(Class-2) Stock Market for Beginners in India: Technical & Fundamental Analysis
📌 Table of Contents
1️⃣ Introduction to Stock Analysis
2️⃣ What is Fundamental Analysis? (Long-Term Investing Guide)
- Key Factors in Fundamental Analysis
- Revenue & Profit
- PE Ratio
- Debt-to-Equity Ratio
- Return on Equity (ROE)
- Future Growth & Business Model
3️⃣ What is Technical Analysis? (Short-Term Trading Guide) - Candlestick Charts
- Support & Resistance
- Moving Averages
- RSI Indicator
- Chart Patterns
4️⃣ How to Use Both Together?
5️⃣ Summary of Class-2
6️⃣ What’s Next? (Class-3: Building a Winning Portfolio)
📌 Introduction to Stock Analysis
Now that you understand the basics of the stock market, it’s time to learn how to pick the right stocks using Technical & Fundamental Analysis. This will help you make informed decisions whether you are investing for the long term or trading for short-term profits.
📖 What is Fundamental Analysis? (Long-Term Investing Guide)
Fundamental Analysis helps investors evaluate a company’s financial health, business model, and future growth potential before investing.
🔹 Example: If you want to invest in TCS, you need to check its financial statements, revenue, profit, and future growth plans to see if it’s a good investment.
Key Factors in Fundamental Analysis
✅ 1. Revenue & Profit (How Much the Company Earns?)
- Check Sales, Net Profit, and Profit Margin
- Higher profit = Stronger company
✅ 2. PE Ratio (Is the Stock Overpriced?)
- Formula: PE Ratio = Stock Price / Earnings per Share (EPS)
- A lower PE (compared to competitors) is better.
✅ 3. Debt-to-Equity Ratio (Is the Company in Debt?)
- Formula: Debt/Equity
- A lower ratio is better (<1 is ideal).
✅ 4. Return on Equity (ROE) – Profitability Indicator
- Formula: ROE = Net Profit / Shareholder Equity
- A higher ROE means the company is using its money efficiently.
✅ 5. Future Growth & Business Model
- Check news, management decisions, and industry trends
- Good companies innovate & expand
📌 Best for Beginners?
Use Fundamental Analysis for long-term investing (5+ years) in strong companies.
📊 What is Technical Analysis? (Short-Term Trading Guide)
Technical Analysis helps traders predict stock price movements using charts, patterns, and indicators.
🔹 Example: If a stock is near a support level, traders expect a bounce and buy it.
Key Concepts in Technical Analysis
✅ 1. Candlestick Charts (Price Movements)
- Each candle shows price movement in a given time (1 min, 1 hour, 1 day).
- Green Candle: Price went up 📈
- Red Candle: Price went down 📉
✅ 2. Support & Resistance (Buy Low, Sell High)
- Support – A price level where a stock stops falling and bounces up.
- Resistance – A price level where a stock stops rising and falls down.
✅ 3. Moving Averages (Trend Indicators)
- SMA (Simple Moving Average) – Shows long-term trend.
- EMA (Exponential Moving Average) – Focuses on recent prices.
✅ 4. RSI (Relative Strength Index – Overbought/Oversold Indicator)
- RSI above 70 = Overbought (Stock may fall)
- RSI below 30 = Oversold (Stock may rise)
✅ 5. Chart Patterns (Predicting Breakouts)
- Head & Shoulders: Signals a trend reversal.
- Double Bottom: Indicates a bullish reversal.
- Cup & Handle: Shows breakout potential.
📌 Best for Beginners?
Use Technical Analysis for short-term trading (Intraday & Swing Trading).
📌 How to Use Both Together?
To maximize profits, use both Fundamental & Technical Analysis:
🔹 Example:
1️⃣ Use Fundamental Analysis to pick a good company (Infosys, TCS, HDFC Bank).
2️⃣ Use Technical Analysis to find the right time to buy (RSI, Moving Averages).
✅ Best Approach: Invest in fundamentally strong stocks and trade using technical indicators.
📚 Summary of Class-2 (Technical & Fundamental Analysis Basics)
| Topic | Key Takeaways |
|---|---|
| Fundamental Analysis | Evaluates company’s financial health & future growth |
| Technical Analysis | Uses charts & indicators to predict stock movements |
| Best for Beginners? | Use Fundamental for long-term, Technical for trading |
| Top Indicators | PE Ratio, ROE, Moving Averages, RSI, Support/Resistance |
| How to Use? | Pick strong companies & enter at the right time using charts |
🚀 What’s Next? (Class-3: How to Build a Winning Stock Portfolio)
Now that you know how to analyze stocks, the next step is to build a strong portfolio and manage risk.
✅ How to Diversify a Portfolio? (Avoid Huge Losses)
✅ Best Stocks for Long-Term Investment in India
✅ How to Manage Risk & Stop Loss?
Would you like a detailed guide on Portfolio Building in Class-3? 🚀