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To analyze tools of technical analysis can be used in forecasting stock prices. know the movements (upward or downward) of stock prices of selected company stocks through Technical analysis. know how best we can utilize these analyses to meet the financial goals. find out expected rate of return using CAPM model.
To
To
To
SCOPE
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tools.
The
study is restricted only to five selected stocks. study depends more on secondary data rather then on primary data. cant predict the prices of the stocks for long term. technical analysis cant be applicable to newly listed companies shares.
The
We
This
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Bajaj Auto limited Hero Honda Motors limited Maruti Udyog limited TVS Motors Company limited Tata Motors limited
Chart patterns
Line
Japanese
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DOW THEORY
Ripple Wave Tide
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MACD
Common, the MACD is a trend following, momentum indicator that shows the relationship between two moving averages of prices. To Calculate the MACD subtract the 26day EMA from a 12-day EMA. A 9-day dotted EMA of the MACD called the signal line is then plotted on top of the MACD. There are 3 common methods to interpret the MACD:
Crossover Divergence Overbought/Oversold
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is a very popular oscillator which measures the rate of change of the current price as compared to the price a certain number of days or weeks back. The ROC has to be used along with price chart. The buying and selling signals indicated by the ROC should also be confirmed by the price chart. = (Current Price / Price n period ago) - 1
ROC
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RSI
Relative
strength index was developed by Wells Wilder. It is one of the powerful and popular indicators, which identifies overbought and oversold market conditions along with the signals of buying and selling opportunities in the market. It also shows the strength and weakness of a particular scrip or market. If the share price is falling and RSI is rising, a divergence is said to have occurred. Divergence indicates the turning point of the market. If the RSI is rising in the overbought zone, it would indicate the downfall of the price. When the RSI is in the oversold region, it generates the buy signal.
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Findings
1. BAJAJ AUTO LIMITED
TECHNICAL INDICATOR MACD RSI ROC BUY SIGNAL SELLING SIGNAL March May January &April February February &January & April May
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CAPM Model
Capital asset pricing model (CAPM) allows for the calculation of the required rate of return for any risky asset based on the securitys beta
An assets covariance with the market portfolio is the relevant risk measure (helps in beta calculation) can be used to determine an appropriate required rate of return on a risky asset
This
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expected rate of return of a risk asset is determined by the RFR plus a risk premium for the individual asset risk premium is determined by the systematic risk of the asset (beta) and the prevailing market risk premium (RM-RFR)
The
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CAPM model is linear and when plotted on a graph paper gives a straight line called SML. graphical version of CAPM is Security Market Line.
The
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HERO HONDA
Beta
0.9236516
BETA Expected Market return Risk free rate Expected rate of return of stock
0.62873352
Market Return 0.1298849 Risk Free Rate 0.07 Expected rate of return of stock 12.53%
0.12988489 7% 10.77%
15.71%
TVS Motors
Beta Expected Market Return Risk Free Rate Expected rate of return of stock
BETA Expected Market Return Risk Free Rate Expected rate of return of stock
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Thank You