SAAB MARFIN MBA                   A Project Report                          On       “Fundamental & Technical Analysis”   ...
SAAB MARFIN MBA                 CONTENTS     SI.no                Contents                Page                            ...
SAAB MARFIN MBA     8     Conclusions                         80     9     Bibliography                        81Fundament...
SAAB MARFIN MBA                          Executive SummaryProject Title : Fundamental Analysis and Technical Analysis of U...
SAAB MARFIN MBA      To provide investors with a basket of securities to be stay invested      to have a sound portfolio.R...
SAAB MARFIN MBA     Management discussion give investors a better understanding of     what the company does and usually p...
SAAB MARFIN MBA      Long term investors can include Unitech, because the growth rates     and earnings are good compared ...
SAAB MARFIN MBAFundamental & Technical Analysis MBA FINANCE   -8-
SAAB MARFIN MBA                   INTRODUCTION TO CAPITAL MARKETSIntroduction to Capital MarketsTransfer of resources from...
SAAB MARFIN MBAformal market. The versions of forward in formal market are futures andoptions. In futures market, standard...
SAAB MARFIN MBA    Augments the quantities of real savings and capital formation from    any given level of national incom...
SAAB MARFIN MBAInternational LinkageThe securities market facilitates the internationalization of an economy bylinking it ...
SAAB MARFIN MBAintermediaries, the number of listed stocks, market capitalization, tradingvolumes and turnover on stock ex...
SAAB MARFIN MBAThe Exchange has a nation-wide reach with a presence in 417 cities andtowns of India. The systems and proce...
SAAB MARFIN MBANational Stock Exchange (NSE)The National Stock Exchange of India Limited has genesis in the report ofthe H...
SAAB MARFIN MBA   Nov-92     Incorporation   Apr-93     Recognition as a stock exchange   May-93     Formulation of busine...
SAAB MARFIN MBA     Mar-05    ‘India Innovation Award’ by EMPI Business School, New Delhi     Jun-05    Launch of Futures ...
SAAB MARFIN MBA         Credit Rating Agencies         R& T Agents - Registrars to Issue         Stock Brokers         Cus...
SAAB MARFIN MBA      Private Placement      Preferential Offer/Rights Issue      Internet BrokingDependence on Securities ...
SAAB MARFIN MBAHouseholdAccording to the RBI data, the household sector accounted for 84.8 % ofgross domesticsavings in Fi...
SAAB MARFIN MBA                              About KARVYThe Karvy group was formed in 1983 at Hyderabad, India. Karvy rank...
SAAB MARFIN MBAinto the field of registry and share accounting by 1985. Since then, Karvyhave utilized its experience and ...
SAAB MARFIN MBAKARVY-MilestonesAT PRESENT STATUS OF KARVYPresently Karvy is a member of National Stock Exchange (NSE), the...
SAAB MARFIN MBAEvery 50th Indian is serviced by KARVY Every 20th trade in stock marketis done through KARVY. Every 6th Inv...
SAAB MARFIN MBAFundamental & Technical Analysis MBA FINANCE   - 25 -
SAAB MARFIN MBA                             Level-II                       Regional Branch                            Head...
SAAB MARFIN MBA        STUDY OF COMPANY PROFILE WITH RESPECT TO                        Mc KINSEY’S 7S MODELSTRATEGY:In mod...
SAAB MARFIN MBA      Build   in-house    processes     that   will    ensure    transparent   and      harmonious relation...
SAAB MARFIN MBABelow the Operations Divisions there are sub divisions namely Registryand Investor Services (RIS), Deposito...
SAAB MARFIN MBAthe report itself is reviewed. To add to this repository of information,Karvy publish a monthly magazine Th...
SAAB MARFIN MBAto a position among the top distributors for equity and debt issues withan estimated market share of 15% in...
SAAB MARFIN MBA      IndusInd Bank Ltd      ICICI Bonds – March 97      ICICI Bonds – Dec 97      ICICI Safety Bonds March...
SAAB MARFIN MBA      ICICI Bonds – 96      ICICI Bonds – 97- I      ICICI Bonds – 97 – II      ICICI Safety Bonds March 98...
SAAB MARFIN MBA       STUDY OF FUNCTIONAL DEPARTMENTS OF KARVYIn Karvy the functions are mainly divided into two parts nam...
SAAB MARFIN MBAMaintenance includes preventive, breakdown and general maintenance.Preventive maintenance shall be done as ...
SAAB MARFIN MBASystem Administration Department                           Dy. General Manager                             ...
SAAB MARFIN MBAholiday’s etc. Intrinsic motivation is concerned with the feeling of havingaccomplished something worthwhil...
SAAB MARFIN MBA                      SERVICE PROFILE OF THE                   KARVY GROUP OF COMPANIESKarvy Stock Broking ...
SAAB MARFIN MBAmarket, while a weekly report, called Karvy Bazaar Baatein, gives moreinformation on the immediate trends i...
SAAB MARFIN MBAAdvisory ServicesUnder its retail brand ‘Karvy – the Finapolis, it delivers advisory servicesto a cross-sec...
SAAB MARFIN MBAKarvy’s service enhancements such as ‘Karvy Converz, a full-fledged callcenter, a top-line website (www.kar...
SAAB MARFIN MBAtakeover defense mechanisms have elevated its relationship with theclient to one based on unshakable trust ...
SAAB MARFIN MBAKarvy Computershare Pvt. LimitedKarvy have traversed wide spaces to tie up with the world’s largesttransfer...
SAAB MARFIN MBAKarvy Insurance Broking Private LimitedAt Karvy Insurance Broking Pvt. Ltd., it provide both life and non-l...
SAAB MARFIN MBAtrading                                                             platform.Regular trading workshops and ...
SAAB MARFIN MBA                      THEROTICAL FRAMEWORKFUNDAMENTAL ANALYSIS:Fundamental analysis is the examination of t...
SAAB MARFIN MBA                             Economy analysisThe economy is the overall economic environment in which all f...
SAAB MARFIN MBAemerging economies such as India and China have a share of 1.82 and5.41 respectively.Find next page the top...
SAAB MARFIN MBAChina                  10       9.5India                  8.4      7.8Indonesia              6        6.3Ma...
SAAB MARFIN MBA1982-83 to 17 per cent in 2007-08. Yet this sector continues to supportmore than half a billion people prov...
SAAB MARFIN MBAof the total consumer goods basket, despite reasonable growth in thenon-durables.Dimension of Indian Econom...
SAAB MARFIN MBAmonths of the current financial year. The growth of 9 per cent duringApril-December 2007, when viewed again...
SAAB MARFIN MBAInterest rates: interest rates affect the cost of financing to the firms.Higher the interest rates, higher ...
SAAB MARFIN MBAInflation: The Wholesale Price Index (WPI), which is available on a weeklybasis, continues to be the most p...
SAAB MARFIN MBAInfrastructure: with the rapid growth of the economy in recent years theimportance and the urgency of remov...
SAAB MARFIN MBA                           Industry AnalysisGrowth of Construction Industry:Since the beginning of economic...
SAAB MARFIN MBAThe overall cost for the construction industry as the percentage of sales is90.27% from Rs87 billion in Dec...
SAAB MARFIN MBARs1,200 billion, is one of the most ambitious projects currently underwayin the nation for strengthening th...
SAAB MARFIN MBABudget 2008-09India is on the verge of witnessing a sustained investment phase ininfrastructure buildup. Wi...
SAAB MARFIN MBA      The Bharat Nirman and water irrigation programmes will benefit      companies involved in road constr...
SAAB MARFIN MBAPORTER’S FIVE FORCE MODELSupply        Past 2-3 years have seen a substantial increase in the              ...
SAAB MARFIN MBA                               COMPANY ANALYSISEstablished in 1971, Unitech today is India’s leading real e...
SAAB MARFIN MBAHeights Greater    Noida           Multi-StoriedCascades Greater Noida                    Multi-StoriedVerv...
SAAB MARFIN MBAof raw materials could impact company’s performance. While the prices ofcement and steel arebeyond company’...
SAAB MARFIN MBALiquidity ratios:    Ratios                         Industry      Company    Current Ratio                 ...
SAAB MARFIN MBATurnover ratios:Ratios                        Industry        Company Total Asset Turnover Ratio           ...
SAAB MARFIN MBA        Dividend Yield            0.47           0.13   P/E of company is higher than industry average; it ...
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  1. 1. SAAB MARFIN MBA A Project Report On “Fundamental & Technical Analysis” Undertaken for: KARVY Stock Broking Limited.Fundamental & Technical Analysis MBA FINANCE -1-
  2. 2. SAAB MARFIN MBA CONTENTS SI.no Contents Page no 1 Executive Summary 1-4 2 Introduction to the capital market 5-14 3 Company Profile 15-37 Theoretical Framework 4 Fundamental analysis 38 4.1 Economic Analysis 39-46 4.2 Industry Analysis 47-51 4.3 Company analysis 52-59 5 Technical analysis 60-76 6 Findings 77-78 7 Recommendations 79Fundamental & Technical Analysis MBA FINANCE -2-
  3. 3. SAAB MARFIN MBA 8 Conclusions 80 9 Bibliography 81Fundamental & Technical Analysis MBA FINANCE -3-
  4. 4. SAAB MARFIN MBA Executive SummaryProject Title : Fundamental Analysis and Technical Analysis of Unitech Ltd.Company and Place: KARVY Stock Broking Ltd. DharwadResearch Process: KARVY Stock Broking Ltd. Is a premier financial services provider &ranked top five in the country. Recently the capital market crashedbecause of many reasons investors lost heavy amount But fundamental &Macro factors Indian market is good. Stability in market is not therecurrently therefore some of the investor who lost money in market crash,so many of them are shaky to enter into market again. Therefore gettinginvestor confidence is more important which will happen when the marketstabilizes. So for that matter broking firms should provide properguidance to their investors for facilitating their decision making ininvestments.Research Objectives:Main Objective: To know the future increase and decrease of stock pricein selected company stocks through Fundamental And Technical Analysis.Sub Objectives: To understand how best we can use this analysis is to meet the financial goal of the investors. To understand the effect of Industry specific factors on the stock prices through Industry Analysis. To know which securities to be bought and when to be bought. To know which securities to be sold and when to sell.Fundamental & Technical Analysis MBA FINANCE -4-
  5. 5. SAAB MARFIN MBA To provide investors with a basket of securities to be stay invested to have a sound portfolio.Research Plan:The data collected for the study is secondary data. The data I have usedfor the study is 1. Historical shares value of the stocks collected from www.nseindia.com 2. The balance sheet and Income statement got from companies web site. 3. Some of the information about the industry is collected from the web site.The Measurement TechniquesThe following techniques are used for the study.1. The bar chart2. Candlestick charting3. Point & figure chart4. Moving average.5. Exponential moving average (EMA)6. The relative strength index (RSI)7. Oscillators (ROC, RSI, MACD,STOCHASTICS)Analysis: Using MS-ExcelFindings:General: One of the most important areas for any investor to look when researching a company is the financial statement. Financial reports are required by law and are published both quarterly and annually.Fundamental & Technical Analysis MBA FINANCE -5-
  6. 6. SAAB MARFIN MBA Management discussion give investors a better understanding of what the company does and usually points out some key areas where they did well. Audited financial reports have much more credibility than unaudited ones. The income statement takes into account some non-cash items such as depreciation. The cash-flow statement strips away all non-cash items and tells you how much actual money the company generated.For Stock: First, the projected MPS of the stock next three years are Rs.231.05, Rs.286.03 and Rs.352.68. Short term support for scrip: 265-275; Next support has been established at 150-165. Long term target by technical analysis is 620-40 but this is unlikely to happen in the medium term because short term trend has been bearish and long term trend has been flat and undergoing long consolidationFor market: Short term support or intermediate support: 4500-4600; next long term support lies at3100-3150 Resistance for Nifty is at present is at 6000 Short term and intermediate trend has been bearish and long term trend is still bullish. Long term nifty target is a 6980- 7020.Recommendations:Fundamental & Technical Analysis MBA FINANCE -6-
  7. 7. SAAB MARFIN MBA Long term investors can include Unitech, because the growth rates and earnings are good compared to others stocks. Therefore investors can include this in their portfolio to earn the higher return on their investment. The Long term investors should buy the stocks fair value found out by the fundamental analysis. Short term investors should look on various support and resistance of stocks to buy or sell and make profit.Conclusion: Stock market or capital market provides the industry with a lot of capital needed by the industry, which leads to the growth of the industry and economy as a whole; hence the stock market plays an important role in the development of the industry. Some times Using Technical and fundamental analysis individually leads to incorrect results hence both Fundamental and technical analysis should be used at a time to get the desired result. Fundamental analysts study everything from the overall economy and industry conditions, to the financial condition and management of companies before deciding on any particular stock. Technical analyst’s look for peaks, bottoms, trends, patterns and other factors affecting a stocks price movement and then make buy/sell decisions based on those factors.Fundamental & Technical Analysis MBA FINANCE -7-
  8. 8. SAAB MARFIN MBAFundamental & Technical Analysis MBA FINANCE -8-
  9. 9. SAAB MARFIN MBA INTRODUCTION TO CAPITAL MARKETSIntroduction to Capital MarketsTransfer of resources from those with idle resources to others who have aproductive need for them is perhaps most efficiently achieved through thesecurities markets. Stated formally, securities markets provide channelsfor allocation of savings to investments and thereby decouple these twoactivities. As a result, the savers and investors are not constrained bytheir individual abilities, but by the economy’s abilities to invest and saverespectively, which inevitably enhances savings and investment in theeconomy.Market SegmentsThe securities market has two interdependent and inseparable segments,the new issues (primary market) and the stock (secondary) market. Theprimary market provides the channel for sale of new securities while thesecondary market deals in securities previously issued. The price signals,which subsume all information about the issuer and his businessincluding associated risk, generated in the secondary market, help theprimary market in allocation of funds. The issuers of securities issue(create and sell) new securities in the primary market to raise funds forinvestment and/or to discharge some obligation. They do so eitherthrough public issues or private placement. There are two major types ofissuers who issue securities. The corporate entities issue mainly debt andequity instruments (shares, debentures, etc.), while the governments(central and state governments) issue debt securities (dated securities,treasury bills).The secondary market enables participants who hold securities to adjusttheir holdings in response to changes in their assessment of risk andreturn. They also sell securities for cash to meet their liquidity needs. Avariant of secondary market is the forward market, where securities aretraded for future delivery and payment. Pure forward is out side theFundamental & Technical Analysis MBA FINANCE -9-
  10. 10. SAAB MARFIN MBAformal market. The versions of forward in formal market are futures andoptions. In futures market, standardized securities are traded for futuredelivery and settlement. These futures can be on a basket of securitieslike an index or an individual security. Incase of options, securities are traded for conditional future delivery.There are two types of options – a put option permits the owner to sell asecurity to the writer of options at a predetermined price while a calloption permits the owner to purchase a security from the writer of theoption at a predetermined price. These options can also be on individualstocks or basket of stocks like index. Two exchanges, namely NSE andBSE provide trading of derivatives of securities.Products and ParticipantsSavings are linked to investments by a variety of intermediaries through arange of complex financial products called “securities” which is defined inthe Securities Contracts (Regulation) Act, 1956. Which includes shares,scrip’s, stocks, bonds, debentures, debenture stock, or other marketablesecurities of like nature in or of any incorporate company or bodycorporate, government securities, derivatives of securities, units ofcollective investment scheme, security receipts, interest and rights insecurities, or any other instruments so declared by the centralgovernment These demand for and supply of securities and fundsdetermine, under competitive market conditions in goods and securitiesmarket, the prices of securities.Securities Market and Economic GrowthA well functioning securities market is conducive to sustained economicgrowth. There have been a number of studies, starting from World Bankand IMF to various scholars, which have established robust relationshipnot only one way, but also the both ways, between the development inthe securities market and the economic growth.The securities market fosters economic growth to the extent that it-Fundamental & Technical Analysis MBA FINANCE - 10 -
  11. 11. SAAB MARFIN MBA Augments the quantities of real savings and capital formation from any given level of national income, Increases net capital inflow from abroad, Raises the productivity of investment by improving allocation of investible funds, and (d) Reduces the cost of capital.Fundamental & Technical Analysis MBA FINANCE - 11 -
  12. 12. SAAB MARFIN MBAInternational LinkageThe securities market facilitates the internationalization of an economy bylinking it with the rest of the world. This linkage assists through theinflow of capital in the form of portfolio investment. Moreover, a strongdomestic stock market performance forms thebasis for well performing domestic corporate to raise capital in theinternational market. This implies that the domestic economy is openedup to international competitive pressures, which help to raise efficiency. Itis also very likely that existence of a domestic securities market will detercapital outflow by providing attractive investment opportunities withindomestic economy.There are also other developmental benefits associated with the existenceof a securities market. The securities market provides a fast-rate breeding ground for the skills and judgment needed for entrepreneurship, risk bearing, portfolio selection and management. An active securities market serves as an ‘engine’ of general financial development and may, in particular, accelerate the integration of informal financial systems with the institutional financial sector. Securities directly displace traditional assets such as gold and stocks of produce or, indirectly, may provide portfolio assets for unit trusts, pension funds and similar FIIs that raise savings from the traditional sector. The existence of securities market enhances the scope, and provides institutional mechanisms, for the operation of monetary and financial policyA Profile of Indian Securities MarketThe past decade in many ways has been remarkable for securities marketin India. It has grown exponentially as measured in terms of amountraised from the market, number of stock exchanges and otherFundamental & Technical Analysis MBA FINANCE - 12 -
  13. 13. SAAB MARFIN MBAintermediaries, the number of listed stocks, market capitalization, tradingvolumes and turnover on stock exchanges, and investor population. Themarket has witnessed fundamental institutional changes resulting indrastic reduction in transaction costs and significant improvements inefficiency, transparency and safety.Securities and Exchange Board of India (SEBI)With the objectives of improving market efficiency, enhancingtransparency, checking unfair trade practices and bringing the Indianmarket up to international standards, a package of reforms consisting ofmeasures to liberalize, regulate and develop the securities market wasintroduced during the 1990s. This has changed corporate securitiesmarket beyond recognition in this decade. The practice of allocation ofresources among different competing entities as well as its terms by acentral authority was discontinued. The secondary market overcame thegeographical barriers by moving to screen-based trading. Trades enjoycounterparty guarantee.Bombay Stock Exchange (BSE)Bombay Stock Exchange Limited is the oldest stock exchange in Asia witha rich heritage. Popularly known as "BSE", it was established as "TheNative Share & Stock Brokers Association" in 1875. It is the first stockexchange in the country to obtain permanent recognition in 1956 fromthe Government of India under the Securities Contracts (Regulation) Act,1956.The Exchanges pivotal and pre-eminent role in the development ofthe Indian capital market is widely recognized and its index, SENSEX, istracked worldwide. With Demutualisation, the trading rights andownership rights have been de-linked effectively addressing concernsregarding perceived and real conflicts of interest. The Exchange isprofessionally managed under the overall direction of the Board ofDirectors. The Board comprises eminent professionals, representatives ofTrading Members and the Managing Director of the Exchange.Fundamental & Technical Analysis MBA FINANCE - 13 -
  14. 14. SAAB MARFIN MBAThe Exchange has a nation-wide reach with a presence in 417 cities andtowns of India. The systems and processes of the Exchange are designedto safeguard market integrity and enhance transparency in operations.During the year 2004-2005, the trading volumes on the Exchangeshowed robust growth. The Exchange provides an efficient andtransparent market for trading in equity, debt instruments and derivatives.The BSEs On Line Trading System (BOLT) is a proprietary system of theExchange and is BS 7799-2-2002 certified. The surveillance and clearing& settlement functions of the Exchange are ISO 9001:2000 certified.BSE as a brand is synonymous with capital markets in India. The BSESENSEX is the benchmark equity index that reflects the robustness of theeconomy and finance. At par with international standards, First in India to introduce Equity Derivatives First in India to launch a Free Float Index First in India to launch US$ version of BSE Sensex First in India to launch Exchange Enabled Internet Trading Platform First in India to obtain ISO certification for Surveillance, Clearing & Settlement BSE On-Line Trading System’ (BOLT) has been awarded the globally recognized the Information Security Management Systemstandard First to have an exclusive facility for financial training Moved from Open Outcry to Electronic Trading within just 50 days An equally important accomplishment of BSE is the launch of a nationwide investor awareness campaign - Safe Investing in the Stock Market - In 2002, the name The Stock Exchange, Mumbai, was changed to BSE.Fundamental & Technical Analysis MBA FINANCE - 14 -
  15. 15. SAAB MARFIN MBANational Stock Exchange (NSE)The National Stock Exchange of India Limited has genesis in the report ofthe High Powered Study Group on Establishment of New Stock Exchanges,which recommended promotion of a National Stock Exchange by financialinstitutions (FII’s) to provide access to investors from all across thecountry on an equal footing. Based on the recommendations, NSE waspromoted by leading Financial Institutions at the behest of theGovernment of India and was incorporated in November 1992 as atax-paying company unlike other stock exchanges in the countryOn its recognition as a stock exchange under the Securities Contracts(Regulation) Act, 1956 in April 1993, NSE commenced operations in theWholesale Debt Market (WDM) segment in June 1994. The Capital Market(Equities) segment commenced operations in November 1994 andoperations in Derivatives segment commenced in June 2000.NSE has been promoted by leading financial institutions, banks, insurancecompanies and other financial intermediaries. NSE is one of the firstde-mutualised stock exchanges in the country, where the ownership andmanagement of the Exchange is completely divorced from the right totrade on it. Though the impetus for its establishment came from policymakers in the country, it has been set up as a public limited company,owned by the leading institutional investors in the country.The NSE model however, does not preclude, but in fact accommodatesinvolvement, support and contribution of trading members in a variety ofways. Its Board comprises of senior executives from promoter institutions,eminent professionals in the fields of law, economics, accountancy,finance, taxation, etc, public representatives.NSE MilestonesFundamental & Technical Analysis MBA FINANCE - 15 -
  16. 16. SAAB MARFIN MBA Nov-92 Incorporation Apr-93 Recognition as a stock exchange May-93 Formulation of business plan Jun-94 Wholesale Debt Market segment goes live Nov-94 Capital Market (Equities) segment goes live Mar-95 Establishment of Investor Grievance Cell Apr-95 Establishment of NSCCL, the first Clearing Corporation Jun-95 Introduction of centralised insurance cover for all trading members Jul-95 Establishment of Investor Protection Fund Oct-95 Became largest stock exchange in the country Apr-96 Commencement of clearing and settlement by NSCCL Apr-96 Launch of S&P CNX Nifty Jun-96 Establishment of Settlement Guarantee Fund Setting up of National Securities Depository Limited, first depository in Nov-96 India, co-promoted by NSE Nov-96 Best IT Usage award by Computer Society of India Dec-96 Commencement of trading/settlement in dematerialised securities Dec-96 Dataquest award for Top IT User Dec-96 Launch of CNX Nifty Junior Feb-97 Regional clearing facility goes live Nov-97 Best IT Usage award by Computer Society of India May-98 Promotion of joint venture, India Index Services & Products Limited (IISL) May-98 Launch of NSEs Web-site: www.nse.co.in Jul-98 Launch of NSEs Certification Programme in Financial Market Aug-98 CYBER CORPORATE OF THE YEAR 1998 award Feb-99 Launch of Automated Lending and Borrowing Mechanism Apr-99 CHIP Web Award by CHIP magazine Oct-99 Setting up of NSE.IT Jan-00 Launch of NSE Research Initiative Feb-00 Commencement of Internet Trading Jun-00 Commencement of Derivatives Trading (Index Futures) Sep-00 Launch of Zero Coupon Yield Curve Launch of Broker Plaza by Dotex International, a joint venture between Nov-00 NSE.IT Ltd. and i-flex Solutions Ltd. Dec-00 Commencement of WAP trading Jun-01 Commencement of trading in Index Options Jul-01 Commencement of trading in Options on Individual Securities Nov-01 Commencement of trading in Futures on Individual Securities Dec-01 Launch of NSE VaR for Government Securities Jan-02 Launch of Exchange Traded Funds (ETFs) NSE wins the Wharton-Infosys Business Transformation Award in the May-02 Organization-wide Transformation category Oct-02 Launch of NSE Government Securities Index Jan-03 Commencement of trading in Retail Debt Market Jun-03 Launch of Interest Rate Futures Aug-03 Launch of Futures & options in CNXIT Index Jun-04 Launch of STP Interoperability Aug-04 Launch of NSE’s electronic interface for listed companiesFundamental & Technical Analysis MBA FINANCE - 16 -
  17. 17. SAAB MARFIN MBA Mar-05 ‘India Innovation Award’ by EMPI Business School, New Delhi Jun-05 Launch of Futures & options in BANK Nifty Index Dec-06 Derivative Exchange of the Year, by Asia Risk magazine Jan-07 Launch of NSE – CNBC TV 18 media centre Mar-07 NSE, CRISIL announce launch of IndiaBondWatch.com Jun-07 NSE launches derivatives on Nifty Junior & CNX 100 Oct-07 NSE launches derivatives on Nifty Midcap 50 Jan-08 Introduction of Mini Nifty derivative contracts on 1st January 2008 Mar-08 Introduction of long term option contracts on S&P CNX Nifty IndexDepository SystemThe Depositories Act, 1996 was passed with the objective of ensuring freetransferability of securities with speed, accuracy and security. It does soby Making securities of public limited companies freely transferable subject to certain exceptions Dematerializing the securities in the depository mode Providing for maintenance of ownership records in a book entry form.In order to streamline both the stages of settlement process, the Actenvisages transfer ownership of securities electronically by book entrywithout making the securities move from person to person. The Act hasmade the securities of all public limited companies freely transferable,restricting the companys right to use discretion in effecting the transferof securities, and the transfer deed and other procedural requirementsunder the Companies Act have been dispensed with. Two depositories,viz., NSDL and CDSL, have come up to provide instantaneous electronictransfer of securities.Capital Market IntermediariesThere are several institutions, which facilitate the smooth functioning ofthe securities market. They enable the issuers of securities to interactwith the investors in the primary as well as the secondary arena. Merchant BankersFundamental & Technical Analysis MBA FINANCE - 17 -
  18. 18. SAAB MARFIN MBA Credit Rating Agencies R& T Agents - Registrars to Issue Stock Brokers Custodians Mutual Funds Depositories Depository ParticipantsPlayers (investors) in securities market Individual investors Institutional investors FII’s Mutual fund investorCapital Market InstrumentsThe changes in the regulatory framework of the capital market and fiscalpolicies have also resulted in newer kinds of financial instruments(securities) being introduced in the market. Also, a lot of financialinnovation by companies who are now permitted to undertake treasuryoperations, has resulted in newer kinds of instruments - all of which canbe traded – being introduced. The variations in all these instrumentsdepend on thetenure, the nature of security, the interest rate, the collateral securityoffered and the trading features, etc. Debentures Bonds Preference Shares Equity Shares Government securitiesCapital Market ProcessesThere are various processes that Issuers of securities follow or utilize inorder to tap the savers for raising resources. Some of the commonly usedprocesses and methods are described below. Initial Public Offering (IPO)Fundamental & Technical Analysis MBA FINANCE - 18 -
  19. 19. SAAB MARFIN MBA Private Placement Preferential Offer/Rights Issue Internet BrokingDependence on Securities MarketThree main sets of entities depend on securities market. While theCorporates and governments raise resources from the securities marketto meet their obligations, the households invest their savings in securities.While the corporate sector and governments together raised a sum of Rs.226,911 crore during 2001-02, the household sector invested 4.3% oftheir financial savings through the securities market during 2000-01.Corporate SectorThe 1990s witnessed emergence of the securities market as a majorsource of finance for trade and industry. The share of capital marketbased instruments in resources raised externally increased to 53% in1993-94, but declined thereafter to 31% by 2000-01.GovernmentsAlong with increase in fiscal deficits of the governments, the dependenceon market borrowings to finance fiscal deficits has increased over theyears. The state governments and the central government financed about14% and 18% respectively of their fiscal deficit by market borrowingsduring 1990-91. In percentage terms, dependence of the stategovernments on market borrowing did not increase much during thedecade 1991-2002. In case of central government, it increased to 69.4%by 2001-02.Fundamental & Technical Analysis MBA FINANCE - 19 -
  20. 20. SAAB MARFIN MBAHouseholdAccording to the RBI data, the household sector accounted for 84.8 % ofgross domesticsavings in Fixed income investment instruments during 2006-07; whichhas increased incomparison to 83.9% in 2005-06. In fiscal 2006-07, the household sectorhas invested 55.7 % of financial savings in deposits, 24.2 % ininsurance/provident funds, 4.9 % in small savings, and 6.5 % in securitiesmarket including government securities , units of mutual funds and othersecurities.Investor population and profileAccording to the SEBI-NCAER survey of Indian investors conducted inearly 1999, an estimated 12.8 million, or 7.6% of all Indian householdsrepresenting 19 million individuals had directly invested in equity sharesand/or debentures as at the end of financial year 1998-99. The investorhouseholds increased at a compound growth rate of 22% between1985-86 and 1998-99. About 35% of investor households becameinvestors in equity shares prior to 1991, while 47% of the investorsentered the market between 1991 and 1995 and 17% after 1995. Morethan 156 million or 92% of all Indian households were non-investorhouseholds who did not have any investments in equity/debentures. Lowper capita income, apprehension of loss of capital, and economicinsecurity, which are all inter-related factors, significantly influenced theinvestment attitude of the households. The lack of awareness aboutsecurities market and absence of a dependable infrastructure anddistribution network coupled with aversion to risk inhibited non-investorhouseholds from investing in the securities market.Fundamental & Technical Analysis MBA FINANCE - 20 -
  21. 21. SAAB MARFIN MBA About KARVYThe Karvy group was formed in 1983 at Hyderabad, India. Karvy ranksamong the top player in almost all the fields it operates. Karvy Computershare Limited is India’s largest Registrar and Transfer Agent with a clientbase of nearly 500 blue chip corporate, managing over 2 crore accounts.Karvy Stock Brokers Limited, member of National Stock Exchange of Indiaand the Bombay Stock Exchange, ranks among the top 5 stock brokers inIndia. With over 6, 00,000 active accounts, it ranks among the top 5Depositary Participant in India, registered with NSDL and CDSL. KarvyCOM trade, Member of NCDEX and MCX ranks among the top 3commodity brokers in the country. Karvy Insurance Brokers is registeredas a Broker with IRDA and ranks among the top 5 insurance agent in thecountry. Registered with AMFI as a corporate Agent, Karvy is also amongthe top Mutual Fund mobilizer with over Rs. 5,000 crores undermanagement. Karvy Realty Services, which started in 2006, has quicklyestablished itself as a broker who adds value, in the realty sector. KarvyGlobal offers niche off shoring services to clients in the US. Karvy has 575 offices over 375 locations across India and overseas atDubai and New York. Over 9,000 highly qualified people staff Karvy.Karvy – Early DaysKarvy the name comes from the names of the directors:K - Mr. V. Kutumba RaoA - Mr. K Ajay KumarR - Mr. M S RamakrishnaV - Mr. Vikram SinghY - Mr. M YugandharThe birth of Karvy was on a modest scale in 1979. It began with the visionand enterprise of a small group of practicing Chartered Accountants whofounded the flagship company …Karvy Consultants Limited. Karvy startedwith consulting and financial accounting automation, and carved inroadsFundamental & Technical Analysis MBA FINANCE - 21 -
  22. 22. SAAB MARFIN MBAinto the field of registry and share accounting by 1985. Since then, Karvyhave utilized its experience and superlative expertise to go from strengthto strength…to better its services, to provide new ones, to innovate,diversify and in the process, evolved Karvy as one of India’s premierintegrated financial service enterprise.GROWTH AND DEVELOPMENT OF KARVYOver the last 20 years Karvy has traveled the success route, towardsbuilding a reputation as an integrated financial services provider, offeringa wide spectrum of services. And Karvy have made this journey by takingthe route of quality service, path breaking innovations in service,versatility in service and finally…totality in service. Karvy’s highly qualifiedmanpower, cutting-edge technology, comprehensive infrastructure andtotal customer-focus has secured for Karvy the position of an emergingfinancial services giant enjoying the confidence and support of anenviable clientele across diverse fields in the financial world.Karvy’s values and vision of attaining total competence in its servicing hasserved as the building block for creating a great financial enterprise,which stands solid on its fortresses of financial strength - its variouscompanies.With the experience of years of holistic financial servicing behind it andyears of complete expertise in the industry to look forward to, Karvy havenow emerged as a premier integrated financial services provider.And today, Karvy can look with pride at the fruits of its mastery andexperience comprehensive financial services that are competentlysegregated to service and manage a diverse range of customerrequirements.Fundamental & Technical Analysis MBA FINANCE - 22 -
  23. 23. SAAB MARFIN MBAKARVY-MilestonesAT PRESENT STATUS OF KARVYPresently Karvy is a member of National Stock Exchange (NSE), theBombay Stock Exchange (BSE), and The Hyderabad Stock Exchange (HSE).Market analysis and market predictions are done by professionalmanagement team.KARVY is covering the entire spectrum of financial services such as StockBroking Services, Advisory Services, Stock broking, DepositoryParticipants, Distribution of financial products - mutual funds, bonds,fixed deposit, equities, Insurance Broking, Commodities Broking, PersonalFinance Advisory Services, Merchant Banking & Corporate Finance,placement of equity, IPOs, among others.It is the largest mobiliser of funds as per PRIME DATABASE. It is amongthe top 5 stock brokers in India (4% of NSE volumes). Indias No. 1Registrar & Securities Transfer Agents (Ranked as “The Most AdmiredRegistrar" by MARG). Among the top 3 Depository Participants. LargestNetwork of Branches & Business Associates. First ISO - 9002 CertifiedRegistrar in India. Among top 10 Investment bankers. Largest Distributorof Financial Products are --Fundamental & Technical Analysis MBA FINANCE - 23 -
  24. 24. SAAB MARFIN MBAEvery 50th Indian is serviced by KARVY Every 20th trade in stock marketis done through KARVY. Every 6th Investor in India invests through KARVYIndias No.1 Registrars and Transfer agent : KARVY Every 10th DematAccount is held at KARVY.ORGANISATION STRUCTURE OF KARVY LEVEL-I Board of CMD, MD, & other Directors Karvy Karvy Karvy Karvy Stock Consultants Investor Global Broking Limited Service Service Limited Limited Limited Karvy Karvy Karvy Karvy Inc. Computershar Insurance Commodities e Pvt. Limited Broking Broking Private Private Limited Limited Karvy Regional HQs / BranchesFundamental & Technical Analysis MBA FINANCE - 24 -
  25. 25. SAAB MARFIN MBAFundamental & Technical Analysis MBA FINANCE - 25 -
  26. 26. SAAB MARFIN MBA Level-II Regional Branch Head ISO CELL Operation Support Branches s Divisions Functions ACCOUNTS RIS SYSTEM FPD HRD BROKING ADMN, DP PURCHASE, & STORES BRANCHES Operations Support Divisions FunctionsFundamental & Technical Analysis MBA FINANCE - 26 -
  27. 27. SAAB MARFIN MBA STUDY OF COMPANY PROFILE WITH RESPECT TO Mc KINSEY’S 7S MODELSTRATEGY:In modern times the word strategy has found its way into themanagement field. In the context of a business concern, strategyindicates specific program of action for achieving the organizationobjectives by employing the firm’s resources efficiently and economically.It involves preparing oneself for meeting unforeseen factor. It is alsoconcerned with meeting the challenges posed by the policies and actionsof other competitors in the market.Quality PolicyTo achieve and retain leadership, Karvy shall aim for complete customersatisfaction, by combining its human and technological resources, toprovide superior quality financial services. In the process, Karvy will striveto exceed Customers expectations.Quality Objectives are to:Fundamental & Technical Analysis MBA FINANCE - 27 -
  28. 28. SAAB MARFIN MBA Build in-house processes that will ensure transparent and harmonious relationships with its clients and investors to provide high quality of services. Establish a partner relationship with its investor service agents and vendors that will help in keeping up its commitments to the customers. Provide high quality of work life for all its employees and equip them with adequate knowledge & skills so as to respond to customers needs. Continue to uphold the values of honesty & integrity and strive to establish unparalleled standards in business ethics. Use state-of-the art information technology in developing new and innovative financial products and services to meet the changing needs of investors and clients. Strive to be a reliable source of value-added financial products and services and constantly guide the individuals and institutions in making a judicious choice of same. Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and regulatory authorities) proud and satisfied.STRUCTURE:Board of DirectorsMr. C Parthasarathy (Chairman and Managing Director), Mr. M Yugandhar(Managing Director ), Mr. M S Ramakrishna (Director ), Mr. Prasad VPotluri (Director), William Stuart Crosby (Chairman – Karvy Computershare Pvt Ltd.), Chandra Balaraman(Director– Karvy Computer share PvtLtd.), Mark Davis(Director– Karvy Computer share Pvt Ltd.), Mr. UdayRaval(Director - Karvy Inc. )Karvy’s organization structure can be viewed as accomplishingdepartments Operations Divisions and Support Function Division.Fundamental & Technical Analysis MBA FINANCE - 28 -
  29. 29. SAAB MARFIN MBABelow the Operations Divisions there are sub divisions namely Registryand Investor Services (RIS), Depository Participant (DP), Broking Services,Financial Product Distribution (FPD).Below the Support Functions, there are sub divisions namely Accounts,System, Human Resource Development, and Administration, Purchase &Stores.These department heads controls the day-to-day affairs of the company.These department heads are directly reports to the director. Board ofDirectors directly appoints department heads. The departmental headsdoes locations of responsibilities among various positions.In Karvy Departments are inter related. Majority of decisions are taken bythe top management. While taking important decision the departmentmanagers are also consulted and their suggestions are also considered.Hence Participative style of management is followed in Karvy.SYSTEM:KARVY covers the entire spectrum of financial services such as Stockbroking, Depository Participants, Distribution of financial products -mutual funds, bonds, fixed deposit, equities, Insurance Broking,Commodities Broking, Personal Finance Advisory Services, MerchantBanking & Corporate Finance, placement of equity, IPOs.A link called ‘Resource Center’, devoted solely to research. Karvy’s highlyskilled research team, comprising of technical analysts as well asfundamental specialists, secure result-oriented information on markettrends, market analysis and market predictions. This crucial informationis given as a constant feedback to its customers, through daily reportsdelivered thrice daily; The Pre-session Report, where market scenario forthe day is predicted, The Mid-session Report, timed to arrive during lunchbreak, where the market forecast for the rest of the day is given and ThePost-session Report, the final report for the day, where the market andFundamental & Technical Analysis MBA FINANCE - 29 -
  30. 30. SAAB MARFIN MBAthe report itself is reviewed. To add to this repository of information,Karvy publish a monthly magazine The Finapolis, which analyzes thelatest stock market trends and takes a close look at the variousinvestment options, and products available in the market, while a weeklyreport, called Karvy Bazaar Baatein, gives more information on theimmediate trends in the stock market. In addition, its specific industryreports give comprehensive information on various industries.Karvy’s Stock Broking services are widely networked across India, with thenumber of trading terminals providing retail stock broking facilities. Toempower the investor further Karvy have made serious efforts to ensurethat its research calls are disseminated systematically to all our stockbroking clients through various delivery channels like email, chat, SMS,phone calls etc.STYLE:An activity like forecasting and planning are made by top level managers.Major policies and plans are made by top management and it isimplemented and administered by employees. In the organization thestyle of informal communication and meetings with employees hascreated workers to a friendly environment.STAFF:The term staff refers to manpower planning, recruitment, performanceappraisal, motivation and morale.SKILLS:The managers and workers in each department are skilled to the extent offunctions they perform. Directors of the company are skilled in everyactivities and disciplines of organization.A 1600 team of highly qualified and dedicated professionals drawn fromthe best of academic and professional backgrounds are committed tomaintaining high levels of client service delivery. This has propelled KarvyFundamental & Technical Analysis MBA FINANCE - 30 -
  31. 31. SAAB MARFIN MBAto a position among the top distributors for equity and debt issues withan estimated market share of 15% in terms of applications mobilized,besides being established as the leading procurer in all public issues.A link called ‘Resource Center’, devoted solely to research. Karvy’s highlyskilled research team, comprising of technical analysts as well asfundamental specialists, secure result-oriented information on markettrends, market analysis and market predictions.Achievements Largest mobiliser of funds as per PRIME DATABASE Among the top 5 stock brokers in India (4% of NSE volumes) Indias No. 1 Registrar & Securities Transfer Agents (Ranked as " The Most Admired Registrar" by MARG) A Category- I -Merchant banker. Among the to top 3 Depository Participants Largest Network of Branches & Business Associates First ISO - 9002 Certified Registrar in India Among top 10 Investment bankers Largest Distributor of Financial Products Full Fledged IT driven operations Handled the largest- ever Public Issue - IDBI Handled over 500 Public issues as Registrars. Handling the Reliance Account which accounts for nearly 10 million account holdersMajor issues managed as arrangers Kerala State Electricity Board. Power Finance Corporation A.P. Water Resources Development Corporation. A.P. Roads Development Corporation. A.P. State Electricity Board. Haldia Petrochemicals Ltd. Major issues managed as Co-ManagersFundamental & Technical Analysis MBA FINANCE - 31 -
  32. 32. SAAB MARFIN MBA IndusInd Bank Ltd ICICI Bonds – March 97 ICICI Bonds – Dec 97 ICICI Safety Bonds March 98 ICICI Safety Bonds – April 98. July 98, Oct 98, Dec 98, Jan 99. The Jammu and Kashmir Bank Ltd Major issue handled as Registrars to Issues IDBI Equity Morgan Stanley Mutual Fund Bank of Baroda Bank of Punjab Ltd Corporation Bank IndusInd Bank Ltd Jammu and Kashmir Bank Ltd Housing and Urban Development Corporation (HUDCO) Ltd Madras Refineries Ltd Tamil Nadu Newsprint & Paper Ltd BPL Ltd Birla 3M Ltd Essar Shipping Ltd Essar Steels Ltd. Hindustan Petroleum Corporation Ltd. Infosys Technologies Ltd. Jindal Vijayanagar Steels Ltd. Nagarjuna Fertilizers & Chemicals Ltd. Rajshree Polyfil Ltd.Karvy Securities Ltd.Karvy has secured over Rs. 500 crore in the following debt issues. Andhra Pradesh Road Development Corporation Ltd ICICI Bonds ( Private Placement)Fundamental & Technical Analysis MBA FINANCE - 32 -
  33. 33. SAAB MARFIN MBA ICICI Bonds – 96 ICICI Bonds – 97- I ICICI Bonds – 97 – II ICICI Safety Bonds March 98. IDBI Bonds 96. IDBI Flexi Bonds I IDBI Flexi Bonds II IDBI Flexi Bonds III Kerala State Electricity Board Krishna Bhagya Jala Nigam Ltd Power Finance Corporation Ltd Andhra Pradesh Water Resources Development Corporation Andhra Pradesh State Electricity BoardSHARED VALUES:Employees at each level of organization are conscious about deliveringcustomer value for his money. Each and every employee understands themission and vision of the company. Employees of company arecommitted towards the quality aspects in service. The employees of Karvythemselves put forward in fulfilling the organizational principles forbetterment of organization.Fundamental & Technical Analysis MBA FINANCE - 33 -
  34. 34. SAAB MARFIN MBA STUDY OF FUNCTIONAL DEPARTMENTS OF KARVYIn Karvy the functions are mainly divided into two parts namelyOperational Functions and the Supporting Functions.OPERATING FUNCTIONS:Registry and Investor Services (RIS) in which Karvy carry out functions asRegistrar & transfer Agent (RTA), and Registrar to the Issues. FinancialProduct Distribution (FPD), Here financial products include Mutual Funds,Fixed income securities, bonds, fixed deposits, Tax-saving Products,Insurance, etc. Stock Broking Services and Depository Participant (DP),which are explained in Service Profile of the Karvy group of companies.SUPPORTING FUNCTIONS: Administration - Purchase and Stores Department HOD Assistant HOD Administration TeamResponsibilities To ensure preventive breakdown of equipment/accessories including computer hardware To ensure speedy breakdown maintenance To ensure that the maintenance status of all equipment/ accessories is entered in the service To ensure that the maintenance is carried out efficientlyFundamental & Technical Analysis MBA FINANCE - 34 -
  35. 35. SAAB MARFIN MBAMaintenance includes preventive, breakdown and general maintenance.Preventive maintenance shall be done as per the prefixed time scheduleby the subcontractors for the purpose. The administration incharge shallmake necessary arrangements for this purpose.In Breakdown / General maintenance admi9nistration team receiveinformation regarding any breakdown or general repairs. On receipt ofthe same, the administrative team shall maintain a record of allmaintenance done.The Procedure involves identification of subcontractors which will be donethrough Newspaper, advertisements, word of mouth. Both the partiesmeet to their requirements and enter into agreement. Subcontractors areappointed for providing services Preventive maintenance, Breakdownmaintenance, Courier services and any other services.2.62 Accounts DepartmentFinance operations in Karvy are centralized at the Head Office Account.Periodic fund requirement at the regional level will be sort as and whenrequired. But all cheques and such instruments would be signed by thelocal regional manager.Fundamental & Technical Analysis MBA FINANCE - 35 -
  36. 36. SAAB MARFIN MBASystem Administration Department Dy. General Manager Dy.Manager Asst. ManagerIn this department the functions include Trouble shooting, desktopqueries, Network problems, Software and Hardware problems, Installationof new systems, creating new networks.Human resource DepartmentThe human resource Department (HRD) caters to the entire recruitmentand employee upbringing in the company. The HR functions and practices,which are practiced at the Karvy, are:Manpower Planning: The departmental heads are entrusted with theresponsibility of assessing the present and the future manpowerrequirement in their departments. Manpower planning is being done inthe company in order to secure a confidence and capabilityRecruitment: Advertising in newspaper and other media, privateemployment agencies, personal contacts, colleges and universities are thesources used by Karvy.Training: The personnel department gives training for all new employees.Performance Appraisal: The HOD of the department, to which theemployees belongs, presents a report of the employees, to be appraised.In addition to that other managers to whom the employee is associated isalso evaluating the performance of the employee.Motivation: The Company provides both extrinsic and intrinsic motivationto the employees. Extrinsic motivation is considered with externalmotivators which employees get through pay, promotion, fringe benefits,Fundamental & Technical Analysis MBA FINANCE - 36 -
  37. 37. SAAB MARFIN MBAholiday’s etc. Intrinsic motivation is concerned with the feeling of havingaccomplished something worthwhile i.e. the satisfaction one gets afterdoing one’s work well, praise, responsibility, recognition, participationare the examples. Job rotation is undertaken to reduce the monitoringand burden of the employees.Morale: For improving employee’s morale positive measures like jobrotation, building responsibility into job etc are introduced. Both upwardand downward communication takes place within the company.Participation is the key to commitment.Fundamental & Technical Analysis MBA FINANCE - 37 -
  38. 38. SAAB MARFIN MBA SERVICE PROFILE OF THE KARVY GROUP OF COMPANIESKarvy Stock Broking LimitedMember - National Stock Exchange (NSE), the Bombay Stock Exchange(BSE), and the Hyderabad Stock Exchange (HSE). Karvy Stock BrokingLimited, one of the cornerstones of the Karvy edifice, flows freely towardsattaining diverse goals of the customer through varied services.Stock Broking ServicesIt is an undisputed fact that the stock market is unpredictable and yetenjoys a high success rate as a wealth management and wealthaccumulation option. The difference between unpredictability and a safetyanchor in the market is provided by in-depth knowledge of marketfunctioning and changing trends, planning with foresight and choosingone & other options with care. Karvy offer trading on a vast platform;National Stock Exchange, Bombay Stock Exchange and Hyderabad StockExchange. Karvy’s highly skilled research team, comprising of technicalanalysts as well as fundamental specialists, secure result-orientedinformation on market trends, market analysis and market predictions.This crucial information is given as a constant feedback to its customers,through daily reports delivered thrice daily; The Pre-session Report,where market scenario for the day is predicted, The Mid-session Report,timed to arrive during lunch break, where the market forecast for the restof the day is given and The Post-session Report, the final report for theday, where the market and the report itself is reviewed. To add to thisrepository of information, Karvy publish a monthly magazine TheFinapolis, which analyzes the latest stock market trends and takes a closelook at the various investment options, and products available in theFundamental & Technical Analysis MBA FINANCE - 38 -
  39. 39. SAAB MARFIN MBAmarket, while a weekly report, called Karvy Bazaar Baatein, gives moreinformation on the immediate trends in the stock market. In addition, it’sspecific industry reports give comprehensive information on variousindustries. Karvy’s Stock Broking services are widely networked acrossIndia, with the number of trading terminals providing retail stock brokingfacilities.To empower the investor further Karvy have made serious efforts toensure that its research calls are disseminated systematically to all ourstock broking clients through various delivery channels like email, chat,SMS, phone calls etc.Depository ParticipantsThe onset of the technology revolution in financial services Industry sawthe emergence of Karvy as an electronic custodian registered withNational Securities Depository Ltd (NSDL) and Central SecuritiesDepository Ltd (CSDL) in 1998. Karvy set standards enabling furthercomfort to the investor by promoting paperless trading across thecountry and emerged as the top 3Depository Participants in the country in terms of customer serviced.Offering a wide trading platform with a dual membership at both NSDLand CDSL, Karvy have established live DPMs, Internet access to accountsand an easier transaction process in order to offer more convenience toindividual and corporate investors. A wide national network makes itsefficiencies accessible to all.Distribution of Financial ProductsA 1600 team of highly qualified and dedicated professionals drawn fromthe best of academic and professional backgrounds are committed tomaintaining high levels of client service delivery. This has propelled Karvyto a position among the top distributors for equity and debt issues withan estimated market share of 15% in terms of applications mobilized,besides being established as the leading procurer in all public issues.Fundamental & Technical Analysis MBA FINANCE - 39 -
  40. 40. SAAB MARFIN MBAAdvisory ServicesUnder its retail brand ‘Karvy – the Finapolis, it delivers advisory servicesto a cross-section of customers. The service is backed by a team ofdedicated and expert professionals with varied experience andbackground in handling investment portfolios. They are continuallyengaged in designing the right investment portfolio for each customeraccording to individual needs and budget considerations with acomprehensive support system that focuses on trading customersportfolios and providing valuable inputs, monitoring and managing theportfolio through varied technological initiatives. ‘Karvy - the Finapolis,covers the latest of market news, trends, investment schemes andresearch-based opinions from experts in various financial fields.Mutual Fund ServicesKarvy has attained a position of immense strength as a provider ofacross-the-board transfer agency services to AMCs, Distributors andInvestors. Nearly 40% of the top-notch AMCs including prestigious clientslike Deutsche AMC and UTI swear by the quality and range of services thatKarvy offers. Besides providing the entire back office processing, Karvyprovides the link between various Mutual Funds and the investor,including services to the distributor, the prime channel in this operation.Carrying the ‘limitless ideology forward, Karvy has explored newdimensions in every aspect of Mutual Fund servicing right from volumemanagement, cost effective pricing, delivery in the least turnaround time,efficient back-office and front-office operations to customized service.Karvy has been with the AMCs every step of the way, helping them servetheir investors better by offering them a diverse and customized range ofservices. The ‘first to market approach that is Karvy’s anthem has earnedthe reputation of an innovative service provider with a visionary bent ofmind.Fundamental & Technical Analysis MBA FINANCE - 40 -
  41. 41. SAAB MARFIN MBAKarvy’s service enhancements such as ‘Karvy Converz, a full-fledged callcenter, a top-line website (www.karvymfs.com), the ‘m-investor andmany more, creating a galaxy of customer advantages.Karvy Consultants Limited As the flagship company of the Karvy Group,Karvy Consultants Limited has always remained at the helm oforganizational affairs, pioneering business policies, work ethic andchannels of progress. Today, Karvy service over 6 lakhs customeraccounts in this business spread across over 250 cities/towns in Indiaand are ranked amongst the largest Depository Participants in the country.With a growing secondary market presence, Karvy have transferred thisbusiness to Karvy Stock Broking Limited (KSBL), Karvy’s associate and amember of NSE, BSE and HSE.Karvy Investor ServiceMerchant BankingRecognized as a leading merchant banker in the country, Karvy registeredwith SEBI as a Category I merchant banker. This reputation was built bycapitalizing on opportunities in corporate consolidations, mergers andacquisitions and corporate restructuring. Karvy’s quality professionalteam and our work-oriented dedication have propelled it to offervalue-added corporate financial services and act as a professionalnavigator for long term growth of its clients, who include leadingcorporates, State Governments, foreign institutional investors, public andprivate sector companies and banks, in Indian and global markets.Its financial advice and assistance in restructuring, divestitures,acquisitions, de-mergers, spin-offs, joint ventures, privatization andFundamental & Technical Analysis MBA FINANCE - 41 -
  42. 42. SAAB MARFIN MBAtakeover defense mechanisms have elevated its relationship with theclient to one based on unshakable trust and confidence.Karvy Global Services LimitedThe specialist Business Process Outsourcing unit of the Karvy Group. HereKarvy offer several delivery models on the understanding that businessneeds are unique and therefore only a customized service could possiblyfit the bill. Be it in re-engineering and managing processes or deliveringnew efficiencies, Karvy’s service meets up to the most stringent ofinternational standards. Karvy’s outsourcing models are designed for theglobal customer and are backed by sound corporate and operationsphilosophies, and domain expertise. Providing productivity improvements,operational cost control, cost savings, improved accountability and awhole gamut of other advantages. Karvy’s wide market coverage includesBanking, Financial and Insurance Services (BFIS), Retail and Merchandising,Leisure and Entertainment, Energy and Utility and Healthcare.Fundamental & Technical Analysis MBA FINANCE - 42 -
  43. 43. SAAB MARFIN MBAKarvy Computershare Pvt. LimitedKarvy have traversed wide spaces to tie up with the world’s largesttransfer agent, the leading Australian company, Computershare Limited.The company that services more than 75 million shareholders across7000 corporate clients and makes its presence felt in over 12 countriesacross 5 continents has entered into a 50-50 joint venture with Karvy.Excellence has to be the order of the day when two companies with suchsimilar ideologies of growth, vision and competence, get together.Issue RegistryKarvy has emerged as the largest transaction-processing house for theIndian Corporate sector. With an experience of handling over 700 issues,Karvy today, has the ability to execute voluminous transactions andhard-core expertise in technology applications have gained the No.1 slotin the business. Karvy is the first Registry Company to receive ISO 9002certification in India that stands testimony to its stature.It is actively coordinating with both the main depositories to developspecial models to enable the customer to access depository (NSDL, CDSL)services during an IPO.Fundamental & Technical Analysis MBA FINANCE - 43 -
  44. 44. SAAB MARFIN MBAKarvy Insurance Broking Private LimitedAt Karvy Insurance Broking Pvt. Ltd., it provide both life and non-lifeinsurance products to retail individuals, high net-worth clients andcorporates. With the opening up of the insurance sector and with a largenumber of private players in the business, Karvy is in a position toprovide tailor made policies for different segments of customers. WithIndian markets seeing a sea change, both in terms of investment patternand attitude of investors, insurance is no more seen as only a tax savingproduct but also as an investment product. By setting up a separate entity,Karvy would be positioned to provide the best of the products available inthis business to its customers.Karvy’s wide national network, spanning the length and breadth of India,further supports these advantages. Further, personalized service isprovided here by a dedicated team committed in giving hassle-freeservice to the clients.Karvy Commodities Broking Private LimitedAt Karvy Commodities, Karvy is focused on taking commodities trading tonew dimensions of reliability and profitability. Karvy has madecommodities trading, an essentially age-old practice, into a sophisticatedand scientific investment option.Here Karvy enable trade in all goods and products of agricultural andmineral origin that include lucrative commodities like gold and silver andpopular items like oil, pulses and cotton through a well-systematizedFundamental & Technical Analysis MBA FINANCE - 44 -
  45. 45. SAAB MARFIN MBAtrading platform.Regular trading workshops and seminars are conducted to hone tradingstrategies to perfection. Karvy’s commitment to excel in this sector stemsfrom the immense importance that commodity broking has to across-section of investors – farmers, exporters, importers, manufacturersand the Government of India itself.Karvy Inc.With its growing ambitions of reaching out to investors across the shoresof this country, Karvy’s has set up Karvy Inc. in the US located in NewYork to provide various financial products and information on Indianequities to potential Foreign Institutional Investors (FIIs) in the region.This entity soon would be ACC registered and would also become amember of various important stock exchanges in the US. This entitywould extensively facilitate various businesses of Karvy viz., stockbroking (Indian equities), research and investment by (QualifiedInstitutional Buyer) QIBs in Indian markets for both secondary and primaryofferings, outsourcing of various assignments for the multiple streams ofbusiness in Karvy Global Services Ltd (KGSL).Fundamental & Technical Analysis MBA FINANCE - 45 -
  46. 46. SAAB MARFIN MBA THEROTICAL FRAMEWORKFUNDAMENTAL ANALYSIS:Fundamental analysis is the examination of the underlying forces thataffect the well being of the economy, industry groups, and companies.The goal is to derive the forecasted earning growths for future pricemovements. Fundamental analysis is the method of evaluating securities byattempting to measure the intrinsic value of a particular stock. It is thestudy of everything from the overall economy and industry conditions, tothe financial condition and management of specific companies (i.e., usingreal data to evaluate a stock’s value). The method utilizes items such asrevenues, earnings, return on equity and profit margins to determine acompany’s underlying value and potential for future growth. One of the major assumptions under fundamental analysis is that,even though things get mis priced in the market from time to time, theprice of an asset will eventually gravitate toward its true value. This seemsto be a reasonable bet considering the long upward march of qualitystocks in general despite regular setbacks and periods of irrationalexuberance. The key strategy for the fundamentalist is to buy when pricesare at or below this intrinsic value and sell when they got overpriced.Fundamental analysis consists of: For the national economy we focus on economic data to assess the present and future growth of the economy. At the industry level, there might be an examination of supply and demand forces for the products offered. At the company level, may involve examination of financial data, management, business concept and competition.Fundamental & Technical Analysis MBA FINANCE - 46 -
  47. 47. SAAB MARFIN MBA Economy analysisThe economy is the overall economic environment in which all firmsoperate. The key variables used to describe the state of economy are: World economy Asian economy Indian economy 1. Growth rate of GDP 2. Industry growth rate 3. Agriculture and monsoons 4. Savings and investment 5. Inflation 6. Interest rates 7. Balance of payments 8. InfrastructureWorld economyAccording to the recent statistics, the world GDP (comprising 180economies) has reached at a sum of US $ 46,747 Billions. Top 15contributors to the world GDP are USA, Japan, Germany, China, UK, France,Italy, Canada, Spain, Brazil, Russia, Korea, India, Mexico and Australia.Percentage share of USA to the total world GDP is 28.3. While both theFundamental & Technical Analysis MBA FINANCE - 47 -
  48. 48. SAAB MARFIN MBAemerging economies such as India and China have a share of 1.82 and5.41 respectively.Find next page the top 15 contributors to the world GDP.Asian EconomyAsian Economies have brought tremendous success in the recent years.Economic growth rate in China crossed a two-digit number, whileeconomic growth in India’s Economy is near to 10 percent. Apart fromthose two emerging Asian Economic giants, economies such asPhilippines, Indonesia and Malaysia are growing at a faster pace. Findbelow various economic indicators on the Asian Economies.GDP growth projections among various Asian Economies over years are asfollows:GDP Growth Projection on Asian EconomiesCountry Name 2007 2008Japan 2.3 1.9Hong Kong SAR 5.5 5Korea 4.4 4.4Singapore 5.5 5.7Fundamental & Technical Analysis MBA FINANCE - 48 -
  49. 49. SAAB MARFIN MBAChina 10 9.5India 8.4 7.8Indonesia 6 6.3Malaysia 5.5 5.8Philippines 5.8 5.8Thailand 4.5 4.8The output over the world increased by 4.4% in the year 2005. The largestcontributors of the world output were India, China and Russia. The GrossWorld Product (in purchasing power parity) as to the 2005 estimated datahas reached at $ 60.71 trillions with a real growth rate of 4.7%.The services sector contributes a largest share to the world GDP. As to the2004 estimated data, the services sector accounted for 64% followed byindustries at 32% and Agriculture 4%.The level of exports and imports over the world has reached at $10.33trillion and 10.3 trillions f.o.b. as to 2004 estimation.World inflation:Inflation, which can be simply stated to be a state of economic activitieswith rising price level and falling purchasing power of money, has becomeglobal phenomenon. Fast rising oil prices over the world has pressurizedthe general price level in countries of the world. Present world economy isexperiencing higher economic growth with some inflationary pressure.The stabilized countries have the inflation level ranging between 1-3%and the developing countries have inflation between 3-6%.Indian economy:Indian primary sectorAgriculture is the mainstay of Indian economy because of its high share inemployment and livelihood creation notwithstanding its reducedcontribution to the nation’s GDP. The share of agriculture in the grossdomestic product has registered a steady decline from 36.4 per cent inFundamental & Technical Analysis MBA FINANCE - 49 -
  50. 50. SAAB MARFIN MBA1982-83 to 17 per cent in 2007-08. Yet this sector continues to supportmore than half a billion people providing employment to 52 per cent ofthe workforce. It is also an important source of raw material and demandfor many industrial products, particularly fertilizers, pesticides,agricultural implements and a variety of consumer goods. This is firsttime after green revolution that the India has become dependent insatisfying its own food need. Growth pattern of Indian agriculture hasbeen so irregular, because of over dependency on the monsoon. This yearwe could achieve dismal growth of 2.5%.India is expecting its agricultureto grow at least 4% (CAGR) in the 11th plan to have sustainable andconsistent growth of overall GDP.Industrial sector (secondary sector)Industrial growth in India has been inspired by the LPG in 1991. in the10th plan we could achive growth rate of 8-9%. At present industrysector is contributing 28% to country’s GDP. Though at present India isexperiencing slowdown in growth of industry production, the long termgrowth of 8-10% is still intact. The first eight months of the current fiscal,till November 2007, witnessed a moderate slowdown in the growth of theindustrial sector. The slowdown has mainly been on account of themanufacturing sector. The mining and quarrying sector grew at a fasterpace, while the growth in electricity remained unchanged from April-November 2006. Nonetheless, the 9.2 per cent growth achieved duringApril-November 2007 by the industrial sector, when seen against thebackdrop of the robust growth during the preceding four years, suggeststhat the buoyancy in this sector has continued, albeit with a degree ofmoderation. Two important changes have occurred in the growth patternof the use-based industrial categories:First, capital goods have grown at an accelerated pace, over a high baseattained in the previous years, which augurs well for the requiredindustria capacity addition. Secondly, the consumer durables basket thatforms part of the Index of Industrial Production (IIP) showed a negativegrowth during the period, thereby forcing a visible decline in the growthFundamental & Technical Analysis MBA FINANCE - 50 -
  51. 51. SAAB MARFIN MBAof the total consumer goods basket, despite reasonable growth in thenon-durables.Dimension of Indian Economy GDP Composition 17% 28% Manufacturing Service Agriculture 55%Gross domestic product: measure of the total production of final goodsand services in the economy during a specified period usually a year.Higher the growth rate, the other things being equal, the more favorableit is for the stock market.The growth rate of GDP is more important indicator of the performance ofthe economy. The average growth rate of Indian economy during1950-1980 was around 3.5% in real terms. In 1980 it was 5% and 6.2% in2004. At present it is 8.7 and estimated to cross 9%.Industrial growth rate: stock market analysts mainly focus on theindustrial sector. Higher the growth rate, more favorable is the things forstock market. The industrial sector witnessed a slowdown in the first nineFundamental & Technical Analysis MBA FINANCE - 51 -
  52. 52. SAAB MARFIN MBAmonths of the current financial year. The growth of 9 per cent duringApril-December 2007, when viewed against the back drop of the robustgrowth witnessed in the preceding four years, suggests that there is acertain degree of moderation in the momentum of the industrial sector.At the product group level, the moderation in growth has been selective.Industries like chemicals, food products, leather, jute textiles, woodproducts and miscellaneous manufacturing products witnessedacceleration in growth, while basic metals, machinery and equipments,rubber, plastic and petroleum products and beverages and tobaccorecorded lower but strong growth during April-December 2007.Agriculture and monsoons: agriculture accounts for about a quarter ofthe Indian economy and has important linkages both direct and indirectwith the industry. There has been a loss of dynamism in the agricultureand allied sectors in recent years. A gradual degradation of naturalresources through overuse and inappropriate use of chemical fertilizershas affected the soil quality resulting in stagnation in the yield levels.Public investment in agriculture has declined and this sector has not beenable to attract private investment because of lower/unattractive returns. Savings and investment: A notable feature of the recent GDP growthhas been a sharply rising trend in gross domestic investment and saving,with the former rising by 13.1 per cent of GDP and the latter by 11.3 percent of GDP over five years till 2006-07. The average investment ratio forthe Tenth Five Year Plan at 31.4 per cent was higher than that for theNinth Five Year Plan, while the average saving rate was also 31.4 per centof GDP higher than the average ratio of 23.6 per cent during the NinthFive Year Plan.Money supply: For policy purposes for 2007-08, the RBI assumed a realGDP growth of 8.5 per cent with inflation close to 5 per cent, and targetedthe monetary expansion in the range of 17-17.5 per cent and creditexpansion in the range of 20 to 24 per cent as consistent with envisagedgrowth and inflation.Fundamental & Technical Analysis MBA FINANCE - 52 -
  53. 53. SAAB MARFIN MBAInterest rates: interest rates affect the cost of financing to the firms.Higher the interest rates, higher will be the cost and if lower, lower thecost and more will be the profitability. Below table shows that interestrates are decreasing year after year which is a good sign for the growth.Year Interest(bank) rates % p.a.April 1997 11April 1998 10March 1999 8March 2001 7April 2003 6Fundamental & Technical Analysis MBA FINANCE - 53 -
  54. 54. SAAB MARFIN MBAInflation: The Wholesale Price Index (WPI), which is available on a weeklybasis, continues to be the most popular measure of headline inflation inIndia.Balance of payments: The strength, resilience and stability of thecountry’s external sector is reflected by various indicators. These includea steady accretion to reserves, moderate levels of current account deficit,changing composition of capital inflows, flexibility in exchange rates,sustainable external debt levels with elongated maturity profile and anincrease in capital inflows. The current account has followed an inverted“U” shaped pattern during the period from 2001-02 to 2006-07, rising toa surplus of over 2 per cent of GDP in 2003-04. Thereafter it has returnedclose to its post-1990s reform average, with a current account deficit of1.2 per cent in 2005-06 and 1.1 per cent of GDP in 2006-07.Capitalinflows, as a proportion of GDP, have been on a clear uptrend during thesix years (2001-02 to 2006-07) of this decade. They reached a high of5.1 per cent of GDP in 2006-07 after a somewhat modest growth rate of3.1 per cent in 2005-06.The net result of these two trends has been agradual rise in reserve increase to reach 4 percent of GDP in 2006-07(Figure 6.1). With capital inflows exceeding financing requirements,foreign exchange reserve increase was of the order of US$ 15.1 billion in2005-06 and US$ 36.6 billion in 2006-07 (Table 6.2). As a proportion ofGDP, external debt was 17.2 per cent and 17.9 per cent in 2005-06 and2006-07 respectively.Fundamental & Technical Analysis MBA FINANCE - 54 -
  55. 55. SAAB MARFIN MBAInfrastructure: with the rapid growth of the economy in recent years theimportance and the urgency of removing infrastructure constraints haveincreased. Traditionally, power, railways, roads, ports, airports andtelecommunications were the exclusive domain of the government. Policyhas changed gradually over the past two decades under the pressure ofrising gaps between demand and supply of infrastructure anddeteriorating quality of assets.Fundamental & Technical Analysis MBA FINANCE - 55 -
  56. 56. SAAB MARFIN MBA Industry AnalysisGrowth of Construction Industry:Since the beginning of economic reforms in 1991, the Indian economyhas recorded a compounded annual growth rate (CAGR) of over 6.7%.That is impressive in itself, and makes India the second fastest growinglarge economy in the world — bettered only by China. More significant isthe orbit change in India’s GDP growth since 2003-04. With 9.4% growthin 2006-07 following 9% growth in 2005-06, India’s CAGR since 2003-04has exceeded 8.6%. There is a wide consensus among economists,policy-makers and industry that India can now sustain a CAGR of around8.5% for the foreseeable future. Indeed, the general feeling is that withmore investments in physical infrastructure, it isquite feasible for the country to achieve double-digit growth by 2011-12— the terminal year of the Eleventh Five Year Plan. This strong economicgrowth, along with thedemographic impetus of a growing population in the working-agecategory, is creating a massive demand supply mismatch across the realestate sector. The sheer increase in the ‘need for built-up space’ isopening up several opportunities for developers — be it forconstructing residential properties, creating commercial space for officesor retail, setting up of SEZs, or developing entertainment zones.Current situation of ConstructionsThe turnover of the construction industry witnessed 57% growth on Yearof Year(YoY) basis to reach Rs150,933m in December 2007. This isbecause investments planned in the infrastructure both by governmentand private sector, booming housing construction and expansion incorporate production facilities, is likely to fast forward the growth in theIndian construction industry. Aggregate operating profit increased by 35%to Rs22,186.55m. The other income of the industry was Rs8,481.04m.The depreciation increased to Rs2,048.49m. The net profit increased by83% to reach Rs19,819.89m on YoY basis.Fundamental & Technical Analysis MBA FINANCE - 56 -
  57. 57. SAAB MARFIN MBAThe overall cost for the construction industry as the percentage of sales is90.27% from Rs87 billion in December 2006 to Rs1,35 billion inDecember 2007. The cost of raw materials to the total sales is 37.82%during December 2007. The staff costs and other operating expenses are7.34% and 8.04% of the total sales, as compared to the correspondingquarter of the previous year. Depreciation and tax decreased but theinterest rate was high.InversementReal estate investments account for about 60% of the total constructioninvestments. Demand-supply gap for residential housing, favorabledemographics, rising affordability levels, availability of financing optionsas well as fiscal benefits available on availing of home loan are the keydrivers supporting the demand for residential construction. In addition tothis, demand for office space from IT/BPO segment is expected tocontinue due to emergence of India as a preferred outsourcingdestination. Also, boom in organized retail is expected to result in hugedemand for real estate construction. According to industry estimates, theIndian real estate industry is expected to grow at a compounded rate of33% between FY05 to FY10, mainly driven by the residential segment.Regulations:Construction Industry in India According to the 11th five-year plan(2007-12), the core infrastructure sector, comprising power, roads,highways, railways, ports, airports, mining and irrigation, will requiremassive investments to the tune of US$490 billion over the next five yearsto sustain current 9-10% GDP growth per annum. The constructionindustry accounts for 40-50% of the plan outlays and contributes about20%, nearly US$59.4 billion to the national GDP. It employs around 31mpeople, second only to the agriculture sector. The industry has witnesseda sustained growth of 30% per annum during the last four years and ispoised to grow at 55% in the current fiscal 2007-08, outperforming eventhe growth of IT and biotech industry in the knowledge sector. JawaharlalNehru National Urban Renewal Mission, with an outlay of approximatelyFundamental & Technical Analysis MBA FINANCE - 57 -
  58. 58. SAAB MARFIN MBARs1,200 billion, is one of the most ambitious projects currently underwayin the nation for strengthening the urban infrastructure.While the government announced the withdrawal of tax benefits underSection 80 IA of the Income Tax Act, there is a lot of confusion regardingits interpretation. While some companies are of the opinion that they canno more claim benefits under this section (i.e. they will have to pay taxesat marginal rate), others feel that the benefit has been withdrawn only onthe subcontracted work i.e. they can still claim tax benefits onself-executed projects.Fundamental & Technical Analysis MBA FINANCE - 58 -
  59. 59. SAAB MARFIN MBABudget 2008-09India is on the verge of witnessing a sustained investment phase ininfrastructure buildup. With a slew of announcements in housing, road,port and airport development, we are seemingly on a path of sustainedhigher economic growth on the back of improvement in infrastructureconstruction in the country. From a policy perspective, there has been agrowing consensus that a private-public partnership is required toremove difficulties concerning the development of infrastructure in thecountry. A substantial chunk of the abovementioned investment target islikely to come from the private sector.Budget measures The general CENVAT rate has been reduced to 14% from 16%. Allocation for National Highway Development Programme (NHDP) has been enhanced to Rs 12,966 crore in 2008-09 from Rs 10,867 crore bn in 2007-08. The budget has given special attention to development of roads in North Eastern region where 180 kms of roads will be completed in 2007-08 and 300 kms of road is being targetted for completion in 2008-09. The corpus of Rural Infrastructure Development Fund (RIDF-XIV) has been raised to Rs14,000 crore, with a separate window for rural roads. The budget has also given considerable thrust to irrigation project where the outlay for 2008-09 has been increased to Rs 20,000 crore from Rs 11,000 crore in 2007-08. The government is setting up 14 irrigation projects with initial capital of Rs 100 crore to fund long-gestation major and medium irrigation projects.Budget ImpactFundamental & Technical Analysis MBA FINANCE - 59 -
  60. 60. SAAB MARFIN MBA The Bharat Nirman and water irrigation programmes will benefit companies involved in road construction and BOT irrigation projects. Reduction of CENVAT is also a big positive for the sector as it indicates government’s commitment towards the Goods and Service Tax Act.Company ImpactCompanies like Jain Irrigation and Madhucon Projects will benefit fromincreased outlay in irrigation spending.Industry Wish listBuilders’ Association of India Alter existing customs duty structure on imported steel bars and rods – fix the duty at 5% without levy of special additional duty and countervailing duty Extend existing structure of import duty, countervailing duty and special duty on cement for another year, to discourage domestic manufacturers from hiking prices Project exporters who have executed projects abroad to be allowed to import equipment purchased abroad at 5% duty instead of current 50% Scrap 2% TDS on construction companies as margins are wafer thin at 4-5%. Allow companies to pay advance tax insteadFundamental & Technical Analysis MBA FINANCE - 60 -
  61. 61. SAAB MARFIN MBAPORTER’S FIVE FORCE MODELSupply Past 2-3 years have seen a substantial increase in the number of contractors and builders, especially in the housing and road construction segment.Demand Demand exceeds supply by a large margin. Demand for quality infrastructure construction is mainly emanating from the housing, transportation and urban development segments.Barriers to Low for road and housing construction. However, highentry working capital requirements can create growth problems for companies with weak financial muscle.Bargaining Low. Due to the rapid increase in the number ofpower of contractors and construction service providers, marginssuppliers have been stagnant despite strong growth in volumes.Bargaining Low. The country still lacks adequate infrastructurepower of facilities and citizens have to pay for using publiccustomers services.Competition Very high across segments like road construction, housing and urban infrastructure development. Relatively less in airport and port development.Fundamental & Technical Analysis MBA FINANCE - 61 -
  62. 62. SAAB MARFIN MBA COMPANY ANALYSISEstablished in 1971, Unitech today is India’s leading real estate companywith a marketcapitalization of around US$ 10 billion. From being a National CapitalRegion (NCR) focused real estate developer, Unitech is fast establishing apan India presence. It is already a market leader in NCR and Kolkata andendeavors to attain leadership in everymarket that it operates in. Unitech has the most diversified product mixcomprising residential, commercial, Information Technology (IT) parks,Retail, Amusement parks and Hotels. It is known for the quality of itsproduct and is the first real estate developer to have been certified ISO9001:2000 certificate in North India.Future expansion plansAs of 31 March 2007, the Company has 22 major ongoing residentialprojects. The totalresidential space offering from on-going projects is over 25 millionsquare feet. Of these 22 major projects, nine are in Gurgaon, five inGreater Noida, six in Kolkata and one each in Lucknow and Bangalore.Ongoing ProjectsProject Location TypeClose(North) Gurgaon Multi-StoriedClose(South) Gurgaon Multi-StoriedUniworld Spa Gurgaon Multi-StoriedFresco Gurgaon Multi-StoriedUniworld Garden Gurgaon Multi-StoriedEspace Gurgaon VillaHarmony Gurgaon Multi-StoriedEscape Gurgaon Multi-StoriedUniworld City Gurgaon Multi-StoriedHorizon Greater Noida Multi-StoriedHabitat Greater Noida Multi-StoriedFundamental & Technical Analysis MBA FINANCE - 62 -
  63. 63. SAAB MARFIN MBAHeights Greater Noida Multi-StoriedCascades Greater Noida Multi-StoriedVerve Greater Noida Multi-StoriedGarden Kolkata Multi-StoriedAir Kolkata Multi-StoriedDowntown Kolkata Multi-StoriedHeights Kolkata Multi-StoriedCascades Kolkata Multi-StoriedHorizon Kolkata Multi-StoriedSouth City Lucknow Multi-StoriedHeritage Estate Bangalore Multi-StoriedUpcoming Township ProjectsProject Location TypeUnitech Grande Noida Multi-StoriedUniworld Resorts Gurgaon Villa & Multi-StoriedGateway Kolkata Multi-StoriedUniworld City Greater Noida Multi-StoriedOasis Chennai Villa & Multi-StoriedOasis Hyderabad Villa & Multi-StoriedRisk factors:In the course of its business, Unitech is exposed to a wide variety of risks.The company is pursuing a strategy of high growth through entry intonew markets. Though the company has, in the recent past, significantlyscaled up its internal as well as external resources in keeping with itsstrategy, it remains to be seen if the company can manage this growtheffectively. Demand for real estate especially residential real estate issensitive to interest rate movements. Interest rats have been rising in therecent past owing to a Reserve Bank of India’s credit tightening policy.This could adversely affect company’s business plans considering thatresidential segment constitutes a significant portion of company’sbusiness. Also, recent curbs by RBI and the Government of India to reducecredit flow to real estate sector may affect company’s plans. Rise in costFundamental & Technical Analysis MBA FINANCE - 63 -
  64. 64. SAAB MARFIN MBAof raw materials could impact company’s performance. While the prices ofcement and steel arebeyond company’s control, we have been leveraging the bargaining powerof scale to manage the cost of other materials through consolidatedpurchase of those materials. Real estate business in India being highlyregulated by Governments at various levels, several regulatory approvals,permits, licenses etc. are required to be obtained from the Governmentfrom time to time for our projects. Any delay in obtaining such approvalscan affect the timely execution of our projects. While there remain anumber of risks to our business, due to Unitech’s experience of over twodecades in real estate development, its relatively low average cost of theland bank, its capital efficiency and its innovativemethods of turning around cash flows, we believe that the company willcontinue to generate healthy shareholder returns for the future. Therefore,Unitech’s outlook for 2007-08 remains positive.Financial performance analysis: Ratios Industry 2007 2006 2005Current Ratio 1.74 0.95 0.48 0.43Quick Ratio 1.46 0.93 0.46 0.4Inventory TurnoverRatio 14.23 32.16 16.45 15.78Debt Equity Ratio 1.85 3.11 3.06 1.86Operating Profit Ratio 23.49 56.83 19.41 9.73Return On Equity 28.46 84.72 31.01 17.2P/E 29.02 31.97 50.04 13.99Price to Book ValueRatio 7.26 16.37 18.35 2.63Dividend PayoutRatio 13.34 4.13 152.1 127.47Earning Yield 3.46 3.13 2 7.15Dividend Yield 0.47 0.13 0.04 1.19Total Asset TurnoverRatio 0.88 0.22 0.58 0.93Capital TurnoverRatio 2.31 0.91 2.36 2.66Gross Profit Margin 21.84 56.64 18.94 9.31Net Profit Margin 12.78 39.22 10.32 5.67Interpretation:Fundamental & Technical Analysis MBA FINANCE - 64 -
  65. 65. SAAB MARFIN MBALiquidity ratios: Ratios Industry Company Current Ratio 1.74 0.95 Quick Ratio 1.46 0.93 Though company’s current ratio is increasing year by year still it is lesser than industry average. But as the company has got ability to use capital more efficiently, this ratio gives it more leverage in terms of earnings. So it can be justifiable.Fundamental & Technical Analysis MBA FINANCE - 65 -
  66. 66. SAAB MARFIN MBATurnover ratios:Ratios Industry Company Total Asset Turnover Ratio 0.36 0.88 Capital Turnover Ratio 0.54 2.31Inventory Turnover Ratio 14.23 32.16 Inventory turnover ratio is exceptionally good compared to industry. Inventory turnover ratios are improving year by year. Asset and Capital Turnover Ratios are lower than industry, because company has not yet realized good from its newly restructured capital .Leverage ratios:Ratios Industry CompanyDebt Equity Ratio 1.85 3.11 Company is in the comfortable zone. So that it can still use more Financial Leverage in future.Profitability ratios:Ratios Industry Company Operating Profit Ratio 23.49 56.83 Gross Profit Margin 21.84 56.64 Net Profit Margin 12.78 39.22 All profitability ratios for the company are exceptionally good and they are more than double the industrial average. Perhaps this could be possible because of its volume, very good companies business strategies and mainly because of high project execution expertise that the company has got over the year.Valuation ratios:Ratios Industry Company P/E 29.02 31.97 Price to Book Value Ratio 7.26 16.37 Dividend Payout Ratio 13.34 4.13 Earning Yield 3.46 3.13Fundamental & Technical Analysis MBA FINANCE - 66 -
  67. 67. SAAB MARFIN MBA Dividend Yield 0.47 0.13 P/E of company is higher than industry average; it is because of the company brand and almost de-risked business operations and company’s higher earning ratios. Coming to Price to BV ratio company higher ratio than industry average which is substantiable from the companies past financial track record point of view. The DY and EY for scrip is lower than industry average, because of lower proportion of dividend payout owing to companies high growth potential.Summary: So I can conclude company’s scrip is over valued.Note:Adjustment factor for P/E:I have considered only Historical P/E but not the Weighted P/E ratio.Because Constant Growth Dividend Model can not be applied for thecompany. ( because there is no consistent dividend pay out).Fundamental & Technical Analysis MBA FINANCE - 67 -

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