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A STUDY ON THE AWARENESS OF DERIVATIVES

AND ITS COMPARISON WITH EQUITY

AT

RELIGARE SECURITIES LTD.(In Partial Fulfilment for the degree of MBA International Business fromPondicherry University, Pondicherry)

BY

Mr. MANZAR ANIS

Register No: 1095629

Under the guidance of

Mr. SACHIN CHAWLA Mr. RAJEESH VISHWANATH

Industrial guide Faculty Advisor cum GuideBranch Manager Department of international businessReligare securities ltd Pondicherry University New Delhi (Janakpuri) Pondicherry

PONDICHERRY CENTRAL UNIVERSITYDepartment of International BusinessPondicherry 605014

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CONTENTS

Chapter No. Title Page No.Declaration from student 4

Certificate from Guide 5Acknowledgement 6

List if abbreviations 7Executive summary 8

1 Introduction

1.1 Background of the study 9

1.2 Company Profile 13

Company History 14 Top management 16

Competitiveadvantage of

Religare

16

1.3 Need of the Study 18

1.4 Objective of the Study 18

1.5 Methodology of the Study 18

1.6 Limitation of the Study 19

2 Data Processing &Analysis

20

2.1 Equity 21 Benefits from

equity21

Risk in equityinvestment

22

How to overcomefrom risk

23

Process ofdiversification

23

Selection of shares 24 Types of cash 24

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market margin

2.2 Derivatives 27 Factors driving the

growth ofderivative

27

Types ofderivatives

28

Types of trades inderivative

39

Types of F& Omargin

40

3 ResearchMethodology

43

4 Analysis 46

5 Interpretation 56

6 Recommendationsand suggestions

57

7 Bibliography 58

8 Annexure 59

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DECLARATION

I hereby state that the Project Report titled Awareness of derivatives and its

comparison with equity submitted in partial fulfillment of the degree ofMasters of

Business Administration (International Business) is an original work done entirely by

me and is based entirely on my own observations. It has not previously formed the basis

for the award of any other degree, diploma, fellowship or any other similar title. The facts

presented here are true to the best of my knowledge.

Place: Pondicherry

Date:

Manzar Anis

M.B.A (International Business)

Department of International Business

School Of Management

PONDICHERRY UNIVERSITY

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Department of International Business School of Management, Pondicherry University

Pondicherry-605014

CERTIFICATE

This to certify that Mr. MANZAR ANIS, a student of MBA-International Business session 2009-

11 has successfully completed his project in RELIGARE SECURITIES LTD. , NEW DELHI

(JANAKPURI) . His period of training was for eight weeks that commenced from 11th May

2010 to 29th June 2010. He has prepared the training report titled Awareness of derivatives

and its comparison with equity for the requirement of the concern and for the Master of

Business Administration (International Business) programme in the Department of

International Business, School of Management, Pondicherry University during the period of

study in the academic year 2009-11.

Mr.Rejeesh Vishwanathan Dr.Mohan K. Pillai

Academic Guide Head Of the DepartmentDepartment of International Business Department of International BusinessSchool of Management School of ManagementPONDICHERRY UNIVERSITY PONDICHERRY UNIVERSITY

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ACKNOWLEDGEMENT

Would it be all-envisaging to offer salutations at the feet of the Lord, who kindly imbued

the energy and enthusiasm through ramifying paths of thick and thin of my efforts.

This project is an authenticated work of mine prepared on training report at RELIGARE

SECURITIES LTD. , NEW DELHI (JANAKPURI). I would like to take this opportunity to

thank all the people, who extended their immense help to complete my project.

I would like to express my gratitude to Mr. SACHIN CHAWLA,Branch Manager,

RELIGARE SECURITIES LTD., NEW DELHI (JANAKPURI). , who spent his valuable

time to discuss about the project and his continuous co- operation helped me to get on with the

project on a full swing without much hassles.

I express my sincere thanks to Dr. RAMADAS, DEAN, School Of Management and also

I express my sincere thanks to Department Head, Dr.MOHAN.K.PILLAI, Department of

International Business, School Of Management. and Mr. RAJEESH VISHWANATHAN,

Reader, Department of International Business, School Of Management. I humbly submit mythanks for his guidence and support through out this project.

Mr .Manzar Anis

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List of Abbreviations

Abbreviation Full FormBSE Bombay stock Exchange

CDSL Central depository services limited

DP Depository Participant

EPS Earnings per share

EWMA Exponentially weighted moving average

FIIs Foreign institutional investors

F & O Futures & Options

IPO Initial Public Offering

LN Natural log

MTM Mark to market

NAV Net asset value

NSDL National securities depository limited

P/E ratio Price per earnings ratio

RBI Reserve bank of India

SCRA Securities contract regulation act

SEBI Securities & Exchange board of IndiaSRO Self-regulatory organization

VaR Value at Risk

FICCI Federation of Indian Chambers ofCommerce and Industry

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http://www.google.co.in/url?sa=t&source=web&ct=res&cd=3&ved=0CBgQFjAC&url=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FFederation_of_Indian_Chambers_of_Commerce_and_Industry&rct=j&q=FICCI&ei=tCopS7-TMs-LkAXC09GFDQ&usg=AFQjCNHSuzPIPkaOhtEVw1J0ENTSv7Dr8ghttp://www.google.co.in/url?sa=t&source=web&ct=res&cd=3&ved=0CBgQFjAC&url=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FFederation_of_Indian_Chambers_of_Commerce_and_Industry&rct=j&q=FICCI&ei=tCopS7-TMs-LkAXC09GFDQ&usg=AFQjCNHSuzPIPkaOhtEVw1J0ENTSv7Dr8ghttp://www.google.co.in/url?sa=t&source=web&ct=res&cd=3&ved=0CBgQFjAC&url=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FFederation_of_Indian_Chambers_of_Commerce_and_Industry&rct=j&q=FICCI&ei=tCopS7-TMs-LkAXC09GFDQ&usg=AFQjCNHSuzPIPkaOhtEVw1J0ENTSv7Dr8ghttp://www.google.co.in/url?sa=t&source=web&ct=res&cd=3&ved=0CBgQFjAC&url=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FFederation_of_Indian_Chambers_of_Commerce_and_Industry&rct=j&q=FICCI&ei=tCopS7-TMs-LkAXC09GFDQ&usg=AFQjCNHSuzPIPkaOhtEVw1J0ENTSv7Dr8g


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EXECUTIVE SUMMARY

The project is about the study of brand awareness of RELIGARE SECURIRTIES LIMITED

among investors. It gives the knowledge of market position of the company. I studied as to how

this company proves to an option for the investors, by studying the performance of investing in

equity & derivative for few months considering their analysis. I selected area of COMPARITIVE

ANALYSIS OF EQUITY & DERIVATIVE, which attract different kinds of investors to invest

in equity derivative and to face high risk and get high returns. The major findings of the project

are to overview of the comparison of equity cash segment and equity derivative segment,

overview of the equity and F & O segment from May 2009 to June 2009. The methodology of

the project here is to analyze the Equity & Derivative performance based on NAV, EPS and

other things. In this project I also included my practical situation during the project internship,

that how the market goes up and down and why it happens.

The methodology of the project here is to analyze the investment opportunities available for

those investors & study the returns & risk involved in various investment opportunities and also

study of investment management & risk management. So for that we have to study & analyze theperformance of Equity & Derivative in the market. We know that there is a high risk, high return

in equity but in a long time only. While in derivative there is a high risk, high return in the short

term, because derivative contract is for short time for 1/2/3 months only. So this project included

different types of returns, margin & risk involved in equity, and types, need, use & margin

involved in the derivatives market and also participants & terms use in derivative market.

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1. INTRODUCTION

1.1Background of the study:

The oldest stock exchange in Asia (established in 1875) and the first in the country to be granted

permanent recognition under the Securities Contract Regulation Act, 1956, Bombay Stock

Exchange Limited (BSE) has had an interesting rise to prominence over the past 133 years. A lot

has changed since 1875 when 318 persons became members of what today is called Bombay

Stock Exchange Limited paying a princely amount of Re 1. In 2002, the name "The Stock

Exchange, Mumbai" was changed to Bombay Stock Exchange. Subsequently on August 19,

2005, the exchange turned into a corporate entity from an Association of Persons (AoP) and

renamed as Bombay Stock Exchange Limited.

BSE, which had introduced securities trading in India, replaced its open outcry system of trading

in 1995, with the totally automated trading through the BSE Online trading (BOLT) system. The

BOLT network was expanded nationwide in 1997.

Since then, the stock market in the country has passed through both good and bad periods. The

journey in the 20th century has not been an easy one. Till the decade of eighties, there was no

measure or scale that could precisely measure the various ups and downs in the Indian stock

market. Bombay stock Exchange Limited (BSE) in 1986 came out with a stock Index that

subsequently became the barometer of the Indian Stock Market.

SENSEX first compiled in 1986 was calculated on a Market Capitalization Weighted

methodology of 30 component stocks representing a sample of large, well established and

financially sound companies. The base year of SENSEX is 1978-79. The index is widely

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reported in both domestic and international markets through prints as well as electronic media.

SENSEX is not only scientifically designed but also based on globally accepted construction and

review methodology. From September 2003, the SENSEX is calculated on a free-float market

capitalization methodology. The free-float Market Capitalization-Weighted methodology is a

widely followed index construction methodology on which majority of global equity benchmarks

are based.

The growth of equity markets in India has been phenomenal in the decade gone by Right from

early nineties the stock market witnessed heightened activity in terms of various bull and bear

runs. The SENSEX captured all these happenings in the most judicial manner. One can identify

the booms and bust of the Indian equity market through SENSEX.

The Exchange also disseminates the Price-Earnings Ratio, the Price to Book Value Ratio and the

Dividend Yield Percentage on day-to-day basis of all its major indices.

The value of all BSE indices are every 15 seconds during the market hours and displayed

through the BOLT system. BSE website and news wire agencies.

All BSE-Indices are reviewed periodically by the Index Committee of the Exchange. The

Committee frames the broad policy guidelines for the development and maintenance of all BSE

indices. Department of BSE Indices of the exchange carries out the day to day maintenance of all

indices and conducts research on development of new indices.

Institutional investors, money managers and small investors all refer to the Sensex for their

specific purposes The Sensex is in effect the substitute for the Indian stock markets. The

country's first derivative product i.e. Index-Futures was launched on SENSEX.

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PERFORMANCE OF SENSEX FROM 1991

11

Year Open high low Close

1991 1,027.38 1,955.29 947.141 1,908.85

1992 1,957.33 4,546.58 1,945.48 2,615.37

1993 2,617.78 3,459.07 980.06 3,346.06

1994 3,436.87 4,643.31 3,405.88 3,926.90

1995 3,910.16 3,943.66 2,891.45 3,110.491996 3,114.08 4,131.22 2,713.12 3,085.20

1997 3,096.65 4,605.41 3,096.65 3,658.98

1998 3,658.34 4,322 2,741.22 3,055.41

1999 3,064.95 5,150.99 3,042.25 5,005.82

2000 5,209.54 6,150.69 3,491.55 3,972.12

2001 3,990.65 4,462.11 2,594.87 3,262.33

2002 3,262.01 3,758.27 2,828.48 3,377.28

2003 3,383.85 5,920.76 2,904.44 5,838.96

2004 5,872.48 6,617.15 4,227.50 6,602.69

2005 6,626.49 9,442.98 6,069.33 9,397.93

2006 9,422.4914,035.3

0 8,799.01 13,786.91

2007

13,827.77

20,498.11

12,316.10 20,286.99

200820,325.2

721,206.7

7 7,697.39 9,647.31

2009 9,720.55 14,493.84*


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*As of 30/June/2009

GRAPH SHOWING SENSEX PERFORMANCE

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1.2 COMPANYS PROFILE

Companys History

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Religare is one of the leading integrated financial services institutions od India. Religare is

promoted by the promotion of Ranbaxy Laboratories Limited. The comapn offers large and

diverse bouuet of services ranging from equties, derivatives, commodities, insurance

broking, to wealth advisory, portfolio managemnt services, personal finacial services

Investment banking and institutuonal broking services. The services are broadly clubbed

across three key business verticals- Retail, wealth mangement and the institutional specturm.

Religare retail network spreads across the length and the breadth of the country with it

presence through more than 1,217 locations across more than 392 cities and towns. The

company has a represenattive office in London. Having spread itself fairly well across the

country and with the promises of not resting on its laurels, it has also aggresively started

eyeing global geographies.

An Overview of a Religare Enterprise Limited

Religare Enterprise Limited Fortis healthcare Limited

Super Religare Laborataries Limited Religare Wellness Limited(formerly SRL Ranbaxy) (formerly Fortis Healthworld)

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Religare Technova Limited

Religare Voyages Limited

Religare Financial Services Group Overview:-

Religare Enterprise Limited

Their Joint Ventures

Life Insurance Business Asset management business(Aegon as a Partner) (Aegon as a Partner)

Private Wealth Business Indias First SEBI approved Film

(Macquire, Australian Financial Services Major Fund (Vistaar as a Partner)As a partner)

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REL Vision and Mission

Top Management Team

Mr. Sunil Godhwani- CEO & Managing Director, Religare Enterprises Limited.Mr. Shacindra Nath- Group Chief operating Officer, Religare Enterprises Limited.Mr. Anil Saxena- Group Chief Operating Officer, Religare Enterprises Limited.

Competitive advantage of Religare

Lowest Brokerage

Online Money Transfer.

Daily Confirmation Calls.

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To build Religare as a globally trusted brand inthe financial services domain and present it asthe Investment Gateway of India.

VISIONVISION

MISSION Providing financial care driven by the core

values of diligence and transparency.MISSION

Religare is driven by ethical and dynamicprocesses for wealth creation.

BRAND

ESSENCEBRAND

ESSENCE


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Daily Contract Notes.

Different Kinds of Accounts like, R-Ally, R-Ally Lite, R-Ally Pro etc.

Providing Funding Facility.

REL & its subsidiaries

Structurally, all businesses are operated through various subsidiaries of the holdingcompany, Religare Enterprises Limited.

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1.3 NEED OF THE STUDY

Different kinds of investors to invest in equity & derivative and to face high risk and

get high returns.

Company proves to an option for the investors.

Studying the performance of investing equity & derivative for few months

considering their analysis.

1.4 OBJECTIVE OF THE STUDY

Any investors vision is a long term investment ad short term investment and gets highreturns by bearing high risk. For that objective need to be climbed successfully an so

objectives of this project are,

1) To find the RIGHT SCRIPT to buy and sell at the RIGHT TIME

2) To get good return.

3) To know how derivatives can be use for hedging.

4) To know the outcome of Equity and Derivative.

5) How to achieve Capital appreciations.

1.5 METHODOLOGY OF THE PROJECT

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Defining objective wont suffice unless and until a proper methodology is to achieve the

objectives.

1) Analyzing and observing the investment opportunities.

2) Analyzing the performance of Equity and Derivative market with the help of NAV,

EPS, P/E ratio etc.

1.6 LIMITATIONS OF THE STUDY

This project was restricted for two months; hence exhaustive data is not available upon

which conclusions can be relied.

1) Investment in Securities carry risk so investment in Equity & Derivative is also

carrying risk on the basis of the market.

2) Factors affecting the Market Price of Investment may be due to Market forces,

performance of the companies is not possible, and so all the data is not available.

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2. DATA PROCESSING & ANALYSIS

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2.1 Equity

Total equity capital of a company is divided into equal units of small denominations, each calleda share.

It is a stock or any other security representing an ownership interest.

It proves the ownership interest of stock holders in a company.

For example:-

In a company the total equity capital of Rs 2, 00, 00,000 is divided into 20, 00,000

units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is said to

have 20, 00,000 equity shares of Rs 10 each.The holders of such shares are members of the

company and have voting rights.

Benefits from Equity

The benefits distributed by the company to its shareholders can be: 1) Monetary Benefits and 2)

Non Monetary Benefits.

1. Monetary Benefits:

A. Dividend: An equity shareholder has a right on the profits generated by thecompany. Profits are distributed in part or in full in the form of dividends.

Dividend is an earning on the investment made in shares, just like interest in case

of bonds or debentures. A company can issue dividend in two forms: a) Interim

Dividend and b) Final Dividend. While final dividend is distributed only after

closing of financial year; companies at times declare an interim dividend during a

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financial year. Hence if X Ltd. earns a profit of Rs 40 crore and decides to

distribute Rs 2 to each shareholder, a holding of 200 shares of X Ltd. would

entitle you to Rs 400 as dividend. This is a return that you shall earn as a result of

the investment made by you by subscribing to the shares of X Ltd.

B. Capital Appreciation: A shareholder also benefits from capital appreciation.

Simply put, this means an increase in the value of the company usually reflected

in its share price. Companies generally do not distribute all their profits as

dividend. As the companies grow, profits are re-invested in the business. This

means an increase in net worth, which results in appreciation in the value of

shares. Hence, if you purchase 200 shares of X Ltd at Rs 20 per share and hold

the same for two years, after which the value of each share is Rs 35. This means

that your capital has appreciated by Rs 3000.

2. Non-Monetary Benefits: Apart from dividends and capital appreciation, investments in

shares also fetch some type of non-monetary benefits to a shareholder. Bonuses and

rights issues are two such noticeable benefits.

A. Bonus: An issue of bonus shares is the distribution free of cost to the shareholders

usually made when a company capitalizes on profits made over a period of time.

Rather than paying dividends, companies give additional shares in a pre-defined

ratio. Prima facie, it does not affect the wealth of shareholders. However, in

practice, bonuses carry certain latent advantages such as tax benefits, better future

growth potential, and an increase in the floating stock of the company, etc. Hence

if X Ltd decides to issue bonus shares in a ration of 1:1, every existing

shareholder of X Ltd would receive one additional share free for each share held

by him. Of course, taking the bonus into account, the share price would also

ideally fall by 50 percent post bonus. However, depending upon market

expectations, the share price may rise or fall on the bonus announcement.

B. Rights Issue: A rights issue involves selling of ordinary shares to the existing

shareholders of the company. A company wishing to increase its subscribed

capital by allotment of further shares should first offer them to its existing

shareholders. The benefit of a rights issue is that existing shareholders maintain

control of the company. Also, this results in an expanded capital base, after which

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the company is able to perform better. This gets reflected in the appreciation of

share value.

Risks In equity investment:

Although an equity investment is the most rewarding in terms of returns generated, certain risks

are essential to understand before venturing into the world of equity.

Market/ Economy Risk.

Industry Risk.

Management Risk.

Business Risk.

Financial Risk

Exchange Rate Risk.

Inflation Risk.

Interest Rate Risk.

How to overcome risks:

Most risks associated with investments in shares can be reduced by using the tool of

diversification. Purchasing shares of different companies and creating a diversified portfolio has

proven to be one of the most reliable tools of risk reduction.

The process of Diversification:

When you hold shares in a single company, you run the risk of a large magnitude. As your

portfolio expands to include shares of more companies, the company specific risk reduces. The

benefits of creating a well diversified portfolio can be gauged from the fact that as you add more

shares to your portfolio, the weightage of each companys share gets reduced. Hence any adverse

event related to any one company would not expose you to immense risk. The same logic can be

extended to a sector or an industry. In fact, diversifying across sectors and industries reaps the

real benefits of diversification. Sector specific risks get minimized when shares of other sectors

are added to the portfolio. This is because a recession or a downtrend is not seen in all sectors

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together at the same time.

However all risks cannot be reduced:

Though it is possible to reduce risk, the process of equity investing itself comes with

certain inherent risks, which cannot be reduced by strategies such as diversification. These risks

are called systematic risk as they arise from the system, such as interest rate risk and inflation

risk. As these risks cannot be diversified, theoretically, investors are rewarded for taking

systematic risks for equity investment.

Selection of Shares:

Proper selections of shares are of two types:-

1. Fundamental analysis:

It involves in depth study and analysis of the prospective company whose shares

we want to buy, the industry it operates in and the overall market scenario. It can be done

by reading and assessing the companys annual reports, research reports published by

equity research houses, research analysis published by the media and discussions with the

companys management or the other experienced investors.

2. Technical analysis :

It involves studying the prices movement of the stock over an extended period of

time in the past to judge the trend of the future price movement. It can be done by

software programs, which generate stock prices charts indicating upward. Downward and

sideways movements of the stock price over the stipulated time period.

Types of Cash market margin

1. Value at Risk (VaR) margin.

2. Extreme loss margin

3. Mark to market Margin

1. Value at Risk (VaR) margin :

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VaR Margin is at the heart of margining system for the cash market segment.

VaR is a technique used to estimate the probability of loss of value of an asset or group of

assets (for example a share or a portfolio of a few shares), based on the statistical analysis

of historical price trends and volatilities.

A VaR statistic has three components: a time period, a confidence level and a loss amount

(Or loss percentage). Keep these three parts in mind as we give some examples of

variations of the question that VaR answers:

With 99% confidence, what is the maximum value that an asset or portfolio

may lose over the next day?

Example:-

Suppose shares of a company bought by an investor. Its market value today is Rs.50 lakhs but its

market value tomorrow is obviously not known. An investor holding these shares may, based on

VaR methodology, say that 1-day VaR is Rs.4 lakhs at 99% confidence level. This implies that

under normal trading conditions the investor can, with 99% confidence, say that the value of the

shares would not go down by more than Rs.4 lakhs within next 1-day.

In the stock exchange scenario, a VaR Margin is a margin intended to cover the largest loss (in

%) that may be faced by an investor for his / her shares (both purchases and sales) on a single

day with a 99% confidence level. The VaR margin is collected on an upfront basis (at the time of

trade).

How is VaR margin calculated?

VaR is computed using exponentially weighted moving average (EWMA) methodology. Based

on statistical analysis, 94% weight is given to volatility on T-1 day and 6% weight is given to

T day returns. To compute, volatility for January 1, 2008, first we need to compute days return

for Jan 1, 2009 by using LN (close price on Jan 1, 2009 / close price on Dec 31, 2008).

Take volatility computed as on December 31, 2008. Use the following formula to calculate

volatility for January 1, 2009:

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Square root of [0.94*(Dec 31, 2008 volatility)*(Dec 31, 2008 volatility)+ 0.06*(January 1,

2009 LN return)*(January 1, 2009 LN return)]

Example:

Share of ABC Ltd

Volatility on December 31, 2008 = 0.0314

Closing price on December 31, 2008 = Rs. 360 Closing price on January 1, 2009 = Rs. 330

January 1, 2009 volatility =

Square root of [(0.94*(0.0314)*(0.0314) + 0.06 (0.08701)* (0.08701)] = 0.037 or 3.7%

How is the Extreme Loss Margin computed?

The extreme loss margin aims at covering the losses that could occur outside the coverage of

VaR margins.

The Extreme loss margin for any stock is higher of 1.5 times the standard deviation of daily LN

returns of the stock price in the last six months or 5% of the value of the position.

This margin rate is fixed at the beginning of every month, by taking the price data on a rolling

basis for the past six months.

Example:

In the Example given at question 10, the VaR margin rate for shares of ABC Ltd. was 13%.

Suppose the 1.5 times standard deviation of daily LN returns is 3.1%. Then 5% (which is higher

than 3.1%) will be taken as the Extreme Loss margin rate.

Therefore, the total margin on the security would be 18% (13% VaR Margin + 5% Extreme Loss

Margin). As such, total margin payable (VaR margin + extreme loss margin) on a trade of Rs.10

lakhs would be 1, 80,000/-

How is Mark-to-Market (MTM) margin computed?

MTM is calculated at the end of the day on all open positions by comparing transaction price

with the closing price of the share for the day.

Example:

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A buyer purchased 1000 shares @ Rs.100/- at 11 am on January 1, 2008. If close price of the

shares on that day happens to be Rs.75/-, then the buyer faces a notional loss of Rs.25, 000/ - on

his buy position. In technical terms this loss is called as MTM loss and is payable by January 2,

2008 (that is next day of the trade) before the trading begins.

In case price of the share falls further by the end of January 2, 2008 to Rs. 70/-, then buy position

would show a further loss of Rs.5, 000/-. This MTM loss is payable.

In case, on a given day, buy and sell quantity in a share are equal, that is net quantity position is

zero, but there could still be a notional loss / gain (due to difference between the buy and sell

values), such notional loss also is considered for calculating the MTM payable.

MTM Profit/Loss = [(Total Buy Qty X Close price)]- Total Buy Value] - [Total Sale Value -

(Total Sale Qty X Close price)].

2.2 Derivatives

Derivative is a product whose value is derived from the value of one or more

basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner.

The underlying asset can be equity, forex, commodity or any other asset. For example, wheat

farmers may wish to sell their harvest at a future date to eliminate the risk of a change in prices

by that date. Such a transaction is an example of a derivative. The price of this derivative is

driven by the spot price of wheat which is the "underlying".

In the Indian context the Securities Contracts (Regulation) Act, 1956 (SCRA) defines

"derivative" to include:-

1. A security derived from a debt instrument, share, loan whether secured or unsecured, risk

instrument or contract for differences or any other form of security.

2. A contract which derives its value from the prices, or index of prices, of underlying securities.

Derivatives are securities under the SC(R) A and hence the trading of derivatives is governed by

the regulatory framework under the SC(R) A.

Factors driving the growth of derivatives

Over the last three decades, the derivatives market has seen a phenomenal growth. A large

variety of derivative contracts have been launched at exchanges across the world. Some of the

factors driving the growth of financial derivatives are:

1. Increased volatility in asset prices in financial markets,

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Limitations of Forward Contract

Forward markets world-wide are afflicted by several problems:

Lack of centralization of trading,

Illiquidity, and

Counterparty risk

In the first two of these, the basic problem is that of too much flexibility and generality. The

forward market is like a real estate market in that any two consenting adults can form contracts

against each other. This often makes them design terms of the deal which are very convenient in

that specific situation, but makes the contracts non-tradable.

Counterparty risk arises from the possibility of default by any one party to the transaction. When

one of the two sides to the transaction declares bankruptcy, the other suffers. Even when forward

markets trade standardized contracts, and hence avoid the problem of illiquidity, still the

counterparty risk remains a very serious issue.

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2. Future Contracts:

Futures markets were designed to solve the problems that exist in forward markets. A futures

contract is an agreement between two parties to buy or sell an asset at a certain time in the future

at a certain price. But unlike forward contracts, the futures contracts are standardized and

exchange traded. To facilitate liquidity in the futures contracts, the exchange specifies certain

standard features of the contract. It is a standardized contract with standard underlying

instrument, a standard quantity and quality of the underlying instrument that can be delivered, (or

which can be used for reference purposes in settlement) and a standard timing of such settlement.

A futures contract may be offset prior to maturity by entering into an equal and opposite

transaction. More than 99% of futures transactions are offset this way.

The standardized items in a futures contract are:

Quantity of the underlying

Quality of the underlying

The date and the month of delivery

The units of price quotation and minimum price change

Location of settlement

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The payoff from a long position in a forward contract is

P = S - X,

where S is a spot price of the security at time of contract maturity, X is the delivery price.

Similarly, the payoff from a short position is

P = X - S.

For example, let's say the current price of the stock is $80.00 and we entered in forward contract

to buy this stock in 3 months time for $81.00 (that means we hope that price will not fall lower

than $81.00). If after three months price is more than $81.00, let's say $83.00, than we can buy

the same stock for $81.00 (as stated by forward contract) and after reselling it on the market our

payoff will be

P = $83.00 - $81.00 = $2.00

If at forward maturity the stock price falls to $78.00, than our loss will be

P = $81.00 - $78.00 = $3.00

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The graphs above illustrate the forward contract payoff patterns for long and short positions.

Distinction between futures and forwards

Futures Forwards

Trade on an organized exchange OTC in nature

Standardized contract terms Customized contract terms

hence more liquid hence less liquid

Follows daily settlement Settlement happens at end of period

Future terminology

Spot price: The price at which an asset trades in the spot market.

Futures price: The price at which the futures contract trades in the futures market.

Contract cycle: The period over which a contract trades. The index futures contracts on the NSE

have one- month, two-month and three months expiry cycles which expire on the last Thursday

of the month. Thus a January expiration contract expires on the last Thursday of January and a

February expiration contract ceases trading on the last Thursday of February. On the Friday

following the last Thursday, a new contract having a three- month expiry is introduced for

trading.

Expiry date: It is the date specified in the futures contract. This is the last day on which the

contract will be traded, at the end of which it will cease to exist.

Contract size: The amount of asset that has to be delivered less than one contract. Alsocalledas

lotsize.

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Basis: In the context of financial futures, basis can be defined as the futures price minus the spot

price. There will be a different basis for each delivery month for each contract. In a normal

market, basis will be positive. This reflects that futures prices normally exceed spot prices.

Cost of carry: The relationship between futures prices and spot prices can be summarized in

terms of what is known as the cost of carry. This measures the storage cost plus the interest that

is paid to finance the asset less the income earned on the asset.

Initial margin: The amount that must be deposited in the margin account at the time a futures

contract is first entered into is known as initial margin.

Marking-to-market: In the futures market, at the end of each trading day, the margin account is

adjusted to reflect the investor's gain or loss depending upon the futures closing price. This is

called marking-to-market.

Maintenance margin: This is somewhat lower than the initial margin. This is set to ensure that

the balance in the margin account never becomes negative. If the balance in the margin account

falls below the maintenance margin, the investor receives a margin call and is expected to top up

the margin account to the initial margin level before trading commences on the next day.

3. Option Contracts

Options are fundamentally different from forward and futures contracts. An option gives the

holder of the option the right to do something. The holder does not have to exercise this right. In

contrast, in a forward or futures contract, the two parties have committed themselves to doing

something. Whereas it costs nothing (except margin requirements) to enter into a futures

contract, the purchase of an option requires an up-front payment.

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Option Terminology

Index options: These options have the index as the underlying. Some options are European

while others are American. Like index futures contracts, index options contracts are also cash

settled.

Stock options: Stock options are options on individual stocks. Options currently trade on over500 stocks in the United States. A contract gives the holder the right to buy or sell shares at the

specified price.

Buyer of an option: The buyer of an option is the one who by paying the option premium buys

the right but not the obligation to exercise his option on the seller/writer.

Writer of an option: The writer of a call/put option is the one who receives the option premium

and is thereby obliged to sell/buy the asset if the buyer exercises on him.

Option price/premium: Option price is the price which the option buyer pays to the option seller.

It is also referred to as the option premium.

Expiration date: The date specified in the options contract is known as the expiration date, the

exercise date, the strike date or the maturity.

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Strike price: The price specified in the options contract is known as the strike price or the

exercise price.

American options: American options are options that can be exercised at any time up to the

expiration date. Most exchange-traded options are American.

European options: European options are options that can be exercised only on the expiration

date itself. European options are easier to analyze than American options, and properties of an

American option are frequently deduced from those of its European counterpart.

In-the-money option: An in-the-money (ITM) option is an option that would lead to a positive

cash flow to the holder if it were exercised immediately. A call option on the index is said to be

in-the-money when the current index stands at a level higher than the strike price (i.e. spot price

>strike price). If the index is much higher than the strike price, the call is said to be deep ITM. In

the case of a put, the put is ITM if the index is below the strike price.

At-the-money option: An at-the-money (ATM) option is an option that would lead to zero cash

flow if it were exercised immediately. An option on the index is at-the-money when the current

index equals the strike price (i.e. spot price = strike price).

Out-of-the-money option: An out-of-the-money (OTM) option is an option that would lead to a

negative cash flow if it were exercised immediately. A call option on the index is out-of-the

money when the current index stands at a level which is less than the strike price (i.e. spot price

< strike price). If the index is much lower than the strike price, the call is said to be deep OTM.

In the case of a put, the put is OTM if the index is above the strike price.

Intrinsic value of an option: The option premium can be broken down into two components -

intrinsic value and time value. The intrinsic value of a call is the amount the option is ITM, if it

is ITM. If the call is OTM, its intrinsic value is zero. Putting it another way, the intrinsic value of

a call is Max[0, (St K)] which means the intrinsic value of a call is the greater of 0 or(St

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K). Similarly, the intrinsic value of a put is Max[0, K St],i.e. the greater of 0 or(K St). K is

the strike price and Stis the spot price.

Time value of an option: The time value of an option is the difference between its premium and

its intrinsic value. Both calls and puts have time value. An option that is OTM or ATM has only

time value. Usually, the maximum time value exists when the option is ATM. The longer the

time to expiration, the greater is an option's time value, all else equal. At expiration, an option

should have no time value.

There are two basic types of options, call options and put options.

Call option: A call option gives the holder the right but not the obligation to buy an asset by a

certain date for a certain price.

i) Long a call:- person buys the right (a contract) to buy an asset at a certain price. We

feel that the price in the future will exceed the strike price. This is a bullish position.

ii) Short a call:- person sells the right ( a contract) to someone that allows them to buy to

buy an asset at a certain price. The writer feels that asset will devaluate over the time

period of the contract. This person is bearish on that asset.

Put option: A put option gives the holder the right but not the obligation to sell an asset by a

certain date for a certain price.

i) Long a put:- Buy the right to sell an asset at a pre-determined price. We feel that the asset

will devalue over the time of the contract. Therefore we can sell the asset at a higher

price than is the current market value. This is a bearish position.

ii) Short a put: - sell the right to someone else. This will allow them to sell the asset at a

specific price. We feel the price will go down and we do not. This is a bullish

position.

Profit / payoff in Option

The payoff to a derivative portfolio is the market value of the portfolio at expiration.

(Also gross payoff).

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The profit on a derivative portfolio is the payoff less the cost of acquisition or

assembling the portfolio. (Net profit).

We will be looking at a number of option strategies and combinations.

The (gross) payoff is the value (positive or negative) of the option or portfolio at

maturity.

The payoff does not include the initial cost (or the initial cash inflow) at the time the

portfolio was set up.

Net profit= (gross) Payoff- cost of buying options or other securities+ premium

received for selling options or other securities

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If S is a final price of the option underlying security, X is a strike price and OP is an option price,

than the profit is

Long Call: P = S - X - OPShort Call: P = X - S + OP

Long Put: P = X - S - OP

Short Put: P = S - X + OP

For example, let's say the stock price is $50.00; we bought European call option with strike

$53.00 and paid $2.00 for this option. If option price is less than $53.00, we will not exercise the

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option to buy the stock, because it doesn't make sense to buy security for higher price than it

costs on the market. In this case we lose all initial investment equal to the option price $2.00. If

stock price is more than $53.00, we will exercise the option. For example if the stock price is

$56.00, after exercising the option and immediately reselling the acquired stock our profit will

be:

P = $56.00 - $53.00 - $2.00 = $1.00

If the stock price is $54.00, than the profit is:

P = $54.00 - $53.00 - $2.00 = - $1.00

As we see in latter case we lose money. The reason is that increase of stock price just by $1.00

above the strike ($53.00) doesn't cover our initial investment of $2.00, although we still exercise

the option to recover at least $1.00 of initial investment. If the stock price at exercise time is

$55.00 than we exercise the option to cover our initial expenses (equal to option price):

P = $55.00 - $53.00 - $2.00 = $0.00

This latter case corresponds to option graph intersection point with horizontal axis on the

drawing above.

Distinction between futures and options

Futures Options

Exchange traded, with novation Same as futures.

Exchange defines the product Same as futures.

Price is zero, strike price moves Strike price is fixed, price moves.

Price is zero Price is always positive.

Linear payoff Nonlinear payoff.

Both long and short at risk Only short at risk.

Types of traders in derivative market

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1. Hedgers: - Hedgers are those who protect themselves from the risk associated with the

price of an asset by using derivatives. A person keeps a close watch upon the prices

discovered in trading and when the comfortable price is reflected according to his wants,

he sells futures contracts. In this way he gets an assured fixed price of his produce.

In general, hedgers use futures for protection against adverse future price movements in

the underlying cash commodity. Hedgers are often businesses, or individuals, who at one

point or another deal in the underlying cash commodity.

Take an example: A Hedger pay more to the farmer or dealer of a produce if its prices go

up. For protection against higher prices of the produce, he hedges the risk exposure by

buying enough future contracts of the produce to cover the amount of produce he expects

to buy. Since cash and futures prices do tend to move in tandem, the futures position will

profit if the price of the produce raise enough to offset cash loss on the produce.

2. Speculators:

Speculators are somewhat like a middle man. They are never interested in actual owing

the commodity. They will just buy from one end and sell it to the other in anticipation of

future price movements. They actually bet on the future movement in the price of an

asset.

They are the second major group of futures players. These participants include

independent floor traders and investors. They handle trades for their personal clients or

brokerage firms

Buying a futures contract in anticipation of price increases is known as going long. Selling a

futures contract in anticipation of a price decrease is known as going short. Speculative

participation in futures trading has increased with the availability of alternative methods of

participation.

Speculators have certain advantages over other investments they are as follows:

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If the traders judgment is good, he can make more money in the futures market

faster because prices tend, on average, to change more quickly than real estate or

stock prices.

Futures are highly leveraged investments. The trader puts up a small fraction of the

value of the underlying contract as margin, yet he can ride on the full value of the

contract as it moves up and down. The money he puts up is not a down payment on

the underlying contract, but a performance bond. The actual value of the contract is

only exchanged on those rare occasions when delivery takes place.

3. Arbitrageurs:

According to dictionary definition, a person who has been officially chosen to make a

decision between two people or groups who do not agree is known as Arbitrageurs. In

commodity market Arbitrageurs are the person who takes the advantage of a discrepancy

between prices in two different markets. If he finds future prices of a commodity edging

out with the cash price, he will take offsetting positions in both the markets to lock in a

profit. Moreover the commodity futureinvestor is not charged interest on the difference

between margin and the full contract value.

Types of Futures and Options Margins

Margins on Futures and Options segment comprise of the following:

1) Initial Margin

2) Exposure margin

In addition to these margins, in respect of options contracts the following additional

margins are collected:

1) Premium Margin

2) Assignment Margin

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How is Initial Margin Computed?

Initial margin for F&O segment is calculated on the basis of a portfolio (a collection of futures

and option positions) based approach. The margin calculation is carried out using software called

- SPAN (Standard Portfolio Analysis of Risk). It is a product developed by Chicago MercantileExchange (CME) and is extensively used by leading stock exchanges of the world.

SPAN uses scenario based approach to arrive at margins. It generates a range of scenarios and

highest loss scenario is used to calculate the initial margin. The margin is monitored and

collected at the time of placing the buy / sell order.

The SPAN margins are revised 6 times in a day - once at the beginning of the day, 4 times

during market hours and finally at the end of the day.

Obviously, higher the volatility, higher the margins.

How is exposure margin computed?

In addition to initial / SPAN margin, exposure margin is also collected.

Exposure margins in respect of index futures and index option sell positions have been currently

specified as 3% of the notional value. For futures on individual securities and sell positions in

options on individual securities, the exposure margin is higher of 5% or 1.5 standard deviation

of the LN returns of the security (in the underlying cash market) over the last 6 months period

and is applied on the notional value of position.

How is Premium and Assignment margins computed?

In addition to Initial Margin, a Premium Margin is charged to trading members trading in Option

contracts. The premium margin is paid by the buyers of the Options contracts and is equal to the

value of the options premium multiplied by the quantity of Options purchased. For example, if

1000 call options on ABC Ltd are purchased at Rs. 20/-, and the investor has no other positions,

then the premium margin is Rs. 20,000. The margin is to be paid at the time trade. Assignment

Margin is collected on assignment from the sellers of the contracts.

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How Marked to Market Margins are computed?

1. Future contracts:- The open positions (gross against clients and net of proprietary/ self

trading) in the futures contracts for each member are marked to market to the daily

settlement price at the end of each day is the weighted average price of the last half an

hour of the futures contract. The profits/losses arising from the different between the

trading price and the settlement price are collected/ given to all clearing members.

2. Option contracts: - the marked o market for option contracts is computed and collected

as part of the Initial Margin in the form of Net Option Values. The Initial Margin is

collected on an online real time basis based on the data feeds given to the system at

discrete time intervals.

How Client Margins are computed?

Client Members and Trading Member are required to collect initial margins from all their

clients. The collection of margins at client level in the derivatives markets is essential as

derivatives are leveraged products and non-collection of margins at the client level would

provide zero cost leverage. In the derivative markets all money paid by the client towards

margins is kept in trust with the Clearing House/ Clearing Corporation and in the event of default

of the Trading or Clearing Member the amounts paid by the client towards margins aresegregated and not utilized towards the dues of the defaulting member.

Therefore, Clearing members are required to report on a daily basis details in respect of

such margin amounts due and collected from their Trading members/ clients clearing and settling

through them. Trading members are also required to report on a daily basis details of the amount

due and collected from their clients. The reporting of the collection of the margins by the clients

is done electronically through the system at the end of each trading day. The reporting of

collection of client level margins plays a crucial role not only in ensuring that members collect

margin from clients but it also provides the clearing corporation with a record of the quantum of

funds it has to keep in trust for the clients.

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3. RESEARCH METHODOLOGY

Problem Statement

The topic, which is selected for the study, is DERIVATIVE MARKET in the firm sothe problem statement for this study will be THE AWARENESS OF THE DERIVATIVE

AND ITS COMPARISION WITH EQUITY.

Objective of the Study

To study the concept of the Derivatives and Derivative Trading.

To know about the different types of Financial Derivatives.

To find out the awareness of the Derivatives.

To know about the experience of investors in derivative market

Scope of study

The study was conducted in New Delhi and NCR through a survey to understand the derivative

market.

Method of data collection

Secondary sources:-

It is the data which has already been collected by someone or an organization for some otherpurpose or research study .The data for study has been collected from various sources:

Books

Journals

Magazines

Internet sources

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Second Phase is Collection of Primary Data and Analysis:

After collecting the Secondary data the next phase will be collection of primary data using

Questionnaires. The questionnaire will be filled by around 50 people who will be mainly from

Delhi/NCR region. The sample will consist of people who are employed or work as free lancers dealing

in derivative market to know their perception towards investment in derivative market. The data

collected will be then entered into MS Excel for analysis of the data collected from the questionnaire.

RESEARCH DESIGN

Non probability

The respondents have been researched by selecting the persons who do the trading in derivative

market and those persons who do not trade in derivative market have not been interviewed. Therefore

the samples are included on the random non-probability basis.

Exploratory and descriptive research

The research is primarily both exploratory and descriptive in nature. The sources of information are

both primary and secondary. The secondary data has been taken by referring to various magazines,

newspapers, internal sources and internet to get the figures required for the research purposes. The

objective of the exploratory research is to gain insights and ideas. The objective of the descriptive

research study is typically concerned with determining the frequency with which something occurs. A

well structured questionnaire was prepared for the primary research and personal interviews were

conducted to collect the responses of the target population .

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SAMPLING METHODOLOGY

Sampling Technique

Initially, a rough draft was prepared a pilot study was done to check the accuracy of the Questionnaire

and certain changes were done to prepare the final questionnaire to make it more judgmental.

Sampling Unit

The respondents who were asked to fill out the questionnaire in the National Capital Region are the

sampling units. These respondents comprise of the persons dealing in derivative market. The people

have been interviewed in the open market, in front of the companies, telephonic interviews and through

other sources also

Sample Size

The sample size was restricted to only 50 respondents.

Sampling Area

The area of the research was National Capital Region (NCR).

Time:

2 months

Statistical Tools Used

Simple tools like bar graphs, tabulation, line diagrams have been used.

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4. ANALYSIS

Q. Education qualification of investors who investing in derivative market.

Education No. of result

Under graduate 6

Graduate 10

Post graduate 23

Professional 11

Q. Income range of investors who investing in derivative market.

Income range No. of Result

below 1,50,000 1

1,50,000-3,00,000 9

3,00,000-5,00,000 14above 5,00,000 26

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Q. Normally what percentage of your monthly household income could be available for

investment

Investment No. of result

Between 5% to 10% 2

Between 11% to 15% 6



More than 25% 11

Q. What is your primary investment purpose?

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Q. What kind of risk do you perceive while investing in the stock market?

Q. Why people do not invest in derivative market?

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Reasons

Q. What is the purpose of investing in derivative market?

Purpose of investment No. of Result

Hedge their fund 27

Risk control 9

More stable 1

Direct investment without buying & holding assets 13

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Q. You participate in derivative market as

Participation as No. of Result

investor 23

Speculator 2

Broker/Dealer 8

Hedger 17

Q. From where you prefer to take advice before investing in derivative market?

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Advice From No. of Result

Brokerage houses 15

Research analyst 7

Websites 2

News Networks 23

Others 3

Q. In which of the following would you like to participate?

Participate in No. of ResultStock index futures 19

Stock index Options 13

Future on individual stock 6

Currency futures 9

Options on individual stock 3

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Q. What contract maturity period would interest you for trading in?

Q. What was the result of your investment?

Result of

investment No. of result

Great results 4Moderate but

acceptable 24

Disappointed 22

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Q. What is best describes the overall approach to invest as a mean of achieving investors

goals.

OPTIONS NO. of Result

Relative level of stability in overall investmentportfolio 17

increasing investment value while minimizingpotential for loss of principal 19

Investment growth with moderate high levels ofrisk 4

Maximum long term returns with high risk 10

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5. INTERPRETATION

Most of the investors who invest in derivatives market are post graduate.

Investors who invest in derivative market have a income of above 5,00,000

Investors generally perceive slump in stock market kind of risk while investing in

derivative market.

People are generally not investing in derivative market due to lack of knowledge and

difficulty in understanding and it is very risky also.

Most of investor purpose of investing in derivative market is to hedge their fund.

People generally participate in derivative market as an investor or hedger.

People generally prefer to take advice from news network before investing in derivative

market.

Most of investors participate in stock index futures.

From this survey we come to know that most of investors make a contract of 3 month

maturity period.

Investors invest regularly in derivative market.

The result of investment in derivative market is generally moderate but acceptable.

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6. RECOMMENDATIONS & SUGGESTIONS

A knowledge need to be spread concerning the risk and return of the derivative market.

More variation in stock index future need to be made looking a demand side of investors.

RBI should play a greater role in supporting derivatives

There must be more derivative instruments aimed at individual investors.

SEBI should conduct seminars regarding the use of derivatives to educate individual

investors.

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7. BIBLIOGRAPHY

Books referred:

Options Futures, and other Derivatives by John C Hull

Derivatives FAQ by Ajay Shah

NSEs Certification in Financial Markets: - Derivatives Core module

Financial Markets & Services by Gordon & Natarajan

Reports:

Report of the RBI-SEBI standard technical committee on exchange traded Currency

Futures

Regulatory Framework for Financial Derivatives in India by Dr.L.C.GUPTA

Websites visited:

www.nse-india.com

www.bseindia.com

www.sebi.gov.in

www.ncdex.com

www.google.com

www.derivativesindia.com

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http://www.nse-india.com/http://www.bseindia.com/http://www.sebi.gov.in/http://www.ncdex.com/http://www.google.com/http://www.derivativesindia.com/http://www.nse-india.com/http://www.bseindia.com/http://www.sebi.gov.in/http://www.ncdex.com/http://www.google.com/http://www.derivativesindia.com/


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MACROBUTTON HTMLDirect More than 25%

4. What is your primary investment purpose?

MACROBUTTON HTMLDirect Retirement Planning

MACROBUTTON HTMLDirect Building up a corpus for charity

donations

MACROBUTTON HTMLDirect Supporting future education of

your children

MACROBUTTON HTMLDirect Other (Specify)

_____________________

5. What kind of risk do you perceive while investing in the stock market?

MACROBUTTON HTMLDirect Uncertainty of returns

MACROBUTTON HTMLDirect Slump in stock market

MACROBUTTON HTMLDirect Fear of being windup of company


_________________

6. Why people do not invest in derivative market? (Rank your preference 1-4)

MACROBUTTON HTMLDirect Lack of knowledge and difficulty

in understanding

MACROBUTTON HTMLDirect Increase speculation

MACROBUTTON HTMLDirect Very risky and highly leveraged

instrument

MACROBUTTON HTMLDirect Counter party risk

7. What is the purpose of investing in derivative market?

MACROBUTTON HTMLDirect To hedge their fund

MACROBUTTON HTMLDirect Risk control

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MACROBUTTON HTMLDirect More stable

MACROBUTTON HTMLDirect Direct investment without buying

and holding assets

8. You participate in derivative market as:

MACROBUTTON HTMLDirect Investor

MACROBUTTON HTMLDirect Speculator

MACROBUTTON HTMLDirect Broker/Dealer

MACROBUTTON HTMLDirect Hedger

9. from where you prefer to take advice before investing in derivative market?

MACROBUTTON HTMLDirect Brokerage houses

MACROBUTTON HTMLDirect Research analyst

MACROBUTTON HTMLDirect Websites

MACROBUTTON HTMLDirect News Networks


_________________

10. In which of the following would you like to participate?

MACROBUTTON HTMLDirect Stock Index Futures

MACROBUTTON HTMLDirect Stock Index Options

MACROBUTTON HTMLDirect Future on individual stock

MACROBUTTON HTMLDirect Options on individual stock

MACROBUTTON HTMLDirect Currency futures

11. What contract maturity period would interest you for trading in?

MACROBUTTON HTMLDirect 1 month


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12. Which of the following statements best describes your overall approach to invest as a mean

of achieving your goals?

MACROBUTTON HTMLDirect Having a relative level of stability

in my overall investment portfolio.

MACROBUTTON HTMLDirect Moderately increasing my

investment value while minimizing potential for loss of

Principal. MACROBUTTON HTMLDirect Pursue investment growth,

accepting moderate to high levels of risk and

principal fluctuation.

MACROBUTTON HTMLDirect Seek maximum long-term returns,

accepting maximum risk with principal fluctuation.

13. What was the result of your investment?

MACROBUTTON HTMLDirect Great results MACROBUTTON HTMLDirect Disappointed

MACROBUTTON HTMLDirect Moderate but acceptable

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