Dr A.P.J.

ABDUL KALAM TECHNICAL

UNIVERSITY LUCKNOW

A
Project
Report On
Innovation Idea for Product & Services
TOPIC:- STOCK MARKET

UTTAM GROUP OF INSTITUTIONS

Submitted By:- SUMIT KUMAR

MBA 1st Sem.

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 INDEX

CHAPTER NO. TOPIC PAGE NO.

EXECUTIVE SUMMARY 6

INTRODUCTION OF THE STUDY 7-8

1. Introduction

2. Importance & scope of study

CHAPTER NO. I COMPANY PROFILE 10-18

1. Introduction the company

2. Vision of company
3. Management of the company
4. Products and Services of company
5. Geographical presence
6. Investment Highlights
7. Investment Concern
8. ON-JOB-TRAINING

CHAPTER NO. II FINANCIAL SYSTEM OVERVIEW 19-26

1. Capital Formations and Economic Development

2. Indian Financial System
3. Stock market
4. Trading in India

CHAPTER NO. III RESEARCH METHODOLOGY 27-28

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 Acknowledgement

I am using this opportunity to express my gratitude to everyone who supported me

throughout the course of this MBA project. I am thankful for their aspiring
guidance, invaluably constructive criticism and friendy advice during the project
work. I am sincerely grateful to them for sharing their truthful and illuminating
views on a number of issues related to the project.

I express my warm thanks to for their support and guidance.

I would also like to thank my project external guide and all the people who
provided me with the facilities being required and conductive conditions for my
MBA project.

Thank you,

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 Executive Summary

This project is an attempt to understand the basics of stock market. A project, which will
make me well, versed with the market happenings ups & downs in the stock market.
The first chapter gives a brief description about the company where I did my internship from,
which is 5paisa.com, which is a trading arm of Indiainfoline Securities Pvt Ltd. The following
chapter explains about the formation & company composition of Indiainfoline Securities Pvt Ltd.
The chapter also gives a detailed report of my summer internship done at the company. It gives
the jobs assigned to me at work, followed by the methods, which I undertook in going about my
internship.
The following chapter two will give the details & explain in brief the basics of capital
market. It will show in details the way stocks are traded, cleared & settled in the market using
different techniques. Further the chapter covers the trading in India the importance of stock
market to the economy.
The next chapter gives the detail as to how I went about completing my project. The steps
taken to understand my topic & researching the oil sector companies have been given in the
chapter Body Methodology.
The chapter four is data presentation, analysis & interpretation on Fundamental Analysis
helps us to understand the importance of the analysis. It shows us the steps taken to complete the
analysis & the findings to be analyzed in the analysis.
The chapter summarizes the reason why I have selected the oil sector for analysis. The huge
investments & growth opportunities in the oil sector makes it an important sector & all the
more reason why we should keep an eye on the progress of it.
The sub chapter on Economy of the Country helps us to know the current scenario of
our country in terms of economy which taken into a/c GDP levels along with future predictions,
current inflation rate, Currency of the country, service industry of the India & FDIs in India.
The next sub chapter explains the oil industry as a whole. From the huge oil market in gulf,
to the current scenario of oil sector in India, the chapter will give a details insight into the ever in
demand sector. The industry is further analyzed by porter’s five-force
.

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INTRODUCTION OF THE STUDY

The following project is a study of the Indian Stock Market & an investment opportunity in
the oil sector in India.
The capital market (securities markets) is the market for securities, where companies and
the government can raise long-term funds. The capital market includes the stock market and the
bond market. A stock market is a market for the trading of company stock and derivatives.

The objectives of my internship are as follows:

 Understanding the various activities in an E- Broking firm.

 To get acquainted with all the workings of online trading.

 To gain practical knowledge in share trading

 To analyze the financial market & the share movements in order to study the prospects of
investing in a particular stock or sector.

The aim of the project is to understand the overall equity market, to get to know the
trading, clearing & settlement aspect of the equity market. As far as this project is concerned, it
will help me to understand the overall working of the equity market & its importance to the
economy of the India. A huge amount of money flows & millions of shares exchange hands in a
single market day. This exchange of shares enables the flow of money in & out of a firm. The
company whose shares are listed & the government who plays a pivotal role through the policies
formed in the market, helps them to raise long term funds which can be used for the benefit &
the growth of the companies & also give back some part of their profit to the investor in the
form of dividends.
Also through this project what I am trying to derive is the analysis of oil sector concluding with
the opportunities of investing in the sector. The reason why I have selected oil sector is
because of the Oil sector is the base for the growth of other sectors and with that the growth
of the economy in general and also there is huge investment opportunities in the sector & also
to understand this sector for my future growth as a equity advisor for the secto

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 INTRODUCTIONS

India Infoline Securities Pvt Ltd is a 100% subsidiary of India Infoline Ltd, which is
engaged in the businesses of equities broking and portfolio management services. It holds
memberships of both the leading stock exchanges of India viz. the stock exchange, Mumbai (BSE)
and the national stock exchange (NSE).
India Info line Ltd is listed on both the leading stock exchanges in India, viz. the Stock
Exchange, Mumbai (BSE) and the National Stock Exchange (NSE). The India Infoline group,
comprising the holding company, India Info line Ltd and its subsidiaries, straddles the entire
financial services space with offerings ranging from Equity research, Equities and derivatives
trading, Commodities trading, Portfolio Management Services, Mutual Funds, Life Insurance, Fixed
deposits, GoI bonds and other small savings instruments to loan products and Investment banking.
India Infoline also owns and manages the websites, www.indiainfoline.com and www.5paisa.com .
India Infoline Ltd, being a listed entity, is regulated by SEBI (Securities and Exchange Board
of India). It undertakes equities research which is acknowledged by none other than Forbes as
'Best of the Web' and '…a must read for investors in Asia'.
It also undertakes research, customized and off-the-shelf. Launched on 11 May 1999,
www.indiainfoline.com is India’s leading and most comprehensive business and financial
information website. The site provides quality information and analysis - earlier restricted to a few
people - to the common man, absolutely free! The site has met with an overwhelming response
and has been reviewed as the most comprehensive financial content website in India by BBC
World. The company also won the Golden Mouse Award in India Internet World 2000 for the
"Best Finance" site. In May 2001, the website was included in the Top 200 Best of the Web list by
Forbes Global under the Asia Investing category. This is the only website from India to be
featured in this category. Since then it has been nominated twice to this list. In its last review,
Forbes editors have said, "www.indiainfoline.com is a must read for the investors in South Asia..."
India Infoline is a growing organization, which is an ideal place for individuals with high
ambitions. The working atmosphere is highly charged with a young and energetic

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 MANAGEMENT

Mr. Nirmal Jain

Nirmal Jain is the founder and Chairman of India Infoline Ltd. He holds an MBA degree from
IIM Ahemdabad, and is a Chartered Accountant (All India Rank 2) and a Cost Accountant. In
1995, he founded his own independent financial research company, known as India Infoline Ltd.

Mr. R Venkataram
R Venkataram is the co-promoter and Executive Director of India Infoline Ltd. He holds a B.
Tech degree in Electronics and Electrical Communications Engineering from IIT Kharagpur and an
MBA degree from IIM Bangalore. He has varied experience of more than 14 years in the
financial services sector.

The Board of Directors

Apart from Nirmal Jain and R Venkataram, the Board of Directors of India Infoline
comprises:
 Mr. Sat Pal Khattar
 Mr. Sanjiv Ahuja
 Mr. Nilesh Vikamsey
 Mr. Kranti Sinha

India Info line Ltd (IIL) started in 1995 with providing Online Media and Content services.
Mr. Nirmal Jain and Mr. Venkataram, the founder members of the company sensed the growing
opportunities in the market and increased the horizon for IIL from time to time. IIL with an aim
to become 'One stop for all financial needs' started with equity and commodity broking,
distribution of financial products and now with investment banking. IIL has a huge branch network
across 95 cities, which it leverages for customer acquisitions, relationship building, retail advisory
and distribution services.

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 IIL is in the expansion mode and plans to set up 350 branches by FY07E.It also plans to set
up branches in cities like Dubai, Singapore and London to serve the NRI's for PMS service. It has
recently opened up a branch in Kuwait and expects this branch to contribute to the equity
broking business.

PRODUCTS AND SERVICES

IIL a one-stop financial services shop, most respected for quality of its advice, personalized
service and cutting-edge technology

Equities

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 Indiainfoline provided the prospect of researched investing to its clients, which was

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 preference (residence or office) through computerized access. Indiainfoline made it possible for
clients to view transaction costs and ledger updates in real time.

PMS
Portfolio Management Service is a product wherein an equity investment portfolio is
created to
suit the investment objectives of a client. Indiainfoline invest the resources of the investors into
stocks from different sectors, depending on one’s risk-return profile. This service is particularly
advisable for investors who cannot afford to give time or don't have that expertise for day-to-day
management of their equity portfolio.

Research
Sound investment decisions depend upon reliable fundamental data and stock selection
techniques. Indiainfoline Equity Research is proud of its reputation for, and wants to find the facts
that the investors need. Equity investment professionals routinely use the research and models as
integral tools in their investments strategy.

Commodities
Indiainfoline extension into commodities trading reconciles its strategic intent to emerge as
a one- stop solutions financial intermediary. Its experience in securities broking has empowered it
with requisite skills and technologies. The Company was among the first to offer the facility of
commodities trading in India’s young commodities market.

Mortgages
Indiainfoline acquired a 75% stake in Money tree Consultancy Services to mark its foray into
the business of mortgages and other loan products distribution. The business is still in the
investing phase and at the time of the acquisition was present only in the cities of Mumbai and
Pune. Indiainfoline now has plans to roll the business out across its pan-Indian network to provide
it with a truly national scale in operations.

Insurance
An entry into this segment helped complete the client’s product basket; concurrently, it

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 graduated the Company into a one-stop retail financial solutions provider. To ensure maximum
reach to customers across India, IIL have employed a

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 Wealth Management Service
IIL is leading wealth Management Company that sits down to understand the needs and
goals. IIL offers a dedicated group for giving the most personal attention at every level.

Newsletters
The Daily Market Strategy is a morning dose on the health of the markets. Five intra-day
ideas, unless the markets are really choppy coupled with a brief on the global markets and any
other cues, which could impact the market. Occasionally an investment idea from the research
team and a crisp round up of the previous day's top stories.
The Indiainfoline Weekly Newsletter is a flashback for the week gone by. A weekly outlook
coupled with the best of the web stories from Indiainfoline and links to important investment
ideas, Leader Speak and features is delivered in investor’s inbox every Friday evening.

GEOGRAPHICAL PRESENCE

IIL has pan-India presence across 94 cities. It started off with major branches in metros
and now it is focusing on Tier II and III cities. In Q1-FY07 the company opened 56 branches,
taking the total number of branches to 233 branches. Almost 50%of the revenue comes from
centers in Maharashtra and Delhi.
Followed by other regions.

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 aggressively increasing its presence by opening branches in different cities. In FY QI-07, they roll
out 56 new branches and acquired 25000 new customers. And it expects them to have 350 and
430 branches by FY 08 respectively.

INVESTMENT CONCERN High

reliance on equity segment
In FY06, 67%of IILs earnings are derived from the equity broking business. Any volatility in
the market has direct impact on the earnings of the company. Sensing this possibility IIL's
diversified into other business segments like distribution of financial products, commodity broking
and recent entry into investment banking. These segments will take time to drive the earnings of
the company. There is an expectation that earnings from equity broking to be 62%and 54%of the
earnings by FY07E and FY08E respectively.

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 ON-JOB-TRAINING
Title – Working In Depository Participant

 Introduction
 Objective
 Task Assigned
 Achievements
 Limitations
 Conclusion

INTRODUCTION

I have been done my summer internship in India Infoline Securities Private Limited to
perform various activities undertaken by an E broking firm (Depository Participant).

OBJECTIVE

India Infoline Securities Pvt. Ltd. (5paisa.com) performs as intermediary between stock
exchange and clients. Various task related to e broking has been assigned to me.

The main objectives are as follows:

 To understand various activities in E-Broking firm. (D P).
 To get familiar with the working of online trading.
 To gain practical knowledge in share trading.
 To get an exposure
TASK ASSIGNED
 Market observation
 Customer acquisition.
 Technical Issues
 Administrative tasks
 Customer follow-up

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Customer acquisition:

To acquire new customers for the company it was the task given to me. 8 new Demat
accounts have been opened in this duration.

Strategy in acquiring new customers

 Reference by existing customers.
 Lead by company guide
 Tele calling (by lead data)
 Cold callings

Technical tasks:

Various technical tasks has been performed like, software down loading, to give software
demonstration to the clients, solving various problems of the clients regarding software handling
etc.

Administrative task:
These were the secondary task given bellow, which has been performed during the training
period.
 Completion of account opening form
 Collection of requires documents form existing clients
 Margin funding form
 To transfer shares

Customer follow-up:
Follow-up has been given to newly acquire as well as existing clients for various issues.
 Trading for offline clients under the relationship manager’s guidance.
 To give markets updates to newly acquire as well as existing clients in market duration, etc.

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  Company generated brokerage from the newly acquired customer by me during the
internship period.
 Offline customer’s orders have been taken in regular market schedule.

LIMITATIONS
 It was hard to acquire knowledge about this field in such short span of time
 Share market is very vast & fast sector, it was very difficult to cope-up with the environment
in such short span of time.
 This field is requiring with very deep fundamental & technical knowledge.
 Acquiring new clients it was the tough task to perform
 High risk involve while trading on behalf of the clients under the guidance of RM.

CONCLUSION
Learning Experience:

In my summer training, I knew about the stock market and its nitty-gritty. And now I am
confident about equity knowledge. Although nobody can claim complete expertise but there is a
sea change at least from our point of view. I have learnt what are the various indices and their
significance in market. I have learnt about various fundamentals and technical aspects, which
affect the stock prices in short run and long run.

Selling Experience:
Apart from this my specific task is to sell the Demat accounts. During this period across
many people who came from different walks of life. I learnt how to deal with them, how to
persuade them and guide them in trading.
Selling an online trading account requires special focus on targeting the customers. Each
and every person does not trade / invest in the stock market. Actually what I had to do was to
identify the prospect and then convince them.
As I met more and more people, I came to know more about how to talk to them, how
much time be given to each person met. Even, by solving the customer queries, my own
understanding was enhanced.
While selling our product in the market, I also came to know more about the competitor’s
product like, icicidirect.com, India bulls and their strategy of marketing and the consumer’s
preference towards the competitor’s product.

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 After forms were filled clients after the procedures were given client Id. After that, I was
required to show the customer how to make a transaction and how to get access to

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INTRODUCTION
In world of commerce, apart from money equally revolutionary concept was the concept of
limited liability. Before the industrial revolution economy was self-sufficient village economy. The
artisans produced goods and services on demand. It was industrial revolution, which paved the
way for production in anticipation of demand, and along with it came the economies of large-
scale production and to support this was needed huge finance. Innovative forms of business
establishment, incorporating the principle of Limited liability emerged. Form the highly
imaginative world of business, a novel form of business organization viz. Joint Stock Companies,
with the features like limited liability and the separation of ownership and management was
born. Risk is an important and inherent part of any business. Risk cannot be avoided. You can
only try to manage it. This was the best example of risk management by spreading it in small
proportions amongst large number of shareholders. This was achieved by a concept called
shares or stock and the need for trading in these stocks was felt.

CAPITAL FORMATIONS AND ECONOMIC DEVELOPMENT

Multiplicity of wants and scarcity of means to satisfy these unlimited wants has continued
to be the fundamental of economic problem. Money resources are required to move physical
resources. Mobilization of resources for economic development was and continues to be the
major problem with all developing and developed nations. The capital might be from within the
country or outside the country. But one of the greatest challenges of nations today is creating
conditions conducive for capital formation as also for attracting capital from various countries. A
growing economy with vibrant capital and money market with rules and regulations in place is a
of capital formation Prerequisite for attracting capital. Stock market plays a key role in the entire
gamut of financial system.
Having broadly discussed the developments and the basic issues involved, we will now try
to review the Indian Financial System. India has come a long way during the last decade of the
20th Century. With the path-breaking budget of 91-92 presented by Dr. Man Mohan Sign an era of
globalization, liberalization, decontrol and de-regulation was adhered in. Since then a lot of water
has flown from under the bridge and lot of Development has taken place. The focus all along has
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 been to faster economic

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 INDIAN FINANCIAL SYSTEM

The financial system comprises a variety of intermediaries, markets, and instruments. It

provides the principal means by which savings are transformed into investments. Given its role in
the allocation of resources, the efficient functioning of the financial system is critical to a modern
economy.

A conceptual Framework of how the financial system works: - The

Financial System

A financial system is a set of institutional arrangements, through which financial

surpluses are
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 mobilized from the units generating surplus income to others in need of them. Financial

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 viz. money market and capital market. Money market refers to the market where borrowers and
lenders exchange short-term funds, to solve their liquidity needs. Money market instruments have
low default risk, maturities under one year and high marketability (liquidity). Low default risk
implies that generally the risk of non-payment of money is low. Maturities under one year imply
that all contracts are of maximum one year. Capital market comprises of institutions and
mechanisms through which medium to long term funds are pooled and made available to
business, government and individuals. It facilitates investment in fixed assets. Capital market
consists of securities or stock market. Securities market consists of primary market and secondary
market.
Primary market consists of channel for sale of new securities, while secondary market deals in
the securities already issued. Primary markets involve the following methods of issue.

 IPO
 Further issue of capital
 Rights issue
 Offers to public
 Bonus issue
Secondary market enables those who already hold securities to adjust their investment
in response to change in their assessment of risk and return, the statement implies that those who
already holds the securities may want to sell them in case if those securities are not paying off, or
if he needs to adjust his liquidity or for any other reason. Secondary market refers to the stock
exchanges, a stock exchange provides mechanism to buy and sell the securities already issues
in primary market. There are at present 23 stock exchanges in India.

STOCK MARKET

The term ‘the stock market’ is a concept for the mechanism that enables the trading of
company stocks (collective shares) and other securities. The size of the 'stock market' is
estimated at about $51 trillion. The stocks are listed and traded on stock exchanges which are
entities specialized in the business of bringing buyers and sellers of stocks and securities together.
Participants in the stock market range from small individual stock investors to large

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 Actual trades are based on an auction market paradigm where a potential buyer bids a
specific price for a stock and a potential seller asks a specific price for the stock. (Buying or
selling at market means you will accept any bid price or ask price for the stock.) When the bid and
ask prices match, a sale takes place on a first come first served basis if there are multiple bidders
or askers at a given price.
The purpose of a stock exchange is to facilitate the exchange of securities between buyers
and sellers, thus providing a market place (virtual or real). The exchanges provide real-time
trading information on the listed securities, facilitating price discovery.

Market participants

Many years ago, worldwide, buyers and sellers were individual investors, such as wealthy
businessmen, with long family histories (and emotional ties) to particular corporations. Over time,
markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g.,
pension funds, insurance companies, mutual funds, hedge funds, investor groups, and banks). The
rise of the institutional investor has brought with it some improvements in market operations.

The First Stock Market

The Dutch started joint stock companies, which let shareholders invest in business
ventures and get a share of their profits - or losses. In 1602,The Dutch East India Company issued
the first shares on the Amsterdam Stock Exchange It was the first company to issue stocks and
bonds. Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock
exchange to introduce continuous trade. The Dutch "pioneered short selling, option trading, debt-
equity, merchant banking, unit trusts and other speculative instruments ". There are now stock
markets in virtually every developed and most developing economies, with the world's biggest
markets being in the United States, Canada, China, India, UK, Germany, France and Japan

Importance of stock market

 Function and purpose
The stock market is one of the most important sources for companies to raise money. This
allows businesses to go public, or raise additional capital for expansion. The liquidity

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 and behavior of the stock market and, in general, on the smooth operation of financial system
functions. Financial stability is the important outlook of central banks.
Exchanges also act as the clearinghouse for each transaction, meaning that they collect
and deliver the shares, and guarantee payment to the seller of a security. The smooth functioning
of all these activities facilitates economic growth in that lower cost and enterprise risks promote
the production of goods and services as well as employment. In this way the financial system
contributes to increased prosperity.

 Relation of the stock market to the modern financial system

The financial system in most western countries has undergone a remarkable transformation.
One feature of this development is disintermediation. A portion of the funds involved in saving and
financing flows directly to the financial markets instead of being routed via banks' traditional
lending and deposit operations. The general public's heightened interest in investing in the stock
market, either directly or through mutual funds, has been an important component of this
process. Statistics show that in recent decades shares have made up an increasingly large
proportion of households' financial assets in many countries. The major part of this adjustment in
financial portfolios has gone directly to shares.

IMPACT OF STOCK EXCHANGES IN INDIA:

Following are the changes due to the existence of Stock Exchange:

1. Mobilization of savings
The savings of the individuals are easily mobilized in various types of industries.
Therefore the amount of investments in the stock exchange increases.
2. Increase in rate of return on investment
The investors get more rate of return i.e. the market rate and not the normal bank rate,
which is much lower.
3. Availability of funds for growth of industries.
The amount of funds required for the growth of the industries is easily available whereas
there was always shortage of capital.
4. Diversification of industries
Due to the availability of funds the industry becomes financially strong and have scope
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 or diversification due to which they can become more strongly in the market.

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 5. Increase in GDP
Increase in business in overall all industries has automatically leaded to the rise in GDP of
the country and thus its prosperity.
6. Decrease in Trade Deficit.
Due to growth in industries the country is becoming self-sufficient leading to decrease in
trade
deficit.

TRADING IN INDIA: -

The trading on stock exchange in India used to take place through open outcry without use
of information technology for immediate matching or recording of trades. This was time
consuming and inefficient. This imposed limits on trading volumes and efficiency. In order to
provide efficiency, liquidity and transparency, NSE introduced a nationwide online fully automated
screen based trading system (SBTS) where a member can punch into the computer quantities of
securities and the prices at which he likes to transact and the transaction is executed as soon as
it finds matching sale or buy order from a counter party. SBTS electronically matches order on
strict time/price priority and hence cuts down on time, cost and risk of error, as well as on fraud
resulting in improved operational efficiency. It allows faster incorporation of price sensitive
information into prevailing prices, thus increasing the information efficiency of markets. It enables
market participants, irrespective of their geographical locations, to trade with one another
simultaneously, improving the depth of liquidity market. It also provides a perfect audit trail, which
helps to resolve disputes by logging in the trade execution process in entirety. Today India can
boast that almost 100% trading take place through electronic order matching. Technology was
used to carry the trading platform from the trading hall of stock exchanges to the premises of
brokers. NSE carried the further platform further the PCs at the residence of Clients through the
Internet for Users in geographically vast country like India.

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 Conceptual framework

Trading Network

The trading network is depicted in the above figure shows NSE has main computer, which is
connected through very small Aperture Terminal installed at the office. The main computer runs
on falls tolerant STRATUS mainframe computer at the exchange. Brokers have terminals installed
at their premises, which are connected through VASTs/ leased lines/ modems. Investors inform
broker to place an order on behalf of them. The broker enters the order through his PC, which
runs under Windows NT and sends signal to the satellite via VAST/ leased line/ modem. The
signal directed to mainframe computer at NSE
The system also provides complete market information online. The market screens at any
point of time provide information on total order depth in a security, the five best buys and sells
available in the market, the quantity traded in the day security, the high and the low, the last
traded price, etc. investors can also know the fate of the orders almost as soon as they placed
with the trading members. The trading system is normally made available for trading on all days
except Saturdays, Sundays and other holidays.

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 Research Methodology

My first task before starting the process was to understand what fundamental
analysis is all about & what the steps to achieve it are. For this my first step
was going through various Internet sites & reading about the methods of
fundamental analysis & the usefulness of the whole process. After reading through
the whole data I then went about understanding fundamental analysis with the help
of my coordinator, Mr. Pradeep Rampal & my manager Mr. Nitin Shrivastava.

Once I got to know about the basics about the fundamental analysis, my task
was to select one company in the oil sector, one major company on which I can
conduct the analysis. After doing a thorough research on the oil sector in India, the
company that I short-listed was Oil & Natural Gas Corporation (ONGC), the big
guns of oil sector.

The next step lead me to knowing the history about the companies along with
the growth prospects that the possess for the future. Internet research & one on
one interview with the branch manager helped me in this task.

Once this was done I went ahead & started my analysis on the companies &
concluded the project with my say on the future investment prospects in the
following company.

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 FUNDAMENTAL ANALYSIS ON OIL SECTOR

Objective: -
 To study the oil industry and find out the growth opportunities.
 To carry out the company analysis of the selected company and to suggest whether it is a
viable investment option.

INTRODUCTION

Fundamental analysis is the examination of the underlying forces that affect the well being
of the economy, industry groups, and companies. As with most analysis, the goal is to derive a
forecast profit from future price movements. 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 investment
opportunity. Fundamental analysis is a method used to determine the value of a stock by
analyzing the financial data that is 'fundamental' to the company. Fundamental analysis does
not look at the overall state of the market nor does it include behavioral variables in its
methodology. It focuses exclusively on the company's business in order to determine whether or
not the stock should be bought or sold. To buy a share of stock a investor is buying a proportional
share in a business. As a consequence, to figure out how much the stock is worth, one should
determine how much the business is worth. Investors generally need to assess the company's
financials in terms of per-share values in order to calculate how much the proportional share of
the business is worth. Some knows this as “fundamental” analysis, and most who use it view it as
the only kind of rational stock analysis.

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 Strengths of Fundamental Analysis

Long-term Trends
Fundamental analysis is good for long-term investments based on long-term trends. The
ability to identify and predict long-term economic, demographic, technological or consumer
trends can benefit patient investors who pick the right company in the right industry groups.

Value Spotting

Sound fundamental analysis will help identify companies that represent a good value.
Some of the most renowned investors think long-term and value. Graham and Dodd, Warren
Buffet 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.

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. 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. Its industry group heavily influences a stock’s price. 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), non-cyclical (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
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 change rapidly and with it the revenue mix of a company. Knowing a

CONCULSIONS AND SUGGESTIONS

A stock exchange functions as a 'continuous auction' market where transactions are

conducted between the buyers and sellers. A stock exchange plays an important role in the
economy. It helps to raise capital for business, mobilize savings for investment, facilitates the
growth of companies, and enables profit sharing.

A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks, which
represent ownership claims on businesses; these may include securities listed on a public stock

The concept behind how the stock market works is pretty simple. ... Companies list shares
of their stock on an exchange through a process called an initial public offering, or IPO.
Investors purchase those shares, which allows the company to raise money to grow its
business.

 After looking at the above analysis ONGC stands strong Net Profit for last FY & the market

capitalization. The financial performance of ONGC for the 3 years reflected a good growth in
sales and though all the market segments sustained or bettered their performance over the
previous years. Cost overrun in a few long-term projects impacted the profitability. However,
the company’s track record has always been oriented towards profitable growth and with the
strong fundamentals; the company is well placed to grow continuously on major fronts. The
financial performance of the company for the 3 years reflected a good growth in sales and
though all the market segments sustained or bettered their performance over the previous
years.

 EPS measures per share profit available for distribution for equity shareholders. The ratio

indicates the earning of the shareholder on their investment .The EPS of ONGC has increased in
2006 due to increased in PAT, which shows that ONGC is maximizing the wealth of the
shareholders. And further ONGC’s has issued bonus share in the ratio 1:2.

 The overall performance of the company is good and there is a continuous flow of project

business. The company is continuing its drive for volume with continued focus on But
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 investors need to be cautious on the following risk factors

Quantitative and Qualitative Market Risk Factors for Investors

Commodity Price Risk

The prices of oil, in particular, crude oil and value-added products are linked to the
international prices of such products. Thus the revenues are exposed to the risk of fluctuation
in prices in the international markets.
Operating Risk
The company is exposed to operating risks, including reservoir risk, risk of loss of oil and gas and
natural calamities risk in respect of all the installations and facilities. But however the company
has insured the installations and facilities, which means that most replacement costs will be
borne by the insurance company. However, the company is not covered for lost profits.
Exchange Rate Risk
ONGC has substantial purchases of services and equipment in foreign currencies and the
prices of crude oil and value-added products are linked to the international prices of crude oil
and value-added products, which are traditionally denominated in U.S. Dollars. Thus the
company is exposed to risks relating to exchange rate fluctuations. There is no hedging or
derivative program to cover these risks. However, the risk involved in the required payments
in foreign currencies is offset to some degree by the revenues from sales of crude oil and value-
added products, which are linked to the U.S. Dollar currency exchange rates and increase if
the U.S. Dollar strengthens against the Indian Rupee.
Interest Rate Risk
The interest rate risk results from changes in interest rates on foreign currency loans, which
may affect the financial expenses. Thus ONGC is exposed to interest rate risk on its
earnings. As ONGC makes short- term investments with banks and other financial institutions
and a decrease in the interest rates in the domestic market will result in lower interest earnings
on short-term deposits.

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