Major Research Project

Topic: - “COMPARATIVE STUDY OF VARIOUS

TRADING OPTIONS IN DERIVATIVE MARKET”

Introduction
As the preliminary step in the direction of the advent of derivatives buying and selling in
India, SEBI installation a 24 member committee below the chairmanship of Dr. L. C. Gupta
on November 18, 1996 to broaden the precise regulatory framework for derivatives buying
and selling in India. The committee submitted its file on March 17, 1998 recommending that
derivatives ought to be declared as securities in order that the regulatory framework relevant
to the buying and selling of securities may also govern the buying and selling of derivatives.
Subsequently, SEBI installation a collection in June 1998 below the chairmanship of
prof.J.R.Verma, to propose filing its file in October 1998. It labored out the operational info
of the margining system, a technique for charging preliminary margins, club info and net-
really well worth criterion, deposit requirements, and real-time tracking of positions
requirements. The exchange-traded derivatives commenced in India in June 2000 with SEBI
allowing BSE and NSE to introduce the fairness by-product segment
.

Financial markets, by nature, are highly volatile and that is why the risk factor is a major
problem for financial professionals. As uncertainty about the future diminishes, volatility is
expected to decrease. The last decade has been one of the most dramatic decades in the
Indian market. In India, the emergence and growth of the derivatives market are relatively
recent. Since its inception in June 2000, the export market has shown significant growth in
volume and the number of contracts sold.
The derivatives Market has an important role to play in the economic development of a
country. The objective of the study is to examine the impact of financial derivatives (futures
and options) on the underlying market volatility. The paper also analyses the derivatives
awareness level of Indian investors and the perception of the investor about the future of the
derivatives market in India.
The emergence of the market for derivatives 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.
Derivatives are risk management instruments, which derive their value from an underlying
asset. The following are three broad categories of participants in the derivatives market
Hedgers, Speculators, and Arbitragers. Prices in an organized derivatives market reflect the
perception of market participants about the future and lead the price of underlying to the
perceived future level.
In recent times, the Derivative markets have gained importance in terms of their vital role in
the economy. The increasing investments in stocks (domestic as well as overseas) have
attracted my interest in this area. Numerous studies on the effects of futures and options
listing on the underlying cash market volatility have been done in the developed markets. The
derivative market is newly started in India and it is not known by every investor, so SEBI has
to take steps to create awareness among the investors about the derivative segment.

McClintock, 1996 notes that the alternatives are widely regarded as financial instruments that
bring about economic losses or processing of firms. In addition, he says it is believed that
their (derivative) market has brought the global economic downturn to the global economy.

As well as transactions that were immediately announced as indicators of market efficiency

(Kojima, 1995), which included conglomerate consolidation (Lewellen, 1971), higher
purchases (Jensen, 1989), and unwanted bond offerings (Andersen, 1995), from which it
came. they were receiving mixed reactions from the community, fearing specific risks and
systemic risks

Company-specific risks include credit, legal, market, financial, and regulatory risks, while
systemic risks include “increased opposition between banks and non-financial institutions,
increased economic market connections, growing attention. foreign trade, declining
disclosure of economic records due to cheap labor, ”and market disruptions due to economic
and communication innovation (Becketti, 1995).

Several studies have been conducted on various aspects of risk management and investment
management, According to Greenspan (1997) ―To date, the most important financial event
in recent decades has been the dramatic development and expansion of the Exit Market.

Avadhani (2000) stated that the derivatives of an established financial instrument emerged to
protect against risks created in the past as the history of the foreign exchange market is shown
with problems.
There have been strong debates on why motivation should exist and many debates on anti-
immigration theories. Even their cause for survival has been criticized (Dodd, 2002).
Therefore, the author feels that it is very important to capture the motives that have arisen in
the ways of life within the financial system and their winning status over the course of many
years of merit within the global economic system (Steinherr, 2002).
Sandeep S., Surendra Y.S. (2008). In their article, we conducted a recent consumer market
survey in India to assess the seller's assessment of market activity and their perception of the
benefits and costs of imports,
The alternatives have been widely criticized for their so-called danger in the financial
markets and their impact on the real economy (Sharma, 2008).
Das, B., & Mohanty, S (2008). You have learned about investor behavior in investing in cars.
In terms of power; see; found and concluded that different investment strategies do not
provide the same level of satisfaction.

Gupta O.P (2007). In his research ―The impact of future presentation Index on commodity
market volatility: The Indian experience has tested the potential for cash outflows to relieve
investment-related problems. Existing literature research shows that to date no specific
research has been done specifically to address the perceptions of traders close to the exit
market area. The current research is therefore a test in this study and therefore, aims to
improve the perception of retailers in the vicinity of the exit market area regarding the
Visakhapatnam Region.

Srivastava, S., Yadav, S. S., Jain, P. K. (2008) had conducted a survey of brokers in the
recently introduced derivatives markets in India to examine the brokers’ assessment of
market activity and their perception of benefits and costs of derivative trading. The need for
such a study was felt as previous studies relating to the impact of derivatives securities on
Indian stock market do not cover the perception of market participants who form an integral
part of the functioning of the derivative markets.

Shah and Thomas (2003) reviewed the changes that took place in India's stock markets and
debt in the decade of the 1990s. This focuses on the importance of issues as a means of
achieving change.

Mohan (2004) provides the reasons for the transformation of the financial sector in India, the
policy changes in the financial sector, and the effects of the transformation process in the
financial sector in detail.

Shirai (2004) examines the impact of financial market changes and corporate capitalization in
India. Changes in the financial markets and large areas of India due to the early 1990s had a
positive impact on each quarter of banks and financial markets. However, the financial
markets continue to be volatile, especially in the case of segregation of better companies than
in the lower echelons and for this reason a significant decrease in previous costs compared to
the latter. The paper says India needs to build infrastructure so that one can promote sensible
financial markets and strengthen banks to promote high risk management.
Bajpai (2006) concludes that the Indian stock market has undergone various stages of
liberation, bringing significant changes and structure to market structure and operation,
resulting in wider investment options, greater reduction in transaction costs and efficiency,
transparency, and security. as the integration of global markets increases.

Gurumurthy (2006) concludes that the success of the financial district within the financial
sector means that the financial sector should be more aggressive without having to deal with
negative opposition to the policies set in the context of the macroeconomic situation. Mohan
(2007) looks at India's strategy for regional financial reforms that have been initiated in the
early 1990s. Allen, Chakrabarti, and De (2007) conclude that with the recent rising costs
among the two largest countries in China, India does not have the potential for rapid financial
transformation because the liberation process began in the early 1990s.

Bhatt, Drs. Babaraju made a look at the "Investor Perspective on Derivatives as an

Investment Road" during 2014. The alternative is a chance management approach that helps
to control the unfortunate fortune in the ways of multiple participants. The alternative offers a
risk of changing the opportunity, from the only one you need to move away from; to someone
who should agree on it. India's excitement over the arrival of a fair exit market has been
encouraging and successful. Profit from the NSE exceeds the market for fairness. This serves
as the main goal of identifying factors that contribute to the choice of alternative financing.

Prakash Yalavatti conducted a study on "India's Strategic Growth Market Research" during
the 12 months of 2015. In the past they have experienced more than one growth within the
number of global changes and commercial enterprises as a result of the acceptance of
globalization and freedom everywhere in the world. As a result, the call for global economic
and material assets increased significantly at the global level. In this regard, the costs of
exchange transactions, investment funds, and recreational costs of various economic markets
have accelerated economic risk for international companies and traders. This view is due to a
few harmful changes in this regard, which threaten the survival of the business world.
Therefore, in order to control such risks, clean resources are developed within the economic
markets, which can be commonly referred to as economic outlets in national and international
economic markets.

Dr. Kamlesh Gakhar; Ms Meetu researched the Derivatives Market in India: Evolution,
Trading in mid-2013. The Indian spinoff market has grown into a multi-trillion-greenback
market over the years. Marked with the ability to gradually reduce risk in the form of real
estate prices, the results are gaining popularity among investors. Since the financial reforms
of 1991, many efforts have been made to promote investor commitment in a way that makes
buying and selling easier for consumers. However, there are some problems in this market
place. Therefore, the present paper is an attempt to look at the emergence of an export market
from India, the buying and selling of raw materials in its many products, and the potential for
the Indian Derivatives market.

Dr. Rishi Manrai’s studies on Investor Behaviour are closer to Derivative Markets in the
Indian Context. The idea of behavioral finance is developing withinside the capital market,
there may be hardly ever any vicinity in which its standards aren’t being applied So the crux
of the study will give the researcher a quantitative model reflecting the factors affecting the
investor behavior in the derivative market with load factors. Through this study, the
researchers would like to study the different factors responsible for investment behavior in
the derivative market.
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