project report on equity research of pharma & energy sector through etf

“EQUITY ANALYSIS OF PHARMA AND ENERGY SECTOR THROUGH E.T.F”

SUMMER PROJECT REPORT

ON

“EQUITY ANALYSIS of Pharma & energy industry THROUGH E.T.F”

AT

BIRLA SUN LIFE INSURANCE LTD.

Certificate of Approval

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The following Summer Internship Project Report titled "EQUITY ANALYSIS OF PHARMA

AND ENERGY SECTOR THROUGH E.T.F" is hereby approved as a certified study in

management carried out and presented in a manner satisfactory to warrant its acceptance as a

prerequisite for the award of Master of Business Administration for which it has been

submitted. It is understood that by this approval the undersigned do not necessarily endorse or

approve any statement made, opinion expressed or conclusion drawn therein but approve the

Summer Internship Project Report only for the purpose it is submitted to the Summer Internship

Project Report Examination Committee for evaluation of Summer Internship Project Report.

Name: Raghav Kumar Jha Signature

1. Faculty Mentor ****************** ___________________

2. Industry Mentor Mr. Iqbal singh bansal ___________________

Acknowledgement

Hereby I sincerely thank RAWAL INSTITUTE OF MANAGEMENT & BIRLA SUNLIFE

INSURANCE for giving me this wonderful opportunity to do a Project with such a prestigious

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company. It has been a privilege to work with Birla Sun life insurance & I thank them for

considering me worthy enough to do Equity research and other project for them.

I would also like to take this opportunity to thank Mr. IQBAL SINGH BANSAL the Industry

mentor for the project. His constant monitoring & guidance has been an essential ingredient of

my project. The way he gave me the opportunity & confidence to go ahead in the research was

truly encouraging. The learning and understanding power that I got from him not only helped

me in my summer internship but am sure it will be helping me throughout my career.

I want to express my deep gratitude to Mr. Sachine Sharma; the department head CRIC of

Rawal Institute of Management, for giving me the opportunity to join Birla Sun life Insurance

and undertake this project to enhance my knowledge.

I would like to gratitude my thanks to Ms. Mandeep associate professor at Rawal Institute of

Management as her constant valuable guidance and suggestion make me able to complete my

project and value addition.

I would like to gratitude my thanks to Dr. Dimple Singhal associate professor at Rawal Institute

of Management as her constant valuable guidance and suggestion make me able to complete my

project and value addition.

At last but not least thanks and appreciations also go to my colleague for their materials which

helped me in developing the project.

INDEX

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1

INTRODUCTION

EXCHANGE TRADED FUNDS COMPANY PROFILE

2 LITERATURE RIVEW

3

1.1 OBJECTIVE

1.2 SCOPE

1.3 ASSUMPTIONS

1.4 RESEARCH METHODOLOGY

4 ANALYSIS & INTERPRETATION

FUNDAMENTAL ANALYSIS TECHNICAL ANALYSIS

5 FINDINGS & RECOMMENDATIONS

6 LIMITATIONS

CONCLUSION

BIBLOGRAPHY

EXECUTIVE SUMMARY

Indian market is known for high volatility market, the reason behind there is high expectation

attach to the investors including emotional attachment. Investors invests in stock market just

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because they are given some tips by their brokers, friends, relatives etc, which put into high risk

to the investors without knowing the consequences in future.

The objective behind the report is to understand the equity research in Pharma and Energy

industry, along with the equity analysis of various companies of Pharma and Energy

sector .There are 5 companies which are selected from each of the sector.

Research gives a direction along with backup of information to get success in right direction. The

purpose is to understand and educate about the consequences in future and risk involved in such

stock before taking any decision to invest in the stock market. For research there are two type of

analysis is to be done before purchase any stock/shares are: -

Fundamental Analysis

o Economic Analysis

o Industry Analysis

o Company Analysis

Technical Analysis

Based on two analysis investors can make out high return on investments. This can be done by

broker, institution, investors etc.

Research gives a platform to compare of Pharma Industries companies and Energy sector

companies, for these 5 companies of each sector has been taken.

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CHAPTER – 3

OBJECTIVE, SCOPE, ASSUMPTION AND LIMITATIONS

OF THE PROJECT

1.1OBJECTIVES

1. To study the exchange traded funds of Pharma and energy sector.

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2. To compare the investors’ confidence in the stock (Equity) Pharma and Energy sector

companies

3. To compare the performance of stock of Pharma and Energy sector listed in NSE.

4. To study the trend of performance of stocks of Pharma sector and Energy sector

1.2 SCOPE

The scope of project is limited to:-

1. Understanding the basics of Fundamental analysis and Technical analysis and apply it to

take a decision of investing in Pharma and Energy Stocks.

2. Five companies of Pharma and Energy have been taken for research purpose.

3. Comparing the both sector for long term and short term investment purpose

1.3 ASSUMPTIONS

This project is prepared on the assumption that most of the investment in stock market is done by

the brokers and not by the common man and on the other hand there are many people who want

to invest in stock market but fears as they think that it is luck game which is not totally true and

this might change their way of thinking.

Research Methodology

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The project is on equity research analysis of the sector. Hence study has to be done on the basis

of information and news available about the sector i.e. secondary data by various modes. This

research had to be completed by doing Fundamental analysis and Technical analysis of the

companies.

Secondary data was collected from the internet, company websites, e-magazines and various

articles. However the main source of information is Annual Report issued by the companies and

also quarterly reports of the current year showing their performances in current market scenario.

1.5 Methodology of the Project

The aim of this project is to do equity research on Pharma and Energy sector and to find out the

opportunities of investment in these sectors where returns can be maximized. This report starts

with Sector Analysis of Pharma and Energy sectors followed by the fundamental analysis of the

companies. Analysis of the sector has been done. Economy of India and respective industries are

analyzed on the basis of various factors and indicators. Ratios are calculated and then the growth

and value of the stocks were estimated. After the fundamental analysis comparison of both

industries is also done.

Technical analysis is used to study stock chart patterns of these companies. The observed

patterns are tested with various oscillators and decision about particular stock is made. Based on

these factors, trend of a particular stock is observed.

Data Interpretation and Analysis

The project is on equity research analysis of Pharma and Energy sector through ETF. Hence the

study was done on the basis of information and news available about the sectors i.e. secondary

data by various modes. This research was completed by doing Fundamental analysis and

Technical analysis of the companies.

Firstly data was analyzed on the basis of the industry. All industries i.e. Pharma, and Energy

were focused on and its performance and relation with the Indian economy was monitored and

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then specific stocks were chosen to be invested in depending upon the fundamentals of the

company stocks. These stocks were individually analyzed and then measured whether it would

give maximum returns if invested in.

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LITERATURE REVIEW

In the last two decades, forecasting of stock has become an important field of research. In the

current uncertainty and despite the surprising rally in the market, fundamental and technical

analysts continue to forecast specific target levels for stocks and indices. Survey evidence shows

that technical analysis dominates fundamental analysis at short horizons.

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Ramaswami.K (1996) assessed the relationship among book values, earnings, dividend and

market price of share, impact of bonus issues, impact of security scam on equity return .to that

end, the author used daily share price of 30 companies included in the construction of BSE

sensitive index, daily data of BSESI and NYSE composite index, annual data on BV per share

market price per share, EPS and DPS and data on bonus issue made ,during the period of

study ,the researcher used correlation ,regression and frequency distribution for interpreting data.

Taylor and Allen (1992) analyses that 90% of the respondents to their survey report using some

form of technical analysis to inform their trading decisions. While 10% of respondents are taking

investment decision either emotion or other basis.

Sharma and Robert E. Kennedy (1977) tested the applicability of random walk hypothesis to

the stock market in developing country namely India and compare this to that of stock markets in

developed countries namely USA, and England. For this purpose the price behavior of Bombay

stock exchange is statistically examined both for randomness and independence .The test the

random walk hypothesis. The test covers 132 monthly observations for each stock market index

of common stock listed in Bombay exchange for eleven years from 1968-1973.The study

indicates that price dependence while statistically significant, is comparably small in the

developing countries. Based on the test, it is evident that the Bombay stock exchange stock

obeys a random walk and is equivalent to developed countries stock exchange.

Gupta, (2003) examined the perceptions about the main sources of his worries concerning the

stock market. A sample comprise of middle-class household’s spread over 21 sates/ union

territories. The study reveals that the foremost cause of worry for household investors is

fraudulent company management and in the second place is too much volatility and in the third

place is too much price manipulation.

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Established in 2000, Birla Sun Life Insurance Company Limited (BSLI) is a joint venture

between the Aditya Birla Group, a well known and trusted name globally amongst Indian

conglomerates and Sun Life Financial Inc, leading international financial services organization

from Canada. The local knowledge of the Aditya Birla Group combined with the domain

expertise of Sun Life Financial Inc., offers a formidable protection for its customers’ future.

With an experience of over 15 years, BSLI has contributed significantly to the growth and

development of the life insurance industry in India and currently ranks amongst the top 5

private life insurance companies in the country.

Known for its innovation and creating industry benchmarks, BSLI has several firsts to its credit.

It was the first Indian Insurance Company to introduce “Free Look Period” and the same was

made mandatory by IRDA for all other life insurance companies. Additionally, BSLI pioneered

the launch of Unit Linked Life Insurance plans amongst the private players in India. To

establish credibility and further transparency, BSLI also enjoys the prestige to be the originator

of practice to disclose portfolio on monthly basis. These category development initiatives have

helped BSLI be closer to its policy holders’ expectations, which gets further accentuated by the

complete bouquet of insurance products (viz. pure term plan, life stage products, health plan and

retirement plan) that the company offers.

Add to this, the extensive reach through its network of 600 branches and 175,000 empanelled

advisors. This impressive combination of domain expertise, product range, reach and ears on

ground, helped BSLI cover more than 2 million lives since it commenced operations and

establish a customer base spread across more than 1500 towns and cities in India. To ensure that

our customers have an impeccable experience, BSLI has ensured that it has lowest outstanding

claims ratio of 0.00% for FY 2008-09. Additionally, BSLI has the best Turn around Time

according to LOMA on all claims Parameters. Such services are well supported by sound

financials that the Company has. The AUM of BSLI stood at Rs. 8165 crs as on February 28,

2009, while as on March 31, 2009, the company has a robust capital base of Rs. 2000 crore.

2.2 VISION

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To be a leader and role model in a broad based and integrated financial services business.

2.3 MISSION

To help people mitigate risks of life, accident, health, and money at all stages and under all

circumstances.

Enhance the financial future of our customers including enterprises.

2.4 VALUES

Integrity: Acting and taking decisions in a manner that is fair and honest. Following the highest

standards of professionalism and being recognised for doing so. Integrity for us means not only

financial and intellectual integrity, but encompasses all other forms as are generally understood.

Commitment: On the foundation of Integrity, doing all that is needed to deliver value to all

stakeholders. In the process, being accountable for our own actions and decisions, those of our

team and those in the part of the organisation for which we are responsible.

Passion: An energetic, intuitive zeal that arises from emotional engagement with the

organisation that makes work joyful and inspires each one to give his or her best. A voluntary,

spontaneous and relentless pursuit of goals and objectives with the highest level of energy and

enthusiasm.

Seamlessness: Thinking and working together across functional groups, hierarchies, businesses

and geographies. Leveraging diverse competencies and perspectives to garner the benefits of

synergy while promoting organizational unity through sharing and collaborative efforts.

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Speed: Responding to internal and external customers with a sense of urgency. Continuously

striving to finish before deadlines and choosing the best rhythm to optimise organizational

efficiencies.

A US $28 billion corporation, the Aditya Birla Group is in the league of Fortune 500

worldwide. It is anchored by an extraordinary force of 100,000 employees, belonging to 25

different nationalities. The group operates in 25 countries across six continents – truly India's

first multinational corporation.

Aditya Birla Group through Aditya Birla Financial Services Group (ABFSG), has a strong

presence across various financial services verticals that include life insurance, fund

management, distribution & wealth management, security based lending, insurance broking,

private equity and retail broking. The seven companies representing ABFSG are Birla Sun Life

Insurance Company, Birla Sun Life Asset Management Company, Aditya Birla Money, Aditya

Birla Finance, Birla Insurance Advisory & Broking Services, Aditya Birla Capital Advisors

and Apollo Sindhoori Capital Investment. In FY 2008-09, the consolidated revenues of

ABFSG from these businesses crossed Rs. 4763 crore, registering a growth rate of 36%.

Sun Life Financial is a leading international financial services organization providing a diverse

range of protection and wealth accumulation products and services to individuals and corporate

customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key

markets worldwide, including Canada, the United States, the United Kingdom, Ireland, Hong

Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. As of December 31, 2008,

the Sun Life Financial group of companies had total assets under management of $381

billion.

2.5 AWARDS

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At Birla Sun Life Insurance, winning is a way of life. Our innovative solutions and customer-

friendly services have been admired, appreciated and rewarded by customers and the industry at

large.

YEAR AWARDS AUTHORITY

2012 Gold Trophy' for Financial Reporting The Institute of Chartered Accountants of India (ICAI)

2012 The South Asian Federation of Accountants (SAFA) Best Presented Accounts & Corporate Governance Disclosures Awards

2012 Excellence in Corporate Governance Golden Peacock Award

2012 Gold in the 'Services category' Effies

2012 Kaan awards Best use of Radio

2012 Best Employer Brand Award Asian Confederation of Businesses

2012 Golden Peacock HR Excellence Award Golden Peacock HR Excellence

2011 Golden Peacock Award Golden Peacock Global Awards Secretariat

2011 Best Insurance Integrated ad campaign (Not Jobs But Passion campaign)

Internet Advertising Competition (IAC)Awards 2011

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2011 Bronze - Media Abby Awards at Goa Fest 2011 as Best Never Before use of Media

Advertising Agencies Association of India & Advertising Club Bombay

2011 Gold - Creative Abby Awards at Goa Fest 2011 as Direct marketing Dimensional Mail


2011 Best use of Outdoor & Ambient media Awards at Goa Fest 2011 - Direct marketing Flat Mail


2011 Gold - "financial services website" category for Birla Sun Life Insurance – Not Jobs But Passion microsite

BBC.com-Campaign India Digital Media Awards 2011

2010 Silver Medal & a letter of appreciation for - Wealth with Protection Solutions campaign

APPIES 2010 - Asia Pacific Advertising & Marketing Congress

2010 Official Nominee - BSLI Email marketing campaign 'Save Forest”

14th Annual Webby Awards 2010

2009 ICAI Awards for Excellence in Financial Reporting - Silver in Insurance Category

Institute of Chartered Accountants of India (ICAI)

2009 Recruiting and Staffing Best in Class Awards

2007 'The Great Place to Work Seminar Series 2007 Anil Sachdev (Chairman & MD of Grow Talent Company Ltd) Robert Levering (Co-founder Great Place to Work Institute) and Jehangir Pocha (Business World Magazine)

2006 The Bhartiya Shiromani Puraskar for Enhancing the image of India

Dr. Bhishma Narain Singh (Former Governor of Tamil Nadu & Assam) in association with the "Institute of Economic Studies (IES)"

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2005 'Successful Performance' for 4 years April 2005 The Indo-Canadian Business Chamber

2005 A letter sent to BSLI - A Message The Mayor, David Miller – Toronto

2004 Best Life Insurer (Runner Up) 2004 TROPHY Outlook Money Awards 2004

2004 Best Life Insurer (Runner Up) 2004 CERTIFICATE

Outlook Money Awards 2004

2004 Top five nominees in the category The 8th Asia Insurance Industry Awards 2004

2004 'The Hewitt Best Employers In India Awards 2004' Trophy

Hewitt

2004 Hewitt Best Employers in India 2004 Hewitt

2004 Sponsorship Acknowledgement for - The Asia Insurance Review

Asia Insurance Review

FUTURE

BUSINESS CONTINUITY PLAN

Birla Sun Life Insurance is one of the few Indian companies to have a fully operational

Business Continuity Plan (BCP) to ensure minimal impact to the organization, its people, and

most importantly, its customers. Our Business Continuity Planning (BCP) Program is a

response plan which would ensure that in the event of a disaster we would be able to restore and

recover operations for critical processes within a predetermined time after the disaster.

BSLI’S BUSINESS CONTINUITY MANAGEMENT POLICY

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To have a planned response in the event of any contingency ensuring recovery of critical

activities at agreed levels within agreed timeframe thereby complying with various regulatory

requirements and minimizing the potential business impact to BSLI. Additionally to create a

system that fosters continuous improvement of business continuity management

BUSINESS CONTINUITY MANAGEMENT SYSTEM OBJECTIVES (BCMS):

The objectives of BSLI's BCMS are as follows

Ensuring a Proactive response to any contingency

Ensuring recovery of identified critical activities within agreed timeframe.

Ensuring that we adhere to our clients, contractual, legal & regulatory requirements.

PROGRAMME OVERVIEW

As part of our Business Continuity Plan, we have a documented crisis response and recovery

procedure for quick response and stabilization of the situation, and a business continuity

procedure to ensure recovery.

HIGHLIGHTS OF OUR PLAN DOCUMENT:

Alternate recovery sites if primary location is unavailable

Assurance to customers that they will continue to receive optimum customer services at all

times

Communication with customers, employees and other stakeholders

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Crisis Management & incident response

Data back-up, data and system recovery

Recovery of all mission-critical business functions and supporting systems

OUR COMMITMENT

Risk Assessment & Business Impact Analysis (BIA) annually.

Business Continuity Plan for HO & its Critical branches.

Crisis Management Plan & Pandemic Response Plan at a corporate Level.

Business Continuity Plan Testing ensuring viability of all its plans.

The activities set forth above may evolve as business and regulatory needs

require.

EXCHANGE TRADED FUND (E.T.F)

Exchange Traded Funds are essentially Index Funds that are listed and traded on exchanges like

stocks. Until the development of ETFs, this was not possible before. Globally, ETFs have opened

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a whole new panorama of investment opportunities to Retail as well as Institutional Money

Managers. They enable investors to gain broad exposure to entire stock markets in different

Countries and specific sectors with relative ease, on a real-time basis and at a lower cost than

many other forms of investing. An ETF is a basket of stocks that reflects the composition of an

Index, like S&P CNX Nifty or BSE Sensex. The ETFs trading value is based on the net asset

value of the underlying stocks that it represents. Think of it as a Mutual Fund that you can buy

and sell in real-time at a price that change throughout the day.

An ETF is a pooled investment vehicle with shares that can be bought or sold throughout the

day on a stock exchange at a market-determined price (MTM). Like a mutual fund, an ETF

offers investors a proportionate share in a pool of stocks, bonds, and other assets. ETFs that are

regulated by the SEBI under the Investment Company Act are generally subject to the same

regulatory requirements as mutual funds and unit investment trusts (UITs). Mutual fund shares

are bought and sold at a single price—NAV—computed at the end of the day, and are sold

through a variety of channels (including financial advisers, broker-dealers, or directly from a

fund company). In contrast, most investors buy and sell ETF shares through a broker-dealer at

market-determined prices, much like publicly traded stocks. The stock price in ETF is

determined on the basis of equity traded and Marked to Money.

How Does ETF Works

The price of an ETF share on a stock exchange is influenced by the forces of supply and demand.

Though imbalances in supply and demand can cause the price of an ETF share to deviate from its

underlying value, substantial deviations tend to be short-lived for many ETFs. Two primary

features of an ETF’s structure help promote trading of its shares at a price that approximates the

ETF’s underlying value: portfolio transparency and the ability for APs to create or redeem ETF

shares at NAV at the end of each trading day. Transparency of an ETF’s holdings—either

through full disclosure of the portfolio or through established relationships of the components of

the ETF’s portfolio with published indexes, financial or macroeconomic variables, or other

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indicators—enables investors to observe and attempt to profit from discrepancies between the

ETF’s share price and its underlying value during the trading day.

BENEFIT OF E.T.F

ETFs can be purchased on margin and sold short.

ETFs also allow you to manage risk by trading futures and option just like a stock.

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Because they trade like a stock you can quickly look up the approximate daily change of a commodity or sector with the ticker symbol of a tracking ETF. Many stock websites also have better interfaces for manipulating charts than commodity websites and even provide applications for your mobile devices.

GROWTH OF ETF

In 2015, the global ETF industry witnessed its all-time high of the year, with over 6,000 ETFs

and ETPs and assets reaching the USD 3 trillion marks. The year also saw month-over-month

increases in inflows to ETFs, with record increases in assets across regions. Japan led in terms

of year-to-date growth, with an increase of over 200%. However, in absolute terms, the leaders

have been the usual: the U.S. and Europe. As per the latest numbers for the end of 2015, ETFs

and ETPs have gathered over USD 300 billion in net new assets, which is a record in itself.

India has not been far behind in this year’s trend in ETFs. It indeed has been an interesting year

for investors in India.

At the end of March, the Indian Ministry of Labour gave notice of a new investment regulation

for the Employees’ Provident Fund Organization (EPFO), which allowed investments of up to

5% of incremental income in ETFs. There was added flexibility for exempt PF trusts for which

equity investment limits would be higher, and they could invest anywhere between 5%-15% of

their funds in equity and equity-related instruments. The Indian ETF industry currently has 52

products with approximately USD 2 billion in assets. It is interesting to note that in 2005, there

were just six ETF products, with assets not even adding up to USD 1 billion.

A graph showing global growth of ETF:-

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ANALYSIs & INTERPRETITION

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SECTORIAL ANALYSIS:

PHARMA

The Indian pharmaceuticals market is the third largest in terms of volume and thirteenth largest

in terms of value, as per a report by Equity Master. Branded generics dominate the

pharmaceuticals market, constituting nearly 70 to 80 per cent of the market. India is the largest

provider of generic drugs globally with the Indian generics accounting for 20 per cent of global

exports in terms of volume. Of late, consolidation has become an important characteristic of the

Indian pharmaceutical market as the industry is highly fragmented.

India enjoys an important position in the global pharmaceuticals sector. The country also has a

large pool of scientists and engineers who have the potential to steer the industry ahead to an

even higher level.

The UN-backed Medicines Patent Pool has signed six sub-licences with Aurobindo, Cipla,

Desano, Emcure, Hetero Labs and Laurus Labs, allowing them to make generic anti-AIDS

medicine Tenofovir Alafenamide (TAF) for 112 developing countries.

Domestic pharmaceutical market grew at a CAGR of 12 per cent year-on-year in February 2016,

broadly in line with the average of 12.9 per cent since April 2015. Indian pharmaceutical firms

are eyeing acquisition opportunities in Japan's growing generic market as the Japanese

government aims to increase the penetration of generic drugs to 60 per cent of the market by

2017 from 30 per cent in 2014, due to ageing population and rising health costs.

India has the largest number US FDA compliant plants. The industry is expected to reach US$

55 million by 2020, out of which US$ 30 million will be for exports.

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Top Pharma Companies listed on National Stock Exchange

AUROPHARMA

CADILAHC

CIPLA

DIVISLAB

DR.REDDY

GLAXO

GLENMARK

LUPIN

PEL

SUNPHARMA

MARKET ANALYSIS / PORTER FIVE FORCE ANALYSIS

Supply: - higher for traditional therapeutic segment, this is typical of a developing market.

Relatively lower for lifetime segment.

Demand: - very high for certain therapeutic segments. Will change as life expectancy, literacy

increases.

Barriers to entry: - licensing, distribution network, patents, types of drug portfolios.

Bargaining power of suppliers: - distributions are increasingly pushing branded products in a

bid to earn higher margins.

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Bargaining power of customers: - High, a fragmented industry has ensured that there is

widespread competition in almost all product segments. Currently, the domestic market is also

protected by DPCO.

Competition: - High, and fragmented owning to many small player in the industry.

FINANCIAL YEAR 2015

FY15/CY14 was quite a challenging one, particularly on the export front. On the domestic front,

the year was a mixed bag for companies Post the pricing policy announced by National

Pharmaceutical Pricing Authority (NPPA) in 2013-14, many MNC pharma companies got

impacted. This had resulted in poor performance being reported by major MNC companies.

Their performance was even below the domestic players. The trend continued for FY15 too.

Only a couple of companies exhibited better growth. The margins of these MNC players

remained subdued due to increasing expenses and slower top line growth.

Currency depreciation had both positive and negative impact on the Indian pharma companies.

Depreciating rupee helped some companies garner better margins. On the other hand, those with

forex loans on their books witnessed higher payments.

The industry continued to face bigger challenges on the regulatory front. The companies faced

issues from the USFDA, as they lacked good manufacturing practices (GMP). Because of this,

there were instances of import alerts being issued, drug recalls, warning letters and so on. The

regulators have become more stringent now and have also been conducting surprise checks.

The Indian pharmaceuticals market increased at a CAGR of 17.46 per cent in 2015 from US$ 6

billion in 2005 and is expected to expand at a CAGR of 15.92 per cent to US$ 55 billion by

2020. By 2020, India is likely to be among the top three pharmaceutical markets by incremental

growth and sixth largest market globally in absolute size. India’s cost of production is

significantly lower than that of the US and almost half of that of Europe. It gives a competitive

edge to India over others.

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With 70 per cent of market share (in terms of revenues), generic drugs form the largest segment

of the Indian pharmaceutical sector.

PROSPECTS

The IPM size is expected to grow at 9-12% CAGR between 2015-18. The growth in Indian

domestic market will be boosted by increasing consumer spending, rapid urbanization,

increasing healthcare insurance, drugs and so on. On the global front, the IPM is ranked 13th in

terms of value. Owing to robust growth, its ranking is expected to improve to 11th position by

2018.

The life style segments such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers

will continue to be lucrative and fast growing owing to increased urbanisation and change in

lifestyle patterns. Going forward, better growth in domestic sales will depend on the ability of

companies to align their product portfolio towards these chronic therapies as these diseases are

on the rise.

In various global markets, the government has been taking several cost effective measures in

order to bring down healthcare expenses. Thus, governments are focusing on speedy introduction

of generic drugs into the market. This too will benefit Indian pharma companies. However,

despite promising outlook, intense competition and consequent price erosion would continue to

remain a cause for concern. Over and above this, following GMP will be an important criterion

for companies in order to grow in the global markets.

For the US market, Indian companies are developing niche portfolios in various segments. High

margin injectables, dermatology, respiratory, biosimilars, complex generics etc. have become an

area of interest. Most of the Indian pharma companies have been working on these niche drugs to

optimize growth and margins. Thus, post patent cliff, the companies which have developed their

product basket in the niche category will be ahead in the curve. Moreover, generic penetration in

the US is expected increase to 86-87% over the next couple of years from 83% currently.

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The Indian pharmaceutical industry is also getting increasingly U.S. FDA compliant to harness

the growth opportunities in areas of contract manufacturing and research. Indian companies such

as Ranbaxy, Sun Pharma, and Dr. Reddy's are increasingly focusing on tapping the U.S. generic

market. There are many multinational pharmaceutical companies who are looking forward to

India as an attractive destination for Research & Development, contract manufacturing, clinical

trials conduct and generic drug research. In 2005, the market value of Indian Pharmaceutical

Industry was US$ 45billion in 2005, and the generic sector is expected to grow to US$ 100

billion in the next few years.

SWOT ANALYSIS OF PHARMA INDUSTRY:

Strengths

1. low cost of production

2. large pool of installed capacity

3. efficient technology

4. liberalized government policy

Weakness

1. Low technology level of capital goods

2. Very low R&D

3. Low level of strategic planning

4. Fragmentation of installed capacity

Opportunities

1. Aging of world population

2. Growing income

3. New diagnoses and new social diseases

4. Saturation point of market is far away

5. New therapy approaches

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6. Globalization

Threats

1. Containment of rising health care cost.

2. High cost of discovering new product and fewer discoveries.

3. Complicated registration process

4. High entry cost in newer market

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ENERGY

The primary energy consumption in India is the third biggest after China and USA with 5.3%

global share in the year 2015 . The energy sector is a category of stocks that relate to producing

or supplying energy. This sector includes companies involved in the exploration and

development of oil or gas reserves, oil and gas drilling, or integrated power firms. India uses

only 6% of the world’s primary energy. India’s energy consumption has almost doubled since

2000 and the potential for further rapid growth is enormous. India’s economy, already the

world’s third-largest, is growing rapidly and policies are in place to press ahead with the

country’s modernization and an expansion of its manufacturing. If a well-managed expansion of

energy supply can be achieved, the prize in terms of improved welfare and quality of life for

India’s 1.3 billion people is huge – first and foremost for the estimated 240million that remain

today without access to electricity. Policy-makers at national and state levels are intensifying

their efforts to ensure that energy is a spur, rather than a hindrance, to India’s advancement,

looking to removing obstacles to investment in energy supply while also focusing on energy

efficiency and pricing reform (the deregulation of diesel prices in late 2014, taking advantage of

the fall in the oil price, means that all oil-based transport fuels are now subsidy-free). Coal is by

far the most important fuel in the energy mix, but India’s recent climate pledge underlined the

country’s commitment to a growing role for low-carbon sources of energy, led by solar and wind

power. With major reforms of India’s system of energy provision planned or underway, the aim

of this World Energy Outlook (WEO) Special Report is not to prescribe a path for India, but to

provide a coherent framework in which India’s policy choices can be assessed, considering their

implications not only for the country’s development, energy security and environment, but also

for a global energy system in which India plays an ever-greater role. An energy sector includes:-

PETROLEUM INDUSTRY---- oil companies, petroleum refiners, fuel transport and end-user

sales at gas stations

32

https://en.wikipedia.org/wiki/Gas_station

https://en.wikipedia.org/wiki/Oil_companies

https://en.wikipedia.org/wiki/Petroleum_industry


GAS INDUSTRY ---- - Natural gas extraction, and coal gas manufacture, as well as distribution

and sales.

ELECTRICAL POWER INDUSTRY---- electricity generation, electric power

distribution and sales

COAL INDUSTRY

NUCLEARPOWER INDUSTRY

RENEWABLE ENERGY INDUSTRY ----- alternative energy and sustainable

energy companies, including those involved in hydroelectric power, wind power, and solar

power generation, and the manufacture, distribution and sale of alternative fuels.

FINANCIAL YEAR 2015

Total investment in renewal energy has recorded $1 billion, coal production also increased to 1.5

billion tons, however crude oil production decline by 0.7% in financial year 2015 .government

has decided to plant five new ultra mega power project by budget 2015.government has also

decided to invest in five new showcase projects totaling 2000MW. However following are some

highlight of energy sector in 2015….

Coal: Coal production (weight: 4.38 % of total energy) increased by 6.3 % in June, 2015 over

June, 2014. Its cumulative index during April to June, 2015-16 increased by 7.3 % over

corresponding period of previous year.

Crude Oil: Crude Oil production (weight: 5.22 %) declined by 0.7 % in June, 2015 over June,

2014. Its cumulative index during April to June, 2015-16 declined by 0.9 % over the

corresponding period of previous year.

Natural Gas: The Natural Gas production (weight: 1.71 %) declined by 5.9 % in June, 2015. Its

cumulative index during April to June, 2015-16 declined by 4.2 % over the corresponding

period of previous year.

33

https://en.wikipedia.org/wiki/Alternative_fuel

https://en.wikipedia.org/wiki/Solar_power

https://en.wikipedia.org/wiki/Solar_power

https://en.wikipedia.org/wiki/Sustainable_energy

https://en.wikipedia.org/wiki/Sustainable_energy

https://en.wikipedia.org/wiki/Alternative_energy

https://en.wikipedia.org/wiki/Nuclear_power

https://en.wikipedia.org/wiki/Coal

https://en.wikipedia.org/wiki/Electric_power_distribution

https://en.wikipedia.org/wiki/Electric_power_distribution

https://en.wikipedia.org/wiki/Electricity_generation

https://en.wikipedia.org/wiki/Electrical_power_industry

https://en.wikipedia.org/wiki/Coal_gas

https://en.wikipedia.org/wiki/Natural_gas


Electricity: Electricity generation (weight: 10.32%) increased by 0.2 % in June, 2015. Its

cumulative index during April to June, 2015-16 increased by 1.5 % over the corresponding

period of previous year.

Renewable Energy: As on 30.06.2015 India’s total power generation considering solar, wind,

small hydro, biomass power and waste to power; total installed capacity of renewable energy

in India was 36470.64 MW as on March, 2015.

KEY POINTS / PORTER MODEL

Supply: - The demand-supply situation is tightly balanced with the latter being marginally

higher than the former

Demand: - electricity and industrial sector acts as the principal growth driver for energy.

However, in recent times agriculture, industrial and infrastructure sector have also emerged as

demand drivers for energy.

Barriers to entry: - High capital costs and Licensing of coal, electricity generation.

Bargaining power of suppliers: - Mostly government decide the price

Bargaining power of customers: - relatively very low bargaining power of customers.

PROSPECTS

As the global sourcing industry continues to grow and as Indian IT companies continue to

increase market share, outlook for the sector remains robust. Emerging protectionist policies in

the developed world are expected to affect the Indian IT companies. Due to US restrictions on

visas as well as rising visa costs, most Indian IT companies are increasingly subcontracting

onsite jobs to local employees in the US. This has adversely affected margins of Indian IT

companies.

34


By 2020 coal production in India is expected to hit 1 billion tons and ready to invest $25 billion

towards the same. Coal is expected to grow at a rate more than 6% in June 2015. Crude oil

production might decline by 0.5%. However, Natural gas production might continue to at a rate

of more than 5%.

India’s wind energy sector would be attracting investment worth of $15 billion by 2020. Rosneft

is about to invest Rs. 60000 crore and eyes Indian solar market. Indian energy sector might

remain under pressure for some time. India, which has raised its solar power capacity target five-

fold, could see annual investments in solar surpassing those in coal by 2019-20 with

commitments worth about $35 billion from global companies. CRISIL states the power sector

loans worth $62.5 billion might turn toxic. Gamesa Secures Fresh Wind Energy Order of 250

MW in India.

India has sought to Canadian companies to invest in Indian energy sector. Petroleum ministry is

to train workforce to join West Asian oil fields. CESC makes a significant investment in non-

conventional energy in recent times. At least three Indian companies, including state-owned

Indian Oil Corporation and ONGC Videsh, are in discussions for significant hydrocarbon deals

to Russia. Ethiopia may renew a key contract awarded to an Indian consortium led by state-

owned Power Grid Corp. Ltd (PGCIL) for managing its power sector, a move that will help India

affirm its role in Africa in the wake of growing Chinese influence. State-run Coal India has tied

up with the Administrative Staff College of India (ASCI) to train its executives to handle varying

rehabilitation and resettlement norms across states.

SWOT ANALYSIS

The energy sector has witnessed mixed news for the last few years. Indian government has also

taken series of action including excise duty reduction and price reduction.

Strengths

o Developing economy (high growth rate approx 7 % as IMF)

35


o Government decisions regarding Autonomy (company can increase prices within a band

of 10%)

Weakness

o High import (70% of total requirement)

o Lack of freedom (company can increase price only up to 10%)

o High price

Opportunities

o Equity oil (companies venturing in to upstream exploration and production activity)

o Natural Gas (Natural gas has the potential to be the fuel of the future)

Threats

o Competition (after 2004 privet players have started entry in energy sector)

o Continuing government interference

36


37


3.2 FUNDAMENTAL ANALYSIS

Fundamental analysis is the foundation of solid investing. It helps you determine the underlying

health of a company by examining the business’ core numbers: its income statements, its

earnings releases, its balance sheet, and other indicators of economic health. From these

“fundamentals” investors evaluate if a stock is under- or overvalued.

Fundamental analysis begins with an individual stock, but it also extends to that company’s

larger context. It explores questions like these:

Is the company competitive within its industry?

Is that industry growing or shrinking, compared to other sectors?

Shares of companies with strong fundamentals will tend to go up over time, while fundamentally

weak companies will see their stock prices fall. This makes fundamental analysis especially

valuable to long-term investors.

Fundamental analysis is one school of investing research. Fundamental analysis helps you

determine if a company is a good or poor investment choice.

Fundamental analysts consider the following in making their decision to invest (or not):

Is the company making a profit consistently?

Is that profit growing or declining over time?

Is the company holding its own relative to the competition? Is it a leader in its sector? Is

that sector growing or declining in importance to the overall economy?

Can the company pay its bills adequately? If you were to dismantle the company’s

operations today, what would be the intrinsic value of its assets versus the value of its

debts?

38


Fundamental analysis includes:

1. Economic Analysis

2. Industry Analysis

3. Company Analysis

On the basis of this three analysis the intrinsic value of the shares are determined. This 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 but if it is equal to market price hold the share and if it is

less than the market price sell the shares.

1. Economic Analysis The economic analysis aims to determining if the economic climate is conclusive and is

capable of encouraging the growth of business sector, especially the capital market.

When the economy expend, most industry groups and companies are expected to benefit

and grow. When the economy decline, most sector groups and companies are usually face

problems. Hence to protect their hard money an investor is need to spend time on

exploring the forces operating in overall economy.

Tools for economic analysis:

Gross Domestic Product (GDP)

Inflation and interest rate

Fiscal policy

Inflation on long term expectation

Inflation on short term expectation

39


2. Industry analysis In addition to an analysis of economy, the analyst must take a close look at the industry

or industries in which the company operates. Aspects of the industry analysis that are

important include:

Nature of competition: Who are the company’s primary competitors? Is the industry

competitive?

Labor condition: Is the industry able to find a sufficiently skilled workforce? Does the

company outsource some or all of its production or service?

Market share of each company in industry.

3. Company analysis The analysis of company requires looking closely at the company’s financial history and

recent events with a goal of assessing the future prospects of the company. The types of

information that an analyst must gather include:

Financial statement data and related disclosures

Position and market share in the industry

Where the company is in its life cycle (i.e., high growth/developmental, maturing, declining)

Sensitivity of company to commodity prices (i.e., oil)

Company Analysis of the companies selected is done on the basis of various accounting ratios.

However the most commonly used ratio in stock exchange is

1. Price Earnings Ratio (P.E Ratio)

2. Price/Earnings Growth Ratio (PEG Ratio)

Price/Earnings Ratio (P.E Ratio)

40


The price to earnings (P/E) multiple or ratio is probably the most popular indicator used by

investors for valuing stocks. It is the ratio of a company's stock price to its earnings per share.

(Earnings per share or EPS is a company's net profit divided by the number of shares it has

issued.) Another way of looking at the P/E ratio is as a ratio of the value that the market thinks a

company deserves (its market capitalization) to its net profit.

It tells you how to cheap or expensive a company's stock is. It is the number of times investors

must pay for the company's current earnings. For example, assume that the share price of a

company is Rs.80. If its EPS is, say Rs 5, its P/E is 16. So investors are willing to pay 16 times

for every rupee of the company's earnings.

Since you can use the P/E ratio to figure out if a company's stock is cheap or expensive, you can

compare the stock price of one company with that of another company in the same industry, or

stocks of two companies from different industries. You can have a P/E ratio for an industry as

well as a stock group, like the BSE Sensex or the NSE Nifty.

It is a good guide but it is not a watertight indicator. The major number entering the P/E ratio

from the profit and loss statement is net profit. Some companies are known to inflate profit

figures. For example, earnings under the head called 'other income' which could be by way of

selling assets (and hence non-business income) can play spoilsport and result in a misleadingly

low P/E to lure gullible investors. Lower expenses than the actual can also inflate the net profit

number and hence distort the P/E.

P/E Ratio is calculated as:

Market Value per Share / Earnings per Share (EPS)

Price/Earnings Growth Ratio (PEG Ratio)

41


The PEG ratio gives a more complete picture of stock valuation than simply viewing the price-

earnings (P/E) ratio in isolation. The PEG ratio is calculated easily and represents the ratio of the

P/E to the expected future earnings growth rate of the company

Stock theory suggests that the stock market should assign a PEG ratio of one to every stock. This

would represent theoretical equilibrium between the market value of a stock and anticipated

earnings growth. For example, a stock with an earnings multiple of 20 and 20% anticipated

earnings growth would have a PEG ratio of one.

1. PEG ratio results greater than one suggest one of the following:

• Market expectation of growth is higher than consensus estimates.

• Stock is currently overvalued due to heightened demand for shares.

2. PEG ratio results of less than one suggest one of the following:

• Markets are underestimating growth and the stock is undervalued

• Analysts' consensus estimates are currently set too low.

A great feature of the PEG ratio is that by bringing future growth expectations into the mix, we

can compare the relative valuations of different industries that may have very different prevailing

P/E ratios. This makes it easier to compare different industries, which tend to each have their

own historical P/E ranges

The PEG ratio is best suited to stocks with little or no dividend yield. Because the PEG ratio

doesn't incorporate income received by the investor in its presentation of valuation, the metric

may give unfairly inaccurate results for a stock that pays a high dividend.

Thorough and thoughtful stock research should involve a solid understanding of the business

operations and financials of the underlying company. This includes knowing what factors the

analysts are using to come up with their growth rate estimates, and what risks exist regarding

future growth and the company's own forecasts for long-term shareholder returns.

42


Investors must always keep in mind that the market can, in the short-term, be anything but

rational and efficient. While in the long run stocks may be constantly heading toward their

natural PEGs of one, short-term fears or greed in the markets may put fundamental concerns on

the backburner.

When used consistently and uniformly, the PEG ratio is an essential tool that adds dimension to

the P/E ratio, allows comparisons across diverse industries and is always on the lookout for

value.

PEG RATIO is calculated as:

PEG Ratio = P/E ratio ÷ Annual EPS Growth

The growth rate is expressed as a percentage above 100%, and should use real growth only, to

correct for inflation. A lower ratio is "better" (cheaper) and a higher ratio is "worse" (expensive)

USE OF DIFFERENT PORTFOLIO STYLESInvestors may use fundamental analysis within different portfolio management styles.

Buy and hold investors believe that latching onto good businesses allows the investor's asset to

grow with the business. Fundamental analysis lets them find 'good' companies, so they lower

their risk and probability of wipe-out.

Managers may use fundamental analysis to correctly value 'good' and 'bad' companies. Even

'bad' companies' stock goes up and down, creating opportunities for profits.

Managers may also consider the economic cycle in determining whether conditions are 'right' to

buy fundamentally suitable companies.

Contrarian investors distinguish "in the short run, the market is a voting machine, not a

weighing machine". Fundamental analysis allows you to make your own decision on value, and

ignore the market.

43


Value investors restrict their attention to under-valued companies, believing that 'it's hard to fall

out of a ditch'. The value comes from fundamental analysis.

Managers may use fundamental analysis to determine future growth rates for buying high priced

growth stocks.

Managers may also include fundamental factors along with technical factors into computer

models (quantitative analysis).

PROCEDURESThe analysis of a business' health starts with financial statement analysis that includes ratios. It

looks at dividends paid, operating cash flow, new equity issues and capital financing. The

earnings estimates and growth rate projections published widely by Thomson Reuters and others

can be considered either 'fundamental' (they are facts) or 'technical' (they are investor sentiment)

based on your perception of their validity.

The determined growth rates (of income and cash) and risk levels (to determine the discount

rate) are used in various valuation models. The foremost is the discounted cash flow model,

which calculates the present value of the future

Dividends received by the investor, along with the eventual sale price.

Earnings of the company or Cash flows of the company.

The amount of debt is also a major consideration in determining a company's health. It can be

quickly assessed using the debt to equity ratio and the current ratio (current assets/current

liabilities).

The simple model commonly used is the Price/Earnings ratio. Implicit in this model of a

perpetual annuity (Time value of money) is that the 'flip' of the P/E is the discount rate

appropriate to the risk of the business. The multiple accepted is adjusted for expected growth

(that is not built into the model).

44


Growth estimates are incorporated into the PEG ratio but the math does not hold up to analysis.

[neutrality is disputed] Its validity depends on the length of time you think the growth will

continue.

Computer modeling of stock prices has now replaced much of the subjective interpretation of

fundamental data (along with technical data) in the industry. Since year 2000, with the power of

computers to crunch vast quantities of data, a new career has been invented. At some funds

(called Quant Funds) the manager's decisions have been replaced by proprietary mathematical

models

Top Line and Bottom Line

1. Top Line

A reference to the gross sales or revenues of a company, or an allusion to a course of action that

increases or reduces revenues. The "top" reference relates to the fact that on a company's income

statement, the first line at the top of the page is generally reserved for gross sales or revenue. A

company that increases its revenues is said to be "growing its top line", or "generating top-line

growth".

2. Bottom line

Bottom line refers to a company's net earnings, net income or earnings per share (EPS). Bottom

line also refers to any actions that may increase/decrease net earnings or a company's overall

profit. A company that is growing its net earnings or reducing its costs is said to be "improving

its bottom line".

ECONOMIC ANALYSIS

The economy of India is the seventh-largest economy in the world measured by nominal GDP

and the third-largest by purchasing power parity (PPP). The country is classified as a newly

industrialised country, one of the G-20 major economies, a member of BRICS and a developing

45


economy with an average growth rate of approximately 7% over the last two decades.

Maharashtra is the wealthiest Indian state and has an annual GDP of US$220 billion, nearly

equal to that of Portugal, and accounts for 12% of the Indian GDP followed by the states of

Tamil Nadu (US$140 billion) and Uttar Pradesh (US$130 billion). India's economy became the

world's fastest growing major economy in the last quarter of 2014, replacing the People's

Republic of China.

The long-term growth prospective of the Indian economy is positive due to its young population,

corresponding low dependency ratio, healthy savings and investment rates, and increasing

integration into the global economy. The Indian economy has the potential to become the world's

3rd-largest economy by the next decade, and one of the largest economies by mid-century. And

the outlook for short-term growth is also good as according to the IMF, the Indian economy is

the "bright spot" in the global landscape. India also topped the World Bank’s growth outlook for

2015-16 for the first time with the economy having grown 7.6% in 2015-16 and expected to

grow 8.0%+ in 2016-17.

GDP of India:

India's gross domestic product advanced 7.1 percent year-on-year in the second

quarter of 2016, slowing from a 7.9 percent expansion in the previous period and

missing market expectations of 7.6 percent growth. It was the lowest reading

since the fourth quarter of 2014, as private consumption expanded at a slower

pace while fixed investment dropped further. However the current GDP of India

is more than the chain’s GDP of less than 6% as recent report published by IMF.

GDP Annual Growth Rate in India is reported by the Ministry of Statistics and

Programme Implementation (MOSPI). In a recent research study by IMF Indian’s

GDP is growing more than 7% that is more than china’s GDP.

Inflation Rate:

The inflation rate in India was 6.00% which was higher than the rate of 2015 of

5.88%. However it is much lower than CPI of 2013 of 10.92% and of 2014 @

46


6.37%. However India’s inflation is almost predictable which we have proved by

grand success of MASALA BOUND.

Export

In the year 2016 the total export was 21689.60 USD Million as compared to

22572.30 USD Million of 2015. This is due to export of Non- Petroliam product

declined by 4.45. In recent India has become one of the biggest refined product

exporters in Asia with petroleum accounting for around 20% of total export.

F.D.I. in India:

The total FDI investments India received in January-June period of 2015 was

$19.4 billion and in the whole of 2014, the country received $28.8 billion. In

2013, India received $22 billion FDI and $22.8 billion in 2012. According to the

RBI data, India received $18.9 billion in the first half of 2015 and $26.4 in 2014

and $25.6 in 2013.

India has replaced China as top destination for foreign direct investment by

attracting $63 billion worth FDI projects in 2015, says a report.

"India was the highest ranked country by capital investment in 2015, with $63

billion-worth of FDI projects announced.

47


PHARMA INDUSTRY COMPANY ANALYSISFor the technical and fundamental analysis of pharma sector I have taken five top performer

companies I.e.

1. Dr. Reddy laboratory ltd.

2. Cipla

3. Glen mark

4. Sun Pharma

5. Cadila Health Care

CALCULATION OF P/E RATIO

2012 2013 2014 2015 2016

DR.REDDY 20.6 19.5 20.4 21.6 28.3

CIPLA 22.2 19.1 23.5 38.1 33.2

GLEN MARK 17.9 18.4 26.7 46.6 38.9

SUNPHARMA 19.8 24.3 37.8 37.5 48.7

CADILA 25.3 26 21.8 23.4 25.5

48


DR.REDDY CIPLA GLEN MARK SUNPHARMA CADILA0

10

20

30

40

50

60

20.6 22.217.9

19.8

25.3

19.5 19.1 18.4

24.3 2621.6

38.1

46.6

37.5

23.4

28.3

33.2

38.9

48.7

25.5

2012

2013

2014

2015

2016

Overall P/E Ratio = 40.25

INTERPRATATION

P/E ratio tells how much the market is willing to pay. It tells whether the share price of company

is fairly valued, undervalued or overvalued.

P/E ratio of Dr. reddy has increasing trend over the year, so it shows the faith of investor

for the stock. The industry P/E ratio is 40.25%, so the Dr. reddy stock price is

undervalued.

Cadila Health Care has shown the constant P/E ratio over time that is approx 25% from

2012 to 2016. So the P/E ratio show less growth, and it has lower P/E ratio as compared

to industry ratio.

Cipla, Glen mark and SunPharma is getting high year by year continuous that shows the

market have much confidence over the stock of these.

Sunpharma has shown the fastest growth in their P/E ratio, within the period of 5 year it’s

P/E ratio has grown more than double.

49


So just looking the P/E ratio I would like to suggest going for Sun Pharma as the investors are

still ready to pay more for stock

CALCULATION OF PEG RATIO

Company Name EPS’15 EPS’16 P/E Ratio % Increase PEG Ratio

DR.REDDY 137.1 126.1 28.3 -8.72 ------

CIPLA 14.7 18.7 33.2 21.39 1.55

GLEN MARK 17.5 24.9 38.9 29.72 1.3

SUNPHARMA 21.9 19.6 48.7 -11.73 ------

CADLIC 56.2 14.9 25.5 -277.18 -------

INTERPRATATIONThe PEG ratio of Dr. Reddy, SunPharma and Cadlic health Care has negative PEG ratio. AS

PEG ratio show the growth considering the PE ratio.

Cipla and Glen Mark has positive PEG ratio respectively 1.55 and 1.3 and these two firm has

high also PE ratio.

So an investor opt Glen Mark and Cipla respectively as suggested by PEG ratio.

EARNING PER SHARE

2012 2013 2014 2015 2016

DR.REDDY 76.7 89.9 115.4 137.1 126.1

CIPLA 14.3 19.2 17.3 14.7 18.7

GLEN MARK 17.2 23.2 20.1 17.5 24.9

SUNPHARMA 25.7 28.8 15.2 21.9 19.6

CADLIC 31.9 31.9 39.2 56.2 14.9

50



20

40

60

80

100

120

140

1602012

2013

2014

2015

2016

INTERPRATATIONDr. Reddy has the fastest and continues growing EPS as within four year it’s earning grow from

76 to 138. However Cadlic health care has also shown good growth over the time.

Cipla, Glen Mark and Sun Pharma have almost constant EPS over the year.

So an investor should go for Sun Pharma and/or Cadlic health care.

RETURN ON EQUITY

Company Name 2012 2013 2014 2015 2016

DR.REDDY 26.1 24 25 23.7 18.4

CIPLA 15 17.1 13.8 10.9 12.7

GLEN MARK 19.3 22.7 18.3 15.8 16.4

SUNPHARMA 21.7 19.9 17 17.7 15

CADLIC 25.2 22.2 23.4 27.1 28.4

51



5

10

15

20

25

30

20122013201420152016

INTERPRATATIONReturn on Equity of all the companies except the Cadlic health care is falling continually.

So an investor should go for Cadlic health care according to return on equity ratio.

52


DIVIDEND PAYOUT RATIO COMPUTATION

Company Name 2012 2013 2014 2015 2016

DPS EPS DPS EPS DPS EPS DPS EPS DPS EPS

DR.REDDY 13.75 76.7 15 89.9 18 115.4 20 137.1 20 126.1

CIPLA 2 14.3 2 19.2 2 17.3 2 14.7 2 18.7

GLEN MARK 2 17.2 2 23.2 2 20.1 2 17.5 2 24.9

SUNPHARMA 4.25 25.7 5.0 28.8 1.5 15.2 3.0 21.9 1 19.6

CADLIC 7.5 31.9 7.5 31.9 9 39.2 12 56.2 3.2 14.9

DIVIDEND PAYOUT RATIO

Company Name

2012 2013 2014 2015 2016

DR.REDDY 17.9 16.7 15.6 14.6 15.9

CIPLA 14 10.4 11.6 13.6 10.7

GLEN MARK 11.7 8.6 9.9 11.4 8

SUNPHARMA 16.6 17.4 9.9 13.7 5.1

CADLIC 23.5 23.5 22.9 21.4 21.5

53


DIVIDEND PAYOUT RATIO GRAPH

2012 2013 2014 2015 20160

5

10

15

20

25 DR. REDDY

CIPLA

GLEN MARK

SUNPHARMA

CADILA

INTERPRATATIONDividend payout ratio of Cipla for all the years under study is continually growing since 2013.

So this show that company profitability has increase and company start making profit.

Cadillac health care has highest dividend payout ratio and it is also almost constant. So this show

the company is fundamentally strong. Cadlic health care leads the industry for dividend payout

ratio.

An investor should invest in either Cadillac or Cipla ltd. on the basis of dividend payout ratio.

DEBT EQUITY RATIO COMPUTATION

54


Company Name

2012 2013 2014 2015 2016

LTD NW LTD NW LTD NW LTD NW LTD NW

DR.REDDY 16419 49890 12659

63691 20755

78652 14315

98531 10690

117009

CIPLA 33 76389 6 90187 3179 100504

3093 108015

2219 118574

GLEN MARK 13125

24016 19203

27630 24287

29833 25744

30003 24873

42703

SUNPHARMA

1554 122358

1153 149897

487 185250

13684

256232

31167

314042

CADLIC 13223

25859 14260

29445 13622

34390 11504

42516 8964 53519

DEBT EQUITY RATIO

Company Name 2012 2013 2014 2015 2016

DR.REDDY .32 0.20 0.30 0.1 0.1

CIPLA 0 0 0 0 0

GLEN MARK 0.5 0.7 0.8 0.9 0.6

SUNPHARMA 0 0 0 0.1 0.1

CADLIC 0.5 0.5 0.4 0.3 0.2

DEBT EQUITY RATIO GRAPH

55


DR.REDDY CIPLA GLEN MARK SUNPHARMA CADLIC0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0.320000000000003

0

0.5

0

0.5

0.2

0

0.700000000000001

0

0.5

0.3

0

0.8

0

0.4

0.1

0

0.9

0.1

0.3

0.1

0

0.600000000000001

0.1

0.2

2012

2013

2014

2015

2016

INTERPRATATION

Debt equity ratio states the creditor / debenture holders claim. However there must be a moderate

combination of debt as it is cheaper source of fund.

As the graph suggests Glen Mark has growing graph of Debt equity. So this is considered as high

risk security. On the contrary Cipla and SunPharma are not using debt in their capital structure.

So I will suggest an Investor to invest in Dr. Reddy or Cadillac health care as both company are

using moderate leverage in their capital structure.

56


NET PROFIT RATIO

Company Name 2012 2013 2014 2015 2016

DR.REDDY 13.3 12.8 14.6 15.6 13.7

CIPLA 16.3 18.7 13.6 10.4 11.0

GLEN MARK 11.5 12.5 9.1 7.2 9.2

SUNPHARMA 33.1 26.4 19.5 16.6 16.7

CADLIC 12.4 10.3 11.1 13.3 15.5

NET PROFIT RATIO GRAPH


5

10

15

20

25

30

35

20122013201420152016

INTERPRATATIONNet Profit ratio of Cipla, Glen Mark, and SunPharma has decreasing trend. This show company

performance is not up to the investment level. Dr. Reddy has slow incremental graph over the

period. The Cadlic health care has continues incremental growth in net profit ratio. So Net Profit

ratio suggests an investor to invest in Cadlic health care.

57


CURRENT RATIO

Company Name 2012 2013 2014 2015 2016

DR.REDDY 1.5 1.5 1.8 1.7 1.7

CIPLA 3.6 3.0 2.2 1.9 1.1

GLEN MARK 1.5 1.7 1.6 1.4 1.5

SUNPHARMA 3.9 4.0 3.1 1.8 2.3

CADLIC 1.3 1.2 1.2 1.3 1.3

CURRENT RATIO GRAPH


0.5

1

1.5

2

2.5

3

3.5

4

4.5

1.5

3.6

1.5

3.9

1.31.5

3

1.7

4

1.2

1.8

2.2

1.6

3.1

1.2

1.71.9

1.4

1.8

1.3

1.7

1.1

1.5

2.3

1.3

2012

2013

2014

2015

2016

INTERPRATATIONCurrent ratio shows the short term solvency capacity of company. A strong current ratio shows

the company high capacity to pay their current liabilities out of their current assets.

CIPLA and SUNPHARMA have decaling this shows the company is not using their current

assets effectively. Dr. Reddy, Glen Mark and Cadlic Health Care have constant current ratio.

58


Other important ratios

DR.

REEDY

(3590)

CIPLA

(516.3)

SUN

PHARMA

(842.05)

CADILA

H.CARE

(375.85)

GLENMAR

K

(836.6)

Attribute Value Value Value Value Value

PE ratio 30.50 27.24 38.40 25.5 11.04

EPS (Rs) 137.1 14.71 21.90 62.08 37.14

Stock turnover ratio 5.88 3.03 4.89 6.67 7.02

Return on long term fund (%) 7.57 8.84 26.78 29.5 28.88

Dividend

Payout ratio

(in crore)

19.04 16.3619.14 19.32

5.38

Return on

average

equity

26.7 18.8317.71 27.10

20.24

Conclusion:- In phrma sector it is very hard to say which is a good stock because there is very

close difference between Dr. Reedy and Cadlic health care so just by looking at the PE ratio,

Return on equity and DIVIDEND PAYOUT RATIO and Net Profit ratio I will suggest to go for

CADLIC rater then Dr. Reedy and Glanmark.

59


ENERGY SECTOR COMPANY ANALYSIS

For the technical and fundamental analysis of Energy sector I have taken three top performer

companies of concern sector I.e.

1. CAIRN INDIA

2. ONGC

3. GAIL

4. NTPC

5. INDIAN OIL CORPORATION

CALCULATION OF P/E RATIO

Company Name 2012 2013 2014 2015 2016

NTPC 14.5 10.2 9.9 12.7 11

GAIL 11.9 10.1 8.8 15.8 19.1

CAIRN 7.8 5 4.7 12.4 -3.5

I.O.C 17.5 16.8 8.7 16.6 8.5

ONGC 11.8 8.6 10.5 9.5 18

Industry P/E Ratio = 17.11

60


NTPC GAIL CAIRN I.O.C ONGC

-5

0

5

10

15

20

25

14.5

11.9

7.8

17.5

11.810.2 10.1

5

16.8

8.69.9

8.8

4.7

8.710.5

12.7

15.8

12.4

16.6

9.511

19.1

-3.5

8.5

18

2012

2013

2014

2015

2016

INTERPRATATION

EARNING PER SHARE

Company Name 2012 2013 2014 2015 2016

NTPC 11.9 15.3 13.8 12.1 12.3

GAIL 35.0 34.5 37.7 24.9 17.8

CAIRN 41.6 63.1 65.2 23.9 -50.3

I.O.C 17.4 18.3 29.2 20.2 46.2

ONGC 26.2 32.9 28.3 31.0 21.4

61



-60

-40

-20

0

20

40

60

80

20122013201420152016

INTERPRATATION

Earning per share (EPS) of NTPC and ONGC is almost constant over the years which show the

regular income to investor on the other hand GAIL and CAIRN INDIA has declined EPS for last

two year.

However I.O.C has good growth over the year so an aggressive and young unmarried investor

can invest in share of I.O.C.

62


RETURN ON EQUITY

Company Name 2012 2013 2014 2015 2016

NTPC 13.2 15.5 13.1 12.2 11.4

GAIL 17.8 15.2 14.7 9.3 6.4

CAIRN 16.4 25.3 21.6 7.6 -19.3

I.O.C 7.0 7.1 10.4 7.1 14.8

ONGC 19.5 20.6 15.9 15.4 10.2


-30

-20

-10

0

10

20

30

20122013201420152016

INTERPRATATION

Return on Equity of almost companies of energy sector is falling. This show the ineffective

management and government regulation.

However I.O.C has increasing trend of ROE. So investor can opt for IOC.

63


DIVIDEND PAYOUT RATIO COMPUTATION

Company Name 2012 2013 2014 2015 2016

DPS EPS DPS EPS DPS EPS DPS EPS DPS EPS

NTPC 4 11.9 5.75 15.3 5.75

13.8 2.5 12.1 1.6 12.3

GAIL 8.7 35 9.6 34.5 10.4

37.7 3.0 24.9 5.5 17.8

CAIRN 0 41.6 11.5 63.1 12.5

65.2 9 23.9 7 -50.3

I.O.C 5.0 17.4 6.2 18.3 8.7 29.2 6.6 20.2 14.0 46.2

ONGC 8.75 26.2 9.75 32.9 9.5 28.3 9.5 31.0 9.5 21.4

DIVIDEND PAYOUT RATIO

Company Name

2012 2013 2014 2015 2016

NTPC 33.6 37.7 41.6 20.6 13.0

GAIL 24.8 27.8 27.6 12 31

CAIRN 0 18.2 19.2 37.7 -13.9

I.O.C 28.7 33.8 29.8 32.6 30.3

ONGC 33.3 29.6 33.6 30.7 44.3

64



-20

-10

0

10

20

30

40

50

20122013201420152016

INTERPRATATION

NTPC:- falling D.P. Ratio does not support the near future investment.

GAIL:- steady increase in profit, investor can trust, company D.P ratio failed in 2015 but it was

able to compensate in 2016.

CAIRN:- company with increasing DP ratio but due to fail merger the DP ratio of company fall

in negative. Current position is not so favorable.

I.O.C and O.N.G.C :- Both company have almost constant and steady dividend payout ratio.

Both organizations are good to invest. However an investor for regular high income can go with

ONGC.

65


DEBT EQUITY RATIO COMPUTATION

Company Name

2012 2013 2014 2015 2016

LTD NW LTD NW LTD NW LTD NW LTD NW

NTPC 548519 742758 645877 812410 755423 870035 933629

820940 1022383 891965

GAIL 93410 249145 131684 287947 160609 324570 147524

340227 126699 353962

CAIRN 0 534432 0 540503 0 656922 0 668343 0 564956

I.O.C 183104 603734 247875 630372 358652 679130 369759

688323 303671 759940

ONGC 39771 1153273 52086 1364391 88428 1525276 316809

1721510 475828 1804544

DEBT EQUITY RATIO

Company Name

2012 2013 2014 2015 2016

NTPC 0.7 0.8 0.9 1.1 1.1

GAIL 0.4 0.5 0.5 0.4 0.4

CAIRN 0 0 0 0 0

I.O.C 0.3 0.4 0.5 0.5 0.4

ONGC 0 0 0.1 0.2 0.3

66


NTPC GAIL CAIRN I.O.C ONGC0

0.2

0.4

0.6

0.8

1

1.2

20122013201420152016

INTERPRATATION

NTPC has very aggressive debt proportion in capital structure, so it show more risk for equity

share holders. GAIL has constant Debt equity ratio, CAIRN is not using debt in their capital

structure so it is safest for equity shareholders but it is to be consider that equity is more costly

than debt. So in investor can opt for ONGC which is using moderate debt equity ratio.

NET PROFIT RATIO

Company Name

2012 2013 2014 2015 2016

NTPC 14.9 17.5 14.4 12.4 12.9

GAIL 10 8.6 7.7 5.2 4.1

CAIRN 66.9 68.8 66.3 30.6 -109.3

I.O.C 1.0 1.0 1.5 1.1 3.2

ONGC 18.7 19.1 14.9 15.2 11.4

67



-120

-100

-80

-60

-40

-20

0

20

40

60

80

20122013201420152016

INTERPRATATION

Net profit ratio of GAIL and ONGC is falling continuously every year so both are not favorable

for investment dividend purpose.

Net profit of I.O.C is increasing but is very low as compare to other stock.

NTPC is providing good in constant net profit over the year. Investor can trust on NTPC stock.

The highest Net profit generating company CARIN has very well past experience but it start

falling in 2015 and in 2016 in went to negative. Perhaps it is due to the failure after acquiring

Vedanta still based organization which was not appreciated by investors.

68


CURRENT RATIO

Company Name

2012 2013 2014 2015 2016

NTPC 2.0 1.7 1.5 1.2 0.9

GAIL 0.8 0.9 1.1 0.1 0.9

CAIRN 4.4 5.7 5 3.8 6.2

I.O.C 1.0 1.0 1.0 1.0 0.9

ONGC 1.2 1.2 1.1 0.9 1.1

NTPC GAIL CAIRN I.O.C ONGC0

1

2

3

4

5

6

7

20122013201420152016

INTERPRATATION

Current ratio of NTPC ratio is falling over the years which show company short term solvency

ratio is not so strong to pay current liabilities, on the contrary CAIRN has very high and

69


aggressive which shows company is not able to using their current assets effectively. However

I.O.C, ONGC and GAIL have moderate current ratio but still these companies have lower

current ratio as compare to standard current ratio of 2:1.

Other important Ratios

NTPC

(158.85)

GAIL

()

ONGC

(228.45)

CAIRN I.O.C

Attribute VALUE VALUE VALUE VALUE VALUE

PE ratio 12.57 21.73 11.31 32.26 26.47

EPS (Rs) 12.48 23.96 19.70 62.08 7.04

EPS (%)

Stock turnover

ratio

16.32 27.61 13.93 42.10 10.27

DPS 2.5 6 5

Dividend

Payout ratio

45.83 25.04 45.83 127.82 30.38

Return on

average

equity

17.6% 19% 19.5% 7.6% 7.1%

CONCLUSION

70


Since the E.P.S, D.P.S and D/P ratio of CAIRN IND LTD. Is high so it is good to invest in

CAIRN LTD. However investor can decide to invest in GAIL as it is second highest performer.

INDUSTRY ANALYSIS

RATIOS PHARMA SECTOR ENERGY SECTOR

P/E RATIO 18.71 23.068

EPS (Rs) 48.782 25.52

Dividend Payout 15.45 54.96

Return on long term fund (%) 20.314 28.67

GROWTH RATE 15.92% 18.45%

P.E.G. Ratio (p.e ratio / growth)

1.17 1.25

THE INDUSTRY RATIO IS THE AVERAGE OF COMPANY RATIOS.

CONCLUSION

Industry analysis clearly states that for long term purpose energy sector is good to invest as it is

higher dividend payout, return on long term fund (%), and growth rate. However investor can

also opt for Pharma sector as it has lower P/E ratio and higher earnings per share.

71


FORMULAS

1. EPS = Net Earnings / Outstanding Shares

There are three types of EPS numbers:

Trailing EPS – last year’s numbers and the only actual EPS

Current EPS – this year’s numbers, which are still projections

Forward EPS – future numbers, which are obviously projections

What Does Outstanding Shares Mean?

Stock currently held by investors, including restricted shares owned by the company's officers

and insiders, as well as those held by the public. Shares that have been repurchased by the

company are not considered outstanding stock.

Also referred to as "issued and outstanding" if all repurchased shares have been retired.

2. P/E = Stock Price / EPS

The P/E gives you an idea of what the market is willing to pay for the company’s earnings. The

higher the P/E the more the market is willing to pay for the company’s earnings. Some

investors read a high P/E as an overpriced stock and that may be the case, however it can also

indicate the market has high hopes for this stock’s future and has bid up the price.

Conversely, a low P/E may indicate a “vote of no confidence” by the market or it could mean

this is a sleeper that the market has overlooked. Known as value stocks, many investors made

their fortunes spotting these “diamonds in the rough” before the rest of the market discovered

their true worth.

72


3. P/S = Market Cap / Revenues

Much like P/E, the P/S number reflects the value placed on sales by the market. The lower the

P/S, the better the value, at least that’s the conventional wisdom.

4. DPR = Dividends Per Share / EPS

Companies that pay higher dividends may be in mature industries where there is little room for

growth and paying higher dividends is the best use of profits (utilities used to fall into this

group, although in recent years many of them have been diversifying).

The payout ratio and the retained earning ratio are the indicators of the amount of earnings that

have been ploughed back in the business. The lower the payout ratio, the higher will be the

amount of earnings ploughed back in the business and vice versa. A lower payout ratio or

higher retained earnings ratio means a stronger financial position of the company.

5. Return on Equity (ROE)

It is one measure of how efficiently a company uses its assets to produce earnings. You

calculate ROE by dividing Net Income by Book Value. A healthy company may produce an

ROE in the 13% to 15% range. Like all metrics, compare companies in the same industry to

get a better picture.

6. Inventory Turnover Ratio = Cost of goods sold / Average inventory at cost

Usually a high inventory turnover/stock velocity indicates efficient management of inventory

because more frequently the stocks are sold, the lesser amount of money is required to finance

the inventory. A low inventory turnover ratio indicates an inefficient management of inventory.

A low inventory turnover implies over-investment in inventories, dull business, poor quality of

73


goods, stock accumulation, accumulation of obsolete and slow moving goods and low profits

as compared to total investment.

7. Dividend pay-out Ratio

The percentage of earnings paid to shareholders in dividends. The dividend pay-out ratio

provides an idea of how earnings support the dividend payments. More mature companies tend

to have a higher pay-out ratio.

𝐃𝐢𝐯𝐢𝐝𝐞𝐧𝐝 𝐏𝐚𝐲𝐨𝐮𝐭 𝐑𝐚𝐭𝐢𝐨=𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆

74


3.3 TECHNICAL ANALYSIS

INTRODUCTION

Technical Analysis is the forecasting of future financial price movements based on an

examination of past price movements. Like weather forecasting, technical analysis does not

result in absolute predictions about the future. Instead, technical analysis can help investors

anticipate what is "likely" to happen to prices over time. Technical analysis uses a wide variety

of charts that show price over time. Technical analysis is applicable to stocks, indices,

commodities, futures or any tradable instrument where the price is influenced by the forces of

supply and demand. Price refers to any combination of the open, high, low, or close for a given

security over a specific time frame. The time frame can be based on intraday (1-minute, 5-

minutes, 10-minutes, 15-minutes, 30-minutes or hourly), daily, weekly or monthly price data and

last a few hours or many years. In addition, some technical analysts include volume or open

interest figures with their study of price action.

.

CHARACTERISTICS

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, cycles or, classically, through recognition of chart patterns.

Technical analysis stands in contrast to the fundamental analysis approach to security and stock

analysis. Technical analysis "ignores" the actual nature of the company, market, currency or

commodity and is based solely on "the charts," that is to say price and volume information,

whereas fundamental analysis does look at the actual facts of the company, market, currency or

75


commodity. For example, any large brokerage, trading group, or financial institution will

typically have both a technical analysis and fundamental analysis team.

PRINCIPLES

Technicians say 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.

The field of technical analysis is based on three assumptions:

The market discounts everything.

Price moves in trends.

History tends to repeat itself.

1. The Market Discounts Everything

A major criticism of technical analysis is that it only considers price movement, ignoring the

fundamental factors of the company. However, technical analysis assumes that, at any given

time, a stock's price reflects everything that has or could affect the company - including

fundamental factors. Technical analysts believe that the company's fundamentals, along with

broader economic factors and market psychology, are all priced into the stock, removing the

need to actually consider these factors separately. This only leaves the analysis of price

movement, which technical theory views as a product of the supply and demand for a particular

stock in the market.

2. Price Moves in Trends

76


In technical analysis, price movements are believed to follow trends. This means that after a

trend has been established, the future price movement is more likely to be in the same direction

as the trend than to be against it. Most technical trading strategies are based on this assumption.

3. History Tends To Repeat Itself

Another important idea in technical analysis is that history tends to repeat itself, mainly in terms

of price movement. The repetitive nature of price movements is attributed to market psychology;

in other words, market participants tend to provide a consistent reaction to similar market stimuli

over time. Technical analysis uses chart patterns to analyze market movements and understand

trends. Although many of these charts have been used for more than 100 years, they are still

believed to be relevant because they illustrate patterns in price movements that often repeat

themselves.

CHARTING TERMS AND INDICATORS

1. Types of charts

OHLC "Bar Charts" — Open-High-Low-Close charts, also known as bar charts, plot the

span between the high and low prices of a trading period as a vertical line segment at the

trading time, and the open and close prices with horizontal tick marks on the range line,

usually a tick to the left for the open price and a tick to the right for the closing price.

77


Candlestick chart — Of Japanese origin and similar to OHLC, candlesticks widen and fill

the interval between the open and close prices to emphasize the open/close relationship. In the

West, often black or red candle bodies represent a close lower than the open, while white,

green or blue candles represent a close higher than the open price.

Line chart — Connects the closing price values with line segments.

Point and figure chart — a chart type employing numerical filters with only passing

references to time, and which ignores time entirely in its construction.

2. Concepts

Resistance — a price level which acts as a ceiling above prices

Support — a price level which acts as a floor below prices

Breakout — the concept whereby prices forcefully penetrate an area of prior support or

resistance, usually, but not always, accompanied by an increase in volume.

Trending — the phenomenon by which price movement tends to persist in one direction for

an extended period of time

Average true range — averaged daily trading range, adjusted for price gaps

Chart pattern — distinctive pattern created by the movement of security prices on a chart

Momentum — the rate of price change

Point and figure analysis — a priced-based analytical approach employing numerical filters

which may incorporate time references, though ignores time entirely in its construction.

78


3. Overlays

Overlays are generally superimposed over the main price chart.

Resistance — an area that brings on increased selling

Support — an area that brings on increased buying

Trend line — a sloping line of support or resistance

Channel — a pair of parallel trend lines

Moving average — an average that lags behind the price action but filters out short term

movements

4. Price-based indicators

These indicators are generally shown below or above the main price chart.

Advance decline line — a popular indicator of market breadth

Average Directional Index — a widely used indicator of trend strength

Commodity Channel Index — identifies cyclical trends

MACD — moving average convergence/divergence

Relative Strength Index (RSI) — oscillator showing price strength

Stochastic oscillator — close position within recent trading range

Momentum — the rate of price change

5. Volume-based indicators

79


Accumulation/distribution index — based on the close within the day's range

Money Flow — the amount of stock traded on days the price went up

On-balance volume — the momentum of buying and selling stocks

PAC charts — two-dimensional method for charting volume by price level.

Popular charting patterns

Technical analysts often use proven successful price patterns from great stocks as

tools to find new great stocks.

1. Bump and Run Reversal

As the name implies, the Bump and Run Reversal (BARR) is a reversal pattern that forms after

excessive speculation drives prices up too far, too fast. The pattern was originally named the

Bump and Run Formation, or BARF. Bulkowski identified three main phases to the pattern:

lead-in, bump and run.

80


2. Double

Top

The

double top is a major reversal pattern that forms after an extended uptrend. As its name

implies, the pattern is made up of two consecutive peaks that are roughly equal, with a

moderate trough in between. Although there can be variations, the classic double top marks

at least an intermediate change, if not long-term change, in trend from bullish to bearish.

Many potential double tops can form along the way up, but until key support is broken, a

reversal cannot be confirmed.

3. Double Bottom

The double bottom is a major reversal pattern that forms after an extended downtrend. As its

name implies, the pattern is made up of two consecutive troughs that are roughly equal, with

a moderate peak in between. Although there can be variations, the classic double bottom

usually marks an intermediate or long-term change in trend. Many potential double bottoms

can form along the way down, but until key resistance is broken, a reversal cannot be

confirmed.

81


4. Head and Shoulders Top

A head and shoulders reversal pattern forms after an uptrend, and its completion marks a

trend reversal. The pattern contains three successive peaks with the middle peak (head) being

the highest and the two outside peaks (shoulders) being low and roughly equal. The reaction

lows of each peak can be connected to form support, or a neckline. As its name implies, the

head and shoulders reversal pattern is made up of a left shoulder, head, right shoulder and

neckline. Other parts playing a role in the pattern are volume, the breakout, price target and

support turned resistance.

82


5. Head and Shoulders Bottom

The head and shoulders bottom is sometimes referred to as an inverse head and shoulders.

The pattern shares many common characteristics with its comparable partner, but relies more

on volume patterns for confirmation. As a major reversal pattern, the head and shoulders

bottom forms after a downtrend, and its completion marks a change in trend. The pattern

contains three successive troughs with the middle trough (head) being the deepest and the

two outside troughs (shoulders) being shallower. Ideally, the two shoulders would be equal in

height and width. The reaction highs in the middle of the pattern can be connected to form

resistance, or a neckline. The price action forming both head and shoulders top and head and

shoulders bottom patterns remains roughly the same, but reversed. The role of volume marks

the biggest difference between the two. Generally speaking, volume plays a larger role in

bottom formations than top formations. While an increase in volume on the neckline

breakout for a head and shoulders top is welcomed, it is absolutely required for a bottom.

6. Rounding Bottom

83


The rounding bottom is a long-term reversal pattern that is best suited for weekly charts. It is also referred to as a saucer bottom, and represents a long consolidation period that turns from a bearish bias to a bullish bias.

7. Cup with Handle

The Cup with Handle is a bullish continuation pattern that marks a consolidation period

followed by a breakout. It was developed by William O'Neil and introduced in his 1988

book, How to Make Money in Stocks. As its name implies, there are two parts to the pattern:

the cup and the handle. The cup forms after an advance and looks like a bowl or rounding

bottom. As the cup is completed, a trading range develops on the right hand side and the

handle is formed. A subsequent breakout from the handle's trading range signals a

continuation of the prior advance.

84


PHARMA SECTOR ANANLYSIS

1. DR.REDDY

85


In this chart we can observe that there is a resistance and support at approx 3585 and 2886 resp.

this means mainly the stock moves between this if it crosses either resistance or support there is

profit or loss resp.

The other indicators used are trend line and moving average of 200days. When this both are

combined together gives a clear picture when to sell or buy the stock. Once the senses cuts the

trend line it gives us the indication that its time to sell the stock and the confirmation of it is

given by the moving average indicator.

At present the Dr REDDY stock have just touch the resistance line which indicates that the

investor should sell there scrip.

2. CIPLA

86


Cipla ltd. has resistance level around 700 and support level at 300. And we can see that it has

also just completed a round heder shape and trend is falling down towards support line so an

investor should hold their share as well as buyers should wait until graph touch the support line.

3. SUNPHARMA

7/13/2

016

7/15/2

016

7/17/2

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7/19/2

016

7/21/2

016

7/23/2

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7/25/2

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7/27/2

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7/29/2

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7/31/2

016

8/2/2016

8/4/2016

8/6/2016

8/8/2016

8/10/2

016

8/12/2

016720740760780800820840860

price of sun pharma

price of sun pharma

87


Sun Pharma has highly sensitive price trend its price fluctuate rapidly as compare to other stock

price of Pharma sector. As shown in technical analysis as well as my price observation. So it is

very hard to predict the future trend of sun Pharma in short run. However as per my price

observation sun Pharma hold 3rd position in price increment.

4. GLANMARK

GLANMARK stock has resistance level is around 832 and support level is on 420.since graph is

recently touch the resistance level so an investor should sold there stock as it is the top price for

company’s stock. However buyers should wait sometimes as it is expected to fall in price of

concern stock.

CONCLUSION

88


Technical analysis suggest that CIPLA is good stock to buy as it as just completed a round shape

pattern which indicates that there is trend change in upward direction. However DR. REDDY

and GLENMARK have good time to sell their stock.

89


ENERGY INDUSTRY ANALYSIS

1.NTPC

NTPC has support level is 140 and resistance level is 215. And we can see that it has also just

completed a round bottom shape and there is an uptrend is also shown in chart. So this is the best

time to buy the stock of NTPC.

2. ONGC

90


Unlike other energy company ONGC shows a uniform pattern it is moving between the support

and resistance which is at 200 and 330 respectively. At present it has just shown a round shape

curve and now the trend is changing slowly, but it is not clear whether the stock will have an

uptrend or down trend so we should wait for some more time before investing.

3.GAIL

91


GAIL has same graph as ONGC it has a uniform pattern it is moving between the support and

resistance which is at 289 and 480 respectively.

At present it has just shown a round shape curve and now the trend is changing slowly. Which

show an uptrend.

The technical analysis of GAIL LTD. Is also supported by my price analysis during 9 week of

internship. One can easly see that the price moves upward for last 9 week on the basis of price

analysis it can assume that the price will move further upward.

7/13/2

015

7/15/2

015

7/17/2

015

7/19/2

015

7/21/2

015

7/23/2

015

7/25/2

015

7/27/2

015

7/29/2

015

7/31/2

015

8/2/2015

8/4/2015

8/6/2015

8/8/2015

8/10/2

015

8/12/2

015

8/14/2

015300310320330340350360370380

PRICE OF GAIL

PRICE OF GAIL

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CAIRN INDIA LTD.

The intraday technical chart of Cairn India Ltd. show a consistent trend between

support and resistance chart.

7/15/2

015

7/17/2

015

7/19/2

015

7/21/2

015

7/23/2

015

7/25/2

015

7/27/2

015

7/29/2

015

7/31/2

015

8/2/2015

8/4/2015

8/6/2015

8/8/2015

8/10/2

015

8/12/2

015

8/14/2

015150160170180190200210

PRICE OF CAIRN

PRICE OF CAIRN

Price analysis of CAIRN INDIA show an upward trend during last 10 week, so on

the basis of price analysis investor can buy the scrip of cairn India.

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On the basis of price growth CAIRN INDIA has positioned second rank in energy

sector just after the Indian Oil Corporation Ltd.

INDIAL OIL CORPORATION (IOC)

Price line of IOC has just touched the resistance level (559). So this show the perfect time to sell

the security because the Priceline is start showing downturn movement.

94


GAIL23%

CAIRN18%

SUN14%

IOC38%

NTPC2%

CADLIC6%

Chart Title

CONCLUSION

Technical Analysis suggests that Gail Ltd. is good stock among the three companies as it has just

completed a reverse head and shoulder pattern which indicates there is trend change soon.

After a long fall in share price of GAIL LTD. Now it has started recovery, as it has just

completed their round bottom. However IOC is one of the fasted increasing scrip in 9 week as

chart and diagram show its price has change 37% in positive. The current phase is most sutable

to sell the IOC scrip as it has just touch the resistance line.

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FINDINGS

1. Economic analysis clearly states that Indian economy not too strong as lower GDP

rate of 7% in 2016 as compare to 7.9% in previous year. But still it is stronger than other

Asian countries as China has less than 6% GDP rate. So for long term equity investment

India is the best platform. Future investors for wealth acquition can opt for current

market.

2. Industry analysis shows that Indian Pharma sector is booming and currently ranked third

in production of Pharma products. India holds 20% share in world export of Pharma

products.

3. In the company analysis I have following findings:-

a. Dr. Reddy and Cadlic both have good earning per share so both show good

condition for investment as compare to other company. However in Energy sector

ONGC has also good EPS, Cairn had highest EPS till 2015 but after acquisition of

Vedanta its EPS fall to negative.

b. Cadlic health care and ONGC have good return on equity. However Dr. Reddy

and NTPC have very well past record but there ROE is falling constantly. So

investor should go with Cadlic and ONGC.

c. Cairn India Ltd. and CIPLA is only company not using debt in their capital

structure. However present scenario state a creditors should trust on CIPLA rater

than loss making CAIRN.

d. Sun Pharma is on top Net Profit ratio but it has fallowing NP trend, Dr. Reddy

hold second position and Cadlic health care on third. In energy sector NTPC and

ONGC have good NP ratio as compare to other.

e. CAIRN INDIA LTD. was on top in both sectors in term of NP ratio till 2014-

2015. But in 2015-2016 its Net Profit ratio fall up to -50%.

4. Industry comparison shows that for equity investment (LONG TERM) energy sector is

better than Pharma sector.

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RECOMMENDATION1. As per my recommendation I will suggest peoples should invest in stock market after

studying the market, as it will be a secondary source of income along with their primary

income. While investing every investor must have a diversified portfolio so that he get

good returns.

2. Stock market is place where we can earn lots of money if we invest smartly. We should

always invest after doing self research rather than investing blindly as someone else has

invested in that particular stock.

3. Investor should take long term decision on the basic of fundamental analysis and short

term decision like cash trading can be done on the basis of technical analysis.

4. The last and the one of the most important suggestion while playing with stocks is keep

emotions aside and be realistic and invest it in for LONG TERM rather than short term.

So one should have a high level of patience while dealing with stock.

5. We should look after the stocks as our child which will give us the return in future and

not as soon as we bought it.

STOCK MARKET IS SUBJECTED TO HIGH RISK SO PEOPLE WITH WEAKER

HEART DON’T EVEN TRY TO DEAL WITH IT AND PEOPLE WHO LOVE TO TAKE

RISK IN LIFE IT’S THE BEST WAY OF EARNING MONEY LEGALLY.

97


1.4 LIMITATIONS

The project has been limited to investment analysis of Pharma and energy only.

Fundamental analysis is done only for five year and technical analysis is done for 9 week only.

Equity technical analysis has been done only with “Trade Tiger” software.

98


CONCLUSION

From the above done analysis, it can be concluded that both Fundamental and Technical

Analysis suggests that amongst the Pharma and ENERGY Sector, CADLIC HEALTH

CARE is the best investment for long term purpose.

However Sun Pharma, CIPLA, and GAIL should be bought respectively at this point of

time.

For the short run investors Indian Oil Corporation and Gail India ltd. is the best scrip

as recommended of price observation of previous 9 week.

On the basis of ROE, and NP ratio Energy sector is good to invest for long term. For

short term and intraday investors Pharma sector may perform well.

Despite of making hues loss 2015-2016 CAIRN INDIA LTD. is also performing very

well in short run.

99


BIBLIOGRAPHY

www.indiainfoline.com

www.sharekhan.com

www.ndtvprofit.com

www.money.rediff.com

www.cipla.com

www.tatagoup.com

www.birlaindia.com

www.en.wikipedia.org

www.in.finance.yahoo.com

www. wikihow .com

www. moneycontrol .com

National Stock Exchange of India Ltd. Web. 05 July 2010. <http://www.nseindia.com/>.

www. equitymasters.com/energysector-in IJMBS Vol. 1, Issue 1, March 2011 IRACST- International Journal of Research in Management & Technology

(IJRMT), ISSN: 2249-9563 Vol. 4, No.2, April 2014

100

http://www.equitymasters.com/energysector-in

http://www.moneycontrol.com/

http://www.wikihow.com/

http://www.in.finance.yahoo.com/

http://www.en.wikipedia.org/

http://www.tatagoup.com/

http://www.cipla.com/

http://www.money.rediff.com/

http://www.indiainfoline.com/

project report on equity research of pharma & energy sector through etf

Data & Analytics