A study on security analysis for selecting appropriate security
- Executive summary
- Investment scenario
- Introduction to the concept of security analysis
- Different approaches of to evaluation
- Fundamental approach
- Technical approach
- Modern approach
- Background of the study
- Significance of the study
- Review of literature
- Importance of the field work undertaken
- Overview of the report
- Overview of the economy
- Profile of industries
- Profile of organizations
An investment refers to the commitment of funds at present, in anticipation of some positive rate of return in future. Today the spectrum of investment is indeed wide. An investor is confronted with array of investment avenues. Among all investment, investment in equity is best high proportion. This is because the history of stock market world over is booms and bursts over night millionaires an instant pauper.
An Indian stock market has been no different. Memories of its crash of December 1990 are still there in the minds of many. After record rise in proceeding few years the index fell precipitously and investor loss heavily. This phenomenon repeated every now and then. Though the equity cult is fast spreading among the investor the hard fact is majority of stocks continue to remain volatile to date. All these are pointers to the fact that the investor market is no longer holding an olive branch to investor in equity. Much of the danger associated with it can be avoided and it need not be such nerve raking experience, provided one approaches it as a rational decision making process. In short Security analysis and portfolio management are hard work, requiring discipline and patience, and the work is not always rewarded with exceptional returns.
An investment is a commitment of funds made in expectation of some positive rate of return in future. An investor makes some sacrifice in the present in the hope of desiring benefits in future. The motive behind investment varies from person to person. Some people invest in order to gain a sense of power or prestige. Often the control of corporate enterprises is a driving motive. For most investor however their interest in investment is largely pecuniary to earn a return on their money. But the return on stock market security is subject to risk. Risk in this case refers to the uncertainty surrounding actual realization of the rate of return offered by an investment. The time element refers to period of waiting required to reap the return. Accordingly early investment decision has three key aspects.
[...] Therefore rupees 100 after one year = 100/100 + R and if R = then 100/112 = .0893. Technical Approach Technical analysis is an alternative approach to predicting the stocks price behavior. Technical analysis is frequently used as a supplement to fundamental analysis rather than as a substitute for it. Thus technical analysis can frequently does, confirm findings based on fundamental analysis. Technical analysis is viewed mainly through price and volume statistics. It helps in measuring price volume, supply demand relationship for overall market as well as for individual stocks. [...]
[...] Some people invest in order to gain a sense of power or prestige. Often the control of corporate enterprises is a driving motive. For most investor however their interest in investment is largely pecuniary to earn a return on their money. But the return on stock market security is subject to risk. Risk incase refers to the uncertainty surrounding actual realization of the rate of return offered by an investment. The time element refers to period of waiting required to reap the return. Accordingly early investment decision has three key aspects. [...]
[...] A stock with a beta higher than one is called an aggressive stock, if this stock beta is less than one the stock is called a defensive one. Aggressive stock has more undiversifiable risk than average stocks and their price fluctuate with greater volatility than market. Significance If the stocks have tripled than the market index has doubled the stock is considered to be highly sensitive and its beta could be greater than one. If the stocks performance exactly matches with that of the index then the beta of the stock would be equal to one. [...]
[...] Time value of money suggests that earlier receipt is more desirable than later receipt, even when the both are equal in the amount of certainty. Because, earlier receipt can be re invested to generate additional returns before later receipt come in. The force operating is the principle of compound interest. Framework: The proper order in which to proceed in Fundamental analysis is, first to analyze the overall economy and securities markets. Second, analyze the industry with in which a particular company operates. [...]
[...] Modern Approach Markovitize led down the foundation for this approach in 1951. He studied capital market with the help of fairly sophisticated method of investigation and in general arrived at the following conclusions. Stock markets are reasonably efficient in reacting quickly and rationally to the flow of information. Successive price changes are independent. As a result past price behavior cannot be used to predict future price behavior. In the capital market, there is a positive relation ship between the risk and return. [...]