Fundamental Analysis in Stock Market in India

In this blog “Fundamental Analysis in Stock Market in India” we’ll discuss every aspect of studying a company’s fundamentals and how to become an experienced stock picker.

For investors and traders, fundamental analysis in the stock market in India has always been the most reliable method of stock market analysis and stock selection.

Some of the world’s successful investors, including Warren Buffett, Peter Lynch, and John Templeton use fundamental analysis of stocks before investing.

What is Fundamental Analysis?

The stock market analysis comes in a variety of forms. While fundamental analysis of stock looks at the very foundations of a business, technical analysis in stock market is concerned with price and volume data of Indian stock market or of any specific stock.

Fundamental analysis and technical analysis are two distinct approaches for stock market India analysis. Both these approaches, fundamental analysis and technical analysis focus on a distinct manner.

When it comes to stock market analysis, both or any one of these approaches can be used. Investors and traders have the choice of selecting which method is best for their strategy.

Fundamental analysis is a method of determining a stock’s inherent worth/fair value. Fundamental analysis of stock helps in the study of a company’s economic health and future growth. The fundamental analysis assesses the worth of a stock based on previous results or real-time data.

External events and effects, as well as financial statements and industry trends, are all included in this type of study. Remember that a stock’s intrinsic worth/fair value does not vary on a daily basis.

Fundamentals, which are what pushes prices up and down, might assist you to figure out what that fair value is.

How does fundamental analysis of stocks help?

Every stock investor’s major concern is the feeling that they are overpaying for a stock. Stocks, unlike supermarkets or grocery stores, do not have a fixed price. As a trader, you buy a stock depending on the current market price (CMP). 

What is a stock’s fair value? For example, if you buy #TCS shares at Rs 3550 today, are you getting a good deal? Fundamental analysis looks at a company’s key statistics to identify its financial health.

As a result, by the end of the process, you should have a good understanding of what the stock price of the company should be.

Always remember that when someone buys a stock at or below its fair value, they stand to profit because the market price is always higher than fair value.

Fundamental Analysis in Stock Market

Steps involved in fundamental analysis of stocks

Every stock or share you own in a company represents a piece of your ownership. When you buy a share, you are basically buying a little fraction of a company.

When businesses do well, they make a profit, enhancing the company’s worth. And, because stocks represent a piece of a company’s ownership, the value of each share rises.

As a stock market investor, you must assess different components of the business, including the business model, previous performance, future growth potential, and its business value vs market price, in order to identify which businesses are doing well and will continue to do so in the future.

Fundamental Analysis in Stock Market

Developing a basic understanding of the business

Understanding a company’s business is the first step in performing a fundamental analysis of stocks. With over 8000 companies listed in the Indian stock market, it is impossible to be an expert in all types of businesses.

It is always in your best interests as an investor to invest in businesses that you are familiar with.

When you have a good understanding of the business, you will also have a good understanding of the company’s inner workings and the elements that may operate in the company’s favor or against it.

Understanding the management

Understanding the management is the second important step in stock market India analysis (performing fundamental analysis on Indian companies). A competent management team is always upfront about their company, its current state, potential, and future expansion plans.

A good company should declare its future expansion ambitions, how it intends to achieve them, and the efforts it is taking to do so. Management that makes ambiguous remarks while presenting its business and uses a lot of jargon should be dealt with cautiously.

All information on the company’s growth plans can be found in the “Management Discussion and Analysis” section of the annual report.

Fundamental Analysis in Stock Market

Quantitative fundamental analysis factors

Some of the quantitative fundamental analysis factors are EPS, P/E ratio, P/B ratio, Debt/Equity ratio, and RoE ratio. Learning about these fundamental indications assists you to learn more about a company or a stock.

  • EPS stands for Earnings Per Share. This is a metric for determining profitability which is calculated by dividing the company’s net profit by the number of outstanding shares.
  • The P/E ratio stands for the Price to Earnings Ratio. This is a metric for determining the worth of anything. P/E represents the price of a stock divided by its earnings per share.
  • The P/B ratio stands for the Price to Book Ratio. This is a metric for valuing banks and financial institutions. P/B is the price of a stock divided by the stock’s or company’s book value.
  • The D/E ratio is the debt-to-equity ratio. This is a measure of a company’s debt. Debt to Equity Ratio = Total Liabilities of the company divided Total shareholder’s equity
  • RoE stands for Return on Equity Ratio. It is a profit measure that can be achieved with the money invested by the company’s shareholders. Return on equity is calculated by dividing the company’s net income by the equity of its shareholders.

How to begin a fundamental analysis of the stock market in India?

To analyze a company’s fundamentals, you must go through five to six steps.

  • Start with learning about the company. And while you are at it, initial screening can be done using financial ratios.
  • Examine the company’s financial statements in detail.
  • Find and research the company’s competitors/rivals.
  • Examine the company’s debt and compare it to that of competitors.
  • Examine the company’s possibilities for the future.
Fundamental Analysis in Stock Market


Fundamental analysis in stock market in India is not difficult, but it does take some time to understand. However, if you are committed to learning Fundamental analysis in stock market in India, it becomes a lot easier.

When performing fundamental analysis of stocks, keep in mind that no matter how brilliant your stock picking skills are, they will be useless if you are not disciplined or easily swayed by popular opinion.

FRequently asked questions

Which is better, fundamental analysis or technical analysis?

Fundamental and technical analysis are two market research methodologies. Long-term forecasts based on economic fundamentals are better served by fundamental analysis.

Technical analysis in stock market allows you to work with specific figures and find easy entry points.

What is fundamental analysis and who uses it?

Fundamental analysis of stocks is used to forecast market movements in the future.

Traders and stock analysts frequently use fundamental analysis. Investors who want to examine a company’s financial performance, prospects, and stock market India analysis use it as well.

Is a low PE ratio favorable?

A low P/E ratio does indicate a quicker return on investment.

What is the importance of fundamental analysis?

For a variety of reasons, fundamental analysis is critical in trading.

For starters, it includes information and activities that aren’t immediately related to price charts. Second, fundamental approaches to analysis allow you to generate long-term investment forecasts.

What does a good P E ratio look like?

When the price/earnings ratio is less than the industry average, it is deemed appropriate.

Is there any Social media for stock market participants in India?

Fundamental Analysis in Stock Market

Stockative is India’s first and only unique social media for stock market participants where real-time stock, mutual fund, ETF, and cryptocurrency discussions are happening.

Users can sign up, make their profile, and connect with passionate traders and investors. 

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