Presentation on Equity Analysis - 2003 Version

8/2/2019 Presentation on Equity Analysis - 2003 Version

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Pratik Agarwal Semester6

Roll -458 Room -31

Under the Guidance of :Prof. C.Chatterjee


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Equity Analysis refers to the methods

used to determine the movements in the equity,

direction of the movements and the methods

applied for the valuation of equities.

It basically means analyzing the

performance of various shares in the stock market

and taking investment decisions on the basis ofsuch analysis.


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Technical analysis

Fundamental analysis


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It is a study of the past price patterns primarily throughcharts in order to take buy/sell decisions.

It is more suitable for short term traders and

speculators.

It does not involve any pricing decision.

It believes market movements are more psychological

rather than being logical.


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Share prices always move in trend which persist for an

appreciable length of time.

In the direction of the trend volume should be high andagainst the direction volume should be low.

If this doesnt happen it is a signal of potential trend

reversal.


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Moving Average


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Relative Strength Index (RSI)

The relative strength index (RSI) is another one of the most used and well-knownmomentum indicators in technical analysis. The indicator is plotted in a range between zero

and 100. A reading above 70 is used to suggest that a security is overbought, while a reading

below 30 is used to suggest that it is oversold. This indicator helps traders to identify whether

a securitys price has been unreasonably pushed to current levels and whether a reversal may

be on the way.


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The objective of Fundamental analysis is tofind out intrinsic value of the share based onfuture fundamentals and compare the samewith market price i.e. it is a Pricing Decision.

It is suitable for long term Investors.

It believes market movements are morelogical and not psychological.


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Dividend Discount Model.

Price to Earnings (P/E ratio).

Price Earnings to Growth (PEG ratio).

Price to Book Value (P/B ratio).


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Dividend Discount Model uses future dividendprojections and discounts them to arrive at apresent value, which is used to evaluate thepotential for investment.

It is Calculated as:

Dividend * (1 + growth rate)/ (Required rate

growth rate)


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P/E ratio refers to the current price divided bythe annual EPS of the company.

Forward P/Es are probably the single mostimportant valuation method because theyreflect the future growth of the company intothe figure. Furthermore , all stocks are priced

based on their future earnings, not on theirpast earnings.


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This is a better measure than P/E ratio as ittakes into account three factors price,earnings and growth.

PEG RATIO= (forward P/E) / Expected earnings

growth rate. The theory goes that as the percentage rises

over 100% the stock becomes more and moreovervalued, and as the PEG ratio falls below

100% the stock becomes more and moreundervalued.


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A ratio used to compare a stock's marketvalue to its book value.

P/B ratio = Stock price / Total Assets -intangible assets and liabilities.

A lower P/B ratio could mean that the stock isundervalued.


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Charts Vs Financial Statements

Time Horizon

Trading Vs Investing


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At the end fundamental analysis has been conducted on someBSE index shares in order to find out their intrinsic value

using P/E ratio and P/B ratio.


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Stock markets movement is more influencedby sentiments rather than fundamentalreasons. There are a lot more factors which

influences equity market both in short termand long term.The above fundamental andtechnical methods are not 100% correct. Itonly gives its view just like other factors do.


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Documents

Presentation on Equity Analysis - 2003 Version