A Comparative Study on Fundamental and Technical Analysis

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A Comparative Study on Fundamental and

Technical Analysis as an Indicator forInvestment Decision- Making

Made By:- TARUN CHAWLA

Roll no. :- Cun120551017

CHITKARA BUSINESS SCHOOL


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INTRODUCTION

KARVY, is a premier integrated financial services provider.

Ranked among the top ten in the country in all its business

segments.

Provide services over 16 million individual investors in various

capacities, and provides investor services to over 300 corporate.

Covers the entire spectrum of financial services such as :

Stock broking, Depository Participants, Distribution of financial

products.


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Financial Instruments

Equities Fixeddeposit

Bonds Mutual

funds

InsuranceBrokingCommoditiesBroking

IPO's

MerchantBanking &

CorporateFinance


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MISSION AND VISION STATEMENT


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Its Competition

Fortune India Ltd

India InfolineReligare Securities

Stock Holding

Motilal Oswal


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Fundamental analysis

Fundamental analysis is the study of economic, industry, and

company conditions in an effort to determine the value of a

company's stock.

Fundamental analysis typically focuses on key statistics in a

company's financial statements to determine if the stock price is

correctly valued.


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Fundamental Analysis

Economy Analysis

Industry analysis

Company AnalysisThe Analysis of

economy, industry and

company constitute the

main activity in thefundamental approach

to security analysis.

And can be viewed as

different stages ininvestment decision

making process. Three tier analysis depict

that company

performance dependentnot only on its own effortbut also on the general

industry and economy

factor.

EIC Framework


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ECONOMIC ANALYSIS

In the economic analysis we study these following

macro-economic variables.

Economic GrowthPopulationsMonsoons and Agriculture ProductionNatural resources and availability of raw materialIndustrial ProductionsInflationInterest rateForeign exchange reserveBalance of payment positionBudget deficits


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Industry Analysis

The past performance of the industry.Growth rate of the industry

The performance of the product and technology of the industry.

Role of government in the industry

Labor conditions.

Rivalry among existing players

Industry life cycle.

The industry analysis should take in to account the following factors as

influence the performance of the company, whose share prices are to be

analyzed.


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Company Analysis

Ratio Analysis

Profitability of the company

Liquidity of the company

Solvency of the company

Activity level of the company

Qualitative Factors

Management of the company

Long-term vision of the company

Strategic position of the company in the market.

Technology


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TECHNICAL ANALYSIS

It is a security analysis technique that claims the ability to forecast

the future direction of prices through the study of past market data,

primarily price and volume.

Technical analysts, sometimes called "chartists", may employmodels and trading rules based on price and volume transformations.

Techniques like the relative strength index, moving averages,

regressions, inter-market and intra-market price correlations, cycles or,

classically, through recognition of chart patterns are used.


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The Dow Theory; a backbone of technical analysis

Dow theory is based on the hypothesis that the stock market

does not perform on a random basis.

The Dow Theory, named after its originator, Charter Dow, is

considered to be first theory of technical analysis.


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Important Tools of Technical Analysis

Support and Resistance Trend line

Trend lengthsVolume


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Technical Charts

Simple chart OHLC

Candle Stick


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Details of Actual Work Done

I have to tell the client about D-MAT account.

Selling of D-MAT account.

Telemarketing. CRM.

Live trading through Terminals.

Data survey to know about investorspreference.


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Part 2

Research

A Comparative Study on Fundamental and

Technical Analysis as an Indicator forInvestment Decision- Making


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Research MethodologySources of Data- Primary as well as Secondary

Research Design- Descriptive Design

SAMPLING METHOD -Convenient Sampling

SAMPLE SIZE- Sample size was 210 including small

investors, speculators, businessmen and students.

The interview was conducted inside the city ofJammu, Udhampur and Kashmir only.


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Objectives of the study

Whether people invest in stock market?

How much returns one expects by investing instock market?

Whether investors believe in Technical Analysisand/or Fundamental Analysis?

Do people use Technical Indicators at the time

of investment decision-making?Do Technical Analysis better than FundamentalAnalysis as an indicator?


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OUTCOMES OF THE SURVEY

Following are the outcomes that have been revealed from the survey:

PEOPLE WHO INVEST IN STOCK MARKET

As a part of this study it was found that out of 200 people 160 people invest in stock

market where as the rest 40 has no believe on the stock market.

160 4040

Invest

Do not invest


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RETURN EXPECTED PER ANNUMInterpretation: Out of 160 people that invest in stock market, most of the investors i.e., 61

in number expect a return of more than 50% percent per annum, where as 48 investorexpect a return of20-50% p.a. 32 investors like 10-20 percent return per annum and 19

person who is satisfied with an expected return of less than 10% p.a.

12%

20%

30%

38%

Return expected per annum

Less than 10%

10%-20%

20%-50%

More than 50%


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STOCKS IN WHICH INVESTORS PREFER TO

INVEST IN

34%

41%

3%

22%

Blue Chip

Mid Cap

Penny Shares

All

Interpretation: Out of 160 investors, 66 investors used to invest in

midcap stocks, 54 in blue-chips and not a single investor in penny

shares. It indicates that most of the investors have a strong believe on

midcap stocks.


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INVESTORS TRADING INTRADAY

Out of 160 investors, 53 investors practice intradaywhere as 107 dont want to take much risk by doingintraday trading.

33%

67%

Investors trading intraday Practice

Investors trading intraday Don't Practice

INVESTORS TRADING INTRADAY


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Attitude towards the following Financial

Instruments, in the Indian Capital Market

0

10

20

30

40

50

60

70

Highly Favorable Favorable Some What Favorable Not Very Favorable Not at all favorable

Shares

Debentures

Mutual Funds

Bonds


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ANALYSIS INVESTORS BELIEVE UPON

Interpretation: It was revealed that a major portion of theinvestors believe in both Technical Analysis as well as in Fundament

Analysis as 74 investors believe on both.

0

10

20

30

40

50

60

70

80

Fundamental Analysis Technical Analysis Both None

Series1

INVESTORS WHO BELIEVES ON DOW


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INVESTORS WHO BELIEVES ON DOW-

THEORY

Interpretation: Out of Investors who believe inTechnical analysis, 43 investors uses Dow theory

for investment

0

10

20

30

40

50

60

70

80

Use Don't Use

Series1


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TYPE OF CHARTS USED BY INVESTORS

Line Chart Bar Chart Candle Stick Chart Point & Figure Chart All None6 11 45 9 34 6

0

5

10

15

20

25

30

35

40

45

Line Chart Bar Chart Candle Stick

Chart

Point & Figure

Chart

All Non

Series1

IS TECHNICAL ANALYSIS AN INDICATOR FOR


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IS TECHNICAL ANALYSIS AN INDICATOR FOR

INVESTMENT DECISION-MAKING?

In Favour Against Can't Say101 48 11

0 20 40 60 80 100 120

In Favour

Against

Can't Say

Series1


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Findings

Unlike Fundamental Analysis, Technical Analysis is alsovery much important to play in the stock market

Fundamental Analysis tells about right choice whereas Technical Analysis tells about the right time to

enter or exit from the market. Technical Analysis assumes that history tends to repeat

itself, but it is not wise to believe that the same trendwills occur next.

Among the various types of charts the Candle-StickChart is the most effective and acceptable tool toevaluate the performance of a stock and forecast thefuture.


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When an investor looks in to the numerous types of chartpatterns, it creates a lot of confusion and expectations inthe minds of the investors.

In trading, volumes can easily determine whether thedemand side is greater or supply side is greater for stocks atany given point of time.

Most of the investors are not aware of the sophisticatedand well designed tools of technical analysis. They investwithout going through the technical analysis.

Though Technical Analysis plays a lions role to decideinvestment pattern as Fundamental Analysis, it cannot betreated as a substitute to Fundamental Analysis.


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Suggestions

Technical analysis is a game of charts and figures. So, at thetime of taking any decision regarding.

Instead of looking in to all chart patterns, it is good tofollow a single chart pattern and to draw timely conclusionby interpreting that.

Market never tells anything of its own! Its the investor whohas to look in to the market and catch up the indicator toforecast and expect the market trend.

Most of the investors assume that by using charts and

patterns, they can earn much by purchasing in low andselling at high prices. But, it is not so easy as they think. So,such believes should be rooted out from mind beforelooking towards market.


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Limitation of the study

The study consists of detailed theoretical explanations.

Sample Size may not be sufficient to interpret the rightresult.

Respondents may have given wrong answer to the

questions. More importance has been given to the subject matter

of Technical Analysis only.

The study may act as a magic-pedia for a layman

having no basic knowledge regarding securities market. Confidentiality of information was the biggest

limitation that corporate people and investors were notwilling to share.


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BIBILIOGRAPHY & WEBLIOGRAPHY

BIBLIOGRAPHY: Bhat, Sudhindra: Security Analysis And Portfolio Management, Excel Books, First

Edition, 2008

Singh, Preeti: Investment Management, Himalaya Publishing House, 14th Edition,2006

NCFM Module of Fundamental analysis and Technical analysis

WEBLIOGRAPHY: www.moneycontrol.com

www.trending123.com

www.investopedia.com

www.nseindia.com

www.wikipedia.com

www.metastock.com www.stockcharts.com

www.traderslog.com

www.bseindia.com
http://www.moneycontrol.com/http://www.trending123.com/http://www.investopedia.com/http://www.nseindia.com/http://www.wikipedia.com/http://www.metastock.com/http://www.stockcharts.com/http://www.traderslog.com/http://www.bseindia.com/http://www.bseindia.com/http://www.traderslog.com/http://www.stockcharts.com/http://www.metastock.com/http://www.wikipedia.com/http://www.nseindia.com/http://www.investopedia.com/http://www.trending123.com/http://www.moneycontrol.com/


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Success is simple. Do what's right, the right

way, at the right time.

SOCHKAR,

SAMAJHKAR,

INVESTKAR


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Documents

A Comparative Study on Fundamental and Technical Analysis