INTERNSHIP SYNOPSIS

Comparative Analysis of Investment Avenues: A study on Euity !s

"erivatives#
AT $AS%ET OPTIONS PRI!ATE &I'ITE"( $AN)A&ORE
Su*mitted $y
Nida Afs+een
,SN No- : .$R/0'$A12
Conta3t No: 4210546567
Email:afs+een-nida89:mail-3om
Internal )uide E;ternal )uide
'r- S+an<ar )ouda 'r- Preet+am % '
Asst- Professor Investment Advisor( Heads Euity "ept-
"'S=$IT'( $ellary $as<et Option Pvt- &td-
Conta3t No: 48865 .6525 Conta3t No: 4480.../00
E=mail: s+an<ara:ouda9:mail-3om E=mail:investment9*as<etoption-3om


"epartment Of 'ana:ement Studies >"'S?
$allari Institute Of Te3+nolo:y @ 'ana:ement(
An ISO 488/:0888 Certified Institution>A ,NIT OA T-E-H-R-" TR,STB?
>Re3o:niCed *y )ovt of %arnata<a( AICTE(
NeD "el+i @ Affiliated to !T,?
Enana )an:otri# CampusNo: 62.F0(
$ellary= Hospet Road( Allipur( $ellary-
P+:86.40=0.2/88F0.2/77( Aa;:0.2/42( e=mail:*itm*ly*ellary9:mail-3om Ge*:
DDD-*itm-edu-in
A3ademi3 Year: 08/.=/1-
CONTENTS
S-NO TIT&E OA THE TOPIC PA)E NO
/ INTRO",CTION /
0 STATE'ENT OA THE PRO$&E' 0
. RE!IEG OA &ITERAT,RE .
1 O$EECTI!ES OA THE ST,"Y 1
5 RESEARCH 'ETHO"O&O)Y 1
7 &I'ITATIONS 5
2 REAERENCES 5

6 TI'E H ACTI!ITY CHART 7
Introdu3tion on t+e study:
The oldest stock exchange in Asia (established in 1875) and the first in the country to be granted
permanent recognition under the Securities ontract !egulation Act" 1#5$" %ombay Stock
&xchange 'imited (%S&) has had an interesting rise to prominence o(er the past 1)) years* A lot
has changed since 1875 +hen )18 persons became members of +hat today is called ,%ombay
Stock &xchange 'imited- paying a princely amount of !e 1*.n /00/" the name 1The Stock
&xchange" 2umbai1 +as changed to %ombay Stock &xchange* Subse3uently on August 1#" /005"
the exchange turned into a corporate entity from an Association of 4ersons (Ao4) and renamed as
%ombay Stock &xchange 'imited*
%S&" +hich had introduced securities trading in .ndia" replaced its open outcry system of trading in
1##5" +ith the totally automated trading through the %S& 5nline trading (%5'T) system* The
%5'T net+ork +as expanded nation+ide in 1##7*
Since then" the stock market in the country has passed through both good and bad periods* The
6ourney in the /0
th
century has not been an easy one* Till the decade of eighties" there +as no
measure or scale that could precisely measure the (arious ups and do+ns in the .ndian stock
market* %ombay stock &xchange 'imited (%S&) in 1#8$ came out +ith a stock .ndex that
subse3uently became the barometer of the .ndian Stock 2arket*
S&7S&8 first compiled in 1#8$ +as calculated on a ,2arket apitali9ation :eighted-
methodology of )0 component stocks representing a sample of large" +ell established and
financially sound companies* The base year of S&7S&8 is 1#78;7#* The index is +idely reported
in both domestic and international markets through prints as +ell as electronic media* S&7S&8 is
not only scientifically designed but also based on globally accepted construction and re(ie+
methodology* <rom September /00)" the S&7S&8 is calculated on a free;float market
capitali9ation methodology* The ,free-float Market Capitalization-Weighted methodology is a
+idely follo+ed index construction methodology on +hich ma6ority of global e3uity benchmarks
are based*
The gro+th of e3uity markets in .ndia has been phenomenal in the decade gone by !ight from early
nineties the stock market +itnessed heightened acti(ity in terms of (arious bull and bear runs* The
S&7S&8 captured all these happenings in the most 6udicial manner* 5ne can identify the booms
and bust of the .ndian e3uity market through S&7S&8*
The &xchange also disseminates the 4rice;&arnings !atio" the 4rice to %ook =alue !atio and the
>i(idend ?ield 4ercentage on day;to;day basis of all its ma6or indices*
The (alue of all %S& indices are e(ery 15 seconds during the market hours and displayed through
the %5'T system* %S& +ebsite and ne+s +ire agencies*
All %S&;.ndices are re(ie+ed periodically by the ,.ndex ommittee- of the &xchange* The
ommittee frames the broad policy guidelines for the de(elopment and maintenance of all %S&
indices* >epartment of %S& .ndices of the exchange carries out the day to day maintenance of all
indices and conducts research on de(elopment of ne+ indices*
.nstitutional in(estors" money managers and small in(estors all refer to the Sensex for their specific
purposes* The Sensex is in effect the substitute for the .ndian stock markets* The country@s first
deri(ati(e product i*e* .ndex;<utures +as launched on S&7S&8*
Statement of t+e Pro*lem:
.n(estment is a goldmine for some but a minefield for most* 2ost in(estors ha(e +holly unrealistic
expectations of +hat returns are achie(able* %eginning some A0 years ago" there +as a long
period +hen high inflation +as the norm* As a result" it +as possible to earn large nominal
returns" e(en if" in real terms" there +as no gain at all* 2any in(estors still expect high
nominal increases in asset prices no+" e(en in a +orld of lo+ inflation* 2oreo(er" in the
period of high inflation" bond yields and interest rates +ere also high* Accordingly" if
in(estors didn@t like the prospects for the e3uity market" they could at least get attracti(e rates
of return on bonds" or e(en on cash deposited in the bank* Bigh nominal interest rates itself
brought a ma6or boost to returns" albeit a temporary one* <or the big drop in bond yields
conferred large capital gains on the holders of bonds* 2oreo(er" the effects of this fall in
yields helped to buoy up the price of other assets" including e3uities*
The stock market is one of the most important sources for companies to raise money* This allo+s
businesses to be publicly traded" or raise additional financial capital for expansion by selling shares
of o+nership of the company in a public market* The li3uidity that an exchange affords the
in(estors gi(es them the ability to 3uickly and easily sell securities* This is an attracti(e feature of
in(esting in stocks" compared to other less li3uid in(estments*
>eri(ati(es play an important role in the capital markets and broader economy" allo+ing businesses
to manage and hedge risk. ompanies in e(ery state utili9e deri(ati(es as a key tool to protect
against risks that are inherent to their businesses* The greatest risk of all" ho+e(er" may be one of
the least (isible C namely" the expanding" shado+y market for deri(ati(es* These highly
sophisticated in(estments ha(e contributed to financial disasters*

Therefore" this is an attempt* The study analy9es comparati(e performance of e3uities o(er
deri(ati(es and (ice;(ersa*
RevieD of literature:
Atia Alam( Talat AfCa and 'a+mood A+mad $odla( "epartment of 'ana:ement S3ien3e(
CO'SATS &a+ore( Pa<istan ha(e found that !ecent global financial crunch /007 increases the
presence of e3uity risk exposure all o(er the +orld" especially in Asian countries" +hich increases
the incenti(e of using e3uity deri(ati(e for managing risk* &xisting literature pro(ides enough
e(idence regarding the firm specific determinants of financial deri(ati(es in both ad(anced and
Asian countries" ho+e(er no study has up till no+ examined the determinants of e3uity deri(ati(es*
urrent study identifies the determinants of e3uity deri(ati(es by using sample data of 2alaysian
non financial firms listed on %ursa Stock &xchange for the period of /00A;/010* &mpirical findings
report that corporations ha(ing higher informational asymmetry" agency costs of debt and financial
constraints are more likely to use e3uity deri(ati(es* >etailed analysis +ith respect to informational
asymmetry reports that firms ha(ing higher informational asymmetry as compared to those ha(ing
lo+er are using e3uity deri(ati(es for reducing informational asymmetry" agency costs and
financial constraints*
Nares+( )-( >0887?" studied the dynamic gro+th of the >eri(ati(es market" particularly <utures D
5ptions and the percei(ed risks to the financial sector continue to stimulate debate on the proper
regulation of these instruments* &(en though this market +as initially fuelled by (arious expert
teams sur(ey" regulatory frame+ork" recommendations byela+s and rules there is still a debate on
the existing regulations such as +hy is regulation neededE :hen and +here regulation neededE
:hat are reasonable and attainable goals of these regulationsE Therefore this article critically
examines the (ie+s of market participants on the existing regulatory issues in trading >eri(ati(e
securities in .ndian capital market conditions*
The emergence and gro+th of the market for deri(ati(e instruments is because of the +illingness of
risk;a(erse economic agents to guard themsel(es against uncertainties arising out of fluctuations in
asset prices* %y pro(iding in(estors and issuers +ith a +ider array of tools for managing risks and
raising capital" deri(ati(es impro(e the allocation of credit and the sharing of risk in the global
economy" 51 lo+ering the cost of capital formation and stimulating economic gro+th* 7o+ that
+orld markets for trade and finance ha(e become more integrated" deri(ati(es ha(e strengthened
these important linkages bet+een global markets" increasing market li3uidity and efficiency" and
ha(e facilitated the flo+ of trade and finance*
%umar R- and C+andra A- >0888?" had studied that .ndi(iduals often in(est in securities based on
approximate rule of thumb" not strictly in tune +ith market conditions* Their emotions dri(e their
trading beha(ior" +hich in turn dri(es asset (stock) prices* .n(estors fall prey to their o+n mistakes
and sometimes otherFs mistakes" referred to as herd beha(ior* 2arkets are efficient" increasingly
pro(ing a theoretical concept as in practice they hardly mo(e efficiently* The purely rational
approach is being subsumed by a broader approach based upon the trading sentiments of in(estors*
The present paper documents the role of emotional biases to+ards in(estment (or disin(estment)
decisions of indi(iduals" +hich in turn force stock prices to mo(e*

O*Ie3tives of t+e study:
1) To find the right script to buy and sell at the right time*
/) To kno+ in(estorsF preference to+ards e3uity and deri(ati(es*
)) To kno+ the outcome of competiti(eness of &3uity and >eri(ati(e*

Resear3+ 'et+odolo:y:
!esearch >esign G >escripti(e !esearch
4opulation G .n(estors in e3uity and deri(ati(e market
Sampling unit G .n(estors dealing +ith options and e3uity
Sample si9e G 50 in(estors*
>ata collection sources G Se3ondary sour3esG
The re3uired information +ill be collected from financial
6ournals" +ebsites" maga9ines" companyFs annual reports
and text book
Primary sour3esG The sur(ey is conducted to kno+ the
preference of in(estors for e3uities and deri(ati(es*
>ata analysis tools G Huestionnaire
&imitations:
This pro6ect is restricted for ten +eeksI hence exhausti(e data is not a(ailable upon +hich
conclusions can be relied*
1) .n(estment in Securities carries risk*
/) <actors affecting the 2arket 4rice of securities result in poor performance of the
companies +hich further leads to confidentiality of data by the company*
Referen3es:
1) Arti3les G Atia Alam" Talat Af9a and 2ahmood Ahmad %odla" >epartment of 2anagement
Science" 52SATS 'ahore" 4akistan-
!esearch by 7aresh J (/00$) and Kumar ! D handra A (/000)
/) $oo<: Bull" Lone (/00A) ; 5ptions" <utures and other >eri(ati(es
=ohra 7*> D % ! %agri (/00)) ; <utures D options
)) Ge*sites: +++*deri(ati(esindia*com
+++*nseindia*com
+++*basketoption*com
Time A3tivity C+art:
NA'E: 7.>A A<SB&&7 ),I"E: ASST* 4!5<* SBA7KA!&J5M>A
,SN NO: )%!1/2%AA7
ACTI!ITY TI'E =&INE RE'AR%S
Mnderstanding structure" culture
and functioning of the
organi9ation
<irst t+o +eeks of
internship
Student should understand
productsNser(ices and problems
of the organi9ation
4reparation of research instrument
for data collection
)
rd
to A
th
+eek of
internship
>iscussion +ith the guide for
finali9ation of research instrument in
hisNher domain and present the same to
the guide(first presentation)
>ata collection 5
th
to 8
th
+eek of
internship
>ata collected to be edited" coded"
tabulated and presented to the guide for
suggestion for analysis*(second
presentation)
Analysis and finali9ation of report #
th
to 11
th
+eek of
internship
Students must use appropriate and latest
statistical tools and techni3ues for
analy9ing the data(it is must to use
latest statistical packages +hose results
should be sho+n in the report)(third
presentation)
Submission of report 1/
th
+eek of internship
<inal report should be submitted to the
uni(ersity before one +eek of the
commencement of theory examination