A PROJECT REPORT ON INVESTMENT BEHAVIOR OF THE CLIENT OF THE SHARE KHAN LTD TOWARDS EQUITY DERIVATIVE MARKET.

UNDERTAKEN AT SHAREKHAN LTD, BARODA

Submitted By: MR.YAKUBKHAN KARAMATI

Guided By: MRS. KUNJAL SINHA ENROL.NO:1107050592114 MBA (2012-13)

C.K.S.V.I.M INSTITUTE OF MANAGEMENTS

DECLARATION

I here by declare that the summer project report titled Investment behavior of the clients of the SHAREKHAN LTD. Towards equity derivative market is based on original piece of work done by me for the fulfillment of degree of Master of Business Administration and whatever information has been taken from any sources had been duly acknowledge. I further declare that the personal data & information received from any respondent during survey has not been shared with any one and is used for academic purpose only.

Date: Place:

Yakubkhan karamati Enrol.no:117050592114

PREFACE For a management student training plays an important role during his/her study. Training provides a corporate or real world platform to learn practically. MBA degree without any training or corporate world experience is just like life without oxygen. So industrial training provides a great learning experience about management concepts and its applications. This training provides us an opportunity to know the current market. To know the current market situations, prevailing competitions, behavioral environment of different people etc. It provides us a platform whereby we can apply our theoretical knowledge and we can solve many practical problems. And hence it can help us to be a successful manager in future. Thanks to all those who directly or indirectly help me to complete this project within a short time limit . For preparation of this report I would like to thanks to faculty members of our college and staff members of SHARE KHAN LTD. I would like to specially thanks to Mr. Nirav Patel {Branch manager}, Mr.Anish vaidhya {Assistant Branch Manager} who were become so helpful me during my summer project.

Mr. Yakubkhan

ACKNOWLEDGEMENT
There is a fact that none of the human being in this world is 100% perfect and in order to gain some perfectness in itself an individual surely needs a helping hand. The same was with me with respect to the project that I was undergoing during this session of 2 months. As I too was illiterate with this research topic that I selected for my research at the initial stages, I got acquainted with it slowly and steadily through efforts and surely from various intelligent and helpful personalities. I would like to extend my heartily thanks to all of them through this acknowledgement. To start with, I would like to thanks to Mr. Nirav Patel branch manager and MR. Anish Vaidhya (Assistant Branch Manager) of SHAREKHAN LTD, BARODA who have been source of constant inspiration and encouragement to me who have from time to time offered valuable suggestion and ideas. I would also like to thanks to Mr. Nilesh Solanki and Mr. Samir Chaudhry (Assistant manager)for giving me necessary guidelines. I personally would like to thanks my training coordinator Mr. Ankit Shah our Faculty for assisting me throughout the project period, guiding me and assisting at various stages and thus sharing his valuable knowledge with me to enhance my knowledge and helping me in preparing a project. I would also like to thanks all the Faculty members, who directly or indirectly help me to successfully complete my project. I would also like to extend my thanks to all the respondents who spared their valuable time and helped me in filling up the questionnaire by providing the needed information.

EXECUTIVE SUMMARY

Days were gone when people only invest their money in post or in banks. Today people have several choices for the investment. One of the most emerging choices is to invest in shares (equities). To get good return on investment people are ready to take risks. For that they now gradually are starting to invest in equities. To start investment in equities people need Demat, Trading and bank account. As one can open his / her Demat account, he/she also can access trading account as both are collectively used for trading in equities. After trading in derivative market investors getting loss more than profit. so it become risky to invest in cash market. So transferring the risk , to hedge the risk, and for speculating derivative market come into picture in 1970s. they accounted for about two third of total transaction in derivative product. In recent years the market for financial derivatives has grown tremendously in terms of variety of instrument available , their complexity and also turnover . In the class of equity derivatives the world over futures and options on stock indices have gained more popularity than on individual stocks, especially among institutional investors , who are major users of the index linked derivatives. Even small investors find their useful due to high correlation of the popular indexes with various portfolio and ease of use. If the investors are trading in derivative market than what criteria they consider while they are investing in derivative market? What is the objective of the investors while they are trading in derivative market? What is their preference? What is the preference in terms of trading? How company can utilize various aspects like which criteria customers prefer, their needs and wants, which parameters of services they prefer as important etc. Such information is used to satisfy customers needs and wants and also to switch non users to users. Also here I have try to know the level of satisfaction of Share khans clients and their suggestions. So that Share khan can serve its clients effectively. So I conduct the survey to know the behavior of the client of the share khan ltd. So share khan ltd can provide effective service to their customers.

TABLE OF CONTENTS

Sr. No. 1.0 INTRODUCTION 1.1 Company Profile 1.2 Literature Review 1.3 Conceptual framework

TOPIC

Page No.

2.0

RESEARCH METHODOLOGY 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 Problem Statement Research Objectives Research Methodology Research Design Data Collection method Sampling Design Statistical Tests to be used How to conduct Statistical test

3.0 4.0 5.0 6.0

ABOUT DERIVATIEVS DATA ANALYSIS & INTERPRETATION FINDINGS RECOMMANDATIONS BIBLIOGRAPHY APPENDIX

1.1: SHARE BROKING SERVICE SECTOR PROFILE:

There are several national as well as local players in stock trading services which are providing various services to their customers like online trading, portfolio management system, stock broking etc. Among them several national level players. KEY PLAYERS:

5Paisa.com - Online trading, live stock quotes and market research Advani Share Brokers - Share broking and market research services Anand Rathi Securities - Portfolio management, corporate finance, equity & fixed income brokerage services Brescon Group - Advisory and broking services CIL Securities - Stock broking & merchant banking services CRN India - Trends of stock market, trading tips, chat etc Churiwala Securities - Stock trading, quotes and market analysis DSP Merrill Lynch - Investment banking and brokerage services Dalmia Securities - Stock broking & depository services EquityTrade - Stock trading, company news & market research Gandhi Securities - Stock broking and investment services Gogia Capital Services - Stock broking and market analysis Hasmukh Lalbhai - Stock trading services Idafa Investments - Stock broking services India Market Access - Offers stock broking, portfolio management and investment banking services Investsmart India - Personal finance advisory & online brokerage services Kisan Ratilal Choksey Shares - Stock broking and e-trading services Kotak Securities - Brokerage services & retail distributor of financial securities Manubhai Mangaldas Securities - Stock broking and market analysis Moneypore - Investment and broking services Motilal Oswal - Online trading, live BSE and NSE quotes Navia Markets - Stock broking, IPO and mutual funds services Parag Parikh - Stock broking and portfolio management Parsoli Corporation - Investment management & stock trading services Pratibhuti Viniyog - Stock broking services Prudential - Investment management services Quantum Securities - Offers broking and portfolio management services. Sivan Securities - offers services related investment banking & stock broking with a focus on South India.

1.2: COMPANY PROFILE:

SSKI HISTORY Founded in 1922, it is one of Indias oldest brokerage houses having over Eighty years of broking experience. Founding member of the Stock Exchange, Mumbai and pioneer institutional broker. SSKI is the only domestic player in a market crowded by 44 multinational securities firm. Foray into institutional broking and corporate finance 20 years ago. SSKI group also comprises Institutional broking division caters to the largest domestic and foreign institutional investors, the corporate finance division focuses on niche areas such as infrastructure, telecom and media. SSKI holds a sizeable portion of the market in each of these segments. Forerunner of investment research in the Indian market, SSKI provide the best research coverage amongst broking houses in India. The companys research team was set up in December 1992 and is rated as one of the best in the country. Voted four times as the top domestic brokerage house by Asia money survey, SSKI is consistently ranked amongst the top domestic brokerage houses in India. Retail broking started in 1985. Research group was set up in December 1992. It acts as a pioneer if investment research in the Indian market aimed at generating quick investment ideas. Group interest Investment Banking, Institutional Broking and Retail Broking. It occupies 65% of business share from foreign institutional investors. SSKI named its online division as Sharekhan on February 8, 2000 coinciding with the launch of its website.

COMPANY PROFILE

Share khan is a share broking and retail broking arm of SSKI, an organization with more than 80 years of trust and credibility in the stock market. Retail Distribution Started In 1998. SSKI is a veteran equities solutions company with over 8 decades of experience in the Indian stock markets. It helps the customers/people to make informed decisions and simplifies investing in stocks. Sharekhan brings to you a user- friendly online trading facility, coupled with a wealth of content that will help you stalk the right shares. SSKI named its online division as a Sharekhan and it is into retail broking. The business of the company overhauled 6 years ago on February 8, 2000. It acts as a discount brokerage house to a full service investment solution provider. It has specialized research product for the small investors and day traders. Sharekhan has a shop in 137 cities across India. Though the portal sharekhan.com, have been providing investors a powerful online trading platform, the latest news, research and other knowledge-based tools for over five years now. We have decided teams for fundamental and technical research so that you get all the information you need to take the right investment decisions. With branches and outlets across the country, our ground network is one of the biggest in India! They have talent pool of experienced professionals specially designated to guide you when you need assistance, which is why investigating with us is bound to be a hassle-free experience for you! The Sharekhan provides its customers First Step program, built specifically for new investors, is testament to our commitment to being your guide throughout your investing lifecycle They have 640 share shops across 280 cities in India to get a host of trading related services our friendly customer service staff will also help you with any account related queries you may have.

ABOUT SHAREKHAN SSKI named its online division as SHAREKHAN and it is into retail broking. The business of the company overhauled 6 years ago on February 8, 2000. It acts as a discount brokerage house to a full service investment solutions provider. It has specialized research product for the small investors and day traders. Largest chain of share shops, 310 shares, shops in 137 cities across India. The site was also launched on February 8, 2000 and named it as www.sharekhan.com. The Speed Trade account of Sharekhan is the next generation technology product launched on April 17, 2002. It offers its customers with the trade execution facilities on the NSE and BSE, for cash as well as derivatives, depository services. Ensures convenience in Trading Experience: Sharekhans trading services are designed to offer an easy, hassle free trading experience, whether trading is done daily or occasionally. The customer will be entitled to a host of value added services in the investment process depending on his investing style and frequency offers a suite of products and services, providing the customers with a multichannel access to the stock markets. It gives advice based on extensive research to its customers and provides them with relevant and updated information to help him make informed about his investment decisions. Sharekhan offers its customers the convenience of a broker-DP. It helps the customers meet his pay in obligations on time thereby reducing the possibility of auctions. The company believes in flexibility and therefore allows accepting late instructions without any extra charge. And execute the instruction immediately on receiving it and thereafter the customer can view his updated account statement on Internet.

 Sharekhan depository services offer Demat services to individual and corporate investors. It has a team of professionals and the latest technological expertise dedicated exclusively to their Demat department. A customer can avail of Demat, repurchase and transmission facilities at any of the Sharekhan branches and business partners outlets. BRAND NAME

The company as a whole in its offline business has named itself as SSKI Securities Private Limited Sevaklal Sevantilal Kantilal Ishwarlal Securities Private Limited. The company has preferred to name themselves under a blanket family name. But in its online division started since 1997, the company preferred to name itself as SHAREKHAN. The Brand name SHAREKHAN itself suggests the business in which the company is dealing so that the customer could easily identify the product or service category.

CORE SERVICES OF SHAREKHAN

1. 2. 3. 4. 5. 6.

Equity and Derivative Trading on BSE and NSE. Depository Services. Online Trading. IPO Services. Commodities Trading on MCX and NSDEX. Portfolio Management Services.

SERVICES PROVIDED BY SHAREKHAN Online Services Offline Services Depository Services Equity and Derivatives Trading Fundamental Research Technical Research

Portfolio Management Commodities Trading Dial-n-trade Share shop

1. Online Services: Mutual Funds Commodity Futures PMS Technical PMS Demat Services Share shops

2. Offline Services: Trading with the help of Dealer Trading without credit By calling to the Share shops Credit facility (Only in Delivery-based) T+2 facility Special website for Offline Clients: www.mysharekhan.com Physical contract notes

Types of Account
Classic A/c Speed-trade

Classic A/c:
Features of Classic A/c: Online trading account for investing in Equities and Derivatives via sharekhan.com.

Integration of: Online trading + Bank + Demat account. Instant cash transfer facility against purchase & sale of shares. Make IPO bookings. You get Instant order and trade confirmations by e-mail Streaming Quotes. Personalized Market Scan with your own customized stock ticker. Single screen interface for cash and derivatives.

Speed-trade:
Features of Speed-trade:

Instant order Execution & Confirmation Single screen trading terminal Real-time streaming quotes, tic-by-tic charts Market summary (most traded scrip, highest value and lots of other relevant statistics) Hot keys similar to a brokers terminal Alerts and reminders Back-up facility to place trades on Direct Phone lines Single screen interface for cash and derivatives

Dial-n-trade:
Features of Dial-n-trade: Two dedicated numbers for placing your orders with your cell phone or landline. Toll free number: 1-800-22-7050. For people with difficulty in accessing the toll-free number, we also have a Reliance number 30307600 which is charged at Rs. 1.50 per minute for STD calls. Automatic funds transfer with phone banking (for Citibank and HDFC bank customers).

Simple and Secure Interactive Voice Response based system for authentication. No waiting time. Enter your TPIN to be transferred to our telebrokers. You also get the trusted, professional advice of our teleprocess. After hours order placement facility between 8.00 am and 9.30 am (timings to be extended soon.

SHARE KHAN LTD. AFFILIATED WITH BANKS Share khan has affiliation with 14 banks, which allows its customers to enjoy the facility of instant credit and transfer of funds from his savings bank account to his Sharekhan trading account. The Affiliated banks are as follows:

HDFC BANK UTI BANK CITI BANK ORIENTAL BANK OF COMMERCE IDBI BANK UBI BANK CORPORATION BANK STATE BANK OF INDIA AXIS BANK YES BANK ICICI BANK INDIAN OVERSEAS BANK DEUTSCHE BANK BANK OF INDIA

PROMOTION TOOLS AND ADVERTISEMENT OF SHAREKHAN

1. Promotion
Online share trading is totally a new concept in Indian market. Generally investor doesnt like to come from conventional way of share trading. Sharekhan has introduced this product in the concept and products are still new in the market. Therefore the company has undertaken extensive promotion campaign to create awareness about the product. Sharekhan adopts the following tools for promoting the product. Internet Tele Marketing Retail Share Shops Franchisee Owners Sales Force

2.

Advertising
Company advertises its product through TV media on channels like CNBC, Print Media-in leading dailies and outdoors media. It advertises itself as an innovative brand with a cartoon of tiger-called SHERU. Besides attractive and colorful brochures as well as posters are used giving full details about the product. Mails are sent to people togging on to sites like moneycontrol.com and rediff.com.

SWOT ANALYSIS
STRENGTHS Online Trading Facility Largest Chain of Retail Share Shops in India 80 years of Experience in securities market Dedicated and responsive workforce/staff Value added service for HNI client Research Center Membership of NSE & BSE Trading option like Future & Option and Commodities Volume based differentiated product.

WEAKNESSES Less informative website Does not have slab rate brokerage which is provided by competitors Problems due to network crash Unawareness Among Investors

OPPORTUNITY Collaboration with international financial institution To tap the Untapped market To capture the market lost to its Competitors. To focus on developing a superior and powerful portal To spread awareness of its Brand Name.

THREATS Follow government laws Severe Competition Competitors develops Prolonged depression and high volatility in the market New Entrants.

LITERATURE REVIEW
Literature review helps to understand the topic thoroughly. It provides valuable insight in the topic. It helps for decision making about the problem. The information collected for the literature review should be relevant and valid as well as reliable. Literature review helps in removing the gaps between theory and the existing study. So in short to clean the rosy picture and to identify the clear cut solution literature review is helpful.

CONCEPTUAL FRAMEWORK
As the research report is made on derivatives, it is essential to know about the Financial Derivatives and commodity derivatives. So, this chapter give brief idea about the essential element or basics of derivatives, based on which entire trading in market is done. However there are many types of financial derivatives like forward, futures, option, swap, swaptions warrants etc., the futures and option are more famous and widely used in equity and commodity derivatives. So, this chapter cover only concept of future and option. But it is essential to know about forward contract to make clear understanding of future and option, so this chapter also include the concept of the forward contract. In India, as per Section 19 of Forward Contract Regulation Act, 1952, option contracts in commodities are presently prohibited. Thus, presently the trading in commodities is done through only future contract in India. So, this chapter elaborates detail description on future contracts. In this chapter it also mentions the detail description of the risk management techniques used by various governing bodies (SEBI & FMC) and the general investors. Moreover, in the end of this chapter brief idea about commodity derivatives and difference between commodity derivatives and financial derivatives is given.

2) RESEARCH METHODOLOGY:

2.1 RESERCH PROBLEM: INVESTMENT BEHAVIOUR OF THE CLIENTS OF THE SHARE KHAN LTD. TOWARDS EQUITY DERIVATIVE MARKET. 2.2 RESEARCH OBJECTIVE: Primary objective: To know the investment behaviour of the client of the share khan ltd. Towards equity derivative market. :Secondary Objective: To know the investment pattern of the investors towards derivative market. To find out the preference level of the investors towards equity derivative market. To know the risk and return expectation of the investors from the derivative market.

2.3 RESEARCH DESIGN: I have used the descriptive research design for the purpose of the survey as it will enable me to describe the characteristics of a particular individual & their tendency towards equity derivative market.

2.4 SAMPLING METHOD: I have used the non probability convenience sampling method. 2.5 SAMPLE SIZE : It would be better to have a sample of 200 people so that the population is properly presented & to cope up with the time limitation.

2.6 DATA COLLECTION METHOD : Primary Data collection :- Primary Data collection by the questionier. Secondary data collection: 1. CIS {customer information system of the share khan ltd. 2. VALUELINE magazine of the share khan ltd.

2.7 DATA ANALYSIS: DATA analysis will be done using SPSS {Statistical Package for Social Science}this will be used because it gives us accurate & quick result.also multiple features of SPSS will help in applying various tests to reach to accurate conclusion. 2.8 STATESTICAL TESTS TO BE USED: One sample T-Test: The One sample T-Test used to test whether the mean of a single variable differs from a specified constant. The average difference between each data value and the hypothesized test value, a t test that tests this difference is 0, and a confidence level for this test may either 95% or 90 %. One sample t-test is used when the type of data are interval in nature .

3) History of derivatives
The history of derivatives is surprisingly longer than what most people think. Some texts even find the existence of the characteristics of derivative contracts in incidents of Mahabharata. Traces of derivative contracts can even be found in incidents that date back to the ages before Jesus Christ. However, the advent of modern day derivative contracts is attributed to the need for farmers to protect themselves from any decline in the price of their crops due to delayed monsoon, or overproduction. The first 'futures' contracts can be traced to the Yodoya rice market in Osaka, Japan around 1650. These were evidently standardised contracts, which made them much like today's futures. The Chicago Board of Trade (CBOT), the largest derivative exchange in the world, was established in 1848 where forward contracts on various commodities were standardised around 1865. From then on, futures contracts have remained more or less in the same form, as we know them today. Exchange traded financial derivatives were introduced in India in 12, June 2000 at the two major stock exchanges, NSE and BSE. There are various contracts currently traded on these exchanges. National Commodity & Derivatives Exchange Limited (NCDEX) started its operations in December 2003, to provide a platform for commodities trading. The derivatives market in India has grown exponentially, especially at NSE. Stock Futures are the most highly traded contracts on NSE accounting for around 55% of the total turnover of derivatives at NSE, as on April 13, 2005.

3.1) WHAT ARE DERIVATIVES?

Derivatives are instruments that derive their value from an underlying asset. The underlying can be a financial instrument, currency, or a commodity. Derivatives are financial contracts whose value/price is dependent on the behaviour of the price of one or more basic underlying assets (often simply known as the underlying). These contracts are legally binding agreements, made on the trading screen of stock exchanges, to buy or sell an asset in future. The asset can be a share, index, interest rate, bond, rupee dollar exchange rate, sugar, crude oil, soyabean, cotton, coffee and what have you. The largest appeal of derivatives is that they offer some degree of leverage. Leverage is a financial term that refers to the multiplication that happens when a small amount of money is used to control an item of much larger value. A mortgage is the most common form of leverage. Derivatives offer the same sort of leverage or multiplication as a mortgage. For a small amount of money, the investor can control a much larger value of company stock then would be possible without use of derivatives. This can work both ways, though. If the investor purchasing the derivative is correct, then more money can be made than if the investment had been made directly into the company itself. However, if the investor is wrong, the losses are multiplied instead.

DERIVATIVE MARKETS Derivative Markets are broadly classified into two types namely, Financial Derivatives and Commodity Derivatives

3.2) FINANCIAL DERIVATIVES

The derivatives traded on the Indian stock Exchange are Financial Derivatives, where the underlying is the index or the individual stock. They are traded in the Futures & Option (F&O) segment of National Stock Exchange (NSE) and The Stock Exchange, Mumbai (BSE). The derivatives markets is regulated by Securities and Exchange Board of India (SEBI). India has also been trading derivatives contracts in silver, gold, spices, coffee, cotton and oil etc for decades in the gray market. Trading derivatives contracts in organized market was legal before Morarji Desais government banned forward contracts. Derivatives on stocks were traded in the form of Teji and Mandi in unorganized markets. Recently futures contract in various commodities were allowed to trade on exchanges. For example, now cotton and oil futures trade in Mumbai, soybean futures trade in Bhopal, pepper futures in Kochi, coffee futures in Bangalore etc. Currently, there are 41 stocks that are taken as the underlying for Futures & Option in the National Stock Exchange(NSE). The NSE Nifty Index also can be assumed as any other stock for the purpose of Future or Option trading. These stocks have various market lots depending on their prices. The minimum contract size is Rs. 200000. The various market lots were decided on the basis that the contracts meet the minimum size criterion.

3.3) TYPES OF DERIVATIVES MARKET

Derivative contracts are of different types. The four important types of derivatives are: 1. 2. 3. 4. 5. 6. 7. Forward contract Futures Options Swap Swaptions Warrants Baskets

The difference between a share and derivative is that shares/securities are an asset while derivative instrument is a contract. Futures and options can be traded on stock exchanges. Let us discuss each of these in greater depth. However as mentioned earlier, for understanding future contract, it is necessary to understand about forward contract. So, first of all we discussed about the forward contracts.

3.3.1) Forward Contract A forward contract is an agreement in which two parties agree to undertake an exchange of the underlying asset at some future date at a pre-determined price. A forward contract is a customized contract between two parties, where settlement takes place on a specific date and at a price agreed in advance. So, a forward contract is the simplest mode of a derivative transaction. It is an agreement to buy or sell an asset (of a specified quantity) at a certain future time for a certain price. No cash is exchanged when the contract is entered into. Illustration 1: Mr. A wants to buy an A.C., which costs Rs 10,000 but he has no cash to buy it outright. He can only buy it 3 months hence. He, however, fears that prices of televisions will rise 3 months from now. So in order to protect himself from the rise in prices Mr. A enters into a contract with the A.C. dealer that 3 months from now he will buy the A.C. for Rs 10,000. What Mr. A is doing is that he is locking the current price of an A.C. for a forward contract. The forward contract is settled at maturity. The dealer will deliver the asset to Mr. A at the end of three months and Mr. A in turn will pay cash equivalent to the A.C. price on delivery. The salient features of forward contracts are: 1. They are bilateral contracts and hence exposed to counter party risk. 2. Each contract is custom designed, and hence is unique in terms of contract size, expiration date and the asset type and quality. 3. The contract price is generally not available in public domain. 4. On the expiration date, the contract has to be settled by delivery of the asset. 5. If the party wishes to reverse the contract, it has to compulsorily go to the same counter-party, which often results in high prices being charged.

However forward contracts in certain markets have become very standardized, as in the case of foreign exchange, thereby reducing transaction costs and increasing transactions volume. This process of standardization reaches its limit in the organized futures market. Limitations of forward markets Forward markets world-wide are affected by several problems: Lack of centralization of trading Illiquidity Counterpart risk

3.3.2) Futures 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. (Detail of the future contract is explained in next section of this chapter i.e. 3.6) The standardized items in a futures contract are: Quality of the underlying Quantity of the underlying The date and the month of delivery The units of price quotation and minimum price change Location of settlement Distinction between futures and forwards contracts Forward contracts are often confused with futures contracts. The confusion is primarily because both serve essentially the same economic functions of allocating risk in the presence of future price uncertainty. However futures are a significant improvement over the forward contracts as they eliminate counterparty risk and offer more liquidity.

Distinction between futures and forwards

FUTURES Trade on an organized Exchange Standardized contract terms More liquid Requires margin payments Follows daily settlement OTC in nature Customized contract terms Less liquid No margin payment Settlement happens at end of period. FORWARDS

In the India, as per the regulation of Forward Market Commission, the trading in commodities is allowed through future contract only. So, we will discuss about future contract in detail in next section of this chapters.

3.3.

Option

This is the best form of derivative, which is interesting as well as rewarding, as proper understanding of this instrument can help us in fetching very attractive returns. Some people remain puzzled by options. The truth is that most people have been using options for some time, because options are built into everything from mortgages to insurance. An option is a contract, which gives the buyer the right, but not the obligation to buy or sell shares of the underlying security at a specific price on or before a specific date. Option, as the word suggests, is a choice given to the investor to either honour the contract; or if he chooses not to walk away from the contract. So, an option buyer has the right to buy or sell, but not an obligation to do so. There are two types of options:

A Call Option is an option to buy a stock at a specific price on or before a certain date. In this way, Call options are like security deposits. If, for example, you wanted to rent a certain property, and left a security deposit for it, the money would be used to insure that you could, in fact, rent that property at the price agreed upon when you returned. If you never returned, you would give up your security deposit, but you would have no other liability. Call options usually increase in value as the value of the underlying instrument rises. When you buy a Call option, the price you pay for it, called the option premium, secures your right to buy that certain stock at a specified price called the strike price. If you decide not to use the option to buy the stock, and you are not obligated to, your only cost is the option premium. Put Options are options to sell a stock at a specific price on or before a certain date. In this way, Put options are like insurance policies If you buy a new car, and then buy auto insurance on the car, you pay a premium and are, hence, protected if the asset is damaged in an accident. If this happens, you can use your policy to regain the insured value of the car. In this way, the put option gains in value as the value of the underlying instrument decreases. If all goes well and the insurance is not needed, the insurance company keeps your premium in return for taking on the risk. With a Put Option, you can "insure" a stock by fixing a selling price. If something happens which causes the stock price to fall, and thus, "damages" your asset, you can exercise your option and sell it at its "insured" price level. If the price of your stock goes up, and there is no "damage," then you do not need to use the insurance, and, once again, your only cost is the premium. This is the primary function of listed options, to allow investors ways to manage risk. Thus, In case of call option, if prices go up after you have bought those options then you earn profit and if prices go down you loose to the extent of premium amount only. In case of put option, if prices go down after your purchase then you benefit whereas if prices go up then you loose to the extent of premium amount.

Based on above discussion, we can summarize feature of the option contract as under. BUYER OF THE OPTION CONTRACT (LONG POSITION) Call Option Put Option Right to buy assets Right to sell assets SELLER/WRITER OF THE OPTION CONTRACT (SHORT POSITION) Obligation to sell assets Obligation to buy assets

Technically, an option is a contract between two parties. The buyer receives a privilege for which he pays a premium. The seller accepts an obligation for which he receives a fee. Both the types of options can be sold or bought. Selling an option, which is also known as option writing should be done very carefully. However option buying is a simpler proposition and also rewarding at the same time. An option which can only be exercised on the expiry date is called a EUROPEAN style option. Whereas the one which can be exercised at any time before the expiry is called an AMERICAN styled option. However after buying any of these options, if you feel like selling or buying them you can do that as they are freely traded on the stock exchanges. Sensex Index Options are European styled Option whereas options in 31 scripts are American Options.

3.3.4) Swaps Swap is an agreement between two parties to exchange different stream of cash flows in future according to predetermined formula. 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 : Interest rate swaps: These entail swapping only the interest related cash flows between the parties in the same currency. Currency swaps: These entail swapping both principal and interest between the parties, with the cash flows in one direction being in a different currency than those in the opposite direction.

3.3.5) Swaptions Swaptions are options to buy or sell a swap that will become operative at the expiry of the options. Thus a swaption is an option on a forward swap. 3.3.6) Warrants Options generally have lives of up to one year, the majority of options exchanges having a maximum maturity of nine months. Longer-dated options are called warrants and are generally traded over-the-counter.

3.3.7) Basket Basket options are options on portfolios of underlying assets are usually a moving average of a basket of assets. Equity index options are a form of basket options.

3.5) COMMODITY DERIVATIVES A commodity is an undifferentiated product whose value arises from the owner's right to sell rather than the right to use. A commodity includes all kinds of goods. FCRA defines goods as every kind of movable property other than actionable claim, money and securities. Derivatives as a tool for managing risk first originated in the commodities markets. They were then found useful as a hedging tool in financial markets as well. In India, trading in commodity futures has been in existence from the nineteenth century with organized trading in cotton through the establishment of Cotton Trade Association in 1875. Over a period of time, other commodities were permitted to be traded in futures exchanges. Regulatory constraints in 1960s resulted in virtual dismantling of the commodities future markets. It is only in the last decade that commodity future exchanges have been actively encouraged. However, the markets have been thin with poor liquidity and have not grown to any significant level.

Yes No Total Yes No Total

Frequencies 74 126 200 Frequencies 74 126 200

Percentage 37.0 63.0 100.0 Percentage 37.0 63.0 100.0

DATA ANALYSIS AND INTERPRETATION:

Q.1 ARE YOU TRADING IN DERIVATIVE MARKET?

Objective: To know that whether the investors are trading in derivative market or not.

Frequency

Graph:

Trading
140 126

percent/frequency

120 100 80 60 40 20 0 Yes Trading No 37 74 63 Frequencies Percentage

Inference: from the above graph out of 200 investors, only 37% investors means 74 respondent are trading in derivative market and 63% means 126 respondents are not trading in derivative market. Q.2 Reasons for not investing in derivative market. {Give the rank} Objective: To know the reason why investors are not trading in trading in derivative market.

Frequency

Reasons Lack of knowledge Lack of awareness High risky Huge amount of investment Other Total

Frequency 26 19 62 17 2 126

Percent 20.6 15.1 49.2 13.5 1.6 100.0

Graph:
Reason
70 60 50 40 30 20 10 0 percent/frequency 62 49.2
Series1

26 20.6 0 0 Reasons Lack of knowledge

1915.1

Series2

1713.5 2 1.6

Series3

Lack of awareness

High risky Huge amount of investment

Other

reasons

Inference: From the above graphical representation you can see that 20.6% investors dont have the knowledge of the derivative market ,15.1% investors are not aware from the derivative market,49.2% investors think that trading in derivative is high risky.13.5% investors says that derivative require huge amount for trading in derivative market. whereas 1.6% investors dont have specify their reasons for not trading in derivative market. Q.3 what is the objective of trading in derivative market? Objective: To know that why they are trading in derivative market.

High return: Frequency Frequency Dont trade 126 Not at all preferred 2 Neutral 2 Some how preferred 5 Most preferred 65 Total 200

Percent 63.0 1.0 1.0 2.5 32.5 100

Graph:
High Return
140
percent/frequency

126

120 100 80 60 40 20 0 Dont trade Not at all preferred Neutral preferred Some how preferred Most preferred 2 1 2 1 5 2.5 32.5 63 65 Frequency Percent

Inference: From the above graph we can say that 63% means 126 respondents are not trading in derivative market. While from the 200 only 74 are trading in derivative market. And from the 74 respondent 4 respondent means 2% respondent are neutral for the high return in derivative market. 2.5% investors are some how preferred High Return.

One Sample T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.79). In other words, we hypothesize that the most of the investors are some how not preferred high return as their objective of investing in derivative. i.e. Ho : x = = 1.79 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are some how preferred high return as their objective of investing in derivative. i.e. H1: x , i.e. H1: x 1.79 Statistical Test: one sample t-test is chosen because the measurement of data is interval in nature. Significance level: 0.05 One-Sample Statistics

N HI.RTN 200

Mean

Std. Std. Error Deviation Mean 1.79 2.36 .17

One-Sample Test Test Value = 2 t

df

HI.RTN

-1.291

199

Sig. (2Mean 95% tailed) DifferencConfidenc e e Interval of the Differenc e Lower .198 -.22 -.54

Upper .11

Inference: Here the test is performed at 95% significance level and the t-value comes out as .198 which is grater than 0.05, it means that the null hypothesis H0 is accepted and alternative hypothesis is rejected and it can be said that there is no significant difference between calculated mean and hypothesized mean.

Hedge the risk: Frequency Frequency 126 1 3 13 43 14 200 Percent 63.0 .5 1.5 6.5 21.5 7.0 100.0

Valid

Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total

Graph:
Hedge the risk
percentage / frequency
140 120 100 80 60 40 20 0 126 63 1 0.5 Dont trade Not at all preferred 3 1.5 Some how not preferred 13 6.5 Neutral Frequency 43 21.5 14 7 Percent

Some Most how preferred preferred

preferrred

Inference: from the above graph we can see that out of the 200 respondent 63% are not trading in derivative market. Where out of the 37% means 74 respondent are trading in the derivative market from the 37% investors 0.5 % investors are not at all preferred the hedge the risk objective , 1.5% investors are somehow preferred this objective, whereas 6.5% investors are neutral at hedge the risk and 7% investors are most referred hedge the risk objective while they are trading in derivative market. T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (.000). In other words, we hypothesize that the most of the investors are some how not preferred high risk as their objective of investing in derivative. i.e. Ho : x = = 1.44 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are some how preferred high risk as their objective of investing in derivative. i.e. H1: x , i.e. H1: x 1.44 Statistical Test: one sample t-test is chosen because the measurement of data is interval in nature. Significance level: 0.05

One Sample statics N Hedge the risk 200 Mean Std. Std. Error Deviation Mean 1.44 1.95 .14

One Sample T-Test: Test Value = 2 t

df

Hedge the risk

-4.071

199

Sig. (2Mean 95% tailed) Difference Confidence Interval of the Difference Lower .000 -.56 -.83

Upper -.29

Inference: Here the test is performed at 95% significance level and the t-value comes out as .000 which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And again investors invest in derivatives with objective of hedging risk only. Funding: FREQUENCY Frequency 126 2 18 22 32 200 Percent 63.0 1.0 9.0 11.0 16.0 100.0

Dont trade Not at all preferred Neutral Some how preferred Most preferred Total

Graph:

Funding
percentage/frequency
140 120 100 80 60 40 20 0 Dont trade Not at all preferred Neutral preferred Some how preferred Most preferred 2 1 63 18 22 9 32 11 16 Frequency Percent 126

Inference: from the above graph we can see that out of the 200 respondent 63% are not trading in derivative market, whereas out of the 37% only 1% are not at all preferred the funding option, 9% are the neutral, 11%some how preferred the funding option where as the 16% are chosen the funding option for the trading in derivative market. The mean of the funding is the 1.52; therefore we can say that most of the investors are chosen the funding while investing in the derivative market.

T-test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (0.001). In other words, we hypothesize that the most of the investors are some how not preferred funding as their objective of investing in derivative. i.e. Ho : x = = 0.001 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are some how preferred funding as their objective of investing in derivative. i.e. H1: x , i.e. H1: x 0.001

One Sample T-Test: Statistical Test: one sample t-test is chosen because the measurement of data is interval in nature. Significance level: 0.05 One-Sample Statistics N Funding 200

Mean

Std. Std. Error Deviation Mean 1.52 2.07 .15

ONE-SAMPLE TEST Test Value = 2 t

df

-3.277

199

Sig. (2Mean 95% tailed) DifferencConfidenc e e Interval of the Differenc e Lower .001 -.48 -.77

Upper -.19

Inference: Here the test is performed at 95% significance level and the t-value comes out as .001 which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And again investors invest in derivatives with objective of funding only.

Short position: Frequency Frequency 126 5 5 24 25 15 200 Percent 63.0 2.5 2.5 12.0 12.5 7.5 100.0

Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total

Graph:

Short position
percentage/frequency
140 120 100 80 60 40 20 0 126

63 24 5 2.5 Dont trade Not at all preferred 5 2.5 Some how not preferred 12 25 12.5 15 7.5 Most preferred

Frequency Percent

Neutral

Some how preferred

preferred

Inference: as we can se from the above graph that out of the 200 respondent 63% investors are not trading in the derivative market. while out of the 37% respondent 2.5 % of the investor are not at all preferred the short position, same as 2.5% are the some how preferred the short position , when only 1.2 % are the neutral , while the 12.5 % are some how preferred the short position while 7.5% are the most preferred the short position.

T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.31). In other words, we hypothesize that the most of the investors are some how not preferred short position as their objective of investing in derivative. i.e. Ho : x = = 1.31 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are some how preferred short position as their objective of investing in derivative. i.e. H1: x , i.e. H1: x 1.31

One Sample t-test N Short position 200 Mean Std. Std. Error Deviation Mean 1.31 1.84 .13

Test Value =2 t df Sig. (2Mean 95% tailed) Difference Confidenc e Interval of the Difference Lower -.95 Upper -.43

-5.307

199

.000

-.69

Inference: Here the test is performed at 95% significance level and the t-value comes out as .000 which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And again investors invest in derivatives with objective of short position only. MORE LIQUID :

Frequency Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total Graph:
More liquid
percentage/frequency
140 120 100 80 60 40 20 0 126

Frequency 126 5 5 24 25 15 200

Percent 63.0 2.5 2.5 12.0 12.5 7.5 100.0

63 24 5 2.5 Dont trade Not at all preferred 5 2.5 Some how not preferred 12 25 12.5 15 7.5 Most preferred

Frequency Percent

Neutral

Some how preferred

preferred

Inference: as we can se from the above graph that out of the 200 respondent 63% investors are not trading in the derivative market. wshile out of the 37% respondent 2.5 % of the investor are not at all preferred the more liquid as the objective, same as 2.5% are the some how preferred the more liquid , when 12 % are the neutral , while the 12.5 % are some how preferred the more liquid while 7.5% are the most preferred the more liquid option. T-Test:

Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.31). In other words, we hypothesize that the most of the investors are some how not preferred more liquid as their objective of investing in derivative. i.e. Ho : x = = 1.31

Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are some how preferred more liquid as their objective of investing in derivative. i.e. H1: x , i.e. H1: x 1.31

One-Sample Statistics N more liquid 200 Mean Std. Deviation Std. Error Mean .91 1.47 .10

One-Sample Test Test Value = 1 Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower more liquid 199 .915 .361 -9.50E-02 -.30 Upper .11

Df

Inference:

Here the test is performed at 95% significance level and the t-value comes out as .000 which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And again investors invest in derivatives with objective of more liquid . Q .4what are the criteria do you taken in the consideration while investing in derivative market? Ans: Objective: from this question we can come to know that which criteria are consider by the investors while they are investing in derivative market. Which criteria are most important for them whether derivatives are ease in transaction, less costly, or available of different contract or for the margin money.

Ease in transaction Frequency Frequency 126 2 4 16 23 29 200 Percent 63.0 1.0 2.0 8.0 11.5 14.5 100.0

Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total

Graph:

Ease in transaction
percentage/frequency
140 120 100 80 60 40 20 0 126

63 16 23 11.5 29 14.5

Frequency Percent

2 1 Dont trade Not at all preferred

4 2 Some how not preferred

Neutral

Some Most how preferred preferred

preferred

Inference: from the above graph we can conclude that out of the 200 investors 63% are already not trading in derivative market whereas out of the 37% investors 1% respondent are not not at all preferred the ease in transaction ,2% are the some how not preferred the ease in transaction , when the 8% are the neutral when the 11.5 % are some how preferred the ease in transaction when 14.5% are the most preferred the option of ease in transaction while investing in the derivative market.

T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.48). In other words, we hypothesize that the most of the investors are some how not preferred more liquid as their objective of investing in derivative. i.e. Ho : x = = 1.48 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are some how preferred more liquid as their objective of investing in derivative. i.e. H1: x , i.e. H1: x 1.31

One sample T-Test: One-Sample Statistics N ease in transaction 200 Mean Std. Deviation Std. Error Mean 1.48 2.03 .14

One-Sample Test Test Value = 2 Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower ease in transaction 199 3.658 .000 -.52 -.81 Upper -.24

Df

Inference: Here the test is performed at 95% significance level and the t-value comes out as .000 which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And again investors invest in derivatives with criteria of the ease in transaction.

LESS COSTLY Frequency Preferred Frequency Dont trade 126 Not at all preferred 11 Some how not preferred 11 Neutral 17 Some how preferred 23 Most preferred 12 Total 200 Graph:

Percent 63.0 5.5 5.5 8.5 11.5 6.0 100.0

Less costly
percentage/frequency
140 120 100 80 60 40 20 0 126

63 17 23 11.5

Frequency Percent 11 5.5 11 5.5 8.5 12 6

Dont trade

Not at all Some how preferred not preferred

Neutral

Some how Most preferred preferred

preferred

Inference: from the above graph we can see that 5.5% investors are not at all preferred the less costly criteria while they are investing in derivative market, another 5.5 % investors some how not preferred ,8.5%are neutral,11.5% investors are some how preferred while only 6% investors are most preferred the less costly criteria while they are trading in the derivative market.

Null Hypothesis (HO): There is no significant difference between calculated mean and

hypothesized mean (1.18). In other words, we hypothesize that the most of the investors are some how not preferred less costly as their objective of investing in derivative. i.e. Ho : x = = 1.18 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are some how preferred less costly as their criteria of trading in derivative. i.e. H1: x , i.e. H1: x 1.18. One sample T-Test: One-Sample Statistics N less costly 200 Mean Std. Deviation Std. Error Mean 1.18 1.73 .12

One-Sample Test Test Value = 1 Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower less costly 1.469 199 .143 .18 -6.16E-02 Upper .42

Df

Inference: Here the test is performed at 95% significance level and the t-value comes out as .143 which is less than 0.05, it means that the null hypothesis H0 is accepted and alternative hypothesis is rejected and it can be said that there is no significant difference between calculated mean and hypothesized mean. And again investors invest in derivative market they some how not preferred the criteria of less costly. Available different contract:

Frequency

Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total

Frequency 126 3 5 22 33 11 200

Percent 63.0 1.5 2.5 11.0 16.5 5.5 100.0

Graph:

avl of different contract

percentage/frequency

140 120 100 80 60 40 20 0

126

63 22 3 1.5 Dont trade 5 2.5 33 11 16.5 11 5.5 Most preferred

Frequency Percent

Not at all Some how preferred not preferred

Neutral

Some how preferred

preferrred

Inference: from the above graph we can say that at the criteria of the available different contract 1.5 % investors are not at all preferred ,2.5% are some how not preferred ,11% investors are the neutral,16.5% are the some how preferred whereas only 5.5% investors are most preferred the available different contract.

T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.33). In other words, we hypothesize that the most of the investors are not at all preferred available different contract as their criteria of investing in derivative. i.e. Ho : x = = 1.33 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are most preferred as their criteria of available different contract while trading in derivative. i.e. H1: x , i.e. H1: x 1.33. One sample T-Test:

One-Sample Statistics N availability of different contract 200 Mean Std. Deviation Std. Error Mean 1.33 1.84 .13

One-Sample Test Test Value = 1 Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower availability of different contract 2.543 199 .012 .33 7.41E-02 Upper .59

df

Inference: Here the test is performed at 95% significance level and the t-value comes out as .012 which is grater than 0.05, it means that the null hypothesis H0 is accepted and alternative hypothesis is rejected and it can be said that there is no significant difference between calculated mean and hypothesized mean. And again investors invest in derivative market they some how not preferred the criteria of available of different contract.

Margin money: Frequency Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total Graph:
Margin money
percentage/frequency
140 120 100 80 60 40 20 0 126

Frequency 126 26 14 7 16 11 200

Percent 63.0 13.0 7.0 3.5 8.0 5.5 100.0

63 26 13 14 7 16 11 5.5

Frequency Percent 7 3.5 Neutral 8

Dont trade Not at all Some how preferred not preferred

Some how Most preferred preferred

preferred

Inference: From the above graph you can see that 13% investors are not at all preferred the margin money as their trading criteria ,7% investors are some how not preferred ,3.5% investors are neutral ,8 % investors are some how preferred whereas only 5.5% investors are most preferred the margin money as their criteria while they are trading in derivative market.

T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (.97). In other words, we hypothesize that the most of the investors are not at all preferred as their criteria of margin money while trading in derivative. i.e. Ho : x = = .97

Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are most preferred the margin money as their criteria of trading in derivative.

One-Sample Statistics N margin money 200 Mean Std. Deviation Std. Error Mean .97 1.57 .11

One-Sample Test Test Value = 1 Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower margin money 199 .271 .787 -3.00E-02 -.25 Upper .19

df

Inference: Here the test is performed at 95% significance level and the t-value comes out as .787 which is grater than 0.05, it means that the null hypothesis H0 is accepted and alternative hypothesis is rejected and it can be said that there is no significant difference between calculated mean and hypothesized mean. And again investors invest in derivative market they not at all preferred the criteria of the margin money.

Q-5 Give your preference of trading in derivative instrument. Ans: Objective: To know the preference of the investors while they are trading in derivative market. INDEX FUTURE: Frequency Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total Graph:
Index future
140 120 100 80 60 40 20 0

Frequency 126 1 1 15 14 43 200

Percent 63.0 .5 .5 7.5 7.0 21.5 100.0

percent/frequency

126

63 43 1 0.5 Dont trade Not at all preferred 1 0.5 Some how not preferred 15 7.5 Neutral 14 7 Some how preferred 21.5

Frequency Percent

Most preferred

preferred

Inference: From the above graph we can see that only 0.5% investors are not at all preferred the index future, 0.5 % investors are some how not preferred ,7.5% investors are some how preferred 21.5% are most preferred as the preference of their trading in derivative market.

T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.60). In other words, we hypothesize that the most of the investors are not at all preferred as their criteria of margin money while trading in derivative. i.e. Ho : x = = 1.60 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are most preferred the margin money as their criteria of trading in derivative. i.e. H1: x , i.e. H1: x 1.60

One sample T-Test:

One-Sample Statistics N index future 200 Mean Std. Deviation Std. Error Mean 1.60 2.16 .15

One-Sample Test Test Value = 1 Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower index future 3.892 199 .000 .60 .29 Upper .90

df

Inference: Here the test is performed at 95% significance level and the t-value comes out as .000 which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And again investors invest in derivative market they some how not preferred the preference of the index future.

STOCK FUTURE Frequency Frequency 126 1 1 16 43 13 200 Percent 63.0 .5 .5 8.0 21.5 6.5 100.0

Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total

Graph:

Stock future
percentage/frequency
140 120 100 80 60 40 20 0 126 63 1 0.5 Dont trade Not at all preferred 1 0.5 Some how not preferred 16 8 Neutral 43 21.5 13 6.5 Frequency Percent

Some Most how preferred preferred

preferrred

Inference: From the above graph you can see that only 0.5% investors are not at all preferred,0.5% investors are some how not preferred, 8% investors are neutral 21.5%investors are some how preferred and 6.5% investors are most preferred the stock future .

T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.44). In other words, we hypothesize that the most of the investors are not at all preferred as their preference of stock future. i.e. Ho : x = = 1.44 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are most preferred the stock future as their criteria of trading in derivative. i.e. H1: x , i.e. H1: x 1.44

One sample T-Test:

One-Sample Statistics N Stock future 200 Mean Std. Deviation Std. Error Mean 1.44 1.9378 .1370

One-Sample Test Test Value = 2 Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower Stock futures 199 4.087 .000 -.5600 -.8302 Upper -.2898

df

Inference: Here the test is performed at 95% significance level and the t-value comes out as .000 which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And again investors invest in derivative market they some how preferred the preference of the stock future

INDEX OPTION Frequency Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total Total Graph: Frequency 126 2 4 26 13 29 200 200 Percent 63 1.0 2.0 13.0 6.5 14.5 100 100.0

Index option
percentage/frequency
140 120 100 80 60 40 20 0 126

63 26 2 1 Dont trade Not at all preferred 4 2 Some how not preferred 13 13 6.5 29 14.5

Frequency Percent

Neutral

Some Most how preferred preferred

preferred

Inference: From the above graph you can see that only 1% investors are not at all preferred the index option,2% investors are some how not preferred,13% investors are neutral,6.5% investors are some how preferred whereas 14.5% investors are most preferred the index option.

T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.43). In other words, we hypothesize that the most of the investors are not at all preferred index option as their preference while they are trading in derivative market. i.e. Ho : x = = 1.43 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are most preferred the index option as their preference of trading in derivative. i.e. H1: x , i.e. H1: x 1.43 One sample T-Test: One-Sample Statistics N index option 199 Mean Std. Deviation Std. Error Mean 1.43 1.98 .14

One-Sample Test Test Value = 2 t index option df Sig. (2-tailed) -4.044 198 Mean Difference .000 .57 95% Confidence Interval of the Difference -.84 -.29

Inference: Here the test is performed at 95% significance level and the t-value comes out as .000 which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And again investors invest in derivative market they some how preferred the preference of the index option.

STOCK OPTION Frequency Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total Graph:
Stock option
percentage/frequency
140 120 100 80 60 40 20 0 126

Frequency 126 9 12 11 25 17 200

Percent 63.0 4.5 6.0 5.5 12.5 8.5 100.0

63 9 4.5 12 6 11 5.5 25 12.5 17 8.5

Frequency Percent

Some how not preferred

Some how preferred

Not at all preferred

preferred

Inference: From the above graph we can see that 63% investors are not trading in derivative market whereas out of 37% ,4.5% investors are not at all preferred the stock option,6% investors are some how not preferred when 5.5% are neutral ,12.5% investors are some how preferred and 8.5 % investors are most preferred the stock option.

Most preferred

Dont trade

Neutral

T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.25)other words, we hypothesize that the most of the investors are not at all preferred stock option as their preference to trade in derivative market. i.e. Ho : x = = 1.25 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are most preferred the stock option as their option to trade in derivative market. i.e. H1: x , i.e. H1: x 1.25

One-Sample Statistics N stock option 200 Mean Std. Deviation Std. Error Mean 1.25 1.83 .13

One-Sample Test Test Value = 1 Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower stock option 1.971 199 .050 .25 -8.87E-05 Upper .51

df

Inference: Here the test is performed at 95% significance level and the t-value comes out as .050 which is grater than 0.05, it means that the null hypothesis H0 is accepted and alternative hypothesis is rejected and it can be said that there is no significant difference between calculated mean and hypothesized mean. And investors invest in derivative market they some how not preferred the preference of the stock option.

Q-6 Give your preference in term of trading in derivative market? Objective: To know the preference of the investors in term of trading in derivative market. Intraday: Frequency Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total Graph: Frequency 126 4 1 5 10 54 200 Percent 63.0 2.0 .5 2.5 5.0 27.0 100.0

Intraday
Frequency/percentage
140 120 100 80 60 40 20 0 126 63 0 0 4 2 10.5 5 2.5 10 5 frequency percentage

54 27

Some how not preferred

Some how preferred

Not at all preferred

preferred

Inference: From the above graph we can see that 63% investors are not trading in derivative market.63% investors are not trading in derivative market.2% investors are not at all preferred the intraday ,5 % investors are some how not preferred ,2.5% investors are neutral,5% investors are some how preferred whereas 27% investors are most preferred the intraday trading.

Most preferred

Dont trade

Neutral

One sample T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.66) in other words that the most of the investors are not at all preferred some not preferred the intraday to trade in derivative market. i.e. Ho : x = = 1.66 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are most preferred the intraday as their preference to trade in derivative market. i.e. H1: x , i.e. H1: x 1.66 One-Sample Statistics N intraday 200 Mean Std. Deviation Std. Error Mean 1.66 2.26 .16

One-Sample Test Test Value = 2 Sig. (2tailed) Mean Difference 95% Confidence Interval of the Difference Lower Intraday 199 2.160 .032 -.35 -.66 Upper -3.01E-02

df

Inference: Here the test is performed at 95% significance level and the t-value comes out as .032which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And investors invest in derivative market they some how preferred the intraday while trading in derivative market.

WEEKLY Frequency Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total Graph: Frequency 126 8 2 17 35 12 200 Percent 63.0 4.0 1.0 8.5 17.5 6.0 100.0

weekly
percentage/frequency
140 120 100 80 60 40 20 0 126 Frequency 8 4 178.5 35 17.5 Percent 12 6

63 2 1

Some how not preferred

Some how preferred

Not at all preferred

preferred

Inference: From the above graph we can see that 63% investors are not trading in derivative ,4% investors are not at all preferred the weekly trading,1% investors are some how not preferred ,8.5% investors are neutral,17.5% investors are some how preferred ,when only 6% investors are most preferred the weekly trading.

Most preferred

Dont trade

Neutral

One sample T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.32)in other words most of the investors are not at all preferred the weekly while trading in derivative market. i.e. Ho : x = = 1.32 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are most preferred the weekly as their preference to trade in derivative market. i.e. H1: x , i.e. H1: x 1.32

One-Sample Statistics N weekly 200 Mean Std. Deviation Std. Error Mean 1.32 1.85 .13

One-Sample Test Test Value = 1 Sig. (2tailed) .017 Mean Difference .31 95% Confidence Interval of the Difference Lower Weekly 2.404 199 5.66E-02 Upper .57

df

Inference: Here the test is performed at 95% significance level and the t-value comes out as .017 which is grater than 0.05, it means that the null hypothesis H0 is accepted and alternative hypothesis is rejected and it can be said that there is no significant difference between calculated mean and hypothesized mean. And investors invest in derivative market they some how not preferred the weekly while trading in derivative market.

MONTHLY: Frequency Frequency 126 10 6 29 13 16 200 Percent 63.0 5.0 3.0 14.5 6.5 8.0 100.0

Dont trade Not at all preferred Some how not preferred Neutral Some how preferred Most preferred Total

Graph:

monthly
percentage/frequency
140 120 100 80 60 40 20 0 126 63 10 5 Dont trade 6 3 29 14.5 Neutral 13 6.5 16 8 Frequency Percent

Not at all Some preferred how not preferred

Some Most how preferred preferred

preferred

Inference: From the above graph we can see that 63% investors are not trading in derivative market. 5% investors are not at all preferred the monthly trading ,3% investors are some how not preferred , 14.5% investors are neutral,6.5% investors are some how preferred ,whereas 8% investors are most preferred the monthly trading.

T-Test: Null Hypothesis (HO): There is no significant difference between calculated mean and hypothesized mean (1.21) in other words most of the investors are not at all preferred the monthly while trading in derivative market. I.e. Ho: x = = 1.21 Alternative Hypothesis (H1): There is significant difference between calculated mean and hypothesized mean. In other words we hypothesize that the most of the investors are most preferred the monthly as their preference to trade in derivative market. i.e. H1: x , i.e. H1: x 1.21
One-Sample Statistics N Mean Std. Deviation 1.75 Std. Error Mean .12

MONTHLY

200

1.21

One-Sample Test Test Value =0 t

df

MONTHLY

9.713

199

Sig. (2Mean 95% tailed) Difference Confidence Interval of the Difference Lower .000 1.21 .96

Upper 1.45

Inference: Here the test is performed at 95% significance level and the t-value comes out as .000 which is less than 0.05, it means that the null hypothesis H0 is rejected and alternative hypothesis is accepted and it can be said that there is significant difference between calculated mean and hypothesized mean. And investors invest in derivative market they some how not preferred the monthly while trading in derivative market.

Q-7 How much percentage of your income you trade in derivative market? Objective: To know investors are how much percentage of their income trade in derivative market. Frequency Frequency 126 8 25 25 13 3 200 Percent 63 4.0 12.5 12.5 6.5 1.5 100.0

Dont trade Less than 5% 5%-10% 11%-15% 16%-20% More than 20% Total

Graph:
More than 20% 16%-20% 11%-15% 5%-10% Less than 5% Dont trade 0 50 1.5 3 6.5 13 12.5 25 12.5 25 4 8 63 100 126 150 Percent Frequency

Inference: From the above graph we can see that 63% investors are not trading in derivative market,4% investors are trading less than 5% of their income,12.5% investors are trade 5% to 10% of their income trade, 12.5% investors are trade 5 % to 10% of their income, 6.5% investors are trade 16% to 20% of their income and only 1.5 % means only 3 investors are trade more than 205 of their income in derivative market.

Q-8 What is the rate of return expected by you from derivative market? Objective: To know the investors expectation towards their investment in derivative market.

Frequency Frequency Do not trade 5%-9% 10%-13. % 14%-17. % 18%-23% Total 126 21 22 23 8 200 Percent 63.0 10.5 11.0 11.5 4.0 100.0

Graph:
rate of return expected
pecentage/frequency
140 120 100 80 60 40 20 0 126

63 21 22 23

Frequency Percent 10.5 11 11.5 8 4

Do not trade

5%-9%

10%-13. %

14%-17. %

18%-23%

Rate of return

Inference: From the above graph we can see that 63% investors are not trading in derivative market. 10.5 % investors are expect the 5% to 9% rate of return,11% investors are expect the 10% to 13%,11.55 investors are expect the 14% to 17% ,whereas only 4 % investors are expect the 18% to 23% Rate of Return.

Q-9 . You are satisfied with the current performance of the derivative market Objective: To know that investors are satisfied with the performance of the derivative market or not. Frequency Frequency 126 8 14 18 25 9 200 Percent 63.0 4.0 7.0 9.0 12.5 4.5 100.0

Do not trade Strongly disagree Disagree Neutral Agree strongly agree Total Graph:

Satisfaction
percentage/frequency
140 120 100 80 60 40 20 0 126

63 8 4 Do not trade 14 7 18 9 25 12.5 Agree 9 4.5 strongly agree

Frequency Percent

Strongly Disagree Neutral disagree

prferred

Inference: From the above Graph we can see that 635 investors are not trading in derivative market, 4% investors are strongly disagree for the satisfaction from the derivative, 7% investors are disagree , 9% investors are neutral, 12.55 investors are agree ,& 4.5% investors are strongly agree for the satisfaction from the derivative market.

Gender: Frequency Frequency 157 43 200 Percent 78.5 21.5 100.0

Male Female Total Graph:

gender
180 160 140 120 100 80 60 40 20 0

157

frequency

78.5 43 21.5

Frequency Percent

male gender

female

Inference: From the above graph we can see that there are 157 male investors when 43 are the female investors. AGE: Frequency Frequency Below 20 years 20-25 years 26-30 years 31-35 years above 35 years Total 3 61 51 43 42 200 Percent 1.5 30.5 25.5 21.5 21.0 100.0

Graph:
age

35 30 25 20 15 10 5 0

30.5 25.5 21.5 21

Percent

percent

1.5 below 20 years 20-25 years 26-30 years 31-35 years above 35 years

years

Inference: From the above graph we can see that out of 200 investors 1.5% investors are below 20 years,30.5% investors are 20 to 25 years,21.5% investors are between 31 to35 years , and 21% investors are above 35 years trading in derivative market.

Occupation: Frequency Student Employed Business Professional House wife Others Total Frequency 35 82 32 22 13 16 200 Percent 17.5 41.0 16.0 11.0 6.5 8.0 100.0

Graph:
Occupation
45 40 35 30 25 20 15 10 5 0 41

percentage

17.5

16

Percent

11

6.5

occupation

Inference: From the above graph we can see that 17.5% investors are students, 41% are the employed, 16% are the business ,11% investors are the professionals,6.5% investors are the housewife, and 8% are others, which include the retired,farmers and unemployed.

ANNUAL INCOME Frequenc y 47 62 73 15 1 2 200 Valid Cumulative Percent Percent 23.5 23.5 31.0 54.5 36.5 91.0 7.5 98.5 .5 99.0 1.0 100.0 100.0

Valid 0 less than 1 lac 1-5 lacs 6-10 lacs 11-15 lacs 15 lacs & above Total

Percent 23.5 31.0 36.5 7.5 .5 1.0 100.0

Graph:
annual income
40 35 30 25 20 15 10 5 0 36.5 31 23.5
Percent

percentage

7.5 0.5 0 less than 1 lac 1-5 lacs 6-10 lacs 11-15 lacs 1 15 lacs & above

income in Rs.

inference: From the above graph we can see that 23.5% investors dont have the income , 31% investors have less than 1 lack annual income ,36.5 % investors have the 1to 5 lacks annual income , 7.5 % investors have the 6 to 10 lacks income , 0.5% investors have the 11 to 15 lacks annual income , and 1% investors have the 15 lacks and above annual income.

Cross tab
Occupation * Invest Cross tabulation

Particular Occupatio Student n Employed Business Profession al House wife Others

Dont trade 77.1% 76.8% 29.0% 27.3% 69.2% 68.8%

% of income Invest in derivative market Less than 11%16%5% 5%-10% 15% 20% 0 3.7% 6.5% 0 15.4% 6.3% 2.9% 8.5% 19.4% 31.8% 15.4% 12.5% 17.1% 4.9% 38.7% 13.6% 0 0 2.9% 3.7% 6.5% 27.3% 0 6.3%

More than 20% 0 2.4% 0 0 0 6.3%

Inference: from the above table we can see that 38.7% of the businessmen are investing their 11% to 15% of their income in derivative market. 2.4% of employed are investing more than 20 % of their income

Symmetric Measures Asymp. Std. Error(a)

Value Sig. Lower Bound Interval by Pearson's R Interval Ordinal by Ordinal Spearman Correlation N of Valid Cases .139 .230 199

Approx. T(b)

Approx. Sig.

Monte Carlo Sig. 95% Confidence Interval Sig. Lower Lower Bound Upper Bound Bound .052(d) .001(d) .047 .001 .056 .002

95% Confidence Interval Sig. Upper Lower Bound Bound Upper Bound .070 .069 1.969 3.320 .050(c) .001(c)

A Not assuming the null hypothesis. B Using the asymptotic standard error assuming the null hypothesis. C Based on normal approximation. D Based on 10000 sampled tables with starting seed 15

FINDINGS:
Here we found that out of 200 investors 74 means 37% investors are trading in derivative market whereas 126 means 63% are not trading in derivative market. Reasons for not investing in derivative market Is derivative is because lack of awareness and knowledge, high risky. The main objective I of trading in derivative market of the investors is getting high return. Criteria for trading is considered by investors are derivatives in derivative they get margin money and derivatives are more liquid. Their attractive preference is index future and index options most of the investors are trading intraday. out of 200 investors 12.5% investors are investing 11% to 15% of their income trading in derivative market. 12.5% are satisfied with derivative market 157male investors and 43 female investors out of 200 investors.

RECOMMENDATION:

Only 74 investors are trading whereas 126 are not trading .so attract them for trading.

19 are lack of awareness so make them aware with the derivative .so increase the customer. Out of 126 ,26 dont have knowledge for derivative so provide them knowledge for trading in derivative market. Those who are not satisfied with the derivative by knowing their behavior of investment make them satisfied. Because negative word mouth of the customers fall down the business. and good word mouth build the business.

BIBILIOGRAPHY:
REFERENCE BOOK: N.D VOHRA & B. R. BAGRI , FUTURES & OPTIONS 2ND EDITION ,TATA McGraw Hill publishing company ltd., New Delhi. NCFM Derivatives Market {Dealers } Module Work Book, National Stock Exchange of India Limited, Mumbai. Donald R. Cooper & Pamela s. Schindler , BUSINESS RESEARCH METHODS 8 TH EDITIONS, Tate McGraw Hill publishing company limited, New Delhi . VALUELINE magazine of the share khan ltd.

WEBSITE: -

www.sharekhan.com

APPENDIX :
QUESTIONNAIRE:
QUESTIONIER: 1. ARE YOU INVESTING IN DERIVATIVE MARKET?

YES

NO

2. REASON FOR NOT INVESTING IN DERIVATIVE MARKET.{GIVE THE RANK}

LACK OF KNOWLEDGE LACK OF AWARENESS HIGH RISKY HUGE AMOUNT OF INVESTMENT OTHER

3. WHAT ARE THE OBJECTIVES OF THE INVESTING IN DERIVATIVES MARKET? 5 SCALE INSTRUMENT MOST PREFERED 4 SOMEWHAT PREFERED 3 NUTRAL 2 1

SOMEWHAT NOT AT NOT ALL PREFERED PREFERED

HIGH RETURN HEDGE THE RISK MORE RELIABLE SAFE TO INVEST IN DERIVATIVE MARKET MORE LIQUID

4. WHAT ARE THE CRITERIA DO YOU TAKEN IN THE CONSIDERATION WHILE INVESTING IN DERIVATIVE MARKET.? SCALE INSTRUMENT 5 4 3 MOST SOMEWHAT NUTRAL PREFERED PREFERED 2 SOMEWHAT NOT PREFERED 1 NOT AT ALL PREFERED

FLEXIBILITY EASE IN TRANSACTION LESS COSTLY AVALABILITY OF DIFFERENT CONTRACT MARGIN MONEY

5. GIVE YOUR PREFERENCE OF INVESTMENT IN DERIVATIVE INSTRUMENT.

SCALE 5 INSTRUMENT MOST PREFERED INDEX FUTURE STOCK FUTURE INDEX OPTION STOCK OPTION

4 SOME HOW PREFERED

3 NEUTRAL

2 SOMEWHAT NOT PREFERED

1 NOT AT ALL PREFERED

6. GIVE YOUR PREFERENCE IN TERMS OF INVESTMENT DERIVATIVE MARKET. SCALE TERMS 5 MOST PREFER 4 SOMEWHAT PREFER 3 NEATRUL 2 SOMEWHAT NOT PREFER 1 NOT AT ALL PREFER

SHORT TERM MEDIUM TERM LONG TERM 7. HOW MUCH PERCERNTAGE OF YOUR INCOME YOU INVEST IN DERIVATIVE MARKET? LESS THAN 5% 5% TO 10% 11% TO 15% 16% TO 20%
MORE THAN 20%

8. WHAT IS THE RATE OF RETURN EXPECTED BY YOU FROM DERIVATIVE MARKET? 5 % TO 9.5% 10% TO 13.5% 14 % TO 17.% 18% TO 23% ABOVE 23%

9. YOU ARE SATISFIED WITH THE CURRENT PERFORMANCE OF THE DERIVATIVE IN TERMS OF EXPECTED RETURN.

STRONGLY AGREE AGREE NUTRAL DISAGREE STRONGLY DISAGREE.

PERSONAL DETAIL: NAME: _______________________________________________________________________ CONTACT NO.:_____________________________________ EMAIL ID: _________________________________________

AGE: BELOW 20YRS 31 TO 40 YR ABOVE 50 20 TO 30 YRS 41 TO 50 YRS

GENDER:

MALE

FEMALE

FROM WHICH CATEGORY DO YOU FEET MORE? STUDENT BUSINESS OWNER EMPLOYEED OTHER

INCOME{YEARLY}: LESS THAN 100000 RS. 100000 TO 200000 RS. 200001 TO 300000 RS. 300001 TO 400000 RS ABOVE 400000 RS.