Angel broking

FUNDAMENTAL ANALYSIS OF SECURITIES AT ANGEL BROKING LTD

CHAPTER-1

INTRODUCTION

What is Investment?

Investment is referred to as the concept of deferred consumption, which might comprise of
purchasing an asset, rendering a loan, keeping the saved funds in a bank account such that it
might generate lucrative returns in the future. The options of investments are huge; all of them
having different risk-reward trade off. This concludes that the investment industry is really
broad and that is why understanding the core concepts of investments and accordingly
analyzing them is essential. After thorough understanding of the investment industry, can an
investor create and manage his own investment portfolio such that the returns are maximized
with the least risk exposure

Types of Investments in the investment industry

As stated earlier, the investment industry is huge; therefore the types of investments are also
varied. Different types of investments are: Cash investments: Cash investments comprise of
savings bank accounts, certificates of deposit (CDs) and treasury bills (TBs). All these types
of investments render a low interest rate and prove to be quite risky during times of inflation.

Debt securities: This type of investment gives returns in the form of fixed periodic payments
and the fixed capital appreciate at maturity. This is safe bait for the investors in the investment
industry and has always proved to be the risk free investment tool. Though, it is generally low
in risks, the returns are also lower than the other peer securities.

Stocks: Investors can also buy stocks (equities) from the secondary markets and be a part of
any business corporates that are listed in the bourses. By this way, one can become the part of
the profits that the company generates. But one should remember that stocks are generally
more volatile and carries more risk than bonds.

THE OXFORD COLLEGE OF BUSINESS MANAGEMENT

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Mutual funds: They are usually a collection of stocks and bonds that a fund manager selects
for an investor such that the returns are maximum. The investor does not have to track the
investment, be it a bond, stock- or index-based mutual funds.

Derivatives: Derivatives are financial contracts, whose value is derived from the value of the
underlying assets like equities, commodities and bonds. They can take the form of futures,
options and swaps. Investors choose derivatives as they are used to minimize the risk of loss
that result from variations in the underlying asset values.

Commodities: The items that are traded on the commodities market are agricultural and
industrial commodities and they need to be standardized. Commodities trading have always
been giving high returns and thus they are the riskiest of all investment options. One, who
trades in commodities, requires specialized knowledge and analytical capabilities.

Real estate: Investing in real estate has to be a long term affair. Funds get hooked into the
real estate sector for a considerable time period.

Tools of Fundamental Analysis
Fundamental analysis is the process of looking at a business at the basic or
fundamental financial level. This type of analysis examines key ratios of a business to
determine its financial health and gives you an idea of the value its stock.

Many investors use fundamental analysis alone or in combination with other tools to evaluate
stocks for investment purposes. The goal is to determine the current worth and, more
importantly, how the market values the stock


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1. Earning Per Share: EPS = Net Earnings / Outstanding Shares

2. Price to Earnings Ratio: The P/E looks at the relationship between the stock price
and the company’s earnings. The P/E is the most popular metric of stock analysis
P/E = Stock Price / EPS

3. Projected earning growth: The P/E is the most popular way to compare the relative
value of stocks based on earnings because you calculate it by taking the current price of the
stock and divide it by the Earnings Per Share (EPS). This tells you whether a stock’s price is
high or low relative to its earnings.

PEG = P/E / (projected growth in earnings)

4. Price to Sales: P/S = Market Cap / Revenues or

P/S = Stock Price / Sales Price Per Share

5. Price to Book

P/B = Share Price / Book Value Per Share

6. Dividend Payout Ratio

The DPR (it usually doesn’t even warrant a capitalized abbreviation) measures what a
company’s pays out to investors in the form of dividends.

DPR = Dividends Per Share / EPS


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7. Dividend yield

This measurement tells you what percentage return a company pays out to shareholders in the
form of dividends. Older, well-established companies tend to payout a higher percentage then
do younger companies and their dividend history can be more consistent

Dividend Yield = annual dividend per share / stock's price per share

8. Book Value

Book Value = Assets – Liabilities

9. Return on Equity

Return on Equity (ROE) is one measure of how efficiently a company uses its assets to
produce earnings. You calculate ROE by dividing Net Income by Book Value. A healthy
company may produce an ROE in the 13% to 15% range. Like all metrics, compare
companies in the same industry to get a better picture


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Investment Scenario

Investment is the employment of fund on assets with an aim of earning income on capital
appreciation. Investment means the present consumption is sacrificed to get return in future.
Investment is the good only for the purpose to get return from the selected or choosing
securities so; investors have to see the fundamental analysis. In fundamental analysis, we can
broadly classify into three types. One is Economic Analysis; Industry analysis and company
analysis. These three are very important base of the securities or stock of market. We have to
study about this fundamental analysis.

An Indian stock market has been no different. Memories of its crash of December 1990
and financial crisis in January 2008 are still there in the minds of many. After record rise
in proceeding few years the index fell precipitously and investor loss heavily. This
phenomenon repeated every now and then. Though the equity cult is fast spreading
among the investor the hard fact is majority of stocks continue to remain volatile to
date. All these are pointers to the fact that the investor market is no longer holding an
olive branch to investor in equity. Much of the danger associated with it can be avoided and it
need not be such nerve raking experience, provided one approaches it as a rational
decision making process. In short Security analysis and portfolio management are hard
work, requiring discipline and patience, and the work is not always rewarded with
exceptional returns.


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REVIEW OF LITERATURE

William O’Neil, Street analyst and publisher “How to Make Money in Stocks”, People who
are new to securities will find it an excellent article one that relies on time-honored indicators
such as quarterly earnings, market capitalization, and daily indexes. O'Neil's study of winning
stocks stretches back to the 1960s, and he shares his insights here, describing what
characterizes a growth stock, when to cut your losses and how to spot a market top.

Ken Little, Fundamental Analyst written an article “Tools of Fundamental Analysis” Many
investors use fundamental analysis alone or in combination with other tools to evaluate stocks
for investment purposes. The goal is to determine the current worth and, more importantly,
how the market values the stock.

Petri Kyrolainen and Jukka Perttunen “Investors Activity and Trading Behavior” in stock
market active investors create price pressures or are intraday momentum traders on the other
hand passive investors accepting price pressures.

Carl Hayes, written “Trade like warren buffet and Use Fundamental analysis” Most
traders are very well aware that market movements can be unpredictable and difficult to
interpret, and this conviction is confirmed by a number of studies published by academics
with the conclusion that there’s a significant degree of randomness to the price action. But
although this is true in the short term, even a cursory examination of the EURUSD chart over
a multi-month period would suffice to show that there are forces which drive price trends with
a lot more clarity than what is evident in a day’s price action

Reports that industrial production, productivity, money supply and unemployment rates are
consistently influencing the share returns, Chen et. al., (1996) proposes that the unexpected


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Inflation, industrial production, changes in risk premiums, etc., are crucial in Asset pricing.
In a recent study Chen and Jorden (2002) finds inflation, interest rates on government
bonds, industrial production, oil prices, etc., are germanein asset prices.

In Indian environment, the study conducted by Rajan Mookerjee 1998) observes weak
linkages between changes in GDP and stock prices, Malathy Prabhakaran, (1999), Rao and
Bhole (2001), Choudhari (1998) and others studied the impact of agriculture on stock
prices and report conflicting results. A comprehensive study on these Economic variables is
awaited in Indian contex

OVERVIEW OF THE ECONOMY
A top down analysis of the firm’s prospects must start with a global economy. The
international economy might affect a firm’s export prospects, the price competition it
faces from competitors, or profit it makes from abroad. Certainly, despite the fact that
the economies of most countries are linked with global economy, there is considerable
variation in the economic performance across countries at any time.

Given the degree of openness to trade and investment, it is a well-accepted fact that
the national markets are inter-related and increasingly global. When making decisions,
traders incorporate information pertaining to price movements and volatility in the asset
they are trading including information about related assets. The movement of markets in
rhythm and chorus could nullify much of the gain out of diversification across borders,
besides being vulnerable to the caprices of global capital.


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Companies are part of the industrial and business sector, which in turn is a part of the overall
economy. Thus, the performance of the company depends of the performance of the
economy in the first place. If the economy is in recession or stagnation, centeris paribus,
the performance of the company will be bad in general or vise versa.

Since India started deregulating its financial markets in the post-liberalization phase, her
integration with the international financial markets has been proceeding rapidly. Based
on the observations it has been concluded that in the post-liberalization era, international
financial market integration has accelerated, though not yet complete.

Indian stock markets have come of age where they have seamlessly joined themselves
with other international stock markets and no longer are the stock prices in India governed
only by the events of the local importance. As per research studies so far, nearly 50% of
the stock prices changes can be attributed to market influences, which are general and
caused by the economic, and industry factors. It is therefore important that any stock
market investment is preceded by economic analysis and industry analysis.

Economic conditions are non-diversifiable risk. It applies to all the industries, but some
industries are expanding while others are stagnant and some contracting depending on
the demand and market conditions. The investor has to choose growth industry from
industries, and then choose the scrip under valued and judged by study and analysis.


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INTRODUCTION TO THE CONCEPT OF SECURITY ANALYSIS
An investment is a commitment of funds made in expectation of some positive rate of return
in future. An investor makes some sacrifice in the present in the hope of desiring benefits in
future. The motive behind investment varies from person to person. Some people invest in
order to gain a sense of power or prestige. Often the control of corporate enterprises is a
driving motive. For most investor however their interest in investment is largely pecuniary
to earn a return on their money. But his return on stock market security is subject to risk.
Risk incase refers to the uncertainty surrounding actual realization of the rate of return offered
by an investment. The time element refers to period of waiting required to reap the
return. Accordingly early investment decision has three key aspects. They are,
 Return
 Risk
 Time
There fore, investment process must be considered in terms of above aspects.

One should approach any scheme of investment as a rational decision making process, in
which he should attempt to select a package of portfolio securities that meets
predetermined set of goals. These investors goal are usually expressed in terms of return.
Almost all the cases, the hard fact are that return and risk are inseparable.

Therefore the ultimate decisions to be made in the investment are two.
What securities to be held?
How many rupees should be allocated to each?

These decisions are made in three steps.
1. Security analysis
2. Security evaluation
3. Portfolio analysis, selections and management.


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Securities are marketable financial instruments that bestow on their owners the right to make
specific claims on particular assets. An individual security provides evidence of their creditor
ship or ownership depending on whether it is bond or tock, respectively. A bond is loan that is
paid off with interest; the investor lends money to the borrowing company that issued bond.
In contrast, stock ownership represents a cash investment a future of a corporation; the
investor owns a part of a corporation and share in its profits.

SECURITY ANALYSIS
(a) Traditional investment analysis, when applied to securities, emphasizes projection of
prices and dividends. That is, the potential prices of a firm’s common stock and future
dividend stream are forecast, and then discounted back to the present.

(b) Basically modern security analysis deeply rooted in the fundamental concept. But
the more modern approach to common stock analysis emphasizes risks and return
estimate rather than mere price and dividend estimates, of course dependent on share
price and accompanying the dividend stream.

SECURITY VALUATION
It refers to the act of assessing the true worth of security. Before committing the fund on stock
exchange securities, the investor should make thorough comparison of the prices of the
security with its true value. The price refers to the price quoted for the security at the stock
exchange at a given movement of time. Value refers to the intrinsic worth. Only with
the help of such evaluation the investor can decide as to buy hold or sell.


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DIFFERENT APPROACHES TO VALUATION
There are essentially three approaches or school of thoughts on the matter of security
price evaluation, classified as

(a) Fundamental Approach
The concept of time value of money is the business of this approach. Money has a
time value. A rupee now is worth more than rupee a year from now. For different
securities, future benefits may me received at different times. Even when the amount of
future payment is the same, differences in the speed of their receipt may create
differences in value. Time value of money suggests that earlier receipt is more desirable
than later receipt, even when the both are equal in the amount of certainty. Because,
earlier receipt can be re invested to generate additional returns before later receipt
come in. The force operating is the principle of compound interest.

Framework: The proper order in which to proceed in Fundamental analysis is, first to
analyze the overall economy and securities markets. Second, analyze the industry with in
which a particular company operates. Finally, analysis of the company should be considered.
The above analysis involves making a careful estimate of expected stream of benefits
and required return of common stock. The intrinsic value then can be obtained through
the present value analysis that is, the dividend discounts model. An alternative method
of valuation is the P/E ratio or earning multiplier approach.

Economic Analysis
Industry Analysis
Company Analysis


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Strategic considerations of economic, industry and company analyses are as follows
(1) Economic Analysis

1. A study of economic trends as indicated by rate of growth in gross national
product, employment, aggregate corporate profits, interest rate, exchange rates, savings
and investments, monsoon positions.
2. An analysis of the relationship between economic trends and economic policies and the
stability of such relationships.
3. A study of world economic trends and their impact on Indian economy.

(2) Industry Analysis

1. Implications of projected growth in gross national product for various industries.
2. Implications of plan priorities and plan expenditure for various industries.
3. Vulnerability of an industry for government regulations, and control of prices and
production.
4. Implications of industrial and fiscal policies of government for an industry.
5. Analysis of competitive conditions as reflected in any barriers to entry.

(3) Company Analysis
1. Trend analyses of company’s market share.
2. An analysis of turn over of assets, operating and production efficiencies through ratio
analysis.
3. Leverage and coverage ratio analysis.
4. An analysis of book value per share.
5. An assessment of quality of management
6. An analysis of price to earning multiples.
7. An analysis of growth in sales and dividends.


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The basis tenets of this approach are as follows
Each share has an intrinsic value. It can be determined by discounting the future
stream of benefits that does accrue to the holder of the security. For instance if rupees 100
now is = rupees 100 + R after one year. Where R is the rate of return then the next question is
if we get rupees hundred after one year how much is it worth now.
Rupees 100 + R after one year = 100 now. Therefore rupees 100 after one year =
100/100 + R and if R = 12 % then 100/112 = .0893.

(b) Technical Approach
Technical analysis is an alternative approach to predicting the stocks price behavior.
Technical analysis is frequently used as a supplement to fundamental analysis rather than as a
substitute for it. Thus technical analysis can frequently does, confirm findings based on
fundamental analysis.

Technical analysis is viewed mainly through price and volume statistics. It helps in
measuring price volume, supply demand relationship for overall market as well as for
individual stocks. Technicians seldom rely upon a single indicator, as no one indicator is
infallible; they place reliance upon reinforcement provided by groups of indicators.


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(c) Modern Approach
Markovitize laid down the foundation for this approach in 1951. He studied
capital market with the help of fairly sophisticated method of investigation and in
general arrived at the following conclusions.

 Stock markets are reasonably efficient in reacting quickly and rationally to the
flow of information.
 Successive price changes are independent. As a result past price behavior cannot be
used to predict future price behavior.
 In the capital market, there is a positive relation ship between the risk and return. This
indicates, in general, investment in several securities would reduce the variability of
return and hence the risk ness of a portfolio


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. INDUSTRY PROFILE

SECTOR PEROFORMANCE:

Many valuable lessons can be learned from history, but extrapolating historical returns
into the future is difficult and complicated. For instance, few investors in 1900 could have
predicted the monumental changes that would take place in the world after 1913. The two
world wars, socialist revolutions, the Great Depression and the Bretton Woods Agreement all
had a profound impact on the global economy and stock markets until the 1970s. The impact
of these events suggests that although we can study the past, the social and economic events
that might affect the markets in the future are often unpredictable.

The graphs below show a breakdown of the world markets in both 1900 and 2000 and the
anomalous growth of the U.S. market during this time.


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CHAPTER-2

RESEARCH DESIGN

BACKGROUND OF THE STUDY

Value investing means finding the intrinsic value of the stock. It means present value of
the future cash inflows. I take into consideration of economic, industry and company
analysis.

In Economic factors, we consider macro economic factors because it reflects the
prosperous out look for sales and profit of the firm or company. This economy reflects
behavior of the stock prices.

While macro economic theory has helped to develop risk factors like interest rate risk,
purchasing power risk, market risk and such alike; the theory of the firm helped in
delineating factors like firm’s cash dividend yield, beta coefficient as a numeric surrogates
for security’s quality rating work focuses on. The security investment involves several type
of risk diversifiable as well as non-diversifiable. While the risk of a security is nothing but
the likelihood of the return turning out to be more or less than the expected, the total
risk of an asset may be perceived as being the sum of several different contributing
risk factors like interest rate fluctuations, market cyclical, purchasing power instability
and so on. as mentioned Donald E. Fisher and Ronald J. Joeden.


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STATEMENT OF THE PROBLEM

“To examine the fundamental factors which influences the valuation of securities”

Investors have a lot of investment opportunities. The investor has to find good among the
alternatives. It is very difficult to find the good opportunity so this analysis helps the investors
to find good one among the alternatives. Many investors invest in securities without analyzing
the economic condition, budget decision, industry growth rates and company factors. Then the
investor end up with the losses.

Many invest insecurities by their emotional forces and many invest with out analyzing
economic conditions, budget decisions, industry growth rates and company factors. Finally,
they end up with losses. Of course, no one can predict the uncertainty factors like September
11 attack in 2001. Despite these factors investors could reduce the risk associated with
securities through analyzing the security properly.

How much the economic factors could influence the stock market? Whether positively or
negatively have the relationship with the stock market movements. Answering these
questions enables the investors to have the perspective about the overall economy and
stock markets.

If the economy prosperous, the industries with in the economy also may also be prosperous
although few may be in the bad shape. Which industry is really having the potentiality for
growth? Knowing these factors through comparing performances between the industries
enables the investors to compare the industries and finally can select the company which is
having the opportunity for growth.


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OBJECTIVE OF THE STUDY

The study was conducted with a view to,

a) The main purpose of this study is to comparatively analyze the deferent industry
performance and selecting the appropriate security by considering potentiality of the
industry.

b) Identify the returns of the securities in considering the risk, growth, and other
related variables and Understand the factor influencing the security prices in different
industries.

c) Analyzing the environmental factors affect the security prices and assess the future
potential of the companies in the industry and aid to investor in assessing the worth of the
securities

SCOPE OF THE STUDY

a)The security analysis starts from broad environmental factors to the industry,
which influences the share price and finally analyzing the company’s potentiality by
considering possible risks associated with securities.

b) Since share price of the company is empirically found to depend up to 50% on the
performance of the industry and the economy, studying those related field provide
insights for selecting the securities.


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c) Budget plays a significant role while selecting the industry, as it may create a
opportunity for one industry and may not for other, the analyzing impact of budget
plan and its polices is important.

d) As research studies shows more than 35% of the share price movements depend on the
company’s performance. So analyzing the company’s potential growth through ratio analysis
provides the valuable insights. Comparability between the companies enables the investors
selecting particular securities

REASEARCH METHODOLOGY

a) Since the study is principally intended to examine the potential growth of securities,
which might be affected of different risk variables on security returns, a sample of 4
industries, and selecting the profitable scrip through selecting potential growth
industries, whose scrips are actively traded during the period 2005 to 2010 has been
considered. In order to identifying the influence of exogenous variables of economy and
market in security prices information on different indicators like Gross domestic product,
Monsoon, Money supplies, Fiscal deficit etc. and for the market observation Sensex has
been used.

b) For analyzing the relationship between economic indicators and stock market
movement, the correlation tools has been used, and selecting the industry by comparing
their sales growth, dividend and its ratios has been comparatively analyzed. On the
other hand, groups of 18 financial ratios capturing the Size, Dividend Policy, Leverage,
Productivity, Liquidity, Profitability, Earnings Variability, P/E ratios and Certain Growth
Variables constituted the company specific fundamentals of financial risk variables. The
estimation of ‘Accounting Beta ‘(the ration of EPS of a firm in relation to the average EPS of


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all firms), Sales, and Earnings have been measured as linear growth rates the testing period
of most recent five-year period.

SAMPLE DESIGN

Definitions of the Population
Since the study is mainly related to selecting the appropriate security, analyzing
industries and comparison between those is necessary. Their potentiality for growth also to
be consider for selecting particular industry, where the companies in that industry has
to be analyzed through comparing between the companies considering their relative
advantages over the others.

Sample Size
All the four industries under the study are randomly selected reconsidering
differentialities in the way they do business and the product they produced has been
considered as sample and the four companies in that particular industry has been
considered as representative sample.

Sample Technique Adopted
Techniques for selecting industries is nothing but the way they doing business since the
product they produce also different. However, for the companies, the out performing
industry over the other out of the sample has been selected and the highest sales in the latest
period in the Computer and Software industry has been selected for studying their
performance.


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SOURCES OF THE DATA

Primary data: The fundamental and technical analysts are consulted and opinions of them
about various parameters of the fundamental factors which influences the stock valuation are
collected

Secondary data
Major part of the data has been collected through secondary sources. These data are
a) Finance Ministry
b) Various magazines books and journals and papers
c) Web sites of the companies and indices has been collected from Bombay stock
exchange

OPERATIONAL DEFINITIONS

Economic Analysis
Economic analysis refers to analyze the factors or indicators of the economy that affects
the stock market. This is also called non-diversifiable risk analysis where the risk associated
with the securities can not be diversified.

Industry analysis
Industry analysis refers to analyze the plan, priorities and vulnerability of an industry
for government regulations. The competitive conditions as reflected in any barriers to
industry also taken in to consideration.


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Company Analysis
Company analysis includes analyze the company as potentiality for growth, present
performance, risk associated with securities are considered as important.

Correlation
Correlation is a statistical measure of the degree to which the security returns move together.
The positive correlation means the variables move together. The negative correlation
suggests that move in opposite direction and zero correlation shows that no tendency to
very either positive or negative direction.

Beta
It measures the sensitivity of the return of a security to changes in returns to the
market portfolio. It may be positive or negative. The positive beta measures that if1% changes
market index, more than 1% in individual security and vice versa.

PERIOD OF STUDY

 The period of study is undertaken for duration five years

 The data related to the economy are gathered from the financial year 2005 to 3rd
financial quarter ending 2009.

LIMITATION OF THE STUDY

a) The economy and industry are so wide and comprehensive that is difficult to
encompass all the likely factors influencing to be captured in any set of possible
indicators.

b) Besides, the study has the limitation of the time and resources.


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c) Again the study has limited to four big industries and many other sub industries
within the industries and small units have been left out. Hence, the applicability of the study is
limited to that extent.

Chapter Scheme

Chapter one started with the introduction of the concept of security analysis, where the
investment scenario in the security takes place. The introduction part explains about different
approaches to the security that is the fundamental approach, modern approach and technical
approach. And investor’s perception about the characteristics of growth and the value
associated with securities.

Then the second part explains the background of the study, where the different theories and
tools like leverages and betas are supported for studying securities.

The second chapter starts with the statement of the problem for studying security and
explains the areas of the analysis. And it covers source of the data literature review and
operation definition of the study.

The third chapter deals with the profile of the respondents. It highlights the economy of
India, industries and the companies. In industries, it deals with growth rate of sales and
dividend of four industries namely, Computer and Software, Pharmaceutical, Cement, and
Automobile industries and also analysis of government policies that affects performances.
The export performance and competitive positions of said industries provides the guidelines
about the future of industries. And come to the companies, it provides overview of three
companies in computer and software industry, namely Infosys, Wipro and HCL.


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Then in analysis part it deals with primarily the global economy, where the Indian stock
market no longer is limited to the Indian situation.

It also deals with the analysis of the economic factor affect to the stock market. In the second
part of analyzing, analyzing industries through comparison of different ratios, sales and
dividend growth that helps to select the appropriate industry which out perform other
industries.

The third part emphasizes on the companies within the Computer and Software industry,
where comparison between Infosys, Wipro, and HCL which are all highly traded in that
related industry in the stock market, guides the investor for selecting appropriate security
which is really doing well than other selected companies.

Finally, the conclusions and suggestions at the end provides the proper guidelines which is
drawn after analyzing the economy, industries and company enables the investors getting
perspective above overall better performance industry and company.


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CHAPTER-3

COMPANY PROFILE

Angel Broking's tryst with excellence in customer relations began in 1987. Today, Angel has
emerged as one of the most respected Stock-Broking and Wealth Management Companies in
India. With its unique retail-focused stock trading business model, Angel is committed to
providing ‘Real Value for Money’ to all its clients.

The Angel Group is a member of the Bombay Stock Exchange (BSE), National Stock
Exchange (NSE) and the two leading Commodity Exchanges in the country: NCDEX &
MCX. Angel is also registered as a Depository Participant with CDSL. It is the only 100%
retail stock broking house offering a gamut of retail centric services like:
► E-broking,
► Investment Advisory,
► Wealth Management Services,
► Portfolio Management Services &
► Commodities

The Angel Group of Companies was brought to life by Mr. Dinesh Thakkar. He ventured into
stock trading with an intention to raise capital for his own independent enterprise. However,
he recognized the opportunity offered by the stock market to serve individual investors. Thus


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India’s first retail-focused stock-broking house was established in 1987. Under his leadership,
Angel became the first broking house to embrace new technology for faster, more effective
and affordable services to retail investors.

The Angel group is managed by a team of 5100+ direct employees. It has a nationwide
network comprising 21 Regional centers, 175 branches, 3 PCG (Private Client Group), 6810+
registered sub brokers and business associates and 12720+ active trading terminals which
cater to the requirements of 589700+ retail clients.

Angel Broking has been awarded the prestigious ‘Major Volume Driver’ award consecutively
for 5 years, from 2005 to 2009 from Bombay stock exchange of India.

Vision of the Company
To provide best value for money to investors through innovative products, trading /
investment strategies, state-of-the-art technology and personalized service.

Philosophy of the Company
Ethical practices & transparency in our entire dealings customer interest above our own
always deliver what we promise effective cost management.

Quality Assurance Policy
We are committed to being the leader in providing World Class Product & Services which
exceed the expectations of our customers Achieved by teamwork and a process of continuous
improvement.

CRM Policy


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A Customer is the most important visitor on our premises. He is not dependent on us but we
are dependent on him. He is not interruption in our work, but is the Purpose of it. We are not
doing him a favour by serving. He is doing us a favour by giving us an opportunity to do so.

Products of Angel Broking
● Online Trading ● Mutual Fund
● Personal loans ● IPO Advisory
● Commodities ● Insurance
● DP Services

Angel Group Companies

Angel Broking Ltd.: Member on the BSE and Depository Participant with CDSL
Angel Capital & Debt Market Ltd.: Membership on the NSE Cash and Futures &
Options Segment
Angel Commodities Broking Ltd.: Member on the NCDEX & MCX
Angel Securities Ltd: Member on the BSE

• · Incorporated :1987
• · BSE Membership :1997
• · NSE membership :1998
• · Member of NCDEX and MCX
• · Depository Participants with CDSL
Angel’s presence-


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· Nation- wide network of 21 regional hubs
· Presence 124 cities
· 6800 + sub brokers & business associates
· 5.9 lakh +clients

Management
1. Mr. Dinesh Thakkar, Founder Chairman & Managing Director
2. Mr. Lalit Thakkar Director – Research
3. Mr. Amit Majumdar Executive Director – Strategy and Finance
4. Mr. Rajiv Phadke Executive Director – HR & Corp
5. Mr. Vinay Agrawal Executive Director – Equity Broking
6. Mr. Nikhil Daxini Executive Director - Sales and Marketing
7 Mr. Hitungshu Debnath Executive Director - Distribution & Wealth Management
8. Mr. Mudit Kulshreshtha Executive Director – Operations

Competitor’s information
 Motilal Oswal
 ICICI Direct
 Indiabulls
 Sharekhan
 HDFC Securities

Milestones

 Awarded with 'Broking House with Largest Distribution Network' and 'Best
Retail Broking House' at Dun & Bred street Equity Broking Awards 2009
 August, 2008 Crossed 500000 trading accounts
 November, 2007 ‘Major Volume Driver’ for 2007
 December, 2006 Created 2500 business associates
 October, 2006 ‘Major Volume Driver’ award for 2006
 September, 2006 Launched Mutual Fund and IPO business
 July, 2006 Launched the PMS function
 October, 2005 ‘Major Volume Driver’ award for 2005


Page 30


 September, 2004 Launched Online Trading Platform
 April, 2004 Initiated Commodities Broking division
 April, 2003 First published research report
 November, 2002 Angel’s first investor seminar
 March, 2002 Developed web-enabled back office software


Page 31



Page 32


Depositary Participant Services
Angel Broking Ltd. is a DP services provider though CDSL. We offer depository services to
create a seamless transaction platform to execute trades through Angel group of companies
and settle these transactions through Angel Depository services.
● Wide branch coverage
● Personalized/attentive services of trained a dedicated staff
● Centralized billing & accounting
● Acceptance & execution of instruction on fax
● Daily statement of transaction & holdings statement on e-mail
● No charges for extra transaction statement & holdings statement

Portfolio Management Services
Successful investing in Capital Markets demands ever more time and expertise. Investment
Management is an art and a science in itself. Portfolio Management Services (PMS) is one
such service that is fast gaining eminence as an investment avenue of choice for High Net
worth Investors (HNI). PMS is a sophisticated investment vehicle that offers a range of
specialized investment strategies to capitalize on opportunities in the market. The Portfolio
Management Service combined with competent fund management, dedicated research and
technology, ensures a rewarding experience for its clients.
Angel PMS brings with it years of experience, expertise, research and the backing of
India's leading stock broking house. At Angel, experienced portfolio management is the
difference. It will advise you on a suitable product based on factors such as your investment
horizon, return expectations and risk tolerance.


Page 33


3. Mckensy’s7s frame work with special reference to organization under study

The organization is not just the structure; rather it is made up of seven elements, shown
above. These are divided into two types: Hard and Soft. Elements in green are hard; they are
easy to identify and feasible. They can be found in strategy elements, corporate plans,
organizational structures and other documentations. The soft elements are hard to describe.
They are sort of intangible. Hence it is more difficult to plan or influence these elements

Effective organizations achieve a fit between all these seven elements. If one element
changes then this will affect all the others. For example, a change in HR-systems like internal
career plans and management training will have an impact on organizational culture
(management style) and thus will affect structures, processes, and finally characteristic
competences of the organization. Hence 7S model is an effective tool in initiating change
process in the organization.


Page 34


The elements of 7s model are:

Strategy: Action plan of a company in response to changes in the external environment.

Structure: Roles and responsibilities and basis for speculation.

System: Formal and informal procedures that support strategy and structure.

Style Culture: Management style and organizational culture.

Staff: Human: resource management processes- training and development process,
socialization process, how new managers are introduced to the organization.

Skill: competencies prevailing in the organization and how these are being developed and
expanded by the organization.

Shared values: Guiding concepts among the employees must be simple and at an abstract
level, must not be easily understood by the people from outside.

The model is based on the theory that, for an organization to perform well, these seven
elements need to be aligned and mutually reinforcing. So, the model can be used to help
identify what needs to be realigned to improve performance, or to maintain alignment
(and performance) during other types of change.

Whatever the type of change - restructuring, new processes, organizational merger, new
systems, change of leadership, and so on - the model can be used to understand how the
organizational elements are interrelated, and so ensure that the wider impact of changes made
in one area is taken into consideration.


Page 35


STRATEGIES

Angel Diet and Angel Trade is focused on capturing the significant growth opportunities in
the financial services market and its strategy is driven by the following key principles

Client Referral Programs: Client referrals are the most reliable and most cost-effective
source of new clients. We help firms maximize their success by creating process and tools
that make generating client a referrals a natural and systematic part of the practice.

Client Retention Programs: Maintaining and leveraging existing client relationships is far
less expensive and more productive than trying to acquire new clients. We help organizations
develop effective client communication programs that build stronger client relationships,
encourage referrals, and produce incremental business.

New Client Acquisition Programs: A diverse mix of campaigns including events, public
relations, advertising and direct marketing can be an effective means of acquiring new clients.
We help firms create and implement integrated marketing strategies to reach their goals.

PARTNERSHIP STRATEGY

Focused Approach to

Volumes – By means of

Deferred Partners

Referral Partners

Associate Referral Partners


Page 36


STRUCTURE:

CSO (Central
Statistical
Organization)

Branches and
Branches and Branches and
Franchise
Franchise Franchise branches
branches
branches
Regional Office Regional Office Regional Office

Angel Clients Business Associates

System
System consists of all formal and informal procedures that allow the organization to function
including

Risk Management System Risk management logic built into Portfolio Management and
Internet Trading Application.


Page 37


Back office support for centralized control and risk management for non-internet transactions.

Order Execution System The telecaller is provided with database and is required to make
call to numbers provided by relationship manager and fix an appointment with them.

The relationship manager then goes and meets the client at the fixed location and time and
tries to convince the client to buy his product and close the deal.

If the deal is successful, the relationship manger gets the required documents from the client
and had over them to the backend operations people.

Management information system.

A management information system (MIS) is a subset of the overall internal controls of a
business covering the application of people, documents, technologies, and procedures by
management to solve business problems such as costing a product, service or a business-wide
strategy.

Merit rating system

Based on the sales and performance appraisal will be done.

Depending on the products which are sold by particular team, appraisal is done.

Style
Top-Down Decision Making


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Top-down" approach is one where an executive, decision maker, or other person or body
makes a decision. This approach is disseminated under their authority to lower levels in the
hierarchy, who are, to a greater or lesser extent, bound by them.

The management style followed by Allegro is “TOP-DOWN” style of decision making. The
decisions are made by the higher authority and are followed by the employees. The employees
are not given the right to make decisions but amend on the decisions made by the decision
making heads.

Staff
There are the following three types of groups of staff:

 There are about 300+ professionals working at Angel Broking Ltd
 Every employee is effectively trained to execute their work.

 There are different groups of staff such as technical support team, sales groups and
investment management groups.

Skills


Page 39


Board Of Directors: The skills of BOD are somewhat similar to the qualities to be possessed
by the CEO. They should be capable of handling and controlling all the managers under
them.

Regional Manager: In order to become the regional manager of Angel Broking,

a person must be competent enough to manage the whole region under him/her.

He/she should also be able to motivate the employees under him from time to time.

He/she should know when he/she is required to boost the morale of the employees.

He/she should also know how to work with other regions in country.

Area Manager: The area manager needs to be capable enough of managing whole area under
him/her.

He/she should also know how to control and handle all cluster managers under them.

Cluster Manager: The cluster manager should be capable enough to manage and control
his/her cluster efficiently and effectively.

Relationship Manager: The relationship manager should have

Good communication skill in order to pitch the consumers.

He/she should have full information about the market and competitors offerings.

Shared Values
Angel Broking Ltd constantly strives to share its experience in order to serve its customers
better. Its research reports are made available to the investor. The investors are educated by
organising investor’s camps to share the information regarding the trends in the market.

4. SWOT Analysis of the company


Page 40


Strengths:
 Angel provides better service
 Angel has wide range of distribution network
 The marketing team is proficient enough to cover various segments
 Angel has better products to serve the customers

Weakness:
 Angel still could not meet the fuller customer satisfaction
 Branding is the concern
 There is a stiff competition from banks

Opportunities:
 Ever increasing market in investment field
 Improving technology
 Unfulfilled needs of the customer
 Education level

Threats
 New competitors
 Technology based business


Page 41


5. Analysis of Financial statement

Particulars Year started Year ended
31.12.2009 31.03.2010
1. a) Income from Operations 6,828.21 33080.30
b)Other Operating Income 1,060.99 6107.91
Total 7,889.20 39188.21
2. Expenditure
a) Employees Cost 3,273.20 11,160.62
b) Depreciation 525.40 2,422.20
c) Operating Expenses 678.57 3,089.73
d) Administrative & Other Expenses 1,129.81 23,658.27
Total 5,606.98 40,330.82
3. Profit/(loss) from the operations before 2282.22 (1142.61)
other income, interest & exceptional item
4 Other income 61.34 1139.77
5. interest and finance charges 440.82 1945.34
6. Profit before exceptional items 1902.45 (1948.08)
7. Profit/(Loss) from Ordinary activities 1902.65 (1948.08)
before Tax
8. Tax expenses 758.83 (659.77)
9. Net Profit/loss 1144.87 (1288.91)

6. Learning Experience
This project work has helped me to know the nature of working in a business unit. During this
project I have approached various professionals who have sufficient knowledge about share


Page 42


valuation. Their thoughts regarding how a particular share will be overvalued or undervalued
has enlightened my knowledge of securities.

I have gained knowledge regarding various sectors in the stock market. I am able to know
how a stock price is affected by studying variables like Dividend, earning, growth etc. through
this study I came to know that fundamental analysis has more weightage than technical
analysis which mainly moves based on speculation.

The project work gave me an opportunity to know many business related aspects which has
influence on the profit of the company which in turn influences share valuation. The study
made me to learn how people in an organization behave in a particular way. It exposed me to
organizational climate in a company.

The study enabled me to apply my theoretical knowledge of my course on the organizational
working condition. Especially in the field of shares, I have gained immense knowledge.

CHAPTER-4


Page 43


ANALYSIS AND INTERPRETATION OF DATA

The forgoing section in this report had a perspective of overall Economy in India. The next
step is to analyze particular industry and compare them for selecting potential growth
industry.

Once the economics analysis is over; getting the prospects of the likely trend in the
economy, analyzing the industry would be taken importance, knowing Which groups
are promising in the coming year makes possible better entry into the company.
There is however, no perfect correlation between the economy and the industry on one hand
and of industries and companies on the other.

India has mixed economy, where private and public sectors play a complementary role
and promote a planned development. Since the initiation of the reforms in 1991, even
foreign enterprises and MNCs given a due role to play in the development of the
economy. As per the latest policy barring about 18 scheduled industrial groups, others are
both open to public and private sector. But as the security market comprise only marketable
securities and they are mostly form private corporate sector and pubic undertakings
which are being shifted to the joint sector. Many financial services are thrown open to
foreign sector now.


Page 44


Fundamental analysis is the cornerstone of investing. In fact, some would say that you aren't
really investing if you aren't performing fundamental analysis. Because the subject is so
broad; however, it's tough to know where to start. There are an endless number of investment
strategies that are very different from each other, yet almost all use the fundamentals

The biggest part of fundamental analysis involves delving into the financial statements. Also
known as quantitative analysis, this involves looking at revenue, expenses, assets, liabilities
and all the other financial aspects of a company. Fundamental analysts look at this
information to gain insight on a company's future performance

Qualitative factors

Business Model
Even before an investor looks at a company's financial statements or does any research, one of
the most important questions that should be asked is: What exactly does the company do?
This is referred to as a company's business model – it's how a company makes money

Competitive Advantage
Another business consideration for investors is competitive advantage. A company's long-
term success is driven largely by its ability to maintain a competitive advantage - and keep it.
Powerful competitive advantages, such as Coca Cola's brand name and Microsoft's
domination of the personal computer operating system, create a moat around a business
allowing it to keep competitors at bay and enjoy growth and profits. When a company can
achieve competitive advantage, its shareholders can be well rewarded for decades

Quantitative Factors
Customers


Page 45


Some companies serve only a handful of customers, while others serve millions. If a business
relies on a small number of customers for a large portion of its sales because the loss of each
customer could dramatically affect revenues. One change in government policy could
potentially wipe out all of its sales.

Market Share
Understanding a company's present market share can tell volumes about the company's
business. The fact that a company possesses an 85% market share tells you that it is the
largest player in its market by far. When the firm is bigger than the rest of its rivals, it is in a
better position to absorb the high fixed costs of a capital-intensive industry.

Industry Growth
One way of examining a company's growth potential is to first examine whether the amount
of customers in the overall market will grow. This is crucial because without new customers,
a company has to steal market share in order to grow.

Regulation
Certain industries are heavily regulated due to the importance or severity of the industry's
products and/or services. As important as some of these regulations are to the public, they can
drastically affect the attractiveness of a company for investment purposes.

In industries where one or two companies represent the entire industry for a region (such as
utility companies), governments usually specify how much profit each company can make. In
these instances, while there is the potential for sizable profits, they are limited due to
regulation

COMPUTER AND SOFTWARE INDUSTRY


Page 46


Indian software industry has a mix of a few large companies and several small to medium
sized companies. Currently 31 Indian companies have exports of more than Rs1billion.
These few large companies would however be classified as small companies by US standards.
First generation entrepreneurs, who had limited access to finance and low risk taking
capability, operate most of these large companies. Smaller companies, which are also
typically entrepreneur run companies, have a similar potential to strike it rich.

(a) Competitive Advantage- Low Cost and Location
Much of India's strong growth in software in the past is attributable to the low cost of Indian
programmers. Indian programmers repaid only about 15-20% of his/her counterpart in
developed nations. Even among competing countries Indian software professionals were
paid the least. India enjoys a location advantage. The advantage it enjoys over other
countries is a 12-hour difference with the world's largest market - the USA. This
enables US companies to establish round the clock software factories by subcontracting to
Indian companies.

(b) Export Performance
The performance of the Indian software and service exports sector for the first three
quarters, April to December 2009, FY 2009-10, India's software and services exports rise
5.5 percent in the year to March 2010 to $49.7 billion. Business has been picking up and
leading companies such as Tata Consultancy services, Infosys Technologies and Wipro beat
quarterly forecasts.


Page 47


(c) Government Policies
Government policies so far have been favorable to software companies. If tax exemption on
exports is withdrawn it could affect software companies adversely. WTO regards tax
exemptions on exports as an indirect subsidy and hence the government may phase out
exemption in the near future.

Growth of Net Profit of Computer and Software Industry 2009-10
Profit after Tax Q1 Q2 Q3

Infosys 1527 1540 1641

Wipro 785 1162 1217

HCL 300 344 255

TCS 1333 1540 1642

Source: Value Notes.com.


Page 48


Figure Showing growth of Net Profit of Indian Software companies

Inference: The above graph depicts that there is major market share from Infosys and TCS.
Wipro is closer to these two companies. Good amount of sales will increase the companies
operating profit. As there is a consistent growth in sales of TCS, the investor can get good
return.


Page 49


PHARMACEUTICAL INDUSTRY
Global pharmaceutical market, western markets are the largest and fastest growing due
to introduction of newer molecules at high prices. A well-established reimbursement
and insurance system implies that per capita drug expenditure is a Billion normally high
in Western Countries as compared to the developing nations. The Indian pharmaceutical
industry is highly fragmented, but has grown rapidly due to the friendly patent regime
and low cost manufacturing structure. Intense competition, high volumes and low prices
characterize the Indian domestic market. Exports have been rising at around 30% over last
five years.
(a) Export Performance
India’s Pharmaceutical exports are to the tune of Rs 275 bn of which formulations contribute
nearly 55% and the rest 45% comes from bulk drugs. In FY2010 exports grew by 21%
year. India’s Pharmaceutical imports were to the tune of Rs60.3bn in FY2010. Imports have
registered a CAGR of only 2% in the past 5 years. Imports of bulk drugs have slowed
down in the past 2-3 years. Exports have been rising at around 30% CAGR over last five
years.
(b) Competitive Position and Advantage
The Indian pharmaceutical industry is highly fragmented, but has grown rapidly due to
the friendly patent regime and low cost manufacturing structure. Intense competition,
high volumes and low prices characterize the Indian domestic market.
Over 20,000 registered pharmaceutical manufacturers exist in the country. The market share
of MNCs has fallen from 75% in 1971 to around 35% in the Indian pharmaceuticals market,
while the share of Indian companies has increased from 20% in 1971 to nearly 65%. PSUs
have almost lost out completely. The sector has undergone several policy as well as
attitudinal changes over the past two years. Patents are the main competitive advantage.

Profit comparison of Major Pharma players 2009-10


Page 50


Net profit after tax Q1 Q2 Q3

Ranbaxy 675.45 186.08 488.23
Cipla 241.71 275.74 289.03

Fortis Healthcare -1.56 2.28 12.40
Dr Reddy Lab 227.44 197.06 168.42

Source: Value Notes.com

Figure showing the Net profit growth of Pharmaceutical companies 2009-10

Inference: Among the above Pharma companies the net profit has seen volatility. The Q2
profit of Ranbaxy has drastically come down. Dr Reddy Lab has posted consistent losses and
Cipla has posted a consistent profits.

AUTOMOBILE INDUSTRY
Since commercial vehicles sales have a linkage with industrial growth and diesel
prices, the demand may fall on account purchase deferment due to prolonged


Page 51


uncertainties in respect of fuel prices and uniform sales taxes. The crude oil has grown
by 0.6% in the current fiscal and the sustained increase in the global crude oil prices has led to
a hefty increase in the diesel prices.

(a) Government Policy
The differential in duty structure also affects the demand for respective segments e.g.
differential duty provisions between 8-seater and 10-seater changed the demand for each
of the segments. Over and above state governments charge sales tax and control to effect the
final prices to customer. In the current year, uniform sales tax to the tune of 04% has been
levied in all the states across India.

(i) Policy on Scrapping of Old Vehicles: The recent notification by judicial body
to ban commercial vehicles above 20 years in age in New Delhi will lead
to a demand for at least 15,000 vehicles to be satisfied in short period of
time. If similar measures are implemented in other parts of the country will boost
demand for new vehicle

Net Profit comparison of major Automobile companies 2009-10
Q1 Q2 Q3


Page 52


Amtek Auto 62.27 30.50 35.08

Bajaj Auto 293.49 402.83 475.14

Tata Motors 513.76 729.14 400.14

Mahindra and Mahindra 400.85 702.94 413.70


Figure Showing the Profit comparison of Major Automobile companies

Inference: The automobile majors Tata Motors and Mahindra and Mahindra have posted
stellar profits during second quarter of the fiscal year 2009-10. There is a sharp decline in the
profits during the 3rd quarter. Bajaj Auto which continued to serve rural segment has seen a
consistent profit in all the quarters.

Earnings Per Share
EPS Comparison of Major IT companies
Mar-05 Mar-06 Mar-07 Mar-08 Mar-09


Page 53


Infosys 80.30 102.70 74.44 87.69 113.70

Wipro 23.89 16.22 21.95 24.08 23.94

HCL 12.43 24.03 19.29 14.99 18.64

TCS 40.92 60.79 41.90 50.76 52.18


Figure Showing the EPS comparison of the Major IT Companies

120

100

80 Infosys
Wipro
60
HCL
40 TCS

20

0
2005 2006 2007 2008 2009
March March March March March

Inference: Infosys provides highest EPS compared to its competitors. Inspite of the financial
crisis post 2008, Infosys is able to manage higher EPS compared to its competitors. TCS also falls
in line with Infosys in terms of EPS. So Infosys and TCS look attractive for investors.

EPS Comparison of Major Pharma companies

2005 2006 2007 2008 2009


Page 54



Ranbaxy 32.78 8.41 13.08 19.74 -21.18

Cipla 15.50 22.94 9.92 10.71 11.95

Fortis -0.20 -1.20 -2.00 0.58 0.20

Dr Reddy 21.32 43.78 79.12 39.12 45.96
Lab
Figure showing EPS Comparison of Major Pharma companies

100

80

60
Ranbaxy
40
Cipla

20 Fortis
Dr Reddy Lab
0
2005 2006 2007 2008 2009
-20 March March March March March

-40

Inference: During the year 2007 Dr Reddy Lab managed to earn higher EPS than its
competitors. Fortis, since it has less market share managed to earn meager EPS. Post
Financial crisis Ranbaxy has negative EPS. Its share price has seen lows in 2010 because of
its poor performance.

EPS Comparison of major Automobile companies

2005 March 2006 March 2007 March 2008 March 2009 March


Page 55


Amtek Auto 13.32 17.60 23.03 25.39 19.64

Bajaj Auto - 128.11 141.19 64.35 54.34

Tata Motors 48.49 55.47 67.07 71.22 37.49

M&M 62.42 45.30 53.70 56.16 41.39


Figure showing the EPS Comparison of major Automobile companies

160
140

120
100 Amtek Auto
Bajaj Auto
80
Tata Motors
60 M&M
40

20
0
2005 2006 2007 2008 2009

Inference: Bajaj Auto has seen a huge jump in its EPS rate in 2006 and continued in 2007 but
has taken a huge beat from world financial crisis. Even though the other competitors had felt
the heat of financial crisis, they are less affected.

Dividend per share
Dividend per share comparison of major IT companies


Page 56



Infosys 11.50 45.00 11.50 33.25 23.50

Wipro 5.00 5.00 6.00 6.00 4.00

HCL 16.00 16.00 8.00 9.00 7.00

TCS 11.50 13.50 11.50 14.00 14.00


Figure showing Dividend per share comparison of major IT companies

50
45
40
35
Infosys
30
Wipro
25
HCL
20
TCS
15
10
5
0
2005 2006 2007 2008 2009

Inference: Infosys pays high dividend compared to its competitors. Post financial crisis all
the IT companies cautious of dividing profits. So there is a reduction in the dividend rate for
all the above mentioned companies.
Dividend per share comparison of major Pharma companies


Page 57


Ranbaxy 17.00 8.50 8.50 8.50 -

Cipla 3.50 2.00 2.00 2.00 2.00

Fortis - - - - -

Dr Reddy Lab 5.00 5.00 3.75 3.75 6.25


Figure showing Dividend per share comparison of major Pharma
companies

18
16
14
12 Ranbaxy
10 Cipla
8 Fortis
6 Dr Reddy Lab

4
2
0
2005 2006 2007 2008 2009

Inference: Among all the above mentioned companies Ranbaxy is very poor in Dividend
record. Fortis is not yielding any returns for the investor in terms of Dividend. Cipla has
shown upward trend in 2009. Except Ranbaxy all the pharma companies have maintained a
consistency in terms of dividend payment.
Dividend per share comparison of major Automobile companies


Page 58


2005 2006 2007 2008 2009
Amtek 1.40 2.00 3.00 0.50 0.50
Auto
Bajaj Auto - 40.00 40.00 20.00 22.00

Tata 12.50 13.00 15.00 15.00 12.50
Motors
M&M 13.00 10.00 11.50 11.50 10.00

Figure showing Dividend per share comparison of major Automobile companies

45
40
35
30 Amtek Auto
25 Bajaj Auto
20 Tata Motors
15 M&M
10
5
0
2005 2006 2007 2008 2009

Inference: During the year 2006 and 2007 Amtek Auto has witnessed a huge jump in its net
profit, so it has paid high dividend in these two years. All the other above mentioned
companies have maintained same dividend record.

Book Value Per Share
Book Value (inclusive of reserves) per share comparison of major IT companies


Page 59


2005 2006 2007 2008 2009
Infosys 28.91 26.56 29.13 25.96 27.51
Wipro 69.54 45.03 63.86 79.05 85.42
HCL 89.59 79.64 51.61 48.22 -
TCS 69.17 114.64 82.35 111.43 136.38

Figure showing Book Value (inclusive of reserves) per share comparison of major IT
companies

160

140
120

100 Infosys
Wipro
80
HCL
60 TCS
40

20

0
2005 2006 2007 2008 2009

Inference: The above graph shows that both TCS and Wipro have increased their book value
consistently. Infosys is maintaining the same book value. In contrast HCL book value is
consistently decreased because of its decrease in its profit.

Book Value (inclusive of reserves) per share comparison of major Pharma companies


Page 60


2005 2006 2007 2008 2009
Ranbaxy 134.85 63.82 63.82 68.01 -8.70

Cipla 51.81 66.14 41.64 12.25 -

Fortis 2.85 4.82 23.06 0.24 -

Dr Reddy 271.05 294.95 225.31 198.84 237.40
Lab

Figure showing Book Value (inclusive of reserves) per share comparison of
major Pharma companies

350

300

250

200 Ranbaxy
Cipla
150
Fortis
100 Dr Reddy Lab

50

0
2005 2006 2007 2008 2009
-50 March March March March March

Inference: The Pharma Company’s book value has hit a new low since 2008 financial crisis.
Dr Reddy Lab has increased its book value inspite of world financial crisis. The year 2010
looks good for the Pharma sector.
Book Value (inclusive of reserves) per share comparison of major Automobile companies
2005 2006 2007 2008 2009


Page 61


Amtek 67.21 107.60 128.82 5.20 -
Auto
Bajaj - 11.05 10.60 15.30 10.87
Auto
Tata 113.15 144.26 178.00 7.77 2.61
Motors
M&M 178.05 123.86 148.52 181.39 10.23

Figure showing Book Value (inclusive of reserves) per share comparison of major
Automobile companies

200
180
160
140
Amtek Auto
120
Bajaj Auto
100
Tata Motors
80
M&M
60
40
20
0
2005 2006 2007 2008 2009

Inference: The world financial crisis made all the automobile companies incur losses and in
turn the book value of these companies decreased. Tata Motors and Mahindra and Mahindra
companies have international exposure and due to financial crisis their book value has
decreased drastically.

Debt Equity Ratio
Debt Equity comparison of major IT companies
2005 2006 2007 2008 2009


Page 62


Infosys - - - - -

Wipro 0.01 0.01 0.02 0.33 0.40

HCL 0.03 0.01 0.01 0.01 0.14

TCS 0.03 0.01 0.01 0.01 0.01


Figure showing Debt Equity comparison of major IT companies

0.45
0.4
0.35
0.3 Infosys
0.25 Wipro
0.2 HCL
0.15 TCS

0.1
0.05
0
2005 2006 2007 2008 2009

Inference: Wipro’s Debt-Equity ratio has increased rapidly in 2008. Infosys has no debt.
HCL has little debt compared to rivals. TCS has decreased its debt in 2006 after that it
maintains same level of debt.
Debt Equity comparison of major Pharma companies
2005 2006 2007 2008 2009
Ranbaxy 0.05 0.43 1.35 1.38 1.05


Page 63


Cipla 0.12 0.23 0.03 0.15 0.21

Fortis 1.44 5.69 1.06 0.26 0.37

Dr Reddy 0.13 0.40 0.07 0.09 0.12
Lab
Figure showing Debt Equity comparison of major Pharma companies

6

5

4 Ranbaxy
Cipla
3
Fortis
2 Dr Reddy Lab

1

0
2005 2006 2007 2008 2009

Inference: Fortis had a huge debt during the year 2006. It has reduced this ratio within a year.
During the year it has marginally increased its debt to acquire extra capacity. Ranbaxy is
reducing its debt level
Debt Equity comparison of major Automobile companies
2005 2006 2007 2008 2009
Amtek 1.24 1.24 0.75 0.99 1.32
Auto


Page 64


Bajaj - 0.30 0.29 0.84 0.83
Auto
Tata 0.60 0.53 0.58 0.80 1.06
Motors
M&M 0.52 0.30 0.46 0.59 0.77


Figure showing Debt Equity comparison of major Automobile companies

1.4

1.2

1
Amtek Auto
0.8 Bajaj Auto
0.6 Tata Motors
M&M
0.4

0.2

0
2005 2006 2007 2008 2009

Inference: Post financial crisis all major Automobile companies has increased its debt level
to expand their business. Amtek auto share value is coming down since its decision to
increase its debt level.

Current Ratio
Current Ratio comparison of major IT companies

2005 2006 2007 2008 2009


Page 65


Infosys 2.80 2.75 4.96 3.30 4.71

Wipro 1.54 1.46 1.68 2.54 1.83

HCL 0.81 0.99 1.41 1.12 1.83

TCS 1.77 2.25 1.99 1.99 1.83


Figure showing Current Ratio comparison of major IT companies

6

5

4 Infosys
Wipro
3
HCL
2 TCS

1

0
2005 2006 2007 2008 2009

Inference: Above diagram shows that Infosys has high current ratio compared to its rivals.
The current ratio has reduced for Wipro and TCS in 2009.
Current Ratio comparison of major Pharma companies

2005 2006 2007 2008 2009
Ranbaxy 1.53 1.72 1.74 1.53 1.42


Page 66


Cipla 2.02 2.28 2.69 2.68 2.82

Fortis 0.93 2.52 3.07 7.55 3.08

Dr Reddy 3.15 3.00 3.21 2.41 2.65
Lab
Figure showing Current Ratio comparison of major Pharma companies

8
7

6

5 Ranbaxy
Cipla
4
Fortis
3 Dr Reddy Lab
2

1
0
2005 2006 2007 2008 2009

Inference: In the above graph it is clear that Fortis had increased its current ratio since 2005
up to 2008, but after financial crisis its current ratio had reduced significantly. Cipla had
consistently increased its current ratio. Ranbaxy and Dr Reddy Lab has maintained more or
less same level of current ratio
Current Ratio comparison of major Automobile companies
2005 2006 2007 2008 2009
Amtek 10.88 11.96 4.42 6.52 6.97
Auto


Page 67


Bajaj - 0.78 0.85 0.88 0.92
Auto
Tata 0.99 1.24 1.24 0.89 0.84
Motors
M&M 1.19 1.24 1.37 1.10 1.06

Figure showing Current Ratio comparison of major Automobile companies

14

12

10
Amtek Auto
8 Bajaj Auto
6 Tata Motors
M&M
4

2

0
2005 2006 2007 2008 2009

Inference: Amtek auto has seen more volatility in its current ratio compared to rival
companies. As shown in the above graph Bajaj auto, Tata Motors and M & M have
maintained same level of current ratio.

TRENDS IN DEFICITS OF CENTRAL GOVERNMENT

Fiscal deficit measure the difference between government spending and revenues. Since
government borrowing must offset the budgetary shortfall, large amounts of government


Page 68


borrowing can force up the interest rate by increasing the total demand for credit in the
economy.

Year Fiscal deficit Sensex return

2005 104717 7.7

2006 118816 -22.8

2007 140955 -4.5

2008 135524 -3.8

2009 145466 8.8

2010 153637 58.4

Correlation 0.546908



Page 69


Figure showing correlation between Fiscal deficit and Sensex return

180000

160000

140000

120000

100000
Fiscal deficit
80000
Sensex return
60000

40000

20000

0
2005 2006 2007 2008 2009 2010
-20000

Inference:


Page 70


Shows there has been positive 0.546908924 between the fiscal deficit and Sensex indicates
that deficit does not have direct influence on Sensex. However the relationship is negative, the
above variable may move in opposite direction

TRENDS IN GROWTH RATE OF INFRASTRUCTURE

Investment in infrastructure developments indicates positive signal to the sectors in the
economy, especially manufacturing companies related to transportation. In order to gain from
the trade the transaction costs should be low. So the better facility reduces the cost of trade
and enables the companies for making profit.

Table Trends in the Savings and Investmen

Year Total Energy Steel Transport and Growth rate of
communication Sensex
2005-06 2.96 3.85 1.4 1.7 26.7
2006-07 10.06 6.68 15 11.6 7.7
2007-08 6.12 4.65 6.5 8.3 -22.7
2008-09 -1.56 1.61 2.4 -5.8 -4.5
2009-10 7.5 2.1 9.7 83.2 -3.8



Page 71

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