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PROJECT REPORT ON INVESTMENT IN EQUITIES CONDUCTED AT VENTURA SECURITIES BY AJAY KUMAR PATEL ROLL.NO: 08708102 Submitted in partial fulfillment of award of Degree of MASTER OF BUSINESS ADMINISTRATION VIVEK VARDHINI SCHOOL OF BUSINESS MANAGEMENT, KOTI, HYDERABAD.

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Page 1: Ajay Project

PROJECT REPORT

ON

INVESTMENT

IN

EQUITIES

CONDUCTED AT

VENTURA SECURITIES

BY

AJAY KUMAR PATEL

ROLL.NO: 08708102

Submitted in partial fulfillment of award of Degree of

MASTER OF BUSINESS ADMINISTRATION

VIVEK VARDHINI SCHOOL OF BUSINESS MANAGEMENT,

KOTI, HYDERABAD.

2008-2010.

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CERTIFICATE

This is to certify that the project entitled “INVESTMENT IN EQUITIES WITH

REFERENCE TO VENTURA SECURITIES” submitted to the Osmania University in partial

fulfillment for the award of degree of Master of Business Administration has been carried out

by Mr. AJAY KUMAR PATEL, Hall-Ticket Number 087-08-102, who is a bonafide student of

Vivek Vardhini School Of Business Management (VVSBM), Koti, Hyderabad for the academic

year 2008-10.

HEAD PRINCIPAL

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CERTIFICATE

This is to certify that the project report titled “INVESTMENT IN EQUITIES WITH

REFERENCE TO VENTURA SECURITIES” submitted in partial fulfillment for the

award of MBA Programme of Department of Business Management, Osmania

University, Hyderabad, was carried out by Mr. AJAY KUMAR PATEL, under my

guidance. This has not been submitted to any other university or institution for the award

of any degree / diploma / certificate.

Name and Address of the Guide Signature of the Guide

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DECLARATION

I hereby declare that this project report titled “INVESTMENT IN

EQUITIES WITH REFERENCE TO VENTURA SECURITIES”

submitted by me to the Department of Business Management, Osmania

University, Hyderabad, is a bonafide work undertaken by me and it is not

submitted to any other university or institution for the award of any degree /

diploma / certificate or published any time before.

Place:

Date:

(AJAY KUMAR PATEL)

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ACKNOWLEDGEMENT

I express my gratitude to Mr. Shiva Kumar for giving me this opportunity to

carry out the project work on “INVESTMENT IN EQUITIES” in Ventura Securities.

I also express my sincere thanks to the Staff Of Ventura Securities who were of

ready help in answering my various quires related to the project work.

It is with great pleasure that I Express my gratitude to Ms.Soumya, under whose

inspiring guidance and advice this study has been carried out.

Ajay Kumar Patel

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TABLE OF CONTENTS

TOPIC PAGE No.

INTRODUCTION TO THE STUDY 1

NEED FOR THE STUDY 3

LITERATURE REVIEW 9

COMPANY PROFILE 36

DATA ANALYSIS 41

SUMMARY 72

FINDINGS 73

SUGGESTIONS 74

CONCLUSIONS 75

BIBILIOGRAPHY 78

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Introduction

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INTROUDCTION

Investment management once seemed a simple process. Well-heeled investors

would hold portfolios composed of stocks and bonds of blue chip industrial companies,

treasury bonds, notes and bills. The choices available to less well-off investors were

much more limited, confirmed primarily to passbook savings accounts. If the investment

environment can be thought of as an ice cream parlor, then the customers of past decades

were offered only chocolate and vanilla.

Mirroring the diversity of modern society, the investment ice cream parlor now

makes available a myriad of flavors to the investing public. Investors face a dizzying

array of choices. The ability to purchase different securities has become both less

expensive and more convenient with the advent of advanced communications and

computer networks, along with the proliferating market for mutual funds that has

developed to serve large or small investors.

Investment environment encompasses the kinds of marketable securities that exist

and where and how they are bought and sold. Investment process is concerned with how

an investor should proceed in making decisions about what marketable securities to

invest in, how extensive the investments should be and when the investments should

made.

Investment means the sacrifice of current rupees for future rupees. Two different

attributes are involved – “time” and “risk”. The sacrifice takes place in the present and is

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certain. The reward comes later and the magnitude is uncertain. In some cases, risk is the

dominant attribute. These are two types of investments. They are:

1) Real Investments

2) Financial Investments

Real investments involve some kind of tangible assets such as land, machinery,

factories.

Financial investments involve contracts written on pieces of paper such as

common stocks and bonds.

Investment in securities such as shares, debentures and bonds is profitable as

well as exciting, but it involves great deal of risk. Investing in financial securities

is considered to be one of the best avenues for investing one’s savings while it is

acknowledged to be one of the most risky avenues of investment. Even Indian

government wants to encourage people in rural areas to invest in equities. This

will help the markets to stabilize by tapping the rural areas and decreases the

dependency on foreign institutional investors.

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NEED FOR THE STUDY

PURPOSE OF THE STUDY

The purpose of the study is to know about stock markets in India, how they work,

fundamental requirements before entering the stock market, how to enter the stock market,

market design, stock selection, when to buy or sell a stock, how to invest and knowing about

market intermediaries.

OBJECTIVES OF THE STUDY

The objective of the study is to look into the scientific approach for selecting a stock

where Fundamental Analysis and Technical Analysis are looked into.

For that purpose the most happening software sector was taken for study and from that

sector, three stocks were picked up and analyzed.

The study deals with analysis of performance of the company, share price fluctuations

and comparing it with another company from same sector.

The purpose of the study is to locate a stock which gives good returns with minimum

risk.

SCOPE OF THE STUDY

For the purpose of study, one sector – software is selected. Wipro, Satyam and TCS are

the three companies that are taken for analysis.

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INTRODUCTION TO STOCKS

The first step for you to understand the stock market is to understand stocks.

A share of stock is the smallest unit of ownership in a company. If you own a share of

a company’s stock, you are a part owner of the company.

You have the right to vote on members of the board of directors and other important

matters before the company. If the company distributes profits to shareholders, you will

likely receive a proportionate share.

One of the unique features of stock ownership is the notion of limited liability. If the

company loses a lawsuit and must pay a huge judgment, the worse that can happen is

your stock becomes worthless. The creditors can’t come after your personal assets. That’s

necessarily true in private-held companies.

There are two types of stock:

Common stock

Preferred stock

Most of the stock held by individuals is common stock.

Common Stock:

Common stock represents the majority of stock held by the public. It has voting

rights, along with the right to share in dividends.

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Preferred Stock:

Despite its name, preferred stock has fewer rights than common stock, except in

one important are – dividends. Companies that issue preferred stocks usually pay

consistent dividends and preferred stock has first call on dividends over common stock.

Investors buy preferred stock for its current income from dividends, so look for

companies that make big profits to use preferred stock to return some of those profits via

dividends.

DEMAT ACCOUNT

What is Demat account and why it is required?

Securities and Exchange Board of India (SEBI) is a board (corporate body)

appointed by the Government of India in 1992 with its head office at Mumbai. Its one of

the function is helping the business in stock exchanges and any other securities markets.

Demat (short form of Dematerialization) is the process by which an investor can get

stocks (also called as physical certificates) converted into electronic form maintained in

an account with the Depository Participant (DP).

DP could be organizations involved in the business of providing financial services

like banks, brokers, financial institutions etc. DP’s are like agents of Depository.

Depository is an organization responsible to maintain investor's securities

(securities can be stocks or any other form of investments) in the electronic form. In India

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there are two such organizations called NSDL (National Securities Depository Ltd.) and

CDSL (Central Depository Services India Ltd.)

Investor’s wishing to open Demat account has to go DP and open the account.

Opening the Demat account is as simple as opening the bank account with any bank. As

we need bank account to save our money, make cheque payments etc, likewise we need

to open a demat account if we want to buy or sell stocks. All stocks what we possess will

show in our demat account. So we don't have to possess any physical certificates. They

are all held electronically in our demat account. As we buy and sell the stocks,

accordingly our stocks will get adjusted in our account.

Is a demat account must?

The market regulator, the Securities and Exchange Board of India (SEBI), has

made it compulsory to open the demat account if you want to buy and sell stocks.

So a demat account is a must for trading and investing.

How to start to open a Demat account?

We have to approach a DP to open a Demat account. Most banks are DP

participants so we may approach them.

A broker and a DP are two different people. A broker is a member of the stock

exchange, who buys and sells stocks on his behalf and also on behalf of his customers.

Following are the documents required to open Demat account.

When we approach any DP, we will be guided through the formalities of opening

an account. The DP will ask to provide some documents as proof of our identity and

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address. Below is a list but we may not require all of them.

PAN card, Voter's ID,  Passport,  Ration card,  Driver's license,  Photo credit card

Employee ID card,  IT returns,  Electricity/ Landline phone bill etc.

Do we need any stocks to open a Demat account?

No. We need not need any stocks to open a demat account. A demat account can

be opened with no balance of stocks. And there is no minimum balance to be maintained

either. You can have a zero balance in your account.

How much it cost to open a Demat account?

The charges for account opening, annual account maintenance fees and

transaction charges vary between various DP’s.

Finally –

After successfully opening the demat account, the DP will allot “Beneficial

Owner Identification” Number, which will be needed to mention for all our future

transactions.

If we want to sell our stocks, we need to place an order with our broker and give a

'Delivery Instruction' to your DP. The DP will debit our account with the number of

stocks sold. We will receive the payment from our broker.

If we want to buy stocks, inform our broker about our Depository Account

Number, so that the stocks bought are credited into our account.

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Points to remember while opening online accounta) Make multiple enquiries and try get low brokerage trading and demat account.b) Also discuss about the margin they provide for day trading.c) Discuss about fund transfer. The fund transfer should be reliable and easy. Fund transfer from our bank account to trading account and visa versa. Some online share trading account has integrated savings account which makes easy for us to transfer funds from our saving account to trading account.d) Very important is about service they provide, the research calls, intraday or daily trading tips.e) Also enquire about their services charges and any other hidden charges if any.f) And also see how reliable and easy is to contact them in case if any emergency.

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Literature

Review Investment process Fundamental

analysis Technical analysis

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INVESTMENT PROCESS

Investment process describes how an investor should go about making decisions

with regard to what marketable securities to invest in, how extensive the investment

should be and when the investment should be made. An eight-step procedure for making

these decisions forms the basis for the investment process.

1) What is Investment

2) Understanding stocks

3) Finding a broker

4) Evaluation of stocks

5) Research tools

6) Investing strategy

7) Investing technique

8) What moves the market

Step 1: What is investment?

Investing is making your money work for you without taking any more risks than

necessary for your comfort.

Investing is the proactive use of your money to make more money.

How to calculate Risk Premium?

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Risk premium is what a stock should return over a “risk-free” investment. It is your

reward for taking a risk with your money.

Weak demand is the important factor in stock pricing:

Despite high crude oil prices, its weak demand for gasoline that holds back oil stock

prices. Supply and demand is an important factor in determining price of stocks.

Corrections are natural part of stock market cycle.

Don’t be too conservative with stocks in retirement:

There is a danger you can be too conservative in your investment strategy as you

approach retirement – don’t back off stocks too soon.

Step 2: Understanding stocks

Stocks are the basic units of ownership in publicly traded companies. There are two

basic types of stocks.

a. Common Stock: Common stock represents the majority of stock held by the

public. It has voting rights, along with the right to share in dividends.

b. Preferred Stock: Companies that issue preferred stocks usually pay

consistent dividends and preferred stock has first call on dividends over

common stock.

Bull and Bear stock markets are the two sides of same coin:

Bull and bear markets go together and are necessary for an efficient market.

Poll results show confidence in stocks:

The results of a poll on where the sensex be at the end of 2008 show stock investors

are positive.

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Step 3: Finding a Broker

To decide which type of broker is right for you, you need to use these resources to

find the brokerage arrangement that best fits your needs.

Thirteen of the top online stock trading sites offer investors a wide variety of services

including research and advice.

Brokers offer different levels of service. A broker fills in the gaps in knowledge and

experience.

Broker explains what types of accounts are available and how to open an account.

Financial advisers can map a blue print that will get you from where you are to your

financial goals.

Financial advisers come in a variety of flavors. Finding the one right for you involves

knowing how each is compensated and what they do.

The new year poses many challenges for stocks, including high oil prices, the credit

crisis, and a potential recession.

Stock prices are driven by the relationship between buyers and sellers. Attractive

stocks have more buyers than sellers, which drives up prices, while less attractive

stocks feel the reverse effect.

Step 4: Evaluating stocks for investment

Fundamental analysis relies on several tools to give investors an accurate picture

of the financial health of a company and how the market values the stock. The following

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are the most popular tools of fundamental analysis. They focus on earnings, growth, and

value in the market.

a) Earnings per Share – EPS

b) Price to Earnings Ratio – P/E

c) Projected Earning Growth – PEG

d) Price to Sales – P/S

e) Price to Book – P/B

f) Dividend Payout Ratio

g) Dividend Yield

h) Book Value

i) Return on Equity

Step 5: Research Tools

The internet is a gold mine of information, but you’ll need some tools to get to the

nuggets. Research tools make the job easier if you know where to find them and how to

use them.

The better stock screens offer similar characteristics that give you greater flexibility

when looking for investment candidates and eliminate other companies.

Stock screens will save time and help to build a thoughtful portfolio by focusing on

those companies that meet your investing requirements.

Stock screens can help any investor make better stock selections by reducing the

number of companies to research.

Dividend ratios can tell much about a stock and its future payout prospects.

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One of the best sources of information on companies is free and as near as your

computer.

Step 6: Investing Strategies

What strategy to use as an investor? The different investment strategies and how

to develop personal investment strategy is explained below:

When and how to sell a winning stock?

Knowing when and how to sell a winning stock is as important as knowing when to

sell a losing stock.

Don’t be too conservative with stocks:

Following a too conservative investment strategy in retirement may not protect you

from outliving your money.

Bottom-up investors focus on strong companies and believe they will perform well in

any market conditions.

Top-down investing looks at big picture before narrowing in on individual stocks.

Step 7: Investing Techniques

Investing techniques offer powerful ways for investors to execute their strategies.

These techniques provide a structure for investing.

After-hours trading of stocks may seem like a great idea, but it is full of risks for the

average investor.

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Diversify stocks by industry to avoid across-the-board losses on bad economic news.

Investments should not be correlated to achieve diversity.

Investing with expectations of high returns is not investing but gambling. Don’t try to

double or triple your money quickly in the stock market – you’ll be disappointed and

perhaps poorer.

Step 8: What moves the market?

What makes the market rise or fall? Sometimes it seems to have a mind of its own

that reacts poorly to good news and with enthusiasm to bad news. One should learn the

factors that are the major influences on the markets and how to use this information.

Basic steps in how stock trading works

Trade = Buy or Sell

To “trade” means to buy and sell in the jargon of the financial markets. How a

system that can accommodate one billion shares trading in a single day works is a

mystery to most people. No doubt, our financial markets are marvels of technological

efficiency.

We don’t need to know all of the technical details of how to buy or sell stocks,

however it is important to have a basic understanding of how the markets work.

Important terms in stock market and in stock trading

Open - The first price at which the stock opens when market opens in the

morning.

High -  The stock price reached at the highest level in a day.

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Low -  The stock price reached the lowest level in a day.

Close - The stock price at which it remains after the end of market timings or the final

price of the stock when the market closes for a day.

Volume - Volume is nothing but quantity.

Bid - The Buying price is called as Bid price.

Offer - The selling price is called offer price.

Bid Quantity - The total number of stocks available for buying is called Bid Quantity.

Offer Quantity - The total number of stocks available for selling is called Offer

Quantity.

Buying and selling of stocks - Buy is also called as demand or bid and selling is also

called as supply or offer. First selling and then buying (this only happens in day trading)

is called as shorting of stocks or short sell.

Stock Trading - Buying and Selling of stocks is called stock trading.

Transaction - One complete cycle of buying and selling of stocks is called One

Transaction.

Squaring off - This term is used to complete one transaction. Means if we buy then we

have to sell (means square-off) and if we sell then we have to buy (means square-off).

Limit Order - In limit order the buying or selling price has to be mentioned and when

the stock price comes to that price then our order will get executed with the mentioned

price by us.

Market Order- When we put buy or sell price at market rate then the price get executes

at the current rate of market. The market order get immediately executed at the current

available price.

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Success Mantra

There are two steps to achieve success in the stock market.

1) How not to loose

When you learn what to do and what not to do in order to loose nothing means you

have won the half battle. Only then you can learn how to gain or what to do in order to

win. A new investor should do paper trading in order to get the market knowledge before

actually entering into the market.

2) How to gain

How to gain requires deep understanding about the market trends and fluctuations.

A new investor can take the route of mutual fund.

The average person generally falls into one of two categories.

The first believe investing is a form of gambling; they are certain that if you

invest, you will more than likely end up losing your money.

The second category consists of those who know they should invest for the

long-run, but don’t know where to begin.

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Their characteristics….

feel investing in some sort of black-magic that only a few people hold the key

to

they leave their financial decisions up to professionals

cannot tell you why they own a particular stock / mutual fund.

investment style is blind faith or limited to “this stock is going up. We should

but it.”

This group is in far more danger than the first. They invest like the masses

and then wonder why their results are mediocre [or in some cases, devastating.

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FUNDAMENTAL ANALYSIS

To determine the intrinsic value of an equity share, the security analyst must forecast the

earnings and dividends expected from the stock and choose a discount rate which reflects

the riskness of the stock. This is what is involved in fundamental analysis, perhaps the

most popular method used by investment professionals. The earnings potential and

riskness of a firm are linked to the prospects of the industry to which it belongs. The

prospects of various industries, in turn, are largely influenced by the developments in the

macro economy.

Researchers have found that stock price changes can be attributed to the following

factors:

Economy-wide factors: 30-35 percent

Industry factors: 15-20 percent

Company factors: 30-35 percent

Others factors: 15-25 percent

Based on the above evidence, a commonly advocated procedure of fundamental

analysis involves a three-step examination, which calls for:

1) Understanding of the macro-economic environment and developments.

2) Analyzing the prospects of the industry to which the firm belongs.

3) Assessing the projected performance of the company and the intrinsic

value of its shares.

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A. MACRO-ECONOMIC ANALYSIS

The macro-economy is the overall economic environment in which all firms

operate. The key variables commonly used to describe the state of the macro-economy

are:

a) Growth Rate of Gross Domestic Product (GDP)

The gross domestic product (GDP) is a measure of the total production of final goods

and services in the economy during a specified period usually a year. The growth rate of

GDP is the most important indicator of the performance of the economy. Firm estimates

of GDP growth rate are available with a time lag of one to two years or so, but

preliminary estimates are made from time to time by various bodies like CMIE, NCAER,

and the RBI. The higher the growth rate of GDP, other things being equal, the more

favorable it is for the stock market.

b) Industrial Growth Rate

The GDP growth rate represents the average of the growth rates of the three principal

sectors of the economy, viz. the services sector, the industrial sector and the agricultural

sector.

Publicly listed companies play a major role in the industrial sector but only a minor

role in the services sector and the agricultural sector. Hence stock market analysts focus

more on the industrial sector. They look at the overall industrial growth rate as well as the

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growth rates of different industries. The higher the growth rate of the industrial sector,

other things being equal, the more favourable it is for the stock market.

c) Agriculture and Monsoons

Agriculture accounts for about a quarter of the Indian economy and has important

linkages, direct and indirect, with industry. Companies using agricultural raw materials as

inputs or supplying inputs to agriculture are directly affected by the changes in

agricultural production. Other companies also tend to be affected due to indirect linkages.

A spell of good monsoons imparts dynamism to the industrial sector and buoyancy to

the stock market. Likewise, a streak of bad monsoons casts its shadow over the industrial

sector and the stock market.

d) Savings and Investment

The demand for corporate securities has an important bearing on stock price

movements. So investment analysts should know what is the level of investment in the

economy and what proportion of that investment is directed toward the capital market.

The level of investment in the economy is equal to:

Domestic savings + Inflow of foreign capital – Investment made abroad.

In India, as in many other countries, the domestic savings is the dominant

component in this expression. In addition to knowing what the savings are we should also

know how the same are allocated over various instruments like equities, bonds, bank

deposits, small savings schemes, and bullion.

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Other things being equal, the higher the level of savings and investments and the

greater the allocation of the same to equities, the more favourable it is for the stock

market.

e) Government Budget and Deficit

Governments play an important role in most economies, including the Indian

economy. The central budget as well as the state budgets prepared annually provides

information on revenues, expenditures, and deficit or surplus.

In India, governmental revenues come more from indirect taxes such as excise duty

and customs duty and less from direct taxes such as income tax. The bulk of the

governmental expenditures goes toward administration, interest payment, defence, and

subsidies, leaving very little for public investment. The excess of governmental

expenditures over governmental revenues represents the deficit. While there are several

measures of deficit, the most popular measure is the fiscal deficit.

The fiscal deficit has to be financed with government borrowings which is done in

three ways. First, the government can borrow from the Reserve Bank of India. This leads

to increase in money supply which has an inflationary impact on the economy. Second,

the government can resort to borrowing in domestic capital market. This tends to push up

domestic interest rates and crowd out private sector investment. Third, the government

may borrow from abroad.

Investment analysts examine the government budget to assess how it is likely to

impact on the stock market.

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f) Money Supply

There are several definitions of money. The two more commonly used ones are:

M1 = currency with public + demand deposits with bank + other

deposits with RBI.

M3 = M1 + time deposits with banks

When we talk of money supply, we usually refer to M3. The growth rate of M3 in

India has been around 15 percent per year. This growth can be explained by three

factors in the main: growth in the real economy, monetization of a portion of deficit

financing and financial deepening of the economy. Monetization of a portion of

deficit financing means the RBI buys the securities issued by the government.

g) Price Level and Inflation

The price level measures the degree to which the nominal rate of growth in GDP is

attributable to the factor of inflation. The effect of inflation on the corporate sector tends

to be uneven. While certain industries may benefit, others tends to suffer. Industries that

enjoy a strong market for their products and which do not come under the purview of

price control may benefit. On the whole, it appears that a mild level of inflation is good

for the stock market.

h) Interest Rate

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Interest rates vary with maturity, default risk, inflation rate, productivity of capital

and so on. The interest rates on money market instruments which are virtually risk free

tend to be the lowest. Long dated government securities generally carry slightly higher

interest rates. Corporate debentures which have some default risk associated with them

carry still higher interest rates.

A rise in interest rates depresses corporate profitability and also leads to an increase

in the discount rate applied by equity investors, both of which have an adverse impact on

stock prices.

h) Foreign Investment

Foreign investment in India comes in two forms: foreign direct investment and

foreign portfolio investment. The former represents investment for setting up new

projects and hence is long term in nature; the latter is in the form of purchase of

outstanding securities in the capital market and hence can be reversed easily.

i) Infrastructural Facilities and Arrangements

Infrastructural facilities and arrangements significantly influence industrial

performance. More specifically, the following are important:

Adequate and regular supply of electric power at a reasonable tariff.

A well-developed transportation and communication system.

An assured supply of basic industrial raw materials like steel, coal, petroleum

products and cement.

Responsive financial support for fixed assets and working capital.

j) Sentiments

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The sentiments of consumers and businessmen can have an important bearing on

economic performance. Higher consumer confidence leads to higher expenditure on big

ticket items. Higher business confidence gets translated into greater business investment

that has a stimulating effect on the economy. Thus, sentiments influence consumption

and investment decisions and have a bearing on the aggregate demand for goods and

services.

B. INDUSTRY ANALYSIS

The objective of industry analysis is to assess the prospects of various industrial

groupings. It is almost impossible to forecast exactly which industrial groupings will

appreciate the most. Yet careful analysis can suggest which industries have a brighter

future than others and which industries are plagued with problems that are likely to

persist for a while.

Industrial analysis is divided into three parts namely,

I. Industry life cycle analysis

II. Structure and characteristics of an industry

III. Profit potential of industries: Porter model.

I. Industry Life Cycle Analysis

Many industrial economists believe that the development of almost every industry

may be analyzed in terms of a life cycle with four well-defined stages:

a. Pioneering Stage

b. Rapid Growth Stage

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c. Maturity and Stabilization Stage

d. Decline Stage

a. Pioneering Stage: During this stage, the technology and or the product is relatively

new. Lured by promising prospects, many entrepreneurs enter this field. As a result,

there is keen, and often chaotic, competition. Only a few entrants may survive this

stage.

b. Rapid Growth Stage: Once the period of chaotic developments is over, the rapid

growth stage arise. Firms which survive the intense competition of the pioneering

stage, witness significant expansion in their sales and profits.

c. Maturity and Stabilization Stage: During this stage, when the industry is more or

less fully developed, its growth rate is comparable to that of the economy as a whole.

d. Decline Stage: With the satiation of demand, encroachment of new products, and

changes in consumer preferences, the industry enters the decline stage, relative to the

economy as a whole. In this stage, the industry may grow slightly during prosperous

periods, stagnate during normal periods and decline during recessionary periods.

The experience of most industries suggest that they go through the 4 phases of

the industry life cycle though there are considerable variations in terms of the relative

duration of various stages and the rates of growth during these stages.

II. Structure and Characteristics of an Industry

Since each industry is unique, a systematic study of its specific features and

characteristics must be an integral part of the investment decision process. Industry

analysis should focus on the following:

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a. Structure of the industry and nature of competition:

The number of the firms in the industry and market share of the

top few firms in the industry.

Licensing policy of the government.

Entry barriers, if any.

Pricing policies of the firm.

Differentiation among products.

Competition from foreign firms.

b. Nature and prospects of demand:

Major customers and their requirements.

Key determinants of demand.

Degree of cyclicality in demand.

Expected rate of growth in the foreseeable future.

c. Cost, efficiency and profitability:

Proportions of the key cost elements – raw materials, labour,

utilities and fuel.

Productivity of labour.

Turnover of inventory, receivables and fixed assets.

Control over prices of outputs and inputs.

Gross profit, operating profit and net profit margins.

Return on assets, earning power and return on equity.

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d. Technology and research:

Degree of technological stability.

Important technological changes on the horizon and their

implications.

Research and development outlays as a percentage of industry

sales.

Proportion of sales growth attributable to new products.

III. Profit Potential of Industries: Porter Model

Michael Porter has argued that the profit potential of an industry depends

on the combined strength of the following five basic competitive forces:

a. Threat of new entrants

b. Rivalry among the existing firms

c. Pressure from substitute products

d. Bargaining power of buyers

e. Bargaining power of sellers

Following figure shows the forces that drive competition and

determine industry profit potential:

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a. Threat of new entrance

New entrants add capacity, inflate costs, push prices down, and reduce profitability. If

an industry faces the threat of new entrants, its profit potential would be limited. The

threat of new entrants is low if the entry barriers confer an advantage on existing firms

and deter new entrants. Entry barriers are high when:

The new entrants have to invest substantial resources to enter the industry.

Economies of scale are enjoyed by the industry.

Existing firms control the distribution channels, benefit from product

differentiation in the form of brand image and customer loyalty.

Switching costs –these are essentially one time cost of switching from the

products of one supplier to another-are high.

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b. Rivalry between existing firms

Firms in an industry compete on the basis of price quality, promotion, service,

warranties, and so on if the rivalry between the firms in an industry is strong, competitive

moves and counter moves dampen the average profitability of the industry. The intensity

of rivalry in an industry tends to be high when:

The number of competitors in an industry is large.

At least a few firms are relatively balanced and capable of engaging in a sustained

competitive battle.

The industry growth is sluggish, prodding firms to strive for a higher market

share.

There is chronic over capacity in the industry.

The industry confronts high exit barriers.

c. Pressure from substitute products

All firms in an industry face competition from industries producing substitute

products. Substitute products may limit a profit potential of the industry by imposing a

ceiling on the prices that can be charged by the firms in the industry. The threat from

substitute products is high when:

The price- performance trade off offered by the substitute products is attractive.

The switching costs for prospective buyers are minimal

The substitute products are being produced by industries earning superior profits.

d. Bargaining power of buyers

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Buyers are competitive force. They can bargain for price cut, ask for superior

quality and better service and induce rivalry among competitors. If they are powerful,

they can depress the profitability of the supplier industry. The bargaining power of a

buyer group is high when:

Its purchases are large relative to the sales of the seller.

Its switching costs are low.

It poses a strong threat of back ward integration.

e. Bargaining power of suppliers:

Suppliers can exert a competitive force in an industry as they can raise prices, lower

quality and curtail the range of free services they provide. Suppliers have strong

bargaining power when;

There are hardly any viable substitute for the products supplied.

Few suppliers dominate and the supplier group is more concentrated than the

buyer group.

The switching cost for the buyers are high.

Suppliers do present a real threat of forward integration.

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C. COMPANY ANALYSIS

Company analysis is concerned with fundamental analysis of equity shares.

Fundamental analysts take two somewhat different approaches in their search for

mispriced securities. The first approach involves estimating the intrinsic value and

comparing the same with the prevailing market price to determine whether the

security is underpriced or fairly priced or overpriced. The second approach involves

estimating a security’s expected return, given its current price and intrinsic value, and

then comparing it with the “appropriate” return for securities with similar

characteristics.

Company analysis is the last leg in the economy-industry-company analysis

sequence. It may be organized into two parts (a) a study of financials, and (b) a study

of other factors.

Investment analysts start with a historical analysis of earning (and dividends),

growth, risk, and valuation and use company analysis as a foundation for developing

the forecasts required for estimating the intrinsic value.

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TECHNICAL ANALYSIS

Technical analysis is radically different from fundamental analysis. While the

fundamental analyst believes that the market is 90 percent logical and 10 percent

psychological, the technical analyst assumes that it is 90 percent psychological and 10

percent logical. Technical analysts don’t evaluate a large number of fundamental factors

relating to the company, the industry and the economy. Instead, they analyze internal

market data with the help of charts and graphs. Subscribing to the ‘castles-in-the-air’

approach, they view the investment game as an exercise in anticipating the behaviour of

market participants. They look at charts to understand what the market participants have

been doing and believe that this provides a basis for predicting future behaviour.

The technical approach is the oldest approach to equity investment, dating back to

the late 19th century. It continues to flourish in modern times as well. As an investor, we

will often encounter technical analysis because newspapers cover it, television

programmes routinely call technical experts for their comments, and investment advisory

services circulate technical reports. Technical analysis can be applied to commodities,

currencies, bonds, and equity stocks, our studies is restricted to equity stocks.

Technical analysis involves a study of market generated data like prices and

volumes to determine the future direction of price movement.

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Martin J. Pring explains: “The technical approach to investing is essentially a

reflection of the idea that prices move in trends which 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 art—is to identify trend changes at an early

stage and to maintain an investment posture until the weight of the evidence indicates that

the trend has been reversed.”

THE DOW THEORY

Originally proposed in the late nineteenth century by Charles H. Dow, the editor

of the Wall Street Journal, the Dow theory is perhaps the oldest and best known theory of

technical analysis.

In the words of Charles Dow:

“The market is always considered as having three movements, all going at the

same time. The first is the narrow movement from day to day. The second is the short

swing, running from two weeks to a month or more; the third is the main movement,

covering at least four years in its duration.”

Proponents of the Dow Theory refer to the three movements as: (a) daily

fluctuations that are random day-to-day wiggles; (b) secondary movements or corrections

that may last for a few weeks to some months; and (c) primary trends representing bull

and bear phases of the market.

An upward primary trend represents a bull market, whereas a downward primary

trend represents a bear market. A major upward move is said to occur when the high

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point of each rally is higher than the low point of the preceding decline. Likewise, a

major downward move is said to occur when the high point of each rally is lower than the

low point of the preceding decline.

The secondary movements represent technical correction. They represent

adjustments to the excesses that may have occurred in the primary movements. These

movements are considered quite significant in the application of the Dow Theory.

The daily fluctuations are considered to be minor significance. Even zealous

technical analysts do not usually try to forecast day-to-day movements in the market.

Bar and Line Charts

The bar chart, one of the simplest and most commonly used tool of technical

analysis, depicts the daily price range along with the closing price. In addition, it may

show the daily volume of transactions. The upper end of each bar represents the day’s

highest price and the lower end the day’s lowest price. The small cross across the bar

marks the day’s closing price.

Technical analysts believe that certain formations or patterns observed on the bar

char or line chart have predictive value. The more important formations and their

indications are described below:

Head and Shoulders Top (HST) Pattern: As the name suggests, the HST formation has

a left shoulder, a head, and a right shoulder. The HST formation represents a bearish

development. It the price falls below the neckline (the line drawn tangentially to the left

and right shoulders), a price decline is expected. Hence, it is a signal to sell.

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Inverse Head and Shoulders Top (IHST) Pattern: As the name indicates, the IHST

formation is the inverse of the HST formation. Hence, it reflects a bullish development. It

the price rises above the neck line, a price rise is expected. Hence, it is a signal to buy.

Triangle or Coil Formation: This formation represents a pattern of uncertainty. Hence,

it is difficult to predict which way the price will break out.

Flags and Pennants Formation: It typically signifies a pause after which the previous

price trend is likely to continue.

Double Top Formation: It represents a bearish development, signaling that the price is

expected to fall.

Double Bottom Formation: It reflects a bullish development, signaling that the price is

expected to rise.

Point and Figure Chart

More complex than a bar chart, a point and figure chart (PFC) has the following features:

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Company

Profile

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COMPANY PROFILE

Ventura Securities Ltd., is a leading stock broking organization

Promoted and managed by professionals having exceptional knowledge of Capital

Market.

Ventura believes in philosophy that the key to their business is service which will

result in total satisfaction to the clients.

Ventura – PROMOTERS

Sajid Malik, Director, is a member of the Institute of Chartered Accountants of

India.He has nearly fifteen years of varied experience in corporate advisory structured

finance and private equity transaction. He has an international exposure to developed

markets in Europe, US and the Far East and has been personally involved in international

equity offerings and cross border acquisitions. He is the CEO of Genesys International, a

company focused on outsourcing of GIS and engineering design services. He is a non-

executive director of Ventura Securities.

Hemant Majethia, Director is member of the Institute of Chartered Accountant

of India. He has nearly fifteen years of rich experience in the capital markets

intermediation, equity research and has a wide cross section of market relationships. Mr.

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Majethia is the CEO of Ventura Securities. It was his vision to create an all India network

of brokers’ relationship and build the distribution strength of Ventura.

Company's Goal

• We aim to add value and provide our clients with an unrivalled and specialized

service which reflects the expertise and efficiency of our dedicated support teams.

History

FOUNDATION OF VENTURA

Founded in 1994 by Chartered Accountants Sajid Malik and Hemant Majethia. They

are the first generation entrepreneurs and are the principal promoters of Ventura.

A dedicated and efficient team of senior managers assists Mr. Majethia the CEO of

the company.

Ventura is a full-service domestic brokerage house providing value-based advisory

services to Institutions (Foreign and Domestic), High Net Worth and Retail Investors

with its core area of operations being stock-broking.

Ventura have considerable strength and domain knowledge in the booming

derivatives market.

Ventura has achieved a reputation for innovative and unbiased research along with

excellent technical analysis and execution capabilities.

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Not only has Ventura provided value-added services to the gamut of India-based

funds, it has also developed the advice-driven business of high net worth and

corporate clients.

Why Ventura?

• Ventura’s services are offered under total confidentiality and integrity with the sole

purpose of maximizing returns for their clients.

• Equity Broking - Corporate Member of The Stock Exchange, Mumbai (BSE) and

National Stock Exchange of India Ltd. (NSE).

• Pan India reach - 380 terminals spread across 75 different locations, in semi urban,

urban and metropolitan areas.

• More than 100,000 retail clients serviced from the above locations

• Ventura have heavily invested in technology (customized and ready to use software)

involving front and back end operations offering seamless process and flawless

execution and raising our service levels.

• Ventura operate on an alert and well-defined system in risk management and

settlement mechanism

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OFFERINGS

Research competency

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• Market Outlooks and Strategy Analysis Market research at Ventura is structured to

meet a wide variety of customer needs.

• Services in this area range from the intra-day analysis of the most recent fundamental

and technical developments affecting pricing to longer-term strategic research of

supply, demand, and inventory trends.

• Along with its price forecasting capability, the Team undertakes analytical research

on hedging and trading strategies.

• The Team also publishes monographs on topics of broad interest to its customers,

such as the impact of changing accounting standards, developments in risk

management, and current hedge activities and strategic thought in the various sectors

of the market.

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Data

Analysis

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ANALYSIS

WIPRO

FUNDAMENTAL ANALYSIS:

COMPANY ANALYSIS:

Wipro is a global IT services company. It has been acknowledged as an offshore provider

of technology services by Gartner, Forrester and other research and advisory firms. Wipro

provides a comprehensive range of IT services, software solutions, IT consulting, business

process outsourcing, or BPO, services and research and development services in the areas of

hardware and software design to companies worldwide. The company combines business

knowledge and industry expertise of its domain specialists and the technical knowledge and

implementation skills of its delivery team in the development centers located in India and around

the world, to develop and integrate solutions which enables its clients to leverage IT for achieving

their business objectives.

The range of its services includes IT consulting, custom application design, development,

re-engineering and maintenance, systems integration, package implementation, technology

infrastructure outsourcing, BPO services and research and development services in the areas of

hardware and software design.

The market for IT services is highly competitive and rapidly changing. India and

AsiaPac IT Services and Products segment focuses primarily on meeting the IT products and

services requirements of companies in India, Asia-Pacific and the Middle East region.

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Wipro’s revenue has grown by an average of 26% a year while profits have grown by

69%.

The company sells and markets its consumer care products primarily through distribution

network in India, which has access to 2 million retail outlets throughout the country. The primary

raw materials for many of its soap and hydrogenated oil products are agricultural commodities,

such as vegetable oils.

As of March 31, 2006, Wipro had over 53,700 employees. Wipro Limited, which had

$1.2 billion in revenue for FY04, also has other interests in fluid power, lighting, medical

equipment products, and financial services. Wipro Technologies makes up around 67% of the

company’s total revenue and is Wipro’s fastest-growing business.

Wipro Technologies achieved $617 million in revenue for the fiscal year ending March

31, 2003, and has over 18,500 employees.

Wipro Technologies has emerged as the second-largest software exporter from India and

has a high-powered client base, including GM, Lehman Brothers, Sony, NYSE, Weyerhaeuser,

Thames Water, Lucent Technologies, Nike, and Nortel.

Vision: To offer services based on world-class infrastructure, industry expert skills, proven

process-oriented service operations that are backed by principals to ensure the world’s best

way of delivering IT infrastructure management solution.

Mission: “To serve customers with integrity through innovative, value for money solutions,

by applying thought day after day”

Values: Human values, integrity, innovation drives us.

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INDUSTRY ANALYSIS:

Information Communication Technology (ICT), the fastest growing industry of the

present era, has not only captured the imagination of the people but also contributed to foster the

pace of globalization and bringing together humanity as has never been before by breaking

geographical, territorial and man made barriers. In the process, it has generated economic

opportunities, social-closeness and contributed to the overall growth process of the whole world.

Within a short span, ICT related exports have become the largest export item of India

surpassing a large number of traditional products and services including dynamic ones.

Information technology (IT) refers to the collection of products and services that turn data into

useful, meaningful, accessible information.

The U.S. is the world leader in information and communications technology (ICT)

products and services, representing almost 40 percent of global spending. U.S. spending on ICT

has increased almost 21 percent since 2000, to almost $1.13 trillion in 2005. Between 2000 and

2005, ICT in the U.S. has achieved a compound annual growth rate of 4 percent, compared to 6.3

percent for all global economies.

To put U.S. ICT spending into context, member nations of the G-8 experienced CAGR of

4.5 percent for the same years. At $3,800, the U.S. is also one of the world’s largest per capita

ICT spending nations. The Information Technology Sector has grown in size from Rs. 5,450

crores in 1994-95 to about Rs. 64,200 crores in 2001-02 contributing 0.59% and 2.87% to G.D.P.

growth respectively in the corresponding periods.

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WIPRO LIMITED CONSOLIDATED BALANCE SHEET

(Rs. In Million)

As of March 31,

Particulars Schedule 2009 2008

SOURCES OF FUNDS

SHAREHOLDERS' FUNDS

Share capital 1 2,928 2,923

Share application money pending allotment 15 40

Reserves and surplus 2 136,356 113,991

136,299 116,954

LOAN FUNDS

Secured loans 3 1,858 2,072

Unsecured loans 4 55,034 42,778

Monthly Intrest 237 116

TOTAL 193,428 161,920

APPLICATION OF FUNDS

FIXED ASSETS

Goodwill 56,521 42,209

Gross block 5 75,353 56,280

Less: Accumulated depreciation 36,342 28,067

Net block 39,011 28,213

Capital work-in-progress and advances 13,552 13,370

109,084 83,792

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INVESTMENTS 6 18,096 16,022

DEFERRED TAX ASSETS (Net) 684 529

CURRENT ASSETS, LOANS AND ADVANCES

Inventories 7 7,586 6,664

Sundry debtors 8 48,859 40,453

Cash and bank balances 9 49,117 39,270

Loans and advances 10 45,673 29,610

151,235 115,997

Less: CURRENT LIABILITIES AND PROVISIONS

Liabilities & Provisions 11 85,671 54,420

Miscellaneous expenditure (to the extent

Not written off or adjusted)

NET CURRENT ASSETS 65,564 61,577

TOTAL 193,428 161,920

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CASH FLOW STATEMENT (Rs. in Million)

Year ended March 31,

2006 2005

A. Cash flows from operating activities:

Profit before tax 23,404.30 17,570.23

Adjustments:

Depreciation and amortization 2,922.56 1,859.00

Amortization of stock compensation 621.88 334.41

Unrealized exchange difference - Net 65.06 (92.45)

Interest on borrowings 31.33 55.68

Dividend / Interest - Net (1,078.86) (674.60)

(Profit)Loss on sale of mutual fund units (237.72) (35.59)

Gain on sale of fixed assets (6.33) (107.47)

Working Capital Changes:

Trade and other receivable (6,360.22) (3,951.12)

Loans and advances (1,533.89) 24.14

Inventories (212.77) (252.95)

Trade and other payables 5,812.81 4,177.81

Net cash generated from operations 23,428.15 18,907.09

Direct taxes paid (4,305.66) (2,242.93)

Net cash generated from operating activities 19,122.49 16,664.16

B. Cash flows from investing activities:

Acquisition of property, fixed assets, plant and equipment

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(including advances) (7,342.71) (5,541.10)

Proceeds from sale of fixed assets 156.98 163.02

Purchase of investments (59,017.77) (46,128.04)

Proceeds on sale / from maturities on investments 51,641.00 43,374.01

Investment in subsidiaries (3,300.73) (1,268.15)

Dividend / interest income received 919.02 710.19

Net cash generated by / (used) investing activities (16,994.21) (8,690.07)

C. Cash flows from financing activities:

Proceeds from exercise of Employee Stock Option 4,704.46 2,577.38

Share application money pending allotment 62.81 12.05

Interest paid (31.33) (55.68)

Dividends paid (including distribution tax) (4,018.65) 7,653.86)

Repayment of short term borrowings - Net (119.31) (385.96)

Net cash provided by/(used in) financing activities 597.98 (5,506.07)

Net increase/(decrease) in cash and

cash equivalents during the period 2,776.26 2,468.02

Cash and cash equivalents at the beginning of the period 5,368.96 2,900.94

Cash acquired on merger 90.34 -

Effect of translation of cash balance (5.54) -

Cash and cash equivalents at the end of the period 8,230.02 5,368.96)

TECHNICAL ANALYSIS

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In the FY1995-96, Wipro’s sales was US$ 12.9 billion and now it is US$ 106.3 billion.

In FY1995-96, the profit after tax was US$ 0.5 billion and in FY2005-06 it has increased to

US$ 20.7 billion.

Sales and Other Income

12.9

58.8

81.7

106.3

1995-96 2003-04 2004-05 2005-06

Profit after Tax

0.5

10.3

16.3

20.7

1995-96 2003-04 2004-05 2005-06

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Market Capitalization

7

304

466

798

1995-96 2003-04 2004-05 2005-06

Capitalization is a measure of corporate size. The invested capital in the FY1995-96 was US$

7 billion and in FY2005-06, it has increased to US$ 798 billions.

Operating Cash Flows

7.4

10.0

18.119.6

1995-96 2003-04 2004-05 2005-06

Operating cash flows is the income before depreciation and taxes. In the FY1995-96, the

operating income was Rs.7.4 billions and in FY2005-06 it has increased to Rs. 19.6 billions.

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Revenues from Global IT Services & Products

50

943

1,353

1,815

1995-96 2003-04 2004-05 2005-06

Wipro’s global revenues have increased from US$ 50 million to US$ 1,815 million.

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APPLICATION OF DOW THEORY:

DATECLOSING PRICE

12-Feb 422.6513-Feb 423.1514-Feb 41015-Feb 416.3519-Feb 415.0520-Feb 412.3521-Feb 41122-Feb 426.826-Feb 439.427-Feb 445.2528-Feb 440.6529-Feb 447.4

INFERENCE:

The above graph represents the daily fluctuations in the market which is one of the major proponent in Dow Theory. It is difficult to forecast day-to-day movements in the market. In the above 12 days of trading, the share price of wipro was highest on 29TH Feb. - Rs.447.4 and the lowest was on 14th Feb. – Rs. 410.

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DATECLOSING PRICE

SUM OF THREE YEAR AVERAGE

12-Feb 422.6513-Feb 423.15 1255.8 418.614-Feb 410 1249.5 416.515-Feb 416.35 1241.4 413.819-Feb 415.05 1243.75 414.5820-Feb 412.35 1238.4 412.821-Feb 411 1250.15 416.7222-Feb 426.8 1277.2 425.7326-Feb 439.4 1311.45 437.1527-Feb 445.25 1325.3 441.7728-Feb 440.65 1333.33 444.4429-Feb 447.4

INFERENCES:

A 10-day moving average of daily prices may be used to detect a short term trend. This stock

price line stands as an indicator to an investor whether to buy the share or to sell it. In the above

10-day average the highest 3-year moving average is on 28th feb.

TATA CONSULTANCY SERVICES (TCS)

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Organizations must continuously innovate and transform themselves to stay ahead of

competition. TCS helps enterprises stay agile and respond better to changing market conditions

by optimizing business processes, making their IT infrastructure resilient and ensuring faster

business results. TCS partners with enterprises worldwide to help them achieve business

transformation. Leveraging its industry insight and technology expertise, TCS enables success in

essential strategic initiatives by aligning IT strategies with business objectives. By aligning IT

with their business needs, TCS helps enterprises experience real business results.

TCS provides solutions globally to help enterprises realize their product development,

production management and asset management strategies, using best-in-class technologies,

processes and competencies. TCS leverages its years of domain and IT experience to bring in

process improvements, process automation and platform based solutions to enterprises across

industries.

COMPANY ANALYSIS:

The company has seen strong and profitable growth across all markets driven by good

performance in existing and new areas of business.

For the year ended march 31, 2007, the company earned a total income of Rs.15156.52 crores

an increase of 34.20% over previous year’s Rs.11,293.76 crores. TCS total income is 18914.26

crores. The net profit increased by 24.79% of the total income. The company is amongst the

leading IT companies in the world and continues to retain its leadership position in the Indian IT

industry. The company has provided effective business solutions to Global and Indian companies

by leveraging its domain knowledge across industry verticals, excellence in technology and

robust processes. The company’s continued investments in innovation and technology have

enabled it to undertake a number of large, end-to-end, mission critical projects in diverse business

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areas and technology domains. The company has 148 offices globally. TCS also has delivery

centers in a number of countries.

BALANCE SHEET AS AT MARCH 31, 2007

Schedule As at

March 31, 2007

Rs. in crores

As at

March 31, 2006

Rs. in crores

SOURCES OF FUNDS:

1. SHAREHOLDERS' FUND

(a) Share Capital A 97.86 48.93

(b) Reserves and Surplus B 7961.13 5560.4

2. LOAN FUNDS

(a) Secured Loans C 41.76 26.52

(b) Unsecured Loans D 8.98 8.98

50.74 35.5

3. DEFERRED TAX LIABILITIES (NET)

E 60.61 64.69

4. TOTAL FUNDS EMPLOYED 8170.34 5709.52

APPLICATION OF FUNDS:

5. FIXED ASSETS

(a) Gross Block F 2315.36 1695.13

(b) Less:- Accumulated Depreciation 854.75 525.35

(c) Net Block 1460.61 1169.78

(d) Capital Work-in-Progress 757.85 280

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2218.46 1449.78

6. INVESTMENTS G 3252.04 1963.52

7. DEFERRED TAXASSETS (NET) E 37.61 25.81

8. CURRENT ASSETS, LOANS AND ADVANCES

(a) Interest Accrued on Investments 0.51 0.33

(b) Inventories H 12.06 22.94

(c) Unbilled Revenues 523.88 353.91

(d) Sundry Debtors I 2799.8 2325.83

(e) Cash and Bank Balances J 557.14 171.17

(f) Loans and Advances K 1363.74 1116.91

5257.13 3991.09

9. CURRENT LIABILITIES AND PROVISIONS

(a) Current Liabilities L 1689.85 1180.14

(b) Provisions M 905.05 540.54

2594.9 1720.68

10. NET CURRENT ASSETS [ (8) less (9) ]

2662.23 2270.41

11. TOTAL ASSETS (NET) 8170.34 5709.52

12. NOTES TO ACCOUNTS Q

Therefore, the TCS total assets are Rs. 8170.34 crores in March 31, 2007 whereas Rs.

5709.52 crores in March 31, 2006. The assets has been increased by 43.1% in the year March

31, 2006.

TECHNICAL ANALYSIS

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Exports from India:

02

46

810

1214

1618

20

IT Services BPO S/W Prod. &Engg. Svcs

H/W

US

$ B

illi

on

2004-05 2005-06 2006-07(E)

The Total Indian IT Exports (including hardware & software in addition to services) were

US$ 24.2 billion in 2005-06 with services exports at 97.5% of the total IT exports. The major

components of Services exports were IT Services exports (55%), BPO exports (26%) and

software products and engineering services exports (16.5%). NASSCOM estimates that in

FY2006-07 Indian IT exports will grow to US$ 31.9 billion from US$ 24.2 billion in 2005-

06.

Domestic IT-BPO market

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0

1

2

3

4

5

6

7

8

IT Services BPO S/W Prod. &Engg. Svcs

H/W

US

$ B

illi

on

2004-05 2005-06 2006-07(E)

In FY 2005-06, the domestic IT-BPO market was at US$ 13.2 billion and was estimated to

grow at 20% to exceed US$ 15.9 billion in FY 2006-07. The IT services segment in the

domestic market is expected to reach US$ 5.6 billion in FY 2006-07, exhibiting a 24.2%

growth over FY 2005-06. The domestic BPO segment is estimated to grow by 29.6% in

2006-07 and is expected to be about US$ 1.2 billion in FY 2006-07.

The Industry Verticals where the Company has a sizable presence are:

a. Banking & Financial Services

b. Insurance

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c. Manufacturing

d. Telecommunications

e. Life Sciences and Health Care

f. Retail

g. Transportation

h. Utilities

i. Entertainment and Media

17.00%4.30%

7.10%

3.20%

2.40%

8.50%

42.20%

15.30%

Telecom Life Sciences & HealthCare

Retail & Distribution Transportation

Energy & Utilities Others

BFSI Manufacturing

The company’s major revenues come from BFSI i.e., 42.20% and the next from

manufacturing 15.30%.

APPLICATION OF DOW THEORY:

DATE CLOSING PRICE

12-Feb 906.1

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13-Feb 864.6514-Feb 758.115-Feb 873.819-Feb 853.220-Feb 875.4521-Feb 886.122-Feb 900.5526-Feb 900.7527-Feb 898.428-Feb 877.5529-Feb 880.9

INFERENCES:

TCS share prices lie between Rs.750 to Rs.900. in the beginning of the week, the share prices of

TCS was decreasing and in the middle of the week it increased to the maximum and by the end of

the week in declined due to the changes in the market.

DATECLOSING PRICE

SUM OF THREE YEAR AVERAGE

12-Feb 906.1

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13-Feb 864.65 2528.85 842.9514-Feb 758.1 2496.55 832.1815-Feb 873.8 2485.1 828.3719-Feb 853.2 2602.45 867.4820-Feb 875.45 2614.75 871.5821-Feb 886.1 2662.1 887.3722-Feb 900.55 2687.4 895.826-Feb 900.75 2699.7 899.927-Feb 898.4 2676.7 892.228-Feb 877.55 2656.3 885.6229-Feb 880.9

INFERENCES:

The share price of TCS has an increasing trend. It has reached its highest average at the end of the

week that is on 26th feb.

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Summary

SUMMARY

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Investing in financial securities is now considered to be one of the best avenues

for investing one’s savings while it is acknowledged to be one of the most risky avenues

of investment. Even Indian Government is planning to to encourage people in rural areas

to invest in equity. This will help the markets to stabilize by tapping the rural areas and

decreases the dependency on Foreign Institutional Investors.

The factors which were studied under this are to know about stock markets in

India, how they work, prerequisites to enter the stock markets, market design, stock

selection, when to buy or sell a stock, how to invest, knowing about market

intermediaries.

For successful investment factors like timing, selection, setting targets, avoiding

speculation and constant review of portfolio is advised.

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Findings

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FINDINGS

From the above analysis, it is found that:

WIPRO has the world’s best way of delivering IT infrastructure management

solution. Due to this, its sales in FY 2006-07 have increased by 30.1% and PAT has

increased by 27%.

TCS gets it majority of income from Telecom industry and banking industry.

Telecom industry contributes 42.20% to its total income.

In comparison to WIPRO and TCS share price analysis, it is found out that TCS has

the highest share price value because of its diversification. TCS is into Banking,

Manufacturing, Telecommunication, Entertainment and Media.

If the stock price line falls below the moving average line, the investor should

purchase the stock because the intrinsic value is more than the market price. That

means the stock is undervalued.

If the stock price line rises above the moving average line, the investor should sell the

stock as the intrinsic value is more than the market price. Therefore, the stock is

overvalued.

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Suggestions

SUGGESTIONS

Suggestions to an investor for reaping good returns in Equity Investment

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Proper scientific way of investigation should be undertaken about sector and its

players before investment

Clear targets should be set before investment

Stock pickup should be always selective and should not depend on rumors of the

market

Define price range first before buying and selling shares

Before buying and selling shares latest price movement trends should be analyzed

Speculation is not advised in the market

Individual Risk tolerance should be known and then be ready for unexpected

Constant proper review of portfolio should be done and wherever required buying

and selling of shares should be done.

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Conclusions

CONCLUSIONS

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Economic liberalization has accelerated the pace of development in the securities market.

In India, the role of securities market has undergone structural transformation with the

introduction of computerized online trading and interconnected market system.

Investment in securities such as shares, debentures and bonds is profitable, but

also involves great deal of risk. Even Indian Government wants to encourage Equity

Investment.

According to Fundamental Analysis:

Economy:

While analyzing stock, investor should consider GNP, Price conditions, Economy,

Housing, Construction Activity, Employment, Accumulation of inventories, Personal

Disposable Income, Personal savings, Interest rates, Balance of Trade, Strength of the

Rupee in Forex market and Corporate Taxation (Direct and Indirect)

Sector Analysis:

It is advised to invest in a sector that is either in a pioneering stage or in its expansion

stage. It is advisable to quickly get out of sectors which are in the stagnation stage prior

to its lapse into the decline stage. The particular phase or stage of a sector can be

determined in terms of sales, profitability and their growth rates amongst other factors.

Company Analysis:

In company analysis, history of the company and line of business, Product portfolio’s

strength, Market share, Top Management, Intrinsic Values like Patents and Trademarks

held, Foreign collaboration, its need and availability for future, Quality of competition in

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the market, present and future, Future business plans and projects, Level of trading of the

company’s listed scrip, EPS, its growth and rating vis-à-vis other companies in the

industry, P/E Ratio, Growth in Sales are analyzed.

According to technical analysis:

The fundamental analysis is the determination of price based on future earnings, where as

the price of a security represents a consensus. The price at which an investor is willing to

buy or sell depends primarily on his expectations. For this purpose technical analysis also

forms a strong tool in analyzing a company where the price movements are recorded in

charts and analyzed.

LIMITATIONS OF THE STUDY

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The study is confined to only one sector.

All the limitations of Fundamental Analysis, Technical Analysis are applicable to the

study.

The factors which affect the markets and intangible are not considered.

Risk perception is considered to be moderate which may not be acceptable to all.

The data for the study considered is of past two years, so analysis is restricted to that

period only.

In the application of Dow theory, only daily price fluctuations were considered due to

time constraint.

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Bibliography

BIBILIOGRAPHY

BOOKS REFFERED:

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Security Analysis and Portfolio Management

- Prasanna Chandra.

Investments

- William, Sharpe

WEBSITES:

www.about.stocks.com

www.nseindia.com

www.buzzingstocks.com

www.moneycontrol.com