CHAPTER-1

INTRODUCTION

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1.1 overview of Fundamental Analysis:

1.1.1 Analysis meaning:

Analysis is the process of breaking down complex subjects and entities into smaller pieces and
better understanding them. (Bhatt V. &., 2020) This technique was used in the study of
mathematics and logic before Aristotle (384-322 BC), but analysis as a formal concept is a
relatively recent development. (Banker, 2020) The definition of analysis is the process of
breaking down something into its parts and learning what they do and how they relate to each
other. Examining blood in the laboratory to discover all its components is an example of
analysis.

Corporate financial managers, securities regulators and investors are inherently biased in their
behaviour and their decisions tend to make emotional choices (Ramiah, 2014). Such behaviours
include overconfidence, optimism, involvement, and risk behaviours (Iqbal s. & Butt, 2015).

This is (Farsi, 2014) We conclude that overconfidence in their research has important
implications for business decisions. (Bao, 2014) also found that such behaviour adversely
affects capacity generation. In their study, (Iqbal s. & Butt, 2015)found such behavioural
heuristics, Self-interest behaviour regarding overconfidence, optimism, commitment, loss
avoidance and risk-taking has a significant impact on working capital management in the
Pakistani situation. In addition, (Chaffi, 2014)concluded that such behaviour is highly
correlated with stock market performance. However, this kind of correlation with the stock
market can be divided into two streams: basic-oriented and technology-oriented. And the
analysis for this is characterized as fundamental analysis and technical analysis. Therefore,
starting with Denial Kahenamen & Mark Tversky's prospect theory, it can be concluded that
financial professionals are human beings and have different emotional and cognitive traits
psychologically. Therefore, financial markets, including the stock market, are primarily
affected by behaviours that show a significant correlation with stock market fundamentals.
Therefore, fundamental analysis is chosen to test the relationship with behavioural bias due to
investor behaviour or cognition.

1.1.2 Types of Analysis:

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1. Fundamental analysis:

Basic accounting and financial analysis is the analysis of a company's financial statements
(usually to analyse the company's assets, liabilities, and income) health and competitors and
markets. (HiralBorikar, 2020)It also takes into account the overall health of the economy and
factors such as interest rates, production, income, employment, GDP, housing, manufacturing
and government. (Prajapati K. &., 2019)There are two basic approaches that can be used:
bottom-up analysis and top-down analysis. These terms are used to distinguish such analysis
from other types of investment analysis, such as: Quantitative and technical.

Investors can use either or both of these complementary stock selection methods. For example,
many fundamental investors use technical indicators to determine entry and exit (Bhatt H.
R.)Similarly, the vast majority of tech investors use basic indicators to narrow their pool of
potential stocks to "good" companies.

2. Technical analysis: Technical analysis is a means of investigating and predicting price

fluctuations in financial markets using historical price charts and market statistics (Sheth, 2019)
. This is based on the idea that if traders can identify previous market patterns, they can predict
future price trends fairly accurately.

Unlike fundamental analysis, which seeks to value a security based on business outcomes such
as sales and profits, technical analysis focuses on price and volume research (Nagvadia).
Technical analysis tools are used to study how the supply and demand of securities affects

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changes in price, volume and implied volatility (Joshi D. &.). Technical analysis is commonly
used to generate short-term trading signals from various charting tools, but it also helps to
improve the assessment of securities strengths or weaknesses compared to one of the broader
markets or sectors (Bhatt H. R., 2020). This information helps analysts improve their overall
rating estimates. Technical analysis can be used on any securities using historical transaction
data. This includes stocks, futures, commodities, bonds, currencies and other securities (Bhatt
V. G.). This tutorial usually analyses stocks by example, but keep in mind that these concepts
apply to all types of security.

1.2 History and evaluation:

Technical analysis is a means of investigating and predicting price fluctuations in financial
markets using historical price charts and market statistics (Prajapati K. &., 2019). This is based
on the idea that if traders can identify previous market patterns, they can predict future price
trends fairly accurately (Bhatt V. G.).

Unlike fundamental analysis, which seeks to value a security based on business outcomes such
as sales and profits, technical analysis focuses on price and volume research (Bhatt V. , 2021).
Technical analysis tools are used to study how the supply and demand of securities affects
changes in price, volume and implied volatility (Bhatt V. &., 2015). Technical analysis is
commonly used to generate short-term trading signals from various charting tools, but it also
helps to improve the assessment of securities strengths or weaknesses compared to one of the
broader markets or sectors. This information helps analysts improve their overall rating
estimates.

Technical Analysis can be used for any security using historical transaction data. This includes
stocks, futures, commodities, bonds, currencies and other securities (Vora, 2020). This tutorial
typically uses an example to analyse stocks, but keep in mind that these concepts apply to all
types of securities.

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In accounting and finance, fundamental analysis is a way to assess the intrinsic value of a
security by analysing various macroeconomic and microeconomic factors. The ultimate goal
of fundamental analysis is to quantify the intrinsic value of a security (Bhatt V. &., 2019). You
can then compare its intrinsic value to the current market price to help you make an investment
decision.

The essence of fundamental analysis is the method used to measure the intrinsic value of a
stock or security. It depends primarily on the economic factors that affect the company and its
finances.

This process is not limited to, but goes beyond, the financial structure of the company.
Describes common economic scenarios, industry growth and decline, and the company's
organizational structure, management, and finance Therefore, (Raval H. P., 2021)analysing the
actual value and then measuring the intrinsic value of the stock is a complete understanding of
the company. It also takes into account macroeconomic and microeconomic factors. The idea
behind this is to compare the actual price with the prevailing market price.

Fundamental analysis is a very comprehensive approach that requires in-depth knowledge of

accounting, finance and economics. For example, fundamental analysis requires the ability to
read financial statements, understand macroeconomic factors, and have knowledge of valuation
techniques. This mainly relies on public data such as: The Company’s past profits and rates of
return for predicting future growth.

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Fundamental Analysis (FA) is a holistic approach to studying business. If an investor wants to
invest in a company over the long term (3-5 years), it is essential to understand the company
from different perspectives. It is important for investors to isolate the daily short-term noise of
stock prices and focus on the underlying performance (Raval H. P., 2021). In the long run, the
stock prices of fundamentally strong companies tend to rise, bringing wealth to investors.

All stock analysis attempts to determine if a security is priced correctly in a wider market.
Fundamental analysis is usually performed from a macro to micro perspective to identify
securities that are not properly valued in the market. Analysts usually look at the overall state
of the economy in turn, then the strength of each industry, and then focus on the performance
of the individual company to determine the fair market value of the stock.

Fundamental analysis uses public data to assess the value of stocks and other types of
securities. For example, investors can perform a fundamental analysis of bond value by
examining economic factors such as interest rates and general economic conditions.

Quantitative and Qualitative Fundamental Analysis:

The problem with defining the term "fundamentals" is that it can cover everything related to a
company's financial position. Of course, this includes everything from a company's market
share to quality of management, not just numbers such as sales and profits.

The various basic factors fall into two categories: quantitative and qualitative. The monetary
meaning of these terms does not differ significantly from the standard definition. Here's how
to define a term in a dictionary:

Quantitative-"Relates to information that can be expressed in numbers and quantities."

Qualitative-"Refers to a property or criterion, not a quantity."

Quantitative base is in this context. They are a measurable feature of the company. For this
reason, financial statements are the largest source of quantitative data. You can measure sales,
profits, assets, etc. very accurately. The qualitative basis is not very specific. This includes
quality, brand awareness, patents, and proprietary technologies for key executives within the
company.

Neither qualitative analysis nor quantitative analysis is basically good. Many analysts consider
them together.

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Qualitative Fundamentals to Consider

Qualitative research is defined as a market research method that focuses on acquiring data
through open and conversational communication.

This method considers not only "what" people are thinking, but also "why" Introduction. Take,
for example, a grocery store that seeks to expand its customer base. From systematic
observations, it can be concluded that the number of men visiting this store is large. A good
way to identify why a woman didn't come to the store is to do a detailed interview with potential
customers in that category (Malek, 2020). As a result of visiting nearby stores and shopping
malls and conducting a survey of randomly selected female customers, it was found that the
number of female customers visiting stores is decreasing due to the shortage of products for
women. There were more men than women, so you can see why they didn't come to the store.

Qualitative research utilizes areas of social science such as psychology, sociology, and
anthropology (Bhatt V. &., 2018). Therefore, the qualitative research method enables detailed
surveys and questions based on the answers of the respondents, and the interviewer /
investigator also tries to understand the motives and feelings of the respondents. Understanding
how your target audience makes decisions can help you draw conclusions in market research.

Types of qualitative research methods with examples

Qualitative research methods should help clarify the behaviour and perceptions of the target
group on a particular topic. Various types of qualitative research methods are commonly used,
including in-depth interviews, focus groups, ethnographic surveys, content analysis, and case
studies. The results of the qualitative method are more meaningful and it is very easy to draw
conclusions from the data obtained.

Qualitative research methods have roots in the social and behavioural sciences. Today, our
world is becoming more and more complex, making it difficult to understand what people are
thinking and recognizing. Online qualitative research methods are easier to understand because
they are more communicative and descriptive.

There are four important basics that analysts always consider when looking at a company.
Everything is qualitative, not quantitative. They include:

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Business model: What exactly is the company doing? This is not as easy as it sounds. If your
company's business model is based on selling fast food chicken, how profitable is it? Or is it
just royalties and franchise fees?

Competitive Advantage: The long-term success of a company depends heavily on its ability
to gain and maintain a competitive advantage. Strong competitive advantages, such as the
Coca-Cola brand name and Microsoft's advantage in PC operating systems, allow us to create
a moat around the enterprise, keep competitors in check, and enjoy growth and profits gain.
When a company gains a competitive advantage, its shareholders will be well paid for decades.

Management: Some consider it to be the most important criterion for management to invest
in a company. That makes sense. Even the best business models are destined to fail if
management does not implement the plan consistently. It is difficult for individual investors to
meet and evaluate managers, but you can see the resumes of executives and directors on the
company's website. How well have you been doing in your previous job? Have you thrown
away a lot of stock lately?

Corporate Governance: Corporate governance represents a policy within an organization that

establishes relationships and responsibilities between management, directors, and stakeholders.
These policies are stipulated in the Articles of Incorporation and Articles of Incorporation of
the Company, as well as the Companies Act and Regulations. You want to do business with an
ethical, fair, transparent and efficient company. Pay particular attention to whether
management respects the rights and interests of shareholders. Make sure that communication
with shareholders is transparent, clear and easy to understand. If you don't receive it, it's
probably because they don't want it. It is also important to consider the industry of the company.
By learning how the industry works, investors can gain a deeper understanding of a company's
financial position.

Financial Statements: Quantitative Basis for Consideration Financial statements are a

medium for companies to disclose information about their financial performance. Supporters
of fundamental analysis use quantitative information from financial statements to make
investment decisions. The three most important financial statements are the income statement,
the balance sheet, and the cash flow statement.

Balance Sheet: A balance sheet is a record of a company's assets, liabilities, and capital at a
particular point in time. The balance sheet is named after the fact that the company's financial
structure is balanced as follows:

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Assets = Liabilities + Equity shareholders

An asset represents a resource that a company owns or manages at a particular point in time.
This includes items such as cash, inventory, machinery and buildings. The other side of the
equation represents the total amount of money the company has used to acquire those assets.
Funds come from debt or capital. Debt represents debt (which, of course, must be repaid), and
capital represents the total amount of money the owner has invested in the business. This
includes retained earnings, or profits from the previous year.

The Income Statement: The balance sheet takes a snapshot approach when investigating a
company and the income statement measures the company's performance over a period of time.
Technically, you can also create a one-month or one-day balance sheet, but only the quarterly
and annual reports of listed companies are displayed. The income statement contains
information about the income, expenses, and profits you earned as a result of your business
during this period.

Cash Flow Statement: A cash flow statement shows a record of a company's cash inflows and
outflows over a specified period of time. Cash flow statements typically focus on the following
payment-related activities:

Income from the sale of cash and other businesses, equipment or long-term assets used to
invest in assets

Cash from Financing (CFF): Cash paid or received from issuance and borrowing of funds.

The cash flow statement shows a record of a company's cash inflows and outflows over a period
of a cash flow statement is important because it is very difficult for a company to manipulate
its liquidity position. There are many things an active accountant can do to make a profit, but
it is difficult to forge cash at a bank. For this reason, some investors use cash flow statements
to more conservatively measure a company's performance.

Fundamental analysis consists of deriving the value and outlook of a company using financial
indicators extracted from the data of the company's financial statements.

The Concept of Intrinsic Value:

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One of the most important prerequisites for fundamental analysis is that current stock prices
often do not fully reflect the value of a company based on publicly available data. The second
assumption is that the values reflected in the company's fundamentals tend to be close to the
true value of the stock. Analysts often refer to this conceptual true value as the intrinsic value.
However, keep in mind that this use of the term "intrinsic value" in equity valuation is different
from its use in other contexts such as options trading. Option prices use a standard calculation
of intrinsic value, but analysts use a variety of complex models to determine the intrinsic value
of a stock. There is no universally accepted formula for determining the intrinsic value of a
stock (Bhatt V. , 2021). Suppose a company's stock is trading for $ 20, and after an analyst's
thorough investigation of the company, it is determined to be worth $ 24. Another analyst looks
it up and says it should be worth $ 26. Many investors take the average of such estimates and
assume that the intrinsic value of a stock can be around $ 25. Investors often want to buy stocks
that are traded well below their intrinsic value, so these estimates are often very relevant
information. This leads to the third important assumption of fundamental analysis. In the long
run, the stock market reflects fundamentals. The problem is that no one knows how long it will
actually take "in the long run". It can be days or years.

This is a fundamental analysis. By focusing on a particular business, investors can measure

the intrinsic value of the company and find opportunities to buy at a discounted price. If the
market catches up with the fundamentals, the investment will pay off (Joshi D. &., 2021). One
of the most famous and most successful fundamental analysts is Warren Buffett, the so-called
"Omaha Oracle" who defended the stock selection approach.

Criticisms of Fundamental Analysis:

The main criticisms of fundamental analysis come from two groups: supporters of technical
analysis and supporters of the efficient market hypothesis.

Technical Analysis:

Technical analysis is another important form of security analysis. Simply put, technical
analysts make investments (more accurately, trades) based solely on stock and volume
movements. Use charts and other tools to exchange momentum and ignore fundamentals. One
of the core beliefs in technical analysis is that the market discounts everything. All news about
the company is already priced at the stock price. As such, stock price movements provide more
insight than the underlying fundamentals of the company itself.

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The Efficient Market Hypothesis:

However, supporters of the Efficient Market Hypothesis (EMH) tend to disagree with both
fundamental and technical analysts. The

Efficient Market Hypothesis argues that it is essentially impossible to beat the market through
fundamental or technical analysis. As the market continuously and efficiently evaluates all
stocks, many market participants can almost immediately kill the opportunity to outperform
the market and significantly outperform the market in the long run. You will not be able to.

Examples of Fundamental Analysis:

Take the Coca-Cola Company as an example. Analysts need to consider the stock's annual
dividend, profit per share, price-earnings ratio, and many other quantitative factors when
investigating the stock. However, Coca-Cola's analysis cannot be completed without
considering brand awareness. Anyone can start a business selling sugar and water, but few are
known to billions of people. It's difficult to pinpoint the value of the Coke brand, but rest
assured that it's an integral part of your company's continued success.

Pros of Fundamental analysis:

Fundamental analysis helps traders and investors gather the right information and make rational
decisions about which position to take. These decisions are based on financial data, so personal
damage is limited. Fundamental analysis aims to understand the value of an asset rather than
set entry and exit, providing traders with a longer view of the market. Once a trader has
determined the value of an asset, it can compare it to the current market price to assess whether
the asset is overvalued or undervalued. The purpose in this case is to profit from changes in the
market.

Cons of fundamental analysis:

Fundamental analysis can be time consuming and requires multiple areas of analysis, which
can make the process very complex. The results of the insights do not help make quick
decisions, as fundamental analysis gives a much longer-term view of the market. Traders
looking to develop short-term trading start and closing methods may be better suited for
technical analysis.

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It is also important to consider the best and worst-case scenarios. Fundamental analysis
provides a broader view of the market, but negative economic, political or regulatory changes
can surprise the market.

Fundamental analysis examples:

There are various tools and methods that can be used for fundamental analysis, but they fall
into two types of fundamental analysis: top-down analysis and bottom-up analysis. Top-down
analysis provides a broader view of the economy, starting with the entire market and ending
with sectors, industries, and finally specific companies. Conversely, bottom-up analysis starts
with a particular stock and extends to all factors that affect its price. The most basic analysis is
used to evaluate stock prices, but it can be used for many asset classes such as bonds.

The tools traders can choose for fundamental analysis depends on the assets being traded. For
example, a stock trader may display revenue, earnings per share (EPS), expected growth rate,
profit margin, and other figures in a company's earnings report.

1.3 Fundamental Analysis Tools:

Earnings per share (EPS): We can't know much about a company by revenue or number of
shares alone, but when you combine them, one of the most common key figures is used for
company analysis. EPS shows how much of a company's earnings come from one share. EPS
is calculated by dividing net income (after dividends of preferred stock) by the number of
issued shares.

Price-to-earnings ratio (P/E): This ratio compares the current selling price of a company's
stock to profit per share.

Projected earnings growth (PEG): PEG forecasts the annual profit growth rate of stocks.

Price-to-sales ratio (P/S): The price-to-sales ratio values a company's stock price as compared
to its revenues. It's also sometimes called the PSR, revenue multiple, or sales multiple.

Price-to-book ratio (P/B): This ratio, also known as the price-to-equity ratio, compares a
stock's book value to its market value. You can arrive at it by dividing the stock's most recent
closing price by last quarter's book value per share. Book value is the value of an asset, as it
appears in the company's books. This is equal to the cost of each asset minus the accumulated
depreciation.

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Dividend pay-out ratio: This compares the dividend paid to shareholders to the company's
total net income. This describes retained earnings, that is, profits that have not been paid but
are reserved for potential growth.

Dividend Yield: Annual dividend and stock price expressed as a percentage dividend per share
for one year divided by the value per share.

Return on equity: Divide the company's net income by the rate of return on equity to obtain
the return on equity. This is sometimes expressed as the rate of return on the company's net
worth.

1.4 Investing and Fundamental Analysis:

Analysts work to create a version to determine the estimated cost of a company's percentage
charges, primarily based on publicly available facts. This cost is an estimate at best, and
analysts are informed that the company's percentage fees should actually be worth it compared
to the current market fees for buying and selling. Some analysts can also talk about the
company's own costs at the expected rates.

If the analyst calculates that the cost of the inventory must be significantly higher than the
latest market price of the inventory, the analyst assigns the inventory a purchase or obesity
rating. This will serve as an advice to traders looking at this analyst. If an analyst calculates an
inherent cost that is lower than modern market fees, the stock is considered overvalued and an
increase or undervalue recommendation is issued.

Investors who pay attention to these clues will find that they need to buy stocks with favourable
clues. Such strains should be more likely to grow over time. Similarly, stocks with a poor
ranking are expected to be more likely to have lower fees. Such stocks are required to be
removed from the current portfolio or delivered as "short" positions.

This inventory analysis method corresponds to a technical analysis that predicts the course of
fees by analysing old market data such as fees and volumes.

Fundamental analysis includes:

1. Economic analysis
2. Industry analysis

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 3. Company analysis
4. Future profit outlook

1. Economic analysis:

All common stocks are exposed to market risk. This feature of almost all types of common
stock shows movements in combination with fluctuations in economic conditions towards
improvement or deterioration. Stock prices have responded positively to low inflation, profit
growth, improved trade balances, rising gross domestic product and other positive
macroeconomic news. Signs of rising unemployment, recovery in inflation, or revised earnings
estimates are putting pressure on stock prices. This relationship is fairly credible, as the U.S.
economy is better represented by the Standard & Poor 500 stock index, a well-known market
indicator that correctly predicts the stock market ahead of the average person in a boom or
recession. The Federal Reserve Bank of New York conducted a survey stating that the slope of
the yield curve is a perfect indicator of economic growth beyond three months ahead. Drops
are shown with a negative gradient and positive gradients are considered good. The impact of
market risk should be obvious to investors. When the economy goes down, stock prices go
down. All companies, both high-performing and low-performing, are affected by the recession.
Stock prices are also affected by the boom.

2. Industry Analysis:

All stocks are exposed to market risk and it is clear that stock prices will fall during a recession.
Another thing to keep in mind is that defenders are less prone to recession. Industry analysis
highlights industries that often face adverse economic conditions.

In 1980, Michael Porter proposed a standard approach to industry analysis. He called this the
"Competitive Analysis Framework". New entrant threats assess the expected reaction of
current competitors to new entrants and barriers to entry into the industry. In certain industries,
it is very difficult for new companies to win the competition.

For example, in the automotive industry, new manufacturers find it difficult to compete with
existing companies such as General Motors and Ford. There are specific industries that are easy
to enter into new businesses, such as: B. Financial planning industry. No special effort is
required to start a new business in such an industry. Industry growth is hampered by current
competition among competitors. In the face of existing competition, the company must invest
most of its profits in this increase in market share, so trying to gain more market share will

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reduce the company's profits. An industry where competition between competitors is friendly
or modest offers greater opportunities for product differentiation and higher profits. Fierce
competition is good for customers, but not good for product manufacturers. In the aviation
industry, there are collective tariff disputes among competitors. If one airline lowers the price,
the other airline will need to adjust the price accordingly in order to retain existing customers.

Another threat to companies in the industry is the handling of alternative products. This
prevents companies from raising the price of their products. When the price of a particular
product rises sharply, consumers simply switch to another cheaper alternative. For example,
there are two different video games, Sega and Nintendo. These games compete directly with
each other in the market. As Nintendo raises prices, new video game customers will switch to
relatively cheap sage. Investors doing industry analysis need to focus on the risk levels of
product substitution that will have a significant impact on the company's future growth.
Another aspect of industry analysis is the bargaining power of buyers. This can have a
significant impact on the seller's high sales. In this state, the return is low. The seller has to
make concessions because he can't afford to lose his customers. For example, we have a
shipbuilding company and our main customers are the US Navy. Since the company produces
only a few vessels each year, losing a contract with the Navy can be very damaging to the
company. On the other hand, in department stores, the number of customers is large, so the
bargaining power of customers is low. Losing one or two customers at this store does not have
a significant impact on retail sales or profitability.

You shouldn't just focus on capital-intensive industries. There are other industries that are not
capital intensive, such as B. Advisors needed at retail computer stores. You need to force
computer engineers to solve people's computer system problems. In recent years, consumers
have usually become more demanding when it comes to personal computers. Therefore, they
are better guided and try to make their own decisions regarding the requirements of the software
and hardware aspects. In fact, they have a great deal of power when contacting sales force. The
bargaining power of the supplier also has a great influence on the profitability of the company.
The supply to manufacture the product is required by the company and the cost cannot be
controlled well. Due to the strong group of buyers in the replacement product market, it is not
possible to raise the price of the finished product to cover the increased costs. Therefore, when
conducting industry analysis, the presence of strong suppliers should be considered negative to
the company.

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Investors need to analyse the above industry structural considerations in order to assess future
industry trends in the light of economic conditions. Once the potential industry is identified,
the final step is EIC analysis, which is limited to enterprises only.

3. Company Analysis:

Corporate analysis reviews and evaluates different companies in selected industries to identify
the most attractive companies. Company analysis, also known as securities analysis, involves
stock selection. Different analysts have different approaches to doing company analysis, such
as

• Value Approach to Investment

• Growth Approach to Investment

In addition, Corporate Analysis analyses a company's finances and determines the category of
stocks as value stocks or growth stocks. These indicators include price-to-book value ratio and
price-earnings ratio. Other indicators, such as return on equity, can also be analysed to
determine potential companies for investment.

4. Future Earnings Outlook:

Future earnings forecasts are estimates of future financial results for a business or project and
are typically used for budgeting, capital budgeting, and / or valuation. In some situations, this
term may refer to a public company's (quarterly) revenue forecast. For country or economy,
see Economic Forecast. Future revenue forecasts using historical internal and revenue data and
external industry and economic indicators are usually analyst model forecasts of a company's
performance over time. In fundamental analysis, analysts often extend stock market analysis
with stock market information such as 52-week highs. For business modelling components /
steps, see the list of Stock Valuations below the Financing Overview.

Perhaps an important aspect of creating a financial forecast is sales forecast. Future fixed and
variable costs and capital can be estimated as a function of profit through a "common size
analysis" where the relationship is derived from past financial ratios and other accounting
relationships. At the same time, the resulting items need to impact the company's business. In
general, an increase in sales requires a corresponding increase in working capital, fixed assets,
and related funding. In the long run, profitability (and other financial indicators) tends towards
the industry average. For a detailed explanation and other considerations, see Valuation with
Discounted Cash Flows for Each Forecast Period.

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1.5 SWOT ANALYSIS:

1. Strength:

The strengths of a company vary by industry. For example, Non-Performing Assets (NPAs)
can be a bank's strength. On the other hand, cheap suppliers and cost advantages can be
significant strengths for auto companies.

Other strengths of a company:

• Volunteer companies
• Effective management (people, employees, etc.)
• Recognition of the great brand
• Skilled labour
• Regulars
• Cost Benefits
• Scalable business model
• Loyalty

2. Weakness:

The opposite of everything discussed in the "Strengths" can be the weakness of a company.
For example, weak finances, inefficient management, poor brand recognition, an unskilled
workforce, non-repetitive customers, non-scalable businesses, and disloyal customers.

In addition, there are some other weaknesses that can affect the company:

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 • Obsolete technology.
• Lack of capital
• High debt

For example, many companies in the telecommunications industry have ceased operations
because they were using outdated 2G/3G technology. Similarly, in the energy sector, renewable
energy production is the technology of the future and companies that do not work on the new
technology could soon become obsolete. In short, outdated technology negatively affects most
of the industry.

3. Opportunity:

A company with many opportunities has many opportunities to succeed and make a profit in
the future.

• Organic growth opportunity - (New product, new market, etc.)

• External growth opportunity (Mergers and Acquisitions)
• Expansion (vertical or horizontal)
• Relaxation of government regulations
• New technologies (Research and Development)

4. Threats:

To survive (and for that matter remain profitable), it is really important for a company to
analyse its threats. Here are some of the biggest threats to a business:

• Competition
• Changing consumer preferences/new trends
• Adverse government regulations

Changing consumer preferences is one of the repetitive threats facing many industries. Here, if
proper measures are not taken to retain the customer, it could adversely affect the profitability
of the company.

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For example, the new trend of health awareness among people may lead to a decline in sales
of beverage/soft drink companies. (These companies are fighting this threat by introducing
"DIET-COKE.")

Similarly, the preference for Ayurvedic products in India has already reduced sales by non-
Ayurvedic consumer goods companies (and an increase in PATANJALI).

1.6 Definition of Fundamental Analysis.

Fundamental analysis is a detailed study of the basic factors that affect economic, industrial
and business interests. It is a stock that measures economic, financial, and other factors (both
qualitative and quantitative) that are used to identify opportunities in which the value of a stock
deviates from the current market price. It is designed to measure true intrinsic value.

Fundamental analysis includes only financial statements, management, competition, business

concepts, and all factors called fundamentals that may affect the value of a security, including
macroeconomic and organizational factors. It will be evaluation. Fundamental analysis It is
based on the assumption that there is a certain delay in the impact of these fundamentals on
stock prices. Therefore, the stock price will not be equal to its value in the short term but will
be adjusted in the long term. This is a three-step analysis:

Economy: An analysis of the country's general economic situation and condition. It is analysed
using economic indicators.

Industry: Use industry competition analysis and industry lifecycle analysis to identify prospects
for different industry classifications.

Company: Determine whether you want to buy, sell, or hold a company's stock by determining
the financial and non-financial characteristics of the company. Sales, profitability, EPS,
management, corporate image, and product quality are analysed for this purpose.

Definition of Technical Analysis

Technical analysis is used to predict the price of a stock. This shows that the price of a
company's stock is based on the interaction of the supply and demand forces that are active in
the market. It is used to predict the future market price of a stock according to the stock's
historical performance statistics. To do this, first determine the fluctuation of the stock price in

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order to know how the stock price will develop in the future. The price at which a buyer and
seller of a stock decides to complete a transaction is a value that combines, evaluates and
represents all the factors and is the only important value. In other words, technical analysis
provides a clear and comprehensive view of why stock price volatility is behind. Technical
analysis Stock prices are assumed to fluctuate in line with trends.

It goes up and down and depends on the trader's attitude, psychology and emotions.

Tools used for Technical Analysis

Prices: An extruder with a security price is represented by an extruder with an investor mindset
and the collection and delivery of securities.

Time: Measuring velocity movement is a characteristic of time. That is, the time elapsed within
the mode reversal determines the velocity extrusion.

Volume: The importance of rate adjustment can be seen in the transaction set that characterizes
the extrusion. It can be noted that if you have an extruder with a stock price and a small extruder
with a transaction amount, the extruder is not always very powerful.

Width: The level of extruder allocation is measured by determining whether the extruder
fashion is spread across many sectors or contains only up to three inventories. This shows how
much the price of the security has been adjusted in the market according to the general method.

Key Differences between Fundamental and Technical Analysis

The difference between fundamental and technical analysis can be drawn clearly on the
following grounds:

1. Fundamental analysis is a method of investigating a security to determine its intrinsic value

for long-term investment opportunities. In contrast, technical analysis is a method of valuing
and predicting the future price of a security based on price fluctuations and trading volume.
This shows what the stock will look like in the future.

2. Fundamental analysis uses a longer period of time to analyse stocks compared to technical
analysis. Therefore, fundamental analysis is used by investors who want to invest in stocks that
will increase in value within a few years. In contrast, technical analysis is used when the
transaction is short-term only.

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3. The time lag between the two analyses is clear not only in approach but also in purpose,
including transaction-related technical analysis and investment-related fundamental analysis.
Most investors use fundamental analysis to buy or hold shares in a company, so traders rely on
technical analysis to generate short-term profits.

4. While fundamental analysis aims at ascertaining the true intrinsic value of the stock,
technical analysis is used to identify the right time to enter or exit the market.

5. In fundamental analysis, decision making is based on the information available and statistic
evaluated. On the contrary, in technical analysis, decision making is based on market trends
and the stock price.

6. In fundamental analysis, both past and present data are considered, whereas, in technical
analysis, only past data is considered.

7. Fundamental Analysis is based on financial statements, whereas technical analysis is based

on charts with price movements.

8. Fundamental analysis allows you to determine the intrinsic value of a stock by analysing
the earnings statement, balance sheet, cash flow statement, return on equity, return on equity,
price-earnings ratio, and more. However, technical analysts use chart patterns (such as
continuation and reversal patterns), price actions, technical indicators, resistance, and support
to analyse future price trends. Resistance is where investors believe that prices have stopped
rising and are ready to sell. Support says investors have stopped going down and are ready to
buy. That is the point of belief.

9. In fundamental analysis, the future price of a security is determined based on the company's
past and present performance and profitability. In contrast, future prices in technical analysis
are based on charts and indicators.

10. Fundamental analysis is performed by long-term position traders and technical analysis is
performed by swing traders and short-term day traders.

Conclusion

In fundamental analysis, an investor buys a stock when the market price of the stock falls below
the intrinsic value of the stock. In contrast, in technical analysis, traders buy stock when they
expect to sell at a relatively high price.

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1.7 Need of Study of Fundamental Analysis:

Basic or intrinsic value is very important in an investment. The intrinsic value of a stock is not
the market value, but the natural value of the stock. Through fundamental analysis, you can
determine the basic value of a stock. This gives investors a better understanding of the various
stocks. The fundamental or intrinsic value is the actual value of a stock that can be derived
from fundamental analysis, and this value is very important when investing in order to make
reasonable decisions about investing in a stock. Fundamental analysis of stocks also includes
factors such as discounts. Future projected projects are discounted against the time value of
money to determine the true value of the stock. Investing in different stocks requires a clear
analysis, but without a clear and rational analysis, decision making becomes very complex and
simpler and more accurate fundamental analysis can be used.

To know the basis:

Fundamental analysis is a presentation of a company's portfolio. Core is the main theme of

every company that sets up a company profile, and an effective way to get better fundamentals,
add more assets, and bear less debt is best for the company. It means that there is. How much
profit does each company make, what is the current scenario for that company? Make a Better
Investment:

For a better Investment you always need to know your company's portfolio and profits. How
profitable is the company actually? The answers to your questions can definitely help you make
better investments that will give you the best profits. Capital valuation is usually a long-term
goal that helps people secure their economic future. For the money you earn to grow wealth,
you need to consider investment options that provide a significant return on the amount initially
invested in

To keep safe investment:

Whenever you do a fundamental analysis, you get most of the information about what really
helps you invest. A safe investment means knowing that the company is keeping its portfolio
well and increasing its profits. Conservation of capital is one of the main reasons people invest
money. Some investments help prevent hard-earned money from being eroded over time.
Parking money on these devices or systems can prevent permanent savings.

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