SECURITY ANALYSIS & PORTFOLIO MANAGEMENT
Study of Fundamental Analysis
Of Aditya Birla Nuvo Limited
Kishore B L
Mr. Vinay H V
A STUDY ON FUNDAMENTAL ANALYSIS OF ADITYA BIRLA NUVO LTD
INTRODUCTION TO FUNDAMENTAL ANALYSIS:
Definition of 'Fundamental Analysis:
A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors. Fundamental analysts attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management).
Investopedia explains 'Fundamental Analysis:
Fundamental analysis is about using real data to evaluate a security's value. Although most analysts use fundamental analysis to value stocks, this method of valuation can be used for just about any type of security. Fundamental analysis is performed on historical and present data, but with the goal of making financial forecasts. There are several possible objectives:
▪ to conduct a company stock valuation and predict its probable price evolution, ▪ to make a projection on its business performance,
▪ to evaluate its management and make internal business decisions, ▪ to calculate its credit risk.
Two analytical models
When the objective of the analysis is to determine what stock to buy and at what price, there are two basic methodologies
1. Fundamental analysis maintains that markets may misprice a security in the short run but that the "correct" price will eventually be reached. Profits can be made by purchasing the mispriced security and then waiting for the market to recognize its "mistake" and reprice the security. 2. Technical analysis maintains that all information is reflected already in the stock price. Trends 'are your friend' and sentiment changes predate and predict trend changes. Investors' emotional responses to price movements lead to recognizable price chart patterns. Technical analysis does not care what the 'value' of a stock is. Their price predictions are only extrapolations from historical price patterns.
Investors can use any or all of these different but somewhat complementary methods for stock picking. For example many fundamental investors use technicals for deciding entry and exit points. Many technical investors use fundamentals to limit their universe of possible stock to 'good' companies.The choice of stock analysis is determined by the investor's belief in the different paradigms for "how the stock market works". See the discussions at efficient-market hypothesis, random walk hypothesis, capital asset pricing model, Fed model Theory of Equity Valuation, market-based valuation, and behavioral finance.
Fundamental analysis includes:
1. Economic analysis
2. Industry analysis
3. Company analysis
On the basis of these three analyses the intrinsic value of the shares are determined. This is considered as the true value of the share. If the intrinsic value is higher than the market price it is recommended to buy the share . If it is equal to market price hold the share and if it is less than the market price sell the shares.
Introduction to Aditya Birla Nuvo limited
Aditya Birla Nuvo Limited is a US$ 4.5 billion diversified conglomerate with manufacturing and service sector businesses ranging from textiles to financial services. The company is the platform through which many new age businesses for the Aditya Birla Group have been launched. The razor-sharp focus on each business has made it a leading player in most segments, including viscose filament yarn, carbon black,...
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