Investment in Stock Market- Fundamental & Technical Analysis

Stock market trading:

Fundamental & Technical Analysis

DON’T: 

AVOID RISKY ELEMENTS OF SHARE MARKET: 

·       Not to start trading until building good understanding of market.

·       Buy shares after doing fundamental and technical research. Stop shooting in dark.

·       Stop gambling by dealing in Intraday trading, depravities, futures and options.

·       Greed takes over and it is important to control emotions and make practical decisions.

·       In addition to take delivery of stock there are other 3 options which are very risky for new entrants.

1.    Intraday trading where shares are booked on 10% margin and delivery is not taken, however if price does not increase as predicted the loss amount will be collected by broker by close of the day at 3.30 pm. Some do short selling who sell at future loss price and hope price will drop but if does not drop as predicted, loss is incurred.

2.    Future trading in derivatives market is done where share or commodity is booked (as promissory note) at a price determined by stock exchange normally as lot of around 5 lacs and booked at 30% margin money until last Thursday of month as expiry. Short selling is possible in futures too.

3.    Options trading is also part of derivatives where buy ‘call’ and sell ‘put’ are put over time period of month basis for a lot of 500 shares at a cost could be referred as ‘insurance premium’ which may see small but could lose all booked amount as this also expires last Thursday of month.

·       If not experienced one can make huge loss by dealing in Intraday or derivatives.

·       Stop buying just because it was mention on tv without doing own homework as no one can give final target price in share market. Experts study technical charts, candle sticks and try to predict short term.

·       Avoid stock with high volatility, they may give high return but would make huge loses too. Some investors enter market as trader to make quick profit and end up losing money in long term and have no funds left to invest. 95% of people lose money this way. Some stocks (often small cap) are driven by operators and media to artificialy increase price and when the sell it drops very fast.

  

Dos: 

Share selection Criteria: 

There is plenty of information available to study performance. Be a ‘Value investors’ for buying good stock for long term. 

·       Buy shares of companies with strong fundamentals etc.

·       Do fundamentals analysis, study Sector it is operating, visit company website to get feel for business, product range, brands etc,

·       Asses future potential for growth, products and services,

·       Markets it is selling to. Is it B2B where there could be pressure of narrow margin, is company relying on few customers, government contracts. Is it B2C supplying directly to consumers and has room to get better margins, build brand loyalty,

·       Share face value, share capital, capital investment, yearly and quarterly profits, cashflow etc.

·       Debt, loans, borrowing etc, debt value of company (not to be more than 30%)

·       Read Annual reports on internet, see if it is giving good information about company or printed as marketing material with lots of photos to hide facts.

·       Managers and directors remuneration should not be more than 5% (although higher is allowed),

·       Related party transactions where funds might be diverted, shares with promoters.

·       If delay in releasing audited accounts, annual report see reasons. If auditors leave seek reason.

·       Do good research, see Nifty indices for selection clarification. Follow Nifty index. See other companies in that listing. Compare share price to quality of share. Cheaper is not always better. See comparison of share price to book value of business. See comparison of share movement over certain period etc.

·       Net profit revenue, EBITDA,  sources of earning, compare EPS, PE and Earning Yield, business model, management, Capital expenditure capex, Analysis further explained in detail. 

·       CANSLIM analysis for share selection: Current earnings (quarterly), Annual Earnings, New product services, Supply and Demand, Leader or lagger, Institutional investment, Market direction. 

Factors effecting share prices are: 

External factors effecting share price: 

·       Interest rates, exchange rate, economic outlook, inflation, deflation, budget, economic and political shocks, changes in economic policy, political events- elections, natural disasters. 

·       Although on average Nifty has given an average annual return of 12.5% in past 15 years and some years it has been 16%. Some months Nifty is in continuous growth phase and stocks gets over valued and after that 2% to 3% reduction comes as correction. It is also observed that every two to three years major correction of 8% to 10% happens in the market. Also during market crash (2008 Lehman crises) market fell by 50%.

·       Investors sentiment such as bull market or bear market. After correction period wait for recovery and start purchasing shares who have strong fundamentals and are available at good price. Make gradual purchase eg. If intend to purchase 100 shares buy in lots of 10 each time. At this point one will be able to get more for the money and when market grows will make good profit. Best to purchase as long term investor in few good companies and only sell when funds are needed or when company is regularly not making profit.

Internal factors effecting share price: 

·       Company sales and profit, future estimated earnings, large orders secured, announcement of dividends, introduction of a new product or a product recall, employee layoffs, 

·       Anticipated takeover or merger, a change of management, 

·       Accounting errors or scandals. 

·       Industry/sector performance. 

Listing of Companies and index: 

·       Companies are listed on NSE (National Stock Exchange) (1,600 companies) and BSE (Bombay Stock Exchange) (5,000 companies).

·       Company Share face value could be Rs 1, 2, or 10. (Some times shares are split)

·       Companies are categorised and grouped to form league table as indices. Example Top 50, also grouped as Private banks, Public sector banks, Housing Finance, Non Banking Financial Companies, IT sector, FMCG, Oil marketing companies etc. This helps to see performance of companies within the sector, compare value of shares, ratios analysis etc.

·       NSE has grouped companies and produces league table according to trading/ performance of business. Broad market indices: Nifty 50, Next Nifty 50, Nifty Midcap 50. Sector indices: Nifty Bank, Nifty PSU Bank, Nifty Private Bank, Nifty Auto, Nifty Energy, Nifty Financial Services, Nifty FMCG, Nifty IT, Nifty Media, Nifty Metal, Nifty Pharma, Nifty Realty. Thematic Indices: Nifty Commodity, Nifty India consumption, Nifty CPSE, Nifty Infrastructure, Nifty MNC, Nifty Growth sector 15, Nifty Midcap liquidirt 15. Strategy indices: Nifty Dividend opportunities 50, Nifty 50 value 20, Nifty 100 Quality 30, Nifty 50 Equal weight, Nifty 100 Low volatility, Nifty Alpha 50. Other listing as: Gainers, Losers, 52 week low and high, Volume sold, Volume delivered and many more statistics to analyse.

·       Screeners to see analysis: www.nseindia.com produces daily league table on performance under various. Moneycontrolstats,  Niftyindices.com, Etmarkets.com, Asiaindex.co.in, Investing.com

·       Group rating: Companies are further given rating as A, B, C  etc, Z group is Trade to Trade (TT) delivery only based on individual performance, share movements etc.

·       Cap Definition: Companies are classified as Large, Mid and Small cap based on Market Cap (Share price x No of shares).

·       Large cap: Companies with above 28,000 cr market cap are defined as Large cap (Approx top 100 companies). These companies give moderate returns of 15% to 20%, have low risk, high buy and sell liquidity, have low volatility, have very high institutional investors. Eg, Reliance, TCS, Infosys, HDFC, ICICI etc

·       Mid cap: Companies with above 8,500 cr and upto 28,000 cr market cap are defined as Mid cap (Aprox 150 comapnies). These companies give high returns, could be up to 40% but equally have high risk of losing value by 40% or more too, high buy and sell liquidity, have high volatility, have high institutional investors. Eg, Akzo nobel, Biocon, Apollo tyres.

·       Small cap: Companies with up to 8,500 cr market cap are defined as Small Cap. These companies give very high returns, could be up to 60% but equally have high risk of losing value by same percentage or more too, very high buy and sell liquidity, have very high volatility, have low institutional investors. Eg, Allahbad Bank, Bombay dyeing etc

·       Data management: IISL (India Index Services Ltd) manages data and produces list based on shares performance and data received from companies.

·       Companies are shifted in various cap category according to performance of business. Some companies which were in Nifty 50 ten years ago are now small cap companies.

Companies submit Quarterly results to stock exchange and this effects share price. Economy and some News also effect share price aour over all market movement. 5% to 15% is minor correction which happens 2 to 3 times a year. 15% to 25% is major correction which happens once a year or in two years. 25% to 50% is deep correction which happens in decade due to major crises.

Bombay Stock Exchange (BSE SENSEX) www.bseindia.com - BSE Sensex of 30 companies gives sensitive index.(started in 1986) of market on daily basis. One can identify the booms and busts of the Indian stock market through Sensex. It is calculated using the Free-float Market Capitalization methodology. Sensex was 1000 on 25 July 1990 on 2000, 15 January 1992, 4000, 30 March 1992, 5000, 11 October 1999, 7000, 21 June 2005, 10,000, 7 February 2006 on 21,000 on 5 November 2010, 23,000 on 9 May 2014, 25,000 on 16 May 2014, 30,000 on 4 March 2015, 34,000 on 26 December 2017, 37,869 in August 2018.

National Stock Exchange of India Limited (NSE: NIFTY) www.nseindia.com - NSE Nifty of 50 companies in 12 sectors. It is a free float market capitalisation weighted index. Launched on 21 April 1996 and historical data is 1,089 in May 1996, 1,380 in May 2000, 1,483 in May 2004, 4,295 in May 2007, 5,086 in May 2010, 7,229 in May 2014, 9,621 in May 2017, 10,622 in Jan 2018. 

Trading platform- Demat account: NSDL and CDSL operate trading platforms such as Demat account. Charging structure varies as Account opening fee, Annual maintenance charge, Brokerage charge for buying and selling. Demat account can be operated on pc/ laptop or from smart phone too as now share trading is totally paperless. Demat accounts offered by bank: (where necessary to open normal account with bank) ICICI direct, HDFC securities, Kotak Securities, SBI Securities, Most bank offer Demat facilities. Discount Brokers: These are discounted brokers where money has to be transferred to their account from bank account. Eg: Opening fee Rs 200 Rs 300 and transaction charges as Rs 20/trade or 0.01% whichever is lower for buying or selling. Some to mention are Zerodha, 5Paisa, SAMCO, SAS Online, Trade Smart, Tradejini, Prostocks, Flyers, Trade bulls, Angel Broking, Aditya Birla, Religare, Sharekhan, Motilal Oswal, Ventura Securities, 

Shares and Mutual Funds can be purchased online using 'Demat account'.

Shares selection further Analysis:

·       Follow news about sector and company to make timely entry or exit decisions.

·       Profitability: Companies with year on year and quarterly profitability,

·       No Debts (can be checked on screener) or debt to equity not to be more than 1.3

·       Return on Equity: with high return on equity ROE (15% to 20% plus),

·       Good management with no court cases or scams,

·       Competitive advantage, share value to price,

·       B2B or B2C, product demand, growth etc,

·       Sector in which business is operating eg. Airline operate with fuel price, currency fluctuation, risk of not selling all seats makes Airline industry risky sector. Similarly auto ancillary companies supplying to few auto companies may get squeezed on margins. 

·       Past performance: Study returns of business over 1 week, 1 month, 6 month, 1 year, 3 years, 10 years.

·       Price to Book Value (BV)= Share price ÷ BV per share.  BV = Assets minus liabilities. BV  ÷ Total shares = BV per share,  Current Market Price CMP ÷ per share = Price to Book Value. Note: IT companies have less Book Value. Some times shares might be Overvalued.

·       52 weeks Low or High. It is not advisable to purchase purely on this. High could be more profitable due to momentum but Low could rise new heights too. Once fundamental research is conducted and established the reason for 52 week low and bounce back is visible it might be time to enter. Not only 52 weeks low some good shares fall considerably due to market correction, bearish market, butterfly effect, regulatory query, market nervousness, large investor withdraws their fund due to their own requirements and it shows lots of shares been sold. Slump in sector due to other reasons such as slump in real estate due to high interest may effect housing finance companies. Rupee devaluation may have effect on oil importing companies, IT companies working in overseas market, government intervention/ change in policy in public sector companies, intervention by regulatory organisations such as RBI, SEBI etc. High crude oil price effects airline industry. Report by some firm on particular company share value etc. If Share price has fallen considerably, asses why prices fell (issues), has issue been resolved, management policies etc. Regularly due to many reasons some good company shares get effected and that could be good time to purchase. 

·       Shares Delivery: Study share volume sold on previous day and delivery taken. It shows demand for shares.

·       Market depth is checked to see Buyers and Sellers interest.

·       FII & DII: Study FII (Foreign Institutional Investment) and DII (Domestic Institutional Investment)

·       Study Options: Compare Spot (cash) market and future market. F&O market action (Arbitrage) price difference for 3 months as current month, next month and far month. (to get the feel only)

·       Currency fluctuation effects. Those companies who rely on high volume of import or export business will get effected.

·       Fuel price increase will effect airlines most. 

·       Foreign loans as ECB (External Commercial Borrowing) by companies from overseas funding organisations in foreign currency.

·       Screeners are available on NSE website > Index> Nifty 100 stock (download file)

·       Timing: Be aware of timing of buying shares when often market fluctuation is high. Expiry: Intraday- Daily at 3.30pm, Commodities- Thursdays 3.30pm, Options Last Thursday of months. Similarly when market opens around 10.20 one gets some idea about price movement to purchase at best price as price saving made by not purchasing is equally important.

·       Upper circuits are 5%, 10%, 15%, 20% increase where trading is stopped and similarly Lower circuits are 5%, 10%, 15% decrease where trading is stopped to control fast rise or fall.

·       Price Correction/ drop: Often market takes dip for price correction as 5% drop.

·       Price also drops due to Analysis report by broker house or bad news about sector or company.

·       Economic slowdown/ recession also bring drop in share prices such as 1992, 2002, 2008. In 2008 Lehman crises started in USA housing finance market and effected world markets, Nifty was down by more than 40%.

·       If invested in good shares, chances of losing cash is 50% in 1 year, 30% in 3 years and Nil in 5 to 7 years.

·       ASM (Additional Surveillance Measure) Listing: When NSE feels that 25 or so people are manipulating price the company goes to ASM list. (Recent ones to put in that list are Pfizer and Adani transmission).

·       On average Sensex will give 14% returns. Rs 10 lacs in 10 years = Rs 57 lacs. It could give high returns, but need to monitor on regular basis.

·      10,000 invested in any one good company will give return between 10% to 68% (Depending on share) or 1,50,000 invested in 15 good Companies will give return average as 37%. Shares from Small cap with potential to give high returns are referred as Penny shares or Multibaggers, Value investing is investing in undervalued shares.

·     New shares launch known as IPO (Intial Public Offering) can be found here

·      Once good research is done to buy shares, don’t keep on checking daily. Check after quarterly results to see performance. If negative results for two quarters think of selling shares. 

·       Buy good company shares with long term investment plan. Don't sell if performing well, or sell well researched shares if moving slowly. Only sell when there is a reason to sell such as not happy with new management, buying reason finishes, you feel company is diversifying in too many other ventures and ignoring core business (eg. Videocon), not adopting new technology (eg. Nokia did not adopt Android), Not moving with new developments etc

 Additional Technical Analysis/ Quantitative Analysis

·       EPS (Earning per share) is Profit ÷ No of shares, PE (Current Market Prices of one share ÷ EPS). Not applicable for new or loss making business. Only works with stable profit making companies where less PE is better and can be used to compare also. It does not work with volatile businesses eg, real estate who may not sell property during year and may have high sales in following year.

·       Study share price charts (line chart, bar chart, candle stick chart), Ratio analysis, MACD line, SRI, Bollinger line etc. (Not necessary for Value investing, but good to know when to purchase)

·       Choose stocks with less risk. May give less returns but will be less risky. May give average return of 20% annualy, where as high risk companies might give 40% return but might drop by 30% to 50% too. Market leaders eg HDFC, TCS, L&T in Large cap, Mid caps eg Nocil, Philip carbon for 20% returns.

·       PE- Price to Earnings Ratio is CMP (Current market price) ÷ EPS. It shows how many times of Market price and less is better. Compare with peers companies of same sector

·       P/BV (Price to Book Value) is CMP ÷ Book Value per share

·       Quantitative Analysis: Long & Short built up. Use Moneycontrol > All stats> Market action>

·       Quantum Analysis: Companies from same sector and cap. High low, Profit, % increase 1m, 6m,1y

·       EPS- Earnings per share: Profit after tax ÷ Equity shares

·       EPS (TTM):

·       Book Value: Total Assets – Total Liabilities

·       BV per share= Net worth ÷ No of shares

·       Liquidity Ratio: Current ratio, Quick Ratio, Inventory ratio

·       Profitability Ratio:

·       Valuation Ratio:

·       Debt to equity ratio:

·       Dividends: Dividend yield. Paid from profit or reserves, not mandatory

·       ROE= Net Profit ÷ Equity (Equity share capital + Reserve+ Surplus)

·       RSI: Relative Strength Index of Buyer & Seller. 30 indicates over sold, 70 indicates over bought

·       Bollinger Band: 20 Days Simple moving average to asses Bearish of Bullish cross over

·       DMA- Days Moving Average, SMA- Simple Moving Average, DEMA- Days Exponition Moving Average

·       Shorts indicates: Calls writing and Put writing gives price movement indication

·       Daily Order Book: Daily delivery gives shares delivered on specific day

·       Bulk or Block purchase: Money control> All Stats > shows large deals in specific companies.

·       Normal Share: Gives voting rights (eg Tata Motors)

·       DVR (Differential Voting Rights) Shares: Gives higher dividend but less right in voting. Stocks are cheaper. (eg Tata Motors DVR).

·       Choose shares/stocks that has low Beta value. It indicates volatility of stock compared to the BSE, NSE. Example Infosys has a beta value of 0.57, means for 1% fluctuation in BSE, NSE, Infosys would fluctuate 0.57%.

·           >1 beta value means higher viotality. Potential to higher gain or loss.

·           <1 beta value means less viotality in comparision with index.

·           =1 beta value means equal volatility with index or indices has beta value of 1.

GENERAL INFORMATION:

Trading can be done through Demat account provided by banks. Demat accounts offered by bank: (where necessary to open normal account with bank) ICICI direct, HDFC securities, Kotak Securities, SBI Securities, Most bank offer Demat facilities. Discount Brokers: These are discounted brokers where money has to be transferred to their account from bank account. Eg: Opening fee Rs 200 Rs 300 and transaction charges as Rs 20/trade or 0.01% whichever is lower for buying or selling. Some to mention are Zerodha, 5Paisa, SAMCO, SAS Online, Trade Smart, Tradejini, Prostocks, Flyers, Trade bulls, Angel Broking, Aditya Birla, Religare, Sharekhan, Motilal Oswal, Ventura Securities, 

Shares and Mutual Funds can be purchased online using 'Demat accoun

  

RESEARCH SITES:

Screeners to see analysis: www.nseindia.com produces daily league table on performance under various. Moneycontrolstats,  Niftyindices.com, Etmarkets.com, Asiaindex.co.in, 
Investing.com, www.moneycontrol.com, www.screener.in, Ticker finology, Tijori, 

Trading Hours:
Shares can be even purchased after closings of market to Post Market Opening (3.30pm to 9.00am), Pre Market Opening (9.00am to 9.30am) which are 'averaged' to avoid sudden surge and drop and during trading hours. That's why 'Previous Closing' and 'Opening Price' is different. Shares purchased will be in account after 2 days referred as T+2.

Mutual funds have entry load of 2.25% and exit load of 1% to 5% for 1 year however there is no such load in purchasing shares. From tax point Short term gain is 15% and Long term (shares held more than 12 months) gain is 10% on over 1 lac profit. 

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FUNDAMENTAL ANALYSIS:

Fundamental Analysis can be done using information on Moneycontrol, screener, investor etc.

(1) Business:

(1a) Business model, business rank, Sector, industry serving, About business.

(1b) Products/ Services (single or diversified).  Products popularity/ demand, segment,

(1c) How many years trading, company size.

(1d) Company registered address, web address in 'Info & Management'. (Visit company Website).

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(2) Management Integrity is difficult to asses.

(2a) Look for track record as trading house it belongs to etc.

(2b) Fraud is biggest cause of investors loosing cash as promoters siphon money to subsidiaries. Google 'Companany Name' for News, scam and 'Promoters name' for information.

(2c) Check Annual reports to see how much Management is paid. (normally between 5% to 10%).

(2d) AGM (Annual General Meeting), EGM (Extraordinary General Meeting). Major decisions about murgers and acquisitions etc.

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(3) Market Cap. Share price x No. of shares. (% of Total Market Capitalization is 80% Large cap, 15% Mid Cap, 5% Small cap).

(3a) Large cap is > 28,000 cr). These are the big and well-established companies. Most of the large-cap companies are leaders in their sector and have a huge market presence. Many of the large-cap companies are listed in Sensex 30 and Nifty 50.

(3b) Medium cap is upto 28,000 cr. These are relatively riskier than large-cap as investment options. These businesses have the potential to become a large cap in a few years and have enough finance to survive harsh economic conditions.

(3c) Small cap is < 8,500 cr. These companies have small market capitalization and usually includes the start-ups or companies in the early stage of development. Small cap stocks are potentially big gainers as they are yet to be discovered within the sector. However, the risk level is high.

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(4) Market Price:

(4a) Share current market price (CMP),

(4b) % Returns over years, (increase in share price). CAGR (Compound Annual Growth Rate) returns over 1,3,5,10 years.

(4c) Share face value can be ₹10, ₹2, ₹1.

(4d) Shares Splits where price is halved by issuing 2 shares for 1.

(4e) Bonus shares issued instead of giving profit/dividend,

(4f) Rights Issue is shares offered at a special price by a company to its existing shareholders in proportion to their holding of old shares.

('Corporate Action' will show above information)

(4g) Market lot is shares purchased as normally 1.

(4h) L/U Price band: Lower/ upper circuit (2, 5,10,20% fixed by exchange based on Market Cap). When share hits band one can not buy or sell.

(4i) Today's high/low

(4j) 52 weeks high/low,

(4k) Bid price (x), Offer price (x), x means number of people

(4l) Volume Weighted Average price (VWAP) is Days Average Price.

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(5) Share movement & Comparison:

(5a) Shares volume traded, today & previous days, Deliverables % (delivery taken exludes Intraday trading).

(5b) Peer comparison. Comparing with other shares from similar sector.

SHAREHOLDING:

(5c) Promoters holding:  30% is good, Higher is better.

(5d) Pledge % shares (upto 10% is ok),

(5e) DII (Domestic Institutional Investors) % invested YOY. MF (Mutual Funds) % invested YOY.

(5f) Public (Retail Investors) % invested YOY.

(5g) FII (Foreign Institutional Investors)% invested YOY.

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(6) Technical Analysis:

(6a) Share price historical data on graph as Monthly chart, Yearly chart, Candle chart shows high, low, opening and closing price of the day.

(6b) Relative strength index (RSI) is a technical indicator to chart the current and historical strength or weakness of a stock. Sell when the RSI above 70 is overbought and below 30 is oversold.

(6c) Exponential Moving Average (EMA) is moving averages of 20, 50 days.

(6d) Weighted Moving Average (WMA) is moving averages of 20, 50 days.

(6e) Simple Moving Average (SMA) is moving averages of 20, 50, 100, 200 days.

(6f) Moving Average Convergence Divergence (MACD)

(6e) Market Depth as buyers and sellers willingness to trade at booked price.

(6f) Volume traded and volume % delivered.

(6g) Volume Weighted Moving Average (VWMA)

(6h) Awesome OSC (34) is Oscillater like Candle stick

There are many more Technical indicators such as Stoch%K (Stochastic Oscillator), Average Directional Index (ADI), Momentum, William % range, Bolinger band etc.

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(7) NUMBER CRUNCHING: (Ratios) analysis is done to asses Share valuation, Intrinsic Value, Quality of share.

(7a) 'PE' (Price to Earning). Low PE indicates share is cheaper compared to other shares in same sector.

(7b) 'Industry PE' for Peer comparison.

Note: PE varies for industries. Compare with industry PE.
Also

PEG = PE divided by Projected EPS growth rate, < 1 is good.

(7c) Book Value value of total assets – total liabilities.

(7d) Share Price to Book value: lower than 1 P/B means stock is undervalued. However, value investors often consider stocks with a P/B value under 3.0.

(7e) EPS (Earning per share). 'Higher' is better, TTM (Trailing Twelve Months)

(7f) P/C is Put to Call Ratio to measure Market sentiment. P/C ratio below 0.75 is considered bearish. Between 0.75 and 1.00 is neutral. Above 1.00 is considered bullish by contrarians. Future price booking for Options Call and Put Expiry months (last Thursday of month), 3 months as Near month, Next month and Far month on specified date.

(7g) P/S (Price to Sales Ratio): 'lower' is good, calculated by dividing the company's market capitalization by the revenue/sales in the year.

(7h) Debt (loans) to Equity Ratio: Less than 1 is good, more than 1 are risky.

(7i) ROE (Return on Equity): greater than 20% is better. A yearly increase in ROE is also a good sign. Also as CAGR (Compound Annual Growth Rate) over years.

(7j) ROCE (Return on Capital Employed): greater than 20% is better.

(7k) Dividend paid (4% is good), how much or since when not paid. Dividend declared. Dividend Yield Ratio needs to be high. Upto 10 lacs, dividend income is tax free.

(7l) Debtor Days

(7m) Inventory Turnover

(7n) Current Ratio: More than 1 shows business will be able to pay liabilities.
(7o) Average Down is strategy of buying additional same shares at lower price so that Average cost gets lower. This should only be done after studying fundamentals of business.

(7p) Interest Coverage Ratio is ability to pay interest. > 4 is good.
(7q) Quick Ratio is ability to pay interest within few months and > 1 is good.

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(8) Banks and NBFC (Non Banking Finance Company).

(8a) ADR (Advance To Deposit Ratio) Good banks lend (0.8) 80% of deposits. below 1 is good. Above 1 is risky.

(8b) Equity Multiplier (EM). EM = Total Capital / Net Worth = 15 (max).

(8c) Return on Assets (ROA) % is Net Profit / Total Assets. Higher is better, above 1% is good.

(8d) Return on Equity (ROE) % is Net Profit / Net Worth. Higher is better, >15% for banks is considered acceptable.

(8e) Net Interest Margin (NIM)= Net Interest Income/ Interest bearing Assets*100 as %. Higher NIM 3% as max.

(NIM vs ROA both should grow. Banks whose NIM is growing, but ROA is decreasing is not a good sign for investors. One easy check it to look at the following:

(a) PAT Growth Rate (PATGR) – last 5 years,

(b) Total Asset Growth Rate (AGR) – last 5 years. A bank must exhibit, PATGR more than AGR)

(8f) PAT (Profit After Tax) Growth for 5 years should be positive.

(8g) Total Asset Growth for 5 years should be positive.

(8h) Net Interest Income (NII) = Interest Earned – Interest paid out. YOY

CAGR (Compound Annual Growth Rate) over years.

(8i) Cost to Income ratio: Lower ratio indicates higher profitability.

(8j) Net Profit, 5 years CAGR.

(8k) Total Deposits % 5 year CAGR.

(8l) Total Advances (Loans) % 5 year CAGR.

(8m) Liquidity: Loan (Credits) to Deposits %. High ratio indicate liquidity crunch and low ratio indicates under-utilization of funds.

(8n) CASA (Current And Savings Account) to total deposits. A higher CASA ratio is good, some banks have 50%. Higher CASA ratio leads to higher net interest margin.

(8o) Non Performing Asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days. Gross NPAs (Non Performing Assets). High as 10% is bad.

(8p) Net NPAs (Non Performing Assets). Net NPAs stood at 4.8% from 8% during this period.

(8q) Provision Coverage Ratio (PCR) % is total provision balances of the bank to gross NPAs.

(8r) Capital Adequacy Ratio (CAR) % is the ratio of bank’s capital to aggregated risk-weighted assets. Banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12%.

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(9) Profit & Loss Account: (Screener shows YOY)

(9a) Sales, (Quarterly, Yearly).

(9b) YOY Sales Growth % (Quarterly, yearly). More than 15% is good. Also Margins increase.

(9c) Cost of sale, Material cost %, Employee cost%.

(9d) Operating Profit Margin (OPM) %, Operating Profit Per Share ₹, Net Operating Profit Per Share ₹

(9e) Interest paid

(9f) Depreciation

(9g) Gross Profit before tax. Profit before Interest and Margin %.

(9h) Tax %

(9i) Net Profit, Net Profit Margin %, Net Profit growth, Year on Year (YOY)

(9j) EPS (Earning Per Share) in Rupees.

(9k) Compounded Sales Growth as TTM, 3, 5 and 10 years.

(9l) Compounded Profit Growth TTM, 3, 5 and 10 years.

(9m) Compound annual growth rate (CAGR) as TTM, 3, 5 and 10 years.

(9n) Return on Equity as TTM, 3, 5 and 10 years.

(9m) Earnings Before Interest and Taxes (EBIT) . Also EBITDA including Depreciation and Amortization.

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(10) Balance sheet.

(10a) Share Capital

(10b) Reserves

(10c) Borrowings/ Loans

(10d) Other Liabilities

(10e) Total Liabilities are (a+c+d)-(b)

(10f) Fixed Assets including Accumulated Depreciation.

(10g) CWIP (Capital Work In Progress)

(10h) Investments

(10i) Other Assets

(10k) Total Assets f+g+h+i

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(11) Cash flows

(11a) Cash from Operating Activities.

(11b) Cash from Investing Activities.

(11c) Cash from Financing Activities.

(11d) Net Cash flow

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(12) BETA value:

A beta that is greater than 1.0 indicates that the security's price is theoretically more volatile than the market. For example, if a stock's betais 1.2, it is assumed to be 20% more volatile than the market. Technology stocks and small caps tend to have higher betas than the market benchmark.

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(13) Forum remarks, sentiment.

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(14) Demat, Brokerage and Taxation

(14a) Demat opening and Annual fee range between  ₹200 to ₹1000

(14b) Brokerage and other Expenses on Both Buy & Sell.

Brokerage: 0.50% or min Rs.25/- or ceiling of 2.5% on transaction value (Both Buy & Sell).

Example: On 70 shares of ₹100 each = ₹7000 Brokerage will be ₹35 (minimum ₹25) or 2.5% maximum ₹175

For shares costing less than Rs.10 minimum brokerage Rs. 0.05/- per share so for 70 shares it will be ₹3.5

Zerodha free on Delivery

GST: 18.00% on Brokerage so for ₹35 it will be ₹6 and for maximum brokerage of ₹175 it will be ₹31.

STT (Securities Transaction Tax): 0.1% of transaction value. So for above example it will be ₹7

Stamp Duty: 0.01% on turnover. So for above example it will be ₹7

NSE and BSE charge 0.003% plus 18% GST on charges.

SEBI Turnover Tax: 0.0001%

(14c) Dividends are taxed as 10% TDS at source.

(14b) Short term capital gain tax will be 15% for shares held less than 12 months.

(14c) Long term capital gain tax is charged at the rate of 10% if the gain is above Rs. 1 lakh and shares held over 12 months.

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(15) Screener codes.

SUMMARY:

Business Name & info.

Market Cap up to 8,500 Cr is Small cap, over 28,500 Cr Large cap.

Current Price.

52 Weeks High/Low.

Stock P/E less is better.

Industry PE for comparison.

PEG = PE divided by Projected EPS growth rate, < 1 is good.

ROCE > 20% is good.

ROE > 20% is good.

EPS > 20% is good.

Book Value as plus or minus to pay all Liabilities.

Price to Book Value < 3 is good, < 1 is undervalued and cheaper to buy.

Dividend to Equity < 1 is good.

Face Value.

RSI 70 is overbought, 30 is over sold.

Dividend > 4% is good.

Price to Sales < 1 is better.

Current Ratio > 1 is good.

Sales.

Sales Growth 5% to 10% is good.

Sales Growth 3 Years.

Net Profit.

Profit after tax.

OPM.

Profit growth.

Profit growth 3 years.

Return over 3 years.

Promoters Holding > 30% is good.

Pledged percentage < 10% is ok.

DII, FII, Public shareholding.

Volume.

Return on Assets.

Secured Loans.

Unsecured Loans.

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Market Capitalization > 50 AND

Down from 52w high > 30% AND

Up from 52w low < 30%

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SEARCH CRITERIA:

Up from 52w low  < 40 AND

Down from 52w high >80 AND

Market capitalization > 5000 AND

Debt to Equity < 1 AND

EPS > 10 AND

Current price < 250 AND

Price to book value < 3 AND

Price to earning AND

Return on equity > 10 AND

Return on capital employed  > 15% AND

Return over 3years AND

Net profit margins > 10% AND

Sales Growth > 20% AND

Sales growth 3Years > 20% AND

Profit growth 3Years AND

Return over 3years AND

Return over 3years > 20% AND

Current ratio < 1 AND

Promoters holding > 30% AND

Pledged shares < 10% AND

Net Profit AND

Net Profit preceding year AND

Secured loan  AND

Sales Growth > 20% AND

Profit growth 3Years

Price to book value AND

Volume AND

High price <90 AND

Low price <30 AND

Current price  > -30 AND

PEG (Price to Growth) Ratio

G Factor >= 7 AND

YOY Quarterly sales growth  > 15 AND

YOY Quarterly profit growth  > 20 AND

Net Profit latest quarter  > 10

++++++++++++++++++++

Market capitalization > 200 AND

Current price <50 AND

Up from 52w low  < 40 AND

Debt to Equity < 1 AND

Return on equity >10 AND

Promoter holding >30 AND

OPM >15 AND

Pledged percentage<5 AND

Profit growth 5Years >10 AND

Sales growth 5Years >5

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Drop in large cap:

Current price  >30 AND

Market capitalization > 30000

Debt to equity < 1 AND

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Bargains with good fundamentals:

Current price >4 AND

Current ratio >1.3 AND

Interest Coverage Ratio >2 AND

Return on equity >10 AND

Return on capital employed >10 AND

OPM >5 AND

OPM 5Year >5 AND

Debt to equity <20 AND

Pledged percentage<5 AND

Market Capitalization >100 AND

Promoter holding >30 AND

Profit growth 5Years >10 AND

Sales growth 5Years >5 AND

Price to Earning <Industry PE AND

(Up from 52w low <20 OR Down from 52w high >30) AND

Up from 52w low <85 AND

Down from 52w high <80

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Popular Valued Stock:

Market Capitalization >200 AND

Return on invested capital > 15 AND

Price to Earning  < 5

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Multibaggers:

Price to Earning < Industry PE AND

Market Capitalization <500 AND

Sales growth 3Years > 30% AND

Profit growth 3Years > 30% AND

Return over 3years > 30 AND

Debt to equity < 1 AND

Average return on equity 3Years >30

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Pathfinder:

Current price >1 AND

Market Capitalization >100 AND

Price to book value <5 AND

Debt to equity <1 AND

Interest Coverage Ratio >3 AND

OPM 5Year > Price to Earning AND

PEG Ratio <1 AND

PEG Ratio >0

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Mid cap with Growth:

Market Capitalization >250 AND

Return over 5years >15 AND

Debt = 0

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Undervalued companies:

Current price >100 AND

Market Capitalization >100 AND

Price to book value <3 AND

Debt to equity <1 AND

Interest Coverage Ratio >3 AND

OPM 5Year >Price to Earning AND

PEG Ratio <1 AND

PEG Ratio >0

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Value investing:

Debt to equity <0.5 AND

Current ratio >2 AND

Interest Coverage Ratio >10 AND

Price to Earning <30 AND

Average return on equity 10Years >15 AND

Market Capitalization > 500 AND

Pledged percentage =0

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Strong Small cap:

Market Capitalization>300 AND

(Current assets /Current liabilities)>2 AND

PB X PE <22.5

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Good growth:

Sales growth 10Years >10% AND

Sales growth 5Years >10% AND

Sales growth 3Years >10% AND

Profit growth 10Years >10% AND

Profit growth 5Years >10% AND

Average return on capital employed 10Years >15 AND

Return on capital employed >15 AND

Promoter holding >40% AND

Debt to equity <1.5 AND

Market Capitalization >500

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Ratio filters:

Return on equity > 20% AND

Return on capital employed > 20% AND

Debt to equity < 1 AND

Pledged percentage < 10% AND

Sales growth 3Years > 10% AND

Profit growth 3Years > 12% AND

Average return on equity 3Years > 10% AND

Return over 1year > 0

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Exponential Moving Average:

Market Capitalization > 2000 AND

YOY Quarterly sales growth > 10

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Strong Fundamentals:

Market Capitalization >7000 AND

Sales growth 10Years >10% AND

Promoter holding >33% AND

Average return on capital employed 10Years >15% AND

Return over 10years >17%

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Bargain with Good Fundamentals:

Current price >4 AND

Current ratio >1.3 AND

Interest Coverage Ratio >2 AND

Return on equity >10 AND

Return on capital employed >10 AND

OPM >5 AND

OPM 5Year >5 AND

Debt to equity <20 AND

Pledged percentage<5 AND

Market Capitalization >100 AND

Promoter holding >30 AND

Profit growth 5Years >10 AND

Sales growth 5Years >10 AND

Free cash flow 3years >0 AND

Price to Earning <Industry PE AND

(Up from 52w low <20 OR Down from 52w high >30) AND

Up from 52w low <85 AND

Down from 52w high <80

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Dividend paying:

Return on equity >10 AND

Return on capital employed >10 AND

Return on assets >10 AND

Market Capitalization >500 AND

Pledged percentage <10 AND

Price to Earning >8 AND

Price to Earning <22 AND

Dividend Payout >10

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25% off from 52 week high:

Down from 52w high < 25 AND

Market capitalization < 20000 AND

Current price > 30

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Companies with 20% growth:

( (Operating cash flow 5years) * .73 + Cash end of last year - Secured loan - Unsecured loan  ) > Market Capitalization AND

 Dividend yield > 0  AND

 Debt to equity < 1

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EPS 20% Growth:

EPS latest quarter > 1.2 * EPS preceding year quarter AND

EPS latest quarter > 0 AND

YOY Quarterly sales growth > 4 AND

EPS last year > EPS preceding year AND

EPS > EPS last year AND

Profit growth 3Years > 15 AND

Return on equity > 10 AND

Down from 52w high < 15 AND

Market Capitalization > 100

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ROE >15%, M Cap >2K-<5K 

Return on equity > 15% AND

Market Capitalization > 2000 AND

Market Capitalization < 5000

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Penny shares 0 Debt, < ₹50:

Current price < 50 AND

debt = 0 AND

YOY Quarterly sales growth > 10 AND

YOY Quarterly profit growth >10 AND

Return on capital employed  > 1

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Value Penny Stock:

Current price < 10 AND

Free cash flow last year > 0 AND

Return on equity > 10 AND

Debt to equity < 1 AND

Reserves >=0 AND

Pledged percentage = 0 AND

Market Capitalization > Debt

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High ROCR, ROE:

Return on equity >18 AND

Return on capital employed >18 AND

Market Capitalization >1000 AND

Debt to equity < 2 AND

Price to Earning <30 AND

EPS >20

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