Introduction to the Stock Market Meaning, Risks, and Global Insights

Executive Summary The project title ‘A PROJECT OF EQUITY RESEARCH’ was a study conducted during my two months internship with PETERSON SECURITIES PRIVATE LIMITED. The main purpose of equity research is to offer investors thorough financial analysis and advice on whether to buy, hold, or sell a certain investment. In an equity research report, an analyst outlines their recommendation, target price, investment thesis, valuation, and risks. It also includes precise information about product, financials, management, market, future plans of the company, growth estimates and the risk factors of the company. Equity research project starts with a stock report of a company where we are able to identify its key highlights, risk factors associated with the company, key financials, date of record, CMP, target price, shareholding patterns, ratios and technical analysis. The second project deals with the factors affecting the stock market where we have shown how the fundamental factors like economy, industry and company and other factors like federal reserve, corporate earnings, geopolitical and macro factors impacted the stock market. Stock prices of the company may rise or fall due to different factors. Ideally, the investor should have a solid allocation strategy in place after a thorough understanding of the above factors. It will ensure that the investor makes the right investment decision and generate magnificent returns in the long-run. The third project shows the valuation perspective of new age startups where we compare the valuation performance of two companies (New Startup Vs Mature Company) and also shows whether their stocks are overvalued or undervalued, rise or fall in the coming years through different financials data. The fourth project shows the risk and return of various asset classes over the last 30-40 years where we are calculating the return and standard deviation of various asset prices like Gold, silver, nifty, FD interest rate, Govt Bonds etc. also shows their performance of their returns through sharp ratio and CAGR. The research methodology used is that we have taken the prices of various securities like Gold, silver, nifty, US Dollar, FD interest rate and Govt Bonds and calculated the average return, risk, CAGR and Sharp ratio. The conclusion is that due to different factors stock prices of the company may rise or fall and the investor should have a solid allocation strategy in understanding of the factors and because of which he can make the right investment decision and generate magnificent returns in the longrun. CHAPTER I INTRODUCTION INTRODUCTION WHAT IS STOCK MARKET A stock market is a place or a platform where investors can buy and sell financial instruments like shares and bonds. A stock market exchange, such as the Bombay Stock Exchange or the National Stock Exchange, or BSE and NSE, respectively, is a stock exchange that facilitates the purchase and sale of stocks. The bigger the risk, like with everything else in life, the greater the payoff. The stock market, unlike other investment options, can be a little hazardous, but the payout is far bigger. Market volatility is one of the key causes of this risk. The stock market is a very volatile and unpredictable market. Due to this unpredictability, the stock market is considered a risky prospect. However, if we study the market in great detail and invest enough time on market fluctuations, we can reap the rewards. Stocks can be categorized by the country where the company is domiciled. For example, Nestlé and Novartis are domiciled in Switzerland and traded on the SIX Swiss Exchange, so they may be considered as part of the Swiss stock market, although the stocks may also be traded on exchanges in other countries, for example, as American depositary receipts (ADRs) on U.S. stock markets. FUNCTIONS OF STOCK MARKET The stock market ensures price transparency, liquidity, price discovery, and fair dealings in trading activities. The stock market ensures that all interested market players have access to information regarding all purchase and sell orders, aiding in the fair and open pricing of stocks. The market also makes sure that the right purchase and sell orders are efficiently matched. The price of any stock should be established by all of its buyers and sellers jointly through price discovery in stock markets. Market makers, investors, traders, speculators, and hedgers are only a few types of stock market participants. While a trader might enter and exit a position in a matter of seconds, an investor can acquire stocks with the intention of holding them for a long time. A market maker provides the market with the liquidity it needs, whereas a hedger can engage in derivatives trading. SIGNIFICANCE OF STOCK MARKET The stock market is a component of a free-market economy. It enables businesses to raise funds by selling stock shares and corporate bonds, and it gives investors a chance to profit from the business's financial success through capital gains and dividend payments. The stock market serves as a platform for directing individual investors' savings and investments into profitable business ventures, which helps the nation's capital formation and economic expansion. EQUITY RESEARCH Equity research is the analysis of a company and its surroundings in order to decide whether to acquire or sell its shares. An acquirer might also use this information to decide how much to offer for a target company's securities in a potential takeover deal. The primary responsibility of an equity research analyst is to provide detailed research reports of the stock market industry. The main purpose of equity research is to offer investors thorough financial analysis and advice on whether to buy, hold, or sell a certain investment. In an equity research report, an analyst outlines their recommendation, target price, investment thesis, valuation, and risks. It also includes precise information about product, financials, management, market, future plans of the company, growth estimates and the risk factors of the company.  Equity research is used for finding the valuation of a listed company (Listed companies trade on a stock exchange like NYSE or NASDAQ etc.  Research the economic and industry parameters like GDP, growth rates, the market size of the industry and the competition aspects, demand and supply, inflation etc.        Perform the fundamental analysis of the historical balance sheet, cash flows and income statement to form an opinion on how the company did in the past Project revenues and profits of the company Project the financial statements like balance sheet, income statement and cash flows also called financial modelling Use the Equity valuation models like DCF, Relative valuations, a sum of parts valuation Compare the fair value with market price If the Fair Price is less than the Current Market Price, it is advisable to propose selling the company's stock since it is overpriced. If the Fair Price is more than the Current Market Price, the shares of the company are undervalued and ought to be purchased. ROLE OF EQUITY RESERCH In order to close the knowledge gap between share purchasers and sellers, equity research is essential. The work of an equity research analyst entails studying stocks, keeping up with the news, speaking with management, and determining stock valuations. Equity research is to find the value stocks among the vast sea of equities and assist buyers in making money. CHAPTER II PART- A INDUSTRY PROFILE PART-B COMPANY PROFILE INDUSTRY PROFILE STOCK MARKET INDUSTRY A stock market sector is a group of stocks that have a lot in common with each other, typically because they operate in comparable industries. According to the most used classification system, the Global Industry Classification Standard, there are 11 different stock market sectors (GICS). These sectors include healthcare, materials, real estate, consumer staples, consumer discretionary, utilities, energy, industrials, consumer services, financials, and technology. By the end of 2020, the total market value of all publicly traded securities globally increased from US$2.5 trillion to US$93.7 trillion. There are 60 stock exchanges in the world as of 2016. ENERGY SECTOR Companies that operate in the oil and natural gas industries fall within the energy sector. Along with manufacturers of other consumable fuels like coal and ethanol, it also includes corporations engaged in the exploration and production of oil and gas. The businesses that supply tools, supplies, and services to oil and gas producers are also considered to be part of the energy sector. MATERIALS SECTOR The materials sector includes companies that provide various goods for use in manufacturing and other applications. This industry also includes companies that produce chemicals, building materials, containers, and packaging, as well as mining stocks and businesses that specialize in producing paper and forest products. INDUSTRIAL SECTOR The industrials sector includes a diverse range of firms that typically make use of heavy machinery. The industrials sector includes businesses in the aerospace, defense, construction, and engineering sectors as well as transportation equities including railways, airlines, and logistics firms. This sector includes businesses that produce machinery, electrical equipment, and building materials, as well as several conglomerates. UTILITIES SECTOR Utilities that specialize in providing electrical power to residential and commercial clients as well as experts in the transmission and distribution of natural gas can be found within the sector. Customers' water delivery is handled by other utilities. Some utilities work in more than one of these specialized fields. Even if they don't exactly resemble the typical regulated utility in a deregulated period, independent power producers and renewable electricity also fall under the utilities sector. HEALTHCARE SECTOR There are two main parts of the healthcare sector. Companies that create medications and therapies based on biotechnology are one component, as are the supplies and equipment required for the clinical studies that are used to test those treatments. The other includes healthcare products and services such as medical diagnostic equipment, surgical supplies, and health insurance. FINANCIAL SECTOR The financial sector includes businesses that are primarily related to handling money. Banks are a significant industry group within the sector, but financials also includes brokerage firms, consumer finance companies, insurance companies, and real estate investment trusts with a focus on mortgages. CONSUMER DISCRETIONARY SECTOR The consumer discretionary industry includes products and services where demand is influenced by consumer financial situation. The industry consists of businesses that market luxury goods, high-end vehicles, and leisure products. In this category, along with stocks for hotels and restaurants, are retail businesses that operate both offline and online. CONSUMER STAPLES SECTOR Whatever their financial situation, people need the items and services that make up the consumer staples industry. Companies in the food, beverage, and tobacco sectors as well as manufacturers of home goods and cosmetics fall under this category. This category also includes retailers that focus on selling essentials, such supermarkets. INFORMATION TECHNOLOGY SECTOR Companies engaged in many types of technological innovation are included in the information technology sector. While some information technology businesses concentrate on developing software or offering services connected to putting technological ideas into practice, others are primarily involved in developing the tools, parts, and hardware that enable technology. Manufacturers of semiconductors and the machinery used to create semiconductor chips are also included in information technology. COMMUNICATION SERVICE SECTOR The communication services sector includes a couple of major areas that used to be part of other sectors. One arm of the industry is devoted to companies that offer telecommunication services, such as wireless telecom networks and companies that offer traditional landline services. On the other end are businesses that produce media and entertainment, which includes both more traditional kinds of media like radio and television and interactive media like the internet. REAL ESTATE SECTOR Two distinct forms of investments in real estate are typically included in the real estate sector. Some companies in the industry are in charge of creating new real estate projects and managing them by finding tenants for different spaces on the project's real estate. Also included in the real estate sector are the majority of real estate investment trusts, which are unique tax-favored business entities active in various facets of the real estate market. STOCK EXCHANGE IN INDIA There are 2 stock exchange in India, one is National Stock Exchange and Bombay Stock Exchange. NATIONAL STOCK EXCHANGE (NSE) National Stock Exchange of India Limited (NSE) is the largest stock exchange in India and it is situated in Mumbai, Maharashtra. According to statistics compiled by the derivatives trade organization Futures Industry Association (FIA), it will be the largest derivatives exchange in the world in 2021 based on the volume of contracts exchanged. NSE is ranked 4th in the world in cash equities by number of trades by the World Federation of Exchanges (WFE) for the calendar year 2021. It is under the ownership of some leading financial institutions, banks, and insurance companies. NSE was established in 1992 as the first dematerialized electronic exchange in the country. It was the first exchange in the nation to offer a cutting-edge, completely automated screen-based electronic trading system that provided simple trading options to investors dispersed throughout the whole nation. NSE's managing director and chief executive officer is Vikram Limaye. As of August 2021, the National Stock Exchange ranked as the tenth-largest stock exchange in the world with a total market capitalization of more than US$3.4 trillion. Investors in India and throughout the world frequently use the NSE's flagship index, the NIFTY 50, a 50-stock index, as a gauge of the Indian capital market. NSE introduced the NIFTY 50 index in 1996. BOMBAY STOCK EXCHANGE (BSE) The Bombay Stock Market (BSE), also known as BSE Limited, is an Indian stock exchange that is situated on Dalal Street in Mumbai. It was established in 1875 as “The Native Share and Stock Brokers Association”. It is the oldest one in Asia, even older than the Tokyo Stock Exchange which was established in 1878. It is the first stock exchange in the country to have obtained permanent recognition in 1956 from the Govt of India under the Securities Contracts (Regulation) Act, 1956. BSE provides an efficient and transparent market for trading in equity, debt instruments, derivatives, mutual funds. More than 5500 companies are listed on BSE making it world’s No. 1 exchange in terms of listed members. The companies listed on BSE command a total market capitalization of USD 1.68 Trillion as of March 2015. It is also one of the world’s leading exchanges (5th largest in March 2015) for Index options trading. The primary index of BSE in BSE Sensex comprises 30 stocks The BSE joined the United Nations Sustainable Stock Exchange project in September 2012 as a Partner Exchange. It established India INX on 30 December 2016 which is the first international exchange of India. It launches commodity derivatives contract in gold and silver. COMPANY PROFILE HISTORY Paterson Securities Ltd. is a financial services company with 10 offices around Australia and its headquarters in Perth, Western Australia. James Paterson established the company in 1903 as an accountancy firm, and in 1922 it expanded into stock trading. When the Second World War broke out, his 16-year-old son Colin had become the leader of the company that had been renamed James W. Paterson and Son. Colin used his accounting expertise to enter the investment banking sector after the firm was compelled to stop doing accounting in 1950. Following Colin Paterson's retirement in 1977, the company was renamed Paterson Securities. In 1935, Mr. R. C. Paterson founded Paterson & Company, carrying on the business of Huson, Tod & Co., the first stock brokerage house in South India (estd. 1892). Today, Paterson Securities Pvt. Ltd. is the oldest surviving stock broking firm in India and has expanded its offerings to bring world-class financial services solutions to its clients. It is a division of Hinduja Bank (Switzerland) Ltd., a Swiss banking organization founded in 1994 that carries on the asset management operations of a finance company founded in 1978. With its main office in Geneva, Hinduja Bank has expanded its network to include offices in Dubai, London, Paris, New York, Mauritius, Mumbai, and Chennai. It has also established a foothold in Switzerland with offices in Zurich, Lucerne, Basle, and St. Margarethen. The Swiss Federal Banking Commission is in charge of regulating and policing the combined Banking Group. It offers innovative solutions in wealth management & private banking, trade finance and corporate advisory services to both individuals and institutions, with strong entrepreneurial and growth interests. The main goal of this company is to offer our clients top-notch wealth management, broking, and other financial services while producing superior profits for all parties involved. It has over 25 centres and a nationwide network of more than 75 business partners. It supports a lean organizational structure which enables to move swiftly and provide better client services. It has more than 150 specialists working with more than 12,000 clients, including financial institutions, significant corporate groupings, high-net-worth individuals, NRIs, and a significant portion of the general public. VISION The vision of Peterson securities pvt ltd. is that they are the personal advisors for wealth management and is the part of a large family. It offers innovative solutions in wealth management & private banking, trade finance and corporate advisory services to both individuals and institutions, with strong entrepreneurial and growth interests. MISSION The main mission of this company is to offer clients top-notch wealth management, broking, and other financial services while producing superior profits for all parties involved and supports a lean organizational structure which enables to move swiftly and provide better client services. SERVICES PROVIDED BY COMPANY  EQUITIES & DERIVATIVES It offers equity broking services to retail as well as institutional investors. Operating more than 60 Trading Terminals at more than 25 Branches, it serves a clientele of over 12,000 and combine excellent execution capabilities with unwavering credibility and trustworthiness. It offers the necessary knowledge and resources to help meet the short- and long-term objectives of the customers. Through the NSE, BSE, and MSE it provides trading in equity in the cash and derivatives divisions.  DEPOSITORY SERVICES The depository system has effectively eliminated paper-based certificates which were prone to irregularities like fake / forged /counterfeit documents, resulting in delays and bad deliveries. Through CDSL, it provides an effective and immediate transfer of securities in demat form. It can make this service available to our business partners upon request.  CURRENCY DERIVATIVES Currency derivative is a contract between the seller and buyer, whose value is to be derived from the underlying asset, the currency amount. Through MCX-SX and NSE, it provides clients with consulting and brokerage services for trading in Currency Futures, the financial instrument that is traded the most globally. Similar in nature to stock or index futures contracts, currency futures are a product of the currency derivatives market. It offers a comprehensive portfolio with the most traded exchange rates as the underlying for currency futures contracts:      INR: USD INR: EUR INR: CHF INR: JPR PORTFOLIO MANAGEMENT SERVICES PMS is a comprehensive service offered by portfolio managers to investors seeking a clientspecific investment approach. On the basis of the client's investment objectives, risk-return profile, and investment horizon, Portfolio Manager normally invests the client's money in one or more asset classes, including equities, mutual funds, and bonds.  DEBT INSTRUMENTS A debt instrument is any paper used or produced to raise funds, such as a promissory note, bond, or bill of exchange. In essence, it is a verbal or written pledge to pay back a debt. Peterson company provides the debt services:  Government Securities  Bonds issued by Corporate bodies, including Banks and Public Financial Institutions  PROVIDENT FUND SERVICES Paterson is one of the few broking houses to provide this value-added service, and it is a pioneer in the area of managing the Provident Fund requirements of small and medium-sized businesses. It makes sure that our clients receive the proper securities for their investments in order to maximize their returns. It offers PF services to companies who qualify under the Exempted Provident Fund Scheme.  OTHER SERVICES The company also provides other services to the clients: Mutual Funds- It provides the services of mutual funds schemes which guides clients according to their requirements and help allocate funds to meet their financial needs. IPOs- Through initial public offering, the company help our clients make the right investment decision on upcoming IPOs through in-depth research updates. Offer 3-in-1 account so as to ensure smooth and quick flow of transactions and funds Real time transfer and enhanced limit Detailed portfolio information and tracks portfolio performance Experienced Dealers at the terminals process transactions quickly and accurately