SIP

A
PROJECT REPORT
ON
“FUNDMENTAL ANALYSIS OF AUTOMOBILE
SECTOR”
For
SHAREKHAN LTD., AURANGABAD.
SUBMITTED TO
SAVITRIBAI PHULE PUNE UNIVERSITY, PUNE
IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT
OF
MASTER OF BUSINESS ADMINISTRATION (M.B.A.)
UNDER THE GUIDANCE OF
Prof. P.S.KAWALE.
-SUBMITTED BY-
SHASHANK TRIBHUWAN.
Submitted to
Sanjivani College of Engineering Department of MBA, Kopargaon.
2015-2017

SANJIVANI RURAL EDUCATION SOCIETY’S,
COLLEGE OF ENGINEERING,
DEPT. OF MBA
Certificate
This is to certify that Mr./Ms. Shashank Raosaheb Tribhuwan.
has submitted a summer project on “Fundamental Analysis of Automobile sector” to
Savitribai Phule Pune University, Pune for the partial fulfillment of Master in Business
Administration (M.B.A.).
We further certify that to the best of our knowledge and belief, the matter presented
in this project has not been submitted to any other Degree or Diploma course.
Prof. P.S.Kawale Dr. B. M. Londhe
Internal Guide Head of Department
External Examiner

Declaration
I undersigned hereby declares that, the project titled “Fundamental
Analysis of Automobile sector” is executed as per the course
requirement of two year full time MBA
Program of Savitribai Phule Pune University. This report has not
submitted by me or any other person to any other University or
Institution for a degree or diploma course. This is my own and original
work.
.
Place:……………..
Date:…………….. SHASHANK TRIBHUWAN.
MBA-2015-17

INDEX
Chapter
no.
Chapter Name Page no.
1 Executive Summary
2 Introduction
3 Industry Profile
4 Company Profile
5 Product Profile
6 Objective of the study
7 Research Methodology.
i. Primary Data
ii. Secondary Data
iii. Scope of the study
iv. Limitation of the study
8 Theoretical Background of the study
9 Data Analysis & Interpretation
10 Findings
11 Conclusion
12 Suggestion
13 Learning Through project
14 Bibliography

Chapter number 1
Executive Summary.

Executive Summary.
The study gave a chance to know about Fundamental Analysis and various tools used in
Fundamental Analysis.
Fundamental analysis helps to understand the basics of financial statements and gives you
the tools that help to decide which companies make worthwhile investments.
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.
The first part gives an insight about the about the company and its various aspects. I got
an opportunity to learn what is really meant by fundamental analysis in stock market, how is it
implemented in the stock market.
I have chosen Automobile sector as study of my research and selected five major
companies on randomly basis which are: Tata Motors Ltd., Mahindra & Mahindra Ltd., Maruti
Suzuki India Ltd., Hero Motocorp Ltd. and Bajaj Auto Ltd.
I have collected all the information from various sources, for my analysis I have study the
balance sheet, profit and loss a/c, and ratios of these five companies and comparing some point
to know where one should have to invest. I also show the past record of these five companies, to
know what exact condition and growth of the company.
I came to know various reasons influencing fundamental analysis of automobile sector. Like
Hike in fuel prices, High interests and rising input cost, Unfavorable economic conditions,
Foreign competitors and Poor infrastructure.

Chapter number 2
Introduction.

Importance.
This project is titled as “fundamental analysis of Automobile Sector”. It is an attempt
made to help individual investor study about a particular company and take a decision whether to
invest in it or not.
Financial statement analysis is the biggest part of fundamental analysis. Also known as
quantitative analysis, it involves looking at historical performance data to estimate the future
performance of stocks. Followers of quantitative analysis want as much data as they can find on
revenue, expenses, assets, liabilities and all the other financial aspects of a company.
Fundamental analysis guides on how look; it this information to gain insight on a company's
future performance.
The massive amount of numbers in a company's financial statement can be bewildering
and intimidating to many investors. On the other hand, if one knows to read them, Sthe financial
statements are a gold mine of information.
This research helps to throw light on some important aspects that should be considered
while selecting any stock and in the process various tools available for Fundamental Analysis
have been used.
The study has focused on Key Players on Indian Automobile sector and thereby a study
of current trends and future prospects of Indian Auto Sector is done.

Brief about company.
Sharekhan Ltd (Sharekhan) is one a leading brokerage houses, established in 2000. Sharekhan
has membership in the cash and derivative segments of both BSE and NSE. It also operates in
the debt and currency futures segment. The company is registered as a DP with CDSL and
NSDL. Besides trading, the company also offers PMS, demat services and mutual funds.
Sharekhan provides a comprehensive set of research reports relating to IPO and mutual funds.
Other value added facilities offered to clients include online trading, dial-n-trade, share shops,
fundamental and technical research. The company serves large number of retail clients with a
client network of more than 1,00,000 clients which includes HNI’s, corporate, and other retail
customers. The company through its subsidiary Sharekhan Commodities Ltd provides
commodity trading services.
In today's competitive world, management has to perform variety of functions and
responsibilities. Theoretical knowledge of such functions and responsibilities can be obtained in
the institute. But, practically when this knowledge is applied in the corporate world, the mangers
face many difficulties. One has to get an insight into the practical knowledge, communication
skills and develop the analytical aspects. Working for such objective will definitely help to
polish us and once accomplished it provides a great satisfaction.
Hence in order to get all the above said, the institute has provided an opportunity to work
in a company and acquire skills, which will help in future course of time

Chapter number 3
Industry Profile.

WORLD SCENARIO.
In the last 25 years, the stock markets have shown exceptional growth. The economic
importance of stock markets in developed countries, taking the capitalisation of listed domestic
companies as an indicator relative to the national product, has developed.
Overall, global stock market capitalization has tripled in the nineties, and has undergone
much faster progress than bank deposits and credit. At the same time, direct involvement of
families in stock holding has increased extraordinarily in the developed countries compared to
the available income in all countries (except for Japan). The significance of equitisation will be
“to underpin the system of market capitalism itself, by giving more people a bigger and more
direct stake in the success of their companies... The new century is set fair to be the age of
equity”
Over the past few years, Indian stock market showed positive movement in the number of listed
companies.
India’s stock exchanges are among the top 10 exchanges globally with BSE topping the list.
Indian Scenario
The financial market divided in to two parts-Money market and Capital market. Stock
market is an important and organized capital market. Stock market has essentially three
categories of participants namely the issuer of securities, investors in securities and the
intermediaries. The stock market has two interdependent and inseparable segments-The new
issue (Primary market) and the stock (Secondary market).The primary market provides the
channel for the sale of new securities while the secondary market deals in securities previously
issued.

Number of companies.
There are 100's of stocks broker in India member of BSE and NSE. Most of them offer retail
broking.
Top 10 Equity broking houses (by no. of Terminals)
Sr.no. Company Name No. Of Terminals.
1 Kotak Securities Limited 4,466
2 Bonanza Portfolio Limited 3,781
3 India Infoline Limited 3,726
4 Angel Broking Private Limited 3,299
5 Religare Securities Limited 3,009
6 HDFC Securities Limited 2,853
7 SMC Global Securities Limited 2,785
8 Motilal Oswal Securities Limited 2,481
9 Sharekhan Limited 1,908
10 ICICI Securities Limited 1,746
1 .Angel broking
Incorporated in 1987, Angel Broking has become one of the most respected Stock-Broking and
Wealth Management Companies in India. They adopted a Retail Specific outlook early on and
have since built up a huge network of Branches and Franchises. (More than 900 cities and 8500
Franchises).
Major Financial News channels regularly feature their Analysts and seek their Expert Opinion.
They have a number of Trading platforms as per the medium of transaction be it Online, Smart
phones, Tablets and Desktops.
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. They are
also registered as a Depository Participant with CDSL.
2 ICICIdirect is an online trading and investment platform of ICICI Securities, and is one
the largest stock broker firm in India with offices in almost all the cities in India. They provide a
wide range of investment options to the retail and institutional customers using their vast
network of ICICI Bank and ICICI direct branches. ICICI Securities (I-Sec) is the largest
brokerage house in India with more than 25 lakh customers.

3 Motilal Oswal is one of the oldest full service broker operating since 1987. They have a
diversified client base that includes retail customers (including High Net worth Individuals),
mutual funds, foreign institutional investors, financial institutions and corporate clients. They are
headquartered in Mumbai and as of December 2014, had a network spread over 520 cities and
towns comprising 1,743 Business Locations operated by there Business Partners. As on
March 2015, they had 740,000 registered customers.
Research is the solid foundation on which Motilal Oswal Securities’ advice is based. Almost
10% of revenue is invested on equity research and they hire and train the best resources to
become our advisors. At present they have 30 research analysts researching over 250 companies
across 20 sectors. From a fundamental, technical and derivatives research perspective, Motilal
Oswal`s research reports have received wide coverage in the media.
4 Idbipaisabuilder.in is a multi purpose online stock trading firm, a leading provider of financial
services in India and is a 100% subsidiary of IDBI(Industrial Development Bank of India) and
provide trading facility in equity shares, derivatives (futures & options),commodity, mutual
funds & IPO’s in India Stock Markets. You can buy or sell securities on NSE and BSE Stock
exchanges through them
5 SBI Capital Securities, is a 100% subsidiary owned by SBI Capital Markets. Their services
include Retail equity, Broking, institutional equity and Depository Participant services. They
provide online trading services to retail customer at http://www.sbismart.com. Online you can
trade with them in equity, future and option and currency. They also provide Mutual funds
buying service and IPO.
They have their own proprietary software called eZ-trade@sbi which is provided to all the
clients trading with them.
6 Power Indiabulls: (PIB) Power Indiabulls (PIB) is the integrated online trading platform
with great speed to invest in Equity, F&O and Commodities. Power Indiabulls main features
includes real-time stock prices, Live trading reports, Multiple Market watch, Intraday charting,
Technical analysis, Price alerts, News Room for seasoned investors and traders.
7 Geojit after it association with BNP Paribas has become a solid stock broker in India. The
brokerage rate is competitive and they provide good customer service.
Geojit BNP Paribas offers an Advanced Online Investment Platform called ‘FLIP’ (Financial
Investment Platform) that comes with multiple conveniences and flexibilities.
Geojit BNP Paribas offers 3 different online trading platforms to its customers. Investor can
select from any of the three trading platforms that Geojit BNP Paribas offers as per investor’s
requirement.

8 Edelweiss Financial Services Ltd. is Mumbai based diversified financial group involved in 5
different businesses which includes capital market, asset management, credit, commodities and
insurance started in 1995. Edelweiss offers real time trading opportunities on the BSE, NSE and
MCX exchange.
They are a full service broker and provide facilities in all major asset classes for investment and
trading in Equity, Mutual Funds, IPOs, F&O and Currency. They also provide advisory to their
customers on the basis of analysis and research wing which provide relevant info.
Edelweiss’s ground network includes 5,937 employees based out of 248 offices (including eight
international offices) in 128 cities. So if you are from Tier 1 and Tier 2 cities, most probably you
should be able to find there office in your city.
9 Sharekhan is one of the leading retail brokerage and is owner by Citi Venture since
1992.Earlier it was the retail broking arm of the Mumbai based SSKI Group, which has over
eight decades of experience in the stock broking business. Sharekhan offers its customers a wide
range of equity related services including trade execution on BSE, NSE ,Derivatives, depository
services, online trading ,investment advice etc. It is being sold to BNP Paribas on July 30, 2015.
Will keep on updating the latest changes which are going to take place.
Sharekhan’s ground network includes over 700+Shareshops in 130+ cities in India.
10. HDFC Securities is Equity Trading Company of HDFC Bank. This is one of the largest
broker in India. HDFC Securities trading account provide a unique 4-in-1 feature that integrates
your HDFC Securities trading account with your existing HDFC bank savings account, Demat
account and your Investment account. Funds / shares are seamlessly moved from the linked
Demat/Bank account to execute the transactions. It also helps in easy transfer and withdrawal of
funds.
HDFC securities provides whole gamut of trading activities including Equity, Derivatives,
Commodity and Currency trading.

Company Profile.
Sharekhan is one of the top retail brokerage houses in India with a strong online trading
platform.The company provides equity based products like derivatives,equities,depository etc
Indias’s premier online trading portal http://www.sharekhan.com. They provide trade execution
services through multiple channels-an internet platform,telephone and retail outlets.
Sharekhan Ltd is India’s leading online retail broking house. Launched on Feb 8th 2000, as an
online trading portal, it has today a pan India and international presence (UAE & Oman) with
over 1200 outlets serving 9,50,000 customers across 400 cities. Sharekhan offers services like
Portfolio Management, trade execution in equities, futures & options, commodities and
distribution of mutual funds, insurance and structured products. These are backed by high quality
investment advice from an experienced research team at Sharekhan, which provides fundamental
and technical research, market related news, statistical information across equities, commodities,
mutual funds, IPOs and much more. Sharekhan is a member of the Bombay Stock Exchange,
The National Stock Exchange and the country’s two leading commodity exchanges, the NCDEX
and MCX. Sharekhan is also registered as a Depository Participant with NSDL and CDSL.

Chapter Number 4
Company Profile.

History.
Founded in 1922, SSKI is one of India's Oldest Brokerage Houses, having Eight Decades of
Experience into
 Institutional Broking
 Investment Banking
 Retail Broking
One of the Founding Members of The Stock Exchange, Mumbai and Pioneer institutional
Broker.
Sharekhan is the retail broking arm of SSKI, an organization with more than 80 years of
trust and credibility in the stock market.
Sharekhan Limited (formerly SSKI investor Services Pvt. Ltd. was promoted by Mr.
Shripal S. Morakhia and Mr. Shreya, S. Morkhia.
Through sharekhan.com company have been providing investors a powerful online
trading platform, the latest news, research, and other knowledge-based tools for over 5
years now.
The shareholders of Sharekhan ltd. are Mr. Shripal Morakhia, Mr.Shreyas Morkhia. foreign
private Equity funds and key employees of the company. The key promoter of the company is
Mr. Shripal morakhia who along with this family owns 55.41% of the paid up capital of the
company. Company has also issued options to employee under ESOP
VISION
“To be the best retail broking brand in the Indian Equities market”.
MISSION
“To educate and empower the individual investor to make better investment decision through
quality advice and superior service.”

Milestones.
 SSKI has been voted as the Top Domestic house in the reset the category, twice by Euro
money survey and four times by Asia Money survey.
 Over US $ 5 billion of private equity deals.
 Pioneers of investment research in the Indian Market.
 Pioneers of Online Trading in India- Among the top 2 online trading websites from India.
 Most preferred financial Destination amongst online banking customers (source: Net
Sense 200, an independent study of financial services in India)
 Winner of the best financial Website Award.
 CHIP- Dish net DSL Web Awards 2001.
 Leading domestic player in Indian Institutional Business.

Chapter Number 5
Product Profile.

Products.
Depository services.
Depository is an organisation which holds your securities in electronic (also known as
‘book entry’) form, in the same manner as a bank holds your money. Further, a
depository also transfers your securities without actually handling securities, in the same
day as a bank transfers funds without actually handling cash.
Online services.
An online service, also known under the title of Software as a Service (SaaS), is a service
provided by a software application running online and making its facilities available to users
over the Internet via an interface (be that HTML presented by a web-browser such as Firefox, via
a web-API or by any other means).
With an online-service, in contrast to a traditional software application, users no longer need to
‘possess’ (own or license) the software to use it. Instead they can simply interact via a standard
client (such as web-browser) and pay, where they do pay, for use of the ‘service’ rather than for
‘owning’ (or licensing) the application itself.

Commodity Trading.
Commodity trading is an exciting and sophisticated type of investment. While this type of
trading has many similarities to stock trading, the biggest difference is the asset that is
traded. Commodity trading focuses on purchasing and trading commodities like gold rather than
company shares as in stock trading. Like stocks, commodities are traded on exchanges where
investors work as a team to purchase or trade products in an attempt to generate profit from the
fluctuation of market prices or because they need that particular product.
Dial-N-Trade Features At A Glance
Quick and secure 3 Step process to place your orders. Just enter your phone id and tpin and
select the segment you want from our varied offering [1 for Equity, 2 for Currency and 3 for
Commodity]”
Availability of all Sharekhan research advice on all segments:
tum Call
Facility to discuss and understand trends and factors affecting the markets
Guidance and education on Market concepts
Pan-India accessibility
No limit on calls made for trading
Complete recording infrastructure for all calls
Quick and secured access to dealers
3 toll-free numbers
Dealing room accessible till Commodity markets close at 11:30 PM or 11:55 PM
Working even on many public holidays.
Portfolio Management.
Portfolio management is the art and science of making decisions about investment mix and
policy, matching investments to objectives, asset allocation for individuals and institutions, and
balancing risk against performance. Portfolio management is all about determining strengths,
weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international,

growth vs. safety, and many other trade-offs encountered in the attempt to maximize return at a
given appetite for risk.
Shareshop.
A share shop is a shop or Internet website where members of the public can buy shares in
companies.
Fundamental Research.
"Fundamental research means experimental or theoretical work under taken primarily to acquire
new knowledge of the underlying foundations of phenomena and observable facts, without any
direct practical application or use in view."
Technical Research.
Applied research oriented toward engineering disciplines (but not to a specific product or
process) and aimed at developing tools and test equipment and procedures, and at providing
solutions to specific technical problems.
Equity & Derivatives Trading.
An equity derivative is a derivative instrument with underlying assets based on equity securities.
An equity derivative's value will fluctuate with changes in its underlying asset's equity, which is
usually measured by share price. Investors can use equity derivatives to hedge the risk associated
with taking a position in stock by setting limits to the losses incurred by either a short or long
position in a company's shares.

Objectives of the study
1. To understand the concept of fundamental analysis.
2. To compare the performance of some major companies on the basis of the Fundamental
analysis with reference to automobile sector.
3. To study and analyze what factors are affecting fundamental analysis of automobile sector.
4. To learn the reasons influencing Fundamental analysis of automobile sector.

Research methodology.
PRIMARY DATA COLLECTION
Primary data is originally gathered specifically on project hand. One can obtain
information from dealers, salesmen, etc. It offers much greater accuracy and reliability.
In this study the facts and figures are raw material with which researcher works. Thus, in
primary data collection researcher come across many methods as follows:
Observation method:
In this method the important thing is not a single question is asked. As in this method
there is no questionnaire therefore researcher has to do only observation and get the subjective
element encountered with questionnaire. Thus, from this method, researcher gets proper
knowledge regarding the product.
SECONDARY DATA COLLECTION:
Secondary data is the data already collected by someone else. This data is not especially
collected to solve present or specific problem. The information is relevant and can be used for
our purpose. Alter doing the data collection in primary method, the researcher did the collection
through the secondary data. In this there are several types such as:
General library
Trade Books
Publisher survey of market
Internet etc...

General Library:
From tills method researcher gets a lot of useful information about the study. It also helps
researcher to study introductory part, theory part and conclusion part.
Internet:
Researcher uses this facility for data collection of various technical data from various
recognized web sites.
Project Methodology for the study undertaken:
In this study no Primary information was collected. The study was through the process of
desk study and the secondary information was collected through:
 Books, company journals, Magazines.
 Internet-websites.
The sample used in the study was information and statistics of 5 key players of Indian
Automobile Sector.

Scope of the study.
This Study was Analysis of Equity shares with respect to Automobile sector.
The study gave a chance to know about Fundamental Analysis and various tools used in
Fundamental Analysis.
Fundamental analysis helps to understand the basics of financial statements and gives you
the tools that help to decide which companies make worthwhile investments.
Limitation of the study.
1. The time frame considered is very limited. In the time period of 2 months analysis of
the trends of the entire company is comparatively not possible.
2. The data used for analysis is not first hand. The use of secondary data may lead to
the variations in the result if valued in the values in the data get changed. Ultimately
the reliability of secondary data limits the project analysis.
3. The report includes fundamental analysis but does not include technical analysis.
Hence study is limited by considering only fundamental factors. So conclusion attend
may vary if technical factors are considered.

Theoretical background of the study.
History Of Fundamental Analysis As A Trading Mechanism
The history of fundamental analysis as a trading mechanism began with Benjamin Graham in
1928. Graham published his first book, Security Analysis in 1934. This book defined the
framework of Value Investment and is now in its fifth edition.
Since that time, a great deal of research focused on specific fundamental measures as key
determinants of a securities future price. The concept of efficiency is central to finance. Mainly,
in an efficient financial market an asset price should be the best possible estimate of its economic
value.
1.2 Definition
A financial market is efficient when widely available information to participant is reflected in
stock prices.
1.3 FORMS OF EFFICIENT MARKET
There are three forms of market efficiency; the weak form, semi-strong form and strong form.
Weak Form: Stock prices reflect all of the information contained in past stock prices. The
inference drawn from this is that you cannot consistently profit by spotting trends and patterns in
stock prices.
Semi-strong Form: Stock prices all of publicly available information (including company
accounts, industry data e.t.c). This simply implies you cannot consistently profit by analysing
company accounts and other public data.
Strong Form: Stock prices reflect all information (including information known only to company
insiders. The insinuation is that no one can earn excess returns by stock picking, even people
with inside information.
However, this dissertation will concentrate more on using fundamental analysis to disprove the
efficient market hypothesis which assets that stock markets impounds all publicly available
information about a company into stock prices in an instantaneous and unbiased manner. The
implication of this assertion is that publicly available information such as financial statement
figures cannot be used to detect mispriced securities; any investment strategy designed on the
basis of published financial information should not prove profitable. However, in contrast to this
argument, fundamental analysts believe that the markets may misprice securities and that it is
possible to make an informed financial projections using financial statement information to earn
an abnormal returns.

According to Fama (1970) he established the efficient market model after it has been tested and
found supported by different wider markets and this became widely in use by financial
communities, applied economist and financial economist. The weak forms of the efficient market
hypothesis is strongly supported by evidence and the result follow and consistent with random
walk model, while the strong form test is strongly supported by the efficient market hypothesis
Fama, Fisher, Jensen and Roll (1969) found that the real time information such as the time of
stock split, the future information on future dividend is fully reflected in this price
Grossman and Stigliz 1980 argues that if the market efficiency theory hypothesis govern the way
price respond to information ,then Institutional investors and security analyst who engage in
equity research will not arrive at any meaningful conclusion and the whole research will be a
complete waste of time and resources. To mention but a few other argument includes the market
anomalies: such as the post earning drifts, value versus growth and small cap stocks anomalies.
According to Ball and Brown (1968), even after earnings are announced, cumulative abnormal
returns for stocks with unexpected positive (negative) earnings surprise
continue to drift upwards (downwards). This anomaly is known as Post Earnings
Announcement Drift (PEAD). Foster, Olson and Shevlin (1984) noted that sixty days prior to an
earnings announcement, combining a long position in stocks with unexpected earnings in the
highest decile with a short position in stocks in the lowest decile generates an abnormal return of
25% p.a. before accounting for transaction cost, which confirms the existence of the PEAD
anomaly.
Many other researchers who have argued in favour of fundamentals analysis includes: Basu
(1977) studied the relationship between price-earning (P/E) ratios and excess returns, and was
the first to uncover evidence that appeared to oppose the efficient market hypothesis (EMH).
Basu concluded that there was an information content present in publically available P/E ratios,
and portfolios built from low P/E stocks earned excess returns even after adjusting for risk. Banz
in 1981,did analysis on monthly returns over the period 1931- 1975 on listed shares on the New
York stock exchange. Over this interval, he observed that the fifty smallest outperformed the
largest by an average of one percentage point per month. He observed a size effect, and
concluded that there was a relationship between market capitalization of a firm, and its returns,
even after adjusting for risk. Also In 1981, Reinganum confirmed that data on firm size could be
used to create portfolios that earn excess returns.
Further fundamental anomalies were discovered, such as the book-to-market effect described by
Rosenberg et al. (1984), which found that stocks with a high book-to-market value yielded
higher long-term returns. Fama and French (1992) surveyed the above styles of anomaly
detection, and concluded that if asset pricing is rational, then size and ratio of book to market
value must be proxies for risk.
Lakonishok et al in 1994 evidence in the US by considering a time horizon up to five years found
a wide range of value strategies (based on sales growth, book-to-market, cash flow, earnings, etc)
all produced higher returns, and refuted Fama and French's claims that these value strategies are

fundamentally riskier. In 1995, Fama and French responded to Lakonishok by stating that size
and book-to-market equity are proxies for sensitivity to risk factors in returns. Their results also
suggest that there is a size factor in fundamentals that might lead to a size related factor in
returns. Later, Fama and French (1998) studied returns on market, value and growth portfolios
for the US and 12 major EAFE countries (Europe, Australia and the Far East). They found that
value stocks tend to have higher returns than growth stocks, and conclude that these returns are
explained by a one-state variable Intertemporal Capital and Asset Pricing Model (ICAPM) (or a
two-factor APT), that explains returns with the global market return and a risk factor for relative
distress.
Frankel and Lee also in 1998 estimate firms fundamental values (V), using I/B/E/S consensus
forecasts, and a residual income model. They find V is highly correlated with stock price, and
that V/P is a good predictor of long term returns. Piotroski focused on high book to market
securities, and shows that the mean return earned by a high book-to-market investor can achieve
a return of at least 7.5% annually. Piotroski 2000 also studied a number of different fundamental
ratios and criteria with similar outcomes, and notes that returns are concentrated in small and
medium size companies, companies with low share turnover, and firms with low analyst
following.
In 2001 Aby et al. focus on using fundamentals to screen stocks for value. Also in 2001 Aby et
al. concentrated on four fundamental conditions, namely, single valued P/E's; Market price less
than Book Value; established track record of return (established by ROE), and dividend payout
ratio. The authors conclude that when the four criteria are used to screen stocks, quality
investments seem to result. It is interesting to note that in earlier work, the authors had simply
focused on shares with low P/E and a market price below book value, and concluded this
filtering method did not produce satisfactory returns.
1.2 Contributions
Fundamental Analysis provides a framework for modelling the financial technicalities of a
company. Primarily, it aids in the development of company or industry specific models, and
provides a means of evaluating the performance of a given company in terms of those models. A
considerable contribution of the fundamental models is that they provide for the calculation of a
number of financial ratios. These ratios are then used to assess the financial health of a company,
and to compare directly to the ratios for different companies for alternative investment decision.
There is a long established tradition of attempting to use these fundamental ratios as predictors of
a companies future share price. Primarily, this started with the work of Benjamin Graham in
1928, and forms the heart of an investment philosophy known as 'Value Investing'. Value
investors believe that the market does not price securities accurately, and that the true price of a
security, its 'intrinsic' value, only rarely coincides with the market price. The trading manner of
value investors is to determine the intrinsic value of a security, and acquire the security as long
as the intrinsic value is above the price the market will sell at but according to the conventional
definition, a value investor is one who invest in low price book value or low price-earnings ratios
stocks while the generic definition defines it as one who pays a price which is less than the value

of the assets in place of a firm. For example firms with high E/P, D/P or B/P ratios earns positive
capital asset pricing model (CAPM) – adjusted abnormal returns.
However, on the contrast growth investor focuses on the potential of a company with much less
emphasis on its present price. They invest on company that are trading higher than their current
intrinsic worth in anticipation that the company intrinsic worth will grow and exceed the current
valuation
1.5 Structure
One important issue, the subject of this dissertation, is to apply fundamental analysis to two UK
listed insurance companies namely : Beazley Group Plc and Hardy Underwriting as a case study
to investigate how detailed the financial statement information can be used to implement an
active investment strategy with the hope of making abnormal returns. The remainder of the
dissertation proceeds as follows: Section II provides a brief review of the relevant literature on
various market anomalies such as post earning drift, value and growth anomalies and small cap
anomalies. Section III describes the methodology by explaining relevant descriptive financial
ratios and valuation dynamics procedure. The analysis of the result is explained in Section IV.
The last section offers the conclusion.
2.0 Literature Review and Theoretical Frame Work
The semi-strong form efficient market hypothesis developed by Fama in 1970 assumes that
security prices respond quickly to new information such as earnings announcement. But research
has observed an apparent delay in share price response to earnings information (Richard, 2004).
According to Ball and Brown (1968), even after earnings are announced, cumulative abnormal
returns for stocks with unexpected positive (negative) earnings surprise continue to drift upwards
(downwards). This anomaly is known as Post Earnings Announcement Drift (PEAD). Foster,
Olson and Shevlin (1984) noted that sixty days prior to an earnings announcement, combining a
long position in stocks with unexpected earnings in
the highest decile with a short position in stocks in the lowest decile generates an abnormal
return of 25% p.a. before accounting for transaction cost, which confirms the existence of the
PEAD anomaly.
Various competing hypotheses try to explain the PEAD phenomenon. One school of thought
attributes the phenomenon to ‘delayed response’ due to investors’ failure to appreciate the full
implication of earnings announcement and high transaction costs that restrain immediate
response to earnings news. Another school of thought suggests that there is misspecification in
the Capital Asset Pricing Model (CAPM) because the model fails to adjust returns for risk and
thus, the abnormal return is a compensation for bearing risk not captured in the CAPM (Ball et al
1988 in Bernard and Thomas, 1989).
2.1.0 Evidence of Post Earnings Announcement Drift
US Evidence

The most widely accepted study of PEAD is that of Bernard and Thomas (1989). They
empirically test competing explanations of PEAD in the US using a sample of quarterly earnings
announcements for firms listed on NYSE/AMEX, covering the period from 1974 to 1986. The
sampling criteria and the methodology are consistent with the models used by Foster et al. (1984)
which are based on standardised unexpected earnings (SUE) i.e. unexpected earnings scaled by
their standard deviation. The SUE model allows for a better comparison among firms because it
accounts for earnings announcements at different points in time. Additionally, this model
prevents firms with more volatile earnings from unduly biasing the result. Firms are ranked in
deciles according to SUE compared to their distribution in the previous quarter and assigned to
ten portfolios where the tenth portfolio consists of firms with the highest ranking of SUE. The
results of Bernard and Thomas (1989) show that PEAD exists for all stocks and it increases
monotonically from the lowest to the highest SUE decile. The effect of PEAD is more significant
for smaller firms.
Finally, most of the drift appears within the first sixty days, almost all of the effect happens
within nine/six months for small/large firms and the largest part occur during the first five days.
Bernard and Thomas reject the hypothesis of CAPM misspecification but find evidence
consistent to delayed price response as an explanation for PEAD. They conclude that the 12
existence of PEAD is due to investors’ failure to realise the serial correlation of quarterly
earnings. Ball and Bartov (1996) however suggest that investors understand this implication but
underestimate the degree of serial correlation between current and future earnings by 50%.
However, the UK evidence Liu, Strong and Xu (2003) are consistent with that of Bernard and
Thomas (1989) their result shows evidence of PEAD in the UK. The PEAD portfolio (highest
decile minus lowest decile) yields significant profit of 2.9%, 5.2%, 8.2%, and 10.8% over 3-, 6-,
9-, and 12 months investment horizon respectively. After controlling for risk and market
microstructure effect, the price based earnings surprise measure gives the strongest drift effect.
Other evidences by Forner et al. (2009) in the Spanish stock market, Truong (2010) in New
Zealand, Booth et al (1996) in Finland. The overall results justify the presence of PEAD in their
respective stock markets.
2.1.1 Price Momentum and Post-Earnings Announcement Drift
Price momentum is the predictability of future returns from past returns. High (low) stock prices
continue to drift up (down) in the same direction so that on average, past winners continue to
outperform past losers over a three to twelve month period (Jegadeesh and Titman, 1993). Chan
et al (1996) attributes the existence of price momentum to market’s under reaction to earnings
news. They analyse the returns of different earnings momentum strategies which differ based on
how earnings surprises are measured. They find that earnings momentum strategy that buys
stocks in the top decile over the previous six months and sell stocks in the bottom decile over the
previous six months generates the highest abnormal return of 8.8% when held for six months.
Chan et al (1996) conclude that drifts in future returns for the next six to twelve months are
predictable from previous news about earnings and a stock’s returns.

2.1.2. Conclusion
Since PEAD is observed in several countries, it is evident that investors do not respond
efficiently to public information like earnings announcements, thereby questioning the efficient
market hypothesis. A delayed response to information is accepted as an explanation by a few
scholars, while models misspecification is less convincing due to insufficient evidence. A new
area of research into a possible explanation of PEAD is the ‘Inflation Illusion Hypothesis’ where
investors fail to consider the inflation effect while predicting future earnings growth rate. This
may partly explain the delay in stock price response ‘to information as visible and freely
available as publicly announced earnings’ (Chordia and Shivakumar, 2005).
2.2.0 Investment Performance of common stocks in relation to their Price –
Earnings Ratio
In an efficient capital market, security prices rapidly respond to available information in an
impartial way and thus provide an unbiased estimate of the underlying values. Although there is
significant empirical evidence supporting the efficient market hypothesis but many still question
its validity. As part of the anomalies of the efficient market hypothesis is that price earnings
ratios (P/E) are indicators of future investment performance of a security. The price earnings
ratio (P/E) hypothesis proposes that low P/E securities will tend to outperform high P/E stocks.
Although, security prices reflect some degree of biasness and the P/E ratio is an indicator of this.
Empirical research by BASU(1977) to determine whether investment performance of common
stocks is related to their P/E ratios and findings reveals that returns on stocks with low P/E ratios
tends to be larger than reasonable by the underlying risks, even after adjusting for transaction
costs, and differential taxes which is inconsistent with the efficient market hypothesis.
In summary, the behavior of security prices over the 14 –year period studied is, possibly, not
fully described by the efficient market hypothesis to the extent that low P/E portfolios actually
earn higher returns on a risk-adjusted basis which validate the price-ratio hypothesis on the
relationship between investment performance and their P/E ratios. Other recent researchers
includes Ahmed and Nanda (2001) use the growth in earnings-per-share (EPS) to capture growth
in the US markets from 1982 to 1997. They show that strategies focusing on investing in stocks
that have the dual characteristics of a high E/P ratio (ie value stocks) and a high growth in EPS
outperform a high E/P alone. Bird and Whitaker (2003, 2004) focus on seven European markets
(United Kingdom, France, Germany, Italy, Switzerland, the Netherlands, and Spain) from
January 1990 to June 2002. They indicate that a combination of value and earnings momentum
results in a small improvement when compared to using the sole book-to-market criterion.
2.3 Relationship between Return and Market Value of Common Stocks
The single-period capital asset pricing model (CAPM) postulates that there exist a linear
relationship between market risk of a security and expected returns. However, Banz study

examines the empirical relationship between the return and the total market value of NYSE
common stocks. But direct test on this have not been concluded. Additional factor which is
relevant for asset pricing is recently suggested. In 1979 Lichtenberger and Rama swamy
establish a significant positive relationship between return of common stocks and dividend yield
for the period of 1936-1977. Although Basu in 1977 summarized his findings that P/E ratios and
risk adjusted returns are related and concluded to interpret his findings as evidence of market
inefficacy. But in 1978 Ball points out, some of the anomalies that have been responsible for the
lack of market efficiency is a result of a misspecification of the pricing model. Between 1936-
1975 Banz study also contributes another piece of emerging puzzle by examining the
relationship between the total market value of common stocks of a firm and its returns.
2.3.3 Conclusion
Over a forty year period, The analysis revealed that CAPM is miss-specified on average, small
NYSE firms had had significantly larger risk adjusted return than large NYSE firms. Although
the size effect is not in any way linear in the market proportion but it is most pronounced for the
smallest firms in the sample.
In summary, the size effect exists but the reason still remains questionable until we find an
answer to it. As a result of this extra caution is required during interpretation

ETOP Analysis.
Environmental sectors Impact of each sector
Socio-culture It has no effect on the buying behavior of the consumers.
Political High impact in terms of setting up of the plant. e.g. Singur
plant of Tata, due to political issues the company has to setup
plant at new location. This caused increased in the
investment and ultimately sales got affected.
Economic High impact on the automobile industry, as Indian economy
is the second largest growing economy in the world. And
also the disposable income of the people in India is
increasing day by day so the affordability towards the
vehicles got increased and leads to increase in the sales of
automobiles.
Regulatory High impact of regulatory authorities. The taxes are very
high. The benefit is given only when the products are
exported from India rest all the time the taxes are very high.
Market High impact of market, as economy is growing the
Automobile industry is also growing at a faster rate, and also
the whole market is not yet tapped.
Supplier High impact is observed, when the price of the raw materials
goes up the prices of the vehicles also goes up and ultimately
the profitability goes down.
Technology It has moderate impact as people give more preference to the
technology part of the vehicles and give less importance to
the features.

FACTORS INFLUENCING THE FUNDAMENTAL ANLYSIS OF AUTOMOBILE
INDUSTRY:
Hike in fuel prices.
High interests and rising input cost.
Unfavorable economic conditions.
Foreign competitors.
Poor infrastructure.
1. Hike in fuel prices.
Hardening interest rates have played party for second month in a row, forcing analysts to
revise their growth estimates for the entire year. May has been the worst month for the
motorcycle makers as the sales dipped by a massive 16%. Passenger cars growth was restricted
to 9% for the first time this fiscal and commercial vehicle sales were flat 1% growth.
According to figures released by the Society of Indian Automobile Manufacturers
(SIAM), passengers car sales stood at 96,922 units as compared to 88,863 units last may. Besides
hardening the interest rates, analyst believe that a repeat of last year’s double digit growth is not
possible as the base is much higher.
The hike in petrol, diesel prices will fuel a slowdown in the auto industry in the short-term, feel
car majors like Maruti, Hyundai and Honda. And, it may spell good news for consumers in terms
of lower prices and greater discounts from car makers, who will try to offset the negative impact
on the industry, which is already hit by higher interest rates and tighter retail financing.
Market analysts said customers could expect more discounts with companies being forced to
clear stocks and keep the momentum going. The impending monsoon season is anyway a lean
period and the fuel price hike could not have come at a worst time. Already, the market is
flooded with discounts, especially in the high-volume compact car segment.
2. High Interests and rising input cost.

3. Unfavorable economic condition.
Inflationary pressures have applied brakes on the growth plans of carmakers reeling under the
pressure of high interest rates and a sharp dip in consumer demand.
Rising interest rates and sluggish stock market conditions have further dampened sentiments,
industry sources said. Volume players like Tata Motors, Hyundai, Maruti and others are finding
the going tough and most of the growth is coming from the huge discounts and subventions
offered by manufacturers, dealers and financiers.
4. Foreign competitors.
Globalization is the inclination of worlds investment and business to move from a country and
local markets to a worldwide environment, is the major factor that affects the auto market.
Now it has been easy for foreign auto dealers to enter into Indian market and create
competition.
The foreign companies like general motors, ford Motor co. Toyota Motor co. Honda motor
company have already entered into the Indian market and are affecting the sales of Indian
Automobile companies.
5 Poor infrastructures.
INDIA’S AUTOMOBILE industry is booming; whether two wheeler industry or four wheeler, it
is moving at a berserk speed. Further now with economy cars to enter market, the common man
will now prefer private transport system to public transport. But the real question is whether
India’s infrastructure is ready for handling this load and the answer is not in affirmative.
The automobile industry should participate in the development of roads across the country.
Today most of the people who have luxury cars say that though they feel happy in owning the
best car, they do not enjoy the drive anymore. The roads are narrower, the

traffic is horrible and to add to that is the ever-increasing pollution level. People no longer enjoy
the rides in their vehicles.
If you want to enjoy the drive, you have to go for a long distance journey, in which case one gets
a chance to drive through highway or expressway that is less congested at present. But driving in
the city is a pain in the neck. Most of the vehicles are used for city driving; it’s time the roads
should be developed at international level. We have international vehicles but not roads! Private
participation in road development is today’s utmost necessity. If roads across the country are
developed, then cities would be less congested as people would find it convenient to stay far
away from their work place owing to easier movement between places. A good infrastructure is
the lifeline of a country.

Data analysis and interpretation.

Table no. 1
List of Top 5 Automobile Companies in India (Figures in Cr.)
Company Turnover PAT MCRP CR Assets
Tata Motors Ltd. 123222.91 9273.62 56499.77 52209.48
Mahindra & Mahindra Ltd. 37026.37 3079.73 49945.17 36926.19
Maruti Suzuki India Ltd. 38140.69 2382.37 31475.63 14762.9
Hero MotoCorp Ltd. 19669.29 1927.9 40398.63 4447.22
Bajaj Auto Ltd. 17008.05 3454.89 46885.69 5154.96
Source: Money control.
Interpretation: Tata Motors Ltd. is the largest automobile company in India by its annual
turnover.

Table no.2 Comparison of Current ratios.
Source: Dion Global Solutions Ltd.
Interpretation: Current ratios of Mahindra & Mahindra Ltd. of last three years are
good.
Tata Motors Ltd.
Mahindra &
Mahindra Ltd.
Maruti Suzuki
India Ltd.
Hero
Motocorp.Ltd.
Bajaj Auto Ltd.
March'16 0.53 1.01 0.63 0.83 1.27
March'15 0.42 1.05 0.68 0.94 0.89
March'14 0.43 1.19 0.77 0.65 0.8
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Current Ratio copmarison(in %)

Table no. 3 Comparison of Quick ratios.
Source: Dion Global Solutions Ltd
Interpretation: Quick ratios of Bajaj Auto are good for last three years.
Tata Motors Ltd.
Mahindra &
Mahindra Ltd.
Maruti Suzuki
India Ltd.
Hero
Motocorp.Ltd.
Bajaj Auto Ltd.
March'16 0.83 0.37 0.67 1.04
March'15 0.42 0.84 0.41 0.72 0.72
March'14 0.36 0.93 0.67 0.47 0.67
0
0.2
0.4
0.6
0.8
1
1.2
Quick Ratios comparison (in %)

Table no.4 Comparison of Operating Profit Margin (%).
Interpretation: Operating profit margin of Bajaj Auto is good for last three years.
Tata Motors Ltd.
Mahindra &
Mahindra Ltd.
Maruti Suzuki
India Ltd.
Hero Motocorp.
Ltd.
Bajaj Auto Ltd.
March'16 5.46 11.17 15.54 15.54 21.06
March'15 -3.4 10.71 13.43 12.84 19.04
March'14 -2.65 11.65 11.66 14 20.37
-5
0
5
10
15
20
25
inpercentage
Operating Profit Margin

Table no. 5 Comparison of Operating profit per share (Rs)
Interpretation: Operating profit per share of Maruti Suzuki Ltd. is the highest for
last three years.
Tata Motors Ltd.
Mahindra &
Mahindra
Maruti Suzuki
India Ltd.
Hero Motocorp
Ltd.
Bajaj Auto Ltd.
Mar'16 6.82 73.58 297.22 222.7 165.17
March'15 -3.84 67.19 222.22 177.39 142.26
March'14 -2.83 76.66 168.69 177.28 141.89
-50
0
50
100
150
200
250
300
350
Operating profit per share (Rs.)

Table no. 6 Production of 4-Wheelers
Manufacturers 2015-16
(Apr-
Mar) In
Nos.
(Apr-Mar)
In Nos.
Maruti Udyog Ltd. 572,097 Hyundai Motor India Ltd. 260,440
Toyota Kirloskar Motor Pvt.
Ltd.
44,975 American OEM
Honda Cars India Ltd. 41,361 General Motors India Pvt.
Ltd.
30,687
Swaraj Mazda Ltd. 11,946 Ford India Pvt. Ltd. 26,946
Skoda Auto India Pvt. Ltd. 9.767 Tata Motors Ltd. 449,878
Daimler Chrysler India Pvt.
Ltd.
1,780 Mahindra & Mahindra Ltd. 128,601
Volvo India Pvt. Ltd. 1,004 Ashok Leyland Ltd. 65,085
Tata Trucks India Ltd. 125 Force Motors Ltd. 35,728
Fiat India Pvt. Ltd. 671 Eicher Motors Ltd 24,348
Hindustan Motors Ltd. 15,458
Total 13,347 Total 719,098
Source: D & B Research.
Interpretation: Maruti Udyog Ltd. is the leading 4-wheelers manufacturer.

Table no.7 Production of 2-Wheelers
(Apr-Mar)
In Nos.
(Apr-Mar) In
Nos.
Hero Motocorp. Ltd. 3,006,486 Bajaj Auto Ltd. 2,042,289
Honda Motorcycle &
Scooter India (Pvt.) Ltd.
603,436 TVS Motor Company
Ltd.
1,366,866
Yamaha Motors India Pvt.
Ltd.
248,665 LML Ltd. 107,044
Suzuki Motorcycle India Pvt.
Ltd.
2,328 Kinetic Engineering
Ltd.
82,392
Majestic Auto Ltd. 56,819
Kinetic Motor
Company Ltd.
53,880
Royal Enfield (Unit of
Eicher Ltd.)
30,596
Total 3,860,915 Total 3,739,886
Source: D & B Research
Interpretation: Hero Motocorp Ltd.is largest two wheeler producer in india.

Table no.8 Indian automotive Export.
Category 2004-05 2014-15(Apr-Dec)
Passenger Cars 25468 121478
Multi utility Vehicles 2654 3892
Commercial Vehicles 10108 19931
Two Wheelers 100002 256765
Three Wheelers 21138 51535
% Growth -16.6 32.8
Source: India trade.
Interpretation: The export has grown tremendously in last decade.

Table no.9 Automobile Production Trends
Automobile Production trends
Category 2010-11 2011-12 2012-13 2013-14 2014-15
Passenger
Vehicles
723,330 989,560 1,209,876 1,309,300 1,545,223
Commercial
Vehicles
203,697 275,040 353,703 391,083 519,982
Three
Wheelers
276,719 356,223 374,445 434,423 556,126
Two Wheelers 5,076,221 5,622,741 6,529,829 7,608,697 8,466,666
Grand Total 6,279,967 7,243,564 8,467,853 9,743,503 11,087,997
Source: India statistics.
Interpretation: In last six years the Indian automobile manufacturing has been
Increased.

Table no.10 Automobile Sales trends.
Automobile sales trends
Category 2010-11 2011-12 2012-13 2013-14 2014-15
Passenger
Vehicles
707,198 902,096 1,061,572 1, 43,076 1,379,797
Commercial
Vehicles
190,682 260,114 318,430 351,041 467,765
Three
Wheelers
231,529 284,078 307,862 359,920 403,910
Two Wheelers 4,812,126 5,364,249 6,209,765 7,052,391 7,872,334
Grand Total 5,941,535 6,810,537 7,897,629 8,906,428 10,123,988
Source: India Statistics.
Interpretation: The sales of automobile industry has raised in the last 4-5 years.

Table no.11 Automobile Export Trend.
Automobile export trends No. of
vehicles
Category 2009-10 2010-11 2011-12 2012-13 2013-2014 2014-15
Passenger
Vehicles
72,005 129,291 166,402 175,572 198,452 218,418
Commercial
Vehicles
12,255 17,432 29,940 40,600 49,537 58,999
Three
Wheelers
43,366 68,144 66,795 76,881 143,896 141,235
Two Wheelers 179,682 265,052 366,407 513,169 619,644 819,847
Grand Total 307,308 479,919 629,544 806,222 1,011,529 1,238,499
Source: India Statistics.
Interpretation: The export is increased 7% every year.

Table no.12 Global competition.
Sr.no. Country Sales (2014-15) in numbers.
1 China 21,984,100
2 US 15,883,969
3 Japan 5,375,513
4 Brazil 3,767,370
5 Germany 3,257,718
6 India 3,241,209
7 Russia 2,950,483
8 UK 2,595,713
9 France 2,201,068
10 Canada 1,779,860
Source: Slam
Interpretation: India is the 6th
largest automobile maker in the world.

Findings.
1) Tata Motors Ltd. is the largest automobile company in India by its annual turnover.
2) Current ratios of Mahindra & Mahindra Ltd. of last three years are good.
3) Quick ratios of Bajaj Auto are good for last three years.
4) Operating profit margin of Bajaj Auto is good for last three years.
5) Operating profit per share of Maruti Suzuki Ltd. is the highest for last three years.
6) Maruti Udyog Ltd. is the leading 4-wheelers manufacturer.
7) Hero Motocorp Ltd.is largest two wheeler producer in India.
8) The export has grown tremendously in last decade.
9) In last six years the Indian automobile manufacturing has been increased.
10) The sales of automobile industry has raised in the last 4-5 years.
11) The export is increased 7% every year.
12) India is the 6th
largest automobile maker in the world.
From the fundamental analysis it is found that if the investor is investing for the short
term then he should not go for the investment in the Automobile stocks. Because the stocks are
not going to appreciate within a year and also due to inflation the profit margins of the
companies got reduced. So the dividends for the shareholders will be less.
The investors invests in the another markets like precious metals like gold and silver.
The investors who are thinking of the long term investment can invest in the stocks of
Automobile companies because the stocks are available at cheaper rates and after few years he
may get capital appreciation.
Indian market is sentiment driven. The international market affects the Indian market.
The factors like hike in fuel prices, high interest rates, unfavorable economic conditions,
margins of the transporters, foreign competitors; poor infrastructure affects the sales of
Automobile companies.
Also through Porter’s five force analysis and ETOP analysis we can get the idea that the
parameters like Potential threats from firms which make substitute products, Supplier’s
bargaining power, Buyer’s bargaining power, Forces of competition created by the rivalry
amongst existing firms also affects the sales of Automobile companies.

Conclusion
Fundamental analysis is a security or stock valuation method that uses financial and economic
analysis to evaluate businesses or to predict the movement of security prices such as stock prices.
The fundamental information that is analyzed can include a company's financial reports, and
non-financial information such as estimates the growth of demand for competing products,
industry comparisons, analysis of the effects of new regulations or demographic changes, and
economy-wide changes. It is commonly contrasted with so-called technical analysis which
analyzes security price movements without reference to factors outside of the market itself.
A potential (or current) investor uses fundamental analysis to examine a company's financial
results, its operations and the market(s) in which the company is competing to understand the
stability and growth potential of that company. Company factors to consider might include
dividends paid, the way a company manages its cash, the amount of debt a company has, and the
growth of a company's revenues, expenses and earnings.
Fundamental Analysis helps in determining the Fair value of the stock.. It helps investors on a
large scale. There are various tools used in fundamental analysis and these tools help the investor
to analyze the company and know about its current status and future prospects. Still it should
always be kept in mind that though there are various tools used in Fundamental Analysis, and
these tools help to give a better picture about the company and its future but still none of these
tools should be used in isolation. These tools have significance when the) are analyzed taking
into consideration other tools. There are certain combinations, which are considered, and finally
Fundamental Analysis is the analysis, which is culmination of information, and analysis from
these tools individually.
The end goal of performing fundamental analysis is to produce a value that an investor can
compare with the security's current price in hopes of figuring out what sort of position to take
with that security.

Suggestions
Importance of industry can never be understated. State of industry will affect the
company performance. It is important to determine cycle. These are entrepreneurial or sunrise,
expansion or growth, stabilization or maturity and decline or sunset stage. Investors should
purchase in the first two stages and disinvest at the maturity stage. It is better to invest in
evergreen industries. Results of cyclical industries are volatile. Investors should consider
competition as the greater the competition lower the profit. It is safer to invest in industries not
subject to government controls. Export oriented industries currently favored by the government
Business or economic cycle has direct impact on industry and individual companies. It
affects investment decisions, employment, demand and profitability. Four stages of economics
cycle are depression, recovery, boom, and recession. Investors should determine the stage of the
economic cycle before investing. Investors should invest just before or during a boom.
It is important to check how company is perceived by its competition and weather it is the
market leader in its products or in its segments. The investor must study the policy a company
follows and its plans for growth. Labor relations are important.

Learning through project.
I have come to know various things regarding Fundamental analysis during the project work.
I also learned about Indian automobile sector through this project. The first automobile in India
rolled in 1897 in Bombay. Within two-wheelers, motorcycles contribute 80% of the segment
size. India is the largest three-wheeler market in the world. Unlike the USA, the Indian passenger
vehicle market is dominated by cars (79%). Tata Motors dominates over 60% of the Indian
commercial vehicle market. Automobile Industry is the largest industry in India with an
impressive growth in the last two decades. The reason behind the growth was abolition of
licensing in 1991 and permitting automatic approval and successive liberalization of the sector.
This project has been a great learning experience for me; at the same time it gave me enough
scope to implement my analytical ability. The subject is to understand how stock market judged
by an analyzing the fundamentals of the company. Stock market is based on the assumptions,
price of share will decide by its company growth and expansion.
Then I learned various reasons and their influence on to the automobile sector.
Hike in fuel prices, High interests and rising input cost, Unfavorable economic conditions,
Foreign competitors and Poor infrastructure.
Overall the project has made its significant influence and will aid to my prospective career.

Bibliography.
WEBSITES
1. http://www.nseindia.com
2. http://www.moneycontrol.com
3. http://business.mapsofindia.com
4. http://companiesinindia.net
5. http://www.bseindia.com
6. http://www.sifyfinance.com
7. http://www.karvy.com
8. http://www.sharekhan.com
9. http://www.motilaloswal.com
10. http://www.knowyourstocks.com
Books
Azhar Kazmi, Business Policy and Strategic Management (Second edition), New
Delhi: Tata McGraw-Hill Publishing Company Limited.

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