Basic of fundamental & technical analysis

New to investing in equities? Learn all about fundamental & technical analysis to make money


Fundamental analysis and technical analysis are the two major schools of thought when it comes to approaching the markets.


Stock analysis is a method for investors and traders to make intelligent buying and selling decisions. By studying and evaluating past and current data, investors and traders attempt to gain an edge in the markets by making informed decisions.

Fundamental analysis and technical analysis are the two major schools of thought when it comes to approaching the markets.


Fundamental Analysis

Fundamental Analysis is a holistic approach to study a business. When an investor wishes to invest in a business for the long term, it becomes extremely essential to understand the business from various perspectives.

It is critical for an investor to separate the daily short term noise in the stock prices and concentrate on the underlying business performance. Over the long term, the stock prices of a fundamentally strong company tend to appreciate, thereby creating wealth for its investors.

Technical Analysis

Technical analysis differs from fundamental analysis in that the stock's price and volume are the only inputs. The core assumption is that all known fundamentals are factored into the price; thus, there is no need to pay close attention to them.

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.

The Underlying Basic Assumptions in Technical Analysis

1) The market discounts everything

This assumption tells us that, all known and unknown information in the public domain is reflected in the latest stock price. Technical analysts believe that everything from a company’s fundamentals to broad market factors to market psychology is already priced into the stock. The only thing remaining is the analysis of price movements, which technical analysts view as product of supply and demand for a particular stock in the market.

2) Price moves in trends

All major moves in the market are an outcome of a trend, spread over short term, midterm and long term. For example, the recent upward movement in the Nifty Index to 11,350 from 6,825 did not happen overnight. This move has happened in a phased manner, over the last 30 months. Another way to look at it is, once the trend is established, the price moves in the direction of the trend.

3) History tends to repeat itself

Technical analysts believe that history tends to repeat itself. This happens because the market participants consistently react to price movements in a remarkably similar way, each and every time the price moves in a certain direction. For example, in up trending markets, market participants get greedy and want to buy irrespective of the high price. Likewise in a down trend, market participants want to sell irrespective of the low and unattractive prices. This human reaction ensures that the price history repeats itself.

Chart 1- State Bank of India line chart drawn with technical analysis tools



The chart depicted here is called ‘Line Chart’, as it is drawn by connecting only the closing prices of share price of SBI. It helps us to understand stock movement on day to day basis in previous years. The chart also shows a popular price pattern called Rising Channel shaded in light yellow color in SBI and it is taking support from Support trend line and resistance from upper trend line of the price pattern. One can understand trader’s psychology looking at volumes too which is shown at the bottom of chart. Nevertheless chart explains that SBI is in uptrend, and it will trade in a range of 260-300 where traders can apply ‘Buy on Dip’ strategy.

Important tools in Technical Analysis

1) Charts (Candlestick, line, Bar chart etc.)
2) Trendline
3) Oscillators (RSI/Stochastic/MACD etc.)
4) Indicators
5) Price Patterns (Head and shoulder, Channel, Wedge, Flag pattern etc.)


6) Moving Average (200 DMA etc.)

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 as indicated above.


Majority of tools mentioned are indicated inside below Nifty daily candlestick chart.

Chart 2: Nifty candlestick chart with associated trend line, flag pattern, 200 dma, RSI and Stochastic



Application of Technical Analysis

Over the years, analysts have developed numerous technical indicators to help forecast future price movements. Some indicators are focused primarily on identifying the current market trend, including support and resistance areas, while others are focused on determining the strength of a trend and the likelihood of its continuation.

Technical analysts apply technical indicators to charts of various timeframes. Short-term traders may use charts ranging from one-minute timeframes to hourly or four-hour timeframes, while traders analyzing longer-term price movement scrutinize daily, weekly or monthly charts.

Asset Types

Probably one of the most versatile features of technical analysis is the fact you can apply TA on any asset class as long as the asset type has historical time series data e.g. Equities, commodities, foreign exchange, fixed income etc. This is also probably the biggest advantages of technical analyis when compared to the other fields of study.


To sum up we can say that technical analysis is a method of evaluating securities that involve a statistical analysis of market activity, such as price and volume. The most popular forms of technical analysis tools are simple moving averages, support and resistance, trend lines and momentum-based indicators. Technical analysis can be used on various asset classes including equities, commodities, currencies, and bonds.

Happy Investing

Source:Moneycontrol.com

Claiming tax benefit on education loan? 5 things you must know

Claiming tax benefit on education loan? 5 things you must know


The assessment year 2018-19 onwards, revised ITR can be filed at any time during the assessment year or before the assessment made whichever is earlier.


If you have missed out claiming education loan interest in your income tax return you don’t have to feel worried. You can revise your income tax return filing during the assessment year.

Under section 80E of Income tax act, interest paid on education loan qualifies for deduction for a maximum period of 8 consecutive years, starting from the year in which the borrower start repaying, or till the time interest is paid fully, whichever is earlier. For instance, if the entire loan payment is done in 6 years only, then tax deduction will be allowed only for 6 years, instead of 8 years.

In case you missed claiming a deduction for interest repayment of education loan in a particular year, you can still claim it by filing a revised income tax return for that financial year. For those filing returns for the assessment year 2017-18, revised ITR can be filed within a period of one year from the end of that relevant assessment year or before the completion of the assessment by income tax department, whichever is earlier. “The assessment year 2018-19 onwards, revised ITR can be filed at any time during the assessment year (before the end of the Assessment Year) or before the assessment made whichever is earlier. There is no limit on the maximum amount that can be claimed as a deduction,” he clarified.

Six important things to keep in mind about education loans.

• Education loans provide you with a moratorium period so that you can wait until your education is complete before you begin to repay your loan. Adhil Shetty, CEO, Bankbazaar.com said that this is not an interest-free period. The bank charges you a simple interest during this period. “The most prudent option would be to repay this interest. Not only will this help you claim tax benefits, it will keep your principal low and even earn you a cut on the interest rates,” he added. 

• Interest repaid can only be claimed by the individual who has taken the loan, if the income of that individual is chargeable to income tax. 

• You can claim tax benefits only on the interest paid on the education loan and not on the principal. 

• The person who avails the loan can claim deductions. Any individual can take an education loan to finance their own higher education or that of their spouse or children. “ The most important thing you should know is that if you take an education loan for your daughter and repay it, you can claim the tax deduction. However, if your daughter repays the loan from her source of income after she starts earning herself, neither you nor she can claim deductions. This is because the loan is in your name but the repayment is not made out of your taxable income,” said Shetty. 

• If the education loan was taken by the father, then he can claim a deduction for the interest component repaid, provided his income is taxable. However, in case the EMI is shared by the son and father, the father can claim a deduction only up to the share of EMI paid by him. The interest share repaid by son won’t be eligible to be claimed, neither by him nor his father,” he said. 

• Not all education loans are eligible for tax exemptions. Section 80E specifies that only loans from specified financial institutions, including banks and “any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf” are eligible for exemptions. So, if you plan to take a loan from an NBFC, you need to ensure that your loan provider is included in this list.

Happy investing

Source:Moneycontrol.com