Stocks & Markets are analyzed by using various methods by the learned Researchers & Analysts. All these methods can be broadly classified into three categories - Fundamental Analysis, Technical Analysis & Techno-Fundamental (Tech-Funda) Analysis.

Fundamental Analysis

Fundamental Analysis aims at determining the intrinsic (in-built) worth of the stock or financial security & comparing it with the market price to identify as to whether it is overpriced or under priced. A Fundamentalist would buy a stock or financial security if it is under priced & sell if it is over priced.

Fundamentalists firmly believe that sooner or later, market price will be equal to the intrinsic worth of the stock or financial security. Global Market Analysis, Economic Analysis, Industry Analysis & Corporate Analysis - are the levels at which Fundamental Analysis is carried out. Balance Sheet Analysis, Profit & Loss Account Analysis by using various ratios like EPS, PE, CR, IRRI etc are only the basic fundamentals used at the Corporate level Analysis, which are considered by many as the basic indicators.

Foreign Institutional Investors (FII), Banks, Mutual Funds etc. have their teams of researchers & trained fundamental analysts who are capable of carrying out detailed fundamental analysis with the help of sophisticated information systems. Similarly, these institutions have 5 to 15 years of long term investment strategies. Therefore fundamental analysis is more suitable for them.

Individual investors are not capable of carrying out Global Market Analysis, Economic Analysis, Industry Analysis & Corporate Analysis in details due to limited resources. Similarly, individual investors can not wait for earning returns after 5 to 15 years. Therefore, fundamental analysis has limited use for individual & common investors.

Technical Analysis

Technical Analysis aims at analyzing the Markets, Stocks & Financial Securities by considering only two factors - Prices & Volume (Number of stocks / securities bought & sold). Technical Analysis is more of an Art than a Science of Analyzing Charts of the securities for identifying prevailing Trends.

Institutions create the trends (tides) because of their voluminous investments & technicians (Technical Analysts) ride those tides, at the earliest, to make profits. "Ride the tides to make profits and skip off the tides when there is a slide", is the modus operendi of Technical Analysts.

The beauty of Technical Analysis is in its simplicity & effectiveness. Any individual of even average educational background can learn Technical Analysis. Technical Analysis is effective in analyzing stock markets, commodities markets, debt markets, derivatives market & foreign markets. In the globalized urban scenario, every intelligent investor must at least have working, if not expert, knowledge of Technical Analysis.

Technical Analysis is not a flaw less Art of taking investment decisions. One of the major drawbacks of this Art is delayed decisions. Unless the trend gets established, a technician can not take decision but one must admit that these decisions are more reliable with exact entry & exit levels, which is not possible with fundamental analysis. Timing the entry & exit is the real strength of technical analysis.

For short and medium term trading and investment, there is no substitute to Technical Analysis. For long term investments, Techno-Fundamental Analysis is best suited for the common and individual investors.

Tech-Funda Analysis

This approach is by far the best & more suitable to the common individual investors, having long term perspective. In this approach, stocks or securities are identified by using technicals but before taking the investment decisions a few selected fundamentals are checked. The fundamentals such as size of equity, owner's equity holding, institutional holding, floating stock, dividend and bonus history, operating & net profit trend, position of free reserves are considered. When technicals are favourable and so are these fundamentals, the investors can invest with conviction for long term.

equitymonk is the Institute of Research in Tech-Funda Analysis. Researchers in this institute conduct extensive research of the Indian Equity Market to identify Trading & Investment opportunities that could be profitably used by the subscribers.