A Study on Derivatives with reference to Futures & Options At Inter- Connected Stock Exchange of India Ltd

Submitted in partial fulfillment for the award of the Degree of Master of Business Administration, JNTU, Hyderabad
By

Mamatha Ramadheni 09321E0011

Under the guidance of

Mrs. K.Bhagya Lakshmi

Department of Business Administration BHOJ REDDY ENGINEERING COLLEGE FOR WOMEN

(Sponsored by Sangam Laxmibai Vidyapeet, approved by AICTE and affiliated to JNTU)

Vinay Nagar, Saidabad, Hyderabad-500059 AP Academic Year 2010-2011

Declaration
I here by declare that this Project Report titled A STUDY ON DERIVATIVES WITH REFERENCE TO FUTURES & OPTIONS submitted by me to the Department of Business Administration is a bonafide work undertaken by me and it is not submitted to any other university or institution for the award of any degree diploma/certificate or published any time before.

DATE: PLACE: Hyderabad

Mamatha Ramadheni 09321E0011

Acknowledgements
I express my sense of this opportunity to express my heartfelt gratitude to the management of Interconnected Stock exchange allowing me to study the practical aspects of Derivatives with reference to Futures and Options in their esteem organization. I express my sincere thanks to my external guide Mr. Rama Krishna who helped me throughout the project with their valuable guidance, suggestions, and encouragement from the beginning till the completion of my project work. I wish to express my sincere thanks to Mrs.R.REKHA principal of Bhoj Reddy Engineering College for Women for his kind cooperation during the entire MBA Project. I also thankful to Mrs. Mrs.R.Vijaya Lakshmi (HOD) for giving her valuable guidance throughout my project. I extend my humble thanks to my internal guide Mrs.K.Bhagya Lakshmi for her timely and valuable suggestion and her valuable guidance, particularly in my successful completion of this project. I also thank the entire staff of Department of Business Administration, Mrs.B.Swapna Priya, Ms.G.Lavanya and Ms.M.Lalitha for their valuable suggestions and help in completion of this project. I protract my deepest sense of gratitude and indebtedness to my family, friends and everyone who has helped me directly or indirectly in completion of my project successfully. Mamatha Ramadheni 09321E0001

ABSTRACT
Derivatives are the important financial instruments that are central to todays financial and trade markets. The subject of derivatives is currently a topic of interest in both finance and accounting. The volume of derivatives has increased enormously in recent years. The purpose of the present study is to observe the impact of derivatives in risk handling derivative products, such as a forward, future, options and swaps, through the use of these products it is possible to partially or fully transfer the price risks by locking in asset prices. As instruments of risk management, these generally influence the fluctuations in the underlying asset prices. The present study is conducted considering two stock price movements. Using the moving averages an attempt is made to give suggestions regarding selling and buying of these selected stocks. Investor can invest in the derivative market because of the greater amount of liquidity offered by the financial derivatives and the lower transaction costs associated with the trading of financial derivatives. Still SEBI has to play in derivatives market, an attempt is made to explain the possible role of SEBI in derivatives market.

CONTENTS

Page Number List of Tables List of Figures Chapter 1 INTRODUCTION 1.1 Introduction to the study 1.2 Need for the study 1.3 Objective of the study 1.4 Research Methodology 1.5 Scope of the Study 1.6 Limitations of the study Chapter 2 PROFILES 2.1 Industry Profile 2.1 Company Profile Chapter 3 Chapter 4 THEORETICAL REVIEW DATA ANALYSIS & INTERPRETATIONS 18 25 32 Chapter 5 75 5 1 3 3 3 4 4 i ii

FINDINGS, SUGGESTIONS & CONCLUSIONS

Bibliography

List of Tables
S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Title of the Table Page No.

Future Prices and Moving Averages of WIPRO for the Month of 32 February 2011 Spot Prices of Moving Averages of February 2011 WIPRO for the Month of 35

Future Prices and Spot Prices of WIPRO for the Month of February 38 2011 Future Prices and Moving Averages of WIPRO for the Month of 40 March 2011 Spot Prices of Moving Averages of WIPRO for the Month of March 43 2011 Future Prices and Spot Prices of WIPRO for the Month of March 46 2011 Future Prices and Moving Averages of WIPRO for the Month of 48 April 2011 Spot Prices of Moving Averages of WIPRO for the Month of April 51 2011 Future Prices and Spot Prices of WIPRO for the Month of April 2011 Call Option Prices of DENABANK for the Month of February 2011 Call Option Prices of DENABANK for the Month of March 2011 Call Option Prices of DENABANK for the Month of April 2011 Put Option Prices of DENABANK for the Month of February 2011 Put Option Prices of DENABANK for the Month of March 2011 Put Option Prices of DENABANK for the Month of April 2011 54 56 59 62 65 68 71

List of Figures

Fig No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Title of the Figure Trends of Future Prices and Moving Averages of WIPRO for the Month of February 2011 Trends of Spot Prices and Moving Averages of WIPRO for the Month of February 2011 Comparison between Future Prices and Spot Prices of WIPRO for the Month of February 2011 Trends of Future Prices and Moving Averages of WIPRO for the Month of March 2011 Trends of Spot Prices and Moving Averages of WIPRO for the Month of March 2011 Comparison between Future Prices and Spot Prices of WIPRO for the Month of March 2011 Trends of Future Prices and Moving Averages of WIPRO for the Month of April 2011 Trends of Spot Prices and Moving Averages of WIPRO for the Month of April 2011 Comparison between Future Prices & Spot Prices of WIPRO for the Month of April 2011 Trends in Strike Prices & Premiums of DENABANK for February 2011 Trends in Strike Prices & Premiums of DENABANK for March 2011 Trends in Strike Prices & Premiums of DENABANK for April 2011 Trends in Strike Prices & Premiums of DENABANK for February 2011 Trends in Strike Prices & Premiums of DENABANK for March 2011 Trends in Strike Prices & Premiums of DENABANK for April 2011

Page No. 34 36 39 41 44 47 49 52 55 57 60 63 66 69 72

CHAPTER 1

INTRODUCTION

CHAPTER 2

INDUSTRY PROFILE & COMPANY PROFILE

CHAPTER 3

THEORETICAL REVIEW

CHAPTER 4

DATA ANALYSIS & INTERPRETATION

CHAPTER 5

FINDINGS, SUGGESTIONS & CONCLUSION

BIBLIOGRAPHY

BIBLIOGRAPHY
Security Analysis & Portfolio Management, S.Kevin, Prentice Hall, 2006 Security Analysis & Portfolio Management, 6/e, Donald E.Fischer and Ronald J.Jordan, Pearson Education, 2007

Economic times News Paper http://www.derivativesindia.com/scripts/index.asp http://www.nseindia.com/