Analysis of Cement Industry in India

Analysis of Cement Industry in India INTRODUCTION People invest in stocks to make their money grow. And to help investors identify the suitable and the appropriate way to invest, there are various modes of analysis. A number of approaches have been developed over time. One most important analytical approach among them is EIC analysis (E for economy, I for industry and C for company). EIC analysis is also sometimes referred to as Fundamental Analysis or the Top Down approach to Fundamental analysis. . In this approach, the investment decisions are taken on the basis of the strength of the economy, industry and company. The major objective of undergoing a project on EIC analysis or top down approach to fundamental analysis is to answer the question as â€Å"What to buy†. At economy level, fundamental analysis will focus on the economic indicators of the country to assess the present and future growth of the economy. Major economic indicators include the GDP growth rate, inflation, imports, exports, monetary and fi scal policies, foreign exchange reserves, IIP, etc. The basic assumption is that if the economy grows, companies would do well. At the industry level, apart from economy other factors like government attitude, entry barriers, competition level, threat of potential entrants, substitute products, cost structure, foreign entrants, also affect the way an industry evolves in time and hence affects the stock prices of companies in that particular industry. This industry analysis will also include Porters five force model (wherever applicable) which will give a better approach to it. The next task to be done in the project is to identify and analyze two companies i.e. ACC and Ultratech cement Ltd. For that a number of factors will be taken into consideration, say, the company’s SWOT analysis and the financials of the company. Thus, on the foundation of some major factors, this EIC analysis will analyze the overall economy, industry and company which will give a clear picture and pra ctical approach of stock identification. The second part of the project is Technical analysis which is a method of evaluating securities by analyzing the statistics generated by market activity, such as past prices and volume. Technical analysis looks at the price movement of a security and uses this data to predict its future price movements. Thus a technical analyst approaches a security from the charts. 2. ECONOMIC ANALYSIS EIC analysis is not just about balance-sheets or analysis of a company’s financial performance. It is also crucial to look at the broader picture- the macro-economic factors that may directly or indirectly affect the economy, industry and stocks of the company. Economic Analysis is the First Step in a three step security analysis process. An economic slowdown has implications for the earnings and margins of companies. At economy level, fundamental analysis will focus on the economic indicators of the country to assess the present and future growth of th e economy. It aims at analyzing the overall Economy and identifying the general direction, in which the economy is heading. Although there are many macroeconomic indicators that are relevant to markets, given below are some must-track-indicators