Technical Analysis of Selected stock of FMCG sector

1. 1
A Dissertation Report Submitted to
BIJU PATNAIK UNIVERSITY OF TECHNOLOGY, ODISHA
(For the fulfilment of the Requirement of the Degree MBA)
2016-2018
A
REPORT
ON
“TECHNICAL ANALYSIS OF FMCG SECTOR”
AT
ADITYA BIRLA CAPITAL LTD
Submitted by
SUBHRA RANJAN KHATUA
BPUT REGD NO: 1606258097
UNDER THE GUIDANCE OF
MR. BHAGVAN BEHERA
BIJU PATNAIK INSTITUTE OF IT & MANAGEMENT STUDIES

2. 2
CERTIFICATE OF THE GUIDE
WHOM SO EVER IT MAY CONCERN
This is to certify that the Project work titled ‘A REPORT ON TECHNICAL ANALYSIS OF
FMCG SECTOR’ is a bonafide work of SUBHRA RANJAN KHATUA Enroll/Reg No.
1606258017 carried out in fulfilment for the award od degree of MASTER OF
BUSINESS ADMINISTRATION FOR THE SESSION (2016-2018) of Biju Patnaik
University of Technology, Odisha under my guidance. The Project work is original and
not submitted earlier for the award of any degree/ diploma or associated of any other
University/Institution. The thesis:
 Embodies the work of the candidate himself.
 Has duly been completed.
 Fulfils the requirements of the rules and regulation relating to the business
project of institution.
 Is up to standard both in respect to contents and language for being referred to
the examiner.
Signature of the Guide
Place:
Date:

3. 3
DECLARATION
I, SUBHRA RANJAN KHATUA hereby declare that the project work titled ‘A REPORT
ON TECHNICAL ANALYSIS OF FMCG SECTOR’ is the original work done by me and
submitted to the BIJU PATNAIK UNIVERSITY OF TECHNOLOGY, Odisha, in fulfilment
of requirement for the award of Master of Business Administration is a record of
original work done by me under the supervision of Prof. Bhagvan Behera.
REGD No: 1606258097
Place:
Date: Signature of the Student

4. 4
Executive Summary
Technical Analysis is the forecasting of future financial price movements based on an
examination of past price movements. Technical analysis does not result in absolute
predictions about the future with regard to forecasting. Instead, technical analysis can help
investors anticipate what is "possible" to happen to prices over time. Technical analysis is
study of predicting prices of securities for future the main aim of technical analysis is to
generate returns by charter person decide when to enter and when to exit in the security.
Technical Analysis is of the stock market relating to factors affecting the supply and demand
of stocks. It helps in understanding the intrinsic value of shares and knowing whether the
shares are undervalued or overvalued. The stock market indicators would help the investor
to identify major market turning points. This is a significant technical analysis of selected
companies which helps to understand the price behavior of the shares, the signals given by
them and the major turning points of the market price. This paper is aims at carrying out
Technical Analysis of the securities of the selected companies and to assist investment
decisions in this Indian Market.

5. 5
CONTENT
SL NO PARTICULAR PAGE NO
1 INTRODUCTION 7-9
2 COMPANY PROFILE 11-12
3 RESEARCH METHODOLOGY 14
4 LETRETURE RIVIEW 16
5 DATA ANALYSIS & INTERPRETATION 18-20
6 FINDINGS, SUGGESTION & BIBLIOGRAPHY 21

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INTRODUCTION

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Technical Analysis:
Technical analysis is a trading tool employed to evaluate securities and attempt to forecast
their future movement by analyzing statistics gathered from trading activity, such as price
movement and volume. Unlike fundamental analysts who attempt to evaluate a security's
intrinsic value, technical analysts focus on charts of price movement and various analytical
tools to evaluate a security's strength or weakness and forecast future price changes.
Principles of technical analysis
The market discounts everything:
Whatever happens to a security is considered by the market. Even though TA mostly
ignores fundamentals, the market will still price those in and thus reflect everything that has
or could influence the security.
The price moves in trends:
Price movement is considered to always follow a certain trend. The old saying “the trend is
your friend” means it is easier to trade with the trend. Most strategies and tools actually
focus on trends, whether short term or long term. Price can be in an uptrend, downtrend or
sideways trend, which is also called ranging.
History repeats itself:
Like history, price movements tend to repeat themselves. TA uses historical data to
determine future movement. Market participants tend to react in a similar way to certain
events or appearances, so they can usually be expected to react in the same way again
when a similar situation occurs in the future.

8. 8
Candlestick Chart:
A candlestick chart (also called Japanese candlestick chart) is a style of financial chart used
to describe price movements of a security, derivative, or currency. Each "candlestick"
typically shows one day, so for example a one-month chart may show the 20 trading days as
20 "candlesticks". It is like a combination of line-chart and a bar-chart: each bar represents
all four important pieces of information for that day: the open, the close, the high and the
low. Being densely packed with information, they tend to represent trading patterns over
short periods of time, often a few days or a few trading sessions.
Bollinger Band:
Developed by John Bollinger, Bollinger Bands® are volatility bands placed above and below a
moving average. Volatility is based on the standard deviation, which changes as volatility
increases and decreases. The bands automatically widen when volatility increases and
narrow when volatility decreases. This dynamic nature of Bollinger Bands also means they
can be used on different securities with the standard settings. For signals, Bollinger Bands
can be used to identify M-Tops and W-Bottoms or to determine the strength of the trend.

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Relative Strength Index:
The relative strength index (RSI) is a momentum indicator developed by noted technical
analyst Welles Wilder, that compares the magnitude of recent gains and losses over a
specified time period to measure speed and change of price movements of a security. It is
primarily used to attempt to identify overbought or oversold conditions in the trading of an
asset.
Moving Average Convergence and Divergence:
The MACD indicator (or "oscillator") is a collection of three time series calculated from
historical price data, most often the closing price. These three series are: the MACD series
proper, the "signal" or "average" series, and the "divergence" series which is the difference
between the two. The MACD series is the difference between a "fast" (short
period) exponential moving average (EMA), and a "slow" (longer period) EMA of the price
series. The average series is an EMA of the MACD series itself.

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COMPANY PROFILE

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ADITYA BIRLA CAPITAL LTD:
Aditya Birla Capital Limited (ABCL) is the holding company for all the financial service
businesses of the Aditya Birla Group. With a strong presence across the life insurance, asset
management, private equity, corporate lending, structured finance, general insurance
broking, wealth management, equity, currency and commodity broking, online personal
finance management, housing finance, pension fund management and health insurance
business, ABCL is committed to serve the end-to-end financial services needs of its retail and
corporate customers.
Formerly known as the Aditya Birla Financial Services Limited (ABFSL), ABCL ranks among
the top 5 fund managers in India (excluding LIC) with an AUM of Rs. 2,463 billion as on
March 31st, 2017 and has a lending book of Rs 388 billion. ABC reported aggregate revenue
from businesses at Rs. 106 billion and profit before tax of Rs. 11.5 billion for fiscal 2016-17.
Anchored by over 12,000 employees, ABC has a nationwide reach through over 1,300 points
of presence and more than 142,000 agents / channel partners.
VISION:
"To be a leader and role model in a broad-based and integrated financial services
business."
The 4 pillars of our vision that will help us achieve it are:
 To be a leader – we are committed to being a leader in all facets of our businesses,
rather than being just another participant in this race.
 To be a role model – we will not become leaders by cutting corners or making
compromises. Whatever we do, we will strive to be the best in class. And if we are
the best, then our customer will have no reason to go elsewhere – therefore our
leadership is assured, on pure merit.
 To be a broad-based player – we are committed to meeting all the felt and unfelt
needs of our target customer. And thereby, we can retain him or her across their
needs and life-stages.
 We aim to be an integrated player –we believe that this approach gives us a
competitive edge through sharing of best practices, deriving cross – business
synergies & providing talent pool with world of opportunity to grow.

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Products of ADITYA BIRLA CAPITAL LTD:
 Stocks & Securities
 Mutual Funds
 Wealth Management
 SME Loans
 Personal Finance
 Home Finance
 Insurance

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RESEARCH METHODOLOGY

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Objective of studies:
 To study the relevence of technical analysis in Indian capital market.
 To analyze the performance of select companies in Indian stock market and to
predict the future trends in the share prices through Technical Analysis.
 To suggesting the investors in making investment decisions in selected stock.
Research Methodology:
The study aims at analyzing the price movements of selected company’s scrip. As the study
describes the existing facts and figures given in the financial statement and the price
movements of the selected companies, the research design followed is descriptive and
analytical in nature. For Technical Analysis, Secondary Data the weekly share price
movements of the selected companies in NSE were absorbed for the 3 months. The closing
prices of share prices were taken and the future price movement was analyzed using various
tools. Data were collected from trading of equity market in NSE, various books, journals,
magazines and websites. All the listed companies in the National Stock Exchange 5
companies which are actively traded in NSE were taken on Stratified sampling basis for the
study.
Tools for the study:
 Candle Stick Chart
 Bollinger Band
 Relative Strength Index (RSI)
 Moving Average Convergence and Divergence (MCAD)
Scope of the study:
Technical analysis is widely used by forex, equity, and commodity traders, to determine the
short term as well as the longterm trends of the market. The scope of technical analysis is
increasing every day, as more and more people are trying to learn the skills of technical
analysis to earn good returns.
Limitation of the study:
Technical analysis is used to forecast stocks. All of the technical indicators give possible
entry and exit points. The forecasting accuracy isn’t 100%. For example, when a possible
entry or exit point for a stock is suggested, it doesn’t guarantee a successful trade. Stock
may decrease after the entry. Stock can also rise after the exit.

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LITRETURE REVIEW

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T. Mallikarjunappa and Shaini Naveen (2016) conducted a study on Comparative Analysis of
Risk and Return with Reference to Stocks of CNX Bank Nifty. This study analyzes the risk and
returns in the banking sector. They compare the performance of the 12 listed banks in the
Nifty Bank Index. The study also analyses the performance of banking stocks mainly to
understand the required rate of return and risk of a particular stock based on different risk
elements prevailing in the market and other economic factors.
Dr. S. Krishnaprabha and Mr. M. Vijayakumar (2015) conducted a study on Risk and Return
Analysis of Selected Stocks in India. Risk and return analysis play an important role in the
decision-making process of most of the investors. Long term investors were able to take
advantage of the market as it less volatile. As there is less fluctuation in the shares when
compared to the market as well as its prices, the long-term investors are able to predict
when the share will raise. The majority of Information Technology, Fast Moving Consumer
Goods, Pharmaceutical Sectors give more return while compared to Banking and
Automobile sector.
Dr. Anubha Srivastava (2014) conducted a comprehensive study of Performance of Indian
Automobile Industry. In that study the Researcher analyses 3 major automobile companies
in India that are Maruti, Mahindra, and Tata. The study found that the performance of the
auto sector is directly related to the country’s economic trend. It is also found that
Mahindra and Mahindra are the most correlated to the auto index than the other two
companies. The increasing demands and sales numbers of Indian auto bring many
opportunities for these players.
Dr. M. Muthu Gopalakrisnan and Dr. K. V. Ramanathan (2013) conducted a Study on
Volatility in Indian Stock Market – A Study of Post and Prerecession Period. In this study, the
Researchers try to analyse price fluctuation in Indian stock market. Estimating the volatility
in the market will help the investors in estimating or calculating their risk. They analyse the
volatility of sectoral index listed in Nifty as on 28-03-2013 using daily opening price, closing
price, high and low prices of 31 selected companies. This study helps in identifying volatility
relationship during Pre-Recession and Post-Recession period.
S.Nagarajan and K.Prabhakaran (2013) conducted a study on Equity Analysis of Selected
FMCG Companies Listed on NSE. They had used standard deviation, co- efficient of variation
and beta for analysing the shares of various selected FMCG companies. They found that the
Nestle India Ltd share price has 53% relationship with nifty index. It was much lower than
other companies selected from the FMCG sector.
Dr. P Vikkreaman and P Varadharajan (2009) analysed the equity of selected companies in
the automobile industry for the period of 2004 to 2007. They use Beta and Alpha techniques
for analysing risk and return of the automobile companies. The calculation of the return
indicator and systematic risk provide a clear understanding regarding the investment
decisions on these companies.

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DATA ANALYSIS
&
INTERPRETATION

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Performance of FMCG Companies:
COMPANY NAME CMP
(as on 10.12.2017)
EPS
(TTM)
INDUSTRY P/E
RATIO
P/E RATIO
HUL 1326.65 22.08 62.90 60.08
BRITANNIA 4855.85 75.68 62.90 64.16
EMAMI 1255.55 13.98 62.90 89.81
COLGATE PALMOLIVE 1069.45 21.48 62.90 49.78
Interpretation:
As shown in the above table from the four FMCG company, two company i.e HUL and
Colgate Palmolive have undervalued stocks. Britannia and Emami have its share overvalued.
From this table HUL and Colgate Palmolive have the potential to grow in future. SO we will
go for technical analysis for this undervalued companies.

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Technical Analysis for 3 months period: (04th Oct to 08th Dec)
Hindustan Unilever Ltd:
SOUIRCE: moneycontrol.com
 Bollinger Band is taken with 20 days moving average and 2 as standard deviation.
 The Candlestick chart in Bollinger Band has already crossed the upper band
(resistance line).
 RSI is taken with 14 days moving average.
 The Relative Strength Index at the point of 70 (overbought).
 MACD indicator is taken with 9days as signal line, and the difference between 12
days moving average – 26 days moving average.
 The signal line has crossed the MACD line downward.

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Colgate Palmolive:
SOURCE: moneycontrol.com
 Bollinger Band is taken with 20 days moving average and 2 as standard deviation.
 The price trend has already crossed the upper band (resistance line).
 The RSI is taken with 14 days moving average.
 The Relative Strength Index at the point 61 (overbought condition).
 MACD is taken with 9 days as signal line and 12 days moving average – 26 days
moving average.
 The signal line first crossed the MACD line upward and then both going
simulteniously.

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FINDINGS:
 After analyzing the charts and figures, I come to the conclusion that both the stock
i.e Hindustan Uniliver Ltd and Colgate Palmolive have undervalued stock in the
FMCG sector.
 As per the charts the the price trend Hindustan Uniliver Ltd and Colgate Palmolive
are upward and it gives the signal buy the stocks.
 But the technical indicators indicates to sell the stocks.
 To earn profit in both stocks the investor can go for short selling with derivative
contract and sell the HUL stock at INR 1304.08 and buy at INR 1245.17.
 Similarly with short selling the investor should enter into derivative contract and sell
the stock at INR 1064.05 and buy at INR 1024.76.
SUGGESTIONS:
 Reading of Technical chart for short term investment is profitable.
 Stock Market has high price volatility.
 Before going for Technical Analysis, it important to study the Fundamentals of the
company.
BIBLIOGRAPHY:
 Security Analysis and Portfolio Management, S. Kevin, PHI Publication.
 www.moneycontrol.com
 www.nseindia.com
 www.dsij.in
 www.stockcharts.com