A STUDY ON DERIVATIVE MARKETS IN INDIA WITH REFERENCE

TO KARVY STOCK BROKING LIMTED

A Project report Submitted in
Partial Fulfillment for the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF MANAGEMENT STUDIES

PYDAH COLLEGE OF ENGINEERING & TECHNOLOGY

(Approved by AICTE & Affiliated to Andhra University)

GAMBHEERAM, ANANDAPURAM MANDAL,

VISAKHAPATNAM – 531 163

Submitted by
PANCHADA CHITTI VARAHALA GOVINDU
(Reg.No.115232102064)

Under the guidance of

Dr.SOWDAMINI

Associate Professor
1
 DECLARATION

I here by declare that the project entitled A STUDY ON "DERIVATIVE MARKETS" IN

INDIA with reference to “KARVY STOCK BROKING LTD”, submitted by me in partial
fulfillment for the award of degree of Master of Business Administration to the Department
of M.B.A., PYDAH COLLEGE OF ENGG&TECH ,Visakhapatnam, is genuine and
bonafide work done by me and it is not previously submitted by me for the award of degree
or diploma in any other institute or university.

Place: Visakhapatnam p.ch.v.govindu

Date: 115232102064

2
 CERTIFICATE

This is to certify that PANCHADA CHITTI VARAHALA GOVINDU student of M.B.A

PADAH COLLEGE OF ENGG&TECHNOLOGY, GAMBHEERAM, Visakhapatnam.
during the academic year 2015-2017 has Under taken the project work on “DERIVATIVE
MARKETS” at “KARVY STOCK BROKING LTD”, This is a record of bonafied
work carried out by him under my guidance and supervision and had fulfilled the
requirements concerning the project work.

Place: Visakhapatnam Dr. Sowdamini

Date:

3
 ACKNOWLEDGEMENT
I would like to thank all the people whose constant support helped me
to bring my project into existence.
I express my sincere thanks to Dr,v.chiranjeevi rao pydah college of
engg & tech visakhapatanam for his ecouragement throughout Academic
period.
I take this opportunity to express my thanks to Prof.sarabandhi,Director,
School of Management studies, Visakhapatnam for giving me permission to do
my project.
I am thankful to Dr.v.chiranjeevi Rao, Associate Professor and Head of
Department, Dept. of Management Studies, for his valuable guidance to
complete my project at Symbiosys Technologies.
I would like to thank Mr. P. Nagireddy Area Manager and other staff at
KARVY STOCKBROKING LTD for his guidance during my project.

Last but not the least I thank one and all who have contributed their part
in helping me during completion of my project work

P.CH.V.GOVINDU
Regd no: 115232102064

4
 CONTENTS

Page No

Chapter I

 Introduction
 Need for the study
 Objectives of the study
 Limitations of the study
Chapter-II

 Industry profile
 Future prospectus
Chapter-III

 Company Profile
Chapter-IV

 Conceptual Profile
Chapter-V

 Findings , Comparison and Analysis

Chapter-VI

 Summary
 Conclusion
 Bibliography
5
 Chapter-I

INTRODUCTION

India can boast of being one of the oldest stock markets in Asia. Earlier in the initial
days trading in securities was done in a Very+ informal or Unsystematic manner Company
agents or representatives representing different corporate Companies, already listed in the
“Stock Exchange”. These representatives has to openly outcry the necessary details about
the company and give a brief description of the number of shares allotted to issue and their
quoted prices. After this the bidding process takes Place.

This system was lacking the information technology for immediate matching or
recording of trades. This was time consuming and inefficient. In order to provide efficiency,
liquidity and transparency, NSE(National Stock Exchange) introduced a nation wide online
fully automated screen based trading system(SBTS) where a member can punch into the
computer Quantities of securities and the prices at which he likes to transact and the

transaction is executed as soon as it finds matching sell or buy orders from a Counter party .

Today India can boast that almost 100% trading takes place through Electronic order
matching. NSE has main computer which is connected through Very Small Aperture
Terminal (VSAT) installed at its office. Brokers have terminals (identified as PCs) installed
at their premises which are connected through VSATS/ Leased Lines/ Modems.

With the emergence of online trading in Indian Stock Exchanges the volume of the
securities traded, the size of the market and the market turnover has increased
tremendously. This accounts for about 2/3rd of the National Income of the Economy

6
NEED FOR THE STUDY
Investment without planning always gives negative results .investing in single security leads to more
risk and may give higher returns. But here the investors like to enjoy higher returns at low risk.it is
only possible by constructing and managing a portfolio. There are many ways to constructing
optimal portfolio, which includes traditional and modern methods. All methods have their own
merits and demerits. Sharpe single index model is one of the methods to construct the optimal
portfolio. Underlying principal of Sharpe single index model is to choose a portfolio which generates
high return when all portfolios offering same return.Sharpe single index used quadratic equations to
construct the optimal portfolio. The process prescribed is complex but gives us fruitful results in
maximizing returns

 “Performance Evaluation of derivatives” makes the reader understand about the

performance of the particular scrips .

 My study can make the investor understand various operations done in Stock Exchange.

 This gives them a clear idea about the performance of the scrips and how and where to

invest.

 After going through my study the reader can be very well benefited by not only knowing

about Stock Exchange but also its operation, various guidelines and by learning the

performance on scrips

 SIGNIFICANCE OF THE STUDY:

 Everyone put his or her time, money and efforts because to have some

significance. My studies have some significance to:

 The Organization:
 As organization has got valuable data regarding customer preference and
market share of Karvy stock broking ltd., in finance industry. Now the
organization can take some significant actions in the direction of customer

7
 satisfaction so that the customer can avail more benefits and the organization
can get good customers and more business.

 The Student:-
 It also has significance to me that I got the precious knowledge about the various
operation of different department, policies and data regarding various schemes
provided by the Karvy stock broking ltd., It will help me in my future for the
practical applications in real life.

OBJECTIVES

 To study various operations of various Stock Exchange in India.

 To study the fluctuations of selected scrips that is traded regularly in NSE and

suggestions given.

 To study the derivatives trading in the Indian Capital Market.

 To study the Futures and forwards contract in the derivative markets.

 To study the factors which determine or influence the Option price.

 To study about Futures and Options as a hedging tools.

 To study clearing and Settlement procedure of Futures and Options.

 To study the payoff for Future and Options in the long and short run.

8
METHODOLOGY
The study was under taken in the trading floor of kotak. The Information regarding
the derivatives is collected from both primary as well as secondary sources of data.

Primary data

 Watching the online trading live.

 Interacting with the operators at the computer terminal’s the clients trading in kotak
.
 Collecting information from the head of each department and from the staff working
in those departments.

Secondary data

 Collecting the data from the website of NSE.

 Referring the topics in textbooks and journals relating to stock exchange operations.
 Collecting information through internet and also from KARVY STOCK BROKING
Limited.

9
LIMITATIONS

As the subject chosen comparatively new one, the study suffers from certain
limitations.

1. Stock Exchange is an ocean and study is an attempt to understand which a drop in the
ocean. The activities in stock exchange and derivatives market are vast and to
understand all the activities is a difficult task, as there are only few persons who can
provide information.

2. To know the entire activities of stock exchange is very difficult as it takes a long period to
understand.

3. Though the system, people and time were there, some information regarding certain
topics in stock trading was not collected due to non availability of time to the key persons
from their busy schedule.

4. Because of the comprehensive nature of some information is not disclosed though

sources of information are available.
10
 CHAPTER –II

INDUSTRIAL PROFILE

INTRODUCTION TO FINANCIAL MARKETS

Finance is the integral part of modern business. Financial markets refer to the
institutional arrangements for dealing in financial assets and credit instruments of different
types, such as currency cheques, bank deposits bills, etc.

The main functions of the financial markets are:

(i) To facilitate creation and allocation of credit and liquidity

(ii) To serve as intermediaries for mobilization of savings;

(iii) To assist the process of balanced economic growth;

(iv) To provide financial convenience;

(v) To cater to the various credits needs of the business houses.

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Types of Financial markets:

On the basis of the maturity period of the financial assets, the market can be divided into:

1. Money market:

A money market is a mechanism through which short-term funds are loaned and
borrowed and through which a large part of the financial transaction of a particular country of
the world are cleared.

The money market is divided into 3 sectors namely organized sector,

unorganized sector and Cooperative sector.

a. Organized sector is comparatively well developed in terms of organized

relationships and specialization of functions. It consists of the Reserve
Bank of India, various scheduled and non-scheduled commercial banks.
The development banks, other financial institutions like LIC, UTI,
discount and finance house of India limited are all a part of the organized
sector.

b. The unorganized sector is more dominate in India. The only link between
the organized and unorganized sectors is through commercial banks. It
consists of the indigenous bankers, Moneylenders, Nidhis and Chit funds.

c. The cooperative sector consists of the state –cooperative banks, primary

agricultural credit societies, Central Cooperative banks, and State Land
Development banks.
2. Capital market:

12
 Capital market is an organized mechanism for effective and efficient transfer
of money capital of financial resources form the investing class i.e., a body of
individual or institutional savers, to the entrepreneur class i.e., a body of individual or
institutions engage in industry, business or service in the private and public sectors of
the economy.

Functions of capital market:

The capital market is directly responsible for the following activities.

 Mobilization of National savings for economic development

 Mobilization and import of foreign capital and foreign investment capital plus
skill to fill up the deficit in the required financial resources to maintain
expected rate of economic growth.
 Productive utilization of resources
 Direction the flow to funds of high yields and also strives for balance and
diversified industrialization.

Constituents of capital market:

The capital market comprises of mutual funds, development banks, specialized

financial institutions, investment institutions, state level development banks, lease companies,
financial service companies, commercial banks and other specialized institutions set up for
the growth of capital market like SEBI, CRISIL.

Instruments Capital market:

The following instruments are being used for raising resources.

Equity shares

Preference shares

Non-voting equity shares

13
 Cumulative convertible preference shares company fixed deposits, banks, and
debentures, global depository receipts.

The capital market is divided into two parts namely new issues market and Stock
market.

STOCK EXCHANGES IN INDIA

At the end of the June 1989, there were 18 recognized stock exchanges in India. Among the

18 stock exchanges, the first organized stock exchange set up at Bombay in 1857 is

distinguished not only by its size but also it has been recognized permanently, while the

recognition for other markets is renewed every 5 years. Stock markets are organized either

as voluntary, non-profit making associations (Bombay, Ahmadabad, Indore) or public limited

companies (Calcutta, Delhi, Bangalore) or company limited by guarantee (Madras,

Hyderabad).

In India, the growth of stock exchanges has been linked to the growth of corporate
sector. Though a number of stock exchanges were set up before independence but, there
was no All India legislation to regulate they’re working. Every stock exchange followed its
own methods of working .To rectify this situation,

14
The SECURITY CONTRACTS (REGULATIONS) ACT was passed in 1956.

In 1965, 22 separate provincial stock exchanges were merged into 3 regional stock
exchanges and in 1973 these, in turn, were combined to form the National Stock Exchange
(NSE) under the title of the stock exchange that has trading floors in many former provincial
center. At present, there are 26 stock exchanges in our country. The over-the counter
exchange of India began its operations in 1992. Since 1995, trading in securities is screen
based (on-line)

BOMBAY STOCK EXCHANGE (BSE):

Bombay stock exchange is the first organized stock exchange set up at

Bombay in 1857. It is the premier or apex stock exchange in India as it is distinguished not
only by its size but also it has been recognized permanently while recognition of other stock
exchanges is renewed every 5 years. It is the oldest stock market.

Bombay Stock Exchange raised the threshold limit for listing to Rs.10 crores,
moved on to weekly settlement and quicker actions for each settlement. Settlement is
through the clearinghouse. 12 days carry forward is allowed on BSE. Index in BSE is
‘SENSEX’. BSE membership fee in 1857 was just Rs1lakh and now it in about Rs 2crores.

NATIONAL STOCK EXCHANGE (NSE)

National Stock Exchange of India Ltd was started in 1992 with a paid-up
equity of Rs.25 crores. The government recognized it in the same year and NSE started its
operations in wholesale in Nov 1994.

15
NSE MISSION

NSE mission is setting the agenda for change in the securities markets in India.

The NSE was set-up with the main objectives of:

 establishing a nation-wide trading facility for equities, debt instruments and

hybrids,
 ensuring equal access to investors all over the country through an appropriate
communication network,
 providing a fair, efficient and transparent securities market to investors using
electronic trading systems,
 enabling shorter settlement cycles and book entry settlements systems, and
 meeting the current international standards of securities markets.

NSE LOGO

The logo of the NSE symbolizes a single nationwide securities trading facility
ensuring equal and fair access to investors, trading members and issuers all over the country.
The initials of the Exchange viz., N, S and E have been etched on the logo and are distinctly

16
visible. The logo symbolizes use of state of the art information technology and satellite
connectivity to bring about the change within the securities industry. The logo symbolizes
vibrancy and unleashing of creative energy to constantly bring about change through

innovation.

NSE MILE STONES

April 1993 November 1992 Incorporati

May 1993 Formulation of business plan

June 1994 Wholesale Debt Market segment goes live

November 1994 Capital Market (Equities) segment goes live

March 1995 Establishment of Investor Grievance Cell

April 1995 Establishment of NSCCL, the first Clearing Corporation

June 1995 Introduction of centralized insurance cover for all trading members

July 1995 Establishment of Investor Protection Fund

October 1995 Became largest stock exchange in the country

April 1996 Commencement of clearing and settlement by NSCCL

April 1996 Launch of S&P CNX Nifty

June 1996 Establishment of Settlement Guarantee Fund

November 1996 Setting up of National Securities Depository Limited, first depository in

17
 India, co-promoted by NSE

November 1996 Best IT Usage award by Computer Society of India

December 1996 Commencement of trading/settlement in dematerialised securities

December 1996 Dataquest award for Top IT User

December 1996 Launch of CNX Nifty Junior

February 1997 Regional clearing facility goes live

November 1997 Best IT Usage award by Computer Society of India

Promotion of joint venture, India Index Services & Products Limited

May 1998
(IISL)

May 1998 Launch of NSE Web-site: www.nse.co.in

July 1998 Launch of NSE Certification Programme in Financial Market

August 1998 CYBER CORPORATE OF THE YEAR 1998 award

February 1999 Launch of Automated Lending and Borrowing Mechanism

April 1999 CHIP Web Award by CHIP magazine

October 1999 Setting up of NSE.IT

January 2000 Launch of NSE Research Initiative

February 2000 Commencement of Internet Trading

June 2000 Commencement of Derivatives Trading (Index Futures)

18
September 2000 Launch of 'Zero Coupon Yield Curve'

Launch of Broker Plaza by Dotex International, a joint venture between

November 2000
NSE.IT Ltd. and I-flex Solutions Ltd.

December 2000 Commencement of WAP trading

June 2001 Commencement of trading in Index Options

July 2001 Commencement of trading in Options on Individual Securities

November 2001 Commencement of trading in Futures on Individual Securities

December 2001 Launch of NSE VaR for Government Securities

January 2002 Launch of Exchange Traded Funds (ETFs)

NSE wins the Wharton-Infosys Business Transformation Award in the

May 2002
Organization-wide Transformation category

October 2002 Launch of NSE Government Securities Index

January 2003 Commencement of trading in Retail Debt Market

June 2003 Launch of Interest Rate Futures

August 2003 Launch of Futures & options in CNXIT Index

June 2004 Launch of STP Interoperability

August 2004 Launch of NSE electronic interface for listed companies

March 2005 ‘India Innovation Award’ by EMPI Business School, New Delhi

19
June 2005 Launch of Futures & options in BANK Nifty Index

December 2006 'Derivative Exchange of the Year', by Asia Risk magazine

January 2007 Launch of NSE – CNBC TV 18 media center

March 2007 NSE, CRISIL announce launch of IndiaBondWatch.com

June 2007 NSE launches derivatives on Nifty Junior & CNX 100

October 2007 NSE launches derivatives on Nifty Midcap 50

January 2008 Introduction of Mini Nifty derivative contracts on 1st January 2008

March 2008 Introduction of long term option contracts on S&P CNX Nifty Index

Launch of NCFM - Derivatives Market (Dealers) Module Test in Hindi

June2008
language

September 2008
Launch of FEDAI-NSE Currency Futures (Basic) Module

20
Jan2009 Launch of Mutual Funds : A Beginners Module

Feb2009 Launch of NCFM - Capital Market (Dealers) Module Test in Gujarati and
Hindi languages

Feb2009 Launch of Shariah BeEs on Feb 4, 2009

Mar2009
Launch of "Options Trading Strategies Module"

NSE Technology

Across the globe, developments in information, communication and network

technologies have created paradigm shifts in the securities market operations. Technology
has enabled organizations to build new sources of competitive advantage, bring about
innovations in products and services, and to provide for new business opportunities. Stock
exchanges all over the world have realised the potential of IT and have moved over to
electronic trading systems, which are cheaper, have wider reach and provide a better
mechanism for trade and post trade execution.

NSE believes that technology will continue to provide the necessary impetus for the
organization to retain its competitive edge and ensure timeliness and satisfaction in
customer service. In recognition of the fact that technology will continue to redefine the
shape of the securities industry, NSE stresses on innovation and sustained investment in

21
technology to remain ahead of competition. NSE IT set-up is the largest by any company in
India. It uses satellite communication technology to energies participation from around 400
cities spread all over the country. In the recent past, capacity enhancement measures were
taken up in regard to the trading systems so as to effectively meet the requirements of
increased users and associated trading loads. With up gradation of trading hardware, NSE
can handle up to 1 million trades per day.

CIRCUIT BREAKERS
The Exchange has implemented index-based market-wide circuit breakers in
compulsory rolling settlement with effect from July 02, 2001

INDEX-BASED MARKET-WIDE CIRCUIT BREAKERS

The S & P CNX The index-based market-wide circuit breaker system applies at 3
stages of the index movement, either way viz. at 10%, 15% and 20%. These circuit breakers
when triggered bring about a coordinated trading halt in all equity and equity derivative
markets nationwide. The market-wide circuit breakers are triggered by movement of either
the BSE Sensex or the NSE S&P CNX Nifty, whichever is breached earlier.

22
  In case of a 10% movement of either of these indices, there would be a one-hour
market halt if the movement takes place before 1:00 p.m. In case the movement
takes place at or after 1:00 p.m. but before 2:30 p.m. there would be trading halt for
½ hour. In case movement takes place at or after 2:30 p.m. there will be no trading
halt at the 10% level and market shall continue trading.

 In case of a 15% movement of either index, there shall be a two-hour halt if the
movement takes place before 1 p.m. If the 15% trigger is reached on or after
1:00p.m. but before 2:00 p.m., there shall be a one-hour halt. If the 15% trigger is
reached on or after 2:00 p.m. the trading shall halt for remainder of the day.

 In case of a 20% movement of the index, trading shall be halted for the remainder of
the day.

S&PCNX NIFTY:

NIFTY is based upon solid economic research it the new world of financial product on
the index like index futures, index options and index funds. A trillions calculations were
expanded to evolve the rules inside the S&P CNX Nifty index.

The result of this work is remarkably simple:

23
  The correct size is to use is 50.
 Stocks considered for the S&P CNX Nifty must be liquid by the 'Impact cost
criterion.
 The largest 50 stocks that meet the criterion go into the index.

The nifty is uniquely equipped as an index for the index market owing to its

 Low market impact cost

 High edging effectiveness

1. BACKOFFICE

To know the trade position of the client, back-office is done in KSBL everyday
immediately after the trade ends. ‘KARVY PACK’ is the package used in back office

24
 system. Steel City Software team was designed and maintained this “KARVY PACK”
Package.

The main modules of back office system are:

 Trading
 Finance
 Importing Exporting
 Margins
 Clearing
 Business Controls
 Payin-Payout
 House Keeping
In the back office, first the Import Export module is opened where the trade
file of the day’s trade is collected and the text file was imported to the system. There, the
old closing prices are inserted by new prices from the Bhavcopy file. Bhavcopy is the
average of last half-an-hour prices of the scrips.

To calculate the net mark to market value, Bhavcopy file is imported from
NSE/BSE/NCDEX/MCX. Net mark to market value is to be known to know the profit or loss
position of the client, basing on which the Trading Manager of KSBL will decide whether the
client can trade or not for the next day on comparing it with the margin paid by the client.

After importing the Bhavcopy file, the trading module is opened. In trading module, the
sauda status is known from the Saud Manager’. Sauda manager is the number of trade
confirmations recorded. Confirmation of trading transaction with brokerage commission is known
as ‘Sauda’.

25
 After Sauda Manager, Net positions process is done. In the net positions process,
cumulative net position reports, client-wise net position reports and other reports are made and
are given to clients and to the accounts department. The bills are prepared and sent to the
respective clients.

2. REPORTS:

After selecting ‘REPORTS’ option from main menu, the member has to specify the
criteria for which the report is needed. The types of reports that may be generated are: Net
Position Reports Client Wise and Scrip Wise; Contract Note reports; Client Wise Confirmation
reports; Bills Summary reports; bad deliveries reports; auctions reports; objections reports;
margins reports; securities reports and miscellaneous reports. The daily reports of various
aspects relating to the trading activities are maintained.

3. CLEARING:

Settlement of trades transacted on an exchange requires smooth, preferably instantaneous,

movement of securities and funds in accordance with the prescribed schedule of pay-in / pay-out.

Movement of securities has been almost instantaneous in the dematerialized environment. Two

depositories are in place to provide electronic transfer of securities. 10 major stock exchanges

accounting for about 99% of turnover have been connected to depositories. All actively traded

scrips are held, traded and settled in de-mat form. NSE follows a different model where a clearing

corporation guarantees settlement obligations emanating from trades.

4. SETTLEMENT:

26
 The trades accumulated over a trading cycle are clubbed together at the end of the trading
cycle, positions (trades) are netted and the balance obligations are settled.

THE ONE TYPE OF SETTLEMENT

ROLLING SETTLEMENT:

In a rolling settlement, each trading day is considered as a trading period and

trades executed during the day are settled based on the net obligations for the day.

At NSE, trades in rolling settlement are settled on a T+2 basis i.e. on the 2nd working day.
For arriving at the settlement day all intervening holidays, which include bank holidays, NSE
holidays, Saturdays and Sundays are excluded. Typically trades taking place on Monday are settled
on Wednesday, Tuesday's trades settled on hursday and so on.

The following table and figure represent rolling settlement process.

A tabular representation of the settlement cycle for rolling settlement is given below:

Table-4.1

Activity Day

Trading Rolling Settlement Trading T

Clearing Custodial Confirmation T+1 working days

27
 Delivery Generation T+1 working days

Settlement Securities and Funds pay in T+2 working days

Securities and Funds pay out T+2 working days

Valuation Debit T+2 working days

Post Settlement Auction T+3 working days

SETTLEMENT AGENCIES:

The NSCCL, with the help of clearing members, custodians, clearing banks
and depositories settles the trades executed on exchanges. The roles of each of these
entities are explained bellow:

a. NSCCL
b. CLEARING MEMBERS
c. CUSTODIANS
d. CLEARING BANKS
e. DEPOSITORIES
f. PROFESSIONAL CLEARING MEMBER

EXPLANATIONS:

28
1. Trade details from Exchange to NSCCL (real-time and end of day trade file).
2. NSCCL notifies the consummated trade details to CMs/custodians who affirm back. Based on
the affirmation, NSCCL applies multilateral netting and determines obligations.
3. Download of obligation and pay-in advice of funds/securities.
4. Instructions to clearing banks to make funds available by pay-in-time.
5. Instructions to depositories to make securities available by pay-in-time.
6. Pay-in of securities (NSCCL advises depository to debit pool account of custodians/CMs
and credit its account and depository does it).
7. Pay-in of funds (NSCCL advises Clearing Banks to debit account of custodians/CMs and
credit its account and clearing bank does it).
8. Pay-out of securities (NSCCL advises Clearing Banks to credit account of custodians/CMs
and debit its account and depository does it).
9. Pay-out of funds (NSCCL advises Clearing Banks to credit account of custodians and
debit its account and clearing bank does it).
10. Depository informs custodians/CMs through DPs.
11. Clearing Banks inform custodians/CMs.
5. COST OF TRADING:

The various costs involved in the process of online trading in Steel City Securities

Limited, Visakhapatnam are as follows:

a. MARGINS:

The base capital to set up a trade center is one crore rupees. Earlier, KSBL paid Rs.75

lakhs as base capital when it was set-up. The Trade Corporation has to maintain a

reserve of some amount with NSE where 30% - 50% will be in the form of cash and the

29
 remaining in the form of bank guarantees (securities), FDR’s etc. KSBL has 7.5. crores as

margin with NSE at present.

Gross intra-day turnover (buy and sell) of a member shall not exceed 25 times the
base capital. Gross exposure of a member at any time shall not exceed 8.5 times the
free base capital of one crore rupees and not exceed 12 times over the free base capital
of one crore rupees.

Minimum of Rs.20000 is collected as margin money from professional clients

in KSBL. For delivery purpose no margin money is collected. Client margin collection is
calculated in 16 types known as ‘Span calculation’ and the maximum margin is collected
from the clients. KSBL collects 25% margin money in futures from clients. For trading in
index 15% margin is charged. For retail clients, the full amount of the value of shares is
calculated and collected to allow them to purchase the shares.

Table-5.1

30
Gross Exposure Margin Payable ( Rs. Crore)

<= 1 Nil

> 1 <=3 2.5% in excess of Rs. 1 crores

> 3& <= 6 Rs. 5 lakh plus 5% in excess of Rs. 3crores

> 6& <= 8 Rs.20 lakh plus 10% in excess of Rs. 6 crores

> & <=20 Rs.40 lakh plus 15% in excess of Rs. 8 crores

> 20 Rs. 220 lakh plus 20 % in excess of Rs.20

b. BROKERAGE:

Brokerage is of two types:

i. Speculation brokerage or square up commission:

This brokerage is charged where buying and selling of shares is done in one
day only and at the end of the days trade, the position is zero. The speculation
brokerage is charged from 0.01% to 0.03%.

ii. Delivery Brokerage:

This brokerage is charged where there may be buying or selling lot remaining
at the end of the days trade. The delivery brokerage is charged from 0.03% to 0.30%.

31
 As per SEBI, maximum brokerage shouldn’t exceed 2.5% both in BSE and NSE. For
retail clients, the brokerage charged is 0.7%. A sub-broker charge 2.5% from the clients
to sell or buy the shares out of which, SCSL charges 1% from the sub-broker.

Service tax:

In SCSL, 10.3% service tax on brokerage is collected from the clients.

Stamp duty:

If the stamp duty of 0.006% on turnover is Rs30 or more, only Rs30 is collected in
NSE. In BSE, the minimum is 1Re and the maximum stamp duty is unlimited.

Security Transaction Tax

This has reference to the Securities Transaction Tax (STT) introduced in the Finance
Act 2004. As per the Finance Act 2004, STT on the transactions executed on the Exchange
will be as under:

NSE, BSE:

 Square up -------------0.25% on Turnover

 Delivery --------------0.125% on Turnover
 F&O
0.017% (Its calculate on Turnover only on Selling )

Options

0.017% (Based only on Premium)

Exercise (only for options)

0.125% (Strike + Premium Multiplied by quantity)

32
6) ACCOUNTS:

The Accounts/ Finance department maintains the accounts in KSBL. The accounts
are prepared in three forms. They are:

a.Client-wise net positions,

b.Scrip-wise net positions,

c.Pay-in and Pay-out settlement of funds.

7) DEMATERIALIZATION AND ELECTRONIC TRANSFER OF SECURITIES:

Though de-mat was introduced in 1994, it came into existence in 1996. The

depositories Act, 1996 was passed to provide for the establishment of depositories in

securities with the objective of ensuring free transferability of securities with speed,

accuracy and security by dematerializing the securities in the depository model. A

depository holds securities in dematerialized form. It maintains ownership records of

securities and effects transfer of ownership through book entry.

The two depositories, National Securities Depository Limited (NSDL) and Central
Depository Services Limited (CDSL) provide services to investors and clearing members
through Depository Participants (DPs). They do not change the investors and clearing

33
members directly but charge their DPs, who are free to have their own charge structure
for their clients.

De-mat Process:

When a client places his physical shares for de-mat, KSBL after inputting the
information in depository participants sends the physical shares to the company, which
issued the shares. The client code number and the information and the clients signature
is sent to Share Holding Registrar.

When a client enters into DP for de-mat purpose, he is given a unique code member.
He can know his share position easily. It is known as client ID number.

8) INTERMEDIARIES:

There are no intermediaries in between SCSL and NSE, BSE, NCDEX and MCX.
Similarly there are no intermediaries in between SCSL and professional clients. Since
SCSL is a share broker to NSE, BSE ,NCDEX and MCX the clients operating in SCSL directly,
on behalf of other clients are sub-brokers to the ultimate clients who doesn’t operate
the trade directly. So, there may be subbrokers as intermediaries in between KSBLand
clients who do not trade directly in KSBL.

As mentioned earlier, KSBL is depository participant. So, KSBL acts as an

intermediary between clients and NSDL & CDSL.

9) MARKET INFORMATION:

34
In KSBL, daily the research analyst collects the market information and it is analyzed. The
market information is used to forecast the index movement, price movement of the shares
and enables the clients to make use of the information in trading to get better results.

The research analyst in forecasting the market movement follows the technical
analysis, fundamental analysis and efficient market hypothesis. The research analyst
collects the information about the company, the industry and the economy through
different media to know the company’s position.

Since, the NSE & BSE are markets with strong form efficiency, as the market
discounts the information itself very quickly and changes as per the information, the
research analyst has only fewer jobs to do here.

The research analyst not only analyses the marketing information but, every day in
KSBL an edition of the research analyst’s, suggestions on scrips that have to be bought
and sold is also printed which helps the clients of KSBL to invest in shares that are
profitable.

35
Chapter –III

COMPANY PROFILE

36
 ABOUT KARVY

One fateful evening in the summer of 1982, 5 young men who worked for a renowned
chartered accountancy firm decided that it was time they struck out on their own to create
an enterprise that would someday become an iconic name in the financial services space.

They came from ordinary middle class backgrounds. They had two assets; one was their
education and the other an unquenchable desire to succeed. They had a lot stacked against
them: the environment was not conducive to entrepreneurship; technology was not fully
supportive, financial markets were largely unregulated, they were based out of Hyderabad
while most key players in the financial world were in Mumbai or other metros and the wolf
was at the door. The odds seemed insurmountable.

These remarkable young men’s “Never say die” approach held them in good stead over the
years. They stuck to their dreams, burnt the midnight oil, embraced technology and made it work
for them and through sheer dint of determination, eventually overcame all obstacles.
First came the registry business, followed by broking, and the rest became a lesson for every
young individual to emulate.

PROMOTERS & MANAGEMENT TEAM

Mr.C.Parthasarathy
Chairman & Managing Director

Mr. C. Parthasarathy is the Chairman and Managing Director of the diversified financial services
Karvy group. C Parthasarathy (CP as he is better known in the Industry), has the uncanny knack of
staying ahead of the curve and the foresight to spot opportunities that seem invisible on the horizon

37
for the others. Karvy’s entire history is a case study of turning adversity into opportunity. CP is a
chartered accountant by qualification, whose entrepreneurial energy drove him to co-found Karvy in
1983 with a less-than-modest capital of Rs 150,000.
Over the years CP’s vision and leadership skills have helped the group navigate through the turbulent
times CP is one of the pioneers of financial inclusion. Under his leadership Karvy has won numerous
industry awards and accolades. He also is an independent Director in many listed companies.

with a strong sense of purpose and clarity of thought.

Mr.M.Yugandhar
Managing Director

Mr. M Yugandhar, Managing Director is a founder member of the KARVY Group. He is a Fellow
Member of the Institute of Chartered Accountants of India and has varied experience in the field of
financial services spanning over 30 odd years.
Yugandhar has helped position and build a strong brand for the group in the registry and other
financial services businesses. The registry business of Karvy is one of its flagship businesses and with
the collaboration with Computershare has grown to become the largest registrar in India for over two
decades. Yugandhar has played a key role in building strong relationships with public sector banks
and other PSUs which has helped Karvywin some important mandates from some of India’s
renowned companies.
Karvy under his guidance has helped create the equity cult and substantially built retail investor
wealth. He is an Independent Director on the board of several reputed companies.

Mr.M.S.Ramakrishna
Director

38
Mr. M S Ramakrishna, Director, founder member of KARVY GROUP, he is the orchestrator of
technology initiatives such as the call center in the service of the customer.
Mr. Ramakrishna was a member of the Hyderabad Stock Exchange and has more than 30 years of
experience in the financial services arena. He has helped KARVY diversify into the field of medical
transcription leveraging on the company's core competency of transaction processing.
He is an Independent Director on the board of several reputed companies.

MANAGEMENT TEAM
Mr.V.Mahesh
Managing Director – Karvy Data Management

Mr. V Mahesh, is the Managing Director of Karvy Data Management and has work experience
spanning over 2 decades with in depth exposure to operations on most financial services businesses.
Commencing his professional stint with the Registry business where he has to his credit managing
over 300 IPOs and other forms of offerings, he was amongst the first few to work closely on the Book
Building process initiated by SEBI in 1995. After initially working with MCS as an Assistant Vice
President, he moved to Karvy. He was also responsible to initiate the process of setting up the
Depository participant business in Karvy and was responsible for both the operations and the
39
marketing of the business. He has been nominated by the NSDL to various committees which
addressed key changes to the overall processes and policies for the Demat business.
Nurturing the passion for understanding and interpreting technology and processes, he was
responsible to create and set up the centralized broking platform, centralized back office operations
for all financial products and creating a network of over 500 branches covering over 300 locations for
Karvy. He is also instrumental in creating and launching the Online platform of Karvy Stock Broking
Limited.

He is a Post Graduate in Commerce from University of Madras (M.Com). and also completed Post
Graduate Diploma in Computer Applications.

Mr.V.Ganesh
CEO – Karvy Computershare

Mr. V Ganesh is a Chartered and Cost Accountant by profession and has over 2.5 decades of
experience in the financial services space and is part of Karvy Group’s leadership team. Before
joining KARVY, he was associated with ITC’s risk management and financial audit services
department. Earlier he was associated with Proctor and Gamble and was responsible for product
pricing and financial support functions for P&G’s soaps and health care businesses.
He was instrumental in setting up the Mutual Fund registry business for Karvy. At KARVY, for over
2 decades, Ganesh has been instrumental in building a strong techno-commercial base with emphasis
on establishing a pan India branch network, back office processing, call center, web initiatives, online
trading, B2B interfaces etc., in the transfer agency and BPO businesses.

Mr.AmitSaxena
CEO &Wholetime Director - Karvy Finance

40
AmitSaxena is the CEO &Wholetime Director, Karvy Financial Services Ltd. He started Karvy
Finance, a NBFC in the challenging times of 2009 and has successfully built the company in a short
period as a leader in Micro & Small Business Loan Segment with a multi product suite, a
differentiated and direct neighbourhood business loan lending model and a pan India branch network.
Prior to establishing Karvy Finance, AmitSaxena worked with Citigroup Consumer Finance across
leadership roles in Auto Finance, Mortgages and Consumer Finance. AmitSaxena with his keen
knowledge of MSME & Consumer Finance industry since its inception in mid-nineties in India, has
been instrumental in establishing new geographies, new products &start up ventures across India
throughout his career. Conceptualisation, innovation and execution being the key elements defining
his success in every venture.
Mr. AmitSaxena is an alumnus of Harvard Business School, IIM Lucknow and BITS-Pilani. He is an
avid speaker at various forums like 1111111111111111Wharton India Economic Forum, Harvard
India Conference & ASSOCHAM MSME Mudra Bank Summit championing the cause and
highlighting the vast potential of MSME segment and Indian entrepreneurs.

Mr.SushilSinha
Wholetime Director - KarvyComtrade

Mr. Sushil Sinha, the Country Head of KarvyComtrade Ltd, has successfully made KarvyComtrade a
force to reckon with in the marketplace. With over 10 years of expertise in the broking sector, he is a
well-known face today in the electronic and print media. Under his aegis, the company has won
numerous honours and awards nationwide, including the UTV Bloomberg Leadership Award 2011
and India’s Best Market Analyst Award—for two consecutive years—by Zee Business.
Having joined KarvyComtrade in December 2005 as Senior Manager (Business Development), he has
steadily climbed up the organizational ladder to head the business now. Before joining KCTL, he
worked in Geojit Financial Securities for two years. Prior to that, he had worked with the Agriculture
department in the Government of Jharkhand under various capacities for four years.
41
A science graduate, Mr. Sinha has completed two MBAs, one majoring in Personnel Management &
Industrial Relations from Patna University and the other in Agri Business Management from IIPM,
Bangalore, a Ministry of Commerce, Government of India institution.

Mr.P.B.Ramapriyan
Vice President & Head - Financial Product Distribution

Mr. Ramapriyan is working with Karvy for over 2 decades, He has strength of sorts in the distribution
of Financial products including Equity, Bonds, Fixed Deposits and Auto Finance. He has
successfully marketed several financial products for large number of corporate of various sizes. He is
also responsible for managing the Pan India Network of brokers and sub-brokers. He has been
instrumental in Karvy’s success in distribution of debt products.

Mr.RajivR.Singh
Vice President & Business Head - Karvy Stock Broking Limited

Mr. Rajiv R. Singh is the Vice President & Business Head of the Equity Broking business. He has
been associated with Karvy for more than a decade. He joined Karvy in 2001 and moved up the
corporate ladder with his sheer dedication, commitment and hard work.

Rajiv, with an enormous experience in finance industry leads the responsibility of all aspects of
Karvy’s equity broking business which includes strategy, revenue generation, business development
and overall customer satisfaction. Rajiv is widely regarded as a results-driven leader who plays a key
role in building the stock broking business of KSBL and make it one of the largest stock broking
houses in the country. Rajiv also plays a key role in identifying skills and motivating staff in
providing outstanding client service.

Rajiv is a Certified Management Accountant–CMA.

42
Mr.J.Ramaswamy
Group Head - Corporate Affairs

Mr. Ramaswamy, the Group Head for Corporate Affairs, is the official spokesperson for the Karvy
Group. Mr. Ramaswamy has more than 25 years of experience in various spheres of the financial
services industry, of which 10 years has been in the Legal and Secretarial division of Reliance,
handling various public issues, mergers, monitoring performance of various departments, liaising with
regulatory bodies and outside agencies (viz., the stock exchange, SEBI, DCA and others), and
coordinating all the board meetings.
The Corporate Affairs Division is involved in integration and strategic planning of all the business
divisions of Karvy. Mr. Ramaswamy’s job responsibility encompasses monitoring the performance of
all divisions through regular reviews, initiating and implementing new business initiatives, corporate
communication and media relations, acting as official spokesperson for the entire Group,
conceptualizing various policies and procedures to improve the internal work environment, and
working on a parallel platform with the HR department to develop models for raising productivity and
cost-effectiveness. He oversees the international business of Karvy Global Services.

Mr.DeepakGupta
Group Head - HR

43
Mr. Deepak Gupta brings with him over 20 years of experience in HR, spanning financial services,
ITes and manufacturing. Prior to joining Karvy, he was Chief People Officer, Human Resources, with
Bajaj Finance Limited, a Rahul Bajaj Group Company, based at Pune. He has also had a successful
career with a few prominent corporate, including SREI, Enam, CRISIL, CEAT Financial Services and
Reliance Industries.
Deepak holds a Master’s degree in Human Resources Development from Jamnalal Bajaj Institute of
Management and a diploma in Business Management and Industrial Relations.

Mr.G.KrishnaHari
Group Head - Finance

Mr. G. Krishna Hari holds a Bachelors degree in Commerce and is associate member of the Institute
of Chartered Accountants of India (ICAI). He has over 27 years of experience in the areas of finance
and accounts functions encompassing fund raising, financial reporting, management accounting,
working capital management, taxation, budgeting and forecasting and financial due diligence reviews
for mergers & acquisitions and investment proposals.
He has been associated with the Karvy Group for the past 15 years and is currently designated as the
Vice President- Finance & Accounts at Karvy Stock Broking Limited. Prior to joining Karvy, he was
the head of finance & accounts division in Asia Pacific Investment Trust Limited, Hyderabad
(Formerly Nagarjuna Investment Trust Limited) an NBFC Company.

44
WHO WE ARE
The Karvy Group is today a well diversified conglomerate. Its businesses straddle the entire
financial services spectrum as well as data processing and managing segments. Since most of
its financial services were retail focused, the need to build scale and skill in the transaction
processing domain became imperative. Also during stressed environment in the financial
services segment, the non financial businesses bring in a lot of stability to the group’s
businesses.
Karvy’s financial services business is ranked among the top-5 in the country across its
business segments. The Group services over 70 million individual investors in various
capacities, and provides investor services to over 600 corporate houses, comprising the best
of Corporate India.
The Group offers stock broking, depository participant, distribution of financial products
(including mutual funds, bonds and fixed deposits), commodities broking, personal finance
advisory services, merchant banking & corporate finance, wealth management, NBFC (loans
to individuals, micro and small businesses), Data management, Forex & currencies, Registrar
& Transfer agents, Data Analytics, Market Research among others.
Karvy prides itself on remaining customer centric as all times through a combination of
leading edge technology, Professional management and a wide network of offices across
India.
Karvy is committed to its quest as an Equal Opportunity Employer and believes in the rights
for differently-abled persons. We have over 12% employees who are challenged in some
form in one of our prominent businesses.

WHY KARVY

45
Karvy’s business entities address a heterogeneous swathe of population from the super rich,
to the nouveau riche, the ubiquitous middle class, the lower classes (the SEC E3 according to
the new Social Economic Classification), urban and the rural folks. All of whom either make
a living through large business (corporate world), SMEs, professional services, traders,
farmers, labour, blue and white collar jobs and the government.
Another key feature of Karvy has been its ability to offer leading edge advice based on
incisive ideas that are strongly rooted in high quality research on every conceivable aspect of
investments be it equities, forex, commodities, bonds, fixed returns, debt instruments or any
other investment grade asset class.
The customer has always been at the centre of every Karvy initiative.

KARVY GROUP
The Karvy Group is a premier integrated financial services provider, ranked among the top-5
in the country across its business segments. The Group services over 70 million individual
investors in various capacities, and provides investor services to over 600 corporate houses.
Karvy Group established its presence through a wide network of over 450 branches, (or 900
offices) covering in excess of 400 cities and towns.
Karvy covers the entire spectrum of financial services, viz stock broking, depository
participant, distribution of financial products (including mutual funds, bonds and fixed
deposits), commodities broking, personal finance advisory services, merchant banking &
corporate finance, wealth management, NBFC, among others.
The Group is professionally managed and ranks among the best in technology, operations and
research across the financial industry. The Karvy Group has evolved over the last
three decades and today it assumes many avatars. Broadly the group pursues two lines of
businesses and can be graphically represented as follows:

OUR COMPANIES

Karvy Stock Broking LTD

Equity Broking, Depository Participant, Distribution of Financial Products (Mutual Funds, FD
and Bonds), Wealth Management Services, Currency Derivatives, Portfolio Management
Services

46
KarvyComtrade LTD
Commodities Broking
Karvy Capital LTD( Formerly Karvy Capital Private LTD)
NBFC & Portfolio Manager
Karvy Investment Advisory Services LTD(Formerly known as Karvy Insurance Broking
LTD)
Investment Advisory Services
Karvy Holdings LTD
Core Investment Company
Karvy Middle East LLC
Wealth Management Products for NRI's
Karvy Realty (India) LTD
Realty Services
Karvy Financial Services LTD
Non Banking Financial Services
Karvy Insurance Repository LTD
Insurance Repository services
KarvyForex& Currencies Private LTD
Currency and forex services
Karvy Consultants LTD
Consultancy and Advisory Services, Publications
Karvy Computershare Private LTD
Registrar and Share Transfer agent
Karvy Computershare W.L.L( Formerly known as FakhroKarvy Computershare W.L.L
)
Agent for Custody & Registration of Securities, Registered Administrator
Karvy Data Management Services LTD
Data Management Services
Karvy Investor Services LTD
Merchant Banking and Corporate Finance
Karvy Insights LTD
Market Research
Karvy Analytics LTD
Analytics

47
Karvy Solar Power LTD
Power Generation
Karvy Global Services LTD
Business Process Outsourcing
Karvy Global Services Inc, USA
Business Process Outsourcing
KarvyInc, USA
Institutional Broking

AWARDS & ACCOLADES

Mr. RajatParthasarathy, Director, Karvy Group and Mr. Rajiv Ranjan Singh, Vice-President
& Business Head - Stock Broking receiving awards from India’s premier stock exchange
BSE - the SKOCH – BSE Order of Merit award and the SKOCH – BSE Aspiring
Nation award - in recognition of its efforts to educate, empower and help create an
enlightened corps of financial market investors.

Mr. Sudhendoo Gandhi, GM, KSBL, receiving the "NSDL Star Performer Award
2014” for Highest Asset Value

48
Mr. Sushil Sinha, Business Head, KCTL & Mr. Suresh Raval,

General Manager, KCTL receiving the ‘Broker with Best Corporate Desk for Commodity
Broking’ award from Hon’ble Finance Minister then - Sri PranabMukerjee at the Bloomberg
UTV Financial Leadership Awards 2011

Mr. C Parthasarathy, Chairman, Karvy Group, receiving the ‘Largest E-Broking House in
India’ award at the Dun & Bradstreet – BSE Equity Broking Awards 2010

Karvy Stock Broking Limited

2014
Won the prestigious "NSDL Star Performer Award 2014 for Highest Asset Value".
Organized by the National Securities Depository, the NSDL Star Performers Awards
recognize the best performers in the securities and depositories space. The award ceremony
was organized on Saturday, December 20, 2014, at TajCoromadel, Chennai. Karvy has won
this award consecutively for last two years.

2010

49
"Largest E-Broking House in India" at BSE Equity Broking Awards 2010 by Dun &
Bradstreet held in ITC Grand Maratha, Mumbai. This award is based on the study carried out
by the world’s leading provider of business information, knowledge and insight, Dun &
Bradstreet in association with the oldest stock exchange in India, the Bombay Stock
Exchange.
The BSE-D&B Equity Broking Awards recognizes the brokerage firms based on the number
of online accounts, volume of online trade, and service delivery of their online trading
platform. Karvy Stock Broking Limited has won this prestigious award for its state of the art,
in-house developed KarvyOnline, a comprehensive online investment platform that enables
investors to invest, anytime from anywhere.

2007
Bagged ace award by receiving the coveted Annual Award for 2006 for "Best CEO,
Initiating HR Practices”, by, the Uttar Pradesh Chapter of National Institute of Personnel
Management (NIPM). The Award has been conferred to Mr. C Parthasarathy, CMD, Karvy
Group, for his contribution to HR practices in Lucknow, organized by UP chapter of NIPM.

2007
"Amity Corporate Excellence" award at the 9th International Business Summit and
Research Conference-INBUSH (International Business Horizon) which was held at a
glittering function in Noida. This award was conferred by Amity International Business
School, Noida.

2006
ISTD – "Vivekananda National Award" for Excellence in HRD & Training

2004
"Best Depository Participant in the country" award

KarvyComtrade Limited

2014

50
Won the prestigious ZEE Business Award for the "Best Agri. Analyst" 2014 in the fifth
edition of India’s Best Market Analyst Awards on Saturday, 13th Dec. 2014 at The LaLit in
Mumbai.

2011
Awarded the "Broker with Best Corporate Desk for Commodity Broking" at the
prestigious Bloomberg UTV Financial Leadership Awards 2011 held in Hotel
TajLandsend, Mumbai.Hon’ble Finance Minister of India then, Shri.PranabMukerjee was the
Chief Guest. The awards have been decided by eminent jury consisting of reputed
economists, management & financial consultants.
Bloomberg UTV Financial Leadership Awards have been instituted to acknowledge the
contribution of the country’s financial champions for extraordinary work done in financial
sector. This award is a reflection of KarvyComtrade - Corporate Desk’s unparalleled
strengths in providing unique risk management strategies and hedging calculators for
Corporates. KarvyComtrade’s ability to handle large volumes of trade.efficiently with
prompt, accurate and tailor-made services by a talented pool of professionals ensures that
Karvy remains relevant to client at all times.

2011
Adjudged as the "Best Analyst in Base Metal Category" at the prestigious "Best Market
Analysts Awards 2011" by Zee Business in association withNCDEX (National Commodity
& Derivatives Exchange Limited). The award ceremony was graced with the presence of
eminent dignitaries.
Zee Business Best Market Analyst Awards have been instituted to honour the contributions
of India’s leading financial experts in empowering the retail investors. The Nominations for
the Awards were invited from Commodities & Stock Broking companies and Fund houses
and were being judged on overall returns achieved for the Stocks, Commodities, Sectors and
Companies, the analysts tracked from April 2010 to December 2010.

About Us
Karvy Stock Broking Limited (KSBL) which is the broking arm of Karvy Group, a well diversified conglomerate

whose business encompasses the entire financial services spectrum along with data processing and managing

segments.
51
 Karvy’s financial services business is ranked among the top-five in the country across its business segments.

The Group services over 70 million individual investors in various capacities and provides investor services to

more than 600 corporate houses, comprising the best of Corporate India.

Karvy prides itself on being extremely customer centric at all times providing leading edge technology combined

with professional management and servicing through a wide network of offices across India.

Karvy Stock Broking Limited (KSBL) is among the country’s leading financial services organizations renowned for

its quality of investment and advice. KSBL through its wide network of offices across India offers customized

investment solutions to corporate, institutions and individual investors.

KSBL helps investors construct a portfolio by factoring in their risk profile and future financial needs so that their

investments achieve an optimal balance between risk and returns.

Our comprehensive trading account helps clients approach various investment avenues in an integrated fashion,

providing them the facility to transact with ease. We have a combined account facility that caters to all investment

opportunities such as trade in Equities, Derivatives, Currency and also investing in IPOs, Mutual funds and

NCDs.

KSBL was awarded BSE Order of Merit award and the SKOCH – BSE Aspiring Nation award in recognition to its

efforts to educate, empower and help create financial markets literacy among investors. It has received the NSDL

Star Performer Award 2014 for highest asset value generated.

OUR ACCOLADES

 Winners of SKOCH-BSE Order of Merit award 2015

 Winners of SKOCH-BSE Aspiring Nation award 2015

 Won ‘NSDL Star Performer Award 2014 for Highest Asset Value’

 Won ‘Largest E-Broking House in India by Dun & Bradstreet 2010

 Won ‘Broker with Best corporate desk for commodity broking 2011’

 India’s no I registrar and securities transfer agent

 ISO 9002 Certified Operations by DNV

 Largest Independent Distributor

52
 Most of India’s 500 fortune companies are serviced by Karvy

 Every 20th trade in stock market is done on the Karvy platform

 Every 6th investor in India invests through Karvy

 Amongst top 10 stock brokers in India

 Amongst top 3 depository participants

 Amongst top 10 investment bankers

The Karvy Group is a premier integrated financial services provider, ranked among the top-5 in
the country across its business segments. The Group services over 70 million individual
investors in various capacities, and provides investor services to over 600 corporate houses.
Karvy Group established its presence through a wide network of over 450 branches, (or 900
offices) covering in excess of 400 cities and towns.
Karvy covers the entire spectrum of financial services, viz stock broking, depository participant,
distribution of financial products (including mutual funds, bonds and fixed deposits), commodities
broking, personal finance advisory services, merchant banking & corporate finance, wealth
management, NBFC, among others.

The Group is professionally managed and ranks among the best in technology, operations and
research across the financial industry. The Karvy Group has evolved over the last three decades
and today it assumes many avatars. Broadly the group pursues two lines of businesses and can
be graphically represented as follows:

53
Financial Services

 Equity Broking
 Depository Participant
 Wealth Management
 Commodities Broking
 Currency Derivatives
 Non-banking Financial Services
 Distribution of Financial Products
 Realty
 Registry services for Corporate
and Mutual funds
 Investment Banking
 Insurance Repository
 The Finapolis
 Forex & Currencies

Non-Financial Services

 Data Management Services

 International BPO
 Alternate Energy
 Data Analytics
 Market Research

54
FINANCIAL SERVICES

EQUITY BROKING SERVICES

Stock markets are considered unpredictable, but they reflect the mood of the economy. Over
the years, investment in equities is considered to be the best long-term wealth maximization
option. The gap between unpredictability and a safety anchor in the market is bridged by the
in-depth knowledge of market functioning and changing trends, planning with foresight and
choosing one’s options with care. From that perspective, our equity broking and advisory
services are beyond just a medium for buying and selling stocks and shares. Instead, we
provide services which are multi-dimensional and multi-focused in its scope.
Karvy can boast of the largest-owned network among financial-services companies in India.
This has ensured that wherever a potential customer is located, it is never too far from a
Karvy office. Given the wide network, there are a number of trading terminals that provide
retail stock-broking facilities. Our services have increasingly offered customer-oriented
convenience which we provide to a spectrum of investors—high net-worth or otherwise—
with equal dedication and competence.
We offer online trading on both key platforms—National Stock Exchange and Bombay Stock
Exchange. More importantly, we make trading safe to the maximum possible extent by
accounting for several risk factors and planning accordingly. We have created a very robust
trading platform that facilitates customers to trade online not only in equities, but also buy
fixed deposits, mutual funds, commodities, currencies and also participate in a public issue.
Our online platform enables customers to view their portfolio online and also access our
various research reports and views on stocks. It also provides them with a facility to
communicate with our research/advisory teams online.
We are assisted by our in-depth research, constant feedback and sound advisory capabilities..
Our highly skilled research team—comprising technical analysts and fundamental
specialists—secure result-oriented information on market trends, market analysis and market
predictions.
This crucial information is provided as a constant feedback to our customers, through daily
reports delivered twice —the Morning moves, which predicts the market scenario for the day;

55
the Daily Wrap up, the final report for the day, where the market and the report itself is
reviewed.
To add to this repository of information, we publish a monthly magazine, The Finapolis,
which analyzes personal finance and offers share market tips and takes a close look at various
investment options and products available in the market. Moreover, our weekly e-
newsletter, Karvy Bazaar Baatein, keeps you informed on key trends in personal finance and
stock market trends. We cover a wide range of sectors and companies which are categorised
as large cap, mid cap and small cap. We also provide periodic macroeconomic reports. Above
all, we also offer special portfolio analysis packages and provide customized advisory
services to help you make the right financial moves to specifically suit your portfolio

DEPOSITORY PARTICIPANT SERVICES

The onset of the technology revolution in the financial-services industry saw the emergence
of KSBL as an electronic custodian registered with the National Securities Depository Ltd
(NSDL) and Central Securities Depository Ltd (CSDL) in 1998. We set standards enabling
further comfort to the investor by promoting paperless trading across the country, emerging
as the top-3 depository participant in India, in terms of customer serviced.
Offering a wide trading platform with dual membership of NSDL and CDSL, KSBL is a
powerful medium for trading and settlement of dematerialized shares. We have established
live DPMs, internet access to demat accounts, and an easier transaction process in order to
offer greater convenience to individuals and corporate investors. A professionally managed
team and the latest technological expertise have been allocated exclusively to our demat
division, including technological enhancements like SPEED-e. This makes our response time
quick and our delivery impeccable. Moreover, a wide national network makes our
efficiencies accessible to all.

DISTRIBUTION OF FINANCIAL PRODUCTS

The paradigm shift from pure selling to knowledge-based selling drives the business today.
With our wide portfolio offerings, we occupy all segments in the retail financial services
industry. A highly qualified and dedicated team of professionals, drawn from the best of
academic and professional backgrounds, are committed to maintaining high levels of client
service delivery. This has propelled us to become one of the top distribution houses for equity
and debt issues, with an estimated market share of 15% in terms of applications and amount
mobilized.
To further tap the immense growth potential in the capital markets, we enhanced the scope of
our retail arm, now providing planning and advisory services to the mass affluent. Here, we
understand customer needs and lifestyle in the context of current earnings and provide
56
adequate advisory services that will facilitate wealth creation in the long run. Both market-
savvy and the less knowledgeable investors find this service quite satisfactory. The edge that
we have over our competitors is the sheer depth of our portfolio of offerings and our
professional expertise. The investment planning for each customer is done with an unbiased
attitude so that the service is truly customized..

CURRENCY DERIVATIVES
Karvy Currency Derivatives Segment, a specialized group vertical within Karvy stock
broking limited, has been established in 2008 to cater to the growing needs of corporate
houses to manage currency exchange rate risk. With the changing dynamics and increasing
volatility of exchange rates across the globe, companies exposed to currency risk face the
challenge of maintaining continued profit margins. Currency Derivatives would be one of the
best options to manage any related exchange rate risk and be free from the worries of market
uncertainties.
At Karvy Currency derivatives segment (CDS), we provide customized hedging strategies for
importers, exporters and companies with foreign exchange exposure. We offer forex advisory
and brokerage service for the Indian currency derivative market, and provide a robust and
reliable online trading platform. Currency Derivatives Segment - Karvy Stock Broking
Limited is an active member of the National Stock Exchange (NSE), MCX Stock Exchange
(MCX-SX) and Bombay Stock Exchange (BSE)..

WEALTH MANAGEMENT SERVICES

Karvy, with over 25 years’ expertise in the financial markets, is offering comprehensive
wealth management solutions for its customers through Karvy Private Wealth (KPW). Our
wealth managers provide direction to a client’s financial decisions, enabling him achieve his
financial and life goals. As a wealth manager, we collate the relevant financial information
and life goals of the client, assess his risk tolerance level, examine his current financial status,
and identify a strategy to fulfill his goals.
Wealth management is an all-encompassing service, providing comprehensive research-based
advisory along with convenient and personalized investment execution. KPW offers an
unmatched product basket, ranging from debt, equity, mutual funds, insurance, derivatives,
commodities, structured products, international funds, art funds and real estate. It is a unique
service aimed at transforming clients’ dreams into reality.
KPW was set up to cater to HNIs, keeping in mind that they require a different kind of
financial planning and management. Our services include planning and protection of
finances, planning of business and retirement needs, and a host of other services, which will
help augment their existing as well as future finances and lifestyle. We combine a hard-nosed
business approach with a soft touch of personalized attention and dedicated customer care.

57
Our research reports have been widely appreciated by the HNI segment. The delivery and
support modules have been fine-tuned by giving our clients access to online portfolio
information, constant updates on their portfolios as well as value-added advice on portfolio
churning, sector switches, etc. Moreover, the investment recommendations given by our
research team in the cash market have enjoyed a high success rate.
To tap NRIs, we commenced operations in the Middle East, Dubai to cater to a significant
Indian population that resides there and is keen on participating in India’s growth story. We
have a strong team that specialises in offering not only Indian investment products but also
local investment products to these customers

PORTFOLIO MANAGEMENT SERVICES

Portfolio management services are meant for high net worth individuals or institutions who
want a personalized management of their finances. A team of expert professionals conduct
extensive research on markets to provide a customized solution to achieve unique investment
objectives. This ensures best selection of investment opportunity within an asset class and
active monitoring for optimized results. Investors are provided with an all time access to
track their portfolios. Our PMS offerings range across two asset classes – Equity and Debt,
with multiple options for each asset class...

KARVY FORTUNE
KarvyFortune, helps individuals and small organisations forge a partnership with Karvy
which is one of the largest financial services group serving over 60 million investors and
provides investor services to over 400 corporate houses in the country. Karvy Fortune already
has a huge network of franchisees, with presence in 330 cities, and a total of 787 business
associates all over India.
Karvy Fortune is constantly on the lookout for hard working, ambitious individuals who
would like to build a robust business without the usual hassles associated with starting an
enterprise. As a business partner of Karvy Fortune you get to be a part of an established
broking house, which is hugely successful in providing financial services to millions of
customers. The risk reward ratio for the individual/ enterprise becoming a franchisee is also
very low considering this is an already established business model and a brand name that has
great value in the financial markets in India.
In addition, as a franchisee owner one can focus on your core skills in running a business,
without the need to assemble a team of specialists from scratch, as the company provides
them with the technical and fundamental support and training.

58
The burgeoning stock market is offering a never before opportunity for the broking business
and a franchisee could use this opportunity to establish a profitable business.

INVESTMENT BANKING
Recognized as a leading merchant banker in the country, we are registered with SEBI as a
Category I merchant banker. We have built up a reputation as an able merchant banker over
the years by capitalizing on opportunities in corporate consolidation, mergers & acquisitions,
corporate restructuring and capital raising (including raising resources for corporates or the
government). Our success over the past two decades has given us the confidence to focus in
this sector with renewed vigor.
The high-quality professional team and our work-oriented dedication have propelled us to
offer value-added corporate financial services and serve as a professional navigator for the
long-term growth of our clients which include leading corporates, state governments, foreign
institutional investors, and public and private sector companies and banks in Indian and
global markets.
Our advisory and consultancy roles in restructuring, divestitures, acquisitions, de-mergers,
spin-offs, joint ventures, privatization and takeover defense mechanisms have elevated our
relationship with the client to one based on unshakable trust and confidence.

COMMODITIES BROKING
An ISO 9001:2008 certified company, KarvyComtrade Limited (KCTL) is India’s leading
commodities brokerage house. We have membership of Multi Commodity Exchange of India
(MCX), National Commodity and Derivatives Exchange (NCDEX), National Multi-
Commodity Exchange of India (NMCE), National Spot Exchange (NSEL), NCDEX Spot
Exchange (NSPOT), Ace Commodity Exchange (ACE) and Indian Commodity Exchange
(ICEX). We are one of the early players in this business and have built a very strong research
which is widely acknowledged across our customer base be it the corporates or the traders
who comprise our prime customer segment. We are by far the only commodity trading
entity who have a presence in the wholesale markets where the commodities are auctioned
purely to get a very strong sense on the demand supply for most of the agricultural products...

NON - BANKING FINANCIAL SERVICE

Karvy Finance, an NBFC established in 2009, is primarily focused on Micro & Small
Enterprise Secured Business Loans with Loan against Property, Loan against Gold & Loan
for Small Commercial Vehicles. Karvy Finance believes in serving the underserved business
customers in India’s market for all their loan needs with a network of 75
neighborhoodlending branches in 35 locations. Karvy Finance aims to provide Fast, Friendly
& Flexible loan services to its target audience

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Keeping in line with Karvy credo to be a leading and preferred financial services provider,
our focus at Karvy Finance is to provide the complete spectrum of financial services products
to our customers and build a strong nationwide distribution footprint to emerge as the leader
in Micro, Small & Medium Enterprise segments in India. At Karvy Finance, we recognize
your self-worth and help in growing your net worth and achieving your dreams on your own
terms..

REALTY SERVICES
Karvy’s Realty services is engaged in the business of value-added real estate and property
services. We offer individuals and corporates myriad options across investments, financing
and advisory services in the realty sector. Building on the Karvy brand as a leading industry
benchmark for world-class customer servicing and quality standards, we bring forth a
reputation for reliability, dependability and honesty.
We have a deep understanding of the sector, and, therefore, the needs and preferences of our
clients. Our team of qualified realty professionals facilitates long-term relationships with
buyers and sellers of properties alike across the country, thus enabling clients to put their
money in genuine properties for a decent value appreciation at the right place and at the right
price..

REGISTRY SERVICES
Karvy Computershare is a 50:50 joint venture between Karvy and Australia-based
Computershare – the world’s largest transfer agent. Karvy Computershare is the largest
registrar in India, servicing over 70 million investor accounts spread over 1,300 issuers
including banks, PSUs and mutual funds. Karvy Computershare has a workforce of around
4,000 experienced professionals drawn from various disciplines. The worldwide network of
Computershare will hold us in good stead by keeping us abreast of the international
standards, in addition to letting us leverage the best technologies from around the world.

 Issue registry
Karvy Computershare (KCPL) has emerged as the largest transaction-processing house in the
Indian corporate sector, mobilising funds for numerous companies. Our ability to execute
voluminous transactions and our hardcore expertise in technology applications has gained us
the No.1 slot in our field of business. We are India’s first registry to receive ISO 9002
certification and have now migrated to the ISO 9001:2008 standard for quality management
systems, certified by Norwegian company DNV . We have also been awarded ISO
27001:2013 certification by DNV, for high standards with respect to information security and
management systems, which stands testimony to our insistence on customer service
excellence. In addition to our unique investor servicing presence across all phases of a public

60
issue, we at KCPL are actively coordinating with both depositories (NSDL and CDSL) to
develop special models that enable customers to access depository services during an IPO.

 Corporate Shareholder Services

KCPL has been a customer-centric company since inception. We offer a single platform
to service multiple financial instruments, in our bid to satisfy the varying needs of both
corporates and their retail investors. In that regard, our volume-management capability is
legendary. Today, we are recognised as a company that exceeds customer expectations,
which is a prime reason for the strong customer loyalty we generate. An opinion poll
commissioned by The Merchant Banker Update and conducted by the reputed market
research agency MARG found KCPL the “Most Admired” registrar among financial-
services companies.

 Mutual Fund Services

KCPL has attained a position of immense strength as a provider of across-the-board
transfer agency services to asset management companies (AMCs), distributors and
investors. Nearly 40% of India’s AMCs leverage our range of high-quality services.
Besides providing the entire back-office processing, we are an interface between the
AMC and the investor.
Carrying our ‘limitless’ ideology forward, we have explored new dimensions in every
aspect of mutual fund servicing, from volume management, cost-effective pricing,
delivery in the least turnaround time and efficient back-office and front-office operations,
to strong customised service. KCPL has been with AMCs every step of the way, helping
them to serve investors better by offering a diverse range of customised services. Our
‘first-to-market’ approach has earned us the reputation of an innovative service provider
with a visionary bent of mind

FOREX & CURRENCIES

Forex and currencies is another business vertical of the Karvy group to venture into Trade
and Corporate Finance Segment, Forex Corporate Advisory Services. The company has
been registered with FEDAI. We offer syndication services to the Indian clients in the area
of Buyers and Suppliers Credit Services. External Commercial Borrowings, Working capital
arrangement, Bill Discounting & Short Term Investment options etc. Intermediary services in
Forex interbank broking and help companies/ corporates/individuals to explore extra-ordinary
opportunities, manage and sustain growth, and maximize their revenue by minimizing the
risks in Forex transactions.

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INSURANCE REPOSITORY
Karvy Insurance Repository (Kinrep) is a licensed Insurance Repository in India. Kinrep has
been offering various life and general insurance companies since 2008. Kinrep has
completely home grown mature business applications to cater to the in house team as well as
clients.
Karvy Insurance Repository is a leader in transforming and managing business processes
using a blend of cutting edge technology and refined practices. Kinrep has wide network of
500 branches across the length and breadth of the country. Kinrep is the first insurance
repository to offer full suite of services to insurers, policy holders and agents of life insurance
on a variety of mobile / tablet platforms including the conventional ones. Kinrep brings over
2000 man-years of pooled BPO experience with over 100 man-years in the Insurance
industry. Kinrep offers the best in class security to insurers with ISO 27001 certified
processes ,fully owned branch network and fortified IT and operational controls..

NON FINANCIAL SERVICES

DATA MANAGEMENT SERVICES

Data Management Services offers services in the areas of E-governance processing, insurance
back office processing, record keeping, back office for BFSI clientele and telecom, data
management requirements of large corporations.

 E- Governance
In today’s world where governments are gearing up to the ever growing needs of the citizens
and scaling to reach their mission, we offer a unique value proposition and present our
bouquet of services... More
 Telecom
At a time when telecom companies are looking to grow beyond the boundaries with
minimum input costs, with our pedigree and footprint in the country we are offering solutions
to help them grow. The service offerings spectrum has been designed in such a way so that an
end to end model is offered... More
 Banking
Banks and financial services companies are looking to penetrate into deeper untapped
markets. We are helping these companies to reach the potential markets with our wide array
of services. Here we have designed our service spectrum in such a way that it is focused for
for each product category in order to help you ascertaining the services you need... More

62
  KYC Registrations
With a view to bring uniformity and remove duplication efforts in the KYC requirements for
the securities markets, SEBI has introduced the SEBI KYC Registration Agency (KRA)
Regulations, 2011...

INTERNATIONAL BUSINESS
Karvy Global is a leading Business Process and Knowledge Services Company, focuses on
delivering knowledge based business solutions for its clients and provides an innovative
framework of solutions that are directly tied to improving bottom line results.
We serve investment banks, insurance providers, brokerages, hedge funds, research agencies,
and life settlement providers across the United States, Middle East, and Europe. Our clients
have found their cost advantage, ability to scale efforts, and specialist knowledge regarding
emerging markets to be a strong advantage in the new, fast, and unpredictable world.
Our areas of focus include equity research, investment banking support, commodity research,
business research and specialized transaction processing services in BFSI & Healthcare
verticals.

MARKET RESEARCH
Karvy Insights (KI, pronounced ‘key’), is the market research arm of the Karvy Group. It is a
full-service market research and insights organization, offering both Qualitative and
Quantitative research solutions across sectors like CPG, Automotive, Finance, Retail/
e-comm, Telecom, Infrastructure, Social research to name a few. KI is all about discovering
different facets of life in all its nuances, detail and complexities. Its vision is to offer
'operative' intelligence to facilitate growth in every sphere, person and business. So whether it
is about shopping behavior/ touch point audits, education choices, healthcare practices, high
value spends on luxury items or about regular day-to-day choices of products, KI can support
you.

63
 ANALYTICS
Karvy Analytics is building world-class solutions for the global analytics universe. Its
solutions bring immediate business benefits to global customers interested in leveraging big
data, statistical and mathematical modeling techniques, social analytics, and mobile
descriptive analytics for new business insights. Karvy Analytics is focused on multi-industry
use cases for companies that need technology and professional services for their functional
and operational analytics projects. It has partnerships with the world’s leading brands to
ensure a strong and supportive eco

4. CONCEPTUAL FRAMEWORK
DERIVATIVES INSTRUMENTS IN INDIA:

The first derivative product to be introduced in the Indian securities market is going to be
"INDEX FUTURES". In the world, first index futures were traded in U.S. on Kansas City
Board of Trade (KCBT) on Value Line Arithmetic Index (VLAI) in 1982. Organized
exchanges began trading options on equities in 1973, whereas exchange traded debt options
did not appear until 1982, on the other hand fixed income futures began trading in 1975, but
equity related futures did not begin until 1982.

DEFINITION OF DERIVATIVES:
“Derivative is a product whose value is derived from the value of an underlying asset in a
contractual manner. The underlying asset can be equity, forex, commodity or any other
asset”.

 Securities Contracts (Regulation) Act, 1956 (SCR Act) defines “debt instrument, share, loan
whether secured or unsecured, risk instrument or contract for differences or any other form of
security.

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 A contract which derives its value from the prices, or index of prices, of underlying
securities.

GROWTH OF DERIVATIVES:
Over the last three decades, the derivatives markets have seen a phenomenal growth. A large
variety of derivative contracts have been launched at exchanges across the world. Some of
the factors driving the growth of financial derivatives are:

 Increased volatility in asset prices in financial markets.

 Increased integration of national financial markets with the international markets.
 Marked improvement in communication facilities and sharp decline in their costs.
 Development of more sophisticated risk management tools, providing economic agents a
wider choice of risk management strategies, and
 Innovations in the derivatives markets, which optimally combine the risks and returns over a
large number of financial assets leading to higher returns, reduced risk as well as transaction
costs as compared to individual financial assets.
HISTORY OF DERIVATIVES MARKET:
Early forward contracts in the US addressed merchants concerns about ensuring that there
were buyers and sellers for commodities.

However “credit risk” remained a serious problem. To deal with this problem, a group of
Chicago; businessmen formed the Chicago Board of Trade (CBOT) in1848.

The primary intention of the CBOT was to provide a centralized location known in advance
for buyers and sellers to negotiate forward contracts.

In 1865, the CBOT went one step further and listed the first “exchange traded” derivatives
contract in the US; these contracts were called “futures contracts”.

In 1919, Chicago Butter and Egg Board, a spin-off CBOT was reorganized to allow futures
trading. Its name was changed to Chicago Mercantile Exchange (CME).

The CBOT and the CME remain the two largest organized futures exchanges, indeed the two
largest “financial” exchanges of any kind in the world today. The first stock index futures
contract was traded at Kansas City Board of Trade.

Currently the most popular stock index futures contract in the world is based on S&P 500
indexes, traded on Chicago Mercantile Exchange.

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 During the Mid eighties, financial futures became the most active derivative instruments
generating volumes many times more than the commodity futures.

Index futures, futures on T-bills and Euro-Dollar futures are the three most popular futures
contracts traded today.

Other popular international exchanges that trade derivates are LIFFE in England,
DTB in Germany, SGX in Singapore, TIFFE in Japan MATIF in France, Eurexetc.

THE DEVELOPMENT OF DERIVATIVES:

Holding portfolios of securities is associated with the risk of the possibility that the investor
may realize his returns, which would be much lesser than what he expected to get. There are
various factors, which affect the returns:
1. Price or dividend (interest)
2. Some are internal to the firm like

 Industrial policy
 Management capabilities
 Consumer’s preference
 Labour strike, etc.

These forces are to a large extent controllable and are termed as non systematic
risks. An investor can easily manage such non-systematic by having a well-
diversified portfolio spread across the companies, industries and groups so that a
loss in one may easily be compensated with a gain in other. There are yet other of
influence which are external to the firm, cannot be controlled and affect large number
of securities. They are termed as systematic risk.
They are:
1. Economic
2. Political
3. Sociological changes are sources of systematic risk.

For instance, inflation, interest rate, etc. their effect is to cause prices of nearly all-individual
stocks to move together in the same manner. We therefore quite often find stock prices falling
from time to time in spite of company’s earnings rising and vice versa. Rational Behind the
development of derivatives market is to manage this systematic risk, liquidity in the sense of
being able to buy and sell relatively large amounts quickly without substantial price
concession. In debt market, a large position of the total risk of securities is systematic. Debt

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 instruments are also finite life securities with limited marketability due to their small size
relative to many common stocks. Those factors favor for the purpose of both portfolio
hedging and speculation, the introduction of a derivatives securities that is on some broader
market rather than an individual security.
FUNCTIONS OF THE DERIVATIVE MARKETS:
In spite of the fear and criticism with which the derivative markets are commonly looked at,
these markets perform a number of economic functions.

 Prices in an organized derivatives market reflect the perception of market participants about
the future and lead the price of underlying to the perceived future level. The prices of
derivatives converge with the prices of the underlying at the expiration of the derivative
contract. Thus derivatives help in discovery of future as well as current prices.

 Derivatives market helps to transfer risks from those who have them but may not like them
to those who have an appetite for them.

 Derivative due to their inherent nature, are linked to the underlying cash markets. With the
introduction of derivatives, the underlying market witness higher trading volumes because of
participation by more players who would not otherwise participate for lack of an arrangement
to transfer risk.

 Speculative trades shift to a more controlled environment of derivatives market. In the

absence of an organized derivatives market, speculators trade in the underlying cash markets.
Margining, Monitoring and surveillance of the activities of various participants become
extremely difficult in these kinds of mixed markets.

 An important incidental benefit that flows from derivatives trading is that it acts as a catalyst
for new entrepreneurial activity. The derivatives have a history of attracting many bright,
creative, Well-educated people with an entrepreneurial attitude. They often energize others to
create new businesses, new products and new employment opportunities, the benefit of which
are immense.

 Derivatives trading acts as a catalyst for new entrepreneurial activity.

 Derivatives markets help increase saving and investment in long run.

REGULATION FOR DERIVATIVES TRADING:

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 SEBI set up a 24-member committee under Chairmanship of Dr.L.C. Gupta to develop the
appropriate regulatory framework for derivatives trading in India. The committee submitted
its report in March 1998. On May 11, 1998 SEBI accepted the recommendations of the
committee and approved the phased introduction of derivatives trading in India beginning
with stock index futures. SEBI also approved the “suggestive bye-laws” recommended by the
committee for regulation and control of trading and settlement of derivatives contracts. The
provisions in the SC(R) A and the regulatory framework developed there under govern
trading in securities. The amendment of the SC(R) A to include derivatives within the ambit
of ‘securities’ in the SC(R) A made trading in derivatives possible within the framework of
the Act.

1. Any exchange fulfilling the eligibility criteria as prescribed in the L C Gupta committee
report may apply to SEBI for grant of recognition under Section 4 of the SC(R) a, 1956 to
start trading derivatives. The derivatives exchange/segment should have a separate governing
council and representation of trading / clearing members shall be limited to maximum of 40%
of the total members of the governing council. The exchange shall regulate the sales practices
of its members and will obtain approval of SEBI before start of trading in any derivative
contract.
2. The exchange shall have minimum 50 members.
3. The members of an existing segment of the exchange will not automatically become the
members of derivative segment. The members of the derivative segment need to fulfill the
eligibility conditions as laid down by the L C Gupta committee.
4. The clearing and settlement of derivatives trades shall be through a SEBI approved clearing
corporation / house. Clearing corporation / houses complying with the eligibility conditions
as laid down by the committee have to apply to SEBI for grant of approval.
5. Derivative brokers/dealers and clearing members are required to seek registration from SEBI.
6. The minimum contract value shall not be less than Rs. 2 Lakh. Exchanges should also submit
details of the futures contract they propose to introduce.
7. The trading members are required to have qualified approved user and sales person who have
passed a certification programme approved by SEBI.
While from the purely regulatory angle, a separate exchange for trading would be a better
arrangement. Considering the constraints in infrastructure facilities, the existing stock (cash)
exchanges may also be permitted to trade derivatives subject to the following conditions.

1.Trading should take place through an on-line screen based trading system.

2.An independent clearing corporation should do the clearing of the derivative market.

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 3.The exchange must have an online surveillance capability, which monitors positions, price
and volumes in real time so as to deter market manipulation price and position limits should
be used for improving market quality.

4.Information about trades quantities, and quotes should be disseminated by the exchange in
the real time over at least two information-vending networks, which are accessible to
investors in the country.

5.The exchange should have at least 50 members to start derivatives trading.

6.The derivatives trading should be done in a separate segment with separate membership; That
is, all members of the cash market would not automatically become members of the
derivatives market.

7.The derivatives market should have a separate governing council which should not have
representation of trading by clearing members beyond whatever percentage SEBI may
prescribe after reviewing the working of the present governance system of exchanges.

8.The chairman of the governing council of the derivative division / exchange should be a
member of the governing council. If the chairman is broker / dealer, then he should not carry
on any broking or dealing on any exchange during his tenure.

9.No trading/clearing member should be allowed simultaneously to be on the governing council

both derivatives market and cash market.

TYPES OF DERIVATIVES:
1. Equity Derivatives (security Derivatives):
 Index Future & Option
 Stock Future & Option

2. Financial Derivatives:
 Equity Derivatives
 Forex currency future
 Interest rate future

3. Underlying Asset or Derivatives:

 Financial Derivatives
 Commodities
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 Any other asset

DIFFERENCE BETWEEN FUTURE MARKET & OPTION MARKET:

 A future contract buyer give the right but obligation to buy
 A future contract seller give the right but obligation to sell
 Call gives the buyer the right, but not obligation to sell
 Put gives to buyer the right, but not obligation to sell
 Call gives the seller option premium, but obligation to sell
 Put gives to seller option premium, but obligation to buy
 Value of option increase, when volatility increase
 Value of option decrease, when volatility decreases.

TYPES OF DERIVATIVES:

The following are the various types of derivatives, explained below:

FORWARDS:
A forward contract is a customized contract between two entities, where settlement takes
place on a specific date in the future at today’s pre-agreed price.

FUTURES:
A futures contract is an agreement between two parties to buy or sell an asset at a certain time
in the future at a certain price. Futures contracts are special types of forward contracts in the
sense that the former are standardized exchange traded contracts.

OPTIONS:
Options are of two types-calls and puts. Calls give the buyer the right but not the obligation to
buy a given quantity of the underlying asset, at a given price on or before a give future date.
Puts give the buyer the right, but not the obligation to sell a given quantity of the underlying
asset at a given price on or before a given date.

WARRANTS:
Options generally have lives of up to one year; the majority of options traded on options
exchanges having a maximum maturity of nine months. Longer-dated options are called
warrants and are generally traded over-the counter.

LEAPS:

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 The acronym LEAPS means long-term Equity Anticipation securities. These are options
having a maturity of up to three years.

BASKETS:
Basket options are options on portfolios of underlying assets. The underlying asset is usually
a moving average of a basket of assets. Equity index options are a form of basket options.

SWAPS:
Swaps are private agreements between two parties to exchange cash flows in the future
according to a prearranged formula. They can be regarded as portfolios of forward contracts.
The two commonly used Swaps are:

 INTREST RATE SWAPS:

These entail swapping only the related cash flows between the parties in the same currency.
 CURRENCY SWAPS:
These entail swapping both principal and interest between the parties, with the cash flows in
on direction being in a different currency than those in the opposite direction.

SWAPTION:
Swaptions are options to buy or sell a swap that will become operative at the expiry of the
options. Thus a swaption is an option on a forward swap. Rather than have calls and puts, the
swaptions market has received swaptions and payer swaptions. A receiver swaption is an
option to receive fixed and pay floating. A payer swaption is an option to pay fixed and
received floating.

PARTICIPANTS IN THE DERIVATIVE MARKETS:

The following three broad categories of participants:

HEDGERS:
Hedgers face risk associated with the price of an asset. They use futures or options markets to
reduce or eliminate this risk.

SPECULATORS:
Speculators wish to bet on future movements in the price of an asset. Futures and options
contracts can give them an extra leverage; that is, they can increase both the potential gains
and potential losses in a speculative venture.

ARBITRAGERS:

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 Arbitrageurs are in business to take of a discrepancy between prices in two different markets,
if, for, example, they see the futures price of an asset getting out of line with the cash price,
they will take offsetting position in the two markets to lock in a profit.

INTRODUCTION OF FUTURES:
Futures markets were designed to solve the problems that exist in forward markets. A futures
contract is an agreement between two parties to buy or sell an asset as a certain time in the
future at a certain price. But unlike forward contract, the futures contracts are standardized
and exchange traded.

To facilitate liquidity in the futures contract, the exchange specifies certain standard
underlying instrument, a standard quantity and quality of the underlying instrument that can
be delivered, (or which can be used for reference purpose in settlement) and a standard timing
of such settlement.

A futures contract may be offset prior to maturity by entering into an equal and opposite
transaction. More than 90% of futures transactions are offset this way. The standardized
items in a futures contract are:

 Quantity of the underlying

 Quality of the underlying
 The date and the month of delivery
 The units of price quotation and minimum price change
 Location of settlement

DEFINITION:
A future contract is an agreement between two parties to buy or sell an asset at a certain time
in the future at a certain price. Futures contracts are special types of forward contracts in the
sense that the former are standardized exchange-traded contracts.

FEATURES OF FUTURES:
 Futures are highly standardized.
 The contracting parties need not pay any down payments.
 Hedging of price risks.
 They have secondary markets to.

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 TYPES OF FUTURES:
On the basis of the underlying asset they derive, the futures are divided into two types:
 Stock futures
 Index futures

DISTINCTION BETWEEN FUTURES & FORWARDS CONTRACTS:

Forward contracts are often confused with futures contracts. The confusion is primarily
because both serve essentially the same economic functions of allocating risk in the presence
of futures price uncertainty. However futures are a significant improvement over the forward
contracts as they eliminate counterparty risk and offer more liquidity. Comparison between
two as follows:
FUTURES FORWARDS

1. Trade on an Organized Exchange 1. OTC in nature

2. Standardized 2. Customized
3. More Liquidity 3. Less Liquidity
4. Require Margin payment 4. No Margin Payment
5. Follows daily settlement 5. Settlement happens at end of Period

Table : 4.1
FUTURES TERMINOLOGY:
 SPOT PRICE: The price at which an asset trades in the spot market.
 FUTURES PRICE: The price at which the futures contract trades in the futures market.3
 CONTRACT CYCLE: The period over which contract trades. The index futures contracts
on the NSE have one-month, two–month and three-month expiry cycle which expire on the
last Thursday of the month. Thus a January expiration contract expires on the last Thursday
of January and a February expiration contract ceases trading on the last Thursday of
February. On the Friday following the last Thursday, a new contract having a three-month
expiry is introduced for trading.
 EXPIRY DATE: It is the date specifies in the futures contract. This is the last day on which
the contract will be traded, at the end of which it will cease to exist.
 CONTRACT SIZE: The amount of asset that has to be delivered under one contract. For
instance, the contract size on NSE’s futures market is 50 Nifties.

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 BASIS: In the context of financial futures, basis can be defined as the futures price minus
the spot price. These will be a different basis for each delivery month for each contract. In a
normal market, basis will be positive. This reflects that futures prices normally exceed spot
prices.
 COST CARRY: The relationship between futures prices and spot prices can be summarized
in terms of what is known as the cost of carry. This measures the storage cost plus the interest
that is paid to finance the asset less the income earned on the asset.
 INITIAL MARGIN: The amount that must be deposited in the margin account at the time a
futures contract is first entered into is known as initial margin.
 MARKING-TO-MARKET: In the futures market, at the end of each trading day, the
margin account is adjusted to reflect the investor’s gain or loss depending upon the futures
closing price. This is called marking-to-market.
 MAINTENANCE MARGIN: This is somewhat lower than the initial margin. This is set to
ensure that the balance in the margin account never becomes negative. If the balance in the
margin account falls below the maintenance margin, the investor receives a margin call and is
expected to top up the margin account to the initial margin level before trading commences
on the next day.
INTRODUCTION OF OPTIONS:
In this section, we look at the next derivative product to be traded on the NSE, namely
options. Options are fundamentally different from forward and futures contracts. An option
gives the holder of the option the right to do something. The holder does not have to exercise
this right. In contrast, in a forward or futures contract, the two parties have committed
themselves to doing something.

Whereas it costs nothing (except margin requirement) to enter into a futures contracts, the
purchase of an option requires as up-front payment.

DEFINITION:
Option is a type of contract between two persons where one grants the other the right to buy a
specific asset at a specific price within a specific time period. Alternatively the contract may
grant the other person the right to sell a specific asset at a specific price within a specific time
period. In order to have this right. The option buyer has to pay the seller of the option
premium. The assets on which option can be derived are stocks, commodities, indexes etc. If
the underlying asset is the financial asset, then the option are financial option like stock
options, currency options, index options etc, and if options like commodity option.

PROPERTIES OF OPTION:
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 Options have several unique properties that set them apart from other securities.
The following are the properties of option:
 Limited Loss
 High leverages potential
 Limited Life

PARTIES IN AN OPTION CONTRACT:

BUYER/HOLDER/OWNER OF AN OPTION:
The buyer of an option is one who by paying option premium buys the right but not
the obligation to exercise his option on seller/writer.

SELLER/WRITER OF AN OPTION:
The writer of the call /put options is the one who receives the option premium and is there by
obligated to sell/buy the asset if the buyer exercises on him

TYPES OF OPTIONS:
The options are classified into various types on the basis of various variables. The following
are the various types of options.

I. ON THE BASIS OF THE UNDERLYING ASSET:

On the basis of the underlying asset the option are divided into two types:

 INDEX OPTIONS:

These options have the index as the underlying. Some options are European while others are
American. Like index futures contract, index options contracts are also cash settled.

 STOCK OPTIONS:

Stock options are options on the individual stocks. Options currently trade on over 500 stocks
in the United States. A contract gives the holder the right to buy or sell shares at the specified
price

II. ON THE BASIS OF THE MARKET MOVEMENTS:

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 On the basis of the market movements the option are divided into two types. They are:

 CALL OPTION:

A call option is bought by an investor when he seems that the stock price moves upwards. A
call option gives the holder of the option the right but not the obligation to buy an asset by a
certain date for a certain price.

 PUT OPTION:

A put option is bought by an investor when he seems that the stock price moves
downwards. A put option gives the holder of the option right but not the obligation to sell an
asset by a certain date for a certain price.

III. ON THE BASIS OF EXERCISE OF OPTION:

On the basis of the exercised of the option, the options are classified into two
categories.

 AMERICAN OPTION:

American options are options that can be exercised at any time up to the expiration
date, most exchange-traded option are American.
 EUOROPEAN OPTION:

European options are options that can be exercised only on the expiration date itself.
European options are easier to analyze than American options, and properties of an American
option are frequently deduced from those of its European counterpart.

FACTORS EFFECTING THE PRICE OF AN OPTION:

The following are the various factors that affect the price of an option they are:
 Stock price: The pay–off from a call option is a amount by which the stock price exceeds
the strike price. Call options therefore become more valuable as the stock price increases and
vice versa. The pay-off from a put option is the amount; by which the strike price exceeds the
stock price. Put options therefore become more valuable as the stock price increases and vice
versa.
 Strike price: In case of a call, as a strike price increases, the stock price has to make a larger
upward move for the option to go in-the-money. Therefore, for a call, as the strike price
increases option becomes less valuable and as strike price decreases, option become more
valuable.

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 Time to expiration: Both put and call American options become more valuable as a time to
expiration increases.
 Volatility: The volatility of a stock price is measured of uncertain about future stock price
movements. As volatility increases, the chance that the stock will do very well or very poor
increases. The value of both calls and puts therefore increase as volatility increase.
 Risk-free interest rate: The put options prices decline as the risk-free rate increases where
as the prices of call always increase as the risk-free interest rate increases.
 Dividends: Dividends have the effect of reducing the stock price on the x-dividend rate.
This has a negative effect on the value of call options and a positive effect on the value of put
options.

DIFFERENCES BETWEEN FUTURES & OPTIONS:

FUTURES OPTIONS

1.Exchange traded, with Novation 1.Same in nature

2.Exchange defines the product 2.Same in nature
3.Price is zero, strike Price moves 3.Strike price is fixed, price moves
4.Price is zero 4.Price is always positive
5.Linear payoff 5.Nonlinear payoff
6.Both long & Short at risk 6.only short at risk

Table : 4.2
5.DATA ANALYSIS & INTERPRETATION:
The Objective of this analysis is to evaluate the profit/loss position futures and options. This
analysis is based on sample data taken of M/s. KOTAK STOCK BROCKING
LIMITED scrip. This analysis considered the May contract of kotak. The lot size of kotak
is 100, the time period of the analysis is, from 11-05-2012 to30-06-2012.
Table : 5.1

KOTAK STOCK FUTURES & OPTIONS

PRICE CALL OPTION PUT OPTION

(2) (3)

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 DATES (4)

(1)
SPOT FUTURE 740 800 840 740 800 840

May/fri/11 742.00 738.85 48.45 25.35 14.00 47.50 0 0

May/sat/12 742.80 740.20 65.15 30.35 17.00 30.15 0 0
May/sun/13 TRADING HOLIDAY
May/mon/14 780.00 770.05 55.25 32.25 16.30 30.95 64.95 0
May /tue/15 785.00 822.95 94.00 51.80 31.90 4.80 30.55 0
May /wed/16 815.55 823.15 108.20 55.15 32.80 13.00 31.55 0
May /thu/17 848.00 855.70 0 75.80 48.50 7.65 20.10 44.65
May /fri/18 845.00 848.75 123.00 71.35 42.25 8.90 20.25 36.55
May/sat/19 776.55 774.55 0 32.60 19.05 26.3 53.75 72.75
May/sun/20 TRADING HOLIDAY
May/mon/21 767.70 712.30 38.55 16.95 8.60 60.00 101.0 0
May /tue/22 700.00 685.40 24.15 11.55 8.00 73.00 130.0 0
May /wed/23 685.00 692.50 24.70 9.80 8.40 0 0 0
May/thu/24 690.00 696.85 21.55 9.05 0 0 0 0
May /fri/25 711.00 716.65 23.80 8.80 0 0 0 0
May /sat/26 722.00 724.45 22.75 8.00 0 0 0 0
May/sun/27 TRADING HOLIDAY
May/mon/28 707.05 704.05 15.95 6.70 0 0 0 0
May/tue/29 695.00 682.90 31.00 77.00 13.00 0 0 0
May/wed/30 697.00 660.65 3.50 1.05 0 105.5 0 0
May/thu/31 660.00 634.80 0.90 0.75 1.05 0 0 0
Jun/fri/01 640.10 637.10 0.55 0.20
0 0 0 0

Jun/sat/02 645.00 673.25 1.20 0.20 0 0 0 0

Jun/sun/03
TRADING HOLIDAY

Jun/mon/04 681.35 661.45 0.05 0.05 0.05 0 0 0

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 TABLE DETAILS:
 The first column explains TRADING DATE.

 Second Column (a) explains the SPOT MARKET PRICE in cash segment on that date of
Opening Balance of Equity Amount.

 Second column (b) explains the FUTURE MARKET PRICE in cash segment on that date of
Closing Balance on Future Market Amount.

 The Third column explains call Option premiums amounting 740, 800, 840.

 The Fourth column explains Put Option premiums amounting 740, 800, 840.

OBSERVATIONS & FINDINGS:

CALL OPTION:
 BUYERS PAY OFF:
As brought 1 lot of KOTAK that is 100, those who buy for 740, paid 48.45 premiums per
share.

Settlement price is 681.35

Spot price 681.35
Strike price 740.00
Amount -58.65
Premium paid (-) 48.45
Net Loss -10.20 x 100 = -1020
Buyer Loss = Rs.1020 (Loss)
Because it is negative it is in the money contract, hence buyer will get more loss, incase spot
price decrease buyer loss also increase.

 SELLERS PAY OFF:

It is in the money for the buyer, so it is in out of the money for seller; hence his profit is also
increase.

Strike price 740.00

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Spot price 681.35
Amount +58.65
Premium Received 48.45
Net profit 10.20 x 100 = +1020
Seller Profit = Rs.1020 (Net Amount)

Because it is positive it is out of the money, hence seller will get more profit, incase spot
price increase in below strike price, seller get loss in premium level

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 OBSERVATIONS & FINDINGS:
PUT OPTION:
 BUYERS PAY OFF:
Those who have purchase put option at a strike price of 740, the premium payable is 47.50
On the expiry date the spot market price enclosed at 681.35

Strike price 740.00

Spot price 681.35
Net pay off 58.65 x 100 = 5865

Already, premium paid 48.45, so it can get profit is 5865

Because it is Positive, out of the money contract, hence buyer will get more profit, incase
spot price increase buyer get loss in premium level.

 SELLERS PAY OFF:

As seller is entitled only for premium so, if he is in profit and also seller has to borne total
profit.

Spot price 681.35

Strike price 740.00
Amount -58.65 x100 =-5865

Already premium received 48.45 so, it can get loss is 5865

Because it is negative, in the money contract, Hence seller gets more loss, incase spot price
increase in above strike price seller can get profit in premium level.

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ANALYSIS OF FUTURE PRICES:
The Objective of this analysis is to evaluate the profit/loss position futures and options. This
analysis is based on sample data taken of M/s. KOTAK STOCK BROCKING
LIMITED scrip. This analysis considered the May contract of KOTAK. The lot size of
KOTAK is 100, the time period of the analysis is, from 11-05-2012 to 30-06-2012
Table : 5.2
DATE FUTURE PRICE

MAY/FRI/11 738.85
MAY/SAT/12 740.20
MAY/MON/14 770.05
MAY /TUE/15 822.95
MAY /WED/16 823.15
MAY /THU/17 855.70
MAY /FRI/18 848.75
MAY/SAT/19 774.55
MAY/MON/21 712.30
MAY /TUE/22 685.40
MAY /WED/23 692.50
MAY/THU/24 696.85
MAY /FRI/25 716.65
MAY /SAT/26 724.45
MAY/MON/28 704.05
MAY/TUE/29 682.90
MAY/WED/30 660.65
MAY/THU/31 634.80
JUN/FRI/01 637.10
JUN/SAT/02 673.25 Figure : 5.1
JUN/MON/04 661.45

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FUTURE MARKET:

BUYER SELLER

11/05/2012(Buying) 738.85 738.85

04/06/2012(Cl., period) 681.35 681.35

Loss 57.00 Profit 57.00

Profit 100 x57.00=5700, Loss 100 x 57.00=5700

Because buyer future price will decrease so, he can get loss. Seller future price also decrease
so, profit also increase, In case seller future will increase, and he can get loss.

The closing price of “Mahindra Satyam” formerly “Satyam Computer services”,at the
end of the contract period is 681.35 and this is considered as settlement price.

DATA OF KOTAK – THE FUTURES & OPTIONS OF THE MAY –

JUNE MONTH 2012:
Table : 5.3
DATE SPOT PRICE FUTURE PRICE

MAY/FRI/11 742.00 738.85

MAY/SAT/12 742.80 740.20
MAY/MON/14 780.00 770.05
MAY /TUE/15 785.00 822.95
MAY /WED/16 815.55 823.15
MAY /THU/17 848.00 855.70
MAY /FRI/18 845.00 848.75
MAY/SAT/19 776.55 774.55
MAY/MON/21 767.70 712.30
MAY /TUE/22 700.00 685.40
MAY /WED/23 685.00 692.50
MAY/THU/24 690.00 696.85
MAY /FRI/25 711.00 716.65
MAY /SAT/26 722.00 724.45
MAY/MON/28 707.05 704.05
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MAY/TUE/29 695.00 682.90
MAY/WED/30 697.00 660.65
MAY/THU/31 660.00 634.80
JUN/FRI/01 640.10 637.10
JUN/SAT/02 645.00 673.25
JUN/MON/04 681.35 661.45

Figure : 5.2

6.CONCLUSIONS
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 OBSERVATIONS AND FINDINGS:
 The future price of M/S KOTAK STOCK moving along with the market price.

 If the buy price of the future is less than the settlement price, than the buyer gets profit on
futures.

 If the selling price of the future is less than the settlement price, than the seller incur losses.

SUGGESTIONS:
 In bullish market the call option writer incurs more losses so the investor is suggested to go
for a call option to hold, where as the put option holder suffers in a bullish market, so he is
suggested to write a put option.

 In bearish market the call option holder will incur more losses so the investor is suggested to
go for a call option to write, where as the put option writer will get more losses, so he is
suggested to hold a put option.

 In the above analysis the market price of M/S.KOTAK is having low volatility, so the call
option writers enjoy more profits to holders.

 The derivative market is newly started in India and it is not known by every investor, so
SEBI has to take steps to create awareness among the investors about the derivative segment.

 In order to increase the derivatives market in India, SEBI should revise some of their
regulations like contract size, participation of FII in the derivatives market.

 Contract size should be minimized because small investors cannot afford this much of huge
premiums.

 SEBI has to take further steps in the risk management mechanism.

 SEBI has to take measures to use effectively the derivatives segment as a tool of hedging.

CONCLUSIONS:

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 Derivatives market is an innovation to cash market. Approximately its daily turnover reaches
to the equal stage of cash market. The average daily turnover of the NSE derivative segments

 In cash market the profit/loss of the investor depends on the market price of the underlying
asset. The investor may incur huge profits or he may incur huge loss. But in derivatives
segment the investor enjoys huge profits with limited downside.

 In cash market the investor has to pay the total money, but in derivatives the investor has to
pay premiums or margins, which are some percentage of total money.

 Derivatives are mostly used for hedging purpose.

 In derivative segment the profit/loss of the option writer is purely depend on the fluctuations
of the underlying asset.

BIBLIOGRAPHY:

 BOOKS:
 Derivatives Dealers Module Work book–NCFM
 Financial Markets and Services–GORDAN and NATRAJAN
 Financial Management – PRASANNA CHANDRA

 JOURNALS:
 The journal of derivatives.
 International journal of financial markets & derivatives.

 NEWS PAPERS:
 Economic times
 The Hindu
 Business Standard

 MAGAZINES:
 Business Today
 Business World
 Business India

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 WEBSITES:
 www.derivativesindia.com
 www.indianinfoline.com
 www.nseindia.com
 www.bseindia.com
 www.sebi.gov.in
 www.google.com

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