Equity Analysis At Ventura Securities 721j4m

A Summer Internship Project Report on

EQUITY ANALYSIS IN INDIAN STOCK MARKET AT VENTURA SECURITIES, PATNA Submitted in partial fulfilment of the requirement for the degree of Master of Business istration (d to Central University of Jharkhand) By

MANISH KUMAR Roll No. CUJ/I/2013/IMBA/038

A study conducted for

VENTURA SECURITIES, PATNA At

CENTRAL UNIVERSITY OF JHARKHAND, RANCHI 2013-2018

0

CERTIFICATE

This is to certify that Mr. MANISH KUMAR, student of Central University of Jharkhand has completed his project report on “EQUITY ANALYSIS IN INDIAN STOCK MARKET AT VENTURA SECURITIES, PATNA ” in fulfilment of Integrated Masters of Business istration. He has successfully completed the project under my constant guidance and . The summer training has been completed in total duration of 4 weeks (23rd May to 18th June 2016). This has not been submitted elsewhere for the award of any degree

Mr. MUKESH KUMAR Sr. MARKETING MANAGER VENTURA SECURITIES , PATNA

DECLARATION

I hereby declare that the work incorporated in this report entitled “A study on Equity analysis at Ventura securities,Patna” is the outcome of original study undertaken by me Carried out under the Business istration Department Central University Of Jharkhand.

I further declare that the matter in this report has not been submitted by me as a whole or in part at any other University or Institution for the award of any Degree or Diploma.

Date-----------------------------Place- CUJ, Ranchi Manish kumar Integrate d MBA CUJ/I/2013/ IMBA/038 Centre for Business istration

ACKNOWLEDGEMENT

Accomplishment of a task with desired success calls for dedication towards work and prompting guidance, co-operation and deliberation from seniors. At the outset, I would like to Thanks Mr. J.P Verma and Mr. Vijay kumar sharma, Assistant Professor, Central University of Jharkhand for his and professional approach in guiding me through the careful details of the project. I am very grateful to my company guides, Mr. Mukesh kumar and Mr. Abhishek kumar who not only helped me on this topic but also helped me to understand the nuances of capital market. In spite of having a very busy schedule, they made sure in every way that we acquire the best possible exposure and knowledge during our project. I would be failing in my duty if I do no express my deep sense of gratitude to Sri A.K Sarkar H.O.D. and all the faculty for their valuable advice and guidance in this project. I am also thankful to our Branch head, Mr Afroz Sir.

TABLE OF CONTENTS CHAPT ER

1

TITLE Executive Summary

Pg. No. 5

About Ventura Securities

6-7

Introduction

8-11

1.1 Research Objective 1.2 Purpose of the Study 1.3 Scope of study 1.4 Types of Research 1.5 Sources of Data collection 1.6 Limitation 2

Research Methodology

12-27

2.1 Introduction 2.2 Fundamental Analysis 2.2.1 Economic Analysis 2.2.2 Industrial Analysis 2.2.3 Company Analysis 2.2.4 Financial Analysis 2.3 Technical Analysis 3

Data Analysis and Interpretations

28-50

4

Findings, suggestions and conclusion

51-53

5

Bibliography

54

EXECUTIVE SUMMARY The automobile industry, one of the core sectors, has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization. The sector seems to be optimistic of posting strong sales in the couple of year in the view of a reasonable surge in demand. The Indian automobile market is gearing towards international standards to meet the needs of the global automobile giants and become a global hub.

A detailed analysis of automobile industry has been covered in respect of past growth and performance. Under this project to better understand the industry I have used fundamental tools to make it more authentic and meaningful. An economy-industry-company (EIC) approach has been followed under Fundamental Analysis which covers effect of Recession, the impact of inflation, FDI’s, Export, and GDP etc. on Automobile Industry. The Industry Analysis has been done with the help of SWOT analysis and industry life cycle. For company analysis as a part of fundamental tool we have undergone with the comparative analysis of TATA motors the leading company, Maruti Suzuki India’s largest car manufacturing and Mahindra and Mahindra along with help of ratio analysis. The fundamental aspect consist of financial and non-financial analysis of these companies. At the end conclusion and recommendations have been specified so as to make the project work more meaningful and purposeful. India is 13th largest commercial vehicle market in the world. The last five years industry has grown CAGR of 14%. Commercial vehicle’s Industry’s share in Indian automobile is 5.05% in the year 2011-12. The Industry which grew at a rate of above 25% over 2005-10 has grown by just 5% in FY12 so the economic fluctuation affect greatly to Indian commercial vehicle Industry. Ability to enhance and vary product mix, Sales and distribution service network, Access to new technologies are the key success factor of Indian commercial vehicle Industry. An Indian railway is the only one competitor of Indian commercial vehicle Industry but because of several advantage commercial vehicle Industry ruled over the Indian railway. In near future we are not seeing any substitute of commercial vehicle Industry. Indian commercial vehicle Industry use sales promotional tool as marketing tool most and for ment the print media is preferred by the most of the Indian players. Here we got chance to understand the fundamentals of Indian commercial vehicles industry and also identifies the position of the industry, that how they had built its image in the market.

Company profile of “VENTURA SECURITIES” Our Mission “To build true relationships and strive towards customer delight, through constant innovation on a strong foundation of dedicated and trained resources.” Incorporate in 1994, Ventura Securities Ltd is Mumbai, India based popular stock broker. Ventura also provides wide range

of investment products and services though it's over 25 branches and over 500 business partners (sub brokers) located across 300 cities in India. Ventura is a full service broker providing advisory services to Institutions (Foreign and Domestic), High Net Worth and Retail Investors with its core area of operations being stockbroking. Ventura has considerable strength and domain knowledge in the booming derivatives market in India. Financial services offered by Ventura include trading in Equity, Derivatives, Commodity, Currency Futures, investments in Mutual Funds, Insurance, Deposits and Depository Services. Ventura provides commodity trading services through Ventura Commodities Pvt. Ltd, an associate company which is trading member of MCX and NCDEX. Ventura is a depository participant (DP) of National Securities Depository Limited (NSDL). Ventura offers 2in1 which include an online trading and a demat . Trade In: BSE and NSE Products and Services of Ventura o

Equity The Indian Equity Market is more popularly known as the Indian Stock Market. The Indian equity market has become the third biggest after China and Hong Kong in the Asian region. According to the latest report by ADB, it has a market capitalization of nearly $600 billion. As of March 2009, the market capitalization was around $598.3 billion (Rs.30.13 lakh crore) which is one-tenth of the combined valuation of the Asia region. The market was slow since early 2007 and continued till the first quarter of 2009. A stock exchange has been defined by the Securities Contract (Regulation) Act, 1956 as and organization, association or body of individuals established for regulating, and controlling of securities.

o

Commodity Indian markets have recently thrown open a new avenue for retail investors and traders to participate: commodity derivatives. For those who want to diversify their portfolios beyond shares, bonds and real estate, commodities is the best option. Till some months ago, this wouldn’t have made sense. For retail investors could have done very little to actually invest in commodities such as gold and silver — or oilseeds in the futures market. This was nearly impossible in commodities except for gold and silver as there was practically no retail avenue for punting in commodities.

o

Currency Futures Currency futures are contracts to exchange a certain amount of a particular currency at a specific exchange rate on a specified date. It is exactly like a futures contract on Nifty. Here the underlying commodity is a currency exchange rate, such as an Indian Rupee to US Dollar exchange rate. Up to now currency swap and currency options were not traded on recognized stock exchanges

o

DERIVATIVES The introduction of risk management instruments in India gained momentum in the last few years due to liberalization process and Reserve Bank of India’s (RBI) efforts in creating currency forward market. Derivatives are an integral part of liberalization process to manage risk. NSE gauging the market requirements initiated the process of setting up derivative markets in India.

Directors: Sajid Malik: Co-promoter of Ventura and Director A chartered ant by qualification, Sajid Malik is also the Promoter and Managing Director of Genesys International, a company with focus on GIS mapping and engineering deg services, listed on the NSE and BSE. Hemant Majethia Co-promoter of Ventura, CEO and Director With over 2 decades of experience in capital market intermediation and equity research Hemant Majethia is well connected and respected in market circles for his technocratic approach to stock broking. He is a chartered ant by qualification and has been instrumental in the development of the online platform "POINTER". Juzer Gabajiwala Director A member of the Institute of Chartered ants of India and The Institute of Company Secretaries of India, heads the HR and operations functions at Ventura. He initiated the launch of the alternate products platforms for mutual fund distribution and insurance. He also spearheaded the wealth management and NRI cell. Prior to ing Ventura, has been associated with the IIT group and the TATA group

CHAPTER. 1 INTRODUCTION

INTRODUCTION India is a developing country. Nowadays many people are interested to invest in financial markets especially on equities to get high returns, and to save tax in honest way. Equities are playing a major role in contribution of capital to the business from the beginning. Since the introduction of shares concept, large numbers of investors are showing interest to invest in stock market. In an industry plagued with scepticism and a stock market increasingly difficult to predict and contend with, if one looks hard enough there may still be a genuine aid for the Day Trader and Short Term Investor. The price of a security represents a consensus. It is the price at which one person agrees to buy and another agrees to sell. The price at which an investor is willing to buy or sell depends primarily on his expectations. If he expects the security's price to rise, he will buy it; if the investor expects the price to fall, he will sell it. These simple statements are the cause of a major challenge in forecasting security prices because they refer to human expectations. As we all know first hand, humans expectations are neither easily quantifiable nor predictable. If prices are based on investor expectations, then knowing what a security should sell for (i.e., fundamental analysis) becomes less important than knowing what other investors expect it to sell for. That's not to say that knowing what a security should sell for isn't important--it is. But there is usually a fairly strong consensus of a stock's future earnings that the average investor cannot disprove Fundamental analysis and technical analysis can co-exist in peace and complement each other. Since all the investors in the stock market want to make the maximum profits possible, they just cannot afford to ignore either fundamental or technical analysis. 1.1

RESEARCH OBJECTIVE “A study on Equity analysis in Indian stock market at Ventura Securities, Patna” The objective of this project is to deeply analyse our Indian Automobile Industry for investment purpose by monitoring the growth rate and performance on the basis of historical data. The main objectives of the Project study are:  Detailed analysis of Automobile industry which is geari ng towards international standards  Analyze the impact of qualitative factors on industry’s and company’s prospects  Comparative analysis of three tough competitors TATA Motors, Maruti Suzuki and Mahindra and Mahindra through fundamental analysis.  Suggesting as to which company’s shares would be best for an investor to invest.

1.2

PURPOSE OF THE STUDY

       

1.3

To know how the economic environment has an effect on the investment decisions. To know how the market price of the share are fixed on the basis of various proponents. To study the share price movement of the company To study how the overall industrial circumstances play a crucial role in the specific company. To know about the trend of number of volume traded. To predict or forecast the future price movements. To identify the pattern of fluctuation. To know the financial strength of the company by the ratio analysis.

SCOPE OF THE STUDY     

This project is a learning device for a finance student mastering up Investment analysis in a practical basis. Through this project I would study the various methods of the fundamental and technical analysis. The project would also be an effective tool for the investors who are thinking to invest in automobile industry. The ratio analysis conduct in the research will be useful for those who want to analyse the financial statement of the company. The economic analysis conducted in the research can also be used for the fundamental analysis of other Indian firm. The following sources have been sought for the preparation report.

1.4 TYPE OF RESEARCH Descriptive and analytical research has been undertaken to draw a conclusion as Investment Analysis is a combined study of both Qualitative and Quantitative factors which form the main basis of Analysis. Research design or research methodology is the procedure of collecting, analysing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion. The methodology used in the study for the completion of the project and the fulfilment of the project objectives. The sample of the stocks for the purpose of collecting secondary data has been selected on the basis of Random Sampling. The stocks are chosen in an unbiased manner and each stock is chosen independent of the other stocks chosen. The stocks are chosen from the automobile sector. The sample size for the number of stocks is taken as 3 for fundamental analysis of stocks as fundamental analysis is very exhaustive and requires detailed study. 1.5 SOURCES OF DATA COLLECTION

The entire data used in the report had been collected from the secondary sources; as such there were no need of any data from the primary sources. The following sources have been sought for the preparation report:  Tata Motors annual report, its available financial database for the investors in its official website.  Maruti Suzuki annual report, its available financial database for the investors in its official website.  Mahindra and Mahindra annual report, its available financial database for the investors in its official website.  The data collected for the technical analysis derived from the websites likewww.moneycontrol.com and www.investopaedia.com  The data collected for the economic analysis was mainly derived from the government bodies’ website, such as website of RBI, Ministry of Statistics and Programme Implementation.  Also website of some international bodies has been extensively consulted for the purpose of collecting facts, such as International Automotive Association and Society of Indian Auto Manufacturers (SIAM).  Also, various text books on Security analysis and portfolio management (like Punithavathy Pandian, S. Kevin), Financial Management (M.Y.Khan, Prasanna Chandra and I.M.Pandey) were consulted for the topic. 1.6 LIMITATIONS      

This study has been conducted purely to understand Equity analysis for investors. The study is restricted to three companies based on Fundamental analysis. The study is limited to the companies having equities. Detailed study of the topic was not possible due to limited size of the project. There was a constraint with regard to time allocation for the research study i.e. for a period of 45 days. Suggestions and conclusions are based on the limited data of five years

CHAPTER. 2 RESEARCH METHODOLO GY

1.1INTRODUCTION Equity Analysis is the analysis of critical factors that affect the value of a stock. The intrinsic value of a stock depends on a plethora of factors. Investment Analysis is a combination of fundamental and technical analysis, constituting attributes which have an effect on the investors before he invests on some stock. Investment success is pretty much a matter of careful selection and timing of stock purchases coupled with perfect with matching to an in individual risk tolerance. In order to carryout selection, timing and matching actions an investors must conduct deep security analysis. Investors purchase equity shares with two basic objective:  To make capital profits by selling shares at higher prices.  To earn dividend income. Fundamental analysis examines all the dimensions of risk exposure and the probabilities of return, and merges them with broader economic analysis and greater industry analysis to formulate the valuation of a stock.

Equity Analysis

Fundament al Analysis

Economic Analysis

Industry Analysis

Technichal Analysis

Company analysis

Traditional

Modern

2.2 FUNDAMENTAL ANALYSIS Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. It is the study of economic, industry and

company conditions value of a company’s stock.

in an effort

to determine the

Fundamental analysis typically focuses on key statistics in company’s financial statements to determine if the stock price is correctly valued. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements. The fundamental approach calls upon the investors to make his buy or sell decision on the basis of a detailed analysis of the information about the company, about the industry, and the economy. It is also known as “top-down approach”. This approach attempts to study the economic scenario, industry position and the company expectations and is also known as “economic-industry-company approach (EIC approach)” Thus the EIC approach involves three steps:

1.Economic analysis 2. Industry analysis 3. company analysis

2.2.1 ECONOMIC ANALYSIS The level of economic activity has an impact on investment in many ways. If the economy grows rapidly, the industry can also be expected to show rapid growth and vice versa. When the level of economic activity is low, stock prices are low, and when the level of economic activity is high, stock prices are high reflecting the prosperous outlook for sales and profits of the firms. The analysis of macroeconomic environment is essential to understand the behaviour of the stock prices. The commonly analysed macroeconomic factors are as follows: 

Gross Domestic Product (GDP).

    

Savings and investment. Inflation. Interest rates. Tax structure. Infrastructure facilities.

2.2.2 INDUSTRY ANALYSIS An industry is a group of firms that have similar technological structure of production and produce similar products and Industry analysis is a type of business research that focuses on the status of an industry or an industrial sector (a broad i ndustryclassification, like "manufacturing"). Irrespective of specific economic situations, some industries might be expected to perform better, and share prices in these industries may not decline as much as in other industries. This identification of economic and industry specific factors influencing share prices will help investors to identify the shares that fit individual expectations Industry Life Cycle: The industry life cycle theory is generally attributed to Julius Groden sky. The life cycle of the industry is separated into four well defined stages.

Decline stage Maturity and stabilization stage: Rapid growth stage:

:

Pioneering stage

 Growth of the industry: The historical performance of the industry in of growth and profitability should be analyzed. The past variability in return an d growth in reaction to macroeconomic factors provide an insight into the future.  Nature of competition: Nature of competition is an essential factor that determines the demand for the particular product, its profitability and the price of the

concernedcompany scrips. The companies' ability to withstand the l ocal as well as themultinational competition counts much. If too many firms are present in the organized sector, the competition would be severe. The competition would lead to a decline in the price of the product. The investor before investing in the scrip of a company should analyze the market share of the particular company's product and should compare it with the top five companies. SWOT analysis: SWOT analysis represents the strength, weakness, opportunity and threat for an industry. Every investor should carry out a SWOT analysis for the chosen industry. Take for instance, increase in demand for the industry’s product becomes its strength, presence of numerous players in the market, i.e. competition becomes the threat to a particular company. The progress in R & D in that industry is an opportunity and entry of multinationals in the industry is a threat. In this way the factors are to bear ranged and analysed. 2.2.3 COMPANY ANALYSIS In the company analysis the investor assimilates the several bits of information related to the company and evaluates the present and future values of the stock. The risk and return associated with the purchase of the stock is analyzed to take better investment decisions. The present and future values are affected by a number of factors.  Competitive edge of the company: Major industries in India are composed of hundreds of individual companies. Though the number of companies is large, only few companies control the major market share. The competitiveness of the company can be studied with the help of the following:



Market share: The market share of the annual sales helps to determine a company’s relative competitive position within the industry. If the market share is high, the company would be able to meet the competition successfully. The companies in the market should be compared with like product grou ps otherwise, the results will be misleading.

 Growth of sales The rapid growth in sales would keep the shareholder in a better position than one with stagnant growth rate. Investors generally prefer size and growth in sales because the larger size companies

may be able to with stand the business cycle rather than the company of smaller size.

 Stability of sales If a firm has stable sales revenue, it will have more stable earnings. The fall in the market share indicates the declining trend of company, even if the sales are stable. Hence the stability of sales should be compared with its market share and the competitor’s market share.  Earnings of the company: Sales alone do not increase the earnings but the costs and expenses of the company also influence the earnings. Further, earnings do not always sin crease with increase in sales. The company’s sales might have increased but its earnings per share may decline due to rise in costs. Hence, the investor should not only depend on the sales, but should analyze the earnings of the company. 2.2.4 Financial analysis: The best source of financial information about a company is its own financial statements. This is a primary source of information for evaluating the investment prospects in the particular company’s stock. Financial statement analysis is the study of a company’s financial statement from various viewpoints. The statement gives the historical and current information about the company’s operations. Historical financial statement helps to predict the future and the current infor mation aids toanalyze the present status of the company. The two main statements used in the analysis are Balance sheet and Profit and Loss . It is better for the investor to avoid a company with excessive debt component in its capital structure. From the balance sheet, liquidity position of the company can also be assessed with the information on current assets and current liabilities.  Ratio analysis: Ratio is a relationship between two figures expressed mathematically. Financial ratios provide numerical relationship between two relevant financial data. Financial ratios are calculated from the balance sheet and profit and loss . The relationship can be either expressed as a percent or as a quotient. Ratios summarize the data for easy understanding, comparison and interpretations. Ratios for investment purposes can be classified into profitability ratios, turnover ratios, and leverage ratios. Profitability ratios are the most popular ratios since investors prefer to measure the present profit performance and use this information to forecast the future strength of the company.

a) Return on Assets (ROA) ROA is computed as the product of the net profit margin and the total asset turnover ratios. ROA = (Net Profit/Total income) x (Total income/Total As sets) This ratio indicates the firm's strategic success. Companies can have one of two strategies: cost leadership, or product differentiation. ROA should be rising or keeping pace with the company's competitors if the company is successfully pursuing either of these strategies, but how ROA rises will depend on the company's strategy. ROA should rise with a successful cost leadership strategy because the company’s increasing operating efficiency. An example is an increasing, total asset, turnover ratio as the company expands into new markets, increasing its market share. The company mayachieve leadership by using its assets more efficiently. With a s uccessful productdifferentiation strategy, ROA will rise because of a rising profit margin. b) Return on Investment (ROI) ROI is the return on capital invested in business, i.e., if an investment Rs.1 crore in men, machines, land and material is made to generate Rs.25 lakhs of net profit, then the ROI is 25%. The computation of return on investment is as follows: Return on Investment investments) x 100

(ROI)

=

(Net

profit/Equity

As this ratio reveals how well the resources of a firm are being used, higher the ratio, better are the results. The return on shareholder’s investment should be compared with the return of other similar firms in the same industry. c) Earnings per Share (EPS) This ratio determines what the company is earning for every share. For many investors, earnings are the most important tool. EPS is calculated by dividing the earnings (net profit) by the total number of equity shares. The computation of EPS is as follows: Earnings per outstanding

share

=

Net

profit/Number

of

shares

The EPS is a good measure of profitability and when compared with EPS of similar other companies, it gives a view of the comparative earnings or earnings power of a firm. EPS calculated for a number of years indicates whether or not earning power of the company has increased.

d) Dividend per Share (DPS) The extent of payment of dividend to the shareholders is measured in the form of dividend per share. The dividend per share gives the amount of cash flow from the company to the owners and is calculated as follows: Dividend per share = Total dividend payment / Number of shares outstanding The payment of dividend can have several interpretations to the sha reholder. Thedistribution of dividend could be thought of as the distr ibution of excess profits/abnormal profits by the company. On the other hand, it could also be negatively interpreted as lack of investment opportunities. In all, dividend pay-out gives the extent of inflows to the shareholders from the company. e) Dividend Pay-out Ratio From the profits of each company a cash flow called dividend is distributed among its shareholders. This is the continuous stream of cash flow to the owners of shares, apart from the price differentials (capital gains) in the market. The return to the shareholders, in the form of dividend, out of the company's profit is measured through the pay-out ratio. The payout ratio is computed as follows: Payout Ratio = (Dividend per share / Earnings per share) * 100 The percentage of payout ratio can also be used to compute the percentage of retained earnings. The profits available for distribution are either paid as dividends or retained internally for business growth opportunities. Hence, when dividends are not declared, the entire profit is ploughed back into the business for its future investments. f) Price/Earnings Ratio (P/E) The P/E multiplier or the price earnings ratio relates the current market price of the share to the earnings per share. This is computed as follows: Price/earnings ratio = Current market price / Earnings per share This ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company. Many investors prefer to buy the company's shares at a low P/E ratio since the general interpretation is that the market is undervaluing the share and there will be a correction in the market price sooner or later. A very high P/E ratio on the other hand implies that the company's shares are overvalued and the investor can benefit by selling the shares at this high market price.

g) Debt-to-Equity Ratio Debt-Equity ratio is used to measure the claims of outsiders and the owners against the firm’s assets. Debt-to-equity ratio = Outsiders Funds / Shareholders Funds The debt-equity ratio is calculated to measure the extent to which debt financing has been used in a business. It indicates the proportionate claims of owners and the outsiders against the firm’s assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm. 2.3 Industry profile of stock market 2.3.1 Financial market Finance is the pre-requisite for modern business and financial institutions play a vital role in the economic system. It is through financial markets and institutions that the financial system of an economy works. Financial markets refer to the institutional arrangements for dealing in financial assets and credit instruments of different types such as currency, cheques, bank deposits, bills, bonds, equities, etc. Financial market is a broad term describing any marketplace where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives. They are typically defined by having transparent pricing, basic regulations on trading, costs and fees and market forces determining the prices of securities that trade. Generally, there is no specific place or location to indicate a financial market. Classification of Financial market

Financial maket

Organised market

Capital market

Governmet securities market

long term loan market

Industrial securities market

Primary market

call money market

Unorganise d market

Money market

Money lenders, Indigenuos Bankers

commercial market

Treasury bill market

secondry market

Capital Market The capital market is a market for financial assets which have a long or indefinite maturity. Generally, it deals with long term securities which have a period of above one year. In the widest sense, it consists of a series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities. As a whole, capital market facilitates raising of capital. Capital market consists of primary market and secondary market.  Primary market: Primary market is a market for new issues or new financial claims. Hence it is also called as New Issue Market. It basically deals with those securities which are issued to the public for the first time.  Secondary market: Secondary market is a market where existing securities are traded. In other words, securities which have already ed through new issue market are traded in this market. Generally, such securities are quoted in the stock exchange and it provides a continuous and regular market for buying and selling of securities. This market consists of all stock exchanges recognized by the government of India.

Money Market Money markets are the markets for short-term, highly liquid debt securities. Moneymarket securities are generally very safe investments which r eturn relatively lowinterest rate that is most appropriate for temporary cash storage or short term time needs. It consists of a number of sub-markets which collectively constitute the money market namely call money market, commercial bills market, acceptance market, and Treasury bill market.  Derivatives Market The derivatives market is the financial market for derivatives, financial instrument like futures contracts or options, which are derived from other forms of assets. A derivative is a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The important financial derivatives are the following:  Forwards  Futures  Options  Swaps . Foreign Exchange Market It is a market in which participants are able to buy, sell, exchange and speculate on currencies. Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The forex market is considered to be the largest financial market in the world. It is a worldwide decentralized over-thecounter financial market for the trading of currencies. Because the currency markets are large and liquid, they are believed to be the most efficient financial markets. It is important to realize that the foreign exchange market is not a single exchange, but is constructed of a global network of computers that connects participants from all parts of the world. Commodities Market It is a physical or virtual marketplace for buying, selling and trading raw or primary products. For investors' purposes there are currently about 50 major commoditymarkets worldwide that facilitate investment tr ade in nearly 100 primarycommodities. Commodities are split into two types: hard and soft commodities. Hard commodities are typically natural resources that must be mined or extracted (gold, rubber, oil, etc.), whereas soft commodities are agricultural products or livestock (corn, wheat, coffee, sugar, soybeans, pork, etc.)

2.3.2 Indian Financial Markets India Financial market is one of the oldest in the world and is considered to be the fastest growing and best among all the markets of the emerging economies. The history of Indian capital markets dates back 200 years toward the end of the18th century when India was under the rule of the East India Company. The development of the capital market in India concentrated around Mumbai where no less than 200 to 250 securities brokers were active during the second half of the 19th century. The financial market in India today is more developed than many other sectors becauseit was organized long before with the securities exchanges of Mumbai, Ahmadabad and Kolkata were established as early as the 19th century. By the early 1960s the total number of securities exchanges in India rose to eight, Including Mumbai, Ahmadabad and Kolkata apart from Madras, Kanpur, Delhi, Bangalore and Pune. Today there are 21 regional securities exchanges in India in addition to the centralized NSE (National Stock Exchange) and OTCEI (Over the Counter Exchange of India). FINANCIAL MARKET REGULATIONS Regulations are an absolute necessity in the face of the growing importance of capital markets throughout the world. The development of a market economy is dependent on the development of the capital market. The regulation of a capital market involves theregulation of securities; these rules enable the capital market to function more efficiently and impartially .A well regulated market has the potential to encourage additional investors to partake, and contribute in, furthering the development of the economy. The chief capital market regulatory authority is Securities and Exchange Board of India (SEBI). o

SEBI SEBI is the regulator for the securities market in India. It is the apex body to develop and regulate the stock market in India It was formed officially by the Government of India in 1992 with SEBI Act 1992 being ed by the Indian Parliament. Chaired by C B Bhave, SEBI is headquartered in the popular business district of Bandra Kurla-complex in Mumbai and has Northern, Eastern, Southern and Western regional offices in New Delhi , Kolkata, Chennai and Ahmedabad. In place of Government Control, a statutory and autonomous regulatory board with defined responsibilities, to cover both development & regulation of the market, and independent powers has been set up.

Stock Exchange in India Stock Exchanges are an organized marketplace, either corporation o r mutualorganization, where of the organization gather to trade company stocks or other securities. As per the Securities Contracts Regulation Act, 1956 a stock exchan

ge is anassociation, organization or body of individuals whether inco rporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities. Stock exchanges facilitate for the issue and redemption of securities and other financial instruments including the payment of income and dividends. The record keeping is central but trade is linked to such physical place because modern m arkets arecomputerized. The trade on an exchange is only by and stock broker do have a seat on the exchange. List of Stock Exchanges in India  Bombay Stock exchange A very common name for all traders in the stock market, BSE, stands for Bombay Stock Exchange. It is the oldest market not only in the country, but also in Asia. In the early days, BSE was known as "The Native Share & Stock Brokers Association. "It was established in the year 1875 and became the first stock exchange in the country to be recognized by the government. In 1956, BSE obtained a permanent recognition from the Government of India under the Securities Contracts (Regulation) Act, 1956.In the past and even now, it plays a pivotal role in the development of the country's capital market. This is recognized worldwide and its index, SENSEX, is also tracked worldwide. Earlier it was an Association of Persons (AOP), but now it is ademutualised and corporatised entity incorporated under the pro visions of theCompanies Act, 1956, pursuant to the BSE (Corporatisation and Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).  National Stock Exchange of India Limited The National Stock Exchange of India Limited has genesis in the report of the HighPowered Study Group on Establishment of New Stock Exchange s, whichrecommended promotion of a National Stock Exchange by financial institutions (FI’s)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 tax- paying company unlike other stock Exchange 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.

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NSE GROUP National Securities Clearing Corporation Ltd. (NSCCL) It is a wholly owned subsidiary, which was incorporated in August 1995 and commenced clearing operations in April 1996. It was formed to build confidence in clearing and settlement of securities, to promote and maintain the short and consistent settlement cycles, to provide a counter-party risk guarantee and to operate a tight risk containment system.

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NSE.IT Ltd. It is also a wholly owned subsidiary of NSE and is its IT arm. This arm of the NSE is uniquely positioned to provide products, services and solutions for the securities industry. NSE.IT primarily focuses on in the area of trading, broker front-end and back-office, clearing and settlement, web-based, insurance, etc. Along with this, italso provides consultancy and implementation services in Data Wa rehousing, Business Continuity Plans, Site Maintenance and Backups, Stratus M ainframeFacility Management, Real Time Market Analysis & Financial News.

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India Index Services & Products Ltd. (IISL) It is a t venture between NSE and CRISIL Ltd. to provide a variety of indices and index related services and products for the Indian Capital markets. It was set up in May 1998. IISL has a consulting and licensing agreement with the Standard and Poor's (S&P), world's leading provider of investible equity indices, for cobranding equity indices.

o

National Securities Depository Ltd. (NSDL) NSE ed hands with IDBI and UTI to promote dematerialization of securities. Thisstep was taken to solve problems related to trading in physical s ecurities. Itcommenced operations in November 1996.

 NSE Facts o It uses satellite communication technology to energize participation from around 400 cities in India. o NSE can handle up to 1 million trades per day. o It is one of the largest interactive VSAT based stock exchanges in the world. o The NSE- network is the largest private wide area network in India and the first extended C- Band VSAT network in the world. o Presently more than 9000 s are trading on the real timeonline NSE application. Today, NSE is one of the largest exchanges in the world and still forging ahead. At NSE, we are constantly working towards creating a more transparent, vibrant and innovative capital market. OVER THE COUNTER EXCHANGE OF INDIA OTCEI was incorporated in 1990 as a section 25 company under the companies Act1956 and is recognized as a

stock exchange under section 4 of the securities Contracts Regulation Act, 1956. The exchange was set up to aid enterprising promotes in raising finance for new projects in a cost effective manner and to provide investors with a transparent and efficient mode of trading Modelled along the lines of the NASDAQ market of USA, OTCEI introduced many novel concepts to the Indian capital markets such as screen-based nationwide trading, sponsorship of companies, market making and scrip less trading. As a measure of success of these efforts, the Exchange today has 115 listings and has assisted in providing capital for enterprises that have gone on to build successful brands for themselves like VIP Advanta, Sonora Tiles & Brilliant mineral water, etc. Need for OTCEI: Studies by NASSCOM, software technology parks of India, the venture capitals funds and the government’s IT tasks Force, as well as rising interest in IT, Pharmaceutical, Biotechnology and Media shares have repeatedly emphasized the need for a national stock market for innovation and high growth companies.

2.3 Technical Analysis Technical Analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. This is a process of identifying trend reversals at an early stage to formulate the buying and selling strategies. Using several indicators, investors analyses the relationship between pricevolume and supply-demand for the overall market, as well as for the individual stock. During an upswing, the number of shares traded is greater than before, and in a downswing, the number of shares traded dwindles. The rationale behind technical analysis is that share price behavior repeats itself over time and analysts attempts to derive methods to predict this repetition. A technical analyst looks at the past data so that to patterns. He then looks at currents price data to see if any of the established patterns are applicable and, if so, extrapolations 1 can be made to predict the future price movements. The basic premise of technical analysis is that prices move in trends or waves which may be upward or downward. It is believed that the present trend are influenced by the past trend and the projection of future trends is possible by an analysis of past price trends. A technical analyst, therefore, analyses the price and volume movements of individual’s securities as well as the market index. Thus, Technical analysis is really a study of past or historical price and volume movements so as to predict the future stock price behavior.

1

Assumptions:The market always moves in a trend. Expect for minor deviations, the stock prices move in a trends. The price may create definite patterns too. The trend may be increasing or decreasing. Interactions of supply and demand determine the market value of scrip. The market discounts everything. The price of the security quoted represents the hopes, fear and inside information of the market players. Technical analysis believes that past prices predict the future. Basic principles of technical analysis:The basic principles on which technical analysis is based are as follows: o The market value of a security is related to demand and supply factors of a security. o There are both rational and irrational factors which surrounds the supply and demand factors of a security. o Security prices behave in a manner that their movement is continuous in a particular direction for some length of time. o The shifts in demand and supply can be detected through charts prepared specially to show market action. o Patterns which are projected by charts records price movements and these recorded patterns are used by analysts to make forecasts about the movement of prices in future. Objective of the technical analysis: To understand and identify the Overbought and Oversold price levels as derived from using all the historical data available.  To identify reversal patterns that might occur in overbought or oversold regions, so as to profit from contra trend trades.  To maximize the gains from all sorts of trading activities, and minimize risk and losses arising from such activities.  To identify the price levels where chances of a profitable trade are less, and recognize 'price-patterns' in and at such levels if and when they occur to avoid such trades. Purpose of technical analysis It identifies a pattern of fluctuations It enables trader to make sense of the short term fluctuation Short term experiences and it help in predicting the future Movements of stock prices. It enables effective decision making.Since most traders buy and sells stocks on the same day, they need to decide quickly on the purchase and sale price, so technical analysis help them in deciding. Charts Used in Technical Analysis Charts are a valuable and easiest of tools used in technical analysis. The graphical presentation of data helps the investor to find out the trend of prices without any difficulty. Charts also have a following uses:

Help to spot current trends for buying and selling Indicate the probable future action of the market by projection Show historical movements Indicate the key areas of and resistance A chart represents of the demand and supply of a stock or commodity. The horizontal axis represents time, with the price drawn as a line connecting consecutive closing values. More sophisticated charts will show more detail; bar charts also include the range from high to low, candlestick charts include the open price along with a color and fill which reflects change relative to the previous close. The basic data on which the chart is drawn are Date Price Band (Open, High, Low & Close) Volume The different charts used in technical analysis are:  Line Chart  Bar chart  Candlestick Chart Line chart The most basic of the three charts is the line chart because it represents only the closing prices over a set period of time. The line is formed by connecting the closing prices over the time frame. Line charts do not provide visual information of the trading range for the individual points such as the high, low and opening prices. However, the closing price is often considered to be the most important price in stock data compared to the high and low for the day and this is why it is the only value used in line charts. Bar Chart The bar chart expands on the line chart by adding several more key pieces of information to each data point. The chart is made up of a series of vertical lines that represent each data point. This vertical line represents the high and low for the trading period, along with the closing price. The close and open are represented on the vertical line by a horizontal dash. The opening price on a bar chart is illustrated by the dash that is located on the left side of the vertical bar. Conversely, the close is represented by the dash on the right. Generally, if the left dash (open) is lower than the right dash (close) then the bar will be shaded black, representing an up period for the stock, which means it has gained value. A bar that is colored red signals that the stock has gone down in value over that period. When this is the case, the dash on the right (close) is lower than the dash on the left (open). Fig Structure of a Bar Char Candlestick Chart Another type of chart used in technical analysis is the candlestick chart, so called because the main component of the chart representing prices looks like a candlestick, with a

thick ‘body’ and usually a line extending above and below it, called the upper shadow and lower shadow, respectively. The top of the upper shadow represents the high price, while The bottom of the lower shadow represents the low price. Patterns are formed both by the body and the shadows. Candlestick patterns are most useful over short periods of time, and mostly have significance at the top of an uptrend or the bottom of a downtrend, when the patterns most often signify a reversal of the trend. While the candlestick chart shows basically the same information as the bar chart, certain patterns are more apparent in the candlestick chart. The candlestick chart emphasizes opening and closing prices. The top and bottom of the real body represents the opening and closing prices. Whether the top represents the opening or closing price depends on the colour of the real body—if it is white/ blue/green, then the top represents the close; black / red or some other dark colour, indicates that the top was the opening price. The length of the real body shows the difference between the opening and closing prices. Obviously, white/green/blue real bodies indicate bullishness, while black/red real bodies indicate bearishness, and their pattern is easily observable in a candlestick chart. Fig. Structure of a Candlestick Chart

CHAPTER. 3 DATA ANALYSIS & INTERPRETATIONS

3. ANALYSIS OF AUTOMOBILE INDUSTRY

Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. With comparatively higher rate of economic growth rate index against that of great global powers, India has become a hub of domestic and exports business. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. To understand this industry for the purpose of investment we need to analyze it by the following approach: 3.1. Fundamental Analysis Fundamental analysis is the study of economic, industry and company conditions in an effort to determine the value of a company s stock. Fundamental analysis typically focuses on key statistics in company s financial statements to determine if the stock price is correctly valued. Most fundamental information focuses on economic, industry and company statistics. The typical approach to analysing a company involves three basic steps: A. Economic Analysis Economic analysis is the analysis of forces operating the overall economy a country. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic analysis is important in order to understand exact condition of an economy The performance of a company depends on the performance of the economy, as it impact the companies in the numerous ways. For example:• • • •

If the economy is booming or tremendously growing nation income increases demand of the goods increases (steel products) hence the industry and the companies in general tend to be more prosperous

caus es On the other hand

If the economy is in recession or the growth national income decreases demand of the goods decreases (steel products) hence the industries and the company’s growth, in general, will dwindle.

caus es

 Gross Domestic Product The Economy of India is the seventh-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The Indian economy has the potential to become the world's 3rd-largest

• • • •

Therefore, the analysis of the macro-economic environment is essential to understand the behaviour of the stock prices like The earnings of the company, present economic conditions of the country, the GDP rate, savings and investment scenario, Inflation, Interest rates, Budget and Fiscal conditions, Tax Structure, balance of Payment, FDIs, FIIs, International Economic conditions, Business Cycles and Investor Psychology, Infrastructure facilities and demographic factor are taken into consideration

GDP

$2.28 trillion (nominal; 2016) $8.64 trillion (PPP; 2016 GDP rank 7th (Nominal) / 3rd (PPP) GDP growth 7.9% ( FY 2015-16 Q4(JanMar 2016) GDP per capita $1,747 (nominal; 129th; 2016) $6,598 (PPP; 108th; 2016) GDP by sector Agriculture: 16.1% Industry: 29.5% Services: 54.4% (2015) economy by the next decade, and one of the largest economies by mid-century.

India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing ed for 17% of the GDP and employed 49% of the total workforce in 2014. Industry s for 26% of GDP and employs 22% of the total workforce. According to the World Bank, India's industrial manufacturing GDP output in 2015 was 6th largest in the world on current US dollar basis ($559 billion). India's services sector has the largest share in the GDP, ing for 57% in 2012, up from 15% in 1950.It is the 7th largest in the world by nominal GDP, and third largest when purchasing power is taken into . The services sector provides employment to 27% of the work force. Today, automobile sector in India is one of the key sectors of the economy in of the employment. Directly and indirectly it employs more than 10 million people and if we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher .As the world economy slipped into recession hitting the demand hard and the banking sector takes conservative approach towards lending to corporate sector, the GDP growth has downgraded it to 7.1 per cent for 2008-09 and it has increased to 8.6% in2010 by overcoming the setbacks of recession.  Recession Auto industry in India had been hit hard by ongoing global financial recession. But it is in a good shape now. Much of this optimism resulted from renewed interest being shown in India auto industry by reputed overseas car makers. Nissan Motors which is a well known Japanese car making company regarded India automobile market as a global car manufacturing hub for future and invested huge amount in our market. There are some other automobile companies of world who have shown interest in India

auto market. Major names among these are General Motors, Skoda Auto and Mercedes-Benz. These companies have major plans lined up for India auto industry. These are few signs of the revolutionized auto industry after recession.  Inflation The rise in inflation will have adverse impact on the industry that will not only see interest rates getting further hardened but also a drop in demand due to the squeeze in purchasing power. The effect of inflation has affected every sector which is related to car manufacturing and production. The increase in the price of fuel and the steel due to inflation has led to a slower growth rate of the car industry in India. Inflation typically results in the following; High raw material cost Non availability of cheap credit due to rise in interest rates. Low earnings Fig. Inflation Rate for the period(May 2015-April2016)  Interest Rates Interest Rates have a direct impact on the economy. The base rate of banks affects the cost of borrowed funds. The base rate is the minimum rate of interest at which banks lend to anyone. It is the floor rate below which the RBI will not allow banks to lend.

Fig. Interest rate chart for private banks, w.e.f. January 2015  Foreign Direct Investment The definition of Foreign Direct Investment includes different elements, namely equity capital ,reinvested earnings of foreign companies, inter-company debt transactions, short and long term loans ,financial leasing, trade credits, investment made by Foreign venture capital investors and so on. FDIs help in the upgrading of technology, skills and managerial capabilities and bring the much

needed capital into the economy. They also help in providing employment opportunities. Inflow of capital helps the economy to grow and has a positive impact on the stock market. The automobile sector in the Indian industry is one of the high performing sectors of the Indian economy. This has contributed largely in making India a prime destination for many international players in the automobile industry who wish to set up their businesses in India. Automatic approval for foreign equity investment up to 100 per cent of manufacture of automobiles and component is permitted. Countries

Inflows (million USD) Mauritius 50,164 Singapore 11,275 USA 8,914 UK 6,158 Netherlands 4,968 FDI : inflow in India in 2015

Inflow % 42.00 9.00 7.00 5.00 4.00

 Balance of Payment The balance of payments is the record of a country’s money receipts from abroad and payments to foreign countries. The difference between receipts and payments may be a surplus or deficit. Balance of payments is a measure of the strength of the rupee on the external . If the deficit increases, the rupee value may depreciate against other currencies, thereby affecting the cost of imports. A favourable balance of payment has a positive effect on the stock market.

Fig.Trade balance and Balance of Payment(BoP) for the period (2003-2013)  Exports and imports Despite recession, the Indian automobile market continues to perform better than most of the other industries in the economy in coming future; more and more MNC’s coming in India to setup their ventures which clearly shows the scope of expansion. During AprilJanuary 2010, overall automobile exports ed a growth rate of 13.24 percent.

B. Industrial Analysis An analysis of the performance, prospects and problems of an industry of interest is known as industry analysis. The economic analysis gives an indication about the direction of the economy and the stock market. Industry analysis is required because the return and risk level of industries differ. The risk factors in an automobile industry differs that from those of the IT or telecom industries. Consumer spending have greater impact on the automobile industry than on the IT industry. Thus concentrating on the Automobile industry we discuss about the following factors Global Automobile Industry. The automotive industry is a wide range of companies and organizations involved in the design, development, manufacture, marketing, and selling of motor vehicles. It is one of the world's most important economic sectors by revenue. The automotive industry does not include industries dedicated to the maintenance of automobiles following delivery to the end-, such as automobile repair shops and motor fuel filling stations. Today, the modern global automotive industry encomes the principal manufacturers, General Motors, Ford, Toyota, Honda, Volkswagen, and Daimler Chrysler, all of which operate in a global competitive marketplace. It is suggested that the globalization of the automotive industry, has greatly accelerated during the last half of the 1990's due to the construction of important overseas facilities and establishment of mergers between giant multinational automakers.

fig. contribution by major producers

Indian Automobile Industry India is the ninth largest in the world with an annual production of over 2.3 million units in 2008. In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. The Automobile Industry is one of the fastest growing sectors in India. The increase in the demand for cars, and other vehicles, powered by the increase in the income is the primary growth driver of the automobile industry in India. In 2009, estimated rate of growth of India Auto industry is going to be 9% .The Indian automobile sector is far from being saturated, leaving ample opportunity for volume growth. Segmentation of Automobile Industry The automobile industry comprises of Heavy vehicles (trucks, buses, tempos, tractors); enger cars; Two-wheelers; Commercial Vehicles; and Three-wheelers. Following is the segmentation that how much each sector comprises of whole Indian Automobile Industry. The automotive industry in India is one of the larger markets in the world. It had previously been one of the fastest growing markets globally, but is currently experiencing flat or negative growth rates India's enger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 3.9 million units in 2011. According to recent reports, India overtook Brazil and became the sixth largest enger vehicle producer in the world (beating such old and new auto makers as Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain, , Brazil), grew 16 to 18 percent to sell around three million units in the course of 2011 and 2012. In 2009, India emerged as Asia's fourth largest exporter of enger cars, behind Japan, South Korea, and Thailand. In 2010, India beat Thailand to become Asia's third largest exporter of enger cars. As of 2010, India is home to 40 million enger vehicles. More than 3.7 million automotive vehicles were produced in India in 2010 (an increase of 33.9%), making the country the second (after China) fastest growing automobile market in the world in that year. According to the Society of Indian Automobile Manufacturers, annual vehicle sales are

projected to increase to 4 million by 2015, no longer 5 million as previously projected. The majority of India's car manufacturing industry is based around three clusters in the south, west and north. The southern cluster consisting of Chennai is the biggest with 35% of the revenue share. The western hub near Mumbai and Pune contributes to 33% of the market and the northern cluster around the National Capital Region contributes 32%. Chennai, houses the India operations of Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, Hindustan Motors, Daimler, Caparo, Mini, and Datsun. Chennai s for 60% of the country's automotive exports. Gurgaon and Manesar in Haryana form the northern cluster where the country's largest car manufacturer, Maruti Suzuki, is based. The Chakan corridor near Pune, Maharashtra is the western cluster with companies like General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes Benz, Land Rover, Jaguar Cars, Fiat and Force Motors having assembly plants in the area. Nashik has a major base of Mahindra and Mahindra with a SUV assembly unit and an Engine assembly unit. Aurangabad with Audi, Skoda and Volkswagen also forms part of the western cluster. Another emerging cluster is in the state of Gujarat with manufacturing facility of General Motors in Halol and further planned for Tata Nano at their plant in Sanand. Ford, Maruti Suzuki and PeugeotCitroen plants are also set to come up in Gujarat. Jamshedpur with Tata Motors, Kolkata with Hindustan Motors, Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country.

Table -Evolution of Indian Auto Industry

Challenges faced by the Indian Automobile Industry o As we move into the new millennium, the Indian Automobile Industry faces some tremendous opportunities and also great challenges. The growth in automobile sales has been impressive for the past ten years since liberalization began. o However, with liberalization, the Indian customer has been presented with a wide range of choices in automobiles, to suit every requirement and budget. The market has turned into a buyers market where the customer is being wooed by the manufacturers and the dealers with a range of freebies unheard of before in India.

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Financing has become so easy that an automobile is within every aspirant's reach. Competition has meant that manufacturers' margins have been squeezed severely and they are all under pressure to cut costs to be profitable and competitive. Some of the older manufacturers like Premier Automobiles (manufacturers of Premier cars), Automobile products of India (manufacturers of Lambretta scooters) and Ideal Jawa (manufacturers of Jawa and Yezdi motorcycles) have closed shop. Hindustan Motors (manufacturers of Ambassador and Contessa cars) is in trouble due to the declining sales of its car’s, as most customers prefer the newer models available in the market. Even the dominant player Maruti has seen its market share decline rapidly due to its models being old and jaded and is in addition facing labour problems in its plant. To add to the problems, come April 2001, under the WTO agreement, India will have to permit import of fully built automobiles, which hitherto was not permitted. The foreign manufacturers such as GM, Ford and Daimler Chrysler will almost certainly import vehicles from their large portfolio of models and makes, further segmenting the market into niches, although how competitive they are in of price remains to be seen.

Industry life cycle The industrial life cycle is a term used for classifying industry life over time. Industry life cycle classification generally groups industries into one of four stages: pioneer, growth, maturity and decline. In the pioneer phase, the product has not been widely accepted or adopted. Business strategies are developing, and there is high risk of failure. However, successful companies can grow at extraordinary rates. The Indian automobile sector has ed this stage quite successfully. The industry is growing rapidly, often at an accelerating rate of sales and earnings growth Indian Automotive Industry is booming with a growth rate of around 15 % annually. The growth rate of the automobile industry in India is greater than the GDP growth rate of the economy, so the automobile sector can be very well be said to be in the growth phase. Swot analysis: A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. SWOT analysis of the Indian automobile sector gives the following points:

weaknesses •Low labor productivity High interest

strengths •Large domestic market •Sustainable labor cost advantage •Competitive auto component vendor base •Government incentives for manufacturing plants •Strong engineering skills in design etc

costs and high overheads make the production uncompetitive •Various forms of taxes push up the cost of production •Low investment in Research and Development •Infrastructure bottleneck  swot analysis

Threats •Ignorance of Research & development •Rising interest rates •Cut throat competition

opportunities •Increasing challenges in consumer demands, technology development, and globalization. •Heavy thrust on mining and construction activity •Increase in the income level •Cut in excise duties

C. COMPANY ANALYSIS The company analysis shows the long-term strength of the company that what is the financial position of the company in the market, where it stands among its competitors and who are the key drivers of the company, what are the future plans of the company, what are the policies of government towards the company and how these take of the company divested among different groups of people. Here, I have taken three companies namely TATA Motors, Maruti Suzuki and Mahindra and Mahindra for the purpose of Fundamental analysis. Tata Motors Limited is India's largest automobile company, with con solidated revenues of Rs. 92,519 crores (USD 20 billion) in 2009-10. It is the leader in commercial vehicles in each segment, and among the top three in enger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer. Maruti Suzuki is a subsidiary of Suzuki Motor Corporation Japan. More than half the numbers of cars sold in India wear Maruti Suzuki badge. They offer a full range of cars – from entry level Maruti 800 & Alto to stylish hatchback Ritz, A star, Swift, Wagon R, Estillo and sedans Dzire, SX4 and Sports Utility Vehicle Grand Vitara. Since inception, it has produced and sold over 7.5 million vehicles in India and exported over 500,000 units to Europe and other countries. Its turnover for the fiscal2008-09 stood at Rs. 203,583 Million & Profit after Tax at Rs. 12,187 Million. The Mahindra Group’s Automotive Sector is in the business of manufacturing and marketing utility vehicles and light commercial vehicles, including three-wheelers. Itis the market leader in utility vehicles in India since inception, and currently s for about half of India’s market for utility vehicles. The Automotive Sector continues to be a leader in the utility vehicle segment with a diverse portfolio that includes mass transport as well as new generation

vehicles like Scorpio, Bolero and the recently launched Xylo and tuv 300 D. Financial analysis RATIO ANALYSIS OF TATA MOTORS, MARUTI SUZUKI ANDMAHINDRA & MAHINDRA 1. EPS Fig. Earning per share chart Interpretations EPS measures the profit available to the equity shareholders per share, that is, the amount that they can get on every share held. EPS of TATA it is continuously decreases from 2011 to 2015 and Maruti had a rising EPS. The effect is more on Tata motors because of the slump in domestic and international markets and sharp fall in sales and net profits which resulted in low EPS. Mahindra is not much affected as its sales have increased from the previous year. But as trend shows Mahindra motors has potential so a shareholder can expect better in future. So for investment Maruti is good . 2. SALES

Fig. sales chart

Interpretations

Maruti and Mahindra show a positive trend in sales over the past five years. Though slowdown in the economy brought hurdles but these companies have potential to grow in future as lots of products are still to add in their portfoli. Moreover increa sed demand in foreign market also seems to be a positive signal for better future. TATA has witnessed a decline in sales of each segment. Maruti and Mahindra are going swiftly 3. OPERATING PROFIT MARGIN Fig Operating Profit Ratio trend chart

Interpretations Here we can see that this graph shows that operating profit of TATA declines year to year and Maruti and Mahindra has little fluctuation in operating profit, it means these both companies comes in growth situation in the future . These both companies are ive to investors. 4. RETURN ON CAPITAL EMPLOYED (ROCE)

Fig Return on capital employed chart

Here we can see that this graph shows that ROCE of TATA declines year to year and Maruti and Mahindra has little fluctuation in ROCE , it means these both companies came in growth situation in the future . These both companies are ive to investors. 5. INVENTORY TURNOVER RATIO

Fig Inventory Turnover Ratio trend chart Here TATA has decreasing situation in last five year and Maruti and Mahindra has little fluctuation in ITR. So Maruti and Mahindra is ive to investors.

6. DEBTORS TURNOVER RATIO Fig Debtors Turnover Ratio trend chart TATA and Maruti has increasing trend in last 5 year, its good sign for investors , but Mahindra has decreasing trend in last 5 year it means Mahindra debtors payback period is long. So it is not good sign for investors.

7. DEBT-EQUITY RATIO Fig Debt to Equity ratio trend chart Here TATA has increasing trend and Mahindra and Maruti has decreasing trend. It means TATA not recover debt rapidly compared with Maruti and Mahindra. Maruti and Mahindra is ive to investors.

8. CURRENT RATIO Fig. Current trend chart

Ratio

The company has gradually reduced its currents liabilities, ,it can be seen that the company is dependent mostly on long term funds to finance its current assets and as a result current liabilities have largely reduced and use of long term liabilities have increased, which can be said as a wise decision from the company.

9. INTEREST COVERAGE RATIO

Fig. Interest Coverage Ratio trend chart Here TATA has decreasing trend but Maruti and Mahindra have increasing .So TATA not indicates good sign for investment but Maruti and Mahindra shows good sign for investment . 10.

DIVIDEND PAYOUT RATIO Fig. Dividend Payout Ratio trend chart

As the company has ignored debt financing and has reduced interest paying, it has gradually increased its dividend paying capabilities to hold shareholders trust over them, in a bad situation like this.it has moved on to become unleveraged and has opted to remit huge dividends in order to attract & hold shareholders.

3.2 Technical Analysis

DATA ANALYSIS 1. MARUTI SUZUKI 

Table-1 . Historical Data analysis chart of Maruti Suzuki (9-5-2016 to 10-6-2016) (BSE)

DTAE

9/5/201 6 10/5/20 16 11/5/20 16 12/5/20 16 13/5/20 16 16/5/20 16 17/5/20 16 18/5/20 16 19/5/20 16 20/5/20 16 23/5/20 16 24/5/20 16 25/5/20 16 26/5/20 16 27/5/20 16 30/5/20 16 31/5/20 16 1/6/201 6 2/6/201 6 3/6/201 6 6/6/201 6 7/6/201 6 8/6/201 6 9/6/201 6 10/6/20 16

OPEN PRICE (RS)

HIGH PRICE (RS)

LOW PRICE (RS)

CLOSE PRICE (RS)

3833.3 0 3856.3 0 3800

3877

3829.4 5 3836.4 5 3790

3856.2 0 3846.9 5 3889.8 5 3862.9 5 3844.6 0 3880.3 0 3949.1 5 3914.2 0 3926.8 5 3947.0 5 3911.5 5 3917.5 0 4053.6 0 4117.1 5 4141.3 5 4073.1 5 4167.9 0 4161.6 5 4183.8 5 4220.1 0 4135.1 5 4143.2 0 4169.4 5 4169.4 5 4152.4 0

3861.4 0 3865 3875 3885.3 0 3910

3856.2 0 3899 3908.0 5 3879.9 5 3892

3950

3968.4 5 3935.1 0 3942.3 0 3958.9 0 3965

3930

3937

3942.1 5 4055

4065

3900 3890

4118 4141 4073 4175 4156.5 0 4200 4214 4160 4150 4142.1 5 4161

4127.9 5 4158.3 0 4152.0 5 4184.7 5 4199

3845.6 0 3830.5 5 3844.0 5 3885.3 0 3808 3880 3885 3900 3891.4 0 3941.1 0 4030 4093 4055.1 0 4058.3 6 4151

4189.0 5 4231.3 0 4224

4127.2 5 4179.0 5 4121

4188.8 0 4171.6 5 4190.5 0 4192

4122.8 0 4124.1 5 4138 4150

MOVIN G AVERA GE OF CLOSI NG PRICE 3834.1 0 3836.7 5 3860.4 5 3863.0 2 3863.5 0 3860.6 8 3892.8 5 3915.7 3 3930.7 3 3928.8 2 3928.4 7 3927.6 7 3966.3 3 4034.3 8 4108.5 2 4112.1 2 4126.6 5 4132.9 0 4171.2 0 4186.0 5 4171.7 7 4154.7 7 4145.9 2 4154.9 7 4146.9 2

VOLU ME

46053 39266 72028 19098 0 70785 29865 55189 14768 1 51188 47830 28752 23677 61439 82422 52734 41971 6242 58362 37135 63352 51197 0 30404 32367 73221 69759

REPRESENTATION OF CLOSING PRICE AND MOVING AVERAGE LINE GRAPH OF CLOSING PRICE: Fig Closing price and moving average graph line The closing Price set through Moving average indicates upward direction or unstable trend line fitted on closing price of the share during the study period, so from this It conclude that it will be highly lucrative to invest in Maruti suzuki and also it involves a moderate risk as the prices are gaining much.

REPRESENTATION OF OPENING AND CLOSING PRICE ON LINE GRAPH: Fig Opening Closing price line

and graph

INTERPRETATION The movement of opening and closing price indicates a steadiness and slight increase during the study period and the situation is good from the investor’s point of view, as the overall market capitalization of Maruti Suzuki is increasing during the study period.

CANDLESTICK CHART: Fig.Candlestick chart INTERPRETATION Its shows stock has good opening price at maximum numbers of days compare to closing price on the same day of the study period. It represents a clear picture of stock price at which the investors will decide to invest (since the black body and the white bodies show trend),thus we predict the investment decisions. REPRESENTATION OF LINE CHART-TOTAL VOLUME W.R.T. DAYS

Fig.Volume volatility graph INTERPRETATION The above chart shows the huge volatility in demand /volume sales of the share as a result of which the price the price is also little bit volatile, as it is visible from the line chart of opening & closing price w.r.t. days, it indicates good sign for investors.

2. TATA MOTORS Table-. Historical Data analysis chart of TATA Motors (9-52016 to 10-6-2016) (BSE)

DATE

OPEN PRICE (RS)

HIGH PRICE (RS)

LOW PRICE (RS)

CLOSE PRICE (RS)

VOLUM E

403.35

MOVIN G AVERAG E OF CLOSIN G PRICE 397.75

9/5/201 6 10/5/20 16 11/5/20 16 12/5/20 16 13/5/20 16 16/5/20 16 17/5/20 16 18/5/20 16 19/5/20 16 20/5/20 16 23/5/20 16 24/5/20 16 25/5/20 16 26/5/20 16 27/5/20 16 30/5/20 16 31/5/20 16 1/6/201 6 2/6/201 6 3/6/201 6 6/6/201 6 7/6/201 6 8/6/201 6 9/6/201 6 10/6/20 16

401

405.25

395.55

401

401.85

387.20

388.90

396.98

748851

386

391.90

376.05

380.10

390.78

1034617

384

388

380

387.20

385.40

575091

390

393.80

385.85

390

385.77

803589

393.80

396.75

389.60

392.55

389.92

500083

391.50

395

387.30

389.90

390.82

554187

384

387.40

381.80

385

389.15

935847

385.25

393.15

383.10

387.70

387.53

1297826

386.25

392.50

383.30

384.55

385.75

591312

388

389.90

380.55

382.75

385

523527

384.40

392

382.35

389.25

385.52

541437

393.55

399.70

393.55

397

389.67

507837

399

401.70

396.85

399.30

395.18

318249

400

404.65

395.95

403.50

399.93

672984

405.40

421.90

401.60

420.55

407.78

1171008

456.30

463.90

444.15

458.20

427.42

48511

455.70

458.20

446.25

449.20

442.65

720409

445

460.30

443.95

453.20

453.52

1105284

456.55

461.75

452.30

453.90

452.10

784791

457.25

464.90

450.50

460.75

455.95

608593

466.95

467

458.65

463.05

459.23

1169024

465

468.70

462.95

466.30

463.37

3469132

467.80

470.25

464.75

466.70

465.35

473127

467.90

467.90

458.10

458.95

463.40

255395

749845

REPRESENTATION OF CLOSING PRICE AND MOVING AVERAGE LINE GRAPH OF CLOSING PRICE: Fig Closing price and moving average graph line Interpretation The closing Price set through Moving average indicates downward or stable trend line fitted on closing price of the share during the study period, so from this It conclude that it will not be highly lucrative to invest in Tata Motors and also it involves a moderate risk as the prices are not gaining much. REPRESENTATION OF OPENING AND CLOSING PRICE ON LINE GRAPH: Fig Opening and Closing price graph line INTERPRETATION The movement of opening and closing price indicates a steadiness and slight decrease during the study period and the situation is not good from the investor’s point of view, as the overall market capitalization of Tata Motors is decreasing during the study period.

REPRESENTATION OF LINE CHART-TOTAL VOLUME W.R.T. DAYS

Fig. Volume graph

volatility

INTERPRETATION The above chart shows the huge volatility in demand volume sales of the share as a result of which the price the price is also little bit volatile, as it is visible from the line chart of opening & closing price w.r.t. days

/

CANDLESTICK CHART Fig. Candlestick chart INTERPRETATION Its shows stock has lower opening price at maximum numbers of days compare to closing price on the same day of the study period. It represents not a clear picture of stock price at which the investors will decide to invest (since neither the black body nor the white bodies show any trend),thus we cannot predict the investment decisions.

3. MAHINDRA & MAHINDRA 

Table-. Historical Data analysis chart of M&M(9-5-2016 to 10-6-2016) (BSE)

DTAE

OPEN PRICE (RS)

HIGH PRICE (RS)

LOW PRICE (RS)

CLOSE PRICE (RS)

VOLUM E

1349.45

MOVIN G AVERAG E OF CLOSIN G PRICE 1333.75

9/5/201 6 10/5/20 16 11/5/20 16 12/5/20 16 13/5/20 16 16/5/20 16 17/5/20 16 18/5/20 16 19/5/20 16 20/5/20 16 23/5/20 16 24/5/20 16 25/5/20 16 26/5/20 16 27/5/20 16 30/5/20 16 31/5/20 16 1/6/201 6 2/6/201 6 3/6/201 6 6/6/201 6 7/6/201 6 8/6/201 6 9/6/201 6 10/6/20 16

1335.1

1357

1330.50

1351.40

1352.95

1333

1350.40

1343.43

27250

1340

1353.95

1315.05

1346.15

1349.23

38531

1353

1363.85

1330.50

1331.80

1344.17

178922

1332

1332

1303

1313.10

1331.78

35705

1313

1321

1306

1318.30

1321.15

22071

1228.80

1351

1320

1341.40

1323.67

44918

1341.95

1342

1312.25

1320.10

1328.08

343874

1321.5

1328

1305.65

1309.35

1326.33

66586

1315.80

1322.40

1290

1294.05

1310.05

27062

1300.20

1301

1279.5

1286.35

1296.37

34512

1272.5

1303.55

1261.05

1296.25

1290.95

35826

1297.1

1318

1297.1

1312.15

1297.17

190220

1312.50

1343

1307

1337.10

1315.22

362396

1339.10

1361.95

1326

1335.15

1328.18

105270

1340

1351.20

1314.10

1331.80

1334.55

253340

1338.3

1344.0

1316.1

1324.70

1328.95

3492

1331

1349.70

1326

1333.85

1328.97

109067

1346.80

1346.80

1329.55

1332.70

1329.77

72513

1343

1359.25

1342

1353.45

1333.25

265621

1358

1386.40

1358

1369.60

1345.40

77915

1375

1386

1372

1377.85

1360.30

60981

1380

1397

1380

1384.70

1377.98

104817

1385.15

1392.75

1365

1376.65

1379.22

113148

1371

1404

1363.75

1382.9

1378.52

101083

39060

REPRESENTATION OF CLOSING PRICE AND MOVING AVERAGE LINE GRAPH OF CLOSING PRICE: Fig Closing price and moving average graph line Interpretation The closing Price set through Moving average indicates little fluctuation in trend line fitted on closing price of the share during the study period, so from this It conclude that it will not be highly lucrative to invest in Mahindra and also it involves a moderate risk as the prices are not gaining much.

REPRESENTATION OF OPENING AND CLOSING PRICE ON LINE GRAPH: Fig Opening and Closing price graph line INTERPRETATION The movement of opening and closing price indicates little increase during the study period and the situation is good from the investor’s point of view, as the overall market capitalization of Mahindra is increasing during the study period.

REPRESENTATION OF LINE CHART-TOTAL VOLUME W.R.T. DAYS

Fig. Volume volatility graph INTERPRETATION The above chart shows the huge volatility in demand /volume sales of the share as a result of which the price the price is also little bit volatile, as it is visible from the line chart of opening & closing price w.r.t. days. Its shows good sign for investors.

CANDLESTICK CHART

Fig. Candlestick chart INTERPRETATION Its shows stock has low opening price at maximum numbers of days compare to closing price on the same day of the study period. It represents a clear picture of stock price at which the investors will decide to invest (since neither the black body nor the white bodies show any trend),thus we predict the investment decisions.

CHAPTER. 4 FINDINGS, SUGGESATION & CONCLUSION

4.1FINDINGS From the data analysis and interpretations of the ratios of three companies’ viz. Tata Motors, Maruti Suzuki and Mahindra and Mahindra, the following findings have been given: o

o

o

o o o o

4.2

The Maruti and Mahindra companies were performing well till 2015 with a positive trend in the earnings per share. But TATA had downward trend. Especially, TATA has witnessed a steep fall till 2015. The sales trend has been upward and positive in case of all the three companies. The sales growth looks upward and positive till 2015, TATA’s sales have declined whereas Maruti and Mahindra have maintained the same upward positive trend. The return on capital employed (ROCE) has been fluctuating since 2011 and the year 2015witnessed low returns in case of all the companies amongst which TATA has the least rate of return. Compared to the three companies, Maruti and Mahindra have good rate of return. In case of interest coverage ratio, TATA has decreasing trend but Maruti and Mahindra have increasing trend till 2015. In case of debtors turnover ratio TATA and Maruti have increasing trend but Mahindra has decreasing trend during 2011 to 2105. Maruti and Mahindra had a stable dividend payout ratio since 2011. TATA has increased their payout ratio in which shows a higher payout ratio. By analysing the current trend of Indian Economy and Automobile Industry I have found that being a developing economy there is lot of scope for growth and this industry still has to cross many levels so there are huge opportunities to invest in and this is being proved as more and more foreign companies are setting up there ventures in India .Increase in income level, increase in consumer demand, technology development, globalization, foreign investments are few of the opportunities which the industry has to explore for developing the economy.

SUGGESTIONS

o

o

By analyzing the automobile industry with the help of fundamental analysis, it has been revealed that this industry has a lot of potential to grow. So recommending investing in Automobile industry with no doubt is going to be a good and smart option because this industry is booming like never before not only in India but all over the world. The three giants of Indian Automobile industry viz. TATA Motors, Maruti Suzuki and Mahindra and Mahindra have outperformed in the industry. From the company analysis, we can know that Mahindra and Maruti would be a better option for an investor compared to TATA. In view of the slump in the domestic and international market, TATA has recorded a slowdown in sales and income level. Its Earnings per share has also declined drastically. It has reduced its dividend

o

o

o

payout ratio. The return on capital employed is also very low. In view of all these, TATA is not a better option for an investor. The global turmoil in financial markets has affected Maruti also. The company is maintaining a stable position. Its sales have grown over past five years. In spite of the general economic slowdown, the sales of Maruti Suzuki increased. As it is maintaining a stable position, it can be recommended that for now Maruti share price shows that it’s a time to hold the position or buy more shares as there is scope of further rise in share prices. Despite the challenging business environment, Mahindra has maintained its upward sales level. Its Return on Capital employed is much higher compared to TATA and Maruti. The company has potential to grow. It would be the best option for the investor. Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors there is a chance of getting correction, as it already went on high side in a very short period of time and is experiencing a downfall from 2011.

 Few Suggestions for “Right Stock Selection” There are three factors which an investor must consider for selecting the right stocks.  Business:  Balance Sheet:  Bargaining:  Investment rules  Invest for long term in equity markets  Align your thought process with the business cycle of the company.  Set the purpose for investment.  Long term goals should be the objective of equity investment.  Disciplined investment during market volatility helps attains profits.  Planning, Knowledge and Discipline are very crucial for investment. 4.3

CONCLUSION

 The automotive industry in India is one of the largest in the world with an annual production of 23.37 million vehicles in FY 2014-15, following a growth of 8.68 per cent over the last year. India emerged as Asia’s fourth largest exporter of automobiles, behind Japan, South Korea and Thailand.  A runway inflation touching a high point of 12% early in the year, the tight monetary policies followed by the authorities for most of the year to control inflation with the consequent high interest rates and weak consumer demand, have collectively had devastating effect on the automotive sector. Maruti suzuki company has a trend of growth from till 215. TATA Motors, which was trying to consolidate its leadership position in the market.

 In spite of it being a tough year for all the companies across the globe and in India, Mahindra has given a satisfactory performance. At present its shares are undervalued giving it a potential for growth.  One factor favouring this point is that India has become a hot destination for companies of diverse nature to invest in. Cut throat competition among top companies, lots of new car and vehicle model launches at regular intervals keeps the Indian auto sector moving. A continuous effort at cost cutting and improving productivity will help theco mpanies in making reasonable profits despite the impact of higher commodity prices and weaker rupee.  The analysis gives an optimistic view about the industry and its growth which recommends the investors to keep a good watch on the major players to benefit in of returns on their investments.

Bibliography

1. www.investopedia.com/technicalanalysis. (2014, april 17). Retrieved april 17, 2014, from www.investopedia.com. 2. www.moneycontrol.com/market/shareprice. (2014). Retrieved april 10, 2014, from www.moneycontrol.com.

3. www.economictimes.indiatimes.com/prices.cms 4. www.wikipedia.com/automotiveindustry 5. (2011-15). Annual Report. Tata Motors Limited 6. (2011-15). Annual Report. Mahindra and Mahindra 7. (2011-15). Annual Report. Maruti suzuki 8. Avadhani, V. A. (2009). Investment Analysis. Mumbai: Himalaya Publishing House 9. Pandian, P. (2013). Security Analysis and Portfolio Management. New Delhi: Vikas Publishing House. 10. S.Kevin. (2011). Security Analysis and Portfolio Management. New Delhi: PHI.