technical analysis of it and phrma industry
TRANSCRIPT
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7.0 INTRODUCTION TO THE CONCEPT:
TECHNICAL ANALYSIS:
It is important to form a view on the likely trend of the overall market, and it ishelpful to have some idea of how to go about selecting individual stocks. Naturally,
all investors would like their investments to appreciate rapidly in price, but stocks,
which may satisfy this wish, tend to accompanied by a substantially greater amount of
risk then many investors are normally willing to accept. However, it is important to
understand that investors can be very conscious when it comes to stock ownership.
Technical analysis is the use of numerical series generated by market activity, such
as price and volume, to predict future price trends. The techniques applied to any
market with a comprehensive price history.
According to the technical analysis the share prices are determined by the demand
supply forces in the market which are in turn influenced by the number of other
fundamental factors. The combined impact of all the factors is reflected in the share
price movements .technical analyst claims that future share prices can be accurately
predicted, by examining past share movements.
BASIC PRINCIPLES:
Security prices behave in a manner that their movement is continuous in aparticular direction for some length of time.
Trends in stock prices change when there is a shift in demand and supply. Shifts in demand and supply can be detected through charts Patterns help in identifying trends to make forecasts.
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DOW THEORY
The roots of technical analysis were originated by dow theory which was
formulated by Charles. H. Dow the editor of the wall street journal during 1900 to
1902. He formulated a hypothesis that the stock does not move on a random basis, but
it is influenced by three distinct movements. They are:
Primarylong term cycle that carries up or down .it is the long term trend inthe market. It resembles the tides..
Secondary short term cycle that acts as a restraining force for the primarymovement. It is also called as corrections. They resemble the waves. They last
for only a short durations. This is called secondary reactions.
Tertiarythey are minor movements which are the day to day fluctuations inthe market. There are of very short term durarion and they are highly
fluctuating and insignificant. It resembles ripples.
Price movements can be identified by means of line chart. Closing price ofshare of index can be plotted and presented as follows for bullish and bearish
trends.
BULLISH TREND
During bullish trend each peak would be higher than the previous peak. Each
bottom will be higher than the previous bottom. Higher bottoms and higher tops will
indicate bullish trend.
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As soon as RSI crosses 70 mark line it signifies the overbought market.Now it is expected that the peak will be touched.
When RSI declines after the peak , it signifies the bearish market ahead When RSI crosses 70 mark line upward and continuously declines, but not
reached 30 mark line it indicates bearish market.
As soon as RSI crosses 30 mark line from upward, it signifies the oversoldmarket. Now it is expected that the bottom will be touched soon. This is
the early signal of bullish market
When RSI is above 30 mark line and progressing towards 70 mark, itsignifies a bullish market
MOVING AVERAGE CONVERGENCE AND DIVERGENCE(MACD)MACD is an oscillator that measures the convergence and divergence between
two exponential moving averages. A short term exponential moving average and a
long term exponential moving average are calculated with the help of the closing
price date. A 15 day and 40- day exponential moving averages constitute a
popular combination. The difference between the short- term EMA and the long
term EMA represents MACD.
Exponential moving average (EMA)
EMA is calculated by using the following formula:
EMA = (current closing priceprevious EMA)* factor +previous EMA
Where factor = 2/n +1
And n = number of days for which the average is to be calculated.
The MACD values for different days are derived by deducting the long- term
EMA for each day from the corresponding short- term EMA for the day.
The parameters used for identifying the trends:
Whenever the MACD line is above the zero mark line, it indicates the signal ofbullish market of the script.
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Whenever the MACD line is above the zero market line, but declining it isearly warning signal of a bearish market.
Whenever MACD line is below the zero mark line, it is the signal of a bearishmarket.
Whenever MACD line is below the zero mark line but raising it gives thesignal of the bullish market ahead.
Whenever the MACD line forms a peak at the top it gives signals that themarket will soon turn bearish, i.e. it represents overbought situation.
Whenever MACD line reaches its bottom it signifies oversold situation, i.e. themarket will start becoming bullish
STOCHASTIC OSCILLATORStochastic oscillator is a momentum indicator which shows the location of the close
relative to the high and low range over a set number of period .it is also used to
identify bull and bear setups to anticipate the future reversal .
Calculation :
%K=(current close-lowest low)/(highest highlowest low)*100
%D=3daySMA of %K.
Where ,
Highest high = Highest high of the look back period
Lowest low = Lowest low of the look back period
14 period is the default setting for the stochastic oscillator , the 14 period may be
days, weeks, months. For the calculation of %K recent closing value is taken for %D
3-day, week, month simple moving average of %K is done , both %K and %D will be
plotted along side , where %K acts as a trigger line
Low reading i.e. below 20 it indicates the price is near its low for the time period andoversold situation .High reading i.e. above 80 it indicates that the price is near its high
for the given period it shows overbought situation.
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8.0 RESEARCH METHODOLOGY
8.1 PROJECT TITLE:
A STUDY ON TECHNICAL ANALYSIS OF IT AND PHARMACEUTICAL
INDUSTRY WITH REFERANCE TO BSE AT RELIGARE SECURITES
LIMITD
8.2 STATEMENT OF THE PROBLEM:
The Indian pharmaceutical and IT sector are growth oriented sectors so this study is
conducted to analyse both the sectors performance using technical analysis. Securities
market has always have fluctuations, with these fluctuations several investors have
gained as well as lost in the stock market. In order to make the investment safe in
stock market, investor has to adopt technical analysis to make better investment
decision.
8.3 OBJECTIVES:
To assess the stock price movements of the selected companies. To analyse the performance of the selected companies using technical analysis. To determine the risk and return involved in the selected companies.
8.4 SCOPE OF THE STUDY:
The study covers only two sectors Pharmaceutical Information technology
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The study covers only 4 companies 2 in pharmaceutical and 2 companies in ITsector
Pharmaceutical
companies: IT companies:
CIPLA INFOSY
RANBAXY TATA COUNSULTANCY SERVICES
8.5 TYPE OF RESEARCH:
The study is an analytical study based on secondary data, question it asks analytical
research attempt to establish why it is that way, or why it came
8.6 STATISTICAL TOOLS USED:
Relative strength index moving average convergence and divergence(MACD) Stochastic oscillator.OTHER TOOLS USED FOR ANALYSIS:
Charts. Bar graphs. Line graph.
8.7 LIMITATIONS OF THE STUDY:
Due to time constraint, the study is confined to only few technical analysisindicators.
The forecasting of technical analysis is purely dependent on previous pricemovement irrespective of the news in the market will make major change
Only few pharmaceutical companies and I T companies are considered for thepurpose of calculation, which may not be enough to take the decision regarding the
whole sectors.
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TABLE 2: SHOWING RISK AND RETURN OF IT COMPANIES FOR THE
YEAR 2011.
COMPANY NAME RETURN BETA
1.INFOSYS -0.64 0.72
3.TCS 0.13 0.47
(Source: money control.com)
ANALYSIS: from the above graph we analyse that Infosys has got highest risk of
0.72% and negative returns of -0.64% compared to that TCS got moderate return of
0.13% and with risk of 0.47%.
GRAPH 2: SHOWING RETURN AND RISK OF I T COMPANIES FOR THE
YEAR 2011.
(Source: Table 2)
INTERPRETATION:
Change in the leadership and strategic decisions of the leader the Infosys company
faced lot of losses.TCS got affected by the low GDP/ high inflation in the country
affected the return in the year 2011.
-0.64
0.13
0.72
0.47
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
INFOSYS TCS
RETURN 2011
RISK 2011
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TABLE 3: SHOWING RISK AND RETURN OF I . T COMPANIES FOR THE
YEAR 2012.
COMPANY NAME RETURN BETA
1.INFOSYS -1.27 0.65
2.TCS 1 0.67
(Source: money control.com)
ANALYSIS:
From the above graph TCS and Infosys has risk of 0.65 %and 0.67%, and Infosys has
got negative returns of -1.27% and TCS got return of 1%.
GRAPH 3: SHOWING RETURN AND RISK OF I . T COMPANIES FOR
THE YEAR 2012.
(Source: Table 3)
INTERPRETAION:
The negative returns for Infosys are due to exchange rate fluctuations and also
economic fluctuations in other markets, as Infosys is a globally operated firm. While
TCS got better returns of 1% as it has major operations in India.
-1.27
1
0.65 0.67
-1.5
-1
-0.5
0
0.5
1
1.5
INFOSYS TCS
RETURN 2012
RISK 2012
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TABLE 4: SHOWING RISK AND RETURN OF PHARMACEUTICAL
COMPANIES FOR THE YEAR 2010.
COMPANY NAME RETURN BETA
1. CIPLA 1.5 0.222. RANBAXY 2.7 0.72
(Source: money control.com)
ANALYSIS:
From the above graph of pharmaceutical companies, Ranbaxy got highest return of
2.7% and cipla has got return of 1.5%. Ranbaxy has got highest risk of 0.72% and
cipla got 0.22%
GRAPH 4: SHOWING RETURN AND RISK OF PHARMACEUTICAL
COMPANIES FOR THE YEAR 2010.
(Source: Table 4)
INTERPRETATION:
Ranbaxys global presence has contributed to the companies return. cipla has got less
global presence and it rely on exporting and strategic alliance with the other
companies for its operations so its returns are moderate .
1.5
2.7
0.22
0.72
0
0.5
1
1.5
2
2.5
3
CIPLA RANBAXY
RETURN 2010
RISK/BETA 2010
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TABLE 5: SHOWING RISK AND RETURN OF PHARMACEUTICAL
COMPANIES FOR THE YEAR 2011.
COMPANY NAME RETURN BETA
1. CIPLA 0.13 0.592. RANBAXY -2.08 0.37
(Source: money control.com)
ANALYSIS:
From the above table we can analyse that cipla got a moderate return of 0.13% with
highest risk of 0.59% when compared with Ranbaxy it has got negative return of -
2.08% with a risk of 0.37.
GRAPH 5: SHOWING RETURN AND RISK OF PHARMACEUTICAL
COMPANIES FOR THE YEAR 2011.
(Source: Table 5)
INTERPRETATION:
The negative return for Ranbaxy company is due the issues with its US food and drug
administration on its operations this slowdown the companies operation. cipla also
had problem with logistics this slow down the operations it able to earn return of
0.13%.
0.13
-2.08
0.590.37
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
CIPLA RANBAXYRETURN 2011
BETA RISK 2011
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TABLE 6: SHOWING RISK AND RETURN OF PHARMACEUTICAL
COMPANIES FOR THE YEAR 2012.
COMPANY NAME RETURN BETA
1. CIPLA 1.7 0.742. RANBAXY 1.15 0.95
(Source: money control.com)
ANALYSIS :
From the graph we can say cipla got highest return of 1.7% and moderate risk of
0.74% when compared to Ranbaxy with highest risk of 0.95% and return of 1.15%.
GRAPH 6: SHOWING THE RETURN AND RISK OF PHARMACEUTICAL
COMPANIES FOR THE YEAR 2012.
(Source: Table 6)
INTERPRETATION:
Ranbaxy Company resolved it problems with the US government and earned profits
of 1.15%in the year 2012. Cipla has overcome with the logistic problems and able to
earn profits of 1.7% higher than that of previous year.
1.7
1.15
0.74
0.95
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
CIPLA RANBAXY
RETURN 2012
RISK 2012
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TECHNICAL INDICATOR1.Relative strength index : IT COMPANIES:
TABLE 7: showing Calculations of R S IINFOSYS
MONTH
CLSG
PR
Avg
Gain Avg Loss
RSI MONT
H
CLSG
PR
Avg
Gain Avg Loss
RSI
Jan-10 99.55 Jul-11 84.05 349.25
-
1027.45 25.36864
Feb-10 95.55 Aug-11 66.85 349.25
-
1122.75 23.72622
Mar-10 92.6 Sep-11 70.2 540.25 -1009.5 34.86046
Apr-10 94.5 Oct-11 70.9 647.95 -1009.5 39.09319
May-10 86.75 Nov-11 65.75 647.95 -946.35 40.64166
Jun-10 91.15 Dec-11 64.9 805.45 -832.25 49.18178
Jul-10 86.4 Jan-12 73.45 689.9 -853.95 44.68698
Aug-10 79.8 390.65 -160.25 70.91124 Feb-12 68.65 821.95 -713.35 53.53677
Sep-10 90.1 599.65 -160.25 78.9117 Mar-12 80.2 821.95 -299.8 73.2739
Oct-10 78.9 586.15 -231.65 71.674 Apr-12 77.2 630.95 -702.15 47.32953
Nov-10 62.25 544.95 -231.65 70.17126 May-12 75.25 289.55 -724.9 28.54256
Dec-10 66.35 940.5 -153.15 85.99643 Jun-12 78.45 352.25 -457.25 43.51452
Jan-11 60.15 809.6 -481.85 62.68923 Jul-12 82 194.75 -732.4 21.00523
Feb-11 62.1 809.3 -595.1 57.62603 Aug-12 93.5 340.6 -710.7 32.39798
Mar-11 65.75 1043 -513.35 67.01577 Sep-12 110.75 369.3 -710.7 34.19444
Apr-11 75.25 709.1 -844.15 45.65266 Oct-12 109.05 369.3 -870.75 29.78106
May-11 84.75 709.1 -886.85 44.43122 Nov-12 101.75 442.4 -468.4 48.57268
Jun-11 83.8 744.8 -886.85 45.64704 Dec-12 106.9 442.4 -563.75 43.96959
(Source: money control.com)
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GRAPH 7: SHOWING RSI OF INFOSYS
(Source: Table 7)
INTERPRETATION OF RSI LINE OF INFOSYS STOCK:
RSI line of the Infosys stock is oscillating between 20-80. From the above graph RSI
line above is above the 70 line when the RSI line shows up trend hen the investor
should hold the scripts and it reached highest i.e. 80 between the month of November
2010 to January 2011 after that script shows down trend then its the signal for the
investor to sell the script then the script falls to the lowest i.e.to the point 30 between
the July 2011 and September due the currency rate fluctuation company operations
were affected and when it show the indication of uptrend and this is the signal for the
investor to buy the script and wait until it reaches to the next high i.e. between the
month January 2012-march 12 is because the Infosys tie up with galaxo smithkline
for optimise digital channel deal . after that the RSI give signal of the next down trend
after march 12 the script should be sold and wait till lowest point 30 and show up
trend then investor is advised to buy the script.
0
10
2030
40
50
60
70
80
90
100
Jan/10
Feb/10
Mar/10
Apr/10
May/10
Jun/10
Jul/10
Aug/10
Sep/10
Oct/10
Nov/10
Dec/10
Jan/11
Feb/11
Mar/11
Apr/11
May/11
Jun/11
Jul/11
Aug/11
Sep/11
Oct/11
Nov/11
Dec/11
Jan/12
Feb/12
Mar/12
Apr/12
May/12
Jun/12
Jul/12
Aug/12
Sep/12
Oct/12
Nov/12
Dec/12
RSI
RSI
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Table 8: showing Calculations of RSITata consultancy services
MONTHCLSGPR
AvgGain
AvgLoss RSI
MONTH
CLSGPR
AvgGain
AvgLoss RSI
Jan-10 735.45 Jul-11 1134.4591.1 -121.7 42.81015
Feb-10 761 Aug-11 1040.691.1
-
207.65 30.49372
Mar-10 780.8 Sep-11 1037.591.1
-
166.55 35.35804
Apr-10 766 Oct-11 1114.298.25
-
166.55 37.10347
May-10 742 Nov-11 1113.198.25
-
148.75 39.77733
Jun-10 751.15 Dec-11 1161.25146.4
-
143.95 50.4219
Jul-10 841.1 Jan-12 1130.5124.85 -174.7 41.67919
Aug-10 843.85147.2 -38.8 79.13978
Feb-12 1221.05215.4 -128.8 62.5799
Sep-10 922.55200.35 -38.8 83.77587
Mar-12 1167.85215.4 -88.15 70.9603
Oct-10 1051.8309.8 -38.8 88.86976
Apr-12 1244.9292.45 -85.05 77.4702
Nov-10 1076.7334.7 -24 93.30917
May12 1245.8216.65 -85.05 71.80974
Dec-10 1165.05423.05 0 50
Jun-12 1277.55248.4 -83.95 74.74048
Jan-11 1157.15413.9 -7.9 98.12707
Jul-12 1240.65200.25
-
120.85 62.36375
Feb-11 1112.95323.95 -52.1 86.14546
Aug-12 1347.3306.9 -90.1 77.30479
Mar-11 1182.5390.75 -52.1 88.23529
Sep-12 1294216.35 -143.4 60.13899
Apr-11 1163.6 312.05 -71 81.46456 Oct-12 1313.4 235.75 -90.2 72.32704
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May-11 1158.8182.8 -75.8 70.68832
Nov-12 1312.85158.7 -90.75 63.61996
Jun-11 1180.35179.45 -75.8 70.30362
Dec-12 1258.55103.5 -90.75 53.28185
(Source: money control.com)
Graph 8: showing RSI of Tata consultancy services
(Source: Table 8)
INTERPRETATION
From the above graph of TCS company RSI line oscillates between 80-30, In the
graph RSI line starts with a higher point and show higher trend and after certain time
it showed down trend due to some corrections in the market and then show up trend
and reaches highest point of 98 between the month January 2011 to march 2011andgives the signal of downtrend this is the signal for the investor to sell the script and
wait till the scrip reaches the lowest point 30 between the month of July2011-sept11
because of the currency rate fluctuations and shows up trend then it the signal to buy
and that script and the investor should be hold it till it reaches the next highest point
i.e. 77.4 between the month July2012-sept12 and when the script show down trend
its the signal to the investor to sell the script.
0
10
20
30
40
50
60
7080
90
100
110
Jan/10
Feb/10
Mar/10
Apr/10
May/10
Jun/10
Jul/10
Aug/10
Sep/10
Oct/10
Nov/10
Dec/10
Jan/11
Feb/11
Mar/11
Apr/11
May/11
Jun/11
Jul/11
Aug/11
Sep/11
Oct/11
Nov/11
Dec/11
Jan/12
Feb/12
Mar/12
Apr/12
May/12
Jun/12
Jul/12
Aug/12
Sep/12
Oct/12
Nov/12
Dec/12
RSI
RSI
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PHARAMASITICAL SECTORTABLE 9: showing Calculations of RSICipla Company
MONTH
CLSG
PR
Avg
Gain
Avg
Loss RSI
MONT
H CLSG PR
Avg
Gain
Avg
Loss RSI
Jan-10 317.3 Jul-11 307.85 42.85 -104.9 29.00169
Feb-10 315.3 Aug-11 280 42.85 -95.1 31.06198
Mar-10 337.1 Sep-11 282.7 45.55 -62.55 42.13691
Apr-10 342.55 Oct-11 294.55 36.05 -62.55 36.56187
May-10 318.95 Nov-11 327.95 69.45 -50.35 57.97162
Jun-10 337.75 Dec-11 319.55 52.2 -58.75 47.04822
Jul-10 326.6 Jan-12 349.15 77.55 -58.75 56.89655
Aug-10 303.35 46.05 -60 43.42291 Feb-12 316.8 77.55 -68.6 53.06192
Sep-10 321.65 64.35 -58 52.59501 Mar-12 304.55 77.55 -53 59.40253
Oct-10 352.25 73.15 -58 55.77583 Apr-12 311.85 82.15 -53 60.78431
Nov-10 343.7 67.7
-
66.55 50.42831 May-12 309.65 70.3 -55.2 56.01594
Dec-10 369.9 93.9
-
42.95 68.61527 Jun-12 316.4 43.65 -55.2 44.15781
Jan-11 332.25 75.1 -80.6 48.23378 Jul-12 338.55 65.8 -46.8 58.43694
Feb-11 299.7 75.1 -102 42.40542 Aug-12 378.15 75.8 -46.8 61.82708
Mar-11 321.05 96.45
-
78.75 55.05137 Sep-12 380.6 78.25 -14.45 84.41208
Apr-11 308.85 78.15
-
90.95 46.21526 Oct-12 363.5 78.25 -19.3 80.21527
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May-11 326.1 64.8
-
90.95 41.60514 Nov-12 414 121.45 -292.9 29.31097
Jun-11 330.35 69.05 -82.4 45.5926 Dec-12 414.1 121.55 -290.7 29.48454
(Source: money control.com)
GRAPH 9: SHOWING RSI OF CIPLA COMPANY
(Source: Table 9)
INTERPRETATION
RSI line of the cipla stock is oscillating between 30-80. Which indicates that the
investor has to sell at the points where the stock s reaching more than 70 between
November 2010 January 2010 and buy when the stock reaches below 30 are at 30
and show up trend then its a indication for the investor to sell the script . As it is
oscillating above 70 line only once, hence it is better for the investor if he holds forthe stock to be uptrend or downtrend and sell the scrip when it reaches highest above
80 and when it starting to show the down trend then the investor is advised to sell the
script. The company had had problem with logistics this slow down the operations in
the year February to July 2011.
0
10
20
30
40
50
60
70
80
90
Jan/10
Feb/10
Mar/10
Apr/10
May/10
Jun/10
Jul/10
Aug/10
Sep/10
Oct/10
Nov/10
Dec/10
Jan/11
Feb/11
Mar/11
Apr/11
May/11
Jun/11
Jul/11
Aug/11
Sep/11
Oct/11
Nov/11
Dec/11
Jan/12
Feb/12
Mar/12
Apr/12
May/12
Jun/12
Jul/12
Aug/12
Sep/12
Oct/12
Nov/12
Dec/12
RSI
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TABLE 10 : showing Calculations of RSIRanbaxy company
MONTH
CLSG
PR
Avg
Gain
Avg
Loss RSI MONTH
CLSG
PR
Avg
Gain
Avg
Loss RSI
Jan-10 453.15 Jul-11 539 115.05 -174.7 39.71
Feb-10 467.05 Aug-11 473.15 115.05 -187.3 38.05
Mar-10 474.9 Sep-11 513.9 155.8 -75.75 67.29
Apr-10 443.1Oct-11
501.1 145.6 -88.55 62.18
May-10 429.85 Nov-11 434.8 133.45
-
154.85 46.29
Jun-10 460.6 Dec-11 405.25 40.75 -184.4 18.10
Jul-10 449.3 Jan-12 450.35 85.85
-
175.85 32.80
Aug-10 490.25 93.45 -56.35 62.38 Feb-12 428.4 85.85
-
196.45 30.41
Sep-10 557.15 146.45 -56.35 72.21 Mar-12 469 126.45 -130.6 49.19
Oct-10 579.75 161.2 -56.35 74.10 Apr-12 504.1 120.8 -130.6 48.05
Nov-10 571.45 161.2 -32.85 83.07
May-
12 517.15 133.85 -117.8 53.19
Dec-10 598.65 188.4 -19.6 90.58 Jun-12 490.35 133.85 -78.3 63.09
Jan-11 545.4 157.65 -72.85 68.39 Jul-12 497.5 141 -48.75 74.31
Feb-11 433.85 157.65 -173.1 47.66 Aug-12 551.3 149.7 -48.75 75.43
Mar-11 444.05 126.9 -173.1 42.30 Sep-12 529.55 149.7 -48.55 75.51
Apr-11 456.2 72.15 -173.1 29.42 Oct-12 525.6 109.1 -52.5 67.51
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May-11 548.9 142.25 -173.1 45.11 Nov-12 503.25 74 -74.85 49.71
Jun-11 540.35 142.25
-
173.35 45.07 Dec-12 502.75 60.95 -75.35 44.72
(SOURCE: moneycontrol.com)
GRAPH 10: SHOWING RSI OF RANBAXY COMPANY
(Source: Table 10)
INTERPRETATION
The RSI line rises to the peak point that is 90 between the month November 2010-
jannuary 2011 and when it start to show down trend then its ideal time for the
investor to selling pressure then the script will be sold then the market will be bearish
,when the RSI line reaches 30 and bellow that den buying pressure will be more and
market turn to up trend then it is a indication for the investor to buy the scripts and the
market will be in bullish but the movement is gradually between march 2011 to
September 2011 and due to correction market become bearish and reaches lowest
between the month of nov2011 and January 2012 and market become bullish slowly .
The Ranbaxy Company is due the issues regarding a drug with US food and drug
administration on its operations in the year 2011 the effect of that we can observe in
the above graph.
0
10
20
30
40
50
6070
80
90
100
Jan/10
Feb/10
Mar/10
Apr/10
M
ay/10
Jun/10
Jul/10
Aug/10
Sep/10
Oct/10
Nov/10
Dec/10
Jan/11
Feb/11
Mar/11
Apr/11
M
ay/11
Jun/11
Jul/11
Aug/11
Sep/11
Oct/11
Nov/11
Dec/11
Jan/12
Feb/12
Mar/12
Apr/12
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ay/12
Jun/12
Jul/12
Aug/12
Sep/12
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RSI
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Jun-11 83.8 Dec-12 106.9 7.653141
(SOURCE: moneycontrol.com)
GRAPH 11: SHOWING MACD OF INFOSYS
(Source: Table 11)
INTERPRETATION:
From the above graph the MACD line starts below the 0 line and show rising trend
between march 2012 to may 2012 it indicates bullish market ahead and it indicates the
investor to buy the script and hold it till it crosses above 0 mark line, when the MACD
line reaches highest point i.e. 7.65 point and show declining signal then investor is
advised to sell the script.
Infosys Company has global presence so the currency rate fluctuation and slow down
of the other economy , increasing rate of inflation rate home country and change in
the leader has affected the performance of the company and later the supporting
economies were stabilised and the strategic alliance with glaxo smitkline company for
optical digital channel deal the company has regained it market value .
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
MACD of Infosys
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TABLE 12: showing Calculations of MACDTata consultancy services
MONTH CLSG PR MACD MONTH CLSG PR MACD
Jan-10 735.45 Jul-11 1134.45
Feb-10 761 Aug-11 1040.6
Mar-10 780.8 Sep-11 1037.5
Apr-10 766 Oct-11 1114.2
May-10 742 Nov-11 1113.1
Jun-10 751.15 Dec-11 1161.25
Jul-10 841.1 Jan-12 1130.5
Aug-10 843.85 Feb-12 1221.05
Sep-10 922.55 Mar-12 1167.85 121.8578
Oct-10 1051.8 Apr-12 1244.9 105.067
Nov-10 1076.7 May-12 1245.8 93.35256
Dec-10 1165.05 Jun-12 1277.55 82.72012
Jan-11 1157.15 Jul-12 1240.65 71.29235
Feb-11 1112.95 Aug-12 1347.3 63.20726
Mar-11 1182.5 Sep-12 1294 65.59492
Apr-11 1163.6 Oct-12 1313.4 68.78961
May-11 1158.8 Nov-12 1312.85 67.55023
Jun-11 1180.35 Dec-12 1258.55 68.39808
(SOURCE: moneycontrol.com)
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Page 25
GRAPH 12: SHOWING MACD OF TATA COUNSULTANCY SERVICES
(Source: Table 12)
INTERPRETATION:
From the above graph we can interpret that MACD line of TCS company start from
the highest i.e. in the month of march 2012 i.e. 121.857 and then the MACD line is
above the zero mark line but it show declining in between July and august 2012 its a
early warning signal of bearish market and it declined to a low point i.e. 63.2 and
show little up tend this is an indicator next it show bullish market so, Investor has to
hold the script till it reaches next highest point to sell the script. .
TCS Company also got affected with the currency rate fluctuations to a little extent
and it managed that with its strong domestic business.
0
20
40
60
80
100
120
140
MACD OF TCS
MACD OF TCS
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TABLE 13: showing Calculations of MACDcipla company.
MONTHCLSGPR MACD MONTH
CLSGPR MACD
Jan-10 317.3 Jul-11 307.85
Feb-10 315.3 Aug-11 280
Mar-10 337.1 Sep-11 282.7
Apr-10 342.55 Oct-11 294.55
May-10 318.95 Nov-11 327.95
Jun-10 337.75 Dec-11 319.55
Jul-10 326.6 Jan-12 349.15
Aug-10 303.35 Feb-12 316.8
Sep-10 321.65 Mar-12 304.55 -8.86295
Oct-10 352.25 Apr-12 311.85 -9.52885
Nov-10 343.7 May-12 309.65 -9.32467
Dec-10 369.9 Jun-12 316.4 -9.61198
Jan-11 332.25 Jul-12 338.55 -9.33376
Feb-11 299.7 Aug-12 378.15 -6.74215
Mar-11 321.05 Sep-12 380.6 -0.15657
Apr-11 308.85 Oct-12 363.5 5.546407
May-11 326.1 Nov-12 414 9.105837
Jun-11 330.35 Dec-12 414.1 12.91311
(SOURCE: moneycontrol.com)
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TABLE 14: showing Calculations of MACDRanbaxy company.
MONTH CLSG PR MACD MONTH CLSG PR MACD
Jan-10 453.15 Jul-11 539
Feb-10 467.05 Aug-11 473.15
Mar-10 474.9 Sep-11 513.9
Apr-10 443.1 Oct-11 501.1
May-10 429.85 Nov-11 434.8
Jun-10 460.6 Dec-11 405.25
Jul-10 449.3 Jan-12 450.35
Aug-10 490.25 Feb-12 428.4
Sep-10 557.15 Mar-12 469 -9.84971
Oct-10 579.75 Apr-12 504.1 -8.15036
Nov-10 571.45 May-12 517.15 -6.59332
Dec-10 598.65 Jun-12 490.35 -11.1057
Jan-11 545.4 Jul-12 497.5 -17.0384
Feb-11 433.85 Aug-12 551.3 -21.6651
Mar-11 444.05 Sep-12 529.55 -19.3942
Apr-11 456.2 Oct-12 525.6 -20.945
May-11 548.9 Nov-12 503.25 -19.4733
Jun-11 540.35 Dec-12 502.75 -11.2707
(SOURCE: moneycontrol.com)
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GRAPH 14: SHOWING MACD OF RANBAXY
(Source: Table 14)
INTERPRETATION:
From the above graph of MACD line of Ranbaxy company starts below the zero mark
line in the month of march 2012 and showed rising it shows bullish trend between
may 2012 to June 2012 and still its below the zero mark line and show a signal of
bearish market and reaches its bottom it shows the oversold situation this the point
where investor has to buy the script and the market become bullish slowly between
the month September 2012 to December 2012.
From the graph the major down trend is due to the issue of Ranbaxy Company with
the US food and drug administration in the year 2011 and in the year 2012 it cleared
all the issues with the US government and started improving its operations.
-25
-20
-15
-10
-5
0
MACD OF RANBAXY
MACD OF RANBAXY
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INDIATOR 3 : STOCHASTICS
TABLE 15: showing calculation of stochastic for Infosys
MONTH
CLSG
PR
%K %D
MONTH
CLSG
PR
%K %D
Jan-10 2476.7 Jul-11 2766.8 63.1441 76.60359
Feb-10 2601.6 Aug-11 2342.8 1.426492 52.40774
Mar-102615.1
Sep-112533.8 29.22853 31.26638
Apr-10 2736.15 Oct-11 2875.2 78.92285 36.52596
May-10 2657.65 Nov-11 2607.55 39.96361 49.37166
Jun-10 2788.55 Dec-11 2765.05 62.88937 60.59195
Jul-10 2788.85 Jan-12 2743.35 59.73071 54.19457
Aug-10 2707.1 Feb-12 2875.4 78.95197 67.19068
Sep-10 3041 Mar-12 2864.95 77.43086 72.03785
Oct-10 2969.6 Apr-12 2462.6 32.02439 62.8024
Nov-10 3049.45 May-12 2439.85 29.25 46.23508
Dec-10 3445 Jun-12 2502.55 36.89634 32.72358
Jan-11 3116.3 Jul-12 2227.4 13.69304 26.61313
Feb-11 3003.05 57.71566 Aug-12 2373.25 29.57478 26.72139
Mar-11 3236.75 77.84573 Sep-12 2534 47.079 30.11561
Apr-11 2905.95 49.35182 61.63774 Oct-12 2363.5 28.51309 35.05563
May-11 2791.85 74.01403 67.07053 Nov-12 2436.6 36.47302 37.35504
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Jun-11 2907.4 92.65263 72.00616 Dec-12 2318.5 23.613 29.53304
(SOURCE: moneycontrol.com)
GRAPH 15: SHOWING STOCHASTIC OF INFOSYS
(Source: Table 15)
INTERPRETATION:
From the above stochastic graph %K started high and in march 2011 to may 2011 the
major situation in which %K cuts %D from the bellow this is the signal to buy the
script. The %K reaches the highest point 92.5 which is above the 80 mark line which
shows the overbought zone the script. In month of June 2011July 2011 the %K line
cuts the %D line from the above its a signal to sell the script and the sc ript reaches
below 20 mark line which indicates oversold zone . In august2011 to September 2011
the %K line cuts %D line from bellow it signals to buy the script by that the %K
reaches the point 80 which shows overbought zone. In the month of February to
march 2012 the %K line cut the %D line from the above this is the signal to sell the
script.
0
10
20
30
40
50
60
70
80
90
100
Feb/11
Mar/11
Apr/11
May/11
Jun/11
Jul/11
Aug/11
Sep/11
Oct/11
Nov/11
Dec/11
Jan/12
Feb/12
Mar/12
Apr/12
May/12
Jun/12
Jul/12
Aug/12
Sep/12
Oct/12
Nov/12
Dec/12
%K
%D
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GRAPH 16: SHOWING STOCHASTIC OF TATA CONSULTANCY
SERVICES
(Source: Table 16)
INTERPRETATION:
From the above stochastic graph the %K started at the highest point, from the month
of February 2011 to march 2011 indicates overbought zone. In the month June 2011
to July 2011 the major situation, in which %K line cuts %D line from the above
which indicates to sell the script .In the month of august 2011 to September 2011the
major change i.e. the %K line cuts the %D line from the bellow which indicates to
buy the script.In between the January 2012 October 2012 the script is in overbought
zone and small amount of buying and selling of the script took place and in between
October 2012 to December 2012 the script reaches above the 80 mark line it is the
situation of overbought zone and %K line cuts %D line which indicates to sell the
script .
0
10
20
30
40
50
60
70
80
90
100
110
Feb/11
Mar/11
Apr/11
May/11
Jun/11
Jul/11
Aug/11
Sep/11
Oct/11
Nov/11
Dec/11
Jan/12
Feb/12
Mar/12
Apr/12
May/12
Jun/12
Jul/12
Aug/12
Sep/12
Oct/12
Nov/12
Dec/12
%K
%D
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TABLE 18: showing calculation of stochastic of Ranbaxy
MONTH
CLSG
PR
%K %D
MONTH
CLSG
PR
%K %D
Jan-10 453.15 Jul-11 539 81.37803 83.12384
Feb-10 467.05 Aug-11 473.15 50.7216 71.36872
Mar-10 474.9 Sep-11 513.9 69.69274 67.26412
Apr-10 443.1 Oct-11 501.1 63.73371 61.38268
May-10 429.85 Nov-11 434.8 32.86778 55.43141
Jun-10 460.6 Dec-11 405.25 19.1108 38.57076
Jul-10 449.3 Jan-12 450.35 40.10708 30.69522
Aug-10 490.25 Feb-12 428.4 29.88827 29.70205
Sep-10 557.15 Mar-12 469 48.78957 39.59497
Oct-10 579.75 Apr-12 504.1 65.13035 47.93606
Nov-10 571.45 May-12 517.15 71.20577 61.70857
Dec-10 598.65 Jun-12 490.35 58.72905 65.02173
Jan-11 545.4 Jul-12 497.5 62.05773 63.99752
Feb-11 433.85 32.42551 Aug-12 551.3 87.10428 69.29702
Mar-11 444.05 37.17412 Sep-12 529.55 76.97858 75.3802
Apr-11 456.2 42.83054 37.47672 Oct-12 525.6 75.13966 79.74084
May-11 548.9 85.98696 55.33054 Nov-12 503.25 64.73464 72.2843
Jun-11 540.35 82.00652 70.27467 Dec-12 502.75 64.50186 68.12539
(Source: moneycontrol.com)
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GRAPH 18: SHOWING STOCHASTIC OF RANBAXY
(Source: Table 18)
INTERPRETATION:
From the above stochastic graph the %K started low in the month of February 2011.In
between the month of march 2011 to April 2011the scrip line is above the 80 mark
line which shows overbought zone .In between the may 2011 to June 2011 the %K
line cuts the %D line from the above which indicates to sell the script. In between the
month of august 2011 to September 2011 the %k cuts the %D line form the bellow
which indicates to buy the script. The major situation in the month of September 2011
to October 2011 the %K line cuts the %D line from the above which give signal to
sell the script. The second major change is in the month of January 2012 to February
2012 %k cut %D from bellow which indicates to buy the script. In the month of July
2012 and august 2012 %K reaches highest point which is above the 80 mark line
which shows over bought zone.
0
10
20
30
40
50
60
70
80
90100
Feb/11
Mar/11
Apr/11
May/11
Jun/11
Jul/11
Aug/11
Sep/11
Oct/11
Nov/11
Dec/11
Jan/12
Feb/12
Mar/12
Apr/12
May/12
Jun/12
Jul/12
Aug/12
Sep/12
Oct/12
Nov/12
Dec/12
%K
%D
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11.0 SUGGESTIONS:
The risk and return will provide a aerial view of the risk that is faced by theselected companies and the return what the investor will earn by investing on the
selected companies.
RSI and MACD indicator give ideal signals for investor to buy and sell the script. It is better to go for long term investment rather than short term investment.Because it is less risky and also provide sufficient return.
Pharmaceuticals sector is definitely a better arena when compared to the I T forthe investment. Pharmaceutical is a booming sector and is not highly volatile like
software sector.
Practically, stock market activities are very risky, so a good research of technicalanalysis could be done carefully while investing.
In case of stock market half knowledge is very dangerous. So, whenever a personwants to invest in stock market he should take necessary tips from the experts or the
technical analysts.
Investor always better to relay on two indicator rather than many indicators ifthey follow too many indicator there is a chance investors may be mislead in taking
decision .
Investor have to utilize the softwares provided by stock broking companybecause they contain different indicators and information source for taking the
appropriate decision.
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12.0 CONCLUSIONS:
Technical analysis is an approach which helps the investor to enter in to the market
and provide ideal guidance in buying and selling of the different script and reduce the
investor losses.
In technical analysis, they plot the previous closing prices on the graph, basedon the plotted graph analysis is done to know the trends to take decision.
It is stated that historical trend always repeat in the market so using oftechnical analysis will be helpful.
By the study, it is found that the pharmaceutical sector is the better sector forthe investments.
Information technology is more volatile in nature, amongst selected ITcompanies TCS is the best performer. For the long term investment IT sector
is best.
There are numerous theories in technical analysis, based on which indicatorinvestor use to identify the signals correctly and reap the benefit.
In technical analysis relaying on one indicator is good, and for confirmationof the market signal referring to second indicator is better. If the investor
follows more than two indicators they may be mislead in the process of
decision making.
From the study we can conclude that technical analysis is the power full and
reliable source, in providing technical signals for buying and selling of scripts.