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 theWeb' 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
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 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.
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 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
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 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

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 better position themselves to categorize stocks within their relevant industry group.
Business can 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

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 But 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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