Fundamental Analysis

1. Dr. NGPASC
COIMBATORE | INDIA

2. Dr. NGPASC
COIMBATORE | INDIA

3. Dr. NGPASC
COIMBATORE | INDIA
Fundamental Analysis is the study of the various factors that
affect a company’s earnings and dividends.
Fundamental analysis studies the relationship between a
company’s share price and the various elements of its
financial position and performance.

4. Dr. NGPASC
COIMBATORE | INDIA
Introduction
 It makes analysis of economic,
industrial and company factors.
It is called the EIC Approach or
top bottom approach.

5. Dr. NGPASC
COIMBATORE | INDIA
Introduction
It is a method of finding out the future
price of a stock which an investor wishes
to buy.
The method for forecasting the future
behavior of investments and rate of return
on them is clearly through an analysis of
the broad economic forces in which they
operate the kind of industry.

6. Dr. NGPASC
COIMBATORE | INDIA

7. New Efficiency
Measures
Change in Senior
Management
Product Innovations
Acquisition of
Another Business
IndustrialAction
Fundamental analysis is a detailed analysis of the
fundamental factors affecting the performance of
company
Dr. NGPASC
COIMBATORE | INDIA

8. A fundamentalist makes use of the EIC framework of analysis
EIC
Economy Company
Industry
The fundamental analysis of share/ security involves 3 steps
Economy Analysis
Industry Analysis
Company AnalysisDr. NGPASC
COIMBATORE | INDIA

9. Economy Analysis

10. The performance of a company depends on the
performance of the economy.
If the economy is booming, incomes rise, demand for goods
increases, and hence the industries and companies in general
tend to be prosperous.
On the other hand, if the economy is in recession, the
performance of companies will be generally bad
The economy is studied to determine if overall conditions
are good for the stock market-
Is inflation a concern?
Are interest rates likely to rise or fall?
Are consumers spending? Is the trade balance favorable?
Is the money supply expanding or contracting?
Dr. NGPASC
COIMBATORE | INDIA

11. Key Economic Variables
An economic variable is any
measurement that helps to determine
how an economy functions.
Dr. NGPASC
COIMBATORE | INDIA

12.  Growth Rates of National Income
The rate of growth of the national economy is an
important variable to be considered by an
investor.
An economy typically passes through different phases of
prosperity, known as the different stages of the
economic or business cycleDr. NGPASC
COIMBATORE | INDIA

13. Inflation
 Inflation is the percentage change in the
value of the Wholesale Price Index
(WPI) on a year-on year basis.
 It effectively measures the change in the
prices of a basket of goods and services
in a year.
Formula for calculating Inflation=
(WPI in month of current year-WPI in same month of previous year)
----------------------------------------------------------------------- X 100
WPI in same month of previous year
Dr. NGPASC
COIMBATORE | INDIA

14. Interest Rates
The interest rate is the percent
charged, or paid, for the
use of money
It is charged when the money is
borrowed, and paid when it is loaned.
The interest rate that the lender
charges is a percent of the total
amount loaned.
Dr. NGPASC
COIMBATORE | INDIA

15.  Government Revenue
Government revenue is money received by a government.
Revenues earned by the government are received from
sources such as- Taxes
Exports and Imports
Government-owned corporations' incomes
Central bank revenue Capital receipts
Government Expenditure
The amount of money that a government spends in order to
achieve its planned budget
Dr. NGPASC
COIMBATORE | INDIA

16. Deficits
When government expenditure exceeds
its revenue, there occurs a deficit.
This deficit is known as budget deficit
Dr. NGPASC
COIMBATORE | INDIA

17.  Exchange Rates
The price of one country's currency expressed in
another country's currency
 Infrastructure
 It’s the basic physical systems of a business or
nation
 The development of an economy depends very much
on the infrastructure available. Industry needs-
 Electricity for its manufacturing activities
 Roads and railways to transport raw materials and
finished goods
 Communication channels to keep in touch with
suppliers and customers.
Dr. NGPASC
COIMBATORE | INDIA

18. Monsoon
The season during which the southwest
monsoon blows, commonly marked by
heavy rains; rainy season.
Because of strong forward and backward
linkages between agriculture and industry,
performance of several industries and
companies are dependent on the
performance of agriculture.
Dr. NGPASC
COIMBATORE | INDIA

19. Savings & Investment
At present it is about 25 percent. It
shows an increasing trend in savings,
which is change for the growth of
capital market.
The higher the level of savings and
investment, the more favorable is it for the
stock market and vice versa.
Dr. NGPASC
COIMBATORE | INDIA

20.  Government Revenue
Government revenue is money receive by a government.
Revenues earned by the government are received from
sources such as- Taxes
Exports and Imports
Dr. NGPASC
COIMBATORE | INDIA
It is necessary for steady and
balanced growth.
No industry or company can grow
and prosper in the midst of political
turmoil.
Political Stability

21. Dr. NGPASC
COIMBATORE | INDIA
Factors

22. Dr. NGPASC
COIMBATORE | INDIA

23. Dr. NGPASC
COIMBATORE | INDIA
Research and
technological
developments

24. Dr. NGPASC
COIMBATORE | INDIA
Capital Formations

25. Dr. NGPASC
COIMBATORE | INDIA
Natural
Resources and
Raw materials

26. Dr. NGPASC
COIMBATORE | INDIA
Factors
Economic Forecasting
Economic
Indicators
Forecasting Techniques

27. Dr. NGPASC
COIMBATORE | INDIA
Forecasting
Techniques
Surveys
Indicators
Diffusion indexes

28. Dr. NGPASC
COIMBATORE | INDIA
Forecasting
Techniques
Economic Model
Building
Opportunistic
Model Building

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Dr. NGPASC
COIMBATORE | INDIA