Вы находитесь на странице: 1из 28

Risk management through Currency Derivatives

Why this topic?

The purpose of this project was to understand the concept of Currency Derivatives and Risk management. This project report contains different chapters. The report begins with the introduction to Derivatives, Currency Futures & its uses etc.

Problem faced
There are many risks which are influenced by factors external to the business and therefore suitable mechanisms to manage and reduce such risks need to be adopted. One of the modern day solutions to manage financial risks is hedging.

The financial environment today has more risks than earlier. Successful business firms are those that are able to manage these risks effectively. Due to changes in the macroeconomic structures and increasing internationalization of businesses, there has been a dramatic increase in the volatility of economic variables such as interest rates, exchange rates, commodity prices etc. Firms that monitor their risks carefully and manage their risks with judicious policies enjoy a more stable business than those who are unable to identify and manage their risks. There are many risks which are influenced by factors external to the business and therefore suitable mechanisms to manage and reduce such risks need to be adopted. One of the modern day solutions to manage financial risks is hedging. The purpose of this project was to understand the concept of Currency Derivatives and Risk management. This project report contains 11 different chapters. The report begins with the introduction to Derivatives, Currency Futures & its uses etc
The Fourth chapter is the introduction to the Topic which gives a brief idea regarding Hedging

strategies using Currency Futures with special reference to Importers and Exporters. It contains retail hedging, Commodity Cross Currency hedging, Natural Hedge in Currency Swaps. Also contains the Hedge exposed to risk of Strengthening and weakening of USD. Chapter 5, 6 & 7 deals with the Currency hedging strategy for Global Investment Portfolio, Currency Hedging done by Companies/Firms and Hedging Instruments for Indian Firms

which they use to minimize the loss which is very much important after which analysis is made. Doing this project was a colossal experience and in great deal I found out the importance of Derivatives Market in Indian Financial sector. All in all, to sum things up, this project stands out to be an eye opener in real terms for me towards a broader vision in understanding the interdependence of the economy, banks, business and technology within the economy.

Variables to be studied
Forwards Futures Options Swaps

Scope and coverage of the study

Derivatives provide a useful role in hedging and risk management so as to facilitate capital flows to developing economies. At the same time, however, they create the conditions for the possibility for raising risk in relation to capital through leveraging and by dodging prudential regulatory safeguards.

After studying about the different aspects of the forex and currency futures market it had get known different trade opportunities which this market is providing to the Indian investors. There lie a huge chunk of market to be explored in this segment and most of the benefiters are not aware about the basis of this market there is a need of proper steps to be taken by the SEBI and NSE to enhance the understanding of this instrument in the mind of investors, exporters and importers.


The objective of this project is to understand the Impact of Exchange Traded Currency Derivatives on Various types of determinants To analyze the scope of currency derivatives market in India To study the factors that helped in understanding the fluctuation in market price. To suggest suitable solution ( Like future, forward or option) to the customers accordingly to their risk taking ability To relate the factors with the fluctuation in market price.

A futures contract is a standardized contract, traded on an exchange, to buy or sell a certain underlying asset or an instrument at a certain date in the future, at a specified price. When the underlying asset is a commodity, e.g. Oil or Wheat, the contract is termed a commodity futures contract. When the underlying is an exchange rate, the contract is termed a currency futures contract. In other words, it is a contract to exchange one currency for another currency at a specified date and a specified rate in the future. Therefore, the buyer and the seller lock themselves into an exchange rate for a specific value or delivery date. Both parties of the futures contract must fulfill their obligations on the settlement date. Currency futures can be cash settled or settled by delivering the respective obligation of the seller and buyer. All settlements however, unlike in the case of OTC markets, go through the exchange. Currency futures are a linear product, and calculating profits or losses on Currency Futures will be similar to calculating profits or losses on Index futures. In determining profits and losses in futures trading, it is essential to know both the contract size (the number of currency units being traded) and also what the tick value is. A tick is the minimum trading increment or price differential at which traders are able to enter bids and offers. Tick values differ for different currency pairs and different underlying. For e.g. in the case of the USD-INR currency futures contract the tick size shall be 0.25 paise or 0.0025 Rupees. To demonstrate how a move of one

tick affects the price, imagine a trader buys a contract (USD 1000 being the value of each contract) at Rs.42.2500. One tick move on this contract will translate to Rs.42.2475 or Rs.42.2525 depending on the direction of market movement. Purchase price: Price increases by one tick: New price: Purchase price: Price decreases by one tick: New price: Rs .42.2500 +Rs. 00.0025 Rs .42.2525 Rs .42.2500 Rs. 00.0025 Rs.42. 2475

The value of one tick on each contract is Rupees 2.50. So if a trader buys 5 contracts and the price moves up by 4 ticks, he/she makes Rupees 50. Step 1: Step 2: Step 3: 42.2600 42.2500 4 ticks * 5 contracts = 20 points 20 points * Rupees 2.5 per tick = Rupees 50

HEDGING USING CURRENCY FUTURES Hedging: Hedging means taking a position in the future market that is opposite to a position in the physical market with a view to reduce or limit risk associated with unpredictable changes in exchange rate. A hedger has an Overall Portfolio (OP) composed of (at least) 2 positions: 1. Underlying position 2. Hedging position with negative correlation with underlying position Value of OP = Underlying position + Hedging position; and in case of a Perfect hedge, the Value of the OP is insensitive to exchange rate (FX) changes. Types of FX Hedgers using Futures

Long hedge: Underlying position: short in the foreign currency Hedging position: long in currency futures Short hedge: Underlying position: long in the foreign currency Hedging position: short in currency futures The proper size of the Hedging position Basic Approach: Equal hedge Modern Approach: Optimal hedge Equal hedge: In an Equal Hedge, the total value of the futures contracts involved is the same as the value of the spot market position. As an example, a US importer who has an exposure of 1 million will go long on 16 contracts assuming a face value of 62,500 per contract. Therefore in an equal hedge: Size of Underlying position = Size of Hedging position. Optimal Hedge: An optimal hedge is one where the changes in the spot prices are negatively correlated with the changes in the futures prices and perfectly offset each other. This can generally be described as an equal hedge, except when the spot-future basis relationship changes. An Optimal Hedge is a hedging strategy which yields the highest level of utility to the hedger.

HEDGING INSTRUMENTS FOR INDIAN FIRMS: It is to study the choice of instruments adopted by prominent firms to stem their foreign exchange exposures. All the data for this has been compiled from the 2008-2009 Annual Reports of the respective companies. A summary of the foreign exchange risk hedging behavior of selected Indian firms are given below.

7.1 RELIANCE INDUSTRIES Reliance is a global scale player in the petrochemicals and petroleum products, which also contribute large portion of its revenues. The Company is exposed to risk of price fluctuation on raw materials as well as finished products in all its businesses. However, Reliances high levels of integration, globally competitive operations, and leadership position in the domestic markets have helped the Company in addressing any adverse impact arising out of volatility in commodity markets. Also, these risks are not significant considering Reliances efficient inventory management system and well-crafted strategy of procuring raw materials, mainly crude oil, through a mix of long-term and spot contracts. Any further reduction in import tariffs on key raw materials and products in both petrochemicals and petroleum businesses may adversely impact the cost structure and/or selling prices of products in the domestic markets, thereby potentially affecting margins. However, despite substantial tariff reduction since economic reforms began in early 1990s, Reliances profitability has consistently increased year on year. Reliance currently prices most of its products below the import parity price levels, which adds to the Companys pricing flexibility in the event of import tariff reductions. Also, the impact of further import tariff reductions on Reliances products is not likely to be substantial in the future, as import tariffs on Reliances major products have already been reduced to WTO bound rates, or very close to those levels. The Company is exposed to foreign exchange risk as its selling price of products is linked to the landed cost of imported products. Also, any volatility in foreign exchange rate has an impact on its exports business and foreign currency debt held by the Company. Reliance undertakes liability management transactions and other structured derivatives such as interest rate swaps and currency swaps on an ongoing basis to manage its foreign exchange rate risks. For hedging Currency and Interest Rate Related Risks:

Nominal amounts of derivative contracts entered into by the Company and outstanding as on 31st March amount to Rs 98,585.59 crore (Previous Year Rs. 1,23,430.42 Crore). Category wise break up is given below:

Reliance Industries Instruments Interest Rate Swaps Currency Swaps Options Contracts Forward Contracts

31st March ,2011 Rs (Crore) 34,253.65 4,567.03 28,180.96 31,583.95

31st March,2010 Rs. (Crore ) 48,361.08 4,199.76 44,853.83 26,015.75

Reliance Industries, Looking at the outstanding position as on March 31 st, 2011 it seems that RIL has practice of almost full hedging of Export and Import. Foreign currency exposures that are not hedged by derivative instruments as on March 31st, 2011 amount to Year Rs. 65,893.02 Crore. For hedging Commodity related risks: 31st March ,2011 (in Kbbl) Petroleum product sales Forward Swaps Futures Spread 14,757 2,194 33,768 (in Kbbl) Crude Oil Purchases 21,420 9,453 51,227

Reliance Industries Instruments

7.2 BHARTI AIRTEL The Group primarily transacts business in U.S. dollars with parties of other countries. The Group has obtained foreign currency loans and has imported equipment and is therefore, exposed to foreign exchange risk arising from various currency exposures primarily with respect to United States dollar and Japanese yen. The Group may use foreign exchange option contracts, swap contracts or forward contracts towards operational exposures resulting from changes in foreign currency exchange rates exposure. These foreign exchange contracts, carried at fair value, may have varying maturities varying depending upon the primary host contract requirement.

The Group manages its foreign currency risk by hedging foreign currency transactions on a 12 months rolling forecast. Forward Contracts and Derivative Instruments The Companys activities expose it to a variety of nancial risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company uses derivative nancial instruments such as foreign exchange contracts, option contracts and interest rate swaps to manage its exposures to interest rate and foreign exchange uctuations. The Group uses foreign exchange option contracts, swap contracts or forward contracts and interest rate swaps to manage some of its transaction exposures. These derivative instruments are not designated as cash ow, fair value or net investment hedges and are entered into for periods consistent with currency and interest exposures The following table details the status of the Companys exposure as on March 31, 2011: Particulars Notional Value March 2011 (Rs.In Millions) A-For Loan related exposures 1.Forward 2.Options 3.Interest Rate Swaps 13,119 29,922 8,501 51,542 25,777 15,986 10,965 52,728 Notional Value March 2010 (Rs. In Millions)

B-For Trade related exposures 1.Forward 2.options 1,558 1,880 3,438 1,467 1,986 3,453

C-Unhedged Foreign Currency 1.Borrowing 2.Payables 3.Recievables 21,840 16,480 552 22,127 17,663 742

The Company has accounted for derivatives, which are covered under the Announcement issued by the ICAI, on marked-to market basis and has recorded losses of 126 Mn for the year ended March 31, 2011 [recorded reversals of losses for earlier period of 42 Mn for the year ended March 31, 2010] Bharti Airtel, Looking at the outstanding position as on March 31st,2011 it seems that Bharti Airtel has practice of almost full hedging strategies of Export, Import as well as Foreign Loan interest and loans.

7.3 INFOSYS The Group uses foreign exchange option contracts, swap contracts or forward contracts and interest rate swaps to manage some of its transaction exposures. These derivative instruments are not designated as cash ow, fair value or net investment hedges and are entered into for periods consistent with currency and interest exposures.


In Rs. Cr. (March 31, 2011)

Forward contracts outstanding In USD In Euro In GBP In AUD 2230 127 72 46

Options contracts outstanding In USD -

Infosys uses cross currency forward and option for outstanding contract in the year 2010-11.


Tata Motors Ltd uses cross currency forward and options of USD\JPY, USD\INR and USD\CHF to neutralized the foreign currency fluctuation risk. Instruments used by Tata Motors for Managing Risk Instruments Forward (Net) US $ /INR US $ /INR Options (Net) US $ /JPY US $ /INR US $ /CHF 505.49 50.71 50.71 687.05 As cash flow hedge Rs (Crore) 603.08 Remarks

Company has total Export during the year 2010-11 is Rs.2436.57 in Crore, Which was 8.52% as a total sales. Company uses different Hedging strategies for reducing risk in against the foreign currency fluctuation or fluctuation in different currency exchange rate which are change in future, Also not predictable because of effect of different factors. Company was total Import during the year 2010-11 was Rs. 2210.08 in Cores, Which is 7.73% as a total sales. Company has not hedged amount receivable of sales of goods, investment in preference shares, loans and interest charges in INR total amount was Rs.6404.46 in Cores. Also Creditors payable on account of loan and interest charges and other foreign currency expenditure in INR total amount was Rs.6116.53 in Crore.

ARTICLES ON CURRENCY DERIVATIVES Title :Exchange traded currency derivatives would provide an excellent opportunity to hedge currency risk for corporate and individuals" By Huzan Mistry (NSE) Addressing the Session on 'Exchange Traded Currency Derivates Market', organized by the Confederation of Indian Industry (CII) here she said that unlike OTC markets, exchange traded currency derivatives provide high level of transparency in price and a robust, independent and individual clearing corporation. Incidentally, NSE was the first exchange to have received approval from Securities and Exchange Board of India for setting up currency futures segment. "Currency Futures are standardized foreign exchange contracts traded on a recognized stock exchange to buy or sell one currency against another on a specified future date, at a price specified on the purchase / sale date" said Ms Mistry. It would help investors in hedging the currency rate fluctuations and market risks. However, in India, currently the trades in Rs Vs US Dollar alone are permitted. In due course, currency derivatives based on other foreign currencies may also be introduced. In her detailed presentation on 'Currency Derivatives', Ms Mistry outlined the various processes, procedures and execution of currency future trading through the NSE. She said that all resident Indian entities and individuals are permitted to trade in currency futures even if there is no underlying exposure to foreign currency. For players with underlying exposure in foreign currency, the currency derivative provides another window for hedging and / or optimizing treasury gains. However as this a nascent product for India, the exposure is limited to a maximum of USD 5 million per entity/individual. Currently RBI has approved only USD-INR currency futures and the contracts to the maximum for 12 months.

According to Ms Mistry, the current OTC trading in Forex through banks sees an average daily volume of USD 34 billion. It will also not call for physical settlement. Forex trading in OTC market through banks invariably involves credit from banks too, and hence comes with attendant risks and limitations, which are not there is currency derivatives. In particular, there is no need for collateral or differential in rates / exposure limit / tenor based on clients financial soundness / size etc. ANNEXURE Title : Launch of currency futures by NSE

By Ms. Shyamala Gopinath ( Deputy Governor of the Reserve Bank of India, at the launch of currency futures by National Stock Exchange of India (NSE), Mumbai, 29 August 2008.)

Honorable Finance Minister, Chairman SEBI Shri Bhave, Chairman NSE, Shri Mathur, MD & CEO NSE, Shri Ravi Narain, DMD, NSE Smt. Chitra Ramakrishnan, ladies and gentlemen.

We are gathered here to mark an event of great significance in the context of Indian financial markets. This event is in fulfillment of the announcement made by the Hon. Finance Minister as part of the Budget Speech in February 2008. It may be recalled that the preparatory work in this regard had commenced with the setting up of an Internal Group on Currency Futures in RBI as announced in the Annual Policy, April 2007. Today is the culmination of a process of extensive consultations and deliberations intended to design a framework for introduction of currency futures in conjunction with the existing vibrant OTC market.

Let me say a few words on the impressive growth of forex markets in India in the recent past. As per the BIS Triennial Survey on the global foreign exchange and derivatives market activity (2007), the foreign exchange market in India has grown into the 16th largest market in the world in terms of total daily turnover which was US$34 billion in 2007. The OTC derivatives segment of the foreign exchange market has also increased significantly to

register a daily average turnover of USD 24 billion, which is 17th largest among all countries. The daily turnover has increased to US$48 billion in 2007-08. The bid-offer spreads are narrow reflecting the liquidity and efficiency of the market. There is a wide menu of products available in the OTC market which serves a distinct economic purpose.

The biggest challenge in designing a framework for currency futures in India, I may say, was the contextual setting in which the foreign exchange market operates in India. There was no ready template available internationally that we could draw upon since most of the countries that have active currency futures markets are those which are relatively more convertible on the capital account. The Endeavour was to have a framework which genuinely sought to provide an additional avenue for risk management while maintaining the integrity of the existing market microstructure.

The Report of the Internal Group was discussed extensively in the meetings of the Technical Advisory Committee on financial markets which consists of market participants, experts and regulators. We have also had the benefit of an array of expert views, including those of the Ministry of Finance which were indeed valuable in giving final contours to the framework. The operational aspects were commendably dealt with by the RBI-SEBI Standing Technical Committee and I must highlight the exemplary inter-regulatory coordinative approach that has been the hallmark of the entire process. A similar approach is now being adopted in respect of interest rate futures as well and we may see a fruition of efforts in this regard in a short time. In this regard, I express deep appreciation of the contribution made by SEBI, and in particularly the Chairman, in bringing this to fruition.

I congratulate NSE for putting in place the platform in a short time and ensuring a sizeable number of members at the initial start itself. I believe the currency futures market will seamlessly complement the existing OTC market. As you may be aware, in all countries, including developed markets, OTC segment dominates foreign exchange transactions.

The introduction of currency futures, I am sure, will provide further depth and breadth to the market and fulfill their intended objective as an effective risk management instrument. I would also like to take this opportunity to urge all the market participants to leverage this significant milestone for skill development within as well as at a broader industry level.

On behalf of RBI, I would like to assure our continued commitment to orderly and well thought out development of financial markets, while maintaining financial stability and integrity (Gopinath 29th August, 2008)

Currency derivatives volumes may outstrip equity markets soon. Average daily trading volumes in the Indian currency market have shown a significant jump, they may eventually outgrow volumes in equity derivatives. (Moneylife Personal Finance Magazine, April 28 2010)

Sebi to introduce more currency derivatives product Bhave Chairman of the Indian securities board SEBI, C B Bhave, today said the market watchdog is planning to introduce more currency derivatives, beginning with options, to give a wider choice to investor. (The Economic Times, April 16 2010)

India raises trading limits in currency derivatives. Indians capital market regulator has allowed companies to increase their exposure to the currency derivatives market by raising position limits for clients and non-bank trading members. (Reuters, March 25,2009)

Indian currency derivatives trade seen touching .1trln by fy12. Average daily trade volume in currency derivatives market in India is expected to surge to Rs1 trillion in 2011-2012 (AprMar) from about 300 billion currently. Pramit Brahmbhatt, chief executive officer, Alpari forex (India) said Thursday. (Sulekha.com Money, May 20 2010)

The emergence of the market for derivative products, most notably forwards, futures and options, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices. However, by locking-in asset prices, derivative products minimize the impact of fluctuations in asset prices on the profitability and cash flow situation of risk-averse investors. Derivative products initially emerged, as hedging devices against fluctuations in commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred years. The financial derivatives came into spotlight in post-1970 period due to growing instability in the financial markets. However, since their emergence, these products have become very popular and by 1990s, they accounted for about two-thirds of total transactions in derivative products. In recent years, the market for financial derivatives has grown tremendously both in terms of variety of instruments available, their complexity and also turnover. In the class of equity derivatives, futures and options on stock indices have gained more popularity than on individual stocks, especially among institutional investors, who are major users of index-linked derivatives. Even small investors find these useful due to high correlation of the popular indices with various portfolios and ease of use. The lower costs associated with index derivatives vis-vis derivative products based on individual securities is another reason for their growing use.

Adler and Dumas (1985) demonstrate how to measure the economic exposure of firms market prices to exchange-rate changes. They argue that the exposure may be captured by the regression coefficient when an assets price is regressed on exchange rates. Also, Jorion (1990) and Allayannis and Ofek (1998) estimate the exchange-rate exposure from a regression model that includes market returns and exchange-rate returns to explain the variability of firms stock returns. Existing literatures mostly use similar methodology to measure firms exchange-rate exposures (e.g., Bodnar and Gentry (1993), He and Ng (1998), Bodnar, Dumas and Marston (2002), Kolari, Moorman and Sorescu (2008), and Aggarwal and Harper (2010)). We also use the method suggested by Allayannis and Ofek (1998) along

with the Fama-MacBeth regression to measure firms stock return sensitivity to exchangerate return. However, since the market return may not fully capture all the effects on stock prices other than exchange-rate changes, the FX beta measured by the regression model may have limitations. Even though the industry and regulatory bodies widely employ foreign currency positions to measure the effects of exchange-rate changes, the literature rarely analyzed the foreign currency positions. There are only a few studies that analyzed foreign currency positions. For instance, Grammatikos, Saunders and Swary (1986) analyze U.S. banks foreign currency positions and Chamberlain, Howe and Popper (1997) attempt to measure U.S. banks net foreign assets as the sum of foreign currency assets less foreign currency deposits. We could collect foreign currency position data on Korean firms so that we could extensively study those currency positions. The existing literatures also documents the incentives for a firms hedging. Smith and Stulz (1985) argue that there exists a positive relation between managerial wealth invested in the firm and the use of derivatives. Also, they demonstrate that financial distress costs stimulate firms to hedge by reducing the variability of a firms cash flows. Froot, Sharfstein and Stein (1993) formalize a general framework for analyzing corporate risk management. They document that if external sources of finance are more costly than internally generated funds, there will be a benefit to hedging. Geczy, Minton, and Schrand (1997) extensively examine the motivations of a firms use of currency derivatives. They document that firms with greater growth opportunities and tighter financial constraints are more likely to use currency derivatives. Also, they argue that firms with extensive exchange-rate exposure and economies of scale are more likely to use currency derivates. Nance, Smith, and Smithson (1993) use survey data on firms use of foreign currency derivatives and document that firms that hedge have more growth options in their investment opportunity set. Allayannis and Weston (2001) examine the use of foreign currency derivatives and its potential impact on firm value using Tobins Q as a proxy for firm value. They find a positive relation between firm value and the use of currency derivatives. Carter, Rogers and Simkins (2006) document that jet fuel hedging is positively related to airline firm value. Our findings are consistent with the previous literature in the sense that foreign currency spot position squaring firms (i.e., onbalance-sheet hedgers) have higher firm values and actively invest in research & development activities.

However, contrary to those previous studies, Jin and Jorion (2006) find that hedging does not seem to affect market values of the U.S. oil and gas industry. In this regard, some literature documents that firms are actually timing the markets instead of hedging. Faulkender (2005) examines whether firms are hedging or timing the markets when they select the interest rate exposures of their new debt issuances. He measures firms interest rate exposures by combining the initial exposure of newly issued debts with their use of interest rate swaps. He finds that the final interest rate exposure is largely driven by the firms market timing, not by hedging intentions. Allayannis, Brown, and Klapper (2003) examine a firms choice between local and foreign currency debt using a data set of East Asian firms surrounding 1998 financial crisis. They find that the interest rate differentials between local currency and foreign currency are important determinants for debt use. Those papers focus on the determinants of local and foreign currency debts. This study extends their studies and investigates what determines currency assets, liabilities, and net asset positions, as well as derivatives hedging and synthetic hedging.


( Submitted to the Graduate Faculty of the Louisiana State University and Agricultural and Mechanical College) The Interdepartmental Program in Business Administration (Finance)

REVIEW ABOUT RESERCH METHODOLOGY Methods of study In dealing with any real life problem it is often found that data at hand are not enough and hence it becomes necessary to collect data that are appropriate. There are several ways of collecting the appropriate data which considerably in context of money costs, time and other resources at the disposal of the researcher The main methods used to study for the primary data are Survey method Observational method Survey method involving of personal, telephonic and mail interviews are Very effective to explain the present working. I got different types of data from each and every individual. My research report is been formed on the basis of their formation from outside.

Observational method involving of direct , restrictive , ambiguity shopping etc is very much useful for a researcher to do a real study of the picture. Here I used direct as well as mystery shopping to know about the performance of the study. For the reference and base I need to refer some secondary datas. for that I made the use of journals magazines website Annual reports The various techniques used for the study are Attitude test SOURCES OF DATA In dealing with any real life problem it is often found that data at hand are handinadequate, and hence it becomes necessary to collect data are appropriate. There are severalways of collecting the appropriate data which considerable in context of many costs, time andother resources at the disposal of the researcher. There are two source of collecting data a) internal source and b) external source. Internal source of collecting data is a collecting of data from the concerned company. External source of data is collecting from the market. This can be again divided into Primary data and secondary data. The researcher has selected both the internal and external source of data for the study. Data for any research can be obtained through primary and secondary sources. But for the conducted study the researcher fully depend on secondary data. Secondary data sources Direct observation Personal interviews Journals Magazines Website Annual report Interview Interview is a direct method of collecting of data. It is a verbal method of securingdata in the field of study. The researcher conducted formal and informal interview anddiscussions with different managers and officials. Observation This method implies the collection of information by way of researchers ownobservation. The information obtained relates to what is currently happening in the sharemarket.. Published sources

Data is also collected from published sources like company profile, company journal, leaflet, internet.

It should have a daily watch on the news, research paper by different paper or articles. So they have continues link in the market. Through daily link they can speculate well in the fluctuation of the market price. Every news should be taken has a positive effect and watch accordingly the market price which help up to trade in the highly fluctuation market In OTC there is no limit for trader to buy or short Currency futures so there demand arises that in Exchange traded currency future should have increase limit for Trading Members and also at client level, in result OTC users will divert to Exchange traded currency Futures. Should Introduced other currency derivatives in Exchange traded currency derivative segment.


TABLE:-1 Region wise classification:-

Where are you located

Percentage 100

Respondent 50 50 0 0


100 0 0

a b c


Inference: All the respondent are from Mumbai.


In which market do you trade

Percentage 100

Respondent 50 15 17 18


30 34 36

30 36 a b c


Inference: 30 % of the people trade in equity. 34 % of the people trade in commodity. 36 % of the people trade in forex.


In which currencies do you trade

Percentage 100 32 30 18 20

Respondent 50 16 15 09 10


20 32 a b 18 c d


Inference: 32 % of the people trade in US currency. 30 % of the people trade in Japanese Yen. 18 % of the people trade in GD pound. 20 % of the people trade in Euro.


Are you an importer or exporter




100 58 42

50 29 21

42 a b 58

Inference: 58 % of them are importer. 42 % of them are exporter.


From how long you have been trading in Percentage the market 100 A B C D 6 26 38 30


50 3 13 19 15

6 30 26 a b c d


Inference: 6 % of them started trading Before 1990.

26 % of them started trading between 1991-2000. 38 % of them started trading between 2011-2010. 30 % of them started trading between 2010 till date.


What are the reasons for you to enter into the market




100 28 18 16 18 20 0

50 14 9 8 9 10 0

20 28 a b c d 18 e f 18 16

Inference: 28 % of people trade because they get good return. 18 % of the people trade and they are bother about their risk. 18 % of the people tade to gain market knowledge. 20 % of the people are used to of trading.


What type of investment do u prefer



100 A B 46 54

50 23 27

46 54

a b

Inference: 46 % of the people prefer Long term investment. 54 % of the people prefer Short term investment.


Are you willing to invest in forex Market



100 A B C 32 38 30

50 16 19 15


32 a b c


Inference: 32 % of the people are willing to invest in forex market. 38 % of the people are not interested in investing in forex market. 30 % of the people are still confued wheather to invest or not.


What are the reasons that make you choose the market



100 A B C D E F 10 22 8 24 18 18

50 5 11 4 12 9 9

10 18

a 22 b c 18 d e f 8


Inference: 10 % of the people choose market because of less risk. 22% of the people choose market because of good return. 24 % of the people choose market to gain knowledge.