PROJECT REPORT

ON

DERIVATIVES

Submitted By:

ASHISH CHOUDHARY
201303143

PGDBA-2013-15
SYMBIOSIS CENTRE FOR DISTANCE LEARNING
(SCDL)

1
iNTRODUCTION

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 INTRODUCTION TO DERIVATIVES

A derivative security is a security whose value depends on the value of together

more basic underlying variable. These are also known as contingent claims. Derivatives
securities have been very successful in innovation in capital markets.

The emergence of the market for derivative products most notably forwards,
futures and options can be traced back to the willingness of risk -averse economic
agents to guard themselves against uncertainties arising out of fluctuations in asset
prices. By their very nature, financial markets are markets by a very high degree of
volatility. Through the use of derivative products, it is possible to partially or fully
transfer price risks by locking in asset prices. As instruments of risk management
these generally dont influence the fluctuations in the underlying asset prices.

However, by locking-in asset prices, derivative products minimize the impact of

fluctuations in asset prices on the profitability and cash-flow situation of risk-averse
investor.

Derivatives are risk management instruments which derives their value from an
underlying asset. Underlying asset can be Bullion, Index, Share, Currency, Bonds,
Interest, etc.

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 OBJECTIVES OF THE STUDY:

! To understand the concept of the Financial Derivatives such as

Forwards,
Futures and Options and swaps
! To find out profit/loss position of the option writer and option holder
! To study various trends in derivatives market
! To study the role of derivatives in India financial market
! To study in detail the role of futures and options
! To examine the advantages and the disadvantages of different
strategies along with situations
! To study the different ways of buying and selling of Options

SCOPE OF THE STUDY:

The study is limited to Derivatives With special reference to Futures and

Options in the Indian context and the IIFL has been taken as representative sample for
the study.

The study cannot be said as totally perfect, any alteration may come. The study
has only made humble attempt at evaluating Derivatives markets only in Indian
context. The study is not based on the International perspective of the Derivatives
markets.

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 RESEARCH METHODOLOGY:

The data had been collected through primary and secondary source.
Primary data:
The data had been collected through IIFL staff.

Secondary data:
The data had been collected through Journals, News papers, and Internet.

Limitations:
! The study does not take any Nifty Index Futures and Options and
International

Markets into the consideration.

! This is a study conducted within a period of 45 days.
! During this limited period of study, the study may not be a detailed, Full

fledged and utilitarian one in all aspects.

! The study contains some assumptions based on the demands of the analysis.
! The study does not provide any predictions or forecast of the selected scripts.
! The study was conducted in Hyderabad only.
! As the time was limited, study was confined to conceptual understanding
of
Derivatives market in India.

5
THEORATICAL
CONCEPTS OF
DERIVATIVES

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 DERIVATIVES:

The emergence of the market for derivative products, most notably

forwards, futures and options, can be traced back to the willingness of risk-averse
economic agents to guard themselves against uncertainties arising out of fluctuations
in asset prices. By their very nature, the financial markets are marked by a very high
degree of volatility. Through the use of derivative products, it is possible to partially
or fully transfer price risks by locking in asset prices. As instruments of risk
management, these generally do not influence the fluctuations underlying prices.
However, by locking in asset prices, derivative products minimizes the impact of
fluctuations in asset prices on the profitability and cash flow situation of riskaverse
investors.

D E F I NI T I O N:
Understanding the word itself, Derivatives is a key to mastery of the topic.
The word originates in mathematics and refers to a variable, which has been derived
from another variable. For example, a measure of weight in pound could be derived
from a measure of weight in kilograms by multiplying by two.
In financial sense, these are contracts that derive their value from some
underlying asset. Without the underlying product and market it would have no
independent existence. Underlying asset can be a Stock, Bond, Currency, Index or
a Commodity. Some one may take an interest in the derivative products without
having an interest in the underlying product market, but the two are always related
and may therefore interact with each other.

The term Derivative has been defined in Securities Contracts (Regulation) Act 1956, as:

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 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.

IMPORTANCE OF DERIVATIVES

Derivatives are becoming increasingly important in world markets as a tool for

risk management. Derivatives instruments can be used to minimize risk. Derivatives
are used to separate risks and transfer them to parties willing to bear these risks. The
kind of hedging that can be obtained by using derivatives is cheaper and more
convenient than what could be obtained by using cash instruments. It is so because,
when we use derivatives for hedging, actual delivery of the underlying asset is not at
all essential for settlement purposes.

Moreover, derivatives would not create any risk. They simply manipulate
the risks and transfer to those who are willing to bear these risks.
For example,

Mr. A owns a bike If he does not take insurance, he runs a big risk. Suppose he
buys insurance [a derivative instrument on the bike] he reduces his risk. Thus,
having an insurance policy reduces the risk of owing a bike. Similarly, hedging
through derivatives reduces the risk of owing a specified asset, which may be a share,
currency, etc.

CHARACTERISTICS OF DERIVATIVES:

1. Their value is derived from an underlying instrument such as stock

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 index, currency, etc.
2. They are vehicles for transferring risk.
3. They are leveraged instruments.

MAJOR PLAYERS IN DERIVATIVE MARKET:

There are three major players in the derivatives

trading.
1. Hedgers
2. Speculators
3. Arbitrageurs

Hedgers: The party, which manages the risk, is known as Hedger. Hedgers seek to
protect themselves against price changes in a commodity in which they have an
interest.
Speculators: They are traders with a view and objective of making profits. They
are willing to take risks and they bet upon whether the markets would go up or come
down. Arbitrageurs: Risk less profit making is the prime goal of arbitrageurs. They
could be making money even with out putting their own money in, and such
opportunities often come up in the market but last for very short time frames.
They are specialized in making purchases and sales in different markets at the
same time and profits by the difference in prices between the two centers.

TYPES OF DERIVATIVES
Most commonly used derivative contracts
are:
Forwards: A forward contract is a customized contract between two entities where

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settlement takes place on a specific date in the futures at todays pre-agreed price.
Forward contracts offer tremendous flexibility to the partys to design the contract
in terms of the price, quantity, quality, delivery, time and place. Liquidity and default
risk are very high.
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 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: Longer dated options are called warrants and are generally traded
over the counter. Options generally have life up to one year, the majority of
options traded on options exchanges having a maximum maturity of nine months.
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 pre-arranged 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.

RISKS INVOLVED IN DERIVATIVES:

Derivatives are used to separate risks from traditional instruments and transfer
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these risks to parties willing to bear these risks. The fundamental risks involved in
derivative business includes

A. Credit Risk: This is the risk of failure of a counterpart to perform its

obligation as per the contract. Also known as default or counterparty risk, it
differs with different instruments.
B. Market Risk: Market risk is a risk of financial loss as a result of adverse
movements of prices of the underlying asset/instrument.
C. Liquidity Risk: The inability of a firm to arrange a transaction at
prevailing market prices is termed as liquidity risk. A firm faces two types
of liquidity risks:
! Related to liquidity of separate products.
! Related to the funding of activities of the firm including derivatives.
D. Legal Risk: Derivatives cut across judicial boundaries, therefore the
legal aspects associated with the deal should be looked into carefully.

DERIVATIVES IN INDIA:

Indian capital markets hope derivatives will boost the nations economic
prospects. Fifty years ago, around the time India became independent men in Mumbai
gambled on the price of cotton in New York. They bet on the last one or two digits of
the closing price on the New York cotton exchange. If they guessed the last
number, they got Rs.7/- for every Rupee layout. If they matched the last two digits
they got Rs.72/- Gamblers preferred using the New York cotton price because the
cotton market at home was less liquid and could easily be manipulated.
Now, India is about to acquire own market for risk. The country, emerging from a
long history of stock market and foreign exchange controls, is one of the vast
major economies in Asia, to refashion its capital market to attract western
investment. A hybrid over the counter, derivatives market is expected to develop along
side. Over the last couple of years the National Stock Exchange has pushed
derivatives trading, by using fully automated screen based exchange, which was
established by India's leading institutional investors in 1994 in the wake of numerous
financial & stock market scandals.

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Derivatives Segments in NSE & BSE

On June 9, 2000 BSE and NSE became the first exchanges in India to introduce
trading in exchange traded derivative products, with the launch of index Futures on
Sensex and Nifty futures respectively. Index Options was launched in June 2001,
stock options in July 2001, and stock futures in November 2001.
NIFTY is the underlying asset of the index futures at the futures and options
segment of NSE with a market lot of 50 and Sensex is the underlying stock index in
BSE with a market lot of 30. This difference of market lot arises due to a minimum
specification of a contract value of Rs.2 Lakhs by Securities and Exchange Board of

India. For example Sensex is 18000 then the contract value of a futures index having
Sensex as underlying asset will 30x18000 = 540000. Similarly, If Nifty is 5200 its
futures contract value will be 50x5200=260000. Every transaction shall be in multiples
of market lot. Thus, index futures at NSE shall be traded in multiples of 50 and a BSE
in multiples of 30.

Contract Periods:
At any point of time there will be always be available nearly 3months contract
periods in Indian Markets.
These were
1) Near Month
2) Next Month
3) Far Month

For example in the month of September 2007 one can enter into September
futures contract or October futures contract or November futures contract. The last
Thursday of the month specified in the contract shall be the final settlement date for
the contract at both NSE as well as BSE; it is also known as Expiry Date.

Settlement:
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 The settlement of all derivative contracts is in cash mode. There is daily as
well as final settlement. Outstanding positions of a contract can remain open till the
last Thursday of that month. As long as the position is open, the same will be
marked to market at the daily settlement price, the difference will be credited or
debited accordingly and the position shall be brought forward to the next day at the
daily settlement price. Any position which remains open at the end of the final
settlement day (i.e. last Thursday) shall be closed out by the exchange at the final
settlement price which will be the closing spot value of the underlying asset.

Margins:
There are two types of margins collected on the open position, viz., initial margin
which is collected upfront which is named as SPAN MARGIN and mark to market
margin, which is to be paid on next day. As per SEBI guidelines it is mandatory for
clients to give margins, failing in which the outstanding positions are required to be
closed out.

Members of F&O segment:

There are three types of members in the futures and options segment. They
are trading members, trading cum clearing members and professional clearing
members. Trading members are the members of the derivatives segment and
carrying on the transactions on the respective exchange.
The clearing members are the members of the clearing corporation who deal with
payments of margin as well as final settlements.
The professional clearing member is a clearing member who is not a trading member.
Typically, banks and custodians become professional clearing members.
It is mandatory for every member of the derivatives segment to have approved
users who passed SEBI approved derivatives certification test, to spread awareness
among investors.

Exposure limit:

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 The national value of gross open positions at any point in time for index
futures and short index option contract shall not exceed 33.33 times the liquid net
worth of a clearing member. In case of futures and options contract on stocks the
notional value of futures contracts and short option position any time shall not exceed
20 times the liquid net worth of the member. Therefore, 3 percent notional value of
gross open position in index futures and short index options contracts, and 5 percent of
notional value of futures and short option position in stocks is additionally adjusted
from the liquid net worth of a clearing member on a real time basis.

Position limit:
It refers to the maximum no of derivatives contracts on the same underlying security
that one can hold or control. Position limits are imposed with a view to detect
concentration of position and market manipulation. The position limits are
applicable on the cumulative combined position in all the derivatives contracts on
the same underlying at an exchange. Position limits are imposed at the customer
level, clearing member level and market levels are different.

Regulatory Framework:

Considering the constraints in infrastructure facilities the existing

stock exchanges are permitted to trade derivatives subject to the following conditions:
Trading should take place through an online screen based trading system.
An independent clearing corporation should do the clearing of
the derivative market.
The exchange must have an online surveillance capability,
which monitors positions, price and volumes in real time so as to detect
market manipulations. Position limits be used for improving market
quality.
Information about traded quantities and quotes should be

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 disseminated by the exchange in the real time over at least two
information-vending networks, which are accessible to the investors in
the country.
The exchange should have at least 50 members to start
derivatives trading.
The derivatives trading should be done in a separate segment with
a separate membership. The members of an existing segment of the
exchange will not automatically become the members of derivatives
segment.
The derivatives market should have a separate governing council
and representation of trading/clearing members shall be limited to
maximum of 40% of total members of the governing council.

The chairman of the governing council of the derivative

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

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16
 FUTURES

FUTURES

The future contract is an agreement between two parties to buy or sell an

asset at a certain specified time in future for certain specified price. In this, it is similar
to a forward contract. A futures contract is a more organized form of a forward
contract; these are traded on organized exchanges. However, there are a number of
differences between forwards and futures. These relate to the contractual futures, the
way the markets are organized, profiles of gains and losses, kind of participants in the
markets and the ways they use the two instruments.

Futures contracts in physical commodities such as wheat, cotton, gold,

silver, cattle, etc. have existed for a long time. Futures in financial assets, currencies,
and interest bearing instruments like treasury bills and bonds and other innovations
like futures contracts in stock indexes are relatively new developments.
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 The futures market described as continuous auction markets and exchanges
providing the latest information about supply and demand with respect to individual
commodities, financial instruments and currencies, etc. Futures exchanges are where
buyers and sellers of an expanding list of commodities; financial instruments and
currencies come together to trade. Trading has also been initiated in options on futures
contracts. Thus, option buyers participate in futures markets with different risk. The
option buyer knows the exact risk, which is unknown to the futures trader.

FEATURES OF FUTURES CONTRACTS:

The principal features of the contract are as
follows.

Organized Exchanges: Unlike forward contracts which are traded in an over- the-
counter market, futures are traded on organized exchanges with a designated physical
location where trading takes place. This provides a ready, liquid market which futures can
be bought and sold at any time like in a stock market.

Standardization: In the case of forward contracts the amount of commodities to

be delivered and the maturity date are negotiated between the buyer and seller and can
be Tailor made to buyers requirement. In a futures contract both these are
standardized by the exchange on which the contract is traded.

Clearing House: The exchange acts a clearing house to all contracts struck on the
trading floor. For instance a contract is struck between capital A and B. Upon entering
into the records of the exchange, this is immediately replaced by two contracts,
one between A and the clearing house and another between B and the clearing
house. In other words the exchange interposes itself in every contract and deal,
where it is a buyer to seller, and seller to buyer. The advantage of this is that A and B
do not have to under take any exercise to investigate each others credit worthiness. It
also guarantees financial integrity of the market. This enforces the delivery for the
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 delivery of contracts held for until maturity and protects itself from default risk by
imposing margin requirements on traders and enforcing this through a system called
marking to market.

Actual delivery is rare: In most of the forward contracts, the commodity

is actually delivered by the seller and is accepted by the buyer. Forward contracts are
entered into for acquiring or disposing of a commodity in the future for a gain at a
price known today. In contrast to this, in most futures markets, actual delivery takes
place in less than one percent of the contracts traded. Futures are used as a device
to hedge against price risk and as a way of betting against price movements rather
than a means of physical acquisition of the underlying asset. To achieve this most
of the contracts entered into are nullified by the matching contract in the opposite
direction before maturity of the first.

Margins: In order to avoid unhealthy competition among clearing members in

reducing margins to attract customers, a mandatory minimum margins are obtained by the
members from the customers. Such a stop insures the market against serious
liquidity crisis arising out of possible defaults by the clearing members. The members

collect margins from their clients as may be stipulated by the stock exchanges
from time to time and pass the margins to the clearing house on the net basis
i.e. at a stipulated percentage of the net purchase and sale position.
The stock exchange imposes margins as
follows:
1. Initial margins on both the buyer as well as the seller.
2. The accounts of buyer and seller are marked to the market daily.

The concept of margin here is same as that of any other trade, i.e. to introduce
a financial stake of the client, to ensure performance of the contract and to cover day
to day adverse fluctuations in the prices of the securities.
The margin for future contracts has two
components:
Initial margin

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 Marking to market

Initial margin: In futures contract both the buyer and seller are required to perform
the contract. Accordingly, both the buyers and the sellers are required to put in
the initial margins. The initial margin is also known as the performance margin and
usually 5% to 15% of the purchase price of the contract. The margin is set by the
stock exchange keeping in view the volume of business and size of transactions as
well as operative risks of the market in general.

The concept being used by NSE to compute initial margin on the futures
transactions is called value- at Risk (VAR) where as the options market had SPAN
based margin system.

Marking-to-Market: Marking to market means, debiting or crediting the

clients equity accounts with the losses/profits of the day, based on which margins
are sought.

It is important to note that through marking to market process, the clearinghouse

substitutes each existing futures contract with a new contract that has the settlement
price or the base price. Base price shall be the previous days closing Nifty value.
Settlement price is the purchase price in the new contract for the next trading day.

FUTURES TERMINOLOGY:
Spot price: The price at which an asset is traded in spot market.
Futures price: The price at which the futures contract is traded in the futures market.
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 under one contract.
For instance contract size on NSE futures market is 100 Nifties.

Basis/Spread:
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 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 formal 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.

Multiplier:
It is a pre-determined value, used to arrive at the contract size. It is the price
per index point.

Tick Size: It is the minimum price difference between two quotes of similar nature.

Open Interest:
Total outstanding long/short positions in the market in any specific point
of time. As total long positions for market would be equal to total short positions for
calculation of open Interest, only one side of the contract is counted.
Long position: Outstanding/Unsettled purchase position at any point of time.
Short position: Out standing/unsettled sale position at any time point of time.

Index Futures:
Stock Index futures are most popular financial futures, which have been used
to hedge or manage systematic risk by the investors of the stock market. They are
called hedgers, who own portfolio of securities and are exposed to systematic
risk. Stock index is the apt hedging asset since, the rise or fall due to systematic risk
is accurately shown in the stock index. Stock index futures contract is an agreement to
buy or sell a specified amount of an underlying stock traded on a regulated futures
exchange for a specified price at a specified time in future.

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 Stock index futures will require lower capital adequacy and margin
requirement as compared to margins on carry forward of individual scrips. The
brokerage cost on index futures will be much lower. Savings in cost is possible
through reduced bid-ask spreads where stocks are traded in packaged forms. The
impact cost will be much lower incase of stock index futures as opposed to dealing in
individual scrips. The market is conditioned to think in terms of the index and
therefore, would refer trade in stock index futures. Further, the chances of
manipulation are much lesser.

The stock index futures are expected to be extremely liquid, given the
speculative nature of our markets and overwhelming retail participation expected to be
fairly high. In the near future stock index futures will definitely see incredible volumes in
India. It will be a blockbuster product and is pitched to become the most liquid contract in
the world in terms of contracts traded. The advantage to the equity or cash market is in
the fact that they would become less volatile as most of the speculative activity would
shift to stock index futures. The stock index futures market should ideally have more
depth, volume and act as a stabilizing factor for the cash market. However, it is too early
to base any conclusions on the volume or to form any firm trend. The difference
between stock index futures and most other financial futures contracts is that settlement is
made at the value of the index at maturity of the contract.

Example:
If NSE NIFTY is at 5800 and each point in the index equals to Rs.50, a
contract struck at this level could work Rs.290000 (5800x50). If at the expiration of the
contract,

the NSE NIFTY is at 5900, a cash settlement of Rs.5000 is required (5900-5800) x50).

Stock Futures:
With the purchase of futures on a security, the holder essentially makes a
legally binding promise or obligation to buy the underlying security at same point in
the future (the expiration date of the contract). Security futures do not represent
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 ownership in a corporation and the holder is therefore not regarded as a shareholder.

A futures contract represents a promise to transact at same point in the future.

In this light, a promise to sell security is just as easy to make as a promise to buy
security. Selling security futures without previously owing them simply obligates the
trader to sell a certain amount of the underlying security at same point in the future.
It can be done just as easily as buying futures, which obligates the trader to buy a
certain amount of the underlying security at some point in future.

Example:
If the current price of the GMRINFRA share is Rs.170 per share. We
believe that in one month it will touch Rs.200 and we buy GMRINFRA shares. If
the price really increases to Rs.200, we made a profit of Rs.30 i.e. a return of 18%.

If we buy GMRINFRA futures instead, we get the same position as ACC in the cash
market, but we have to pay the margin not the entire amount. In the above example if
the margin is 20%, we would pay only Rs.34 per share initially to enter into the futures
contract. If GMRINFRA share goes up to Rs. 200 as expected, we still earn Rs. 30 as profit.

PAYOFF FOR FUTURES CONTRACTS:

Futures contracts have linear payoffs. In simple words, it means that the
losses as well as profits for the buyer and the seller of a futures contract are unlimited.
These linear payoffs are fascinating as they can be combined with options and the
underlying to generate various complex payoffs.

Payoff for buyer of futures: Long futures

The payoff for a person who buys a futures contract is similar to the payoff
for a person who holds an asset. He has a potentially unlimited upside as well as
potentially unlimited downside.
Take the case of a speculator who buys a two-month Nifty index futures
contract when Nifty stands at 4800. The underlying asset in this case is Nifty

23
portfolio. When the index moves up, the long futures position starts making profits,
and when index moves down it starts making losses.

Payoff for a buyer of Nifty futures

Profit

4800
0 Nifty

LOSS

Payoff for seller of futures: Short futures

The payoff for a person who sells a futures contract is similar to the payoff
for a person who shorts an asset. He has potentially unlimited upside as well as
potentially unlimited downside.

Payoff for a seller of Nifty futures

Profit

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 4800
0 Nifty

Loss

Take the case of a speculator who sells a two-month Nifty index futures contract
when the Nifty stands at 4800. The underlying asset in this case is the Nifty portfolio.
When the index moves down, the short futures position starts making profits, and when
index moves up, it starts making losses.

3.3.4 PRICING FUTURES

Cost of Carry Model:

We use fair value calculation of futures to decide the no arbitrage limits on
the price of the futures contract. This is the basis for the cost-of-carry model
where the price of the contract is defined as follows.

F=S+C
Where
F - Futures
S - Spot price
C - Holding cost or Carry cost
This can also be expressed as

T
F = S (1+r)
Where
r - Cost of financing
T - Time till expiration

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Pricing index futures given expected dividend amount:
The pricing of index futures is also based on the cost of carry model where the
carrying cost is the cost of financing the purchase of the portfolio underlying the
index, minus the present value of the dividends obtained from the stocks in the index
portfolio.

Example
Nifty futures trade on NSE as one, two and three month contracts. Money can be
borrowed at a rate of 15% per annum. What will be the price of a new two-
month futures contract on Nifty?

1. Let us assume that ACC will be declaring a dividend of Rs.10/- per share
after 15 days of purchasing of contract.
2. Current value of Nifty is 1200 and Nifty trade with a multiplier of 200.
3. Since Nifty is traded in multiples of 200 value of the
contract is 200x1200=240000.
4. If ACC has weight of 7% in Nifty, its value in Nifty is Rs.16800 i.e.
(240000x0.07).
5. If the market price of ACC is Rs.140, then a traded unit of Nifty involves
120 shares of ACC i.e. (16800/140).
6. To calculate the futures price we need to reduce the cost of carry to the extent
of dividend received is Rs.1200 i.e. (120x10). The dividend is received 15
days later and hence compounded only for the remainder of 45 days. To
calculate the futures price we need to compute the amount of dividend
received for unit of Nifty. Hence, we divided the compounded figure by 200.
60/365 45/365
7. Thus futures price F = 1200(1.15) (120x10(1.15) )/200 =
Rs.1221.80.

Pricing index futures given expected dividend yield

If the dividend flow throughout the year is generally uniform, i.e. if there are few

26
historical cases of clustering of dividends in any particular month, it is useful to
calculate the annual dividend yield.
T
F = S (1+ r-q)
Where

F- Futures price
S - Spot index value r - Cost of financing.q -
Expected dividend yield T Holding.
Period Example:
A two-month futures contract trades on the NSE. The cost of financing is 15% and the
dividend yield on Nifty is 2% annualized. The spot value of Nifty is 1200. What
would be the fair value of the futures contract?
60/365
Fair value = 1200(1+0.15-0.02) = Rs.1224.35

Pricing stock futures

A futures contract on a stock gives its owner the right and the obligation to buy
or sell the stocks. Like, index futures, stock futures are also cash settled: There is
no delivery of the underlying stock.

Pricing stock futures when no dividend is expected

The pricing of stock futures is also based on the cost of carry model, where the
carrying cost is the cost of financing the purchase of the stock, minus the present
value of the dividends obtained from the stock. If no dividends are expected during the
life of the contract, pricing futures on that stock is very simple. It simply involves the
multiplying the spot price by the cost of carry.

Example:
SBI futures trade on NSE as one, two and three month contracts. Money can be
borrowed at 15% per annum. What will be the price of a unit of new two-month
futures contract on SBI if no dividends are expected during the period?
1. Assume that the spot price of SBI is Rs.228.
60/365
2. Thus, futures price F = 228(1.15) = Rs.223.30.

Pricing stock futures when dividends are expected

27
When dividends are expected during the life of futures contract, pricing involves
reducing the cost of carrying to the extent of the dividends. The net carrying cost is
the cost of financing the purchase of the stock, minus the present value of the
dividends obtained from the stock.

Example:
ACC futures trade on NSE as one, two and three month
contracts.
What will be the price of a unit of new two-month futures contract on ACC if
dividends are expected during the period?
1. Let us assume that ACC will be declaring a dividend of Rs.10/- per share
after 15 days pf purchasing contract.
2. Assume that the market price of ACC is Rs.140/-
3. To calculate the futures price, we need to reduce the cost of carrying to
the extent of dividend received. The amount of dividend received is Rs.10/-.
The dividend is received 15 days later and hence, compounded only
for the remaining 45 days.
4. Thus, the futures price
60/365 45/365
F = 140 (1.15) 10(1.15) = Rs.133.08.

3.4 OPTIONS

An option is a derivative instrument since its value is derived from the

underlying asset. It is essentially a right, but not an obligation to buy or sell an asset.
Options can be a call option (right to buy) or a put option (right to sell). An option is
valuable if and only if the prices are varying.
An option by definition has a fixed period of life, usually three to six
months. An option is a wasting asset in the sense that the value of an option
diminishes as the date of maturity approaches and on the date of maturity it is equal to
zero.
An investor in options has four choices before him. Firstly, he can buy a call
option
28
meaning a right to buy an asset after a certain period of time. Secondly, he can buy
a put option meaning a right to sell an asset after a certain period of time. Thirdly, he
can

write a call option meaning he can sell the right to buy an asset to another
investor. Lastly, he can write a put option meaning he can sell a right to sell to another
investor. Out of the above four cases in the first two cases the investor has to pay
an option premium while in the last two cases the investors receives an option
premium.

D E F I NI T I O N :
An option is a derivative i.e. its value is derived from something else. In
the case of the stock option its value is based on the underlying stock (equity). In the
case of the index option, its value is based on the underlying index.

Options clearing corporation

The Options Clearing Corporation (OCC) is guarantor of all exchange-traded
options once an option transaction has been completed. Once a seller has written
an option and a buyer has purchased that option, the OCC takes over it. It is the
responsibility of the OCC who over sees the obligations to fulfill the exercises. If
I want to exercise an ACC November 100-call option, I notify my broker. My
broker notifies the OCC, the OCC then randomly selects a brokerage firm, which is
short of

one ACC stock. That brokerage firm then notifies one of its customers who
have written one ACC November 100 call option and exercises it. The brokerage firm
customer can be chosen in two ways. He can be chosen at random or FIFO basis.
Because, OCC has a certain risk that the seller of the option cant fulfill the
contract, strict margin requirement are imposed on sellers. This margin requirements
acts as a performance Bond. It assures that OCC will get its money.

29
OPTIONS TERMINOLOGY:

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 the 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 option contract is known as the expiration date,
the exercise date, the straight date or the maturity date.

Strike Price:
The price specified in the option contract is known as the strike price or the
exercise price.

CHARACTERISTICS OF OPTIONS:
The following are the main characteristics of options:
1. Options holders do not receive any dividend or interest.

2. Options holders receive only capital gains.

3. Options holder can enjoy a tax advantage.

4. Options are traded at O.T.C and in all recognized stock exchanges.

30
 5. Options holders can control their rights on the underlying asset.

6. Options create the possibility of gaining a windfall profit.

7. Options holders can enjoy a much wider risk-return combinations.

8. Options can reduce the total portfolio transaction costs.

9. Options enable the investors to gain a better return with a limited amount of

investment.

Call Option:
An option that grants the buyer the right to purchase a desired instrument is
called a call option. A call option is contract that gives its owner the right but not the
obligation, to buy a specified asset at specified prices on or before a specified date.

An American call option can be exercised on or before the specified date. But, a
European option can be exercised on the specified date only.

The writer of the call option may not own the shares for which the call
is written. If he owns the shares it is a Covered Call and if he des not owns the
shares it is a Naked call.

Strategies:
The following are the strategies adopted by the parties of a call option.
Assuming that brokerage, commission, margins, premium, transaction costs and
taxes are ignored.

A call option buyers profit/loss can be defined as follows:

At all points where spot price < exercise price, there will be a loss.
At all points where spot prices > exercise price, there will be a profit.
Call Option buyers losses are limited and profits are unlimited.

31
Conversely, the call option writers profits/loss will be as follows:
At all points where spot prices < exercise price, there will be a profit.
At all points where spot prices > exercise price, there will be a loss.
Call Option writers profits are limited and losses are unlimited.

Following is the table, which explains In the-money, Out-of-the-money and At-the-

money position for a Call option.

Exercise call option Spot price>Exercise price In-The-Money

Do not exercise Spot price<Exercise price Out-of the-Money
Exercise/Do not exercise Spot price=Exercise price At-The-Money

Example:
The current price of NTPC share is Rs.260. Holder expect that price in a three
month period will go up to Rs.300 but, holder do fear that the price may fall
down below Rs.260.
To reduce the chance of holder risk and at the same time, to have an
opportunity of making profit, instead of buying the share, the holder can buy a
three-month call option on NTPC share at an agreed exercise price of Rs.250.

1. If the price of the share is Rs.300. then holder will exercise the option
since he get a share worth Rs.300. by paying a exercise price of Rs.250.
holder will gain Rs.50. Holders call option is In-The-Money at maturity.
2. If the price of the share is Rs.220. then holder will not exercise the option.
Holder will gain nothing. It is Out-of-the-Money at maturity.

Payoff for buyer of call option: Long call

The profit/loss that the buyer makes on the option depends on the spot price of the
underlying asset. If upon expiration, the spot price exceeds the strike price, he
makes a profit. Higher the spot price more is the profit he makes. If the spot price of
the underlying asset is less than the strike price, he lets his option un-exercise. His loss
in this case is the premium he paid for buying the option.

32
 Payoff for buyer of call option

Profit

4850
0 Nifty

86.
Loss

33
The figure shows the profit. The profits/losses for the buyer of the three-month
Nifty
4850(underlying) call option are shown above. As can be seen, as the spot nifty
rises, the call option is In-The-money. If upon expiration Nifty closes above the
strike of
4850, the buyer would exercise his option and profit to the extent of the
difference between the Nifty-close and strike price. However, if Nifty falls below
the strike of
4850, he lets the option expire and his losses are limited to the premium he paid i.e.
86.60.

Payoff for writer of call option: Short call

For selling the option, the writer of the option charges premium. Whatever is the
buyers profit is the sellers loss. If upon expiration, the spot price exceeds the
strike price, the buyer will exercise the option on the writer. Hence as the spot price
increases the writer of the option starts making losses. Higher the spot price more is
the loss he makes. If upon expiration the spot price is less than the strike price, the
buyer lets his option un-exercised and the writer gets to keep the premium.

Payoff for writer of call option

Profit

86.
60
4850
0
Nifty

Loss
 The figure shows the profits/losses for the seller of a three-month Nifty 4850 call
option. If upon expiration Nifty closes above the strike of 4850, the buyer would exercise his
option on the writer would suffer a loss to the extent of the difference between the Nifty-close and
the strike price. This loss that can be incurred by the writer of the option is potentially unlimited.
The maximum profit is limited to the extent of up-front option premium Rs.86.60.

Put option:
An option that gives the seller the right to sell a designated instrument is called put
option. A put option is a contract that gives the owner the right, but not the obligation to sell a
specified number of shares at a specified price on or before a specified date. An American put
option can be exercised on or before the specified date. But, a European put option can be
exercised on the specified date only.
The following are the strategies adopted by the parties of a put option.
A put option buyers profit/loss can be defined as follows:
At all points where spot price<exercise price, there will be a gain. At all
points where spot price>exercise price, there will be a loss.
Conversely, the put option writers profit/loss will be as follows:
At all points where spot price<exercise price, there will be a loss. At all points
where spot price>exercise price, there will be a profit.

Following is the table, which explains In-the-money, Out-of-the Money and At-the- money
positions for a Put option.

Exercise put option Spot price<Exercise price In-The-Money

Do not Exercise Spot price>Exercise price Out-of-The-Money
Exercise/Do not Exercise Spot price=Exercise price At-The-Money

Example:
35
 The current price of RPL share is Rs.250. Holder by a three month put option at exercise
price of Rs.260. (Holder will Exercise his option only if the market price/ spot price is less than the
exercise price).
If the market/Spot price of the NTPC share is Rs.245. then the holder will exercise the option.
Means put option holder will buy the share for Rs.245. In the market and deliver it to the
option writer for Rs.260. the holder will gain Rs.15 from the contract.

Payoff for buyer of put option: Long put.

A put option gives the buyer the right to sell the underlying asset at the strike price specified in the
option. The profit/loss that the buyer makes on the option depends on the spot price of the
underlying. If upon the expiration, the spot price is below the strike price, he makes a profit.
Lower the spot price more is the profit he makes. If the spot price of the underlying asset is higher
than the strike price, he lets his option expire un-exercised.

Payoff for buyer of put option

Profit

4850
0
61.70 Nifty

Loss

The figure shows the profits/losses for the buyer of a three-month Nifty 4850 put option.
As can be seen, as the spot Nifty falls, the put option is In-The-Money. If upon expiration, Nifty
36
closes below the strike of 4850, the buyer would exercise his option and make a profit to the
extent of the difference between the strike price and Nifty-close. The profits possible on this
option can be as high as the strike price. However, if Nifty rises above the strike of 1250, he lets
the option expire. His losses are limited to the extent of the premium he paid.

Payoff for writer of put option: Short put

The figure below shows the profit/losses for the seller/writer of a three-month put option. As the
spot Nifty falls, the put option is In-The-Money and the writer starts making losses. If upon
expiration, Nifty closes below the strike of 4850, the buyer would exercise his option on writer
who would suffer losses to the extent of the difference between the strike price and Nifty-close.

Pricing Options:
Factors determining options value:
Exercise price and Share price:
If the share price is more than the exercise price then the holder of the call option will
get more net payoff, means the value of the call option is more. If the share price is less than the
exercise price then the holder of the put option will get more net pay-off.

Interest Rate:
The present value of the exercise price will depend on the interest rate. The value of the call
option will increase with the rise in interest rates. Since, the present value of the exercise price
will fall; the effect is reversed in the case of a put option. The buyer of a put option receives
exercise price and therefore as the interest increases, the value of the put option will decrease.
Time to Expiration:
The present value of the exercise price also depends on the time to expiration of the
option. The present value of the exercise price will be less if the time to expiration is
longer and consequently value of the option will be higher. Longer the time to expiration higher
is the possibility of the option to be more in the money.

Volatility:
The volatility part of the pricing model is used to measure fluctuations expected in the

37
 value of the underlying security or period of time. The more volatile the underlying security, the
greater is the price of the option. There are two different kinds of volatility.
They are Historical Volatility and Implied Volatility. Historical volatility estimates
volatility based on past prices. Implied volatility starts with the option price as a given, and
works backward to ascertain the theoretical value of volatility which is equal to the market price
minus any intrinsic value.

Black Scholes pricing models:

The principle that options can completely eliminate market risk from a stock portfolio
is the basis of Black Scholes pricing model in 1973. Interestingly, before Black and Scholes
came up with their option pricing model, there was a wide spread belief that the expected
growth of the underlying asset ought to effect the option price. Black and Scholes demonstrate
that this is not true. The beauty of black and scholes model is that like any good model, it
tells us what is important and what is not. It doesnt promise to produce the exact prices that
show up in the market, but certainly does a remarkable job of pricing options within the
framework of assumptions of the model.
The following are the assumptions;
1. There are no transaction costs and taxes.
2. The risk from interest rate is constant.
3. The markets are always open and trading is continuous.

4. The stock pays no dividend. During the option period the firm should not pay any
dividend.
5. The option must be European option.
8. There are no short selling constraints and investors get full use of short sale proceeds.

Pricing Index Option:

Under the assumptions of Black Scholes options pricing model, index options should be valued in
the way as ordinary options on common stock. The assumption is that the investors can purchase the
underlying stocks in the exact amount necessary to replicate the index: i.e. stocks are infinitely
divisible and that the index follows a diffusion process such that the continuously compounded
returns distribution of the index is normally distributed. To use the black scholes formula for index
options, we must however, make adjustments for the dividend payments received on the index

38
stocks.
Pricing Stock Options:
The Black Scholes options pricing formula that we used to price European calls and puts,
with some adjustments can be used to price American calls and puts & stocks. Pricing American
options becomes a little difficult because, unlike European options, American options can be
exercised any time prior to expiration. When no dividends are expected during the life of options
the options can be valued simply by substituting the values of the stock price, strike price, stock
volatility, risk free rate and time to expiration in the black scholes formula. However, when
dividends are expected during the life of the options, it is some times optimal to exercise the
option just before the underlying stock goes ex-dividend. Hence, when valuing options on
dividend paying stocks we should consider exercised possibilities in two situations. One-just
before the underlying stock goes Ex-dividend, two at expiration of the options contract.
Therefore, owing an option on a dividend paying stock today is like owing to options one in long
maturity option with a time to maturity from today till the expiration date, and other is a short
maturity with a time to maturity from today till just before the stock goes Ex-dividend.

39
 SWAPS

Sw a p s

Financial swaps are a funding technique, which permit a borrower to access one market
40
and then exchange the liability for another type of liability. Global financial markets present
borrowers and investors with a variety of financing and investment vehicles in terms of currency
and type of coupon fixed or floating. It must be noted that the swaps by themselves are not a
funding instrument: They are devices to obtain the desired form of financing indirectly. The
borrower might otherwise as found this too expensive or even inaccessible.

A common explanation for the popularity of swaps concerns the concept of

comparative advantage. The basis principle is that some companies have a comparative advantage
when borrowing in fixed markets while other companies have a comparative advantage in floating
markets. Swaps are used to transform the fixed rate loan into a floating rate loan.

3.5.1 Types of swaps:

All Swaps involves exchange of a series of payments between two parties. A swap
transaction usually involves an intermediary who is a large international financial institution. The
two payment streams estimated to have identical present values at the outset when discounted at
the respective cost of funds in the relevant markets.
The most widely prevalent swaps are
1. Interest rate swaps.
2. Currency swaps.

Interest rate swaps

Interest rate swaps, as a name suggest involves an exchange of different payment streams, which
are fixed and floating in nature. Such an exchange is referred to as an exchange of borrowings.
For example, B to pay the other party A cash flows equal to interest at a pre-determined
fixed rate on a notional principal for a number of years. At the same time, party A agrees to
pay B cash flows equal to interest at a floating rate on the same notional principal for the same
period of time. The currencies of the two sets of interest cash flows are the same. The life of the
swap can range from two years to fifty years.

Usually two non-financial companies do not get in touch with each other to directly arrange a
swap. They each deal with a financial intermediary such as a bank.
At any given point of time, the swaps spreads are determined by supply and demand. If no
41
participants in the swaps market want to receive fixed rather than floating, Swap spreads tend to
fall. If the reverse is true, the swaps spread tend to rise. In real life, it is difficult to envisage a
situation where two companies contact a financial institution at a exactly same with a proposal to
take opposite positions in the same swap.

Currency Swaps
Currency swaps involves exchanging principal and fixed interest payments on a loan in
one currency for principal and fixed interest payments on an approximately equivalent loan in
another currency.

Example:
Suppose that a company A and company B are offered the fixed five years rates of
interest in US $ and Sterling. Also suppose that sterling rates are higher than the dollar rates.
Also, company A a better credit worthiness then company B as it is offered better rates on both
dollar and sterling. What is important to the trader who structures the swap deal is that the
difference in the rates offered to the companies on both currencies is not same. Therefore, though
company A has a better deal. In both the currency markets, company B does enjoy a
comparative lower disadvantage in one of the markets. This creates an ideal situation for a
currency swap. The deal could be structured such that the company B borrows in the market in
which it has a lower disadvantage and company A in which it has a higher advantage. They
swap to achieve the desired currency to the benefit of all concerned.
A point to note is that the principal must be specified at the outset for each of the currencies. The
principal amounts are usually exchanged at the beginning and the end of the life of the swap.
They are chosen such that they are equal at the exchange rate at the beginning of the life of the
swap.
Like interest swaps, currency swaps are frequently warehoused by financial institutions that
carefully monitor their exposure in various currencies so that they can hedge currency risk.

CURRENTLY AVAILABLE FUTURES IN NSE

Span Margin:: Apr 09, 2012

Symbol Mlot TotMgn% TotMgnPerLt
42
LT 50 24.16 46531.63
LUPIN 350 47.75 86364.25
M&M 312 24.57 52743.8
WOCKPHARMA 600 33.98 73579.5
YESBANK 1100 23.82 63511.25
ZEEL 700 24.84 43057
BRIGADE 550 50.83 84899.38
MINIFTY 20 18.56 19568.55
EDELWEISS 250 57.35 144358
COLPAL 550 28.56 60401
BANKNIFTY 25 18.2 45020.6
CNX100 50 18.91 49145.13
CNXIT 50 19.33 36533.15
JUNIOR 25 25.01 65965.5
NFTYMCAP50 75 27.57 60157.13
NIFTY 50 18.54 48857.08
BAJAJAUTO 100 29.05 69763.75
BAJAJHIND 950 72.99 143518.26
BALRAMCHIN 2400 55.64 113916.24
BANKBARODA 700 29.73 90055
BANKINDIA 950 29.93 117013.14
BATAINDIA 1050 47.93 94497.88
BEL 275 37.78 175685.81
BEML 125 30.82 52850.81
BHARATFORG 1000 29.02 81487.5
BHARTIARTL 250 22.71 49283.13
BHEL 75 23.21 36348.5
BHUSANSTL 250 34.63 109680.79
BILT 1900 31 89889

BINDALAGRO 4950 80.14 161261.3

BIOCON 450 30.37 55649.75
BIRLAJUTE 850 48.2 89260.63
BOMDYEING 300 40.96 95792.25
BONGAIREFN 2250 62.33 92911.22
BPCL 550 24.96 53713
BRFL 1150 30.73 103538.4
ESCORTS 2400 50.3 116255.66
43
ESSAROIL 5650 75.31 1004713.73
FEDERALBNK 851 30.24 84696.21
FINANTECH 150 28.68 93693.88
GAIL 750 31.72 104728.63
GDL 2500 41.26 118793.75
MAHLIFE 350 47.95 119007.8
GESHIP 600 45.21 110181
GLAXO 300 19.91 50760.75
GMRINFRA 1250 42.17 98870.72
GNFC 1475 32.11 86123.55
GRASIM 88 22.92 59727.76
GTL 750 21.77 42673.63
GUJALKALI 1400 46.77 110498.5
HAVELLS 400 41.64 92510
HCC 1400 42.64 112148.08
HCLTECH 650 25.5 40036.75
HDFC 75 19.91 41545.38
HDFCBANK 200 22.66 71799
HDIL 400 54.38 219148.88
IOC 600 38.43 114265.5
ITC 1125 24.48 54002.81
IVRCLINFRA 500 27.61 62955.54
IVRPRIME 400 141.03 146108
J&KBANK 300 30.62 73150.5
JETAIRWAYS 400 32.53 97787
JINDALSTEL 625 58.78 864736.43
JPASSOCIAT 750 40 113213.63
HINDZINC 250 38.04 53914.25
NIITLTD 1450 27.88 48236.29
JPHYDRO 3125 58.71 156408.89
REDINGTON 500 33.85 59234.75
NETWORK18 500 45.03 80485
NAUKRI 150 39.08 59415.16
MICO 50 29.14 56244.75
WWIL 3150 70.62 111684.51
KPIT 1650 48.75 70876.25
GITANJALI 500 34.68 55199.53
GBN 250 39.41 100070.02
JSTAINLESS 1000 52.02 84402.5
JSWSTEEL 275 38.47 99491.86
KESORAMIND 500 39.35 90181.25
KOTAKBANK 275 34.11 101976.88
KTKBANK 1250 33.46 110718.75
LAXMIMACH 100 42.34 99031.25
LICHSGFIN 850 46.71 125403.27

44
LITL 425 59.42 136749.97
ORIENTBANK 1200 30.85 104184
ISPATIND 4150 67.59 127490.91
HINDOILEXP 1600 62.68 115232.3
PANTALOONR 500 29.24 94956.25
PARSVNATH 700 57.37 118758.5
GTOFFSHORE 250 41.53 82974.38
PATELENG 250 35.18 67252.47
DCB 1400 48.31 83605.98
JINDALSAW 250 43.18 98152.29
PATNI 650 34.23 58565
PENINLAND 2750 73.98 203059.51
PETRONET 2200 49.26 83836.5
PFC 1200 38.82 90924.05
PNB 600 30.19 123654
POLARIS 1400 126.22 153209
POWERGRID 1925 35.31 79465.17
PRAJIND 1100 47.17 83851.42
PUNJLLOYD 750 28.34 98700.35
PURVA 500 28.84 53158.75
RAJESHEXPO 1650 48.9 110055
RANBAXY 800 22.45 62964
RCOM 350 28.78 65033.5
REL 550 42.93 496514.63
RELCAPITAL 550 41.59 475616.09
RELIANCE 75 25.43 49085.69
SUNTV 500 74.6 124632.5
SUZLON 1000 26.94 85160
SYNDIBANK 1900 35.1 70808.25
TATACHEM 675 36.66 82285.88
TATAMOTORS 412 21.27 62665.91
TATAPOWER 200 37.66 96260.49
TATASTEEL 382 26.72 71268.67
TATATEA 275 35.52 76882.94
TCS 250 23.41 49917.38
TECHM 200 33.83 48996.5
TITAN 206 33.59 84016.23
TRIVENI 1925 57.61 147068.69
TTML 5225 50.01 102842.22
TULIP 250 35.95 85200.5
TVSMOTOR 2950 39.51 50994.44
ULTRACEMCO 200 49.88 89206
UNIONBANK 2100 35.36 155817.1
UNIPHOS 700 29.72 71765.75
UNITECH 900 41.86 154479.88
45
VIJAYABANK 3450 42.26 103456.88
INFOTECH 1350 52.36 91550.25
ABAN 50 32.52 61735
ABB 250 24.08 72756.25
ABIRLANUVO 200 31.41 122529.5
ACC 375 25.75 77018.19
ADLABSFILM 225 61.58 160207.24
AIAENG 200 30.13 83456
AIRDECCAN 850 53.95 86339.68
ALBK 2450 38.18 113245.63
ALOKTEXT 3350 33.27 81162.19
AMBUJACEM 2062 17.33 41028.73
AMTEKAUTO 600 20.84 40933.5
ANDHRABANK 2300 37.98 83564.75
ANSALINFRA 650 107.95 197206.61
APIL 200 29.64 44457.5
APTECHT 650 54.2 89331.28
ARVINDMILL 4300 55.53 121540.06
ASHOKLEY 4775 41.88 73308.19
AUROPHARMA 350 62.92 79457
AXISBANK 225 27.29 69879.69
CAIRN 1250 28.93 69359.38
CANBK 800 39.51 94484
CENTRALBK 2000 35.7 80375
CENTURYTEX 425 40.65 171034.31
CESC 550 29.36 79321
CHAMBLFERT 3450 69.05 121034.23
CHENNPETRO 900 36.47 104580
CIPLA 1250 24.33 55834.88
CMC 200 48.95 80584
CORPBANK 600 25.44 54349.5
CROMPGREAV 500 27.29 49883.75
CUMMINSIND 475 23.34 34913.69
DABUR 2700 32.89 87399
DENABANK 2625 51.81 100717.51
DIVISLAB 155 30.52 73007.55
DLF 400 27.94 99462
DRREDDY 400 26.01 58278
EDUCOMP 75 41.17 122344.16
EKC 1000 27.57 81609.2
HEROHONDA 400 22.76 63484
HINDALCO 1595 35.31 97901.55
HINDPETRO 1300 34.68 118995.5
HINDUJAVEN 250 90.94 135832.3
HINDUNILVR 1000 23.03 45597.5
46
HOTELEELA 3750 43.69 77659.33
HTMTGLOBAL 250 107.46 87540.61
I-FLEX 150 45.88 74038.13
ICICIBANK 175 25.85 57787.38
IDBI 1200 45.97 69708.89
IDEA 2700 27.64 82599.75
IDFC 1475 29.34 90955.54
IFCI 7875 55.29 266938.43
INDHOTEL 1750 31.91 78168.63
INDIACEM 725 35.09 52343.44
INDIAINFO 250 38.13 121979.66
INDIANB 1100 37.9 90795.6
INDUSINDBK 1925 47.65 91592.39
INFOSYSTCH 100 34.85 50579.5
IOB 1475 30.32 82836.5
MAHSEAMLES 600 44.05 112305
MARUTI 200 22.07 38176
MATRIXLABS 1250 48.3 97450.5
MCDOWELL-N 125 30.01 65615.83
MOSERBAER 825 32.07 59346.38
MPHASIS 800 27.5 52720
MRPL 2225 63.64 121365.34
MTNL 1600 39.67 83976
NAGARCONST 1000 27.25 78179.84
NAGARFERT 3500 67.31 97074.18
NATIONALUM 575 32.77 76297.94
NDTV 550 26.84 59554.5
NEYVELILIG 1475 68.04 144831.98
NICOLASPIR 1045 32.59 103512.78
NIITTECH 600 106.7 97092.72
NTPC 1625 35.2 121802.13
NUCLEUS 550 68.19 102542.5
OMAXE 650 70.97 146291.01
ONGC 225 28.1 63338
ORCHIDCHEM 1050 37.53 95127.88
RENUKA 500 44.9 213297.5
RNRL 7150 62.37 645542.97
ROLTA 900 42.18 104604.75
RPL 1675 40.63 114850.31
SAIL 1350 37.39 109684.36
SASKEN 550 127.11 103614.5
SATYAMCOMP 600 21.04 50206.5
SBIN 132 20.3 61807.3
SCI 800 44.64 81218.64
SESAGOA 75 43 103348.19
47
SHREECEM 200 28.08 73499
SIEMENS 188 21.22 69590.66
SKUMARSYNF 1300 48.71 76157.25
SOBHA 350 37.4 99026.88
SRF 1500 52 90562.5
STAR 850 91.9 140337.13
STER 219 28.4 49428.33
STERLINBIO 1250 30.31 65203.13
STRTECH 1050 70.74 169434.47
SUNPHARMA 225 21.78 48561.69
VOLTAS 900 36.71 72581.79
VSNL 525 36.24 98082.13
WELGUJ 800 33.15 135900.47
WIPRO 600 20.12 48781.5

48
 BIBLIOGRAPHY

Bibliography

Books:-

! Indian financial system - M.Y. Khan

! Investment management - V.K. Bhalla
! Publications of National Stock Exchange

49
News Papers:-
The Financial Express
Business World
Economic Times

Websites
www.nseindia.org
www.bseindia.com
www.Unicon.com
www.sebi.gov.in

50