DERIVATIVES

AS
HEDGING TECHNIQUE
(ANALYSIS ON OIL SECTOR)
 
 Derivatives

• Derivative is a product whose value is derived from the value of one or

more basic variables called bases(underlying asset) in a contractual
manner. The underlying asset can be equity, forex, commodity or any
other asset
 Example

• Wheat farmers may wish to sell their harvest at a future date to

eliminate the risk of a change in prices by that date. Such a
transaction is an example of a derivative. The price of this
derivative is driven by the spot price of wheat which is the
“underlying”.
 Players in the Market

The following are the players in the Derivatives markets:

 

• Speculators: People who buy or sell in the market to make profits. For example, if you will the stock price of Reliance
is expected to go up to Rs. 400 in one month; one can buy a one-month future of Reliance at Rs. 350 and make profits.
 
• Hedgers: People who buy or sell to minimize their losses. For example, an importer has to pay US $ to buy goods and
rupee is expected to fall to Rs.50/$ from Rs.48/$, then the importer can minimize his losses by buying a currency future at
Rs.49/$.

• Arbitrageurs: People who buy or sell to make money on price differentials in different markets. For example, a
futures price is simply the current price plus the interest cost. If there is any change in the interest, it presents an arbitrage
opportunity. We will examine this in detail when we look at futures in a separate chapter. Basically, every investor assumes
one or more of the above and derivatives are a very good option for him.
 Types of Derivatives

The most commonly used derivatives contracts are

 Forwards
 Futures
 Options
 OBJECTIVES
This project has been taken up to study the Derivatives Futures and Option in
detail with the idea of suggesting the strategies in this markets and an Technical
analysis of oil sector using graphs and suggesting the buy or sell decision to the
investor by using:

• Sector Financial report

• Individual performances
• Graphs
 LIMITATIONS

• Only the major factors like demand, supply, budget impact on this sector
government support and Future Prospects of this sector have been studied, where
as the prices of oil depends on various other factors like climatic conditions,
International body for determining prices like OPEC, Demand and supply of the
oil.

• The Technical Analysis of Oil sector is restricted only to Indian markets.

 SOURCES OF DATA

• Primary data was collected from the respondents who are trading in Indian
Markets. Secondary data was provided by the organization and was gathered from
the official websites of the respective organizations. Information about the history
and various factors affecting the price performance has been studied from various
Internet sites. The data was sorted to find out the various factors that help in
suggesting the decision taking for the individuals to buy and sell in this sector.
 RESEARCH METHODOLOGY
 

• Information from various sites was first analyzed to perform the technical
analysis of major players in oil sector in an order. Various online reports have
been studied to and have been combined to form a general analysis. Further
Technical analysis has been used to study the prices of oil companies and their
future tendencies, which will be helpful for trading in Indian markets. An effort
has been made to suggest decision making for the individual.
 COMPANY PROFILE

Kotak Mahindra is one of India’s leading financial institutions,

offering complete financial solutions that encompass every sphere
of life. From commercial banking, to stock broking, to mutual
funds, to life insurance, to investment banking, the group caters to
the financial needs of individuals and corporates.
 KOTAK SECURITIES
• Kotak Securities Ltd is India’s leading stock broking house
• It has been the largest in IPO distribution
• Kotak Securities Ltd., a 100 % subsidiary of Kotak Mahindra Bank is
one of the oldest stock broking houses in India. It was incorporated in
1994 and is head quartered in Mumbai, India. Kotak Securities’
network spans over 321 cities with 877 outlets, with an employee
workforce beyond 5100.
 Awards
UTI MF – CNBC TV18 Financial Advisor Awards - Best Performing Equity Broker (National) for
the year 2009

Asia money Brokers Poll: Best Local Brokerage (2009, 2008, 2007 & 2006)

Asia money Brokers Poll: Best Analyst in India - Sanjeev Prasad (2009, 2008, 2007, 2006 &
2005) 

Finance Asia: Best Broker in India (2010 & 2009)

Institutional investor: Best Local Broker (2009)