Introductions: 1.1 Purpose of The Project Definition

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Introductions

1.1 Purpose of the Project Definition


The purpose of the project is that to learn about the skills and information of the stock market.
Apply the fundamental and technical analysis to know the company health and when to enter or exit
from the market.

Equity Market
The equity market (often referred to as the stock market) is the market for
trading equity instruments. Stocks are securities that are a claim on the earnings and assets
of a corporation (Mishkin 1998). An example of an equity instrument would be
commonstock shares, such as those traded on the New YorkStock Exchange

Fundamental analysis
Fundamental analysis is a method of measuring a security's intrinsic value by
examining related economic and financial factors. Fundamental analysts study
anything that can affect the security's value, from macroeconomic factors such
as the state of the economy and industry conditions to microeconomic factors
like the effectiveness of the company's management.

Technical analysis

Technical analysis is a trading discipline employed to evaluate investments


and identify trading opportunities by analyzing statistical trends gathered from
trading activity, such as price movement and volume. technical analysts focus
on patterns of price movements, trading signals and various other analytical
charting tools to evaluate a security's strength or weakness.

Derivatives:

Type 1: Forward Contracts


Forward contracts are the simplest form of derivatives that are available today. Also, they are the
oldest form of derivatives. A forward contract is nothing but an agreement to sell something at a future
date. The price at which this transaction will take place is decided in the present.
However, a forward contract takes place between two counterparties. This means that the exchange
is not an intermediary to these transactions. Hence, there is an increase chance of counterparty credit
risk. Also, before the internet age, finding an interested counterparty was a difficult proposition.
Another point that needs to be noticed is that if these contracts have to be reversed before their
expiration, the terms may not be favorable since each party has one and only option i.e. to deal with
the other party. The details of the forward contracts are privileged information for both the parties
involved and they do not have any compulsion to release this information in the public domain.

Type 2: Futures Contracts


A futures contract is very similar to a forwards contract. The similarity lies in the fact that futures
contracts also mandate the sale of commodity at a future data but at a price which is decided in the
present.

However, futures contracts are listed on the exchange. This means that the exchange is an
intermediary. Hence, these contracts are of standard nature and the agreement cannot be modified in
any way. Exchange contracts come in a pre-decided format, pre-decided sizes and have pre-decided
expirations. Also, since these contracts are traded on the exchange they have to follow a daily
settlement procedure meaning that any gains or losses realized on this contract on a given day have
to be settled on that very day. This is done to negate the counterparty credit risk.

An important point that needs to be mentioned is that in case of a futures contract, they buyer and
seller do not enter into an agreement with one another. Rather both of them enter into an agreement
with the exchange.

Type 3: Option Contracts


The third type of derivative i.e. option is markedly different from the first two types. In the first two
types both the parties were bound by the contract to discharge a certain duty (buy or sell) at a certain
date. The options contract, on the other hand is asymmetrical. An options contract, binds one party
whereas it lets the other party decide at a later date i.e. at the expiration of the option. So, one party
has the obligation to buy or sell at a later date whereas the other party can make a choice. Obviously
the party that makes a choice has to pay a premium for the privilege.

There are two types of options i.e. call option and put option. Call option allows you the right but not
the obligation to buy something at a later date at a given price whereas put option gives you the right
but not the obligation to sell something at a later date at a given pre decided price. Any individual
therefore has 4 options when they buy an options contract. They can be on the long side or the short
side of either the put or call option. Like futures, options are also traded on the exchange.

Type 4: Swaps
Swaps are probably the most complicated derivatives in the market. Swaps enable the participants to
exchange their streams of cash flows. For instance, at a later date, one party may switch an uncertain
cash flow for a certain one. The most common example is swapping a fixed interest rate for a floating
one. Participants may decide to swap the interest rates or the underlying currency as well.

Swaps enable companies to avoid foreign exchange risks amongst other risks. Swap contracts are
usually not traded on the exchange. These are private contracts which are negotiated between two
parties. Usually investment bankers act as middlemen to these contracts. Hence, they too carry a
large amount of exchange rate risks.

So, these are the 4 basic types of derivatives. Modern derivative contracts include countless
combinations of these 4 basic types and result in the creation of extremely complex contracts.

1.2 Scope of the Project


This project based on fundamental and technical analysis where
fundamental analysis tells about the health conditions of companies, on
the other hand technical analysis tells about the entry in market and exit
point from the market. Using both the analysis we can reduce the risk and
forecast the behavior of stock market whether it will be bullish or bearish.

Chapter 2

Company Overview
India Infoline Finance Ltd.

IIFL is a financial services conglomerate which was started by a group of passionate


entrepreneurs in 1995. The genesis of IIFL lies in the power of dreaming big and
believing in your dreams.

IIFL was the pioneer in the retail broking industry with its launch of 5paisa trading
platform which offered the lowest brokerage in the industry and the freedom from
traditional ways of transacting. Our strength has been to continuously innovate and
reinvent ourselves. IIFL’s evolution from an entrepreneurial start -up in 1995 to a full
range diversified financial services group is a story of steady growth by adapting to
the dynamic business environment, without losing focus on our core domain of
financial services.

Today, IIFL Holdings Limited (Bloomberg Code: IIFL IN, NSE: IIFL, BSE: 532636)
is India’s leading integrated financial services group with diverse operating
businesses, mainly, Non Banking and Housing Finance, Wealth and Asset
Management, Financial Advisory and Broking, Mutual Funds and Financial Product
Distribution, Investment Banking, Institutional Equities, Realty Broking and Advisory
Services.

IIFL serves more than 4 million satisfied customers across various business segments
and is continuously building on its strengths to deliver excellent service to its
expanding customer base.
Chapter 3
Review of Literature

Fundamental analysis Overview

 Fundamental analysis is a method of determining a stock's real or "fair


market" value.
 Fundamental analysts search for stocks that are currently trading at
prices that are higher or lower than their real value.
 If the fair market value is higher than the market price, the stock is
deemed to be undervalued and a buy recommendation is given.
 In contrast, technical analysts ignore the fundamentals in favor of
studying the historical price trends of the stock.
Quantitative and Qualitative Fundamental Analysis
The problem with defining the word fundamentals is that it can cover anything
related to the economic well-being of a company. They obviously include
numbers like revenue and profit, but they can also include anything from a
company's market share to the quality of its management.

The various fundamental factors can be grouped into two categories:


quantitative and qualitative. The financial meaning of these terms isn't much
different from their standard definitions. Here is how a dictionary defines the
terms:

 Quantitative – capable of being measured or expressed in numerical


terms.
 Qualitative – related to or based on the quality or character of
something, often as opposed to its size or quantity.

Technical analysis Overview

 Technical analysis is a trading discipline employed to


evaluate investments and identify trading opportunities in price trends
and patterns seen on charts.
 Technical analysts believe past trading activity and price changes of a
security can be valuable indicators of the security's future price
movements.
 Technical analysis may be contrasted with fundamental analysis, which
focuses on a company's financials rather than historical price patterns
or stock trends.

Indicators

ADX
ADX is used to quantify trend strength. ADX calculations are based on
a moving average of price range expansion over a given period of time. The
default setting is 14 bars, although other time periods can be used. ADX can
be used on any trading vehicle such as stocks, mutual funds, exchange-
traded funds and futures.

ADX is plotted as a single line with values ranging from a low of zero to a high
of 100. ADX is non-directional; it registers trend strength whether price is
trending up or down.

Stochastic RSI
The Stochastic RSI (StochRSI) is an indicator used in technical analysis that ranges
between zero and one (or zero and 100 on some charting platforms) and is created by
applying the Stochastic oscillator formula to a set of relative strength index (RSI) values
rather than to standard price data

MACD
Moving Average Convergence Divergence (MACD) is a trend-
following momentumindicator that shows the relationship between two moving
averages of a security’s price. The MACD is calculated by subtracting the 26-
period Exponential Moving Average (EMA) from the 12-period EMA.

RSI
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that
measures the speed and change of price movements. The RSI oscillates between zero and 100.
Traditionally the RSI is considered overbought when above 70 and oversold when below 30. Signals
can be generated by looking for divergences and failure swings. RSI can also be used to identify the
general trend.

CHART TYPES
There are four main types of charts that are used by investors and traders depending on the
information that they are seeking and their individual skill levels. The chart types are: the
line chart, the bar chart, the candlestick chart and the point and figure chart.

LINE CHART

The most basic of the four charts is the line chart because it represents only the closing prices
over a set period of time. The line is formed by connecting the closing prices over the time
frame. Line charts do not provide visual information of the trading range for the individual
points such as the high, low and opening prices. However, the closing price is often
considered to be the most important price in stock data compared to the high and low for the
day and this is why it is the only value used in line charts.

BAR CHART

The bar chart expands on the line chart by adding several more key pieces of information to
each data point. The chart is made up of a series of vertical lines that represent each data
point. This vertical line represents the high and low for the trading period, along with the
closing price. The close and open are represented on the vertical line by a horizontal dash.

Conversely, the close is represented by the dash on the right. Generally, if the
left dash (open) is lower than the right dash (close) then the bar will be shaded black,
representing an up period for the stock, which means it has gained value. A bar that is colored
red signals that the stock has gone down in value over that period.
Figure 2: A bar chart

CANDLESTICK CHART

The candlestick chart is similar to a bar chart, but it differs in the way that it is visually
constructed. Similar to the bar chart, the candlestick also has a thin vertical line showing the
period's trading range. The difference comes in the formation of a wide bar on the vertical
line, which illustrates the difference between the open and close.

And, like bar charts, candlesticks also rely heavily on the use of colors to explain what has
happened during the trading period. A major problem with the candlestick color
configuration, however, is that different sites use different standards; therefore, it is important
to understand the candlestick configuration used at the chart site you are working with.

There are two color constructs for days up and one for days that the price falls.
When the price of the stock is up and closes above the opening trade, the candlestick will
usually be white or clear. If the stock has traded down for the period, then the candlestick
will usually be red or black, depending on the site. If the stock's price has closed above the
previous day’s close but below the day's open, the candlestick will be black or filled with the
color that is used to indicate an up day.
Figure 3: A candlestick chart

Chapter 4

Objectives

To working in the capital market or share market which


is done on the research on the equity, future and option
by using fundamental and technical analysis we can
reduce the risk or take calculative risk in stock market
and increase the probability of profit.
Choose from a wide range of investment options,
products and services to build a portfolio that will fulfil
your financial goal with ease.

Equity

Derivatives

Commodity

Mutual funds

While creating portfolio by choosing above options do


all the analysis.

Chapter 5

Methodology

Chapter 6

Data Analysis, Results and Interpretation

Equity part
Sell

Data classification: the study is based on secondary


data, which have been collected from various websites
of NSE, BSE and SEBI and selected companies.the
opening high, low and closing prices of s&p CNX nifity
index .

NSE website which provides all the market information


on call and put options trades on different stocks during
the day that include options premium

Chapter 7

Conclusion

Relationship of cash market and derivative with using


technical and fundamental.

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