AN INTERNSHIP REPORT ON

“INTRINSIC VALIE OF STOCKS” In ODISHA CAPITAL MARKET ENTERPRISES LTD.

Internship Report is Submitted Towards Partial Fulfillment for The Requirement for The Degree
of Master of Business Administration (MBA)
SUBMITTED BY
PRITIPADMA MISHRA
REGISTRATION NO: 2306287130
ROLL NO: 23MB129

Submitted to

GANDHI INSTITUTE FOR TECHNOLOGICAL ADVANCEMENT (GITA)

BY
UNDER THE GUIDANCE OF

INTERNAL GUIDE EXTERNAL GUIDE

PROF. SHASWATI SAHU Mr. BIPIN BIHARI DUTTA

1
Certificate of Originality

This is to certify that the project titled “INTRINSIC VALUE OF STOCKS” in ODISHA
CAPITAL MARKET ENTERPROSES LTD.(OCMEL)is an original work of the student and is
being submitted in partial fulfilment for the award of Master’s Degree in Business
Administration of GITA Autonomous College, affiliated to Biju Patnaik University of
Technology (BPUT), Rourkela. This report has not been submitted earlier to this University or
to any other University/ Institution for the fulfilment of the requirement of a course of study.

SIGNATURE OF SUPERVISOR SIGNATURE OF STUDENT

Place: Place:
Date: Date:

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CERTIFICATE OF GUIDE/SUPERVISOR

This is to certify that the dissertation entitled “Intrinsic value of stocks” by Sonalisa Sahoo for
the partial fulfilment of “Master in Business Administration (MBA)” is a record of Bonafide
original research work carried out by him/her, under my supervision and guidance. The
dissertation has reached the standard of fulfilling the partial requirement of the Master of
Business Administration in Management (MBA) of GITA Autonomous College
The dissertation hasn’t been submitted to any other University/Institution for the award of any
degree or diploma so far as my knowledge is concerned.

Prof. Shaswati Sahu

Date:

3
 Declaration
I, Sonalisa Sahoo, student of MBA (GITA Autonomous College), do hereby declare that I have completed the
project study entitled “Intrinsic value of stocks” under the guidance of Shaswati Sahu in the field of
HR/Marketing/Finance/Operation/ IT.
The project work done by me is genuine and authentic and is not submitted to any other institution for the award
of any degree or publication.
Date – 04/11/2024
Place -Bhubaneswar Sonalisa Sahoo

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 ACKNOWLEDGEMENT

First and foremost, I am very thankful to the lord almighty for having best owned upon his grace,
without which I would not have got strength to complete my project. This summer internship gave
me a very good opportunity for learning new things, with timely and successful completion of
project. These all have been made possible by the effort of many individuals and therefore it is
necessary for me to express my sincere to each one of them.

First, I would like to thank Mr. Thomas Mathew, MD of Bhubaneswar stock exchange for allowing
us to conduct our summer internship project in the organization.

I take this opportunity to express my deep sense of gratitude to my company guide, Mr. Bipin
BDutta, Assistant manager, Bhubaneswar stock exchange, for his wonderful guidance on the topic
of the project undertaken by me and also for him immense support by giving enough clarifications to
my doubt whenever it was required, throughout the journey of my internship. Without his direction,
it would have been impossible for me to proceed and give my best. He has significantly contributed
in making concepts related to my work simple to understand. Every time he kept motivating me to
come up with something new in my study.

I am also very much thankful to my faculty guide MS. Shaswati Sahu, for suggesting me to
undertake internship in Bhubaneswar Stock Exchange. She has constantly motivated me to deliver
my best and also gave right information in the quickest possible time. I am thankful to her for
inspiring me to do case study or research work which made me enthusiastic for my work.

At last, I would like to thank my seniors and family members, who gave me nice support in making
this project successful.

I take immense pleasure to thank all inspiring spirits behind the success of the project

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CHAPTER-I INTRODUCTION
1.1. Backdrop
1.2. Objective of the study
1.3. Method Adopted
1.4. Outline of the study

CHAPTER-II REVIEW OF LITRETURE AND SCOPE OF THE STUDY

2.1. Literature review of intrinsic value of stocks
2.2. scope of the study of intrinsic value of stocks
CHAPTER-III Qualitative study & Theoretical frame work
3.1. why intrinsic value matters.
3.2. why to invest in securities market.
3.3 key benefits of stocks.
3.4. Benefit of investing in securities market.
CHAPTER-IV INTRINSIC VALUE OF STOCKS
CHAPTER-V KEY TAKEWAYS
CHAPTER-VI CASE STUDY
CHAPTER-VII FAINDINGS & CONCLUSION
CHAPTER-VIII REFERENCES

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 CHAPTER-I

INTRINSIC VALUE OF STOCKS

BACKDROP
 1. Historical Evolution
 Early Investment Principles: The concept of intrinsic value emerged in the early 20th
century, with investors like Benjamin Graham and David Dodd advocating for
fundamental analysis. Their work, particularly in "Security Analysis," emphasized the
need to evaluate a company's true worth beyond market prices.
 Market Reactions: Historical market events, such as the Great Depression, highlighted
the disconnect between market prices and underlying values, reinforcing the
importance of intrinsic valuation.
 2. Theoretical Foundations
 Valuation Models: The Discounted Cash Flow (DCF) model became a standard method
for estimating intrinsic value by calculating the present value of expected future cash
flows. This approach relies on both quantitative data and qualitative assessments of a
company’s prospects.
 Graham and Dodd's Principles: Their emphasis on margin of safety—buying securities
at a price below their intrinsic value—laid the groundwork for value investing
strategies.
 3. Market Dynamics
 Behavioral Finance: The rise of behavioral finance in the late 20th century introduced
the idea that investor psychology affects stock prices, often leading to irrational market
behavior that creates opportunities to identify undervalued stocks.
 Information Asymmetry: The disparity in information availability among investors can
lead to mispricing, making intrinsic value assessments critical for identifying investment
opportunities.
 4. Regulatory and Economic Influences
 Accounting Standards: Changes in accounting practices, such as the adoption of
International Financial Reporting Standards (IFRS), impact how financial data is
reported and interpreted, influencing intrinsic value calculations.
 Market Regulation: The regulatory environment affects investor behavior and
corporate governance, which can impact perceptions of a company's intrinsic value.
 5. Investor Perspectives

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  Long-Term Focus: Intrinsic value is often a guiding principle for long-term investors,
who prioritize fundamental analysis over short-term market fluctuations.
 Sustainable Investing: The growing emphasis on ESG (Environmental, Social,
Governance) factors has added another layer to intrinsic value assessments, as investors
consider a company's ethical practices and sustainability efforts alongside traditional
financial metrics.
Conclusion
The backdrop of intrinsic value encompasses a rich tapestry of historical developments,
theoretical advancements, and evolving market dynamics. Understanding these elements helps
investors navigate the complexities of stock valuation and make informed decisions.
INTRODUCTION

he intrinsic value of a stocks is an estimate of its true, inherent worth, independent of its
current market price. It is a fundamental concept in value investing and is used to determine
whether a stock is undervalued or overvalued by the market

FUNDAMENTAL ANALYSIS

Intrinsic value is typically calculated using fundamental analysis, which involves examining a
company’s financial statements, business model, market position, and other qualitative and
quantitative factors.

DISCOUNTED CASH FLOW (DCF)

One common Methods for estimating intrinsic value is the discounted cash flow model. this
approach involves projecting the company’s future cash flow and then discounting them back to
their present value using a discount rate.

QUALITATIVE FACTORS

Intrinsic value also Take into account qualitative factors such as the company’s management quality,
brand strength, competitive advantage, and industry position. these factors can be harder to quantify
but are crucial for a comprehensive valuation.

DYNAMIC NATURE

Intrinsic value is not static; it can change over time as new information becomes available, a
company’s performance change, or broader economic condition evolve.

OBJECTIVE OF STUDY

 To determine a stocks true or fair value based on fundamental analysis rather than its current
market price.
 To identify investment opportunities
 To reduce risk
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  To support long term strategies
 To gain market insights
 To valuation for investment decision
 To the study of long-term wealth building
 To risk mitigation
 Study of market independence

Research methodology

Researching the intrinsic value of stocks typically involves a mix of quantitative and qualitative
methodologies. Here are some common approaches:

 1. Fundamental Analysis

 Financial Statement Analysis: Examine balance sheets, income statements, and cash flow
statements to assess a company's financial health.
 Valuation Ratios: Use ratios such as Price-to-Earnings (P/E), Price-to-Book (P/B), and
Dividend Discount Model (DDM) to gauge relative value.
 Discounted Cash Flow (DCF) Analysis: Project future cash flows and discount them back to
present value using an appropriate discount rate.

 2. Comparative Analysis

 Peer Comparison: Compare financial metrics with similar companies in the same industry to
determine relative valuation.
 Benchmarking: Use industry averages as a benchmark to assess performance and valuation.

 3. Qualitative Analysis

 Management Evaluation: Assess the quality and track record of the company's leadership.
 Competitive Positioning: Analyze the company’s market position, competitive advantages,
and potential risks.
 Industry Trends: Investigate broader economic and industry trends that could impact the
company’s performance.

 4. Market Sentiment Analysis

 News and Reports: Review news articles, analyst reports, and investor sentiments to
understand market perceptions and potential biases.
 Social Media Analysis: Utilize sentiment analysis tools to gauge public perception and
trends from social media platforms.

 5. Statistical and Econometric Models

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  Regression Analysis: Analyze relationships between stock prices and economic indicators or
other variables.
 Time Series Analysis: Study historical stock price data to identify patterns and forecast
future movements.

 6. Risk Assessment

 Beta Analysis: Measure the stock's volatility compared to the overall market.
 Scenario and Sensitivity Analysis: Evaluate how changes in key assumptions (e.g., growth
rates, discount rates) impact intrinsic value.

 7. Longitudinal Studies

 Conduct studies over time to observe how intrinsic value assessments change with market
conditions, company performance, and economic cycles.

 Data Sources

 Financial Databases: Use sources like Bloomberg, Reuters, or Yahoo Finance for financial
data.
 Company Reports: Analyz annual reports (10-K) and quarterly reports (10-Q).
 Market Research: Leverage industry reports and market analysis studies.

 Conclusion

Combining these methodologies provides a comprehensive view of a stock's intrinsic value, allowing
for informed investment decisions. It's also important to remain adaptable and update analyses as
new information becomes available.

Types

Researching the intrinsic value of stocks involves several methodologies, each suited to different
types of analysis. Here are some common approaches:

1. Discounted Cash Flow (DCF) Analysis: This method estimates the intrinsic value based on
projected future cash flows, discounted back to their present value. It requires assumptions
about future growth rates, discount rates, and cash flow patterns.
2. Comparable Company Analysis (Comps): This approach involves evaluating similar
companies to derive valuation multiples (like P/E or EV/EBITDA) and applying these to the
target company's financial metrics.
3. Precedent Transactions Analysis: This method looks at past transactions involving similar
companies to determine a valuation benchmark, considering the premiums paid in
acquisitions.
4. Asset-based Valuation: This technique assesses a company's intrinsic value based on its net
asset value, calculating the value of its assets minus liabilities.
5. Earnings Power Value (EPV): This approach estimates a company's value based on its
sustainable earnings and assumes no growth, focusing on its current profitability.
6. Market Sentiment Analysis: Incorporating qualitative aspects like market trends, investor
sentiment, and macroeconomic factors can also help gauge intrinsic value.

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 7. Dividend Discount Model (DDM): Particularly relevant for dividend-paying stocks, this
model calculates the present value of expected future dividends.
8. Scenario Analysis: This involves creating different scenarios based on varying assumptions
(like economic conditions or company performance) to assess how these Impact intrinsic
value.

Combining these methodologies can provide a more comprehensive view of a stock's intrinsic value,
balancing quantitative analysis with qualitative insights.

Intrinsic value is the anticipated or calculated value of a company stock, currency or product
determined through fundamental analysis. it Include tangible and intangible factors. intrinsic value is
also called the real value and may or may not be the same as the current market value. It is also
referred to as the price a rational investor is willing to pay for an investment, given its level of risk

BASIC FORMULA

The fundamental or the intrinsic value of a business or any investment asset is generally considered
as the present value of all future cash flows discounted at an appropriate discount rate.

The, the most “standard” approach is similar to the net present value formula:

Where the symbols have the usual meaning shown below –

 NPV= Net present value

 Cfi =net cash flow for the It h period (for the first cash flow, I =0)
 R=interest rate
 N=number of Period

Method of Valuation

While valuing a company as a going concern, there are three main

methods used by industry practitioners:

Comparable company analysis, and

Precedent Transactions

DCF analysis

Let us see each of the methods briefly:

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Method 1: Comparable Analysis

The method of comparative analysis is also known as trading multiples

or peer group analysis or equity comps or public market multiples. The
method employs the technique of relative valuation in which an analyst
compares the business (or asset) to be valued to other similar
companies by studying trading multiples such as P/E, EV/EBITDA, or
different other ratios. The method provides an observable value for the
business based on what other companies are worth.

Example, if a company A trades at 10x P/E ratio and company B has

earnings of Rs. 2 per share, the value of each stock of company B is
worth at Rs 20 per share (assuming the companies are entirely
comparable).

Method 2: Precedent Transactions

The method of precedent transactions is similar to relative valuation in

which an analyst compares the company to be valued to other
businesses that have been recently sold or acquired and belongs to the
same industry.

These transactions are put to use to assess the value of the company.

Method 3: DCF Analysis

DCF also is known as the Discounted Cash Flow (DCF) method is the
most used approach to arrive at the intrinsic value. In this method, the
analyst forecasts the future cash flow of the business and discount it to
present value by using the firm’s Weighted Average Cost of capital
(WACC).

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Let us now see an example to understand how fair value is determined
with the help of the DCF method.

Assume you are evaluating a company that has the following cash flow.

Cash flow for the first five years starting 2019 – Rs 100
Discount rate – 10%
Terminal Growth rate – 5%
The present estimation of the cash flow generated in 2019 –

= CF / (1+r) ^n

= 100/ (1+10%) ^1

Thus, the present value is Rs 91

Terminal value is computed as perpetual growth. Formula is –

= {CF*(1+growth rate)}/ (discount rate – growth rate)

Thus, the terminal value is

= {100*(1+5%)}/ (10%-5%)

= Rs 2100

The present worth of the terminal value is calculated using the method
shown above.

So, the present value of all future cash flows is shown as –

The present value of future cash flow (including terminal value)

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Thus, the fair value of the company is Rs 1683 (addition of the present
value of all future cash flows).

CHAPTER-II

Literature review

Several notable economists and financial experts have contributed their opinions on the concept of
intrinsic value of stocks, each offering unique perspectives based on their theories and research. Here

are some key figures and their views:

1. Benjamin Graham

 Perspective: Often regarded as the "father of value investing," Benjamin Graham’s work laid
the foundation for understanding intrinsic value. His seminal book, "Security Analysis"
(1934), co-authored with David Dodd, introduced the concept of intrinsic value as a measure
of a stock’s true worth based on fundamental analysis. Graham emphasized buying stocks at
a discount to their intrinsic value to provide a margin of safety.
 Key Contribution: Graham’s approach focused on fundamental valuation methods such as
discounted cash flow (DCF) and earnings multiples, advocating for a conservative approach
to investing based on thorough analysis.

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2. David Dodd

 Perspective: Co-authoring with Benjamin Graham, David Dodd’s work also significantly
influenced the concept of intrinsic value. Their joint work, "Security Analysis," provided a
systematic approach to evaluating stocks based on intrinsic value, using financial metrics and
conservative assumptions.
 Key Contribution: Dodd’s contributions emphasized the importance of rigorous financial
analysis and valuation techniques in assessing a stock’s intrinsic worth.

3. Eugene Fama

 Perspective: Known for developing the Efficient Market Hypothesis (EMH), Eugene Fama’s
work suggests that stock prices always reflect all available information, making it difficult to
consistently identify stocks trading below their intrinsic value. According to EMH, market
prices should equal intrinsic values, so the concept of consistently finding undervalued stocks
may be problematic.
 Key Contribution: Fama’s work challenges the practical application of intrinsic value
estimation by suggesting that markets are efficient and prices are already aligned with
intrinsic values.

4. Robert Shiller

 Perspective: Robert Shiller, a proponent of Behavioral economics, has critiqued traditional

valuation models by highlighting the impact of investor psychology and market bubbles on
stock prices. In his book "Irrational Exuberance" (2000), Shiller discusses how market prices
can deviate from intrinsic values due to speculative bubbles and investor sentiment.
 Key Contribution: Shiller’s work adds a behavioral dimension to the intrinsic value debate,
emphasizing that market prices can deviate significantly from intrinsic values due to
psychological factors and speculative behavior.

5.AswathDamodar

Perspective: Often referred to as the “Dean of Valuation,” Aswath Damodaran is a leading expert on
valuation. His books, such as "Valuation: Measuring and Managing the Value of Companies"
(1996), provide comprehensive methodologies for estimating intrinsic value using models like DCF,
relative valuation, and real options.

 Key Contribution: Damodaran’s extensive research and practical guidance on valuation

models offer a detailed framework for estimating intrinsic value, addressing various
challenges and assumptions involved in the process.

6. John Burr Williams

 Perspective: In his book "The Theory of Investment Value" (1938), Williams introduced the
Dividend Discount Model (DDM), which focuses on valuing a stock based on the present
value of expected future dividends.
 Key Contribution: Williams’ work laid the groundwork for dividend-based valuation
methods, providing an alternative approach to estimating intrinsic value that remains relevant
for dividend-paying stocks.

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 7. Michael Jense

 Perspective: Michael Jensen’s work on agency theory and corporate governance has
implications for intrinsic value by highlighting how managerial behaviour and agency costs
can affect a company’s performance and, consequently, its intrinsic value.
 Key Contribution: Jensen’s research emphasizes the importance of corporate governance in
ensuring that managerial decisions align with shareholder interests, indirectly affecting the
intrinsic value of stocks.

8. Jeremy Siegel

 Perspective: In his book "Stocks for the Long Run" (1994), Jeremy Siegel provides evidence
supporting the long-term investment in stocks based on their historical performance and
fundamental value. He argues that over the long term, stock prices tend to align with their
intrinsic values.
 Key Contribution: Siegel’s work supports the idea that intrinsic value is a meaningful
concept for long-term investors, despite short-term market fluctuations.

These economists and experts offer a range of perspectives on the intrinsic value of stocks, from
foundational theories and practical methodologies to critiques and behavioral insights. Their
contributions collectively provide a comprehensive view of how intrinsic value is assessed and its
relevance to investment decisions.

SCOPE OF THE STUDY OF INTRINSIC VALUE OF STOCKS

 Intrinsic value is different from the current market price of an asset. however, comparing it to
that current price can give investors an idea of whether the asset is undervalued or
overvalued.
 Intrinsic value refers to a fundamental, objective value contained in an object, asset, or
financial contract.
 It is the anticipated or calculated value of a company, stocks, currency or product determined
through fundamental analysis

CHAPTER- III

Qualitative study

A qualitative study of the intrinsic value of stocks involves assessing various non-numeric
factors that influence a company's worth beyond its financial metrics. Here’s an outline of how
you might approach this:
 1. Understanding Intrinsic Value

 Definition: Intrinsic value represents the perceived or calculated true value of a

company, based on fundamental analysis rather than market price.

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 Importance: Helps investors make informed decisions by evaluating whether a stock is
undervalued or overvalued.
 2. Key Qualitative Factors

 Management Quality
o Leadership experience and track record.
o Corporate governance practices.
o Transparency and communication with shareholders.
 Business Model
o Clarity and sustainability of the business model.
o Competitive advantages (e.g., brand strength, patents).
o Revenue generation methods and diversification.
 Industry Position
o Market share and competitive landscape.
o Industry growth prospects and trends.
o Regulatory environment and potential challenges.
 Company Culture
o Employee satisfaction and retention rates.
o Innovation and adaptability to change.
o Ethical practices and corporate social responsibility.
 3. Data Collection Methods

 Interviews
o Conduct interviews with company management, employees, and industry experts.
 Surveys
o Gather insights from investors and analysts regarding their perceptions of the
company.
 Case Studies
o Analyze successful companies in the same industry to identify best practices.
 Media Analysis
o Review news articles, press releases, and social media for public sentiment.
 4. Analysis Techniques

 Thematic Analysis

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 o Identify common themes from qualitative data collected through interviews and
surveys.
 SWOT Analysis
o Assess the company's strengths, weaknesses, opportunities, and threats based on
qualitative findings.
 Narrative Analysis
o Examine the company’s story, including its history and future vision, to
understand its potential.
 5. Combining Qualitative and Quantitative Data

 Integrate qualitative insights with quantitative financial analysis (e.g., earnings reports,
P/E ratios) to arrive at a more holistic view of intrinsic value.
 6. Conclusion

 Synthesize findings to provide a comprehensive assessment of the intrinsic value of the

stock, considering both qualitative and quantitative aspects.
 Offer recommendations for potential investors based on this analysis.
 7. Limitations

 Acknowledge potential biases in qualitative research.

 Discuss the challenges of generalizing findings across different contexts.
This approach helps investors understand not just the numbers but the underlying factors that
drive a company's potential for growth and profitability.

Why Intrinsic Value Matters

Analysts employ the methods used in these models to determine whether the intrinsic value of a
security is higher or lower than its current market price. This allows them to categorize it as
overvalued or undervalued. Investors can typically determine an appropriate margin of Sefty.
when calculating a stock's intrinsic value in which the market price is below the estimated
intrinsic value.
You can limit the amount of downside you would incur if the stock ends up being worth less than
your estimate if you leave a cushion between the lower market price and the price you believe
it's worth.

How To Find the Intrinsic Value of a Stock?

Calculate the company's future cash flow then Calculate the present value of the estimated
future cash flows. Add up all the present values to arrive at the intrinsic value.
How Do You Know If a Stock Is Undervalued?

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You can determine whether a stock is undervalued in a few ways. One method is to look at a
company's price-to-earnings (P/E) ratio, which is its stock price divided by its earnings per
share. A company may be undervalued if its P/E ratio is below that of its competitors or the
overall market.4
What's the Difference Between Market Value and Intrinsic Value?
Market value is the current stock price of company. It's based on supply and demand and can
fluctuate due to many factors such as opinions and feelings. Intrinsic value is a company's true
value. It can be thought of as the actual worth of a company when taking the value of its assets
and liabilities into consideration.

Why to invest in Securities Market

It Provide banks with the advantage of liquidity, in addition to the profits from
realized capital gains when these are sold.

KEY BENEFITS OF INVESTING IN STOCKS

Stocks can be a valuable part of your investment portfolio. owning stocks in

different companies can help you build your saving, protect your money from
inflation and taxes, and maximize income from your investment.

BENEFITS OF INVESTING IN THE SECURITIES MARKET

1. POTENTIOAL FOR HIGH RETURNS: Historically, the stocks market has provided higher returns
compared to other asset classes such as bonds or savings accounts.

2. DIVERSIFICATION: Investing in a range of securities help spread portfolio, you can mitigate
the impact of poor performance of a single security.

3. LIQUIDITY: Stocks and other securities are generally easy to buy and sell, providing flexibility
and liquidity to investors.

4. INFLATION HEDGE: Equities have historically outpaced inflation, helping to preserve

purchasing power over the long term.

5. RAX BENEFIT: Certain investments come with tax advantages, such as tax-deferred growth in
retirement accounts.

1.2 Investment in securities rests on three set out objectives such as

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  PROTECTION OF INVESTORS:

The SEC’s missions is to protect investors maintain fair, orderly, and efficient
markets and facilitate capital formation. Protecting investors in the securities
market is essential to maintain trust and integrity.

REGULATORY OVERSIGHT

 AGENCIES: Bodies like the SEC in the U.S., FCA in the UK, and similar
agencies globally oversee market activities, enforce regulation, and take
action against violations.
 COMPLIANCE: Ensuring that firms comply with legal and regulatory
requirements to protect investors’ interests.

TRANSPARENCY AND DISCLOSER:

 FINANCING REPORTING: Companies must provide accurate, timely, and

comprehensive information about their financial health and business operations.
 DISCLOSURE REQUIRMENTS: Ensuring that all material information is
disclosed to prevent misinformation and fraud.

MARKET SURVEILLANCE:

 MONITORING: Continuous monitoring of trading activities to detect and prevent

illegal activities like insider trading and market manipulation.
 ENFORCEMENT: Taking swift action against those who engage in fraudulent
practices.

INVESTOR EDUCATION:

 RESOURSCES: Providing educational materials and tools to help investors

understand market risks, investment strategies, and their rights.

 AWARENESS PROGRAMS: Conducting seminars, workshops, and online

courses to educate investors about safe investment practices.

CYBERSUCURITIES:

 DATA PROTECTION: Implementing robust cybersecurity measures to protect

investors’ personal and financial information from cyber threats.

 INNCIDET RESPONSE: Establishing protocols for responding to data breaches

and cyberattacks.

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 ENSURING FAIR, TRANSPARENT AND EFFICIENT MARKET AND

 Ensuring a fair, transparent, and efficient market is vital for maintaining

 Investors confidence and market integrity.

 A system of regulation that is transparent to market participants in stills the

confidence needed to attract suppliers and users of capital, improves market
efficiency, and contributes to increased overall economic activity and investment
 Market efficiency refers to the degree to which market prices reflect all available,
relevant information. If markets are efficient, then all information is already
incorporated into prices, and so there is no way to “beat” the market because there
are no undervalued or overvalued securities available.

 REDUCTION OF SYSTEMATIC RISK

Systematic risk refers to the risk inherent in the whole market or part of the
market.
Reducing systematic risk in the securities market involves strategies that
investors and portfolio managers can use to protect against market-wide risk.
Systematic risk, also known as market risk, affect the entire market and
cannot be eliminated through diversification.
Owning different securities or owning stocks in different sectors can reduce
systematic risk.

1.2

INVESTMENT IN SECURITIES ALWAYS ENTAILS RISK

Investing in securities market always have risk it is totally up to an Investor to which they are
willing to take risk. Here are some key Risk.

KEY RISK

 Market risk or systematic Risk: it means that an Investors may experience losses due to
factors affecting the overall performance of financial markets and general economy of
the country.
 Inflation Risk: inflation risk is also called as purchasing power risk. It is defined as the
chance that the cash flows from an investment would lose their value in future because
of a decline in its purchasing power due to inflation.

21
  Business Risk: it refers to the risk that a business of a company might be affected or
may stop its operation due to any unfavourable operational, market or financial
situation.
 Volatility Risk: Volatility risk arises as the companies’ stock prices may fluctuate over
time.
 Currency Risk: It refers to the potential risk of loss from fluctuating foreign exchange
rates that an investor may face when he has invested in foreign currency or made
foreign-currency-traded investment.

1.3

RISK BRING THE SCOPE OF BETTER RETURN

Yes, taking on higher risk can potentially lead to higher returns, a concept central to the risk-
return trade off in finance. This trade off means that to achieve higher returns, investors
generally must be willing to accepts a higher level of risk.

Here are few key points to understands:

1. STOCKS VS. BONDS: Stocks generally offer higher potential returns compared to bonds
but come with greater risk. Bonds, on the other hand, provide more stable and predictable
returns but usually lower than stocks.
2. Diversification: By diversification a portfolio – spreading investments across various asset
classes, industries, and geographic regions- investment can manage and mitigate some risk
while still seeking higher returns.
3. RISK TOLERANCE: individual risk tolerance plays a crucial role in investment decisions.
Investors with higher risk tolerance may invest more in equities or high- yield bonds,
while conservative investors might prefer bonds or blue-chip stock.
4. MARKET VOLATILITY: The securities market is inherently volatile, and higher
potential returns come with the possibility of significant losses, especially in the short term.
5. INVESTORS HORIZON: The length of time an investor plans to hold their investments
can affect the risk-return balance. Longer investment horizons typically allow more time to
ride out market fluctuation, potentially leading to higher returns.

PORTFOLIO NEEDS TO BE MANAGED FOR RISK AS MUCH AS FOR RETURN

Managing a portfolio in the securities market involves balancing risk and return.

Portfolio management is the art of selecting and overseeing a group of investments that meet
the long-term financial objectives and risk tolerance of a client, a company, or an institution.

Managing return and risk of a security portfolio

Investors can preserve their capita by diversifying holdings over different asset classes and
choosing assets that are non-correlating.

22
Managing a portfolio in the securities market involves a balancing act between risk and return.

1. Risk and Return Relationship: Generally, higher potential returns come with higher risk.
This is a fundamental principle in investing: if you're aiming for greater rewards, you often
need to be prepared for the possibility of greater losses. For instance, stocks typically offer
higher returns than bonds, but they also come with higher volatility and risk.
2. Diversification: One key strategy to manage risk is diversification—spreading investments
across various asset classes, sectors, and geographic regions. Diversification helps reduce the
impact of any single investment's poor performance on the overall portfolio.
3. Risk Tolerance: Each investor has a different level of risk tolerance, which can depend on
factors like their financial goals, investment horizon, and personal comfort with market
fluctuations. Understanding and aligning your portfolio with your risk tolerance is crucial for
effective management.
4. Volatility: This is a measure of how much the price of an investment varies over time.
Investments with high volatility can offer higher returns but also pose greater risk. Managing
volatility involves strategies like choosing a mix of high and low volatility assets.
5. Regular Review and Adjustment: Market conditions change, and so might your personal
circumstances and investment goals. Regularly reviewing and adjusting your portfolio helps
ensure it remains aligned with your objectives and risk tolerance.
6. Risk Management Tools: Investors use various tools and strategies to manage risk,
including stop-loss orders, hedging with options, and setting up asset allocation plans.

Balancing risk and return is an ongoing process that requires attention, analysis, and sometimes
adjustment, but it's essential for achieving long-term investment success.

 RISK OF A SECURITIES OR PORTFOLIO

The risk of securities or a portfolio refers to the potential for loss or variability in returns associated
with investing. It can manifest in various forms:

1. Market Risk: The risk that the entire market or a segment of it will decline, affecting the
value of your securities. This includes:
o Equity Risk: The risk of stock prices declining.
o Interest Rate Risk: The risk that changes in interest rates will affect the value of bonds and
other fixed-income securities.
o Currency Risk: The risk that fluctuations in exchange rates will affect investments in foreign
assets.

2. Credit Risk: The risk that a borrower or issuer of a security will default on their obligations,
causing losses for investors. This is especially relevant for bonds and other debt instruments.
3. Liquidity Risk: The risk that you may not be able to sell an investment quickly enough to
avoid or minimize a loss. This is more common in less frequently traded securities or assets.
4. Inflation Risk: The risk that inflation will erode the purchasing power of your returns. This
affects fixed-income securities and cash investments.

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 5. Specific Risk (or Idiosyncratic Risk): The risk associated with a particular company or
industry. This includes factors like management decisions, competitive pressures, or
regulatory changes.
6. Systemic Risk: The risk that the failure of one financial institution or sector could trigger a
broader financial crisis.

When managing a portfolio, diversifying investments across different asset classes and sectors can
help mitigate some of these risks. Additionally, understanding the risk profile of each security and
how it fits into the overall portfolio is crucial for effective risk management.

 RELATION BETWEEN RISK AND RETURN

The relationship between risk and return in the securities market is fundamental to investing and is
often summarized by the principle that higher risk is associated with the potential for higher returns.
Here’s a breakdown of how this relationship works:

1. Risk and Return Defined:

o Risk refers to the uncertainty or volatility of an investment's returns. In financial
terms, it often means the potential for losing money or the variation in returns over
time.
o Return is the gain or loss made on an investment, typically expressed as a percentage
of the initial investment.
2. Risk-Return Trade off:
o Higher Risk, Higher Potential Return: Investments with higher risk levels (such as
stocks or speculative assets) have the potential for higher returns compared to lower-
risk investments (such as government bonds or savings accounts). This is because
investors require a premium for taking on additional risk.
o Lower Risk, Lower Potential Return: Conversely, lower-risk investments usually
offer lower returns. This is because there is less uncertainty and fewer chances of
significant loss.
3. Types of Risk:
o Systematic Risk: This is the risk that affects the entire market or a broad segment of
the market, such as economic downturns or political instability. It cannot be
diversified away.
o Unsystematic Risk: This is specific to a particular company or industry, such as
management changes or product recalls. This type of risk can be mitigated through
diversification.
4. Diversification:
o Diversification involves spreading investments across different assets or asset classes
to reduce unsystematic risk. While diversification doesn’t eliminate systematic risk, it
can help manage the overall risk level of an investment portfolio.
5. Capital Asset Pricing Model (CAPM):
o CAPM is a model used to determine the expected return on an investment based on its
risk relative to the market. The model suggests that the expected return of a security is
equal to the risk-free rate plus a risk premium based on the security’s beta (a measure
of its risk relative to the market).
6. Efficient Frontier:

24
 oIn modern portfolio theory, the efficient frontier represents the set of optimal
portfolios that offer the highest expected return for a given level of risk. Investors can
choose a portfolio along the efficient frontier based on their risk tolerance.
7. Risk Tolerance:
o Individual investors have different levels of risk tolerance, which affects their
investment choices. Risk tolerance is influenced by factors such as investment goals,
time horizon, and financial situation.

Understanding the risk-return relationship helps investors make informed decisions about where to
allocate their resources, balancing their desire for higher returns with their ability to handle potential
losses.

 NEED OF HAVING DIVERSIFIED PORTFOLIO

A diversified portfolio is crucial in the securities market for several reasons:

1. Risk Reduction: Diversification helps spread investment risk across various asset classes,
sectors, and geographic regions. By not putting all your eggs in one basket, you reduce the
impact of poor performance in any single investment. For instance, if one sector or stock
underperforms, other investments in your portfolio may still perform well, balancing out
potential losses.
2. Smoother Returns: Different assets and sectors tend to perform differently at various times.
Diversification can lead to more stable and predictable returns over time, as the volatility of
individual investments is smoothed out by the overall performance of the diversified
portfolio.
3. Mitigating Market Risks: Markets can be unpredictable. Diversification allows you to
mitigate the impact of market downturns or economic disruptions on your portfolio. For
example, if the stock market is struggling, bonds or real estate might be performing better,
providing a cushion against losses.
4. Capitalizing on Different Opportunities: A diversified portfolio gives you exposure to
various investment opportunities. Different sectors and asset classes can perform well under
different economic conditions. For instance, technology stocks might do well during periods
of innovation, while utilities might be more stable during economic downturns.
5. Improving Long-Term Performance: Historically, diversified portfolios have shown better
long-term performance compared to concentrated ones. This is because the diversified
approach balances out high-risk, high-reward investments with more stable, lower-risk ones.
6. Reducing Specific Risk: By investing in a range of securities, industries, or countries, you
reduce the specific risk associated with any single entity. For example, investing in multiple
companies within the same industry can still expose you to industry-wide risks, but adding
investments from other sectors reduces this exposure.
7. Adapting to Changing Conditions: Diversification allows your portfolio to adapt to
changing economic and market conditions. As different sectors or asset classes respond
differently to these conditions, a diversified portfolio can benefit from various trends and
cycles.

In essence, diversification is a strategy to manage risk while aiming to achieve more consistent and
potentially higher returns over the long term. It’s a fundamental principle in investment management
and is widely recommended by financial advisors.

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  NON-DIVERSIFIABLE AND DIVERSIFIABLE RISK AND THE FACTORS GIVING
RISE TO IT.

In the context of finance and investing, the concepts of non-diversifiable and diversifiable risk are
crucial to understanding how risk affects securities and investment portfolios. Here's a breakdown of
these concepts and the factors that contribute to them:

Non-Diversifiable Risk (Systematic Risk)

Definition: Non-diversifiable risk, also known as systematic risk, is the risk inherent to the entire
market or a particular segment of the market. This type of risk cannot be eliminated through
diversification, as it affects all securities to some extent.

Factors Giving Rise to Non-Diversifiable Risk:

1. Economic Factors:
o Interest Rates: Changes in interest rates can impact borrowing costs, consumer spending,
and corporate profits.
o Inflation: Rising inflation can erode purchasing power and affect the profitability of
companies.
o Economic Recessions: Economic downturns can lead to widespread declines in market
values and investor sentiment.

2. Political and Regulatory Factors:

o Government Policies: Changes in taxation, trade policies, and regulations can impact market
conditions.
o Political Stability: Political instability or changes in government can create uncertainty in the
markets.

3. Market-wide Events:
o Global Events: Geopolitical events, natural disasters, or pandemics can have broad market
impacts.
o Market Sentiment: Overall investor sentiment and behaviour can influence market
movements.

4. Interest Rate Risk:

o Fluctuations in interest rates can affect bond prices, borrowing costs, and overall market
liquidity.

Diversifiable Risk (Unsystematic Risk)

Definition: Diversifiable risk, also known as unsystematic risk, is specific to an individual security
or a small group of securities. This risk can be reduced or eliminated through diversification within a
portfolio.

Factors Giving Rise to Diversifiable Risk:

1. Company-Specific Factors:
o Management Decisions: Decisions made by a company's management can affect its
performance and stock price.

26
 o Product Demand: Changes in consumer preferences or product demand can impact a
company's earnings.

2. Industry-Specific Factors:
o Competitive Position: A company's competitive position within its industry can affect its
performance relative to its peers.
o Regulatory Changes: Changes in regulations specific to an industry can impact companies
within that sector.

3. Operational Risk:
o Operational Failures: Issues such as production problems or supply chain disruptions can
affect a company’s performance.

4. Financial Risk:
o Leverage: Companies with high levels of debt may face higher financial risk compared to
those with lower levels of debt.

Importance of Diversification

 Reducing Risk: By holding a diversified portfolio, investors can mitigate unsystematic risk, as the
performance of individual securities will have a lesser impact on the overall portfolio.
 Maximizing Returns: Diversification can help smooth out returns over time, as different securities
may react differently to various risk factors.

Summary

 Non-diversifiable (Systematic) Risk: Affects the entire market or a broad sector; cannot be
eliminated through diversification. Examples include economic conditions and political events.
 Diversifiable (Unsystematic) Risk: Specific to individual securities or industries; can be mitigated
through diversification. Examples include company-specific issues and industry trends.

Understanding these types of risk helps investors make informed decisions about how to construct
and manage their investment portfolios.

CHAPTER-IV

INTRINSIC VALUE OF STOCKS

The intrinsic value of a stock refers to its true, inherent worth based on fundamental analysis, rather
than its current market price. It's an estimate of what the stock should be worth based on various
financial metrics and projections.

To determine the intrinsic value, investors typically consider factors such as:

27
 1. Earnings: Historical and projected earnings can give insight into a company's profitability.
2. Revenue Growth: How fast the company’s revenue is growing can indicate future potential.
3. Dividends: If the company pays dividends, the dividend yield and growth are important.
4. Discounted Cash Flow (DCF) Analysis: This method estimates the value of a stock by
calculating the present value of expected future cash flows, adjusted for risk.
5. Book Value: This is the value of a company's assets minus its liabilities.
6. Comparable Company Analysis: Comparing the company’s valuation multiples (like P/E
ratio) to those of similar companies.

The intrinsic value is often used to make investment decisions. If the intrinsic value is higher than the
current market price, the stock might be considered undervalued; if it’s lower, it might be
overvalued.

The intrinsic value of a stock is its perceived true value based on fundamental analysis, rather than its
current market price. Here’s a deeper dive into how to determine it and its significance:

Key Concepts

1. Fundamental Analysis: This involves evaluating a company's financial health, management,

competitive advantages, and market conditions to gauge its value.
2. Long-Term Perspective: Intrinsic value focuses on the long-term potential of a company,
factoring in future earnings, cash flow, and growth prospects.

Methods to Calculate Intrinsic Value

1. Discounted Cash Flow (DCF) Analysis

 Future Cash Flows: Estimate the company's free cash flows for a specific period (usually 5-
10 years).
 Discount Rate: Use the company's weighted average cost of capital (WACC) as the discount
rate.
 Present Value: Discount the future cash flows back to their present value.
 Terminal Value: Calculate the value of cash flows beyond the forecast period using a growth
model, and discount it back.
 Total Intrinsic Value: Sum the present values of cash flows and the terminal value.

2. Dividend Discount Model (DDM)

 Useful for companies that pay consistent dividends.

 Formula: Intrinsic Value=D1r−g\text{Intrinsic Value} = \frac{D_1}{r -
g}Intrinsic Value=r−gD1 where:
o D1D_1D1 = expected dividend next year
o rrr = required rate of return
o ggg = growth rate of dividends

3. Comparable Company Analysis

 Identify peer companies and evaluate their valuation multiples (like P/E or EV/EBITDA).
 Apply these multiples to the target company’s metrics to estimate intrinsic value.

28
Factors to Consider

 Market Conditions: Economic factors can influence stock prices and intrinsic value.
 Management Quality: Strong leadership can significantly impact a company's future
performance.
 Industry Trends: Changes in the industry can affect growth rates and cash flow potential.
 Risk Factors: Assess potential risks, including competitive threats and regulatory changes.

The intrinsic value of stocks involves a systematic approach to analyzing a company’s

fundamentals and financial health to determine its true worth. Here’s a structured guide on
how to conduct this study effectively:

1. Understanding the Intrinsic Value Concept

 Definition: Intrinsic value refers to the perceived or calculated true value of a stock, based on
various fundamental factors rather than its current market price.
 Importance: It helps investors make informed decisions about buying or selling stocks by
identifying whether a stock is undervalued or overvalued.

2. Methods for Calculating Intrinsic Value

a. Discounted Cash Flow (DCF) Analysis

 Steps:
o Project Future Cash Flows: Estimate free cash flows for a forecast period (typically
5-10 years).
o Determine Discount Rate: Use the company's weighted average cost of capital
(WACC).
o Calculate Present Value: Discount the projected cash flows back to their present
value.
o Estimate Terminal Value: Calculate the value of cash flows beyond the forecast
period using a growth model.
o Sum Up: Add the present values of the cash flows and the terminal value.

b. Dividend Discount Model (DDM)

 Usage: Best for companies that pay consistent dividends.

 Formula: Intrinsic Value=D1r−g\text{Intrinsic Value} = \frac{D_1}{r -
g}Intrinsic Value=r−gD1 where:
o D1D_1D1 = expected dividend next year
o rrr = required rate of return
o ggg = growth rate of dividends

c. Comparable Company Analysis

 Approach: Identify peer companies and analyze their valuation multiples.

 Execution: Use multiples like Price/Earnings (P/E), Price/Book (P/B), and EV/EBITDA to
estimate the intrinsic value of the target company.

3. Data Collection and Analysis

29
  Financial Statements: Gather income statements, balance sheets, and cash flow statements.
 Key Ratios: Analyze financial ratios like P/E ratio, return on equity (ROE), and debt-to-
equity ratio.
 Growth Rates: Estimate future growth rates based on historical performance and industry
trends.

4. Qualitative Factors

 Management Quality: Evaluate the effectiveness and track record of the company’s
leadership.
 Market Position: Assess competitive advantages (e.g., brand strength, market share).
 Industry Trends: Analyze market conditions, industry growth prospects, and potential
disruptions.

5. Performing the Analysis

 Scenario Analysis: Consider best-case, worst-case, and base-case scenarios to account for
uncertainty.
 Sensitivity Analysis: Test how changes in key assumptions (growth rate, discount rate)
impact intrinsic value.

6. Making Investment Decisions

 Comparison with Market Price: After calculating intrinsic value, compare it to the current
market price.
o If intrinsic value > market price: Potentially undervalued.
o If intrinsic value < market price: Potentially overvalued.
 Margin of Safety: Consider investing only when there’s a significant difference between
intrinsic value and market price to reduce risk.

7. Continuous Monitoring and Revaluation

 Market Changes: Keep track of changes in market conditions, industry dynamics, and
company performance.
 Reassess Assumptions: Regularly update your analysis based on new data and changing
circumstances.

CHAPTER-V
5.2.1 Key Takeaways

* Intrinsic value refers to some fundamental, objective value contained in an object,

asset, or financial contract.
* When evaluating stocks, there are several methods for arriving at a fair
assessment of a share's intrinsic value.

30
 * Models utilize factors such as dividend streams, discounted cash flows, and
residual income.

* Each model relies crucially on good assumptions. If the assumptions used are
inaccurate or erroneous, then the values estimated by the model will deviate from
the true intrinsic value.

5.2.2 Pricing of shares: How intrinsic value is referred to in it?

 It is difficult to say exactly what processes the market goes through in pricing the
shares.

 It is really a compound of entity consisting of millions of retail investors, mutual

funds, and institutional investors both domestic and foreign.
 In the realm of finance there is a widely held belief that fundamental value of a
share is nothing but the present value of future benefits in terms of dividend
declared at a discounted rate which investors expect to earn on the equity of the
firm.
 This is the price investors will be willing to pay for the share.
 This value is frequently referred to as intrinsic value or fundamental value.
 All demand and supply of shares usually originate from the future benefits of the
share.
 If the prevailing market price of a share is below its fundamental value – it is a
good buy and demand for the stocks goes up vis-versa.
 In addition, market incorporates the effect of different information in pricing the
shares. The most important and driving factors of stock market.

Primary task is to deriving intrinsic value and estimating returns from

stocks

 Method of estimation of return from ordinary shares

 Computation of historical return

 Adjustment for rights issue in estimating return from a share

 Estimation of growth rate of dividend in general
 Constant dividend growth rate model for estimating the average return
 Contribution of capital gains and dividend income to the overall return from shares
 Use of constant dividend growth rate model for evaluating a share as to whether it is
overpriced or under Priced.
 Accommodation of all assumptions involved in evaluating a share in the analysis

CHAPTER-VI

CASE STUDY

1. First select 10 listed companies, 5 from Large Cap, 3 from Mid-Cap and 2 from Small-Cap
companies. OR you may take 5 companies, 3 from Large Cap, 1 from Mid Cap and 1 Small-Cap
companies as per suitability.
Large cap companies Mid cap companies Small cap companies
TCS SUZLON Energy Hindustan motors

31
 Reliance industries Indian Renewable energy Ksolves India
HUL Kalyan Jewellers
LARSEN &TOUBRO
SBI

2. Ascertain the current status of those 10/5 companies in the following manner:

2.1 Fundamental Status

Current Fundamental Status of the Stock
Face Net EPS PE Last Last Dividend
Sl. Name of the Stock Value Profit (Rs.) Ratio Bonus Dividend Growth
No. Margin Rate
(%)
(%)
1 TCS 1.00 21.52 120.3 35.15 1:1 1000 10.70%
3
2 Reliance industries 10.00 7.86 12.24 29.42 1:1 100.00 7.44%
3 HUL 1.00 7.15 11.03 58.33 1:2 4200.00 13.00%
4 LARSEN &TOUBRO 2.00 9.05 20.25 34.82 1:2 1700.0 6.20%
5 SBI 1.00 14.71 76.05 10.95 1370.00 1.67%

2.1.1 Make analysis of Quarterly results of those stocks

Quarterly Results in Brief of ABC Ltd. (SBI)

(Rs. in ______)
Particulars Jun’24 Mar’24 Dec’23 Sep’23 Jun’23

Sales 1,11525.98 1,11,042.63 1,06,733.78 1,01,378.80 95,975.45

Operating Profit 82,237.82 79,155.96 75,107.38 70,389.55 67,802.74
Interest 70,400.53 69,387.44 66,918.05 61,878.84 57,070.50
Gross Profit 26,448.58 28,747.55 20,336.08 19,416.62 25,296.93
EPS (Rs.) 19.09 23.19 10.27 16.06 18.92
Also make Annual Results in Brief of ABC Ltd. (SBI)
particulars Mar’ 24** Mar’ 23 Mar’22 Mar’21 Mar’20

Sales 4,15,130.66 3,32,103.06 2,75,457.29 2,65,150.63 2,57,323.59

Operating profit 2,29,455.63 2,17,852.60 1,65,026.03 1,38,485.38 1,39,080.05

32
 interest 2,55,254.83 1,87,262.56 1,54,749.70 1,54,440.03 1,59,238.77

Gross profit 93,797.18 83,712.97 75,292.37 70,014.42 61,916.97

EPS(Rs) 68.44 56.29 35.49 22.87 16.23

(a)
2022
stocks P/E P/B Debt to Market Dividend ROE Face
ratio ratio equity cap % value

Coca cola 28.9 10.7 1.68 22.763 T 37.00 3.59% 148.01

Asian paints 97.50 20.1 0.06 2.961 T 4.40 22.11% 1.00

TCS 29.4 15.40 0.0163 11.917 T 22.00 43.1% 1.00

HUL 37.52 9.81 0.0062 6.018 T 17.00 18.10% 1.00

SBI 10.515 1.78 1.548 5.477 T 7.10 18.97% 1.00

2023

stocks P/E ratio P/B ratio Debt to Market ROE % Dividend Face
equity cap value
Coca cola 23.76 9.27 1.622 21.210 T 39.87% 0.46 1.48
Asian 64.48 19.0 0.0 3.265 T 25.68 5.1500 1.00
paints
TCS 27.84 12.86 0.0 13.7347 T 50.9% 9.0000 1.00
HUL 59.45 11.67 0.0 6.265 T 96% 18.00 1.00
SBI 8.40 1.75 1.455 5.735 15.5% 11.300 1.00

2024

Stocks P/E ratio P/B ratio Debt to Market ROE% Dividend Face
equity cap value
Coca cola 26.1 10.57 1.75 23.541 T 38.49% 0.49 5,466.36

33
 Asian 54.6 14.21 0.06 2,81,716 31.4% 28.15 1.00
paints
TCS 30.34 14.24 0.09 14.411 T 50.94% 10.0 1.59
HUL 58.05 11.59 0.0 5,96,091 16.05% 12.0 1.00
SBI 10.54 1.637 1.429 86.12 20.32% 13.70 1.00

(b) Finding of the fundamental study

Above Companies stocks and their fundamental analysis give us the certain information about the
Companies growth. It identify undervalued companies with strong growth potential by assessing
factor like market share and sales growth investors can find opportunities for long term.

Technical Status of the Stock

EPS Current PE 52-Wk 52-Wk Growth
Market Price H/L Avg. Rate
Sl. Name of the Stock
Price (%)
No (As at a Market
. Cutoff Date) Price
1. Coca cola 239.73 65.96 26.86 65.01 63.23 10%

2. Asian paints 11.39 2,935.65 54.6 3,422 2,671.0 3%

3. TCS 32.92 3969.95 32.6 4,592.25 4,150. 9.9%

4. HUL 42.4 2,515.90 58.05 2,515.90 3,035.0 2%

5. SBI 19.09 825.95 10.53 19.90 825.85 20.47%

34
35
Asian paints price line chart

36
TCS(Tata consultancy service)

37
HUL(Hindustan Unilever limited)

38
SBI

39
40
 CHAPTER-VII

FINDINS AND CONCLUSION:

Calculating the intrinsic value of a stock is essential for determining whether it is
undervalued or overvalued compared to its current market price. Here are the main steps to
find the intrinsic value, followed by how to reach a conclusion:
1. Understand the Concept of Intrinsic Value
 Intrinsic value is the perceived or calculated true value of a company, based on
fundamentals, rather than the current market price.
2. Methods to Calculate Intrinsic Value
a. Discounted Cash Flow (DCF) Analysis
 Estimate Future Cash Flows: Project the company’s future free cash flows for a
certain number of years (typically 5-10 years).
 Determine a Discount Rate: This is usually the company's weighted average cost
of capital (WACC).
 Calculate Present Value: Discount the future cash flows back to the present value
using the discount rate.
 Terminal Value: Estimate the value of cash flows beyond the forecast period and
discount that back to the present.
 Sum: Add the present values of the forecasted cash flows and the terminal value to
get the intrinsic value.
b. Dividend Discount Model (DDM)
 If the company pays dividends, calculate the present value of expected future
dividends.
 Use the formula: Intrinsic Value=D1r−g\text{Intrinsic Value} = \frac{D_1}{r -
g}Intrinsic Value=r−gD1 where D1D_1D1 is the expected dividend next year, rrr is
the required rate of return, and ggg is the growth rate of dividends.
c. Comparable Company Analysis
 Analyze similar companies in the same industry to determine valuation multiples (like
P/E, EV/EBITDA).
 Apply these multiples to the target company’s financial metrics to estimate its
intrinsic value.
3. Conclusion
 Comparison with Market Price: Once you have calculated the intrinsic value,
compare it with the current market price.

41
 o If the intrinsic value is greater than the market price, the stock may be
undervalued.
o If the intrinsic value is less than the market price, the stock may be
overvalued.
 Margin of Safety: Consider the margin of safety; it’s prudent to invest only when the
intrinsic value significantly exceeds the market price to account for uncertainties.
 Regular Reassessment: Revisit your calculations periodically, as market conditions
and company fundamentals can change.

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 CHAPTER-VIII
REFERENCES
 www.rediffmail.com
 www.moneycontrol.com
 www.finology.com
 www.investing.com
 https://www.sebi.gov.in
 www.google.com

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