TABLE OF CONTENTS

EXCUTIVE SUMMARY......................................................................................................2
PART I...............................................................................................................................3
COMPANY PROFILE..........................................................................................................3
INTRODUCTION.............................................................................................................4
COMPANY OVERVIEW.................................................................................................6
PART II................................................................................................................................10
PROJECT OVERVIEW......................................................................................................10
CHAPTER 1....................................................................................................................11
INTRODUCTION TO DERIVATIVES......................................................................11
INTRODUCTION TO OPTIONS...............................................................................13
HISTORY OF STOCK EXCHANGES IN INDIA.....................................................17
FUNCTIONS OF STOCK EXCHANGE....................................................................18
REGULATORY FRAMEWORK...................................................................................19
THE STOCK EXCHANGES..........................................................................................21
MEMBERS OF THE STOCK EXCHANGE..................................................................22
History Of NSE(National Stock Exchange).....................................................................23
RESEARCH METHODOLOGY.....................................................................................27
DATA ANALYSIS..........................................................................................................28
LIMITATIONS.............................................................................................................30
RECEMENDATION.....................................................................................................31
PART III..............................................................................................................................32
CHARTS AND GRAPHS...................................................................................................33
BIBLIOGRAPHY................................................................................................................34

Table of Figures

Figure 1- Hierarchy of Offices...............................................................................................9

1
 EXCUTIVE SUMMARY

TITLE: “Trading pattern of informed participants in option (out of money Counter)”.

OBJECTIVES: The objective of the study includes the effect shown on the market by the

informed participants in option.

RATIONALE OF THE STUDY: The purpose of this major research project is to find

out the total open interest on the same price after informal participants comes into the

market.

METHODOLOGY: The study is exploratory in nature. Secondary data has been

collected as a source of data collection. Trend analysis has been used for data analysis.

CONCLUSION: Finally the research is concluded with applicability of the study in

option areas of the derivatives and due to huge amount of informal participants there are

strong volatility in the market.

2
 PART I
COMPANY PROFILE

3
 INTRODUCTION

Angel Broking tryst with excellence in customer relations began in 1987. Today, Angel

has emerged as one of the most respected Stock-Broking and Wealth Management

Companies in India. With its unique retail-focused stock trading business model, Angel is

committed to providing ‘Real Value for Money’ to all its clients.

The Angel Group is a member of the Bombay Stock Exchange (BSE), National Stock

Exchange (NSE) and the two leading Commodity Exchanges in the country: NCDEX &

MCX. Angel is also registered as a Depository Participant with CDSL.

Our Business:

• Equity Trading

• Commodities

• Portfolio Management Services

• Mutual Funds Life Insurance

• Personal Loans

• IPO

• Depository Services

• Investment Advisory

Our Presence:

• Nation-wide network of 21 Regional Hubs

• Presence in 124 cities

4
 • Over 6810 Sub-Brokers & Business Associates

• More than 5.9 lakh Clients

Angel Group:-

• Angel Broking Ltd.

• Angel Capital & Debt Market Ltd.

• Angel Commodities Broking Ltd.

• Angel Securities Ltd

5
 COMPANY OVERVIEW
VISION

To provide values for money to investor through innovative, product and trading /

investment stratagies, state of art and technology and personalized services.

CRM POLICY:- CUSTOMER IS KING

MILESTONES:

August, 2008 Crossed 500000 trading accounts

November, 2007 ‘Major Volume Driver’ for 2007
March, 2007 Crossed 200000 trading accounts
December, 2006 Created 2500 business associates
October, 2006 ‘Major Volume Driver’ award for 2006
September, 2006 Launched Mutual Fund and IPO business
July, 2006 Launched the PMS function
March, 2006 Crossed 100000 trading accounts
October, 2005 ‘Major Volume Driver’ award for 2005
September, 2004 Launched Online Trading Platform
April, 2004 Initiated Commodities Broking division
April, 2003 First published research report
November, 2002 Angel’s first investor seminar
March, 2002 Developed web-enabled back office software
November, 1998 Angel Capital and Debt Market Ltd. incorporated
December, 1997 Angel Broking Ltd. incorporated

MANAGEMENT:

1. Mr. Dinesh Thakkar Founder Chairman & Managing Director

The Angel Group of Companies was brought to life by Mr. Dinesh Thakkar. He ventured

into stock trading with an intention to raise capital for his own independent enterprise.
6
However, he recognized the opportunity offered by the stock market to serve individual

investors. Thus India’s first retail-focused stock-broking house was established in 1987.

Under his leadership, Angel became the first broking house to embrace new technology for

faster, more effective and affordable services to retail investors.

Mr. Thakkar is valued for his understanding of the economy and the stock-market. The

print and electronic media often seek his views on the market trend as well as investment

strategies

2. Mr. Lalit Thakkar Director – Research Mr. Lalit Thakkar is the motivating force

behind Angel’s highly acclaimed Research team. He’s been a part of the senior

management team since the Angel Group’s inception. His technical and fundamental

outlook has provided impetus to Angel’s market research team. Research-based &

personalized advisory services are Angel’s forte, and Mr. Lalit Thakkar has undoubtedly

been the brain behind it. When it comes to analyzing the market, Mr. Lalit Thakkar is truly

a genius. His hands-on experience and fundamental knowledge of the market can predict

the market trend early. His views on the market trend are often quoted in the print and

electronic media.

3. Mr. Amit Majumdar Executive Director – Strategy and Finance A chartered

Accountant by qualification, Mr. Amit Majumdar is a key member of Angel’s strategic

decision-making process. He has been with the group since August 2004. He has handled

several functions of the group like finance and operations, to name a few. He has rich

experience in finance, investment banking, treasury, consultancy and advisory services.

Mr. Majumdar has led many successful initiatives for the group. Before joining the Angel

Group, Mr. Majumdar has been associated with Rabo India Finance, Ambit Corporate

Finance and Ernst & Young.

7
4. Mr. Rajiv Phadke Executive Director – HR & Corp. Communications. Rajiv Phadke

has actively contributed to the Group’s growth over the last four years. Holding a major in

Finance, Mr. Rajiv Phadke is a strategic thinker with expertise in the field of corporate

planning, international marketing, financial services, brand-building, HRD and quality

management.

With over 32 years of experience, Mr. Phadke has successfully led SBUs and financial

companies from concept to commissioning. His career horizon spans Motilal Oswal

Securities, Times Guaranty Financials, Nagarjuna Securities and Tata Exports Ltd. He is

also a well-known speaker in the HR and business development circuit and his views are

featured on various electronic media as well.

5. Mr. Vinay Agrawal Executive Director – Equity Broking

Mr. Vinay Agrawal leads the Equity Broking business at Angel, which comprises Business

Development, Operations, Product Development and E-broking initiative. He is actively

involved in exploring new ways to adopt technology for business enhancement. A

Chartered Accountant by qualification, Mr. Agrawal began his career with the Angel

Group as Finance and Operations Consultant and since then he’s quickly climbed up the

corporate ladder.

8
 Figure 1- Hierarchy of Offices
CSO
(Central Support
Office)

Regional Office Regional Office Regional Office

Branches & Branches & Branches &

Franchise Branches Franchise Branches Franchise Branches

Angel Clients Business Associates

Angel Clients

9
 PART II

PROJECT OVERVIEW

10
 CHAPTER 1

INTRODUCTION TO DERIVATIVES
The emergence of the market for derivative products, most notably forwards,

futures and options, can be traced back to the willingness of risk-averse

economic agents to guard themselves against uncertainties arising out of

fluctuations in asset prices. By their very nature, the financial markets are

marked by a very high degree of volatility. Through the use of derivative

products, it is possible to partially or fully transfer price risks by locking-in

asset prices. As instruments of risk management, these generally do not

influence the fluctuations in the underlying asset prices. However, by lockingin

asset prices, derivative products minimize the impact of fluctuations in

asset prices on the profitability and cash flow situation of risk-averse

investors.

1.1 DERIVATIVES DEFINED

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

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

contractual manner. The underlying asset can be equity, forex, commodity or

any other asset. For example, wheat farmers may wish to sell their harvest at

a future date to eliminate the risk of a change in prices by that date. Such a

transaction is an example of a derivative. The price of this derivative is driven

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

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

(SC(R)A) defines "derivative" to include-

11
1. A security derived from a debt instrument, share, loan whether secured or unsecured,

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

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

securities.

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

governed by the regulatory framework under the SC(R)A.

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.

History of derivatives markets

Early forward contracts in the US addressed merchants' concerns about ensuring that there

were buyers and sellers for commodities. However 'credit risk" remained a serious

problem. To deal with this problem, a group of Chicago businessmen formed the Chicago

Board of Trade (CBOT) in 1848.

The primary intention of the CBOT was to provide a centralized location known in

advance for buyers and sellers to negotiate forward contracts. In 1865, the CBOT went one

step further and listed the first 'exchange traded" derivatives contract in the US, these

contracts were called 'futures contracts".

In 1919, Chicago Butter and Egg Board, a spin-off of CBOT, was reorganized to

allow futures trading. Its name was changed to Chicago Mercantile Exchange (CME). The

CBOT and the CME remain the two largest organized futures exchanges, indeed the two

largest "financial" exchanges of any kind in the world today.

12
 The first stock index futures contract was traded at Kansas City Board of Trade.

Currently the most popular stock index futures contract in the world is based on S&P 500

index, traded on Chicago Mercantile Exchange. During the mid eighties, financial futures

became the most active derivative instruments generating volumes many times more than

the commodity futures. Index futures, futures on T-bills and Euro-Dollar futures are the

three most popular futures contracts traded today. Other popular international exchanges

that trade derivatives are LIFFE in England, DTB in Germany, SGX in Singapore, TIFFE

in Japan, MATIF in France, Eurex etc.

NSE's DERIVATIVES MARKET

The derivatives trading on the NSE commenced with S&P CNX Nifty Index futures on

June 12, 2000. The trading in index options commenced on June 4, 2001 and trading in

options on individual securities commenced on July 2, 2001. Single stock futures were

launched on November 9, 2001. Today, both in terms of volume and turnover, NSE is the

largest derivatives exchange in India. Currently, the derivatives contracts have a maximum

of 3-month expiration cycles. Three contracts are available for trading, with 1 month, 2

months and 3 months expiry. A new contract is introduced on the next trading day

following the expiry of the near month contract.

INTRODUCTION TO OPTIONS
In this section, we look at the next derivative product to be traded on the NSE, namely

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

gives the holder of the option the right to do something. The holder does not have to

exercise this right. In contrast, in a forward or futures contract, the two parties have

committed themselves to doing something. Whereas it costs nothing (except margin

requirements) to enter into a futures contract, the purchase of an option requires an up-

front payment.
13
OPTION TERMINOLOGY

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

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

cash settled.

Stock options: Stock options are options on individual stoc ks. Options currently trade on

over 500 stocks in the United States. A contract gives the holder the right to buy or sell

shares at the specified price.

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

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

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

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

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

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

by a certain date for a certain price.

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

a certain date for a certain price.

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

seller. It is also referred to as the option premium.

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

the exercise date, the strike date or the maturity.

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

exercise price.

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

expiration date. Most exchange-traded options are American.

14
European options: European options are options that can be exercised only on the

expiration date itself. European options are easier to analyze than American options, and

properties of an American option are frequently deduced from those of its European

counterpart.

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

positive cashflow to the holder if it were exercised immediately. A call option on the index

is said to be in-the-money when the current index stands at a level higher than the strike

price (i.e. spot price > strike price). If the index is much higher than the strike price, the

call is said to be deep ITM. In the case of a put, the put is ITM if the index is below the

strike price.

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

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

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

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

lead to a negative cashflow if it were exercised immediately. A call option on the index is

out-of-the-money when the current index stands at a level which is less than the strike

price (i.e. spot price < strike price). If the index is much lower than the strike price, the

call is said to be deep OTM. In the case of a put, the put is OTM if the index is above the

strike price.

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

components - intrinsic value and time value. The intrinsic value of a call is the amount the

option is ITM, if it is ITM. If the call is OTM, its intrinsic value is zero. Putting it another

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

call is the greater of 0 or (St — K). Similarly, the intrinsic value of a put is Max[0, K —

St],i.e. the greater of 0 or (K — St). K is the strike price and St is the spot price.
15
Time value of an option: The time value of an option is the difference between its

premium and its intrinsic value. Both calls and puts have time value. An option that is

OTM or ATM has only time value. Usually, the maximum time value exists when the

option is ATM. The longer the time to expiration, the greater is an option's time value, all

else equal. At expiration, an option should have no time value.

History of options:

Although options have existed for a long time, they were traded OTC, without much

knowledge of valuation. The first trading in options began in Europe and the US as early

the seventeenth century. It was only in the early 1900s that a group of firm setup what was

known as the put and call Brokers and Dealers Association with the aim of providing a

mechanism for bringing buyers and sellers together. If someone wanted to buy an option,

he or she would contact one of the member firms. The firm would then attempt to find a

seller or writer of the option either from its own clients or those of other member firms. If

no seller could be found,the firm would undertake to write the option itself in return for a

price.

This market however suffered from two deficiencies. First, there was no secondary

market and second, there was no mechanism to guarantee that the writer of the option

would honor the contract. In 1973, Black, Merton and Scholars invented the famed Black-

Scholars formula. In April 1973, CBOE was set up specifically for the purpose of trading

options. The market for options developed so rapidly that by early '80s, the number of

shares underlying the option contract sold each day exceeded the daily volume of shares

traded on the NYSE. Since then, there has been no looking back.

16
HISTORY OF STOCK EXCHANGES IN INDIA

The origin of the stock exchanges in India can be traced back to the later half of

19th century. After the American Civil War (1860-61) due to the share mania of the public,

the number of brokers dealing in shares increased. The brokers organized an informal

association in Mumbai named “The Native Stock and Share Brokers Association” in 1875.

Increased activity in trade and commerce during the First World War and Second

World War resulted in an increase in the stock trading. Stock Exchanges were established

in different centers like Chennai, Delhi, Nagpur, Kanpur, Hyderabad and Bangalore. The

growth of stock exchanges suffered a set back after the end of World War. Worldwide

depression affected them. Most of the stock exchanges in the early stages had a speculative

nature of working without technical strength. Securities and Contract Regulation Act 1956

gave powers to the central government to regulate the stock exchanges. The SCR Act

recognized the stock exchanges in Mumbai, Kolkata, Chennai, Ahmadabad, Delhi,

Hyderabad and Indore. The Bangalore stock exchange was recognized only in1963. At

present we have 23 stock exchanges and 21 of them had hardware and software compliant

to solve Y2K problem.

Till recent past, floor trading took place in all the stock exchanges. In the floor

trading system, the trade takes place through open outcry system during the official trading

hours. Trading posts are assigned for different securities where buy and sell activities of

securities took place. This system needs a face-to-face contact among the traders and

restricts the trading volume. The speed of the new information reflected on the prices was

rather slow. The deals were also not transparent and the system favored the brokers rather

than the investors.

17
 The setting up of NSE and OTCEI with the screen based trading facility resulted in

more and more stock exchanges turning towards the computer based trading. Bombay

stock exchange introduced the screen based trading system in 1995, which is known as

BOLT (Bombay On-line Trading System).

Madras stock exchange introduced Automated Network Trading System

(MANTRA) on Oct 7th 1996. Apart from Bombay stock exchange, Vadodara, Delhi, Pune,

Bangalore, Kolkata and Ahmadabad stock exchanges have introduced screen based

trading. Other exchanges are also planning to shift to the screen based trading.

FUNCTIONS OF STOCK EXCHANGE

1. Maintains active trading: - Shares are traded on the stock exchanges, enabling the

investor to buy and sell securities. The prices may vary from transaction to transaction.

A continuous trading increased the liquidity or marketability of the shares traded on the

stock exchanges.

2. Fixation of prices: - Price is determined by the transactions that flow from

investors’ demand and suppliers’ preferences. Usually the traded prices are made

known to the public. This helps the investor to make better decisions.

3. Ensures safe and fair dealing: - The rules, regulations and by-laws of the stock

exchanges’ provide a measure of safety to the investors. Transactions are conducted

under competitive conditions enabling the investors to get a fair deal.

4. Aids in financing the industry: - A continuous market for shares provides a

favorable climate for raising capital. The negotiability and transferability of the

securities helps the companies to raise long-term funds. When it is easy to trade the

securities, investors are willing to subscribe to the initial public offerings. This

stimulates the capital formation.

18
 5. Dissemination of information: - Stock Exchanges provide information through

there various publications. They publish the share prices traded on daily basis along

with the volume trade. Directory of Corporate Information is useful for the investors’

assessment regarding the corporate. Handouts, handbooks, and pamphlets provide

information regarding the functioning of the stock exchanges.

6. Performance inducer: - The prices of stocks reflect the performance of the traded

companies. This makes the corporate more concerned with its public image and tries to

maintain good performance.

7. Self-regulating organization: - The stock exchanges monitor the integrity of the

members, brokers, listed companies and clients. Continuous internal audit safeguards

the investors against unfair trade practices. It settles the disputes between member

brokers, investors, and brokers.

REGULATORY FRAMEWORK

The Securities Contract Regulation Act 1956 and the Securities and Exchange Board of

India Act 1992 provided a comprehensive legal framework. A three tire regulatory

structure comprising the Ministry of Finance, the Securities and Exchange Board of India

and Governing Boards of the Stock Exchanges regulates the functioning of stock

exchanges.

Ministry of Finance: - The Stock Exchange Division of the Ministry of Finance has

powers related to the application of the provision of the SCR Act and licensing of dealers

in the other area. According to SEBI Act, the Ministry of Finance has the appellate and

supervisory powers over the SEBI. It has power to grant recognition to the stock

exchanges and regulation of their operations. Ministry of Finance has the power to approve

the appointments of executive chiefs and nominations of the public representatives in the

19
Governing Boards of the stock exchanges. It has the responsibility of preventing

undesirable speculation.

The Securities and Exchange Board of India: - The Securities and Exchange Board of

India even though established in the year 1988, received statutory powers only on 30th Jan

1992. Under the SEBI Act, a wide variety of powers are vested in the hands of SEBI. SEBI

has the powers to regulate the business of stock exchanges, other security markets and

mutual funds. Registration and regulation of market intermediaries are also carried out by

SEBI. It has the responsibility tot prohibit the fraudulent unfair trade practices and insider

dealings. Takeovers are also monitored by the SEBI. Stock Exchanges have to submit

periodic and annual returns to SEBI. SEBI has the multi-pronged duty to promote the

healthy growth of the capital market and protect the investors.

The Governing Board: - The Governing Board of the stock exchange consists of elected

member directors, government nominees and public representatives. Rules, byelaws and

regulations of the stock exchange provide substantial powers to the Executive Director for

maintaining efficient and smooth day-to-day functioning of the stock exchange. The

Governing Board has the responsibility to maintain an orderly and well-regulated market.

The governing body of the stock exchange consists of 13 members of which (a) 6

members of the stock exchange are elected by the members of the stock exchange (b)

central government nominates not more than three members. (c) The board nominates

three public representatives (d) SEBI nominates persons not exceeding three and (e) the

stock exchange appoints one Executive Director.

One third of the elected members retire at annual general meeting. The retired

member can offer himself for election if he is not elected for two consecutive years. If a

20
member serves in the governing body for two years consecutively, he should refrain from

offering himself for another two year.

The members of the governing body elect the President and vice-president. It needs

no approval from the Central Government or the Board. The office tenure for the President

and Vice-President is one year. They can offer themselves for re-election, if they have not

held office for two consecutive years. In that case they can offer themselves for re-election

after a gap of one-year period.

THE STOCK EXCHANGES

The names of the stock exchanges are given below:

• Ahmadabad Stock Exchange

• Bangalore Stock Exchange

• Bhubaneswar Stock Exchange

• Chennai Stock Exchange

• Cochin Stock Exchange

• Coimbatore Stock Exchange

• Delhi Stock Exchange

• Guwahati Stock Exchange

• Hyderabad Stock Exchange

• Indore Stock Exchange

• Jaipur Stock Exchange

• Kanpur Stock Exchange

• Kolkata Stock Exchange

• Ludhiana Stock Exchange

21
 • Magadha Stock Exchange

• Mangalore Stock Exchange

• Mumbai Stock Exchange

• Pune Stock Exchange

• Saurashtra Stock Exchange

• Vadodhara Stock Exchange

• NSE

• OTCEI

• Inter Connected Stock Exchange

Stock exchanges normally functions between 10.00 a.m. and 3.45 p.m. on the working

days. Badla sessions are held on Saturdays.

MEMBERS OF THE STOCK EXCHANGE

The Securities Contract Regulation Act of 1956 has provided uniform regulation for the

admission of members in the stock exchanges. The qualifications for becoming a member

for a recognized stock exchange are given below:

• The minimum age prescribed for the members is 21 years.

• He/She should be an Indian Citizen.

• He/She should be neither a bankrupt nor compounded with the creditors.

• He/She should not be convicted for fraud or dishonesty.

• He/She should not be engaged in any other business connected with a company.

• He/She should not be a defaulter of any other stock exchange.

• The minimum required educational qualification is a pass in 12th standard

examination.
22
The Mumbai and Kolkata stock exchanges have set up training institutes to enable the

members to understand the complexities of the stock trading. In recent days highly

qualified persons such as Company secretaries, Chartered accountants and MBA’s are

becoming members. Corporate membership is also permitted now. The members of the

stock exchanges are eligible to work either as individuals or in partnership or as

representative members transacting business through their appointed members. The

governing board has to approve the partnership and the appointed members. A member, if

he has completed five years of membership in a stock exchange can apply for membership

in other stock exchanges. If he applies before the completion of five years he has to

relinquish the membership of the present membership before accepting the other.

History Of NSE(National Stock Exchange)

The National Stock exchange, in Bombay is the largest Stock

exchange of the country and the third largest in the world. Before the NSE, the Indian

securities industry was inefficient due to lack of proper infrastructure and a few select

brokerage firms controlling the industry. There was a great resistance to setting up modern

facilities and innovative infrastructure.

The basic idea of setting up the NSE was facilitating computerized market trading. The

intention was to set up a vibrant and viable debt market, and in the middle of 1993 it came

into existence. The trading started in the middle of 1994.The NSE is jointly owned by a

group of financial institutions, Insurance companies, banks and other financial

intermediaries. In the completely de-mutualised exchange the ownership has no bearing

23
to trade. The objective is to place all investors across the country in more than 1200 cities

on equal footing.

This was done by competitively harnessing the latest technology and adapting a

new system of operations through the VSAT (Very Small Earth Based Aperture

Terminals) terminals. The fully automatic screen based trading system is based on the

principle of an order driven market which provides complete flexibility to the participants.

There are no trading floors as in conventional stock exchanges.

The trading is entirely screen based with automatic order processing. One can

obtain the entire market information, which is dynamically updated, at the click of a

button. The system also conceals the identity of the market operators. As the market

investors can sit and operate from their own houses and homes, they have all the facilities

of back office support. The connection with other traders through the satellite link is

established, and each member receives the market information at the same time.

The NSE is one of the first stock exchanges in the world to use the VSAT system

for end-to-end connectivity and computer based trading. NSE has completely shifted the

trading platform from the floors of the Stock Exchange to the computer terminals at the

brokerage firms and further to personal computers and laptops in the investors’ homes and

offices!

The NSE is one of the very few exchanges in the world trading all kinds of

securities on a single platform. The three mutually exclusive segments of the NSE are:

• Capital Market segment

• Wholesale and Debt Market segment

24
 • Futures Adoptions Trading

The capital Market Segment covers trading in equities and retail trade in convertible

and non-convertible debentures and hybrids. This segment covers the securities of medium

and large companies with nation wide investor base. This might include securities which

are being traded on other exchanges as well. The Capital Market increases the volume of

trade and liquidity considerably.

The wholesale and Debt Market segment of the NSE is a facility for institutions

including subsidiaries of banks which are involved in financial services and other

corporate bodies. The trading system facilitates making of two way quotes in a very

flexible manner.

These three trading platforms were established one after the other. The wholesale Debt

market commenced its operations in June 1994 and the Capital Market Segment started

operating at the end of 1994.The futures and options segment began in 2000, and today the

NSE holds the 14th position in the 40 futures and Exchanges today.

A company that wants to get listed with the NSE needs to enter a listing agreement and

is required to pay the specified listing fees. It also needs to adhere to all the clauses of the

agreement and to send details of book closure, record dates, annual and half yearly reports,

and cash flow statements.

The NSE has emerged as the world’s third largest growing bourse today with such a

large number of companies being listed everyday. It has outpaced world leaders such as

the London Stock Exchange, NASDAQ and NYSE. The NSE can handle up to 1 million

25
trades per day .It recorded a 15% jump in the number of listed firms of 1244 during the

one year period which ended in April 2007.

26
 RESEARCH METHODOLOGY

PROJECT DESIGN:- This project is designed to find the action of inform participation.

This project is clearly understood by the charts we can predict the future movement of

various participants.

INFORMATION NEEDED: - The information is needed for this project is dates of

circuit breaker then after finding the dates. The remaining data for this project are nifty

under line value, nifty open interest, putt call ratio, putt open interest, call open interest,

last trade price of option.

SOURCES OF DATA: - The data is secondary in nature which is taken from the national

stock exchange web site.

27
 DATA ANALYSIS

1. PUT OPEN INTEREST WITH LAST TRADE PRICE: - The data which is

showing the major response of the investor is on bullish side. In this chart the

volume is very huge and stills the price of putt falling down. This indicates that the

investors are using the short putt strategy and the future expectation of investor is

bullish in the market. The strategy says that when you sell putt in advance and then

you have to buy after certain period. The highest selling pressure is generating on

17th march 2009 and it continues to 6th may 2009 and then the volume fell down

for two or three days. Then it builds a pressure again and volume continues to grow

till the expiry date.

2. PUTT CALL RATIO WITH VOLATILITY INDEX: - The putt call ratio is

related with volatility index because they always show an opposite effect. When

volatility index increases then putt call ratio falls down. In this chart as we saw that

putt call ratio is not high as much high then volatility index. They both are moving

in side ways movement then after few week volatility index generates a huge rate

this indicates that the market is trading in high volatile situation.

3. CALL OPEN INTEREST WITH LAST TRADE PRICE:- The call means a

bullish option and this is bought when buyers prediction is on bullish side. The

above chart is showing that the investor are buying call in huge amount and this out

of money counter is building a huge pressure to market on positive side. The out of

money counter is trading in huge volume this indicates there are some positive

signs of increasing the price of index as well as many stocks.

4. NIFTY OPEN INTEREST WITH UNDER LINE VALUE:- The nifty is

generating a high volume because the investor and foreign investor institute and

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hedge funds are buying the index in a large amount this indicates that the

prediction is on bullish side. One thing is clear with this chart that when huge

volume is in the market there is rise in price the interest of buying the future of

nifty in large amount or high and increasing open interest is the sign of increment

in market.

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 LIMITATIONS

It would be unethical and unfair to declare the research having no limitation. The

research process witnessed several barriers and hurdles while it was being processed.

1. Less liquidity in out of money counter.

2. Hedging actions prior to high volatility expectations.

3. Hedge funds participations is one of the great limitation of option in out of money

counter.

4. Option writing in out of money counters by informed participation also taking place.

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 RECEMENDATION

1. Irrespective of same topic, what really matters is the way of looking at a particular

situation, perception, data collection by other researcher due to which the analysis will

effect the research work.

2. Before conducting any research help should be taken from previous research but that

should not be taken as a base for any research as each research have some or the other

flaws associated with it.

3. I would recommend all of you to take care while collecting the data from bhavcopy.

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PART III

32
CHARTS AND GRAPHS

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 BIBLIOGRAPHY
1. www.nseindia.com

2. www.Angeltrade.com

3. www.wikipidia.com

4. www.investopedia.com

5. www.google.com

6. www.altiusdirectory.com

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