This project involves technical analysis of stocks listed on BSE
SENSEX. The project aims at knowing the importance of technical
reports given by brokerage houses to their customers or investors.
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Technical analysis of stocks listed on BSE- (with datalinks to Google Drive)
1.
2. OBJECTIVES OF THE STUDY
Primary Objective:
To do technical analysis of chosen securities
Sub-Objectives:
a) To study the various theories of technical analysis
b) Understand the movement and performance of stocks
c) Understanding and analyzing the factors that affect the
movement of stock prices in the Indian Stock Markets.
Owned By: YUGANTAR
3. METHODOLOGY
Exploratory Research
Primary Data
Questionnaire
Secondary Data
Yahoo finance
Investopedia.com
CQL
Sample Size 168
Area Of Study Delhi
Owned By: YUGANTAR
4. SURVEY FINDINGS
1. Investors prefer to diversify their investment in a portfolio with
different investment options.
2. 42 % were having trading experience of 1year- 3years. Investors who
were trading for the last 3-7 years were 21%.
3. Investing in stock market yields higher return .
4. Risk perception reveals that investors perceive investment in the
stock market to be a riskier affair irrespective of the Bull & Bear
market existence.
5. FIIs driving the Indian Equity Market.
6. 40% of respondents prefer to trade intraday, while investors with
long term goal investing in stock market were only 26%
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59. FINDINGS
HDFC Bank, MARUTI SUZUKI & NTPC are safe and
decent stocks.
ICICI Bank is aggressive and riskier stock.
SAIL & TATA Motors are aggressive.
Power Grid is a less risky stock.
Owned By: YUGANTAR
60. RECOMMENDATIONS
Buy HDFC for short term.
ICICI share prices will decline in future so wait till it
dips and buy it when share price decline.
NTPC is a good option wait till it shows good signs .
Hold position with NTPC
Buy Tata Motors Maruti Suzuki.
Owned By: YUGANTAR
61. CONCLUSION
Defensive stocks are considered safe & provide stable
returns.
Aggressive stocks have relatively higher variance than
market benchmark.
Proportion of systematic & unsystematic risk
determines the diversification of risk.
Technical Reports helps in finding trends and thereby
maximizing wealth in bear and bull market.
FII’s and large institutional buyers are the driving
force for the Indian Stock Market.
Riskiness is associated in both bull & bear run.
Owned By: YUGANTAR
technical analysis of various stocks listed on stock market and knowing the importance of Technical analysis first of all industries to be studied have to be chosen. To select such sample an exploratory research is carried out to know various industries/sector which are more popular among investors and how much importance technical analysis plays in giving profits.Primary Data was collected through a structured questionnaire comprising of close ended questionnaire.Secondary Data was collected through – online data store and sites like yahoo finance, investopedia and Religare’s Customer Query Log.
1.Only 20.23 % of investors were having only their investment in Shares while majority of the investors 79.77% were keeping their funds and investment in portfolio of Shares, Mutual funds, ULIPS, Bonds, Insurance etc2. 42 % were having trading experience of 1year- 3years. Investors who were trading for the last 3-7 years were 21% and those having the trading experience of more than 7 years constituted 12 %. Investors who have just started and having trading experience of less than 1 year were 25 %. 3. 72 % believe that stock market provide higher return whereas 47 ie.28% do not agree with this view.4. (A) 91 respondents feel that investing in stocks even in Bull Run carry high risk, whereas 45 investors feel there is moderate risk in investment and 19 investors were of the opinion that there is low risk involved if you research on the stocks you are investing in and make a portfolio of stocks before investing. (B) Bear run is perceived to be more risky with 112 investors indicating higher risk while investing in the Bear Run. 23 investors responded in the favour of moderate risk whereas 24 were in the favour of low risk. 9 investors were not able to say anything regarding the risk involved in the investment during Bear Run.5. were of the view that FIIs pulling out their money from the Indian equity market in the last 1 year has caused the equity market to enter into Bearish Run.112 investors out of 168 responded that it is FII that is driving the Indian equity market whereas 23 say that Institutional buyers drive the Indian equity market and remaining 23 believe that retail buyers play a role in the movement of the Equity market.
During the research the investors were asked about the factor which guides them while investing in the stock market and it was found that they invest in the stock market on the basis of fundamental analysis & technical analysis of the company whereas investors also responded that they trade on the advices of their brokers or relationship managers. Out of the total 168 investors surveyed 68 % of the investors rely both on fundamental and technical analysis for investing their money in the stock market. 45% of the investors rely only on fundamental analysis which includes quarterly profit, financial ratios, and projects in hand of the company. 23% of the investors invest on the basis of technical analysis only whereas 12% of the investors rely on their broker’s advice. 20% of the investors rely on their on research for trading.
Out of the 115 Investors trading on the basis of technical analysis and fundamental analysis both 94 investors said that they earn positive return during the last Bull Run whereas 10 investors incurred net loss during the last Bull Run and for investors recorded no profit no loss (profit/ loss incurred were negligibly small) during the last Bull Run the number was 11.
115 investors using fundamental and technical analysis both 67 investors recorded net positive return in the last 6 months of the Bear Run and 32 investors recorded net negative return and 16 investors recorded no profit no loss in the last 6 months of Bear Run.the number of investors recording net positive return by using technical analysis outnumbers those who recorded net negative return in both the Bull and bear market, it can be concluded that technical report and technical analysis of the company can be handy basis for aiding investors to choose scrips and stocks.
During the schedule of the SIP when investors were surveyed regarding the sector specific stock they prefer and consider being safe (less volatile) and offer decent returns, out of the 168 investors surveyed 65 consider Banking, 34 Metal industries, 32 Power and the remaining 37 consider Automobile sector offering safe and decent returns.
Evident from fig.15 MACD is above the zero line at 29.08 which signify uptrend momentum, when MACD is positive it means that the shorter EMA is trading above the longer EMA, which signifies uptrend momentum. HDFC bank’s MACD is undergoing bullish phase as the MACD has experienced a centerline crossover.From the graph below we can say that HDFC Bank’s stock will rise further from 2088.35 as on 14 july 2010.
As the value of RSI for the HDFC BANK stock is 73.82 and it has reached the 70 mark we can say that the stock is overbought as on 14 july 2010.Also as it is evident from the graph that the RSI of the HDFC bank is in between 70-75 near about 74 which shows the security is overbought and in near future it is not a candidate for the pullback. Investors still have scope of making profit by buying this stock currently trading at Rs.2088.35
Again the value of Money flow index for HDFC bank is less than 80 or near to 80 but still security is at overbought level. MFI here shows that there is negative divergences, with decreasing mfi the stock prices are rising. Being MFI has crossed 80 mark earlier the stock prices of HDFC is rising and the stock has not experienced pullback, potential of HDFC bank stock is positive and it assures that it will further increase and investors can book profit even at a price of Rs 2088.5 as on 14 july 2010.
Since the short term Moving average that is for the 15 Day exceeds the long term moving average that is for 50 days, the stock is deemed to be moving in the uptrend in the short term. The HDFC bank stock is showing a bullish crossover, since shorter moving average is above the longer moving average. Moreover HDFC trend shows strong trend which makes it clear that HDFC’s stock will further rise in short term. The graph below show that the 15 DMA is going upward and indicate that the in the short term the price of the security will go uptrend.
Since the Beta of the HDFC Bank stock is 0.726 and is less than 1 it means that the stock is defensive with respect to the market benchmark. Alpha being 0.054 means that, if the market return is zero, the return on the HDFC Bank stock is .054%. Coefficient of correlation between the BSE SENSEX and the HDFC Bank stock is 0.648 which is positive and signify that if the market goes up the share price of the HDFC Bank also goes up.Coefficient of determination i.e. R-square is 0.420 i.e. 42 %. It indicates that 42 % of the variance HDFC Bank stock’s return is explained by the changes in the market returns. Thus 42 % of the HDFC Bank’s risk is explained by the market. It is the market risk and is systematic risk and therefore it is un-diversifiable. The remaining 58 % risk is firm specific and is unsystematic risk and therefore it is diversifiable. The variance of the stock is 2.137 which suggest that the stock‘s return is less volatile and the risk associated with the stock is less.
MACD of ICICI Bank is above zero line and is flagged at 3.90, which suggests a uptrend momentum. Its centerline crossover suggests a bullish trend. ICICI Bank is currently trading at 800 points and it is evident from MACD that its stock will rise further as shown in fig 20. In fig 21, the 12 day EMA is above the 26 day EMA, which results in positive MACD and bullish crossover above the center line.
RSI of ICICI Bank is in support phase, as it is at 59.63 which conform that the stock will rise as it is below the over-bought level.
MFI is at support level at 55.64 and the stock is trading at 890.85. Since the stock is not overbought the trend suggests an uptrend movement of the stock.
As evident from fig 24, longer DMA crosses over the shorter DMA which implies bearish crossover and suggests that the share price may decline.
Beta of ICICI Bank is 1.527 which shows that the ICICI Bank is an aggressive stock and if market moves up by 1% then the security will move up by 1.527 % and if market goes down by 1% then the security will fall by 1.527 %. Also the value of Alpha being less than zero show that if the return on SENSEX is zero then the return on security will be (-0.084).The value of correlation of coefficient of ICICI Bank with BSE SENSEX is 0.840 which show that the two variables are highly positively co-related with each other which indicates that if BSE SENSEX goes up and if it register positive return then price of ICICI Bank will also go up and it will register positive returns, the same is true for the vice versa. The value of coefficient of determination of the security is .706 which show that 70.6% of the variance ICICI Bank stock’s return is explained by the changes in the market returns. Thus 70.6 % of the ICICI Bank’s risk is explained by the market. It is the market risk and is systematic risk and therefore it is un-diversifiable. The remaining 29.4 % risk is firm specific and is unsystematic risk and therefore it is diversifiable. The major part of the total risk ie 70.6% is un-diversifiable which show that the security is riskier.
MACD of NTPC is -0.2 below the zero line, which suggests a bearish run for NTPC’s stock. Negative MACD means 26 day EMA is greater than 12 day EMA influencing MACD below zero line (Fig 25). It suggests a downward movement of the stock.
, RSI is trending from marker A marker B thereby provding support to NTPC’s stock at A (25) and resistance at B (30)At D the stock got support and trended upward until RSI reached at marker F. While rallying from H to I a bearish divergence occurred causing a trend reversal. At K the stock found support and a new resistance point at N is identified leaving the stock at ambiguous situation. Since price movements with declining RSI shows down trend and with recent trend reversal NTPC stock shows downtrend
MFI of NTPC is at 78.63 which is near to 80 i.e. overbought level. NTPC’s overbought level depicts a pullback of stock price.
15 day Moving Average is nearly equal to 50 day Moving Average and moving average is flat. In such situation no trend exists for short term movements. It formulates a situation where by we cannot anticipate as such signals often lead to false trends.
As we find the Beta of NTPC stock with BSE SENSEX we get the value 0.573 which is less than 1 and it shows that the stock is defensive stock and if BSE SENSEX changes with 1% the NTPC stock will change with .573 %.The co-relation of coefficient between the BSE SENSEX and the NTPC stock is 0.58 which show that the two variables are positively co-related and if BSE SENSEX rises up, stock price for NTPC will also rise up and vice versa.The value of coefficient of determination of the security is 0.343 which shows that 34.3% of the variance NTPC stock’s return is explained by the changes in the market returns. Thus 34.3% of the NTPC risk is explained by the market. It is the market risk and is systematic risk and therefore it is un-diversifiable. The remaining 65.7% risk is firm specific and is unsystematic risk and therefore it is diversifiable. Here we can see that the around 65.7 % of the security’s risk can be diversified and can be brought down to zero sacrificing some return. So a major part of the total risk of NTPC is diversifiable.
MACD of Powergrid is trailing below zero line and is moving along the zero line. It is moving slowly away from zero line. MACD of Power Grid is showing a downtrend. Being MACD moving very close to the zero line keeps the stock in an ambiguous situation.
RSI is at 39.73, which shows it is in support phase and is showing a uptrend
MFI of Power Grid is 65.17 which is far below the 80 mark suggesting that the stock is not overbought and it will gain momentum in short run.
15 day Moving Average is less than 50 day Moving Average which shows downward movement of stock. A falling moving average indicates prices, on average, are falling. 50 day moving average is acting as resistance in downtrend (fig 33).
Power Grid’s stock shows downtrend as Power Grid’s stock price is below the 200 days and 50 days moving averages as evident from fig 34.
As we find the Beta of Power grid stock with BSE SENSEX we get the value 0.649 which is less than 1 and it shows that the stock is defensive stock and if BSE SENSEX changes with 1% the Power grid stock will change with .65 %.The co-relation of coefficient between the BSE SENSEX and the Power Grid stock is 0.609 which show that the two variables are positively co-related and if BSE SENSEX rises up, stock price for power grid will also rise up and vice versa.The value of coefficient of determination of the security is 0.372 which shows that 37.2% of the variance Power Grid stock’s return is explained by the changes in the market returns. Thus 37.2% of the Power grid risk is explained by the market. It is the market risk and is systematic risk and therefore it is un-diversifiable. The remaining 62.8% risk is firm specific and is unsystematic risk and therefore it is diversifiable. Here we can see that the around 63 % of the security’s risk can be diversified and can be brought down to zero sacrificing some return. So a major part of the total risk of Power grid is diversifiable.
26 days EMA is greater than 12 days EMA resulting in fallback of MACD below zero line, however, it is showing an uptrend momentum as on 15 july 2010. SAIL will gain momentum and will provide good returns.
Macd and sail close prices
Relative Strength Index of SAIL as on 15 July 2010 is 59.13 which implies that the stock is still not overbought and there is scope of stock in further strengthening its position, currently trading at 200.3.
SAIL has been a very volatile stock with many up’s and down. Currently SAIL is trading at 200.3 as on 15- July-2010. MFI for SAIL is 59.60, which signifies that the stock is in bullish period and will rise further.
Shorter moving average is below the longer moving average which indicates downtrend in stock prices(fig 39).
Fig 40 makes things more clear on comparing 15, 50 & 200 day moving averages we can see that 200 day (longer) moving average is showing uptrend momentum on an average. Fig 40 shows a price crossover of sail’s stock with 15 days DMA at marker 1 and with 50 day DMA at marker 2, which indicates that stock will move up and shows a bullish trend.
As we find the Beta of SAIL stock with BSE SENSEX we get the value 1.326 which is more than 1 and it shows that the stock is aggressive stock and if BSE SENSEX changes with 1% the SAIL stock will change with 1.326 %.The co-relation of coefficient between the BSE SENSEX and the SAIL’s stock is 0.708 which show that the two variables are positively co-related and if BSE SENSEX rises up, stock for SAIL will also rise up and vice versa.The value of coefficient of determination of the security is .501 which shows that 50.1% of the variance SAIL stock’s return is explained by the changes in the market returns. Thus 50.1% of the SAIL risk is explained by the market. It is the market risk and is systematic risk and therefore it is un-diversifiable. The remaining 49.9% risk is firm specific and is unsystematic risk and therefore it is diversifiable. Here we can see that the around 50 % of the security’s risk can be diversified and can be brought down to zero sacrificing some return.
MACD of Sterlite is far below the zero line and it indicates that the stock is experiencing a downtrend in its stock prices and this will continue. Currently Sterlite is trading at 166.15 as on 14 july 2010.
In Fig-43 RSI of Sterlite is showing trend reversal as at level of 48.88 it is resisting stock from trading up. RSI trend is showing currently Sterlite is in bearish run.
MFI of Sterlite is at 61.73 below the overbought level, trading at the support level of 40- 60 indicating that the stock will gain momentum.
Shorter moving averages are less than the longer moving averages (fig 45), indicating downward movement of stock. In the following graph marker 1 shows 200 DMA crosses 15 DMA and marker 2 shows 200 DMA crosses 50 DMA. This is a triple cross-over whereby the longer moving average has crossed the two shorter moving averages thereby signaling a downtrend
As we find the Beta of Sterlite stock with BSE SENSEX we get the value 0.494 which is less than 1 and it shows that the stock is deffensive stock and if BSE SENSEX changes with 1% the Sterlite stock will change with 0.494%.The co-relation of coefficient between the BSE SENSEX and the Sterlite stock is 0.016 which show that the two variables are positively co-related and if BSE SENSEX rises up, stock for Sterlite will also rise up and vice versa.The value of coefficient of determination of the security is 0.00 which shows that the variance Sterlite stock’s return is not explained by the changes in the market returns. Sterlite’s 100% risk is diversifiable and unsystematic. Here we can see that the around all the security’s risk can be diversified and can be brought down to zero sacrificing some return.
MACD is above zero line, it is showing a downturn, being above zero line it indicates that the stock will move up.
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MFI of Maruti Suzuki is trading at 63.08 which implies the RSI is in support phase and Maruti is trending upward in short run.
15 day DMA is greater than 50 day DMA which indicates a uptrend movement. In fig 50, price cross-over is clearly visible signaling a bullish trend.15 day moving average providing support at 1395.
As we find the Beta of Maruti Suzuki stock with BSE SENSEX we get the value .777 which is less than 1 and it shows that the stock is defensive stock and if BSE SENSEX changes with 1% the Maruti suzuki stock will change with .777 %.The co-relation of coefficient between the BSE SENSEX and the Maruti Suzuki stock is 0.498 which show that the two variables are positively co-related and if BSE SENSEX rises up, stock price for Maruti Suzuki will also rise up and vice versa.The value of coefficient of determination of the security is 0.248 which shows that 24.8% of the variance Maruti Suzuki stock’s return is explained by the changes in the market returns. Thus 24.8% of the Maruti suzuki risk is explained by the market. It is the market risk and is systematic risk and therefore it is un-diversifiable. The remaining 75.2% risk is firm specific and is unsystematic risk and therefore it is diversifiable. Here we can see that the around 75 % of the security’s risk can be diversified and can be brought down to zero sacrificing some return. So a major part of the total risk of Maruti Suzuki is diversifiable.
RSI of Tata Motors is at 64.95 below the over-bought level. RSI indicates that the stock will rise and is not a candidate for pullback.
MFI of Tata Motors is 54.99, much below the overbought level indicating that there is scope for the stock to rise. Currently MFI is at support level.
As we find the Beta of Tata Motors stock with BSE SENSEX we get the value 1.481 which is more than 1 and it shows that the stock is aggressive stock and if BSE SENSEX changes with 1% the Tata Motors stock will change with 1.481 %.The co-relation of coefficient between the BSE SENSEX and the Tata Motors stock is 0.659 which show that the two variables are positively co-related and if BSE SENSEX rises up The stock price for Tata Motors will also rise up and vice versa.The value of coefficient of determination of the security is 0.434 which shows that 43.4% of the variance Tata Motors stock’s return is explained by the changes in the market returns. Thus 43.4% of the Tata Motors risk is explained by the market. It is the market risk and is systematic risk and therefore it is un-diversifiable. The remaining 56.6% risk is firm specific and is unsystematic risk and therefore it is diversifiable. Here we can see that the around 56 % of the security’s risk can be diversified and can be brought down to zero sacrificing some return. So a major part of the total risk of Tata Motors is diversifiable.