Indian Capital Markets
Indian Capital Markets
ON
TO
CAPITAL
MARKET
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 1
INDIAN CAPITAL MARKET
✔ INTRODUCTION:
Every business unit needs money to finance its activities. The money
is invested in physical resources, i.e. land and building, machines and
equipment, stock of raw material, etc., which are used by the enterprise in
production. All these resources together constitute ‘capital’. Capital is
often defined as “wealth used in the production of further wealth.”
✔ CAPITAL MARKET:
Capital market facilitates the free trading (buy and sell) in all
securities. It has two mutually supporting and indivisible segments: the
primary market and the secondary market. In the primary market
companies issue new securities to raise funds. Hence, it is also referred to
the new issue market. The secondary market deals with the second-hand
securities; viz., securities that have already been issued by companies
that are listed in stock exchange. Since the securities are listed and traded
in the stock exchange, the secondary market is also called the stock
market.
✔ PROBLEM STATEMENT:
In earlier times the investors are not so aware of the market in other
way say that the investors are not too much knowledgeable. As they are
not too much knowledgeable they invested in market without using any
concept and skills. This study is also for enhancing the knowledge of
various investors. Study also suggested that how genuine investors should
react before and after investing in market.
The Indian capital market is faced many problems and this study is
firstly defined what is the problem in Indian capital market as of 1992.
2. Trading took place by ‘open outcry’ on the trading floor, which was
inaccessible to users. It was routine for brokers to charge the investor a
price that was different from that actually transacted at. In fact, the
normal market practice involved brokers charging user’s one single
Above, all are the problems in the Indian capital market as of 1992
but time change and mostly these problems are solved.
OBJECTIVE
OF THE
STUDY
The sole effort behind carrying out this study is to provide guidance of
India capital market. Also, defining the relationship of Indian capital
markets with global capital markets.
RESEARCH
METHODOLO
GY
✔ STUDY DESIGN:
1. Data source
Secondary Data:
Industry Reports
Internet
Books & Magazines
The various tools for analysis used are graphs, charts, percentage
growth, secondary data.
✔ METHOD OF ANALYSIS:
1. Fundamental Analysis
Fundamental analysis done for studying the how future prices of the
company will perform. Fundamental analysis is useful to finding the right
value of the company. Fundamental analysis includes the study of
Economy, Industry and Company. For estimating any company’s share
price not only the historical performance data of that company are very
useful but also the quantitative analysis of the revenue, assets liquidity,
expenditure, etc.
INTRODUCTI
ON TO
ORGANIZATI
ON
✔ COMPANY PROFILE:
Share khan is also about focus. Share khan does not claim expertise in
too many things. Share khan’s expertise lies in stocks and that's what he
talks about with authority. So when he says that investing in stocks should
not be confused with trading in stocks or a portfolio-based strategy is
better than betting on a single horse, it is something that is spoken with
years of focused learning and experience in the stock markets. And these
beliefs are reflected in everything Share khan does for you!
To sum up, Share khan brings to you a user- friendly online trading facility,
coupled with a wealth of content that will help you stalk the right shares.
Those of you who feel comfortable dealing with a human being and would
rather visit a brick-and-mortar outlet than talk to a PC, you'd be glad to
know that Share khan offers you the facility to visit (or talk to) any of our
share shops across the country.
In fact Share khan runs India's largest chain of share shops with over six
hundred outlets in more than 100 cities! What's a share shop? How do you
locate a share shop in your city?
To find the answers of these questions, you must visit Share khan. hi other
words Share khan is a company that provides you an outstanding trading
facility with a wide variety of products and acts as an investment
consultant to manage your portfolio and secure a high rate of return on
your investments in the securities market.
SSKI has been voted the best domestic brokerage in India by Asia money
Polls’ 2004. Also SSKI is being rated as No. 1 Financial Researcher by
Business Today, in the Survey conducted on Lead Managers of all the
Mutual Funds.
In short, Share khan is currently having a good position in the market with
the highest no of transactions and also the highest turnover (buying &
selling) in India and a leader in providing better services to the investors.
Share khan, India's leading stock broker is the retail arm of SSKI, and
offers you depository services and trade execution facilities for equities,
derivatives and commodities backed with investment advice tempered by
decades of broking experience. A research and analysis team is constantly
working to track performance and trends. That's why Share khan has the
trading products, which are having one of the highest success rates in the
industry the largest chain.
✔ NATURE:
Sharekhan is basically a service providing firm. It is a stock
broking firm which providing services of selling and purchases of stocks on
behalf of one investor from another investor and then transfer stocks to
respective dematerialized account. Sharekhan Limited is a retail financial
services provider with a focus on equities, derivatives and commodities
brokerage execution on the National Stock Exchange of India Ltd. (NSE),
Bombay Stock Exchange Ltd. (BSE), National Commodity and Derivatives
Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd.
(MCX).
company was awarded the 2005 Most Preferred Stock Broking Brand by
Aawaz Consumer Vote.
➢ SSKI named its online division as SHARE KHAN and it is into retail
Broking.
➢ The business of the company overhauled 8 years ago on February 8,
2000
➢ It acts as a discount brokerage house to a full service investment
solutions provide
➢ It has specialized research product for the small investors and day
traders.
➢ Largest chain of share shops which is 825+ share shops in 280 cities,
415 Franchisees & over 100 Branches across India.
➢ It has $25m/trades every day.
➢ Leading player today with 20% market share.
➢ Over 8000 online clients.
➢ The site was also launched on February 8, 2000 and named it as
www.sharekhan.com.
➢ The Speed Trade account of share khan is the next generation
technology product launched on April 17, 2002.
➢ SpeedTradePlus was launched on October 28, 2002 for trading in
Derivatives.
➢ It offers its customers with the trade execution facilities on the NSE,
for cash as well as derivatives, depositories.
✔ VISION:
OwnsSSKI
SSKI
56%
SSKI
Owns Investor
Corporate
Services
Securities
Finance
of 50.5% Pvt.Pvt.
Pvt.Ltd.
Ltd.
of Ltd.
✔ CORPORATE OFFICE
LOWER PAREL,
MUMBAI – 400013
Total Share Shops : More than 825+ in more than 280 cities
The official timing are 9:30a.m to 6:oo p.m. Reporting even one
minute after 9:30a.m shall be a late mark system. 3 such late marks
in the month after be considered as 1day’s leave. Like wise employee
attending office after 11:30a.m or leaving office before 3:30p.m will
be marked absent for half day.
If any HOD decides on different work timing for his team, then timing
has to
be followed accordingly & the late coming will be as per the approval
of the
HOD
Conduct - grooming
Performance appraisal
DISCIPLINE
INTEGRITY
INITIATIVE
TEAM WORK
✔ ORGANIZATIONAL STRUCTURE:
✔ PRODUCT PROFILE:
Dematerialization and trading in the demat mode is the safer and faster
alternative to the physical existence of securities. Demat as a parallel
solution offers freedom from delays, thefts, forgeries, settlement risks and
paper work. This system works through depository participants (DPs) who
offer demat services and hold the securities in the electronic form for the
investor Share khan Depository services offer dematerialization services to
individual and corporate investors.
With the Share khan Team Managing Your Portfolio, you can be assured
that your investments are in safe hands!
Right from choosing the combination of stocks most suitable for you based
on your risk appetite to monitoring their movements and discussing them
with you at special events. Click here to see how we manage your portfolio
in a few easy steps. This is how we make investing completely hassle-free
for you. There are mainly three types of PMS, Share khan provides.
✔ MUTUAL FUND
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 27
INDIAN CAPITAL MARKET
Everybody talks about mutual funds, but what exactly are they? Are they
like shares in a company, or are they like bonds and fixed deposits? Will I
lose all my money in funds or will I become an overnight millionaire? Big
questions that get answered in just five minutes.
Meaning
Mutual fund industry was started in India with establishment of UTI (1963),
which is only player in the market of mutual fund up to 1987. During that
time mutual fund market refers the unit link schemes like Master Share
and Master Gain.
✔ Online IPO
All quotes posted by users on any online commodity trading systems are
live and firm. They can be acted on with full assurance of a completed
transaction.
The greatest advantage of an online system for trading is that just a click
can be used to hit a bid or lift an offer.
The Online trading system operates almost continuously around the clock,
24 hours a day, seven days a week. This allows any user to extend the
trading day, and easily pass the trading objectives to others in companies
in different time’s zones.
The Off-Line account is trading account through which one can buy and
sell through his/her telephone or by personal visit at Sharekhan Shop. This
a/c is for those who are not comfortable with computer and want to trade.
➢ Offline A/c is the A/c for the investors who are not familiar with the
use of computer.
➢ The A/C opening charges Rs.460 which includes Rs.300 for Demat
account and Rs. 160 for trading account (One time).
Any one who have A/C either of above banks they can use this facility.
Otherwise one has to make fund transfer or withdraw by cheque.
This account enables you to buy and sell shares through our website. You
get features like
✔ MARKET PROFILE:
This report analyzes the Indian retail brokerage industry, taking into
account the health of the capital markets and the intensity of competition
among the brokerage companies. Michael Porters Five Forces Analysis has
been employed to understand industry attractiveness. The report covers
all important segments of the industry and also analyzes the prevailing
market dynamics.
Rs. 5 per Rs.35/- per Rs 10/- per Rs 3/- per 1) Rs. 1 per
certificate demat cert + Rs Certificate + certificate
Min Rs. 35 request 40/- as Courier (max Rs.
form and postal Charges Rs 250/-)
Demat
Rs.2/- for charges 25/- +Rs.25
each courier
certificate charges for
POA A/c
As from the above given chart we can study that the fees charged but
the Sharekhan is comparatively low with its competitors in the market.
Sharekhan provides auto pay in-pay out facility which means investor
do not have to pay for transferring his stocks from trading account to
his respective demat account, it will itself will be transferred as per
investor’s instructions without any charge. While few other players in
market are charging for this facility.
✔ SWOT ANALYSIS:
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 37
INDIAN CAPITAL MARKET
• Strengths:
Well-maintained infrastructure.
Dedicated, Intelligent and Loyal staff.
On-line Trading products.
Lowest brokerage and other charges w.r.t. Competitors.
The best investment advice correct up to 70-90 % through
dedicated research and reports.
Wide product range to enable the clients to choose the best
alternative.
One of the best DPs in India.
A positive image in the existing clients.
• Weaknesses:
Less awareness in the market.
Time consuming process for account opening, resolving the
problems of the customers, etc.
Service quality is not maintained accordingly how they are
promoted.
Opportunities:
• Threats:
Decreasing rates of brokerage in the market.
Increasing competition against other brokers & DPs.
Poor marketing activities for making the company known among
the customer.
A threat of loosing clients for any kind of weakness of the
company.
Indirect threat from instable stock market, i.e., low/no profit of
Sharekhan’s clients would lead them to go for other broker/DP.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 39
INDIAN CAPITAL MARKET
INDIAN
CAPITAL
MARKET
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 40
INDIAN CAPITAL MARKET
✔ BACKGROUND:
The securities market in India witnessed several policy initiatives
since the year 2000, which further refined the market micro-
structure, modernized operations and broadened investment choices
for the investors. The irregularities in the securities transaction in the
last quarter of the previous financial year hastened the introduction
and implementation of several reforms. While a Joint Parliamentary
Committee was constituted to go into the irregularities and
manipulations in all their ramifications in all transactions relating to
securities, decisions were taken to complete the process of
demutualization and corporatisation of stock exchanges to implement
the decision to separate ownership, management and operation of
stock exchanges and to effect legislative changes for investor
protection, and to enhance the effectiveness of SEBI as the capital
market regulator. The mainly event is described with date below:
Date Event
1876 Birth of Bombay Stock Exchange (BSE).
27 Jun Notification issued by government under SC(R)A
1969 prohibiting forward or futures trading.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 41
INDIAN CAPITAL MARKET
2001
2 Jul Major stocks moved to rolling settlement; start of
2001 stock options market.
After the above revolution the Rolling settlement on T+5 bases was
introduced in respect of most active 251 securities from July 2, 2001.
Rolling settlement on T+3 basis commenced for all listed securities
from April 1, 2002 and subsequently on T+2 basis from April 1, 2003.
Trading in index options commenced in June 2001 and trading in
options on individual securities commenced in July 2001. Futures
contracts on individual stock were launched in November 2001.
Futures and options contracts on 49 individual securities were made
available from August 2003. Interest rate futures contract was
launched from June 2003. The year 2001-02 has been quiet eventful
for debt markets in India, with implementation of several important
decisions like setting up of a clearing corporation for government
securities, a negotiated dealing system to facilitate transparent
electronic bidding in auctions and secondary market transactions on
a real time bases an dematerialization of debt instruments. These
developments in the securities market, which support corporate
initiatives, finance the exploitation of new ideas and facilitate
management of financial risks, hold out necessary impetus for
growth, development and strength of the emerging market economy
of India.
The amount of funds supplied by the supplier may not be the amount
needed by the user. Similarly, the risk, liquidity and maturity
characteristics of the securities issued by the issuer may not match
preference of the supplier. In such cases, they incur substantial
search costs to find each other. Search costs are minimized by the
intermediaries who match and bring the suppliers and users of funds
together. These intermediaries may act as agents to match the needs
of users and suppliers of funds for a commission, help suppliers and
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 44
INDIAN CAPITAL MARKET
users in creation and sale of securities for a fee or buy the securities
issued by users and in turn, sell their own securities to suppliers to
book profit. A large variety and number of intermediaries provide
intermediation services in the Indian securities market as may be
seen from table.
12.00% 10.30%
10.00% 9.31% (Source : Merrill Lynch)
8.00%
6.00% 4.60% 4.50% 4.40% 4.20% 3.80%
4.00% 2.30%
2.00%
0.00%
ND
A
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INDIAN CAPITAL MARKET
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US
d
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W
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Source: MSDW
Increasing Consuming/Producing
Age Group
1400
1200 92
1000 49
800 811
598
600
400
200 380 365
0
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 47
2001 2016
0-14 15-59 60&Above
INDIAN CAPITAL MARKET
20 18.4
18 15.9
16 14.5 14.3
13.3
14
12 10.4
10 8.6 8.1
8 7.1 6.9
6
3.4
4 2
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2001-04 2004-07
Po
investment in the country is to increase from $ 120 billion (Rs. 5, 28, 000
crores) in 2004 to $ 208 billion (Rs. 9, 15, 200 crores) by 2007.
With the recent budget there has been some more rationalization of
corporate tax rate structure. With the introduction of further tax reforms
related to equity market, the domestic investors continue to look at
equities as a favorable investment avenue, both in terms of generating
consistent returns and saving tax.
Presence of Price-Rigging
Few financial institutions like the Mutual Funds, LIC and GIC dominate
the Indian stock market scene. Hence, the Indian stock market is
significantly influenced by the actions of these few institutions. It actually
reduces the level of competition in the stock market which is not a healthy
trend for the growth of any stock market.
Like the financial institutions the FIIs also lead the Indian stock market. As
per the projection India will become one of the largest economy of the
world based on its strong economic and demographic factor. As a result of
this FIIs and other investors are attracted towards India. As a result the FIIs
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 51
INDIAN CAPITAL MARKET
taking India’s market at a new high, but it is very important to know that
how long they are investing in India because of a sudden change the
Indian market collapsed.
The next few decades the growth generated by the large developing
countries, particularly the BRICs (Brazil, Russia, India and China)
could become a much larger force in the world economy than it is
now—and much larger than many investors currently expect. If things
go right, the BRICs could become a very important source of new
global spending in the not too distant future.
INTERNATIONAL COMPARISON
(End December 2006)
Particular USA UK Japan German Singapor Hongkon China India
s y e g
As may be seen from table except USASS, no other country has higher turnover
ration than India. At the end of December 2006, Standard and Poor’s (S&P)
ranked India 19th in terms of market capitalization, 17th in terms of total value
traded in stock exchanges and 7th in terms of turnover ratio.
USA
30 UK
JAPAN
41
GERMANY
SINGAPORE
HONGKONG
8
CHINA
3 31 10 INDIA
4
19% USA
24%
UK
JAPAN
8% GERMANY
SINGAPORE
5%
16% HONG KONG
4% CHINA
INDIA
16% 8%
The table shows you the international comparison in various ways, the same
thing are shown in below charts in percentage point of view, the first chart shows
the round about 41% of listed companies in the India which is greater than USA.
The next chart shows the turnover ratio of the various countries the chart shows
the India’s turnover ratio 19% which is next only to USA.
Indian Stock market has witnessed drastic changes during the past
decade due to the broad stock market liberalization measures.
Dematerialization of shares and setting up clearing houses has
virtually eliminated the risks involved in trading. Similarly rapid
strides were made in settlement procedures, corporate governance
standards, introduction of derivative products etc.
GLOBALIZATION
The Indian Stock Market though one of the oldest in Asia being in
operation since 1875, remained largely outside the global integration
process until the late 1980s. A number of developing countries in
concert with the International Finance Corporation and the World
Bank took steps in the 1980s to establish and revitalize their stock
markets as an effective way of mobilization and allocation of finance.
In line with the global trend, reform of the Indian Stock Market began
with the establishment of Securities and Exchange of India in 1988.
However, the reform process gained momentum only in the
aftermath of the external payment crisis of 1991 followed by the
Securities scam of 1992. Among the significant measures of
integration, portfolio investment by FIIs allowed since September
1992, has been the turning point for Indian Stock Market. As of now,
FIIs are allowed to invest in all categories of securities traded in the
primary and secondary segments and also in the derivatives
segment. Following the commissioning of the NSE in June 1994,
GLOBAL INVESTMENT
TCF TCF % of
TCF
1990-
7056 1.4 0.1 83.3 15.2
91
1999-
10444 20.7 29.0 23.1 27.2
00
2000-
10018 40.2 27.6 59.4 -27.2
01
2006-
12638 36.9 7.7 -6.6 62.0
07
Source: Reserve Bank of India Annual Report 2006-07
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 57
INDIAN CAPITAL MARKET
The portfolio flows have been one of the major forces that have
changed the quantum and nature of international capital flows to
India. Portfolio flows include the investment in ADRs /GDRs and
offshore funds in addition to investment by Foreign Institutional
Investors (FIIs). Foreign portfolio investments have been allowed in
India on the basis of the recommendations of the Narasimham
committee.
Ever since the opening up of the market for FIIs, the net investments
by FIIs have always been positive every year except in the year 1998-
99 where the net investment was negative primarily because of the
uncertainty that prevailed after India tested a series of nuclear
bombs in May 1998 and the imposition of the economic sanctions by
the United States, Japan and other industrialized countries. On an
average India has received cross border portfolio investment around
US $ 2.2 billion per year between 1992-93 and 2006-07 of which
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 58
INDIAN CAPITAL MARKET
01
2001-
2021 1505 477 39
02
2006-
979 377 600 2
07
Source: Reserve Bank of India Annual Report 2006-07
The FIIs hold 8.12 per cent of the total outstanding shares of the 469
companies studied as of September 2006, emerging as the biggest
institutional investor, ahead of the mutual funds, domestic financial
institutions and the private corporate bodies. In an overall ranking
they occupy the third position after the promoters and the Indian
public holding higher levels of investment than FIIs.
The above table shows the FIIs holding over the Indian security
market, which says that FIIs are the one of the large investors in
Indian security market. The FIIs holding is the third highest in the
overall holding in Indian security market.
The FIIs have added 291 companies in their equity portfolio of which
127 companies were added during April-June 2007 quarter. The
quantum that FIIs hold varies between 0.01 per cent and 64.26 per
cent stake in these companies. During the year FIIs more than
doubled their stakes in 164 companies and increased their stakes
between 50 per cent and 100 per cent in another 40. In over a 100
companies, the FIIs are the second-largest shareholders after the
promoters.
In the first quarter of the current fiscal, FIIs held over 30 per cent
stake each in 12 companies. In 41 firms, they hold stakes between 20
per cent and 30 per cent and in 55 companies, their holdings range
between 15 per cent and 20 per cent. Finally, in 76 companies they
hold between 10 per cent and 15 per cent stakes.
EFFICIENT
MARKET
HYPOTHESIS
EMH has been the subject of intense debate among academics and
financial professionals. It is a world in which (1) all investors have costless
access to currently available information about the future, (2) all investors
are capable analysts, and (3) all investors pay close attention to market
prices and adjust their holdings appropriately. In such a market a
security’s price is a good indicator of its investment value, fair value or
intrinsic value, wherein it is the present value of the security’s future
prospects, as estimated by well-informed and skillful analysts who use the
information that is currently at hand. That is, an efficient market is one in
which every security’s price equals its investment value at all times and is
an unbiased estimate of its true value.
Contrary to popular view, market efficiency does not require that the
market price be equal to the true value at every point of time. All it
requires is that errors in the market price be unbiased, that is, prices can
be greater than or less than true value as long as these deviations are
random.
EMH evolved in the early 1960s from the PhD dissertation of Eugene
Fama. Fama persuasively made the argument that in an active market
that includes many well-informed and intelligent investors, securities will
be appropriately priced and reflect all available information. If a market is
efficient, where large number of rational, profit maximisers actively
compete, with each trying to predict the future market values of individual
securities and where important current information is almost freely
available to all participants, no information or analysis or perception can
be expected to result in out-performance of an appropriate benchmark.
Early tests of weak form market efficiency failed to find any evidence
that abnormal profits could be earned trading on information related to
past prices. More recent studies, however, have indicated that investors
may under react to current types of information in the short term, but
overreact in the long term, driving security prices away from this
investment values. As a result, it may be possible to earn abnormal profits
by buying either securities that have recently risen in price or those that
have fallen in price over a longer time period. These two strategies are
known as ‘momentum’ and ‘contrarians’ strategies respectively.
Semi strong form EMH states that stock prices fully reflect all publicly
available information at its best and quickest. Usually, when talked about
efficient markets, semi strong form of efficient markets is meant, because
of the strict laws governing the use of insider information (a form of
private information) to make buying and selling decisions, as that involves
restricting the analysis to the publicly available information that analysts
use in making recommendations. However, public information also
includes all non-market information such as news about the industry or
various economies, the current political state abroad, etc.
The implication of semi strong form EMH is that investors should not
be able to derive above average rates of return from public information. In
other words, fundamental analysis is of no use.
Strong form EMH suggests that all information, both public and
private has been discounted in the efficient markets, where it would be
impossible to earn abnormal profits (other than by chance) by using
information whatsoever. It encompasses both weak form and semi strong
form and implies that no opportunities should exist for any investor to
derive above average rates of return, even with the use of insider
information. Like the semi strong version, tests of this hypothesis provided
mixed results. However, the bulk of tests were supportive.
Semi Strong:
Weak Strong
All public
Form: All Public &
Private Information
Form: Information
Past
Prices
Note that in both the cases the horizontal axis is the time line and the
vertical axis is the security’s price. Observe that shortly before the news
arrived, prices were Rs. 950 and Rs.545 for Infosys and Visual Soft
respectively. With the arrival of the information the prices immediately
move intraday to their new equilibrium level of Rs. 1132 and Rs.505
respectively, where it stays until additional information arrives.
Figure-1.1
950Figure
T1132
Time
=P rice 1.1:
11th July, Arrival of Good News
2007
in Rs. about acc
Figure-1.2
Figure
TTime
545
505
=Price 1.2:
19th July, Arrival of Bad News
2007
in Rs. about WIPRO
RESEARCH
ANALYSIS
-
AUTOMOBIL
E INDUSTRY
400 375
350
Stock Population 2006
300
250
200
Series1
150
73 83
100 56
38 41
50 20
-3 0.04 13
0
-50
W IA
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N.
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8 7.3 7.4
7 7.1 7.1 7.2
7 6.6
5.7
6 5.3
5 4.3
4
0
SA
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a
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Scale of 1 to 10 with 1 = Low and 10 = High;
( Source: IMD Competitiveness Yearbook 2006)
Government Initiatives
Source: SIAM
BAJAJ AUTO
Company Description
• Hero Honda has launched the Splendor NXG to compete with the
Bajaj Pulsar.
• BAL is planning to launch the ‘Pulsar 220cc’, a new entry level bike.
Sector View
Face Value of Rs 10
Share
1200
1000
800
600
400
200
0
Apr-06 May- Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07
06
TIME
Share Holding %
Pattern
Share Holding
Promoters 29.80
Pattern
Institutional 25.92
Investors
Financial Details
NET EPS
YEAR SALES PAT EPS
GROWTH
END (Rs M) (Rs)
(Rs M) (%)
• In 4QFY07, Bajaj Auto reported Net Profit of Rs 2.6b (3% increase YoY),
largely driven by higher sales and higher other income.
• Sales grew by 28% YoY to Rs 16.5b led by better product mix. The
realization per unit for Bajaj Auto at Rs 38,910 (up 5.2% YoY and 11.3%
QoQ) was the highest in the last several quarters. However, higher other
expenditure resulted in only a 10 bp increase QoQ in EBITDA margin.
sales dropping 11% YoY. Exports grew by 38% YoY, once again led by a
64% growth in motorcycles.
SALES IN UNITS
4Q FY 4Q FY GR GR
FY 07
07 06 % %
Total Sales
Scooters 10276
20418 49640 -59 -42
geared 2
Scooters un-
4971 12039 -59 31084 -43
geared
22198
3 Wheelers 53725 60437 -11 -3
5
39343 18246
Grand Total 479 22 20
7 99
Exports
12395
Motorcycles 41050 25054 64 50
0
54853
Total Exports 42485 38 19692 20
8
Source: Company
Motorcycles
Three Wheelers
Company Description
• The continued growth in the tractor sector will benefit M&M as it is the
market leader.
• Increased focus by the government on rural spending in this budget will
benefit tractor
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 93
INDIAN CAPITAL MARKET
manufacturers.
• The company’s increased focus on exports and the well acceptance of
the Scorpio,
despite strong competition from MNC players.
Recent Developments
Mahindra has tied up with Renault for manufacturing the ‘Logan’ from
FY07
• We expect M&M to see 11% volume growth in UVs over FY07-09 and a
12% volume growth in tractors.
• M&M trades at a P/E of 10.6x and EV/EBITDA of 5x on standalone FY08
estimates.
• On a consolidated basis, the stock trades at 8.6x FY08. M&M remains
the best bet in the sector, as valuations are at discount to its peers. We
reiterate Buy with a target price of Rs 598.
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 94
INDIAN CAPITAL MARKET
Sector View
Face Value of
Rs 10
Share
600
500
400
300
200
100
0
Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar-
06 06 06 06 06 06 06 06 06 07 07 07
Time
Share Holding %
Pattern
Promoters 23.98
Institutional 54.40
Investors
Financial Details
NET EPS
YEAR SALES PAT EPS
GROWTH
END (Rs M) (Rs)
(Rs M) (%)
Mahindra & Mahindra's (M&M) net sales, EBITDA and net profit grew
27%, 23% and 32% in 4QFY07 to Rs 19.1b, Rs 2.1b and Rs 1.5b
respectively, in-line with our expectation. EBITDA margins were impacted
because of higher other expenses. Margins declined 40bp YoY and 90bp
QoQ to 11% in 4QFY07.
For FY07, M&M’s total income, EBITDA and net profit grew 45%, 42%
and 52% to Rs 66.6b, Rs 7.7b and Rs 5b, respectively. All the subsidiaries
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 97
INDIAN CAPITAL MARKET
The business outlook for M&M remains positive. M&M, with its rural-
centric product line, will register a 12% YoY growth in tractor volumes over
FY07-08E. We expect M&M to register 11% YoY volume growth in utility
vehicles (UV) over FY07-08, following a strong 23% growth in FY07.
Moreover, exports of UVs and tractors and rise in three wheeler sales will
provide additional growth drivers to the company.
Q4 Q4 %C FY07 FY06 %C
FY07 FY06 H H
Automotive
Total 04 61
Source: Company
Passenger Vehicles
Source: Company
Farm Equipment
Source: Company
Outlook
CONCLUSIO
N
CONCLUSION
• After few years India would become the larger force in the world
economy.
• The growth of the Indian economy is becoming high, which leads to the
higher returns in the capital market.
• India’s constantly increasing growth is attracting the FII’s interest in the
Indian markets.
• There will be more and more capital flow from the developed countries
in India through FIIs and FDI.
• India has became very powerful in the automobile sector because of the
high growth in the automobile sector.
• From the suggestion the investors should be very cautious in terms of
investing the money.
FINDINGS
✔ FINDINGS:
LIMITATIONS
✔ LIMITATIONS:
SUGGESTION
S
✔ SUGGESTIONS:
Risk and return are really important, but your most important point
might actually be this: I am investing for how long. Your time horizon will
INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH, AHMEDABAD. Page 112
INDIAN CAPITAL MARKET
determine your style in a big way. Day traders have very short horizons -
they don’t use fundamental analysis (nor do they need to). Many
individual investors, whether or not they admit it, get caught up in gaming
the next quarter’s earning surprise, and are therefore investing for about
three months.
They may move the market; they may know the people who move
the market (for clarification institutions, not individuals, move the market).
The short-term horizons are not bad, but an individual investor should
realize they are playing a tough game. It may be wise to set a longer time
frame and find good companies.
At first glance, this is sound like common sense, but far too often
investors simply do not practice the risk-mitigation tactic of avoiding big
mistakes. Somewhat instinctively, investors seem to hunt for big game –
defending against losses. But, if investors can manage to avoid losses,
they will really do wonders for their average. So, the investors’ portfolio
should very defensive so that losses avoided.
Investors start to believe in fantasy when they think they really know
their companies. All good investors want to know as much as possible
about their investments, but a company is an onion you can never fully
peel. Every piece of information is valuable and if investors have it, the
odds are tilted a bit in their favor, enhancing the hedge against failure.
But, investor making an educated investment based on incomplete
information.
So, since investor cannot know everything and much of the market
commentary is suspect. Look elsewhere and trust real experts. See what
true industry experts say, what industry associations say, what customers
say, what competitors say and so on.
7. Be Different
expertise that will help them find the growing companies worthy of their
money.
After done this fundamental analysis we can say that Bajaj Auto
Company is better for investment compare to Mahindra & Mahindra.
Because Bajaj Auto has different product portfolio and the profit of the
company is also better than Mahindra & Mahindra.
GLOSSARY
GLOSSARY
LIST of ABBREVIATIONS:
CM Capital Market
Co. Company
DP Depository Participant
FI Financial Institution
BIBLIOGRAP
HY
BIBLIOGRAPHY
REFERECE BOOKS
WEB SITES
➢ www.nseindia.com
➢ www.bseindia.com
➢ www.indinfoline.com
➢ www.moneycontrol.com
➢ www.business-standard.com
➢ www.rbi.org
➢ www.sebi.org
➢ www.sharekhan.com
Disclaimer