A

RESEARCH REPORT

ON

“EQUITY MARKETS: AN INDIAN INVESTMENT SCENARIO”

AT

KARVY STOCK BROKING LTD

SUBMITTED TO

SAVITRIBAI PHULE UNIVERSITY

In the partial fulfilment of the requirement for the award of degree of

MASTER OF BUSINESS ADMINISTRATION

UNDER THE GUIDANCE OF

Dr. Satish Inamdar

SUBMITTED BY

VIRAJ VINODBHAI KANSARA

SINHGAD INSTITUTE OF MANAGEMENT

VADGAON, PUNE-41.

(2015-2017)

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DECLARATION

I, the undersigned hereby declare that the project report entitled “EQUITY MARKETS: AN INDIAN

INVESTMENT SCENARIO” written and submitted by me to the Savitribai Phule Pune University, in

partial fulfillment of the requirements for the degree of Master of Business Administration under

the guidance of Dr.Satish Inamdar is my original work and the conclusions drawn therein based

on the material collected by myself.

Place:

Date:

2

ACKNOWLEDGEMENT

I acknowledge my sincere thanks for the cooperation and involvement by the college and all

those who have helped me in preparing and presenting the report.

I take this opportunity of expressing my profound gratitude to my project guide Dr. Satish

Inamdar, whose continuous support has been a constant source of motivation for me. I am

extremely thankful to him for providing valuable guidance and attention to me.

I would like to deep sense of gratitude to Dr. Parag Kalkar sir, sinhgad institute of

management(SIOM), pune, for allowing me to carry out this project work in this prestigious

institution.

I am also grateful to Mr. Yogesh Shimpi, manager at KARVY stock broking ltd, Nashik for

sparing their valuable time and cooperation in accomplishing my task. It was great experience

and pleasure working with such a dynamic personality.

At last special thanks to all merchants and shopkeepers for their valuable support in our project.

Place-

Date- Name- Viraj Vinodbhai Kansara

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Chapter 1

Introduction

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INTRODUCTION

The project is aimed at finding the business health and financial problem position of various

sectors for the purpose of doing investment in the shares of that company .fundamental analysis

is done tofor analyzing the sector’s position.

Initially 10 prominent sectors were taken into consideration (as listed below) and out of those

three important sectors were chosen for analysis.

1. Banking

2. Oil and gas

3. Infrastructure

4. Information technology

5. Pharmaceutical

6. Telecom

7. Retail

8. Power

9. FMCG

10. Automobiles

11. Mining

12. Refineries

The three sectors chosen for analysis are –

1. Pharmaceutical

2. Banking

3. Information technology

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There are two basic approaches one can use for doing the fundamental analysis, bottom up

analysis and top down analysis. This report is based on top down analysis, which means

report starts from economy analysis .Then the search narrowed to industry analysis ,and after

that analysis is done for specific companies.

The analysis of the company starts with data finding, such as company background, market

data ,share holding pattern and balance sheet and profit and loss account. It also includes

analyzing the investment rational. Then the analysis of the health is done with financial

statement analysis that includes ratios. It looks at profitability ratios, margin ratios,

performance ratios, efficiency ratios, capitalization ratios, growth ratios etc.

It is necessary to consider number of valuation tools before taking an investment decisions.

Finally the conclusion is drawn based on a result table showing all positives and negatives of

all 3 companies and comparing them. And one stock is recommended for doing investment.

This report would help the reader to get an insight on various sectors and would prove as

quick reference for those who are tracking the sector .I hope the report would prove handy

for people interested in tracking the future happening of the sector in the share market.

STATEMENT OF PROBLEM

In an industry plagued with skepticism 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 LONG

TERM or 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 the investor is willing to buy or sell

depends primarily on his expectations. If he expects the security price to rise ,hewill buy it; if

the investor expects the price to fall, he will sell it. These simple statements are the cause of

the major

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Challenge in forecasting security prices, because they refer to human expectations. As we all

know firsthand, humans expectations are neither easily quantifiable nor predictable.

Fundamental analysis is very important study to be done while investing in stock market. Since

all the investors in the stock market wants to make maximum profits possible, they just cannot

afford to ignore fundamental analysis. Fallowing are statements of problems in this project-

1. Which sector is most successful player to invest with?

2. Which company is most suitable to invest in the shares?

3. Which all are factors to be considered while doing analysis of the company?

OBJECTIVE

1. To find investment potential, health and financial position of the company of various

sectors for the purpose of doing investment in the shares of the company.

2. To understand each sector so that one can do analysis of his own while selecting stock

from various sectors for investment.

3. To study the background, business profile and investment rationale of the companies of

selected sector.

4. To perform a comparative analysis and check their relative position between the chosen

companies.

SIGNIFICANCE OF STUDY

In India many traditional people are very risk averse. They are not aware of investment

opportunities in stock market. They consider stock market as the game of gambling. But the

original scenario is quite different. There is no doubt that there are speculators who try to hike

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The price of the stock artificially. Investing in equities involves high risk and the return on it

totally depends on the company’s performance but investing in right stock at the right price and

holding for a longer time horizon would surely be a better investment.

For investing in various sectors company stock and to understand the business of those sectors

for the further upcoming IPO of the companies to invest in those companies which is profitable

or risky.

SCOPE OF PROJECT

1. This report would give an insight on how the sector performs & what points to look into

while tracking the sector

2. This report would also prove handy for the aspirants and enthusiast to understand the

knowhow of the sector.

3. This report will prove as quick reference for those who are willing invest in specified

sector companies.

4. The study would be helpful to determine the measures to be adopted that are important

to analyze various sectors.

LIMITATIONS OF THE PROJECT

1. The study can be biased to the extent of potential perception.

2. Data has a time limit of only last five financial years.

3. Collected data is historical in nature.

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Chapter 2

Organizational Profile

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Introduction

KARVY, is a premier integrated financial services provider, and ranked amongst the leading

corporate in the country in all its business segments, servicing over millions of

individualinvestors in various capacities, and provides investor services to many corporates,

comprising the who’s who of Corporate India. KARVY covers the entire spectrum of financial

services such as Stock Broking, Depository Participants, Distribution of financial products –

mutual funds, bonds, fixed deposit, equities, Insurance Broking, Commodities Broking, Personal

Finance, Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs,

among others. Karvy has a professional management team and ranks among the best in

technology and operations.

KARVY Stock broking ltdKarvy Stock Broking Limited was incorporated on 30th March 1995. Karvy Stock Broking

Limited (KSBL)is a member of – National Stock Exchange Limited, Bombay Stock Exchange

Limited and MCX Stock Exchange Limited. Karvy Stock Broking Limited has been registered as

a Depository Participant with National Securities Depository Ltd (NSDL) since December 1997

and with Central Depository Securities Ltd (CDSL) since October 1999 and offers these services

across the network.

Business FocusKARVY covers the entire spectrum of financial services such as Stock Broking, Depository

Participants, Distribution of financial products like mutual funds, bonds, fixed deposit, equities,

Insurance Broking, Commodities Broking,Personal Finance, Advisory Services, Merchant

Banking & Corporate Finance, placement of equity, IPOs, among others. Besides this, we also

provide customized advisory services to help in making the right financial moves that are

specifically suited to portfoliorequirements of the clients.

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Vision statement

“To be pioneering financial services company. And continue to grow at a healthy pace, year after

year, decade after decade.”

Mission statement

“To Bring Industry, Finance and People together.”

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KARVY ORGANIZATION CHART

Website Management Team General Management Team

Web Information Manager Managing Director 

(C. Parthasarathy)M. Sreejith Web Supervisor Chief Executive Officer

( V. Ganesh)Umesh T Technical Manager CFO, Compliance Officer & Company Secretory N. Ratnagiri Rao & LVS Ramachandra Rao (Rakesh Santhalia)

Head Issuer Interface & OperationsTechnical Supervisor

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I Lakshmana Murthy (M R V Subrahmanyam)

Head IT - Software Development

(T. Mallikarjunaiah) Chief Information Security

Officer 

(Kalyan Chakravarthy P.V)

Chief Information Security Officer 

(Kalyan Chakravarthy P.V)

Chapter 3

Review of literature13

Litreature used for this project:In this project several websites are reviewed for best contents some of them are as fallows

Internet (Wikipedia)

NDTV profit.

Money control

Slideshare

Although the project called “Equity markets :an Indian investment scenario”

Was taken into consideration for the study.

Although the project on similar topic done by someone was also taken into consideration for

the study.

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Chapter 4

Research Methodology15

Data collection

Data collection

Primary data Secondary data

Observations Newspaper

Internet

Books

Brochures

Primary data:

Primary data Primary data for a project is the first hand information regarding the project being

studied. In this regard the primary data for this project would be getting the necessary

information from the company management by an interview, telephonic conversation or direct

mail.

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Secondary data:

Secondary data for a project would be the collection of information that has a bearing on the

outcome of the project from secondary sources like news, press releases, internet etc. Whereas

published secondary sources will used as prime documents for the study. The major among these

is the Annual Reports of the company for the financial years 2015-16.

The data collected for this project was from secondary sources. The data was complied with the

help of sources like News articles, Company profiles, Internet.

Fundamental Analysis:

Top to Bottom

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Tools Of Economic Analysis:

The most used tools for performing economic analysis are:

1. Gross domestic product (GDP).

2. Monetary policy and liquidity.

3. Inflation

4. Intrest rates

5. International influences

6. Fiscal policy

1. Gross domestic product ( GDP): Gross domestic product (GDP) is a monetary measure of the market value of all final

goods and services produced in a period (quarterly or yearly). Nominal GDP estimates

are commonly used to determine the economic performance of a whole country or region,

and to make international comparisons. Nominal GDP per capita does not, however,

reflect differences in the cost of living and the inflation rates of the countries; therefore

using a GDP PPP per capita basis is arguably more useful when comparing differences in

living standards between nations.

2. Inflation:

Inflation is defined as a sustained increase in the general level of prices for goods and

services. It is measured as an annual percentage increase. As inflation rises, every dollar

you own buys a smaller percentage of a good or service. The value of a rupee does not

stay constant when there is inflation. The value of a rupee is observed in terms of

purchasing power, which is the real, tangible goods that money can buy. When inflation

goes up, there is a decline in the purchasing power of money.

3. Intrest rate:

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An interest rate is the amount of interest due per period, as a proportion of the amount

lent, deposited or borrowed (called the principal sum). The total interest on an amount

lent or borrowed depends on the principal sum, the interest rate, the compounding

frequency, and the length of time over which it is lent, deposited or borrowed.

4. Fiscal policy: Fiscal policy involves the decisions that a government makes regarding collection of

revenue, through taxation and about spending that revenue. It is often contrasted with

monetary policy, in which a central bank (like the Federal Reserve in the United States)

sets interest rates and determines the level of money supply.

Induusty Analysis:For this project we have taken three important sectors which are very important and

popular on Bombay Stock Exchange and National Stock Exchange. The companies are

selected on the basis of market capitalization. The companies with highest market cap are

selected.

1. Pharmaceutical.

2. Banking.

3. Information technology.

Pharmaceutical Sector in India:

The pharmaceutical industry in India ranks 3rd in the world terms of volume and 14th in

terms of value.

According to Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, the

total turnover of India's pharmaceuticals industry between 2008 and September 2009

was US$21.04billion. 

Hyderabad, Mumbai, Bangalore and Ahmadabad are the major pharmaceutical hubs of

India. The domestic market was worth US$13.8 billion in 2013.

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India's biopharmaceutical industry clocked a 17 percent growth with revenues of Rs.137

billion ($3 billion) in the 2009-10 financial year over the previous fiscal.

Bio-pharma was the biggest contributor generating 60 percent of the industry's growth at

Rs.8,829 crore, followed by bio-services at Rs.2,639 crore and bio-agri at Rs.1,936 crore.

In terms of the global market, India currently holds a modest 1–2% share, but it has been

growing at approximately 10% per year.

India gained its foothold on the global scene with its innovatively engineered generic

drugs and active pharmaceutical ingredients (API), and it is now seeking to become a

major player in outsourced clinical research as well as contract manufacturing and

research. 

Industry classification and performance:

The Indian pharmaceutical industry can be classified into organized and unorganized sectors.

Accounting for over 70% of total sales, the organized sector has about 250 manufacturing and

formulation units. On the basis of management control, the organized sector can be further

classified into MNCs and Indian companies.

Branded formulations: They are ethical formulations prepared using a bulk drug under product patent and are marketed by a single pharmaceutical company.

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Generics: They are formulations that do not contain any patented bulk drug and can be manufactured by more than one company.

Bio Pharma and the healthcare sector are the largest Indian Biotech Industry (USD Bn)

component of the Indian biotech industry with a market share of 62 percent. Bio Pharma has

shown a historical growth of 19 percent and is expected to continue mainly due to pharma

companies facing increasing development cost and pressure on profit margins. As per an IMS

Report the global Bio similar market is estimated 4.3 As per an IMS Report, the global Bio

similar market is estimated to assume a size of $ 2.7 billion by 2017

Growth Drivers of Industry:

Government policies and regulatory framework:

Investment approval: Automatic investment approval upto 100% foreign equity for NRI

and overseas corporate bodies. These investments are allowed in food processing

segments such as coffee and tea.

FDI in organized retail: India currently allows upto 100 % FDI in cash and carry

segment and 51% in single brand retail, which is to be further expected to be further

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expected to 100%. India is also to allow 51% FDI in multi brand retail, which will boost

the nascent organized retail market in the country.

Priority sector: The government of india recognizes food processing and agro industries

as priority sectors.

Relaxation of licence rules: Industrial licences are not required for almost all foods and

agroprocessing industries, barring certain items such as beer, potable alcohol and wines,

sugarcane and hydrogenated animal fats and oils as well as items reserved for exclusive

manufacturing in the small scale sector.

Statutory Minimum Price: In oct 2009 government amended the Sugarcane Control

Order ,1996, and replaced the Statutory Minimum Price (SMP) of sugarcane with Fair

and Remunerative Price (FRP) and State Advised Price (SAP).

Banking sector in India : The total assets of Indian banks, which are regulated by the Reserve Bank of India (RBI)

and the Ministry of Finance (MoF) were pegged at Rs 82,99,220 crore (US$ 1564.8

billion) during FYI2. Further, the revenues of Indian banks grew almost four-fold from

US$ 11.8 billion to US$ 46.9 billion over the decade spaning 2001-10.

Indian economy's liberalisation in the early 1990s has resulted in conception of

various private sector banks. This has sparked a boom in the country's banking

sector in the past two decades.

The revenue of Indian banks grew four-fold from US$ 11.8 billion to US$ 46.9

billion, whereas the profit after tax rose nearly nine-fold from US$ 1.4 billion to

US$ 12 billion over 2001-10.

The growth is due to two major factors. First, the influx of Foreign Direct

Investment (FDI) of up to 74 per cent with certain restrictions4. Second, the

conservative policies of the Reserve Bank of India (RBI), which have shielded

Indian banks from recession and global economic turmoil.

The Bankex is an index tracking the performance of important banking sector

stocks, and has grown at a compounded annual growth rate (CAGR) of

approximately 20 per cent over 2003-12

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Competitive landscape and leading banks in India:

Banking in India is moderately consolidated, with the top 10 players accounting for

approximately 60 per cent of the total industry. The Indian banking sector is majorly dominated

by public sector banks. Figure 5 describes the market shares of the leading players (based on

total credit portfolio), along with the respective shares of government, private and foreign banks.

Leading 3 banks in india:

1. State Bank of India: SBI undoubtedly is the leading bank in India when it comes to number

of branches, ATM’s, net profits, total assets managed, etc. With an employee base of close to

3 lakh people SBI commands 20% (approx) of the Indian banking sector. The bank has over

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17,000 branches with more than 27,000 ATM’s. The bank manages assets worth more than

390 billion USD.

2. ICICI Bank: ICICI is the second in the list when it comes to quantity of assets managed

by the Bank. According to the current market cap ICICI is ahead of SBI but behind HDFC.

ICICI Bank has about 3540 branches, 11200 ATM’s and over 82000 employees. The bank

manages assets worth 99 billion USD.

3. HDFC Bank: HDFC Bank is an Indian banking and financial services company. HDFC

Bank is the second largest private bank in India as measured by assets. It is the largest bank

in India by market capitalization as of February 2016. It was ranked 69th in 2016

BrandZTM Top 100 Most Valuable Global Brands.

What does the union budget offers the Banking sector 2016: Government to infuse 250 billion rupees capital into state-run banks in 2016/17; will find

resources for additional capital for banks if required.

First, even though Jaitley has stuck to the Rs.25,000 crore figure laid out in August 2015 as

part of a four-year road map which envisaged infusion of Rs.25,000 crore each into public

sector banks in fiscal years 2016 and 2017 and Rs.10,000 crore each in 2018 and 2019, he

has made it clear that if more money is required, the government will not shy away from its

responsibility.

Second, sticking to Rs.25,000 crore recapitalisation funds and pegging fiscal deficit at 3.5%

in 2016-17 is a smart idea (higher recapitalisation funds would have derailed the fiscal

consolidation path) as this may encourage the Reserve Bank of India (RBI) to cut its policy

rate sooner than later.

Third, the quantum of market borrowing for the next fiscal year is a big positive for the bond

market. While the expectations were for about Rs.6.4 trillion gross market borrowing by the

government to take care of its fiscal deficit in 2016-17, the actual figure is Rs.6 trillion. Net

of redemptions of old bonds, the net borrowing for the year is Rs.4.25 trillion.

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Other regulatory developments that impact the Indian banking sector:

The RBI. which regulates other India banks, formulated several policies and initiatives that

directly impacted the country's banking sector over the last few years. Some of these

initiatives art as follows

1. Deregulation of savings rates for banks in India: In a move that enables banks to

decide the interest rates they offer on savings accounts, the RBI has deregulated the

savings bank deposit interest rates from an earlier norm of 4 per cent per annum to aid

product and price innovation in the long run.

2. Provision Coverage Ratio(PCR): The mandatory dire‘ti.e to maintain a PCR of 70 per

cent benefits all commercial banks. The current PCR can be used to minimise NPAs

during economic downturn.

3. Basel III guidelines: The RBI has planned the implementation of the Basel III norms,

which would require a capital infusion of approximately US $ 60 billion over the next

five years. These norms would require the systemically important banks to maintain a

higher level of capital, at a time when the credit demand in the economy is rising. This

might hamper the banking industry's short term growth. However. Dr. Subbarao. the

Governor of the Reserve Bank of India in 2012. commented that Basel III would make

Indian banks stronger in the long run, thereby enabling them to invest in the real sectors

of the economy.

4. Relaxation of branch authorization policy for tier II cities: Under the relaxation of

Branch Authorisation Policy, the domestic banks do not need the RBI approval to set up

service offices, central processing centres and administrative offices in the tier II cities,

with a population ranging between 50,000 to 99,999. Further, a similar relaxation to

expand into tier III to tier VI cities already exists. The policy will spread the organised

banking to the remote areas of the country, and aid financial inclusion.

5. Relaxation of mobile payment guidelines: Relaxation of mobile payment guidelines:

With the increasing popularity of mobile banking, the RBI removed the cap of Rs. 50,000

(US$ 942.7) for transactions through mobile phones. This relaxation allowed banks to

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assess the involved risk, and place their own limits while granting customers with mobile

banking facilities. In a statement, the RBI commented that the Interbank Mobile Payment

Service (IMPS), which was developed and operated by the National Payment Corporation

of India (NPC1), also enabled real time fund transfer among different banks.

6. Issue of financial guidelines for new bank licenses: The RBI, deviating from its

traditional policy of granting licenses to only a few private institutions, is now issuing

new bank licenses to all entities that satisfy the eligibility criteria. This move is expected

to encourage healthy competition and promote financial inclusion in the banking

industry.

7. Subsidiary route for foreign banks: The RBI is encouraging foreign players entering

the Indian banking industry to conduct business through wholly owned subsidiaries.

Further, it is promoting existing important foreign players to incorporate themselves as

wholly owned subsidiaries of foreign parent companies. This mm e is expected to benefit

foreign players by allowing them to expand their consumer base to semi urban areas

8. Expansion into rural markets: Expanding operations to rural markets has been a

concern for private and foreign banks as it prevents financial inclusion. Sonic larger

players have managed to establish their presence in rural markets either through mergers

and acquisitions, or acquiring associates. For instance, ICICI Bank merged with Bank of

Rajasthan to expand its consumer base in the rural market.

9. Intensifying competition due to homogrnrous products: Most Indian banks offer

homogeneous services, which result in high competition in the industry on finer points,

such as loan rates and interest rates. Many new entrants, especially non banking financial

corporations (NBFC), are expected to enter the industry in the coming years due to the

new Banking License. Guidelines of the RBI. High competition will benefit the industry

in the long run by driving all banks (especially public sector banks) to improve their

performance.

Financial inclusion and technological transformation in banking

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A World Bank Survey conducted in 2015 revealed that only 38 per cent of all adults in

India had a bank account with a formal banking institution, while this figure stood at 21

per cent in the poorest income quintile. This represents a massive opening that financial

institutions in the country can leverage upon for future growth. Further, the policies of the

Reserve Bank have prioritized financial inclusion, presenting an opportunity that might

not manifest itself again. The Indian government has advised banks to open at least one

branch in villages with a population of more than 2,000, and also cover the peripheral

villages. Banks are also required to formulate a board approved Financial Inclusion Plan

(FIP), the implementation of which will be monitored by the RBI.

Information technology sector in India Information technology (IT) industry in India has played a key role in putting India on

the global map. IT industry in India has been one of the most significant growth

contributors for the Wharf economy. The industry has played a significant role in

transforming India's image from a slow moving bureaucratic economy to a land of

innovative entrepreneurs and a global player in providing world class technology

solutions and business services. The industry has helped India transform from a rural and

agriculture-based economy to a knowledge based economy.

1. Information Technology has made possible information access at gigabit speeds. It

has made tremendous impact on the lives of millions of people IA ho are poor.

Marginalized and living in rural and far flung topographies.

2. Internet has made revolutionary changes with possibilities of e-government measures

like e-health, e-education, e-agriculture, etc. Today whether its tiling Income Tax

returns or applying for passports online or railway e-ticketing, it just need few clicks

of the mouse.

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3. India's IT potential is on a steady march towards global competitiveness improving

defense capabilities and meeting up energy and environmental challenges amongst

others.

4. IT sector in India, with the main focus on increasing technology adoption and

developing new delivery platforms, has aggregated revenues of USD 88.1 billion in

FY2014, while generating direct employment for over 2.5 million people.

5. Out of 88.1 billion, export revenues (including Hardware) has reached USD 59.4

billion in FY2014 while domestic revenues (including Hardware) of about USD 28.8

billion.

Government initiative Mr Ravi Shakar Prasad, Minister of Communication and Information Technology,

announced plan to increase the number of common service centres or e-Seva centres

to 250,000 from 150,000 currently to enable village level entrepreneurs to interact

with national experts for guidance, besides serving as a e-services distribution point.

The Railway Ministry plans to give a digital push to the India Railways by

introducing bar-coded tickets, Global Positioning System (GPS) based information

systems inside coaches, integration of all facilities dealing with ticketing issues, Wi-

Fi facilities at the stations, super-fast long-route train service for unreserved

passengers among other developments, which will help to increase the passenger

traffic.

Research & Development

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To support Research & development in the country and promoting Start ups focused on

technology and innovation, a weighted deduction of 150% of expenditure incurred on

in-house R&D is introduced under the Income Tax Ac. In addition to the existing

scheme for funding various R&D projects have been funded through new scheme like

Support International Patent Protection in Electronics & IT Multiplier Grants Scheme

(MGS). The government has initiated the setting up of an Open Technology Center

through NIC aimed at giving effective direction to the country on Open Technology in

the areas of Open Source Solutions, (OSS), Open Standard, Open Processes,

RegulationsAfter the economic reforms of 1991-92, liberalization of external trade, elimination of

duties on imports of information technology products, relaxation of controls on both

inward and outward investments and foreign exchange and the fiscal measures taken by

the Government of India and the individual State Governments specifically for IT and

ITES have been major contributory factors for the sector to flourish in India and for the

country to be able to acquire a dominant position in offshore services in the world. The

major fiscal incentives provided by the Government of India have been for the Export

Oriented Units (EOU), Software Technology Parks (STP), and Special Economic Zones

(SEZ).

Challenges Cyber security and quality management are few key areas of concern in today's

information age. To overcome in today's global IT scenario, an increasing number of

companies in India have gradually started to emphasize on quality to adopt global

standards such as ISO 9001 (for Quality Management) and ISO 27000 (for Information

Security). Today, centers based in India account for the largest number of quality

certifications achieved by any single country. India aims to transform India into a truly

developed and empowered society by 2020.

Future prospectus

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The near future of Indian IT industry sees a significant rise in share of technology spend

as more and more service providers both Indian and global target new segments and

provide low cost, flexible solutions to customers.

Tools of company analysis

for the company analysis one company have been chosen for each sector which are as fallows

Pharmaceutical sector- Sun pharma

Banking sector- HDFC Bank

IT Sector- TCS

1. Management

Management includes the -core competency- or -fundamental strength- of the company that puts

them ahead of all the other competing firms. 80% of money should be invested with known,

proven and robust companies. Known companies are those which have their existence past many

years. Their product is appreciated and they are qualified in their field. Proven companies are

those who have seen the economic cycle (good-had-good times) and have survived the bad times

and grown out of it. Robust companies are those which have future growth plans and the

capacity to timely execute the plans. E.g. Ambani's, Tata group, Munjal group.

2. Face value

The birth of a share takes place in a primary market during an IPO. The face value of the share is

decided at that time by the promoters. The most common face values are 1, 2, 5, 10. The face

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value 10/- is mostly used. It is used for price comparison of stock of same sector. e.g. suppose

the FV of HCC is '.1/- with current market price '.110/- and the FV of HDIL is .10/-with current

market price of '.250/-. Both the companies are from the same sector. The cost of HCC share is

greater than III)IL share. If one has to only see the stock price, to start with, the face value plays

a very important role in price and people usually get mislead by the stock price when they ignore

the FV.

3. Equity share capital

Equity Capital = FV * no of shares

Always invest in large equity companies. The equity capital has to be compared in peer group

companies only. E.g. equity capital of an auto company should be compared with the equity

capital of auto Companies only and not with equity capital of IT companies. Invest in the

company, having large equity capital compared to other companies of the same sector.

4. Market capitalization

Market Capitalization = current market price * no of shares

According to market capitalization companies are divided as follows Large cap companies:

having market capital greater than 7500Cr. Mid cap companies: having market capital between

500Cr & 7500Cr. Small cap companies: having market capital less than 500 Cr. More than 80%

should be invested in large cap companies.

5. Earning per share (EPS)

EPS = Net profit/ No of Shares

It is a self comparative tool. EPS of one company should not be compared with the EPS of

another company even if they are from same sector.

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6. Price to Earning ratio (P/E) ratio

P/E = Market Price/ EPS , Hence, share price = P/E * EPS

This means share price is always P/E times of EPS, which also means an investor is P/E times

the earnings to buy the share. If P/E is low, share price will also be less. Thus, always go for

Companies having less P/E multiple. Always compare P/E multiple of companies from same

sector. P/E is the number of times of the company's earning to buy the share. Every sector carries

different demand premium (P/E), but in every sector stocks should trade in similar P/E multiples.

7. Return On Equity

Return on Equity (ROE) measures the rate of return on ownership interest (shareholder's equity)

of common stock owners. It measures firm's efficiency at generating profits from every unit of

shareholder's equity. ROE shows how well company uses investment funds to generate earnings

growth. ROE between 15 % to 20 % are generally considered good.

ROE = Net Income (after payment of interest and taxes)/ Shareholder's Equity

8. Dividend

Dividend is the small portion of the net profits, what company decides to distribute to its

shareholders. It is always calculated on FV in terms of percentage. It shows goodwill of the

company towards it shareholders.

9. Bonus

A company gives bonus in the form of shares only. It is given in some ratio of what share holders

are holding. It is in the ratio of free: holdings, 1:2 means the company will give 1 bonus share for

every 2 holdings.

10. 52 week H/L

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It is the highest and the lowest value of the stocks during the trailing 52 weeks. If the stock is

trading near to its high price be cautious. Buy when the stock is trading 30-40% low than the

high price.

11. Future growth plan

This is one of the most important tools of fundamental analysis. If the company has a good future

growth plan invest in that company as the profits of such companies would increase and this in

turn would increase the share price of that company.

Chapter 5

Data Interpretataion

33

Sun Pharmaceutical

Introduction :

Sun Pharmaceuticals was established by Mr. Dilip Shanghvi in 1983 in Vapi with five products

to treat psychiatry ailments. Cardiology products were introduced in 1987 followed by

gastroenterology products in 1989. Today it is the largest chronic prescription company in India

and a market leader in psychiatry, neurology, cardiology, orthopedics, ophthalmology,

gastroenterology and nephrology.

The 2014 acquisition of Ranbaxy will make the company the largest pharma company in India,

the largest Indian pharma company in the US, and the 5th largest speciality generic company

globally.

Over 72% of Sun Pharma sales are from markets outside India, primarily in the US. The US is

the single largest market, accounting for about 50% turnover; in all, formulations or finished

dosage forms, account for 93% of the turnover. Manufacturing is across 26 locations, including

plants in the US, Canada, Brazil, Mexico and Israel.

SWOT AnalysisStrenth-

Strong growth in emerging market business

Introduction of Pantoprazole & Eloxatin in US market has very limited competition

34

They have strong marketing & sales force of over 12,000 employees

They have successfully acquired Taro pharma which has further consolidated their

position in Indian markets

Strong brand presence in India and US markets

Weakness- Stiff competition from many Indian and other global brands means limited market share

growth

Limited presence in emerging markets and European countries

Opportunity- They can leverage their acquisitions to further increase the growth

They can increase their presence in contract manufacturing

Increasing healthcare awareness in India

Threats- There is growing competition in generics market

Stringent patent regulations

High price sensitivity of consumers

Management at Sun Pharmaceutical

Israel Makov: Chairman

Dilip Shanghvi: Managing Director

Sudhir V. Valia: Executive Director

Sailesh T. Desai: Executive Director

Hasmukh S. Shah: Non Executive Independent Director

35

Keki M Mistry: Non Executive Independent Director

Ashwin Dani: Non Executive Independent Director

S. Mohanchand Dadha: Non Executive Independent Director

Rekha Sethi: Non Executive Independent Director

Vijay Patel: Non Executive Independent Director

Sun Pharmaceuticals future growth plans Though the Rs 1,400-crore (Rs 14 billion) Sun Pharmaceuticals has made substantial

investments in R&D over the past five to six years, the corporate decision to convert this

intellectual asset into a future growth-driver by demerging the innovative research arm

come only now.

The company had invested $23.15 million in the R&D assets and two manufacturing

units of Able Labs, which were auctioned recently, and another $10 million in Valeant

Pharma's facilities in Ohio and Hungary. They would be required to invest another $15

million over the next three years in these assets to start operations.

About 35-40 per cent of R&D spend - this roughly 10 to 11 per cent of our sales - had

been on innovative R&D. This will now shift to the new company.

Sun Pharmaceutical shares information Face value - Re1/Share

No of shares - 240.66 cr

Total equity share capital - 240.66 cr

52 week high/low - Low- 750

High- 758

Sun Pharmaceutical Dividend PolicyAnnoucement Date Effective Date Details    Rate(%) Type30 May 16 08 Sep 16 100.00 Final11 Aug 15 21 Oct 15 300.00 Final

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13 Aug 14 11 Sep 14 150.00 Final28 May 13 19 Sep 13 250.00 Final29 May 12 14 Aug 12 425.00 Interim

Sun Pharmaceutical market capitalization:

Market capitalization = Current maket price* Number of shares

= 754.35 * 240.66

= 181541.87 cr

Key Ratios:

Ratios 2016 2015Liquidity ratios:

Current ratio 0 0

Quick ratio 0 0

Leverage ratios:

Debt equity ratio 0.26 0.24

Profitability ratios:

Net profit margin -14.09 -18.38

EPS -4.46 -7.12

DPS 1 3

37

ROA -2.91 -5.55

ROE -4.86 -9.78

ROCE -1.89 -5.11

P/E -213.76 -

HDFC BankIntroduction:

HDFC Bank is an Indian banking and financial services company headquartered

in Mumbai maharashtra. It has about 87,555 employees and has a presence in Bahrain, Hong

Kong and Dubai. HDFC Bank is the second largest private bank in India as measured by

assets. It is the largest bank in India by market capitalization as of February 2016. It was ranked

69th in 2016 BrandZTM Top 100 Most Valuable Global Brands.

 1995 HDFC Bank was incorporated, with its registered office in Mumbai, India. Its first

corporate office and a full service branch at Sandoz House, Worli was inaugurated by the then

Union Finance Minister, Dr. Manmohan Singh.

As of June 30, 2016, the Bank’s distribution network was at 4,541 branches and 12,013 ATMs.

 HDFC Bank provides a series of digital offerings like - 10 second personal loan, Chillr,

PayZapp, SME Bank, Watch Banking, 30-Minute Auto Loan, 15-minute Two-Wheeler Loan, e-

payment gateways, Digital Wallet, etc.

HDFC Bank provides a number of products and services which includes Wholesale banking,

Retail banking, Treasury, Auto (car) Loans, Two Wheeler Loans, Personal loans, Loan Against

Property and Credit Cards.

SWOT Analysis:

Strengths:

38

HDFC bank is the second largest private banking sector in India having 2,201 branches

and 7,110 ATM’s

The bank’s ATM card is compatible with all domestic and international Visa/Master

card, Visa Electron/ Maestro, Plus/cirus and American Express.

HDFC bank has the high degree of customer satisfaction when compared to other private

banks.

Weakness:

HDFC bank doesn’t have strong presence in Rural areas, where as ICICI bank its direct

competitor is expanding in rural market.

HDFC lacks in aggressive marketing strategies like ICICI.

The bank focuses mostly on high end clients.

The share prices of HDFC are often fluctuating causing uncertainty for the investor

Opportunities:

HDFC bank has better asset quality parameters over government banks, hence the profit

growth is likely to increase.

The companies in large and SME are growing at very fast pace. HDFC has good

reputation in terms of maintaining corporate salary accounts.

HDFC bank has improved it’s bad debts portfolio and the recovery of bad debts are high

when compared to government banks.

Greater scope for acquisitions and strategic alliances due to strong financial position.

Threats:

HDFC’s nonperforming assets (NPA) increased from 0.18 % to 0.20%.

39

Though it is a slight variation it’s not a good sign for the financial health of the bank.

The non banking financial companies and new age banks are increasing in India.

The government banks are trying to modernize to compete with private banks.

RBI has opened up to 74% for  foreign banks to invest in Indian market.

Management at HDFC Bank:

NAME DESIGNATION

Shyamala Gopinath Chairperson

Paresh Sukthankar Deputy Managing Director

A N Roy Director

Keki Mistry Director

Renu Karnad Director

Umesh Chandra Sarangi Additional Director

Aditya Puri Managing Director

Kaizad Bharucha Executive Director

Bobby Parikh Director

Partho Datta Director

Malay Patel Director

Srikanth Nadhamuni Additional Directior

40

HDFC Banks future plans:

HDFC bank will will raise infrastructure bonds worth Rs.4,500 crore before the end of

March, following up on its jumbo share sale earlier this month, as the bank braces itself

to take advantage of increased lending opportunities to both companies as well as

individuals over the next two fiscal years.

HDFC Bank could also look at increasing lending to the infrastructure sector, which

currently accounts for about 15% of the bank’s book, after it raises funds via the long-

term infrastructure bonds.

HDFC bank will follow the likes of Axis Bank Ltd, ICICI Bank Ltd, Kotak Mahindra

Bank Ltd and Andhra Bank in raising infrastructure bonds this fiscal. Axis Bank was the

last bank to sell these bonds when it raised Rs.5,700 crore in December.

HDFC Bank share price information:

Face value - Rs 2

No of shares - 2055183108 shares

Total equity share capital - 550 cr

52 week High/Low - High - 1318.45

Low - 928

Dividend Policy:

2015-2016 475%

2014-2015 400%

2013-2014 342.5%

41

2012-2013 275%

2011-2012 215%

2010-2011 165%

2009-2010 120%

Market capitalization:

Market capitalization = current maket price * no of shares

= 1284.35 * 2055.18

= 326,961.19

Key ratios:

Ratios 2016 2015

Liquidity ratios:

Current ratio 0.07 0.04

Quick ratio 14.51 12.69

Leverage ratios:

Debt equity ratio 18.62

Profitability ratios:

EPS 50.63 42.54

DPS 9.50 8

ROA 1.92 1.93

ROE 18.65 19.94

42

ROCE 18.18 18.36

P/E 25.10 -

TATA Consultuncy services (TCS):

Introduction

Tata Consultancy Services Limited (TCS) is an Indian multinational information

technology (IT) service, consulting and business solutions company.  It is a subsidiary of

the Tata Group and operates in 46 countries. TCS is one of the largest Indian companies

by market capitalization ($80 billion).

TCS and its 67 subsidiaries provide a wide range of information technology-related products and

services including application development, business process outsourcing, capacity planning,

consulting, enterprise software, hardware sizing, payment processing, software management and

technology education services. firm's established software products are TCS BaNCS and TCS

MasterCraft .

Swot analysis:

Strength

 High command on local and domestic market(India).

 Strong brand backing (TATA)

 Strong Ethics

 Brand Image is quite strong in markets it serves

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Employee strength of over 300000

Weakness

 Not very strong in product segment.

Opportunities:

 Emerging markets

 Product market e.g. domain targeted offerings

 Repeat Business from existing clients

Threats:

Attrition and Employee loyalty.

Bigger MNC's entering India and competing for global clients.

Focussing on organic growth.

Management at TCS:

Name Designation

Cyrus Mistry Chairman

Arthi Subramanian Executive Director

V Thayagarajan Director

Ron Sommer Director

44

Isshat Hussain Director

N Chandrashekhera Managing Director & CEO

Aman Mehta Director

Clayton Christenson Director

Vijay Kelkar Director

O P Bhatt Director

TCS fu[ture plans:

*source: Economic times

45

Mistry wants 25 Tata companies to crack this test by 2025. Tata Steel had cracked this

way back in 2004, touching even 700, but has not been assessed since. 

And '25' is a recurring theme in that vision. By 2025, Mistry wants the group to be in the

top 25 globally by market capitalisation (currently it would be in the late 70s); and he

wants the conglomerate to reach out to 25% of the global population in some way (it

reaches 900 million today, it must reach 2 billion in 2025 to be 25% of the estimated

global population of 8 billion). 

TCS Share price information:

No of Shares - 1,970,427,941

Face Value - Rs 1

Total Equity Share Capital - 197.04

52 Week High/Low - High - 2740

Low – 2119

Dividend policy:

Fiscal Year

Quarter Type of Dividend

Dividend Amount per share (INR)

*

Record Date

Actual Payment Date

2016-17 Q1 Interim 6.50 26-Jul-16 2-Aug-162015-16 Q4 Final 27.00 7-Jun-16 24-Jun-162015-16 Q3 Interim 5.50 22-Jan-16 29-Jan-162015-16 Q2 Interim 5.50 26-Oct-15 30-Oct-152015-16 Q1 Interim 5.50 21-Jul-15 03-Aug-152014-15 Q4 Final 24.00 08-Jun-15 07-Jul-152014-15 Q3 Interim 5.00 28-Jan-15 9-Feb-15

46

Market capitalization:Market capitalization = current market price * no of shares

= 2335.45 * 1970427941

= Rs 468,981.55 cr.

Key Ratios:

Ratios 2016 2015

Liquidity ratios

Current ratio 2.24 2.78

Quick Ratio 2.24 2.80

Leverage ratios

Debt equity ratio - 0.01

Profitability ratios

EPS 116.13 98.31

DPS 43.50 79

ROA 29.46 30.53

ROE 38.87 42.40

ROCE 49.34 52.77

P/E 19.95 -

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Chapter 6

Observations, Finging, Suggestion

&

Conclusion

48

Market capitalization:

19%

33%

48%

Market Capitalization

Sun PharmaHDFCTCS

Observation:

All above three companies are the large cap companies in their respective sector Among the

three TCS has the highest market capitalization.

49

P/E Ratio:

83%

10%

8%

P/E Ratio

Sun PharmaHDFCTCS

Observation :

50

From the above companies only HDFC Bank AND TCS has satisfactory P/E Ratio

Earning per share (EPS):

3%

30%

68%

EPS

Sun PharmaHDFCTCS

Observation:

From above companies TCS has good EPS also HDFC has an average EPS.

51

Return on Equity (ROE):

8%

30%

62%

ROE

Sun PharmaHDFCTCS

Observation:

Above Diagram shows that TCS has the highest ROE fallowed by HDFC Bank.

52

Conclusion:

After the detail data analysis and observation it was found that TCS company from the IT sector

is a most suitable company to invest with because of the following reasons-

1 . TCS has highest rate on equity and highest share in Market Capitalization.

2. Company has good' EPS and P/E ratio.

3. Management of TCS is very efficient which is headed by famous businessmen Mr. Narayan

Murthy and Infosys has global exposure.

4. TCS is consistently paying higher rate of dividend every year and has liberal dividend policy.

5. As the Infosys belongs to pr's ate sector, there is less government interventions in the company

affairs. IT sector growing tremendously since last one decade in India.

Suggestion:

There are many important things you need to know to trade and invest successfully in the stock

market or any other market. If you should go back to the olden days, you would realize that

trading was never such a complicated and difficult-to-grasp business as it is today! Terminology

like stocks and securities, stock market day trading, currency trading and so on, did not even

exist in those days Stock market day trading can "make" you or "break" you within just one clay!

So it demands a lot of self-discipline. Returns on your investment can be unpredictable, for there

are risks involved. However, if you have a good trading system in place, you may just end up

with 50% or even 100% of profits, provided you hold stocks for a longer period of time! Also, it

53

is not possible to win every day. There will be days in stock market day trading when the

situation seems to be totally out of your control. So "pitfalls" can occur. The best way to avoid

these pitfalls and learn how to minimize risks, is to spend sonic time in acquiting knowledge

about stock market day trading. The Stock Market is always right and price is the only reality in

trading. if you want to make money in any market, you need to mirror what the market is doing.

If the market is going down and you are long, the Market is right and you are wrong and vice

versa. Other things being equal, the longer you stay right with the market, the more money you

will make.

Chapter 7

Learning

54

Learning:

Market observation: Day to day market observation to understand the PROS and

CONS of the market.

News effect on market: How the news affect the share market as well as a particular

company share.

Investor’s perception towards market : Investors want profits, so whenever they get

desired profit they exit immediately. And when the share price falls the investor will try

to purchase it.

55