PROJECT REPORT

ON

“HNI Clients and their Financial Awareness about Futures &

Option”

TOWARDS FULFILLMENT FOR THE

POST GRADUATE DEGREE IN

MASTER OF MANAGEMENT STUDIES (MMS)

AS PER
UNIVERSITY OF MUMBAI

SUBMITTED BY

KHAN AHRAR HASAN ALI HASAN

(FINANCE)
2017 – 2019

KOHINOOR BUSINESS SCHOOL

KURLA, MUMBAI.

1
 DECLARATION

I, Mr Khan Ahrar Hasan Ali Hasan, hereby declare that this project entitled “HNI
Clients and their Financial Awareness about Futures & Option” is an outcome
of my own efforts under the guidance of Prof. Nilesh Ubale. The project is
submitted to KOHINOOR BUSINESS SCHOOL for the partial fulfilment of the
Master of Management Studies (MMS), University of Mumbai.

Date: Signature: _______

Place: Mumbai

2
 CERTIFICATE

This is to certify that Khan Ahrar Hasan Ali Hasan of Kohinoor Business School
has successfully completed the project work titled “HNI Clients and their
Financial Awareness about Futures & Option” in partial fulfilment of
requirement for the completion MMS as prescribed by the University of Mumbai.

This project report is the record of authentic work carried out by him during
the month of March 2019.

He has worked under my guidance.

Date:
Place: Mumbai Prof. Nilesh Ubale

3
 ACKNOWLEDGEMENT

It gives me a great pleasure to present my project on “HNI Clients and

their Financial Awareness about Futures & Option”. I am very
thankful to my project guide Prof. Nilesh Ubale, who always helped me
to complete my project with his support & motivation.

I also thank to our Head of Department Dr. Bharti Deshpande who

gave me the ideas & suggestions for various books related to my project
& helped me in completion of my project.

I also would like to thank our library staff who supported me by giving
various book related to my project and to help me in completion of
project.

4
 PREFACE

Today India has become a “globalize country”. The process of globalization has
very highly affected. Corporate world of both, India and exotic corporate world
means today’s neoteric business world. This corporate world plays a decisive
role in globalization.

This corporate world is now becoming more and more competitive. Regarding
this competition business houses need more professionalized people for their
managerial work. Highly professionalized people come from business school.
Business school offers training for all business aspects.

Theoretical knowledge is not enough. After study student has to go practical

world. At that time they have difficulty in practical works. This MBA program
provides an opportunity for this type of practical knowledge.

The rationale behind visiting the company and preparing the Project Report is to
study the Financial Awareness of HNI clients in F & O

5
 Executive Summary

New ideas and innovations have always been the hallmark progress made by
mankind. At every stage of development, there have been two core factors
that drive man to ideas to innovations. These are increasing returns and
decreasing risk.
The financial markets are no different. The endeavour has been always to
maximize returns and minimize risk. A lot of goes in to developing financial
products centred on those two factors.
Derivatives are among the forefront of the innovations in the financial markets
and aim to increase returns and reduce risk. They provide an outlet for
investors to protect themselves from the vagaries of the financial markets.
These instruments have become very popular with investors all over the
world.
Now, investors are more cautions before investing their money into any
derivative segment as they fear loses. From this research I would say, there
are only few HNI investors who are willing to invest in derivatives market as
it carries Lack of knowledge and difficulty in understanding and an element
of risk and uncertainty with it.
Other than that the real servicing come when one moves ahead. I have done
primary data analysis i.e. study of investment pattern of HNI clients among
derivatives and the conclusion says that most of the HNI clients are not willing
to participate in the derivative market because it is difficult for them to
understand and they consider it as a highly risky. Also during the survey,
findings showed that HNIs are optimistic that market condition will improve
soon and they also thought this is right time to invest as prices are at all times
low.
The study has been done to know the different types of derivatives and also to
know the derivative market in India.

6
 INDEX

Sr. No. Particulars Page No.

Part-I GENERAL INFORMATION
1 About the Industry 8

2 Introduction of the Subject

1 What is Derivative? 11
2 Types & Products 16
3 Myths & Realities about Derivatives 17
4 Why FII is crucial for the F & O market? 17

PART-II PRIMARY STUDY

4 Introduction of the Study
1 Problem Statement 19
2 Importance of the Study 19
3 Objective of the Study 19
5 Data Analysis and Interpretation 20
6 Results and Findings 38
7 Limitations of the Study 38
8 Conclusion 39
9 Suggestions & Annexure 40 & 41

7
 Part-I GENERAL INFORMATION
(1) ABOUT THE INDUSTRY

A stock market is a primarily a virtual exchange of securities (that is, shares

and debentures, which companies use as a means of raising finance) and
derivatives (i.e. virtual instruments such as contracts that relate to assets and
securities and can be traded). It is virtual in the sense that the market is an
intangible concept, rather than a physical place, and as a result of advancing
technologies traders can now get involved with little more than a laptop or
mobile phone. The market brings together a range of traders of all shapes and
sizes - from small, one-man bands trading for their own personal gains
through to hedge funds managing billions in assets, and everything in
between.

Stock markets list the securities of publicly traded companies. As distinct

from a regular limited company ('Ltd.'), Shares can change hands several
times on a daily basis, and at insignificant levels the company is unconcerned
with who owns those shares.

8
Shares themselves are intangible assets, entitling the bearer to an annual
payment known as a 'dividend', paid out of distributable profits, and often
corresponding voting rights in proportion to the size of the share held at the
AGM, where major strategic decisions such as electing the board are put to
the vote. The bearer of a share at any given point is in effect a part owner of
the business to which those shares pertain, and it is this aspect that gives a
share any underlying value.
The price of a share at any given stage is dictated by supply and demand
within the market, and rises or falls every time a share is bought or sold. This
effectively means that shares are priced by the collective will and attitudes of
the market, comprised of all the traders and investment houses that actively
trade in those securities.

Stock markets generally trade over a set duration of hours, usually reflecting
the working day in their particular region, allowing the zealous trader to trade
different markets round the clock - from London to New York to Tokyo -
while affording those companies so listed to raise capital in the form of initial
share issues to the market. As a result, the markets operate on a slick basis
almost around the clock, bringing together buyers and sellers of securities and
giving businesses and governments a free, unadulterated bellwether for the
economic and commercial outlook of a given sector, industry or economy.

In essence, that's the foundation of what a stock market is, and it's by no means
a comprehensive study. Getting to know the markets requires lengthy research
and an understanding of business, economics, law and politics. Yet for those
that do get to grips with how the markets operate, the allure of trading profits
is sufficient rewards for all their hard work.

List of Stock exchanges in India:

Mumbai Stock Exchange

Ahmedabad Stock exchange Association Ltd.
Bangalore Stock Exchange Ltd.
Metal Commodity Exchange
Calcutta Stock Exchange Association Ltd.
Cochin Stock Exchange Ltd.
Delhi Stock Exchange Association Ltd.
Guwahati Stock Exchange Ltd.
Hyderabad Stock Exchange Ltd.
Jaipur Stock Exchange Ltd.
Kanara Stock Exchange Ltd.

9
Ludhiana Stock Exchange Association Ltd.
Madras stock Exchange Ltd.
Madhya Pradesh Stock Exchange Ltd.
Magadh Stock Exchange Ltd.
Mangalore Stock Exchange Ltd.
Pune Stock Exchange Ltd.
Saurashtra Kutch Stock Exchange Ltd.
Uttar Pradesh Stock Exchange Association Ltd.
Vadodara Stock Exchange Ltd.
Coimbatore Stock Exchange
Meerut Stock Exchange Ltd.
Over The Counter (OTC) Exchange of India
National Stock Exchange of India

10
 (2) INTRODUCTION OF THE SUBJECT

(1) What is Derivative?

The term “Derivative” is used to refer to financial instruments which
derived their value from underlying assets. The underlying assets could
be equities (shares), debt (bonds, T-bills and notes), currencies and
indices of these various assets, such as the Nifty 50 index. Derivatives
derive their names from their respective underlying assets. Thus, if a
derivative’s underlying assets is equity, it is called equity derivative and
so on.
Derivatives can be traded either on a regulated exchange, such as the
NSE or off the exchanges, i.e. directly between parties, which is called
“over-the-counter” (OTC) trading. The basic purpose of derivatives is
to transfer the price risk from one party to another; they facilitate the
allocation of risk to those who are willing to take it. In so doing,
derivatives help mitigate the risk arising from the future uncertainty of
prices.

There are various types of derivatives traded across the world. They
range from the very simple to the most complex products. The
following are the three basic forms of derivatives.
Forward
Future
Option

11
 Forward
A forward contract or simply a forward is a contract between two parties to
buy or sell an asset at a certain future date for a certain price that is pre -
decided on the date of contract. The future date is referred to as expiry date
and the pre-decided price is referred to as Forward Price.
A forward is thus an agreement between two parties in which one party, the
buyer, enters into an agreement with the other party, the seller that he would
buy from the seller an underlying asset on the expiry date at the forward price.
Therefore, it is a commitment by both the parties to engage in a transaction at
a later date with the price set in advance. This is different from a spot market
contract, which involves immediate payment and immediate transfer of asset.
The party that agrees to buy the asset on a future date is referred to as a long
investor and is said to have a long position. Similarly the party that agrees to
sell the asset in a future date is referred to as a short investor and is said to
have a short position. The price agreed upon is called the delivery price or the
Forward Price.
Forward contracts are traded only in Over the Counter (OTC) market and not
in stock exchanges. OTC market is a private market where
individuals/institutions can trade through negotiations on a one to one basis.

Settlement of forward contracts

When a forward contract expires, there are two alternate arrangements

possible to settle the obligation of the parties: physical settlement and cash
settlement. Both types of settlements happen on the expiry date.

Default risk in forward contracts

A drawback of forward contracts is that they are subject to default risk.

Regardless of whether the contract is for physical or cash settlement, there
exists a potential for one party to default, i.e. not honor the contract. It could
be either the buyer or the seller. This results in the other party suffering a loss.
This risk of making losses due to any of the two parties defaulting is known
as counter party risk. The main reason behind such risk is the absence of any
mediator between the parties, who could have undertaken the task of ensuring
that both the parties Fulfill their obligations arising out of the contract. Default
risk is also referred to as counter party risk or credit risk.

12
 Future
Like a forward contract, a futures contract is an agreement between two
parties in which the buyer agrees to buy an underlying asset from the seller,
at a future date at a price that is agreed upon today. However, unlike a
forward contract, a futures contract is not a private transaction but gets
traded on a recognized stock exchange. In addition, a futures contract is
standardized by the exchange. All the terms, other than the price, are set by
the stock exchange (rather than by individual parties as in the case of a
forward contract). Also, both buyer and seller of the futures contracts are
protected against the counter party risk by an Entity called the Clearing
Corporation.

Difference between Forwards & Futures

Forward Future
Privately negotiated contracts Traded on an exchange
Not standardized Standardized contracts
Settlement dates can be set by the Fixed settlement dates as declared
parties by the exchange
High counter party risk Almost no counter party risk

13
 Options
Like forwards and futures, options are derivative instruments that provide the
opportunity to buy or sell an underlying asset on a future date.

An option is a derivative contract between a buyer and a seller, where one party
(say First Party) gives to the other (say Second Party) the right, but not the
obligation, to buy from (or sell to) the First Party the underlying asset on or
before a specific day at an agreed-upon price. In return for granting the option,
the party granting the option collects a payment from the other party. This
payment collected is called the “premium” or price of the option.
The right to buy or sell is held by the “option buyer” (also called the option
holder); the party granting the right is the “option seller” or “option writer”.
Unlike forwards and futures contracts, options require a cash payment (called
the premium) upfront from the option buyer to the option seller. This payment
is called option premium or option price. Options can be traded either on the
stock exchange or in over the counter (OTC) markets. Options traded on the
exchanges are backed by the Clearing Corporation thereby minimizing the risk
arising due to default by the counter parties involved. Options traded in the
OTC market however are not backed by the Clearing Corporation.

There are two types of options

call options and
put options

Call Options
A call option is an option granting the right to the buyer of the
option to buy the underlying asset on a specific day at an agreed
upon price, but not the obligation to do so. It is the seller who
grants this right to the buyer of the option. It may be noted that the
person who has the right to buy the underlying asset is known as
the “buyer of the call option”. The price at which the buyer has the
right to buy the asset is agreed upon at the time of entering the
contract. This price is known as the strike price of the contract (call
option strike price in this case).

Since the buyer of the call option has the right (but no obligation)
to buy the underlying asset, he will exercise his right to buy the
underlying asset if and only if the price of the underlying asset in
the market is more than the strike price on or before the expiry date

14
 of the contract. The buyer of the call option does not have an
obligation to buy if he does not want to.

Put Options

A put option is a contract granting the right to the buyer of the option
to sell the underlying asset on or before a specific day at an agreed upon
price, but not the obligation to do so. It is the seller who grants this right
to the buyer of the option. The person who has the right to sell the
underlying asset is known as the “buyer of the put option”. The price at
which the buyer has the right to sell the asset is agreed upon at the time
of entering the contract. This price is known as the strike price of the
contract (put option strike price in this case).

Since the buyer of the put option has the right (but not the obligation)
to sell the underlying asset, he will exercise his right to sell the
underlying asset if and only if the price of the underlying asset in the
market is less than the strike price on or before the expiry date of the
contract. The buyer of the put option does not have the obligation to
sell if he does not want to

Difference between Futures & Options

Futures Options
Both the buyer and the seller are The buyer of the option has the right
under an obligation to fulfill the and not an obligation whereas the
contract. seller is under obligation to fulfill the
contract if and when the buyer
exercises his right.
The buyer and the seller are The seller is subjected to unlimited
subject to unlimited risk of risk of losing whereas the buyer has
loss. limited potential to lose (which is the
option premium).
The buyer and the seller have The buyer has potential to make
potential to make unlimited gain unlimited gain while the seller has a
or loss. potential to make unlimited gain. On
the other hand the buyer has a
limited loss potential and the seller
has an unlimited loss potential.
19

15
(2) Types of Products

Index Futures
A futures contract is a standardized contract to buy or sell a specific
security at a future date at an agreed price. An Index future, as the name
suggests, a future on the index i.e. underlying is the index itself. There
is no underlying security or a stock, which is to be delivered to fulfill
the obligations as index futures are cash settled. As other derivatives,
the contract derived its value from underlying index. The underlying
indices in this case will be the various eligible indices and as permitted
by the Regulator from time to time.

Index Options
Options contract gives its holder right, but not the obligation to buy or
sell something on or before a specified date at a stated price.
Generally Index options are European style. European style means
those option contracts that can be exercised only on the expiration
date. The underlying indices for index options are various eligible
indices and as permitted by the Regulator from time to time.

Stock Futures
A stock future contract is a standardized contract to buy or sell a
specific stock at a future date at an agreed price. A stock future is, as the
name suggests, a future on a stock i.e. underlying is a stock. The contract
derives its value from the underlying stock. Single stock futures are cash
settled.

Stock Options
Options on individual stocks are options contracts where the
underlying are individual stocks. Based on eligible criteria and subject to
the approval from the regulator, stocks are selected on which options are
introduced. These contracts are cash settled and are American style.
American Style options are those options contracts that can be exercised
on or before the expiry date.

16
(3) Myths & Realities about Derivatives

In less than three decades of their coming in to vogue, derivatives markets

have become the most important market in the world.
Today Derivatives have become the part and parcel of the day-to-day life for
ordinary people in major parts of the world. While, this is true for many
countries, there are still apprehensions about the introduction of derivatives.
There are many myths for derivatives but the realities are different especially
for the exchange traded derivatives, which are well regulated with all the
safety mechanisms in place.
What are these myths behind this derivative?
Derivatives increase speculation and do not serve any economic
purpose.
Indian market is not ready for Derivative trading.
Disasters are proved that Derivatives are very risky and highly
leveraged instruments.
Derivatives are very complex and exotic instruments that Indian
investors find difficulty in understanding.

(4) Why FII play is crucial for the F & O Market?

The foreign institutional investors (FIIs) play in the futures & options (F&O)
segment is crucial for Indian markets, including in terms of setting the short -
term trend. Until February, their share was on the rise, accounting for a third
of daily contracts (index and stock futures and options) traded on the NSE.
Notably, since it has been proved decisive in the last couple of years to predict
the undercurrent of the market, many traders and investors track it keenly.

According to an expert, “F&O trades have become lead indicators for the
market as they are interested in returns month on month. Apart from looking
at leverage levels, traders also see when FIIs are long with huge positions, as
any small negative news leads to unwinding and vice versa. Unwinding of
long positions in F&O also puts pressure on the cash market even if there is
no actual selling happening in a big way.” That apart, FIIs’ play in derivatives
also leads to arbitrage in the cash market.

Among key reasons for the rise in FII activity in the F&O segment are the
higher returns. Expert says, FIIs are mostly based out at Europe and the US,
see lucrative opportunities. The F&O segment has given returns of around
eight per cent, going by the premiums prevailing in the derivatives segment,
over the cash market. “These returns are substantially higher from their home
17
market fixed income returns. There are several such FIIs interested only in
derivative deals,”

Apart from higher returns, the rise in FII activity in F&O segment is also
partly due to the depth in the cash segment, which is not big enough to absorb
high volumes. Thus, FIIs, with strong back-up of significant holding in most
index heavyweights from banking, software and automobiles sectors, have
raised their play in the F&O segment rather than buying heavyweights in the
cash market.
Had it not been for the higher activity in the F&O segment, Indian markets
would have been more volatile. The price sensitiveness of the cash segment
vis-a-vis buying and selling by FIIs can be gauged from past trends. FIIs were
net sellers in the cash market worth Rs 1.1 lakh crore during the global
economic crisis of 2008-09. The market crashed in that period, with the
Sensex falling over 60 per cent from its peak of 21,207 on January 10, 2008.
While the successive reversal of outflow saw the Sensex revisiting its highest
level on November 5, 2010, the market again moved down by 29 per cent on
subsequent outflow led by the weakening world economy due to the debt crisis
(in 2011).

Meanwhile, barring the uncertainty over tax issues, 2012 has started on a
good
note. FIIs are net buyers and the Sensex has edged up from its 2011 low and
is
now hovering at around 17,000 levels. FIIs’ play in F&O in 2012 has been
8-10
times their turnover in cash market, up from five to seven times during
April-
October
2011.

18
 PART-II PRIMARY STUDY
(4) INTRODUCTION OF THE STUDY

(1) Problem Statement

To know the awareness of HNI clients’ investment in F & O, in which

derivative instrument do they invest more and the reasons behind their
investment in F & O

(2) Importance of the Study

Derivatives Instruments are important instruments for trading. But still in

India many less people invest in that and specially HNI clients. This study is
to know the awareness of HNI clients in derivatives, what factors attract HNI
clients to invest in F & O-if they invest, and what the reason is why they do
not invest in F & O-if they do not invest.

(3) Objective of the Study

To know the awareness of HNI clients towards investment on

Derivative market.

19
(6) DATA ANALYSIS AND INTERPRETATION

Que 1: Occupation of Respondents

Business Salaried
man Person

34%

66%

If Businessman; what kind of Business?

Manufact Trad Export Supp

urer er er lier

8% 2%

31%
59%

20
Que: 2 whom do you consult while taking the financial decisions?

Own family, friends, and relatives

Banker Insurance Agent
Own & family, friends, relatives

7%
9%
4%

15%
65%

Options Number of Respondents

Own 65
Family/friends/relatives 15
Banker 04
Insurance Agent 09
Own, 07
Family/friends/relatives

Total 100

Interpretation: From above chart and table it reveals that 65% respondents
take their financial decisions on their own. 15% take their financial decisions
from family/friends/relatives. This means majority of HNIs do not want to
consult any financial advisor.

21
 Que: 3 from following tools in which do you Invest?

Equit Commo Real- Own Equity,

y dity Estate Business Commodity

13%

8%
4%
61%
14%

Options Number of Respondents

Equity 61
Commodity 14
Real-estate 04
Own business 08
Equity, Commodity 13

Total 100

Interpretation: From above chart and table it reveals that majority of

respondents invest in Equity and only 8% invest in their own business. It
shows the major area of interest for investment of HNIs is also equity.

22
 Que: 4 Who is your broker?

Sharekh Indiabul Motilal Angel Oth

an ls Oswal Broking ers

22%
28%

11%

14%
25%

Options Number of Respondents

Sharekhan 19
Indiabulls 10
Motilal Oswal 12
Angel Broking 22
Others 25

Total 88

Interpretation: From above chart and table it reveals that as such there
is no specific broker as majority of them falls under the category of
others.
Others are: SMC, Anand Rathi, Marfatia, AXIS Bank, VSE, HDFC Sec.,
Jhaveri Securities, Kuwarji, BMA Sub brokers,

23
Que: 5 are you satisfied with your broker?

Yes No

5%

95%

Options Number of respondents

Yes 84
No 04
Total 88

Interpretation: From above chart and table it reveals that majority of

investors are satisfied with their current broker.

24
Que: 6 Do you invest in Derivative?

Yes No

18%

82%

Number of
Options respondents
Yes 18
No 82
Total 100

Interpretation: From above chart and table it reveals that majority of

investors (82%) do not invest in derivatives.

25
 Que: 6A if you invest in derivatives-reasons?

To hedge the Fund

Risk Control
More Stable
Direct investment without buying and holding the
assets
More Stable, Direct investment without buying and
holding the assets

11%
22%
6%
22%

39%

Options Number of respondents

To hedge the Fund 2
Risk Control 1
More Stable 4
Direct Investment without buying
and 7
holding the assets
More Stable, Direct Investment
without 4
buying and holding the assets
Total 18

Interpretation: From above chart and table it reveals that more than 39% of
investors invest in derivatives because, there is Direct Investment without
buying and holding the assets. Those who invest in derivative market they
take advantages of investing in derivative market.
26
 Que: 6B if you do not invest in derivatives-reasons?

Lack of knowledge and difficult to understand

Increase Speculation
Very risky and highly leveraged instrument
Counter party risk
Lack of knowledge and difficult to understand,
Counter party risk

19%

43%
9%

24%
5%

Options Number of respondents

Lack of knowledge and difficulty
in 35
understanding
Increase speculation 4
Very risky and highly leveraged 20
instruments
Counter party risk 7
Lack of knowledge and difficulty
in 16
understanding, Counter party risk
Total 82

27
Interpretation: From above chart and table it reveals that almost 50% investors
do not invest in derivatives because of Lack of knowledge and difficulty in
understanding. Majority of them are around 45 years old, so usually they look
for a safer investment, not showing interest in risky investment and difficult
to understand for them.

28
Que: 7 from where you prefer to take advice before investing in
derivative market?

Brokerage Research
houses Analyst
News Websites, news
networks others networks

6%
20%

27%
7%

7%
33%

Options Number of respondents

Brokerage Houses 1
Research Analyst 4
Websites 1
News Networks 5
Others 1
Websites, News Networks 3
Brokerage Houses, Research
Analyst 2
Brokerage Houses, Websites 1
Total 18

Interpretation: From above chart and table it reveals that almost 40% of
investors follow advices from news networks. Second highest advisor is
Research Analyst. Only 1 respondent takes advices from others i.e. friends.
29
 Que: 8 which of the following derivative instrument do you
invest in?

Stock Futures Stock Index Futures

Stock Optins Stock Index Options
Stock Futures, Stock Stock Futures, Stock Index
Options Futures
Stock Index Futures, Stock Index Futures, Stock
Stock Options Index Options
Stock Futures, Stock Stock Optins, Stock Index
Index Futures Options
6 6
% % 17%
5%
5%
17%
11%
11
%
17%
5%

Options Number of respondents

Stock Futures 3
Stock Index Futures 1
Stock Options 2
Stock Index Options 3
Stock Futures, Stock Options 1
Stock Futures, Stock Index Futures 2
Stock Index Futures, Stock Options 3
Stock Index Futures, Stock Index Options 1
Stock Futures, Stock Index Options 1
Stock Options, Stock Index Options 1
Total 18

Interpretation: From above chart and table it reveals that almost 40% investors
invest in Stock Options.
30
 Que: 9 how much total of your investment goes to F &
O?

10 11- 21- more

% 20% 40% than 40%

6%
22%

44%

28%

Options Number of respondents

10% 1
11-20% 8
21-40% 5
More than 40% 4
Total 18

Interpretation: From above chart and table it reveals that because of risky
investment those who invest in derivative market from their total investment
in derivative market 44% investors show interest in derivative market from
11-20%

31
Que: 10 what are the returns of your investment in F & O?

Up to 11- 21- more

10% 20% 30% than 30%

5%
28%

39%

28%

Options Number of respondents

Up to 10% 5
11-20% 5
21-30% 8
More than 30% 1
Total 18

Interpretation: From above chart and table it reveals that majority investors
get 21-30% return on their investment in F & O. Systematic investment in
derivative market bring good returns.

32
Que: A respondent’s age?

20-30 31-40 41-50 51-60 more

yrs yrs yrs yrs than 60

5% 0%

39%
56%

Options Number of respondents

20-30 yrs 10
31-40 yrs 7
41-50 yrs 1
51-60 yrs 0
More than 60yrs 0
Total 18

Interpretation: From above chart and table it reveals that because of

difficulty in understanding majority young HNIs show interest in derivative
market.

33
Que: B Gender of respondent?

Male Female

0%

100%

Number of
Options respondents
Male 18
Female 0
Total 18

Interpretation: From above chart and table it reveals that all the
investors in derivatives are male.

34
Que: C qualification of respondent

Gradu Post
ate Graduate

17%

83%

Number of
Options respondents
Graduate 15
Post Graduate 03
Others 0
Total 18

Interpretation: From above chart and table it reveals that majority (83%)
investors in derivatives are Graduates. However 17% are Post Graduates
also. All the derivative market investors are at least graduates.

35
Que: D if you are a businessman, annual turnover of your
company?

50 lacks- 1.1-3 3.1-5 5.1-10 above

1 Cr Cr Cr Cr 10 Cr.

0%

33% 34%

33%

Options Number of respondents

50 lacks-1 Cr 3
1.1-3 Cr 3
3.1-5 Cr 3
5.1-10 Cr 0
Above 10 Cr 0
Total 9

Interpretation: From above chart and table it reveals that all the businessman
who invest in derivative, the annual turnover of their company is between
50Lacks to 5 Cr.

36
Que: E if you are a salaried person, your monthly household
income?

20000-50000 50001-75000 75001-100000 100001-

150000 more than 151000

0%
11%

33% 56%

Options Number of respondents

20000-50000 0
50001-75000 5
75001-100000 3
100001-150000 1
Above 150000 0
Total 9

Interpretation: From above chart and table it reveals that majority

salaried respondents have their monthly household income between
50001-75000.

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 RESULTS AND FINDINGS
Derivative market encourages the investor to take more risk and earn
more return. So in this way it helps the Indian economy by developing
entrepreneurship. Derivative market is more regulated and standardized
so in this way it provides a more controlled environment. In a nutshell,
we can say that the rule of High Risk and High Return apply in
derivatives. If we are able to take more risk we can earn more profit.

(8) LIMITATION OF THE STUDY

The study has been done on HNI clients of Vadodara city, so it
may possible the perceptions of investment in F & O of HNI
clients of other cities, metro cities are different. It may possible
that the HNIs of other cities have different view of investment on
F & O.

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 (9) CONCLUSION

Derivatives allow firms and individuals to hedge risks to take risk

efficiently.

HNIs have to make sure that derivatives are used properly. This means
that the risk of derivatives positions have to be measured and
understood. HNIs should have well-defined policies for derivative uses.
An HNI must know how risk is managed with derivative and the role
of derivative in it.

So should we fear Derivatives?

The answer is “No”. We should have a healthy respect for them. We do
not fear planes because they may crash and do not refuse to board them
because of that risk. Instead, we make sure that planes are as safe as it
makes economic sense for them to be. The same applies to derivatives.
Typically, the losses from derivatives are localized, but the whole
economy gains from the existence existences of derivatives markets.

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 (10) SUGGESTION

Less number of HNIs invest in derivative market. For Value Plus they
can be their target clients. In Life Line bulletin Value Plus can add the
advantages, disadvantages, latest news about derivative market. So
more number of HNIs will aware about derivative market.

Majority derivative market investors are 25-35 years old. Value Plus
can keep a seminar for them as well as for those who are around 45-50
years who do not invest in derivative market and can be prospective
client for derivative market for Value Plus.

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 10. ANNEXURE

Que 1: Occupation of Respondents

A. Businessman
B. Salaried Person
Que 1A: If Businessman; what kind of Business?
A. Manufacturer
B. Trader
C. Exporter
D. Supplier
Que: 2 whom do you consult while taking the financial decisions?
A. Own
B. Family, friends, and relatives
C. Banker
D. Insurance Agent
E. Own & family, friends, relatives
Que: 3 From following tools in which do you Invest?
A. Equity
B. Commodity
C. Real-Estate
D. Own Business
E. Equity, Commodity
Que: 4 Who is your broker?
A. Sharekhan
B. Indiabulls
C. Motilal Oswal
D. Angel Broking
E. Others
Que: 5 Are you satisfied with your broker?
A. Yes
B. No
Que: 6 Do you invest in Derivative?
A. Yes
B. No
Que: 6A if you invest in derivatives-reasons?
A. To hedge the Fund
B. Risk Control
C. More Stable
D. Direct investment without buying and holding the assets
E. More Stable, Direct investment without buying and holding the assets
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Que: 6B If you do not invest in derivatives-reasons?
A. Lack of knowledge and difficult to understand
B. Increase Speculation
C. Very risky and highly leveraged instrument
D. Counter party risk
E. Lack of knowledge and difficult to understand, Counter party risk

Que: 7 From where you prefer to take advice before investing in

derivative market?
A. Brokerage houses
B. Websites, news networks
C. Others
D. Research Analyst
Que: 8 Which of the following derivative instrument do you invest
in?
A. Stock Futures
B. Stock Index
Futures
C. Stock Optins
D. Stock Futures,
Stock Options
E. Stock Index
Futures, Stock
Options
F. Stock Index
Options
G. Stock Futures,
Stock Index
Futures
H. Stock Index
Futures, Stock
Index Options
I. Stock Optins,
Stock Index
Options
Que: 9 how much total of your investment goes to F & O?
10%
11-20%
21-40%
More

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Que: 10 what are the returns of your investment in F & O?
A. 11-20%
B. 21-30%
C. More than 30%
D. Up to 10%

Que: A respondent’s age?

A. 20-30 yrs
B. 31-40 yrs
C. 41-50 yrs
D. 51-60 yrs
E. More than 60
Que: B Gender of respondent?
A. Male
B. Female
Que: C Qualification of respondent?
A. Graduate
B. Post Garduate
Que: D If you are a businessman, annual turnover of your
company?
A. 50 lacks-1 Cr
B. 1.1-3 Cr
C. 3.1-5 Cr
D. 5.1-10 Cr
E. Above 10 Cr.

Que: E If you are a salaried person, your monthly household

income?
A. 20000-50000
B. 50001-75000
C. 75001-100000
D. 100001-150000
E. More than 151000

43