SUMMER TRAINING PROJECT

ON FUNDAMENTAL ANALYSIS AND ITS APPLICATION

AT

INDIABULLS
Submitted in partial fulfillment of the requirement for the degree of

MASTERS OF BUSINESS ADMINISTRATION

OF

Punjab Technical University Jalandhar

(SESSION 2010-2011)

SUBMITTED BY: Rahul Pathania

PROJECT ADVISOR

ChapterNo.

CONTENT

PAGE NO.

1 2 2.1 2.2 2.3 2.4 3 3.1 3.2 4 5 6 6.1 6.2 6.3 6.3.1 6.3.2 6.3.3 6.3.4 7 7.1 7.2

DECLARATION ACKNOWLEDGMENT ABSTRACT INTRODUCTION COMPANY PROFILE PRODUCTS AND SERVICES OFFERED BY INDIABULLS INDIABULLS EQUITY ANALYSIS SWOT ANALYSIS OF INDIABULLS ANALYSIS OF THE SURVEY RESEARCH METHODOLOGY SCOPE LIMITATIO NS WORK DONE DURING TRAINING PERIOD DATA ANALYSIS & INTERPRETATION FUNDAMENTAL ANALYSIS ECONOMIC ANALYSIS INDUSTRY ANALYSIS INFOSYS TECHNOLOGIES LTD. CASH FLOW STATEMENT BALANCE SHEET RATIO ANALYSIS HISTORICAL DATA RECOMMENDATIONS AND CONCLUSION REFERENCES ANNEXURE

3 4 5 6 14 16 17 34 36 40 42 42 43 45 56 63 67 79 83 84 85 86 94 97 98

LIST OF TABLES

Table no. Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7

Particulars How did you come to know about your stock broking firm? What is annual family income? What is your preference avenue for investment? You are more interested in? How do you trade? On what basis do you buy a scrip? What is the value of your portfolio?

Page no. 46 47 48 49 50 51 52

Table 8

Are you satisfied with the services of the current broker firm?

53

Table 9 If some other broker firm promises you to provide better services will you shift to that firm?

54

LIST OF FIGURES 4

Fig. no. Fig. no. 1 Fig. no. 2 Fig. no. 3 Fig. no. 4 Fig. no. 5 Fig. no. 6 Fig. no. 7 Fig. no. 8 Fig. no. 9

Particulars How did you come to know about your stock broking firm? What is annual family income? What is your preference avenue for investment? You are more interested in? How do you trade? On what basis do you buy a scrip? What is the value of your portfolio? Are you satisfied with the services of the current broker firm?

Page no. 46 47 48 49 50 51 52 53 54

If some other broker firm promises you to provide better services will you shift to that firm? Fig. no. 10 Fig. no. 11 Fig. no.12 Fig. no. 13 Occupation of investor Market share of each brokerage firm Income of investors surveyed Value of portfolio investors surveyed 34 35 36 37

DECLARATION
5

I, RAHUL PATHANIA, a student of M.B.A., QUEST INFOSYS GROUP OF Institute of Management and Technology, Mohali, hereby declare that the project report entitled Fundamental Analysis and its Application is my original work and result of my own efforts. This has not been submitted in part or full towards any other degree or diploma.

(Rahul Pathania) M.B.A.

ACKNOWLEDGEMENT
Preservation, inspiration and motivation have always played a key role in the success of any venture. In the present world of competition and success, training is like a bridge between theoretical and practical working; willingly I prepared this particular Project. First of all I would like to thank the supreme power, the almighty god, who is the one who has always guided me to work on the right path of my life. I would like to thank Mr. Goldy Aggarwal for granting me permission to under take the training in their esteemed organization. I express my sincere thanks to & others faculty members of M.B.A. department, for the

valuable suggestion and making this project a real successful. I also thanks to Mr. Rahul Gupta (Branch manager)and Mr. Jagjit Singh (Relation-ship manager) for his time-to-time guidance and support in completing the project. I also thank the other staff of INDIABULLS who devoted their valuable time by helping me to complete my project. Last but not least, my sincere thanks to my parents and friends directly or indirectly who helped me to bring this project into the final shape. Rahul Pathania

ABSTRACT
Share market fluctuates even Prime Minister Sneezes. This implies that there is not such hard and fact rule which can be applied to remain always in profit. But if these indicators are known to investors then it will certainly help to reduce the risk. Fundamental analysis helps in reducing risk by giving a right to the performance of the shares. The project undertakes detailed discussions on fundamental analysis . A survey was conducted to know rationale and psychology of the investors. Project also gives me an insight how transactions are executed at India Bulls.

CHAPTER-I

INTRODUCTION

INTRODUCTION
The project covers fundamental analysis of certain scrips that accounts for major share in BSE-30 SENSEX. The shares that have been included cover almost each and every sector of the Indian Economy. The shares have been selected on the basis of the market capitalization and Beta (unsystematic risk) as on 21st March, 2008. The shares from a particular sector which has more market capitalization and less Beta have been taken and certain indicators have been applied to these shares.

STOCK MARKET IN INDIA

The emergence of stock market can be traced back to 1830. In Bombay, business passed in the shares of banks like the commercial bank, the chartered mercantile bank, the chartered bank, the oriental bank and the old bank of Bombay and shares of cotton presses. In Calcutta, Englishman reported the quotations of 4%, 5%, 6% loans of East India Company as well as the shares of the bank of Bengal in 1836. This list was a further broadened in 1839 when the Calcutta newspaper printed the quotations of banks like union bank and Agra bank. It also quoted the prices of business ventures like the Bengal bonded warehouse, the Docking Company and the stoam tug company. Between 1840 and 1850, only half a dozen brokers existed for the limited business. But during the share mania of 1860-65, the number of brokers increased considerably. By 1860, the number of brokers was about 60 and during the exciting period of the American Civil war, their number increased to about 200 to 250. the end of American Civil war brought disillusionment and many failures and the brokers decreased in number and prosperity. It was in those troublesome times between 1868 and 1875 that brokers organized an informal association and finally as recited in the Indenture constituting the Articles of Association of the Exchange. On or about ninth day of July one thousand and eight hundred and seventy-five, a few native brokers doing brokerage business in shares and stocks resolved upon forming in Bombay an association for protecting the character, status and interest of native share and stock brokers and providing a hall or building for the use of the members of such association. As a meeting held in the broker Hall on the 5th day of February, 1887, it was resolved to execute a formal deal of association and to constitute the first managing committee and to appoint the first trustees. Accordingly, the Articles of Association of the

10

Exchange and the Stock Exchange was formally established in Bombay on 3rd day of December, 1887. The Association is now known as The Stock Exchange. The entrance fee for new member was Re.1 and there were 318 members on the list, when the exchange was constituted. The numbers of members increased to 333 in 1896, 362 in 1916and 478 in 1920 and the entrance fee was raised to Rs.5 in 1877, Rs.1000 in 1896, Rs.2500 in 1916 and Rs. 48,000 in 1920. At present there are 23 recognized stock exchanges with about 6000 stock brokers. Organization structure of stock exchange varies. 14 stock exchanges are organized as public limited companies, 6 as companies limited by guarantee and 3 are non-profit voluntary organization. Of the total of 23, only 9 stock exchanges have been permanent recognition. Others have to seek recognition on annual basis. These exchange do not work of its own, rather, these are run by some persons and with the help of some persons and institution. All these are own as functionaries on stock exchange. These are 1. 2. 3. 4. Stockbrokers sub-broker market makers Portfolio consultants etc. Stock brokers are the members of stock exchanges. These are the persons who buy, sell or deal in securities. A certificate of registration from SEBI is mandatory to act as a broker. SEBI can impose certain conditions while granting the certificate of registrations. It is obligatory for the person to abide by the rules, regulations and the buy-law. Stock brokers are commission broker, floor broker, arbitrageur etc. Detail of registered brokers Total no. of registered brokers as on 31.03.2004 9687 135 303 Addition during the year 2004-05 Cancellation/Surrender of memberships Total no. of registered brokers as on 31.03.2005 9519

1.) Stockbrokers

11

2.) Sub-broker A sub-broker acts as agent of stock broker. He is not a member of a stock exchange. He assists the investors in buying, selling or dealing in securities through stockbroker. The broker and sub-broker should enter into an agreement in which obligations of both should be specified. Sub-broker must be registered SEBI for a dealing in securities. For getting registered with SEBI, he must fulfill certain rules and regulation. 3.) Market Makers Market maker is a designated specialist in the specified securities. They make both bid and offer at the same time. A market maker has to abide by byelaws, rules regulations of the concerned stock exchange. He is exempt from the margin requirements. As per the listing requirements, a company where the paid-up capital is Rs. 3 crore but not more than Rs. 5 crore and having a commercial operation for less than 2 years should appoint a market maker at the time of issue of securities. 4.) Portfolio consultants A combination of securities such as stocks, bonds and money market instruments is called as portfolio. Whereas the portfolio consultants are the persons or firms or companies who advise or direct or undertake the management or administration of securities or funds on behalf of their clients. Indian Stock Exchange India Stock Exchanges are a structured marketplace for the proper conduct of trading in company stocks and other securities. There are 23 recognized stock exchanges in India, including the Over the Counter Exchange of India for providing trading access to small and new companies. The main services of the India Stock Exchanges all over the country are to provide nation-wide services to investors and to facilitate the issue and redemption of securities and other financial instruments. The introduction of the concept of the stock exchanges in India came with the breaking of the American Civil War and the idea materialized first in 1874 with the foundation of the Bombay Stock Exchange at the Dalal Street in Mumbai.

12

Currently, in all the India Stock Exchanges the trading system is computerized for more efficient and transparent trading. There has been a significant boom in the degree of development and volume of trading in the stock exchanges . The two most important exchange houses of the Indian stock market are the Bombay Stock Exchange and the National Stock Exchange. Many of the regional 13

Stock exchanges have obtained the membership of these two stock exchanges in India. The index of the Bombay Stock Exchange, BSE Sensex is a valueweighted index composed of 30 companies. Another significant feature of the India Stock Exchanges is the regulatory agency, Securities and Exchange Board of India or SEBI which supervises the activities of stock markets, regulates the functioning of stock exchanges and intermediaries and registers Foreign Investors trading in Indian scrips.

Recognized Stock Exchanges in India

Name THE BOMBAY STOCK EXCHANGE The Ahmedabad Stock Exchange Association Ltd,. BANGALORE STOCK EXCHANGE LTD,.

Address Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai- 400 001. Manek Chowk, Ahmedabad - 380 001 'M' Block, First Floor, Unity Building, J.C. Road, Bangalore - 560 002. 217,Budhraja Building, Jharpada Cuttack Road, Bhubaneswar, Orissa - 751 006. 14

BHUBANESHWAR STOCK EXCHANGE ASSN., LTD,.

THE CULCUTTA STOCK EXCHANGE ASSOCIATION LTD,. COCHIN STOCK EXCHANGE LTD., THE DELHI STOCK EXCHANGE ASSN. LTD., THE GAUHATI STOCK EXCHANGE LTD,. THE HYDERABAD STOCK EXCHANGE LTD,. JAIPUR STOCK EXCHANGE LTD,.

7, Lyons Range , Calcutta - 700 001. Veekshanam Road P.B. 3529,Ernakulam, Cochi - 682 035. 3&4/4B,Asaf Ali Road, New Delhi 110 002. Saraf Building Annexe A.T. Road, Guwahati - 781 001. Bank Street, Hyderabad - 500 001. Rajasthan Chamber Bhawan, M.I. Road, Jaipur - 302 003. 4th Floor, Rambhavan Complex, Kodialbail, Mangalore - 575 003. Lajpat Rai Market, Clock Tower, Ludhiana 141 008. 'Exchange Building', Post Box No.183, 11, Second Line Beach, Chennai - 600 001 67, Bada Sarafa, Indore - 452 002. Bihar Industries Assn. Premises, Sinha Library Road, Patna - 800 001. 1177,Budhwar Peth, Bank of Maharashtra Bldg., 2nd Floor, Bajirao Road, Pune 411 002. 4,Swaminarayan Gurukul Bldg., Dhebarbhai Road, Rajkot - 380 002.

KANARA STOCK EXCHANGE LTD. THE LUDHIANA STOCK EXCHANGE ASSN. LTD. MADRAS STOCK EXCHNAGE LTD. MADHYA PRADESH STOCK EXCHANGE LTD. THE MAGADH STOCK EXCHANGE LTD.

PUNE STOCK EXCHANGE LTD.

SAURASHTRA KUTCH STOCK EXCHANGE LTD.,

15

THE UTTAR PRADESH STOCK EXCHANGE ASSN. LTD. VADODARA STOCK EXCHANGE LTD.

Padam Towers, 14/113,Civil Lines, Kanpur - 208 001 101, Paradise Complex, Tilak Toad, Sayaji Gunj, Vadodara - 390 005. Chamber Tower, 8/732,Avvinashi Road, Coimbatore 641 018. Kingsway Building, 345, Bombay Bazar, Meerut Cantonment - 250 001. Maker Towers "F" Cuffe Parade, Bombay - 400 005. Mahindra Towers, A-Wing, RBC, Worli, Mumbai 18

COIMBATORE STOCK EXCHANGE

MEERUT STOCK EXCHANGE LTD.

OTC EXCHANGE OF INDIA. THE NATIONAL STOCK EXCHANGE OF INDIA LTD. THE INTER-CONECTED STOCK EXCHANGE OF INDIA (ISE)

16

CHAPTER-II

COMPANY PROFILE

17

ABOUT INDIABULLS
Indiabulls is India's leading retail financial services company with 135 locations spread across 95 cities. While our size and strong balance sheet allow us to provide you with varied products and services at very attractive prices, our over 750 Client Relationship Managers are dedicated to serving your unique needs. Indiabulls is lead by a highly regarded management team that has invested crores of rupees into a world class Infrastructure that provides our clients with real-time service & 24f7 access to all information and products. Our flagship Indiabulls Professional Network offers real-time prices, detailed data and news, intelligent analytics, and electronic trading capabilities, right at your fingertips. This powerful technology is complemented by our knowledgeable and customer focused Relationship Managers. We are creating a world of Smart Investor. Indiabulls offers a full range of financial services and products ranging from Equities to Insurance to enhance your wealth and hence, achieve your financial goals. Indiabulls' Client Relationship Managers are available to you to help with your financial planning and investment needs. To provide the highest possible quality of service, Indiabulls provides full access to all our products and services through multi-channels. Indiabulls offers a full range of financial services and products ranging from Equities to Insurance to enhance your wealth and hence achieve your financial goals. Our Indiabulls Professional Network offers real-time prices, detailed data and news, intelligent analytics, and electronic trading capabilities, right at your finger-tips. This powerful technology is complemented by our knowledgeable and customer focused Relationship Managers. Indiabulls' Relationship Managers are available to you to help with

18

your financial planning and investment needs. To provide the highest possible quality of service, Indiabulls provides fun access to all products and services through multi-channels.

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PRODUCTS AND SERVICES OFFERED BY INDIABULLS

Equities & Derivatives Indiabulls Equity Analysis Comprehensive services for independent investors, active traders & Non-Resident Indians. Premium research on 401+ companies updated daily. Depository Services Insurance Value added services for seamless delivery Take care of your life while you take care business. of

EQUITY AND DERIVATIVES

Our Retail Equity Business caters to the needs of individual Indian and Nonresident Indian (NRI) investors. Indiabulls offers broker assisted trade execution, automated online investing and access to aIl IPO's. Through various types of brokerage accounts, Indiabulls offers the purchase and sale of securities which includes Equity, Derivatives and Commodities Instruments listed on National Stock Exchange of India Ltd (NSEIL), The Stock Exchange, Mumbai (BSE) and NCDEX. Indiabulls Signature Account - Comprehensive services including research and investing guidance for independent investors. Power Indiabulls - Indiabulls is dedicated to empower Active Traders through personal service and advanced trading technology. Non-Resident Indian (NRI) Investor Services - With an extensive range of investment products, you will discover an unwavering commitment to helping you

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INDIABULLS EQUITY ANALYSAS

Building and maintaining your ideal portfolio demands objective, dependable information. Indiabulls Equity Analysis helps satisfy that need by rating stocks based on carefully selected, fact-based measures. And because we're not focused on investment banking, we don't have the same conflicts of interest as traditional brokerage firms. This objectivity is only one important difference in our ratings. A to E ratings are applied to over 401 Indian headquartered stocks using a wide variety of investment criteria from four broad categories. The Indiabulls Equity Analysis model attempts to gauge investor expectations, since stock prices tend to move in the same direction as changes in investor expectations. Stocks with low and potentially Improving investor expectations tend to receive A or B ratings Stocks with high and potentially falling investor expectations tend to receive D or E ratings Over the next 12 months, A-rated stocks have a return outlook of strongly outperforming the market while E-rated stocks have a return outlook of strongly underperforming the market.

DEPOSITORY SERVICES
Indiabulls is a depository participant with the National Securities Depository Limited and Central Depository Services (India) Limited for trading and settlement of dematerialized shares. Indiabulls performs clearing services for all securities transactions through its accounts. We offer depository services to create a seamless transaction platform - execute trades through Indiabulls Securities and settle these transactions through the Indiabulls Depository Services. Indiabulls Depository Services is part of our value added services for our clients that create multiple interfaces with the client and provide for a solution that takes care of all your needs.

21

India bulls products

Indiabulls financial services Ltd.
Indiabulls Financial Services Ltd is listed on the National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange. The market capitalization of Indiabulls is around USD 3,330 million (30th September 2007). Consolidated net worth of the group is around USD 950 million (30th September 2007). Indiabulls and its group companies have attracted more than USD 800 million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital. Business of the company has grown in leaps and bounds since its inception. Revenue of the company grew at a CAGR of 159% from FY03 to FY07. During the same period, profits of the_company_grew_at_a_CAGR_of_184%. Indiabulls became the first company to bring FDI in Indian Real Estate through a JV with Farallon Capital Management LLC, a respected US based investment firm. Indiabulls has demonstrated deep understanding and commitment to Indian Real Estate market by winning competitive bids for landmark properties in Mumbai and Delhi.

Consumer Finance

Indiabulls being a retail focused organization fulfills the credit need of a large percentage of population in India. The key aspect of Indiabulls business model is to provide an extremely unique customer experience. The blend of power of the Internet with personalized services allows Indiabulls to expand its geographical coverage and capture a greater share in the highly competitive retail market. We offer consumer loans, home loans, personal loans, securities brokerage, and other financial products and services to retail customers from across 640 Indiabulls offices in 127 leading cities of the country.

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Mortgage Loans

Indiabulls has commenced lending of Mortgage Loans to prospective customers under the flagship of Indiabulls Housing Finance Ltd. Here we enable home-seekers to access finance to buy their homes. We also provide plot loans, Loan against Residential, Commercial and Rental Property, thereby enabling the borrower to leverage the property owned to fund any legitimate needs be it Business Expansion, Child's Education, Child's Marriage or for Holiday Abroad.

23

Real Estate

Indiabulls Real Estate Limited (IREL) with projects covering a total land area in excess of 10000 acres is one of the largest listed real estate companies in India and a leading national player across multiple realty and infrastructure sectors. IREL projects include High-end Office and Commercial Spaces, Premium Residential Developments, Integrated Townships, Luxury Resorts and Special Economic Zones. IREL is partners with internationally renowned consultants and construction companies for its developments at various stages of execution.

Indiabulls Power Services Limited (IBPSL)

Founded in September 2007, Indiabulls Power Services Limited (IBPSL) is part of Indiabulls Group. IBPSL has been founded as a subsidiary of Indiabulls Real Estate Limited (IBREL). Indiabulls has ventured into the power business to take advantage of the opportunity presented by the huge gap in Demand and Supply of power in India. With Electricity Act 24

2003 easing the regulatory environment and with State Utilities becoming financially healthy over the last couple of years, private participation in the Power Sector is booming, providing excellent opportunities for investment and nation building. The National Electricity Policy (NEP) notified in 2005 has envisaged an ambitious target of creation of 5% spinning reserve by 2012. This requires obliteration of energy shortage across the country. However, even after one year of NEP notification, the statistics diverge significantly from what is envisaged. Instead of reduction in peak and energy shortages, they have increased significantly. In fact for the period between April 2006 and May 2006 energy shortage and peak shortage in the country were 10.7% and 13.1% respectively.

Indiabulls Wholesale Services Ltd (IBWSL)

Founded in mid 2007, Indiabulls Wholesale Services Limited (IBWSL) is a part of Indiabulls Group, one of the top 25 business houses in India with a combined market capitalization of over US$ 7.5 billion across different businesses. IBWSL has been founded as a subsidiary of Indiabulls Real Estate Limited (IBREL). The company has been formed to take advantage of the massive organized retail opportunity that is available in India, Some key facts about the Indian retail industry: 1. Retail is Indias largest industry, accounting for over 10 per cent of the countrys GDP and around eight per cent of the employment. 2. The market size of Indian retail industry is about US $312 billion to grow to US $ 425 billion by 2010. 3. Organised retailing comprises only 2.8 per cent / US $ 9 billion of the total retailing market. 4. The organised retail sector is expected to grow to a US $ 70 billion market by 2010. 25

IBWSL managed by highly qualified professionals having years of experience in organised retail and related industries is very well positioned to be the top player in the Indian retail industry, some of the factors that contribute to achieving this goal are: 1. Strong Pan-India presence planned with big box retail stores, cash and carry operations, with hypermarkets and specialty stores to follow. 2. First phase of 5 wholesale cash & carry stores to be launched in early 2008. 3. An investment of Rs. 1,500 crores (US $ 325 million aprox) will fuel the first phase of the retail foray for IBWSL. 4. Partnerships with top International Brands, Retailers and Investors will offer access to world class goods in India. 5. Full fledged destination retailing which includes multiplexes, gaming/ fitness, food court facilities etc

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GROWTH &ACHIEVMENTS

GROWTH OF INDIABULLS
27

Indiabulls real estate Pvt ltd India bulls insurance Advisory Pvt ltd India bulls credit Services ltd Indiabulls securities Pvt ltd

Indiabulls financial services ltd

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Increasing Number of Customers

500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 Mar-03 Mar-04 Mar-05 Jun-05 Dec-05 Jun-06 16,455 30,498 79,932 108,324 178,800 330,000

450,000

Jun-08

What Customers Expect

Wide range of services under one roof

What Indiabulls Offers

Extensive product range Enhanced customer experience Personalized service through relationship managers Understands local market dynamics Expanding geographical and online presence

24 Hour Support & Ease of access

Personalized Attention

Indiabulls has emerged as one of the leading and fastest growing financial company in less than two year, since its initial public offering in September 2004. It has a market capitalization of around USD 800 million and consolidated net worth of around USD 500 million.

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2000-01

Indiabulls Financial Services Ltd. established Indias one of the first trading platforms with the development of an in house team. Indiabulls expands its service offerings to include Equity, F&O, Wholesale Debt, Mutual fund, IPO distribution and Equity Research. Indiabulls ventured into Insurance distribution and commodities trading. Company focused on brand building and franchise model. Indiabulls came out with its initial public offer (IPO) in September 2004. Indiabulls started its consumer finance business Indiabulls entered the Indian Real Estate market and became the first company to bring FDI in Indian Real Estate.

2001-03

2003-04

2004-05

Indiabulls won bids for landmark properties in Mumbai.

Indiabulls has acquired over 115 acres of land in Sonepat for residential home site development. Merrill Lynch and Goldman sac, one of the renowned investment banks in the world have increased their shareholding in Indiabulls. Indiabulls is a market leader in securities brokerage industry, With around 31% share in online trading, Farallon Capital and its affiliates, the worlds largest hedge fund committed Rs. 2000 million for Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance Ltd.

2005-06

Steel Tycoon Mr. LN Mittal promoted LNM India Internet venture Ltd. acquired 8.2% stake in Indiabulls Credit Services Ltd.

30

Indiabulls entered in a 50/50 joint venture with DLF, Kenneth Builders

& Developers (KBD). KBD has acquired 35.8 acres of land from Delhi Development Authority through a competitive bidding process for Rs 450 crore to develop residential apartments.

2006-07

Indiabulls Financial Services Ltd. is included in the prestigious Morgan

Stanley Capital International Index (MSCI). Farallon Capital has agreed to invest Rs. 6,440 million in Indiabulls Financial Services Ltd.

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GEOGRAPHICAL AREA COVERAGE

900 800 700 600 500 400 300 200 100 0 '03 March '04 March '05 March '05 June '06 June '07 June '08 June '03 March '04 March '05 March '05 June '06 June '07 June '08 June

Indiabulls starts its journey in year 2001 with a registered office in New Delhi. Year 2003 describe that it have only 25 branches in India .But now it reaches 414 branches in June 2006.It shows its continuously growth.

INCREASE IN NO. OF RMS

32

Indiabulls is serious about maintaining the relations with the customer and that is why they appointed the relationship managers within their premises to offer the best and delightful services to the customer.

4,50 0 4,00 0 3,50 0 3,00 0 2,50 0 2,00 0 1,50 0 1,00 0 50 0 0 M r-0 a 3 M r-0 a 4 M ar-05 J un-05 J -06 un 1 24 476 97 0 1,8 93 3 87 ,1

4 0 ,00

J -0 un 8

Increased penetration of customers through RMs

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SWOT ANALYSIS OF INDIABULLS

A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimized to achieve desired results.

1. STRENGTHS NATIONAL PRESENCE: Indiabulls has a national presence. It has an advantage over the local players like master capital and competent Finman because Indiabulls can also cater to the needs of the investors in other parts of the country. GOODWILL: Due to its national presence, Indiabulls has a very good brand image. It has its own identity in this particular business. SERVICES AND PRODUCTS: The survey conducted revealed that the services provided by the Indiabulls like portfolio management services and marginal funding gives it a huge advantage over other players competing in the city. Indiabulls has got a very wonderful and powerful software.

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2. WEAKNESSES ACCOUNT OPENING CHARGES: Today's scenario is very competitive. All other competitors are taking very nominal charges for the account opening but the account opening charges are quite high as compared to its competitors. So, its it major weakness. BROKERAGE: The brokerage charges are a little bit high than the competitors. So it is facing a stiff competition from its competitors. 3. OPPORTUNITY HUGE UNTAPPED MARKET: Inspite of its national presence, there is quite huge untapped market. So they can expand its business. BANKING SECTOR: Indiabulls has entered into banking sector. They are into personal loans. 4. THREATS SEBI GUIDELINES: If SEBI give certain guidelines, which can adversely affect the Indiabulls, it can prove to be major threat. COMPETITORS: The competitors like Kotak Securities are the major threat to Indiabulls at the National level. But in Chandigarh other local players like Competent Finman is the major threat to its business.

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ANALYSIS OF THE SURVEY

SAMPLE SIZE: 50 A survey was conducted to know the rationale and psyche of the investors in the Chandigarh city in various broker firms. This survey was conducted for 7 days and data was collected. The questionnaire was designed in such a way that we can easily come to know about how investors invest in the security and how other broker firms lack behind India Bulls and how they are ahead of India Bulls. The suggestions will be given to India Bulls on the basis of the survey conducted and also the plus points of India Bulls will be told to them so that they can concentrate on those points and can grasp more market share in Chandigarh city and nearby places. The survey was conducted all over Chandigarh and survey consist if 60% serviceman, 20% others like retired persons, small retailers and rest 20% were businessman. I asked the executives that only service class people invest. They told that generally businessmen don't come to their places. They place their orders from their place only and they come very rare.
OCCUPATION OF THE INVESTORS

SERVICEMAN BUSINESSMAN OTHERS

Fig.10 Next, they were asked about the brokerage they pay to their brokers. Some were paying according to the norms fixed by the brokerage firm and some had negotiated according to the volume and their negotiation skills. But the investors surveyed of HDFC on-line were paying as mentioned in their brochure. investors surveyed of HDFC on-line were paying as it is as mentioned in their brochure. The most of the investors were approached by the respective executives and rests were recommended by their friends. They told me that executives on the recommendation of the investor give a call to the potential investors and they approach in this way to the investors.

36

The survey conducted consisted of 40 investors covering main brokerage firms operating in the city. This includes India Bulls Securities Itd (20%) Competent Finman (20%), HDFC online (10%), Master Capital (20%), Kotak Securities (20%), and Net Worth (10%)
MARKET SHARE OF EACH BROKERAGE FIRM

COMPETENT FINMAN HDFC ON-LINE MASTER CAPITAL KOTAK SECURITIES NET WORTH INDIABULLS SECURITIES LTD

Fig.11 The next aspect on which the survey was conducted was to know which income group generally invest in the share market. To solve this problem the whole group was divided into the income group of less than 1 lakh, 1-1.5 lakh, 1.5-2.5 lakh and more than 2.5 lakh. Only 10% of the investors surveyed were having their family an income of less than 1 lakh and they invest in share market. The value of their portfolio was around Rest 20,000 20% of the investors surveyed were having their family annual income between 1-1.5 lakh. On an average, the market value of their portfolio on an average varies in between Rs 40,000Rs 60,000. They are bothered about ups and downs in the market but are little less bothered as compared to the income group of less than Rs 1 lakh. They invest in small caps and mid cap companies like NIPPON, IFCI etc. 20% of the investors surveyed belong to the income group having family annual income between 1.5 lakh-2.5 lakh. On an average the market value of the portfolio varies between Rs 60,000-Rs 1,20,000. They invest in mid caps and sometimes in some big companies like Infosys etc. Rest 50% of the investors belong to the income group having family annual income of more than 5 lakh. The average market value of the portfolio varies in between Rs 1,20,000- Rs

37

2,50,000. They invest in those companies which have high reputation in the market and gives good returns. The investors were asked whether they invest from their regular earnings or income from other sources? They said we invest when we get some earnings from other sources like some money from L1C and bank interests etc. 10% 20% 20% 50% less than 1 lakh 1-1.5 lakh 1.5-2.5 lakh more than 2.5lakh

INCOME OF THE INVESRTORS SURVEYED

10%

20% 50%

20%

Fig.12 All the investors (surveyed) have Initial Public Offerings (IPO) and secondary markets as their preference avenues for the investment. They are interested in Intra-day settlement and short term investment. Very few are interested in long term investment. The major difference lies in the services provided by the brokerage firm. The product delivered is same but services provided by one firm distinguish it from other company. Here, India Bulls is having the advantage because it is providing Financial Statements, Advisory Services, Margin Funding and Portfolio Management Services. But some of the brokerage firms are lacking behind in some of the services like HDFC is not providing any advisory services and Margin Funding. Competent Finman is not providing Margin Funding and Portfolio management services.

38

Questionnaire was designed in such a way that investors were asked to rank the services being provided to them as 1,2,3,4 etc. Majority of the investors rank advisory services and margin funding as their priority. Very few investors invest on basis of fundamental analysis and on the recommendation of the friend. They generally invest on the basis of the news and on the recommendation of the broker. The investors surveyed have portfolio varying from as low as Rs 10,000 to as high of Rs 15, 00,000. 30% of investors were having their portfolio of less than Rs 50,000. 20% of the customers are having their portfolio ranging from Rs50, OOO-Rs 1, 00,000. 30% of the investors were having their portfolio in between the range of Rs 1, 00,000- Rs 2, 50,000. 20% of the investors were having their portfolio of more than Rs 2,50,000. All the investors know that there are some other broker firms operating in the city. The main advantage for India Bulls is that all the investors know that it is Operating in the city. 70% of the customers are ready to shift to other broker firms if they will be provided with better services.

30% -Less than 50,000 20%-50,000-1,00,000 20%-1,00,000-2,50,000 20%-more than 2,50,000

VALUE OF THE PORTFOLIO OF I NVESTORS SURVEYED

20% 30%

30% 20%

Fig.13
39

CHAPTER 3

DATA BASE AND RESEARCH METHODOLOGY

40

DATA BASE AND RESEARCH METHODOLOGY

OBJECTIVE OF THE PROJECT

The project is undertaken with the following objectives: 1. 2. 3. To know how on-line trading takes place. To know the rationale and psychology of the investors, how they invest and what are The ravenues for the investment. To conduct fundamental analysis in Indian Stock Market.

METHODOLOGY
During the training period the operations of online trading was known from the Relationship Manager. For the purpse of second objective i.e. investors analysis questionnaire were got filled from 50 investors. The brief summary is shown in table below: SAMPLE SIZE SAMPLE METHOD POPULATION 50 Convenience sampling WORKING CLASS, BUSINESS CLASS & RETIRED PERSONS

For the purpose of conducting fundamental analysis the data related to companies, industry and economy were collected for 4 years starting from 2004-05 to 2007-08. Various financial and statistical techniques like CAPM, ratio analysis, Cash Flow analysis, percentage analysis. METHOD OF COLLECTING DATA AND THEIR SOURCES 1. 2. 3. 4. Guidance from Project guide and Company guide. Referring to previous projects done. Discussions with other SIP trainees doing training in the same area. From websites of respective companies. 41

SCOPE
This project gives me ample scope to know the share market and know the psychology of the investors residing in Chandigarh and nearby places. But the scope was limited to certain shares only and also some of the techniques were used. The project has allowed me to learn the various aspects of the share market and various tools which can be applied to know the different aspects of buying and selling.

LIMITATIONS
1. 2. 3. 4. 5. 6. Only certain indicators were applied to certain shares which not hard and fast rules which can be applied while is buying the shares. Investors of only Chandigarh and nearby places were covered. As a trainee, limitation of analyzing and interpreting the data. Time constraint was the main hurdle in conducting survey and taking out the ratios. People don't respond in a very good manner and they don't give time for filling up the questionnaires. Only dividend discount model and CAPM model has been applied for valuation of the shares.

42

CHAPTER IV

WORK DONE DURING TRAINING PERIOD

43

WORK DONE DURING TRAINING PERIOD

During the training period following procedure for online training was learnt

LOGON: First of all, the requirement for trading is to log on Indiabulls has its software Power India Bull (PIB) which makes the trading possible. There are two types of transactions1) Buy 2) Sell

BUY TRANSACTION
Check the buying limit In the buying transaction, the system will check the buying limit of the buyer after checking the balance. If there is sufficient balance in the account only then the PIB will proceed further otherwise it will display that the client has insufficient balance to execute the balance. Placement of order After checking the limit, the customer places the order in accordance with limit available in his account. If still customer places order above the limit the reason for rejection will be displayed immediately. Order accepted The order if accepted it will be transmitted to the exchange for the execution. On execution of the transaction the confirmation message is displayed on the screen if the price strikes. But if the price doesn't strikes it will remain pending. If the customer feels to modify the price, it can modify anytime before the striking of the desired price. If the order is confirmed, it is flashed on the screen. On execution the confirmation may be sent to the customer mobile or email or contract note may be sent to the customer by hand. 44

SELL TRANSACTION
In case of the sell transaction, the procedure is more or less same. First of all the software will check the DP accounts for the quantity. Reject order The order may be rejected if more number of shares has been entered than it has been in the DP account. The reasons for the same will be flashed on the computer screen. Accept order If the order is accepted the order will be transmitted to exchange for the execution. The investor can give the price of its own or it may sell at the market price. If he has given his own price the order will remain pending until and unless the price strikes. Pending order If the price doesn't strike the order will remain pending and if investor feels at any point before the striking of the price to change the offer price he can modify or even delete the transaction. Confirmation of the order If the order is confirmed it is immediately flashed on the screen. On execution the confirmation may be sent to the customer mobile or email or contract note may be sent to the customer by hand.

45

CHAPTER-V

DATA ANALYSIS & INTERPRETATION

46

Ques) How did you come to know about your stock broking firm? Table 1
particulars Newspaper Friends Executive others percentage 8% 48% 28% 16%

Fig.1

FIRM'S

16%

8% Newspapers Friends Executive others

28%

48%

INTERPRETATION

47

The above data depict that most of the investors came to know about the firm from their friends/acquaintances. 28% of the respondents came to know about the firm through its executives which shows that the firm is efficient enough to attract customers.

QUES) What is the annual family income?

Table 2 particulars Less than 3 lakh 3-5 lakh 5-10 lakh More than 10 lakh Percentage 16% 36% 30% 18%

Fig.2

Annual Income

18%

16%

Less than 3 lakh 3-5 lak h 5-10 lak h M ore than 10 lak h

30%

36%

INTERPRETATION
The above figure shows that most of the respondents have their annual earning between 3 5 48

lakh which make them a good target customers for the stock broking firms though people with comparatively less annual income have been doing investments.

Ques) What is your preference avenue for investment?

Table 3 particulars Initial public offerings(IPO) Trading market Mutual funds
Fig.3

Percentage 24% 31% 45%

AVENUE FOR INVESTMENT

24% 45%

Initial public offerings(IPO) Trading market Mutual funds

31%

INTERPRETATION
The above figure depicts that most preferred avenue is Mutual funds, followed by IPOs and Trading markets. 49

50

Ques) You are more interested in?

Table 4 particulars Intraday Short term Long term Percentage 31% 42% 27%

Fig.4

FIELD OF INTEREST

27%

31% Intraday Long term Short term

42%

INTERPRETATION
It can be easily inferred from the above diagram that respondents are investing for long-term as compared to other time periods. It has also been observed that intraday transactions are gaining popularity.

51

Ques) How do you trade?

Table 5 Particulars Through phone Through internet By visiting broker firm yourself Percentage 34% 42% 24%

Fig.5

TRADING

24% 34% Through phone Through internet By visiting broker firm yourself 42%

INTERPRETATION
Evidently, people being technology friendly; prefer online trading. The above pie chart shows that 42% of respondents prefer online trading followed by call and trade 34%.

52

Ques) On what basis do you buy a scrip?

Table 6 Particulars On the recommendation of the broker Fundamental analysis On the recommendation of your friend Yourself On the basis of news Fig.6 Percentage 32% 11% 15% 17% 25%

BUYING OF SCRIP

On the recommendation of the broker 25% 32% Fundamental analysis On the recommendation of your friend 17% 15% Yourself 11% On the basis of news

INTERPRETATION
It has been observed that 32% respondents buy on the recommendation of their broker. 25% rely on the news and 17% on their friends.

53

Ques) What is the value of your portfolio?

Table 7
Particulars Rs 50,000- Rs 2,00,000 Rs 2,00,000- Rs 5,00,000 Rs 5,00,000- Rs 10,00,000 More than Rs 10,00,000 Fig.7 percentage 21% 38% 32% 9%

PORTFOLIO VALUES

9%

21%

Rs 50,000- Rs 2,00,000 Rs 2,00,000- Rs 5,00,000

32%

Rs 5,00,000- Rs 10,00,000 More than Rs 10,00,000 38%

INTERPRETATION
It is evident from above data and figure that 38% respondents portfolio value falls between 2,00,000-5,00,000. Whereas with 32% portfolio value of respondents are not far behind. This means that respondents believe in high value portfolio.

54

Ques) Are you satisfied with the services of the current broker firm?

Table 8 Particulars Yes No Percentage 72% 28%

Fig.8

SERVICE OF BROKER'S

No 28% Yes No Yes 72%

INTERPRETATION
72% of respondents are satisfied with services of current broker firm.

55

Ques ) If some other broker firm promises you to provide better services will you shift to that firm? Table 9 Particula r Yes No Can't say percentage 26% 65% 11% Fig.9

SHIFT TO OTHER FIRM'S

11%

25% Yes No Can't say

64%

INTERPRETATION
Majority of respondents are not ready to shift which depicts that they are satisfied with the services of broker.

56

CHAPTER-VI

FUNDAMENTAL ANALYSIS

57

What is Fundamental Analysis?

Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data \to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient. By believing that prices do not accurately reflect all available information, fundamental analysts look to capitalize on perceived price discrepancies.

General Steps to Fundamental Evaluation Even though there is no one clear-cut method, a breakdown is presented below in the order an investor might proceed. This method employs a top-down approach that starts with the overall economy and then works down from industry groups to specific companies. As part of the analysis process, it is important to remember that all information is relative. Industry groups are compared against other industry groups and companies against other companies. Usually, companies are compared with others in the same group. For example, a telecom operator (Verizon) would be compared to another telecom operator (SBC Corp), not to an oil company (Chevron Texaco). Economic Forecast First and foremost in a top-down approach would be an overall evaluation of the general economy. The economy is like the tide and the various industry groups and individual companies are like boats. When the economy expands, most industry groups and companies benefit and grow. When the economy declines, most sectors and companies usually suffer. Many economists link economic expansion and contraction to the level of interest rates. 58

Interest rates are seen as a leading indicator for the stock market as well. Below is a chart of the S&P 500 and the yield on the 10-year note over the last 30 years. Although not exact, a correlation between stock prices and interest rates can be seen. Once a scenario for the overall economy has been developed, an investor can break down the economy into its various industry groups.

Group Selection If the prognosis is for an expanding economy, then certain groups are likely to benefit more than others. An investor can narrow the field to those groups that are best suited to benefit from the current or future economic environment. If most companies are expected to benefit from an expansion, then risk in equities would be relatively low and an aggressive growthoriented strategy might be advisable. A growth strategy might involve the purchase of technology, biotech, semiconductor and cyclical stocks. If the economy is forecast to contract, an investor may opt for a more conservative strategy and seek out stable income59

oriented companies. A defensive strategy might involve the purchase of consumer staples, utilities and energy-related stocks. To assess a industry group's potential, an investor would want to consider the overall growth rate, market size, and importance to the economy. While the individual company is still important, its industry group is likely to exert just as much, or more, influence on the stock price. When stocks move, they usually move as groups; there are very few lone guns out there. Many times it is more important to be in the right industry than in the right stock! The chart below shows that relative performance of 5 sectors over a 7-month time frame. As the chart illustrates, being in the right sector can make all the difference.

Narrow Within the Group Once the industry group is chosen, an investor would need to narrow the list of companies before proceeding to a more detailed analysis. Investors are usually interested in finding the leaders and the innovators within a group. The first task is to identify the current business and competitive environment within a group as well as the future trends. How do the companies rank according to market share, product position and competitive advantage? Who is the current leader and how will changes within the sector affect the current balance of power? What are the barriers to entry? Success depends on an edge, be it marketing, technology, market share or innovation. A comparative analysis of the competition within a sector will help identify those companies with an edge, and those most likely to keep it. 60

Company Analysis With a shortlist of companies, an investor might analyze the resources and capabilities within each company to identify those companies that are capable of creating and maintaining a competitive advantage. The analysis could focus on selecting companies with a sensible business plan, solid management and sound financials. Business Plan The business plan, model or concept forms the bedrock upon which all else is built. If the plan, model or concepts stink, there is little hope for the business. For a new business, the questions may be these: Does its business make sense? Is it feasible? Is there a market? Can a profit be made? For an established business, the questions may be: Is the company's direction clearly defined? Is the company a leader in the market? Can the company maintain leadership? Management In order to execute a business plan, a company requires top-quality management. Investors might look at management to assess their capabilities, strengths and weaknesses. Even the best-laid plans in the most dynamic industries can go to waste with bad management (AMD in semiconductors). Alternatively, even strong management can make for extraordinary success in a mature industry (Alcoa in aluminum). Some of the questions to ask might include: How talented is the management team? Do they have a track record? How long have they worked together? Can management deliver on its promises? If management is a problem, it is sometimes best to move on Financial Analysis The final step to this analysis process would be to take apart the financial statements and come up with a means of valuation. Below is a list of potential inputs into a financial analysis.

61

Accounts Payable Accounts Receivable Acid Ratio Amortization Assets Current Assets Fixed Book Value Brand Business Cycle Business Idea Business Model Business Plan Capital Expenses Cash Flow Cash on hand Current Ratio Customer Relationships Days Payable Days Receivable Debt Debt Structure Debt:Equity Ratio Depreciation Derivatives-Hedging Discounted Cash Flow Dividend Dividend Cover Earnings EBITDA Economic Growth Equity Equity Risk Premium Expenses

Good Gross Profit Growth Industry Interest International Investment Liabilities Liabilities Management Market Market Net Profit Pageview Pageviews Patents Price/Book Price/Earnings PEG Price/Sales Product Product Regulations R & Revenues Sector Stock Strategy Subscriber Subscribers Supplier Taxes Trademarks Weighted Average Cost of Capital

Will Margin Cover Current Long-term Growth Share Margin Growth Value

Placement D Options Growth Relationships

The list can seem quite long and intimidating. However, after a while, an investor will learn what works best and develop a set of preferred analysis techniques. There are many different valuation metrics and much depends on the industry and stage of the economic cycle. A complete financial model can be built to forecast future revenues, expenses and profits or an investor can rely on the forecast of other analysts and apply various multiples to arrive at a valuation. Some of the more popular ratios are found by dividing the stock price by a key value driver.

62

Ratio Price/Book Value Price/Earnings Price/Earnings/Growth Price/Sales Price/Subscribers Price/Lines Price/Page views Price/Promises

Company Type Oil Retail Networking B2B ISP or cable company Telecom Web site Biotech

This methodology assumes that a company will sell at a specific multiple of its earnings, revenues or growth. An investor may rank companies based on these valuation ratios. Those at the high end may be considered overvalued, while those at the low end may constitute relatively good value. Putting it All Together After all is said and done, an investor will be left with a handful of companies that stand out from the pack. Over the course of the analysis process, an understanding will develop of which companies stand out as potential leaders and innovators. In addition, other companies would be considered laggards and unpredictable. The final step of the fundamental analysis process is to synthesize all data, analysis and understanding into actual picks.

63

EECONOMIC ANALYSIS
ANALYTICAL FRAMEWORK FOR COMMON STOCK of analysis. The primary motive for buying a stock is to sell it subsequently at a higher price. In many cases, dividends will be expected also. Dividends and price changes are the principal ingredient~ in what investors regard as return or yield. If an investor had impeccable information and insight about dividends and stock prices over subsequent periods, he would be well on his way to great riches. But the real world of investing is full of political, economic, social, and other forces that we do not understand sufficiently to permit us to predict anything with absolute certainty. Forces intermix and flow at crosscurrents. Nothing is static. For the security analyst, what primary influences will determine the dividends to be paid on a stock in the future and what the stock price will be in the future are the ultimate questions to be answered. A logical systematic approach to estimating future dividends and stock price is indispensable. The framework we will be using is the economic-industry-company approach, or the E-I-C framework. This approach is sometimes referred to as a "top-down" method ECONOMIC AND INDUSTRY ANALYSIS King observed that, on the average, over half the variation in a stock's price could be attributed to a market influence that affects all stock-market indexes, such as the Dow Jones Industrial Average or the S&P 500 Stock Index.! But stocks are also subject to an industry influence, over and above the influence common to all stocks. King noted that this industry influence explained, on the average, about 13 percent of the variation in a stock's price. In sum, about two-thirds of the variation in the prices of stocks observed in King's study was the result of market and industry influences or factors. King actually examined only about sixty companies, so it is dangerous to extrapolate from this small sample/to a generalization about all stocks. However, although the amount of variation in a stock's price attributable to the market may be more or less than the percentage observed by King, the impact of a common market influence is obviously something to contend with. 64

The significance of these conclusions seems to be that in order to estimate stock price changes, an analyst must spend more than a little time probing the forces operating in the overall economy, as well as influences peculiar to industries he is concerned with. A failure to examine overall economic and industry influences is a naive error, that of assuming that individual companies follow their own private paths in a vacuum. It is important to predict the course of the national economy because economic activity affects corporate profits, investor attitudes and expectations, and ultimately security prices. An outlook of sagging economic growth can lead to lower corporate profits, a prospect that can engender investor pessimism and lower security prices. Some industries might be expected to hold up better, and stock prices of companies in these industries may not decline as much as securities in general. The key for the analyst is that overall economic activity manifests itself in the behavior of stocks in general-or the stock market, if you will. This linkage between economic activity and the stock market is critical. Before an investor commits funds in the market, he must decide if the time is right to invest in securities at all; and if so, he must then decide which type of security to purchase under the circumstances.2 Thus, he must decide whether to purchase common stocks, options, preferred stocks, bonds, or some combination thereof. We will explore the relevance of broad economic variables such as national income and defense expenditures to the investor or analyst considering the purchase of common stocks. In the process, we will place major emphasis on the techniques most frequently employed by business economists as they go about their business of short-term economic forecasting. These are important for the security analyst or investor to know because he will be utilizing much of the output of the economists' efforts as a basis for his own opinion about the impending economic environment. In this respect, the analyst can better evaluate economic forecasts if he has at least some knowledge of alternative economic forecasting tools-not only the techniques but also their advantages and shortcomings. The techniques we will examine and evaluate include the use of surveys, key economic indicators, diffusion indexes, econometric model building, and the opportunistic model building. First, let us discuss the relationship of economic forecasting to the stock-investment decision more fully.3

65

FORECASTING TECHNIQUES
Short-Term versus Long-Term Economic Forecasts First, let us define some terms in the manner in which a business forecaster uses them. When he speaks of a short-term forecast, he is generally referring to one covering a period of up to three years, although frequently \1e means a much shorter period, such as a quarter or several quarters. An intermediate forecast refers to a three- to five-year period ahead. And finally, a long-term forecast refers to a period more than five years, and frequently ten or more years, in advance. We noted in an earlier chapter that one of the differences between investment and speculation is the time horizon of the individual in question. That is, the speculator is interested in very short-term holds of securities in order to realize quick capital gains. On the other hand, the investor is interested in situations that will yield adequate returns in both dividends and capital gains for their risk class over a period of several years. However, we also observed earlier that even in the true investment situation, the investor or analyst must constantly review each securitys performance both in an absolute sense and in a relative sense-relative to the market. Furthermore, he must regularly observe the state of the stock market, the money and capital markets, and the economy in general in order to ascertain if basic economic conditions have changed sufficiently to warrant his changing his investment strategy. This is another reason for viewing the macroeconomic picture-namely, to detect the relatively most attractive industries at a given moment. Thus, even for the pure investor with a long time horizon, we see that this long period is broken into several short-term periods. In other words, his initial long-term forecast can be broken down into a series of short-term forecasts that are constantly reviewed and revised. Therefore we will focus on a one-year horizon throughout our analysis. In this chapter we will discuss only short-term forecasting techniques, realizing that when these various short-term forecasts are put side by side, they constitute a check for consistency with an independently arrived-at long-term forecast.

66

INDUSTRY ANALYSIS
Investing is a business of relative changes. When the econ. omic outlook is assessed, along with the direction of changes in the overall market for stocks, the analyst must realize that even though industry groups and/or individual companies may find it difficult to "buck the trend," they do not necessarily respond to the same degree. For example, it is widely assumed that heavy-goods industries fare worse in economic recessions than do consumergoods industries. Heavy-goods industries include automobiles (and related industries such as rubber, steel, and glass) and machinery. Consumer-goods and service industries include utilities (telephone, power), food, and banks. Recessions or expansions in economic activity may translate into falling or rising stock markets with different relative price changes among industry groups. For the analyst, industry analysis demands insight into (1) the key sectors or subdivisions of overall economic activity that influence particular industries, and (2) the relative strength or weakness of particular industry or other groupings under specific sets of assumptions about economic activity. The analyst with an economic forecast that he has developed from scratch, or a set of figures that he has developed from forecasts prepared by others, is now ready to apply this information to an appropriate industry. Before demonstrating this, however, let us look at some definitions of an industry. Webster's Dictionary defines an industry as "a department or branch of a craft, art, business, or manufacture." And more specifically: [a] group of productive or profit-making enterprises or organizations that have a similar technological structure of production and that produce or supply technically substit1:ltable goods, services, or sources of income.! 'Webster's Third New International Dictionary (Springfield, Mass.: Merriam, 1966), pp. 1155-56. Although at first glance these definitions seem neat and clear-cut, they are not. First, it may seem desirable to break industries down by their products; however, defining a product is no easy chore.

67

INDUSTRY CLASSIFICATION BY PRODUCT

Are glass containers in the same industry -as metal containers? Is steel in the same industry as aluminum? Is a fast-food chain in the same industry as a chain of restaurants? In one sense, a container is a container, and the substance from the product to appear in a separate industry for an industry analysis; however, the. firms producing these different products might be very dissimilar in the other products that they produce.2 Between the steel and aluminum industries, the economics, technology, and refinements are so substantially different that analyzing them as separate industries is advisable. Substantial differences also exist between the mode of operation in a limited-menu, fast-food, takeout type of restaurant and that of a limited-menu, sit-down type or a legitimate full-menu restaurant. By now it should be clear that pinpointing an industry is not easy, and the investigator needs to have a clear goal in mind sc that he can properly classify firms into industries for his specific purpose. For example, if the goal were to reach an estimate of sales for the industry, the analyst might want to consider similar products and products that could be substituted for the item in question (glass containers for metal, or aluminum containers for steel). But if he were calculating comparative costs of the industry, he might consider only those firms with similar manufacturing processes, for only such a comparison would be meaningful. For instance, the analyst might 'Compare the costs of one candy producer with those of another candy producer but not with those of a toy manufacturer. Industry classification by product does not present a terribly acute problem for the astute analyst when he is classifying firms with basically one product or a homogeneous group of products. The problem worsens considerably, however, when he deals with a firm that has a diversified product line. Unfortunately, today the latter case is the rule rather than the exception. Our illustration later in this chapter will serve to highlight this problem.

68

SIC CLASSIFICATION
In order to provide an organized reporting framework for the vast amount of data collected by the federal government, the Standard Industrial Classification (SIC) was developed. The following passage from the SIC Manual describes the system. The SIC is the statistical classification standard underlying all establishment based federal economic statistics classified by industry. The SIC is used to promote the comparability of establishment data describing various facets of the U.S. economy. The classification covers the entire field of economic activities and defines industries in accordance with the composition and structure of the economy. It is revised periodically to reflect the economy's changing industrial organization Agriculture, forestry, and fishing Mining Construction Manufacturing Transportation, communications, electric, gas, and Sanitary services Wholesale trade-durable goods Retail trade Finance, insurance, and real estate Services Public administration No classifiable establishments M AJOR GROUPS 01-09 10-14 15-17 20-39 40-49 50-51 52-59 60-67

69

INDUSTRIAL DIVISION
The major groups detailed in the table and identified by two-digit codes are further subdivided into three-digit industry groups and, finally, into four-digit industries. For example, under industrial division G, retail trade, major group 57 is home furniture, furnishings, and equipment stores, industry group 571 is home furniture and Furnishings stores; this consists of industry numbers 5712, furniture stores; 5713, floor covering stores; 5714, drapery, curtain, and upholstery stores; and 5719, miscellaneous home furnishings stores. Using SIC codes, industry information, such as the number of firms classified in the industry, number of employees, value of shipments, and capital expenditures, can be found and analyzed. This information is useful in detecting changing industrial patterns and developments over time, such as expansion or contraction of the industry. Although the census provides valuable information to the industry analyst, it is not without its drawbacks. For example, the methodology employed in classifying firms into the various categories is not consistent over the entire spectrum of the U.S. economy

THE ECONOMY AND THE INDUSTRY ANALYSIS

In the preceding chapter we saw how various techniques of economic forecasting could be brought to bear upon the investment decision. Specially we observed how various approaches could be used to forecast components of gross national product and we noted that for the investment decision it was often as significant to predict the direction of any change in these sectors as it was to predict their actual level. An example or two will highlight this concept. When the GNP is growing, unemployment is relatively low (4 to 5 percent), and the general economic climate is optimistic; an economic forecast based upon any of the approaches already discussed would probably show high and increasing levels of expenditures on consumer durables, inventory, and plant and equipment Because business is buoyant and it is generally expected that this will continue, businessmen accumulate inventory in anticipation of still higher sales levels, and they also increase their capacity through plant and equipment expenditures. At the same time, on the consumer's side of the market, individual households are experiencing high levels of personal discretionary income (income available for luxuries), and they are free to spend some of this money on such things as residential housing, automobiles, and other consumer durables. Indeed, if prior economic periods had been far less booming than those just described, expenditures on various durables, having been postponed, could now become exaggerated. It would be desirable at such a time to buy securities of firms in industries most likely to benefit from these purchasing patterns. As you will recall i nthe opportunistic-model-building approach, the forecaster would arrive at specific estimates of the broad categories we have just mentioned. It is easy to see how such an economic forecast can be helpful, not only in selecting industries that will benefit in a period of general economic prosperity but also in selecting those that will benefit in periods when only certain sectors of the economy are expanding. Much academic research has substantiated the importance of sound industry analysis to successful investment analysis. Examples of the latter type would be defense industries in a period when the federal government is boosting the economy through large national-defense expenditures, and also those industries that will be hurt least during a period of economic downswing-such as those producing food, something that is always necessary. Another way of gauging the economy's performance with special regard to specific

industry classifications is to examine regularly the statistics contained in the monthly Federal Reserve Bulletin. By examining the behavior of the various series over time, the analyst can gain insights into important economic developments in many industries and important industry sub sectors. An increase in manufacturing could necessitate additional capital spending to add overall manufacturing capacity. If additional capacity comes on-line, price competition could become more prevalent if an occurrence, such as an economic downturn, results in decreased demand for manufactured products. These are but two of the possible implications of the noted increase in capacity utilization. Many more undoubtedly exist Although such tentative conclusions can be derived from even such a superficial analysis, such observations should be incorporated into the analyst's overall data base of information.

INDUSTRY SHARE PRICES RELATIVE TO INDUSTRY EARNINGS

Having evaluated the various characteristics of past sales and earnings, industry permanence, government attitude, labor conditions, and industry competitive conditions, the analyst must ultimately reach a considered investment decision. However, even if all indications are that the industry has very favorable future prospects, this does not necessarily imply that funds should be committed to it immediately. A decision to purchase is not made based only on the current status and future prospects, but also on the current prices of securities in the industry, their risk, and the returns they promise. At this point we will refer to only the price consideration. If the price is very high relative to future earnings growth, these securities might not be a wise investment. Conversely, if future prospects are dim but prices are low relative to a fairly level future pattern of earnings, the stocks in this industry might well be an attractive investment. Frequently, when an industry develops because of technology or some other such reason, investors become overzealous in their desire to purchase securities of firms in this new industry. Thus, these share prices are bid to very high levels, with the consequence that the PIE ratio soars. So it can be seen that the "market psychology" can be a crucial factor in both raising prices to exorbitant levels and depressing prices to unreasonable levels, depending on how the market evaluates the industry's future prospects.

EXTERNAL SOURCES OF INFORMATION FOR INDUSTRY ANALYSIS

Federal Government The federal government publishes a wide variety of data that can be useful during the industry phase of the analysis. It is well worth the time to thumb through the Census of Manufacturers, Federal Reserve Bulletins, and Survey of Current Business in order to appreciate more fully the wealth of information, helpful in the economic as well as industry analysis, available in these government sources. Many private services use these governmentfurnished data in their own security-analysis efforts. Investment Services Many investment services are available to furnish the investor or analyst with valuable industry and corporate information. The ones we highlight in this section are perhaps the best known. Standard & Poors Standard & Poor's regularly covers a number of different industries in two ways: a basic analysis and a current update of the basic analysis. The basic analysis provides an in-depth report on all facets of the industry and the firms comprising the industry. A revised basic analysis is published approximately every year. The current update, entitled Current Analysis and Outlook, is published roughly every quarter. Standard & Poor's also publishes the Security Price Index Record, containing indexes of the S&P's groupings, which are helpful when performing an industry analysis.

TRADE PUBLICATIONS Virtually every major U.S. industry has at least one trade association, which in its publications reports much data pertaining to the industry it represents. The analyst can locate these sources, as well as references to various industries in other publications, by checking the Business Periodicals Index and the Science and Technology Index, as well as secondary sources already mentioned in this chapter.-

FINANCIAL POSITION: The BALANCE SHEET

The level, trend, and stability of earnings are powerful forces in the determination of security prices. This flow of earnings is depicted on the income statement. The stock of assets and the claims to those assets that provide the fuel for those earnings are revealed on the balance sheet. The balance sheet shows, at a given point in time, the assets, liabilities, and owners' equity in a company. It is the analyst's primary source of information on the financial strength of a company: Assets include properties and rights to properties, both tangible (such as buildings) and intangible (such as patents and goodwill). Liabilities are debts that are payable on demand or over specified future periods. They are evidenced by simple invoices or rather lengthy legal documents, such as mortgages. The equity of stockholders represents the excess of assets over liabilities at the balance-sheet date. Modern accounting principles dictate the basis for assigning values to assets. Liability values are set by contracts. When assets are reduced by liabilities, the "book value" of stockholders' equity can be determined. This book value invariably differs from current value in the marketplace because market value is dependent upon the earning power of assets and not their cost or value in the accounts. For the most part, the accounting concept of conservatism requires that assets be carried at original or historical cost when they are first acquired. During subsequent time periods, they may be valued at cost or market, whichever is lower. Income statement and reported-earnings problems can stem from the rate at which assets are written off against related revenues, a matter we discussed under inventory and depreciation accounting. In addition, the framework of historical cost does not make reference to the changing purchasing power of the dollar. When inflation occurs, historicaldollar accounting can be unrealistic and deficient. First, the income statement fails to express all items in dollars of the same purchasing power. For example, revenues closely represent current dollars; where FIFO inventory costing would represent "old" dollars. Needless to say, over time interperiod comparability is destroyed. Second, assets and stockholders' equity reflect an admixture of items shown in dollars of

different purchasing power. For example, FIFO inventory procedure might tend to show inventories in near-current dollars, but fixed assets may t-e worth many times their carrying value. These distortions in asset groups are ~ lady reflected in the stockholders' -equity section of the balance sheet. The erosion of the purchasing power of the dollar affects measurements using the balance sheet and influences "real" earning power. Most accounting statements deal with rather arbitrary cutoff points in time. 6 Thus, accounting statements cannot be considered complete without parenthetical references and notes that not only clarify the data in the body of the statements but also introduce new information not conveniently admissible within the statements proper. Quite often, valuation bases for assets are shown next to the item caption or in footnotes. Parenthetical references should be examined to note where assets have been pledged and the related liability secured. Footnotes to the balance sheet often show many of the following items of importance to the analyze 1. Contingent liabilities for taxes, dividends and pending lawsuits. 2. Particulars on options outstanding, leases, loans, and other financing arrangements. 3. Changes in accounting principles and techniques, including bases of valuation, and the dollar effect on income. 4. Facts of importance occurring between the balance-sheet data and date of S I:::mission of statements that might have a material effect on the statements. Examples include refinancing, proposed mergers, and changes in capitalization The analyst will find a wealth of information in these parenthetical references .EO.: footnotes that can shed light on the company under analysis.

INFOSYS TECHNOLOGIES LTD.

INFOSYS TECHNOLOGIES LTD.

Infosys Technologies Ltd. (NASDAQ: INFY) was started in 1981 by seven people with US$ 250. Today, we are a global leader in the "next generation" of IT and consulting with revenues of over US$ 4 billion. Infosys defines, designs and delivers technology-enabled business solutions that help Global 2000 companies win in a Flat World. Infosys also provides a complete range of services by leveraging our domain and business expertise and strategic alliances with leading technology providers. Infosys' service offerings span business and technology consulting, application services, systems integration, product engineering, custom software development, maintenance, reengineering, independent testing and validation services, IT infrastructure services and business process outsourcing. Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force in the industry leading to the rise of offshore outsourcing. The GDM is based on the principle of taking work to the location where the best talent is available, where it makes the best economic sense, with the least amount of acceptable risk. Infosys has a global footprint with over 40 offices and development centers in India, China, Australia, the Czech Republic, Poland, the UK, Canada and Japan. Infosys has over 91,000 employees. Infosys takes pride in building strategic long-term client relationships. Over 97% of our revenues come from existing customers. Vision "To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people." Mission "To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large."

Values We believe that the softest pillow is a clear conscience. The values that drive us underscore our commitment to: Customer Delight: To surpass customer expectations consistently Leadership by Example: To set standards in our business and transactions and be an exemplar for the industry and ourselves Integrity and Transparency: To be ethical, sincere and open in all our transactions Fairness: To be objective and transaction-oriented, and thereby earn trust and respect Pursuit of Excellence: To strive relentlessly, constantly improve ourselves, our teams, our services and products to become the best A Magnet for the Best Global Talent Fortune magazine identified Infosys among the top companies that "inspire, nurture and empower a new generation of global leaders." We are committed to remain among the industry's leading employers. Quality Focus 'In God we trust, everyone else must come with data' is an oft-heard phrase at Infosys. We constantly benchmark our services and processes against globally recognized quality standards. Our certifications include SEI-CMMI Level 5, CMM Level 5, PCMM Level 5, TL 9000 and ISO 9001-2000. In February 2007, Infosys BPO was certified for eSCM level 4.0, the eSourcing Capability Model for Service Providers developed by a consortium led by Carnegie Mellon University's Information Technology Services Qualification Centre. Innovation, Speed and Excellence in Execution We were one of the first companies to develop and deploy a global delivery model and attain SEI-CMMI Level 5 certification our offshore and onsite operations. We manage growth by investing in infrastructure and by rapidly recruiting, training and deploying new professionals. We have 44 global development centers, the majority of which are located in India. We also have development centers in Australia, Canada, China, Japan, Mauritius, and

at multiple locations in the United States and Europe. We invest in infrastructure and people to continue growing our business. Industry Leadership Our history is marked by a series of firsts. We were the first Indian company to list on a US stock exchange and the first Indian company to do a POWL in Japan. In December 2006, we became the first Indian company to be added to the NASDAQ-100 index and became the only Indian company to be part of any of the major global indices. More recently, Infosys was named among the 'Top 10 Companies for Leaders' by Fortune magazine. We won the prestigious Global Most Admired Knowledge Enterprises (MAKE) award for the fourth year in succession History Established in 1981, Infosys is a NASDAQ listed global consulting and IT services company with more than 90,000 employees. From a capital of US$ 250, they have grown to become a US$ 4 billion company with a market capitalization of over US$ 20 billion. In our journey of over 25 years, we have catalyzed some of the major changes that have led to India's emergence as the global destination for software services talent. We pioneered the Global Delivery Model and became the first IT company from India to be listed on NASDAQ. Our employee stock options program created some of India's first salaried millionaires. Read more about the defining moments in Infosys' history.

Milestones
2008 Infosys crosses revenues of US$ $ 4.18 billion. Employees grow to over 90,000+ Reports Q4 revenue of US$ 1,142 million 2007 Infosys crosses revenues of US$ 3 billion. Employees grow to over 70,000+ Kris Gopalakrishnan, COO, takes over as CEO. Nandan M. Nilekani is appointed CoChairman of the Board of Directors Opens new subsidiary in Latin America

 Reports Q2 revenue of over US$ 1billion 2006 Infosys celebrates 25 years. Revenues cross US$ 2 billion. Employees grow to 50,000+ N. R. Narayana Murthy retires from the services of the company on turning 60. The Board of Directors appoints him as an Additional Director. He continues as Chairman and Chief Mentor of Infosys 2005 Records the largest international equity offering of US$ 1 billion from India Selected to the Global MAKE Hall of Fame 2004 Revenues reach US$ 1 billion Infosys Consulting Inc. is launched 2003 Establishes subsidiaries in China and Australia Expands operations in Pune and China, and sets up a Development Center in Thiruvananthapuram 2002 Touches revenues of US$ 500 million Nandan M. Nilekani takes over as CEO from N.R. Narayana Murthy, who is appointed Chairman and Chief Mentor Opens offices in The Netherlands, Singapore and Switzerland Sponsors secondary ADS offering Infosys and the Wharton School of the University of Pennsylvania set up The Wharton Infosys Business Transformation Awards (WIBTA) Launches Progeon, offering business process outsourcing services Experience: One year marketing executive with Sai Automobile, Yamunanagar, Haryana Touches revenues of US$ 400 million. Opens offices in UAE and Argentina, and a Development Center in Japan N. R. Narayana Murthy is rated among Time Magazine/CNN's 25 most influential businessmen in the world Infosys is rated as the Best Employer by Business World/Hewitt 2000 Touches revenues of US$ 200 million

 Opens offices in France and Hong Kong, a global development center in Canada and UK, and three development centers in the US Re-launches Banks 2000, the universal banking solution from Infosys, as Finacle 1999 Touches revenues of US$ 100 million. Listed on NASDAQ Infosys becomes the 21st company in the world to achieve a CMM Level 5 certification Opens offices in Germany, Sweden, Belgium, Australia, and two development centers in the US Infosys Business Consulting Services is launched 1998 Starts enterprise solutions (packaged applications) practice 1997 Opens an office in Toronto, Canada Infosys is assessed at CMM Level 4 1996 The Infosys Foundation is established 1995 Opens first European office in the UK and Global Development Centers at Toronto and Mangalore. Sets up e-Business practice 1994 Moves corporate headquarters to Electronics City, Bangalore. Opens a Development Center at Fremont 1993 Introduces Employee Stock Options (ESOP) program Acquires ISO 9001/TickIT certification Goes public 1987 Opens first international office in Boston, US 1983 Relocates corporate headquarters to Bangalore 1981 Infosys is established by N. R. Narayana Murthy and six engineers in Pune, India, with an initial capital of US$ 250 Signs up its first client, Data Basics Corporation, in New York

CASH FLOW STATEMENT

For the year ended March 31,

in R s. [rare

Schedule CASH FLOWS FROM OPERATING ACTIVITIES Net profit before tax and exceptional items Adjustments to reconcile net profit before tax to cash provided by operating activities (Profit) / loss on sale of fixed assets Depreciation Interest and dividend income Profit on sale of liquid mutual funds Provision for investments Effect of exchange differences on translation of foreign currency cash and cash equivalents Changes in current assets and liabilities Sundry debtors Loans and advances Current liabilities and provisions Income taxes paid NET CASH GENERATED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTI G ACTIVITIES Purchase of fixed assets and change in capital work-in-progress Payment for Intellectual Property Rights (refer Note 23.2.21) Investment in subsidiaries (refer Note 23.2.16) Investments in securities (refer Note 23.2.16) Interest and dividend received Cash flow from investing activities before exceptional items Proceeds on sale of long-term investments (net of taxes) (refer Note 23.2.22) NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of share capital on exercise of stock options Dividends paid during the period Dividend tax paid during the period NET CASH USED IN FINANCING ACTIVITIES Effect of exchange differences on translation of foreign currency cash and cash equivalents NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS 20 22

2009

2008

5,100

4,129

546 (654)

469 (298) (11) 2 4 (774) (180) 347 (421) 3,267

(18) (801) (186) 312 (483) 3,816

16 17 18

19

0,370)

0,443) 14

(127) 519 (978) (978) 58 (714) (121) (777) 18 2,079 5,610 7,689

(635) 695 272 0,097)

6
0,091) 1,216 (1,343) (189) (316) (4) 1,856 3,754 5,610

21 23

BALANCE SHEET
Schedule SORCES "'l' FU"lDS SHAREHOLDERS' FUNDS Share capital Reseryes and surplus
2009 2008

1 2

286 13,204 13,490

286 10,876 11,162

c . .TT . Ol'FUNDS FlXED ASSETS Original cost l..ess: Accumulated depreciation et book value A dd:Capital work-in-progress
L

3 4,508 1,837 2,671 1,260 3,931 964 99 3,093 6,429 2,705 12,227 1,483 2,248 8,496 13,490 3,889 1,739 2,150 957 3,107 839 79 2,292 5,470 1,199 8,961 1,162 662 7,137 11,162

DIVESTMENTS DEFERRED TAX ASSETS CURRENT ASSETS, LOANS AND ADVANCES Sundry debtors Cash and bank balances Loans and advances L E S S CURRENT LIABILITIES AND PROVISIONS : Current liabilities Provisions NET CURRENT ASSETS SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

4 5 6 7 8

9 10

23

RATIO ANALYSIS

2009
Ratios - Financial performance Expon revenue 1 total revenue (%) Domestic revenue 1 total revenue (%) Software development expenses 1 total revenue (%) Gross profit 1 total revenue (%) Selling and marketing expenses 1 total revenue (%) General and administration expenses 1 total revenue (%) SG&:A eh-penses / total revenue (%) Aggregate employee costs 1 total revenue (%) Operating profit 1 total revenue (%) Depreciation 1 total revenue (%) Operating profit after depreciation and interest 1 total revenue (%) Other income 1 total revenue (%) Provision for investments 1 total revenue (%) Profit before tax and exceptional items 1 total revenue (%) Tax 1 total revenue (%) Effective tax rate - Tax 1 PBT (%) Errective tax rate excluding tax reversals - Tax 1 PBT (%) PAT before exceptional items 1 total revenue (%) PAT after exceptional items 1 total revenue (%) PAT after exceptional items and excluding tax reversal 1 total revenue (%) Ratios - Balance sheet Debt-eqUity ratio Current ratio Days Sales Outstanding (DSO) Cash and eqUivalents 1 total assets (%) (I) Cash and equivalents 1 total revenue (%) (I) Capital expenditure 1 total revenue (%) Operating cash [lows 1 total revenue (%) Depreciation 1 average gross block (%) Technology investment 1 total revenue (%) Ratios - Return PAT before exceptional items 1 average net worth (%) ROCE (PBlT / average capital employed) (%) Return on average invested capital (%) (I) Capital output ratio Invested capital output ratio (I) Value added 1 total revenue (%) Enterprise-value 1 total revenue (x) Dividend 1 adjusted public orrer price (%) OJ Market price1 adjusted public orrer price (%) Ratios - Growth Overseas revenue (%) Total revenue (%) Operating profit (%) Net profit (before exceptional items) (%) Net profit (before exceptional items and excluding tax reversal) (%) Net profit (after exceptional items) (%) Basic EPS (before exceptional items) (%) Basic EPS (before exceptional items and tax reversal) (%) Basic EPS (after exceptional items) (%) Ratios - Per share Basic EPS (before exceptional items) C R s .) Basic EPS (before exceptional items and tax reversal) (Rs.) Basic EPS (after exceptional items) (Rs.) Basic cash EPS (before exceptional items) (Rs.) Basic cash EPS (after exceptional items) (Rs.) Price 1 earning, end of year (2) Price 1 cash earnings, end of year (2) PE 1 EPS growth ") Book value (Rs.) Price 1 book value, end of year Dividend per share (J) Dividend (%) 0) Dividend payout (%) (3) Market capitalization 1 tolal revenue, end of year (x)

2008 98.40 1.60 55.35 44.65 5.47 7.05 12.52 48.02 32.13 3.57 28.56 2.85 0.02 31.40 2.68 8.53 11.55 28.72 28.77 27.82

2007 98.18 1.82 54.13 45.87 5.53 7.23 12.76 47.29 33.12 4.53 28.58 1.59 30.17 3.36 11.12 11.78 26.82 26.82 26.62

98.60 1.40 56.72 43.28 4.67 6.90 11.57 49.89 31.72 3.49 28.23 4.36 32.59 4.03 12.35 14.73 28.57 28.57 27.79

3.28 72 57.00 49.14 8.76 24.39 13.00 2.57 36.26 41.38 71.12 1.27 2.76 85.97 4.76 1,785 1,94,008 19.28 19.01 17.47 18.35 19.09 18.16 15.36 16.07 15.18 78.24 76.12 78.24 87.80 87.80 18.40 16.40 1.20 235.84 6.11 13.25 265 19.83 5.26

4.91 64 50.26 42.66 10.97 24.85 13.95 3.36 41.83 45.73 88.81 1.46 3.29 80.71 8.34 1,549 2,71,987 45.97 45.65 41.35 56.01 51.98 56.25 52.95 49.01 53.20 67.82 65.58 67.93 76.24 76.35 29.76 26.48 0.56 195.41 10.33 11.50 230 19.85 8.77

2.73 61 64.71 49.44 11.61 25.58 16.30 3.69 39.89 44.89 93.96 1.49 3.74 80.79 8.61 1,011 2,00,852 31. 79 31.60 28.56 30.23 29.26 27.15 28.02 27.09 2498 44.33 44.01 44.33 51.83 51.83 33.62 28.76 1.20 125.15 11.91 7.50 150 19.36 9.10

HISTORICAL DATA

Operating profit / total revenue(%)

33.12

32.13

31.72

2007-2009

Net profit / total revenue

27.82

27.79

26.62

2007 -2009

Return on average capital employed(%)

45.73 44.89

41.38

2007-2009

Cash and equivalent / total assets(%)

64.71

57 50.26

2007-2009

Capital output ratio

4.46

1.49 1.27

2007-2009

Value added / total revenue(%)

85.97

80.79

80.71

20072009 Basic earnings

78.24 67.82

44.33

2007-2009

Dividend per share 13.25

11.5

7.5

2007-2009

Price/ earning ,end of year

33.62 29.76

18.4

2007-2009

INCOME
15648 13149

9028 6860 4761 3623 1901 509 882 YEAR 1999-2009 2604

OPERATING PROFIT

4963 4225 2989 2325 1038 1272 1584

202

347

765

YEAR 1999-2009

Profit after tax

4470 3777

2421 1859 958 1243

623 133 286

808

YEAR 1999-2009

Market capitalization

115307

82154 59338 32909 61073

82362

26926 24654 26847 9673

YEAR 1999-2009

Basic EPS
78.24 67.82

44.34 34.63 18.09 23.43

11.78 2.59 5.41

15.27

YEAR 1999-2009

Book Value
235.84 195.41

125.15 96.87 53.98 61.03

10.86

15.75

26.26

39.29

YEAR 1999-2009

CHAPTER-VII

RECOMMENDATIONS & CONCLUSION

RECOMMENDATIONS The following must be taken by the Indiabulls (CHANDIGARH BRANCH) to improve its business:
In the competitive scenario, the brokerage must be made competitive. The account opening charges must be reduced to make it more competitive. There must be proper advertising in the local newspapers of Chandigarh, so that untapped market can be tapped. Some newspapers and magazines must be kept in the middle of the office so that if some clients or potential investors come to office, they can read some of them to know about the market. It is recommended investors should make a fundamental analysis of the companies scrip in which he wants to invest. Some analysis is not provided by broker. Should have the market knowledge before investing. The firm should target investors who are risk takers.

CONCLUSION
According fundamental analysis: It synthesizes all data, analysis and undertaking into actual picks. Investors can themselves categories stocks within their relevant industry group. Companies can be identified that are capable of creating & maintaining a competitive advantage. No doubt fundamental analysis is extraordinary time consuming. According to fundamental analysis of INFOSYS: From the last 10years the income of the company is on continuous rise at the average rate. Same trend of rise in profit & book value of the firm is also seen. The shareholder has witnessed a continuous increase in their EPS which comes out to be a big factor for attracting new investors. The market capital of the company increased tremendously in the year 2000 from 9673crore to 59338 but then it witnessed a sudden down fall in the 4 subsequent years. Again there occurred a rising trend from year 2005 to 2007 but then fell from 115307 to 82362 in year 2008-07. According the data analysis of the project: Investors prefer buying short term scrip Most of the investors income ranges from 200000-500000 Indiabulls has satisfied most of its customers.

 The trading mostly takes place on internet which is the fastest way of trading.

REFERENCES

1. Donalde. Fischer and Ronald J. Jordan , SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT 6TH Addition, . Pearson Education India, Mumbai. 2. www,Infosys.com 3. www.indiabulls.com 4. www.wikipedia.com 5. www.nse.com 6. www.bse.com

ANNEXURE
ANNEXURE (This questionnaire is meant for study purpose only)
Name. Address .... Age. Gender...... Occupation..

Ques1) Through which brokerage firm you are dealing?

Ques 2) What is the brokerage you are paying? Intraday ............................ . Delivery .

Ques 3) How do you come to know about the firm? a) Newspaper b) Friends c) Executive d) others (please specify) .................................... Ques 4) What is the annual family income? a) Less than l lakh b) 1-1.5Iakh c) 1.5-2.5Iakh d) More than 2.51akh Ques 5) What is your preference avenue for investment? a) Initial Public Offerings (IPO) b) Trading Market c) Mutual Funds Ques 6) You are more interested in? a) Intraday b) Short term c) Long-term

Ques 7) What are the services you are availing from the broker Firm? YES (a) (b) (c) (d) NO

Financial statements Advisory services Margin funding Portfolio management services

Ques 8) Please rank the services according to your preference? (e) (f) (g) (h) Financial Statements Advisory Services Margin Funding . . Portfolio Mgt. Services

Ques 9) How do you trade? (a) (b) Through phone Through internet yourself

Ques 10) On what basis do you buy a scrip? (a) (b) (c) (d) (e) (a) (b) (c) (d) On the recommendation of the broker Fundamental analysis On the recommendation of your friend Yourself On the basis of news Rs 50,000- Rs 2,00,000 Rs 2,00,000- Rs 5,00,000 Rs 5,00,000- Rs 10,00,000 More than Rs 10,00,000

Ques 11) what is the value of your portfolio?

Ques 12) Do you know about other broker firms operating in the city? a) Yes b) No

If yes, please specify .....................................'" .............................................................

Ques 13) Are you satisfied with the services of the current broker firm? a) Yes b) No

Ques 14) If some other broker firm promises you to provide better services will you shift to that firm? a) Yes b) No c) Can't say