Security analysis and portfolio management (sapm) concept Industrial analysis

The process of analyzing the industries securities and the market as a whole estimating the risk and returns expected from each of the investment which a visual to identifying under valued securities buying and overvalued securities for setting and overvalued securities for setting is both  and art & science this is what is called severities another.

Industrial analysis:

           The industry analysis should take accounts the following factors among has influencing the performance of company where company were shares are to be and

Product line

Raw material and input

Capacity install and utilized

Industry characteristics

Demand and market

Govt. Policy with regard to industry

Labor and other industrial problem

Management

Future prospects

Product line:

          the position of the industry in the life cycle of its growth “ initial stages, high growth stages maturity stages are to be denoted “. It is also necessary to know the industries with a high growth potential like computers, electronics, chemicals, demands, FMCG’s [fast morale consummate goods]

Raw material and Input:

          Under this head you have to look into industries depending on imports of scarce raw material, competition from other company and barriers to entry of a new company production from foreign competition import and export & restriction etc...

Capacity installed and utilized:

          The demand for industrial products in the economy is estimated by the planning commission and government the units for licensed capcity  on the basis of estimated. If the demand is rising respected and market is good for the products.

Industry characteristics:

          Whether the industry is cycle fluctuations or stable has to be load into first.

          If the demand is seasonal the case of fertilizers, pesticides

The problem they market the prospects. If it is consumer product food products of forma and the demand all over India freight charges are in component of the cost of production.

Demand and market:

          The demand for the product should expand and its price should not be control by the govt. If the industry to have good prospects of profitability if the demand is income elastic price elastic the supplier should able to sell the goods at a growing rate and the prospects of growth are good. It is also important that price of raw material and other input cost like freight, elasticity etc... Should not be controlled by the govt.

Government policy with regard to industry:

          The government policy is announced in the industrial policies, regulation and subsequent announcements for time to time by the govt. The policy can also be seen strategy laid down in the 5 years plan and importance given to the industry by the planning commission and the expected demand in the economy.

          The plan priorities for the industry the physical and financial targets of investment and foreign collaboration in that industry are important variables effecting its fortunes.

Labor and other industrial problem:

          The whether its capital labor intensive has take different categories and expertise productivity of labor as much as labor efficiency would determine the progress to the industry.

          If there are programs of labor strikes, lockouts, pure productivity for the investors.

Future prospects:

          Many of the factors of operations industry are interlink such capacity utilization, demand and market, govt. Policies, availability of inputs in future etc...

          It is therefore necessary to an overall picture of the industry and to study these problems prospects.

Cycle of

          Growth

                                    Range of industries

Macro economic analysis:      

          The macro economy is the overall economic environment in which all firms operate. The key variables commonly used to describe the state of the macro economy are...

●      Growth rate of GDP

●      Industrial growth rate

●      Agriculture and monsoons

●      Savings and investments

●      Govt. Budget and deficient

●      Price level and inflation

●      Interest rates

●      Balance of payments & exchange rate

●      Infrastructural facilities and arrangements

Growth rate of GDP:

          The gross domestic product is measure of the production if and services in the economy during the period usually a year. The GDP of the Indian economy for the fiscal 2000-2003 was estimated at rs 2.47 million in current rupees.

          The growth rate of GDP is the most important indicator of the performance of economy. The average rate of GDP growth in India during 1950-1980 was around 3.5% real time with wide year to year through.

          The GDP growth rate has risen to able 5% in the decade of 1980s . the GDP growth rate during the decade 1995-2004 average with yearly rates ranging from 4.2% in 2001. 8.2% in 2004. The general view among economists is that in the next 5 years. The GDP growth  rate in India of 7% may be achieved with some improvement on the side and easing of infrastructural both.

Forecasting the GDP growth rate:

          A commonly employed processor for force the GDP growth rate is estimate the most likely growth rates of three sectors of economy   1. Industry sector

          2. Agriculture sector

          3. Service sector

Calculate the weighted arithmetic average of 3 rates, the weight of a sector being its share in the GDP.