A reseach on fundamental access of selected automobile companies in India

Abstract

Today, the most important strength of volatile financial market is information. Fixed income securities are for more risk-averse investors where as young people are more interested in equity shares as they like to take more risk in lieu of more return. Prices of these securities move according to the information available in the financial market. Investors are always confused regarding Where to invest, When to invest and How much to invest. Fundamental analysis is a method which helps an investor in knowing “What the price should be” or “What is the real value of a share”. It is based on the foundation that in the long run, the true value of a share will be equal to its intrinsic value i.e. present value of all the future cash inflows from the share in the form of dividends as valuation of equity shares are based on the assumption of going concern concept of business. Fundamental analysis involves analyzing the economy wide factors (e.g. GDP growth rate, employment etc), industry wide factors (e.g. competition, nature of product etc) and companywide factors (e.g. financial statements, corporate governance, management efficiency etc). It is also quoted by John Forman, “Fundamental analysis is very powerful in terms of determining long-term direction, but lacks short-term applicability”. The automobile industry is considered to be one of the key drivers of economic growth as it involves huge investment at the same time large profit to automobile companies. On the basis of past performance, it is analyzed that the demand outlook of automobile industry will continue to grow in 2018-19 due to healthy sales momentum in rural areas as well. This built confidence among the investors to invest in automobile industry which is highly rewarding at the same time it is highly risky in long run.