INDIAN STOCK MARKETS

30 TH OCTOBER 2018

MARKETS TODAY

Nifty ended lower today, down by 52.5 points to close at 10198.40

India VIX moved up by 3.27 percent to 20.47 levels. VIX has to go down below 17-16 zones to confirm the short term reversal
and a decent bounce back after the sharp cut of last two months, experts said.

TECHNICAL GYAAN

The Nifty formed a small Spinning candle and remained consolidative with the limited upside for most part of the session.

A spinning candle is a candlestick pattern with a short real body that's vertically centered between long upper and lower
shadows. Often times, the candlestick pattern is a sign of indecision about the future direction of the underlying asset.

OTHER NEWS

a) The Government will sell a 3% stake in Coal India for Rs. 266 per share (Discount of ~4%) through Offer for Sale route
on October 31st.
b) A couple of months back, investors had a tough time deciding whether to invest in Indian stocks trading at rich
valuations. That problem no longer exists, according to India's largest asset manager, ICICI Prudential AMC.
c) Oil falls to 2 month low, due to intensifying trade wars between USA & China. Brent Crude was trading at $76.04 on the
London exchange.
d) RBI clears reappointment of Aditya Puri as CEO of HDFC Bank for 2 years.

RESULTS TODAY

a) Tech Mahindra profits beat Q2 estimates, Profit at 1064 Crore supported by strong deals

DISCOUNTED CASH FLOW ANALYSIS

The DCF analysis is the most commonly followed valuation method used in the world to find Intrinsic Valuation. It discounts the
future cash flows accruing to the company at the Cost of Capital.

An analyst undertaking DCF analysis has to first forecast the Income Statement making accurate assumptions. The assumptions
are most important for this model as even a slight difference can change thee Intrinsic Valuation by a huge percentage.

After forecasting the Income Statement, the Cash Flow & Balance Sheet are forecasted.

The next step is to calculate the FCFF or Free Cash Flow to the Firm. This includes taking the EBIT and multiplying it by 1- Tax
Rate, which is generally 34% in India. This gives us NOPAT, we subtract investments in Fixed Capital & Working Capital, Capital
Expenditure and add Depreciation to the formula to get to the FCFF. We generally forecast it for 3-5 years because any forecast
too far in the future distorts the model. We put a Terminal growth rate which is generally greater than inflation and less than
GDP growth rate, which gives us the Terminal Value. All the FCFFs and Terminal Value is discounted using the WACC.

The sum of these discounted values gives us Enterprise Value, in which we subtract the value of Debt, Minority Interest and add
Cash. This gives us the Market Capitalisation of the stock, which divided by the Number of Outstanding shares gives us the
Intrinsic Value of the share.

Disclaimer: All the news has been collated from Internet. Views are personal and no guarantee is given for the views.