A PROJECT SYNOPSIS

ON
DERIVATIVES
AT
INDIABULLS SECURITIES LTD
Submitted by:
J. ABHILASH
ROLL NO: 140720672068

Project synopsis submitted in partial fulfillment for the award of

the Degree of

MASTER’S DEGREE IN BUSINESS MANAGEMENT

DEPARTMENT OF BUSINESS MANAGEMENT

DAVID MEMORIAL INSTITUTE OF MANAGEMENT
(AFFILIATED TO OSMANIA UNIVERSITY)
Lalapet Road, Tarnaka, Hyderabad, Telangana.
BATCH (2020-22)

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 ABSTRACT
The purpose of this poster is to present the concept and proof of several rules of derivative
using terminology and tools in abstract algebra. Four main tasks are fulfilled: prove that the
differential operator D is a linear transformation, the product rule, and the degree of the
derivative is one less than the degree of the original polynomial, and some corollaries and
propositions. Some of the problems can be solved by using the limit definition introduced in
calculus courses. The motivation for proof is presented in a format of showing the facts about
polynomials and their derivatives using nothing but algebraic concepts and proof technique.

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2. INTRODUCTION
Derivative is a financial security with a value that is reliant upon or derived from, an
underlying asset or group of assets—a benchmark. The derivative itself is a contract between
two or more parties, and the derivative derives its pricefrom fluctuations in the underlying
asset. Derivatives are secondary securities whose value is solely based (derived) on the value
of the primary security that they are linked to–called the underlying.While a derivative's
value is based on an asset, ownership of a derivative doesn't mean ownership of the asset.
Futures contracts, forward contracts, options, swaps, and warrants are commonly used
derivatives.
Definition: A derivative is a contract between two parties which derives its value/price from
an underlying asset. The most common types of derivatives are futures, options, forwards and
swaps.
Description: It is a financial instrument which derives its value/price from the underlying
assets. Originally, underlying corpus is first created which can consist of one security or a
combination of different securities. The value of the underlying asset is bound to change as
the value of the underlying assets keep changing continuously.
The emergence of the market for derivative products, most notably forwards, futures and
options, can be traced back to the willingness of risk-averse economic agents to guard
themselves against uncertainties arising out of fluctuations in asset prices. By their very
nature, the financial markets are marked by a very high degree of volatility. Through the use
of derivative products, it is possible to partially or fully transfer price risks by locking-in
asset Prices. As instruments of risk management, these generally do not influence the
Fluctuations in the underlying asset prices. However, by locking-in asset prices, Derivative
products minimize the impact of fluctuations in asset prices on the Profitability and cash flow
situation of risk-averse investors.

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3. NEED AND IMPORTANCE THE STUDY
In recent times the Derivative markets have gained importance in terms of their vital role in
the economy. The increasing investments in derivatives (domestic as well as overseas) have
attracted my interest in this area. Through the use of derivative products, it is possible to
partially or fully transfer price risks by locking-in asset prices. As the volume of trading is
tremendously increasing in derivatives market, this analysis will be of immense help to the
investors.

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4. LITERATURE REVIEW
ARTICLE 1
TITLE: A Study on Financial derivatives (futures & options) with reference to ICICI bank.
AUTHOR: Dr.T. Sreelatha
JOURNALS:  International Journal of Emerging Technologies and Innovative Research,
July-2018.
ABSTRACT:
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. In recent times the
Derivative markets have gained importance in terms of their vital role in the economy. The
increasing investments in stocks (domestic as well as overseas) have attracted my interest in
this area. Numerous studies on the effects of futures and options listing on the underlying
cash market volatility have been done in the developed markets. 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 cash market the
profit/loss of the investor depends on the market price of the underlying asset. The investor
may incur huge profit or he may incur huge loss. But in derivatives segment the investor
enjoys huge profits with limited downside. Derivatives are mostly used for hedging purpose.
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. In a nutshell the
study throws a light on the derivatives market.
ARTICLE 2

TITLE:A Study on Financial Derivatives (Futures & Options) and Development of

Financial Derivatives Market in India.

AUTHOR: S. T. P. Raghavan.

JOURNAL:  Journal of Advances and Scholarly Researches in Allied Education,

Volume:15/ Issue:7, Sep 2018.

ABSTRACT:
The growth of the equity derivative business has been an unprecedented one. The retail and
institutional investors occupied a key role in development of derivatives trading in India. It is
been known that most of the contributors in equity derivatives are Retail investors (which
includes small brokers trading for themselves) have contributed 51.04% higher when

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comparing with institutional investment. Higher portion of funds where poured by retail
investors.
ARTICLE 3

TITLE: The Dodd-Frank Act and OTC Derivatives: The Impact of Mandatory Central Clearing on
the Global OTC Derivatives Market.

AUTHOR: Paul M. McBride.

JOURNAL: The International Lawyer vol.44, No. 4(WINTER 2010).

ABSTRACT:
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act represents a
turning point in the regulation of the OTC derivatives markets. By subjecting OTC derivatives and
the global markets in which they are traded to a variety of new requirements, the Act represents
the first major attempt to regulate one of the most important components of the international
financial system. The rules that regulatory agencies must implement in order to effectuate the
intent of the Act, however, will inevitably have consequences on the market's future development
and utility that reach far beyond the United States. This article considers how the implementation
of just one aspect of the Dodd-Frank Act, mandatory central clearing, may impact commercial
end-users who routinely manage risk in the OTC derivatives market. Ultimately, through an
analysis of OTC derivatives, risk management, and central clearing, this article warns that the
potential negative unintended consequences associated with mandatory central clearing are likely
to outweigh the possible benefits.

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5. OBJECTIVES OF THE STUDY
Following are the objectives of the study: -
 To study various trends in derivatives market.
 To understand the concept of the Financial Derivatives such as Futures and Options.
 To analyze the operations of futures and options.
 To study about risk management with the help of derivatives.

 To study the different ways of buying and selling of Options.

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6. COMPANY PROFILE

Indiabulls is India’s leading Financial and Real Estate Company with a widepresence
throughout India. They ensure convenience and reliability in all their products and services.
Indiabulls has over 640 branches all over India. The customers of Indiabulls are more than
4,50,000 which covers from a wide range of financial services and products from securities,
derivatives trading, depositary services, research & advisory services, consumer secured &
unsecured credit, loan against shares and mortgage & housing finance. The company
employs around 4000 Relationship managers who help the clients to satisfy their customized
financial
goals.IndiabullsenteredtheRealEstatebusinessintheyear2005withitsgroupofcompanies. Large
scale projects worth several hundred million dollars are evaluated bythem.

Indiabulls Financial Services Ltd is listed on the National Stock Exchange (NSE), Bombay
Stock Exchange (BSE) and Luxembourg Stock Exchange. The market capitalization of
Indiabulls is around USD 2500 million (29thDecember, 2006). Consolidated net worth of the
groupisaroundUSD700million.IndiabullsanditsgroupcompanieshaveattractedUSD500 million
of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large
shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity
Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and FarallonCapital.

In middle of 2099, when e-commerce was just about starting in India, Sameer Gehlaut and
his close IIT Delhi friend Rajiv Rattan got together and bought a defunct securities
companywith a NSE membership and started offering brokerage services. A Few months
later, their friend Saurabh Mittal also joined them. By December 2099, the company
embarked on its journeyto build one of the first online platforms in India for offering internet
brokerage services. In January 2000, the 3 founders incorporated Indiabulls Financial
Services and made it as the flagshipcompany.

In mid-2000, Indiabulls Financial Services received venture capital funding from Mr. L.N.
Mittal & Mr. Harish Fabiana. In late 2000, Indiabulls Securities, a subsidiary of Indiabulls
Financial Services started offering online brokerage services and simultaneously opened
physical offices across India. By 2003, Indiabulls securities had established a strong pan
India presence and client base through its offices and on the internet.

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INDUSTRY PROFILE
1. Evolution
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years
ago. The earliest records of security dealings in India are meager and obscure. The East India
Company was the dominant institution in those days and business in its loan securities used
to be transacted towards the close of the eighteenth century.
By 1930's business on corporate stocks and shares in Bank and Cotton presses took place in
Bombay. Though the trading list was broader in 1939, there were only half a dozen brokers
recognized by banks and merchants during 1940 and 1950.
The 1950's witnessed a rapid development of commercial enterprise and brokerage business
attracted many men into the field and by 1960 the number of brokers increased into 60.
In1960-61theAmericanCivilWarbrokeoutand cottonsupplyfromUnitedStatesofEurope
wasstopped;thus,the'ShareMania'in Indiabegun.Thenumberofbrokersincreasedtoabout
200to250.However,attheendoftheAmericanCivilWar,in1965,adisastrousslumpbegan (for
example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87).
AttheendoftheAmericanCivilWar,thebrokerswhothrivedoutofCivilWarin1974,found a place
in a street (now appropriately called as Dalal Street) where they would conveniently
assemble and transact business. In 1987, they formally established in Bombay, the "Native
ShareandStockBrokers'Association"(whichisalternativelyknownas"TheStockExchange "). In
1995, the Stock Exchange acquired a premise in the same street and it was inaugurated in
1999. Thus, the Stock Exchange at Bombay wasconsolidated.
2. Other leading cities in stock marketoperations
Ahmadabad gained importance next to Bombay with respect to cotton textile industry. After
1980, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were
floated, the need for a Stock Exchange at Ahmadabad was realized and in 1994 the brokers
formed "The Ahmadabad Share and Stock Brokers' Association".
What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to
Calcutta.Also,teaandcoalindustriesweretheothermajorindustrialgroupsinCalcutta.After the
Share Mania in 1961-65, in the 1970's there was a sharp boom in jute shares, which was
followed by a boom in tea shares in the 1980's and 1990's; and a coal boom between 2004and
2014. On June 2014, some leading brokers formed "The Calcutta Stock Exchange
Association".

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7. RESEARCH METHODOLOGY
The study is both descriptive and analytical in nature. It is a blend of primary data and
secondary data. The primary data has been collected personally by approaching the online
share traders who are engaged in derivatives (futures & options). The data are collected with
a carefully prepared questionnaire. The secondary data has been collected from the books,
journals and websites which deal with derivatives (futures & options).

SOURCES OF DATA
Primary Sources: The primary data is collected directly through structured unbiased
questionnaire and personal interviews.
Secondary method: The secondary data is a data collected from the different sources like
Websites, Journals, and Text books.
TECHINIQUES OF DATA ANALYSIS
 Profit & loss position of futures and options are analyzed.
 Call options, put options are used to evaluate the performance of derivatives.
 Market price, trading date and profit per share will be identified.

SCOPE OF THE STUDY

The study is limited to “Derivatives” with special reference to futures and options in the
Indian context and the study of derivatives futures and options carried out for the period of
45 days. One-month data 1st November to 1st December 2021 is taken for analysis. The
study has only made humble attempt at evaluating Derivatives markets only in Indian
context.

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8. LIMITATIONS
The following are the limitations of this study.
 The subject of derivatives is vast it requires extensive study and research to
understand the debt of various instrument operating in the market only a recent phenome. But
the various international examples have also been added to make the study more comfortable.
 There are various other factors also which define the risk and return preferences of an
investor however the study was only contained towards the risk maximization and profit
maximization objective of an investor
 The derivative market is dynamic one premium, contract rates strike price fluctuate
on demand & supply basis. Therefore, data related to last few trading months was only
consider and interpreted
 The scrip chosen for analysis is BHEL&ONGC and the contract taken is 01-APR-
2021 ending one-month contract.
 The data collected is completely restricted to the BHEL&ONGC 01st APR 2017 to
30th APR 2021

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BIBLIOGRAPHY

TEXT BOOKS
 Financial market and services – By Gordan & Natarajan , Year 2009.
 Financial management – By Prasanna Chandra, Year 2011.
 Risk management – By Dr.G.Kotreshwar, Year 2009.

JOURNALS
 International Journal of EmergingTechnologiesand Innovative Research, July-2018.
 Journal of Advances and Scholarly Researches in Allied Education, Volume:15/
Issue:7, Sep 2018.
 The International Lawyer vol.44, No. 4(WINTER 2010).
 journal of insurance issues vol.19. No.2(FALL 1996), pp.149-162(14 pages).
 The Journal of Financial and Quantitative Analysis, Vol. 27, No. 1 (Mar., 1992), pp. 97-
107 (11 pages),
 Annual Review of Financial Economics, Vol. 1 (2009), pp. 319-339 (21 pages)
 Journal of ASFMRA, (2011), pp. 60-65 (6 pages)
 The Journal of Financial and Quantitative Analysis, Vol. 38, No. 3 (Sep., 2003), pp. 555-
574 (20 pages)
 Financial Analysts Journal, Vol. 63, No. 4 (Jul. - Aug., 2007), pp. 72-78 (7 pages)
 Economic and Political Weekly, Vol. 42, No. 13, Money, Banking and Finance (Mar. 31 -
Apr. 6, 2007.

WEBSITES
 www.derivativesindia.com
 www.nseindia.com
 www.bseindia.com
 www.sebi.gov.in

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