Investment Analysis & Equity Research

By Dr.Anup Raj

Nucleus & Protoplasm of Investment

Income Expense = Saving(Passive in Nature) Saving is the root of Investment Saving-Investment =Idle Capital or Fund

Saving

It is all about sacrifice of your current consumption capacity to obtain a return latter

Investment

If a man is proud of his wealth, he should not be praised until it is known how he employs it. Socrates

Investment
The commitment of funds to one or more assets that will be held over some future time period

Investment Management

It is all about coping with variablity in return

Forms of Investment

Physical Form of Investment Gold,Real Estate,Base Metals,Antiques etc. Financial Form of Investments:Shares,Debentures,Bonds,Derivatives & other financial Securities

Investment Decision

Personal Level or Individual Level Orgnisational Level or Corporate Level

Investment as a Profession

Certified Financial Planner Chartered Financial Consultant Chartered Financial Analyst Financial Advisor Risk Analyst

Investment Decision Process

Return(Expected) Return(Realized) Risk(Expected Variance in Expected Return) Risk-Return Trade Off

Structuring the Decision Process

Security Analysis:-The first part of the investment decision

processs,involving valuation and analysis of individual securities

Portfolio Management:-It involves the management of a

group of assets i.e. portfolio as a unit

Important considerations in the investment decision process for Todays Investors

The Great Unknown:-Uncertainty:- Risk At best estimates are imprecise; at worst they are completely wrong

Organizing Financial Assets

Direct Investment:- Investors buy or sell securities by themselves typically through brokerage accounts/house Indirect Investment:-Buy and sell take place through an expert such as Mutual Fund,Fund Houses etc.

Major types of Financial Assets

Non Marketable:- Saving Deposits,C.Ds,Bond Money market :-Treasury Bills,NCD,CPs,Repurchase Agreements,Bankers acceptance, etc. Capital Market Instruments:- Fixed Income,Equities,Treasuries etc.

Risk Return Relationship

Risk Return Relationship

The nature of the relationship is that as the level of expected risk increases, the level of expected return also increases. The opposite is true as well. Lower levels of expected risk are associated with lower expected returns.

Risk Return Relationship

This risk-return relationship is characterized as being a direct relationship or a positive relationship.

Risk

Risk = the possibility of something unexpected happening or Risk = the possibility of an unexpected outcome occurring

LIVE EXAMPLES

Strike at Marutis manesar plants has stopped the production of much sought after segment of SWIFT
Ultimately the rival group are having its benefits by wooing buyers

LIVE EXAMPLES

Interest rate hike is killing interest rate sensitive companies such as Infrastructure and Construction

Expected Return

The expected rate of return on a investment or stock represents the mean of a probability distribution of possible future returns on the stock