CHAPTER-I

INTRODUCTION

GENERAL
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.

DERIVATIVES
Derivative is a product whose value is derived from the value of one or more
basic variables, called bases (underlying asset, index, or reference rate), in a contractual
manner. The underlying asset can be equity, forex, commodity or any other asset. For
example, wheat farmers may wish to sell their harvest at a future date to eliminate the
risk of a change in prices by that date. Such a transaction is an example of a derivative.
The price of this derivative is driven by the spot price of wheat which is the "underlying".

In the Indian context the Securities Contracts (Regulation) Act, 1956

(SC(R) A) defines "derivative" to include1. A security derived from a debt instrument, share, loan whether secured or unsecured,
risk instrument or contract for differences or any other form of security.
2. A contract which derives its value from the prices, or index of prices, of underlying
securities.

FACTORS DRIVING THE GROWTH OF DERIVATIVES

Over the last three decades, the derivatives market has seen a phenomenal growth. A
large variety of derivative contracts have been launched at exchanges across the world.
Some of the factors driving thegrowth of financial derivatives are:
1. Increased volatility in asset prices in financial markets,
2. Increased integration of national financial markets with the international markets,
3. Marked improvement in communication facilities and sharp decline in their costs,
4. Development of more sophisticated risk management tools, providing economic
agents a wider choice of risk management strategies, and
5. Innovations in the derivatives markets, which optimally combine the risks and returns
over a large number of financial assets leading to higher returns, reduced risk as well as
transactions costs as compared to individual financial assets.
DERIVATIVE PRODUCTS
Derivative contracts have several variants. The most common variants are forwards,
futures, options and swaps. We take a brief look at various derivatives contracts that have
come to be used.

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

where settlement takes place on a specific date in the future at today's pre-agreed
price.
Futures: A futures contract is an agreement between two parties to buy or sell an
asset at a certain time in the future at a certain price. Futures contracts are special
types of forward contracts in the sense that the former are standardized exchangetraded contracts.
Options: Options are of two types - calls and puts. Calls give the buyer the right
but not the obligation to buy a given quantity of the underlying asset, at a given
price on or before a given future date. Puts give the buyer the right, but not the
obligation to sell a given quantity of the underlying asset at a given price on or
before a given date.
Warrants: Options generally have lives of upto one year, the majority of options
traded on options exchanges having a maximum maturity of nine months. Longerdated options are called warrants and are generally traded over-the-counter.
Leaps: The acronym LEAPS means Long-Term Equity Anticipation Securities.
These are options having a maturity of upto three years.
Baskets: Basket options are options on portfolios of underlying assets. The
underlying asset is usually a moving average of a basket of assets. Equity index
options are a form of basket options.
Swaps: Swaps are private agreements between two parties to exchange cash
flows in the future according to a prearranged formula. They can be regarded as
portfolios of forward contracts. The two commonly used swaps are:
3

o Interest rate swaps:These entail swapping only the interest related cash
flows between the parties in the same currency.
o Currency swaps: These entail swapping both principal and interest
between the parties, with the cash flows in one direction being in a
different currency than those in the opposite direction.
Swaptions: Swaptions are options to buy or sell a swap that will become
operative at the expiry of the options. Thus a swaption is an option on a forward
swap. Rather than have calls and puts, the swaptions market has receiver
swaptions and payer swaptions. A receiver swaption is an option to receive fixed
and pay floating. A payer swaption is an option to pay fixed and receive floating.

FUTURES AND OPTIONS TRADING SYSTEM

The futures & options trading system of NSE, called NEAT-F&O trading system,
provides a fully automated screen-based trading for Index futures & options and Stock
futures & options on a nationwide basis as well as an online monitoring and surveillance
mechanism. It supports an order driven market and provides complete transparency of
trading operations. It is similar to that of trading of equities in the cash market
segment.The software for the F&O market has been developed to facilitate efficient and
transparent trading in futures and options instruments. Keeping in view the familiarity of
trading members with the current capital market trading system, modifications have been
performed in the existing capital market trading system so as to make it suitable for
trading futures and options.

ORDER TYPES AND CONDITIONS

The system allows the trading members to enter orders with various conditions
attached to them as per their requirements.
These conditions are broadly divided into the following categories:
Time conditions
Price conditions
Other conditions
1.TIME CONDITIONS
Day order: A day order, as the name suggests is an order which is valid
for the day on which it is entered. If the order is not executed during the
day, the system cancels the orderautomatically at the end of the day.
Immediate or Cancel (IOC): An IOC order allows the user to buy or sell
a contract as soon as the order is released into the system, failing which
the order is cancelled from the system. Partial match is possible for the
order, and the unmatched portion of the order is cancelled immediately.
2.PRICE CONDITIONS
Stop-loss: This facility allows the user to release an order into the
system, after the market price of the security reaches or crosses a
threshold price e.g. if for stop-loss buy order, thetrigger is 1027.00,
the limit price is 1030.00 and the market (last traded) price is 1023.00,
then this order is released into the system once the market price
reaches or exceeds 1027.00.This order is added to the regular lot book
with time of triggering as the time stamp, as a limit order of 1030.00.
5

For the stop-loss sell order, the trigger price has to be greater than the
limit price.

OTHER CONDITIONS
Market price: Market orders are orders for which no price is
specified at the time the order is entered (i.e. price is market price).
For such orders, the system determines the price.
Trigger price: Price at which an order gets triggered from the stoploss book.
Limit price: Price of the orders after triggering from stop-loss book.

Pro: Pro means that the orders are entered on the trading member's own account.

Cli: Cli means that the trading member enters the orders on behalf of a client.

PLACING ORDERS ON THE TRADING SYSTEM

For both the futures and the options market, while entering orders on the trading system,
members are required to identify orders as being proprietary or client orders. Proprietary
orders should be identified as 'Pro' and those of clients should be identified as 'Cli'. Apart
from this, in the case of 'Cli' trades, the client account number should also be provided.

The futures market is a zero sum game i.e. the total number of long in
any contract always equals the total number of short in any contract.
The total number of outstanding contracts (long/short) at any point in
6

time is called the "Open interest". This Open interest figure is a good
indicator of the liquidity in every contract. Based on studies carried out
in international exchanges, it is found that open interest is maximum in
near month expiry contracts.

CLEARING AND SETTLEMENT

National Securities Clearing Corporation Limited (NSCCL) undertakes clearing
and settlement of all trades executed on the futures and options (F&O) segment of the
NSE. It also acts as legal counterparty to all trades on the F&O segment and guarantees
their financial settlement.

TYPES OF MARGINS
The margining system for F&O segment is explained below:

Initial margin:
Margin in the F&O segment is computed by NSCCL upto 105 client level for open
positions of CMs/TMs. These are required to be paid up-front on gross basis at individual
client level for client positions and on net basis for proprietary positions. NSCCL collects
initial margin for all the open positions of a CM based on the margins computed by NSESPAN.A CM is required to ensure collection of adequate initial margin from his TMs upfront. The TM is required to collect adequate initial margins up-front from his clients.

Premium margin:
In addition to initial margin, premium margin is charged at client level. This margin is
required to be paid by a buyer of an option till the premium settlement is complete.

Client margins:
NSCCL intimates all members of the margin liability of each of their client.
Additionally members are also required to report details of margins collected from clients
to NSCCL, which holds in trust client margin monies to the extent reported by the
member as having been collected form their respective clients.

PARTICIPANTS IN THE DERIVATIVES MARKETS

The following three broad categories of participants - hedgers, speculators, and
arbitrageurs trade in the derivatives market. Hedgers face risk associated with the price of
an asset. They use futures or options markets to reduce or eliminate this risk. Speculators
wish to bet on future movements in the price of an asset. Futures and options contracts
can give them an extra leverage; that is, they can increase both the potential gains and
potential losses in a speculative venture.
Arbitrageurs are in business to take advantage of a discrepancy between prices in
two different markets. If, for example, they see the futures price of an asset getting out of
line with the cash price, they will take offsetting positions in the two markets to lock in a
profit.

NSE's DERIVATIVES MARKET

The derivatives trading on the NSE commenced with S&P CNX Nifty Index
futures on June 12, 2000. The trading in index options commenced on June 4, 2001 and
trading in options on individual securities commenced on July 2, 2001. Single stock
futures were launched on November 9, 2001. Today, both in terms of volume and
turnover, NSE is the largest derivatives exchange in India.

Currently, the derivatives contracts have a maximum of 3-month expiration

cycles. Three contracts are available for trading, with 1 month, 2 months and 3 months
expiry. A new contract is introduced on the next trading day following the expiry of the
near month contract.

TRADING MECHANISM
The futures and options trading system of NSE, called NEAT-F&O trading
system, provides a fully automated screen-based trading for Index futures & options and
Stock futures & options on a nationwide basis and an online monitoring and surveillance
mechanism.
It supports an anonymous order driven market which provides complete
transparency of trading operations and operates on strict price-time priority. It is similar
to that of trading of equities in the Cash Market (CM) segment.The NEAT-F&O trading
system is accessed by two types of users. The Trading Members (TM) have access to
functions such as order entry, order matching, order and trade management.
It provides tremendous flexibility to users in terms of kinds of orders that can be
placed on the system.Various conditions like Immediate or Cancel, Limit/Market price,
Stop loss, etc. can be built into an order. The Clearing Members (CM) use the trader
workstation for the purpose of monitoring the trading member(s) for whom they clear the
trades. Additionally, they can enter and set limits to positions, which a trading member
can take.

1.1 STATEMENT OF PROBLEM

This study mainly focuses on finding the traders view towards derivative market
and type of derivative traded by them.It also analyses whether the clients are aware of
derivative trading and to find out the satisfaction level of the clients towards the services
offered by the company.

1.2 OBJECTIVES OF THE STUDY

To study the traders view towards derivative market and type of derivative
traded by them.
To analyse the factors taken into consideration by traders while trading in
derivatives.
To evaluate the relation between type of derivative and factors influencing the
traders while trading in derivatives.
To know the level of satisfaction of traders through trading in derivatives

1.3 NEED FOR THE STUDY

To help the company in finding the traders view towards online trading in
derivatives.
To know the reason for trading in derivatives and their basic purpose of trading.
To know the traders view about the returns and risk through derivatives.
To help and create a good relationship between the traders and the company.

1.4 SCOPE OF THE STUDY

10

 The study focussing on the traders view towards trading in derivatives and factors
considered by them while trading.
The study will help the company to know its position in the market and to adopt
the right strategy to compete in the market.
The study will help the company to know the satisfaction level of the traders
towards returns on derivative trading.

1.5 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It
may be understood as a science of studying how research is done scientifically. In it we
study the various steps that are generally adopted by a researcher in studying his research
problem along with the logic behind them. It is necessary to know not only the research
methods/techniques but also the methodology. They should also know to develop certain
indices or tests. It is necessary to understand the assumptions underlying various
techniques and to know the criteria by which they can decide certain techniques and
procedures.
TYPE OF RESEARCH
Descriptive
In this study descriptive research design is used. Descriptive research portrays the
characteristics of a group or situation. For instance, the degree to which use varies with
income, age, sex, or other characteristics is a descriptive study. The main descriptive
study is to acquire the knowledge.
The present project deals with descriptive study.
11

INSTRUMENT USED
A structured questionnaire has been used as an instrument for this study.
Structured questionnaire is those in which there are definite, concrete and predetermined
questions relating to the aspects for which the research collects data, same questionnaire
has been used for all the respondents.
QUESTIONNAIRE DESIGN
The structured questionnaire consist of open ended, multiple choice closed ended,
dichotomous question, ranking question.

DATA COLLECTION
NATURE OF DATA
The nature of data is both primary and secondary data.
Primary data
The primary data are collected afresh and for the first time, and thus happen to be
original in character.Descriptive tool design has been used to study the primary data
which is collected through questionnaire method.
Secondary Data
The secondary data is collected from magazines, journals, company records,
company websites.
SAMPLING PROCEDURE
Convenience sampling has been adopted for collection of information.

Convenience sampling
12

Non-probability samples that are unrestricted are called convenience samples.

Researchers have the freedom to choose whomever they find, thus the name convenience.
SAMPLE SIZE
A sample is a subset of the population. Size of sample refers to the number of
samples chosen from the population for investigation.
The sample size adopted for this study is 100.
PERIOD OF STUDY
The study was undertaken for a period of 3 months (from Jan 2014 to Feb 2014 )
PILOT SURVEY
A survey with 10 respondents was conducted for testing the validity of the
questions. It was found that there are no changes required in the questionnaire. Hence
same questionnaire was used for final study.

STATISTICAL TOOLS
The tools which is used for this method are,
Percentage Analysis
Chi- Square Test
Rank Analysis
Co-efficient of Correlation

1. PERCENTAGE ANALYSIS
13

The percentage method is used for comparing certain feature. The collected
data represented in the form of tables and graphs in order to give effective
visualization of comparison mode.

Sample percentage = (Actual population/ Sample size) x 100

2. CHI-SQUARE TEST
The X2 test is one of the simplest and most widely used non-parametric tests
in statistical work. It makes no assumptions about the population being sampled.
The quantity X2 describes the magnitude of discrepancy between theory and
observation, i.e; with the help of X2test we can know whether a given discrepancy
between theory and observation can be attributed to chance or whether it results from
the inadequacy of the theory to fit the observed facts.
(O - E) 2
Formula for Chi-square test = _____________
E
O Observed frequency
E Expected or theoretical frequency
Row total * Column total
E=

___________________________
Grand total

Degree of freedom = (r-1) (c-1)

3. RANK ANALYSIS

14

When the relative important is not the same, I compute rank analysis to identify
which observation ranks high and the order in which they fall down. The formula for
computing rank correlation is,

X=xw

Where X rank value

The variable with the maximum value is found to be leading factor for which much
important is given. And the order is found in the descending order.Here, in this
project work rank analysis is used to find out the ranking position of the sectors in
derivatives.
4. COEFFICIENT OF CORRELATION
Correlation may be defined as a tendency interrelation variation and coefficient
correlation is the measure of such a tendency, i.e., the degree to which the two variables
and integrated is measured by a coefficient which is called the coefficient of correlation,
it gives the degrees of correlation.
Definition
The relationship between two variables such that a change in one variable results in a
positive or negative change in the other variable and also a greater change in one variable
result in corresponding greater or smaller change in the other variable is known as
correlation.

Properties of correlation
15

It is measure of the closeness of fit in a relative sense.

Correlation coefficient lies between -1 and +1.
The correlation is perfect and positive if r = 1 and its prefect and negative if r = -1.
If r = 0, then there is no correlation between the two variables and thus variables are

said to be independent.
The correlation coefficient is a pure number and is not affected by a change of origin
and scale.
It is a relative measure of association between two or more variables.

Working Rule
The coefficient correlation is calculated by the following steps:
Step I

: Denote one series by x and other series by y.

Step II

: Calculate x and y of the x and y series respectively.

Step III

: Take the deviations of the observation in x - series from

x and write it under the column headed by dx = x x

Step IV

: Square these deviations and write them under the

columns headed by dx2dy2.

Step V : Multiply the respective dx and dy and write them under

the column headed by dxdy.
Step VI

: Apply the following formula to calculate r and rxy, the

coefficient correlation.
r=

dxdy

______________
dx2 * dy2

1.6 LIMITATIONS OF THE STUDY

The time period was restricted for a period of two months.
The data is collected from the respondents only in Chennai.
The sample size is 100. Therefore cannot be generalized to the entire population.
16

 The respondent does not find enough time to fill the Questionnaire.

CONCLUSION
The process of research can be painstakingly time consuming. It can
involve the overcoming of many obstacles and may unfortunately need to be revised
several times as you progress through the steps. By completing your study in the correct
order and making sure you dont forget important tasks, your progression from theory to
publication will occur much more smoothly. For this reason, most graduate programs
require that you work under the supervision of an experienced researcher for a number of
years before beginning your own independent study.
CHAPTER SCHEME
Chapter-1: Deals with INTRODUCTION.
Chapter-2: Deals with REVIEW OF LITERATURE.
Chapter-3: Deals with COMPANY PROFILE.
Chapter-4: Deals with DATA ANALYSIS AND INTERPRETATION.
Chapter-5: Deals with FINDINGS SUGGESTIONS&CONCLUSION.

CHAPTER-II
REVIEW OF LITERATURE

INTRODUCTION
A literature review summarises, interprets, and critically evaluates existing
"literature" (or published material) in order to establish current knowledge of a subject.
17

The purpose for doing so relates to ongoing research to develop that knowledge: the
literature review may resolve a controversy, establish the need for additional research,
and/or define a topic of inquiry. The purpose of your literature review is to establish
current knowledge on an aspect that relates to legal and ethical issues within the practices
of professional nursing. The literature review is a "stand-alone"

DEFINITION OF DERIVATIVE
Derivative is a product whose value is derived from the value of one or more basic
variables, called bases (underlying asset, index, or reference rate), in a contractual
manner. The underlying asset can be equity, forex, commodity or any other asset. For
example, wheat farmers may wish to sell their harvest at a future date to eliminate the
risk of a change in prices by that date. Such a transaction is an example of a derivative.
Nirmalkumarsoni has said that, This study is on the subject of stocks that is
riding herd no matter whether it is on weekend get-togethers, parties, small celebrations,
or just while freaking out. Online stock trading and the advantages associated has become
buzz-phrase. When we speak of Indian stocks, the name of the NSE of India and the BSE
of India robotically flashes in the mind. Those who have not yet ventured into investing
in Indian stocks will get robotically attracted towards putting in money too. Easier said
than done! Most investors realize only after putting in their money that there are lots of
intricacies involved
SheimQuah has revealed that, Over the recent years, online trading has gain
immense popularity in Malaysia. It started with securities and equities trading with the

18

local banks. Now, Bursa Malaysia has also opened its doors for individuals to trade
derivatives such as futures and options via the internet.
Currently with the online platform, not only do traders and investors have access to Bursa
Malaysia's derivatives but also being able to trade offshore derivatives in Chicago
Mercantile Exchange, which has the largest options and futures contracts open interest of
any futures exchange in the world, since the announcement of partnership between Bursa
Derivatives Bhd the CME Group Inc in September 2009. Now, there is a choice for
individual traders and investors to trade derivatives and commodities on their own or to
go through their brokers.
Jon Elton tells that, Traditionally developed for the purpose of risk management,
commodity derivatives are now increasing in popularity as an investment tool. Presently,
investors having no need for the commodity are trading in the commodity derivatives
market. In fact, investors just speculate on the price direction of such commodities, with
the hope of making money in case the price moves in their favor.
Commodity derivatives market is a direct form of investing in commodities rather than
investing in those companies trading in such commodities.
It is quite simpler to predict the price of commodities depending on their supply and
demand forecast, in comparison to forecasting the price of the shares of the firm. This
depends on many other factors before considering just the supply and demand of the
products manufactured and sold or traded.
Anjali Choksi performed survey to analyse the derivative market experience and
investor strategies of the Indian stock market. Majority of the investors invest in cash and
future market segment. Stock futures are preferred more for trading by investors. The
19

study reveals the awareness of derivatives among mass investors and those investors
having no knowledge of it depend mostly on broker or take advice of friends in order to
make an investment. Therefore, knowledge should be imparted through discussions and
seminars on such issues so that derivatives can play a stronger role in moving towards
more efficient markets.
Dr.K.S.Jaiswal has found that currency futures are transferable futures contract
that specifies the price at which a specified currency can be bought or sold at a future
date. Research analyst suggests that in order to trade effectively and profitably in
currency futures, an investor needs to strategize his or her investments.
A large number of exchanges, banks, dealers, exchange brokers and speculators are all
getting ready to join in and government is also expanding derivative trading to help
investor cope up with widening fluctuations in rupee.
Dr.A.P.Hosmani has said that the percentage of investors using derivatives is
currently less than half. It is proved that investors are neither risk evaders nor risk
seekers. It is proved that there is a big need of training and education programmes for
retail investors to fill confidence and make investors take the advantage of derivative
products, professionals, brokers, regulators should give guidance and training for retail
investors continuously at reasonable cost at all places.
Dr. MayankJoshipurat from the study tells that, introduction of derivative
trading does not lead to any significant increase in relative volatility of the stocks- in fact,
there is a very weak evidence of decline of excess daily return in a one year period after
the introduction of F and O trading when compared to the corresponding one year period
prior to F and O trading introduction.

20

Mr. Y.M. Satishconcludes that though trading in derivativeinstruments is riskier,

it is catching the attention of traders very rapidly due to its speciality such as margin
payment system, short term, nature etc. Now, the world markets for trade and finance
have become more integrated as derivatives have strengthened these important linkages
among the global markets, increasing market liquidity, efficiency and facilitating the flow
of trade and finance.
Thus, derivatives have become one of the most important investment alternatives
available for the investors. A thorough knowledge of derivatives will definitely help the
investors to optimize their investment decisions, and there by, the profits.
B.Brorsenhas said that,Option pricing models based on an underlying lognormal
distribution typically exhibit volatility smiles or smirks where the implied volatility
varies by strike price. To adequately model the underlying distribution, a less restrictive
model is needed. A relaxed binomial model is developed here that can account for the
skewness of the underlying distribution and a relaxed trinomial model is developed that
can account for the skewness and kurtosis of the underlying distribution.
The new model incorporates the usual binomial and trinomial tree models as restricted
special cases. Unlike previous flexible tree models, the size and probability of jumps are
held constant at each node so only minor modifications in existing code for lattice models
are needed to implement the new approach. Also, the new approach allows calculating
implied skewness and implied kurtosis.
Numerical results show that the relaxed binomial and trinomial tree models developed in
this study are at least as accurate as tree models based on log normality when the true

21

underlying distribution is lognormal and substantially more accurate when the underlying
distribution is not lognormal.
JooNunes says that A new characterization of the American-style option is proposed
under a very general multifactor Markovian and diffusion framework. The efficiency of
the proposed pricing solutions is shown to depend only on the use of a viable valuation
method for the corresponding European-style option and for the transition density of the
models state variables. Under a Gauss-Markov stochastic interest rates setup, these new
American option pricing solutions are shown to offer a much better accuracy-efficiency
trade-off than the approximations already available in the literature. This result is also
used to price callable corporate bonds under an endogenous bankruptcy structural
approach, by decomposing the option to call or default into a European put on the firm
value plus two early exercise premium components.
Nicole Branger, In an uncertain volatility model where only the stock and the
money market account are traded, the upper price bound of a European claim is given by
the solution of a Black-Scholes-Barenblatt equation. If an additional hedge instrument is
available, the price bound can be tightened.
This is also true if the set of admissible strategies is restricted to tractable
strategies, which are defined as sums of Black-Scholes strategies. We study the structure
of both strategies, the general strategies and the tractable strategies, when an additional
convex instrument is available.
For a call and a bullish vertical spread, we give closed-form solutions for the
optimal tractable hedge when the additional instrument is a call option. We show that

22

the position in the additional convex claim as well as the reduction in the price bounds
allow to capture the amount of convexity risk a claim is exposed to.
Ashish Jain says that , Volatility is the key variable in option pricing models and
for risk management in general. Not surprisingly, this has led to the recognition that
volatility uncertainty is an important risk factor. This realization, in turn, has given rise to
derivative instruments tied to volatility, such as variance swaps, volatility swaps, and
options on both variance and volatility, which are specifically designed to help manage
this risk. To price these contracts, a model is needed for the volatility process. This article
develops full pricing and risk management models for these instruments in the context of
a Heston square root stochastic volatility model, including expressions for all of the
standard Greek letters and a couple of new ones for the parameters of the volatility
process. In addition, the authors provide a procedure for setting up optimal hedges of
variance and volatility contracts using a finite set of options as an operational
approximation to the full solution requiring a continuum of options.

CHAPTER-III
COMPANY PROFILE

INDUSTRY PROFILE
INDIAN STOCK MARKET

The Indian economy appears to have weathered the global economic downturn
better than many of the other developed countries. Economic growth has remained

23

positive and India continues to achieve one of the highest growth rates in the world after
China. There is still tremendous potential in the Indian economy.
Stock Markets Perform The Following Functions:

Connecting those who seek money with those who can provide it.

Create an auction mechanism in which prices can be decided for investments.

Distributing the future risk of investments across many millions of individuals.

Providing the clean tickets upon which future wealth can be staked.

Connecting financial institutions together to create money.

Overtime Stock Markets have become the very symbol of commerce in the modern
world. They are truly unique in their scope and in the complexity of the number of
transactions they handle each day. The economy of the world relies on the stock
exchanges to fascinate even trade in the stocks of companies.In our current era anyone
can easily hook themselves up the most popular stock exchanges just by opening an
online brokerage account. Direct interaction with the selling floor of the exchanges gives
the modern investor more control than any other generation.
BOMBAY STOCK EXCHANGE
The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces its
history to the 1850s, when stockbrokers would gather under banyan trees in front of
Mumbai's Town Hall.The location of these meetings changed many times, as the number
of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and
in 1875 became an official organization known as 'The Native Share & Stock Brokers
Association.

24

In 1956, the BSE became the first stock exchange to be recognized by the Indian
Government under the Securities Contracts Regulation Act.The Bombay Stock Exchange
developed the BSE Sensex in 1986, giving the BSE a means to measure over all
performance of the exchange.
In 2000 the BSE used this index to open its derivatives market, trading Sensex futures
contracts. The development of Sensex options along with equity derivatives followed in
2001 and 2002, expanding the BSE's trading platform.
Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to
an electronic trading system in 1995. It took the exchange only fifty days to make this
transition.
The Bombay Stock Exchange uses the BSE Sensex, an index of 30 large, developed BSE
stocks. This index gives a measure of the overall performance of the Bombay Stock
Exchange, and is closely followed around the world. Based on the Sensex, the BSE
equity market has grown significantly since 1990.
In addition to individual stocks, the BSE also has a market in derivatives, which was the
first to be established in India. Listed derivatives on the exchange include stock futures
and options, index futures and options, and weekly options.
The Bombay Stock Exchange is also actively involved with the development of the retail
debt market. The debt market in India is considered extremely important, as the country
continues to develop and depends on this type of investment for growth.

25

Until recently, the debt market in India was limited to a wholesale market, with banks and
financial institutions as the only participants. The Bombay Stock Exchange believes that
a retail market will bring great opportunities to individual investors through better
diversification.
NATIONAL STOCK EXCHANGE
In the fast growing Indian financial market, there are 23 stock exchanges trading
securities. The National Stock Exchange of India (NSE) situated in Mumbai - is the
largest and most advanced exchange with 1016 companies listed and 726 trading
members.
The NSE is owned by the group of leading financial institutions such as Indian Bank or
Life Insurance Corporation of India. However, in the totally de-mutualisedExchange, the
ownership as well as the management does not have a right to trade on the Exchange.
Only qualified traders can be involved in the securities trading.
The NSE is one of the few exchanges in the world trading all types of securities on a
single platform, which is divided into three segments: Wholesale Debt Market (WDM),
Capital Market (CM), and Futures & Options (F&O) Market. Each segment has
experienced a significant growth throughout a few years of their launch. While the WDM
segment has accumulated the annual growth of over 36% since its opening in 1994, the
CM segment has increased by even 61% during the same period.
The National Stock Exchange of India Ltd. provides its clients with a single, fully
electronic trading platform that is operated through a VSAT network. Unlike most world
26

exchanges, the NSE uses the satellite communication system that connects traders from
345 Indian cities. The advanced technologies enable up to 6 million trades to be operated
daily on the NSE trading platform.
Capital market reforms in India and the launch of the Securities and Exchange Board of
India (SEBI) accelerated the incorporation of the second Indian stock exchange called the
National Stock Exchange (NSE) in 1992.
After a few years of operations, the NSE has become the largest stock exchange in India.
Today the NSE takes the 14th position in the top 40 futures exchanges in the world. In
1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior
Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of
50 stocks from 25 different economy sectors.
The Indices are owned and managed by India Index Services and Products Ltd (IISL) that
has a consulting and licensing agreement with Standard & Poor's. In 1998, the National
Stock Exchange of India launched its web-site and was the first exchange in India that
started trading stock on the Internet in 2000.
The NSE has also proved its leadership in the Indian financial market by gaining many
awards such as 'Best IT Usage Award' by Computer Society in India (in 1996 and 1997)
and CHIP Web Award by CHIP magazine (1999).
PRESENT STOCK MARKET
The current Stock market is compressed of 300,000 computers situated on pro
traders desks. These computers are networked together using sophisticated protocols.
These levels of information sharing make pricing an almost exact science. These 300,000

27

computers are further linked to another 26 million computers worldwide. These

computers are located in banks, small businesses, and large corporation.
These computers comprise the banking networks which make computerized transactions
possible. Finally, these computers are connected to another 300 million computers which
connect and disconnect from the financial markets daily. In New York City alone, these
transactions amount to over $2.2 trillion dollars daily.
SECURITIES MARKET IN INDIA AN OVERVIEW
MARKET SEGMENTS
The securities market has two interdependent and inseparable segments, the new
issues (primary) market and the stock (secondary) market. The primary market provides
the channel for creation and sale of new securities, while the secondary market deals in
securities previously issued.

The securities issued in the primary market are issued by public limited
companies or by government agencies. The resources in this kind of market are mobilized
either through the public issue or through private placement route. It is a public issue if
anybody and everybody can subscribe for it, whereas if the issue is made available to a
selected group of persons it is termed as private placement.
There are two major types of issuers of securities, the corporate entities who issue
mainly debt and equity instruments and the government (central as well as state) who
issue debt securities (dated securities and treasury bills).
The secondary market enables participants who hold securities to adjust their holdings in
response to changes in their assessment of risks and returns. Once the new securities are

28

issued in the primary market they are traded in the stock (secondary) market. The
secondary market operates through two mediums, namely, the over-the-counter (OTC)
market and the exchange-traded market.
OTC markets are informal markets where trades are negotiated. Most of the trades
in the government securities are in the OTC market. All the spot trades where securities
are traded for immediate delivery and payment take place in the OTC market.
The other option is to trade using the infrastructure provided by the stock Exchanges. The
exchanges in India follow a systematic settlement period. All the trades taking place over
a trading cycle (day=T) are settled together after a certain time (T+2 day).
The trades executed on exchanges are cleared and settled by a clearing corporation. The
clearing corporation acts as a counterparty and guarantees settlement.

A variant of the secondary market is the forward market, where securities are
traded for future delivery and payment. A variant of the forward market is Futures and
Options market. Presently only two exchanges viz., National Stock Exchange of India
Ltd. (NSE) 1992 and Bombay Stock Exchange (BSE) 1887 provide trading in the Futures
& Options.

KEY STRENGTHS OF THE INDIAN SECURITIES MARKETS

The key strengths of the Indian capital market include a fully automated trading
system on all stock exchanges, a wide range of products, an integrated platform for
trading in both cash and derivatives, and a nationwide network of trading through over
4,000 corporate brokers.

29

The securities markets in India have made enormous progress in developing

sophisticated instruments and modern market mechanisms. The real strength of the Indian
securities market lies in the quality of regulation. The market regulator, Securities and
Exchange Board of India (SEBI) is an independent and effective regulator.
It is established in the year 1982. It has put in place sound regulations in respect of
intermediaries, trading mechanism, settlement cycles, risk management, derivative
trading and takeover of companies.
The NSE and BSE have most advanced and scientific risk management systems.
The growing number of market participants, the growth in volume of securities
transactions, the reduction in transaction costs, the significant improvements in
efficiency, transparency and safety, and the level of compliance with international
standards have earned for the Indian securities market a new respect in the world.
COMPANY PROFILE
SHAREKHAN LIMITED
Sharekhan Ltd. is a brokerage firm which is established on 8th February 2000 and
now it is having all the rights of SSKI. The company was awarded the 2005 Most
Preferred Stock Broking Brand by Awwaz Consumer Vote. It is first brokerage Company
to go online. The Company's online trading and investment site - www.Sharekhan.com was also launched on Feb 8, 2000.
This site gives access to superior content and transaction facility to retail
customers across the country. Sharekhan's management team is one of the strongest in the
sector and has positioned Sharekhan to take advantage of the growing consumer demand
30

for financial services products in India through investments in research, pan-Indian

branch network and an outstanding technology platform.
It is currently amongst India's largest broking house. It is a member of the Stock
Exchange, Mumbai. It is a depository participant of the National Securities Depository
Limited and Central Depository Services (India) Limited. Presently Citigroup is holding
50% and IDFC 12% of the paid up equity capital of the ShareKhan and the Employees
own the rest which is 13%.
Sharekhan Limited is a retail financial services provider with a focus on equities,
derivatives, and commodities brokerage execution on the National Stock Exchange of
India Ltd. (NSE), Bombay Stock Exchange Ltd. (BSE), National Commodity and
Derivatives Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd.
(MCX). Sharekhan provides trade execution services through multiple channels,
including an Internet platform, and telephone and retail outlets.
VISION
To empower the investor with quality advice and superior service and thus help him to
take better investment decisions. We believe that our growth depends on client
satisfaction.
MISSION
To educate and empower the individual investor to make better investment decisions
through,
Quality advice
Innovative products and
Superior service
31

FEATURES OF SHAREKHAN LTD

Multiple exchanges on a single screen

Intra-day calls and flash news

Historical charts with technical tools

Streaming quotes

24x7 web enabled back-office

Auto pay-in of shares

Online transfer of funds

E-broking facility is one such effort, which gives you access to state-of the art
trading platform with multiple exchanges, order and trade confirmations, research
reports, e-contracts and a 24x7 on-line web enabled centralized back-office
system at the click of a button.

SERVICES OF SHAREKHAN
Portfolio management services: Sharekhan offers discretionary PMS to investors
in order to assist them in managing their funds amidst continuous changing market
dynamics and increase complexities of investing.
Investing in equity, markets require in-depth knowledge and through analysis coupled
with clear understanding of domestic and international economics.
Investors need the services of an expert to manage their funds and deliver good returns in
diverse market conditions. Continuous wealth creation with an emphasis on capital

32

preservation in todays complex markets.In order to systematically diversify the holdings

of clients across varied sectors and with an intention to give them handsome returns.
BROKERAGE
Some stock trading companies charge direct percentage while others charge a
fixed amount per Rs 100. Sharekhan charges 0.5% for delivery trading and 0.1% for
intraday or one could say Sharekhan charges 50 paise per Rs 100.
To sum up, Sharekhan brings to the customer, a user-friendly online trading facility,
coupled with a wealth of content that will help them stalk the right shares. Sharekhans
equity related services include trade execution on BSE, NSE, derivatives, commodities,
depository services, online trading and investment advice. Trading is available in BSE
and NSE. Along with Sharekhan.com website, Sharekhan has around 679 offices (share
shops) in 234 cities around the countr

33

PROFILE OF THE COMPANY

Name of the company:Sharekhan ltd.
Headquarters

: Share Khan SSKI,

34

A-206, Phoenix House,

Phoenix Mills Compound,
Lower Parel,
Mumbai - Maharashtra, INDIA- 400013.
Nature of Business: Service Provider
Services:

Depository Services, Online Services and

Technical Research.
Number of Employees: Over 3500
Revenue: Data Not Available
Website

: www.sharekhan.com

Slogan:Your Guide to The Financial Jungle.

PRODUCT PROFILE OF THE COMPANY

SHAREKHAN CLASSIC ACCOUNT
Allow investor to buy and sell stocks online along with the following features like
multiple watch lists, integrate banking, demat and digital contracts, real-time portfolio
tracking with price alerts and instant credit& transfer.

Online trading account for investing in Equities and Derivatives.

Free trading through phone(Dial-n-Trade)

Two dedicated numbers for placing your orders with your cell phone or landline.

Automatic funds transfer with phone banking (for Citibank and HDFC bank
customers)

Simple and secure interactive voice response based system for authentication

Get the trusted, professional advice of our telebrokers

35

After hours order placement facility between 8.00 am and 9.30 am

Integration of: online trading+ Bank+ Demat account

Instant cash transfer facility against purchase & sale of shares
IPO investments
Instant order and trade confirmations by e-mail
Single screen interface for cash and derivatives

SHAREKHAN SPEED TRADE ACCOUNT

This account for active traders who trade frequently during the days trading session.
Following are few popular features of speed trade account.

Single screen interface for cash and derivatives

Real-time streaming quotes with instant order execution & confirmation
Hot keys similar to a traditional broker terminal
Alerts and reminders
Back-up facility to place traders on direct phone lines.

SHAREKHAN TRADE TIGER ACCOUNT

This accounts for active traders who trade frequently during the day's trading
session. Following are few popular features of Trade Tigers account.

Single screen interface for cash and derivatives. Customize market watches
byscrips or sectors and view them on a single screen.

Real-time streaming quotes with Instant order Execution & Confirmation.

36

Hot keys similar to a traditional broker terminal.

Alerts and reminder.

SHAREKHAN MINI
We intend to give our low Bandwidth users a complete
(NSE/BSE/NSEFO) solution on the handset , hence we call it Share Khan Mini aka
Low Bandwidth Website.
Low Bandwidth can be due to:
1) Rural where high speed connections are not available,
2) Financial Situation- that is, expensive high speed connection,

3) Some older technologies load pages very slowly and do not support features
used on newer sites.

ShareKhan Mini is the solution for the above cause. But on a free
way like a broadband/corporate internet this website works faster than the classic ones,
reason being its customized to work on low fuel and when you put it on nitro it glides.

FORTUNE FINDER
Spot the best trading opportunities using Fortune Finder for 500 stocks in
Day Trading and over 3000 stocks for Delivery.

37

It's a scientific system powered by a trend evolution algorithm which

captures the changing trend pattern for each stock.
This helps investors /traders to get a clear and simple "call to action" for profitable trades.
It's a simple decision making system to generate high probability calls with only 3 action
clues:
1. BUY
2. SELL
3. HOLD

LOCATION AND AREA OF OPERATION

a) 122 Franchisees and 28 branches.
b) Covers 213 cities in 23 states across India.
c) Also they cover 588-share shop in 213 cities.
d) Trade execution facility on BSE and NSE for Cash as well as Derivatives
e) Depository/Demat account services.
f) Personalized Share Khan research advice.

CHAPTER-IV
DATA ANALYSIS AND INTERPRETATION

INTRODUCTION

38

The data after collection has to be processed and analyzed in accordance with the
outline laid down for the purpose at the time of developing the research plan. This is
essential for a scientific study and for ensuring that we have all the relevant data.
Processing implies editing, coding, classification and tabulation of collected data so that
they acquiescent to analyses.

The term analysis refers to the computation of certain measures along with
searching for patterns of relationship that exist among data groups. Thus, In the process
of analysis, relationship or difference supporting or confliction with original or new
hypothesis should be subjected to statistical tests of significance to determine with that
validity data can be said to indicate any conclusions.

Analysis of data in general way involves a number of closely related operations

that are performed with the purpose of summarizing the collected data and organizing
them in such manner that answers the research questions.

TABLE 4.1.1
AGE OF RESPONDENTS
Particulars

No of respondents

Percentage

20-30

40

40

39

31-40

33

33

41-50

16

16

Above 50

11

11

100

100

TOTAL
Source: Primary Data
INFERENCE:

40% of the respondents belongs to the age group of 20-30, 30-40 age group
contains 33%, 40-50 age group contains 16% and 11% of the respondents belongs to age
of 50&above
FIGURE 4.1.1

Age of the respondents

No.Of.Samples

40
35
30
25
20
15
10
5
0

40

No.of.Samples

33
16

20-30

31-40

41-50

11
Above 50

Age

TABLE 4.1.2
GENDER OF RESPONDENTS
Particulars

No of respondents

Percentage

Male

77

77

Female

23

23

40

TOTAL

100

100

Source: Primary Data

INFERENCE:
77% of respondents are male and the remaining 23% of respondents are female.
FIGURE 4.1.2
_

Gender of the Respondents

80
70
60
50
No.of.Samples 40
30
20
10
0

77

No.of.Samples

23

Male

Female
Gender

TABLE 4.1.3
OCCUPATION OF RESPONDENTS
Particulars
Government
Private
Business
Retired

No of respondents
8
51
22
10
41

Percentage
8
51
22
10

Others
TOTAL
Source: Primary Data

9
100

9
100

INFERENCE:
51% of respondents belong to the occupation of private concern; 22%- business;
10%-retired; 9%-others (student, homemaker); and remaining 8% of respondents belongs
to the occupation of government concern.
FIGURE 4.1.3

Occupation of the Respondents

60
50
40
No.of.Sapmles

30

No.of.Samples

51

20
10

22
10

0
Government Business

9
Others

Occupation

TABLE 4.1.4
INCOME OF RESPONDENTS
Particulars

No of respondents

Percentage

Below 1 lakh

15

15

Between 1 lakh to 5 lakhs

46

46

Between 5 lakhs to 10 lakhs

22

22

Between 10 lakhs to 25 lakhs

12

12

25 lakhs and above

100

100

TOTAL
Source:Primary Data
42

INFERENCE:
46% of respondents are earning between Rs.1 lakh to 5 lakhs, 22%-between 5
lakhs to 10 lakhs, 15%-below 1 lakh,12%-between 10 lakh to 25 lakhs and remaining 5%
are earning 25 lakhs and above.
FIGURE 4.1.4

Income of the Respondents

60
50
40
30
20
10
0

51
8

22

10

9
No.of.Samples

No.of.Sapmles

Income

TABLE 4.1.5
QUALIFICATION OF RESPONDENTS
Particulars

No of respondents

Percentage

Under Graduate

33

33

Post Graduate

54

54

Diploma

Others

TOTAL

100

100

Source:Primary Data
INFERENCE
43

54% of respondents are postgraduate, 33%-Undergraduate, 9%-Diploma courses

and remaining 4% of respondents belong to others (SSLC, Professional).

FIGURE 4.1.5

Qualification of the Respondents

60
50
40
No.of.Samples

30
20

No.of.Samples

54
33

10

0
Under Graduate

Diploma

Qualification

TABLE 4.1.6
COMMITMENT TOWARDS TRADING
Particulars

No of respondents

Percentage

Professional Trader

48

48

Part-time Trader

52

52

TOTAL

100

100

Source: Primary Data

INFERENCE
48% of respondents are professional traders, 52% respondents are part-time
traders.
FIGURE 4.1.6
44

Commitment Towards Trading

52
51
50
49
48
47
46

No.of.Samples

52
48
No.of.Samples

Commitment Towards Trading

TABLE 4.1.7
YEARS OF TRADING IN DERIVATIVES
Particulars

No of respondents

Percentage

Less than a year

1 to 5 years

71

71

More than 5 years

23

23

TOTAL

100

100

Source:Primary Data
INFERENCE
6% of the respondents are trading less than a year, 71% of the respondents are
trading from 1 to 5 years and 23% of the respondents are trading for more than 5 years.

FIGURE 4.1.7
45

Years of Trading in Derivatives

80
70
60
50
40
30
20
10
0

No.of.Samples

71
23

No.of.Samples

Years of Trading

TABLE 4.1.8
RISK LEVELS OF TRADERS
Particulars

No of respondents

Percentage

Risk Averse

46

46

Risk neutral

51

51

Aggressive risk taker

TOTAL

100

100

Source:Primary Data
INFERENCE
46% of the respondents take less risk, 51% of the respondents take neutral risk
and 3% of the respondents are aggressive risk takers.

FIGURE 4.1.8
46

Risk Levels of Traders

No.of.Samples

60
50
40
30
20
10
0

51

46

3
No.of.Samples

Risk Levels

TABLE 4.1.9
VIEW ON DERIVATIVE MARKET

Particulars

No of respondents

Percentage

Highly risk

72

72

Highly rewarding

18

18

TOTAL

100

100

Source:Primary Data
INFERENCE:
72% of the respondents view it as highly risk and 18% of the respondents view it as
highly rewarding.
FIGURE 4.1.9
47

View on Derivative Market

80
60
No.of.Samples

40

No.of.Samples

72

20

18

0
Highly Risk

Highly Rewarding

View on Derivative Market

TABLE 4.1.10
TRADING REASON IN DERIVATIVES MARKET

Particulars

No of respondents

Percentage

High Returns

68

68

High volatility

25

25

High leverage

TOTAL

100

100

Source:Primary Data
INFERENCE
68% of the respondents consider as high return, 25% of the respondents consider as high
volatality and 7% of the respondents consider as high leverage.
FIGURE 4.1.10

48

Trading Reason in Derivatives

No.of.Samples

70
60
50
40
30
20
10
0

68
25

No.of.Samples

Trading Reason

TABLE 4.1.11
TYPE OF TRADING
Particulars

No of respondents

Percentage

Intraday Trading

30

30

Swing Trading

46

46

Position Trading

24

24

TOTAL

100

100

Source:Primary Data
INFERENCE
30% of the respondents prefer intraday trading, 46% of the respondents prefer swing
trading, and 24% of the respondents follow position trading.
FIGURE 4.1.11

49

TABLE 4.1.12
FACTORS CONSIDERED BY TRADERS
Particulars

No of respondents

Percentage

Fundamental Analysis

20

20

Technical Analysis

20

20

Brokers Recommendation

42

42

Friends Advice

News

TOTAL

100

100

Source:Primary Data
INFERENCE
20% of the respondents consider fundamental analysis, 20% of the respondents
consider technical analysis, 42% of the respondents consider brokers recommendation,
9% of the respondents consider friends advice and 9% of the respondents follow news.
FIGURE 4.1.12

50

Factors Considered by Trader

50
40
30
20
10
0

20

20

42
9

No.of.Samples

Factors

TABLE 4.1.13

TYPE OF DERIVATIVE
Particulars

No of respondents

Percentage

Stock Futures

36

36

Index Futures

42

42

Stock Options

10

10

Index Options

12

12

TOTAL

100

100

Source:Primary Data

INFERENCE
36% of the respondents prefer stock futures, 42% of the respondents prefer
index futures, 10% of the respondents prefer stock options and 12% of the respondents
prefer index options.

51

FIGURE 4.1.13

Type of Derivative

No.of.Samples

50
40
30
20
10
0

44

38

12

14

Type of Derivative

TABLE 4.1.14
LEVEL OF SATISFACTION TOWARDS RETURNS ON DERIVATIVES
Particulars

No of respondents

Percentage

Highly satisfied

17

17

Satisfied
Neither satisfied nor

52

52

31

31

dissatisfied
52

Dissatisfied

Highly dissatisfied

100

100

TOTAL
Source:Primary Data
INFERENCE

17% of the respondents are highly satisfied, 52% of the respondents are satisfied, and
remaining 31% of the respondents are neither satisfied nor dissatisfied.
FIGURE 4.1.14

Level of Satisfaction Towards Returns on Derivatives

60
50
40
30
20
10
0

17

52

31

0
No.of.Samples

No.of.Samples

Level of Satisfaction

TABLE 4.1.15
PREFERENCE ON TRADING METHOD
Particulars

No of respondents

Percentage

Online Trading

86

86

Offline Trading

14

14

TOTAL

100

100

Source:Primary Data
INFERENCE
53

86% of the respondents prefer online trading and 14% of the respondents prefer offline
trading.
FIGURE 4.1.15

Preference on Trading Method

No.of.Samples

100
80
60
40
20
0

86
14

No.of.Samples

Trading Method

TABLE 4.1.16
VIEW ON ONLINE TRADING
Particulars

No of respondents

Percentage

User Friendly

100

100

Complicated

TOTAL

100

100

INFERENCE
100% respondents view online trading as user friendly.
54

FIGURE 4.1.16

View on Online Trading

No.of.Samples

100
90
80
70
60
50
40
30
20
10
0

100

No.of.Samples

0
User Friendly

Complicated

View on Online Trading

TABLE 4.1.17
VIEW ON OFFLINE TRADING (SERVICE PROVIDED)
Particulars

No of respondents

Percentage

Good

52

52

Satisfactory

43

43

Can be improved

TOTAL

100

100

Source: Primary Data

INFERENCE
52% of the respondents feels good on services provided, 43% of the respondents are
satisfied and 5% of the respondents feels the service to be improved
55

FIGURE 4.1.17

View on Offline Trading

(Service Provided)

No.of.Samples

60
50
40
30
20
10
0

52

43
5

No.of.Samples

View on Offline Trading

TABLE 4.1.18

EFFECTIVENESS OF SERVICES- SHAREKHAN

Particulars

No of respondents

Percentage

Yes

97

97

No

TOTAL

100

100

Source: Primary Data

INFERENCE

56

97% of respondents say that the service provided by the Sharekhan is effective and the
remaining 3% of respondents says that the service provided is not effective.
FIGURE 4.1.18

Effectiveness Of Services- Sharekhan

No.of.Samples

100
90
80
70
60
50
40
30
20
10
0

97

No.of.Samples

3
Yes

No

Effectiveness of Services

TABLE 4.1.19
TYPES OF SERVICES
Particulars
No of respondents
Percentage
Market Updates
38
38
Trade Alerts
24
24
Advisory Service
21
21
Client Support(in general)
10
10
All the above
7
7
TOTAL
100
100
Source: Primary Data
INFERENCE
38% of the respondents prefer market updates as effective service, 24% of the
respondents prefer trade alerts, 21% of the respondents prefer advisory services, 10% of
the respondents prefer client support and 7% of the respondents prefer all the above
services.
57

FIGURE 4.1.19

Types of Services

No.of.Samples

40
35
30
25
20
15
10
5
0

38
24

21
10

No.of.Samples

Types of Services

TABLE 4.1.20
RECOMMENDATION OF FINANCIAL SERVICES- SHAREKHAN
Particulars

No of respondents

Percentage

Yes

100

100

No

TOTAL

100

100

Source: Primary Data

INFERENCE
100% of respondents will recommend the financial services provided by sharekhan to
others.
FIGURE 4.1.20

58

Recommendation of Financial Services

100
80
60
No.of.Samples

100

No.of.Samples

40
20
0

0
Yes

No

Recommendation of Financial Services

TABLE 4.1.21
LEVEL OF SATISFACTION WITH THE COMPANY
Particulars
Highly satisfied
Satisfied
Neither satisfied nor dissatisfied
Dissatisfied
Highly dissatisfied
TOTAL
Source:Primary Data

No of respondents
37
52
11
0
0
100

Percentage
37
52
11
0
0
100

INFERENCE
52% of respondents are satisfied with the company, 37% of the
respondents are highly satisfied and remaining 11% of respondents are neither satisfied
nor dissatisfied with the company.
FIGURE 4.1.21

59

Level of Satisfaction With the Company

60
50
40
30
20
No.of.Samples

52
37

No.of.Samples

10

11

Level of Satisfaction

TEST NO: 1
CHI-SQUARE
The chi square test is between the age and level of satisfaction with the company.

60

Ho : There is no significant difference between Age and Level of satisfaction with the

company.
H1 : There is a significant difference between Age and Level of satisfaction
with the company.
Level of significance = 5%

Age
Level of satisfaction with

20-30

31-40

41-50

Above 50

Row Total

Highly satisfied

13

10

11

37

Satisfied
Neither satisfied

20

22

52

nor dissatisfied

11

Dissatisfied

Highly dissatisfied

Column Total

40

33

16

11

100

the company

OBSERVED FREQUENCY
61

EXPECTED FREQUENCY

Age
Level of satisfaction

20-30

31-40

41-50

Above 50

Highly satisfied

14.8

12.21

5.92

4.07

Satisfied
Neither satisfied

20.8

17.16

8.32

5.72

nor dissatisfied

4.4

3.63

1.76

1.21

Dissatisfied

Highly dissatisfied

With the company

62

63

OE

(O - E)

(O - E)/E

13

14.8

-1.8

3.24

0.21

20

20.8

-0.8

0.64

0.03

4.4

2.6

6.76

1.53

10

12.21

-2.21

4.88

0.39

22

17.16

4.84

23.42

1.36

3.63

-2.63

6.91

1.90

11

5.92

5.08

25.80

4.35

8.32

-4.32

18.66

2.24

1.76

-0.76

0.57

0.32

4.07

-1.07

1.14

0.28

5.72

0.28

0.07

0.01

1.21

0.79

0.62

0.51

TOTAL

64

13.13

Chi Square
Where

(O E) / E

Observed Frequency

Expected Frequency

Row Total x Column Total

Expected Frequency E

Grand Total

Degree of Freedom

(r 1) x (c 1)

(At 5% level of significance)

(5 -1) x (4 1)

x 3 = 12

X Calculated value =

13.13

X Table value

21.0

INFERENCE
Since calculated value of X is less than the tabulated value, we accept null
hypothesis. Hence, we conclude that is no significant difference between the age and
level of satisfaction with the company.

TEST NO: 2
CHI- SQUARE

65

The chi square test is between the Gender and level of satisfaction towards returns on
derivative trading.

Ho: There is no significant difference between gender and level ofsatisfaction

towards returns on derivative trading.

H1: There is a significant difference between gender and level of satisfaction

towards returns on derivative trading.
Level of significance = 5%

OBSERVED FREQUENCY

66

Level of

Neither

Satisfactio

Satisfied

satisfied

Dissatisfied

nor

Towards
returns on

Highly

Row total

dissatisfied

dissatisfied

Highly
satisfied

derivatives
Gender

12

37

28

77

Female

15

23

Column

17

52

31

100

Male

Total

EXPECTED FREQUENCY

67

Neither

Level of
Satisfied

Satisfactio

satisfied

Dissatisfie

Highly

nor

dissatisfie

n
Towards
returns on

dissatisfie

Highly

satisfied

derivatives
Gender

13.09

40.04

23.87

3.91

11.96

7.13

Male

Female

68

OE

(O - E)

(O - E)/E

12

13.09

-1.09

1.18

0.09

37

40.04

-3.04

9.24

0.23

28

23.87

4.13

17.05

0.71

3.91

1.09

1.18

0.30

15

11.96

3.04

9.24

0.77

7.13

-4.13

17.05

2.39

TOTAL

Chi Square
Where

4.49

(O E) / E

Observed Frequency

Expected Frequency

Row Total x Column Total

Expected Frequency E

Grand Total

69

Degree of Freedom

(r 1) x (c 1)

(At 5% level of significance)

(2 -1) x (5 1)

=1

x 4=4

X Calculated value

X Table value =

4.49
9.48

INFERENCE
Since calculated value of X is less than the tabulated value, we accept null
hypothesis. Hence, we conclude that there is no significant difference between the gender
and level of satisfaction with the returns on derivative trading.

70

TEST NO: 3
RANK ANALYSIS

To rank the different sectors in derivatives.

Sectors in
derivatives

Rank I

Rank II

Rank III

Rank IV

Rank V

Total

IT

40

32

18

10

100

Bank

33

29

21

16

100

Metals

10

21

14

28

27

100

Reality

17

16

35

19

13

100

Power

12

27

59

100

100

100

100

100

100

Total

RANK
I
II
III
IV
V

WEIGHTAGE
5
4
3
2
1
71

Calculation:
R1 =(40x5) + (32x4) + (18x3) + (10x2) + (0x1) = 402
R2 = (33x5) + (29x4) + (21x3) + (16x2) + (1x1) = 377
R3 = (10x5) + (21x4) + (14x3) + (28x2) + (27x1) = 259
R4=(17x5) + (16x4) + (35x3) + (19x2) + (13x1) = 305
R5= (0x5) + (2x4) + (12x3) + (27x2) + (59x1)

= 15

S. No

Sectors

Total

Rank

IT sector

402

Bank Sector

377

II

Metals Sector

259

IV

Reality sector

305

III

Power Sector

157

72

INFERENCE:
The respondents have given first rank for IT sector in their preference towards sectors in
derivative trading.

TEST NO: 4
CO-EFFICIENT OF CORRELATION
To find out the relationship between types of derivative and factors taken into
consideration while trading.
X

36

20

42

10

12

20

42

0
9

Calculation:
_
x

dx = (x- x)

_
dx2

73

dy = (y-y)

dy2

Dxdy

36

20

16

256

42

20

22

484

10

42

-10

100

22

484

-220

12

-8

64

-11

121

88

-20

400

-11

121

220

x =100

y = 100

dx = 0

dx2=1304

dy = 0

_
x = x/n = 100/5 = 20
_
y = y/n = 100/5 = 20

dxdy
r

______________

dx2 * y2
=

88 / 1304*756

88 / 946704

88 / 972.99
r

0.09

74

dy2 =756

dxdy= 88

INFERENCE:
From the correlation analysis result, it has been found that there is a positive relation
between type of derivative and factors considered by traders.

CHAPTER-V
FINDINGS, SUGGESTIONS AND CONCLUSION
FINDINGS
It is found that most of the respondents belong to the age group of 20-30.
Most of the respondents are found to be male.
It is found that most of the respondents are working in private concerns and others
belong to government, business, retired and students.
The respondents earn between 1 lakh to 5 lakhs annually and most of them are
post graduates.
Part time traders are more in number than professional traders and most of them
are trading for 1 to 5 years.
It is found that most of the traders take neutral risk while remaining are risk
averse and aggressive risk takers.
75

 The traders view derivative market as highly risk, than highly rewarding.
It is found that most of the respondents consider derivative trading as high return,
while remaining considers it as highly volatile and leverage.
The traders prefer mostly swing trading style, while remaining prefer intraday and
position trading.
Most of the respondents feel that brokers recommendation is best while they go
for trading in derivatives.
Index futures and stock futures are traded by most of the respondents and satisfied
with the returns they get on trading
The respondents go for online trading, as it is user friendly.
The services provided by the company like market updates, trade alerts, advisory
services, client support are helpful to the clients.
The respondents are recommending the financial services provided by sharekhan
to others.
Majority of the respondents are satisfied with the company.
From chi-square test it is inferred that there is no significance difference between age and
level of satisfaction with the company.
Using chi-square test it is found that there is no significance difference between
gender and level of satisfaction towards the return on derivative trading.
Using rank analysis it is inferred that the respondents have given first rank for IT sector
in their trading towards sectors in derivatives.
From the correlation analysis result, it has been found that there is a positive significant
relation between type of derivative and factors considered by traders

76

SUGGESTIONS

The relationship managers services are well and good. Still they can improve
through frequent communication with the clients.
Some clients feel that there is some problem in time of updation of US market
time, so measures can be taken to solve this issue on trade tiger software.
The traders have suggested that the web based trading terminals can be improved
in trade tiger software.
It has been found that the traders are not fully satisfied in getting trade alerts as
only 21% of the respondents are satisfied with trade alerts provided by the
company. So, measures can be taken to give more trade alerts to the clients.
Most of the clients feel that the market updates given by the company are great
in their software and they have to maintain it forever.

77

CONCLUSION
Over the recent years, online trading has gain immense popularity. Derivatives
have become one of the most important investment alternatives available. Derivatives
have strengthened the important linkages among the global markets, increasing market
liquidity, efficiency and facilitating the flow of trade and finance. A thorough knowledge
of derivatives will definitely help to optimize the investment decisions, and there by, the
profits.

This study concludes that the company should give more awareness to the clients
about derivative trading, the web based trading terminals can be improved in companys
software and more trade alerts can be given to the clients.

It is found that derivative trading has increased faster and the traders feel that
derivative trading is of both high risk and high return. The study also concludes that most
of the clients are satisfied with trading in derivatives and satisfied with the services
provided by the company.

78