1.

Introduction
Indian securities markets have undergone many changes during the last decade. Exponential growth in trading volumes is pushing existing trading systems and processes to capacity and increasing settlement risk. With Indian market moving to a T+3 rolling settlement cycle in line with global markets, Indian markets are continuing its efforts to increase the efficiency and transparency which would result in lowering of trade costs and make Indian markets a more attractive destination for global investors. Indeed Indian markets are surging ahead to become one of the most competitive and efficient markets of the world. The Indian securities market have grown leaps and bounds in the past decades from an unimportant position to a position where the global investors are interested as far as the global market is concerned. The robust growth of the market has made the listed companies in the stock markets to grow in an unmatched manner compared to their unlisted counterparts. The securities thus gained momentum in Indian scenario and yet only a small percentage of the investors look up to this opportunity. The securities available to an investor for investment are of various types as well as many in number to select from. There are more than 7000 companies listed in the stock exchanges of the country. Traditionally, the securities were classified into ownership securities such as equity shares and preference shares and creditor-ship securities such as debentures and bonds. From this vast group of securities the investor has to choose those securities which he considers worthwhile and the same has to be included in his investment portfolio. There arises a need for the detailed analysis of the available securities.

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Security analysis is the analysis of securities which are tradable financial instruments. These can be classified into debt securities, equities, or hybrid securities. In a broad sense, futures contracts and tradable credit derivatives are also included. Security analysis is typically divided into fundamental analysis, which relies upon the examination of fundamental business factors such as financial statements and technical analysis, which focuses upon price trends. Quantitative analysis may use indicators from both areas. As time pass by and as the global markets face turbulent times, a number of new securities with innovative features are issued by companies to raise funds for their projects. Convertible debentures, deep discount bonds, flexi bonds, floating rate bonds, global depository receipts are some of these new securities. There are three alternative approaches to security analysis
(1)

Fundamental analysis

(2) Technical analysis (3) Efficient market hypothesis

Fundamental analysis, the older of the two approaches, concentrates on the fundamental factors affecting the company such as EPS of the company. The dividend payout ratio, the competition faced by the company, the market share, quality management, etc is some of the main factors that a fundamental analyst looks into. A fundamental analyst not only studies the fundamental factors affecting the company but also the factors affecting the industry and the economy fundamentals.

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The share price of a company is determined based on the fundamental factors in this approach and the fundamental analyst works out the true worth or intrinsic value of security; then compares this intrinsic value with the current market price. If the current market price is higher than the intrinsic value, the share is said to be over priced and vice versa. The incorrect pricing of securities provides an opportunity to the investor to acquire the share or dispose of the share profitably. An investor would buy those securities which are under-priced and sell those securities which are overpriced. It is believed that notable cases of incorrect pricing will be corrected by the market in future. Fundamental analysis helps to identify fundamentally strong companies whose shares are worthy to be included in the investors portfolio. The second alternative approach to security analysis is technical analysis. A technical analyst believes that share price movements are systematic and exhibit certain consistent patterns. The technical analyst studies past movements in the prices of shares to identify trends and patterns and tries to predict the future price movements. The current market price is compared with the future predicted price to determine the extent of incorrect pricing. Technical analysis is an approach which concentrates on price movements and ignores the fundamentals of the shares. Efficient market hypothesis is the more recent approach to security analysis. According to this approach, the financial market is efficient in pricing securities. The efficient market hypothesis holds that market price adjusts instantaneously and fully reflects all relevant available information. It means that market price will always equal their intrinsic value.

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As a result, fundamental analysis which tries to identify undervalued or overvalued securities is said to be a waste of time. The efficient market hypothesis further holds that share price movements are random and not systematic. Consequently, technical analysis which tries to study price movements and identify patterns in them is of little use. Efficient market hypothesis is a direct repudiation of both fundamental analysis and technical analysis. An investor can not consistently earn abnormal returns by undertaking fundamental analysis or technical analysis. According to efficient market hypothesis it is possible for an investor to earn normal returns by randomly choosing securities of a given risk level. Security analysis is the initial phase of the portfolio management process and consists of examining the risk-return characteristics of individual securities. A basic strategy in securities investment is to buy under-priced securities and sell overpriced securities. But the major problem that investors face is the identification of under-priced and overpriced securities. Fundamental Analysis determines intrinsic stock prices by projecting future earnings and then by applying an acceptable return on investment; calculates the stock price of the security. This approach is used by most traditional investment analysts and is the basis of their stock performance recommendations. Fundamental Analysis provides a solid pricing mechanism in a stable economic and business environment, but all businesses operate in dynamic environments and future earnings are never guaranteed. This results in varying estimates of earnings. Dynamic business environments result in less reliable earnings estimates and a greater possible range of future earnings.

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The rate of return component of Fundamental Analysis is also variable and is influenced by other factors such as the return from alternative investments and the perceived risk of the stock investment. As the risk increases, the required rate of return increases to compensate for the risk. However the actual price of a stock is determined by the stock market and the stock market is driven by human emotion. Analyzing past stock prices can provide some insight into future movements; and this is the realm of Technical Analysis. Technical Analysis applies statistical techniques to historical stock prices to identify likely future stock price movements. It does not consider the fundamentals of the stock, the business, or economic environment as the influence of these factors is deemed to be already reflected in the stock price. Because Technical Analysis is based on actual past stock price data (which was influenced by human emotion) it incorporates a component of human emotion in its calculations. This can provide valuable indicators and insight into future stock price movements that can not be identified using Fundamental Analysis. At any point in time actual stock prices consist of two components; the fair value price (fundamental) and a variance from the Fair Value; due to dynamic environment and human emotion. The more volatile the environment and emotion; the greater is the variance. This results in cyclic boom (bull) and bust (bear) markets. Achieving the best possible return for our investment requires both an appreciation of the fundamental fair value of a stock and the future variance indicated by technical analysis.

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2. Scope of the Study

This study mainly focuses on the investment decisions by predicting future stock price movements with the help of technical analysis and by analyzing the various economical factors affecting the share price of the company with the help of fundamental analysis. The main scope of this study is:

To help the investor in taking decisions

Analysis of the shares of the company

Studying the stock price movement in the market To identify trends, trend reversals and continuation patterns at an earlier stage to aid the buying and selling of shares.

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3. Objectives of the study

3.1 General objective
To analyze the security using fundamental and technical analysis and provide them to investor to aid his/her decision on the buying or selling of securities.

3.2 Specific objectives

To do the company stock valuation and predict its probable price movements

To calculate the systematic risk of the security

To analyze chart patters and identify the trends

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4. Fundamental Analysis
Fundamental analysis of a business involves analyzing its financial statements, management and competitive advantages, competitors and markets. It focuses on the overall state of the economy, interest rates, production, earnings, and management. When analyzing a stock, futures contract, or currency using fundamental analysis there are two basic approaches one can use; bottom up analysis and top down analysis. Fundamental analysis is performed on historical and present data. There are several possible objectives such as to conduct a company stock valuation and predict its probable price evolution, to make a projection on its business performance, to evaluate its management and make internal business decisions, to calculate its credit risk. Fundamental analysis includes: o Economic analysis o Industry analysis o Company analysis

On the basis of these three analyses, the intrinsic value of the shares is determined. The intrinsic value is considered as the true value of the share. If the intrinsic value is higher than the market price it is recommended to buy the share. If it is equal to market price, the recommendation is to hold the share and if it is less than the market price, the recommendation is to sell the shares. Fundamental analysis is about using real data to evaluate a security's value, although it is used by most of the analysts to value stocks.

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For assessing stocks, fundamental analysis uses revenues, earnings, future growth, return on equity, profit margins and other data to determine a company's underlying value and potential for future growth.

4.1 Economy Analysis

The performance of a company depends on the performance of the economy. If the economy is booming, income rise, demand for goods increase, and hence the industries and companies in general, tend to be prosperous. On the other hand, if the economy is in recession, the performance of the companies will be generally bad and it reflects in their operations due to less demand and increased cost. Some of the key economic variables that an investor must monitor as part of the fundamental analysis are: 4.1.1 GDP & other growth indicators The growth rate of national economy is an important variable to be considered by an investor. GNP, NNP, GDP are the different measures of the total income or total economic output of the country as a whole. The growth of these measures indicates the growth rate of the economy. An economy typically passes through different prosperity stages and is known as business life cycle. The stage of the economic cycle through which a country passes has a direct impact on the performance of industries and companies. The GDP of India expanded 6.9 percent in the third quarter of 2011 over the same quarter of the previous year. Unlike the commonly used quarterly GDP growth rate the annual GDP growth rate takes into account a full year of economic activity, thus avoiding the need to make any type of seasonal adjustment.
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India's average annual GDP Growth was 8.45 percent for the past 7 years which reached a historical high of 10.10 percent in September of 2006 and a record low of 5.50 percent in December of 2004. 4.1.2 Inflation Rate Inflation prevailing in the economy has considerable impact on the performance of companies. The higher rates of inflation upset the business plans by cost escalation and a squeeze on profit margins. Inflation also leads to erosion of purchasing power in the hands of consumers resulting in lower demand for products. Thus higher rates of inflation in the economy are likely to affect the performance of companies adversely. The inflation rate in India was last reported at 9.34 percent in November of 2011. The average inflation rate in India was 7.99 percent for the past four decades which reached a historical high of 34.68 percent in September of 1974 and a record low of -11.31 percent in May of 1976. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the Consumer Price Index (CPI) which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy. 4.1.3 Interest Rate Interest rates determine the cost and availability of credit for companies operating in an economy. A low interest rate always stimulates investment by making credit available easily and cheaply; and lower cost of finance for companies and thus higher profitability. On the contrary higher interest rates result in higher cost of production which may lead to lower profitability and lower demand.
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In India, interest rate decisions are taken by the Reserve Bank of India and the current benchmark interest rate (reverse repo) in India was is at 8.5 percent. India's average interest rate was 5.82 percent reaching an historical high of 14.50 percent in August of 2000 and a record low of 3.25 percent in April of 2009. 4.1.4 Government Budget As the government is the largest investor and spender of money, the trends in government revenue, expenditure and deficits have a significant impact on the performance of industries and companies. Expenditure by the government stimulates the economy by creating jobs and generating demand. Since a major portion of demand in the economy is generated by government spending, the nature of government spending is of great importance in determining the fortunes of many an industry. India reported a government budget deficit equivalent to 5.10 percent of the GDP in the fiscal year ending March 2011. A budget deficit occurs when the government spends more money than it takes in and the opposite condition is called a budget surplus. 4.1.5 The Exchange rate The exchange rate of rupee is influenced by the balance of trade deficit, balance of payment deficit, and also the foreign exchange reserves of the country. The excess of imports over exports is called balance of trade deficit. The balance of payments deficit represents the net difference payable on account of all transactions such as trade, services and capital transactions. If these deficits increase there is a possibility that the rupee may depreciate in value.

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The Indian Rupee exchange rate depreciated 3.44 percent against the US Dollar during the last month. During the last 12 months, the Indian Rupee exchange rate depreciated 16.88 percent against the US Dollar. The USDINR exchange averaged 30.37 for the past four decades reaching a historical high of 53.72 in December of 2011 and a record low of 7.19 in March of 1973. 4.1.6 Infrastructure The development of an economy depends very much on the infrastructure available. Industry needs electricity for its manufacturing activities, roads and rail ways to transport raw materials and finished goods, communication channels to keep in touch with suppliers and customers. 4.1.7 Monsoon The monsoon accounts for 80 per cent of the rainfall in India. Even if the monsoon is delayed by few days, it can have an adverse effect on the economy as about half of India's farm output comes from crops sown during the JuneSeptember rainy season. Monsoon is a key to determine agricultural output, inflation, consumer spending and overall economic growth. While a normal rainfall signals growth and prosperity, a below normal rainfall could spell disaster making food more expensive, aggravating the power, water shortage, hitting industrial production which in turn will put more pressure on the government. An adequate monsoon would boost the agricultural productivity which may help to cut down the rising inflation rates also.

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4.1.8 Economic Stability A stable political environment is necessary for steady and balanced growth. No industry or company can grow and prosper in the midst of political turmoil. Stable long term economic policies are what are needed for industrial growth. The growing linkages and integration of the Indian economy and its financial system with the world are testing the resilience of the economy/system from the rapid aggravation of the sovereign debt crisis and prolonged slowdown in the Euro area and the U.S. The network of the financial sector is found to be closely clustered, leaving major lenders to banks vulnerable to any disturbance in the banking sector. The financial market infrastructure continues to junction without any major disruption. The respondents of Reserve Bank's first Systemic Risk Survey expressed their confidence in the stability of the domestic financial system even as they were concerned about the stability of the global financial system and the impact of global developments on the domestic economy.

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4.2 Industry Analysis

An analyst shall consider a number of key characteristics in an industry analysis. These characteristics broadly relate to the operational and structural aspects of the industry and have a bearing on the prospects of the industry. Increasing global trade and heavy competition is resulting in the emergence of better and superior quality services amongst the players; thereby boosting the industrys growth at a tremendous rate. The industry accounts for the majority of trade done by the nation and thereby contributes to the nations development by large extent. To tap this potential, favorable policy and various steps have been taken by the Indian government so as to fuel the growth of the industry significantly. The housing finance sector in India has undergone unprecedented change over the past five years. The importance of the housing sector in India can be judged by the estimate that for every Indian rupee (INR) invested in the construction of houses, INR 0.78 is added to the gross domestic product of the country and the real estate sector is subservient to the development of 269 other industries. The real estate sector is also the second largest employment generator in the country. The governments support to housing had traditionally been centralized and directed through the State Housing Boards and Development Authorities. In 1970, the central government set up the Housing and Urban Development Corporation (HUDCO) to finance housing and urban infrastructure activities. In 1977, Housing Development Finance Corporation (HDFC) was the first housing finance company in the private sector to be set up in India.

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The public sector insurance companies Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) were also mandated to support housing finance activities, both directly through their housing subsidiaries (LIC Housing Finance Ltd was thus established in 1989) and indirectly through a mandated requirement to invest a certain proportion of their annual accretion in socially oriented schemes which includes housing. In 1988, the National Housing Bank (NHB) was established as a 100% subsidiary of the Reserve Bank of India, (the central bank of the country), to promote housing finance through a refinance mechanism to banks, housing finance companies (HFCs) and other institutions and also to function as the supervisory and regulatory body for housing finance companies. Currently there are 29 HFCs approved for refinance assistance from NHB. Although commercial banks were the largest mobiliser of savings in the country, traditionally banks were rather reluctant to lend for housing as they preferred financing working capital needs of industry. Several banks had set up housing finance subsidiaries which functioned as independent units with little support or interest from their parent bank. Towards the end of the 1990s, against the backdrop of lower interest rates, industrial slowdown, sluggish credit off-take and ample liquidity, commercial banks recognized that to maintain their profit margins, they needed to shift their focus from wholesale segment and build their retail portfolios. The lower interest rate regime, rising disposable incomes, stable property prices and fiscal incentives made housing finance attractive business which traditionally has been characterized by low nonperforming assets and given the vast demand for housing loans, almost all the major commercial banks plunged into the business of housing finance.

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4.2.1 Demand and supply gap The demand for a product usually tends to change at a steady rate, where as the capacity to produce the product tends to change at irregular intervals. As a result an industry is likely to experience under supply and over supply of capacity at different times. The strivers who were the lower sections were in large numbers a decade ago, while aspirers fall second and the rich fall third. In the current scenario aspirers have come ahead of strivers due to various reasons and therefore the demands for housing finance have increased leaps and bounds. 4.2.2 Competitive condition in the industry Another significant factor to be considered in industry analysis is the competitive conditions in the industry. The level of competition among various companies in an industry is determined by certain competitive forces are barriers to entry, the threat of substitution, bargaining power of suppliers, and rivalry among competitors. New entrants may face certain barriers to their entry. The barriers to entry may rise because of preference buyers have for the products of established firms. Their products enjoy a premium in the market. In an industry where buyers market prevails the buyers have more bargaining power. They would also force down the prices eroding profitability in the industry. Thus, an industry which is dictated by buyers would be in a weak competitive position. On the contrary, an industry where the sellers have higher bargaining power is expected to do well and be in a stronger position. In housing finance industry, the competition is tough as almost all banks have housing finance schemes which compete against private players and other development firms and government agencies.

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4.2.3 Permanence In this age of rapid technological change, the degree of performance of an industry is an important consideration in industry analysis. Permanence is a phenomenon related to the products and the technology used by the industry. If an analyst feels that the need for a particular industry will vanish in a short period, or that the rapid technological changes would render the products obsolete within a short time, it would be foolish to invest in such an industry. In the case of housing finance, the degree of permanence is high as long as people need houses to live in. 4.2.4 Labour conditions The state of labour condition in the industry under analysis is an important consideration in an economy such as ours where the labour unions are very powerful. If the labour in a particular industry is rebellious and is inclined to resort to strikes frequently the prospects of that industry cannot become bright. 4.2.5 Attitude of government The attitude of the government towards an industry has a significant impact on its prospects. The government may encourage the growth of certain industries and can assist such industries through favorable legislation. 4.2.6 Cost structure Cost structure is based on fixed cost and variable cost. The higher fixed cost component higher is the sales volume necessary to achieve break-even point.

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4.3 Company Analysis

Company analysis is the final stage of fundamental analysis. The economy analysis provides the investor a broad outline of the prospects of growth in the economy while the industry analysis helps the investor to select the industry in which investment would be rewarding and then the investor is left to decide the company in which he should invest his money. Company analysis is the action required at this stage. Company analysis deals with the estimation of returns and risk of individual shares and is based on information. Information regarding companies can be broadly classified in to two broad groups Internal and external. Internal information consists of data and events that are made public by the companies concerning their operations. The internal information source includes annual reports to shareholders, public and private statements of officers of the company, the companys financial statements etc. External source of information are those generated independently outside the company. These are prepared by investment services and the financial press. In company analysis, the analyst tries to forecast the future earnings of the company because, a strong evidence of future earnings of the company have a direct and powerful effect upon share prices. The level trend and stability of earnings of a company however depend upon a number of factors concerning the operations of the company 4.3.1 LIC Housing Finance Ltd LIC Housing Finance Ltd. is one of the largest Housing Finance Company in India. Incorporated on 19th June 1989 under the Companies Act, 1956, the company was promoted by LIC of India and went public in the year 1994.
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The Company launched its maiden GDR issue in 2004. The Authorized Capital of the Company is Rs.1500 Million (Rs.150 Crores) and its paid up Capital is Rs.850 Millions (Rs.85 Crores). The Company is recognized by National Housing Bank and listed on the National Stock Exchange (NSE) & Bombay Stock Exchange Limited (BSE) and its shares are traded only in demat format. The GDR's are listed on the Luxembourg Stock Exchange. The main objective of the Company is providing long term finance to individuals for purchase / construction / repair and renovation of new / existing flats / houses. The Company also provides finance on existing property for business / personal needs and gives loans to professionals for purchase / construction of Clinics / Nursing Homes / Diagnostic Centres / Office Space and also for purchase of equipments. The Company possesses one of the industry's most extensive marketing network in India: Registered and Corporate Office at Mumbai, 7 Regional Offices, 13 Back Offices and 190 marketing units across India. In addition the company has appointed over 1241 Direct Sales Agents (DSAs), 6535 Home Loan Agents (HLAs) and 782 Customer Relationship Associates (CRAs) to extend its marketing reach. Back Offices spread across the country conduct the credit appraisal and administrative functions. The Company has set up a Representative Office in Dubai and Kuwait to cater to the Non-Resident Indians in the GLCC countries covering Bahrain, Dubai, Kuwait, Qatar and Saudi Arabia. Today the Company has a proud group of over 10 lakh prudent house owners who have enjoyed the Company's financial assistance.

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4.3.2 Key Events and Milestones Year 1989 1994 2000 2002 2004 2005 Key Events and Milestones Company was incorporated Equity shares were launched Crisil assigned AAA rating Took over GLFL Housing Finance Merrill Lynch Capitat acquired stake Goldman Sachs acquired stake

4.3.3 Growth of the company Companies are judged by their sales and earnings growth rates than on the absolute value of their sales and earnings. The company which consistently grows faster than their peers can only ensure better returns. In LIC Housing Finance Ltds case, the company has been growing multifold in the past years. Year Sales Var % Profit After Tax Var % 2011/03 2010/03 2009/03 2008/03 4,680.09 3,456.24 2,880.17 2,089.40 35.41 20.00 37.85 35.05 974.49 662.18 531.62 387.19 47.16 24.56 37.30 38.70

4.3.4 Profitability of the company The companies that consistently find ways to squeeze more profits out of sales than their peers are of interest for the share holders. LIC Housing Finance has been increasing their profits in the past years.

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Year Profit After Tax Var % Year OPM (%) Var %

2011/03 2010/03 2009/03 2008/03 974.49 662.18 531.62 387.19 47.16 24.56 37.30 38.70 2011/03 2010/03 2009/03 2008/03 89.94 95.48 94.61 92.60 -5.80 0.92 2.17 0.67

4.3.4 Financial health of the company The financial health of a company is dependent on a combination of profitability, short-term liquidity and long term liquidity. Companies, which are profitable, but have poor short term or long term liquidity measures, do not survive the troughs of the trade cycle. And those which are not profitable but are cash rich do not survive in the long term either. The companies that do succeed and survive over the long term have a well-rounded financial profile, and perform well in all aspects of financial analysis. Profitability ratios reflect the business environment of the time. The key profitability ratios of LICHF are: Return on Total Assets (ROTA) Return on capital employed (ROCE) Net profit margin The key short-term liquidity ratios are: Current Ratio Quick Ratio 1.86% 1.97% 20.73% 12.13 12.09

Financial health of the company Such companies are taken over for their cashflow or by others who

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believe that they can improve the profitability of the business. Thus,

Return on Total Assets (ROTA) Return on capital employed (ROCE) Net profit margin

12.53% 12.98% 52.06%

Short-term liquidity is the ability of the company to meet its short-term financial commitments. Short-term liquidity ratios measure the relationship between current liabilities and current assets. Current assets are stocks and work-inprogress, debtors and cash that would normally be re-circulated to pay current liabilities. The ideal ratio 1:1. But a very high ratio indicates that the company is unable to manage its cash properly. The key short-term liquidity ratios are: Current Ratio Quick Ratio 1.27 1.23

Long term liquidity or gearing is concerned with the financial structure of the company. Long term liquidity ratios measure the extent to which the capital employed in the business has been financed either by shareholders through share capital and retained earnings, or through borrowing and long-term finance. Highly geared companies are risky. Look for a balance.

The key long-term liquidity ratios are: Gearing Ratio 89.11%

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Interest Cover

13.15

Stock performance Investors need to know how a stock has performed relative to all other stocks. Generally they attempt to hold the markets top-performing securities-those that have done better over the past year than majority of stocks in their industrial group. BSE period 3 Months 6 Months 12 Months close price 156.05 change NSE period 3 Months 6 Months 12 Months close price 156.45 change

-18.94

-19.02

157.85

-19.86

157.85

-19.73

157.55

-19.71

157.60

-19.61

Stocks support and resistance Investors should note that the average prices at which a stock traded over the past 50- and 200-day periods. These "moving averages" tend to provide a floor, or support, for stocks trading above them and a ceiling, or resistance, for stocks below them. Stocks that sink below support are in danger of further weakening; stocks that rise above resistance have a shot at new highs.

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BSE Close Price 52 Week Low 50-day Average Moving Rs.126.50 Rs.111.00

NSE Close Price 52 Low 50-day Moving Average Week Rs.126.70 Rs.110.00

Rs.135.21

Rs.135.33

Companys performance against its peers Market Cap (rs cr.) 25,342.94

Sales Company (rs cr.) Mundra Port & Special Economic Zone Ltd. Sun Pharma Advanced Research Company Ltd. Future Ventures India Ltd. Gateway Ltd. KGN Enterprises Ltd. Distriparks

PAT (rs cr.)

1,886.58

986.16

58.35

-8.50

1,605.15

13.12

-0.67

1,417.04

183.01 9.58

84.83 1.27

1,388.07 1,173.95

Key financial ratios and their interpretation

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2011/03

2010/03

2009/03

2008/03

Per Share EPS CEPS Book Value Dividend/Share Operating Profit / Share Net Operating Income / Share Free Reserves / Share 18.42 72.18 61.65 53.69 9.42 34.83 28.39 20.43 4.92 5.96 21.42 0.9 6.55 17.49 21.69 86.99 4 24.06 11.51 14.93 73.44 3 19.07 5.33 7.84 65.13 1.5 13.46

Profitability Ratios OPM GPM NPM RONW 69.51 58.5 52.06 22.03 69.08 57.03 46.42 19.18 67.16 55.1 37.14 16.17 65.9 53.6 25.44 6.43

Liquidity ratios Debt/Equity Current Ratio Quick Ratio Interest Cover 0.77 1.27 1.23 17.58 0.9 1.23 1.21 5.92 0.78 1.28 1.26 4.32 0.73 1.16 1.14 4.07

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Turn Over Ratios Sales/Total Assets Sales/Fixed Assets Sales/Current Assets 1.62 0.81 0.72 0.59 0.28 0.25 0.25 0.25 7.53 4.36 3.32 4.33

Miscellaneous No of Days of Working Capital CAR 0 0 0 0 47.84 82.52 108.4 83.09

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Current ratio The current ratio is a popular financial ratio used to test a

company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities. The concept behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes). In theory, the higher the current ratio, the better. A ratio of less than one is often a cause for concern, particularly if it persists for any length of time. Here the current ratio is 1.27 which is greater than 1. The company will be able to pay off its short term liabilities. Quick ratio The quick ratio, the quick assets ratio or the acid-test ratio - is a liquidity indicator that further refines the current ratio by measuring the amount of the most liquid are more difficult to turn into cash. Therefore, a higher ratio means a more liquid current position. a ratio of less than one would start to send out danger signals. Here the quick ratio is 1.23 which is greater than 1. Interest cover This measures the ability of the business to "service" its debt. The interest coverage ratio is higher in 2011 as compared to the previous years and is17.58, which is a good signel. EPS

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EPS measures the overall profit generated for each share in existence over a particular period. Here the earnings per share ratio is 4.92 which is very less as compared to the earnings for the years before.

Fixed-Asset Turnover Ratio The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. The fixed-asset turnover ratio is higher for the current year. Sales to Current Assets Ratio Sales to Current Assets Ratio is used to measure how well a company is making use of its assets in generating sales revenue. A high ratio may indicate deficient working capital. Here the ratio is 1.62 which is greater than 1. Gross Profit margin The gross profit margin ratio tells us the profit a business makes on its cost of sales, or cost of goods sold. The gross profit margin ratio is higher for 2011 as compared to the previous years and is 58.5, which is a good signal. P/E ratio The P/E ratio is an indication of how highly the market "rates" or "values" a business. A P/E ratio is best viewed in the context of a sector or market average to get a feel for relative value and stock market pricing. Dividend yield

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This is known as the "payout ratio". It provides a guide as to the ability of a business to maintain a dividend payment. It also measures the proportion of earnings that are being retained by the business rather than distributed as dividends.

Sales to Total Assets ratio Sales to Total Assets ratio indicates how efficiently the firm generates sales revenue on each dollar of assets. It is defined as the total assets divided by the turnover of the firm. 7.53 is the Sales to Total Assets ratio for the company and is the highest for 2011from the given years. So, it is a good signal.

P&L Account Mundra Port and Special Economic Zone (Rs in crores)

Mar '11 12 mths

Mar '10 12 mths

Mar '09 12 mths

Mar '08 12 mths

Income Sales
29

1,886.58

1,395.39

1,137.59

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Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling Admin Expenses and 76.17 78.7 58.88 47.25 181.7 107.73 85.57 45.08 66.62 54.68 40.56 33.66 164.9 67.13 100.26 74.56 120.41 51.41 97.7 36.23 1,929.62 1,560.17 1,247.30 883.78 0 1,886.58 43.04 0 0 1,395.39 164.78 0 0 1,137.59 109.71 0 0 818.58 65.2 0

Miscellaneous Expenses Preoperative Exp Capitalised

18.55

15.44

16.66

19.22

Total
30

575.07

431.37

373.49
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279.14

Expenses

Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Tax Extra-ordinary items PBT (Post Before

1,311.51

964.02

764.1

539.44

1,354.55 75.01 1,279.54 207.86 0

1,128.80 182.2 946.6 168.14 0

873.81 200.81 673 137.24 0

604.64 137.46 467.18 100.64 0

1,071.68

778.46

535.76

366.54

5.2

-17.99

-20.97

0.27

1,076.88

760.47

514.79

366.81

Extra-ord Items)

Tax Reported Net Profit Total Addition Preference Dividend Value

90.72 986.16

59.48 700.98

53.71 461.09

153.41 213.41

410.17

331.11

253.07

181.43

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Equity Dividend Corporate Dividend Tax

180.33

160.29

120.22

60.1

Per share data (annualised) Shares issue (lakhs) Earning Share (Rs) Equity Dividend (%) Book (Rs) Value 21.42 86.99 73.44 65.13 45 40 30 15 Per 4.92 17.49 11.51 5.33 in 20,033.94 4,006.79 4,006.79 4,006.79

Balance Sheet Mundra Port and Special Economic Zone

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Mar '11

Mar '10

Mar '09

Mar '08

12 mths

12 mths

12 mths

12 mths

Sources Of Funds Total Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 7,597.08 6,645.43 5,258.27 4,519.26 618.27 3,303.01 524.83 3,157.18 28.02 2,313.00 21.98 1,906.75 2,684.74 2,632.35 2,284.98 1,884.77 0 4,294.07 0 3,488.25 0 2,945.27 0 2,612.51 2.81 3,890.58 2.81 3,084.76 2.81 2,541.78 2.81 2,209.02 0 0 0 0 400.68 400.68 400.68 400.68 Share 403.49 403.49 403.49 403.49

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Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash Bank Balance Total Current Assets Loans Advances Fixed Deposits 33.61 726.28 970.36 808.01 and 714.1 665.54 210.06 193.59 415.06 321.78 398.48 396.36 and 105.05 132.4 160.35 81.55 268.78 157.99 211.64 296.34 1,325.73 715.04 41.23 1,394.61 721.03 31.39 1,232.55 431.75 26.49 405.83 1,082.66 18.47 1,000.98 5,305.64 751.69 4,209.93 530.53 3,251.42 359.84 2,841.83 6,306.62 4,961.62 3,781.95 3,201.67

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Total

CA, 1,162.77 1,713.60 1,578.90 1,397.96

Loans & Advances Deffered Credit Current Liabilities Provisions Total Provisions Net Assets Miscellaneous Expenses Total Assets Current CL &

797.98 114.11

1,320.08 73.68

1,189.47 46.88

1,113.94 95.09

912.09

1,393.76

1,236.35

1,209.03

250.68

319.84

342.55

188.93

0 7,597.09

0 6,645.41

0 5,258.27

0 4,519.25

Contingent Liabilities Book (Rs) Value 21.42 86.99 73.44 65.13 1,509.34 1,069.41 877.39 545.1

Beta & alpha A beta of 1.0 indicates a security of average risk. A stock with beta greater than 1.0 has above average risk. Its returns would be would be more volatile than the market returns. A stock with beta less than 1.0 would have below average risk. Variability in its returns would be comparatively lesser than the market variability.
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Beta can also be negative, implying that the stock returns move in a direction opposite to that of the market returns. Beta is calculated form historical data of returns to measure the systematic risk of a security. It is a historical measure of systematic risk. In using this beta for investment decision making the investor is assuming that the relationship between the security variability and market variability will continue to remain the same in future also.

Systematic risk is the variability in security returns caused by changes in the economy or the market. All securities are affected by such changes to some extent, but some securities exhibit greater variability in response to market changes. The systematic risk of a security is measured by the statistical measure called beta. For MPSEZ the value is 1.1066. Since the beta value is greater than 1, it is above average risk. The alpha value is 0.0021. Other values obtained from the analysis of the three months data are: Average price of share 0.0003611

Average price of index

-0.00158043

Standard deviation of share

0.0232831

Standard deviation of index

0.011506494

Coefficient of share

6447.8597

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Coefficient of index

-728.061172

Beta

1.1066

Alpha

0.0021

Intrinsic value of the share using Gordons Model or Multiplier approach It is a model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. Given a dividend per share that is payable in one year, and the assumption that the dividend grows at a constant rate in perpetuity, the model solves for the present value of the infinite series of future dividends. According to this model; V= D0 (1+g)/ (K-g) Where; V= intrinsic value of share D=Expected dividend per share one year from now g= growth rate K= Required rate of return for equity investor D: 1.20/ Share

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K: 26.37% g: 5% So, V= 1.2* (1+.05)/ (.2837-.05) = Rs 5.39/Expected Return using CAPM Close price of nifty index on 17 june (P0): 5366.40 Close price of nifty index on 14 september (P1): 5012.55 Rm = (P1-P0)/P0 = (5012.55-5366.40)/5366.40 =-0.2637 K = Rf+ (Rm- Rf)

Where; K= expected return Rf= risk free rerurn = systematic risk Rm= return of the market index K =8 + 1.1066 (26.37-8) = 28.33% TECHNICAL ANALYSIS

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Technical analysis stands in contrast to the fundamental analysis approach to security and stock analysis. Technical analysis analyzes price, volume and other market information, whereas fundamental analysis looks at the facts of the company, market, currency or commodity. Most large brokerage, trading group, or financial institutions will typically have both a technical analysis and fundamental analysis team. Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, business cycles, stock market cycles or, classically, through recognition of chart patterns. A fundamental principle of technical analysis is that a market's price reflects all relevant information, so their analysis looks at the history of a security's trading pattern rather than external drivers such as economic, fundamental and news events. Price action also tends to repeat itself because investors collectively tend toward patterned behavior hence technicians' focus on identifiable trends and conditions. Based on the premise that all relevant information is already reflected by prices, technical analysts believe it is important to understand what investors think of that information, known and perceived. Technical analysts believe that prices trend directionally, i.e., up, down, or sideways (flat) or some combination. The basic definition of a price trend was originally put forward by Dow Theory. Technical analysts believe that investors collectively repeat the behavior of the investors that preceded them. To a technician, the emotions in the market may be irrational, but they exist. Because investor behavior repeats itself so often, technicians believe that recognizable (and predictable) price patterns will develop on a chart.Technical analysis is not limited to charting, but it always considers price trends.

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There are many techniques in technical analysis. Adherents of different techniques (for example, candlestick charting, Dow Theory, and Elliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one technique. Some technical analysts use subjective judgment to decide which pattern(s) a particular instrument reflects at a given time and what the interpretation of that pattern should be. A technical analyst believes that share prices are determined by the demand and supply forces operating in the market. These demand and supply forces in turn are influenced by a number of fundamental factors as well as certain psychological or emotional factors. Many of these factors cannot be quantified. The combined impact of all these factors is reflected in the share price movements. A technical analyst therefore concentrates on the movement of share prices. He claims that by examining past share price movements future share prices can be accurately predicted. Technical analysis is the name given to forecasting techniques that utilize historical share price data. The rationale behind technical analysis is that share price behavior repeat itself over time analysis attempt to derive methods to predict this repetition. A technical analyst looks at the past share price data to see if he can establish any patterns. He then look at current price data to see if any of the established patterns are applicable and if so extrapolations can be made to predict the future price movements. Although past share prices are the major data used by technical analyst, other statistics such as volume of trading and stock market indices are also utilized to some extent. The basic premises of technical analysis are that price move in trends or waves which may be upward or down ward. It is believed that present trends are influenced by the past trends and that the projection of future trends is possible by an analysis of past price trends. A technical analyst therefore analysis the price and volume movements of individual trends. A technical analyst therefore
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analysis the price and volume movements of individual securities as well the market index, thus technical analysis is really a study of past or historical price and volume movements so as to predict the future stock price behavior. Basic principles of technical analysis The market value of a security is related to demand and supply factors operating in the market There are both rational and irrational factors which surround the supply and demand factors of a security Security prices behave in a manner that their movement is continuous in a particular direction for some length of time. Trends in stock prices have been seen to change when there is a shift in the demand and supply factor. The shift in demand and supply can be specially to show market condition. detected through charts prepared

EFFICIENT MARKET THEORY The basic assumption in technical analysis is that stock price movements are quite orderly and not random. From the results of several empirical studies on stock price movements are random. The new theory came to be known as random walk theory because of its principal contention that share price movements represent a random walk rather than an orderly movement. Random walk Theory Stock price behavior is explained by the theory in the following manner. A change occurs in the price of a stock only because of certain changes
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in the economy, industry or company. Information about these changes alters the stock prices immediately and stock moves to a new level, either upwards or down wards depending upon the type of information. The basic premise in random walk theory is that the information on changes in the economy, industry and company performance is immediately and fully spread so that all investor have full knowledge of the information. There is an instant adjustment in stock prices either upward or down ward. Thus the current stock price fully reflects all available information on the stock. Therefore, the price of a security two days ago can in no way help in speculating the price two days later. The price of each day is independent. It may be unchanged higher or lower from the previous price but that depends on new pieces of information being received each day. The random walk theory pre suppose that the stock markets are so efficient and competitive that there is an immediate price adjustment. This is the result of good communication system through which information can be spread almost anywhere in the country instantaneously. Thus the random walk theory is based came to be known as the efficient market hypothesis (EMH) or the efficient market model. This hypothesis states that the capital market is efficient in processing information. An efficient capital market is one in which security prices equal their intrinsic value at all times and where most securities are correctly priced. Others employ a strictly mechanical or systematic approach to pattern identification and interpretation. Technical analysis is frequently contrasted with fundamental analysis, the study of economic factors that influence the way investors price financial markets. Technical analysis holds that prices already reflect all such trends before investors are aware of them. Uncovering those trends is what technical indicators are
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designed to do, imperfect as they may be. Fundamental indicators are subject to the same

limitations, naturally. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions.

CHART FOR MUNDRA PORT

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Line chart

Line chart

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Candle stick

Bar chart

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CHART FOR NIFTY JUNIOR

Line chart

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Bar chart

Candle stick

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Line chart

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Interpretations of charts with patterns

Three various chart patterns like rectangle, triangle and flag can be seen here. These are continuation patterns and are formed during side way movements of share prices. They indicate a continuation of the trend prevailing before the formation of the pattern. Rectangle It is a continuation pattern where the trend continues. There will an upward trend or a downward trend according to the nature of the chart. Here it is in downward trend. Triangle These are formed when the price movements result in two or more consecutive descending tops and two or more consecutive ascending bottoms. The triangle may be formed during a bull phase or a bear phase. It is generally seen that the volume diminishes during the movement within the triangular pattern. The breakout from the pattern is usually accompanied by increasing volume. Here it is showing an upward trend.
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Flag These are very reliable continuation patterns. They occur mid way between a sharp rise in price or a steep fall in price. Here it is showing a downward trend.

A description of the price movements during the study period

The variation of the share price was around Rs 150. There is not much variation from that price. During the initial stages for the study period, the price was stable and after some time the price was showing an upward trend. The upward trend continued for some time and it came back to the initial level and showed a downward trend. It continued for about one and a half month and slowly increased and then it was moving in a positive way. This was just for a shorter period and the share price was nearing zero during the terminal stages of the
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study. The close price chart shows a head and shoulder formation and so the trend will continue i.e. the downward trend will continue.

RECOMMENDATION & CONCLUSION

The company is worth investing in since the market value of the share is low. The companys share price is much lower. The company is having safe financial stability and it is safe to invest in. the economic factors are supporting the growth of the firm and so the demand. The companys profit in 2011been five times as that in 2007. This is another safer side of the company. All the external factors are in favour of the industry even though some economic factors are not that much supportive.

The financial ratio analysis shows that the firm is worth investing in. almost all the ratios of the company are in the positive side.

The study of the chart patterns revealed that the share price will show a continuing trend since the flag formation was there in the end of the period. Even though the trend continues, there will be a trend reversal in the future since the external factors are in favour of the company.

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The comparison of the market price and the intrinsic value shows that it is the right time to buy the share.

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BIBLIOGRAPHY

Books: S Kevin,2011, Security analysis and portfolio management, Prentice Hall of India, New Delhi.

Websites www.icicidirect.com http://www.tradingeconomics.com/india/inflation-cpi http://www.tradingeconomics.com/india/gdp-growth-annual http://www.answers.com/search?q=monsoon+and+trade+in+arabian+sea http://business.rediff.com/slide-show/2010/jun/02/slide-show-1-howmonsoon-impacts-indian-economy.htm http://www.rbi.org.in/Scripts/PublicationReportDetails.aspx? UrlPage=&ID=658 http://www.researchandmarkets.com/research/028dbd/shipping_and_port

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