Fundamental analysis

Fundamental Analysis: 

Fundamental Analysis Presented By: Kashyap Cholera (07) Hazel Doshi (10) Vinita Mehta (25) Hetal Shah (39) Monali Shah (40) Miti Sutaria (51) Ekta Turakhia (53) Fundamental Analysis

Fundamental analysis: 

Fundamental analysis Definition and meaning Objective Influence of the economy Agriculture Public investment and expenditure Monetary policy General business conditions Economic & political stability Fundamental Analysis

Two basics methodology of analysis : 

Two basics methodology of analysis Fundamental analysis Technical analysis Fundamental analysis v/s technical analysis User Tools Goal of the investors and traders Fundamental Analysis

Economic Policy: 

Economic Policy Introduction Main objective of this policy is: To achieve price stability Financial/ economic stability Adequate stability of credit for growth. Increase employment Stabilize balance of payment An important part of Indian economic policy of national government is bringing back confidence of business establishments in India financial system. This is especially true of services sector of Indian economy. Fundamental Analysis

Economic policy (contd): 

Economic policy (contd) Right Economic policies at the right time The economic problems can be classified under many heads like unemployment, agricultural issues, industrial problems, etc . India has worked hard and the economic policies made were all very helpful and contributed to the growth of the economy. Fundamental Analysis

The two approaches: 

The two approaches Top Down Approach What is top down approach? 5 stages in top down analysis:- Global economy. Local economy. Sector: Technology . Industry level : Application Software. Specific business level : Microsoft. Fundamental Analysis

Bottom Up Approach : 

Bottom Up Approach What is bottom up approach? 5 stages in bottom up analysis:- Specific Business Industry Level Sector Local Economy Global Economy Fundamental Analysis

Macro-economic analysis: 

Macro-economic analysis Introduction. The Main Factors For Economic Analysis Are:- GDP Broadest measure of country’s economy. India’s growth rate is expected to sail well above 8%. Various growth rates by different sectors. Fundamental Analysis

PowerPoint Presentation: 

Inflation The inflation rate in the country has inversely proportional impact on the value on national currency. Inflation stays quite high. Oil price the great cause for inflation. In the Overall situation of a slowdown in the growth of inflation and gdp, the rbi has put a hold on further monetary tightening. Fundamental Analysis

PowerPoint Presentation: 

Interest Rates The interest rates have gone up significantly. Why have the interest rates gone up? Budget Budget deficit or surplus. Budgets have an economic, political and technical basis. Development by effective mobilization of resources. Fundamental Analysis

The Balance Of Payments: 

The Balance Of Payments Passive BOP leads to a tendency to a decrease in the national currency's exchange rate  the share of exports in gross national product (  the openness of the economy ),  the elasticity of the exchange rate. Movement of short-term and long-term capital depends on the level of domestic interest rates, restrictions or encourage of import and export of capital. Changes in the balance of capital have an impact on the currency. negative influence of excessive short-term capital inflows into the country Fundamental Analysis

CURRENT ACCOUNT: 

CURRENT ACCOUNT YEARS CREDIT (RS) DEBIT (RS) 2008-2009 857960 1405412 (547452) 2009-2010 862333 1423079 (560746) 2010-2011 1139517 1734545 (595028) CAPITAL ACCOUNT YEAR CREDIT (RS) DEBIT (RS) 2008-09 755703 733018 22685 2009-2010 943447 699806 243641 2010-2011 1304426 1132272 172154 Fundamental Analysis

Rupee v/s Dollar: 

Rupee v/s Dollar V olumes thinning as compared to other currency markets Rupee depreciated by 20 per cent in a span of five months i.e 54.30 per dollar Date Rupees per dollar Change in % Period in months Jul ‘06 46.88 — — Jan ‘08 39.27 -16.23 18 Mar ‘09 51.94 32.26 14 Aug ‘11 44.07 -15.15 29 Dec ‘11 53.72 21.90 4 Jan ‘12 49.45 -7.95 1 (-) indicates appreciation  (+) indicates depreciation Source: Bloomberg Fundamental Analysis

Rupee v/s Dollar (contd): 

Rupee v/s Dollar (contd) L arge corporate bodies, banks or big foreign investors take positions in one direction that can potentially influence the rupee-dollar exchange rates more than the matured market currency pairs . High volatility Even as the dollar index went from 80.18 to 78.87 . The RBI appeared to be quick to act against rupee weakness in September. H as left the impression that policymakers are willing to accept rupee weakness as a necessary part of the economy’s rebalancing, provided the currency’s weakness from current levels is measured. Fundamental Analysis

Merits of fundamental analysis: 

Merits of fundamental analysis Long term investments: ability to identify and predict long-term economic, demographic, technological or consumer trends can benefit patient investors who pick the right industry groups or companies Value spotting: Graham and Dodd, Warren Buffett and John Neff are seen as the champions of value investing. help uncover companies with valuable assets, a strong balance sheet, stable earnings, and staying power . Development of Business Understanding a company's business, investors can better position to categorize stocks within industry group. Fundamental Analysis

Demerits of fundamental analysis: 

Demerits of fundamental analysis Doesn’t considered "herd mentality" . Time constrains Industry and company specific: Valuation techniques vary depending ,which can limit the amount of research to be performed. Subjective: based on assumptions. Fundamental Analysis

Industry Analysis: 

Industry Analysis Assessment of current condition & future prospectus. Understanding company’s business & business environment. Stocks selection-provides insight into issuer’s growth opportunities. Fundamental Analysis

Infrastructure: 

Infrastructure Rapid growth in different sectors- due to urbanization & increased foreign investments. Present day spending is 5%,less than other nations. For 2011-12 Rs 2,14,000crores allotted. Fundamental Analysis

Roads & Railways: 

Roads & Railways India has world’s largest network. Foreign direct investment (FDI) : April-October 2011 stood at Rs.10074 chores. Allot US$500 million in the 11 th year plan. RAILWAYS India has 4 th largest railway network. US$ 12millon invested and railways is a major catalyst for growth. Indian Railways have generated Rs43,107 crores of revenue earnings-November 2011 : Rs39,452 crores during 2010, registering 9% increase. Additionally, the Asian Development Bank (ADB) would extend loans of up to US$ 500 million to Indian Railways. Fundamental Analysis

Aviation: 

Aviation Attracted FDI worth U$423 million Increasing passenger traffic. Fundamental Analysis

Real Estate : 

Real Estate Real estate on a growth path. During April-September 2011-12, the Indian real estate and housing sectors received US$ 453 million in foreign direct investment (FDI). Plans have been announced by the Government to increase investments and the Government would increase funds from around US$ 15 billion per year to over US$ 23 billion in 2012 for the same. Fundamental Analysis

Power: 

Power India possesses the fifth largest power production capacity, contributes 4% of the total global power production . The private sector currently accounts for 17.88% of the total installed capacity of 156,783.98 MW. Inflow increased from US$ 87 million to US$ 1.252 million. The Indian power and distribution transformer sector registered revenue of US$ 200 crores during 2009,estimated to reach RS.400crores by the end of 2015. Future investment will benefit. Fundamental Analysis

Measures taken by government of India : 

Measures taken by government of India The investment rate in the country is experiencing a fast rate of growth: primarily due to investor Government’s friendly policies. Liberalization of ( FDI) regulations. To create infrastructure debt funds. To boost infrastructure development with tax-free bonds of 300 billion rupees. Fundamental Analysis

Stock valuation models: 

Stock valuation models Dividend discount model Present value of all future cash flows generated from the assets. Po = D1 + Po (1+r) (1+r) Where, P= current price of the share D= dividend expected a year p= price of the share expected r= rate of the return required on the share Fundamental Analysis

Growth model: 

Growth model Also known as “ Gordon” growth model. In this model, the dividend amount grows at a constant rate and can be obtained by using the formula given below: Po = Div1 (r-g) Where r= expected return g= growth rate Fundamental Analysis

Earnings multiplier approach: 

Earnings multiplier approach Price to earnings ratio is calculated as follows: P/E ratio= Market price/EPS Where, EPS=Profit after Tax/No. of shares P/E ratio is the P/E multiple for the stock. Po= E1*(Po/E1) Where, Po is the estimated price E1 is the estimated EPS Po/E1 is the reasonable P/E ratio Fundamental Analysis

PowerPoint Presentation: 

EPS P/E Po Riskiness Company A 4 20 80 High Company B 4 25 100 Low The P/E ratio can be worked out on the basis of discounting model P/E = ( 1-b) ( r-g) Where b is the plough back ratio or the proportion of retained profits out of total profits, r is the required rate of return and g is the growth rate, (1-b) is the dividend payout ratio. Thus, the P/E multiple of a stock price is directly proportional to the dividends distributed by the company. Example : Two companies A and B whose EPS and P/E ratios are as follows: Fundamental Analysis

YEAR-ON-YEAR FINANCIAL REPORTS: 

YEAR-ON-YEAR FINANCIAL REPORTS Fundamental Analysis

PowerPoint Presentation: 

Fundamental Analysis

PowerPoint Presentation: 

Fundamental Analysis

PowerPoint Presentation: 

Fundamental Analysis

RATIO ANALYSIS OF RELIANCE INFRASTRUCTURE LTD.: 

RATIO ANALYSIS OF RELIANCE INFRASTRUCTURE LTD. Fundamental Analysis

COMPARATIVE STUDY OF THE PAST 2 YEARS OF REL INFRA: 

COMPARATIVE STUDY OF THE PAST 2 YEARS OF REL INFRA RATIO FORMULAE MARCH ‘11 MARCH ‘10 1.EPS net income –dividends on preference shares No. of shares 58.0 57.5 2.P/E Ratio Market Value per Share Earnings per Share 8.1 8.2 3. Current Ratio Current assets Current liabilities 1.6 3.1 4. Quick Ratio Current assets- inventories current liabilities 1.11 1.61 Fundamental Analysis

PowerPoint Presentation: 

RATIOS FORMULAE MARCH ‘11 MARCH ‘10 5. Debt Equity Ratio Total long term debts shareholder' funds 0.5 0.4 6. P/BV Market price per share Book value per share 0.5 0.6 7. ROE Net income Shareholder’s equity 6.6 % 6.8 % 8. ROCE Net income Capital employed 4.1 2.6 Fundamental Analysis

CONCLUSION: 

CONCLUSION Fundamental Analysis