You are on page 1of 47

BHARATI VIDYAPEETHS

INSTITUTE OF MANAGEMENT STUDIES & RESEARCH


A
PROJECT REPORT ON

EQUITY RESEARCH ON PAINT AND FMCG SECTOR


SUMMER INTERNSHIP REPORT SUBMITTED TO THE
UNIVERSITY OF MUMBAI
IN
PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF
MASTER OF MANAGEMENT STUDIES
BY
NEHA RAJENDRA GADGE
ROLL NO. 08
BATCH 2013-2015

FOR THE SUMMER INTERNSHIP AT

BIRLA SUN LIFE WEALTH MANAGEMENT

MMS - Finance

Page 1

DECLARATION

I Ms. Neha Rajendra Gadge of Bharati Vidyapeeth Institute of Management Studies and
Research hereby declare that the project work titled Equity Research on Paint and FMCG
Sector submitted in partial fulfillment of the required for the award of the degree of Masters of
Management Studies (MMS). The results embodied in this report have not been submitted to
any other university or institute for award of any degree or diploma.

NEHA GADGE

MMS - Finance

Page 2

CERTIFICATE OF APPROVAL

This is to certify that the summer internship project entitled Equity Research on Paint and
FMCG Sector submitted by Ms. Neha Gadge, a student of Bharati Vidyapeeth Institute Of
Management Studies And Research, as a part of the curriculum of Master of Management
Studies and Research has been approved.

Prof. Dr. Amol Gore

Dr. D. Y. Patil

Project Guide

Director

MMS - Finance

Page 3

ACKNOWLEDGEMENT

I take this opportunity to sincerely thank and express my gratitude to my project guide
Mr.Nikesh Ruparel for guiding me throughout my entire project.
The experience and the knowledge acquired over the interactions with the guide have been
invaluable to say the least and will help me a great deal in my future education and career.
I would also like to thank my guide Prof. Dr. Amol Gore for valuable input on coordination in
my project.
My project was completed in a very supportive and interactive environment and has been great
learning experience. Last but not the least I would like to thank my family and friends for all the
support they have provided me.

NEHA GADGE

MMS - Finance

Page 4

EXECUTIVE SUMMARY

Indian Economy being one of the fastest developing countries in the world, companies in India
are growing at a faster rate as compared to their growth rate a decade back. Many Indian
companies are expanding their business globally with mergers and acquisition.
As companies grow their shareholders benefitted with good dividend and capital appreciation on
investment in equity shares of such companies. Number of companies listed in stock exchange
(BSE & NSE) has been increasing every year with new IPOs coming in the market.
In India people are realizing that equity has potential to give highest return as compared to other
investment avenues however people are not aware how to do equity valuation, they just invest in
shares based on tips given by brokers, friends or family members.
Investing in equity shares based on tips is not the true investment but it is clear gambling with
your money which many of us would not like to do with our hard earned money.
Equity valuation begins with analysis of the sector in which you want to make investment; if the
sector looks positive then analyze various companies in the sector. A company is analyzed
fundamentally to check its performance and financial strength. Technical analysis is used to
decide the right price to buy a stock so that higher return on investment can be generated.
In this report I have explained how to do Fundamental Analysis & Technical Analysis with
respect to Paint and FMCG sector and few Paint and FMCG companies in this sector. A short
introduction about the equity has been given and why equity research is done. The company
profile of Birla Sun life insurance has been given The latest data has been taken to analyze the
best performance amongst all the companies.
In Fundamental Analysis, PEST (political, economical, social and technical) factors have been
taken with respect to Paint and FMCG sector. Then we have discussed the various kinds of
charts like the Line Chart, Bar Chart and Candlestick chart. After that a brief introduction about
trendiness has been given under which we have the Support and Resistance.
Then the technical analysis of the top Paint and FMCG companies has been done. The market
price and P/E ratios have been taken to calculate the EPS. After the target price was calculated
with the help of sector P/E and EPS and finally the difference was taken between the target price
and market price to arrive at the best performing company. Finally the conclusion and
recommendations are given with respect to derived result.

MMS - Finance

Page 5

INDEX
CHAPTER

1.

TITLE

INTRODUCTION TO EQUITY

COMPANY OVERVIEW

LITERATURE REVIEW

RESEARCH METHODOLOGY

DATA ANALYSIS AND INTERPRETATION

6.

SECTOR ANALYSIS

FINDINGS

SUGGESTION AND RECOMMENDATION

LEARNING FROM PROJECT

10

BIBLIOGRAPHY

MMS - Finance

PAGE NO.

Page 6

INTRODUCTION TO EQUITY
EQUITY
In accounting and finance, equity is the residual claim or interest of the most junior class of
investors in assets, after all liabilities are paid. If valuations placed on assets do not exceed
liabilities, negative equity exists. In an accounting context, Shareholders equity (or stockholders
equity, shareholders funds, shareholders capital or similar terms) represent the remaining
interest in assets of a company, spread among individual shareholders of common or preferred
stock.
This definition is helpful to understand the liquidation process in case of bankruptcy. At first, all
the secured creditors are paid against proceeds from assets. Afterword, a series of creditors,
ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity
is the last or residual claim against assets, paid only after all other creditors are paid. In such
cases where even creditors could not get enough money to pay their bills, nothing is left over to
reimburse owners equity. Thus owners equity is reduced to zero. Ownership equity is also
known as risk capital, liable capital and equity.
EQUITY SHARES
An equity share, commonly referred to as ordinary share also represents the form of fractional or
part ownership in which a shareholder, as a fractional owner, undertakes the maximum
entrepreneurial risk associated with a business venture. The holders of such shares are members
of the company and have voting rights.
EQUITY INVESTMENT
Equity investment generally refers to buying and holding of shares of stock on a stock market by
individuals and firms in anticipation of income from dividend and capital gain as the value of the
stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in
private (unlisted) company or start up (a company being created or newly created). When
investment is in infant companies, it is referred to as venture capital investing and is generally
understood to be higher risk than investment in listed going-concern situation.
HOW TO INVEST IN EQUITY SHARES
Equity market investments typically yield high returns, particularly if invested over longer
periods of time, although such investments are characterized by a high degree of price volatility
in the short term. The volatility in our markets, particularly in the nineties, reflects significant
shifts in the nature of the Indian economy, with the services sector gaining increasing
importance. This fundamental change in the economy has resulted in a dramatic change in the
MMS - Finance

Page 7

nature of our stock markets with the services sector, including technology, assuming increasing
importance. Investment in equities has dismayed many in the short term, but if executed in the
framework of the steps outlined below, may help in better choices.
STEP 1:
Identify your objective, given your needs, life stage and resources. If you want to increase the
value of your investment in order to have a larger sum to spend at a later date, your main priority
will be capital growth.
STEP 2:
Identify your risk tolerance and then invest appropriately Young people at the start of their
working lives will have a greater appetite for taking financial risk as compared to people at the
end of their career who are looking forward to stable income and preservation of capital. These
two extremes will exemplify the ability to take equity exposure. The young person is likely to be
invested largely in equities for he can afford to take short term capital loss in anticipation of
higher rates of return from equities. The elderly will be unable to take the risk of capital loss
even in the short term as their ability to make back any losses will be limited by time and ability
to earn.
STEP 3:
Categorize your stock: Cyclical, Growth or Defensive Investing in cyclical stocks, such as those
in the cement or steel sector, requires an understanding of the economic scenario. An active
involvement in the investment is required in order to reap the maximum benefits of swings in
economic cycles over time. The stock prices are likely to move through extreme highs and lows,
and the ability to time entry and exit will be necessary. Growth investing refers to stocks in
sectors where the future direction is clear for the medium term - such as technology. However
even here, timing is key, for the stock may do nothing for a long time as momentum builds up
and then move sharply thereafter. Defensive investing is that which is done from a long term
viewpoint, where a stock is held on the premise that it will grow consistently and on a
sustainable basis over time, such as those in the fast moving consumer goods sector. While the
appreciation may, at times, not be as dramatic as cyclical or growth stocks, stocks that constitute
defensive investments grow steadily over longer time periods.
STEP 4:
Check out the technical position. Can you actually sell your investment when you want to? The
liquidity of a stock is very important in taking an investment decision, for if there is very little
free stock available in the market, buying and selling may well impact the stock price in an
adverse manner. It is interesting to see what the price volume relationship is for a stock. So if a
stock price is moving up or down on high trading volume, it is more likely that there is real
interest in that price movement than if there is very little volume supporting the price move.

MMS - Finance

Page 8

STEP 5:
Know what the company does The fate of each stock is tied inextricably to the fortune of the
underlying business, and the market's perception of the future prospects for that business. The
industry's future potential in terms of projected demand-supply is key as is the company's
competitive position in the industry. The business model of the company should be considered,
as well as possible future changes, and the ability of the company to sustain growth and
momentum well into the future.
STEP 6:
Know who runs the company the capability and integrity of management is even more important
in determining the future viability of your investment. A strong, credible, experienced and
shareholder responsive management team is critical for operating and growing a successful
company. In the newer areas of our economy, management vision is also of significant
importance.
STEP 7:
Know the company's performance The price earnings (P/E) ratio is the often quoted measure of a
company's value. This ratio divides the stock price by the year's earnings, and is useful in
arriving at comparative valuation. But the tool that is quite prevalent in professional evaluations
is the return on equity (ROE), which is the year's earnings divided by the net worth of the
company. This when compared to the cost of capital for the company allows the investor to
gauge the company's wealth creating ability. Apart from the ratios the investor must also focus
on the sustainability of earnings growth.
STEP 8:
Know the company's valuation Two stocks may have the same EPS but different P/E's. This is
because ROE may be different and its sustainability may be different. Broadly speaking, the
higher the sustainable ROE, the higher the P/E rating. A high P/E does not therefore necessarily
imply an overvalued stock. Stocks with high sustainable ROEs are likely to trade at high P/E
multiples.
STEP 9:
Know the price target Having selected stocks and built a portfolio, it is now imperative to track
these investments closely. One method of doing so is to set expectations, by identifying a target
price, and to re-evaluate the stock when this target is reached. Here, it is important to consider
opportunity costs. If there is a loss on a stock, should one realize that loss and invest in another
stock, which has a greater potential, or should one wait for the loss to turn into a profit. By not
selling out of low return stocks to get into higher return stocks, investors miss out on
opportunities.
MMS - Finance

Page 9

STEP 10:
Do you want a professional manager? Many investors mistakenly assume that they can purchase
one or two stocks and they will do well. In the absence of good luck, this can be a dangerous
strategy since there is always a risk of a stock declining in value or the business facing company
specific problems. The more diversified the portfolio, lower is the risk of one poorly performing
stock affecting overall performance of the portfolio. However, a good way of diversifying the
portfolio is to invest through mutual funds where the professional fund manager and the
rigorous investment process is likely to limit risk while maximizing profit, depending on the risk
profile of the fund invested in.
WHY SHOULD ONE INVEST IN EQUITY IN PARTICULAR
When you buy a share of a company you become a shareholder in that company. Shares are also
known as Equities. Equities have the potential to increase in value over time. It also provides
your portfolio with the growth necessary to reach your long term investment goals. Research
studies have proved that the equities have outperformed most other forms of investments in the
long term.

Equities are considered the most challenging and the rewarding, when compared to other
investment options.
Research studies have proved that investments in some shares with a longer tenure of
investment have yielded far superior returns than any other investment.

However, this does not mean all equity investments would guarantee similar high returns.
Equities are high risk investments. One needs to study them carefully before investing.

MMS - Finance

Page 10

WHAT IS EQUITY RESEARCH


Equity is research is what an equity research analyst does. Equity research is a study of equities
or stock for the purpose of investment. Equities or common stock comprises a big chunk in any
companys capital and shareholders need to know whether to stay investor in the company or
sale the shares and come out.
As an individual, it is time consuming to do equity research that is to study the company, its
financial statements, products, managements and take a decision about investment. Exactly for
the same reason there are people working in research companies whose job is to do equity
research and recommend companies for investment.
OBJECTIVE
Purpose of equity research is to study companies, analyze financials, and looks at quantitative
and qualitative aspects mainly for decision: Whether to invest or not.
1. To conclude the fundamental analysis of Paint and FMCG Sector
2. To do Technical analysis of Paint and FMCG industry.

MMS - Finance

Page 11

YOUR DREAMS OUR COMMITMENT


BIRLA SUN LIFE INSURANCE
Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla
Group, a well-known Indian conglomerate and Sun Life Financial Inc., one of the leading
international financial services organizations from Canada. With an experience of over a decade,
BSLI has contributed to the growth and development of the Indian life insurance industry, and
currently is one of the leading life insurance companies in the country. BSLI offers a complete
range of offerings, comprising of protection solutions, children's future solutions, wealth with
protection solutions, health and wellness solutions, as well as retirement solutions; it has an
extensive distribution reach of over 500 cities through its network of over 550 branches, over
1,05,000 empanelled advisors, and over 100 partnerships with corporate agents, brokers and
banks. The AUM of Birla Sun Life Insurance is close to Rs. 22,300 Crores and it has a robust
capital base of over Rs. 2,200 Crores, as on 30th September, 2013.
BSLI has a customer base of over two million policy holders and has attained recognition as the
3rd Most Trusted Life Insurance Company in the 'Most Trusted Brands' survey 2013 conducted
by Brand Equity (The Economic Times Group) with Neilsen. The Company offers a complete
range of offerings comprising protection solutions, children's future solutions, wealth with
protection solutions, health and wellness solutions, retirement solutions and savings with
protection solutions. It has an extensive distribution reach in over 500 cities through its network
of over 540 branches, more than 81,000 empanelled advisors and over 140 partnerships with
corporate agents, brokers and banks. Birla Sun Life Insurance has total assets under management
of 24,775 Crore and a robust capital base of over 2,170 Crore, as on 31st Mar, 2014.
BSLI is in its five successful years of operations have contributed significantly to the growth and
development of the life insurance industry in India. It pioneered the launch of Unit Linked Life
insurance Plans (ULIP) amongst the private players in India. It was the first player in the
industry to sell its policies through bank assurance route and through the internet. It was also the
first private sector player to introduce a pure term plan in the Indian market. This was supported
MMS - Finance

Page 12

by new to the market. The process of getting sales illustrations signed by customers, offering a
free look period on all policies, which are now industry standards were introduced by BSLI.

About the Aditya Birla Group


BSLI has a customer base of over two million policy holders and has attained recognition as the
3rd Most Trusted Life Insurance Company in the 'Most Trusted Brands' survey 2013 conducted
by Brand Equity (The Economic Times Group) with Neilsen. The Company offers a complete
range of offerings comprising protection solutions, children's future solutions, wealth with
protection solutions, health and wellness solutions, retirement solutions and savings with
protection solutions. It has an extensive distribution reach in over 500 cities through its network
of over 540 branches, more than 81,000 empanelled advisors and over 140 partnerships with
corporate agents, brokers and banks. Birla Sun Life Insurance has total assets under management
of 24,775 Crores and a robust capital base of over 2,170 Crores, as on 31st Mar, 2014. For more
information
The Aditya Birla group is a diversified conglomerate with total revenue of approximately US$40
billion in year 2012. With gross revenue of USD 40 Billion (in 2012) it is the third largest Indian
private sector conglomerate behind Tata Group with revenue of just over USD 100 Billion and
RIL with revenue of USD 74 Billion.

About Sun Life Financial Inc.


Sun Life Financial Inc. Is a leading international financial services organization providing a
diverse range of wealth accumulation and protection products and services to individuals and
corporate customer. Tracing its route back to 1865, Sun Life Financials and its partners today
have operations in key markets worldwide, including Canada, The United States, The United
Kingdom, Hong Kong, The Philippines, Japan, Indonesia, India, China and Bermuda.

MMS - Finance

Page 13

FUNDAMENTAL ANALYSIS
INTRODUCTION
A method of evaluating a security that entails attempting to measure its intrinsic value by
examining related economic, financial and other qualitative and quantitative factors.
Fundamental analysts attempt to study everything that can affect the security's value, including
macroeconomic factors (like the overall economy and industry conditions) and company-specific
factors
(like
financial
condition
and
management).
The end goal of performing fundamental analysis is to produce a value that an investor can
compare with the security's current price, with the aim of figuring out what sort of position to
take with that security (underpriced = buy, overpriced = sell or short).
This method of security analysis is considered to be the opposite of technical analysis.
Fundamental analysis is the cornerstone of investing. In fact, some would say that you aren't
really investing if you aren't performing fundamental analysis. Because the subject is so broad,
however, it's tough to know where to start. There are an endless number of investment strategies
that are very different from each other, yet almost all use the fundamentals.
The goal of this tutorial is to provide a foundation for understanding fundamental analysis. It's
geared primarily at new investors who don't know a balance sheet from an statement. While you
may not be a "stock-picker extraordinaire" by the end of this tutorial, you will have a much more
solid grasp of the language and concepts behind security analysis and be able to use this to
further
your
knowledge
in
other
areas
without
feeling
totally
lost.
The biggest part of fundamental analysis involves delving into the financial statements. Also
known as quantitative analysis, this involves looking at revenue, expenses, assets, liabilities and
all the other financial aspects of a company. Fundamental analysts look at this information to
gain insight on a company's future performance. A good part of this tutorial will be spent
learning about the balance sheet, income statement, cash flow statement and how they all fit
together.
Fundamental analysis uses both historical and current data to cover the main objectives:
1.
2.
3.
4.

Make
Conduct
a
company
stock
Evaluate
and
Calculate
a

MMS - Finance

financial
forecasts.
valuation
and
predict
price
evolution.
predict
business
performance.
companys
credit
risk.
Page 14

5. Evaluate company management and make internal business decisions.Fundamental analysis


serves to answer questions, such as: Is the company's revenue growing?

Is it actually making a profit?


Is it in a strong-enough position to beat out its competitors in the future?
Is it able to repay its debts?
Is management trying to "cook the books"?

FUNDAMENTALS: QUANTITATIVE AND QUALITATIVE


As mentioned in the introduction, fundamentals can include anything related to the economic
wellbeing of a company. Obvious terms include things like revenue and profit, but fundamentals
also include everything from a companys market share to the quality of its management.
The various fundament factors can be grouped into two categories: Quantitative and Qualitative.

Qualitative - related to or based on the quality or character of something, often as


opposed to its size or quality.
Quantitative- capable of being measured or expressed in numerical terms.

QUALITATIVE FACTORS - THE INDUSTRY


Each industry has differences in terms of its customer base, market share among firms, industrywide growth, competition, regulation and business cycles. Learning about how the industry
works will give an investor a deeper understanding of a company's financial health.
Customers
Some companies serve only a handful of customers, while others serve millions. In general, it's a
red flag (a negative) if a business relies on a small number of customers for a large portion of its
sales because the loss of each customer could dramatically affect revenues. For example, think of
a military supplier who has 100% of its sales with the U.S.government. One change in
government policy could potentially wipe out all of its sales. For this reason, companies will
always disclose in their 10-K if any one customer accounts for a majority of revenues.
Market Share
Understanding a company's present market share can tell volumes about the company's business.
The fact that a company possesses an 85% market share tells you that it is the largest player in its
market by far. Furthermore, this could also suggest that the company possesses some sort of
"economic moat," in other words, a competitive barrier serving to protect its current and
future earnings, along with its market share. Market share is important because of economies of
scale. When the firm is bigger than the rest of its rivals, it is in a better position to absorb the
MMS - Finance

Page 15

high fixed costs of a capital-intensive industry.


Industry Growth
One way of examining a company's growth potential is to first examine whether the amount of
customers in the overall market will grow. This is crucial because without new customers, a
company has to steal market share in order to grow.
In some markets, there is zero or negative growth, a factor demanding careful consideration. For
example, a manufacturing company dedicated solely to creating audio compact cassettes might
have been very successful in the '70s, '80s and early '90s. However, that same company would
probably have a rough time now due to the advent of newer technologies, such as CDs and
MP3s. The current market for audio compact cassettes is only a fraction of what it was during the
peak of its popularity.

Competition
Simply looking at the number of competitors goes a long way in understanding the competitive
landscape for a company. Industries that have limited barriers to entry and a large number of
competing
firms
create
a
difficult
operating
environment
for
firms.
One of the biggest risks within a highly competitive industry is pricing power. This refers to the
ability of a supplier to increase prices and pass those costs on to customers. Companies operating
in industries with few alternatives have the ability to pass on costs to their customers. A great
example of this is Wal-Mart. They are so dominant in the retailing business, that Wal-Mart
practically sets the price for any of the suppliers wanting to do business with them. If you want
to
sell
to
Wal-Mart,
you
have
little,
if
any,
pricing
power.
Regulation
Certain industries are heavily regulated due to the importance or severity of the industry's
products and/or services. As important as some of these regulations are to the public, they can
drastically affect the attractiveness of a company for investment purposes.
In industries where one or two companies represent the entire industry for a region (such as
utility companies), governments usually specify how much profit each company can make. In
these instances, while there is the potential for sizable profits, they are limited due to regulation.
In other industries, regulation can play a less direct role in affecting industry pricing. For
example, the drug industry is one of most regulated industries. And for good reason - no one
wants an ineffective drug that causes deaths to reach the market. As a result, theU.S.Food and
Drug Administration (FDA) requires that new drugs must pass a series of clinical trials before
they can be sold and distributed to the general public. However, the consequence of all this
MMS - Finance

Page 16

testing is that it usually takes several years and millions of dollars before a drug is approved.
Keep in mind that all these costs are above and beyond the millions that the drug company has
spent
on
research
and
development.
All in all, investors should always be on the lookout for regulations that could potentially have a
material impact upon a business' bottom line. Investors should keep these regulatory costs in
mind as they assess the potential risks and rewards of investing.

Qualitative Factors - The Company


Before diving into a company's financial statements, we're going to take a look at some of
the qualitative aspects
of
a
company.
Fundamental analysis seeks to determine the intrinsic value of a company's stock. But since
qualitative factors, by definition, represent aspects of a company's business that are difficult or
impossible to quantify, incorporating that kind of information into a pricing evaluation can be
quite difficult. On the flip side, as we've demonstrated, you can't ignore the less tangible
characteristics
of
a
company.
In this section we are going to highlight some of the company-specific qualitative factors that
you
should
be
aware
of.
Business
Model
Even before an investor looks at a company's financial statements or does any research, one of
the most important questions that should be asked is: What exactly does the company do? This is
referred to as a company's business model it's how a company makes money. You can get a
good overview of a company's business model by checking out its website or reading the first
part of its 10-K filing (Note: We'll get into more detail about the 10-K in the financial statements
chapter.
For
now,
just
bear
with
us).
Sometimes business models are easy to understand. Take McDonalds, for instance, which sells
hamburgers, fries, soft drinks, salads and whatever other new special they are promoting at the
time. It's a simple model, easy enough for anybody to understand.
Other times, you'd be surprised how complicated it can get. Boston Chicken Inc. is a prime
example of this. Back in the early '90s its stock was the darling of Wall Street. At one point the
company's CEO bragged that they were the "first new fast-food restaurant to reach $1 billion in
sales since 1969". The problem is, they didn't make money by selling chicken. Rather, they made
their money from royalty fees and high-interest loans to franchisees. Boston Chicken was really
nothing more than a big franchisor. On top of this, management was aggressive with how it
recognized its revenue. As soon as it was revealed that all the franchisees were losing money, the
MMS - Finance

Page 17

house

of

cards

collapsed

and

the

company

wentbankrupt.

At the very least, you should understand the business model of any company you invest in. The
"Oracle of Omaha", Warren Buffett, rarely invests in tech stocks because most of the time he
doesn't understand them. This is not to say the technology sector is bad, but it's not Buffett's area
of expertise; he doesn't feel comfortable investing in this area. Similarly, unless you understand a
company's business model, you don't know what the drivers are for future growth, and you leave
yourself vulnerable to being blindsided like shareholders of Boston Chicken were.
Competitive
Advantage
Another business consideration for investors is competitive advantage. A company's long-term
success is driven largely by its ability to maintain a competitive advantage - and keep it.
Powerful competitive advantages, such as Coca Cola's brand name and Microsoft's domination
of the personal computer operating system, create a moat around a business allowing it to keep
competitors at bay and enjoy growth and profits. When a company can achieve competitive
advantage, its shareholders can be well rewarded for decades.
Management
Just as an army needs a general to lead it to victory, a company relies upon management to steer
it towards financial success. Some believe that management is the most important aspect for
investing in a company. It makes sense - even the best business model is doomed if the leaders of
the company fail to properly execute the plan.

QUANTITATIVE FACTORS
Now we know the qualitative analysis factors of fundamentals analysis, lets proceed to the
Quantitative factor of fundamental analysis. Quantitative factors include analysis of financial
statement of the company.

TECHNICAL ANALYSIS
Technical analysis is a financial term used to denote a security analysis discipline for
forecasting the direction of prices through the study of past market data, primarily price and
volume. Behavioral economics and quantitative analysis incorporate technical analysis, which
being an aspect of active management stands in contradiction to much of modern portfolio
theory.
Technical analysis employs models and trading rules based on price and volume transformations,
such as the relative strength index, moving averages, regressions, inter- market and intra-market
price correlations, business cycles, stock market cycles or, classically, through recognition of
chart patterns.
MMS - Finance

Page 18

Technical analysis stands in contrast to the fundamental analysis approach to security and stock
analysis. Technical analysis analyzes price, volume and other market information, whereas
fundamental analysis looks at the actual facts of the company, market, currency or commodity.
Most large brokerage, trading group, or financial institutions will typically have both a technical
analysis and fundamental analysis team.

6.1

CONCEPTS

Resistance - a price level that may prompt a net increase of selling activity
Support - a price level that may prompt a net increase of buying activity
Breakout - the concept whereby prices forcefully penetrate an area of prior support or
resistance, usually, but not always, accompanied by an increase in volume.
Trending - the phenomenon by which price movement tends to persist in one direction for an
extended period of time
Average true range - averaged daily trading range, adjusted for price gaps

Chart patterns - distinctive pattern created by the movement of security prices on a chart

6.2

CHART TYPES :

There are three main types of charts that are used by investors and traders
depending on the information that they are seeking and their individual skill levels. The chart
types are: the line chart, the bar chart, the candlestick chart.

A. LINE CHART :
The most basic of the three charts is the line charts because it represents only the
closing prices over a set period of time. The line is formed by connecting the closing prices
over the time frame. Line charts do not provide visual information of the trading range for
the individual points such as the high, low and opening prices. However, the closing
price is often considered to be the most important price in stock data compared to the high
and low for the day and this is why it is the only value used in line charts.

MMS - Finance

Page 19

6.3. BAR CHARTS :


The bar chart expands on the line chart by adding several more key pieces of information to
each data point. The chart is made up of a series of vertical lines that represent each data
point. This vertical line represents the high and low for the trading period, along with the
closing price. The close and open are represented on the vertical line by a horizontal dash.
The opening price on a bar chart is illustrated by the dash that is located on the left side of the
vertical bar. Conversely, the close is represented by the dash on the right. Generally, if the
left dash (open) is lower than the right dash (close) then the bar will be shaded black,
representing an up period for the stock, which means it has gained value. A bar that is colored
red signals that the stock has gone down in value over that period. When this is the case, the
dash on the right (close) is lower than the dash on the left (open).

MMS - Finance

Page 20

B. CANDLE-STICK CHARTS :
The candlestick chart is similar to a bar chart, but it differs in the way that it is visually
constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the
period's trading range. The difference comes in the formation of a wide bar on the
vertical line, which illustrates the difference between the open and close. And, like bar
charts, candlesticks also rely heavily on the use of colors to explain what has happened
during the trading period. There are two color constructs for days up and one for days
that the price falls. When the price of the stock is up and closes above the opening trade,
the candlestick will usually be white or clear. If the stock has traded down for the period,
then the candlestick will usually be red or black, depending on the site. If the stock's price
has closed above the previous days close but below the day's open, the candlestick will be
black or filled with the color that is used to indicate an up day.

MMS - Finance

Page 21

6.4

CHART PATTERNS :

1. HEAD AND SHOULDERS :


This is one of the most popular and reliable chart patterns in technical analysis. Head and
shoulders is a reversal chart pattern that when formed, signals that the security is likely to
move against the previous trend Head and shoulders top is a chart pattern that is formed at
the high of an upward movement and signals that the upward trend is about to end. Head and
shoulders bottom, also known as inverse head and shoulders is the lesser known of the two,
but is used to signal a reversal in a downtrend.

MMS - Finance

Page 22

2. Cup and Handle :


A cup with handle chart is a bullish continuation pattern in which the upward trend
has paused but will continue in an upward direction once the pattern is confirmed. This price
pattern forms what looks like a cup, which is preceded by an upward trend. The handle
follows the cup formation and is formed by a generally downward/sideways
movement in the security's price. Once the price movement pushes above the resistance lines
formed in the handle, the upward trend can continue. There is a wide ranging time frame for
this type of pattern, with the span ranging from several months to more than a year.

3. DOUBLE TOPS AND BOTTOMS :


This chart pattern is another well-known pattern that signals a trend reversal - it is
considered to be one of the most reliable and is commonly used. These patterns are
formed after a sustained trend and signal to chartists that the trend is about to reverse. The
pattern is created when a price movement tests support or resistance levels twice and
is unable to break through. This pattern is often used to signal intermediate and long-term
trend reversals.

MMS - Finance

Page 23

4. TRIANGLES :
Triangles are some of the most well-known chart patterns used in technical analysis.
The three types of triangles, which vary in construct and implication, are the symmetrical
triangle, ascending and descending triangle. These chart patterns are considered to last
anywhere from a couple of weeks to several months.

MMS - Finance

Page 24

5. FLAG AND PENNANT :


These two short-term chart patterns are
continuation patterns that are formed when
there is a sharp price movement followed by a
generally sideways price movement. This
pattern is then completed upon another sharp
price movement in the same direction as the
move that started the trend. The patterns are
generally thought to last from one to three
weeks

6. WEDGE :
The wedge chart pattern can be either a continuation or reversal pattern. It is similar to a
symmetrical triangle except that the wedge pattern slants in an upward or downward
direction, while the symmetrical triangle generally shows a sideways movement. The other
difference is that wedges tend to form over longer periods, usually between three and six
months.

7. TRIPLE TOPS AND BOTTOMS :


Triple tops and triple bottoms are another type of reversal chart pattern in chart analysis.
These are not as prevalent in charts as head and shoulders and double tops and bottoms, but
they act in a similar fashion. These two chart
patterns are formed when the price movement tests
a level of support or resistance three times and is
unable to break through; this signals a reversal of
the prior trend.

MMS - Finance

Page 25

8. ROUNDING BOTTOM :
A rounding bottom, also referred to as a saucer bottom, is a long-term reversal pattern that
signals a shift from a downward trend to an upward trend. This pattern is traditionally
thought to last anywhere from several months to several years.

MMS - Finance

Page 26

RATIO ANALYSIS
7.1

FINANCIAL STATEMENTS:

The prosperity of a company will depend upon its profitability and financial
health. The financial statement published by a company periodically helps us to access the
profitability and financial health of the company. The two basic financial statements provided by
the companies are the balance sheet and the P&L A/C. The first gives us a picture of the
companys assets and liabilities while the second gives us a picture of its earnings.
The balance sheet gives us the list of assets and liabilities of a company on a
specific date. The major categories of assets are fixed and current. The P&L A/C, also called as
the income statement, reveals the revenue earned, the cost incurred and the resulting profit or loss
of the company for one accounting year. The profit after tax (PAT) divided by the number of
shares gives the Earnings per Share (EPS), which is a figure which most investors are interested.
The P&L A/C summarizes the activities of a company during an accounting year.

7.2

ANALYSIS OF FINANCIAL STATEMENTS:

The financial statement of a company can be used to evaluate the financial


position of the company. Financial ratios are most extensively used for this purpose. Ratio
analysis helps an investor to determine the strengths and weakness of the company. It also helps
him to analyze whether the financial performance and financial strengths are improving or
deteriorating. Ratios can be used for comparative analysis either with other firms in the industry
through across sectional analysis or with past data through a time series analysis.
Different ratios measure different aspects of a companys performance or health.
Fou groups of ratios may be used for analyzing the performance of a company.

1. LIQUIDITY RATIOS :
These measure the companys ability to fulfill its short-term obligations and
reflect its short-term financial strength or liquidity. The commonly used ratios are;

Current Ratio = Current Assets / Current Liabilities.


Quick Ratio = Current Assets - Inventory - Prepaid Expenses/Current Liabilities

A higher current ratio would enable a company to meet its short-term obligations
even if the value of current assets decline. The quick ratio represents the ratio between quick
assets and current liabilities. It is a more rigorous measure of liquidity. However, both these ratios
are to be used together to analyze the liquidity of the company.
MMS - Finance

Page 27

2. LEVERAGE RATIOS
These ratios are also known as capital structure ratios. They measure the ability of
the company to meet its long-term debt obligations. They throw light on thelong-term solvency of
a company. The commonly used leverage ratios are:

Debt-Equity Ratio = Long term Debt/Shareholders Equity


Proprietary Ratio = Shareholders Equity/Total Assets
Interest Coverage Ratio = EBIT/Interest

The first three ratios indicate the relative contribution of owners and creditors in
financing the assets of the company. These ratios reflect the safety margin available to the longterm creditors. The coverage ratios measures the ability if the company to meet its interest
payments arising from the debt.

3. PROFITABILITY RATIOS
The profitability of a company can be the profitability ratios. These ratios are calculated be
relating the profits either to sales, or to investment, or t the equity shares. Thus we have three
groups of profitability ratios. These are listed below;
A. Profitability related to Sales :
Gross Profit Ratio = Gross Profit (Sales Cost of Goods Sold)/Sales
Operating Profit Ratio = EBIT / Sales
Net Profit Ratio = EAT/Sales
Administrative Expenses Ratio = Administrative Expenses/Sales
Selling Expenses Ratio = Selling Expenses/Sales
Operating Expenses Ratio = Administrative Expenses + Selling Expenses/Sales
Operating Ratio = COGS + Operating Expenses/Sales

B. Profitability related to Investment :


Return on Assets = EAT/Total Assets
Return on Capital Employed = EBIT/Total Capital Employed
Return on Equity = EAT/Shareholders Equity

C. Profitability related to Equity Shares.


Earnings Per Share = Net Profit available to Eq.Sh.Holders/No. of Equity Shares
Earnings Yield = EPS/Market Price per Share
Dividend Yield = DPS (Dividend per Share)/Market Price per Share
MMS - Finance

Page 28

Dividend Payout Ratio = DPS/EPS


Price Earnings Ratio (P/E Ratio) = Market Price per Share/EPS

D. Overall Profitability (Earning Power)


Return on Investment (ROI) = EAT/Total Assets
The overall profitability is measured by the ROI, which is the product of the net
profit ratio and the investment turnover. It is a central measure of the earning power or operating
efficiency of a company.

4. ACTIVITY OR EFFICIENCY RATIOS :


These are also known as turnover ratios. These ratios measure the efficiency in
asset management. They express the relation between the sales and the different types of assets,
showing the speed with which these assets generate sales. Important activity ratios are
enumerated below;

Current Asset Turnover = Sales / Current Assets


Fixed Assets Turnover = Sales / Fixed Assets

Total Assets Turnover = Sales / Total Assets

MMS - Finance

Page 29

DATA ANALYSIS AND INTERPPRETATION


ANALYSIS OF PAINT SECTOR
The paint industry volume in India has been growing at 15% per annum for quite some years
now. As far as the future growth prospects are concerned, the industry is expected to grow at 1213% annually over the next five years. FY11 was a challenging year for the industry as a whole
due to subdued demand across key sectors and rising inflation.
The unorganized sector controls around 35% of the paint market, with the organized sector
accounting for the balance. In the unorganized segment, there are about 2,000 units having small
and medium sized paints manufacturing plants. Top organized players include Asian Paints,
Kansai Nerolac, Berger Paints and ICI.
Demand for paints comes from two broad categories:
DECORATIVE: Major segments in decorative include exterior wall paints, interior wall paints,
wood finishes and enamel and ancillary products such as primers, putties etc. Decorative paints
account for over 72% of the overall paint market in India. Asian Paints is the market leader in
this segment. Demand for decorative paints arises from household painting, architectural and
other display purposes. Demand in the festive season (September-December) is significant, as
compared to other periods. This segment is price sensitive and is a higher margin business as
compared to industrial segment.
INDUSTRIAL: Three main segments of the industrial sector include automotive coatings,
powder coatings and protective coatings. Kansai Nerolac is the market leader in this segment.
User industries for industrial paints include automobiles engineering and consumer durables. The
industrial paints segment is far more technology intensive than the decorative segment.
The paints sector is raw material intensive, with over 300 raw materials (30% petro-based
derivatives) involved in the manufacturing process. Since most of the raw materials are
petroleum based, the industry benefits from softening crude prices.
KEY POINTS
Supply: Supply exceeds demand in both the decorative as well as the industrial paints segments.
Industry is fragmented.
Demand: Demand for decorative paints depends on the housing sector and good monsoons.
Industrial paint demand is linked to user industries like auto, engineering and consumer durables.
Barriers to entry: Brand, distribution network, working capital efficiency and technology play a
crucial role.

MMS - Finance

Page 30

Bargaining power of suppliers: Price increase constrained with the presence of the unorganised
sector for the decorative segment. Sophisticated buyers of industrial paints also limit the
bargaining power of suppliers. It is therefore that margins are better in the decorative segment.
Bargaining power of customers: High due to availability of wide choice.
Competition: In both categories, companies in the organised sector focus on brand building.
Higher pricing through product differentiation is also followed as a competitive strategy.
FINANCIAL YEAR '11
FY11 was a mixed bag for the paint companies. While all the 3 players viz. Asian Paints, Kansai
Nerolac and Berger Paints reported strong growth in sales, operating margins came under severe
pressure due to raw material price inflation. Top-line growth was boosted by strong demand
from the decorative paints segment. Nonetheless, the demand environment in the industrial
segment continues to remain challenging due to rising interest rates.
Performance on the margins front was a big disappointment. Rising prices of crude oil and
titanium dioxide increased the overall expenditure thereby impacting profitability growth.
However, companies are undertaking a gradual and calibrated price increase to shield margins.
Nonetheless, as a complete pass on of raw material price increase is not possible in the industrial
segment, the blended margins continue to suffer.
All the key players are in an expansion phase. Asian Paints' plant in Khandala, Maharashtra is
under construction and is expected to be commissioned by 4QFY13. Kansai Nerolac's capacity
expansion plans at Jainpur and Hosur culminated during the year. Berger Paints has also
undertaken capacity expansion for its plants located in Andhra Pradesh and Goa. Further, it is
also contemplating to set up a manufacturing facility in Pune, Maharashtra.
PROSPECTS
The market for paints in India is expected to grow at 1.5 times to 2 times GDP in the next five
years. With GDP growth expected to be over 7% levels, the top three players are likely to clock
above industry growth rates, especially given the fact that protection that was available to
unorganized players has come down significantly.
Decorative paints segment is expected to witness higher growth going forward. The fiscal
incentives given by the government to the housing sector have benefited the housing sector
immensely. This will benefit key players in the long term.
Although the demand for industrial paints is lukewarm it is expected to increase going forward.
This is on account of increasing investments in infrastructure. Domestic and global auto majors
have long term plans for the Indian market, which augur well for automotive paint manufacturers
like Kansai Nerolac and Asian-PPG. Increased industrial paint demand, especially powder
MMS - Finance

Page 31

coatings and high performance coatings will also propel topline growth of paint majors in the
medium term.

ANALYSIS OF FMCG SECTOR


The consumer products industry has been growing at a brisk pace in the past few years backed
by robust economic growth and rising rural income. Growth drivers such as rapid urbanization,
evolving consumer lifestyles and emergence of modern trade have shielded the industry from the
slowdown.
The industry is still urban-centric with majority of the goods being consumed by urban India.
Metropolitan cities and small towns (population of 1-10 lakh) have been driving the FMCG
consumption in urban India since 2002. In fact, middle India, comprising of the small towns, has
been growing the fastest across rural and urban segments. As per Nielsen, the FMCG market size
of middle India is set to expand rapidly over the next two decades. Rural India, where 70% of the
population resides, presents the biggest market potential for the industry. Backed by low unit
packs and aggressive distribution reach, rural market size is expected to expand in the future.
Consumer goods are retailed through two primary sales channels - General Trade and Modern
Trade. General trade comprising of the ubiquitous kirana stores is the largest sales channel
forming 95% of overall retail sales. However, growth of consumer goods retailed through
modern trade channel is outpacing the growth of FMCG products in general trade. Factors such
as a comfortable and modern store experience, access to a wide variety of categories and brands
under a single roof and compelling value-for-money deals are attracting consumers to organised
retail in a big way. But modern trade is still an urban phenomenon in India. Product categories
such as packaged rice, liquid toilet soaps, floor cleaners, breakfast cereals, air fresheners and
mosquito repellent equipment have a higher penetration in modern trade channel. Modern trade
is expected to gain greater importance with opening up of foreign direct investment in multibrand retail.
The implementation of the Goods and Services Tax (GST) is expected to benefit the sector
immensely by reducing the overall incidence of taxation. GST aims to reduce the cascading
effect by replacing a multitude of indirect taxes such as central excise, service tax, VAT and
inter-state sales tax with a single GST rate. Moreover, FMCG companies will be able to optimize
logistics and distribution costs in the GST era. The resulting cost savings by the companies can
be passed on to the final consumer thereby boosting demand. However, the implementation of
GST has currently been put on the backburner by the government.
Key Points
Supply:
Abundant supply through a distribution network of over 8 m stores across the
country. Distribution networks are being beefed up to penetrate the rural areas.

MMS - Finance

Page 32

Demand:
slowdown.

Being items of daily consumption, demand is least impacted by economic

Barriers to entry:
Huge investments in setting up distribution networks and promoting
brands and competition from established companies.
Bargaining power of suppliers:
Inputs being mostly agri-commodities, the suppliers are
numerous and lack scale to wield bargaining power. Companies like ITC that are integrated
backwards have lower dependence on suppliers.
Bargaining power of customers:
Customer does not have bargaining power in case of
branded products but intense competition within the FMCG companies results in value for
money deals for consumers (e.g. buy one, get one free concept).
Competition: Competition is faced from domestic unorganized players and established MNC's.
Price wars are a common phenomenon. Private labels offered by retailers at a discount to
mainframe brands act as competition to undifferentiated and weak brands.
Financial Year 2012 -13
All the FMCG companies have reported double-digit sales growth in FY13 led by combination
of price-hikes and higher volumes. Godrej Consumer Products (GCPL) continued to grow the
fastest, clocking a growth of 32% in FY13 backed by strong growth in its existing brands as well
as overseas acquisitions.
ITC has been able to maintain a robust growth of 20% in FY13 led by robust growth in its
FMCG business. Backed by strong pricing power in cigarette business, the company has
managed to pass on the structural increase in taxation. Its non-cigarette FMCG business has been
the fastest growing business other than the agri business segment in FY13. Even Colgate has
recorded brisk sales growth contributed majorly by volumes. Dabur's offtake has gained
momentum in the fourth quarter driven by pick-up in rural off take after completion of Project
Double and improved sales from the Canteen Stores Department channel.
FMCG behemoth HUL has been witnessing moderation in off take particularly in personal care
products, packaged foods and beverages. Its volume growth in FY13 moderated to 7% from 9%
last year mainly on account of slowdown in discretionary spending. However, the company
continues to focus on innovations and new brand launches particularly in the high-margin
personal care segment. Another company, Britannia has been seeing slower volumes with
revenue growth coming from price-hikes and better product-mix.
Easing price of commodities has led to input cost savings for majority of FMCG companies in
FY13. However the impact has been muted with a steep rise in ad-spends amid rising
competition. Even tax incidence has risen for a large number of companies as they set to lose
benefits on plants located in tax havens, going forward. Notwithstanding these factors,
MMS - Finance

Page 33

companies such as HUL, Dabur, Marico and Britannia have recorded incremental gains of less
than 1% in their net margins during the year. GCPL saw a steep contraction in net margin in
FY13 due to higher promotional spends as well as increased depreciation and tax outgo.
Prospects
Persistently high inflation and general economic slowdown is not expected to turnaround in the
immediate future. Therefore lower discretionary spending is likely to keep demand for consumer
goods tepid. Moreover as FMCG companies have already taken a number of price-hikes earlier,
this tool will also not be available on concerns of further demand compression. This is likely to
fuel increased competition among existing players trying to save their turf.
However, long term demand potential of FMCG goods remains robust. According to
International Labour Organisation, India will have the highest working age population in the
world by 2020. Increase in working-age population and rising middle class will translate into
higher purchasing power & boost consumerism. Higher penetration and evolution in
consumption pattern will drive rural demand.

MAJOR PLAYERS IN PAINT AND FMCG SECTOR


COMPANY NAME

MARKET CAP (Rs. In Crore )

Asian Paints
Akzo Nobel
Zydus Wellness
Emami
Nestle
ITC

57,815.65
5225.96
2,277
6,836
39,819
1,51,078

MMS - Finance

Page 34

FINDINGS AND RECOMMENDATIONS


FUNDAMENTAL ANALYSIS OF PAINT AND FMCG SECTOR (as on 09/07/2014)
NOTE : HIGHLIGHTED STOCKS ARE OVERVALUED WHICH ARE FURTHER
EXAMINED ACCORDING TO LTPT

COMPANY

PRICE

P/E

EPS '14

Asian Paints Ltd.

510.00

41.53

12.30

Berger Paints Ltd.


Kansai Nerolac
Paints Ltd.
Akzo Nobel India

252.70
1380.00
1004.00

INDUSTRY

36.95
37.60
30.38

6.76
38.33
32.19

EPS
'13

109.
47
6.06
32.8
9
46.8
9

LTPT

450.36
247.52
1403.45
1178.64
REJECTED

36.62

PRICE

P/E

EPS '14

EPS
'13

LTPT

Jyothy
Laboratories Ltd.
Nestle India Ltd.

189.00

31.57

5.99

2.84

205.46

Zydus Wellness
Ltd.
INDUSTRY
P/E

MMS - Finance

REJECTED
REJECTED
ACCEPTED

COMPANY

Marico
Colgate-Palmolive
(India) Ltd.
Dabur India Ltd.
GlaxoSmithKline
Pharmaceuticals
Ltd.
Emami Ltd.

STATUS

STATUS

ACCEPTED
1779.00
247.30
1389.00
184.70
4555.00

42.27
28.11
39.72
48.15
37.88

114.85
8.95
34.96
3.86
56.16

114.
15
5.93
36.5
3
3.39
85.6
5

3939.36
306.99
1199.13
132.40
1926.29

REJECTED
ACCEPTED
REJECTED
REJECTED

REJECTED

450.00
533.00

25.43
21.41

14.91
24.69

14.6
5
24.8
4

511.41
ACCEPTED

846.87
REJECTED

34.30

Page 35

PORTFOLIO REPORT OF FMCG AND PAINT SECTOR


COMPANY
Kansai Nerolac Paints
Ltd.
Jyothy Laboratories Ltd
Marico
Emami Ltd.

PRICE
1380
189
247.3
25.43

VOLUME INVESTMENT
14493
2.0 Cr
105820
80873
77519
TOTAL

2.0 Cr
2.0 Cr
2.0 Cr
8.0 Cr

JUSTIFICATION
We have chosen the above four companies as they are undervalued that is its individual P/E is
less than average P/E. And for the stocks whose P/E is overvalued, its LTPT is more than Price
as on July 9, 2014. Hence we have invested our 8 Crore in the above companies

MMS - Finance

Page 36

TECHNICAL ANALYSIS OF PAINT AND FMCG INDUSTRY


KANSAI NEROLAC

Kansai Nerolac Paints Ltd (BSE: 500165, NSE: KANSAINER) (formerly known as Goodlass
Nerolac Paints Ltd) is largest in industrial paint and second largest decorative paint company
based in Mumbai.[3][4][5] It is a subsidiary of Kansai nerolac paints, JAPAN.It is engaged in the
industrial, automotive and powder coating business. It develops and supplies paint systems used
on the finishing lines of electrical components, cycle, material handling equipment, bus bodies,
containers and furniture industries.
Kansai Nerolac Paints has 5 paint manufacturing plants and about 67 contract manufacturers.
The Nerolac owned plants are at 1. Jainpur (Uttarpradesh) 2. Bawal (Haryana) 3. Lote, Chiplun
(Maharastra) 4.Chennai (Tamil Nadu) 5. Hosur (Tamil Nadu)
Kansai Nerolac Paints Ltd. has entered into many technical collaborations with other industry
leaders such as E.I. Du-products.[9]
The Mumbai-based company is the leader in the industrial paints segment with a market share of
over 40%.[13] It is the third-largest player in the decorative paints segment with a modest market
share of 13%. Nearly 75% of the Indian paints industry consists of the decorative segment.[14]
Kansai Paint was founded by Katsujiro Iwai in Amagasaki City, Japan on May 1918.[15] Kansai
Paint is a comprehensive manufacturer of paints and coatings. The Products include- Automotive
Coatings, Industrial coatings, Decorative coatings, Protective coatings and Marine
Coatings. They are also present in U.K., Turkey, U.S.A, Canada, Mexico, UAE.[16]
Technologically innovative products are the company's hallmark. Kansai Nerolac Paint offers
differentiated products with a focus on being eco-friendly and healthy.[17] Kansai Nerolac Paints
key products and brands includes the following:

Decorative Paints: Interior wall paints, Exterior wall paints, Wood surface paints and
Metals surface paints.

MMS - Finance

Page 37

Automotive Coatings :Pre-Treatment Chemicals, Electrodepostition. Intermediate


Coats/Primer Surfacers, Topcoats, Clear Coats, Touch Up Paints, Auto Refinishing Products,
Heat Resistant Paints, Underbody Paints & PVC Sealants & Rapgard Transit Protection
Films.[18]
Performance Coatings: Performance Coating are available for wide range of products. For
household appliances and metal fittings in factories, there is a comprehensive range of
general industrial coating systems like P.T. chemicals, Primers and lacquers, Coil Coat, Heat
Resistant Paints & Metal Decoration Coatings. Powder Coating is now increasing in
popularity because of its high quality, resistance to corrosion, the apparent ease of
application and the environmental friendliness of the technology.

TECHNICAL ANALYSIS

ONE YEAR PRICE TREND

On analyzing Kansai Nerolac Paints Ltd. over a year, we observe that the company is showing an
upwards trend in the next half of the year.
As observed previously, the rate of change in EPS of Kansai Nerolac Paints Ltd. is also
considerably high which makes this counter more desirable to be a part of investor's portfolio.
In the end of March'14, the counter was trading at 1000's but recently i.e. after five months it in
now trading at 1700's and is showing an increasing trend, which indicates its positive
performance.

MMS - Finance

Page 38

JYOTHY LABORATORIES LTD

Jyothy Laboratories Ltd is a Mumbai-based fast-moving consumer goods company founded in


1983.[2][3] In 200910 the company reported a turnover of 5.82 billion (US$97 million) and
profit of 800 million (US$13 million).[1] The company has 21 manufacturing units at 14
locations
across
India.[4] The
company
originated
in Kandanassery,
near Guruvayur in Thrissur district of Kerala State by M P Ramachandran.[5] It has 6 business
divisions namely Fabric Care, Household Insecticide, Utensil Cleaners, Fragrances, Personal
Care and Fabric Care Service.[6] Ujala, Maxo, Exo, Jeeva and Maya are some of the brands it
owns under these divisions.[3] Ujala is the biggest brand in the company portfolio and
contributing up to 46% (in 2010) of the company revenues. The company is the largest player in
the fabric whitener space in India with a market share of 72%.[7] On 5 May 2011 Jyothy
Laboratories bought 50.97% stake in Henkel India. It has offered to buy 20% more in Henkel
India through a compulsory open offer mandated by SEBI norms[8][9]

TECHNICAL ANALYSIS
ONE YEAR PRICE TREND

MMS - Finance

Page 39

On analyzing Jyothy Laboratories over a year, we observe that the company is showing a
horizontal trend in the entire year. In the end of Sept'2013, the counter was trading at 150's and
showed and increasing trend towards March'2014 which indicates its positive performance.
As observed previously, the rate of change in EPS of Jyothy Laboratories is also considerably
high along with an undervalued P/E ratio which makes this counter more desirable to be a part of
investor's portfolio.
FIVE YEAR PRICE TREND

The five year price trend of Jyothy Laboratories shows that the counter considerably increased
from 120 to 340 in the year 2010. There onwards it is continuously showing a horizontal trend.
From the above graph it can be predicted that there is a scope for a potential growth of the
company in future prospects. The red mark shows the most ideal point at which the share can be
purchased, i.e. when it is at the lowest, while the green mark shows the ideal price, i.e.340 at
which the share can be sold.

MMS - Finance

Page 40

MARICO

Marico ( (BSE: 531642) is an Indian consumer goods company providing consumer products
and services in the areas of Health and Beauty based in Mumbai.
During 200910, the company generated a turnover of about Rs 26.6 billion (USD 600
million),[4] in respect of its food, hair care and skin care related activities. Marico's own
manufacturing facilities are located at Goa, Kanjikode, Jalgaon, Pondicherry, Dehradun, Baddi,
Paonta Sahib and Daman.
The organisation holds a number of brands including Parachute, Saffola, Hair&Care, Nihar,
Mediker, Revive, Manjal, Kaya Skin Clinic, Livon, Set Wet, Zatak, Fiancee,HairCode, Eclipse,
Xmen, Hercules, Caivil, Code 78 and Black Chic.
PARACHUTE
Parachute is the flagship brand of Marico which consists of edible grade coconut oil. Marico
manufactures and markets its coconut based hair oils under its popular brand Parachute
Advansed and a series of extensions thereof.
OTHERS
Marico's brands and their extensions occupy leadership positions with significant market shares
in a number of health and beauty areas.
Saffola is essentially blended refined edible oil which is claimed to be beneficial for Heart
health. It is marketed under the names of New Saffola, Tasty and Active. All of them contain
blended vegetable oils in various proportion. The main type of oils which are blended include
Rice Bran oil, Kardi oil or Safflower oil, Corn oil and Soya oil.
In addition to being a producer of consumer products the organisation also operates Kaya Skin
Clinic (of which (as of 2010) 81 exist in India, 13 in UAE) and 2 in Bangladesh. Marico recently
acquired the aesthetics business, of the Singapore based Derma Rx Asia Pacific Pte. Ltd. (Derma
Rx), under the Kaya portfolio. All the services offered at Skin Clinic are designed and supervised
by a team of over 250 dermatologists and carried out by certified skin practitioners who have
undergone more than 300 hours of training. The services are US FDA approved and tested inhouse, and conform to the highest international quality standards. Kaya Skin Clinic has over
600,000 satisfied customers.
MMS - Finance

Page 41

Harsh Mariwala is the chairman and MD of this organization. The company has 3 divisions the
Consumer Products Group(CPG), The International Business Group and Kaya Skin Clinic. CPB
is headed by Saugata Gupta. Kaya Skin Clinic is headed by Ajay Pahwa.
The company in recent years has been known for its foreign acquisitions in countries such as
South Africa, Egypt and Singapore. Marico Ltd has reported 27.36% increase in net profit at Rs
157.72 crore for the first quarter ended June 30, 2013.

TECHNICAL ANALYSIS
FIVE YEAR PRICE TREND

On analyzing Marico over five years, we observe that the company is showing a horizontal
upward trend in the from 2010 to 2014. In the mid 2014, the counter is trading at 270's and
increasing trend which indicates its positive performance.
The rate of change in EPS of Jyothy Laboratories is also considerably high along with an
undervalued P/E ratio which qualifies it to be 'accepted' to be purchased by the investor.

MMS - Finance

Page 42

EMAMI LTD.

Emami Limited is an Indian producer of fast moving consumer goods (FMCG), such as
cosmetics and health and baby products. The company is based in Kolkata.
The company is well known in India for its fairness cream products for men.
In 2008 the company announced that it intended to offer baby care products.
The company's health products unit offers tonics for colds and coughs as well as nutraceuticals.
The company forayed into men's deodrant market by launching HE brand of deodorants. Hrithik
Roshan was appointed as brand ambassador for HE brand. .[4]
The company has the following subsidiaries:

Emami Paper Mills Limited


Emami Chisel Art
CRI Limited
South City Projects (Kolkata) Ltd
Advanced Medicare & Research Institute Ltd (AMRI)
Frank Ross Limited
Emami Realty Limited
Emami Retail Pvt. Limited (Starmark)
Emami Biotech Limited
Emami Cement Ltd
AMRI Hospitals

MMS - Finance

Page 43

TECHNICAL ANALYSIS
FIVE YEAR PRICE TREND

As is it observed in the five year price trend, the graph of Emami is highly volatile. It steeply
rises upwards from 392 to 900 till the mid of the year 2010 and the stock suddenly fell down
back to 400, thereby showing a horizontal trend. The same trend is seen repeated in the year
2013 where the stock is suddenly falling down to 430(approx.) from 782 within a very short span
of time. Thus, keeping in mind the volatility of this stock, it can be concluded that it is safer to
buy the stock when it is at the lowest and to be sold when it has achieved a considerable high
mark in the market, without further waiting for the stock to grow up.

MMS - Finance

Page 44

CONCLUSION
LEARNING FROM THE PROJECT
This project has given me broad aspect to gain knowledge of the financial
activities. This project was a good exposure for us to get acquainted with the sector analysis as
well as other financial aspects i.e. equity markets, debt markets, mutual funds, derivatives, etc.
and how the work in the real life.
The proper Sector Analysis helped us in knowing which sectors are going to do
good in the days to come and thus choose those stocks which would protect our NAV from going
down ( Given the conditions of Bearish market) and thus we could successfully beat the
benchmark. The Technical Analysis charts helped in knowing the moving trends.

From the project it can be concluded that,


FMCG industry is a cyclical commodity industry where the profit and return on capital
is dependent on the demand cycle picture. Given the high potential growth, quite a few
foreign transnationals have been eyeing the Indian Markets and are planning to acquire
domestic companies. This could lead to higher prospects of growth to this sector in the
coming years.

This Internship and project has not only exposed us to do this research but has
also given us an opportunity to understand the corporate world, work culture and
professionalism, which would help us to excel in our career .
Our training program helped us to understand various aspects of training module.
We got knowledge of share market, mutual funds and our mentor advised to make project on
equity research or on IPO or on mergers and acquisitions or on mutual funds.

MMS - Finance

Page 45

SUGGESTIONS AND RECOMMENDATIONS


The companies which are able to taken into consideration must be analyzed well before investing
in it so that any future risk can be avoided wherein you will be sure of not losing any money and
will make profit with your money,
Choose the script with sound fundamentals and good track record.
According to recent developments and its performance an investor should select the sector to
invest.
Instead of relying on newspaper and news channel recommendation an investor should invest

after doing thorough study of the firm.

MMS - Finance

Page 46

BIBLIOGRAPHY
NEWSPAPER & BOOKS
The Economic Times
Business Standard

WEBSITES
www.birlasunlife.com
www.info.shine.com
www.moneycontrol.com
www.equitymaster.com
www.indiainfoline.com
www.moneyworks4me.com

www.investopedia.com

MMS - Finance

Page 47