Security Analysis (Hindi) | CA Final SFM (New Syllabus) Classes & Video Lectures

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Security analysis is the analysis of tradeable financial instruments called securities. It deals with finding the proper value of individual securities.

Security Analysis involves a systematic analysis of the “Risk-Return” profiles of various securities which is to help a rational investor to estimate a value for a company from all the price sensitive information/data so that the investor can decide whether to “Buy”, “Sell” or “Hold” a security and thereby earn a reasonable rate of return.

• Investment decision depends on securities to be bought, held or sold.
• Buying security is based on
o highest return per unit of risk or
o lowest risk per unit of return.
• A security considered for buying today may not be attractive tomorrow due to management policy changes in the company or economic policy changes adopted by the government.
Therefore, analysis of the security on a continuous basis is a must.


Approaches for Security analysis
Security analysis is broadly classified into:
1. Fundamental Analysis
2. Technical Analysis

In fundamental analysis, factors affecting risk-return characteristics of securities are looked into while in technical analysis, demand/ supply position of the securities along with prevalent share price trends are examined.


Fundamental Analysis
Fundamental analysis is a method of evaluating a security in an attempt to measure its intrinsic value, by examining related economic, financial, and other qualitative and quantitative factors.

Fundamental analysis, is the analysis of a business's financial statements (usually to analyze the business's assets, liabilities, and earnings); health; and its competitors and markets. It also considers the overall state of the economy and factors including interest rates, production, earnings, employment, GDP, housing, manufacturing and management.
Fundamental analysis is based on the assumption that the share prices depend upon the future dividends expected by the shareholders. The present value of the future dividends can be calculated by discounting the cash flows at an appropriate discount rate and is known as the 'intrinsic value of the share'. The intrinsic value of a share, according to a fundamental analyst, depicts the true value of a share. A share that is priced below the intrinsic value must be bought, while a share quoting above the intrinsic value must be sold.

Thus, it can be said that the price the shareholders are prepared to pay for a share is nothing but the present value of the dividends they expect to receive on the share and this is the price at which they expect to sell it in the future.

Components of Fundamental Analysis
1. Economic Analysis
2. Industry Analysis
3. Company Analysis