A PROJECT REORT ON TECHNICAL ANALYSIS OF TATA-MOTORS

GROUP MEMBERS: - RAVI JAIKARI AKSHAY CHANAKYA SAHIL BHATIA ROBINSON SINGH SAHIL CHHIBBER HARPREET SINGH

FUNDAMENTAL ANALYSIS OF THE STOCK Tata Motors is a TATA Group subsidiary, with Tata Sons holding about 35% of the company. Tata Motors is amongst Indias largest car manufacturers. It also owns UK based Jaguar Land Rover, which it bought from Ford in 2008. It manufactures a wide range of heavy and light commercial vehicles, ranging from the Tata Nano, the worlds cheapest car to hi end vehicles under their Jaguar and Land Rover luxury brands.

Investment Rationale JLR has been performing very well over the past few years with impressive growth in sales and profits. Considering that JLR contributes less than half of turnover, but over 80% of profits to Tata Motors, this augurs very well for the future performance of Tata Motors stock. Tata Motors domestic operations are profitable as well. JLR is hiring staff, increasing investments in research and development, as well as adding manufacturing capacities. They are planning a slew of new launches, with over 50 new models in the pipeline due till 2015. We expect JLR to drive profitability and growth for Tata Motors over the next few years.

CONSOLIDATED (INRm) REVENUES EBITDA EBITDA MARGIN(%) ADJUSTED PAT ADJUSTED EPS(INR) P/E(x) EV/EBITDA(x) EV/SALES(x)

FY10 9,25,193 81,160 8.8 9,994 3.5 59.9 10.2 0.9

FY11 12,31,333 1,68,175 13.7 89,413 28 7.5 4.9 0.7

FY12 16,43,428 2,08,255 12.7 1,12,059 35.1 6 4 0.5

FY13 19,09,937 2,48,387 13 1,30,075 40.8 8 3.3 0.4

DOW THEORY
Dow Theory forms the cornerstone of the study of technical analysis, even in the face of todays sophisticated computer technology, and the proliferation of newer and supposedly better technical indicators. SIX BASIC TENETS OF DOW THEORY:1). The averages discount everything. The sum and tendency of the transactions of the Stock Exchange represent the sum of all Wall Streets knowledge of the past, immediate and remote, applied to the discounting of the future. 2). The market has three trends. Dow considered a trend to have three parts, primary, secondary, and minor, which he compared to the tide, waves, and ripples of the sea. The primary trend represents the tide, the secondary or intermediate trend represents the waves that make up the tide, and the minor trends behave like ripples on the waves. 3). Major trends have three phases. Major trends usually take place in three distinct phases: An accumulation phase: - The accumulation phase represents informed buying by the most astute investors. A public participation phase: - The public participation phase occurs when prices begin to advance rapidly and business news improves. A distribution phase: - The distribution phase takes place when newspapers begin to print increasingly bullish stories; when economic news is better than ever; and when speculative volume and public participation increase.

4). The averages must confirm each other. In referring to the Industrial and Rail Averages, Dow meant that no important bull or bear market signal could take place unless both averages gave the same signal, thus confirming each other. Both averages must exceed a previous secondary peak to confirm the inception or continuation of a bull market. 5). Volume must confirm the trend. Volume is recognized as a secondary but important factor in confirming price signals. Volume should expand or increase in the direction of the major trend. In a major uptrend, volume would then increase as prices move higher, and diminish as prices fall. In a downtrend, volume should increase as prices drop and diminish as they rally. 6). A trend assumed to be in effect until it gives definite signals that it has reversed.

This tenet forms much of the foundation of modern trend-following approaches. a number of technical tools are available to traders to assist in the difficult task of spotting reversal signals, including the study of support and resistance levels, price patterns, trend lines, and moving averages.

CURRENT TREND OF THE STOCK

T AT AMO T O R S (2 7 5 .3 0 0 , 2 7 8 .4 5 0 , 2 7 2 .5 5 0 , 2 7 3 .5 0 0 , -4 .3 5 0 0 1 ), D T T rn d lin e U p (s h o rte r te rm ) < a u to > (2 1 7 .0 9 0 ), D T T rn d lin e U p (lo n g e r te rm ) < a u to >

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35 000 30 000 25 000 20 000 15 000 10 000 19 26 2 2012 9 16 23 30 6 F e b ru a ry 13 21 27 5 Ma rc h 12 19 26 2 9 Ap ril 9 Ju ly 16 23 30 6 Au g u s t 13 21 27 3 10 S e p te m b e r 17 24

x 10 00 0 0 50 1 O c to b e r

EXPLANATION OF THE CHART The current Trend of the stock is upward, as we can see in the chart. Price is increasing but we have to wait till the market gives us further direction. If the price breeches the upward trend line, it will going to further move upward as it is a potential resistance for the stock.

N AND M FORMATION

EXPLANATION OF THE CHART

N FORMATION: - The N formation can be easily seen in the chart. This shows the bull run of the stock. If the stock breeches the level of Rs.229.70, we will buy the share. As in this case we will buy the share.

M FORMATION : - The chart above shows the M formation, which means the stock might fall. If the stock will cut its low of Rs.228.60 it will further fall. However in this case, the stock hasnt shown the same behaviour as after cutting the low of Rs. 228.60 the stock went up.

SUPPORT & RESISTANCE

In simple terms, support and resistance are areas on a stock chart that act as price barriers. Using them to your advantage can maximize your trading profits. Support and resistance are highly regarded in the world of technical analysis (analyzing stock charts) DEFINATION OF SUPPORTSupport is a price level on a stock chart where historically the stock has had difficulty falling below. The price level acts as a floor and prevents the price of the stock from falling any further. There are two ways the stock will test this level of support: 1. Either the stock will fall to this level and then "bounce" off of it and begin to rise again or... 2. The stock will fall to this level, break through it, and continue dropping until it finds another level of support, a resting spot so to speak.

DEFINATION OF RESISTANCEResistance in a sense is the opposite of support. Resistance is a price level on a chart where historically the stock has had difficulty rising above. This price level acts as a ceiling and prevents the stock from rising any further. The stock price will test the resistance area in the same two ways as it does an area of support. Either it will bump up against it and reverse in the down direction, or it will break through it and continue rising.

EXPLANATION OF THE CHART In the above chart we can see that the stock is in upward trend, the resistance level is near, and if the price breeches the resistance level the price might have the upward potential movement. Also the chart shows 2 support level, but in this case support level is too far to breech. If it breeches the first support level It might fell down further, however there is another level of support to it.

THE CONCEPT OF DIVERGENCE BETWEEN DEMAND INDEX AND PRICE

DIVERGENCE: - A divergence is said to occur when two readings are not moving generally together when they would be expected to. DIVERGENCE BETWEEN DEMAND AND PRICE INDEX:DEMAND INDEXDemand Index, DI, incorporates price and volume to give a ratio of buying pressure to selling pressure. 1. DI is often a leading indicator of price change, based on the general observation that volume tends to peak before prices do. 2. DI can be used with both daily and weekly data 3. DI is charted on an open scale and fluctuates above and below a zero line. When buying pressure is greater than selling pressure, the DI is above the zero line and vice versa. Signals DI offers the following types of signals: 1. Divergences between DI and price. A divergence between the DI and prices suggests an approaching change in the price trend. 2. Trend line analysis of DI showing levels of support/resistance can help determine changes in trend. As a leading indicator DI trend lines are often broken ahead of price trend lines 3. Zero-line crossings can confirm previous signals as a lagging indicator.

PRICE INDEX-(MONEY FLOW INDEX) Since the Money Flow Index uses volume in its calculation, this indicator can prove effective as a divergence indicator. The theory is as follows:

If price is rising, and the volume on up days is greater than the volume on down days, then this is confirming of the price rise. Likewise, if price is falling and the volume on down days is greater than the volume on up days, then the recent downward trend in stock prices is confirmed. In contrast, if prices rise, yet the volume on the up days is less than the volume transacted on down days, then money is secretly pouring out of the stock; this is a bearish divergence. And similarly, when prices fall, but the volume on the down days is less than the volume on up days, then money is flowing back into the stock, a bullish divergence.

EXPLANTAION OF THE CHART As the chart indicates there is no divergence between the price index and the demand index. This is because as we can see the price of the stock is falling and with that the demand index is also falling so there is no divergence to be seen.

POSSIBLE TRADE As we dont see any divergence between price and demand index so we will possible wait for any divergence or to wait for any N or M formation.

THE SIGNIFICANCE OF ON THE BALANCE VOLUME

On Balance Volume (OBV) combines price and volume to determine whether price movements are strong or are weak and lacking conviction. On Balance Volume is a simple calculation, which is given below: 1. On an up day, the volume is added to the previous day's OBV 2. On a down day, the volume is subtracted from the previous day's OBV. Volume is usually interpreted as follows:

Increasing or decreasing price accompanied by increasing volume, confirms the price trend. Increasing or decreasing price accompanied by decreasing volume, indicates that the price movement is weak and lacking conviction.

The On Balance Volume indicator is used mainly to confirm price trends or warn of potential price

EXPLANTAION OF THE CHART As the chart indicates there is no divergence between the price index, demand index and the OBV This is because as we can see the price of the stock is falling with the OBV and with that the demand index is also falling. Hence no possible trade to be made. Investor should wait for any divergence or any pattern to make a profitable trade.