F&T

FUNDAMENTAL AND TECHNICAL ANALYSIS
EXECUTIVE SUMMARY:
In the recent past, the bank interest rates have been increased steadily. But the rate of Inflation has also been increased. There is no big difference between the interest rate and Inflation rate. Because of inflation, value of money has been decreased and cost of living has been increased. This has created panic among lower, middle and upper middle class families who considered keeping their savings in banks as safe as well as remunerative. So, the invertors are searching for proper investment avenues. Here, an attempt is made to predict the future movement of scrips. This study helps the investors to invest in shares. India has registered a growth rate of 8.6 percent in FY 2007-08 and is expected to grow at the rate of 10% plus in this fiscal year, and is one of the fastest growing economies in the world. It is one of the major attractions for FIs and FIIs. FIIs invest in India through secondary Markets. There is a great scope for India for becoming member of G-8 nations committee. The stock exchange comes in the secondary market. Stock exchange performs activities such as trading in share, securities, bonds, mutual fund & commodities. Stock Broking industry is growing at an enormous rate, as more and more people are attracted towards stock exchanges with the hope of making profits. But during this period the country also registered a fairly high industrial growth. The old industries and business establishments who wanted to expand the activities as well as the new industries and the business establishments floated shares in the market to raise capital for their activities. The companies, which registered steady growth, earned confidence of the people and their shares, were rated high in the market. This project report helps the reader to understand the techniques of investing in the stock market particularly in the secondary market. Some of the proven techniques have been used in this report to help the reader or investor.
Fundamental Analysis is the study of everything from the overall economy and industry conditions, to the financial condition and management of specific companies (i.e., using real data to evaluate a stocks value). Technical analysis is the examination of past price movements to forecast future price movements. Technical analysts are sometimes referred to as chartists because they rely almost exclusively on charts for their analysis. Objectives of the study: To know the future movement of selected companies shares through fundamental and technical analysis. o To predict the future price of the selected companies shares. o To study the strategies to be adopted by the retail investors based on the technical and fundamental analysis. o To know the floor and cap price of the stock. o To analyze individual company scrips by considering the factors relating to the economy, industry and the respective company. o To predict investor positions (Buy, sell & hold) based on historical price trends and the likely company prospects.
Findings and suggestion:

EXPECTED MARKET PRICE OF BHEL year particulars 2008 FUNDAMENTAL ANALISIS 2132.30 TECHNICAL ANALYSIS current market price(31-03-08)
2009 2707.42
2010 3429.62
2500
2,061.35
3750
EXPECTED MARKET PRICE OF L&T year Particulars 2008 FUNDAMENTAL ANALISIS 2325.33 TECHNICAL ANALYSIS current market price
2009 2451.38
2010 2584.41 5800
4450
3,024.80
INDIAN STOCK MARKET

OVERVIEW OF EQUITY MARKET IN INDIA BSE (Bombay Stock Exchange) Introduction: For the premier Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called "The Stock Exchange, Mumbai" by paying a princely amount of Re1.
3
Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology. Due to its wide acceptance amongst the Indian investors, SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through sensex. NSE (NATIONAL STOCK EXCHANGE) The Organization: The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs)
to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a taxpaying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. NIFTY: The Nifty is relatively a new comer in the Indian market. S&P CNX Nifty is a 50 stock index accounting for 23 sectors of the economy. It is used for purposes such as benchmarking fund portfolios; index based derivatives and index funds. The base period selected for Nifty is the close of prices on November 3, 1995, which marked the completion of one-year of operations of NSE's capital market segment. The base value of index was set at 1000. S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is a specialized company focused upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.
FII in Indian stock market

As part of its initiative to liberalize its financial markets, India opened her doors to foreign institutional investors in September, 1992. This event represents a landmark event since it resulted in effectively globalizing its financial services industry.
Year 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 net investment by FII 4.27 5444.6 4776.6 6720.9 7386.2 5908.45 729.11 9765.13
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
9682.52 8272.9 2668.9 44000.03 41416.45 67432.34 94327.87
What does India Need - FDI or FII

FDI usually is associated with export growth. It comes only when all the criteria to set up an export industry are met. That includes, reduced taxes, favorable labor law, freedom to move money in and out of country, government assistance to acquire land, full grown infrastructure, reduced bureaucratic involvement etc. IT, BPO, Auto Parts, Pharmaceuticals, unexplored service sectors including accounting; drug testing, medical care etc are key sectors for foreign investment. Manufacturing is a brick and mortar investment. It is permanent and stays in the country for a very long time. Huge investments are needed to set this industry. It provides employment potential to semi skilled and skilled labor. On the other hand the service sector requires fewer but highly skilled workers. Both are needed in India. Conventional wisdom is that China will have an upper hand in manufacturing for a long time. If India plays its cards right India may be the hub for the service sector. Still high end manufacturing in auto parts and pharmaceuticals should be Indias target. The FII (Foreign Institutional Investor) is monies, which chases the stocks in the market place. It is not exactly brick and mortar money, but in the long run it may translate into brick and mortar. Sudden influx of this drives the stock market up as too much money chases too little stock. In last four months an influx of about $1.5 Billion has driven the Indian stock market 20% higher. Where FDI is a bit of a permanent nature, the FII flies away at the shortest political or economical disturbance. The late nineties economic disaster of Asian Tigers is a key example of the latter. Once this money leaves, it leaves ruined economy and ruined lives behind. Hence FII is to be welcomed with strict political and economical discipline.
China receives mainly the FDI. They do not have instruments to receive the FII i.e. laws, institutions and political and judicial framework. On the contrary, India should welcome both and work hard to retain both.
The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak & Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited. Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates. As on December 31, 2006, the group has a net worth of over Rs.3, 100 crore, and the AUM across the group is around Rs. 225 billion and employs over 9,600 employees in its various businesses. With a presence in 282 cities in India and offices in New York, London, Dubai and Mauritius, it services a customer base of over around 2.2 million. The group specializes in offering top class financial services, catering to every segment of the industry. The various group companies include: 1. Kotak Mahindra Capital Company Limited 2. Kotak Mahindra Securities Limited 3. Kotak Mahindra Inc 4. Kotak Mahindra (International) Limited
5. Global Investments Opportunities Fund Limited 6. Kotak Mahindra (UK) Limited 7. Kotak Securities Limited 8. Kotak Mahindra Old Mutual Life Insurance Company Limited 9. Kotak Mahindra Asset Management Company Limited 10. Kotak Mahindra Trustee Company Limited 11. Kotak Mahindra Investments Limited 12. Kotak Forex Brokerage Limited 13. Kotak Mahindra Private-Equity Trustee Limited 14. Kotak Mahindra Prime Limited Kotak Mahindra has international partnerships with Goldman Sachs (one of the world's largest investment banks and brokerage firms), Ford Credit (one of the world's largest dedicated automobile financiers) and Old Mutual (a large insurance, banking and asset management conglomerate). Kotak Securities, an affiliate of Kotak Mahindra Bank, is the stock-broking and distribution arm of the Kotak Mahindra Group. The institutional business division, which provides AKSESS, primarily covers secondary market broking. It caters to the needs of foreign and Indian institutional investors in Indian equities (both local shares and GDRs). The division also has a comprehensive research cell with sectoral analysts covering all the major areas of the Indian economy. Kotak Securities Ltd. is India's leading stock broking house with a market share of around 8.5 % as on 31st March. Kotak Securities Ltd. has been the largest in IPO distribution. The accolades that Kotak Securities has been graced with include: 1. Prime Ranking Award (2003-04)- Largest Distributor of IPO's 2. Finance Asia Award (2004)- India's best Equity House 3. Euro money Award (2005)-Best Equities House In India 4. Finance Asia Award (2005)-Best Broker In India 5. Finance Asia Award (2006)- Best Broker In India
6. Euro money Award (2006) - Best Provider of Portfolio Management: Equities The company has a full-fledged research division involved in Macro Economic studies, Sectorial research and Company Specific Equity Research combined with a strong and well networked sales force which helps deliver current and up to date market information and news. Kotak Securities Ltd is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), providing dual benefit services wherein the investors can use the brokerage services of the company for executing the transactions and the depository services for settling them. Kotak Securities has 195 branches servicing more than 2,20,000 customers and a coverage of 231 Cities. Kotaksecurities.com, the online division of Kotak Securities Limited offers Internet Broking services and also online IPO and Mutual Fund Investments. Kotak Securities Limited manages assets over 2500 crores of Assets Under Management (AUM) .The portfolio Management Services provides top class service, catering to the high end of the market. Portfolio Management from Kotak Securities comes as an answer to those who would like to grow exponentially on the crest of the stock market, with the backing of an expert.
INTRODUCTION TO THE TOPIC

FUNDAMENTAL AND TECHNICAL ANALYSIS:
Fundamental analysis
The basic purpose of buying a security is to earn dividends and ultimately sell it at higher price. An investor therefore is interested in obtaining estimates of future prices of the share. These in turn will depend upon the performance of the industry to which the company belongs and the general economic situation of the country. The multitude of factors affecting a companys profitability can be broadly classified as: 1. Economic wide factors: these includes the factors like growth rate of the economy, the rate of inflation, foreign exchange rates etc which affects profitability of all companies.
2.
Industry wide factors: these include factors which are specific to

industry to which the company belongs. For instance the demand supply gap in the industry, the emergence of substitutes, and changes in government policies towards industry affects the company belonging to an industry.
3. Company wide factor: these factors are specific to a firm. The firm specific factors like plant and machinery, the brand image of the product, and ability of the management to affect the profitability. Fundamental analysis considers the financial and economic data that may influence the viability of a company. There are many flavors of fundamental analysis centered on such concepts as value, growth and turnarounds. Technical analysis is the
10
study of the price chart. It assumes that by looking at the progress of that little squiggly line you can forecast the future trend of a stock. Fundamental analysis is essential to most investors, and technical analysis is essential to most traders and speculators. An investor with rational and scientific approach will therefore be interested in analyzing the influence of the expected performance of the company, industry and economy as a whole on share prices, even before taking the investment decision such analysis is called fundamental analysis. Fundamental analysis is the method of evaluating securities by attempting to measure the intrinsic value of a particular stock. It is the study of everything from the overall economy and industry conditions, to the financial condition and management of specific companies (i.e., using real data to evaluate a stocks value). The method utilizes items such as revenues, earnings, return on equity and profit margins to determine a companys underlying value and potential for future growth. One of the major assumptions under fundamental analysis is that, even though things get mis priced in the market from time to time, the price of an asset will eventually gravitate toward its true value. This seems to be a reasonable bet considering the long upward march of quality stocks in general despite regular setbacks and periods of irrational exuberance. The key strategy for the fundamentalist is to buy when prices are at or below this intrinsic value and sell when they got overpriced.
11
TECHNICAL ANALYSIS: Technical analysis is the examination of past price movements to forecast future price movements. Technical analysts are sometimes referred to as chartists because they rely almost exclusively on charts for their analysis. Moving Average: A Moving Average is an indicator that shows the average value of a security's price over a period of time. When calculating a moving average, a mathematical analysis of the security's average value over a predetermined time period is made. As the securities price changes, its average price moves up or down. There are several popular ways to calculate a moving average. Meta Stock for Java calculates a "simple" moving average--meaning that equal weight is given to each price over the calculation period. Interpretation: The most popular method of interpreting a moving average is to compare the relationship between moving averages of the security's price with the security's price itself. A buy signal is generated when the security's price rises above its moving average and a sell signal is generated when the security's price falls below its moving average. This type of moving average trading system is not intended to get you in at the exact bottom nor out at the exact top. Rather, it is designed to keep you in line with the security's price trend by buying shortly after the security's price bottoms and selling shortly after it tops. The critical element in a moving average is the number of time periods used in calculating the average. When using hindsight, you can always find a moving average that would have been profitable. The key is to find a moving average that will be consistently profitable. The most popular moving average is the 39-week (or
12
200-day) moving average. This moving average has an excellent track record in timing the major (long-term) market cycles. Advantages: The advantage of moving average system of this type (i.e., buying and selling when prices break through their moving average) is that you will always be on the "right" side of the market: prices cannot rise very much without the price rising above its average price. The disadvantage is that you will always buy and sell some late. If the trend does not last for a significant period of time, typically twice the length of the moving average, you will lose your money. Support and Resistance: Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control. What Is Support? Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it is believed that demand will overcome supply and prevent the price from falling below support. Support does not always hold and a break below support signals that the bears have won out over the bulls. A decline below support indicates a new willingness to sell and/or a lack of incentive to buy. Support breaks and new lows signal that sellers have reduced their expectations and are willing sell at even lower prices. In addition,
13
buyers could not be coerced into buying until prices declined below support or below the previous low. Once support is broken, another support level will have to be established at a lower level. Where Is Support Established? Support levels are usually below the current price, but it is not uncommon for a security to trade at or near support. Technical analysis is not an exact science and it is sometimes difficult to set exact support levels. In addition, price movements can be volatile and dip below support briefly. Sometimes it does not seem logical to consider a support level broken if the price closes 1/8 below the established support level. For this reason, some traders and investors establish support zones. What Is Resistance? Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance. Resistance does not always hold and a break above resistance signals that the bulls have won out over the bears. A break above resistance shows a new willingness to buy and/or a lack of incentive to sell. Resistance breaks and new highs indicate buyers have increased their expectations and are willing to buy at even higher prices. In addition, sellers could not be coerced into selling until prices rose above resistance or above the previous high. Once resistance is broken, another resistance level will have to be established at a higher level.
Where Is Resistance Established? Resistance levels are usually above the current price, but it is not uncommon for a security to trade at or near resistance. In addition, price movements can be volatile and rise above resistance briefly. Sometimes it does not seem logical to
14
consider a resistance level broken if the price closes 1/8 above the established resistance level. For this reason, some traders and investors establish resistance zones. So, Here, Identification of key support and resistance levels is an essential ingredient to successful technical analysis. Even though it is sometimes difficult to establish exact support and resistance levels, being aware of their existence and location can greatly enhance analysis and forecasting abilities. If a security is approaching an important support level, it can serve as an alert to be extra vigilant in looking for signs of increased buying pressure and a potential reversal. If a security is approaching a resistance level, it can act as an alert to look for signs of increased selling pressure and potential reversal. If a support or resistance level is broken, it signals that the relationship between supply and demand has changed. A resistance breakout signals that demand (bulls) has gained the upper hand and a support break signals that supply (bears) has won the battle. Price Oscillator: The Price Oscillator displays the difference between two moving averages of a security's price. The difference between the moving averages can be expressed in either points or percentages. The Price Oscillator is almost identical to the MACD, except that the Price Oscillator can use any two user-specified moving averages. (The MACD always uses 12 and 26-day moving averages, and always expresses the difference in points.) Interpretation: Moving average analysis typically generates buy signals when a short-term moving average (or the security's price) rises above a longer-term moving average. Conversely, sell signals are generated when a shorter-term moving average (or the security's price) falls below a longer-term moving average. The Price Oscillator illustrates the cyclical and often profitable signals generated by these one or two moving average systems.
15
Price Rate-Of-Change: The Price Rate-of-Change ("ROC") indicator displays the difference between the current price and the price x-time periods ago. The difference can be displayed in either points or as a percentage. The Momentum indicator displays the same information, but expresses it as a ratio. Interpretation: It is a well-recognized phenomenon that security prices surge ahead and retract in a cyclical wave-like motion. This cyclical action is the result of the changing expectations as bulls and bears struggle to control prices. The ROC displays the wave-like motion in an oscillator format by measuring the amount that prices have changed over a given time period. As prices increase, the ROC rises; as prices fall, the ROC falls. The greater the change in prices, the greater the change in the ROC. The time period used to calculate the ROC may range from 1-day (which results in a volatile chart showing the daily price change) to 200-days (or longer). The most popular time periods are the 12- and 25-day ROC for short to intermediateterm trading. These time periods were popularized by Gerald Appel and Fred Hitschler in their book, Stock Market Trading Systems. The 12-day ROC is an excellent shortto intermediate-term
overbought/oversold indicator. The higher the ROC, the more overbought the security; the lower the ROC, the more likely a rally. However, as with all overbought/oversold indicators, it is prudent to wait for the market to begin to correct (i.e., turn up or down) before placing your trade. A market that appears overbought may remain overbought for some time. In fact, extremely overbought/oversold readings usually imply a continuation of the current trend. The 12-day ROC tends to be very cyclical, oscillating back and forth in a fairly regular cycle. Often, price changes can be anticipated by studying the previous cycles of the ROC and relating the previous cycles to the current market
16
Relative Strength Index (RSI): The Relative Strength Index ("RSI") is a popular oscillator. It was first introduced by Welles Wilder in an article in Commodities (now known as Futures) Magazine in June, 1978. The name "Relative Strength Index" is slightly misleading as the Relative Strength Index does not compare the relative strength of two securities, but rather the internal strength of a single security. A more appropriate name might be "Internal Strength Index." Interpretation: When Wilder introduced the Relative Strength Index, he recommended using a 14-day Relative Strength Index. Since then, the 9-day and 25-day Relative Strength Indexs have also gained popularity. The fewer days used to calculate the Relative Strength Index, the more volatile the indicator. The Relative Strength Index is a price-following oscillator that ranges between 0 and 100. A popular method of analyzing the Relative Strength Index is to look for a divergence in which the security is making a new high, but the Relative Strength Index is failing to surpass its previous high. This divergence is an indication of an impending reversal. When the Relative Strength Index then turns down and falls below its most recent trough, it is said to have completed a "failure swing." The failure swing is considered a confirmation of the impending reversal. In Mr. Wilder's book, he discusses five uses of the Relative Strength Index: 1. Tops and Bottoms. The Relative Strength Index usually tops above 70 and bottoms below 30. It usually forms these tops and bottoms before the underlying price chart. 2. Chart Formations. The Relative Strength Index often forms chart patterns such as head and shoulders or triangles that may or may not be visible on the price chart.
17
3. Failure Swings (also known as support or resistance penetrations or breakouts). This is where the Relative Strength Index surpasses a previous high (peak) or falls below a recent low (trough). 4. Support and Resistance. The Relative Strength Index shows, sometimes more clearly than price themselves, levels of support and resistance. 5. Divergences. As discussed above, divergences occur when the price makes a new high (or low) that is not confirmed by a new high (or low) in the Relative Strength Index. Prices usually correct and move in the direction of the Relative Strength Index.
Trend lines: In the preceding section, we saw how support and resistance levels can be penetrated by a change in investor expectations (which results in shifts of the supply/demand lines). This type of a change is often abrupt and "news based." In this section, we'll review "trends." A trend represents a consistent change in prices (i.e., a change in investor expectations). levels represent barriers to change. Trends differ from support/resistance levels in that trends represent change, whereas support/resistance
18
As shown in the following chart, a rising trend is defined by successively higher low-prices. A rising trend can be thought of as a rising support level--the bulls are in control and are pushing prices higher.
As shown in the next chart, a falling trend is defined by successively lower high-prices. A falling trend can be thought of as a falling resistance level--the bears are in control and are pushing prices lower.
The Bar Chart: The Bar chart is one of the most popular types of charts used in technical analysis. As illustrated on the left, the top of the vertical line indicates the highest price at which a security traded during the day, and the bottom represents the lowest price. The closing price is displayed on the right side of the bar and the opening price is shown on the left side of the bar. A single bar like the one to the left represents one day of trading.
19
The chart below is an example of a bar chart for AT&T (T):
The advantage of using a bar chart over a straight-line graph is that it shows the high, low, open and close for each particular day. Candle sticks Charting: Candlestick charts have been around for hundreds of years. They are often referred to as "Japanese candles" because the Japanese would use them to analyze the price of rice contracts. Similar to a bar chart, candlestick charts also display the open, close, daily high and daily low. The difference is the use of color to show if the stock went up or down over the day.
20
The chart below is an example of a candlestick chart for AT&T (T). Green bars indicate the stock price rose, red indicates a decline:
Investors seem to have a "love/hate" relationship with candlestick charts. People either love them and use them frequently or they are completely turned off by them. There are several patterns to look for with candlestick charts - here are a few of the popular ones and what they mean.
This is a bullish pattern - the stock opened at (or near) its low and closed near its high
21
The opposite of the pattern above, this is a bearish pattern. It indicates that the stock opened at (or near) its high and dropped substantially to close near its low.
Known as "the hammer", this is a bullish pattern only if it occurs after the stock price has dropped for several days. A small body along with a large range identifies a hammer. This pattern indicates that a reversal in the downtrend is in the works.
Known as a "star. For the most part, stars typically indicate a reversal and or indecision. There is a possibility that after seeing a star there will be a reversal or change in the current trend.
Point and Figure Chart: The point & figure (P&F) chart is somewhat rare. In fact, most charting services do not even offer it. This chart plots day-to-day increases and declines in price: increases are represented by a rising stack of "X"s, while decreases are represented by a declining stack of "O"s. This type of chart was traditionally used for intraday charting (a stock chart for just one day), mainly because it can be long and tedious to create a P&F chart manually over a longer period of time. The idea behind P&F charts is that they help you to filter out less significant price movements and to focus on the most important trends. Below is an example of a P&F chart for AT&T (T):
22
POPULAR CHARTING PATTERNS: Technical analysts often use proven successful price patterns from great stocks as tools to find new great stocks. Let's look at a few examples
23
Cup and Handle - This is a pattern on a bar chart that can be as short as seven weeks and as long as 65 weeks. The cup is in the shape of a "U". The handle has a slight downward drift. The right-hand side of the pattern has low trading volume. As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought at or near the old high. This selling pressure will make the stock price trade sideways with a tendency towards a downtrend for anywhere from four days to four weeks, then it will take off. This pattern looks like a pot with a handle. It is one of the easier patterns to detect; and investors have made a lot of money using it.
Head and Shoulders - This is a chart formation resembling an "M" in which a stock's price: - Rises to a peak and then declines, then
-
Rises above the former peak and again declines, and then - rises again but not to the second peak and again declines.
The first and third peaks are shoulders, and the second peak forms the head. This pattern is considered a very bearish indicator.
24
Double Bottom - This pattern resembles a "W" and occurs when a stock price drops to a similar price level twice within a few weeks or months. You should buy when the price passes the highest point in the handle. In a perfect double bottom, the second decline should normally go slightly lower than the first decline to create a shakeout of jittery investors. The middle point of the "W" should not go into new high ground. This is a very Bullish indicator.
The belief is that, after two drops in the stock price, the jittery investors will be out and the long-term investors will still be holding on.
Importance of project
25
1. The project gives thorough knowledge of fundamental and technical analysis 2. In this project report the Engineering sector is analyzed by considering budget and demand and supply of the industry. 3. In the project report the 2 companies have selected and analyzed the companys future market price by two distinct theories. 4. Reader of this project comes to know the expected future market prices and can invest into the scripts. 5. This gives the full information of calculation of intrinsic value.
Objective of the study

Main objective:
26
To know the future movement of selected companies shares through fundamental and technical analysis. Sub objectives o To predict the future price of the selected companies shares. o To study the strategies to be adopted by the retail investors based on the technical and fundamental analysis. o To know the floor and cap price of the stock. o To analyze individual company scrips by considering the factors relating to the economy, industry and the respective company. o To predict investor positions (Buy, sell & hold) based on historical price trends and the likely company prospects. Data collecting methodology The data collected for the study is secondary data. The data I have used for the study is 1. Historical shares value of the stocks collected from ICICI DIRECT.COM. 2. The balance sheet and Income statement got from companies web site. 3. Some of the information about the industry is collected from other financial web site.
THE MEASUREMENT TECHNIQUE The following techniques are used for the study. 1. Simple moving average. 5. Exponential moving average (EMA)
27
6. The relative strength index (RSI) 7. Value anchor.
LIMITATIONS OF THE STUDY: 1. The study is limited only to these 2 sectors and 4 companies. 2. Here, an attempt is made to predict the future movement stock. It contains an element of guess work 3. Here, I have used only 3 Technical tools to predict the movement of Scrips
Technical analysis of selected sector socks is as fallows Here you can see the charts of BHEL, L&T and NIFTY which is designed (derived) by MS Excel sheet. For calculating of RSI, SMA and EMA 2 years historical closing prices are used. The respective formulas of SMA, EMA and RSI is as follows
28
SMA (Simple Moving Average) A simple moving average is formed by computing the average (mean) price of a security over a specified number of periods. While it is possible to create moving averages from the Open, the High, and the Low data points, most moving averages are created using the closing price. For example: a 5-day simple moving average is calculated by adding the closing prices for the last 5 days and dividing the total by 5.
Ex: if the closing prices are as follows: 10, 11, 12, 13, 14, 17, 12 10+11+12+13+14=60 (60/5)=12 Here 12 is a first moving average obtained from the given closing prices, next moving average can be calculated by deducting first cl price i.e 10 and adding next cl. Price i.e 17 and again dividing it by 5.
Exponential Moving Average (EMA)

In order to reduce the lag in SMA, technicians often use EMA. EMA's reduce the lag by applying more weight to recent prices relative to older prices. The weighting applied to the most recent price depends on the specified period of the moving average. The shorter the EMA's period, the more weight that will be applied to the most recent price. For example: a 10-period EMA weighs the most recent price 18.18% while a 20-period EMA weighs the most recent price 9.52%. As such, it will react quicker to recent price changes than a SMA. Here's the calculation formula
EMA (current) = ((price (current)-EMA (prev)) x multiplier+ EMA(prev)

Where, Multiplier 2/n+1 n- Number of days for which EMA is calculated If we take the same example of SMA 5 day EMA is calculated as follows. EMA= (12-11) X 0.666 + 11 = 11.66
29
Where multiplier = 2/ (5 +1) = 0.666 For next EMA 11.66 acts as previous EMA and so on
Relative Strength Index. Ans: Developed by J. Welles Wilder and introduced in his 1978 book, New Concepts in Technical Trading Systems, the Relative Strength Index is an extremely useful and popular momentum oscillator.
Calculation
30
BHEL Company Charts
1.
Short term moving averages of BHEL Company.
31
Short term Moving averages of BHEL

3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 11/1/2006 7/1/2006 9/1/2006 1/1/2007 3/1/2007 5/1/2007 11/1/2007 1/1/2008 3/1/2008 3/1/2006 5/1/2006 7/1/2007 9/1/2007
support resistan ce
trendline violation
adjested 10 days ema 40 days ema

sell signals Buy signals
10 days sma
2. Long-term moving averages of BHEL Company.

L o n g te rm m o v in g a v e ra g e s fo r B H E L 3 ,5 0 0 .0 0 3 ,0 0 0 .0 0 2 ,5 0 0 .0 0 2 ,0 0 0 .0 0 1 ,5 0 0 .0 0 1 ,0 0 0 .0 0 5 0 0 .0 0 0 .0 0 7/1/2006 9/1/2006 3/1/2006 5/1/2006 1/1/2007 11/1/2006
s e ll
T r e n d v io la t io n
a d je s te d 2 5 d a ys E M A 1 2 5 d a ys e m a 2 5 d a ys s m a
B u y fo r lo n g te r m
3/1/2007
5/1/2007
7/1/2007
1/1/2008
Interpretation for short term moving averages:

1. The above chart of BHEL is of short term analysis say for example 15 days to 60 days.
32
11/1/2007
3/1/2008
9/1/2007
2. The above chart shows support and resistance level which is shown by arrow mark above. 3. The chart shows the buying and selling signals which is shown in red green and red arrow marks and circle is the point which specifies the exact price to buy or sell the stock. 4. And from above chart one can see the trend line violation which is shown by black arrow mark.
Interpretation for long term moving averages:

1. As we can see from the above chart the buy and sell levels are Rs 1130 and Rs. 2100. 2. In the long term chart also we can see a trend violation at the stage of jan 2008. 3. Here in long term moving average chart one can see that the 25 days SMA going upwards and 125 days EMA coming downwards. So if in future the 25 days SMA goes upwards and crosses the 125 days EMA then again the bull run rally start.
Target price for BHEL according to Technical charts:

1. At the beginning of the chart the support level is around Rs. 900 in the month of June 2006 and resistance level is at Rs. 1100 in the month of August 2006. 2. after its resistance in august 2006 at Rs 1100 the stock has under gone for consolidation for 2 months 3. After breaking its resistance of Rs. 1100 the stock again under gone for consolidation up to Feb 2007. 4. On Fab 2007 the stock had resistance of Rs. 1200 and fell down in march id for Rs. 1000 there for the new support become Rs. 1000 and resistance again Rs. 1200. 5. On April 2007 end it crossed its resistance and started rally. 6. In the month of July 2007 it achieved 52 weeks high and created a new resistance of Rs. 1800 and new support become Rs. 1700 7. The stock was on its life time high of Rs. 2870 on November 2007.
33
8. In the November 2007 the stock had resistance of Rs. 2900 and support was Rs. 2100 in the year 2007 of October. 9. In the month of Jan 2008 it has broken its previous support and started a bearish run. 10. In the month of Dec mid 2007 the stock violated its trend line. 11. the present support is 1850 and previous resistance is 2200 Short term target
Target prices for BHEL

Support- 1800 Resistance- 2150 Target price- 2150-1800=350 There for = 350 + 2150= 2500 Long term target Support- 1850 Resistance- 2800 Target price- 2800-1850=950 There for = 950 + 2800= 3750
34
3. 14 days RSI OF BHEL COMPANY
Interpretation:
35
1. Here we can see that the stock has gone for correction over a period and the present RSI is around 50 and which is very attractive. 2. From the above chart we can say that the stock is under consolidation and it is a best time to enter into this script at present market price.
36
L&T company Charts
1. Short term moving average of L&T Company
37
S h o rt term m o v in g av erag e s fo r L & T

5,000.00 4,500.00 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 3/1/2006 5/1/2006 7/1/2006 9/1/2006
Tr e nd lin e vio latio n
Up w o r d tr e n d lin e
S ell B uy 1/1/2007 3/1/2007 5/1/2007 7/1/2007 9/1/2007 1/1/2008 11/1/2006 11/1/2007 3/1/2008
adjested 10 days ema 40 days ema 10 days sma
2. Long term moving averages of L&T

Long term moving averages of L&T
5,000.00 4,500.00 4,000.00 3,500.00 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 0.00 1/1/2007 11/1/2006 11/1/2007 3/1/2008 3/1/2006 5/1/2006 7/1/2006 9/1/2006 3/1/2007 5/1/2007 7/1/2007 9/1/2007 1/1/2008 Accumulation up word break out phase - 3 phase -2 phase - 1
adjested 25 days ema 125 days ema 25 days sma
Interpretation for short term moving average:

1. The stock is showing upward trend line from Aug 2006 to June 2007. 2. There is a buy signal on March 2007 at Rs. 1500 level. 3. We can see the aggressive Bull Run from May 2007 to Nov 2007 the stock has almost double on Nov 2007.
38
4. There is a selling signal when 10 days SMA came below 40 days EMA. 5. From Jan 2008 to March 2008 there is a declining trend line. 6. At the end of 31.3 2008 it seems to be violation of trend line.
Interpretation for long term moving average:

1. The long term moving average of L&T stock is bit attractive which is showing 3 phases of Bull Run. 2. The stock has shown a accumulation for the period from May 2006 to My 2007 and immediately the upward break out happened and the stock started rally.
Target price for L&T according to Technical charts: Short term target
Support- 2800 Resistance- 3650 Target price- 3650-2800=850 There for = 850+3650=4450
Long term target

Support- 2800 Resistance- 4300 Target price- 4300-2800=1500 There for = 4300-1500=5800
3. 14 DAYS RSI OF L&T
39
RSI of L&T Company
40
1. At present the L&T Company RSI is very reasonable and started rally so one should see the market condition and invest in the script. 2. The RSI going upward and at present the RSI is around 45 levels. So one should invest at current market price.
41
Nifty Charts
1. NIFTY moving averages
42
M arket M .A
6500 6000 5500 5000 4500 4000 3500 3000 2500 2000 1500 wait C lose S MA 25 day E MA 25day E MA 100day
sell Buy
2. RSI Calculation for Nifty
Analysis: (Short term or intermediate) 1. If we look at 90 day EMA of Nifty chart, for the past one and half year the trend has been Bullish. 2. From 20th Jan 2008 onwards there has been shift in the trend towards Bearish.
4/1/2005 6/1/2005 8/1/2005 10/1/2005 12/1/2005 2/1/2006 4/1/2006 6/1/2006 8/1/2006 10/1/2006 12/1/2006 2/1/2007 4/1/2007 6/1/2007 8/1/2007 10/1/2007 12/1/2007 2/1/2008 4/1/2008
43
3. The 18day EMA & SMA of Nifty has broken down below 90 day EMA. So this is one more conclusive evidence for reversal of trend from Bull to Bear.
Immediate Future: As we can see from the graph it is clear that market is finding support at 4450 to 4600(which is previous resistance for the market). At this level market is likely to consolidate for the medium time period. Significance of Future Trend: In future unless and until market finds required strengths to come to the previous level i.e. resistance at 5630 50, there will be no signs of market turning Bullish. And if in future market breaks the resistance level i.e. 5630-50 then it will rally up to 6980-7020. (Target) Long term analysis 1. Market is sentiment driven and swings and hypes in market are so strong that they prevail even for years that have happened at present. 2. There has been shift in market trend and it has turned bearish though there is no clear sign of bear trend (its a long term correction not exactly bearish) but present situation is of complete chaos has left market in a state of volatility so we should wait and see market movement closely. 3. Markets long term support is at 3118-3130 and next support is at 4500 level so next rally from that level 4500 is 1380-1400(4500-3110) and we can see some 150-200 points abortive rally has been occurred and has reached 6050. 4. At that level market was waiting for correction. Bad clues from US slow down had made market to take LT correction and market has turned to be volatile and has yet to settle down at previous support of 4500. Short term analysis: 1) Trend short term or intermediate trend for the scrip has been flat. Now turning in to bearish. 2) Key short term support and resistance levels for the scrip.
44
As we can see from the 10 day EMA &SMA graph the scrip has established strong support at 130-140 price band. Price movement; the scrip has undergone major consolidation (sideway movement) phase. And it seems that the scrip has made abortive attempt to breach the flat trend and start rally, but in vain and the obvious reason for this failure is market crash. In the month Feb 2008 the scrip has broken the key support (130-140) and turned out to be bearish Future; as the scrip has already broken the key support, the short term traders should sell it and the fresh buy signal for the stock is known only when scrip establishes support. If in case scrip regains the strength to come back to the level of 130-140, investors should still wait till it clearly breaches above that level but with expanding volume. Trading tactics for short term investors: As it can be clearly seen from the graph, the stock is purely a trading stock. So to trade in the scrip one should look for key support and also look for cue from RSI. If the stock is at support and selling pressure is high i.e. RSI value 30 and below, it should be bought and sold at high buying pressure i.e. at RSI value 70 & above. Here the identifying future target price (for the short term) is very difficult as scrip was undergoing phase of consolidation and has no established resistance level.
Fundamental analysis of selected sector socks is as fallows

Fundamental analysis The basic purpose of buying a security is to earn dividends and ultimately sell it at higher price. An investor therefore is interested in obtaining estimates of future prices of the share. These in turn will depend upon the performance of the industry to
45
which the company belongs and the general economic situation of the country. The multitude of factors affecting a companys profitability can be broadly classified as:
1. Economic wide factors: these includes the factors like growth rate of the
economy, the rate of inflation, foreign exchange rates etc which affects profitability of all companies.
2.
Industry wide factors: these include factors which are specific to

industry to which the company belongs. For instance the demand supply gap in the industry, the emergence of substitutes, and changes in government policies towards industry affects the company belonging to an industry.
3. Company wide factor: these factors are specific to a firm. The firm
specific factors like plant and machinery, the brand image of the product, and ability of the management to affect the profitability.
Economic wide factors The following are the some of the important economic factors which influence the investment of investor over a period of time. Indian Economy Overview India's economy is on the fulcrum of an ever increasing growth curve. With positive indicators such as a stable 8-9 per cent annual growth, rising foreign
46
exchange reserves, a booming capital market and a rapidly expanding FDI inflows, India has emerged as the second fastest growing major economy in the world. The economy has been growing at an average growth rate of 8.8 per cent in the last four fiscal years (2003-04 to 2006-07), with the 2006-07 growth rate of 9.6 per cent being the highest in the last 18 years. Significantly, the industrial and service sectors have been contributing a major part of this growth, suggesting the structural transformation underway in the Indian economy. For example, industrial and services sectors have logged in a 10.63 and 11.18 per cent growth rate in 2006-07 respectively, against 8.02 per and 11.01 cent in 200506. Similarly, manufacturing grew by 8.98 per cent and 12 per cent in 2005-06 and 2006-07 and transport, storage and communication recorded a growth of 14.65 and per cent 16.64 per cent, respectively. Another significant feature of the growth process has been the consistently increasing savings and investment rate. While the gross saving rate as a proportion of GDP has increased from 23.5 per cent in 2001-02 to 34.8 per cent in 2006-07, the investment rate-reflected as the gross capital formation as a proportion of GDP-has increased from 22.8 per cent in 2001-02 to 35.9 per cent in 2006-07.
The Current Fiscal Year The process continues in the current fiscal year. On the back of 9.9 per cent growth in the first half of 2006-07, GDP grew by 9.1 per cent during April-September 2007.
While overall industrial production grew by 9 per cent during April-December 2007, importantly capital goods production rose by 20.2 per cent compared to 18.6 per cent during same period in 2006.
Services grew by 10.5 per cent in April-September 2007, on the back of 11.6 per cent during the corresponding period in 2006-07.
47
Manufacturing grew by 9.6 per cent during April-December 2007, on the back of 12.2 per cent growth during same period in 2006-07. Core infrastructure sector continued its growth rate recording 6 per cent growth in April-November 2007. While exports grew by 21.76 per cent during April-December 2007, imports increased by 25.97 per cent in the same period. Money Supply (M3) has grown by a robust 22.8 per cent growth (year-onyear) as of December 21, 2007 compared to 19.3 per cent last year. The annual inflation rate in terms of WPI was 3.5 per cent for the week ended December 29, 2007 as compared to 5.89 per cent a year ago. Fiscal and revenue deficit decreased by 11 per cent and 17.2 per cent, respectively, during April-November 2007-08 over corresponding period last year.
With such a robust growth rates, the advance estimates of the Central Statistical Organization (CSO) expects the economy to grow by 8.7 per cent in 2007-08.
Per Capita Income Along this significant acceleration in the growth rate of Indian economy, India's per capita income has increased at a rapid pace, exceeding an earlier forecast made by Goldman Sachs BRIC report which estimated India's per capita to touch US$ 800 by 2010 and US$ 1149 by 2015. Per capita income has increased from US$ 460 in 2000-01 to almost double to US$ 797 by the end of 2006-07. In 2007-08, India's per capita income is estimated to be over US$ 825.07, according to the advance estimates of the Central Statistical Organisation (CSO). Further, India's per capita income is expected to increase to US$
48
2000 by 2016-17 and US$ 4000 by 2025. This growth rate will, consequently, propel India into the middle-income category. Some Highlights Reflecting the favorable prospect of growth rate of Indian economy, the orders received Indian companies have increased by a whopping 68.6 per cent to US$ 32.48 billion during January-October 2007 compared to US$ 19.26 billion in the same period last year.
India is among the five countries sharing 50 per cent of the world production (or GDP). FDI inflows have jumped by almost three times to US$ 15.7 billion in 200607 as against US$ 5.5 billion in 2005-06. The aggregate income of the top 500 companies rose by 28.4 per cent in 200607 to total US$ 469.51 billion. India's National Stock Exchange (NSE) ranks first in the stock futures and second in index futures trade in the world. Twenty Indian firms have made it to the list of Boston Consulting Group's 100 New Global Challenger Giants list. According to a study by the McKinsey Global Institute (MGI), India's consumer market will be the world's fifth largest (from twelfth) in the world by 2025.
The number of companies incorporated has increased at an annual average of 55,000 companies in the last two years to 865,000, from 712,000 companies at the end of 2005.
Four Indians and seven Indian microfinance companies make it to the Forbes list of Top10 world's wealthiest CEOs World's Top 50 Microfinance Institutions, respectively.
India has the most number of private equity (PE) funds operating amongst the BRIC markets. Mumbai has been ranked tenth among the world's biggest centers of commerce in terms of the financial flow volumes by a survey compiled by MasterCard Worldwide.
49
Another significant aspect has been the broad-based nature of the growth process. While new economy industries like Information Technology and biotechnology have been growing around 30 per cent, significantly old economy sectors like steel have also been major contributors in the Indian growth process. For example, India has moved up two places to become the fifth largest steel producer in the world. And with its manufacturing and service sectors on a searing growth path, Lehman Brothers Asia estimates India to grow by as much as 10 per cent every year in the next decade. 1. Growth rate of industrial sector: The growth of industrial sector is an important contributor to the growth of national income. The performance and the growth of industry is measured through an Index of industrial product. The industrial growth rate is further disaggregated into growth rates of different sectors like electricity basic goods consumer goods and so
Industry Industry FY02 FY03 0.5 3.1 2.9 2.6 5.8 3.2 6 5.8
YoY % change FY00 FY01 Mining & Quarrying 1 3.7 Electricity 7.3 4 Manufacturing 7.2 5.4 IIP 6.6 5.1
FY04 5.3 5 7.4 7
FY05 4.4 5.2 9.1 8.4
FY06 1 5.2 9.1 8.2
FY07 5 6.5 10.7 9.7
2. Inflation Inflation prevailing in the economy has considerable impact on the performance of the companies high rates of inflation upsets business plans, results in high input costs and hence reduction in profit margins. On the other hand the inflation erodes purchasing power of buyer and results in reduction in demand for goods. The demand for consumer goods will particularly be affected adversely. Inflation is measured by sustainable price index number. The whole sale price index number is generally used for this purpose.
50
Year Inflation rate (consumer prices) Rank Percent Change Date of Information 2003 2004 2005 2006 2007 5.40 % 3.80 % 4.20 % 4.20 % 5.30 % 64 92 134 125 139 -29.63 % 10.53 % 0.00 % 26.19 % 2002 est. 2003 est. 2004 est. 2005 est. 2006 est.
3. Interest rates Interest rates reflect the cost and availability of credit to the companies operating in the economy. The interest rates and the volume as well as direction of the credit supply in the economy is influenced by monitory policy of the reserve bank of India (RBI). If the cheap money policy is pursued the interest rates are likely to be lower and larger volume of money supply is expected to be there in the economy. The lower rate of interest implies lower cost of financing the companys operations and assures higher profitability, higher the rate of interest higher will be the costs of manufacturing and sale, which is expected to lead lower profit.
Interest Rates (% per annum) Cash Reserve Ratio Bank Rate Reverse Repo rate (Absorption rate) Repo rate (Injection rate) IDBI MT lending rate PLR of 5 major banks Deposit rate of 5 major banks (maturity>1year) Average call money rate
2-Apr 5.5 6.5 6 8 12.5 11.0-12.0 7.0-8.5 3.6-7.5
3-Apr 4.8 6.3 5 7 12.5 10.8-11.5 5.3-6.2 2.0-5.1
4-Apr 4.5 6 4.5 6 10.3 10.3-11.0 5.0-5.5 2.1-4.5
5-Apr 5 6 4.8 6 10.3 10.3-10.8 5.3-6.3 3.3-5.5
6-Apr 5 6 5.5 6.5 10.3 10.3-10.8 6.0-7.0 4.2-6.2
6-Dec 5.3 6 6 7.3 10.3 11.0-11.5 6.8-8.0 5.4-12.0
51
4. Foreign exchange rates If company is major exporter or importer its performance and profitability are likely to be affected considerably by the exchange rates of rupee against other currencies. A depreciation of rupee against US or other currency will make Indian products more competitive price wise. In the foreign markets, thereby stimulating export from India
5. Government budget. The government budget provides detailed information on each of components of government spending and revenues. The deficit is essentially the excess of government spending on revenues. A budget deficit is often incurred for creating infrastructural facilities in the economy tends to create inflationary pressure. Due to this there is a strong public opinion against the governments creating of deficit without expanding the revenue. 6. Savings and investment. The capital market is channel through which the savings of households are made available to corporate for investment. Therefor the trends in saving and investment are significant in studying their impact on capital market. Savings and Investment % to GDP at constant prices By sector Household Savings Private Corporate Sector Public Sector By types of assets Physical Assets Financial Assets Gross Domestic Savings Net Capital Inflow Gross Domestic Investment
FY01 21.3 4.5 -0.9 10.7 10.5 24.9 1.1 24.3
FY02 21.2 4.1 -1.7 11 10.2 23.6 0.6 24
FY03 22 3.6 -2 11.2 10.8 23.6 0.2 24.8
FY04 23.1 4.1 -0.7 12.7 10.4 26.5 -1.2 25.3
FY05 23.5 4.4 1 12 11.5 28.9 -1.6 27.2
FY06 22 4.8 2.2 11.7 10.3 29.1 1 30.1
52
Errors and Omission Gross Capital Formation
1 23.3
1.1 23.8
-2.1 22.2
0.1 25
1 27.4
1.6 30.2
Industrial analysis
Engineering:
Engineering is a diverse industry with a number of segments. A company from this sector can be a power equipment manufacturer (like transformers and boilers), execution specialist or a niche player (like providing environment friendly solutions). It can be an electrical, non-electrical machinery and static equipment manufacturer too The sector is relatively less fragmented at the top, as competencies required are high. But it is highly fragmented at the lower end (like unbranded transformers for the retail segment) and is dominated by smaller players. The user industries in broad terms are power utilities (generation, transmission and distribution), industrial majors (refining, automotive and textiles), government (public investment) and retail consumers (pumps and motors). Order book size determines the performance of the company in the short to medium-term. In order to bag big contracts, companies need to have a big balance sheet size and proven execution capabilities. They need huge working capital in order to execute bigger contracts, as initially they receive only part payment and the remaining comes as projects get executed. Tariffs that earlier offered protection to Indian capital goods manufacturers, have been removed. Import duties on a range of equipments have also been reduced.
53
This coupled with the high cost of capital in India puts Indian manufacturers at a disadvantage against overseas competition. Power sector contributes the largest to the engineering companies' revenues. For instance, ABB and BHEL derive 60% and 72% of their revenues from supplying equipments to the power sector. And with the government planning to add large generation capacities in the eleventh (2007-12) five-year plan, the potential seems huge for the engineering majors. This is because, apart from the investment in generation capacity buildup, an equivalent amount is likely to be spent in the transmission and distribution space as well. Infrastructure is another key area of operation for major Indian engineering companies. L&T, for example, garners around 30% of its sales from infrastructure activities like engineering, design and construction of industrial projects and social & physical projects like housing, hospitals, IT parks, expressways, bridges, ports, and water & effluent treatment projects. The high global crude prices on account of growing demand has led to increased activities in the exploration and development space. This has helped the engineering companies in this space. More importantly, this segment of the engineering business has relatively higher margins than infrastructure, owing to more complex tasks involved.
Key Points Supply: Abundant supplies available across most segments, except for technology intensive executions Demand: Demand growth in this sector is fuelled by expenditure in core sectors such as power, railways, infrastructure development, private sector investments and the speed at which the projects are implemented.
54
Barriers to entry: Barriers to entry are high at upper end of the industry as skilled manpower and technologies, and ability to fund large projects are a prerequisite Bargaining power of suppliers: Bargaining power of suppliers is low because of intense competition. However, in technology driven high-end segments, suppliers have the upper hand. Bargaining power of customers: Bargaining power for technology driven segments is low. Competition: Majority of the companies compete in terms of pricing, experience in specific field, product differentiation and timely completion of projects. Financial Year '07 FY07 proved to be yet another good year for the Indian engineering and capital goods industry. Strong growth in industrial and manufacturing industries reflected in the picking up of investment activities in areas like power, infrastructure and processes. The capital goods index recorded strong growth during the entire year, though with some blips during the months September and October 2006. The order books of almost all companies witnessed healthy growth. For engineering majors like BHEL and L&T, at the end of March 2007, the value of outstanding orders stood at nearly 3 times and 2 times respective FY07 revenues. In general, the growth in order book came from both power and industrial businesses. The companies were able to bag international orders. The topline of the engineering majors witnessed double-digit growth during the fiscal. While the industry continued the trend of cost cutting through reducing debt and restructuring operations and manpower rationalization, rising input costs dented pared the improvement in profitability. Sharp rise in costs of steel and crude on the back of buoyant global demand and inadequate supplies, was the biggest dampener to profit growth
55
The fiscal also witnessed majors like Suzlon and Crompton Greaves chart out aggressive acquisitions in the international arena. The major focus area for these companies was to fill in the niches by way of acquiring new technologies and clients and having a diversified geographical presence. Budget 2008-09: World-class infrastructure has emerged as one of the most important necessities for unleashing high and sustained growth and alleviation of poverty in any economy. And with poor infrastructure to support other growth initiatives, the Indian economy continues to be a laggard when compared to its developing peers. From a policy perspective, however, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. The realisation finally seems to be setting in. This makes the future of the Indian engineering sector extremely bright. Apart from highway development and construction and modernisation of airports, the potential for the sector lies in the oil and gas space, where high global demand has led to increased action in exploration and production activities. However, scale and execution capabilities remain the mantras for success Budget Measures
1. Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh, Karnataka,
Maharashtra, Orissa and Tamilnadu urged to bring five more UMPPs to the bidding stage by extending the required support
2. Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the
Eleventh Plan period with a capital subsidy of Rs 280 bn; allocation of Rs 55 bn for FY09.
3. Rs 8 bn to be provided for Accelerated Power Development and Reforms
Project (APDRP) in FY09

4. Proposal to set up a national fund for transmission and distribution (T&D)
reform in the power sector

5. Exemption from 4% additional duty of customs has been withdrawn on power
generation projects (other than mega power projects), transmission, sub
56
transmission and distribution projects, and specified goods for high voltage transmission projects
6. Custom duty on project imports reduced from 7.5% to 5% 7. Initiatives like skill development programme and setting up of industrial
training institutes to be taken

8. Defense allocation to be increased by 10% 9. Excise duty being exempted on end-use basis, on refrigeration equipment
(consisting of compressor, condenser units, evaporator, etc) above 2 TR (tonne refrigeration) utilising power of 50 KW and above
10. Parent company allowed to set-off the dividend received from its subsidiary
company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company. Budget Impact 1. Aggressiveness in allotting UMPPs to prospective bidders expected to be helpful for engineering companies providing equipments and EPC services for power plants. 2. Setting up of a national fund for T&D reforms to aid growth prospects of equipment suppliers and T&D project developers. 3. Removal of exemption from additional customs duty on power generation, transmission and distribution projects to increase cost for companies importing such projects, which shall consequently be beneficial for domestic project developers. However, on the other hand, reduction in custom duty on project imports to nullify the impact. 4. Initiatives like skill development programme and setting up of industrial training institutes to reduce talent crunch for engineering companies, which are reporting high levels of attrition 5. Increase in defense allocation to aid prospect of companies providing defense equipments and technologies
57
Company Impact: 1. Allocation of UMPPs to support growth if equipment and service providers like BHEL, L&T. 2. Greater focus on the T&D front to be beneficial for ABB, Siemens, Crompton Greaves, Emco, Bharat Bijlee. Also, companies providing T&D project services like Jyoti Structures and Kalpataru Transmission to benefit. 3. Removal of exemption from additional customs duty on power generation, transmission and distribution projects to benefit domestic companies i.e BHEL and L&T. 4. Skill development initiatives to pare pressure of attrition from companies like L&T and BHEL. 5. Increase in defense allocation to aid prospects of L&T and Bharat Electronics.
Budget over the years:

Budget 2005-06 A special purpose vehicle (SPV) to be launched to finance infrastructure projects that are financially viable. Investment limit for 2005-06 is fixed at Rs 100 bn. Budget 2006-07 Estimated outlay for Jawaharlal Nehru National Urban Renewal Mission to be Rs 62.5 bn during 2006-07, including a grant component of Rs 45.9 bn. Through this mission, the government intends to promote establishment of new towns, preferably focused on a specific industry (IT) or a specific theme (education or health). Budget support for National Highway Development Programme (NHDP) enhanced from Rs 93.2 bn to Rs 99.5 bn in 2006-07. Budget 2007-08 Hike in corpus of Rural Infrastructure Development Fund-XIII and Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)
NHDP-III to be launched in FY06 to target selected high density highways not forming part of the GQ or the N-S, E-W corridor; Rs 14 bn provided in FY06 to four-lane 4,000 kms. Excise duty on A/Cs has Special accelerated road been reduced from 24% development programme for the to 16%. North Eastern region proposed at an estimated cost of Rs 46.2 bn approved with allocation of
58
Private sector participation in transmission projects and hike in budgetary support for APDRP
Reduction in customs duty on imports of medical equipments from 12.5% to 7.5%
Rs 5.5 bn in 2006-07
1,000 kms of access-controlled Expressways to be developed on the Design, Build, Finance and Operate (DBFO) model. Capital expenditure on defense proposed at Rs 375 bn.
Peak rate of customs duty on non-agricultural products has been reduced from 15% to 12.5% with a few exceptions.
Exemption to specified goods for making capital goods for setting up a unit with an investment of Rs 50 m or more withdrawn. Resin binders used for manufacture of rotor blades for wind operated electricity generators exempted from excise duty. Under NELP VI, 55 blocks and Dividend distribution tax area of 355,000 sq kms offered. to be hiked from 12.5% Investment of Rs 220 bn to 15% expected in the refinery sector in the next few years.
Five ultra mega power projects of 4,000 MW each to be awarded before December 31, 2006 Additional education cess of 1% to fund secondary and higher educa
Increase in allocation to defense to Rs 960 bn, including Rs 420 bn for capital expenditure Concessions under section 80IA for infrastructure facilities extended to cross country natural gas distribution network, including gas pipeline and storage facilities integrated to the network Customs duty on sprinklers and drip irrigation systems for agricultural & horticultural purposes is reduced from 7.5% to 5% Concessional customs duty of 5% on specified plantation machinery extended by two years to April 2009 Customs duty on food processing machinery and parts reduced from 7.5% to 5%
Key Positives of budget 2008-09:
59
Power play: Since power utilities are one of the biggest consumers (generation, transmission and distribution) for engineering companies, reforms introduced in the power sector like privatisation of SEBs will help in strengthening the order book size. Huge addition in power generation capacity, in order to meet the demand supply gap will be a big positive for the sector. Infrastructure development: The government is focusing on development of infrastructure like housing, airports, roads and ports. This will be big positive for engineering and construction companies Industrial act: Industrial divisions of engineering companies are likely to benefit from the increased focus on automation and capacity addition plans drawn by the India Inc. Key Negatives of budget 2008-09 Captive competition: Duty free import of T&D equipments by captive power generation units, if allowed by government, can have some impact on margins of the T&D majors because of competition People problem: Engineering companies, across the board, are facing troubled times retaining key employees. This is due to increased levels of competition for talent from MNCs, who have deep pockets and thus better paying capabilities. As a result of increasing levels of attrition, some companies are facing execution issues.
Prospects:
World-class infrastructure has emerged as one of the most important necessities for unleashing high and sustained growth and alleviation of poverty in any economy. And with poor infrastructure to support other growth initiatives, the Indian economy continues to be a laggard when compared to its developing peers. From a policy perspective, however, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. The realisation finally seems to be setting in. This makes the future of the Indian engineering sector extremely bright. Apart from highway
60
development and construction and modernisation of airports, the potential for the sector lies in the oil and gas space, where high global demand has led to increased action in exploration and production activities. Considering these factors, we expect the sector to grow strongly into the future. However, scale and execution capabilities will be the key mantras for success for the engineering companies Impetus given for growth of infrastructure and core industry in the last two budgets of the central government is expected to increase capacity utilisation of producers of coal, cement, iron ore and likely to increase demand for construction and mining equipments. Industrial growth and capital investment levels have improved and this will drive the growth in the coming years. The government's initiative to bring clarity to the power sector reforms is a welcome sign for the industry. More coordination between the Centre and states for infrastructure development is a step in the right direction. The Electricity Act 2003 has introduced a lot of reforms in the power sector. The unbundling in the sector will definitely boost private investment. PSUs like NTPC are expected to almost double their generation capacity in next few years, which is a good sign for the engineering companies. The shift in focus towards reducing T&D losses will further increase the order book size of the companies operating in this realm. With power generation and distribution looking up, power equipment companies can look forward to a promising future Deregulation combined with high global demand for crude has led to a surge in exploration and production activities in India and globally. Also, there has been a radical change in the governments approach to E&P (exploration and production) activities in the country. This thrust in development of new wells and improvement of output from old wells promises bright prospects for engineering companies Automation business has perked as the user industries started realising its benefits. With increasing competition among the power companies, the consumers will demand better quality and uninterrupted power supply. In such a scenario automation will play an important role. With the automation technologies gaining momentum, companies like ABB and Siemens will benefit a lot going forward. Capacity addition and de-bottlenecking exercise being carried by various industries like steel, power, refineries, chemicals etc is likely to provide a fillip to the industrial segment of the engineering companies
61
Performance of Industry The industrial sector recorded a healthy growth of 10.3% (measured in terms of the Index of Industrial Production) during the period April-Oct. 2006-07 as compared to 8.6 percent achieved during the corresponding period last year. Capital goods sector, which posted a robust growth of 16.9 per cent in 2005-06, has maintained its growth momentum during the current year as well. According to the Index of Industrial Production, capital goods sector posted a growth of 15.0 per cent during April-Oct. 2006-07. The growth trends during Apr-Oct 2006-07 as compared to Apr-Oct 200506 are given in the table below: Sector Wise Growth Rates (in %) Weight 200506 Overall 100.0 8.2 1.0 9.1 5.2 8.2 6.7 15.8 12.0 15.3 Mining and 10.5 Quarrying Manufacturing 79.4 Electricity Overall Basic Goods Consumer Goods I) Durables 10.2 100.0 35.6 28.7 5.4 2005-06 2006-07 (Apr- Oct) (Apr-Oct) 8.6 0.9 9.7 5.2 8.6 6.3 16.9 13.5 13.9 10.3 3.4 11.2 7.1 10.3 9.0 15.0 9.8 13.2
Use-Based Classification
Capital Goods 9.3
II) Non- 23.3 11.0 13.5 8.5 durables Production and growth rates of some of the industries being dealt within the Department of Heavy Industry for the period April-October 2006-07 as compared to April-October 2005-06 are given below Production Industry Industrial Machinery Machine Tools Unit Apr-Oct 2005-06 Apr-Oct 2006-07
Growth Rate (%)
Rs. lakhs 176464.79 147578.72 16.37 Rs. lakhs 151449.86 153371.70 1.27
62
Boilers Turbines (Steam/Hydro) Electric Generators
Rs. lakhs 181945.45 262286.24 44.16 Rs. lakhs 38443.43 56947.33 48.13 Rs. lakhs 41662.05 58458.17 40.32 35.43 7778.79 39.50 4813.09 277808 689649 11.51 -38.20 29.51 18.71
Power Distribution Mill. Transformers KVA Telecommunication Tables Passenger Cars Mill. Mtr.
Commercial Vehicles Numbers 214510 Numbers 580952
Heavy Engineering Industry

Textile Machinery There are over 600 units engaged in the manufacture of Textile Machineries, their components, accessories and spares,and out of these about 100 units are manufacturing the complete textile machinery. The range includes textile machinery required for sorting, cording,processing of yarns/ fabrics and weaving. The industry is gearing itself to avail the opportunities of supplying machines required to cater the export target of garment manufacturers post Multi Fibre Agreement (MFA).With a
63
capital investment of Rs. 1500 crore and an installed capacity of Rs. 3050 crore per annum. Their current production as well as exports and imports are as under: (Rs. in crore) Year 2003-2004 2004-2005 2005-2006 Production 1339 1685 2212 Exports 535 457 476 Imports 2179 3299 6768
Cement Machinery Cement plants based on dry processing and precalcination technology for capacities upto 7500 TPD are being manufactured in the country.Modern cement plants are designed for zero downtime, high product quality and better output with minimum energy consumed per unit of cement production etc. At present, there are 18 units in the organized sector for the manufacture of complete cement plant machinery. With an installed capacity of around Rs. 600 crore/annum, the industry is fully capable to meet the domestic demand.
Sugar Machinery Domestic manufacturers occupy predominant position in the global scenario and are capable of manufacturing from concept to commissioning stage sugar plants of latest design for a capacity upto 10,000 TCD (tons crushing per day). There are presently 27 units in the organised sector for the manufacture of complete sugar plants and components with an installed capacity of around Rs. 200 crore per annum. (Rs. in lakh) 2003-2004 Import 427 Export 1139 2004-2005 1259 2682 2005-2006 905 3767
64
Rubber Machinery There are at present 19 units in the organized sector for the manufacture of rubber machinery mainly required for tyre/tube industry. The range of equipments manufactured in the country includes inter-mixer, tyre curing presses, tube splicers, bladder curing presses, tyre moulds, tyre building machines, turnet servicer, bias cutters, rubber injection moulding machine,bead wires etc. (Rs.in crore) 2003-2004 Import Export 25.91 22.29 2004-2005 36.75 46.15 2005-2006 12.02 50.32
Material Handling Equipment

The range of equipment manufactured includes crushing and screening plants, coal/ore/ash handling plant and associated equipment such as stackers, reclaimers, ship loaders/ unloaders,wagon tipplers, feeders etc. catering to the growing and rapidly changing needs of the core industries such as Coal, Cement, Power, Port, Mining, Fertilizers and steel plants. There are 50 units in the organised sector for the manufacture of material handling equipment.Besides, there are number of units operating in the small-scale sector. The industry is self sufficient in meeting domestic demand and is also capable of meeting global competition. (Rs.in crore) 2003-2004 Import 242.58 2004-2005 261.44 2005-2006 545.54
65
Export
41.54
80.16
77.91
Oil Field Equipment

The petroleum industry in India is undergoing a major change. With the ongoing process of liberalisation, the industry has been thrown open for private sector in all major areas of exploration,production, refining and marketing, and this has resulted in increased demand for the oil field and related equipments. Domestic production covers mainly the on-shore drilling equipment.Under Offshore drilling only offshore platforms and some other technological structures are being produced locally. The major producers of these equipments are BHEL,Hindustan Shipyard, Mazagaon Dock and Larsen & Toubro.
(Rs.in crore) 2003-2004 Import Export 142.49 165.81 2004-2005 638.20 300.47 2005-2006 352.84 71.87
Metallurgical Machinery
Metallurgical machinery includes equipment for mineral beneficiation, ore dressing, size reduction, steel plant equipments, foundry 30 Indian Public Sector aiming global heights equipments and furnaces. At present, there are 39 units in the organized sector engaged in the manufacture of various types of metallurgical machinery. The existing production capacity in the country is sufficient to meet the demand of these equipment in the country. Indigenous manufacturers are in a position to supply majority of the equipment for steel plants e.g. blast furnaces, sinter plants,
66
coke ovens, steel melting shop equipment, continuous casting equipment, rolling mills & finishing line.However, there is a technological gap in the basic design and engineering for plant and equipment required in the ferrous and non-ferrous sector for which the domestic manufacturers are dependent on imported know-how. Since the process of making ferrous and non-ferrous metal is linked up with the design of the equipment, there is a need for close interaction between the process know-how, designers and equipment manufacturers. (Rs.in crore) 2003-2004 Import Export 495.28 434.23 2004-2005 454.40 370.70 2005-2006 1200.65 535.04
Mining Machinery
The major mining equipments are Longwall Mining Equipment, Road Header, side discharges Loader (SDL), Haulage Winder, Ventilation Fan,Load Haul dumper (LHD), Coal Cutter,Conveyors, Battery Locos, Pumps, Friction Prop,etc. At present there are 32 manufacturers in the organized sector both in public and private sector for underground and surface mining equipment of various types. Out of these, 17 units manufacture underground mining equipment.Majority of the requirement of the mining industry is being met by the indigenous manufacturers. (Rs.in crore) 2003-2004 Import Export 16.80 1.15 2004-2005 39.01 1.55 2005-2006 41.99 5.90
Dairy Machinery
67
At present, there are 16 units in the organized sector, both in private and public sector, manufacturing Dairy Machinery equipments such as evaporators, milk refrigerators andstorage tanks, milk and cream deodorizers, centrifuges, clarifiers, agitators , homogenisers, spray dryers and heat exchangers. Small Scale units are also contributing to the indigenous production. The spray dryers, plate type heat exchanger and other core equipment for milk powder plant call for high degrees of polish requirement on the equipment because the presence of any micro crevices resulting from inadequate polish tends to be the incubation and breeding ground for the bacteria. The technology gaps exist for handling equipments such as self cleaning cream, separator, aseptic processing systems, and for the equipment required for manufacture of yoghurt and traditional Indian sweets.
(Rs.in crore) 2003-2004 Import 18.15 Export 10.54
2004-2005 21.05 8.08
2005-2006 52.36 5.95
Machine Tools Machine Tool Industry is in a position to export general purpose and a standard machine tool to even industrially advanced countries. During last four decades, the machine tool industry in India has established a sound base and there are around 160 machine tool manufacturers in the organized sector as also around 400 units in the small ancillary sector. The industry, however,lacks in design and engineering capability to undertake very high precision CNC Machines.Some companies have taken up manufacture of CNC Machines, but there is a need to upgrade research and development in this field. Indian machine tools are manufactured to the international standard of quality / precision and reliability. A number of collaborations have also been approved for bringing in the latest technology in this field of modern machine tools and the industry is now exporting conventional as well as NC/CNC high - tech machine tools. In the field of R& D, Central Manufacturing Technology Institute, Bangalore has been doing research for
68
more appropriate designed machine tools. There is gap in technology for Special Purpose Machines and even in some categories of CNCs. Import of technology is encouraged to bridge the gap.
Performance of the industry during the last three years is tabulated below: (Rs. in crore) 2003-2004 Production Import Export 797.00 965.00 55.00 2004-2005 1089.04 1820.83 52.61 2005-2006 1342.00 2899.00 50.00
Company analysis
The company analysis is the last step in EIC analysis framework of fundamental analysis. The industry analysis helps the investor in selecting the industry in which the investments are better rewarded. The investor now has to decide in which of the companies belonging to chosen industries he should invest. This requires the company analysis. The company analysis has to be made in three different parts 1. Study of financial information and asses the financial health of the company. 2. Sizing up present situation and prospects. This requires an analysis of the present business of the company and its future prospects.
69
3. Evolution of management.
BHEL COMPANY ANALYSIS
70
1. Company financial health

The financial statements of the company can be used to understand and evaluate the financial performance and health of the company. Ratio analysis helps an investor to determine the financial strengths and weakness of the company. The following is the ratio analysis of the BHEL Company
Balance sheet of BHEL Mar '03 Mar '04 Mar '05 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Current Liabilities Provisions Total CL & Provisions Net Current Assets 244.76 244.76 0 0 4,558.91 0 4,803.67 500 31.09 531.09 5,334.76 3,347.82 2,178.81 1,169.01 67.55 10.33 2,001.06 4,075.78 1,119.44 7,196.28 1,495.26 201.47 8,893.01 4,094.18 806.46 4,900.64 3,992.37 244.76 244.76 0 0 5,051.18 0 5,295.94 500 40.03 540.03 5,835.97 3,459.16 2,365.46 1,093.70 109.57 28.98 2,103.88 4,608.48 1,504.63 8,216.99 1,693.39 1,155.01 11,065.39 5,339.66 1,139.94 6,479.60 4,585.79 244.76 244.76 0 0 5,782.13 0 6,026.89 500 36.98 536.98 6,563.87 3,628.50 2,584.70 1,043.80 98.12 8.95 2,916.11 5,972.14 1,392.86 10,281.11 1,921.33 1,785.01 13,987.45 7,248.99 1,325.45 8,574.44 5,413.01 Mar '06 244.76 244.76 0 0 7,056.62 0 7,301.38 500 58.24 558.24 7,859.62 3,821.62 2,839.79 981.83 191.27 8.29 3,744.37 7,168.06 1,483.97 12,396.40 4,186.27 2,650.01 19,232.68 8,905.14 3,649.32 12,554.46 6,678.22 Mar '07 244.76 244.76 0 0 8,543.50 0 8,788.26 0 89.33 89.33 8,877.59 4,134.61 3,146.31 988.3 306.58 8.29 4,217.67 9,695.82 2,068.91 15,982.40 5,517.59 3,740.00 25,239.99 11,957.32 5,708.25 17,665.57 7,574.42
71
Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
95.5 5,334.76 1,054.58 196.26
17.92 5,835.96 815.79 216.37
0 6,563.88 609.68 246.24
0 7,859.61 769.95 298.31
0 8,877.59 976.05 359.06
Profit & Loss account Mar '03 Mar '04 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 7,727.79 728.49 6,999.30 69.08 -45.32 7,023.06 3,160.38 199.96 1,504.64 478.10 532.98 81.56 0.00 5,957.62 996.36 1,065.44 54.78 1,010.66 185.35 0.00 825.31 -49.01 776.30 291.51 444.51 2,797.24 0.00 97.90 12.54 2,447.60 18.16 40.00 196.26 8,893.17 856.44 8,036.73 14.61 -30.63 8,020.71 3,634.66 196.81 1,639.51 598.67 888.89 193.58 0.00 7,152.12 853.98 868.59 60.08 808.51 198.00 0.00 610.51 396.59 1,007.10 348.93 658.15 3,517.46 0.00 146.86 19.00 2,447.60 26.89 60.00 216.37
Mar '05 10,682.15 1,043.15 9,639.00 259.98 539.77 10,438.75 5,097.68 220.54 1,650.38 783.44 1,006.38 116.98 0.00 8,875.40 1,303.37 1,563.35 81.41 1,481.94 218.87 0.00 1,263.07 306.60 1,569.67 616.30 953.40 3,777.71 0.00 195.81 26.64 2,447.60 38.95 80.00 246.24
Mar '06 14,739.46 1,298.01 13,441.45 342.00 386.01 14,169.46 7,099.40 229.01 1,878.51 1,054.67 1,216.00 126.27 0.00 11,603.86 2,223.60 2,565.60 58.75 2,506.85 245.93 0.00 2,260.92 299.86 2,560.78 881.61 1,679.16 4,504.46 0.00 354.90 49.78 2,447.60 68.60 145.00 298.31
Mar '07 19,058.33 1,695.44 17,362.89 482.32 181.37 18,026.58 8,561.41 259.08 2,366.93 1,733.59 887.55 190.50 0.00 13,999.06 3,545.20 4,027.52 43.33 3,984.19 244.61 0.00 3,739.58 -13.79 3,725.79 1,311.09 2,414.70 5,437.65 0.00 599.66 92.83 2,447.60 98.66 245.00 359.06
72
BHEL Ratios calculations sl.no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 ratio Net working capital current ratio quick ratio inventory turnover ratio debt equity ratio interest coverage ratio gross profit margin Net profit ratio cost of goods sold ratio Operating profit ratio return on equity return on assets return on capital employed EPS DPS P/E price to book value ratio book value per share dividend payout ratio earning yield dividend yield total asset turnover ratio capital turnover ratio formula CA-CL CA/CL CA-(stock+prepaid exp)/CL COGS/avg INV long trm DBT/ Sh holders eq EBIT/INTERST Gross profit / sales EAT/ Net sales COGS/ net sales*100 EBIT/ Net sales Net profit/ share holders equity Net profit/total assets EBIT/ Total capital Net profit available eq sh/ NO shares Div paid to ord sh / No of shares MPS/EPS MPS/BPS Net worth / no of shares DPS/EPS*100 EPS/MPS *100 DPS/MPS*100 COGS/total asst COGS/capital employed 2007 7574.42 1.43 1.13 3.32 0.01 93.42 19 13.51 80.63 20.41 27.48 27.69 44.18 98.66 24.5 22.91 6.30 359.06 24.83 4.36 1.08 1.58 1.59 year 2006 6678.22 1.53 1.17 3.10 0.07 43.46 14.71 12.19 86.33 16.54 23.00 22.11 30.28 68.6 14.5 32.75 7.53 298.31 21.14 3.05 0.65 1.48 1.59 2005 5413.01 1.63 1.22 3.04 0.08 19.8 11.25 9.58 92.08 13.52 15.82 15.77 20.82 38.95 8 19.70 3.12 246.24 20.54 5.08 1.04 1.35 1.47
Interpretation:
73
Net working capital: NWC represents the excess of current assets over current liabilities. Companies should have sufficient NWC in order to be able to meet the claims of the creditors and the day to day needs of business. The greater is the amount of NWC greater is the liquidity of the firm. In BHEL company the three year NWC is as follows. Sl.no Ratio Formula Year 2007 7574.4 2006 6678.2 2005 5413.01
1 Net working capital CA-CL 2 2 The company from 2005 to 2007 has increased its NWC which shows that the company has good liquidity to its creditors. Current ratio: The Current Ratio expresses the relationship between the firms current assets and its current liabilities. The rule of thumb says that the current ratio should be at least 2 that is, the current assets should meet current liabilities at least twice. Year sl.no Ratio Formula 2007 2 current ratio CA/CL 1.43:1 Here we can see that the companys current ratio decreasing gradually. Quick ratio: The quick ratio, also referred to as acid test ratio, examines the ability of the business to cover its short-term obligations from its quick assets only (i.e. it ignores stock). Clearly this ratio will be lower than the current ratio, but the difference between the two (the gap) will indicate the extent to which current assets consist of stock. 2006 1.53:1
2005 1.63:1
year sl.no Ratio Formula 2007 2006 2005 3 Quick ratio CA - (stock + prepaid exp)/CL 1.13:1 1.17:1 1.22:1 Here we can see that the companys quick ratio is bit constant for three years and company is able to satisfy its creditors with this ratio. Inventory turn over ratio: This ratio measures the stock in relation to turnover in order to determine how often the stock turns over in the business. It indicates the efficiency of the firm in selling its product.
Formula year
74
sl.no 4
Ratio inventory turnover ratio
2007 COGS/avg INV 3.32
2006 3.10
2005 3.04
In 2007: 12/ 3.32= 3.61 months In 2006: 12/3.1=3.87 months In 2005: 12/3.04= 3.95 months. Here we can see that the companys working efficiency increased over a period of time. They are able to convert their inventory into sale in 3.61 months.
Debt equity ratio: This ratio indicates the extent to which debt is covered by shareholders funds. It reflects the relative position of the equity holders and the lenders and indicates the companys policy on the mix of capital funds. The ratio reflects the relative contribution of creditors and owners of business in its financing. year sl.no Ratio Formula 2007 2006 2005 5 debt equity ratio Long trm DBT/ Sh holders eq 0.01 0.07 0.08 Here we can see that the company gradually decreased its debt combination from its finance. Interest Coverage Ratio: This ratio indicates how well the firms earning can cover the interest payments on its debt. sl.no Ratio 6 interest coverage ratio Gross Profit Margin: Formula EBIT/INTERST year 2007 93.42 2006 43.46 2005 19.8
Normally the gross profit has to rise proportionately with sales. It can also be useful to compare the gross profit margin across similar businesses although there will often be good reasons for any disparity. year sl.no Ratio Formula 2007 2006 2005 7 Gross profit margin Gross profit / sales 19 14.71 11.25 The ratio above shows the increasing trend in the gross profit since the ratio has improved from 11.25% in 2005 to 19.00% on 2007. This indicates that the rate in increase in cost of goods sold are less than rate of increase in sales, hence the increased efficiency.
75
Net profit ratio: sl.no Ratio Formula year 2007 13.51 2006 12.19 2005
8 Net profit ratio EAT/ Net sales % % 9.58% a high net profit margin would ensure adequate return to the owners as well as enable a firm to withstand adverse economic conditions when selling price is declining cost of production is rising and demand for the product falling.
Cost of goods sold ratio: year sl.no Ratio Formula 2007 2006 2005 9 cost of goods sold ratio COGS/ net sales*100 80.63 86.33 92.08 This is one of the expenses ratios it is computed by expenses by net sales. The cost of goods sold ratio shows what percentage share of sales is consumed by cost of goods sold and conversely what proportion is available for meeting expenses such as selling and general distribution expenses as well as financial expenses consisting of taxes interest and dividend and so on. Operating profit ratio: This ratio reveals the profitability of sales resulting from regular business as well as buying, selling, and manufacturing operations. sl.no Ratio 10 operating profit ratio Return on Equity: This ratio shows the profit attributable to the amount invested by the owners of the business. ROE measures the amount of money that the company has managed to generate for its shareholders. sl.no Ratio 11 return on equity Formula Net profit/ share holders equity year 2007 27.48 2006 23.00 2005 15.82 Formula EBIT/ Net sales year 2007 20.41 2006 16.54 2005 13.52
76
Here we can see that the companies return on equity is increasing constantly so we can say that the profitability to ordinary shareholders is strong and showing an upward trend.
Return on assets: This ratio gives you an idea on the company's management effectiveness in utilizing its assets to make a profit for its shareholders. year sl.no Ratio Formula 2007 2006 2005 12 return on assets Net profit/total assets 27.69 22.11 15.77 The company ROA has increased constantly which its management efficiency in getting good returns from its assets.
Return on capital employed: sl.no Ratio return Formula on capital year 2007 2006 2005
13 employed EBIT/ Total capital 44.18 30.28 20.82 This ratio shows how efficiently the long term funds of owners and lenders are being used. Earning Per Share: For an equity investor, a companys EPS is the most important indicator of its performance. If the EPS is good, the company can pay dividends, plough back the surplus into reserves and issue bonus shares in the future. For these reasons, the market price of any companys share is largely influenced by its projected EPS Sl.no ratio year Formula 2007 Net profit available eq sh/ NO 2006 2005
14 EPS shares 98.66 68.6 38.95 We can see here the companys EPS gone three times higher from three year.
77
Dividend per Share: Year Sl.no ratio Formula 2007 2006 2005 15 DPS div paid to ord sh / No of shares 24.5 14.5 8 This indicates the dividend paid for each share. Shareholders would, naturally like to receive the maximum possible dividends from a company, consistent with its profits and need for retained earnings.
P/E Ratio: P/E ratio is a useful indicator of what premium or discount investors are prepared to pay or receive for the investment. The higher the price in relation to earnings, the higher the P/E ratio which indicates the higher the premium an investor is prepared to pay for the share. This occurs because the investor is extremely confident of the potential growth and earnings of the share. sl.no Ratio 16 P/E Formula MPS/EPS year 2007 22.91 2006 32.75 2005 19.70
The above ratio shows that the shares were traded at a much higher premium in 2007 than were in 2005. In 2005 the price was 19.7 times higher than earnings while in 2007, the price is 22.91 times higher. Price to book value ratio: year sl.no Ratio Formula 2007 2006 2005 17 Price to book value ratio MPS/BPS 6.30 7.53 3.12 It measures the relationship between the market price of an equity share with book value per share. The P/B ratio is significant in predicting future stock return. Firms with low P/B ratio had consistently higher returns compared to the firms with high P/B ratio. Book value per share: sl.no Ratio Formula year
78
2007 2006 18 Book value per share Net worth / no of shares 359.06 298.31 This ratio indicates the net asset value of a companys share. A high book value indicates that the company has strong reserves, indicating scope for bonus shares, of course subject to necessary guidelines of the SEBI. Dividend payout ratio: This ratio looks at the dividend payment in relation to net income and can be calculated as follows: sl.no Ratio 19 dividend payout ratio Earning yield: This ratio highlights as a percentage a companys earnings vis-a-vis the current market value of its share. For blue chip companies this ratio tends to be around 5 per cent to 6 per cent. sl.no Ratio 20 earning yield Dividend yield: The dividend yield ratio indicates the return that investors are obtaining on their investment in the form of dividends. This yield is usually fairly low as the investors are also receiving capital growth on their investment in the form of an increased share price. Year 2007 1.08 Formula EPS/MPS *100 Year 2007 4.36 2006 3.05 Formula DPS/EPS*100 year 2007 24.83 2006 21.14
2005 246.24
2005 20.54
2005 5.08
sl.no Ratio 21 dividend yield
Formula DPS/MPS*100
2006 0.65
2005 1.04
79
Total asset turnover ratio: Year sl.no Ratio Formula 2007 2006 2005 22 total asset turnover ratio COGS/total asst 1.58 1.48 1.35 Total asset turnover ratio measures the efficiency of a firm in managing and utilizing its assets. The higher ratio indicates the more efficient management. Capital turnover ratio: Year sl.no Ratio Formula 2007 2006 2005 23 capital turnover ratio COGS/capital employed 1.59 1.59 1.47 Capital turnover ratio measures the efficiency of a firm in managing and utilizing its capital. The higher ratio indicates the more efficient management.
Bharat Heavy Electricals Limited: Bharat Heavy Electricals Limited (BHEL) is one of the largest engineering enterprises of its kind in India. BHEL is the largest domestic capital
80
goods manufacturer in India and the 12th largest in the world. The international competitors of BHEL are General Electric, Siemens, Alstom and ABB. BHEL offers a wide spectrum of equipment, systems and services in the field of power, transmission, industry, transportation, oil & gas, non-conventional energy sources and telecommunication. Power sector constitutes over half of its total business. The company has 14 manufacturing divisions, 8 service centres and 4 power sector regional centres. Its first plant was set up at Bhopal in 1956 under technical collaboration with AEI, UK followed by three more major plants at Hardwar, Hyderabad and Tiruchirapalli with Russian and Czechoslovak assistance. Products & services BHEL manufactures over 200 products under 30 major product groups. The company has installed equipment for over 100,000 mw of power generation for utilities, captive and industrial users. Its strengths are comparable product range and cost competitiveness with foreign manufacturers. The company enjoys a crucial advantage of depreciated assets. The company is cost-competitive when it comes to power plant equipment and has bagged a number of power project orders placed in India against open international competitive bidding. The company has joint venture with Siemens for servicing old Indian fossil fuel power plants and with GE for designing of heavy-duty gas turbines. Thirtytwo thermal power stations equipped with Bhels generating sets have been given productivity awards by the power ministry. Of these power stations, eight have received gold medals. The awards have been given for meritorious and efficient performance based on account of reduced inputs. The company already manufactures products required by the distribution systems like transformers, switchgears etc. The company is planning towards becoming an application service provider. The company will continue to focus on project management, reducing cycle time and cost control. In the power sector, the company plans to obtain a part of the business generated by independent power producers through a combination of approaches including consortium route, equity participation and limited financial syndication. I It has equipped itself with the new type of once-through design boiler technology, and for pollution control - bag filter technology. BHEL entered into new
81
business in integrated gasification combined cycle systems, coal washeries, and LRT systems. In it's existing businesses of transportation, transmission & industry. BHEL is pursuing opportunities in EMU coaches, loco refurbishment, gas-insulated switcher, HVDC insulators, and electronic meters. The company will continue to focus on product developments in order to foster its growth strategy. The electronics division has forayed into traction business and received a large order from DoT for switching equipment. BHEL has developed a new series compensation scheme Flexible AC Transmission System (FACTS) for reducing power losses and speedy transmission. The FACTS will enhance power transfer capability of the system and reduce transmission losses in 400 kV lines considerably. The company has also developed an automatic device that adjusts itself to the systems requirement in less than 10 milliseconds. It reduces system losses and improves power system stability in highvoltage transmission lines.
Key Risks
Delay in capacity expansion The companys 37,000 MW of order flow for BHEL over FY09-12E, in addition to the existing strong order backlog. Any delay in second phase of expansion from 10,000 MW to 15,000 MW could severely impact BHELs earnings, given the strong deliverables over next three-four years. The first phase of expansion from 6,000 MW to 10,000 MW had been delayed by nine months.
82
Slowdown in pace of power reforms Given the recent momentum in power reforms, it is expected the balance Eleventh Plan orders and 70% of Twelfth Plan orders to be placed by FY12. Any significant delay in the awarding activity could be a huge dampener for BHELs outlook going ahead, given that the company is the market leader (65% market share in countrys installed capacity as in FY07). Increase in private sector investments in power projects = intensifying competition As per CEA, 35% of the power capacity addition in the Twelfth Plan will be undertaken by the private sector. Any subsequent change in the mix, in favour of the private sector, could result in lower order intake for BHEL. While central and state sector projects are BHELs forte (70% plus market share), the companys market share in private sector projects has been lower (20-25%) on account of stiff competition. Stiff input prices could affect margins Although it have not built in benefits on account of raw material pricing over FY09 12E, any unprecedented rise in input costs above FY07-08E levels could dampen BHELs margins. Execution delays could lead to de-rating The re-rating in BHELs valuations over the past one year builds in strong visibility over the next few years. The key concern now is BHELs ability to execute this huge opportunity, failing wherein could lead to the stock being de-rated.
Value anchor
83
Period & months
2008/03
2009/03
2010/03
CAGR 1.20 1.21 1.24 1.09 1.12 1.10
INCOME Net Operating Income EXPENSES Material Consumption Manufacturing Expenses Personel Expenses Selling Expenses Administrative Expenses Cost of Sales Reported PBDIT Other Recuring Income Adjusted PBDIT Depreciation Adjusted PBIT Finanical Expenses Adjusted PBT Tax Charges Adjusted PAT Non-recurring Items Other Non-cash Adjustments REPORTED PAT no. of shares
20822.62 10155.72 2472.116 2591.409 248.2735 942.93

16,410.45 4,412.17
24971.74 12307.66 3066.919 2837.178 277.4314 1038.846

19,528.03 5,443.70
29947.6 14915.58 3804.834 3106.255 310.0138 1144.518

23,281.20 6,666.41
783.4328
5,195.60
1220.577
6,664.28
1901.64
8,568.05
1.56 1.06 0.95 1.37 1.35 0.66 0.78
258.5655
4,937.04
273.3171
6,390.96
288.9104
8,279.14
41.34491
4,895.69
39.45076
6,351.51
37.64339
8,241.49
1771.04
3,124.65
2392.347
3,959.17
3231.617
5,009.88
-13.4603
3,111.19
-8.82506
3,950.34
-5.78605
5,004.09
24.48 127.09
24.48 161.37
24.48 204.42
Expected EPS FOR 3 YEAR
risk free rate Average Dividend payout ratio Required rate of rate Expected growth rate in dividend P/E Ratio AVG PE ratio Weighted PE ratio 25.28 18.6 16.02 9.81 23.74 16.78 8
Beta 1.1
EMRP 9.5
Expected future price of the BHEL Company

Year Value ancher
2008 2009 2010
2132.30
2707.42
3429.62
84
Calculation of Intrinsic value Average Dividend payout ratio= sum of 5 years DPR/ 5 Required rate of rate= risk free rate +(beta*EMPR) Expected growth rate in dividend= avg of retention ratio* avg of ROE P/E RATIO= AVG DPR / (required rate of risk-exp growth rate in div) AVG PE ratio= 5 years PE ratio/ 5 Weighted PE ratio= calculated PE ratio+AVG PE ratio/2 Value anchor = weighted PE ratio* expected market price
85
L&T COMPANY ANALYSIS
1. Company financial health

The financial statements of the company can be used to understand and evaluate the financial performance and health of the company. Ratio analysis helps an investor to determine the financial strengths and weakness of the company. The following is the ratio analysis of the BHEL Company
L&T Company balance sheet and profit and loss account

Balance Sheet Mar '03 Mar '04 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds 248.67 248.67 0.04 3,279.53 34.34 3,562.58 2,703.11 472.89 3,176.00 6,738.58 24.88 24.88 0.00 2,717.55 32.61 2,775.04 1,045.25 279.10 1,324.35 4,099.39 Mar '05 25.98 25.98 0.00 3,312.25 30.90 3,369.13 793.72 1,065.34 1,859.06 5,228.19 Mar '06 27.48 27.48 0.00 4,583.32 29.37 4,640.17 465.79 987.78 1,453.57 6,093.74 Mar '07 56.65 56.65 0.00 5,683.85 27.93 5,768.43 245.40 1,832.35 2,077.75 7,846.18
86
Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
6,231.79 2,256.12 3,975.67 72.60 1,160.37 2,590.01 1,850.37 279.11 4,719.49 1,484.53 41.42 6,245.44 4,360.73 424.75 4,785.48 1,459.96 69.98 6,738.58 562.79 141.88
2,038.15 1,049.63 988.52 26.23 965.88 1,812.30 3,314.58 282.05 5,408.93 1,423.34 93.22 6,925.49 4,191.95 660.99 4,852.94 2,072.55 46.21 4,099.39 655.86 220.45
2,106.55 1,089.54 1,017.01 65.82 960.70 2,310.84 3,963.60 354.67 6,629.11 1,860.18 473.35 8,962.64 5,023.23 794.64 5,817.87 3,144.77 39.89 5,228.19 625.10 256.94
2,300.68 982.22 1,318.46 286.06 1,919.52 2,210.27 4,814.16 398.71 7,423.14 2,061.50 184.49 9,669.13 6,106.04 1,015.37 7,121.41 2,547.72 21.98 6,093.74 305.59 335.61
2,876.30 1,122.83 1,753.47 471.22 3,104.44 3,001.14 5,504.64 993.68 9,499.46 2,449.14 100.75 12,049.35 8,362.01 1,180.13 9,542.14 2,507.21 9.84 7,846.18 270.22 202.65
Profit & Loss account Mar '03 Mar '04 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend 9,931.98 518.99 9,412.99 248.21 -1.15 9,660.05 3,000.92 656.94 668.40 2,801.77 1,144.12 214.40 -1.98 8,484.57 927.27 1,175.48 388.13 787.35 304.57 0.00 482.78 4.35 487.13 77.10 433.10 5,483.65 0.00 9,917.52 272.20 9,645.32 391.15 432.59 10,469.06 3,729.06 69.19 678.08 4,009.64 662.21 191.91 -0.74 9,339.35 738.56 1,129.71 273.15 856.56 84.53 0.00 772.03 4.53 776.56 236.08 532.75 5,610.29 0.00
Mar '05 13,404.27 214.56 13,189.71 634.94 86.84 13,911.49 5,211.98 90.33 764.51 5,170.22 877.60 147.20 -3.15 12,258.69 1,017.86 1,652.80 280.51 1,372.29 87.52 0.00 1,284.77 8.02 1,292.79 302.29 983.85 7,046.71 0.00
Mar '06 15,030.81 253.86 14,776.95 527.52 -103.24 15,201.23 4,510.78 221.50 890.03 6,647.70 996.59 125.00 -1.89 13,389.71 1,284.00 1,811.52 321.34 1,490.18 107.12 0.00 1,383.06 -1.85 1,381.21 366.12 1,012.14 8,878.93 0.00
Mar '07 17,983.37 338.08 17,645.29 459.80 121.76 18,226.85 5,320.98 308.13 1,258.21 7,451.07 1,222.80 166.15 -3.30 15,724.04 2,043.01 2,502.81 331.46 2,171.35 160.13 0.00 2,011.22 -5.34 2,005.88 601.87 1,403.02 10,403.06 0.00
87
Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)
186.80 23.93 2,486.69 17.42 75.00 141.88
199.04 25.54 1,244.02 42.82 800.00 220.45
357.21 49.41 1,299.24 75.72 1,375.00 256.94
302.25 42.39 1,373.86 73.67 1,100.00 335.61
368.25 53.34 2,832.71 49.53 650.00 202.65
Ratios calculations Sl.no 1 2 3 4 5 6 7 8 9 10 Ratio Net working capital Current ratio Quick ratio Inventory turnover ratio Debt equity ratio Interest coverage ratio Gross profit margin Net profit ratio Cost of goods sold ratio Operating profit ratio Formula CA-CL CA/CL CA-(stock+prepaid exp)/CL COGS/avg INV
Long trm DBT/ Sh holders eq
11 Return on equity 12 Return on assets Return on capital 13 employed 14 EPS 15 16 17 18 19 20 21 22 23 DPS P/E Price to book value ratio Book value per share Dividend payout ratio Earning yield Dividend yield Total asset turnover ratio Capital turnover ratio
EBIT/INTERST Gross profit / sales EAT/ Net sales COGS/ net sales*100 EBIT/ Net sales Net profit/ share holders equity Net profit/total assets EBIT/ Total capital Net profit available eq sh/ NO shares Div paid to ord sh / No of shares MPS/EPS MPS/BPS Net worth/ no of shares DPS/EPS*100 EPS/MPS *100 DPS/MPS*100 COGS/total asst COGS/capital employed
2007 2,507.21 1.26 0.93 5.24 0.36 7.52 10.61 7.74 89.11 11.52 24.44 22.11 54.98 49.53 13 32.69 7.99 202.65 26.25 3.06 0.80 2.00 2.74
Year 2006 2005 2,547.72 3,144.77 1.36 1.54 1.03 1.12 6.06 5.30 0.31 0.55 5.03 4.43 7.91 7 6.69 7.33 90.61 92.94 8.63 7.66 21.95 21.88 44.08 73.67 22 33.02 7.25 335.61 29.86 3.03 0.90 2.20 2.90 29.47 24.18 37.61 75.72 27.5 13.14 3.87 256.94 36.32 7.61 2.76 2.34 3.67
88
1. Net working capital: Sl.n o Ratio
Year Formula 2007 2006 2005 2,507. 2,547. 3,144. 1 Net working capital CA-CL 21 72 77 Here we can see that the L&T company has maintained a constant NWC which is a good sign it implies that the company is able to good liquidity to its creators
2. Current ratio Sl.no Ratio 2 Current ratio Formula CA/CL 2007 1.26 Year 2006 1.36 2005 1.54
The short term creditors prefer high current ratio since it reduces their risk. As a share holder one should prefer low current ratio so that the company may use its current assets for expansion purpose. Here we can see that the companys current ratio has reduced over a period of time so we can say that the companies using its current assets for expansion purpose. 3. Quick ratio Year Sl.no Ratio Formula 2007 2006 3 Quick ratio CA-(stock+prepaid exp)/CL 0.93 1.03 Measures assets that are quickly converted into cash and they are compared with current liabilities. This ratio realizes that some of current assets are not easily convertible to cash e.g. inventories. In the ratio above we can see that the companys quick ratio reduced over a period of time. 4. Inventory turn over ratio. Year Sl.no Ratio Formula 2007 2006 4 Inventory turnover ratio COGS/avg INV 5.24 6.06 This ratio measures the stock in relation to turnover in order to determine how often the stock turns over in the business. This ratio should be higher because it indicates that the company is efficiently converting its inventory into sales. 2007: 12/5.24 = 2.29 times 2006: 12/6.06 = 1.98 times 2005 5.30 2005 1.12
89
2005: 12/5.30 = 2.26 times 5. Debt equity ratio. Year Sl.no Ratio Formula 2007 2006 5 Debt equity ratio long trm DBT/ Sh holders eq 0.36 0.31 The debt to equity ratio shows that for every 1 rupee of shareholders funds in 2007 there was 0.36 rupee of debt. This compares to 0.55 rupee in 2005. 6. Interest coverage ratio. Year Sl.no Ratio Formula 2007 2006 6 Interest coverage ratio EBIT/INTERST 7.52 5.03 This ratio, as the name suggests indicates the extent to which a fall in EBIT is tolerable in that the ability of the firm to service its interest payments would not be adversely affected. Here the companys Interest coverage ratio has increased which is dangerous sign. 7. Gross profit margin Year Sl.no Ratio Formula 2007 2006 7 Gross profit margin Gross profit / sales 10.61 7.91 The ratio above shows the increasing trend in the gross profit since the ratio has improved from 7% in 2005 to 10.61% on 2007. This indicates that the rate in increase in cost of goods sold are less than rate of increase in sales, hence the increased efficiency. 2005 7 2005 4.43 2005 0.55
8. Net profit margin Sl.no Ratio Formula 2007 8 Net profit ratio EAT/ Net sales 7.74 The net margin ratio shows that the margin is fairly stable over time with slight Year 2006 6.69 2005 7.33
improvement to 7.74% in 2007. However, to know how well the firm is performing one has to compare this ratio with the industry average or a firm dealing in a similar business
90
9. Cost of goods sold Sl.n o Ratio Cost of goods sold Formula 2007 Year 2006 2005 92.94
9 ratio COGS/ net sales*100 89.11 90.61 The cost of goods sold ratio shows what percentage share of sales is consumed by cost of goods sold and conversely what proportion is available for meeting expenses such as selling and general distribution expenses as well as financial expenses consisting of taxes interest and dividend and so on. 10 Operating profit ratio Sl.no Ratio Formula 2007 10 Operating profit ratio EBIT/ Net sales 11.52 Here operating profit ratio has increased over a period of time which shows firms ability to withstand adverse economic conditions when selling price is declining.
Year 2006 8.63
2005 7.66
11. Return on equity Sl.no Ratio Formula 2007 11 Return on equity Net profit/ share holders equity 24.44 Here the profitability to ordinary shareholders is bit weaker and showing an downward trend. Year 2006 21.95 2005 29.47
12. Return on assets Year Sl.n o Ratio 12 Return on assets Formula Net profit/total assets 2007 22.11 2006 21.88 20 05 24.
91
18 This ratio gives you an idea on the company's management effectiveness in utilizing its assets to make a profit for its shareholders 13. Return on capital employed Sl.n o Ratio Return on capital Formula 2007 Year 2006 2005 37.61
13 employed EBIT/ Total capital 54.98 44.08 This ratio shows how efficiently the long term funds of owners and lenders are being used. 14. Earnings Per Share Sl.no Ratio Formula Net profit available eq sh/ NO 2007 Year 2006
2005 75.72
14 EPS shares 49.53 73.67 Whatever income remains in the business after all prior claims, other than owners claims (i.e. ordinary dividends) have been paid, will belong to the ordinary shareholders who can then make a decision as to how much of this income they wish to remove from the business in the form of a dividend, and how much they wish to retain in the business. The shareholders are particularly interested in knowing how much has been earned during the financial year on each of the shares held by them. For this reason, an earning per share figure must be calculated.
15. Dividend per Share Year Sl.no Ratio Formula 2007 2006 15 DPS Div paid to ord sh / No of shares 13 22 This indicates the dividend paid for each share. Shareholders would, naturally like to receive the maximum possible dividends from a company, consistent with its profits and need for retained earnings. But the companys DPS has reduced drastically in L&T Companys case.
92
2005 27.5
16. PE ratio Sl.n o 16 P/E Ratio MPS/EPS Formula 2007 32.69 Year 2006 33.02 2005 13.14
The P/E ratio reflects the price currently being paid by the market for each rupee of currently reported EPS. High P/E generally reflects lower risk and/or higher growth prospects for earnings. The above ratio shows that the shares were traded at a much higher premium in 2007 than were in 2005. In 2005 the price was 13.14 times higher than earnings while in 2007, the price is 32.69 times higher. 17. Price to book value Year Sl.no Ratio Formula 2007 2006 2005 17 Price to book value ratio MPS/BPS 7.99 7.25 3.87 It measures the relationship between the market price of an equity share with book value per share. The P/B ratio is significant in predicting future stock return. Firms with low P/B ratio had consistently higher returns compared to the firms with high P/B ratio. 18. Book value per share Year Sl.no Ratio Formula 2007 2006 18 Book value per share Networth/ no of shares 202.65 335.61 This ratio indicates the net asset value of a companys share. A high book value indicates that the company has strong reserves, indicating scope for bonus shares, of course subject to necessary guidelines of the SEBI. 19. Dividend payout ratio Sl.n o Ratio 19 Dividend payout ratio Formula DPS/EPS*100 2007 26.25 Year 2006 29.86 2005 36.32 2005 256.94
93
This ratio looks at the dividend payment in relation to net income and can be calculated 20. Earning yield Year Sl.no Ratio Formula 2007 2006 20 Earning yield EPS/MPS *100 3.06 3.03 This ratio highlights as a percentage a companys earnings vis-a-vis the current market value of its share. For blue chip companies this ratio tends to be around 5 per cent to 6 per cent. 21. Dividend yield Sl.no Ratio 21 Dividend yield Formula DPS/MPS*100 2007 0.80 Year 2006 0.90 2005 2.76 2005 7.61
Notice here there is a decrease in the yield from 2005 to 2007. The main reason for this is that the dividend per share decreased while at the same time, the price of a share increased. 22. Total asset turnover ratio Year Sl.no Ratio Formula 2007 2006 22 Total asset turnover ratio COGS/total asst 2.00 2.20 Total asset turnover ratio measures the efficiency of a firm in managing and utilizing its assets. The higher ratio indicates the more efficient management. 23. Capital turn over ratio Year Sl.no Ratio Formula 2007 2006 23 Capital turnover ratio COGS/capital employed 2.74 2.90 Capital turnover ratio measures the efficiency of a firm in managing and utilizing its capital. The higher ratio indicates the more efficient management. 2005 3.67 2005 2.34
94
Value anchor of the L&T Company is in the next page.
95
Period & months 2008/03 2009/03 L&T Company income statement INCOME Period & months 2007/03 2006/03 2005/03 Net Operating Income 20521.39 23866.29 INCOME EXPENSES Net Operating Income 17,645.29 13,189.71 Material Consumption 5826.54 14,776.95 6529.54 Manufacturing Expenses 9112.49 10701.82 EXPENSES Personnel Expenses 1468.49 1713.91 Material Consumption 5,199.22 4,614.02 5,125.14 Selling Expenses 232.85 269.96 Manufacturing Expenses 7,759.20 6,869.20 5,260.55 Administrative Expenses 1347.46 1515.59 Personel Expenses 1,258.21 890.03 -6.97 764.51 Capitalized Expenses -4.80 Selling Expenses 200.84 156.74 Cost of Sales 17,983.04 20,723.86 170.18 Reported PBDIT 2,538.35 3,142.43 861.27 Administrative Expenses 1,197.99 972.22 Other Recurring Income 493.93 532.02 -3.15 Capitalised Expenses -3.3 -1.89 Adjusted PBDIT 3,032.28 3,674.45 Cost of Sales 15,612.16 13,500.32 12,178.50 Depreciation 187.86 220.40 Reported PBDIT 2,033.13 1,276.63 1,011.21 Adjusted PBIT 2,844.42 3,454.06 Other Recuring Income 458.56 339.48 Finanical Expenses 347.89 365.13 230.91 Adjusted PBDIT 2,491.69 1,616.11 1,242.12 Adjusted PBT 2,496.53 3,088.93 Tax Charges 725.76 875.15 87.52 Depreciation 160.13 107.12 Adjusted PAT 1,770.77 2,213.78 Adjusted PBIT 2,331.56 1,508.99 1,154.60 Non-recurring Items 0.59 0.28 Finanical Expenses 331.46 321.34 280.51 Other Non-cash 5.52 -5.70 Adjusted PBT 2,000.10 1,187.65 874.09 Adjustments Tax Charges PAT 601.87 366.12 REPORTED 1,776.88 2,208.36 302.29 Adjusted PAT 1,398.23 821.53 39.37 571.80 no. of shares 33.40 earnings per share 53.20 Non-recurring Items 1.24 188.04 56.09 404.03 Other Non-cash Adjustments -5.34 -1.85 8.02 REPORTED PAT no. of shares earnings per share Retained Earnings Dividend/Share total dividend Retention ratio Reserves & Surplus ROE market price PE ratio 1,394.13 28.33 49.21 1,028.24 13.00 368.29 0.74 5,683.85 23.36 1,619.15 32.90 1,007.72 13.74 73.34 718.70 22.00 302.28 0.71 4,583.32 21.35 2,432.70 33.17 983.85 12.99 75.74 628.62 27.50 357.225 0.64 3,312.25 28.58 999.5 13.20
2010/03 2004/03 27756.39 9,645.32 7317.37 12568.34 2000.36 3,296.47 312.99 4,078.83 1704.69 678.08 -10.13 111.16 23,893.61 3,862.77 748.51 573.05 -0.74 4,435.82 8,912.31 258.56 733.01 4,177.26 340.67 383.22 1,073.68 3,794.03 1055.28 84.53 2,738.75 989.15 0.13 273.15 5.89 716.00 236.08 2,744.78 479.92 46.42 59.13 50.48 4.53 534.93 12.44 43.00 360.95 80.00 995.2 0.67 2,717.55 18.82 574.35 13.36
CAGR 2003/03 1.16 9,412.99 1.12 1.17 1.17 3,002.07 1.16 3,458.71 1.12 668.4 1.45 609.39 749.13 1.08 -1.98 8,485.72 1.17 927.27 388.13 1.05 1,315.40 1.21 304.57 1,010.83 0.48 388.13 -1.03 622.70 77.1 545.60 1.18 26.91 4.35 576.86 24.87 23.20 252.78 7.50 186.525 0.44 3,279.53 16.35 184.55 7.96
96
risk free rate Dividend payout ratio required rate of rate expected growth rate in dividend p/e ratio AVG PE ratio weighted pe ratio 69.69 17 15.92 64.26 23.16 43.71 8
beta 1
EMRP 9
The following table shows the expected market prices of L&T Company.
year
value anchor
2008 2325.33
2009 2451.38
2010 2584.41
The following is the L&T company management review

The following lines explain the chairmans speech of L&T Company it tells about the companys strategy of future expansion and development strategy. Performance overview: India is one of the fastest growing economies globally with GDP growing at 9.4% last year. High capacity utilisation across various sectors is fuelling an up trend in capital expenditure. The scale of investment in infrastructure envisaged in the 11th Five Year Plan (2007-2012) will call for greater engagement by the private sector and international institutions. All these are lead indicators for growth. The conducive business environment coupled with a slew of measures taken by the Company for improvement of operational efficiency, institutionalization of a risk management framework and more judicious selection of projects, have yielded significant benefits. In Financial Year 2006-2007, the Company's order inflows & sales have grown by 37% and 19% respectively. The Company bagged its largest ever order in domestic & international markets such as expansion & modernisation of Delhi International Airport and an offshore platform project in Qatar. The order book
97
as on March 31, 2007 stood at Rs. 369 Bn including Rs. 61 Bn from international business. The Company has achieved improvement in margins in all its business segments for the second year. The Subsidiary and Associate Companies have also performed well. During the year, the Company issued bonus shares in the ratio of 1:1 and recommended/paid dividend of-Rs. 13 per share on a face value of Rs. 2 per share. The market capitalization of the Company has increased further from Rs. 334 Bn to Rs. 456 Bn during the year and has outperformed the Sensex. Investing for profitable growth: Investments are the oxygen of growth. Within the larger context of the country's increasing investments in building a brighter future, the Company is also investing in multiple spheres - people, technology, capacity expansion both domestically & internationally and brand building. This is essential for sustaining the growth momentum and continuous value creation. People - Talent management: Talent acquisition and retention is one of the key result areas for our senior managers. On an on-going basis, the Company renews, rejuvenates and adds Human Resource Management & Development systems, processes and practices to its repertoire and periodically does compensation benchmarking so as to ensure a vibrant and motivated workforce. The Company is constantly honing people management leadership skills of the employees and is increasingly investing in training centers across India. Innovative human resource initiatives like 'Campus to Corporate', launch of an e-learning portal - 'Any Time Learning', buddy referrals for talent acquisition, have been launched. As a result, the Company has been able to substantially increase its human resource. Technology - Building on core engineering strength: Given our commitment to becoming a knowledge-based premium
conglomerate, investments in technology across all businesses continue to remain at the forefront of the Company's business strategy. The Company has set up
98
Engineering design centers at Mumbai, Baroda, Chennai, Bangalore, and Delhi as well as in the Middle East. In line with our objective of emerging as a player with end-to-end capabilities in the power sector, the Company has signed an agreement with Mitsubishi Heavy Industries Limited, Japan for super critical boiler technology and is close to achieving a similar tie-up in the field of turbines. International Business - Strengthening presence beyond India: The Company continues to forge alliances and to invest in international business for enhancing capabilities and achieving its vision of becoming an Indian multinational with focus in the Middle East and China. Joint ventures have been set up in Kuwait and Saudi Arabia for electromechanical construction in oil & gas, power and infrastructure sectors. The Modular Fabrication yard being set up at Sohar, Oman will strengthen the Company's presence in the Gulf region. The Company is receiving encouraging response from clients for project execution and Design & Engineering services. The Company has set up manufacturing facilities in China for high- end switchgear & rubber processing machinery and a factory is also being built for industrial valves. These initiatives will accelerate the Company's thrust towards its `Lakshya' target of achieving 25% revenues from international business. Capacity Expansion: The Company is expanding capacity internationally and within India. Substantial capacity augmentation at Hazira will help us address the growing demand in oil & gas industry. The Electrical & Electronics division is expanding its capacity at Mysore, Ahmednagar and Mahape to take care of rapid growth in the sector. The Company crossed a major milestone with the inauguration of the first two units at its 300-acre campus in Coimbatore. The facilities for the manufacture of industrial valves and switchboards are already accomplished. The campus will progressively see the establishment of manufacturing facilities for advanced tooling and high precision components in aerospace, nuclear power, defence sectors etc. The Company is building a state of the art Heavy Lift-cum-Pipelay vessel in partnership with SapuraCrest Petroleum Berhad, Malaysia that will give offshore installation capability and achieve significant competitiveness. All the divisions of the Company have
99
planned increased investments in acquisition and installation of new equipment and manufacturing facilities. Looking Ahead: As we move on, the Company is well positioned to exploit the opportunities that will emerge from hydrocarbon, infrastructure, power, minerals & metals and other industrial sectors. The Public Private Partnership model is going to be the way forward for infrastructure projects in the country. L&T Infrastructure Development Projects Limited has already consolidated its position with some completed projects and several under implementation across various sectors. With its capabilities augmented through the recent tie-up for manufacture of super critical boilers and the proposed collaboration for turbines, the Company will be in a position to set up complete power projects. L&T Infrastructure Finance Company Limited has initiated funding in the infrastructure segment. The Company has commenced building ships at its Hazira Works. We are also scouting for a suitable site in India to set up a world-class facility for shipbuilding and repair, comparable to the best worldwide. The defence, nuclear power and aerospace sectors show potential and promise. The Raksha Udyog Ratna (RUR) status, when granted to the Company, will facilitate increased business in Defence sector. Leveraging its proven capabilities in construction and electrification for the railways, the Company envisages expanding its presence in this sector. Given the healthy order book position and the opportunities available, the Company believes that it will be able to achieve sustained growth. I am happy to share that the Company was ranked number 1 in two critical attributes 'Quality' and 'Reputation' over a host of other corporates, in The Wall Street Journal Asia's nationwide survey of Indian companies. To conclude, I wish to place on record my appreciation for the outstanding commitment and smart work of all our employees. I am also grateful for the continuing support of my colleagues, our customers, business associates, shareholders and members of the Board. It is this collective effort and support of each member of
100
L&T Group's extended family that instills confidence in our ability for building on the profitable growth momentum into the future.
Finding and suggestion:

1. The following table shows the expected market of the BHEL stock for the period of 3 years i.e 2008 to 2009
EXPECTED MARKET PRICE OF BHEL year particulars 2008 FUNDAMENTAL ANALISIS 2170.85 TECHNICAL ANALYSIS current market price(31-03-08)
2009 2756.37
2010 3491.62
2500
2,061.35
3750
101
Analysis:
At present the company share price is very attractive and fundamentally undervalued Because the intrinsic value of the share is 2170.85 and current market price is 2061.35 So one can have buy view on this stock from long term point of view.
Suggestion:
Buy for long term point of view.
2. The following table shows the expected market of the L&T stock for the period of 3 years i.e 2008 to 2009
EXPECTED MARKET PRICE OF L&T year Particulars 2008 FUNDAMENTAL ANALISIS 2325.33 TECHNICAL ANALYSIS Current market price
2009 2451.38
2010 2584.41 5800
4450
3,024.80
Analysis:
102
Above table shows the company script is mainly technical driven there is less scope for fundamental analysis. Companys intrinsic value is Rs. 2325.33 but the current market price is Rs. 3024.8. By this we can say that the company is overvalued according to fundamental analysis. But when we analyze by technically the stock is having good support and resistance so we can say that the stock moves upto 4450 in short run and in long term the stock is predicted to go around 5800. Suggestion: If investor at present holding this stock should wait for some time to get good return in short term the stock may go for Rs. 4450 and in the long run the stock may go to Rs. 5800.
Suggestion:
support.
Hold
for time being and sell when stock breaks its previous
Conclusion
Engineering is a diverse industry with a number of segments. A company from this sector can be a power equipment manufacturer (like transformers and boilers), execution specialist or a niche player (like providing environment friendly solutions). It can be an electrical, non-electrical machinery and static equipment manufacturer too
The economy has been growing at an average growth rate of 8.8 per cent in the last four fiscal years (2003-04 to 2006-07), with the 2006-07 growth rate of 9.6 per cent being the highest in the last 18 years. Significantly, the industrial and service sectors have been contributing a major part of this growth, suggesting the structural transformation underway in the Indian economy. Technical and fundamental analysis is the strong theory accepted world wide some investor strongly believes on fundamentals of company and some believe
103
technical plays very important role in investing. But it is mainly depends on demand and supply for the stocks in the stock market. An effort is made to make understand the reader of this project what is fundamental analysis and what is technical analysis. By this project report one can strive to calculate intrinsic value of the shares and understanding what graphs are showing about the script.
Bibliography 1. Kotak securities.com 2. equitymaster.com 3. icicidirect.com 4. nseindia.com 5. bseindia.com 6. bhel.com 7. larsentabro.com Reference Books o Security Analysis and Portfolio Management. Prasanna Chandra o Financial management. Khan and jain
104
Software used
Ms-Office 2003
Microsoft Excel Microsoft Word M S power point Paint
105

F&T

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

F&T

Uploaded by

Copyright:

Available Formats

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

Findings and suggestion:

FUNDAMENTAL AND TECHNICAL ANALYSIS

2010 2584.41 5800

INDIAN STOCK MARKET

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FII in Indian stock market

FUNDAMENTAL AND TECHNICAL ANALYSIS

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

9682.52 8272.9 2668.9 44000.03 41416.45 67432.34 94327.87

What does India Need - FDI or FII

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

INTRODUCTION TO THE TOPIC

Industry wide factors: these include factors which are specific to

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

The chart below is an example of a bar chart for AT&T (T):

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

Objective of the study

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

6. The relative strength index (RSI) 7. Value anchor.

FUNDAMENTAL AND TECHNICAL ANALYSIS

Exponential Moving Average (EMA)

EMA (current) = ((price (current)-EMA (prev)) x multiplier+ EMA(prev)

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

BHEL Company Charts

Short term moving averages of BHEL Company.

FUNDAMENTAL AND TECHNICAL ANALYSIS

Short term Moving averages of BHEL

adjested 10 days ema 40 days ema

2. Long-term moving averages of BHEL Company.

Interpretation for short term moving averages:

FUNDAMENTAL AND TECHNICAL ANALYSIS

Interpretation for long term moving averages:

Target price for BHEL according to Technical charts:

FUNDAMENTAL AND TECHNICAL ANALYSIS

Target prices for BHEL

FUNDAMENTAL AND TECHNICAL ANALYSIS

3. 14 days RSI OF BHEL COMPANY

FUNDAMENTAL AND TECHNICAL ANALYSIS

FUNDAMENTAL AND TECHNICAL ANALYSIS

L&T company Charts