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A SYNOPSIS

ON

“Working Capital Management”


Synopsis submitted for approval from
Directorate of Distance Education Guru Jambeshwar University Science &
Technology, Hisar

RESEARCH SUPERVISOR SUBMITTED BY


Amit Gupta Lalit Kumar
Designation: Chief Manager Finance Enrollment No. 08061101035
Charted Accountant M.B.A – 4th Semester (Finance)
Remarks of Evaluator

Approved/Disapproved Approved/Disapproved

(I Evaluation) (II Evaluation)

Session: - 2008-09
Directorate of Distance Education GJUS&T, Hisar
RESUME OF PROJECT GUIDE

1. Name : Amit Gupta


2. Designation : Chief Manager Finance
3. Qualification : Chartered Accountant
4. Area of specialization : Finance
5. Experience : 16 Years
6. Official address : Sanden Vikas ( India) Ltd.
Plot No. 65, Sector-27 A
Faridabad, Haryana

7. Telephone no. :
8. Mobile :

I am willing to supervise Mr. Lalit Kumar

Enrolment No.08061101035

On the topic ‘’Working Capital Management ’’

Amit Gupta

(Signature with Seal)


CERTIFICATE
This is to certify that Mr. Lalit Kumar, Enrolment No. 08061101035 has proceeded under by
supervision Amit Gupta Research Project Report on ‘’Working Capital Management ’’ in
the specialization area “Finance”.

The work embodied in this report is original and is of the standard expected of an MBA student and
has not been submitted in part of full to this or any other university for the award of any degree or
diploma. He has completed all requirements of guidelines for Research Project Report and the work
is fit for evaluation.

Amit Gupta
Signature of Supervisor/Guide (with SEAL)

Name : Amit Gupta

Designation : Chief Manager- Finance

Organization : Sanden Vikas ( India ) Limited

Manjula Sandhu
(Director)
Shaheed Bhagat Singh College
of Management & Technology.
NH-3, N.I.T Faridabad
EXECUTIVE SUMMARY

The project entitled “Foreign Currency – Rupee Options” has been done in order to study the current
scenario of derivatives market in India and to analyze whether the purpose for which derivatives are
used has actually been achieved. The study is also done to study the concept of derivatives and the
purpose for which financial institutions adopt derivatives.

INTRODUCTION

BACKGROUND OF THE STUDY

Forward trading in some form or other is quite ancient. It is not dearly established as to where
and when the first forward market came into existence. There are some reports that forward trading
existed in India as far back as 2000 BC and also that some forms of forward trading existed in Roman
times. Forward trading in somewhat systematic manner is believed to have been in existence in the12-
century English and French fairs.

The evolution occurred in stages. The Chicago Board of Trade (CBOT), which opened in
1848, is, to this day, the largest futures market in the world. The general rules framed by CBOT in
1865 became a pacesetter for many other markets. In 1870, the New York cotton exchange was
founded.

The London metal exchange was established in 1877 and is now the leading market in metal
trading (both spot and forward). Thereafter many new futures market was started. The first financial
futures market was the international monetary, founded in 1972 by the Chicago mercantile exchange.
The London international financial futures exchange followed this in 1982.

As already mentioned, some form of forward trading probably existed in India also.
Unfortunately, India has not had as good a tradition of record keeping as the west, and therefore, hard
evidence of forward trading in our history is lacking. The first organized forward markets came into
existence in the late 19th and early 20th century in Calcutta (for jute and jute goods) and Mumbai (for
cotton).

Chronologically, India’s experience in organized forward trading is almost as long as that of the
United Kingdom, and certainly longer than many developed nations.

Statement of the problem


The problem is to analyze Derivative ways of minimizing the Risk in Indian Capital market
and to analyze the current scenario of Derivative markets in India.

Need and Importance of the Study

World financial market has witnessed a spectacular change in the field of derivative markets in
the past one decade, especially in the field of option, futures and swaps. India also could not become
aloof from the world trend and mainly after the liberalization has set in motion. India introduced the
different types in phased manner. A derivative market has gained momentum since its introduction in
India and has played a major role in Indian financial markets. Today the derivative volume in India is
Rs. 4000 crores. In this context the study of present scenario of Indian derivative market is very
contextual and important as well. That is why this subject is the topic of this dissertation.

Similarly, on the equity market, many retail investors who are uncomfortable about the equity market
would enter if they were given the alternative of buying insurance, which controls their downside risk.
This would enhance the action of the savings of the country, which are routed through the equity
market. More importantly

Derivative is one of the important tools of hedging risk. Therefore, the study of current scenario of
derivative market in India is very importance.

Objectives of the Research

The main objectives of the project are as follows: -

� To study the current scenario of derivatives market in India.

�To analyze whether the purpose for which derivatives are used has actually been
achieved.

�To study the concept of derivatives and the purpose for which financial institutions
adopt derivatives.

REVIEW OF LITERATURE
PURPOSE

Literature review is one of the prime parts of dissertation. The very basic purpose of the literature
review is to gain insight on the theoretical background of the research problem. It helps the researcher
to gain strong theoretical basis of the problem under study and also helps to explore whether any one
has done research on the related issue. That’s why literature review helps one to find out the path of
problem solving.

In this regard, the very basic purpose of literature review in this dissertation is same as mentioned
above.

METHODOLOGY

For simplicity, the literature review has been divided into the following parts.

1� Definition of derivatives


2�Perquisites for derivatives market
3�Types of Derivatives
4�Derivatives market in India
5�Type of Options

Development of India’s financial industry

Today, derivatives are a major part of the global financial system. If India is able to swiftly
develop competence in the derivatives area, then there is an enormous opportunity for India as a centre
of international finance. One of the largest futures market on Japan’s Nikkei 225 index, today, is in
Singapore. In that same sense, it is quite possible for Indian markets to be trading derivatives on
underlying price, which are not from India. This would bring revenues into India’s financial industry
and help enhance India’s integration into the world economy.

Conversely, if India does not develop such markets locally, the derivatives market in the Indian
instruments might develop outside India that will undermine the regulatory framework under which
other Indian markets work. In addition, Indian investors who cannot access such off-shore markets
will be denied the benefits of advance risk hedging mechanism putting them at disadvantage be able to
enhance the fraction of their portfolio that they allocate to India once hedging instruments become
available.
Some of the few suggestions are as follows: -

1� Regulations should be transparent and subject the same disclosure standards as those applying to
other participants in the financial markets.

1�Increase the limits on trading of derivatives by foreign institutional investors.

1�Increase the number of stocks on which options and futures are traded.

�SEBI should promote the use of the derivatives and educate the investors on how derivatives can
reduce risk if used widely.

1�Availability of futures on all agricultural commodities would boost private sector participation in
sourcing agricultural produce from villages and transport them across the country as also store
them to transport across the time or period. This in turn helps mitigate the crisis emanating from
the vagaries of monsoon.

1�Indian currency derivatives market is basically an Over The Counter (OTC) market. It suffers
from poor participation from corporate, and fewer market

BIBLIOGRAPHY

11. Vohra N.D and Bagri B.R. “Option and Futures”, Tata McGraw Hill Publishing
Company Ltd., 2001.
22. Gambhir Neeraj, “Rupee / Dollar Option”: Forex and Treasury Management, ICFAI
Publications, February 2003.
33. Economic Times and Business Standard
44. Prasanna Chandra, “Financial Management Theory and Practice” 5th ed., Tata McGraw
Hill Publisher.

Websites:

www.google.com
www.altavista.com
www.sebi.com
www.schaefferresearch.com
www.excite.com
www.icfai.orm
www.commodityindia.com
www.smartjones.com