fundamental & technical analysis of 5 companies of oil & gas sector

Executive Summary:The report Fundamental & Technical analysis of the 5 major oil & gas companies is to analyze the strength and weakness of the scrips of the 5 major companies in the oil & gas industry. The 5 major companies include ONGC, BPCL, GAIL INDIA LTD, HPCL and Cairn India. The primary objective of the study is to suggest the investors, whether to buy the scripts or not, based on the valuation of shares. Also to analyze the trend of the scripts in the market. The secondary objective is to analyze how the companies perform, understand the capital market and its functioning, and to compare theoretical knowledge with actual industrial practice.To analyze all the scripts, fundamental and technical analysis is used. In the fundamental analysis, ratios of the companies are studied. For technical analysis, tools like Japanese Candlestick Charts, Relative Strength Index (RSI), Simple moving average (SMA), Exponential moving average (EMA) and volume are used. Also the movement of corresponding graphs is studied to interpret whether to buy, sell or hold the share.

Chapter 11.1 Introduction to the Industry[footnoteRef:1]: [1: https://books.google.co.in/books?isbn=8179752224]

Financial Markets:India Financial marketis one of the oldest in the world and is considered to be the fastest growing and best among all the markets of the emerging economies. The history of capital markets dates back 200 years toward the end of the 18th century when India was under the rule of the East India Company. The development of the capital market in India concentrated around Mumbai where no less than 200 to 250 securities brokers were active during the second half of the 19th century. Thefinancial market in Indiatoday is more developed than many other sectors because it was organized long before with the securities exchanges of Mumbai, Ahmedabad and Kolkata were established as early as the 19th century. It is classified as follows:

What is Money Market?[footnoteRef:2] [2: https://en.wikipedia.org/wiki/Money_market_in_India]

TheMoney market in Indiais themoney marketfor short-term and long-term funds with maturity ranging from overnight to one year in India includingfinancial instrumentsthat are deemed to be close substitutes ofmoney.Similar todeveloped economiesthe Indian money market is diversified and has evolved through many stages, from the conventional platform oftreasury billsandcall moneytocommercial paper,certificates of deposit,repos,forward rate agreementsand most recentlyinterest rate swapsThe Indian money market consists of diverse sub-markets, each dealing in a particular type of short-term credit. The money market fulfills the borrowing and investment requirements of providers and users of short-term funds, and balances the demand for and supply of short-term funds by providing an equilibrium mechanism. It also serves as a focal point for thecentral bank's intervention in the market.

Structure of Money Market:The Indian money market consists of the unorganised sector: moneylenders, indigenous bankers, and unregulated Non-Bank Financial Intermediaries (e.g. Finance companies, Chit funds, Nidhis) organized sector:Reserve Bank of India,private banks, public sector banks, development banks and othernon-banking financial companies(NBFCs) such asLife Insurance Corporation of India(LIC), theInternational Finance Corporation, IDBI, and the co-operative sector.

Instruments in Money Market:[footnoteRef:3] [3: business.mapsofindia.com India-market]

1. Call Money:The call money market deals in short term finance repayable on demand, with a maturity period varying from one day to 14 daysCommercial banks, both Indian and foreign, co-operative banks, Discount and Finance House of India Ltd.(DFHI), Securities trading corporation of India (STCI) participate as both lenders and borrowers andLife Insurance Corporation of India(LIC),Unit Trust of India(UTI),National Bank for Agriculture and Rural Development(NABARD)can participate only as lenders. The interest rate paid on call money loans, known as the call rate, is highly volatile. It is the most sensitive section of the money market and the changes in the demand for and supply of call loans are promptly reflected in call rates. There are now two call rates in India: the Inter bank call rate'and the lending rate of DFHI. The ceilings on the call rate and inter-bank term money rate were dropped, with effect from May 1, 1989. The Indian call money market has been transformed into a pure inter-bank market during 200607.[4]The major call money markets are inMumbai,Kolkata,Delhi,Chennai,Ahmedabad.

2. Treasury bill market:Treasury bills are instrument of short-term borrowing by theGovernment of India, issued as promissory notes under discount. The interest received on them is the discount which is the difference between the price at which they are issued and their redemption value. They have assured yield and negligible risk of default. Under one classification, treasury bills are categorised as ad hoc, tap and auction bills and under another classification it is classified on the maturity period like 91-days TBs, 182-days TBs, 364-days TBs and two types of 10-days TBs. In the recent times (200203, 200304), theReserve Bank of Indiahas been issuing only 91-day and 364-day treasury bills. the auction format of 91-day treasury bill has changed from uniform price to multiple price to encourage more responsible bidding from the market players.the bills are two kinds- Adhoc and regular. The treasury bills sold to the public and banks are called regular treasury bills. They are freely marketable. commercial bank buy entire quantity of such bills issued on tender. They are bought and sold on discount basis. Ad-hoc bills were abolished in April 1997.

3. Ready forward contract (Repos):Repo is an abbreviation forRepurchase agreement, which involves a simultaneous "sale and purchase" agreement.When banks have any shortage of funds, they can borrow it fromReserve Bank of Indiaor from other banks. The rate at which the RBI lends money to commercial banks is calledrepo rate, a short term forrepurchase agreement. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases borrowing from RBI becomes more expensive.

4. Money market mutual funds:Money market mutual funds invest money in specifically, high-quality and very short maturity-based money market instruments. The RBI has approved the establishment of very few such funds in India. In 1997, only one MMMF was in operation, and that too with very small amount of capital.

What is Capital Market?[footnoteRef:4] [4: www.yourarticlelibrary.com/.../capital-market...of-capital-market/11128]

Capital marketsarefinancial marketsfor the buying and selling of long-termdebtorequity-backedsecurities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Capital markets are defined as markets in which money is provided for periods longer than a year.Modern capital markets are almost invariably hosted on computer-basedelectronic tradingsystems; most can be accessed only by entities within the financial sector or the treasury departments of governments and corporations, but some can be accessed directly by the public.There are many thousands of such systems, most serving only small parts of the overall capital markets. Entities hosting the systems include stock exchanges, investment banks, and government departments.A key division within the capital markets is between theprimary marketsandsecondary markets. In primary markets, new stock or bond issues are sold to investors, often via a mechanism known asunderwriting. The main entities seeking to raise long-term funds on the primary capital markets are governments (which may be municipal, local or national) and business enterprises (companies). Governments tend to issue only bonds, whereas companies often issue either equity or bonds. The main entities purchasing the bonds or stock include pension funds,hedge funds,sovereign wealth funds, and less commonly wealthy individuals and investment banks trading on their own behalf. In the secondary markets, existing securities are sold and bought among investors or traders, usually on anexchange,over-the-counter, or elsewhere. The existence of secondary markets increases the willingness of investors in primary markets, as they know they are likely to be able to swiftly cash out their investments if the need arises.A second important division falls between thestock markets(for equity securities, also known as shares, where investors acquire ownership of companies) and thebond markets (where investors become creditors).

Classification:

Primary Markets:The primary market is where securities are created. It's in this market that firms sell (float) new stocks and bonds to the public for the first time. For our purposes, you can think of the primary market as being synonymous with aninitial public offering(IPO). Simply put, an IPO occurs when a private company sells stocks to the public for the first time.IPOs can be complicatedbecause many different rules and regulations dictate the processes of institutions, but they all follow a general pattern:1. A company contacts anunderwritingfirm to determine the legal and financial details of the public offering.2. A preliminary registration statement, detailing the company's interests and prospects and the specifics of the issue, is filed with the appropriate authorities. Known as a preliminary prospectus, orred herring, this document is neither finalized nor is it a solicitation by the company issuing the new shares. It is simply an information pamphlet and a letter describing the company's intent.3. The appropriate governing bodies must approve the finalized statement as well as afinal prospectus, which details the issue's price, restrictions and benefits, and is issued to those whopurchasethe securities. This final prospectus is legally binding for the company.The important thing to understand about the primary market is that securities are purchased directly from an issuing company.

Secondary Market:The secondary market is what people are talking about when they refer to the "stock market".The defining characteristic of the secondary market is that investors trade among themselves. That is, in the secondary market, investors trade previously issued securities without the issuing companies' involvement. For example, if you go to buy Microsoft stock, you are dealing only with another investor who owns shares in Microsoft. Microsoft (the company) is in no way involved with the transaction. Thesecondary market, also called theaftermarket, is thefinancial marketin which previously issuedfinancial instrumentssuch as stock,bonds,options, andfuturesare bought and sold.The term "secondary market" is also used to refer to the market for anyused goodsor assets, or an alternative use for an existing product or asset where the customer base is the second market (for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production).With primary issuances of securities or financial instruments, or theprimary market, investors purchase these securities directly from issuerssuch ascorporationsissuingsharesin anIPOorprivate placement, or directly from the federal government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market.The secondary market for a variety of assets can vary fromloansto stocks, from fragmented to centralized, and fromilliquidto very liquid. The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies.

Stock Markets in India:People buy goods and services in a place called market. However, when the people need to trade in stocks, shares, debentures etc. there is a specific place where one needs to go. One cannot deal with these items in a normal market place. Thus a place or a platform where the trading of these shares and stocks takes place is known as theSTOCK MARKET. The price of these shares and stocks is not considered by monopoly; rather it is the demand and supply forces of the market that determines the prices of these shares and stocks.In earlier times, the trading, that is, the buying and selling of shares and stocks takes place at a particular place known as stock exchange. Thus, the person needs to go at that particular platform if he or she needs to trade in the shares. However with the advancement of technology, this process has almost become redundant. Now, the trading of shares and stock can take place electronically. There is a tremendous reduction of paperwork as everything has gone online.

Origin of the Indian Stock Market:[footnoteRef:5] [5: https://books.google.co.in/books?isbn=8176292028]

The Indian stock market is not a new concept. It has a history of about 299 years old. It was in early 18th Century, the main institution that is dealing in the trading of shares and stocks is the East India Company. Later by around 1830s the main dealing in the shares and stocks (mainly in bank and cotton) was initiated in Bombay. However, the items in which the trading took place increased tremendously by the end of 1839. There after the concept ofbrokerbusiness was started which show momentum in the mid 18th century. This concept has attracted nm\ember of people to indulge in the trading of items. By 1860, the number of brokers who are dealing in the trading of items goes up to 60 in number. Further, the number of brokers increased from 60 to 250 in around 1862-1863.However, around 1980-61 there is no supply of cotton from America as there was civil war that took place in America. Due to this, there is a concept of Share Mania that took place in India.This is the era of 1980 in which the Indian market had the initial flavor of the trading in items and the concept of Stock market. Thereafter, it has shown significant changes both in the pre-independence era and post-independence era.Pre-Independence Era:The concept of stock market place was not a very systematic system. People who needs to trade generally gathered on the streets which was popularly known as theDALAL STREETand the trading and the transaction used to take place from the Dalal street. It was in year 1875 that the first stock exchange was formulated in the name of The Native Share and Stock Brokers Association which is presently known as the Bombay stock exchange. There after it was in year 1908, that the stock exchange in Calcutta was formulated known asThe Calcutta Stock Exchange Association. This wind of stock exchange has also shown its pace in madras in 1920 resulting in the formation of the Madras Stock exchange which was started with around 100 brokers who are trading in the madras Stock exchange. It was in 1934 when the Lahore Stock exchange was established. The Uttar Pradesh stock exchange and the Nagpur stock Exchange was established in year 1940. In year 1944, the Hyderabad stock exchange was established. It was not until 1947 that any stock exchange was established in Delhi. It was in year 1947 that the Delhi Stock and Share Broker Association Limited and The Delhi stocks and Shares exchange Limited was established in Delhi.

Post-Independence Era:There was shutdown of various stock exchanges in India due to the depression that took place after Independence. It was under the Securities Contracts (Regulations) Act, 1956 that various stock exchanges has got a recognition as a recognized stock exchange such as Bombay, Delhi, Hyderabad, Indore etc. there are several other stock exchanges that were established post-independence.Thus, the market of stock exchange in India is tremendous and is growing with leaps and bounds.

Exchanges in India:Stock Exchanges are an organized marketplace, either corporation or mutual organization, where members of the organization gather to trade company stocks or other securities. The members may act either as agents for their customers, or as principals for their own accounts. Stock exchanges also facilitate for the issue and redemption of securities and other financial instruments including the payment of income and dividends. The record keeping is central but trade is linked to such physical place because modern markets are computerized. The trade on an exchange is only by members and stock broker do have a seat on the exchange.

The major stock exchange maintained by theSecurities and Exchange Board of India(SEBI) are: Bombay Stock Exchange(BSE) National Stock Exchange of India(NSE)Commodity Exchange Multi Commodity Exchange of India Limited(MCX) National Commodity & Derivatives Exchange Limited(NCDEX) Indian National Multi-Commodity Exchange (NMCE) Commodity Exchange LimitedICEX.

About BSE:[footnoteRef:6] [6: www.bseindia.com]

Established in 1875, BSE (formerly known as Bombay Stock Exchange Ltd.), is Asia's first & fastest Stock Exchange with the speed of 200 micro seconds and one of India's leading exchange groups. Over the past 140 years, BSE has facilitated the growth of the Indian corporate sector by providing it an efficient capital-raising platform. Popularly known as BSE, the bourse was established as "The Native Share & Stock Brokers' Association" in 1875. BSE is a corporatized and demutualized entity, with a broad shareholder-base which includes two leading global exchanges, Deutsche Bourse and Singapore Exchange as strategic partners. BSE provides an efficient and transparent market for trading in equity, debt instruments, derivatives, mutual funds. It also has a platform for trading in equities of small-and-medium enterprises.

More than 5500 companies are listed on BSE making it world's No. 1 exchange in terms of listed members. The companies listed on BSE command a total market capitalization of USD 1.68 Trillion as of March 2015. It is also one of the world's leading exchanges (5th largest in March 2015) for Index options trading. BSE also provides a host of other services to capital market participants including risk management, clearing, settlement, market data services and education. BSE systems and processes are designed to safeguard market integrity, drive the growth of the Indian capital market and stimulate innovation and competition across all market segments. BSE is the first exchange in India and second in the world to obtain an ISO 9001:2000 certification. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its On-Line trading System (BOLT). BSE's popular equity index - the S&P BSE SENSEX - is India's most widely tracked stock market benchmark index. It is traded internationally on the EUREX as well as leading exchanges of the BRICS.

BSE has won several awards and recognitions that acknowledge the work done and progress made like India Innovation Award for the Big Data implementation , ICICI Lombard & ET Now Risk Management BFSI Company 2013, SKOCH Order of Merit Certificate was awarded to BSE for E -Boss for qualifying amongst India's Best 2013, The Golden Peacock Global CSR Award for its initiatives in Corporate Social Responsibility, NASSCOM - CNBC-TV18's IT User Awards, 2010 in Financial Services category, Skoch Virtual Corporation 2010 Award in the BSE StAR MF category and Responsibility Award (CSR) by the World Council of Corporate Governance. Its recent milestones include the launching of BRICSMART indices derivatives, BSE-SME Exchange platform, S&P BSE GREENEX to promote investments in Green India.Bombay Stock Exchange has now adopted only its initials as the new name (BSE), positioning itself better position as a national multi-asset financial infrastructure institution. BSEs strategic shift in approach, attitude and business focus is reflected in its new tag line -Experience the New. With renewed zeal and focus on new business opportunities, product and service innovation, upgrades in technology, increased investor and member focus, BSE is always pushing the envelope on all fronts. The ambition is to continually improve and adopt new and better ways of conducting our business. As the first stock exchange in Asia and the pioneer of securities transaction business, BSE prides itself on being at the forefront of bringing innovations to the Indian capital markets while creating diverse investment opportunities for the investor community in India throughout its long history.

BSE continues to undertake several initiatives to build on its strong brand, legacy and market position to create value for its stakeholders and the financial system.At par with international standards, BSE Ltd. has been a pioneer in several areas over the decades and has many firsts and key achievements to its credit. BSE is the first exchange in India to: Launch a special platform for trading in SME securities Introduce Equity Derivatives Launch a Free Float Index - S&P BSE SENSEX Launch Exchange Enabled Internet Trading Platform Obtain ISO certification for a stock exchange Exclusive facility for financial training BSE Institute Ltd. Launch its website in Hindi and regional languages Host the popular opening-bell ceremony in Indian capital markets

About NSE:[footnoteRef:7] [7: www.nseindia.com]

The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products & services viz. demutualisation of stock exchange governance, screen based trading, compression of settlement cycles, dematerialisation and electronic transfer of securities, securities lending and borrowing, professionalisation of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market of debt and derivative instruments and intensive use of information technology.PurposeCommitted to improve the financial well-being of people.

VisionTo continue to be a leader, establish global presence, facilitate the financial well being of people.

ValuesNSE is committed to the following core values : Integrity Customer focused culture Trust, respect and care for the individual Passion for excellence TeamworkMs. Chitra was selected as the woman of the year, in the business leadership awards by the Forbes magazine recently and is also ranked 17th in the list of top global women business leaders by Fortune Magazine USA. She is the second most powerful businesswoman in India in this list. She has also been featured in the list of top 30 women achievers by the Business Today group, for the last four successive years. She is the third woman CEO to head an Exchange in the Asia-Pacific region.For fourth consecutive year CRISIL has assigned its highest corporate credit rating of CCR AAA to the National Securities Clearing Corporation Ltd (NSCCL). 'CCR AAA' rating indicates highest degree of strength with regard to honouring debt obligations. As per CRISIL the rating reflects NSCCLs status as Clearing Corporation for NSE. The rating also factors in NSCCLs rigorous risk management controls and adequate settlement guarantee cover.CRISIL has further stated that NSCCLs risk management system is comprehensive, and is regularly upgraded to pre-empt market failures. The company addresses risks in clearing and settlement with its stringent norms for selection of members, robust margining system, and risk-based position limits and surveillance mechanism.

The award recognizes best practice, quality service and innovation in derivatives and risk management in the Asia-Pacific region. The winning institutions are those that, over the past year, have responded best in the needs of their clients, both on the asset and liability side, along with the end-users that have demonstrated outstanding trading and risk management strategies.'Asia Risk' is the only publication dedicated solely to the business of financial risk management and the derivatives market in the Asia-Pacific region since 1995.

NSE has been awarded 'The Asian Banker Financial Derivative Exchange of the Year Award" NSCCL has been awarded 'The Asian Banker Clearing House of the Year Award"

Security Measures and Operational Features of BSE and NSE:

The leading stock exchanges in India have developed itself to a large extent since its emergence. These stock exchanges aim at offering the investors and traders better transparency, genuine settlement cycle, honest transaction and to reduce and solve investor grievances if any. Please Note: The researcher has not covered all the operational features of both the stock exchanges, but has taken into consideration only the ones which are important to understand the thesis. The aim to describe these operational features is for better understanding of the working of stock exchanges. This is done for the purpose of easy understanding from the readers point of view.

Its general operational features are as follows:

1) Market Timings: Trading on the equities segment takes place on all days of the week (except Saturdays and Sundays and holidays declared by the Exchange in advance). The market timings of the equities segment are:

Normal Market Open: 09:55 hours Normal Market Close: 15:30 hours

The Post Closing Session is held between 15.50 to 16.00 hours.

2) Automated Trading System: Today our country has an advanced trading system which is a fully automated screen based trading system. This system adopts the principle of an order driven market as opposed to a quote driven system.

i) NSE operates on the 'National Exchange for Automated Trading' (NEAT) system.

ii) BSE operates on the BSEs Online Trading (BOLT) system.

3) Market Segments The Exchange operates the following sub-segments in the Equities segment:

Rolling Settlement

In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on the net obligations for the day.

At NSE, trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day. For arriving at the settlement day all intervening holidays, which include bank holidays, NSE holidays, Saturdays and Sundays are excluded. Typically trades taking place on Monday are settled on Wednesday, Tuesday's trades settled on Thursday and so on.

Limited Physical Market

Pursuant to the directive of SEBI to provide an exit route for small investors holding physical shares in securities mandated for compulsory dematerialised settlement, the Exchange has provided a facility for such trading in physical shares not exceeding 500 shares.

Settlement Cycle

Settlement for trades is done on a trade-for-trade basis and delivery obligations arise out of each trade. The settlement cycle for this segment is same as for the rolling settlement viz:

ActivityDay

TradingRolling Settlement TradingT

ClearingCustodial ConfirmationT+1 working days

Delivery GenerationT+1 working days

SettlementSecurities and Funds pay inT+2 working days

Securities and Funds pay outT+2 working days

PostAssigning of shortages for close outT+3 working days

Settlement

Reporting and pick-up of bad deliveryT+4 working days

Close out of shortagesT+5 working days

Replacement of bad deliveryT+6 working days

Reporting of re-bad and pick-upT+8 working days

Close out of re-bad deliveryT+9 working days

4) Brokerage And Other Transaction Costs

Brokerage is negotiable. The Exchange has not prescribed any minimum brokerage. The maximum brokerage is subject to a ceiling of 2.5 percent of the contract value. However, the average brokerage charged by the members to the clients is much lower.Typically there are different scales of brokerages for delivery transaction, trading transaction, etc.

The Stamp Duty on transfer of securities in physical form is to be paid by the seller but in practice it is paid by the buyer while registering the shares in his name. In case of transfer of shares, the rate is 50 paise for every Rs.100/- or part thereof on the basis of the amount of consideration and that for transfer of debentures the rate of stamp duty varies from State to State, where the registered office of a Company issuing the debentures is located

5) Transfer Of Ownership

Transfer of ownership of securities, if the same is not delivered in demat form by the seller, is effected through a date stamped transfer-deed which is signed by the buyer and seller. The duly executed transfer-deed along with the share certificate has to be lodged with the company for change in the ownership. A nominal duty becomes payable in the form of stamps to be affixed on the transfer-deeds.

Transfer-deed remains valid for twelve months or the next book closure following the stamped date whichever occurs later for transfer of shares in the name of buyer. However, for delivery of shares in the market, transfer deed is valid till book closure date of the company.

18

1.2 Introduction to the Company[footnoteRef:8]: [8: https://www.ventura1.com]

Ventura Securities Ltd. (Ventura) commenced operations in 1994 as a stock broking house. Over the past two decades, they have grown into a group of companies that provides a complete array of financial products and services.Through a large network of sub-brokers, they offer their clients the opportunity to invest and trade in equity and equity derivatives, commodities, mutual funds, fixed income products and currency futures. They also directly facilitate clients who wish to trade in equity online via their in-house, customized and ready to use software Pointer which enables seamless processes and flawless execution. They adhere to a well-defined risk management system and settlement mechanism thereby conducting fully compliant operations.

Beyond investment avenues, the Ventura Group is constantly committed to providing investors with access to timely and relevant research and data to ensure an informed and fruitful investment experience. Change for the better is a way of life at Ventura. Innovations have always been customer centric which has been amply reflected in the upgradation of systems to facilitate their network partners.Mission Statement: To build true relationships and strive towards customer delight, through constant innovation on a strong foundation of dedicated and trained resources.

1.3 Introduction to the Project:This project is on analyzing the equities to invest money for getting higher return on investments made. This project report can be helpful for investors planning to invest in any of these five companies from the oil & gas sector in India. I chose to do this project because I wanted to analyze the equities from the investor point of view and also to understand the movement and performance of stocks and also try to know the factors that affect the movement of stock prices in the Indian stock markets.In the recent past, the bank interest rates have been increased steadily. But the rate of Inflation has also been increased. There is no big difference between the interest rate and Inflation rate. Because of inflation, value of money has been decreased and cost of living has been increased. This has created panic among lower, middle and upper middleclass families who considered keeping their savings in banks as safe as well as remunerative. So, the investors are searching for proper investment avenues. Here, an attempt is made to predict the future movement of scrips. This study helps the investors to invest in shares. The stock exchange comes in the secondary market. Stock exchange performs activities such as trading in share, securities, bonds, mutual fund & commodities. Stock Broking industry is growing at an enormous rate, as more and more people are attracted towards stock exchanges with the hope of making profits.

Chapter 22.1 Literature ReviewWarren Buffet, Investment Guru: Only buy something that youd be happy to hold if the market shuts down for 10 years

George Soros, Chairman, Soros Fund Management:Prevailing wisdom is that markets are always right, I assume they are always wrong

Michal Parness, Founder & CEO: Investors dont Make Money in the Stock Market. One reason the institutions make so much money is that they are trading. They make money every time you buy or sell. They make money whether you win or lose. That means that when youre investing, youre basically just sitting there. Youre not going anywhere. Youre not making money as an investor.

Trading the Trend: The Only Way to Make Money in the Market:If you dont know this already, Trend Trading means trading trends based on human emotions. Not lagging indicators. Not complex statistical analysis and not Ph.D. level mathematical equations. With trend trading, you look for market movement. That could mean stocks that are going to move up or down during the course of a day (intraday). Youll play the gaps up and down, often several days a week. The Trend trading means being aware and taking advantage of trends like the run-ups that happen around earning sessions. These are trends that have worked time and time again in the market. They consistently yield results.

Australian National University Stephen Sault Australian National University - Faculty of Economics & Commerce March 28, 2006:While the fundamental and technical analysis literatures invest considerable effort in assessing their respective ability to explain share prices, they invariably do so without reference to each other. In this context, we propose an equity valuation model integrating both fundamental and technical analysis and, in doing so, recognize their potential as complements rather than as substitutes. Testing confirms the complementary nature of fundamental and technical analysis by showing that, while each performs well in isolation, models integrating both have superior explanatory power. While our findings relate to the valuation of shares, they also have implications for other valuation exercises.

Sandy Jadeja 9- Oct -2004 Should you use Technical or Fundamental analysis to make your decisions?Volumes have been written about the different ways to forecast or predict market movement. Traditionally, there are two distinct schools of thought that an individual may choose from, and that being Fundamental analysis or Technical analysis. By choosing fundamental analysis, your decisions are based upon underlying economic factors, cash flows, and price earnings. This information will aim to tell you why a stock will move. Technical analysis aims to show you how and when a stock will move. This method discounts all news and information regarding the value of the stock. In other words, you only pay attention to a chart. The saying a picture is worth a thousand words truly summarizes this concept nicely. You can of course choose to use a combination of both if you prefer. This would imply that when the stock you are looking at becomes undervalued fundamentally, you would wait for a technical setup to get you in to the market. Deciding on which method is appropriate and gives bigger returns is truly a matter of opinion. Respectively, both methods have the same goal; to determine market direction. I know of a number of individuals who only use one or the other and is equally successful with phenomenal returns. It becomes interesting when one speaks to traders from each school. The fundamental traders believe that charts are a waste of time and provide no real sense as to why one would make trading decisions based on indicators and repetitive patterns. This group are essentially bargain hunters. They want to buy stocks which they feel are underpriced and will return to a normal value at a later stage. Fundamental traders often hold stocks for longer periods of time compared to technical traders. On the other hand, the technical traders believe that numbers do not lie and that information based on value, supply and demand are already factored into the price. They also argue that people can be predictable and that these behaviors occur in the form of price patterns. These patterns repeat with a degree of predictability and therefore can be used to forecast future price movements. Technical traders generally hold positions for shorter periods of time compared to fundamental traders. Clearly both avenues are important, and one must make careful decisions before jumping into trading without having an objective. I have always said that finding a method, style or strategy depends on ones personality. If you are thinking of long term investing then the fundamental approach may suit your needs whereas if you are looking for short term market moves, then technical analysis can provide a myriad of systems to accommodate your personal style.

2.2 Statement of Problem:Technical analysis is the study of price movement and trend in the markets in order to forecast future prices. Investors play a crucial role for trading in the stock market. Investment timing plays a crucial role for trading in the market. So this analysis is directed towards the use of different tools of technical analysis, which help the investor to identify and decide when to buy and sell. 2.3 Objectives of the Project:1. To gain practical knowledge of fundamental and technical analysis.2. To know how technical tools are used to predict the future behavior of stocks.3. To know how charting techniques are useful to take buy and sell decisions.4. To know how an investor takes rational investment decisions by studying the market trends and movements.2.4 Methodology:Secondary data source:Data is collected from the websites, magazines, textbooks and newspapers.2.5 Sample Design and Sample Size:The samples are selected from the index of Nifty and belong to the Oil & Gas sector. The companies selected are:1. Oil and Natural Gas CorporationLimited2. GAIL(India) Limited3. Bharat Petroleum Corporation Limited4. Hindustan Petroleum Corporation Limited5. Cairn IndiaLimited2.6 Scope and Limitations:1. The study is related to fundamental and technical analysis to predict the future behavior of stocks.2. The analysis has been done only on selected 5 stocks of Nifty, from the Oil & Gas sector industries.3. The analysis involves use of limited technical tools and charts out of the various tools present. 4. Technical analysis cannot be applied to newly listed company scrips.5. The study depends on secondary data rather than primary data.Chapter 33.1 An overview of Fundamental & Technical Analysis:What is Fundamental Analysis?[footnoteRef:9] [9: https://books.google.co.in/books?isbn=0471792543]

Fundamental analysis is the examination of the underlying forces that affect the wellbeing of the economy, industry groups and companies. As with most analysis, the goal is to develop a forecast of future price movement and profit from it. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces of the products. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stocks fair value called intrinsic value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued. As the current market price will ultimately gravitate towards fair value, the fair value should be estimated to decide whether to buy the security or not. By believing that prices do not accurately reflect all available information, fundamental analysts look to capitalize on perceived price discrepancies.Fundamental Analysis is a method of evaluating a security by attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the securitys value, including macroeconomic factors (like the overall economy and industry conditions) and individual specific factors (like the financial condition and management of companies).

Objectives of Fundamental Analysis:1. To predict the direction of national economy because economic activity affects the corporate profit, investor attitudes and expectation and ultimately security prices.2. To estimate the stock price changes by studying the forces operating in the overall economy, as well as influences peculiar to industries and companies.3. To select the right time and right securities for the investment.

Three phases of Fundamental Analysis:1. Understanding of the macro-economic environment and developments (Economic Analysis) 2. Analyzing the prospects of the industry to which the firm belongs (Industry Analysis)3. Assessing the projected performance of the company (Company Analysis)The three phase examination of fundamental analysis is also called as an EIC (Economy-Industry-Company analysis) framework or a top-down approach.Here the financial analyst first makes forecasts for the economy, then for industries and finally for companies. The industry forecasts are based on the forecasts for the economy and in turn, the company forecasts are based on the forecasts for both the industry and the economy. Also in this approach, industry groups are compared against other industry groups and companies against other companies. Usually, companies are compared with others in the same group. For example, a telecom operator (Spice) would be compared to another telecom operator not to an oil company.

Strengths of Fundamental Analysis:1. Long-term Trends Fundamental analysis is good for long term investments based on long-term trends. The ability to identify and predict long-term economic, demographic, technological or consumer trends can benefit investors and helps in picking the right industry groups or companies.2. Value Spotting Sound fundamental analysis will help identify companies that represent a good value. Some of the most legendary investors think for long-term and value. Fundamental analysis can help uncover the companies with valuable assets, a strong balance sheet, stable earnings, and staying power. 3. Business Acumen One of the most obvious, but less tangible rewards of fundamental analysis is the development of a thorough understanding of the business. After such painstaking research and analysis, an investor will be familiar with the key revenue and profit drivers behind a company. Earnings and earnings expectations can be potent drivers of equity prices. A good understanding can help investors avoid companies that are prone to shortfalls and identify those that continue to deliver. 4. Value Drivers In addition to understanding the business, fundamental analysis allows investors to develop an understanding of the key value drivers within the company. A stocks price is heavily influenced by the industry group. By studying these groups, investors can better position themselves to identify opportunities that are high-risk (tech), low-risk (utilities), growth oriented, value driven, non-cyclical, cyclical etc.

Fundamental Analysis Tools:These are the most popular tools of fundamental analysis. They focus on earnings, growth, and value in the market.1. Financial Ratio Analysis2. Balance Sheet of a Company3. Profit & Loss Account4. Cash Flow Statement5. Annual Reports etc.

What is Technical Analysis?[footnoteRef:10] [10: https://books.google.co.in/books?isbn=0735200661]

Fundamental analysis and Technical analysis are the two main approaches to security analysis. Technical analysis is frequently used as a supplement to fundamental analysis rather than as a substitute to it. According to technical analysis, the price of stock depends on demand and supply in the market place. It has little correlation with the intrinsic value. All financial data and market information of a given stock is already reflected in its market price. Technical analysts have developed tools and techniques to study past patterns and predict future price. Technical analysis is basically the study of the markets only. Technical analysts study the technical characteristics which may be expected at market turning points and their objective assessment. The previous turning points are studied with a view to develop some characteristics that would help in identification of major market tops and bottoms. Human reactions are, by and large consistent in similar though not identical reaction; with his various tools, the technician attempts to correctly catch changes in trend and take advantage of them. Technical analysis is directed towards predicting the price of a security. The price at which a buyer and seller settle a deal is considered to be the one precise figure which synthesis, weighs and finally expresses all factors, rational and irrational, quantifiable and non-quantifiable and is the only figure that counts. Thus, the technical analysis provides a simplified and comprehensive picture of what is happening to the price of a security. Like a shadow or reflection it shows the broad outline of the whole situation and it actually works in practice.

Assumptions of Technical Analysis:1. The market value of a security is solely determined by the interaction of demand and supply factors operating in the market. 2. The demand and supply factors of a security are surrounded by numerous factors; these factors are both rational as well as irrational. 3. The security prices move in trends or waves which can be both upward or downward depending upon the sentiments, psychology and emotions of operators or traders.4. The present trends are influenced by the past trends and the projection of future trends is possible by an analysis of past price trends. 5. Except minor variations, stock prices tend to move in trends which continue to persist for an appreciable length of time.6. Changes in trends in stock prices are caused whenever there is a shift in the demand and supply factors. Shifts in demand and supply, no matter when and why they occur, can be detected through charts prepared specially to show market action.7. Some chart trends tend to repeat themselves. Patterns which are projected by charts record price movements and these patterns are used by technical analysis for making forecasts about the future patterns.

Tools & Techniques of Technical Analysis:There are numerous tools and techniques for doing technical analysis. Basically this analysis is done from the following four important points of view:1. Prices: Whenever there is change in prices of securities, it is reflected in the changes in investor attitude and demand and supply of securities.2. Time: The degree of movement in price is a function of time. The longer it takes for a reversal in trend, greater will be the price change that follows. 3. Volume: The intensity of price changes is reflected in the volume of transactions that accompany the change. If an increase in price is accompanied by a small change in transactions, it implies that the change is not strong enough. 4. Width: The quality of price change is measured by determining whether a change in trend spreads across most sectors and industries or is concentrated in few securities only. Study of the width of the market indicates the extent to which price changes have taken place in the market in accordance with a certain overall trends.The theories used in technical analysis are:1. Dow Theory: The Dow Theory, originally proposed by Charles Dow in 1900 is one of the oldest technical methods still widely followed. The basic principles of technical analysis originate from this theory. According to Charles Dow The market is always considered as having three movements, all going at the same time. The first is the narrow movement from day to day. The second is the short swing, running from two weeks to a month or more and the third is the main movement, covering at least four years in its duration. The Theory advocates that stock behavior is 90% psychological and 10% logical. It is the mood of the Crowd which determines the way in which prices move and the move can be gauged by analyzing the price and volume of transactions. The Dow Theory only describes the direction of market trends and does not attempt to forecast future movements or estimate either the duration or the size of such market trends. The theory uses the behavior of the stock market as a barometer of business conditions rather than as a basis for forecasting stock prices themselves.

2. Elliott Wave Theory: Ralph Nelson Elliott developed theElliott Wave Theoryin the late 1920s by discovering thatstock markets, thought to behave in a somewhat chaotic manner, in fact traded in repetitivecycles. Elliott discovered that these market cycles resulted from investors' reactions to outside influences, or predominantpsychologyof the masses at the time. He found that the upward and downward swings of the mass psychology always showed up in the same repetitive patterns, which were then divided further into patterns he termed "waves". Elliott's theory is somewhat based on theDow theoryin that stock prices move inwaves.

The tools used in Technical Analysis are:1. Trends: It is a graphical representation of Time Series of data. Technical analysis is built on the assumption that prices trend. Trend Lines are an important tool in technical analysis for both trend identification and confirmation. A trend line is a straight line that connects two or more price points and then extends into the future to act as a line of support or resistance.Types of Trend lines:i. Uptrendii. Downtrendiii. Horizontal trend

2. Charts: A chart pattern is a distinct formation on a stock chart that creates a trading signal, or a sign of future price movements. Chartists use these patterns to identify current trends and trend reversals and to trigger buy and sell signals.Types of Charts:

i. Line ChartThe most basic of the four charts is theline chartbecause it represents only the closing prices over a set period of time. The line is formed by connecting the closing prices over the time frame.ii. Bar ChartsThebar chartexpands on the line chart by adding several more key pieces of information to each data point. The chart is made up of a series of vertical lines that represent each data point. This vertical line represents the high and low for the trading period, along with the closing price.iii. Candlestick ChartsThecandlestickchart is similar to a bar chart, but it differs in the way that it is visually constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the period's trading range.iv. Point and Figure ChartsThepoint and figure chartis not well known or used by the average investor but it has had a long history of use dating back to the first technical traders. This type of chart reflects price movements and is not as concerned about time and volume in the formulation of the points.

3. Mathematical Indicators: i. Moving Averages: A Moving Average is an indicator that shows the average value of a security's price over a period of time. When calculating a moving average, a mathematical analysis of the security's average value over a predetermined time period is made. As the security's price changes, its average price moves up or down. There are five popular types of moving averages: simple (also referred to as arithmetic), exponential, triangular, variable, and weighted. Moving averages can be calculated on any data series including a security's open, high, low, close, volume, or another indicator. A moving average of another moving average is also common.ii. Bollinger Band: It is a band plotted two standard deviations away from a simple moving average, developed by famous technical trader John Bollinger. Because standard deviation is a measure of volatility, Bollinger Bands adjust themselves to the market conditions. When the markets become more volatile, the bands widen (move further away from the average), and during less volatile periods, the bands contract. The tightening of the bands is often used by technical traders as an early indication that the volatility is about to increase sharply.4. Oscillators: A technical analysis tool that is banded between two extreme values and built with the results from a trend indicator for discovering short-term overbought or oversold conditions. As the value of the oscillator approaches the upper extreme value the asset is deemed to be overbought, and as it approaches the lower extreme it is deemed to be oversold. Oscillators are most advantageous when a clear trend cannot be easily seen in a company's stock such as when it trades horizontally or sideways. The most common oscillators are: RSI & MACD.i. Relative Strength Index (RSI): A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula: RSI= 100 - 100/(1 + RS*) *Where RS = Average of x days' up closes / Average of x days' down closes.ii. Moving Average Convergence Divergence (MACD): A trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day EMA from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.

Analysis & Findings:Fundamental Analysis:It is carried out through the analysis of the following 3 phases3.2.1 Economy Analysis[footnoteRef:11]: [11: http://www.worldoil.com]

TheOil Industrystarted off more than five thousand years back. Oil sipping up from the ground was used to make the boats waterproof in the Middle East and also used as medicating as well as for painting different things.The demand for Oil was much higher than what it actually produced and this brought forward the concept of making oil production companies which is collectively known as the Oil Industry.

The Oil Industry is a very important industry in the world and a lot depends on the price of the oil and it has been observed that whenever the oil prices increase the price of various products also increases. The Oil Industry also through oil production accounts for a large amount of the consumption of energy. According to the statistics the amount of oil consumed by the world every year is as many as 30 billion barrelThe Oil Industry can be parted in two, Upstream and Downstream. The importance of oil in the world evolved at a slow pace but once it was identified, it became one of the most important things in the lives of human beings.

The Impact of Oil Price Crash on Different Industries and Overall Indian Economy is very prominent. The price trend is crucial for the government in bringing out vital economic and policy reforms inIndia. The steep fall in crude prices has caught the global economy by surprise, not to miss the existing & emerging potential oil exporting nations. On one hand the downward trend is highly detrimental to the nations with major revenue chunk linked to oil exports and those who have invested heavily on the alternate energy sources such as renewable, shale, etc., on the other hand the major net oil importers such as the Asian nations led byIndiaare looking overjoyed on account of anticipated national fiscal savings on buying of cheaper crude oil and drop in fuel prices at consumer end.

On the surface, one may claim that falling crude oil prices are oil importing nation's moment of delight and oil exporting nation's worst nightmare. But is it really all good and great for a crude oil import dependent nation such asIndia? There is a need to go beyond pre-conceived notions and understand that the reverse of the common phrase, "Every cloud has a silver lining" is also true, especially for a country likeIndia. For a nation likeIndia, there is a need to identify the cloud under the silver lining.

While it may be assumed thatIndiawill be able to reduce fiscal deficit, reduce inflation, lower interest rates and recover from oil subsidy on account of lower oil import bill. But the steep decline in crude oil price is expected to leave a bitter taste on the government's tax revenues, translate into lower growth of both exports & imports and impact the GDP growth of the country. It is worth to note that the government has increased the excise duty on petrol and diesel twice in a move to aid the tax revenues.

3.2.2 Industry Analysis[footnoteRef:12]: [12: www.makeinindia.com]

After the Indian Independence, the Oil Industry in India was a very small one in size and Oil was produced mainly from Assam and the total amount of Oil production was not more than 250,000 tons per year. This small amount of production made the oil experts from different countries predict the future of the oil industry as a dull one and also doubted India's ability to search for new oil reserves. But the Government of India declared the Oil industry in India as the core sector industry under the Industrial Policy Resolution bill in the year 1954, which helped the Oil Industry in India vastly.

Oil exploration and production in India is done by companies like NOC or National Oil Corporation, ONGC or Oil and Natural Gas Corporation and OIL who are actually the oil companies in India that are owned by the government under the Industrial Policy Rule. The National Oil Corporation during the 1970s used to produce and supply more than 70 percent of the domestic need for the petroleum but by the end of this amount dropped to near about 35 percent. This was because the demand on the one hand was increasing at a good rate and the production was declining at a steady rate.

Oil Industry in India during the year 2004-2005 fulfilled most of demand through importing oil from multiple oil producing countries. The Oil Industry in India itself produced nearly 35 million metric tons of Oil from the year 2001 to 2005. The Import that is done by the Oil Industry in India comes mostly from the Middle East Asia.

The Oil that is produced by the Oil Industry in India provides more than 35 percent of the energy that is primarily consumed by the people of India. This amount is expected to grow further with both economic and overall growth in terms of production as well as percentage. The demand for oil is predicted to go higher and higher with every passing decade and is expected to reach an amount of nearly 250 million metric ton by the year 2024.

Statistics: i. The oil and gas industry ranks amongst Indias six core industries.ii. India was the fourth largest consumer of crude oil and petroleum products in the world in 2013, after the United States, China and Japan.iii. Oil imports constitute over 80% of Indias total domestic oil consumption as of May, 2014.iv. Oil and gas contribute 39.2% to primary energy consumption.v. During 2013-14, natural gas constituted about 7.8% of the energy mix.vi. India had 47 Trillion cubic feet of proven natural gas reserves at the beginning of 2014. Approximately 34% of total reserves are located onshore, while 66% are offshore.vii. Investments worth USD 70 Billion are expected across the oil and gas value chain during 201217.viii. At the end of 2013, India had 215.066 MMTPA of refining capacity, making it the second largest refiner in Asia after China. Private joint venture companies own about 41% of total capacity.ix. India increasingly relies on imported LNG; the country was the fourth-largest LNG importer in 2013 and accounted for 5.5% of global imports.x. Indias crude oil pipeline network spans just under 9,460 miles and has a total capacity of 129.4 MMTPA.

Sector Policy: i. The Integrated Energy Policy, 2006 outlines goals for dealing with challenges faced by Indias energy sector.ii. The Petroleum and Natural Gas Regulatory Board Act, 2006 regulates refining, processing, storage, transportation, distribution, marketing and the sale of petroleum, petroleum products and natural gas.iii. The Auto Fuel Policy, 2003 provides a roadmap to comply with various vehicular emission norms and corresponding fuel quality upgrading requirements over a period of time.iv. The National Biofuel Policy, 2009 promotes bio-fuel usage; the Government of India has provided a 12.36% concession on excise duty on bio-ethanol and exempted bio-diesel from excise duty.v. The National Exploration Licensing Policy, 1999 provides a contract framework for the exploration and production of hydrocarbons. Licenses for exploration are awarded through a competitive bidding system nine rounds of bidding were completed as of 2011.vi. 52 Blocks proposed to be offered under N.E.L.P.X. The offer is de-risked to the extent of all necessary statutory clearances having been pre-obtained.vii. The Coal Bed Methane Policy, 1997 encourages exploration and production of coal bed methane as a new eco-friendly source of energy.viii. The Petroleum Rules, 1976 contains provisions for regulations governing pollution, society and other operating standards.ix. The Policy on Shale Gas & Oil, 2013 allows companies to apply for shale gas and oil rights in their petroleum exploration licenses and petroleum mining leases.

Recent happenings in India:

Diesel price to go up by Rs 2.80 a litre in Chandigarh ONGC Videsh loses bid for two oil blocks in Mexico. LNG import terminals to face major challenges. GAIL India to swap US LNG, issue tender next month GAIL plans to buy US shale gas asset for $1.5 billion to meet future Indian demand. India's June fuel demand rises 2.83% YoY GAIL seeks bids to sell 0.37 million tonnes US LNG. Post N-deal, RIL may look at exporting petrol, diesel to IranIndian Oil Corp bags 'leading oil & gas corporate' award. Impact of Irans nuclear deal on India[footnoteRef:13]: [13: http://articles.economictimes.indiatimes.com/2015-07-15/news/64449967_1_iran-nuclear-deal-oil-prices-nuclear-weapon http://articles.economictimes.indiatimes.com/2015-07-15/news/64449967_1_iran-nuclear-deal-oil-prices-nuclear-weapon]

Current bilateral trade between India and Iran is about $14bn (8.96bn) with the balance of trade in heavily in Tehran's favor. Indian exports to Iran were around $4.2bn last year. India primarily imports oil from Iran, but has been hampered by restrictions placed by global powers.Due to the sanctions, India has been paying Iran in Indian rupees, with the money kept in an Indian account. In fact, the country is yet to release an estimated $6bn in pending oil payments to Iran.Now Delhi, which is the fourth largest consumer of oil in the world, is free to import Iranian oil but will have to pay in dollars. Importing goods or sending shipments to Iran is currently expensive because of high shipping charges. India hopes the removal of sanctionswill make it easier for companies to get shipments.

Markets are seeing some positive developments that could bring cheers to equity investors globally. Earlier, it took 12 hours of rigorous political efforts yesterday to seal the fate of Greece debt crisis with the European creditors. And today nine-years of negotiations of the six major countries with Iran on nuclear deal finally reached to conclusion.

How Iran deal affects the oil markets:a. Will incremental supply of 0.5-0.8 million barrels per day to the world market in the next six months.

b. Iran will emerge as an added supply source for an oversupplied market.

c. Iran incremental supplies would double the global surplus projected for the rest of the year.

d. Expert believe that If agreement's details drive prices lower, Brent crude may drop to mid-$40s/bbl before recovering to $50s.

e. Oil inventories in industrialized countries are at their widest surplus.

f. Increased imports from Iran likely to further help reduce crude import costs

g. Lower shipping costs as travel time will reduce

h. Credit period offered by Iran is 90 days as compared with other Gulf countries at 30 days

i. Additional 60 days of credit period can lift the GRM as much as $1/bbl

j. MRPL, Essar Oil and IOC imported 10-30% of total crude requirement from Iran

k. Insurance costs of ship which procures crude from Iran will reduce Market is expected to oversupplied, positive for oil consumer nations like India.

l. India imported 10-16% of crude from Iran between 2002 and 2012.

m. Pre Sanctions India used to import a significant quantity of Crude from Iran which can be restored to a large extent now.

n. Official selling price of Gulf producer to remain quite competitive in order to maintain market share this will help Indian refiners to boost their margins.

o. Lower crude oil prices will bring down import bill for government.

3.2.3 Company Analysis[footnoteRef:14]: [14: www.stockcharts.com]

An analysis is going to be performed of 5 companies from Oil & Gas sector from the Nifty index. Ratio Analysis of the companies is done and interpretations have been drawn from it as follows:

A. Oil and Natural Gas CorporationLimited:

i. Company Profile:ONGC (Oil and Natural Gas Corporation Limited) is India's leading oil & gas exploration company. ONGC has produced more than 600 million metric tonnes of crude oil and supplied more than 200 billion cubic metres of gas since its inception. Today, ONGC is India's highest profit making corporate. It has a share of 77 percent in India's crude oil production and 81 per cent in India's natural gas production.

Major Achievements of ONGC: Judged as Asia's best Oil & Gas company, as per a recent survey conducted by US-based magazine 'Global Finance' Ranked as the 2nd biggest E&P company (and 1st in terms of profits), as per the Platts Energy Business Technology (EBT) Survey 2004.

Latest News:

Exit ONGC, prefer midcap IT stocks: Sharmila Joshi Hold ONGC for long term: Sudarshan Sukhani Buy ONGC 310 Put, advises VK Sharma Stay invested in ONGC, advises Sameet Chavan Antique upgrades ONGC to buy, sees growth recovery Sell ONGC, SBI; buy Bharti Airtel: Rahul Mohindar

ii. Financial Ratios:

RatiosMarch 2015March 2014

Face Value (Rs.)5.005.00

Dividend Per Share (Rs.)9.509.50

Gross Profit Margin (%)39.3842.41

Return On Capital Employed (%)23.3424.58

Current Ratio0.971.19

Debtors Turnover Ratio11.1612.71

Investments Turnover Ratio14.3114.60

Asset Turnover Ratio0.640.69

Earnings Per Share25.8324.46

Book Value159.81145.47

iii. The balance sheet is the statement showing the increase or decrease in the assets and liabilities. This indicates the change in capital structure as well as increase or decrease in assets. As we can see, the face value of the share is Rs.5. Also, we can see that the current ratio was 1.19 in 2014 and it has gone down to 0.97 in 2015, which shows that the firm has lesser abilities to pay off its liabilities than the previous year. Also the asset turnover ratio in 2014 was 0.69, meaning the company generated more revenue per rupee of asset investment than 2015, in which the ratio slightly falls down to 0.64. The gross profit margin ratio in 2014 was 42.41, which declined slightly to 39.38 in 2015. Now higher the GP ratio, higher is the firms ability to produce goods and services at a low cost with high sales. Here, even if there is a small drop down in the ratio in 2015, it is still high enough and hence favourable. The book value has increased from 2014 to 2015 by a considerable amount, hence showing that the investors are willing to pay more price for the stocks. The debtors turnover ratio has fallen from 12.71 in 2014 to 11.16 in 2015, which shows that the debtors collection period has increased and efficient credit collection policies are recommended. Lastly, the EPS has increased from 24.46 to 25.83 in 2015, which indicates that the company is profitable.

B. GAIL (India) Limited:i. Company Profile:GAIL (India) Limitedis the largest state-owned natural gas processing and distribution company in India, It is headquartered inNew Delhi. It has following business segments: Natural Gas, Liquid Hydrocarbon,Liquefied petroleum gasTransmission,Petrochemical, City Gas Distribution, Exploration and Production, GAILTEL andElectricity Generation. GAIL has been conferred with theMaharatnastatus on 1 Feb 2013, by the Government of India. Major Achievements of GAIL (India) Ltd: Selected as the top Indian company in the Gas Processing, Transmission and Marketing sector for the Dun & Bradstreet - American Express Corporate Awards 2006. GAIL's Dahej-Vijaipur Pipeline Project won the Silver Medal in Mega Projects Category at the International Project Management Association Awards, 2006. Received the Platts Global Industry Leadership Award 2005. Rated as one of the Best Employers in India by Hewitt Associates in

Latest News:

GAIL to swap US LNG, issue tender next month GAIL sells 2 mn tonnes US LNG abroad GAIL India's Q1 results on July 24, 2015 Oil Min reverts back to promoters selecting CEO of Petronet Go long in GAIL India, target Rs 393: Siddarth Bhamre Oil & Gas- RIL, ONGC, OIL, BPCL, GAIL top picks: KRChoksey Buy GAIL India, target Rs 442: Rajat Bose













The balance sheet is the statement showing the increase or decrease in the assets and liabilities. This indicates the change in capital structure as well as increase or decrease in assets. As we can see, the face value of the share is Rs.10. Also, we can see that the current ratio was 1.00 in 2014 and it has increased to 1.10 in 2015, which shows that the firms abilities to pay off its liabilities has increased than the previous year. Also the asset turnover ratio in 2014 was 0.61, meaning the company generated less revenue per rupee of asset investment than 2015, in which the ratio slightly increased to 1.66. The gross profit margin ratio in 2014 was 11.54, which declined slightly to 9.60 in 2015. Now higher the GP ratio, higher is the firms ability to produce goods and services at a low cost with high sales. Here, there is a small drop down in the ratio in 2015, it is hence not high enough and therefore unfavorable. The book value has increased from 2014 to 2015 by a considerable amount, hence showing that the investors are willing to pay more price for the stocks. The debtors turnover ratio has increased from 21.33 in 2014 to 21.44 in 2015, which shows that the debtors collection period has declined and efficient credit collection policies are being used. Lastly, the EPS has increased from 31.71 to 34.49 in 2015, which indicates that the company is profitable.

C. Bharat Petroleum Corporation Limited: i. Company Profile:Bharat Petroleum Corporation Limited(BPCL) is an Indian state-controlledoilandgascompany headquartered inMumbai, Maharashtra. The Corporation operates two large refineries of the country located atMumbaiandKochi. BPCL has been ranked 242th in theFortune Global 500rankings of the world's biggest corporations for the year 2014. Major Achievements of GAIL (India) Ltd: Twelve locations certified ISO-14001 Seventy one locations certified ISO-9002 Achievement of million man hour safety record Cultivation of Jatrobha to facilitate Bio Diesel production Contribution to Alternate energy resources (wind mills and Solar energy)

Latest News:

BPCL's Q1 results on August 14, 2015 Shell reopens 77th petrol pump in India Positive on BPCL: Mayuresh Joshi HPCL may test Rs 898, BPCL 1050: Rajat Bose India to outperform, Fed rate hike likely in Sept: Deutsche BPCL to invest $4 bn to double Bina oil refinery capacity BPCL to expand Bina oil refinery by 30%: S. Varadarajan













The balance sheet is the statement showing the increase or decrease in the assets and liabilities. This indicates the change in capital structure as well as increase or decrease in assets. As we can see, the face value of the share is Rs.10. Also, we can see that the current ratio was 0.78 in 2014 and it has increased to 0.87 in 2015, which shows that the firms abilities to pay off its liabilities has increased than the previous year. Also the asset turnover ratio in 2014 was 6.29, meaning the company generated less revenue per rupee of asset investment than 2015, in which the ratio slightly increased to 6.53. The gross profit margin ratio in 2014 was 1.74, which increased slightly to 2.24 in 2015. Now higher the GP ratio, higher is the firms ability to produce goods and services at a low cost with high sales. Here, there is a increase in the ratio in 2015, it is hence high enough and therefore favorable. The book value has increased from 2014 to 2015 by a considerable amount, hence showing that the investors are willing to pay more price for the stocks. The debtors turnover ratio has increased from 46.16 in 2014 to 64.17 times in 2015, which shows that the debtors collection period has declined and efficient credit collection policies are being used. Lastly, the EPS has increased from 36.55 to 56.16 in 2015, which indicates that the company is profitable.

D. Hindustan Petroleum Corporation Limited (HPCL):

i. Company Profile

Hindustan Petroleum Corporation Limited(HPCL) is an Indian state-ownedoilandnatural gascompany with its headquarters atMumbai, Maharashtraand withNavratnastatus. HPCL has been ranked 260th in the Fortune Global 500rankings of the world's biggest corporations (2013) and 4th among India's Companies for the year 2012. HPCL has about 25% marketing share in India among PSUs and a strong marketing infrastructure.

Major Achievements of HPCL:

HPCL ranks 1054 in Forbes 2000 list HPCL ranks 336 in Fortune Global 500 list Scope CSR Award for the Year 2009-10 Golden Peacock Award for CSR 2011 Readers Digest Trusted Brand Gold Award 2011 Brand Leadership award

Latest News:

Go long in HPCL, target Rs 940: Ashish Kyal Buy HPCL, says Sudarshan Sukhani Buy IT on dips; banks still to gain momentum: IIFL Look at HPCL, says VK Sharma HPCL may test Rs 898, BPCL 1050: Rajat Bose Bulls got grip, see 8650 level if 8580 is held: Rajat Bose HPCL looks positive: Ajay Jain Expect upside in oil marketing companies: Devang Mehta













The balance sheet is the statement showing the increase or decrease in the assets and liabilities. This indicates the change in capital structure as well as increase or decrease in assets. As we can see, the face value of the share is Rs.10. Also, we can see that the current ratio was 0.68 in 2014 and it has increased to 0.73 in 2015, which shows that the firms abilities to pay off its liabilities has increased than the previous year. Also the asset turnover ratio in 2014 was 4.76, meaning the company generated less revenue per rupee of asset investment than 2015, in which the ratio slightly increased to 4.79. The gross profit margin ratio in 2014 was 1.10 in 2014, which increased to 1.35 in 2015. Now higher the GP ratio, higher is the firms ability to produce goods and services at a low cost with high sales. Here, there is an increase in the ratio in 2015, it is hence high enough and therefore favorable. The book value has increased from 2014 to 2015 by a considerable amount, hence showing that the investors are willing to pay more price for the stocks. The debtors turnover ratio has decreased from 48.64 in 2014 to 42.93 in 2015, which shows that the debtors collection period has increased and efficient credit collection policies are not being used. Lastly, the EPS has increased from 26.72 to 51.20 in 2015, which indicates that the company is profitable.

E. Cairn India:

i. Company Profile

Cairn India is one of the largest independent oil and gas exploration and production companies in India with a market capitalization of ~ US$ 7 billion. Cairn India was rated as the fastest-growing energy company in the world, as per 2012 & 2013 Platts Top 250 Global Energy Company Rankings. Cairn India operates ~27% of India's domestic crude oil production. Through its affiliates, Cairn India has been operating for close to 20 years playing an active role in developing India's oil and gas resources. Major Achievements of HPCL:

Winner of 2012 Platts Top 250 Global Energy Company award for the Fastest growing company in Asia and the World Winner of 2012 PetroFed award for O&G Pipeline Transportation Company of the Year Winner of Blue Dart Global CSR Award, 2012 Winner of 2011 Spotlight Awards by League of American Communications Professionals Cairn India awarded 'Superbrand' status, 2011

Latest News:

Cairn-Vedanta merger blues: After LIC, UIIC unhappy Cairn India Q1 net falls 24% as oil prices hit a soft patch Cairn India Q1 net seen at Rs 1000 cr, revenue may rise 7% Cairn India for stable & predictable investment regime Asset quality remains a concern for PSU banks: Dipan Mehta 'LIC monitoring wing votes against Cairn-Vedanta merger' Exit Cairn India: Devang Mehta













The balance sheet is the statement showing the increase or decrease in the assets and liabilities. This indicates the change in capital structure as well as increase or decrease in assets. As we can see, the face value of the share is Rs.10. Also, we can see that the current ratio was 1.26 in 2014 and it has increased to 1.43 in 2015, which shows that the firms abilities to pay off its liabilities has increased than the previous year. Also the asset turnover ratio in 2014 was 0.27, meaning the company generated less revenue per rupee of asset investment than 2015, in which the ratio slightly decreased to 0.21. The gross profit margin ratio in 2014 was 59.23, which declined slightly to 35.99 in 2015. Now higher the GP ratio, higher is the firms ability to produce goods and services at a low cost with high sales. Here, there is a drop down in the ratio in 2015, it is hence not high enough and therefore unfavorable. The book value has decreased from 2014 to 2015 by a considerable amount, hence showing that the investors are not willing to pay more price for the stocks. The debtors turnover ratio has decreased from 7.44 in 2014 to 7.37 in 2015, which shows that the debtors collection period has increased and efficient credit collection policies are not being used. Lastly, the EPS has decreased largely from 39.08 in 2014 to 7.04 in 2015, which indicates that the company is not at all profitable.

3.3 Analysis and FindingsTechnical Analysis:Technical analysis of the following 5 companies from Nifty is done on the following parameters as given below:1. Relative Strength Index (RSI)2. Moving Average Convergence Divergence (MACD)3. Japanese Candlestick Chart

A. Oil and Natural Gas CorporationLimited:

i. Relative Strength Index (RSI):

RSI indicator is a momentum indicator, which measures over bought and over sold conditions in the market. The indicator oscillates between 0 and 100, with the values below 30 traditionally showing oversold conditions in the market, which in this case doesnt go below 30. Since it is not going below the 30 level, it is not suitable to buy. And values above 70 show over bought conditions in the market, here, indicating to sell of approximately in the month of July, 2014. It also shows the current direction of the trend, with the values above 50 indicating an uptrend and the values below 50 indicating downtrend. As we can see here, the values show more of an uptrend than the downtrend in the market condition.

ii. Moving Average Convergence Divergence (MACD):

MACD is a momentum indicator that shows relationship between differences of two moving averages. It is used then to find new trends and new entries for your trade. It consists of 4 components, a slow moving average shown here by the red line, a fast moving average, shown here by the black line, a difference between the two shown by the histogram and a 0 line, shown here at 1.811. Although there is more than one strategy to use MACD in trading, the safest one can be interpreted as follows: Trading the moving average crossover. For long positions, looking at the crossover between the faster moving average and slower moving average above the 0 line, here, shown in the month of May 2013 & July 2014, indicates buying and the crossover below the 0 line, shown here at November 2013 and April 2015, indicate selling action to be taken, opposite in case of short positions.

iii. Japanese Candlestick Chart:

Candlestick provides us with great strength in market condition insights and even signals us about trend changes and price reversals. We can see that there is a bearish trend in the market mostly in the years shown above due to the presence of more number of red candles than the white ones. We can also see that the sellers are largely in control around the August and September of 2013 and we can see that the market falls largely below the 60M moving average starting from the end of December 2014 to July 2015. Buying action shouldve been recommended at the beginning of the year 2014.

B. GAIL (India) Limited:

i. Relative Strength Index (RSI):

RSI indicator is a momentum indicator, which measures over bought and over sold conditions in the market. The indicator oscillates between 0 and 100, with the values below 30 traditionally showing oversold conditions in the market, which in this case doesnt go below 30 at all. Since it is not going below the 30 level, means the buying indictor is not showing, hence it is not suitable to buy. And values above 70 show over bought conditions in the market, here, indicating there are no extreme conditions involved in the stock, hence the stock prices being stable. It also shows the current direction of the trend, with the values above 50 indicating an uptrend and the values below 50 indicating downtrend. As we can see here, the values show more of an down than the uptrend in the market condition, hence indicating a bullish market in the late 2013 and a bearish market in 2015.


MACD is a momentum indicator that shows relationship between differences of two moving averages. It is used then to find new trends and new entries for your trade. It consists of 4 components, a slow moving average shown here by the red line, a fast moving average, shown here by the black line, a difference between the two shown by the histogram and a 0 line, shown here at 3.041. Although there is more than one strategy to use MACD in trading, the safest one can be interpreted as follows: Trading the moving average crossover. For long positions, looking at the crossover between the faster moving average and slower moving average above the 0 line, here, shown in the month of April 2014 & also October 2014, indicates buying and the crossover below the 0 line, shown here from April-September 2013 and May 2015, indicate selling action to be taken, opposite in case of short positions.

iii. Japanese Candlestick Chart, Volume and Moving Average (50 & 200 days MA):

Candlestick provides us with great strength in market condition insights and even signals us about trend changes and price reversals. We can see that there is a bearish trend in the market mostly in the year 2013 from March-October shown above. We can also see that the sellers are largely in control around the Nov and Dec of 2014 and we can see that the market falls largely below the 60M moving average starting from the end of December 2014 to July 2015. Buying action shouldve been recommended at the beginning of the year 2014.

C. Bharat Petroleum Corporation Limited (BPCL):i. Relative Strength Index (RSI):

RSI indicator is a momentum indicator, which measures over bought and over sold conditions in the market. The indicator oscillates between 0 and 100, with the values below 30 traditionally showing oversold conditions in the market, which in this case doesnt go below 30 at all. Since it is not going below the 30 level, means the buying indictor is off, hence it is not a suitable time to buy. And values above 70 show over bought conditions in the market, here, indicating that at the mid of the year 2013 there was an over bought condition in the market, hence the perfect time to sell. It also shows the current direction of the trend, with the values above 50 indicating an uptrend and the values below 50 indicating downtrend. As we can see here, the values show more of an down than the uptrend in the market condition, hence indicating a bullish market in the late 2013 and a stable market henceforth.


MACD is a momentum indicator that shows relationship between differences of two moving averages. It is used then to find new trends and new entries for your trade. It consists of 4 components, a slow moving average shown here by the red line, a fast moving average, shown here by the black line, a difference between the two shown by the histogram and a 0 line, shown here at 4.193. Although there is more than one strategy to use MACD in trading, the safest one can be interpreted as follows: Trading the moving average crossover. For long positions, looking at the crossover between the faster moving average and slower moving average above the 0 line, here, shown in the month of Feb to April and June 2015, indicates buying and the crossover below the 0 line, shown here in May 2015, indicate selling action to be taken, opposite in case of short positions.

iii. Japanese Candlestick Chart, Volume and Moving Average (50 & 200 days MA):

fundamental & technical analysis of 5 companies of oil & gas sector

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