MINOR PROJCET REPORT

ON

ASTUDY ON DERIVATIVES MARKET OF INDIA

Submitted in Partial Fulfilment for the award of the degree of bachelor of business
administration

(2017-2020)

SUBMITTED TO :-SUBMITTEDBY:

Mr.Vijay DahiyaRabbansh Sachdeva

ASSISTANT PROFFESOR BBA(G)(VI SEMESTER )

DEPARTMENT OF BUSINESS ROLL N0-4521201717

MAHARAJA SURAJMAL INSTITUE

RECOGNISED BY UCG u/s 2(f)

AFLIATED TO GURU GOBIND INDRAPRASTHA UNIVERSITY

C-4, JANAK PURI

 ACKNOWLEDGEMENT

Every successful work is not completed without the help and support of the people around us.
A success is shared by not an individual but in fact by the people who constantly help him
and guide him in his work. Through this I want to express my gratitude towards all those who
have directly or indirectly contributed in my journey.

I am greatly thankful to Mr. Vijay dahiya, Professor, MSI janakpuri who as my guide was a
constant source of inspiration and encouragement to me. The strong interest evinced by her
has helped me in dealing with the problems I faced during the course of project work.

I would like to thank my entire beloved family & friends for their constant support and also to
our faculty for their ever inspiring guidance about the summer training.

RABBANSH SACHDEVA
 CERTIFICATE OF COMPLETION

This is to certify that Rabbansh Sachdeva, 04521201717, pursuing BBA (General) from
Maharaja SurajmalInstitute,Janakpurihas successfully completed the research project on “A
study on derivatives market of india” under my supervision and guidance.

He has taken care of all necessary aspects and has shown keen interest and utmost sincerity
during the completion of this project file.

I certify that this project file is up to my satisfaction and as per the

guidelines laid down by the Guru Gobind Singh Indraprastha
University.

Mr. Vijay Dahiya

(Internal mentor)
 CONTENT

S.no Description Page no.

1. Acknowledgement
2. Certificate of Completion
3. Executive Summary
4. Chapter 1-Introduction-
 Introduction
 Objectives
 Research Methodology
 Limitations
5. Chapter 2- Literature Review
6 Chapter 3-Overview of Industry as a Whole
7 Chapter 4- Analysis and Interpretation
8 Chapter 5- Recommendations and Conclusions
9 Bibliography
 EXECUTIVE SUMMARY

Financial markets are, by nature, extremely volatile and hence the risk factor is major concern
for financial agents. As uncertainty about future goes down, volatility is expected to go down;
however as mentioned earlier, the response/ reaction time becomes shorter, volatility is
expected to increase.
To reduce the risk, the concept of derivatives comes into picture. Last decade was one of
the eventful decades in the Indian markets. In India, the emergence and growth of
derivatives market is relatively a recent phenomenon. Since its inception in June 2000,
derivatives market has exhibited exponential growth both in terms of volume and number of
traded contracts.

On one side, just a few derivatives disaster stories were enough to bring entire business of
derivatives under the limelight, make every one worry about unknown risk associated with
derivatives, and elevate derivatives into mysterious ‘something’; while on the other side, there
were people who started understanding the derivatives and used the derivatives for hedging
and mitigating the risks while adding liquidity to the markets.

This study attempts to discuss the genesis of derivatives, trading by tracing its historical
developments, types of traded derivatives products, regulation and policy developments,
trend and growth, future prospects and challenges of derivative market in India. The study
also covered the trends in derivative market of India.
 CHAPTER 1-
INTRODUCTION
 DERIVATIVES

Definition of Derivatives

One of the most significant events in the securities markets has been the development and
expansion of financial derivatives. The term “derivatives” is used to refer to financial
instruments which derive their value from some underlying assets.

The underlying assets could be equities (shares), debt (bonds, T- bills, and notes),
currencies, and even indices of these various assets, such as the Nifty 50 Index.

Derivatives derive their names from their respective underlying asset. Thus if a derivative’s
underlying asset is equity, it is called equity derivative and so on. Derivatives can be traded
either on a regulated exchange, such as the NSE or off the exchanges, i.e., directly between
the different parties, which is called “over-the-counter” (OTC) trading. (In India only exchange
traded equity derivatives are permitted under the law.)

The basic purpose of derivatives is to transfer the price risk (inherent in fluctuations of the
asset prices) from one party to another; they facilitate the allocation of risk to those whoare
willing to take it. In sodoing, derivatives help mitigate the risk arising from the future
uncertainty ofprices.

For example, on November 1, 2009 a rice farmer may wish to sell his harvest at a future date
(say January 1, 2010) for a pre-determinedfixed price to eliminate the risk of change in prices
by that date. Such a transaction is an example of a derivatives contract. The price of this
derivative is driven by the spot price of rice which is the "underlying".
OBJECTIVES OF THE STUDY

 To understand the concept of the Financial Derivatives such as Forwards,

Futures, Options and Swaps

 To study the current scenario of derivative market of India.

 To analysis whether the purpose for which derivatives are used

has been actually achieved or not.

 To study the purpose for which financial institutions adopt derivatives.

 To study the Investors Preference for selecting types of

Derivativesfor Investment

 To know the pricing of derivatives.

 To find the growth of derivatives of India.

 To know about future of derivative trading in India.

RESEARCH METHODOLOGY

Research refers to the systematic investigation into and study of materials and sources in
order to establish facts and reach new conclusions. Research comprises "creative work
undertaken on a systematic basis to increase the stock of knowledge, including knowledge
of humans, culture and society, and the use of this stock of knowledge to devise new
applications." It is used to establish or confirm facts, reaffirm the results of previous work,
solve new or existing problems, support theorems, or develop new theories. In the broadest
sense of the word, the definition of research includes any gathering of data, information, and
facts for the advancement of knowledge. It is a process of steps used to collect and analyze
information to increase our understanding of a topic or issue". It consists of three steps: pose
a question, collect data to answer the question, and present an answer to the question.

The process used to collect information and data for the purpose of making business
decisions is called as Research Methodology. The methodology may include
publication research, interviews, surveys and other research techniques, and could include
both present and historical information.

The purpose of Methodology is to describe the purpose involved in the Research Work. This
includes the overall Research Design, the data collection method. Research Methodology
refers to the various sequential steps to be adopted by a Researcher in studying a problem
with certain object or objective in view.

Research Design

A research design is the set of methods and procedures used in collecting and analyzing
measures of the variables specified in the research problem research. The design of a study
defines the study type (descriptive, correlational, semi-experimental, experimental, review,
meta-analytic) and sub-type (e.g., descriptive-longitudinal case study), research
problem, hypotheses, independent and dependent variables, experimental design, and, if
applicable, data collection methods and a statistical analysis plan. Research design is the
framework that has been created to find answers to research questions. There are many
ways to classify research designs, but sometimes the distinction is artificial and other times
different designs are combined. Nonetheless, the list below offers a number of useful
distinctions between possible research designs. A research design is an arrangement of
conditions or collections.
A research design is a systematic approach that a researcher uses to conduct a scientific
study. It is the overall synchronization of identified components and data resulting in a
plausible outcome.  To conclusively come up with an authentic and accurate result,
the research design should follow a strategic methodology, in line with the type of research
chosen. To have a better understanding of which research paper topic, to begin with, it is
imperative to first identify the types of research.

Types of Research Design:

         Exploratory Research

Exploratory research, as the name implies, intends merely to explore the research
questions and does not intend to offer final and conclusive solutions to existing problems.
This type of research is usually conducted to study a problem that has not been clearly
defined yet.

         Descriptive Research

Descriptive research can be explained as a statement of affairs as they are at present

with the researcher having no control over variable. Moreover, “descriptive studies may
be characterised as simply the attempt to determine, describe or identify what is, while
analytical research attempts to establish why it is that way or how it came to be”

Data Collection
Data collection is the process of gathering and measuring information on variables of
interest, in an established systematic fashion that enables one to answer stated research
questions, test hypotheses, and evaluate outcomes.A formal data collection process is
necessary as it ensures that the data gathered are both defined and accurate and that
subsequent decisions based on arguments embodied in the findings are valid. The process
provides both a baseline from which to measure and in certain cases an indication of what to
improve.
 
Methods of Data Collection

There are two types of data collection methods namely primary data collection and
secondary data collection.
Primary data

Primary Data is the data which is originally collected by an investigator or agency for the first
time for specific purpose. The source from which the primary data is collected is called the
primary source. Such data is original in character as it is collected for the first time. It is first-
hand information. Primary Data once collected and published becomes Secondary Data.
There are many methods to collect primary data and the main methods include:

         Questionnaires

         Interviews

         Focus group interviews

         Observation

Secondary data

The data which is not directly collected but rather obtained from the published or
unpublished sources is known as Secondary Data. It is also known as Second Hand Data.
These are not original data since the enumerators or investigators themselves do not collect
these data. They simply make use of the data collected by the others. Common sources of
secondary data include:

         Census

         Large surveys

         Internet

         Journals

         Books

         News papers

         Organizational records
Thus, the data for is collected through primary sources ( questionnaire ) and the research is
descriptive in nature. The study was conducted among 20 individuals. The data has been
collected in the form of questionnaire from these 20 respondents on various factors that can
help me determine the Recruitment policy.
How do we know something exists? There are a numbers of ways of knowing…

 -Sensory Experience
 -Agreement with others
 -Expert Opinion
 -Logic
 -Scientific Method (we’re using this one)
 

The Scientific Process (replicable)

1. Identify a problem
2. Clarify the problem
3. Determine what data would help solve the problem
4. Organize the data
5. Interpret the results
 

General Types of Educational Research

 Descriptive — survey, historical, content analysis, qualitative

 Associational — correlational, causal-comparative
 Intervention — experimental, quasi-experimental, action research (sort of)

Methods Used

Primary and Secondary methods are used in the collection of data for the report.

Primary data includes the responses taken from the employees, from the personal
interaction with the employees of the company and data about various policies from the
Sharekhan portal and other various sites.

Secondary data includes the analysis taken from the various news articles and other various
websites from the internet.

Research Design Used:

The study is exclusively based on secondary data.

Secondary data is collected from various sources such as text books ,reports ,annual report
of Indian financial market, research articles , etc. Various Website of companies ,stock
exchange are used.
LIMITATIONS:-

 The study was carried out only on secondary information and it is carried

out for a short period hence the finding of the study cannot be generalized.

 The study does not take International Markets into the consideration.

 This is a study conducted within a period of 45 days.

 During this limited period of study, the study may not bea detailed, Full –

fledged and utilitarian one in all aspects.

 The study contains some assumptions based on the demands of the analysis.

 The study does not provide any predictions or forecast of the selected scripts.

 As the time was limited, study was confined to conceptual

understanding of Derivatives market in India

CHAPTER 2-
LITERATURE
REVIEW
Bhatt, Dr.Babaraju (2014) conducted a study on “Perception of Investors Towards
Derivatives as an Investment Avenue” which stated that, The Derivatives are risk
management tool that support in effective management of risk by various stakeholders.
Derivatives provide an chance to transfer risk, from the one who wish to avoid it; to one who
wish to agree it. India’s experience with the introduction of equity derivatives market has
been really encouraging and successful. The derivatives turnover on the NSE has
surpassed the equity market turnover. This study main objective was to identify the factors
which affect the investment decision in derivatives.

Dr. Y. Nagaraju (2014) studied investors' perception towards derivative instruments and
markets. The study shows that even though most people look at derivatives with fear, they
should understand the fact that derivatives help in shifting the risk to the other party. There
are many myths that surround derivative market. All these can be done away with proper
system in place. Derivative instruments and derivative markets are not so popular among
individual investors. Only educated investors with the help of friends and brokers are
investing in this market. The reasons for not investing in this market are lack of knowledge
and very complex nature of instruments. Some people have a wrong perception about
derivatives. The study suggests that measures should be taken to make sure that the
investors get a right picture of the instruments and their risk factors.

Supriya (2014) reviewed derivative as a tool for managing risk which comes out of
uncertainty and makes it difficult for businesses to estimate their future production cost and
revenues. The NSE figures reveal that in equity derivative almost 90% of activity is due to
stock futures and index futures, whereas trading in options is still limited to few stocks, partly
because they are settled in cash and not the underlying stock. Further she found NSE has
programmes to inform and educate brokers, dealers, traders and market personnel. Dr. Y.
Nagaraju (2014) studied investors' perception towards derivative
CHAPTER 3-
Overview of Industry
As A Whole
STOCK EXCHANGE

A stock exchange, share market or bourse is a corporation or mutual organization which

provides facilities for stock brokers and traders, to trade company stocks and other
securities. Stock exchanges also provide facilities for the issue and redemption of
securities, as well as, other financial instruments and capital events including the payment
of income and dividends. The securities traded on a stock exchange include: shares
issued by companies, unit trusts and other pooled investment products and bonds. To be
able to trade a security on a certain stock exchange, it has to be listed there.

 NSE
The National Stock Exchange of India Limited (NSE) is a Mumbai-based stock exchange. It
is the largest stock exchange in India and the third largest in the world in terms of volume of
transactions. NSE is mutually-owned by a set of leading financial institutions, banks,
insurance companies and other financial intermediaries in India but its ownership and
management operate as separate entities. NSE has a market capitalization of around US$1
trillion and over 1,652 listings as of July 2012.
 CHAPTER 4-
ANALYSIS AND
INTERPRETATION
PLAN OF ANALYSIS TECHNIQUE

The collected data has been carefully classified, tabulated and interpreted on the basis of
which tables , charts and graphs are drawn. Analysed data helped drawing inferences and
better understanding.

DATA ANALYSIS & INTERPRETATION

GRAPH 1:The following graph shows the Derivatives’ Turnover Vis-À-Vis Cash Market
Turnover (in ` lakh crore) From 2013-2019.

ANALYSIS
The equityderivatives segmentin Indiahas grown exponentially over the years and has continued its
momentum in 2018-19 as well. Above graph shows thatIn2018-19, the total turnover in
equity derivatives segment rose by 44.0 per cent compared to the previous year. The ratio of turnover
in equity derivatives to that in cash segment has increased from 20 times in 2017-18 to 27 times in
2018-19. Almost all the trading in the F&O segment, during 2018-19, happened on NSE, which
dominated the F&O market and BSE’s share has waned gradually over the years,
 CHAPTER 5-
CONCLUSION AND
RECOMMENDATIONS
BIBLIOGRAPHY