Executive Summary: The report “Fundamental “Fundamental & Tech Technical nical analysis analysis of the 5 major oil & gas companies companies is to analyze the strength and weakness of the scrip’s of the 5 major companies in the oil & gas industry. The The 5 major companies include O!"# $%"# !'( ()(' T)# T)# *%" and "airn (ndia. The primary o+jecti,e of the study is to suggest the in,estors# whether to +uy the scripts or not# +ased on the ,aluation of shares. 'lso to analyze the trend of the scripts in the market. The secondary o+jecti,e is to analyze how the companies perform# understand the capital market and its functioning# and to compare theoretical knowledge with actual industrial practice. To analyze all the scripts# fundamental and technical analysis is used. (n the fundamental analysis# ratios of the companies are studied. For technical analysis# tools like -apanese "and "andle lest stic ick k "hart "harts# s# ela elati ti,e ,e /tre /treng ngth th (nde (nde0 0 1/( 1/(2# 2# /imple /imple mo mo,i ,ing ng a,er a,erage age 1/3' 1/3'2# 2# 40po 40 pone nent ntia iall mo mo,i ,ing ng a,er a,erag agee 143' 143'22 and and ,olu ,olum me are are used used.. 'lso lso the the mo,em o,emen entt of corresponding graphs is studied to interpret whether to +uy# +u y# sell or hold the share.
1
Chapter 1 1.1 Introduction to the Industry1: Financial Markets: (ndia Financial market is one of the oldest in the world and is considered to +e the fastest growing growing and +est among all the markets of the emerging economies. economies. The history history of capital capital markets dates +ack 66 years toward the end of the 78th century when (ndia was under the rule of the 4ast (ndia "ompany. The de,elopment of the capital market in (ndia concentrated around 3um+ai where no less than 66 to 56 securities +rokers were acti,e during the second half of the 79th century. The financial market in (ndia today is more de,eloped than many other sectors +ecause it was organized long +efore with the securities e0changes of 3um+ai# 'hmeda+ad and :olkata were esta+lished as early as the 79th 7 9th century. (t is classified as follows;
1 https://books.google.co.in/books?isbn=8179752224 2
Chapter 1 1.1 Introduction to the Industry1: Financial Markets: (ndia Financial market is one of the oldest in the world and is considered to +e the fastest growing growing and +est among all the markets of the emerging economies. economies. The history history of capital capital markets dates +ack 66 years toward the end of the 78th century when (ndia was under the rule of the 4ast (ndia "ompany. The de,elopment of the capital market in (ndia concentrated around 3um+ai where no less than 66 to 56 securities +rokers were acti,e during the second half of the 79th century. The financial market in (ndia today is more de,eloped than many other sectors +ecause it was organized long +efore with the securities e0changes of 3um+ai# 'hmeda+ad and :olkata were esta+lished as early as the 79th 7 9th century. (t is classified as follows;
1 https://books.google.co.in/books?isbn=8179752224 2
What is Money Market? The Money market in India is the money mark market et for short-term short-term and long-term long-term funds with maturity ranging from overnight to one year in India including nancial instruments that are deemed to be close subs ubstitute utes of money money.. Similar to develoed economies the economies the Indian money market is diversied and has evolved through many stages! from the conventional latform of treasury bills and bills and call money to money to co comm mmer erci cial al ae a err ! cer erti tic cat ates es of de eo osi sitt ! reos reos!! for orwa warrd ratte ra agreements and agreements and most recently interest rate swas
The (ndian money market consists of di,erse su+
s >s inter,ention in the market.
Structure o! Money Market:
The (nd (ndian ian mon money ey mar market ket cons consist istss of the uno unorg rgani anised sed sec sector tor;; mon moneyl eylende enders# rs# ind indige igenous nous +ankers# and unregulated on<$ank Financial (ntermediaries 1e.g. Finance companies# "hit funds# idhis2 organized sector; eser,e $ank of (ndia# (ndia# pri,ate +anks +anks## pu+lic sector +anks# de,el de ,elop opme ment nt +a +ank nkss an and d ot othe her r non< non<+an +ankin king g fin financi ancial al com compani panies es 1 1$F $F"s "s22 su such ch as ife (nsurance "orporation of (ndia1("2# (ndia1("2# the (nternational Finance "orporation# "orporation# ()$(# and the co< operati,e sector.
Instruments in Money Market: " 1. Call Money:
The call money market deals in short term finance repaya+le on demand# with a maturity period ,arying from one day to 7? days "ommercial +anks# +oth (ndian and foreign# co< market_in_India 2 https://en.wikipedia.org/wiki/Money _ market_in_India
" business.apso!india.co # $ndia%arket "
operati,e +anks# )iscount and Finance *ouse of (ndia td.1)F*(2# /ecurities trading corporation of (ndia 1/T"(2 participate as +oth lenders and +orrowers and ife (nsurance "orporation of (ndia 1("2# @nit Trust of (ndia1@T(2# ational $ank for 'griculture and ural )e,elopment 1'$')2can participate only as lenders. The interest rate paid on call money loans# known as the call rate# is highly ,olatile. (t is the most sensiti,e section of the money market and the changes in the demand for and supply of call loans are promptly reflected in call rates. There are now two call rates in (ndia; the (nter +ank call rate>and the lending rate of )F*(. The ceilings on the call rate and inter<+ank term money rate were dropped# with effect from 3ay 7# 7989. The (ndian call money market has +een transformed into a pure inter<+ank market during 66AB6C.D?E The major call money markets are in 3um+ai# :olkata# )elhi# "hennai# 'hmeda+ad.
. #reasury $ill market:
Treasury +ills are instrument of short
". %eady !or&ard contract '%epos(:
epo is an a++re,iation for epurchase agreement# which in,ol,es a simultaneous Gsale and purchaseG agreement. Hhen +anks ha,e any shortage of funds# they can +orrow it from eser,e $ank of (ndia or from other +anks. The rate at which the $( lends money to commercial +anks is called repo rate# a short term for repurchase agreement. ' reduction in the repo rate will help +anks to get money at a cheaper rate. Hhen the repo rate increases +orrowing from $( +ecomes more e0pensi,e.
#
). Money market mutual !unds:
3oney market mutual funds in,est money in specifically# high<=uality and ,ery short maturity<+ased money market instruments. The $( has appro,ed the esta+lishment of ,ery few such funds in (ndia. (n 799C# only one 333F was in operation# and that too with ,ery small amount of capital.
What is Capital Market?) "apital markets are financial markets for the +uying and selling of long
in,estors in primary markets# as they know they are likely to +e a+le to swiftly cash out their in,estments if the need arises. ' second important di,ision falls +etween the stock markets 1for e=uity securities# also known as shares# where in,estors ac=uire ownership of companies2 and the +ond markets 1where in,estors +ecome creditors2.
Classi!ication:
*rimary Markets:
The primary market is where securities are created. (t>s in this market that firms sell 1 float2 new stocks and +onds to the pu+lic for the first time. For our purposes# you can think of the %
primary market as +eing synonymous with an initial pu+lic offering 1(%O2. /imply put# an (%O occurs when a pri,ate company sells stocks to the pu+lic for the first time. (%Os can +e complicated +ecause many different rules and regulations dictate the processes of institutions# +ut they all follow a general pattern; 1. ' company contacts an underwriting firm to determine the legal and financial details of the pu+lic offering. . ' preliminary registration statement# detailing the company>s interests and prospects and the specifics of the issue# is filed with the appropriate authorities. :nown as a preliminary prospectus# or red herring# this document is neither finalized nor is it a solicitation +y the company issuing the new shares. (t is simply an information pamphlet and a letter descri+ing the company>s intent. ". The appropriate go,erning +odies must appro,e the finalized statement as well as a final prospectus# which details the issue>s price# restrictions and +enefits# and is issued to those who purchase the securities. This final prospectus is legally +inding for the company.
The important thing to understand a+out the primary market is that securities are purchased directly from an issuing company.
Secondary Market:
The secondary market is what people are talking a+out when they refer to the Gstock marketG. The defining characteristic of the secondary market is that in,estors trade among themsel,es. That is# in the secondary market# in,estors trade pre,iously issued securities without the issuing companies> in,ol,ement. For e0ample# if you go to +uy 3icrosoft stock# you are dealing only with another in,estor who owns shares in 3icrosoft. 3icrosoft 1the company2 is in no way in,ol,ed with the transaction. The secondary market# also called the aftermarket# is the financial market in which pre,iously issued financial instruments such as stock # +onds# options# and futures are +ought and sold. The term Gsecondary marketG is also used to refer to the market for any used goods or assets# or an alternati,e use for an e0isting product or asset where the customer +ase is the second market 1for e0ample# corn has +een traditionally used primarily for food production and feedstock# +ut a GsecondG or GthirdG market has de,eloped for use in ethanol production2. Hith primary issuances of securities or financial instruments# or the primary market# in,estors purchase these securities directly from issuers such as corporations issuing shares in
&
an (%O or pri,ate placement# or directly from the federal go,ernment in the case of treasuries. 'fter the initial issuance# in,estors can purchase from other in,estors in the secon dary market. The secondary market for a ,ariety of assets can ,ary from loans to stocks# from fragmented to centralized# and from illi=uid to ,ery li=uid. The major stock e0changes are the most ,isi+le e0ample of li=uid secondary markets < in this case# for stocks of pu+licly traded companies.
Stock Markets in India:
%eople +uy goods and ser,ices in a place called market. *owe,er# when the people need to trade in stocks# shares# de+entures etc. there is a specific place where one needs to go. One cannot deal with these items in a normal market place. Thus a place or a platform where the trading of these shares and stocks takes place is known as the /TO": 3':4T. The price of these shares and stocks is not considered +y monopolyI rather it is the demand and supply forces of the market that determines the prices of these shares and stocks. (n earlier times# the trading# that is# the +uying and selling of shares and stocks takes place at a particular place known as stock e0change. Thus# the person needs to go at that particular platform if he or she needs to trade in the shares. *owe,er with the ad,ancement of technology# this process has almost +ecome redundant. ow# the trading of shares and stock can take place electronically. There is a tremendous reduction of paperwork as e,erything has gone online.
'
+ri,in o! the Indian Stock Market: -
The (ndian stock market is not a new concept. (t has a history of a+out 99 years old. (t was in early 78th "entury# the main institution that is dealing in the trading of shares and stocks is the 4ast (ndia "ompany. ater +y around 786Js the main dealing in the shares and stocks 1mainly in +ank and cotton2 was initiated in $om+ay. *owe,er# the items in which the trading took place increased tremendously +y the end of 789. There after the concept of +roker +usiness was started which show momentum in the mid 78th century. This concept has attracted nmKem+er of people to indulge in the trading of items. $y 78A6# the num+er of +rokers who are dealing in the trading of items goes up to A6 in num+er. Further# the num+er of +rokers increased from A6 to 56 in around 78A<78A. *owe,er# around 7986
The concept of stock market place was not a ,ery systematic system. %eople who needs to trade generally gathered on the streets which was popularly known as the )'' /T44T and the trading and the transaction used to take place from the )alal street. (t was in year 78C5 that the first stock e0change was formulated in the name of “The ati,e /hare and /tock $rokers 'ssociationL which is presently known as the L $om+ay stock e0changeL. There after it was in year 7968# that the stock e0change in "alcutta was formulated known as LThe "alcutta /tock 40change 'ssociationL. This wind of stock e0change has also shown its pace in madras in 796 resulting in the formation of the 3adras /tock e0change which was started with around 766 +rokers who are trading in the madras /tock e0change. (t was in 79? when the ahore /tock e0change was esta+lished. The @ttar %radesh stock e0change and the agpur stock 40change was esta+lished in year 79?6. (n year 79??# the *ydera+ad stock e0change was esta+lished. (t was not until 79?C that any stock e0change was esta+lished in $ https://books.google.co.in/books?isbn=817'292(28 (
)elhi. (t was in year 79?C that the “)elhi /tock and /hare $roker 'ssociation imitedL and “The )elhi stocks and /hares e0change imitedL was esta+lished in )elhi.
*ostIndependence Era:
There was shutdown of ,arious stock e0changes in (ndia due to the depression that took place after (ndependence. (t was under the /ecurities "ontracts 1egulations2 'ct# 795A that ,arious stock e0changes has got a recognition as a recognized stock e0change such as $om+ay# )elhi# *ydera+ad# (ndore etc. there are se,eral other stock e0changes that were esta+lished post< independence. Thus# the market of stock e0change in (ndia is tremendous and is growing with leaps and +ounds.
Exchan,es in India:
/tock 40changes are an organized marketplace# either corporation or mutual organization# where mem+ers of the organization gather to trade company stocks or other securities. The mem+ers may act either as agents for their customers# or as principals for their own accounts. /tock e0changes also facilitate for the issue and redemption of securities and other financial instruments including the payment of income and di,idends. The record keeping is central +ut trade is linked to such physical place +ecause modern markets are computerized. The trade on an e0change is only +y mem+ers and stock +roker do ha,e a seat on the e0change.
The major stock e0change maintained +y the /ecurities and 40change $oard of (ndia 1/4$(2 are; •
$om+ay /tock 40change 1$/42
1)
•
ational /tock 40change of (ndia 1/42
"ommodity 40change •
•
3ulti "ommodity 40change of (ndia imited 13"M2 ational "ommodity & )eri,ati,es 40change imited 1")4M2
•
(ndian ational 3ulti<"ommodity 40change 13"42
•
"ommodity 40change imited ("4M.
/$out 0SE:
% www.bseindia.co 11
4sta+lished in 78C5# $/4 1formerly known as $om+ay /tock 40change td.2# is 'sia>s first & fastest /tock 40change with the speed of 66 micro seconds and one of (ndia>s leading e0change groups. O,er the past 7?6 years# $/4 has facilitated the growth of the (ndian corporate sector +y pro,iding it an efficient capital 'ssociationG in 78C5. $/4 is a corporatized and demutualized entity# with a +road shareholder<+ase which includes two leading glo+al e0changes# )eutsche $ourse and /ingapore 40change as strategic partners. $/4 pro,ides an efficient and transparent market for trading in e=uity# de+t instruments# deri,ati,es# mutual funds. (t also has a platform for trading in e=uities of smalls o. 7 e0change in terms of listed mem+ers. The companies listed on $/4 command a total market capitalization of @/) 7.A8 Trillion as of 3arch 675. (t is also one of the world>s leading e0changes 15th largest in 3arch 6752 for (nde0 options trading. $/4 also pro,ides a host of other ser,ices to capital market participants including risk management# clearing# settlement# market data ser,ices and education. $/4 systems and processes are designed to safeguard market integrity# dri,e the growth of the (ndian capital market and stimulate inno,ation and competition across all market segments. $/4 is the first e0change in (ndia and second in the world to o+tain an (/O 9667;666 certification. (t is also the first 40change in the country and second in the world to recei,e (nformation /ecurity 3anagement /ystem /tandard $/ CC99<<66 certification for its On<ine trading /ystem 1$OT2. $/4>s popular e=uity inde0 < the /&% $/4 /4/4M < is (ndia>s most widely tracked stock market +enchmark inde0. (t is traded internationally on the 4@4M as well as leading e0changes of the $("/. $/4 has won se,eral awards and recognitions that acknowledge the work done and progress made like (ndia (nno,ation 'ward for the $ig )ata implementation # ("("( om+ard & 4T ow isk 3anagement $F/( "ompany 67# /:O"* Order of 3erit "ertificate was awarded to $/4 for 4 <$oss for =ualifying amongst (ndia>s $est 67# The !olden %eacock !lo+al "/ 'ward for its initiati,es in "orporate /ocial esponsi+ility# '//"O3 < "$"< TN78>s (T @ser 'wards# 676 in Financial /er,ices category# /koch Nirtual "orporation 676 'ward in the $/4 /t' 3F category and esponsi+ility 'ward 1"/2 +y the Horld "ouncil of "orporate !o,ernance. (ts recent milestones include the launching of $("/3'T indices deri,ati,es# $/4
12
$om+ay /tock 40change has now adopted only its initials as the new name 1$/42# positioning itself +etter position as a national multi
aunch a special platform for trading in /34 securities
•
(ntroduce 4=uity )eri,ati,es
•
aunch a Free Float (nde0 < /&% $/4 /4/4M
•
aunch 40change 4na+led (nternet Trading %latform
•
O+tain (/O certification for a stock e0change
•
40clusi,e facility for financial training B $/4 (nstitute td.
•
aunch its we+site in *indi and regional languages
•
*ost the popular opening<+ell ceremony in (ndian capital markets
/$out 2SE:3
& www.nseindia.co 1"
The ational /tock 40change 1/42 is (ndia>s leading stock e0change co,ering ,arious cities and towns across the country. /4 was set up +y leading institutions to pro,ide a modern# fully automated screen<+ased trading system with national reach. The 40change has +rought a+out unparalleled transparency# speed & efficiency# safety and market integrity. (t has set up facilities that ser,e as a model for the securities industry in terms of systems# practices and procedures. /4 has played a catalytic role in reforming the (ndian securities market in terms of microstructure# market practices and trading ,olumes. The market today uses state
• • • • •
4alues /4 is committed to the following core ,alues ; (ntegrity "ustomer focused culture Trust# respect and care for the indi,idual %assion for e0cellence Teamwork 3s. "hitra was selected as the woman of the year# in the +usiness leadership awards +y the For+es magazine recently and is also ranked 7Cth in the list of top glo+al women +usiness leaders +y Fortune 3agazine @/'. /he is the second most powerful +usinesswoman in (ndia in this list. /he has also +een featured in the list of top 6 women achie,ers +y the $usiness Today group# for the last four successi,e years. /he is the third woman "4O to head an 40change in the 'sia<%acific region.
For fourth consecuti,e year "(/( has assigned its highest corporate credit rating of "" '''’ to the ational /ecurities "learing "orporation td 1/""2. >"" '''> rating 1#
indicates highest degree of strength with regard to honouring de+t o+ligations. 's per "(/( the rating reflects /""’s status as "learing "orporation for /4. The rating also factors in /""’s rigorous risk management controls and ade=uate settlement guarantee co,er. "(/( has further stated that /""’s risk management system is comprehensi,e# and is regularly upgraded to pre
The award recognizes +est practice# =uality ser,ice and inno,ation in deri,ati,es and risk management in the 'sia<%acific region. The winning institutions are those that# o,er the past year# ha,e responded +est in the needs of their clients# +oth on the asset and lia+ility side# along with the end'sia isk> is the only pu+lication dedicated solely to the +usiness of financial risk management and the deri,ati,es market in the 'sia<%acific region since 7995. /4 has +een awarded >The 'sian $anker Financial )eri,ati,e 40change of the Pear 'wardG /"" has +een awarded >The 'sian $anker "learing *ouse of the Pear 'wardG
Security Measures and +perational Features o! 0SE and 2SE:
The leading stock e0changes in (ndia ha,e de,eloped itself to a large e0tent since its emergence. These stock e0changes aim at offering the in,estors and traders +etter transparency# genuine settlement cycle# honest transaction and to reduce and sol,e in,estor grie,ances if any. %lease ote; The researcher has not co,ered all the operational features of +oth the stock e0changes# +ut has taken into consideration only the ones which are important to understand the thesis. The aim to descri+e these operational features is for +etter understanding of the working of stock e0changes. This is done for the purpose of easy understanding from the readers point of ,iew.
(ts general operational !eatures are as follows;
1$
Market #imin,s ; Trading on the e=uities segment takes place on all days of
1(
the week 1e0cept /aturdays and /undays and holidays declared +y the 40change in ad,ance2. The market timings of the e=uities segment are; Normal Market Open: 09:55 hours Normal Market Close: 15:30 hours
The %ost "losing /ession is held +etween 75.56 to 7A.66 hours.
( /utomated #radin, System ; Today our country has an ad,anced trading
system which is a fully automated screen +ased trading system. This system adopts the principle of an order dri,en market as opposed to a =uote dri,en system. i) NSE operates on the 'National Exchane !or "utomate# $ra#in' (NEAT ) s%stem& BOLT ii) SE operates on the (SE s Online $ra#in ) s%stem& ‟
"(
‟
Market Se,ments
The 40change operates the following su+
%ollin, Settlement
(n a rolling settlement# each trading day is considered as a trading period and trades e0ecuted during the day are settled +ased on the net o+ligations for the day. 't /4# trades in rolling settlement are settled on a TQ +asis i.e. on the nd working day. For arri,ing at the settlement day all inter,ening holidays# which include +ank holidays# /4 holidays# /aturdays and /undays are e0cluded. Typically trades taking place on 3onday are settled on Hednesday# Tuesday>s trades settled on Thursday and so on.
•
5imited *hysical Market
1%
%ursuant to the directi,e of /4$( to pro,ide an e0it route for small in,estors holding physical shares in securities mandated for compulsory dematerialised settlement# the 40change has pro,ided a facility for such trading in physical shares not e0ceeding 566 shares.
•
Settlement Cycle
/ettlement for trades is done on a trade
'cti,ity
)ay
Trading
olling /ettlement Trading
T
"learing
"ustodial "onfirmation
TQ7 working days
)eli,ery !eneration
TQ7 working days 1&
/ettlement
%ost /ettlement
/ecurities and Funds pay in
TQ working days
/ecurities and Funds pay out
TQ working days
'ssigning of shortages for close out
TQ working days
eporting and pick
TQ? working days
"lose out of shortages
TQ5 working days
eplacement of +ad deli,ery
TQA working days
eporting of re<+ad and pick
TQ8 working days
"lose out of re<+ad deli,ery
TQ9 working days
)( 0rokera,e /nd +ther #ransaction Costs
$rokerage is negotia+le. The 40change has not prescri+ed any minimum +rokerage. The ma0imum +rokerage is su+ject to a ceiling of .5 percent of the contract ,alue. *owe,er# the a,erage +rokerage charged +y the mem+ers to the clients is much lower.Typically there are different scales of +rokerages for deli,ery transaction# trading transaction# etc. The /tamp )uty on transfer of securities in physical form is to +e paid +y the seller +ut in practice it is paid +y the +uyer while registering the shares in his name. (n case of transfer of shares# the rate is 56 paise for e,ery s.766R< or part thereof on the +asis of the amount of consideration and that for transfer of de+entures the rate of stamp duty ,aries from /tate to /tate# where the registered office of a "ompany issuing the de+entures is located -( #rans!er +! +&nership
Transfer of ownership of securities# if the same is not deli,ered in demat form +y the seller# is effected through a date stamped transfer
certificate has to +e lodged with the company for change in the ownership. ' nominal duty +ecomes paya+le in the form of stamps to +e affi0ed on the transfer
1(
1. Introduction to the Company 6: Nentura /ecurities td. 1Nentura2 commenced operations in 799? as a stock +roking house. O,er the past two decades# they ha,e grown into a group of companies that pro,ides a complete array of financial products and ser,ices. Through a large network of su+<+rokers# they offer their clients the opportunity to in,est and trade in e=uity and e=uity deri,ati,es# commodities# mutual funds# fi0ed income products and currency futures. They also directly facilitate clients who wish to trade in e=uity online ,ia their in
' https://www.ventura1.co 2)
1." Introduction to the *ro7ect: This project is on analyzing the e=uities to in,est money for getting higher return on in,estments made. This project report can +e helpful for in,estors planning to in,est in any of these fi,e companies from the oil & gas sector in (ndia. ( chose to do this project +ecause ( wanted to analyze the e=uities from the in,estor point of ,iew and also to understand the mo,ement and performance of stocks and also try to know the factors that affect the mo,ement of stock prices in the (ndian stock markets. (n the recent past# the +ank interest rates ha,e +een increased steadily. $ut the rate of (nflation has also +een increased. There is no +ig difference +etween the interest rate and (nflation rate. $ecause of inflation# ,alue of money has +een decreased and cost of li,ing has +een increased. This has created panic among lower# middle and upper middleclass families who considered keeping their sa,ings in +anks as safe as well as remunerati,e. /o# the in,estors are searching for proper in,estment a,enues. *ere# an attempt is made to predict the future mo,ement of scrips. This study helps the in,estors to in,est in shares. The stock e0change comes in the secondary market. /tock e0change performs acti,ities such as trading in share# securities# +onds# mutual fund & commodities. /tock $roking industry is growing at an enormous rate# as more and more people are attracted towards stock e0changes with the hope of making profits.
21
Chapter .1 5iterature %evie& Warren Buffet, Investment Guru: 8Only +uy something that you’d +e happy to hold if the market shuts down for 76 yearsL
George Soros, Chairman, Soros Fund anagement!
“%re,ailing wisdom is that markets are always right# ( assume they are always wrongL
i"ha# $arness, Founder % CEO!
(n,estors don’t 3ake 3oney in the /tock 3arket. One reason the institutions make so much money is that they are trading. They make money e,ery time you +uy or sell. They make money whether you win or lose. That means that when you’re in,esting# you’re +asically just sitting there. Pou’re not going anywhere. Pou’re not making money as an in,estor.
Trading the Trend! The On#& Wa& to a'e one& in the ar'et ;
(f you don’t know this already# “Trend TradingL means trading trends +ased on human emotions. ot lagging indicators. ot comple0 statistical analysis and not %h.). le,el mathematical e=uations. Hith trend trading# you look for market mo,ement. That could mean stocks that are going to mo,e up or down during the course of a day 1intraday2. Pou’ll play the gaps up and down# often se,eral days a week. The “Trend tradingL means +eing aware and taking ad,antage of trends like the run
Austra#ian Nationa# niversit& Ste)hen Sau#t Austra#ian Nationa# niversit& * Fa"u#t& of E"onomi"s % Commer"e ar"h +, +--.!
Hhile the fundamental and technical analysis literatures in,est considera+le effort in assessing their respecti,e a+ility to e0plain share prices# they in,aria+ly do so without reference to each other. (n this conte0t# we propose an e=uity ,aluation model integrating +oth fundamental and technical analysis and# in doing so# recognize their potential as complements rather than as su+stitutes. Testing confirms the complementary nature of fundamental and 22
technical analysis +y showing that# while each performs well in isolation# models integrating +oth ha,e superior e0planatory power. Hhile our findings relate to the ,aluation of shares# they also ha,e implications for other ,aluation e0ercises.
Sand& /ade0a 1* O"t *+--2 Shou#d &ou use Te"hni"a# or Fundamenta# ana#&sis to ma'e &our de"isions3
Nolumes ha,e +een written a+out the different ways to forecast or predict market mo,ement. Traditionally# there are two distinct schools of thought that an indi,idual may choose from# and that +eing Fundamental analysis or Technical analysis. $y choosing fundamental analysis# your decisions are +ased upon underlying economic factors# cash flows# and price earnings. This information will aim to tell you why a stock will mo,e. Technical analysis aims to show you how and when a stock will mo,e. This method discounts all news and information regarding the ,alue of the stock. (n other words# you only pay attention to a chart. The saying “a picture is worth a thousand wordsL truly summarizes this concept nicely. Pou can of course choose to use a com+ination of +oth if you prefer. This would imply that when the stock you are looking at +ecomes under,alued fundamentally# you would wait for a technical setup to get you in to the market. )eciding on which method is appropriate and gi,es +igger returns is truly a matter of opinion. especti,ely# +oth methods ha,e the same goalI to determine market direction. ( know of a num+er of indi,iduals who only use one or the other and is e=ually successful with phenomenal returns. (t +ecomes interesting when one speaks to traders from each school. The fundamental traders +elie,e that charts are a waste of time and pro,ide no real sense as to why one would make trading decisions +ased on indicators and repetiti,e patterns. This group are essentially +argain hunters. They want to +uy stocks which they feel are underpriced and will return to a normal ,alue at a later stage. Fundamental traders often hold stocks for longer periods of time compared to technical traders. On the other hand# the technical traders +elie,e that num+ers do not lie and that information +ased on ,alue# supply and demand are already factored into the price. They also argue that people can +e predicta+le and that these +eha,iors’ occur in the form of price patterns. These patterns repeat with a degree of predicta+ility and therefore can +e used to forecast future price mo,ements. Technical traders generally hold positions for shorter periods of time compared to fundamental traders. "learly +oth a,enues are important# and one must make careful decisions +efore jumping into trading without ha,ing an o+jecti,e. ( ha,e always said that finding a method# style or strategy depends on one’s personality. (f you are thinking of long term in,esting then the fundamental approach may suit your needs whereas if you are looking for short term market mo,es# then technical analysis can pro,ide a myriad of systems to accommodate your personal style.
2"
. Statement o! *ro$lem: Technical analysis is the study of price mo,ement and trend in the markets in order to forecast future prices. (n,estors play a crucial role for trading in the stock market. (n,estment timing plays a crucial role for trading in the market. /o this analysis is directed towards the use of different tools of technical analysis# which help the in,estor to identify and decide when to +uy and sell.
." +$7ectives o! the *ro7ect: 7. . . ?.
To gain practical knowledge of fundamental and technical analysis. To know how technical tools are used to predict the future +eha,ior of stocks. To know how charting techni=ues are useful to take +uy and sell decisions. To know how an in,estor takes rational in,estment decisions +y studying the market trends and mo,ements.
.) Methodolo,y: /econdary data source; )ata is collected from the we+sites# magazines# te0t+ooks and newspapers.
.- Sample 9esi,n and Sample Sie: The samples are selected from the inde0 of ifty and +elong to the Oil & !as sector. The companies selected are; 7. . . ?. 5.
Oil and atural !as "orporation imited !'( 1(ndia2 imited $harat %etroleum "orporation imited *industan %etroleum "orporation imited "airn (ndia imited
. Scope and 5imitations: 7. The study is related to fundamental and technical analysis to predict the future +eha,ior of stocks. . The analysis has +een done only on selected 5 stocks of ifty# from the Oil & !as sector industries. . The analysis in,ol,es use of limited technical tools and charts out of the ,arious tools present. ?. Technical analysis cannot +e applied to newly listed company scrip’s. 5. The study depends on secondary data rather than primary data.
2#
Chapter " ".1 /n overvie& o! Fundamental ; #echnical /nalysis: What is Fundamental /nalysis? < Fundamental analysis is the e0amination of the underlying forces that affect the well+eing of the economy# industry groups and companies. 's with most analysis# the goal is to de,elop a forecast of future price mo,ement and profit from it. 't the company le,el# fundamental analysis may in,ol,e e0amination of financial data# management# +usiness concept and competition. 't the industry le,el# there might +e an e0amination of supply and demand forces of the products. For the national economy# fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices# fundamental analysis com+ines economic# industry# and company analysis to deri,e a stock’s fair ,alue called intrinsic ,alue. (f fair ,alue is not e=ual to the current stock price# fundamental analysts +elie,e that the stock is either o,er or under ,alued. 's the current market price will ultimately gra,itate towards fair ,alue# the fair ,alue should +e estimated to decide whether to +uy the security or not. $y +elie,ing that prices do not accurately reflect all a,aila+le information# fundamental analysts look to capitalize on percei,ed price discrepancies. Fundamental 'nalysis is a method of e,aluating a security +y attempting to measure its intrinsic ,alue +y e0amining related economic# financial and other =ualitati,e and =uantitati,e factors. Fundamental analysts attempt to study e,erything that can affect the security’s ,alue# including macroeconomic factors 1like the o,erall economy and industry conditions2 and indi,idual specific factors 1like the financial condition and management of companies2.
( https://books.google.co.in/books?isbn=(47179254) 2$
+$7ectives o! Fundamental /nalysis: 7. To predict the direction of national economy +ecause economic acti,ity affects the corporate profit# in,estor attitudes and e0pectation and ultimately security prices. . To estimate the stock price changes +y studying the forces operating in the o,erall economy# as well as influences peculiar to industries and companies. . To select the right time and right securities for the in,estment.
#hree phases o! Fundamental /nalysis: 7. @nderstanding of the macro
2%
Stren,ths o! Fundamental /nalysis: 7.
ong
. Nalue /potting /ound fundamental analysis will help identify companies that represent a good ,alue. /ome of the most legendary in,estors think for long
Nalue )ri,ers (n addition to understanding the +usiness# fundamental analysis allows in,estors to de,elop an understanding of the key ,alue dri,ers within the company. ' stock’s price is hea,ily influenced +y the industry group. $y studying these groups# in,estors can +etter position themsel,es to identify opportunities that are high
2&
Fundamental /nalysis #ools: These are the most popular tools of fundamental analysis. They focus on earnings# growth# and ,alue in the market. 7. . . ?. 5.
Financial atio 'nalysis $alance /heet of a "ompany %rofit & oss 'ccount "ash Flow /tatement 'nnual eports etc.
2'
What is #echnical /nalysis?1= Fundamental analysis and Technical analysis are the two main approaches to security analysis. Technical analysis is fre=uently used as a supplement to fundamental analysis rather than as a su+stitute to it. 'ccording to technical analysis# the price of stock depends on demand and supply in the market place. (t has little correlation with the intrinsic ,alue. 'll financial data and market information of a gi,en stock is already reflected in its market price. Technical analysts ha,e de,eloped tools and techni=ues to study past patterns and predict future price. Technical analysis is +asically the study of the markets only. Technical analysts study the technical characteristics which may +e e0pected at market turning points and their o+jecti,e assessment. The pre,ious turning points are studied with a ,iew to de,elop some characteristics that would help in identification of major market tops and +ottoms. *uman reactions are# +y and large consistent in similar though not identical reactionI with his ,arious tools# the technician attempts to correctly catch changes in trend and take ad,antage of them. Technical analysis is directed towards predicting the price of a security. The price at which a +uyer and seller settle a deal is considered to +e the one precise figure which synthesis# weighs and finally e0presses all factors# rational and irrational# =uantifia+le and non<=uantifia+le and is the only figure that counts. Thus# the technical analysis pro,ides a simplified and comprehensi,e picture of what is happening to the price of a security. ike a shadow or reflection it shows the +road outline of the whole situation and it actually works in practice.
1) https://books.google.co.in/books?isbn=(7)52((''1 2(
/ssumptions o! #echnical /nalysis: 7. . . ?. 5. A.
C.
The market ,alue of a security is solely determined +y the interaction of demand and supply factors operating in the market. The demand and supply factors of a security are surrounded +y numerous factorsI these factors are +oth rational as well as irrational. The security prices mo,e in trends or wa,es which can +e +oth upward or downward depending upon the sentiments# psychology and emotions of operators or traders. The present trends are influenced +y the past trends and the projection of future trends is possi+le +y an analysis of past price trends. 40cept minor ,ariations# stock prices tend to mo,e in trends which continue to persist for an apprecia+le length of time. "hanges in trends in stock prices are caused whene,er there is a shift in the demand and supply factors. /hifts in demand and supply# no matter when and why they occur# can +e detected through charts prepared specially to show market action. /ome chart trends tend to repeat themsel,es. %atterns which are projected +y charts record price mo,ements and these patterns are used +y technical analysis for making forecasts a+out the future patterns.
")
#ools ; #echni>ues o! #echnical /nalysis: There are numerous tools and techni=ues for doing technical analysis. $asically this analysis is done from the following four important points of ,iew; 7. %rices; Hhene,er there is change in prices of securities# it is reflected in the changes in in,estor attitude and demand and supply of securities. . Time; The degree of mo,ement in price is a function of time. The longer it takes for a re,ersal in trend# greater will +e the price change that follows. . Nolume; The intensity of price changes is reflected in the ,olume of transactions that accompany the change. (f an increase in price is accompanied +y a small change in transactions# it implies that the change is not strong enoug h. ?. Hidth; The =uality of price change is measured +y determining whether a change in trend spreads across most sectors and industries or is concentrated in few securities only. /tudy of the width of the market indicates the e0tent to wh ich price changes ha,e taken place in the market in accordance with a certain o,erall trends. The theories used in technical analysis are; 7. 9o& #heory: The )ow Theory# originally proposed +y "harles )ow in 7966 is one of the oldest technical methods still widely followed. The +asic principles of technical analysis originate from this theory. 'ccording to "harles )ow “The market is always considered as ha,ing three mo,ements# all going at the same time. The first is the narrow mo,ement from day to day. The second is the short swing# running from two weeks to a month or more and the third is the main mo,ement# co,ering at least four years in its durationL. The Theory ad,ocates that stock +eha,ior is 96S psychological and 76S logical. (t is the mood of the "rowd which determines the way in which prices mo,e and the mo,e can +e gauged +y analyzing the price and ,olume of transactions. The )ow Theory only descri+es the direction of market trends and does not attempt to forecast future mo,ements or estimate either the duration or the size of such market trends. The theory uses the +eha,ior of the stock market as a +arometer of +usiness conditions rather than as a +asis for forecasting stock prices themsel,es. . Elliott Wave #heory: alph elson 4lliott de,eloped the 4lliott Ha,e Theory in the late 796s +y disco,ering that stock markets# thought to +eha,e in a somewhat chaotic manner# in fact traded in repetiti,e cycles. 4lliott disco,ered that these market cycles resulted from in,estors> reactions to outside influences# or predominant psychology of the masses at the time. *e found that the upward and downward swings of the mass psychology always showed up in the same repetiti,e patterns# which were then di,ided
"1
further into patterns he termed Gwa,esG. 4lliott>s theory is somewhat +ased on the )ow theory in that stock prices mo,e in wa,es. The tools used in Technical 'nalysis are; 7. #rends: (t is a graphical representation of Time /eries of data. Technical analysis is +uilt on the assumption that prices trend. Trend ines are an important tool in technical analysis for +oth trend identification and confirmation. ' trend line is a straight line that connects two or more price points and then e0tends into the future to act as a line of support or resistance. #ypes o! #rend lines: i. @ptrend ii. )owntrend iii. *orizontal trend . Charts: ' chart pattern is a distinct formation on a stock chart that creates a trading signal# or a sign of future price mo,ements. "hartists use these patterns to identify current trends and trend re,ersals and to trigger +u y and sell signals. #ypes o! Charts:
i.
ii.
iii.
i,.
5ine Chart The most +asic of the four charts is the line chart +ecause it represents only the closing prices o,er a set period of time. The line is formed +y connecting the closing prices o,er the time frame. 0ar Charts The +ar chart e0pands on the line chart +y adding se,eral more key pieces of information to each data point. The chart is made up of a series of ,ertical lines that represent each data point. This ,ertical line represents the high and low for the trading period# along with the closing price. Candlestick Charts The candlestick chart is similar to a +ar chart# +ut it differs in the way that it is ,isually constructed. /imilar to the +ar chart# the candlestick also has a thin ,ertical line showing the period>s trading range. *oint and Fi,ure Charts The point and figure chart is not well known or used +y the a,erage in,estor +ut it has had a long history of use dating +ack to the first technical traders. This type of chart reflects price mo,ements and is not as concerned a+out time and ,olume in the formulation of the points.
. Mathematical Indicators: "2
i.
Movin, /vera,es: ' 3o,ing ',erage is an indicator that shows the a,erage ,alue of a security>s price o,er a period of time. Hhen calculating a mo,ing a,erage# a mathematical analysis of the security>s a,erage ,alue o,er a predetermined time period is made. 's the security>s price changes# its a,erage price mo,es up or down. There are fi,e popular types of mo,ing a,erages; simple 1also referred to as arithmetic2# e0ponential# triangular# ,aria+le# and weighted. 3o,ing a,erages can +e calculated on any data series including a security>s open# high# low# close# ,olume# or another indicator. ' mo,ing a,erage of another mo,ing a,erage is also common.
ii.
0ollin,er 0and; (t is a +and plotted two standard de,iations away from a simple mo,ing a,erage# de,eloped +y famous technical trader -ohn $ollinger. $ecause standard de,iation is a measure of ,olatility# $ollinger $ands adjust themsel,es to the market conditions. Hhen the markets +ecome more ,olatile# the +ands widen 1mo,e further away from the a,erage2# and during less ,olatile periods# the +ands contract. The tightening of the +ands is often used +y technical traders as an early indication that the ,olatility is a+out to increase sharply.
?. +scillators: ' technical analysis tool that is +anded +etween two e0treme ,alues and +uilt with the results from a trend indicator for disco,ering shorts stock such as when it trades horizontally or sideways. The most common oscillators are; /( & 3'"). i.
%elative Stren,th Index '%SI(: ' technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine o,er+ought and o,ersold conditions of an asset. (t is calculated using the following formula; /( U 766 < 766R17 Q /V2 VHhere / U ',erage of 0 days> up closes R ',erage of 0 days> down closes. ii. Movin, /vera,e Conver,ence 9iver,ence 'M/C9(: ' trend
""
/nalysis ; Findin,s: Fundamental /nalysis: (t is carried out through the analysis of the following phases "..1 Economy /nalysis 11:
The +il Industry started off more than fi,e thousand years +ack. Oil sipping up from the ground was used to make the +oats waterproof in the 3iddle 4ast and also used as medicating as well as for painting different things.The demand for Oil was much higher than what it actually produced and this +rought forward the concept of making oil production companies which is collecti,ely known as the Oil (ndustry. The Oil (ndustry is a ,ery important industry in the world and a lot depends on the price of the oil and it has +een o+ser,ed that whene,er the oil prices increase the price of ,arious products also increases. The Oil (ndustry also through oil production accounts for a large amount of the consumption of energy. 'ccording to the statistics the amount of oil consumed +y the world e,ery year is as many as 6 +illion +arrel The Oil (ndustry can +e parted in two# @pstream and )ownstream. The importance of oil in the world e,ol,ed at a slow pace +ut once it was identified# it +ecame one of the most important things in the li,es of human +eings. The (mpact of Oil %rice "rash on )ifferent (ndustries and O,erall (ndian 4conomy is ,ery prominent. The price trend is crucial for the go,ernment in +ringing out ,ital economic and policy reforms in (ndia. The steep fall in crude prices has caught the glo+al economy +y surprise# not to miss the e0isting & emerging potential oil e0porting nations. On one hand the downward trend is highly detrimental to the nations with major re,enue chunk linked to oil e0ports and those who ha,e in,ested 11 htt*++www.worldoil.com "#
hea,ily on the alternate energy sources such as renewa+le# shale# etc.# on the other hand the major net oil importers such as the 'sian nations led +y (ndia are looking o,erjoyed on account of anticipated national fiscal sa,ings on +uying of cheaper crude oil
and
drop
in
fuel
prices
at
consumer
end.
On the surface# one may claim that falling crude oil prices are oil importing nation>s moment of delight and oil e0porting nation>s worst nightmare. $ut is it really all good and great for a crude oil import dependent nation such as (ndiaW There is a need to go +eyond pres ta0 re,enues# translate into lower growth of +oth e0ports & imports and impact the !)% growth of the country. (t is worth to note that the go,ernment has increased the e0cise duty on petrol and diesel twice in a mo,e to aid the ta0 re,enues.
"$
".. Industry /nalysis 1:
'fter the (ndian (ndependence# the Oil (ndustry in (ndia was a ,ery small one in size and Oil was produced mainly from 'ssam and the total amount of Oil production was not more than 56#666 tons per year. This small amount of production made the oil e0perts from different countries predict the future of the oil industry as a dull one and also dou+ted (ndia>s a+ility to search for new oil reser,es. $ut the !o,ernment of (ndia declared the Oil industry in (ndia as the core sector industry under the (ndustrial %olicy esolution +ill in the year 795?# which helped the Oil (ndustry in (ndia ,astly. Oil e0ploration and production in (ndia is done +y companies like O" or ational Oil "orporation# O!" or Oil and atural !as "orporation and O( who are actually the oil companies in (ndia that are owned +y the go,ernment under the (ndustrial %olicy ule. The ational Oil "orporation during the 79C6s used to produce and supply more than C6 percent of the domestic need for the petroleum +ut +y the end of this amount dropped to near a+out 5 percent. This was +ecause the demand on the one hand was increasing at a good rate and the production was declining at a steady rate. Oil (ndustry in (ndia during the year 66?<665 fulfilled most of demand through importing oil from multiple oil producing countries. The Oil (ndustry in (ndia itself produced nearly 5 million metric tons of Oil from the year 667 to 665. The (mport that is done +y the Oil (ndustry in (ndia comes mostly from the 3iddle 4ast 'sia. The Oil that is produced +y the Oil (ndustry in (ndia pro,ides more than 5 percent of the energy that is primarily consumed +y the people of (ndia. This amount is e0pected to grow further with +oth economic and o,erall growth in terms of production as well as percentage. The demand for oil is predicted to go higher and higher with e,ery passing decade and is e0pected to reach an amount of nearly 56 million metric ton +y the year 6?.
12 www.makeinindia.com "%
Statistics:
i. The oil and gas industry ranks amongst (ndia’s si0 core industries. ii. (ndia was the fourth largest consumer of crude oil and petroleum products in the world in 67# after the @nited /tates# "hina and -apan. iii. Oil imports constitute o,er 86S of (ndia’s total domestic oil consumption as of 3ay# 67?. i,. Oil and gas contri+ute 9.S to primary energy consumption. ,. )uring 67<7?# natural gas constituted a+out C.8S of the energy mi0. ,i. (ndia had ?C Trillion cu+ic feet of pro,en natural gas reser,es at the +eginning of 67?. 'ppro0imately ?S of total reser,es are located onshore# while AAS are offshore. ,ii. (n,estments worth @/) C6 $illion are e0pected across the oil and gas ,alue chain during 67B7C. ,iii. 't the end of 67# (ndia had 75.6AA 33T%' of refining capacity# making it the second largest refiner in 'sia after "hina. %ri,ate joint ,enture companies own a+out ?7S of total capacity. i0. (ndia increasingly relies on imported !I the country was the fourth
"&
Sector *olicy:
i.
The (ntegrated 4nergy %olicy# 66A outlines goals for dealing with challenges faced +y (ndia’s energy sector.
ii.
The %etroleum and atural !as egulatory $oard 'ct# 66A regulates refining# processing# storage# transportation# distri+ution# marketing and the sale of petroleum# petroleum products and natural gas.
iii.
The 'uto Fuel %olicy# 66 pro,ides a roadmap to comply with ,arious ,ehicular emission norms and corresponding fuel =uality upgrading re=uirements o,er a period of time.
i,.
The ational $iofuel %olicy# 669 promotes +io
,.
The ational 40ploration icensing %olicy# 7999 pro,ides a contract framework for the e0ploration and production of hydrocar+ons. icenses for e0ploration are awarded through a competiti,e +idding system B nine rounds of +idding were completed as of 677.
,i.
5 $locks proposed to +e offered under .4..%.M. The offer is de
,ii.
The "oal $ed 3ethane %olicy# 799C encourages e0ploration and production of coal +ed methane as a new eco
,iii.
The %etroleum ules# 79CA contains pro,isions for regulations go,erning pollution# society and other operating standards. "'
i0.
The %olicy on /hale !as & Oil# 67 allows companies to apply for shale gas and oil rights in their petroleum e0ploration licenses and petroleum mining leases.
%ecent happenin,s in India:
• • • • •
• • •
)iesel price to go up +y s .86 a litre in "handigarh O!" Nidesh loses +id for two oil +locks in 3e0ico. ! import terminals to face major challenges. !'( (ndia to swap @/ !# issue tender ne0t month !'( plans to +uy @/ shale gas asset for X7.5 +illion to meet future (ndian demand. (ndia>s -une fuel demand rises .8S PoP !'( seeks +ids to sell 6.C million tonnes @/ !. %ost leading oil & gas corporate> award.
Impact o! Irans nuclear deal on India 1":
"urrent +ilateral trade +etween (ndia and (ran is a+out X7?+n 1Y8.9A+n2 with the +alance of trade in hea,ily in Tehran>s fa,or. (ndian e0ports to (ran were around X?.+n last year. (ndia primarily imports oil from (ran# +ut has +een hampered +y restrictions placed +y glo+al powers. 1" htt*++articles.economictimes.indiatimes.com+2)1$-)&1$+news+%###((%&,1,iran-nuclear-deal-oil-rices-nuclear-weaon htt*++articles.economictimes.indiatimes.com+2)1$-)&-1$+news+%###((%&,1,irannuclear-deal-oil-rices-nuclear-weaon "(
)ue to the sanctions# (ndia has +een paying (ran in (ndian rupees# with the money kept in an (ndian account. (n fact# the country is yet to release an estimated XA+n in pending oil payments to (ran. ow )elhi# which is the fourth largest consumer of oil in the world# is free to import (ranian oil +ut will ha,e to pay in dollars. (mporting goods or sending shipments to (ran is currently e0pensi,e +ecause of high shipping charges. (ndia hopes the remo,al of sanctions will make it easier for companies to get shipments.
3arkets are seeing some positi,e de,elopments that could +ring cheers to e=uity in,estors glo+ally. 4arlier# it took 7 hours of rigorous po litical efforts yesterday to seal the fate of !reece de+t crisis with the 4uropean creditors. 'nd today nine
@o& Iran deal a!!ects the oil markets:
a. Hill incremental supply of 6.5<6.8 million +arrels per day to the world market in the ne0t si0 months. +. (ran will emerge as an added supply source for an o,ersupplied market. c. (ran incremental supplies would dou+le the glo+al surplus projected for the rest of the year. d. 40pert +elie,e that (f agreement>s details dri,e prices lower# $rent crude may drop to mid
#)
i. 'dditional A6 days of credit period can lift the !3 as much as X7R++l j. 3%# 4ssar Oil and (O" imported 76<6S of total crude re=uirement from (ran k. (nsurance costs of ship which procures crude from (ran will reduce 3arket is e0pected to o,ersupplied# positi,e for oil consumer nations like (ndia. l. (ndia imported 76<7AS of crude from (ran +etween 66 and 67. m. %re /anctions (ndia used to import a significant =uantity of "rude from (ran which can +e restored to a large e0tent now. n. Official selling price of !ulf producer to remain =uite competiti,e in order to maintain market share this will help (ndian refiners to +oost their margins. o. ower crude oil prices will +ring down import +ill for go,ernment.
".." Company /nalysis 1):
'n analysis is going to +e performed of 5 companies from Oil & !as sector from the ifty inde0. atio 'nalysis of the companies is done and interpretations ha,e +een drawn from it as follows;
/. +il and 2atural Aas Corporation 5imited: i.
Company *ro!ile: O!" 1Oil and atural !as "orporation imited2 is (ndia>s leading oil & gas e0ploration company. O!" has produced more than A66 million metric tonnes of crude oil and supplied more than 66 +illion cu+ic metres of gas since its inception. Today# O!" is (ndia>s highest profit making
corporate. (t has a share of CC percent in (ndia>s crude oil production and 87 per cent in (ndia>s natural gas production.
1# www.stockcharts.com #1
Ma7or /chievements o! +2AC: •
•
-udged as 'sia>s +est Oil & !as company# as per a recent sur,ey conducted +y @/<+ased magazine >!lo+al Finance> anked as the nd +iggest 4&% company 1and 7st in terms of profits2# as per the %latts 4nergy $usiness Technology 14$T2 /ur,ey 66?.
5atest 2e&s: • • •
• •
ii.
40it O!"# prefer midcap (T stocks; /harmila -oshi *old O!" for long term; /udarshan /ukhani $uy O!" 76 %ut# ad,ises N: /harma /tay in,ested in O!"# ad,ises /ameet "ha,an 'nti=ue upgrades O!" to +uy# sees growth reco,ery /ell O!"# /$(I +uy $harti 'irtel; ahul 3ohindar
Financial %atios: Ratios
March =1-
March =1)
ace alue /0s. ividend 3er Share /0s. 4ross 3rot Margin /5 0eturn 6n 7aital 8mloyed /5
5.66 9.56 9.8 .?
5.66 9.56 ?.?7 ?.58
"urrent atio )e+tors Turno,er atio (n,estments Turno,er atio 'sset Turno,er atio 4arnings %er /hare $ook Nalue
6.9C 77.7A 7?.7 6.A? 5.8 759.87
7.79 7.C7 7?.A6 6.A9 ?.?A 7?5.?C
iii.
#2
The +alance sheet is the statement showing the increase or decrease in the assets and lia+ilities. This indicates the change in capital structure as well as increase or decrease in assets. 's we can see# the face ,alue of the share is s.5. 'lso# we can see that the current ratio was 7.79 in 67? and it has gone down to 6.9C in 675# which shows that the firm has lesser a+ilities to pay off its lia+ilities than the pre,ious year. 'lso the asset turno,er ratio in 67? was 6.A9# meaning the company generated more re,enue per rupee of asset in,estment than 675# in which the ratio slightly falls down to 6.A?. The gross profit margin ratio in 67? was ?.?7# which declined slightly to 9.8 in 675. ow higher the !% ratio# higher is the firm’s a+ility to produce goods and ser,ices at a low cost with high sales. *ere# e,en if there is a small drop down in the ratio in 675# it is still high enough and hence fa,oura+le. The +ook ,alue has increased from 67? to 675 +y a considera+le amount# hence showing that the in,estors are willing to pay more price for the stocks. The de+tors turno,er ratio has fallen from 7.C7 in 67? to 77.7A in 675# which shows that the de+tors collection period has increased and efficient credit collection policies are recommended. astly# the 4%/ has increased from ?.?A to 5.8 in 675# which indicates that the company is profita+le.
0. A/I5 'India( 5imited: i.
Company *ro!ile:
!'( 1(ndia2 imited is the largest state
Ma7or /chievements o! A/I5 'India( 5td:
#"
•
•
• •
/elected as the top (ndian company in the !as %rocessing# Transmission and 3arketing sector for the )un & $radstreet < 'merican 40press "orporate 'wards 66A. !'(>s )ahej
5atest 2e&s:
• • • • •
ii.
!'( to swap @/ !# issue tender ne0t month !'( sells mn tonnes @/ ! a+road !'( (ndia>s Z7 results on -uly ?# 675 Oil 3in re,erts +ack to promoters selecting "4O of %etronet !o long in !'( (ndia# target s 9; /iddarth $hamre Oil & !as< (# O!"# O(# $%"# !'( top picks; :"hoksey $uy !'( (ndia# target s ??; ajat $ose
Financial %atios: Ratios
March =1-
March =1)
ace alue /0s. ividend 3er Share /0s. 4ross 3rot Margin /5 0eturn 6n 7aital 8mloyed /5
76.66 76.?6 9.A6
76.66 9.A6 77.5?
7C.55
79.78
"urrent atio )e+tors Turno,er atio (n,estments Turno,er atio 'sset Turno,er atio 4arnings %er /hare $ook Nalue
7.76 7.?? 5.57 7.AA ?.?9 7.?
7.66 7. 6.95 7.A7 7.C7 797.66
##
The +alance sheet is the statement showing the increase or decrease in the assets and lia+ilities. This indicates the change in capital structure as well as increase or decrease in assets. 's we can see# the face ,alue of the share is s.76. 'lso# we can see that the current ratio was 7.66 in 67? and it has increased to 7.76 in 675# which shows that the firm’s a+ilities to pay off its lia+ilities has increased than the pre,ious year. 'lso the asset turno,er ratio in 67? was 6.A7# meaning the company generated less re,enue per rupee of asset in,estment than 675# in which the ratio slightly increased to 7.AA. The gross profit margin ratio in 67? was 77.5?# which declined slightly to 9.A6 in 675. ow higher the !% ratio# higher is the firm’s a+ility to produce goods and ser,ices at a low cost with high sales. *ere# there is a small drop down in the ratio in 675# it is hence not high enough and therefore unfa,ora+le. The +ook ,alue has increased from 67? to 675 +y a considera+le amount# hence showing that the in,estors are willing to pay more price for the stocks. The de+tors turno,er ratio has increased from 7. in 67? to 7.?? in 675# which shows that the de+tors collection period has declined and efficient credit collection policies are +eing used. astly# the 4%/ has increased from 7.C7 to ?.?9 in 675# which indicates that the company is profita+le.
C. 0harat *etroleum Corporation 5imited: i.
Company *ro!ile:
$harat %etroleum "orporation imited 1$%"2 is an (ndian state< controlled oil and gas company head=uartered in 3um+ai# 3aharashtra. The "orporation operates two large refineries of the country located at 3um+ai and :ochi. $%" has +een ranked ?th in the Fortune !lo+al 566 rankings of the world>s +iggest corporations for the year 67?. #$
Ma7or /chievements o! A/I5 'India( 5td: • • • • •
Twel,e locations certified (/O<7?667 /e,enty one locations certified (/O<966 'chie,ement of million man hour safety record "ulti,ation of -atro+ha to facilitate $io )iesel production "ontri+ution to 'lternate energy resources 1wind mills and /olar energy2
5atest 2e&s: • •
•
• •
ii.
$%">s Z7 results on 'ugust 7?# 675 /hell reopens CCth petrol pump in (ndia %ositi,e on $%"; 3ayuresh -oshi *%" may test s 898# $%" 7656; ajat $ose (ndia to outperform# Fed rate hike likely in /ept; )eutsche $%" to in,est X? +n to dou+le $ina oil refinery capacity $%" to e0pand $ina oil refinery +y 6S; /. Naradarajan
Financial %atios: Ratios
March =1-
March =1)
ace alue /0s. ividend 3er Share /0s. 4ross 3rot Margin /5 0eturn 6n 7aital 8mloyed /5
76.66 7C.66 .?
76.66 77.66 7.C?
78.5
7?.5C
"urrent atio
6.8C
6.C8
#%
)e+tors Turno,er atio (n,estments Turno,er atio 'sset Turno,er atio 4arnings %er /hare $ook Nalue
A?.7C 7.A? A.5 5A.7A A9.77
?A.7A 7?.9 A.9 A.55 6.6?
The +alance sheet is the statement showing the increase or decrease in the assets and lia+ilities. This indicates the change in capital structure as well as increase or decrease in assets. 's we can see# the face ,alue of the share is s.76. 'lso# we can see that the current ratio was 6.C8 in 67? and it has increased to 6.8C in 675# which shows that the firm’s a+ilities to pay off its lia+ilities has increased than the pre,ious year. 'lso the asset turno,er ratio in 67? was A.9# meaning the company generated less re,enue per rupee of asset in,estment than 675# in which the ratio slightly increased to A.5. The gross profit margin ratio in 67? was 7.C?# which increased slightly to .? in 675. ow higher the !% ratio# higher is the firm’s a+ility to produce goods and ser,ices at a low cost with high sales. *ere# there is a increase in the ratio in 675# it is hence high enough and therefore fa,ora+le. The +ook ,alue has increased from 67? to 675 +y a considera+le amount# hence showing that the in,estors are willing to pay more price for the stocks. The de+tors turno,er ratio has increased from ?A.7A in 67? to A?.7C times in 675# which shows that the de+tors collection period has declined and efficient credit collection policies are +eing used. astly# the 4%/ has increased from A.55 to 5A.7A in 675# which indicates that the company is profita+le.
9. @industan *etroleum Corporation 5imited '@*C5(: i.
Company *ro!ile
*industan %etroleum "orporation imited 1*%"2 is an (ndian state< owned oil and natural gas company with its head=uarters at 3um+ai# 3aharashtra and with a,ratna status. *%" has +een ranked A6th in the #&
Fortune !lo+al 566 rankings of the world>s +iggest corporations 1672 and ?th among (ndia>s "ompanies for the year 67. *%" has a+out 5S marketing share in (ndia among %/@s and a strong marketing infrastructure. Ma7or /chievements o! @*C5: • • • • • •
*%" ranks 765? in For+es 666 list *%" ranks A in Fortune !lo+al 566 list /cope "/ 'ward for the Pear 669<76 !olden %eacock 'ward for "/ B 677 eaders’ )igest Trusted $rand !old 'ward 677 $rand eadership award
5atest 2e&s:
• • • • •
ii.
!o long in *%"# target s 9?6; 'shish :yal $uy *%"# says /udarshan /ukhani $uy (T on dipsI +anks still to gain momentum; ((F ook at *%"# says N: /harma *%" may test s 898# $%" 7656; ajat $ose $ulls got grip# see 8A56 le,el if 8586 is held; ajat $ose *%" looks positi,e; 'jay -ain 40pect upside in oil marketing companies; )e,ang 3ehta
Financial %atios: Ratios
March =1-
March =1)
ace alue /0s. ividend 3er Share /0s. 4ross 3rot Margin /5
76.66 75.56 7.5
76.66 8.56 7.76
#'
0eturn 6n 8mloyed /5
7aital
"urrent atio )e+tors Turno,er atio (n,estments Turno,er atio 'sset Turno,er atio 4arnings %er /hare $ook Nalue
8.5?
C.7
6.C ?.9 77.89 ?.C9 57.6 ??.
6.A8 ?8.A? 7.58 ?.CA A.C ?65.5
The +alance sheet is the statement showing the increase or decrease in the assets and lia+ilities. This indicates the change in capital structure as well as increase or decrease in assets. 's we can see# the face ,alue of the share is s.76. 'lso# we can see that the current ratio was 6.A8 in 67? and it has increased to 6.C in 675# which shows that the firm’s a+ilities to pay off its lia+ilities has increased than the pre,ious year. 'lso the asset turno,er ratio in 67? was ?.CA# meaning the company generated less re,enue per rupee of asset in,estment than 675# in which the ratio slightly increased to ?.C9. The gross profit margin ratio in 67? was 7.76 in 67?# which increased to 7.5 in 675. ow higher the !% ratio# higher is the firm’s a+ility to produce goods and ser,ices at a low cost with high sales. *ere# there is an increase in the ratio in 675# it is hence high enough and therefore fa,ora+le. The +ook ,alue has increased from 67? to 675 +y a considera+le amount# hence showing that the in,estors are willing to pay more price for the stocks. The de+tors turno,er ratio has decreased from ?8.A? in 67? to ?.9 in 675# which shows that the de+tors collection period has increased and efficient credit collection policies are not +eing used. astly# the 4%/ has increased from A.C to 57.6 in 675# which indicates that the company is profita+le.
E. Cairn India: i.
Company *ro!ile
#(
"airn (ndia is one of the largest independent oil and gas e0ploration and production companies in (ndia with a market capitalization of [ @/X C +illion. "airn (ndia was rated as the fastests domestic crude oil production. Through its affiliates# "airn (ndia has +een operating for close to 6 years playing an acti,e role in de,eloping (ndia>s oil and gas resources. Ma7or /chievements o! @*C5: •
•
• •
•
Hinner of 67 %latts Top 56 !lo+al 4nergy "ompany award for the Fastest growing company in 'sia and the Horld Hinner of 67 %etroFed award for O&! %ipeline Transportation "ompany of the Pear Hinner of $lue )art !lo+al "/ 'ward# 67 Hinner of 677 /potlight 'wards +y eague of 'merican "ommunications %rofessionals "airn (ndia awarded >/uper+rand> status# 677
5atest 2e&s:
• • • • • •
ii.
"airn(" monitoring wing ,otes against "airn 40it "airn (ndia; )e,ang 3ehta
Financial %atios: Ratios
March =1-
March =1)
ace alue /0s.
76.66
76.66
$)
ividend 3er Share /0s. 4ross 3rot Margin /5 0eturn 6n 7aital 8mloyed /5
9.66 5.99
7.56 59.
76.?7
6.6A
"urrent atio )e+tors Turno,er atio (n,estments Turno,er atio 'sset Turno,er atio 4arnings %er /hare $ook Nalue
7.? C.C ?.76 6.7 C.6? 79C.A
7.A C.?? A6.87 6.C 9.68 6.8
The +alance sheet is the statement showing the increase or decrease in the assets and lia+ilities. This indicates the change in capital structure as well as increase or decrease in assets. 's we can see# the face ,alue of the share is s.76. 'lso# we can see that the current ratio was 7.A in 67? and it has increased to 7.? in 675# which shows that the firm’s a+ilities to pay off its lia+ilities has increased than the pre,ious year. 'lso the asset turno,er ratio in 67? was 6.C# meaning the company generated less re,enue per rupee of asset in,estment than 675# in which the ratio slightly decreased to 6.7. The gross profit margin ratio in 67? was 59.# which declined slightly to 5.99 in 675. ow higher the !% ratio# higher is the firm’s a+ility to produce goods and ser,ices at a low cost with high sales. *ere# there is a drop down in the ratio in 675# it is hence not high enough and therefore unfa,ora+le. The +ook ,alue has decreased from 67? to 675 +y a considera+le amount# hence showing that the in,estors are not willing to pay more price for the stocks. The de+tors turno,er ratio has decreased from C.?? in 67? to C.C in 675# which shows that the de+tors collection period has increased and efficient credit collection policies are not +eing used. astly# the 4%/ has decreased largely from 9.68 in 67? to C.6? in 675# which indicates that the company is not at all profita+le.
"." /nalysis and Findin,s $1
#echnical /nalysis: Technical analysis of the following 5 companies from ifty is done on the following parameters as gi,en +elow; 1. %elative Stren,th Index '%SI( . Movin, /vera,e Conver,ence 9iver,ence 'M/C9( ". Bapanese Candlestick Chart
/. +il and 2atural Aas Corporation 5imited:
$2
i.
%elative Stren,th Index '%SI(:
/( indicator is a momentum indicator# which measures o,er +ought and o,er sold conditions in the market. The indicator oscillates +etween 6 and 766# with the ,alues +elow 6 traditionally showing o,ersold conditions in the market# which in this case doesn’t go +elow 6. /ince it is not going +elow the 6 le,el# it is not suita+le to +uy. 'nd ,alues a+o,e C6 show o,er +ought conditions in the market# here# indicating to sell of appro0imately in the month of -uly# 67?. (t also shows the current direction of the trend# with the ,alues a+o,e 56 indicating an uptrend and the ,alues +elow 56 indicating downtrend. 's we can see here# the ,alues show more of an uptrend than the downtrend in the market condition.
ii.
Movin, /vera,e Conver,ence 9iver,ence 'M/C9(:
$"
3'") is a momentum indicator that shows relationship +etween differences of two mo,ing a,erages. (t is used then to find new trends and new entries for your trade. (t consists of ? components# a slow mo,ing a,erage shown here +y the red line# a fast mo,ing a,erage# shown here +y the +lack line# a difference +etween the two shown +y the histogram and a 6 line# shown here at 7.877. 'lthough there is more than one strategy to use 3'") in trading# the safest one can +e interpreted as follows; Trading the mo,ing a,erage crosso,er. For long positions# looking at the crosso,er +etween the faster mo,ing a,erage and slower mo,ing a,erage a+o,e the 6 line# here# shown in the month of 3ay 67 & -uly 67?# indicates +uying and the crosso,er +elow the 6 line# shown here at o,em+er 67 and 'pril 675# indicate selling action to +e taken# opposite in case of short positions.
iii.
Bapanese Candlestick Chart:
$#
"andlestick pro,ides us with great strength in market condition insights and e,en signals us a+out trend changes and price re,ersals. He can see that there is a +earish trend in the market mostly in the years shown a+o,e due to the presence of more num+er of red candles than the white ones. He can also see that the sellers are largely in control around the 'ugust and /eptem+er of 67 and we can see that the market falls largely +elow the A63 mo,ing a,erage starting from the end of )ecem+er 67? to -uly 675. $uying action should’,e +een recommended at the +eginning of the year 67?.
$$
0. A/I5 'India( 5imited:
i.
%elative Stren,th Index '%SI(:
/( indicator is a momentum indicator# which measures o,er +ought and o,er sold conditions in the market. The indicator oscillates +etween 6 and 766# with the ,alues +elow 6 traditionally showing o,ersold conditions in the market# which in this case doesn’t go +elow 6 at all. /ince it is not going +elow the 6 le,el# means the +uying indictor is not showing# hence it is not suita+le to +uy. 'nd ,alues a+o,e C6 show o,er +ought conditions in the market# here# indicating there are no e0treme conditions in,ol,ed in the stock# hence the stock prices +eing sta+le. (t also shows the current direction of the trend# with the ,alues a+o,e 56 indicating an uptrend and the ,alues +elow 56 indicating downtrend. 's we can see here# the ,alues show more of an down than the uptrend in the market condition# hence indicating a +ullish market in the late 67 and a +earish market in 675.
%$ ii. Movin, /vera,e Conver,ence 9iver,ence 'M/C9(:
3'") is a momentum indicator that shows relationship +etween differences of two mo,ing a,erages. (t is used then to find new trends and new entries for your trade. (t consists of ? components# a slow mo,ing a,erage shown here +y the red line# a fast mo,ing a,erage# shown here +y the +lack line# a difference +etween the two shown +y the histogram and a 6 line# shown here at .6?7. 'lthough there is more than one strategy to use 3'") in trading# the safest one can +e interpreted as follows; Trading the mo,ing a,erage crosso,er. For long positions# looking at the crosso,er +etween the faster mo,ing a,erage and slower mo,ing a,erage a+o,e the 6 line# here# shown in the month of 'pril 67? & also Octo+er 67?# indicates +uying and the crosso,er +elow the 6 line# shown here from 'pril
$&
iii. iii.
Bapa Bapanes nesee Candl Candlest estic ick k Chart Chart 4o 4olume lume and Movi Movin, n, /v /vera,e era,e '-= '-= ; == == days days M/(: M/(:
"andlestick pro,ides us with great strength in market condition insights and e,en signals us a+out trend changes and price re,ersals. He can see that there is a +earish trend in the market mostly in the year 67 from 3arch
$'
C. 0harat *etroleum Corporation 5imited '0*C5(: i.
%elat %elative ive Stre Stren,t n,th h Inde Index x '%S '%SI(: I(:
/( indicator is a momentum indicator# which measures o,er +ought and o,er sold conditions conditions in the market. The indicator oscillates oscillates +etween 6 and 766# with the ,alues +elow 6 traditionally showing o,ersold conditions in the market# which in this case doesn’t go +elow 6 at all. /ince it is not going +elow the 6 le,el# means the +uying indictor is off# hence it is not a suita+le time to +uy. 'nd ,alues a+o,e C6 show o,er +ought conditions in the market# here# indicating that at the mid of the year 67 there was an o,er +ought condition in the market# hence the perfect time to sell. (t also shows the current direction of the trend# with the ,alues a+o,e 56 indicating an uptrend and the ,alues +elow 56 indicating downtrend. 's we can see here# the ,alues show more of an down than the uptrend in the market condition# hence indicating a +ullish market in the late 67 and a sta+le market henceforth.
$(
ii. ii.
Movi Movin, n, /vera, era,ee Conv Conver er,e ,enc ncee 9ive 9iver, r,en ence ce 'M/ 'M/C9 C9(: (:
3'") is a momentum indicator that shows relationship +etween differences of two mo,ing a,erages. (t is used then to find new trends and new entries e ntries for your trade. (t consists of ? components# a slow mo,ing a,erage shown here +y the red line# a fast mo,ing a,erage# shown here +y the +lack line# a difference +etween the two shown +y the histogram and a 6 line# shown here at ?.79. 'lthough 'lthough there is is more than one strategy to use 3'") in trading# the safest one can +e interpreted as follows; Trading the mo,ing a,erage crosso,er. crosso,er. For long positions# positions# looking looking at the crosso,er crosso,er +etween the faster mo,ing a,erage and slower mo,ing a,erage a+o,e the 6 line# here# shown in the month of Fe+ to 'pril and -une 675# indicates +uying and the crosso,er +elow the 6 line# shown here in 3ay 675# indicate selling action to +e taken# opposite in case of short positions.
%)
iii.
Bapanese Candlestick Chart 4olume and Movin, /vera,e '-= ; == days M/(:
"andlestick pro,ides us with great strength in market condition insights and e,en signals us a+out trend changes and price re,ersals. He can see that there is a +earish trend in the market mostly in the -an 675 as shown a+o,e. He can also see that the sellers are largely in control around the mid 3ay of 675 and we can see that the market falls largely +elow the ?3 mo,ing a,erage in the +eginning of -an 675. $uying action should’,e +een recommended at the end of -an 675.
%1
9. @industan *etroleum Corporation 5imited '@*C5(: i.
%elative Stren,th Index:
/( indicator is a momentum indicator# which measures o,er +ought and o,er sold conditions in the market. The indicator oscillates +etween 6 and 766# with the ,alues +elow 6 traditionally showing o,ersold conditions in the market# which in this case doesn’t go +elow 6 at all. /ince it is not going +elow the 6 le,el# means the +uying indictor is off# hence it is not a suita+le time to +uy. 'nd ,alues a+o,e C6 show o,er +ought conditions in the market# here# indicating that at the mid of the year 675 there was an o,er +ought condition in the market# hence the perfect time to sell. (t also shows the current direction of the trend# with the ,alues a+o,e 56 indicating an uptrend and the ,alues +elow 56 indicating downtrend. 's we can see here# the ,alues show more of an down than the uptrend in the market condition# hence indicating a sta+le market in the 67 & 67? and a +earish market henceforth.
%2
ii.
Movin, /vera,e Conver,ence 9iver,ence 'M/C9(:
3'") is a momentum indicator that shows relationship +etween differences of two mo,ing a,erages. (t is used then to find new trends and new entries for your trade. (t consists of ? components# a slow mo,ing a,erage shown here +y the red line# a fast mo,ing a,erage# shown here +y the +lack line# a difference +etween the two shown +y the histogram and a 6 line# shown here at .95?. 'lthough there is more than one strategy to use 3'") in trading# the safest one can +e interpreted as follows; Trading the mo,ing a,erage crosso,er. For long positions# looking at the crosso,er +etween the faster mo,ing a,erage and slower mo,ing a,erage a+o,e the 6 line# here# shown in the month of -an to 'pril 675# indicates +uying and the crosso,er +elow the 6 line# shown here from 3ay 675# indicate selling action to +e taken# opposite in case of short positions.
%"
iii.
Bapanese Candlestick Chart:
"andlestick pro,ides us with great strength in market condition insights and e,en signals us a+out trend changes and price re,ersals. *ere if we o+ser,e there is a rise and fall e,ery now and then# hence there is an unsta+le market o,erall. There is a sharp rise in the market at the +eginning of Fe+ 675 and after a certain point the +uyers pull down the price and hence we can see a spinning top# indicating the trend re,ersal. This chart is full of spinning tops and as we can see# the trend is changing e,ery now and then# hence concluding to a ,ery indecisi,e market condition.
%#
E. Cairn India: i.
%elative Stren,th Index '%SI(:
/( indicator is a momentum indicator# which measures o,er +ought and o,er sold conditions in the market. The indicator oscillates +etween 6 and 766# with the ,alues +elow 6 traditionally showing o,ersold conditions in the market# which in this case went +elow 6 in the mid of -une# 675# sensing o,er sold conditions in the market# hence the right time to +uy. 'nd ,alues a+o,e C6 show o,er +ought conditions in the market# here# indicating that the market is well sta+le and there is no o,er +ought condition. (t also shows the current direction of the trend# with the ,alues a+o,e 56 indicating an uptrend and the ,alues +elow 56 indicating downtrend. 's we can see here# it shows a potential uptrend till 'pril 675 and a downtrend thereafter.
%$
ii.
Movin, /vera,e Conver,ence 9iver,ence 'M/C9(:
3'") is a momentum indicator that shows relationship +etween differences of two mo,ing a,erages. (t is used then to find new trends and new entries for your trade. (t consists of ? components# a slow mo,ing a,erage shown here +y the red line# a fast mo,ing a,erage# shown here +y the +lack line# a difference +etween the two shown +y the histogram and a 6 line# shown here at 7.58. 'lthough there is more than one strategy to use 3'") in trading# the safest one can +e interpreted as follows; Trading the mo,ing a,erage crosso,er. For long positions# looking at the crosso,er +etween the faster mo,ing a,erage and slower mo,ing a,erage a+o,e the 6 line# here# shown in the month of Fe+ruary 675# indicates +uying and the crosso,er +elow the 6 line# shown here from 'pril to -une 675# indicate selling action to +e taken# opposite in case of short positions.
%%
iii. Bapanese Candlestick Chart 4olume and Movin, /vera,e '-= ; == days M/(:
"andlestick pro,ides us with great strength in market condition insights and e,en signals us a+out trend changes and price re,ersals. *ere# if we o+ser,e# the market is too +ullish in -an 675 and hence spinning tops are o+ser,ed in the entire month of Fe+ and 3arch 675# after which the sellers take control of the market and hea,y selling action takes place in the month of 3arch 675# after which in 'pril# again there is more of a +ullish trend# after which +y the mid of 'pril 675# the sellers gain control again. Towards the end of -uly 675# there are a lot of spinning tops indicating a trend re,ersal# thus the months ahead of -uly# to +e +righter as compared to the pre,ious months i.e. 3ay 1a lot of doji’s2 & -une 1all time low in -une +eginning due to the crash of "hinese markets2.
%&
Chapter ) Conclusion: The Oil & !as sector has +een analyzed and studied. Fi,e scrip’s of a com+ination of arge "ap and 3id "ap were selected# of which Fundamental analysis as well as Technical analysis of the scrip’s was performed and interpretations were drawn a+out the companies. The suggestions to the in,estors to in,est in these companies of the Oil & !as (ndustry in (ndia are as follows; •
•
•
• •
$uoyed +y (ran>s historic nuclear accord with world powers to end sanctions# (ndia will ask Tehran for rights to de,elop O!" stocks ha,e not +een doing too well. $ut e0perts suggest that patience will pay in the long run. ' @nited ation pegged (ndia>s economic growth at 8.7 per cent for 675<7A# =uite higher than what other glo+al agencies such as the (nternational 3onetary Fund and the Horld $ank ha,e projected. (ndia in,ites "anadian firms to in,est in energy infra. Hhile appro,ing a new gas pricing formula +ased on international hu+ rates in Octo+er last year# the go,ernment had decided that new gas disco,eries in deep
*ence# these are some of the reasons one should in,est in this sector.
%'
