1Equity Total equity capital of a company is divided into equal units of small denominations, each called a share.

It is a stock or any other security representing an ownership interest. It proves the ownership interest of stock holders in a company.

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 &other asset. For example, wheat farmers may wish to sell their harvest a future date to eliminate the risk of a change in prices by that date. Such at transaction is an example of a derivative. The price of this derivative is driven by the spot price of wheat which is the "underlying".

To get knowledge of Indian Stock Market and its functions To find the RIGHT SCRIPT to buy and sell at the RIGHT TIME To understand benefits and risk associated with equity cash &derivatives To understand the basis of derivatives. Comparative study of equity cash and derivatives

RESEARCH DESIGN descriptive Sample unit one Source of data collection-secondary data personal observation. disscussions

Meaning Of Stock Exchange

Functions of Stock Exchange

Continuous and ready market for securities Facilitates evaluation of securities Encourages capital formation Provides safety and security in dealings Regulates company management

Fundamental analysis

Technical

analysis

Three ways by which we can figure that out what it is about this stock that makes it hot

E.P.S

EPS = net profit/ number of shares If a company's EPS has grown over the years, it means the company is doing well, and the price of the share will go up

Price earnings ratio (PE ratio):

PE = market price/ EPS In the case of EPS, it is not so much a high or low EPS that matters as the growth in the EPS. The company's PE reflects investors' expectations of future growth in the EPS. A high PE company is one where investors have hopes that earnings will rise, which is why they buy the share

Forward PE

Forward PE = Current market price/ estimate EPS for the next financial year. An investors think the company will do better in the future because of the package and new leadership, and its earnings will go up. And we think it is a good time to buy the shares of the company now.

Stock Reaches Fair Value or Target Price

Other Investment Opportunity

.Inaccurate Fair Value Calculation

Takeover news

The book is unclean

When the prices reaches Stop loss

Need the money

Forward contract is an agreement to buy or sell an

asset on a specified a specified price. One of the parties to the contract assumes a long position and agrees to buy the underlying asset on a certain specified future date for a certain specified price.

The other party assumes a short position and agrees to sell the asset
on the same date for the same price. Other contract details like delivery date, price and quantity are negotiated bi later all y by the parties to the contract. The forward contracts are normally traded outside the exchanges

Futures markets were designed to solve the problems that exist in forward markets. 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. But unlike forward contracts, the futures contracts are standardized and exchange traded. To facilitate liquidity in the futures contracts, the exchange specifies certain standard features of the

contract. It is a standardized contract with standard underlying

i nstrument, a standard quantity and quality of the underlying instrument that can be delivered, (or which can be used for reference purposes in settlement) and a standard timing of such settlement. A futures contract may be offset prior to maturity by entering into an equal and opposite transaction. More than 99% of futures transactions are offset this way.

Options are fundamentally different from forward and futures contracts. An option gives the holder of the option the right to do something. The holder does not have to exercise this right. In contrast, in a forward or futures contract, the two parties have committed themselves to doing something. Whereas it costs nothing (except margin requirements) to enter into a futures contract, the purchase of an option requires an up-front payment. Two types of options 1) Call option- includes long a call and short a call. 2) Put options- includes long a put & short a put

Individual stock options

Stock index options

Currency options

 Equity

CASH

EQUITY

DERIVATES

Company Specified

Market risk

risk

Credit risk
Settlement Risk

Sector specified risk Global risk: General market risk

COMPARISON
Basis Return Equity CASH Capital appreciation Dividend Income Capital gain Price Fluctuation Derivative

Risk

Company Specified

Market risk

Sector specified
Global risk General Market Risk

Credit risk
Liquidity risk Settlement risk

Duration

Generally Long term (more than 1 yr)

Short term (Max. 3 months)

Participants

Long term Investors Hedgers Safe Investors

Speculations Arbitragers Hedgers

Expiry Date of contract

No such things

Last Thursday of any month

After doing 45 days of training at kotak securities jalandhar under the guidance of experts, it is concluded that most of the people in share market & both (offline & online) clients met in the branch Were doing trading in equity derivatives without considering the risk involved in F&O. . The broker firm kotak securities also helps the clients to understand the movement of shares and the risk involved and whether to buy a particular share or not?? The person having proper knowledge of hedging will always end up With earning profits and ultimately increasing the worth of his/her Portfolio. Here is a table which shows the comparison of value of Both cash and derivatives of last 6 months.

cash( crores)

turnover

in F&OSegment( turnover in crores)

Jan 2013
Feb 2013 March 2013 April 2013 May 2013 June 2013

295415.17
226641.72 212598.12 210797.03 214363.52 207942.94

2950975.14
2575097.44 3127445.81 3010162.93 3503801.19 3190886.52

From this table we can see that in practical life though equity cash segment is better than the derivatives because it involves lesser risk more numbers of investors are trading in derivatives (F& O) segment. It is a major finding of the projects shows that by 60% to 70% investors bear more risk and trade in derivatives market because they want to earn more profits by trading in derivatives.

1. Never invest anything that you cannot afford

2. Never start before having a knowledge of how to invest 3. Make a habit of not to invest in more than 10% of your investment on any single share. 4. Aim for long terms and learn proper hedging so that you will end up with earning profits irrespective of all fluctuations in the market. 5. Right time for investing. 6. Be patient. 7. Don't be emotionally attached to stocks.

RBI should play a greater role in supporting Derivatives. Because nowadays derivatives market are increasing rapidly and it plays a major role in the whole securities market.

Derivatives market should be developed in order to keep it at par with other derivative market in the world. Nowadays more number of investors are shows their interest in derivatives market because it includes high return by bearing high risk.

Speculation should be discouraged because it affects the market conditions badly and new investors are reducing their interest in the market.

There must be more derivatives instruments aimed at individual investors People have very little knowledge about option market which is less risky compare to

future market and I think sebi should conduct seminars in this regard.

Margin limit by brokers should be reduced in order to boost up arbitrators.