CHAPTER I

1. INTRODUCTION

1.1 INDUSTRY PROFILE

Stock market is a market where trading of company stocks, other securities and derivatives takes place. Stock exchanges are corporations or mutual organizations, which are specialized in trading stocks and securities. All sorts of company stocks are enrolled in the stock exchanges. Some of the stock markets in India are listed below: Bangalore Stock Exchange Mumbai (Bombay) Stock Exchange Calcutta Stock Exchange Delhi Stock Exchange Madras Stock Exchange National Stock Exchange

Mumbai (Bombay) stock exchange is Indias first stock exchange. It was founded in 1875 with total number of listed stocks being more than 6,000. In India there are total 22 stock exchanges operating across the country. The National Stock Exchange (NSE) is situated in Mumbai The small and medium sized companies can list their stocks in Over The Counter Exchange of India (OTCEI). The Securities and Exchange Board of India (SEBI) regulates the functioning of capital market and protects the interests of the investors. It is situated in Mumbai. Some functions of SEBI are as follows: Regulation of working in stock exchanges and other securities markets. Registration and regulation of the operation of collective investment plans, including mutual funds. Inhibition of fallacious and unfair business practices in the securities markets. Controlling accomplishment of shares and takeover of companies.

Stock exchange means any body of individuals, whether incorporated or not, constituted for the purpose of regulating or controlling the business of buying, selling or dealing in securities. 1

These securities include: (i) Shares, scrip, stocks, bonds, debentures stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; (ii) Government securities; and (iii) Rights or interest in securities.

History of stock market in India The working of stock exchanges in India started in 1875. BSE is the oldest stock market in India. The history of Indian stock trading starts with 318 persons taking membership in Native Share and Stock Brokers Association, which we now know by the name Bombay Stock Exchange or BSE in short. In 1965, BSE got permanent recognition from the Government of India. National Stock Exchange comes second to BSE in terms of popularity. BSE and NSE represent themselves as synonyms of Indian stock market. The history of Indian stock market is almost the same as the history of BSE. There are 23 recognised stock exchanges in India Bombay Stock Exchange ,National Stock Exchange, Ahmadabad Stock Exchange, Bangalore Stock Exchange, Bhubaneswar Stock Exchange, Calcutta Stock Exchange, Delhi Stock Exchange, Guwahati Stock Exchange, Hyderabad Stock Exchange ,Jaipur Stock Exchange, Ludhiana Stock Exchange, Cochin Stock Exchange, Coimbatore Stock Exchange, Madhya Pradesh Stock Exchange, Magadh Stock Exchange, Madras Stock Exchange, Mangalore Stock Exchange, Meerut Stock Exchange ,OTC Exchange Of India Pune Stock Exchange, Saurashtra Kutch Stock Exchange, Uttar Pradesh Stock Exchange, Vadodara Stock Exchange.

1.2. COMPANY PROFILE

Name of the company Year of Establishment Admin office : : : Sharekhan ltd. 1925 ShareKhan SSKI 2

A-206 Phoenix House 2nd floor,S.B.Marg, Lower Parel Mumbai - Maharashtra, INDIA- 400013 Nature of Business Services Core Services : : : Equity and Derivatives trading on BSE and NSE 1. Depository Services 2. Online Trading 3. IPO Services 4. Commodity Trading on MCX and NCDEX 5. Port folio Management services. Number of Employees Revenue Website Slogan : : : : Over 3500 Data Not Available www.sharekhan.com Your Guide to The Financial Jungle. Service Provider Depository Services, Online Services and Technical Research.

1.2.1. Background and inception of the company

Origin and Growth Sharekhan is a retail broking arm of S.S. Kantilal Ishwarlal Investors Services Pvt. Ltd., An organization with more than 8 decades of trust and credibility in the stock market. Sharekhan Ltd (Formally SSKI Investors Services Pvt Ltd.) was promoted by Mr. Shripal. S Morkharia and Mr. Shreyas. S Morkhia. It is currently Indias largest broking house. It is a member of the stock 3

exchange, Mumbai. It is a depository participant of the NSDL and CDSL. Its business includes stock broking, depository services, portfolio management and derivatives. The companys core specialty lies in its retail distribution with a large network of branches i.e. 510 share shops (retail shops) in 170 cities in India and sub-brokers/authorized persons. Its strengths lies in its investment research capabilities. Its research division has several analysts continuously monitoring global, national and regional political, economic and social situations so as to assess their impact on the economy in general, the sectors so as to assess their impact on the economy in general, the sectors and companies they research which helps them if offering quality research and advice to clients. The SSKI Group Comprises of Institutional broking and Corporate Finance. The Institutional broking division caters to domestic and foreign institutional investors, while the Corporate Finance Division focuses on niche areas such as infrastructure. Telecom and media. SSKI has been voted as the Top Domestic Brokerage House in the research category by Euro Money Survey and by Asia Money Survey.

For the derivates segment, to educate the potential investors towards the share market they provide a study kit named the Derivative Digest. And for potential investors wanted to start the trading in the share market also provided with the study kit First Step to investing in the share market, gives them a general understanding about how the share market operates, and it also gives an idea regarding the role of share brokers in the Capital Market. These are the wide-raging services offered by the share khan to its customers. And most importantly. Share Khan is blessed with well-dedicated sales wings, who are looking after the various needs of the customers in a committed manner and which provide the customers with tremendous amount of satisfaction and happiness about their investment.

1.2.2. Nature of the Business Carried

Sharekhan is a broking company. The company offers a complete range of pre trade, trade and post trade service on the BSE (Bombay Stock Exchange) and the NSE (National Stock Exchange). Whether the client come in to the companys conventionally located officers and 4

trade in a dedicated ambience or issue instructions over the phone, our highly trained team and sophisticated equipment ensure smooth transactions and prompt service.\ Investment Advisory Service Facilitation Services to Retail Investors, Corporate. Depository Services Investment options includes : i. Online trading (Includes equity, derivatives) ii. Commodities trading iii. Mutual Funds iv. Portfolio management Services Sharekhan Branches are conceptualized to be place where investors can come in contact with investment opportunities in an atmosphere of convenience and comfort. Our services are available through our network of 510 Share Shops spanning 170 major towns and cities in the country. Professional seeks to educate clients and end their confusion by custom an Investment Plan according to the needs of clients and is also today a part of companys induction program advising employees on how to plan their investments.

1.2.3. VISION, MISSION & QUALITY POLICY Vision

Sharekhan practices customer centric approach to be leading broking Firm. The Company Vision is: i. To be the top most company for providing investment advisory and financial planning services in India. ii. To be a leading investment intermediary for transaction through both online and offline medium.

Mission
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To educate and empower the individual investor to make better investment decisions through quality advice and superior service. a) Educate and empower i. Research backed advice, which is easy to understand, retail specific, and discipline. ii. Total equity solutions for the entire investment process. iii. Relationship management a) Superior service i. Integrity ii. Transparency iii. Professionalism iv. Information product, news, operations v. Hassle free trading vi. Enjoyable experience our goals is to accomplish top most position in both online and offline medium of trade and also to remain a customer centric organization.

Quality objectives
Objectives represent, what needs to be accomplished in order to reach the goals. To increase the customer base of investors to invest in all kind of securities. Sharekhan has one among the largest network of outlets of the either trading firms with 180 outlets. To retain the existing consumers with research backed advice and personalized care the needs of the consumer.

1.2.4. Products and service profile

The different types of products and services offered by Sharekhan Ltd. are as follows: Equity and derivatives trading Depository services 6

Online services Commodities trading Dial-n-trade Portfolio management Share shops Fundamental research Technical research

Types of accounts in Sharekhan ltd.

Sharekhan offers two types of trading account for its clients
Classic Account (which include a feature known as Fast Trade Advanced Classic Account for the online users) and Speed Trade Account

CLASSIC ACCOUNT

This is a product for the retail investor who is risk-averse and hence prefers to invest in stocks selectively or who does not trade too frequently. There is no volume commitment on the part of the client. The features of the products are as follows: The registration charges are Rs. 750/- that is a one-time payment. With the online package defaults demat a/c. would be opened with SSKI. For the 1st year no demat charges have to be paid. Its free. The client gets exposure of up to 4 time of the deposit amount. For example if the client has Rs. 5000/- in his/her account he/she can get the exposure up to Rs. 20,000/The brokerage applicable is 0.50% on delivery and 0.1 for intra day trading.

This account comes with the following features: a. Online trading account for investing in Equities and Derivatives b. Free trading through Phone (Dial-n-Trade) i. Two dedicated numbers(1800-22-7500 and 39707500) for placing the orders using cell phones or landline phones ii.Automatic funds transfer with phone banking facilities (for Citibank and HDFC bank customers) iii.Simple and Secure Interactive Voice Response based system for authentication iv.get the trusted, professional advice of Sharekhan limiteds Tele Brokers v.After hours order placement facility between 8.00 am and 9.30 am c. Integration of: Online Trading +Saving Bank + Demat Account. 8

d. e. f. g.

Instant cash transfer facility against purchase & sale of shares. IPO investments. Instant order and trade confirmations by e-mail. Single screen interface for cash and derivatives.

SPEED TRADE ACCOUNT

This is an internet-based software application, which enables one to buy and sell in an instant. It is ideal for active traders and jobbers who transact frequently during days session to capitalize on intra-day price movement. The company will be merging speed trade and speed trade plus. There will be a common exe called speed. Trade which allows customers to trade on both case and F & O. account opening fee Rs. 1000. This account comes with the following features: a. Instant order Execution and Confirmation. b. Single screen trading terminal for NSE Cash, NSE F&O & BSE. c. Technical Studies. d. Multiple Charting. e. Real-time streaming quotes, tic-by-tic charts. f. Market summary (Cost traded scrip, highest value etc.) g. Hot keys similar to brokers terminal. h. Alerts and reminders. i. Back-up facility to place trades on Direct Phone lines. j. Live market debts.

Charge structure
Fee structure for General Individual: Charge Account Opening Classic Account Rs. 750/= Intra-day 0.10 % Delivery - 0.50 % Speed Trade Account Rs. 1000/= Intra-day - 0.10% Delivery - 0.50%

Brokerage Depository Charges:

Account Opening Charges 9

Rs. NIL

Annual Maintenance Charges

Rs. NIL first year Rs. 300/= p.a. from second calendar year onward

SERVICE PROFILE
a. Trading Facilities: Sharekhan as a member of NSE & BSE provides both offline and online trading facilities nationwide for trading the securities in secondary market to its clients. The Companys wide network of outlets spread across the country facilities to executive the orders in secondary market. b. Derivatives: (Futures and Options) The company also facilitates the trading system for trading in secondary market under future and options segment of NSE and BSE. The equity dealers in the company will be eager to give insights into the new sets introduction in the Indian Capital market futures and options. c. Depositor Services: Sharekhan is a Depository participant of National Securities Depository Limited and Central Depository and securities Limited. Sharekhan will open De-mat accounts, which will investors to convert physical certificates of shares into electronic balances in an account maintained. d. Margin Financing: In the present rolling settlement scenario, Sharekhan understand investor need for additional capital availability for daily purchaser shares. It offers unique facility avail finance, for purchasing shares at very competitive interest rates. e. IPOs and Mutual Funds: Sharekhan offers the change of investing in the potentially lucrative IPO market. Sharekhan is a distribution house for all mutual funds. This is the new scheme introduced by the company and it also offers schemes catering to investors with varying risk return profiles.

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f. Stock lending and Borrowing: One can place an order of shares with Sharekhan. It is approved intermediary of the security or lending scheme. These would be sent out the borrowers, these earnings fees for all investors idle shares. Thus Sharekhan fulfils the investor need for borrowing and lending of shares. g. Equity Research: Sharekhan has a highly rated research using involved in macroeconomic studies, industry and company specific equity research. The research teams inputs will be available as daily trading calls, quarterly investment picks and long term investment picks, based on the fundamentals of particular company and the industry as whole. h. Internet Trading: Investors can also trade their securities through this facility by logging into companys website. The virtual world that Sharekhan offers online trading services through. i. Portfolio Management Services: Sharekhan securities are a registered portfolio manager with SEBI to manage portfolios on behalf of clients with discretionary and anon discretionary rights this service is a provision for those who may not have the right time to manage their stocks investment or require the service of companys highly specialized professional team. j. Online Trading: Share Khan was amongst the pioneers of online trading in India and has launched Sharekhan.com in February 2000. Since then, they have been at the forefront in understanding customer needs, analyzing trends and brining innovation in their offerings. They have online trading products that are customized to the habits and preferences of investors as well as traders.

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Features of Online Trading Products: i. Live streaming quotes ii. Instant order execution and conformation iii. Price alerts iv. Single Screen for equities and derivatives v. Multiple market watch windows vi. Real-time portfolio tacking a. Other Services: i. Free access to investment advice, from Sharekhan research team. ii. Sharekhan value line ( A monthly publication) iii. Daily research reports and market review. iv. Daily trading calls based technical analysis v. Cool trading products. (Daring derivatives and market strategy) vi. Personalized advice. vii. Live management information. viii.Internet based online trading session. ix. Online BSE and NSE executions through BOLT & NEAT terminals.

Bank Connection:Sharekhan has affiliation with 11 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 CITY BANK ICICI BANK OBC BANK UNION BANK INDUSAND BANK IDBI BANK CENTURION BANK AXIS BANK YES BANK

1.2.5. Areas of operation:

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Sharekhan provides a wide range of services nationwide to a substantial and diversified client base that includes retail clients, high net worth individuals, corporates and financial institutions. It has presence in more than 280 cities through its network of longstanding franchisees and sub brokers. It has its presence globally i.e in UAE also.

1.2.6. Management team

Dinesh Murikya : Owner of the company

Tarun Shah

CEO of the company

Shankar Vailaya

Director (Operations)

Jaideep Arora

Director (Products & Technology)

Pathik Gandotra

Head of Research

Rishi Kohli

Vice President of Equity Derivatives

Nikhil Vora

Vice President of Researc

1.2.7. Competitors information:

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Sharekhan is one of the major player in on line Trading. In Mumbai the main competitors of Sharekhan are ICICI Direct, India bulls, Kotak Securities, HDFC Securities, Anand Rathi, Motilal Oswal, Religare securities and reliance securities.
Religare Securities:

Religare is a global financial services group with a presence across Asia, Africa, Middle East, Europe and the Americas. In India, Religares largest market, the group offers a wide array of products and services ranging from insurance, asset management, broking and lending solutions to investment banking and wealth management. The group has also pioneered the concept of investments in alternative asset classes such as arts and films .With 10,000 plus employees across multiple geographies, Religare serves over a million clients, including corporates and institutions, high net worth families and individuals, and retail investors. Religare Enterprises Limited is part of a family of companies that fall under the broader Religare brand, which includes other global businesses such as diagnostics, aviation and travel, wellness retail, and IT products and solutions. A diversified financial services group Religare Enterprises Limited (REL) offers a comprehensive suite of customer-focused financial products and services targeted at retail investors, high net worth individuals and corporate and institutional clients. REL, along with its joint venture partners, offers a range of products and services in India, including asset management, life insurance, wealth management, equity and commodity broking, investment banking, lending services, private equity and venture capital. Religare has also ventured into the alternative investments sphere through its holistic arts initiative and film fund.

Kotak Securities: Kotak Mahindra is one of India's leading financial conglomerates, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock 14

broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates. Kotak Securities Ltd., a 100 % subsidiary of Kotak Mahindra Bank is one of the oldest and largest broking firms in the industry. Their offerings include stock broking through the branch and Internet, Investments in IPO, Mutual funds and Portfolio management service. Reliance Securities Ltd: Reliance Securities Limited is a Reliance Capital company and part of the Reliance Anil Dhirubhai Ambani Group. Reliance Money is a brand owned by Reliance Capital Limited. Reliance Securities with the permission of Reliance Capital Limited uses the Reliance Money brand to market its various services. Reliance Securities endeavours to change the way investors transact in equities markets and avails services. It provides customers with access to Equity, Derivatives, Portfolio Management Services, Investment Banking, Mutual Funds and IPOs. It also offers secured online share trading platform and investment activities in secure, cost effective and convenient manner. To enable wider participation, it also provides the convenience of trading offline through variety of means, including Call & Trade, Branch dealing Desk and its network of affiliates. Reliance Money through its pan India presence with 6,233 outlets has more than 3.5 million customers. Reliance Capital is one of India's leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking groups, in terms of net worth.

1.2.8. Infrastructural facilities

Sharekhan investment outlets are designed to be places where retail investors can come in touch with investment opportunities in an atmosphere of convenience and comfort. The look and

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feel of the offices across India projects a consistent branch image for the company. The features that enable a unique facility for retailing financial services include among others: Easily visible branches set up in the commercial spaces of potential investment zones ranging between 750 sft to 1000 sft. Most branches are located in the ground floor sporting huge glass frontage promoting easy accessibility and reflecting our attitude of complete transparency. The major portion of the branch area dedicated for customer use. The furniture is in CKD formats to add flexibility in using the branch for investors purposes. Connectivity to NSE for trading facilities. TV and other electronic mediums to facilitate real time update and dissemination of information to our customers. Each branch comprises of trained and qualified investment advisors to take care of the needs of the customers.

1.2.9. Achievements of Sharekhan

1. Rated among the top 20 wired companies along with Reliance, HUJl, Infosys, etc by Business Today, January 2004 edition. 2. Awarded Top Domestic Brokerage House four times by Euro money and Asia money. 3. Pioneers of online trading in India amongst the top 3 online trading websites from India. Most preferred financial destination amongst online broking customers. 4. Winners of Best Financial Website award. 5. Voted by CNBC Awaaz as the Most Preferred Stock broker in India in 2005.

1.2.10. Work flow model

At Sharekhan its believed that, The clients are people, not accounts hence successful investment management relationship begins with a clear understanding of each clients specific needs, concerns and long-term objectives. Sharekhan investment philosophy applies a disciplined 16

approach to building a customized strategy designed to meet customers individual financial goals and tolerance for risk.

1.2.11. Future Plans and prospectus:

i. 2, 00,000 plus retail customers being serviced through centralized call centres / web solutions. ii. Branches / Semi branches servicing affluent / aggressive traders through high skill financial advisor. iii. 250 independent investment managers/ franchisee servicing 50,000 highly valued clients iv. New initiatives Portfolio management Services and commodities trading

CHAPTER II McKinsey 7 s framework with special reference to organisation under study.

The 7-S model is better known as McKinsey 7-S model. This is because the two persons who developed this model, Tom Peters and Robert Waterman, have been consultants at McKinsey & co. at that time. They published their 7-S model in their article Structure is not 17

organization (1980) and in their books The art of Japanese management (1981) and In search of excellence (1982).

The model starts on the premise that an organization is not just structure, but consists of seven elements:

STRATEGY: The direction and scope of the company over the long term. STRUCTURE: The basic organization of the company, its departments, reporting lines, areas of expertise and responsibility.

SYSTEMS: Formal and Informal procedures that govern everyday activity, covering everything from management information systems, through to the systems at the point of contact with the customer (retail systems, call centre, systems, online systems, etc). SKILL: The capabilities and competencies that exist within the company. What it does best. 18

SHARED VALUES: The values and beliefs of the company. Ultimately they guide employees towards valued behaviour. STAFF: The companys people resources and how they are developed, trained and motivated. STYLE: The leadership approach of top management and the companys overall operating approach.

THE 7S MODEL WITH REFERENCE TO SHAREKHAN:

STRATEGY: Sets out the vision, mission, objective and major action plans and policies of the organization. These set out the picture of the organization in the future typically spelling out the overall corporate strategy, the Strategic business unit strategy and functional Strategies. It can also be defined as the choice of direction and action that the company adopts to achieve its objective in a competitive situation. It is the first step that the company has to take in leading its organization to ladder of success. The major areas of Strategic Goals of Sharekhan are:

Major a. Market Standing

Description Desired share of present and new markets, including areas in which new products are needed and service goals aimed at building customer loyalty. b. Innovation Innovation in products/ services as well as innovation in skill and activities required to supply them. c. Human Resources Supply, development and performance of managers employee attitudes. d. Financial Resources Sources of capital supply and how it will be utilized.

e. Physical Resources

Physical facilities and how they will be utilized in providing services. 19

f.

Productivity

Efficient use of resources relatives to outcomes.

g.

Social Responsibility

Responsibilities in such area as concern for community and ethical behaviour.

STRUCTURE: Include policies and procedures that govern the way in which the organization acts within the organization. It provides the frame work for relationship among different parts of the organization. It sets out formal reporting relationships, mode of communication, their respective roles and rules and regulation for carrying out different tasks. If it is not properly defined it has a detrimental effect on the effective and efficient working because motivation and morale is low, decision are delayed and are of poor quality the expenses rises, orders are lost due to competition, lack of confidence etc. Structure of any organization has to answer the following questions

What is basic structural form? How centralized versus decentralized is the organization? What is the relative status and power of the organization? At sharekhan the structure is clearly defined. Sharekhan has its 620 share shops across

280 cities in India with the headquarters situated at Mumbai. The registered Office is centralized at residency road, Bangalore. Sharekhan has its operations distributed throughout India. I.e. in the north and southern regions. The southern region covers areas like Karnataka, Andhra Pradesh, Kerala and Tamilnadu.These areas are managed by a Regional Branch Head who takes care of operation in these respective areas. The organization chart for the regional office and its branches are as follows. ORGANISATION CHART:

HEAD OFFICE
Chairman

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Regional Heads Regional Product Heads Branch Relationship Sr. Regional

Zonal Heads

Jr. Regional

Back Office Dealers SYSTEMS: Systems in their frame work stands for the rules and regulations, procedures and practices that must be allowed to carry out the tasks in the organization. A good system adds to the efficient and effective working of the entrepreneur. At Sharekhan in Chintamani the procedure followed is clear, transparent and not complicated. The information systems at the various branches of sharekhan are followed by submission of MIS reports at end of their day to day activities. The activities of the front end operation include: Client Advisory Services Processing of demat account transactions. New issue promotions. Portfolio Management of NRI clients. Promotions activities for promotions of various funds (New Recommended ones). Finally MIS reporting of day to day transactions. Sales Team

At the back office day to day operations include Processing of various application forms of demat account IPOs and forwarding the same to the Head office. Providing statement of account to the investors on request. Addressing requests for nonpayment of sub brokers commission. MIS reporting of day to day transactions.

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The Total Quality Control System of Sharekhan has created principles about its quality philosophy Create constancy of purpose and improve services for long range needs rather than short term profitability. Search continually problems in the system and improve processes. Encourage effective two way communication and other means to drive fear throughout the organization and help people to work more productively. The Electronic Data Processing (EDP) department of Sharekhan takes care of both offline and online transactions. In the online transactions, online trading takes place using neat software. It is connected to NSDL, CDSL, NSE and BSE and helps stock brokers to trade online. The offline is mainly connected for the purpose of conversion of physical form of shares to electronic form. STYLE: Style includes Leadership style of top management and overall operating style of the organization. Style impacts the norms people follow and they work and interact with each other and with customers. How does the top management make decisions Participatory Vs Top Down? How do managers spend their time in informal meetings, informal conversations, etc?

At sharekhan, they follow a very in effable style of functioning.

Managers, staff etc are approachable (a perfect blend of formal and informal approaches). They follow the system of performance appraisal on 180 degree appraisal model. Rewards are given according to the performance. Personal attention to the project trainees helps in creating a good image in the eyes of the public. Staff has very good informal conversations that develop a sense of loyalist, motivation, dedication within the employees. Emergency meetings are held where top management and employees collectively participate- targets for the week is set, responsibilities are delegated, suggestions are invited.

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There is a good cordial relation between the management and the employees which shows a participatory leadership style is observed.

STAFF: The staffing procedure mainly includes how the organization has to look into its people, their backgrounds, and competencies. Staff also includes the organization approaches to recruitment, selection and specialization. How people developed, how recruits are trained, socialized and integrated and how their careers are managed? At Sharekhan, there are around 3500 employees working across India. At Sharekhan, Chintamani branch there are about 10 employees. The candidates are recruited from diverse fields of commerce like B. Coms, MBAs, ICWAs, CAs and CFAs great opportunity for freshers and post graduates are available. They are involved in all the required meetings and activities. The Staff are given freedom to use their innovation and creative skills. Get together are held for staff members to socialize. Staff grievances are given a listening in a year.

SKILLS: Include distinctive competencies that reside in the organization. These can be distinctive competencies people, management practices, systems and technology. What new capabilities the organization needs to develop, which one does it need to unlearn to compete in future. This can be learnt through a SWOT Analysis. The competent skills of the people include good communication and presentation skills, strong academic record, consistent in the performance levels etc. SHARED VALUES: Refers to core/ fundamental values that are widely shared in the organization and serve as guiding principles that are important. These values have great meaning because they focus attention and provide a broader sense and purpose. They also give a strong basis for stabilities to

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the organization, in a rapidly changing environment by providing a basic meaning to people working in the organization. Do people have a shared understanding of why a company exits? Do people have a shared understanding of the vision of the company? How do people describe the ways in which the company is distinctive?

At Sharekhan, which is primarily a client or investor oriented organization has embedded this quality among all its member employees. The members work today towards the growth and success of the unit. The employees share responsibility and protect the companys name and integrity. There is no sharing of confidential/ important information with the outsiders. There is collective responsibility and accountability on the part of its members. This can be said as the shared values of the employees of the organization.

CHAPTER III SWOT ANALYSIS:

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A SWOT analysis is a tool, used in management and strategy formulation. It can help to identify the Strengths, Weaknesses, Opportunities and Threats of a particular company. Strengths and weaknesses are internal factors that create value or destroy value. They can include assets, skills, or resources that a company has at its disposal, compared to its competitors. They can be measured using internal assessments or external benchmarking. Opportunities and threats are external factors that create value or destroy value. A company cannot control them. But they emerge from either the competitive dynamics of the industry/market or from demographic, economic, political, technical, social, legal or cultural factors.

SWOT MATRIX:

S O WT
IN E N L TRA

ETRA XENL (O )
Strengths Global parentage and expertise.

(S ) In rn l te a S n th tre g s

E te a x rn l O pmanagement. s p rtu itie n Experience senioro

(T )

World class technology and infrastructure. Strict risk control systems. Fundamental and technical research.

S O S a g tr te ie U S tota e se k a v n g o O d a ta e f

E te a x rn l

25

S S a g s T tr te ie U S toa o T se v id

 Multiple products under one roof. Company with well diversified portfolio.

Weakness Many competitors. No direct marketing strategy. Payment services are not good.
No global reach. Weak brand name.

Opportunities To grab the growing Indian market. Scope for taking its business overseas and going global. Scope for increasing its branch network especially in the important financial centres as well as extending its physical presence in other parts of the country. Up gradation of the latest technology to give better and faster service to its clients Threats Global economic slowdown. The Indian capital market is fluctuating. The ever increasing and challenging neck-to-neck competition specially with those established and existing reputed stock broking companies. Uncertainty of the market and volatility and fluctuations in the stock prices. Change in customer needs, preferences and taste. Threat from new entrants into the field of stock broking.

CHAPTER IV Analysis of balance sheet.

The equity share capital has remained more or less the same. There is 16.6 percentage increases in Reserves and surplus in 2009 over the previous year. Investments increased by 50 percentage.

CHAPTER V
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Learning experience.
The opportunity of undergoing an in plant training for one month duration is being capitalized by me by increasing my knowledge base by working at Sharekhan. I am privileged to highlight some of the learning experience got from this training. It helped to link the theories, techniques and practices of management with different activities of the organization in trading operations It increased my conceptual understanding of the entire subject financial derivatives. Basically stock market investments are considered to be very risky, but if the scrips selected by the investor is favorable according to the market conditions than the investor will be able to generate high profit within a short time span.

CHAPTER VI INTRODUCTION TO THE CONCEPT

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. 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 locking-in asset prices, derivative products minimize the impact of fluctuations in the asset prices on the probability and cash flow situation of risk-averse investors.

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The wide array of risks that a business firm is exposed to may be classified into five categories:

Technological risk- arises mostly in the R&D and operations stages of the value chain. Economic risk- stem from fluctuations in revenues and production costs. Financial risk- arises from the volatility of interest rates, currency rates, commodity prices, and stock prices. Performance risk- arises when the contracting counterparties do not fulfill their obligations. Legal and regulatory risk- arises from changes in laws and regulations. WHY TOTAL RISK MATTERS Modern finance theory regards hedging activities aimed at reducing total corporate as irrelevant. Under certain plausible condition, the CAPM and Arbitrage pricing theory show that unsystematic risk has no bearing on the required rate of return. Only systematic risk (or market risk) is priced and, hence, has an influence on the required rate of return. Since the price of systematic risk is identical for all the participants in the financial market, a firm or investor does not benefit by laying it off in the financial market. Thus, according to this line of reasoning, in an efficient financial market the expected NPV of any risk hedging activity like taking an insurance cover or buying a forward contract is zero. Other things being equal, a firm or investor with a high total risk exposure is likely to face financial difficulties which tend to have a disrupting effect on the profit.

FACTORS DRIVING THE GROWTH OF DERIVATIVES. Increased volatility in asset prices. Increased integration of national financial markets with the international markets. Marked improvement in communication facilities and sharp decline in their costs. Development of more sophisticated risk management tools, proving economic agents a wider choice of risk management strategies and 28

Innovations in the derivatives markets.

DERIVATIVE PRODUCTS Forwards: A forward contract is an agreement between two parties to exchange an asset for cash at a predetermined future date called the settlement date for a price that is specified today. Futures: A futures contract is a standardized forward contract which can be traded on organized exchanges. In fact, a future is a standardized form of forward contract. A future is a contract or an agreement between two parties to exchange an assets / currency or commodity at a certain future date at an agreed price. The trader who promises to buy is said to be in long position and the party who promises to sell said be in short position. Options: Inboard sense, an option is a claim without any liability. More specifically, an option is a contract that gives the holder a right, without any obligation, to buy or sell an asset at an agreed price on or before a specified period of time. Warrants: Longer dated options which have expiry date up to one year are called warrants. Leaps: Long Term Equity Anticipation Securities (LEAPS) are the options having a maturity of up to 3 years. Baskets: Baskets are the options on portfolios of underlying Assets. Swaps: Swaps are private agreements between two parties to exchange cash flows in the future according to pre-arranged formula. Swaptions: (Options + Forwards) are the options on a forward Swap.

PARTICIPANTS IN DERIVATIVES MARKET: Hedgers Speculators 29

 Arbitrageurs ECONOMIC FUNCTIONS OF THE DERIVATIVE MARKET: Transfer of risks. Discovery of future as well as current prices. Higher trading volumes in financial markets. Acts as a catalyst for new entrepreneurial activity. Margining, monitoring and surveillance of the activities of various participants.

A. INTRODUCTION TO FORWARDS: Forward contracts are perhaps the oldest and simplest tools for managing financial risk. A forward contract represents an agreement between two parties to exchange an asset for cash at a predetermined future date called the settlement date for a price that a specified today. For example, if you agree on Jan 1 to buy 100 bales of cotton on July 1 at a price of Rs800/- per bale from a cotton dealer, you have entered into a forward contract with the cotton dealer. As per this contract, on July 1 you will have to pay Rs-80,000/- and the cotton dealer will have to supply 100 bales. According to this agreement, you have bought forward cotton or you are long forward cotton, whereas the cotton dealer has sold forward cotton or is short forward cotton. No money or cotton changes hand when the deal is signed. The forward contract only specifies the terms of a transaction that will occur in future.

Features: They are bilateral contracts and hence exposed to counter party risk.

30

 Each contract is custom designed and hence is unique in terms of contract size, expiration date and the asset type and quality. The contract price is generally not available in public domain. On the expiration date, the contract has to be settled by the delivery of the asset. 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. Forward contracts are generally used in real estate, commodities, gold, foreign currency exchange etc.

B. INTRODUCTION TO FUTURES: A futures contract is a standardized forward contract which can be traded on organized exchanges. It is similar to the forward contract in all the respect. In fact, a future is a standardized form of forward contract. A future is a contract or an agreement between two parties to exchange an assets / currency or commodity at a certain future date at an agreed price. The trader who promises to buy is said to be in long position and the party who promises to sell said be in short position. When a futures contract is first listed for trading by an exchange, interested parties take long or short positions on the contract. When one trader takes a long position on the contract for a particular price and another trader takes a short position on the contract at the same price, it generates a trading volume of one contract. At this point there is one contract which remains to be performed or settled through delivery of the asset in the future. Thus, there is one open contract. This is also referred to as open interest, which is the terminology used to describe the number of open contracts or contracts remaining to be settled in future on any particular day. Futures contracts are contracts specifying a standard volume of a particular currency to be exchanged on a specific settlement date. A future contract is an agreement between a buyer and a seller. Such a contract confers on the buyer an obligation to buy from the seller, and the seller an obligation to sell to the buyer a specified quantity of an underlying asset at a fixed price on or before a fixed day in future. Such a contract can be for delivery of an underlying asset. 31

To eliminate counter party risk and guarantee traders, futures markets use a clearing house which employs initial margin, daily market to market margin; exposures limits etc. to ensure contract compliance and guarantee settlement. Standardized futures contracts generate liquidity, greater transparency, fairness and efficiency. Due to these inherent advantages, futures markets have been enormously successful in comparison with forward markets all over the world.

Broadly there are two types of futures: Commodity futures (Cocoa, Cotton, Aluminum, Gold, Crude oil, Soya bean etc) Financial futures (Index futures, stock futures, debt instruments, foreign currencies, monetary metals etc) Features: Traded on an organized exchange with Notation. Standardized contract terms are defined by exchange. Requires margin payment. They are marked-to-market. Price is zero and linear payoff. Both long and short at risk. The price of a futures contract is determined on the floor of the exchange by forces of demand and supply. A margin is a deposit to be made to the clearing house by the parties entering into a futures contract. There are three types of margins: Initial margin or performance margin Maintenance margin 32

 Variation margin The difference between forward contract and future is that future is a standardized contract in terms of quantity, date and delivery. It is traded on organized exchanges, so it has secondary markets. Future contract is always settled daily, irrespective of the maturity date which is called marking to the market.

C. INTRODUCTION TO OPTIONS: Inboard sense, an option is a claim without any liability. More specifically, an option is a contract that gives the holder a right, without any obligation, to buy or sell an asset at an agreed price on or before a specified period of time. Types of options: 1) Call option: - Gives the buyer the right, but not the obligation to buy a specific futures contract at a predetermined price within a limited period of time. A call option is a contract, which gives the owner the right to buy an asset for a certain price on or before a specified date. For example, if you buy a call option on a certain share of XYZ Company, you have the right to purchase 100 shares (assuming of course, that the option involves 100 shares). Suppose current share price (S) of Reliance Industries is Rs-291/-. You expect that price in a three months period will go up Rs-300/-. But you also fear that the price may also fall below Rs-291/-. To reduce the chance of risk and at the same time to have the opportunity of making profit, instead of buying the share, you can buy a 3-month call option on Reliance Industries at an agreed exercise price (E) of, say, RS-280/-. Ignoring the option premium, taxes, transaction costs and the time value of money, the decision to exercise your option depends upon the share price after three months. You will exercise option when the share price after three months is

33

above Rs-280/- and you will not exercise when the share price after three month is below Rs240/-. Thus option should be exercised when: Share price at expiration > Exercise price = St>E Do not exercise option when: Share price at expiration <= Exercise price =St<E The value of call option at expiration is: Value of call option at expiration= Maximum [(share price exercise price), 0] Ct = Max [(St E), 0] The expression above indicates that the value of call option at expiration is the maximum of the share price minus the exercise price and zero. The call option holders opportunity to make profit is unlimited. It depends on the actual market price of the underlying share when the option is exercised. Greater the market value of the underlying asset, the larger is the value of the option. The following figure shows the value of call option. Value of call option

Exercise price
Unlimited pay off 0 Out-of-money 1.1 Pay-off of a call option buyer It may be observed from the above figure 1.1 that the possible outcomes can be divided into two parts: one above the exercise price and other below the exercise price. The outcome above the exercise price are said to be In-the-money and are beneficial to the option holder but Value of share in the money Fig.

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not the outcome below the exercise price. It is the exercise price that divides the good and bad outcomes. For the call option writer, he will gain when share price is below the strike price and will lose when stock price is above the strike price. The call buyers gain is call sellers loss. The figure 1.2 shows the pay-off of a call option writer.

In the- money (Good outcome) 0

out of money (Bad outcome) Value of share

Exercise price

Value of call option Fig. 1.2 Pay off of a call option writer. 2) Put option: - Gives the buyer the right, but not the obligation, to sell a specific futures contract at a predetermined price within a limited period of time. Put option is a contract that gives the holder a right to sell specified shares at an agreed price on or before a given maturity. Thus, if you buy a put option on shares of XYZ Company, you have the right to sell 100 shares of this company at the specified price at any time between today and the specified date. Suppose the current price (S) of Reliance Industries is Rs. 291 and you expect that the price will fall within a three months. Therefore, you can buy a 3-month put option on Reliance Industries at an agreed exercise price 35

(E), say, Rs. 295. If the price actually falls to (S t) Rs. 280 after three months, you will exercise your option. You will buy the share for Rs. 280 from the market and deliver it to the put-option writer to receive Rs. 295. Your gain is Rs.15 ignoring the put option premium, transaction cost and taxes. You will not exercise if the share price rises above exercise price; the put option is worthless and its value is zero. Thus, exercise the put option when Exercise price >Share price at expiration = E > St Do not exercise put option when Exercise price <=Share price at expiration = E<St The value of put option at expiration will be Value of put option at expiration= Maximum [(Exercise price Share price), 0] Pt = Max [(E-St), 0] PROFIT Limited profit Exercise price Value of share 0 In-the money out-of-money

Fig. 1.3 Pay-off for a put option buyer The figure 1.3 shows that the value of put option for the put option holder depends on the value of underlying asset .The value of put option is zero when it is out of the money. The potential profit of the put option is limited because share price cannot fall below zero. 36

The put option buyers gain is the sellers loss. The potential loss of the put option is limited to the exercise price. Since the buyer has to pay a premium to the seller for purchasing a put option, the potential profit of the buyer and the potential loss of the seller will reduce by the amount of premium. The figure 1.4 shows the pay-off for a put option seller.

Out-of-money

in-the-money value of share Exercise price

Limited loss Loss Fig. Pay-off for a put option seller OPTION TERMINOLOGY Index options: These the 1.4

options have the index as options etc.

underlying. In India, they have a European style settlement. Eg. Nifty options, Mini Nifty

Stock options: Stock options are options on individual stocks. A stock option contract gives the holder the right to buy or sell the underlying shares at the specified price. They have an American style settlement. 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.

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Writer / seller of an option: The writer / seller 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. 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.

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 cash flow if it were exercised immediately. An option on the index is at-the-money when the current index equals the strike price (i.e. spot price = strike price).

Out-of-the-money option: An out-of-the-money (OTM) option is an option that would lead to a negative cash flow if it were exercised immediately. A call option on the index is out-of-the-money when the current index stands at a level which is less than the strike price (i.e. spot price < strike price). If the index is much lower than the strike price, the

38

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.

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.

European Option: When an option is allowed to exercise only on the maturity date, it is called a European Option. American Option: When an option can be exercised any time before its maturity is called an American Option. TABLE 1:

Business growth of futures and options market: NSE turnover (Rs.Cr)

AVERAGE YEAR INDEX FUTURES 2008-09 2007-08 2006-07 2005-06 2853615 3820667 2539574 1513755 STOCK FUTURES 2789329 7548563 3830967 2791697 INDEX OPTIONS 2672532 1362111 791906 338469 STOCK OPTIONS 164586.4 359136.6 193795 180253 TOTAL TURN OVER 8480063 13090478 7356242 4824174 DAILY TURN OVER 46087.3 52153.3 29543 19220

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2004-05 2003-04 2002-03 2001-02 2000-01

772147 554446 43952 21483 2365

1484056 1305939 286533 51515 -

121943 52816 9246 3765 -

168836 217207 100131 25163 -

2546982 2130610 439862 101926 2365

10107 8388 1752 410 11

Source: www.nseindia.com

TABLE 2:

Derivative instruments available for trade in India (NSE):

PRODUCT SPECIFICATIONS Underlying instrument Security descriptor Type Contract size Expiry day Price steps Trading cycle Base priceFirst day of trading Base priceSubsequent Price bands INDEX FUTURES
S&P CNX Nifty N FUTIDX NIFTY Lot size-100 Last Thursday of the expiry month Re-0.05 3 months Previous day closing Nifty value Daily settlement

STOCK FUTURES
Individual securities N FUTSTK As specified by

INDEX OPTIONS
S&P CNX Nifty N OPTIDX NIFTY European Lot size- 100 Last Thursday of the expiry month Re-0.05 3 months Theoretical value based on BlackScholes model Daily closing price Operating ranges are kept at 99% of the base price 20,000 units greater or

STOCK OPTIONS
Individual securities N OPTSTK American As specified by exchange Last Thursday of the expiry month Re-0.05 3 months Theoretical value based on BlackScholes model Daily closing price Operating ranges are kept at 99% of the base price Lower of 1% of market wide position limit stipulated for open positions or Rs-5 cr.

exchange Last Thursday of the expiry month Re-0.05 3 months Previous day closing value of underlying security Daily settlement

price Operating ranges are kept at +10 percent

price Operating ranges are kept at +20 percent

Quantity freeze

20,000 greater

units

or

Lower of 1% of market wide position limit stipulated for open positions or Rs-5 cr.

Settlement basis

MTM

&

final

MTM

&

final

Cash settlement on T+1 basis

Daily settlement on T+1 basis and final

settlement will be

settlement will be

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cash settled on T+1

cash settled on T+1 Basis Closing price for Premium value for daily settlement and the closing value of index on expiry day for final settlement

on T+3 Basis. Premium value for daily settlement and the closing value on expiry day for final settlement

Settlement price

Basis Closing

price

for

daily settlement and closing value on the expiry day for final settlement

daily settlement and closing value on the expiry day for final settlement

BSE also offers similar products in the derivatives segment.

6.1. STATEMENT OF THE PROBLEM:

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 locking in-asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of risk averse investors. Trading in F&O should be well organized approach for the purpose of which they are being used, be it to hedging or trading for profits. The study analyses the various strategies that can be used by traders and investors to get maximum returns in the derivatives market.The problem is to analyze the derivatives that are traded in India with respect to volatility of market to minimize the risk of the investor in the derivatives market

6.2OBJECTIVES:
To study financial derivatives as an investment alternative.

To suggest option strategy to maximize payoff of an investor.

To analyze various types of financial derivatives used by investors as an effective tools in managing risk.

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To analyse and recommend whether to buy stock at a reasonable price and position yourself for a big market move.

To suggest investors in the arena of financial derivatives market for managing risk especially in the current recession period.

6.3. RESEARCH METHODOLOGY

The type of research is selected on the basis of problems identified. Here the research type used is descriptive research. Descriptive research includes fact-findings and enquiries of different kinds. The major purpose of descriptive research is a description of the state of affairs, as it exists in the present system. In this project an attempt has been made to analyze various option strategies in the option market and how they help to hedge the risk.

6.3.1. DATA COLLECTION:

Secondary data: is collected through text books, websites, newspapers and company brochure, Nifty Spot Rate for the period of Dec 2008-Jan 2009

6.3.2. SAMPLING TECHNIQUE.

Tools of analysis: The research will be conducted by using the strategies of futures, forwards and options Bullish, Bearish and Neutral Strategies.

6.3.3. PLAN OF ANALYSIS:

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The study analyses the financial instruments that can be used by the traders and investors for hedging the risk involved in buying, holding and selling various kinds of financial assets in derivatives market with special focus on options.

6.4. LIMITATIONS OF THE STUDY:

The study is limited to investors of Sharekhan and its Employees. The strategies built are subject to Indian stock market risk and uncertain conditions. The findings and suggestions are based on existing trends in the secondary market. The strategy does not serve the purpose of suggesting a investor, if the investor change his risk bearing level.

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CHAPTER VII 7.1DATA ANALYSIS AND INTERPRETATION:

7.1.1. RISK MANAGEMENT WITH FORWARD CONTRACTS:

Forward contracts are perhaps the oldest and simplest tools for managing financial risk. A forward contract represents an agreement between two parties to exchange an asset for cash at a predetermined future date called the settlement date for a price that is specified today.

Illustration with current example:

The depreciation of the Indian rupee and a strong upward movement in international gold prices pushed the yellow metal to a record high of Rs-15,230/- per 10 grams as on Feb. 18 2009. As investors are increasingly parking their money in gold because of a melting stock market and erosion in the value of other financial asset classes, the market price of the gold tend to rise further. So investor can enter in to forward contract to buy gold at a price close to current market price say Rs-14,755/- per 10 grams to buy on Mar 2 2009. Now according to this agreement, investor have bought forward gold or in long forward gold. Whereas the gold dealer has sold forward gold or in short forward gold. No money or gold changes hand when the deal is signed. The forward contract only specifies the terms of a transaction that will occur in future.

On Mar 2 2009, the contract will be settled so that investor gets the gold at a price of Rs14,755/- per 10 grams. If market price of the gold is higher than the contract price, the investor gets the profit of the difference between the market and contract price or else undergoes loss if

44

the price is lower than market price. By entering into forward contract the investor can avoid the downside risk.

Suppose if the market price of the gold touches Rs-15,665/- as projected then investor gets a profit of Rs-910/- per 10 grams.

Risk management with forward contracts:

7.1.2. RISK MANAGEMENT WITH FUTURE CONTRACTS: When you buy a security, you have a choice. You can buy it in the spot market and get immediate delivery or you can buy it in the futures market and obtain deferred delivery on specified future payment. These differences between purchases in the spot market and futures market suggest the following relationship between the spot and futures prices. 45

Futures price (1+ Risk-free rate of interest) t

. =

spot price - PV of interest or dividend dividend payments foregone

Broadly there are two types of futures: Commodity futures (Cocoa, Cotton, Aluminum, Gold, Crude oil, Soya bean etc) Financial futures (Index futures, stock futures, debt instruments, foreign currencies, monetary Metals etc) Fig. Risk management with futures contract

The futures contract is entered by a margin deposit which is to be made to the clearing house by the parties as security of possible default risk in the form of 3 types of margins: 1) Initial margin (performance margin) - 5-25percent. 2) Maintenance margin (app. 75 percent of initial margin) 3) Variation margin (additional fund) - if fall below margin level, exchange issue margin call to deposit variation margin. 46

The future contracts are market-to-market (MTM) process.

Illustration with Current example: Contract size=10 grams Gold futures contract price Feb-2009- Rs-1368/Value of contract= 1368 x 10 = 13680/Initial margin = 10% (13680) = 1368/Maintenance margin= 75 %( 1368) = 1026/Suppose if the margin balance is Rs-4300/- and variation margin is Rs-130/Then; Profit = margin balance- margin deposit. =4300-(1368+130) =2802/Financial futures: The financial futures consist of index and stock futures. The strategy of futures contracts for managing a portfolio with a higher volatility than the market index to bring about a risk management is given as; No of futures required = value of portfolio to be hedged Value of one future contract Where beta = difference in the percentage change in the value of the portfolio being hedged and % change in the index value. X beta

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Illustration with current example; a) Short position: Consider the portfolio value is Rs- 60,000/- and nifty is 3046 on Jan 3, 2009. If the nifty down by 10%, then value of portfolio will be Rs-54,000/- and beta = 1.2 Sell 30 nifty futures @ Rs- 3046 per contract. Buy 30 nifty futures @ Rs- 2741 per contract. Gain= 305x30=Rs-9150/No. of futures required = 60,000 3046 = 24 no. b) Long position: (mutual funds) Investment scheme- Rs-50, 00,000/- and nifty- 3046 on jan3, 2009. Nifty futures needed= 50, 00,000 2000 Conclusion: The strategy is that for managing risk of the portfolio with a higher volatility than the market index, more futures contracts would be required to bring about a perfect hedge. = 2500 no. x 1.2

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7.1.3. RISK MANAGEMENT WITH OPTION CONTRACTS: DATE 16-DEC 17-DEC 18-DEC 19-DEC 20-DEC 23-DEC 24-DEC 25-DEC 28-DEC 30-DEC 31-DEC 01-JAN 02-JAN 03-JAN 06-JAN 07-JAN 08-JAN 10-JAN 13-JAN 15-JAN 16-JAN 17-JAN 49 NIFTY SPOT RATE 2981 3041 2984 3060 3077 3039 2968 2916 2857 2922 2979 2959 3033 3046 3121 3112 2920 2873 2773 2835 2736 2828

21-JAN 22-JAN 23-JAN 28-JAN 29-JAN 30-JAN

2796 2706 2713 2771 2849 2823

Table: Nifty Spot Rate for the period of Dec 2008-Jan 2009

The following strategies are analyzed for current market condition and hence forth proper guidance is given for the investor for managing the risk. 1) LONG CALL: Where the investor expects the price of the underlying stock to rise, the bought call can provide leveraged exposure to the price rise. Buying a call also locks in a maximum purchase When to use the long call Market outlook Bullish Volatility Rising outlook price for the life of the option.

Profits and losses The maximum loss the investor can suffer is the premium paid for the option, which will occur if the share price at expiry is below the strike price. The investor breaks even if at expiry the share price is equal to the strike price of the option plus the premium paid. As the share price rises beyond this point, the potential profits of the bought call are unlimited.

Current Example:

On 24th Dec 2008, Nifty is quoting at Rs-2968/- and the January- 2950/- (strike price) call costs Rs-80/- (premium). Buy Nifty call at 80/- Net outlay is Rs-4000/-. If the Nifty index does go up you can close your position either by selling the option back to the market or exercising your right to buy the underlying shares at the exercise price.

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Possible outcome at expiry Spot Rate = 3110 Spot Rate < 2950 Spot Rate > 3030 Option worth 4000. Closing the position now will produce a net profit of 4000 Option expires worthless. The loss is Rs-4000/- (premium) Net profit = intrinsic value of (Break even = 2950+80) option i.e. by whatever amount the share price exceeds 3030/-

Graph 2: Payoff diagram of Long Call

Profit

3110 3030(Break Even)

Loss 2950(Strike Price)

Analysis of Current Example: Date Spot Price 24/12/2008 2968 07/01/2009 3012

From Table 1 it is observed that after 7h January market never behaved as per our expectation. In order to minimize the loss it is better to exercise the option on 7th January, which will result in loss of (3012-2950-80) 50 = (900) Interpretation: Action 1 Action 2 If you excise the option 7th January your loss will be 900 If you do not excise the option your loss will be 4000

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Other considerations Time decay: Time decay works against the buyer of the call. If the expected share price rise does not take place soon after entering the position, time decay will start to erode the value of the option. Strike price: The investor will usually have a choice of strike prices, and must balance the cost of the option against the rise in share price required for the strategy to be successful. The out-ofthe money option will be the cheapest, but also requires the largest rise in share price. Many investors regard the at-the-money option as offering the best balance of risk and reward. Expiry month: A longer-term option allows more time for a rise in the share price to take place, but will be more expensive than a shorter-term option. The investor needs to form a view of the time frame over which the share price movement is expected to take place.

Follow-up action If the share price rise takes place as expected, the call option taker must decide whether to close out at a profit, or maintain the position in the hope of a further increase in price. The longer the option position is left open, the greater the effect of time decay. If the share price does not rise as expected, it is often advisable to close out the position in order to recover some time value from the position. If at expiry the option is in-the-money, the investor must choose whether to sell the option or exercise it. The choice will be determined by whether the investor wants to own the underlying shares.

2) LONG PUT: Where the investor expects the price of the underlying stock to fall, the bought put provides leveraged exposure to the price fall. Buying a put option is one of the few ways

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investors can speculate on a falling share price. Put options may also be used to protect an investor's holding in the underlying stock. When to use the long put Market outlook Profits losses The maximum loss the investor can suffer is the premium paid for the option, which will occur if the share price at expiry is above the strike price. The investor breaks even if at expiry the share price is equal to the strike price of the option less the premium paid. As the share price falls beyond this point, the potential profits of the bought put are limited only by a fall in the share price to zero. Example: Situation: An investor thinks Nifty on 6th Jan, currently trading at Rs-3121/-, is overvalued and may fall substantially. He therefore decides to buy Puts to gain exposure to its anticipated fall. Action: On 6th January buy Nifty 2850 Put at Rs-50/- for a total consideration of Rs -2500/-. Possible outcome at expiry
Spot Price 2750 Spot Price 2800 Spot Price >2850 The 2850 put will be trading at Rs 100/- which gives a profit of Rs 50 (100-50) 50 = 2500, if the position is closed out

Falling Rising

and

Volatility outlook

2850

Recover intrinsic value of premium The 2850 put will give loss of premium 50 50 = 2500

Graph 3: Payoff diagram of Long Put

2750 2800(Break Even) 2850 (Strike price)

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Analysis of Current Example: Date Spot Price 06/1/2009 3121 13/1/2009 2773 15/1/2009 2835

From Table 1 it is observed that after 6th January market behaved as per our expectation. In order to Maximize the profit it is better to excise the option on 13th January, which will result in profit of (2850-2773) 500 = Rs.1350/Interpretation: Action 1 Action 2 If you the excise the option 13th January your profit will be 1350 If you the excise the option 24th January your profit will be 750

Other considerations Time decay: Time decay works against the buyer of the put. If the expected share price fall does not take place soon after entering the position, time decay will start to erode the value of the option. Strike price: The investor must balance the cost of the option against the fall in share price required for the strategy to be successful. The out-of-the money option will be the cheapest but also requires the largest fall in share price. If the investor is buying a put to protect a shareholding, the cost of the option must be weighed up against the protection required. The in-the-money option locks in the highest sale price for the underlying shares, but also is the most expensive option. Follow-up action If the share price fall takes place as expected, the put option taker must decide whether to close out at a profit, or maintain the position in the hope of a further increase in price. The longer the option position is left open, the greater the effect of time decay. If the share price does not fall as expected, it is often advisable to close out the position in order to recover some time value from the position.

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At expiry, the holder of an in-the-money put option would usually close out the position, rather than exercising (unless they own the underlying shares). If the put has been bought to protect a shareholding, the investor must decide whether they want continue holding the stock, in which case the put would be sold, or sell the shares, in which case the option would be exercised. 3) SHORT CALL: Sellers expect a gradual fall in the market and lower volatility. The optimal strike (exercise price to sell) is dependent on one's expectation for the stock. The more bearish the lower strike exercise price should be in order the or When to use the short call Market outlook Volatility outlook Neutral to mildly bearish Falling

to maximize premium income.

Profits and losses Your maximum profit depends on the underlying stock closing at or below the strike price of the option. The potential for loss is unlimited which means it is dependant on how far the stock is above the exercise price at expiry. In practical terms the seller of the call may not be able to carry the position until expiry if they have insufficient margin to carry the unrealized loss in which case the client's broker will close the position early.

Example: Situation: The Nifty stock index are currently trading at 2857 on 28th Dec. Action: on 6th January Sell Nifty January 2850 at Rs-50/Possible outcome at expiry Spot Price = 2950 Spot Price < 2850 The put writer will incur loss of (2950-50-2850)50=2500 The option will not be exercised & investor keeps the

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Premium = 2500

Graph 4: Payoff diagram of Short Call

Profit

2850(Strike Price)

2900 (Break Even)

Loss Analysis of Current Example: Date Spot Price 28/12/2008 2857 10/1/2009 2873

2950

16/1/2009 2736

From Table 1 it is observed that after 28th Dec market behaved as per our expectation. In order to Maximize the profit it is better to excise the option on 16th January, which will result in profit of 50 50 =2500/Interpretation: Action 1 Action 2 If you the excise the option on 10th January your profit will be 1350 If you the excise the option on 24th January your profit will be 2500

Other considerations Time decay: Time decay works against the buyer of the put. If the expected share price fall does not take place soon after entering the position, time decay will start to erode the value of the option. Strike price: The investor must balance the cost of the option against the fall in share price required for the strategy to be successful. The out-of-the money option will be the cheapest but also requires the largest fall in share price.

56

If the investor is buying a put to protect a shareholding, the cost of the option must be weighed up against the protection required. The in-the-money option locks in the highest sale price for the underlying shares, but also is the most expensive option. Follow-up action If the share price fall takes place as expected, the put option taker must decide whether to close out at a profit, or maintain the position in the hope of a further increase in price. The longer the option position is left open, the greater the effect of time decay. If the share price does not fall as expected, it is often advisable to close out the position in order to recover some time value from the position. At expiry, the holder of an in-the-money put option would usually close out the position, rather than exercising (unless they own the underlying shares). If the put has been bought to protect a shareholding, the investor must decide whether they want continue holding the stock, in which case the put would be sold, or sell the shares, in which case the option would be exercised. 4) SHORT PUT: The written put can provide the investor with extra income in flat to rising markets. It can also be used as a way to buy stock cheaply. This strategy is generally used when the investor expects the share price to remain steady or increase slightly over the life of the option. When to use the short put Market outlook Volatility outlook Profits and losses The maximum profit the investor can make is the premium received for writing the option, which will occur if the share price at expiry is above the strike price. The investor breaks even if at expiry the share price is equal to the strike price of the option less the premium paid. As the share price falls beyond this point, the potential losses of the sold put are limited only by a fall in the share price to zero. If the investor does not close out an in-the-money put before expiry, the option will be exercised and the investor will be required to buy the underlying stock at the strike price of the option. Neutral to mildly bullish Falling

57

Example: Situation: The Nifty stock index are currently trading at 2736 on 16th January Action: on 16th January Sell Nifty Jan 2750 put at Rs-90/-

Possible outcome at expiry Spot Price =2750 Spot Price >2930 The put writer will incur loss of (2930-90-2750) 50 = 4500 The option will not be exercised & investor keeps the Premium = 4500

Graph 5: Payoff diagram of Short Put

Profit

2840 (Break Even)

2930(Strike Price)

Loss

2750

Analysis of Current Example: Date Spot Price 16/1/2009 2736 21/1/2009 2796

From Table 1 it is observed that after 16th January market behaved as per our expectation. In order to Maximize the profit it is better to excise the option on 21st Jan, which will result in profit of 90 50 = Rs.4500/-

Interpretation: Action 1 If you the excise the option 21st January your profit will be 4500

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Other considerations Cheap stock: Many investors write put options as a way of buying stock cheaply. If the share price falls and the option is exercised, the purchase price is effectively the strike price of the option less the premium received - which is less then the price of the stock at the time of writing the option. If the share price at expiry is above the strike price, the option will expire worthless. The investor does not get to buy the stock, but has benefited from the receipt of the premium. Time decay: Time decay works in favor of the put writer. If the stock price stays steady, the atthe-money option will deliver the most profit to the put writer, as this is the option with the most time value. Exercise: The put writer must be wary of early exercise. A put option is generally more likely than a call option to be exercised early.

Follow-up action If at expiry the stock is trading below the strike price; the put writer will be exercised unless the position has been closed out. As expiry approaches, the investor should consider buying back the put if they do not want to own the stock. Alternatively, the investor could roll the option position to a later month and possibly a different strike price.

5) BULL SPREAD: If the investor is not bullish enough to buy a call outright but expects the share price to rise moderately, the bull spread is a lower cost way to gain exposure to such a market movement. The strategy consists of the purchase of a call option and the sale of a call option with a higher strike price. When to use the bull spread Market outlook Volatility outlook moderately bullish steady to increasing 59

a. Bull call spread Example: Situation: On 2nd January, the spot price of Nifty is 3033. Buy 1 Nifty January 3000 call option at Rs-30/- and sell 1 January 3050 call at Rs-05/-. Total outlay and maximum loss is 5250. Break even is Rs-3130/- (3000+130). Maximum profit is (3050-3000-25) 50 =1250/-.

Possible out come at expiry Spot price < 3000 Both the 3000 and 3050 calls are worthless and the maximum loss is equal to the net cost of establishing the spread i.e. Rs-1250/The 3000 call gains intrinsic value and profit is equal to the intrinsic value of the 3000 calls less the net debit of Rs-25. Maximum profit is therefore realized at 3050, the point just before which the 3050 calls may be exercised. The position can be closed for a maximum profit of Rs-25 above 3050 i.e. difference in intrinsic value of two calls less than net debit (50-25).

Spot Price 3000-3050

Spot price >3050

Graph 6: Payoff Diagram of Bull Spread

Profit

3050

3025(Break Even) Loss 3000

Analysis of Current Example: Date Spot Price 02/1/2009 3033 07/1/2009 3112 60

From Table 1 it is observed that after 2nd January market behaved as per our expectation. In order to Maximize the profit it is better to exercise the option on 7th January, which will result in profit of (3050-3000-25) 50 = Rs.1250

Interpretation: Action 1 If you the excise the option 7th January your profit will be 1250

b. Bull Put Spread The bull spread can be constructed using puts instead of calls. As with the call spread, the investor buys the lower strike option and sells the higher strike option. The investor may decide to construct the spread in this way if the options are perceived to be overpriced. Since entering the put spread involves selling volatility, the higher option premiums will benefit the trader. In contrast, they make the call spread more expensive to enter.

The bull put spread can also be viewed as writing a put with protection in place against a collapse in the market. In this case, the written put may be close to being at-the-money, with the taken put out-of-the-money The maximum profit from the bull put spread is the premium received when the spread is established. The maximum loss is the difference between the strike prices less the premium received. Profit and Losses While the short call reduces the risk inherent in taking an outright call it also limits the profits that can be made. The maximum profit obtainable is the difference between the strike prices of the two options, less the cost of the spread. Maximum profit will occur if, at expiry, the share price is at, or above, the strike price of the sold option. If the stock rises quickly to this level, the spread will often be unwound early in order to avoid the risk of early exercise on the short leg. The higher delta of the long call means that the spread will increase in value as the share price rises. The maximum loss possible is the cost of the spread and will be incurred when the share price is at or below the strike price of the bought option at expiry. 61

Other considerations Limited risk/limited reward: The bull spread is a cheaper strategy than simply buying a call option. As a result, the profit potential is also reduced. Cost of strategy: The investor must be satisfied that the cost of the spread is worth the potential reward. Commission costs on entering and exiting will be greater for this strategy than when buying a call outright. Follow-up action If the stock unexpectedly rises sharply, it may be advisable to exit the strategy once the upper strike price is reached. Although time value is helpful around the strike price of the short leg, unwinding the strategy early removes the risk of exercise on the short call. If the stock price falls suddenly, the spread may be unwound before the taken call loses too much time value. 6) BEAR SPREAD: The bear spread can be considered when the investor expects a moderate fall in the market but is not prepared to pay to take a put outright. The strategy consists of the purchase of a put option and the sale of a put option with a lower strike price. When to use the bear spread Market outlook Volatility outlook moderately bearish steady to increasing

Profits and losses As with the bull spread, the written leg of this strategy serves to reduce the cost of entering the position. However it also caps the profits that can be earned. The maximum profit to be earned is the difference between the strike prices of the two options, less the cost of the spread. If, at expiry, the share price has fallen to the strike price of the sold option, the maximum profit will be earned. If the stock declines to these levels, the trader may well choose to unwind the 62

spread early, in order to avoid the possibility of excise on the short leg. The maximum potential loss is the cost of the spread. This will occur if, at expiry, the share price is above the exercise price of the bought option.

Possible outcome at expiry. spot price > Rs-2750 spot price 2750-2700 spot price 2700 Both puts are worthless and the maximum loss is equal to the net cost of establishing the spread i.e. Rs-200 The position can be closed out for the intrinsic value of the Rs-2750 put. The maximum potential profit of Rs200 is realized just before the level at which the 2700 put may be exercised by the holder The position can be closed for the difference in the intrinsic value of two puts, so the profit is (2750-2700-4) 50 = 2300

spot price <2700

a. Bear Put spread A bear put spread involves the purchase and sale of puts at different exercised price but with the same expiry date. The purchase puts have higher exercise price than those written. Situation: On 13th January spot rate of Nifty is trading at 2773. You buy 1 Nifty January 2750 put at RS-90/- and sell 1 Nifty 2700 put at Rs-86/-. Maximum profit and maximum loss Rs-200/Graph 7: Payoff diagram of Bear Spread

Profit

2700

2704 (Break Even) Loss 2750

Analysis of Current Example: Date 16/1/2009 21/1/2009 22/1/2009

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Spot Price

2736

2796

2706

From Table 1 it is observed that after 16th January market behaved as per our expectation. In order to Maximize the profit it is better to excise the option on 22nd January, which will result in profit of (2750-2700-4) 50 = Rs.2300 Interpretation: Action 1 Action 2 If you the excise the option 22nd January your profit will be 2300 If you the excise the option 21st January your loss will be 2300

b. Bear call spread The bear spread can be constructed using calls instead of puts. As with the put spread, the trader buys the higher strike option and sells the lower strike option. The trader may decide to use calls instead of puts in order to take advantage of options that are viewed as overpriced. Since the trader is selling the spread, the receipt of higher premiums is a benefit. There may also be greater liquidity in calls than puts, giving greater flexibility when entering and exiting the spread. The maximum profit available is the value of the premium received. The maximum loss is the difference between the strike prices less the premium received. The bear call spread can be seen as writing a call with protection against an unexpected rise in the market. In this instance, the trader may write a call around the money, and take a call out-of-the-money, which effectively provides a ceiling to the potential loss if the market should rise.

Other considerations Limited risk/limited reward: The bear spread costs less to place than the outright purchase of a put option. As a result, the potential for profit is also reduced. Cost of strategy: The investor must be satisfied that the cost of the spread is justified by the potential reward. Commission costs on entering and exiting can significantly reduce profitability. Follow-up action 64

If the stock unexpectedly falls sharply, it may be advisable to exit the strategy once the lower strike price is reached. Time decay will benefit the spread around the lower strike price; however the trader will usually be more concerned with avoiding exercise on the short leg. If the stock price rises suddenly, the spread may be unwound before the taken put loses too much time value.

CHAPTER VIII SUMMARY OF FINDINGS:

Though forwards are not traded in the organized exchange, they are used as risk management tools in an unorganized market especially in the commodities market without any formal procedure. The futures are used as an effective risk management tools in the organized stock markets as well as commodities market. The strategy is that for managing risk of the portfolio with a higher volatility than the market index, more futures contracts would be required to bring about a perfect hedge.

FOR OPTIONS STRATEGIES:

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 In Long Call, the maximum loss the investor can suffer is the premium paid for the option, which will occur if the share price at expiry is below the strike price. The investor breaks even if at expiry the share price is equal to the strike price of the option plus the premium paid. As the share price rises beyond this point, the potential profits of the bought call are unlimited. In Long Put, the maximum loss the investor can suffer is the premium paid for the option, which will occur if the share price at expiry is above the strike price. The investor breaks even if at expiry the share price is equal to the strike price of the option less the premium paid. As the share price falls beyond this point. In Short Call, the maximum profit depends on the underlying stock closing at or below the strike price of the option and will be limited premium received. The potential for loss is unlimited which means it is dependant on how far the stock is above the exercise price at expiry.

In Short put, the maximum profit the investor can make is the premium received for writing the option, which will occur if the share price at expiry is above the strike price. The investor breaks even if at expiry the share price is equal to the strike price of the option less the premium paid. As the share price falls beyond this point, the potential losses of the sold put are unlimited. In Bull Spread, the maximum profit obtainable is the difference between the strike prices of the two options, less the cost of the spread. The maximum loss possible is the cost of the spread and will be incurred when the share price is at or below the strike price of the bought option at expiry. In Bear Spread, the maximum profit to be earned is the difference between the strike prices of the two options, less the cost of the spread. If, at expiry, the share price has fallen to the strike price of the sold option, the maximum profit will be earned. The maximum potential loss is the cost of the spread. This will occur if, at expiry, the share price is above the exercise price of the bought option.

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SUGGESTIONS:
In todays world, managing risk is a daunting task. In coping with this challenge the following inter-related suggestions need to be borne in mind. Align risk management with strategy. Proactively manage uncertainties. Employ a mix of real and financial methods. Know the limits of risk management tools. Learn when it is worth reducing risk.

For Option strategies:

The Long Call strategy is generally used when you expect the share price to rise, and volatility to increase. Be realistic in selecting a strike price - the out-of-the-money option will be cheapest, but also requires a large move in the share price for the Long Call strategy to be profitable.

In case of Long Call, if the share price does not rise as expected, it is often advisable to close out the position in order to recover some time value from the position.

The Long Put strategy is generally used when you expect the share price to fall, and volatility to increase.

In case of Long Put, if the share price fall takes place as expected, the put option taker must decide whether to close out at a profit, or maintain the position in the hope of a further increase in price. The longer the option position is left open, the greater the effect of time decay.

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 As a shareholder, it is not practical to have protection in place 12 months of the year. This Long Put strategy is suitable for shorter periods when you fear a market downturn.

The Short Call strategy is generally used when sellers expect a gradual fall in the market and lower volatility. The Short Put strategy is generally used when the investor expects the share price to remain steady or increase slightly over the life of the option. If at expiry the stock is trading below the strike price, the put writer will be exercised unless the position has been closed out. In case of Short Call as expiry approaches, the investor should consider buying back the put if they do not want to own the stock. Alternatively, the investor could roll the option position to a later month and possibly a different strike price.

The Bull Spread strategy is generally used when an investor is expecting a limited rise in the price of the stock. While using Bull Spread, be sure that the cost of the spread is justified by the potential reward.

The Bear Spread strategy is generally used when the investor expects a moderate fall in the market but is not prepared to pay to take a put outright. While using Bear Spread, be sure that the cost of the spread is justified by the potential reward.

In Bear Spread, if the stock unexpectedly falls sharply, it may be advisable to exit the strategy once the lower strike price is reached. In Bear Spread, if the stock price rises suddenly, the spread may be unwound before the taken put loses too much time value. alternative is to vary the break-even points of the strategy by rolling one of the legs up or down, thereby maintaining the strangle.

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 Since of the potential for unlimited losses, be sure that the premium received is worthy of the risk taken. Use the short strangle over the short straddle if you have any doubts about the market's neutrality.

CONCLUSIONS
By analyzing all these strategies we can conclude that during bullish market outlook Long Call, Short Put, Bull Spread and Long Strangle strategies are suitable to use. The Long Put, Short Call and Bear Spread are best suited during bearish market condition. When you expect market to be neutral for few forth coming days, it is better to hold on to Short put strategies. When uncertainty about market is more it is wise to use strategies. While using any option strategy it is also required to consider factors like Strike price, Time decay, Cost of strategy and volatility. It is necessary to ensure that cost of strategy must be justified by the potential reward. To summarize the role of regulation is the cushion and help other market monitoring mechanism such as competition or reputation to maintain a fair and orderly financial markets in which innovation is encouraged. Its objective is thus to support and encourage all the necessary structural changes in the products or institutions architecture that allows market participants to increase the benefits extract from the economic functions of derivatives at controlled risk levels. Thus, one could view the role of regulation as that of a player of last resort that guarantees that 69

the economic benefits associated to the derivative trading activity remains on the efficient .risk/return frontier.

ANNEXURE
BALANCE SHEET Mar ' 09 66.29 1,500.16 25.00 356.19 0.00 0.00 1947.64 3.73 0.00 Mar ' 08 66.08 0.00 0.00 305.24 0.00 75.40 446.72 0.56 0.00 Mar ' 07 54.40 0.00 0.00 200.89 0.00 3.50 258.79 0.01 0.00

Equity Share Capital Share Application Money Preference Share Capital Reserves & Surplus Secured Loans Unsecured Loans Total Gross Block Less : Revaluation Reserve

70

Less : Accumulated Depreciation

0.36

0.05

0.00

Net Block Capital Work-in-progress Investments Current Assets, Loans & Advances Less : Current Liabilities & Provisions

3.37 0.01 600.23 554.81

0.51 0.07 400.28 21.42

0.01 0.00 253.81 7.53

9. 5

10.57

5.56

Total Net Current Assets Miscellaneous expenses not written Total Book Value of Unquoted Investments

545.31 0.00

10.86 0.00

1.97 0.00

1947.64 850.74

446.72 339.99

291.79 185.80

Market Value of Quoted Investments Contingent liabilities Number of Equity shares outstanding (in Lacs)

15.28

30.87

25.78

685.01 682.90

120.03 550.84

60.00 445.97

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BIBLIOGRAPHY
1. Donald R Cooper & Pamela S Schindler, Business Research Methods, Tata McGraw Hill, 8th Edition 2. N.D.Vohra & B.R.Bagri, Future and Options, Tata Mcgraw Hill, 3rd Edition. 3. Prasanna Chandra, Security Analysis and Portfolio Management, Tata McGraw Hill, 3rd Edition. 4. NCFM study material Derivative Module.

5. www.bseindia.com 6. www.nseindia.com 7. www.sharekhan.com 8. www.strike-price-options.com

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9. www.wikipedia.com

List of abbreviations used.

1. NSDL - NATIONAL SECURITIES DEPOSITORY LIMITED 2. CSDL - CENTRAL SECURITIES DEPOSITORY LIMITED 3. NSE - NATIONAL STOCK EXCHANGE 4. BSE - BOMBAY STOCK EXCHANGE 5. BOLT - BOMBAY ONLINE TRADING SYSTEM 6. NEAT - NATIONAL EXCHANGE FOR AUTOMATED TRADING 7. LEAPS - LONG TERM EQUITY ANTICIPATION SECURITIES 8. S&P CNX nifty - STANDARD AND POORS CRISIL NSE EXCHANGE 50 9. MTM - MARK TO MARKET 10. N FUTSTK - NSE FUTURE STOCKS 11. N FUTIDX NIFTY - NSE FUTURE INDEX 50 12. N OPTIDX NIFTY - NSE OPTIONS INDEX 50 13. N OPTSTK - NSE OPTIONS STOCK 14. MCX - MULTI COMMODITY EXCHANGE 15. NCDEX - NATIONAL COMMODITY AND DERIVATIES EXCHANGE 16. SEBI SECURITIES EXCHANGE BOARD OF INDIA

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