A STUDY ON EFFECTIVENESS OF EQUITY DERIVATIVES IN CASH MARKET SEGMENT IN INDIA Submitted by S.Dinesh, MBA.,M.Phil.,LIII.,PGDCA.,(Ph.D).

, Assistant Professor, Department of Management Studies, Sri Jayaram Engineering College, Cuddaore. Cell: 93 !3""#$$, 9%&&#'3$! E(Mail: dines)a$9&!*ya)oo.+om R.Arivazhagan, MBA.,(Ph.D). Assistant Professor, S+)ool of Management, S,M -ni.ersity, /attan0ulat)ur, 1ndia

Abstra+t 2ne of t)e most signifi+ant e.ents in t)e se+urities mar0ets )as been t)e de.elopment and e3pansion of finan+ial deri.ati.es. Deri.ati.e produ+ts li0e futures and options on 1ndian sto+0 mar0ets )a.e be+ome important instruments of pri+e dis+o.ery, portfolio di.ersifi+ation and ris0 )edging in re+ent times. 4)e empiri+al analysis points to5ards a de+line in spot mar0et .olatility after t)e introdu+tion of inde3 futures due to in+reased impa+t of re+ent ne5s and redu+ed effe+t of un+ertainty originating from t)e old ne5s. 6o5e.er, furt)er in.estigation also re.eals t)at t)e mar0et 5ide .olatility )as fallen during t)e period under +onsideration. 5)et)er t)e introdu+tion of inde3 futures per se )as been instrumental in redu+ing t)e spot mar0et .olatility or t)e .olatility )as fallen in line 5it) general fall in mar0et 5ide .olatility /ey5ords: Pi.ote point, 1nterest, Margin, Automated terminal, Deri.ati.es I. Introduction

4)e origin of deri.ati.es +an be tra+ed ba+0 to t)e need of farmers to prote+t t)emsel.es against flu+tuations in t)e pri+e of t)eir +rop. 7rom t)e time it 5as so5n to t)e time it 5as ready for )ar.est, farmers 5ould fa+e pri+e un+ertainty. 4)roug) t)e use of simple deri.ati.e produ+ts, it 5as possible for t)e farmer to partially or fully transfer pri+e ris0s by lo+0ing(in

asset pri+es. 4)ese 5ere simple +ontra+ts de.eloped to meet t)e needs of farmers and 5ere basi+ally a means of redu+ing ris0. 1n $&!&, t)e C)i+ago 8oard of 4rade, or C824, 5as establis)ed to bring farmers and mer+)ants toget)er. A group of traders got toget)er and +reated t)e 9to(arri.e9 +ontra+t t)at permitted farmers to lo+0 in to pri+e upfront and deli.er t)e grain later. 1.1 Deri !ti e" de#ined A deri.ati.e is a produ+t 5)ose .alue is deri.ed from t)e .alue of one or more underlying .ariables or assets in a +ontra+tual manner. 4)e underlying asset +an be e:uity, fore3, +ommodity 1.$ NSE%" DERIVATIVES MARKET 4)e deri.ati.es trading on t)e ;SE +ommen+ed 5it) S<P C;= ;ifty 1nde3 futures on June $", "###. 4)e trading in inde3 options +ommen+ed on June !, "##$ and trading in options on indi.idual se+urities +ommen+ed on July ", "##$. Single sto+0 futures 5ere laun+)ed on ;o.ember 9, "##$. 4oday, bot) in terms of .olume and turno.er, ;SE is t)e largest deri.ati.es e3+)ange in 1ndia. Currently, t)e deri.ati.es +ontra+ts )a.e a ma3imum of 3(mont) e3piration +y+les. 4)ree +ontra+ts are a.ailable for trading, 5it) $ mont), " mont)s and 3 mont)s e3piry. A ne5 +ontra+t is introdu+ed on t)e ne3t trading day follo5ing t)e e3piry of t)e near mont) +ontra+t. 1.$.1 THE S&' CN( NIFTY 1n t)is paper aims to dis+uss )o5 t)e S<P C;= ;ifty addresses some of t)ese issues. Di er"i#ic!tion) As mentioned earlier, a sto+0 mar0et inde3 s)ould be 5ell di.ersified, t)us ensuring t)at )edgers or spe+ulators are not .ulnerable to indi.idual(+ompany or industry ris0. *i+uidit, o# t-e inde.) 4)e inde3 s)ould be easy to trade on t)e +as) mar0et. 4)is is partly related to t)e +)oi+e of sto+0s in t)e inde3. 6ig) li:uidity of inde3 +omponents implies t)at t)e information in t)e inde3 is less noisy. 1.$.$ Inde. deri !ti e" 1nde3 deri.ati.es are deri.ati.e +ontra+ts 5)i+) )a.e t)e inde3 as t)e underlying. 4)e most popular inde3 deri.ati.es +ontra+ts t)e 5orld o.er are inde3 futures and inde3 options. ;SE9s mar0et inde3, t)e S<P C;= ;ifty 5as s+ientifi+ally designed to enable t)e laun+) of inde3(based produ+ts li0e inde3 deri.ati.es and inde3 funds. 4)e first deri.ati.e +ontra+t to be traded on ;SE9s mar0et 5as t)e inde3 futures +ontra+t 5it) t)e ;ifty as t)e underlying. 4)is 5as follo5ed by ;ifty options, deri.ati.e +ontra+ts on se+toral inde3es li0e C;= 14 and 8A;/ ;ifty +ontra+ts. 4rading on inde3 deri.ati.es 5ere furt)er introdu+ed on C;= ;ifty Junior, C;= $##, ;ifty Mid+ap '# and Mini ;ifty '#.

1.$./ Inde. #und" An inde3 fund is a fund t)at tries to repli+ate t)e inde3 returns. 1t does so by in.esting in inde3 sto+0s in t)e proportions in 5)i+) t)ese sto+0s e3ist in t)e inde3. 4)e goal of t)e inde3 fund is to a+)ie.e t)e same performan+e as t)e inde3 it tra+0s. 1.$.0 A1out Indi! VI( 1ndia >1= is a .olatility inde3 based on t)e inde3 option pri+es of ;174?. 1ndia >1= is +omputed using t)e best bid and as0 :uotes of t)e out(of(t)e(money near and mid(mont) ;174? option +ontra+ts 5)i+) are traded on t)e 7<2 segment of ;SE. 1ndia >1= indi+ates t)e in.estor@s per+eption of t)e mar0et@s .olatility in t)e near term. 4)e inde3 depi+ts t)e e3pe+ted mar0et .olatility o.er t)e ne3t 3# +alendar days. i.e. )ig)er t)e 1ndia >1= .alues, )ig)er t)e e3pe+ted .olatility and .i+e(.ersa. II St!te2ent o# t-e 3ro14e2 1n re+ent year in.estment made in deri.ati.e mar0et gro5ing radi+ally. A)y be+ause of t)e deri.ati.e mar0et is )ig)ly .olatile in nature ,5)en +ompared to t)e +as) mar0et. 1nitially t)e deri.ati.e mar0et started it as a tool for )edging. 8ut finally, it is used for s0imming t)e mar0et opportunities. Espe+ially to t)e settlement +y+le of t)e deri.ati.e mar0et, influen+e are )uge in +as) mar0et. III O15ecti e o# t-e "tud, 4)e main obBe+ti.e of t)is study are: $C 4o assess t)e impa+t of deri.ati.e mar0et effe+t in +as) mar0et segment "C 4o e.aluate different stri0e pri+e mo.ement of t)e +ontra+t 3C 4o Predi+t t)e +as) mar0et inde3 and underlying inde3 IV Sco3e o# t-e "tud, 1n t)is resear+) study used to 0no5 t)e impa+t of e:uity deri.ati.es in +as) mar0et mo.ement. 4)is resear+) study 5ill be used to measure t)e impa+t of +as) mar0et and pro.ide information to t)e in.estors for ma0ing de+ision related to buyD)oldDsell. So, it 5ill used to t)e in.estors to penetrate t)e mar0et returns. IV Met-odo4o6, o# t-e "tud, Met)odology is t)e systemati+ approa+) to sol.e t)e resear+) problem. 1n t)is resear+) study resear+)er deployed interest rate +al+ulation, Pi.ote point analysis, ,ate of return. And some of t)e important 5ill be used in t)e +onte3t of deri.ati.es are Eree0s.

0.1 H,3ot-e"i" o# t-e "tud, 1n t)is resear+) study pri+e mo.ement of e:uity futures and e:uity options 5ere analysed. 4)e rea+tion of +as) mar0et and deri.ati.es +ompared by t)e turno.er, inde3 points and stri0e pri+es and interest rates. Pi.ot Points represents a point at 5)i+) a maBor pri+e mo.ement is e3pe+ted to o++ur. Pi.ot points +an be used in t5o 5ays. 4)e first 5ay is for determining o.erall mar0et trend: if t)e pi.ot point pri+e is bro0en in an up5ard mo.ement, t)en t)e mar0et is bullis), and .i+e .ersa. 6o5e.er, t)at pi.ot points are s)ort(term trend indi+ators, useful for only one day until t)ey need to be re+al+ulated. 4)e se+ond met)od is to use pi.ot point pri+e le.els to enter and e3it t)e mar0ets. PPFG6HIHCCD3 4)en, ,$F G" J PPC K I, ,"F PP H G6 ( IC, ,3F 6 H " J GPP ( IC, S$F G" J PPC K 6, S"F PP ( G6 ( IC. S3F I ( " J G6 ( PPC 1f t)e pri+e is abo.e t)e PP, t)en one 5ould only be long. 1f t)e pri+e is belo5 t)e PP, t)en one 5ould only be s)ort. 1f t)ere is support +lose to t)e PP, one 5ill first 5ait for t)e pri+e to pass t)roug) bot) t)e PP and t)e support before entering s)ort. 1f t)ere is resistan+e +lose to t)e PP, one 5ill first 5ait for t)e pri+e to mo.e t)roug) bot) t)e PP and t)e resistan+e before entering long. !.3 Data +olle+tion Primary data 5ere +olle+ted 5it) t)e offi+ials from ,eligare se+urities, /ota0 se+urities and 1ndia 1nfoline in Cuddalore distri+t t)roug) oral +ommuni+ation. Se+ondary data 5ere +olle+ted from t)e ;ational Sto+0 E3+)ange 5ebsite, Bournals and ne5s papers. !.! 4ools used aC Pi.ote point analysis bCA.erage pri+e +C ,ate of return V Re ie7 o# 4iter!ture 4)e effe+t of introdu+tion of deri.ati.es on t)e .olatility of t)e spot mar0ets and in turn, its role in stabilising or destabilising t)e +as) mar0ets )as remained an a+ti.e topi+ of analyti+ and empiri+al interest. Luestions pertaining to t)e impa+t of deri.ati.e trading on +as) mar0et .olatility )a.e been empiri+ally addressed in t5o 5ays: by +omparing +as) mar0et .olatilities during t)e pre(and post(futuresD options trading eras and se+ond, by e.aluating t)e impa+t of options and futures trading Ggenerally pro3ied by trading .olumeC on t)e be)a.iour of +as) mar0ets. 4)e literature is, )o5e.er, in+on+lusi.e on 5)et)er

introdu+tion of deri.ati.e produ+ts lead to an in+rease or de+rease in t)e spot mar0et .olatility. 2ne s+)ool of t)oug)t argues t)at t)e introdu+tion of futures trading in+reases t)e spot mar0et .olatility and t)ereby, destabilises t)e mar0et GCo3 $9% M 7igle5s0i $9&$M Stein, $9&%C. 2t)ers argue t)at t)e introdu+tion of futures a+tually redu+es t)e spot mar0et .olatility and t)ereby, stabilises t)e mar0et GPo5ers, $9%#M S+)5arN and Iaats+), $99$ etc.C. 4)e rationale and findings of t)ese t5o alternati.e s+)ools are dis+ussed in detail in t)is se+tion. 4)e ad.o+ates of t)e first s+)ool per+ei.e deri.ati.es mar0et as a mar0et for spe+ulators. 4raders 5it) .ery little or no +as) or s)ares +an parti+ipate in t)e deri.ati.es mar0et, 5)i+) is +)ara+terised by )ig) ris0. 4)us, it is argued t)at t)e parti+ipation of spe+ulati.e traders in systems, 5)i+) allo5 )ig) degrees of le.erage, lo5ers t)e :uality of information in t)e mar0et. 4)ese uninformed traders +ould play a destabilising role in +as) mar0ets GC)atrat), ,am+)ander and Song, $99'C. 6o5e.er, a++ording to anot)er .ie5point, spe+ulation +ould also be .ie5ed as a pro+ess, 5)i+) e.ens out pri+e flu+tuations. 4)e debate about spe+ulators and t)e impa+t of futures on spot pri+e .olatility suggests t)at in+reased .olatility is undesirable. 4)is is, )o5e.er, misleading as it fails to re+ognise t)e lin0 bet5een t)e information and t)e .olatility GAntoniou and 6olmes, $99'C. Pri+es depend on t)e information +urrently a.ailable in t)e mar0et. 7utures trading +an alter t)e a.ailable information for t5o reasons: first, futures trading attra+t additional traders in t)e mar0etM se+ond, as transa+tion +osts in t)e futures mar0et are lo5er t)an t)ose in t)e spot mar0et, ne5 information may be transmitted to t)e futures mar0et more :ui+0ly. 4)us, future mar0ets pro.ide an additional route by 5)i+) information +an be transmitted to t)e spot mar0ets and t)erefore, in+reased spot mar0et .olatility may simply be a +onse:uen+e of t)e more fre:uent arri.al and more rapid pro+essing of information. 2n t)e ot)er )and, arguments suggesting t)at t)e future and option mar0ets )a.e be+ome important mediums of pri+e dis+o.ery in +as) mar0ets are e:ually strong. Se.eral aut)ors )a.e argued t)at trading in t)ese produ+ts impro.e t)e o.erall mar0et dept), en)an+e mar0et effi+ien+y, in+rease mar0et li:uidity, redu+e informational asymmetries and +ompress +as) mar0et .olatility G/umar, Sarin and S)astri, $99'M Antoniou, 6olmes and Priestley, $99&C. A fe5 studies )a.e been underta0en to e.aluate t)e effe+t of introdu+tion of deri.ati.e produ+ts on .olatility of 1ndian spot mar0ets. 4)ese studies )a.e mainly +on+entrated on t)e ;SE, and t)e e.iden+e is in+on+lusi.e in t)is regard. A)ile 4)enmoN)i G"##"C s)o5ed t)at t)e in+eption of futures trading )as redu+ed t)e .olatility of spot inde3 returns due to in+reased information flo5. A++ording to S)enbagaraman G"##3C, t)e introdu+tion of deri.ati.e produ+ts did not )a.e any signifi+ant impa+t on mar0et .olatility in 1ndia. ,aBu and /arande G"##3C also reported a de+line in .olatility of S<P C;= ;ifty after t)e introdu+tion of inde3 futures. 1n t)e present study, follo5ing 8ologna and Ca.allo G"##"C a EA,C6 model )as been used to empiri+ally e.aluate t)e effe+ts on .olatility of t)e 1ndian spot mar0et and to see t)at 5)at e3tent t)e +)ange Gif anyC +ould be attributed to t)e of introdu+tion of inde3 futures. Ae use 8SE("## and ;ifty Junior as surrogate indi+es to +apture and study t)e mar0et 5ide fa+tors +ontributing to t)e +)anges in spot mar0et .olatility. 4)is gi.es a better idea as to: 5)et)er t)e introdu+tion of inde3 futures in itself +aused a de+line in t)e .olatility of spot mar0et or t)e o.erall mar0et 5ide .olatility )as de+reased, and t)us, +ausing a de+rease in .olatility of indi+es on 5)i+) deri.ati.e produ+ts )a.e been introdu+ed. 7inally, t)e studies in t)e 1ndian +onte3t )a.e e.aluated t)e trends in ;SE and not on t)e Sto+0 E3+)ange, Mumbai G8SEC for t)e reason t)at t)e turno.er in ;SE +aptures an o.er5)elmingly large part of t)e deri.ati.es mar0et. 6o5e.er, sin+e t)e 0ey issue addressed )ere is t)e .olatility of t)e +as) mar0et as affe+ted or unaffe+ted by t)e deri.ati.e mar0et, t)e importan+e of e.aluating t)e trends in 8SE as 5ell 5as felt and t)e

empiri+al analysis 5as +arried out li0e5ise. Pos)a05ale, Sunil G"##"C e3amined t)e random 5al0 )ypot)esis in t)e emerging 1ndian sto+0 mar0et by testing for t)e nonlinear dependen+e using a large disaggregated daily data from t)e 1ndian sto+0 mar0et. 4)e sample used 5as 3& a+ti.ely traded sto+0s in t)e 8SE ;ational 1nde3. 6e found t)at t)e daily returns from t)e 1ndian mar0et do not +onform to a random 5al0. Daily returns from most indi.idual sto+0s and t)e e:ually 5eig)ted portfolio e3)ibit signifi+ant non(linear dependen+e. 4)is is largely +onsistent 5it) pre.ious resear+) t)at )as s)o5n e.iden+e of non(linear dependen+e in returns from t)e sto+0 mar0et inde3es and indi.idual sto+0s in t)e -S and t)e -/. ;oor, ANuddin ?a0ob, Diana 8eal and Delpa+)itra, Sarat) G"## C studied t)e sto+0 mar0et seasonality in terms of day(of(t)e(5ee0, mont)(of(t)eyear, mont)ly and )oliday effe+ts in ten Asian sto+0 mar0ets, namely, Australia, C)ina, 6ong /ong, Japan, 1ndia, 1ndonesia, Malaysia, Singapore, Sout) /orea and 4ai5an. 6e +on+luded t)at t)e e3isten+e of seasonality in sto+0 mar0ets and also suggested t)at t)is is a global p)enomenon. VI An!4,"i" !nd Di"cu""ion" .$ Comparison of ;174? 7utures 21 .s Settle pri+e Date Settle Pri+e $(;o.($# $'".#' "(;o.($# $''.9' 3(;o.($# $9$."' !(;o.($# 3#$.'' '(;o.($# 3"'.#' &(;o.($# 3##.' 9(;o.($# 333.!' $#(;o.($# 3#&.3 $$(;o.($# "3".'' $"(;o.($# #9$.'' $'(;o.($# $!#."' Sour+e: Cal+ulated .alue -nderlying >olume pri+e $$%.'' $$9 $ #.' "&$.& 3$".!' "%3." 3#$.'' "%'.% $9!."' #%$. ' $"$. 3 3""9 3#9 # 3#3&'$ !$33" &"'"% " $!39 !$$&"# "%$3!& !$&# ! % 33 !'3''" "'$9!!## "'#3 ## "!&''%## "'$"'9'# "'!" !## "'3!#9## "'# #9'# "'&#9#'# "!!"&$## "!3&$ '# "!9!!"## 2pen 1nt C)ange in 21 &!!&'# ($'%&## ($&#9## "%#"'# 3##!'# (&''## ("%99'# %!&$## ($3&#9'# (! !'# ' "''# O of +)anges in 21 3.3' (#. 3 (#.%3 $.#& $.$& (#.3! ($.$" ".9# ('. ' (#.$9 "."

7rom t)e abo.e table and +)art +learly s)o5s t)at t)e mo.ement of daily pri+e in future mar0et is in and around t)e underlying pri+e of t)e parti+ular sto+0 inde3. 2pen interest for

future mar0et )ig)ly .olatile in negati.e aspe+t in $$ t) ;o.. 1t +learly depi+ts t)at t)e e3isting position also been sold due to t)e negati.e aspe+t in t)e mar0et. ." Day to day .olatile mo.ement of S<P C;= ;ifty Date #$(;o.($# #"(;o.($# #3(;o.($# #!(;o.($# #'(;o.($# #&(;o.($# #9(;o.($# $#(;o.($# $$(;o.($# $"(;o.($# 2pen #9".3 $"%.' ' $'#. "#9. 3"$.& ' 33'." ' "&$ 3#3." "& .3 ' $&".3 6ig) $3".! $3&.$ $&".' "9#.$ ' 33&.' 33'.9 3$#.9 3#%. ' "9 .' ' "#".' $"&.% ' Io5 Close #&!.% ' #9!.! $! .& $99.3 ' 3#3.$ " '.3 ' "!3.' ' " 9." ' $%9.' #' .% ' #39.! $$%.'' $$9 $ #.' "&$.& 3$".!' "%3." 3#$.'' "%'.% $9!."' #%$. ' $"$.

$'(;o.($# #%9.9 Sour+e: Cal+ulated .alue

7rom t)e abo.e table and +)art +learly depi+ts t)at $" t) ;o. is t)e day for )ig) negati.e .olatile and !t) ;o. is )ig)ly positi.e .olatile in t)e mar0et. C)art +learly s)o5s t)e mo.ement of t)e inde3 for ea+) and e.ery day.

.3 Comparison of 7-41D= and S<P C;= ;174? pri+e

7rom t)e abo.e +)art +learly s)o5s t)e mo.ement of future inde3 pri+e G7-41D=C and underlying asset pri+eGS<P C;= ;174?C.alues for t)e 3 mont)s +ontra+t starts from 3#t) July "#$# to "&t) 2+t "#$#. Most of t)e time t)e mo.ement of 7-41D= a++ompanied 5it) t)e mo.ement of t)e underlying asset pri+e. .! Comparison of turno.er of t)e inde3 and t)e ;ifty future inde3

7rom t)e abo.e +)art +learly identified t)at .olume of trade made by +as) mar0et and future mar0et for 3 mont)s +ontra+t . Mo.ement of future mar0et is slo5 in starting time of

trade. 8ut, t)e ending or t)e settlement time t)e mar0et .olatile on t)e mo.ement of future mar0et.

.' Spread of ;171D=

7rom t)e abo.e +)art +learly depi+ts t)at t)e day for )ig) negati.e .olatile and t)e )ig)ly positi.e .olatile in t)e mar0et. C)art +learly s)o5s t)e mo.ement of t)e future inde3 for ea+) and e.ery day. . 2ption CE +losing pri+e for different stri0e pri+es

7rom t)e abo.e +)art +learly depi+ts t)at t)e mar0et in bet5een '3## to '!## points. So, t)at t)e stri0e pri+e also been same for t)at t5o pri+es. 4)ere is no )uge differen+e bet5een t)e settlement time. 8ut in t)e beginning of t)e 3 mont) +ontra+t t)e stri0e pri+e .olatile for t)e t5o pri+e mo.ements are almost same. 8ut t)e differen+es are t)ere in pri+es in t)e first one and )alf mont)s. E3pe+tation of t)e buyer in t)e mar0et is )ig), before t)e settlement period. After t)e mar0et not rea+)ing any good information so ,t)e pri+e is do5n at t)e settlement period. .% 2ption PE +losing pri+e for different stri0e pri+es

7rom t)e abo.e +)art +learly depi+ts t)at t)e mar0et in bet5een '3## to '!## points. So, t)at t)e stri0e pri+e also been same for t)at t5o pri+es. 4)ere is no )uge differen+e bet5een t)e settlement time. 8ut in t)e beginning of t)e 3 mont) +ontra+t t)e stri0e pri+e .olatile for t)e t5o pri+e mo.ements are almost same. 8ut t)e differen+es are t)ere in pri+es in t)e first one and )alf mont)s.

.& Predi+tion of future .alue for underlying and deri.ati.e instruments

S?M8AI S<P C;= ;174? GM2;46I?C S<P C;= ;174? G AEE/I?C 7-41D=P;174? GM2;46I?C 7-41D=P;174? GAEE/I?C 2P41D=P;174?PC E GS4,1/E P,1CE '3##C GM2;46I?C 2P41D=P;174?PC E GS4,1/E P,1CE '3##C GAEE/I?C 2P41D=P;174?PC E GS4,1/E P,1CE '!##C GM2;46I?C 2P41D=P;174?PC E GS4,1/E P,1CE '!##C GAEE/I?C 2P41D=P;174?PPE GS4,1/E P,1CE '3##C GM2;46I?C 2P41D=P;174?PPE GS4,1/E P,1CE '3##C GAEE/I?C 2P41D=P;174?PPE GS4,1/E P,1CE '!##C GM2;46I?C 2P41D=P;174?PPE GS4,1/E P,1CE '!##C GAEE/I?C G'."&C '.3# G&.3"C &.3# G$#.9&C $$ G$!.#"C $! G$ . &C $ .%# G$9.%"C $9.%# G"".3&C "".!# G($%!.#'C # G(&$.3'C # G(33.&'C # G'&.&'C '&.&' G$# .3'C $# .3' G$99.#'C $99.#' G"! .''C "! .'' G$."3C $."' G!.$"C !.$' G%.#3C %.#' G9.9"C 9.9' G$".&3C $".&' G$'.%"C $'.%# G$&. 3C $&. ' G($!$.#3C # G( %.#"C # G("&.'3C # G!'.!&C !'.'# G&3.9%C &! G$'%.9&C $'& G$9 .!%C $9 .!' G!'$."%C !'$."' G'"#. 3C '"#. ' G'%9."%C '%9.3# G !&. 3C !&. ' G%#%."%C %#%."' G%% . 3C %% . ' G&3'."%C &3'.3# G(" 3.9#C # G('$.'#C # G"93."#C "93."# G'#'. #C '#'. # G&'#.3#C &'#.3# G$# ".%#C $# ".%# G$!#%.!#C $!#%.!# G''".#%C ''".#' G $9.'3C $9.'' G %!.3%C %!.3' G%!$.&3C %!$.&' G%9 . %C %9 . ' G& !.$3C & !.$' G9$&.9%C 9$9 S-PP2,43 G!9"%.#'C !9"% G'& $.3#C '& $ G!9#9. %C !9$# G'&''.##C '&'' G("#9.!3C # S-PP2,4" G'$ '.#'C '$ ' G'9$".!'C '9$" G'$ 3.&3C '$ ! G'9"#.$#C '9"# G$#.33C $#.3' S-PP2,4$ G''9%.'#C ''9& G'9%$."#C '9%$ G''9&. %C ''99 G'9% .&#C '9%% G3 9.%%C 3 9.%' P1>24E P21;4 G'&3'.'#C '&3 G #"".3'C #"" G'&'".&3C '&'3 G #!$.9#C #!" G'&9.'3C '&9.'' ,ES1S4A;CE$ G " %.9'C " & G #&$.$#C #&$ G "&%. %C "&& G #9&. #C #99 G9!&.9%C 9!9 ,ES1S4A;CE" G '#'.9'C '# G $3"."'C $3" G '!$.&3C '!" G $ 3.%#C $ ! G$$ &.%3C $$ &.%' ,ES1S4A;CE3 G 93&.!#C 93& G $9$.##C $9$ G 9% . %C 9%% G ""#.!#C ""# G$'"&.$%C $'"&.$'

Sour+e: Cal+ulated .alue 7rom t)e abo.e table s)o5s t)e pi.ote analysis for mont)ly and 5ee0ly for ;174?, 7uture ;ifty, Call option GSP '3##C ;ifty, Call option GSP '!##C ;ifty, Put option GSP '3##C ;ifty, Put option GSP '!##C ;ifty. period )as been sele+ted for t)e deri.ati.es from 3# t) July "#$# to "&t) 2+t "#$# GE3piry date:"&D$#D"#$#C. 7rom t)e abo.e study +onsist ! 5or0ing days, out of 5)i+) resear+)er )as to sele+t September mont) for pi.ot mont)ly +al+ulation. A)i+) +onsist of "$ 5or0ing days. Aee0ly pi.ote +al+ulated for ! 5or0ing days. ;ifty Gmont)lyC pi.ote suggest t)at buy abo.e and sell belo5 '&3 points and for ;iftyGAee0lyC pi.ote suggest t)at buy abo.e and sell belo5 #"" points. ;ifty futureGMont)lyC pi.ote suggest t)at buy abo.e and sell belo5 '&'3 points and 5ee0ly pi.ote suggest t)at buy abo.e and sell belo5 #!" points. Call option GSP '3##C mont)ly finds t)at buy abo.e and sell belo5 ,s.'&9.'' and for +all option 5ee0ly finds t)at buy abo.e and sell belo5 of ,s.%!$.&'. Call option GSP '!##C mont)ly suggest t)at buy abo.e and sell belo5 ,s.'#'. # and for +all option 5ee0ly suggest t)at buy abo.e and sell belo5 of ,s. !&. '. Put option GSP '3##C mont)ly finds t)at buy abo.e and sell belo5 ,s.!'.' and for put option 5ee0ly finds t)at buy abo.e and sell belo5 of ,s.9.9'. Put option GSP '!##C mont)ly suggest t)at buy abo.e and sell belo5 ,s.'&.&' and for put option 5ee0ly suggest t)at buy abo.e and sell belo5 of ,s.$!. VI FINDINGS AND SUGGESTION 2pen interest for future mar0et )ig)ly .olatile in negati.e aspe+t in $$ t) ;o.. 1t +learly depi+ts t)at t)e e3isting position also been sold due to t)e negati.e aspe+t in t)e mar0et. $"t) ;o. is t)e day for )ig) negati.e .olatile and !t) ;o. is )ig)ly positi.e .olatile in t)e mar0et Most of t)e time t)e mo.ement of 7-41D= a++ompanied 5it) t)e mo.ement of t)e underlying asset pri+e. Mo.ement of future mar0et is slo5 in starting time of trade. 8ut, t)e ending or t)e settlement time t)e mar0et .olatile on t)e mo.ement of future mar0et. 8eginning of t)e 3 mont) +ontra+t t)e stri0e pri+e .olatile for t)e t5o pri+e mo.ements are almost same. 8ut t)e differen+es are t)ere in pri+es in t)e first one and )alf mont)s.

 4)e mar0et in bet5een '3## to '!## points. So, t)at t)e stri0e pri+e also been same for t)at t5o pri+es. 4)ere is no )uge differen+e bet5een t)e settlement time. 8ut in t)e beginning of t)e 3 mont) +ontra+t t)e stri0e pri+e .olatile for t)e t5o pri+e mo.ements are almost same. ;ifty Gmont)lyC pi.ote suggest t)at buy abo.e and sell belo5 '&3 points ;ifty futureGMont)lyC pi.ote suggest t)at buy abo.e and sell belo5 '&'3 points Call option GSP '3##C mont)ly finds t)at buy abo.e and sell belo5 ,s.'&9.'' Call option GSP '!##C mont)ly suggest t)at buy abo.e and sell belo5 ,s.'#'. # Put option GSP '3##C mont)ly finds t)at buy abo.e and sell belo5 ,s.!'.' Put option GSP '!##C mont)ly suggest t)at buy abo.e and sell belo5 ,s.'&.&' 4)e maBor suggestion of t)is resear+) study are: -se te+)ni+al tools to predi+t t)e mar0et. Pi.ote point +al+ulations are used to 0no5 t)e resistant and support le.el for te+)ni+al analysis ;ifty futureGMont)lyC pi.ote suggest t)at buy abo.e and sell belo5 '&'3 points Call option GSP '3##C mont)ly finds t)at buy abo.e and sell belo5 ,s.'&9.'' Put option GSP '!##C mont)ly suggest t)at buy abo.e and sell belo5 ,s.'&.&' CONC*USION 4)is study )as empiri+ally pro.ide t)e information about t)e e:uity deri.ati.es in 1ndian sto+0 mar0et. 4)e result of t)e study s)o5ed t)e fa+t t)at t)e stri0e pri+e rea+ted to t)e inde3 pri+e. 4)e analysis presented in t)is study )as impli+ations to 0no5 t)e terminology and te+)ni+al analysis of t)e mar0et effi+ien+y. 7rom t)e abo.e findings +learly states t)at t)e returns in stri0e pri+es are same mo.ement in t)e settlement period. Pi.ote points used to 0no5 t)e le.el at 5)i+) in.estor going to ta0e a de+ision for buying and selling t)e instruments. 4)is resear+) study furt)erly pro.ide better s+ope for doing resear+) study in t)e areas of deri.ati.e mar0et effe+ts. REFERENCES 8ologna, P and I. Ca.allo G"##"C: QDoes t)e 1ntrodu+tion of Sto+0 1nde3 7utures Effe+ti.ely ,edu+e Sto+0 Mar0et >olatilityR 1s t)e S7utures Effe+t@ 1mmediateR

E.iden+e from t)e 1talian sto+0 e3+)ange using EA,C6T, Applied Financial Economics, $", $&3($9". 8ollersle. 4. G$9& C: QEeneralised Autoregressi.e Conditional 6eteros+edasti+ityT Jo rnal o! Econometrics, 3$, 3#%(3"%. C)atrat), ArBun, SanBay ,am+)ander and 7ran0 Song G$99'C: QDoes 2ptions 4rading Iead to Ereater Cas) Mar0et >olatilityRT Jo rnal o! F t res Mar"ets, $' G%C, %&'( &#3. Co3, C C G$9% C: Q7utures 4rading and Mar0et 1nformationT Jo rnal o! Political Econom#, &!, $"$'(3%. Engle, ,. G$9&"C, QAutorregressi.e Conditional 6eteros0edasti+ity 5it) Estimates of -nited /ingdom 1nflationT, Econometrica, '#, 9&%($##&.7ama.E.7 G$9%#C, QEffi+ient Capital Mar0ets: A ,e.ie5 of 4)eory and Empiri+al Aor0T, Jo rnal o! Finance, >ol."', ;o.", pp.3&3($%. Srini.asan., G$99%C, QSe+urity Pri+es 8e)a.ior Asso+iated 5it) ,ig)t(1ssue related E.entsT $he ICFAI Jo rnal o! Applied Finance8 >ol.3, ;o.3, pp.%$(&$. >aidyanat)an 0ant 0umargali, ,, G"##'C, QEffi+ien+y of t)e 1ndian +apital Mar0etT, Indian Jo rnal o! !inance and research, .ol. >, no. ", Ql. $9! At)anassiou, E., /ollias, C., and Syriopoulos, 4., G"## C, Dynami+ .olatility and e3ternal se+urity related s)o+0s: 4)e +ase of t)e At)ens Sto+0 E3+)ange, Jo rnal o! International Financial Mar"ets, Instit tions and Mone#, %ol.$ , pp.!$$(!"!. 8ro5n, S., and Aarner, J., G$9&#C, Measuring se+urity pri+e performan+e, Jo rnal o! Financial Economics, >ol.&, pp."#'("'&. 8ro5n, S., and Aarner, J., G$9&'C, -sing daily sto+0 returns: 4)e +ase of e.ent studies, Jo rnal o! Financial Economics, >ol.$!, pp.3(3$. 9e1"ite" $. 555.sebi.go..in ". 555.bseindia.+om 3. 555.nseindia.+om !. 555.in.estopedia.+om