ANANDRATHI

SUMMER PROJECT/INTERNSHIP REPORT ON: IMPACT OF DERIVATIVES ON INDIAN FINANCIAL MARKET AT- ANANDRATHI

SECURITIES PRIVATE LIMITED,RANCHI
Submitted in partial fulfillment for the Post Graduate Diploma Course in Business Management(Finance) at Xavier Institute of Social Service, Ranchi. (2007-2009)

By : ANANDPRAKASH Under The Guidance of: Prof. Bhaskar Bhawani

XAVIER INSTITUTE OF SOCIAL SERVICE

ANANDRATHI

Approval Sheet
This is to certify that the dissertation entitled “Impact of Derivatives on Indian Financial Market” has been prepared by Anand prakash in partial fulfillment of Post Graduate Diploma in Business Management with specialization in Finance at Xavier Institute of Social Service (XISS), Ranchi. This embodies data collected & analyzed by the candidate under the guidance of Prof. Bhaskar Bhawani of the institute, member of faculty of XISS department of Finance, Ranchi and is hereby approved as indicating the proficiency of the candidate.

Prof. Bhaskar Bhawani Department of Finance Research Guide

Dr . Fr. B.A.Ekka,s.j. Director,XISS

Prof Dr.RatneshChaturvedi EXTERNAL EXAMINER H.O.D ,Department of Finance

Table of Contents
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ANANDRATHI Acknowledgements...............................................................................................4 Areas of concern faced by the organization and their relevance..........................5 DEFINITION:.................................................................................................8 Derivatives :.......................................................................................................8 Types of Derivatives:..........................................................................................9 Techniques of managing risk............................................................................16 Futures payoff.................................................................................................16 Applications of futures.....................................................................................17 Options Payoffs...............................................................................................19 Options............................................................................................................21 Applications of Options....................................................................................23 Payoff for seller of put options at different strike............................................26 Swaps 27 Other Derivatives:...........................................................................................28 Participants in the market:...............................................................................29 Hedgers...........................................................................................................29 Arbitrageurs....................................................................................................30 CORE STRNGTHS.............................................................................................40 OUR FINDINGS....................................................................................................48 XAVIER INSTITUTE OF SOCIAL SERVICE

ANANDRATHI CONCLUSIONS.....................................................................................................51 RECOMMENDATIONS...........................................................................................53 REFERENCES.......................................................................................................54

Acknowledgements

I acknowledge with gratitude the opportunity that was provided to to me by Mr. SHASHANK training at BHARDWAJ undergo vocational

ANANDRATHI, RANCHI and his constant inputs on finer points for my project. This project bears the imprint of many people. Firstly, I would like to extend a debt of thanks to my project guide, Miss RASHMI GUPTA, and Miss PUNAM who gave willingly of their time and shared with me their experiences and the plethora of knowledge in this field.

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ANANDRATHI

I would also like to acknowledge Mr. ANAND SINHA, Mr. KALESHWAR YADAY at ANANDRATHI securities for guiding me through and reviewing the project to help me cover the entire scope of my project.

Areas of concern faced by the organization and their relevance

• Volatility of the stock market
The highly volatile nature of the stock market coupled with the high degree of uncertainty brings ahead the most difficult aspect of operations. Dealing with derivatives makes it all the more complex since derivatives is highly risky method of trading than other trading methods. Therefore here the need arises to possess the best of resources in order to equip with the best and most hidden news about the market as well as the most accurate in-house technical analysis.

• Client Management

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This is generally negligible for exchange traded derivatives but needs careful attention in the case of OTC derivatives. making payments or accounting for them etc. XAVIER INSTITUTE OF SOCIAL SERVICE . • Various types of risks:  Credit risk or default risk: The risk that a counter party will default on its obligations. in placing orders. • Cash settlement Due to mark to market nature of the transactions cash settlement becomes very crucial • Handling derivatives Exposures The highly volatile and complex nature of derivatives makes it imperative that every firm that uses derivatives must therefore exercise considerable caution and care in handling its derivative exposures. hence it becomes another major challenging aspect.  Operational Risk: The risk that errors may occur in carrying out operations.ANANDRATHI The clients are most demanding due to the high amount of money required in derivative trading as security.

especially as most of the models work well most of the time. volatility far exceeds historically based estimates) or due to undetected flaws in the models.  Liquidity risk: The risk that a derivative cannot be purchased or sold quickly enough at a fair price. There can be occasions when the models fail to give accurate price data because the assumptions no longer hold. Many traders especially the less experienced ones take the models as infallible gospel. (E. which fully complies with all pricing policies. The focus of discussion that follows will be mainly on market and operational risk. which the trader may not understand. may thus still end up with unexpected and disastrous results. XAVIER INSTITUTE OF SOCIAL SERVICE . The discussion will emphasize on perspective of a hedger.  Market risk: The risk of adverse changes in the market price of a derivative.g. A trade.ANANDRATHI  Model Risk or formula risk: Options and many synthetic derivatives are priced using complicated mathematical formulae. due to lack of liquidity in the market. but the same principles can be applied by an entity using derivatives for trading.  Legal Risk: The risk that the law or regulatory rule may be changed or re- interpreted causing an adverse financial impact on a derivative transaction. This risk is tending to increase with the increased use of computerized pricing models based on elaborate mathematics. which make numerous assumptions. Liquidity risk is greater for OTC derivatives.

more basic underlying variables. A security derived from a debt instrument. in a contractual manner.ANANDRATHI DEFINITION: Derivatives : Derivative is a financial instrument whose value depends on the values of others. it is traded actively on many exchanges. called bases (underlying asset. 1956 (SC (R) A) defines derivatives to include— 1.) In recent year. Or. risk instrument or contract for differences or any other form of security. forex. Now. or index of prices of underlying securities. (The underlying asset can be equity. In the Indian context the Securities contracts (Regulation Act). share. Derivative is a product whose value is derived from the value of one or more basic variables. loan whether secured or unsecured. Derivatives are securities under the (SC (R) A) and hence the trading of derivatives is governed by the regulatory framework under the (SC (R )A). index or reference rate). 2. A contract which derives its value from the prices. commodity or any other asset. Derivatives have become increasingly important in the field of finance. XAVIER INSTITUTE OF SOCIAL SERVICE .

providing economic agents a wider range of risk management strategies 5.ANANDRATHI In Indian capital market derivative is allowed in organized exchange from year 2001 by government after abolition of the traditional Badla System. Increased integration of national financial markets with the international financial markets. reduced risk as well as transactions costs as compared to individual financial assets. Development of more sophisticated tools. Increased volatility in asset prices in financial markets 2. Innovations in the derivatives markets. Types of Derivatives: There are four types of derivatives  Forwards  Futures XAVIER INSTITUTE OF SOCIAL SERVICE . Marked improvement in communication facilities and sharp decline in their costs 4. Factors driving the growth of derivatives: 1. 3. which optimally combine the risks and returns over a large number of financial assets leading to higher returns.

ANANDRATHI  Options  Complex Derivatives Forwards Futures Options Complex Derivative  Inter-bank foreign exchange forwards  Specific  Commodit y futures  Financial Futures  Commodit y options  Swaps  Forward rate  Financial options agreements  Range forwards Forward Contract: XAVIER INSTITUTE OF SOCIAL SERVICE .

ANANDRATHI It is an agreement between two parties to buy or sell. Future contract trades in future market.An auction market in which participants buy and sell commodity/future contracts for delivery on a specified future date. as the case may be a commodity/financial instrument/currency at a predetermined future date at a price agreed when the contract is entered into. These price changes occur so that the yield on an already –issued security is the same as that of a new one issued at the current rate. A futures contract is thus a ‘standardized’ forward contract. Interest Rates futures: The price of an interest bearing securities like bills. Types of financial Futures: Categorization on the basis of the type of risk each is intended to cover. Futures Contract: It is a contract to buy or sell a standard amount of a standardized or predetermined grade of a certain commodity at a predetermined location on a predetermined future date at a pre-agreed price. Future Market: . Volume in the futures market usually increases when the stock market outlook is uncertain. XAVIER INSTITUTE OF SOCIAL SERVICE . This is a cash market transaction in which delivery of the commodity is deferred until after the contract has been made. bonds and debentures is inversely related to the prevailing market rate of interest.

Currency Futures: These contracts are used for hedging by exporters and importers.ANANDRATHI Interest rate futures are used for hedging by banks. At times repurchases may compel the fund XAVIER INSTITUTE OF SOCIAL SERVICE . pension funds. They are of particular use to unit trusts. Unlike stocks indices are not prone to price manipulation since a variety of stocks can be included Trading in the underlying securities is costlier compared to trading in derivatives on account of brokerages etc. insurance companies etc. Index futures are cost effective derivative instruments than derivatives on individual stocks. investment trusts. financial institutions and large companies who face huge foreign exchange exposures. Derivatives also bring many advantages from the perspective of mutual funds. The trading activity of the open-ended fund depends on the magnitude of sales. Stock index futures are meant for hedging and speculation on the general level of stock market prices. Derivatives allow the portfolio managers to achieve their goals with relative ease and in a cost-effective manner without being subject to the hassles associated with trading in underlying securities. pension funds and others whose assets and liabilities can be affected by changes in interest rates. Stock Index Futures: These are futures contracts on a popular stock market index. In this market short hedgers are those seeking protection against raising interest rates while long hedgers are those seeking protection against falling interest rates. financial institutions. banks.

governments. Index futures effectively take care of these problems. the unanticipated component in the price level changes. cost of living allowance or variable price supply contracts. the actual prices at the time of trading tend to be different. This would lead to a number of problems. Inflation cannot be avoided but futures based on cost of living index can be used to hedge against unanticipated inflation. The threat of prices coming down also looms largely over such activity. All the stocks comprising the portfolio may not be highly liquid. Index futures can also be employed to neutralize the impact of any possible adverse movement in the markets. These futures are used by provident and pension funds. larger companies and others who face obligations related to price level such as dearness allowance. Firstly it is very difficult to liquidate the stocks in accordance with the portfolio proportion. Cost of living index Futures These are also called inflation futures and are based on a specified cost of living index. While the sale and repurchases are pegged to the NAV. Difference contract: between Forward contract and Futures XAVIER INSTITUTE OF SOCIAL SERVICE .ANANDRATHI manager to off load a portion of the portfolio.

Owing to the differences between purchases in the spot market and futures market. Spot and futures prices: Financial Instruments: When you buy a security. you have a choice. date and delivery conditions are standardized) While there is no secondary market for forward contract.ANANDRATHI A forward contract is a tailor made contract (the terms are negotiated between buyer and seller) whereas a futures contract is a standardized contract (quantity. This means that profits and losses on futures contracts are settled daily. In a futures contract. Forward contracts are settled on the maturity e whereas futures contracts are marked on a daily basis. however a margin is required. futures contracts are traded in organized exchanges. you make payment at a specified time in future and hence get the benefit of ownership from that point onwards. Usually no collateral is required for a forward contract. If you buy in the future market. Forward contracts usually end with deliveries. you make payment now and you are entitled to the benefits of ownership (like dividends and interest) from now onwards. You can buy it in the spot market and get immediate delivery or you can buy it in the futures market and obtain deferred delivery. whereas futures contracts are settled with the differences. Spot and Futures Prices: Commodities: XAVIER INSTITUTE OF SOCIAL SERVICE . If you buy in the spot market.

Futures and Hedging: The type of futures contract a firm wants may not be available. the gain is on 2 counts: The interest is earned on the money as the payment is deferred There is saving on storage. you have to forego the convenience of having the commodity readily on hand. In the above case. rather than the spot market. It is as easy to take a short position in futures as it is to take a long position 3. insurance and wastage costs as there is no need to store the commodity. Such a substitution is called cross-hedge. For e. When a firm resorts to cross hedging it must take into account how the relative prices move. XAVIER INSTITUTE OF SOCIAL SERVICE .g. for e. if they both tend to move in unison. soybean oil producer may not be able to get soybean oil future contracts. There is no need for an initial cash flow 2. it should know the relationship between the movements of the soybean oil prices and groundnut oil prices. it may have to make to with some surrogate like groundnut oil.g. The wide range of commodities and financial instruments on which futures contracts are available exceeds anything available in other markets. But against the advantages.ANANDRATHI If you buy a commodity in the futures market. In such a case. It is easy to close a futures contract by an offsetting trade 4. Thus the advantages that futures provide over other hedging devices are: 1.

g. E. A speculator buys a 2-month nifty index futures contract when Nifty stands at 2000. The underlying asset in this case is Nifty portfolio. XAVIER INSTITUTE OF SOCIAL SERVICE . When the index moves up the long futures position starts making profit and vice versa.ANANDRATHI Techniques of managing risk Futures payoff Payoff for buyer of futures: Long futures The payoff for a person who buys a futures contract is similar to a person who holds an asset.

His short futures position will now start making profits. Now if the price of the security falls. E. sell futures E.10. XAVIER INSTITUTE OF SOCIAL SERVICE . it will also lead to fall in prices of the futures. At the same time he shorts his position on the futures of the same stock after paying some margin of about Rs. When the index moves up the short futures position starts making profit and vice versa. Applications of futures Hedging: Long security.ANANDRATHI Payoff for seller of futures: Short futures The payoff for a person who sells a futures contract is similar to a person who shorts an asset.g. will be offset by the profit he makes on his short futures position.g. A speculator sells a 2-month nifty index futures contract when Nifty stands at 2000. An investor’s security’s value starts decreasing from 500 to 470. Therefore the losses he suffered on the security. The underlying asset in this case is Nifty portfolio.

E.g.1. 000 i. costing 1 lakh Rs. On the futures expiration date.ANANDRATHI Speculation: Bullish security.000 for a period of 2 months i.10 on futures position.e. ABC Ltd. 1025 and seem overpriced. sell futures Arbitrage: Overprices futures: buy spot. buy futures Just as the case when investors buy securities in the anticipation that its price is likely to increase in future. he makes a profit of Rs. The security trades at Rs.e. 00. 10. An investor buys 100 shares. Incase of futures the investor buys 100 security futures for which he pays a margin of Rs 20000. One-month futures trade at Rs. 1015. Trades at Rs. Speculation: Bearish security. But this should be done only when the cost of borrowing funds is less than the arbitrage profit possible. sell futures Arbitrage opportunity arises when the future price deviates substantially from its fair value. 2 months later the security closes at 1010 and he makes a profit of 1000 on an investment of Rs.15 on the spot position and Rs. Sell the security. An arbitrageur will borrow funds and buy the security on the cash market at 1000. Simultaneously sell futures on the security at 1025.20. E. Futures position expires with the profit of Rs. 400 on an investment of Rs.g. The result is a risk less profit of Rs. 1000 and the 2 month futures trades at Rs. let’s consider the security closes at Rs. an annual return of 12%. the same principle works for futures contract. On the expiration day. Take the delivery of the security purchased and hold it for a month. 1000. XAVIER INSTITUTE OF SOCIAL SERVICE . an annual return of 6%.1006.

the spot price exceeds the strike price. Payoff profile for writer of call options: Short Call XAVIER INSTITUTE OF SOCIAL SERVICE . he makes a profit. If the spot price is less then the strike price. sell spot Options Payoffs Payoff profile for buyer of call options: Long Call A call option gives the buyer the right to buy the underlying asset at the strike price specified in the option. If upon expiration. His loss in this case is the premium he paid. The profit/loss he makes depends on the spot price of the underlying.ANANDRATHI Arbitrage: Under priced futures: buy futures. he lets his option un-exercised.

His loss in this case is the premium he paid for buying the option. If upon expiration the spot price is below the strike price. The profit/loss that the buyer makes on the option depends on the spot price of the underlying. he makes a profit.ANANDRATHI Payoff profile for buyer of Put options: Long put A put option gives the buyer the right to sell the underlying asset at the strike price specified in the option. Payoff profile for writer of Put options: short put XAVIER INSTITUTE OF SOCIAL SERVICE . If the spot price is higher then the strike price. he lets his option expire unexercised.

to buy or sell a particular commodity or instrument or asset. The date at which the option expires or matures is called the expiration date or the maturity date. The price at which the option holder can buy or sell the underlying asset is called the exercise price or strike price. The commodity or instrument or asset covered by the contract is called the ‘underlying’ commodity or instrument or asset. The person who acquires the right is the option holder or buyer and the counter party is known as the option seller or writer.ANANDRATHI Options An option is a contract between two parties whereby one party acquires the right. but not the obligation.  American Option: The options that can be exercised at any time up to the expiration date. XAVIER INSTITUTE OF SOCIAL SERVICE . at a specified price on or before a specified date.  Put Option: It gives the holder the right but not the obligation to sell an asset by a certain date for a certain price  Option Premium: The price at which the option buyer pays to the option seller.  Call Option: It gives the holder the right but not the obligation to buy an asset by a certain date for a certain price.

the put is OTM if the index is above the strike price.e. If the case of put.  Out of the money Option: It is an option that would lead to a negative Cash flow if it were exercised immediately.Options have great leveraging power. spot price<strike price). The Advantages of Options: • Cost Efficiency: . An investor can obtain an option position that will mimic a stock position almost identically. but at a huge cost savings. A call option on the index is out of the money when the current index stands at a level. A call option on the index is said to be in the money when the current index stands at a level higher than the strike price (i. XAVIER INSTITUTE OF SOCIAL SERVICE .e.ANANDRATHI  European options: The options that can be exercised on the expiration date itself. For example. In the case of put. Spot price>strike price). the put is ITM if the index is below the strike price. An option is at the money when the current index equals the strike price. in order to purchase 200 shares of an $80 stock. which is less than the strike price (i.  In the Money Option: It is an option that would lead to a positive cash flow to the holder if it were exercised immediately.  At the money Option: It is an option that would lead to zero cash flow if it were exercise immediately.

However. The investor has to pick the right call to purchase (a topic for another discussion) in order to mimic the stock position properly. Applications of Options XAVIER INSTITUTE OF SOCIAL SERVICE . the total outlay would be only $4. There are many ways to use options to recreate other positions. However. Options are a very flexible tool. then we have a higher percentage return. It really depends on how you use them. known as stock replacement. and this also makes them safer than stocks.ANANDRATHI an investor must pay out $16. is not only viable but also practical and cost efficient.000 to use at his or her discretion. it is not quite as simple as that. • More Strategic Alternatives: . We call these positions synthetics. When they pay off.Depending on How You Use Them: . Options can be less risky for investors because they require less financial commitment than equities. Obviously.We don't need a calculator to figure out that if you spend much less money and make almost the same profit.There are situations in which buying options is riskier than owning equities.The final major advantage of options is that they offer more investment alternatives.000 (2 contracts X 100 shares/contract X $20 market price). • Higher Potential Returns: . that's what options typically offer to investors. this strategy. The investor would then have an additional $12. and they can also be less risky due to their relative imperviousness to the potentially catastrophic effects of gap openings. if the investor were to purchase two $20 calls (with each contract representing 100 shares).000. Options are the most dependable form of hedge. • Less Risky . but there are also times when options can be used to reduce risk.

A one month call with a strike of 1225 3. Speculation: Bullish security. A one month call with a strike of 1275 5. A one month call with a strike of 1300 XAVIER INSTITUTE OF SOCIAL SERVICE . which call option should be purchased given a number of one-month calls trading. the stock will lose value and the put options will The downside to the buyer of the call option is limited to the option premium. Therefore the next question arises. The options available are: 1. buy the right number of put options with the right strike price. buy calls or sell puts There are 2 ways in which options can be used to benefit from the upward movement in the underlying security. Assume the current price level is Rs 1250. When the stock price falls. A one month call with a strike of 1250 4.ANANDRATHI Hedging: Have underlying buy puts To protect the value of the portfolio from falling below a particular level.   Buy call options Sell Put options Put options can be purchased for a particular stock of concern.g. However his upside is unlimited. E. ensuring that the value of the portfolio does not fall below a particular level.  gain. the portfolio will lose value and put options bought will gain.  Put options can also be purchased on the index if the concern is for the overall portfolio. When the index falls. risk-free rate is 12% per year and volatility of the underlying security is 30%. A one month call with a strike of 1200 2.

Payoff for buyer of call options at different strikes As the writer of puts. the buyer simply loses the small premium amount of Rs 27. if the price of a security falls to 1230 and the investor has sold a put XAVIER INSTITUTE OF SOCIAL SERVICE .50.ANANDRATHI The selection of option among these depends on how strongly one feels the upward movement of the market as well as the risk one is willing to take. Its execution depends on the unlikely event that the underlying will raise by more then 50 points on the expiration date. The call with a strike of 1300 is deep out-of-money. E. The call with a strike of 1200 is deep in-the-money and hence trades at a higher premium. The call with a strike of 1275 is out-of-money and trades at a low premium. there is limited upside and an unlimited downside. In the more likely event of the call expiring out of the money.g.

Payoff for seller of put options at different strike  Speculation: Bearish security. the buyer will exercise the option and the seller will end up losing Rs. sell calls or buy puts XAVIER INSTITUTE OF SOCIAL SERVICE . Taking into account the premium earned the net loss is Rs.5.70.20.ANANDRATHI with an exercise of 1300.

Two types of swaps: • Interest Rate swaps: It is an agreement between 2 parties to exchange interest obligations or receipts in the same currency on an agreed amount of notional principal for an agreed period of time. The net interest differential is paid or received.ANANDRATHI Payoff for seller of call option at various strikes Swaps A swap transaction is one in which 2 or more party’s exchange. XAVIER INSTITUTE OF SOCIAL SERVICE . as the case may be.   There is no exchange of principal repayment obligations It is structured as a separate contract distinct from the underlying loan agreement   It is applicable to new as well as existing borrowings It is treated as an off the balance sheet transaction. Main characteristics are:  It effectively translates a floating rate borrowing into a fixed rate borrowing and vice versa. one set has predetermined payments for another.

In the process range forwards provide protection against extreme variations in the exchange rate. Range Forwards These are used in foreign exchange markets as a variant of the standard forward exchange contract. Here instead of quoting a single forward rate. it is merely an agreement that fixes the rate of interest for the future. a quotation is given in terms of a range.ANANDRATHI • Currency Swap: It is an agreement between 2 parties to exchange payments or receipts in one currency for payments or receipts in another. Swaptions XAVIER INSTITUTE OF SOCIAL SERVICE . No actual borrowing or lending is involved. Currency swaps involve:    An exchange of principal amounts today An exchange of interest payments during the currency of the loans A re-exchange of principal amounts at the time of maturity Reasons for swaps: Spread compression Market segmentation Market saturation Other Derivatives: Forward Rate Agreements It is a contract between a bank and a customer who gives the customer a guaranteed future rate of interest to cover a specified sum of money over a specified period of time in the future.

The interest rate on a loan has three components. a hedger needs to XAVIER INSTITUTE OF SOCIAL SERVICE . the borrowing cost for the institution concerned. a fall in price. in return for a regular payment. In order to hedge a position. Credit derivatives involve the third element. Commodity-linked Loans and Bonds A commodity linked bond would involve a loan to a borrower in which the interest payable and/or repayment schedule is linked to a commodity price. A credit derivative is a default swap in which one party swaps the default risk alone with a counter party. Credit derivatives These are based on credit risk of loans. If the commodity price raises the debt service obligation rises by a predetermined margin and in the other case. Swaptions can be used to hedge uncertain cash flows. and a credit risk premium. the latter agrees to pay the first party in the case of default by the borrower.ANANDRATHI It is a contract by which a party acquires an option to enter into a swap. the debt service obligation is reduced subject to a minimum debt service obligation. loan deposit spread. Participants in the market: Hedgers These are market players who wish to protect an existing asset position from future adverse price movements. A call swaption gives the purchaser the option of entering into a swap as a floating ratepayer.

increased confidence of the investors in the Indian market.required by hedgers would be very expensive Arbitrageurs These are traders and market makers who deal in buying and selling futures contracts hoping to profit from price differentials between markets and/or exchanges.ANANDRATHI take an equal and opposite position in the futures market to the one held in the cash market. In general they buy futures contracts when they expect futures prices to rise and sell futures contract when they expect futures prices to fall. foreign exchange reserves at an all-time high of more XAVIER INSTITUTE OF SOCIAL SERVICE . Speculators have no position to protect and do not necessarily have the physical resources to make delivery of the underlying asset nor do they necessarily need to take delivery of the underlying asset. They take positions on their expectations of futures price movements and in order to make a profit. INDIAN FINANCIAL MARKET: Today--with the ‘FEEL GOOD' factor about India in the global arena rising. Speculators provide liquidity to the markets and without them the price protection .  Speculators A speculator is a one who accepts the risk that hedgers wish to transfer.insurance . Sensex looking more attractive than ever before.

7 billion as of March 31. With a view to enabling banks to raise resources overseas. Economic reforms in India since July 1991 have accelerated growth. The rise in the savings rate has with an increase in the rate of growth of GDP over the last three years. Financial intermediaries comprises of public financial institutions. Their foreign currency borrowings have been subject to the prudential limit of 25 per cent of their TierI capital. controlled. The rate of savings in India is constantly rising. Financial Intermediaries : A structural change was noticed in the Indian financial system with the establishment of a host of financial intermediaries during the second phase of evolution of the system. the Indian economy has seen a great transformation from a closed. liberalised and one of the fastest growing economies of the world. External debt exposure to financial intermediaries is regulated.ANANDRATHI than $140 billion --is the most susceptible period for the regulators of the Indian financial sector. enhanced stability and strengthened both external and financial sectors. These limits amounted to US $ 2. 2006. the investors find Indian market very attractive. the latest monetary policy announcement on October 31. slow growing economy to a more open. or US $ XAVIER INSTITUTE OF SOCIAL SERVICE . The gross domestic savings in the year 2005-06 is estimated at 1156809. In recent years. commercial banks. housing bank etc. NBFCs. particularly SEBI and RBI. 2006 has enhanced this limit to 50 per cent of their Tier I capital. mutual funds. higher growth trajectory. Foreign Currency Borrowings : In India. In spite of the strict vigilance by the regulators. suggesting that the economy is transiting to a sustainable.

etc. credit cards. Non Banking Finance Companies. profitability. The aggregate foreign investment (FDI plus FII) limit for the private sector banking has been raised to 74 percent in the recent country budget. the CRR will be 6%. deregulation has opened new opportunities for banks to increase revenue by diversifying into investment banking. whichever is higher.ANANDRATHI 10 million. The RBI hiked the CRR by 50 basis points to 5. securitization. Further.5 per cent in two stages on 23 December 2006 and 6 January 2007. Currently the CRR is 5. Banking Companies : The banking sector is the soul-life-blood of liberalization period. asset quality and risk management. the financial system in India.Cash Reserve Ratio (CRR) : CRR is the amount of cash reserve that is required to be maintained by commercial banks in India with the RBI. underscoring the need for further enhancement of the risk management capabilities of the banking system.75% of the net demand and time liability. post offices and capital markets. Significant progress has been made with respect to the banking sector in the post . insurance. Liberalization has created a more competitive environment in thebanking sector. mortgage. The financial health of the commercial banks has improved manifolds with respect to capital adequacy. From the fortnight beginning from March 3. (Source: RBI) XAVIER INSTITUTE OF SOCIAL SERVICE . banks are likely to access forex markets more. With a move towards fuller capital account convertibility. depository services. 2007. The competition has increased within the banking sector (with the emergence of new private banks and foreign banks) as well as from other segments of the financial sector such as mutual funds.

2 XAVIER INSTITUTE OF SOCIAL SERVICE . The Bank has played a facilitator role in this regard instead of itself opening such dedicated housing finance institutions Non. Total assets/liabilities of NBFCs (excluding reporting NBFCs) at the end of March 2006 were Rs. The Government has issued ordinance giving more flexibility to the RBI to fix SLR below the current stipulated limit of 25%. down marginally by 1. 35561 crores. It was 20% in 1963 and rose to 38.Banking Finance Companies Non-Banking Financial Companies are under the regulatory framework of Reserve Bank of India by virtue of powers vested in Chapter III B of the Reserve Bank of India Act. which are accepting public deposits. including 428 NBFCs. 1934 At the end of June 2006. which mainly carries on the business of housing finance or has as one of the main objects in its Memorandum of Association. Specialized companies : financial entities – Housing finance A company. there were 13014 NBFCs registered with the Reserve Bank of India.ANANDRATHI Statutory Liquidity Ratio (SLR) : SLR is an instrument in the hands of RBI to impose supplementary reserve requirements on the banking system. The principal mandate of the Bank is to promote housing finance institutions to improve/strengthen the credit delivery network for housing finance in the country. business of providing finance for the housing. To start business of housing finance. The maximum limit of SLR in India is 40%. the Housing Finance Companies has to get it registered with the National Housing Bank.5% in 1990. The current limit is 25%. Net-owned funds of NBFCs increased by 562 crores despite a decline in the number of reporting NBFCs. During the year 2005-06.

loss due to natural calamities etc. unemployment. XAVIER INSTITUTE OF SOCIAL SERVICE . poor health. 104950 crores in 2006 from Rs.is the perfect way by which we can understand the concept of mutual funds. The share of UTI and other public sector mutual funds in the total amount mobilised was around 22. in the year 2005-06. Net mobilisation of resources by mutual funds increased by more than four-fold to Rs. 25454 crore in 2005. Many of these risks are out of our control. The small investors who lacks expertise to choose the right kind of investment for themselves opt for a kind of collective investment vehicle like Mutual Funds which pool their marginal resources. invest in a wide range of securities and distribute the returns. Insurance provides us an opportunity to cover the risk at least in monetary terms. there was a significant decline in fee-based income of the NBFCs while there was a marginal increase in fund-based income. The total asset under the management of mutual funds during the end of 2006 was recorded at 323598 crores. Risk transfer institutions : Our everyday life is subjected to an innumerable risk like risk of premature death. The pioneer in the field of mutual fund is Unit Trust of India established in 1964.5% in 2005 and 17. Investment Intermediaries : Mutual funds : “Put not your trust in money. put your money in trust”.8% in 2006.ANANDRATHI percent from 36003 crores at end of March 2005.

From then. With the expansion of commercial banking and unprecedented development of multinational corporations.life insurance or general insurance as discussed below: In the beginning of the year 2000. It comprises of the institutions and mechanisms through which funds are pooled and made available to business. a number of insurance companies have emerged both in the public and private sector to cater to the needs of the society. the insurance industry mainly comprises of two players. government and individuals. the domestic financial markets has assumed global outlook. the insurance market is also highly regulated. marine insurance and other miscellaneous insurance. As all other markets.The Life Insurance Corporation of India for effecting life insurance and The General Insurance Corporation of India with its four subsidiaries for effecting fire insurance. Insurance Regulatory and Development Authority regulate the insurance business in India. The integration of world financial and capital market with that of the Indian provides XAVIER INSTITUTE OF SOCIAL SERVICE . The Insurance Act.ANANDRATHI The business of insurance is broadly classified into life insurance and non. Capital Market : “Capital Market is a market for financial investments that are direct or indirect claims to capital”. 1938 was the first legislation governing not only life insurance but also the non-life insurance business in India. After the nationalization of the insurance business in1956.

a total of Rs. the primary market has grown exponentially during the last decades. Capital market is firmly regulated by the Securities and Exchange Board of India (SEBI) to offer better protection to the investors.161769 crores was mobilised through primary market by a combination of equity issue. This globalisation has added depth to the market with a large number of market participants. private placement and Euro issues (ADR/GDR). Merchant Bankers. SEBI has also prescribed regulations for the Intermediaries. In India. Capital market : Primary : The market wherein resources are mobilised by companies through issue of new securities is termed as the primary market. The introduction of SEBI Guidelines for Disclosure and Investor Protection during 1992 revolutionised the Indian capital market. During the year 2006. Mutual Funds etc. Funds mobilisation from the market reached its peak in the year 1993-94. debt issue. Capital market : Secondary : Secondary market popularly known as the Stock Exchange is referred to as the XAVIER INSTITUTE OF SOCIAL SERVICE . underwriters. Later it was replaced by the Guidelines issued in 2000 and SEBI is frequently updating these guidelines to suit the need of the present time.ANANDRATHI greater benefits to both the demanders and suppliers of funds and opportunity to diversify risk. 1994-95 and 1997-98. such as the brokers.

The 3rd of January witnessed the highest closing indices of 14015 at BSE and 4025 at NSE. The stock market is touching new heights year after year since 2003.350 crore in 2005. derivatives trading take place under the provisions of the Securities Contracts (Regulation) Act. Banks and Institutions and Corporate Bodies issue Fixed income securities to secure money. Public Bodies. Almost all legal entity like Central and State Governments. Government of India (GOI) securities continued to account for the major part of activity In the secondary debt market. transparent and vibrant with significant retail participation. The gross issuance of GOI dated securities in 2006 amounted to Rs. XAVIER INSTITUTE OF SOCIAL SERVICE . trading and settlement in fixed income securities of various types and features. 1956 and the Securities and Exchange Board of India Act. 129. respectively in January 2007.14 000 crores as compared to Rs. The stock exchanges are the exclusive centres for trading in equities. 1992. Derivatives: In India. Debt Markets are markets for the issuance. debt market plays a very crucial role. The turnover recorded during the calendar year 2006 in NSE derivative market is 7046665 crores and in BSE derivative market is 4012 crores showing significant growth over the previous years. with the BSE and NSE indices crossing 14000 and 4000. Debt : In a developing country like India.ANANDRATHI “Barometer of the economy”. NSE continued to occupy the third position after NASDAQ and NYSE in terms of number of transactions occurring during the calendar year 2006. Current debt market has become more efficient. Statutory corporations.

in which futures contracts derive their value from the ruling price of underlying commodities. among others. guar seed (11 per cent) and chana (10 per cent). metals. bullion.39 lakh crore in 2006-07 (till December 2006). and these included major agricultural commodities. 27. Gold accounted for the largest share (31 per cent) of trade in terms of value. The growth in the commodity derivative trading witnessed in 2005-06 continued during 2006-07.29 lakh crore in 2003-04 to Rs. As compared to 59 commodities in January 2005. natural gas and polymer. This is a mechanism by which participants can enter into transactions for purchase and sale of commodities at a price. crude oil. 94 commodities were traded in the commodities futures market as of December 2006. 1. Total volume of trade rose sharply from Rs. XAVIER INSTITUTE OF SOCIAL SERVICE . where the performance of delivery and payment obligation becomes due on a future date.ANANDRATHI Commodities market : Commodities Futures trading is a class of Derivatives trading. followed by silver (19 per cent). spices.

brokerage & distribution of equities. investment banking. corporate advisory. founded in 1994 by Mr. The firm's philosophy is entirely client centric. The firm. with a clear focus on providing long term value addition to clients. structured products . commodities. while maintaining the highest standards of excellence. XAVIER INSTITUTE OF SOCIAL SERVICE . AnandRathi.ANANDRATHI COMPANY PROFILE ANAND RATHI SECURITIES AnandRathi (AR) is a leading full service securities firm providing the entire gamut of financial services. today has a pan India presence as well as an international presence through offices in Dubai and Bangkok. AR provides a breadth of financial and advisory services including wealth management.all of which are supported by powerful research teams. mutual funds and insurance.

Corporates and Institutions and was recently ranked by Asia Money 2006 poll amongst South Asia's top 5 wealth managers for the ultra-rich. IPOs and insurance products. Clients deal with a relationship manager who leverages and brings together the product specialists from across the firm to create an optimum solution to the client needs. real estate. CORE STRNGTHS Breadth of Services.Our research expertise is at the core of the value proposition that we offer to our clients. In year 2007 Citigroup Venture Capital International joined the group as a financial partner.to go far deeper than others. investment banking. The entire firm activities are divided across distinct client groups: Individuals. Management Team. the firm offers to its clients the entire spectrum of financial services ranging from brokerage services in equities and commodities. Research teams across the firm continuously track various markets and products. merger and acquisitions. to deliver incisive insights and ideas and be accountable for results Management Team Management Team Held several Senior Management positions with one of India's largest industrial groups Mr. distribution of mutual funds.In line with its client-centric philosophy. In-Depth Research .AR brings together a highly professional core management team that comprises of individuals with extensive business as well as industry experience.ANANDRATHI ethics and professionalism. corporate finance and corporate advisory. The aim is however common . Pradeep Gupta . Private Clients.Vice Chairman XAVIER INSTITUTE OF SOCIAL SERVICE .

Bangalore & other metro towns and is planning to extend it to all other major towns in the country.Amit Rathi . The Company is presently providing Wealth Management services mainly in Mumbai.ANANDRATHI Plus 17 years of experience in Financial Services Mr. PRIMARY MARKET DISTRIBUTOR The Company is a leading Primary Market Distributor and was ranked 6th in FY2006 for All India Broker Performance in equity distribution in the High Networth Individuals (HNI) Category & 9th in the Retail Category having more than 5% market share XAVIER INSTITUTE OF SOCIAL SERVICE .Managing Director Chartered Accountant & MBA. Plus 11 years of experience in Financial Services SERVICES PROVIDED BY ANAND RATHI SECURITIES WEALTH MANAGEMENT AnandRathi is very strongly placed in its Wealth Management services and was recently ranked by Asia Money 2006 poll amongst South Asia s top 5 wealth managers for the ultra-rich.

PRIVATE WEALTH MANAGEMENT Affluent individuals need sophisticated advice and strategic guidance to capitalize on opportunities to preserve. In addition. AR offers the most XAVIER INSTITUTE OF SOCIAL SERVICE .ANANDRATHI RETAIL SEGMENT AnandRathi is a leading player in the Retail Segment. QIP placement. The products & services offered include PO/Rights/Secondary issues. grow and transfer their wealth. Merger & Acquisitions and Management Buy-outs. Private Equity. The company has a customer base of over 0. Capital protection products and Real Estate fund. The company is planning to expand aggressively in the next one year. ALERNATIVE INVESTMENT The company also offers Alternative Investment options that include Structured products.1Mn and pan India presence in all States with more than 350 branches/ business associates. Market neutral strategies. Arbitrage products. INVESTMENT BANKING The Company s Investment Banking division offers a range of advisory services for Strategic alliances and in Capital Raising areas. a desire exists within wealthy families to simplify the management of multigenerational needs and lessen the profound emotional impact of wealth on family members.

ANANDRATHI extensive platform of customized servicing. chana. MUTUAL FUNDS AR is one of India's top mutual fund distribution houses. We provide comprehensive. XAVIER INSTITUTE OF SOCIAL SERVICE . integrated investment strategies to address your wealth management needs. In addition to transaction execution. guar gum and spices such as sugar. jeera and cotton. independent and unbiased advice to our clients backed by in-depth research. Commodities broking is supported by a dedicated research cell that provides both technical as well as fundamental research. investment ideas and arbitrage opportunities. agri-commodities such as wheat. guar. individual strategies and products to help meet the requirements of the affluent private investor. ANAND RATHI provides our clients customized advice on hedging strategies. We have a dedicated mutual fund research cell for mutual funds that consistently churns out superior investment ideas. We firmly believe in the importance of selecting appropriate asset allocations based on the client's risk profile. Oils and Oilseeds. Our research covers a broad range of traded commodities including precious and base metals.a whole new opportunity to hedge business risk and an attractive investment opportunity to deliver superior returns for investors. which includes AR's highly-rated research. Our success lies in our philosophy of providing consistently superior. COMMODITIES Commodities broking . picking best performing funds across asset classes and providing insights into performances of select funds. Our commodities broking services include online futures trading through NCDEX and MCX and depository services through CDSL. Working closely with specialists across firm PWM offers an array of products & services.

It offers a range of specialized investment strategies designed to capture opportunities across the market spectrum. Risk management includes identification. INSTITUTIONAL WEALTH MANAGEMENT Corporate and Institutional treasuries need ever more sophisticated advice that is backed by serious and credible research. PORTFOLIO MANAGEMENT SERVICES AR Portfolio Management Service is a discretionary investment service created to meet the demand for more targeted investment styles and opportunities. capitalprotected to the most aggressive strategies in the equities and derivatives markets. We understand that your needs XAVIER INSTITUTE OF SOCIAL SERVICE . Our investment process ensures that your strategy and portfolio are built on solid foundations. The entire sales process and product selection is research oriented and customized to the client's needs. measurement and assessment of the risk and handling of the risk. of which insurance is an integral part. We lay strong emphasis on timely claim settlement and post sales services. we provide to our clients comprehensive risk management techniques. The range of products varies from the highly defensive. Our guiding philosophy is to manage the clients' entire risk set by providing the optimal level of cover at the least possible cost. The firm deals with both life insurance and general insurance products across all insurance companies. Together you and your relationship manager select the strategy in line with your individual goals.ANANDRATHI INSURANCE BROKING As an insurance broker. both within the business as well as on the personal front. which are backed by proprietary global economic & investment research. AR IWM provides its institutional clients integrated wealth management solutions across global markets. AR investment specialists then construct and manage your portfolio in accordance with the chosen investment strategy.

tenure. fixed-floating.from simple money-market mutual funds to complex arbitrage strategies in the equities or commodities markets. mergers and acquisition opportunities and debt financing & restructuring advisory.ANANDRATHI could range from finding short-term surplus management strategies to higher yielding and long term investments. The Corporate Finance team has handled assignments in businesses like paper. The AR Corporate Finance team helps clients manage their debt-financing needs by profiling business and cash-flow risks. hospitality. The team has also built an impressive track-record in debt restructuring based on its superior understanding of business needs and relationships with key lenders. building in multiple variables such as currencies. textiles and sugar. telecom. currencies and equities markets to provide investment solutions that meet your complex needs . in a comprehensive manner and finally negotiating with the prospective lenders / buyers. INVESTMENT BANKING AND CORPORATE FINANCE AR Investment Banking provides comprehensive services to clients including raising money in the equity capital markets to identifying strategic alliances. collateral etc. CORPORATE ADVISORY SERVICES XAVIER INSTITUTE OF SOCIAL SERVICE . defining the alternative sources of funding . The IWM team brings together the highly-rated AR research across fixed income.

MILESTONES SET BY ANAND RATHI SECURITIES XAVIER INSTITUTE OF SOCIAL SERVICE . strong distribution capabilities and a dedicated research team.ANANDRATHI AnandRathi Advisors assists companies in realizing tangible improvements in various facets of their businesses by providing a range of corporate advisory services that includes the entire gamut from financial. Our IPO research team provides clients with indepth overviews of forthcoming IPOs as well as investment recommendations. organizational and operational restructuring. whatever be your need. airlines and optic fibre. utilizing our unparalleled business know-how to give you the competitive edge. we have been consistently ranked among the top 10 distributors of IPOs on all major offerings. power. mining. Online filling of forms is also available. IPOs We are a leading primary market distributor across the country. Successful assignments undertaken for leading organizations in India as well as overseas bear ample testimony to our wide-ranging capabilities. metals. Our strong performance in IPOs has been a result of our vast experience in the Primary Market. our specialists. experts and associates assist you in conceptualizing problems and devising effective solutions. to profit improvement and business turnaround strategies Highly qualified and thoroughly professional. cement. a wide network of branches across India. AR have successfully handled various assignments under industry segments like refinery. paper.

9% equity stake Retail customer base crosses 100 thousand Establishes presence in over 350 locations. • XAVIER INSTITUTE OF SOCIAL SERVICE .ANANDRATHI • 1994: Started activities in consulting and Institutional equity sales with staff of 15 1995: Set up a research desk and empanelled with major institutional investors 1997: Introduced investment banking businesses Retail brokerage services launched 1999: Lead managed first IPO and executed first M & A deal 2001: Initiated Wealth Management Services 2002: Retail business expansion recommences with ownership model 2003: Wealth Management assets cross Rs1500 crores Insurance broking launched Launch of Wealth Management services in Dubai Retail Branch network exceeds 50 2004: Commodities brokerage and real estate services introduced Wealth Management assets cross Rs3000crores Institutional equities business relaunched and senior research team put in place Retail Branch network expands across 100 locations within India 2005: Real Estate Private Equity Fund Launched across 200 locations within India Retail Branch network expands • • • • • • • • • 2006: AR Middle East. WOS acquires membership of Dubai Gold & Commodity Exchange (DGCX) Ranked amongst South Asia's top 5 wealth managers for the ultra-rich by Asia Money 2006 poll Ranked 6th in FY2006 for All India Broker Performance in equity distribution in the High Networth Individuals (HNI) Category Ranked 9th in the Retail Category having more than 5% market share Completes its presence in all States across the country with offices at 300+ locations within India 2007: Citigroup Venture Capital International picks up 19.

buy futures Speculation: Bearish security. sell futures Arbitrage: Overprices futures: buy spot. sell futures XAVIER INSTITUTE OF SOCIAL SERVICE .ANANDRATHI OUR FINDINGS In all 8 main methods were studied under different situations for futures and options: • • • • Hedging : Long security. sell futures Speculation: Bullish security.

Derivatives pay off over a period of time based on the performance of assets. The payoff can be in cash or assets and vary. THREE REASONS TO START DERIVATIVES TRADING: If you are looking for a trading option outside of traditional stocks and bonds. sell futures Speculation: Bullish security. sell futures Arbitrage: Overprices futures: buy spot. leading to abandoning of the method being followed. In addition to stocks and bonds. exchange rates. derivatives trading may be a good option. or indices. sell calls or buy puts The 3 winners that came out successful in most of the situations were: • • • Hedging : Long security. is the panic among the clients as well as the dealers. by performance and timing. buy calls or sell puts Apart from technical aspect another major aspect that increases or reduces the risk as well as the profit/loss. interest rates. derivatives can also be traded through in the money market. These can range from the stock market index to the consumer price index to weather conditions and fluctuations in currency exchange XAVIER INSTITUTE OF SOCIAL SERVICE . Indicators affecting a derivative's performance are varied. sell spot Hedging: Have underlying buy puts Speculation: Bullish security. foreign exchange (forex). and depending on the type of derivative. of course.ANANDRATHI • • • • Arbitrage: Under priced futures: buy futures. buy calls or sell puts Speculation: Bearish security. and credit.

something that may appeal to those who cannot or do not want to invest as much as is required to purchase stock. derivatives may be a good option. There are two main types of derivatives: futures and options. 1. These are investment banks. in a fast-paced world. the risk is much less of an investment. Less Risk than other Trades. you are not purchasing the underlying product or buying into the company. XAVIER INSTITUTE OF SOCIAL SERVICE .ANANDRATHI rates. commercial banks. they can be a good way to break into the market as well as a good way to mix short and long-term investments. and hedge and mutual funds. They Can be a Good Short Term Investment. Derivatives can also be a good way to add balance to your total portfolio. derivatives may be an option. 2. weeks. or a few months.When you trade in derivatives. also known as futures trading. However. derivatives can be days.If you are looking for an investment opportunity that can pay off in a shorter time frame. investors have the option to see results much sooner in options or futures trading that are not available through other means. and end users. you can get involved in derivatives trading for a much lower initial investment. While some stocks and bonds are long-term investments over the course of many years. and want an option to put your money to work now. corporations. such as floor traders. While you can still lose money in derivatives trading. although in some cases you are agreeing to purchase assets in the future. thereby spreading risk throughout a variety of investments rather than in only a few. Making derivatives work for you requires careful research and consideration just like any other investment opportunity. Because of the shorter turnaround time. such as some stocks. There are three main types of firms that use derivatives. If you have a portfolio consisting of long-term investments. The following reasons provide information on why it may be a good idea to begin derivatives trading. Further. your risk is on the performance. Instead. which allow someone the option to buy or sell at a prearranged price.

and it opens international options that may not be available through the traditional stock market (particularly given the regulations placed on foreign companies to comply with U. Doing both is the best option. or learn as much about the business as possible. Some types of trading options are available around the clock. This is another reason some investors are drawn to derivatives trading. These guidelines should cover the following:  What types of risks can potentially be hedged given the available hedging instruments? XAVIER INSTITUTE OF SOCIAL SERVICE . Numerous resources are available on the Internet for learning more about derivatives trading and the many options available. Those interested in derivatives training may want to begin by focusing on a particular area. on a global scale. Variety and Flexibility-The nature of derivatives essentially means that the opportunities for trading this type of investment are limited only by the imagination. as you can then work with a financial representative in a much more involved way and have a better handle on what your money is doing and where. The other side of this is that someone interested in entering the derivatives trading market needs to either have a trusted financial representative. For a successful use of derivatives. laws such as Sarbanes-Oxley). Getting involved in the global economy can be exciting.ANANDRATHI 3. such as currency trading. CONCLUSIONS Successfully using derivatives requires a well thought out and planned approach from the start.S. a company must: • Evolve a clear policy Any firm that uses derivatives for hedging need to evolve a clear set of policy guidelines.

 Comprehensive reporting system to cover the extent of risk exposure through derivatives. the present loss or profit on open positions. which risks does the company want to hedge?  For those risks which the company decides to hedge. confined to periods when adverse price risks are expected)?  Should hedges be for the full value of the expected exposure or can they be for only part of the exposure?  Who is empowered to take the decision on when to hedge and how much to hedge?  Does the company envisage only straightforward hedges (i. should the hedging be universal (i. which are potentially “hedgeable”.ANANDRATHI  Of the risks. at all times) or selective (i.e.  Which levels of staff are authorized to enter into which types of transactions  Restriction on counter parties with whom dealings should/should not be made  Limits for derivative exposure in terms of absolute value and/or a proportion of spot exposure or any other variable  Separation trading(front office) and book-keeping(back office) functions  Internal audit procedures to ensure that figures reported correspond with actual contract status.e. in the same or very similar items) or does it permit more complex and involved or synthetic hedges? • Establish a system of controls to monitor adherence to the policy. a sensitivity analysis to price changes • Enforce adherence to the system of controls XAVIER INSTITUTE OF SOCIAL SERVICE .e.

just due to panic. Until and unless there is an exceptional situation.  Careful observation of exceptionally trading staff RECOMMENDATIONS For the dealers A lot of theoretical methods are studied but are not put to practical use. Since the investors are not very technically aware. For the company: XAVIER INSTITUTE OF SOCIAL SERVICE .  Rotation/transfer of key traders from one portfolio to another  Ensuring that trading staff has no control whether administrative or financial over back-office operations. therefore it becomes the responsibility of the technical people in the field like dealers to properly guide them and follow the techniques diligently. once these has been set.ANANDRATHI  A system of review of the reports received (including internal audit reports) by a sufficiently high level of management and if necessary by external technical experts  A firm adherence to position limits etc. the simple techniques do bring in desired results.

These leads to a considerable time loss of the productive time of employees as well as the clients. as well as its proper operation and execution  Online Logins for clients Whenever the clients need their stock holdings and their profit and loss statements. futures and other derivatives John C Hull Managing Investment Prasanna Chandra Websites • www.com XAVIER INSTITUTE OF SOCIAL SERVICE .bseindia. REFERENCES Books • • • Financial Management I M Pandey Options. This apart from speeding up the process and saving time will also ensure the privacy of the clients.ANANDRATHI  Technical analysis-The environment in which the organization operates is highly volatile and uncertain. they have to seek from the office manually. Therefore there is a strong requirement to equip with best of resources in terms of most hidden information and news of the market. Therefore there is a need to consider creating online profiles of the clients and providing them with the usernames and passwords. Not only a well-built in-house technical analysis is extremely essential.

com www.nseindia.derivativesindia.com XAVIER INSTITUTE OF SOCIAL SERVICE .ANANDRATHI • www.

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