Professional Documents
Culture Documents
This is to certify that the Project work entitled “RISK MANAGEMENT DERIVATIVES
FUTURES AND OPTION” with reference to “KARVY” has been successfully carried out by
Syed Baba Sharfuddin student of MBA bearing Hall Ticket 18081E0026. This work has been
done in the partial fulfillment to award the degree of MASTER OF BUSINESS
ADMINISTRATION by Jawaharlal Nehru Technological University, Hyderabad for the
academic year 2019 – 2020.
External Guide
This is to certify that Mr. SYED BABA SHARFUDDIN, Reg No: 18081E0026, MBA
(Finance) student from Shadan College Of Engineering & Technology, Peerancheru.
Affiliated to JNTUH has successfully completed his project work titled in “Risk
management Derivatives Futures and Options” as part of his course curriculum. And
during the period of 45 days, under my guidance and supervision.
He has completed the assigned project within the time frame. He is sincere,
hardworking and his conduct during the project is commendable.
DECLARATION
I hereby declare that this project report titled “RISK MANAGEMENT DERIVATIVES
FUTURES AND OPTION” submitted by me to the Department of Business Management, Shadan
College of Engineering & Technology affiliated to JNTU, Hyderabad, is a bonafide work
undertaken by me and it is not submitted to any other university or institution for the award of any
degree diploma/certificate or published any time before.
At the outset, I would like to place on record my gratitude to the management Shadan
College of Engineering & Technology for providing me admission to pursue my post graduate
studies in Business Administration. I would like to record my heartfelt thankfulness to our
respected Principal Dr. Mohammad Ateeq ur Rahman sir, Director- Academics Mr. S.A.Muneem
sir, Director- Administration, Dr.B. Srinivas sir and the Head of the Department Mr. Mohd
Ikramullah Aman for their tremendous support and constant guidance, as they were mainly
responsible for smooth conduct and achievement of my work. I express my appreciation of their
influence over the student community for sustained interest in academic work.
I wish to express my thanks to all other faculty members for their kind co-operation during my
project work.
ABSTRACT
The emergence of the marketplace for derivatives products, especially forwards, futures and
options, could be tracked back again to the willingness of risk-averse financial agents to protect
themselves against uncertainties arising out of fluctuations in asset prices.
Derivatives are risk management instruments, which derive their value from an underlying asset.
Listed below are three broad types of participants in the derivatives market Hedgers, Speculators
and Arbitragers. Prices within an organized derivatives market reflect the perception of market
participants about the near future and lead the cost of underlying to the perceived future level.
Recently, the Derivative markets have gained importance with regards to their essential role
throughout the market. The increasing investments in stocks (domestic in addition to overseas)
have attracted my interest in this area. Numerous studies on the consequences of futures and
options listing on the underlying cash market volatility have already been done in the developed
markets. The derivative market is newly were only available in India in fact it is as yet not known
by every investor, so SEBI must do something to create awareness among the investors about the
derivative segment.
TABLE OF CONTENTS
CHAPTER I
INTRODUCTION 11
Objectives 12
Primary Data 12
Secondary Data 12
Limitations 12
Primary Market 14
Secondary Market 14
Checking functions 15
Adjustment of equilibrium 15
Maintenance of liquidity 16
Vision of Karvy 20
Brand of Companies 21
Analysis of WIPRO 24
Analysis of INFOSYS 34
Conclusion 39
Findings 41
Recommendation 42
Bibliography 43
CONTENTS PARTICULARS PAGE.NO
CHAPTER 1 INTRODUCTION 10
RESEARCH METHODOLOGY 12
BIBILIOGRAPHY 43
QUESTIONNAIRE
Chapter-1
INTRODUCTION
1.1 The emergence of the marketplace for derivatives products, especially forwards, futures and
options, could be tracked back again to the willingness of risk-averse financial agents to protect
themselves against uncertainties arising out of fluctuations in asset prices. By their very nature,
the financial markets are marked by an extremely high amount of volatility. Through the use of
derivative products, you'll be able to partially or fully transfer price risks by locking-in asset
prices. As instruments of risk management, these generally usually do not influence the
fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative
product minimizes the impact of fluctuations in asset prices on the profitability and cashflow
situation of risk-averse investors.
1.2 Stock futures are derivative contracts that provide you the energy to get or sell a couple of
stocks at a set price by a specific date. Once you get the contract, you are obligated to uphold the
conditions of the agreement.
It gives traders a competent notion of what the futures price of a stock or value of an index may
very well be.
Based on the existing future price, it can help in identifying the near future demand and offer of
the shares.
Since it really is predicated on margin trading, it allows small speculators to participate and trade
in the futures market by paying a little margin rather than the whole value of physical holdings.
The analysis is likely to"Derivatives" with special reference of futures at the Indian context
and also the inter connected STOCK MARKET was taken in your own behalf sample to its
study. The study can not be said as totally flawless. Any alteration will soon come. The study
includes just made a modest effort at test derivatives market just in India circumstance. The
study isn't centered on the global view of derivatives markets, that is present in NASDAQ,
CBOT etc..
1.4 Objectives
Secondary Data:
Various portals,
www.nseindia.com
Karvyvalue.com
1.6 Limitations
➢ The scrip chosen for analysis is WIPRO, TCS, INFOSYS and the contract taken is
➢ The data collected is totally limited to WIPRO, TCS, INFOSYS of May 2019; hence this
analysis can't be taken.
CHAPTER-2
REVIEW OF LITERATURE
Structure of Indian Securities Market
Primary Market
The principal market is where securities are manufactured. It's in the forex market that companies
sell (float) new stocks and bonds to the general public for the very first time. For our purposes,
you can think about the principal market as the marketplace where a short public offering (IPO)
occurs. To put it simply, an IPO occurs whenever a private company sells stocks to the general
public for the very first time. The principal market can be the marketplace where governments or
public sector institutions raise money through bond offerings.
Secondary Market
Secondary market can be an equity trading avenue where already existing/pre- issuedsecurities
are traded among investors. Secondary market could possibly be either auction or dealer market.
While stock market may be the part of an auction market, Over-theCounter (OTC) is part of the
dealer market. Functions of Stock Exchange
The business of stock market offers a ready market to speculators and investors in commercial
enterprises. It thus, allows the public to get and sell securities already in issue.
It offers opportunities to Jobbers and other members to execute their activities with almost all
their resources in the stock market.
The stock market renders safeguarding activities for investors which enablesthem to create a fair
judgment of a securities. Therefore, directors need to disclose all material facts with their
respective shareholders. Thus, innocent investors could be safeguard from the clever brokers.
In addition, it operate a compensation fund which is always open to investors suffering loss due
due the speculating dealings in the stock market.
Its members managed under rigid group of rules made to protect everyone and its own members.
Thus, this tendency creates the discipline among its members in social life also.
Checking functions
New securities checked before being qualified and admitted to listing. Thus, stock market
exercises rigid control over the actions of its members.
Adjustment of equilibrium
The investors in the stock market promote the adjustment of equilibrium of demand and offer of a
specific stock and therefore avoid the tendency of fluctuation in the costs of shares.
Maintenance of liquidity
The lender and insurance firms purchase large numbers of securities from the stock market. These
securities are marketable and may be converted into cash anytime. Therefore banks prefer to keep
securities rather than profit their reserve. This it facilities the bank operating system to keep up
liquidity by procuring the marketable securities.
Stock exchange give a place for saving to public. Thus, it generates the habit of thrift and
investment among the general public. This habit leads to investment of funds incorporate or
government securities. The funds positioned at the disposal of companies are utilized by them for
productive purposes.
Stock exchange increases the trade, commerce and industry in the united states. it provides
chance to capital to flow in to the most productive channels. Thus, the flow of capital from
unproductive field to productive field really helps to refine the large-scale enterprises.
It plays a significant part in capital formation in the united states. its publicity regarding various
commercial securities makes even disinterested people feel thinking about investment.
The govt. can undertake projects of national importance and social value by raising funds through
sale of its securities on stock market.
According to MARSHAL "Stock market aren't merely the principle theaters of business
transaction, also, they are barometers which indicate the overall conditions of the atmosphere of
business."
Stock exchanges have multiple roles in the economy. This may include the following:
Raising capital for businesses
A stock exchange provides companies with the facility to raise capital for expansion through
selling shares to the investing public.
When people draw their savings and spend money on shares (via an IPO or the issuance of new
company shares of an already listed company), it usually leads to rational allocation of resources
because funds, that could have already been consumed, or kept in idle deposits with banks, are
mobilized and redirected to greatly help companies' management boards finance their
organizations. This might promote business activity with benefits for many financial sectors such
as for example agriculture, commerce and industry, leading to more powerful financial growth
and higher productivity degrees of firms.
Organizations view profits as a opportunity to expand services and products, boost distribution
stations, hedge against volatility, and increase their market share or gain additional necessary
small business assets. A take over bid or even a merger understanding through the money markets
is probably the simplest and most common means for a business to grow by fusion or acquisition.
Profitsharing
Unprofitable and distressed companies may possibly cause capital losses for investors.
Corporate governance
By using a diverse and broad range of owners, organizations have a tendency to enhance
management standards and efficacy to satisfy the requirements of their investors and also the
stricter rules for people corporations imposed by people stock markets and also the national
government. Thus, it actually is alleged that people employers (organizations who are possessed
by investors that are associates of all exchange stocks on people trades ) generally have better
direction records compared to privately held organizations (those organizations at which stocks
are not publicly traded, frequently possessed by the business enterprise creators, their very own
heirs and families, or else where with way of a tiny band of shareholders ). Maybe not
surprisingly assert, a few well-documented cases are understood where it is in fact alleged there
has been considerable slippage in corporate governance to get several public businesses. The
dotcom bubble in the late 1990s, and also the subprime-mortgage catastrophe in 2007 08, are
classical kinds of company mismanagement.
Instead of other businesses that want huge capital outlay, buying shares is available to both large
and small stock investors just because a person buys the amount of shares they are able to afford.
Therefore, the STOCK MARKET provides the chance for small investors to possess shares of the
same companies as large investors.
At the stock market, share prices rise and fall depending, largely, on financial forces. Share prices
have a tendency to rise or remain stable when companies and the economy generally show signs
of stability and growth. An financial recession, depression, or financial meltdown could
eventually result in a currency markets crash. Therefore, the movement of share prices and
generally of the stock indexes is definitely an indicator of the overall trend throughout the market.
The Bombay STOCK MARKET (BSE) can be an Indian stock market located at Dalal Street,
Mumbai (formerly Bombay), Maharashtra, India.
Established in 1875, the BSE is Asia’s first stock market, It claims to be the world's quickest
stock market, with a median trade speed of 6 microseconds, The BSE may be the world's
11th largest stock market with a standard market capitalization of $1.83 Trillion by March, 2019.
A lot more than 5500 companies are publicly listed on the BSE
CHAPTER-3
COMPANY ROFILE
ABOUT THE BUSINESS
Vision of Karvy:
To accomplish & sustain market leadership, Karvy shall shoot for complete client satisfaction, by
combining its human and technological resources, to supply top notch quality services. Along the
way Karvy shall make an effort to meet and exceed customer's satisfaction and set industry
standards.
NBFC (loans to individuals, micro and smaller businesses), Data management, Forex&
currencies, Registrar Transfer agents, Data Analytics, GENERAL MARKET TRENDS amongst
others. Karvy can be authorized to supply Aadhar Card enrollment, updating and Aadhar PVC
services.
Karvy prides itself on remaining customer centric as all times through a mixture of industry
leading technology, Professional management and a broad network of offices across India.
Karvy is focused on its quest as the same Opportunity Employer and believes in the rights for
differently-abled persons.
Brand of Companies
• KarvyInc, USA
• Market Excellence Award, Commodities - Metal” from India’s premier stock market BSE
- the SKOCH-BSE
• Order of Merit award and the SKOCH - BSE Aspiring Nation award - in recognition of its
efforts to teach, empower and helpcreate an enlightened corps of financial market
01-05-2018 to 25-05-2018.
Table-1:
If a person buys Inch lot i.e. 2400 Futures of WIPROon 1st May, 2018 and sells 25th May, 2018
then he'll get yourself a Profit of Rs536.45 -Rs483.7 = R S 42.75 per share. So, he will get
yourself a Gain of Rs.102600 i.e.,42.75*2400.
The trading week demonstrated a greater and Low strike costs or exercising prices to the WIPRO
futurescontract.
There always exist an immediate result of Price movements on receptive interest and contracts
exchanged.
The final cost of WIPRO by the end Of the contract period isRs 536.45 that is recognized as
settlement price.
Graph-3
530
520
510
500
480
30 -Apr-18 05-May-18 10-May-18 15-May-18 20 -May-18 25 -May-18 30-May-18
In the event the purchase price in to the near future would be Somewhat less compared to payoff
price, when compared with buyer of the other receives
benefit.
In the event the worth in to the long run is Somewhat less compared to payoff price, when
compared with this seller incurs losses.
The future cost of WIPRO is going united with all the Market price tag.
In the event the purchase price in to the near future would be Somewhat less compared to payoff
price, when compared with buyer of the other receives
benefit.
In the event the worth in to the long run is Somewhat less compared to payoff price, when
compared with this seller incurs losses.
Graph -4
2600
2550
2500
2450
2400
2350
2300
2250
30 -Apr-18 05-May-18 10-May-18 15-May-18 20 -May-18 25 -May-18 30-May-18
MAKING INTERPREATION:
If a person buys 1 lot i.e. 250 futures of TCS on 1st May, 2107 and sells on 25th May, 2018
then he will get a profit of 2624.6 – 2282.25= Rs 342.35 per share. So, he will get a profit of
Rs 85587 i.e., Rs342.35*250.
The closing price of TCS at the end of the contract period is Rs 2624.6 and this is considered
as settlement price.
Table-4
Mark to
Date Market Settlement Price
2-May-18 0 2282.25
3-May-18 10625 2324.75
4-May-18 - 2315.8
2212.5
5-May-18 3650 2330.5
8-May-18 6237.5 2355.45 Graph -5
8-May-18 2300 2364.65
10-May-18 -6875 2336.75
11-May-18 3725 2351.65
12-May-18 3612.5 2366.1
15-May-18 -537.5 2363.85
16-May-18 15450 2425.75
17-May-18 6325 2451.05
18-May-18 2526.3
18812.
5
18-May-18 - 2508.05
4312.5
22-May-18 4612.5 2527.5
23-May-18 -487.5 2525.55
24-May-18 8275 2558.65
25-May-18 2624.6
16487.
5
CHART INTERPREATION MARK TO MARKET PROFIT &
LOSS FOR TCS FUTURES
25000
20000
15000
10000
5000
0
30-Apr-18 05 -May-18 10-May-18 15 -May-18 20 -May-18 25 -May-18 30-May-18
- 5000 Graph -6
-10000
MAKING INTERPREATION
The future price of TCS is moving together with the market price.
If the buy price into the future is significantly less than the settlement price, compared to the
buyer of another gets profit.
If the value into the future is significantly less than the settlement price, compared to the
seller incurs losses
ANALYSIS OF INFOSYS: -
Table-5
Date Underlying Value Futures Price Open Int No. of contracts
880
870
860
850
840
830
820
30 -Apr-18 05-May-18 10-May-18 15 -May-18 20-May-18 25-May-18 30-May-18
INTERPREATION:
If an Individual Buys 1 lot i.e. 500 futures INFOSYS on 1st May, 2107 and sells on 25th
May, 2018 then he will get yourself a benefit of 883.3 - 826.2= R S 57.1 per share.
The closing Price of INFOSYS at the end of the contract time period is Rs 883.3 which
is Recognized as settlement price.
Table-6
Date Mark to Market Settlement Price
2-May-18 0 826.2
10000
5000
0
30-Apr-18 05 -May-18 10-May-18 15 -May-18 20 -May-18 25 -May-18 30-May-18
- 5000
-10000
Graph-8
CHART INTERPREATION THE PRICE
MOVEMENT OF
SPOT AND FUTURES
880
880
870
860
850
840
830
820
810
30 -Apr-18 05 -May-18 10 -May-18 15-May-18 20-May-18 25-May-18 30-May-18
MAKING INTERPREATION
The future price of INFOSYS is moving combined with the market price.
If the buy price into the future is significantly less than the settlement price, compared to
the buyer of another gets profit.
If the value into the future is significantly less than the settlement price, compared to the
seller incurs losses
CHAPTER-5
Stock futures are Hedging contracts That Provide you the Capacity to purchase or offer a
group of stocks at a predetermined price with a certain day. Once you purchase the contract,
then you're bound to maintain the details of the agreement.
It offers traders a better idea about precisely what the futures market of a stock or value of a
index is very likely to be.
Predicated on the present prospective price, it aids in finding out the near future demand and
distribution of their stocks.
As it's founded on margin trading, then it lets small speculators to trade and participate in the
futures market by investing in a little margin rather than the complete value of actual
holdings.
In My Analysis all of the upcoming stock price are moving with the market price of assets.
Infosys Future Prices are largely more than inherent asset value Therefore the investors
largely makes gains
Whereas in comparison with Wipro and Tcs the worthiness of prospective costs and value of
underlying assets are nearly same that the investors are earning ordinary profits
Stock stocks are derivative contracts That supply you the ability to sell or get a handful stocks
at a predetermined price by a particular date. Upon getting the contract, then you're bound to
maintain the terms of this deal.
It Gives traders a more capable idea of what exactly the futures market of a stock or value of
the indicator might just be.
According On the existent prospective price, it helps in pinpointing the future requirement
and offer of these stocks.
Considering It actually is centered on margin trading, also it lets small speculators to trade
and participate in the futures market by investing in just a tiny margin in contrast to the
complete value of actual holdings.
Inside My Investigation All the long run Stock cost are moving with the marketplace price of
underlying resources. From all businesses I have plumped for Wipro, TCS, Infosys
Infosys Prospective Costs are largely a Whole Lot more than inherent asset value hence that
the investors largely makes gains
Where compared with Wipro and Tcs the value of prospective costs and value of assets will
be nearly Same that the shareholders are making ordinary profits.
5.2 Findings
In cash market the profit/loss of the Investor is dependent on the marketplace price of their
underlying advantage. The buyer could incur enormous profits or he may possibly incur Huge
losses. But
In derivatives Segment that the investor enjoys huge profits with limited drawback.
In cash market the investor needs to pay the Full total money, however in derivatives that the
investor must pay gross profits or premiums, which can be some percentage of overall
contract.
In derivative section the profit/loss of The choice writer only depends upon the changes of the
underlying asset.
5.3 Recommendation
The derivatives market is newly were only available in India in fact it is as yet not known by
every investor, so SEBI must do something to create awareness among the investors about the
derivative segment.
In order to raise the derivatives market in India, SEBI should revise a few of their regulations
like contract size, participation of FII in the derivatives market.
Contract size ought to be minimized because small investors cannot afford anywhere near this
much of huge premiums.
SEBI must take measures to use effectively the derivatives segment as an instrument of
hedging.
Bibliography
www.nseindia.com
www.bseindia.com
www.karvyonline.com
Economictimes.indiatimes.org
www.moneycontrol.com