a project report o1

Investment Opportunities in Stock market1) EXECUTIVE SUMMARY

This project is an attempt to understand the basics of stock market. A project which has made

me well versed with the market happenings ups and downs in the stock market. The first

topic gives a brief description about the company, where I did my internship from, which is

Motilal Oswal Securities Ltd. The following chapter explains about the formation &

company composition of Motilal Oswal Securities Ltd. The topic also gives a detailed report

of my summer internship done at the company. It gives the details of jobs assigned to me

followed by the methods, which were undertaken during the internship. The topic two will

give the details & explain in brief the basics of capital market. It will show in details the way

stocks are traded, cleared & settled in the market using different techniques. Further the

chapter covers the trading in India the importance of stock market to the economy.

The next topic gives the detail as to how I went about completing my project. The steps

taken to understand my topic & researching the ONCG sector companies have been given in

the chapter Body Methodology.

The data presentation, analysis & interpretation on Fundamental Analysis helps us to

understand the importance of the analysis. It shows us the steps taken to complete the

analysis & the findings to be analyzed in the analysis.

The topic summarizes the reason why I have selected the ONGC sector for analysis. The

huge investments & growth opportunities in the ONCG sector makes it an important sector &

all the more reason why we should keep an eye on the progress of it.

The next topic on Economy of the Country helps us to know the current scenario of our

country in terms of economy which taken into a/c GDP levels along with future predictions,

current inflation rate, Currency of the country, service industry of the India & FDIs in India.

The next sub topic explains the ONGC industry as a whole. From the huge ONGC market in

USA, to the current scenario of ONGC sector in India, the topic will give a details insight

into the ever in demand sector. The industry is further analyzed by porter’s five-force model.

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Investment Opportunities in Stock marketThe company analysis of ONGC sector will have a detail research & study of India’s largest

FMCG Company viz. ONGC(oil and natural gas corporation).The technique of SWOT have

being followed to analysis the company’s fundamentals. The topic conclusions and

suggestions are on my take on the company & their financial positions. It also helps us take a

prediction as to how strong the stock is for future investments. Further it also helps the retail

investors to be cautious in investing in the company by considering the risk involves.

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Investment Opportunities in Stock market2) INDUSTRY OVERVIEW

OVERVIEW OF INDIAN CAPITAL MARKET

2.1) INTRODUCTION

In world of commerce, apart from money, equally revolutionary concept was the concept of

limited liability. Before the industrial revolution, we had self-sufficient village economy. The

artisans produced goods and services on demand. It was industrial revolution which paved the

way for production in anticipation of demand, and along with it came the economies of large-

scale production and to support this was needed huge finance. Innovative forms of business

establishment, incorporating the principle of Limited liability emerged. From the highly

imaginative world of business, a novel form of business organization viz. Joint Stock

Companies, with the features like limited liability and the separation of ownership and

management was born. Risk is an important and inherent part of any business. Risk cannot be

avoided. You can only try to manage it. This was the best example of risk management by

spreading in small proportions amongst large number of shareholders. This was achieved by a

concept called shares or stock and the need for trading in these stocks was felt.

2.2) CAPITAL FORMATIONS AND ECONOMIC DEVELOPMENT

Multiplicity of wants and scarcity of means to satisfy these unlimited wants has , continued to

be the fundamental of economic problem. Money resources are required to move physical

resources. Mobilization of resources for economic development was and continues to be the

major problem with all developing and developed nations. The capital might be from within

the country or outside the country.

But one of the greatest challenges of nations today is creating conditions conducive for

capital formation as also for attracting capital from various countries. A growing economy

with vibrant capital and money market with rules and regulations is Prerequisite for attracting

capital. Stock market plays a key role in the entire gamut of financial system.

Having broadly discussed the developments and the basic issues involved, we will now try to

review the Indian Financial System. India has come a long way during the last decade with

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Investment Opportunities in Stock marketthe path-breaking budget of 91-92 presented by Dr. Manmohan Sign an era of globalization,

liberalization, decontrol and de-regulation was adhered in. Since then a lot of water has flown

From under the bridge and lot of Development has taken place. The focus all along has been

to faster economic development.

2.3) INDIAN FINANCIAL SYSTEM

The financial system comprises a variety of intermediaries, markets, and instruments. It

provides the principal means by which savings are transformed into investments. Given its

role in the allocation of resources, the efficient functioning of the financial system is critical

to a modern economy.

A conceptual Framework of how the financial system works: -

The Financial System

A financial system is a set of institutional arrangements, through which financial surpluses

are mobilized from the units generating surplus income to others in need of them. Financial

markets, financial instruments, financial services and financial institutions constitute the

financial system. Financial market provide channels for allocation of savings to investment,

that is how the savings are channelized into investments thus generating further income, cash

or assets. Financial market has two major components viz. money market and capital market.

Money market refers to the market where borrowers and lenders exchange short-term funds,

to solve their liquidity needs. Money market instruments have low default risk, maturities

under one year and high marketability (liquidity). Low default risk implies that generally the

risk of non-payment of money is low. Maturities under one year imply that all contracts are

of maximum one year. Capital market comprises of institutions and mechanisms through

which medium to long term funds are pooled and made available to business, government

and individuals. It facilitates investment in fixed assets. Capital market consists of securities

or stock market. Securities market consists of primary market and secondary market. Primary

market consists of channel for sale of new securities, while secondary market deals in the

securities already issued. Primary markets involve the following methods of issue.

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Investment Opportunities in Stock market• IPO

• Further issue of capital

• Rights issue

• Offers to public

• Bonus issue

Secondary market enables those who already hold securities to adjust their investment in

response to change in their assessment of risk and return, the statement implies that those

who already hold the securities may want to sell them in case if those securities are not

paying off, or if they need to adjust their liquidity or for any other reason. Secondary market

refers to the stock exchange, a stock exchange provides mechanism to buy and sell the

securities already issues in primary market. There are at present 23 stock exchanges in India.

2.4) STOCK MARKET

The term ‘the stock market’ is a concept for the mechanism that enables the trading of

company stocks (collective shares) and other securities. The size of the 'stock market' is

estimated at about $51 trillion. The stocks are listed and traded on stock exchanges which are

entities specialized in the business of bringing buyers and sellers of stocks and securities

together. Participants in the stock market range from small individual stock investors to large

hedge fund traders, who can be based anywhere. Their orders usually end up with a

professional at a stock exchange, who executes the order.

Some exchanges are physical locations where transactions are carried out on a trading floor,

by a method known as open outcry (e.g.: -New York stock exchange). This type of auction is

used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and

offers simultaneously. The other type of exchange is a virtual kind, composed of a network of

computers where trades are made electronically via traders at computer terminals (e.g. -

NASDAQ). 23 Actual trades are based on an auction market paradigm where a potential

buyer bids a specific price for a stock and a potential seller asks a specific price for the stock.

(Buying or selling at market means you will accept any bid price or ask price for

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Investment Opportunities in Stock marketthe stock.) When the bid and ask prices match, a sale takes place on a first come first served

basis if there are multiple bidders or askers at a given price.

The purpose of a stock exchange is to facilitate the exchange of securities between buyers

and sellers, thus providing a market place (virtual or real). The exchanges provide real-time

trading information on the listed securities, facilitating price discovery.

2.5) Market participants

Many years ago, worldwide, buyers and sellers were individual investors, such as wealthy

businessmen, with long family histories (and emotional ties) to particular corporations. Over

time, markets have become more "institutionalized"; buyers and sellers are largely

institutions (e.g., pension funds, insurance companies, mutual funds, hedge funds, investor

groups, and banks). The rise of the institutional investor has brought with it some

improvements in market operations.

I) The First Stock Market

The Dutch started joint stock companies, which let shareholders invest in business ventures

and get a share of their profits - or losses. In 1602, The Dutch East India Company issued the

first shares on the Amsterdam Stock Exchange It was the first company to issue stocks and

bonds. Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first

stock exchange to introduce continuous trade. The Dutch "pioneered short selling, option

trading, debt-equity, merchant banking, unit trusts and other speculative instruments ". There

are now stock markets in virtually every developed and most developing economies, with the

world's biggest markets being in the United States, Canada, China, India, UK, Germany,

France and Japan

Importance of stock market

• Function and purpose

The stock market is one of the most important sources for companies to raise money. This

allows businesses to go public, or raise additional capital for expansion. The liquidity that an

exchange provides affords investors the ability to quickly and easily sell securities. This is an

attractive feature of investing in stocks, compared to other less liquid investments such as real

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Investment Opportunities in Stock marketEstate. History has shown that the price of shares and other assets is an important part of the

dynamics of economic activity, and can influence or be an indicator of social mood. Rising

share prices, for instance, tend to be associated with increased business investment and vice

versa. Share prices also affect the wealth of households and their consumption. Therefore,

central bank tends to keep an eye on the control and behaviour of the stock market and, in

general, on the smooth operation of financial system functions.

Financial stability is the important outlook of central banks.

Exchanges also act as the clearing house for each transaction, meaning that they collect and

deliver the shares, and guarantee payment to the seller of a security. The smooth functioning

of all these activities facilitates economic growth in that lower cost and enterprise risks

promote the production of goods and services as well as employment. In this way the

financial system contributes to increased prosperity.

• Relation of the stock market to the modern financial system

The financial system in most western countries has undergone a remarkable transformation.

One feature of this development is disintermediation. A portion of the funds involved in

saving and financing flows directly to the financial markets instead of being routed via banks'

traditional lending and deposit operations. The general public's heightened interest in

investing in the stock market, either directly or through mutual funds, has been an important

component of this process. Statistics show that in recent decades shares have made up an

increasingly large proportion of households' financial assets in many countries. The major

part of this adjustment in financial portfolios has gone directly to shares.

2.6) IMPACT OF STOCK EXCHANGES IN INDIA:

Following are the changes due to the existence of Stock Exchange:

1. Mobilization of savings

The savings of the individuals are easily mobilized in various types of industries. Therefore

the amount of investments in the stock exchange increases.

2. Increase in rate of return on investment

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Investment Opportunities in Stock marketThe investors get more rate of return i.e. the market rate and not the normal bank rate, which

is much lower.

3. Availability of funds for growth of industries.

The amount of funds required for the growth of the industries is easily available whereas

there was always shortage of capital.

4. Diversification of industries

Due to the availability of funds, the industry is financially strong, have scope or

diversification due to which they can become more strongly in the market.

5. Increase in employment

Growth and diversification of industries leads to increase in the amount of work and thus

increase job opportunities for the unemployed.

6. Increase in standard of living

The increased job opportunities and the availability of goods of higher quality have increased

the standard of living of people.

7. Increase in GDP

Increase in business in overall all industries has automatically leaded to the rise in GDP of the

country and thus its prosperity.

8. Decrease in Trade Deficit.

Due to growth in industries the country is becoming self-sufficient leading to decrease in

trade deficit.

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Investment Opportunities in Stock market2.7) TRADING IN INDIA:

The trading on stock exchange in India used to take place through open outcry without use of

information technology for immediate matching or recording of trades. This was time

consuming and inefficient. This imposed limits on trading volumes and efficiency. In order to

provide efficiency, liquidity and transparency, NSE introduced a nationwide online fully

automated screen based trading system (SBTS) where a member can punch into the computer

quantities of securities and the prices at which he likes to transact and the transaction is

executed as soon as it finds matching sale or buy order from a counter party. SBTS

electronically matches order on strict time/price priority and hence cuts down on time, cost

and risk of error, as well as on fraud resulting in improved operational efficiency. It allows

faster incorporation of price sensitive information into prevailing prices, thus increasing the

information efficiency of markets. It enables market participants, irrespective of their

geographical locations, to trade with one another simultaneously, improving the depth of

liquidity market. It also provides a perfect audit trail, which helps to resolve disputes by

logging in the trade execution process in entirety. Today India can boast that almost 100%

trading take place through electronic order matching. Technology was used to carry the

trading platform from the trading hall of stock exchanges to the premises of brokers. NSE

carried the further platform further the PCs at the residence of Clients through the Internet for

Users in geographically vast country like India.

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Investment Opportunities in Stock marketConceptual framework

Trading Network

The trading network is depicted in the above figure shows NSE has main computer, which is

connected through very small Aperture Terminal installed at the office. The main computer

runs on falls tolerant STRATUS mainframe computer at the exchange. Brokers have

terminals installed at their premises, which are connected through VASTs/ leased lines/

modems. Investors inform broker to place an order on behalf of them. The broker enters the

order through his PC, which runs under Windows NT and sends signal to the satellite via

VAST/ leased line/ modem. The signal directed to mainframe computer at NSE

The system also provides complete market information online. The market screens at any

point of time provide information on total order depth in a security, the five best buys and

sells available in the market, the quantity traded in the day security, the high and the low, the

last traded price, etc. investors can also know the fate of the orders almost as soon as they

placed with the trading members. The trading system is normally made available for trading

on all days except Saturdays, Sundays and other holidays.

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Investment Opportunities in Stock market3) COMPANY OVERVIEW

INTRODUCTION:

Motilal Oswal Securities Ltd. (MOSL) was founded in 1987 as a small sub-broking unit, with

just two people running the show. Focus on customer-first-attitude, ethical and transparent

business practices, respect for professionalism, research-based value investing and

implementation of cutting-edge technology has enabled us to blossom into an over 1600

member team.

Today they are a well diversified financial services firm offering a range of financial products

and services such as Wealth Management, Broking & Distribution, Commodity Broking,

Portfolio Management Services, Institutional Equities, Private Equity, Investment Banking

Services and Principal Strategies.

They have a diversified client base that includes retail customers (including High Net worth

Individuals), mutual funds, foreign institutional investors, financial institutions and corporate

clients. We are headquartered in Mumbai and as of June 30th, 2011, had a network spread

over 586 cities and towns comprising 1,607 Business Locations operated by our Business

Partners and us. As at June 30th, 2011, we had 722,303 registered customers.

In 2006, the Company placed 9.48% of its equity with two leading private equity retail

investors based out of the US – New Vernon Private Equity Limited and Bessemer Venture

Partners. The company got listed on BSE and NSE on September 9, 2007. The issue which

was priced at Rs.825 per share (face value Rs.5 per share) got a overwhelming response and

was subscribed 27.18 times in turbulent market conditions. The issue gave a return of 21% on

the date of listing. As of end of financial year 2008, the group net worth was Rs.7 bn and

market capitalization as of March 31, 2008 was Rs.19 bn.

Credit rating agency Crisil has assigned the highest rating of P1+ to the Company’s short-

term debt program.

Shareholding Pattern at on 31st March, 2011.

As of March 31st, 2011; the total shareholding of the Promoter and Promoter Group stood at

69.16%. The shareholding of institutions stood at 12.07% and non-institutions at 18.77%.

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Investment Opportunities in Stock market3.1) SWOT ANALYSIS

STRENGTH:

• The Promoter/ Directors are well experienced in this industry.

• Company has wide sales network.

• The trade name is already established in the market.

• Company is allotting funds every year for the advertisement.

• Government Incentives

• Locational Advantage

WEAKNESS:

• Once the unit is established, the entire unit would be looked after by professional people

and not by the main Promoters. The main Promoter will visit the unit at regular intervals.

OPPORTUNITIES:

• New industry to nearby area

• Positive industry outlook (Growth rate @ 30%)

THREATS:

• Change in government policy regarding excise duty

• Delay in implementation

• Threat from unorganized sector

• Realty sector – Primary growth driver

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Investment Opportunities in Stock market3.2) TRADING DEPARTMENT:

Motilal Oswal is one of the broker who is acting as wholesalers and as a broker, it is the duty

of it to provide service of collecting funds and securities from the retail investors and send it

to clearing house and vice versa. According to SEBI investor has to open trading account for

trading in shares. Client can open an account in any depository.

Trading department is divided into three parts:

1) Pre-trading (A/c opening, Deposits, ect.)

2) Trading (Dealing room, Sauda punching, conformation)

3) Post-trading (Payout process, Bills, Pay-in-process & Contract note)

3.3) MARKETING DEPARTMENT:

The main aim of marketing activities at Motilal Oswal is that the customer should get enough

guidance to join the company and how he can get the best service than any other stockbroker.

Marketing Mix:

Products, Price, Place, Promotion

‘Knowledge First’ Campaign

This year MOFSL introduced a new brand philosophy. The relentless focus on research and

insight, which is the DNA of the company, has manifested itself in the brand idea -

‘Knowledge First’. This simple philosophy of 'Knowledge First' has been brought alive

through a multimedia campaign in TV, print, outdoor and the web.

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Investment Opportunities in Stock market4) RESEARCH TOPIC

“INVESTMENT OPPORTUNITIES IN STOCK MARKET WITH

SPECIAL FOCUS ON OIL SECTOR”

My research topic is Investment Opportunities in Stock Market with Special Focus on

Oil Sector which talks about what are the investment opportunities that are available in Oil

Sector, but investing money in stock market can be different from investor to investor. Some

investors will enter in to market for speculation and earns speculative profit on the basis of

difference of high and low price. Some investors will earn profit by investing money for long

run without considering day to day fluctuations of share market.

I have chosen oil sector for my research because it’s not easy to compare all sectors or

companies to seek investment opportunities in equity market because there is an ocean of

information in these sectors which will lead to no better conclusion.

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Investment Opportunities in Stock market5) LITERATURE REVIEW

As per the chosen topic under summer internship report i.e. working of capital market and

wealth management services I referred several relevant journals, newspaper, research reports

of Motilal Oswal Securities Ltd. My Project topic is based on an overview of share market

and proceedings of stock exchanges prevailing in Indian market, further I studied about

various products and services offered by Motilal Oswal Securities Ltd. It includes Equities,

Portfolio Management, Commodities, Process of IPOs, Mutual funds and E-broking.

Literature review helped for several findings about share market and materials relevant to the

subject being explored, Data evaluation and analysing it for concrete information about

research. Relevance of literature and its review is purely based on facts and figures analysed

by professional research analyst of published journals, websites and leading newspaper in

Indian economy.

When I started to work on equity market I read one small interview of current

chairman of SEBI Mr.U.K.Sinha, he was mainly emphasising on participation of retail

investors of India who stopped or don’t want to deal in share market due to uncertainty and

volatility of stock market. He said he will boost these investor by bringing some new policies

and fair guidelines to encourage their participation in equity market. He was relating his point

of fair practices to IPO/FPO of ONGC and Vaswani Industries. Mr. U.K.Sinha’s interview

was first literature for me to take this topic as my summer project report.

After that I studied on MOSL reports regarding participation of retail investors and it

was proved that there is very low interest in retail investors in equity market. Their

participation in current scenario is not even 2% so I researched which sector will attract more

toward equity market and I short-listed oil sector as it’s have scope in macro and micro

economy of India.s.

6)RESEARCH PROBLEM

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Investment Opportunities in Stock marketResearch problem is consisting problem regarding selected topic for research.

My studies bring out some research problem which elaborated following.

1) Increasing inflation rate in Indian economy forcing people to spend more than saving or investing in different venues of financial system in India or abroad.

2) Nature of any Stock market exist in world is symbol of high volatility. So investors are not ready to invest their hard money in equity market.

3) Lack of know-how about the equity market stopping several investors to enter in new opportunity for them as equity exposure of their income to invest their money.

7) RESEARCH OBJECTIVE

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Investment Opportunities in Stock marketResearch objective is that which will provide fair guidelines to researcher like on which we

have to exactly study, analyse and interpret according to our research topic. Some objective

which I have enlisted as following:

1) To understand different venues to invest in capital market especially if we have to

invest in equity market.

2) To know general tendency of retail investors about their investment habits like when

they like to enter into market on peak time of market or on downside of market.

3) The stability of the equity under consideration

4) The predictability of the value of the given equity under the given circumstances

5) The variability of the given equity, given the various variance factors

6) The general market trend influencing the market value of the given equity

7) The earnings management

8) RESEARCH METHODOLOGY

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Investment Opportunities in Stock marketMy first task before starting the process was to understand what fundamental analysis is all

about & what the steps to achieve it are. For this my first step was going through various

Internet sites & reading about the methods of fundamental analysis & the usefulness of the

whole process. After going through the whole data. I then went about understanding

fundamental analysis with the help of my coordinator, Mr. Parag Nagda.

Once I got to know about the basics about the fundamental analysis, my task was to select

one company in the oil sector, one major company on which I can conduct the analysis. After

doing a thorough research on the oil sector in India, the company that I short-listed was Oil &

Natural Gas Corporation (ONGC), the big guns of oil sector.

The next step leads me to knowing the history about the companies along with the growth

prospects that possess for the future. Internet research & one on one interview with the

branch manager helped me in this task. Once this was done I went ahead & started my

analysis on the companies & concluded the project with my say on the future investment

prospects in the following company.

To know more about equity market and current situations prevailing in investors mind

we did one research on my project topic with the help of MOSL employees. Firstly we have

had choose local area of seawoods,Navi Mumbai and short listed 438 individuals and 40

mutual fund managers as a part of our research on participation of retail investors in equity

market.

Research methodology which we have used for study is based on EIC module viz

Economic Analysis, Industry analysis and company analysis. As far as research is concerned

there are two types of research methods that are followed:

Fundamental analysis

Technical analysis

Financial statement analysis is the biggest part of Fundamental analysis also known as

quantitative analysis; it involves looking at historical performance data to estimate the future

performance of stocks whereas Technical analysis does not care one bit about the value of the

company, it is only interested in the price movements of the company’s share in the market.

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Investment Opportunities in Stock market1) POPULATION:

Population for survey and research was mixed income group with different

occupations like real estate dealers, salaried employees, retired citizens, college

students etc.

2) COLLECTION OF DATA:

Basically data collection is of Primary source from near locality of office administration.

9) DATA ANALYSIS & INTERPRETATION

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Investment Opportunities in Stock market9.1) FUNDAMENTAL ANALYSIS ON OIL SECTOR

Objective: - To study the oil industry and find out the growth opportunities. To carry out the company analysis of the selected company and to suggest whether it is a

viable investment option.

INTRODUCTIONFundamental analysis is the examination of the underlying forces that affect the well

being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's investment opportunity. Fundamental analysis is a method used to determine the value of a stock by analyzing the financial data that is 'fundamental' to the company. Fundamental analysis does not look at the overall state of the market nor does it include behavioral variables in its methodology. It focuses exclusively on the company's business in order to determine whether or not the stock should be bought or sold. To buy a share of stock a investor is buying a proportional share in a business. As a consequence, to figure out how much the stock is worth, one should determine how much the business is worth. Investors generally need to assess the company's financials in terms of per-share values in order to calculate how much the proportional share of the business is worth. Some knows this as “fundamental” analysis, and most who use it view it as the only kind of rational stock analysis.

Strengths of Fundamental AnalysisLong-term Trends:Fundamental analysis is good for long-term investments based on long-term trends. The ability to identify and predict long-term economic, demographic, technological or consumer trends can benefit patient investors who pick the right company in the right industry groups.

Value Spotting:Sound fundamental analysis will help identify companies that represent a good value. Some of the most renowned investors think long-term and value. Graham and Dodd, Warren Buffet and John Neff are seen as the champions of value investing. Fundamental analysis can help uncover companies with valuable assets, a strong balance sheet, stable earnings, and staying power.

9.2) Fundamental analysis by EIC model

1) ECONOMIC ANALYSIS

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Investment Opportunities in Stock marketFirst and foremost in a top-down approach would be an overall evaluation of the

general economy. The economy is like the tide and the various industry groups and individual companies are like boats. When the economy expands, most industry groups and companies benefit and grow. When, the economy declines, most sectors and companies usually suffer. So it is important to study the economy.

Economic experts and various studies conducted across the globe envisage India and China to rule the world in the 21st century. For over a century the United States has been the largest economy in the world but major developments have taken place in the world economy since then, leading to the shift of focus from the US and the rich countries of Europe to the two Asian giants- India and China. The rich countries of Europe have seen the greatest decline in global GDP share by 4.9 percentage points, followed by the US and Japan with a decline of about 1 percentage points each. Within Asia, the rising share of China and India has been increasing since 1990.

According to experts, the share of the US in world GDP is expected to fall (from 21 per cent to 18per cent) and that of India to rise (from 6 per cent to 11 per cent) in 2025, and hence the latter will emerge as the third pole in the global economy after the US and China.

Since independence Indian economy has thrived hard for improving its pace of development. Notably in the past few years the cities in India have undergone tremendous infrastructure up-gradation but the situation in not similar in most part of rural India. Similarly in the realm of health and education and other human development indicators India's performance has been far from satisfactory, but showing a wide range of regional inequalities with urban areas getting most of the benefits. In order to attain the status that currently only a few countries in the world enjoy and to provide a more egalitarian society to its mounting population, appropriate measures need to be taken.

2) GROWTH RATE OF INDIA:

Development Indicators:

The productivity scenario of India’s economy is experiencing a faster rate of growth today.

Some of the development indicators of the India’s economy are as follows:

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Investment Opportunities in Stock marketBoth the savings and investment rates in the country are experiencing a faster rate of

growth recently. Both the indicators are expected to rise very fast in the coming years.

The age profile in India among the global population over the world is considered to be a

better dividend for the country’s economy. Young population group of India’s economy has

significantly added to the country’s growth.

The Government of India in the same direction has undertaken many steps to train and

educate its masses for getting employment.

Policy measures undertaken in India recently have helped a lot in the economic progress.

Economic growth has created huge employment opportunities on the one hand and reduced

poverty on the other. With manifold objectives in mind, the Government has come forward

with high investments on social sector development particularly on health, education and

infrastructure related developments.

3) INFLATION IN INDIA:

The current rise in inflation has its roots in supply-side factors. There was shortfall in domestic production vis-à-vis domestic demand and hardening of international prices, prices of primary Commodities, mainly food items. Wheat, pulses, edible oils, fruits and vegetables, and condiments and spices have been the major contributors to the higher inflation rate of primary articles. The inflation was also accompanied by buoyant growth of money and credit. While the GDP growth zoomed to 9.0 per cent per annum. Demand for nearly everything

from housing to fast moving consumer goods is outpacing supply in part because white-collar salaries are rising faster in India than anywhere else in Asia. One of the daunting tasks before the government is to reconcile the twin needs of facilitating credit for growth on the one hand and containing liquidity to tame inflation on the other.

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Investment Opportunities in Stock market

4) FDI (Foreign Direct Investment)Foreign direct investment (FDI) into India has increased significantly during the

current financial year. The inflows are likely to be more than double the amount recorded in 2006. FDI equity inflows during April 2006 to November 2006 were $7.2 billion, which is the highest ever for equity capital since economic liberalization. The higher inflows as well as the new credit rating reflected growing investor confidence in India.

As the third-largest economy in the world, India is undoubtedly one of the most preferred destinations for foreign direct investments (FDI); India has strength in information technology and other significant areas such as auto components, chemicals, apparels, pharmaceuticals and jewellery. India has always held promise for global investors, but its rigid FDI policies were a significant hindrance in this regard. However, as a result of a series of ambitious and positive economic reforms aimed at deregulating the economy and stimulating foreign investment, India has positioned itself as one of the front-runners ofthe rapidly growing Asia Pacific Region. India has a large pool of skilled managerial and technical expertise. The size of the middle-class population at 300 million exceeds the population of both the US and the EU, and represents a powerful consumer market.

INDUSTRY ANALYSIS:

When stocks move, they usually move as groups; there are very few lone guns out there. Many times it is more important to be in the right industry than in the right stock. To assess an industry groups potential, it would be consider the overall growth rate, market size, and importance to the economy. While the individual company is still important, its industry group is likely to exert just as much or more influence on the stock price.

1.) INTERNATIONAL CRUDE OIL MARKET SCENARIO

“Oil is the one commodity absolutely essential to this tidal wave of global growth. It's

literally the blood supply of global growth. If it is a developing country, it need all the oil it

can get to drive it’s trucks,may it be cars, planes or ships. It needs oil to run the factories,

machines and power plants so necessary to a modern industrial economy. Due to newly

industrialized countries are joining the party and importing an unending procession of super-

tankers laden with black gold the demand for is increasing continuously.

Since decades Crude Oil is playing key role in the global energy supply and it will continue

to remain so for the half of 21st century. Crude Oil and Natural Gas satisfy around 37.5% of

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Investment Opportunities in Stock marketthe global energy requirement and it is expected that this share will increase in the coming

decades

It is however surprise to notice that though crude oil is required by every country for the

development of their economy but majority of these resources are lying in the unstable

country like Iran, Iraq and others. Although world crude oil reserves have been increasing

over the years but their reserve to production (R/P) ratio is decreasing. It is estimated that the

entire global crude oil reserve would end up in the next 40.6 years. What surprised the most

is though the reserve and consumption has seen an upward movement, the production figure

is lower. It means to say global crude oil consumption figures are higher than the production

figures.

2) MAJOR CRUDE OIL PRODUCERS

Iran accounts for world’s 2nd largest proven conventional oil reserves and also the 2nd

largest Producer of crude oil in the world. However its production saw a major decline and

now it averages at 1.5 billion barrel per year. However Iranian production has suffered a lot

because of the US, which is prohibiting imports from Iran.

Canada

Canada has occupied a substantial position in the world crude market. From 8.7 billion

barrels in 1980 to 16.7 billion barrels of crude oil reserves in 2005.

United States

It is the demand from the United States, which made the world realize about the importance

of Crude Oil and Natural Gas. Since the 19th century United States is using Crude Oil and

Natural Gas for various purposes and from then till date United States Crude Oil reserves and

production both have reached its peak and now seeing a continuous downward trend. There is

no need to go back much, if we consider 1980 and 2005 end, reserves have declined by 20%.

In 1980 US had a reserve of 36.5 billion barrels and as on 1st January 2006 it is 29.3 billion

barrels. Since 1980 reserves were continuously declining and it is declining at a much faster

rate, which indicates the rate, at which the consumption is increasing. United States

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Investment Opportunities in Stock marketproduction figures are also seeing a downward trend, in 1980 production was 4 billion barrels

whereas as on 1st January 2006 it is 2 billion barrels i.e. a decline of 50%. The above figures

indicates that over the years US consumption is increasing and it will continue to do so at a

faster rate in the future and to satisfy the demand US is now banging on the imported crude

oil in much larger quantity. Canada is the major source of import for US. Around 90% of the

production in Canada is exported to US, but as said earlier that Canada domestic

consumption is increasing year after year and it will leave less space for the US export in the

future. It is interesting to note that US has the largest concentration of Oil Shale in the world,

according to Bureau of Land Management and holds around 800 billion barrels of

recoverable oil which huge enough to meet current US demand for another 110 years.

However the main constraint in developing the Oil shale reserves is the easy access to cheap

Canadian Oil sands which they has under the NAFTA (North American Free Trade

Agreement). Not only this, there are also various environmental factors which does not allow

the development of Oil Shale.

3.) OPEC - Organization of Petroleum Exporting Countries

Though it was from 1914 (after World War I) when world starts realizing about the

importance of Oil and starts exploring for it, but it was the great 1960 when World saw the

emergence of a new body OPEC and since then World Oil market never remain the same as it

was before. After the formation of OPEC world crude oil prices starts fluctuating in a manner

as the waves of music fluctuate and starts reaching a new high every now or then. OPEC was

founded in Baghdad, Iraq, in September 1960, in order to unify and coordinate its members’

Crude policies, so as to secure fair and stable prices for petroleum producers; efficient,

economic and regular supplies of petroleum to consuming nations and a fair return to those

investing in the industry. So it is clear that it is formed not to help the world market but to

help its members. Originally it includes Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela as

its members, but as time passed by it keeps on expanding and as of today it includes 12

members.

Today OPEC accounts for almost 76% share of world oil reserves but it accounts for mere

40% of the world oil production. Oil prices are rising day after day not because the world is

running out of Oil but because the bulk of reserves are in countries where market incentives

cannot work fully or in the hands of monopolists who have may be exercising their power by

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Investment Opportunities in Stock marketrestraining investments. World crude oil reserves are estimated at more than 1 trillion barrels

of which OPEC are estimated to hold more than 75%. Since OPEC holds the major portion of

Oil reserves/output it exerts strong influence on global oil prices. When OPEC decides to cut

down production level it increases the world oil prices whereas when it boost oil production

in order to increase supplies it drives down the price but this hardly happens. As of January

2007, world recoverable oil reserve is estimated at 1317 billion barrels, OPEC contribute 910

billion barrel and Rest of the world contribute 407 billion barrel

World crude oil demand is increasing year after year and it will continue. OPEC being the

major will always play a strong role in World Crude supply. According to Fatih Barol

(former statistical analyst of OPEC) Share of OPEC in World supply will rise to around 50%

by 2030 from its present level of 42%.

Five Indian oil companies have been listed in the Fortune Global 500 lists for the year 2009.

They are:

Rank 153 - Indian Oil Corporation Ltd (IOCL)

•A wholly owned subsidiary company, Indian Oil Technologies Ltd. is the 19th largest

petroleum company in the world

•India’s largest company by sales.

•India’s flagship Downstream company - Along with subsidiaries accounts for 47% of

Petroleum market share among Public Sector Oil Companies, 41% of National refining

capacity and 51% downstream pipeline capacity

•Operates the largest and widest network of petrol and diesel stations in the country

•Indian Oil’s world-class R&D Center has developed over 2,100 formulations of SERVO

brand lubricants and greases for virtually all-conceivable applications meeting stringent

international standards and bearing the stamp of approval of all major original equipment

manufacturers.

•Indian Oil is also strengthening its existing overseas marketing ventures and simultaneously

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Investment Opportunities in Stock market•scouting new opportunities for marketing and export of petroleum products to new energy

markets in Asia and Africa.

Rank 342 - Reliance Industries Ltd.

•India’s largest private sector company on all major financial parameters

•Presence in Upstream, midstream and downstream segment

Rank 368 - Bharat Petroleum Corporation Ltd. (BPCL)

•It is the 3rd largest oil company in India owned by the Government of India.

•In 1976, the Burmah Shell Group of Companies was taken over by the Government

of India to form Bharat Refineries Limited.

•In 1977, it was renamed Bharat Petroleum Corporation Limited. It was the first refinery to

process newly found indigenous crude (Bombay High), in the country.

Rank 378 - Hindustan Petroleum Corporation Ltd.

•HPCL a Fortune 500 Company, with an annual turnover of over Rs 74,044 crores, 20%

refining & marketing share in India and a strong market infrastructure.

•The Corporation operates 2 major refineries producing a wide variety of petroleum fuels &

specialties, one in Mumbai (West Coast) of 5.5 MMTPA capacities and the other in

Vishakhapatnam (East Coast) with a capacity of 7.5 MMTPA.

•HPCL holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited, a

refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is progressing

towards setting up of a refinery in the state of Punjab.

•HPCL also owns and operates the largest Lube Refinery in the country producing Lube Base

Oils of international standards. With a capacity of 335,000 Metric Tones this Lube Refinery

accounts for over 40% of the country's total Lube Base Oil production.

•The vast marketing network of the Corporation consists of Zonal offices in the 4 metro cities

and 85 regional offices facilitated by a supply & distribution infrastructure.

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Investment Opportunities in Stock marketRank 402 - Oil and Natural Gas Corporation Ltd. (ONGC)

It is a public sector petroleum company in India, contributing 74% of India’s crude oil

production.

Revenue (2006): $ 10.5 billion

Employees: 41000

•ONGC has gained junior shares in a host of projects, from Russia's Sakhalin-1, Iran's

Yadavaran Field and Sudanese properties abandoned by Western investors.

•But it has yet to take a lead role that would give it more say and a bigger share of future

production. The race is gaining urgency both for India and ONGC as Chinese and other Asian

competitors snap up plum properties in the face of stagnating domestic production.

•The 50-year-old firm has acquired interests in 16 overseas projects since it started looking

abroad in 2001.

•Government officials say ONGC must boost its reserve-to-production ratio - the number of

years its reserves will last with the current level of output - by improving its drilling

technology and management practices. ONGC's ratio is 22 years. In some onland areas the

ratio is 57 years.

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Investment Opportunities in Stock market9.3) COMPANY ANALYSIS

Once the industry group is chosen, an investor would need to narrow the list of companies

before proceeding to a more detailed analysis. Investors are usually interested in finding the

leaders and the innovators within a group. The first task is to identify the current business and

competitive environment within a group as well as the future trends. How do the companies

rank according to market share, product position and competitive advantage? Who is the

current leader and how will changes within the sector affect the current balance of power?

Success depends on an edge, be it marketing, technology, market share or innovation. A

comparative analysis of the companies within a sector will help identify the company with an

edge, and those most likely to keep it.

9.4)ABOUT ONGC:

Oil and Natural Gas Corporation (ONGC) was set up in 1956 with significant contribution in

industrial and economic growth of the country, is a leading National Oil Company of India

engaged mainly in exploration, development and production of crude oil, natural gas and some

value added products. It was subsequently converted into a public limited company in Jun.'93

following new liberalized economic policy adopted by the Government of India in July, 1991

sought to deregulate and delicense the core sector (including petroleum sector) with partial

disinvestments of Govt. equity in Public Sector Undertakings and other measures.

ONGC is one of the “Navratna” PSUs.It is India's largest producers of Crude Oil, Natural Gas

and LPG. It also produces other value added petroleum products such as NGL, C2-C3, Aromatic

Rich Naphtha and Kerosene. Since its inception in 1956 the company has made four basin

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Investment Opportunities in Stock marketdiscoveries in India and presently produces from 108 oil & gas fields located in six sedimentary

basins. The company is active in 16 of the 26 sedimentary basins and in others knowledge-

building efforts at various stages are in progress. Its activities are spread over both land and

offshore areas of Indian sedimentary basins.

During March, 1999, ONGC, Indian Oil Corporation (IOC) a downstream giant and Gas

Authority of India Limited (GAIL) the only gas marketing company, agreed to have cross holding

in each other's stock to pave the way for Long-term strategic alliance amongst themselves, both

for the domestic and overseas business opportunities, in the energy value chain.

In March 2004, the government of India has disinvested its stake in company through Offer for

sale of up to 142593300 equity shares of Rs. 10 each at a price of RS. 750. ONGC is pursuing a

strategy of downstream integration to diversify its revenues and establish

presence in higher-margin segments. Through MRPL, it has a major presence in oil refining

(capacity: 9.69 million TPA - 8% of total refining capacity in India), and is looking to establish

up to 1600 retail outlets to get into oil marketing directly. ONGC stake in MRPL, a subsidiary

company was 71.62% during 2005.

9.5) STRATEGIC VISION: 2001-2020

On a long-term basis, ONGC has drawn out a four-pronged strategy for the next twenty years.

This includes-

1. Doubling reserves from 5.77 billion metric tonne (bln Mt) oil plus oil equivalent gas (O+OEG)

to 12 bln Mt in the next 20 years.

2. Improving average recovery factor to 40% from 28% currently. Notably, while some of the

wells have a recovery factor of over 30%, some have a recovery factor of less than 10% also.

3. Souring 20-mln Mt pa Oil/Oil-equivalent Gas from Equity Assets abroad.

4. Sustainable growth as a Global Integrated Energy Provider.

The focus of management will be to monetised the assets as well as to assetise the money.

MANAGEMENT:

The Company is managed by the Board of Directors, which formulates strategies, policies and

reviews its performance periodically. The Chairman & Managing Director and six Whole-time

Directors manage the business of the Company under the overall supervision and guidance of the

Board. The Functional Directors, Statutory Auditors, were also invited to attend the Audit &

Ethics Committee Meetings, as and when required. The Board has 16 members, comprising of 7

Functional Directors (two vacant), including the Chairman & Managing Director, 1 Director from

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Investment Opportunities in Stock market ONGC Videsh Ltd. (vacant), and 8 non-executive Directors comprising of: 3 part-time official

Directors (one vacant) and 5 part-time non-official Directors (one vacant), all nominated by

Government of India. The Board of Directors thus, has an adequate combination of executive and

non-executive Directors.

Mr. R.S. Sharma, a Fellow member of the Institute of the Cost and Works Accountants of India

and Indian Institute of Bankers. Mr. Sharma has attended Advance Financial Management

programme in Oil and Gas from University of Texas, Dallas, USA. Mr. Sharma has experience of

thirty years in Finance, Accounts, Management, Insurance and Banking. Mr. R.S. Sharma has

been on the Board of ONGC since March 1, 2002. Mr. Sharma was earlier Director (Finance),

OVL and before that he was with ONGC for a period of twenty years. Prior to this he was with

Union Bank of India.

Dr. Ashok Kumar Balyan joined the Board of ONGC as Director (Human Resources) on

August 23, 2003. He holds a Doctorate degree in Chemistry from Technische Hochshule fur

Chemie, Merseburg, Germany; an alumnus of IIT, Delhi. He has thirty years of experience and

has held several field and staff assignments in various disciplines including Analytical Geo-

Chemistry Lab, Mud Engineering, Planning, and Monitoring of Exploration activities, Project

Management and Basin Manager and Head of Exploration. He has been with ONGC since 1976

and prior to that he was with Shriram Institute for Industrial Research.

Mr. Y.B. Sinha joined the Board of ONGC as Director (Exploration) on May 5, 2000. Sh.Sinha

holds a Master’s degree in Geology from Lucknow University. He has experience of 37 years in

ONGC. He has been involved in installation of reservoir simulation facilities and in development

of the Company’s exploration and exploitation strategy. He played a major role in evolving the

exploration strategy for the Company and was instrumental in the transformation of the

operational entities through planning of acreage specific and areas requisite exploration

programme, when the Government of India introduced the NELP regime. He also has evaluated

oil and gas fields in Russia, Sudan, and Kazakhistan. Mr. Sinha joined the Company as a field

geologist and has been with us since 1966. Mr. Sinha is on the Boards of ONGC Videsh Ltd,

Petronet LNG Ltd. and Petro Technical Open Software Corporation, Houston. He is member of

Human Resource, Project Appraisal, Health, Safety & Environment and Policy & Planning and

Mumbai High Re development Project Committees.

Porter’s Five Forces Model & ONGC: -

ONGC is the company which mainly operates in upstream segment of the Oil & Gas sector

so, following can be the implications of Porter's Model to ONGC: -

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Investment Opportunities in Stock market Threat of New Entrants:-ONGC and Oil India dominate the upstream segment.

Together they contribute 87% to India's total oil production. However, with the

exploration getting renewed thrust, private players will increase their share in the

segment. In an effort to secure the supplies of crude oil, government is trying to get

oil equity across the globe

Bargaining Power of Buyers: -Since the Govt. allocates the crude oil produced by

ONGC; ONGC is forced to share under-recoveries on the sale of petroleum products

by way of giving discounts to OMCs. (Oil Marketing Companies). So, the bargaining

power of buyers is high.

Bargaining Power of Suppliers: -Since the 70% of the requirement of crude oil is met

by imports from OPEC countries so; their bargaining power is high.

Threat of Substitutes: - It is low for ONGC due to the fact that in addition to

traditional oil and gas business, ONGC is engaged in the development of alternative

hydrocarbon extraction technologies such as coal-bed methane, or CBM, gas hydrate

production and underground coal gasification. Using CBM technology, methane, a

type of natural gas that is considered to be a relatively “clean” fuel, can be derived

from coal seams. They have budgeted a total of Rs. 2,200 million for investment in

CBM exploration and development through fiscal 2007.With the growing demand for

energy, demand for alternative fuels such as LNG, CNG and CBM (coal bed

methane) is likely to rise. ONGC has been awarded CBM fields during the fourth

round of NELP and plans to start commercial production in 1QFY05.

Inter - Firm Rivalry: -The Oil and Natural Gas Corporation Limited (ONGC) enjoys a

dominant position in the country's hydrocarbon sector with 84 per cent market share

of crude oil & gas production. Around 57 per cent petroleum exploration licenses in

India for over 588 thousand sq. km belonged to ONGC. Further, it has acquired

management control of MRPL, which marks its entry into the refinery business. Due

to near monopoly position of ONGC, the inter - firm rivalry is low.

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Investment Opportunities in Stock market9.6) Shareholding Pattern

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9.7) PROJECTS & INVESTMENTS

ONGC is actively involved in Increased Oil Recovery (IOR) and Enhanced Oil

Recovery (EOR) projects in 15 of its major fields to augment recovery from the matured

fields. These involve a substantial Capital Expenditure (Capex)

Capex: ONGC has spent 99.75 of its CAPital Expenditure (Capex) on Exploration

and Production (E&P). In the last 5 years, ONGC has spent a record Capex of around forty

thousand Crore rupees, highest among Indian corporate during this period.

ONGC’S PROJECTS

A total of 22 Discoveries were made which include 9 New Prospects (3 Deep waters, 1 Shallow water, 5 Onshore) and 13 new pools.

First ulta-deepwater gas discovery of the country established in KG offshore in well UD-1 (waterdepth: 2841 m) in NELP block KG-DWN-98/2.

Highest In-place Oil & Gas reserve accretion of 169.52 MTOE in 11 years; 9th time crossed the150 MTOE milestones in 51 years of operation.

ONGC Videsh Limited (OVL), the 100% owned subsidiary of ONGC, recorded the highest everproduction of 7.95 MTOE of Oil + Oil Equivalent Gas in 2006-07, up 25% from 6.34 MTOE in FY 06

With the addition of 9 more properties in FY07, OVL now has 26 projects spread in 15 countries.

OVL’s ties in Brazil further strengthened with signing of an agreement between ONGC and Brazilian Oil Major Petrobras to swap interests in offshore blocks in India and Brazil.

Crude Oil production went up by 9% to 26.05 MMt in FY07, from 24.4 MMt in FY06.

Natural Gas production was maintained at 22.44 billion cubic meters (BCM) compared to 22.57 BCM in FY06, despite massive disruptions of operations in Hazira Plant due to flood.

ONGC & GAIL signed Gas Sales Agreement (GSA) on 7th July 2006.

CREDIT RATING

ONGC has been awarded the highest-ever Credit Rating for any Indian corporate by the

International Credit Rating Agency Moody’s Investors Services. ONGC secured - Baa1

(Indicative Foreign Currency debt rating.)

CRISIL and ICRA have also assigned ONGC the highest domestic credit ratings of AAA and

LAAA, respectively with a ‘stable’ outlook.

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9.8) FINANCIALS OF ONGC: Liquidity ratio: -Current ratio

Years Mar’ 08 Mar’ 09 Mar’ 10

CurrentRatio

1.41 1.28 1.15

Current ratio indicates the liquidity position of ONGC. As per the Ideal Current Ratio is 2:1 but ONGC’s is below the Ideal Ratio, Moreover it has decreased over the period of 3 years. Which shows that its current assets (receivables) are decreasing and all the current liabilities are increasing which shows it that it may not be able to pay off its current liabilities out of current assets .It does not project a good image for creditors.

Turnover ratios: -1.) Finished goods inventory (day’s cost of sales)


F.G.inventory 2.33 5.36 3.80

The ratio indicates the days in which the inventory can be transformed up to sales .In the year 2006 the ratio as increased which shows ONGC’s inefficiency in the year 2007 to convert its finished goods into sales but in the year 2008 it has performed very well. And hence its days of converting its finished goods into sales are decreased .The ratio shows the operating efficiency of ONGC, so it is also indicates that the large amount of funds are not blocked into inventory for a long period of time.

2.) Receivable (day’s gross sales)-collection period days


CollectionPeriod

30.80 28.36 17.74

The collection period implies the efficiency of management in realizing money from debtors. Since the collection period has decreased marginally in 2007 and it has decreased very much in 2008, which indicates the credit collection efficiency of ONGC towards its debtors. It also indicates that ONGC is able to generate cash flows from its debtors in relatively less days. Further its investment in debtors in 2007 has also decreased by around Rs 10,000 mn.

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Creditors (days cost of sales)


CollectionPeriod

30.80 28.36 17.74

Profitability Ratio: -

EPS


EPS 91.05 101.20 73.14

The ratio indicates the earning of the shareholder on their investment .The EPS of ONGC has increased in 2007 due to increased in PAT, which shows that ONGC is maximizing the wealth of the shareholders. The decreased in EPS in 2008 should not be misinterpreted because the reduction in EPS is primarily due to the bonus issue made by ONGC in the ratio 1:2 .The EPS of ONGC has decreased due to increased number of shares (bonus issue) but PAT on year on year basis as increased.

Gross profit marginYears Mar’ 08 Mar’ 09 Mar’ 10

Gross ProfitMargin

46.44 52.34 44.66

The gross profit margin shows the margin between sales and cost of goods sold .It has increased in the year 2007 due to the substantial, increase in gross profit .In the year ended 2008,the gross profit has increased marginally and the sales has increased in a large proportion, thereby the Gross Profit Ratio of ONGC’s has declined.

PAT


PAT 28.0 29.06 27.62

The net profit margin shows the operating efficiency of a company .In the year 2007 the ratio has increased due to increased gross profit margin whereas in the year 2008, it has declined marginally in spite of declining Gross Profit Margin which shows he efficiency of ONGC in reducing its indirect expenses.

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Investment Opportunities in Stock marketROI


ROI 41.44 40.41 26.75

ROI measures the performances of a company. The ratio has decreased marginally in 2007 and substantially in 2008 due to increased investment in 2007 that is the reason for declining ROI in spite of increased PAT.

Debt –Equity Ratio


Debt –Equity Ratio

0.21 0.24 0.24

It indicates the leverage for a firm .The ratio is low due to 74%shareholding of the government in ONGC and its equity shareholding. The ratio has increased in 2007, which shows the increasing debt component in the capital structure of ONGC. But ONGC has kept its debt component unchanged in the year 2008. Share Price History of ONGC: As on dated 16/06/2011

After Studying and Analysing the Financial of ONGC the Following Interpretation came

forward:

Highest-ever Dividend of 450% (up from 400% dividend for FY05). The total payout

in absolute terms works out to be Rs. 6,417 Crore (up12.5% from Rs. 5,704 Crore);

out of this, the Government will get Rs. 4,757 Crore (74.14%).

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BSE NSE

Open Price Rs. 268.80 Rs. 268.00

High Price Rs. 270.90 Rs. 270.85

Low Price Rs. 266.80 Rs. 266.10

Close Price Rs. 269.25 Rs. 269.10

Volume 377797 1751848


ONGC recorded the highest-ever Gross Income (Turnover) of Rs. 49,440 Crore (up

4% from Rs. 47,245 Crore in FY05). 66% of the Turnover came from sale of Crude

Oil, 14% from sale of Natural Gas and 13% from sale of Value-Added- products

(VAPs) like LPG, NGL, ARN, and Trading - 7%. The Compounded Annual Growth

Rate (CAGR) in Gross Income in last 5 years is 20.6%

Highest-ever Net Profit of Rs. 14,431 Crore (up 11% from Rs. 12,983 Crore in FY05)

Net Worth Rs. 53,593 Crore (up 15% from Rs. 46,314 Crore in FY05).

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10) RECOMMENDATION & SUGGESTIONS

Investors need to be cautious on the following risk factors:

1. As the market situation changes from time to time, we suggest a continuous study is

required for finding the available options of investment which will reduce the risk

factors of investment.

2. The prices of oil, in particular, crude oil and value-added products are linked to the

international prices of such products. A strong recommendation is to study the

international market and their growth in our country.

3. A portion of investments to be invested in such a scheme so that the investors get the

funds invested with the company with full insurance & security.

4. When the expenses & investments are made in foreign currencies the risk factors

covered is also high thus the company should invest major of their funds in foreign

market with high returns and study the market & the risk factors regularly with

respect to their field.

5. The type of investments may be either long term or short term depending on the

market scenario, availability of funds, interest rates etc. The company has to

understand and calculate the risk factor and the profit and then take the necessary

steps and measures to reduce the risk factor and maximise the return on investments

of the investors. Research and development department with thorough professionals

with complete knowledge and study is strongly recommended and suggested.

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11) RESEARCH FINDINGS & CONCLUSION

FOR ONGC ORGANISATION:

1) After looking at the above analysis ONGC stands strong Net Profit for last FY & the

market capitalization. The financial performance of ONGC for the 3 years reflected a

good growth in sales and though all the market segments sustained or bettered their

performance over the previous years. Cost overrun in a few long-term projects

impacted the profitability. However, the company’s track record has always been

oriented towards profitable growth and with the strong fundamentals; the company is

well placed to grow continuously on major fronts. The financial performance of the

company for the 3 years reflected a good growth in sales and though all themarket

segments sustained or bettered their performance over the previous years.

2) EPS measures per share profit available for distribution for equity shareholders. The

ratio indicates the earning of the shareholder on their investment .The EPS of ONGC

has increased in 2006 due to increased in PAT, which shows that ONGC is ss the

wealth of the shareholders. And further ONGC’s has issued bonus share in the ratio

1:2.

3) The overall performance of the company is good and there is a continuous flow of

project business. The company is continuing its drive for volume with continued

focus on profitability. Looking at the above-mentioned ratios, ONGC looks profitable

in the long run because there is nosign of downfall in the near future.

4) The government’s drive to get higher dividends from PSUs also makes these

companies worth a look on the dividend yield front.

5) Comparing the financial statement & analyzing the ratios of ONGC it seems to be a

good buy for the Investors.

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11.1) FOR RETAIL INVESTORS AS OPPORTUNITIES IN EQUITY MARKET:

After collection of raw data from small size of population, I cannot conclude with one sided

opinion but this research can definitely help to find general tendency of small or retail

investors towards one of the biggest industry in India i.e. capital market. Due to

uncontrollable volatility of market and prejudice thinking about share market as a kind of

“Gambling”, holding retail investors back to enter in to new platform for their investments.

When me and my team collected data about local residents we found that they don’t

even understand what is share market and few only knew that they were investing their

money, which they even can lose about the same what it is they know only one thing that

entering into share market is as equal to losing your own money in big gamble. We tried to

clear these misconceptions about market while interacting with them many of them

understood but still were hesitating to park their part of money in share market. We arranged

few seminars also for creating awareness about equity and capital market. As per my study

findings which I came to know after research that people have small proportion of their

income as saving and most of them are ready to invest them into share market but they really

need proper guidance to increase their awareness and risk appetite to enter into capital

market. They really want to know when to enter into market i.e. perfect entry and when to

remove money from market i.e. perfect exit.

CONCLUSION:

At the end I would like to conclude as part of my research study I have taken only one sector

i.e. Oil sector to bring light on investment opportunities for investors with main focus on

retail investors. But it won’t be sufficient to say that only oil sector is good or bad to invest,

it’s just small part of bigger industry as investment venue.

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12) LIMITATIONS OF THE STUDY

There are several limitations exists to my study. It cannot be universally applicable as it

studied on small size of population and it will be differ country to country or city to city I

would like to state limitations of the study in points for better understanding:

1) Study was done keeping in mind the kind of people who are aware and capable of

investing & can take risk. Hence, people who are not aware and are capable of investing are

not considered and thus the study is limited to the extent of scope of investments.

2) Market studied for investments done depends on the availability of growth in certain

industries for that particular period with only limited future growth.

3) The accuracy of Data collected and analysed is temporary and hence cannot be certified as

permanent as the same can change from time to time depending upon the market and

available funds.

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13) IMPLICATION OF THE PROJECT FOR THE COMPANY

Implication of conducted research and its findings can help the company by various ways.

Basically research was on prospective customers/investors who invested their money in

securities with the help of any one of the leading broking firm in India viz. Motilal Oswal

Securities Ltd (MOSL). So implication of the project is as follows:

Prospective clients can be targeted by an organisation through findings of analysed

and interpreted data.

The company can plan their investment based on the return through proper study

based on purchasing power, investment habits and expectations regarding equity

market and as per the customer’s expectations.

The study helps the company to plan business strategies as they found new findings

which varies from various localities.

Based on the findings and expectations of the customers from various localities, the

company can advertise their activities according to the needs of the customers, which

would benefit the Company as well as the customers.

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14) SCOPE FOR THE FUTURE STUDY

Indian capital market is ever booming with high scope for earning and learning stock market

and thus leaving a huge scope for study and experiment. Every now and then there are new

scenarios emerging in the Oil sector industry. As I studied about retail investors and future

investment opportunities for the customers in Oil sector, both are subjective and can change

with prevailing market conditions. Investors can vary in the equity market as per their risk

appetite, income level, purchasing power, willingness to invest, and many things can pursue

their mind to enter or exit from the market and if we talk about investment opportunities in

equity market, it also can change with volatility in the market sometimes it’s better to invest

in equity market than real estate and gold and sometimes equity market becomes most

vulnerable to park one’s hard money so both things are leaving huge scope for future study as

it changes time to time and its inconsistency is itself is one opportunity to study on this

market and its participants. But in fact it is safer to invest in Oil sector as this market is

growing on the higher side.

Various Research and studies in India emphasises Oil sector as one of the most

booming sector for investment and growth. Every year there are new competitors in this

industry as it is more lucrative for big giants of world MNC’s like Wal-mart, HUL etc, so

same way other organisations are looking to enter into this industry. FMCG sector is more

consumers driven and they have to adopt latest trends which are prevailing in market and due

to which it provides huge scope for future study on this topic, which I have chosen for my

research and project by considering all above factors.

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15)BIBLIOGRAPHY/REFERENCES

A) Books:

Financial Management by Prasanna Chandra

Financial Management by I M.Pandey

B) Website:

www.motilaloswal.com

www.geojit.com

www.icicidirect.com

www.moneycontrol.com

www.nseindia.com

www.bseindia.com

www.ibef.org

www.managementparadise.com

www.moneypore.com

www.buzzingstocks.com

www.wikipedia.org

www.petroleum.nic.in

www.ongcindia.com

www.sebi.gov.in

C) Journals and newspapers:

Dalal Street May &June, 2011

Mint newspaper

The Economic Times

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a project report o1

Documents

importance of stock

basics of stock market

money market

basics of capital market

huge ongc market

sub topic

topic conclusions

market happenings ups