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A Comparative Study on Fundamental and Technical Analysis as an Indicator for Investment Decision- Making

Made By:- TARUN CHAWLA Roll no. :- Cun120551017 CHITKARA BUSINESS SCHOOL

INTRODUCTION
KARVY, is a premier integrated financial services provider. Ranked among the top ten in the country in all its business segments. Provide services over 16 million individual investors in various capacities, and provides investor services to over 300 corporate.

Covers the entire spectrum of financial services such as :


Stock broking, Depository Participants, Distribution of financial products.

Financial Instruments
Mutual funds
Insurance Broking
Commodities Broking

Bonds

Merchant Banking & Corporate Finance

IPO's

Fixed deposit

Equities

MISSION AND VISION STATEMENT

Its Competition
Fortune India Ltd India Infoline Religare Securities Stock Holding Motilal Oswal

Fundamental analysis
Fundamental analysis is the study of economic, industry, and company conditions in an effort to determine the value of a company's stock. Fundamental analysis typically focuses on key statistics in a company's financial statements to determine if the stock price is correctly valued.

EIC Framework
Fundamental Analysis
The Analysis of economy, industry and company constitute the main activity in the fundamental approach to security analysis. And can be viewed as different stages in investment decision making process.
Company Analysis Industry analysis

Economy Analysis

Three tier analysis depict that company performance dependent not only on its own effort but also on the general industry and economy factor.

ECONOMIC ANALYSIS

In the economic analysis we study these following macro-economic variables.


Economic Growth

Populations Monsoons and Agriculture Production Natural resources and availability of raw material Industrial Productions Inflation Interest rate Foreign exchange reserve Balance of payment position Budget deficits

Industry Analysis
The industry analysis should take in to account the following factors as influence the performance of the company, whose share prices are to be analyzed.

The past performance of the industry. Growth rate of the industry The performance of the product and technology of the industry. Role of government in the industry Labor conditions. Rivalry among existing players Industry life cycle.

Company Analysis
Qualitative Factors Management of the company Long-term vision of the company Strategic position of the company in the market. Technology Ratio Analysis Profitability of the company Liquidity of the company Solvency of the company Activity level of the company

TECHNICAL ANALYSIS
It is a security analysis technique that claims the ability to forecast the future direction of prices through the study of past market data, primarily price and volume. Technical analysts, sometimes called "chartists", may employ models and trading rules based on price and volume transformations. Techniques like the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, cycles or, classically, through recognition of chart patterns are used.

The Dow Theory; a backbone of technical analysis


The Dow Theory, named after its originator, Charter Dow, is considered to be first theory of technical analysis. Dow theory is based on the hypothesis that the stock market does not perform on a random basis.

Important Tools of Technical Analysis


Support and Resistance Trend line

Trend lengths

Volume

Technical Charts
Simple chart OHLC

Candle Stick

Details of Actual Work Done


I have to tell the client about D-MAT account. Selling of D-MAT account. Telemarketing. CRM. Live trading through Terminals. Data survey to know about investors preference.

Part 2 Research
A Comparative Study on Fundamental and Technical Analysis as an Indicator for Investment Decision- Making

Research Methodology
Sources of Data- Primary as well as Secondary Research Design- Descriptive Design SAMPLING METHOD -Convenient Sampling SAMPLE SIZE- Sample size was 210 including small investors, speculators, businessmen and students. The interview was conducted inside the city of Jammu, Udhampur and Kashmir only.

Objectives of the study


Whether people invest in stock market? How much returns one expects by investing in stock market? Whether investors believe in Technical Analysis and/or Fundamental Analysis? Do people use Technical Indicators at the time of investment decision-making? Do Technical Analysis better than Fundamental Analysis as an indicator?

OUTCOMES OF THE SURVEY


Following are the outcomes that have been revealed from the survey: PEOPLE WHO INVEST IN STOCK MARKET As a part of this study it was found that out of 200 people 160 people invest in stock market where as the rest 40 has no believe on the stock market.

160

40

40

Invest Do not invest

RETURN EXPECTED PER ANNUM


Interpretation: Out of 160 people that invest in stock market, most of the investors i.e., 61 in number expect a return of more than 50% percent per annum, where as 48 investor expect a return of20-50% p.a. 32 investors like 10-20 percent return per annum and 19

person who is satisfied with an expected return of less than 10% p.a

Return expected per annum


12% 38%

20%
Less than 10% 10%-20% 20%-50% More than 50% 30%

STOCKS IN WHICH INVESTORS PREFER TO INVEST IN


Interpretation: Out of 160 investors, 66 investors used to invest in midcap stocks, 54 in blue-chips and not a single investor in penny shares. It indicates that most of the investors have a strong believe on midcap stocks.

22% 34% 3% Blue Chip Mid Cap Penny Shares All 41%

INVESTORS TRADING INTRADAY


INVESTORS TRADING INTRADAY
33%

Investors trading intraday Practice

67%

Investors trading intraday Don't Practice

Out of 160 investors, 53 investors practice intraday where as 107 dont want to take much risk by doing intraday trading.

Attitude towards the following Financial Instruments, in the Indian Capital Market
70

60

50

40

Shares
Debentures Mutual Funds

30

Bonds

20

10

0 Highly Favorable Favorable Some What Favorable Not Very Favorable Not at all favorable

ANALYSIS INVESTORS BELIEVE UPON


80 70 60

50
40 30 20 10 0 Fundamental Analysis Technical Analysis Both None Series1

Interpretation: It was revealed that a major portion of the


investors believe in both Technical Analysis as well as in Fundament Analysis as 74 investors believe on both.

INVESTORS WHO BELIEVES ON DOWTHEORY


80 70 60 50 40 30 20 10 0 Use Don't Use Series1

Interpretation: Out of Investors who believe in Technical analysis, 43 investors uses Dow theory for investment

TYPE OF CHARTS USED BY INVESTORS


Line Chart 6 Bar Chart 11 Candle Stick Chart 45 Point & Figure Chart 9 All 34 None 6

45 40 35 30 25 20 15 10 5 0 Line Chart Bar Chart Candle Stick Chart Point & Figure Chart All Non Series1

IS TECHNICAL ANALYSIS AN INDICATOR FOR INVESTMENT DECISION-MAKING?


In Favour 101 Against 48 Can't Say 11

Can't Say

Against

Series1

In Favour

20

40

60

80

100

120

Findings
Unlike Fundamental Analysis, Technical Analysis is also very much important to play in the stock market Fundamental Analysis tells about right choice where as Technical Analysis tells about the right time to enter or exit from the market. Technical Analysis assumes that history tends to repeat itself, but it is not wise to believe that the same trend wills occur next. Among the various types of charts the Candle-Stick Chart is the most effective and acceptable tool to evaluate the performance of a stock and forecast the future.

When an investor looks in to the numerous types of chart patterns, it creates a lot of confusion and expectations in the minds of the investors. In trading, volumes can easily determine whether the demand side is greater or supply side is greater for stocks at any given point of time. Most of the investors are not aware of the sophisticated and well designed tools of technical analysis. They invest without going through the technical analysis. Though Technical Analysis plays a lions role to decide investment pattern as Fundamental Analysis, it cannot be treated as a substitute to Fundamental Analysis.

Suggestions
Technical analysis is a game of charts and figures. So, at the time of taking any decision regarding. Instead of looking in to all chart patterns, it is good to follow a single chart pattern and to draw timely conclusion by interpreting that. Market never tells anything of its own! Its the investor who has to look in to the market and catch up the indicator to forecast and expect the market trend. Most of the investors assume that by using charts and patterns, they can earn much by purchasing in low and selling at high prices. But, it is not so easy as they think. So, such believes should be rooted out from mind before looking towards market.

Limitation of the study


The study consists of detailed theoretical explanations. Sample Size may not be sufficient to interpret the right result. Respondents may have given wrong answer to the questions. More importance has been given to the subject matter of Technical Analysis only. The study may act as a magic-pedia for a layman having no basic knowledge regarding securities market. Confidentiality of information was the biggest limitation that corporate people and investors were not willing to share.

BIBILIOGRAPHY & WEBLIOGRAPHY


BIBLIOGRAPHY: Bhat, Sudhindra: Security Analysis And Portfolio Management, Excel Books, First Edition, 2008 Singh, Preeti: Investment Management, Himalaya Publishing House, 14th Edition, 2006 NCFM Module of Fundamental analysis and Technical analysis WEBLIOGRAPHY: www.moneycontrol.com www.trending123.com www.investopedia.com www.nseindia.com www.wikipedia.com www.metastock.com www.stockcharts.com www.traderslog.com www.bseindia.com

Success is simple. Do what's right, the right way, at the right time. SOCHKAR, SAMAJHKAR, INVESTKAR