equity investment opportunity analysis

8/6/2019 Equity Investment Opportunity Analysis

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Pranab NandaPratik ParikhJaydeep kalariaAnkit Iyer


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Objective of the Study

Scope

Significance and Relevance of the Study

Limitations of the Study

Financial Market

Equity Market

Investing Principles Rules & Regulations in the Indian Equity Market

IT Equity Sector Status

SWOT Analysis of Indian IT Sector

Selection of Key Indicators for Stock Selection

Key Indicators

Conclusions

Recommendations


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To study three public limited companies in a particularsector;

To compare certain critical financial ratios frominvestment point of view;

To identify, analyse and evaluate factors that affectequity investment ;

To select the best stock in the sector chosen;


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The project covers sectoral analysis and equity analysis of three

potential public limited companies of a particular sector;

The following components of the Equity market will be studied and

presented:

Prevailing policies as per Reserve Bank of India;

Balance Sheet and Profit & Loss Analysis include Changes in

Capital Structure, Returns on Investment, Return on Equity,

Changes in Capital Structure, Bonus given by Company, Profit

relativity, Market Price, Volume Analysis, Dividend Pattern;

Fundamental analysis of 3 selected companies in IT sector;


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The project is based on secondary data available on public domain;

Investment in Equity Market is subject to market risk. Investor

should read our recommendations and the documents of the

company carefully before investing;

To prepare guidelines for an investor to invest in equity market;

To enhance wealth of investors and guide them through report;

An Investor can assess and determine whether investment in any of

the proposed security is worth or not;


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A mechanism that allows people to buy and sell (trade) financial

securities (such as stocks and bonds), commodities (such asprecious metals or agricultural goods) at low transaction costs and

at prices that reflect the efficient-market hypothesis.

facilitate:

The raising of capital (in the capital markets)

The transfer of risk (in the derivatives markets)

The transfer of liquidity (in the money markets)

International trade (in the currency markets)

and are used to match those who want capital to those who have it.


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Preferred as best Investment because of:

the possibility of incredibly high returns and wealth creation;

It will not only earn capital appreciation but also dividend yield

also;

Chances of getting bonus share.

Entitle to have benefits of split share from corporate action of

company;

All dividends are tax free, one has to pay only a 10% short term

capital gains tax on profits made within a year, and all profits

earned after a year are exempted of long term capital gain tax;

the investment is perfectly liquid as one can sell your share and

redeem the gains at any time;


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Invest for Real Returns

Keep an Open Mind

Never Follow the Crowd

Everything Changes

Avoid the Popular

Learn from your Mistakes

Buy During Times of Pessimism

Hunt for Value and Bargains

Search Worldwide

No-one Knows Everything


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Securities Exchange Board of India (SEBI), repeal of the Capital Issues

(Control) Act, 1947;

Disclosure and Investor Protection (DIP) guidelines;

Screen Based Trading Systems (SBTS) by NSE;

National Securities Clearing Corporation Ltd., (NSCCL) in April 1996;

Foreign Exchange Management Act, 1999;

Foreign Direct Investment Policy in 2010;


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STRENGTHS WEAKNESS Large no. of talented graduates Affordable and quality education as

compared to developed countries

English language benefit

Well-developed IT industry

Strong customer base of well knowncompanies

Powerful venture capital interest ininvesting in growth opportunity

Scarce foreign language skills other

than English.

Lack of customer service culture

Expensive and poor quality telecominfrastructure

Poor electricity supply

Cultural differences High attrition rates, therefore less

no. of people with extensive callcentre experience

OPPORTUNITIES THREATS Horizontal and vertical expansion of

existing customer base into newmarkets

Time zone difference between andtarget markets

Increasing awareness of outsourcingservices

High Billing rates

Political instability

India's competitors in EasternEurope, and the Asia Pacific regionsoffering cheap BPO services

Increasing technology automation


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To each purchase, one should make sure that one obtains (1) a

minimum of quality in the past performance and current financialposition of the company, and also (2) a minimum of quantity in

terms of earnings and assets per dollar of price.

Benjamin Graham

Growth in Profit and Sales Earnings per Share

Price Earning (P/E) Ratio

DPS (Dividend per Share)

Return on Net worth (Equity + Reserves)

Dividend/ Net Profit

Return on Long Term Funds (%)

Price Analysis


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Constant growth in sales and profit reflects efficient management policy,competitive marketing strategy, fair pricing model of products, and

adoption of modern production technology and good workingenvironment of organization.


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One of the major factors for the dividend policy of the firm and marketprice of the company.

A steady growth in EPS year after year indicates good track ofprofitability.


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Measures the number of times the earnings of the latest year at whichthe share price of a company is quoted and is a barometer of themarket sentiment;It signifies the number of years in which the earnings can equal thecurrent market price;Companies with excellent track record of profitability, professionalmanagement and liberal distribution policy have high P/E multiplewhereas companies with moderate track record, conservativedistribution policy and average prospectus quote at low P/E multiple;


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Determines what proportion of earnings is paid to share holders byway of dividends and what proportion is ploughed back in the firmfor reinvestment purpose;Dividend policy of a firm depends on investor preference forcurrent dividends, interdependency between dividend andinvestment decision, irrational behaviour of investor and firms,different taxation of dividends and capital gains and under pricing ofequity issues;


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Motivates share holder to invest in a company is the expectation ofadequate rate of return on their invested funds and periodically they

will want to assess the rate of return in order to decide whether tocontinue with their investment;


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Indicates the extent of the net profits distributed to theshareholders as dividend;

A high ratio signifies a liberal distribution policy and a low ratioreflects conservative distribution policy;


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Basic principle of investment: buy low, sell high which is alwaysignored by the Investors and often get swept up in prevailing marketsentiment.;


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- For InvestorThe basic objective of an investor for making investment in stocks is

to obtain higher returns by selling it at a higher price subsequently.The positive change in price of stocks and income in the form ofdividends is expected by the investor when he invests his funds in thestock market.

From the analysis we can see that TCS and INFOSYS have given high

dividends from year 2006 to 2010.

TCS and WIPRO have given maximum return from year 2006 to 2010.

- For ShareholderThe shareholder invests in the company for long term investment.

They are always interested in profit and sales growth of the company,growth in earning per share and positive return on their investment.

From the analysis we can see that TCS and WIPRO have performedwell from shareholder perspective in the time frame chosen.


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The Journey of a Thousand Miles Begins with a Single Step

equity investment opportunity analysis

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