Competitive Strategy to Perform Good Risk Analysis of Options

8/9/2019 Competitive Strategy to Perform Good Risk Analysis of Options

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A STUDY TO UNDERSTAND COMPLEXITIES AND FRAME A

COMPETITIVE STRATEGY TO PERFORM GOOD RISK

ANALYSIS OF OPTIONS

(Submitted to the Bangalore University in partial fulfillment for the

award of the Degree of Masters in Business Administration)

Submitted by

Vijay.K

Reg. No. O5JJCM6059

Under the guidance of

Prof.Edward Aloysius

(Faculty Guide)

KRISTU JAYANTI COLLEGE OF MANAGEMENT &

TECHNOLOGY

Bangalore - 560077


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2006-2007

DECLARATION

I here by declare that this study titled A STUDY TO UNDERSTAND

COMPLEXITIES AND FRAME A COMPETITIVE STRATEGY TO

PERFORM GOOD RISK ANALYSIS OF OPTIONS submitted by me

to the department of management, Bangalore University in partial

fulfillment of requirement of MBA programme is a bonafide work carried by

me under the guidance of Prof. Aloysius Edward. This has not been

submitted earlier to any other university or institution for the award of any

degree/certified or published any time before.

PLACE: BANGALORE

DATE: 31/04/07 VIJAY.K

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CERTIFICATE FROM GUIDE AND HEAD OF INSTITUTION

This is to certify that this project entitled A STUDY TO UNDERSTAND

COMPLEXITIES AND FRAME A COMPETITIVE STRATEGY TO PERFORM

GOOD RISK ANALYSIS OF OPTIONS submitted in partial fulfillment for the

award of MBA degree OF Bangalore University was carried out by Mr. VIJAY.K

(05JJCM6059).

Under the guidance of Prof. EDWARD ALOYSIUS. This has not been submitted to

any other University or Institution for the award of any degree/diploma/certificate.

Mr. EDWARD ALOYSIUS Dr. ARUN KUMAR

Guide MBA Dean

Fr. JoseKutty.P.D.

Principal

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ACKNOWLEDGEMENTS

First of all, I thank the Almighty God for his mercy and love when kept me in good

health and sound mind and helped me to complete the project successfully.

I take this opportunity to thank our Principal Fr. Josekutty P.D. who had given us the

full support and required information regarding the project work .

I take this opportunity to express my profound and sincere thanks to Mr. Aloysius

Edward for his guidance and support throughout the project work .

I take this opportunity to express my profound and sincere thanks to Mr. Chella

Surendra ( KARVY THE FINAPOLIS) for giving an opportunity to do this project

work in their reputed organization.

A special word of thanks to Dr. Arun Kumar ( Dean of MBA Department) and Prof.

A.M.TATTI (HOD of MBA Department) for their kind support throughout the project

work .

I sincerely thank my parents and friends for their encouragement and support during the

project. Last, but not the least, I express my gratitude to everyone who has directly or

indirectly helped me in completing the project in time and thereby making my project a

grand success.

VIJAY .K

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EXECUTIVE SUMMARY

Derivatives are financial instruments/contracts whose value depends upon the value of an

underlying. Since their value is essentially derived out of an underlying they are financial

obstructions whose value is derived mathematically from the changes in the value of the

underlying.

The underlying can be an agricultural commodity like wheat, barley or tea;

individual stocks, like Microsoft, Infosys and Zee Telefilms; stock index like Nikkei

225, BSE Sensex or NSE Nifty; financial instruments like treasury bills, notes and bonds;

currencies like dollar, Euro, Pound; or even interest rates and literally anything. Since

datives today are being written on any type of underlying and not necessary on an asset,

the underlying can be a widget a hypothetical thing which is used for an example.

Options markets play an important role in the world of finance. From the point

of view of investors particularly institutional investors, options are important derivative

instrument and a major innovation in the field of risk management.

Options are a type of derivative, which simply means that their value depends on the

value of an underlying investment. In most cases, the underlying investment is a stock,

but it can also be an index, a currency, a commodity, or any number of other securities.

I had taken Beta and Volatility calculations of ten companies in NIFTY with the

help of secondary (historical) data. Beta shows the measurement of risk and Volatility

shows the variations of the respective companies share value.

The datas for the analysis are collected from the National Stock Exchange and

Derivatives India (nseindia.com and derivatrivesindia.com). Researcher is mainly using

the secondary (historical) datas for the analysis.

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CONTENTS

CHAPTER

NO.

CONTENTS PAGE

NO.

1 INTRODUCTION 9 - 26

2 RESEARCH METHODOLOGY 27 32

3 COMPANY PROFILE 33 - 43

4 ANALYSIS AND INTERPRETATION 44 76

5 SUMMARY OF FINDINGS, CONCLUSIONS

AND SUGGESTIONS

77 79

BIBLIOGRAPHY 81

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TABLES AND GRAPHS

TABLE NO. CONTENTS PAGE NO.

4.1 Table and Graph showing niftyand market returns of RANBAXY 46 47

4.2

Table and Graph showing nifty

and market returns of

BAJAJAUTO

49 50

4.3Table and Graph showing nifty

and market returns of ACC52 53

4.4



HEROHONDA

55 56



TATASTEEL

58 59

4.6



DR.REDDYs

61 62

4.7



MOSERBAER

64 65



MARUTIUDYOG LMTD

67 68


and market returns of M & M70 71

4.10



ASHOKLEYLAND

73 74

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CHAPTER 1

INTRODUCTION

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INTRODUCTION

BSE created history on June 9, 2000 by launching the first Exchange traded Index

Derivative Contract i.e. futures on the capital market benchmark index - the BSE Sensex.

The inauguration of trading was done by Prof. J.R. Varma, member of SEBI and

chairman of the committee responsible for formulation of risk containment measures for

the Derivatives market. The first historical trade of 5 contracts of June series was done on

June 9, 2000 at 9:55:03 a.m. between M/s Kaji & Maulik Securities Pvt. Ltd. and

M/s Emkay Share & Stock Brokers Ltd. at the rate of 4755.

In the sequence of product innovation, the exchange commenced trading in Index Options

on Sensex on June 1, 2001. Stock options were introduced on 31 stocks on July 9, 2001

and single stock futures were launched on November 9, 2002.

September 13, 2004 marked another milestone in the history of Indian Capital Markets,

the day on which the Bombay Stock Exchange launched Weekly Options, a unique

product unparallel in derivatives markets, both domestic and international. BSE permitted

trading in weekly contracts in options in the shares of four leading companies namely

Reliance, Satyam, State Bank of India, and Tisco in addition to the flagship index-

Sensex.

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Derivatives are increasingly being used to protect assets from drastic fluctuations and atthe same time they are being re-engineered to cover all kinds of risk and with this the

growth of the derivatives market continues. It is, indeed, ironic that something set up to

prevent risk will also allow parties to expose themselves to risk of exponential

proportions.

FUTURES:

A futures contract is a standardized contract to buy or sell a specific security at a future

date at an agreed price.

FORWARDS:

The process involves the delivery of foreign currency at a specified future date for a

specified price is known as Forward contract.

OPTIONS :

Options are a type of derivative, which simply means that their value depends on the

value of an underlying investment. In most cases, the underlying investment is a stock,

but it can also be an index, a currency, a commodity, or any number of other securities.

SWAPS:

Financial SWAPS are a funding technique, which permit a borrower to access one market

and then exchange the liability for another type of liability. The global financial markets

present borrowers and investors with a wide variety of financing and investment vehicles

in terms of currency and type of coupon- fixed or floating.

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TYPES OF PRODUCTS :

Index Futures

A futures contract is a standardized contract to buy or sell a specific security at a

future date at an agreed price.

An index future is, as the name suggests, a future on the index i.e. the underlying

is the index itself. There is no underlying security or a stock, which is to bedelivered to fulfill the obligations as index futures are cash settled. As other

derivatives, the contract derives its value from the underlying index. The

underlying indices in this case will be the various eligible indices and as permitted

by the Regulator from time to time.

Index Options

Options contract give its holder the right, but not the obligation, to buy or sell

something on or before a specified date at a stated price. Generally index options

are European Style. European Style options are those option contracts that can be

exercised only on the expiration date. The underlying indices for index options are

the various eligible indices and as permitted by the Regulator from time to time.

Stock Futures

A stock futures contract is a standardized contract to buy or sell a specific stock at

a future date at an agreed price. A stock future is, as the name suggests, a future

on a stock i.e. the underlying is a stock. The contract derives its value from the

underlying stock. Single stock futures are cash settled.

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Stock Options

Options on Individual Stocks are options contracts where the underlyings are

individual stocks. Based on eligibility criteria and subject to the approval from the

regulator, stocks are selected on which options are introduced. These contracts are

cash settled and are American style. American Style options are those option

contracts that can be exercised on or before the expiration date.

ELIGIBILITY CRITERIA :

As prescribed by SEBI vide its Circulars regarding the eligibility criteria for

introducing Futures & Options Contracts on stocks and indices, the following

revised eligibility criteria would be applied w.e.f. September 22nd, 2006 to

determine the eligibility of stocks and indices on which Futures & Options

contract could be introduced for trading in Derivatives.

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estimate value would be applied to the day's order book snapshots to

compute the order size.

o The quarter sigma percentage would be applied to the average of the best

bid and offer price in the order book snapshot to compute the order size to

move price of the stock by quarter sigma.

o The median order size to cause quarter sigma price movement shall be

determined separately for the buy side and the sell side. The average of the

median order size for the buy and the sell side is taken as the median

quarter sigma order size.

o The quarter sigma order size in stock shall be calculated on the 15th of

each month, on a rolling basis, considering the order book snapshots in the

previous six months. Similarly, the average daily market capitalization and

the average daily traded value shall also be computed on the 15th of each

month, on a rolling basis, to arrive at the list of top 500 stocks.

Eligibility criteria for unlisted companies coming out with Initial Public Offering :

For unlisted companies coming out with initial public offering, if the net publicoffer is Rs. 500 crores (Rs 5 Billion) or more, then the exchange may consider

introducing stock options and stock futures on such stocks at the time of its listing

in the cash market.

Eligibility criteria for stocks on account of corporate restructuring:

All the following conditions should be met in the case of shares of a company

undergoing restructuring through any means for eligibility to re-introducederivative contracts on that company from the first day of listing of the post

restructured company in the underlying market:

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segment. Therefore, for a stock to become ineligible, the criteria for

market wide position limit shall be relaxed up to 10% of the criteria

applicable for the stock to become eligible for derivatives trading. The

other eligibility conditions would be applicable mutas mutandis for the

stock to become ineligible.

If a stock fails to meet the aforesaid eligibility criteria forthree months consecutively,

then no fresh month contract shall be issued on that stock

However, the existing unexpired contracts may be permitted to trade till expiry and new

strikes may also be introduced in the existing contract months.

The Exchange may compulsorily close out all derivative contract positions in a particular

underlying when that underlying has ceased to satisfy the eligibility criteria or the

exchange is of the view that the continuance of derivative contracts on such underlying is

detrimental to the interest of the market keeping in view the market integrity and safety.

The decision of such forced closure of derivative contracts shall be taken in consultation

with other exchanges where such derivative contracts and are also traded shall be applied

uniformly across all exchanges.

Re-Introduction of Stocks Discontinued from Futures & Options Trading :

A stock, which is dropped from derivatives trading, may become eligible once again. In

such instances, the stock is required to fulfill the eligibility criteria forthree consecutive

months (instead of one month as specified earlier) to be re-introduced for derivatives

trading. Derivative contracts on such stocks may be re-introduced by the exchange itself.

However, introduction of futures and option contracts on a stock for the first time would

continue to be subject to SEBI approval.

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Eligibility criteria for introducing Futures & Options Contracts on Index

The Futures Options Contracts on an index can be issued only if 80% of the index

constituents are individually eligible for derivatives trading. However, no single ineligible

stock in the index shall have a weight age of more than 5% in the index. The index on

which Futures and Options contracts are introduced shall be required to comply with the

eligibility criteria on a monthly basis.

Discontinuance of Futures & Options Contracts on index:

If the index fails to meet the above eligibility criteria for three months consecutively, then

no fresh month contract shall be issued on that Index. However, the existing unexpired

contracts shall be permitted to trade till expiry and new strike prices will continue to be

introduced in the existing contracts.

The above requirements as prescribed by SEBI need to be necessarily met for

introduction of F&O contracts on underlying stocks of the cash market. However, once

the criteria are met, it is at the discretion of the Exchange to apply to SEBI for permission

to launch F&O contract on the eligible stocks. Once the SEBI approval in respect of those

stocks is obtained, the exchange issues a suitable notice to the market, in advance and

then introduces F & O contracts on the respective stocks.

TRADING SYSTEM

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The Derivatives Trading at BSE takes place through a fully automated screen based

trading platform called as DTSS (Derivatives Trading and Settlement System). The DTSS

is designed to allow trading on a real time basis. In addition to generating trades by

matching opposite orders, the DTSS also generates various reports for the member

participants.

Order Matching Rules

Order Matching will take place after order acceptance wherein the system searches for anopposite matching order. If a match is found, a trade will be generated. The order against

which the trade has been generated will be removed from the system. In case the order is

not exhausted further matching orders will be searched for and trades generated till the

order gets exhausted or no more match-able orders are found. If the order is not entirely

exhausted, the system will retain the order in the pending order book. Matching of the

orders will be in the priority of price and timestamp. A unique trade-id will be generated

for each trade and the entire information of the trade is sent to the members involved.

Order Conditions

The derivatives market is order driven i.e. the traders can place only Orders in the system.

Following are the Order types allowed for the derivative products. These order types have

characteristics similar to ones in the cash market.

o Limit Order: An order for buying or selling at a limit price or better, if

possible. Any unexecuted portion of the order remains as a pending order

till it is matched or its duration expires.

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o Market Order: An order for buying or selling at the best price prevailing in

the market at the time of submission of the order.

o There are two types of Market orders:

1. Partial fill rest Kill (PF): execute the available quantity and kill any

unexecuted portion.

2. Partial fill rest Convert (PC): execute the available quantity and

convert any unexecuted portion into a limit order at the traded

price.

o Stop Loss: An order that becomes a limit order only when the market

trades at a specified price.

All orders shall have the following attributes:

o Order Type (Limit / Market PF/Market PC/ Stop Loss)

o The Asset Code, Product Type, Maturity, Call/Put and Strike Price.

o Buy/Sell Indicator

o Order Quantity

o Price

o Client Type (Own / Institutional / Normal)

o Client Code

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o Order Retention Type (GFD / GTD / GTC)

Good For Day (GFD) - The lifetime of the order is that trading session.

Good Till Date (GTD) - The life of the order is till the number of days as

specified by the order retention period. .

Good Till Cancelled (GTC) - The order if not traded will remain in the

system till it is cancelled or the series expires, whichever is earlier.

o Order Retention Period (in calendar days) This field is enabled only if the

value of the previous attribute is GTD. It specifies the number of days the

order is to be retained.

o Protection Points This is a field relevant in Market Orders and Stop Loss

orders. The value enterable will be in absolute underlying points and

specifies the band from the touchline price or the trigger price within

which the market order or the stop loss order respectively can be traded.

o Risk Reducing Orders (Y/N): When the member's collateral falls below 50

lacs then he will be allowed to put only risk reducing orders and he will

not be allowed to take any fresh positions. It is not essentially a type of

order but a mode into which the member is put into when he violates his

collateral limit. A member who has entered the risk-reducing mode will be

allowed to put only one risk reducing order at a time.

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TRADING HOLIDAYS

Holidays Date Day

1 Bakri-Id 1st January, 2007 Monday

2 Republic Day 26th January, 2007 Friday3 Moharum 30th January, 2007 Tuesday

4 Mahashivratri 16th February, 2007 Friday

5 Ram Navami 27th March, 2007 Tuesday

6 Good Friday 6th April, 2007 Friday

7 Maharashtra Day 1st May, 2007 Tuesday

8 Buddha Pournima 2nd May, 2007 Wednesday

9 Independence Day 15th August, 2007 Wednesday

10 Mahatma Gandhi Jayanti 2nd October, 2007 Tuesday

11 Diwali Amavasya (Laxmipuja) 9th November, 2007 Friday

12 Bakri-Id (falls twice in 2007) 21st December, 2007 Friday13 Christmas 25th December, 2007 Tuesday

SESSION

TIMINGS

SESSION NAME FROM TO

Beginning of the Day Session 8:00 9:00

Login Session 9:00 9:55

Trading Session 9:55 15:30

Position Transfer Session 15:30 15:50

Closing Session 15:50 16:05

Option Exercise Session 16:05 16:35

Margin Session 16:35 16:50Query Session 16:50 17:50

End of Day Session 17:50 17:50

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o A LTM is provided with derivatives trading terminals for execution of

trades either on his own account or on account of his clients.

o A LTM can issue contract notes to his clients in his own name.

o A LTM can exercise and perform trade and position management

functions online and also check his payment obligations that may result

from his trading activities.

o A LTM, however, cannot clear and settle trades executed by him directly

with the Clearing House of the Exchange. For this purpose, we would need

to enter into an arrangement with an existing Clearing Member of the

Derivatives Segment of BSE. (A list of Clearing Members can be obtained

from the Exchange.)

What are the advantages of becoming a LTM?

There are following significant advantages in becoming LTM of the Derivatives

Segment of the BSE.

Direct access to the on-line Derivatives Trading System of the Exchange

Trading in Option and Futures on Sensex, Single Stock Futures and options in

eligible scrips and interest rate derivative instruments

Access to new products as and when they are introduced

Who can become LTM?

Individuals, firms, corporates and institutions, who are not members of the Cash

Segment of BSE, can become LTM.

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What are the requirements for becoming a LTM?

o Minimum networth of Rs. 25 lakhs

o A registration with SEBI

Charges Payable By LTM :

One-time (non-refundable) contribution to Trade Guarantee Fund (TGF) : Rs.1,00,000

One-time (non-refundable) contribution to Investors Protection Fund (IPF) : Rs.2,00,000

Annual Membership Charges : RS 25,000.

Minimum Security Deposit:

LTM has to maintain a minimum security deposit of Rs.7,50,000 with the Clearing

Member and the same is available to him for the purpose of trading limits and initial

margin requirements.

Transaction Charges:

The members are at present required to pay transaction charges at a Re. 0.25 per

Rs.1,00,000 of turnover which is appropriated towards TGF & IPF.

Sub-brokers in the Cash Segment can become LTMs of the Derivatives Segment with

minimum investment and significant advantages as mentioned above.

* Annual membership charges of Rs. 25,000/- have been waived for the financial

year, 2004-2005

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CHAPTER 2

RESEARCH METHODOLOGY

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STATEMENT OF PROBLEM:

The Option buyers are no way under obligation in exercising their right to buy or sell

.Their right to buy or sell can be exercised only if its execution is in their favor.

Accordingly, an option contract is specific on the quantity of the asset to be bought or

sold, the price at which the transaction has to take place(strike price) and the date up towhich the contract is valid(expiry date).

The price at which asset would change and in future is agreed upon the

time of entering into the contract. The actual purchase or sale of the underlying involving

payment of cash and delivery of the instrument does not take place until the contracted

date of delivery. Prices of options are commonly depending upon six factors. Unlike

futures which derives there prices primarily from the undertaking. Options prices are far

more complex. The study tries to understand these complexities and frame a competitive

strategy to frame a good risk analysis.

NEED AND IMPORTANCE OF THE STUDY

The study covers derivatives market with specific reference to Option market.

The study shows the profit enhancement and risk reduction in derivatives.

The study shows the Beta and Volatility calculation for the purpose of measuring the risk

and variability of different companys shares.

The study also shows how an investor can minimize risk.

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OBJECTIVES OF THE STUDY:

1. To have a basic knowledge about stock option.

2. To see whether there is any risk less profit available in the market.

3. How far option can be advised as a profit making strategy.

OPERATIONAL DEFINITIONS OF CONCEPTS

Buy Open: - Means a buy transaction which will have the effect of creating or increasing

a long position.

Clearing Member: - Clearing Member means a Member of the Clearing Corporation.

Closing buy transaction Means a buy transaction which will have the effect of partly or

fully offsetting a short position.

Closing sell transaction: - Means a sell transaction which will have the effect of partly

or fully offsetting a long position.

Constituent: - A constituent means a person, on whose instructions and, on whose

account, the Trading Member enters into any contract for the purchase or sale of any

security or does any act in relation thereto.

Contract Month: - Contract month means the month in which a contract is required to

be finally settled.

Derivatives Contract: - A contract which derives its value from the prices of underlying

securities.

Expiration Day: - The day on which the final settlement obligation are determined in a

Derivatives Contract.

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Futures Contract: - means a firm contractual agreement to buy or sell the underlying

security in the future.

Last Trading Day: - Means the day unto and on which a Derivatives Contract is

available for trading.

Long Position: - Long Position in a Derivatives contract means outstanding purchase

obligations in respect of a permitted derivatives contract at any point of time.

Open Position: - Open position means the sum of long and short positions of the

Member and his constituent in any or all of the Derivatives Contracts outstanding with

the Clearing Corporation.

Open Interest: - Open Interest means the total number of Derivatives Contracts of an

underlying security that have not yet been offset and closed by an opposite Derivatives

transaction nor fulfilled by delivery of the cash or underlying security or option exercise.

For calculation of Open Interest only one side (either the long or the short) of the

Derivatives Contract is counted.

Options Contract: - Options Contract is a type of Derivatives Contract which gives the

buyer/holder of the contract the right (but not the obligation) to buy/sell the underlying

security at a predetermined price within or at end of a specified period. The option

contract which gives a right to buy is called a Call Option and the option contract that

gives a right to sell is called a Put Option.

Option Holder: - Option Holder means a Trading Member who is the buyer of the

Options Contracts.

Option Writer: - Option Writer means a Trading Member who is the seller of the

Options Contracts.

Outstanding Obligation: - Means the obligation which has neither been closed out nor

been settled.

Permitted Derivatives: - Contract Permitted Derivatives Contract is a derivative contract

which is permitted to be traded on the Futures & Options segment of the Exchange.

Regular lot / Market Lot Means the number of units that can be bought or sold in a

specified derivatives contract and it is also termed as Contract Multiplier.

Risk Disclosure Document: - Refers to the document to be issued to all potential

investors at the time of registration for disclosure of the risks inherent to derivatives.

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Settlement Date: - Means the date on which the settlement of outstanding obligations in

a permitted Derivatives contract are required to be settled.

Sell Open: - Means a sell transaction which will have the effect of creating or increasing

a short position.

Short Position: - Short position in a derivatives contract means outstanding sell

obligations in respect of a permitted derivatives contract at any point of time.

Trading cycle: - Trading cycle means the period during which the derivatives contract

will be available for trading.

Trading Member: - Trading Member is a member of Derivative Exchange.

Trading cum Clearing Member: - Means Member of Derivatives Exchange as well as

its Clearing Corporation.

Trade Type: - Trade type is the type of trade as may be permitted by the F&O Segment

of the Exchange from time to time for each Market Type.

Underlying Securities: - Means a security with reference to which a derivatives contract

is permitted to be traded on the Futures & Options segment of the Exchange from time to

time.

Beta; - Beta is the measurement of risk; if the Beta value is more it shows the more risk

of the respective share.

Volatility; - More the volatility, higher is the probability of the future generating higher

returns to the buyer. The downside in both the cases of call and put is fixed but the gains

can be unlimited.

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CHAPTER 3

COMPANY PROFILE

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COMPANY PROFILE

KARVY, is a premier integrated financial services provider, and ranked among the top

five in the country in all its business segments, services over 16 million individual

investors in various capacities, and provides investor services to over 300 corporates,

comprising the who is who of Corporate India. KARVY covers the entire spectrum of

financial services such as Stock broking, Depository Participants, Distribution of

financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking,Commodities Broking, Personal Finance Advisory Services, Merchant Banking &

Corporate Finance, placement of equity, IPOs, among others. Karvy has a professional

management team and ranks among the best in technology, operations and research of

various industrial segments.

The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise

of a small group of practicing Chartered Accountants who founded the flagship company

Karvy Consultants Limited. We started with consulting and financial accounting

automation, and carved inroads into the field of registry and share accounting by 1985.

Since then, we have utilized our experience and superlative expertise to go from strength

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to strengthto better our services, to provide new ones, to innovate, diversify and in the

process, evolved Karvy as one of Indias premier integrated financial service enterprise.

Thus over the last 20 years Karvy has traveled the success route, towards building a

reputation as an integrated financial services provider, offering a wide spectrum of

services. And we have made this journey by taking the route of quality service, path

breaking innovations in service, versatility in service and finallytotality in service.

Our highly qualified manpower, cutting-edge technology, comprehensive infrastructure

and total customer-focus has secured for us the position of an emerging financial services

giant enjoying the confidence and support of an enviable clientele across diverse fields in

the financial world.

Our values and vision of attaining total competence in our servicing has served as the

building block for creating a great financial enterprise, which stands solid on our

fortresses of financial strength - our various companies.

With the experience of years of holistic financial servicing behind us and years of

complete expertise in the industry to look forward to, we have now emerged as a premier

integrated financial services provider.

And today, we can look with pride at the fruits of our mastery and experience

comprehensive financial services that are competently segregated to service and manage a

diverse range of customer requirements.

Member - Natio nal Stock Exchange (NSE), The Bombay Stock Exchange (BSE), and

The Hyderabad Stock Exchange (HSE).

Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely

towards attaining diverse goals of the customer through varied services. Creating a

plethora of opportunities for the customer by opening up investment vistas backed by

research-based advisory services. Here, growth knows no limits and success recognizes

no boundaries. Helping the customer create waves in his portfolio and empowering the

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investor completely is the ultimate goal.

Stock Broking Services

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high

success rate as a wealth management and wealth accumulation option. The difference

between unpredictability and a safety anchor in the market is provided by in-depth

knowledge of market functioning and changing trends, planning with foresight and

choosing ones options with care. This is what we provide in our Stock Broking

services.

We offer services that are beyond just a medium for buying and selling stocks and shares.

Instead we provide services which are multi dimensional and multi-focused in their

scope. There are several advantages in utilizing our Stock Broking services, which are the

reasons why it is one of the best in the country.

We offer trading on a vast platform ; National Stock Exchange, Bombay Stock Exchange

and Hyderabad Stock Exchange. More importantly, we make trading safe to the

maximum possible extent, by accounting for several risk factors and planning

accordingly. We are assisted in this task by our in-depth research, constant feedback and

sound advisory facilities. Our highly skilled research team, comprising of technical

analysts as well as fundamental specialists, secure result-oriented information on market

trends, market analysis and market predictions. This crucial information is given as a

constant feedback to our customers, through daily reports delivered thrice daily ; The Pre-

session Report, where market scenario for the day is predicted, The Mid-session Report,

timed to arrive during lunch break , where the market forecast for the rest of the day is

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given and The Post-session Report, the final report for the day, where the market and the

report itself is reviewed. To add to this repository of information, we publish a monthly

magazine Karvy ; The Finapolis, which analyzes the latest stock market

trends and takes a close look at the various investment options, and products available in

the market, while a weekly report, called Karvy Bazaar Baatein, keeps

you more informed on the immediate trends in the stock market. In addition, our specific

industry reports give comprehensive information on various industries. Besides this, we

also offer special portfolio analysis packages that provide daily technical advice on scrips

for successful portfolio management and provide customized advisory services to help

you make the right financial moves that are specifically suited to your portfolio.

Our Stock Broking services are widely networked across India, with the number of ourtrading terminals providing retail stock broking facilities. Our services have increasingly

offered customer oriented convenience, which we provide to a spectrum of investors,

high-networth or otherwise, with equal dedication and competence.

But true to our spirit, this success is not our final destination, but just a platform to launch

further enhanced quality services to provide you the latest in convenient, customer-

friendly stock management.

Over the years we have ensured that the trust of our customers is our biggest returns.

Factors such as our success in the Electronic custody business has helped build on our

tradition of trust even more. Consequentially our retail client base expanded very fast.

To empower the investor further we have made serious efforts to ensure that our research

calls are disseminated systematically to all our stock broking clients through various

delivery channels like email, chat, SMS, phone calls etc.

Our foray into commodities broking has been path breaking and we are in the process of

converting existing traders in commodities into the more organized mainstream of trading

in commodity futures, both as a trading and risk hedging mechanism.

In the future, our focus will be on the emerging businesses and to meet this objective, we

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have enhanced our manpower and revitalized our knowledge base with enhances focus on

Futures and Options as well as the commodities business.

Depository participants

The onset of the technology revolution in financial services Industry saw the emergence

of Karvy as an electronic custodian registered with National Securities Depository Ltd

(NSDL) and Central Securities Depository Ltd (CSDL) in 1998. Karvy set standards

enabling further comfort to the investor by promoting paperless trading across the country

and emerged as the top 3 Depository Participants in the country in terms of customer

serviced.

Offering a wide trading platform with a dual membership at both NSDL and CDSL, we

are a powerful medium for trading and settlement of dematerialized shares. We have

established live DPMs, Internet access to accounts and an easier transaction process in

order to offer more convenience to individual and corporate investors. A team of

professional and the latest technological expertise allocated exclusively to our demat

division including technological enhancements like SPEED-e, make our response time

quick and our delivery impeccable. A wide national network makes our efficiencies

accessible to all .

Distribution of financial products

The paradigm shift from pure selling to knowledge based selling drives the business

today. With our wide portfolio offerings, we occupy all segments in the retail financial

services industry.

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A 1600 team of highly qualified and dedicated professionals drawn from the best of

academic and professional backgrounds are committed to maintaining high levels of

client service delivery. This has propelled us to a position among the top distributors for

equity and debt issues with an estimated market share of 15% in terms of applications

mobilized, besides being established as the leading procurer in all public issues.

To further tap the immense growth potential in the capital markets we enhanced the scope

of our retail brand, Karvy the Finapolis , thereby providing planning and advisory

services to the mass affluent. Here we understand the customer needs and lifestyle in the

context of present earnings and provide adequate advisory services that will necessarily

help in creating wealth. Judicious planning that is customized to meet the future needs of

the customer deliver a service that is exemplary. The market-savvy and the ignorantinvestors, both find this service very satisfactory. The edge that we have over competition

is our portfolio of offerings and our professional expertise. The investment planning for

each customer is done with an unbiased attitude so that the service is truly customized.

Our monthly magazine, Finapolis, provides up-dated market information on market

trends, investment options, opinions etc. Thus empowering the investor to base every

financial move on rational thought and prudent analysis and embark on the path to wealth

creation.

Advisory services

Under our retail brand Karvy the Finapolis', we deliver advisory services to a cross-

section of customers. The service is backed by a team of dedicated and expert

professionals with varied experience and background in handling investment portfolios.

They are continually engaged in designing the right investment portfolio for each

customer according to individual needs and budget considerations with a comprehensive

support system that focuses on trading customers' portfolios and providing valuable

inputs, monitoring and managing the portfolio through varied technological initiatives.

This is made possible by the expertise we have gained in the business over the years.

Another venture towards being investor-friendly is the circulation of a monthly magazine

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called Karvy - the Finapolis'. Covering the latest of market news, trends, investment

schemes and research-based opinions from experts in various financial fields.

Private client group

This specialized division was set up to cater to the high net worth individuals and

institutional clients keeping in mind that they require a different kind of financial

planning and management that will augment not just existing finances but their life-style

as well. Here we follow a hard-nosed business approach with the soft touch of dedicated

customer care and personalized attention.

For this purpose we offer a comprehensive and personalized service that encompasses

planning and protection of finances, planning of business needs and retirement needs and

a host of other services, all provided on a one-to-one basis.

Our research reports have been widely appreciated by this segment. The delivery and

support modules have been fine tuned by giving our clients access to online portfolio

information, constant updates on their portfolios as well as value-added advise on

portfolio churning, sector switches etc. The investment recommendations given by our

research team in the cash market has enjoyed a high success rate.

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BOARD OF DIRECTORS

Mr. C. Parthasarathy (DIRECTOR)

Mr. M. Yugandhar (DIRECTOR)

Mr. M.S. Ramakrishna (DIRECTOR)

Mr. Akash Mehta (DIRECTOR)

Mr. Peter Wing Hung So (DIRECTOR)

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Achievements

Among the top 5 stock brokers in India (4% of NSE volumes)

India's No. 1 Registrar & Securities Transfer Agents

Among the to top 3 Depository Participants

Largest Network of Branches & Business Associates

ISO 9002 certified operations by DNV

Among top 10 Investment bankers

Largest Distributor of Financial Products

Adjudged as one of the top 50 IT uses in India by MIS Asia

Full Fledged IT driven operations

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Quality policy :

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by

combining its human and technological resources, to provide superior quality financial

services. In the process, Karvy will strive to exceed Customer's expectations.

Quality Objectives

As per the Quality Policy, Karvy will :

Build in-house processes that will ensure transparent and harmonious

relationships with its clients and investors to provide high quality of services.

Establish a partner relationship with its investor service agents and vendors that

will help in keeping up its commitments to the customers.

Provide high quality of work life for all its employees and equip them with

adequate knowledge & skills so as to respond to customer's needs.

Continue to uphold the values of honesty & integrity and strive to establish

unparalleled standards in business ethics.

Use state-of-the art information technology in developing new and innovative

financial products and services to meet the changing needs of investors and

clients.

Strive to be a reliable source of value-added financial products and services and

constantly guide the individuals and institutions in making a judicious choice of

same.

Strive to keep all stake-holders(shareholders, clients, investors, employees,

suppliers and regulatory authorities) proud and satisfied.

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CHAPTER 4

ANALYSIS AND INTERPRETATION

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CALCULATION OF BETA AND VOLATALITY

Formula used for the calculation of Beta and Standard Deviation

This chapter provides the beta and volatility of derivatives of FIVE companies in

NIFTY.

Computation of Standard Deviation:

RATE OF RETURN = (Adj Close Open) / Open*100

Variance calculated as per Excel Formula

Standard Deviation = square root of variance

(Standard deviation based on Arithmetical Returns calculated as per Excel Formulae)

COMPUTATION OF BETA:

Beta = n. xy - (x) (y)

n. x^2-(x) ^2

Stock Return (Y) = (Adj Close Open) / Open*100

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Market Return(X) = (Adj Close Open) / Open*100

4.1 RANBAXY - From 1-3-2007 to 31-3-2007

BETA AND VOLATILITY

S & P CNX Market Stock

NIFTY RANBAXY Return Return

Date Open Close Open Close X Y X*Y X^2

01-Mar-07 3745.40 3811.20 344.0 337.40 1.757 -1.919 3.371 3.087

02-Mar-07 3811.65 3726.75 345.00 341.25 -2.227 -1.087 2.420 4.960

05-Mar-07 3726.50 3576.50 345.50 317.60 -4.025 -8.075 32.501 16.201

06-Mar-07 3577.15 3655.65 325.00 320.05 2.194 -1.523 -3.341 4.814

07-Mar-07 3661.55 3626.85 322.00 304.50 -0.948 -5.435 5.152 0.899

08-Mar-07 3627.25 3761.65 312.00 309.20 3.705 -0.897 -3.323 13.727

09-Mar-07 3761.85 3718.00 334.00 322.00 -1.166 -3.593 4.189 1.360

12-Mar-07 3717.45 3734.60 328.00 322.50 0.461 -1.677 -0.773 0.213

13-Mar-07 3735.25 3770.55 323.75 317.20 0.945 -2.023 -1.911 0.893

14-Mar-07 3768.40 3641.10 316.50 307.20 -3.378 -2.938 9.924 11.411

15-Mar-07 3644.90 3643.60 315.95 309.70 -0.036 -1.978 0.071 0.0013

16-Mar-07 3639.35 3608.55 315.00 311.00 -0.846 -1.269 1.073 0.716

19-Mar-07 3611.30 3678.90 319.50 315.65 1.872 -1.205 -2.255 3.504

20-Mar-07 3680.35 3697.60 318.90 318.15 0.469 -0.235 -0.110 0.220

21-Mar-07 3697.70 3764.55 340.00 330.40 1.808 -2.823 -5.103 3.269

22-Mar-07 3764.50 3875.90 334.20 332.50 2.959 -0.509 -1.506 8.756

23-Mar-07 3876.75 3861.05 334.25 329.00 -0.405 -1.571 0.636 0.164

26-Mar-07 3863.45 3819.95 333.00 325.25 -1.126 -2.327 2.620 1.268

28-Mar-07 3818.75 3761.10 326.00 325.25 -1.510 -0.230 0.347 2.280

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29-Mar-07 3759.15 3798.10 336.95 336.95 1.036 0.000 0.000 1.073

30-Mar-07 3788.85 3821.55 347.20 343.65 0.863 -1.022 -0.881 0.745

n = 21 Total 2.402 -42.336 43.101 79.5613

Chart showing both Stock return and Market return

-8

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-2

0

2

4

6

RE

TURNS

Series 1: Market Return

Series 2: Stock Return

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n. x^2-(x) ^2

Beta = 21* 43.101 - (2.402)(-42.336)

21* 79.5613 - (2.402) (2.402)

Beta = 0.604

Volatility = Standard Deviation of Return on RANBAXY


= 1.871

Interpretation:

The Beta should fall between 0 and 1 for the risk less investment. Here from the above

calculations it is clear that the RANBAXY is having Beta less than one which indicates

less risky investment.

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4.2 BAJAJAUTO - From 1-3-2007 to 31-3-2007

BETA AND VOLATILITY


NIFTY BAJAJAUTO Return Return


01-Mar-07 3745.40 3811.20 2618.00 2521.95 1.002 3.669 3.676 1.004

02-Mar-07 3811.65 3726.75 2505.00 2544.05 -2.227 1.559 -3.471 4.960

05-Mar-07 3726.50 3576.50 2503.00 2453.75 -1.522 -1.968 2.995 2.316

06-Mar-07 3577.15 3655.65 2469.70 2461.10 2.194 -0.348 - 0.763 4.814

07-Mar-07 3661.55 3626.85 2535.00 2451.40 -0.948 -3.298 3.126 0.899

08-Mar-07 3627.25 3761.65 2499.00 2510.85 3.705 0.474 1.756 13.727

09-Mar-07 3761.85 3718.00 2525.00 2488.70 -1.166 -1.438 1.677 1.360

12-Mar-07 3717.45 3734.60 2518.00 2512.85 0.461 -0.204 - 0.094 0.213

13-Mar-07 3735.25 3770.55 2515.00 2521.00 0.945 0.238 0.225 0.893

14-Mar-07 3768.40 3641.10 2478.00 2529.55 -3.378 2.080 7.206 11.411

15-Mar-07 3644.90 3643.60 2541.00 2492.75 -0.036 -1.696 0.061 0.0013

16-Mar-07 3639.35 3608.55 2539.00 2489.75 -0.846 -1.939 1.640 0.716

19-Mar-07 3611.30 3678.90 2440.00 2515.45 1.872 3.092 5.788 3.504

20-Mar-07 3680.35 3697.60 2525.00 2501.20 0.469 -0.942 - 0.442 0.220

21-Mar-07 3697.70 3764.55 2510.00 2498.85 1.808 -0.444 -0.803 3.269

22-Mar-07 3764.50 3875.90 2575.00 2567.45 2.959 - 0.293 0.867 8.756

23-Mar-07 3876.75 3861.05 2580.00 2529.15 -0.405 -1.971 0.798 0.164

26-Mar-07 3863.45 3819.95 2532.15 2507.15 -1.126 -0.987 1.111 1.26828-Mar-07 3818.75 3761.10 2510.00 2466.65 -1.510 -1.727 2.608 2.280

29-Mar-07 3759.15 3798.10 2455.00 2421.40 1.036 -1.369 -1.418 1.073

30-Mar-07 3788.85 3821.55 2439.95 2427.60 0.863 -0.506 -0.437 0.745

n = 21 Total 2.402 -8.018 26.106 79.5613

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n. x^2-(x) ^2

Beta = 21* 26.106 - (2.402) (-8.018)

21* 79.5613 - (2.402) (2.402)

Beta = 0.341

Volatility = Standard Deviation of Return on BAJAJAUTO


= 1.757

Interpretation:


calculations it is clear that the BAJAJAUTO is having Beta less than one which indicates


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4.3 ACC - From 1-3-2007 to 31-3-2007 - BETA AND VOLATILITY


NIFTY ACC Return ReturnDate Open Close Open Close X Y X*Y X^2

01-Mar-07 3745.40 3811.20 902.05 876.30 1.757 -2.855 - 5.016 3.087

02-Mar-07 3811.65 3726.75 885.00 854.45 -2.227 -3.452 7.688 4.960

05-Mar-07 3726.50 3576.50 859.00 811.40 -4.025 -5.541 22.302 16.201

06-Mar-07 3577.15 3655.65 820.00 809.95 2.194 -1.226 -2.690 4.814

07-Mar-07 3661.55 3626.85 864.00 810.50 -0.948 -6.192 5.870 0.899

08-Mar-07 3627.25 3761.65 821.00 833.15 8.844 1.480 13.089 78.216

09-Mar-07 3761.85 3718.00 840.00 781.15 -1.166 -7.005 8.168 1.360

12-Mar-07 3717.45 3734.60 780.00 746.70 0.461 -4.269 - 1.968 0.213

13-Mar-07 3735.25 3770.55 769.00 749.35 0.945 -2.555 - 2.414 0.893

14-Mar-07 3768.40 3641.10 722.10 746.95 -3.378 0.034 - 0.114 11.411

15-Mar-07 3644.90 3643.60 750.00 731.80 -0.036 -2.427 0.087 0.001

16-Mar-07 3639.35 3608.55 735.70 723.15 -0.846 -1.705 1.442 0.716

19-Mar-07 3611.30 3678.90 730.00 739.35 1.872 1.281 2.398 3.504

20-Mar-07 3680.35 3697.60 745.00 749.20 0.469 0.564 0.265 0.220

21-Mar-07 3697.70 3764.55 752.00 752.75 1.808 0.099 0.179 3.269

22-Mar-07 3764.50 3875.90 755.00 753.70 2.959 -0.172 - 0.509 8.756

23-Mar-07 3876.75 3861.05 755.00 746.30 -0.405 -1.152 0.466 0.164

26-Mar-07 3863.45 3819.95 750.00 733.60 -1.126 -2.187 2.462 1.268

28-Mar-07 3818.75 3761.10 732.85 734.70 -1.510 0.252 -0.380 2.280

29-Mar-07 3759.15 3798.10 734.00 734.75 1.036 0.102 0.105 1.073

30-Mar-07 3788.85 3821.55 738.80 735.25 0.863 -0.480 -0.414 0.745n = 21 Total 2.402 -37.406 51.016 79.5613

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Chart showing both Market return and Stock return of ACC

-6

-4

-2

0

2

4

6

8

10

RETURNS




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n. x^2-(x) ^2

Beta = 21* 51.016 - (2.402)(-37.406)

21* 79.5613 - (2.402) (2.402)

Beta = 0.697

Volatility = Standard Deviation of Return on ACC


= 2.421

Interpretation:


calculations it is clear that the ACC is having Beta less than one which indicates less

risky investment.

4.4HEROHONDA - From 1-3-2007 to 31-3-2007BETA AND VOLATILITY

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NIFTY HEROHONDA Return Return


01-Mar-07 3745.40 3811.20 658.30 668.25 1.757 1.511 2.655 3.087

02-Mar-07 3811.65 3726.75 662.10 692.75 -2.227 0.046 -0.102 4.960

05-Mar-07 3726.50 3576.50 681.10 684.95 -4.025 0.565 -2.274 16.201

06-Mar-07 3577.15 3655.65 686.00 667.20 2.194 -2.740 -6.011 4.814

07-Mar-07 3661.55 3626.85 675.00 666.75 -0.948 -1.222 1.158 0.899

08-Mar-07 3627.25 3761.65 660.05 668.35 3.705 1.257 4.657 13.727

09-Mar-07 3761.85 3718.00 670.00 691.40 -1.166 3.194 -3.724 1.360

12-Mar-07 3717.45 3734.60 691.00 698.80 0.461 1.129 0.524 0.213

13-Mar-07 3735.25 3770.55 707.50 697.85 0.945 -1.364 -1.289 0.893

14-Mar-07 3768.40 3641.10 684.50 677.20 -3.378 -1.066 3.601 11.411

15-Mar-07 3644.90 3643.60 680.00 673.30 -0.036 -0.985 0.035 0.0013

16-Mar-07 3639.35 3608.55 685.00 650.20 -0.846 -5.080 4.298 0.716

19-Mar-07 3611.30 3678.90 655.00 640.35 1.872 -0.022 -0.041 3.504

20-Mar-07 3680.35 3697.60 647.00 635.75 0.469 -1.739 -0.815 0.220

21-Mar-07 3697.70 3764.55 639.90 651.10 1.808 1.750 3.164 3.269

22-Mar-07 3764.50 3875.90 656.90 685.25 2.959 4.316 12.771 8.756

23-Mar-07 3876.75 3861.05 685.00 677.85 -0.405 -1.043 0.422 0.164

26-Mar-07 3863.45 3819.95 680.00 667.40 -1.126 -1.853 2.086 1.268

28-Mar-07 3818.75 3761.10 640.70 658.20 -1.510 2.731 -4.124 2.280

29-Mar-07 3759.15 3798.10 652.10 676.60 1.036 0.037 0.038 1.073

30-Mar-07 3788.85 3821.55 674.80 688.75 0.863 0.020 0.017 0.745

n = 21 Total 2.402 -0.558 17.046 79.5613

Chart showing both Market Return and Stock Return of HEROHONDA

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-4

-2

0

2

4

6

RETURNS




n. x^2-(x) ^2

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Beta = 21* 17.046 - (2.402)(-0.558)

21* 79.5613 - (2.402) (2.402)

Beta = 0.216

Volatility = Standard Deviation of Return on HEROHONDA


= 2.134

Interpretation:


calculations it is clear that the HEROHONDA is having Beta less than one which

indicates less risky investment.

4.5 TATASTEEL - From 1-3-2007 to 31-3-2007BETA AND VOLATILITY


NIFTY TATASTEEL Return Return


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01-Mar-07 3745.40 3811.20 445.70 451.10 1.757 1.212 2.129 3.087

02-Mar-07 3811.65 3726.75 455.00 443.45 -2.227 -2.538 5.652 4.960

05-Mar-07 3726.50 3576.50 441.30 420.75 -4.025 -4.657 18.744 16.201

06-Mar-07 3577.15 3655.65 424.00 419.25 2.194 -1.120 -2.457 4.814

07-Mar-07 3661.55 3626.85 422.20 413.25 -0.948 -2.120 2.010 0.899

08-Mar-07 3627.25 3761.65 417.00 427.75 3.705 2.578 9.551 13.727

09-Mar-07 3761.85 3718.00 429.95 433.80 -1.166 0.897 -1.046 1.360

12-Mar-07 3717.45 3734.60 437.70 435.50 0.461 -0.503 -0.232 0.213

13-Mar-07 3735.25 3770.55 437.00 444.75 0.945 1.773 1.675 0.893

14-Mar-07 3768.40 3641.10 432.00 429.95 -3.378 -0.475 1.605 11.411

15-Mar-07 3644.90 3643.60 435.00 433.25 -0.036 -0.402 0.014 0.001

16-Mar-07 3639.35 3608.55 435.00 430.55 -0.846 -1.023 0.864 0.716

19-Mar-07 3611.30 3678.90 434.00 429.90 1.872 -0.945 -4.502 3.504

20-Mar-07 3680.35 3697.60 432.00 423.45 0.469 -1.979 -1.185 0.220

21-Mar-07 3697.70 3764.55 435.00 430.15 1.808 -1.115 4.616 3.269

22-Mar-07 3764.50 3875.90 435.00 442.05 2.959 1.621 6.998 8.756

23-Mar-07 3876.75 3861.05 449.90 438.30 -0.405 -2.578 1.318 0.164

26-Mar-07 3863.45 3819.95 438.30 441.80 -1.126 0.798 2.136 1.268

28-Mar-07 3818.75 3761.10 441.00 441.35 -1.510 0.079 -1.436 2.28029-Mar-07 3759.15 3798.10 441.00 439.95 1.036 -0.238 2.123 1.073

30-Mar-07 3788.85 3821.55 442.10 449.65 0.863 1.708 2.436 0.745

n = 21 Total 2.402 -9.027 51.013 79.5613

Chart showing both Market Returns and Stock Returns of TATASTEEL

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-5

-4

-3

-2

-1

0

1

2

3

4

5

RETURNS




n. x^2-(x) ^2

Beta = 21* 51.013- (2.402)(-9.027)

21* 79.5613 - (2.402) (2.402)

Beta = 0.653

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Volatility = Standard Deviation of Return on TATASTEEL


= 1.770

Interpretation:


calculations it is clear that the TATASTEEL is having Beta less than one which indicates


4.6 Dr REDDY - From 1-3-2007 to 31-3-2007

BETA AND VOLATILITY


NIFTY Dr.REDDY Return Return


01-Mar-07 3745.40 3811.20 670.00 661.75 1.757 -1.231 -2.162 3.087

02-Mar-07 3811.65 3726.75 655.00 660.10 -2.227 0.778 -1.733 4.960

05-Mar-07 3726.50 3576.50 601.00 617.50 -4.025 2.745 -11.048 16.201

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06-Mar-07 3577.15 3655.65 630.00 622.55 2.194 -1.182 -2.593 4.814

07-Mar-07 3661.55 3626.85 635.00 635.25 -0.948 0.039 -0.036 0.899

08-Mar-07 3627.25 3761.65 641.00 668.55 3.705 4.297 15.920 13.727

09-Mar-07 3761.85 3718.00 679.90 660.00 -1.166 -2.926 3.411 1.360

12-Mar-07 3717.45 3734.60 678.00 658.40 0.461 -2.890 -2.429 0.213

13-Mar-07 3735.25 3770.55 660.00 661.00 0.945 0.151 0.288 0.893

14-Mar-07 3768.40 3641.10 645.00 648.45 -3.378 0.534 -1.803 11.411

15-Mar-07 3644.90 3643.60 655.00 672.45 -0.036 2.664 -0.095 0.0013

16-Mar-07 3639.35 3608.55 681.00 683.60 -0.846 0.382 -0.323 0.716

19-Mar-07 3611.30 3678.90 689.00 677.25 1.872 -1.705 -3.191 3.504

20-Mar-07 3680.35 3697.60 683.00 682.40 0.469 -0.087 -0.040 0.220

21-Mar-07 3697.70 3764.55 682.40 679.20 1.808 -0.469 -0.847 3.269

22-Mar-07 3764.50 3875.90 690.00 682.00 2.959 -1.159 -3.429 8.756

23-Mar-07 3876.75 3861.05 690.00 686.30 -0.405 -0.536 0.217 0.164

26-Mar-07 3863.45 3819.95 689.00 682.15 -1.126 -0.994 1.119 1.268

28-Mar-07 3818.75 3761.10 654.90 692.15 -1.510 5.687 -8.587 2.280

29-Mar-07 3759.15 3798.10 692.00 706.50 1.036 2.095 2.170 1.073

30-Mar-07 3788.85 3821.55 714.50 728.25 0.863 1.924 1.596 0.745

n = 21 Total 2.402 8.117 -13.595 79.5613

Chart showing both Stock return and Market return

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-4

-2

0

2

4

6

8

RETURNS




n. x^2-(x) ^2

Beta = 21* (-13.595) - (2.402)(8.117)

21* 79.5613 - (2.402) (2.402)

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Beta = -0.161

Volatility = Standard Deviation of Return on DR. REDDYS


= 2.203

Interpretation:

The Beta should fall between 0 and 1 for the riskless investment. Here from the above

calculations it is clear that the DR.REDDYS is having Beta less than one(negative)

which indicates less risky investment.

4.7 MOSERBAER- From 1-3-2007 to 31-3-2007


NIFTY MOSERBAER Return Return


01-Mar-07 3745.40 3811.20 334.40 317.70 1.757 -4.994 8.774 1.004

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02-Mar-07 3811.65 3726.75 320.00 323.30 -2.227 1.031 2.296 4.960

05-Mar-07 3726.50 3576.50 320.00 299.40 -4.025 -6.437 25.909 2.316

06-Mar-07 3577.15 3655.65 309.80 313.70 2.194 1.259 2.762 4.814

07-Mar-07 3661.55 3626.85 321.65 303.40 -0.948 -5.674 5.379 0.899

08-Mar-07 3627.25 3761.65 307.15 313.00 3.705 1.905 7.058 13.727

09-Mar-07 3761.85 3718.00 316.00 307.00 -1.166 -2.848 3.320 1.360

12-Mar-07 3717.45 3734.60 308.55 311.00 0.461 0.794 0.366 0.213

13-Mar-07 3735.25 3770.55 310.90 319.60 0.945 2.806 1.971 0.893

14-Mar-07 3768.40 3641.10 305.00 300.25 -3.378 -1.557 5.259 11.411

15-Mar-07 3644.90 3643.60 309.90 297.45 -0.036 -4.017 0.144 0.0013

16-Mar-07 3639.35 3608.55 300.00 291.70 -0.846 -2.766 2.340 0.716

19-Mar-07 3611.30 3678.90 298.00 291.75 1.872 -2.097 -3.925 3.504

20-Mar-07 3680.35 3697.60 295.70 293.85 0.469 -0.625 -0.293 0.220

21-Mar-07 3697.70 3764.55 294.00 295.05 1.808 0.357 0.645 3.269

22-Mar-07 3764.50 3875.90 300.00 301.45 2.959 0.483 1.429 8.756

23-Mar-07 3876.75 3861.05 302.00 298.65 -0.405 -1.109 0.449 0.164

26-Mar-07 3863.45 3819.95 301.00 300.60 -1.126 -0.132 0.148 1.268

28-Mar-07 3818.75 3761.10 298.00 290.70 -1.510 -2.449 3.698 2.280

29-Mar-07 3759.15 3798.10 286.90 292.90 1.036 2.091 2.166 1.07330-Mar-07 3788.85 3821.55 295.00 299.10 0.863 1.390 1.199 0.745

n = 21 Total 2.402 -22.589 71.094 79.5613

Chart showing both the market and stock returns of MOSERBAER

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-6

-4

-2

0

2

4

6

RETURNS




n. x^2-(x) ^2

Beta = 21* 71.094 - (2.402) (-22.589)

21* 79.5613 - (2.402) (2.402)

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02-Mar-07 3811.65 3726.75 844.00 833.10 -2.227 -1.291 2.875 4.960

05-Mar-07 3726.50 3576.50 825.00 772.90 -4.025 -6.315 25.418 16.201

06-Mar-07 3577.15 3655.65 790.00 791.75 2.194 0.221 0.485 4.814

07-Mar-07 3661.55 3626.85 797.00 774.85 -0.948 -2.779 2.634 0.899

08-Mar-07 3627.25 3761.65 787.00 792.35 8.844 0.679 6.005 78.216

09-Mar-07 3761.85 3718.00 792.00 787.20 -1.166 -0.606 0.706 1.360

12-Mar-07 3717.45 3734.60 789.80 797.10 0.461 0.924 0.426 0.213

13-Mar-07 3735.25 3770.55 800.00 801.55 0.945 0.194 0.183 0.893

14-Mar-07 3768.40 3641.10 791.00 791.75 -3.378 0.095 - 0.321 11.411

15-Mar-07 3644.90 3643.60 804.10 796.15 -0.036 0.989 - 0.036 0.001

16-Mar-07 3639.35 3608.55 798.00 780.10 -0.846 -0.022 0.018 0.716

19-Mar-07 3611.30 3678.90 786.00 788.85 1.872 0.362 0.677 3.504

20-Mar-07 3680.35 3697.60 792.00 789.65 0.469 -0.297 - 0.139 0.220

21-Mar-07 3697.70 3764.55 796.00 791.65 1.808 -0.546 - 0.987 3.269

22-Mar-07 3764.50 3875.90 790.50 831.30 2.959 5.161 15.271 8.756

23-Mar-07 3876.75 3861.05 833.00 840.65 -0.405 0.918 - 0.372 0.164

26-Mar-07 3863.45 3819.95 837.15 821.70 -1.126 -1.845 2.077 1.268

28-Mar-07 3818.75 3761.10 775.25 796.65 -1.510 2.760 - 4.168 2.280

29-Mar-07 3759.15 3798.10 828.50 812.45 1.036 -1.937 - 2.006 1.07330-Mar-07 3788.85 3821.55 828.50 820.20 0.863 -1.002 - 0.865 0.745

n = 21 Total 2.402 -5.174 46.410 79.5613

Chart showing both Market return and Stock return of MARUTI UDYOG

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-6

-4

-2

0

2

4

6

RETURNS



Beta = n. xy - (x) (y)n. x^2-(x) ^2

Beta = 21* 46.410 - (2.402)(-5.174)

21* 79.5613 - (2.402) (2.402)

Beta = 0.593

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Volatility = Standard Deviation of Return on MARUTI UDYOG LTD


= 2.182

Interpretation:


calculations it is clear that the MARUTI UDYOG LIMITED is having Beta less than one

which indicates less risky investment.

4.9M & M - From 1-3-2007 to 31-3-2007 - BETA AND VOLATILITY


NIFTY M & M Return Return


01-Mar-07 3745.40 3811.20 816.00 805.20 1.757 -1.323 -2.324 3.087

02-Mar-07 3811.65 3726.75 799.00 770.50 -2.227 -3.567 7.944 4.960

05-Mar-07 3726.50 3576.50 744.80 709.20 -4.025 -4.780 19.239 16.201

06-Mar-07 3577.15 3655.65 716.00 725.15 2.194 1.278 2.804 4.814

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07-Mar-07 3661.55 3626.85 738.70 761.05 -0.948 3.025 - 2.868 0.899

08-Mar-07 3627.25 3761.65 765.30 765.60 3.705 0.039 0.144 13.727

09-Mar-07 3761.85 3718.00 775.00 733.90 -1.166 -5.303 6.183 1.360

12-Mar-07 3717.45 3734.60 739.25 738.25 0.461 -0.135 - 0.062 0.213

13-Mar-07 3735.25 3770.55 740.00 760.35 0.945 2.750 2.599 0.893

14-Mar-07 3768.40 3641.10 750.00 749.10 -3.378 -0.120 0.405 11.411

15-Mar-07 3644.90 3643.60 760.00 747.05 -0.036 -1.704 0.061 0.001

16-Mar-07 3639.35 3608.55 746.00 730.70 -0.846 -2.051 1.735 0.716

19-Mar-07 3611.30 3678.90 748.70 738.90 1.872 -1.309 - 2.450 3.504

20-Mar-07 3680.35 3697.60 744.00 743.85 0.469 -0.020 - 0.009 0.220

21-Mar-07 3697.70 3764.55 749.00 753.50 1.808 0.600 1.084 3.269

22-Mar-07 3764.50 3875.90 758.00 781.60 2.959 3.113 9.211 8.756

23-Mar-07 3876.75 3861.05 779.80 796.80 -0.405 2.180 - 0.833 0.164

26-Mar-07 3863.45 3819.95 800.00 788.55 -1.126 -1.431 1.611 1.268

28-Mar-07 3818.75 3761.10 785.00 762.35 -1.510 -2.885 3.318 2.280

29-Mar-07 3759.15 3798.10 792.80 757.75 1.036 -4.421 -4.580 1.073

30-Mar-07 3788.85 3821.55 757.00 780.40 0.863 3.091 2.668 0.745

n = 21 Total 2.402 -12.973 45.880 79.5613

Chart showing both Market Return and Stock Return of M & M

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-5

-4

-3

-2

-1

0

1

2

3

4

5

RETURNS




n. x^2-(x) ^2

Beta = 21* 45.880 - (2.402)(-12.973)

21* 79.5613 - (2.402) (2.402)

Beta = 0.597

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06-Mar-07 3577.15 3655.65 37.30 38.20 2.194 2.413 5.294 4.814

07-Mar-07 3661.55 3626.85 39.00 37.95 -0.948 -2.692 2.552 0.899

08-Mar-07 3627.25 3761.65 38.90 39.50 3.705 1.542 5.713 13.727

09-Mar-07 3761.85 3718.00 39.50 40.05 -1.166 1.392 -1.623 1.360

12-Mar-07 3717.45 3734.60 40.30 41.30 0.461 2.481 1.441 0.213

13-Mar-07 3735.25 3770.55 41.30 41.00 0.945 -0.726 0.686 0.893

14-Mar-07 3768.40 3641.10 39.10 39.10 -3.378 0.000 0.000 11.411

15-Mar-07 3644.90 3643.60 39.60 39.20 -0.036 -1.010 0.003 0.001

16-Mar-07 3639.35 3608.55 39.50 39.10 -0.846 -1.012 0.856 0.716

19-Mar-07 3611.30 3678.90 39.10 39.35 1.872 0.639 1.196 3.504

20-Mar-07 3680.35 3697.60 39.80 39.70 0.469 - 0.251 -0.118 0.220

21-Mar-07 3697.70 3764.55 39.95 40.85 1.808 2.252 4.071 3.269

22-Mar-07 3764.50 3875.90 41.00 41.45 2.959 1.621 6.998 8.756

23-Mar-07 3876.75 3861.05 41.45 40.95 -0.405 -1.206 0.488 0.164

26-Mar-07 3863.45 3819.95 41.10 40.95 -1.126 -0.365 0.411 1.268

28-Mar-07 3818.75 3761.10 39.75 38.80 -1.510 -2.390 2.609 2.280

29-Mar-07 3759.15 3798.10 38.80 37.30 1.036 -3.866 -5.049 1.073

30-Mar-07 3788.85 3821.55 37.80 38.40 0.863 1.587 1.369 0.745

n = 21 Total 2.402 -7.364 61.961 79.5613

Chart showing both Market Returns and Stock Returns of ASHOKLEYLAND

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-8

-6

-4

-2

0

2

4

6

RETURNS




n. x^2-(x) ^2

Beta = 21* 61.961- (2.402)(-7.364)21* 79.5613 - (2.402) (2.402)

Beta = 0.791

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Volatility = Standard Deviation of Return on ASHOKLEYLAND


= 2.521

Interpretation:


calculations it is clear that the ASHOK LEYLAND is having Beta less than one which

indicates less risky investment.

OVERALL INTERPRETATION

CHART SHOWING VARIOUS COMPANYS AND THEIR

RESPECTIVE BETA VALUES

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-0.4

-0.2

0

0. 2

0. 4

0. 6

0. 8

1

RANBA

XY

BAJAJAUTO

ACCHEROH

OND

TATASTEEL

DR.RED

DY'S

MOSER

BAER

MARUT

IUDY

M&M

ASHOK

BETA

INTERPRETATION :

The Beta is the measure of the risk involved when invested in Stock Options of a

particular company. The Beta value should fall between 0 and 1 for a riskless investment.

If the Beta value is more than 1 then it involves a high risk.

Here from the above chart it can be seen that all the ten companies have Beta value less

than one . But from investors point of veiw investing in DR.REDDYS would have les

risk when compared to all other companies followed by HEROHONDA,BAJAJAUTO,

RANBAXY, etc.

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CHAPTER 5

FINDINGS, SUGGESTIONS AND

CONCLUSIONS

SUMMARY

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FINDINGS

MOSERBAERhas the maximum Beta when compared to other companies, so

investing in MOSERBAER will carry high risk.

Volatility of MOSERBAER company is more so it will produce high output

when compared to other companies, but it carries a lot of risk.

Volatility Indian market is not constant and is varying over time.

The investor can reduce his loss even if the market moves against hisperception by using stock options.

CONCLUSION

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Options are financial instruments that provide a great deal of flexibility for the investor in

making investment decisions.Options trading has thrown up some great success stories in

the world of high finance. But it has also destroyed established traders and individuals.

Users have to; thus, exercise a certain amount of caution. Options are traded on a variety

of securities, including equities. Given the basic operations, investors have to understand

certain key terms. These are the critical factors that affect the price of an option.

It can be concluded that if the investor has a good perception about the market and the

strategies (Calculation of Beta and volatality) he will be able to make good return from

the market . If the investors change the strategies according to the fluctuations then only

he will be able to make profit with minimum possibility of loss since stock option is

considered as a good tool to reduce the possibility of loss in market if the market moves

against his perception. From the Analysis and the Interpretation it can be said that the

Risk profile is the same across all the stock options. But the findings are restricted as

there are limitations of the study.

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SUGGESTIONS

Investing in HEROHONDA will be usefull as it has balance between Beta and

volatility,.

With a good perception of the market , investor can use Stock Options as a profit

making strategy.

If the Beta value is less than one then it is a risk less investment. If Beta is more

than one it carries high risk with it and its better not to invest.

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BIBLIOGRAPHY

WWW.NSEINDIA.COM

WWW.BSE.COM

WWW.ECONOMICTIMES.COM

WWW.KARVY.COM

Prasanna Chandra, Inestment Analysis and Portfolio Management,

TATA McGraw-Hill.

Fischer and Jordan, Security Analysis and Portfolio Management,

Prentice hall.
http://www.karvy.com/http://www.karvy.com/

Competitive Strategy to Perform Good Risk Analysis of Options

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