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CERTIFICATE
This is certify that MR. BADANI HARSHIL M. of S.K.Patel
Initute of Management and Computer Studies, Gandhinagar have
submitted his project report titled PROJECT REPORT ON
DERIVATIVE AND ITS STRATEGIES in the year 2010 in partial
fulfillment of Kadi Sarva Vishwavidyalaya requirements for the award of
the title Master of Business Administration.
PROF. SONU V. GUPTA PROF. PRAKASH M.
CHAWLA
(DIRECTOR & PROJECT GUIDE) (CO-ORDINATOR)
DATE:-
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DECLARATION
I , here by, declare that the project report titled PROJECT
REPORT ON DERIVATIVE AND ITS STRATEGIES is original to
the best of my knowledge and has not been published elsewhere. This is
for the purpose of partial fulfillment of Kadi Sarva Vishwavidyalaya
requirements for the award of the title of MBA.
Students name Signature:
Badani Harshil M.
PREFACE
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Today as we all know that share market is well-known field and
full of stiff competition. Now days it is one of the field of investment to
earn money . For this investment of money in market there are different
stock-broking companies are available in the market. They provide one or
another type of service to account holder or investor.
Share market is my interest of field from the beginning. At this
moment I got an opportunity to work with stock broking company and I
have prepare this report on the SHARE-KHAN STOCK BROKING
PVT. LTD. Stock broking company charges have been of much
important account holders point of view. It is difficult to cover up the
entire field so I have taken the field which I found of interest.
For every company charges of stock broking are very
important. All the companies keep those charges as per the boundaries
given by SEBI.
ACKNOWLEDGEMENT
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Training is major part of study in respect of MBA or any other
course. Through these report I want to express my whole gratitude
towards all those persons who have guided me in preparation of this
report and also provided me organizational training.
For this report I received full support from all quarters. Firstly I
would be thankful to Prof. Sonu V. Gupta ( Director & Project Guide)
who has advised me the right way for training and I am also thankful to
all the Management Faculties and the librarians.
I am also thankful to Mr. Hiren Mehta, the manager of
sharekhan who has given me the permission for my summer training and
provided me the useful knowledge & training of stock market. I am also
thankful to Mr. Mihir Mehta, the assistant manager of sharekhan who has
given me good guidance from his practical knowledge.
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I am also thankful to Mr. Piyush , the sales manager of
sharekhan under whom I have taken sales training. Last but not least I am
thankful to all other departmental head & staff of the company who have
shared their incredible knowledge and experience with me and given me
full support in preparation of this report.
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INDEX
Sr. No. Particulars Page No.PART-A Industry Analysis 8
1) History of Indian Share Market 9
2) Development 12
3) BSE 14
4) NSE 15
5) NCDEX 17
6) MCX 17
7) Basis of Share Market 19
8) Industry Analysis with Porters 5 Force
Model
20
PART-B Introduction to Share Khan 27
1) Vision 34
2) Core Value 383) SSKI Group 38
4) Organizational Structure 39
5) Products of Sharekhan 41
6) Market Coverage 51
7) Research & Advised Tools 52
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8) SWOT Analysis 59
PART-C Derivative & its Strategies 62
1) The Indian Equity & Derivative Mkt. 63
2) Introduction 64
3) Types of Derivative 76
PART-C Research 811) Title of Study 82
2) Statement of Problem 83
3) Objective of Study 84
4) Universe of Study 85
5) Hypothesis 86
6) Sampling Decision 88
7) Data Collection Method 89
8) Research Results 91
9) Period of Study 11010) Tools & Techniques 110
11) Limitations of the Study 111
12) Suggestions 112
13) Conclusion 113
14) Bibliography 114
15) Appendix 115
PART-A
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INDUSTRY
ANALYSIS
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1. HISTORY OF INDIANSHAREMARKET
The working of stock exchanges in India started in 1875. BSE
is the oldest stock market in India. The history of Indian stock trading
starts with 318 persons taking membership in Native Share and Stock
Brokers Association which we now know by the name Bombay Stock
Exchange or BSE. In 1965, BSE got permanent recognition from the
Government of India. National Stock Exchange comes second to BSE in
terms of popularity. BSE and NSE represent themselves as synonyms of
Indian Stock Market. The history of Indian stock market is almost the
same as the history of BSE.
The Sensex is complied based on the performance of the stock
of 30 financially sound benchmarked companies. In 1990 the BSE
crossed the 1000 mark for first time. It crossed 4000 figure in 1992. The
reason for such huge surge in the stock market was the liberal financial
policies announced by the financial minister Dr. Manmohan Singh.
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This bullish mode of stock market was suddenly lost with the
scam of Harshad Mehta. It came to the public knowledge that Mr. Mehta,
also known as the big bull of Indian stock market. He has diverted huge
funds from banks through fraudulent means. He played with 270 million
shares of 90 companies. Millions of small scale investors became victims
to the fraud as the Sensex fell down upto 570 points.
This phenomenon is result of opening up of online trading
system and diminished interest rates from banks. The stockbrokers based
in India are opening offices at different cities in country to prevent from
such fraud. The government formed Security Exchange Board of India,
through an act in 1992. SEBI is the statutory body that controls and
regulates the functioning of stock exchanges, brokers, sub-brokers,
portfolio managers investment advisors etc SEBI oblige several rigid
measures to protect the interest of investors.
Sensex crossed 5000 in 1999 and 6000 in year 2000. The 7000
mark was crossed in June and 8000 in September 2005. After that many
foreign institutional investors started to invest in Indian stock market.
Due to
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that the market has taken the bullish way and in 2008 it touched the limit
of 21000.
India hosts the largest number of listed companies after United
States. Global investors now ardently seek to invest in Indian stock
market. Once appeal with skepticism, stock market now appeals to
middle class Indians also. Many Indians working in foreign countries
now divert their savings to stocks. They can invest their money in this
stock from their own places.
Now days most of persons want to invest their money according
to the tips of expert. They do not invest only in giant companies. Good
monsoon is also taken as good sign for bullish market. If monsoon is not
good then it is taken as sign of bearish market. Thus one of the affected
factor to the market is agriculture sector.
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2. DEVEPMENT
An important early event in the development of the stock
market in india was formation of the native share and stock brokers
association in Bombay in 1875, The precursor of present day is BSE.
This was followed by the formation of association in Ahmadabad (1894),
Calcutta (1908) and Madras (1937). In addition, a large number of
ephemeral exchanges emerged mainly in buoyant periods to recede into
oblivion during depression time subsequently.
In order to check such aberrations and promote a more orderly
development of the stock market, the central government introduced a
legislation called the Securities Contracts Act, 1956. Under this
legislation it is mandatory on the part of a stock exchange to seek
government recognition. As of January 2002 there were 23 stock
exchanges recognized by the central government. They are located at
Ahmadabad, Bangalore, Baroda, Bhuvaneshvar, Calcutta, Chennai,
Cochin, Coimbatore, Delhi, Guwahati, Hyderabad, Indore, Jaipur,
Kanpur, Ludhiana, Mangalore,
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Mumbai (NSE, BSE, OTC exchange of India, Inter-connected stock
Exchange of India), Patna, Pune and Rajkot. Of course, the main stock
exchanges are NSE and BSE.
These rules can be amended, varied or rescinded only with the
prior approval of the government. The Securities Contract Act vests the
government with the power to make enquiries into the affairs of a
recognized stock exchange and its business, withdraw the task of
regulating the stock exchange to the Securities Exchange Board of India.
Now days Indias largest ticker on the wall of BSE is
broadcasted on Indias and South Asias largest video screen Indias
leading business news channel: NDTV Profit.
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3. BSE (BOMBAY STOCK
EXCHANGE)
As the first stock exchange in India, the Bombay Stock
Exchange is considered to have played a very important role in the
development of the countrys capital markets. The BSE is the largest of
22 stock exchanges in India, with about 18000 listed companies. It is also
the fifth largest exchange in the world.
This index gives a measure of overall performance of the BSE
and is closely followed around the world. Based on sensex, BSE equity
market is growing up significantly since 1990. In addition to individual
stock, the BSE has also a market in derivatives, which was the first to be
developed in India. Listed derivatives on the exchange include stock
future and option, index future and option and weekly options.
The BSE is also actively involved in the development of retail
debt market. The debt market is also one of the growing market and
country continues to develop on this type of market. Recently in India
debt market was limited to wholesale market i.e. banks, financial
institutions etc But BSE believes that retail market will bring great
opportunities for individual investors.
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4. NSE (NATIONAL STOCK
EXCHANGE)
In the fast growing Indian financial market, there are 23 stock
exchanges trading securities. The 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 etc
However, in the totally de-mutualised exchange, the ownership as well as
the management does not have a right to trade on exchange. Only
qualified traders can be involved in security trading.
The NSE is one of the few exchanges in world trading in which
all types of trading is possible on single platform. This exchange is
divided into three segments: Wholesale Debt Market, Capital Market and
Future and Option Market. Each segment has experienced a significant
growth throughout a few years of their launch. All the three markets
increased and has good growth since its opening in 1994.
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The NSE provides its clients with a single, fully electronic
trading platform that is operated through a VSAT network. Unlike most
world exchanges, the NSE uses the satellite communication system that
connects traders from 345 Indian cities. The advanced technologies
enable upto 6 million trades to be operated daily on the NSE platform.
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5. NCDEX
(NATIONAL COMMODITIES ANDDERIVATIVES EXCHANGE)
NCDEX started on 15th December, 2003. This exchange
provides facilities to their trading and clearing member at different 130
centers for contract. In commodity market the main participants are
speculators, hedgers and arbitragers.
Promoters of NCDEX are:
National Stock Exchange (NSE)
ICICI Bank
Life Insurance Corporation (LIC)
National Bank of Agriculture and Rural Development (NABARD)
IFFCO
Punjab National Bank (PNB)
CRISIL
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Why NCDEX?
NCDEX is nationalized screen based system which is providing
transparent, private and easy service.
NCDEX is one of the traditional media which gives online
information.
NCDEX is one of the Indian commodity exchange, constructed
on the basis of the current national institutes. The exchange has been
established with the collaboration of institutes like NABARD, LIC
etc
Facilities Provided by NCDEX:
NCDEX has developed facilities for checking of commodity
and also provides a warehouse facility.
By collaborating with industrial partners, companies, news
agencies, banks and developers of kiosk network NCDEX is able to
provide current rates and contract rates.
To prepare guidelines related to special products of
securitization NCDEX works with bank.
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To avail farmers from risk of fluctuation in prices NCDEX
provides special services for agricultural.
NCDEX is working with tax officer to make clear different
types of sales and service taxes.
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6. MCX
(MULTI COMMODITYEXCHANGE)
MULTI COMMODITY EXCHANGE of India limited is a new
order exchange with a mandate for setting up a nationwide, online multi-
commodity market place, offering unlimited growth opportunities to
commodity market participants. As a true neutral market, MCX has taken
several initiatives for users. In a new generation commodity future market
in the process, become the countrys premier exchange.
MCX, an independent and de-mutualized exchange since inception, is all
set up to introduce a state of the art, online digital exchange for
commodities future trading in the country and has accordingly initiated
several steps to translate this vision into reality.
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7. BASIS OF STOCK
MARKET
Corporations issue official looking sheets of paper that
represent ownership of the company. These are called stock certificates
and each certificates represents set number of shares. The total number of
shares will vary from one company to another, as each makes its own
choice about how many pieces of ownership to divide the corporation
may have only 2500 shares, while another such as IBM or the Ford
Motor Company, may issue over a billion shares.
Companies sell stock (pieces of ownership) to raise money and
provide funding for the expansion and growth of the business. The
business founders give up part of their ownership in exchange for this
needed cash. The expectation is that even though the owners have
surrendered a portion of a company to the public, their remaining share of
stock will become increasingly valuable as the business grows.
Corporations are not allowed to sell shares of stock on open
stock market without the approval of the Securities and Exchange
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Commission(SEC). This transition from a privately held corporation to a
publicly traded one is called going publicand this first sale of stock to the
public is called an initial public offering or IPO.
Why do people invest in the stock market:
When you buy stock in a corporation, you own part of that
company. This gives you a vote at annual shareholder meetings, and a
right to a share of future profits.
When a company pays out profit to the shareholder, the money
received is called a dividend. The corporations board of directors
choose when to declare a dividend and how much to pay. Most older and
larger companies pay a regular dividend, most newer and smaller
companies do not.
The average investor buys stock hoping that the stocks price
will rise, so the shares can be sold at the profit. This will happen if more
investors want to buy stock in a company than wish to sell. The potential
of a small dividend check is of little concern.
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What is usually responsible for increased interest in companys
stock is the prospect of the companys sales and profits going up. A
company who is a leader in a hot industry will usually see its share price
rise dramatically. Investors take the risk of the price falling because they
hope to make more money in the market than they can with safe
investment such as bank CDs or government bonds.
How does one buy stocks:
Buying stocks is not as walking into a stockbrokers office and
buying shares like you would a pair of shoes from a store. You are
required to open an account with the brokerage, like opening an account
at a bank.
Some brokers will allow you to open an account with very little
money. The firm will then hold this money in an interest earning cash
account, awaiting your orders to buy or sell stock or other securities such
as bonds or mutual funds. When you buy or sell, you pay a commission,
which is deducted, from your account. When a stock is purchased, the
ownership of the shares may be listed in one of two ways. listed means
how the corporation tracks the ownership of their stock.
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If you choose to have the stock listed in your name, you will
receive the actual stock certificates. Most investors choose to have the
ownership listed in the brokers name, called held in street name, with
the broker keeping track of whose trading account the stock actually
belongs to. The benefits are reduced paperwork, consolidated portfolio
statement, no concerns about storing and processing the paper certificates
and the ability to instantly sell and transfer the shares. Either way any
dividends are credited to your account. Stocks held in street name are
insured up to $5,00,000 by the federal government against fraud or
financial failure of the brokerage company.
Why do people sell their stock?
The reasons people sell their stock are more complex. A person
may just need the money. He or she may have watched the price go up
and have a hunch this is a good time to lock in their profit and sell some
or all their shares. Bad news concerning a company or its industry or a
disappointing earning report is sure to prompt heavy selling.
An investor may see better opportunities in another company
and so sell his stock that arent moving up. But usually, investors sell
because
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They have watched the price fall and just want to get out before they lose
even more.
Secondary Market Intermediaries: Stock brokers, Sub brokers, Portfolio Managers, custodians,
share transfer agents constitute the important intermediaries in secondary
market. A stock broker plays an important role in the secondary market
helping both the seller and the buyer of the securities to enter into a
transaction.
The transaction entered cannot be annulled except in the case of
Fraud, willful misrepresentation or upon prima-facie evidence of a
material
Mistake in the transaction, in the judgment of the existing authorities. If a
Member of the stock exchange (broker) has orders to buy and to sell the
same kind of securities, he may complete the transaction between his
clients
concerned.
When executing an order the stock may on behalf of his client
buy
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or sell securities from his own account i.e. as principal or act as an agent.
For each transaction he has to issue necessary contract note indicating
whether he as principal or as an agent for another has entered into the
transaction. While buying pr selling securities as a principal, the stock
broker has to obtain the consent of his client and the prices charged
should be fair and justified by the conditions of the market.
Ten Golden Rules for Investing:
Warren Buffet has suggested ten golden rules for investing which proves
to be immense use the investor who wants a better investment in stock
markets, Sharekhan follows these rules which are as described below:
Never invest in a business you cannot understand
Risk can be reduced by concentrating on a few holdings.
Stop trying to predict the direction of the stock market, the
economy, interest rates or elections.
Buy companies with strong histories of profitability and with a
dominant business franchisees.
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Be fearful when others are greedy and be greedy when others
are fearful.
Unless you can watch your stock holding decline by 50%
without becoming panic-stricken, you should not be in the stock
market.
Do not take yearly results too seriously. Instead of focusing on
4 or 5 year averages.
Focus on return on equity, not earning per share (EPS)
Calculate owner earnings to get a true reflection of value.
Look for companies with high profit margins.
Always invest for the long term. Do the business have favorable
long-term prospects?
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8. INDUSTRY ANALYSIS
WITH PORTERS 5 FORCEMODEL
28
SUPPLIERS
Web maintainers
NSCL
CSDL
NSE
BSE
MCX
NCDEX
SUPPLIERS
Web maintainers
NSCL
CSDL
NSE
BSE
MCX
NCDEX
SUBSTITUTES
Mutual Funds
Insurance
Bank FD
SUBSTITUTES
Mutual Funds
Insurance
Bank FD
BUYERS
Small Investors
Franchise/Business
Partners
HNIs
MF Companies
HUF
Institutional
Investors
BUYERS
Small Investors
Franchise/Business
Partners
HNIs
MF Companies
HUF
Institutional
Investors
POTENTIAL ENTERANT
Investmart
Various Banks
Geojit
Cipher
UTI Securities Ltd.
Refco Group Ltd.
IDBI Capital Mkt. Services
Ltd.
POTENTIAL ENTERANT
Investmart
Various Banks
Geojit
Cipher
UTI Securities Ltd.
Refco Group Ltd.
IDBI Capital Mkt. Services
Ltd.COMPETITORS
ICICI Web Trade Ltd
5paisa.com
Kotak Securities Ltd
India Bulls
Motilal Oswal Securities Ltd
HDFC Securities Ltd
Marwadi Finance Ltd
COMPETITORS
ICICI Web Trade Ltd
5paisa.com
Kotak Securities Ltd
India Bulls
Motilal Oswal Securities Ltd
HDFC Securities Ltd
Marwadi Finance Ltd
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Web maintainers are companies who make and maintain
softwares for stock broking houses. If say for example stock broking
houses switches over to other web maintainers then that company
cannot understand the mechanisms of softwares. So it is quite high
switching cost.
2. BUYERS
There are various types of investors who trade through stock
broking houses like SSKI, which includes investors like small
investors, medium net worth investors, business partners, institutional
investors and mutual fund companies.
Here the bargaining power of stock broking houses depends on
how big the investor is.
So here we can say that bargaining power of stock broking houses
is high in case of small investors & HUF.
While its moderate in HNI/MNIs and business partners.
While its less in case of mutual fund companies and institutional
investors.
There is competitive buzz in stock broking industry, competitors
are offering low brokerage and best services with added feature. So
switching
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cost is pretty much less. So the buyer can easily switch over to
competitors product.
Entry Barriers
Huge capital :- Capital is necessary not only for fixed facilities but
also for customers credit and absorbing start up losses. To start a stock
broking house, one needs huge capital for technology up gradation and
skilled manpower.
Technology :- Technology for stock broking houses is life saving
device. Stock broking requires huge capital to make their products user
friendly, which in turn requires capital to employ skilled manpower.
Thus, technology could be one of the entry barrier.
Regulatory Constraints:- Obtaining a license is a tedious job for a
stock broking house. It should comply with the regulation of the
governing bodies like SEBI, NSDL, etc. For a stock broking houses to
plunge into the stock broking industry, it needs to have some kind of
financial background and expertise. Thus, regulators constraints could
be an entry barrier.
Experience curve:- The core competency in this industry is the
services which are provided to the end-users and the research based
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activities which includes TIPS, fundamental as well as technical
script analysis. Also the
most important thing which helps already established firms
is-TRUST which people would be having on firms like SSKI ,
Motilal Oswal, etc. this is very difficult for new companies to imitate.
Network:- the Reach to the customer is the key factor in the
industry. The network of the companies like Motilal Oswal, Sharekhan,
ICICI is very efficient and spreaded all over India. It will take time for a
new entrant to establish such a huge network (e.g. Marwadi), which say
that, Network can come up as most difficult entry barrier to
overcome.
Expected Retaliation:- whenever a new player comes in the
industry, the old companies have an option to reduce the prices of their
product. This kind of practice is called expected Retaliation which is
also possible in this industry in terms of less brokerage rates and
reduced account opening charges. E.g. before the entry of so many mew
companies, Sharekhan was having two types of accounts viz. speed
trade speed trade plus, which were costing 1000 & 1500 account
opening charges respectively. But due to competition, they have come
up with only one account ie speed trade plus with the account charges
of Rs.1000.
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3. COMPETITORS
The company is facing the competition from local as well as
national level players. The local players provide facility for off-line
trading while the national players like ICICIdirect.com and
Kotakstreet.com, HDFC Security provide online trading services.
There are also other big names like Indiabulls, Motilal Oswal,
5paisa and Marwadi encircles the company form both the sides by
providing online and off-line trading with competitive services.
4. POTENTIAL ENTRANT
Tew entrant which may take away the share of current players.
The potential entrant in Rajkot city like Investmart, Jeojit and
Cipher which are coming in near future.
Nationalized banks are also thinking to enter in this field byb tieing
up with broking houses. Eg Bank Of Baroda.
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5. SUBSTITUTES
Here substitutes are such instruments which can be used instead
of investing in shares.
The instruments like Bank FD, insurance, mutual funds are the
substitutes.
If the use of this instruments increase this may be disadvantage
for the stock broking houses.
The companies and banks which are having this instruments can
plunge into this industry.Banks are planning to jump while others may
come
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PART-B
INTRODUCTION
TO
SHAREKHAN
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Sharekhan is an equities focused organization tracing its lineage
to SSKI (Shripal Sevantilal Kantilal Ishvarlal) a veteran equities solutions
company with over 8 decades of experience in the Indian stock market.
Sharekhan is 80 years old company which is started online in
the year 2000 & it is the first company who started online in 1984. They
ventured into institutional broking & corporate finance. They having
more than 350 branches, 750 franchises and also having 900 shops in 213
cities. In Rajkot branch , daily dealing rs. 16 crore & 400 crore all over
India. Almost 8000 employees and 120000 trading customers.
If you experience our language, presentation style, content or
for that matter the online trading facility. You will find a common thread
one that helps you make informed decisions and simplifies investing in
stocks. The common thread of empowerment is what Sharekhans all
about! Sharekhan does not claim expertise in too many things. Share
khans expertise lies in stocks and thats what he talks about with
authority. So when he says that investing in stocks should not be
confused with trading in stock or a portfolio based strategy is better than
betting on a single horse. It is something that is spoken with years of
focused learning and experience in
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the stock markets and these beliefs are reflected in everything sharekhan
does for you!
To sum up, Share khan brings to you a user-friendly online
trading facility, coupled with a wealth of content that will help you stalk
the right shares. Those of you feel comfortable dealing with a human
being and would rather visit a brick-and-mortar outlet than talk to a PC,
youd be glad to know that Share khan offers you the facility to visit (or
talk to) any of our share shops across the country.
In fact share khan runs indias largest chain of share shops with
Over six hundred outlets in more than 100 cities! Whats a share shop?
How do you locate a share shop in your city? To find the answers of
these questions, you must visit share khan. Hi other words share khan is a
company that provides you an outstanding trading facility with a wide
variety of products and acts as an investment consultant to manage your
portfolio and secure a high rate of return on your investment in the
security market.
SSKI has been voted the best domestic brokerage in India by
Asia money Polls 2004. Also SSKI is being rated as No. 1 Financial
Researcher
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of Business Today, in survey conducted on Lead Managers of all Mutual
Funds.
Basically company is at second position at India level in the
case of Brokerage services and has top turnover in trading takes it at good
position in the market. The services they provide to investor are
discussed in more detail in marketing activities of the Sharekhan. The
clients are managed with friendly corporate culture and to motivate them
different services are provided by the managers also. Managers also give
tips to the investors to invest and manage few scripts which are best so
they can handle their profit or loss.
Sharekhan is in good position in the market with the highest
number of transactions in the market and offers you depository services
and trade execution facilities for equities, derivatives and commodities
with its decades of experience. Research and analysis team is constantly
working to track performance and trends. As a result of that it has good
trading products with it. If we see its progress than in future i.e. in next
year it is going to issue its own share capital in the market. It has now a
days capital of 3000crore which is not a small amount.
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1. VISION
To empower the investor with quality advise and superior
service to help him in taking better decisions. We believe that our growth
depends on client satisfaction.
2. CORE VALUE
Customer satisfaction through providing quality services effectively
and efficiently.
Smile, it enhances your face value is a service quality stressed on
periodic customer service audit.
Maximization of stakeholders value.
Success through teamwork, integrity and people.
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3. SSKI GROUP CORPORATE
STRUCTURE
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41
SSKI investor service pvt.Ltd.
Retail Broking arm of group
Share holding pattern
56% Morakhia Family
18.5% HSBC Pvt.Management Mauritius
18.5% First CarlyleVentures.
Owns 56% of
Owns 44% of
SSKI Corporate Finance Pvt.Ltd.
Investment Banking arm ofthe group
Share holding pattern
50.5% SSKI Security Pvt.Ltd.
49.5% Morakhia Family
SSKI Securitiesand Pvt. Ltd.
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5. PRODUCTS OF THE
SHAREKHAN
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Offline TradingAccount
Classic Account or
Fast Trade Account
Speed Trade
Account
PMS
Mutual Funds
Sharekhan
Products
Online Trading
Account
OtherServices
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1. Sharekhan Depository Services:
Dematerialization and Trading in the demat mode is the safer
and faster alternative to the physical existence of securities. Demat as a
parallel solution offers freedom from delays, theft, forgeries, settlement
risks and paperwork. This system works through depository participants
(DPs) who offer demat services and hold the securities in the electronic
form for the investor Sharekhan Depository Services offer
dematerialization services to individual and corporate investors.
We have a team of professionals and the latest technological
expertise dedicated exclusively to our demat department, apart from a
national network of franchisee, making our services quick, convenient
and efficient. At sharekhan, our commitment is to provide a complete
demat solution which is simple, safe and secure.
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Sharekhan is registered Depository Participant (DP) with
National Securities Depository Ltd. (NSDL). The participants are
required to enter into an agreement with beneficial owners. It is required
that separated accounts shall be opened by every participants in the name
of each the beneficial owner and the securities of each other beneficial
owner shall be segregated and shall not be mixed up with the securities of
other beneficial owner or with the participants own securities.
The participants are obliged to reconcile the records for a period of five
years. Records of all the transactions entered into with a depository and
with a beneficial owner.
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Depository
Clearing
Corporation
Clearing
Member
Depository
Participant
Stock
Exchange
Trading
Member
Investors
Issuer/ R&TAgent
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2. Portfolio Management System:
With the sharekhan team managing your Portfolio, you can be
assured that your investment are in safe hands.
We follow a multi-disciplined approach incorporating
quantitative analysis, fundamental analysis and technical analysis. This
multi-pronged approach enables us to provide risk controlled returns for
you.
Right from choosing the combination of stocks most suitable
for you based on your risk appetite to monitoring their movements and
discussing them with you at special events. Click here to see how we
manage your portfolio in a few easy steps. This is how we make
investing completely hassle-free for you. There are mainly three types of
PMS that sharekhan provides.
Pro-Tech (High risk & Return)
Pro-Prime (Moderate risk & Return)
Pro-Arbitrage (Low Risk & Fixed Return)
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3. Mutual Funds:
Everybody talks about mutual funds, but what exactly are they?
Are they like shares in a company, or are they like bonds and fixed
deposits? Will I lose all my money in funds or will I become an overnight
millionaire? Big questions that to get answer in just five minutes.
A mutual funds is a poor of money that is invested according to
a common investment objective by an asset management company
(AMC). The AMC offers to invest the money of hundreds of investors
according to a certain objective to keep money liquid or give a regular
income or grow the money long term. Investors buy a scheme if it fits in
with their investment goals, like getting a regular income now or letting
the money accumulate over the long term. Investors pay a small fraction
of their total funds to the AMC each year as investment management
fees.
Mutual fund industry was started in India with establishment of
UTI (1963), which is only player in the market of mutual fund up to
1987. During that time mutual fund market refers the unit link schemes
like Master Share and Master Gain. Mutual fund provides varieties of
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schemes for different kind of customers to suit their goals. Mutual fund
have open-ended
and close-ended schemes, childrens plan , diversified equity fund,
balanced fund, liquid fund, income fund, short term fund, sector fund,
ELSS (equity linked savings schemes) and pension plan.
Online IPO:
Online IPO is a new service started by Sharekhan for providing
the application form of any companys issue of shares just like the TCS
issue can be subscribed by filling an online form to reduce the paper
work and the fund transfer facility is also provided to the clients for
transferring the funds online.
Online Commodity Trading:
Online Commodity Trading offers a way for an open, many to
many system where every user has equal access to price quotes and
trading functionality. It provides a level playing field for all , without
favoritism or control by a chosen few, where any user can view all quotes
posted by other user in real time,act or trade on quotes posted by others,
post their own prices and quantities for other to trade.
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Liquidity, or trade activity, is perhaps the best measure of
success of an online trading commodity trading system. With most online
commodity trading system, traders can be sure of finding an interesting
market development or trading opportunity almost every time they log
on.
All quotes posted by users on any online online commodity
trading system are live and firm. They can be acted on with full assurance
of a completed transaction. The greatest advantage of an online system
for trading is that just a click can be used to hit a bid or lift an offer.
The Online trading system operates almost continuously around
the clock, 24 hours a day, seven days a week. This allows any user to
extend the trading day, and easily pass the trading objectives to others in
companies in different times zones. The online commodity trading
system in India is only emerging segment yet. This is because the internet
boom in Indian is on the rise only now. The internet charges are
becoming minimal and the internet is soon becoming a way of life in life
in India. It is in this scenario that online trading is becoming more the
way of trading in India.
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There are mainly two exchanges deals with commodity.
MCX (Multi Commodity Exchange)
NCDEX (National Commodity and Derivative Exchange)
Commodity trading is also known as Vayda Market. In short Share
khan also provides broking in commodities and the brokerage charges are
0.10% on total trade value and if carry forwarded an additional 0.02%
charges on total trade. Items which are traded through commodity
exchanges are:
Spices : Peeper , Red Chilli, Jeera , Turmeric
Metal : Steel Long, Steel Flat, CopperNickel, Tin
Fibre : Kapas, Long Staple Cotton , Medium Staple Cotton
Pulses : Chana , Udad , Yello Peas
Cereals : Rice Basmati Rice, Wheat , Maize , Sarbati Rice
Energy : Crude Oil
Offline Trading Account:
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The off Line account is trading account through which one
can buy and sell through his/her telephone or by personal visit at
sharekhan shop. This account is for those who are not comfortable with
computer and want to trade..
Offline a/c is the A/C for the investors who are not familiar
with the use of computers.
The A/c opening is free for first year, then for second year
charge is Rs. 400 and for the subsequent years, the charge is Rs. 360.
Online Trading Account:
There are no charges for account opening.
For first year Demat account is free, for second year charge is
Rs. 400, for the subsequent years the charge is Rs. 360.
Tie up with 12 banks through which one can transfer or
withdraw his fund online. Which are as follows:
1. HDFC Bank 2. IDBI Bank
3. UTI Bank 4. OBC bank
5. CITY Bank 6. Indian Bank
7. Union Bank Of India 8. Yes Bank
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9. Bank of Punjab 10.ICICI Bank
11. Bank of India 12. Centurion Bank
Any one who have A/C in either of above banks they can use
this Facility. Otherwise one has to make fund transfer facility or
withdraw by cheque.
This account enables you to buy and sell shares through our
websites. You get features like
a) Streaming Quotes (using the applet based system)
b) Multiple watch list
c) Integrated Banking, Demat and digital contracts
d) Instant Credit and transfer and instant order execution and
confirmation
e) Real time portfolio tracking with price alert and of course, the
assurance of secure transaction
f) Price alerts
Online trading account includes two types of account:
I. Classic Account or Fast Trade Account
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II. Speed Trade Account
6. MARKET COVERAGE
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Ground Network Largest in India122 Franchisees and 28
branchesb
Covers 213 cities in 23 states
across Indiaa
Also they cover 588-share
shop in 213 cities.s
Trade execution facility on
BSE and NSE for Cash as well as
DerivativesD
Depository/Demat account
servicess
Personalized Sharekhan
research advicer
Uniform service standards
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7. RESEARCH AND ADVISEDTOOLS
Every investors needs and goals are different . To meet these
needs, Sharekhan provides a comprehensive set of research reports, so
that one can take the the right investment decisions regardless of their
investing preferences! The Research and Development at Sharekhan is
done at its Head office Mumbai.
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INVESTMENT ADVICE
ON EQUITY,
DERIVATIVE,
COMMODITY
Short-term Trading
Eagle Eye
High
Long-term Trading
Investors eye
sharkhan valueline
Hedging
Sharekhan
Derivative Products
Commodities TradingDerivative info KitDerivative Digest
Derivative Calculator
Market Neutral
Commodities Buzz
Commodities Traders
Corner Sharekhan
Exclusive Bullion
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The R&D department Head Mr.Hemang jani forwards all the
details regarding all stocks and scripts to all the branches through
internet. At the end of each trading day there is a Teleconference ,
through which the R&D department Head MR.Hemang jani talks with
each Branch heads and discusses about each days closing position and
shows their predictions about next days opening position. The quarries
regarding stock position and other relevant matter of the branch heads of
each branch is being solved through teleconference.
The various publication of Sharekhan viz. Derivatives Digest
Sharekhans Valueline,Engle eye, High Noon, Investors Eye,
Commodities Buzz, Commodities Beat, Commodity Traders corner,
Sharekhan Exclusive, etc. are being prepared be the research team of
Sharkhan made up of highly experienced people from diverse field.
These all Publication provides:
In depth analysis of the before, during ( live market updates) and after
market timings & Speacial sector tracking reports sent regularly.
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1. Sharekhan Publication:
Stock ideas :
Stock ideas are aimed at Sharekhans trading client. It presents
our best stock picks in todays market. We categorize these companies
into six clusters to help you identify the stock that fit your time horizons
and return objectives the best. Each cluster represents a certain profile in
terms of business fundamentals as well as the kind of returns you can
expect of it over a certain time horizon.
Stock Clusters:
Sharekhan categories all the scripts that are under coverage into
6 clusters, Each cluster represents a certain profile in terms of business
fundamentals as well as the kind of returns you can expert over a certain
time horizon. This help in identifying the stocks that fit your time
horizons and return objectives best. The six clusters are: Evergreen,
Apple Green, Emerging Star, Ugly Duckling, Vultures pick and
Cannonball.
Evergreen:
These stocks are steady compounders, churning out steady
growth rates year on year. They are typically significant players in their
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markets, with sound strategies that will help them achieve and sustain
market
dominance in the long run. They have strong brands, management
credentials and a consistent track record of achieving super normal
shareholder returns. We expect stocks in this category to compound at
between 18- 20% per annum for the next five to ten years. Also called
ownership stocks, Evergreen stock are the brightest jewels in any
portfolio.
Apple Green :
These are stocks that have the potential to be steady
compounders and are attempting to move upwards, to turn Evergreen.
They rank a shade below the Evergreen companies, only because their
potential in the five to ten years time is still not very clear, although they
might grow at rates faster than of the Evergreen stocks in the next year or
two. They could grow at 25-30% per annum over the next two to three
years.
Emerging Star:
These are typically young companies, often in niche businesses,
that have the potential to grow and dominate their niches. Even better ,
they might turn out to be real giants , if their niches explode into full-
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blown markets in their own rights. These stocks are potential ten-baggers
but you need to be patient.
Ugly Duckling:
These are companies that are trading below their fair value or at
values which are at a significant discount to that of their peer group, due
to a combination of circumstances. But things are now starting to happen
in these companies or in their markets that are likely to cause a re-
evaluation of their prospects. These stocks could double in two to three
yearstime.
Vultures Pick:
These are companies with valuable assets or brands that have
been trashed to ridiculously low prices. Buy a Vultures pick and wait for
a predator who finds its assets undervalued to come along. This could be
a long wait but the return could be startlingly high.
Cannonball:
Seasons favorites Typically they are fast gainers in a rising
market, which could give returns of 20-40% within three months. These
are based on combination of sound information, technical charts and
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available fundamentals for investors which are having an appetite for
high risk and high reward.
2. Ensures Convenience in Trading Experience:
Sharekhans trading services are designed to offer an easy,
hassle free trading experience, whether trading is done daily or
occasionally. The customer will be entitled to a host of value added
services, in the investment process depending on his investing style and
frequency. It offers a suite of products and services, providing the
customers with a multi-channel access to the stock markets. It gives
advice based on extensive research to its customers and provides them
with relevant and updated information to help him make informed about
his investment decisions
Sharekhan offers its customers the convenience of a broker-
DP
It helps the customer meet his pay in obligations on time
thereby reducing the possibility of auctions. The company believes in
flexibility and therefore allows accepting late instructions without any
extra charge. And execute the instruction immediately on receiving it and
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thereafter the customer can view his updated account statement on
internet.
Sharekhan Depository Services offers demat sevices to individual
and corporate investors. It has a team of professionals and the latest
technological expertise dedicated exclusively to their demat department.
A
customer can aware of Demat, Repurchase , pledge , Transmission
facilities at any of the share khan branches and business partners outlets.
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8. SWOT ANALYSIS
During this training at Sharekhan, we had come to know the
Strengths -Weaknesses -Opportunities -- Threats for the company and it is
very useful for a company to analyze them. Therefore, the SWOT analysis
is presented here and the suggestions for maintaining strengths and
removing weaknesses are explained.
Strengths:
80 years of research and broking experience
Fastest Browser based Trading
11,00,000 + customer
Largest ground network in broking with 588+ retail outlets spanning 213
cities\
Dedicated, Intelligent and Loyal staff.
On-line Trading products.
Lowest brokerage and other charges than. Competitors.
The best investment advice correct up to 70-90 % through dedicated
Wide product range to enable the clients to choose the best alternative.
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One of the best DPs in India.
A positive image in the existing clients.
Weaknesses:
Less awareness in the market.
Time consuming process for account opening, resolving the
problems of the
Customers, etc. Service quality is not maintained accordingly how
they are promoted.
Opportunities:
Large primary market to sit as a book runner for the other
companies just like Kotak securities ltd. that runs the books of share
holdings for many companies
Slope of stock market towards delivery based transactions.
Large potential market for delivery and intra-day transactions.
Open interest of the people to enter in stock market for investing.
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Attract the customers who are dissatisfied with other brokers &
DPs. a An indirect opportunity generated by the market from its
bullishness.
Threats:
Decreasing rates of brokerage in the market. Increasing
competition against other brokers & DPs.
Poor marketing activities for making the company known among
the customers. A threat of loosing clients for any kind of weakness of the
company. Indirect threat from instable stock market, i.e., low/no profit of
Sharekhan's clients would lead them to go for other broker/DP.
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PART-C
DERIVATIVE
AND
ITS STRATEGIES
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1. THE INDIAN EQUITY AND
DERIVATIVE MARKET
The emergence of the market for derivative products, most
notably forwards, futures and options can be traced back to 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 derivatives 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 the cash flows
situation of risk- adverse investors.
In recent years, derivatives have become increasingly important
in the field of finance. While futures and options are now actively traded
on many exchanges, forward contracts are also popular.
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The phenomenal growth of financial derivatives across the
world is attributed the fulfillment of needs of hedgers, speculators and
arbitrageurs by these products.
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2. INTRODUCTION
Derivatives as the name suggests, are financial instruments
whose value is dependent on another underlying asset.
The underlying security in the case of equity derivatives is an
equity share or the widely followed Nifty and Sensex indices.
A share of equity can only ptovide an unhedged position
whether long or short and the entire risk of the transaction lies with
the trader or investor.
FACTORS DRIVING THE GROWTH OF
DERIVATIVES:
Increased volatility in asset prices in financial markets.
Increased integration of national financial markets with the
international market.
Marked improvement in communication facilities and sharp
decline in their costs.
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Development of more sophisticated risk management
tools,providing economic agents a wider choice of risk management
strategies.
Innovations in derivative markets, which optimally combine
the risks and returns over a large number of financial assets leading to
higher returns, reduced risks as well as transaction costs as compared
to financial assets.
To hedge against price fluctuations in the underlying
commodities.
DERIVATIVE PRODUCTS
A. Forwards
B. Futures
C. Options
D. Swaps
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1. Forwards:
A forward contract is the simplest mode of a derivative
transaction. It is an agreement to buy or sell an asset (of a specified
quantity) at a certain
future time for a certain price. No cash is exchanged when the contract is
entered into.
Illustration: - Shyam wants to buy a TV, which costs Rs 10,000 but he
has no cash to buy it outright. He can only buy it 3 months hence. He,
however, fears that prices of televisions will rise 3 months from now. So
in order to protect himself from the rise in prices Shyam enters into a
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DERIVATIVESDERIVATIVES
OptionsOptions FuturesFutures SwapsSwaps ForwardsForwards
Commodit
y
Commodit
ySecuritySecurity
InterestRate
Interest
Rate CurrencyCurrencyPutPut CallCall
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contract with the TV dealer that 3 months from now he will buy the TV
for Rs 10,000. What Shyam is doing is that he is locking the current price
of a TV for a forward contract. The forward contract is settled at
maturity. The dealer will deliver the asset to Shyam at the end of three
months and Shyam in turn will pay cash equivalent to the TV price on
delivery.
2. Futures:
It is an agreement between two parties to buy or sell an asset at
a certain time in the future at a certain price through exchange traded
contracts. A Future represents the right to buy or sell a standard quantity
and quality of an asset or security at a specified date and price. Futures
are similar to Forward Contracts, but are standardized and traded on an
exchange, and are valued, or "Marked to Market daily.
The Marking to Market provides both parties with a daily
accounting of their financial obligations under the terms of the Future.
Unlike Forward Contracts, the counterparty to a Futures contract is the
clearing corporation on the appropriate exchange. Futures often are
settled in cash or cash equivalents, rather than requiring physical delivery
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of the underlying asset. Parties to a Futures contract may buy or write
Options on Futures.
3. Options:An option is a contract, which gives the buyer the right, but not
the obligation to buy or sell shares of the underlying security at a specific
price on or before a specific date. Option, as the word suggests, is a
choice given to the investor to either honor the contract; or if he chooses
not to walk away from the contract. There are two kinds of options: Call
Options and Put Options.
A Call Option is an option to buy a stock at a specific price on
or before a certain date. When you buy a Call option, the price you pay
for it, called the option premium, secures your right to buy that certain
stock at a specified price called the strike price. If you decide not to use
the option to
buy the stock, and you are not obligated to, your only cost is the option
premium.
Put Options are options to sell a stock at a specific price on or
before a certain date. In this way, Put options are like insurance policies.
With a Put Option, you can "insure" a stock by fixing a selling price. If
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something happens which causes the stock price to fall, and thus,
"damages" your asset, you can exercise your option and sell it at its
"insured" price level. If the price of your stock goes up, and there is no
"damage," then you do not need to use the insurance, and, once again,
your only cost is the premium.
Technically, an option is a contract between two parties. The
buyer receives a privilege for which he pays a premium. The seller
accepts an obligation for which he receives a fee.
CALLOPTIONS
Call options give the taker the right, but not the obligation, to
buy the underlying shares at a predetermined price, on or before a
predetermined date.
Illustration: - Raj purchases 1 Satyam Computer (SATCOM) AUG 150
Call --Premium 8
This contract allows Raj to buy 100 shares of SATCOM at Rs
150 per share at any time between the current date and the end of next
August. For this privilege, Raj pays a fee of Rs 800 (Rs eight a share for
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100 shares). The buyer of a call has purchased the right to buy and for
that he pays a premium.
Now let us see how one can profit from buying an option;
Sam purchases a December call option at Rs 40 for a premium of Rs 15.
That is he has purchased the right to buy that share for Rs 40 in
December. If the stock rises above Rs 55 (40+15) he will break even and
he will start making a profit. Suppose the stock does not rise and instead
falls he will choose not to exercise the option and forego the premium of
Rs 15 and thus limiting his loss to Rs 15.
Call
Options-Long & Short Positions
When you expect prices to rise, then you take a long position by
buying calls. You are bullish.
When you expect prices to fall, then you take a short position by
selling calls. You are bearish.
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PUT OPTIONS
A Put Option gives the holder of the right to sell a specific
number of shares of an agreed security at a fixed price for a period of
time.
Illustration:- Raj is of the view that the a stock is overpriced and will
fall in future, but he does not want to take the risk in the event of price
rising so purchases a put option at Rs 70 on X. By purchasing the put
option Raj has the right to sell the stock at Rs 70 but he has to pay a fee
of Rs 15 (premium). So he will breakeven only after the stock falls below
Rs 55 (70-15) and will start making profit if the stock falls below Rs 55.
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Put Options-Long & Short Positions :
When you expect prices to fall, then you take a long position by
buying Puts. You are bearish.
When you expect prices to rise, then you take a short position by
selling Puts. You are bullish.
CALL
OPTIONSPUT OPTIONS
If you expect a fall in
price(Bearish)
Short Long
If you expect a rise in price
(Bullish)Long Short
4. Swaps:
Swaps are private agreement between two parties to exchange
cash flow in the future according to a prearranged formula.
They can be reguarded as portfolio of forward contracts.
A forward contract involves one exchange at a specific future
value date, while a swap contract entails multiple exchanges over a
period of time.
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Interest rate swaps and currency swaps are the most popular.
CURRENCY SWAPS:
These entails swapping only the interest related cash flows
between the parties in the same currency.
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.
5. NSEs Derivative Market:
The derivative trading on the NSE commenced with S & P CNX
Nifty Index Futures on June 12, 2000.
The trading in index options commenced on june 4th, 2001 and
trading in options on individual security commenced on july 2nd, 2001.
Single stock futures were launched on November 9th, 2001.
Today, both in terms of volume and turnover, NSE is the largest
Derivative exchange in India.
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Currently, the derivative contract have maximum of 3 month
expiration cycles.
Three contract share are available for trading with 1month,
2month and 3month expiry.
A new contract is introduced on the next trading day following
the expiry of near month contract.
6. The S & P CNX Nifty:
The s & P CNX Nifty is a market capitalization index based upon
solid economic research.
It was designed not only as a barometer of market movement but
also to be a foundation of a new world of financial products based on
the index like index futures, index options and index funds.
A trillion calculations were expended to evolve the rules inside
the S & P CNX Nifty index.
(a) The correct size to use is 50.
(b) Stocks considered the S & P CNX Nifty must be liquid by the
impact cost criterion.
(c) The largest 50 stocks that meet the criterion go into the index.
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S & P CNX Nifty is a contrast to the adhoc methods that have
gone into index construction in the preceding years, where indexes
were made out of intuition and lacked a scientific basis.
The research that led up to S & P CNX Nifty is well respected
internationally as a pioneering effort in better understanding how to
make a stock market index.
The nifty is uniquely equipped as an index for the index
derivatives market owing to its (a) low market impact cost and (b)
high hedging effectiveness.
Finally, Nifty is calculated using NSE prices, the most liquid
exchange in India, thus making it easier to do arbitrage for index
derivatives.
3. TYPES OF DERIVATIVES
There are two types of derivatives. 1) Future Product and
2)Option Product. Trading strategies can be created using them
individually or in combination. Derivatives add a lot of flexibility to a
traders tools. They can be used for two purposes, namely Speculation
and Hedging.
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SPECULATION:-
Speculation is the skill of analyzing data and taking position on
the various market situations to profit from favorable price
movements, this activity is called trading.
Trading includes going both long and short on the market. We
cant say that trading is about predicting the direction of the stock
market and about predicting prices.
The most important aspect of trading is Money Management.
Money Management involves risking a particular amount of
money to make several times the amount risked.
No one can predict the stock market, the key to making money
in trading on a sustained basis is to make big profits when you are
right and limit your losses when you are wrong.
Also important is the size of your trading positions in
proportion to the overall size of your trading capital, correct position
sizes enable you to stay in the game for the longest possible time and
hence increase the chances of making money.
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Trading in fact, is a skill that can be learnt and, once learnt you
can make huge amounts of money. To do so traders should get used
to the notion of losses at the very outset.
Trading is both about profits and losses. The key is to keep
losses small and profits big
.
HEDGING:-
The idea of hedging is more important in the commodities and
currency markets.
In the equity market hedging can be an expensive exercise.
Often people think that they will be fully protected if they take
a position which profits if the market starts moving in the reverse
direction.
True they will protect themselves but not totally because
hedging comes at a cost, for while hedging can reduce losses but it
also lowers your profits.
If my experience , it is not worthwhile for traders to hedge their
positions.
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Instead , when a trade starts moving contrary to the expected
direction, you need to quickly get out.
Often in the media we hear recommendations about buying
stock futures and hedging it by buying a put.
This strategy sounds great but the put comes at a cost which is
deductible from the profits that you earn on your futures, assuming
that the profit on your futures position is higher than the cost of the
put.
In equity derivatives we can hedge as below.
If the market view is bullish:
Buy futures
Sell call
Buy put
We take an example of RPL that,
If we buy RPL@175 and market is bullish, if we want to hedge
then sell call @180 and buy put@170.
If the market view is bearish:
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Sell futures
Buy call
Sell put
If we take an example of RPL,
If we sell future of RPL@175 and we want to go for hedge then
we will buy call with strike price @180 and sell put with strike price
@ 170.
In-the-money:
A call option whose strike price is below the current price of the
underlying : or
A put with a strike above the current price.
For example: If the ACC stock is trading at Rs. 200, the ACC call
options with strike 190, 180, 170 and below are all in the money.
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Out-of the-money:
A call option whose strike price is above the current price of the
underlying stock or
A put with a strike below the current price.
For example: When ACC is trading at Rs. 200, the ACC call options
with strikes 210, 220, 230 and upwards are out-of the-money.
At the money(ATM):
This is an option that has a strike price equal to the current price
of the underlying stock.
For example: The ACC option with a strike price of Rs-200 is at-
the-money when the stock trading at or near the strike price.
Expiration date:
The date when the term of an options contract terminates is
called its expiration date.
The expiry of Indian options mandated by the stock exchange is
the last Thursday of every month.
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Technically speaking, options contracts are available for the
near month ( current ), mid month (next), and far month (the month
after next).
Currently, how ever, only the near month options usually have
tradable liquidity and only towards the last week of the near month
do options of the mid-month gather enough liquidity to be traded
comfortably.
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PART-D
RESEARCH
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1. TITLE OF THE STUDY
In this fast growing world people dont have enough time to
reach each and every place. In present days, service sectors are growing
very fast and the competition is also very healthy. People want very fast
services from company and they also want data services.
This research is totally dependent on Derivative and Its
Strategies in stock market to the country as a whole. As this service can
be said as latest so it will take some time to develop in the mind of the
people.
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2. STATEMENT OF THEPROBLEM
In India many people are investing in stock market but they are
not aware by all the services provided by the broker. In this when the
broker is not effective, the customer is not satisfied with his services, at
this time the problem arises and the people feel that they are denied of
their rights.
In this study the problem is also about the awareness of the
Derivative & Its Strategies provided by broker. There are many brokers
who are very efficient & effective in research on this point and providing
tips and knowledge to the investors and customers. I have taken sample
of investors to get knowledge about Derivatives and Its Strategies in
stock market.
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3. OBJECTIVE OF THE STUDY
The main objective of the study is to know about the awareness
of Derivatives and Its Strategies in the stock market. If we say then
other secondary objectives are:
To get knowledge about the derivatives in the stock market.
To know the potentiality of investing in the stock market
through online trading.
To know about the current brokerage rate in the market and
customers view and affordability of brokerage in the stock market.
To know about best research in the stock market by brokers and
expectations of customer for returns from that tips.
To know the average existence time of customer with the same
broker.
To find out the best medium by which we can do trading in a
better way
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4. UNIVERSE OF THE STUDY
This research study contains the awareness of the investors in
the stock market through on line trading. There are many investors in the
stock market but out of whole universe of the investors I have selected a
small population from the Junagadh city only. There are mainly two
types of universe such as finite universe & infinite universe. Finite study
can be calculated and infinite study can not be calculated. For my
research study I have selected finite study to know about the awareness in
the minds of investors in the stock market through Derivatives.
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5. HYPOTHESIS
Testing of Hypothesis using Z test (Two
tailed):
1.) The Null Hypothesis (H0): There is no significant difference in level
of literacy about Derivatives & Commodities among the people of
Junagadh City.
Therefore, H0 : u = 50%
H1: u 50%
2.) Level of Significance :
The Level of significance should be set at = 0.05
3.) The Statistical Test :
Z = X u / xWhere, Z = No. of standard deviations for the desired level of
confidence.
X = Mean of the sample
U = Mean of the population or hypothetical mean
x = Estimate for the standard error or the mean
4.) The Decision Rule
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1.000 (1-0.025) = 0.975
1.9+ 0.6 = 1.96 & - 1.96 (the result will be between two)
x =5 / root of 100 - 1
= 5/9
= 0.5556
Z= 55 50 / 0.5556
= 8.999
5.) Draw a statistical conclusion
The absolute value of the computerized Z statistic (8.999) is larger than
1.96, therefore null hypothesis is rejected.
So, Alternate Hypothesis is accepted.
H1:There is significant difference in level of literacy about Derivatives
& Commodities among the people of Junagadh City.
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7. DATA COLLECTIONMETHOD
There are mainly two sources of data i.e.
(1) Primary Data
(2) Secondary Data
Primary Data:
The data, which is collected directly from the respondents to the
base of knowledge and belief of the research, are called primary data.
The normal procedure is to interview some people individually to get a
sense of how people feel about the Derivatives in stock market. So far as
my research is concerned, primary data is the main source of information.
We have collected data through Questionnaire and information from
respondent.
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Primary method includes many types such as:
(1) Observation Method
(2) Interview Method
(3) Questionnaire Method
(4) Scheduling Method
(5) Use of mechanical device
Secondary Data:
When data are collected and compelled from the
published nature or any others primary data is called secondary data.
There are mainly three points which he should consider while using that
data :
(a) Reliability of the data
(b) Suitability of the data
(c) Adequacy of the data
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8. RESEARCH RESULTS
Q.-2 Gender
OPTION NO. OFRESPONDENT
PERCENTAGE
Male 80 80%
Female 20 20%
TOTAL 100 100%
Gender
80%
20%
Male
Female
From above diagram we can say that most of male members do
trading in the stock market through derivatives.
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Q.-3 AGE (YEARS)
OPTION NO. OF RESPONDENT PERCENTA
GE21-35 40 40%
36-50 35 35%
51-65 17 17%
ABOVE 66 8 8%
TOTAL 100 100%
Age
40%
35%
17%
8%
21-35
36-50
51-65
From above diagram we can see that respondents are from the
age group 21 to 35 years are about 40% of total who deals with stock
market. While 35 % are between 36 to 50 years.
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Q.-4 EDUCATION
OPTION NO. OF
RESPONDENT
PERCENTAGE
Under graduate 15 15%Graduate 60 60%
Post graduate 25 25%
TOTAL 100 100%
EDUCATION
15%
60%
25%
Undergraduate
Graduate
Post graduate
This result shows that most of graduate persons are doing trade
with stock-market i.e. 60% of the persons are graduate who are trading.
This result shows that educated persons are trading in stock market.
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Q.- 5 OCCUPATION
OPTION NO. OF RESPONDENT PERCENTAGE
Professional 15 15%Business man 35 35%
Govt. Employee 25 25%
Pvt. Employee 17 17%
Student 8 8%
Total 100 100%
Here this result says that businessman and government
employee who can earn more are trading with stock-market to invest their
saving in the stock market to earn more.
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Q.- 6 DO YOU TRADE IN DERIVATIVES?
OPTION NO. OF RESPONDENT PERCENTAGE
Yes 35 35%
No 65 65%Total 100 100%
Respons
35%
65%
Yes
No
From above response it is very clear that minority of people
want to invest in derivatives because it is risky to invest in derivative is
preferred by investor.
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Q.- 7 CURRENTLY, THROUGH WHICH BROKING HOUSE ARE
YOU DEALING?
OPTION NO. OF RESPONDENT PERCENTAGE
ICICI Direct.com 18 18%
Kotak Security 5 5%
Sharekhan 23 23%
Motilal Oswal 5 5%
Angle Broking 11 11%
Marwadi 28 28%
Indiabulls 3 3%
HDFC 2 2%India Infoline 4 4%
Anagram 3 3%
Karvy 6 6%
Total 100 100%
Broking house18%
5%
23%
5%11%
28%
3%2%4%
3% 6% ICICI Direct.comKotak securitySharekhanmotilal OswalAngle BrokingMarwadiIndia BullsHDFCIndia InfolineAnagramKarvy
Here in above chart if we see than the highest market is covered by
Marwadi group while second highest is share khan which is very good
strength for sharekhan.
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Q.- 8 WHICH TYPES OF FACILITIES ARE GIVEN BY YOUR
BROKING HOUSE FOR ON LINE TRADING?
OPTION NO. OFRESPONDENT PERCENTAGE
Single Screen tradingTerminal
13 13%
Online orders on thePhone
15 15%
Online IPO 21 21%
Live tic-by-tic intraday charting
7 7%
Instant order/Tradeconfirmation in samewindows
8 8%
Real time streamingQuotes
8 8%
Research Report 19 19%
Online Mutual Fund 8 8%
Total 100 100%
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Above research says that most of brokers provides real time
online IPO, research report and online orders on phone.
103
Facilities by Broking House
13%
15%
21%
7%
8%
8%
19%
8%Single screen tradind terminal
Online orders on the phone
online IPO
Live tic-by-tic intra day
chartingInstant order/Trade
confirmation in same windowsReal time streaming quotes
Research Report
Online mutual Fund
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Q.- 9 DOES YOUR FIRM PROVIDE THE SPECIAL SOFTWARE
FOR ON LINE TRADING?
OPTION NO. OF RESPONDENT PERCENTAGE
YES 11 11%
NO 89 89%
TOTAL 100 100%
Response
11%
89%
YES
NO
Here response says that most of brokers are not providing
online software for broking.
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Q.- 10 IF YOU TRADE IN DERIVATIVES, IN WHICH
INSTRUMENT DO YOU INVEST?
INSTRUMENT NO. OF RESPONDENT PERCENTAGE
Futures 56 56%
Calls 25 25%
Puts 15 15%
Arbitrage 4 4%
TOTAL 100 100%
Instrument for Inve
56%
25%
15%
4%
Futures
calls
Puts
arbitrage
Here most of the persons are investing in the future because
they think that it is safer than call & put & they have not so more tips
from brokers for call & put.
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Q.- 11 IN WHICH INSTRUMENT OF DERIVATIVES SEGMENT DO
YOU TRADE?
DERIVATIVESEGMENT NO. OFRESPONDENT PERCENTAGE
Indices futures 37 37%
Indices options 5 5%
Stock Futures 43 43%
Stock options 15 15%
TOTAL 100 100%
Instrument for Trade
37%
5%43%
15%
Indices futures
Indices options
Stock futures
Stock options
Here, from above diagram we can see that investors if invest in
derivative than they will invest in stock future first and then in indices
future because stock future follow American style of derivatives.
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Q.- 12 WHICH TYPE OF TRADER YOU ARE?
TYPE NO. OF RESPONDENT PERCENTAG
EBullish trader 75 75%
Bearish trader 25 25%
Total 100 100%
Type of Trader
75%
25%
Bullish trader
Bearish trader
If we see the picture of stock market two years ago or above
picture than it says same thing tha