UNIT - III: Fundamental and Technical Analysis (6 Lectures) Fundamental Analysis: Economy

analysis - Industry analysis - Company analysis - weaknesses of fundamental analysis.

Technical Analysis: Meaning and Assumptions of technical analysis – Tools of technical analysis -
Trend lines and their significance – Market indicators – The Dow theory – Market indices –
Mutual fund activity – Confidence level – Price indicators - Important chart formations - Price
patterns and technical indicators

EIC Analysis of a Company

Below are the further details of the components of EIC analysis, which analyst always consider
before choosing or reaching any decision about any business.

 Economic Analysis
 Industry Analysis
 Company Analysis
 1. Economic Analysis:

Every common stock is susceptible to the market risk. This feature of almost all types of common
stock indicates their combined movement with the fluctuations in the economic conditions
towards the improvement or deterioration.

Stock prices react favorably to the low inflation, earnings growth, a better balance of trade,
increasing gross national product and other positive macroeconomic news. Indications that
unemployment is rising, inflation is picking up or earnings estimates are being revised downward
will negatively affect the stock prices. This relationship is reasonably reliable that the US
economy is better represented by the Standard & Poor 500 stock index, which is famous market
indicator. The stock market will forecast an economic boom or recession properly from the signs
in front of average citizen. TheFederal bank of New York has conducted a research that describes
that the slope of the yield curve is the perfect indicator of the economic growth more than three
months out. Recession is indicated by negative slope while positive slope is considered as good
one.

The implications of market risk should be clear to the investor. When there is recession in the
economy, the prices of stocks moves downward. All the companies suffer the effects of
recession despite of the fact that these are high performing companies or low performing ones.
Similarly the stock prices are positively affected by the boom period of the economy.

2. Industry Analysis:

It is clear there is certain level of market risk faced by every stock and the stock price decline
during recession in the economy. Another point to be remembered is that the defensive kind of
stock is affected less by the recession as compared to the cyclical category of stock. In
the industry analysis, such industries are highlighted that can stand well in front of adverse
economic conditions.

In 1980, Michael Porter proposed a standard approach to industry analysis which is referred to
as competitive analysis frame work. Threats of new entrants evaluate the expected reaction of
current competitors to new competitors and obstacles to entry into the industry. In certain
industries it is quite difficult for new company to compete successfully.

For example new producers in the automobile industry face difficulty in competing the
established companies, like General Motors and Ford etc. There are certain other industries
where the entry of new company is easier like financial planning industry. No extraordinary
efforts are required in such kind of industries to establish any new company. The growth in the
industry is slowed down through the rivalry among the current competitors. Profits of the
company are reduced when it tries to cover more market share because under existing rivalry
the company has to invest a large portion of its earnings in this enhancing market share. The
industry where the rivalry is friendly or modest among competitors provides greater opportunity
for product differentiation & increased profits. The intense competition is favorable for the
customer but not good for the producer of the product. In case of airline industry there are
common fare price wars among the competitors. When one airline company reduces its price
then the other must also adjust its price accordingly in order to retain the existing customers.

Another threat faced by company in industry is the treat of substitutes which prevents the
companies to enhance the price of their products. When there is much increase in the price of
particular product, then the consumer simply switches to other alternative product which has
lower price. For example there are two different video games named Sega and Nintendo. These
games competes each other directly in the market. If the price of Nintendo is enhanced then the
new video game customers are switch toward the Sage which has relatively lower price. The
investor conducting industry analysis should focus the level of risk of product substitution which
seriously affects the future growth of company.

Another aspect of the industry analysis is the bargaining power of buyers which can greatly
influence the large percentage of sales of seller. In this condition the profit margins are lower.
Concessions are necessary to be offered by the seller because it is not affordable for him to lose
customer. For example there is ship building company and the US Navy is its main customer.
Only two to three ships are produced by the company every year and so it is very harmful for the
firm to lose the Navy contract. On the other hand in case of departmental store, there is large
number of customers and so the bargaining power of customers is low. In this business, losing
one or two customers will not much affect the sales or profitability of the retail store.

The only capital intensive industry should not be focused. There are other industries that are not
capital intensive like consultants required in retail computer store. There is need that is present
which force the computer technician to solve the problems of the computer systems of people.
In recent year, consumers are usually more sophisticated in area of personal computers. So they
are better guided and they try to make their own decisions in the needs of software and
hardware aspects. In fact they possess high power when they contact the sales staff.

The bargaining power of suppliers has also substantial influence over the profitability of the
company. The supplies for manufacturing products are required by the company and it does not
have sufficient control over the costs. It is not possible for the company to increase the price of
its finished products in order to cover the increased costs due to the presence of powerful buyer
groups in market of substitute products. So while conducing industry analysis, the presence of
powerful suppliers should be considered as negative for the company.

The above considerations of industry structure should be analyzed by the investor in order to
make an estimate about the future trends of the industry in the light of the economic conditions.
When potential industry is identified then comes the final step ofEIC analysis which is narrower
relating to companies only.
3. Company Analysis:

In company analysis different companies are considered and evaluated from the selected
industry so that most attractive company can be identified. Company analysis is also referred to
as security analysis in which stock picking activity is done. Different analysts have different
approaches of conducting company analysis like

1. Value Approach to Investing

2. Growth Approach to Investing

Additionally in company analysis, the financial ratios of the companies are analyzed in order to
ascertain the category of stock as value stock or growth stock. These ratios include price to book
ratio and price-earnings ratio. Other ratios like return on equity etc. can also be analyzed to
ascertain the potential company for making investment.

What is Technical Analysis?

Technical analysis is a method of evaluating securities that involves a statistical analysis of

market activity, such as price and volume. Technical analysts do not attempt to measure a
security’s intrinsic value, but rather, use charts and other tools to identify patterns that can be
used as a basis for investment decisions.

There are many different forms of technical analysis: Some rely on chart patterns, others use
technical indicators and oscillators, and most use a combination of techniques. In any case,
technical analysts’ exclusive use of historical price and volume data is what separates them from
their fundamental counterparts. Unlike fundamental analysts, technical analysts don’t concern
themselves with a stock’s valuation – the only thing that matters are past trading data and what
information the data might provide about future price movements.

Technical analysis is based on three assumptions:

1. The market discounts everything.

2. Price moves in trends.
3. History tends to repeat itself.

1. The Market Discounts Everything

Many experts criticize technical analysis because it only considers price movements and ignores
fundamental factors. The counterargument is based on the Efficient Market Hypothesis, which
states that a stock’s price already reflects everything that has or could affect a company –
including fundamental factors. Technical analysts believe that everything from a company’s
fundamentals to broad market factors to market psychology are already priced into the stock.
This removes the need to consider the factors separately before making an investment decision.
The only thing remaining is the analysis of price movements, which technical analysts view as the
product of supply and demand for a particular stock in the market.

2. Price Moves in Trends

Technical analysts believe that prices move in short-, medium-, and long-term trend. In other
words, a stock price is more likely to continue a past trend than move erratically. Most technical
trading strategies are based on this assumption.

3. History Tends to Repeat Itself

Technical analysts believe that history tends to repeat itself. The repetitive nature of price
movements is often attributed to market psychology, which tends to be very predictable based
on emotions like fear or excitement. Technical analysis uses chart patterns to analyze these
emotions and subsequent market movements to understand trends. While many form of
technical analysis have been used for more than 100 years, they are still believed to be relevant
because they illustrate patterns in price movements that often repeat themselves.

Support and resistance are the next major concept after understanding the concept of a trend.
You’ll often hear technical analysts talk about the ongoing battle between bulls and bears, or the
struggle between buyers (demand) and sellers (supply). The proverbial ‘battle lines’ can be
defined as the support and resistance levels where the most trading occurs. Support levels are
where demand is perceived to be strong enough to prevent the price from falling further, while
resistance levels are prices where selling is thought to be strong enough to prevent prices from
rising higher.
For example, Figure 7 shows a situation where a resistance level becomes a support level before
returning to a resistance level after a series of breakouts. The trendline’s strength also becomes
increasingly greater over time given the number of ‘touches’ and rebounds. Many traders
underestimate the importance of these role reversals and fail to realize how frequently they
occur – even in popular stocks like Wal-Mart Stores Inc. (WMT) seen above.

In almost every case, a stock will have both a support and resistance level and will trade in
between them before breaking out higher or lower. The breakout will transform the trendline
that was broken into the opposite role and a new price channel will be established.

Importance of Support and Resistance

Support and resistance levels are a critical part of trend analysis because it can be used to make
specific trading decisions and identify when a trend is about to reverse. For example, a trader
might identify an upcoming support level and decide to start buying the stock as it approaches
knowing that it will likely rebound higher. These levels both test and confirm trends and should
be closely monitored by anyone using technical analysis. As long as the price remains between
these two levels, the trend is likely to continue in the prevailing direction.

Charts
Charts are simply graphical representations of a series of prices over time. For example, a chart
might show a stock’s price movement over a one-year period where each point represents an
individual day’s closing price. Or, a chart might show a commodity’s price movement over a
period of just one hour with each point representing one second. The common denominator is
that price is typically on the Y-axis and time is usually on the X-axis.
Figure 9 shows an example of a basic stock chart for Alphabet Inc. (GOOGL). It’s a representation
of the price movement of a stock over a roughly six-month period. The bottom of the chart,
running horizontally (X-axis), is the date or time scale. On the right-hand side, running vertically
(Y-axis), is the price of the security. This type of chart – known as a candlestick chart – shows the
daily price range of a stock that’s represented by the length of each bar.

Chart Properties
There are several things that investors should be aware of when looking at a chart, since these
factors can affect the information that is provided. They include the time scale, price scale, and
price point properties that are used in the creation of the chart.

Time Scale

The time scale refers to the range of dates that appear at the bottom of the chart, which can
vary from seconds to decades. The most frequently used time scales are intraday, daily, weekly,
monthly, quarterly, and yearly. Shorter timeframes are commonly used by day traders or
investors looking for greater detail, although these smaller timeframes tend to have more ‘noise’
that can make trends harder to spot.

Intraday charts plot price movements over the course of a single day and are often used
exclusively by day traders. Often times, the time scale of these charts is denominated in seconds
or minutes to show maximum detail.

Daily charts are commonly used by traders and investors with each price point representing a
single day. In line charts, each point represents the closing price for the day. In candlestick
charts, such as Figure 9, each point represents the open, high, low, and close for the day. These
data points can be spread out over weeks, months, or years to monitor both short-term and
intermediate-term trends in price over time.

Weekly, monthly, quarterly, and yearly charts are used to analyze long-term trends in stock
prices. Each data point in these graphics is a condensed version of what happened over a
specified period. For example, a weekly chart’s data point represents the price movement over
the course of an entire week or the closing price of the last trading day.

Price Scale and Price Point

The price scale appears on the right side of the chart and shows the stock’s price ranges. This
may seem like a simple concept – in that prices move from lower to higher – but price scales can
be either linear (arithmetic) or logarithmic in nature.
 Figure 10 – Linear v. Logarithmic – Source: TD Ameritrade Charts

Linear price scales (Figure 10 – Left Side) have even spacing between each price point, which
means that a price that moves from $10 to $20 is the same distance as a price that moves from
$40 to $50. In other words, the price scale measures absolute moves and doesn’t show the
effects of percentage changes in value over time.

Logarithmic scales (Figure 10 – Right Side) look at price movements in percentage terms, which
means that the spacing between each point is equal to the percentage change. For instance,
price change from $10 to $20 is 100% while a price change from $40 to $50 is only 25% even
though the absolute difference is the same - $10. Logarithmic charts will show a smaller space
between $40 and $50 than between $10 and $20 for this reason.

Many professionals use logarithmic charts because it’s easier to spot how large price movements
are on a percentage basis, whereas linear charts can be a little distorted in fast moving markets.

Types of charts(only 3)

Line Charts

Line charts are the most basic type of chart because it represents only the closing prices over a
set period. The line is formed by connecting the closing prices for each period over the
timeframe. While this type of chart doesn’t provide much insight into intraday price movements,
many investors consider the closing price to be more important than the open, high, or low price
within a given period. These charts also make it easier to spot trends since there’s less ‘noise’
happening compared to other chart types.
 Figure 11 – Line Chart Example – Source: StockCharts.com

Bar Charts

Bar charts expand upon the line chart by adding the open, high, low, and close – or the daily
price range, in other words – to the mix. The chart is made up of a series of vertical lines that
represent the price range for a given period with a horizontal dash on each side that represents
the open and closing prices. The opening price is the horizontal dash on the left side of the
horizontal line and the closing price is located on the right side of the line. If the opening price is
lower than the closing price, the line is often shaded black to represent a rising period. The
opposite is true for a falling period, which is represented by a red shade.

Figure 12 – Bar Chart Example – Source: StockCharts.com

Candlestick Charts

Candlestick charts originated in Japan over 300 years ago, but have since become extremely
popular among traders and investors. Like a bar chart, candlestick charts have a thin vertical line
showing the price range for a given period that’s shaded different colors based on whether the
stock ended higher or lower. The difference is a wider bar or rectangle that represents the
difference between the opening and closing prices.

Falling periods will typically have a red or black candlestick body, while rising periods will have a
white or clear candlestick body. Days where the open and closing prices are the same will not
have any wide body or rectangle at all. (To read more, see The Art of Candlestick Charting – Part
1, Part 2, Part 3, and Part 4).

Figure 13 – Candlestick Chart Example – Source: StockCharts.com

Chart Patterns
Head and Shoulders

The Head and Shoulders is a reversal chart pattern that indicates a likely reversal of the trend
once it’s completed. A Head and Shoulder Top is characterized by three peaks with the middle
peak being the highest peak (head) and the two others being lower and roughly equal
(shoulders). The lows between these peaks are connected with a trend line (neckline) that
represents the key support level to watch for a breakdown and trend reversal. A Head and
Shoulder Bottom – or Inverse Head and Shoulders – is simply the inverse of the Head and
Shoulders Top with the neckline being a resistance level to watch for a breakout higher.

Figure 22 – Head and Shoulders – Source: StockCharts.com

Cup and Handle

The Cup and Handle is a bullish continuation pattern where an upward trend has paused, but will
continue when the pattern is confirmed. The ‘cup’ portion of the pattern should be a “U” shape
that resembles the rounding of a bowl rather than a “V” shape with equal highs on both sides of
the cup. The ‘handle’ forms on the right side of the cup in the form of a short pullback that
resembles a flag or pennant chart pattern. Once the handle is complete, the stock may breakout
to new highs and resume its trend higher.
 Figure 23 – Cup and Handle Example – Source: StockCharts.com

Double Tops and Bottoms

The Double Top or Double Bottom pattern are both easy to recognize and one of the most
reliable chart patterns, making them a favorite for many technically-orientated traders. The
pattern is formed after a sustained trend when a price tests the same support or resistance level
twice without a breakthrough. The pattern signals the start of a trend reversal over the
intermediate- or long-term. (For more in-depth reading, see The Memory of Price and Price
Patterns – Part 4).

Figure 24 – Double Top Example – Source: StockCharts.com

Triangles

Triangles are among the most popular chart patterns used in technical analysis since they occur
frequently compared to other patterns. The three most common types of triangles
are symmetrical triangles, ascending triangles, and descending triangles. These chart patterns
can last anywhere from a couple weeks to several months.
 Figure 25 – Symmetrical Triangle Example – Source: StockCharts.com

Symmetrical triangles occur when two trend lines converge toward each other and signal only
that a breakout is likely to occur – not the direction. Ascending triangles are characterized by a
flat upper trend line and a rising lower trend line and suggest a breakout higher is likely, while
descending triangles have a flat lower trend line and a descending upper trend line that suggests
a breakdown is likely to occur. The magnitude of the breakouts or breakdowns is typically the
same as the height of the left vertical side of the triangle.

Flags & Pennants

Flags and Pennants are short-term continuation patterns that represent a consolidation
following a sharp price movement before a continuation of the prevailing trend. Flag patterns
are characterized by a small rectangular pattern that slopes against the prevailing trend, while
pennants are small symmetrical triangles that look very similar.
 Figure 26 – Pennant Example – Source: StockCharts.com

The short-term price target for a flag or pennant pattern is simply the length of the ‘flagpole’ or
the left vertical side of the pattern applied to the point of the breakout, as with the triangle
patterns. These patterns typically last no longer than a few weeks, since they would then be
classified as rectangle patterns or symmetrical triangle patterns.

Wedges

The Wedge pattern is a reversal or, less commonly, continuation pattern that’s similar to the
symmetrical triangle except that it slants upward or downward. Rising wedges are bearish chart
patterns that occur when trend is moving higher and the prices are converging and the prevailing
trend is losing momentum. Falling wedges are bullish chart patterns that occur when the trend is
moving lower and prices are converging, which signifies that the bearish trend is losing
momentum and a reversal is likely.

The wedge pattern can be very difficult to identify and trade, which means it’s important to look
for confirmations in other technical indicators, as we’ll learn about in the next section. For
example, most traders watch for a diverging relative strength index or moving average
convergence-divergence trend line that confirms a reversal is likely to occur.

Gaps

Gaps occur when there is empty space between two trading periods that’s caused by a
significant increase or decrease in price. For example, a stock might close at $5.00 and open at
$7.00 after positive earnings or other news. There are three main types of
gaps: Breakaway gaps, runaway gaps, and exhaustion gaps. Breakaway gaps form at the start of a
trend, runaway gaps form during the middle of a trend, and exhaustion gaps for near the end of
the trend. (For more insight, read Playing the Gap).

Triple Tops & Bottoms

Triple Tops and Triple Bottoms are reversal patterns that aren’t as prevalent as Head and
Shoulders or Double Tops or Double Bottoms. But, they act in a similar fashion and can be a
powerful trading signal for a trend reversal. The patterns are formed when a price tests the same
support or resistance level three times and is unable to break through.

Figure 27 – Triple Bottom Example – Source: StockCharts.com

Rounding Bottom

The Rounding Bottom – or Saucer Bottom – is a long-term reversal pattern that signals a shift
from a downtrend to an uptrend and lasts anywhere from several months to several years.

The chart patterns looks similar to a Cup and Handle pattern but without the handle. The long-
term nature of the pattern and lack of a confirmation trigger – such as the handle – makes it a
difficult pattern to trade.

Conclusion

Chart patterns are a valuable part of technical analysis – even if they are more art than science.
Many traders use them to identify potential trades that they can confirm using other forms of
technical analysis to maximize their odds of success. You should now be able to recognize some
of these chart patterns as we move on to other forms of technical analysis.
 Types of Moving Averages
The three most popular types of moving averages are Simple Moving
Averages (SMA), Exponential Moving Averages (EMA), and Linear Weighted Moving Averages.
While the calculation of these moving averages differs, they are used in the same way to help
assist traders in identifying short-, medium-, and long-term price trends.

Simple Moving Average

The most common type of moving average is the simple moving average, which simply takes the
sum of all of the past closing prices over a time period and divides the result by the total number
of prices used in the calculation. For example, a 10-day simple moving average takes the last ten
closing prices and divides them by ten.

Figure 15 – Simple Moving Averages – Source: StockCharts.com

Figure 15 shows a stock chart with both a 50-day and 200-day moving average. The 50-day
moving average is more responsive to price changes than the 200-day moving. In general,
traders can increase the responsiveness of a moving average by decreasing the period and
smooth out movements by increasing the period.

Critics of the simple moving average see limited value because each point in the data series has
the same impact on the result regardless of when it occurred in the sequence. For example, a
price jump 199 days ago has just as much of an impact on a 200-day moving average as one day
ago. These criticisms sparked traders to identify other types of moving averages designed to
solve these problems and create a more accurate measure.
Linear Weighted Average

The linear weighted average is the least common moving average, which takes the sum of all
closing prices, multiplies them by the position of the data point, and divides by the number of
periods. For example, a five-day linear weighted average will take the current closing price and
multiple it by five, yesterday’s closing price and multiple it by four, and so forth, and then divide
the total by five. While this helps resolve the problem with the simple moving average, most
traders have turned to the next type of moving average as the best option.

Exponential Moving Average

The exponential moving average leverages a more complex calculation to smooth data and place
a higher weight on more recent data points. While the calculation is beyond the scope of this
tutorial, traders should remember that the EMA is more responsive to new information relative
to the simple moving average. This makes it the moving average of choice for many technical
traders.

Figure 16 – EMA v. SMA Moving Averages – Source: StockCharts.com

Figure 16 shows how the EMA (red line) reacts more quickly than the SMA (blue line) when
sudden price movements occur. For example, the breakout in late-November caused the EMA to
move higher more quickly than the SMA even though both are measuring the same 50-day
period. The difference may seem slight, but it can dramatically affect returns.
How to Use Moving Averages

Moving averages are helpful for identifying current trends and support or resistance levels, as
well as generating actual trading signals.

The slope of the moving average can be used as a gauge of trend strength. In fact, many
momentum based indicators (as we will see in the next section) look at the slope of the moving
average to determine the strength of a trend. For example, Figure 16 (above) has moving
average slopes that clearly show a moderate sideways period between September and October
and a significant upswing between December and April.

Many technical analysts often look at multiple moving averages when forming their view of long-
term trends. When a short-term moving average is above a long-term moving average, that
means that the trend is higher or bullish, and vice versa for short-term moving averages below
long-term moving averages.

Moving averages can also be used to identify trend reversals in several ways:

1. Price Crossover. The price crossing over the moving average can be a powerful sign of a
trend reversal, while the price crossing above the moving average indicates a bullish
breakout ahead. Often, traders will use a long-term moving average to measure these
crossovers since the price frequently interacts with shorter-term moving averages, which
creates too much noise for practical use.
2. MA Crossover. Short-term moving averages crossing below long-term moving averages is
often the sign of a bearish reversal, while a short-term moving average crossover above a
long-term moving average could precede a breakout higher. Longer distances between
the moving averages suggest longer term reversals as well. For instance, a 50-day moving
average crossover above a 200-day moving average is a stronger signal than a 10-day
moving average crossover above a 20-day moving average.
 Figure 17 – Crossover and Support Illustrations – Source: StockCharts.com

And finally, moving averages can be used to identify areas of support and resistance. Long-term
moving averages, such as the 200-day moving average, are closely watched areas of support and
resistance for stocks. A move through a major moving average is often used as a sign from
technical traders that a trend is reversing.

Conclusion

Moving averages are a powerful tool for traders analyzing securities. They provide a quick
glimpse at the prevailing trend and trend strength, as well as specific trading signals for reversals
or breakouts. The most common timeframes used when creating moving averages are the 200,
100, 50, 20, and 10-day moving averages. The 200-day moving average is a good measure for a
year timeframe, while shorter moving averages are used for shorter timeframes.

These moving averages help traders smooth out some of the noise found in day-to-day price
movements and give them a clearer picture of the trend. In the next section, we will take a look
at some of the other techniques used to confirm price and movement patterns.

The different types of Mutual Funds are as follows -

Equity Funds / Growth Funds

Funds that invest in equity shares are called equity funds. They carry the principal objective of
capital appreciation of the investment over a medium to long-term investment horizon. Equity
Funds are high risk funds and their returns are linked to the stock markets. They are best suited
for investors who are seeking long term growth. There are different types of equity funds such as
Diversified funds, Sector specific funds and Index based funds.

Diversified Funds
These funds provide you the benefit of diversification by investing in companies spread across
sectors and market capitalization. They are generally meant for investors who seek exposure
across the market and do not want to be restricted to any particular sector.

Sector Funds
These funds invest primarily in equity shares of companies in a particular business sector or
industry. While these funds may give higher returns, they are riskier as compared to diversified
funds. Investors need to keep a watch on the performance of those sectors/industries and must
exit at an appropriate time.

Index Funds
These funds invest in the same pattern as popular stock market indices like CNX Nifty Index and
S&P BSE Sensex. The value of the index fund varies in proportion to the benchmark index. NAV of
such schemes rise and fall in accordance with the rise and fall in the index. This would vary as
compared with the benchmark owing to a factor known as “tracking error”.

Tax Saving Funds

These funds offer tax benefits to investors under the Income Tax Act, 2961. Opportunities
provided under this scheme are in the form of tax rebates under section 80 C of the Income Tax
Act, 1961. They are best suited for long investors seeking tax rebate and looking for long term
growth.

Debt Fund / Fixed Income Funds

These Funds invest predominantly in rated debt / fixed income securities like corporate bonds,
debentures, government securities, commercial papers and other money market instruments.
They are best suited for the medium to long-term investors who are averse to risk and seeking
regular and steady income. They are less risky when compared with equity funds.

Liquid Funds / Money Market Funds

These funds invest in highly liquid money market instruments and provide easy liquidity. The
period of investment in these funds could be as short as a day. They are ideal for Corporates,
institutional investors and business houses who invest their funds for very short periods.
 Gilt Funds
These funds invest in Central and State Government securities and are best suited for the medium
to long-term investors who are averse to risk. Government securities have no default risk.

Balanced Funds
These funds invest both in equity shares and debt (fixed income) instruments and strive to provide
both growth and regular income. They are ideal for medium- to long-term investors willing to take
moderate risks.

Exchange Traded Funds (ETFs)

Exchange Traded Funds (ETFs) track an index, a commodity or a basket of assets as closely as
possible, but trade like shares on the stock exchanges. They are backed by physical holdings of the
commodity, and invest in stocks of companies, precious metals or currencies. ETFs give you the
flexibility to buy and sell units throughout the day, on the stock exchanges.