--> Best Online Share Trading Company in Indore

About Us
Help Desk
Contact Us
Sign In
  • Home
  • blogs
  • Fundamental Analysis in Stock Market

Fundamental Analysis in Stock Market

Fundamental Analysis in Stock Market


While choosing the correct firm can be challenging, investing in stocks can be simple. You must evaluate the firm and its future through a variety of lenses if you want to earn the number of co gains or buy shares on a long-term basis. 


You cannot rely on its stock market price's daily fluctuations. Your choice to buy should be based on something far more specific. 


The majority of long-term investors evaluate stock value using a variety of techniques. The fundamental examination of equities is one such technique covered in this article.


What is Fundamental Analysis?


The stock prices change every day. The stock's current market value may be cheap or overvalued. Investing based on the stock's current price could not produce the desired outcomes. Consequently, fundamental analysis enters the scene.


Fundamental analysis is a technique for analysing a company's health. It measures the market price or actual value of the stock using financial and economic considerations. 


Short-term information regarding the business or the stock is avoided. Investors can determine if a stock is a good deal or not based on its real value. The company or stock is overvalued if the current market price exceeds the intrinsic value. 


It is undervalued if the current market price is less than the inherent value.


Types of Fundamental Analysis


Qualitative analysis


The qualitative analysis, as the name implies, takes into account a firm's qualitative factors including goodwill, demand, consumer behavior, company recognition in the larger market, competitive analysis, and brand value. 


Additionally, it tries to assess the management's performance, the effect of their choices on the market, and their socioeconomic standing. Typically, qualitative analysis is viewed as being subjective.


Quantitative analysis


Quantitative analysis is related to the measurable characteristics of a business. Hence, the biggest source of quantitative analysis is financial statements. 


Quantitative analysis is about statistics, reports, and data. It considers statements, balance sheets, cash flows, debt, quarterly performance, and many financial ratios to understand the company’s overall financial health and determine the share’s price. 


Pros of fundamental analysis


  • For the long-term investing strategy, it is helpful.


  • With fundamental analysis, you may learn when and where to invest for great returns over the long term.


  • Both qualitative and quantitative analysis are included in the fundamental analysis. It assists in giving a thorough understanding of the functioning of the organisation.


Importance of Fundamental Analysis


Fundamental analysis, the backbone of investing, aids in better decision-making. You may evaluate a stock's fair value by performing a fundamental analysis on it. 


Additionally, using stock fundamental analysis, you can assess any organisation's health and performance using key figures and significant economic indicators.


You can estimate future price changes and determine if a stock is undervalued or overvalued by using fundamental securities research. Moreover, it helps in the analysis of a company's competitive advantage and strength.


Understanding a company's business model and how its management functions—both of which are necessary for coming to a wise investment decision—can be gained via fundamental analysis of stocks.


Tools used in fundamental analysis


To ascertain the true value of a stock, investors use a wide variety of instruments. This comprises:


  • Monetary reports (balance sheets, income statements, cash flow statements)


  • Earnings (quarterly earnings and expected future earnings) 


  • Monetary ratios (Earnings per share, price-to-earnings ratio, return on equity)


To better understand how fundamental research is utilised to make money in the stock market, let's look at an example.


Varun is a stock market investor. He notices that the market price of the stock "X" is Rs 90. He is interested in learning the intrinsic worth of the stock using fundamental research. 


Varun  discovers that the stock has the potential to increase to Rs 110 in the upcoming 12 months after carefully examining the company's financial statements, earnings ratios, and general business health.


Varun is able to determine the intrinsic value of the stock in this method. 


He decides to "purchase" it since he realises it is undervalued in the market and will gain profit from it in the future.


Difference between Fundamental analysis and Technical analysis


Investors utilise both fundamental and technical analysis to make decisions about their stock market investments. The strategy is quite different, though.


Fundamental Analysis

Technical Analysis

Examines stock value in context of financial and economic issues.

Uses previous stock movement analysis to forecast a stock's price in the future

Long-term strategy

Short-term strategy

Financial statements are used for analysis.

Price movement charts are used for analysis.

Includes fresh market data

Mostly focuses on past performance




The process of fundamental analysis involves some reading and statistical calculation. Contrary to popular belief, however, it is not just employed by specialists and professionals. The market's fundamental examination is helpful to all investors.


You can take the guidance from the professional at TradingBells to know more about the Fundamental Analysis in stocks.


Tip: Review atleast 5 latest annual report of the company, look at the finance. Look at the products. Look at the technology & most important, look at the company’s vision.


Related Blogs

Issued in the interest of investors: Prevent Unauthorised transactions in your trading and Demat account. Update your mobile numbers/email IDs with Tradingbells. Receive alerts and information of all debit and other important transactions in your trading and Demat account directly from Exchange/Depository on your mobile/email at the end of the day. KYC is a onetime exercise while dealing in securities markets. Once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.

No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries of refund as money remains in investor's account.

2021-22, TradingBells All rights reserved