Report On Eicher

FUNDAMENTAL ANALYSIS OF EICHER MOTORS
1. INTRODUCTION
Indian securities markets are touching new heights as it has surpassed 20,000
marks. More and more investors are attracting towards equity investment and
trading. But this is not always the case that no one can assure you certain returns
there is always essence of uncertainty and risk in investment and that push
investors on back seats. Sometimes it becomes very difficult for investors to
predict the share price of the particular company in this very volatile market. It
raises questions in investors mind that at what price I should buy? When to sell
it. Hold?
But as trading and investments are increasing on the markets as SEBI had taken
stern steps to disclose important information to its shareholder and investor. So
they can get as possible as information about the companies of which they are
holding the shares or going to buy and now-a-days brokers and some analyst
providing some future predictions of stocks price movements. So now investment
has become somewhat easy for investors. How they get it? This is done with a
Stock Analysis getting the information about company and its price movements
on stock markets and try to predict how would behave on stock markets. So there
is great importance of stock analysis among investors, brokers, experts, analyst
etc.
What is Equity?
First, you must understand that there are many different types of equity and
therefore, several different definitions for equity. What is equity and how can it
help you?
Equity refers to ownership. Stocks or shares refer to equity in a business. Equity
can be defined as the left over interest of assets after all obligations have been
paid for. Assets can be more easily defined as a resource a person owns that can
be converted into money. Equity can be solely financial or it can be related to
real estate, stocks/shares or accounting.
What is Equity Research?

Investment brings back high returns and value. It is crucial for any organization
or business to invest for growth. You might be confident of your investment
plans but there is always a doubt about the company in which you are investing.
Equity research is the answer to avoid any kind of investment risk.
A high quality research report of the equity research will be provided to us that
also suggest future beneficial investments. This report captures the returns and
the risks involved making us more confident about our present investment
decisions. Companies globally are adopting equity research before taking critical
decisions of investment. The equity research combined with the awareness of the
strengths and weaknesses of the company is highly beneficial. It provides us with
a clear picture for investments. The team of analysts conducts through research.
They collect comprehensive information and critical data. They conduct a
rigorous research and analysis to provide us with details such as the company
financial reputation, history, about their market shares and company news and
other useful information. This also includes sector reports and market estimates.
Due to vast geographical reach, they have good knowledge of the various
industries and the market. They find out all the highs and lows and the future
growth rate of a company which we are investing in.
2. OBJECTIVE OF THE PROJECT

To provide an overview of Indian Auto Industry.
To study about Eicher Motors and its impact on the Indian Automobile and
Industry.
To identify the growth drivers of the sector.
To identify the top-line and bottom-line of Eicher Motors
The analysis of Eicher Motors by calculating the various ratios, the price
targets and the fundamental analysis which would help us know whether the
stock is outperforming and which stock is underperforming. Apart from this the
price target will help us know that by how much our share would rise or fall
when the market fluctuates in future.
Research Methodology
The project is on equity research analysis of the sector. Hence study has to be
done on the basis of information and news available about the sector i.e.
secondary data by various modes. This research had to be completed by doing
Fundamental analysis and Technical analysis of the companies.
Secondary data was collected from the internet, company websites, magazines
and various articles. However the main source of information is Annual Report
issued by the companies and also quarterly reports of the current year showing
their performances in current market scenario.
Methodology of the Project

The main aim of this project is to do equity research on Eicher Motors and to
find out the opportunities of investment in this stock where returns can be
maximized. This report starts with Sector Analysis of Automobile sector
followed by the fundamental analysis of the company. Analysis of the stock has
been done. Economy of India and respective industries are analyzed on the basis
of various factors and indicators. After analyzing the companies of the industries,
stock prices are estimated by Relative Valuation Method and the stocks were
purchased by creating a portfolio. Ratios are calculated and then the growth and
value of the stocks were estimated.
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Technical analysis is used to study stock chart patterns of these companies. The
observed patterns are tested with various oscillators and decision about particular
stock is made. Based on these factors, trend of a particular stock is observed
3. COMPANY PROFILE
Inventure Growth & Securities Ltd

The story of Inventure began on June 22, 1995 as a public limited company;
today the company has membership in cash and derivatives segment of Bombay
Stock Exchange (BSE) and National Stock Exchange (NSE), currency futures
segment of BSE and NSE, MCX Stock Exchange (MCX-SX) and wholesale debt
market segment of BSE and NSE. The company is also a member of OTC
Exchange of India (OTCEI). The company is also registered as a depository
participant with Central Depository Service (India) Limited (CDSL). Inventure
has recently received the license to act as a Portfolio Manager.
Its forte is providing advisory and innovatively structured financial solutions in
the area of fund raising, infrastructure development, government borrowing,
corporate restructuring and money market intermediation. At the retail level,
Inventure provides investment advisory service and distributes financial products
like mutual funds, insurance products, etc. The Company is committed to provide
efficient services to its clientele base which includes institutional clients, HNI
and retail investors across the country. Inventure operates through 224 business
locations including branches, franchisees (Remisiers and Authorized Person) and
sub-brokers located across India.
Today, Inventure is a professionally managed multi-faceted financial services
provider, offering a host of comprehensive services that are well diversified
under one roof, to cater to the varied financial needs of the customer.
We have a very strong presence in the western region and now we are planning
to rapidly expand our footprints PAN India through our regional offices,
branches and franchises.
We foster a culture that is entrepreneurial and results-driven and that emphasizes
on teamwork. Our team is encouraged to display higher levels of initiative, drive,
and hunger for learning and taking on additional responsibility.
All our businesses are built on a research and analytics foundation. Our
understanding of underlying market trends and strong analytical expertise has
resulted in a demonstrated ability to identify emerging trends and themes early.
We seek to provide the highest quality research and investment opinions to our
clients.
Our Values
We place our clients first.
We believe people make our organization.
We take pride in our work culture that is based on Integrity, Openness,
Trust and Team work
We aim at building long term Win Win Relationship with our Clients.
We encourage creativity, Innovativeness and Enterprise.
Our Mission
To Achieve and maintain Global Leadership position in all our
endeavors in the industry.
We are committed to provide quality services.
We are dedicated to long term growth and to providing superior
returns to all our Stakeholders.
In all our endeavors, we will practice the highest standards of integrity
and care for people.
Our Vision
Inventures vision is to be an internationally respected Corporate Citizen
rendering best investment solutions to its clients by leveraging Latest technology
and knowledge based expertise. Its mission is to achieve the above objectives in
an environment of transparency, honesty, fairness and compliance with
regulatory framework.
Inventure is committed to provide to all its clients professional services with
personal touch and right information at the right moment.
Milestone
1996
Registration as a Member of BSE.
Registration as a Dealer of OTC Exchange of India.
1999
Registration as a Depository Participant with CDSL.
2000
Registration as a Trading Member of NSE Capital Market as well as
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Future and Option Segment.

Registration as a Trading Member of Bombay Stock Exchange,
Derivatives Segment.
2004
Registration as a Self-Clearing Member of NSE Future and Option
Segment.
2007
Crossed 25,000 registered clients.
Acquired IFPL( Inventure Finance Private Limited).
2008
Ventured into Wealth Management by incorporating a subsidiary in the
name and style of IWML ( Inventure Wealth Management Limited).
Incorporated subsidiary IIBPL (Inventure Insurance and Broking
Private Limited).
Registration as a Trading Member of BSE in Currency Derivative
Segment.
Registration as a Trading Member of MCX Stock Exchange in Currency
Derivative Segment.
Registration as a Clearing Member of MCX Stock Exchange in Currency
Derivative Segment.
Registration as a Trading Member & Clearing Member of National Stock
Exchange of India Ltd. in Currency Derivative Segment.
Acquired ICL ( Inventure Commodities Limited).
2009
Registration as a Clearing Member of National Stock Exchange of India
Ltd.
Registration as a Trading Member of Bombay Stock Exchange Ltd. in
Wholesale Debt Market Segment.
2010
Registration as a Trading Member of National Stock Exchange of India
Ltd. in Wholesale Debt Market Segment.
Registrations as a Portfolio Manager.
2011
Company listed on BSE & NSE
4. FUNDAMENTAL ANALYSIS
Fundamental analysis is the examination of the underlying forces that affect the
interests of the economy, industrial sectors and companies. As with most
analysis, the goal is to derive a forecast for the future. At the company level,
fundamental analysis may involve examination of financial data, management,
business concept and competition. At the industry level, there might be an
examination of supply and demand forces for the products offered. 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 combines economic, industry, and company analysis to
derive a stock's current fair value and forecast future value. If fair value is not
equal to the current stock price, fundamental analysts believe that the stock is
either over or under valued and the market price will ultimately gravitate towards
fair value. Fundamentalists do not heed the advice of the random walkers and
believe that markets are weak-form efficient. By believing that prices do not
accurately reflect all available information, fundamental analysts look to
capitalize on perceived price discrepancies.
Strengths of Fundamental Analysis

Long-term Trends
Fundamental analysis is good for long-term investments based on long-term
trends, very long-term. The ability to identify and predict long-term economic,
demographic, technological or consumer trends can benefit patient investors who
pick the right industry groups or companies.
Value Spotting
Sound fundamental analysis will help identify companies that represent good
value. Some of the most legendary investors think long-term and value. Graham
and Dodd, Warren Buffett and John Neff are seen as the champions of value
investing. Fundamental analysis can help uncover companies with valuable
assets, a strong balance sheet, stable earnings and staying power.
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Business Acumen
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such painstaking
research and analysis, an investor will be familiar with the key revenue and profit
drivers behind a company. Earnings and earnings expectations can be potent
drivers of equity prices. Even some technicians will agree to that. A good
understanding can help investors avoid companies that are prone to shortfalls and
identify those that continue to deliver. In addition to understanding the business,
fundamental analysis allows investors to develop an understanding of the key
value drivers and companies within an industry. A stock's price is heavily
influenced by its industry group. By studying these groups, investors can better
position themselves to identify opportunities that are high risk (tech), low-risk
(utilities), growth oriented (computer), value driven (oil), noncyclical (consumer
staples), cyclical (transportation) or income oriented (high yield).
Knowing Who's Who

Stocks move as a group. By understanding a company's business, investors can
better position themselves to categorize stocks within their relevant industry
group. Business can change rapidly 7 and with it the revenue mix of a company.
Some prominent old economy companies are moving into new economy
businesses. Enron, a natural gas transmission company, is now making a market
to buy and sell bandwidth. Some companies that are part of the new economy are
really old economy companies in disguise. This happened to many of the pure
internet retailers, which were not really internet companies, but plain retailers.
Knowing a company's business and being able to place it in a group can make a
huge difference in relative valuations.
Weaknesses of Fundamental Analysis

Time Constraints
Fundamental analysis may offer excellent insights, but it can be extraordinarily

time consuming. Time consuming models often produce valuations that are
contradictory to the current price prevailing on Wall Street. When this happens,
the analyst basically claims that the whole street has got it wrong. This is not to
say that there are not misunderstood companies out there, but it is quite brash to
imply that the market price, and hence Wall Street, is wrong.
Industry/Company Specific
Valuation techniques vary depending on the industry group and specifics of each
company. For this reason, a different technique and model is required for
different industries and different companies. This can get quite time consuming
and limit the amount of research that can be performed. A subscription-based
model may work great for an ISP, but is not likely to be the best model to value
an oil company.
Subjectivity
Fair value is based on assumptions. Any changes to growth or multiplier
assumptions can greatly alter the ultimate valuation. Fundamental analysts are
generally aware of this and use sensitivity analysis to present a base-case
valuation, a best-case valuation and a worst-case valuation. However, even on a
worst case, most models are almost always bullish, the only question is how
much so.
Analyst Bias
The majority of the information that goes into the analysis comes from the
company itself. Companies employ investor relations managers specifically to
handle the analyst community and release information. As Mark Twain said,
"there are lies, damn lies and statistics". When it comes to massaging the data or
spinning the announcement, CFOs and investor relations managers are
professionals. Only buy-side analysts tend to venture past the company statistics.
Buy-side analysts work for mutual funds and money managers. They read the
reports written by the sell-side analysts who work for the big brokers (CIBC,
Merrill Lynch, Robertson Stephens, CS First Boston, Paine Weber, DLJ to name
a few). These brokers are also involved in underwriting and investment banking
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for the companies. Even though there are Chinese walls in place to prevent a
conflict of interest, the brokers have an ongoing relationship with the company
under analysis. When reading these reports, it is important to take into
consideration any biases a sell-side analyst may have. The buy-side analyst on
the other hand is analyzing the company purely from an investment standpoint
for a portfolio manager. If there is a relationship with the company, it is usually
on different terms. In some cases this may be as a large shareholder.
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5. TECHNICAL ANALYSIS
Technical analysis is the examination of past price movements to forecast
future price movements. Technical analysts are sometimes referred to as chartists
because they rely almost exclusively on charts for their analysis. Technical
analysis is applicable to stocks, indices, commodities, futures or any tradable
instrument where the price is influenced by the forces of supply and demand.
Price refers to any combination of the open, high, low or close for a given
security over a specific timeframe. The time frame can be based on intraday
(tick, 5-minute, 15-minute or hourly), daily, weekly or monthly price data and
last a few hours or many years. In addition, some technical analysts include
volume or open interest figures with their study of price action.
Dow Theory
The Dow Theory laid the foundations for what was later to become modern
technical analysis. Dow Theory was not presented as one complete
amalgamation, but rather pieced together from the writings of Charles Dow over
several years. Of the many theorems put forth by Dow, three stand out:
Price Discounts Everything
Price Movements are not Totally Random
What is More Important than Why
Price Discounts Everything\

This theorem is similar to the strong and semi-strong forms of market efficiency.
Technical analysts believe that the current price fully reflects all information.
Because all information is already reflected in the price, it represents the fair
value and should form the basis for analysis. After all, the market price reflects
the sum knowledge of all participants, including traders, investors, portfolio
managers, buy-side analysts, sell-side analysts, market strategist, technical
analysts, fundamental analysts and many others. It would be folly to disagree
with the price set by such an impressive array of people with impeccable
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credentials. Technical analysis utilizes the information captured by the price to

interpret what the market is saying with the purpose of forming a view on the
future.
Prices Movements are not Totally Random

Most technicians agree that prices trend. However, most technicians also
acknowledge that there are periods when prices do not trend. If prices were
always random, it would be extremely difficult to make money using technical
analysis. In his book, Schwager on Futures: Technical Analysis, Jack Schwager
states:
"One way of viewing it is that markets may witness extended periods of random
fluctuation, interspersed with shorter periods of nonrandom behavior. The goal of
the chartist is to identify those periods (i.e. major trends).
"A technician believes that it is possible to identify a trend, invest or trade based
on the trend and make money as the trend unfolds. Because technical analysis
can be applied to many different timeframes, it is possible to spot both short-term
and long-term trends. The IBM chart illustrates Schwager's view on the nature of
the trend. The broad trend is up, but it is also interspersed with trading ranges. In
between the trading ranges are smaller uptrends within the larger uptrend. The
uptrend is renewed when the stock breaks above the trading range. A downtrend
begins when the stock breaks below the low of the previous trading range.
What is more important than why!!
In his book, The Psychology of Technical Analysis, Tony Plummer paraphrases
Oscar Wilde by stating, "A technical analyst knows the price of everything, but
the value of nothing". Technicians, as technical analysts are called, are only
concerned with two things:
1. What is the current price?
2. What is the history of the price movement?
The price is the end result of the battle between the forces of supply and demand
for the company's stock. The objective of analysis is to forecast the direction of
the future price. By focusing on price and only price, technical analysis
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represents a direct approach. Fundamentalists are concerned with why the price is
what it is. For technicians, the why portion of the equation is too broad and many
times the fundamental reasons given are highly suspect. Technicians believe it is
best to concentrate on what and never mind why. Why did the price go up? It is
simple, more buyers (demand) than sellers (supply). After all, the value of any
asset is only what someone is willing to pay for it. Who needs to know why?
The Three Stages of Primary Bull Markets and Primary Bear Markets
Hamilton identified three stages to both primary bull markets and primary bear
markets. These stages relate as much to the psychological state of the market as
to the movement of prices. A primary bull market is defined as a long sustained
advance marked by improving business conditions that elicit increased
speculation and demand for stocks. A primary bear market is defined as a long
sustained decline marked by deteriorating business conditions and subsequent
decrease in demand for stocks. In both primary bull markets and primary bear
markets, there will be secondary movements that run counter to the major trend.
Primary Bull Market - Stage 1
Accumulation Hamilton noted that the first stage of a bull market was largely
indistinguishable from the last reaction rally of a bear market. Pessimism, which
was excessive at the end of the bear market, still reigns at the beginning of a bull
market. It is a period when the public is out of stocks, the news from corporate
America is bad and valuations are usually at historical lows. However, it is at this
stage that the so-called "smart money" begins to accumulate stocks. This is the
stage of the market when those with patience see value in owning stocks for the
long haul. Stocks are cheap, but nobody seems to want them. This is the stage
where Warren Buffet stated in the summer of 1974 that now was the time to buy
stocks and become rich. Everyone else thought he was crazy.
In the first stage of a bull market, stocks begin to find a bottom and quietly firm
up. When the market starts to rise, there is widespread disbelief that a bull market
has begun. After the first leg peaks and starts to head back down, the bears come
out proclaiming that the bear market is not over. It is at this stage that careful
analysis is warranted to determine if the decline is a secondary movement (a
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correction of the first leg up). If it is a secondary move, then the low forms above
the previous low, a quiet period will ensue as the market firms and then an
advance will begin. When the previous peak is surpassed, the beginning of the
second leg and a primary bull will be confirmed.
Primary Bull Market - Stage 2 - Big Move

The second stage of a primary bull market is usually the longest, and sees the
largest advance in prices. It is a period marked by improving business conditions
and increased valuations in stocks. Earnings begin to rise again and confidence
starts to mend. This is considered the easiest stage to make money as
participation is broad and the trend followers begin to participate.
Primary Bull Market - Stage 3 - Excess

The third stage of a primary bull market is marked by excessive speculation and
the appearance of inflationary pressures. (Dow formed these theorems about 100
years ago, but this scenario is certainly familiar.) During the third and final stage,
the public is fully involved in the market, valuations are excessive and
confidence is extraordinarily high. This is the mirror image to the first stage of
the bull market. A Wall Street axiom: When the taxi cab drivers begin to offer
tips, the top cannot be far off.
Primary Bear Market - Stage 1 Distribution
Just as accumulation is the hallmark of the first stage of a primary bull market,
distribution marks the beginning of a bear market. As the "smart money" begins
to realize that business conditions are not quite as good as once thought, they
start to sell stocks. The public is still involved in the market at this stage and
become willing buyers. There is little in the headlines to indicate a bear market is
at hand and general business conditions remain good. However, stocks begin to
lose a bit of their luster and the decline begins to take hold. While the market
declines, there is little belief that a bear market has started and most forecasters
remain bullish. After a moderate decline, there is a reaction rally (secondary
move) that retraces a portion of the decline. Hamilton noted that reaction rallies
during bear markets were quite swift and sharp. As with his analysis of secondary
moves in general, Hamilton noted that a large percentage of the losses would be
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recouped in a matter of days or perhaps weeks. This quick and sudden movement
would invigorate the bulls to proclaim the bull market alive and well. However,
the reaction high of the secondary move would form and be lower than the
previous high. After making a lower high, a break below the previous low would
confirm that this was the second stage of a bear market.
Primary Bear Market - Stage 2 - Big Move

As with the primary bull market, stage two of a primary bear market provides the
largest move. This is when the trend has been identified as down and business
conditions begin to deteriorate. Earnings estimates are reduced, shortfalls occur,
profit margins shrink and revenues fall. As business conditions worsen, the selloff continues.
Primary Bear Market - Stage 3 - Despair

At the top of a primary bull market, hope springs eternal and excess is the order
of the day. By the final stage of a bear market, all hope is lost and stocks are
frowned upon. Valuations are low, but the selling continues as participants seek
to sell no matter what. The news from corporate America is bad, the economic
outlook bleak and not a buyer is to be found. The market will continue to decline
until all the bad news is fully priced into stocks. Once stocks fully reflect the
worst possible outcome, the cycle begins again.
Criticisms of Dow Theory

The first criticism of the Dow Theory is that it is really not a theory. Neither Dow
nor Hamilton wrote proper academic papers outlining the theory and testing the
theorems. The ideas of Dow and Hamilton were put forth through their editorials
in the Wall Street Journal. Robert Rhea stitched the theory together by poring
over these writings.
Secondly, the Dow theory is criticized for being too late. The trend does not
change from bearish to bullish until the previous reaction high has been
surpassed. Many traders feel that this is simply too late and misses much of the
move. Dow and Hamilton sought to catch the meat of the move and enter during
the second leg. Even though this is where the bulk of the move will take place, it
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is also after the first leg and part way into the second leg. And, if one has to wait
for confirmation from the other average, it could even be later in the move.
Thirdly, because it uses the DJIA and DJTA, the Dow theory is criticized as
being outdated and no longer an accurate reflection of the economy. This may be
a valid point, but as outlined earlier, the DJTA is one of the most economically
sensitive indices. The stock market has always been seen as a great predictor of
economic growth.
Strength of Technical Analysis

Focus on Price
If the objective is to predict the future price, then it makes sense to focus on price
movements. Price movements usually precede fundamental developments. By
focusing on price action, technicians are automatically focusing on the future.
The market is thought of as a leading indicator and generally leads the economy
by 6 to 9 months. To keep pace with the market, it makes sense to look directly at
the price movements. More often than not, change is a subtle beast. Even though
the market is prone to sudden knee-jerk reactions, hints usually develop before
significant moves. A technician will refer to periods of accumulation as evidence
of an impending advance and periods of distribution as evidence of an impending
decline.
Supply, Demand, and Price Action

Many technicians use the open, high, low and close when analyzing the price
action of a security. There is information to be gleaned from each bit of
information. Separately, these will not be able to tell much. However, taken
together, the open, high, low and close reflect forces of supply and demand.
The annotated example above shows a stock that opened with a gap up. Before
the open, the number of buy orders exceeded the number of sell orders and the
price was raised to attract more sellers. Demand was brisk from the start. The
intraday high reflects the strength of demand (buyers). The intraday low reflects
the availability of supply (sellers). The close represents the final price agreed
upon by the buyers and the sellers. In this case, the close is well below the high
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and much closer to the low. This tells us that even though demand (buyers) was
strong during the day, supply (sellers) ultimately prevailed and forced the price
back down. Even after this selling pressure, the close remained above the open.
By looking at price action over an extended period of time, we can see the battle
between supply and demand unfold. In its most basic form, higher prices reflect
increased demand and lower prices reflect increased supply.
Support/Resistance
Simple chart analysis can help identify support and resistance levels. These are
usually marked by periods of congestion (trading range) where the prices move
within a confined range for an extended period, telling us that the forces of
supply and demand are deadlocked. When prices move out of the trading range,
it signals that either supply or demand has started to get the upper hand. If prices
move above the upper band of the trading range, then demand is winning. If
prices move below the lower band, then supply is winning.
Pictorial Price History

Even if you are a tried and true fundamental analyst, a price chart can offer
plenty of valuable information. The price chart is an easy to read historical
account of a security's price movement over a period of time. Charts are much
easier to read than a table of numbers. On most stock charts, volume bars are
displayed at the bottom. With this historical picture, it is easy to identify the
following:
Reactions prior to and after important events.
Past and present volatility.
Historical volume or trading levels.
Relative strength of a stock versus the overall market
Assist with Entry Point

Technical analysis can help with timing a proper entry point. Some analysts use
fundamental analysis to decide what to buy and technical analysis to decide when
to buy. It is no secret that timing can play an important role in performance.
Technical analysis can help spot demand (support) and supply (resistance) levels
as well as breakouts. Simply waiting for a breakout above resistance or buying
near support levels can improve returns.
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It is also important to know a stock's price history. If a stock you thought was
great for the last 2 years has traded flat for those two years, it would appear that
Wall Street has a different opinion. If a stock has already advanced significantly,
it may be prudent to wait for a pullback. Or, if the stock is trending lower, it
might pay to wait for buying interest and a trend reversal.
Weaknesses of Technical Analysis

Analyst Bias
Just as with fundamental analysis, technical analysis is subjective and our
personal biases can be reflected in the analysis. It is important to be aware of
these biases when analyzing a chart. If the analyst is a perpetual bull, then a
bullish bias will overshadow the analysis. On the other hand, if the analyst is a
disgruntled eternal bear, then the analysis will probably have a bearish tilt.
Open to Interpretation
Furthering the bias argument is the fact that technical analysis is open to
interpretation. Even though there are standards, many times two technicians will
look at the same chart and paint two different scenarios or see different patterns.
Both will be able to come up with logical support and resistance levels as well as
key breaks to justify their position. While this can be frustrating, it should be
pointed out that technical analysis is more like an art than a science, somewhat
like economics. Is the cup half-empty or half-full? It is in the eye of the beholder.
Too Late
Technical analysis has been criticized for being too late. By the time the trend is
identified, a substantial portion of the move has already taken place. After such a
large move, the reward to risk ratio is not great. Lateness is a particular criticism
of Dow theory.
Always another Level

Even after a new trend has been identified, there is always another "important"
level close at hand. Technicians have been accused of sitting on the fence and
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never taking an unqualified stance. Even if they are bullish, there is always some
indicator or some level that will qualify their opinion.
Trader's Remorse
Not all technical signals and patterns work. When you begin to study technical
analysis, you will come across an array of patterns and indicators with rules to
match. For instance: A sell signal is given when the neckline of a head and
shoulders pattern is broken. Even though this is a rule, it is not steadfast and can
be subject to other factors such as volume and momentum. In that same vein,
what works for one particular stock may not work for another. A 50-day moving
average may work great to identify support and resistance for Infosys, but a 70day moving average may work better for TCS. Even though many principles of
technical analysis are universal, each security will have its own idiosyncrasies
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6. ECONOMIC ANALYSIS
It is important to analyze the economic activity in which all the companies
operate. The economic activity affects profits of a company, investors attitude as
well as expectations and, value of a security.
Economic Indicators
Global Economy
The top-down analysis of a company starts with global and domestic economy.
The globalization affects a companys prospects of exports, price competition,
and exchange rate.
Domestic Economy
GDP is the measure of the total production of goods and services in an
economy. Growing GDP indicates an expanding economy. An Indian economy is
affected by agricultural production as well as industrial production and services.
The good and normal monsoon indicates a good and normal agricultural
production and increasing income of farmers and agricultural labour. Industrial
production statistics reveals the status of industrial activity in the country.
Employment
Unemployment rate is the percentage of the total labour force in the country.
The unemployment rate indicates how the economy operates at full capacity.
Inflation
Inflation is the rate at which the general level of prices is rising. High rate of
inflation indicates economy is operating with full associated with demand for
goods and services exceed production capacity. The government should try to
trade-off between inflation rate and unemployment rate to increase the
employment as well as decrease the inflation rate.
21
Interest Rates
As interest rate determines the present value of cash flows, high interest rate
affects demand for housing and high-value consumer durables. The real interest
rate is an important factor for business activity.
Budget Deficit
The budget deficit is the difference between government spending and
revenues. Higher budget deficit indicates higher government borrowing which
pressure up interest rates. The excessive government borrowing will crowd out
private borrowing if the borrowing is unchecked. Fiscal deficit is budget deficit
plus borrowing. Higher fiscal deficit indicates higher government spending on
unproductive spending.
Other Factors
Money supply, Fiscal Policy, Monetary Policy, Manufacturing and trade sales,
Labour productivity, Index of consumer expectations, New acquisition of plants
and machinery by corporates, Stock prices, Personal income, Tax collections by
the government, FII investments, FDI investments, Credit off takes etc.
Industrial analysis
Recessions or expansions in economic activity may translate into falling or
rising stock markets with different relative price changes among industry groups.
For the analyst, industry analysis calls for insight into
1) The key sectors or subdivisions of overall economic activity that influence
particular industries, and
2) The relative strength or weakness of particular industry or other groupings
about economic activity.
Major Classifications
The industry can be classified by product and services in the categories like
Basic Industries, Capital Goods, Consumer Durables, Consumer Non- Durables,
Consumer Services, Energy, Financial Services, Health Care, Public Utilities,
Technology, Transportation etc.
22
Classification based on Business Cycles

Industry can be classified on the basis of its reaction to upswings and
downswings of the economy which is known as business cycles. General
classifications of the industry based on the business cycles are growth industry,
cyclical industry, defensive industry, and cyclical-growth industry.
Growth industry
The major characteristics of a growth industry are higher rate of expansion,
growth in earnings, and independent of the business cycles, often associated with
technological changes or innovative means of carrying out things. Between 40s
and
60s,
industries
like
photography,
color
television,
computers,
pharmaceuticals, and office equipments were growth industries. Communication

equipments,
Software,
genetic
engineering,
and
environmental/waste
management are the recent growth industries.
Cyclical industry
It is most likely to benefit from a period of economic prosperity and suffer
from economic recession. Consumer durables are the major cyclical industry.
Defensive industry
It is likely to get least affected during the periods of economic downswing as
consists of items necessary for existence. The demand for these products is
considered to be counter cyclical. Food processing industry, consumer nondurables fall in the category of defensive industry.
Other Factors
Past Sales and Earnings Performance, Government policy and regulation
toward industry, Labour conditions, Competitive conditions, Industry life cycle,
International investing community attitude, Industry share price etc.
23
POLITICO-ECONOMIC ANALYSIS:
No industry or company can exist in isolation. It may have splendid
managers and a tremendous product. However, its sales and its costs are
affected by factors, some of which are beyond its control - the world
economy, price inflation, taxes and a host of others. It is important,
therefore, to have an appreciation of the politico-economic factors that affect
an industry and a company.
The political equation
A stable political environment is necessary for steady, balanced growth. If
a country is ruled by a stable government which takes decisions for the longterm development of the country, industry and companies will prosper.
Foreign Exchange Reserves
A country needs foreign exchange reserves to meet its commitments, pay
for its imports and service foreign debts.
Foreign Exchange Risk
This is a real risk and one must be cognizant of the effect of a revaluation
or devaluation of the currency either in the home country or in the country
the company deals in.
Restrictive Practices
Restrictive practices or cartels imposed by countries can affect companies
and industries. crystallizing the exposure.
Foreign Debt and the Balance of Trade
Foreign debt, especially if it is very large, can be a tremendous burden on
an economy. India pays around $ 5 billion a year in principal repayments
and interest payments.
Inflation
Inflation has an enormous effect in the economy. Within the country it
erodes purchasing power. As a consequence, demand falls. If the rate of
inflation in the country from which a company imports is high then the cost
of production in that country will automatically go up.
The Threat of Nationalization
The threat of nationalization is a real threat in many countries the fear
that a company may become nationalized.
Interest Rates
A low interest rate stimulates investment and industry. Conversely, high
interest rates result in higher cost of production and lower consumption.
Taxation
The level of taxation in a country has a direct effect on the economy. If
tax rates are low, people have more disposable income.
24
Government Policy
Government policy has a direct impact on the economy. A government
that is perceived to be pro-industry will attract investment.
GDP
The gross domestic product (GDP) is one the primary indicators used to
gauge the health of a country's economy. It represents the total dollar value
of all goods and services produced over a specific time period.
For example, when the economy is healthy, you will typically see low
unemployment and wage increases as businesses demand labor to meet the
growing economy. A significant change in GDP, whether up or down,
usually has a significant effect on the stock market. It's not hard to
understand why: a bad economy usually means lower profits for companies,
which in turn means lower stock prices. Investors really worry about
negative GDP growth, which is one of the factors economists use to
determine whether an economy is in a recession.
THE ECONOMIC CYCLE:
It affects investment decisions, employment, demand and the

profitability of companies.
The four stages of an economic cycle are:
Depression
Recovery
Boom
Recession
Depression
At the time of depression, demand is low and falling. Inflation is high and
so are interest rates. Companies, crippled by high borrowing and falling
sales, are forced to curtail production, close down plants built at times of
higher demand, and let workers go.
Recovery
During this phase, the economy begins to recover. Investment begins
anew and the demand grows. Companies begin to post profits. Conspicuous
spending begins once again.
Boom
In the boom phase, demand reaches an all time high. Investment is also
high. Interest rates are low. Gradually as time goes on, supply begins to
exceed the demand. Prices that had been rising begin to stabilize and even
fall. There is an increase in demand. Then as the boom period matures prices
begin to rise again.
25
Recession
The economy slowly begins to downturn. Demand starts falling.. Interest
rates and inflation are high. Companies start finding it difficult to sell their
goods. The economy slowly begins to downturn.
26
7. INDUSTRY ANALYSIS
The importance of industry analysis is now dawning on the Indian
investor as never before.
Cycle
The first step in industry is to determine the cycle it is in, or the stage of
maturity of the industry. All industries evolve through the following stages:
1. Entrepreneurial, sunrise or nascent stage
2. Expansion or growth stage
3. Stabilization, stagnation or maturity stage, and
4. Decline or sunset stage to properly establish itself. In the early days, it
may actually make losses.
The Entrepreneurial or Nascent Stage

At the first stage, the industry is new and it can take some time for it to
properly establish itself.
The Expansion or Growth Stage
Once the industry has established itself it enters a growth stage. As the
industry grows, many new companies enter the industry.
The Stabilization or Maturity Stage
After the halcyon days of growth, an industry matures and stabilizes.
Rewards are low and so too is the risk. Growth is moderate. Though sales
may increase, they do so at a slower rate than before. Products are more
standardized and less innovative and there are several competitors.
The Decline or Sunset Stage
Finally, the industry declines. This occurs when its products are no longer
popular. This may be on account of several factors such as a change in social
habits the film and video industries.
27
8. AUTOMOBILE INDUSTRY SEGMENT

Based on vehicle registration data, the 1989 population of cars and trucks
in India was about 4 million compared to 5.3 million in China and 13 million in
Brazil. The population of motorized two-wheelers greatly outstrips this number,
as is also the case in China. The Indian automobile industry is best segmented as
follows:
Medium and heavy commercial vehicles (M/HCV)

Light commercial vehicles (LCV)
Light Utility Vehicle(LUV)
Passenger cars
Two-wheelers
Overall, the recent history in each segment has been marked by an almost
steady increase in performance throughout the 1980s. In some cases, as with twowheelers, the performance over this period was dramatic.
However, the start of the 1990s saw the entire economy face a setback triggered
by many factors. Chief among them was the steep hike in fuel prices, increases in
excise duties, the devaluation of the rupee, and changes in rules relating to
depreciation.
The simultaneous effects of increases in excise duties, the price of fuel,
and overall increased levels of inflation led to a sharp drop in sales for each
segment in 1991. In August 1990, the excise duty for cars was increased from 42
percent to 53 percent, and in July 1991, this was further raised to 66 percent.
28
These government measures were largely motivated by the urgent need to

reign in the trade deficit and by the increasing gap between oil consumption and
local production. The squeeze on imports was expected to be relieved somewhat
for 1992-1993, as the foreign exchange reserves situation recovered. Thus, while
these constraints were expected to remain long-term issues, a lessening of the
severity of the situation was expected in the short term. This transpired in June
1992, after considerable pressure from the industry and the Industry Ministry on
the Finance Ministry. Excise duty on cars was lowered from 66 percent to 55
percent and on LCVs from 15 percent to 10 percent. However, the credit squeeze
imposed to curb inflation remains, and continues to adversely affect consumer
credit and market demand for motor vehicles.
29
Some growth forecasts for Indian auto industry

The Passenger Vehicle market of India will even cross Japan by selling about 5
million
Vehicles by 2017-18.
The Indian auto exports will be upto$5.62 billion in the year ending March 2011
and the same will grow to $17.64 billion in 2015-16.
Indias share in global auto exports may also triple by 2016.
Indias passenger vehicle production projections :
o In 2010 2.6 million Vehicles

o By 2015 5.1 million Vehicles
o By 2020 9.7 million Vehicles
Investment plan of automobile industry
Auto Industry is expected to invest up to Rs. 80,000 Cr. in fresh capacity
in the next four years.
Major investments will be done by :
Tata Motors: Rs. 8000 cr.

Maruti Suzuki: Rs. 3800 cr.
Daimler India: Rs. 3500 cr.
Toyota: Rs. 3200 cr.
30
9. SWOT ANALYSIS
A scan of the internal and external environment is an important part of the
strategic planning process. Environmental factors internal to the firm usually can
be classified as Strengths (S) or Weaknesses (W), and those external to the firm
can be classified as Opportunities (O) or Threats (T). Such an analysis of the
strategic environment is referred to as a SWOT analysis.
SWOT analysis of the Indian automobile sector gives the following points:
1. Strengths:
Large domestic market

Sustainable labour cost advantage
Competitive auto component vendor base
Government incentives for manufacturing plants
Strong engineering skills in design etc.
2. Weaknesses:
Low labour productivity

High interest costs and high overheads make the production uncompetitive
Various forms of taxes push up the cost of production
Low investment in Research and Development
Infrastructure bottleneck
3. Opportunities:
Increasing challenges in consumer demands, technology development,

and globalization.
Heavy thrust on mining and construction activity
Increase in the income level
Cut in excise duties.
4. Threats:
Ignorance of Research & development.

Rising interest rates.
Cut throat competition.
31
10. MICHEAL PORTERS FIVE FORCES

1. BARRIER TO ENTRY
New entrants increase the capacity in an industry and the inflow of
funds. The question that arises is how easy is it to enter an industry?
There are some barriers to entry:
a) Economies of scale
b) Product differentiation
c) Capital requirement
d) Switching costs
e) Access to distribution channels
f) Cost disadvantages independent of scale
g) Government policy
h) Expected retaliation
j) International cartels
2. THE THREAT OF SUBSTITUTION
New inventions are always taking place and new and better products
replace existing ones. An industry that can be replaced by substitutes or is
threatened by substitutes is normally an industry one must be careful of
investing in. An industry where this occurs constantly is the packaging
industry -bottles replaced by cans, cans replaced by plastic bottles, and the
like. To ward off the threat of substitution, companies often have to spend
large sums of money in advertising and promotion.
3. BARGAINING POWER OF THE BUYERS
In an industry where buyers have control, i.e. in a buyer's market,
buyers are constantly forcing prices down, demanding better services or
higher quality and this often erodes profitability. The factors one should
check are whether:
a) A particular buyer buys most of the products (large purchase volumes). If
such buyers withdraw their patronage, they can destroy an industry. They
can also force prices down.
b) Buyers can play one company against another to bring prices down.
4. BARGAINING POWER FOR THE SUPPLIERS
An industry unduly controlled by its suppliers is also under threat.
This occurs when:
a) The suppliers have a monopoly, or if there are few suppliers.
b) Suppliers control an essential.
c) Demand for the product exceeds.
d) The supplier supplies to various industries.
e) The switching costs are high.
f) The supplier's product does not have a substitute.
g) The supplier's product is an important input for the buyer's.
h) The buyer is not important to the supplier.
i) The supplier's product is unique.
32
5. RIVALRY AMONG COMPETITORS

Rivalry among competitors can cause an industry great harm. This
occurs mainly by price cuts, heavy advertising, additional high cost services
or offers, and the like. This rivalry occurs mainly when:
a) There are many competitors and supply exceeds demand. Companies
resort to price cuts and advertise heavily in order to attract customers for
their goods.
b) The industry growth is slow and companies are competing with each
other for a greater market share.
c) The economy is in a recession and companies cut the price of their
products and offer better service to stimulate demand.
d) There is lack of differentiation between the product of one company and
that of another. In such cases, the buyer makes his choice on the basis of
price or service.
e) In some industries economies of scale will necessitate large additions to
existing capacities in a company. The increase in production could result in
over capacity & price cutting.
f) Competitors may have very different strategies in selling their goods and
in competing they may be continuously trying to stay ahead.
33
11. COMPANY ANALYSIS

At the final stage of fundamental analysis, the investor analyzes the
company. This analysis has two thrusts:
How has the company performed vis--vis other similar companies and
How has the company performed in comparison to earlier years?
It is imperative that one completes the politico economic analysis and the
industry analysis before a company is analyzed because the company's
performance at a period of time is to an extent a reflection of the economy,
the political situation and the industry. What does one look at when
analyzing a company?
The different issues regarding a company that should be examined are:
The Management
The Company
The Annual Report
Ratios
Cash flow
THE MANAGEMENT:
The single most important factor one should consider when investing in
a company and one often never considered is its management.
In India management can be broadly divided in two types:
Family Management
Professional Management
THE COMPANY:
An aspect not necessarily examined during an analysis of fundamentals
is the company. A company may have made losses consecutively for two
years or more and one may not wish to touch its shares - yet it may be a
good company and worth purchasing into. There are several factors one
should look at.
1. How a company is perceived by its competitors?
One of the key factors to ascertain is how a company is perceived by its
competitors. It is held in high regard. Its management may be known for its
maturity, vision, competence and
aggressiveness. The investor must
ascertain the reason and then determine whether the reason will continue
into the foreseeable future.
2. Whether the company is the market leader in its products or in its
segment
Another aspect that should be ascertained is whether the company is the
market leader in its products or in its segment. When you invest in market
leaders, the risk is less. The shares of market leaders do not fall as quickly as
those of other companies. There is a magic to their name that would make
individuals prefer to buy their products as opposed to others.
34
3. Company Policies
The policy a company follows is also important. What is its plans for
growth? What is its vision? Every company has a life. If it is allowed to live
a normal life it will grow upto a point and then begin to level out and
eventually die. It is at the point of leveling out that it must be given new life.
This can give it renewed vigor and a new lease of life.
4. Labour Relations
Labour relations are extremely important. A company that has motivated,
industrious work force has high productivity and practically no disruption of
work. On the other hand, a company that has bad industrial relations will
lose several hundred man days as a consequence of strikes and go slows.
5. Where the company is located and where its factories are?
One must also consider where the companies Plants and Factories are
located..
THE ANNUAL REPORT:
The primary and most important source of information about a company is
its Annual Report. By law, this is prepared every year and distributed to the
shareholders. Annual Reports are usually very well presented. A tremendous
amount of data is given about the performance of a company over a period
of time.
The Annual Report is broken down into the following specific parts:
A) The Director's Report,
B) The Auditor's Report,
C) The Financial Statements, and
D) The Schedules and Notes to the Accounts.
A. The Directors Report
The Directors Report is a report submitted by the directors of a
company to its shareholders, advising them of the performance of the
company under their stewardship.
1. It enunciates the opinion of the directors on the state of the economy and the
political situation vis--vis the company.
2. Explains the performance and the financial results of the company in
the period under review. This is an extremely important part. The results and
operations of the various separate divisions are usually detailed and
investors can determine the reasons for their good or bad performance.
3. The Directors Report details the company's plans for modernization,
expansion and diversification. Without these, a company will remain static
and eventually decline.
4. Discusses the profit earned in the period under review and the
dividend. Recommended by the directors. This paragraph should normally
be read with some skepticism, as the directors will always argue that the
performance was satisfactory. If adverse economic conditions are usually at
fault.
35
5. Elaborates on the directors' views of the company's prospects in the

future.
6. Discusses plans for new acquisition and investments. An investor must
intelligently evaluate the issues raised in a Directors Report. Industry
conditions and the management's knowledge of the business must be
considered.
B. The Auditor's Report
The auditor represents the shareholders and it is his duty to report to the
shareholders and the general public on the stewardship of the company by its
directors. Auditors are required to report whether the financial statements
presented do, in fact, present a true and fair view of the state of the
company. Investors must remember that the auditors are their representatives
and that they are required by law to point out if the financial statements are
not true and fair..
C. Financial Statements
The published financial statements of a company in an Annual Report
consist of its Balance Sheet as at the end of the accounting period detailing
the financing condition of the company at that date, and the Profit and Loss
Account or Income Statement summarizing the activities of the company for
the accounting period.
Balance Sheet
The Balance Sheet details the financial position of a company on a
particular date; of the company's assets (that which the company owns), and
liabilities (that which the company owes), grouped logically under specific
heads. It must however, be noted that the Balance Sheet details the financial
position on a particular day and that the position can be materially different
on the next day or the day after.
Profit & Loss Account

The Profit and Loss account summarizes the activities of a company
during an accounting period which may be a month, a quarter, six months, a
year or longer, and the result achieved by the company. It details the income
earned by the company, its cost and the resulting profit or loss. It is, in
effect, the performance appraisal not only of the company but also of its
management- its competence, foresight and ability to lead.
RATIOS:
Ratios express mathematically the relationship between performance
figures and/or assets/liabilities in a form that can be easily understood and
interpreted.
No single ratio tells the complete story
Ratios can be broken down into four broad categories:
(A) Profit and Loss Ratios
36
These show the relationship between two items or groups of items in

a profit and loss account or income statement. The more common of these
ratios are:
1. Sales to cost of goods sold.
2. Selling expenses to sales.
3. Net profit to sales and
4. Gross profit to sales.
(B) Balance Sheet Ratios
These deal with the relationship in the balance sheet such as :
1. Shareholders equity to borrowed funds.
2. Current assets to current liabilities.
3. Liabilities to net worth.
4. Debt to assets and
5. Liabilities to assets.
(C) Balance Sheet and Profit and Loss Account Ratios.
These relate an item on the balance sheet to another in the profit and
loss account such as:
1. Earnings to shareholder's funds.
2. Net income to assets employed.
3. Sales to stock.
4. Sales to debtors and
5. Cost of goods sold to creditors.
(D) Financial Statements and Market Ratios
These are normally known as market ratios and are arrived at by
relative financial figures to market prices:
1. Market value to earnings and
2. Book value to market value.
(a) Market value
(b) Earnings
(c) Profitability
(d) Liquidity
(e) Leverage
(f) Debt Service Capacity
(g) Asset Management/Efficiency
(h) Margins.
The major ratios that are considered:
(i) Market value
(ii) Price- earnings ratio
(iii) Market-to-book ratio
(iv) Earning per share
(v) Dividend per share
(vi) Dividend payout ratio
(vii) Leverage ratios
(viii) Return on investments/total assets
37
CASH FLOW:
A statement of sources and uses begins with the profit for the year to
which are added the increases in liability accounts (sources) and from which
are reduced the increases in asset accounts (uses). The net result shows
whether there has been an excess or deficit of funds and how this was
financed. Investors must examine a company's cash flow as it reveals exactly
where the money came from how it was utilized. Investors must be
concerned if a company is financing either its inventories or paying
dividends from borrowings without real growth as that shows deterioration.
38
11. INDIAN STOCK MARKET

OVERVIEW OF EQUITY MARKET IN INDIA
BSE (Bombay Stock Exchange)
SENSEX - THE BAROMETER OF INDIAN CAPITAL MARKETS
Introduction:
For the premier Stock Exchange that pioneered the stock broking
activity in India, 128 years of experience seems to be a proud milestone. A
lot has changed since 1875 when 318 persons became members of what
today is called "The Stock Exchange, Mumbai" by paying a princely amount
of Re1.
Since then, the country's capital markets have passed through both
good and bad periods. The journey in the 20th century has not been an easy
one. Till the decade of eighties, there was no scale to measure the ups and
downs in the Indian stock market. The Stock Exchange, Mumbai (BSE) in
1986 came out with a stock index that subsequently became the barometer of
the Indian stock market.
SENSEX is not only scientifically designed but also based on globally
accepted construction and review methodology. First compiled in 1986,
SENSEX is a basket of 30 constituent stocks representing a sample of large,
liquid and representative companies. The base year of SENSEX is 1978-79
and the base value is 100. The index is widely reported in both domestic and
international markets through print as well
as electronic media. The
Index was initially calculated based on the "Full Market Capitalization"
methodology but was shifted to the free-float methodology with effect from
September 1, 2003. The "Free-float Market Capitalization" methodology of
index construction is regarded as an industry best practice globally. All
major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use
the Free-float methodology.
Due to its wide acceptance amongst the Indian investors, SENSEX is
regarded to be the pulse of the Indian stock market. As the oldest index in
the country, it provides the time series data over a fairly long period of time
(From 1979 onwards). Small wonder, the SENSEX has over the years
become one of the most prominent brands in the country.
The growth of equity markets in India has been phenomenal in the decade
gone by. Right from early nineties the stock market witnessed heightened
activity in terms of various bull and bear runs. The SENSEX captured all
these events in the most judicial manner. One can identify the booms and
busts of the Indian stock market through Sensex.
39
NSE (NATIONAL STOCK EXCHANGE)

The Organization:
The National Stock Exchange of India Limited has genesis in the report
of the High Powered Study Group on Establishment of New Stock
Exchanges, which recommended promotion of a National Stock Exchange
by financial institutions (FIs) to provide access to investors from all across
the country on an equal footing. Based on the recommendations, NSE was
promoted by leading Financial Institutions at the behest of the Government
of India and was incorporated in November 1992 as a tax-paying company
unlike other stock exchanges in the country.
On its recognition as a stock exchange under the Securities Contracts
(Regulation) Act, 1956 in April 1993, NSE commenced operations in the
Wholesale Debt Market (WDM) segment in June 1994. The Capital Market
(Equities) segment commenced operations in November 1994 and
operations in Derivatives segment commenced in June 2000.
NIFTY:
The Nifty is relatively a new comer in the Indian market. S&P CNX Nifty
is a 50 stock index accounting for 23 sectors of the economy. It is used for
purposes such as benchmarking fund portfolios; index based derivatives and
index funds. The base period selected for Nifty is the close of prices on
November 3, 1995, which marked the completion of one-year of operations
of NSE's capital market segment. The base value of index was set at 1000.
S&P CNX Nifty is owned and managed by India Index Services and
Products Ltd. (IISL), which is a joint venture between NSE and CRISIL.
IISL is a specialized company focused upon the index as a core product.
IISL have a consulting and licensing agreement with Standard & Poor's
(S&P), who are world leaders in index services.
40
FII in Indian stock market

As part of its initiative to liberalize its financial markets, India opened her
doors to foreign institutional investors in September, 1992. This event
represents a landmark event since it resulted in effectively globalizing its
financial services industry.
FII Ivestment Financial Year

crores
Financia
Equity
l Year
13.40
1992-93
5,126.50
1993-94
4,796.30
1994-95
6,942.00
1995-96
8,545.60
1996-97
5,267.00
1997-98
-717.20
1998-99
9,669.50
1999-00
10,206.70
2000-01
8,072.20
2001-02
2,527.20
2002-03
39,959.70
2003-04
44,122.70
2004-05
48,800.50
2005-06
25,235.70
2006-07
53,403.80
2007-08
-47,706.20
2008-09
110,220.6
2009-10
0
110,120.8
2010-11
0
43,737.60
2011-12
59,322.00
2012-13*
Total
48,8344.4
0
Debt
Total
0.00
0.00
0.00
0.00
28.90
691.05
-867.00
452.60
-273.30
690.40
162.10
5,805.00
1,758.60
-7,333.80
5,604.70
12,775.30
1,895.20
32,437.70
13.40
5,126.50
4,796.30
6,942.00
8,574.50
5,958.05
-1,584.20
10,122.10
9,933.40
8,762.60
2,689.30
45,764.70
45,881.30
41,466.70
30,840.40
66,719.10
-45,811.00
142,658.3
0
146,438.1
0
93,725.50
73,209.0
70,1686.0
5
36,317.0
49,987.90
13,887.00
15,4019.6
0
41
12.AUTOMOBILE INDUSTRY
Introduction
The Indian auto industry is one of the largest in the world with an annual
production of 21.48 million vehicles in FY 2013-14.
The automobile industry accounts for 22 per cent of the country's manufacturing
gross domestic product (GDP).
An expanding middle class, a young population, and an increasing
interest of the companies in exploring the rural markets have made the two
wheelers segment (with 80 per cent market share) the leader of the Indian
automobile market. The overall passenger vehicle segment has 14 per cent
market share.
India is also a substantial auto exporter, with solid export growth expectations
for the near future. Various initiatives by the Government of India and the major
automobile players in the Indian market is expected to make India a leader in the
Two Wheeler and Four Wheeler market in the world by 2020.
Market Size
Sales of commercial vehicles in India grew 5.3 per cent to 52,481 units in
January 2015 from a year ago, according to Society of Indian Automobile
Manufacturers (SIAM).
Sales of cars also grew for a third month in a row to 169,300 units in January
2015, up 3.14 per cent from the year-ago period.
Car market leader Maruti Suzuki India witnessed 8.6 per cent higher sales
at approximately 118,551 units in February 2015, out of which 107,892 were
sold in domestic market and 10,659 units were exported.
Hyundai Motor India Ltd (HMIL) reported a 2.4 per cent growth in total
sales at 47,612 units in February, compared with 46,505 units in the same month
last year.
In the two-wheeler segment, Hero MotoCorp witnessed sales of 484,769 units in
February 2015.
42
TVS Motor Co posted 15 per cent higher sales at 204,565 units against
177,662 units.
Bajaj Auto sold a total of 243,000 two and three-wheelers segment.
Investments
To match production with demand, many auto makers have started to
invest heavily in various segments in the industry in the last few months. The
industry has attracted foreign direct investment (FDI) worth US$ 12,232.06
million during the period April 2000 to February 2015, according to the data
released by Department of Industrial Policy and Promotion (DIPP).
Some of the major investments and developments in the automobile
sector in India are as follows:
DSK Hyosung has announced to set up a plant in Maharashtra and is planning
to add 10-15 dealerships in the next financial year (FY 15-16) mostly in the tierII cities and introduce more models in the 250cc segment.
Germany-based luxury car maker Bayerische Motoren Werke AGs (BMW)
local unit has announced to procure components from seven India-based auto
parts makers.
Mahindra Two Wheelers Limited (MTWL) has acquired 51 per cent shares in
France-based Peugeot Motorcycles (PMTC).
Suzuki Motor Corp is planning to sell the automobiles made in the Gujarat
plant, in Africa.
Tata Motors Ltd, Indias largest automobile maker, will sell trucks in
Malaysia, Vietnam and Australia to strengthen its presence in the Asia-Pacific
region.
Government Initiatives
The Government of India encourages foreign investment in the
automobile sector and allows 100 per cent FDI under the automatic route. Excise
duty on small cars, scooters, motorcycles and commercial vehicles was reduced
in February last year to 8 per cent from 12 per cent to boost the Make in India
initiative of the Indian government.
43
Some of the major initiatives taken by the Government of India are:

Under the Union budget of 2015-16, the Government has announced to
provide credit of Rs 850,000 to farmers, which is expected to boost the tractors
segment. The government is aligning to ensure that at least one family member is
economically strong to support the family. This is expected to improve the
sentiments of entry-level two-wheelers.
The Government plans to promote eco-friendly cars in the country i.e. CNG
based vehicle, hybrid vehicle and electric vehicle and also made mandatory of 5
per cent ethanol blending in petrol.
The government has formulated a Scheme for Faster Adoption and
Manufacturing of Electric and Hybrid Vehicles in India, under the National
Electric Mobility Mission 2020 to encourage the progressive induction of
reliable, affordable and efficient electric and hybrid vehicles in the country.
The Automobile Mission Plan (AMP) for the period 20062016, designed by
the government is aimed at accelerating and sustaining growth in this sector.
Also, the well-established Regulatory Framework under the Ministry of
Shipping, Road Transport and Highways, plays a part in providing a boost to this
sector.
Road Ahead
India is probably the most competitive country in the world for the
automotive industry. It does not cover 100 per cent of technology or components
required to make a car but it is giving a good 97 per cent, highlighted Mr Vicent
Cobee, Corporate Vice-President, Nissan Motors Datsun.
The vision of AMP 2006-2016 sees India, to emerge as the destination
of choice in the world for design and manufacture of automobiles and auto
components with output reaching a level of US$ 145 billion; accounting for more
than 10 per cent of the GDP and providing additional employment to 25 million
people by 2016.
The Japanese auto maker Maruti Suzuki expects the Indian passenger car market
to reach four million units by 2020, up from 1.8 million units in 2013-14.
44
Exchange Rate Used: INR 1 = US$

0.0157 as on April 28, 2015
References: Media
Reports,
Press
Releases, Department of Industrial
Policy
and
Promotion
DIPP),
Automotive
Component
Manufacturers
Association of India (ACMA), Society of Indian (Automobile Manufacturers

(SIAM), Union Budget 2014-15
45
13. STOCK ANALYSIS

ABOUT
Eicher Motors Limited (EML) is the flagship company of the Eicher Group, which
was a catalyst in the green revolution in India with the production of Indias first
agricultural tractor in 1959. EML is now a leading player in the Indian automotive
space. It owns the iconic Royal Enfield motorcycle business, which leads the premium
motorcycle segment in India. The oldest motorcycle company in continuous
production world-wide, Royal Enfield has witnessed a huge surge in demand in the
recent past, and is charting its course to be the leading player in the mid-size
motorcycle segment globally. EMLs joint venture with the Volvo group, VE
Commercial Vehicles Limited, designs, manufactures and markets reliable, fuelefficient trucks and buses; and is leading the path in driving modernization in
commercial transportation in India and other developing markets. EMLs 50:50
strategic joint venture with US based Polaris Industries Inc., Eicher Polaris Private
Ltd. is in start-up phase, and is currently designing and developing, and will soon
manufacture and sell a full new range of personal vehicles. In 2014, Eicher Motors
recorded its highest ever total income of INR 8738 crores (USD 1.4 billion) and is
listed on the Bombay and National Stock Exchange
Milestones
A journey, spanning over five decades, Eicher has come a long way. These rewarding
times saw the company grow, diversify, acquire, amalgamate, consolidate and expand;
winning hearts and trust of clients, dealers/distributors and shareholders alike.
The path pursued has been illuminated with landmarks and milestones, which stand as
an edifice saluting our achievements. These milestones can be divided into 3 phases.
Initial Phase
1948
Goodearth Company set up to sell and service imported tractors
1952-57
Goodearth Company imported and sold about 1500 tractors in India
1958
Eicher Tractor Corporation of India Ltd. incorporated
1959
First indigenous Eicher tractor built
1959
Eicher came out with India's first indigenously built tractor from its Faridabad factory
1960
Eicher changed name from Eicher Tractor Corporation of India Pvt. Ltd. to Eicher
Tractors India Ltd.
1965-75
100% indigenization achieved in Eicher Tractors
46
Mid Journey
1980
Eicher Goodearth Ltd. name given to Eicher
1982
Collaboration agreement with Mitsubishi for the manufacture of Light Commercial
Vehicles signed in Tokyo
1982
Incorporation of Eicher Motors Ltd.
1985
Silver Jubilee Year for Eicher
1986
Eicher Motors Ltd. springs into operation
1987
Eicher Tractors went public
More Recent
1990
Eicher Goodearth buys 26% equity stake in Enfield India Ltd.
1991
ECS launched; Eicher takes over Ramon & Demm
1992
Eicher Tractors Ltd. selected as 'Company of the Year' for 1990-91 in the fourwheeler category comprising commercial vehicles, passenger cars, jeeps and tractors
1993
Eicher adopts new identifier
1993
Eicher acquires majority stake in Enfield India (60% equity shareholding)
1994
Eicher Motors Ltd. ends the technical assistance agreement with Mitsubishi after a
successful transfer of technology and achieving total indigenisation
1994
Enfield India Ltd. changed its name to Royal Enfield Motors Ltd.
1995
Eicher City Map - Delhi launched
1996
Eicher Tractors Ltd. amalgamated with Royal Enfield Motors to form Eicher Ltd.
2005
Eicher Motors Ltd. has disinvested the businesses of tractors and engines to TAFE
Motors & Tractors Ltd. (TMTL)
2008
Volvo Group and Eicher Motors Ltd. established VE Commercial Vehicles Limited
(VECV)
2010
The company launched the VE-series of Heavy Duty trucks
2012
Royal Enfield launches the Thunderbird 500 and 350 models.
2013
Royal Enfield opens second manufacturing facility in Oragadam, Tamil Nadu. In
September 2013, Royal Enfield globally launches the Continental GT 535cc caf racer
47
in London, UK.
2014
Royal Enfield opens its first concept store in Saket, New Delhi and launches its first
exclusive store in London, UK.
BUSINESS
Eicher Motors Limited (EML) is the flagship company of the Eicher Group,
which was a catalyst in the green revolution in India with the production of Indias
first agricultural tractor in 1959. EML is now a leading player in the Indian
automotive space. It owns the iconic Royal Enfield motorcycle business, which leads
the premium motorcycle segment in India. The oldest motorcycle company in
continuous production world-wide, Royal Enfield has witnessed a huge surge in
demand in the recent past, and is charting its course to be the leading player in the
mid-size motorcycle segment globally. EMLs joint venture with the Volvo group, VE
Commercial Vehicles Limited, designs, manufactures and markets reliable, fuelefficient trucks and buses; and is leading the path in driving modernization in
commercial transportation in India and other developing markets. EMLs 50:50
strategic joint venture with US based Polaris Industries Inc., Eicher Polaris Private
Ltd. is in start-up phase, and is currently designing and developing, and will soon
manufacture and sell a full new range of personal vehicles. In 2014, Eicher Motors
recorded its highest ever total income of INR 8738 crores (USD 1.4 billion) and is
listed on the Bombay and National Stock Exchanges.
ROYAL ENFIELD
The oldest motorcycle company in continuous production, Royal Enfield made its
first motorcycle in 1901. A division of Eicher Motors Limited, Royal Enfield has
created the mid-size motorcycle segment in India with its unique and distinctive
modern classic bikes. With its enhanced manufacturing base in Chennai, India, Royal
Enfield is able to grow its production rapidly against a surge in demand for its
motorcycles. With 50% growth every year for the last 3 years, Royal Enfield is fast
becoming a very important player in the global mid-size motorcycle market and is
working towards re-inventing this space with motorcycles that are evocative and
engaging and great fun to ride. Royal Enfields product lineup includes the Bullet,
Classic and Thunderbird models in both 350 and 500cc displacements; and the
recently introduced Continental GT 535cc caf racer. Royal Enfield operates through
12 company-operated stores and 380 dealers in all major cities and towns in India, and
exports to over 50 countries across the world including the USA, Japan, UK, several
European and Latin American countries, as well as the Middle East and South Asia.
48
Royal Enfield also organizes and supports many motorcycling events and rides , more
prominently the Rider Mania an annual gathering of Royal Enfield riders from all
over India to the lovely beaches of Goa, and the Himalayan Odyssey, the most
arduous motorcycle ride over some of the toughest roads and highest mountain passes
in the Himalayas. Royal Enfield also conducts the popular One Ride where people
around the world ride out on their motorcycles on the first Sunday of April.
VE COMMERCIAL VEHICLES LTD.
VE Commercial Vehicles Limited (VECV) is a joint venture between the Volvo

Group and Eicher Motors Limited. In operation since July 2008, the company includes
the complete range of Eicher branded trucks and buses, VE Powertrain, Eichers
components and engineering design services businesses, the sales and distribution
business of Volvo Trucks as well as aftermarket support to Volvo Buses in India.
VECVs vision is to be recognized as the industry leader driving modernization in
commercial transportation in India and the developing world.
EICHER POLARIS PVT LTD

In 2012, Eicher Motors Limited signed a strategic joint venture agreement with
US based Polaris Industries Inc., to design, develop, manufacture and sell a full new
range of personal vehicles suitable for India and other emerging markets. The JV will
allow Eicher Motors Ltd. to enter into a new vehicle segment. In 2013, the JV
company- Eicher Polaris Pvt. Ltd (EPPL) set up its manufacturing facility in Jaipur,
Rajasthan. The project is now in its advanced stages of development and production of
the four- wheeled personal vehicle is scheduled to begin in the second half of 2015.
49
14.DATA ANALYSIS
50
51
52
53
15.NEWS ABOUT EICHER MOTORS

January 3, 2015
Eicher Motors with Polaris Industries is building a small vehicle for farmers
MUMBAI: Eicher Motors is doing a Tata Motors to tap the bottom end of the
market.
But the maker of the iconic Royal Enfield Bullet motorcycle and large trucks is
doing it in a different way it is combining two ideas that its bigger rival has tried
with
contrasting
results.
Eicher, in partnership with Polaris Industries, the US maker of all-terrain vehicles, is
building a vehicle with a 600cc diesel engine, said people with knowledge of the
matter. It will be targeted at small traders and marginal farmers who can carry their
produce, as well as use it for travelling with the family. Commercial production is
expected
to
start
as
early
as
May.
The product is currently under homologation and is expected to come in two
versions a double-cabin micro pickup and a multi-purpose van.
Thanks to Polaris' expertise in making off-road vehicles, the automobile is capable
of
traversing
even
places
where
there
are
no
roads.
Tata Motors' attempt with the Nano with a 600cc petrol engine has so far not
yielded the expected result. But the Ace mini truck, made on the same platform before
the Nano was launched, has been one of the most successful products ever by India's
largest
maker
of
commercial
vehicles.
Unlike Tata Motors, which had placed a price ceiling of Rs 1 lakh on the Nano
while it was developing the minicar, Eicher-Polaris hasn't decided on the price yet.
But the plan is to make the vehicle affordable, the people said.The vehicle is built on a
tubular platform a common architecture that can easily be modified for making
multiple products and not the more common ladder-on-frame construction where
the body is welded on the chassis. The joint-venture partners have already committed
Rs 250 crore to the project. The vehicle is expected to use a lot of composite
materials as much as 20 kg of plastic is expected to go in.
The strategy is to make the vehicle extremely affordable both to purchase and
run. Higher amounts of composite materials will make it lighter and therefore more
fuel-efficient. The developers are expecting it to return 25 km to a litre.The JV will be
sourcing the 600cc engine from three-wheeler engine specialist Greaves Cotton. The
vehicle is expected to do the validation build next month, before actual production
begins at a new facility in Jaipur. For the first year, the plan is to make about 10,00012,000 units, which will be scaled up to 1,00,000. There is also a plan to export.
"The company plans to target individuals such as bakers or small distributors in
cities and small marginal farmers in the hinterlands, who during the day can use the
vehicle to ferry goods or produce and take the family out in the evenings or on
54
weekends," said one of the people in the know of the development. Without defining
what the vehicle is, an Eicher-Polaris spokesperson said: "We are working towards
creating a personal four-wheeler that will carve out a new category in the Indian
automobile industry. The project continues to meet strategic milestones and we are on
course for the launch in 2015."
It has started developing a distribution network. The JV has hired Radhesh Chandra
Verma, previously head of reseller and consumer operations at Metro Cash & Carry,
as chief executive. The JV's products will be positioned below the small commercial
vehicles that Eicher is developing through its JVs with Volvo, VE Commercial
Vehicle, from a facility in Bhopal. Eicher-Polaris' offering will be in the below-one
ton category. The Volvo JV intends to have products ranging from 1.2 tonnes to 49
tonnes. The launch of the 600cc vehicle will be directionally positive for Eicher as it
would be the company's first entry in the below 7.5-tonne segment, where volumes are
almost three times the truck segments in which the company is present
April 22, 2015
Volvo Eicher bets big on heavy duty truck market with new range
Firm launched the Eicher Pro 6000 series big trucks in Mumbai on Wednesday
Mumbai: VE Commercial Vehicles Ltd launched the Eicher Pro 6000 series big
trucks in Mumbai on Wednesday. The new range includes haulage and tipper trucks.
It marks the entry of Eicher brand into a new phase of growth and consolidation in the
heavy duty truck market, said A.K. Birla, executive vice-president, sales, marketing
and aftermarket.
Operational since July 2008, VE Commercial Vehicles is a joint venture between
the Volvo Group and Eicher Motors Ltd.
With the new range, Eicher is eyeing a bigger pie in the heavy truck market and
looking to increase its shares to 15% from the current 10%.
The segment has largely been the stronghold of Tata Motors Ltd and Ashok
Leyland Ltd. Sales of medium and heavy duty trucks rose 21% to 195,918 units in
2014-15, according to lobby group Society of Indian Automobile Manufacturers.
Eicher Motors' Q4 net jumps 38% to Rs. 216 cr
NEW DELHI, MAY 8:
Eicher Motors Ltd on Friday reported a consolidated net profit of 216 crore for
the first quarter ended March 31, 2015 up 38 per cent, compared with 156 crore in
the corresponding period last year.
Total income of the company rose 33 per cent to 2,568 crore during the period
from 1,924 crore during January-March 2014.
Eicher Motors has continued its strong run and reported its best-ever quarter results
registering 33.5 per cent growth and posting the highest-ever quarterly income from
operations at 2,568 crore for first quarter 2015, Siddhartha Lal, Managing Director
55
and Chief Executive Officer, Eicher Motors, said.

The first quarter has been the best-ever quarter at Royal Enfield, Eicher Motors
standalone business unit, with record sales of 92,845 units, a growth of 44.5 per cent
over the first quarter of 2014, he said.
Volume growth
Commenting on Royal Enfields performance, Lal said Royal Enfield has
maintained a very strong volume growth in the first quarter of 2015 and moves ahead
with a healthy order book.
Royal Enfield is working on new platforms and products that will fuel our growth
in the coming years. It is also expanding its footprint in India and in key markets
across the world, to build its presence globally, he said.
On Volvo Eicher Commercial Vehicles (VECV) performance, he said the
commercial vehicle industry has been on a recovery path in the first quarter of 2015
and VECV continues to do well and has ended the first quarter with sales of 11,020
units over 9,981 units in the first quarter of 2014.
Eicher Motors 50:50 joint venture with Polaris Industries continues as per plans,
meeting timelines and project milestones. The product will be launched in 2015, Lal
added.
Eicher Motors shares surged 6.26 per cent to Rs. 15,722.20 on the BSE.
May 10, 2015.

Eicher Motors firing all cylinders
Investors in Eicher Motors Ltd have had a cushy ride for a year. Its shares returned
143%, way beyond the 36% return by the benchmark BSE auto index and the far
lower 20% gain by the BSE Sensex in the past one year. Importantly, Eichers Marchquarter performance not only lived up to the Streets expectation, but there could also
be more steam still, given the growth prospects in its motorcycle division and
recovery in commercial vehicle sales.
For the quarter to March, Royal Enfield, its flagship motorcycle brand and cash
cow, clocked the best-ever quarterly sales43% higher than the year-ago period.
This, along with price hikes, translated into a 51% growth in net sales to Rs.961.2
crore. One can see the robust demand for this premium motorcycle in the four-to-fivemonths waiting period, at a time when the other motorcycle firms are struggling to
push sales with discounts.
According to Emkay Global Financial Services
Ltd, despite the sluggish economic environment, the company raised motorcycle
prices by 2%, in addition to the 4% excise duty hike. This has not dampened sales. It
may be over a year before the waiting periods reduce, says the report.
Meanwhile, the trucks, buses and engines entity, Volvo-Eicher Commercial Vehicles
56
Ltd (VECV), which was a drag on cash flows for several years, is now turning around
on the back of a cyclical recovery in commercial vehicles. Eichers 33.5% growth in
consolidated revenue implies a 26% increase in VECVs sales during the quarter.
Obviously, with strong sales momentum across segments, higher operating leverage
kicks in to improve profitability. Besides, raw material costs have been low for the last
three to four quarters. So, the March quarter consolidated operating margin at 14.3%
was 272 basis points (bps) higher than a year ago and about 100 bps higher than even
the December quarter. One basis point is one-hundredth of a percentage point.
That said, the Royal Enfield standalone entity accounted for most of the profitability,
with a higher-than-estimated operating margin of 26.1%. In fact, the 7% margin
clocked by VECV business was a tad lower than forecast. But, on the whole,
operating profit rose 65% to Rs.366 crore, in line with Bloombergs consensus
estimate of 17 analysts.
Eichers stock has been galloping because of sound growth prospects. Bloombergs
consensus points to an earnings growth rate of around 25-30% per annum for the next
couple of years. At Rs.15, 789 apiece, the shares trade at 20-times Bloombergs
consensus earnings estimate for fiscal 2017.
May 12, 2015.

Royal Enfield buys UK-based firm Harris Performance
Harris Performance designs and manufactures specialised high performance
motorcycle chassis and components
Royal Enfield has acquired UK-based Harris Performance Products for an undisclosed
amount. Under the terms of the deal, the Chennai-based company will acquire the
assets, employees, trade names, know-how, and intellectual property of Harris.
This
is
Royal
Enfields
first
acquisition.
Harris Performance was set up 40 years ago by brothers Steve and Lester Harris, and
third director Stephen Bay ford. The company is known for its design and
manufacturing of high-performance motorcycle chassis (base frame) and components.
Harris Performance has had a long-standing relationship with Royal Enfield. It has
developed the chassis of the iconic Royal Enfield Continental GT Cafe Racer.
Siddhartha Lal, chief executive, Royal Enfield, said the company was working on
new-generation products and platforms. Getting the Harris Performance team to work
with the company would boost Enfields engineering and product design, he added.
Their proven expertise, deep insight and understanding of motorcycling will be
invaluable for us in our journey towards achieving leadership in the global mid-sized
57
motorcycling
segment,
said
Lal.
Harris Performance has been the only manufacturer from the UK to have been
officially commissioned by Yamaha and Suzuki to design, develop and manufacture
race bikes for Grand Prix and World Superbike racing series.
According to Lal, the existing staff of Harris Performance will become Royal
Enfield employees. They (Harris Performance staff) would take the responsibility of
performance and development engineering for our new range of motorcycles; they
will be part of Royal Enfields upcoming UK Tech Centre, he said.
58
16.REPORT &FINDINGS
The key takeaway from Eichers CY14 annual report on Royal Enfield
business is the focus on export markets and the new product development.
Management has spelt out the vision for the next leg of growth by way of higher
R&D, launch of new products / platforms and improving visibility and presence
in export markets. This would happen in tandem with significant capacity
addition which was the focus in the last two years. We expect Royal Enfield
volume CAGR of ~45% from CY14-CY16 on the back of capacity addition and
continued domestic demand. Beyond CY16, we expect the third plant to start
operations and exports visibility to improve. For VECV, launch of the entire
range of pro-series is on the cards in CY15. We believe VECV could be a
formidable player in the HD segment post these new launches and the fleet
operator upgrading to better platforms.
New hires focusing on international markets: In CY14, the company has made
some key hires to strengthen its global expertise. The new hires include Mr. Rudratej
Rudy Singh, who was with Unilever and has marketing experience across emerging
markets. Others include, Mr. Rod Copes, who is an industry veteran, after leading
Harley Davidsons geographic expansion across emerging markets. He is expected to
drive Royal Enfields growth in North America. On the product development side,
they have hired Mr. Pierre Terblanche, who was Head of Design at Ducati and is
known to be one of the most prolific industrial designers of motorcycles. Looking at
the key markets, the plan is to improve visibility and presence in UK, US and Europe
as, despite being low volume markets, success in these geographies would go a long
way in proving product quality and acceptability. In terms of volume markets,
LATAM (specifically Columbia) and Asean countries are expected to be the key
Product development and capex: While the company has not detailed out the
break-up for the Rs. 5bn between capacity and product development, we believe that
CY15 would see a much higher expenditure on product development and R&D vs.
earlier years. The company is setting up technology centres in Chennai and UK, to
strengthen new product capabilities. R&D spend for Royal Enfield has been averaging
1.5-2% of sales, we expect the absolute spend to see a significant increase in CY15
and CY16. The company is well on course to have a manufacturing run-rate of 60,000
+ units a month by 2HCY16 as the phase-2 of Oragadam plant kicks in. Furthermore,
additional 50 acres have been acquired near Chennai, for the third manufacturing
facility
VECV: Current market share in the HD segment remains low at ~4%. The company
is betting big on 1) ramp up in availability pro-series across India 2) revival in the CV
industry 3) fleet operators upgrading to new-age trucks (pro-series) which would
typically be 7-10% more expensive, but would offer lower cost of ownership and new
safety/comfort features. Our channel checks suggests that even the new-platforms of
Tata Motors (Prima) and Ashok Leyland (Captain) havent seen traction as
replacement of existing fleet has not taken place. We believe it is only a matter of time
before the new-platforms pick-up significantly for the Industry as a whole. Having
59
said that, given weak footing in the HD segment, VECVs success in the segment
could be more back-ended
Royal Enfield
-up to 450,000 units in CY15 and ~650,000 units in CY16 by way
of phase-2 expansion at Oragadam facility
) for the third plant. We
expect construction activity to begin in CY15
acquired 4.5 acres of land and other a smaller satellite centre being set-up in UK
(to be operational by CY15 end)
all stores to match the concept stores opened in Delhi and London in CY14 VECV
geting to have the entire pro-series range to be available across dealerships by
the end of CY15
Export at Royal Enfield are currently weak as domestic demand far outstrips capacity
60
resulting in reduced focus in international markets. However, with plans of capacity

addition the company targets a larger exports pie in the long term recent key hires to
strengthen global expertise
Rudratej Rudy Singh: From Unilever, where he was Vice President and on its
South Asia Board running the marketing operations for the entire cluster of Unilever
markets. 18 years experience across emerging as well as developed markets
Rod Copes: Industry veteran, after leading Harley Davidsons geographic
expansion across emerging markets. He will drive Royal Enfields growth in North
America
Pierre Terblanche: Was Head of Design at Ducati for over a decade. Known to be
one of the most prolific industrial designers of motorcycles. Management is targeting
USA, UK and Europe as they believe these markets are highly influential, and success
in these markets is crucial to succeed as a global leader in mid-sized motorcycles
Management believes that the potential in LATAM (Columbia) and ASEAN is much
larger than developed markets as, like India, there is huge scope for upgrades
Pro Series
Model
GVW
Chassi
s
Max.
Outpu
t
Pro
1059
XP
7.2
4x2
94
Pro
1110
XP
13
4x2
114
Pro
3008
XP
8.2
4x2
147
Pro
3013
13
4x2
121
Pro
3014
14.5
4x2
147
Pro
6031
31
8x2
210
Pro
6025
25
6x4
280
Pro
8049
49
6x4
280
Launc
h
timelin
e
Launch
ed in
July14
Launch
ed in
July14
Launch
ed in
July14
Launch
ed in
July14
Launch
ed in
July14
Launch
ed in
Mar
15
Launch
ed in
Mar
15
Yet to
be
61
Pro
8031
31
6x4
280
launch
ed
Yet to
be
launch
ed
Royal Enfield upcoming launches

(media reports)
Royal Enfield is expected to be working on two new models/platforms

would generate 60Nm (Current 500cc has a torque of 41Nm)
working on a possible parallel twin engine 750cc model to be released next year
export market as well
62
Eicher Motors
Financial Summary
63
17.Conclusion
Fundamental analysis helps you determine if a company is a good or poor investment

Choice. Imagine youre a venture capitalist or a bank, who must decide if that
company is
worthy of a loan or equity investment. How can you evaluate whether this particular
Company deserves your investable capital?
Fundamental analysts consider the following in making their decision to invest (or
not):
Is the company making a profit consistently? (While this is naturally the most
important
question for investors, its important to consider the answer in a bigger context. A
single
profitable quarter for a new company might be a fluke. In the same regard, a drop in
profitability for an established blue-chip company might just be a temporary setback.)
Is that profit growing or declining over time?
Is the company holding its own relative to the competition? Is it a leader in its sector?
Is that sector growing or declining in importance to the overall economy?
Can the company pay its bills adequately? If you were to dismantle the companys
operations today, what would be the intrinsic value of its assets versus the value of its
debts?
The same indicators are used to analyze very different markets: for instance, stock
market
and bond market, Forex and commodity market. In some cases, this approach is
authorized
by the situation: A "false bottom" is a "false bottom" everywhere. However, it is
frequently
not the case. This results in errors.
Researchers cannot understand the nature of the market. Some of them consider this to
be a natural, not an artificially created object. This complex of difficulties and errors
caused a huge amount of incorrect prediction technique
64
18.Bibliography
www.inventuregrowth.com
www.moneycontrol.com
www.equimaster.com
www.ibef.org
www.indiainfoline.com
www.moneyworks4me.com
www.info.shine.com
www.eichermotors.in
www.nseindia.com
www.bseindia.com
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Report On Eicher

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What is equity research and why is it important?

What is equity research and why is it important?

What are the objectives of the project?

What are the objectives of the project?

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

What is Equity Research?

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

2. OBJECTIVE OF THE PROJECT

Methodology of the Project

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Inventure Growth & Securities Ltd

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Future and Option Segment.

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Strengths of Fundamental Analysis

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Knowing Who's Who

Weaknesses of Fundamental Analysis

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Fundamental analysis may offer excellent insights, but it can be extraordinarily

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Price Discounts Everything\

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

credentials. Technical analysis utilizes the information captured by the price to

Prices Movements are not Totally Random

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Primary Bull Market - Stage 2 - Big Move

Primary Bull Market - Stage 3 - Excess

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Primary Bear Market - Stage 2 - Big Move

Primary Bear Market - Stage 3 - Despair

Criticisms of Dow Theory

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Strength of Technical Analysis

Supply, Demand, and Price Action

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Pictorial Price History

Assist with Entry Point

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Weaknesses of Technical Analysis

Always another Level

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

Classification based on Business Cycles

pharmaceuticals, and office equipments were growth industries. Communication

management are the recent growth industries.

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

FUNDAMENTAL ANALYSIS OF EICHER MOTORS

THE ECONOMIC CYCLE:

It affects investment decisions, employment, demand and the

FUNDAMENTAL ANALYSIS OF EICHER MOTORS