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FUTURE OF DERIVATIVES

Introduction to Tamesak Holdings

An Asia investment company Incorporated under the Singapore Companies Act as an investment holding company in 1974. Owns and commercially manages investments in companies previously held directly by the Singapore Government. Invests on commercial principles as an asset owner. AAA/Aaa by Standard & Poors and Moodys respectively

Investment Themes

Transforming Economies Growing Middle Income Populations Deepening Comparative Advantages

Emerging Champions

Introduction To Fullerton Securities & Wealth Advisors

Wholly owned subsidary of Temasak Holdings. FSWA is a company registered under Companies Act, 1956 as on 8th feburary,2008.

Fullerton Vision

To be distinctive financial services entity, providing the widest range of unbiased financial solutions to customers. Achieved through proprietary distribution network and business partners. Top class equity research. High quality & well trained employees. Consistent service. Cutting edge technology. To provide superior financial planning and wealth advisory.

Fullerton Mission

To create superior long term shareholder value in the financial sector across emerging markets Organic growth Acquire and transform Improve productivity Optimize capital Risk- Reward balance

Key Value Leadership

Great Leadership
Passionate Balanced Disciplined Leaders in commercial/sme, mass consumer and mass self employed segments

Customer centric business models


Relationship v/s product positioning Enabling management model and culture Empowered within defined boundaries

Deeply embedded in each market and chosen segment


High market share top 3 Embedded the right values and behaviour across the organisation.

Board Of directors

Organizational Chart
Pallav Sinha MA & CEO

Ashok Mathur Head,South

Ashwinder Raj Singh head.,North & NCR Mr. Ashutosh Cluster Head,Punjab

Punit Gupta Head, West

Sariq Hoda Head,EAst

Baljinder Singh RM, Acquistion

Mohit Singla Channel Manager

Jitin Arora RM, HNI

Munish Goyal BDM

Group Companies

Bank Danamon in Indonesia


The second largest private national bank and the fifth largest commercial bank in Indonesia, with a 5% share of the domestic system loans and deposits and 1,426 branches.

Fullerton India Credit Corporation


Established in December 2005, Fullerton Indias business model is community oriented, branch centric and endeavors to build enduring relationships with customers.

Dunia
FFH entered into a strategic partnership with Mubadala Investment Company PJSC, Waha Capital PJSC (formerly known as Oasis International Leasing Company PJSC), and A.A.Al Moosa Enterprises LLC, with 40% ownership by FFH. Dunia Finance LLC or Dunia, as it is more commonly known, was created.

Various departments Of FSWA, Ludhiana


Wealth Securities DST(Direct Sales Team)

Various Services Provided By FSWA


Financial Planning Mutual Funds Equities Insurance NRI Services

SWOT Analysis of FSWA, Ludhiana


Strengths

Everyday technical and fundamental calls are mailed to customers before the market opens.

Every single thing happening in organization is mailed to head within seconds and it encourages employees to work.
Being MNC it has funds are available for expansion. Therefore, No loan is required.

Weakness

Employees sometimes use phones for personal calling which doesnt come into notice and it may increase expenses of company.

Opportunities Future expansion plans:- right now company has only 2 offices in Punjab , its plan is to open 15 new branches in Punjab by the end of this financial year.

To tap untapped market by providing proper knowledge to potential customers.

Threats

Existing brokerage firms in market. Being an MNC people dont know about this company, so people may prefer visiting another company and opening account.

History Of Derivatives

The first organized commodity exchange came into existence in the early 1700s in Japan. U. S. futures markets, was the creation of the Chicago Board of Trade in 1848. In 1865, CBOT listed the first exchange traded derivatives contract.

In 1865, CBOT listed the first exchange traded derivatives contract. The Chicago Mercantile Exchange (CME), was formed in 1919, though it did exist before in 1874 under the names of Chicago Produce Exchange (CPE) and Chicago Egg and Butter Board (CEBB).
The first financial futures to emerge were the currency in 1972 in the US.

The first foreign currency futures were traded on May 16, 1972, on International Monetary Market (IMM), a division of CME.
The first call and put options were invented by an American financier, Russell Sage, in 1872.

Indian Derivative Market


1991 Liberalisation process initiated

14 1995 18

December NSE asked SEBI for permission to trade index futures.

November SEBI setup L.C.Gupta Committee to draft a policy framework for

1996

index futures.

11 May 1998

L.C.Gupta Committee submitted report.

7 July 1999

RBI gave permission for OTC forward rate agreements (FRAs) and interest rate swaps.

24 May 2000 SIMEX chose Nifty for trading futures and options on an

Indian index.
25 May 2000 SEBI gave permission to NSE and BSE to do index futures trading. 9 June 2000 Trading of BSE Sensex futures commenced at BSE.

12 June 2000 Trading of Nifty futures commenced at NSE.

25 September Nifty futures trading commenced at SGX.


2000

2 June 2001

Individual Stock Options & Derivatives

Derivative instruments are defined by Securities Contract (Regulation) Act include:

A security derived from debt instruments, shares, secured / unsecured loan, risk instruments or contracts for differences, or any other form of security. A contract that derives its value from the prices / index of prices underlying securities.

Categories Of Participants

Hedgers

Speculators

Arbitrageur

Types Of Derivative Contracts


Futures Options Forwards

Swaps

Forward Contract
A

forward contract is a customized contract between the buyer and the seller where settlement takes place on a specific date in future at a price agreed today.

Futures Contract

A futures contract gives the holder the right and the obligation to buy or sell, an Asste at a certain time in future , it follows daily settlement

Options
A contract that gives the option holder the right but not the obligation to buy or sell the underlying asset at a price, called the strike price, during a period or on a specific date in exchange for payment of a premium is known as option. Two Types Of Options Call Options Put Options

Swaps
Swaps are contracts to exchange cash (flows) on or before a specified future date based on the underlying value of currencies/exchange rates, bonds/interest rates, commodities, stocks or other assets. Two Types Of Swaps Interest Rate Swaps Currency Swaps

Factors Contributing To Growth Of Derivatives


Price Volatility Globalization of Market Technological advances

Advances in financial theories

Title Of The Study A Study on Future Of Derivatives in Ludhiana.

Objectives Of Study
To study brokers experience in regard to derivatives. To study investors perception towards derivatives. To study the risk involved in derivative instruments.

Limitations Of Study

Limited time:- The time available to conduct the study was only 2 months. It being a wide topic had a limited time. Aspect coverage:- Some of the aspects may not be covered in my study. Accuracy:- Some investors have filled forms just for filling them. This may lead to less accuracy in research.

Research Methodology

Research methodology means the way in which the data has been collected for the research project and the way we would complete our prospected task.

Research design

Research design is the structure within which research is conducted; it contains the blueprint for the collection, measurement and analysis of data. Descriptive research design has been used as in this research the perception of brokers and investors in regard to derivatives has been studied.

Universe

Sampling Technique

Population

Sampling plan
Sample Size
Sampling frame Sampling unit

Universe- All the people who are dealing in derivatives and were interested to deal in derivatives. Population(i) All the brokers dealing in derivatives in Ludhiana. (ii) All the people dealing in derivatives or interested in dealing, in Ludhiana. Sampling Unit Every single person visiting Ansal plaza and Feroz Gandhi market and every broker of Ludhiana Stock Exchange is sample unit in the report

Sampling Frame - It represents the elements of the target population. Ludhiana City is the sampling frame for this project.
Sample size- Sample size used in the project is 50 (25 brokers and 25 investors).

Sampling Technique- Non Probability technique i.e convenience sampling has been used for collecting data.

Data collection
Primary Data Secondary Data

Data Analysis And Interpretation


PART I To Study The Brokers experience in regard to Derivatives

(Table 4a.1) Percentage of clients dealing in derivatives (N=25)


Percentage Of Clients
0-20 20-40 40-60 60 & above Total

Brokers response
14 7 2 2 25

Percentage
56 28 8 8 100

(Graph 4a.2) Better mode of Investing keeping in account profitability

(Table 4a.3) Most preferred Mode for investing (n=30)


Options Number of responses Percentage

Index futures
Stock futures Index options Stock options Total

11
12 3 4 30

36.67
40 10 13.33 100

(Table 4a.4) Risk Perception of brokers towards derivatives


Risk Perception
Highly Risky Moderate Risk

Number of responses
22 3

Percentage
88 12

Less Risky
Total

0
25

0
100

(Table 4a.5) Highest risk carrying derivative (n=29)


Types of derivatives Equity Derivative Commodity derivative Currency derivative Interest rate derivative Total Number Of responses 5 22 1 1 29 Percentage 17.24 75.86 3.45 3.45 100

(Graph 4a.6) ( N=25)

(Graph 4a.7) Returns on derivatives if compared with Real Estate Returns (N=25)

(Graph 4a.8) (N=25)

(Graph 4.9) (N=25)

PART II To Study Investors Perception Towards Derivatives.

(Graph 4b.1) Annual Income range of respondents (N=25)

(Graph 4b.2) Investment Options used by respondents (n=50)

(Graph 4b.3) (N=25)

(Graph 4b.4) Frequency in dealing with derivatives (n=9)

(Table 4b.5) Purpose for undertaking derivative Contract (n=11)


Purpose Hedging Speculation Risk Management Arbitrage Total Number of responses 7 2 2 0 11 Percentage 63.64 18.18 18.18 0 100

(Graph 4b.6) Most preferred derivatives (n=13)

(Graph 4b.7) Percentage Income invested in derivatives (n=9)

(Table 4b.8) Perception of investors regarding Profits (n=9)


Options Highly Profitable +2 Profitable +1 Neutral 0 Loss Making -1
Highly Loss Making -2 Total

Number of responses 0 3 4 1
1 9

Percentage 0 3 0 -1
-2 0 Mean=Total/Total no. of respondents 0/9=0

(Table4b.9) Investors risk Perception for derivatives (n=9)


Risk Factor
Highly Risky Moderate Risk

Number of responses
6 3

Percentage
66.67 33.33

Less risky
Total

0
9

0
100

Graph 4b.10) (n=9)

(Graph 4b.11) Reasons for not increasing investment in derivatives (n=4)

(Graph 4b.12) Suggesting others put their money in derivatives (n=5)

Graph 4b.13) (n=16)

(Table 4b.13) Reason for not dealing in derivatives (n=9)

PART-III Analyzing Average Daily Turnover At NSE

(Graph 4c.1)Business Growth in Derivatives segment Since 2000-2010

Findings

Main factor that led to growth of derivatives are higher return. Stock Futures are most preferred for investing in derivatives.

Derivatives carry high risk factor and amongst that commodity derivatives are the most risky to trade due to high fluctuations. Money invested in real estate would fetch higher return compared to derivatives and would carry less risk.

Maximum people Hedging tool.

use

derivative

as

People already investing money through derivatives would like to increase their investments because they find it highly profitable.
Some people would prefer to invest their money through derivatives if they are provided with knowledge and a reliable broker.

Suggestions

People with low investment and less knowledge should not enter derivatives market. SEBI should be more vigilant to check the volatility triggered by operators.

One should invest for long term and that too only in blue chip companies.
One should always invest their money and should not speculate because speculation can cause heavy losses. If one wants to make money in stock market he should invest gradually in cash segment.

Conclusion

According to responses given by brokers and investors a conclusion can be attained that there is great market ahead for derivatives in future. As fifty percent of people are ready to take knowledge and invest their money in derivatives, existing investors are ready to increase their investments which is healthy sign for the markets. Even average turnover at NSE has increased over last 10 years which shows us trend that in future there will be rise in derivatives trading.

Thank you