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This is certify that MR. BADANI HARSHIL M. of S.K.Patel Initute of Management and Computer Studies, Gandhinagar have submitted his project report titled “PROJECT REPORT ON DERIVATIVE AND ITS STRATEGIES” in the year 2010 in partial fulfillment of Kadi Sarva Vishwavidyalaya requirements for the award of the title Master of Business Administration.
PROF. SONU V. GUPTA CHAWLA
(DIRECTOR & PROJECT GUIDE)
I , here by, declare that the project report titled “PROJECT REPORT ON DERIVATIVE AND ITS STRATEGIES” is original to the best of my knowledge and has not been published elsewhere. This is for the purpose of partial fulfillment of Kadi Sarva Vishwavidyalaya requirements for the award of the title of MBA.
Badani Harshil M.
Today as we all know that share market is well-known field and full of stiff competition. Now days it is one of the field of investment to earn money . For this investment of money in market there are different stock-broking companies are available in the market. They provide one or another type of service to account holder or investor.
Share market is my interest of field from the beginning. At this moment I got an opportunity to work with stock broking company and I have prepare this report on the “SHARE-KHAN STOCK BROKING PVT. LTD.” Stock broking company charges have been of much important account holder’s point of view. It is difficult to cover up the entire field so I have taken the field which I found of interest.
For every company charges of stock broking are very important. All the companies keep those charges as per the boundaries given by SEBI.
Training is major part of study in respect of MBA or any other course. Through these report I want to express my whole gratitude towards all those persons who have guided me in preparation of this report and also provided me organizational training.
For this report I received full support from all quarters. Firstly I would be thankful to Prof. Sonu V. Gupta ( Director & Project Guide) who has advised me the right way for training and I am also thankful to all the Management Faculties and the librarians.
I am also thankful to Mr. Hiren Mehta, the manager of sharekhan who has given me the permission for my summer training and provided me the useful knowledge & training of stock market. I am also thankful to Mr. Mihir Mehta, the assistant manager of sharekhan who has given me good guidance from his practical knowledge.
I am also thankful to Mr. Piyush , the sales manager of sharekhan under whom I have taken sales training. Last but not least I am thankful to all other departmental head & staff of the company who have shared their incredible knowledge and experience with me and given me full support in preparation of this report.
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PART-A Industry Analysis History of Indian Share Market Development BSE NSE NCDEX MCX Basis of Share Market Industry Analysis with Porter’s 5 Force Model PART-B Introduction to Share Khan Vision Core Value SSKI Group Organizational Structure Products of Sharekhan Market Coverage Research & Advised Tools
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SWOT Analysis PART-C Derivative & its Strategies The Indian Equity & Derivative Mkt. Introduction Types of Derivative PART-C Research Title of Study Statement of Problem Objective of Study Universe of Study Hypothesis Sampling Decision Data Collection Method Research Results Period of Study Tools & Techniques Limitations of the Study Suggestions Conclusion Bibliography Appendix
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1. HISTORY OF INDIAN SHAREMARKET
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 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.
The Sensex is complied based on the performance of the stock of 30 financially sound benchmarked companies. In 1990 the BSE crossed the 1000 mark for first time. It crossed 4000 figure in 1992. The reason for such huge surge in the stock market was the liberal financial policies announced by the financial minister Dr. Manmohan Singh.
This bullish mode of stock market was suddenly lost with the scam of Harshad Mehta. It came to the public knowledge that Mr. Mehta, also known as the big bull of Indian stock market. He has diverted huge funds from banks through fraudulent means. He played with 270 million shares of 90 companies. Millions of small scale investors became victims to the fraud as the Sensex fell down upto 570 points.
This phenomenon is result of opening up of online trading system and diminished interest rates from banks. The stockbrokers based in India are opening offices at different cities in country to prevent from such fraud. The government formed Security Exchange Board of India, through an act in 1992. SEBI is the statutory body that controls and regulates the functioning of stock exchanges, brokers, sub-brokers, portfolio managers’ investment advisors etc… SEBI oblige several rigid measures to protect the interest of investors.
Sensex crossed 5000 in 1999 and 6000 in year 2000. The 7000 mark was crossed in June and 8000 in September 2005. After that many foreign institutional investors started to invest in Indian stock market. Due to
that the market has taken the bullish way and in 2008 it touched the limit of 21000.
India hosts the largest number of listed companies after United States. Global investors now ardently seek to invest in Indian stock market. Once appeal with skepticism, stock market now appeals to middle class Indians also. Many Indians working in foreign countries now divert their savings to stocks. They can invest their money in this stock from their own places.
Now days most of persons want to invest their money according to the tips of expert. They do not invest only in giant companies. Good monsoon is also taken as good sign for bullish market. If monsoon is not good then it is taken as sign of bearish market. Thus one of the affected factor to the market is agriculture sector.
An important early event in the development of the stock market in india was formation of the native share and stock broker’s association in Bombay in 1875, The precursor of present day is BSE. This was followed by the formation of association in Ahmadabad (1894), Calcutta (1908) and Madras (1937). In addition, a large number of ephemeral exchanges emerged mainly in buoyant periods to recede into oblivion during depression time subsequently.
In order to check such aberrations and promote a more orderly development of the stock market, the central government introduced a legislation called the Securities Contracts Act, 1956. Under this
legislation it is mandatory on the part of a stock exchange to seek government recognition. As of January 2002 there were 23 stock exchanges recognized by the central government. They are located at Ahmadabad, Bangalore, Baroda, Bhuvaneshvar, Calcutta, Chennai, Cochin, Coimbatore, Delhi, Guwahati, Hyderabad, Indore, Jaipur, Kanpur, Ludhiana, Mangalore,
Mumbai (NSE, BSE, OTC exchange of India, Inter-connected stock Exchange of India), Patna, Pune and Rajkot. Of course, the main stock exchanges are NSE and BSE.
These rules can be amended, varied or rescinded only with the prior approval of the government. The Securities Contract Act vests the government with the power to make enquiries into the affairs of a recognized stock exchange and its business, withdraw the task of regulating the stock exchange to the Securities Exchange Board of India.
Now days India’s largest ticker on the wall of BSE is broadcasted on India’s and South Asia’s largest video screen – India’s leading business news channel: NDTV Profit.
3. BSE (BOMBAY STOCK EXCHANGE)
As the first stock exchange in India, the Bombay Stock Exchange is considered to have played a very important role in the development of the country’s capital markets. The BSE is the largest of 22 stock exchanges in India, with about 18000 listed companies. It is also the fifth largest exchange in the world. This index gives a measure of overall performance of the BSE and is closely followed around the world. Based on sensex, BSE equity market is growing up significantly since 1990. In addition to individual stock, the BSE has also a market in derivatives, which was the first to be developed in India. Listed derivatives on the exchange include stock future and option, index future and option and weekly options. The BSE is also actively involved in the development of retail debt market. The debt market is also one of the growing market and country continues to develop on this type of market. Recently in India debt market was limited to wholesale market i.e. banks, financial institutions etc… But BSE believes that retail market will bring great opportunities for individual investors.
4. NSE (NATIONAL STOCK EXCHANGE)
In the fast growing Indian financial market, there are 23 stock exchanges trading securities. The NSE situated in Mumbai is the largest and most advanced exchange with 1016 companies listed and 726 trading members.
The NSE is owned by the group of leading financial institutions such as Indian Bank or Life Insurance Corporation of India etc… However, in the totally de-mutualised exchange, the ownership as well as the management does not have a right to trade on exchange. Only qualified traders can be involved in security trading.
The NSE is one of the few exchanges in world trading in which all types of trading is possible on single platform. This exchange is divided into three segments: Wholesale Debt Market, Capital Market and Future and Option Market. Each segment has experienced a significant growth throughout a few years of their launch. All the three markets increased and has good growth since its opening in 1994.
The NSE provides its clients with a single, fully electronic trading platform that is operated through a VSAT network. Unlike most world exchanges, the NSE uses the satellite communication system that connects traders from 345 Indian cities. The advanced technologies enable upto 6 million trades to be operated daily on the NSE platform.
(NATIONAL COMMODITIES AND DERIVATIVES EXCHANGE)
NCDEX started on 15th December, 2003. This exchange provides facilities to their trading and clearing member at different 130 centers for contract. In commodity market the main participants are speculators, hedgers and arbitragers.
Promoters of NCDEX are:
National Stock Exchange (NSE) ICICI Bank Life Insurance Corporation (LIC) National Bank of Agriculture and Rural Development (NABARD) IFFCO Punjab National Bank (PNB) CRISIL
NCDEX is nationalized screen based system which is providing transparent, private and easy service. NCDEX is one of the traditional media which gives online
information. NCDEX is one of the Indian commodity exchange, constructed
on the basis of the current national institutes. The exchange has been established with the collaboration of institutes like NABARD, LIC etc…
Facilities Provided by NCDEX:
NCDEX has developed facilities for checking of commodity and also provides a warehouse facility. By collaborating with industrial partners, companies, news
agencies, banks and developers of kiosk network NCDEX is able to provide current rates and contract rates. To prepare guidelines related to special products of
securitization NCDEX works with bank.
To avail farmers from risk of fluctuation in prices NCDEX
provides special services for agricultural. NCDEX is working with tax officer to make clear different
types of sales and service taxes.
‘MULTI COMMODITY EXCHANGE’ of India limited is a new order exchange with a mandate for setting up a nationwide, online multicommodity market place, offering unlimited growth opportunities to commodity market participants. As a true neutral market, MCX has taken several initiatives for users. In a new generation commodity future market in the process, become the country’s premier exchange.
MCX, an independent and de-mutualized exchange since inception, is all set up to introduce a state of the art, online digital exchange for commodities future trading in the country and has accordingly initiated several steps to translate this vision into reality.
7. BASIS OF STOCK MARKET
Corporations issue official looking sheets of paper that represent ownership of the company. These are called stock certificates and each certificates represents set number of shares. The total number of shares will vary from one company to another, as each makes its own choice about how many pieces of ownership to divide the corporation may have only 2500 shares, while another such as IBM or the Ford Motor Company, may issue over a billion shares.
Companies sell stock (pieces of ownership) to raise money and provide funding for the expansion and growth of the business. The business founders give up part of their ownership in exchange for this needed cash. The expectation is that even though the owners have surrendered a portion of a company to the public, their remaining share of stock will become increasingly valuable as the business grows.
Corporations are not allowed to sell shares of stock on open stock market without the approval of the Securities and Exchange
Commission(SEC). This transition from a privately held corporation to a publicly traded one is called going publicand this first sale of stock to the public is called an initial public offering or IPO.
Why do people invest in the stock market:
When you buy stock in a corporation, you own part of that company. This gives you a vote at annual shareholder meetings, and a right to a share of future profits.
When a company pays out profit to the shareholder, the money received is called a “dividend”. The corporation’s board of directors choose when to declare a dividend and how much to pay. Most older and larger companies pay a regular dividend, most newer and smaller companies do not.
The average investor buys stock hoping that the stock’s price will rise, so the shares can be sold at the profit. This will happen if more investors want to buy stock in a company than wish to sell. The potential of a small dividend check is of little concern.
What is usually responsible for increased interest in company’s stock is the prospect of the company’s sales and profits going up. A company who is a leader in a hot industry will usually see its share price rise dramatically. Investors take the risk of the price falling because they hope to make more money in the market than they can with safe investment such as bank CD’s or government bonds.
How does one buy stocks:
Buying stocks is not as walking into a stockbroker’s office and buying shares like you would a pair of shoes from a store. You are required to open an account with the brokerage, like opening an account at a bank.
Some brokers will allow you to open an account with very little money. The firm will then hold this money in an interest earning cash account, awaiting your orders to buy or sell stock or other securities such as bonds or mutual funds. When you buy or sell, you pay a commission, which is deducted, from your account. When a stock is purchased, the ownership of the shares may be listed in one of two ways. “listed” means how the corporation tracks the ownership of their stock.
If you choose to have the stock listed in your name, you will receive the actual stock certificates. Most investors choose to have the ownership listed in the broker’s name, called “held in street name”, with the broker keeping track of whose trading account the stock actually belongs to. The benefits are reduced paperwork, consolidated portfolio statement, no concerns about storing and processing the paper certificates and the ability to instantly sell and transfer the shares. Either way any dividends are credited to your account. Stocks held in street name are insured up to $5,00,000 by the federal government against fraud or financial failure of the brokerage company.
Why do people sell their stock?
The reasons people sell their stock are more complex. A person may just need the money. He or she may have watched the price go up and have a hunch this is a good time to lock in their profit and sell some or all their shares. Bad news concerning a company or its industry or a disappointing earning report is sure to prompt heavy selling.
An investor may see better opportunities in another company and so sell his stock that aren’t moving up. But usually, investors sell because
They have watched the price fall and just want to get out before they lose even more.
Secondary Market Intermediaries:
Stock brokers, Sub brokers, Portfolio Managers, custodians, share transfer agents constitute the important intermediaries in secondary market. A stock broker plays an important role in the secondary market helping both the seller and the buyer of the securities to enter into a transaction.
The transaction entered cannot be annulled except in the case of Fraud, willful misrepresentation or upon prima-facie evidence of a material Mistake in the transaction, in the judgment of the existing authorities. If a Member of the stock exchange (broker) has orders to buy and to sell the same kind of securities, he may complete the transaction between his clients concerned.
When executing an order the stock may on behalf of his client buy
or sell securities from his own account i.e. as principal or act as an agent.
For each transaction he has to issue necessary contract note indicating whether he as principal or as an agent for another has entered into the transaction. While buying pr selling securities as a principal, the stock broker has to obtain the consent of his client and the prices charged should be fair and justified by the conditions of the market.
Ten Golden Rules for Investing:
Warren Buffet has suggested ten golden rules for investing which proves to be immense use the investor who wants a better investment in stock markets, Sharekhan follows these rules which are as described below:
Never invest in a business you cannot understand Risk can be reduced by concentrating on a few holdings. Stop trying to predict the direction of the stock market, the
economy, interest rates or elections. Buy companies with strong histories of profitability and with a
dominant business franchisees.
Be fearful when others are greedy and be greedy when others
are fearful. Unless you can watch your stock holding decline by 50%
without becoming panic-stricken, you should not be in the stock market. Do not take yearly results too seriously. Instead of focusing on
4 or 5 year averages. Focus on return on equity, not earning per share (EPS) Calculate “owner earnings” to get a true reflection of value.
Look for companies with high profit margins. Always invest for the long term. Do the business have favorable
8. INDUSTRY ANALYSIS WITH PORTER’S 5 FORCE MODEL
POTENTIAL ENTERANT POTENTIAL ENTERANT Investmart Investmart Various Banks Various Banks Geojit Geojit Cipher Cipher UTI Securities Ltd. UTI Securities Ltd. SUPPLIERS SUPPLIERS Web maintainers Web maintainers NSCL NSCL CSDL CSDL NSE NSE BSE BSE MCX MCX NCDEX NCDEX Refco Group Ltd. Refco Group Ltd. IDBI Capital Mkt. Services IDBI Capital Mkt. Services COMPETITORS COMPETITORS Ltd. Ltd. ICICI Web Trade Ltd ICICI Web Trade Ltd 5paisa.com 5paisa.com Kotak Securities Ltd Kotak Securities Ltd India Bulls India Bulls Motilal Oswal Securities Ltd Motilal Oswal Securities Ltd HDFC Securities Ltd HDFC Securities Ltd Marwadi Finance Ltd Marwadi Finance Ltd SUBSTITUTES SUBSTITUTES Mutual Funds Mutual Funds Insurance Insurance Bank FD Bank FD BUYERS BUYERS Small Investors Small Investors Franchise/Business Franchise/Business Partners Partners HNI’s HNI’s MF Companies MF Companies HUF HUF Institutional Institutional Investors Investors
NSDL & CSDL are the regulatory bodies for Depository
Participants like SSKI, SHCIL, ICICIdirect.com, etc. Also these regulatory bodies have got an upper hand as the bargaining power stock broking houses like SSKI, etc. would be less. NSE & BSE are playgrounds where common an investor trade
through stock broking houses, for which they have to take permission from NSE/BSE. NSE & BSE are under the purview of SEBI, that’s why stock
broking houses like SSKI, have low bargaining power. But here there is one advantage that NSE/BSE have i.e. they cannot go for forward integration. MCX & NCDEX are stock exchanges which trade in
commodities and derivatives. Here again stock broking houses have to follow rules and regulation of the same. Web maintainers are companies which maintain web sites &
technical aspects of the same. Here stock broking houses like SSKI can have more bargaining power due to stiff competition among web maintaining companies.
Web maintainers are companies who make and maintain
software’s for stock broking houses. If say for example stock broking houses switches over to other web maintainers then that company cannot understand the mechanisms of software’s. So it is quite high switching cost.
There are various types of investors who trade through stock
broking houses like SSKI, which includes investors like small investors, medium net worth investors, business partners, institutional investors and mutual fund companies. Here the bargaining power of stock broking houses depends on
how big the investor is. So here we can say that bargaining power of stock broking houses
is high in case of small investors & HUF. While its moderate in HNI/MNI’s and business partners. While its less in case of mutual fund companies and institutional
investors. There is competitive buzz in stock broking industry, competitors
are offering low brokerage and best services with added feature. So switching
cost is pretty much less. So the buyer can easily switch over to competitors product.
Entry Barriers Huge capital:- Capital is necessary not only for fixed facilities but
also for customers credit and absorbing start up losses. To start a stock broking house, one needs huge capital for technology up gradation and skilled manpower.
Technology:- Technology for stock broking houses is life saving
device. Stock broking requires huge capital to make their products user friendly, which in turn requires capital to employ skilled manpower. Thus, technology could be one of the entry barrier.
Regulatory Constraints:- Obtaining a license is a tedious job for a
stock broking house. It should comply with the regulation of the governing bodies like SEBI, NSDL, etc. For a stock broking houses to plunge into the stock broking industry, it needs to have some kind of financial background and expertise. Thus, regulators constraints could be an entry barrier.
Experience curve:- The core competency in this industry is the
services which are provided to the end-users and the research based
activities which includes “TIPS”, fundamental as well as technical script analysis. Also the most important thing which helps already established firms
is-“TRUST” which people would be having on firms like SSKI , Motilal Oswal, etc. this is very difficult for new companies to imitate.
Network:- the “Reach” to the customer is the key factor in the
industry. The network of the companies like Motilal Oswal, Sharekhan, ICICI is very efficient and spreaded all over India. It will take time for a new entrant to establish such a huge network (e.g. Marwadi), which say that, ”Network can come up as most difficult entry barrier to overcome.”
whenever a new player comes in the
industry, the old companies have an option to reduce the prices of their product. This kind of practice is called expected Retaliation which is also possible in this industry in terms of less brokerage rates and reduced account opening charges. E.g. before the entry of so many mew companies, Sharekhan was having two types of accounts viz. speed trade speed trade plus, which were costing 1000 & 1500 account opening charges respectively. But due to competition, they have come up with only one account ie speed trade plus with the account charges of Rs.1000.
The company is facing the competition from local as well as
national level players. The local players provide facility for off-line trading while the national players like ICICIdirect.com and Kotakstreet.com, HDFC Security provide online trading services. There are also other big names like Indiabulls, Motilal Oswal,
5paisa and Marwadi encircles the company form both the sides by providing online and off-line trading with competitive services.
Tew entrant which may take away the share of current players. The potential entrant in Rajkot city like Investmart, Jeojit and
Cipher which are coming in near future. Nationalized banks are also thinking to enter in this field byb tieing
up with broking houses. Eg Bank Of Baroda.
Here substitutes are such instruments which can be used instead
of investing in shares. The instruments like Bank FD, insurance, mutual funds are the
substitutes. If the use of this instruments increase this may be disadvantage
for the stock broking houses. The companies and banks which are having this instruments can plunge into this industry.Banks are planning to jump while others may come
PART-B INTRODUCTION TO SHAREKHAN
Sharekhan is an equities focused organization tracing its lineage to SSKI (Shripal Sevantilal Kantilal Ishvarlal) a veteran equities solutions company with over 8 decades of experience in the Indian stock market. Sharekhan is 80 years old company which is started online in the year 2000 & it is the first company who started online in 1984. They ventured into institutional broking & corporate finance. They having more than 350 branches, 750 franchises and also having 900 shops in 213 cities. In Rajkot branch , daily dealing rs. 16 crore & 400 crore all over India. Almost 8000 employees and 120000 trading customers. If you experience our language, presentation style, content or for that matter the online trading facility. You will find a common thread one that helps you make informed decisions and simplifies investing in stocks. The common thread of empowerment is what Sharekhan’s all about! Sharekhan does not claim expertise in too many things. Share khan’s expertise lies in stocks and that’s what he talks about with authority. So when he says that investing in stocks should not be confused with trading in stock or a portfolio based strategy is better than betting on a single horse. It is something that is spoken with years of focused learning and experience in
the stock markets and these beliefs are reflected in everything sharekhan does for you! To sum up, Share khan brings to you a user-friendly online trading facility, coupled with a wealth of content that will help you stalk the right shares. Those of you feel comfortable dealing with a human being and would rather visit a brick-and-mortar outlet than talk to a PC, you’d be glad to know that Share khan offers you the facility to visit (or talk to) any of our share shops across the country. In fact share khan runs india’s largest chain of share shops with Over six hundred outlets in more than 100 cities! What’s a share shop? How do you locate a share shop in your city? To find the answers of these questions, you must visit share khan. Hi other words share khan is a company that provides you an outstanding trading facility with a wide variety of products and acts as an investment consultant to manage your portfolio and secure a high rate of return on your investment in the security market. SSKI has been voted the best domestic brokerage in India by Asia money Polls’ 2004. Also SSKI is being rated as No. 1 Financial Researcher
of Business Today, in survey conducted on Lead Managers of all Mutual Funds. Basically company is at second position at India level in the case of Brokerage services and has top turnover in trading takes it at good position in the market. The services they provide to investor are discussed in more detail in marketing activities of the Sharekhan. The clients are managed with friendly corporate culture and to motivate them different services are provided by the managers also. Managers also give tips to the investors to invest and manage few scripts which are best so they can handle their profit or loss. Sharekhan is in good position in the market with the highest number of transactions in the market and offers you depository services and trade execution facilities for equities, derivatives and commodities
with its decades of experience. Research and analysis team is constantly working to track performance and trends. As a result of that it has good trading products with it. If we see its progress than in future i.e. in next year it is going to issue its own share capital in the market. It has now a day’s capital of 3000crore which is not a small amount.
To empower the investor with quality advise and superior service to help him in taking better decisions. We believe that our growth depends on client satisfaction.
2. CORE VALUE
Customer satisfaction through providing quality services effectively and efficiently. “Smile, it enhances your face value” is a service quality stressed on periodic customer service audit. Maximization of stakeholder’s value. Success through teamwork, integrity and people.
3. SSKI GROUP – CORPORATE STRUCTURE
SSKI investor service pvt. Ltd. Retail Broking arm of group Share holding pattern 56% Morakhia Family 18.5% HSBC Pvt. Management Mauritius 18.5% First Carlyle Ventures. Owns 56% of Owns 44% of SSKI Corporate Finance Pvt. Ltd. Investment Banking arm of the group Share holding pattern 50.5% SSKI Security Pvt. Ltd. 49.5% Morakhia Family
SSKI Securities and Pvt. Ltd.
4. ORGANISATIONAL STRUCTURE
Back- Office Staff
5. PRODUCTS OF THE SHAREKHAN
Offline Trading Account
Online Trading Account
PMS Classic Account or Fast Trade Account Speed Trade Account Mutual Funds
Sharekhan Depository Services:
Dematerialization and Trading in the demat mode is the safer
and faster alternative to the physical existence of securities. Demat as a parallel solution offers freedom from delays, theft, forgeries, settlement risks and paperwork. This system works through depository participants (DPs) who offer demat services and hold the securities in the electronic form for the investor Sharekhan Depository Services offer
dematerialization services to individual and corporate investors.
We have a team of professionals and the latest technological expertise dedicated exclusively to our demat department, apart from a national network of franchisee, making our services quick, convenient and efficient. At sharekhan, our commitment is to provide a complete demat solution which is simple, safe and secure.
Issuer/ R&T Agent
Sharekhan is registered Depository Participant (DP) with National Securities Depository Ltd. (NSDL). The participants are required to enter into an agreement with beneficial owners. It is required that separated accounts shall be opened by every participants in the name of each the beneficial owner and the securities of each other beneficial owner shall be segregated and shall not be mixed up with the securities of other beneficial owner or with the participants own securities. The participants are obliged to reconcile the records for a period of five years. Records of all the transactions entered into with a depository and with a beneficial owner.
2. Portfolio Management System:
With the sharekhan team managing your Portfolio, you can be assured that your investment are in safe hands.
quantitative analysis, fundamental analysis and technical analysis. This multi-pronged approach enables us to provide risk controlled returns for you.
Right from choosing the combination of stocks most suitable for you based on your risk appetite to monitoring their movements and discussing them with you at special events. Click here to see how we manage your portfolio in a few easy steps. This is how we make investing completely hassle-free for you. There are mainly three types of PMS that sharekhan provides. Pro-Tech (High risk & Return) Pro-Prime (Moderate risk & Return) Pro-Arbitrage (Low Risk & Fixed Return)
Everybody talks about mutual funds, but what exactly are they?
Are they like shares in a company, or are they like bonds and fixed deposits? Will I lose all my money in funds or will I become an overnight millionaire? Big questions that to get answer in just five minutes.
A mutual funds is a poor of money that is invested according to a common investment objective by an asset management company
(AMC). The AMC offers to invest the money of hundreds of investors according to a certain objective – to keep money liquid or give a regular income or grow the money long term. Investors buy a scheme if it fits in with their investment goals, like getting a regular income now or letting the money accumulate over the long term. Investors pay a small fraction of their total funds to the AMC each year as investment management fees.
Mutual fund industry was started in India with establishment of UTI (1963), which is only player in the market of mutual fund up to 1987. During that time mutual fund market refers the unit link schemes like Master Share and Master Gain. Mutual fund provides varieties of
schemes for different kind of customers to suit their goals. Mutual fund have open-ended
and close-ended schemes, children’s plan , diversified equity fund, balanced fund, liquid fund, income fund, short term fund, sector fund, ELSS (equity linked savings schemes) and pension plan.
Online IPO is a new service started by Sharekhan for providing
the application form of any company’s issue of shares just like the TCS issue can be subscribed by filling an online form to reduce the paper work and the fund transfer facility is also provided to the clients for transferring the funds online.
Online Commodity Trading:
Online Commodity Trading offers a way for an open, many to
many system where every user has equal access to price quotes and trading functionality. It provides a level playing field for all , without favoritism or control by a chosen few, where any user can view all quotes posted by other user in real time,act or trade on quotes posted by others, post their own prices and quantities for other to trade.
Liquidity, or trade activity, is perhaps the best measure of success of an online trading commodity trading system. With most online commodity trading system, traders can be sure of finding an interesting market development or trading opportunity almost every time they log on.
All quotes posted by users on any online online commodity trading system are live and firm. They can be acted on with full assurance of a completed transaction. The greatest advantage of an online system for trading is that just a click can be used to hit a bid or lift an offer.
The Online trading system operates almost continuously around the clock, 24 hours a day, seven days a week. This allows any user to extend the trading day, and easily pass the trading objectives to others in companies in different time’s zones. The online commodity trading system in India is only emerging segment yet. This is because the internet boom in Indian is on the rise only now. The internet charges are becoming minimal and the internet is soon becoming a way of life in life in India. It is in this scenario that online trading is becoming more the way of trading in India.
There are mainly two exchanges deals with commodity. MCX (Multi Commodity Exchange) NCDEX (National Commodity and Derivative Exchange)
Commodity trading is also known as “Vayda Market”. In short Share khan also provides broking in commodities and the brokerage charges are 0.10% on total trade value and if carry forwarded an additional 0.02% charges on total trade. Items which are traded through commodity exchanges are: • • • • • • Spices : Peeper , Red Chilli, Jeera , Turmeric Metal : Steel Long, Steel Flat, Copper¸Nickel, Tin Fibre : Kapas, Long Staple Cotton , Medium Staple Cotton Pulses : Chana , Udad , Yello Peas Cereals : Rice Basmati Rice, Wheat , Maize , Sarbati Rice Energy : Crude Oil
Offline Trading Account:
The off – Line account is trading account through which one can buy and sell through his/her telephone or by personal visit at sharekhan shop. This account is for those who are not comfortable with computer and want to trade.. Offline a/c is the A/C for the investors who are not familiar
with the use of computers. The A/c opening is free for first year, then for second year
charge is Rs. 400 and for the subsequent years, the charge is Rs. 360.
Online Trading Account:
There are no charges for account opening. For first year Demat account is free, for second year charge is
Rs. 400, for the subsequent years the charge is Rs. 360. Tie up with 12 banks through which one can transfer or
withdraw his fund online. Which are as follows: 1. HDFC Bank 3. UTI Bank 5. CITY Bank 7. Union Bank Of India
2. IDBI Bank 4. OBC bank 6. Indian Bank 8. Yes Bank
9. Bank of Punjab 11. Bank of India
10.ICICI Bank 12. Centurion Bank
Any one who have A/C in either of above banks they can use this Facility. Otherwise one has to make fund transfer facility or withdraw by cheque.
This account enables you to buy and sell shares through our websites. You get features like
a) b) c) d)
Streaming Quotes (using the applet based system) Multiple watch list Integrated Banking, Demat and digital contracts Instant Credit and transfer and instant order execution and
confirmation e) Real time portfolio tracking with price alert and of course, the
assurance of secure transaction f) Price alerts Online trading account includes two types of account: I. Classic Account or Fast Trade Account
Speed Trade Account
6. MARKET COVERAGE
Ground Network Largest in India
Covers 213 cities in 23 states across India a Also they cover 588-share shop in 213 cities. s Trade execution facility on BSE and NSE for Cash as well as Derivatives D Depository/Demat account services s Personalized Sharekhan research advice r Uniform service standards 122 Franchisees and 28 branches b
7. RESEARCH AND ADVISED TOOLS
Eagle Eye High Noon
Investor’s eye sharkhan valueline
INVESTMENT ADVICE ON EQUITY, DERIVATIVE, COMMODITY
Derivative info Kit Derivative Digest Derivative Calculator Market Neutral Srategies
Commodities Buzz Commodities Traders Corner Sharekhan Exclusive Bullion Calculator
Every investor’s needs and goals are different . To meet these needs, Sharekhan provides a comprehensive set of research reports, so that one can take the the right investment decisions regardless of their investing preferences! The Research and Development at Sharekhan is done at its Head office Mumbai.
The R&D department Head Mr.Hemang jani forwards all the details regarding all stocks and scripts to all the branches through internet. At the end of each trading day there is a Teleconference , through which the R&D department Head MR.Hemang jani talks with each Branch heads and discusses about each day’s closing position and shows their predictions about next day’s opening position. The quarries regarding stock position and other relevant matter of the branch heads of each branch is being solved through teleconference.
The various publication of Sharekhan viz. Derivatives Digest Sharekhan’s Valueline,Engle eye, High Noon, Investor’s Eye,
Commodities Buzz, Commodities Beat, Commodity Trader’s corner, Sharekhan Exclusive, etc. are being prepared be the research team of Sharkhan made up of highly experienced people from diverse field. These all Publication provides: In – depth analysis of the before, during ( live market updates) and after market timings & Speacial sector tracking reports sent regularly.
Stock ideas :
Stock ideas are aimed at Sharekhan’s trading client. It presents
our best stock picks in today’s market. We categorize these companies into six clusters to help you identify the stock that fit your time horizons and return objectives the best. Each cluster represents a certain profile in terms of business fundamentals as well as the kind of returns you can expect of it over a certain time horizon.
Sharekhan categories all the scripts that are under coverage into
6 clusters, Each cluster represents a certain profile in terms of business fundamentals as well as the kind of returns you can expert over a certain time horizon. This help in identifying the stocks that fit your time horizons and return objectives best. The six clusters are: Evergreen, Apple Green, Emerging Star, Ugly Duckling, Vulture’s pick and Cannonball.
These stocks are steady compounders, churning out steady
growth rates year on year. They are typically significant players in their
markets, with sound strategies that will help them achieve and sustain market
dominance in the long run. They have strong brands, management credentials and a consistent track record of achieving super normal shareholder returns. We expect stocks in this category to compound at between 18- 20% per annum for the next five to ten years. Also called ownership stocks, Evergreen stock are the brightest jewels in any portfolio.
Apple Green :
These are stocks that have the potential to be steady
compounders and are attempting to move upwards, to turn Evergreen. They rank a shade below the Evergreen companies, only because their potential in the five to ten years’ time is still not very clear, although they might grow at rates faster than of the Evergreen stocks in the next year or two. They could grow at 25-30% per annum over the next two to three years.
These are typically young companies, often in niche businesses,
that have the potential to grow and dominate their niches. Even better , they might turn out to be real giants , if their niches explode into full-
blown markets in their own rights. These stocks are potential ten-baggers but you need to be patient.
These are companies that are trading below their fair value or at
values which are at a significant discount to that of their peer group, due to a combination of circumstances. But things are now starting to happen in these companies or in their markets that are likely to cause a reevaluation of their prospects. These stocks could double in two to three years’time.
These are companies with valuable assets or brands that have
been trashed to ridiculously low prices. Buy a Vulture’s pick and wait for a predator who finds its assets undervalued to come along. This could be a long wait but the return could be startlingly high.
Season’s favorites Typically they are fast gainers in a rising
market, which could give returns of 20-40% within three months. These are based on combination of sound information, technical charts and
available fundamentals for investors which are having an appetite for high risk and high reward.
Ensures Convenience in Trading Experience:
Sharekhan’s trading services are designed to offer an easy,
hassle free trading experience, whether trading is done daily or occasionally. The customer will be entitled to a host of value added services, in the investment process depending on his investing style and frequency. It offers a suite of products and services, providing the customers with a multi-channel access to the stock markets. It gives advice based on extensive research to its customers and provides them with relevant and updated information to help him make informed about his investment decisions
Sharekhan offers its customers the convenience of a brokerDP
It helps the customer meet his pay in obligations on time thereby reducing the possibility of auctions. The company believes in flexibility and therefore allows accepting late instructions without any extra charge. And execute the instruction immediately on receiving it and
thereafter the customer can view his updated account statement on internet. Sharekhan Depository Services offers demat sevices to individual and corporate investors. It has a team of professionals and the latest technological expertise dedicated exclusively to their demat department. A
customer can aware of Demat, Repurchase , pledge , Transmission facilities at any of the share khan branches and business partners outlets.
8. SWOT ANALYSIS
During this training at Sharekhan, we had come to know the Strengths -Weaknesses -Opportunities -- Threats for the company and it is very useful for a company to analyze them. Therefore, the SWOT analysis is presented here and the suggestions for maintaining strengths and removing weaknesses are explained.
Strengths: 80 years of research and broking experience Fastest Browser based Trading 11,00,000 + customer Largest ground network in broking with 588+ retail outlets spanning 213 cities\ Dedicated, Intelligent and Loyal staff. On-line Trading products. Lowest brokerage and other charges than. Competitors. The best investment advice correct up to 70-90 % through dedicated Wide product range to enable the clients to choose the best alternative.
One of the best DPs in India.
A positive image in the existing clients.
Weaknesses: Less awareness in the market. Time consuming process for account opening, resolving the
problems of the Customers, etc. Service quality is not maintained accordingly how
they are promoted.
Large primary market to sit as a book runner for the other
companies just like Kotak securities ltd. that runs the books of share holdings for many companies Slope of stock market towards delivery based transactions. Large potential market for delivery and intra-day transactions. Open interest of the people to enter in stock market for investing.
Attract the customers who are dissatisfied with other brokers & An indirect opportunity generated by the market from its
DPs. a bullishness.
Decreasing rates of brokerage in the market.
competition against other brokers & DPs.
Poor marketing activities for making the company known among
the customers. A threat of loosing clients for any kind of weakness of the company. Indirect threat from instable stock market, i.e., low/no profit of Sharekhan's clients would lead them to go for other broker/DP.
PART-C DERIVATIVE AND ITS STRATEGIES
1. THE INDIAN EQUITY AND DERIVATIVE MARKET
The emergence of the market for derivative products, most notably forwards, futures and options can be traced back to willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivatives 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 the cash flows situation of risk- adverse investors. In recent years, derivatives have become increasingly important in the field of finance. While futures and options are now actively traded on many exchanges, forward contracts are also popular.
The phenomenal growth of financial derivatives across the world is attributed the fulfillment of needs of hedgers, speculators and arbitrageurs by these products.
Derivatives as the name suggests, are financial instruments
whose value is dependent on another underlying asset. The underlying security in the case of equity derivatives is an
equity share or the widely followed Nifty and Sensex indices. A share of equity can only ptovide an unhedged position
whether long or short and the entire risk of the transaction lies with the trader or investor.
• • Increased volatility in asset prices in financial markets. Increased integration of national financial markets with the
international market. • Marked improvement in communication facilities and sharp
decline in their costs.
Development of more sophisticated risk management
tools,providing economic agents a wider choice of risk management strategies. • Innovations in derivative markets, which optimally combine
the risks and returns over a large number of financial assets leading to higher returns, reduced risks as well as transaction costs as compared to financial assets.
To hedge against price fluctuations in the underlying
DERIVATIVE PRODUCTS A. B. C. D. Forwards Futures Options Swaps
Call Call Commodit Commodit y y Security Security
Interest Interest Rate Rate
A forward contract is the simplest mode of a derivative transaction. It is an agreement to buy or sell an asset (of a specified quantity) at a certain
future time for a certain price. No cash is exchanged when the contract is entered into. Illustration: - Shyam wants to buy a TV, which costs Rs 10,000 but he has no cash to buy it outright. He can only buy it 3 months hence. He, however, fears that prices of televisions will rise 3 months from now. So in order to protect himself from the rise in prices Shyam enters into a
contract with the TV dealer that 3 months from now he will buy the TV for Rs 10,000. What Shyam is doing is that he is locking the current price of a TV for a forward contract. The forward contract is settled at maturity. The dealer will deliver the asset to Shyam at the end of three months and Shyam in turn will pay cash equivalent to the TV price on delivery.
It is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price through exchange traded contracts. A Future represents the right to buy or sell a standard quantity and quality of an asset or security at a specified date and price. Futures are similar to Forward Contracts, but are standardized and traded on an exchange, and are valued, or "Marked to Market” daily.
The Marking to Market provides both parties with a daily accounting of their financial obligations under the terms of the Future. Unlike Forward Contracts, the counterparty to a Futures contract is the clearing corporation on the appropriate exchange. Futures often are settled in cash or cash equivalents, rather than requiring physical delivery
of the underlying asset. Parties to a Futures contract may buy or write Options on Futures.
An option is a contract, which gives the buyer the right, but not the obligation to buy or sell shares of the underlying security at a specific price on or before a specific date. ‘Option’, as the word suggests, is a choice given to the investor to either honor the contract; or if he chooses not to walk away from the contract. There are two kinds of options: Call Options and Put Options.
A Call Option is an option to buy a stock at a specific price on or before a certain date. When you buy a Call option, the price you pay for it, called the option premium, secures your right to buy that certain stock at a specified price called the strike price. If you decide not to use the option to
buy the stock, and you are not obligated to, your only cost is the option premium. Put Options are options to sell a stock at a specific price on or before a certain date. In this way, Put options are like insurance policies. With a Put Option, you can "insure" a stock by fixing a selling price. If
something happens which causes the stock price to fall, and thus, "damages" your asset, you can exercise your option and sell it at its "insured" price level. If the price of your stock goes up, and there is no "damage," then you do not need to use the insurance, and, once again, your only cost is the premium. Technically, an option is a contract between two parties. The buyer receives a privilege for which he pays a premium. The seller accepts an obligation for which he receives a fee.
CALL OPTIONS Call options give the taker the right, but not the obligation, to buy the underlying shares at a predetermined price, on or before a predetermined date.
Illustration: - Raj purchases 1 Satyam Computer (SATCOM) AUG 150 Call --Premium 8 This contract allows Raj to buy 100 shares of SATCOM at Rs 150 per share at any time between the current date and the end of next August. For this privilege, Raj pays a fee of Rs 800 (Rs eight a share for
100 shares). The buyer of a call has purchased the right to buy and for that he pays a premium. Now let us see how one can profit from buying an option; Sam purchases a December call option at Rs 40 for a premium of Rs 15. That is he has purchased the right to buy that share for Rs 40 in December. If the stock rises above Rs 55 (40+15) he will break even and he will start making a profit. Suppose the stock does not rise and instead falls he will choose not to exercise the option and forego the premium of Rs 15 and thus limiting his loss to Rs 15.
Call Options-Long & Short Positions When you expect prices to rise, then you take a long position by buying calls. You are bullish. When you expect prices to fall, then you take a short position by selling calls. You are bearish.
PUT OPTIONS A Put Option gives the holder of the right to sell a specific number of shares of an agreed security at a fixed price for a period of time. Illustration:- Raj is of the view that the a stock is overpriced and will fall in future, but he does not want to take the risk in the event of price rising so purchases a put option at Rs 70 on ‘X’. By purchasing the put option Raj has the right to sell the stock at Rs 70 but he has to pay a fee of Rs 15 (premium). So he will breakeven only after the stock falls below Rs 55 (70-15) and will start making profit if the stock falls below Rs 55.
Put Options-Long & Short Positions : When you expect prices to fall, then you take a long position by buying Puts. You are bearish. When you expect prices to rise, then you take a short position by selling Puts. You are bullish.
CALL OPTIONS If you expect a fall in price(Bearish) If you expect a rise in price (Bullish) Short Long
PUT OPTIONS Long Short
Swaps are private agreement between two parties to exchange cash flow in the future according to a prearranged formula. They can be reguarded as portfolio of forward contracts. A forward contract involves one exchange at a specific future value date, while a swap contract entails multiple exchanges over a period of time.
Interest rate swaps and currency swaps are the most popular.
CURRENCY SWAPS: These entails swapping only the interest related cash flows between the parties in the same currency.
CURRENCY SWAPS: These entail swapping both principal and interest between the parties, with the cash flows in one direction being in a different currency than those in the opposite direction.
5. NSE’s Derivative Market:
The derivative trading on the NSE commenced with S & P CNX Nifty Index Futures on June 12, 2000. The trading in index options commenced on june 4th, 2001 and trading in options on individual security commenced on july 2nd, 2001. Single stock futures were launched on November 9th, 2001. Today, both in terms of volume and turnover, NSE is the largest Derivative exchange in India.
Currently, the derivative contract have maximum of 3 month expiration cycles. Three contract share are available for trading with 1month, 2month and 3month expiry. A new contract is introduced on the next trading day following the expiry of near month contract.
6. The S & P CNX Nifty:
The s & P CNX Nifty is a market capitalization index based upon solid economic research. It was designed not only as a barometer of market movement but also to be a foundation of a new world of financial products based on the index like index futures, index options and index funds. A trillion calculations were expended to evolve the rules inside the S & P CNX Nifty index. (a) The correct size to use is 50. (b) Stocks considered the S & P CNX Nifty must be liquid by the ‘impact cost’ criterion. (c) The largest 50 stocks that meet the criterion go into the index.
S & P CNX Nifty is a contrast to the adhoc methods that have gone into index construction in the preceding years, where indexes were made out of intuition and lacked a scientific basis. The research that led up to S & P CNX Nifty is well respected internationally as a pioneering effort in better understanding how to make a stock market index. The nifty is uniquely equipped as an index for the index derivatives market owing to its (a) low market impact cost and (b) high hedging effectiveness. Finally, Nifty is calculated using NSE prices, the most liquid exchange in India, thus making it easier to do arbitrage for index derivatives.
3. TYPES OF DERIVATIVES
There are two types of derivatives. 1) Future Product and 2)Option Product. Trading strategies can be created using them individually or in combination. Derivatives add a lot of flexibility to a trader’s tools. They can be used for two purposes, namely Speculation and Hedging.
Speculation is the skill of analyzing data and taking position on the various market situations to profit from favorable price movements, this activity is called trading. Trading includes going both long and short on the market. We can’t say that trading is about predicting the direction of the stock market and about predicting prices.
The most important aspect of trading is Money Management.
Money Management involves risking a particular amount of money to make several times the amount risked. No one can predict the stock market, the key to making money in trading on a sustained basis is to make big profits when you are right and limit your losses when you are wrong.
Also important is the size of your trading positions in proportion to the overall size of your trading capital, correct position sizes enable you to stay in the game for the longest possible time and hence increase the chances of making money.
Trading in fact, is a skill that can be learnt and, once learnt you can make huge amounts of money. To do so traders should get used to the notion of losses at the very outset. Trading is both about profits and losses. The key is to keep losses small and profits big .
The idea of hedging is more important in the commodities and currency markets. In the equity market hedging can be an expensive exercise. Often people think that they will be fully protected if they take a position which profits if the market starts moving in the reverse direction. True they will protect themselves but not totally because hedging comes at a cost, for while hedging can reduce losses but it also lowers your profits.
If my experience , it is not worthwhile for traders to hedge their positions.
Instead , when a trade starts moving contrary to the expected direction, you need to quickly get out. Often in the media we hear recommendations about buying stock futures and hedging it by buying a put. This strategy sounds great but the put comes at a cost which is deductible from the profits that you earn on your futures, assuming that the profit on your futures position is higher than the cost of the put. In equity derivatives we can hedge as below.
If the market view is bullish:
Buy futures Sell call Buy put We take an example of RPL that, If we buy RPL@175 and market is bullish, if we want to hedge then sell call @180 and buy put@170.
If the market view is bearish:
Sell futures Buy call Sell put If we take an example of RPL, If we sell future of RPL@175 and we want to go for hedge then we will buy call with strike price @180 and sell put with strike price @ 170.
A call option whose strike price is below the current price of the underlying : or A put with a strike above the current price. For example: If the ACC stock is trading at Rs. 200, the ACC call options with strike 190, 180, 170 and below are all in the money.
A call option whose strike price is above the current price of the underlying stock or A put with a strike below the current price. For example: When ACC is trading at Rs. 200, the ACC call options with strikes 210, 220, 230 and upwards are out-of –the-money.
At the money(ATM):
This is an option that has a strike price equal to the current price of the underlying stock. For example: The ACC option with a strike price of Rs-200 is atthe-money when the stock trading at or near the strike price.
The date when the term of an options contract terminates is called its expiration date. The expiry of Indian options mandated by the stock exchange is the last Thursday of every month.
Technically speaking, options contracts are available for the near month ( current ), mid month (next), and far month (the month after next). Currently, how ever, only the near month options usually have tradable liquidity and only towards the last week of the near month do options of the mid-month gather enough liquidity to be traded comfortably.
1. TITLE OF THE STUDY
In this fast growing world people don’t have enough time to reach each and every place. In present days, service sectors are growing very fast and the competition is also very healthy. People want very fast services from company and they also want data services. This research is totally dependent on “Derivative and Its Strategies” in stock market to the country as a whole. As this service can be said as latest so it will take some time to develop in the mind of the people.
2. STATEMENT OF THE PROBLEM
In India many people are investing in stock market but they are not aware by all the services provided by the broker. In this when the broker is not effective, the customer is not satisfied with his services, at this time the problem arises and the people feel that they are denied of their rights. In this study the problem is also about the awareness of the “Derivative & Its Strategies” provided by broker. There are many brokers who are very efficient & effective in research on this point and providing tips and knowledge to the investors and customers. I have taken sample of investors to get knowledge about “Derivatives and Its Strategies” in stock market.
3. OBJECTIVE OF THE STUDY
The main objective of the study is to know about the awareness of “Derivatives and Its Strategies” in the stock market. If we say then other secondary objectives are: To get knowledge about the derivatives in the stock market. To know the potentiality of investing in the stock market
through online trading. To know about the current brokerage rate in the market and
customer’s view and affordability of brokerage in the stock market. To know about best research in the stock market by brokers and
expectations of customer for returns from that tips. To know the average existence time of customer with the same
broker. To find out the best medium by which we can do trading in a
4. UNIVERSE OF THE STUDY
This research study contains the awareness of the investors in the stock market through on line trading. There are many investors in the stock market but out of whole universe of the investors I have selected a small population from the Junagadh city only. There are mainly two types of universe such as finite universe & infinite universe. Finite study can be calculated and infinite study can not be calculated. For my research study I have selected finite study to know about the awareness in the minds of investors in the stock market through Derivatives.
Testing of Hypothesis using Z test (Two
1.) The Null Hypothesis (H0): “There is no significant difference in level of literacy about Derivatives & Junagadh City.” Therefore, H0 : u = 50% 50% Commodities among the people of
H1: u ≠
2.) Level of Significance : σ The Level of significance should be set at α = 0.05 3.) The Statistical Test : Z = X – u / σx = No. of standard deviations for the desired level of Where, Z confidence. X = Mean of the sample U = Mean of the population or hypothetical mean σx = Estimate for the standard error or the mean 4.) The Decision Rule
1.000 (1-0.025) = 0.975 1.9+ 0.6 = 1.96 & - 1.96 (the result will be between two)
σx =5 / root of 100 - 1 = = Z= = 5/9 0.5556 55 – 50 / 0.5556 8.999
5.) Draw a statistical conclusion The absolute value of the computerized Z statistic (8.999) is larger than 1.96, therefore null hypothesis is rejected. So, Alternate Hypothesis is accepted. H1:There is significant difference in level of literacy about Derivatives & Commodities among the people of Junagadh City.
6. SAMPLING DESIGN
It is very true that to do the research with the whole universe. As we know that it is feasible to go to population survey because of the n number of customers and their scattered location. So for this purpose sample size has to be determined well in advance and selection of sample also must be scientific so that it represents the whole universe.
So far as my research is concerned, we have taken sample size of 100 respondents. I have selected Income Earners with saving to invest in Junagadh city. All the respondents are stratified on the basis of their profession and savings. We have selected the selected the samples as per random. Sample Universe Sampling Technique Sample Size Sampling Unit Junagadh City Stratified and Random 100 Respondents Professional = Random Business man = Random Government Employee = Random Employee in pvt. Firms = Random
7. DATA COLLECTION METHOD
There are mainly two sources of data i.e. (1) (2) Primary Data Secondary Data
The data, which is collected directly from the respondents to the
base of knowledge and belief of the research, are called primary data. The normal procedure is to interview some people individually to get a sense of how people feel about the Derivatives in stock market. So far as my research is concerned, primary data is the main source of information. We have collected data through Questionnaire and information from respondent.
Primary method includes many types such as: (1) (2) (3) (4) (5) Observation Method Interview Method Questionnaire Method Scheduling Method Use of mechanical device
When data are collected and compelled from the
published nature or any other’s primary data is called secondary data. There are mainly three points which he should consider while using that data : (a) (b) (c) Reliability of the data Suitability of the data Adequacy of the data
8. RESEARCH RESULTS
Q.-2 Gender OPTION Male Female TOTAL NO. OF RESPONDENT 80 20 100 PERCENTAGE 80% 20% 100%
From above diagram we can say that most of male members do trading in the stock market through derivatives.
Q.-3 AGE (YEARS) OPTION 21-35 36-50 51-65 ABOVE 66 TOTAL NO. OF RESPONDENT 40 35 17 8 100 PERCENTA GE 40% 35% 17% 8% 100%
17% 40% 21-35 36-50 51-65 ABOVE 66 35%
From above diagram we can see that respondents are from the age group 21 to 35 years are about 40% of total who deals with stock market. While 35 % are between 36 to 50 years.
Q.-4 EDUCATION OPTION Under graduate Graduate Post graduate TOTAL NO. OF RESPONDENT 15 60 25 100 PERCENTAGE 15% 60% 25% 100%
Undergraduate Graduate Post graduate
This result shows that most of graduate persons are doing trade with stock-market i.e. 60% of the persons are graduate who are trading. This result shows that educated persons are trading in stock market.
Q.- 5 OCCUPATION OPTION Professional Business man Govt. Employee Pvt. Employee Student Total NO. OF RESPONDENT 15 35 25 17 8 100 PERCENTAGE 15% 35% 25% 17% 8% 100%
Here this result says that businessman and government employee who can earn more are trading with stock-market to invest their saving in the stock market to earn more.
Q.- 6 DO YOU TRADE IN DERIVATIVES? OPTION Yes No Total NO. OF RESPONDENT 35 65 100 PERCENTAGE 35% 65% 100%
Y es No 65%
From above response it is very clear that minority of people want to invest in derivatives because it is risky to invest in derivative is preferred by investor.
Q.- 7 CURRENTLY, THROUGH WHICH BROKING HOUSE ARE YOU DEALING? OPTION ICICI Direct.com Kotak Security Sharekhan Motilal Oswal Angle Broking Marwadi Indiabulls HDFC India Infoline Anagram Karvy Total NO. OF RESPONDENT 18 5 23 5 11 28 3 2 4 3 6 100 PERCENTAG E 18% 5% 23% 5% 11% 28% 3% 2% 4% 3% 6% 100%
3% 6% 4% 2% 3% 18% 5% ICICI Direct.com Kotak security Sharekhan motilal Oswal Angle Broking Marwadi India Bulls HDFC India Infoline Anagram Karv y
23% 11% 5%
Here in above chart if we see than the highest market is covered by Marwadi group while second highest is share khan which is very good strength for sharekhan.
Q.- 8 WHICH TYPES OF FACILITIES ARE GIVEN BY YOUR BROKING HOUSE FOR ON LINE TRADING? OPTION Single Screen trading Terminal Online orders on the Phone Online IPO Live tic-by-tic intra day charting Instant order/Trade confirmation in same windows Real time streaming Quotes Research Report Online Mutual Fund Total NO. OF RESPONDENT 13 15 21 7 8 8 19 8 100 PERCENTAG E 13% 15% 21% 7% 8% 8% 19% 8% 100%
Facilities by Broking House
8% 13% Single screen tradind terminal
Above research says that most of brokers provides the phone Online orders on real time online IPO, research report and online 15% orders on phone.
19% online IPO Liv tic-by-tic intra day e charting Instant order/Trade confirmation in same windows Real time streaming quotes Research Report 8% 7% 21% Online mutual Fund
Q.- 9 DOES YOUR FIRM PROVIDE THE SPECIAL SOFTWARE FOR ON LINE TRADING?
OPTION YES NO TOTAL
NO. OF RESPONDENT 11 89 100
PERCENTAGE 11% 89% 100%
Here response says that most of brokers are not providing online software for broking.
Q.- 10 IF YOU TRADE IN DERIVATIVES, IN WHICH INSTRUMENT DO YOU INVEST? INSTRUMENT Futures Calls Puts Arbitrage TOTAL NO. OF RESPONDENT 56 25 15 4 100 PERCENTAG E 56% 25% 15% 4% 100%
Instrument for Invest
F utures calls 56% 25% P uts arbitrage
Here most of the persons are investing in the future because they think that it is safer than call & put & they have not so more tips from brokers for call & put.
Q.- 11 IN WHICH INSTRUMENT OF DERIVATIVES SEGMENT DO YOU TRADE? DERIVATIVE SEGMENT Indices futures Indices options Stock Futures Stock options TOTAL NO. OF RESPONDENT 37 5 43 15 100 PERCENTAGE 37% 5% 43% 15% 100%
Instrument for Trade
37% Indices futures Indices options Stock futures Stock options 43%
Here, from above diagram we can see that investors if invest in derivative than they will invest in stock future first and then in indices future because stock future follow American style of derivatives.
Q.- 12 WHICH TYPE OF TRADER YOU ARE? TYPE Bullish trader Bearish trader Total NO. OF RESPONDENT 75 25 100 PERCENTAG E 75% 25% 100%
Type of Trader
Bullish trader Bearish trader
If we see the picture of stock market two years ago or above picture than it says same thing that most of the traders in the market are bullish trader who trades when the market is up.
Q.- 13 DO YOU HEDGE IN DERIVATIVES?
OPTION YES NO TOTAL
NO. OF RESPONDENT 20 80 100
PERCENTAGE 20% 80% 100%
Above chart says everything to us that in the market investors have not or few knowledge about the derivatives.
Q.- 14 IF YOU ARE BULLISH THEN WHAT STRATEGY DO YOU SUGGEST IN HEDGING? OPTION Buy future, buy put, sell call Buy future, buy put only Buy call, buy put of distance strike price Total NO. OF RESPONDENT 25 65 10 100 PERCENTAGE 25% 65% 10% 100%
Buy future, buy put, sell call Buy future, buy put only Buy call, buy put of distance strike price
As in market everyone is dealing with the tips of broker and from above research it can be known that they most of advice for buy future, buy put only. Then says to sell call if necessary after 1st strategy.
Q.- 15 DO YOU BELIEVE THAT ONE CAN EARN IN DERIVATIVES? OPTION YES NO TOTAL NO. OF RESPONDENT 35 65 100 PERCENTAGE 35% 65% 100%
As more of the investors are unaware from derivatives they have said that it is not possible to earn from derivatives.
Q.- 16 DO YOU BELIEVE THAT ONE CAN EARN IN CALLS & PUTS, THAN TO TRADE IN FUTURE? OPTION YES NO TOTAL NO. OF RESPONDENT 60 40 100 PERCENTA GE 60% 40% 100%
Here In this question if we see most of people has heard about it so the response for positive and negative is nearer. But they believe that in call and put risk is lesser than future.
Q-17 A) Are you satisfied with the facilities given by your company? OPTION YES NO TOTAL NO. OF RESPONDENT 29 71 100 PERCENTAGE 29% 71% 100%
Yes No 71%
In this question if we see than most of the customers want more services from their broker whether it is brokerage, tips or any one. If it is not given than they are not satisfied. Above research shows that investors are unsatisfied by broker in one or another way.
Q-17 B) If no then which segments they should try to improve? OPTION BROKERAGE RATE RATE/TIPS TOTAL NO. OF RESPONDENT 57 43 100 PERCENTAGE 57% 43% 100%
43% Brokerage Rate 57% Rate/Tips
As this graph shows that 2 big problems shown by customers which are created by brokers. But they want mainly low brokerage services.
Q-18 According to you trading is,
OPTION ADVISABLE NOT ADVISABLE TOTAL
NO. OF RESPONDENT 34 66 100
PERCENTAGE 34% 66% 100%
Advisable Not Advisable
If we see the response of the people in this research then 66% of the people are saying that trading is not advisable. Which is due to some of loss in the market by trading.
9. PERIOD OF STUDY
This research study is to be prepared in certain time limit and after certain time limit have to submit it to the company, university and my college too. The time period is allowed for this research study is TWO MONTH which is not enough to receive accurate accuracy in the study.
TOOLS & TECHNIQUES
To make this research study successful many tool & techniques are to be utilized which includes: (1) Gathering the relevant data from different sites and literature
provided by the company. (2) Use of computer plays most important role in the preparation of
this research study.
LIMITATIONS OF THE STUDY
People may have personal bias towards particular investment
option so they may not give correct information and due to which conclusion may be derived.
The time duration of the research is short that’s why the
information is not covered fully.
The area was limited to Rajkot city only, so we can not know
the degree of the literacy outside the city.
The last limitation is Sample size, taken by us is of 300 only;
due to which we may not get the proper results.
• Sharekhan needs to make its marketing team strong and also it should increase marketing activities such as promotional campaigns. • Sharekhan should educate the investors about Derivatives & Commodities by organizing classes, corporate presentations, taking part in consumer fairs, organizing events. • Company should show the benefits of trading on Derivatives & Commodities • Sharekhan can also use Newspapers and Local New Channels as a medium of advertising. • Sharekhan may also use its helpline number for giving education on stock market. • Company may appoint special team for giving education & attracting people towards trading in stock market.
Whenever it comes to the share market, Broker is the main person who performs all the activities on behalf of the client and therefore most of the people prefer it. Now a days Internet is the newer medium for trading but still people do not know how to do transaction online but as Sharekhan is providing this facility also, therefore it is a dual benefit for the company. Therefore the company has also marketed its various services to the people and the benefits of it if they use. There are sufficient no. of people aware about how to trade in
derivative in stock market so this is a good for the stock market industry that at least people are aware about it. Out of survey of 100 respondents, 65% of the investors are
doing their invest in the stock market and 35% in derivatives. But here respondents believe that Sharekhan is providing better
facility of Online trading than other brokers. 71% of respondents are not satisfied with the services of their
brokers. 57% of the respondents are not satisfied with the facility of
brokerage charges of their broker. They say that firm have to take 0.05 or 0.04 paisa in intraday brokerage while 0.20 to 0.25 paisa in delivery base.
Most of people believe that derivative is not advisable for the
Kothari C.R., Research Methodology, New Delhi, Vikas
Publishing House pvt.Ltd. 1978 Websites:
1. 2. 3. 4. 5. 6. 7. 8. 9.
www.Google.com www.bseindia.com www.nseindia.com www.sharekhan.com www.ncdex.com. www.mcx.com www.icicidirect.com www.moneycontrol.com www.NDTVindia.com
NEWSPAPERS: 1. 2. ECONOMIC TIMES TIMES OF INDIA
Name: Gender: Male 21-35 Female 36-50 51-65 Graduate Above 66 Post Graduate Businessmen Govt. Employee Others No
3. Age: 4. Education:
5. Occupation: Professional Employees working Pvt. Firms 6. Do you Trade in Derivatives? Yes
7. Currently, through which trading firm are you dealing? ICICI Direct.com Motilal Oswal Indiabulls Anagram Kotak Security Angle Broking HDFC Karvy
Sharekhan Marwadi India Infoline
8.Which types of facilities are given by your broking house for derivatives? ICICI Direct.com Motilal Oswal Indiabulls Kotak Security Angle Broking Sharekhan Marwadi
9. Does your firm provide special software for online trading? Yes No
10.If you trade in derivative then in which instrument do you invest? Future Arbitrage 11.In which instrument of derivative segment do you trade? Indices future Stock option 12.Which type of trader you are? Bullish Trader 13.Do you hedge in Derivatives? Yes No Bearish Trader Indices Option Stock future Call Put
14.If you are Bullish trader then which strategy do you suggest for hedging? Buy Future, Buy Put, Sell Call
Buy Future, Buy Put Only Buy Call, Buy Put at Distance Strike Price
15.Do you believe that one can earn from Derivatives? Yes No
16.Do you believe that one can earn from calls and puts than from future? Yes No
17A).Are you satisfied with the facilities given by your company? Yes No
17B).If no then in which segment they should try to improve? Brokerage Rates 18.According to you trading is, Advisable Not Advisable Research/Tips