Project on comparative analysis between equity&derivatives at selected scrips at Angel Broking pune.

Under the Guidance of: Prof .V.M.Tidke

Submitted By Satyajit Janrao Helode MBA-I DIV-A

Submitted to: Sanjivani Rural Education Society Of MBA, Kopargaon,ANagar pune university.

2011-2012.

DECLARATION

I hereby declare that this project report title A STUDY ON COMPARITIVE ANALYSIS BETWEEN EQUITY AND DERIVATIVES ON SELECTED SCRIPS with reference to ANGEL BROKING LTD. under guidance of Prof. V.M.TIDKE submitted by me to the faculty of S.R.E.S

KOPERGAON, Pune University, , is a bonafide work undertaken by me and it is not submitted to any other University or Institution for the award of any degree or diploma certificate or published any time before.

SATYAJIT J. HELODE

CHAPTER 1 Theoretical Framework

INTRODUCTION Equity shares: Equity shares are the equally divided capital of a company. Total capital contribution for a company comprises of investments through equity share holdings by small and big investors. The investors who have a stake in a company are referred to as shareholders. The equity shares are therefore documents issued by a company and floated in the open market for purchase by a shareholder which entitles them to be one of the owners of the company. Shares or stock options in a company entitle the buyer the ownership rights in a company. As a unit of ownership the stock/share holder gets a voting right in the company. The total of these shares is what contributes to the capital of the company. The profits of equity shareholders depend on the profit making capability of the company that they have invested in. In a situation where the company has made huge profits the benefits are passed over to the equity share holders by way of dividends. The equity shareholders also enjoy voting rights in the company. Derivatives: In the early eighties, the word derivatives was used mainly in chemistry (as in derivative of carbon) or mathematics (as in the second derivative of a function). Today, it is most commonly used in the contest of financial markets. This is reflection of the phenomenal speed with which these new financial instruments have evolved since the mid-80s in what can be called the derivatives revolution The emergence of the marker for derivative products, most notably forwards, futures and options can be traced back to the willingness of risk adverse 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 highly degree of volatility. Through the use of derivatives products it is possible to partially or fully transfer price risks by locking in 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 adverse investors. A derivative is a product whose value is derived for the value of the one or more basic variables called in a contractual manner. Types of derivatives: The most commonly used derivatives contacts are forwards, futures and options

Forwards: A forwards contract is a customized contract between two entities, where settlement takes please on a specific date in the future at todays pre-agreed price Futures: 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, Future contract are special types of contract are special or wards contracts in the sense that the former are standardized exchange-traded contracts. Options: Options are of two type- 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 given 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

TOPIC RELATED CONCEPTS

. FUTURES TRADING: Futures trading was the first form of Derivative trading and remains the most important in terms of size. The role of speculative and related issues. At the outlet it is necessary to understand clearly what futures trading means. DEFINITION OF FUTURES TRADING: A forward contract is an agreement between two parties to buy or sell as the case may be a commodity or financial instrument or currency at a pre determined future date at a price agreed when the contract is entered in to the key element are that The date on which the commodity will be bought sold is determined in advance. The price to be paid or received at that future date is determined at present.

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. Contract cycle: The period over which a 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 specified 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 less than one contract. For instance, the contract size on NSE futures market is 200 Nifty. Basis: In the context of financial futures, basis can be defined as the futures price minus the spot Price. There 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 of 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 investors gain or loss depending upon the futures closing price. This is called markingtomarket. 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.

OPTIONS:

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 requirements) to enter into a futures contract, the purchase of an option requires an upfront payment.

OPTIONS TERMINOLOGY: Index options: These options have the index as the underlying. Some options are European while others are American. Like index, futures contracts, index options contracts are also cash settled. Stock options: Stock options are options on 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. Buyer of an option: The buyer of an option is the one who by paying the option premium buys the right but not the obligation to exercise his option on the seller/writer. Writer of an option: The writer of a call/put option is the one who receives the option premium and is thereby obliged to sell/buy the asset if the buyer exercises on him. There are two basic types of options, call options and put options.

Call option: A call option gives the holder the right but not the obligation to buy an asset by a certain date for a certain price. Put option: A put option gives the holder the right but not the obligation to sell an asset by a certain date for a certain price. Option price: Option price is the price, which the option buyer pays to the option seller. It is also referred to as the option premium. Expiration date: The date specified in the options contract is known as the expiration date, the exercise date, the strike date or the maturity. Strike price: The price specified in the options contract is known as the strike price or the exercise price. American options: American options are options that can be exercised at any time up to the expiration date. Most exchange-traded options are American. European options: 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.

In-the-money option: An in-the-money (ITM) option is an option that would lead to a positive cash flow to the holder if it were exercised immediately. A call option on the index is said to be in the money when the current index stands at a level higher than the strike price (i.e. spot price _ strike price). If the index is much higher than the strike price, the call is said to be deep ITM. In the case of a put, the put is ITM if the index is below the strike price.

At-the-money option: An at-the-money (ATM) option is an option that would lead to zero cash flow if it were exercised immediately. An option on the index is at-the-money when the current index equals the strike price (i.e. spot price = strike price).

Out-of-the-money option: An out-of-the-money (OTM) option is an option that would lead to a negative cash flow it was exercised immediately. A call option on the index is out-ofthe-money when the current index stands at a level, which is less than the strike price (i.e. spot price _ strike price). If the index is much lower than the strike price, the call is said to be deep OTM. In the case of a put, the put is OTM if the index is above the strike price.

REVIEW OF LITERATURE

Equity definition

In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If valuations placed on assets do not exceed liabilities, negative equity exists. In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock.

Ownership interest in a corporation in the form of common stock or preferred stock. It also refers to total assets minus total liabilities, in which case it is also referred to as shareholder's equity or net worth or book value. In real estate, it is the difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house). In the context of a futures trading account, it is the value of the securities in the account, assuming that the account is liquidated at the going price. In the context of a brokerage account, it is the net value of the account, i.e. the value of securities in the account less any margin requirement According to Financial Dictionary Equity means: Stock

or

any

other

security

representing

an

ownership

interest.

On the balance sheet, the amount of the funds contributed by the owners (the stockholders) plus the retained earnings (or losses). Also referred to as "shareholder's equity". In the context of margin trading, the value of securities in a margin account minus what has been borrowed from the brokerage. In the context of real estate, the difference between the current market value of the property and the amount the owner still owes on the mortgage. Thus, it is the amount, if any, the owner would receive after selling a property and paying off the mortgage.

DERIVATIVE: A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.

Investopedia explains Derivative: Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Derivatives are contracts and can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a particular region.

Derivatives are generally used as an instrument to hedge risk, but can also be used for speculative purposes. For example, a European investor purchasing shares of an American company off of an American exchange (using U.S. dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into Euros.

Derivative Definition in dictionary: A financial instrument whose characteristics and value depend upon the characteristics and value of an underling asset, typically a commodity, bond, equity or currency. Examples of derivatives include futures and options. Advanced investors sometimes purchase or sell derivatives to manage the risk associated with the underlying security, to protect against fluctuations in value, or to profit from periods of inactivity or decline. These techniques can be quite complicated and quite risky.

The term "Derivative" indicates that it has no independent value, i.e. its value is entirely "derived" from the value of the underlying asset. The underlying asset can be securities, commodities, bullion, currency, live stock or anything else. In other words,

Derivative means a forward, future, option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities. With Securities Laws (Second Amendment) Act, 1999, Derivatives has been included in the definition of Securities. The term Derivative has been defined in Securities Contracts (Regulations) Act , as:-A Derivative includes: -a. a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security; b. a contract which derives its value from the prices, or index of prices, of underlying securities;

Futures Contract: Futures Contract means a legally binding agreement to buy or sell the underlying security on a future date. Future contracts are the organized/standardized contracts in terms of quantity, quality (in case of commodities), delivery time and place for settlement on any date in future. The contract expires on a pre-specified date which is called the expiry date of the contract. On expiry, futures can be settled by delivery of the underlying asset or cash. Cash settlement enables the settlement of obligations arising out of the future/option contract in cash. International Research Journal of Finance and Economics: A futures contract is an agreement for buying or selling a commodity for a predetermined delivery price at a specific future time. Futures are standardized contracts that are traded on organized futures exchanges that ensure performance of the contracts and thus remove the default risk. Futures contracts are not "direct" securities like stocks, bonds, rights or warrants. They are still securities, however, though they are a type of derivative contract. The party agreeing to buy the underlying asset in the future assumes a long position, and the party agreeing to sell the asset in the future assumes a short position. Investopedia Says: The terms "futures contract" and "futures" refer to essentially the same thing. For example, you might hear somebody say they bought "oil futures", which means the same thing as "oil futures contract". If you want to get really specific, you could say that a futures contract refers only to the specific characteristics of the underlying asset, while "futures" is more general and can also refer to the overall market as in: "He's a futures trader."

Option contract: Options Contract is a type of Derivatives Contract which gives the buyer/holder of the contract the right (but not the obligation) to buy/sell the underlying asset at a predetermined price within or at end of a specified period. The buyer / holder of the option purchase the right from the seller/writer for a consideration which is called the premium. The seller/writer of an option is obligated to settle the option as per the terms of the contract when the buyer/holder exercises his right. The underlying asset could include securities, an index of prices of securities etc. Under Securities Contracts (Regulations) Act, 1956 options on securities has been defined as "option in securities" means a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put, a call or a put and call in securities; An Option to buy is called Call option and option to sell is called Put option. Further, if an option that is exercisable on or before the expiry date is called American option and one that is exercisable only on expiry date, is called European option. The price at which the option is to be exercised is called Strike price or Exercise price. Therefore, in the case of American options the buyer has the right to exercise the option at anytime on or before the expiry date. This request for exercise is submitted to the Exchange, which randomly assigns the exercise request to the sellers of the options, who are obligated to settle the terms of the contract within a specified time frame. International Research Journal of Finance and Economics: Options are also financial instruments used for hedging and speculation. The commodity option holder has the right, but not the obligation, to buy (or sell) a specific quantity of a commodity at a specified price on or before a specified date. Option contracts involve two parties the seller of the option writes the option in favour of the buyer (holder) who pays a certain premium to the seller as a price for the option. There are two types of commodity options: a call option gives the holder a right to buy a commodity at an agreed price, while a put option gives the holder a right to sell a commodity at an agreed price on or before a specified date (called expiry date). Investopedia explains Option Options are extremely versatile securities that can be used in many different ways. Traders use options to speculate, which are a relatively risky practice, while hedgers use options to reduce the risk of holding an asset. In terms of speculation, option buyers and

writers have conflicting views regarding the outlook on the performance of an underlying security. For example, because the option writer will need to provide the underlying shares in the event that the stock's market price will exceed the strike, an option writer that sells a call option believes that the underlying stock's price will drop relative to the option's strike price during the life of the option, as that is how he or she will reap maximum profit. This is exactly the opposite outlook of the option buyer. The buyer believes that the underlying stock will rise, because if this happens, the buyer will be able to acquire the stock for a lower price and then sell it for a profit.

CHAPTER II THE PRESENT STUDY/ METHODOLOGY

NEED FOR THE STUDY:

Through the use of futures & options, it is possible to partially or fully transfer price risks by locking in asset prices. As instruments for risk management, these generally do not influence the fluctuations in the underlying asset prices. In recent year, the market for financial derivatives has grown tremendously both in terms of variety of instruments available, their complexity and also turnover. The following factors have been driving the growth of financial derivatives: Derivatives are to be used as a tool to transfer risk by taking the opposite position in the underlying asset. An extraordinary keen understanding and appreciation of the dynamics of at religious devotion to the elimination increased volatility in asset price in financial market. Financial derivatives have changed the face of finance by creating new ways to understand, measure, and manage risks. Ultimately, financial derivatives should be considered part of any firm's risk-management strategy to ensure that valueenhancing investment opportunities are pursued. The freedom to manage risk effectively must not be taken away Equity shares are the equally divided capital of a company. Total capital contribution for a company comprises of investments through equity share holdings by small and big investors. The investors who have a stake in a company are referred to as shareholders. The equity shares are therefore documents issued by a company and floated in the open market for purchase by a shareholder which entitles them to be one of the owners of the company.

OBJECTIVES OF THE STUDY:

The project is done mainly to study the activities and prospects of the stock market and to gain knowledge about how the stock broking is done. The project is done on the activities of one of the member of NATIONAL STOCK EXCHANGE i.e., Angel broking ltd

To study the various trends in derivative market To study the role of derivatives in Indian financial market. To study in detail the role of futures and options. To have awareness about derivatives trading by comparing derivatives with equity markets.

SCOPE OF THE STUDY: The scope of the study is limited to four scripts. In a day there will be many contracts traded in the market but only one contract which is traded more is taken in to consideration for the study. Only the closing prices of the equity, futures, and options are taken for the study.

RESEARCH DESIGN:

The research deign for this project work is descriptive the sample taken are SBIN,TATA MOTOR, INFOSYSTECH, & DLF convince sampling for this descriptive project, the sources of date are Primary Data:

Primary data is collected from the office staff and employees in the company through a structured schedules and personal interview. It includes and personal interview. It includes first hand information from within the company. The schedule is especially designed to find out various commissions and other benefits packages to motivate and retain the employees within the company.

Secondary Data:

Secondary sources include the information from the management of the company, annual reports of the company, various books, journals and the internet websites.

1 Data collected from selected outlets. 2 Information collected from periodicals and journals.

PRESENTATION OF THE STUDY

Chapter -1: o This chapter named theoretical frame work consists of Main subject, Topic related concepts and Review of literature. Chapter-2: o This chapter named Methodology consists of need and significance of study, Objectives of study, Scope of study, Research design, Presentation of the study and Limitations of the study. Chapter-3: o This chapter titled Organization Profile consists of Industrial profile, Organization profile and Topic profile in the organization. Chapter-4: o This chapter named Analysis of Study; here the competitors are compared based on the various parameters such as market potential, volume of trading, potential customers and strengths & weakness of the organization. Chapter-5: This chapter consists of Findings, Suggestions and Conclusion

LIMITATIONS OF THE STUDY:

There were practically many difficulties felt while collecting the primary data.. The study is only based on 4 scrips with the available information The comparative analysis is done on the basis of the Closing Prices, Number Of Contracts, and Turnovers of individual script in Equity, Futures & Options From 1st MAY, 2011 to 31st MAY, 2011 The data is collected only from NSE in the selected period of one month. This project was restricted for three months; hence exhaustive data is not available upon which conclusions can be relied.

CHAPTER III ORGANISATION PROFILE

INDUSTRY PROFILE

INDUSTRY PROFILE

STOCK MARKET: A stock market is a market for the trading of company stock, and Derivatives of same both those securities listed on a stock exchange as well as those only traded privately. Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the orders. Actual trades are based on an auction market paradigm where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. When the bid and offer prices match, a sale takes place on a first come first serve basis if there are multiple bidders or offers at a given price. The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real).

SEGMENT OF SECURITIES MARKET:

The securities market comprises of two broad segments Primary market Secondary market Primary market: Primary markets create a flow of new securities to the securities market. This is achieved through public offering of debt or equity or a composite structure of debt and equity to the investors. Here the issuer of securities raises the funds to meet its fund requirements. Primary market offering could either be in the form of public offerings or private placements. The issuers here could include corporate, Government municipal corporations and in some cases existing shareholders and institutional investors offering their securities for sale. The product offering by intermediaries in the primary market include management of IPOs of issuers, mobilization of resources from retail and institutional investors, private placement of issues, debt syndications etc. Intermediaries in the primary market include merchant bankers, registrars and broker

SECONDARY MARKET:

Secondary markets provide a medium of exchange and enable investors to trade in the securities. An efficient securities market distinguishes financial investments from various forms of other illiquid investments. Stock exchanges provide the platform and the mechanism for effecting transactions between different market participants. Secondary market comprises of trading in equities, bonds and derivatives. The depth of the market is determined by number of factors such as liquidity of the instruments traded, number of market participants, types of instruments traded, settlement practices etc. There are 23 stock exchanges in the country, which offers screen based trading system.

HISTORY OF STOCK EXCHANGE The only stock exchanges operating in the 19th century were those of Bombay set up in 1875 and Ahmadabad set up in 1894. These were organized as voluntary non-profit making organization of brokers to regulate and protect their interests. Before the control on securities trading became a central subject under the constitution in 1950, it was a state subject and the Bombay securities contract (CONTROL) Act of 1952 used to regulate trading in securities. Under this, Act, the Bombay stock exchanges in 1927 and Ahmadabad in 1937.During the war boom, a number of stock exchanges were organized in Bombay, Ahmadabad and other centers, but they were not recognized. Soon after it became a central subject, central legislation was proposed and a committee headed by A.D.Gorwala went into the bill for securities regulation. On the basis of committees recommendations and public discussions the securities contracts (regulations) Act became law in 1956. DEFINITION OF STOCK EXCHANGE: Stock exchange means anybody or individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. ORIGIN OF STOCK MARKETS IN INDIA: The origin of stock market in India goes back to the end of the 18th century when long term negotiable securities were first issued. However, for all practical purpose, the real

beginning occurred in the, middle of the 19th century after the enactment of the companys act in 1850, which introduced the features of limited liability and generated investor interest in corporate securities. An important early event in the development of the stock market in India was the formation of the Native Share and STOCK BROKERS ASSOCIATION at BOMBAY in 1875. This was followed by the formation of as associations/exchanges in Ahmadabad (1894), Calcutta (1908) and Madras (1937). With over 21 million shareholders, India has a third largest investor base in the world after USA and Japan. Over 9000 companies are listed on stock exchange, which are serviced by approximately 7500 stock brokers. The Indian capital market is significant in terms of the degree of development, volume of trading and its tremendous growth. BYLAWS: Besides the above act, the securities contract (regulations) rules were also made in 1975 to regulate certain matters of trading on the stock exchanges. These are also by laws of exchanges, which are concerned with the following subjects. Opening/Closing of the stock exchanges, timing of trading, regulation of blank transfer, regulation of Badly or carryover business, control of settlement, and other activities of stock exchange, fixations of margins, fixations of market prices or making prices, regulation of taravani business (jobbing), regulation of brokers trading, brokerage charges, trading goods on the exchanges, arbitration and settlement of disputes, settlement and clearing of the trading etc. REGULATIONS OF STOCK EXCHANGES: The securities contract (regulations) is the basis for operations of the stock exchange in India. No exchange can operate legally without the government permission or recognition. Stock exchanges are given monopoly in certain areas under section 19 of the above Act to ensure that the control and regulation are facilitated. Regulation can be granted to a stock exchange provided certain conditions are satisfied and the necessary information is supplied to the government. Recognition can also be withdrawn, if necessary.
It is an association of member brokers for the purpose of self-regulation and protecting the interests of its members. It can operate only if it is recognized by the government. Under the

securities contract (regulation) Act, 1956. The recognition is granted under section 3 of the Act by the central government, ministry of finance.

SECURITIES AND EXCHAGE BOARD OF INDIA (SEBI): SEBI was set up as an autonomous regulatory authority by the Government of India in 1988 to perform the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto. It is empowered by two acts namely the SEBI act, 1992 and the securities contract (regulation) Act 1956 to the function of protecting regulating the capital markets. investors rights and

BOMBAY STOCK EXCHANGE INTRODUCTION: Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, now spanning three centuries in its 133 years of existence. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875. BSE is the

first stock exchange in the country which obtained permanent recognition (in 1956) from the Government of India under the Securities Contracts (Regulation) Act 1956. BSE' pivotal and pre-eminent role in the development of the Indian capital market is widely recognized. It migrated from the open outcry system to an online screen-based order driven trading system in 1995.

Earlier an Association of Persons (AOP), BSE is now a corporative and demutualised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). With demutualization, BSE has two of world's best exchanges, Deutsche Bores and Singapore Exchange, as its strategic partners. Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient access to resources. There is perhaps no major corporate in India which has not sourced BSE' services in raising resources from the capital market. Today, BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in transaction numbers. The market capitalization as on December 31, 2007 stood at USD 1.79 trillion. An investor can choose from more than 4,700 listed companies, which for easy reference, are classified into A, B, S, T and Z The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic stature, and is tracked worldwide. It is an index of 30 stocks representing 12 major sectors. The SENSEX is constructed on a 'free-float' methodology, and is sensitive to market sentiments and market realities. Apart from the SENSEX, BSE offers 21 indices, including 12 sectoral indices. BSE has entered into an index cooperation agreement with Deutsche Bores. This agreement has made SENSEX and other BSE indices available to investors in Europe and America. Moreover, Barclays Global Investors (BGI), the global leader in ETF through its iShares brand, has created the 'iShares BSE SENSEX India Tracker' which tracks the SENSEX. The ETF enables investors in Hong Kong to take an exposure to the Indian equity market. BSE has tied up with U.S. Futures Exchange (USFE) for U.S. dollar-denominated futures trading of SENSEX in the U.S. The tie-up enables eligible U.S. investors to directly participate in India's equity markets for the first time, without requiring American Depository Receipt (ADR) authorization. The first Exchange Traded Fund (ETF) on SENSEX, called "SPICE" is listed on BSE. It brings to the investors a trading tool that can be easily used for the purposes of investment, trading, hedging and arbitrage. SPICE allows small investors to take a long-term view of the market. BSE provides an efficient and transparent market for trading in equity, debt instruments and derivatives. It has a nation-wide reach with a presence in more than 450 cities and towns of

India. BSE has always been at par with the international standards. The systems and processes are designed to safeguard market integrity and enhance transparency in operations. BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certifications. It is also the first exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE On-line Trading System (BOLT). BSE continues to innovate. In recent times, it has become the first national level stock exchange to launch its website in Gujarati and Hindi to reach out to a larger number of investors. It has successfully launched a reporting platform for corporate bonds in India christened the ICDM or Indian Corporate Debt Market and a unique ticker-cum-screen aptly named 'BSE Broadcast' which enables information dissemination to the common man on the street. Investor Services: The Department of Investor Services redresses grievances of investors. BSE was the first exchange in the country to provide an amount of Rs.1 million towards the investor protection fund; it is an amount higher than that of any exchange in the country. BSE launched a nationwide investor awareness programmed- 'Safe Investing in the Stock Market' under which 264 programmers was held in more than 200 cities.

The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line screen based trading in securities. BOLT is currently operating in 25,000 Trader Workstations located across over 450 cities in India.

BSEWEBX.com: In February 2001, BSE introduced the world's first centralized exchange-based Internet trading system, BSEWEBX.com. This initiative enables investors anywhere in the world to trade on the BSE platform.

Surveillance: BSE' On-Line Surveillance System (BOSS) monitors on a real-time basis the price

movements, volume positions and members' positions and real-time measurement of default risk, market reconstruction and generation of cross market alerts.

BSE Training Institute: BTI imparts capital market training and certification, in collaboration with reputed management institutes and universities. It offers over 40 courses on various aspects of the capital market and financial sector. More than 20,000 people have attended the BTI programmers. Drawing from its rich past and its equally robust performance in the recent times, BSE will continue to remain an icon in the Indian capital market. BSE also has a wide range of services to empower investors and facilitate smooth transactions: This stock exchange, Mumbai, popularly known as BSE was established in 1875 as The Native share and stock brokers association, as a voluntary non -profit making association. It has an evolved over the years into its present status as the premiere stock exchange in the country. It may be noted that the stock exchange the oldest one in Asia, even older than the Tokyo Stock Exchange, which was founded in 1878. The exchange, while providing an efficient and transparent market for trading in securities, upholds the interests of the investors and ensures redressed of their grievances, whether against the companies or its own member brokers. It also strives to educate and enlighten the investors by making available necessary informative inputs and conducting investor education programmers. A governing board comprising of 9 elected directors. 2 SEBI nominees, 7 public representatives and an executive director is the apex body, which decides the policies and regulates the affairs of the exchange. The Executive director as the chief executive officer is responsible for the day to day administration of the exchange. The average daily turnover of the exchange during the year 2000-01 (April-March) was Rs 3984.19 corers and average number of daily trades 5.69 lakhs. However the average daily turn over of the exchange during the year 2001-02 has declined to Rs. 1244.10 crores and numbers the period are also trades during the period to 5.17 lakhs. The average daily turnover of the exchange during the year 2002-03 has declined and number of average daily trades during the period is also decreased.

The Ban on all deferral products like BLESS AND ALBM in the Indian capital markets by SEBI with effect from July 2, 2001, etc., have adversely impacted the liquidity and consequently there is a considerable decline in the daily turnover at the exchange. The average daily turnover of the exchange present scenario is 110363 (lakhs) and number of average daily trades 1057(lakhs).

BSE INDICES: In order to enable the market participants, analysts etc, to track the various ups and downs in the Indian market, the Exchange has introduced in 1986 an equity stock index called BSE-SENSEX that subsequently became the barometer of the moments of the share prices in the Indian Stock market. It is a Market capitalization weighted index of 30 component stocks representing a sample of large, well-established and leading companies. The base year of Sensex is 1978-79. The Sensex is widely reported in both domestic and international markets through print as well as electronic media. Sensex is calculated using a market capitalization weighted method. As per this

methodology, the level of the index reflects the total market value of all 30 component stocks from different industries related to particular base period. The total market value of a company is determined by multiplying the price of its stock by the number of shares outstanding. Statisticians call an index of a set of combined variables (such as price and number of shares) a composite Index. An Indexed number is used to represent the results of this calculation In order to make the value easier to work with and track over a time. It is much easier to graph a chart based on indexed values than one based on actual values world over majority of the wellknown indices are constructed using Market capitalization weighted method. In practice, the daily calculation of SENSEX is done by dividing the aggregate market value of the 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the Sensex. The Divisor keeps the Index comparable over a period of time and if the reference point for the entire Index maintenance adjustments. SENSEX is widely used to describe the mood in the Indian Stock markets. Base year average is charged as per the formula.

New base year average = old base year average (new market value/old market value). Www. bseindia.com

NATIONAL STOCK EXCHANGE: The NSE was incorporated in 1992 with an equity capital of Rs 25crs. The

International securities consultancy (ISC) if Hong Kong has helped in setting up NSE. ISE has prepared the detailed business plans and installation of hardware and software systems. The promotions for NSE were financial institutions, insurances companies, banks and SEBI capital market ltd, Infrastructure leasing and financial services ltd and stock holding corporation ltd. It has been set up to strengthen the move towards professionalization of the capital market as well as provide nationwide securities trading facilities to investors. NSE is not an exchange in the traditional sense where brokers own and manage the exchange. A two tier administrative set up involving a company board and a governing aboard of the exchange is envisaged. NSE is a national market for shares PSU bonds, debentures and government securities since infrastructure and trading facilities are provided

MISSION: Markets in NSE mission are setting the agenda for change in the securities 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. The standards set by NSE in terms of market practices and a technology has become industry benchmarks and is being emulated by other market participants. NSE is more than a mere market facilitator. It's that force which is guiding the industry towards new horizons and greater opportunities. Corporate Structure: NSE is one of the first de-mutilated stock exchanges in the country, where the ownership and management of the Exchange is completely divorced from the right to trade on it. Though the impetus for its establishment came from policy makers in the country, it has been set up as a public limited company, owned by the leading institutional investors in the country. From day one, NSE has adopted the form of a demutualised exchange - the ownership, management and trading is in the hands of three different sets of people. NSE is owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries and is managed by professionals, who do not directly or indirectly trade on the Exchange. This has completely eliminated any conflict of interest and helped NSE in aggressively pursuing policies and practices within a public interest framework. The NSE model however, does not preclude, but in fact accommodates involvement, support and contribution of trading members in a variety of ways. Its Board comprises of senior executives from promoter institutions, eminent professionals in the fields of law, economics, accountancy, finance, taxation, and etc, public representatives, nominees of SEBI and one full time executive of the Exchange. While the Board deals with broad policy issues, decisions relating to market operations are delegated by the Board to various committees constituted by it. Such committees include representatives from trading members, professionals, the public and the management. The dayto-day management of the Exchange is delegated to the Managing Director who is supported by a team of professional staff.

NSE-NIFTY: The NSE on April 22, 1996 launched a new equity Index. The NSE -50The new index, which replaces the existing NSE -100 indexes, is expected to serve as an appropriate Index for the new segment of futures and options. Nifty means National Index for Fifty Stocks. The NSE-50 comprises 50 companies that represent 20 broad Industry groups with an aggregate market capitalization of around Rs. 1, 70,000 crores. All companies included in the Index

have a market capitalization in excess of Rs 500 cores each and should have traded for 85% of trading days at an impact cost of less than 1.5%. The base period for the index is the close of prices on Nov 3, 1995, which makes one year of completion of operation of NSE capital market segment. The base value of the Index has been set at 1000. NSE-MIDCAP INDEX: The NSE midcap Index or the Junior Nifty comprises 50 stocks that represents 21 aboard Industry groups and will provide proper representation of the midcap segment of the Indian capital Market. All stocks in the index should have market capitalization of greater than Rs 200 cores and should have traded 85% of the trading days at an impact cost of less 2.5%. The base period for the index is Nov 4, 1996, which signifies two years for completion of operations of the capital market segment of the operations. The base value of the Index has been set at 1000. Average daily turnover of the present scenario 258212 (Lakhs) and number of averages daily trades 2160(Lakhs).

Most organizations and individuals face financial risk. Changes in stock market prices, interest rates and exchange rates can have great significance. Adverse changes may even threaten the survival of otherwise successful businesses. It is therefore not surprising that financial instruments for the management of such risk have developed. These instruments are known as financial derivatives. By providing commitments to prices or rates for future dates, or by giving protection against adverse movements, financial derivatives can be used to reduce the extent of financial risk. Conversely they also provide profit opportunities for those prepared to accept risk.

Indeed, at least to some extent, they involve the transfer of risk from those who wish to avoid it to those who are willing to accept it.

Financial derivatives are financial instruments whose prices are derived from the prices of other financial instruments. Financial derivatives include forwards, futures, options and swaps. The instruments to which they relate include stocks, bonds, interest rates and currencies. Although financial derivatives have existed for a considerable period of time, they have become a major force in financial markets only since the early 1970s. The 1970s constituted a watershed in financial history, partly because the fixed exchange rate regime (the Bretton Woods system) that had operated since the 1940s broke down, and partly because monetarism took over from Keynesianism as the orthodoxy in monetary policy. These developments established the context in which financial derivatives could develop, flourish and become a major force in world financial markets. When the Bretton Woods system collapsed in the early 1970s, a regime of fixed exchange rates gave way to a financial environment in which exchange rates were constantly changing in response to the pressures of demand and supply. The fact that currency prices moved constantly, and often substantially, in the new situation meant that businesses faced new risks. Currency derivatives developed in response to the need to manage those risks. They also provided a vehicle for those market operators whose motivation was to profit from currency price.

In other words, the new system of variable exchange rates generated a need to find techniques to reduce the risks arising, and simultaneously created opportunities for speculation. Financial derivatives developed as a vehicle for these 2 forms of economic activity.

The new-found instability was not limited to currency markets. Short-term interest rates also became prone to fluctuation. Two major factors underlay this increase in interest rate instability. First, many governments attempted to manage exchange rate fluctuations by manipulating short-term interest rates. This involved the acceptance of interest rate instability in the hope of reduced currency volatility. Second, the adoption of monetarism entailed the adoption of money supply targets. It is impossible to achieve both money supply and interest rate

objectives; one needs to be manipulated if the other is to be achieved. Before the 1970s, monetary authorities tended to maintain interest rates at constant levels and accepted the consequences in terms of money supply growth. The switch towards attempts to control the growth rate of the money supply entailed the acceptance that interest rates had to change frequently to whatever level was consistent with the desired growth rate of money supply (for example, if the money supply started to increase too rapidly, interest rates had to rise in order to reduce the demand for bank loans, such loans being a major source of money supply growth). So, from the 1970s short-term interest rates became more volatile than they had previously been. This increased instability of short-term interest rates had implications for long-term interest rates, and hence bond prices, which are largely determined by long-term interest rates. Long-term interest rates might be seen as determined by an average of current and expected future shortterm interest rates. It is thus to be expected that increased volatility of short-term interest rates would be accompanied by a raised volatility of long-term interest rates. The result is increased instability of bond prices. This in turn involves greater risk for both the issuers of, and investors in, bonds. Not only are bond prices dependent upon long-term interest rates, but so too are the prices of other long-term assets such as company shares. Stock prices may be seen as the present values of expected future dividend payments, and the discount rates used to ascertain those present values are based on long-term interest rates. So increased instability in long-term interest rates implies enhanced volatility in share prices. This share price volatility is reflected in the volatility of stock indices, which provide measures of average share price movements, particularly since long-term interest rates affect all share prices and hence constitute a source of systematic risk (systematic risk is risk that is common to all, or at least most, stocks).

So, since the early 1970s financial market instability has increased. Financial derivatives have emerged as means of managing the risks associated with that instability, and also of taking advantage of it.

Forwards, futures and swaps involve commitments to exchanges of cash flows in the future at prices or rates determined in the present. An option provides the right, but not the

obligation, to a future exchange at a price or rate determined in the present. Each instrument has its advantages and disadvantages.

Forwards can relate to commitments in the short and medium term (perhaps up to 5 years), and are relatively simple to understand and use. They tend to have the disadvantage of inflexibility of timing. Futures do not constrain the timing of the cash flows, but tend to be shortterm (less than a year) and more difficult to understand and use. Swaps can be seen as series of forward contracts. They tend to be longer term than either forwards or futures (their maturities may exceed 10 years). However, they tend to be inflexible as to the timing of the future cash flows. Also, like forwards but unlike futures, they can be difficult to cancel or reverse.

Options have the advantage that the holder can choose to ignore them. If the price or rate of the underlying instrument (stock, stock index, bond, deposit, borrowing or currency) moves so that the price or rate stipulated by the option becomes unattractive, then the holder of the option may simply choose to disregard it. This may be particularly advantageous for a hedger.

A hedger is someone with an existing risk of a price (or rate) movement who uses derivatives as a means of reducing that risk. Since forwards, futures and swaps involve commitments, they tend to preclude the possibility of benefiting from otherwise favourable price (or rate) movements. Options provide protection against adverse movements while preserving the ability to gain from beneficial price or rate movements. Speculators also enjoy a corresponding advantage in that the facility of ignoring an option avoids the realisation of potentially large losses, an outcome that cannot be avoided with the other derivatives. However, these benefits of options, relative to the other derivatives, have to be paid for in the form of an option premium. A corresponding payment is not required when using forwards, futures or swaps.

Any use of a derivative in conjunction with another financial instrument (derivative or otherwise) can be regarded as financial engineering. Financial engineering can produce risk management tools that would be otherwise unavailable. In addition, it can be used to construct investments with risk-reward profiles that could not otherwise be produced but which match the

requirements of many investors more closely than any existing investment vehicles. The potential of financial engineering using derivatives should make it clear to risk managers, bankers and those involved in investments, corporate finance and treasury that an understanding of financial derivatives is now a vital component of their professional expertise. TRADING IN DERIVATIVES: Indian securities markets have indeed waited for too long for derivatives trading to emerge. Mutual Funds, FIIs and other investors who are deprived of hedging opportunities will now have a derivatives market to bank on. First to emerge are the globally popular variety index futures. While derivatives markets flourished in the developed world Indian markets remain deprived of financial derivatives to the beginning of this millennium. While the rest of the world progressed by leaps and bounds on the derivatives front, Indian market lagged behind. Having emerged in the markets of the developed nations in the 1970s, derivatives markets grew from strength to strength. The trading volumes nearly doubled in every three years making it a trillion-dollar business. They became so ubiquitous that, now, one cannot think of the existence of financial markets without derivatives. Two broad approaches of SEBI is to integrate the securities market at the national level, and also to diversify the trading products, so that more number of traders including banks, financial institutions, insurance companies, mutual funds, primary dealers etc. choose to transact through the Exchanges. In this context the introduction of derivatives trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real landmark. SEBI first appointed the L.C.Gupta Committee in 1998 to recommend the regulatory framework for derivatives trading and to recommend suggestive bye-laws for Regulation and Control of Trading and Settlement of Derivatives Contracts. The Board of SEBI in its meeting held on May 11, 1998 accepted the recommendations of the Dr L.C.Gupta Committee and approved the phased introduction of derivatives trading in India beginning with Stock Index Futures. The Board also approved the "Suggestive Bye-laws" recommended by the committee for Regulation and Control of Trading and Settlement of Derivatives Contracts.

SEBI subsequently appointed the J.R.Verma Committee to recommend Risk Containment Measures in the Indian Stock Index Futures Market. The report was submitted in the same year (1998) in the month of November by the said committee. However the Securities Contracts (Regulation) Act, 1956 (SCRA) needed amendment to include "derivatives" in the definition of securities to enable SEBI to introduce trading in derivatives. The Government in the year 1999 carried out the necessary amendment. The Securities Laws (Amendment) Bill 1999 was introduced to bring about the much-needed changes. In December 1999 the new framework has been approved. Derivatives have been accorded the status of `Securities'. The ban imposed on trading in derivatives way back in 1969 under a notification issued by the Central Government has been revoked. Thereafter SEBI formulated the necessary regulations/bye-laws and intimated the Stock Exchanges in the year 2000, while derivative trading started in India at NSE in the same year and BSE started trading in the year 2001. In this module we are covering the different types of derivative products and their features, which are traded in the stock exchanges in India. EQUITY DERIVATIVES EXCHANGES IN INDIA: In the equity markets both the National Stock Exchange of India Ltd. (NSE) and The Stock Exchange, Mumbai (BSE) was quick to apply to SEBI for setting up their derivatives segments. NSE as stated earlier commenced derivatives trading in the same year i.e. 2000 AD, while BSE followed after a few months in 2001. Both the exchanges have set-up an in-house segment instead of setting up a separate exchange for derivatives. NSE's Futures & Options Segment was launched with Nifty futures as the first product. BSE' Derivatives Segment, started with Sensex futures as its first product. Stock options and stock futures were introduced in both the Exchanges in the year 2001 Thus started trading in Derivatives in Indian Stock Exchanges (both BSE & NSE) covering Index Options, Index Futures, and Stock Options & Futures at in the wake of the new

millennium. In a short span of three years the volume traded in the derivative market has outstripped the turnover of the cash market

DERIVATIVES TRADING IN FINANCIAL MARKETS: Derivatives were not traded in the financial markets of the world up to the period about three decades back, though Stock Exchanges trading in securities in the cash market came to be in vogue more than a century ago. In India the first Stock Exchange, BSE was established in 1875. But BSE commenced trading in derivatives only from 2001. Even in the international financial/securities market the advent of derivatives as trading products was a concurrent-effect with the process of globalization and integration of the national economies of the developed countries beginning from the Seventies of the last Century. As volumes traded increased and as competition turned intense, trade & business became more complex in the new environment. The new opportunities were matched by fresh challenges and unpredictable volatility of the trading environment. Corporate for the first time sensed the formidable risks inherent in business transactions and the unpredictability of the markets to which they are exposed. Facing multiple risks the business organizations, were induced to search for new remedies, i.e. risk containment devices/instruments. Derivatives came to be the natural remedy in this context. To quote an international professional authority: "As capital markets become increasingly integrated, shocks transmit easily from one market to another. The proliferation of new instruments with complex features has led to enhanced investment opportunities. One such instrument which has become darling of corporate, banks, institutions alike is 'Derivatives'. To have a touch of the tree top's view, Derivatives transaction is defined as a bilateral contract whose value is derived, from the value of an underlying asset, or reference rate, or index. Derivative transactions have evolved in the past twenty years to cover a broad range of products which include instruments like 'forwards', 'futures', 'options', 'swaps' covering a broad spectrum of underlying assets including exchange rates, interest rates, commodities, and equities." Though recent in origin derivatives instruments issued over the years have grown by leaps and bounds and the total amount issued globally is estimated to approach $80 trillion by the

advent of the new millennium. Derivative positions have grown at a compounding rate of 20% since 1990. In India though derivatives were introduced very recently in 2001, the trading turnover has already surpassed that of the equity segment. In NSE alone as per a report on its website the total turnover of the derivatives segment for the month of May 2003 stood at Rs. 53424 crores. During the month of May 2003, the percentage of derivatives segment as a percentage of the cash segment was 97.68%. However in the earlier two months the turnover of Derivatives was higher than that of the cash segment.

ORGANISATION PROFILE

HISTORICAL BACKGROUND OF ANGEL BROKING LIMITED:

Angel Bookings tryst with excellence in customer relations began more than 20 years ago. Today, Angel has emerged as a premium Indian stock-broking and wealth management house, with an absolute focus on retail business, and a commitment to provide "Real Value for Money" to all its clients. Angel Broking ltd was founded by a group of professional in 1997, a seemingly distant past in internet age. Its meticulous research was published and distributed in printed form to a client base including whos who of Indian business including MNCs, investment banks and consulting firms. The quality of research was highly acclaimed and soon became the industry benchmark. Over the last few years, its research coverage has grown to cover practically all companies, sectors, economy and financial markets. The breadth and depth of content is unmatched stock markets, mutual funds, personal finance, taxation and economy. Angel Broking Ltds head office is located in Mumbai. The main branch office of Angel Broking ltd is at Delhi. Angel Broking limited has its presence in 110 cities with 5000+ SubBrokers & Business Associates and more then 5lakh clients. Every branch of Angel Broking ltd is fully equipped and independently connected to NSE and BSE hub at Mumbai through VSAT connectivity. NSAT3e satellite is used for trading

leisure line is the mode used for trading of security, which is provider by BSNL and is the fastest mode of trading of securities. In early 1999, when internet penetration in India was at its infancy and future unknown, it took hard decision of killing its earlier business model and embracing the internet. It discontinued delivery of reports in printed form and made available quality research at click of a mouse. Thus, was a born of www.angelbroking.com / www.angeltrade.com . The sites have emerged as most popular web sites on Indian business and finance. Company Business Philosophy: Ethical Practices & Transparency in All Our Dealings. Customers Interest above Our Own. Always Deliver What We Promise. Effective Cost Management.

Company Quality Assurance Policy:We are committed to being the Leader in providing World Class Products & Services which exceed the expectations of our customers achieved by teamwork and a process of continuous improvement. Company Motto:-Our motto is to make our customer smile - To have complete harmony between Quality-in-Process and continuous improvement to deliver exceptional service that will delight our Customers and Clients.

Company CRM Policy: Customer is King A Customer is the most Important Visitor on Our Premises

He is not Dependant on us but we are dependent on him He is not an Interruption in our work, but is the Purpose of it We are not doing him a favour by serving He is doing us a favor by giving us an opportunity to do so - Mahatma Gandhi COMPANY POLICY:The main object of angel broking limited is to provide the best quality services to the investors. Angel broking provide a range of products and services to its customers either directly or through any one of its wholly owned subsidiaries. These multiple offerings across multiple channels either online through internet or offline through any branches or over telephone enables it to emerge as a financial one stop shop. This also offers significant cross-selling opportunities, which helps angel broking is strengthening customer relationship and loyalty. The services of angel broking are prompt and hence there are no delays in payout of funds, or deliveries to clients. Angel broking collects pay in t+3 and pay out in t+2 days. In a short span of 18 yrs since its inception the angel group has emerged as one of the top five retail stock broking houses in India having memberships of BSE NSE and two leading commodity exchanges in the country i.e. NCDEX and MCX. Angel broking is also registered as a depository participant with CDSL.

The group is promoted by Mr.Dinesh Thakkar, who started this business as a sub broker in 1987 with a team of three. Today the angel group is managed by a team of 1800+ direct employees and has a nationwide network of 12 regional hubs, 2 private client group offices, 60 branches, 2400+ sub brokers and business associates. The group currently services more than 2 lacs retail clients.

Angel has always believed in offering the best of services to their customers. Be it in form of focused research or state of the art technology or customized product offering or personalized touch to our services. Angel is the only 100% retail stock broking house offering a gamut of retail centric services.

Which include? E- broking Investment Advisory Portfolio Management Services Wealth Management Services Commodities Trading

ANGEL BROKING COMPANIES Angel Broking Ltd Angel Capital & Debt Market Ltd. Angel Commodities Broking Ltd. Angel Securities Ltd.

Services provided by Angel Broking Ltd.

Mutual fund distribution and advisory: Customized investment solutions on your specific individual financial goals aligned with your risk appetite. Access to in depth research and proper selection from diversified funds based on your preferred criteria. Customized reports at desired frequency. Ratings and rankings of all mutual funds from in house expert analysis. Current and historical performance of different funds enabling comparisons. News and alerts for your mutual funds portfolio and performance tracking with Watch Lists. Online mutual fund applications (NFO or existing) / online order status Tracking/ online updation of unit holdings at latest NAV/ online dividend payout and reinvestment facility.

IPO Distribution and Advisory Wide network of branches for better customer reach. Dedicated research teams generating sector related reports. Ease in investing with informed decision making. Advisory help desk for all IPO related queries.

Depository Participant Services

Angel Broking Ltd is a depository service provider through CDSL. We offer depository services to create a seamless transaction platform to execute trades through Angel Group of Companies and settle these transactions through Angel depository services. Hassle free automated pay in of sell obligation by Angel Broking Ltd/ Angel Capital and Debt market Ltd. Instant disbursement of non cash benefits like bonus and rights. Wide branch network. Personalized attentive services of trained and dedicated staff. Centralized billing and accounting. Acceptance and execution of instructions on FAX. Zero upfront payment and lowest transaction charges. Daily statement of transactions and holding statements on e-mail. No charges for extra transaction statement and holding statement. All in one combined monthly bill-cum-transaction-cum-holding-cum-ledger statement.

Technical Research Services:

Derivative Strategies

Our analysts take view on the select stocks based on the derivatives data and technical tools. Suitable derivative Strategies are devised which are flashed on our terminals and in our reports.

Future Calls

A customized product for HNIs to help them trade with leveraged positions; wherein clients are advised on the stocks with entry exit and stop levels for short tern benefits. Over and above this, financial status of the calls is monitored at all times.

Investment Advisory Desk To help you manage your equity portfolio and create wealth. To help you understand your risk profile and define your investment goal realistically. To minimize risk and maximize returns. To help you decide what to buy/sell and when to buy/sell. To help you understand macro economic trends and sectoral/company specific developments. To help you restructure your portfolio on sound research.

Portfolio Management Services

Angel Broking offers discretionary PMS to investors in order to assist & managing their funds amidst continuous changing market dynamics and increasing complexities of investing. Investing in equity needs in-depth knowledge and through analysis coupled with clear understanding of domestic and international economies. Investors need the services of an expert to manage their funds and deliver good returns in diverse market conditions. Continuous wealth creation with an emphasis on capital preservation is essential in todays complex markets.

In order to systematically diversify the holdings of clients across and with an intention to give them handsome returns, Angel devised the concept of the model portfolio. Successful investing in Capital Markets demands ever more time and expertise.

Investment Management is an art and a science in itself. Professional Investment Management Services are no longer the privilege of only large institutional investors.

Portfolio Management Services (PMS) is one such service that is fast gaining eminence as an investment avenue of choice for High Net worth Investors like you. PMS is a sophisticated investment vehicle that offers a range of specialized investment strategies to capitalize on opportunities in the market.

The PMS combined with competent fund management, dedicated research and technology, ensures a rewarding experience for its clients. Angel PMS brings with it years of experiences, expertise, research and the backing of Indias leading stock broking house. At Angel, experienced portfolio management is the difference. You will enjoy a relationship with a portfolio manager equipped to design and implement a portfolio around your unique needs. We will advise you on a suitable product based on factors such as your investment horizon, return expectations and risk tolerance. By entrusting the management of your portfolios to Angel, you can enjoy convenience without compromising on quality.

Commodities Markets Indian markets have recently thrown open a new avenue for retail investors and traders to participate commodity derivatives. For those who want to diversify their portfolios beyond shares, bonds and real estate, commodities are one of the best options. Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. Commodities are easy to understand and are based on the fundamentals of demand and supply. Retails investors should understand the risks and advantages of trading in commodities futures before taking a leap. Historically, prices in commodities futures have been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option. Depository Participant Angel Broking Ltd has started its depository services by registering with CDSL. There are various benefits of holdings your Demat Account with us but the biggest advantage is that you shall be ensured of a risk free, prompt and efficient depository process.

Options provided by Angel Broking for choosing the products offered by CDSL:

Easy Facility: You can view, download and print the updated holding of you Demat Account along with valuation of holding.

Easiest Facility: You can, by using this facility, submit your own delivery instructions on the internet without the intervention of your DP. This is in addition to all the facilities provided under the Easy facility.

Milestones:October, 2009 Angel Broking bags the coveted Major Volume Driver Award by BSE for 200809 May,2009 Angel Broking wins two prestigious awards for 'Broking House with Largest Distribution Network' and 'Best Retail Broking House' at Dun & Bradstreet Equity Broking Awards Crossed the 500,000 mark in unique trading accounts August, 2008 November, 2007 March, 2007 December, 2006 October, 2006 September, 2006 July, 2006 March, 2006 October, 2005 September, 2004 April, 2004 April, 2003 November, 2002 March, 2002 November, 1998 December, 1997 Received "Major Volume Driver" award for FY07 Crossed the 200,000 mark in unique trading accounts Crossed the 2,500 mark in terms of business associates. Received "Major Volume Driver" award for FY06 Commenced Mutual Fund and IPO distribution business Formally launched the PMS function Crossed the 100,000 mark in unique trading accounts Received the prestigious "Major Volume Driver" award for FY05 Launch of Online Trading Platform Incorporation of Commodities Broking division Publication of first Research Report First ever Investor seminar of Angel Group Web-enabled Back Office software developed Incorporation of Angel Capital and Debt Market Ltd. Incorporation of Angel Broking Ltd

TOPIC PROFILE IN THE ORGANISATION

EQUITY In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If valuations placed on assets do not exceed liabilities, negative equity exists. In an accounting context, Shareholders' equity (or stockholders' equity, shareholders' funds, shareholders' capital or similar terms) represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock. At the start of a business, owners put some funding into the business to finance assets. This creates liability on the business in the shape of capital as the business is a separate entity from its owners. Businesses can be considered to be, for accounting purposes, sums of liabilities and assets; this is the accounting equation. After liabilities have been accounted for, the positive remainder is deemed the owner's interest in the business. This definition is helpful to understand the liquidation process in case of bankruptcy. At first, all the secured creditors are paid against proceeds from assets. Afterward, a series of creditors, ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such cases where even creditors could not get enough money to pay their bills, and nothing is left over to reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital, liable capital and equity. Equity investments Equity investments generally refers to the buying and holding of shares of stock on a stock market by individuals and firms in anticipation of income from dividends and capital gain as the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup (a company being created or newly created). When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations.

The equities held by private individuals are often held via mutual funds or other forms of pooled investment vehicle, many of which have quoted prices that are listed in financial newspapers or magazines; the mutual funds are typically managed by prominent fund management firms (e.g. Schroders, Fidelity Investments or the Vanguard Group). Such holdings allow individual investors to obtain the diversification of the fund(s) and to obtain the skill of the professional fund managers in charge of the fund(s). An alternative, usually employed by large private investors and pension funds, is to hold shares directly; in the institutional environment many clients who own portfolios have what are called segregated funds as opposed to, or in addition to, the pooled e.g. mutual fund alternative. A calculation can be made to assess whether an equity is over or underpriced compared with a long-term government bond. This is called the Yield Gap or Yield Ratio. It is the ratio of the dividend yield of an equity and that of the long-term bond. BASIC FEATURES OF DERIVATIVES: The term "Derivative" indicates that it has no independent value, i.e. its value is entirely "derived" from the value of the underlying asset. The underlying asset can be securities, commodities, bullion, currency, live stock or anything else. In other words, Derivative means a forward, future, option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities. The Securities Contracts (Regulation) Act 1956 defines derivative as under: "Derivative" includes a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security; a contract which derives its value from the prices, or index of prices of underlying securities; DERIVATIVES ARE USED: By Hedgers for protecting (risk-covering) against adverse movement. Hedging is a mechanism to reduce price risk inherent in open positions. Derivatives are widely used

for hedging. A Hedge can help lock in existing profits. Its purpose is to reduce the volatility of a portfolio, by reducing the risk. Speculators to make quick fortune by anticipating/forecasting future market movements. Hedgers wish to eliminate or reduce the price risk to which they are already exposed. Speculators, on the other hand are those classes of investors who willingly take price risks to profit from price changes in the underlying. While the need to provide hedging avenues by means of derivative instruments is laudable, it calls for the existence of speculative traders to play the role of counter-party to the hedgers. It is for this reason that the role of speculators gains prominence in a derivatives market. Arbitrageurs to earn risk-free profits by exploiting market imperfections. Arbitrageurs profit from price differential existing in two markets by simultaneously operating in the two different markets. TYPES OF DERIVATIVES: Derivative products initially emerged as hedging devices against fluctuations in commodity prices, and commodity-linked derivatives remained the sole form of such products for almost three hundred years. Financial derivatives came into spotlight in the post-1970 period due to growing instability in the financial markets. However, since their emergence, these products have become very popular and by 1990s, they accounted for about two-thirds of total transactions in derivative products. In recent years, the market for financial derivatives has grown tremendously in terms of variety of instruments. Available their complexity and also turnover. In the class of equity derivatives the world over, futures and options on stock indices have gained more popularity than on individual stocks, especially among institutional investors, who are major users of index-linked derivatives. Even small investors find these useful due to high correlation of the popular indexes with various portfolios and ease of use. The lower costs associated with index derivatives viseavise derivative products based on individual securities is another reason for their growing use. The most commonly used derivatives contracts are forwards, futures and options which we shall discuss in detail later. Here we take a brief look at various derivatives contracts that have come to be used.

 Forwards: A forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at todays 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 given 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: 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: Interest rate swaps: These entail swapping only the interest 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 one direction being in a different currency than those in the opposite direction. Swap ions: Swap ions are options to buy or sell a swap that will become operative at the expiry of the options. Thus a swap ion is an option on a forward swap. Rather than have calls and puts, the Swap ions market has receiver Swap ions and payer Swap ions. A receiver swap ion is an option to receive fixed and pay floating. A payer swap ion is an option to pay fixed and receive floating.

 Classification of Derivatives:

The derivatives can be classified as

Forwards (Currencies, Stocks, and Swaps etc): Forward contract is different from a spot transaction, where payment of price and delivery of commodity concurrently take place immediately the transaction is settled. In a forward contract the sale/purchase transaction of an asset is settled including the price payable, not for delivery/settlement at spot, but at a specified future date. India has a strong dollar-rupee forward market with contracts being traded for one, two, and Six-month expiration. Daily trading volume on this forward market is around $500 million a day. Indian users of hedging services are also allowed to buy derivatives involving other currencies on foreign markets. Futures (Currencies, Stocks, Indexes, and Commodities etc): A futures contract has been defined as "a standardized, exchange-traded agreement specifying a quantity and price of a particular type of commodity (soybeans, gold, oil, etc.) to be purchased or sold at a pre-determined date in the future. On contract date, delivery and physical possession take place unless the contract has been closed out. Futures are also available on various financial products and indexes today, futures contract is thus a forward contract, which trades on an exchange. S&P CNX Nifty futures are traded on National Stock Exchange. This provides them transparency, liquidity; anonymity of trades, and also eliminates the counter party risks due to the guarantee provided by National Securities Clearing Corporation Limited. Options (Currencies, Stocks, and Indexes etc). :Options are the standardized financial contracts that allows the buyer (holder) of the options, i.e. the right at the cost of option premium, not the obligation, to buy (call options) or sell (put options) a specified asset at a set price on or before a specified date through exchanges under stringent financial security against default. Raising funds from the derivatives market: This is fairly simple. Say, you have Infosys, which is trading at Rs 3000. You have shares lying with you and are in urgent need of liquidity. Instead of pledging your shares and borrowing from banks at a margin, you can sell the stock at Rs 3000. Suppose you need this liquidity only for a month and also do not want to part with Infosys. You can buy a 1 month future at Rs 3050.

After a month you get back your Infosys at the cost of an additional Rs 50. This Rs 50 is the financing cost for the liquidity. The other beauty about this is you have already locked in your purchase cost at Rs 3050. This fixes your liquidity cost also and you are protected against further price losses.

Lending funds to the market: The lending into the market is exactly the reverse of borrowing. You have money to lend. You can buy a stock and sell its future. Say, you buy Infosys at Rs 2000 and sell a 1 month future at Rs 2100. In effect what you have done is lent Rs 3000 to the market for a month and earned Rs 100 on it. Using arbitrage to make money in derivatives market: Arbitrage is making money on price differentials in different markets. For Example, future is nothing but the future value of the spot price. This future value Is obtained by factoring the interest rate. But if there are differences in the money market and the interest rates change then the future price should correct itself to factor the change in interest. But if there is no factoring of this change then it presents an opportunity to make money- an arbitrage opportunity. Let us take an example.

Example: A stock is quoting for Rs 1000. The 1-month future of this stock is at Rs 1005. The risk free interest rate is 12%. What should be the trading strategy? Solution: The strategy for trading should be: Sell Spot and Buy Futures Sell the stock for Rs 1000. Buy the future at Rs 1005. Invest the Rs1000 at 12 %. The interest earned on this stock will be 1000(1+.012) (1/12) =1009

So net gain the above strategy is Rs 1009- Rs 1005 = Rs 4 Thus one can make a risk less profit of Rs 4 because of arbitrage But an important point is that this opportunity was available due to miss-pricing and the market not correcting itself. Normally, the time taken for the market to adjust to corrections is very less.

So the time available for arbitrage is also less. As everyone rushes to cash in on the arbitrage, the market corrects itself.

Using future to hedge position: One can hedge ones position by taking an opposite position in the futures market. For example, if you are buying in the spot price, the risk you carry is that of prices falling in the future. You can lock this by selling in the futures price. Even if the stock continues falling, your position is hedged as you have firmed. The price at which you are selling. Similarly, you want to buy a stock at a later date but face the risk of prices rising. You can hedge against this rise by buying futures. You can use a combination of futures too to hedge yourself. There is always a correlation between the index and individual stocks. This correlation may be negative or positive, but there

the change in the price of a stock to the change in index? For example if stock goes up by 8. It will also fall by a similar level when the index falls. 10, the price of the

have a position in a stock, you can hedge the same by buying the index at times the value of the stock. Example:

my position by selling 8000 of Nifty. That is I will sell 8 Nifty Scenario 1

If index rises by 10 %, the value of the index becomes 8800 i.e. a loss of Rs 800 The value of my stock however goes up by 8 % i.e. it becomes Rs 10800 I .e a gain of Rs 800. Thus my net position is zero and I am perfectly hedged.

Scenario 2 If index falls by 10 %, the value of the index becomes Rs 7200 a gain of Rs 800 But the value of the stock also falls by 8 %. The value of this stock becomes Rs 9200 a loss of Rs 800.

based on regression models. Regression is nothing but analysis of past data. So there is a chance

value.

Using options in trading strategy:

Options are a great tool to use for trading. If you feel the market will go up. You should buy a call option at a level lower than what you expect the market to go up. If you think that the market will fall, you should buy a put option at a level higher than the level to which you expect the market fall. When we say market, we mean the index. The same strategy can be used for individual stocks also. A combination of futures and options can be used too, to make profits. Strategy for an option writer to cover himself:

An option writer can use a combination strategy of futures and options to protect his position. The risk for an option writer arises only when the option is exercised. This will be very clear with an example. Supposing I sell a call option on Satyam at a strike price of Rs 300 for a premium of Rs 20. The risk arises only when the option is exercised. The option will be exercised when the price exceeds Rs 300. I start making a loss only after the price exceeds Rs 320(Strike price plus premium).More importantly, I have to deliver the stock to the opposite party. So to enable me to deliver the stock to the other party and also make entire profit on premium, I buy a future of Satyam at Rs 300. This is just one leg of the risk. The earlier risk was of the call being exercised. The risk now is that of the call not being exercised. In case the call is not exercised, what do I do? I will have to take delivery as I have bought a future. So minimize this risk, I buy a put option on Satyam at Rs 300. But I also need to pay a premium for buying the option. I pay a premium of Rs 10.Now I am fully covered and my net cash flow would be Premium earned from selling call option: Rs 20Premium paid to buy put option: (Rs 10) Net cash flow: Rs 10

But the above pay off will be possible only when the premium I am paying for the put option is lower than the premium that I get for writing the call. Similarly, we can arrive at a covered position for writing a put option too; another interesting observation is that the above strategy in itself presents an Opportunity to make money. This is so because of the premium differential in the put and the call option. So if one tracks the derivative markets on a continuous basis, one can chance upon almost risk less money making opportunities

Other strategies using derivatives: The other strategies are also various permutations of multiple puts, calls and futures. They are also called by exotic names, but if one were to observe them closely, they are relatively simple instruments. Some of these instruments are: Butterfly spread: It is the strategy of simultaneous buying of put and call Calendar Spread: An option strategy in which a short-term option is sold and a longer-term option is bought both having the same striking price. Either puts or calls may be used. Double option: An option that gives the buyer the right to buy and/or sell a Futures contract, at a premium, at the strike price Straddle option: The simultaneous purchase and sale of option of the same specification to different periods. Tandem Options: A sequence of options of the same type, with variable strike price and period. Bermuda Option: Like the location of the Bermudas, this option is located somewhere between a European style option which can be exercised only at maturity and an American style option which can be exercised any time the option holder chooses. This option can be exercisable only on predetermined dates.

SETELLEMENT OF FUTURES: Mark to market settlement: There is a daily settlement for Mark to Market .The profits/ losses are computed as the difference between the trade price or the previous days settlement price, as the case may be, and the current days settlement price. The parties who have suffered a loss are required to pay the mark-to-market loss amount to exchange which is in turning passed on to the party who has made a profit. This is known as daily mark-to-market settlement. Theoretical daily settlement price for unexpired futures contracts, which are not traded during the last half an hour on a day, is currently the price computed as per the formula detailed below: F = S * e trey where:

F = theoretical futures price S = value of the underlying index/ stock r = rate of interest (MIBOR- Mumbai Inter bank Offer Rate) t = time to expiration Rate of interest may be the relevant MIBOR rate or such other rate as may be specified. After daily settlement, all the open positions are reset to the daily settlement price. The pay-in and payout of the mark-to-market settlement is on T+1 days (T = Trade day). The mark to market losses or profits are directly debited or credited to the broker account from where the broker passes to the client account.

Final Settlement: On the expiry of the futures contracts, exchange marks all positions to the final settlement price and the resulting profit / loss is settled in cash. The final settlement of the futures contracts is similar to the daily settlement process except for the method of computation of final settlement price. The final settlement profit / loss are computed as the difference between trade price and the previous days settlement price, as the case may be, and the final settlement price of the relevant futures contract. Final settlement loss/ profit amount is debited/ credited to the relevant brokers clearing bank account on T+1 day (T= expiry day). This is then passed on the

client from the broker. Open positions in futures contracts cease to exist after their expiration day.

SETTELEMENT OF OPTIONS: Daily Premium Settlement: Premium settlement is cash settled and settlement style is premium style. The premium payable position and premium receivable positions are netted across all option contracts for each broker at the client level to determine the net premium payable or receivable amount, at the end of each day. The brokers who have a premium payable position are required to pay the premium amount to exchange which is in turn passed on to the members who have a premium receivable position. This is known as daily premium settlement. The brokers in turn would take this from their clients. The pay-in and pay-out of the premium settlement is on T+1 days (T = Trade day). The premium payable amount and premium receivable amount are directly debited or credited to the broker, from where it is passed on to the client. Interim Exercise Settlement for Options on Individual Securities: Interim exercise settlement for Option contracts on Individual Securities is affected for valid exercised option positions at in-the-money strike prices, at the close of the trading hours, on the day of exercise. Valid exercised option Contracts are assigned to short positions in option contracts with the same series, on a random basis. The interim exercise settlement value is the difference between the strike price and the settlement price of the relevant option contract. Exercise settlement value is debited/ credited to the relevant broker account onT+3 day (T= exercise date). From there it is passed on to the clients. Final Exercise Settlement: Final Exercise settlement is effected for option positions at in-the-money strike prices existing at the close of trading hours, on the expiration day of an option contract. Long positions at in-the money strike prices are automatically assigned to short positions in option contracts

with the same series, on a random basis. For index options contracts, exercise style is European style, while for options contracts on individual securities, exercise style is American style. Final Exercise is Automatic on expiry of the option contracts. Exercise settlement is cash settled by debiting/ crediting of the clearing accounts of the relevant broker with the respective Clearing Bank, from where it is passed to the client. Final settlement loss/ profit amount for option contracts on Index is debited/credited to the relevant broker clearing bank account on T+1 day (T = expiry day), from where it is passed Final settlement loss/ profit amount for option contracts on Individual Securities is debited/ credited to the relevant broker clearing bank account on T+3 day (T = expiry day), from where it is passed Open positions, in option contracts, cease to exist after their expiration day. REGULATORY FRAMEWORK: The trading of derivatives is governed by the provisions contained in the SC(R) A, the SEBI Act, the rules and regulations framed there under and the rules and byelaws of stock exchanges. Securities Contracts (Regulation) Act, 1956 SC(R) A aims at preventing undesirable transactions in securities by regulating the business of dealing therein and by providing for certain other matters connected therewith. This is the principal Act, which governs the trading of securities in India. The term securities has been defined in the SC(R) A. As per Section 2(h), the Securities include: Shares, scraps, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate. 2. Derivative. 3. Units or any other instrument issued by any collective investment scheme to the investors in such schemes. 4. Government securities. 5. Such other instruments as may be declared by the Central Government to be securities. 6. Rights or interests in securities. Derivative is defined to include a security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security 7. A contract which derives its value from the prices, or index of prices, of underlying securities.

Section 18A provides that notwithstanding anything contained in any other law for the time being in force, contracts in derivative shall be legal and valid if such contracts are: Traded on a recognized stock exchange _ Settled on the clearing house of the recognized stock exchange, in accordance with the rules and byelaws of such stock exchanges.

SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992:

SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India(SEBI) with statutory powers for (a) protecting the interests of investors in securities (b) promoting the development of the securities market and (c) regulating the securities market. Its regulatory jurisdiction extends over corporate in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market. SEBI has been obligated to perform the aforesaid functions by such measures as it thinks fit. In particular, it has powers for: Regulating the business in stock exchanges and any other securities markets Registering and regulating the working of stock brokers, subbrokers etc. Promoting and regulating self-regulatory organizations Prohibiting fraudulent and unfair trade practices Calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, mutual funds and other persons associated with the securities market and intermediaries and selfregulatory organizations in the securities market Performing such functions and exercising according to Securities Contracts (Regulation) Act, 1956, as may be delegated to it by the Central Government SEBI (STOCK BROKERS AND SUBBROKERS) REGULATIONS, 1992; In this section we shall have a look at the regulations that apply to brokers under the SEBI Regulations. The stock broker Is eligible to be admitted as a member of a stock exchange

 Has the necessary infrastructure like adequate office space, equipment and man power to effectively discharge his activities; Has any past experience in the business of buying, selling or dealing in securities. Is subjected to disciplinary proceedings under the rules, regulations and bye-laws of a stock exchange with respect to his business as a stock-broker involving either himself or any of his partners, directors or employees.

REGULATION FOR DERIVATIVES TRADING; SEBI set up a 24-member committee under the 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 that Act. Any Exchange fulfilling the eligibility criteria as prescribed in the LC 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 prior approval of SEBI before start of trading in any derivative contract. The Exchange shall have minimum 50 members. 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 lay down by the LC Gupta committee.

 The clearing and settlement of derivatives trades shall be through a SEBI approved clearing corporation/house. Clearing corporations/houses complying with the eligibility conditions as laid down by the committee have to apply to SEBI for grant of approval. Derivative brokers/dealers and clearing members are required to seek registration from SEBI. This is in addition to their registration as brokers of existing stock exchanges. The minimum net worth for clearing members of the derivatives clearing corporation/house shall be Rs.300 Lake. The net worth of the member shall be computed as follows: Capital + Free reserves Less non-allowable assets viz., Fixed assets Pledged securities Members card Non-allowable securities (unlisted securities) Bad deliveries Doubtful debts and advances Prepaid expenses Intangible assets 30% marketable securities

The minimum contract value shall not be less than Rs.2 Lake. Exchanges should also submit details of the futures contract they propose to introduce. The initial margin requirement, exposure limits linked to capital adequacy and margin demands related to the risk of loss on the position shall be prescribed by SEBI/Exchange from time to time. The L.C.Gupta committee report requires strict enforcement of Know your customer rule and requires that every client shall be registered with the derivatives broker. The members of the derivatives segment are also required to make their clients aware of the risks involved in derivatives trading by issuing to the client the Risk Disclosure Document and obtain a copy of the same duly signed by the client. The trading members are required to have qualified approved user and sales person who have passed a certification programmer approved by SEBI.

NSES CERTIFICATION IN FINANCIAL MARKETS: A critical element of financial sector reforms is the development of a pool of human resources having right skills and expertise to provide quality intermediation services in each segment of the market. In order to dispense quality intermediation, personnel providing services need to possess requisite skills and knowledge. This is generally achieved through a system of testing and certification. Such testing and certification has assumed added significance in India as there is no formal education/training on financial markets, especially in the area of operations. Taking into account international experience and needs of the Indian financial market, NSE offers NCFM (NSE Certification in Financial Markets) to test practical knowledge and skills that are required to operate in financial markets in a very secure and unbiased manner and to certify personnel with a view to improve quality of intermediation. NCFM offers a comprehensive range of modules covering many different areas in finance including a module on derivatives. The module on derivatives has been recognized by SEBI. SEBI requires that derivative brokers/dealers and sales Persons must mandatory pass this module of the NCFM. REGULATION FOR CLEARING AND SETTLEMENT: The LC Gupta committee has recommended that the clearing corporation must perform full notation, i.e. the clearing corporation should interpose itself between both legs of every trade, becoming the legal counter party to both or alternatively should provide an unconditional guarantee for settlement of all trades. The clearing corporation should ensure that none of the Board members has trading interests. The definition of net-worth as prescribed by SEBI needs to be incorporated in the Application / regulations of the clearing corporation. The regulations relating to arbitration need to be incorporated in the clearing corporations regulations. Specific provision/chapter relating to declaration of default must be incorporated by the clearing Corporation in its regulations. The regulations relating to investor protection fund for the derivatives market must be included in the clearing corporation application/regulations.

The clearing corporation should have the capabilities to segregate upfront/initial margins deposited by clearing members for trades on their own account and on account of his clients. The clearing corporation shall hold the clients margin money in trust for the clients purposes only and should not allow its diversion for any other purpose. This condition must be incorporated in the clearing corporation regulations.

The clearing member shall collect margins from his constituents (clients/trading members). He shall clear and settle deals in derivative contracts on behalf of the constituents only on the receipt of such minimum margin.

Exposure limits based on the value at risk concept will be used and the exposure limits will be continuously monitored. These shall be within the limits prescribed by SEBI from time to time.

The clearing corporation must lay down a procedure for periodic review of the net worth of its members. The clearing corporation must inform SEBI how it proposes to monitor the exposure of its members in the underlying market. Any changes in the bye-laws, rules or regulations which are covered under the Suggestive bye-laws for regulations and control of trading and settlement of derivatives contracts would require prior approval of

TRADING MEMBER (TM) Net worth - Rs.100 lakhs Interest-Free Security Deposit - Rs. 8 lakhs Annual Subscription Fees - Rs. 1 lakhs MEMBERSHIP CRITERIA - MUMBAI STOCK EXCHANGE (BSE) Clearing Member (CM) Net worth - 300 lakhs Interest-Free Security Deposits - Rs. 25 lakhs

 Collateral Security Deposit - Rs. 25 lakhs Non-refundable Deposit - Rs. 5 lakhs Annual Subscription Fees - Rs. 50 thousand In addition for every TM he wishes to clear for the CM has to deposit Rs. 10 lakhs with the following break-up Cash - Rs. 2.5 lakhs Cash Equivalents - Rs. 25 lakhs Collateral Security Deposit - Rs. 5 lakhs

TRADING SYSTEMS NSE's Trading system for its futures and options segment is called NEAT F&O. It is based on the NEAT system for the cash segment. BSE's trading system for its derivatives segment is called DTSS. It is built on a platform different from the BOLT system though most of the features are common.

ABOUT THE SCRIPS THAT ARE TAKEN FOR EVALUATION:

INFOSYS TECHNOLOGIES LTD Infosys Technologies Ltd. Was started in 1981 by seven people with US$ 250. Today,

they are a global leader in the "next generation" of IT and consulting with revenues of over US$ 4 billion. Infosys' offerings span business and technology consulting, application services, systems integration, product engineering, custom software development, maintenance, reengineering, independent testing and validation services, IT infrastructure services and business process outsourcing Infosys pioneered the Global Delivery Model (GDM), which emerged as a disruptive force in the industry leading to the rise of offshore outsourcing. The GDM is based on the principle of taking work to the location where the best talent is available, where it makes the best economic sense, with the least amount of acceptable risk. Infosys has a global footprint with over 50 offices and development centers in India, China, Australia, the Czech Republic, Poland, the UK, Canada and Japan. Infosys has over 103,000 employees. Infosys takes pride in building strategic long-term client relationships. Over 97% of our revenues come from existing customers. DLF LIMITED:

DLF Limited or DLF (Delhi Land and Finance) is the India's biggest real estate developer based in New Delhi, India. The DLF Group was founded by Raghuvendra Singh in 1946. DLF developed residential colonies in Delhi such as Krishna Nagar, South Extension, Greater Kailash, Kailash Colony and Hauz Khas. In 1957, with the passage of Delhi Development Act, the government assumed the control of real estate development activities in Delhi and the role of private real estate developers was restricted. As a result DLF began acquiring land at relatively low cost outside the area controlled by the Delhi Development Authority, particularly in the district of Gurgaon in the adjacent state of Haryana. In the mid-1970s, the company started developing DLF City project at Gurgaon. Its upcoming plans include hotels, infrastructure and special economic zones-related development projects.

The company is currently headed by Indian billionaire Kushal Pal Singh. Kushal Pal Singh, according to the Forbes listing of richest billionaires in 2009, now stands as the 98th richest man in the world and the world's richest property developer. The company's US$ 2 billion IPO in July, 2007 created India's biggest IPO in history. In July 2007, DLF announced its first quarter results ending 30 June 2007. The company reported a turnover of Rs. 3,120.98 Crore and PAT at Rs. 1,515.48 Crore. State Bank of India (SBI) has history of more than 200 years of existence. SBI is the largest commercial bank in India and accounts for approximately 18% of the total Indian banking business and the group account for 25% of the total Indian banking business. The central bank, Reserve Bank of India (RBI) is the largest shareholder in the bank with 59.7% stake followed by overseas investors including GDRs with 19.78% shareholding as on September 06. RBIs stake in the bank is likely to be transferred to the Government of India (GOI). SBI has the largest distribution network in India spread across every nook and corner of India. SBI has the largest branch and ATM network of over 14,000 branches (including subsidiaries) Apart from Indian network it also has a network of 73 obverses of. ces in 30 countries in all time zones, correspondent relationship with 520 International banks in 123 countries. In recent past, SBI has acquired banks in Mauritius, Kenya and Indonesia. The bank had total staff strength of 198,774 as on 31 st March, 2006. Of this, 29.51% are of.cers, 45.19% clerical staff and the remaining 25.30% were sub-staff. The bank is listed on the Bombay stock Exchange, Kolkata stock Exchange, Chennai Stock Exchange and Ahmedaoad stockeExchange while its GDRs are listed on the London stock Exchange.

TATA MOTORS Tata Motors is Indias largest automobile company, with consolidated revenues of USD 20 billion in 2009-10. It is the leader in commercial vehicles and among the top three in passenger vehicles. Tata Motors has products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, the world's second largest bus manufacturer, and employs 24,000 workers. Since first rolled out in 1954, Tata Motors has produced and sold over 4 million vehicles in India.

Established in 1945, when the company began manufacturing locomotives, the company manufactured its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG, which ended in 1969. Tata Motors is a dual-listed company traded on both the Bombay Stock Exchange, as well as on the New York Stock Exchange. Tata Motors in 2005 was ranked among the top 10 corporations in India with an annual revenue exceeding INR 320 billion. In 2010, Tata Motors surpassed Reliance to win the coveted title of 'India's most valuable brand' in a annual survey conducted by Brand Finance and The Economic Times. Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow, Ahmedabad, Sanand, Dharwad and Pune in India, as well as in Argentina, South Africa and Thailand.

CHAPTER IV ANALYSIS AND INTERPRETATION

SBI CLOSING PRICE:Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 2692.7 2583.7 2615.8 2602.4 2649.9 2623.25 2627 2675 2641.45 2649.65 2616.3 2414.7 2355.75 2322.3 2320.45 2249.75 2222.1 2177.95 2188.3 2234.65 2237.3 2297.95 FO DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO CLOSE 2877.9 2812.45 2711.8 2600.3 2625.9 2609.1 2655.15 2629.85 2631.6 2656.15 2623.85 2630.55 2579.65 2397.05 2338.8 2303.25 2326.45 2255.75 2230.4 2183.55 2187.35 CALL OPT 260 260 260 260 170 205 205 205 205 205 205 205 205 19.45 6.75 2.9 2.35 1.1 0.65 0.3 0.05

PUT OPT 8 8.65 21.7 40.25 31.35 33.15 22.15 25.45 22.05 16.15 19.95 17 36.85 118.6 164.05 194.65 172.95 241.15 267.2 307.95 310.25

Table no:- 1

250.05 200.05 150.05 100.05 50.05 0.05 3000 2900 2800 2700 2600 2500 2400 2300 2200 2100 2900 2800 2700 2600 2500 2400 2300 2200 2100 2-May-11 4-May-11 6-May-11

Chart no :1.1

Chart no:-1.3

Chart no:-1.2

28-Apr-11

30-Apr-11

2-May-11

4-May-11

8-May-11
10-May-11 12-May-11 14-May-11 16-May-11 18-May-11 20-May-11 22-May-11 24-May-11 26-May-11 28-May-11 30-May-11

6-May-11

8-May-11

10-May-11

12-May-11

EQUITY

14-May-11

FO CLOSE

CALL OPT

16-May-11

18-May-11

20-May-11

22-May-11

24-May-11

26-May-11

EQUITY

FO CLOSE

CALL OPT

Chart no:-1.4

PUT OPT
305 255 205 155 105 55 5 28-Apr-11 30-Apr-11 10-May-11 12-May-11 14-May-11 16-May-11 18-May-11 20-May-11 22-May-11 24-May-11 26-May-11 2-May-11 4-May-11 6-May-11 8-May-11

PUT OPT

Interpretation: While comparing the equity and futures closing prices the prices of futures are more in few days this is because the futures are usually traded at premium than the market closing price of the equity, it may trade in discounts if there are many profit bookings made in the market. For instance if we consider the closing prices of equity and futures for first 4 days . there is a fall in the price i.e., from 2692.7 to 2602.4 in equity and simultaneously the future prices are also falls i.e., 2877.9 to 2600.3 and they are trading at discounts. Now considering the equity and options, here the main observation that has to be made is the call and put options they are totally inverse in nature i.e., if the call rises put falls and vice versa. This is because if the market is in positive side then the investors will invest in call, and if negative then put. This can be clearly seen in charts1.3 & 1.4. As we observe the dates from 16. to 26 of May. the call is having more price, and on 16 May. the put raised because the market is in down trend and it continues. But at the end the both put and the call will become zero and near value because the contracts are closed and there will be no roll out to next month this is similar to all the scrips

TATA MOTORS CLOSING:Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 1225.35 1163.1 1159.3 1137.15 1199.95 1176.85 1186.25 1211.65 1187 1211.05 1215.75 1189 1149.15 1150.85 1168.65 1129.45 1121.85 1133.8 1162.4 1088.85 1077.35 1095.3 FO DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO 1227 1220.6 1221.65 1158.1 1157.3 1135.85 1195.95 1175 1178.8 1204.75 1184.15 1208.65 1202.95 1186.75 1149.85 1152.65 1170.45 1131.6 1125 1135.75 1159.45 CE 90 90 85 43.7 44.35 33.05 66.15 50.25 50.65 69.2 53.45 70 64 49.8 23.2 23.1 32.25 12.6 9.5 10.85 9.7 PE 15.95 17.5 17 38.65 38.65 47.9 19.9 26.5 23.3 14.65 20.15 11.25 12.35 13.7 24.3 19.8 12.35 30.4 33.65 24.4 0.7

Table no :- 2

Chart no:-5.1

EQUITY
1250 1200 1150 1100 1050 1000 EQUITY

Chart no:-5.2

FO
1240 1220 1200 1180 1160 1140 1120 1100

FO

Chart no:-5.3

CE
100 90 80 70 60 50 40 30 20 10

CE

Chart no:-5.4

60 50 40 30 20 10 0

PE

PE

Interpretation: The equity prices of the TATA MOTOR are decreasing so, there is also more fluctuations in the futures. If the future prices shown fluctuations the prices of equity also shows ups and downs as shown in chart no. As there is high fluctuations the futures amount is also traded at discount for few days and at premium for few days. There are many fluctuations in the options, if we observe the table the equity prices are fluctuating day by day with minor amounts. Due to this the investors are investing in call and put to reduce the risk. If the market is rising then they are going to call and if the market is falling they are going to put. Therefore there are more fluctuations while compared to equity.

INFOSYSTCH CLOSING:Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQITY 2922.55 2911.05 2869.75 2848.5 2893 2908.55 2880.05 2906.05 2881.25 2878.35 2850.4 2844.15 2842.5 2846.45 2849.85 2837.05 2844.5 2788.65 2776.55 2787.5 2780.6 2785.65 PE DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO 2930.7 2891.55 2918.2 2893.75 2854.5 2827.75 2873 2890.25 2872.9 2889.75 2865.45 2871.5 2836.55 2837.6 2827.4 2828.5 2836.6 2819.25 2823.6 2774.9 2773.3 CE 299.75 299.75 104 104 66.4 51.7 72 78.35 66.5 76 59.5 55.85 34.7 30.1 24.45 22.2 21.75 12.85 12 1.15 0.1 PE 39.45 56.85 37.95 44.65 64.8 74.9 46 37.95 43.7 33.4 40.95 34.6 46.6 42.15 43.75 40 35.05 41.7 35.5 72 72.3

Table no:-3

2950 2900 2850 2800 2750 2700 2650

2950 2900 2850 2800 2750 2700

Chart no:6.3

Chart no:-6.2

Chart no:-6.1

350 300 250 200 150 100 50 0 2-May-11 4-May-11 6-May-11 8-May-11 10-May-11 12-May-11 14-May-11 16-May-11 18-May-11 20-May-11 22-May-11 24-May-11

EQITY

FO

CE
FO

26-May-11
28-May-11 30-May-11

EQITY

CE

Chart no:-6.4

PE
80 70 60 50 40 30 20 10 0

PE

Interpretation: The equity price of the INFOSYTCH are comparatively stable so, there is no more fluctuations in the futures. As there is low fluctuations the futures amount is also traded at low premiums &discounts. We can see this in chart no 6.1&6.2. Due to this situation the investors get minimum profits from the scrps and if the loss occurs it will be minimum. This kind of scrps are more reliable for investors.

DLF CLOSING:Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQITY 226.3 220.75 218.9 215.2 219.5 218.9 221.95 227.2 227.75 232.95 226.2 227.65 230.25 222.05 228.4 223.1 219.1 210.05 217.5 225.2 231.45 238.95 FO DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO 229.75 224.35 227.95 221.6 220.2 215.6 220.7 219.95 222.85 227.5 227.9 232.85 226.2 228.45 230.2 221.75 228.2 222.45 218.3 209.2 216.15 CE 17 11.8 13.5 9.85 8.7 6.8 8.8 7.95 9.1 11.3 11.3 14.25 9.2 10.8 12.15 6.2 10.55 6.3 4.9 0.15 0.3 PE 5.8 7.6 5.8 8.25 8.4 11.1 8 7.95 6.3 4.05 3.55 1.9 3.1 2.45 2.15 4.65 2.55 4.3 6.8 10.9 3.55

Table no:- 4

Chart no:-7.1

EQITY
250 240 230 220 210 200 190

EQITY

Chart no7.2

FO
235 230 225 220 215 210 205 200 195

FO

Chart no:7.3

CE
20 15 10 5 0 CE

Chart no:-7.4

PE
12 10 8 6 4 2 0

PE

Interpretation: The equity price is gradually increasing, but the futures price is in premium in most of the days while compared to equity. This is because as the scrip is increasing the investors are selling it for profit booking in intra trading. As explained before that usually the futures are traded in premium for that current month this can be seen here. There are more fluctuations in call and put prices as the equity price is not risen or fallen continuously.

Contract wise analysis of scrips

SBI
Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 2064601 5117195 2267662 1718854 1459895 1087829 997943 2276952 1450405 1840643 1382243 8011380 5882457 3402653 2699718 2403365 2485550 3454715 4087372 2603919 1353984 2056407 Date 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FUTURE 18164 16415 24228 49546 29022 19299 21492 16156 13414 30285 16655 26144 23460 122533 58836 25921 26511 27440 29350 38241 44047 CE OPT 0 0 0 0 2 1 0 0 O 0 0 0 0 12604 7088 2103 1756 1479 681 386 996 PE OPT 12 33 245 1091 973 664 392 359 230 611 489 681 4251 12192 946 216 108 300 65 150 291

Table no:-5

Chart no:-8.1

EQUITY
10000000 8000000 6000000 4000000 2000000 0

EQUITY

22-May-11

26-May-11

10-May-11

12-May-11

14-May-11

16-May-11

18-May-11

20-May-11

24-May-11

28-May-11

Chart no;-8.2

FUTURE
140000 120000 100000 80000 60000 40000 20000 0

30-May-11

2-May-11

4-May-11

6-May-11

8-May-11

FUTURE

Chart no;-8.3

CE OPT
14000 12000 10000 8000 6000 4000 2000 0

CE OPT

Chart no:-8.4

PE OPT
14000 12000 10000 8000 6000 4000 2000 0

PE OPT

Interpretation: As the price of equity is fluctuating day by day the contracts traded are also fluctuating a lot. The same is with the futures and this can be seen in two charts 4.29 & 4.30 and they similar. For the purpose of reducing the risk the investors are trading both the call and put in the respective situations.

TATA MOTOR
Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 1161049 2066322 1613262 1067416 2224080 1266813 1494899 1772226 1881467 2004128 2379703 1561367 2555103 2008459 1426097 1874272 2098258 1791018 2815981 7224010 2837058 4316117 DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FUTURE 14005 11252 11686 18977 18095 13885 24053 13215 18345 15566 20987 22518 18715 16300 22470 15773 17175 18475 20010 17503 25008 CE 14 0 2 176 939 506 640 174 116 103 131 95 140 91 1797 1401 865 2899 3084 3176 5474 PE 67 276 170 719 738 455 938 628 827 772 1136 1028 1051 1127 2147 1054 953 1169 488 362 2705

Table no :-6

Chart no :-9.1

EQUITY
8000000 6000000 4000000 2000000 0 EQUITY

Chart no:-9.2

FUTURE
30000 25000 20000 15000 10000 5000 0 FUTURE

Chart no 9.3

CE
6000 5000 4000 3000 2000 1000 0

CE

Chart no: 9.4

PE
3000 2500 2000 1500 1000 500 0

PE

Here the equity is having more contracts while compared to all, but all those are not hold they all are traded. Here the futures are traded in lots in a lot there will be few no., of the same scrip will be there, and they vary from scrip to scrip. While the contracts of call and put are traded in opposite direction.

INFOSYTCH
Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 1683523 1654255 2115550 1582654 1491333 617275 609171 801259 624560 1035292 808671 946309 1272062 931995 1002959 847360 953183 1384427 1059522 783118 858419 2551326 DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO 14615 15154 9430 12732 11870 10526 11278 8222 11215 6730 6864 10143 7045 8739 14330 8647 9511 6964 10898 16238 14509 CE 0 0 1 0 92 121 117 35 97 17 25 30 196 166 639 323 440 441 588 605 248 PE 30 154 62 87 115 61 113 70 75 70 58 66 76 59 147 32 61 50 49 47 95

Table no:- 7

Chart no:-10.1

EQUITY
3000000 2500000 2000000 1500000 1000000 500000 0

EQUITY

12-May-11

10-May-11

14-May-11

16-May-11

18-May-11

20-May-11

22-May-11

24-May-11

26-May-11

28-May-11

Chart no:-10.2

FO
20000 15000 10000 5000 0 FO

Chart no 10.3

CE
700 600 500 400 300 200 100 0

30-May-11

2-May-11

4-May-11

6-May-11

8-May-11

CE

Chart no;-10.4

PE
200 150 100 50 0 PE

INTEPRETETION On 31 of may the no., of contracts are more for eqity i.e., 25 may for fo,23 for ce,20 for pe this is due to the rise in prices from few days before and on that day the prices is high. The futures are also traded more simultaneously with the equity and the no., of contracts are traded more is on the day . Initially there are equal in number but they decreased and the call was traded more while compared to put because the market was in positive side in first few days.

DLF
Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 5892442 5121351 4539043 5387898 3902411 2950567 4841641 4326348 5620830 4620791 2294039 3363952 3666870 3372459 3482710 3172248 8183275 11023956 9657904 4600345 3821128 4977091 DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO 12734 10023 10658 9923 9131 9573 8430 5843 8647 7469 9963 9525 6696 8015 7788 8924 8893 12753 20194 18677 14498 CE 1 78 82 110 439 501 555 402 735 336 259 133 113 247 74 303 167 246 2256 3121 1109 PE 174 414 305 344 227 175 175 138 252 225 446 398 386 484 521 749 633 604 1745 1266 189

Table no :- 8

Chart no:-11.1

EQUITY
12000000 10000000 8000000 6000000 4000000 2000000 0

EQUITY

26-May-11

10-May-11

12-May-11

14-May-11

16-May-11

18-May-11

20-May-11

22-May-11

24-May-11

28-May-11

Chart no:-11.2

FO
25000 20000 15000 10000 5000 0

30-May-11

2-May-11

4-May-11

6-May-11

8-May-11

FO

Chart no:-11.3

CE
3500 3000 2500 2000 1500 1000 500 0

CE

Chart no:-11.4

PE
2000 1500 1000 500 0 PE

Interpretation: From table 11.1 we can observe that the equity are traded more but there are more fluctuations in the no., of contracts traded, this may be due to more fluctuations are made intra day so that made the closing price changes with a small margin. The futures are also traded similar to equity that can be seen in charts 11.2. While considering the options from tables 11.3 & 11.4 i.e., closing price & no., of contracts, from 18 of May to 24th May. there is a increase in the prices and the shares are also traded more. On the same dates the call options are also increased this clearly shown that the increase in the scrip price result in the call price and the quantity are also traded more.

ANALYSYS ON TERNOVER SBI Turnover

Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 55998.79 134505.1 59114.15 44889.2 38538.25 28564.21 26186.59 60476.8 38426.7 48814.34 36344.76 198259.01 139043.85 79662.82 62970.92 54519.29 55592.72 76155.68 89509.26 57949.48 30249.02 46829.86 DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO 65953.2 58103.1 82752.6 164526 95038.1 63218.5 71099.7 53132.2 44111 100145 54841.1 86168.8 76216.1 377664 172641 75222.6 77547.7 78060.3 82325.7 105679 120608 CE 0 0 0 0 6.68 3.38 0 0 0 0 0 0 0 39814.4 22229.9 6583.09 5495.33 4624.06 2128.74 1206.48 3112.6 PE 37.62 103.47 771.83 3450.53 3084.42 2101.52 1236.94 1133.58 725.45 1924.7 1539.76 2142.42 13443.3 39191.2 3144.82 723.83 359.42 1020.64 223.68 521.3 1021.01

Table no:-8

Chart no:-12.1

EQUITY
250000 200000 150000 100000 50000 0

EQUITY

Chart no 12.2

FO
400000 350000 300000 250000 200000 150000 100000 50000 0 FO

Chart no:-12.3

CE
45000 40000 35000 30000 25000 20000 15000 10000 5000 0 CE

Chart no :-12.4

PE
3525 3025 2525 2025 1525 1025 525 25 PE

Interpretation: From the above table and charts it is clearly depicted that the futures are having more turnover than the equity. As explained earlier that the futures are traded more than equity because they are traded in lots. The futures lot of SBIN consists of 125 shares; if an investor wants to purchase those many shares then it costs a lot. So, with the help of futures the investor can buy with some margin amount i.e., the investor can invest in 125 shares less than the market price. Due to this many investors will invest in futures so the turnover is more in futures. The call option is also some what equivalent to the concept of futures but the difference is the prices are less than the futures and the prices are according to the option. The call options are having more turnover than put option, because call options contracts are traded more than the put.

TATA MOTOR
Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 14250.08 24575.75 18630.27 12287.61 26278.39 14967.94 17751.48 21297.24 22638.31 24347.09 28716.57 18634.28 29504.99 23139.22 16646.76 21260.31 23576.3 20272.15 32557.49 79444.47 30716.3 46994.46 DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO 43206.74 34269.75 35677.11 56161.55 52100.31 39887.62 70830.51 38904.05 54151.27 46498.67 62863.15 68238.41 55984.13 48425.27 64863.29 45431.4 50162.84 52502.53 56320.69 49600.55 72212.82 CE 43.68 0 6.18 527.21 2800.1 1502.1 1922.2 522 348.34 312.34 396.11 290.05 421.99 272.69 5280.5 4111.1 2554.3 8433.9 8957.8 9228.7 15888 PE 195.32 805.57 496.15 2120.87 2201.74 1356.28 2757.88 1846.96 2424.94 2253.57 3313.33 2984.32 3057.34 3281.34 6299.28 3089.02 2771.93 3435.29 1445.72 1065.65 7820.33

Table no:- 9

Chart no:-13.1

EQUITY
90000 80000 70000 60000 50000 40000 30000 20000 10000 0 EQUITY

Chart no:-13.2

FO
80000 70000 60000 50000 40000 30000 20000 10000 0 FO

Chart no :-13.3

CE
18000 16000 14000 12000 10000 8000 6000 4000 2000 0 CE

Chart no:-13.4

PE
9000 8000 7000 6000 5000 4000 3000 2000 1000 0

PE

Interpretation: From table 13.1 & chart 13.2 we can observe that futures are traded more from the month start. But from 10th May to last of the moth equity are traded in a stable position this is because there is no major change in the prices in those days and simultaneously there is no major change in the contracts too. The futures are made more turnover than equity.

INFOSYSTCH
Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 49236.45 48610.09 60679.66 45237.29 42883.24 17869.98 17655.12 23304.97 18047.23 29933.78 23078.95 27005.76 36261.29 26548.43 28541.56 24044.45 27162.87 38569.72 29408.01 21835.04 23832.43 71224.41 DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO 53690.62 54880.92 34391.08 46510.3 42354.92 37367.78 40320.92 29580.16 40465.68 24335.32 24664.16 36545.91 25033.26 31059.73 50718.09 30595.5 33677.34 24559.3 38548.78 56324.74 50314.42 CE 0 0 3.69 0 335.49 439.67 426.27 127.74 353.82 62.21 91.08 109.19 707.62 598.38 2297.8 1160.7 1579.9 1578.8 2105.9 2157.1 883.6 PE 108.38 558.68 223.98 314.14 419.11 222.5 409.78 253.14 270.75 252.41 209.49 237.63 275.02 213.12 532.19 115.62 220.27 180.8 176.5 171.75 347.35

Table no:-10

Chart no:-14.1

EQUITY
80000 70000 60000 50000 40000 30000 20000 10000 0 EQUITY

Chart no:-14.2

FO
60000 50000 40000 30000 FO 20000 10000 0

Chart no:-14.3

CE
2500 2000 1500 1000 500 0

CE

Chart no14.4

PE
600 500 400 300 PE 200 100 0

Interpretation: The futures are having more turnover than the equity, this is because they are in lots and they consider the full value rather than the margin amounts. The call and put charts are traded according to the rise and fall of the equity price. This can be seen in the charts 14.1 & 14.2. Here also the turnover of futures are more than the equities & options.

DLF
Date 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 27-May-11 30-May-11 31-May-11 EQUITY 13340 11429.72 9924.95 11675.52 8557.66 6472.37 10703 9786.17 12875.88 10739.37 5238.78 7591.56 8395.27 7579.92 7889.32 7095.61 17949.27 23213.1 20640.93 10255.3 8815.91 11814.9 DATE 28-Apr-11 29-Apr-11 2-May-11 3-May-11 4-May-11 5-May-11 6-May-11 9-May-11 10-May-11 11-May-11 12-May-11 13-May-11 16-May-11 17-May-11 18-May-11 19-May-11 20-May-11 23-May-11 24-May-11 25-May-11 26-May-11 FO 29478.45 22790.33 24269.83 22245.9 20072.32 20807 18553.08 12863.45 19201.48 16921.25 22836.17 22175.64 15323.04 18121.63 17860.71 19995.42 20117.16 28445.81 44049.59 39156.02 30823.41 CE 2.37 181.01 191.22 253.79 1003.2 1140.3 1268.6 917.52 1681.8 775.7 601.54 312.12 260.75 564.39 171.1 687.92 381.73 557.43 5077.5 6883.6 2441.4 PE 392.47 937.97 689.78 782.3 519.66 402.34 399.63 314.63 571.67 505.48 995.96 883.61 859.75 1080.52 1158.77 1677.15 1410.84 1353.92 3959.07 2924.36 429.39

Table:- 10

Chart no:-15.1

EQUITY
25000 20000 15000 10000 5000 0

EQUITY

Chart no 15.2

FO
50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

FO

.chart no:-15.3

CE
8000 7000 6000 5000 4000 3000 2000 1000 0 CE

Chart no :-15.4

PE
4500 4000 3500 3000 2500 2000 1500 1000 500 0

PE

Interpretation: From table 15.3& 15.4 we can observe that the puts are traded more than the call option but the turnover of futures in this case is more. The futures are also traded similar to equity that can be seen in charts 15.1 & 15.2. While comparing the future ,equities,& options the futures turnover is almost double of the equities in all the month.

CHAPTER V Findings & Suggestions

FINDINGS

I have done my project at ANGEL BRKING LTD on COMPARITIVE ANALYSIS BETWEEN EQUITY AND DERIVATIVES ON SELECTED SCRIPS. So in my project I took a sample of 4 companies to make the comparative analysis.

Many of investors are do their investment in equities & derivatives. The analysis of market gave a way to determine the rate of turnover. The number of contracts and the closing prices of equity and derivative markets. Except the turnover, the number of contracts and closing prices were more for equity market. This condition arises because a large number of investors are interested in equity. In the case of SBIN securities futures was traded at higher market price compared to its equity on all the days except a few days of study. In the case of INFOSYS securities equity contracts was traded more compared to its derivatives on all the days except a few days of study. In the case of DLF securities equity was traded at high market price compared to its derivatives on all the days except a few days of study.

CONCLUSION: I conclude through my observation that investment in equity is beneficial than investment in derivatives or the second option is to invest a proportionate amount in equity and remaining in derivatives to nullify the losses.

BIBLIOGRAPHY: www.derivativesindia.com www.bseindia.com www.nseindia.com www.Angel broking.com www.hseindia.com