MINI PROJECT REPORT ON

FUNDAMENTAL AND TECHNICAL ANALYSIS OF SHARESOF AUTOMOBILE INDUSTRY -A

CASE STUDY
By,
APPACHU P.K
USN NO: 4GW14MBA04

Submitted to

VISVESVARAYA TECHNOLOGICAL UNIVERSITY, BELGAUM

In partial fulfillment of the requirements for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
Under the Guidance of
FACULTY GUIDE
PROF.GANESH Y.S.
Associate Professor
GSSS Centre for PG Studies & Research
Mysore

GSSS CENTRE FOR PG STUDIES & RESEARCH

Department of Management
KRS ROAD, MYSURU 570016
2014-2016

1. ABSTRACT:
The paper focuses on performance of equity shares of automobile industry in India. For an investor to
gain return through his investment he has to evaluate both the industry and the individual performance
of the securities in it. The evaluation can be done through two analysis i.e. fundamental and technical
analysis. Fundamental analysis examines the economic environment, industry performance and
company performance before making an investment decision. While technical analysis measures the
performance of the securities using Sharpe, Trenor and Jensen performance measure.
KEYWORDS: Fundamental analysis, Technical analysis, Ratios.
2. INTRODUCTION:
India is the world's second fastest growing auto market and boasts of the sixth largest automobile
industry after China, the US, Germany, Japan and Brazil. A car is not only a utility, but also represents
aspirations and image of its owner. So there fundamental and technical analysis will come into play. The
fundamental approach to security analysis is to compare the current observable market value of a
particular security with its theoretical or intrinsic value that is based on a variety of factors such as
growth trend, earnings stability, and dividend history as well as based on subjective estimates of future
earnings and capitalization rates. Decision rules is a great demand for equity shares of automobile
industry, but for an investor to choose the right equity shares for buying and selling individual securities
result from these comparisons of relative value
Technical Analysis is used to mean fairly wide range of techniques, all based on the concept that past
information on prices and trading volume of stocks gives the enlightened investor a picture of what lies
ahead. It attempts to explain and forecast the changes in security prices by studying only the market data
rather than information about a company or its prospects as is done by fundamental analyst. Technical
analysts' exclusive use of historical price and volume data is what separates them from their fundamental
counterparts. Unlike fundamental analysts, technical analysts don't care whether a stock is undervalued the only thing that matters is a security's past trading data and what information this data can provide
about where the security might move in the future.
3. LITERATURE REVIEW:

Jenni.L Bettman Stephen.J.Sault, Emmas Schultz (2009), proposes an equity valuation model
integrating fundamental and technical analysis, they tend to recognize their potential as a complement
rather than substitutes. The tests confirm the complementary nature between the two analyses. Menkhof
(2010) observed that for a forecasting duration of two weeks, technical analysis outperforms the
fundamental analysis. De Zwart et all (2009) observed that technical analysis works well for short term
trading while fundamental analysis outperforms technical for long term trading.Hossein Khanifar et.
al., (2012): This paper studies affecting factors on analysts decisions in Tehran Stock Exchange.
Principally, analysts use two types of fundamental and technical analyses in their decisions. In present
research, they have studied the affecting factor son analysts decisions in the format of fundamental
analysis. Such analysis is studied in three sectors: (1) economy/market, (2) industry, (3) firm. This paper
uses analytical approach to study affecting factor son analysts decisions. Its statistical population

contains analysts in brokering companies at Tehran Stock Exchange. Based on the results ,it was
determined that firm related factors such as actual EPS, estimated EPS, profit margin, P/E ratio and
sale rate have the highest importance in analysts decisions followed by economy/market related factors
and industry related factors

4. RESEARCH METHODOLOGY:
4.1. OBJECTIVES OF THE STUDY:

To study the companys earnings and dividends companys intrinsic value and growth prospects

To study past prices and trading volume of financial instruments to forecast future prices which intern is
helpful for both company as well as investor

4.2. RESEARCH DESIGN:

The research design is used for the study was descriptive in nature. It aims to determine the strategy and
the way of performance appraisal.

4.3. DATA COLLECTION METHOD:

This study is based and collected with the help of both primary and secondary data. To fulfill the
objective of the study; the meaningful information data collected in research analysis should be accurate
and reliable. PRIMARY DATA: The primary data was collected from: stock market brokers.
SECONDARY DATA: The secondary data for this study was collected through magazines, newspapers,
web sites etc. Past project data of the company, journals and articles
4.4. LIMITATIONS:

1) The study is for the period of 2014-2015 only because the data taken is for the mentioned period
only
2) It is concerned for automobile sector only and data of 3 leading companies in the sector are taken
for the whole sector for calculation
3) Behavioral finance can be taken as a concept which may or may not consider this interpretation

5. INTERPRETATION:

FUNDAMENTAL V/S TECHNICAL ANALYSIS

Fundamentalist study the case not the should. They make their decisions in quality, value and
depending on their specific investment goals, the yield, and the growth potential of the security. They are
concerned with the basis, the corporations financial strength, record of growth sales and earnings,
profitability, the investment acceptance and so on.
Whereas Technicians believe that (1) the stock market is rooted 15 percent in economics and 85
per cent in psychology;(2) the record of past and present performance of a stock, and necessarily of the
corporation, is the key factor; and (3) stock market dominated by institutional investors, operates on the
wolf pack theory of following leaders
Comparative analysis
RATIOS

MARUTI SUZUKI

MAHINDRA

TATA

Equity per share(EPS)=

53.47

122.85

-14.72

Dividend per share=

12

25.00

pay-out ratio=

0.2244

0.2035

0 (but 1.9387
paid from past
profits)

RANKING OF PORTFOLIO:
SECURITIES

SHARPE

TRENOR

JENSEN

MARUTI

MAHINDRA

TATA

While striking a comparison between the fundamental and technical analysis. The basis to be taken is
The EPS, DPS and payout ratio in fundamental analysis and ranking is to be highly based on Sharpe and
trenor
While comparing the dividend and earnings it can be noted that

There was an upward movement in the automobile sector during the calculation
Tata motors is the only the loss making company during the period
Mahindra is the highest earner when compared to others even though the ranking in technical
analysis keeps it in the second position
Tata paid from past profits as it incurred loss in the year march2015. So as it paid from past
profits it still maintained the highest pay-out and in technical analysis the ranking is first. as Tata
yields a high return on portfolio due to its company net worth
Maruti maintains stable returns and even in ranking it is ranked average at last ranked because of
stable returns

6. CONCLUSION
(1) Equity shares are purely based on risks of market and company risks. Stability of an equity share is
depended purely on the debt the company is gaining and the market risks according to the ratios and
models
(2) The financial year 2015-2016 is not a time to sell shares because automobile industry is in a downfall
but if a bull is taken into study, it is the best time to buy equity shares as price of the shares are reduced
and the future profits can be expected from shares if purchased now
(3) There is a downfall in the Indian automobile sector mainly because of foreign entrances such as
Volkswagen, Hyundai, and Honda which are car manufacturers giving hard time to Indian
manufacturing companies.
(4) It can be noted that behavioral financing is an element to be kept in mind about the investor. Because
even if the investor finds a company or stock at loss he might still invest because of his behavior
(5) Itmay be noted that past profits affects the present and the study of the past easily helps the investor
to get to know the future earnings or losses that may come. So a comparison between the fundamental
returns or the technical returns lets the investor to know whether or not to invest in a company
(6) Because of global depression indirectly the Indian automobile sector is affected. When it comes to
price fluctuations in stock market it is observed that the prices of some of the automobile company
shares were low during 2008-10 and 2014-15

7. BIBILOGRAPHY
Literature review:
IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 2, No.5, October 2013
Businessand Economic ResearchISSN 2162-4860 2013, Vol. 3, No. 1- macro think institute
Text Book sources

(1) INVESTMENT MANAGEMENT security analysis and portfolio management by V.K Bhalla,
Sultan chand publications

Web sources:
(1) Equitymasters.com
(2) Gurufocus.com
(3) Moneycontrol.com
(4) Reuters.com