AURORA’S POST-GRADUATE COLLEGE (MCA)

Accredited by NAAC with‘ A+’ Grade

PROJECT SYNOPSIS

Name of the Student : GANGI SHETTY GANGI SHETTY SAI

VINEETH

Course : MBA

Academic Year : 2021-2023

Hall Ticket No : 1325-21-672-191

Title of the Project : FUTURE & OPTIONS IN INDIA

NAME OF THE COMPANY: TATA STEEL LIMITED

Name of the Guide :

Date of Submission :

Signature of the Student Signature of the Guide

College Seal
 A

SYNOPSIS ON

FUTURE & OPTIONS IN INDIA

AT

TATA STEEL LIMITED

Project Synopsis submitted in partial fulfillment for the award of the

Degree of

MASTER OF BUSINESS ADMINISTRATION

By

GANGI SHETTY SAI VINEETH

1325-21-672-191

AURORA’S POST-GRADUATE COLLEGE (MCA)

Accredited with ‘A+’Grade by NAAC

Ramanthapur, Hyderabad – 500 013

(2021-23)
 TABLE OF CONTENTS

S. No Description Page No

1 INTRODUCTION

1.1 Definition of Expatriate -

1.2 Need for the Study -

1.3 Problem Statement -

1.4 Significance of the Study -

1.5 The Objectives of the Study -

1.6 The Hypotheses of the Study -

1.7 Scope of the study -

2 REVIEW OF LITERATURE

2.1 Theoretical Reviews -

2.2 Articles -

3 RESEARCH METHODOLOGY

3.1 Research Design -

3.2 Sampling Procedure -

3.3 Sample Size -

3.4 Methods of Data Collection -

3.5 Questionnaire Design -

3.6 Reliability test -

3.7 Statistical Tools -

CHAPTERIZATION -

BIBLIOGRAPHY -
1.1 INTRODUCTION
Derivatives are an important breed of financial instrument which are central to today‘s

financial markets. In India, the derivative market segment is very popular and quite active. It

is very clear that in currency markets, commodity markets and stock markets involving all the

market participants face considerable risk on account of price fluctuations regarding assets

traded in these markets. In a financial market system, derivatives can improve a market‘s

efficiency by price discovery, liquidity and transfer of risk. Moreover, investors and business

houses use derivatives to hedge or manage their risks. The unfamiliarity and complexity of

trading in derivatives has created an air of doubt among the investors inducing them to take

differing perspectives on derivatives.

A derivative instrument helps to hedge the risk involved in the trading of an underlying asset.

In short derivatives are those financial instruments which derive value from an underlying

asset or index. The underlying assets are of two types, namely commodities like gold, cotton,

pepper etc. and financial assets like shares, currencies, bonds etc. Based on the underlying

assets, the derivatives are classified into commodity and financial derivatives. The basic

purpose of these instruments is to provide commitments to prices for future dates for giving

protection against adverse movements in future prices, in order to reduce the extent of

financial risks. Not only this, they also provide opportunities to earn profit for those persons

who are ready to go for higher risks. In other words, these instruments, indeed, facilitate to

transfer the risk from those who wish to avoid it to those who are willing to accept the same.

Therefore, by lock-in asset prices investors can minimize the impact of price fluctuations

with profitability.

Every modern economy is based on a sound financial system. A financial system is a set of

institutional arrangements through which financial surpluses are mobilized from the units

generating surplus income and transferring them to the others in need of them. The activities
include production, distribution, exchange and holding of financial assets/instruments of

different kinds by financial institutions, banks and other intermediaries of the market. The

financial markets have two major components; they are money market and capital market.

A derivative is a financial instrument whose value depends on other, more basic, underlying

variables. The valuable underlying could be prices of traded securities and stocks, prices of

gold or copper. Derivatives have increasingly important field of finance, options and futures

are traded actively on many exchanges, Forward contacts, Swap and different types of

options are regularly traded outside exchanges by financial institutions, Banks and their

corporate clients in what are termed as over the counter markets. In other words, there no

single market place organized exchanges.

A derivative security is a security whose value depends on the value of together more basic

underlying variable. These are also known as Contingent Claims. Derivatives securities have

been very successful in innovation in capital markets.

The emergence of the market for derivative products most notably forwards, futures and

options can be traced back to the willingness of risk adverse economic agents to guard

themselves against uncertainties arising out of fluctuations in asset prices. By their very

nature, financial markets are market by a very high degree of volatility. Though the use of

derivative products, it is possible to partially or fully transfer price risks by locking – in asset

prices. As instrument of risk management these generally don’t influence the fluctuations in

the underlying asset prices.

However, by locking-in asset prices, derivative products minimize the impact of fluctuations

in asset prices on the profitability and cash-flow situation of risk-averse investor.

Currency Derivatives. A currency future, also known as FX future, is a futures contract to

exchange one currency for another at a specified date in the future at a price (exchange rate)
that is fixed on the purchase date. Currency future contracts allow investors to hedge

against foreign exchange risk.

Within the applicable position limits, position taken by the FPIs in the currency derivative

segment shall be subject to the following conditions:

 Foreign Portfolio Investors (FPIs) may take long as well as short positions per stock

exchange up to the following limit without having to establish the existence of any

underlying exposure:

 USD-INR currency pair: USD 15 million.

 EUR-INR, GBP-INR and JPY-INR currency pairs (all put together): USD 5

million.

 FPIs shall ensure that their short positions at a stock exchange across all contracts in

USD-INR pair do not exceed USD 15 million and do not exceed USD 5 million

equivalent in EUR-INR, GBP-INR and JPY-INR pairs, all put together at any point

of time.

 To take long positions in excess of USD 15 million in USD-INR pair and in excess

of USD 5 million equivalent in EUR-INR, GBP-INR and JPY-INR pairs, all put

together. FPIs shall be required to have an underlying exposure in Indian debt or

equity securities, including units of equity/debt mutual funds.

 Position taken by Domestic Clients excluding Bank within the applicable position

limit shall be subjected to the following conditions:

 Domestic clients may take long as well as short positions per stock exchange up to

the following limit without having to establish the existence of any underlying

exposure:

 USD-INR currency pair : USD 15 million and EUR-INR, GBP-INR, JPY-

INR currency pairs (all put together): USD 5 million.

  Domestic clients may take positions in excess of USD 15 million in USD-

INR pair and in excess of USD 5 million equivalent in EUR-INR, GBP-

INR and JPY-INR pairs, all put together, subject to the conditions

specified in the RBI A.P. (DIR Series) Circular no. 147 dated June 20,

2014 and RBI A.P. (DIR Series) Circular no. 90 dated March 31, 2015.

Currency derivatives are financial contracts between the buyer and seller involving the

exchange of two currencies at a future date, and at a stipulated rate. Currency Derivatives

Trading is suitable for those interested in reducing their foreign exchange rate risk. Currency

Derivatives in India provide a bundle of opportunities for a number of players. Take this

opportunity to effectively manage your international exchange rate risk with currency trading

in India.
1.2 NEED FOR THE STUDY
The study has been done to know the futures of derivatives and also to know the derivative

market in India. This study also covers the recent developments in the derivative market

taking into account. The trading of BHEL, ITC, ONGC, through this study I came to know

the trading done in derivative and their use in the stock market
1.3 PROBLEM STATEMENT
In Hyderabad, the retail investors see derivative instruments as a risky investment option

because many of them lack the basic knowledge regarding their purpose and modus operandi.

Most of the investors withdraw their investment decision in financial derivative due to lack of

knowledge and technical support. A close examination of the derivative market brings out the

fact that the retail investors are ready to invest in the derivatives with a support extended by a

third party. The investors are encouraged to invest in these instruments through

intermediaries like stock brokers and financial experts. The retail investors leave their

investment decision in derivatives in the hands of the intermediaries. Even the most

experienced investors in the market is facing difficulties due to lack of information at the

right time.
1.4 SIGNIFICANCE OF THE STUDY
Derivatives are important tools for risk management in the financial market. This research

does not confine to investors preference towards Futures and Options but throws light on

their level of satisfaction, their risk and returns, the factors influencing their decision to trade

in them and the problems faced by retail investors in derivative market segment. This study is

also intended to attract the investors towards derivative market segment. The derivatives can

not only act as an investment option but can be used an effective tool to manage financial

risk. I hope this study will give an insight to the retail investors and various other

stakeholders like stock brokers, financial experts, professionals, institutional investors,

academicians, researchers, statutory bodies etc.

1.5 THE OBJECTIVES OF THE STUDY
 To study the Derivative trading.

 To study the performance of future trading since February 2018 to April 2022 of

BHEL, ITC, ONGC.

 To compare the prices of BHEL, ITC, ONGC, from February to April.

 To understand the concept of the Financial Derivatives and derivative trading such as

Futures

 To study the different ways of buying and selling of future

1.6 THE HYPOTHESES OF THE STUDY
H1: Level of satisfaction of the investors with the Future and Options trading is not high.

H2: There is no significant difference in satisfaction level of male and female investors.

H3: There is no significant difference in the satisfaction level of investors in relation to

education.

H4: The level of satisfaction does not differ with age.

H5: Trading in derivatives is independent of education.

1.7 SCOPE OF THE STUDY
The study is limited to “Derivatives” With special reference to Futures in the Indian context

and the India Info line has been taken as representative sample for the study. The study

cannot be said as totally perfect, any alteration may come. The study has only made humble

attempt at evaluating Derivatives Markets only in Indian Context. The study is not based on

the International perspective of the Derivatives Markets.

2.1 THEORETICAL REVIEWS
The emergence of the market for derivative products, most notably forwards, futures and

options, can be traced back to the willingness of risk-averse economic agents to guard

themselves against uncertainties arising out of fluctuations in asset prices. By their very

nature, the financial markets are marked by a very high degree of volatility. Through of

derivatives of products, it is possible to transfer price risks partially or fully by locking –in

asset prices. As instruments of risk management, these generally do not influence the

fluctuations underlying prices. However, by locking –in asset prices, derivatives products

minimize the impact of fluctuations in asset prices on the profitability and cash flow situation

of risk–averse investors.

DEFINITION

The term Derivatives has been defined in securities Contracts (Regulation)Act 2016

 A security derived from a debt instrument, share, loan whether secure or unsecured,

risk instrument or contract for differences or any other form of security.

 A contract, which derives its value from the prices, or index of prices, of underlying

securities.

History of Derivatives

 Derivative trading began in 2015 when the Chicago board of trade (CBOT) listed the

first “exchange traded” derivatives contract in the USA. These contracts were called

“future contract”.

 In 2020 the Chicago Butter and Egg board a spin-off of CBOT was recognized to

allow future trading. Its name was changed to Chicago mercantile exchange (CME).

The first stock index futures contract was traded at Kansas City board of trade.

Need for derivative in India today

In less than 3 decades of their coming into vogue, derivative market have become most
important market in the world. Today derivatives have become part and parcel of the day-to-

day life for ordinary people in major part of the world.

Until the advent of NSE the Indian capital market had no access to the latest trading methods

and was using traditional outdated methods of trading.

Uses of Derivative market

 Derivative markets serve for risk

 Hedges use derivative to reduce risk exposure.

 Speculator use derivatives to increase risk exposure in the anticipation of making

profit.

 Derivative market facilitates the shifting of risk from those who bear it at a high cost,

to those who bear it at a low cost.

 Speculators perform a valuable service by absorbing risk from hedgers.in return they

receive a risk premium.

Participants

The following three broad categories of participants in the derivatives market.

Hedgers

Hedgers face risk associated with the price of an asset. They use futures or options markets to

reduce or eliminate this risk.

Speculators

Speculators wish to bet on future movements in the price of an asset. Futures and options

contracts can give them an extra leverage; that is, they can increase both the potential gains

and potential losses in a speculative venture.

Arbitrageurs
Arbitrageurs are in business to take advantage of a discrepancy between prices in two

different markets. If, for example, they see the futures price of an asset getting out of line

with the cash price, they will take offsetting positions in the two markets to lock in a profit.

Functions of derivatives market

The following are the various functions that are performed by the derivatives markets. They

are:

 Prices in an organized derivatives market reflect the perception of market participants

about the future and lead the prices of underlying to the perceived future level.

 Derivatives market helps to transfer risks from those who have them but may not like

them to those who have an appetite for them.

 Derivative trading acts as a catalyst for new entrepreneurial activity.

 Derivatives markets help increase savings and investment in the long run.
2.2 ARTICLES
Article 1: Large UK Companies and Derivatives

Author: Kevin Grant Andrew P. Marshall

Journal: First published: 28 June 2008

Abstract: Derivative securities have transformed the way treasurers view financial price risk

and have been used to hedge risks that were previously left open. In this paper, we present the

results of surveys of treasurers of large UK companies to questions about their derivative use.

We examine the extent of derivative use, the reasons for their use, the perceived risks

associated with derivatives, what sort of controls are in place to monitor the use of

derivatives, and, finally, reporting practices which govern the disclosure of derivative

practices. Results of the surveys indicate widespread use of derivatives like swaps, forwards

and options. The primary reasons for their use are to manage interest rate and currency risk.

There is a rather limited, but growing, use of derivatives to manage commodity and equity

risk. Treasurers report that they are somewhat cautious about more exotic types of

derivatives, primarily because of concern over the illiquidity of the underlying market for

these derivatives. Interestingly, treasurers revealed that they view control and the nature of

their counterparty as the main risks in using derivatives. Finally, the use of derivatives is

accompanied by significant control mechanisms inside companies, and treasurers are using

sophisticated procedures to quantify their derivative exposures before they are reported at

board level.
Article 2: Entry and Exit in OTC Derivatives Markets

Author: Andrew G. Atkeson, Andrea L. Eisfeldt, Pierre-Olivier Weill

Journal: First published: 18 December 2015

Abstract: We develop a parsimonious model to study the equilibrium and socially optimal

decisions of banks to enter, trade in, and possibly exit, an OTC market. Although we endow

all banks with the same trading technology, banks' optimal entry and trading decisions

endogenously lead to a realistic market structure composed of dealers and customers with

distinct trading patterns. We decompose banks' entry incentives into incentives to hedge risk

and incentives to make intermediation profits. We show that dealer banks enter more than is

socially optimal. In the face of large negative shocks, they may also exit more than is socially

optimal when markets are not perfectly resilient.

Article3: The Promise of Blockchain Technology for Global Securities and Derivatives

Markets: The New Financial Ecosystem and the ‘Holy Grail’ of Systemic Risk Containment

Author: Emilios Avgouleas & Aggelos Kiayias

Journal: European Business Organization Law Review volume 20, pages81–110 (2019)

Abstract: Weaknesses in investor control over their investments and in warehousing

systemic risk in modern Financial Market Infrastructure (FMI) are the result of a combination

of market failures and of structural flaws deeply ingrained in modern financial markets. Yet

the utility of complex FMI comprising long custodial chains and large global Central

Counterparties (CCPs) for the operation of modern markets is not seriously disputed. The

change in the technology paradigm with the introduction of DLT systems for securities and

derivatives FMI can increase investor control, the efficiency of risk management and, to

some extent, augment the distribution of systemic risk. It can thus create a more diverse and

resilient financial ecosystem. This cross-disciplinary paper identifies a multitude of reasons

that favour a paradigm shift in FMI technology. It also sketches a comprehensive blockchain-

based framework for the development of permission-based platforms for derivatives clearing

and settlement and the handling of liquidity shortages within DLT systems. Arguably, the

impact of technological change should lead to a reduction of industry rents for the benefit of

end investors and of the end users of finance (entrepreneurs and businesses) enhancing

market welfare. Therefore, the use of blockchain technology in FMI can transform the

structure and future direction of the financial services industry as a whole.

Article4: The Use of Interest Rate Derivatives by End-users: The Case of Large Community

Banks

Author: David A. Carter & Joseph F. Sinkey Jr.

Journal: Journal of Financial Services Research volume 14, pages17–34 (1998)

Abstract: This paper investigates the use of interest-rate derivatives by U.S. commercial

banks with total assets between $100 million and $1 billion. These banks are interesting,

because they allow us to focus on the end-users of interest-rate derivatives rather than

dealers. Over our four-year test period, 1990–1993, only 10% of these large community

banks, on average about 250 banks per year, used any interest-rate derivatives. We find

evidence that the use of interest-rate derivatives is positively related to exposure to interest-

rate risk as measured by the absolute value of the 12-month maturity gap. In addition, a

community bank's decision to participate in interest-rate contracts is positively related to size.

Nevertheless, we find no positive relationship between size and the extent of participation in

the derivatives market. Finally, our evidence suggests that banks that participate more heavily

in interest-rate swaps have stronger capital positions, an indicator of market or regulatory

discipline or both.
Article5: International Evidence on Financial Derivatives Usage

Author: Söhnke M. Bartram,Gregory W. Brown,Frank R. Fehle

Journal: First published: 28 April 2009

Abstract: Theory predicts that nonfinancial corporations might use derivatives to lower

financial distress costs, coordinate cash flows with investment, or resolve agency conflicts

between managers and owners. Using a new database, we find that traditional tests of these

theories have little power to explain the determinants of corporate derivatives usage. Instead,

we show that derivative usage is determined endogenously with other financial and operating

decisions in ways that are intuitive but not related to specific theories for why firms hedge.

For example, derivative usage helps determine the level and maturity of debt, dividend

policy, holdings of liquid assets, and international operating hedging.

3. RESEARCH METHODOLOGY
The study is both descriptive and analytical in nature. It is a blend of primary data and

secondary data. The primary data has been collected personally by approaching the online

share traders who are engaged in share market. The data are collected with a carefully

prepared questionnaire. The secondary data has been collected from the books, journals and

websites which deal with online share trading.

3.1 Research Design

A research design is an arrangement of condition for collection and analysis of the data in a

manner that aims to combine relevance to the research purpose with economy in procedure.

The study is descriptive in nature i.e., descriptive research. Descriptive research is concerned

with describing the characteristics of a particular individual or group. This includes surveys

and fact-finding enquiries of different kinds. The main characteristic of this method is that the

researcher has no control over the variables; one can only report what has happened or what

is happening. Thus, the research design in case of descriptive study is a comparative design

throwing light on all the areas and must be prepared keeping the objectives of the study and

the resources available. This study involves collection of data from Junior level Executives.

3.2 Sampling Procedure

Research is an art of scientific investigation. Research is defined as a “scientific and systematic search

for information on a specific topic”.

The purpose of search is to discover answers to questions through the application of scientific

procedures.

3.3 Sample Size

100 respondents
3.4 Methods of Data Collection
Primary Sources: The primary data was collected through structured unbiased questionnaire

and personal interviews of investors. For this purpose questionnaire included were both open

ended & close ended & multiple-choice questions.

Secondary method: The secondary data collection method includes:

 Websites

 Journals

 Text books

Method Used For Analysis of Study

The methodology used for this purpose is Survey and Questionnaire Method. It is a time

consuming and expensive method and requires more administrative planning and supervision.

It is also subjective to interviewer bias or distortion.

Sampling Unit: Businessmen, Government Servant, Retired Individuals

BIBLIOGRAPHY
WEBSITES :

 www.indiabulls.com

 www.nsdl.com

 www.cdsl.com

 www.moneycontrol.com

 www.nseindia.com

 www.bseindia.com

 www.sebi.com

 www.economictimes.com

BOOKS :

 Investment management by V.K.Bhalla.

 Security Analysis and Portfolio Management – V.A.Avadhani.

 Marketing of Financial Services – V.A.Avadhani.

 Indian Financial System – M.Y.Khan.

JOURNALS:

 International journal of emerging technologies and innovative research, July-2018

 Journal of advances and scholarly researches in allied education, volume:15/issue:7,

sep 2018

 The international lawyer vol.44 , no.4

 Journal of insurance issues vol.19.no.2

 Journal of ASFMRA,2011.

NEWSPAPERS:

 The Business Lines

 The Economic Times