A STUDY ON EQUITY & EQUITY DERIVATIVE - INDIAN SECURITIES

MARKETPresented By: ______________________

24th July, 2015

ABOUT THE INTERNSHIP Company: Karvy Stock Broking Limited (KSBL)

Location: Dilsukhnagar Branch, Dilsukhnagar

Branch Manager: Mr. B. Srinivas Rao (Cluster Manager)

Headquarter: Karvy House, Banjara Hills

Intern Job: Research, sales and promotions and NEAT practitioner

Internship Period: 2months (15th April – 15th June)

KARVY STOCK BROKING LIMITED

Karvy Stock Broking Limited is one of the cornerstones of the Karvy edifice, flows freely towards attaining diverse goals of the customer through varied services.

KSBL is a member of National Stock Exchange of India and the Bombay Stock Exchange, ranks among the top 5 stock brokers in India. With over 6,00,000 active accounts, it ranks among the top 5 Depositary Participant in India, registered with NSDL and CDSL.

KARVY STOCK BROKING LIMITED (KSBL), DILSUKHNAGAR is a branch under the Karvy Stock Broking Limited segment of the Karvy Group. It covers the suburban area of south-eastern Hyderabad and surrounding places, Dilsukhnagar branch is one of the three branches of Karvy, spread across Hyderabad and Secunderabad which was established in the year 2003. KSBL, Dilsukhnagar branch has approximately 40 employees including the two departments that is gold loans and stock broking. Mr. B. Srinivas Rao is the head of KSBL Dilsukhnagar branch who is also the cluster manager of stock broking department and manages two branches i.e. Dilsukhnagar branch and Kukatpally branch.

Different functions of Dilsukhnagar branch:

Depository Participant Trading Center PAN Center

Information Reporting Hierarchy

OBJECTIVE OF THE STUDY

1. To identify the best stocks for long term investment in NSE index CNX Nifty using fundamental analysis.

2. To find the return on investment in CNX NIFTY index and the identified stocks for the span of 5years i.e. FY 2010-15.

3. To analyze the return on investment in CNX NIFTY index and the identified stocks with and without portfolio management techniques.

4. To study the impact of cash market segment on derivative market using settlement price and the value of underlying equity.

5. To predict the cash market index (CNX NIFTY) & underlying index (FUTIDX NIFTY) using PIVOT POINT Method.

METHODOLOGY The purpose of the project is to help the investors by giving out a systematic approach toward selection and investment in different stocks in stock market.

The approach toward the project was through interaction with experienced people in the stock market and also through secondary sources like books, articles and journals.

Secondary Sources:• Narendra Nathan, Sanjay Kumar Singh & Sanket Dhanorkar “Learn how to pick value stocks”

(online) (cited: May 18th, 2015).Available from URL:

http://articles.economictimes.indiatimes.com/2015-05-18/news/62323235_1_value-traps-value-stocks-book-value• Nenavath Sreenu (2012), “A Study on Technical Analysis of Derivative Stock Futures and the Role

for Debt Market Derivatives in Debt Market Development in India”, International Journal of Business Economics & Management Research, Vol.2, Issue 3, ISSN 22498826.• Available from URL: http://

zenithresearch.org.in/images/stories/pdf/2012/March/ZIJBEMR/7_ZIJBEMR_MARCH12_VOL2_ISSUE3.pdf

CONT.

EQUITY MARKETSTOCKS

SELECTION

CONT. On the basis of method used to identify the stocks from CNX NIFTY, it ended up with the following stocks:

Sector Company

Banks Yes Bank Limited

Banks Axis Bank

RefineriesBharat Petroleum

Corporation

Oil Drilling and

ExplorationGAIL INDIA

Software HCL Technologies

Software Wipro

IT-Software Infosys

IT-SoftwareTata Consultancy

Services

Cigarettes and FMCG ITC Limited

Infrastructure Larsen & Toubro Limited

AutomobileMahindra & Mahindra

Limited

RETURN ON INVESTMENT IN CNX NIFTY & IDENTIFIED STOCKS

Company/Index

Amount

Invested

Price (June 2010)

Shares Purchas

ed

Price (May 2015)

Return

Difference

Nifty Bees 110000 532.75 206 847.1917492

464924

Axis Bank 10000 1242.40 8 585.4 4712 -5288Yes Bank 10000 269.30 37 882.3 32763 22763

BPCL 10000 662.75 15 850.15 12828 2828Gail 10000 467.30 21 388.85 8321 -1679HCL 10000 364.15 27 1010.75 27756 17756

Wipro 10000 384.50 26 561.7 14609 4609Infosys 10000 2791.00 4 2023.16 7249 -2751

TCS 10000 751.00 13 2610.3 34758 24758ITC 10000 305.45 33 327.1 10709 709L&T 10000 1808.96 6 1654.45 9146 -854M&M 10000 627.35 16 1258.1 20054 10054Equity Portfolio Nifty Bees Difference

72,904 64,924 7,980

ROI without using portfolio management techniques

Shares Sold

Share Bought

CompanyShar

e Price

No. of

Shares

Amount

(Rs.)

Company

Share

Price

No. of

Shares

Amount

(Rs.)

Axis Bank 1404 8 11300Yes

Bank310 36

11300

Gail 488 21 10447Axis Bank

481 221044

7

Infosys 4051 4 14515 BPCL 725 201451

5

Company/IndexPrice

(Rs.)No. of shares

Return

(Rs.)

Nifty Bees 847.19 206 174924

Axis Bank 585.4 22 12710

Yes Bank 882.3 74 65290

BPCL 850.15 35 29755

HCL 1010.75 27 27756

Wipro 561.7 26 14609

TCS 2610.3 13 34758

ITC 327.1 33 10709

L&T 1654.45 6 9146

M&M 1258.1 16 20054

Return on Equity Portfolio

(Rs.)224787

Difference 49862

Portfolio Management

With PM

(Rs.)

Without PM

(Rs.)

Difference

(Rs.)Increase (%)

49862.24 7979.529 41882.71 525%

EQUITY DERIVATIVE MARKETUnderlying Value Vs Settlement price of FUTIDX Nifty

Turnover comparison of FUTIDX & CNX Nifty

Spread in FUTIDX NIFTY

Spread in CNX NIFTY

PREDICTION OF FUTURE VALUES FOR DERIVATIVE INSTRUMENTS USING PIVOT POINTSPivot Point (P): It is simply the average of the high, low and closing prices from the previous trading day, which is used as an indicator to determine the overall trend of the market over different time frame.

Support (S1, S2) and Resistance level (R1, R2): Price support and resistance levels are key trading tools in any market. Their roles may be interchangeable, depending on whether the price level is approached in an up-trending or a down-trending market.

For instance, if we take the opening price on 30th March,2015 of FUTIDX expiring on 25th June, 2015, it is 8515.2 which is between the previous day’s pivot point i.e. 8521.7 and support level 1 i.e. 8467.4. Thus according to pivot point the closing price would be more than the opening price which is true i.e. closing price is 8645.7.

Date Open High Low Close S2 S1Pivot Point

R1 R2

27-Mar-15

8545.0

8576.0

8460.0

8529.1

8405.7

8467.4

8521.7

8583.4

8637.7

30-Mar-15

8515.2

8659.0

8515.2

8645.7

8462.8

8554.2

8606.6

8698.1

8750.5

31-Mar-15

8667.1

8686.3

8582.2

8618.6

8524.9

8571.8

8629.0

8675.9

8733.1

TREND ANALYSIS USING PIVOT POINTS

PIVOTPOINTTABLE

FINDINGS & CONCLUSION

CONT.4. The turnover in equity derivative market is very high due to high volatility and

quick response to market information.5. The study confirms that the turnover in the derivative market increases as the

expiry date comes nearer with decrease in the margin.6. The settlement price of derivative instrument as well as stock price of any

stock can be predicted using Pivot point as depicted in the study.7. Pivot point can also be used as an indicator for market trend i.e. bearish or

bullish.CONCLUSION

This study has empirically provided the information about the equity and equity derivative market. It has also provided information on selecting stocks for investment through the 10 steps. While investing, it is important to understand the importance of portfolio management for maximum returns. The result of the study showed the fact that the strike price reacts to the index price. From the findings of this study, it is evident that the returns in strike prices are same as movement in the settlement period. Pivot points can be used to know the level at which the investor is going to take a decision for buying and selling of the instruments. This study can be further researched by considering the effects of macro economic variables and economic events on equity and equity derivative market.

QUESTIONS???