Professional Documents
Culture Documents
Fundamental Analysis
Intrinsic value depends on the performance of the Economy,Industry and the company Intrinsic Value: What should be the price given the fundamentals
Technical Analysis
Every stock price moves in a particular patterns and the pattern repeats itself Fundamentals of the company have no bearing on the stock prices Head and Shoulders Pattern
Economy Analysis
Analysis of macro economic variables Inter related parameters Also dependent on demographic factors like population,urbanization
Growth rate
Change in GDP Sectoral growth rates: 1)Agriculture 2)Industrial 3)Services
Interest rates
Bank rate PLR(Prime Lending rate) Call market rate High Interest rates depresses companys profitability
Forex reserves
Foreign exchange reserves indicate how rapidly the government will have to correct the deficit Forex Reserves: a)FDI b)FII c)Exports
Other Indicators
Demographic data Monsoon Infrastructure facilities-Communication, transportation, power etc
Economic Forecasting
Economic Indicators: 1)Leading-Fiscal policy, rainfall, monetary policy, indices, capital investment 2)Coincidental-GNP,Interest rates 3)Lagging-unemployment rate Econometric model building
Industry Analysis
A group of firms that have similar technological structure of production and produce similar products Classification based on: i) Business Cycle ii) Industry Life Cycle
Business Cycle
Classified based on the over all growth of the specific industry 1. Growth industries 2. Cyclical industries 3. Defensive industries 4. Cyclical-Growth industries
Growth Industry
Abnormal high rate of earnings and growth but consistent Independent of Business Cycle Are born as a result of some technological revolution Examples: Telecom , Biotech, IT
Cyclical Industries
Move along with the business cycle Gain more profit in the boom period and most likely to suffer at times of recession Examples: FMCG, consumer durables, steel, cement
Defensive Industries
Defy the Business Cycle These industries do extremely well irrespective of the economy Examples: Utilities, Housing and food items
Cyclical-Growth Industries
At good times, they perform better than the normal business cycle but at bad times, suffer more than normal Examples: Airlines, Automobiles
Stage 1:Pioneering
The product is launched for the first time Very high growth rate Competition based on differentiation High mortality rate No permanent positioning STRATEGY: common investor normally avoids these industries
Stage 2:Expansion
Very few survivors Sales grow at a very fast rate Moderate growth rates Price based competition Many strategic alliances STRATEGY: An ideal investment
Stage 4:Decline
Low or negative growth of sales Obsolete technology Change in consumer preferences Shift in social norms
Industry Factors
Past sales and earnings performance Cost structure and profitability Permanence Government policy Labor conditions Competitive conditions R&D and pollution standards