A COMPREHENSIVE PROJECT REPORT ON EQUITY RESEARCH & TECHNICAL ANALYSIS OF IT SECTOR Submitted to (GIDC Rajju Shroff Rofel Institute

of Management Studies, Vapi)

IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION In Gujarat Technological University

UNDER THE GUIDANCE OF MRS. AABHA SINGHVI Lecturer (Finance) Submitted by BHAVESH PATEL: Enroll. No. 117160592050 NEHA DUBE : Enroll. No. 117160592053 [Batch: 2011-13] MBA SEMESTER III/IV MBA PROGRAMME Affiliated to Gujarat Technological University AHMEDABAD

Students Declaration

We Bhavesh Patel and Neha Dube hereby declare that the report for Comprehensive Project entitled EQUITY RESEARCH &

TECHNICAL ANALYSIS OF IT SECTOR is a result of our own work and our indebtedness to other work publications, references, if any, have been duly acknowledged.

Place: Vapi Date Patel

(Signature) Bhavesh

Neha Dube

Institutes Certificate

Certified that this Comprehensive Project Report Titled EQUITY RESEARCH & TECHNICAL ANALYSIS OF IT

SECTOR is the bonafide work of Mr. Bhavesh patel and Miss Neha Dube (Enrolment No. 117160592050,117160592053), who carried out the research under my supervision. I also certify further, that to the best of my knowledge the work reported herein does not form part of any other project report or dissertation on the basis of which a degree or award was conferred on an earlier occasion on this or any other candidate.

DATE: SINGHVI GRIMS, VAPI (Finance)

MRS. AABHA

Lecturer

This project report is forwarded for the evaluation to the Gujarat technological University.

DATE: GRIMS,

Director

Vapi

PREFACE

The report on Comprehensive Project has been prepared as per the guidelines students. Understanding of both practical and theoretical prescribed by college for MBA

knowledge is essential in this competitive world. The basic aim of this study in management field is to know how to apply management theories in practical. Therefore practicing this study is important for management students. Thus, it is our morale and obligatory duty to take this as a part of our study with great enthusiasm and seriousness and gives them due important. And lastly we received all the information and

cooperation from our guide Mrs Aabh singhvi who helped us a lot during our project work and also the staff and students of the college. We hope requirements. that this report will meet educational

ACKNOWLEDGEMENT

To acknowledge is very great way to show your gratitude towards the persons who have contributed in your success in one or other way. We would like to thank our Director DR. Pankaj Patel who has given us the opportunity. we would like to thank Mrs. Abha Singhvi, who has guided us for our project work and provided encouragement through out our Project work duration. We lack of words to thankful the entire faculty and staff of GRIMS, Vapi without which this project would be not a successful one. Last but not the least we are highly thankful to our parents, and also to operation. all dear friends for their friendly support and co-

Place: VAPI You DATE:

Thanking

Bhavesh patel Neha Dube

Executive Summary Equity Research & Technical Analysis is a study of the stock market relating to factors affecting the supply and demand of stocks. It help the investor to identify major market turning points.This is a significant Equity Research & technical analysis study of selected IT companies which helps to understand the price behaviour of the shares, the signals given by them and the major turning points of the market price. Any investor or trader must certainly consider technical analysis as a tool whether to buy the stock at a particular point of time though it is fundamentally strong. The objective of the present project is to make a study on the Equity Research & Technical analysis on selected stocks of IT sector and interpret on whether to buy or sell them by using techniques. This in turn would help investors to identify the current trend and risks involved with the scrip on par with market. The study is purely based on secondary sources which includes the historical data available from the website. For the purpose of analysis, statistical tools like Correlation Coefficient, & Co-efficient of determination, Multiple Regression Analysis and Least squares equation estimation using simple linear Regression, Technical Indicators Change, Moving and

like Relative Strength Index, Rate Of average convergence and divergence,

Accumulation Distribution Line, Simple Moving Average used to know if the stock is technically strong.

SR NO 1

3 4

5 6 7 8 9 10

PARTICULARS PART I GENERAL INFORMATION Introduction of Stock Exchange 1.1 History of Stock Exchange 1.2 Nature & Function of Stock Exchange 1.3 Need of Exchange 1.4 Security Exchange Board of India 1.4.1 Objective of SEBI 1.4.2 Salient Features SEBI 1.4.3 Function of SEBI 1.5 Bombay Stock Exchange 1.6 National Stock Exchange 1.6.1 Objectives of NSE 1.6.2 Benefits of Listing on NSE Introduction to CNX IT Index & IT Sectors 2.1) About CNX IT Index 2.2) Eligibility Criteria for Selection of Constituent 2.3) Index Governance 2.4) Functioning of Software segment Introduction of Companies PART II PRIMARY STUDY Introduction of Study 4.1) Literature Review 4.2) Background of the Study 4.2.1) Equity Research 4.2.2) Technical Analysis 4.3) Problem Statement 4.4) Objectives of the Study 4.5) Hypothesis Research Methodology Data Analysis and Interpretation Results and Findings Limitations of the Study Conclusion/Suggestions Bibliography

PAGE NO

8 10 11 12 12 12 13 15 17 17 18 19 19 19 22 31

38 41 32 44 50 50 50 51 53 88 90 91 92

1) HISTORY OF STOCK EXCHANGES

A centralized market for buying & selling stocks where the price is determined through supply- demand mechanism.

Though the historical records relating to securities market in India is meager and obscure, there is evidence to indicate that the loan securities of the East Indian Company used to be traded towards close of the 18th century. By 1830s, the trading in shares of banks started. The trader by the name of broker emerged in 1830 when 6 persons called themselves as share brokers. This number grew gradually. Till 1850, they traded in shares of banks and securities of the East India Company in Mumbai under a sprawling Banyan Tree in front of the Town Hall, which is now in the Horniman Circle Park. It is no surprise that the majestic Phiroze Jeejeebhoy Towers is located at the Horniman Circle. In 1850, the Companies Act introducing limited liability was enacted heralding the era of modern joint stock company which propelled trading volumes. The depression was so severe that it paved way for setting up of a formal market. The number of brokers, which had increased during the civil war to about 250, declined. During the civil war, they had become so influential and powerful that even the police had only salams for them. But after the end of the civil war, they were driven from pillar to post by the police. They moved from place to place till 1874 when they found a convenient place, which is now appropriately called Dalal Street after their name. They organized an informal association on or about 9th July 1875 for protecting their interests. On 3rd December 1887, they established a stock exchange called Native Share and Stock Brokers Association. This laid the foundation of the oldest stock exchange in India. The word native indicated that only natives of India could be brokers of the Exchange. In 1880s a number textile mills came up in Ahmedabad. This created a need for trading of shares of these mills.

In 1894, the brokers of Ahmedabad formed "The Ahmedabad Share and Stock Brokers' Association". As a result of Swadesi movement and the coal boom of 1904-08, Calcutta became another major center of share trading and an exchange was set up in 1908. During interwar years, as the demand for industrial goods kept increasing, existing enterprise expanded and new ones were floated. Yet another stock exchange was started in Madras in 1920. Stock exchanges in Hyderabad and Delhi started operations in the year 1943 and 1947, respectively. At the time of independence, there were seven stock exchanges functioning in major cities of the country.

The membership of stock exchanges was initially open to individuals and partnership firms and was later opened to companies. While the Bombay Stock Exchange, Ahmedabad Stock Exchange and Madhya Pradesh Stock Exchange, were organized as voluntary non-profit associations of persons, the Calcutta Stock Exchange, Delhi Stock Exchange, Uttar Pradesh Stock Exchange, and others including Ludhiana, Cochin, Gauhati, Jaipur and Manglore Stock Exchanges were organized as public limited companies. The governance of stock exchanges rests in a governing board comprising of the members of the board and an Executive Director. Earlier, the investor service levels were low and the regulatory laws inadequate. In the mid- eighties, the G.S. Patel committee on stock exchange reforms and the Abid Hussain Committee on capital markets recommended the creation of a second tier stock market. In 1991, the Department of Economic Affairs, Ministry of Finance, and Government of India to instituted an expert study: 1. Study the trading system, covering both specified and non-specified

shares on major stock exchange. 2. Review effectiveness of regulation and surveillance over trading operation, 3. Look in to the working of badla and its impact on trading, and 4. Make recommendations for investors for investor confidence. OTCEI arose out of the need to have a second tier market in the country. It was set up to provide small and medium companies an access to

capital market for raising finance in a cost-effective manner and investors with a convenient, transparent, and efficient avenue for capital market investment. The national reach of BSE and NSE and cutthroat competition between them, threatened the existence of the regional stock exchanges (RSEs). The survival of these RSEs, which once had a secure position, had now become a cause for concern. So these RSEs formed the Federation of Indian Stock Exchanges (FISE) in early 1996. The eroding market share, dwindling volumes, and declining profitability of members at the RSEs left the FISE with the two options: join the hands with the BOLT expansion plan or maintain status quo and wait until capital market revived.

1.1) NATURE & FUNCTIONS OF STOCK EXCHANGE

There is an extraordinary amount of ignorance and of prejudice born out of ignorance with regard to nature and functions of Stock Exchange. As economic development proceeds, the scope for acquisition and ownership of capital by private individuals also grow. Along with it, the opportunity for Stock Exchange to render the service of stimulating private savings and challenging such savings into productive investment exists on a vastly great scale. These are services, which the Stock Exchange alone can render efficiently. The Stock Exchanges in India have an important role to play in the building of a real shareholders democracy. To protect the interest of the investing public, the authorities of the Stock Exchanges have been increasingly subjecting not only its members to a high degree of discipline, but also those who use its facilities-Joint Stock Companies and other bodies in whose stocks and shares it deals. The activities of the Stock Exchange are governed by a recognized code of conduct apart from statutory regulations. Investors both actual and potential are provided, through the daily Stock Exchange quotations. The job of the Stock Exchange and its members is to satisfy the need of market for

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investments to bring the buyers and sellers of investments together, and to make the 'Exchange' of Stock between them as simple and fair as possible.

1.2) NEED FOR A STOCK EXCHANGE

As the business and industry expanded and economy became more complex in nature, a need for permanent finance arose. Entrepreneurs require money for long term needs, whereas investors demand liquidity. The solution to this problem gave way for the origin of 'stock exchange', which is a ready market for investment and liquidity. As per the Securities Contract Act, 1956, "STOCK EXCHANGE" means any body of individuals whether incorporated or not constituted for the purpose of regulating or controlling the business of buying, selling or dealing in securities".

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2) SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

Securities and Exchange Board of India (SEBI) setup as an autonomous regulatory authority by the Government of India in 1988 "to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto". It is empowered by two acts namely the SEBI Act, 1992 and the securities contract (regulation) Act, 1956 to perform the function of protecting investor's rights and regulating the capital markers. Securities and Exchange Board of India (SEBI) regulatory reach has been extended to more areas and there is a considerable change in the capital market. SEBI's annual report for 1997-98 has stated that throughout its six-year existence as a statutory body, it has sought to balance the twin objectives of investor protection and market development. It has formulated new rules and crafted regulations to foster development. Monitoring. and surveillance was put in place in the Stock Exchanges in 1996-97 and strengthened in 1997-98.

2.1)OBJECTIVES OF SEBI
The promulgation of the SEBI ordinance in the parliament gave statutory status to, SEBI in 1992. According to the preamble of the SEBI, the three main objectives are: To protect the interests of the investors in securities To promote the development of securities market. To regulate the securities market.

2.2) SALIENT FEATURES OF SEBI

The SEBI shall be a body corporate by the name having perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or by sued.

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The Head Office of the Board shall be at Bombay. The Board may establish offices at other places in India. In Bombay, the Board is situated at Mittal Court, B- Wing, 224, Nariman Point, Bombay-400 021.

The chairman and the Members of the Board are appointed by the Central Government.

The general superintendence, direction and management of the affairs of the Board are in a Board of Members, which may exercise all powers and do all acts and things which may be exercised or done by that Board.

The Government can prescribe terms of office and other conditions of service of the Chairman and Members of the Board. The members can be removed under section 6 of the SEBI Act under specified circumstances.

It is primary duty of the Board to protect the interest of the investor in securities and to promote the development of and to regulate the securities market by such measures, as it thinks fit.

2.3) FUNCTIONS OF SEBI

Regulating the business in Stock Exchange and any other securities market. Registering and regulating the working of Stock Brokers, SubBrokers, Share Transfer Agents, Bankers to the issue, Trustees to trust deeds, Registrars to an issue, Merchant Bankers, Underwriters, Portfolio Managers, Investment Advisers and such other Intermediaries who may be associated with securities market in any manner. Registering and regulating the working of collective investment schemes including Mutual Funds. Promoting and regulating self-regulatory organizations. Prohibiting fraudulent and unfair trade practices in the securities market. Promoting investor's education and training of intermediaries in securities market. Prohibiting Insiders Trading in securities. 13

Regulating substantial acquisition of shares and take-over of companies

Calling for information, understanding inspection, conducting enquiries and audits of the Stock Exchanges, Intermediaries and Self-Regulatory organizations in the securities market.

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3) BOMBAY STOCK EXCHANGE (BSE)

Bombay Stock Exchange Limited (the Exchange) is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporatised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the

BSE(Corporatisation and Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).Bombay Stock Exchange Limited received its Certificate of Incorporation on 8th August, 2005 and Certificate of Commencement of Business on 12th August, 2005. The 'Due Date' for taking over the business and operations of the BSE, by the Exchange was fixed for 19th August, 2005, under the Scheme. The Exchange has succeeded the business and operations of BSE on going concern basis and its recognition as an Exchange has been continued by SEBI. Since then, the stock market in the country has passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no measure or scale that could precisely measure the various ups and downs in the Indian stock market. Bombay Stock Exchange Limited (BSE) in 1986 came out with a Stock Index that subsequently became the barometer of the Indian Stock Market.

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SENSEX, first compiled in 1986 was calculated on a "Market Capitalization-Weighted" methodology of 30 component stocks representing a sample of large, well-established and financially sound companies. The base year of SENSEX is 1978-79. The index is widely reported in both domestic and international markets through print as well as electronic media. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. From September 2003, the SENSEX is calculated on a free-float market capitalization methodology. The "free-float Market Capitalization-Weighted" methodology is a widely followed index construction methodology on which majority of global equity benchmarks are based. The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised of 100 stocks listed at five major stock exchanges in India at Mumbai, Calcutta , Delhi , Ahmedabad and Madras . The BSE National Index was renamed as BSE-100 Index from October 14, 1996 and since then it is calculated taking into consideration only the prices of stocks listed at BSE. The Exchange launched dollar-linked version of BSE-100 index i.e. Dollex-100 on May 22, 2006. The Exchange also disseminates the Price-Earnings Ratio, the Price to Book Value Ratio and the Dividend Yield Percentage on day-to-day basis of all its major indices. The values of all BSE indices are updated every 15 seconds during the market hours and displayed through the BOLT system, BSE website and news wire agencies.

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4) NATIONAL STOCK EXCHANGE (NSE)

NSE was incorporated in 1992 and was given recognition as a stock exchange in April 1993. It started operations in June 1994, with trading on the wholesale debt market segment. Subsequently it launched Capital market segment in November 1994 as a trading platform for equities and the futures and options segment in June 2000 for various derivative instruments.

4.1) NSE was set up with the objectives of:

1. Establishing a nationwide trading facility for all type of securities: 2. Ensuring equal access to investors all over the country through an appropriate communication network. 3. Providing a fair, efficient and transparent securities market using electronic trading system 4. Enabling shorter settlement cycles and book entry settlements;

NSE has been able to take the stock market to the doorsteps of the investors. The technology has been harnessed to deliver the services to the investors across the country at the cheapest possible cost. It provides a nationwide, screen-based, automated trading system, with a high degree of transparency and equal access to investors irrespective of geographical location. The high level of information dissemination through online system has helped in integrating retail investors on a nationwide basis. The standards set by the exchange in terms of market practices, products, technology and service standards have become industry benchmark and are being replicated by other market participants. Within a very short span of 17

time, NSE has been able to achieve all the objectives for which it was set up. It has been playing a leading role as a change agent in transforming the Indian Capital Markets to its present form. The Indian Capital Market are a far cry from what they used to be a decade age in terms of market practices, infrastructure, technology, risk management, clearing and settlement and investor service.

4.2) Benefits of listing on NSE

NSE provides a trading platform that extends across length and breath of the country. Investors from approximately 345 centers can avail of trading facilities on the NSE trading network. Listing on NSE thus, enables issuers to reach and service investors across the country. NSE being the largest stock exchange in terms of trading volumes, the securities trade at low impact cost and are highly liquidity. This in turn reduces the cost of trading to the investor. The trading system of NSE provides unparallel level of trade and post information. The best five buy and sell orders are displayed on the trading system and the total number of securities available for buying and selling is also displayed. This helps the investor to know the depth of the market. Further, corporate announcements, results, corporate actions etc, are also available on the trading system, thus reducing scope for price manipulation or misuse. The facility of making initial public offer (IPOs), using NSEs network and software, results in significant reduction in cost and time of issues NSE s website www.nseindia .com provides a link to the websites of the companies that are list on NSE, so that visitors interested in any company can visit that companiys websites form the NSE sites. Listed companies are provided with monthly trade statistics for the securities of the company listed on the exchange. The listing fee is nominal.

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5) About CNX IT Index

Information Technology (IT) industry has played a major role in the Indian economy during the last few years. A number of large, profitable Indian companies today belong to the IT sector and a great deal of investment interest is now focused on the IT sector. In order to have a good benchmark of the Indian IT sector, IISL developed the CNX IT sector index. Companies in this index are those that have more than 50% of their turnover from IT related activities like software development, hardware manufacture, vending, support and maintenance. The index is a market capitalisation weighted index with its base period being December 1995 and the base date and base value being January 1, 1996 and 1,000 respectively.

5.1) Eligibility Criteria for Selection of Constituent

Stocks Companies must rank within the top 500 companies ranked by average free-float market capitalisation and aggregate turnover for the last six months. Companies should form a part of the IT sector. The companys trading frequency should be at least 90% in the last six

months.
The company should have reported a positive net worth. The company should have an investable weight factor (IWF) of at least

10%.
The company should have a listing history of 6 months. A company

which comes out with an IPO will be eligible for inclusion in the index, if it fulfills the normal eligibility criteria for the index for a 3 month period instead of a 6 month period.
Final selection of 20 companies shall be done based on the free-float

market capitalization of the companies

5.2) Index Govenance:

A professional team at IISL manages CNX IT Index. There is a three-tier governance structure comprising the Board of Directors of IISL, the Index Policy Committee, and the Index Maintenance Sub-Committee. 19

what exactly does IT cover? Anything involved with software, computers, networks, intranets, Web sites, servers, databases and telecommunications falls under the IT umbrella. IT is the technology that helps companies store, process and flow data within an organization. This sector ultimately serves other sectors like Banking, Manufacturing, Telecom, Hotels, Hospitals etc. to improve their efficiency and increase their revenues via customer satisfaction. Figure Title: IT SEGMENTWISE MARKET SHARE Figure no: 1

1. IT-

Software

These

companies

help

in

developing

and

implementation of different software for their clients worldwide. These software could be for documentation, security services, banking softwares etc. 2. ITeS Business process outsourcing (BPO) Major Corporations across the world outsource their back-office operations to some companies. E.g. Employee payroll for a US companys global workforce is maintained by an Indian BPO. Slowly the definition is

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expanding to Human resources, accounting, logistics, legal processes etc. 3. IT- Hardware and peripherals - The stuff you can actually see and touch, and would likely break if you threw it out a fifth-story window, is hardware. This would include laptops, desktops, Storage devices, Networking devices, LCD, printers etc. 4. IT- Education This segment provides training for employment in the other segments. This would include companies providing various certification courses, like Java, Oracle etc. These companies also provide training for employees in corporate sector. Recently, some companies have also expanded this service to cater to schools and colleges. This sector has made significant contributions to Indias economic growth in terms of GDP increase, foreign exchange earnings as well as employment generation. Its contribution to GDP has increased tenfold in last decade, from 0.6% to 6% till 2009-10. The sector has helped India transform from a rural and agriculture-based economy to a knowledge-based economy. Besides this, the lives of people have been positively influenced by direct or indirect contribution of IT sector to various parameters such as employment, standard of living, per-capita income etc. Table Title: TOP PLAYERS IN INDIAN IT INDUSTRY Table no: 1

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In India, the IT Software segment has seen significant growth and has put India on the global map. It contributes for almost 75% of the total revenues of the IT sector. Though Hardware enjoys second place in terms of market share in India, it is quite low as compared to global benchmark. The BPO segment has grown well and is expected to make a footprint in the IT Sector. Figure Title: Functioning of Software segment Figure no: 2

5.3) Functioning of Software segment is explained pictorially in the figure below:

The software sector is service-oriented and thus the products offered are 22

tailored to the requirement of its client. Hence, major input costs are those of human resources (forming almost 40% of the total costs) and research and development. Companies understand the requirements of clients and the product is developed accordingly. In the last ten years the IT sector in India has grown at an average annual rate of 28%. India has emerged as the preferred destination for IT services owing to the cost advantage and talent pool. India accounts for almost 51% of the global sourcing market. Exports contribute around 75% of the total revenue of the IT sector in India. However due to increased export-orientation and lesser domestic consumption the sector suffered major hit in the recession that shook the globe in 2008-09. In the year 2010, different economies began seeing recovery, but at varying pace. Indian companies have subsequently begun tapping other geographical markets and domestic consumption has also relatively increased.

Table Title: Comparing the Top Players Table no: 2

Comparing the Top Players

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As can be seen from the table above, Educomp Solutions has clocked the highest Sales CAGR of 99% in the past five years, followed by HCL Infosystems (50%), Infosys (24%) and Wipro (22%). However, the highest margins are enjoyed by the software majors Infosys (28%), closely followed by Educomp (27%) and TCS (24%).

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Figure Title: PORTERS FIVE FORCES MODEL Figure no: 3

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1. Easy availability of Talent pool and cost advantage The sector is human power and knowledge-oriented and this cost accounts for more than 40% of overall cost. Indians are considered to have better mathematical skills required for writing software. The easy availability of this talent pool makes it a long-term

advantage. Widespread knowledge of English makes this pool employable, as compared to other countries like China, Japan etc. Also, it is 5 to 8 times cheaper to employ an Indian technologist than one from developed countries and thus the business has been flowing to India over the years. 2. Process and Quality Nearly all the Indian software companies take CMM

(Capability Maturity Model) certification, which is the benchmark of quality management. Out of approximately 250 companies reaching supreme level i.e. level 5 of CMM, 60 are from India. This gives the impression of the company being dependable and hence, helps them tap the market easily. 3. Supportive government policies In early 1970s when Americans began looking offshore for software development, the government policies of India were not much supportive. However, post liberalisation the government recognised the potential and took supportive stance towards IT by reducing import tariff on Hardware and Software, developing Software Technology Parks and introducing legislative actions to protect intellectual property (e.g. Information technology act 2000). Indian government policies are framed in a way that ensures maximum benefit out of IT outsourcing to India.

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4. Unique geographic location The major consumer of IT products so far has been the US. The time difference between India and US is 12 hours and it offers economy of 24 hours a day by communication equipment. 1. Threat of new emerging service economies Along with India, Israel and Ireland carry most of the benefits for development of IT Sector. These countries are now taking up the market share and posing threat to Indian IT sector. Moreover, software sector of Korea, Taiwan, Philippine challenges India. 2. Emergence of China as substitute China is gradually emerging as a tough competitor in offshore IT services. China has begun offering better rates with reduced operational costs as compared to India, because of its low cost talent pool. The government of China is taking measures to improve the IT sector and to overcome the language barrier. Although China has not yet reached Indias revenue rate of USD 12.7 billion/year from Information technology services, Chinas IT and BPO sector is expected to grow 30 percent annually by 2013. Bill Gates has forecasted that software sector of China would reach Indias in 5 years. 3. Hardware Sector lagging behind India is the leader for Software and ITeS sector. However, the development of hardware sector has been lagging, due to it being a low margin business. Indian companies thus have to depend on foreign countries for their hardware requirement. 4. Poor Infrastructure for software, Greater ITeS, communication to grow at facilities faster are rate.

necessary

BPO

Communication network in India is far behind most of the western developed countries and worse than our closest competitor China. Arrival of 3G however, will give a relief to some extent.

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5. Concentrated market and Anti-outsourcing United States and United Kingdom have been the dominant market for Indian IT sector. This dependency and concentration on few markets resulted in sudden fall in demand towards the end of last decade on the aftermath of the recent global crisis. Also, countries have started raising their concerns regarding migration of jobs to India. Diversified client base would help reduce the dependency of the sector on few economies. 6. Domestic consumption Overseas market accounts for 75% of Indian software sector, mainly from software outsourcing. The demand for IT products within India has been very less, as compared to those by other countries. The environment necessary for further growth of software sector would come with domestic consumption of its products. 7. Exchange rate A major part of the Sector revenue is earned in Foreign currency (due to high exports) but it incurs expenses (e.g. employee salary) in Indian rupees. Thus, appreciation of rupee reduces revenues whereas depreciation increases the revenues. The fluctuating exchange rate brings volatility in operating margins for IT sector. After recession, the year 2010 has seen steady recovery by the sector. Global markets have seen a growth of 5% in GDP, with developing nations growing faster than developed nations. IT spend in 2011 is expected to grow nearly 4%. Worldwide IT spending will also benefit from the accelerated recovery in emerging market. According to NASSCOM, India can reach $ 130 Billion in IT revenue by 2015, with CAGR of 14%. With this, it would be contributing to 7% of annual GDP and creating 14.3 million employment opportunities. With the government taking active measures to stimulate the growth of IT sector and emergence of BPO and KPO over last few years, India is expected to climb the global value and knowledge chain. In long-term we can expect the Indian IT sector to see good growth. Different
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segments of the sector are set to experience different growth rates. BPO industry will experience high growth but the Software and ITeS segment is expected to see slower growth. However, on company basis each company has to compete against other domestic as well as global player. They have to adapt new business models to compete with global players e.g. Cloud, Ondemand services, and SaaS. With increased threat from countries like China, the companies will suffer loss unless they change business models. It is very important that while investing in a company, an investor selects a sector, where the long-term future prospects are bright. In the above case, we have seen that the IT sector is expected to have good growth in the long run. Also, it is equally important that the company has anexcellent financial track record( i.e. Green 10 Year XRay) and its long-term future prospects are Green (Very Good). *The 10 YEAR X-RAY facilitates analysis of the financial performance of the company considering the five most important parameters. A 10 Year period will normally encompass an entire business cycle. Analysing the performance over this time frame is essential to understand how a company has fared during the good as well as bad times. The five most important parameters that one needs to look at are Net Sales Growth Rate, EPS Growth Rate, Book Value Per Share (BVPS) Growth Rate, Return on Invested Capital (ROIC) and Debt to Net Profit Ratio. Given below is the MoneyWorks4me assessment for a few IT companies: At MoneyWorks4me we have assigned colour codes to the 10 YEAR X-RAY and Future Prospects of the companies, as Green (Very Good), Orange (Somewhat Good) and Red (Not Good).

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Table Title: ASSESSMENT FOR A IT COMPANY Table no: 3

While investing, one must always invest in a company that operates in a sector with bright long-term prospects. Further, the companys 10 YEAR XRAY and future prospects should also be Green. The table above gives you a list of few Indian companies from the IT Sector that you could consider investing in.

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6) INTRODUCTION OF IT COMPANIES 6.1) HCL TECHNOLOGIES

HCL Technologies Limited (HCL) (BSE: 532281, NSE: HCLTECH) is an Indian provider of Information technology (IT) services and consulting company headquartered in Noida, Uttar Pradesh, India. It is primarily engaged in providing a range of outsourcing services, business process outsourcing and infrastructure services. HCL Technologies is the largest IT company in India and is ranked 48 in the global list of IT services providers. HCL Technologies is one of more than 3,000 technology companies in the Bloomberg database. HCL Technologies is one of the seven companies with a revenue of more than $4.5 billion, a market capitalization of more than $5 billion, and a compounded annual growth rate greater than 25 per cent during the past five years.

History
HCL Technologies is one of three businesses which are separately listed in India falling under the corporate umbrella of HCL Enterprise with combined annual 2011 revenues of US$6 billion. HCL Enterprise was founded in 1976 and is one of India's original IT garage start ups.[citation needed] HCL Technologies formed in 1991 when HCL's R&D business was spun off to focus on the growing IT services industry. They have decided to vast their features in Information Technology all over the world. Over the last 20 years, HCL has expanded its service portfolio in IT applications (custom applications for industry solutions and package implementation), IT infrastructure management, and business process outsourcing, while maintaining and affecting product engineering.HCL Technologies is the first Indian IT garage start up.It is also the first company to address the needs of Indian Consumer Market.

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6.2) Infosys Limited

Infosys Limited (formerly Infosys Technologies Limited) is an Indian multinational provider of business consulting, technology, engineering, and outsourcing services. It is headquartered in Bangalore, Karnataka.[2] Infosys is the third-largest India-based IT services company by 2012 revenues. Of this revenue, the majority comes from international business. In 2009, Infosys collected 1.2% of its income from the domestic Indian market.

Infosys was co-founded in 1981 by N. R. Narayana Murthy, Nandan Nilekani, N. S. Raghavan, S. Gopalakrishnan, S. D. Shibulal, K. Dinesh and Ashok Arora after they resigned from Patni Computer Systems. The company was incorporated as "Infosys Consultants Pvt Ltd." in Model Colony, Pune as the registered office and signed up its first client, Data Basics Corporation, in New York. In 1983, Infosys corporate headquarters was relocated to Bangalore. In 1999, Infosys achieved Capability Maturity Model level 5 certification. In recent years, Infosys has begun shifting operations to the United States and other countries outside of India. In 2012, Infosys announced a new office in Milwaukee, Wisconsin to service Harley-Davidson, being the 18th international office in the United States.Infosys hired 1,200 United States employees in 2011, and expanded the workforce by an additional 2,000 employees in 2012.Globally, Infosys has 67 offices between the US, India, China, Australia, Japan, Middle East, UK, Germany, France, Switzerland, Netherlands, Poland, Canada.

6.3) Oracle Financial Services Software Limited

Oracle Financial Services Software Limited (formerly called i-flex Solutions Limited BSE: 532466) is a subsidiary of Oracle Corporation. It is an IT solution provider to the banking industry. It claims to have more than 900 customers in over 145 countries.Oracle Financial Services Software Limited is ranked No. 9 in IT companies of India and overall ranked No. 253 in Fortune India 500 list in 2011.

32

History
Part of Citicorp Oracle Financial Software Limited was a part of Citicorp's (now Citigroup) wholly owned subsidiary called Citicorp Overseas Software Ltd (COSL). In 1991, Mr. Ravi Apte carved out a separate company called Citicorp Information Technologies Industries Ltd. (CITIL) out of COSL and named Mr. Rajesh Hukku to head CITIL. While COSL's mandate was to serve Citicorps internal needs globally and be a cost center, CITIL's mandate was to be profitable by serving not only Citicorp but the whole global financial software market. COSL was the brain child of Mr. Ravi Apte, who convinced Citicorp, while working for Citibank, to start COSL as the offshore captive. Many of the executive management of Oracle Financial Services, including Rajesh Hukku, R.Ravisankar and NRK Raman were at COSL and moved to CITIL when it was formed. i-flex CITIL started off with the universal banking product MicroBanker (which became successful in some English speaking parts of Africa and other developing regions over the next 34 years) and the retail banking product Finware. In the mid-90s, CITIL developed FLEXCUBE at its Bangalore development center after a significant development effort spanning more than 18 months. After the launch of FLEXCUBE, all of CITIL's transactional banking products were brought under a common brand umbrella. CITIL changed its name to i-flex solutions to reflect its growing independence from Citicorp and to strengthen its FLEXCUBE brand. The name CITIL also made the prospective client banks hesitant about trusting the company with their data, since the name alluded to a close link with Citibank which could be one of their competitors. The first version of MicroBanker was created at COSL by Ravi Sankaran who migrated to Australia before CITIL was formed. COSL started selling MicroBanker to non-Citi banks in Africa. Ravi Apte the founder CEO of COSL decided to carve out CITIL to focus on non-Citi business. Because non-Citi was the primary target for MicroBanker, MicroBanker was moved to CITIL. Rajesh Hukku was in the United States managing COSL's business 33

development in North America during the time CITIL was formed. It was Mr. Apte who decided to get Hukku back to India to head the newly formed CITIL.[citation needed] This is previously Oracle Corporation Oracle Financial Services Software Bagmane Tech Park, Bangalore In 2006, i-flex became a majority-owned subsidiary of Oracle Corporation. Oracle built its stake through a series of purchases, first buying Citigroup's 41% stake in i-flex solutions for US$593 million in August 2005, a further 7.52% in March and April 2006, and 3.2 per cent in an open-market purchase in mid-April 2006. On 14 August 2006, i-flex solutions announced it would acquire Mantas, a US-based anti-money laundering and compliance software company for US$122.6 million. The company part-funded the transaction through a preferential share allotment to majority shareholder Oracle Corporation. Following its acquisition by Oracle, i-flex has begun an expansion plan reportedly to capitalize on its owner's brand and financial strength.[citation needed] It has invested to expand capacity at its existing locations in India which is reportedly sufficient to accommodate 17,000 employees compared with over 10000 staff already employed by the company in August 2007.[citation needed] On 12 January 2007, after an open offer price to minority shareholders, Oracle increased its stake in i-flex to around 83%. On 4 April 2008, the board of directors of i-flex solutions approved a proposal to change the name of the company to Oracle Financial Services Limited, subject to regulatory and shareholder approvals. A press release issued by the company said that "The proposed new name reflects the company's close strategic and operational alignment with its parent, Oracle Corporation, which owns 81 percent of the company." It added that the current management team under N.R.K. Raman, CEO and Managing Director, will continue to run the operations of the company. On 24 October 2010, Oracle announced the appointment of Chaitanya M Kamat (Chet Kamat) as Managing Director and Chief Executive Officer of Oracle Financial Services Software Limited. Mr. Kamat has also joined the

34

Board of Directors. The outgoing CEO and MD, N.R.K.Raman retired from these posts after 25 distinguished years of service.

6.4) WIPRO
Wipro Limited (formerly Western India Products Limited) (NYSE: WIT, BSE: 507685) is an information technology (IT) consulting and outsourcing service company located in Bangalore, Karnataka, India. As of 2012, the company had 140,000 employees in 54 countries.Wipro is the second largest IT services company in India. Its subsidiary, Wipro Enterprises Ltd., offers consumer care, lighting, healthcare, and infrastructure engineering.

In February 2002, Wipro became the first software technology and services company in India to be certified for ISO 14001 certification. Wipro also achieved ISO 9000 certification to become the first software company to get SEI CMM Level 5in 2002. Wipro Consumer Care and Lighting Group entered the market of Compact Fluorescent Lamps, with the launch of a range of CFL, under the brand name of Wipro Smartlite. As the company grew, a study revealed that Wipro was the fastest wealth creator for 5 years (19972002).The same year witnessed the launch of Wipros own laptops with Intel's Centrino mobile processor. Wipro also entered into an exclusive agreement with the owners of Chandrika for marketing of their soap in select states in India. It set up a wholly owned subsidiary company viz. Wipro Consumer Care Limited to manufacture consumer care and lighting products. In 2004, Wipro joined the billion dollar club. It also partnered with Intel for i-shiksha. The year 2006 saw Wipro acquire cMango Inc., a US based Technology Infrastructure Consulting firm[Enabler, and a Europe based retail solutions provider. In 2007, Wipro inked a large deal with Lockheed Martin. It also entered into a definitive agreement to acquire Oki Techno Centre Singapore Pte Ltd (OTCS) and signed an R&D partnership contract with Nokia Siemens Networks in Germany. The year 2008 saw Wipros foray into the clean energy business with Wipro Eco Energy. In April 2011, Wipro signed an agreement with Science Applications International Corporation (SAIC) for the acquisition of 35

their global oil and gas information technology practice of the commercial business services business unit. The year 2012 saw Wipro make its 17th acquisition in IT business when it acquired Australian analytics product firm Promax Applications Group (PAG) for $35 million.

6.5) Tata Consultancy Services

Tata Consultancy Services Limited (TCS) (BSE: 532540, NSE: TCS) is an Indian multinational information technology (IT) services, business solutions and outsourcing services company headquartered in Mumbai, Maharashtra. TCS is a subsidiary of the Tata Group and is listed on the Bombay Stock Exchange and the National Stock Exchange of India. It is one of India's most valuable companies and is the largest India-based IT services company by 2012 revenues. History 1968 to 2000 Tata Consultancy Services (TCS) was founded in 1968. Its early contracts included providing punched card services to sister company TISCO (now Tata Steel), working on an Inter-Branch Reconciliation System for the Central Bank of India, and providing bureau services to Unit Trust of India. In 1975, TCS conducted its first campus interviews, held at IISc, Bangalore. The recruits comprised 12 Indian Institutes of Technology graduates and three IISc graduates, who became the first TCS employees to enter a formal graduate trainee programme.

In 1979, TCS delivered an electronic depository and trading system called SECOM for the Swiss company SIS SegaInterSettle. TCS followed this up with System X for the Canadian Depository System and automating the Johannesburg Stock Exchange. TCS associated with a Swiss partner, TKS Teknosoft, which it later acquired.

In 1981, TCS established India's first dedicated software research and development center, the Tata Research Development and Design Center 36

(TRDDC) in Pune. In 1985 TCS established India's first client-dedicated offshore development center, set up for client Tandem.

In the early 1990s the Indian IT outsourcing industry grew rapidly due to the Y2K bug and the launch of a unified European currency, Euro. TCS created the factory model for Y2K conversion and developed software tools which automated the conversion process and enabled third-party developer and client implementation. 2000 to present By 2004, TCS's e-business activities were generating over US$500 million in annual revenues. On 25 August 2004 TCS became a publicly listed company. In 2005 TCS became the first India-based IT services company to enter the bioinformatics market. In 2006 TCS designed an ERP system for the Indian Railway Catering and Tourism Corporation. In 2008 TCS undertook an internal restructuring exercise which aimed to increase the company's agility.

TCS entered the small and medium enterprises market for the first time in 2011, with cloud-based offerings. On the last trading day of 2011, TCS overtook RIL to achieve the highest market capitalisation of any India-based company. In the 2011/12 fiscal year TCS achieved annual revenues of over U$10 billion for the first time.

37

PART TWO

4) Literature Review

(1)
Ravindra and wang in 2006 examined the relationship of trading volume to stock indices in Asian markets. stock market indices from 6 developing market in asia were analyzed over a 34 month periods ending in october 2005.In the south korean market the causality extends from the stock indices to trading volume,while the casuality was the opposite in the taiwanese market. Causality between stock index return and volumes in the asian equity market Ravindra, wang

(2)
Price and volume are simultaneously determined in equilibrium. Whatever process generates price also gives rise to the accompanying trading volume. Trading volume is also a widely available market statistic. Therefore, it is perhaps not surprising that both financial academics ~e.g., Blume et al. ~1994!! and practitioners ~e.g., various technical chartists! have recognized the potential usefulness of trading volume in investment decisions. Price Momentum and Trading Volume CHARLES M. C. LEE and BHASKARAN SWAMINATHAN

(3)
Using the multivariate statistical methods of principal component analysis and discriminate analysis, it aim to determine an accurate method for

classifying a companys stock as a good or a poor investment choice. Additionally, they will explore the possibilities for reducing the dimensionality of a complex financial and economic dataset while maintaining the ability to account for a high percentage of the overall variation in the data. A Multivariate Statistical Analysis of Stock Trends April Kerby James Lawrence ,Alma College Miami University Oxford, OH 38 Alma, MI

(4)
Article reports the results of a questionnaire survey conducted in February 1995 on the use by foreign exchange dealers in Hong Kong of fundamental and technical analyses to form their forecasts of exchange rate movements. Our findings reveal that>85% of respondents rely on both fundamental and technical analyses for predicting future rate movements at different time horizons. At shorter horizons, there exists a skew towards reliance on technical analysis as opposed to fundamental analysis, but the skew becomes steadily reversed as the length of horizon considered is extended. Technical analysis is considered slightly more useful in forecasting trends than fundamental analysis, but significantly more useful in predicting turning points. Interest rate-related news is found to be a relatively important fundamental factor in exchange rate forecasting, while moving average and/or other trend-following systems are the most useful technical technique." LUI, Y.H. and D. MOLE, 1998. The use of fundamental and technical analyses by foreign exchange dealers: Hong Kong evidence. Journal of International Money and Finance. [Cited by 53] 7.07

(5)
Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity. It is based on three assumptions: the market discounts everything, price moves in trends and history tends to repeat itself. Technicians believe that all the information they need about a stock can be found in its charts. Technical traders take a short-term approach to analyzing the market. One of the most important concepts used in technical analysis is that of a trend, which the general direction that a security is headed. Volume is the number of shares or contracts that trade over a given period of time, usually a day. The higher the volume, the more active the security. In study tools such as rate of change, relative strength index, and exponential moving average were used to analyze the data. Researcher finds that the selected securities had high fluctuations during the period. Finally the researcher concludes that technical analysis suitable to the short-term approach than the long term approach. 39

A Study on Technical Analysis with Special Reference to Cement Sector,K.S.Nemavathi

(6)
project is to make a study on the technical analysis on selected stocks of energy sector and interpret on whether to buy or sell them by using

techniques. This in turn would help investors to identify the current trend and risks involved with the scrip on par with market. The study is purely based on secondary sources which includes the historical data available from the

website. For the purpose of analysis, techniques like Beta, Relative Strength Index and Simple Moving average is used for the analysis to know if the stock is technically strong.

Technical Analysis on Selected Stocks of Energy Sector R. Chitra

40

4.2) INTRODUCTION

Technical Analysis helps to predict the direction of share price movement through the study of past market data, primarily price and volume. Technical analysts consider that prices of the securities are determined largely by forces of demand and supply. The technical analysts use charts, graphs, trends and moving averages to predict the direction and magnitude of price changes. Pricing, a leading technical analyst, provided a more specific definition that the trends are determined by the changing attitudes of investors towards the different economic, monetary, political, and psychological factors. However , sometimes, the share price of the company is subject to be influenced by investor sentiments. Hence, are required to consider the following factors while conducting Technical Analysis: Budget News; Announcement of Election news; Changes occurring in the parliament; Announcement of company results; Changes that have occurred in the management of a company; Announcement of stock Split, rights Issue, Bonus; Changes of interest rate by RBI.

41

4.2.1) Equity Research

A method that seeks to understand behavior by using complex mathematical and statistical modeling, measurement and research. By assigning a numerical value to variables, quantitative analysts try to replicate reality mathematically.

Coefficient of variance

Coefficient of variance helps to find out how big the securitys variance really is relative to the price of the stock. It compares the risk of assets with varying averages to their expected returns. The coefficient of variance divides a securitys standard deviation by mean price and multiplies it by 100.

Correlation Coefficient

The quantity r, called the linear correlation coefficient, measures the strength and the direction of a linear relationship between two variables. The linear correlation coefficient is sometimes referred to as the Pearson product moment correlation coefficient in honor of its developer Karl Pearson. The value of r is such that -1 < r < +1. The + and signs are used for positive linear correlations and negative linear correlations, respectively.

Co-efficient of determination

The coefficient of determination, r 2, is useful because it gives the proportion of the variance (fluctuation) of one variable that is predictable from the other variable. It is a measure that allows us to determine how certain one can be in making predictions from a certain model/graph. The coefficient of determination is the ratio of the explained variation to the total variation.

42

The coefficient of determination is such that 0 < r 2 < 1, and denotes the strength of the linear association between x and y

Regression analysis

Regression analysis is a statistical technique for estimating the relationships among variables. It includes many techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables. More specifically, regression analysis helps one understand how the typical value of the dependent variable changes when any one of the independent variables is varied, while the other independent variables are held fixed. Most commonly, regression analysis estimates the conditional expectation of the dependent variable given the independent variables that is, the average value of the dependent variable when the independent variables are fixed. Less commonly, the focus is on a quantile, or other location parameter of the conditional distribution of the dependent variable given the independent variables. In all cases, the estimation target is a function of the independent variables called the regression function. In regression analysis, it is also of interest to characterize the variation of the dependent variable around the regression function, which can be described by a probability distribution. Regression analysis is widely used for prediction and forecasting, where its use has substantial overlap with the field of machine learning. Regression analysis is also used to understand which among the independent variables are related to the dependent variable, and to explore the forms of these relationships. In restricted circumstances, regression analysis can be used to infer causal relationships between the independent and dependent variables.

43

4.2.2) Technical Analysis

Price of securities in the stock market fluctuate daily on account of continuous buying and selling. Stock prices move in trend and cycles and are never stable. An investor in the stock market is interested in buying securities at a low price and selling them at a high price so as to get a good return on his investment. A technical analyst believes that share prices are determined by the demand and supply forces operating in the market. These demand and supply forces in turn are influence by a number of fundamental factors as well as certain psychological or emotional factors. Many of these factors cannot be quantified. The combined impact of all these factors is reflected in the share price movement. A technical analyst therefore concentrates on the movement of share prices. He claims that by examining past share prices movement future share prices can be accurately predicted. Technical analysis is the name given to forecasting techniques that utilise historical share price data. The rationale behind technical analysis is that share price behavior repeats itself over time and analyst attempt to derive methods to predict this repetition. A technical analyst looks at the past share price data to see if he can establish ant patterns. The basic premise of technical analysis is that prices move in trends or waves which may be upward or downward. It is believed that the present trends are influenced by the past trends and that the projection of future trends is possible by an analysis of past price trends. A technical analyst, therefore, analyses the price and volume movements of individual securities as well as the market index. Thus, technical analysis is really a study of past or historical price and volume movement so as to predict the future stock price behavior.

44

Basic Principles of technical analysis

1. The market value of a security is related to demand and supply factors operating in the market. 2. There are both rational and irrational factors which surround the supply and demand factors of a security. 3. Security prices behave in a manner that their movement is continuous in a particular direction for some length of time. 4. Trends in stock prices have been seen to change when there is a shift in the demand and supply factors. 5. The shifts in demand and supply can be detected through charts prepared specially to show market action. 6. Patterns which are projected by charts record price movements and these recorded patterns are used by analysts to make factors about the movement of prices in future. 7.

Mathematical Indicators
Share prices do not rise or fall in straight line. The movements are erratic. This makes it difficult for the analyst to gauge the underlying trend. He can use the mathematical tool of moving averages to smoothen out the apparent erratic movements of share prices and highlight the underlying trend.

[A] Moving Averages

Moving averages are mathematical indicators of the underlying trend of the price movement. Two types of moving averages (MA) are commonly used by analysts- the simple moving average and the exponential moving average. The closing prices of shares are generally used for the calculation of moving average. 1. Simple Moving Average An average is the sum of prices of a share for a specific number of days divided by the number of days. In a simple moving average, a set of 45

averages are calculated for a specific number of days, each average being calculated by including a new price and excluding an old price.

[B] Oscillators
Oscillators are mathematical indicator calculated with the help of the closing price data. They help to identify overbought and oversold conditions and also the possibility of trend reversals. These indicators are called oscillators because they move across a reference point. 1. Rate Of Change Indicators (ROC) It is a very popular oscillator which measures the rate of change of the current price as compared to the price a certain number of days or weeks back. To calculate a 7 day rate of change, each days price is divided by the price which prevailed 7 days ago and then 1 is subtracted from this price ratio.

ROC=

Current Price____-1 Price n period ago.

The ROC value may be positive, negative or zero. An ROC chart the X axis represents the time and the Y axis represents the values of the ROC. The ROC values oscillate across the zero line. When the ROC line is above the zero line, the price is rising and when it is below the zero line, the price is falling.

Ideally, one should buy a share that is oversold and sell a share that is overbought. In the ROC chart, the overbought zone is above the zero line and the oversold zone is below the zero line. Many analysts use the zero line for identifying buying and selling opportunities. Upside crossing (from below to the zero line) indicates a buying opportunity, while a downside crossing (from above to below the zero line) indicates a selling opportunity.

46

2. Relative Strength Index (RSI) Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Traditionally, and according to Wilder, RSI is considered overbought when above 70 and oversold when below 30. Signals can also be generated by looking for divergences, failure swings and centerline crossovers. RSI can also be used to identify the general trend. This is a powerful indicator that signals buying and selling opportunities ahead of the market. RSI for a share is calculated by using the following formula.

RSI= 100-[100/(1+RS)]

Where, RS= Average Gain per day Average loss per day

The most commonly used time period for the calculated of RSI is 14days. For the calculation a 14 day RSI, the gain per day or loss per day is arrived at by comparing the closing price of a day with that of the previous day for a period of 14 days. The gain are added up and divided by 14 to get the average loss per day. The average gain per day and the average loss per day are used in the above formula for calculating the RSI for a day. In this way RSI values can be calculated for a number of days. In this way the RSI values for the subsequent days can be calculated by taking the closing prices of 14 previous days. The RSI values range from 0 t0 100.

The RSI values above 70 are consided to denote overbought condition and values below 30 are considered to denote oversold condition. When the RSI has crossed the 30 line from below to above and is rising, a buying opportunity is indicated. When it has crossed the 70 line from above to below and is falling, a sell signal is indicated.

47

3) ADL The Accumulation Distribution Line is a cumulative measure of each period's volume flow, or money flow. A high positive multiplier combined with high volume shows strong buying pressure that pushes the indicator higher. Conversely, a low negative number combined with high volume reflects strong selling pressure that pushes the indicator lower. Money Flow Volume accumulates to form a line that either confirms or contradicts the underlying price trend. In this regard, the indicator is used to either reinforce the underlying trend or cast doubts on its sustainability. An uptrend in prices with a downtrend in the Accumulation Distribution Line suggests underlying selling pressure (distribution) that could foreshadow a bearish reversal on the price chart. A downtrend in prices with an uptrend in the Accumulation Distribution Line indicate underlying buying pressure (accumulation) that could

foreshadow a bullish reversal in prices.

There are three steps to calculating the Accumulation Distribution Line (ADL). First, calculate the Money Flow Multiplier. Second, multiply this value by volume to find the Money Flow Volume. Third, create a running total of Money Flow Volume to form the Accumulation Distribution Line (ADL). 1. Money Flow Multiplier = [(Close - Low) - (High - Close)] /(High - Low) 2. Money Flow Volume = Money Flow Multiplier x Volume for the Period 3. ADL = Previous ADL + Current Period's Money Flow Volume 4) SMA An average is the sum of prices of a share for a specific number of days divided by the number of days, in a simple moving average a set of averages are calculated for a specific number of days, each average calculated by including a new price and excluding an old price. Closing price is lower than SMA indicate buy opportunity and vice varsa. 5) MACD The MACD indicater is the difference between two exponential moving averages (12 and 26 as default) and also has signal trigger or timing line(9 days EMA as default) MACD is all about convergence and divergence of two moving 48

averages. Convergence occur when moving averages move toward each other, and divergence occurs when moving averages move away from each other. the shortest moving average (12 days) is faster and is responsible for MACD movement.longer moving average(26 days) is slower and less reactive to price changes in underlying security. The MACD line oscillates above and below the zero line which is known as center line.

49

4.3) Statement of the Problem

Technical analysis is the most useful and consistent approach to trading in the markets. Technical analysis is the art and science of putting stock

information on a chart in the form of various kinds of bars and detecting different patterns indicators. While a lot of people know at least a little about technical analysis, very few really know how to use it. The main function of technical analysis is to show the currentAdvances In Management demandsupply position of the market or the particular stock, define risk and reward of each particular trade.

4.4 ) OBJECTIVES
To identify the relationship between the price movement of Top 5 IT companys Equity Shares & CNX IT using various statistical tools

To know the Coefficient of variance of the prices of Top 5 IT companys Equity Shares. To understand price movement of Top 5 IT companys stock price using various technical analysis indicators. To give suggestion to investors about investment opportunity using technical analysis.

4.5) Hypothesis
H0 : CNX Price index is independent of the share price of the TCS,WIPRO,INFOSIS,HCL and ORACLE FINCIAL SERVICE SOFTWARE H1 : CNX Price index is dependent of the share price of the TCS,WIPRO,INFOSIS,HCL and ORACLE FINCIAL SERVICE SOFTWARE

50

5) RESEACH METHODOLOGY

Significance of study

The Report was prepared to analyze the Performance Top 5 IT companys Equity Shares on CNX IT.

Data Collection Method

The collected data is OF nature. Data has been Internet, Research Articles

Secondary in collected from

Statistical Tools

Correlation Coefficient, & Co-efficient of determination, Multiple Regression Analysis and Least squares equation estimation using simple linear Regression

Technical Indicators

Relative Strength Index, Rate Of Change, Moving average convergence and

divergence, Accumulation Distribution Line, Simple Moving Average. Software MS Excel, SPSS

Scope of the Study

The scope of this project is limited to only one sector i.e. IT sector. This project is concerned with only one sector of

companies in the stock market. The project does not extend its scope to any other sector of companies.

Sample Size

Top Five IT company ( Based on Market Capitalization) were considered from the IT sector to analysis the price movement of company, name of the companies are as follows : TCS, Infosys , Wipro , HCL Tech , Oracle Finance. 51

Market Capitalization As on 17th march

Table Title: Top 5 IT as per Market Capitalization Table no:4 Market Cap
(Rs. cr)

Company Name TCS Infosys Wipro HCL Tech Oracle Financial

285,098.60 131,146.93 92,249.22 52,299.35 21,392.14

52

6 ) DATA ANALYSIS AND INTERPRETATION Multiple Regression Analysis H0 : CNX Price index is independent of the share price of the TCS,WIPRO,INFOSIS,HCL and ORACLE FINCIAL SERVICE SOFTWARE H1 : CNX Price index is dependent of the share price of the TCS,WIPRO,INFOSIS,HCL and ORACLE FINCIAL SERVICE SOFTWARE
The first table of interest is the Model Summary table. This table provides the R, R2, adjusted R2, and the standard error of the estimate, which can be used to determine how well a regression model fits the data: Table Title: Model Summary Table no: 5 Model Summary R Model 1 R 1.000a Square .999 Adjusted R Std. Error of Square .999 the Estimate 10.612

a. Predictors: (Constant), INFOSYS, ORACLE, WIPRO, HCL, TCS

The "R" column represents the value of R, the multiple correlation coefficient. R can be considered to be one measure of the quality of the prediction of the dependent variable; in this case, CNX IT index. A value of 1.000 , in this example, indicates a good level of prediction. The "R Square" column represents the R2 value (also called the coefficient of determination), which is 53

the proportion of variance in the dependent variable that can be explained by the independent variables (technically, it is the proportion of variation accounted for by the regression model above and beyond the mean model). You can see from our value of 0.999 that our independent variables explain 99.9% of the variability of our dependent variable, CNX IT INDEX VALUE. However, you also need to be able to interpret "Adjusted R Square" (adj. R2) to accurately report your data. We explain the reasons for this, as well as the output, in our enhanced multiple regression guide

Statistical significance The F-ratio in the ANOVA table (see below) tests whether the overall regression model is a good fit for the data. The table shows that the independent variables statistically significantly predict the dependent variable, F(5,117) = 4.676E4, p < .0005 (i.e., the regression model is a good fit of the data) Table Title: ANOVA Table no: 6 ANOVAb Sum of Model 1 Regressio n Residual Total Squares 2.633E7 13176.552 2.634E7 df 5 117 122 Mean Square 5265627.71 5 112.620 F 4.676E4 Sig. .000a

a. Predictors: (Constant), INFOSYS, ORACLE , WIPRO, HCL, TCS b. Dependent Variable: CNXIT

54

Estimated model coefficients The general form of the equation to predict CNX IT INDEX from HCL, WIPRO, TCS,ORACLE, INFOSYS is: predicted CNX IT = 692.542 - (0.459 x HCL) + (1.225x WIPRO) + (1.193 x TCS) + (0.061 x ORACLE)+(1.243 x Infosys) This is obtained from the Coefficients table, as shown below:

Table Title: Coefficients Table no: 7

Coefficientsa Unstandardized Coefficients Model 1 (Constant) HCL WIPRO TCS ORACLE INFOSYS B 692.542 .459 1.225 1.193 .061 1.243 Std. Error 38.849 .047 .090 .034 .009 .010 .061 .075 .267 .026 Standardized Coefficients Beta t 17.827 9.714 13.562 34.765 6.861 Sig. .000 .000 .000 .000 .000 .000

.651 122.359

a. Dependent Variable: CNXIT

Unstandardized coefficients indicate how much the dependent variable varies with an independent variable, when all other independent variables are held 55

constant. Consider the effect of HCL in this example. The unstandardized coefficient, B1, for HCL is equal to 0.459 (see Coefficients table). This means that for each in HCL price, there is a increase in CNX IT of 0.459 price

Statistical significance of the independent variables

You can test for the statistical significance of each of the independent variables. This tests whether the unstandardized (or standardized)

coefficients are equal to 0 (zero) in the population. If p < .05, you can conclude that the coefficients are statistically significantly different to 0 (zero). The t-value and corresponding p-value are located in the "t" and "Sig." columns. Table Title: Coefficients Table no: 8 Coefficientsa Unstandardized Coefficients Model 1 (Constant) HCL WIPRO TCSY ORACLE INFOSYS B 692.542 .459 1.225 1.193 .061 1.243 Std. Error 38.849 .047 .090 .034 .009 .010 .061 .075 .267 .026 Standardized Coefficients Beta t 17.827 9.714 13.562 34.765 6.861 Sig. .000 .000 .000 .000 .000 .000

.651 122.359

a. Dependent Variable: CNXIT

56

Putting it all together General

multiple

regression

was

run

to

predict These

CNX

IT

Index

value

HCL,WIPRO,TCS,ORACLE

INFOSYS,

variables

statistically

significantly predicted CNX IT Index, F(5, 117) = 4.676E4, p < .0005, R2 = 0.999. All four variables added statistically significantly to the prediction, p < .05 so CNX IT Index is dependent on the share price of value

HCL,WIPRO,TCS,ORACLE INFOSYS so null hypothesis is rejected.

57

CO-EFFICIENT OF DETERMINATION CNX IT INDEX AND STOCK PRICE OF IT COMPANYS & ALSO AMONGS THE TOP IT COMPANIES.

Table Title: Table no: 9.

CO-EFFICIENT OF DETERMINATION

CORRELATION

CNX

INFOSYS HCL

ORACLE TCS

WIPRO

INFOSYS

0.972268

1 0.696834 0.028764 0.725663 0.682169

HCL

0.806921

0.696834

1 0.102503 0.785494

0.78322

ORACLE

0.063636

0.028764 0.102503

1 0.292417 0.002809

TCS

0.84282

0.725663 0.785494 0.292417

1 0.582151

WIPRO

0.753631

0.682169

0.78322 0.002809 0.582151

Co- Efficient of determination for company INFOSYS, HCL,TCS and WIPRO are good as our independent variables explain 97.22 %, 80.69

%,84.28%,75.36%

of the variability of our dependent variable and co-

efficient of determination for oracle is very low as only 0.063636 it is not good as it can explain only 6.36 % of variability of our dependent variable.

58

CORRELATION BETWEEN CNX IT INDEX AND STOCK PRICE OF IT COMPANYS & ALSO AMONGS THE TOP IT COMPANIES.
Table Title:

CORRELATION COEFFICIENT

Table no: 10

CORRELATION CNX

INFOSYS HCL

ORACLE

TCS

WIPRO

INFOSYS

0.986037

0.834766

-0.1696

0.851859 0.825935

HCL

0.898288

0.834766

-0.32016

0.886281 0.884997

ORACLE

-0.25226

-0.1696

-0.32016

-0.54076

-0.053

TCS

0.918052

0.851859

0.886281

-0.54076

1 0.762988

WIPRO

0.868119

0.825935

0.884997

-0.053

0.762988

Above Table shows the correlation between the CNX IT index price and the IT companys share price and also the correlation among the IT company them self. From the above correlation matrix we can say that Infosys, HCL, TCS,WIPRO prices are positively correlated with the CNX IT price index but ORACLE is negatively correlated with the CNX IT price index and further It was found that the share price of INFOSYS(0.986037) and TCS(0.918052) are positively highly correlated with the CNX IT price index.It is also found that all the above 4 companys share price are positively correlated with each others share price accept the price of ORACLE which negatively correlated with share price of other 4 company. 59

Table Title: COEFFICIENT OF VARIANCE Table no: 11

INFOSYS MEAN 2576.687805

HCL 661.4626016

ORACLE 3008.210163

TCS

WIPRO

1357.662602 392.962602

SD

243.1266479

61.51537513

198.8713138

104.0527421 28.2698933

variance

59110.56694

3784.141377

39549.79947

10826.97314 799.186869

coeff.var

9.435626912

9.299902213

6.610951466

7.664109034 7.19404167

From the above Coefficient of variance Matrix it can be inferred that ORACLEs better and less risky as compared to the share price of its peer company as the coefficient of variance for ORACLE is very less compared to others. It can also be inferred that INFOSYS(9.43) is very risky among above 5 companies. It can also be said that the TCS(7.66) and (7.19 )WIPRO s share price less better and little risky than the ORACLEs share price but is less risky and good than the share price of the other 2 company i.e. INFOSYS(9.43 ) and HCL(9.30) as C.V of TCS(7.66) and (7.19)WIPROs stock price is less than that of INFOSYS(9.43 ) and HCL(9.30)

60

LEAST SQUAR EQUATION ESTIMATION OF IT COMPANIES

Table Title: 1) TCS

LEAST SQUAR EQUATION ESTIMATION

Table no: 12 B0 24.75491 B1 0.205581 X MEAN 6483.63 Y MEAN 1357.66

Y = B0 +B1x Y = 24.75491 + 0.205581( CNX IT RETURN) 2) INFOSYS Table no: 13 B0 -768.378 B1 0.515925 X MEAN 6483.63 Y MEAN 2576.69

Y = B0+B1x Y = -768.378 + 0.515925(CNX IT) 3 ) WIPRO Table no: 14

B0 50.52401

B1 0.052401

X MEAN 6483.63

Y MEAN 392.96

Y = B0+B1x 61

Y = 50.52401 + 0.052401( CNX IT )

4) HCL TECH

Table no: 12

B0 -109.58

B1 0.118922

X MEAN 6483.63

Y MEAN 661.46

Y = B0 +B1x Y = -109.58 + 0.118922( CNX IT)

5) ORACLE FINANCIAL

Table no: 12 B0 3708.22 B1 -0.10797 X MEAN 6483.63 Y MEAN 3008.21

Y = B0 +B1x Y = 3708.22 + -0.10797( CNX IT)

62

TECHNICAL ANALYSIS OF IT COMPANIES

1) TCS
Figure Title: TCS RSI Figure no: 4

RSI
100 90 80 70 60 50 40 30 20 10 0

SELL

RSI

BUY

Interpretation: In the above RSI chart at 26th nov RSI is Below 30 and moving up which indicate the BUY Opportunity it indicate the rise in rice in near future, around 26 feb RSI falling from 70 which indicate fall in the price of sell so it indicate sell opportunity.

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13 12-Feb-13 18-Feb-13 22-Feb-13 28-Feb-13 06-Mar-13

63

Figure Title: ROC Figure no: 5

ROC
0.08 0.06 0.04 0.02 0 -0.02 -0.04 -0.06 -0.08 ROC

BUY

SELL

Interpretation: In the above ROC chart ROC line crossing 0 from below moving up which indicate increase in price of stock in near future so there is a buy opportunity and on 6th march ROC line crossing 0 from above moving down which indicate decrease in price of stock in coming future which indicate selling opportunity.

Date 08-Oct-12 15-Oct-12 22-Oct-12 30-Oct-12 06-Nov-12 13-Nov-12 21-Nov-12 29-Nov-12 06-Dec-12 13-Dec-12 20-Dec-12 28-Dec-12 04-Jan-13 11-Jan-13 18-Jan-13 25-Jan-13 01-Feb-13 08-Feb-13 15-Feb-13 22-Feb-13 01-Mar-13 08-Mar-13 15-Mar-13

64

Figure Title: MACD Figure no: 6

70 60 50 40 30 20 10 0 -10 -20 -30 -40

70

SELL

BUY

60 50 40 30 20 10 0 9 EMA 12 EMA -26 EMA

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13

-10 -20 -30 -40

Interpretation: In the above MACD chart on 10th dec MACD line crossing Trend line is 9 days EMA from above which indicate downtrend and fall in price near future indicating selling opportunity and MACD crossing Trend line 19 Days SMA from below it indicate uptrend indicating increase in price in near future so there is a buy Opportunity.

Figure Title: ADL Figure no: 7 65

4500000 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0

16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 -2000000 -4000000 -6000000

Increase Buying Pressure + Price

Total Traded Quantity ADL

Increase in selling pressure -Price

Interpretation:

In the above ADL chart ADL line indicate as there is selling pressure and buying pressure in the stock, ADL line falling down form 5th dec which indicate the increase in the selling pressure which also indicate fall in price of stock in coming future and on 14th feb ADL moving up which indicate increase in the buying pressure which further indicate the increase in the price of the stock in coming future. Figure Title: SMA Figure no: 8

Date 10-Oct-12 19-Oct-12 31-Oct-12 09-Nov-12 21-Nov-12 03-Dec-12 12-Dec-12 21-Dec-12 02-Jan-13 11-Jan-13 22-Jan-13 31-Jan-13 11-Feb-13 20-Feb-13 01-Mar-13 12-Mar-13 21-Mar-13

66

1800 1600 1400 1200 1000 800 600 400 200 0

SELL

5 DAYS MA Close Price

BUY

Interpretation:

In the above chart represent the Simple Moving Average (SMA). In Simple Moving averages can be used to identify the direction of the trend. In these, at the date of 3 dec the closing price is below the simple moving average uptrend so the shares can be best to buy. In above chart at the date of 28 feb the sell signal is generated because closing price is above the simple moving average.

2 ) INFOSYS
Figure Title: RSI

Date 08-Oct-12 15-Oct-12 22-Oct-12 30-Oct-12 06-Nov-12 13-Nov-12 21-Nov-12 29-Nov-12 06-Dec-12 13-Dec-12 20-Dec-12 28-Dec-12 04-Jan-13 11-Jan-13 18-Jan-13 25-Jan-13 01-Feb-13 08-Feb-13 15-Feb-13 22-Feb-13 01-Mar-13 08-Mar-13 15-Mar-13

67

Figure no: 9

RSI
100 90 80 70 60 50 40 30 20 10 0 RSI

SELL

BUY

Interpretation: In the above RSI chart at 5th dec RSI is Below 30 and moving up which indicate the BUY Opportunity it indicate the rise in rice in near future, around 19 feb RSI falling from 70 which indicate fall in the price of sell so it indicate sell opportunity.

Date 08-Oct-12 15-Oct-12 22-Oct-12 30-Oct-12 06-Nov-12 13-Nov-12 21-Nov-12 29-Nov-12 06-Dec-12 13-Dec-12 20-Dec-12 28-Dec-12 04-Jan-13 11-Jan-13 18-Jan-13 25-Jan-13 01-Feb-13 08-Feb-13 15-Feb-13 22-Feb-13 01-Mar-13

Figure Title: ROC Figure no: 10

68

ROC
0.25 0.2 0.15

BUY
0.1

SELL
ROC

0.05 0 -0.05 -0.1

Interpretation: In the above ROC chart ROC line crossing 0 from below moving up on 9th nov which indicate increase in price of stock in near future so there is a buy opportunity and on 23rd feb ROC line crossing 0 from above moving down which indicate decrease in price of stock in coming future which indicate selling opportunity.

Figure Title: MACD Figure no: 11

Date 08-Oct-12 15-Oct-12 22-Oct-12 30-Oct-12 06-Nov-12 13-Nov-12 21-Nov-12 29-Nov-12 06-Dec-12 13-Dec-12 20-Dec-12 28-Dec-12 04-Jan-13 11-Jan-13 18-Jan-13 25-Jan-13 01-Feb-13 08-Feb-13 15-Feb-13 22-Feb-13 01-Mar-13 08-Mar-13 15-Mar-13

69

250 200

300

BUY SELL

250 200 150

150 100

100 50 50 0 -50 -100

9 EMA 12 EMA -26 EMA

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13

0 -50 -100

Interpretation: In the above MACD chart on 9th nov MACD line crossing Trend line is 9 days SMA from above which indicate downtrend and fall in price near future indicating selling opportunity and on 19th dec MACD crossing Trend line 9 Days SMA from below it indicate uptrend indicating increase in price in near future so there is a buy Opportunity.

Figure Title: ADL Figure no: 12

70

14000000 12000000 10000000 8000000 6000000 4000000 2000000 0

16000000 14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 -2000000 -4000000 Total Traded Quantity ADL

Increase Selling Pressure - Price

Interpretation:

In the above ADL chart ADL line indicate as there is selling pressure and buying pressure in the stock, ADL line falling down form 15th jan which indicate the increase in the selling pressure which also indicate fall in price of stock in coming future and on 12 dec ADL moving up which indicate increase in the buying pressure which further indicate the increase in the price of the stock in coming future.

Figure Title: SMA Figure no: 13

Date 11-Oct-12 23-Oct-12 05-Nov-12 16-Nov-12 29-Nov-12 11-Dec-12 21-Dec-12 03-Jan-13 15-Jan-13 25-Jan-13 06-Feb-13 18-Feb-13 28-Feb-13 12-Mar-13 22-Mar-13

Increase Buying Pressure + Price

71

3500 3000 2500 2000 1500 1000 500 0

SELL

BUY

5 DAYS MA Close Price

In the above chart represent the Simple Moving Average (SMA). In Simple Moving averages can be used to identify the direction of the trend. In these, at the date of oct 5 the closing price is below the simple moving average uptrend so the shares can be best to buy. In above chart at the date of 4 jan the sell signal is generated because closing price is above the simple moving average.

3) WIPRO

Figure Title: RSI Figure no: 14

Date 08-Oct-12 15-Oct-12 22-Oct-12 30-Oct-12 06-Nov-12 13-Nov-12 21-Nov-12 29-Nov-12 06-Dec-12 13-Dec-12 20-Dec-12 28-Dec-12 04-Jan-13 11-Jan-13 18-Jan-13 25-Jan-13 01-Feb-13 08-Feb-13 15-Feb-13 22-Feb-13 01-Mar-13 08-Mar-13 15-Mar-13

72

RSI
90 80 70 60 50 40 30 20 10 0 RSI

SELL

BUY

Interpretation:

In the above RSI chart at 10 oct RSI is Below 30 and moving up which indicate the BUY Opportunity it indicate the rise in rice in near future, around 31 dec RSI falling from 70 which indicate fall in the price of sell so it indicate sell opportunity.

Figure Title: ROC Figure no: 15

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13 12-Feb-13 18-Feb-13 22-Feb-13 28-Feb-13 06-Mar-13

73

ROC
0.1 0.08

SELL
0.06 0.04 0.02 0 -0.02 -0.04 -0.06 -0.08 -0.1 ROC

Interpretation: In the above ROC chart ROC line crossing 0 from below moving up on 17 oct which indicate increase in price of stock in near future so there is a buy opportunity and on 5 march ROC line crossing 0 from above moving down which indicate decrease in price of stock in coming future which indicate selling opportunity.

Figure Title:MACD Figure no:16

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13 12-Feb-13 18-Feb-13 22-Feb-13 28-Feb-13 06-Mar-13 12-Mar-13

BUY

74

16 14 12 10 8 6 4 2 0 -2 -4 9 EMA 12 EMA -26 EMA

SELL BUY
Date 08-Oct-12 15-Oct-12 22-Oct-12 30-Oct-12 06-Nov-12 13-Nov-12 21-Nov-12 29-Nov-12 06-Dec-12 13-Dec-12 20-Dec-12 28-Dec-12 04-Jan-13 11-Jan-13 18-Jan-13 25-Jan-13 01-Feb-13

Interpretation: In the above MACD chart on 10th dec MACD line crossing Trend line is 9 days SMA from above on 19 oct which indicate downtrend and fall in price near future indicating selling opportunity and MACD crossing Trend line 9 Days SMA from below on 12 nov it indicate uptrend indicating increase in price in near future so there is a buy Opportunity.

Figure Title:ADL Figure no: 17

75

9000000 8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0

2000000 0 -2000000 -4000000 -6000000 -8000000 -1000000 -1200000

Increasing Buying Pressure + Price

Total Traded Quantity ADL

Interpretation:

In the above ADL chart ADL line indicate as there is selling pressure and buying pressure in the stock, ADL line falling down from 23 oct which indicate the increase in the selling pressure which also indicate fall in price of stock in coming future and on 23 dec ADL moving up which indicate increase in the buying pressure which further indicate the increase in the price of the stock in coming future.

Figure Title: SMA Figure no: 18

Date 10-Oct-12 19-Oct-12 31-Oct-12 09-Nov-12 21-Nov-12 03-Dec-12 12-Dec-12 21-Dec-12 02-Jan-13 11-Jan-13 22-Jan-13 31-Jan-13 11-Feb-13 20-Feb-13 01-Mar-13 12-Mar-13 21-Mar-13

Increasing Selling Pressure - Price

76

500 450 400 350 300 250 200 150 100 50 0

SELL

BUY
5 DAYS MA Close Price

Interpretation:

In the above chart represent the Simple Moving Average (SMA). In Simple Moving averages can be used to identify the direction of the trend. In these, at the date of 11 jan the closing price is below the simple moving average uptrend so the shares can be best to buy. In above chart at the date of 28 feb the sell signal is generated because closing price is above the simple moving average.

4)HCL
Figure Title: RSI Figure no: 19

Date 08-Oct-12 15-Oct-12 22-Oct-12 30-Oct-12 06-Nov-12 13-Nov-12 21-Nov-12 29-Nov-12 06-Dec-12 13-Dec-12 20-Dec-12 28-Dec-12 04-Jan-13 11-Jan-13 18-Jan-13 25-Jan-13 01-Feb-13 08-Feb-13 15-Feb-13 22-Feb-13 01-Mar-13 08-Mar-13 15-Mar-13

77

RSI
100 90 80 70 60 50 40 30 20 10 0 RSI

SELL

BUY

Interpretation:

In the above RSI chart at 21 jan RSI is Below 30 and moving up which indicate the BUY Opportunity it indicate the rise in rice in near future, around 27 feb RSI falling from 70 which indicate fall in the price of sell so it indicate sell opportunity.

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13 12-Feb-13 18-Feb-13 22-Feb-13 28-Feb-13 06-Mar-13

Figure Title: ROC Figure no: 20

78

ROC
0.14 0.12 0.1 0.08 0.06 0.04 0.02 0 -0.02 -0.04 -0.06 -0.08 ROC

BUY SELL

Interpretation: In the above ROC chart ROC line crossing 0 from below moving up on 24 dec which indicate increase in price of stock in near future so there is a buy opportunity and on 11 march ROC line crossing 0 from above moving down which indicate decrease in price of stock in coming future which indicate selling opportunity.

Figure Title: MACD Figure no: 21

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13 12-Feb-13 18-Feb-13 22-Feb-13 28-Feb-13 06-Mar-13 12-Mar-13

79

25

30

BUY
20 15 10 10 5 0 -5 5 0 -5 25

SELL

20 15 9 DAYS EXP MOV AVG 12-26 EXP MOV AVG

Interpretation: In the above MACD chart on 29 nov MACD line crossing Trend line is 19 days SMA from above which indicate downtrend and fall in price near future indicating selling opportunity and MACD crossing Trend line 19 Days SMA from below on 10 jan it indicate uptrend indicating increase in price in near future so there is a buy Opportunity.

Date 09-Oct-12 17-Oct-12 26-Oct-12 05-Nov-12 13-Nov-12 22-Nov-12 03-Dec-12 11-Dec-12 19-Dec-12 28-Dec-12 07-Jan-13 15-Jan-13 23-Jan-13 31-Jan-13 08-Feb-13 18-Feb-13 26-Feb-13 06-Mar-13 14-Mar-13 22-Mar-13

Figure Title: ADL Figure no: 22

80

12000000

14000000 12000000 10000000

10000000

Increasing selling pressure -price

8000000 8000000 6000000 6000000 4000000 4000000 2000000 2000000 0 Total Traded Quantity ADL

Increasing selling pressure +price

Interpretation:

In the above ADL chart ADL line indicate as there is selling pressure and buying pressure in the stock, ADL line falling down form 17 jan which indicate the increase in the selling pressure which also indicate fall in price of stock in coming future and on 27 feb ADL moving up which indicate increase in the buying pressure which further indicate the increase in the price of the stock in coming future.

Figure Title: SMA Figure no: 23

Date 11-Oct-12 23-Oct-12 05-Nov-12 16-Nov-12 29-Nov-12 11-Dec-12 21-Dec-12 03-Jan-13 15-Jan-13 25-Jan-13 06-Feb-13 18-Feb-13 28-Feb-13 12-Mar-13 22-Mar-13

81

900

SELL
800 700 600 500 400 300 200 100 0 5 DAYS MA

BUY

Close Price

Interpretation:

In the above chart represent the Simple Moving Average (SMA). In Simple Moving averages can be used to identify the direction of the trend. In these, at the date of 7 feb the closing price is below the simple moving average uptrend so the shares can be best to buy. In above chart at the date of 13 march the sell signal is generated because closing price is above the simple moving average.

5)ORACLE FINANCIAL SERVICE SOFTWARE

Date 08-Oct-12 15-Oct-12 22-Oct-12 30-Oct-12 06-Nov-12 13-Nov-12 21-Nov-12 29-Nov-12 06-Dec-12 13-Dec-12 20-Dec-12 28-Dec-12 04-Jan-13 11-Jan-13 18-Jan-13 25-Jan-13 01-Feb-13 08-Feb-13 15-Feb-13 22-Feb-13 01-Mar-13 08-Mar-13 15-Mar-13 22-Mar-13

Figure Title: RSI 82

Figure no: 24

RSI
90 80 70 60 50 40 30 20 10 0 RSI

SELL

BUY

Interpretation:

In the above RSI chart at 25 oct RSI is Below 30 and moving up which indicate the BUY Opportunity it indicate the rise in rice in near future, around 12 dec RSI falling from 70 which indicate fall in the price of sell so it indicate sell opportunity.

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13 12-Feb-13 18-Feb-13 22-Feb-13 28-Feb-13 06-Mar-13

Figure Title: ROC Figure no: 25

83

ROC
0.15

0.1

BUY
0.05

SELL

ROC 0

-0.05

-0.1

Interpretation: In the above ROC chart ROC line crossing 0 from below moving up on 12 nov which indicate increase in price of stock in near future so there is a buy opportunity and on 7 jan ROC line crossing 0 from above moving down which indicate decrease in price of stock in coming future which indicate selling opportunity.

Figure Title: MACD Figure no: 26

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13 12-Feb-13 18-Feb-13 22-Feb-13 28-Feb-13 06-Mar-13 12-Mar-13

84

200 150 100 50 0 -50 -100 -150

200 150 100 50 0

BUY

SELL

9 EMA 12 EMA -26 EMA

Date 05-Oct-12 11-Oct-12 17-Oct-12 23-Oct-12 30-Oct-12 05-Nov-12 09-Nov-12 16-Nov-12 22-Nov-12 29-Nov-12 05-Dec-12 11-Dec-12 17-Dec-12 21-Dec-12 28-Dec-12 03-Jan-13 09-Jan-13 15-Jan-13 21-Jan-13 25-Jan-13 31-Jan-13 06-Feb-13

-50 -100 -150

Interpretation: In the above MACD chart on 05 oct MACD line crossing Trend line is 9 days EMA from above which indicate downtrend and fall in price near future indicating selling opportunity and MACD crossing Trend line 9 Days EMA from below 16 nov it indicate uptrend indicating increase in price in near future so there is a buy Opportunity.

Figure Title:ADL Figure no: 27

85

300000 250000 200000 150000 100000 50000 0

200000 100000 0 -100000 -200000 -300000 -400000 -500000 -600000 -700000 Total Traded Quantity ADL

Increasing selling pressure -price

Interpretation:

In the above ADL chart ADL line indicate as there is selling pressure and buying pressure in the stock, ADL line falling down form 9 feb which indicate the increase in the selling pressure which also indicate fall in price of stock in coming future and on 03 dec ADL moving up which indicate increase in the buying pressure which further indicate the increase in the price of the stock in coming future.

Figure Title:SMA figure no:28

Date 10-Oct-12 19-Oct-12 31-Oct-12 09-Nov-12 21-Nov-12 03-Dec-12 12-Dec-12 21-Dec-12 02-Jan-13 11-Jan-13 22-Jan-13 31-Jan-13 11-Feb-13 20-Feb-13 01-Mar-13 12-Mar-13 21-Mar-13

Increasing buying Pressure + price

86

4000 3500 3000 2500 2000 1500 1000 500 0 5 DAYS MA

BUY

SELL

Close Price

Interpretation:

In the above chart represent the Simple Moving Average (SMA). In Simple Moving averages can be used to identify the direction of the trend. In these, at the date of 4 dec the closing price is below the simple moving average uptrend so the shares can be best to buy. In above chart at the date of 28 jan the sell signal is generated because closing price is above the simple moving average.

7) Results & Findings

Date 08-Oct-12 15-Oct-12 22-Oct-12 30-Oct-12 06-Nov-12 13-Nov-12 21-Nov-12 29-Nov-12 06-Dec-12 13-Dec-12 20-Dec-12 28-Dec-12 04-Jan-13 11-Jan-13 18-Jan-13 25-Jan-13 01-Feb-13 08-Feb-13 15-Feb-13 22-Feb-13 01-Mar-13 08-Mar-13 15-Mar-13 22-Mar-13

87

 The share price of ORACLE FINANCE is much better when compared with other selected stock prices because of lesser coefficient of variance. The stock price of INFOSYS,TCS,WIPRO,HCl are positively correlated with CNX price Index and stock price of ORACLE FINANCE is negatively Correlated with CNX Price Index it further found that stock price of INFOSYS and TCS are highly positively correlated with CNX price Index. It is found that co efficient of determination for Infosys is very high i.e 0.972268 and very low for oracle i.e. 0.063636. It has been found form Multiple Regression analysis that CNX IT index value is dependent on the share price of infosys, tcs, wipro ,hcl and oracle financial service software. The RSI (Relative Strength Index) of TCS and WIPRO stood at 45 and 35 which indicate single for bullish trend and RSI of INFOSYS and ORACLE stood at 26 and 20 which shows over sold and further found that RSI is stood at 58 which indicate slightly over bought situation. The ROC (Rate of Change) of TCS,INFOSYS,WIPRO are crossing 0 from below which indicate the bullish trend on the other hand ROC of HCL and ORACLE are still in negative has not cross 0 from below which indicate bearish trend. The MACD (Moving Average Convergence-Divergence) line for INFOSYS and ORACLE are above the 9 days timing line it indicate the bullish trend in stock price where as the MACD line for TCS, WIPRO and HCl are below the 9 days timing line which indicate bearish trend in stock price. The ADL ( Accumulation distribution line) of TCS, INFOSYS, HCl moving up which indicate bullish trend further found that Accumulation distribution line of WIPRO and ORACLE moving down which indicate bearish trend in stock price. SMA (Simple Moving Average) for TCS,INFOSYS,WIPRO,HCL are higher than closing price of stock which indicate bearish trend. And in

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the case of ORACLE FINANCE closing price is lower then SMA which indicate bullish trend.

8) Limitation of the Study

The study on equity research and technical analysis was conducted by taking only selected IT companies scrips. 89

 The study is for a short period(6 month); hence the behavior pattern may serve limited purpose.

9)Conclusion & Suggestion

Investor takes investment decision base on their risk bearing capacity. they use various technical indicator for understanding and predicting future price movement of stock. 90

 Risk taker investor can invest in Infosys which has highest co efficient of variation and risk avoider can invest in ORACLE which has lowest coefficient of variantion.

Table Title: Joint Suggestion Table no:17

Suggestion Company Name TCS INFOSYS WIPRO HCL ORACLE RSI HOLD BUY BUY HOLD BUY ROC BUY BUY BUY SELL SELL MACD SELL BUY SELL SELL BUY ADL BUY BUY SELL BUY SELL SMA SELL SELL SELL SELL BUY Overall HOLD BUY SELL SELL BUY

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