AMAN PPT

TRAINING REPORT ON

Derivatives Business in India with focus on Future and Options

: A StudyAT

RELIGARE SECURITIES LTD

AMAN KAUR

ROLL NO. 04

COMPANY PROFILE

Religare securities is the retail broking arm of REL, an organization with more than eight decades of trust & credibility in the stock market.

It is India's leading retail financial Services Company with We have over 250 share shops across 115 cities in India. While our size and strong balance sheet allow us to provide you with varied products and services at very attractive prices, our over 750 Client Relationship Managers are dedicated to serving your unique needs.

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Religare securities is lead by a highly regarded management team that has invested crores of rupees into a world class Infrastructure that provides our clients with real-time service & 24/7 access to all information and products.

Our flagship Religare securities Professional Network offers real-time prices, detailed data and news, intelligent analytics, and electronic trading capabilities, right at your fingertips. This powerful technology complemented by our knowledgeable and customer focused Relationship Managers. We are creating a world of Smart Investor.

CENTRAL TEAM

Central Team Mr. Sunil Godhwani

Chairman and Managing Director, Religare Enterprises Limited

Mr. Shachindra NathGroup CEO, Religare Enterprises Limited

Mr. Anil SaxenaGroup CFO, Religare Enterprises Limited

Board of Directors - Religare Enterprises Limited Mr. Sunil Godhwani

Chairman and Managing Director Mr. Shachindra Nath

Group CEO Mr. Anil Saxena

Group CFO Mr. Harpal Singh

Non Executive Director Mr. Deepak Ramchand Sabnani

Independent Director 

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CEO's Mr. Anuj Gulati

Chief Executive Officer Religare Health Insurance Co. Ltd. 

Mr. Gagan RandevChief Executive Officer Religare Securities Limited

Mr. Kamlesh Dangi Chief People Officer Religare Enterprises Limited

Mr. Kavi AroraChief Executive OfficerReligare Finvest Limited

Mr. Martin NewsonChief Executive Officer Religare Capital Markets

Mr. Rajiv JamkhedkarChief Executive Officer AEGON Religare Life Insurance Company Limited

Mr. Saurabh NanavatiChief Executive Officer Religare Asset Management Company Private Limited

Mr. Vikas AgnihotriChief Executive Officer Religare Macquarie Wealth Management Limited

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VISIONTo be the best retail broking brand in the

Indian Equities market.

MISSIONTo educate and empower the individual

investor to make better investment decisions through quality advice and superior service.

STRUCTURE

Religare AMC Limited Asset Management Business Portfolio Management

AEGON Religare Life Insurance Co. Ltd. Life Insurance Company, JV with Aegon (26%),

Religare (44%), and Bennett & Coleman (30%)Religare Macquarie Wealth Mgmt. Ltd.

JV with Macquarie for Wealth Management BusinessReligare Securities Limited

Retail Equity Broking Online Investment Portal Depository Services

Religare Commodities Limited Commodity Broking Business

Religare Capital Markets Limited PE and M&A Advisory Institutional Broking Investment Banking Religare Finvest Limited Lending and Distribution business

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Religare Insurance Broking Limited Life Insurance Broking Business Non-Life Insurance Broking Business

Religare Arts Initiative Limited Business of Art Art Gallery Art Advisory

Religare Venture Capital Limited Private Equity and Investment Manager

Vistaar Religare Capital Advisors Ltd. JV with Vistaar Entertainment Ventures for film fund India's first ever film fund

Religare - Milestone JV with Milestone Capital to manage a healthcare and education fund

Religare Finance Ltd. Capital Market Financing

Religare securities Products & Services

Equity brokerage services Depository ServicesCommodities Brokerage ServicesMargin Trade FinanceDistribution of Financial ProductsDistribution of Insurance products

PROJECT

OBJECTIVE

To gain knowledge about stock market, how to study Derivatives and learn more about it, specially focused on Future & Options and its business in India.

To make clients and let them know about the different services offered by the Religare and study Religare as depository.

To understand the problem faced by the existing client and find ways to solve there queries at your level otherwise let the above level know about there problem.

METHODLOGY

Methodology of the project starts with: In the first phase we are trained and they teach us different things

about derivatives, capital market as well as share market. After that they conduct a mock viva, in this they ask about the real life

problem faced by the customers and our understanding with product. After that I had to go on call with our colleagues for practical

understanding of product. They provide leads and after that we make calls. Then after that we have to provide details of product and convince

them Then we have to visit them and get the formed filled from them. Maintaining records of clients and contacting them at regular basis. Get the knowledge of technical as well as fundamental methods. Help company in it promotional activities, as company is an expansion

mode.Assigning leads

Maintain database

Teaching about

derivative capital market

Tracking leads

List of your

learning

Derivative

A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments are to be made between the parties.

DERIVATIVE MARKET

The derivatives market is the financial market for derivatives are the financial instruments or contract who value is derived from the value of an underlying widely held and easily marketable financial asset. These underlying asset s can be currency ,shares, bonds, commodities etc.

Over the past two decades, the financial markets have experienced an impressive expansion in terms of securities issued and traded on the secondary markets. In addition, financial markets have become more and more interconnected allowing almost continuous trading in some precious metals, currencies and stocks traded on several exchanges.

TYPES OF DERIVATIVES

  Forwards: A forward contract is customized contract between two entities,

where settlement takes place on a specific date in the future at today’s pre-agreed price.

  Futures: A future contract is an agreement between two parties to buy or sell an

asset at a certain time in the future at a certain price. Future contracts are special types of forward contract in the sense that the former are standardized exchange-traded contracts.

  Options: Options are of two types- calls and puts. Calls give the buyer the right

but not the obligation to buy a given quantity of an underlying asset, at a given price on or before a given future date. Puts gives the buyer the right, but not the obligation to sell a given quantity of the underlying asset at a given price on or before a given date.

  Warrants: Options generally have lives up to one year, the majority of options

traded on options exchanges having a maximum maturity of nine months. Longer dated options are called warrants and are generally traded over the counter

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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.

Currency swaps: These entail swapping both principal and interest between the parties with the cash flows in one direction being in a different currency than those in the opposite direction.

Swaptions: They are options to buy or sell a swap that will become operative at the expiry of the options. Thus swaption is a option on a forward swap. Rather than have calls and puts, the swaption market have receiver swaptions and payer swaptions. A receiver swaption is an option to receive fixed and pay floating. A payer swaption is an option to pay fixed and receive floating.

FUTURES

In future market shares are deal in lots these lots could be of different numbers like 100, 200, 500 etc. Investors while taking over these lots and coming under the contract takes the position of the shares by paying the 1/3rd amount of the total holdings.

Holdings of investors = (shares lot * price of the lot) / 3. This formula explains that as investor is interested in taking 2 lots of

reliance of 100 shares of Rs. 900, the investor has to Pay :- (2*100*900) / 3 = 60000/ Which shows the investor is taking the position of Rs. 180000/- in just Rs.

60000/- in future market which the area of attraction of this particular market. These holdings are taken for 1 month, 2 months and three months according to the investor’s preference. The beauty of this contract is that the remaining 2/3rd money of the holdings is paid by the broking house the investors dealing with. Investor coming into this contract should know that by the time of contract he is in like of 1 or 2 months investor should clear its position before the last Thursday of the expiry month.

PARTICIPANTS

HedgersSpeculators Arbitrageurs

OPTIONS

An option is a contract which gives its holder the right, but not the obligation, to buy (or sell) an underlined asset at some predetermined price on or before a specified period of time.

What is the single most important characteristic of an option?It does not obligate its owner to take any action. It merely gives the owner the right to buy or sell an asset.

TERMINOLOGY

Parties:- Buyer or Holder- The Person who obtains

the right to buy or sell but has no obligation to perform is called the owner/ holder of the option. One who buys an option has to pay a premium to obtain the right.

Writer or Seller- One who confer the right and undertakes the obligation to the holder is called seller/writer of an Option.

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Premium Price – The premium is paid by the person buying the option and is collected by the person selling (writing) the option after the option expires. Price is defined on the basis of the value of underlined assets and length of time. Which is non-refundable.

Strike price – The price at which the option can be exercised. The range of strike prices is predetermined by the exchange.

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Expiration Date – The date when the option Mature. It is the latest time when the option can be exercised is called the time of maturity.

Execution :- American Style:- American option can

exercised the right at any point of time before the expiry date of option.

European Style:- European option are exercised only upon maturity.

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Call Option:- A Call Option is a right but no obligation to buy an underlined asset at a predetermined price within the specified time.

Put Option:- A Put Option is a right but no obligation to sell an asset at a predetermined price within the specified time.

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Moneyness of the option tells the benefit theholder gets if he exercise the right.

In-the-Money:- Option are those which if exercised would result in positive cash flow (in flow) to the holder. Or when it is beneficial for Buyer.

Call Option- Beneficial to exercise the right when Spot Price> Strike PricePut Option- Beneficial to exercise the right when Spot Price< Strike Price

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Out-of-the-Money:- Option would results in cash outflow or not beneficial for buyer to exercise the right.

Call Option- Not- Beneficial to exercise the right when

Spot Price< Strike PricePut Option- Not - Beneficial to exercise the right

when Spot Price> Strike Price

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At-the-Money:- Option would have no cash flows.

Spot Price = Strike Price

CHARGES

Brokerage Charges The maximum brokerage chargeable by a trading member in relation to trades

effected in the contracts admitted to dealing on the F&O segment of NSE is fixed at 2.5% of the contract value in case of index futures and stock futures. In case of index options and stock options it is 2.5% of notional value of the contract [(Strike Price + Premium) × Quantity)], exclusive of statutory levies.

  Transaction Charges The transaction charges payable to the exchange by the trading member for the

trades executed by him on the F&O segment are fixed at the rate of Rs. 2 per lakh of turnover (0.002%) subject to a minimum of Rs. 1,00,000 per year. However, for the transactions in the options sub-segment the transaction charges will be levied on the premium value at the rate of 0.05% (each side) instead of on the strike price as levied earlier.

For a trading Member participating in trading S&P CNX Defty at any time during the

year till September 30, 2010 there would be no transaction charges. The trading member would be required to make a lump sum contribution of Rs.500/- for the whole year as a contribution to Investor Protection Fund.

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Securities Transaction Tax The trading members are also required to

pay securities transaction tax (STT) on non delivery transactions at the rate of 0.017 (payable by the seller) for derivatives

OBJECTIVE OF THE STUDY

To understand the concept of the Derivatives and F&O Trading.

To know different types of Financial Derivatives.

To know the role of derivatives trading in India.

To analyze the performance of Derivatives Trading

Study investors perception in derivative market

RESEARCH METHDOLOGY

Secondary sources Books Journal Internet sources

LIMITATION

. LIMITED TIME: The time available to conduct the study was only 45 days. It

being a wide topic, had a limited time.  2. LIMITED RESOURCES: Limited resources are available to collect the information

about the commodity trading.  3. VOLATALITY: Share market is so much volatile and it is difficult to forecast

anything about it whether you trade through online or offline. 4. ASPECTS COVERAGE: Some of the aspects may not be

covered in my study. 5. Companies did not disclose their secrets data and strategies. 6. Possibility of Error in data collection. 7. Possibility of Error in analysis of data due to small sample size.

Q 1. Education qualification of investors who investing in derivative market

Education No. of result Under graduate 6 Graduate 10 Post graduate 23 Professional 11

Q.2 Income range of investors who investing in derivative market

 Income range No. of Result Below 1, 50,000 1 1, 50,000- 3, 00,000 93, 00,000- 5, 00,000 14 Above 5, 00,000 26

Q.3 Normally what percentage of your monthly household income could be

available for investment? Investment No. of result

Between 5% to 10% 2 Between 11% to 15% 6 Between 16% to 20% 13 Between 21% to 25% 18 More than 25% 11

Q. 4 What kind of risk do you perceive while investing in the stock market?

Risk in stock market No. of result Uncertainty of returns 19 Slump in stock market 22 Fear of windup of company 6 Others 3

Q. 5 Why people do not invest in derivative market?

Reasons No. of result

Lack of knowledge & understanding 27 Increase speculation 2 Risky & highly leveraged 17 Counter party risk 4

.Q .6 What is the purpose of investing in derivative market

Purpose of investment NO. OF RESULT

Hedge their fund 27

Risk control 9

More stable 1

Direct investment without buying & holding assets

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