Fundamental Analysis

Fundamental Analysis (FA) is a holistic approach to study a business. When an investor wishes to invest in a business for the long term (say 3 – 5 years), it becomes 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, a fundamentally strong company’s stock prices tend to appreciate, thereby creating wealth for its investors.

We have many such examples in the Indian stock market. To name a few, one can think of companies such as Infosys Limited, TCS Limited, Page Industries, Eicher Motors, Bosch India, Nestle India, TTK Prestige etc. Each of these companies has delivered an average over 20% compounded annual growth return (CAGR) year on year for over 10 years. At a 20% CAGR, the investor would double his money in roughly about 3.5 years to give you a perspective. Higher the CAGR faster is the wealth creation process. Some companies such as Bosch India Limited have delivered close to 30% CAGR. Therefore, you can imagine the magnitude and the speed at which wealth is created if one would invest in fundamentally strong companies.

Here are long term charts of HDFCBANK, Infosys, and TCS Limited that can set you thinking about long term wealth creation. Do remember these are just 3 examples amongst the many that you may find in Indian markets.


TCS Long Chart- TCS Monthly Charts


Infosys Long Chart – Monthly Chart for Infosys


HDFC BANK Long Chart – Monthly Chart for HDFCBANK