SUMMER INTERNSHIP PROJECT REPORT

On

“STUDY OF AWARENESS AND WORKING OF DERIVATIVES

MARKET”
AT

KARVY STOCK BROKLING LTD.

FC, ROAD PUNE

BY

BHANDARI RUSHABH SANTOSH

UNDER THE GUIDENCE OF

PROF. KHUSHALI MA’AM

SUBMITTED TO

“SAVITRIBAI PHULE PUNE UNIVERSITY”

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD

OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION (MBA)

2019-2020

THORGH

SURYADATTA EDUCATION FOUNDATION’S

SURYADATTA INSTITUTE OF MANAGEMENT & MASS

COMMUNICATION (SIMMC)

PUNE - 411021.
 DECLARATION

I, RUSHABH SANTOSH BHANDARI student of MBA, Suryadatta Institute of

Management & Mass Communication, hereby declare that this financial project
report on “STUDY OF AWARENESS AND WORKING OF
DERIVATIVES MARKET” is bonafide record of work done by me and all
content and facts are prepared and resented by me without any bias.

I hereby declare that this financial project on “STUDY OF AWARENESS

AND WORKING OF DERIVATIVES MARKET” submitted toward
fulfilment of MBA Degree of Savitribai Phule Pune University, is an original
work done by me.

NAME: RUSHABH SANTOSH BHANDARI

PLACE: PUNE

DATE:
 Acknowledgement

I, Rushabh Santosh Bhandari Place On The Record With Great Pleasure And
Express My Sincere And Deep Gratitude To The Help And Encouragement
From Those Who Are Responsible For Fetching Us Explore In- Depth And
Fountain Of Valuable Knowledge And Experience That I Have Gained In The
Completion Of Those Felicitations Project.

I Express My Deepest Gratitude to Our Guide

Prof: KHUSHALI MA’AM Extending His Helping Hands To Us Was Almost

Important In Completing Our Report. Also Million Sincere Thanks to Ask
Others Faculty Members of Our College for Providing Inspiration throughout
the Report.

NAME: RUSHABH SANTOSH BHANDARI

PLACE: PUNE

DATE:
 List of Tables

Sr.no Topic Page no.

1 Executive Summary
2 Introduction
3 Scope
4 Objective
5 Literature Review
6 Company Profile
7 Growth and Development of
Karvy
8 Karvy Group
9 Research Methodology
10 Introduction of Derivative
11 Types of Derivative Market
12 Analysis and Interpretation
13 Findings
14 Suggestion
15 Conclusion
16 Bibliography & Webliography
 Index
(Tables)
Sr no. Title Page no.
1 Table 1
2 Table 2
3 Table 3
4 Table 4
5 Table 5
6 Table 6
7 Table 7
8 Table 8
9 Table 9
10 Table 10

(Graphs)
Sr. no. Title Page no.
1 Graph 1
2 Graph 2
3 Graph 3
4 Graph 4
 Executive Summary

Derivatives trading in the stock market have been a subject of enthusiasm of

research in the field of finance the most desired instruments that allow market
participants to manage risk in the modern securities trading are known as
derivatives. The derivatives are defined as the future contracts whose value
depends upon the underlying assets. If derivatives are introduced in the stock
market, the underlying asset may be anything as component of stock market
like, stock prices or market indices, interest rates, etc. The main logic behind
derivatives trading is that derivatives reduce the risk by providing an additional
channel to invest with lower trading cost and it facilitates the investors to extend
their settlement through the future contracts. It provide6s extra liquidity in the
stock market. Derivatives are assets, which derive their values from an
underlying asset. These underlying assets are of various 6 categories like
• Commodities including grains, coffee beans, etc.

• Precious metals like gold and silver.

• Foreign exchange rate.

•Bonds of different types, including medium to long

-term negotiable debt securities issued by governments, companies, etc.
• Short
-term debt securities such as T-bills.
• Over
-The-Counter (OTC) money market products such as loans or deposits.
• Equities
For example, a dollar forward is a derivative contract, which gives the buyer a
right & an obligation to buy dollars at some future date. The prices of the
derivatives are driven by the spot prices of these underlying assets. However,
the most important use of derivatives is in transferring market risk, called
Hedging, which is a protection against losses resulting from unforeseen price or
volatility changes. Thus, derivatives are a very important tool of risk
management.There is various derivative products traded. They are;
1. Forwards
2. Futures
3. Options, Swaps.
Derivatives are also highly levered instruments, and this has its own
implications. On the one hand, the leverage makes derivatives attractive to
speculators (those who wish to bet on price direction). In itself, this is not a bad
thing, since speculators add considerable liquidity to the market and, by taking
the opposite side, facilitate the positions hedgers want to take. However,
leverage magnifies the eject of price moves, so sharp unfavourable price moves
can easily spell disaster to the derivatives portfolio and thence to the larger
business entity. Indeed, the annals of financial history are littered with stories of
corporations and financial institutions which collapsed when deterioration in
market conditions led to massive losses in the derivatives portfolio—
occasionally, even in cases where the derivatives were being used to hedge
existing exposures. The potentially lethal cocktail of leverage and volatility
makes it vital that users understand fully the risks of the instruments, and
regulators the systemic impact of volatility spikes.
Introduction
 Introduction

Derivatives are the type of investment on the underlying assets like debentures,
bonds, but people are less likely invests in these types of investments. If one is
aware about these investment type, he can earn returns in his pocket but only
because lack of awareness, people are not ready to invest in it.

Derivatives are a part of stock market, one of the options for the investments,
but an unrecognised part on the investor’s side. That’s the reason why I chose
this topic for my project. So that I can gather information about why is their less
awareness about this investment option?

With a common trend in the market on the part of the investors, they don’t
willing to invest in the share market, and if when some of them do so, they will
go for shares and mutual funds, only those who are trading regularly in the
stock market, will prefer the derivatives investment.

The derivatives market is the financial market for derivatives, financial

instruments like futures contracts or options, which are derived from other
forms of assets.

The market can be divided into two, that for exchange-traded derivatives and
that for over-the-counter derivatives. The legal nature of these products is very
different, as well as the way they are traded, though many market participants
are active in both. The derivatives market in Europe has a notional amount of
€660 trillion.
 Scope

Derivatives which are part of Indian stock exchanges (NSE, BSE)

those investors who invest in the derivatives, which type of
derivatives they prefer the most, what is the reason to invest in that
specific type of derivatives. On the other hand, those who are not
interested in such investment, I would like to know the reason behind
it.

Today, people as an investor ignore the stock market investment

options, so I wanted to know the reason behind this behaviour of the
investors.

Objectives

1. To study the investor’s mentality.

2. To analyse the investment patterns.

3. To observe the preferences of the investors.

4. To conclude the current investor behaviour.

Literature Review
 Literature Review

Review of literature is body of knowledge that aim to review the important

aspects of current and previous knowledge in a critical way. It has an ultimate
objective of bringing the reader with up to date information with present
literature on a topic and makes a foundation for another study that may be
needed in the same area. It bridges the gap between existing knowledge and the
knowledge to explore. This chapter deals with the discussion on the earlier
studies relevant for the present topic of research that is investor‘s preference
towards derivatives. To get a clear cut idea and for in-depth research work
different nations and multiple contexts in various time periods were reviewed
here, undertakes a comprehensive assessment of the private corporate debt
market, the public sector bond market, the govt. securities market, the housing
finance and other debt markets in India. This provides a diagnostic study of the
state of the Indian debt market, recommending necessary measures for the
development of the secondary market for debt. It highlights the need to integrate
the regulated debt market with the free debt market, the necessity for market
making for financing and hedging options and interest rate derivatives, and tax
reforms. Compared the FTSE 100 stock index with the stock index futures
market. He found support for the hypothesis that lower transaction costs is the
primary reason for traders with market wide information to use the futures
market. analysed the impact of the US S&P 500 index futures on spot market
volatility. Their results showed that index futures did not have an escalating
effect on spot market volatility. Pierluigi and Laura (2002) reported a decrease
in the volatility of the underlying market on Italian Stock Market after the
introduction of derivatives.

Behaviour of Stock Market Volatility after Derivatives by Golaka C Nath,

Research Paper (NSE): Financial market liberalization since early 1990s has
brought about major changes in the financial markets in India. The creation and
empowerment of Securities and Exchange Board of India (SEBI) has helped in
providing higher level accountability in the market. New institutions like
National Stock Exchange of India (NSEIL), National Securities Clearing
Corporation (NSCCL), and National Securities Depository (NSDL) have been
the change agents and helped cleaning the system and provided safety to
investing public at large. With modern technology in hand, these institutions did
set benchmarks and standards for others to follow. Microstructure changes
brought about reduction in transaction cost that helped investors to lock in a
deal faster and cheaper. Do Futures and Options trading increase stock market
volatility? By Dr. Premalata Shenbagaraman, Research Paper (NSE): Numerous
studies on the effects of futures and options listing on the underlying cash
market volatility have been done in the developed markets. The empirical
evidence is mixed and most suggest that the introduction of derivatives do not
destabilize the underlying market.
Industry Profile &
Organization
(Company) Profile
 Industry Profile & Organization (Company) Profile

KARVY STOCK BROKING LIMITED

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.

Karvy – Early Days

Karvy the name comes from the names of the directors:

K – Mr. Krishna Prasad

A- Mr. Arun
R- Mr. Radha Krishna
V- Mr. Venkat Krishna
Y- Mr. Yogendar

GROWTH AND DEVELOPMENT OF KARVY

Over the last 20 years Karvy has traveled the success route, towards building
a reputation as an integrated financial services provider, offering a wide
Spectrum of services. And they have made the journey by taking the route of
Quality service. Path breaking innovation in service, versatility in service and
Finally totality in service.
Their highly qualified manpower, cutting-edge technology, comprehensive
infrastructure and total customer- focus has secured for us the position of an
emerging financial services giant enjoying the confidence and support of an
enviable clientele across diverse fields in the financial world.
With the experience of years of holistic financial behind us and years of
complete expertise in the industry to look forward to, they have now emerged
as a premier integrated financial services provider.
And today, they can look with pride at the fruits of their mastery and
experience Comprehensive financial services that are competently segregated
to service and manage a diverse range of customer requirements.

PROMOTERS & MANAGEMENT TEAM

Mr. C. Parthasarathy
Chairman, Karvy Group

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 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 with a strong sense of purpose and clarity of
thought.

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.

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 have helped Karvy win 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

Mr. M S Ramakrishna, Director, founder member of KARVY GROUP, he is

the orchestrator of technology initiatives such as the call centre 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
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 centre, web initiatives, online
trading, B2B interfaces etc., in the transfer agency and BPO businesses.

Mr. Sushil Sinha

Wholetime Director, Karvy Comtrade
Mr. Sushil Sinha, the Country Head of Karvy Comtrade Ltd, has successfully
made Karvy Comtrade 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 Karvy Comtrade 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.

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
CEO, Distribution & Allied Businesses
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. Rajiv R. Singh

CEO, Stock Broking

Mr. Rajiv R. Singh 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 makes 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.

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 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. Deepak Gupta

Group Head, HR

Mr. Deepak Gupta brings with him over 20 years of experience in HR, spanning
financial services, its 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. Krishna Hari

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, and
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.

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

 Karvy Comtrade 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
 Karvy Forex & Currencies Private LTD
 Currency and Forex services

 Karvy Consultants LTD

 Consultancy and Advisory Services, Publications

 Karvy Fintech Private LTD (formerly known as KCPL Advisory

Services Pvt Ltd)
 Registrar and Share Transfer agent

 Karvy Fintech (Bahrain) W.L.L (formerly known as Karvy

Computershare W.L.L)
Fund Administrator
 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

 Karvy Solar Power LTD

 Power Generation

 Karvy Global Services LTD

 Business Process Outsourcing

 Karvy Global Services Inc, USA

 Business Process Outsourcing

 Karvy Inc, USA

AWARDS & ACCOLADES

 KRISHI PRGATI AWARDS, 2017

 Karvy Commodities honoured with Derivative House of the Year 2017.
 ZEE Business Award for the “Best Agri. Analyst” 2014
 Market Excellence Award, Commodities – Metal
 NSDL Star Performer Award 2014 for Highest Asset Value
 Largest E-Broking House in India, 2010
 Best CEO, Initiating HR Practices, 2007
 Amity Corporate Excellence, 2007
 ISTD – “Vivekananda National Award” for Excellence in HRD &
Training, 2006
 Best Depository Participant in the country, 2004
 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, via 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:

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 Fin polis
 Forex & Currencies

Non-Financial Services

 Data Management Services

 International BPO
 Alternate Energy
 Data Analytics
 Market Research
 Mission and Vision

Mission : To be the leading and preferred service provider to our

customers, and we aim to achieve this leadership position by building an
innovative, enterprising, and technology driven organization which will set
the highest standards of service and business ethics.

Vision: Strive to be the leaders and experts through our processes, people
and technology offering the unique blend that delivers superior value by
establishing and maintaining the highest levels of services and
professionalism.
 Research
Methodology
 Research Methodology

Type and source of data

I. Primary data:

A survey with the help of questionnaire.

II. Secondary data:

 Internet
 Books
 Company website
 Newspapers

Limitations:

 Time limits.
 Findings are based on the responses given by the people.

Tools of analysis:

 Pie charts

 Bar graphs

 Tables
 Introduction of derivatives

Derivative is a contract or a product whose value is derived from value of some

other asset known as underlying. Derivatives are based on wide range of
underlying assets.

These include:

• Metals such as Gold, Silver, Aluminium, Copper, Zinc, Nickel, Tin, Lead etc.

• Energy resources such as Oil (crude oil, products, cracks), Coal, Electricity,
Natural Gas etc.

• Agri commodities such as wheat, Sugar, Coffee, Cotton, Pulses etc, and

• Financial assets such as Shares, Bonds and Foreign Exchange.

Factors influencing the growth of derivative market globally:-

Over the last four decades, derivatives market has seen a phenomenal growth.
Many derivative contracts were launched at exchanges across the world.
Some of the factors driving the growth of financial derivatives are:

• Increased fluctuations in underlying asset prices in financial markets.

• Integration of financial markets globally.

• Use of latest technology in communications has helped in reduction of

transaction costs.

• Enhanced understanding of market participants on sophisticated risk

management tools to manage risk.

• Frequent innovations in derivatives market and newer applications of

products.
 Derivatives Market

Products:-

1) Forwards: - It is a contractual agreement between two parties to buy/sell an

underlying asset at a certain future date for a particular price that is pre-decided
on the date of contract.

Both the contracting parties are committed and are obliged to honour the
transaction irrespective of price of the underlying asset at the time of delivery.
Since forwards are negotiated between two parties, the terms and conditions of
contracts are customized. These are Over-the-counter (OTC) contracts.

2) Futures: - A futures contract is similar to a forward, except that the deal is

made through an organized and regulated exchange rather than being negotiated
directly between two parties. Indeed, we may say futures are exchange traded
forward contracts.

3) Options: - An Option is a contract that gives the right, but not an obligation,
to buy or sell the underlying on or before a stated date and at a stated price.
While buyer of option pays the premium and buys the right, writer/seller of
option receives the premium with obligation to sell/ buy the underlying asset, if
the buyer exercises his right.

4) Swaps: - A swap is an agreement made between two parties to exchange cash

flows in the future according to a prearranged formula. Swaps are, broadly
speaking, series of forward contracts. Swaps help market participants manage
risk associated with volatile interest rates, currency exchange rates and
commodity prices.

Introduction to forward and futures

Contracts Forward contract is an agreement made directly between two parties

to buy or sell an asset on a specific date in the future, at the terms decided
today. Forwards are widely used in commodities, foreign exchange, equity and
interest rate markets.

Essential features of a forward are:

• It is a contract between two parties (Bilateral contract).

• All terms of the contract like price, quantity and quality of underlying,
delivery terms like place, settlement procedure etc. are fixed on the day of
entering into the contract. In other words, Forwards are bilateral over-the-
counter (OTC) transactions where the terms of the contract, such as price,
quantity, quality, time and place are negotiated between two parties to the
contract.

Any alteration in the terms of the contract is possible if both parties agree to it.
Corporations, traders and investing institutions extensively use OTC
transactions to meet their specific requirements. The essential idea of entering
into a forward is to fix the price and thereby avoid the price risk. Thus, by
entering into forwards, one is assured of the price at which one can buy/sell an
underlying asset.

Futures contract

Futures markets were innovated to overcome the limitations of forwards. A

futures contract is an agreement made through an organized exchange to buy or
sell a fixed amount of a commodity or a financial asset on a future date at an
agreed price.

Simply, futures are standardised forward contracts that are traded on an

exchange. The clearinghouse associated with the exchange guarantees
settlement of these trades. A trader, who buys futures contract, takes a long
position and the one, who sells futures, takes a short position. The words buy
and sell are figurative only because no money or underlying asset changes hand,
between buyer and seller, when the deal is signed.

Features of futures contract:-

In futures market, exchange decides all the contract terms of the contract other
than price.
Accordingly, futures contracts have following features:

• Contract between two parties through Exchange

• Centralised trading platform i.e. exchange
• Price discovery through free interaction of buyers and sellers
• Margins are payable by both the parties

Feature Forward contracts Futures contracts

Operational mechanism It is not traded on the It is an exchange-traded
exchanges. contract.
Contract specifications Terms of the contracts Terms of the contracts
differ from trade to trade are standardized.
(tailor made contract)
according to the need of
the participants.
Counter-party risk Exists, but at times gets Exists but the clearing
reduced by a guarantor. agency associated with
exchanges becomes the
counter-party to all
trades assuring
guarantee on their
settlement.
Liquidation profile Low, as contracts are High, as contracts are
tailor made catering to the standardised exchange-
needs of the parties traded contracts.
involved. Further,
contracts are not easily
accessible to other market
participants.
• Quality decided today (standardized)
• Quantity decided today (standardized)
Price discovery
Quality of information
and its dissemination
(Table 1)
Not Efficient, as markets Efficient, centralised
are scattered. trading platform helps
all buyers and sellers to
come together and
discover the price
through common order
book.
Quality of information Futures are traded
may be poor. Speed of nationwide. Every bit of
information dissemination decision related
is week. information is
distributed very fast.

Examples:-

o Futures:-
Commodities futures, Currency futures, Index futures and Individual
stock futures in India.

o Forward:-
Currency markets are an example of forwards. Today currency futures
and options have been introduced in India, but yet a market for currency
forwards exists through banks.

Uses of futures:-
  Hedgers Corporations, Investing Institutions, Banks and
Governments all use derivative products to hedge or reduce their
exposures to market variables such as interest rates, share values,
bond prices, currency exchange rates and commodity prices.

 A company due to receive a payment in a foreign currency on a

future date. It enters into a forward transaction with a bank
agreeing to sell the foreign currency and receive a predetermined
quantity of domestic currency.

 It is much less expensive to create a speculative position using

derivatives than by actually trading the underlying commodity or
asset. As a result, the potential returns are much greater.

 An arbitrage is a deal that produces risk free profits by exploiting a

mispricing in the market. A simple arbitrage occurs when a trader
purchases an asset cheaply in one location/ exchange and
simultaneously arranges to sell it at another location/ exchange at a
higher price.
 As mentioned above, there are three major players in derivatives
market – Hedgers, Traders, and Arbitrageurs. Hedgers are there to
hedge their risk, traders take the risk which hedgers plan to offload
from their exposure and arbitragers establish an efficient link
between different markets.

For example, at the end of day (1st March 2012)

Market price
Of underlying asset
 (In Rs.):- 100
Futures: - 110
Lot size: - 50
Here an arbitrageur will buy in the cash market at Rs. 100 and sell in the
Futures market at Rs. 110, thereby locking Rs. 10 as his profit on each
share.

On the expiration date,

Suppose price (in Rs.) of the underlying asset is 108.
Total profit would therefore be 10*50 = Rs. 500.

Cash Market Futures

Buy 100 Sell 108

Sell 108 Buy 110

+8 +2

Suppose price (in Rs.) of the underlying asset is 95 on the expiration date.

Cash Market Futures

Buy 100 Sell 110

Sell 95 Buy 95

-5 +15

Total profit would therefore be 10*50 = Rs. 500.

 In the entire activity, the transaction cost and impact cost have not been
considered. In real life, the transaction cost has to be considered like the
brokerage, service Tax, Securities Service Tax etc.

Types of Stock Market Indices:-

Indices can be designed and constructed in various ways. Depending

upon their methodology, they can be classified as under:

1. Market capitalisation weighted index

2. Free float capitalisation index
3. Price weighted index
4. Equal weighted index

1. Market capitalisation weighted index:-

In this method of calculation, each stock is given weight according to its

market capitalization. So higher the market capitalization of a constituent,
higher is its weight in the index. Market capitalization is the market value
of a company, calculated by multiplying the total number of shares
outstanding to its current market price.

For example, ABC company with 5,00,00,000 shares outstanding and a

share price of Rs 120 per share will have market capitalization of
5,00,00,000 x 120 = Rs 6,00,00,00,000 i.e. 600 Cores. Let us understand
the concept with the help of an example:
There are five stocks in an index. Base value of the index is set to 100 on
the start date which is January 1, 1995. Calculate the present value of
index based on following information.
 Sr. No. Stock Name Stock price Number of Today’s
as on shares in stock price
January 1, lakhs (in Rs.)
1995 (in Rs.)
1 AZ 150 20 650
2 BY 300 12 450
3 CX 450 16 600
4 DW 100 30 350
5 EU 250 8 500
(Table 2)

Old Shares Old M. Old Old Value New New New New Value
Price in Cap (in weights of Portfolio price M. weight of portfolio
Lakhs lakhs) (price * Cap (price *
weightage) weightage)
150 20 3000 0.16 23.94 650 13000 0.31 198.82
300 12 3600 0.19 57.45 450 5400 0.13 57.18
450 16 7200 0.38 172.34 600 9600 0.23 135.53
100 30 3000 0.16 15.36 350 10500 0.25 86.47
250 8 2000 0.11 26.60 500 4000 0.09 47.06
Total 18800 296.28 42500 525.06

(Table 3)

Market capitalization (Mcap) = Number of Shares * Market Price

Old value of portfolio is equated to 100.
Therefore, on that scale new value of portfolio would be (525.05/ 296.27)*100
= 177.22.
Thus, the present value of Index under market capitalization weighted method is
177.22.
2. Free-Float Market Capitalization Index:-

In various businesses, equity holding is divided differently among various stake

holders – promoters, institutions, corporate, individuals etc. Market has started
to segregate this on the basis of what is readily available for trading or what is
not.

The one available for immediate trading is categorized as free float. And, if we
compute the index based on weights of each security based on free float market
cap, it is called free float market capitalization index.

3. Price-Weighted Index:-
A stock index in which each stock influences the index in proportion to its
price. Stocks with a higher price will be given more weight and therefore, will
have a greater influence over the performance of the Index.

Let us take the same example for calculation of price-weighted index.

(Table 4)
Sr. No. Stock Stock price Number of Today’s
Name as on shares in stock price
January 1, lakhs (in Rs.)
1995 (in
Rs.)
1 AZ 150 20 650
2 BY 300 12 450
3 CX 450 16 600
 4 DW 100 30 350
5 EU 250 8 500
(Table 5)
Stock Stock Price Price Today’s Price Price
Name price as weights weighted stock weights weighted
on Prices price (in Prices
January Rs.)
1, 1995
(in Rs.)
AZ 150 0.12 18 650 0.254 166
BY 300 0.24 72 450 0.176 79
CX 450 0.36 162 600 0.235 141
DW 100 0.08 8 350 0.137 48
EU 250 0.2 50 500 0.196 98
1250 310 2550 532

We can equate 310 to 100 to find the current value, which would be
(532/310)*100 = 171.7268

4. Equal Weighted Index:-

An equally-weighted index makes no distinction between large and small

companies, both of which are given equal weighting.

The value of the index is generated by adding the prices of each stock in the
index and dividing that by the total number of stocks.

Let us take the same example for calculation of equal weighted index.
 Sr. No. Stock Name Stock price Number of Today’s
as on shares in stock price
January 1, lakhs (in Rs.)
1995 (in Rs.)
1 AZ 150 20 650
2 BY 300 12 450
3 CX 450 16 600
4 DW 100 30 350
5 EU 250 8 500
(Table 6)
Base level of this index would be (150+300+450+100+250)/5 = 250.
We can equate this to 100.

Current level of this index would be (650+450+600+350+500)/5 = 510.

It means current level of index on the base of 100 would be (510/250)*100 =

204.
Cash and carry arbitrage

The following data is available on stock A as on August 1, 2008. Cash market

price Rs. 1500
December Futures Rs. 1520
Contract multiplier 100
(For stock)

Assume an implied cost of carry of 8% p.a. i.e. 0.75% per month.

Theoretically/ fair price of December futures is 1504.69
(= 1500 * e Illustrations: 0.0075*5/12).
Going by the theoretical price, we may say that December futures on stock A
are overvalued.
To take advantage of the mispricing, an arbitrageur may buy 100 shares of stock
A and sell 1 futures contract on that at given prices.
This would result in the arbitrage profit of Rs. 1531 (= 100 X 15.31), which is
the difference between actual and fair prices for 100 shares. Position of the
arbitrager in various scenarios of stock price would be as follows:

Case I: Stock rises to Rs. 1550

Profit on underlying = (1550 – 1500) x 100 = Rs. 5000
Loss on futures = (1550 - 1520) x 100 = Rs. 3000
Gain on Arbitrage = Rs. 2,000
Cost of Arbitrage in terms of financing
(Rs. 4.69 for 100 shares) = Rs. 469
Net gain out of arbitrage = (2000 – 469) = Rs 1531
Case II: Stock falls to Rs.1480
Loss on underlying = (1500- 1480) x 100 = Rs. 2000
Profit on futures = (1520-1480) x 100 = Rs. 4000
Gain on Arbitrage = Rs. 2000
Cost of Arbitrage in terms of financing (Rs. 4.69 for 100 shares) = Rs. 469
Net gain out of arbitrage = (2000 – 469) = Rs. 1531

Reverse cash and carry arbitrage

The reverse cash and carry arbitrage is done when the futures are trading at a
discount to the cash market price. Let us look at the following data on stock A
as on December 1.

Cash market price Rs. 100

December
Futures price Rs. 90

The prices trading in the market reflect a negative cost of carry, which offers an
opportunity to the traders to execute reverse cash and carry arbitrage as cost of
carry is expected to reverse to positive at some point in time during contract’s
life.

Otherwise, also, if the trader carries his position till the expiry, it will yield him
an arbitrage profit. The assumption in implementing this arbitrage opportunity
is that the arbitrager has got the stock to sell in the cash market, which will be
bought back at the time of reversing the position.
If stock is not available, arbitrager needs to borrow the stock to implement the
arbitrage. In that case, while analyzing the profitability from the transaction,
cost of borrowing of stock would also be taken into account.
Assuming the contract multiplier for futures contract on stock A is 200 shares.
To execute the reverse cost and carry, arbitrager would buy one December
futures at Rs.90 and sell 200 shares of stock A at Rs.100 in cash market. This
would result in the arbitrage profit of Rs. 2000 (200 X Rs.10).
Position of the arbitrager in various scenarios of stock price would be as
follows:

Case I: Stock rises to Rs. 110

Loss on underlying = (110 - 100) x 200 = Rs. 2000
Profit on futures = (110 - 90) x 200 = Rs. 4000
Net gain out of arbitrage = Rs. 2000

Case II: Stock falls to Rs. 85

Profit on underlying = (100 - 85) x 200 = Rs. 3000
Loss on futures = (90 - 85) x 200 = Rs. 1000
Net gain out of arbitrage = Rs. 2000
 Introduction to Options

An Option is a contract that gives the right, but not an obligation, to buy or sell
the underlying asset on or before a stated date/day, at a stated price, for a price.
The party taking a long position i.e. buying the option is called buyer/ holder of
the option and the party taking a short position i.e. selling the option is called
the seller/ writer of the option.

The option buyer has the right but no obligation with regards to buying or
selling the underlying asset, while the option writer has the obligation in the
contract. Therefore, option buyer/ holder will exercise his option only when the
situation is favourable to him, but, when he decides to exercise, option writer
would be legally bound to honour the contract.

Options may be categorized into two main types:-

• Call Options
• Put Options

Option, which gives buyer a right to buy the underlying asset, is called Call
option and the option which gives buyer a right to sell the underlying asset, is
called Put option.
Pay offs in options:-

Long on option:
Buyer of an option is said to be “long on option”. As described above, he/she
would have a right and no obligation with regard to buying/ selling the
underlying asset in the contract.
When you are long on equity option contract:

• You have the right to exercise that option.

• Your potential loss is limited to the premium amount you paid for buying the
option.
• Profit would depend on the level of underlying asset price at the time of
exercise/expiry of the contract.

Short on option:
Seller of an option is said to be “short on option”. As described above, he/she
would have obligation but no right with regard to selling/buying the underlying
asset in the contract.

When you are short (i.e., the writer of) an equity option contract:
• Your maximum profit is the premium received.
• You can be assigned an exercised option any time during the life of option
contract (for American Options only). All option writers should be aware that
assignment is a distinct possibility.
• Your potential loss is theoretically unlimited as defined below.
Long Call

On October 1, 2010, Nifty is at 6143.40. You buy a call option with strike price
of 6200 at a premium of Rs. 118.35 with expiry date October 28, 2010. A Call
option gives the buyer the right, but not the obligation to buy the underlying at
the strike price.

So in this example, you have the right to buy Nifty at 6200. You may buy or
you may not buy, there is no compulsion. If Nifty closes above 6200 at expiry,
you will exercise the option; else you will let it expire.

So, let’s consider some assumptions as shown below:-

1. If Nifty closes at 6100:-

You will NOT exercise the right to buy the underlying (which you have got by
buying the call option) as Nifty is available in the market at a price lower than
your strike price. Why will you buy something at 6200 when you can have the
same thing at 6100? So you will forego the right. In such a situation, your loss
will be equal to the premium paid, which in this case is Rs. 118.35

2. If Nifty were to close at 6318.35:-

You will exercise the option and buy Nifty @ 6200 and make profit by selling it
at 6318.5. In this transaction you will make a profit of Rs. 118.35, but you have
already paid this much money to the option seller right at the beginning, when
you bought the option. So 6318.35 is the Break Even Point (BEP) for this option
contract. A general formula for calculating BEP for call options is strike price
plus premium (X + P).

3. If Nifty were to close at 6700:-

You will exercise the option and buy Nifty at 6200 and sell it in the market at

Nifty at Premium Paid Buy Nifty at Sell Nifty at Pay off for
Expiry Long Call
Position
A B C D=A+B+C
6100 -118.35 -6100 6100 -118.35
6150 -118.35 -6150 6150 -118.35
6200 -118.35 -6200 6200 -118.35
6250 -118.35 -6200 6250 -68.35
6300 -118.35 -6200 6300 -18.35
6350 -118.35 -6200 6350 31.65
6400 -118.35 -6200 6400 81.65
6450 -118.35 -6200 6450 131.65
6500 -118.35 -6200 6500 181.65
6550 -118.35 -6200 6550 231.65
6600 -118.35 -6200 6600 281.35
6650 -118.35 -6200 6650 331.35
6700 -118.35 -6200 6700 381.35
6700, thereby making a profit of Rs. 500. But since you have already paid Rs.
118.35 as option premium, your actual profit would be 500 – 118.35 = 381.65.
(Table 7)
(Graph 1)
Short Call

Whenever someone buys a call option, there has to be a counterparty, who has
sold that call option. If the maximum loss for a long call position is equal to the
premium paid, it automatically means that the maximum gain for the short call
position will be equal to the premium received. Similarly, if maximum gain for
long call position is unlimited, then even maximum loss for the short call
position has to be unlimited. Lastly, whenever, the long call position is making
losses, the short call position will make profits and vice versa. Hence, if we
have understood long call pay off, short call pay off chart will be just the water
image of the long call pay off.

Thus at 6100 Nifty, When long call position makes a loss of Rs. 118.35, short
call position will make a profit of Rs. 118.35.
Similarly for 6700, when long call makes a profit of 381.65, short call position
will lose 381.65. As Nifty starts rising, short call position will go deeper into
losses.
Nifty at Premium Buy Nifty Sell Nifty Pay off for Pay off for
Expiry Paid at at Long Call Short Call
Position Position
A B C D=A+B+C -D
6100 -118.35 -6100 6100 -118.35 118.35
6150 -118.35 -6150 6150 -118.35 118.35
6200 -118.35 -6200 6200 -118.35 118.35
6250 -118.35 -6250 6250 -68.35 68.35
6300 -118.35 -6300 6300 -18.35 18.35
6350 -118.35 -6350 6350 31.65 -31.65
6400 -118.35 -6400 6400 81.65 -81.65
6450 -118.35 -6450 6450 131.65 -131.65
6500 -118.35 -6500 6500 181.65 -181.65
6550 -118.35 -6550 6550 231.65 -231.65
6600 -118.35 -6600 6600 281.65 -281.65
6650 -118.35 -6650 6650 331.65 -331.65
6700 -118.35 -6700 6700 381.65 -381.65
(Table 8)
 (Graph 2)
Long Put

On October 1, 2010, Nifty is at 6143.40. You buy a put option with strike price
of 6200 at a premium of Rs. 141.50 with expiry date October 28, 2010. A put
option gives the buyer of the option the right, but not the obligation, to sell the
underlying at the strike price. In this example, you can sell Nifty at 6200. When
will you do so? You will do so only when Nifty is at a level lower than the
strike price. So if Nifty goes below 6200 at expiry, you will buy Nifty from
market at lower price and sell at strike price. If Nifty stays above 6200, you will
let the option expire. The maximum loss in this case as well (like in long call
position) will be equal to the premium paid; i.e. Rs. 141.50.

What can be the maximum profit? Theoretically, Nifty can fall only till zero. So
maximum profit will be when you buy Nifty at zero and sell it at strike price of
6200. The profit in this case will be Rs. 6200, but since you have already paid
Rs. 141.5 as premium, your profit will reduce by that much to 6200 – 141.5 =
6058.5.

Breakeven point in this case will be equal to

Strike price – premium (X – P).
In our example breakeven point will be equal to 6200 – 141.5 = 6058.5. Thus
when Nifty starts moving below 6058.5, will you start making profits.
Nifty at Premium Paid Buy Nifty at Sell Nifty at Pay off for
Expiry Long Put
Position
A B C D=A+B+C
5800 -141.5 -5800 6200 258.5
5850 -141.5 -5850 6200 208.5
5900 -141.5 -5900 6200 158.5
5950 -141.5 -5950 6200 108.5
6000 -141.5 -6000 6200 58.5
6050 -141.5 -6050 6200 8.5
6100 -141.5 -6100 6200 -41.5
6150 -141.5 -6150 6200 -91.5
6200 -141.5 -6200 6200 -141.5
6250 -141.5 -6250 6250 -141.5
6300 -141.5 -6300 6300 -141.5
6350 -141.5 -6350 6350 -141.5
6400 -141.5 -6400 6400 -141.5
(Table 9)
(Graph 3)

The maximum loss for the option buyer is the premium paid, which is equal to
141.5 * 50 = 7075, where 50 is the lot size. Contract value for this put option is
6200 * 50 = 310000.

A put option buyer need not pay any margin. This is because he has already
paid the premium and there is no more risk that he can cause to the system. A
margin is paid only if there is any obligation. An option buyer (either buyer of a
Call option or a put option) has no obligation.

Short Put

What will be the position of a put option seller/writer? Just the opposite of that
of the put option buyer. When long put makes profit, short put will make loss. If
maximum loss for long put is the premium paid, then maximum profit for the
short put has to be equal to the premium received. If maximum profit for long
put is when price of underlying falls to zero at expiry, then that also will be the
time when short put position makes maximum loss.

The table below shows the profit/ loss for short put position. An extra column is
added to the above table to show positions for short put. The pay off chart is
drawn using this table.

Nifty at Premium Buy Nifty Sell Nifty Pay off for Pay off for
Expiry Paid at at Long Put Short Put
Position Position
A B C D=A+B+C -D
5800 -141.5 -5800 6200 258.5 -258.5
5850 -141.5 -5850 6200 208.5 -208.5
5900 -141.5 -5900 6200 158.5 -158.5
5950 -141.5 -5950 6200 108.5 -108.5
6000 -141.5 -6000 6200 58.5 -58.5
6050 -141.5 -6050 6200 8.5 -8.5
6100 -141.5 -6100 6200 -41.5 41.5
6150 -141.5 -6150 6200 -91.5 91.5
6200 -141.5 -6200 6200 -141.5 141.5
6250 -141.5 -6250 6250 -141.5 141.5
6300 -141.5 -6300 6300 -141.5 141.5
6350 -141.5 -6350 6350 -141.5 141.5
6400 -141.5 -6400 6400 -141.5 141.5
(Table 10)
(Graph 4)

Contract value in this case will be equal to 6200 * 50 = 310000 and margin
received will be equal to 141.5 * 50 = 7075.

Seller of the put option receives the premium but he has to pay the margin on
his position as he has an obligation and his losses can be huge. As can be seen
above, options are products with asymmetric risk exposure i.e., the gains when
the underlying asset moves in one direction is significantly different from the
losses when the underlying asset moves in the opposite direction.

For example, under a call option, when a stock price goes down, the loss
incurred by the buyer of this option is limited to the purchase price of the
option. But if the stock price goes up, the buyer of the call gains in proportion to
the rise in the stock’s value, thereby giving asymmetric pay off. In contrast to
this, futures have symmetric risk exposures (symmetric pay off).
 Analysis &
interpretation
 Analysis & interpretation
Q. Age Group

20-30 18
30-40 7
40-50 4
50 & above 1
Total 30

Here, the age group of the most of the population is 20-30 i.e. the most
population is youth; out of the rest, 23.3% is between 30-40 and 13.3% is
between 40-50, where there is a small part of this population is aware about the
share market investment.
Q. Have you interested in share market investments?

Yes 16
No 5
Maybe 9
Total 30

Here, we can see that out of targeted people, more than 50% of people are
interested in the investments, 30% people have not yet finalised and only small
group of people is declining to participate.
Q. Have you created D-MAT account?

Yes 5
No 25
Total 30

In this case, we can see that, most of the population is not willing to open the D-
MAT account, may be various reasons behind this behaviour, but the end result
is that, there are only few present of people who are willing to trade in the share
market.
Q. Do you know about derivatives market?

Yes 9
No 21
Total 30

Here, we can see that, people are not aware about the investments in the
derivatives market, rather they hardly know about the derivatives market.
Q. According to a survey, Indian citizens are not interested to
invest in the share market; the reason is lack of awareness and
knowledge.

Disagree 3
Partially agree 16
Neutral 11
Total 30

Here, more than half of the population is agreed that there is lack of awareness
and knowledge about these investments, while around 37% of population has no
idea about the reasons behind this trend, and very less people i.e. only 10% of
population is not agreed with the statement.
Q. For financial planning, long term investments in stock
market (Mutual funds, IPOs, Derivatives) will be helpful.

Agree 18
Partially agree 10
Disagree 2
Total 30

In this case, more than half of the population is agreed on the statement given,
33.3% of the population wants to go with the other options also, only the tiny
part of the population disagreed with the statement.
Q. Now a days, SEBI is conducting the awareness programme
about stock market investments. What is your opinion about
it?

Here, according to the people, (63%) are thinking that, it will be helpful for the
people to understand the stock market.
(13.3%) people thinking that it will not succeed to invite people for stock
market investments,
(26.7%) people thinking that it will change mind-set of the people. And
(3.3%) people said that they don’t know what will be the result.

Note: - Here, some people have marked more than one option.
FINDINGS
 Findings

 With the help of the survey above, we get to know that the people or the
investors are not likely to invest in the share market.

 Most of the people are not interested to open the D-MAT account.

 For the options of the investment, there is a lack of awareness in the

investors.

 Investors tend to follow the traditional options for the investment.(Fixed

deposits)

 Investors understand that long term financial planning for share market
options will be useful but they are not ready for the investment till today.

 According to the responses, it seems that, investors think that share

market investments are high risky and there is no guarantee of the funds
invested, for that proper guiding to the people is necessary.

 Most of the population is not aware about the derivatives market.

SUGGESTION
 Suggestions

o Though the share-market is in the existence from a very long time, still
today, people are not aware about the many investment options in the
share-market.

o The awareness about the various attractive investment options should be

increased.

o For increase in the awareness the proper guidance from an appropriate

person is necessary.

o When investors take interest to know about the share-market, selection

for the investment will be easier.

o Investors should divert their traditional trend of the investment.

o Today, financial services providing companies taking actions regarding

creating awareness about the share market.
CONCLUSION
 Conclusion

In today’s world, people are thinking about various options to invest their
money for great attractive returns in the future. Most of these investment
options are related to share market, so people think that it is risky to invest in
the share market, also they are not ready to understand the exact working of the
share market. For the long time financial planning, share market is the good, no,
the best option, once people understand the process.

Today, people are following the traditional methods for the investments, e.g.
fixed deposits, savings in banks or post where they could get 7 % or around
interest on their investment where in the share market, the returns are more if
there is a proper guidance provided to the investors.

For this purpose, these days, SEBI along with financial services providing
companies and financial brokers are using various techniques related to creation
of awareness about share market investments, e.g. appointment of a relationship
manager for the investor, arrangement of seminars or webinars, awareness with
the help of advertisements etc.

So, according to me, these programmes will be helpful for the people to invest
in more attractive investment options and will create a financial awareness
among the people.
 Bibliography & Webliography

 NISM series-Derivatives market

 What is Karvy?

o https://www.investopedia.com/terms/d/derivative.asp

o https://www.KarvyOnline.in/

o https://www.bseindia.com/markets/Derivatives/DeriRepo
rts/introduction.aspx