Professional Documents
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Summer Project Report On Currency Market
Summer Project Report On Currency Market
Summer Project Report On Currency Market
ii
CERTIFICATE BY THE MENTOR
This is to certify that the contents of this report entitled “IMPACT OF
CURRENCY
MARKET IN INDIAN ECONOMY” by Nitish Patel, 12 submitted to Center for
Management Studies for the Award of Master of Business Administration (MBA Sem-II)
is
original research work carried out by him under my mentoring. I, hereby
certify the
authenticity of the data and facts mentioned in the report.
This report has not been submitted either partly or fully to any other
University or Institute
for award of any degree or diploma.
Date :
Place :
iii
CANDIDATE’S STATEMENT
I hereby declare that the work incorporated in this report entitled
“IMPACT OF
CURRENCY MARKET IN INDIAN ECONOMY” in partial fulfillment of the
requirements for the award of Master of Business Administration (Sem.- II) is the
outcome of
original study undertaken by me and it has not been submitted earlier to any other
University
or Institution for the award of any Degree or Diploma.
Nitish Patel
Date:
Place:
iv
Preface
As a Part of MBA Program, Student has to pursue a project duly approved by the
Faculty of
Concerned area. I had the privilege of undertaking the project on
“Impact of Currency
Market in Indian Economy” at Religare Securities Limited. Main aim of the Project
is to
find out the factors which impact on Indian economy of currency market of glob &
India.
The foreign exchange trading introduced in India since 2008. There are
several products
traded in forex market. As far as the study is consent the report is
mainly focusing on the
currency market in India. There are two exchanges MCX-SX and NSE for currency
trading in
India. There are four main currency pairs been traded in India are USD,
EURO, GBP and
JPY. There is major four ways to invest in or we can say financial
instrument to invest in
currency are spot, forward, swap, future and option.
There are mainly three factors which impact the currency market are economic,
political and
market physiology. Foreign exchange reserves in a strict sense are only the
foreign currency deposits and bonds held by central banks and monetary
authorities. These
are assets of the central bank held in different reserve currencies, mostly the US
dollar, and to
a lesser extent the euro, the UK pound, and the Japanese yen, and used to back its
liabilities,
the impact on any economy can be measured by analyzing the GDP, GNP, Import and
export
growth of the country and additionally the foreign reserve of the country.
The report contains the market research of currency investors as in-depth
interview with
questioner. This Project work is divided into following parts which are as under.
1. Objective of the Study
2. Limitations of the Study
3. Research Methodology.
4. To Understand Global Forex Market
5. To Understand Indian Forex Market
6. To Study Indian Economy
7. Data analysis & Interpretation
7. Conclusion
9. Annexure
10. Bibliography
v
Acknowledgement
I am thankful to Mr. Siddharth Doshi (Branch Manager) and the management
of Religare
securities limited for permitting me to go through my summer training.
First and for most I would like to thank my company guide Mr. Nishank
Patel ( Sales
Manager) for his constant encouragement, guidance and advice at every stage of my
training.
I would like to thank Mr. Pratik Adhvayu (Relationship Manager), Mr.
Sameer Pandya
(Relationship Manager), Mr. Ritesh Panchal (Dealer). This project would
not have been
successfully completed without their great support.
I am very much thankful to Center for Management Studies, Ganpat
University for their
excellent guidance, support and appreciation and also provided me with this great
opportunity
to work in such a reputed organization.
I express my sincere thanks to Mr. M. Sharma (chancellor), CA. Ujal
Mehta (central
coordinator), Dr. Vipul Patel (coordinator) and a sincere thanks to Prof. Niki
Sanghvi, Center
for Management Studies, Ganpat University, Ahmadabad, who helped me in
understanding
the project and the implementation of the same. Her suggestions really helped me
think on a
broad perspective and give me motivation to do my best. I would again like to thank
Center
for Management, Ganpat University, Ahmadabad for helping and supporting me
for my
Summer Internship Program at RELIGARE SECURITIES LIMITED.
Date:
Place: - Nitish Patel
vi
Table of Content
Chapter Particulars Page no.
Certificate By the Guide I
Certificate by Mentor II
Candidate’s Statement III
Preface IV
Acknowledgments V
Table of content VI
List of Tables VIII
List of Figures & Graphs IX
Objective & limitations of the study X
Chapter 1 Introduction 1
Chapter 2 Company Profile 2
2.1. introduction of the company 2
2.2. Religare Securities Limited 4
2.3. Religare securities offering different services. 5
2.4. Group of companies 6
2.5. General information 7
Chapter 3 Research Methodology 8
3.1 Research Design 8
3.2. Define the target population 10
3.3. The six ‘W’ 11
Chapter 4 Foreign Exchange Markets in India 12
4.1. Market Size and liquidity 14
4.2. Market participants 16
4.3. Trading characteristics 20
4.4. Determinants of FX rates 21
4.5. Financial instruments 24
4.6. Speculation 25
4.7. Foreign exchange reserves 26
Chapter 5 Economy of India 31
5.1. Post-liberalization period (since 1991) 32
vii
5.2. Sectors 33
5.3. External trade and investment 36
5.4. Indian currency exchange
39
5.5. Foreign Exchange Department of RBI 48
5.6. FEMA Rules & Policies 49
Chapter 6 Impact of currency market in Indian economy 50
6.1. GDP & GNP 50
6.2. Exports & Imports in FY'11 52
Chapter 7 Interpretation of questioner 53
7.1 Demographic Questions 53
7.2 Main Questions 58
Chapter 8 Conclusion 68
Chapter 9 Annexure 69
9.1 Questioner 69
Chapter 10 Bibliography 71
viii
List of Table
Table
No.
Particulars Page
no.
1 Major Players of Online Trading in India 4
2 Top 10 currency traders 15
3 Most traded currencies 19
4 Top 20 largest countries by foreign exchange reserves 29
5 inter-governmental free-trade associations and supranational organizations 30
6 Share of top five investing countries in FDI inflows 38
7 Shareholders of MCX-SX 42
8 Contract Specifications for USD – INR 43
9 Contract Specifications for Euro – INR 44
10 Contract Specifications for Pound Sterling-INR 45
11 Contract Specifications for Japanese Yen-INR 46
12 GDP & GNP of India 50
13 Monetary Policy Rates: India 51
14 Lending & Deposit Rates : India 51
15 Data interpretation of gender 53
16 Data interpretation of age 54
17 Data interpretation of education qualification 55
18 Data interpretation of occupation 56
19 Data interpretation of annual income 57
20 Data interpretation of currency preference 59
21 Data interpretation of primary object of investing 60
22 Data interpretation of time duration 61
23 Data interpretation of factors to determine 62
24 Data interpretation of percentage criteria of investment 63
25 Data interpretation of currency relay on 64
26 Data interpretation of risk in currency market 65
27 Data interpretation of return in currency market 66
28 Data interpretation of service provided by broker 67
ix
List of Graphs
No. Particulars Page no.
1 Pie chart of gender 53
2 Pie chart of age 54
3 Pie chart of education qualification 55
4 Pie chart of occupation 56
5 Pie chart of annual income 57
6 Pie chart of investment avenues 58
7 Pie chart of currency preference 59
8 Pie chart of primary object of investing 60
9 Pie chart of time duration 61
10 Pie chart of factors to determine 62
11 Pie chart of percentage criteria of investment 63
12 Pie chart of currency relay on 64
13 Pie chart of risk in currency market 65
14 Pie chart of return in currency market 66
15 Pie chart of service provided by broker 67
x
Objective of the study
Primary Objective:
· To Study Impact of Currency market in Indian economy.
Secondary Objective:
· To study the on board aspects of corporate.
· To Study the various services provided by Broker house to their clients.
· To know investors experience in Forex market,
· To study what other services investors expect from their broker house.
Limitations of the study
· Theoretical data are taken from internet; possibilities of wrong data can take
in the report.
· Respondent could provide wrong data.
· Shortage of time.
· May small sample size doesn’t cover the all population characteristics.
ϭ
Chapter 1. Introduction
The foreign exchange market or Currency market is a global, worldwide decentralized
over-
the-counter financial market for trading currencies. Financial centers
around the world
function as anchors of trading between a wide range of different types of buyers
and sellers
around the clock, with the exception of weekends.
The foreign exchange market determines the relative values of different
currencies. The
primary purpose of the foreign exchange is to assist international trade
and investment, by
allowing businesses to convert one currency to another currency. For
example, it permits a
US business to import British goods and pay Pound Sterling, even though
the business's
income is in US dollars.
It also supports direct speculation in the value of currencies, and the carry
trade, speculation
on the change in interest rates in two currencies. In a typical foreign exchange
transaction, a
party purchases a quantity of one currency by paying a quantity of another
currency.
The modern foreign exchange market began forming during the 1970s after three
decades of
government restrictions on foreign exchange transactions (the Bretton Woods
system of
monetary management established the rules for commercial and financial relations
among the
world’s major industrial states after World War II), when countries
gradually switched to
floating exchange rates from the previous exchange rate regime, which remained
fixed as per
the Bretton Woods system.
Ϯ
Name
Religare is a Latin word that translates as 'to bind together'. This
name has been chosen to
reflect the integrated nature of the financial services the company offers.
Symbol
The Religare name is paired with the symbol of a four-leaf clover.
Traditionally, it is
considered good fortune to find a four-leaf clover as there is only one
four-leaf clover for
every 10,000 three-leaf clovers found. For us, each leaf of the clover has a
special meaning. It
is a symbol of Hope, Trust, Care, and Good Fortune. For the world, it
is the symbol of
Religare. For us, each leaf of the clover has a special meaning. It is
a symbol of Hope,
Trust, Care, And Good Fortune. For the world, it is the symbol of Religare.
The first leaf of the clover represents Hope. The aspirations to succeed. The
dream of
becoming. Of new possibilities. It is the beginning of every step and the
foundation on which
a person reaches for the stars.
The second leaf of the clover represents Trust. The ability to place one‟s own
faith in
another. To have a relationship as partners in a team. To accomplish a
given goal with the
balance that brings satisfaction to all, not in the binding, but in the bond that
is built.
The third leaf of the clover represents Care. The secret ingredient that is the
cement in
every relationship. The truth of feeling that underlines sincerity and the triumph
of diligence
in every aspect. From it springs true warmth of service and the ability
to adapt to evolving
environments with consideration to all.
The fourth and final leaf of the clover represents Good Fortune.
Signifying that rare
ability to meld opportunity and planning with circumstance to generate those often
looked for
remunerative moments of success.
Hope, Trust, Care, Good Fortune. All elements perfectly combine in the
emblematic
and rare, four-leaf clover to visually symbolize the values that bind
together and form the
core of the Religare vision.
ϰ
2.2. Religare Securities Limited
Religare Securities Limited (RSL), a 100% subsidiary of Religare
Enterprises Limited is a
leading equity and securities firm in India. The company currently handles sizeable
volumes
traded on NSE and in the realm of online trading and investments; it
currently holds a
reasonable share of the market. The major activities and offerings of the company
today are
Equity Broking, Depository Participant Services, Portfolio Management
Services,
International Advisory Fund Management Services, Institutional Broking and
Research
Services. To broaden the gamut of services offered to its investors, the
company offers an
online investment portal armed with a host of revolutionary features.
RSL is a member of the National Stock Exchange of India, Bombay Stock
Exchange of
India, Depository Participant with National Securities Depository Limited
and Central
Depository Services (I) Limited, and is a SEBI approved Portfolio Manager.
Religare has been constantly innovating in terms of product and services
and to offer such
incisive services to specific user segments it has also started the NRI, FII, HNI
and Corporate
Servicing groups. These groups take all the portfolio investment decisions
depending upon a
client’s risk / return parameter.
Religare has a very credible Research and Analysis division, which not
only caters to the
need of our Institutional clientele, but also gives their valuable inputs to
investment dealers.
VISION AND MISSION
Vision To build Religare as a globally trusted brand in the financial
services domain and
present it as the „Investment Gateway of India'.
Mission Providing complete financial care driven by the core values of
diligence and
transparency.
Brand Essence Core brand essence is Diligence and Religare is driven by
ethical and
dynamic processes for wealth creation.
Major Players of Online Trading in India
(table 1)
Religare Securities Angel Trade
Share Khan ICICI Direct
India bulls Reliance Money
Motilal Oswal Standard Chartered
HDFC IDBI Paisa Builder
HSBC Geojit
Networth Kotak Securities
ϱ
Religareli
gare
finvest
limited
Religare
Finance
limited
Religare
Commodit
ies
Limited
ϳ
RESEARCH DESIGE:-
1. Exploratory research
2. Conclusive research
1. Exploratory Design:-
• In exploratory design first collect the information about research.
• Understand foreign exchange market
• About foreign exchange market in India
• About Indian economy
• Impact of currency market in Indian economy
• Collection of primary data from past research.
• Then collection secondary data from Books, Magazines, Internet etc.
• Then start qualitative research in this the interview of branch manager
&
relationship manager of Religare securities limited.
2. Conclusive research design:
• In conclusive research main part is survey.
• In this research design we get perfect conclusion.
• It is structure.
In conclusive research design two types
a. Causal research
b. Descriptive research
In this research use Descriptive research
• descriptive research two types
i. Cross sectional
ii. Longitudinal design
In cross sectional
In cross sectional use Single cross sectional design because in our
research the
information collects only one’s a time.
In longitudinal design use panel.
ϭϬ
But the idea of fixed exchange rates has by no means died. The EEC
(European Economic
Community) introduced a new system of fixed exchange rates in 1979, the
European
Monetary System. This attempt to fix exchange rates met with near
extinction in 1992-93,
when pent-up economic pressures forced devaluations of a number of weak
European
currencies. Nevertheless, the quest for currency stability has continued
in Europe with the
renewed attempt to not only fix currencies but actually replace many of them with
the Euro in
2001.
The lack of sustainability in fixed foreign exchange rates gained new
relevance with the
events in South East Asia in the latter part of 1997, where currency
after currency was
devalued against the US dollar, leaving other fixed exchange rates, in
particular in South
America, looking very vulnerable.
But while commercial companies have had to face a much more volatile
currency
environment in recent years, investors and financial institutions have
found a new
playground. The size of foreign exchange markets now dwarfs any other
investment market
by a large factor. It is estimated that more than USD 3,000 billion is
traded every day, far
more than the world's stock and bond markets combined.
Forex (Foreign Exchange) is the international financial market used for
trade of world
currencies. It has been working since 70s of the 20th century - from
the moment when the
biggest world nations decided to switch from fixed exchange rates to
floating ones. Daily
volume of Forex trade exceeds 4 trillion United States dollars, and this
number is always
growing .Main currency for Forex operations is the United States dollar (USD).
Unlike stock exchanges, Forex market doesn't have any fixed schedule or
operating hours -
it's open 24 hours per day, 5 days per week from Monday to Friday, since buy/sell
orders are
performed by world banks any time during the day or night (some banks
even work on
Saturdays and Sundays). Just like any other exchange, Forex market is driven by
supply and
demand of a particular tool. For instance, there are buyers and sellers for "Euro
vs US dollar".
Exchange rates at Forex are changing constantly, and fluctuations may
happen many times
per second - this market is very liquid.
ϭϰ
c. Central banks
National central banks play an important role in the foreign exchange
markets. They try to
control the money supply, inflation, and/or interest rates and often have official
or unofficial
target rates for their currencies. They can use their often substantial
foreign exchange
reserves to stabilize the market. Nevertheless, the effectiveness of
central bank "stabilizing
speculation" is doubtful because central banks do not go bankrupt if they make
large losses,
like other traders would, and there is no convincing evidence that they
do make a profit
trading.
d. Forex Fixing
Forex fixing is the daily monetary exchange rate fixed by the national bank of each
country.
The idea is that central banks use the fixing time and exchange rate
to evaluate behavior of
their currency. Fixing exchange rates reflects the real value of
equilibrium in the forex
market. Banks, dealers and online foreign exchange traders use fixing
rates as a trend
indicator.
The mere expectation or rumor of central bank intervention might be
enough to stabilize a
currency, but aggressive intervention might be used several times each year in
countries with
a dirty float currency regime. Central banks do not always achieve their
objectives. The
combined resources of the market can easily overwhelm any central bank. Several
scenarios
of this nature were seen in the 1992–93 ERM collapse, and in more recent times in
Southeast
Asia.
e. Hedge funds as speculators
About 70% to 90% of the foreign exchange transactions are speculative. In other
words, the
person or institution that bought or sold the currency has no plan to actually take
delivery of
the currency in the end; rather, they were solely speculating on the
movement of that
particular currency. Hedge funds have gained a reputation for aggressive
currency
speculation since 1996. They control billions of dollars of equity and
may borrow billions
more, and thus may overwhelm intervention by central banks to support almost any
currency,
if the economic fundamentals are in the hedge funds' favor.
f. Investment management firms
Investment management firms (who typically manage large accounts on behalf of
customers
such as pension funds and endowments) use the foreign exchange market to
facilitate
transactions in foreign securities. For example, an investment manager
bearing an
international equity portfolio needs to purchase and sell several pairs of foreign
currencies to
pay for foreign securities purchases. Some investment management firms
also have more
speculative specialist currency overlay operations, which manage clients' currency
exposures
with the aim of generating profits as well as limiting risk. Whilst the number of
this type of
ϭϴ
specialist firms is quite small, many have a large value of Assets Under Management
(AUM),
and hence can generate large trades.
g. Retail foreign exchange traders
Individual Retail speculative traders constitute a growing segment of this
market with the
advent of retail forex platforms, both in size and importance. Currently,
they participate
indirectly through brokers or banks. Retail brokers, while largely controlled and
regulated in
the USA by the CFTC and NFA have in the past been subjected to periodic foreign
exchange
scams. To deal with the issue, the NFA and CFTC began (as of 2009)
imposing stricter
requirements, particularly in relation to the amount of Net Capitalization
required of its
members. As a result many of the smaller and perhaps questionable brokers are now
gone or
have moved to countries outside the US. A number of the forex brokers operate from
the UK
under FSA regulations where forex trading using margin is part of the wider over-
the-counter
derivatives trading industry that includes CFDs and financial spread betting.
There are two main types of retail FX brokers offering the opportunity
for speculative
currency trading: brokers and dealers or market makers. Brokers serve as
an agent of the
customer in the broader FX market, by seeking the best price in the market for a
retail order
and dealing on behalf of the retail customer. They charge a commission
or mark-up in
addition to the price obtained in the market. Dealers or market makers, by
contrast, typically
act as principal in the transaction versus the retail customer, and quote a price
they are willing
to deal at.
h. Non-bank foreign exchange companies
Non-bank foreign exchange companies offer currency exchange and
international payments
to private individuals and companies. These are also known as foreign exchange
brokers but
are distinct in that they do not offer speculative trading but rather
currency exchange with
payments (i.e., there is usually a physical delivery of currency to a bank
account).
It is estimated that in the UK, 14% of currency transfers/payments are
made via Foreign
Exchange Companies. These companies' selling point is usually that they
will offer better
exchange rates or cheaper payments than the customer's bank. These
companies differ from
Money Transfer/Remittance Companies in that they generally offer higher-value
services.
i. Money transfer/remittance companies and bureau de changes
Money transfer companies/remittance companies perform high-volume low-value
transfers
generally by economic migrants back to their home country. In 2007, the
Aite Group
estimated that there were $369 billion of remittances (an increase of 8%
on the previous
year). The four largest markets (India, China, Mexico and the
Philippines) receive $95
billion. The largest and best known provider is Western Union with 345,000 agents
globally
followed by UAE Exchange
% daily share
84.9%
39.1%
19.0%
12.9%
7.6%
6.4%
5.3%
2.4%
2.2%
1.6%
1.5%
1.4%
1.3%
1.3%
0.9%
12.2%
200%
ϮϬ
• EURUSD : 28%
• USDJPY : 14%
• GBPUSD : 9%
and the US currency was involved in 84.9% of transactions, followed by
the euro (39.1%),
the yen (19.0%), and sterling (12.9%). Volume percentages for all
individual currencies
should add up to 200%, as each transaction involves two currencies.
Trading in the euro has grown considerably since the currency's creation in January
1999, and
how long the foreign exchange market will remain dollar-centered is open
to debate. Until
recently, trading the euro versus a non-European currency ZZZ would have usually
involved
two trades: EURUSD and USDZZZ. The exception to this is EURJPY, which
is an
established traded currency pair in the interbank spot market. As the dollar's
value has eroded
during 2008, interest in using the euro as reference currency for prices in
commodities (such
as oil), as well as a larger component of foreign reserves by banks,
has increased
dramatically. Transactions in the currencies of commodity-producing
countries, such as
AUD, NZD, CAD, have also increased.
4.4. Determinants of FX rates
The following theories explain the fluctuations in FX rates in a floating exchange
rate regime
(In a fixed exchange rate regime, FX rates are decided by its government):
I. International parity conditions: Relative Purchasing Power Parity, interest rate
parity,
Domestic Fisher effect, International Fisher effect. Though to some extent the
above
theories provide logical explanation for the fluctuations in exchange
rates, yet these
theories falter as they are based on challengeable assumptions [e.g.,
free flow of
goods, services and capital] which seldom hold true in the real world.
II. Balance of payments model: This model, however, focuses largely on tradable
goods
and services, ignoring the increasing role of global capital flows. It
failed to provide
any explanation for continuous appreciation of dollar during 1980s and
most part of
1990s in face of soaring US current account deficit.
III. Asset market model: views currencies as an important asset class for
constructing
investment portfolios. Assets prices are influenced mostly by people’s willingness
to
hold the existing quantities of assets, which in turn depends on their
expectations on
the future worth of these assets. The asset market model of exchange
rate
determination states that “the exchange rate between two currencies
represents the
price that just balances the relative supplies of, and demand for, assets
denominated in
those currencies.”
None of the models developed so far succeed to explain FX rates levels and
volatility in the
longer time frames. For shorter time frames (less than a few days) algorithms can
be devised
to predict prices. It is understood from the above models that many
macroeconomic factors
affect the exchange rates and in the end currency prices are a result of dual
forces of demand
ϮϮ
and supply. The world's currency markets can be viewed as a huge melting pot: in a
large and
ever-changing mix of current events, supply and demand factors are constantly
shifting, and
the price of one currency in relation to another shifts accordingly. No
other market
encompasses (and distills) as much of what is going on in the world at
any given time as
foreign exchange.
Supply and demand for any given currency, and thus its value, are not
influenced by any
single element, but rather by several. These elements generally fall into
three categories:
economic factors, political conditions and market psychology.
a. Economic factors
These include: (a) economic policy, disseminated by government agencies and central
banks, (b) economic conditions, generally revealed through economic
reports, and
other economic indicators.
• Economic policy comprises government fiscal policy (budget/spending practices)
and
monetary policy (the means by which a government's central bank
influences the
supply and "cost" of money, which is reflected by the level of interest rates).
• Government budget deficits or surpluses: The market usually reacts
negatively to
widening government budget deficits, and positively to narrowing budget
deficits.
The impact is reflected in the value of a country's currency.
• Balance of trade levels and trends: The trade flow between countries
illustrates the
demand for goods and services, which in turn indicates demand for a
country's
currency to conduct trade. Surpluses and deficits in trade of goods and services
reflect
the competitiveness of a nation's economy. For example, trade deficits
may have a
negative impact on a nation's currency.
• Inflation levels and trends: Typically a currency will lose value if there is a
high level
of inflation in the country or if inflation levels are perceived to be
rising. This is
because inflation erodes purchasing power, thus demand, for that particular
currency.
However, a currency may sometimes strengthen when inflation rises because
of
expectations that the central bank will raise short-term interest rates to combat
rising
inflation.
• Economic growth and health: Reports such as GDP, employment levels,
retail sales,
capacity utilization and others, detail the levels of a country's
economic growth and
health. Generally, the more healthy and robust a country's economy, the
better its
currency will perform, and the more demand for it there will be.
• Productivity of an economy: Increasing productivity in an economy should
positively
influence the value of its currency. Its effects are more prominent if the increase
is in
the traded sector.
b. Political conditions
Internal, regional, and international political conditions and events can
have a
profound effect on currency markets.
Ϯϯ
5.2. Sectors
Industry and services
Industry accounts for 28% of the GDP and employ 14% of the total
workforce. In absolute
terms, India is 12th in the world in terms of nominal factory output. The
Indian industrial
sector underwent significant changes as a result of the economic reforms
of 1991, which
removed import restrictions, brought in foreign competition, led to
privatization of certain
public sector industries, liberalized the FDI regime, improved
infrastructure and led to an
expansion in the production of fast moving consumer goods. Post-
liberalization, the Indian
private sector was faced with increasing domestic as well as foreign
competition, including
the threat of cheaper Chinese imports. It has since handled the change
by squeezing costs,
revamping management, and relying on cheap labor and new technology. However, this
has
also reduced employment generation even by smaller manufacturers who
earlier relied on
relatively labor-intensive processes.
Textile manufacturing is the second largest source of employment after
agriculture and
accounts for 20% of manufacturing output, providing employment to over 20
million
people. Ludhiana produces 90% of woollens in India and is known as the
Manchester of
India. Tirupur has gained universal recognition as the leading source of
hosiery, knitted
garments, casual wear and sportswear.
India is 13th in services output. The services sector provides employment to 23% of
the work
force and is growing quickly, with a growth rate of 7.5% in 1991–2000,
up from 4.5% in
1951–80. It has the largest share in the GDP, accounting for 55% in
2007, up from 15% in
1950. Information technology and business process outsourcing are among the
fastest
growing sectors, having a cumulative growth rate of revenue 33.6% between
1997–98 and
2002–03 and contributing to 25% of the country's total exports in 2007–08. The
growth in the
IT sector is attributed to increased specialization, and an availability
of a large pool of low
cost, highly skilled, educated and fluent English-speaking workers, on the
supply side,
matched on the demand side by increased demand from foreign consumers
interested in
India's service exports, or those looking to outsource their operations. The share
of the Indian
IT industry in the country's GDP increased from 4.8 % in 2005–06 to 7%
in 2008. In 2009,
seven Indian firms were listed among the top 15 technology outsourcing
companies in the
world.
Mining forms an important segment of the Indian economy, with the
country producing 79
different minerals (excluding fuel and atomic resources) in 2009–10,
including iron
ore, manganese, mica,bauxite, chromite, limestone, asbestos, fluorite, gypsum,
ochre, phosph
oric and silica sand Organized retail supermarkets accounts for 24% of the
market as of
2008. Regulations prevent most foreign investment in retailing. Moreover,
over thirty
regulations such as "signboard licenses" and "anti-hoarding measures" may
have to be
complied before a store can open doors. There are taxes for moving goods from state
to state,
and even within states. Tourism in India is relatively undeveloped, but
growing at double
digits. Some hospitals woo medical tourism.
ϯϰ
Agriculture
Farmers work outside a rice field in Andhra Pradesh. India
is the second largest producer of rice in the world after
China, and Andhra Pradesh is the second largest rice
producing state in India with West Bengal being the largest.
India ranks second worldwide in farm output. Agriculture
and allied sectors like forestry, logging and fishing
accounted for 15.7% of the GDP in 2009–10, employed
52.1% of the total workforce, and despite a steady decline of its share in the GDP,
is still the
largest economic sector and a significant piece of the overall socio-economic
development of
India. Yields per unit area of all crops have grown since 1950, due to
the special emphasis
placed on agriculture in the five-year plans and steady improvements in
irrigation,
technology, application of modern agricultural practices and provision of
agricultural credit
and subsidies since the Green Revolution in India. However, international
comparisons reveal
the average yield in India is generally 30% to 50% of the highest average yield in
the world.
India receives an average annual rainfall of 1,208 millimeters (47.6 in)
and a total
annual precipitation of 4000 billion cubic meters, with the total
utilizable water resources,
including surface and groundwater, amounting to 1123 billion cubic meters.
546,820 square
kilometers (211,130 sq mi) of the land area, or about 39% of the total
cultivated area, is
irrigated. India's inland water resources including rivers, canals, ponds and lakes
and marine
resources comprising the east and west coasts of the Indian ocean and
other gulfs and bays
provide employment to nearly six million people in the fisheries sector.
In 2008, India had
the world's third largest fishing industry.
India is the largest producer in the world of milk, jute and pulses,
and also has the world's
second largest cattle population with 175 million animals in 2008. It is
the second largest
producer of rice, wheat, sugarcane, cotton and groundnuts, as well as the second
largest fruit
and vegetable producer, accounting for 10.9% and 8.6% of the world fruit
and vegetable
production respectively. India is also the second largest producer and the largest
consumer of
silk in the world, producing 77,000 million tons in 2005.
Banking and finance
The Indian money market is classified into the organized sector, comprising
private, public
and foreign owned commercial banks and cooperative banks, together known as
scheduled
banks, and the unorganized sector, which includes individual or family
owned indigenous
bankers or money lenders and non-banking financial companies. The unorganized
sector
and microcredit are still preferred over traditional banks in rural and
sub-urban areas,
especially for non-productive purposes, like ceremonies and short duration loans.
Prime Minister Indira Gandhi nationalized 14 banks in 1969, followed by six others
in 1980,
and made it mandatory for banks to provide 40% of their net credit to
priority sectors like
agriculture, small-scale industry, retail trade, small businesses, etc. to
ensure that the banks
Balance of payments
Cumulative Current Account Balance 1980
India's balance of payments
liberalization in the 1990s, precipitated by a bala
consistently, covering 80.3% of its imports in 2002
from 66.2% in 1990–91. However, the global economic slump
followed by a general deceleration in world trade s
exports as a percentage of imports drop to 61.4% in
09. India's growing oil import bill is seen as the main
behind the large current account deficit,
2008–09. Between January and October 2010, India imported $8
oil.
Due to the global late-2000s recession
and 39.2% respectively in June 2009.
the global recession, such as United States and mem
more than 60% of Indian exports.
compared to the decline in exports, India's trade d
billion). As of June 2011, exports and imports have
monthly exports reaching $25.9 billion for the mont
reaching $40.9 billion for the same month. This represents a year
for exports and 54.1% for imports.
India's reliance on external assistance and concess
liberalization of the economy, and the
4.4% in 2008–09. In India, Exte
from non-resident lenders, are being permitted by the Govern
source of funds to Indian corporate. The
through ECB policy guidelines issued by the Reserve
Exchange Management Act of 1999.
from $5.8 billion in March 1991 to $283.5 billion i
Foreign direct investment
As the fourth-largest economy in the world in PPP terms, India is
FDI; India has strengths in telecommunication, informati
areas such as auto components, chemica
surge in foreign investments, rigid FDI policies we
to positive economic reforms aimed at deregulating
investment, India has positioned itself as one of the front
growing Asia-Pacific region. India has a large pool of skilled managerial
and
expertise. The size of the middle
growing consumer market.
Current Account Balance 1980–2008 based on IMF data Since independence,
balance of payments on its current account has been negative. Since
economic
liberalization in the 1990s, precipitated by a balance of payment crisis,
India's exports rose
consistently, covering 80.3% of its imports in 2002–03, up
However, the global economic slump
followed by a general deceleration in world trade saw the
exports as a percentage of imports drop to 61.4% in 2008–
India's growing oil import bill is seen as the main driver
behind the large current account deficit, which rose to $118.7 billion,
or 9.7% of GDP, in
Between January and October 2010, India imported $82.1 billion worth of
crude
00s recession, both Indian exports and imports declined by 29.2%
and 39.2% respectively in June 2009. The steep decline was because countries hit
hardest
the global recession, such as United States and members of the European Union,
account for
n 60% of Indian exports. However, since the decline in imports was much
shar
compared to the decline in exports, India's trade deficit reduced to
25,250
billion). As of June 2011, exports and imports have both registered
impressive growth with
monthly exports reaching $25.9 billion for the month of May 2011 and
monthly imports
billion for the same month. This represents a year on year growth of
56.9%
for exports and 54.1% for imports.
India's reliance on external assistance and concessional debt has
decreased since
liberalization of the economy, and the debt service ratio decreased from 35.3% in
1990
External Commercial Borrowings (ECBs), or commercial loans
resident lenders, are being permitted by the Government for providing an additional
source of funds to Indian corporate. The Ministry of Finance monitors and
regulates them
through ECB policy guidelines issued by the Reserve Bank of India under
the
of 1999. India's foreign exchange reserves have steadily risen
from $5.8 billion in March 1991 to $283.5 billion in December 2009.
largest economy in the world in PPP terms, India is a preferred destination for
India has strengths in telecommunication, information technology and other
significant
areas such as auto components, chemicals, apparels, pharmaceuticals, and jeweler.
Despite
surge in foreign investments, rigid FDI policies were a significant
hindrance. However, due
to positive economic reforms aimed at deregulating the economy and
stimulating foreign
ositioned itself as one of the front-runners of the rapidly
. India has a large pool of skilled managerial and
of the middle-class population stands at 300 million and represen
ϯϳ
2008 based on IMF data Since independence,
has been negative. Since economic
nce of payment crisis, India's exports rose
hich rose to $118.7 billion, or 9.7% of GDP, in
2.1 billion worth of crude
, both Indian exports and imports declined by 29.2%
The steep decline was because countries hit hardest by
bers of the European Union, account for
However, since the decline in imports was much sharper
25,250 crore (US$5.63
both registered impressive growth with
h of May 2011 and monthly imports
on year growth of 56.9%
ional debt has decreased since
decreased from 35.3% in 1990–91 to
(ECBs), or commercial loans
ment for providing an additional
monitors and regulates them
Bank of India under the Foreign
have steadily risen
a preferred destination for
on technology and other significant
ls, apparels, pharmaceuticals, and jeweler. Despite a
re a significant hindrance. However, due
the economy and stimulating foreign
runners of the rapidly
. India has a large pool of skilled managerial and technical
class population stands at 300 million and represents a
Inflows (%)
42.00
9.00
7.00
5.00
4.00
The inordinately high investment
routing of international funds through the country given significant
between India and Mauritius,
taxation FDI channel.
ws up to a 100% FDI stake in ventures.
d industrial licensing requirements,
asy access to foreign technology and
moving growth curve of the real-estate sector
ed FDI regime. In March 2005, the
he construction sector, including built-
n development projects comprising housing, commercial
eational facilities, and city- and regional-
Despite a number of changes in the FDI policy to remove caps in most
ater FDI in politically
e total FDI equity inflow into India in
27.41 billion), a growth of 25% in rupee terms over
ϯϵ
3) Shareholders
(table 7)
Sr. No. Name of Shareholder % holding
1 Allahabad Bank 4.60
2 Andhra Bank 4.60
3 Axis Bank 1.84
4 Bank of Baroda 4.60
5 Bank of India 4.60
6 Corporation Bank 4.60
7 Financial Technologies (India) Ltd. 5.00
8 HDFC Bank 2.21
9 IFCI Limited 13.23
10 IL & FS Financial Services Ltd. 5.00
11 Indian Bank 4.60
12 Indian Overseas Bank 4.60
13 MCX Stock Exchange ESOP Trust 1.00
14 Multi Commodity Exchange of India Ltd. 5.00
15 Oriental Bank of Commerce 4.60
16 Punjab & Sind Bank 0.92
17 Punjab National Bank 9.20
18 State Bank of Indore 1.84
19 Syndicate Bank 2.30
20 UCO Bank 0.46
21 Union Bank of India 11.50
22 United Bank of India 1.84
23 Vijaya Bank 1.84
Total 100.00
ϰϯ
4) Products
MCX-SX started live operations on October 7, 2008 by launching monthly
contracts in the
USDINR currency pair under the regulatory framework of Securities and Exchange
Board of
India (SEBI), and Reserve Bank of India (RBI). Consequently, the stock exchange
expanded
its currency derivatives offerings to Euro-Indian Rupee (EURINR), Pound
Sterling-Indian
Rupee (GBPINR) and Japanese Yen-Indian Rupee (JPYINR).
Each of these currency contracts on MCX-SX has a life of 12 months
from the month in
which it is launched.
I. Contract Specifications for USD – INR (table
8)
Symbol USDINR
Instrument Type FUTCUR
Unit of trading 1 (1 unit denotes 1000 USD)
Underlying USD
Quotation/Price
Quote
Rs. per USD
Tick size 0.25 paise or INR 0.0025
Trading hours Monday to Friday ,9:00 a.m. to 5:00 p.m.
Contract trading
cycle
12 month trading cycle.
Last trading day Two working days prior to the last business day of the expiry
month at 12 noon.
Final settlement
day
Last working day (excluding Saturdays) of the expiry month.
The last working day will be the same as that for Interbank Settlements in Mumbai.
Base price Theoretical price on the 1st day of the contract. On all other days,
DSP of the contract.
Price operating
range
Tenure upto 6 months Tenure greater than 6 months
+/-3 % of base price +/- 5% of base price
Position limits
Clients Trading Members Banks
Higher of 6% of total open
interest or USD 10 million
Higher of 15% of the total open
interest or USD 50 million
Higher of 15% of the total open
interest or USD 100 million
Minimum initial
margin
1.75% on first day & 1% thereafter.
Extreme loss
margin
1% of MTM value of gross open position.
Calendar spreads Rs. 400/- for a spread of 1 month, Rs. 500/- for a spread of 2
months, Rs. 800/- for a spread of 3 months &
Rs. 1000/- for a spread of 4 months or more
Settlement Daily settlement : T + 1 , Final settlement : T + 2
Mode of settlement Cash settled in Indian Rupes
ϰϰ
Daily settlement
price (DSP)
DSP shall be calculated on the basis of the last half an hour weighted
average price of such contract or
such other price as may be decided by the relevant authority from time to time.
Final settlement
price (FSP)
RBI reference rate
Position limits
Clients Trading Members Banks
Higher of 6% of total open
interest or GBP 5 million
Higher of 15% of the total open
interest or GBP 25 million
Higher of 15% of the total open
interest or GBP 50 million
Minimum initial margin 3.2% on first day & 2% thereafter
Extreme loss margin 0.5% of MTM value of gross open positions.
Calendar spreads Rs.1500/- for a spread of 1 month, 1800/- for a spread of 2
months, Rs.2000/- for a spread of 3 months
or more
Settlement Daily settlement : T + 1 , Final settlement : T + 2
Mode of settlement Cash settled in Indian Rupees
Daily settlement price
(DSP)
DSP shall be calculated on the basis of the last half an hour weighted average
price of such contract or
such other price as may be decided by the relevant authority from time to time.
ϰϲ
Age (years)
Age (years):
20 – 30
30 – 40
40 – 50
50 & Above
Interpretation:
The chart reflects age vise division of currency in
people having between 30 to 40 years is more intere
of currency market is more in this age group & risk
group, any broking firm can target this age group a
40 to 50 years are invest more in currency market.
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No. of respondent
ϴ
Ϯϭ
ϲ
ϱ
The chart reflects age vise division of currency investor; we can see
that the number of
people having between 30 to 40 years is more interested in currency market. The
of currency market is more in this age group & risk taking aptitude is
more than other age
group, any broking firm can target this age group and can get benefits, at second
age between
40 to 50 years are invest more in currency market.
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(table 16)
No. of respondent
in %
20
52
15
13
(Chart 2)
vestor; we can see that the number of
sted in currency market. The awareness
taking aptitude is more than other age
nd can get benefits, at second age between
Education Qualification:
Education Qualification
H.S.C
Graduate
Post Graduate
Other
Interpretation:
The above graph shows the education level
graduate & 32% of the respondents were post graduate. The gradua
invest in currency market. Majority of the investor
majority investors are graduate & taking much in
criteria investors can be targeted to get benefit t
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PP
SP
C
Occupation:
Occupation
Business
Self employment
Service
Student
House Wife
Other
Interpretation:
The 44% of the investors were having business & on
service. The awareness of currency market. The majo
business of import & export. The main object of the
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ϰй
Interpretation
Form the above mention graph we can analyze the gre
for future investment there are grater no. of i
respondent are relay on the USD and on s
22 % of the respondent thinks that GBP will rise in
of USD & EURO are higher in future.
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Which currency do you most rely on?
No. of respondent No. of respondent in %
18
16
11
5
0
Form the above mention graph we can analyze the greater market share is
covered by USD
for future investment there are grater no. of investor to invest in
USD, the 36
respondent are relay on the USD and on second stage 32% of respondent are relay on
EURO.
22 % of the respondent thinks that GBP will rise in future. But as per my opinion
the chances
of USD & EURO are higher in future.
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No. of respondent in %
36
32
22
10
0
(Chart 12)
ater market share is covered by USD
nvestor to invest in USD, the 36% of the
% of respondent are relay on EURO.
future. But as per my opinion the chances
Chapter 8. Conclusion
The survey I have carried out on Impact of currency market in India.
The conclusion of the
survey is as follows.
The awareness of the forex market in India is very low in compare to
other financial
instruments. Only fewer people know about the currency trading. As the
gender wise male
investors are more investing than women investors. But the education
level is as well a
positive sign of women also taking interest in forex market. The equity
and commodity
investors are as well investing in currency. In India USD, EURO, GBP,
and JPY are the
currencies been traded most.
USD and EURO are the most preferred currency in response from the
respondents. there is
high volume in this two currency pair in India. USD is on first position to trade
in India, as
per the data of MCX-SX the volume of USD/INR of June contract 3588917 in lots as on
3
rd
June 2011. The EURO is on second to be traded in India. The data of
MCX-SX volume in
EURO/INR is 156556 in lots, as on 3
rd
June 2011. GBP and JPY are been traded in India on
3
rd
and 4
th
position respectively. The volume in GBP/INR was 58255 in lots and
volume in
JPY/INR was 23628 in lots as on 3
rd
June 2011 respectively.
In future 36% & 32% of respondent are relay on USD & EURO respectively. But in
future as
per the report of Bank Of Japan Change in the total quantity of
domestic currency in
circulation and current account deposits held at BOJ, It's positively
correlated with interest
rates-early in the economic cycle an increasing supply of money leads to additional
spending
and investment, and later in the cycle expanding money supply leads to inflation.
This release
would be affect the JPY rate.
The earning in currency market is low in comparison of Equity or
Commodity market. The
volatility in currency rates is very less. It doesn’t volatile as equity or
commodity market. The
risk is also very less in the currency market. The main or primary
object of investing in
currency market by investor is hedging. More number of respondents is
connected in the
business of Import-Export. They use to hedge the currency market for
future payment and
earn the deference.
The impact of currency market in Indian economy can be measure from the Gross
Domestic
product and Gross national product. The GDP of current year if 7.8%. It
is a positive in
compare to last financial year; the second factor is foreign reserve. As on may
2011 India is
having $ 3010 billion of foreign reserve as per the IMF data. Export of the country
is as well
increased as exports surged by 37.5 per cent for the financial year ended March
31, 2011 to
touch $245.9 billion shooting well past the $200-billion target set for
the year. Currency
market in India is having a wide scope for development in future.
ϲϴ
Chapter 9 Annexure
9.1 Questioner
Dear Sir/Madam.
I am student of M.B.A at Ganpat University, undergoing Summer Internship Program at
Religare
Securities Limited, Ahmadabad. Undergoing a Project report on “Impact of Currency
Market in
Indian economy”. So give your opinion for the same, the information will not be
disclosed and will
be used for project purpose.
[Note- please tick(√) to your selected option]
Name
Gender: [ ] Male [ ] Female
Age (years): [ ] 20 – 30 [ ] 30 – 40
[ ] 40 – 50 [ ] 50 & Above
Education Qualification:
[ ] H.S.C [ ] Graduate
[ ] Post Graduate [ ] Other
Occupation: [ ] Business [ ] Self employment [ ] Service
[ ] Student [ ] House Wife [ ]Other
Annual Income (Rs):
[ ] ≤ 2, 00,000 [ ] 2, 00,000- 3, 50,000
[ ] 3, 50001- 5, 00,000 [ ] 5, 00,001 ≥
1. What are investment avenues which you are presently investing?
[ ] Equity [ ] Currency [ ] Commodity
[ ] IPO [ ] Mutual Fund [ ] Insurance
[ ] SIP [ ] Bonds [ ] Other
2. In Which currency do you prefer to invest?
[ ] USD [ ] EURO [ ] GBP [ ] JPY
[ ] Other__________
3. What is the primary objective of your investment in currency?
[ ] Hedging [ ] Volatility [ ] Speculation
[ ] Arbitrage [ ] Other_________
4. What is the time duration you invest in currency?
[ ] Intraday [ ] Less than 1 months [ ] 1-2 months
[ ] 2-3 months [ ] more than 3 months
ϲϵ
ϳϬ