1.1 INTRODUCTION ABOUT THE TOPIC

The market for long term securities like bonds, equity stocks and

preferred stocks is divided into primary market and secondary market.

Primary market deals with the new issues of securities. Outstanding

securities are traded in the secondary market, which is commonly known

as stock market or stock exchange. In the secondary market, the investors

can sell or buy securities. Stock markets predominantly deal in the equity

shares. Well regulated and active stock market promotes capital

formation. The health of the economy is reflected by the growth of the

stock market. Stock broking is a growing industry in India. The main

reason is that Indian economy is one of the strongest in the world. As a

result of that both foreign and domestic investors are interested in

investing in Indian stock market.

The topic selected for the study is “Security Analysis of selected

power sector securities listed in Bombay Stock Exchange” with

reference to Motilal Oswal securities Ltd, Thrissur.

The study is done for the purpose of conducting fundamental analysis

and technical analysis of leading securities in the stock market. In the

stock market share price of companies are determined by the demand and

supply forces operating in the market. These demand and supply forces in

turn are influenced by a number of fundamental factors as well as certain

psychological or emotional factors. The combined impact of all these

factors is reflected in the share price movement. The price movements of

securities follow systematic and certain consistent patterns. Past

movements in the prices of shares help to identify trends and pattern. It is

useful for the prediction of future price movements. The companies

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selected are NTPC, RELIANCE, POWERGRID, NHPC, TATAPOWER

and ADANI POWER.

Security analysis is conducted by analyzing both the fundamental and

technical aspects. The technical analysis includes bar chart, Moving

Average & RSI (Relative Strength Index).

Security analysis

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An examination and evaluation of the various factors affecting the

value of a security is known as Security analysis. Security analysis refers

to the analysis of tradable financial instruments. Financial instruments

can be classified into debt securities, equities, or some hybrid of the two,

futures contracts and tradable credit derivatives are sometimes included.

Security analysis is typically divided into fundamental analysis, which

relies upon the examination of fundamental business factors such as

financial statements, and technical analysis, which focuses upon price

trends and momentum

. Two analytical models When the objective of the analysis is to

determine what stock to buy and at what price, there are two basic

methodologies

Fundamental analysis maintains that markets may misprice a security in

the short run but that the "correct" price will eventually be reached.

Profits can be made by trading the mispriced security and then waiting

for the market to recognize its "mistake" and re-price the security.

Technical analysis maintains that all information is reflected already in

the stock price, so fundamental analysis is a waste of time. Trends 'are

your friend' and sentiment changes predate and predict trend changes.

Investors' emotional responses to price movements lead to recognizable

price chart patterns. Technical analysis does not care what the 'value' of a

stock is. Their price predictions are only extrapolations from historical

price patterns.

Investors can use both these different but somewhat complementary

methods for stock picking. Many fundamental investors use techniques

for deciding entry and exit points. Many technical investors use

fundamentals to limit their universe of possible stock to 'good' companies

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Fundamental analysis

Fundamental analysis of a business involves analyzing its financial

statements and health, its management and competitive advantages, and

its competitors and markets. When applied to futures and forex, it focuses

on the overall state of the economy, interest rates, production, earnings,

and management. When analyzing a stock, futures contract, or currency

using fundamental analysis there are two basic approaches one can use;

bottom up analysis and top down analysis. The term is used to distinguish

such analysis from other types of investment analysis, such as

quantitative analysis and technical analysis.A method of security

valuation which involves examining the company's financials and

operations, especially sales, earnings, growth potential, assets, debt,

management, products, and competition. Fundamental analysis takes into

consideration only those variables that are directly related to the company

itself, rather than the overall state of the market or technical analysis data.

The end goal of performing fundamental analysis is to produce a value

that an investor can compare with the security's current price in hopes of

figuring out what sort of position to take with that security

Fundamental analysis is performed on historical and present data, but

with the goal of making financial forecasts. There are several possible

objectives:

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To conduct a company stock valuation and predict its probable

price evolution,

To make a projection on its business performance,

To evaluate its management and make internal business decisions,

To calculate its credit risk

Tools for fundamental analysis

For fundamental analysis, the following ratios are used:

EPS = PAT / No of equity shares

DPS = Amount declared as dividend / No.

of equity shares

Pay out ratio = DPS / EPS

ROE = PAT / Net worth

P/E ratio = MPS / EPS

P/E Average = Average of the P/E range

Current ratio = Current assets / Current liabilities

Debt- Equity ratio = Debt capital / Owner’s capital

Interest coverage ratio = EBIT / Interest

N/P Margin = PAT / Net sales

TECHNICAL ANALYSIS

Technical analysis is a study of the market data in terms of factors

affecting supply and demand schedules, namely, prices, volume of

trading, etc. The technical analysis believes that share prices are

determined by the demand and supply forces operating the market. These

demand and supply forces are in turn influenced by a number of

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fundamental factors as well as certain psychological and emotional

factors. The combined impact of all these factors is reflected in the share

price movement. The technical analysis therefore concentrates on the

movement of share price. Technical analysis is the name given to

forecasting techniques that utilize historical share price data.

Technical analysis is a method of evaluating securities by analyzing

statistics generated by market activity, such as past prices and volume.

Technical analysts do not attempt to measure a security's intrinsic value,

but instead use charts and other tools to identify patterns that can suggest

future activity. Technical analysts believe that the historical performance

of stocks and markets are indications of future performance.

TOOLS OF TECHNICAL ANALYSIS

Relative Strength Index

Simple Moving Average

Line Chart

Bar Chart

1.2 REVIEW OF LITERATURE

Aber John(1976) in his study found that numerous empirical studies have

tested the profitability of technical trading rules in a variety of markets

for the purpose of either uncovering profitable trading rules or testing

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market efficiency, or both. The technical trading studies simulated only

one or two trading systems. In these studies, although transaction costs

were deducted to compute net returns of technical trading strategies, risk

was not adequately handled, statistical tests of trading profits and data

snooping problems were often disregarded, and out-of-sample

verification along with parameter (trading rule) optimization were not

considered in the testing procedure.

Goodman and John W Peavy (1983) in their study found that there is no

way of making an expected profit by extrapolating past changes in the

futures price, by chart or any other esoteric devices of magic or

mathematics. The market quotation already contains in itself all that can

be known about the future and in that

sense has discounted future contingencies as much as is humanly

possible.

Philip O Regan (1988) explained that demonstrated that under a noisy

rational expectations model in which current prices do not fully reveal

private information (signals) because of noise (unobserved current supply

of a risky asset) in the current equilibrium price, historical prices (i.e.,

technical analysis) together with current prices help traders make more

precise inferences about past and present signals than do current prices

alone

Brown and David P (1989) in their article explained that results provide

evidence for a “predictive information link” between non-earnings

numbers and future earnings changes. They indicate that some non-

earnings numbers do contain information useful for predicting future

earnings changes that is not contained in either past or current earnings.

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Edward (1992) found that also extends her test to include a “valuation

link” between the predicted future earnings changes and stock returns

during the annual report dissemination period. She finds evidence that

this valuation link does exist. The non-earnings accounting numbers are

therefore useful for predicting both future earnings and returns.

Demark and Thomas R (1994) explained that the history of technical

analysis dates back to at least the 18th century when the Japanese

developed a form of technical analysis known as candlestick charting

techniques. This technique was not introduced to the West until the

1970s.

Hackel and Kenneth S (1996)found that it has been stated that “the task

of research is to discover what information projects future earnings and,

from a financial statement analysis point of view, what information in the

financial statements does this”

Jan R (1998) explained that results show that receivables do provide

incremental information for the prediction of future sales, earnings and

profit margins.

Squires (2000) found that study the value relevance of capital

expenditures for explaining returns beyond the use of current earnings.

Their findings show that changes in the level of capital expenditure were

strongly and positively related to excess returns. This exhibits the fact

that current capital expenditure has good news for the future performance

of a firm and supports the use of capital expenditures for predicting future

earnings or returns.

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Thomas Robinson (2002) in their study explained that Fundamental

analysis involves assessing a firm’s equity value based on the analysis of

published financial statements and other information without reference to

the prices at which a firm’s securities trade in the capital markets.

Palepu and Krishna (2004) found that technical analysis has been

extensively used among market participants such as brokers, dealers, fund

managers, speculators, and individual investors in the financial industry.

3 Numerous surveys indicate that practitioners attribute a significant role

to technical analysis. For example, futures fund managers rely heavily on

computer-guided technical trading systems, and about 30% to 40% of

foreign exchange traders around the world believe that technical analysis

is the major factor determining exchange rates in the short-run up to six

months.

Prasanna Chandra (2005) explained that Active portfolio management is

commonly partitioned into two types of activities: market timing, which

requires forecasts of broad-based market movements, and security

analysis, which requires the selection of individual stocks that are

perceived to be underpriced by the market.

V K Bhalla (2006) explained that security analysis Psychological and

Institutional Forces and the Determination of Exchange Rates,

Neoclassical economists, by their own admission, have had a terrible time

explaining foreign-currency prices. In large part, this is due to the fact

that they assume "economic" behavior to be independent of social and

cultural influences. But markets are social institutions. They "organize

and guide human social behavior through sanctions (formal and informal,

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negative and positive), mores, norms, status, and shared worldviews".

Consequently, explaining economic exchange requires an understanding

of the behavior associated with the subculture of those in question.

Dhanesh Kumar Khatri (2006) in their article found that a leading

technical analyst, provides a more specific definition: “The technical

approach to investment is essentially a reflection of the idea that prices

move in trends that are determined by the changing attitudes of investors

toward a variety of economic, monetary, political, and psychological

forces. The art of technical analysis, for it is an art, is to identify a trend

reversal at a relatively early stage and ride on that trend until the weight

of the evidence shows or proves that the trend has reversed.”

Stephan H Penman (2007) in his study found that Technical analysis

includes a variety of forecasting techniques such as chart analysis, pattern

recognit ion analysis, seasonality and cycle analysis, and computerized

technical trading systems.However, academic research on technical

analysis is generally limited to techniques that can be expressed in

mathematical forms, namely technical trading systems, although some

recent studies attempt to test visual chart patterns using pattern

recognition algorithms. A technical trading system consists of a set of

trading rules that result from parameterizations, and each trading rule

generates trading signals (long, short, or out of market) according to their

parameter values. Several popular technical trading systems are moving

averages, channels, and momentum oscillators.

Ran Canetti & IBM Research (2008) explained that Composable Formal

Security Analysis, a security property of a protocol is composable if it

remains intact even when the protocol runs alongside other protocols in

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the same system. We describe a method for asserting composable security

properties, and demonstrate its usefulness. In particular, we show how

this method can be used to provide security analysis that is formal,

relatively simple, and still does not make un-justified abstractions of the

underlying cryptographic algorithms in use. It can also greatly enhance

the feasibility of automated security analysis of systems of realistic size.

Prasanna Chandra (2008) in his study he explained that Motivated by an

obvious gap between the widespread use of Bloomberg terminals in the

finance industry and the scant resources available to an instructor on how

to incorporate the available information through the terminal into a

finance course, we illustrate our experience using the terminal in an

equity-focused security analysis and portfolio management course. Our

goal is to enable students inexperienced with the terminal to prepare an

analyst report. We identify the most significant challenges we face and

provide the corresponding solutions. Our results are also applicable to

other finance courses including financial analysis, investments, and

student managed investment fund.

1.3 INTRODUCTION OF THE STUDY

1.3.1 OBJECTIVES OF THE STUDY

To study fundamental and technical analysis of securities in the

power sector.

To evaluate the performance of the company.

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To analyze the movement of stock.

To evaluate the risk and return of the selected securities.

1.3.2 NEED OF THE STUDY

The capital gains of an investor are on the performance of a particular

company’s stock in the stock market. The stronger the company’s share,

the more profit the investor gets. So it is necessary to ascertain, analyze

and interpret the share of various firms in order to know its position in the

market. Investors can make wise investment with the help of this analysis

Through this project, it tries to point out the company which ensure

maximum return and minimum risk in power sector where in investment

could be made.

1.3.3 SCOPE OF THE STUDY

The study is to analyze the financial strength and future investment

prospective of the key players from power sector of the economy.The

fundamental analysis is to determine the value of the shares. The

technical analysis is to predict the future stock behavior. Rational

investors always focus on maximum return which bears minimum risk.

Hence, for them, well diversified equity funds are the superlative

opportunity available for the investment. .

1.3.4 LIMITATIONS

Data considered only for past few months.

Indian capital market is featured by the weak form of efficient

market hypothesis.

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The research will be confined to only 7 securities in the power

sector.

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2.1 INDUSTRY PROFILE

Capital Market

The market where investment funds like bonds, equities and

mortgages are traded is known as the capital market. The primal role of

the capital market is to channelize investments from investors who have

surplus funds to the ones who are running a deficit. The capital market

offers both long term and overnight funds. The financial instruments that

have short or medium term maturity periods are dealt in the money

market whereas the financial instruments that have long maturity periods

are dealt in the capital market. The different types of financial

instruments that are traded in the capital markets are equity instruments,

credit market instruments, insurance instruments, foreign exchange

instruments, hybrid instruments and derivative instruments.

A capital market is a market for securities (both debt and equity),

where business enterprises (companies) and governments can raise long-

term funds. It is defined as a market in which money is lent for periods

longer than a year, as the raising of short-term funds takes place on other

markets (e.g., the money market). The capital market includes the stock

market (equity securities) and the bond market (debt).

Capital markets consist of

1 Primary market

2 Secondary markets

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Primary market

The primary market is that part of the capital markets that deals with

the issuance of new securities. Companies, governments or public

sector institutions can obtain funding through the sale of a new stock

or bond issue. This is typically done through a syndicate of securities

dealers. The process of selling new issues to investors is called

underwriting. In the case of a new stock issue, this sale is an initial

public offering (IPO). Dealers earn a commission that is built into the

price of the security offering, though it can be found in the

prospectus.

The primary markets are where new stock and bonds issues are sold

(via underwriting) to investors. The secondary markets are where

existing securities are sold and bought from one investor or trader to

another, usually on a securities exchange, over the counter, or

elsewhere.

Features of primary markets are:

This is the market for new long term equity capital. The primary

market is the market where the securities are sold for the first time.

Therefore it is also called the new issue market (NIM).

In a primary issue, the securities are issued by the company

directly to investors.

The company receives the money and issues new security

certificates to the investors.

Primary issues are used by companies for the purpose of setting up

new business or for expanding or modernizing the existing

business.

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The primary market performs the crucial function of facilitating

capital formation in the economy.

The new issue market does not include certain other sources of new

long term external finance, such as loans from financial

institutions. Borrowers in the new issue market may be raising

capital for converting private capital into public capital; this is

known as "going public."

The financial assets sold can only be redeemed by the original

holder.

Methods of issuing securities in the primary market are:

1 Initial public offering;

2 Rights issue (for existing companies);

An initial public stock offering (IPO) referred to simply as an

"offering" or "flotation," is when a company issues common stock or

shares to the public for the first time. They are often issued by

smaller, younger companies seeking capital to expand, but can also be

done by large privately-owned companies looking to become publicly

traded.

A rights issue is offered to all existing shareholders individually

and may be rejected, accepted in full or accepted in part. Rights are

often transferable, allowing the holder to sell them on the open

market. A right to a share is generally issued on a ratio basis (e.g. one-

for-three rights issue). Because the company receives shareholders'

money in exchange for shares, a rights issue is a source of capital.

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Secondary market

The secondary market, also known as the aftermarket, is the

financial market where previously issued securities and financial

instruments such as stock, bonds, options, and futures are bought

and sold. The term "secondary market" is also used to refer to the

market for any used goods or assets, or an alternative use for an

existing product or asset where the customer base is the second

market (for example, corn has been traditionally used primarily for

food production and feedstock, but a second- or third- market has

developed for use in ethanol production).

Under a secondary market offering or seasoned equity offering of shares

to raise money, a company can opt for a rights issue to raise capital. The

rights issue is a special form of shelf offering or shelf registration. With

the issued rights, existing shareholders have the privilege to buy a

specified number of new shares from the firm at a specified price within a

specified time. A rights issue is in contrast to an initial public offering

(primary market offering), where shares are issued to the general public

through market exchanges. With primary issuances of securities or

financial instruments, or the primary market, investors purchase these

securities directly from issuers such as corporations issuing shares in an

IPO or private placement, or directly from the federal government in the

case of treasuries.

After the initial issuance, investors can purchase from other investors in

the secondary market.The secondary market for a variety of assets can

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vary from fragmented to centralized, and from illiquid to very liquid. The

major stock exchanges are the most visible example of liquid secondary

markets - in this case, for stocks of publicly traded companies. .

Exchanges provide a centralized, liquid secondary market for the

investors who own stocks that trade on those exchanges. Most bonds and

structured products trade “over the counter,” or by phoning the bond desk

of one’s broker-dealer.

Functions of Secondary market

Secondary marketing is vital to an efficient and modern capital

market. In the secondary market, securities are sold by and

transferred from one investor or speculator to another. It is

therefore important that the secondary market be highly liquid

(originally, the only way to create this liquidity was for investors and

speculators to meet at a fixed place regularly; this is how stock

exchanges originated, see History of the Stock Exchange). As a

general rule, the greater the number of investors that participate in a

given marketplace, and the greater the centralization of that

marketplace, the more liquid the market.

Fundamentally, secondary markets mesh the investor's preference for

liquidity (i.e., the investor's desire not to tie up his or her money for a

long period of time, in case the investor needs it to deal with unforeseen

circumstances) with the capital user's preference to be able to use the

capital for an extended period of time

Stock Exchanges

Stock exchanges are open markets that trade financial assets.

Whether associated with a company or acting as an individual, a

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stock exchange is the place where stocks are bought and sold. There

are a number of major stock exchanges around the world and each of

these plays a part in determining the overall financial and economic

condition of any economy. Stock exchanges deal with a number of

financial instruments such as stocks, bonds and equities. Both

corporate and government bonds are traded in stock exchanges.

Equities include popular investment options, rights issues, bonus

issues, and all other forms of shares and stocks. The actual trading of

stocks takes place through mediators such as financial advisors,

brokerage houses, and stockbrokers A stock exchange, (formerly a

securities exchange) is a corporation or mutual organization which

provides "trading" facilities for stock brokers and traders, to trade

stocks and other securities. Stock exchanges also provide facilities

for the issue and redemption of securities as well as other financial

instruments and capital events including the payment of income and

dividends. The securities traded on a stock exchange include: shares

issued by companies, unit trusts, derivatives, pooled investment

products and bonds. To be able to trade a security on a certain stock

exchange, it has to be listed there. Usually there is a central location

at least for recordkeeping, but trade is less and less linked to such a

physical place, as modern markets are electronic networks, which

gives them advantages of speed and cost of transactions. Trade on an

exchange is by members only. The initial offering of stocks and bonds

to investors is by definition done in the primary market and

subsequent trading is done in the secondary market. A stock

exchange is often the most important component of a stock market.

Supply and demand in stock markets are driven by various factors

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which, as in all free markets, affect the price of stocks (see stock

valuation).

There is usually no compulsion to issue stock via the stock

exchange itself, nor must stock be subsequently traded on the

exchange. Such trading is said to be off exchange or over-the-

counter. This is the usual way that derivatives and bonds are

traded. Increasingly, stock exchanges are part of a global market for

securities.

The role of stock exchanges

The main role of a stock exchange is to facilitate the transactions

associated with both the buying and selling of securities. Buyers and

sellers of shares and stocks can track the price changes of securities

from the stock markets in which they operate. The ups and downs of

stock indexes help the investors to speculate on the return on

investment (ROI) of various investment options. Stock exchanges

also serve as a source of capital formation for listed companies.

Business entities that are listed in a particular stock exchange can

issue shares to the public and sell those shares in that market. To take

part in these transactions, listed companies need to abide by the rules

and requirements of that market. The stock exchanges protect the

interests of both buyers and sellers by assuring a timely transfer of

money. The participants of a stock market are required to operate

within the specified transaction limits fixed by the regulatory

authority of that stock market Speed and transparency are vital for all

stock market transactions. The companies listed in a stock exchange

need to provide proper guidance regarding business performance

and prospects, mergers and acquisitions, stock prices, dividends and

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other information at all times. Investors make their investment

decisions based on the information obtained from these companies,

and the comments of analysts who track those companies.

Bombay Stock Exchange

Bombay Stock Exchange is the oldest stock exchange in Asia with a

rich heritage, now spanning three centuries in its 133 years of existence.

What is now popularly known as BSE was established as "The Native

Share & Stock Brokers' Association" in 1875

Stock Exchanges Operations :

With the help of stockbrokers, the buyers and sellers participating in

a stock market carry out their transactions. The brokers representing

selling parties take their orders to the stock exchange floor and then

find brokers representing parties willing to invest in similar stocks. If

both parties agree to trade at the fixed price, the transaction takes

place. The size of the world stock market was estimated at about

$36.6 trillion US at the beginning of October 2008. The total world

derivatives market has been estimated at about $791 trillion face or

nominal value, 11 times the size of the entire world economy. The

value of the derivatives market, because it is stated in terms of

notional values, cannot be directly compared to a stock or a fixed

income security, which traditionally refers to an actual value.

Moreover, the vast majority of derivatives 'cancel' each other out (i.e.,

a derivative 'bet' on an event occurring is offset by a comparable

derivative 'bet' on the event not occurring.). Many such relatively

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illiquid securities are valued as marked to model, rather than an

actual market price.

The stocks are listed and traded on stock exchanges which are

entities of a corporation or mutual organization specialized in the

business of bringing buyers and sellers of the organizations to a

listing of stocks and securities together

A transaction on a stock exchange must be made between two

members of the exchange — an ordinary person may not walk into

the New York Stock Exchange (for example), and ask to trade stock.

Such an exchange must be done through a broker.

There are three types of stock broking service.

Execution-only, which means that the broker will only carry out

the client's instructions to buy or sell.

Advisory dealing, where the broker advises the client on which

shares to buy and sell, but leaves the final decision to the

investor.

Discretionary dealing, where the stockbroker ascertains the

client's investment objectives and then makes all dealing

decisions on the client's behalf

Roles similar to that of a stockbroker include investment advisor,

and financial advisor. A stockbroker may or may not be also an

investment advisor.

Stockbrokers also sometimes or exclusively trade on their own

behalf, as a principal, speculating that a share or other financial

instrument will increase or decline in price. In such cases the term broker

makes little sense and the individuals or firms trading in principal

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capacity sometimes call themselves dealers, stock traders or simply

traders.

2.2 COMPANY PROFILE

Motilal Oswal Securities Ltd

Motilal Oswal Securities Ltd. (MOSL) was founded in 1987 as a

small sub-broking unit, with just two people running the show. Focus on

customer-first-attitude, ethical and transparent business practices, respect

for professionalism, research-based value investing and implementation

of cutting-edge technology has enabled us to blossom into an almost 2000

member team.

Today firm offering a well diversified financial services and a

range of financial products and services such as Wealth Management,

Broking & Distribution, Commodity Broking, Portfolio Management

Services, Institutional Equities, Private Equity, Investment Banking

Services and Principal Strategies.

Company have a diversified client base that includes retail

customers (including High Net worth Individuals), mutual funds, foreign

institutional investors, financial institutions and corporate clients.

company headquartered in Mumbai and as of June 30th, 2009, had a

network spread over 555 cities and towns comprising 1,308 Business

Locations .at June 30th, 2009, company had 5,57,373 registered

customers.

In 2006, the Company placed 9.48% of its equity with two leading

private equity investors based out of the US – New Vernon Private Equity

Limited and Bessemer Venture Partners. The company got listed on BSE

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and NSE on September 9, 2007. The issue which was priced at Rs.825

per share (face value Rs.5 per share) got an overwhelming response and

was subscribed 27.18 times in turbulent market conditions. The issue

gave a return of 21% on the date of listing. As of end of financial year

2008, the group net worth was Rs.7 bn and market capitalization as of

March 31, 2008 was Rs.19 bn.

Credit rating agency Crisil has assigned the highest rating of P1+ to

the Company’s short-term debt program.

Mission of company

To be the most respected and preferred private equity manager in the mid

size corporate segment

Products and services

Equity

In keeping with its tradition of personalized service, Motilal Oswal

Securities Limited provides Customized Equity Advisory Group to

clients based on their profile. Equity Research is an inherent strength of

MOSt.  Converting that research to advice is the main function of Equity

Advisory.  The investment ideas identified by the research team are

presented and communicated with conviction to clients by advisory team.

MOSt Equity Advisor proactively helps you take informed equity

investment decisions and build a healthy portfolio giving the best fit to

your investment and trading needs.

Derivatives

Futures & options are derivatives, which use equity as their

underlying. Hence Equity Advisory Group (EAG) will also act as

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advisors for F&O & help take informed decisions while trading in these

derivative instruments. Since derivatives instrument provide good

leverage opportunity, it is a great tool for speculation. Leverage is a

double edge sword for which one requires an equity advisor. The advisors

will also help with various strategies like Bull Spread, Bear Spread,

Cover call writing, hedging strategies etc. This is to help to make better

trading returns. Portfolio management

Motilal Oswal Securities Ltd brings with more than 2 decades of

experience & expertise in equity research and stock broking. Motilal

Oswal Securities Ltd is one of the leading portfolio service providers,

with asset under management worth Rs. 590 Crores.

Online trading

Clients trade online through “MyBroker platform”. Broker with

complete research support from MOSL which helps the clients to make

right decision at right time. They can choose trading a/c which suits their

trading habit’s & preference and trade anywhere, anytime. Buying and

selling is as easy as click of a button.

Key Features:

Single platform for multiple exchange BSE & NSE (Cash & F&O),

Mutual Funds & IPO.

Tick by tick market watch (BSE / NSE / F&O).

Single window Order placement with instant confirmation.

Instant funds transfer from any of our 19 listed banks. 

After Market Order (AMO) can place orders in advance before

market opens.

Call and trade facility.

Mutual funds

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Mutual funds offer the ideal platform to participate in the Equity &

Debt market indirectly through professional management. Mutual funds

are becoming the most popular investment vehicles offering various kinds

of schemes with different investment objectives

Commodities

Over the years commodities markets have been experiencing

tremendous progress, which is evident from the fact that the trade in this

segment is standing as the boon for the global economy today. The

promising nature of these markets has made them an attractive investment

avenue for investors.

Initial Public Offerings  (IPOs)

Book Building and Fixed Price Issue are the two types of Initial

Public Offerings  (IPOs)  through which a public company can raise

money in the capital market.In a book building public issue the bids are

received at different price levels and the demand for the issue is built up

over a period of time.

Motilal Oswal Depository Services (MODES)

Today MODES is available at all business locations of Motilal

Oswal. In terms of number of accounts MODES is the second biggest

Depository Participant in CDSL with over 150,000 accounts. Holder of a

MODES account get recommendations on their holdings based on

Motilal Oswal Research rated the "Most Independent Research - Local

Brokerage" by Asia Money Brokers Poll 2006.

Marginal funding

Motilal Oswal Financial Services understand needs and help the

trader to meet their liquidity requirements. Company offer Margin

26

funding to individuals and corporate. Company provide finance for

investment in primary market issues and also possess expertise in

financing for short-term requirements, to buy securities from

secondary markets.

27

3 RESEARCH METHODOLOGY

3.1 Reasearch Type

The segment identified for conducting the study is power Sector in

India. The number of companies selected for the study is Seven.

Analytical study is used to conduct the study.

3.2 Data collection

secondary data is collected from websites, Books and magazines.

3.3 Tools for analysis

Fundamental Analysis

Technical Analysis

For fundamental analysis, the following ratios are used:

EPS

DPS

Payout ratio

ROE

P/E ratio

Current ratio

Debt- Equity ratio

Interest coverage ratio

N/P Margin and G/P ratio.

For technical analysis, the following tools are used:

28

Relative strength index 5 day moving average 50 day moving average Line chart and candlestick chart

Analysis and Interpretation of data

29

Analysis of data is a process of inspecting, cleaning, transforming, and

modeling data with the goal of highlighting useful information, suggesting

conclusions, and supporting decision making. Data analysis has multiple facts

and approaches, encompassing diverse techniques under a variety of names, in

different business, science, and social science domains.

ADANI POWER

Table No:4.1.1

Share Price details of Adani Power

for the year ended 2011-2012

Face value 10

Market capitalization (Cr) 13701

52 week high 70

52 week low 36

Interpretation:

The face value of Adani Power is Rs 10 each. Their market capitalization

is Rs 13701 cr. The highest value for 52 week is Rs 70 and the low for the

same is Rs 36.

Table No:4.1.2

Pay Out Ratio of Adani Power

for the year ended 2011-2012

EPS(Earning per share) 0

Dividend yield % 0

Interpretation:

The Earnings Per Share of Adani Power is ‘0’, their dividend yield ratio

is also ‘0’.

Table No: 4.1.3

30

Return on Equity of Adani Power

for the year ended 2011-2012

SHARE CAPITAL 2180

RESERVE AND SURPLUS 3848

NET WORTH 6029

PROFIT AFTER TAX (PAT) -294

RETURN ON NET WORTH (%) -6.35

Interpretation:

The net worth of Adani Power is Rs.6029. their profit after tax is -294

and their return on net worth is -6.35.

Table No: 4.1.4

Key Ratios of Adani Power

for the year ended 2011-2012

CURRENT RATIO 0.23DEBT EQUITY RATIO 3.59GROSS PROFIT RATIO (%) 38.68NET PROFIT RATIO (%) -9.93INTEREST COVERAGE RATIO

PRICE EARNING RATIO 0

Interpretation :

The current ratio of Adani Power is .23 and their debt equity ratio is

3.59. the gross profit ratio is 38.68 percentage and net profit ratio is -

9.93 percentage. Their interest coverage ratio is nil.

Chart No 4.1.1

31

Line Chart of ADANI POWER

Interpretation:

The share price of Adani power is 50 at the beginning of the study. After

that price move upto 68. The share price now showing bullish trend after

the fall from 68 to 40. The upward trend is a good signal to investors

Chart No 4.1.2Candlestick Chart of ADANI POWER

32

Interpretation:

The chart shows a positive trend of share price of ADANI POWER after

the early fall of share price during the period of study. The share price of

Adani power is 50 at the beginning of the study. After that price move

upto 68.

Chart No 4.1.3

33

Moving Average Chart of ADANI POWER

Interpretation:

5 day moving average of ADANI POWER cut the 50 day moving

average twice during the study period and maintains the critical level.

Now it is above the support line. ADANI POWER shows a positive trend

in its share price.

Chart No 4.1.4

34

RSI Chart of ADANI POWER

Interpretation:

RSI chart of ADANI POWER shows the bullish buying trend of the

stock. Stock is near to the RSI point 70 . it shows the strength of the

stock. This stock touch the 70 level twice during the period of study.

RELIANCE POWER

35

Table No: 4.2.1

Share Price details of Reliance Power

for the year ended 2011-2012

Face value 10

Market capitalization (Cr) 21164

52 week high 111

52 week low 58

Interpretation:

The face value of Reliance Power is Rs 10 each. Their market

capitalization is Rs 21164 cr. The highest value for 52 week is Rs 111and

the low for the same is Rs 58.

Table No: 4.2.2

Pay Out Ratio of Reliance Power

for the year ended 2011-2012

EPS(Earning per share) 0.38

Dividend yield % 0

Interpretation:

The Earnings Per Share of Reliance Power is .38, their dividend yield

ratio is also ‘0’.

Table No: 4.2.3

Return on Equity of Reliance Power

36

for the year ended 2011-2012

SHARE CAPITAL 2805RESERVE AND SURPLUS 13296NET WORTH 16103PROFIT AFTER TAX (PAT) 310RETURN ON NET WORTH (%) 0.85

Interpretation:

The net worth of Reliance Power is Rs.16103. Their profit after tax is 310

and their return on net worth is .85

Table No: 4.2.4

Key Ratios of Reliance Power

for the year ended 2011-2012

CURRENT RATIO 45.26DEBT EQUITY RATIO 0.05GROSS PROFIT RATIO (%) 3OO.62NET PROFIT RATIO (%) 204.80INTEREST COVERAGE RATIO 3.25PRICE EARNING RATIO 198.55

Interpretation :

The current ratio of Reliance Power is 45.26 and their debt equity ratio is

0.05. The gross profit ratio is 300.62 percentage and net profit ratio is

204.80 percentage. Their interest coverage ratio is 3.25.

Chart No 4.2.1

37

Line Chart of RELIANCE POWER

Interpretation:

The reliance power stock shows bearish trend in the early stage of study.

Now the movement of stock price shows a recovery trend. Share price of

RELIANCE POWER is 100 at the beginning of the study. After that price

down upto 60 level. Now the stock shows recovery trend from the

massive fall.

Chart No 4.2.2

Candlestick Chart of RELIANCE POWER

38

Interpretation:

The reliance power stock shows down trend in the early stage of study.

The stock price fall from 101 to 60 during the period of study. Now the

stock is in recovery trend.

Chart No 4.2.3

Moving Average Chart of RELIANCE POWER

39

Interpretation:

Reliance power stock shows negative trend in the early stage. The share

price break 50 DAY MOVING AVERAGE only once during the period

of study.Now the stock price is above the 50 DAY MOVING

AVERAGE. It shows positive trend in the end of study period.

Chart No 4.2.4

RSI Chart of RELIANCE POWER

40

Interpretation:

RSI chart of Reliance power shows the bullish buying trend . The Stock

now move to the RSI point of 70 . it shows the buying trend of the stok.

The stock down upto 60 point level twice during the period of study.

41

TATA POWER

Table No: 4.3.1

Share Price details of Tata Power

for the year ended 2011-2012

Face value 1

Market capitalization (Cr) 21583

52 week high 113

52 week low 87

Interpretation:

The face value of Tata Power is Rs 1 each. Their market capitalization is

Rs 21583 cr. The highest value for 52 week is Rs 113and the low for the

same is Rs 87.

Table No: 4.3.2

Pay Out Ratio of Tata Power

for the year ended 2011-2012

EPS(Earning per share) 3.97

Dividend yield % 1.37

Interpretation:

The Earnings Per Share of Tata Power is 3.97, their dividend yield ratio is

also 1.37.

42

Table No: 4.3.3

Return on Equity of Tata Power

for the year ended 2011-2012

SHARE CAPITAL 237RESERVE AND SURPLUS 11720NET WORTH 11957PROFIT AFTER TAX (PAT) 1169RETURN ON NET WORTH (%) 10.09

Interpretation:

The net worth of Tata Power is Rs.11957. Their profit after tax is 1169

and their return on net worth is 10.09 percentage.

Table No: 4.3.4

Key Ratios of Tata Power for the year ended 2011-2012

CURRENT RATIO 0.95

DEBT EQUITY RATIO 0.64

GROSS PROFIT RATIO (%) 32.27

NET PROFIT RATIO (%) 13.64

INTEREST COVERAGE RATIO 4.27

PRICE EARNING RATIO 22.90

Interpretation :

The current ratio of Tata Power is 0.95 and their debt equity ratio is 0.64.

The gross profit ratio is 32.27 percentage and net profit ratio is 13.64

percentage. Their interest coverage ratio is 4.27.

43

Chart No 4.3.1

Line Chart of TATA POWER

Interpretation:

Tata power stock shows bearish trend in its share price. The stock shows

a massive fall in its share price from 112 to 92 during the study period.

First half of study period the stock shows a positive trend. After that the

stock fall upto 90 level. Now stock trading at the maximum low level.

44

Chart No 4.3.2

Candlestick chart of TATA POWER

Interpretation:

First half of study period the stock shows a positive trend. After that the

stock fall upto 90 level. Now stock trading at the maximum low

level.Tata power stock shows bearish trend in its share price. The stock

shows a massive fall in its share price from 112 to 92 during the study

period.

Chart No 4.3.3

45

Moving Average Chart of TATA POWER

Interpretation:

5 day moving average of Tata power is below the 50 day moving average

line. The price of this stock is below the support price .The stock price

will show a good trend only after it resist the 50 day moving average line.

Chart No 4.3.4

46

RSI Chart of TATA POWER

Interpretation:

RSI of TATA POWER is 40 in the last period of study ,it shows the

bearish selling trend of stock. The chart shows negative trend of stock

price during the period of study. The stock only cut 70 point level once

during the period of study.

47

CESC

Table No 4.4.1

Share Price details of CESC for the year ended 2011-2012

Face value 10

Market capitalization (Cr) 4202

52 week high 345

52 week low 252

Interpretation:

The face value of CESC is Rs 10 each. Their market capitalization is Rs

4202 cr. The highest value for 345 week is Rs 252 and the low for the

same is Rs 58.

Table No 4.4.2

Pay Out Ratio of CESC for the year ended 2011-2012

EPS(Earning per share) 49.46

Dividend yield % 1.48

Interpretation:

The Earnings Per Share of CESC is 49.46, their dividend yield ratio is

also 1.48 percentage.

48

Table No 4.4.3

Return on Equity of CESC for the year ended 2011-2012

SHARE CAPITAL 125

RESERVE AND SURPLUS 5806

NET WORTH 6011

PROFIT AFTER TAX (PAT) 554

RETURN ON NET WORTH (%) 12.10

Interpretation:

The net worth of CESC is Rs.6011. Their profit after tax is 554 and their

return on net worth is 12.10

Table No 4.4.4

Key Ratios of CESC for the year ended 2011-2012

CURRENT RATIO 2.12

DEBT EQUITY RATIO 0.67

GROSS PROFIT RATIO (%) 27.80

NET PROFIT RATIO (%) 11.65

INTEREST COVERAGE RATIO 3.04

PRICE EARNING RATIO 6.80

Interpretation :

The current ratio of CESC is 2.12 and their debt equity ratio is 0.67. The

gross profit ratio is 27.80 percentage and net profit ratio is 11.65

percentage. Their interest coverage ratio is 3.04.

49

Chart No 4.4.1

Line Chart of CESC

Interpretation:

CESC stock shows bullish trend in its share price. The chart shows the

strength of the stock in its share price. The CESC stock now trading at

330 level after the recovery from 270.

50

Chart No 4.4.2

Candlestick Chart of CESC

Interpretation:

The chart shows the trend of share price CESC. In the last stage, the stock

shows possative trend in its price. Now the stock trading at the maximum

level.

51

Chart No 4.4.3

Moving Average Chart of CESC

Interpretation:

Share price of CESC once cut the support and it lead to a fall in its price.

The support prices for the stock are 315 and 288. Now the share price is

above the 50 day moving average line. The stock shows bullish trend in

its price.

52

Chart No 4.4.4

RSI Chart of CESC

Interpretation:

RSI of CESC shows positive buying trend of stock. RSI of stock is now

above the 70 level, shows the bullish trend in the stock price. The

company only reached 30 point level twice during the period of study.

53

NHPC

Table No 4.5.1

Share Price details of NHPC for the year ended 2011-2012

Face value 10

Market capitalization (Cr) 24601

52 week high 29

52 week low 14

Interpretation:

The face value of NHPC is Rs 10 each. Their market capitalization is Rs

24601 cr. The highest value for 52 week is Rs 29 and the low for the

same is Rs 14.

Table No 4.5.2

Pay Out Ratio of NHPC for the year ended 2011-2012

EPS(Earning per share) 2.09

Dividend yield % 3.50

Interpretation:

The Earnings Per Share of NHPC is 2.09, their dividend yield ratio is also

3.50.

54

Table No 4.5.3

Return on Equity of NHPC for the year ended 2011-2012

SHARE CAPITAL 12300

RESERVE AND SURPLUS 14052

NET WORTH 26353

PROFIT AFTER TAX (PAT) 2771

RETURN ON NET WORTH (%) 10.88

Interpretation:

The net worth of NHPC is Rs.26353. Their profit after tax is 2771 and

their return on net worth is 10.88

Table No 4.5.4

Key Ratios of NHPC for the year ended 2011-2012

CURRENT RATIO 1.41

DEBT EQUITY RATIO 0.63

GROSS PROFIT RATIO (%) 84.05

NET PROFIT RATIO (%) 49.02

INTEREST COVERAGE RATIO 11.28

PRICE EARNING RATIO 9.56

Interpretation :

The current ratio of NHPC is 1.41 and their debt equity ratio is 0.63. The

gross profit ratio is 84.05 percentage and net profit ratio is 49.02

percentage. Their interest coverage ratio is 11.28.

55

Chart No 4.5.1

Line Chart of NHPC

Interpretation:

During the period of study, the share price trend is downward. The share

price falls from 29 to 18. The first half of the study the stock price shows

upward trend after share price reached Rs 30, the share price down

sharply upto Rs 20. Now the stock trading at Rs 20.

56

Chart No 4.5.2

Candlestick Chart of NHPC

Interpretation

The chart shows the bearish movement of stock during the period of

study. The first half of the study the stock price shows upward trend after

share price reached Rs 30, the share price down sharply upto Rs 20.

57

Chart No 4.5.3

Moving Average Chart of NHPC

Interpretation:

The chart shows the bearish trend of NHPC stock. The stock now moves

below the 50 Day Moving average. The massive fall of share price from

29 to 18 can’t recover in short time.

58

Chart No 4.5.4

RSI Chart of NHPC

Interpretation:

RSI chart shows bearish selling trend of stock. RSI point of last period

shows 34 point, it give the clear-cut idea of negative movement of that

particular stock.

59

POWERGRID

Table No 4.6.1

Share Price details of Powergrid

for the year ended 2011-2012

Face value 10

Market capitalization (Cr) 52084

52 week high 124.45

52 week low 101.2

Interpretation:

The face value of POWERGRID is Rs 10 each. Their market

capitalization is Rs 52084 cr. The highest value for 52 week is Rs 124.45

and the low for the same is Rs 101.2.

Table No 4.6.2

Pay Out Ratio of Powergrid for the year ended 2011-2012

EPS(Earning per share) 9

Dividend yield % 1.87

Interpretation:

The Earnings Per Share of POWERGRID is 9, their dividend yield ratio

is also 1.87.

60

Table No 4.6.3

Return on Equity of Powergrid for the year ended 2011-2012

SHARE CAPITAL 4629

RESERVE AND SURPLUS 18858

NET WORTH 23487

PROFIT AFTER TAX (PAT) 3254

RETURN ON NET WORTH (%) 14.50

Interpretation:

The net worth of POWERGRID is Rs.23487. Their profit after tax is

3254 and their return on net worth is 14.50

Table No 4.6.1

Key Ratios of Powergrid for the year ended 2011-2012

CURRENT RATIO 0.74

DEBT EQUITY RATIO 2.10

GROSS PROFIT RATIO (%) 90.81

NET PROFIT RATIO (%) 32.43

INTEREST COVERAGE RATIO 3.37

PRICE EARNING RATIO 12.5

Interpretation :

The current ratio of POWERGRID is 0.74 and their debt equity ratio is

2.10. The gross profit ratio is 90.81 percentage and net profit ratio is

32.43 percentage. Their interest coverage ratio is 3.37.

61

Chart No 4.6.1

Line Chart of POWERGRID

Interpretation:

The share price of Powergrid shows a bullish trend during the last period

of study. The chart shows negative trend of price in the early period. The

upward trend in last period is good signal to investors.

62

Chart No 4.6.2

Candlestick Chart of POWERGRID

Interpretation:

The price movement of stock shows down trend in the early stage. Now

the trend is positive for POWERGRID stock. The share price of

Powergrid shows a bullish trend during the last period of study. The

upward trend in last period is good signal to investors.

63

Chart No 4.6.3

Moving Average Chart of POWERGRID

Interpretation:

POWERGRID’s 5 day moving average cut the support line only once

during the period of study. Now the share price of company is above the

support line. Support price for the stock is 108. If it loss this strong

support there may be a fall in its price.

64

Chart No 4.6.4

RSI Chart of POWERGRID

Interpretation:

RSI of powergrid stock is 70 above during the 9 th period, after that it

come down into 45 level. 9th period is the idele time to buy

POWERGRID stock.The 10th perid shows 45 point level.that doesn’t

show eihter a possative or a negative trend.

65

NTPC

Table No 4.7.1

Share Price details of NTPC for the year ended 2011-2012

Face value 10

Market capitalization (Cr) 127763

52 week high 175

52 week low 136

Interpretation:

The face value of NTPC is Rs 10 each. Their market capitalization is Rs

127763 cr. The highest value for 52 week is Rs 175 and the low for the

same is Rs 136.

Table No 4.7.2

Pay Out Ratio of NTPC for the year ended 2011-2012

EPS(Earning per share) 13.75

Dividend yield % 2.58

Interpretation:

The Earnings Per Share of NTPC is 13.75, their dividend yield ratio is

also 2.58.

66

Table No 4.7.3

Return on Equity of NTPC for the year ended 2011-2012

SHARE CAPITAL 8245

RESERVE AND SURPLUS 65054

NET WORTH 73291

PROFIT AFTER TAX (PAT) 9223

RETURN ON NET WORTH (%) 13.07

Interpretation:

The net worth of NTPC is Rs.73291. Their profit after tax is 9223 and

their return on net worth is 13.07

Table No 4.7.4

Key Ratios of NTPC for the year ended 2011-2012

CURRENT RATIO 2.10

DEBT EQUITY RATIO 0.66

GROSS PROFIT RATIO (%) 26.94

NET PROFIT RATIO (%) 14.76

INTEREST COVERAGE RATIO 8.19

PRICE EARNING RATIO 11.26

Interpretation :

The current ratio of NTPC is 2.10 and their debt equity ratio is 0.66. The

gross profit ratio is 29.94 percentage and net profit ratio is 14.76

percentage. Their interest coverage ratio is 8.19.

67

Chart No 4.7.1

Line chart of NTPC

Interpretation:

The stock price NTPC falls in every rise. The stock shows negative trend

in its price in the early stage. The stock price fall from 170 to 140 during

the time of study. Now the stock trading at 150 level.

68

Chart No 4.7.2

Candlestick chart of NTPC

Interpretation:

NTPC stock price shows a down trend in the early stage of study.The

stock shows a recovery trend in the last stage. The stock price NTPC falls

in every rise. Now the stock trading at 150 level.

69

Chart No 4.7.3

Moving Average chart of NTPC

Interpretation:

5 day moving average of NTPC cut twice the resistance line of 50 day

moving average. The stock shows positive trend in its price. The support

price of NTPC is 149. If the stock loss its support price it may lead to a

fall in its price.

70

Chart No 4.7.4

RSI chart of NTPC

Interpretation:

RSI of NTPC stock shows 30 point level in 10th period of study. It shows

bearish selling trend of that particular stock.RSI of 9th period is above the

70 point level, so 9th period is idle time to buy that particular stock

71

5.1 FINDINGS

Table No 4.2.4 shows that the profitability ratios are high in

RELIANCE POWER while considering other securities selected

for the study.

Table No 4.1.3 shows ADANI POWER have negative return on

equity.

Table No 4.1.1 indicate that the Current share price of ADANI

POWER is affordable one to investors and it is low risk scrip.

Table No 4.3.4 shows the Liquidity ratios are affordable in TATA

POWER than any other stocks under study.

Table No 4.4.2 shows that the CESC have high EPS (49.46

rupees) than other stocks followed by NTPC .(13.75 rupees)

Table No 4.7.3 shows the RETURN ON NETWORTH high in

power grid followed by NTPC

Table No 4.5.2 shows the Dividend yield percentage high in NHPC

stock

Chart No 4.4.4 shows the CESC and ADANI POWER stock shows

a bullish trend as per RSI chart.

Chart No 4.3.3 and 4.5.3 shows that the TATA POWER, and

NHPC, stocks now trading below the critical line of 50 day moving

average.

72

Table No 4.3.1 shows Share price of TATA POWER shows

negative trend during the study period.

Chart No 4.1.3 shows FIVE DAY MOVING AVERAGE shows a

bullish trend in ADANI POWER, RELIANCE POWER & CESC

stocks.

MOVING AVERAGE shows mixed trend in all the stocks selected

for the study,so we can’t predict the share price trend of power

sector as a whole.

5.2 SUGGESTIONS

73

Fundamentals of all power stock are not strong, as per the financial

statement year ended 2012

Movement of TATA POWER, and NHPC shows a weaker trend.

The stocks now trading below the critical line so that an investor

can move from these stocks.

ADANI POWER, RELIANCE and CESC shows bullish trend in

its share price and it is advisory to hold these shares.

Investor can buy CESC stock in a long term prospective.

It is better to book profit on NTPC & POWER GRID stocks even

though they trading above the 50 day moving average.(RSI Chart

shows bearish trend).

It is advisory to an investor, should not depend only on one tool,

rather one has gone for other chart patterns to get confirmation for

buy or sell signal.

The risk is common for all securities. The scrip that is having low

price may also be subject to high risk. The main reason is that

market is unpredictable. So the investor must invest carefully.

Since the risk is involved in every scrip, greater emphasize is given

to return in each investment

74

5.3 CONLUSION

The study deals with share and share trading gives a general idea

about the analysis of stocks. The analysis carried on two basis,

Fundamental analysis and technical analysis. Technical analysis shows a

short term trend based on historical data and fundamental analysis helpful

for the decision making for long term investment. From the analysis it is

found that the charts prepared on the basis of the share price, with the

support of technical tools shows all the trends and variations as

interpreted in the theory. In the analysis using moving average it is found

that if the price is lying above the moving average, the scrip is in a

bullish trend if the price lying below the moving average the scrip is in

bearish trend. Technical analysis ignores the actual nature of the

company. Technical analysis is based solely on the chart that is to say

price and volume information. The investor has to invest wisely on the

scrip which gives high return with most possible risk.

75