Future of Derivatives in Ludhiana

8/2/2019 Future of Derivatives in Ludhiana

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SUMMER TRAININGPRESENTATION

ONSTUDY OF FUTURE OF

DERIVATIVESIN LUDHIANA

Presented bJasmeet Ka

(MBA 2c)

Presented toMr. Arun Dutta

(Faculty, PCTE)


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Investment ThemesInvestment Themes

Transforming Economies

Growing Middle Income Populations

Deepening Comparative Advantages

Emerging Champions


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Introduction To FullertonIntroduction To Fullerton

Securities & Wealth AdvisorsSecurities & Wealth Advisors

Wholly owned subsidary of Temasak

Holdings.

FSWA is a company registered under

Companies Act, 1956 as on 8th

feburary,2008.


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Fullerton VisionFullerton Vision

To be distinctive financial services entity, providing thewidest range of unbiased financial solutions to customers.

Achieved through proprietary distribution network and

business partners.

Top class equity research.

High quality & well trained employees.

Consistent service.

Cutting edge technology.

To provide superior financial planning and wealth advisory.


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Fullerton MissionFullerton Mission

To create superior long termshareholder value in the financialsector across emerging markets

Organic growth Acquire and transform

Improve productivity

Optimize capital

Risk- Reward balance


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Key Value LeadershipKey Value Leadership

Great LeadershipPassionate

Balanced

Disciplined

Leaders in commercial/sme, mass consumer andmass self employed segments

Customer centric business models

Relationship v/s product positioningEnabling management model and culture

Empowered within defined boundaries


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Deeply embedded in each market

and chosen segment

High market share top 3

Embedded the right values and behaviour

across the organisation.


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Board Of directorsBoard Of directors


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Organizational ChartOrganizational ChartPallav Sinha

MA & CEO

Ashok

MathurHead,South

Ashwinder

Raj Singh

head.,North& NCR

Punit

Gupta

Head, West

Sariq Hoda

Head,EAst

Mr. Ashutosh

Cluster

Head,Punjab

Baljinder

Singh

RM,

Acquistion

Mohit

Singla

Channel

Manager

Jitin Arora

RM, HNI

Munish

Goyal

BDM


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Group CompaniesGroup Companies

Bank Danamon in Indonesia

The second largest private national bank and thefifth largest commercial bank in Indonesia, with a5% share of the domestic system loans and deposits

and 1,426 branches.

Fullerton India Credit Corporation

Established in December 2005, Fullerton Indiasbusiness model is community oriented, branchcentric and endeavors to build enduringrelationships with customers.


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Various departments OfVarious departments Of

FSWA, LudhianaFSWA, Ludhiana

Wealth

Securities

DST(Direct Sales Team)


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Various Services Provided ByVarious Services Provided By

FSWAFSWAFinancial PlanningMutual Funds

Equities

Insurance

NRI Services

SWOT A l i f FSWASWOT A l

i f FSWA


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SWOT Analysis of FSWA,SWOT Analysis of FSWA,

LudhianaLudhiana

Strengths

Everyday technical and fundamental calls aremailed to customers before the market opens.

Every single thing happening in organization ismailed to head within seconds and it encouragesemployees to work.

Being MNC it has funds are available forexpansion. Therefore, No loan is required.


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Weakness

Employees sometimes use phones for personalcalling which doesnt come into notice and itmay increase expenses of company.

Opportunities Future expansion plans:- right now company

has only 2 offices in Punjab , its plan is to open15 new branches in Punjab by the end of this

financial year.

To tap untapped market by providing properknowledge to potential customers.


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Threats

Existing brokerage firms in market.

Being an MNC people dont know about this

company, so people may prefer visiting another

company and opening account.


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History Of DerivativesHistory Of Derivatives

The first organized commodity exchange cameinto existence in the early 1700s in Japan.

U. S. futures markets, was the creation of theChicago Board of Trade in 1848.

In 1865, CBOT listed the first exchange traded

derivatives contract.


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In 1865, CBOT listed the first exchange traded

derivatives contract.

The Chicago Mercantile Exchange (CME), was

formed in 1919, though it did exist before in 1874

under the names of Chicago Produce Exchange(CPE) and Chicago Egg and Butter Board

(CEBB).

The first financial futures to emerge were the

currency in 1972 in the US.


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The first foreign currency futures were traded on

May 16, 1972, on International Monetary Market

(IMM), a division of CME.

The first call and put options were invented by an

American financier, Russell Sage, in 1872.


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1991 Liberalisation process initiated

14 December

1995

NSE asked SEBI for permission to trade index futures.

18 November

1996

SEBI setup L.C.Gupta Committee to draft a policy framework for index

futures.

11 May 1998 L.C.Gupta Committee submitted report.

7 July 1999 RBI gave permission for OTC forward rate agreements (FRAs) and

interest rate swaps.

Indian Derivative MarketIndian Derivative Market

24 May 2000 SIMEX chose Nifty for trading futures and options on an


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24 May 2000 SIMEX chose Nifty for trading futures and options on an

Indian index.

25 May 2000 SEBI gave permission to NSE and BSE to do index futures

trading.

9 June 2000 Trading of BSE Sensex futures commenced at BSE.

12 June 2000 Trading of Nifty futures commenced at NSE.

25 September

2000

Nifty futures trading commenced at SGX.

2 June 2001 Individual Stock Options & Derivatives


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Derivative instruments are defined by

Securities Contract (Regulation) Act

include:-

A security derived from debt instruments,shares, secured / unsecured loan, risk

instruments or contracts for differences, or anyother form of security.

A contract that derives its value from the

prices / index of prices underlying securities.


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Categories Of

Participants

HedgersSpeculators

Arbitrageur


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Types Of DerivativeTypes Of Derivative

ContractsContracts


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Forward ContractForward Contract

A forward contract is a customized

contract between the buyer and the

seller where settlement takes place on

a specific date in future at a price

agreed today.


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Futures ContractFutures Contract

A futures contract gives the holder the

right and the obligation to buy or sell, an

Asste at a certain time in future , itfollows daily settlement


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OptionsOptions

A contract that gives the option holder theright but not the obligation to buy or sell

the underlying asset at a price, called the

strike price, during a period or on aspecific date in exchange for payment of a

premium is known as option.

Two Types Of OptionsCall Options

Put Options


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SwapsSwaps

Swaps are contracts to exchange cash(flows) on or before a specified future

date based on the underlying value of

currencies/exchange rates, bonds/interestrates, commodities, stocks or other assets.

Two Types Of Swaps

Interest Rate Swaps Currency Swaps


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Factors Contributing ToFactors Contributing To

Growth Of DerivativesGrowth Of DerivativesPrice Volatility

Globalization of Market

Technological advances

Advances in financial theories


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Title Of The StudyTitle Of The Study

A Study on Future Of DerivativesA Study on Future Of Derivativesin Ludhiana.in Ludhiana.


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Objectives Of StudyObjectives Of Study

To study brokers experience in regard toderivatives.

To study investors perception towards

derivatives.To study the risk involved in derivative

instruments.


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Limitations Of StudyLimitations Of Study

Limited time:- The time available to conduct thestudy was only 2 months. It being a wide topic

had a limited time.

Aspect coverage:- Some of the aspects may not

be covered in my study.

Accuracy:- Some investors have filled forms

just for filling them. This may lead to less

accuracy in research.


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Research MethodologyResearch Methodology

Research methodology meansthe way in which the data hasbeen collected for the research

project and the way we wouldcomplete our prospected task.


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Research designResearch design

Research design is the structure within whichresearch is conducted; it contains the blueprint

for the collection, measurement and analysis of

data.

Descriptive research design has been used as

in this research the perception of brokers and

investors in regard to derivatives has beenstudied.


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Universe- All the people who are dealing inderivatives and were interested to deal inderivatives.

Population-

(i) All the brokers dealing in derivatives inLudhiana.

(ii) All the people dealing in derivatives orinterested in dealing, in Ludhiana.

Sampling Unit Every single person visitingAnsal plaza and Feroz Gandhi market and every

broker of Ludhiana Stock Exchange is sample unitin the report


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Sampling Frame - It represents the

elements of the target population.

Ludhiana City is the sampling frame for

this project.

Sample size- Sample size used in the

project is 50 (25 brokers and 25 investors).

Sampling Technique-Non Probability

technique i.econvenience sampling has

been used forcollecting data.


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Data collection

Primary DataSecondary Data

l i d


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Data Analysis AndData Analysis And

InterpretationInterpretation

PART I

To Study The Brokers experiencein regard to Derivatives

(Table 4a 1)(Table 4a 1) Percentage ofPercentag

e of


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(Table 4a.1)(Table 4a.1) Percentage ofPercentage of

clients dealing inclients dealing in

derivativesderivatives (N=25)(N=25)Percentage OfClients

Brokers response Percentage

0-20 14 56

20-40 7 28

40-60 2 8

60 & above 2 8

Total 25 100

(Graph 4a 2)(Graph 4a 2) BBetter modeetter mode


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(Graph 4a.2)(Graph 4a.2) BBetter modeetter mode

of Investing keeping inof Investing keeping in

account profitabilityaccount profitability


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(Table 4a.3)(Table 4a.3) Most preferredMost preferred

Mode for investingMode for investing

(n=30)(n=30)Options Number of responses Percentage

Index futures 11 36.67

Stock futures 12 40

Index options 3 10

Stock options 4 13.33

Total 30 100

(Table 4a 4)(Table 4a 4) RiskRisk


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(Table 4a.4)(Table 4a.4) RiskRiskPerception of brokersPerception of brokers

towards derivativestowards derivativesRisk Perception Number of responses Percentage

Highly Risky 22 88

Moderate Risk 3 12

Less Risky 0 0

Total 25 100

(Table 4a 5)(Table 4a.5) Highest riskHig

hest risk


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(Table 4a.5)(Table 4a.5) Highest riskHighest riskcarrying derivativecarrying derivative

(n=29)(n=29)Types of derivatives Number Ofresponses

Percentage

Equity Derivative 5 17.24

Commodityderivative

22 75.86

Currency derivative 1 3.45

Interest ratederivative

1 3.45

Total 29 100


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(Graph 4a.6)

( N=25)

(Graph 4a.7)(Graph 4a.7) Returns onReturns on


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(Graph 4a.7)(Graph 4a.7) Returns onReturns onderivatives if comparedderivatives if compared

with Real Estate Returnswith Real Estate Returns(N=25)(N=25)


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(Graph 4a.8)

(N=25)


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(Graph 4.9)

(N=25)


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PART II

To Study Investors Perception

Towards Derivatives.

(Graph 4b.1)(Graph 4b.1) AnnualAnnual


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(Graph 4b.1)(Graph 4b.1) AnnualAnnualIncome range ofIncome range of

respondentsrespondents(N=25)(N=25)

(Graph 4b.2)(Graph 4b.2) InvestmentInvestment


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(Graph 4b.2)(Graph 4b.2) InvestmentInvestmentOptions used byOptions used by

respondentsrespondents (n=50)(n=50)


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(Graph 4b.3)

(N=25)

(G h 4b 4)(G h 4b 4) F iF

i


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(Graph 4b.4)(Graph 4b.4) Frequency inFrequency in

dealing with derivativesdealing with derivatives

(n=9)(n=9)

(Table 4b.5)(Table 4b.5) Purpose forPurp

ose for


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(Table 4b.5)(Table 4b.5) Purpose forPurpose forundertaking derivativeundertaking derivative

ContractContract(n=11)(n=11)Purpose Number of responses Percentage

Hedging 7 63.64

Speculation 2 18.18

Risk Management 2 18.18

Arbitrage 0 0

Total 11 100

(G h 4b 6)(Graph 4b 6) M tMost


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(Graph 4b.6)(Graph 4b.6)MostMost

preferred derivativespreferred derivatives

(n=13)(n=13)

(Graph 4b.7)(Graph 4b.7) PercentagePercentag

e


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(Graph 4b.7)(Graph 4b.7) PercentagePercentageIncome invested inIncome invested in

derivativesderivatives(n=9)(n=9)

(Table 4b.8)(Table 4b.8) Perception ofPercep

tion of


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(Table 4b.8)(Table 4b.8) Perception ofPerception ofinvestors regardinginvestors regarding

ProfitsProfits(n=9)(n=9)Options Number of responses

PercentageMean=Total/Totalno. of respondents

0/9=0Highly Profitable

+20 0

Profitable+1

3 3

Neutral0

4 0

Loss Making

-1

1 -1

Highly LossMaking -2

1 -2

Total 9 0

(Table4b.9)(Table4b.9) Investors riskInvestors risk


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( ab e b 9)( ab e b 9) es o s ses o s sPerception for derivativesPerception for derivatives

(n=9)(n=9)Risk Factor Number of responses

Percentage

Highly Risky 6 66.67

Moderate Risk 3 33.33

Less risky 0 0

Total 9 100


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(Graph 4b.10)

(n=9)

(Graph 4b.11)(Graph 4b.11) Reasons forReasons for


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( p )( p )not increasing investmentnot increasing investment

in derivativesin derivatives(n=4)(n=4)

(Graph 4b.12)(Graph 4b.12) SuggestingSug

gesting


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( p )( p ) gg ggg gothers put their money inothers put their money in

derivativesderivatives(n=5)(n=5)


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(Graph 4b.13)

(n=16)

(Table 4b 13)(Table 4b 13) Reason forReason for


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(Table 4b.13)(Table 4b.13) Reason forReason for

not dealing in derivativesnot dealing in derivatives

(n=9)(n=9)


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PART-III

Analyzing Average Daily Turnover

At NSE

(Graph 4c.1)(Graph 4c.1)BusinessBusiness


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( p )( p )Growth in DerivativesGrowth in Derivatives

segment Since 2000-2010segment Since 2000-2010

Fi diFindings


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FindingsFindings

Main factor that led to growth ofderivatives are higher return.

Stock Futures are most preferred forinvesting in derivatives.

Derivatives carry high risk factor andamongst that commodity derivatives are

the most risky to trade due to highfluctuations.

Money invested in real estate would fetchhigher return compared to derivatives andwould carry less risk.


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Maximum people use derivative asHedging tool.

People already investing moneythrough derivatives would like toincrease their investments becausethey find it highly profitable.

Some people would prefer to invest

their money through derivatives ifthey are provided with knowledgeand a reliable broker.

S tiS ti


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SuggestionsSuggestionsPeople with low investment and less

knowledge should not enter derivativesmarket.

SEBI should be more vigilant to check thevolatility triggered by operators.

One should invest for long term and thattoo only in blue chip companies.

One should always invest their money andshould not speculate because speculationcan cause heavy losses.

If one wants to make money in stock


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ConclusionConclusionAccording to responses given by brokers

and investors a conclusion can beattained that there is great market aheadfor derivatives in future.

As fifty percent of people are ready totake knowledge and invest their money inderivatives, existing investors are readyto increase their investments which ishealthy sign for the markets.

Even average turnover at NSE hasincreased over last 10 years which showsus trend that in future there will be rise in

derivatives trading.


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Thank youThank you

Documents

Future of Derivatives in Ludhiana