Fundamental vs Technical Analysis: Which Should You Use?
If you’re starting your journey in the Indian stock market, one of the biggest questions you’ll face is: Should I use fundamental analysis or technical analysis? While both are powerful methods to evaluate stocks, they serve different purposes and suit different types of investors.
This guide compares the two in simple terms to help you decide which approach fits your goals.
What Is Fundamental Analysis?
Fundamental analysis evaluates a company’s intrinsic value based on its financial health, business model, industry position, and macroeconomic factors.
Key Components:
- Revenue & Profit Growth
- Earnings Per Share (EPS)
- Price-to-Earnings (P/E) Ratio
- Balance Sheet (Assets, Liabilities)
- Management & Industry Outlook
Ideal For:
- Long-term investors
- Those who want to buy and hold stocks based on company performance
Example: Investing in HDFC Bank after analyzing its consistent earnings and strong fundamentals.
What Is Technical Analysis?
Technical analysis studies price movement and volume using charts and indicators to predict short-term price direction.
Common Tools:
- Candlestick Patterns
- Moving Averages
- RSI (Relative Strength Index)
- MACD (Moving Average Convergence Divergence)
- Support & Resistance Levels
Ideal For:
- Short-term traders
- Swing traders and intraday players
- Timing entry and exit points
Example: Buying TCS when it breaks a resistance level with strong volume.
Key Differences at a Glance
| Factor | Fundamental Analysis | Technical Analysis |
|---|---|---|
| Focus | Company financials & value | Price trends & market psychology |
| Timeframe | Long-term (months to years) | Short to medium term (minutes to weeks) |
| Tools Used | Financial statements, ratios | Charts, patterns, indicators |
| Suitable For | Investors | Traders |
| Example Platform | Screener.in, Moneycontrol | TradingView, Zerodha Kite |
Which One Should You Use?
Use Fundamental Analysis if:
- You want to build long-term wealth
- You prefer lower risk and steady returns
- You’re investing in blue-chip or dividend stocks
Use Technical Analysis if:
- You want to trade stocks actively
- You’re focused on short-term profits
- You can monitor charts regularly
Can You Combine Both?
Yes! Many investors use fundamental analysis to find good companies and technical analysis to decide when to enter or exit.
Example: Buy Infosys (fundamentally strong) when the price breaks above the 50-day moving average (technical trigger).
Tools for Indian Users
- Screener.in: For fundamental ratios and financial reports
- TradingView / Investing.com: For chart analysis
- Moneycontrol & NSE India: For data and news
- Zerodha Kite / Upstox Pro: For combining both methods while placing trades
FAQs
Q1: Is technical analysis reliable for the Indian market?
Yes. Indian stocks follow the same price action principles as global markets.
Q2: Which method is better for beginners?
Start with fundamental analysis if you’re investing. Learn technical analysis gradually if you plan to trade.
Q3: Do professional traders use both?
Absolutely. Even large institutions blend both methods for optimal decision-making.
Q4: Can I trade on technicals alone?
Yes, but always use proper risk management. Pure technical traders often rely on strict chart-based setups.
Q5: How do I learn both methods?
Use free tools like Screener.in for fundamentals and TradingView for technicals. Also, follow blogs like this to stay updated.
