A Project Report on Equity Analysis on Indian IT Sector

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR

TABLE OF CONTENTS:

CHAPTER

CONTENT

NO.

1

PAGE NO.

INTRODUCTION: 1.1 Introduction 1.2 Top players in Indian IT sector 1.3: Definition of equity market

1.4 Indian IT sector 1.5 History of Indian IT sector

1.6 Role of IT industry 1.7Contribution of Information Technology in Indian economy

1-16

1.8 Impact of IT sector 1.9 Future of Information Technology 1.10 Meaning of Equity

1.11 Meaning of Technical analysis 1.12 Meaning of Fundamental analysis

1.13 SWOT analysis of the industry

2

REVIEW OF LITERATURE & RESEARCH DESIGN 2.1 Introduction 2.2 Literature Review 2.3 Statement of the problem 2.4 Objective of study 2.5 Scope of study

17-30

2.6 Need of the study 2.7 Limitations 2.8 Research Methodology 2.8.1: Source of Data 2.8.2: Research Method 2.8.3: Sample Size

KRUPANIDHI DEGREE COLLEGE

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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 2.8.4 Chapter scheme

3

INDUSTRY PROFILE AND COMPANY PROFILE 3.1 Introduction 3.2 IT sectors- an overview 3.3 The Indian IT industry 3.4 Major IT companies 3.5 Nature of competition 3.6 Growth of Indian IT industry 3.7 Market segments and their products

31-57

3.8 Scope of IT industry in India 3.9 Expanding foreign investments by India 3.10 Stock exchanges in India 3.11 List of stock exchanges in India 3.12 Profile of TCS (Tata Consultancy Services) 3.13 Profile of Wipro 3.14 Profile of Infosys 3.15 Profile of Satyam computer services 3.16 Profile of HCL 3.17 Profile of Tech Mahindra 3.18 Profile of Larsen & Toubro limited

4

Results, Analyses & Discussions

58-88

5

Summary of Findings, Conclusions and Suggestions

89-93

Recommendations Bibliography


94

Page 2


LIST OF TABLES:

Table No. 4.1 4.2

Description

Page No.

Table showing Debt to equity ratio of TCS Table showing EPS of TCS Table showing Current ratio of TCS Table showing Debt to equity ratio of Wipro Table showing Current ratio of Wipro Table showing EPS of Wipro Table showing EPS of Infosys Table showing current ratio of Infosys Table showing EPS of Satyam computer services

63 64 66 67 68 69 71 72 74 75

4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18

Table showing Debt to equity ratio of Satyam computer services Table showing current ratio of Satyam computer services Table showing Debt to equity ratio of HCL Technologies Table showing EPS of HCL Technologies Table showing current ratio of HCL Technologies Table showing Debt to equity ratio of Tech Mahindra Table showing EPS of Tech Mahindra Table showing current ratio of Tech Mahindra Table showing Debt to equity ratio of L&T InfoTech

4.19

Table showing EPS of L&T InfoTech

86

4.20

Table showing current ratio of L&T InfoTech

87

4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10


76 78 79 80 81 82 83 85

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LIST OF CHARTS:

Chart No.

Description

Page No.

3.1 3.2

Graph showing major trends in Hiring Graph showing IT market structure

33 35

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13

Graph showing Debt to equity ratio of TCS Graph showing EPS of TCS Graph showing P/E ratio of TCS Graph showing current ratio of TCS Graph showing Debt to equity ratio of Wipro Graph showing current ratio of Wipro Graph showing EPS per year of Wipro Graph Showing P/E ratio of Wipro Graph showing EPS of Infosys Graph showing current ratio of Infosys Graph Showing P/E ratio of Infosys Graph showing EPS of Satyam computers services Graph showing Debt to equity ratio of Satyam computer services Graph showing current ratio of Satyam computer services Graph showing P/E ratio of Satyam computer services Graph showing Debt to equity ratio of HCL technologies. Graph showing EPS of HCL Technologies Graph Showing Current ratio of HCL Technologies Graph showing P/E ratio of HCL Technologies. Graph showing Debt to equity of Tech Mahindra Graph Showing EPS of Tech Mahindra Graph showing current ratio of Tech Mahindra Graph showing P/E ratio of Tech Mahindra Graph showing Debt to equity of L&T InfoTech Graph showing EPS of L&T InfoTech Graph showing current ratio of L&T InfoTech Graph showing P/E ratio of L&T InfoTech

63 64 65 66 67 68 69 70 71 72 73 74 75

4.14 4.15 4.16 4.17 4.18 4.19 4.20 4.21 4.22 4.23 4.24 4.25 4.26 4.27


76 77 78 79 80 81 82 83 84 85 86 87 88 89

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1.1: INTRODUCTION: India is a developing country. Now days many people are interested to invest in financial markets especially on equities to get high returns, and to save tax in honest way. Equities are playing a major role in contribution of capital to the business from the beginning. Since the introduction of shares concept, large number of investors are showing interest to invest in stock market.

In an industry plagued with skepticism and a stock market increasingly difficult to predict and contend with, if one looks hard enough there may still be a genuine aid for the day trader and short term investor.

The price of a security represents a consensus. It is the price at which one person agrees to buy and another agrees to sell. The price at which an investor is willing to buy or sell depends primarily on his expectations. If he expects the security's price to rise, he will buy it; if the investor expects the price pric e to fall, he will sell it. These simple statements statemen ts are the cause of a major challenge in forecasting security prices, because they refer to human expectations.

Investor v/s Trader: People can make money in equity market by investing or trading or both. However, to avoid disappointment of losing money, customers should make very prudent and informed decisions. "Investors" put their money into stocks for a long term. This is under the principle that over

time, the underlying investment will increase in value, and the investment will be profitable. On the other hand "Traders" take a proactive approach to their investing. They follow or predict a trend in the

stock and use strategies like buy-low, sell-high and make profits.

Though there is really no right or wrong type of stock trading, it is necessary for investors to identify which type of trading is right for them. They can make a great amount of money either way however, they must consider their time frame, risk, and how much work you want to put into it. KRUPANIDHI DEGREE COLLEGE

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While traders can make more money much faster, they are required to do more work and monitoring than the typical investor. Determine what type of trader you want to be, and then make sure that the people you take guidance from have the same goals as you.

1.2: Top players in Indian IT sector: No.

Name of company

Share price (Rs)

1

TCS

1429

2

Wipro

399.65

3

Infosys

2774

4

Satyam computers services

113.40

5

HCL Technologies

694.6

6

Tech Mahindra

989.10

7

L&T Infotech

1457

1.3: Definition of „Equity Market‟: The market in which shares are issued and traded, either through exchanges or overthe-counter markets also known as the stock market, it is one of the most vital areas of a market economy because it gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.

1.4: Indian IT sector: The information technology sector can broadly be classified into:1.4.1:- IT- Software- These companies help in developing and implementation of different

software for their clients worldwide. These software could be for documentation, security services, banking software‟s etc.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 1.4.2:- ITeS Business Process Outsourcing (BPO) – Major Corporations across the world

outsources their back-office operations to some companies. E.g. Employee payroll for a US company‟s global workf orce orce is maintained by an Indian BPO. Slowly the definition is expanding

to

Human

resources,

accounting,

logistics,

legal

processes

etc.

1.4.3:- IT- Hardware and peripherals - The stuff which can be actually seen and touched,

and would likely break if we threw it out, is hardware. This would include laptops, desktops, Storage devices, Networking devices, LCD, printers etc. 1.4.4:- IT- Education - This segment provides training for employment in the other

segments. This would include companies providing various certification courses, like Java, Oracle etc. These companies also provide training for employees in corporate sector. Recently, some companies have also expanded this service to cater to schools and colleges.

1.5: History of Indian IT sector:Information Technology (IT) industry in India is one of the fastest growing industries. Indian IT industry has built up valuable brand equity for itself in the global markets. IT industry in India comprises of software industry and information technology enabled services (ITES), which also includes business process outsourcing (BPO) industry. India is considered as a pioneer in software development and a favorite destination for IT- enabled services.

The origin of IT industry in India can be traced to 1974, when the mainframe manufacturer, Burroughs, asked its India sales agent, Tata Consultancy Services (TCS), to export programmers for installing system software for a U.S. client. The IT industry originated under unfavorable conditions. Local markets were absent and government policy toward private enterprise was hostile. The industry was begun by Bombay-based conglomerates which entered the business by supplying programmers to global IT firms located overseas.

During that time Indian economy was state-controlled and the state remained hostile to the software industry through the 1970s. Import tariffs were high (135% on hardware and 100% on software) and software was not considered an "industry", so that exporters were KRUPANIDHI DEGREE COLLEGE

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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR ineligible for bank finance. Government policy towards IT sector changed when Rajiv Gandhi became Prime Minister in 1984. His New Computer Policy (NCP-1984) consisted of a package of reduced import tariffs on hardware and software (reduced to 60%), recognition of software exports as a "delicensed industry", i.e., henceforth eligible for bank finance and freed from license-permit raj, permission for foreign firms to set up wholly-owned, exportdedicated units and a project to set up a chain of software parks that would offer infrastructure at below-market costs. These policies laid the foundation for the development of a world-class IT industry in India.

Today, Indian IT companies such as Tata Consultancy Services (TCS), Wipro, Infosys, and HCL etc. all are renowned in the global market for their IT prowess.

Some of the major factors which played a key role in India's emergence emergence as key global IT player are:

i.

Indian Education System: The Indian education system places strong emphasis on mathematics and science,

resulting in a large number of science and engineering graduates. Mastery over quantitative concepts coupled with English proficiency has resulted in a skill set that has enabled India to reap the benefits of the current international demand for IT.

ii.

High Quality Human Resource: Indian programmers are known for their strong technical and analytical skills and their

willingness to accommodate clients. India also has one of the largest pools of Englishspeaking professional.

iii.

Competitive Costs: The cost of software development and other services in India is very competitive as

compared to the Western countries.

iv.

Infrastructure Scenario:

Indian IT industry has also gained immensely from the availability of a robust infrastructure (telecom, power and roads) in the country. KRUPANIDHI DEGREE COLLEGE

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In the last few years Indian IT industry has seen tremendous growth. Destinations such as Bangalore, Hyderabad and Gurgaon have evolved into global IT hubs. Several IT parks have come co me up at Bangalore, Bang alore, Hyderabad, Chennai, Pune, Gurgaon etc. These parks offer Silicon Valley type infrastructure. In the light of all the factors that have added to the strength of Indian IT industry, it seems that Indian success story is all set to continue.

1.6: ROLE OF IT INDUSTRY: The IT industry can serve as a medium of e-governance, as it assures easy accessibility to information. The use of information technology in the service sector improves operational efficiency and adds to transparency. It also serves as a medium of skill formation. I.

Economies of scale for the information technology industry are high. The marginal cost of each unit of additional software or hardware is insignificant compared to the value addition that results from it.

II. III.

Unlike other common industries, the IT industry is knowledge-based. Efficient utilization of skilled labor forces in the IT sector can help an economy achieve a rapid pace of economic growth.

IV.

The IT industry helps many other sectors in the growth process of the economy including the services and manufacturing sectors.

1.7: CONTRIBUTION OF INFORMATION TECHNOLOGY IN INDIAN ECONOMY: The growth in the service sector in India has been led by the IT – ITES ITES sector, contributing substantially to increase in GDP, employment, and exports. The sector has increased its contribution to India's GDP from 1.2% in FY1998 to 7.5% in FY2012. According to NASSCOM, the IT – BPO BPO sector in India aggregated revenues of US$100 billion in FY2012, where export and domestic revenue stood at US$69.

The contribution of India's IT industry to economic progress has been quite significant. The rapidly expanding socio-economic infrastructure has proved to be of great use in supporting the growth of Indian information technology industry.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR The flourishing Indian economy has helped the IT sector to maintain its competitiveness in the global market. The IT and IT enabled services industry in India has recorded a growth rate of 22.4% in the last fiscal year. The total revenue from this sector was valued at 2.46 trillion Indian rupees in the fiscal year 2007. Out of this figure, the domestic IT market in India accounted for 900 billion rupees. So, the IT sector in India has played a major role in drawing foreign funds into the domestic market.

The growth and prosperity of India's IT industry depends on some crucial factors. These factors are as follows:

i.

India is home to a large number of IT professionals, who have the necessary skill and expertise to meet the demands and expectations of the global IT industry.

ii.

The cost of skilled Indian workforce is reasonably low compared to the developed nations. This makes the Indian IT services highly cost efficient and this is also the reason as to why the IT enabled services like business process outsourcing and knowledge process outsourcing have expanded significantly in the Indian job market.

iii.

India has a huge pool of English-speaking IT professionals. This is why the Englishspeaking countries like the US and the UK depend on the Indian IT industry for outsourcing their business processes.

The emergence of Indian information technology sector has brought about sea changes in the Indian job market. The IT sector of India offers a host of opportunities of employment. With IT biggies like Infosys, Cognizant, Wipro, Tata Consultancy Services, Accenture and several other IT firms operating in some of the major Indian cities, there is no scarcity of job opportunities for the Indian software professionals. The IT enabled sector of India absorbs a large number of graduates from general stream in the BPO and KPO firms. All these have solved the unemployment problem of India to a great extent.


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1.8: IMPACT OF IT SECTOR: i.

Impact on Society:

A society can also refer specifically to any group of people, other animals and the interactions within that group. This can be anything from a small neighborhood to the entire global community. Religion, ethnicity, interests, political opinions or other relating factors may help form a group of people.

ii.

Common Traditions:

In the context of this report it is helpful to highlight a difference between "traditions" and "activities/interests". Tradition can be defined as the following: “An inherited, established, or customary pattern of thought, action, or behavior (as a religious practice or a social custom).Cultural continuity in social attitudes, customs, and institutions."

iii.

Cultural Continuity:

Social attitudes have changed in that citizens of a society now expect the various elements of that society to be better informed than previously. They also expect to be able to access more information about a specific product, service or organization so that they can make informed decisions with regard to their interactions with that entity.

iv.

Institutions:

The word institutions can incorporate a wide variety of organizations. For the purposes of this report the institutions will examine: 1. Governments, 2. Commercial businesses, 3. News & media organizations, 4. Educational organizations.

The focus is on how information technology development has improved the processes by which these institutions accomplish their tasks or goals.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR v.

Governments:

The government of a nation is comprised of many varied institutions. However developments in information technology have helped governments to improve their "service" to their citizens. Information technology has also had a major impact on the defense capabilities of governments. This covers both a government‟s government‟s capability to wage war and their intelligence gathering capability. Advances in weapons technology and weapons design have increased the effectiveness of various governments' armed forces. For example it would have been impossible to design aero planes such as the B2 Bomber if it were not for the advances made in information technology. The B2bomber relies on a "continuous curvature" design to minimize radar signature. It would have been impossible to design or build this machine without the development of computer modeling techniques.

1.9: Future of Information Technology: IT will continue to gain momentum; telecom and wireless will follow the trend. The immense expansion in networking technologies is expected to continue into the next decade also. IT will bring about a drastic improvement in the quality of life as it impacts application domains and global competitiveness. Technologies that are emerging are Data Warehousing and Data Mining. They involve collecting data to find patterns and testing hypothesis in normal research. Software services that are being used in outsourcing will go a long way.

1.10: Meaning of equity: Equity is the ownership interest of investors in a business firm. Investors can own equity shares in a firm in the form of common stock. Equity ownership in the firm means that the original business owner no longer owns 100% of the firm but shares ownership with others. On a company‟s balance company‟s balance sheet, equity is represented by the common stock and paid-in capital.

Equity analysis: Equity analysis is researching and analyzing equities, or stocks. These stocks trade on various stock markets such as the BSE, NSE, New York Stock Exchange, and NASDAQ, AMEX or foreign stock markets.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR Equity analysts are usually employed by financial firms that have equity research departments made up of numerous analysts, each of which focuses on being an "expert" on a particular industry. in dustry. There are numerous industries within the 10 sectors. Those 10 sectors are the consumer discretionary, consumer staples, energy, industrials, financials, healthcare, materials, information technology, and telecommunications and utilities sectors. On a daily basis, equity research analysis closely "follow", or monitor a number of stocks. For example, a PC hardware equity research analyst would probably spend a great deal of time monitoring the business of Dell Computer and any news that may affect dell. Investors purchase equity shares with two basic objectives: 1. To make capital profits by selling shares at higher prices. 2. To earn dividend income. These two factors are affected by lots of factors. An investor has to carefully understand and analyze all these factors. There are basically two approaches to study security prices and valuation i.e. i .e. fundamental analysis and technical analysis. The value of common stock is determined in large measure by the performance of the firm that issued the stock. If the company is healthy and can demonstrate strength and growth, the value of the stock will increase. When values increase then prices follow and returns on an investment will increase. However, just to keep the savvy investor on their toes, the mix is complicated by the risk factors involved. Fundamental analysis examines all the dimensions of risk exposure and the probabilities of return, and merges them with broader economic analysis and greater industry analysis to formulate the valuation of a stock.

Valuation of Equity: The methods used to analyze securities and market investment decision falls into two very broad categories:



Technical Analysis



Fundamental Fundamental Analysis


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1.11 MEANING OF TECHNICAL ANALYSIS: A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security‟s intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

A Technical analyst believes that share prices are determined by the demand and supply forces operating in the market. These demand and supply forces in turn are influenced by a number of fundamental factors as well as certain psychological or emotional factors. Many of these factors cannot be quantified. The combined impact of all these factors is reflected in the share price movement. A technical analyst therefore concentrates on the movement of share prices. He claims that by examining past share price movements future share prices can be accurately predicted. Technical analysis is the name given to forecasting techniques that utilize historical share price data.

The rationale behind technical analysis is that share price behavior repeats itself over time and analysts attempt to derive methods to predict this repetition. A technical analyst looks at the past share price data to see if he can establish any patterns. He then looks at current price data to see if any of the established patterns are applicable and, if so, extrapolations can be made to predict the future price movements. Although past share prices are the major data used by technical analyst, other statistics such as volume of trading and stock market indices are also utilized to some extent.

The basic premise of technical analysis is that prices move in trends or waves which may be upward or downward. It is believed that the present trends are influenced by the past trends and that the projection of future trends is possible by an analysis of past price trends. A technical analyst, therefore, analyses the price and volume movements of individual‟s securities as well as the market index. Thus, technical analysis is really a study of past or historical price and volume movements so as to predict the future stock price behavior.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 1.11.1: Basic principles of technical analysis: The basic principles on which technical analysis is based may be summarized as follows: 1. The market value of a security is related to demand and supply factors operation in the market. 2. There are both rational and irrational factors which surround the supply and demand factors of a security. 3. Security prices behave in a manner that their movement is continuous in a particular direction for some length of time. 4. Trends in stock prices have been seen to change when there is a shift in the demand and supply factors. 5. The shifts in demand and supply can be detected through charts prepared specially to show market action. 6. Patterns are used by analysis to make forecasts about the movement of prices in future.

1.12: MEANING OF FUNDAMENTAL ANALYSIS: Fundamental analysis is a method of forecasting the future price movements of a financial instrument based on economic, political, environmental and other relevant factors and statistics that will affect the basic supply and demand of whatever underlies the financial instrument. Fundamental analysis is the cornerstone of investing. The basic philosophy underlying the fundamental analysis is that if an investor invests re.1 in buying a share of a company, how much expected returns from this investment he has. It insists that no one should purchase or sell a share on the basis of tips and rumors. The fundamental approach calls upon the investors to make his buy or sell decision on the basis of a detailed analysis of the information about the company, about the industry, and the economy. Fundamental analysis is really a logical and systematic approach to estimating the future dividends and share price. It is based on the basic premise that share prices are determined by a number of fundamental factors relating to the economy, industry and company. Hence, the economy fundamentals, industry fundamentals and company fundamentals have to be considered while analyzing a security for investment purpose.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR Fundamental analysis is, in other words, a detailed analysis of the fundamental factors affecting the performance of companies. Each share is assumed to have an economic worth based on its present and future earning capacity. This is called its intrinsic value or fundamental value. The purpose of fundamental analysis is to evaluate the present and future earning capacity of a share based on the economy, industry and company fundamentals and thereby assess the intrinsic value of the share. The investor can then compare the intrinsic value of the share with the prevailing market price to arrive at an investment decision. If the market price of the share is lower than its intrinsic value, the investor would decide to buy the share as it is underpriced. The price of such a share is expected to move up in future to match with its intrinsic value.

Fundamental analysis thus involves three steps: 1. Economy Analysis. 2. Industry Analysis. 3. Company Analysis.

1.12.1: ECONOMY ANALYSIS: The performance of a company depends on the performance of the economy. If the economy is booming, income rise, demand for goods increases, and hence the industries and companies in general trend to be prosperous. On the other hand, if the economy is in recession, the performance of companies will be generally bad. Investors are concerned with those variables in the economy which affect the performance of the company in which they intend to invest. A study of these economic variables would give an idea about future corporate earnings and the payment of dividends and interest to investors.

Here are some of the key economic variables that an investor must monitor as part of his fundamental analysis:

i.

Growth Rates of National Income

ii.

Inflation

iii.

Interest Rates

iv.

Exchange rates


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR v.

Infrastructure

vi.

Monsoon

vii.

Economic and Political Stability

1.12.2: INDUSTRY ANALYSIS: An industry is a group of firms that have similar technological structure of production and produce similar products and Industry analysis is a type of business research that focuses on the status of an industry or an industrial sector (a broad industry classification, like "manufacturing"). Irrespective of specific economic situations, some industries might be expected to perform better, and share prices in these industries may not decline as much as in other industries. This identification of economic and industry specific factors influencing share prices will help investors to identify the shares that fit individual expectations. Industry Life Cycle:

The industry life cycle theory is generally attributed to Julius Grodensky. The life cycle of the industry is separated into four well defined stages: a.

Pioneering stage:

The prospective demand for the product is promising in this stage and the technology of the product is low. The demand for the product attracts many producers to produce the particular product. produ ct. There would be severe competition compet ition and only fittest companies co mpanies survive this stage. The producers try to develop brand name, differentiate the product and create a product image. In this situation, it is difficult to select companies for investment because the survival rate is unknown. b.

Rapid growth stage:

This stage starts with the appearance of surviving firms from the pioneering stage. The companies that have withstood the competition grow strongly in market share and financial performance. The technology of the production would have improved resulting in low cost of production and good quality products. The companies have stable growth rate in this stage and they declare dividend to the shareholders. It is advisable to invest in the shares of these companies.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR c.

Maturity and stabilization stage:

The growth rate tends to moderate and the rate of growth would be more or less equal to the industrial growth rate or the gross domestic product growth rate. Symptoms of obsolescence may appear in the technology. To keep going, technological innovations in the production process and an d products should be introduced. intro duced. The investors have to closely monitor the events that take place in the maturity stage of the industry. d.

Decline stage:

Demand for the particular product and the earnings of the companies in the industry decline. It is better to avoid investing in the shares of the low growth industry even in the boom period. Investment in i n the shares of these types of o f companies leads to erosion eros ion of capital.

1.12.3: COMPANY ANALYSIS: Company analysis is the final stage of fundamental analysis. The economy analysis provides the investor a broad b road outline of the prospects pros pects of growth in the economy. econo my. The industry analysis helps the investor to select the industry in which investment would be rewarding. Now he has to decide the company in which he should s hould invest his money. Company analysis provides the answer to this th is question. Company analysis deals with the estimation of return and risk of individual shares. This calls for information. Many pieces of information influence investment decisions. Information regarding companies can be broadly classified into two broad groups: internal and external. Internal information consists of data and events made public by companies concerning their operations. The internal information sources include annual reports to shareholders, public and private statements of officers of the company, the company‟s financial statements, etc. External sources of information are those generated independently outside the company. These are prepared by investment services and the financial press. In company analysis, the analyst tries to forecast the future earnings of the company because there is strong evidence that earnings have a direct and powerful effect upon share prices. The level, trend and stability of earnings of a company, however, depend upon a number of factors concerning the operations of the company.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR i.

Financial Statements

ii.

Analysis of Financial Statements

iii.

Leverage ratios and Profitability Ratios

iv.

Assessment of Risk

1.13: SWOT Analysis of the Industry: SWOT analysis: SWOT analysis represents the strength, weakness, opportunity and threat for an industry. Every investor should carry out a SWOT analysis for the chosen industry. Take for instance, increase in demand for the industry‟s product becomes its strength, presence of numerous players in the market, i.e. competition becomes the threat to a particular company. The progress in R & D in that industry is an opportunity and entry of multinationals in the industry is a threat. In this way the factors are to be arranged and analyzed.

Strengths

Weaknesses

• Highly skilled human resource

• Absence of practical k nowledge nowledge

•Low wage structure • Dearth of suitable candidates •Quality of work

•Initiatives taken by the Government (setting • Less Research and Development up Hi-Tech Parks and implementation of egovernance projects) • Contribution of IT sector to India‟s GDP is •Many global players have set-up set-up operations still rather small. in India like Microsoft, Oracle, Adobe, etc. • Employee salaries in IT sector are •Following Quality Standards such as ISO increasing tremendously. Low wages benefit


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 9000, SEI CMM etc.

will soon come to an end.

•English-speaking •English-speaking professionals

•Cost competitiveness competitiveness

•Quality telecommunications infrastructure

•Indian time zone (24 x 7 services to the global customers). Time difference between India and America is approximately 12hours, which is beneficial for outsourcing of work

Opportunities

Threats

• High quality IT education market

• Lack of data security systems

• Increasing number of working age people

• Countries like China and Philippines Philippines with

• India 's well-developed well-developed soft infrastructure

qualified

workforce

making

efforts

to

• Upcoming International Players in the overcome the English language barrier market

• IT development concentrated in a few cities only


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 2.1: Introduction: A literature review is an evaluative report of studies found in the literature related to our selected area. The review should describe, summarize, evaluate and clarify this literature. It should give a theoretical basis for the research and help us to determine the nature of our own research. Select a limited number of works that are central to our area rather than trying to collect a large number of works that are not as closely connected to our topic area. A literature review goes beyond the search for information and includes the identification and articulation of relationships between the literature and our field of research. While the form of the literature review may vary with different types of studies, the basic purposes remain constant: a) Provide a context for the research b) Justify the research c) Ensure the research hasn't been done before (or that it is not just a "replication study") d) Show where the research fits into the existing body of knowledge e) Enable the researcher to learn from previous theory on the subject f) Illustrate how the subject has been studied previously g) Highlight flaws in previous research h) Outline gaps in previous research i) Show that the work is adding to the understanding and knowledge of the field j) Help refine, refocus or even change the topic.

2.2: Literature Review: There is a vast body of literature by eminent scholars and financial experts on different aspects of the stock market. The literature available on stock market mainly deals with various aspects such as stock market efficiency, stock pricing, stock valuation and stock market operations-. This chapter presents an overview of the important studies mid literature on capital market. The review of the available literature shows that although there are a number of studies on the different aspects of capital market, there is no specific comprehensive study on the attitudes, aspirations and perceptions of individual investors. The present study is an attempt to fill this gap to a certain extent.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR DOW Theory – Trends: The ideas of Charles Dow, the first editor of the Wall Street

Journal, form the basis of technical analysis. The Dow Theory is a method of interpreting and signaling changes in the stock market direction based on the monitoring of the Dow Jones Industrial and Transportation Averages. Dow created the Industrial Average, of top blue chip stocks, and a second average of top railroad stocks (now the Transport Average). He believed that the behavior of the averages reflected the hopes and fears of the entire market. The behavior patterns that th at he observed apply appl y to markets throughout the world. Baumol (1965)

In this paper researcher ascertains the importance of contribution to a better understanding of the performance of the stock market. His book represents a synthesis of past research and current thinking on the subject. It analyses in considerable detail both the short-run and longrun price equilibrating processes and points out important departures from the competitive ideal and the implications of these departures to stock market efficiency. Besides, Baumol offers his own hypothesis on the pricing of securities, and he sheds new light on the overall efficiency of the stock market as a mechanism for allocating the nation‟s capital resources. Bhatia (1970)

In this researcher has made an evaluative study of the “New Issue Market (NIM)” for the period 1958-1973. The role of the financial institutions in the NIM has been described and evaluated. The study shows that a new class of middle - income individual investors has emerged as an important supplier of the risk capital. The growth of joint stock companies played an important role in the development of the new issue market. Besides, the government also passed various legislations to protect the interests of the investors. Of the various institutions involved in the organization of the NIM, stock exchanges are the most important, because they provide a continuous market for issued securities. Gupta (1972)

In this researcher he has studied about the working of stock exchanges in India and has given a number of suggestions to improve its working. The study highlights the need to regulate the volume of speculation so as to serve the needs of liquidity and price continuity. It


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR suggests the enlistment of corporate securities in more than one stock exchange at the same time to improve liquidity. The study also wishes the cost of issues to be low, in order to protect small investors. investors .

Rohatgi (1973)

This research explains that the basic function of the stock market is to provide ready marketability or liquidity to holdings of securities. The ideal stock market is one that can provide instantaneous and unlimited liquidity. But it is reasonable to assume that a prudent long-term investor in equities would provide for his immediate cash needs. This is in agreement with the three motives of liquidity preference. If so, one would expect not ìnstant' liquidity, but moderate liquidity. It will be unreasonable for any investor to suppose that his equity holdings are as good as cash.

Mc Kinnon and Shaw (1973)

This study investigated the advocate liberalization of financial market. Study argues the state intervention in setting interest rates and quantitative measures of resource allocation adversely affect, not only allocative efficiency but also depress the aggregate saving rate in less developed economies.

Khan (1976)

This study of researcher examines the role, and the cost of raising funds from the market. The study goes on to suggest appropriate measures to enable the NIM to play a part in consonance with the requirements of the planned growth of industry. The core of the study deals with the new issues and company finance, the structure of underwriting, and the cost of capital. The study has important policy implications in terms of its relevance to the national economy. In the process of industrialization, a developed NIM would be instrumental in forging an organic link between the collection and distribution of industrial capital.

Blume and Friend (1978)

This study states that the proportion of stock owned by institutional investors in America has increased sharply, while that owned by individual investors has decreased. They analyze the effects of the shift in stock ownership from individuals to institutions on the efficiency of equity market. They also examine, the pros and cons of numerous proposals for improving


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR the securities market. Transactions by individuals have always been regarded as essential to both liquidity liquidit y and the efficiency of the market.

Panda (1980)

In this, researcher has studied the role of stock exchanges in India before and after independence. The study reveals that listed stocks covered four-fifths of the joint stock sector companies. Investment in securities was no longer the monopoly of any particular class or of a small group of people. It attracted the attention of a large number of small and middle class individuals. It was observed that a large proportion of savings went in the first instance into purchase of securities securiti es already issued.

Gupta (1981)

This research is an extensive study titled `Return on New Equity Issues' which states that the investment performance of new issues of equity shares, especially those of new companies, deserve separate analysis. The factor significantly influencing the rate of return on new issues to the original buyers is the `fixed price' at which they are issued. The return on equities includes dividends and capital appreciation. The study presents sound estimates of rates of return on equities, and examines the variability of such returns over time. The findings of this study suggest that the market seems to function largely on a `hit or miss' basis rather rath er than on the basis of informed beliefs about the th e long-term long -term prospects pro spects of o f individual indi vidual enterprises. The main reason for the market's irrationality appears to be the preponderance of speculative influences over investment influences.

Gujarathi (1981)

This study of researcher answers the question of the risk - adjusted return in the issue market. It is a significant work in the field of new issues in India. The difficulty of estimating the risk (Beta) of newly issued securities forced Guajarathi to use complicated methodology for arriving at the risk-adjusted return. His conclusion is that investors in the new issue market in 1970s earned an extra normal return of nearly 2 per cent per month.

Chitale (1983)

This research has evaluated the underlying causes of the growing shortage of equity finance for funding new industrial enterprises in the private sector during the period 1960-1980. The


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR available evidence suggests the emerging scarcity of risk finance, despite bullish trend in the price of select shares and over - subscription to a few issues of good companies. The study also evaluates the quantum and the kind of returns that investors were able to earn from their investments in equity shares of new companies.

Gupta (1985)

This study has analyzed share price behavior in India in the context of efficient market hypothesis. Using data over a period of five years (January 1971 to March 1976) from the Indian stock market, the author has examined the applicability of Random Walk Hypothesis in describing share price behavior under the Indian conditions.

Cho (1986)

This study of researcher argues that financial market liberalization may remain, incomplete without an efficient market for equity capital as a means of spreading risk and reward.

Gupta (1987)

This study emphasis on the geographic distribution of corporate shareholders in India. The study shows that a process of `securitization' is going on in the Indian capital market. The spotlight of the study is on equity shareholders. It covers individual holders of industrial securities in India. It is based on a sample of 1,09,031 security holders drawn from 165 companies distributed over various regions of India. The study brings out the dominant share of the metropolitan cities. The respective percentage shares as per data related r elated to 19831983 - 84 were; Bombay Bomba y (35.3), Calcutta (10.0), ( 10.0), Delhi (9.5) and Madras (3.9). An important factor for the very meager share of small towns and villages in the country's share - holding population, according to Gupta, is the lack of infrastructure needed for facilitating share transactions.

Deva Kumar (1987)

This study reveals that earlier to 1985, there were very few investors and they were knowledgeable. During the 1985 boom, thousands of new investors invaded the market. The new investors suffered heavy losses compared to the professionals. A good number of new investors have walked out of the stock market to safer areas like UTI Units, NSC, etc. There is a mild shift of investment preferences to mutual funds also.


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Narayana Rao and Bhole (1990)

This research point out that over longer periods of time, positive rate of return was being provided by equities, but in the short-run, the real return was often o ften negative. The regression analysis shows that the nominal total return on equities in India has increased, but not in proportion to an increase in the rate of inflation. The coefficient of inflation is found to be nearer to zero than one. The real return on equity has been found negatively related to inflation throughout all periods. Thus equity share in India may only be a weak or partial hedge against inflation.

Gupta (1991)

Researcher has made an extensive survey of Indian share-owners, around mid-1990 . It throws light on many unknown aspects of the market for shares and other financial assets. The study covers a wide range of aspects and has generated much new data on investors, their investment habits and preferences. The study involved nearly 6000 households spread over more than 100 cities of India. According to the study there do around 38 lakh share owning households and about 90 to 95 lakh shares own individuals in India. The number of debenture - owning households is about 29 lakh and most of them are shareowners also. The most outstanding development is that share ownership has become a middle class phenomenon (7501'0). Nearly 6.5 percentages of the Indian households own shares and are mainly restricted to cities. The analysis reveals that nearly 75% of the share owners are long term investors.

Anshuman and Chandra (1991)

This study of researcher has trace out the government policy of favoring small shareholders in terms of allotment of shares. They argue that such a policy suffers from several lacunae such as higher issue and servicing costs and lesser vigilance about the functioning of companies because of inadequate knowledge.

Jawahar Lal (1992)

This study presents a profile of Indian investors and evaluates their investment decisions. He made an effort to study their familiarity with, and comprehension of financial information,


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR and the extent to which this is put to use. The information that the companies provide generally fails to meet the needs of a variety of individual investors and there is a general impression that the company's Annual Report and other statements are not well received by them.

Fama and French, (1992)

This study titled, “The cross section of expected returns”, Journal of Finance identifies that value stocks (high book/market) significantly outperform growth stocks (low book/market). The average return of the highest book/market decile is reported to be one per cent per month higher than the average return for the lowest book/market decile. (www.aimsinternational.org).

Mayer (1992)

This research has examined using company balance sheet data, found that internal resources finance bulk of corporate investment in major OECD countries and the roll of the stock market is very limited.

Pyare Lal Singh (1993)

This study titled, Indian Capital Market, a functional analysis, depicts the primary market as a perennial source of supply of funds. It mobilizes the savings from the different sectors of the economy like households, public and private corporate sectors. The number of investors increased from 20 lakhs in 1980 to 150 lakhs in 1990 (7. 5 times). In financing of the project costs of the companies with different sources of financing, the contribution of the securities has risen from 35.01% in 1981 to 52.94% in 1989. In the total volume of the securities issued, the contribution of debentures / bonds in recent years has increased significantly from 16. 21 per cent to 30.14 per cent.

Subhash Chander and Ashwani Kansara (1994)

This study has surveyed the perceived significance of the information contained in the abridged prospectus attached to the application form for shares / debentures of companies. For an existing company, the information necessary for investment decisions could be obtained from newspapers, magazines, annual reports, prospectus etc. But for a new


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR company, abridged prospectus is the main important document which provides information for investment decisions. The study shows that the majority of investors are casual investors. The investors regard abridged prospectus as well as the investment journals as the prime source of information for their investment decisions. Investment decisions also depend upon unofficial premium quoted in business magazines, expert analysis, market trends, political considerations, etc.

Bajpai (1994)

This study investigated that, the liquidity aspect is an essential constituent of an efficient stock market, a sub-system of capital market. The growth of the equity in the 1980s was supported by the actual experience of the Indian investors. Equity prices between 1978 and 1993 have outperformed other popular avenues of investment. The chance of lucrative capital gain along with annual return from equity investment attracted investors in a large scale towards primary and secondary capital markets. It highlighted the need for liquidity of investment. The fact is that only 6 per cent of the listed scripts remained on the active trading, and 28 per cent of them were traded once in a year just to satisfy the requirements of listing agreement.

Bhole (1995)

This study "The Indian Capital Market at Crossroads" finds that various categories of people in India have become preoccupied, preoccupied , rather obsessed with, the industrial securities market since the middle of the 1980s, particularly since the launching of the New Economic Policy (NEP) in the middle of 1991. The stock market has been regarded and projected as the barometer of the health of the economy. The essentiality of the growth or spread of equity culture or equity is being constantly stressed. Though the stock market activity has been subject to wide fluctuations, the long-term trend has been one of steep increase. An accelerating or exponential increase in new issues has occurred during the 80s and 90s. The investors' asset preference has somewhat shifted from deposits to industrial securities.

Sahadevan and Thirpal Raju (1995 )

This study investigates into the lead-lag relationship between money supply and stock return in the Indian context. The study has attempted to trace the relationship between stock returns


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR and money supply using monthly observation on SENSEX, RBI Index, M1, and M3 for a period spanning over 14 years ending March 1994. The result reveals that supply variations in money have a lag effect on stock return and hence, stock market is not found efficient with respect to monetary data.

Amanulla and Kamaiah (1995)

This research makes an attempt to assess the Indian stock market efficiency by using market integration approaches. The results show that there is no evidence in favour of market efficiency of Bombay, Madras and Calcutta Stock Exchanges, while the results confirm the existence of market efficiency in Ahmedabad and Delhi Stock Exchanges.

Feldman and Kumar (1995)

This research shows the potential benefits of equity markets to developing countries. They argue that several constraints prevent banks from providing funds for long-term investment. Improving the functioning of secondary market trading has the added advantage of facilitating the primary issuance of equity shares. The combined capitalization of some 38 emerging stock markets had increased dramatically from less than $ 100 billion in 1983 to nearly $2 trillion by 1993. Information flows, disclosure requirements, auditing and accounting standards and the existence of credit rating institutions have an important bearing on the development and operations of capital markets.

Dowen, R.J. (2001)

This study of researcher extends researcher extends the Abarbanell and Bushee (1997, 1998) research on topic “Fundamental Information and Monetary Policy: The Implications for Earnings and

includin g new information informatio n developed in finance-related finance -related literature literatur e as Earnings Forecasts” by including additional signals in the form of dividend yield, firm size and book-to-market value of equity ratio. Monetary policy is also identified as a variable that may form the relationship. This is based on the belief bel ief that monetary monetar y policy influences equity returns. Similar Simi lar results were found. Monetary policy relates both to the observed level of the signals and the level of earnings change. However, monetary policy “does not alter the degree to which future earnings are predictable fr om om publicly available information”. information”.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR The Economic Times' study (1995)

This study suggests that the major factors leading to a sustained weakness in stock prices are excessive supply of equity shares and higher than apparent (P/E) levels of major stocks. Both imply a failure of the market. When the Sensex peaked at 4547 on April 2, 1992, the aggregate market capitalization amounted to Rs. 2,410 billion. And when the Sensex steadily fell to touch a bottom of 1980 19 80 on o n 27 April 1993, (56.5%) the th e aggregate aggre gate market mark et capitalization cap italization declined only by 23% to Rs. 1859 billion. The bulk of this differential (56.5-23 =33.5%) is due to the increase in the sheer quantity of shares. By September 12, 1994, the Sensex scaled a peak of 4643, up by 134 %. But the aggregate market capitalization rose even more steeply to Rs. 5,518 billion.

A CMIE (1995)

This study on Initial Public Offering (IPO) points out that average annualized returns obtained from issue date to list date by IPOs was 339%. But these returns fade away with time, so that after one-month of listing, they drop to 256%. Annualized returns after three months fell to 206% and subsequently to 120% after one year from listing. Returns on IPOs are also highly volatile in the first few days of listing. By the end of sixty days from listing, the volatility drops to 25 % of what it was in the first ten days of listing.

Debojit Chakraborty (1997)

This study of researcher tries to establish a relationship between “major economic indicators and stock market behavior” . It also analyses the stock market reactions to

changes in the economic climate. The factors considered are inflation, money supply, and growth in GDP, fiscal deficit and credit deposit ratio. To find the trend in the stock markets, the BSE National Index of Equity Prices (Natex) which comprises 100 companies was taken as the index. The study shows that stock market movements are largely influenced by, broad money supply, inflation and fiscal deficit apart from political stability.

CMIE (1997)

This study explains that the proportion of rights issues was down to 16% during the first three-quarters of the1996-'97 from 21% in 1995- With an objective to judge, what kind of issues from the primary market have provided returns to the investors, CMIE analyzed the


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR returns of a random sample of rights issues. This analysis clearly brought out the point that judicious investments do provide returns. The majority of the rights offerings, which have given positive returns, outperformed the market.

From the available review of literature mentioned above, there was no article or studies which is related to my area of interest. Hence in order to bridge the gap between this, I have selected this topic for my research.

2.3: Statement of the problem: This study was undertaken to analyze the various economic, industry and company factors that affect the IT sector. Fundamental analysis is good for long term investment based on long term trend. The ability to identify and predict long term economic, demographic, and technological or consumer trends can benefit long term investor who picks the right industry or company. Again the study also analyzes the performance of the seven IT companies for the past five years and comparison comp arison is made for their performance perfo rmance in different years.

2.4: Objective of the study: The objective of this project is to deeply analyze our Indian IT sector for investment purpose by monitoring the growth rate and performance on the basis of historical data. The main objectives of the Project study are:

i.

To analyze the financial health of selected IT companies stock.

ii.

To examine the growth of IT sector in Indian capital market.

iii.

To prepare comparative study of top IT companies.

iv.

The primary objective of equity research is to analyze the earnings persistence.

v.

To find out potentiality of selected companies through current ratios.

vi.

To check companies performance on the basis of historical data.

vii.

To study and examine the relevance of fundamental analysis in investment decisions making process.

viii.

To analyze which company is giving best returns to the shareholders.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 2.5: Scope of the study: The scope of the study is identified and during the study is conducted. The project is based on tools like fundamental analysis and ratio analysis. Further, the study is based on information of last five years. i.

The analysis is made by taking into consideration seven companies i.e. TCS, Wipro, Infosys, Satyam computers services, HCL Technologies, Tech Mahindra, L&T Infotech.

ii.

The scope of the study is limited for a period of five years.

iii.

The scope is limited to only the fundamental analysis of the chosen stocks.

2.6: Need of the study: To start any business capital plays major role. Capital can be acquired in two ways by issuing shares or by taking debt from financial institutions or borrowing money from financial institutions. The owners of the company have to pay regular interest and principal amount at the end. Stock is ownership in a company, with each share of stock representing a tiny piece of ownership. The more shares a person own, the more of the company he owns. The more shares he own, the more dividends he earn when the company makes a profit. In the financial world, ownership is called “Equity”.

Advantages of selling stock:

• A company can raise more capital than it could borrow. • A company does not have to make periodic interest payments to creditors. • A company does not have to make principal payments stock/shares play a major role in acquiring capital to the business in return investors are paid dividends to the shares they own.

The role of equity analysis is to provide information to the market. An efficient market relies on information: a lack of information creates inefficiencies that result in stocks being misrepresented (over or under valued). This is valuable because it fills information gaps so that each individual investor does not need to analyze every stock thereby making the markets more efficient.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 2.7: Limitations: a) This study has been conducted purely to understand Equity analysis for investors. b) The study is restricted to seven companies based on Fundamental analysis. c) The study is limited to the companies having equities. d) Detailed study of the topic was not possible due to limited size of the project. e) Suggestions and conclusions are based on the limited data of five years. f) The future is uncertain.

2.8: Research Methodology: Research design or research methodology is the procedure of collecting, analyzing and interpreting the data to diagnose the problem and react to the opportunity in such a way where the costs can be minimized and the desired level of accuracy can be achieved to arrive at a particular conclusion. The sample of the stocks for the purpose of collecting secondary data has been selected on the basis of Random Sampling. The stocks are chosen in an unbiased manner and each stock is chosen independent of the other stocks chosen. The stocks are chosen from the IT sector. The sample size for the number of stocks is taken as 7 for fundamental analysis of stocks as fundamental analysis is very exhaustive and requires detailed study.

2.8.1: Source of Data: Sources of data may be classified into primary and secondary sources. Primary sources are original sources from which the researcher directly collects data from the customer. Secondary data has been collected from various sources to analyze the fundamentals. The secondary data are collected from the BSE, NSE, moneycontrol.com, articles, magazine, journals and various websites w ebsites etc.

2.8.2: Research Method : The descriptive method is used for the study.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 2.8.3: Sample Size: For this study seven IT companies are selected which are listed under Indian stock market.

2.8.4 Chapter scheme: Chapter 1 Introduction: It contains information of equity analysis and Indian IT sector,

background, concept, overview, meaning of fundamental and technical analysis, role of IT sector, and impact of IT sector on Indian economy. Chapter 2 Review of Literature and Research Design: It contains the information about

the introduction, Review of Literature, Statement of problems, Scope of study, Objective of study, Methodology, Limitation, and chapter schemes. Chapter 3 Industry profile and Company profile: It contains the information related to the

origin and growth of Indian IT sector and Indian stock market, types of stock market, recent trends etc. and also the information related to top IT companies working in India and listed in stock market, and all details about it. Chapter 4 Results, Analysis, and Discussions : It is the analysis showing the various

opinions of the investors relating to the direct equity investment and investment in IT sector. Chapter 5 Summary of Finding, Conclusion & Suggestion : It contains the findings,

conclusion, and suggestion related to the various investment avenues. Bibliography.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 3.1: Introduction: The computer systems design and related services industry is among the economy's largest and fastest sources of employment growth. Employment increased by 616,000 over the 1994-2004 periods, posting a staggering 8.0-percent annual growth rate. The projected 2004-14 employment increase of 453,000 translates into 1.6 million jobs, and represents a relatively slower annual growth rate of 3.4 percent as productivity increases and offshore outsourcing take their toll. ("Industry output and employment projections to 2014" by Jay M. Berman, Bureau of Labor Statistics) However, the main growth catalyst for this industry is expected to be the persistent evolution of technology and business' constant effort to absorb and integrate these resources to enhance their productivity and expand their market opportunities. Employment of computer and information systems managers is expected to grow between 18 to 26 percent for all occupations through the year 2014. (Career Guide to Industries 2006-07) The Indian IT sector is growing rapidly and it has already made its presence felt in all parts of the world. IT has a major role in strengthening the economic and technical foundations of India. Indian professionals are setting up examples of their proficiency in IT, in India as well as abroad.

3.2: IT sectors- an overview: The computer systems design and related services industry is among the economy's largest and fastest sources of employment growth. Employment increased by 616,000 over the 1994-2004 periods, posting a staggering 8.0-percent annual growth rate. The projected 2004-14 employment increase of 453,000 translates into 1.6 million jobs, and represents a relatively slower annual growth rate of 3.4 percent as productivity increases and offshore outsourcing take their toll. ("Industry output and employment projections to 2014" by Jay M. Berman, Bureau of Labor Statistics) However, the main growth catalyst for this industry is expected to be the persistent evolution of technology and business' constant effort to absorb and integrate int egrate these t hese resources reso urces to enhance their productivity pro ductivity and expand their market opportunities. Employment of computer and information systems managers is expected to grow between 18 to 26 percent for all occupations through the year 2014. (Career Guide to Industries 2006-07)


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR The sector can be classified into these broad categories 1. IT Services 2. Engineering Services 3. ITES-BPO Services 4. E Business

3.2.1: IT Services: It can further be categorized into Information Services (IS) outsourcing, packaged software support and installation, systems integration, integration , processing services, ser vices, hardware support s upport and installation and IT training and education.

3.2.2: Engineering Services: Include Industrial Design, Mechanical Design, Electronic System Design (including Chip/Board

and

Embedded Software

Design),

Design

Validation

Testing,

Industrialization and Prototyping.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 3.2.3: IT Enabled Services: These are services that use telecom networks or the Internet. For example, Remote Maintenance, Back Office Operations, Operation s, Data Processing, Pro cessing, Call Centers, Business Process Outsourcing, etc.

3.2.4: E Business: (Electronic business) is carrying out business on the Internet; it includes buying and selling, serving customers and collaborating with business partners.

MajorTrends:

Graph No. 3.1 showing major trends in Hiring

The bar chart shows that the recruitment of engineers and IT professionals in the industry is growing at the Compound Compoun d annual rate of 14.5% approximately. approx imately. In the FY06, the direct employment emp loyment in the th e IT-ITES sector was 1.3 million people and the th e indirect employment was 3 million approximately.

A trend in salary hikes along with abundant growth opportunities, IT sector is one of the highest paying sectors. The average increase in salary in IT sector across the levels was around 16% and the average av erage increase in the ITeS BPO sector across the t he levels was in between16%-18% Requisites Requisit es for balanced salaries salarie s – 

Review of compensation according to the skills



Developing talent in-house


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 

Entry of talented fresher‟s in fresher‟s in the industry

IT: Success Factors: Increasing number of skilled professionals

in IT. The demographic factor.

Approximately 60% of the population of India lies in the age group of 15-65. More than half of the population of India is below the age of 25. So in the future, the number of working people is going goin g to be more than the number numbe r of dependents. dependent s. In the year 2006, 2 006, Total enrollment enroll ment in colleges was 9.3 million and India produced 441,000 Technical graduates. India has the second largest English-speaking workforce in the world.

3.3: The Indian IT Industry: The Information Technology (IT) sector in India holds the distinction of advancing the country into the new-age economy. The growth momentum attained by the overall economy since the late 1990s to a great extent can be owed to the IT sector, well supported by a liberalized libe ralized policy poli cy regime with reduction reductio n in telecommunication te lecommunication cost co st and import duties on hardware and software. Perceptible is the transformation since liberalization - India today is the world leader in information technology and business outsourcing. Correspondingly, the industry‟s industry‟s contribution to India‟s India‟s GDP has grown significantly from 1.2% in 1999-2000 to around 4.8% in FY06, and has been estimated to cross 5% in FY07. The sector has been growing at an annual rate of 28% per annum since FY01. Indian IT companies have globally established their superiority in terms of cost advantage, availability of skilled manpower and the quality of services. They have been enhancing their global service delivery capabilities through a combination of organic and inorganic growth initiatives. Global giants like Microsoft, SAP, Oracle, and Lenovo have already established their captive centers in India. These companies recognize the advantage India offers and the fact that it is among the fastest growing IT markets in the Asia-Pacific region.

Sector structure/Market size: The Indian information technology industry has played a key role in putting India on the global map. Thanks to the success of the IT industry, India is now a power to reckon with. According to the National Association of Software and Service Companies (NASSCOM), the apex body for software services in India, the revenue of the information technology sector


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR has risen from 1.2 per cent of the t he gross domestic domesti c product (GDP) in FY 1997-98 199 7-98 to an estimated 5.8 per cent in FY 2008-09. India's IT growth in the world is primarily dominated by IT software and services such as Custom Application Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services. The government expects the exports turnover to touch US$ 80 billion by 2011, growing at an annual rate of 30 per cent per annum, from the earlier few million dollars‟ dollars‟ worth exports in early 1990s.

Graph No. 3.2 showing IT market structure


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR Functioning of Software segment segment is explained pictorially in the figure below:


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3.4: MAJOR IT COMPANIES: S. NO.

COMPANY

1

TCS

2

INFOSYS

3

WIPRO

4

HP

5

IBM

6

SATYAM

7

HCL

8

PATNI

9

POLARIS

10

CISCO

11

KPIT CUMMINS

12

I-FLEX SOLUTIONS

13

MICROSOFT

14

DELL

15

LARSEN & TURBO

3.5: Nature of competition: Nature of competition is an essential factor that determines the demand for the particular product, its profitability and the price of the concerned company scripts. The company‟s ability to withstand the local as well as the multinational competition counts much. If too many firms are present in the organized sector, the competition would be severe. The competition would lead to a decline in the price of the product. The investor before investing in the script of a company should analyze the market share of the particular company's product and should compare it with the top five companies.


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Key Positives & Negatives for the Indian IT Industry: Positives

Negatives

Growth in IT spending

Rupee Appreciation

Opening up of newer geographies like Anticipated slowdown in the US economy Europe Strong volume growth

Wage inflation

Increase in offshore spending

Higher attrition rate

M&A to increase reach, clients and Lack of proper infrastructure offerings Setting training and development centers to Competition from low cost countries, China, train fresh entrants

Philippines, Vietnam

3.6: Growth of Indian IT industry: India's IT industry has recorded phenomenal growth over the last decade. During the period from 1992-2001, the compounded annual growth rate of the Indian IT services industry has been over 50%. The software sector in India has grown at almost double the rate of the US software sector. The statistics of the India's IT industry substantiates the huge momentum acquired by the IT sector in the recent past. During the financial year 2000-2001, the software industry in India accounted for $8.26 billion. The corresponding figure was $100 million 10 years back. As per the report of a study undertaken by NASSCOM-McKinsey, the software export from Indian IT industry is likely to reach 50 billion US dollars in the year 2008. This growth rate of the software sector for the year 2008 has been projected on the basis of the 35% per year growth rate achieved in the last couple of years. Export of software and services from India is expected to add almost 41 billion US dollars to the annual revenue of the Indian government in the current year. The share of technology industry in India's GDP is


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR expected to reach 5.5% in 2008; while the corresponding figure in 1998 was as small as 1.2%. The study of NASSCOM has revealed that the growth of India's IT industry has prompted the growth of Indian exports ex ports by b y almost 36%. Another favorable favo rable effect of India's IT boom is the t he expansion of opportunities opp ortunities of employment. By the end en d of fiscal fisc al year 2008, 20 08, the IT sector of India is expected to employ around 2 million skilled Indian youths. The growth of India's IT sector has brought about many other positive changes in the Indian economy. The purchasing power of a large section of Indian population has increased dramatically. This has resulted in an increase in the average standard of living of the majority of population of the country. The increase in purchasing power of the common people has propelled the growth rate of the other sectors of the th e economy as well. India is now home to a number of IT giants. The operations of IT firms like Wipro, Infosys, Accenture, Capgemini, Tata Consultancy Services and many man y more in different locations of India have changed the entire scenario of the Indian job market. The ITES sector has also come up to complement the growth of Indian IT sector.

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


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR Outsourcing: A research by Gartner forecasts India as the undisputed leader in the outsourcing space in the year 2008. India's most prized resource is its readily available technical work force. India has the second largest English-speaking scientific professionals in the world, second only to the US. It is estimated that India has over 4 million technical workers, over 1,832 educational institutions and polytechnics, which train more than 67,785 computer software professionals every year. The enormous base of skilled manpower is a major draw for global customers. According to NASSCOM software and services exports (including exports of IT services, BPO, engineering services and R&D and software products) reached US$47 billion in FY 2008-09, contributing nearly 78 per cent to the total software and services revenue of US$ 59.6 billion.

Domestic Markets: India's domestic market has also become a force to reckon with, as the existing IT infrastructure evolves both in terms of technology and depth of penetration. According to NASSCOM, domestic IT market (including hardware) reached US $24.3 billion in FY 2008-09 as against US$ 23.1 billion in FY 2007-08, a growth of 5.3 per cent. India Inc's demand for IT services and products has bolstered growth in the domestic sector with deal sizes going up remarkably and contracts worth US$ 50 million-US$100 million up for grabs. Such growth in the software and services sector has been achieved because of spectacular spectacu lar growths in some segments. se gments. According to research firm Gartner, India's personal computer (PC) market is likely to grow by 13.7 per cent to 11.1 million units in 2009, aided by a surge in demand for laptops. The laptop market is expected to grow by 37 per cent from 2009 to 3.69 million mil lion units and constitute constitu te a third of the total PC market. The securities market has essentially three categories of participants (i) the investors, (ii) the issuers, (iii) the intermediaries. The Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), Ministry of Corporate Affairs (MCA) and the Department of Economic Affairs (DEA) of the Ministry of Finance regulate these participants.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 3.7: Market Segments and their Products: The Exchange (NSE) provides trading in four different segments - Wholesale Debt Market, Capital Market, Futures and Options and Currency Derivatives Segment as mentioned below.

(i) Wholesale Debt Market (WDM) Segment: This segment at NSE commenced its operations in June 1994. It provides the trading platform for wide range of debt securities which includes State and Central Government securities, T-Bills, PSU Bonds, Corporate debentures, Commercial Papers, Certificate of Deposits etc.

(ii) Capital Market (CM) Segment: This segment at NSE commenced its operations in November 1994. It offers a fully automated screen based trading system, known as the National Exchange for Automated Trading (NEAT) system. Various types of securities e.g. equity shares, warrants, debentures etc. are traded on this system.

(iii) Futures & Options (F&O) Segment: This segment provides trading in derivatives instruments like index futures, index options, stock options, and stock futures, and commenced its operations at NSE in June 2000.

(iv) Currency Derivatives Segment (CDS) Segment: This segment at NSE commenced its operations on August 29, 2008, with the launch of currency futures trading in trading in US Dollar-Indian Rupee (USD-INR). Trading in other currency pairs like Euro-INR, Pound Sterling-INR and Japanese Yen-INR was further made available for trading in February 2010. „Interest rate „Interest rate futures‟ futures‟ was another product made available for trading on this segment with effect from August 31, 2009.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR Equity Investment: Why should one invest in equities in particular?

When a person buys a share of a company he becomes a shareholder in that company. Equities have the potential to increase in value over time. Research studies have proved that the equity returns have outperformed the returns of most other forms of investments in the long term. Investors buy equity shares or equity based mutual funds because equities are considered the most rewarding, when compared to other investment options if held over a long duration. Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment. The average annual return of the stock market over the period of last fifteen years, if one takes the Nifty index, as the benchmark to compute the returns, has been around16%.However, this does not mean all equity investments would guarantee similar high returns. Equities are high-risk investments. Though higher the risk, higher the potential returns, high risk also indicates that the investor stands to lose some or all his investment amount if prices move unfavorably. One needs to study equity markets and stocks in which investments are being made carefully, before investing.

Return on Equities in India: If we take the Nifty index returns for the past fifteen years, Indian stock market has returned about 16% to investors on an average in terms of increase in share prices or capital. Besides that on average stocks have paid 1.5% dividend annually. Dividend is a percentage of the face value of a share that a company returns to its shareholders from its annual profits. Compared to most other forms of investments, investing in equity shares offers the highest rate of return, if invested over a longer duration.

3.8: Scope of IT Industry in India: The IT industry has great scope for people as it provides employment to technical and non-technical graduates and has the capability to generate huge foreign exchange inflow for India. India exports software and services to approximately 95 countries in the world. By outsourcing to India, many countries get benefits in terms of labor costs and business processes. Also, the Indian Indi an companies are broadening broade ning the range of services being bei ng provided to the customers, which is resulting in more off shoring. Talent acquisition, development and KRUPANIDHI DEGREE COLLEGE

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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR retention initiatives taken by the companies have brought down the employee attrition rates, thereby providing more stability to the employees and increasing their job commitment. Many financial institutions are providing funds for the expansion of IT and ITeS businesses. In order to support IT and ITES, the Indian Government is also taking many steps. For example: a) The Govt. has provided incentives including tax holiday up to 2010 and competitive duty structures. b) The Govt. is trying to reduce the international communication cost. c) It is providing infrastructure support through organizations such as software technology parks. All these factors collectively create a number of opportunities in the IT sector.

3.9: Expanding Foreign Investments by India: This year India's investment in US surpassed $ 2 billion. The main reason being the booming Indian economy which has boosted the confidence of Indian companies. So unlike the past, now they are willing to take risks. Many Indian companies have acquired several foreign entities pushing the Indian share in US economy up to $ 2 billion in 2006-07. Out of total hundred, forty eight deals have been made in the IT-ITeS sector by Indian firms. The other acquisitions have been in various sectors like pharmaceuticals, hospitality industry, agro products and automotive industry. “India Inc. is now well-equipped to acquire overseas companies because of the regulatory development that has taken place due to the government's adoption of liberal measures and various monetary relaxations provided by the Reserve Bank of India (RBI) with the growth of foreign exchange." Stated the study done by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young. As a result, Indian companies are opening up units in US and other foreign markets resulting in mass generation of employment and hence giving rise to the reverse outsourcing trend.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 3.10: STOCK EXCHANGES IN INDIA: Stock Exchanges are an organized marketplace, either corporation or mutual organization, where members of the organization gather to trade company stocks or other securities. The members may act either as agents for their customers, or as principals for their own accounts. As per the Securities Contracts Regulation Act, 1956 a stock exchange is an association, organization or body of individuals whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities. Stock exchanges facilitate for the issue and redemption of securities and other financial instruments including the payment of income and dividends. The record keeping is central but trade is linked to such physical place because modern markets are computerized. The trade on an exchange is only by members and stock broker do have a seat on the exchange.

3.11: List of Stock Exchanges in India: Bombay Stock Exchange National Stock Exchange OTC Exchange of India

Regional Stock Exchanges:

1. Ahmedabad 2. Bangalore 3. Bhubaneswar 4. Calcutta 5. Cochin 6. Coimbatore 7. Delhi KRUPANIDHI DEGREE COLLEGE

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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 8. Guwahati 9. Hyderabad 10. Jaipur 11. Ludhiana 12. Madhya Pradesh 13. Madras 14. Magadh 15. Mangalore 16. Meerut 17. Pune 18. Saurashtra Kutch 19. Uttar Pradesh 20. Vadodara

3.12: Profile of TCS (Tata Consultancy Services): TCS is an Indian multinational Information Technology (IT) Services, business solutions and outsourcing services. Company headquartered in Mumbai, Maharashtra. TCS is a subsidiary of the Tata Group and is listed on the Bombay Stock Exchange and the National Stock Exchange of India. It is one of India‟s most valuable companies and it is the largest India-based IT services company by 2012 revenues.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 1968 to 2000

Tata Consultancy Services (TCS) was founded in 1968. Its early contracts included providing punched card services to sister company TISCO (now (n ow Tata Steel), working on an Inter-Branch Reconciliation Reconciliat ion System for the Central Centr al Bank of India, and providing bureau services to Unit Trust of India. In 1975, TCS conducted its first campus interviews, held at IISc, Bangalore. The recruits comprised 12 Indian Institutes of Technology graduates and three IISc graduates, who became the first TCS employees to enter a formal graduate trainee programme. In 1979, TCS delivered an electronic depository and trading system called SECOM for the Swiss company SIS Sega Inter Settle. TCS followed this up with System X for the Canadian Depository Deposi tory System and automating automatin g the Johannesburg Stock Exchange. Exch ange. TCS associated with a Swiss partner, TKS Teknosoft, which it later acquired. In 1981, TCS established India's first dedicated software research and development center, the Tata Research Development and Design Center (TRDDC) in Pune Pune..[7] In 1985 TCS established India's first client-dedicated offshore development center, set up for client Tanedm. In the early 1990s the Indian IT outsourcing industry grew rapidly due to the Y2K bug and the launch lau nch of a unified unifi ed European currency, currenc y, Euro. TCS created the factory factor y model for Y2K conversion and developed software tools which automated the conversion process and enabled third-party th ird-party developer develop er and client implementation. implementati on. 2000 to present:

By 2004, TCS's e-business activities were generating over US$500 million in annual revenues. On 25 August 2004 TCS became a publicly listed company. In 2005 TCS became the first India-based IT services company to enter the bioinformatics market. In 2006 TCS designed an ERP system for the th e Indian Railway Railwa y Catering and Tourism Tou rism Corporation. In 2008 TCS undertook an internal restructuring exercise which aimed to increase the company's agility. KRUPANIDHI DEGREE COLLEGE

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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR TCS entered the small and medium enterprises market for the first time in 2011, with cloud based offerings. On the last trading day of 2011, TCS overtook RIL to achieve the highest market capitalization of any India-based company. In the 2011/12 fiscal year TCS achieved annual revenues of over U$10 billion for the first time. TCS is the market leader in IT sector in India and other major companies like Wipro, Infosys, Accenture and IBM are the major market share in the economy. The revenue of TCS is now US $5.70 billion it is more than the other major companies.

Type

Public (BSE: 532540) Subsidiary of Tata Group

Founded

1968

Headquarters

Mumbai, India

Key people

Ratan Tata (Chairman) S Ramadorai (vice chairman) N Chandrasekaran ( CEO & MD) S Mahalingam (Executive Director & CFO) Phiroz Vandrevala (Executive Director & Head, Global

Corporate Affairs) (VP& Head, Global Human Resources) Ajoy Mukherjee (VP&

Industry

Software services

TCS Bancs Products

Digital Certification Products Healthcare Management Systems IT consulting IT services Outsourcing BPO Software Product


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

Wipro Infotech is a leading manufacturer of computer hardware and provider of IT services in India and the Middle East region. Part of Wipro Ltd, the $6.98 billion conglomerate and global leader in technology enabled solutions, the company leverages on the parent's philosophy of 'Applying Thought' to enable business results by being a transformation catalyst.

Wipro‟s Wipro‟s vast IT services portfolio includes consulting, systems integration, application development and maintenance, technology infrastructure services, package implementation and R&D services among others.

Type

Public (BSE 507685)

Founded

1945

Founder(s)

M.H. Premji

Headquarters

Bangalore, Karnataka, Bangalore, Karnataka, India India

Key people

Azim Premji

(Chairman)


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Girish Paranjpye Key people

(Joint CEO) (Joint CEO) Suresh Vaswani

(Joint CEO) SA Sudarshan

Industry

IT Services

Services

IT Consulting Business Process Outsourcing Product Engineering Solutions Technology Infrastructure Services

Revenue

US$ 7.3 billion (2012)

Operating income

US$ 1.19 billion (2012)

Profit

US $1.09 billion (2012)

Total equity

US$ 5.62 billion (2012)

Total assets

US$ 8.56 billion (2012)

Employees

140569 (2012)

Website

www.wipro.com


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3.14: Profile of Infosys: Infosys Limited (NYSE: INFY) was started in 1981 by seven people with US$250. Today, they are a global leader in consulting, technology and outsourcing with revenues of US$ 7.398 billion (FY14). Many of the world‟s most successful organizations rely on Infosys to deliver measurable business value. Infosys provides business consulting, technology, engineering and outsourcing services to help clients in over 30 countries build tomorrow‟s enterprise. Our award-winning Infosys Labs and its breakthrough intellectual property can be leveraged as a co-creation engine to accelerate innovation across the enterprise. Infosys pioneered the Global Delivery Model (GDM), based on the principle of taking work to the location where the best talent is available, where it makes the best economic sense, with the least amount of acceptable risk. Continued leadership around GDM enables Infosys to drive extraordinary efficiencies and free up clients‟ resources for strategic transformation or innovation initiatives. Infosys has a global footprint with 69 offices and 87 development centers in US, India, China, Australia, Japan, Middle East, UK, Germany, France, Switzerland, Netherlands, Poland, Canada and many other countries. Infosys and its subsidiaries have 156,688 employees as on March 31, 2013. Infosys takes pride in building strategic long-term client relationships. 96.5% of our revenues come from existing customers (Q4 FY 13). Infosys gives back to the community through the Infosys Foundation that funds learning and education. KRUPANIDHI DEGREE COLLEGE

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Type

Public (BSE 500209)

Founded

July 2, 1981

N R Narayana Murthy Nandan Nilekani N. S. RaghavanKris Founder(s)

Gopalakrishnan S. D. Shibulal K. Dinesh Ashok Arora

Headquarter

Bangalore, India Bangalore, India

N R Narayana Murthy

(Chairman) Key People

Kris Gopalakrishnan Gopalakrishnan

(CEO) & (CEO) & (MD) S. D. Shibulal

(COO) & (COO) & (Director)

Industry

Software services

Products

IT Services

Revenue

US $ 7.4 billion (2013)

Total Assets

US$ 8.53 billion (2013)

Total equity

US$ 7.33 billion (2013)

Website


www.infosys.com

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3.15: Profile of Satyam Computer Services: Mahindra Satyam (formerly Satyam Computer Services) is an Indian Indi an IT services company based in Hyderabad, India. It was founded in 1987 by B Ramalinga Raju. Mahindra Satyam is a part of the Mahindra the Mahindra Group which is one of the top 10 industrial firms based in India. The company offers consulting and information technology (IT) services spanning various sectors, and is listed on the Pink Sheets, the National Stock Exchange (India) and and Bombay Stock Exchange (India). In June 2009, the company unveiled its new brand identity "Mahindra Satyam" subsequent to its takeover by the Mahindra Group's IT arm, Tech arm, Tech Mahindra on 13 April 2009.

Mahindra Satyam provides services in the following areas: a)

Aerospace

b)

Banking, Financial Services & Insurance

c)

Energy and Utilities

d)

Life Sciences & Healthcare

e)

Manufacturing, Chemicals & Automotive

f)

Public Services & Education

g)

Retail

h)

Consumer Packaged Goods

i)

Travel, Transport, Logistics

j)

Telecom, Infrastructure, Media and Entertainment & Semiconductors

k)

Information Technology

Type

Public Company

Traded as

BSE: 500376


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR NSE: SATYAMCOMP Industry

IT services, IT consulting

Founded

1987

Founder(s)

Byrraju Ramalinga Raju

Headquarters

Hyderabad, India

Key people

Vineet Nayyar (Chairman) C. P. Gurnani (CEO) IT, business IT, business consulting and outsourcing services

Services Revenue

69.23 billion (US$1.3 billion) (2012)

Profit

13.06 billion (US$240 million) (2012)

Owner(s)

Mahindra Group

Website

www.mahindrasatyam.com

3.16: Profile of HCL: HCL Technologies is one of more than 3,000 technology companies in the Bloomberg database. HCL Technologies is one of the seven companies with revenue of more than $4.5 billion, a market capitalization cap italization of more than $5 billion, billi on, and a compounded compound ed annual growth rate rat e greater than 25 per cent during the past five years. HCL Technologies is one of three businesses which are separately listed in India – India – falling under the corporate umbrella of HCL Enterprise with combined annual 2011 revenues


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR of US$6 billion. HCL Enterprise was founded in 1976 and is one of India's original IT garage startups. HCL Technologies formed in 1991 when HCL's R&D business was spun off to focus on the growing IT services industry. They have decided to vast their features in Information Technology all over the world. Over the last 20 years, HCL has expanded its service portfolio in IT applications (custom applications for industry solutions and package implementation), IT infrastructure management, and business process outsourcing, while maintaining and affecting product engineering. HCL Technologies is the first Indian IT garage startup. It is also the first company to address the needs of Indian Consumer Market.

Type

Public

Traded as

BSE: 532281 BSE: 532281 NSE: HCLTECH NSE: HCLTECH

Industry


Founded on

November 12, 1991

Founders

Shiv nadir vineet nayar

Key people

Shiv Nadar

(Chairman & CSO) Vineet Nayar

(VC & Joint Managing Director) Anant Gupta

(President & CEO) Services Revenue Website

IT, business IT, business consulting and outsourcing and outsourcing services US$ 4.54 billion (Apr 2013) www.hcltech.com


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3.17: Profile of Tech Mahindra: Tech Mahindra Limited is an Indian provider of information technology (IT), networking technology solutions and business support services (BPO) to the global telecommunications industry. Tech Mahindra is a part of Mahindra Group conglomerate with headquartered at Pune, India. On 23 May 2012, Tech Mahindra reported a 3% increase in its revenue for the year ended March 31, to $1.15 Billion. Its activities spread across a broad spectrum, including Business Support Systems (BSS), Operations Support Systems (OSS), Network Design & Engineering, Next Generation Networks, Mobility Solution, and Security consulting and testing. The “solution portfolio” includes Consulting, Consulting, Application Development & Management, Network Services, Solution Integration, Product Engineering, Infrastructure Managed Services, Remote Infrastructure Management and BSG (comprises BPO, Services and Consulting). Tech Mahindra is ranked #6 in India's software services firms behind Tata Consultancy Services, Wipro, Infosys, HCL Technologies and Satyam Computer Services and overall #161 in Fortune India 500 list for 2011. Tech Mahindra has implemented more than 15

Greenfield

Operations globally

and

has

over 128

active

customer

engagements mostly in the Telecom sector.

Its executive management team consists of Vineet Nayyar(Executive Vice Chairman), CP Gurnani(MD), Sujit Baksi (President – Corporate Affairs & Business Services Group), Sonjoy Anand (CFO), L. Ravichandran (President - IT Services), Amitava Roy (Chief Operating Officer), Sujitha Karnad (Senior Vice President - HR & QMG for IT Services).

Type

Public (BSE: 532755) (NSE: TECHM)

Industry



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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR Founded

1986

Headquarters

Pune, India

Key people

Vineet Nayyar (VC&CEO)

Services

IT, Business consulting and outsourcing services

Revenue

$1.15 billion (2012)

Net Income

$129 million (2012)

Parent

Mahindra Group

Website

www.techmahindra.com

3.18: Profile of Larsen & Toubro Limited: Larsen & Toubro Limited, also known as L&T, is an Indian multinational

conglomerate headquartered in Mumbai, India. The company has business interests in engineering, construction, manufacturing goods, information technology and financial services. L&T is India‟s largest engineering and construction construction company, with a dominant presence in India‟s infrastructure, power, hydrocarbon, machinery, shipbuilding and railway sectors. In recent years, L&T has expanded its global presence and international projects contributed 9% of its overall order book for the 2010-11 period. Considered to be the “bellwether of India‟s engineering sector”, L&T was recognized as the company of the year in 2010. L&T has featured four times in Forbes Fab 50 list of the best public companies in the Asia-Pacific Asi a-Pacific region. In 2012, 2012 , Forbes Forb es magazine magazi ne ranked L&T the world‟s 9th most innovative company, ahead of Google and Apple Inc. KRUPANIDHI DEGREE COLLEGE

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Traded as

NSE: LT BSE: 500510

Industry

Conglomerate

Founded

Mumbai, India (1938)

Founder(s) Founder(s)

Henning Holck Larse Soren Kristian Tobro

Headquarters

L&T House, Ballard Estate, Vadodara, Gujarat, India

Key people

K. Venkataramanan(CEO & MD) A. M. Naik(Executive Chairman)

Products

Construction Heavy equipment Electrical equipment Power Shipbuilding Financial Services IT Services

Revenue

US$ 13.5 billion (2012)

Operating income

US$ 1.488 billion (2012)

Net income

US$ 907 million (2012)

Total assets

US$ 22.84 billion (2012

Total equity

US$ 5.978 billion (2012)

Website

www.larsentoubro.com


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 4. ANALYSIS, RESULTS AND DISCUSSION 4.1 Financial analysis: The best source of financial information about a company is its own financial statements. This is a primary source of information for evaluating the investment prospects in the particular company‟s stock. Financial statement analysis is the study of a company‟s financial statement from various viewpoints. The statement gives the historical and current information about the company‟s operations. Historical financial statement helps to predict the future and the current information aids to analyze the present status of the company. The two main statements used in the analysis are Balance sheet and Profit and Loss Account. The balance sheet is one of the financial statements that companies prepare every year for their shareholders. It is like a financial snapshot, the company's financial situation at a moment in time. It is prepared at the year end, listing the company's current assets and liabilities. It helps to study the capital structure of the company. It is better for the investor to avoid a company with excessive debt component in its capital structure. From the balance sheet, liquidity position of the company can also be assessed with the information on current assets and current liabilities.

4.2 Ratio analysis: Ratio is a relationship between two figures expressed mathematically. Financial ratios provide numerical relationship between two relevant financial data. Financial ratios are calculated from the balance sheet and profit and loss account. The relationship can be either expressed as a percent or as a quotient. Ratios summarize the data for easy understanding, comparison and interpretations. Ratios for investment purposes can be classified into profitability ratios, turnover ratios, and leverage ratios. Profitability ratios are the most popular ratios since investors prefer to measure the present profit performance and use this information to forecast the future strength of the company. The most often used profitability ratios are return on assets, price earnings multiplier, price to book value, price to cash flow, and price to sales, dividend yield, return on equity, present value of cash flows, and profit margins.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR a) Return on Assets (ROA)

ROA is computed as the product of the net profit margin and the total asset turnover ratios. ROA = (Net Profit/Total income) x (Total income/Total Assets)

This ratio indicates the firm's strategic success. Companies can have one of two strategies: cost leadership, or product differentiation. ROA should be rising or keeping pace with the company's competitors if the company is successfully pursuing either of these strategies, but how ROA rises will depend on the company's strategy. ROA should rise with a successful cost leadership strategy because the com pany‟s increasing increasing operating efficiency. An example is an increasing, total asset, turnover ratio as the company expands into new markets, increasing its market share. The company may achieve leadership by using its assets more efficiently. With a successful product differentiation strategy, ROA will rise because of a rising profit pro fit margin. b) Return on Investment (ROI):

ROI is the return on capital invested in business, i.e., if an investment Rs 1 crore in men, machines, land and material is made to generate Rs. 25 lakhs of net profit, then the ROI is 25%. The computation of return on investment is as follows: Return on Investment (ROI) = (Net profit/Equity investments) x 100

As this ratio reveals how well the resources of a firm are being used, higher the ratio, better are the results. The return on shareholder‟s investment should be compared with the return of other similar firms in the same industry. The inert-firm comparison of this ratio determines whether the investments in the firm are attractive or not as the investors would like to invest only where the return is higher. c) Return on Equity:

Return on equity measures how much an equity shareholder's investment is actually earning. The return on equity tells the investor how much the invested rupee is earning from the company. The higher the number, the better is the performance of the company and suggests the usefulness of the projects the company has invested in. The computation of return on equity is as follows:


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR Return on equity = (Net profit to owners/value of the specific owner's Contribution to the business) x 100

The ratio is more meaningful to the equity shareholders who are invested to know profits earned by the company co mpany and those thos e profits which can be made available availabl e to pay dividend d ividend to them. d) Earnings per Share (EPS):

This ratio determines what the company is earning for every share. For many investors, earnings are the most important tool. EPS is calculated by dividing the earnings (net profit) by the total number of equity shares. The computation of EPS is as follows:

Earnings per share = Net profit/Number of shares outstanding

The EPS is a good measure of profitability and when compared with EPS of similar other companies, it gives a view of the comparative earnings or earnings power of a firm. EPS calculated for a number of years indicates whether or not earning power of the company has increased. e) Dividend per Share (DPS):

The extent of payment of dividend to the shareholders is measured in the form of dividend per share. The dividend per share gives the amount of cash flow from the company to the owners and is calculated as follows: Dividend per share = Total dividend payment / Number of shares outstanding

The payment of dividend can have several interpretations to the shareholder. The distribution of dividend could be thought of as the distribution of excess profits/abnormal profits by the company. On the other hand, it could also be negatively interpreted as lack l ack of investment opportunities. In all, dividend payout gives the extent of inflows to the shareholders from the company. f) Dividend Payout Ratio:

From the profits of each company a cash flow called dividend is distributed among its shareholders. This is the continuous stream of cash flow to the owners of shares, apart from KRUPANIDHI DEGREE COLLEGE

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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR the price differentials (capital gains) in the market. The return to the shareholders, in the form of dividend, out of the company's profit is measured through the payout ratio. The payout ratio is computed as follows: Payout Ratio = (Dividend per share / Earnings per share) * 100

The percentage of payout ratio can also be used to compute the percentage of retained earnings. The profits available for distribution are either paid as dividends or retained internally for business growth opportunities. Hence, when dividends are not declared, the entire profit is ploughed back into the business for its future investments. g) Dividend Yield:

Dividend yield is computed by relating the dividend per share to the market price of the share. The market place provides opportunities opportunities for the investor to buy the company‟s share at any point of time. The price at which the share has been bought from the market is the actual cost of the investment to the shareholder. The market price is to be taken as the cum-dividend price. Dividend yield relates the actual cost to the cash flows received from the company. The computation of dividend yield is as follows Dividend yield = (Dividend per share / Market price per share) * 100

High dividend yield ratios are usually interpreted as undervalued companies in the market. The market price is a measure of future discounted values, while the dividend per share is the present return from the investment. Hence, a high dividend yield implies that the share has been under priced in the market. On the other hand a low dividend yield need not be interpreted as overvaluation overvaluat ion of shares. sha res. A company that does not pay p ay out dividends divid ends will not have a dividend yield and the real measure of the market price will be in terms of earnings per share and not through throu gh the dividend payments. pa yments. Internally for business growth opportunities. Hence, when dividends are not declared, the entire profit is ploughed back into the business for its future investments. h) Price/Earnings Ratio (P/E):

The P/E multiplier or the price earnings ratio relates the current market price of the share to the earnings per share. This is computed as follows: Price/earnings ratio = Current market price / Earnings per share KRUPANIDHI DEGREE COLLEGE

Page 65

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR This ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company. Many investors prefer to buy the company's shares at a low P/E ratio since the general interpretation is that the market is undervaluing the share and there will be a correction in the market price sooner or later. A very high P/E ratio on the other hand implies that the company's shares are overvalued and the investor can benefit by selling the shares at this high market price. i) Debt-to-Equity Ratio:

Debt-Equity Debt-Equity ratio is used to measure the claims of outsiders and the owners against the firm‟s assets. Debt-to-equity Debt-to-equity ratio = Outsiders Funds / Shareholders Funds

The debt-equity ratio is calculated to measure the extent to which debt financing has been used in a business. It indicates the proportionate claims of owners and the outsiders against the firm‟s assets. The purpose is to get an idea of the cushion available to outsiders on the liquidation of the firm.

4.3. TCS (TATA CONSULTANCY SERVICES): Dividend:

Based on the Company‟s performance, the Directors are pleased to recommend for approval of the members a final dividend of 8 per share and a special dividend of 8 per share for the financial year 2011-12 2011-12 taking the total dividend to 25 per share (previous year year 14 per share) on the capital of 1,95,72,20,996 equity shares of 1 each. The final dividend and the special dividend on the equity shares, if approved by the members would involve a cash outflow of 3,639.57 crores including dividend tax. For equity shares, the proposed final dividend (including special dividend), interim dividends already paid and dividend tax for the financial year 2011-12 2011-12 would aggregate 5,686.82 crores, resulting in a payout of 51.93% of unconsolidated unconsolidated profit of the Company (54.75% of consolidated profit).


Page 66


Data analysis of Tata Consultancy Services: i) Debt to Equity ratio = Long term debts/ Equity share holder fund ii) EPS = Earnings available to Equity share holder/ No of Equity shares iii) Current ratio= current assets/ current liability iv) P/E ratio= Market value per share/ Earning per share (EPS)

i). Debt to Equity ratio = Long term debts/ Equity share holder fund

Table No. 4.1 Showing Debt to equity ratio of TCS Year

Mar '12

Mar '11

Mar '10

Mar '09

Debt to Equity Ratio

0.01

0.01

0.01

0.04

Mar '08 0.05

0.06 0.05 0.04 0.03 0.02 0.01 0

Graph No. 4.1 Showing Debt to equity ratio of TCS Analysis: Researcher see that debt to equity ratio in mar 2008 was 0.05 and in mar 09 it was

0.04 and next year in mar 10 it came to 0.01 and still the same. Interpretation: Debt to equity ratio of company is decreasing from 2008 to 2012 in last 5

years it decreased to 80%. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. KRUPANIDHI DEGREE COLLEGE

Page 67


ii) EPS = Earnings available to Equity share holder/ No of Equity shares

For the year ended 2011/2012 =

10523/19572.21

= 53.65


9189.79/19572.21 9189.79/19572.2 1 = 46.90


7092.66/19572.21

= 36.15


5311.12/9786.41

= 54.20


5059.64/9786.10

= 51.71

Table No. 4.2 showing EPS of TCS (in Rs. Cr.) Year EPS

Mar 12

Mar 11

Mar 10

Mar 09

Mar 08

53.65

46.90

36.15

54.20

51.70

ratio 60 50 40 ratio

30 20 10 0 mar'08

mar'09

mar'10

mar'11

mar'12

Graph No. 4.2 Showing EPS of TCS Analysis: From the above table it can be seen that EPS of company in 2008 was 51.70 and it

is increased in next year in 2008/09 by 4.84%. And there was decrease in EPS in the year 2009/2010 by 49.93%. Again EPS increases by 14.39% in March 2012 as compare to its previous year.


Page 68

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR Interpretation: From the above graph it can be seen that EPS of company is increasing from

2008 but there was a small decrease in 2010 because of some factors and again company has performed well in EPS.

iii) P/E ratio: Market price of share share / EPS


1430/51.70

= 27.66


1430/54.20

= 26.39


1430/36.15

= 39.56


1430/46.90

= 30.50


1430/53.65

= 26.65 (in Rs. Cr.)

P/E ratio 40 35 30 25 P/E ratio

20 15 10 5 0 2007/08

2008/09

2009/10

2010/11

2 0 11/ 1 2

Graph No. 4.3 showing P/E ratio of TCS Analysis: From the above calculation it can be seen that price earnings ratio of company was decreased from 27.66 in 2007/08 to 26.39 in 2008/09. But in next financial year 2009/10 it increased to 39.56 and again decreased in next year 30.50 and 26.65 in 2010/11 and 2011/12 respectively. Interpretation: Researcher sees that there was up and down in P/E ratio of the company from 2007/08 to 201/12. KRUPANIDHI DEGREE COLLEGE

Page 69

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR iv) Current ratio: Current ratio= current assets/ current liability

Table No. 4.3 showing current ratio of TCS Year Current

Mar 12

Mar '11

Mar '10

2.85

1.87

2.69

Mar '09 2.22

Mar '08 2.19

ratio

current ratio 3 2.5 2 1.5

current ratio

1 0.5 0 Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

Graph No 4.4 showing current ratio of TCS Analysis: The above table shows current ratio of the company which is 2.99:1 in 2007/08 and

increased to 2.22:1 in next year mar 2009. But it decreased to 1.87:1 in mar 2010 and again increases to 2.69:1 in year 2011-12. Interpretation: The higher the current ratio, the more capable the company is of paying its

obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. So for TCS, current ratio shows that they have more current assets than current liability. As graph shows that they have potential to pay its obligation so short term solvency for TCS is strong.


Page 70

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 4.4. Data analysis of Wipro: i) Debt to Equity ratio = Long term debts/ Equity share holder fund ii) EPS = Earnings available to Equity share holder/ No of Equity shares iii) Current ratio= current assets/ current liability iv) P/E ratio= Market value per share/ Earning per share (EPS) i) Debt to Equity ratio ratio = Long term debts debts// Equity share holder fund fund

Table No. 4.4 showing Debt to equity ratio of Wipro 2007-08

Year

2008-09

0.38

Debt to equity

2009-10

0.42

0.34

2010-11

2011-12

0.23

0.21

Debt to equity Ratio 0.45 0.4 0.35 0.3 0.25

Ratio

0.2 0.15 0.1 0.05 0 2007/08

2 0 0 8/ 0 9

2 0 0 9/ 1 0

2010/11

2011/12

Graph No. 4.5 showing Debt to equity ratio of Wipro Analysis: From the above table researcher has observed that the debt to equity ratio of Wipro

in 2007/08 was 0.38 and increased in 2008/09 to 0.42 and again it decreased to 0.34 in next 2009-10 year and 0.21 in 2011-12. Interpretation: From the above graph it can be seen that there is decrement after 2008/09 to

2011/12 it may be because of increase in employment of equity capital to its capital structure.


Page 71

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR ii) Current Current ratio ratio = current current assets/ assets/ current liability

Table No. 4.5 showing current ratio of Wipro Year

March 12

March 11

March 10

March 09

March 08

Current

1.83

1.82

1.82

1.45

1.63

ratio

current ratio 2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

current ratio

mar'12

mar'11

mar'10

mar'09

mar'08

Graph No. 4.6 showing current ratio of Wipro Analysis: From the table it is analyzed that current ratio of company was decreased from

1.63:1 to 1.45:1 in mar 2009 but later on it is increasing continuously till 1.83 in mar 2012. Interpretation: Graph shows that the company does not have that much potential to pay its

obligation as they have good current ratio but it should be more than ideal ratio 2:1 and here ratio has increased to 12.26 % from 2008 to 2012.

iii) EPS = Earnings available to to Equity share holder/ No of Equity Equity shares


3252/14614.53

= 22.25


3873.60/14649.81

= 26.44


4593.20/14682.11

= 31.28


5265.30/245.46


= 21.45 Page 72

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR For the year ended 2011/2012 =

5596.90/24587.56

= 22.76

Table No. 4.6 showing EPS of Wipro (in Rs. Cr.) Year

2007-08

2008-09

2009-10

2010-11

2011-12

EPS

22.25

26.44

31.28

21.45

22.76

EPS 35 30 25 20

eps

15 10 5 0 20 07 -08

2 0 0 8- 0 9

2 0 0 9- 1 0

2 0 1 0- 1 1

2 0 1 1- 1 2

Graph No. 4.7 showing EPS per year of Wipro Analysis: The above table shows EPS of Wipro is 22.25 in 2007-08, in next year 2008-09 it

increased to 26.44 and again in next year 2009-10 it is increased to 31.28. But after it is decreased to 21.45 in 2010-11. Interpretation: From the graph shown above it can be said that there is increment in EPS till

2009-10 continuously but after that it is decreased and again continue to grow.

iv) P/E ratio = Market value per share/ Earning per share (EPS) (in Rs. Cr.)


400/22.25 = 17.98


400/26.44 = 15.12


400/31.28 = 12.79


400/21.45 = 18.64


400/22.76 = 17.57


Page 73


P/E ratio 20

15

P/E ratio

10

5

0 2007/08

2008/09

2009/10

2010/11

2011/12

Graph No. 4.8 Showing P/E ratio of Wipro Analysis: Table shows P/E ratio which was decreased to 18.91% from 2007-08 to 2008-09

and again it is decreased and comes to 12.79 in 2009-10. In 2010-11 it is increased by 45.74% compare to previous year and again it comes down to 17.57 in 2011-12 Interpretation: Researcher sees that there is decrease in P/E ratio from2007-08 to 2009-10

but after that it is growing. growin g.

4.5. Data analysis of Infosys: i) Debt to Equity ratio = Long term debts/ Equity share holder fund ii) EPS = Earnings available to Equity share holder/ No of Equity shares iii) Current ratio= current assets/ current liability iv) P/E ratio= Market value per share/ Earning per share (EPS)

i) Debt to Equity ratio = Long term debts/ Equity share holder fund Not available


Page 74

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR ii) Earning per share = Earnings available to Equity share holder/ No of Equity shares


5988/5728.3

= 104.53


6266/5738.25

= 109.20


6835/5741.52

= 119.05


8332/5742.30

= 145.10


9429/5742.36

= 164.20

Table No. 4.7 showing EPS of Infosys (in Rs. Cr.) Year

March 12

March 11

March 10

March 09

March 08

EPS

164.20

145.10

119.05

109.20

104.53

EPS

eps

mar'12

mar'11

mar'10

mar'09

mar'08

Graph No. 4.9 showing EPS of Infosys Analysis: From above table it is analyzed that in mar 08 EPS of Infosys company was 104.53

and in mar 09 it is increased to 109.20 and again in next year mar 10 it is increased to 119.05 and continue increasing 145.10, 164.20 in year mar‟11 and mar‟12 respectively. Interpretation: EPS of Infosys is increasing continuously from mar 08 to mar 12 which is a

good indicator for the growth of the company as well as for investors.


Page 75

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR iii) Current ratio= Current assets/ Current liability

Table No. 4.8 showing current ratio of Infosys Year Current

Mar „12 4.34

Mar '11

Mar '10

Mar '09

Mar '08

4.65

3.98

4.30

3.13

ratio:

current ratio 5 4 3 current ratio 2 1 0 mar'12

mar'11

mar'10

mar'09

mar'08

Graph No. 4.10 showing current ratio of Infosys Analysis: Table shows the Current ratio of Infosys which is 3.13:1 in mar 2008 and increased

to 4.30:1 in mar 09. And in after that it is decreased to 3.98:1 in mar 10 and grows to 4.34:1 in mar 2012. The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. So for Infosys, current ratio shows that they have more current assets than current liability. Interpretation: According to researcher company shows a good potential as they have more

than ideal ratio 2:1 in last 5 years. Current ratio is increased from 3.13 to 4.34 in last 5 years.

iv) P/E ratio= Market value per share/ Earning per share (EPS)



2774/145.10 =

19.12

Page 76


2774 /119.05 =

23.30


2774/109.20 =

25.40


2774/104.53 =

26.53


2774/81.45

34.05

=

(in Rs. Cr.)

P/E ratio 35 30 25 20 P/E ratio 15 10 5 0 2007/08

2008/09

2009/10

2010/11

2011/12

Graph No. 4.11 Showing P/E ratio of Infosys Analysis: From the above table it is analyzed that in 2007-08 P/E ratio was 34.05 and then

after it is decreased to 26.53 in 2008-09 and in next year again it is decreased to 25.40 and keep on decreasing 23.30 in and 2011-12 to 19.29. Interpretation: P/E ratio of Infosys is decreasing continuously from 35.05 to 19.12 in

2011/12 to 2007/08.

4.6. Data analysis of Satyam computers services: i). Calculation of EPS: EPS = Earnings available to Equity share holder/ No of Equity shares

For the year ended 2007/2008 = KRUPANIDHI DEGREE COLLEGE

1687.89/6704.79

= 25.17 Page 77


-8174/6738.95 -81 74/6738.95

= -121.30


-123.90/11761.86 -123.90/11761 .86

= -1.05


-140.70/11765.66 -140.70/11765 .66

= -1.20


1297.60/11767.98 = 11.03

Table No. 4.9 showing EPS of Satyam computer services (in Rs. Cr.) Year

Mar '12

Mar '11

EPS (Rs.)

11.03

Reported

1,297.60

Mar '10

Mar '09

-1.20

-1.05

-121.30

-140.70

-123.90

-8,174.60

Mar '08 25.17 1,687.89

Net Profit (cr)

EPS 40 20 0 -20

mar'12

mar'11

mar'10

mar'09

mar'08

-40 -60 -80 -100 -120 -140

Graph No. 4.12 showing EPS of Satyam computers services Analysis: From the above table it shows that the company was performing well till 2008 but

after that EPS of company decreases to -121.30 to in mar 2009 then it is increased to -1.05 in mar 2010 again it is decreased to -1.20 in mar 2011. And then after EPS has increased up to 11.03 in mar12.


Page 78

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR Interpretation: EPS of Satyam computers services was in negative as company was not

performing well because of the scandal in Satyam but later on company‟s EPS was increased from -121.30 to 11.03 in mar 2008 to mar 12.

ii). Debt to equity ratio: = Long term debts/ Equity share holder fund

Or

Total debt/Net worth Table No. 4.10 showing Debt to equity ratio of Satyam computer services Mar '12

Year Debt

to

0.01

Mar '11 0.01

Mar '10

Mar '09

Mar '08

0.02

NA

NA

equity ratio

ratio 0.02 0.015 ratio

0.01 0.005 0 2 0 0 7/ 0 8

2008/09

2009/10

2010/11

2011/12

Graph No. 4.13 showing Debt to equity ratio of Satyam computer services Analysis: Above table shows the debt to equity ratio of Satyam which is decreasing from 0.02 to 0.01 from mar10 to mar 11 and after that in mar 12 in remains same as previous year to 0.01. Interpretation: Graph shows the decreasing debt to equity of Satyam computers from 2009/10 to 2011/12.


Page 79


iii). Current ratio: Current ratio= current assets/ current liability

Table No. 4.11 showing current ratio of Satyam computer services (in Rs. Cr.) Year current

March 08 4.0

March 09

March 10

March 11

March 12

0.84

1.64

1.52

2.16

ratio

CURRENT RATIO 4 3.5 3 2.5 2 1.5

CURRENT RATIO

1 0.5 0 Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

Graph No. 4.14 showing current ratio of Satyam computer services Analysis: Calculation in the above table shows the current ratio of Satyam computers which

was 4:1 in 2007/08 then after it decreased to 0.84 in mar 2009.current ratio is increased to 1.64 and again increased in 2011/12 to 2.16. Interpretation: Researcher analyses in the above graph that current ratio is decreased

suddenly from 4:1 to 0.84:1 in mar 2009 because of scandal and then after it is growing slowly.


Page 80

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR iv) P/E ratio = Market value per share/ Earning per share (EPS)


113/11.03

= 10.24


113/-1.20

= -94.16


113/-1.05

= -107.6


113/-121.30

= - 0.93


113/25.17

=

4.48

P/E ratio 20 0 -20

2007/08

2 0 0 8/ 0 9

2 0 0 9/ 1 0

2010/11

2011/12

-40

P/E ratio

-60 -80 -100 -120

Graph No. 4.15 showing P/E ratio of Satyam computer services

Analysis: The above calculation of P/E ratio explains that in 2007-08 P/E ratio was 4.48 but

in next year 2008-09 it was decreased to -0.93 and again in year 2009-10 it decreases to 107.60 but after it has increased to 10.24 in 2011-12. Interpretation: Above table shows P/E ratio is decreasing continuously from 2007/08 to

2010/11 and goes in negative but in 2011/12 it has increased to 10.24 because of market share has increased and EPS of company has also increased.


Page 81

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 4.7. Data analysis of HCL Technologies: (i) Debt to Equity ratio = Long term debts/ Equity share holder fund

Table No. 4.12 showing Debt to equity ratio of HCL Technologies (in Rs.) Year-

Jun‟12

Jun‟11

Jun‟10

Jun‟09

Jun‟08

Ratio

0.16

0.29

0.45

0.64

0.01

ratio 0.7 0.6 0.5 0.4

ratio

0.3 0.2 0.1 0 jun'08

jun'09

jun'10

jun'11

jun'12

Graph No. 4.16 showing Debt to equity ratio of HCL technologies.

Analysis: Above table calculation shows that in 2008/09 debt to equity ratio was 0.01 and in

next year it has increased to 0.64 but after this year ratio starts decreasing every year continuously till June 2012 to 0.16. Interpretation: Graph shows continuous decrease in debt to equity after Jun ‟2009 till Jun

‟12.

(ii) EPS = Earnings available to Equity share holder/ No of Equity shares


1053.83/6663.40

= 15.82


1319.45/6702.57

= 19.69


Page 82


1259/6787.84

=

18.55


1646.63/6886.89

= 23.91


2427.08/6932.83

= 35.01

Table No. 4.13 showing EPS of HCL Technologies (in Rs.) Year-

Jun‟12

Jun‟11

Jun‟10

Jun‟09

Jun‟08

EPS-

35.01

23.91

18.55

19.69

15.82

eps 40 35 30 25 eps

20 15 10 5 0 june'12

jun'11

jun'10

jun'09

jun'08

Graph No. 4.17 showing EPS of HCL Technologies

Analysis: Above table shows that there was overall increment in EPS of the company. In

jun08 EPS was 15.82 and increased to 19.62 in jun09 but in next year it has decreased to 18.55. Again from jun10 EPS was increased from 18.55 to 35.01 in jun12. Interpretation: From the above graph researcher sees that EPS of company is good and it is

increasing per year so it is advisable to invest in this company for long term.


Page 83

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR (iii) Current ratio= current assets/ current liability

Table No. 4.14 showing current ratio of HCL Technologies Year-

Jun‟12

Current

1.36

Jun‟11 1.78

Jun‟10

Jun‟09

Jun‟08

1.59

0.69

1.48

Ratio

current ratio 1.8 1.6 1.4 1.2 1

current ratio

0.8 0.6 0.4 0.2 0 june'12

jun'11

jun'10

jun'09

jun'08

Graph No. 4.18 Showing Current ratio of HCL Technologies Analysis: From the above table it shows current ratio of HCL which was 1.48 in jun08 and

decreased to 0.69. Again in next year jun10 it has increased to 1.59 and continues growing to 1.78 in jun11 but in year table shows decrease of 1.36 in jun12. Interpretation: The above analysis shows the current ratio of HCL from five year which is

increasing and decreasing every year, in June 2011 shows the better position of the company. The higher the current ratio, the more capable the company is of paying its obligations.

(iv) P/E ratio = Market value per share/ Earning per share (EPS) ( in Rs.)

For the year June 2012 =

694/35.01

= 19.82


694/23.91

=


29.02

Page 84

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR For the year June 2010 =

694/18.55

=

37.41


694/19.69

=

35.24


694/15.82

=

43.86

ratio 45 40 35 30 25

ratio

20 15 10 5 0 jun'08

jun'09

jun'10

jun'11

jun'12

Graph No. 4.19 showing P/E ratio of HCL Technologies. ‟08 and Analysis: Above table shows P/E ratio of HCL techno. Which was 43.86 in Jun ‟08 decreased to 35.24 and again it is increased to 37.41 and after that it is decreasing till 19.82 in jun2012. Interpretation: The above graph analysis shows that companies P/E is came down in last

few years which were 43.86 in 2008 and falls to 19.82 in 2012.

4.8. Data analysis of Tech Mahindra: i) Debt to Equity ratio ratio = Long term debts debts// Equity share holder fund fund

Table No. 4.15 showing Debt to equity ratio of Tech Mahindra Year-

Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

Ratio-

0.28

0.54

0.74

---

0.02


Page 85


debt to equity 0.8 0.7 0.6 0.5 0.4

debt to equity

0.3 0.2 0.1 0 mar'12

mar'11

mar'10

mar'09

mar'08

Graph No. 4.20 showing Debt to equity of Tech Mahindra Analysis: The above table describes the debt to equity ratio of company which was 0.02 in

2008 and increased to 0.74 in mar10 and after that it decreases to 0.54 in mar11 and in next year again it falls to 0.28. company‟s performance in Interpretation: Above calculation shows that debt to equity of company‟s year 2010 was good but after that it is decreasing till 2012. But as compare to 2008 company is performing well now.



329.40/1213.63

= 27.14


1014.60/1217.34

= 83.35


703.20/1223.20

= 57.49


435.60/1259.55

= 34.58


588.80/1274.87

= 46.19

Table No. 4.16 showing EPS of Tech Mahindra (in Rs.) Year-

2011/2012

2010/2011

2009/2010

2008/2009

2007/2008

EPS

46.19

34.58

57.49

83.35

27.14


Page 86


eps 100 80 60 eps 40 20 0 mar'12

mar'11

mar'10

mar'09

mar'08

Graph No. 4.21 Showing EPS of Tech Mahindra Analysis: Above table shows EPS of company which was 27.14 in 2008 and grows to 83.35

in 2010, then it decreases to 57.49 in mar10, again it decreases to 34.58 as compared to last year and increased to 46.19 in the year 2012. Interpretation: Above graph shows EPS of company that has given good return to

shareholders and performed well in 2009 but after that it is decreasing for next two years.

iii) Current ratio= current assets/ current liability

Table No. 4.17 showing current ratio of Tech Mahindra Year-

Mar „12

Mar '11

Mar '10

Mar '09

Mar '08

Current ratio:

1.09

1.70

1.53

1.98

1.63


Page 87


2 1.8 1.6 1.4 1.2 ratio

1 0.8 0.6 0.4 0.2 0 2007/08

2008/09

2009/10

2010/11

2011/12

Graph No. 4.22 showing current ratio of Tech Mahindra Company‟s current ratio in 2008 was 1.63 and then in next year it is raised to 1.98. Analysis: Company‟s In year 2010 current ratio was 1.53 which was less compared to last year but again it has increased to 1.70 in 2011 and decreased to 1.09 in year 2012. Interpretation: The ideal ratio for current ratio is 2:1 and company have good ratio as it

shows the potentiality for its obligation.

iv) P/E ratio = Market value per share/ Earning per share (EPS)

For the year ended 2007/2008

=

990/27.14 = 36.48


=

990/83.35 = 11.87


=

990/57.49 = 17.22


=

990/34.58 = 28.62


990/46.19 = 21.43


(in Rs.)

Page 88


40 35 30 25 EPS

20 15 10 5 0 2007/08

2008/09

2 0 0 9/ 1 0

2010/11

2011/12

Graph No. 4.23 showing P/E ratio of Tech Mahindra Analysis: From the above data it is analyzed that EPS of Tech Mahindra in 2008 was 36.48

which was decreased to 11.87 in 2009 and again increased to 17.22, 28.62 in 2010, 2011 respectively and it decreases to 21.43 in 2012. Interpretation: Above data shows that Tech Mahindra has good earnings per share and

performing well after recession recessi on time.

4.9. Data analysis of L&T InfoTech: (Larsen and Toubro) i) Debt to Equity ratio = Long term debts/ Equity share holder fund

Table No. 4.18 showing Debt to equity ratio of L&T InfoTech Year-

Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

Ratio:

0.39

0.33

0.37

0.53

0.38


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debt to equity 0.6 0.5 0.4 debt to equity

0.3 0.2 0.1 0

Graph No. 4.24 showing Debt to equity of L&T InfoTech Analysis: Above table shows debt to equity ratio of L&T Company which was 0.38 in mar

2008 and then it is increased to 0.53 in 2009 and decreased to 0.37 in 2010 and again increased to 0.37 in 2012. Interpretation: Analysis in graph describes debt to equity of company which is showing

good performance of company in last 5 years.



2257.82 /2923.27

= 77.24


2934.66/5856.88

= 50.11


5442.32/6021.95

= 90.37


4447.66/6088.52

= 73.05


4682.29/6123.99

= 76.46

Table No. 4.19 showing EPS of L&T L&T InfoTech (in Rs.) Year-

2011/2012

2011/2012

2011/2012

2008/2009

2007/2008

EPS:

76.46

73.05

90.37

50.11

77.24


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EPS 100 80 60 eps 40 20 0 Mar-12

mar'11

mar'10

mar'09

mar'08

Graph No. 4.25 showing EPS of L&T InfoTech Analysis: Above data shows EPS of company as 77.24 in mar08 which is decreased to 50.11

in mar09, again EPS is increased to 90.27 in mar‟10 and decreased to 73.05 in mar‟11 and it grows to 76.46 in 2012. Interpretation: According to above data company is good for long term investment as EPS

of company is well in last few years. Company has given good return to shareholders.

iii) Current ratio= current assets/ current liability

Table No. 4.20 showing current ratio of L&T InfoTech Year-

Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

Current

1.20

1.20

1.19

1.22

1.09

ratio:


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current ratio 1.22 1.2 1.18 1.16 1.14 1.12 1.1 1.08 1.06 1.04 1.02

current ratio

mar'12

mar'11

mar'10

mar'09

mar'08

Graph No. 4.26 showing current ratio of L&T InfoTech Analysis: Above table shows the current ratio of L&T Company which was 1.09 in mar

2008 and 1.22 in 2009 which is decreased to 1.19 in mar‟10 and 1.20 in 2011, 2012. Interpretation: Above graph shows the current ratio of company is not more than 2 but ideal

ratio says it should be 2:1. An ideal current ratio would be 2, indicating that even if the current assets are to be reduced by half; the creditors will be able to able to get their money in full.

iv) P/E ratio = Market value per share/ Earning per share (EPS)


=

1457/77.24

=

18.86


=

1457/50.11

=

29.07


=

1457/90.37

=

16.12


=

1457/73.05

=

19.94


=

1457/76.46

=

19.05


Page 92


P/E ratio 30 25 20 ratio

15 10 5 0

Graph No. 4.27 showing P/E ratio of L&T InfoTech Analysis: Above data of P/E ratio of company says that it was 18.86 in 2008 which is

increased to 29.07 (2009) at high in last 45 five years and again falls to 16.12(low in 2010). Again it starts increasing to 19.94 in 2011 and decreases to 19.05.

Interpretation: Above graph describes that company was performing well in 2009 but after

that P/E ratio of company falls. If P/E ratio is decreasing means growth and market share of company is also decreasing.


Page 93

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 5.1. FINDINGS: From the study equity analysis on IT industry and data analysis and interpretations of the ratios of seven companies the following findings have been given: 1. IT/ITeS industry has led India's economic growth and this sector's contribution to the national GDP has risen from 1.2 per cent in 1997-98 to an estimated 7.5 per cent in 2011-12. 2. These seven companies were performing well till 2008 with a positive trend in the earnings per share. But there was a downward trend in 2009 in most of companies because of recession. 3. Infosys is found with more current ratio as compare to other companies. As it proves that the company compan y is more capable of paying its it s obligations than others. ot hers. 4. EPS of Satyam company goes in negative, the reason behind was it because of scandal in the company in the year 2009. 5. Increasing EPS indicate good earnings. 6. The stock prices always take a correction after a major climb. 7. The P/E ratio of all the selected companies is increasing year after year. 8. The software sector in India has grown at almost double the rate of the US software sector. 9. From the balance sheet it is found out that the reserve and surplus of the company is increasing every year. 10. Researcher has found that the ROE of the 7 companies are increasing year after year. 11. The seven companies have witnessed a low price earnings ratio in 2008 compared to the previous years. But the ratio increased in 2009 in 7 companies. HCL Technologies has the highest P/E ratio in 2009 which indicates that it is overvalued. 12. The overall performance of the companies is good, and there is a continuous flow of project business. The companies are continuing its drives for volume with a continuous focus on profitability. 13. By analyzing the current trend of Indian Economy and IT Industry I have found that being a developing economy there is lot of scope for growth and this industry still has to cross many levels so there are huge opportunities to invest in. KRUPANIDHI DEGREE COLLEGE

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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 5.2. Suggestions: By analyzing the IT industry with the help of fundamental analysis, it has been revealed that this industry has a lot of potential to grow. So recommending investing in IT industry with no doubt is going to be a good and smart option because this industry is booming like never before befo re not only in India but all al l over the world. 

Long term investors can include these top seven IT companies in his portfolio because the growth rates and earnings are good compared to others stocks. Therefore investors can include this in their portfolio to earn the higher return on their investment.



Investing in Wipro for long time could be a good option because they are spreading their business.



There are various factors which effects on stock market, so an investor must be aware of all those.



Short term investors should look on various support and resistance of stocks to buy or sell and make profit.

 An investor must take research about stock of company and its previous data before

investing. 

Current ratio must be improved by company and it should be in ideal ratio 2:1 so that there are possibilities to meet the current obligations for the company.

 Companies which are not much popular in stock market must adopt some strategies

for investors to encourage them to invest in their company. 

Few Suggestions for “Right Stock Selection”

There are three factors which an investor must consider for selecting the right stocks. • Business: An investor must look into what kind of business the company is doing, visibility of the business, its past track record, capital needs of the company for expansion etc. • Balance Sheet: The investor must focus on its key financial ratios such as earnings per share, price-earnings ratio, debt-equity ratio, dividends per share etc. and he must also check whether the company is generating cash flows.


Page 95

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR • Bargaining: This is the most important factor which shows the true worth of the company. An investor needs to choose valuation parameters which suit its business. Investment rules:

a) Invest for long term in equity markets. b) Align your thought process with the business cycle of the company. c) Set the purpose for investment. d) Long term goals should be the objective of equity investment. e) Disciplined investment during market volatility helps attains profits. f) Planning, Knowledge and Discipline are very crucial for investment.


Page 96

A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 5.3. Conclusion: Global recession had an effect on the growth of IT industry but it was a short term phenomenon. The industry is bouncing back. One factor f actor favoring this point is that India has become a hot destination destinatio n for companies of diverse nature n ature to invest in. Inspite of it being a tough year for all the companies across the globe, Indian market has given good performance as compared to other companies in the world. A continuous effort at cost cutting and improving productivity will help the companies in making reasonable profits despite the impact of higher commodity prices and weaker rupee.

Th e anal ysi ysi s gives an optim i sti c view about about th e in dustry and it s growth whi ch r ecommends commends the in ves vestor s to keep keep a good good watch watch on t he major players to be benefi t i n term s of r etur ns on their i nvestments nvestments..


Page 97



Page 98


BIBLIOGRAPHY 1. A Theoretical Foundation for Technical Analysis," Journal of Technical Analysis, 59, 5-22, 2003 (University of Pittsburgh preprint 1994). 2. Ali, A., and Hwang, L. (2000). Country-Specific Factors Related to Financial Reporting and the Value Relevance of Accounting Data. Journal of Accounting Research, Vol. 38, No. 1, 1-21. http://dx.doi.org/10.2307/2672920 3. Allen, T., and M. S. Morton, eds. 1994. Information Technology and the Corporation of the 1990s. New York: Oxford University Press. 4. Atika Jauharia Hatta and Bambang Sugeng Dwiyant, “The Company Fundamental Factors And Systematic Risk In Increasing Stock Price”, Jour nal nal of Economics, Business, and Accountancy Ventura Volume No 15, No.2, August (2012), page 245256. 5. Chand, Vikram K. (2006), Reinventing public service delivery in India: Selected Case Studies, Sage Publications, ISBN 0-7619-3489-8. 6. David Keller, "Breakthroughs in Technical Analysis; New Thinking from the World's Top Minds," New York, Bloomberg Press, 2007 7. Dyna Seng Jason.R Hancock, “Fundamental Analysis and the Prediction of Earnings”, International Journal of Business and Management, Volume 7, No.3, February 2012, page 32-46, (2012). 8. Economies: Brazil, Russia, India, And China”, International Business & Economic Research Journal Volume 7, No 3(2008),page 1-8. 9. Financial Planning Curriculum Framework". Financial Planning Standards Board. 2011. Retrieved 7 April 2012. 10. Graham, Benjamin; Dodd, David L. (1934). Security Analysis: Principles and Technique. New York: McGraw-Hill Book Co. ISBN 0-07-024496-0. 11. G. Caginalp and G. Constantine, "Statistical inference and modeling of momentum in stock prices," Applied Mathematical Finance 2, 225-242, 1995. 12. Griffioen, Technical Analysis in Financial Markets, Schwager, Jack D. Getting Started in Technical Analysis. Wiley, 1999, p. 2 13. "HCL Technologies Fast Facts". Hcltech.com. Retrieved 2012-07-25.


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A STUDY ON EQUITY ANALYSIS OF INDIAN IT SECTOR 14. Irwin, Scott H. and Park, Cheol-Ho. (2007). "What Do We Know About the Profitability of Technical Analysis?" Journal Journal of Economic Surveys , Vol. 21, No. 4, pp. 786-826. 15. Julia Bistrova and Natalja, Natalja, “Created Value of Fundamental Analysis During Pre And Post Crisis Period On The Baltic Equity Market”, Scientific Journal Of Riga Technical University , Volume 20 ,(2010) ,page 26-32. 16. Kahn, Michael N. (2006). Technical Analysis Plain and Simple: Charting the Markets in Your Language, Financial Times Press, Upper Saddle River, New Jersey, p. 80 17. Kerstein, J., and Kim, S. (1995). The Incremental Information Content of Capital Expenditures. The Accounting Review, Vol. 70, No. 3, 513-526. 18. Lento, Camillo (2008). "A Combined Signal Approach to Technical Analysis on the S&P 500". Journal of Business & Economics Research 6 (8): 41 – 51. 51. 19. Leon Wansleben (2012) 'Financial Analysts' In: K. Knorr Cetina & A. Preda (eds.), Handbook of the Sociology of Finance, Oxford: Oxford UP, pp. 250-271 20. Lev and Thiagarajan, “Fundamental Information Analysis”. Journal of Accounting Research, Vol. 31, No. 2, page 190-215. http://dx.doi.org/10.2307/2491270 (1993) 21. Neely, 21. Neely, Christopher J., and Paul A. Weller (2001). "Technical analysis and Central Bank Intervention," Journal of International Money and Finance, 20 (7), 949 – 70 70 22. Osamwonyi Ifuero Osad and Igbinosa, “Economy Fundamentals as Long run Explanation For Stock Price Behaviours” in Nigeria, European Journal of Economics, Finance And Administrative Sciences, Issue 48 (2012).page 16-35. 23. Preda, Alex (2009). Framing Finance: The Boundaries of Markets and Modern Capitalism. University of Chicago Press. 24. Richard Smitten (September 14, 2001). Jesse Livermore: The World's Greatest Stock Trader. pp. 43, 47 – 48, 48, 125. 25. Robert D. Gay, Jr, “Effect of Macroeconomic Variables On Stock Market Returns For Four Emerging Economies: Brazil, Russia, India, And China”, International Business & Economic Economic Research Journal Volume 7, No 3(2008),page 1-8. 26. Saraswati, Jyoti (2012). Dot.compradors: Power and Policy in the Development of the Indian Software Industry, Pluto Press, London. ISBN 9780745332659. 27. Stober, T.L. (1993). The Incremental Information Content of Receivables in Predicting Sales, Earnings, and Profit Margins. Journal of Accounting, Auditing and Finance, Vol. 8, 447-473.


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A Project Report on Equity Analysis on Indian IT Sector

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