Just to make you understand that you can analyze the market in two ways, fundamentally or technically. Fundamentally essentially means that you try to find out the factors that can influence a business in which the company is and figure out in future what is going to be the effect of those factors on the performance of the business of that company. Technical analysis is more concerning stock price you try to find out what the crowd is thinking for the stock price and where you think the crowd will take the stock price to. So that is more sentiment driven rather than performance-driven. Now considering these two factors, The fundamental and the technical analysis helps you to do a 360-degree understanding of a stock where you cannot just get information about the stock but also do value-added research in both the aspects -technical and fundamental.
So that you can start making a judgment on that stock and the judgment can be based on your objective whether you want it to be a medium-term or a short term judgment or you want it to be a long term judgment. If someone wants to do a deeper analysis with more technical parameters then all data can be accessed from various websites.
I go into the further stock price understanding just to give you an academic understanding of a stock price so a stock price is a component of two important characters – one, the intrinsic value of the stock which is derived out of the business which the company's into. An intrinsic value also takes into account the past performance of the company which is reflected by profit and loss account and the balance sheet. But the second and which is the most critical part of any stock price movement is the speculative value in the stock price and that speculative value is largely driven by the liquidity phenomenon that means the more liquidity in the system the more people are willing to buy that stock. That speculative value will be more prominent in the stock price and the stock price will move beyond the intrinsic value.
You must have understood the concept of price earning multiple so there are a lot of companies where P multiple is very high. How do you justify that the justification is very simple when P is high. That means there is no speculative value in the stock price, which means people are expecting more money to be there pumped into the stock market to bring that to buy that particular stock. People want to be always a net buyer in the stock that's why the speculative value is more than the intrinsic value. All right now let's go to the other data point which may be relevant for you. If you're a short-term trader and if you probably trade for a swing of four five six days you would like to know whether these stock there is any significant buying or selling is happening in that stock. Buying and selling are two important parameters. One is a volume – that means how many people are buying selling on accumulative business and the second which is critical is the delivery that was at the 8th of the day how many people are taking delivery of that stock and going home. The more people take delivery of that stock there is a higher possibility that the momentum towards price increase will sustain. Because if they are taking delivery that means they're putting and they're willing to put more money. That means they're willing to take more risk and the higher people are willing to take less the chances that the momentum will be higher is extremely high.
High low close simple moving average and probably parabolic SAR to look at the trend in the stock price at this moment so this ladder is pretty much a sum up of the various support and resistance levels that can help that stock to take immediate support or to go to the next level. One more concept I want to discuss in this is a 52-week high. So 52-week high zone the buyer zone is essentially 52-week high minus 15% so that's the top range where the buyer is always available to buy that stock and similarly 52-week low zone is 52-week low plus 15% so that's a seller zone. So what is all the stocks who are at a bias zone typically will always be going will always go up and typically stocks which are in a seller's zone they are the one which will always see selling pressure. So one should always buy the 52-week high stocks and sell later and vice versa.
You should always look at the position to initiate a buy by first and then square up. You should never go short in these stocks because there is a huge momentum to buy this stock because of their inherent characteristics. So apart from the technical level ladder you also can have a look at the various technical indicators. These are in one-step advanced indicators that are giving you some indication about the momentum associated with that stock.
Technical is more relevant for people who are looking for a short term trading approach. From a fundamental perspective if you are an investor you'd like to see how the company has been performing right and fundamentally you can look at various parameters to arrive at a judgment about the company first. You should know what the company is doing so we have something called show profile which gives you a complete understanding of a brief background about the company and the kind of product they have been developing the time and associated with that company.
To know it apart from that you can go to a sector so you can do a peer group comparison of other companies associated with that particular sector based on market cap. Equity return on capital employed is a beautiful section where you can see whether this company is looking expensive or cheap from a peer group comparison perspective or you can also do industry-wise so there will be a sector and there will be multiple industries inside that sector.
The efficiency ratio talks about the working capital cycle. Look at the working capital cycle of the company. If it's minus 42 that is so impressive so literally the company is not requiring the fund to do business. They have enough money to get generated because of their working capital efficiency.
Go to cash flow and this is one of my most important financial statements. If I want to make a judgment on any company so in cash flow you go inside the cash flow. This will give you a clear idea that how the company is generating cash inside the business. So his cash flow operation is so much cash from investing is so much down and cash from financing is so much down. This means that the company is generating enough cash to be redeployed for investment purposes. The company is not just making a profit but the company is also generating cash. From its profit, that means the company is and rating profit and not parking its profit in debtors or inventory. Eventually, the profit is getting into cash which is the most critical because the cash helps you to do follow-on capital expenditure.
If you see the promoter shareholding has been pretty much static & it has gone up in the middle and now again it has gone into the flat is own that means promoter is very confident about the company and then you have institutions and retail shareholding as well here which is giving you an idea of what kind of interest this company has generated over some time.
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