1

WINTER TRAINING REPORT ON

DERIVATIVES MARKET

FOR

NAM SECURITIES LTD.

BY RAMDAS KACHHI A-44

In Partial Fulfillment for the award of the degree Post Graduate Diploma In Business Management 2011-201

NEW DELHI INSTITUTION OF MANAGEMENT

F-13, Okhla Phase-1, New Delhi, Pin: 110020 E-mail: info@ndimedu.com Website: www.ndimedy.com

WINTER TRAINING REPORT ON

DERIVATES MARKET

FOR

NAM SECURITIES LTD.

Under the supervision of

Mr. ASHWANI GOYAL

Submitted byRamdas Kachhi

A-44

Submitted toDr.Chand Tandon

ACKNOWLEDGEMENT
It gives immense pleasure to express deepest gratitude towards New Delhi Institution of Management for providing the opportunity to undertake this Research Project, which helped me to enhance my knowledge. This research work, which assign to me, helped me in understanding how things are done in the exact market scenario and we have learnt a lot from this fieldwork. We are also thankful to you as you made us understand the value of my work. I extend my sincere gratitude to my faculty guide, Dr. Chand Tandon for the continuous, creative, valuable and informative support extended to me, without which the project would not have been completed. We would also like to thank all the people who filled the questionnaires through which we were able to get the necessary data and was able to carry out the Derivatives Market Research on customer demand. Last but not the least we would like to thank each and everyone who supported us and gave his or her valuable suggestion for completion of this project. We are glad to recognize all the efforts made by our friends and faculty. Once again I take this opportunity to convey my sincere thanks to each and every person who helped me directly and indirectly in the successful completion of my project.

DECLARATION

I Ramdas Kachhi student of New Delhi Institution of Management batch 2011-2013 declare that every part of the project report Market Research & Industry Mapping that I have submitted is original. I was in regular contact with the nominated guide and contacted many times for discussing the project.

DATE OF PROJECT SUBMISSION: ______________.

(Ramdas Kachhi) FACULTYS COMMENTS: __________________________________________________________________ _____________________________________________________ __________________________________________________________________ _____________.

(Dr. Chand Tandon)

TABLE OF CONTENTS

Serial no. 1 2 3 4 5 6 7 8 9 10 11

Particulars EXECUTIVE SUMMARY COMPANY BACKGROUND JOB ASSIGNMENT INTRODUCTION OF PROJECT DETAIL OF WORK DONE MAJOR LEARNING RESEARCH METHODOLOGY RESEARCH PLAN

Page no.

EXECUTIVE SUMMARY

Derivative Market is a part of Stock Market that helps us in collecting, recording and analyzing the future trading from the current market data . This data can be used to understand the issues that are dealt in for the purpose of collecting the data, from their point of view. The Project undertaken is to understand the Stock market condition and companies mapping. The project is the basic step that will enable us to understand the various theories of Research Methodology that we have been studying. It is a practical application of the entire concept that is used by companies. This project has helped us a lot in understanding how exactly the research process takes place and how data is used for building up an analysis and finding a solution. Overall this project has given a deep insight to the Market Research.

NAM SECURITIES LIMITED

COMPANY PROFILE : NAM is the broadly diversified stock broking groups in to the business of : Securities Clearing member Commodities Depositories Distribution

NAM Groups consists of three companies as started hereunder : Nam Securities Limited is flagship company with cumulative history of over 24 years in Stock Broking, Depository and Distribution as member of National Stock Exchange of India Limited Bombay Stock Exchange Delhi Stock Exchange National Securities depository Limited MCX Stock Exchange United stock exchange OTC Exchange of India Association of Mutual Fund in India Agile Commodities Private Limited is Clearing and Trading Member of Multi-Commodity Exchange of India National Multi Commodity Exchange of India NIKIYA Exports Private Limited is two decade old company

Core Purpose and Value

Our Pillars :

NAMs four pillars for sustained growth and excellence

Our Core Purpose :

To Grow with Growth of the Customer

PHILOSPHY :
ANTS NEVER QUIT : Never Quit looking for a way to get where you re supposed to go. ANTS THINK WINTER ALL SUMMER : It is important to be realistic.

ANTS THINK SUMMER ALL WINTER: Stay positive at all times. ANTS DO ALL THAT POSSIBLY CAN : Do all you can and more. IN NUTSHELL: ( Four part philosophy) *Never give up *Stay Positive *Look ahead *Do all you can

PARTNER :
NAM's Financial Services Department supports its Business Partners by providing infrastructure for trading in Cash and Derivative Segments of the stock markets, Commodities Exchange , Depository Services and IPO's and Mutual Fund products.

NAM's Financial Engineering department supports its Partners and the customers in their complex finacial decisions, through tailor-made financial solutions.

With regard to liability management, we assist our Partners and the clients in how they manage their liabilities more efficiently by advising and hedging financial transactions.

CORPORATE BUSINESS OF NAM SECURITIES :

10

Equity

&

Derivatives

At NAM One Prinicipal Underlies Everything We do :

COMMITMENT :

To achieve the highest degree of quality in our service to the clients, We specialize solely in Research. NAM is one of the only brokers where the top management personally involves in Research. Years of Experience, Dedication and Focus of our staff purely on this client segment have created a unique business model that is constantly being adapted to the changing environment. For effective investment strategies we have a simple formula : FRESH IDEAS : Our Creative solutions cover all the financial needs of our customers. We are able to provide tailor-made cocepts because we listen to our clients. Why has the business worked so well for us : It's all about Solidity and Dynamics We have eligibility and the capacity to undertake very large transactions quickly and efficiently. Our short decision making process, even when it comes to big tickets---is an essential element in our client relationship management.

11

Depository
Our entrepreneurial spirit combined with our product range make us a preferred Supplier of financial services.

In the year 2000, when Depository operations were fully operational in India, NAM were chosen to become Business Partners with the country 'largest Depository,
NATIONAL SECURITIES DEPOSITORY LIMITED :

NAM is the first to launch Depository Services, on-line connectivity with NSDL, in Punjab, catering to several thousands of clients in all the cities in the state.NAM is the first to launch Depository Services,online connectivity with NSDL, in Punjab, catering to several thousands of clients in all the cities in the state. NAM's Second DPM is operating from its registered office in the capital of India, at New Delhi.

IPO's & Mutual Funds

12

NAM is ANMI registered Distributor of almost all the Mutual Funds in INDIA, and is effectively rendering Distribution services in India and Abroad.

Commodities
Our entrepreneurial spirit combined with our product range make us a preferred Supplier of financial services.

In the year 2000, when Depository operations were fully operational in India, NAM were chosen to become Business Partners with the country' largest Depository,
NATIONAL SECURITIES DEPOSITORY LIMITED : NAM is the first to launch Depository Services, on-line connectivity

with NSDL, in Punjab, catering to several thousands of clients in all the cities in the state.NAM is the first to launch Depository Services,online connectivity with NSDL, in Punjab, catering to several thousands of clients in all the cities in the state. NAM's Second DPM is operating

13

from its registered office in the capital of India, at New Delhi.

Industry overview
INTRODUCTION TO STOCK MARKET MEANING OF STOCK MARKET : The Stock exchange has been defined under section 2(3) of securities contract (regulation) act 1956 as anybody of individual in corporate or not , constituted for the purpose of assisting , regulating or controlling the business of buying , selling or dealing in securities . The securities that are traded in stock market are defined under section 2(b) of the act as: Shares scrip , stock ,bonds , debentures stock or other marketable securities of a like nature in any in corporate or other body corporate. Government securities and rights or interest in securities . INDIAN STOCK MARKET :- With over 20 million shareholders . idea has the third largest base in the world after the USA and Japan . over 9000 companies are listed on the stock exchanges, which are serviced by approximately 7500 stockbrokers. The Indian capital market is significant in terms of the degree of development , volume of trading and its tremendous growth potential. There are 23 recognized stock exchanges in India , including the over the counter exchange of India (OTCEI) for small and new companies and national stock exchange (NSE) which was set up a model exchange to provide nation- wide services to investors . NSE, which in the recent

14

past has accounted for the largest trading volumes , has a fully automated screen based system that operates in the wholesale debt market segment as well as the capital , market segment. The main objectives of the stock market are to provide : Ready market ability Liquidity Control of dealing Protection of interest of investors

THE Bombay Stock Exchange

Bombay Stock Market (BSE) , one of the oldest in the world , accounts number of listed companies and has also started a screen- based trading system with the introduction of the Bombay on line trading system. The number of companies listed on the BSE at the end of companies listed in 9 emerging markets Malaysia , s. Africa , Mexico, Taiwan , Korea , Philippines ,Thailand ,Brazil and Chile). The number of companies was also more than the in developed markets of Japan , UK , Germany, France Australia, Switzerland, Canada and Hong Kong. The stock exchange , Mumbai , is now known as Bombay Stock Exchange Limited was established in 1875 as The Native Share and Stock Association . It is the oldest one in Asia , even older than the Tokyo Stock Exchange ,which was established in 1878 . it is the first stock Exchange in the country to have obtained permanent recognition in 1956 from the govt. of India under the securities contracts (regulation) act 1956. The BSE provides an efficient and transparent market for trading in securities, debt and derivatives , equity , currency etc . A Governing board having 20 directors is the apex body , which decides and regulates the affairs of the Exchange.

15

The National Stock Exchange

The National Stock Exchange (NSE) is Indias leading stock exchange . NSE was set up leading institutions to provide a modern , fully automated screen based trading system with national reach. The exchange has brought about unparalleled transparency , speed & efficiency , safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems , practices and procedures . The National Stock Exchange of India Limited (NSE) is a Mumbaibased stock exchange. It is the largest stock exchange in India the third largest in the world in terms of volume of transaction. NSE is mutuallyowned by set of leading financial institutions , banks , insurance companies and other financial intermediaries in India bit its ownership and management operate as separate entities. As of 2006 , the NSE VSAT terminals , 2799 in total , cover more than 1500 cities across India. In March 2006, the NSE had a total market capitalization of 4,380,774 core INR making it the second largest stock market in South Asia of market capitalization . Currently ,NSE has the following major segments of the capital market : Equity Future and option Retail debt market Wholesale debt market

The Sensex and Nifty :- In India the most popular indices have been the BSE Sensex and S&P CNX Nifty. The BSE Sensex has 30 stocks comprising the index which are selected based on market capitalization , industry representation , trading frequency etc. It represent 30 large well established and financially sound companies in a variety of industries. It represent 14 major industry groups. Then there is BSE national index and BSE 200. However ,trading in index futures has only commenced on the BSE Sensex . Nifty was launched by National Stock Exchange in April 1996 taking the base of November 3,1955. The nifty index consists of shares of 50

16

companies with each having market capitalization of more than RS 500 crore.

INTRODUCTION OF DEPOSITORY

A depository established under the depositories Act can provide any service connected with recording of allotment of securities or transfer of ownership of securities in the record of a depository. The depositories are important intermediaries in the securities market that is scrip- less or moving towards such a state. In India , the depositories act defines a depository to mean a company formed and registered under the Companies Act , 1956 and which has been granted a certificate of registration under sub section (IA) of section 12 of the Securities and Exchange Board of India Act ,1992. The principal function of depository is to Dematerialize securities Enable their transaction in book-entry form. Dematerialization of securities occurs when securities occurs when securities , issued in physical form, are destroyed and an equivalent number of securities, are credited into the beneficiary owners account. In a depository system , the investors stand to gain by way of lower costs and lower risks of theft or forgery , etc. All the players have to be conversant with the rules and regulations well as with the technology

17

for processing. The intermediaries in this system have to play strictly by the rules . BENEFITS OF DEPOSITORY SERVICES : A safe and convenient way to hold securities Immediate transfer of securities No stamp duty on transfer of securities No odd lot problem , ever one share can be purchase or sold Elimination of risk associated with physical certificates such as bad delivery, fake securities , delays , theft etc. Reduction in paper work involved in transfer of securities Reduction in transaction cost Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.

THE MAIN DEPOSITORY PLAYERS IN INDIA

National Securities Depository Limited NSDL was established in August 1996, the first depository in India. Using innovative and flexible technology system , NSDL works to support the investors and brokers in the capital market of the country . NSDL aims at ensuring the safety and soundness of Indian marketplaces by developing products and services that will continue to nurture the growing needs of the financial services industry. In the depository system , securities are held in depository accounts, which is more orless similarto holding funds in banks accounts. Transfer of ownership of securities is done through simple account transfers. NSDL is promoted by Industrial Development Bank of India Limited (IDBI) the largest development bank of Indian, Unit Trust of India (UTI)- the largest mutual funds in India and National Stock Exchange

18

of India Limited (NSE)- the largest stock exchange India. Some of the prominent banks in the country have a stake in NSDL. Business Partners :NSDL carries out its activities through various functionaries called Business Partners who include Depository Participants (DPS), Issuing companies and their Registrars and Share Transfer agents, clearing corporations/clearing houses of Stock Exchange. Central depository services limited CDSL was setup with the objective of providing convenient ,dependable and secure depository services at affordable cost to all market participants .Union Finance Minister Shri Yashwant Sinha flagged off the operation of CDSL system are : A. CDSL received the certificate of commencement of business from SEBI in February 1999. B. Settlement of trades in The demat mode through BOI shareholding ltd, the clearing house of BSE ,started in july1999 C. All leading stock exchanges like NSE ,BSE DSE etc have established connectivity with CDSL. D. As at the end of Dec 2005 ,over 5000 issues have admitted their securities (equities ,bonds, debentures and commercial paper),units of mutual funds ,certificate of deposits etc. Into the CDSL system. PROMOTERS CDSL Was promoted by BSE in association with Bank Of India ,BOB ,and state bank of India and HDFC bank .BSE has been involved with this venture right from the inception and has contributed overwhelmingly to the fruition of the project the initial capital of the company is Rs.104.50 cores.

19

Taxation of derivative transaction in securities

A. Taxation of profit &loss on derivatives transaction in securities: prior to financial year 2005-06 , transaction in derivatives were considered as speculative transaction for the determination of tax flexibility under the income tax act 1. This is in view of section 43(5) of the income tax which defined speculative transaction as a transaction in which a contract for purchase or sale of any commodity including stocks and shares is periodically or ultimately settled otherwise than by actual delivery or transfer of the commodity or scrips .however ,such transaction s entered into by hedger and stock exchange member in course of jobbing or arbitrage activity were specially excluded from the

20

purview of definition of speculative transaction. Finance act 2005 has amended section 43(5) so as to exclude transactions in derivatives carried out in a recognized stock exchange for this purpose this implies that income or loss on derivative transaction s which are carried out in a recognized stock exchange is not taxed as speculative income or loss. Thus loss on derivative transaction can be set off against other income during the year . in case the same cannot be set off , it can carried forward to subsequent assessment year and set off against any other income off the subsequent year such losses can be carried forward for a period of 8 assessment . it may also be noted that securities transaction tax paid on such transaction is eligible as deduction under income tax ,1961.

B. Securities transaction tax on derivatives transactions: As per chapter vii of the finance (no.2) act, 2004 , securities transaction

21

tax (STT)is levied on all transaction of sale and /or purchase of equity shares and units of equity oriented fund and sale of derivatives , where the transaction of such sale in entered into in a recognized stock exchange. As per finance act 2008 the following STT rates are applicable w.e.f. 1st June ,2008 in relation to sale of a derivative ,where the transaction of such sale In entered into in a recognised stock exchange

Sr. no Taxable securities transaction 1 Sales of an option in securities 2 Sale of an option in securities where option is expired 3 Sales of a future in securities

Rate 0.017% o.125% 0.017%

Payable by Seller Purchaser Seller

22

JOB ASSIGNED To know the benefits of investing in equity(directly) and make the investors aware of their rights and obligations regarding investment in equity. Benefits of Depository :

Bad delivery eliminated Immediate transfer of shares No stamp duty on such transfers Elimination of risks that are normally associated in dealing with Physical certificates - loss / theft / mutilation due to careless handling / forgery / etc. Reduced transaction cost transperancy

How do Depository operate : Depository interacts with its clients / investors through its agents, called Depository Participants normally known as DPs. For any investor / client, to avail the services provided by the Depository, has to open Depository account, known as Demat A/c, with any of the DPs.

23

KEY RESPONSIBILITIES
The main responsibility is to create a smooth broker-clients relationship and make the investors understand their rights and obligations. Since most investors never feel free to invest in equity directly since most of the brokers are found to be complexion. My main responsibility was to know the basic rights and obligations and make the same understandable to the investors. BROKER-CLIENTS RELATIONS KNOW YOUR CLIENT(KYC): The trading member shall enter into an agreement in the specified format provided by NSE with the client before accepting orders on latters behalf. The said agreement shall be executed on non-judicial stamp paper of adequate value ,duly signed by both the parties on all the pages. Copy of the said agreement is to be kept with the trading member permanently. In addition to the agreement ,the TM shall seek information from the client in the Client Registration Application Form obtaining information like: investor risk profile ,financial profile, investors identification details ,address details, income ,PAN number ,employment ,age , investments ,other assets and financial liabilities UNIQUE CLIENT CODE: SEBI made it mandatory for all brokers to use unique client codes for all clients. Brokers shall collect and maintain in their back office the Permanent Account Number(PAN) allotted by Income Tax Department for all their clients. MARGINS FROM THE CLIENTS: Members should have a prudent system of risk management to protect themselves from clients default. Margins are likely to be an important element of such a system.

24

EXECUTION OF ORDERS: Where the constituent requires an order to be placed or any of his order to be modified after the order has entered the system but has not been traded, the Trading member may, if it so desires, obtain order placement/modification details in writing from the constituent. CONTRACT NOTE: Contract note is a confirmation of trade(s) done on a particular day for and on behalf of a client. A stock-broker shall issue a contract note to his clients for trades(purchase/sale of securities) executed with all relevant details as required therein to be filled in. A contract note shall be issued to a client within 24 hours of the execution of the contract duly signed by the TM or his Authorized Signatory. PAYMENTS/DELIVERY OF SECURITIES TO THE CLIENTS Every TM shall make payments to his clients or deliver the securities purchased within one working day of pay-out unless the client has requested otherwise. BROKERAGE: The maximum brokerage chargeable by TM in respect of trades effected in the securities admitted to dealing on the CM segment of the Exchange is fixed at 2.5% of the contract price ,exclusive of statutory levies. SEGREGATION OF BANK ACCOUNTS The TM should maintain separate bank accounts for clients funds and own funds.It shall be compulsory for all TMs to keep the money of the clients in a separate account and their own money in a separate account. SEGREGATION OF DEMAT(BENEFICIARY) ACCOUNTS The Trading Members shall keep the dematerialized securities of Constituents in a separate beneficiary account distinct from the beneficiary account maintained for holding their own dematerialized securities.

25

DISPUTE, ARBITRATION AND APPEAL Investor complaints received against the trading members/companies in respect of claims/disputes for transactions executed on the Exchange are handled by the Investor Service Cell(ISC).The complaints are forwarded to the trading members for resolution and seeking clarifications. The ISC follows-up with trading members and makes efforts to resolve the complaint expeditiously. Arbitration ,which is a quasi judicial process, is an alternate dispute resolution mechanism prescribed under the Arbitration and Conciliation Act,1996. The aggrieved parties can file for arbitration at the regional centres viz. Mumbai ,Delhi, Kolkata and Chennai based on the region where the constituent ordinarily resides. The reference for arbitration should be filed within six months from the date when the dispute arose between the parties in the prescribed form along with a list of Arbitrators.

26

SECURITIES AND EXCHANGE BOARD OF INDIA

The Securities and Exchange Board of India (frequently abbreviated SEBI) is the regulator for the securities market in India.

History :
It was formed officially by the Government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. SEBI is headquartered in the business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad. Controller of Capital Issues was the regulatory authority before SEBI came into existence; it derived authority from the Capital Issues (Control) Act, 1947.

27

Initially SEBI was a non statutory body without any statutory power. However in 1995, the SEBI was given additional statutory power by the Government of India through an amendment to the securities and Exchange Board of India Act 1992. In April, 1998 the SEBI was constituted as the regulator of capital market in India under a resolution of the Government of India.

Objectives :
Protect the interest of investor in securities Promote the development of capital market by ensuring flow of saving in it. Promote the development of securities market with the reasonable regulation thereof. Facilitates companies to raise their finances at minimum cost long with fair practices. Prohibit insider trading in securities. Restrict transaction pertaining to acquisition of shares & takeover of companies . Impose the monetary penalties on capital market intermediaries & other participants for a range of violations. Exercises the power as may by delegated to it by the government.

Functions and responsibilities

SEBI has to be responsive to the needs of three groups, which constitute the market: The issuers of securities The investors

28

The market intermediaries. SEBI has three functions rolled into one body: 1. Quasi-legislative, 2. Quasi-judicial and 3. Quasi-executive.

It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. Though this makes it very powerful, there is an appeals process to create accountability. There is a Securities Appellate Tribunal which is a three-member tribunal and is presently headed by a former Chief Justice of a High court - Mr. Justice NK Sodhi. A second appeal lies directly to the Supreme Court. SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e.g. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 basis). SEBI has been active in setting up the regulations as required under law. SEBI has also been instrumental in taking quick and effective steps in light of the global meltdown and the Satyam fiasco. It had increased the extent and quantity of disclosures to be made by Indian corporate promoters. More recently, in light of the global melt down,it liberalised the takeover code to facilitate investments by removing regulatory structures. In one such move, SEBI has increased the application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at present.

29

Powers :
For the discharge of its functions efficiently, SEBI has been invested with the necessary powers which are: To approve bylaws of stock exchanges. o require the stock exchange to amend their bylaws. Inspect the books of accounts and call for periodical returns from recognised stock exchanges. Inspect the books of accounts of a financial intermediaries. compel certain companies to list their shares in one or more stock exchanges. Levy fees and other charges on the intermediaries for performing its functions. Grant licence to any person for the purpose of dealing in certain areas. Delegate powers exercisable by it. Prosecute and judge directly the violation of certain provisions of the companies Act.

Rights and obligations of stock broker ,sub-broker and clients The client shall invest /trade
in those securities /contracts/ other

instruments admitted to dealing on the exchange as defined in the rules ,Bylaws and regulations of exchanges /Securities and Exchange Board of

30

India (SEBI) and circulars/ issued there under from time to time

The stock broker , sub- broker and the client shall be bound by all the Rules, byways and regulations of the Exchange and circular /notices issued there under and rules and regulations of SEBI relevant notifications of Government authorities as may be in forces from time to time . The client shall satisfy itself of the capacity of the stock broker to deal in securities and /or deal in derivatives contracts and wishes to execute its order through the stock broker antd the client shall from time to time continue to satisfy itself of such capacity of the stock broker before executing orders through the stock broker. The stock broker shall continuously satisfy itself about the genuineness and financial soundness of the client and investment objectives relevant to services to be provided. The stock broker shall take step s to make the client aware of the precise nature of the stock brokers liability for business to be conducted ,including any limitations ,the liability and capacity in which the stock brokers act. The sub-broker shall provide necessary assistance and co-operate with the stock broker in all its dealing with client(s). The stock broker shall ensure due protection to the client regarding

31

clients rights to dividends right or bonus shares etc. in respect of transactions routed through it and it shall not to anything which is likely to harm the interest of the client with whom they have had transactions in securities. The stock broker and client shall reconcile and settle their accounts from time as per the rules ,Regulations ,Bye Laws ,circulars, notice and Guidelines issued by SEBI and the relevant Exchange Where the trade is executed. The stock broker shall send daily margin statements to the clients . Daily margin statement should include interalia , details of collateral utilized and collateral status ( available balance/due from client) with break up in terms of cash ,Fixed Deposit Receipts ( FDRs) ,Bank Guarantee and Securities. The client shall ensure that it has the required legal capacity to and is authorized to ,entire into relationship with stock broker and it capable of performing his obligations and undertaking hereunder .All required to be taken to ensure compliance of all the transactions , which the client may enter into shall be completed by the client prior to such transaction being entered into. The stock broker shall make pay out of funds or delivery of securities ,as the case may be , to the client within one working day of receipt of the

32

relevant Exchange where the trade is executed unless otherwise specified by the client and subject to such terms and conditions as may be prescribed by the relevant Exchange from time to time where the trade is executed .

BROKERAGE : The client shall pay to the broker brokerage and statutory levies as are prevailing from time to time and as they apply to the clients account , transactions and to the services that stock broker renders to the client. The stock broker shall not charge brokerage more than the maximum brokerage permissible as per the rules , regulations and bye-laws of the relevant stock exchanges and /or rules and regulations of SEBI.

DERIVATIVES
Derivatives is a product whose value is derived from the value of one or more basic variables called bases (underlying assets , index ,or reference rate )in a contractual manner .the underlying asset can be equity , forex ,commodity or any other asset .Example wheat ,farmer may wish to sell their harvest at a future date to eliminate the risk of a change in prices by that date. In Indian context the securities contracts Act 1956 (SC(R)A) defines derivatives to include1. A security from debt instrument , share ,loan whether secured or unsecured ,risk instrument or contract for differences or any other form of security .

33

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

History of Financial Derivatives Markets

Financial derivatives have emerged as one of the biggest markets of the world during the past two decades. A rapid change in technology has increased the processing power of computers and has made them a key vehicle for information processing in financial markets. Globalization of financial markets has forced several countries to change laws and introduce innovative financial contracts which have made it easier for the participants to undertake derivatives transactions. Early forward contracts in the US addressed merchants concerns about ensuring that there were buyers and sellers for commodities. Credit risk, however remained a serious problem.To deal with this problem, a group of Chicago businessmen formed the Chicago Board of Trade (CBOT) in 1848. The primary intention of the CBOT was to provide a centralized location (which would be known in advance) for buyers and sellers to negotiate forward contracts. In 1865, the CBOT went one step further and listed the first exchange traded derivatives contract in the US. These contracts were called futures contracts. In 1919, Chicago Butter and Egg Board, a spin-off of CBOT, was reorganized to allow futures trading. Its name was changed to Chicago Mercantile Exchange (CME). The CBOT and the CME remain the two largest organized futures exchanges, indeed the two largest financial

34

exchanges of any kind in the world today.The first exchange-traded financial derivatives emerged in 1970s due to the collapse of fixed exchange rate system and adoption of floating exchange rate systems. As the system broke down currency volatility became a crucial problem for most countries. To help participants in foreign exchange markets hedge their risks under the new floating exchange rate system, foreign currency futures were introduced in 1972 at the Chicago Mercantile Exchange. In 1973, the Chicago Board of Trade (CBOT) created the Chicago Board Options Exchange (CBOE) to facilitate the trade of options on selected stocks. The first stock index futures contract was

traded at Kansas City Board of Trade. Currently the most popular stock index futures contract in the world is based on S&P 500 index, traded on Chicago Mercantile Exchange.

History of Derivative Trading at NSE The derivatives trading on the NSE commenced on June 12, 2000 with futures trading on S&P CNX Nifty Index. Subsequent trading in index options and options on individual securities menaced on June 4, 2001 and July 2, 2001. Single stock futures were launched on November 9, 2001. Ever since the product base has increased to include trading in futures and options on CNX IT Index, Bank Nifty Index, Nifty Midcap 50 Indices etc. Today, both in terms of volume and turnover, NSE is the largest derivatives exchange in India. The derivatives contracts have a

35

maximum of 3-month expiration cycles except for a long dated Nifty Options contract which has a maturity of 5 years. Three contracts are available for trading, with 1 month, 2 months and 3 months to expiry. A new contract is introduced on the next trading day following the expiry of the near month contract. Futures contracts on interest-bearing government securities were introduced in mid-1970s. The option contracts on equity indices were introduced in the USA in early 1980s to help fund managers to hedge their risks in equity markets.
NSEs DERIVATIVES MARKET

The derivative market trading on the NSE commenced with S&P Nifty index futures on June 12 ,2000 the trading in index option commenced on June 4 ,2011and trading in option on individual securities commenced July 2 ,2001.sigle stock futures were launched on November 9,2001.today ,both in the terms of volume and turnover ,NSE is the largest derivative exchange in India .currently the derivative contracts have a maximum of 3 month ,2 month ,and 1 month expiration cycle. Three contracts are available for trading with 1 month 2 month and 3 month expiry . A new contract is introduced on the next trading day following the expiry of the near month contract. Participants and functions Trading mechanism Turnover

INDEX DERIVATIVES index derivatives are derivative contracts which derive their value from an underlying index. the most popular index derivative are index future and index

36

options . Index derivative have become very popular worldwide .Index derivatives offer various advantage and hence have become very popular. Institutional and large equity holder need portfolio-hedging facility .index derivatives aremore suited to them and cost-effective than derivatives based on individual stocks .pension funds in the US are known to use stock index future for risk hedging purpose. Index derivatives offer ease of use for hedging any portfolio irrespective of the its competition Stock index is difficult to manipulate as compared to individual stock prices ,more so in india and the possibitlity of corning is reduced .this is party because an individual stock has a limited supply ,which can cornered. Stock index ,being an average is much less volatile than individual stock prices .this implies much lower capital adequacy and margine requirments. Index derivative are cash ,settled and hence do not suffer from settlement delays and problems related to bad delivery ,forged/fake certificates

.FACTOR DRIVING THE GROWTH OF DERIVATIVES Over the three decades , the derivatives market has seen a phenomenal growth a large variety of derivative contracts have been launched at exchange across the world .some factor A. Increased volatility in asset in financial markets . B. Increased integration of national financial markets with the international markets , C. Development of more sophisticated risk management tools providing economic agents a wider choice of risk management strategies , and D. Marked improvement in communication facilities and sharp decline in their costs ,

37

E. Innovations in the derivatives markets ,which optimally combines the risks and returns over a large number of financial assets leading to higher returns , financial assets .

Participants in a Derivative Market:

The derivatives market is similar to any other financial market and has following three broad categories of participants: A. Hedgers: These are investors with a present or anticipated exposure to the underlying asset which is subject to price risks. Hedgers use the derivatives markets primarily for price risk management of assets and portfolios. B. Speculators: These are individuals who take a view on the future direction of the markets. They take a view whether prices would rise or fall in future and accordingly buy or sell futures and options to try and make a profit from the future price movements of the underlying asset. C. Arbitrageurs: They take positions in financial markets to earn riskless profits. The arbitrageurs take short and long positions in the same or different contracts at the same time to create a position which can generate a riskless profit.

38

Product (types ) of derivatives

Derivatives contracts have several variants. The most common variants are1. 2. 3. 4. Forwards Futures Options Swaps

1. FORWARDS CONTRACTS :-A forwards contract is an agreement to buy or sell an asset on a specified date for a specified . One of the parties to the contracts assumes a long position and agrees to buy underlying on a certain specified future date for a certain specified price .the other party assume a short position and agrees to sell the asset on the same date for the same price .Other contract details like delivery date , price and quantity are negotiated bilaeatuterally by the parties to the contract. The forward contracts are normally traded out side the exchange. Features of forward contracts are They are bilateral contracts and hence exposed to counter party risk. Each contract is custom designed and hence is unique in terms of contract size ,expiration date and asset type and quality. The contract price is generally not available in public domain. On the expiration date ,the contract has to be settled by delivery of the asset. If the party wishes to reserve the contract ,it has to compulsorily go to the same counter party , which often results in high prices being charged.

39

Limitation of forward market lack of centralization of trading . illiquidity and counterparty risk

2. FUTURES Futures markets were designed to solve the problems that exist in forward markets. A future 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 future contracts are standardized and exchange traded.to facilitate liquidity in the future contracts the exchange specified certain standard features of the contract . The standardized item in a future contract are: Quantity of the underlying . Quality of the underling . The date and the month of delivery The units of the price and minimum price change Location of settlement. Future payoffs future contracts have linear payoffs. In similar words, it means the losses as well as profits for the buyer and the seller of a future contract are unlimited .these linear payoffs are fascinating as they can be combined with options and the underlying to generate various complex payoffs. A. Payoff for buyer of future :long futures the payoff for a person who buys a future contract is similar to the payoff for a person who holds an asset. He has a potentially unlimited upside as well as a potentially unlimited downside .Take the case of a speculator who buys a two month nifty index futures contract when the nifty stands at 2220. Profit

40

2220 0 Nifty

Loss

________________________________________________________________ B. Payoff for seller of futures The payoff for a person who sell s a future contract is similar to the payoff for a person who short an asset . He has a potentially unlimited upside as well as down side . In this figure shows the profit/losses for a short future contract .the investor sold future when the index at 2220 .if the index goes down , his future position starts making profits .if the index raise his future position starts showing losses.

profit

2220 nifty

loss

41

________________________________________________________________

Pricing future Pricing of future contract is very simple . Using the cost of carry logic we have calculate the their value of a future contract .every time the observed price deviates from the their value arbitrager would enter into trade to capture the arbitrage profit .this turn would push the future price back to its fair value the cost of carry modal used for pricing is given below :

F =SerT
where r=

cost of financing(using continuously compound interest rate)

T = time till exspiration in the year E =2.71828

Pricing equity index futures Pricing index future given expected dividend amount Pricing index future given expected dividend yield

Application of futures A. B. C. D. E. Hedging : long security ,sell future Speculation : bullish security buy futures Speculation: bearish security sell futures Arbitrage: overpriced futures buy spot sell futures Arbitrage: underpriced futures :buy future ,sell spot.

3. OPTIONS
Options are fundamentally different from forward and future contract .An options gives the holder of the option the right to do something .

42

the holder does not have to excise this right . in contrast , in a forward or future contact , that two parties have committed themselves to doing something .whereas it costs nothing (except margin requirements) to enter into future contract ,the purchase of an option require and up front payment.

Option Terminology
A. Call option; A call option gives the holder the right but not the obligations to buy an asset by a certain date for a certain price. B. 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. C. Strike price: The price specified in the options contract is known as the strike price or the exercise price. D. Expiration date ; the date specified in the options contract is known as the expiration date the exercise date ,the strike date or the maturity. Options payoffs The optionally characteristics of options result in a nonlinear payoff for options . in simple words , it means that losses for the buyer of an option are limited ,however the profits are potentially unlimited .for a writer , the payoff is exactly the opppositsite. His profits are limited to the options premium however his losses are potentially unlimited . 1. 2. 3. 4. 5. 6. Payoff profile of buyer of asset: ong asset Payoff seller of asset :short asset Payoff profile for buyer of a call options: long call . Payoff profile for buyer of a call options : short call Payoff profile for buyer of put options :long put Payoff profile for writer of put options: short put

Pricing options an option buyer has the right but not the obligation to exercise on the seller. The worst that can happen to a buyer is the loss of the premium paid by him.His downside limited to this premium ,but his upside is potentially unlimited. This optionality is precious and has a value ,which is expessed in terms of the option price , just like in other free markets, it is the supply and demand in the secondary market that derives the price of an option.

43

For the call and put on a non dividend paying stock are:

C = SN(d1) Xe-rTN(d2)

P =Xe-RtN (-d2)-SN(-d1) Where d1= In sx +( r+2/2)T

Applications of options A. B. C. D. E. Hedging: have underlying buy puts Speculation: bullish security buy call or sell put . Speculation: bearish security sell call and buy put Bull spreads : buy a call and sell another Bear spreads: sell a call and buy another.

4.SWAPS: Swaps are private agreements between two parties to

exchange cash flows in the future according to a prearranged formula. They can be regarded as portfolios of forward contracts. The two commonly used swaps are: A. Interest rate swaps: These entail swapping only the interest related cash flows between the parties in the same currency. B. Currency swaps: These entail swapping both principal and interest between the parties, with the cash flows in one direction being in a

44

different currency than those in the opposite direction. The Following Features Compared To Exchange-Traded Derivatives: A. The management of counter-party (credit) risk is decentralized and located within individual institutions. B. There are no formal centralized limits on individual positions, leverage, or margining

C.

There are no formal rules for risk and burden-sharing, (iv) There are no formal rules or mechanisms for ensuring market stability and integrity, and for safeguarding the collective interests of market participants, and

D.

The OTC contracts are generally not regulated by a regulatory authority and the exchanges self-regulatory organization. They are however, affected indirectly by national legal systems, banking supervision and market surveillance.

Functions of the Derivative Market

The derivatives market performs a number of economic functions. In this section, we discuss some of them. Prices in an organized derivatives market reflect the perception of the market

45

participants about the future and lead the prices of underlying to the perceived future level. The prices of derivatives converge with the prices of the underlying at the expiration of the derivative contract. Thus derivatives help in discovery of future as well as current prices. The derivatives market helps to transfer risks from those who have them but do not like them to those who have an appetite for them. Derivatives, due to their inherent nature, are linked to the underlying cash markets. With the introduction of derivatives, the underlying market witnesses higher trading volumes. This is because of participation by more players who would not otherwise participate for lack of an arrangement to transfer risk. Speculative trades shift to a more controlled environment in derivatives market. In the absence of an organized derivatives market, speculators trade in the underlying cash markets. Margining, monitoring and surveillance of the activities of various participants become extremely difficult in these kind of mixed markets. An important incidental benefit that flows from derivatives trading is that it acts as a catalyst for new entrepreneurial activity. The derivatives have a history of attracting many bright, creative, well-educated people with an entrepreneurial attitude. They often energize others to create new businesses, new products and new employment opportunities, the benefit of which are immense .In a nut shell, derivatives markets help increase

46

savings and investment in the long run. Transfer of risk enables market participants to expand their volume of activity.

OVER-THE-COUNTER
Over-the-counter (OTC) or off-exchange trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties. It is contrasted with exchange trading, which occurs via facilities constructed for the purpose of trading , such as futures exchanges or stock exchanges. Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading. Non-standard products are traded in the so-called over-the-counter (OTC) derivatives markets. OTC derivatives have less standard structure and are traded bilaterally (between two parties). In such bilateral contract, each party should have credit risk concerns with respect to the other party. OTC derivatives are significant in the asset classes such as interest rate, foreign exchange, equities and commodities. OTC contracts : An over-the-counter contract is a bilateral contract in which two parties agree on how a particular trade or agreement is to be settled in the future. It is usually from an investment bank to its clients directly. Forwards and swaps are prime

47

examples of such contracts. It is mostly done via the computer or the telephone. For derivatives, these agreements are usually governed by an International Swaps and Derivatives Association agreement. This segment of the OTC market is occasionally referred to as the "Fourth Market."

Importance Of OTC Derivatives In Modern Banking :

OTC derivatives are significant part of the world of global finance. The OTC derivatives markets are large and have grown exponentially over the last two decades. The expansion has been driven by interest rate products, foreign exchange instruments and credit default swaps. The notional outstanding of OTC derivatives markets rose throughout the period and totaled approximately US$601 trillion at December 31, 2010. In the past two decades, the major internationally active financial institutions have significantly increased the share of their earnings from derivatives activities. These institutions manage portfolios of derivatives involving tens of thousand of positions and aggregate global turnover over $1trillion. The OTC market is an informal network of billateral counterparty relationships and dynamic, time-varying credit exposures whose size and distribution are tied to important asset markets. International financial institutions have increasingly nurtured the ability to profit from OTC derivatives activities and financial markets participants benefit from them.

48

OBJ ECT IVE OF TH E RESEARCH

As per the requirement of the project questionnaire established direct contact with the respondents for the purpose of my study, where the respondents were both the customer and non-customer of Data Securities Market Service provider, a leading Stock Market Integrator and a Managed Service Player, NAM SECURITIES LTD., and as the objective was to study that which plan is more widely accepted out of CLIENT service and traditional plan in the city of NAM SECURITIES LTD, I found out that the customers find trading service

49

products a one-stop and hassle free solution for their needs of Stock Market, Market Integration & Professional Services, Stock Market Services, Managed Services, stock market Services and Total Outsourcing Services. Because by way of these products they are also investing their money into the market, which was not available with the traditional products. The objective of the project is to Analyses the investor behavior towards different investment in stock market. The research takes into consideration the view of the CIS of different businesses and the working executives. Analyzing the various factors such as using of trading services.

NEED AND SCOPE OF THE PROJECT

The project is a very good chance of getting pragmatic approach of Research Methodology. This gives the practical exposure to this field. Might understand all theories or concepts in the classroom coaching but this project has solved various queries that might have not been able to solve in the class. When did this project it supposed to develop a questionnaire and the thing which we thought is very easy job turned out a lot of questions like: Why will customer listen? Why will customers be interested to fill it? Etc. This has also made us approach various types of people and convince them for our purpose.

50

The project in itself has a vast scope. This project has not only broadened our horizon of understanding the course but it has also cleared our vision as a Research student. We have segmented the customers depending upon their utility and we have clearly tried to bring out the factors that are making a brand successful. The project thus gives us a direct chance of performing a market research in the exact professional scenario.

RESEARCH METHODOLOGY
The topic of the project is MARKET RESEARCH & INDUSTRY MAPPING. The study was carried out with the objective to get an insight as to which of the plans out of trading Integrator and a Managed Services is more acceptable in the market of ABC city. DATA COLLECTION TECHNIQUES 1. PRIMARY RESEARCH Primary research included working with people and observing them. As the study was done with the Registered office of NAM SECURITIES LTD, the observations were concerned with people working there, their work practices and ways of doing work. The method adopted for this survey was Exploratory Research since the main aim was to gain an insight in to the acceptance of theclients for Investment, and what are the factors that lead to their decision while choosing a plan. A decision was taken to use the questionnaire method. The questionnaire was thought to be

51

the most suitable because it allows structured, meaningful and uniform interaction with the respondent. The following steps enumerate the various stages of this project. Step1. Designing the questionnaire The first step in the research process was the formation of questionnaire, keeping in view the need for uniformity and specificity of information. A structured, non-disguised questionnaire was drafted keeping in mind that it will cover the objectives of the project. The questionnaire is drafted for the enterprises, which includes clients of lease line services as well as of other trading companies and also the general public. Step2. Deciding the sample size The sample size for the number of persons to be surveyed was decided to be 350 so that sufficient information and variability can be obtained. As far as the companies are concerned, the number of connectivity companies does not matter for the purpose of this project. The place of study is ABC city only. Step3. Collection of data The questionnaires were directly filled by the respondents, or a communication was made through telephone or personal meetings. Some of the questionnaires were mailed to the respondents. Step4. Classification and tabulation of data The data obtained through the questionnaire was then fed in to the computer and tabulated. The data was obtained through objective questions and was put in graphical form. This was done to facilitate analysis about the various aspects such as awareness level, major factors influencing people while buying an insurance cover etc.

52

Step5. Analysis and Findings The data, as it was put in the form of graphs was easier to analyze. Interpretations were done and major inferences were drawn. 2. SECONDARY RESEARCH The secondary source of information included the data provided by the company. This data was of utmost importance for understanding the problem. However desk research was also carried out to enhance theoretical knowledge. Desk research included consulting books and Internet searching. 3. DATA ANALYSIS The data provided and collected was processed, classified and fitted into charts and tables to make findings more meaningful. On the basis of these data, relevant conclusions and inferences were drawn and the results were interpreted objectively. IN BRIEF CENTRE RESEARCH TYPE : NAM SECURITIES LTD. : EXPLORATORY

RESEARCH TECHNIQUE : QUALITATIVE & QUANTITATIVE RESEARCH APPROACH : SURVEY TOOL USED DATA SOURCE SAMPLE SIZE : QUESTIONNAIRE : PRIMARY & SECONDARY : 100

SAMPLING PROCEDURE : STRATIFIED AND RANDOMLY

53

RESEARCH PLAN
Primary data collection through Questionnaire from people. Analysis of findings as primary data. Finding consumer behaviour towards using of connectivity service. Data Source: Sample size = 100 DATA COLLECTION METHODS: Data is collected by survey method through filled Questionnaire. RESEARCH INSTRUMENTS: Questionnaire is used to gather the information. SAMPLING PLAN: Information is gathered form a sample drawn for different segments customer.

DATA ANALYSIS AND INTERPRATATION Q.1Is business growth in derivatives segment (NSE) ? A. INDEX FUTURE CONTRACTS YEARS 2000-01 2001-02 2002-03 NUMBER OF CONTRACTS 90580 1025588 2126763

54

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

17191668 21635449 58537886 81487424 156598579 210428103 35279898

250000000 200000000 150000000 100000000 50000000 0 CONTRACTS CONTRACTS

INTERPRATATION= From the data and the bar diagram above there is high business growth in the derivative segment in the india.in the year 2000-01, the number of contracts in index future were 90580where as a segment increase of 210428103is observed in the year 2008-09. B. STOCK FUTURE NUMBER OF TURNOVERS OF STOCK FUTURES YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 TURNOVER RS.(CR.) 2365 21483 43952 554446 772147

55

2005-06 2006-07 2007-08 2008-09 2009-10

1513755 2539574 3820667.27 3570111.40 619179.23

turnover
4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0

INTERPRATATION From the data and above bar chart there is high turn over in the derivative segment in India. in the year 2001-02the turnover of index future was 21483 where as a huge increase of 3570111.40in the year 2008-08 oobserved.

C. STOCK FUTURE:STOCK FUTURE CONTRACTS YEAR 2000-01 2001-02 2002-03 2003-04 NO.OF CONTRACTS 1957856 10676843 32368842 47043066

56

2004-05 2005-06 2006-07 2007-08 2008-009

80905493 104955401 203587952 221577980 19386820

CONTRACTS
250000000 200000000 150000000 100000000 50000000 0 CONTRACTS

INTERPRETATION =from the given data and bar chart the growth of contracts is lowest in 2000-01 and highest is 2007-08 .

D. INDEX OPTIONS CONTRACTS year 2000-01 2002-03 2003-04 2004-05 Contracts 34 442241 1732414 3293558

57

2005-06 2006-07 2007-08 2008-09 2009-10

12935116 25157438 55366038 212088444 483777512.11

250000000 200000000 150000000 100000000 50000000 0 Column1 options contracts

INTERPRATATION=from the data and above bar graph the main contracts of index options was nil it is the year was 2000-01.But there was a prod mains Increase 17500000 in the year 2000-01 was huge increase in the index options contracts to 212088444in the year 2008-09.

E. Index Option turnover YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 OPTION TURNOVER 3765 9246 52816 121943 338469

58

2006-07 2007-08 2008-09 2009-10

791906 1362110.88 3731501.84 884302.84

4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 turnover

turnover

INTERPRATATION =From the chart and data chart above there was no turnover in the year 2000-01from .index options slowly started increasing in the year 2000-1 to 3765but in the year 2007-08there was no huge increasing of 1362110.84and consistent increase.

Q.2 What is investor perception in derivatives market ? OPTIONS NUMBER OF RESPONDS Under graduate 20 Graduate 13 PERCENTAGE 21% 14%

59

Post graduate Professional

19 43

20% 45%S

percentage
21% 45% undergraduate 14% graduate post graduate 20% professional

Q.3 Income range

options Less than 1,50,000 1,50,000-3,00,000 3,00,000-5,00,000 Above5,00,000 Number of responds 10 23 34 28 %age 11 24 36 29

60

income %
11% 29% 24% lass than 1,50,000 150000-3,00,000 3,00,000-500000 36% above 500000

INTRPRATATION:- from the above figure we can say that people more than 3,00,000 annual income generally invest in this market.

Q.4 Percentage of monthly household income

OPTIONS BETWEEN 5%-10% 11%-15% 16%-20% 21%-25% MORE THAN 25% TOTAL

NUMBER OF RESPONDS 9 17 15 36 18 95

PERCENTAGE 9% 18% 16% 38% 19% 100%

61

MONTHLY HOUSE HOLD

MORE THAN 25%

21%-25%

16%-20%

MONTHLY HOUSE HOLD

11%-15%

BETWEEN 5%-10% 0% 10% 20% 30% 40%

INTERPRETATION :- from the above data we can say that people who invest in market ,generally invest 21%-25% of their income.

62

LIMITATIONS OF SURVEY
Limited area of study :our survey is confined only to Delhi Sample size was limited so it might be possible that in the study all type of investor or people are not covered. Limited span of study: All the finding and suggestion will be based on the current market situation , which is dynamic in nature. Indian stock market is semi efficient market where sentiments play a major role in price ; hence 100% accurate predictions cannot made about its future.

FINDING FROM SURVEY

After entire analysis of survey and questionnaire it has been found that : Majority of the people are not willing to go for derivative market as an investment option because it is highly risky and require continuously involvement of the investor . it is time consuming Majority of people invest in stock (equity) market only. For non- investor there are two dominants reasons : working on expansion plan and reinvestment in their own unit. Factor consider for investment in majorly growth ad quick money. Majority of investors are preferred to invest as trader or jobber rather than an investor .lack of knowledge in the main reason why people do not invest in derivative market. Many investor prefer to take professional advice before investing in derivative market research report in the from of derivative market . In India investment in equity is quite popular among investor .survey finding s reveal that only 44 % responds are ready to go far derivative market as an investment option.

63

MAJOR LEARNING I learnt about equity market , mutual funds ,derivatives market. I learnt about online trading and off line trading market , and information about intraday and delivery trading system.

I learnt about Demat Account, how to opened it, and what type of documentation required for his /her account.. I learnt depository participant work .like filled delivery system slips and edit data.

I learnt to apply a lot of theoretical knowledge into practical use. I also came to know the various work culture rules and ethics that are required to be fallowed in the organization . I have learnt it is very important to build a relationship with a client as it brings more business.

64

RECOMANDATIONS
The decision about whether to use derivatives should be driven not by the companys size but by its strategic objectives .it is important that all the user of derivatives understand how their contracts are structured ,the unique price and risk characteristic of those instruments and how they will perform under stressful and volatile economic conditions.to increase transparency improved information on the size and structured of derivative market , should be provided . Internationally consistent market statistics on the national amount and gross market value outstanding of broad categories of foreign exchange ,interest rate,and equity based derivatives market instrument should be provided, A careful risk management study in respect to the corporate goals with complete market stimulation is very necessary for participating in derivative market.

65

CONCLUSION
Derivatives allow firms and individual to hedge risks and to take risks efficiently . They also can create risk at the firm level, especially if a firm uses derivatives episodically and is inexperienced in their use . For the economy as a whole ,a collapse of a large derivatives user or dealer may create systematic risks . on balance derivative help make the economy more efficient . However ,neither user of derivatives nor regulator can complacent firms have to make sure that derivative are used properly . this means that risks of derivative position have to measured and understood .those in charge of taking derivatives positions must have proper trainings. It also means that a firm must have well defined policies for derivative use. A firm board must know how risk is managed within the firm and which role derivatives play. Regulator have to make sure to monitor carefully financial firms with large derivatives .

Though regulator seem to doing a good job in monitoring bans and brokerage houses , the risks taken by insurance companies, hedge funds and government sponsored enterprises should be understood .and monitored . So should be fear derivatives ?the answer is that no we should have a healthy respect from them .we do not fears plan because they many crash and do not refuse to board them because of that risk instead, we make sure that plans are as safe as it makes economic sense them to be .the same applies to derivative s .typically , the losses from derivatives are localized , but the whole economy gains from the existence of derivatives.

66

BIBLIOGRAPHY

References: www.nse.com www.bse.com www.futures&options.com www.moneycontrol.com www.scribd.com

Literature Review: AIMA, Securities Analysis & Portfolio Management NSEs ,Certificate In Financial Markets-Derivative core module Financial Market &Services by Gordon and Natrajan

67

APPENDIX
QUESTIONNAIRE

Client Name: Contact No: Email Id Address : :

Any Reference : ... ...

Q.1 Do you aware about share market ? 1. Yes B. No Q .2 Where do you want do to invest ? A. B. C. D. E. Share market Insurance Fixed deposits Real estate Others

Q. 3 Do you deal in Derivative instruments? 1. Yes 2. No

68

Q.4Which of the following derivative instrument do you deal in? A. Stock futures B. Stock index futures C Stock options D .Stock index options Q.5 How much do stock index future contribute to your entire business? 2. 3. 4. 5. More than 75% 50-75% 25-50% Less than 25%

Q.6 What type of investor usually buy stock index futures? Q.7what is the liquidity perception regarding stock index future? 1. 2. 3. 4. Very high High Low Very low

Q.8what kind of investor usually approach for trading in stock exchange? 1. Hedger 2. Speculator 3. Arbitrager Q.8 what is the perception about risk reduction through stock index future ? 1. 2. 3. 4. Very high High Low Very low

Q.9What is the awareness level about stock index future? 1. Excellent 2. Good 3. Poor

69

Q.10 Would you like to any suggestion regarding improvement of trading in stock future?

THANK YOU