CHAPTER – 1

INDUSTRY PROFILE

1.1 ABOUT THE INDUSTRY

As compared to other financial trading markets, Foreign exchange day-trading has

numerous advantages. Currency trading is, in a lot of ways, more beneficial than
trading futures or stocks. The Foreign exchange market is really a 24-hour market,
daily. It means that the trader of currency can essentially choose their own hours to
do their trading business.

Foreign day-trading demands a lot less beginning capital than day stock-trading,
hence, investors can really begin small in the currency market. Traders need to focus
on several leading currencies only, instead of on tens and thousands of stocks.

What is more, Foreign exchange day-trading has good liquidity. The Forex currency
exchange market is the biggest financial market around the globe today. This leads to
narrow spreads and fair prices. The stock liquidity is cut after normal trading hours.
Forex trading does not suffer this conflict, since the currency market is available
around the clock. Not only because of the around-the-clock market and the liquidity,
but because of electronic Foreign exchange day-trading, fast entries and exits are
combined with global trading.

Traders can choose their most feasible time to do trading business with Forex day-
trading, as it is a 24/7 market. The high liquidity of Forex is combined with a real 24-
hour market. It offers traders with exceptional independence, and Foreign exchange
currency trading, when they want to, and not when the market wants traders to.

The Forex market virtually follows the sun, moving around the world from major
banking and financial firms of united states, to New Zealand and Australia, to the Far
East, to Europe, and then back to United States.

With each trading day in Forex day-trading, total currency trading volumes are
identified by the markets that are open, and the times each of the markets intersect
with one another. With each second, minute, and hour that pass, Foreign exchange
currency trading volume stays high, but the peak is reached when British, European,
and United States markets open at the same time - this is from 1 p.m. GMT to 4 p.m.
GMT.

By all accounts, foreign exchange is the biggest financial market around the globe. In
the Forex market, there are no limitations to sell currencies short, not like in stocks,
that have to be sold, at short currencies, on an upscale.

HISTORY OF FOREIGN EXCHANGE MARKET

Although it might seem easy to go onto your computer, open a forex account with a
broker, deposit some money, and begin trading right away, it hasn't been so easy to
do so in the past, as the forex industry has changed significantly over the past couple
decades.

After the end of World War II all major currencies were pegged against the value of
gold under an international pact adopted at a conference held at Bretton Woods,
which became the informal name of the system. This stabilized exchange rates
initially, but became untenable as economies developed in the post-war era and gold
prices became increasingly expensive. In 1971, the system was effectively
eliminated, enabling exchange rates to float freely.

With the widespread adoption of the Internet in the 1990s, banks and small
companies created online networks to produce automated quotes and allowed for
instantaneous trading. Advancing technology and regulation created a new category
of brokers that enabled individuals to trade foreign exchange for the first time. Today,
retail brokers, who can be found in virtually every corner of the world, account for a
meaningful fraction of global spot foreign exchange volumes.

A Discussion on Forex Market History in India

The foreign exchange currency trading in India is growing at a really good pace
however it is said that the forex market is still in the early phase in India. Nevertheless,
there are already several big players in the Indian forex market. Let us find out details
on the forex market history in India to know more about Indian forex market.
The history of forex market in India owes its origin to an important decision taken by
the Reserve Bank of India (RBI) in the year 1978 which allows banks to undertake
intra-day trading in foreign currency exchange. As a result of this step, the agreement
of maintaining ‘square’ or ‘near square’ position was to be complied with only at the
close of business every day. The history of currency trading in India also clearly shows
that during the initial period when these economic reforms started, the exchange rate
of national currency i.e. Indian rupee used to be determined by the RBI in terms of a
weighted basket of currencies of India’s major trading partners. Moreover, there were
some fairly significant restrictions on the current account transactions.

Then again during early nineties, more economic reforms were introduced which
witnessed the important two-step downward adjustment in the exchange rate of the
Indian rupee in order to place it at a suitable level in line with the inflation differential
so that the competitiveness in exports could be maintained. With these economic
reforms which resulted in the unification exchange rate of the rupee heralded the
commencement of the new era of market determined forex currency rate regime of
rupee in the Indian forex history which was based on the demand and supply principle
in the forex market.

National Stock Exchange of India popularly known as NSE was the first recognized
exchange in Indian forex history to launch forex currency futures trading in India.
These currency futures are beneficial over overseas forex trading especially to
comparatively small traders and retail investors. Another important point to know is
that before discussing the history of forex market in India, it is important to know the
central government of India has the powers to control transactions in foreign exchange
and hence forex transactions in India are managed by the government authorities.

Foreign Exchange (Forex) Market Participants

The foreign exchange market links omnipotent central bankers with holiday
travellers. Historically, the major participants include policy makers, global FX banks,
companies conducting international commerce fund managers funding cross-border
investments or hedging currency exposures as well as speculators large and small.
Central Banks

Central banks hold large currency reserves of their domestic currency as well as that
of important trading partners. Moreover, central banks efforts to manage domestic
economic performance by monetary policy, including raising or lowering short-term
interest rates, has immediate and powerful effects on currency prices.

Global FX Banks

A small number of global banks sit atop the FX market paradigm. These banks deal
with central banks, major corporations and fund managers. These banks provide
pricing on large FX trades as well as economic and market commentary and
expertise on executing and clearing trades in major and emerging market currencies
around the world.

International Companies

Companies that do business internationally are important foreign exchange market

participants. For example, if Atlanta-based Coca Cola were to sell a product in the
United Kingdom they trade pounds for dollars in the FX market to repatriate it back
to the United States.

Fund Managers

Across the board, fund managers are active foreign exchange traders. They access
the market to acquire foreign currencies required to fund cross-border investments.
For example, the purchase of shares in Tokyo requires a US-based investment
manager to have the correct sum of Japanese yen in an account in order to settle
the stock transaction. Depending on their FX market view, the fund manager might
seek to hedge the currency risk that comes with holding an overseas investment.
The manager would enter into a swap or forward FX trade to lock in the current
USD/JPY rate into the future. Some fund managers, especially hedge funds, are also
very active speculators in the foreign exchange markets.
 COMPANY PROFILE

1.2 ABOUT THE COMPANY

At Star Fing Private Limited is a leading stock, share, currency & commodity broking
headquartered in India. We operate on a unique retail focused stock trading model
that provides revolutionary trading platforms and expertise to a diversified client
base.

We are registered in Bombay Stock Exchange (BSE), National Stock Exchange

(NSE) and the two leading Commodity Exchanges in the county MCX & NCDEX.

Exchange Registration Details

 AP0397134991 (NSE)
 AP0397134991 (NSE-SX)
 AP0397134991 (NSE F&O)
 AP0106120157353 (BSE)
 AP0106120157353 (BSE F&O)
 AP 111340(MCX)
 AP 111340 (NCDEX)

We also provide training, we are with a simple aim, we teach you how to invest your
money and make profits. If you have ever considered… how to be a trader, what to
trade, what trading software to use or just how you can learn about the market…look
no further. With our trading program we offer a full range of financial training course
all based on price action trading so whether you are interested in trading futures
markets, Commodities, or day trading the currency markets we can teach you how to
trade consistently and profitably.

We believe at Training Traders we can offer the very best Training, Coaching and
follow up Mentorship available anywhere. Your Training Course is just the beginning
of your journey. We take great care and pride in offering strong Mentorship and
Coaching follow up. It does not matter if you are a new trader or experienced – the
education process never ends. No two days are the same in Markets and all traders
learn or should learn every day.

We are committed to providing world-class products and services which exceed the
expectations of our customers, achieved by teamwork and a process of continuous
improvement.

It is Our faith in Indian Stock and Commodities market that has helped us in creating
a satisfied client base that runs into lakhs.

It is the faith of our clients in our excellent research, prompt and quality services,
which have seen them, smile even during the most turbulent times in financial
markets.

MISSION

Star Fing mission is to provide comprehensive and innovative brokerage solutions

backed-up by reliable support services at extremely competitive prices to our clients.

VISION

Star Fing vision is to remove ‘complexity’ out of the ‘trading equation’.

we also envision becoming one of the leading financial service providers in the
country.

ADVISORY SERVICES

Training & Education

We at Star Fing (Star Financial Group) focus in training and educating individuals
about Financial market and to sharpen their skills to participate in the financial world.
Star Fing came alive with the intention to provide support and guidance to new
comers to the trading world. with our knowledge and years of experience in trading
we have customized the training programme and made it simple for a layman to
understand the financial market.

Our courses are targeted for individual investors or traders, novice or experienced,
who want to learn how to use the same tools and techniques as the professional
traders.

These courses offer a complete education and training experience focusing on

trading fundamentals, technical analysis, risk management, and highly-developed
skills of execution for virtually any trading instrument. At Star Fing we are with a
simple aim, we want to teach you how to invest your money and make profits. If you
have ever considered… how to be a trader, what to trade, what trading software to
use or just how you can learn about the market look no further. With our trading
program we offer a full range of financial training course all based on price action
trading so whether you are interested in trading futures markets, Commodities, or
day trading the currency markets we can teach you how to trade consistently and
profitably. We believe at Training Traders we can offer the very best Training,
Coaching and follow up Mentorship available anywhere. Your Training Course is just
the beginning of your journey. We take great care and pride in offering strong
Mentorship and Coaching follow up. It does not matter if you are a new trader or
experienced – the education process never ends. No two days are the same in
Markets and all traders learn or should learn every day.

Learning Objectives

At the end of the course, the participants should be able to:

 Recognize the basics of the commodities and Currency market.

 Examine the risks and rewards in the Commodities and currency market.
 Determine the participants in the Commodities market and their respective
roles.
 Appraise the effect of the global market on money stock and money market
liquidity Technical tools from basic to advanced.
Financial Planning:

As you ascend newer highs in your life, your aspirations and needs grow
proportionately. These ever-increasing needs are further compounded by inflation,
which depreciates the purchasing power of your hard-earned money. To achieve
your dreams and fulfil your future obligations, you need to carefully plan your
finances. This can be done via sound financial planning that takes into account your
current and future needs, your individual risk profile and your income to chart out a
roadmap to meet these anticipated needs.

Investment Planning:

Placing of funds into the proper investment vehicles based on the investor’s future
goals, time horizon and priorities. This also takes into account the safety of the
investments as well as liquidity and level of return. Ideally, proper investment
planning will allow the investor’s funds to produce financial rewards over time.

Risk Management:

Risk management is the continuing process to identify, analyse, evaluate, and treat
loss exposures and monitor risk control to mitigate the adverse effects of loss. While
a variety of different strategies can mitigate or eliminate risk, the process for
identifying and managing the risk is fairly standard First, threats or risks are
identified. And then the vulnerability of key assets like information to the identified
threats is assessed.

Risk Control Techniques

1. Avoidance of activities which cause loss.

2. Reduction of the frequency of loss – risk prevention.
3. Reduction of the severity of loss – risk reduction.
 CHAPTER – 2

Introduction to study

2.1 Introduction

The foreign exchange market in India has been around for about 40 years now. The
market started operating in 1978 after the government's decree. After its
establishment, the forex market has seen significant growth over the years. The
market is regulated by the central government and all aspects of the trade are defined
by national laws. There are many things about this market that make it distinct from
other markets in the world. To start with, its structure is slightly unique and defined by
different market dynamics. In order to understand the forex market in India, you need
to study its structure and what makes it different.

The structure of the forex market in India:

Like other forex markets in the world, the forex in India consists of several
stakeholders. The main stakeholders in this market are:

 Traders
 Banks /Authorized dealers
 The Reserve Bank of India

The three actors mentioned above play different roles in the trade. Traders are
generally all individuals in the public who are also corporate customers of the
banks. These customers use the banks as authorized dealers to access the forex
market. There are traders of different kinds but all of them are able to access the
market only through dealers. This is much like elsewhere in the world where brokers
are the intermediaries between the forex and ordinary traders.

The banks, on the other hand, are the legally authorized institutions to handle
currency. In India, banks exist in different tiers and there are clear laws that
determine which institution is categorized as a financial institution. From these legal
institutions, all those who want to trade can create accounts, access the market
and choose products that they would like to trade in. The trading landscape has
changed a lot over the years especially since the 1990's when the Indian regulatory
authorities liberalized this market.
Lastly, the Reserve Bank of India (RBI) is the central financial institution which is
responsible for the monetary policy in India. This institution has been instrumental in
shaping the trading landscape in India. Before 1993, the Indian Rupee had a fixed
value which was determined by the RBI. This meant that the currency only attracted
a certain exchange rate even though the market dynamics were changing. In 1993,
though, the RBI repealed the prevailing law at the time to allow for an exchange rate
determined by the market itself. Since then, the Rupee's value has changed a lot in
relation to different currencies.

FOREIGN EXCHANGE MARKET OVERVIEW

In today’s world no economy is self-sufficient, so there is need for exchange of

goods and services amongst the different countries. So, in this global village, unlike
in the primitive age the exchange of goods and services is no longer carried out on
barter basis. Every sovereign country in the world has a currency that is legal tender
in its territory and this currency does not act as money outside its boundaries. So,
whenever a country buys or sells goods and services from or to another country, the
residents of two countries have to exchange currencies. So, we can imagine that if
all countries have the same currency then there is no need for foreign exchange.

Need for Foreign Exchange

Let us consider a case where Indian company exports cotton fabrics to USA and
invoices the goods in US dollar. The American importer will pay the amount in US
dollar, as the same is his home currency. However, the Indian exporter requires
rupees means his home currency for procuring raw materials and for payment to the
labour charges etc. Thus, he would need exchanging US dollar for rupee. If the
Indian exporters invoice their goods in rupees, then importer in USA will get his
dollar converted in rupee and pay the exporter.

From the above example we can infer that in case goods are bought or sold outside
the country, exchange of currency is necessary.

Sometimes it also happens that the transactions between two countries will be
settled in the currency of third country. In that case both the countries that are
transacting will require converting their respective currencies in the currency of third
country. For that also the foreign exchange is required.

About foreign exchange market.

Particularly for foreign exchange market there is no market place called the foreign
exchange market. It is mechanism through which one country’s currency can be
exchange i.e. bought or sold for the currency of another country. The foreign
exchange market does not have any geographic location.

Foreign exchange market is described as an OTC (over the counter) market as there
is no physical place where the participant meets to execute the deals, as we see in
the case of stock exchange. The largest foreign exchange market is in London,
followed by the New York, Tokyo, Zurich and Frankfurt. The market is situated
throughout the different time zone of the globe in such a way that one market is
closing the other is beginning its operation. Therefore, it is stated that foreign
exchange market is functioning throughout 24 hours a day.

In most market US dollar is the vehicle currency, viz., the currency sued to dominate
international transaction. In India, foreign exchange has been given a statutory
definition. Section 2 (b) of foreign exchange regulation ACT,1973 states:
 Foreign exchange means foreign currency and includes:

 All deposits, credits and balance payable in any foreign currency and any draft,
traveller’s cheques, letter of credit and bills of exchange. Expressed or drawn
in India currency but payable in any foreign currency.
 Any instrument payable, at the option of drawee or holder thereof or any other
party thereto, either in Indian currency or in foreign currency or partly in one
and partly in the other.

In order to provide facilities to members of the public and foreigners visiting India, for
exchange of foreign currency into Indian currency and vice-versa. RBI has granted to
various firms and individuals, license to undertake money-changing business at
seas/airport and tourism place of tourist interest in India. Besides certain authorized
dealers in foreign exchange (banks) have also been permitted to open exchange
bureaus.

Following are the major bifurcations:

 Full fledge moneychangers – they are the firms and individuals who have been
authorized to take both, purchase and sale transaction with the public.
 Restricted moneychanger – they are shops, emporia and hotels etc. that have
been authorized only to purchase foreign currency towards cost of goods
supplied or services rendered by them or for conversion into rupees.
 Authorized dealers – they are one who can undertake all types of foreign
exchange transaction. Bank are only the authorized dealers. The only
exceptions are Thomas cook, western union, UAE exchange which though, and
not a bank is an AD.

Even among the bank’s RBI has categorized them as follows:

  Branch A – They are the branches that have nostro and vostro account.
 Branch B – The branch that can deal in all other transaction but do not
maintain nostro and vostro a/c’s fall under this category.

For Indian we can conclude that foreign exchange refers to foreign money, which
includes notes, cheques, bills of exchange, bank balance and deposits in foreign
currencies.

The main players in foreign exchange market are as follows:

1. CUSTOMERS

The customers who are engaged in foreign trade participate in foreign exchange
market by availing of the services of banks. Exporters require converting the dollars
in to rupee and importers require converting rupee in to the dollars, as they have
to pay in dollars for the goods/services they have imported.

2.COMMERCIAL BANK

They are most active players in the forex market. Commercial bank dealing with
international transaction offer services for conversion of one currency in to another.
They have wide network of branches. Typically, banks buy foreign exchange from
exporters and sells foreign exchange to the importers of goods. As every time the
foreign exchange bought or oversold position. The balance amount is sold or bought
from the market.
3. CENTRAL BANK

In all countries Central bank have been charged with the responsibility of
maintaining the external value of the domestic currency. Generally, this is achieved
by the intervention of the bank.

4. EXCHANGE BROKERS

forex brokers play very important role in the foreign exchange market. However,
the extent to which services of foreign brokers are utilized depends on the tradition
and practice prevailing at a particular forex market centre. In India as per FEDAI
guideline the Ads are free to deal directly among themselves without going through
brokers. The brokers are not among too allowed to deal in their own account all over
the world and also in India.

4. OVERSEAS FOREX MARKET

Today the daily global turnover is estimated to be more than US$ 1.5 trillion
a day. The international trade however constitutes hardly 5 to 7 % of this total
turnover. The rest of trading in world forex market is constituted of financial
transaction and speculation. As we know that the forex market is 24-hour
market, the day begins with Tokyo and thereafter Singapore opens, thereafter
India, followed by Bahrain, Frankfurt, Paris, London, new York, Sydney, and
back to Tokyo.

6. SPECULATORS

The speculators are the major players in the forex market.

 Bank dealing are the major speculators in the forex market with a view to
make profit on account of favourable movement in exchange rate, take
position i.e. if they feel that rate of particular currency is likely to go up in
short term. They buy that currency and sell it as soon as they are able to
make quick profit.
  Corporation’s particularly multinational corporation and transnational
corporation having business operation beyond their national frontiers and on
account of their cash flows being large and in multi currencies get in to foreign
exchange exposures. With a view to make advantage of exchange rate
movement in their favour they either delay covering exposures or do not cover
until cash flow materialize.
 Individual like share dealing also undertake the activity of buying and selling
of foreign exchange for booking short term profits. They also buy foreign
currency stocks, bonds and other assets without covering the foreign
exchange exposure risk. This also result in speculations.

The status of the forex market in India:

In 2018, the forex market in India is quite vibrant. Even though it is not the market with
the most daily volume, it is among the top ten markets in the world. As of 2017, the
forex assets in India place it as the 8th best market in the world by forex reserves. The
top asset in this market is the United States as represented by US institutional bonds
and government bonds. The Indian forex reserves are also held in terms of gold.
Indeed, India is the first nation in the world in terms of gold consumption.

Statistically, the Indian forex market has changed a lot. To start with, the daily
turnover for the market is well over several billion dollars down from a couple of
millions when it started. The Indian forex market has several forex players that
facilitate the exchange of currency. The markets in these exchanges have several
listed brokers and authorized institutions. There are several non-bank financial
institutions that are legally authorized to facilitate trade in the Indian market. These
institutions are regulated by the FEDAI and they use the USP for better rates of
exchange. The market is open 24 hours every day and it is linked to the rest of the
world markets.
2.2 Scope and Importance

Scope:

 To analyse the volume of foreign exchange in India by performing a

comparative analysis from the year 2008-09 to 2018-19.

 This study is to understand the crucial role of foreign exchange market in the
Indian economy.

Importance:
 The currency market is the biggest and most liquid of financial markets.

 the price of one currency in terms of another, helps to determine a nation's

economic health and hence the well-being of all the people residing in it.

 To transfer finance, purchasing power from one nation to another. Such transfer
is affected through foreign bills or remittances made through telegraphic
transfer. (Transfer Function).

 To provide credit for international trade. (Credit Function).

 To make provision for hedging facilities, i.e., to facilitate buying and selling spot
or forward foreign exchange.

2.3 Brief Literature Review

Money is traded in Foreign Exchange Markets. CFD (Contract for difference) is a

financial derivative that allows traders to obtain profits from price movements of an
asset without owning it. Trading a currency, say GBP (Great Britain Pound) is
buying a share in the British Economy. Exchange rate of a currency versus other
currencies reflects the country’s economic strength as compared to other
countries. An exchange rate is simply the ratio of one currency valued against
another currency. In Foreign Exchange Markets, there are several major
currencies which include USD (United States Dollar), EUR(Euro), JPY (Japanese
Yen), GBP (Great Britain Pound), CHF (Swiss Franc), CAD (Canadian Dollar),
AUD (Australian Dollar), NZD (New Zealand Dollar). Foreign Exchange trading is
 simultaneously buying one currency and selling another. Trading is buying or
selling in pairs. Currency Pairs not containing USD are called as called
crosses/minors. Major currency paired with currency of an emerging economy is
called an Exotic Pair. Most traded currencies include Dollar: 84.9%, Euro: 39.1%,
Yen:19%. Currencies total 200% instead of 100% in this case since there is a
currency pair. Foreign Exchange market enable huge trading volume to happen
with very little price effect. Different types of ways to trade are SPOT Forex,
Currency Futures, Currency Options and Currency ETFs (Exchange Traded
Funds). There are various advantages of Foreign Exchange Trading. They include
Low barriers to entry, High liquidity, 24hour market, Low barriers to entry, No fixed
lot size, No commission, Low Transaction Cost, No Middlemen. Another concept
is Leverage. Leverage gives the trader the ability to make nice profits and at the
same time keep risk capital to a minimum. Without proper risk management, high
degree of leverage can lead to large losses. Major players in the Foreign Exchange
Market are The Super Banks followed by large commercial Companies,
Government and Central Banks and the speculators respectively.

2.4