Fundamental & Technical Analysis | Analytics Steps

To understand the business from an investment perspective, there are always two schools of thought that come to mind, people who follow fundamental analysis and those who follow technical analysis. However some investors do both analysis to understand the business from every aspect. Let us understand both in detail.

Fundamental analysis

Fundamental analysis is a method or approach to understand business deeply and separate the daily short term noise in the stock prices to concentrate the underlying business performance. Fundamentally strong companies' stock prices tend to appreciate in the long run and therefore create wealth for the investors.


Fundamental analysis is generally done from a macro to micro perspective in order to identify securities which are not correctly priced by the market. An investor can perform fundamental analysis just by looking at the overall state economy, bond value, interest rate etc.


A fundamental analyst creates a model to estimate the company’s share price based on publicly available information, he can estimate the educated opinion of what the company's share price should be worth compared to the current trading price of the stocks.





There are many fundamental factors that can be considered while calculating the worth of the company and they all can be categorized into two main categories: quantitative and qualitative.


  1. Quantitative: Information that can be shown into the quantity or numbers.

  2. Qualitative: Refers to the quality or standard of something instead of quantity.

Fundamental Analysis Tools


Every fundamental analyst needs tools to evaluate the share price of any stock irrespective of how it is valued by the stock market. Three major tools used by investors to do fundamental analysis are described below:


  1. Financial reports: balance sheet, income statement and cash flow statements

  2. Earnings: quarterly and future projected earnings.

  3. Financial ratios: Earnings per share, price to earnings ratio, projected earnings growth etc.

Technical Analysis


Technical analysts used this method to examine and predict the price movements in the financial markets by using historical stock price charts and market statistics. Technical analysts study the price and volume of the stock to predict the future value of the stocks. Technical analysts analyze that supply and demand of the security can affect the changes in price, volume and its volatility.

Assumptions in Technical Analysis

There are three general assumptions for the discipline.


  1. Market Discounts Everything: Technical analysts believe that a company's fundamental criteria are already considered by the market when pricing the stock.

  2. Price moves in trend: This assumption believes that a stock price continues to follow the past trend than move erratically.

  3. History Repeats itself: Technical analysts believe that market psychology is very predictable and based on many emotions like fear or excitement. Technical analysts use chart patterns to analyze these emotions to understand the trend.
Location: Noida, Uttar Pradesh, India

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