in stocks and that's what he talks about with authority. So when he says that investing in stocks should not be confused with trading in stocks or a portfolio-based strategy is better than betting on a single horse, it is something that is spoken with years of focused learning and experience in the stock markets. And these beliefs are reflected in everything Sharekhan does for us! Sharekhan is a part of the SSKI group, an Indian financial services power house, with strong presence in Retail equities Institutional equities Investment banking.
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In Nagpur it is having the branches at C.A. road, near telephone exchange square and Khare town, Dharampeth and 12-13 franchisees in Nagpur. We have been given the centre at C.A. road. Sharekhan provides 4 in 1 account. - Demat a/c - Trading a/c: for cash calculation - Bank a/c: for fund transfer - Dial and Trade: for query relating trading Products: Mutual fund schemes Insurance Portfolio Management System Shares online and offline Bonds Fixed Deposits Commodities Out of these we have to mostly sell demat accounts and Mutual Funds. Demat account: Sharekhan is a depository participant. This means that we can keep the shares in dematerialized form in Sharekhan. But for this one has to the demat account in Sharekhan. Dematerialization is the process by which a client can get physical certificates converted into electronic balances maintained in his account with the DP. In Sharekhan, under demat account there are two types of terminals. TYPE OF DEMAT DEPOSIT (Refundable) ACCOUNT TERMINAL CLASSIC Rs.5000 Rs.10000 TRADETIGER Rs.5000 Rs.10000/25000
CHARGES (nonrefundable) Rs.750 Nil Rs.1000 Nil

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Its core services are: Equities, and Derivatives trading on the National Stock Exchange of India Ltd. (NSE), and Bombay Stock Exchange Ltd. (BSE), Commodities trading on National Commodity and Derivatives Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX), Depository services, Online trading services, IPO Services, Dial-n-Trade Portfolio management services, Fundamental and Technical Research services, In addition to this they also provide advisory services and distributions for mutual funds. Sharekhan ValueLine (a monthly publication with reviews of recommendations, stocks to watch out for etc.) Daily research reports and market review (High Noon & Eagle Eye) Pre-market Report Daily trading calls based on Technical Analysis Cool trading products (Daring Derivatives and Market Strategy) Personalized Advice Live Market Information Sharekhan First Step
Sharekhan First Step The Sharekhan FirstStep is a brand new program designed especially for those who are new to investing in shares. All one have to do is open a Sharekhan FirstStep account and they guide us through the investing process. Market Share Sharekhan enjoyed about 20 per cent market share in Web business (Internet trading) in stock markets. Three years ago, Web trading showed lot of promise but with the market witnessing a downturn, there was not much interest among retail customers.
Profits The share of Web trading constituted 22 per cent of the revenue. As Sharekhan's daily trading volume was over Rs 200 crore, the share of Web trading at about Rs 40 crore a day was substantial and a larger part of the volume was coming from day traders. Features of Trading With Sharekhan: 1. Freedom from paperwork 2. Instant credit and money transfer 3. Trade from any net enabled PC 4. After hour orders 5. Online orders on the phone 6. Timely advice and-research reports 7. Real-time Portfolio tracking 8. Information and Price alerts. FINANCIAL CAPABILITY Taking in to consideration all its assets and liabilities company is valued at around Rs. 750-850 crores. HIERARCHY IN Sharekhan There are 14 main hierarchical levels in Sharekhan: 1) Trainees 2) Super trainees 3) Sales executives 4) Assistant sales manager 5) Area sales manager : Mr. Chirag Joshi 6) City sales manager 7) Assistant branch manager 8) Branch manager 9) Regional head 10) Cluster head 11) Business head 12) Country head 13) Directors 14) CEO
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SWOT ANALYSIS OF SHAREKHAN
STRENGTHS
WEAKNESSES
First brokerage firm to go online. Products PMS Services. Technology Online fund transfer. Research reports. Clients (average of 15,000 accounts per year) Recommendations from clients. Free Demat a/c opening. Low annual maintenance charge
High brokerage charges but now they have overcome this by a new prepaid scheme in which brokerage is reduced to half.
OPPORTUNITIES
THREATS
Huge market.
Volatility of the share market. Competitors.
Account opening: Opening a DP account with Sharekhan One can open a Depository Participant (DP) account, either through a Sharekhan branch or through a Sharekhan Franchisee center. There is no fee for opening DP accounts with Sharekhan. However a nominal deposit (refundable) is charged towards services which will be adjusted against all future billings.
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All investors have to submit their proof of identity and proof of address along with the prescribed account opening form. List of Documents required to open an account with Sharekhan: 1) Proof of Identity You can submit a photo copy of any of the following o Voter ID o Passport o PAN Card o MAPIN UID Card o Driving License o Photo I card issued by Employer registered under MAPIN 2) Copy of Ration Card 3) Address Proof You can submit a photo copy of any of the following o Voter ID Card o Driving License o Passport o Ration Card o Telephone Bill o Electricity Bill o Leave-License o Bank Passbook o Latest Bank Statement o Insurance Policy o Flat Maintenance Bill 4) A copy of cancelled cheque 5) Nominee photograph, if filled 6) Signed Photograph of all holders
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BROKERAGE STRUCTURE OF SHAREKHAN BROKERAGE: INTRADAY CASH- EQUITIES FnO PREPAID SCHEME 0.05% 0.05% 0.025% 0.25% DELIVERY 0.5%
Sharekhan has tie up with the following banks: HDFC Axis Bank IDBI Citi Bank IndusInd Bank Union Bank ICICI Oriental Bank Of Commerce
MINIMUM INVESTMENT IN MUTUAL FUND: INVESTMENT Mutual Fund (Any Company) Systematic Investment Plan (Any Company) ADVANTAGES OF SHAREKHAN: 1. Online trading is very user friendly and one doesn't need any software to access. 2. They provide good quality of services like daily SMS alerts, mail alerts, stock recommendations etc. 3. Sharekhan has ability to transfer funds from most banks. Unlike ICICI Direct, HDFC Sec, etc., so investor not really needs to open an account with a particular bank as it can establish link with most modern banks.
MINIMUM AMOUNT 5000 500
CUSTOMER Business class people (high class) High Net worth Individuals Service class people Government Employees Young Adults (19-30 yrs.) Adults (35-50 yrs.) HUF (Hindu Undivided Family) Women (literate and working)
COMPETITORS 1. India Bulls 2. Motilal Oswal 3. Religare 4. Kotak Securities 5. ICICI Direct 6. Anand Rathi 7. India Infoline 8. Reliance Money 9. Angel Broking
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OBJECTIVE: To project Sharekhan as an authority in the retail stock trading business. To execute business for the company by selling demat accounts and mutual funds. To study the various products of the company. To know how to open and close the calls. To learn the online terminal used for trading. To know the various policies of the company. To know how to handle various types of customers. To know various reasons for market fluctuations. To learn to manage time. To gain practical knowledge of the market. To have a practical experience of working in a reputed organization.
TARGETS / TASKS: TARGETS To sell 24 Demat accounts worth Rs.2,00,000/- for 3 month for Sharekhan Limited at Nagpur. To sell 2 Demat accounts per week for 3 months for Sharekhan limited at Nagpur. To sell Mutual Funds of various companies through Sharekhan Limited in Nagpur city for 3 months.
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TASKS To collect the leads. To do the telecalling and take appointments. To attend the appointment on prescribed time. To tell the client about the company and its products. To tell the client about the advantages of opening a demat account with Sharekhan limited. To convince the clients to do Online Trading. To explain him the terms and conditions of the product. To convince the client to open Demat account at Sharekhan ltd. To give a live demo of how the online terminal works. By means of presentation explaining them how to trade online. To take signatures of the client on the KYC (know your customer) form. To collect the documents required to open a demat account. To fill up the KYC form for the customer. To install the software in the client`s computer. To make the client trade. To sell the mutual funds. To get the references from the client. To conduct seminars in the banks and good companies. To submit the daily report of myself and of all the 6 people in my group to the company guide.
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CHAPTER-4 ANALYSIS AND INTERPRETATION

4.1 ASHOK LEYLAND LTD COMPANY PROFILE: Ashok Leyland Ltd (ALL) was built-in 1948 as Ashok Motors for accumulate Austin car in India. ALL, a company under Hinduja group is the second-largest manufacturer of medium/heavy-duty vehicles in India and the first ISO/TS 16949 Corporate Certified Indian auto company which is specific to the auto industry. In the year of 1955 the Ashok Motors came to known as Ashok Leyland due to the agreement with Leyland Motors, UK, for manufacture Leyland vehicles. ALL have the manufacturing plants located in Ennore (Chennai, TN), Ambattur (Chennai, TN), Hosur (TN) (Three), Bhandara (Maharashtra) and Alwar (Rajasthan) with an annual production capacity of 84,000 vehicles. The company supplies both to State Transport undertakings (STUs) and Defence. The company has supplied specially developed light recovery vehicles (LRVs) to the Indian Army. The company has also broken new ground Buses running on CNG fuel in India and this category of buses are running lucratively in Bombay and Delhi. ALL furnished lot of thrust to new range of Intermediate Commercial Vehicles, which fall between the light and heavy ranges of Commercial Vehicles, with the technical assistance from IVECO. Commercial production of the 709 and 909 models has commenced under the first phase of expansion cum modernization.In 1993, it became the first in India's automobile history to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994. The company raised Rs 436 cr through a GDR issue in 1995. ALL acknowledged QS 9000 in 1998 and ISO 14001 certification for all vehicle manufacturing units in 2002.. In 2006-07, Ashok Leyland has entered the knowledge business space by offering of Design and Engineering Services. The company is building up Ashley Design and engineering Services (ADES), a division
focused on provision of design and engineering services to the automobile, power engineering and aerospace sectors and the company has also entered into a Joint Venture with Ras Al Khaimah Investment Authority (RAKIA) in the U.A.E. to put up a plant for building bus bodies in the U.A.E. Ashok Leyland acquired the Truck Business Unit of AVIA a.s. in Prague, Czech Republic in October 2006. During the year 2007 ALL noticed a share purchase agreement with Defiance Testing and Engineering Services, Inc, Michigan, USA to acquire the entire equity capital for a consideration of $17 million and the company has pierced into a Joint Venture with the Alteams Group, Finland to manufacture High Pressure Die Castings (HPDC) aluminum products predominantly for the automotive and telecommunications sector. Ashok Leyland has announced its entry into the pre-owned commercial vehicles market with Altrux would be marketed through TVS & Sons Ltd. in Kerala. ALL and automotive supplier Siemens VDO Automotive AG, Germany, have signed an harmony for a joint venture to propose, grow and settle in infotronics products and services for the transportation sector. As on May 2008, the company made the legal formation of the three JV companies for the Light Commercial Vehicle (LCV) business in India for vehicle manufacturing, power train manufacturing and technology development. Such three companies are Ashok Leyland Nissan Vehicles Pvt. Ltd, Nissan Ashok Leyland Power train Pvt Ltd and Nissan Ashok Leyland Technologies Pvt Ltd. The Ashok Leyland s Nissan LCV project crossed a significant milestone during September of the year 2008 with the signing of a Memorandum of Understanding with the Government of Tamil Nadu for acquiring 380 acres of land to locate the facilities of the joint venture companies at Pillaipakkam, near to Chennai. ALL decided to double investment in Uttaranchal from Rs 1,000 cr to Rs 2,000 cr as a part of its expansion plan and (ALL) is ramping up investments in its
commercial vehicle (CV) business by investing close to Rs 6,000 cr in the next few years for attain the leadership quality in the same field. The company's production capacity planned by the year 2010 will be additionally 100,000 vehicles. 4.1.1 SHAREHOLDING PATTERN ON ASHOK LEYLAND LTD Shareholding pattern as on Dec 2011 Foreign Institutions Govt Holding Non Promoter Corp. Hold. Promoters Public & Others TOTAL
(Source: secondary data)
Shares 346,774,644.00 276,695,702.00 1,109,360.00 32,900,749.00 513,618,712.00 159,239,150.00 13,303,383,17.00
[%] 26.07 20.80 0.08 2.47 38.61 11.98 100
4.1.1 SHAREHOLDING PATTERN ON ASHOK LEYLAND LTD.

Public & Others 12%
Foreign 26%
Promoters 39%
Institutions 21% Non Promoter Corp. Hold. Govt Holding 2% 0%
4.1.2 RETURN ON EQUITY

YEAR PGI SOM, Anna Universty 2011 2010 2009 2008 2007 Page 54
Equity share capital Reserves & surplus Net worth PAT Return on equity Return on equity %
133.03 3340.86 3473.89 190.00 0.0546 5.46
133.03
132.39
122.16
118.93
2015.95 1762.18 1290.29 1048.94 2148.98 1849.57 1412.45 1167.87 469.31 0.2184 21.84 441.29 0.2329 23.29 327.32 0.2317 23.17 271.41 0.2324 23.24
4.1.3 PAYOUT RATIO YEAR EPS DPS PAYOUT DIVIDEND PAYOUT 4.1.4 PRICE EARNING RATIO YEAR MPS EPS PRICE EARNING RATIO 2011 18.15 1.26 14.40 2010 35.40 3.27 10.82 2009 38.40 3.12 12.30 2008 40.30 2.5 16.12 2007 21.05 2.14 9.836 2011 1.26 1.00 0.7936 79.36 2010 3.27 1.50 0.4587 45.87 2009 3.12 1.20 0.4807 48.07 2008 2.5 1.00 0.48 48 2007 2.14 1.00 0.4672 46.72
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4.1.5 NORMALIZED P.E RATIO
YEAR EPS EARNINGS YIELD DIVIDEND YIELD LOW HIGH LOW/EPS HIGH/EPS AVERAGE PRICE EARNING NORMALISED
2011 1.26 0.0238
2010 3.27 0.09237
2009 3.12 0.08125
2008 2.50 0.06203
2007 2.14 0.10166
0.0209
0.04237
0.03906
0.02977
0.0475
23.16 43.58 8.355 15.374 11.86
26.15 57.50 7.996 17.58 12.788
29.10 53.00 9.326 16.98 13.153
20.40 42.75 8.16 17.1 12.63
17.00 21.08 7.94 9.836 8.9
PRICE EARNING (11.86+12.78+13.15+12.63+8.9 )/5=59.32/5=11.864 RATIO
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4.1.6 INTRINSIC VALUE CALCULATION OF ASHOK LEYLAND LTD DIVIDEND PAYOUT RATIO (DPOR) Average Dividend Pay-Out Ratio= Dividend pay-out ratio for 5 years/5 Average Retention Ratio= 1- Average Dividend Pay-out Ratio Average Return on Equity (%)= Sum of ROE for 5 years/5 Long Term Growth Rate in Equity (g)= Average Retention Ratio* Average ROE Normalized Average P/E Ratio= Sum of P/E Ratio for 5 years /5 Projected EPS for 2012= EPS for Current Year*(1+Growthrate/100) Intrinsic Value= Projected EPS* Normalized Average P/E Ratio Projected Dividend per Share=Dividend for Current Year*(1+g %) INTERPRETATION: The intrinsic value of the share of Ashok Leyland Ltd is Rs.17.42which is lower than the market price of Rs.22.30 (as on March 31st March 2011). This reveals that the share is at present overpriced and should be preferred for selling. The projected values of both EPS and DPS amount to Rs.1.37 and Rs.1.09, both of which are higher than their corresponding current values of Rs.1.26 and Rs.1.00.
DPS/EPS (.7936+.4587+.4807+.48+.4672)/5 =.5360 1-.5360=.464
(5.46+21.84+23.29+23.17+23.24)/5 =19.4
.464*19.4=9.0016
(14.40+10.82+12.30+16.12+9.836)/5 =12.69 1.26*(1+9.0016/100)=1.3734
1.3734*12.69=17.42
1*(1+9.0016/100)=1.09
4.2 HEROHONDA MOTORS LTD Hero Honda Motors Ltd, a name gives the origin of the company, the joint venture between India's Hero Group and Honda Motor Company, Japan was the reason for inception of the company, the agreement was signed in 1983 and the company was incorporated in the year of 1984. It is a world's largest two-wheeler manufacturing company and also one of the most successful joint ventures worldwide. Hero Honda bikes currently spin out from its three globally benchmarked manufacturing units sited at Dharuhera and Gurgaon in Haryana and Haridwar, Uttrakhand. These plants collectively are proficient of producing out 4.4 million units per year. At first in India to prove that it was possible to drive a vehicle without polluting the roads by the one and only company Hero Honda Motors. Over 20 million Hero Honda two wheelers squash Indian roads. After a year from inception, in 1985 the company's first product was released under the name of "CD 100". In the year 1994 company's extraordinary product was came to existence, a new motorcycle model "Splendor" was introduced, apart from this event the company have produced 1,000,000th motorcycle in the same year. An event to the company as well as the habitual, the number of new models and attractive market capture motorcycles was continuously came to subsist and also coming up. Hero Honda has consistently matured at double digits since its commencement and today, every second motorcycle sold in the country is a Hero Honda. Every 30 seconds, someone in India buys Hero Honda's top selling motorcycle "Splendor". This festive season, the company sold half a million two wheelers in a single month a feat unparalleled in global automotive history. In the year 1997 Hero Honda's 2nd manufacturing plant at Gurgaon was inaugurated and Environment Management System of Gurgaon Plant certified ISO-14001 by DNV Holland in 2000. The brand "Splendor"
declared as 'World No. 1' largest selling single two-wheeler model in the same year. "Hero Honda Passport Programme" under in CRM was launched, one of the largest programs of this kind in the world, has over 3 million members on its roster. The company was achieved a record of one million production in one single year in 2001. Hero Honda becomes the first Indian Company to cross the cumulative 7 million sales mark with help four type of new model release (CD Dawn, Splendor +, Passion Plus and Karizma) in the year of 2003 and the company was honored as Most Respected Company in Automobile Sector by Business World. Joint Technical Agreement was renewed in 2004 and Adjudged as the Best Value Creator - Large Size Companies 2003-04 by The Outlook Money. Hero Honda and SBI Cards launch co-branded credit card for Hero Honda's customers. The next generation model bikes are introducing by the company in every aspect, in 2005, the company introduced 5 new models to catch the pulse of the customers need. Awaaz Consumer Awards 2005 India's most preferred two-wheeler brand by CNBC in the 'Automobiles' category and Bike Maker of the Year Award by Overdrive Magazine was conferred to the company along with two more awards for the same year. During the year 2005-06 the plants capacities expanded to allow for 9, 00,000 additional in units, at an investment outlay of Rs. 143 crore and added an entirely new venture- Hero Honda Sure! For pre-owned motorcycles, another benchmarks redefining initiative of the company. During the period 2007-08 Hero Honda achieved yet another milestone of two crore bikes. In a country of a billion people, it signifies a Hero Honda bike in every 50 people and launched five new products in this period - Splendor NXG, refreshed Pleasure, the new Super Splendor, new Passion Plus and of course our most recent launch Hunk. The company received NDTV Profit Car India & Bike India Awards - Bike Manufacturer of the year and Overdrive Magazine's Bike Manufacturer of
the year awards. Hero Honda coveted position of World No 1 Two-wheeler Company for the seventh consecutive year. Having reached an unassailable pole position in the Indian two wheeler market, Hero Honda is constantly working towards consolidating its position in the market place. The company moving with believes that changing demographic profile of India. This would provide the growth ballast that would sustain Hero Honda in the years to come. Hero Honda Motors Limited is pioneered India's motorcycle industry and its responsibility now to take the industry to the next level by level of its accomplishment. 4.2.1 SHAREHOLDING PATTERN ON HERO HONDA MOTORS LTD Shareholding Pattern As On Dec 2011 Foreign Institutions Govt Holding Non Promoter Corp. Hold. Promoters Public & Others Totals
Shares 57830555.00 73281272.00 241826.00 16279789.00 59893658.00 16900582.00 278,821,265.00
[%] 28.76 32.65 0.10 7.25 26.69 7.54 100
4.2.1 SHAREHOLDING PATTERN ON HERO HONDA MOTORSLTD.

Public & Others 7% Promoters 26%
Foreign 28%
Institutions 32% Non Promoter Corp. Hold. Govt Holding 7% 0%
(Source: secondary data) PGI SOM, Anna Universty Page 60

YEAR Equity share capital Reserves & surplus Net worth PAT Return on equity Return on equity % 2011 39.94 2010 39.94 2009 39.94 2430.12 2470.06 857.89 0.3469 34.69 2008 39.94 1969.39 2009.33 971.34 0.4834 48.34 2007 39.94 1453.44 1493.38 810.47 0.5427 54.27
3760.81 2946.30 3800.75 2986.24 1281.76 967.88 .6613 66.13 0.3241 32.41
4.2.3 PAYOUT RATIO YEAR EPS DPS PAYOUT DIVIDEND PAYOUT 2011 60.79 20.00 0.3290 32.9 2010 45.24 19.00 0.419 41.9 2009 40.07 17.00 0.424 42.4 2008 45.84 20.00 0.436 43.6 2007 37.75 20.00 0.529 52.9
4.2.4 PRICE EARNING RATIO YEAR MPS EPS PRICE RATIO 2011 60.79 EARNING 17.62 2010 45.24 15.35 2009 688.75 40.07 17.18 2008 890.45 45.84 19.42 2007 548 37.75 14.51
1071.15 694.55
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4.2.5 NORMALIZED P.E RATIO YEAR EPS EARNINGS YIELD DIVIDEND YIELD LOW HIGH LOW/EPS HIGH/EPS AVERAGE EARNING NORMALISED PRICEARNINGRATIO (15.38+14.75+19.03+15.38+12.39)/5=15.386 2011 60.79 0.036 0.0119 488 814 11.53 19.24 PRICE 15.38 2010 45.24 0.065 0.0273 550 785 12.15 17.35 14.75 2009 40.07 0.058 0.0246 611 915 15.24 22.83 19.035 2008 45.84 0.051 0.0224 471 940 10.27 20.50 15.38 2007 37.75 0.068 0.0364 320 616 8.47 16.31 12.39
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4.2.6 INTRINSIC VALUE CALCULATION OF HERO HONDA MOTORS LTD DIVIDEND (DPOR) Average Dividend Pay-Out Ratio= Dividend pay-out ratio for 5 years/5 Average Retention Ratio= 1Average Dividend Pay-out Ratio Average Return on Equity (%)= Sum of ROE for 5 years/5 Long Term Growth Rate in Equity (g)= Average Retention Ratio* Average ROE Normalized Average P/E Ratio= Sum of P/E Ratio for 5 years /5 Projected EPS for 2012= EPS for Current Year*(1+Growthrate/100) Intrinsic Value= Projected EPS* Normalized Average P/E Ratio Projected Dividend per Share=Dividend for Current Year*(1+g %) INTERPRETATION: The calculated intrinsic value of the share of Hero Honda Motors Ltd is Rs.1581.55 which is lower than its current market price of Rs.1071.15 (as on 31st March, 2011). This reveals that the share is at present overpriced and should be preferred for selling. The projected values of both EPS and DPS mount to Rs.94.05 and 30.94, both of which are 60.79 and 20.00
PAYOUT
RATIO DPS/EPS (.32+.41+.42+.43+.52)/5 =.42
1-..42=.58
(66.13+32.41+34.69+48.34+54.27)/5 =47.168
.58*47.168=54.714 %
(17.62+15.35+17.18+19.42+14.51)/5 =16.81 60.79*(1+54.714/100)=94.050
94.050*16.81=1581.55
20*(1+54.714/100)=30.94
4.3 MAHINDRA & MAHINDRA LTD The Mahindra brothers joined hands with a distinguished gentleman called Ghulam Mohammed and to make the birth of Mahindra & Mahindra in October 2nd, 1945 as Mahindra & Mohammed, a franchise for assembling jeeps from Willys, USA. Two years later, India became an independent nation and in 1948 Mahindra & Mohammed changed its name to Mahindra & Mahindra (M & M). The Steel trading business was commenced in association with suppliers in UK. Since then, Mahindra & Mahindra has grown steadily in size and stature and evolved into a Group that occupies a premier position in almost all key sectors of the economy. Mahindra Group is among the top 10 industrial houses in India. Its products and services is grouped into seven groups, such as Automotive, Farm Equipment, Trade & Financial Services, Information Technology, Infrastructure Development, Sestet and Specialty Business. Mahindra Engineering & Chemical Products Limited was originated its operations during the year 1970. In the year 1977, the International Tractor Company of India merged with Mahindra & Mahindra to become its Tractor Division and within two years Mahindra brand of tractors was launched. During the year 1991 the company introduced Commander range of vehicles and the Mahindra Financial Services Limited was established as a wholesale fund provider. Merged diverse activities of Steel, Machine Tools and Graphics into Inter trade Division in the year 1992. The company established Mahindra Steel Service Centre Limited in association with Mitsubishi Corporation and Nissho Iwai Corporation of Japan. The company and Acres International Limited (Canada) was jointly instituted the Mahindra Acres Consulting Engineers Limited to provide multidisciplinary engineering consultancy service. During the period of 1994, Mahindra Realty & Infrastructure Developers Limited was brought its existence.
A public private partnership initiative between Mahindra World City and Southern Railway, the Paranur railway station was the first to be redesigned and maintained by the corporate sector in the year 2007. As in part of Corporate Social Responsibility, the company inaugurated Impact India Foundation's Lifeline Express, world's first hospital on rails on October of the year. The company has been awarded the ISO/IEC 27001:2005 certificate. This completes the company's successful migration from BS 7799 to ISO 27001. Mahindra inaugurated its state -ofthe-art Blanking Line facility in Nashik backed by German technology. Mahindra & Mahindra Auto Sector's Zaheerabad plant has won the First Prize in the National Energy Conservation Awards - 2007. Mahindra & Mahindra Ltd. was awarded the 'Excellence in Innovation' Award at the Indira International Innovation Summit (3i's Summit) in February 2008. The company won the BSE award for Best Corporate Social Responsibility Practice at the Social and Corporate Governance Awards (Innovative strategies - Measurable Impacts), presented by BSE and NASSCOM Foundation. As like above the company credited lot of awards from various reputed raters and sources. Mahindra Holidays & Resorts India Ltd. (MHRIL) signs an MOU with West Bengal Tourism Development Corp. (WBTDC) & Sunderban Infrastructure Development Corp. (SIDC) for development of Tourism in West Bengal in February 2008. On March 2008, Mahindra signs MoU with Government of Maharashtra to invest an additional Rs 1500 crore in Chakan Greenfield. As on April of the same year, a consortium of Mahindra & Mahindra Ltd. (M&M) and ICICI Venture Funds Managements Ltd, India's leading PE player with AUM of over $ 2 billion, has signed a definitive agreement agreeing to acquire 100% stake in Metalcastello S.p.A, a leading Italian independent gear manufacturer and in the same month of the same year launched Mahindra Scorpio SUV in Chile in partnership with Fortaleza of
the Automotores Gildemeister Group. Mahindra launched new AfterMarket Business Vertical, Inaugurates first multi-brand car service centre in Mumbai on April 2008. As on May 2008, the company launched the Mahindra Pik Up Double Cab in Paraguay, in partnership with the Rieder Group. 4.3.1 SHAREHOLDING PATTERN OF MAHINDRA &MAHINDRA LTD SHAREHOLDING PATTERN (AS ON SHARES Dec 2011) Foreign Institutions Govt Holding Non Promoter Corp. Hold. Promoters Public & Others Totals
[%] 79,193,104.00 78,114,108.00 223,826.00 19,307,789.00 76,380,492.00 25,601,946.00 278,821,265.00 2.45 48.32 5.17 3.94 28.65 11.74 100
4.3.1 SHAREHOLDING PATTERN ON MAHINDRA & MAHINDRA
LTD.
Public & Others 12%
Foreign 2%
Promoters 29%
Institutions 48%
Non Promoter Corp. Hold. 4%
Govt Holding 5%
4.3.2 RETURN ON EQUITY YEAR

Equity share capital Reserves & surplus Net worth PAT Return on equity Return on equity %
2011 272.62
2010 239.07
2009 238.03 3314.88 3552.91
2008 233.4 2675.47 2908.87 857.10 0.2946 29.46
2007 111.65 1874.88 1986.53 512.67 0.2580 25.80
4989.46 4111.0 5262.08 4350.07 867.51 0.1648 16.48
1,103.37 1,068.39 0.2536 25.36 0.3007 30.07
4.3.3 PAYOUT RATIO YEAR EPS DPS PAYOUT DIVIDEND PAYOUT 4.3.4 PRICE EARNING RATIO YEAR MPS EPS PRICE RATIO 2011 383.65 30.60 EARNING 12.537 2010 697.05 44.54 15.649 2008 780.40 43.10 18.106 2008 627.05 35.26 17.78 2007 496.90 44.02 11.28 2011 30.60 10.00 0.3267 32.67 2010 44.54 11.50 0.258 25.8 2009 43.10 11.50 0.2668 26.68 2008 35.26 10.00 0.2836 28.36 2007 44.02 13.00 0.2953 29.53
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4.3.5 NORMALIZED P.E RATIO YEAR EPS EARNINGS YIELD DIVIDEND YIELD LOW HIGH LOW/EPS HIGH/EPS EARNING NORMALISED PRICE RATIO (14.809+15.703+16.907+16.022+10.603)/5 EARNING =14.808 421.66 808.35 10.086 19.532 525 873.90 11.787 19.620 15.703 456.65 1001 10.595 23.22 16.907 345 785 9.784 22.26 16.022 360 573.50 8.178 13.028 10.603 0.00967 0.0164 0.0147 0.0159 0.0261 2011 30.60 0.0264 2010 44.54 0.0638 2009 43.10 0.0552 2008 35.26 0.0562 2007 44.02 0.0885
AVERAGE PRICE 14.809
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4.3. INTRINSIC VALUE CALCULATION OF MAHINDRA & MAHINDRA LTD. DIVIDEND PAYOUT RATIO (DPOR) Average Dividend Pay-Out Ratio= Dividend pay-out ratio for 5 years/5 Average Retention Ratio= 1Average Dividend Pay-out Ratio Average Return on Equity (%)= Sum of ROE for 5 years/5 Long Term Growth Rate in Equity (g)= Average Retention Ratio* Average ROE Normalized Average P/E Ratio= Sum of P/E Ratio for 5 years/5 Projected EPS for 2012= EPS forCurrentYear*(1+Growthrate/10 0) Intrinsic Value= Projected EPS* Normalized Average P/E Ratio Projected Dividend per Share=Dividend for Current Year*(1+g %) INTERPRETATION: The calculated intrinsic value of the share of Mahindra & Mahindra Ltd is Rs.545.38 which is higher than the current market price of Rs.523.50 (as on 31st March, 2011). This reveals that the share is at under priced and should be preferred for buying. The projected values of both EPS and DPS amount to Rs.36.20 and 11.83, both of which are higher than their corresponding current values of Rs.30.60 and Rs.10.00
DPS/EPS (.3267+.258+.2668+.2836+.2953)/5 =.28
1-.28=.72
(16.48+25.36+30.07+29.46+25.80)/5 =25.434
.72 *25.434=18.312%
(12.53+15.64+18.10+17.78+11.28)/5 =15.06 30.60*(1+18.312/100)=36.20
36.20*15.06=545.38
10*(1+18.312/100)=11.83
4.4 MARUTI SUZUKI INDIA LTD The Maruti story began in the year when scooters had a waiting period and the Indian car customer had limited options. The Government of India identified the need for a small car for the Indian masses, a car that would be economical, environment friendly yet contemporary in technology. In short 'A people's car'. The result, Maruti Suzuki India Limited (MSIL) was born in February 1981. Maruti Suzuki started as a government company, with Suzuki as a minor partner, to make a people's car for middle class India. Over the years, the company's product range has widened and ownership has changed hands. A subsidiary of Suzuki Motor Corporation (SMC) of Japan, the Maruti Suzuki India Limited headquartered in Delhi, running with 3 vehicle assembly plants at Gurgaon and 1 vehicle assembly plant at Manesar. Also Maruti have 16 Regional offices. The product portfolio of the company consist 11 models with around 100 variants including Maruti 800, Omni, Alto, WagonR, Swift, Zen, Gypsy, Dzire, Versa, SX4 and Grand Vitara.Started its production in the year 1983 and launched Maruti 800. During the year 2000, Insititute of Driving Training and Research (IDTR) was launched jointly with Delhi Government to promote safe driving. In line with product, the Maruti Alto was launched. The company formulated call center in the year 2000, it was first of its kind. In the year 2001 MSIL found one new business segment, Maruti True Value was launched for sales, purchase and trade of pre owned cars in India. The Company launched Maruti finance & Insurance for the convenience of customers. As a first facelift by Maruti engineers the Maruti New Zen was launched during the year 2003 and entered into partnership with State Bank of India. A year after, the second successful facelift by Maruti engineers, New Esteem was launched in the year 2004. The Company introduced a special programme namely 'Dil se' during the
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period of 2006 for Indians living abroad or NRIs to facilitate them to gift Maruti cars online to friends and relatives back at home. In the same year 2007, the company name was changed from Maruti Udyog Limited to Maruti Suzuki India Limited and Joined hands with Gujarat Government to set up Driving and Technical Training Institute for tribal youth. The biggest draw even the year 2007 was the award for highest Automotive Customer Satisfaction Index. Maruti Suzuki scored the highest in customer satisfaction index for the eighth consecutive year. In the Initial Quality Study, Maruti Swift walked away with the highest IQS in the Premium Compact car segment during the year 2007. During the year 2008, the new model, Swift Dzire was launched. MSIL and Mundra Port and Special Economic Zone Ltd (MPSEZL) had signed an agreement on February 2008 for a mega car terminal at Mundra in Kutch district of Gujarat. The initial investment in the project may around Rs 100 crore. The Company crossed one significant milestone in February 2008; it becomes the first Indian car company to export half a million cars. Apart from the domestic market, the cumulative exports of the company crossed 500,000 units. As on March 2008, the company made pact with Shriram City Union Finance Limited - a part of Shriram Group, Chennai, to offer easy, transparent and hassle-free car finance to its customers, particularly in semi urban and rural markets. The agreement is a joint initiative of the two companies to provide competitive car finance to people in Tier-II and Tier-III cities across the country. The Company launched Maruti 800 Duo in June of the year 2008, which is a dual fuel (LPG-cum- petrol) model car. The company set up a network of component vendors, dealers and service stations and facilitated around 60 technical collaborations for Indian vendors from Japanese, European and even American partners to
upgrade technology and quality levels. MSIL have a sales network of 600 outlets in 393 towns and cities, and provide maintenance support to customers at 2628 workshops in over 1200 towns and cities (as on March 31,2008). The Company planned about proposed investments till 2010 amount of Rs. 9000 Cores. 4.4.1 SHAREHOLDING PATTERN OF MARUTI SUZUKI INDIA LTD. Shareholding Pattern as on Dec 2011 Foreign Institutions Govt Holding Non Promoter Corp. Hold. Promoters Public & Others Totals
Shares 62,961,620.00 50,238,359.00 0.00 13,591,244.00 156,618,440.00 5,500,397.00 288,910,060.00
[%] 21.79 17.39 0.00 4.70 54.21 1.90 100.00
4.4.1 SHAREHOLDING PATTERN ON MARUTI SUZUKI INDIA LTD.

Public & Others, 1.9 Foreign, 21.79
Promoters, 54.21
Institutions, 17.39
Govt Holding, 0 Non Promoter Corp. Hold., 4.7
4.4.2 RETURN ON EQUITY YEAR Equity share capital Reserves & surplus Net worth PAT Return on equity Return on equity % 2011 144.5 9,200.40 2010 144.5 8,270.90 2009 144.5 6,709.40 6,853.90 1,562.00 0.2278 22.78 2008 144.5 5,308.10 5,452.60 1,189.10 0.2180 21.80 2007 144.5 4,234.30 4,378.80 853.60 0.1949 19.49
9,344.90 8,415.40 1,218.70 0.1304 13.04 1,730.80 0.2056 20.56
4.4.3 PAYOUT RATIO YEAR EPS DPS PAYOUT DIVIDEND PAYOUT 8.41 8.47 8.44 8.61 6.83 2011 41.57 3.50 0.0841 2010 59.03 5.00 0.0847 2009 53.29 4.50 0.0844 2008 40.65 3.50 0.0861 2007 29.25 2.00 0.0683
4.4.4 PRICE EARNING RATIO
YEAR MPS EPS PRICE RATIO
2011 779.85 41.57 EARNING 18.75
2010 826.42 59.03 14.00
2009 820.20 53.29 15.39
2008 874.30 40.65 21.50
2007 421.30 29.25 14.40
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YEAR EPS EARNINGS YIELD DIVIDEND YIELD LOW HIGH LOW/EPS HIGH/EPS
2011 41.57 0.02583
2010 59.03 .07137
2009 53.29 .06497
2008 40.65 .04649
2007 29.25 .06942
.00217
.00604
.00548
.00400
.00474
516.86 931.15 11.10 20.60
700 1194.40 11.85 20.23 16.04
671.15 990.70 12.59 18.59 15.59
396.30 939.70 9.7490 23.11 16.42
300 599.80 10.25 20.50 15.375
AVERAGE PRICE 15.85 EARNING NORMALISED PRICE RATIO
EARNING (15.85+16.04+15.59+16.42+15.375)/5=15.855
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4.4.6 INTRINSIC VALUE CALCULATION OF MARUTI SUZUKI LTD DIVIDEND (DPOR) Average Dividend Pay-Out Ratio= Dividend pay-out ratio for 5 years/5 Average Retention Ratio= 1Average Dividend Pay-out Ratio Average Return on Equity (%)= Sum of ROE for 5 years/5 Long Term Growth Rate in Equity (g)= Average Retention Ratio* Average ROE Normalized Average P/E Ratio= Sum of P/E Ratio for 5 years /5 Projected EPS for 2012= EPS for CurrentYear*(1+Growthrate/100) Intrinsic Value= Projected EPS* Normalized Average P/E Ratio Projected Dividend per Share=Dividend for Current Year*(1+g %) INTERPRETATION: The calculated intrinsic value of the share of Maruti Suzuki India Ltd is Rs.824.89 which is lower than the current Market price of Rs.1289.40 (as on 31st March, 2011). This reveals that the share is at present overpriced and should be preferred for selling .The projected EPS and DPS amount to Rs.49.07 and 4.13, both of which are higher than their corresponding current values of Rs.41.57 and Rs.3.50
PAYOUT
RATIO DPS/EPS (.08+.08+.08+.08+.06)/5 =0.076
1-.076=.924
(13.04+20.56+22.78+21.80+19.49)/5 =19.534
.924*19.534=18.049%
(18.75+14+15.39+21.50+14.40)/5 =16.80 41.57*(1+18.049/100)=49.072
49.072*16.80=824.89
3.50*(1+18.049/100)=4.13
4.5 TATA MOTORS LTD Tata Sons purchased the Tatanagar shops from the Government of India on 1st June 1945 for Rs. 25.39 lakhs with the aim of immediately manufacturing steam locomotive boilers. Later it planned to manufacture complete locomotives and other engineering products. Tata Motors Ltd was incorporated in the year of 1945. In world charisma the Tata Motors Ltd (Formerly known as Tata Engineering and Locomotive Company Ltd) is the fifth-largest manufacturer of medium and heavy commercial vehicle and the second largest medium and heavy bus manufacturer. The company producing light, medium and heavy commercial vehicles and also manufacturing passenger cars, utility vehicles, excavators and machine tools in manufacturing units located at Jamshedpur, Pune, Lucknow and Pant Nagar in Uttarakhand. 1946 Tata Engineering was undertaken manufacture of 5000 'KC' broad gauge open wagons for the Indian Railway. The Managing Agency Tata Sons was transferred to Tata Industries on 1st July 1946. In the year 1948 the company made collaboration with Marshal Sons (UK) and introduced Steam Road Roller and in 1950 Collaboration signed with M/s Krauss-Maffei, West Germany for manufacture of steam locomotives. Collaboration with M/s DaimlerBenz AG, West Germany was made in the year 1954 for the manufacture of medium commercial vehicles at Jamshedpur. The company came to joint venture with Cummins Engineering Company and incorporated Tata Cummins Private Limited in Jamshedpur, Bihar, on 0ctober 20, 1993 to manufacture high horse power and emission-friendly diesel engines for medium and heavy commercial vehicles. In 1994 TataSumo - a multi-utility vehicle launched. LPT 709 - a full forward control, light commercial vehicle launched. Joint Venture Agreement signed with M/s Daimler - Benz / Mercedes - Benz for manufacture of Mercedes-Benz passenger cars in India.
Indian Space Research Organization (ISRO) and Tata Motors are working to develop a prototype of the hydrogen-powered automobile under in agreement for a pilot project. As on December 2007 Tata launched seven medium and heavy trucks in Pune, the company plans to launch 30 new models in the commercial vehicle segment. Joint venture between Fiat Group Automobiles SpA and Tata Motors, has rolled out plans for expanding production capacity and backward integration in Pune with an additional investment of Rs 2,341 crore comes under memorandum of understanding in March 2008 and also Tata Motors has entered into a definitive agreement with the Ford Motor Company for the purchase of Jaguar Land Rover, comprising brands, plants and intellectual property rights. As on April 2008, the first test a small car namely 'Nanos' roll out from Uttarakhand plant. The trail production of Nano will start in June-July from Singur, West Bengal after the equipment test and commercial production of the same will start around October. Tata Motors is working on technology that will allow its diesel generators to also use natural gas and in process of entering into a technology tie-up with the New Energy & Industrial Technology Development Organization (NEDO), a Japanese Gvt agency. To converts its generator to 'Dual-Fuel System'. The company concentrates on various initiatives which focused on cost reduction, right sizing the organization, volume / market share gains, product quality and the launch of new products have enabled the company a turnaround one in the globe. Tata Motors Limited is India's largest automobile company, with consolidated revenues of Rs.70, 938.85 crores (USD 14 billion) in 2008-09. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer.
The company's 23,000 employees are guided by the vision to be "best in the manner in which we operate best in the products we deliver and best in our value system and ethics." 4.5.1 SHAREHOLDIN PATTERN OF TATA MOTORS LTD Ownership Pattern as on Dec 2011 Foreign Institutions Govt Holding Non Promoter Corp. Hold. Promoters Public & Others Totals
No of Shares 137,812,624.00 80,506,717.00 407,181.00 2,871,889.00 182,721,830.00 45,513,028.00 449,833,269.00
% Share Holding 27.21 18.69 0.08 38.87 3.35 11.78 100.00
4.5.1 SHAREHOLDING PATTERN ON TATA MOTORS LTD

Public & Others 12% Foreign 27%
Promoters 3%
Non Promoter Corp. Hold. 39%
Institutions 19%
Govt Holding 0%
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YEAR Equity share capital Reserves & surplus Net worth PAT Return on equity Return on equity (%) 11,716.10 1,001.26 0.0818 8.18 7,453.96 2,028.92 0.2588 25.88 6,484.34 6,869.75 1,913.46 0.2785 27.85 5,154.20 5,537.07 1,528.88 0.2761 27.61 3,749.60 4,111.39 1,236.95 0.3008 30.08 12,230.15 7,839.50 514.05 385.54 385.41 382.87 361.79 2011 2010 2009 2008 2007
4.5.3 PAYOUT RATIO
YEAR EPS DPS PAYOUT DIVIDEND PAYOUT
2011 18.81 6.00 0.3222 32.22
2010 50.52 15.00 0.2969 29.69
2009 47.10 15.00 0.3184 31.84
2008 37.59 13.00 0.3458 34.58
2007 32.44 12.50 0.3853 38.53
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4.5.4 PRICE EARNING RATIO YEAR MPS EPS PRICE EARNING RATIO 2011 180.30 18.81 9.58 2010 622.70 50.52 12.32 2009 728.20 47.10 15.46 2008 931.85 37.59 24.78 2007 413.70 32.44 12.70
YEAR EPS EARNINGS YIELD DIVIDEND YIELD LOW HIGH LOW/EPS HIGH/EPS
2011 18.81 0.02614
2010 50.52 0.08113
2009 47.10 .06468
2008 37.59 .04033
2007 32.44 .07841
0.07957
.02408
.020598
.01395
.03021
470.18 828.65 11.04 19.82
530.50 841.90 10.500 16.664 13.58
650.25 997.80 13.805 21.184 17.49
400 947 10.641 25.192 17.91
300 527.90 9.247 16.27 12.758
AVERAGE PRICE 15.43 EARNING NORMALISED
PRICE EARNING (15.43+13.58+17.49+17.91+12.758)/5=15.43 RATIO
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4.5.6 INTRINSIC VALUE CALCULATION OF TATA MOTORS LTD DIVIDEND (DPOR) Average Dividend Pay-Out Ratio= Dividend pay-out ratio for 5 years/5 Average Retention Ratio= 1Average Dividend Pay-out Ratio Average Return on Equity (%)= Sum of ROE for 5 years/5 Long Term Growth Rate in Equity (g)= Average Retention Ratio* Average ROE Normalized Average P/E Ratio= Sum of P/E Ratio for 5 years /5 Projected EPS for 2012= EPS for CurrentYear*(1+Growthrate/100) Intrinsic Value= Projected EPS* Normalized Average P/E Ratio Projected Dividend per Share=Dividend for Current Year*(1+g %) INTERPRETATION: The calculated intrinsic value of Tata Motors Ltd is Rs.326.77 which is lower than its current market price of Rs.842.57 (as on 31st March, 2011). This reveals that the share is at present overpriced and should be preferred for selling. The projected values of both EPS and DPS amount to Rs.21.83 and Rs.6.96, both of which are higher than their corresponding current values of Rs.18.81 and Rs.6.00 6*(1+16.07/100)=6.9642 21.83*14.96=326.77 (9.58+12.32+15.46+24.78+12.70)/5 =14.96 18.81*(1+16.07/100)=21.83 .672*23.92=16.07% (8.18+25.88+27.85+27.61+30.08)/5 =23.92 1-.328=.672 PAYOUT RATIO DPS/EPS (.32+.29+.31+.34+.38)/5 =.328
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4.6 CALCULATION OF ALPHA & BETA 4.6.1 ASHOK LEYLAND LTD Return (y) = Closing Opening * 100 Opening YEARS 2007 2008 2009 2010 2011 4.6.1. A Calculation YEARS 1 2 3 4 5 SUM Y 29.21 43.01 12.53 -71.10 220 233.65 X(Index Return) X 36.37 39.81 54.77 -51.77 75.51 154.69 1322.77 1584.83 2999.75 2680.13 5701.76 14289.24 XY 1062.36 1712.22 686.26 3680.84 16612.2 23753.88 RETURN(Y) 29.21 43.01 12.53 -71.10 220
= nXY- (X) (Y) nX- (X) = 5*23753.88-(154.69)*(233.65) (5*14289.24) - (154.69) = 82626.08 47517.20
=1.73 Y=Y/n=233.65/5=46.73 =Y- X =46.73-1.73*30.93 = -6.77 When index moves up by30.93, the expected return from Ashok Leyland Ltd can be calculated as follows: Ri=+Rm = -6.77+1.73*30.93 = 46.73 4.6.2 HERO HONDA MOTORS LTD Return (y) = Closing Opening * 100 Opening YEARS 2007 2008 2009 2010 2011 RETURN(Y) 50.12 -11.11 -8.82 15.01 111.58 X=X/n=154.69/5=30.93
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4.6.2. A Calculation YEARS 1 2 3 4 5 SUM Y 50.12 -11.11 -8.82 15.01 111.58 156.78 X(Index Return) 36.37 39.81 54.77 -51.77 75.51 154.69 X 1322.77 1584.83 2999.75 2680.13 5701.76 14289.24 XY 1822.86 -442.28 -483.07 -777.06 8425.40 8545.85
= nXY- (X) (Y) nX- (X)
= 5*8545.85-(154.69)*(156.78) (5*14289.24) - (154.69)
= 18476.95 47517.20 = .38 Y=Y/n=156.78/5=31.35 =Y- X =31.35-.38*30.93 = 19.59 When index moves up by30.93, the expected return from Hero Honda Motors Ltd can be calculated as follows: Ri=+Rm X=X/n=154.69/5=30.93
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= 19.59+.38*30.93 = 31.3 4.6.3 MAHINDRA & MAHINDRA LTD Return (y) = YEARS 2007 2008 2009 2010 2011 4.6.3.A Calculation YEARS 1 2 3 4 5 SUM Y 87.58 77.57 -5.12 -67.94 281.72 373.81 X(Index Return) 36.37 39.81 54.77 -51.77 75.51 154.69 X 1322.77 1584.83 2999.75 2680.13 5701.76 14289.24 XY 3185.28 3088.06 -280.42 3517.25 21272.67 30782.84 Closing Opening * 100 Opening RETURN(Y) 87.58 77.57 -5.12 -67.94 281.72
= nXY- (X) (Y) nX- (X)
= 5*30782.84-(154.69)*(373.81) (5*14289.24) - (154.69)
= 96089.55
47517.20 = 2.02 Y=Y/n=373.81/5=74.76 =Y- X =74.76-2.02*30.93 = 12.28 When index moves up by30.93, the expected return from Mahindra & Mahindra Ltd can be calculated as follows: Ri=+Rm = 12.28+2.02*30.93 = 74.75 4.6.4 MARUTI SUZUKI INDIA LTD X=X/n=154.69/5=30.93
Return (y) =
Closing Opening * 100 Opening
YEARS 2007 2008 2009 2010 2011
RETURN(Y) 37.65 46.15 7.03 -47.83 183.71
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4.6.4. A Calculation YEARS 1 2 3 4 5 SUM Y 37.65 46.15 7.03 -47.83 183.71 226.71 X(Index Return) X 36.37 39.81 54.77 -51.77 75.51 154.69 1322.77 1584.83 2999.75 2680.13 5701.76 14289.24 XY 1369.33 1837.23 385.03 2476.15 13871.94 19939.68
= nXY- (X) (Y) nX- (X) = 5*19939.68-(154.69)*(226.71) (5*14289.24) - (154.69) = 64628.63 47517.20 = 1.36 Y=Y/n=226.71/5=45.34 =Y- X =45.34-1.36*30.93 = 3.27 When index moves up by30.93, the expected return from Maruti Suzuki India Ltd can be calculated as follows: Ri=+Rm = 3.27+1.36*30.93 = 45.33
X=X/n=154.69/5=30.93
4.6.5 TATA MOTORS LTD Return (y) = Closing Opening * 100 Opening YEARS 2007 2008 2009 2010 2011 4.6.5. A Calculation YEARS 1 2 3 4 5 SUM Y 29.32 37.83 -17.62 -79.20 364.25 334.58 = nXY- (X) (Y) nX- (X) = 5*33212.02-(154.69)*(334.58) (5*14289.24) - (154.69) = 114303.91 47517.20 = 2.40
RETURN(Y) 29.32 37.83 -17.62 -79.20 364.25
X(Index Return) X 36.37 39.81 54.77 -51.77 75.51 154.69 1322.77 1584.83 2999.75 2680.13 5701.76 14289.24
XY 1066.36 1506.01 -965.04 4100.18 27504.51 33212.02
Y=Y/n=334.58/5=66.91 =Y- X =66.91-2.40*30.93 = -7.32
X=X/n=154.69/5=30.93
When index moves up by30.93, the expected return from Tata Motors Ltd can be calculated as follows: Ri=+Rm = -7.32+2.40*30.93 = 66.91 4.7 COMPARISON OF ALPHA COMPANY ASHOK LEYLAND LTD HERO HONDA MOTORS LTD MAHINDRA&MAHINDRA LTD MARUTI SUZUKI INDIA LTD TATA MOTORS LTD ALPHA() -6.77 19.59 12.28 3.27 -7.32
The alpha parameters indicate what the return of the security would be when the market return is zero. The positive alpha thus represents a sort of bonus return and would be highly desirable aspect of a security; where as a negative alpha represents a penalty to the investors. Here Hero Honda Motors has highest alpha.
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4.8 COMPARISON OF BETA COMPANY ASHOK LEYLAND LTD HERO HONDA MOTORS LTD MAHINDRA&MAHINDRA LTD MARUTI SUZUKI INDIA LTD TATA MOTORS LTD
INTERPRETATION:
BETA () 1.73 .38 2.02 1.36 2.40
The beta measures the volatility of the securities returns relative to the market, the largest the beta, the more volatile the security. Here Tata Motors has highest beta. 4.9 COMPARISON OF INDIVIDUAL SECURITY RETURN COMPANY ASHOK LEYLAND LTD HERO HONDA MOTORS LTD MAHINDRA&MAHINDRA LTD MARUTI SUZUKI INDIA LTD TATA MOTORS LTD RETURN 46.73 31.35 74.75 45.33 66.91
INTERPRETATION:
From the 5 Automobile companies Mahindra & Mahindra contributing highest return at 74.75.
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4.10 TECHNICAL ANALYSIS 4.10.1 ASHOK LEYLAND LTD 4.10.1.A EXPONENTIAL MOVING AVERAGE (EMA) CHART
EMA chart
Close Price 12 EMA 50 EMA 200 EMA
2009
2010
2011
Interpretation: Moving average represents the underlying trend in the share price movements.12 day EMA indicating the short term trend, 50 day EMA indicating medium term trend and 200 day EMA indicating long term trend. In 2009& 2010 shows a bearish trend but the end of that year prices moving back to previous high level. In 2011 shows bullish trend or increasing trend.
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4.10.1. B Moving Average Convergence &Divergence chart MACD)

MACD chart
2009
2010
2011
Interpretation: In 2009 & 2010 the MACD lines are below the zero line, it indicates that the investor has buying opportunity. In 2011 the MACD lines are above the zero line, it indicate that the investor has selling opportunity. 4.10.1. C Relative Strength Index Chart (RSI)
RSI chart 70
30
2009
2010
2011
Interpretation: During 2009 & 2010 Ashok Leyland touches 70 point at many times and shown overbought position. In 2011 it indicate oversold condition by touching 30 points. 4.10.2 HERO HONDA MOTORS LTD 4.10.2.A EMA CHART
EMA chart
CLOSE PRICE
12 EMA 50 EMA 200 EMA
2009
2010
2011
Interpretation: In this graph 2009 & 2010 showing bearish trend but the end of that year prices moving back to previous high level. In 2011 shows bullish trend or increasing trend.
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4.10.2. B MACD Chart

MACD chart
2009
2010
2011
Interpretation: In 2009 & 2010 the MACD lines is above the zero line so the investor should sell their shares to earn more profit. In 2011 the MACD lines is below the zero line so its clear that the securities are worth for investment or in other terms the trend is said to have turned bullish trend.
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4.10.2.C RSI Chart

RSI chart 70
30
0
2009 2010 2011
Interpretations: During the first 2009 & 2010 this company had touch 30 point many times and its shown oversold position. In 2011, touch 70 point it indicate that overbought position.
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4.10.3 MAHINDRA & MAHINDRA LTD 4.10.3. A . EMA chart

EMA chart
CLOSING PRICE
12 EMA 50 EMA 200 EMA
2009
2010
2011
Interpretation: 12 day EMA indicating short term trend, 50 day EMA indicating medium term trend and 200 day EMA indicating long term trend. In 2009 & 2010 shows bearish trend and in 2011 shows bullish trend.
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4.10.3.B. MACD Chart

MACD chart
2009
2010
2011
Interpretation: In 2009 & 2010 the MACD lines is above the zero line so the investor should sell their shares to earn more profit. In 2011 the MACD lines is below the zero line so its clear that the securities are worth for investment.
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4.10.3.C. RSI Chart

RSI chart 70
30
0
2009 2010 2011
Interpretation: In 2009 &2010 Mahindra & Mahindra Ltd had touch 30 points at many times and shown oversold position. In 2011 company had touch 70 points it indicate that overbought position.
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4.10.4 MARUTI SUZUKI INDIA LTD 4.10.4.A EMA Chart

EMA chart
CLOSING PRICE 12 EMA 50 EMA 200 EMA
2009
2010
2011
Interpretation: The moving averages are plotted on the price charts. The curved line joining these moving averages represent the trend line. In 2009 & 2010 shows a bullish trend but the end of the year prices moving back to previous low level. In 2011 shows bearish trend.
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4.10.4.B MACD Chart

MACD chart
2007
2008
2009
Interpretation: In 2009 & 2010 the MACD lines is below the zero line so the investor should buy shares. In 2011 the MACD lines is above the zero line so the investor should sell their shares to earn more profit. 4.10.4. C.RSI Chart
RSI chart 70
30
0
2009 2010 2011
Interpretation: In 2009 & 2010 the company touch 30 point and shown oversold position. In 2011 the company touch 70 point had shown overbought position. 4.10.5 TATA MOTORS LTD 4.10.5.A. EMA Chart
EMA chart
CLOSING PRICE 12 EMA 50 EMA 200 EMA
2009 (Source: secondary data)
2010
2011
Interpretation: 12 day EMA indicating short term trend, 50 day EMA indicating medium term trend and 200 day EMA indicating long term trend. In 2009 & 2010 shows bearish trend but the end of that year prices moving back to previous high level. In 2011 shows bullish trend or increasing trend.
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4.10.5.B. MACD Chart

MACD chart
2009 (Source: secondary data)
2010
2011
Interpretation: In 2009 & 2010 the MACD lines are above the zero line so the investor should sell their shares to earn more profit. In 2011 the MACD lines are below the zero line its clear that the securities are worth for investment or in other terms the trend is said to have turned bullish.
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4.10.5.C RSI Chart

RSI chart 70
30
0
2009
2010
2011
Interpretation: In 2009 & 2010 Tata Motors had touch 70 point, it shown overbought position In 2011 company touch 30 point it indicate oversold position.
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CHAPTER-5 FINDINGS AND SUGGESTIONS

5.1 FINDINGS ASHOK LEYLAND LTD The stock is said to be over priced as the intrinsic value of the security Rs.17.42 is lower than the current market price of the security Rs.22.30 (as on 31st March 2011). respectively. The expected return from Ashok Leyland Ltd, when index moves up by 30.93% is 46.73. HERO HONDA MOTORS LTD The stock is said to be under priced as the intrinsic value of the security Rs.1581.55 is lower than the current market price of Rs.1832.55 (as on 31st March 2011). This means that the investor should sell the share as the price of the security may reduce in future. The projected EPS and DPS of the security are estimated to be Rs.94.05 and Rs.30.94 respectively. MAHINDRA & MAHINDRA LTD The stock is said to be under priced as the intrinsic value of the security Rs.545.38 is higher than the current market price of Rs.523.50 (as on 31st March 2011). The expected return from Hero Honda Motors Ltd, when index moves up by 30.93% is 31.35. This means that the investor should sell the share as the The projected Earnings per Share (EPS) and Dividend per price of the security may reduce in future. Share (DPS) of the security is estimated to be Rs.1.37 and Rs.1.09
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This means that the investor should buy the share as the The projected EPS and DPS of the security is estimated to be The expected return from Mahindra & Mahindra Ltd, when
price of the security may come up in future. Rs.36.20 and Rs.11.83 respectively. index moves up 30.93% is 74.75. MARUTI SUZUKI INDIA LTD The stock is said to be under priced as the intrinsic value of the security Rs.824.89 is lower than the current market price of Rs.1289.40 (as on 31st March 2011). This means that the investor should sell the share as the The projected EPS and DPS of the security is estimated to be The expected return from Maruti Suzuki India Ltd, when price of the security may reduce in future. Rs.49.07 and Rs.4.13 respectively. index moves up 30.93% is 45.33. TATA MOTORS LTD The stock is said to be under priced as the intrinsic value of the security Rs.326.77 is lower than the current market price of Rs.842.57 (as on 31st March 2011). This means that the investor should sell the share as the price The projected EPS and DPS of the security is estimated to The expected return from Tata Motors Ltd, when index of the security may reduce in future be Rs.21.83 and Rs.6.96 respectively. moves up 30.93% is 66.91.
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5.2 SUGGESTIONS: As per the analysis done, the following suggestions are recommended:ASHOK LEYLAND LTD The intrinsic value of the share is less than the market price. This reveals that the shares of the company are overpriced at present. In this case best suited recommendation would be to sale the shares in order to avoid future loss. HERO HONDA MOTORS LTD The intrinsic value of share is less than the market price. This reveals that the shares of the company are overpriced at present. In this case best suited recommendation would be to sale the shares in order to avoid future loss. MAHINDRA & MAHINDRA LTD The calculated intrinsic value of its share is Rs.545.38 which is higher than the current market priceRs.523.50. Here the recommendation would be to keep away from selling off the shares in anticipation of likelihood profits. MARUTI SUZUKI INDIA LTD The calculated intrinsic value of its share is Rs.824.89 which is lower than its present market price Rs.1289.40 (as on 31st March 2011). This reveals that the shares of the company are overpriced at present. In this case best suited recommendation would be to sale the shares in order to avoid future loss. TATA MOTORS LTD The calculated intrinsic value of its shares is Rs.326.77 which is higher than its current market price Rs.842.57 (as on 31st March 2011). This
reveals that the shares of the company are overpriced at present. In this case best suited recommendation would be to sale the shares in order to avoid future loss.
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5.3 CONCLUSION In this report Security Analysis of major five automobile companies is done. It comprises of fundamental analysis, risk measurement and technical analysis. Data were collected from secondary sources. The analysis is done with five years data for fundamental analysis and three years data for technical analysis. The fundamental analysis is focusing on intrinsic value of shares, which have effective use in buying strategies. The current market price is compared with future predicted price to determine the whether the share is under priced or overpriced. The technical analysis of the securities revealed their performance in the stock market indicating the bullish and bearish trend. Technical analysis is an approach which concentrates on price movements and ignores the fundamentals of the share. The purpose of the whole project was to identify the performance of securities of the selected companies in particular and that of the automobile industry in general. From the analysis it was identified that each security has got the potential to produce more return than the market index. No system has consistently outperformed the market. There is no system that does not call for human judgment and input. All systems require thought and sum assumptions.
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BIBLIOGRAPHY
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BOOKS Preethi Singh, 2006, Investment Management, Himalaya Publishing house New Delhi. Kevin S, 2007, Security Analysis and Portfolio Management, Prentice Hall of India New Delhi. Kevin S, 2003, Portfolio Management, Prentice hall of India New Delhi. khan M.Y and Jain P.K,2006, Financial Management, Tata McGraw Hill Publishing company Ltd New Delhi Kothari C.R .2001.Reserch Method And Technique.Wishwa Prakashan New Delhi Pandey I.M, 2008, Financial Management, Tata McGraw Hill Publishing company Ltd New Delhi Pandian Punithavathy, 2008, Security Analysis and Portfolio Management, Vikas Publishing Press New Delhi. WEBSITES http://www.cochin stock exchange.com http://www.Bombay stock exchange.com http://www.Moneycontrol.com http://www.Capitaline.com http://www.Ashokleyland.com http://www.Herohonda.com http://www.Maruthisuzukiinia.com http://www.Mahindra&mahindra.com http://www.Tatamotors.com
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SECURITY ANALYSIS OF MAJOR FIVE AUTOMOBILE COMPANIES LISTED IN INDIAN IN STOCK EXCHANGE

1.1 INTRODUCTION: A security purchased for investment purposes, rather than

PGI SOM, Anna Universty

PGI SOM, Anna Universty

PGI SOM, Anna Universty

PGI SOM, Anna Universty

PGI SOM, Anna Universty

PGI SOM, Anna Universty

1.4 OBJECTIVES OF THE STUDY:

Exponential Moving Average (EMA) Moving Average Convergence and Divergence(MACD)

PGI SOM, Anna Universty

Relative Strength Index (RSI)

1.8PERIOD OF THE STUDY:

1.9 DURATION OF THE STUDY:

PGI SOM, Anna Universty

CHAPTER-2 REVIEW OF LITERATURE

The performance of the company depends on the performance of

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PGI SOM, Anna Universty

Intrinsic Value Calculation:

RISK MEASURING TOOLS

PGI SOM, Anna Universty

PGI SOM, Anna Universty

both the brokers and the Technical Analyst.

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CHAPTER -3 COMPANY PROFILE

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CHARGES (nonrefundable) Rs.750 Nil Rs.1000 Nil

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SWOT ANALYSIS OF SHAREKHAN

Volatility of the share market. Competitors.

PGI SOM, Anna Universty

PGI SOM, Anna Universty

MINIMUM AMOUNT 5000 500

PGI SOM, Anna Universty

PGI SOM, Anna Universty

PGI SOM, Anna Universty

CHAPTER-4 ANALYSIS AND INTERPRETATION

Shares 346,774,644.00 276,695,702.00 1,109,360.00 32,900,749.00 513,618,712.00 159,239,150.00 13,303,383,17.00

[%] 26.07 20.80 0.08 2.47 38.61 11.98 100

4.1.1 SHAREHOLDING PATTERN ON ASHOK LEYLAND LTD.

Institutions 21% Non Promoter Corp. Hold. Govt Holding 2% 0%

(Source: secondary data)

4.1.2 RETURN ON EQUITY

133.03 3340.86 3473.89 190.00 0.0546 5.46

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4.1.5 NORMALIZED P.E RATIO

2011 1.26 0.0238

2010 3.27 0.09237

2009 3.12 0.08125

2008 2.50 0.06203

2007 2.14 0.10166

23.16 43.58 8.355 15.374 11.86

26.15 57.50 7.996 17.58 12.788

29.10 53.00 9.326 16.98 13.153

20.40 42.75 8.16 17.1 12.63

17.00 21.08 7.94 9.836 8.9

PRICE EARNING (11.86+12.78+13.15+12.63+8.9 )/5=59.32/5=11.864 RATIO

PGI SOM, Anna Universty

DPS/EPS (.7936+.4587+.4807+.48+.4672)/5 =.5360 1-.5360=.464

(14.40+10.82+12.30+16.12+9.836)/5 =12.69 1.26*(1+9.0016/100)=1.3734

Shares 57830555.00 73281272.00 241826.00 16279789.00 59893658.00 16900582.00 278,821,265.00