A PROJECT REPORT ON

STOCK MARKET
IN
SUBMITTED BY: CHIRAG K. PADALIYA
BATCH ROLL NO : PGDM SEM II. 2010 : 09071 T D!"#$% "&PGDM' I( )*"%!*+ ,-+,!++.#(% , %/# "#0-!"#.#(% , T +*(! I(1%!%-%# , M*(*2#.#(% S%-!#13 A4!)-" 5 " %/# *6*"4#4 , %/# 4#2"## , P 1% G"*4-*%# D!)+ .* !( M*(*2#.#(%

T +*(! I(1%!%-%# O, M*(2#.#(% S%4!#1 A4!)-"7870209

COMPANY CERTI5ICATE

DECLARATION

We, under signed CHIRAG K.PADALIYA & CHIRAG G KAPURIYA students of PGDM S M.II !ere"# de$%&re t!&t t!e 'ro(e$t )or* 'resented in t!is re'ort is our $ontri"ution &nd !&+e "een $&rried out under t!e su'er+ision of Mr. ASU,-SH .A.HA/I of TOLANI INSTITUTE O5 MANGEMENT STUDIES3 ADIPUR &KUTCH'. ,!e o"(e$ti+e of tr&ining undert&*en is to get s'e$i&%i0ed *no)%edge in s'e$i&%i0ed fie%d, )!i$! furt!er s!&r'en t!e s*i%% &nd 'r&$ti$&%%# in t!e s'e$i&%i0&tion.

DATE : PLACE : R&(*ot

SIGNATURE 1 2222222222222222222222222222222222222 3CHIRAG K. PADALIYA4 22222222222222222222222222222222222222 3CHIRAG G. KAPURIYA4

ACKNO:LEDGEMENT
We )is! to in$%ude t!&t it )ou%d not !&+e "een 'ossi"%e to $o5'%ete t!is 'ro(e$t )it! out !e%' &nd su''ort of 5&n# 'eo'%e. I &5 t!&n*(u% to &%% of t!e5. We &re t!&n* fu%% to Mr. As!o* H. Ko#&ni, C - of SKS S CURI,I S L%IMI, D for gi+ing us t!is +&%u&"%e o''ortunit# to gi+e us Pro(e$t 'er5ission &t SKS S CURI,I S LIMI, D. )e t!&n* !i5 to t&*e *een interest in our )or*, &nd guide us t!roug! out our 'ro(e$t. We &re t!&n*fu% to Mr.Pr&+in So(itr&, !e&d of DP )!o !e%'ed us "ot! for5&%%# &nd infor5&%%#. We &re &%so t!&n*fu% to Mr.L&%it Lun&g&ri#&, !e&d of de5&t &nd 5odifi$&tion de'&rt5ent for gi+ing us +&%u&"%e *no)%edge &nd su''ort t!roug!out our tr&ining. I &5 &%so re&%%# t!&n*fu% to ,o%&ni Institute of M&n&ge5ent Studies for gi+ing us &%% *ind of su''ort re6uired for $o5'%etion of our 'ro(e$t re'ort &nd t!&n*s t!e AIC, for in$%uding fin&% tr&ining &s & '&rt of s#%%&"us for PGDM. ,!us I !e&rti%# t!&n* "ot! t!ese institutions )!o !&+e t!e 'ri+i%eged o''ortunit# to $&rr# on t!e 'ro(e$t &nd to re&%i0e t!e 'otenti&% )!i$! )&s ti%% no) !idden )it!in ourse%+es

DATE PLACE

: : R*;< %

CHIRAG K. PADALIYA CHIRAG G. KAPURIYA

PRE5ACE
PGDM is & 'rofession&% $ourse )!erein for & student to 'osses on%# t!eoreti$&% *no)%edge &%one is not enoug! "ut &%so to i5'ro+e 'r&$ti$&% s*i%% )!i$! is !e%'fu% to t!e5 in e+er# fie%d of %ife in t!eir future. Students need to !&+e & 'r&$ti$&% i5'%e5ent&tion in t!e $urrent s$en&rio. We fe%t t!&t t!is unit is "eing run su'er"%# "# e7$e%%ent 5&n&ge5ent te&5s &nd e5'%o#ee $o2o'er&tion. It is our '%e&sure to 'resent )or* &fter I !&d finis!ed 5# tr&ining &t SKS SL. ,!is tr&ining !&s e7'&nded our !ori0on of *no)%edge in 'r&$ti$&% &s )e%% &s t!eoreti$&% )!i$! &re +it&% for &n# student in 5&n&ge5ent %e+e% studies. After $o5'%etion of t!is tr&ining )e $o5e to *no) t!&t )!en )e stud# t!eor# "ut 'r&$ti$e it is +er# diffi$u%t to underst&nd. ,!erefore to ser+e du&% 'ur'ose of 'r&$ti$&% tr&ining !&s "een 5&de $o5'u%sor# for t!e students of PGDM Su$! tr&ining 'ro5otes & students to "oost t!eir 'otenti&%s &nd t!e inner 6u&%ities, &nd t!ere"# students $o5e to *no) &"out t!eir re&%it# t!&t !o) t!e t!eoreti$&% *no)%edge )or*s in &$tu&% sense in &n# unit. ,!is !&s indeed 'ro+ed to "e +er# usefu% to 5e. A%% infor5&tion furnis!ed !ere &re $orre$t &nd true &$$ording to 5e, &nd sin$ere%# &'o%ogi0e if in$orre$t d&t&.

INDE=
SR. NO.

4 5 6
7

TOPIC INDUSTRY OVERVIEW. INTRODUCTION HISTORY DEVELOPMENT MAJOR PLAYERS INDUSTRY ANALYSIS COMPANY OVERVIEW. ABOUT RELIGARE HISTORY COMPANY PROFILE LOCATION BOARD OF DIRECTORS GROUP COMPANY ACCOUNTION POLICY FUTURE PLANS DEPARTMENTS OF COMPANY PRODUCT PROFILE RESEARCH OBJECTIVE SOURCE OF DATA SAMPLING PROCESS SCOPE OF STUDY LIMITATIONS OF STUDY ANALYSIS AND INTERPRETATION SUGGESTION QUESTIONNAIRE CONCLUSION BIBLIOGRAPHY

PAGE NO.

INDUSTRY O>ER>IE: INTRODUCTION:7

Sto$* e7$!&nges to so5e e7tent '%&# &n i5'ort&nt ro%e &s indi$&tors, ref%e$ting t!e 'erfor5&n$e of t!e $ountr#8s e$ono5i$ st&te of !e&%t!. Sto$* 5&r*et is & '%&$e )!ere se$urities &re "oug!t &nd so%d. It is e7'osed to & !ig! degree of +o%&ti%it#9 'ri$es f%u$tu&te )it!in 5inutes &nd &re deter5ined "# t!e de5&nd &nd su''%# of sto$*s &t & gi+en ti5e. Sto$* "ro*ers &re t!e ones )!o "u#s &nd se%%s se$urities on "e!&%f of indi+idu&%s &nd institutions for so5e $o55ission. ,!e Se$urities &nd 7$!&nge .o&rd of Indi& 3S .I4 is t!e &ut!ori0ed "od#, )!i$!

regu%&tes t!e o'er&tions of sto$* e7$!&nges, "&n*s &nd ot!er fin&n$i&% institutions. ,!e '&st 'erfor5&n$es in t!e $&'it&% 5&r*ets es'e$i&%%# t!e se$urities s$&5 "# :H&srs!&d Me!t&8 !&s %ed to tig!tening of t!e o'er&tions "# S .I. In &ddition t!e intern&tion&% tr&ding &nd in+est5ent e7'osure !&s 5&de it i5'er&ti+e to "etter o'er&tion&% effi$ien$#. Wit! t!e +ie) to i5'ro+e, dis$i'%ine &nd "ring gre&ter tr&ns'&ren$# in t!is se$tor, $onst&nt efforts &re "eing 5&de &nd to & $ert&in e7tent i5'ro+e5ents !&+e "een 5&de.

HIS,-RY -; ,H S,-CK .R-KI/G I/DUS,RY

Indi&n Sto$* M&r*ets &re one of t!e o%dest in Asi&. Its !istor# d&tes "&$* to ne&r%# <== #e&rs &go. ,!e e&r%iest re$ords of se$urit# de&%ings in Indi& &re 5e&ger &nd o"s$ure. .# >?@=As "usiness on $or'or&te sto$*s &nd s!&res in .&n* &nd Cotton 'resses too* '%&$e in .o5"&#. ,!oug! t!e tr&ding %ist )&s "ro&der in >?@B, t!ere )ere on%# !&%f & do0en "ro*ers re$ogni0ed "# "&n*s &nd 5er$!&nts during >?C= &nd >?D=. ,!e >?D=As )itnessed & r&'id de+e%o'5ent of $o55er$i&% enter'rise &nd "ro*er&ge "usiness &ttr&$ted 5&n# 5en into t!e fie%d &nd "# >?E= t!e nu5"er of "ro*ers in$re&sed into E=. In >?E=2E> t!e A5eri$&n Ci+i% W&r "ro*e out &nd $otton su''%# fro5 United St&tes of uro'e )&s sto''ed9 t!us, t!e AS!&re M&ni&A in Indi& "egun. ,!e nu5"er of "ro*ers in$re&sed to &"out <== to <D=. Ho)e+er, &t t!e end of t!e A5eri$&n Ci+i% W&r, in >?ED, & dis&strous s%u5' "eg&n 3for e7&5'%e, .&n* of .o5"&# S!&re )!i$! !&d tou$!ed Rs <?D= $ou%d on%# "e so%d &t Rs. ?F4. At t!e end of t!e A5eri$&n Ci+i% W&r, t!e "ro*ers )!o t!ri+ed out of Ci+i% W&r in >?FC, found & '%&$e in & street 3no) &''ro'ri&te%# $&%%ed &s D&%&% Street4 )!ere t!e# )ou%d $on+enient%# &sse5"%e &nd tr&ns&$t "usiness. In >??F, t!e# for5&%%# est&"%is!ed in .o5"&#, t!e G/&ti+e S!&re &nd Sto$* .ro*ersA Asso$i&tionG 3)!i$! is &%tern&ti+e%# *no)n &s G,!e Sto$* ,!us, t!e Sto$* 7$!&nge &t .o5"&# )&s $onso%id&ted. ,!us in t!e s&5e )&#, gr&du&%%# )it! t!e '&ss&ge of ti5e nu5"er of e7$!&nges )ere in$re&sed &nd &t $urrent%# it re&$!ed to t!e figure of <C sto$* e7$!&nges. 7$!&ngeG4. In >?BD, t!e Sto$* 7$!&nge &$6uired & 're5ise in t!e s&5e street &nd it )&s in&ugur&ted in >?BB.

BSE &BOMBAY STOCK E=CHANGE'

,!e Sto$* 7$!&nge, Mu5"&i, 'o'u%&r%# *no)n &s ?BSE? )&s est&"%is!ed in >?FD &s ?T/# N*%!@# S/*"# *(4 S% $< B" <#"1 A11 $!*%! (?. It is t!e o%dest one in Asi&, e+en o%der t!&n t!e ,o*#o Sto$* 7$!&nge, )!i$! )&s est&"%is!ed in >?F?. It is & +o%unt&r# non2'rofit 5&*ing Asso$i&tion of Persons 3A-P4 &nd is $urrent%# eng&ged in t!e 'ro$ess of $on+erting itse%f into de5utu&%ised &nd $or'or&te entit#. It !&s e+o%+ed o+er t!e #e&rs into its 'resent st&tus &s t!e 're5ier Sto$* 7$!&nge in t!e $ountr#. It is t!e first Sto$* 7$!&nge in t!e Countr# to !&+e o"t&ined 'er5&nent re$ognition in >BDE fro5 t!e Go+t. of Indi& under t!e Se$urities Contr&$ts 3Regu%&tion4 A$t, >BDE. ,!e 7$!&nge, )!i%e 'ro+iding &n effi$ient &nd tr&ns'&rent 5&r*et for tr&ding in

se$urities, de"t &nd deri+&ti+es u'!o%ds t!e interests of t!e in+estors &nd ensures redress&% of t!eir grie+&n$es )!et!er &g&inst t!e $o5'&nies or its o)n 5e5"er2"ro*ers. It &%so stri+es to edu$&te &nd en%ig!ten t!e in+estors "# $ondu$ting in+estor edu$&tion 'rogr&5 &nd 5&*ing &+&i%&"%e to t!e5 ne$ess&r# infor5&ti+e in'uts. A Go+erning .o&rd !&+ing <= dire$tors is t!e &'e7 "od#, )!i$! de$ides t!e 'o%i$ies &nd regu%&tes t!e &ff&irs of t!e 7$!&nge. ,!e Go+erning .o&rd $onsists of B e%e$ted dire$tors, )!o &re fro5 t!e "ro*ing $o55unit# 3one t!ird of t!e5 retire e+er #e&r "# rot&tion4, t!ree S .I no5inees, si7 'u"%i$ re'resent&ti+es &nd &n 7e$uti+e Dire$tor & C!ief 7e$uti+e -ffi$er &nd & C!ief -'er&ting -ffi$er.

NSE &NATIONAL STOCK E=CHANGE'

/S )&s in$or'or&ted in >BB< &nd )&s gi+en re$ognition &s & sto$* e7$!&nge in A'ri% >BB@. It st&rted o'er&tions in Hune >BBC, )it! tr&ding on t!e W!o%es&%e De"t M&r*et Seg5ent. Su"se6uent%# it %&un$!ed t!e C&'it&% M&r*et Seg5ent in /o+e5"er >BBC &s & tr&ding '%&tfor5 for e6uities &nd t!e ;utures &nd -'tions Seg5ent in Hune <=== for +&rious deri+&ti+e instru5ents. /S !&s "een &"%e to t&*e t!e sto$* 5&r*et to t!e doorste's of t!e in+estors. ,!e

te$!no%og# !&s "een !&rnessed to de%i+er t!e ser+i$es to t!e in+estors &$ross t!e $ountr# &t t!e $!e&'est 'ossi"%e $ost. It 'ro+ides & n&tion2)ide, s$reen2"&sed, &uto5&ted tr&ding s#ste5, )it! & !ig! degree of tr&ns'&ren$# &nd e6u&% &$$ess to in+estors irres'e$ti+e of geogr&'!i$&% %o$&tion. ,!e !ig! %e+e% of infor5&tion disse5in&tion t!roug! on2%ine s#ste5 !&s !e%'ed in integr&ting ret&i% in+estors on & n&tion2)ide "&sis. ,!e st&nd&rds set "# t!e e7$!&nge in ter5s of 5&r*et 'r&$ti$es, Produ$ts , te$!no%og# &nd ser+i$e st&nd&rds !&+e "e$o5e industr# "en$!5&r*s &nd &re "eing re'%i$&ted "# ot!er 5&r*et '&rti$i'&nts. Wit!in & +er# s!ort s'&n of ti5e, /S !&s "een &"%e to &$!ie+e &%% t!e o"(e$ti+es for )!i$! it )&s set u'. It !&s "een '%&#ing & %e&ding ro%e &s & $!&nge &gent in tr&nsfor5ing t!e Indi&n C&'it&% M&r*ets to its 'resent for5. ,!e Indi&n C&'it&% M&r*ets &re & f&r $r# fro5 )!&t t!e# used to "e & de$&de &go in ter5s of 5&r*et 'r&$ti$es, infr&stru$ture, te$!no%og#, ris* 5&n&ge5ent, $%e&ring &nd sett%e5ent &nd in+estor ser+i$e.

What i a t!"# $a%#&t i'(&)*

In t!e sto$* 5&r*et )or%d, #ou need & )&# to $o5'&re t!e 5o+e5ent of t!e 5&r*et, u' &nd do)n, fro5 d&# to d&#, &nd fro5 #e&r to #e&r. An inde7 is (ust & "en$!5&r* or #&rdsti$* e7'ressed &s & nu5"er t!&t 5&*es it 'ossi"%e to do t!is $o5'&rison. ;or e.g. S&P C/I /ift# is t!e inde7 of /S &nd S /S I is t!e inde7 of .S .

S&"+%iti& Ma%#&t P%i$a%, Ma%#&t S&"!'(a%, Ma%#&t

,!e Se$urities M&r*et $onsists of t)o seg5ents, +i0. Pri5&r# 5&r*et &nd Se$ond&r# 5&r*et. Pri5&r# 5&r*et is t!e '%&$e )!ere issuers $re&te &nd issue e6uit#, de"t or !#"rid instru5ents for su"s$ri'tion "# t!e 'u"%i$9 t!e Se$ond&r# 5&r*et en&"%es t!e !o%ders of se$urities to tr&de t!e5. Se$ond&r# 5&r*et essenti&%%# $o5'rises of sto$* e7$!&nges )!i$! 'ro+ide '%&tfor5 for 'ur$!&se &nd s&%e of se$urities "# in+estors. In Indi&, &'&rt fro5 t!e Region&% Sto$* 7$!&nges est&"%is!ed in different $enters, t!ere &re e7$!&nge %i*e t!e /&tion&% Sto$* 7$!&nge 3/S 4 &nd t!e -+er t!e Counter 7$!&nge of Indi& 3-,C I4, )!o 'ro+ide n&tion )ide tr&ding f&$i%ities )it! ter5in&%s &%% o+er t!e $ountr#. ,!e tr&ding '%&tfor5s of sto$* e7$!&nges &re &$$essi"%e on%# t!roug! "ro*ers &nd tr&ding of se$urities is $onfined on%# to sto$* e7$!&nges. ,!us, t!e se$urities 5&r*et !&s t)o inde'endent, inse'&r&"%e seg5ents, t!e ne) issues 3'ri5&r#4 5&r*et &nd t!e sto$* 3se$ond&r#4 5&r*et. ,!e 'ri5&r# 5&r*et 'ro+ides

$!&nne% for s&%e of ne) se$urities )!i%e t!e se$ond&r# 5&r*et de&%s in se$urities 're+ious%# issued. ,!e issuer of se$urities se%%s t!e se$urities to t!e 'ri5&r# 5&r*et to r&ise funds for in+est5ent &ndJor to dis$!&rge so5e o"%ig&tions. ,!e se$ond&r# 5&r*et en&"%es t!e5 )!o !o%d se$urities to &d(ust t!eir !o%dings in res'onse to $!&nge in t!eir &ssess5ent of ris* &nd return. ,!e# &%so se%% se$urities for $&s! to 5eet t!eir %i6uidit# needs. ,!e $or'or&te se$urities 5&r*et d&tes "&$* to t!e >? ,H $entur# )!en t!e se$urities of t!e &st Indi& Co5'&n# )ere tr&ded in Mu5"&i &nd Ko%*&t&. ,!e "ro*ers used to g&t!er under & "&n#&n tree in Mu5"&i &nd under & nee5 tree in Ko%*&t& for t!e 'ur'ose. Ho)e+er, t!e re&% "eginning $&5e in t!e >?D=s )it! t!e introdu$tion of t!e (oint sto$* $o5'&nies )it! %i5ited %i&"i%it#. ,!e >?E=s )itnessed "e&ris! de&%ings in se$urities &nd se$urities s'e$u%&tion. ,!is "roug!t "ro*ers to .o5"&# toget!er in Hu%# >?FD to "oo5 t!e first org&ni0ed sto$* e7$!&nge in t!e $ountr#, +i0. ,!e Sto$* 7$!&nge, Mu5"&i, A!5ed&"&d Sto$* 7$!&nge in>?BC &nd << ot!ers fo%%o)ed )it! <=,H $entur#. ,!e Sto$* 7$!&nges &re t!e e7$%usi+e $enters for tr&ding in e6uities &nd t!e

tr&ding '%&tfor5 of &n e7$!&nge is &$$essi"%e on%# to "ro*ers. ,!e regu%&tor# fr&5e)or* !e&+i%# f&+ors t!e re$ogni0ed sto$* e7$!&nges "# &%5ost "&nning tr&ding &$ti+it# outside t!e sto$* e7$!&nges. ,!e se$urities &re di+ided into t)o '&rts +i0. Cor'or&te se$urities &nd Go+ern5ent Se$urities

Corporate Securities:
,!e no of sto$* e7$!&nges in$re&sed fro5 >> in>BB= to <@ no). A%% t!e e7$!&nges &re fu%%# $o5'uteri0ed &nd offer >==K on2%ine tr&ding. BECC $o5'&nies )ere &+&i%&"%e for tr&ding on sto$* e7$!&nges &t t!e end of M&r$! <==<. ,!e tr&ding '%&tfor5 of t!e sto$* e7$!&nges )&s &$$essi"%e to BE?F 5e5"ers fro5 o+er C== $ities on t!e s&5e d&te.

,!e se$tor&% distri"ution of turno+er !&s undergone signifi$&nt $!&nge o+er %&st fe) #e&rs. ,!e s!&re of 5&nuf&$turing $o5'&nies in turno+er of to' :D=8 $o5'&nies, )!i$! )&s ne&r%# ?=K in >BBD2BE, de$%ined s!&r'%# to &"out EK in <=>2=<. During t!e s&5e 'eriod t!e s!&re of I, $o5'&nies in turno+er in$re&sed s!&r'%# fro5 ni% in >BBD2BE to EFK in <==>2=<.

Government Securities:
,!e &ggreg&te turno+er in $entr&% &nd st&te go+ern5ent d&ted se$urities, in$%uding tre&sur# "i%%s, t!roug! SGL tr&ns&$tions in$re&sed @> ti5es "et)een >BBC2BD &nd <==>2=<. During <==>2=< it re&$!ed & %e+e% of Rs. >,DF@,?B@ $rore, !ig!er t!&n $o5"ined tr&ding +o%u5es in e6uit# seg5ents of &%% t!e e7$!&nges in t!e $ountr#, ref%e$ting dee'ening of t!e 5&r*et. ,!e s!&re of outrig!t tr&ns&$tions in go+ern5ent se$urities in$re&sed fro5 <@.<K in >BBD2BE to FFK in <==>2=<. ,!e s!&re of re'o tr&ns&$tions de$%ined $orres'onding%# fro5 FE.?K in >BBD2BE to <@K in <==>2=<. ,!e S!&re of d&ted se$urities in turno+er of go+ern5ent se$urities in$re&sed fro5 EBK in >BBE2BF to BCK in <==>2=<. ,!e ,2"i%%s &$$ounted for re5&ining SGL turno+er.

Derivatives Market:
Deri+&ti+es tr&ding $o55en$ed in Indi& in Hune <==. ,!e tot&% e7$!&nge tr&ded deri+&ti+es )itnessed & +o%u5e of Rs. CC<,@C@ $rore during <==<2=@ &s &g&inst Rs. C=>? $rore during t!e 're$eding #e&r. W!i%e /S &$$ounted for &"out BB.DK of tot&% turno+er, .S &$$ounted for &"out =.DK in <==<2=@. ,!e 5&r*et )itnessed !ig!er +o%u5es fro5 Hune <==> )it! introdu$tion of inde7 o'tions, &nd sti%% !ig!er +o%u5es )it! introdu$tion of sto$* o'tions in Hu%# <==>. ,!ere )&s & s'urt in +o%u5es in /o+e5"er <==> )!en sto$* futures )ere introdu$ed. It is "e%ie+ed t!&t Indi& is t!e %&rgest 5&r*et in t!e )or%d for sto$* futures. ,!e sto$* 5&r*et or se$ond&r# 5&r*et ensures free 5&r*et&"i%it#, negoti&"i%it# &nd 'ri$e dis$!&rge. ;or t!ese re&sons t!e sto$* 5&r*et is referred to &s t!e ner+e $enter

of t!e $&'it&% 5&r*et, ref%e$ting t!e e$ono5i$ trend &s )e%% &s t!e !o'es, &s'ir&tions &nd &''re!ensions of t!e in+estors. Sto$* M&r*et is &%so $&%%ed t!e "&ro5eter of t!e e$ono5#

S#$ (4*"A M*"<#% I(%#".#4!*"!#1

Sto$* "ro*ers, su"2"ro*ers, 'ortfo%io 5&n&gers, $ustodi&ns, s!&re tr&nsfer &gents $onstitute t!e i5'ort&nt inter5edi&ries in t!e Se$ond&r# M&r*et. A Sto$* "ro*er '%&#s & +er# i5'ort&nt ro%e in t!e se$ond&r# 5&r*et !e%'ing "ot! t!e se%%er &nd t!e "u#er of t!e se$urities to enter into & tr&ns&$tion. ,!e "u#er &nd se%%er 5&# "e eit!er & "ro*er or & $%ient. ,!e tr&ns&$tion entered $&nnot "e &nnu%%ed e7$e't in t!e $&se of fr&ud, )i%%fu% 5isre'resent&tion or u'on 'ri5&2f&$ie e+iden$e of & 5&teri&% 5ist&*e in t!e tr&ns&$tion, in t!e (udg5ent of t!e e7isting &ut!orities. If & 5e5"er of t!e sto$* e7$!&nge 3"ro*er4 !&s orders to "u# &nd to se%% t!e s&5e *ind of se$urities, !e 5&# $o5'%ete t!e tr&ns&$tion "et)een !is $%ients $on$erned. W!en e7e$uting &n order t!e sto$* 5&# on "e!&%f of !is $%ient "u# or se%% se$urities fro5 !is o)n &$$ount i.e. &s 'rin$i'&% or &$t &s &n &gent. ;or e&$! tr&ns&$tion !e !&s to issue ne$ess&r# $ontr&$t note indi$&ting )!et!er t!e tr&ns&$tion !&s "een entered into "# !i5 &s 'rin$i'&% or &s &n &gent for &not!er. W!i%e "u#ing 'r se%%ing se$urities &s & 'rin$i'&%, t!e sto$* "ro*er !&s to o"t&in t!e $onsent of !is $%ient &nd t!e 'ri$es $!&rged s!ou%d "e f&ir &nd (ustified "# t!e $onditions of t!e 5&r*et. A su"2"ro*er is one )!o )or*s &%ong )it! t!e 5&in "ro*er &nd is not dire$t%# registered )it! t!e sto$* e7$!&nge &s & 5e5"er. He &$ts on "e!&%f of t!e sto$* "ro*er &s &n &gent or ot!er)ise for &ssisting t!e in+estors in "u#ing, se%%ing or de&%ing in se$urities t!roug! su$! sto$* "ro*ers. /o sto$* "ro*ers or su"2"ro*ers s!&%% "u#, se%% or de&% in se$urities un%ess !e !o%ds & $ertifi$&te of registr&tion gr&nted "# S .I under t!e Regu%&tions 5&de "# S .I ion re%&tion to t!e5.

,!e Centr&% Go+ern5ent !&s notified S .I 3Sto$* .ro*ers & Su"2.ro*ers4 Ru%es, >BB< in e7er$ise of t!e 'o)ers $onferred "# se$tion <B of S .I A$t, >BB<. ,!ese ru%es $&5e into effe$t on <=t! August, >BB<.

T#( G +4#( "-+#1 , " I(@#1%!(2

W&rren .uffet !&s suggested ten go%den ru%es for in+esting )!i$! 'ro+es to "e i55ense use to t!e in+estors )!o )&nt & "etter in+est5ent in sto$* 5&r*ets. ,!e ru%es &re &s des$ri"ed "e%o)1 >. /e+er in+est in & "usiness #ou $&nnot underst&nd. <. Ris* $&n "e redu$ed "# $on$entr&ting on & fe) !o%dings. @. Sto' tr#ing to 'redi$t t!e dire$tion of t!e sto$* 5&r*et, t!e e$ono5#, interest r&tes, or e%e$tions. C. .u# $o5'&nies )it! strong !istories of 'rofit&"i%it# &nd )it! & do5in&nt "usiness fr&n$!isee. D. .e fe&rfu% )!en ot!ers &re greed# &nd greed# )!en ot!ers &re fe&rfu%. E. Un%ess #ou $&n )&t$! #our sto$* !o%ding de$%ine "# D=K )it!out "e$o5ing '&ni$2stri$*en, #ou s!ou%d not "e in t!e sto$* 5&r*et. F. Do not t&*e #e&r%# resu%ts too serious%#. Inste&d, fo$us on four or fi+e #e&r &+er&ges. ?. ;o$us on return on e6uit#, not e&rnings 'er s!&re 3 PS4. B. C&%$u%&te Lo)ner e&rningsM to get & true ref%e$tion of +&%ue. Loo* for $o5'&nies )it! !ig! 'rofit 5&rgins.

>=. A%)&#s in+est for t!e %ong ter5. Does t!e "usiness !&+e f&+or&"%e %ong ter5 'ros'e$tsN

TRANSACTION CYCLE

D#ci(i&n $& T!a"#

Placin O!"#!

+*n"( &! S#c*!i$i#(

T!an(ac$i&n C,cl#

T!a"# E)#c*$i&n

S#$$l#%#n$ &' T!a"#(

Cl#a!in &' T!a"#(

A 'erson !o%ding &ssets 3Se$uritiesJ;unds4, eit!er to 5eet !is %i6uidit# needs or to res!uff%e !is !o%dings in res'onse to $!&nges in !is 'er$e'tion &"out ris* &nd return of t!e &ssets, de$ides to "u# or se%% t!e se$urities. He se%e$ts & "ro*er &nd instru$ts !i5 to '%&$e "u#Jse%% order on &n e7$!&nge. ,!e order is $on+erted to & tr&de &s soon &s it finds & 5&t$!ing se%%J"u# order. At t!e end of t!e tr&de $#$%e, t!e tr&des &re netted to deter5ine t!e o"%ig&tions f t!e tr&ding 5e5"er8s se$uritiesJfunds &s 'er sett%e5ent $#$%e. .u#erJse%%er de%i+ers fundsJ se$urities &nd re$ei+es se$uritiesJfunds &nd &$6uires o)ners!i' of t!e se$urities. A se$urities tr&ns&$tion $#$%e is 'resented &"o+e. Hust "e$&use of t!is ,r&ns&$tion $#$%e, t!e )!o%e "usiness of Se$urities &nd Sto$* .ro*ing !&s e5erged. And &s &n e7tension of

sto$* "ro*ing, t!e "usiness of -n%ine Sto$* "ro*ingJ -n%ine ,r&dingJ e5erged

2.ro*ing !&s

MAJOR PLAYERS
>. SKSE SECURITIES LIMITED&))).s*ses%.$o54 <. ANGEL BROKING LTD. 3))).&nge%"ro*ing.$o54 @. RELIGARE SECURITIES LTD. 3))).re%ig&reon%ine.$o54 C. S. S. KANTILAL ISH:ARLAL SECURITIES P>T LTD. 3www.sharekhan.com4 D. ICICI :EB TRADE LTD. 3www.icicidirect.com4 E. 9 PAISA.COM 3www.5paisa.com4 F. KOTAK SECURITIES LTD. 3www.kotakstreet.com4 ?. INDIABULLS 3www.indiabulls.com4 B. MOTILAL OS:AL SECURITIES LTD. >=. HD5C SECURITIES LTD. 3www.hdfcsec.com4 >>. UTI SECURITIES LTD.

H!1% "A , SKSE S#$-"!%!#1 L!.!%#4

SKS Se$urities Li5ited is & su"sidi&r# of S&ur&s!tr& Kut$! Sto$* 7$!&nge Ltd. It )&s est&"%is!ed on <? t! H&nu&r#, <=== &nd it !&s st&rted its tr&ding &$ti+ities &s & 5e5"er of t!e .o5"&# Sto$* 7$!&nge on >= t! A'ri%,<=== &nd &s & 5e5"er of /&tion&% Sto$* 7$!&nge of indi& Ltd. on Et! Se'te5"er, <===

BSE MEMBERSHIP

,!e S&ur&s!tr& Kut$! Sto$* 7$!&nge 3 rst)!i%e4 Ltd., !&s t!erefore f%o&ted & su"sidi&r# n&5e%# SKS Se$urities Li5ited &nd on >> t! ;e"ru&r#, <=== it &$6uired 5e5"ers!i' of t!e .o5"&# Sto$* 7$!&nge &nd st&rted $o55er$i&% tr&ding fro5 >>t! A'ri%, <===. More t!&n >== 5e5"ers of t!e S&ur&s!tr& Kut$! Sto$* 7$!&nge !&+e "e$o5e su"2"ro*er of t!e su"sidi&r# &nd st&rted tr&ding in .S C&s! seg5ent. At 'resent SKS SL !&+e &"out @BB su"2"ro*ers &nd &"out E= su"2"ro*ers out of tot&% !&+e t!eir offi$e in t!e s&5e &5"ien$e. -ut of tot&% su" "ro*ers >=D &re t!e registered 5e5"er of SKS SL.

NSE &NATIONAL STOCK E=CHANGE'

SKS SL !&s &%so &$6uired 5e5"ers!i' of C&s! Seg5ent of t!e /&tion&% Sto$* 7$!&nge of Indi& 3/S 4 onEt! Se'te5"er <==<. And &%so &$6uired 5e5"ers!i' of ;uture & -'tion Seg5ent in <==B. SKS SL Se$urities Li5ited is &%so & de'ositor# '&rti$i'&nt of CDSL. -n%# Me5"ers of S&ur&s!tr& Kut$! Sto$* 7$!&nge Ltd. 3 rst)!i%e4 3SKS SL4 du%# registered "# S .I $&n "e$o5e & 5e5"er of SKS S CURI,I S LIMI, D. ,!e 5e5"er )i%% !&+e to get t!e5 registered )it! S .I &s su"2"ro*er of SKS S CURI,I S LIMI,H D 3SKS SL4 for tr&ding in .S J/S

SKS SL 5&# registered 5e5"ers of SKS &s &ut!ori0ed 'ersonJre5isiers for tr&ding in ;uture & -'tion seg5ent of .S &ndJor /S &nd $&n &%so register t!e5 &s $%ients. SKS SL 5&# &%so register $%ients introdu$ed t!roug! su$! &ut!ori0ed 'ersons on%# &nd 5&# tr&de on t!eir "e!&%f. SKS SL )ou%d not tr&de for in+estors dire$t%#, e7$e't for ;utures & -'tion Seg5ent of .S &ndJor /S .

S-SE CEO. S-SE S-SESL

CEO.S-SESL /MR0ASHO- H -OYANI

GENERAL MANAGER

-NOW YOUR CLIENTS /MR0 MANOJ -OTADIA1

MAR-ET OPERATION /MR0PARES H BAVISHI

ACCOUNT DEPT0 /DHARME SH MA-WAN A1

SURVEILLA MARGIN 2 NCE TRADING CLEARING TERMINAL

DEPOSITOR Y PARTICIPAN TS /MR0 PRAVIN SOJITRA1

DEMAT 2 MODIFICATIO N

TRDING 2 SETTLEMEN T
TRADING 2 SETTLEM ENT

Mission & Vision Statement

MISSION STATEMENT VISION STATEMENT

Core Competence

Ret&i% fo$used rese&r$! 'rodu$ts Ro"ust internet tr&ding f&$i%it# De'ositor# ser+i$es t!roug! CDSL We" "&sed <C 7 F "&$* offi$e soft)&re Good underst&nding of t!e su"2"ro*er &nd ret&i% $usto5er needs Profession&% )or* $u%ture )it! & 'erson&% tou$! Cost2 effe$ti+e 'ro$esses St&te2of2t!e2&rt te$!no%og# Sing%e $onne$ti+it# &nd s'eed# e7e$ution of tr&des. -n%ine te$!ni$&% su''ort & !e%' des*.

Uniqueness Of SKSESL
>==K ret&i% fo$us .S J /S $&s! & ;&- on & sing%e s$reen

f%e7i"%e 5&rginsJ e7'osure %i5its Person&%i0ed ser+i$es t!roug! $entr&%i0ed !e%' des* &nd <D "r&n$!es. $ost effe$ti+e te$!no%og#

Services of SKSESL

P&%ue Added .&$* offi$e Ser+i$es O We" en&"%ed $entr&%i0ed "&$*2offi$e O Centr&%i0ed !e%' des* ser+i$es O 2$ontr&$t notes $u5 4i55

E.B%!#i'3
2.ro*ing

O Mu%ti'%e e7$!&nges on sing%e s$reen O Intr&2d&# $&%%s & f%&s! ne)s O Histori$&% $!&rts )it! te$!ni$&% too%s

De5&t Ser+i$es O H&ss%e free &uto5&ted '&#2in O Wide "r&n$! $o+er&ge O Centr&%i0ed "i%%ing & &$$ounting

Salient features of SKSESL tra e!

M-+%!)+# #B$/*(2#1 ( * 1!(2+# 1$"##(: You $&n tr&de on%ine on .S , /S 2C&s! &nd ;&-, MCI &nd /CD I on & sing%e s$reen. S)##4: SKS SL use t!e %&test te$!no%og# to gener&te effi$ient u'ti5e &nd gre&ter st&"i%it# to gi+e #ou !ig! s'eed. C .)#%!%!@# C" <#"*2# "*%#1: SKS SL "e%ie+e in 'ro+iding our $%ients t!e "est +&%ue &dded ser+i$es &t t!e 5ost $o5'etiti+e "ro*er&ge r&tes. O)%!.-. .*"2!(1: SKS SL gi+es #ou t!e tr&ding e7'osure &t o'ti5u5 5&rgin %e+e% O(+!(# ,-(41 %"*(1,#": ,!e $%ients en(o# t!e $on+enien$e of on%ine tr&nsfer of funds fro5 t!eir "&n* &$$ounts, to t!e 5&rgin &$$ount of SKS SL on%ine. P#"1 (*+!D#4 1#"@!$#: H/I $%ients $&n &+&i% of 'erson&%i0ed &d+isor# ser+i$es fro5 our tr&ined &nd e7'erien$ed de&%ers, reg&rding tr&ding o''ortunities.

B*$< ,,!$# !(,"*1%"-$%-"#: SKS SL 'ro+ide &n &uto5&ted )e" en&"%ed $entr&%i0ed "&$*2offi$e )!ere"# t!e $%ients $&n !&+e &$$ess to t!eir tr&de $onfir5&tion re'orts,

!o%ding st&te5ent, t!eir net 'osition, t!e 5&rgins &nd t!e st&te5ent of &$$ounts &nd %edgers on & <C I F "&sis. E 7 C (%"*$% ( %#1 $-. C!++1: We 'ro+ide $ontr&$t notes $u5 "i%%s in e%e$troni$ for5 resu%ting in e&se of &$$ess to tr&des $&rried out "# t!e $%ients on &n# '&rti$u%&r d&#. E7$ (%"*$% N %#1 $-. B!++1

Ange% 'ro+ide $ontr&$t notes $u5 "i%%s in e%e$troni$ for5. ,!e soft)&re f&$i%it&tes do)n%o&ding of re%e+&nt $ontr&$t notes &nd "i%%s.

Ange% !&+e t&*en &de6u&te $&re &nd 're$&ution &"out t!e d&t& se$urit#, so t!&t &%% our $%ients &re &ssured t!&t t!e d&t& is on%# &$$essed "# t!e5 &nd not s!&red )it! &n#one e%se.

D#) 1!% "A 5*$!+!%A

:/*% !1 D#) 1!% "A P*"%!$!)*(%E

Ser+i$es &nd ;&$i%ities 'ro+ided "# De'ositor# P&rti$i'&nt is so5et!ing %i*e Co55er$i&% .&n*ing Ser+i$e. M&(or differen$e "et)een t)o is t!&n Co55er$i&% .&n* 'ro+ide interest on -)ner8s de'osit )!i%e not in $&se of De'ositor# P&rti$i'&nt. "ut , s!&res &re tr&nsfer into %e$troni$ ;or5 &nd *e't in .enefi$i&r# -)ner8s A$$ount, $&n s&# .&%&n$e. A de'ositor# is & f&$i%it# for !o%ding se$urities, )!i$! en&"%es se$urities tr&ns&$tions to "e 'ro$essed "# "oo* entr#. ,o &$!ie+e t!is 'ur'ose, t!e de'ositor# 5&# i55o"i%i0e t!e se$urities or de25&teri&%i0e t!e5 3so t!&t t!e# e7ist on%# &s e%e$troni$ re$ord4. Indi& !&s $!osen t!e de5&teri&%i0&tion route. In Indi&, & de'ositor# is &n org&ni0&tion, )!i$! !o%ds t!e "enefi$i&% o)ner8s se$urities in e%e$troni$ for5, t!roug! & registered De'ositor# P&rti$i'&nt 3DP4. A de'ositor# fun$tions so5e)!&t si5i%&r to & $o55er$i&% "&n*. ,o &+&i% of t!e ser+i$es offered "# & de'ositor#, t!e in+estor !&s to o'en &n &$$ount )it! it t!roug! & registered DP. CDSL8s De5&t ser+i$es &re e7tended t!roug! its &gents $&%%ed De'ositor# P&rti$i'&nts 3DP4. ,!e DP is t!e %in* "et)een t!e in+estor &nd CDSL. An in+estor )!o o'ens & De5&t &$$ount )it! & DP $&n uti%i0e t!e ser+i$es offered "# CDSL. W!i%e t!e DP 'ro$esses t!e instru$tions of t!e in+estor, t!e &$$ount &nd re$ords t!ereof is 5&int&ined )it! CDSL. A DP is t!us & Lser+i$e $enterM for t!e in+estor.

CDSL8s s#ste5 is "&sed on $entr&%i0ed d&t&"&se &r$!ite$ture )it! on2%ine $onne$ti+it# )it! DP8s. .e$&use of t!is $entr&%i0ed &r$!ite$ture. ,!e $ost for setting u' & DP outfit under CDSL s#ste5 is signifi$&nt%# s%o)er. Si5i%&r%#, t!e re$urring $osts to "e in$urred "# & CDSL2DP in ter5s of 5&int&ining "&$*2u's &nd t!e re%&ted d&t& stor&ge &re 5ini5&%. ,!is en&"%es & CDSL2DP to offer de'ositor# ser+i$es to in+estors &t &nd &ttr&$ti+e 'ri$e &nd &t t!e s&5e ti5e &$!ie+e "re&*2e+en f&ster &t 5u$! %o)er +o%u5es. ,!e $entr&%i0ed &r$!ite$ture &%so &%%o)s CDSL2DP to 5&*e &+&i%&"%e to t!e in+estors & to t!e 5inute st&tus of t!eir &$$ount &nd tr&ns&$tions. CDSL2DPs $&n &%so set u' "r&n$!es )it! dire$t e%e$troni$ $onne$ti+it# )it! CDSL. SKS SL is & $or'or&te DP in s&ur&s!tr&. As on d&te SKS ser+i$e @@=== '%us $%ients t!roug! & )e%%2e6ui''ed "r&n$! net)or*. SKS SL is '%&nning to offer on%ine ser+i$es, )!i$! is offered "# /SDLJCDSL. SKS SL is &ffi%i&ted to CDSL in order to gi+e o'ti5u5 $ost so%ution to t!eir $%ients *ee'ing in +ie) t!e in+estors needs. SKS SL '%&$e & !ig! 're5iu5 o+er $usto5er ser+i$e &nd 'ro5't re'orting in order to ensure integrit# of tr&ns&$tion. SKS SL8s $usto5er $entri$ s$!e5es !&+e "een designed to e%e5ent 3su$! &s tr&de e7e$ution de5&teri&%i0&tion &nd re25&teri&%i0&tion4 &t e$ono5i$&% 'ri$es 7$e't De5&t, &n# De'ositor# P&rti$i'&nt 'ro+ides fo%%o)ing ser+i$es1 >. A$$ount -'ening <. De5&teri&%i0&tion @. Pro$essing De%i+er# &nd Re$ei't Instru$tion C. A$$ount St&te5ent D. Re25&teri&%i0&tion E. P%edging F. /o5in&tion ?. ,r&ns&$tion of Se$urities

B. C!&nge in Address >=. .&n* A$$ount Det&i%s

C"!%#"!* , " B#!(2 * DP

Su''ose & .ro*er or &n# fir5 )&nted to &$t &s & De'ositor# P&rti$i'&nt )it! CDS3I4L, t!en it !&s to fu%fi%% so5e re6uire5ent f&s!ioned "# CDS3I4L. After fu%fi%%ing su$! nor5s, CDS3I4L 'ro+ide %i$ense to &$t &s & De'ositor# P&rti$i'&nt. Let us %oo* in so5e gre&ter det&i%s of t!is.

E+!2!C!+!%A
Pu"%i$ ;in&n$i&% Institution .&n*s in$%uding ;oreign .&n*s St&te ;in&n$i&% Cor'or&tion An Institution eng&ged in 'ro+iding fin&n$i&% ser+i$e 'ro5oted "# &"o+e Mentioned (oint%# &nd se+er&%%# Custodi&n of Se$urities C%e&ring Cor'or&tion or C%e&ring House of & Sto$* 7$!&nge Sto$* .ro*er /on2.&n*ing ;in&n$i&% Co5'&n# Registr&r & ,r&nsfer Agents

SKS Se$urities Li5ited is & Sto$* .ro*er &s )e%% &s C%e&ring Cor'or&tion or C%e&ring House of & Sto$* 7$!&nge.

ROLE O5 DP
A De'ositor# is &n org&ni0&tion fir5 to 'ro+ide e%e$troni$ de'ositor# f&$i%ities for se$urities tr&ded. Se$urities &re t!en !e%d in t!e e%e$troni$ for5 t!roug! t!e 5ediu5 of DP. ,!e /SDL is t!e first de'ositor# in Indi&. ,!e fun$tions of /SDL &re regu%&ted "# t!e Se$urities &nd 7$!&nge .o&rd of Indi& 3S .I4.

,!e De'ositor# is not (ust &not!er $ustodi&n. ,!e De'ositor# $&n %eg&%%# tr&nsfer "enefi$i&% o)ners!i', )!i$! & $ustodi&n $&nnot. ,!e $!ief o"(e$ti+e of & de'ositor# is to redu$e sett%e5ent ris* "# 5ini5i0ing t!e '&'er)or* in+o%+ed in tr&ding, sett%ing &nd tr&nsferring se$urities. ,o uti%i0e t!e ser+i$es offered "# & de'ositor#, #ou 5ust o'en &n &$$ount )it! t!e de'ositor# t!roug! & DP. ,!e DPs &re t!e %in* "et)een t!e s!&re!o%ders &nd t!e $o5'&n# &nd /SDL. De'ending on t!e DP, t!ere 5&# or 5&# not "e &n o'ening &$$ount fee. ,!e DPs %e+# fees to)&rds tr&ns&$tion &nd $ustod#. .&n*s, fin&n$i&% institutions, $ustodi&ns &nd sto$* "ro*ers $&n "e$o5e DPs su"(e$t to t!eir 5eeting $ert&in re6uire5ents 'res$ri"e "# /SDL &nd S .I. /SDL 'u"%is!es t!e %ist of DPs registered )it! t!e5 fro5 ti5e to ti5e. ,!e DP )i%% 'ro+ide #ou )it! & '&ss"oo* or st&te5ent of &$$ount 'eriodi$&%%# to infor5 #ou on #our !o%dings. You $&n e+en !&+e & 0ero "&%&n$e in #our &$$ount

P*A -% P" $#11 W!en tr&ns&$tion is done "et)een t!e t)o 5e5"ers of s&5e DP t!en it is $&%%ed intern&% '&#out 'ro$ess, "ut it $&n "e *no)n on%# &fter C o8$%o$* )!en tr&ding gets o+er. It $&n "e *no)n t!&t )!et!er t!e tr&ns&$tion is done intern&%%# or not. -t!er)ise &%% t!e tr&ns&$tions &re done t!oroug! e7$!&nge on%#. /o) if t!e situ&tion &rises in )!i$! one of t!e 5e5"er of DP !&s so%d & definite 6u&ntit# of s!&res, "ut &g&inst )!i$! no one !&s 'ur$!&sed t!e s&5e &5ount of 6u&ntit# of s!&res "e%onging to s&5e $o5'&n# t!en t!e )!o%e %ot )i%% go to t!e e7$!&nge. -n t!e ot!er !&nd if one of t!e '&rties !&s "oug!t $o5'&r&ti+e%# %ess 6u&ntit# t!&n so%d "# &not!er '&rt# t!en it is $&%%ed 1/ "%,*++ , 1/*"#1.

/o) %et us underst&nd t!e &"o+e $on$e't )it! t!e !e%' of & 'r&$ti$&% e7&5'%e. Su''ose, one of t!e 5e5"ers of Ange% in RAHK-, !&s so%d ?== s!&res of Re%i&n$e L,D., "ut &g&inst )!i$! 5e5"er of Ange% &t Mu5"&i "r&n$! !&s 'ur$!&sed on%# @== s!&res of t!e s&5e $o5'&n# t!en it is $&%%ed SHORT5ALL . /o), &fter t!e $%osing of tr&ding &$ti+it# 3i.e. &fter C o8$%o$*4. 7$!&nge )i%% 're'&re & s!ortf&%% re'ort & t!is )i%% "e dire$t%# sent to H.-. /o), de'&rt5ent )i%% 're'&re & su55&r# fro5 t!e re'ort. After t!&t if DP !&s &$$ess t!en de&%ing )i%% "e done intern&%%# ot!er)ise &u$tion )i%% "e done "# e7$!&nge in )!i$! e7$!&nge )i%% 'ur$!&se or se%% s!ortf&%% of s!&res fro5 t!e 5&r*et. P&#out 'ro$ess 5&in%# indi$&tes &$$ess &5ount to "e '&id "# DP i.e. )!en 'ur$!&se of s!&re is $o5'&r&ti+e%# !ig!er t!en se%%ing.

P*A I( P" $#11 /o) if )e %oo* fro5 t!e ot!er side t!e s&5e $on$e't, t!en it is $&%%ed PAY IN PROCESS . In t!is 'ro$ess if se%%ing is done $o5'&r&ti+e%# !ig!er t!en 'ur$!&se, t!en DP )i%% e&rn i.e. DP )i%% get re%&ti+e%# 5ore &5ount &g&inst )!i$! it !&s to '&# %ess &5ount. In "ot! t!e tr&ns&$tion i.e. in '&#ing & '&#out t!e '&#5ent )i%% "e done t!oroug! $!e$*s on%#. C (%"*$% ( %# Contr&$t note is & $onfir5&tion of tr&des done on & '&rti$u%&r d&# for &nd on "e!&%f of & $%ient. Ange% s!&%% issue & $ontr&$t note to !is $%ient for tr&des 3'ur$!&seJs&%e of se$urities4 e7e$uted )it! &%% re%e+&nt det&i%s &s re6uired t!erein to "e fi%%ed in 3refer to S .I $ir$u%&r no. SMDJS DJCIRJ<@@<> d&ted Hune ?, <==D4. A $ontr&$t note s!&%% "e issued to & $%ient )it!in <C !ours of t!e e7e$ution of t!e $ontr&$t du%# signed "# t!e ,M or !is &ut!ori0ed sign&tor# or $%ient &ttorne#

"ENE#ITS O# O$ENIN% AN ACCOUNT &IT' C(SL S)STEM

,!e uni6ue $entr&%i0ed d&t&"&se of CDSL en&"%es DPs in

De"itJCredit se$urities inst&nt&neous%# to t!e .enefi$i&% -)ner8s &$$ount, t!ere"# &+oiding &n# tr&nsit 'osition. CDSL8s uni6ue $%ient ID nu5"er ensures de"itJ$redit of se$urities on%# to t!e intended &$$ount &s t!e s#ste5 does not &$$e't & tr&ns&$tion, )!ere &$$ount nu5"er is *e#ed in in$orre$t%#. CDSL offers f&$i%ities to t!e C%e&ring House. C%e&ring Cor'or&tion under )!i$! se$urities so%dJ'ur$!&sed "# &n# .- on .S t!e5 t!roug! t!e "ro*er8s 'oo% &$$ount. CDSL does not $o%%e$t &n# $ustod# fees fro5 DPs, t!us, .-s $&n e7'e$t & %o)er $!&rge in res'e$t of se$urities !e%d in CDSL &$$ounts. ,!e tr&ns&$tion $ost for sett%e5ent of se$urities t!roug! CDSL &s %o)er in 5ost $&ses. $&n "e dire$t%# de%i+ered fro5J re$ei+ed in t!e .- &$$ount, )it!out routing

 I(%" 4-$%! ( % 4#"!@*%!@#1

,!e e5ergen$e of t!e 5&r*et for deri+&ti+e 'rodu$ts, 5ost not&"%# for)&rds, futures &nd o'tions, $&n "e tr&$ed "&$* to t!e )i%%ingness of ris*2&+erse e$ono5i$ &gents to gu&rd t!e5se%+es &g&inst un$ert&inties &rising out of f%u$tu&tions in &sset 'ri$es. .# t!eir +er# n&ture, t!e fin&n$i&% 5&r*ets &re 5&r*ed "# & +er# !ig! degree of +o%&ti%it#. ,!roug! t!e use of deri+&ti+e 'rodu$ts, it is 'ossi"%e to '&rti&%%# or fu%%# tr&nsfer 'ri$e ris*s "# %o$*ingin &sset 'ri$es. As instru5ents of ris* 5&n&ge5ent, t!ese gener&%%# do not inf%uen$e t!e f%u$tu&tions in t!e under%#ing &sset 'ri$es. Ho)e+er, "# %o$*ing2in &sset 'ri$es, deri+&ti+e 'rodu$ts 5ini5i0e t!e i5'&$t of f%u$tu&tions in &sset 'ri$es on t!e 'rofit&"i%it# &nd $&s! f%o) situ&tion of ris*2&+erse in+estors.

D#"!@*%!@#1 D#,!(#4
Deri+&ti+e is & 'rodu$t )!ose +&%ue is deri+ed fro5 t!e +&%ue of one or 5ore "&si$ +&ri&"%es, $&%%ed "&ses 3under%#ing &sset, inde7, or referen$e r&te4, in & $ontr&$tu&% 5&nner. ,!e under%#ing &sset $&n "e e6uit#, fore7, $o55odit# or &n# ot!er &sset. ;or e7&5'%e, )!e&t f&r5ers 5&# )is! to se%% t!eir !&r+est &t & future d&te to e%i5in&te t!e ris* of & $!&nge in 'ri$es "# t!&t d&te. Su$! & tr&ns&$tion is &n e7&5'%e of & deri+&ti+e. ,!e 'ri$e of t!is deri+&ti+e is dri+en "# t!e s'ot 'ri$e of )!e&t )!i$! is t!e Lunder%#ingM. 7&5'%e12 A +er# si5'%e e7&5'%e of deri+&ti+es is $urd, )!i$! is deri+&ti+e of 5i%*. ,!e 'ri$e of $urd de'ends u'on t!e 'ri$e of 5i%*, )!i$! in turn de'ends u'on t!e de5&nd, &nd su''%# of 5i%*. See it t!is )&#. ,!e 'ri$e of Re%i&n$e ,ri'%e -'tion Con+erti"%e De"entures 3Re%i&n$e ,-CD4 used to +&r# )it! t!e 'ri$e of Re%i&n$e s!&res. And t!e 'ri$e of ,e%$o )&rr&nts de'ends u'on t!e 'ri$e of ,e%$o s!&res. Do A5eri$&n de'ositor# re$ei'tsJ g%o"&% de'ositor# re$ei'ts of ICICI, S&t#&5 &nd Infos#s tr&ded on sto$* e7$!&nges in t!e USA &nd ng%&nd !&+e t!eir o)n +&%uesN /o. ,!e# dr&) t!eir 'ri$e fro5 t!e under%#ing s!&res tr&ded in Indi&. Consider !o) t!e +&%ue of 5utu&% fund units $!&nges on & d&#2to2d&# "&sis. Don8t 5utu&% fund units dr&) t!eir +&%ue fro5 t!e +&%ue of t!e 'ortfo%io of se$urities under t!e s$!e5esN Aren8t t!ese e7&5'%es of deri+&ti+esN Yes, t!ese &re. And #ou *no) )!&t9 t!ese e7&5'%es 'ro+e t!&t deri+&ti+es &re not so

ne) to us. /ift# o'tions &nd futures, Re%i&n$e futures &nd o'tions, S&t#&5 futures &nd o'tions et$ &re &%% e7&5'%es of deri+&ti+es. ;utures &nd o'tions &re t!e 5ost $o55on &nd 'o'u%&r for5 of deri+&ti+es. In t!e Indi&n $onte7t t!e Se$urities Contr&$ts 3Regu%&tion4 A$t, >BDE 3SC3R4A4 defines Lderi+&ti+eM to in$%ude >. A se$urit# deri+ed fro5 & de"t instru5ent, s!&re, %o&n )!et!er se$ured or unse$ured, ris* instru5ent or $ontr&$t for differen$es or &n# ot!er for5 of se$urit#. <. A $ontr&$t )!i$! deri+es its +&%ue fro5 t!e 'ri$es, or inde7 of 'ri$es, of under%#ing se$urities. Deri+&ti+es &re se$urities under t!e SC3R4A &nd !en$e t!e tr&ding of deri+&ti+es is go+erned "# t!e regu%&tor# fr&5e)or* under t!e SC3R4A.

H!1% "A , D#"!@*%!@#1

,!e deri+&ti+es 5&r*ets !&s e7isted for $enturies &s & resu%t of t!e need for "ot! users &nd 'rodu$ers of n&tur&% resour$es to !edge &g&inst 'ri$e f%u$tu&tions in t!e under%#ing $o55odities. A%t!oug! tr&ding in &gri$u%tur&% &nd ot!er $o55odities !&s "een t!e dri+ing for$e "e!ind t!e de+e%o'5ent of deri+&ti+es e7$!&nges, t!e de5&nd for 'rodu$ts "&sed on fin&n$i&% instru5ents 2 su$! &s "ond, $urren$ies, sto$*s &nd sto$* indi$esQ!&s no) f&r outstri''ed t!&t for t!e $o55odities $ontr&$ts. Indi& !&s "een tr&ding deri+&ti+es $ontr&$ts in si%+er, go%d, s'i$es, $offee, $otton &nd oi% et$ for de$&des in t!e gr&# 5&r*et. ,r&ding deri+&ti+es $ontr&$ts in org&ni0ed 5&r*et )&s %eg&% "efore Mor&r(i Des&i8s go+ern5ent "&nned for)&rd $ontr&$ts. Deri+&ti+es on sto$*s )ere tr&ded in t!e for5 of Te*i &nd Man i in unorg&ni0ed 5&r*ets. Re$ent%# futures $ontr&$t in +&rious $o55odities )&s &%%o)ed to tr&de on e7$!&nges. In Hune <===, /&tion&% Sto$* 7$!&nge &nd .o5"&# Sto$* 7$!&nge st&rted tr&ding in futures on Sense7 &nd /ift#. -'tions tr&ding on Sense7 &nd /ift# $o55en$ed in Hune <==>. Per# soon t!ere&fter tr&ding "eg&n on o'tions &nd futures in @> 'ro5inent sto$*s

in t!e 5ont! of Hu%# &nd /o+e5"er res'e$ti+e%#. ,!e 5&r*et %ots *ee's on $!&nging fro5 ti5e to ti5e

TYPES O5 DERI>ATI>ES

DERIVATIVES

O6ti!'

F+t+%&

S7a6

F!%7a%(

P+t

Ca55

I't&%& t

C+%%&'",

C!$$!(i

S&"+%it,

5OR:ARDS:

A for)&rd $ontr&$t is t!e si5'%est 5ode of & deri+&ti+e tr&ns&$tion. It is &n &gree5ent to "u# or se%% &n &sset 3of & s'e$ified 6u&ntit#4 &t & $ert&in future ti5e for & $ert&in 'ri$e. /o $&s! is e7$!&nged )!en t!e $ontr&$t is entered into. I++-1%"*%! (: 7 S!#&5 )&nts to "u# & ,P, )!i$! $osts Rs >=,=== "ut !e !&s no $&s! to "u# it outrig!t. He $&n on%# "u# it @ 5ont!s !en$e. He, !o)e+er, fe&rs t!&t 'ri$es of te%e+isions )i%% rise @ 5ont!s fro5 no). So in order to 'rote$t !i5se%f fro5 t!e rise in 'ri$es S!#&5 enters into & $ontr&$t )it! t!e ,P de&%er t!&t @ 5ont!s fro5 no) !e )i%% "u# t!e ,P for Rs >=,===. W!&t S!#&5 is doing is t!&t !e is %o$*ing t!e $urrent 'ri$e of & ,P for & for)&rd $ontr&$t. ,!e for)&rd $ontr&$t is sett%ed &t 5&turit#. ,!e de&%er )i%% de%i+er t!e &sset to S!#&5 &t t!e end of t!ree 5ont!s &nd S!#&5 in turn )i%% '&# $&s! e6ui+&%ent to t!e ,P 'ri$e on de%i+er#.

$ositive Aspects of #or+ar Contracts! , >. A "usiness org&ni0&tion or institution $&n use t!e for)&rd 5&r*et to !edge or %o$* in t!e 'ri$e of 'ur$!&se or s&%e of & $o55odit# or fin&n$i&% &sset on & future $o55it5ent d&te. <. M&rgins &re not gener&%%# '&id on for)&rd $ontr&$ts9 t!ere is &%so no u' front 're5iu5 so t!ese $ontr&$ts do not re6uire &n initi&% $ost. @. As for)&rd $ontr&$ts &re t&i%or 5&de, t!e ris* of 'ri$e $&n "e !edged u' to >== 'er $ent. ,!is f&$i%it# 5&# not "e 'ossi"%e in futures or o'tions.

N#2*%!@# A1)#$%1 , 5 "6*"4 C (%"*$%1: 7 >. As t!ere is no 'erfor5&n$e gu&r&ntee in & for)&rd $ontr&$t, t!ere is &%)&#s $ounter2'&rt# ris*. In &ddition, t!e 'ossi"i%it# t!&t t!e $ounter2 '&rt# $ou%d f&i% to 'erfor5 !is o"%ig&tion on t!e due d&te $re&tes &ddition&% ris*. <. ;or)&rd $ontr&$ts do not &%%o) in+estors to deri+e g&in fro5 & f&+or&"%e 'ri$e 5o+e5ent or to un)ind & tr&ns&$tion on$e t!e $ontr&$t is 5&de. At t!e 5ost, t!e $&n "e $&n$e%%ed on ter5s &greed u'on "# t!e $ounter2 '&rt#. @. It is diffi$u%t to get $ounter2'&rt# on one8s o)n ter5s. In &ddition, &s & for)&rd $ontr&$t is not tr&ded on &n e7$!&nge, it offers no re&d# %i6uidit#. C. In 5ost $&ses, one $ounter2'&rt# of & for)&rd $ontr&$t is & "&n* or & tr&der )!o )i%% s6u&re u' !is 'osition "# entering into re+erse $ontr&$t. ,!ese tr&ns&$tions do not t&*e '%&$e si5u%t&neous%#, so t!e "&n* of tr&der )i%% nor5&%%# *ee' %&rge "id2&s* to &+oid &n# %oss due to 'ri$e f%u$tu&tions. ,!is 'ro$edure in$re&ses t!e $ost of !edging. Ho)e+er, for)&rd $ontr&$ts in $ert&in 5&r*ets !&+e "e$o5e +er# st&nd&rdi0ed, &s in t!e $&se of foreign e7$!&nge, t!ere"# redu$ing tr&ns&$tion $osts &nd in$re&sing tr&ns&$tions +o%u5e. ,!is 'ro$ess of st&nd&rdi0&tion re&$!es its %i5it in t!e org&ni0ed futures 5&r*et. ;or)&rd $ontr&$ts &re +er# usefu% in !edging &nd s'e$u%&tion. ,!e $%&ssi$ !edging &''%i$&tion )ou%d "e t!&t of &n e7'orter )!o e7'e$ts to re$ei+e '&#5ent in do%%&rs t!ree 5ont!s %&ter. He is e7'osed to t!e ris* of e7$!&nge r&te f%u$tu&tions. .# using t!e $urren$# for)&rd 5&r*et to se%% do%%&rs for)&rd, !e $&n %o$* on to & r&te tod&# &nd redu$e !is un$ert&int#. Si5i%&r%# &n i5'orter )!o is re6uired to 5&*e & '&#5ent in do%%&rs t)o

5ont!s !en$e $&n redu$e !is e7'osure to e7$!&nge r&te f%u$tu&tions "# "u#ing do%%&rs for)&rd. If & s'e$u%&tor !&s infor5&tion or &n&%#sis, )!i$! fore$&sts &n u'turn in & 'ri$e, t!en !e $&n go %ong on t!e for)&rd 5&r*et inste&d of t!e $&s! 5&r*et. ,!e s'e$u%&tor )ou%d go %ong on t!e for)&rd, )&it for t!e 'ri$e to rise, &nd t!en t&*e & re+ersing tr&ns&$tion to "oo* 'rofits. S'e$u%&tors 5&# )e%% "e re6uired to de'osit & 5&rgin u'front. Ho)e+er, t!is is gener&%%# & re%&ti+e%# s5&%% 'ro'ortion of t!e +&%ue of t!e &ssets under%#ing t!e for)&rd $ontr&$t. ,!e use of for)&rd 5&r*ets !ere su''%ies %e+er&ge to t!e s'e$u%&tor. In 5ost 5&r*ets, 5idd%e5en &re re6uired to "ring "u#ers &nd se%%ers of for)&rd $ontr&$ts toget!er. ,!ese 5idd%e5en $!&rge & fee, for t!eir ser+i$es.

5-%-"# $ (%"*$% ;utures 5&r*ets )ere designed to so%+e t!e 'ro"%e5s t!&t e7ist in for)&rd 5&r*ets. A futures $ontr&$t is &n &gree5ent "et)een t)o '&rties to "u# or se%% &n &sset &t & $ert&in ti5e in t!e future &t & $ert&in 'ri$e. .ut un%i*e for)&rd $ontr&$ts, t!e futures $ontr&$ts &re st&nd&rdi0ed &nd e7$!&nge tr&ded. ,o f&$i%it&te %i6uidit# in t!e futures $ontr&$ts, t!e e7$!&nge s'e$ifies $ert&in st&nd&rd fe&tures of t!e $ontr&$t. It is & st&nd&rdi0ed $ontr&$t )it! st&nd&rd under%#ing instru5ent, & st&nd&rd 6u&ntit# &nd 6u&%it# of t!e under%#ing instru5ent t!&t $&n "e de%i+ered, 3or )!i$! $&n "e used for referen$e 'ur'oses in sett%e5ent4 &nd & st&nd&rd ti5ing of su$! sett%e5ent. A futures $ontr&$t 5&# "e offset 'rior to 5&turit# "# entering into &n e6u&% &nd o''osite tr&ns&$tion. More t!&n BBK of futures tr&ns&$tions &re offset t!is )&#.

T/# 1%*(4*"4!D#4 !%#.1 !( * ,-%-"#1 $ (%"*$% *"#: Ru&ntit# of t!e Under%#ing. Ru&%it# of t!e Under%#ing. ,!e d&te &nd 5ont! of de%i+er#. ,!e units of 'ri$e 6uot&tion &nd 5ini5u5 'ri$e $!&nge. Lo$&tion of sett%e5ent.

D!1%!($%! ( C#%6##( ,-%-"#1 *(4 , "6*"41 $ (%"*$%1: 7 ;or)&rd $ontr&$ts &re often $onfused )it! futures $ontr&$ts. ,!e $onfusion is 'ri5&ri%# "e$&use "ot! ser+e essenti&%%# t!e s&5e e$ono5i$ fun$tions of &%%o$&ting ris* in t!e 'resen$e of future 'ri$e un$ert&int#. Ho)e+er futures &re & signifi$&nt i5'ro+e5ent o+er t!e for)&rd $ontr&$ts &s t!e# e%i5in&te $ounter2'&rt# ris* &nd offer 5ore %i6uidit#. 5-%-"#1 ,r&de on &n org&ni0ed e7$!&nge St&nd&rdi0ed $ontr&$t ter5s ter5s Hen$e 5ore %i6uid Re6uires 5&rgin '&#5ents ;o%%o)s d&i%# sett%e5ent 5 "6*"41 -,C in n&ture Custo5i0ed

$ontr&$t

!en$e %ess %i6uid /o 5&rgin '&#5ent Sett%e5ent !&''ens &t end of 'eriod

5-%-"#1 %#".!( + 2A: 7

Spot pric#1 ,!e 'ri$e &t )!i$! &n &sset tr&des in t!e s'ot 5&r*et. #utures pric#1 ,!e 'ri$e &t )!i$! t!e futures $ontr&$t tr&des in t!e futures 5&r*et. Contract c-cl#1 ,!e 'eriod o+er )!i$! & $ontr&$t tr&des. ,!e inde7 futures $ontr&$ts on t!e /S !&+e one25ont!, t)o25ont!s &nd t!ree25ont!s e7'ir# $#$%es )!i$! e7'ire on t!e %&st ,!ursd&# of t!e 5ont!. ,!us & H&nu&r# e7'ir&tion $ontr&$t e7'ires on t!e %&st ,!ursd&# of H&nu&r# &nd & ;e"ru&r# e7'ir&tion $ontr&$t $e&ses tr&ding on t!e %&st ,!ursd&# of ;e"ru&r#. -n t!e ;rid&# fo%%o)ing t!e %&st ,!ursd&#, & ne) $ontr&$t !&+ing & t!ree25ont! e7'ir# is introdu$ed for tr&ding. E.pir- at#1 It is t!e d&te s'e$ified in t!e futures $ontr&$t. ,!is is t!e %&st d&# on )!i$! t!e $ontr&$t )i%% "e tr&ded, &t t!e end of )!i$! it )i%% $e&se to e7ist. Contract si/#1 ,!e &5ount of &sset t!&t !&s to "e de%i+ered under one $ontr&$t. ;or inst&n$e, t!e $ontr&$t si0e on /S 8s futures 5&r*et is $!&nge ti5e to ti5e. "asi11 In t!e $onte7t of fin&n$i&% futures, "&sis $&n "e defined &s t!e futures 'ri$e 5inus t!e s'ot 'ri$e. ,!ere )i%% "e & different "&sis for e&$! de%i+er# 5ont! for e&$! $ontr&$t. In & nor5&% 5&r*et, "&sis )i%% "e 'ositi+e. ,!is ref%e$ts t!&t futures 'ri$es nor5&%%# e7$eed s'ot 'ri$es. Cost of carrA1 ,!e re%&tions!i' "et)een futures 'ri$es &nd s'ot 'ri$es $&n "e su55&ri0ed in ter5s of )!&t is *no)n &s t!e $ost of $&rr#. ,!is 5e&sures t!e stor&ge $ost '%us t!e interest t!&t is '&id to fin&n$e t!e &sset %ess t!e in$o5e e&rned on t!e &sset. I(!%!*+ .*"2!(1 ,!e &5ount t!&t 5ust "e de'osited in t!e 5&rgin &$$ount &t t!e ti5e & futures $ontr&$t is first entered into is *no)n &s initi&% 5&rgin. M*"<!(27% 7.*"<#%1 In t!e futures 5&r*et, &t t!e end of e&$! tr&ding d&#, t!e 5&rgin &$$ount is &d(usted to ref%e$t t!e in+estor8s g&in or %oss de'ending u'on t!e futures $%osing 'ri$e. ,!is is $&%%ed 5&r*ingto5&r*et. M*!(%#(*($# .*"2!(1 ,!is is so5e)!&t %o)er t!&n t!e initi&% 5&rgin. ,!is is set to ensure t!&t t!e "&%&n$e in t!e 5&rgin &$$ount ne+er "e$o5es neg&ti+e. If t!e "&%&n$e in t!e 5&rgin &$$ount f&%%s "e%o) t!e 5&inten&n$e 5&rgin, t!e in+estor re$ei+es & 5&rgin $&%% &nd is e7'e$ted to to' u' t!e 5&rgin &$$ount to t!e initi&% 5&rgin %e+e% "efore tr&ding $o55en$es on t!e ne7t d&#.

HO: DOES 5UTURE TRADING :ORKSE ,!ere &re t)o "&si$ $&tegories of futures '&rti$i'&nts1

H#42#"1:
In gener&%, !edgers use futures for 'rote$tion &g&inst &d+erse future 'ri$e 5o+e5ents in t!e under%#ing $&s! $o55odit#. ,!e r&tion&% of !edging is "&sed u'on t!e de5onstr&ted tenden$# of $&s! 'ri$es &nd futures +&%ues to 5o+e in t&nde5. Hedgers &re +er# often "usinesses, or indi+idu&%s, )!o &t one 'oint or &not!er de&% in t!e under%#ing $&s! $o55odit#. ,&*e, for inst&n$e, & 5&(or food 'ro$essor )!o $&ns $orn. If $orn 'ri$es go u', !e 5ust '&# t!e f&r5er or $orn de&%er 5ore. ;or 'rote$tion &g&inst !ig!er $orn 'ri$es, t!e 'ro$essor $&n L!edgeM !is ris* e7'osure "# "u#ing enoug! $orn futures $ontr&$ts to $o+er t!e &5ount of $orn !e e7'e$ts to "u#. Sin$e $&s! &nd futures 'ri$es do tend to 5o+e in t&nde5, t!e futures 'osition )i%% 'rofit if $orn 'ri$es rise enoug! to offset $&s! $orn %osses.

S)#$-+*% ":
S'e$u%&tors &re t!e se$ond 5&(or grou' of future '%&#ers. ,!ese '&rti$i'&nts in$%ude inde'endent tr&ders &nd in+estor. ;or s'e$u%&tors, future !&+e i5'ort&nt &d+&nt&ges o+er ot!er in+es5ents. If t!e tr&der8s (udg5ent is good, !e $&n 5&*e 5ore 5one# in t!e future 5&r*et f&ster "e$&use futures 'ri$es tend, on &+er&ge, to $!&nge 5ore 6ui$*%# t!&n re&% est&te or sto$* 'ri$es, for e7&5'%e. -n t!e ot!er !&nd, "&d tr&ding (udg5ent in future 5&r*ets $&n $&use gre&ter %osses t!&n 5ig!t "e t!e $&se )it! ot!er in+est5ents.

H 6 5-%-"#1 6 "<
.u# & $ontr&$t

W!en s!&res &re "oug!t, it $&n "e "oug!t in &n# nu5"er, e+en if it is (ust one s!&re. In ;utures, & $ontr&$t )!i$! )i%% !&+e & s'e$ifi$ %ot si0e de'ending on t!e sto$* $&n "e "oug!t. LetAs s&#, &n Infos#s ;utures $ontr&$t is "oug!t. ,!is )i%% $o5'rise >== s!&res. -r, HPCL ;utures $ontr&$t is "oug!t. ,!is )i%% "e & %ot of ED= s!&res. In ;utures, %ot is "oug!t. ,!e %ot si0e is set for e&$! futures $ontr&$t &nd it differs fro5 sto$* to sto$*. M&rgin '&#5ent

W!en & ;utures $ontr&$t is "oug!t, t!e entire +&%ue of t!e $ontr&$t is not '&id "ut (ust t!e 5&rgin. ,!is 5&rgin &5ount too is 'res$ri"ed "# t!e e7$!&nge.

LetAs s&# & HPCL ;utures $ontr&$t is "oug!t. And t!e 'ri$e of e&$! HPCL s!&re is Rs @>>. ,!is )i%% &5ount to Rs <,=<,>D= 3Rs @>> 7 ED= s!&res4. t!e entire &5ount of Rs <,=<,>D= is not '&id. -n%# '&# >DK to <=K of t!&t &5ount is '&id &nd t!is is $&%%ed t!e 5&rgin &5ount.

,!e 5&rgin de'ends on )!&t t!e e7$!&nge sets for t!e d&#. .&sed on $ert&in '&r&5eters, it de$%&res t!e 5&rgin for e&$! sto$*.

So t!e 5&rgin for Infos#s )i%% +&r# fro5, s&#, HPCL. LetAs s&# t!e 5&rgin for t!e HPCL ;utures is >DK. So on%# Rs @=,@<< 3not Rs <,=<,>D=4 is '&id. Ho) #ou 5&*e or %ose 5one#

A HPCL ;utures $ontr&$t is "oug!t &nd t!e under%#ing 'ri$e is Rs @>> 'er s!&re. LetAs s&#, t!e ne7t d&# it 5o+es to Rs @><. ,!e differen$e is Rs > 'er s!&re 3@>< 2 @>>4 Rs ED= 3Rs > 'er s!&re 7 ED= s!&res4 is $redited. ,!e fo%%o)ing d&#, it di's to Rs @>=. ,!e differen$e is Rs < 'er s!&re 3@>< 2 @>=4 Sin$e t!e 'ri$e !&s di''ed, Rs >,@== 3Rs < 'er s!&re 7 ED= s!&res4 is de"ited fro5 &$$ount. ,!is )i%% go on ti%% ;utures $ontr&$t is so%d or it e7'ires 3%&st ,!ursd&# of t!e 5ont!4. So, on & d&i%# "&sis 5one# is 5&de or %ost.

:/A 5-%-"#1 *"# ) )-+*" /o de%i+er#

,!ere is no de%i+er#. W!en 'ur$!&se is 5&de in t!e $&s! seg5ent 3)!ere in+estors "u# &nd se%% &n# nu5"er of s!&res &nd !o%d t!e5 in de5&t &$$ounts4, t!e s!&res &re de%i+ered &nd sent to de5&t &$$ount. -+er !ere, t!ere is no de%i+er# so de5&t &$$ount is not needed.

Lo)er "ro*er&ge

,!e "ro*er&ge in ;utures is 5u$! %o)er. It )i%% "e &round =.=@K to =.=DK of t!e tr&ns&$tion. ,!ese &re t!e r&tes gi+en to regu%&r in+estors. An o$$&sion&% in+estor 5&# end u' '&#ing u' to =.>K &s "ro*er&ge. In t!e $&s! seg5ent, t!e "ro*er&ge )i%% "e &round =.<DK to =.FDK. M&rgin '&#5ent

W!en 'ur$!&se is 5&de in t!e $&s! seg5ent, #ou !&+e to 5&*e t!e entire '&#5ent to #our "ro*er. LetAs s&# ED= HPCL s!&res &re "oug!t for Rs @>> 'er s!&re. Rs <,=<,>D= !&s to "e '&id. Wit!in t)o d&#s, fu%% '&#5ent to "ro*er is to "e 5&de. In ;utures, (ust t!e 5&rgin is '&id, not t!e entire &5ount. C&n effe$ti+e%# s!ort se%%

W!en s!&res &re so%d )it!out o)ning t!e5, it is *no)n &s s!ort se%%ing. It is done if it is "e%ie+ed t!&t t!e 'ri$e of t!e sto$* is going to dro'. ,!is )&#, it is so%d &t & !ig!er r&te &nd "oug!t &t & %o)er r&te %&ter. Wit! ;utures, tr&ns&$tions &re not s6u&red &t t!e end of t!e d&#. ,r&ns&$tion $&n "e s6u&red )!ene+er )&nted or )&it ti%% it e7'ires on t!e %&st ,!ursd&# of t!e 5ont!. .ut, in t!e $&s! seg5ent, tr&ns&$tion !&s to "e s6u&red u' &t t!e end of t!e d&#, so s!ort se%% $&n "e done (ust for one d&#.

:/#"# %/# $*1/ 1#2.#(% 1$ "#1 Pri$e differenti&%

It is )ort! noting t!&t t!e 'ri$e of t!e s!&res in t!e $&s! seg5ent is 5ost%# %o)er t!&n t!e ;utures 'ri$e.

So, if it is &+&i%&"%e for Rs @>> in t!e ;utures seg5ent, it $&n "e "oug!t for Rs @=? in t!e $&s! seg5ent. ,!oug!, on o$$&sions it 5&# e+en "e s%ig!t%# !ig!er. ,&7

In ;utures, t&7 of @@K on 'rofit is '&id. In e6uit#, it is & f%&t r&te of >=K 3s!ort ter5 $&'it&% g&ins4 if it is so%d )it!in & #e&r &nd no t&7 if so%d &fter & #e&r 3%ong ter5 $&'it&% g&ins4. ;%e7i"i%it# in 'ur$!&ses

In t!e $&s! seg5ent, &n# no. of s!&res $&n "e 'i$*ed !o)e+er 5&n# s!&res #ou )&nt st&rting fro5 (ust one s!&re. In ;utures, it $&nnot "e "oug!t %ess t!&n t!e %ot si0e 'res$ri"ed. If 5ore s!&res &re "oug!t, "ut t!e# 5ust "e in 5u%ti'%es of t!e %ot. So, one or t)o $ontr&$ts &re "oug!t. Ris* in ;utures is !ig!er

If &n in+estor )&nts to "u# s!&res &nd !o%d on to it, !e s!ou%d in+est in t!e $&s! seg5ent. Sin$e ;utures is & tr&ding too%, t!e ris* is &%so 5u$! !ig!er.

LetAs s&# t!e s!&res of Infos#s &re going &t Rs <,F== 'er s!&re. And, !e "u#s >== s!&res in t!e $&s! seg5ent. !e ends u' '&#ing Rs <,F=,===. ,!e 'ri$e di's to Rs <,<==. If !e se%%s t!e s!&res &t t!is r&te, !e 5&*es & %oss of >?.DK /o) %etAs s&# !e 'ur$!&ses &n Infos#s ;utures &t t!e under%#ing s!&re 'ri$e "eing t!e s&5e. He '&#s t!e <=K 5&rgin of Rs DC,===.

LetAs s&# t!e 'ri$e di's to Rs <,<==. He !&s to '&# out Rs D=,===. Sin$e !e in+ested on%# Rs DC,===, !e !&s in$urred & %oss of B<.DK. Hen$e, !is %osses $&n "e 5u$! !ig!er in ;utures. :/#"# $*( A - %"*4#E A%% sto$*s &re not 'er5itted for tr&ding in deri+&ti+es. .ut do note, to tr&de in futures, #ou )i%% !&+e to &''ro&$! & "ro*er )!o is &ut!ori0ed to tr&de in deri+&ti+es

A4@*(%*2#1 , 5-%-"#1 T"*4!(2 !( I(4!* ,!ere &re 5&n# in!erent &d+&nt&ges of tr&ding futures o+er ot!er in+est5ent &%tern&ti+es su$! &s s&+ings &$$ounts, sto$*s, "onds, o'tion, re&% est&te &nd $o%%e$ti"%es. 1. H!2/ L#@#"*2#: ,!e 'ri5&r# &ttr&$tion, of $ourse, is t!e 'otenti&% for %&rge 'rofits in s!ort 'eriod of ti5e. ,!e re&son t!&t futures tr&ding $&n "e so 'rofit&"%e is t!e !ig! %e+er&ge. ,o :o)n8 & future $ontr&$t &n in+estor on%# !&s to 'ut u' & s5&%% fr&$tion of t!e +&%ue of t!e $ontr&$t 3usu&%%# &round >=2<=K4 &s :5&rgin8. In ot!er )ords, t!e in+estor $&n tr&de & 5u$! %&rger &5ount of t!e se$urit# t!&n if !e "oug!t it outrig!t, so if !e !&s 'redi$ted t!e 5&r*et 5o+e5ent $orre$t%#, !is 'rofit )i%% "e 5u%ti'%ied 3ten2fo%d on & >=K de'osit4. ,!is is &n e7$e%%ent return $o5'&red to "u#ing &nd t&*ing '!#si$&% de%i+er# in sto$*s. 2. P" ,!% !( C %/ C-++ F C#*" .*"<#%: In future tr&ding, it is e&s# to se%% 3&%so referred to &s going s!ort4 or it is to "u# 3&%so referred to &s going %ong4 sto$*. .# $!oosing $orre$t%#, #ou $&n 5&*e 5one# )!et!er 'ri$es go u' or do)n. ,!erefore, tr&ding in t!e futures 5&r*ets offers t!e o''ortunit# to 'rofit fro5 &n# 'otenti&% e$ono5i$ s$en&rio. Reg&rd%ess of )!et!er )e !&+e inf%&tion or def%&tion, "oo5 or de'ression, !urri$&nes, droug!ts , f&5ines or free0es, t!ere is &%)&#s t!e 'otenti&% for 'rofit 5&*ing o''ortunities.

8. L 6#" %"*(1*$%! ( $ 1%: Anot!er &d+&nt&ge of futures tr&ding is 5u$! %o)er re%&ti+e $o55issions. Your $o55ission for tr&ding & futures $ontr&$t is one tent! of & 'er$ent 3=.>=2.<=4. Co55issions on indi+idu&% sto$*s &re t#'i$&%%# &s 5u$! &s one 'er$ent for "ot! "u#ing &nd se%%ing. G. H!2/ +!0-!4!%A: Most futures 5&r*ets &re +er# %i6uid, i.e. t!ere &re !uge &5ounts of $ontr&$ts tr&ded e+er# d&#. ,!is ensures t!&t 5&r*et orders $&n "e '%&$ed +er# 6ui$*%# &s t!ere &re &%)&#s "u#ers &nd se%%ers for 5ost $ontr&$t.

8.9 OPTIONS INTRODUCTION TO OPTIONS

/o)&d&#s, 5&n# in+estorsA 'ortfo%ios in$%ude in+est5ents su$! &s
funds stocks mutual

&nd

bonds

. .ut t!e +&riet# of se$urities #ou !&+e &t #our dis'os&%

does not end t!ere. Anot!er t#'e of se$urit#, $&%%ed &n o'tion, 'resents & )or%d of o''ortunit# to so'!isti$&ted in+estors. ,!e 'o)er of o'tions %ies in t!eir +ers&ti%it#. ,!e# en&"%e #ou to &d&'t or &d(ust #our 'osition &$$ording to &n# situ&tion t!&t &rises. -'tions $&n "e &s s'e$u%&ti+e or &s $onser+&ti+e &s #ou )&nt. ,!is 5e&ns #ou $&n do e+er#t!ing fro5 'rote$ting & 'osition fro5 & de$%ine to outrig!t "etting on t!e 5o+e5ent of & 5&r*et or inde7. ,!is +ers&ti%it#, !o)e+er, does not $o5e )it!out its $osts. -'tions &re $o5'%e7 se$urities &nd $&n "e e7tre5e%# ris*#. ,!is is )!#, )!en tr&ding o'tions, #ouA%% see & dis$%&i5er %i*e t!e fo%%o)ing1 -'tions in+o%+e ris*s &nd &re not suit&"%e for e+er#one. -'tion tr&ding $&n "e s'e$u%&ti+e in n&ture &nd $&rr# su"st&nti&% ris* of %oss. -n%# in+est )it!
risk capital

Des'ite )!&t &n#"od# te%%s #ou, o'tion tr&ding in+o%+es ris*, es'e$i&%%# if #ou donAt *no) )!&t #ou &re doing. .e$&use of t!is, 5&n# 'eo'%e suggest #ou steer $%e&r of o'tions &nd forget t!eir e7isten$e. -n t!e ot!er !&nd, "eing ignor&nt of &n# t#'e of in+est5ent '%&$es #ou in & )e&* 'osition. Per!&'s t!e s'e$u%&ti+e n&ture of o'tions doesnAt fit #our

st#%e. /o 'ro"%e5 2 t!en donAt s'e$u%&te in o'tions. .ut, "efore #ou de$ide not to in+est in o'tions, #ou s!ou%d underst&nd t!e5. /ot %e&rning !o) o'tions fun$tion is &s d&ngerous &s (u5'ing rig!t in1 )it!out *no)ing &"out o'tions #ou )ou%d not on%# forfeit !&+ing &not!er ite5 in #our in+esting too%"o7 "ut &%so %ose insig!t into t!e )or*ings of so5e of t!e )or%dAs %&rgest $or'or&tions. W!et!er it is to hedge t!e ris* of foreign2e7$!&nge tr&ns&$tions or to gi+e e5'%o#ees o)ners!i' in t!e for5 of sto$* o'tions, 5ost 5u%ti2n&tion&%s tod&# use o'tions in so5e for5 or &not!er. :/*% *"# )%! (1E An o'tion is & $ontr&$t )ritten "# & se%%er t!&t $on+e#s to t!e "u#er t!e rig!t Q "ut not t!e o"%ig&tion Q to "u# 3in t!e $&se of & call o'tion4 or to se%% 3in t!e $&se of & put o'tion4 & '&rti$u%&r &sset, &t & '&rti$u%&r 'ri$e 3Strike price / Exercise price4 in future. In return for gr&nting t!e o'tion, t!e se%%er $o%%e$ts & '&#5ent 3t!e premium4 fro5 t!e "u#er. 7$!&nge tr&ded o'tions for5 &n i5'ort&nt $%&ss of o'tions )!i$! !&+e st&nd&rdi0ed $ontr&$t fe&tures &nd tr&de on 'u"%i$ e7$!&nges, f&$i%it&ting tr&ding &5ong %&rge nu5"er of in+estors. ,!e# 'ro+ide sett%e5ent gu&r&ntee "# t!e C%e&ring Cor'or&tion t!ere"# redu$ing $ounter'&rt# ris*. -'tions $&n "e used for !edging, t&*ing & +ie) on t!e future dire$tion of t!e 5&r*et, for &r"itr&ge or for i5'%e5enting str&tegies )!i$! $&n !e%' in gener&ting in$o5e for in+estors under +&rious 5&r*et $onditions. ,!e ide& "e!ind &n o'tion is 'resent in 5&n# e+er#d&# situ&tions. S&#, for e7&5'%e, t!&t #ou dis$o+er & !ouse t!&t #ouAd %o+e to 'ur$!&se. Unfortun&te%#, #ou )onAt !&+e t!e $&s! to "u# it for &not!er t!ree 5ont!s. You t&%* to t!e o)ner &nd negoti&te & de&% t!&t gi+es #ou &n o'tion to "u#

t!e !ouse in t!ree 5ont!s for & 'ri$e of S<==,===. ,!e o)ner &grees, "ut for t!is o'tion, #ou '&# & 'ri$e of S@,===./o), $onsider t)o t!eoreti$&% situ&tions t!&t 5ig!t &rise1 >. ItAs dis$o+ered t!&t t!e !ouse is &$tu&%%# t!e true "irt!'%&$e of %+isT As & resu%t, t!e 5&r*et +&%ue of t!e !ouse s*#ro$*ets to S> 5i%%ion. .e$&use t!e o)ner so%d #ou t!e o'tion, !e is o"%ig&ted to se%% #ou t!e !ouse for S<==,===. In t!e end, #ou st&nd to 5&*e & 'rofit of SFBF,=== 3S> 5i%%ion 2 S<==,=== 2 S@,===4. <. W!i%e touring t!e !ouse, #ou dis$o+er not on%# t!&t t!e )&%%s &re $!o$*2 fu%% of &s"estos, "ut &%so t!&t t!e g!ost of Henr# PII !&unts t!e 5&ster "edroo59 furt!er5ore, & f&5i%# of su'er2inte%%igent r&ts !&+e "ui%t & fortress in t!e "&se5ent. ,!oug! #ou origin&%%# t!oug!t #ou !&d found t!e !ouse of #our dre&5s, #ou no) $onsider it )ort!%ess. -n t!e u'side, "e$&use #ou "oug!t &n o'tion, #ou &re under no o"%ig&tion to go t!roug! )it! t!e s&%e. -f $ourse, #ou sti%% %ose t!e S@,=== 'ri$e of t!e o'tions. ,!is e7&5'%e de5onstr&tes t)o +er# i5'ort&nt 'oints. ;irst, )!en #ou "u# &n o'tion, #ou !&+e & rig!t "ut not &n o"%ig&tion to do so5et!ing. You $&n &%)&#s %et t!e e7'ir&tion d&te go "#, &t )!i$! 'oint t!e o'tion "e$o5es )ort!%ess. If t!is !&''ens, #ou %ose >==K of #our in+est5ent, )!i$! is t!e 5one# #ou used to '&# for t!e o'tion. Se$ond, &n o'tion is 5ere%# & $ontr&$t t!&t de&%s )it! &n under%#ing &sset. ;or t!is re&son, o'tions &re $&%%ed deri+&ti+es, )!i$! 5e&ns &n o'tion derives its +&%ue fro5 so5et!ing e%se. In our e7&5'%e, t!e !ouse is t!e under%#ing &sset. Most of t!e ti5e, t!e under%#ing &sset is & stock or &n index.

TYPES O5 OPTION
C*++ O)%! ( 12

A $*++ )%! ( is &n o'tion to "u# & sto$* &t & s'e$ifi$ 'ri$e on or "efore & $ert&in d&te. In t!is )&#, C&%% -'tion &re %i*e se$urit# de'osits
W!en #ou "u# & C&%% o'tion, t!e 'ri$e #ou '&# for it, $&%%ed t!e o'tion 're5iu5, se$ures #our rig!t to "u# t!&t $ert&in sto$* &t & s'e$ified 'ri$e $&%%ed t!e stri*e 'ri$e. If #ou de$ide not to use t!e o'tion to "u# t!e sto$*, &nd #ou &re not o"%ig&ted to, #our on%# $ost is t!e )%! ( )"#.!-.. P-% O)%! (1 12 Are o'tions to se%% & sto$* &t & s'e$ifi$ 'ri$e on or "efore & $ert&in d&te. In t!is )&#, Put o'tions &re %i*e insur&n$e 'o%i$ies. Wit! & Put -'tion, #ou $&n GinsureG & sto$* "# fi7ing & se%%ing 'ri$e. If so5et!ing !&''ens )!i$! $&uses t!e sto$* 'ri$e to f&%%, &nd t!us, Gd&5&gesG #our &sset, #ou $&n e7er$ise #our o'tion &nd se%% it &t its GinsuredG 'ri$e %e+e%. If t!e 'ri$e of #our sto$* goes u', &nd t!ere is no Gd&5&ge,G t!en #ou do not need to use t!e insur&n$e, &nd, on$e &g&in, #our on%# $ost is t!e 're5iu5. ,e$!ni$&%%#, &n o'tion is & $ontr&$t "et)een t)o '&rties. ,!e "u#er re$ei+es & 'ri+i%ege for )!i$! !e '&#s & 're5iu5. ,!e se%%er &$$e'ts &n o"%ig&tion for )!i$! !e re$ei+es & fee.

W!en #ou "u# & $&%% o'tion, t!e 'ri$e #ou '&# for it, $&%%ed t!e o'tion 're5iu5, se$ures #our rig!t to "u# t!&t $ert&in sto$* &t & s'e$ified 'ri$e, $&%%ed t!e stri*e 'ri$e. If #ou de$ide not to use t!e o'tion to "u# t!e sto$*, &nd #ou &re not o"%ig&ted to, #our on%# $ost is t!e o'tion 're5iu5.

OPTION TERMINOLOGY
In e. options! ,!ese o'tions !&+e t!e inde7 &s t!e under%#ing. In Indi&, t!e# !&+e & uro'e&n st#%e sett%e5ent. g. /ift# o'tions, Mini /ift# o'tions et$. Stoc0 options! Sto$* o'tions &re o'tions on indi+idu&% sto$*s. A sto$* o'tion $ontr&$t gi+es t!e !o%der t!e rig!t to "u# or se%% t!e under%#ing s!&res &t t!e s'e$ified 'ri$e. ,!e# !&+e &n A5eri$&n st#%e sett%e5ent. "u-er of an option! ,!e "u#er of &n o'tion is t!e one )!o "# '&#ing t!e o'tion 're5iu5 "u#s t!e rig!t "ut not t!e o"%ig&tion to e7er$ise !is o'tion on t!e se%%erJ)riter. &riter 1 seller of an option! ,!e )riter J se%%er of & $&%%J'ut o'tion is t!e one )!o re$ei+es t!e o'tion 're5iu5 &nd is t!ere"# o"%iged to se%%J"u# t!e &sset if t!e "u#er e7er$ises on !i5. Option price1premium! -'tion 'ri$e is t!e 'ri$e )!i$! t!e o'tion "u#er '&#s to t!e o'tion se%%er. It is &%so referred to &s t!e o'tion 're5iu5. E.piration ate! ,!e d&te s'e$ified in t!e o'tions $ontr&$t is *no)n &s t!e e7'ir&tion d&te, t!e e7er$ise d&te, t!e stri*e d&te or t!e 5&turit#. Stri0e price! ,!e 'ri$e s'e$ified in t!e o'tions $ontr&$t is *no)n &s t!e stri*e 'ri$e or t!e e7er$ise 'ri$e. Open Interest 7 Open interest is t!e nu5"er of o'tions $ontr&$ts t!&t &re o'en9 t!ese &re $ontr&$ts t!&t !&+e neit!er e7'ired nor "een e7er$ised. A.#"!$*( options! A5eri$&n o'tions &re o'tions t!&t $&n "e e7er$ised &t &n# ti5e u' to t!e e7'ir&tion d&te.

European options! uro'e&n o'tions &re o'tions t!&t $&n "e e7er$ised on%# on t!e e7'ir&tion d&te itse%f. In,t2e,mone- option! An in2t!e25one# 3I,M4 o'tion is &n o'tion t!&t )ou%d %e&d to & 'ositi+e $&s! f%o) to t!e !o%der if it )ere e7er$ised i55edi&te%#. A $&%% o'tion on t!e inde7 is s&id to "e in2t!e25one# )!en t!e $urrent inde7 st&nds &t & %e+e% !ig!er t!&n t!e stri*e 'ri$e 3i.e. s'ot 'ri$e U stri*e 'ri$e4. If t!e inde7 is 5u$! !ig!er t!&n t!e stri*e 'ri$e, t!e $&%% is s&id to "e dee' I,M. In t!e $&se of & 'ut, t!e 'ut is I,M if t!e inde7 is "e%o) t!e stri*e 'ri$e. At,t2e,mone- option! An &t2t!e25one# 3A,M4 o'tion is &n o'tion t!&t )ou%d %e&d to 0ero $&s! f%o) if it )ere e7er$ised i55edi&te%#. An o'tion on t!e inde7 is &t2t!e25one# )!en t!e $urrent inde7 e6u&%s t!e stri*e 'ri$e 3i.e. s'ot 'ri$e V stri*e 'ri$e4. Out,of,t2e,mone- option: An out2of2t!e25one# 3-,M4 o'tion is &n o'tion t!&t )ou%d %e&d to & neg&ti+e $&s! f%o) if it )ere e7er$ised i55edi&te%#. A $&%% o'tion on t!e inde7 is out2of2t!e25one# )!en t!e $urrent inde7 st&nds &t & %e+e% )!i$! is %ess t!&n t!e stri*e 'ri$e 3i.e. s'ot 'ri$e W stri*e 'ri$e4. If t!e inde7 is 5u$! %o)er t!&n t!e stri*e 'ri$e, t!e $&%% is s&id to "e dee' -,M. In t!e $&se of & 'ut, t!e 'ut is -,M if t!e inde7 is &"o+e t!e stri*e 'ri$e. Intrinsic value of an option: ,!e o'tion 're5iu5 $&n "e "ro*en do)n into t)o $o5'onents 2 intrinsi$ +&%ue &nd ti5e +&%ue. ,!e intrinsi$ +&%ue of & $&%% is t!e &5ount t!e o'tion is I,M, if it is I,M. If t!e $&%% is -,M, its intrinsi$ +&%ue is 0ero. Putting it &not!er )&#, t!e intrinsi$ +&%ue of & $&%% is Max [0, (St K)] )!i$! 5e&ns t!e intrinsi$ +&%ue of & $&%% is t!e gre&ter of

= or (St K). Si5i%&r%#, t!e intrinsi$ +&%ue of & 'ut is Max [0, K Q StX, i.e. t!e gre&ter of = or (K St). K is t!e stri*e 'ri$e &nd St is t!e s'ot 'ri$e. Time value of an option! ,!e ti5e +&%ue of &n o'tion is t!e differen$e "et)een its 're5iu5 &nd its intrinsi$ +&%ue. .ot! $&%%s &nd 'uts !&+e ti5e +&%ue. An o'tion t!&t is -,M or A,M !&s on%# ti5e +&%ue. Usu&%%#, t!e 5&7i5u5 ti5e +&%ue e7ists )!en t!e o'tion is A,M. ,!e %onger t!e ti5e to e7'ir&tion, t!e gre&ter is &n o'tionAs ti5e +&%ue, &%% e%se e6u&%. At e7'ir&tion, &n o'tion s!ou%d !&+e no ti5e +&%ue.

:/A -1# )%! (1

S)#$-+*%! ( You $&n t!in* of speculation &s "etting on t!e 5o+e5ent of & se$urit#. ,!e &d+&nt&ge of o'tions is t!&t #ou &renAt %i5ited to 5&*ing & 'rofit on%# )!en t!e 5&r*et goes u'. .e$&use of t!e +ers&ti%it# of o'tions, #ou $&n &%so 5&*e 5one# )!en t!e 5&r*et goes do)n or e+en side)&#s. S'e$u%&tion is t!e territor# in )!i$! t!e "ig 5one# is 5&de 2 &nd %ost. ,!e use of o'tions in t!is 5&nner is t!e re&son o'tions !&+e t!e re'ut&tion of "eing ris*#. ,!is is "e$&use )!en #ou "u# &n o'tion9 #ou !&+e to "e $orre$t in deter5ining not on%# t!e dire$tion of t!e sto$*As 5o+e5ent, "ut &%so t!e 5&gnitude &nd t!e ti5ing of t!is 5o+e5ent. ,o su$$eed, #ou 5ust $orre$t%# 'redi$t )!et!er & sto$* )i%% go u' or do)n, &nd #ou !&+e to "e rig!t &"out !o) 5u$! t!e 'ri$e )i%% $!&nge &s )e%% &s t!e ti5e fr&5e it )i%% t&*e for &%% t!is to !&''en.

H#42!(2 ,!e ot!er fun$tion of o'tions is !edging. ,!in* of t!is &s &n insur&n$e 'o%i$#. Hust &s #ou insure #our !ouse or $&r, o'tions $&n "e used to insure #our in+est5ents &g&inst & do)nturn. Criti$s of o'tions s&# t!&t if #ou &re so unsure of #our sto$* 'i$* t!&t #ou need & !edge, #ou s!ou%dnAt 5&*e t!e in+est5ent. -n t!e ot!er !&nd, t!ere is no dou"t t!&t !edging str&tegies $&n "e usefu%, es'e$i&%%# for %&rge institutions. +en t!e indi+idu&% in+estor $&n "enefit. I5&gine t!&t #ou )&nted to t&*e &d+&nt&ge of te$!no%og# sto$*s &nd t!eir u'side, "ut s&# #ou &%so )&nted to %i5it &n# %osses. .# using o'tions, #ou )ou%d "e &"%e to restri$t #our do)nside )!i%e en(o#ing t!e fu%% u'side in & $ost2effe$ti+e )&#.

 Pa,&'' '&! Call O-$i&n

Lon3 $osition
;or &ggressi+e in+estor )!o &re +er# "u%%is! &"out t!e 'ros'e$ts for & sto$*J inde7 "u#ing $&%%s $&n "e &n e7$e%%ent )&# to $&'ture t!e u'sides 'otenti&% )it! %i5ited do)n side. .u#ing & $&%% is t!e 5ost "&si$ of &%% o'tions str&tegies. It $onstitutes t!e first o'tion tr&de for so5eone &%re&d# f&5i%i&r )it! "u#ing &nd se%%ing sto$*s &nd )ou%d no) )&nt to tr&de o'tion. .u#ing & $&%% is &n e&s# str&teg# to underst&nd. W!en #ou "u# it 5e&ns #ou &re "u%%is!. "u#ing & $&%% 5e&ns #ou &re +er# "u%%is! &nd e7'e$t t!e under%#ing sto$*Jinde7 to rise in future. W!en to use in+estor is +er# "u%is! on t!e sto$* Jinde7. Ris*2 %i5ited to 're5iu5 Re)&rd un%i5ited .u# & one25ont! $&%% of nift# &t stri*e 'ri$e of C<D= )it! & 're5iu5 of Rs.>== P&#off t&"%e /ift# S'ot P&%ue of ><D= C&%% Pre5iu5 P&id /et Profit J 3Loss4 C=== = 2>== 2>== C=D= = 2>== 2>== C>== = 2>== 2>== C>D= = 2>== 2>== C<== C<D= = = 2>== 2>== 2>== 2>== C@== C@D= CC== D= >== >D= 2>== 2>== 2>== 2D= = D= CCD= <== 2>== >== CD== <D= 2>== >D=

$pa-off Call "u-er

S2ort $osition
/ift# S'ot P&%ue of ><D= C&%% Pre5iu5 re$ei+ed /et Profit J 3Loss4 C=== C=D= C>== C>D= C<== C<D= C@== C@D= CC== CCD= CD== = = = = = = 2D= 2>== 2>D= 2<== 2<D= >== >== >== >== >== >== >== >== >== >== >== >== >== D= >== = >== >== >==

2D= 2>== 2>D=

P*A ,, C*++ S#++#"

 P*A ,, , " P-% O)%! (

Lon3 $osition
.u# & one25ont! Put of nift# &t stri*e 'ri$e of C<D= )it! & 're5iu5 of Rs. >== P&#off t&"%e
/ift# S'ot P&%ue of ><D= C&%% Pre5iu5 P&id /et Profit J 3Loss4 C=== <D= C=D= <== C>== >D= C>D= >== C<== D= C<D= = C@== C@D= CC== = = = CCD= CD== = =

2>== >D=

2>== >==

2>== D=

2>== =

2>== 2D=

2>== 2>==

2>== 2>== 2>== 2>== 2>== 2>==

2>== 2>== 2>== 2>==

P*A ,, B-A P-%

S2ort $osition
/ift# S'ot C=== C=D= C>== C>D= C<== C<D= C@== C@D= CC== CCD= CD== P&%ue of ><D= 2<D= 2<== 2>D= 2>== 2D= = = = = = = C&%% Pre5iu5 re$ei+ed >== >== >== >== >== >== >== >== >== >== >==

2>D= 2>==

2D=

D=

>==

>==

>==

>==

>==

>==

/et Profit J 3Loss4

P*A ,, S#++ P-%

 SUGGESTION
A'3&5 '&&( t! $a#& it $a%#&ti'3 t&a$ t%!'3 a'( a5 ! it h!+5( i'"%&a & $a%#&ti'3 a"ti8iti& +"h a 6%!$!ti!' "a$6ai3' 0 C!$6a', h!+5( h!7 th& 4&'&9it !9 t%a(i'3 !' !'5i'& t%a(i'30 A'3&5 h!+5( t+%' &)i ti'3 "+ t!$&% /7h! a%& t%a(i'3 i' &:+it, !'5,1 t!7a%( !'5i'& t%a(i'30 A'3&5 "a' a5 ! + & '&7 6a6&% a'( 5!"a5 '&7 "ha''&5 a a $&(i+$ !9 a(8&%ti i'30 A'3&5 $a, a5 ! + & it h&565i'& '+$4&% 9!% 3i8i'3 &(+"ati!' !' t%a(i'30

RECOMMEENDATION:

,!e &)&reness &nd *no)%edge &5ongst t!e in+estors is %ess reg&rding t!e

in+est5ent &%tern&ti+es &+&i%&"%e "efore !i5. So, t!e $o5'&n# s!ou%d $ondu$t +&rious se5in&rs &nd 'resent&tion to guide t!e in+estor &nd in$re&ses t!eir *no)%edge.

Co5'&n# s!ou%d $on$entr&te 5ore on its 5&r*eting de'&rt5ent.

,!e !ig! e5'%o#ees turn o+er is & "ig $on$ern for t!e $o=5'&n# s!ou%d

re$ruit su$! 'ersons )!o $&n ser+e t!e org&ni0&tion for & %ong ti5e.

,!e $o5'&n# s!ou%d send t!eir re'resent&ti+e to t!e in+estor &nd 5&*e

t!e5 &)&re of t!e +&rious ser+i$es & "enefits t!e# get $o5'&re to ot!er $o5'&nies.

,!e $o5'&n# s!ou%d &%so tr# to $o5e )it! so5e ne) 'rodu$ts )!i$! &re

not #et %&un$!ed in t!e 5&r*et. ,!is is 'ossi"%e )it! so5e rese&r$! &nd de+e%o'5ent. So $o5'&n# s!ou%d s'Yend on R&D

CONCLUSION

I got &n o''ortunit# to )or* &s & su55er tr&inee in Ange% .ro*ing Li5ited, R&(*ot. M# 'ro(e$t guide )&s Mr. Pi5&% H&ni. He g&+e 5e t!e %i"ert# to $!oose )!&t I )&nted to )or* on. I de$ided to go t!roug! different de'&rt5ents of t!e org&ni0&tion &nd stud# t!e )or*ing of different de'&rt5ents. Initi&%%# I did not *no) fro5 )!ere to st&rt. I si5'%# %e&rnt &"out t!e $o5'&n# "# re&ding t!eir different Report and asking about my doubts to the people around me. My guide introduces me to the employees of the company wherever there is a need to work with them. There was formal induction done for me. For another week or so, I spent my time getting acquainted with how all the departments work. I would introduce myself to people who did not know me and ask them to help me out. I would then ask them a few questions that I had prepared before hand. These whole e!ercise was learning in itself for me. Most of the time, my guide introduced me to the other employees. I would be asked to wait or come another time. "ut I would wait with patience and get my doubts cleared. #s my summer internship was in marketing department, but I also learnt that it is not only enough for an employee to work only in his department rather he should have a sound knowledge of the other departments as well. My guide helped me a lot in this. $e e!plained me each and every step how I have to go for the process but this is the field where you have to do a lot of home work for understanding the function. More important than all this, I got to see how an organi%ation works from up close.


.--KS1 Kot!&ri C.R., Rese&r$! Met!odo%og#, /e) De%!i, Pi*&s

BIBLIOGRAPHY

Pu"%is!ing House P+t. Ltd. >BF? /.C!&tur+edi , Prin$i'%es of M&n&ge5ent.

:EBSITES: >. <. @. C. D. ))).Ange%"&$*offi$e.$o5 ))).Ange%tr&de.$o5 )))."seindi&.$o5 ))).nseindi&.$o5 ))).5$7.$o5

NE:SPAPERS: C-/-MIC ,IM S ,IM S -; I/DIA