Home
Account Login
Not Logged In
☰
  • Trade Now
  • About Us
    • Why Choose Us
    • About Kotak Securities
    • About Kotak Group
    • Service
    • Media
    • Careers
    • Current Openings
  • Product
    • Asset Classes
      • Tax Free Bonds
      • Gold ETF
      • Stock Lending & Borrowing (SLBM)
    • Trading Tools
      • Kotak Stock Trader
      • Trade Smart Terminal
      • KEAT PRO X
      • Website
      • Call and Trade
      • Margin Calculator
    • Account Types
      • Demat Account
      • Private Client Group (PCG)
      • 2 in 1 Account
      • Trinity Account
      • NRI Account
      • Foreign Investors (QFI)
    • Value Added Features
      • Global Investing
      • Margin Intraday Square off (MIS)
      • Stock Basket (smallcase)
      • Margin Trading Facility
      • Super Multiple
      • BNST
      • Portfolio Tracker
      • Capital gain report
      • Use Stocks as Margin
      • Knowledge Bank
      • Refer and Earn
  • Pricing
  • Research
    • Live Research Calls
      • Fundamental Call
      • Technical Call
      • Derivatives Call
      • SIP Call
      • Top Monthly Picks
      • Pick of the Week
    • Kotak Research Centre
    • Latest Research Reports
      • Stock Recommendations
      • Research webinars
    • Sample Research Reports
  • Help
    • Contact Us
    • Get Your Account Statements
    • Open an account
    • Demos
    • Forms
  • More
    • Startup Engagement
    • Kotak University
    • Franchisee
Home » Share Market » Stock Market Analysis
Research: Knowledge Bank
  • Kotak Research Center
  • Sample Research Reports
  • Demat Account
  • Stock Trader App
  • Meaningful Minutes

Chapter 1.7: Stock Market Analysis and More

You cannot invest without analyzing the stocks and the underlying companies. That would be akin to running on the highway blindfolded. There are many kinds of share market analyses. Read further to know about fundamental and technical analyses

WHAT IS FUNDAMENTAL ANALYSIS?

This method aims to evaluate the value of the underlying company. It takes into account the intrinsic value of the share keeping in mind the economic conditions and the industry along with the company’s financial condition and management performance. A fundamental analyst would most definitely look at the balance sheet, the profit and loss statement, financial ratios and other data that could be used to predict the future of a company. In other words, fundamental share market analysis is about using real data to evaluate a stock's value. The method uses revenues, earnings, future growth, return on equity, profit margins and other data to determine a company's underlying value and potential for future growth.

The basic belief is that as the company grows so will the value of the share increase. This in turn will benefit the investor in the long run.

Fundamental Analysis of a Company By Kotak Securities®

What is an overvalued stock or an undervalued stock?

Once you look at the balance sheet and other financial details, you use ratios to compare the financials with the price of the stock. This helps understand how much an investor is really paying in comparison with the company’s growth. The most common ratio used is the Price-to-Earnings or PE ratio. This is computed by dividing the share price with the company’s earnings per share.

If the share price in comparison with its earnings per share is less than industry average, then the stock is said to be undervalued. This means the stock is selling at a much lower price than what it is actually worth.

What is a Overvalued & Undervalued Stock By Kotak Securities®

In contrast, an overvalued stock is where the investor is paying more for each rupee the company earns. This means, the stock’s price exceeds its intrinsic value. This often happens when investors expect the company to do well in the future. A high PE in relation to the past PE ratio of the same stock may indicate an overvalued condition, or a high PE in relation to peer stocks may also indicate an overvalued stock.

However, as an investor you have to be very careful. Compare the fundamental value of the stock with its historic values. If there is a sudden increase in valuation, there are high chances that the price may fall to correct the mispricing. In case of a sudden fall in valuation, check for any latest news about the company. It is quite likely that some new factor may have emerged that may be detrimental to the company’s profits.

Since the PE is computed using the earnings per share for the year gone by, it is called a trailing PE. This is not a perfect way to understand the stock’s value. For this reason, analysts often use the forward PE, where the estimated earnings per share for the current or another year is used.

Let us understand using an example.

Suppose a company ABC earns Rs 50 per share. Its current share price is Rs 100. Its PE ratio is thus 2. Suppose, the average PE ratio for the industry is 5, then the company is undervalued. If there is another company in the same industry with a PE ratio of 10, then its stock will be considered to be overvalued.

However, an analyst expects the company to earn Rs 100 per share in the next financial year. Then the forward PE would be 1.
This shows that the price is even more undervalued when you consider the company’s growth.

WHAT IS TECHNICAL ANALYSIS?

Unlike fundamental analysis, technical analysis has nothing to do with the financial performance of the underlying company. In this method, the analyst simply studies the trend in the share prices. The underlying assumption is that market prices are a function of the supply and demand for the stock, which, in turn, reflects the value of the company. This method also believes that historical price trends are an indication of the future performance.

Thus, instead of assessing the health of the company by relying on its financial statements, it relies upon market trends to predict how a security will perform. Analysts try to cash in on the momentum that builds up over time in the market or a stock.

Techinical Analysis of Share Market By Kotak Securities®

Technical analysis is often used by short-term investors and traders, and rarely by long-term investors, who prefer fundamental analysis.
Technical analysts read and make charts of prices. Some common technical share market analysis measures are the day-moving averages (DMAs), Bollinger bands, Relative Strength Indices (RSI) and so on.

INVESTING PHILOSOPHIES:

So now you know about stock market analysis techniques. How does that really help you invest? These investing philosophies will help you understand.

What does value investing mean?

Value investing is an investment style, which favors good stocks at great prices over great stocks at good prices. Hence, it is often referred to as ‘price-driven investing’. A value investor will buy stocks that may be undervalued by the market, and avoid stocks that he believes the market is overvaluing. Warren Buffet, one of the world's best-known investment experts, believes in value investing.

For example, if a stock of a company growing at 10% is selling at Rs 100 with a PE ratio of 10 and another stock of company that also grows at 10% is selling at Rs 150 with a PE ratio of 15, the value investor would select the first stock over the second. This is because the first stock is undervalued in comparison with the second.

Value investors see the potential in the stocks of companies with sound financial statements that they believe the market has undervalued. They believe the market always overreacts to good and bad news, causing stock price movements to not move in tandem with long-term fundamentals. For this reason, they are always on the hunt for undervalued companies.

Value investors profit by taking a position on an undervalued stock (at a deflated price) and then profit by selling the stock when the market corrects its price later. Value investors don't try to predict which way interest rates are heading or the direction of the market and the economy in the short term. They only look at a stock's current valuations and compare them to their historical range.

In other words, they pick up the stocks as fledglings and cash in on them when they are valued right in the markets.

For example, say a particular stock's PE ratio has ranged between a low of 20 and a high of 60 over the past five years, value investors would consider buying the stock if its current PE is around 30 or less. Once purchased, they would hold the stock until its PE rose to the 50-60 ranges, before they consider selling it. In case they expect further growth in the future, they may continue to hold.

What is contrarian philosophy?

As the name suggests, the contrarian philosophy suggests trading against the market sentiment. This means you buy stocks when they are out of favor in the market place, and avoiding stocks that everyone is buying. They then sell these stocks when they gain back the favor.

Contrarians believe in taking advantages that arise out of temporary setbacks or negative news that have caused a stock’s price to decline.

A simple example of the contrarian philosophy would be buying umbrellas in the winter at a cheap rate and selling them during rainy days. Value investing is a kind of contrarian philosophy.

HOW TO PLACE CONTRARIAN TRADES?

If you are a contrarian trader:

  • Conduct stock market analysis. Find out stocks with low PE ratios.
  • Once you do that, compare with historical PE ratios and share prices.
  • Read up about the company, its financial performance and future outlook. If you are satisfied that the company is inherently worthy, select the stock.
  • Wait for the prices to decline. Buy at lows.
  • You could also look at market indicators like mutual fund cash positions, and put/call ratios, and investment advisory opinions. Mutual funds hold a portion of their assets as cash. A greater cash holding suggests that mutual funds are bearish, while a low cash holding means mutual funds are investing money in the markets. This means they are bullish. Once you understand this, take an exactly opposite position. Sell when MFs are buying and buy when they are selling.
  • A put option is an agreement to sell in the future in the derivatives market, while a call option is when you agree to buy in the future. The put/call ratio helps you understand the proportion of put options and call options. The higher this ratio, the greater the put options, and vice versa.
  • An increase in put options suggests that the market is bearish, while demand for call options means the market is bullish. As a contrarian trader, you should prepare accordingly.
  • Investment advisories are issued by many brokerage firms and investment banks, which regularly conduct analysis of individual stocks, industries and the overall economy. A positive recommendation often leads to an increase in share price as investors buy the stock. Contrarian traders could buy when negative investment advisories are issued, and sell after positive recommendations.

What are Contrarian Trades By Kotak Securities®

What next?

You now know how to analyze the markets and are empowered with the information to trade in the stock markets.

But wait, do you have the requisite accounts yet?
Read about demat account and dematerialization here, and about the trading account here.

Related Share Market Articles
What Is Share Market? Share Market Timings Share Market Related Concepts
Share Market Live What Is a Broker? Stock Brokers in India
What Are Brokerage Firms? Understanding Financial Statement Analysis How to Read Stock Charts
Share Market Basics What Are Stock Quotes? What Are Stock Market Indices?
Share Market Tips Stock Market For Beginners Difference Between Stock And Share
Share Market Investment Advantages Of Equity Shares Relation Between Stock Price And Dividends
What Is Equity? Understanding Stock Market Trends How To Trade In Stock Market
How To Invest In Share Market Intrinsic Value Of Stocks What Are Different Types Of Stocks?
Stock Market Faqs What Are Stock Charts Difference Between Stock Market And Share Market
Online Stock Trading How Does Share Marke Works? How To Trade In Stock For Beginners
Share Investment Guide Large, Medium, and Small-Cap in Share Market

Previous Chapter Next Chapter
Trading Demos
  • Mobile Trading with Kotak Stock Trader View Demo
  • Desktop Trading with KEAT ProX View Demo
2014661828285397187587
Register for our Newsletter Meaningful Minutes
How it helps
  • Use existing bank account
  • Convenience through partnerships
  • Kotak Securities support

Stock Market Sectors :        A | B | C | D | E | F | G | H | I | J | L | M | N | O | P | R | S | T | V | W |

About Us

  • • Branch Locator
  • • About Kotak Securities
  • • Awards and Accolades
  • • About Kotak Group
  • • Technology
  • • Strong Research
  • • Customer Support Chat
  • • Brokerage Charges

Asset Classes

  • • Equity Trading
  • • Derivative Trading
  • • Mutual Fund Investment
  • • IPO
  • • Gold Funds
  • • Currency Derivatives
  • • Fixed Deposits & Tax Free Bonds
  • • Debentures

Derivatives Market

  • • Most Active Contracts
  • • Gainers
  • • Losers
  • • Top Volume Traded
  • • Top Value Traded
  • • Most Active Put
  • • Most Active Call
  • • Open Interest
  • • Highest in Premium
  • • Put Call Ratio

Investment Knowledge Bank

  • • Share Market Basics
  • • What is Demat Account
  • • What are Derivatives?
  • • What are Futures?
  • • What are Options?
  • • What are Mutual Funds?
  • • Basics of Financial Planning
  • • Calculators
  • • Videos
  • • Meaningful Minutes

Trading Tools & Research Reports

  • • KEAT PRO X
  • • Kotak Stock Trader APP
  • • Fastlane
  • • Xtralite
  • • Dealer assisted trading
  • • Call and Trade
  • • Investors Research
  • • Trader Research
  • • Mutual Fund Research
  • • Fundamental Analysis Reports
  • • Technical Analysis Reports
  • • Derivative Reports
  • • Currency Derivative Reports

Account Types & Value Added Services

  • • Demat Account
  • • 2 in 1 Account
  • • Trinity Account (3-in-1 Account)
  • • Linked Account
  • • NRI Account
  • • PMS
  • • Margin Trading
  • • BNST
  • • TradeSmart Store
  • • SMS Alerts
  • • AMO

Equity Market

  • • Share Market Live
  • • Gainer
  • • Loser
  • • Most Active Stocks
  • • Volume Buzzer
  • • 52Wk High
  • • 52Wk Low
  • • All Market News
  • • Bullion News
  • • Economy General
  • • Corporate Actions
  • • Other News
CUSTOMER CARE Chat with us
77389 88888WhatsApp Chat
(Add city STD code while calling from Mobile)

TIME:
Customer Service:- Mon to Fri – 9.00 AM TO 6.00 PM
Call and Trade:- Mon to Fri – 8.30 AM TO 5.30 PM

For Call & Trade, dial 080 4725 3255
Write to us at service.securities@kotak.com for Trading Account-related queries and ks.demat@kotak.com for Demat Account-related queries

Connect with us

No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account.

KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary. Attention Investors Prevent Unauthorized Transactions in your demat / trading account --> Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors. Circular No.: NSDL/POLICY/2014/0094, NSE/INSP/27436, BSE - 20140901-21

Kindly note that as per NSE circulars nos: NSE/INVG/36333 dated November 17, 2017, NSE/INVG/37765 dated May 15.2018 and BSE circular nos: 20171117-18 dated November 17, 2017, 20180515-39 dated May 15.2018, trading in securities in which unsolicited messages are being circulated is restricted. The list of such stocks are available on the website of NSE & BSE. In case of any queries, request you to kindly get in touch with Customer Service on 18002099191/9292

Kotak securities Ltd. having composite licence no.CA0268 is a Corporate Agent of Kotak Mahindra Life Insurance Company Limited and Kotak Mahindra General Insurance Company Limited. We have taken reasonable measures to protect security and confidentiality of the Customer information.

The Stock Exchange, Mumbai is not in any manner answerable, responsible or liable to any person or persons for any acts of omission or commission, errors, mistakes and/or violation, actual or perceived, by us or our partners, agents, associates etc., of any of the Rules, Regulations, Bye-laws of the Stock Exchange, Mumbai, SEBI Act or any other laws in force from time to time.
The Stock Exchange, Mumbai is not answerable, responsible or liable for any information on this Website or for any services rendered by our employees, our servants, and us.

Please do not share your online trading password with anyone as this could weaken the security of your account and lead to unauthorized trades or losses. This cautionary note is as per Exchange circular dated 15th May, 2020.

Note: NSDL and CDSL have mapped Unique Client Codes (UCC) to demat accounts based on PAN, refer NSDL and CDSL circulars. Format for linking/delinking the UCC: NSDL: link | CDSL: link.

Clients are required to keep all their account related information up-to-date including details like email id, mobile number, address, bank details, demat details, income details etc. which will help the client to timely receive any information and to avail the various facilities relating to the Trading and Demat account. To update the details, client may get in touch with our designated customer service desk or approach the branch for assistance.

Investor Awareness regarding the revised guidelines on margin collection:-
Attention Investors :

1. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020.
2. Update your mobile number & email Id with your stock broker/depository participant and receive OTP directly from depository on your email id and/or mobile number to create pledge.
3. Pay 20% upfront margin of the transaction value to trade in cash market segment.
4. Investors may please refer to the Exchange's Frequently Asked Questions (FAQs) issued vide circular reference NSE/INSP/45191 dated July 31, 2020, notice no. 20200731-7 dated July 31, 2020 and NSE/INSP/45534 dated August 31, 2020, notice no. 20200831-45 dated August 31, 2020 and other guidelines issued from time to time in this regard.
5. Check your Securities /MF/ Bonds in the consolidated account statement issued by NSDL/CDSL every month.
.......... Issued in the interest of Investors

Clients are hereby cautioned not to rely on unsolicited stock tips / investment advice circulated through bulk SMS, websites and social media platforms. Kindly exercise appropriate due diligence before dealing in the securities market.

Requirement of obtaining consent through OTP has been waived for off market transfer reason code “Implementation of Government / Regulatory Direction / Orders” Consent through OTP would continue to be required for all other reasons for any off-market transfers. Refer NSDL circular.

Covid-19 impact to clients:-
1. Applicable to clients on whose email id contract notes and other statements get bounced or who have opted for Physical contract notes/ other statements or Digital and Physical contract notes/ other statements :Due to the nationwide lockdown, we are unable send physical contract notes and other statements. To view them, log into www.kotaksecurities.com
2. Kindly update your email id with us to receive contract notes/various statements electronically to avoid any further inconvenience.
3. We are unable to issue the running account settlement payouts through cheque due to the lockdown. We request you to update your Bank account details to facilitate direct transfer to your linked bank account. You may approach our designated customer service desk or your branch to know the Bank details updation procedure.
4. Exchange advisory: Investors are advised to exercise caution while taking investment decisions in these unpredictable times. Clients are also encouraged to keep track of the underlying physical as well as international commodity markets. Clients are advised to undertake transactions after understanding the nature of the contractual relationship into which they are entering and the extent of its exposure to risk. Clients are further advised to follow sound risk management practices and not to be carried away by unfounded rumors, tips etc.

Filling complaints on SCORES- Easy & Quick
a. Register on SCORES portal  |  b. Mandatory details for filling complaints on SCORES  i. Name, PAN, Address, Mobile Number, E-mail ID  |  c. Benefits:  i. Effective Communication  ii. Speedy redressal of the grievances

Charges for Other Services  |  Disclaimer  |  Sitemap  |  Privacy & Security  |  256 Bit Encryption  |  BSE  |  NSE  |  MSE  |  MCX  |  SEBI  |  SCORES  |  Anti Money Laundering Measures  |  Important Policies  |  Dos & Donts  |  List of GST Registration Number

© 2005 Kotak Securities Limited.

Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. Telephone No.: +22 43360000, Fax No.: +22 67132430.
Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825.

CIN: U99999MH1994PLC134051. SEBI Registration No: INZ000200137(Member of NSE, BSE, MSE, MCX & NCDEX), AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586.

NSDL/CDSL: IN-DP-NSDL-23-97

New To share Market?

Open Your Account Today!

New Customer?

Hurry! Sign up for Free Intraday Trading now

BROKERAGE FREE

on intraday trades

AVAIL THE OFFER NOW

NO ACCOUNT OPENING CHARGES



Submit

Please Note

That by submitting the above mentioned details, you are authorising Kotak Securities & its sub-brokers & agents to call you and send promotional communication even though you may be registered under DNC.

Open An Account