economic & industry analysis

8/13/2019 Economic & Industry Analysis

1/24

Economic and Industry Analysis

Atul Chandra Pandit

Assistant Professor, BIBM

Why do we invest in stock?

Expectation of dividend Capital gain

Other advantages


2/24

Means of Realizing Gain

Trading and Gain

Holding for a long period


3/24

Attitude Toward Investment

Risk Taker

Risk Neutral

Risk Averse


4/24

Types of Analysis

1. Fundamental Analysis(FA)

2. Technical Analysis(TA)


5/24

Fundamental Analysis

This approach stresses on the economicconditions, such as the level of employment ,

economic growth , direction of the changes in the

interest rates to determine the value of the

securities in the market.

This approach also examines a firms earnings

capacity, its growth potential, and its sources offinance and the risk factor associated with it.


6/24

Technical Analysis

It is based on the past market performance ofa firms securities. It attempts to identifysuperior investments by analyzing the priceperformance and volume of transactions of

the a firmssecurities.

It emphasizes on the price trend in the

securities and deviations from the trend.


7/24

Fundamental Analysis


8/24

undamental Analysis (FA)

Economic Analysis

Industry Analysis

Company Analysis


9/24

Approaches of FA

Top-Down Approach

Bottom-Up Approach


10/24

Economic Analysis

It involves assessing the general economiccondition of the country in which the investoris going to invest, and;

Overall economic condition of the worldeconomy that may affect the economiccondition of the country of investment.


11/24

Economic Analysis

Assessment of economic condition is

necessary as studies shows very strongrelationship between the economiccondition and the stock market performance


12/24

Economic Analysis- Factors

Government Economic Policy

Monetary Policy

Fiscal Policy


13/24


World Economic events

Foreign Trade

Exchange Rates

Forex Reserve


14/24


Public Attitude

Domestic Legislation

Business Cycles


15/24


GDP Growth Rate.

Unemployment Rate


16/24


Labor Productivity

Interest Rate

Inflation


17/24

Industry Analysis


18/24

What is an Industry?

An industry is a group of companies which

produce similar goods and/or services.

Example-Pharmaceuticals, Banking,

Insurance, NBFI, Textile


19/24

Industry Analysis

Industry Analysis is done to select the right

industry for investment.

Basically an investor wants to get answers of a

few questions through the industry analysis.


20/24

Industry Analysis- Basic Questions

1. Is there any difference in the returns of thealternative industries during a specific timeperiod?

2. Is the earnings of the alternative industriesconsistent over time?

3. Is the performance of firms within an industryconsistent ?


21/24

Industry Analysis- Basic Questions

4.Is there any difference in the alternative industriesin terms of risk?

5. Does the risk for an industry vary or does itremains constant?


22/24

Industry Analysis- Factors

1. Industry Structures

2. Nature of Competition

3. Industry Demand-Supply

4. Industry Product Quality

5. Cost Elements


23/24

Industry Analysis- Factors

6. Government Regulation

7. Exposure to the Business Cycle

8. Financial Norms and Standards

9. Industry Growth Rate

10. Industry Profitability and others


24/24

Nature of Competitiona

Threat of newEntrants

Rivalry amongexisting firms

Threat ofSubstitute Products

BargainingPower of Buyers

BargainingPower of Suppliers

economic & industry analysis

Documents