INDIAN SCHOOL OF BUSINESS &ECONOMY

INDIAN INSTITUTE OF PLANING AND MANAGEMENT,

SATBARI CAMPUS, NEW DELHI

SUMMER INTERNSHIP PROJECT (SIP) REPORT

ON

“ROLE OF DEMATERALISATION (DEMAT) CUM TRADING IN STOCK MARKET & ANALYSIS OF CURRENACY DERIVATIVES SEGMENT”

AT

SHAREKHAN LIMITED (SEC-18, NOIDA)

BY

SURESH KUMAR

Enrollment No: 10AM80724 (ISBE)

Session: 2010-12

E-mail ID: skpanwar143@yahoo.com

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A PROJECT REPORT

ON

“DEMAT CUM TRADING”

&

“CURRENCY DERIVATIVE SEGMANTS”

_____________________________________________________________

A report submitted in complete fulfillment of the requirements of

Indian school of Business & Economic (ISBE) of INDIAN INSTITUTE PLANING & MANAGEMENT

(IIPM)

NEW DELHI

UNDER THE INDUSTRIAL GUIDENCE OF

MR. NARESH KUMAR, & MR. SACHIN KR. CHAUDHARY,

BRANCH TM. ASSISTANT MANAGER.

SUBMITTED TO: SUBMITTED BY:

PROF. AMIT BAGGA, SURESH KUMAR,

IIPM CAMPUS, ENROLL NO: 10ARE80724

NEW DELHI. ISBE (2010 – 2011),

IIPM NEW DELHI

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ACKNOWLEGEMENT

I hereby take this opportunity to acknowledge to contribution of all those who helped me during my SIP. This includes My Respected Company’s branch TM Mr.Naresh Kumar, SIP guide Mr. Sachin Kr. Chaudhary, My Project Mentor Prof. AMIT BAGGA, IIPM NEW DELHI. My SIP would not have been possible without the guidance, support and encouragement provided by all concerned. My Special thanks to Mr. Sachin Kr. Chaudhary and all the people of “Share khan” for their help in developing new ideas and skills in me.

My special thanks remembrance to PROF. AMIT BAGGA at IIPM, NEW DELHI. Who has encouraged to me to be a continuous learner.

I am very grateful to our team at SHAREKHAN who always offered a helping hand throughout my project work.

Above all, I thank the almighty without whose blessings anything would have been possible.

SURESH KUMAR,

Enroll No: 10ARE80724 (ISBE)

IIPM, NEW DELHI.

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CONTENTSEXECUTIVE SUMMARY ……………………………………………………………………. 7

INTRODUCTION ………………………………………………………………. 8 COMPANY PROFILE.

1) History of Share khan ……………………………………………………….. 9-102) Dematerlisation ( Demat ) Trading with Sharekhan ……..……. 11- 143) About Share khan’s Products & services ……………………………. 15- 164) Share khan is Competitors & its trading terminals/ software’s. 17

INTRODUCTION OF CAPITAL & STOCK MARKET …………………… 18- 20

INTRODUCTION OF STOCK EXCHANGE………………………………………… 20 -21

1) NSE ( National Stock Exchange)1.1) introduction………………………………………………………. 22-25

2) BSE ( Bombay Stock Exchange) 2.1) introduction ………………………………………………………… 26-282.2) BSE Sensex. ……………………………………………………………… 29-31

ANALYSIS & RESEARCH ON CURRENCY DERIVATIVE SEGMENT - INDIA

CURRENCY DERIVATIVE SEGMENT1.1) INTRODUCTION…………….. ………………………………………… 321.2) CONTRACT SPECIFICATION FOR CURRENCY FUTURE… 33-35 1.3) BROKERAGE CHARGES & CLEARING BANKS………….. 35- 381.4) MARGINING SYSTEM. …………………………………………… 38 1.5) TOTAL TURNOVER……………………………………….. …………… 39-41

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2) BASIC CURRENCY:

2.1) HISTORY OF US DOLLAR. … ………………… 42

2.2) US DOLLAR VALUE VS GOLD VALUE… 43

2.3) HISTORY OF EURO CURRENC………… 44

3) RELATION BETWEEN DOLLAR AND EURO……………………. 45-46

4) WHY US DOLLAR WEAK AGAINST THE EURO…………………… 47

5) WHY IS DOLLAR LOW WHEN STOCK MARKET IS HIGH……………. 48

6) WHY IS DOLLAR HIGH WHEN STOCK MARKET IS LOW …………… 49

7) CORRELATION:

7.1) CORRELATION DOLLAR TO EURO………….. …………… 50-51

7.2) CORRELATION EURO TO DOLLAR …... 51-52

8) APPRECIATION AND DEPRECIATION OF CURRENCY… 53-54

RESEARCH SECTION IN SHAREKHAN. …………………………. … 55

MY SIP IN SHAREKHAN (DERIVATIVE CUM DEMAT TRADING). 56- 58

2) Analysis of Weekly Performance. …………………… 58-59

3) Learning in Sharekhan. ……………………………… 59

RESEARCH METHODOLOGY:

1) Exploratory & Descriptive Research. …………………… 59-61

3) Sampling Methodology. …………………………………… 61-62

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DATA ANALYSIS & INTERPRETATION. ………………. 63 - 71

FINDINGS. ……………………………………………………… 72

RECOMMENDATIONS& SUGGESTIONS. ………………… 72-73

CONCLUSION. …………………………………………………. 73

BIBLOGRAPHY. ………………………………………………. 74

ANNEXURE

1) Questionnaire. …………………………………………… ……… 75 - 77

2) Abbreviations. ………………………………………………………. 78-80

EXECUTIVE SUMMARY

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New ideas and innovations have always been the hallmark of progress made by mankind. At every stage of development, there have been two core factors that drive man to ideas and innovation. These are increasing returns and reducing risk, in all facets of life.

The financial markets are no different. The endeavor has always been to maximize returns and minimize risk. A lot of innovation goes into developing financial products centered on these two factors. It has spawned a completely new area called financial engineering.

The Reserve Bank of India in its Annual policy Statement for the year 2007-2008 proposed to set up a working Group on Currency Future to study the international experience and suggest a suitable frame-work to operationalise the proposal, in the with the currency legal and regulatory framework. This group submitted its report in April 2008. Following this, RBI, Securities, and Exchange Board of India (SEBI) jointly constituted a Standing Technical Committee to inter-alia evolve norms and oversee implementation of Exchange Traded Currency Derivatives. The Committee submitted its report on May 29, 2008. This report laid down the framework for the launch of Exchange Traded Currency Future in terms of the eligibility norms for existing and new Exchanges and their Clearing Corporations/Houses, eligibility criteria for members of such Exchanges/Clearing Corporation/Houses, product design, risk management measures, surveillance mechanism and other related issue.

The Regulatory framework for currency future trading in the country, as laid down by the regulators, provide that persons resident in India are permitted to participate in the currency future market in India subject to directions contained in the Currency Future (Reserve Bank) Directions, 2008, which have come into force effect from August 6, 2008

This market presents a tremendous opportunity for individual investors .The markets have performed smoothly over the last two years and has stabilized. The time is ripe for investors to make full use of the advantage offered by this market.

We have tried to present in a lucid and simple manner, the Currency derivatives segment market, so that the individual investor is educated and equipped to become a dominant player in the market.

INTRODUCTION

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AS A FINANCIAL SYSTEM

The financial system is one of the most important inventions of the modern society .The phenomena of imbalance in the distribution of capital or funds existed in every economic system. These are areas or people with surplus funds and there are those with deficit. A financial System functions are as an intermediately and facilities in the flow of funds from areas of surplus to the area of deficit. A financial system is a composition of various institutions, markets regulation and law, practices, money managers, transactions and claims and liabilities.

The functions performed by financial system are as:

1) SAVING FUNCTIONS2) LIQUIDITY FUNCTIONS.3) PAYMENTS FUNCTIONS.4) RISK FUNCTIONS.5) POLICY FUNCTIONS.

NSE was the first exchange to have received an in-principle approval form SEBI for setting up currency derivative segment. National Stock Exchange was the first exchange to launch Currency future trading in India. The currency Derivatives segment at NSE commenced operations on August 29, 2008 with the launch of currency futures trading in US Dollar-India Rupee (USD-INR)

COMPANY PROFILE

SHAREKHAN LIMITED

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SHAREKHAN is the one of the top Retail Brokerage houses in India with strong online trading platform. The company provides equity based products (Research, equities, Depository, Currency derivative segment, margin funding etc.). It has one of the largest network in India in field of shares trading with 1053 shares shops in 331 cities and India’s premier online trading portal www.sharekhan.com.with their research expertise, customer commitment and superior technology, they provide investors with end to end solutions in investments. They provide trade execution services through multiple channels- an internet platform, Telephone and Retails outlet.

Morakhiya family established share khan in 8 Feb 2000 and Morakhiya family still continue are the largest shareholder .it is the retail broking arm of the Mumbai-based SSKI ( Shanti lal Shewantilal Kantilla Ishwarlal securities limited) Group. Share khan parental company SSKI was established in 5 Feb 1922. With a legacy of more than 8 decades (80 years) in stock markets. SSKI ventured into institutional broking and corporate finance over a decade ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. Share khan offers its customers a wide range of equity related services including trade execution on BSE, NSE and Derivatives , Depository Services, online Trading, investing advices, Commodities etc.

Share khan Ltd. is a brokerage firm which is established on 8 thfeb 2000 and now it is having all the rights of SSKI. AWWAZ CONSUMER VOTE awarded the Company the 2004 most preferred stock brokering brand. It is first Brokerage Company to go online .the company’s online trading and investment site www.sharekhan.com was launched on 8 Feb. 2000. This site gives access to superior content and transaction facility to retail customers across the country know for its jargon-free, investor friendly, languages and high quality research , the content rich and research oriented portal has stood out among its contemporizes because of its steadfast dedication to offering customers best of breed technology and superior market information.

Share khan has one of the best states of art web portal providing fundamental and statistical information across equity, mutual funds and IPO’s. One can surf across 5,500 companies for in-depth in information, details more than 1500 mutual funds

Schemes and data IPO data. Access other market related details such as board meetings, results announcements, FII transaction, buying/ selling by mutual funds.

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Share khan management teams is one of the most strongest in the sector and had positioned share khan to take advantages of the growing consumers demand for financial services product in India through investments in research , pan-Indian branch network and outstanding technology platform , further , share khan’s leverages and relationship with SSKI group provides it’s a unique position to understand and leverages the growth of the financial services sector we look forward to share khan’s managements as they continue their expansion for the benefits of all shareholders .

LOCATION OF SHAREKHAN TRADING CENTRE

In Noida Sector -18 , at P-12 A , BHS liberty building, 3 rd Floor, Share khan Trading Centre is located and others centers are at Connaught place ( New Delhi ), Karkardumma Near ,Metro station ( New Delhi), I was at Noida sector-18 as a trainee during may-June 2010 under guidance of Mr. Sachin Kr. Chaudhary( Assist. Manager) and Mr. Marsh Kumar (Branch TM).

Share khan provides 4 in 1 Account:

1) DEMAT A/C.2) Trading a/c for cash calculations.3) Bank a/c for fund Transfer.4) Dial n trade: for query related Trading.

SHAREKHAN’S BASIC PRODUCTS:

1) Demat cum Trading.

2) Commodities.

3) Port-Folio Management System (PMS).

4) Mutual Funds.

5) Derivatives.

Out of these, we had to Sell Demat A/c s and Currency Derivative segment.

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FEATURES OF TRADING WITH SHAREKHAN:

1) Provide online Terminal to client.2) Executive time is less.3) Provide “Relationship Manager” fallibility to Client.4) Dealer ( above Rs. 2,5000 /-)5) Online funds Transfer facility.6) Software based/ website based trading. (Error frees trading).7) Provides Timely advices (tips) and Research Reports on E-mail Id of clients.8) Real time Port-Folio Tracking.9) Information and price alert.10)Instant credit and money transfer facility across country.11)Free from paperwork.12)Equity Fund facility available (above Rs. 2 laces).13)** EXPOSURE facility (10 times, 4T x 5T SCHEMES).

DEMAT-ACCOUNTDemat account is mandatory for trading and investing of shares. Demat refers to dematerialized account. Demat Account is a safe secure and convenient way where you can buy and sell the shares without any paper work and all the things will be taken care by the DP (Depository Participants).If you have Demat account you need not to show any kind of physical certificate that you have these shares. They held automatically in your account. DP will also provide you monthly statement of your transaction just like a bank statement.

For individual Indian citizens to trade in listed stocks or debentures the Securities Exchange Board of India( SEBI) requires the investors to maintain a Demat account .In a Demat account shares and securities are held in electronic form instead of taking actual possession of certificates. The investor while registering with an investment broker (or sub broker) opens a Demat account. The Demat account number, which is quoted for all transactions to enable electronic settlements of trades to take place.

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Objective of Demat system:

India has adopted a system in which book entry is done electronically .it is the system where on paper is involved. Physical form is extinguished and shares or securities are held in electronics mode. Before the introduction of the depository system by the Depository Act, 1996. The process of sale, purchase and transfer of shares was a huge problem and the safety perspective was zero

SIMILARITY

Bank Account Vs Demat Account

S. No. BASIS OF SIMILARITY PARTICULARS

1. Securities and Convenience Both are very safe and convenient means of holding deposits/ securities.

2. Number of Accounts No legal barrier on the number of bank or Demat accounts that can be opened

3. Transfer of Deposits (funds or securities)

Funds / securities are transferred only at the instruction of the account holder.

4. Physical transfer money/securities

Physical transfer of money / securities is not involved.

Difference between Bank Account and Demat Account: Bank Account Vs Demat Account

S. No. Basis of Differentiation Bank Account Demat Account

1. Form of Holding / Deposits Funds Securities

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2. Used for Safekeeping of Money

Safekeeping of shares

3. Facilitates Transfer of money(without actually handling money

Transfer of shares ( without actually handling shares)

How to open a Demat account?

To open a Demat account you have to approach DP and he will guided you the official procedure to open an account.

To see whom the register DPs, you can visit NSDL and CDSL website .you can choose the DP of your own choice. On opening a Demat account, a unique BOID (Beneficial Owner Identification) Number is allotted, which should be quoted in all future transactions.

You can open a Demat account with no balance of shares, there is no minimum balance is required.

Documents required for opening a Demat Account.

Documents to be provided Proof of Identity

Proof of Address

Signature proof

Bank proof

1) Copy of PAN Card ( dully self certified)(Compulsory Requirement)

Yes No Yes No

2) Personalized cheque leaf or cheque leaf along with bank statement or bank passbook ( Compulsory Requirement)

No No No Yes

3) Copy of Passport (copy of pages with photo, name & address) No Yes Yes No

4) Copy of Driving License( DL)( Copy of pages with photos, name address & expiry dates)

No Yes Yes No

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5) Copy of Voter’s Identity card6) Copy of Bank passbook/ Bank

transaction statement( not more than 3 months old)

NoNo

YesYes

NoNo

NoYes

7) Copy of Ration card8) COPY of Rent Agreement.

No No

Yes Yes

No No

Yes No

9) Copy of Telephone Bill10)Copy of Electricity Bill11)Banker Verification

No No No

Yes Yes No

No No Yes

No No No

Directions to fill up the DEMAT form:

a) Documents mentioned in Sr. No. 1 & 2 are Compulsory.b) Provides anyone document for which “yes” is mentioned in four columns.c) Please ensure that signature is obtained on all the location specified on the kyc.d) Please write your name as it appears in the PAN card / PAN site.e) Specify the address along with the city-state & PIN code as it appears in the

proof.f) Please paste your photo with sign in space provided & sign across it.g) Signatures are required on all pages of the agreement.h) Name, address and signature of the witness are compulsory.i) Please note that if signature on the form & the proof provided differs, the form is

liable for rejection, in such cases client has to get his signatures verified by banker.

j) Please note that trading account cannot be opened in the name of a minor.k) Copy of cheque leaf of the default bank to be mapped to the trading account is

compulsory.l) Proof of second and third holders are as per the NSDL guidelines.m) Please fill up the form in CAPITAL LETTERS.n) All the accounts holders should sign wherever there is cancellation/ correction.

“All proof should be self attested by the Client

Sharekhan has tied up with the following banks:

1) HDFC BANK.

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2) AXIS BANK.3) IDBI (INDUSTRIAL DEVELOPMENT BANK OF INDIA).4) CITY BANK.5) ICICI BANK.6) INDUSLND BANK.7) UBI (UNION BANK OF INDIA).8) OBC (ORIENTAL BANK OF COMMERCE).9) YES BANK.10) Deucthland Bank.

Share khan’s Products:

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Fig: Share khan’s Products Circular Chart

Sharekhan Services:

A Sharekhan outlet offers the following services: 16

Online BSE and NSE executions (through BOLT & NEAT terminals)

Free access to investment advice from Share khan is Research Team.

Sharekhan Value Line (a monthly publication with reviews of recommendations, stocks to watch out for etc) .Daily research reports and market review (High Noon & Eagle Eye).

Pre-market Report (Morning Cups) .Daily trading calls based on Technical Analysis .Cool trading products (Daring Derivatives and Market Strategy).

Personalized Advice. Live Market Information. Depository Services.

Derivatives Trading (Futures and Options).

IPO’s & Mutual Funds Distribution.

Internet-based Online Trading: Speed Trade .

Reasons to Choose Share khan’s Services:

Experience

SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia Money broker's poll held recently, SSKI won the 'India's best broking house for 2004' award. Ever since it launched Sharekhan as its retail broking division in February 2000, it has been providing institutional-level research and broking services to individual investors. Accessibility

Sharekhan provides services for investors. These services are accessible through many centers across the country (Over 704 locations in 331 cities), over the Internet (through the website www.sharekhan.com) as well as over the Voice Tool.

Knowledge In a business where the right information at the right time can translate into direct

profits, investors get access to a wide range of information on the content-rich portal,

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Www.sharekhan.com. Investors will also get a useful set of knowledge-based tools that

will empower them to take informed decisions.

Convenience

One can call Share khan’s Dial-N-Trade number to get investment advice and execute his/her transactions. They have a dedicated call-center to provide this service via a Toll Free Number 1800-22-7500 & 39707500 from anywhere in India.

Customer Service

Its customer service team assists their customer for any help that they need relating to transactions, billing, Demat and other queries. Their customer service can be contacted via a toll- free number, email or live chat on www.sharekhan.com .

Investment Advice

Sharekhan has dedicated research teams of more than 30 people for fundamental and technical research. Their analysts constantly track the pulse of the market and provide timely investment advice to customer in the form of daily research emails, online chat, printed reports etc.

Sharekhan Customers: Business Class Peoples.

High Net worth Individuals.

Service Class People.

Government Examples.

Young Adults (19- 30 yrs.)

Adults (35- 50 yrs.)

HUF (Hindu undivided family).

Women (literate and working).

Competitors :1) India Bulls. 4) ICICI Direct. 7) Reliance Money.

2) Motilal Oswal. 5) 5 Paisa .com. 8) India Info line.

3) Religare. 6) Kotak Securities. 9) Anand Rathi.

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CAPITAL MARKET

A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money market). The capital market includes the stock market (equity securities) and the bond market (debt). Financial regulators, such as the UK's Financial Services Authority (FSA) or the U.S. Securities and Exchange Commission (SEC), oversee the capital markets in their designated jurisdictions to ensure that investors are protected against fraud, among other duties.

Capital markets may be classified as primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere.

It can also show though a flow chart as follows:

Capital Market Structure in India

Securities Market Development financial Financial intermediaries

Institution

Govt. Securities Corporate

(Gilt edged Securities

Securities market) Market. ICICI, IDBI, SFCs, IIBI etc. Merchant Bankers

Mutual Funds

New Issue (IPO) Old Issue Leasing Companies

(Primary Market) (Secondary Market) Venture Capital Funds

Stock Exchanges (NSE, BSE etc.) OCTEI (Over the Counter Exchange of India Ltd)

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STOCK MARKET:

A stock market or equity market is a public market (a loose network of economic

transactions not a physical facility or discrete entity) for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring.).

The stocks are listed and traded on stock exchanges, which are entities of a corporation, or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The stock market in the United States is NYSE while in Canada; it is the Toronto Stock Exchange. Major European examples of stock exchanges include the London Stock Exchange, Paris Bourse, and the Deutsche Bores. Asian examples include the Tokyo Stock Exchange, the Exchange, the Bombay Stock Exchange and the Karachi Stock Exchange...

Trading though Stock Exchange:

The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery.

New York Stock Exchange (NYSE):

The New York Stock Exchange is a physical exchange, also referred to as a listed exchange — only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a floor broker, who goes to the floor trading

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post specialist for that stock to trade the order. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes place--in this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made, the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order.

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STOCK EXCHANGE:

A Stock Exchange is an entity, which provides "trading" facilities for stockbrokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events include payment of income and dividends. The securities traded on a stock Exchange includes shares issued by companies, unit trusts, derivatives, pooled investment products and bonds.

The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market.

A stock exchange is often the most important component of a stock market. Supply and demand in stock markets are driven by various factors which, as in all free markets, affect the price of stocks (see stock valuation).

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

Major Stock Exchanges: 31 Dec 2009 Report

Economy Stock ExchangeTrade Volume(TrxMillions)

Number of listed companies

Trade Value(US Billions)

Market Capitalization(US Trillions)

USANew York Stock Exchange

2713.73 2327 17521.12 121.1

USA NASDAQ 2280.40 2852 13608.08 31.63

India National Stock 1630.44 1453 791.93 10.84

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Exchange of India

China Shenzhen EX 1256.01 830 2771.98 7.42

Korea Korea Exchange 909.39 1788 1569.78 7.86

IndiaBombay Stock Exchange

589.31 4955 263.9 11.56

Taiwan Taiwan Stock Ex 270.83 755 904.58 6.03

Stock Exchanges in India (Secondary Market):

1) NSE (National Stock Exchange).

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2) BSE (Bombay Stock Exchange).

NATIONAL STOCK EXCHANGE (NSE):

Introduction

The National Stock Exchange of India Limited is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading... NSE has a market capitalization of around Rs 47, 01,923 core (7 August 2009) and is expected to become the biggest stock exchange in India in terms of market capitalization by 2009 end. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization (Market Cap).

NSE is mutually owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least two foreign investors NYSE Euro next and Goldman Sachs who have taken a stake in the NSE.

Historical Background

The National Stock Exchange of India was promoted by leading financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000. In 1991, “Pherwani committee” recommended the establishment of the National Stock Exchange.

NSE was established in November 1992, and it started trading operations from June 30, 1994.

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It was established with an equity capital of 25 Core and IDBI, ICICI, LIC, GIC, SBI and some other institutions promoted it.

NSE is a country wide, on-line; screen based trading system conforming international standards. Its control centre is at Mumbai.

NSE is first demutualised stock exchange in India. Companies with minimum capital of Rs. 10 Cores or more are eligible for

listing in NSE & BSE. NSE is the biggest Stock Exchange of India.

Markets under NSE

Currently, NSE has the following major segments of the capital market:

Equity Futures and Options Retail Debt Market Wholesale Debt Market Currency futures

NSE became the first stock exchange to get approval for Interest rate futures as recommended by SEBI-RBI committee, on 31 August,2009, a futures contract based on 7% 10 Year GOI bond (NOTIONAL) was launched with quarterly maturities.

Advantages of retailing through NSE.

Wide reach because of nation-wide spread of NSE trading network with more than 800 active brokers spread across 380 cities.

Screen based, anonymous order driven system familiar to retailing investors for over 8 years.

Trade matching based on fair and transparent principles of price-time priority. Intra-day netting of buy and sell trades in the same security allowed (settlement

of only net outstanding positions). Settlement of obligations on rolling basis (T+2 days). Settlement of obligations through NSCCL (wholly owned subsidiary of NSE)

which offers financial settlement guarantee through a separate guarantee fund. Settlement of securities in dematerialized form through depositories only.

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Future of Retailing

Retail debt market will expand manifold as the securities get widely distributed NSE's anonymous screen based order driven system will bring transparency and

liquidity to trading in government securities. Efficient price discovery because of wide participation. Diversification of risk and income stream for investing public facilitated.

Additional income tax benefits of Rs.3000/- under Section 80L of Income Tax Act.

Diversification of risk. Liquidity through trading.

Let us consider an example of 12% GOI 2008. As on June 1, 2002, its purchase price is Rs. 122.52, (prices are quoted per Rs. 100). If an investor holding the above security were to sell it on January 14, 2003, he would have received a sale price of Rs.130.28, Amounting to an annualized return of 18.06%, in addition to the half-yearly interest payment @ 12 % on the face value received by the investor.

Now, if the investor had put in the bulk money in other alternative means for investmentas indicated above, he would have earned lesser returns of between7-9%.Secondly, investment in government securities has the added advantage of easy entry and exit routes resulting in more liquidity to the investor as compared to other fixed income investments which have varying periods of lock-in for the holder and would bemore beneficial if held to maturity.

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MARKET CAP: Rs 47, 01,923 core (2009 August Report).

This is the daily chart which be easily seen on the internet for daily updating. Here 18, May 2010 daily chart of “Nifty” has been shown.

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BOMBAY STOCK EXCHANGE (BSE):

Introduction:

The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai; popularly called Bombay Stock Exchange, or BSE) is the oldest stock exchange in Asia and has the third largest number of listed companies in the world, with 4700 listed as of August 2007. It is located at Dalal Street, Mumbai. On 31 December 2007, the equity market capitalization of the companies listed on the BSE was U$1.79 trillion, making it the largest stock exchange in south Asia and 12 th largest in world .With over 4700 Indian companies listed & over 7700 scripts on the stock exchange, it has a significant trading volume. The BSE INDEX (sensitive index), also called the "BSE 30", is a widely used market index in India and Asia. Though many other exchanges exist, BSE and NSE account for most of the trading in shares in India.

History:

The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai's Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as 'The Native Share & Stock Brokers Association'. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000, the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform. Historically an open-cry floor trading exchange, the Bombay Stock Exchange to an electronic trading system in 1995.

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Timeline:

Following is the timeline on the rise and rise of the Sensex through Indian stock market history.

1830's Business on corporate stocks and shares in Bank and Cotton presses started in Bombay.

1870 - 90's Sharp increase in share prices of jute industries followed by a boom in tea stocks and coal.

1978-79 Base year of Sensex, defined to be 100.

1986 Sensex first compiled using a market Capitalization-Weighted methodology for 30 component stocks representing well-established companies across key sectors.

30 October 2006 The Sensex on October 30, 2006 crossed the magical figure of 13,000 and closed at 13,024.26 points, up 117.45 points or 0.9%. It took 135 days for the Sensex to move from 12,000 to 13,000 and 123 days to move from 12,500 to 13,000.

5 December 2006 The Sensex on December 5, 2006 crossed the 14,000-mark to touch 14,028 points. It took 36 days for the Sensex to move from 13,000 to the 14,000 mark.

6 July 2007 The Sensex on July 6, 2007 crossed the magical figure of 15,000 to touch 15,005 points in afternoon trade. It took seven months for the Sensex to move from 14,000 to 15,000 points.

19 September 2007 The Sensex scaled yet another milestone during early morning trade on September 19, 2007. Within minutes after trading began, the Sensex crossed 16,000, rising by 450 points from the previous close. The 30-share Bombay Stock Exchange's sensitive index took 53 days to reach 16,000 from 15,000. Nifty also touched a new high at 4659, up 113 points.

The Sensex finally ended with a gain of 654 points at 16,323. The NSE Nifty gained 186 points to close at 4,732.

A new all-time intrahigh of 18,327. It finally gained 789 points to close at an all-time high of 18,280. The market set several new records including the biggest single day gain of

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789 points at close, as well as the largest intra-day gains of 993 points in absolute term backed by frenzied buying after the news of the UPA and Left meeting on October 22 put an end to the worries of an impending election.

8 January 2008 The Sensex peaks. It crossed the 21,000 mark in intra-day trading after 49 trading sessions. This was backed by high market confidence of increased

25 June 2008 The Sensex touched an intraday low of 13,731 during the early trades, then pulled back and ended up at 14,220 amidst a negative sentiment generated on the Reserve Bank of India hiking CRR by 50 bps.

2 July 2008 The Sensex hit an intraday low of 12,822.70 on July 2, 2008. This is the lowest that it has ever been in the past year. Six months ago, on January 10, 2008, the

Market had hit an all time high of 21206.70. This is a bad time for the Indian markets, although Reliance and Infosys continue to lead the way with mostly positive results. Bloomberg lists them as the top two gainers for the Sensex, closely followed by ICICI Bank and ITC Ltd.

6 October 2008: The Sensex closed at 11801.70 hitting the lowest in the past 2 years.

10 October 2008 The Sensex today closed at 10527,800.51 points down from the previous day having seen an intraday fall of as large as 1063 points. Thus, this week turned out to be the week with largest percentage fall in the Sensex.

18 May 2009 After the result of 15th Indian general election Sensex gained 2110.79 points from the previous close of 12173.42, a record one-day gain. In the opening trade itself, the Sensex evinced a 15% gain over the previous close, which led to a two-hour suspension in trading. After trading resumed, the Sensex surged again, leading to a full day suspension of trading.

Hours of Operations (BSE):

Beginning of the Day Session 8:00 - 9:00

Trading Session 9:00 - 15:30

Position Transfer Session 15:30 - 15:50

Closing Session 15:50 - 16:05

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Option Exercise Session 16:05 - 16:35

Margin Session 16:35 - 16:50

Query Session 16:50 - 17:35

End of Day Session 17:30

The hours of operation for the BSE quoted above are stated in terms of the local time (i.e. GMT +5:30) in Mumbai (Bombay), India. BSE's normal trading sessions are on all days of the week except Saturdays, Sundays and holidays declared by the Exchange in advance.

BSE SENSEX

BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-weighted index composed of 30 stocks that started January 1, 1986. The Sensex is regarded as the pulse of the domestic stock markets in India. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around fifty per cent of the market capitalization of the BSE. The base value of the Sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1989-1990. At regular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions. The index is calculated based on a free-float capitalization method; a variation of the market cap method. Instead of using, a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors.

Initially, the index was calculated based on the ‘full market capitalization’ method. However, this was shifted to the free float method with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice.

As per free float capitalization methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period.

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The Market Capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This Market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also referred as adjustment factor. Free float factor represent the percentage of shares that are readily available for trading.

The Calculation of Sensex involves dividing the free float market capitalization of 30 companies in the index by a number called Index divisor. The Divisor is the only link to original base period value of the Sensex. It keeps the index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrip has, etc.

The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.

Sensex milestones

Here is a timeline on the rise of the Sensex through Indian stock market history.

1000, July 25, 1990 - On July 25, 1990, the Sensex touched the four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon and excellent corporate results.

4000, March 30, 1992 - On March 30, 1992, the Sensex crossed the 4,000-mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad Mehta scam hit the markets and Sensex witnessed unabated selling.

5000, October 11, 1999 - On October 8, 1999, the Sensex crossed the 5,000-mark as the Bharatiya Janata Party-led coalition won the majority in the 13th Lok Sabha election.

6000, February 11, 2000 - On February 11, 2000, the information technology boom helped the Sensex to cross the 6,000-mark and hit and all time high of 6,006.

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10,000, February 7, 2006 - The Sensex on February 6, 2006 touched 10,003 points during mid-session. The Sensex finally closed above the 10,000-mark on February 7, 2006.

11,000, March 27, 2006 - The Sensex on March 21, 2006 crossed 11,000 and touched a peak of 11,001 points during mid-session at the Bombay the Sensex first closed at over 11,000.

17000, September 26, 2007 - The Sensex on September 26, 2007 crossed the 17,000 mark for the first time.

18,000, October 9, 2007 - The Sensex on October 9, 2007 crossed the 18,000 mark for the first time.

19,000, October 15, 2007 - The Sensex on October 15, 2007 crossed the 19,000 mark for the first time.

20,000, October 29, 2007 - The Sensex on October 29, 2007 crossed the 20,000 mark for the first time.

21,000, Jan 08, 2008 - The Sensex on January 8, 2008 touched all time peaks of 21078 before closing at 20873.

BSE SENSEX falls:

Some major single-day falls of the Sensex have occurred on the following dates:

1. January 21, 2008 --- 1,408.35 points 2. July 6, 2009 --- 870 points3. January 22, 2008 --- 857 points4. February 11, 2008 --- 833.98 points5. May 18, 2006 --- 826 points6. October 10, 2008 --- 800.10 points7. March 13, 2008 --- 770.63 points8. December 17, 2007 --- 769.48 points9. January 7, 2009 --- 749.05 points10.March 31, 2007 --- 726.85 points11.October 6, 2008 --- 724.62 points12.October 17, 2007 --- 717.43 points13.September 15, 2008 --- 710.00 points14.January 18, 2007 --- 687.82 points15.November 21, 2007 --- 678.18 points

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16.August 16, 2007 --- 642.70 points17.August 17, 2009 --- 626.71 points18.June 27, 2008 --- 600.00 points

STOCK BROKER:

Brokers are the persons/ company who are intermediator between BSE /NSE and Clients.

Types :

1) Broker Dealer.2) Floor Broker.3) Retail Broker.4) Stock Trader.

Analysis & Research On

CURRENCY DERIVATIVES SEGMENT

Introduction:

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The Reserve Bank of India in its Annual policy Statement for the year 2007-2008 proposed to set up a working Group on Currency Future to study the international experience and suggest a suitable frame-work to operationalise the proposal, in the with the currency legal and regulatory framework. This group submitted its report in April 2008. Following this, RBI, Securities, and Exchange Board of India (SEBI) jointly constituted a Standing Technical Committee to inter-alia evolve norms and oversee implementation of Exchange Traded Currency Derivatives. The Committee submitted its report on May 29, 2008. This report laid down the framework for the launch of Exchange Traded Currency Future in terms of the eligibility norms for existing and new Exchanges and their Clearing Corporations/Houses, eligibility criteria for members of such Exchanges/Clearing Corporation/Houses, product design, risk management measures, surveillance mechanism and other related issues.

The Regulatory framework for currency future trading in the country, as laid down by the regulators, provide that persons resident in India are permitted to participate in the currency future market in India subject to directions contained in the Currency Future (Reserve Bank) Directions, 2008, which have come into force effect from August 6, 2008.The membership of the currency futures market of a recognized stock exchange has been mandated to be separate from the membership of the equity derivative segment or the cash segment. Banks authorized by the Reserve Bank of India under section 10 of the Foreign Exchange Management Act, 1999 as ‘ AD Category – I bank ‘ are permitted to become trading and clearing members of the currency futures market of the recognized stock exchange, on their own account and on behalf of their clients, subject to fulfilling certain minimum prudential requirement pertaining to net worth, non – performing assets etc.NSE was the first exchange to have received an in-principle approval form SEBI for setting up currency derivative segment. National Stock Exchange was the first

Exchange to launch Currency future trading in India. The currency Derivatives segment at NSE commenced operations on August 29, 2008 with the launch of currency futures trading in US Dollar-India Rupee (USD-INR)

Trading MechanismThe Currency Derivatives trading system of NSE, called NEAT-CDS (National Exchange for Automated Trading – Currency Derivatives Segment) trading system, provides a fully automated screen-based trading for currency future on a nationwide

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basis as well as an online monitoring and surveillance mechanism. The NEAT-CDS system support an order driven market, wherein orders match automatically. Order matching is essentially based on security, its price and time. All quantity fields are in contracts and price in India rupees. The Exchange notifies the contract size and size for each of the contracts traded on this segment from time to time. When any order enters the trading system, it is an active order. It tries to find a match on the opposite side of the book. If it finds a match, a trade is generated. If it does not find a match, the order becomes passive and sits in the respective order book in the system.

Contract Specification for Currency FuturesNSE trades Currency Derivatives contracts having near 12 calendar month expiry cycles. All contracts expire two working days prior to the last working day of every calendar month (subject to holiday calendars). This is also the last trading day for the expiring contract. The contract would cease to trade at 12:00 noon on the last trading day. A new contract with 12th month expiry would be introduced immediately ensuring availability of 12-month contracts for trading at any point.

The Instrument type: FUTCUR refers to ‘Futures contract on currency’ and contract symbol: USDINR denotes a currency pair of ‘US Dollars – Indian Rupee’. Each futures contract has a separate limit order book. All passive orders are stacked in the system in terms of price-time priority and trades take places at the passive order price (order,

which has come earlier, and residing in the system). The best order for a given futures contract will be the order to buy at the highest price whereas the best sell order will be the order to sell at the lower price. The contract specification for US Dollar, GBP British Pound, JPY Japanese Yen, EUR Euro - Indian Rupee (USDINR), (GBPINR), (JPYINR), and (EURINR) Currency Futures is summarized in the table below.

Symbol - USDINR, GBPINR, JPYINR, EURINR

Market Type - Normal

Instrument Type - FUTCUR

Unit of Trading - Lots (Minimum 1 lot)

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Lot size - 1 Lot is equal to (USD 1000), (GBP

1000), (JPY 1000), (EUR 1000).

Underlying - The Exchange rate in India Rupee

For US Dollars, GBP, JPY, EURO.

Tick size - 0.25 paisa or INR 0.0025

Trading hours - Monday to Friday

9:00 a.m. to5:00 p.m.

Contract trading cycle - 12-month trading cycle.

Last trading day - Two working days prior to the last

Business day of the expiry month.

Up to 12 Noons

Final settlement day - Last working day (excluding Saturday)

Of the expiry month.

Quantity Freeze - 10,001 or greater

Base price Theoretical price on the 1st day of the

Contract. On all other days, Daily

Settlement Price (DSP) of the contract.

Operating Price - Tenure up to 6 months

+/-3% of base price

Tenure greater than 6 months

+/-5% of base price

Position limits - Clients: - higher of 6% of total open

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Interest or currency 10 million

Trading Members: - higher of 15% of

The total open interest or currency 50

Million

Banks: - higher of 15% of the total

Open interest or currency 100 million

Initial margin - SPAN based Margin

Extreme loss margin - 1% of MTM value of open position

Calendar spreads - Rs. 250/- per contract for all month

Spread

Settlement - Daily settlement: T + one

Final settlement: T + two

Mode of Settlement - Cash settled in India Rupees

Daily settlement price - Calculated on the basis of the last half

An hour weighted average price.

Final settlement price - RBI reference rate

CHARGES: -

Brokerage charges

The maximum brokerage chargeable by a trading member in relation to trade affected in the contract admitted to dealing on the Currency Derivatives segment of NSE is fixed at 2.5% of the contract value.

Transaction charges

The transaction charges payable to the exchange by the trading number for the trade executed by him on the Currency Derivatives segment would be as prescribed by the

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Exchange from time to time. In order to encourage active participation in the Currency Derivatives Segment, the exchange has waived the transaction charges until June 30, 2009

Contribution to investor Protection Fund

The trading members are required to make a lump sum contribution of Rs.500/- to investor protection Fund of Currency Derivatives segment

CLEARING AND SETTLEMENT

NSCCL undertakes clearing and settlement of all trades executed on the Currency Derivatives Segment (CDS) of the Exchange.

Clearing Entities

Clearing and settlement activities in the Currency Derivatives segment are undertaken by NSCCL with the help of the following entities:

Clearing members

In the Currency Derivatives segment, trading member-cum- clearing member, clear and settle their own trades as well as trades of other trading member (TMs). Besides, there is a special category of members, called professional clearing member (PCM) who clear and settle trades executed by TMs. The members clearing their own trades and trades of others, and the PCMs are required to bring in additional security deposits in respect.

Clearing banks

The Clearing and settlement process comprises of the following three main activates

1) Clearing 2) Settlement3) Risk Management

Clearing mechanism

The clearing mechanism essentially involves working out open positions and obligations of clearing (trading-cum-clearing/professional clearing) members. This position is considered for exposure and daily margin purposes. A TM’s open position is arrived at as the summation of his proprietary open position and clients’ open positions, in the contracts in which he has traded. Proprietary positions are calculated on net basis (buy-sell) for each contract. Clients’ positions are arrived at by summing together net (buy- sell) position of each individual client. A TM’s open position is the sum of proprietary open position, client open long position and client open short position.

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Settlement Mechanism

All futures contracts are cash settled, i.e. thought exchange of cash in India Rupee. The settlement amount for a CM is netted across all their TMs/clients, with respect to their obligations on MTM settlement. Currency future contracts have two types of settlements, the MTM settlement, which happens on a continuous basis at the end of each day, and the final settlement, which happens on the last trading day of future contract.

Mark to market settlement(MTM Settlement):

All furthers contract for each member are marked-to-market (MTM) to the daily settlement price of the relevant future contract at the end of each day. The profits/ losses are computed as the difference between:

1. The trade price and the day’s settlement price for contracts executed during the day but not squared up.

2. The previous day’s settlement price and the current day’s settlement price for brought forward contracts.

3. The buy price and the sell price for contracts during the day and squared up.The CMs who have a loss are required to pay the mark-to-market (MTM) loss amount in cash which is in turn is passed on to the CMs who have made a MTM profit. This is known as daily mark-to-market settlement. CMs are responsible to collect and settle the daily MTM profits/losses incurred by the TMs and their client’s clients clearing and setting through them. TMs are responsible to collect/pay losses/profits from/to their client by the next day. After completion of daily settlement computation, all the open positions are reset to the daily settlement price. Such position becomes the open positions for the next day.

Final settlement for futuresOn the trading day of the future contracts, after the close of trading hours, NSCCL marks all position of a CM to the final settlement price and resulting profit/loss is settled in cash. Final settlement loss/profit amount is debited/credited to the relevant CM’s clearing bank account on T+2 working day following last trading day of the contract(contract expiry date)

Settlement prices for futureDaily settlement price on a trading day in the closing price of the respective futures contracts on such day. The closing price for a futures contract is currently

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calculated as the last an hour weighted average price of the contract in the currency Derivatives Segment of NSE.

Settlement StatisticsDuring August 2008-March 2009, cash settlement for currency futures amounted to Rs.367.37 corer (US $ 72.10 million).

Risk managementNSCCL has developed a comprehensive risk containment mechanism for the Currency Derivatives segment. The salient features of risk containment mechanism on the Currency Derivatives segment are:1. The financial soundness of the members is the key to risk management.

Therefore, the requirement for membership in term of capital adequacy (net worth, security deposits) is quite stringent. Clearing member pays Rs.10 lakes for every trading member’s trades in cash & non-cash form.

2. NSCCL charges an upfront initial margin for all the open position of a clearing member (CM). The CM in turn collects the initial margin from the TMs and their respective clients.

3. The open position of the members is marked to market based on contract settlement price for each contract at the end of the day. The difference is settled in cash on a T+one basis.

4. A member is alerted of his position to enable him to adjust his position or bring in additional capital. Margin violations result in withdrawal of trading

facility for all TMs of a CM in case of a violation by the CM.5. A separate settlement Guarantee Fund for this segment has been created out

of the capital of members.The most critical component of risk containment mechanism for the Currency Derivatives Segment is the margining system and on-line position monitoring actual position monitoring and margining is carried out on-line though Parallel Risk Management System (PRISM). PRISM uses SPAN (Standard portfolio Analysis of Risk) system for the purpose of computation of on-line margins, based on the parameters defined by SEBIMargining System

NSCCL has developed a comprehensive risk containment mechanism for the Currency Derivates segment.

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Types of margins The margining system for Currency Derivatives segment is explained below:a) Initial margin: Margin in the Currency Derivatives segment is computed

by NSCCL up to client level for open position of CM/TMs. These are required to be paid up-front on gross basis at individual client level for client position and on net basis for proprietary positions.

b) Extreme loss margin: Extreme loss margin of 1% on the value of the gross open positions shall be adjusted from the liquid assets of the clearing member on an on line, real time basis.

c) Client margin: NSCCL intimates all members of the margin liability of each of their client. Additionally members are also required to report details of margins collected from clients to NSCCL, which holds in trust client margin monies to the extent reported by the member as having been collected from their respective clients.Position Limit for Currency Futures:The client level position limit shall be applicable where the gross open position of the client across all contracts exceeds 6% of the total open interest or 10 million USD, whichever is higher.Trading Member level position limit:The trading member position limit shall be higher of 15% of the total open interest or 50 million USD. However, the position limit for a Trading Member, which is a bank, shall be higher of 15% of the total open interest or 100 million USD.Clearing member position limit:No separate position limit is prescribed at the level of clearing member. However, the clearing member should ensure that his own trading position and the position of each trading member clearing through him are within the limits specified above.

TURNOVERTrading in currency futures segment commenced on August 29, 2008. On the very first day of operations, a total number of 65,798 contracts valued at RS.291 corer were traded on the Exchange. Since then trading activity in this segment has been witnessing a rapid growth. The total traded volume from August 2008 until March 2009 was Rs.162, 272 corers (US $ 31849mmillion). Total number of contracts traded during the August 2008

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to March 2009 was 32,672,768. The business growth of Currency Futures Segment shown under mention;

Business Growth of Currency Future

Month/year no. of contract traded Trading value trading value no of contract trade trading value-trading value

(Rs. Cr) (US $ mn) (Rs.Cr.) (US $ mn)

Sep-08* 1,258,099 5,763 1,131 90,871 428 84

Oct-08 2,275,261 11,142 2,187 170,202 851 167

Nov-08 3,233,679 15,969 3,134 146,262 737 145

Dec-08 4,681,593 22,840 4,483 177,520 867 170

Jan-09 4,900,904 23,980 4,707 254,797 1,247 245

Feb-09 6,416,059 31,761 6,234 315,317 1,612 316

Mr-09 9,907,173 50,817 9,974 257,554 1,313 258

Aug 08-Mar09 32,672,768 162,272 31,849 257,554 1,313 258

*Includes turnover details for August 29, 2008- the first day of trading for Currency Future at NSE

Traded value record

Trading volumes in the CDS segment during 2008-09 reached a high of Rs.3, 911.39 corers (US $ 767.69 million) on March 20, 2009. The following table shows the record highs in the Currency Derivatives segment.

CDS segment Date Number/Value

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Record Number of Trades March 20, 2009 25,702

Record no. of contract Traded March 20, 2009 775,933

Record Daily Turnover (in cores) March 20, 2009 Rs.3911.39

Top five Currency Futures Contracts

During 2008-2009, top5 Currency Future contracts in term of contracts traded and trading value are presented in the table below.

Top five Currency Futures contracts according to number of contract 2008-09

S.no. Name of the Contract no of contract Turnover % of contracts to top 5 contracts

(Rs.cr.) (US $ mn)

1. 27-mar-09 9,222,657 47116.17 9,247.53 34.88

2. 25-feb-09 5,783,369 28455.59 5,585.00 21.06

3. 28-jan-09 4,883,849 23867.90 4,684.57 17.67

4. 29-Dec-08 4,294,228 21048.27 4,131.16 15.58

5. 26-Nov-08 2,962,925 14605.98 2,866.73 10.81

Total 27,147,028 135,094 26,514.99 100.00

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Basically transaction are made in four currency (USDINR, GBPINR, JPYINR, EURINR) but while I was there doing my summer internship Program I got chances to do transaction only two currency (USDINR, EURINR).

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The history of the US DollarThe currency of the United States can be traced back to 1690 before the birth of the country when the region was still a patchwork of colonies. The Massachusetts Bay Colony used paper notes to finance military expeditions. After the introduction of paper currency in Massachusetts, the other colonies quickly followed.

Various British imposed restrictions on the colonial paper currencies were in place until being outlawed. In 1775, when the colonists were preparing to go to war with the British, the Continental Congress introduced the Continental currency. However, the currency did not last long as there was insufficient financial backing and the notes were easily counterfeited.

Congress then chartered the first national bank in Philadelphia - the Bank of North America - to help with the government's finances. The dollar was chosen to become the monetary unit for the USA in 1785. The Coinage Act of 1792 helped put together an organized monetary system that introduced coinage in gold, silver, and copper. Paper notes or greenbacks were introduced into the system in 1861 to help finance the Civil War. The paper notes used several different techniques including a Treasury seal and engraved signatures to help diminish counterfeiting. In 1863, Congress put together the national banking system that granted the US Treasury permission to oversee the issuance of National Bank notes. This gave national banks the power to distribute money and to purchase US bonds more easily whilst still being regulated.

The Federal Reserve Act of 1913 created one central bank and organized a national banking system that could keep up with the changing financial needs of the country. The Federal Reserve Board created a new currency called the Federal Reserve Note.

The first federal note was issued in the form of a ten-dollar bill in 1914. Finally, a decision by the Federal Reserve board was made to lower the manufacturing costs of the currency by reducing the actual size of the notes by 30%. The same designs were also printed on all dominations instead of individual designs.

The designs of the notes would not be changed again until 1996 when a series of improvements were carried out over a ten-year period to prevent counterfeiting.

US dollar value vs. gold value

The sudden jump in the price of gold after central banks gave up on controlling it was a strong sign of a loss of confidence in the U.S. dollar. In the absence of a gold-market-valued U.S. dollar, investors were choosing to continue putting their faith in actual gold. Consequently, the price of gold rose from $35 per troy ounce (1.125 $/g) in 1969 to almost $500 (29 $/g) in 1980.

This graph shows the final closing value of the U.S. dollar for each calendar year. Value is measured in milligrams of gold. By this measure, the U.S. dollar lost a great amount of value during the 1970s.

Shortly after the gold price started its ascent in the early 1970s, the price of other commodities such as oil also began to rise. While commodity prices became more volatile, the average exchange rate between oil and gold remained much the same in the 1990s as it had been in the 1960s, 1970s and 1980s.

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Fearing the emergence of a specie gold-based economy separate from central banking, and with the corresponding threat of the collapse of the U.S. dollar, the U.S. government approved several changes to the trading on the COMEX. These changes resulted in a steep decline in the traded

History of EURO CURRENCY

Introduction

Euro is the most lately introduced currency in the world. It is the official currency of the European Union countries lying in the Euro zone. The Euro belongs to namely Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxemburg, the Netherlands, Austria, Portugal and Finland to 12 countries as now. This number would increase by one more country i.e. Slovenia which will be adopting euro as its national currency with effect from January 1st, 2007. Apart from these countries, the currency is also used in some countries lying outside the euro zone.

Euro came into existence in the year 1999 when it was launched as an accounting currency. In the year 2002, banknotes and coins of the currency were introduced in the European Union countries with certain conditions to be complied with if any country wants to use the currency parallel to the domestic currency. The currency is symbolized with "€" sign and has a currency code EUR and numeric code 978 according to the ISO 4217 standard.

Structure A decimal system is used by the euro currency. 1 unit of euro is divided into 100 equal cents or eurocents. The currency coins are issued by each of the member country of Euro zone for small denominations, first being issued on January 1st, 2002, with a denomination showing common side and an image showing backside i.e. is the national side. The individual country in which the coin is minted specifies the image that the coin shows. The volume of coins to be produced is a subject matter of approval from the European Central Bank (ECB). Furthermore the euro coins are categorized in the following three types

Normal coins - Normal coins are general coins that are issued for circulation in eight denominations namely 1, 2, 5, 10, 20, 50 cents and 1, 2 euro. The coins are a legal tender in all the 12 member countries of the zone and they are issued at face value. The technical specifications of the coins are agreed upon by a Council regulation.

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Commemorative coins - These coins are almost same as the normal coins except that it is issued in a single denomination i.e. 2. The technical specifications for a 2-euro coin are used in this type of coins.

Collector coins - Nor the collector coins are not intended for circulation and neither they are a legal tender in all the member countries but only in the country in which it is being issued. The coins have a face value that is different from the other coins in circulation and are issued on a selling price that is equal or above the face value. Not even the two sides match with the

Other coins and the name of the issuing are clearly mentioned on the coin.

The bank notes are issued for medium to big seven denominations namely €500, €200, €100, €50, €20, €10, €5. All these notes have a common design on both the sides unlike the euro coins. The European Central Bank has the absolute authority to issue the banknotes of euro but the circulation of these notes depends upon the national banks of the member countries.

Factors affecting the exchange rates between two countries

The volatility in the foreign exchange rates depends upon a numerous macro economic factors that have different degrees of importance to different economies of the world. Some special and exceptional factors affecting the rates may also exist in the case of different countries. Following are shown the common factors on which the foreign exchange rate depends

Flow of imports and exports between the countries Flow of capital between the countries Relative inflation rates Fluctuation limits on exchange rate imposed by the governments of the countries Merchandise trade balance Rate of inflation in the country Flow of funds between the countries for the payment of stock and bond

purchases Relative growth Short term and long term interest rate differentials Cost of borrowings

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Relation between DOLLAR and EURO

The Euro is the official currency of the European Union and is used as the official currency of Austria, Belgium, Finland, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

The American Dollar is the official currency of the United States, which controls the printing and trade of the dollar. The U.S. dollar is also the official currency of Ecuador, El Salvador, East Timor and the Trust Territory of the Pacific Islands (Palau, Micronesia and the Marshall Islands).

Introduction of the Euro and the Value of a Dollar

After the introduction of the euro, the U.S. dollar has steadily decreased in value, or "depreciated" relative to the euro. In 2002, one euro could purchase between 0.98 and 1.17 U.S. dollars. By 2004, one euro could purchase between $1.20 and $1.30. By 2009, the average exchange rate was 1 euro to between $1.23 and $1.49.

Depreciation of the Dollar

Various economic thinkers have analyzed the reasons for the dollar's relative decline against the euro, and against world currencies generally. First, the rising U.S. budget and trade deficits were and continue to be negative throughout this period--which weakens the dollar. Second, economists speculate that the dollar's fall might be partly because other countries are decreasingly using the dollar as a reserve currency.

Developments after 2008

The financial crisis of 2008 severely affected the world's economy. The U.S. dollar gained value during this time against most other world currencies. The rate fluctuated from roughly $1.50/euro in summer 2008 to $1.20/euro by November. One possible reason for this was the U.S. dollar's historical role as a safe monetary unit. However, after the spring of 2009, the dollar once again weakened against the euro.

Considerations/Misconceptions

The concepts of appreciation and depreciation sometimes are confusing. When a currency appreciates, it means that it costs less to buy that currency with other world currencies. Thus, $1.50/euro to $1.30/euro is an appreciation of the dollar (since it takes

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fewer dollars to buy a single euro). The falling numbers actually represent increases in value. Conversely, a rate change from $1.30/euro back to $1.50/euro is a depreciation (a loss in value), since it takes more dollars to buy a single euro.

The 1.5 Rule

Since the U.S. economy has been in flux, it is difficult to anticipate how the euro and dollar will measure against each other. However, for several years, the euro has been worth an average.

If you are a U.S. tourist in Europe and new to the euro, just multiply every expense by 1.5. (Example: A 100-euro ferry ride would be $150). To calculate the reverse, divide dollars by 1.5. This is not a precise measure, and the worth of each currency could fluctuate on any day, but for the moment, this conversion is handiest.

Why Is the U.S. Dollar Weak Against the Euro?

Supply and Demand

1. Like anything else, the forces of supply and demand dictate the value of a currency. Demand for a currency is created by economic growth and investor interest, while supply is regulated by the monetary policy of central banks. In response to a deflationary crisis, the Federal Reserve vastly increased the potential supply of dollars, lowering the value of the dollar.

Interest Rates

2. One reason why the dollar is weak against the euro is relative interest rates. The U.S. reacted more quickly to the economic contraction resulting from the credit crisis by slashing interest rates. The European Central Bank (ECB) waited several months longer to begin easing rates, and never took rates as low as did the Federal Reserve. In the U.S., the Fed's benchmark rate was lowered to essentially zero, while the ECB paused with rates at a record low of 1 percent.

Quantitative Easing

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3. Another major reason the dollar slipped against the euro was quantitative easing. This refers to a monetary policy strategy in which the central bank lowers its quality standards on collateral it accepts for loans to increase the overall volume of lending it can perform. While the Federal Reserve has participated in quantitative easing to stimulate the domestic economy, the ECB has resisted such measures as of 2009.

Diversification

4. Independent of the credit crisis and the monetary policy of central banks, the first decade of the 21st century saw a major global trend toward diversification of currency reserves that had the inevitable effect of weakening the dollar. Large holders of foreign currency reserves, especially China, said it was in their best interest to diversify their holdings into Euros and other currencies rather than primarily dollars. Several major oil-supplying countries have also expressed a desire to price oil in Euros and local currencies rather than dollars, questioning the dollar's status as the world's lone reserve currency. These major shifts in demand for dollars are longer-term forces favoring the euro over the dollar.

5. Considerations

Despite the constant mantra from Washington that a strong dollar is in the best interests of the United States, a weak dollar is actually a boon for several interests. Primarily, these domestic companies with strong foreign presences realize windfall profits as they repatriate money earned overseas.

Why Does a Weak Dollar Increase the Stock Market?

When the U.S. dollar, USD, loses value, it is important to understand what else is happening. Sometimes the dollar will drop in value because another major currency, often the Euro, is appreciating. Sometimes the USD drops when interest rates change and the difference makes another currency more appealing, in terms of return on investment. In January 2011, the weakness of the USD is because of concerns that are more fundamental.

Monetary Policy

1. Monetary Policy is the planning and implementation of currency availability, pricing,

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that is done by the Federal Reserve. Current monetary policy has emphasized high availability, or cheapness, of U.S. dollars. Any stock, bond or commodity that has some intrinsic value, but is priced in USD will tend to increase in price as the value of the dollar falls.

Relative Value

2. If each dollar becomes worthless, or falls in relative value, then it will not be able to buy as much as was previously possible. The value of anything can be calculated in different ways. You can consider the relative value of something, for example how much corn you can buy with a given amount of rice. You can price items in any currency, or you can price items in a common currency.

The USD as a Reserve Currency

3. For many years, the USD has served as the default global and reserve currency. For most international transactions, local currency has to be converted into dollars and then the dollars are exchanged for merchandise. This has not only supported the value of the USD.

Prices and the Cheapening Dollar

4. The relative values of most stocks, bonds and commodities have changed little. Gold is still worth about the same, relative to silver; major stocks have similar valuations relative to their competitors. The cheapening dollar forced the prices of these assets to go up. The stock market, on the whole, has responded as well. For relative valuations to continue to hold, the prices of most stocks have risen. Although it is not always the case that a fall in the value of the USD will cause stock prices to rise.

Why Is Dollar High When Stock Market Is Low?

While the stock market and the dollar often have an inverse relationship (meaning that in general, when one is high the other is low), the relationship is not necessarily causal (meaning that a low stock market does not necessarily raise the price of the dollar, or vice versa). There are a number of reasons why the inverse relationship is often observed, however.

Safety

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1. When the stock market falls, many investors pull money out of stocks and buy safer investments. The U.S. dollar is one of the safest currencies in the world, hence, many investors buy dollars when the stock market falls, which is what happened during the 2008 financial crisis.

Loans

2. When firms borrow money, the loan is generally used to expand production capacity by buying new machinery or space and investing in new projects. A high dollar means that loans in dollars are comparatively expensive. Expensive loans means less investing, and lower investment rates means a lower stock market.

Exports

3. Looking at the issue from the other side, a low dollar can be a boost for the stock market because low dollars make United States imports to other countries cheaper in foreign currency. Hence, export-oriented United States companies often see a rise in their profits, which raises their stock prices and can have an aggregate positive effect on the stock market.

Debates

4. Debate abounds about the dollar and stock market relationship, especially considering data that shows that a strong dollar supports a strong stock market. Jeff Miller, author of the market blog A Dash of Insight, cites two leading market analysts with opposing views on the subject, especially with regard to data since the 2008 financial crisis and what a post-recession low dollar augurs. David Merkel cites pre-recession data and believes a strong dollar is necessary for long-term financial health, and that the policies necessary to strengthen the dollar (raising interest rates, for example) would worsen the recession, but clean out only weak businesses, helping the economy in the long run. Bob McTeer assumes that a low dollar leads to higher exports and therefore a higher stock market, but for political reasons cautions against policies that intentionally devalue the dollar.

Stock Market Factors

5. The stock market is influenced by a myriad of factors, and is impossible to predict. Hence, while many patterns can be observed in the market (for example, over large amounts of time, the stock market does grow wealth), it is very difficult to establish

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exactly what affects what and exactly how a given factor affects the market.

Correlation between Dollar & Euro currency

Correlation Dollar to Euro Correlation Euro to Dollar

1. Correlation Dollar to Euro

MONTHS AVERAGE RATE DAYS

January 1.42721 USD (20 days average)

February 1.36857 USD (20 days average)

March 1.35685 USD (23 days average)

April 1.34095 USD (21 days average)

May 1.25653 USD (21 days average)

June 1.22085 USD (22 days average)

July 1.277 USD (22 days average)

August 1.29029 USD (21 days average)

September 1.3067 USD (22 days average)

October 1.38978 USD (21 days average)

November 1.3661 USD (22 days average)

December 1.32201 USD (23 days average)

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DOLLAR CHART

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC1.1

1.15

1.2

1.25

1.3

1.35

1.4

1.45

Average rates of 2010

2. Correlation Euro to Dollar

MONTHS AVERAGE RATE DAYS

January 0.70078 EUR (20 days average)

February 0.730765 EUR (20 days average)

March 0.73706 EUR (23 days average)

April 0.745791 EUR (21 days average)

May 0.796253 EUR (21 days average)

June 0.819193 EUR (22 days average)

July 0.783286 EUR (22 days average)

August 0.775236 EUR (21 days average)

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September 0.765702 EUR (22 days average)

October 0.719578 EUR (21 days average)

November 0.732405 EUR (22 days average)

December 0.756462 EUR (23 days average)

Euro chart

jan feb mar apr may jun july aug sep oct nov dec0.64

0.66

0.68

0.7

0.72

0.74

0.76

0.78

0.8

0.82

0.84average rates of 2010

average rates of 2010

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Appreciation and depreciation of currency

As per my post on basics of appreciation and depreciation of rupee, we saw what appreciation and depreciation of rupee means. Now this post will help us to understand what causes appreciation and depreciation of a currency and its effects.

As from our previous example, we assume that there are 2 countries India and USA, and there is flexible exchange rate regime. Therefore, value of currency of each country in terms of the other depends on the demand and supply of their currencies. It is in the foreign exchange market that exchange rate among different countries is determined. It is a market in which currencies of various countries are converted into each other or exchanged for each other. In our case, Indians sell rupees to buy US dollar and the Americans will sell dollars in exchange for rupees.

Demand for dollarNow demand for dollar by Indians arises due to the following: · The Indian individuals, firms or government who import goods from USA into India, as they need to pay for goods and services imported.· The Indian individuals travelling and studying in USA would require meeting their travel expenses and education expenses.· The Indians who want to invest in equity shares and bonds of the US companies and other financial instruments.· The Indian firms who want to invest directly in building factories, sales facilities, shops in USA.

Supply of dollarLet’s see what causes supply of dollars in exchange market:

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· The individual firms and government which export Indian goods to USA will earn dollar from American residents who would buy Indian goods imported into USA and pay their price in dollar.· Americans who travel to India and use the services of Indian transport, hotels etc .will also supply dollars to be converted into rupees for meeting these expenses.

American firms and individuals who want to buy assets in India , such as bonds and equity shares of Indian companies or wish to make loans to Indian individual and firms will also supply dollars.Equilibrium is establish in foreign exchange markets by simple demand and supply of currencies…..whenDemand= supply, then foreign exchange market is said to be in equilibrium. The equilibrium in the foreign exchange market will be disturbed if some changes occur in the underlying factors that determine the demand for and supply of foreign exchange.

Appreciation of rupeeFor e.g., if there is in increase in incomes of American people due to boom conditions in the US economy, it will affect the equilibrium rate of exchange. The increase in incomes of the people of USA will lead to increase in demand for imported goods those of India. Now this would lead to increase in supply of dollars, which would in turn lower the price of dollars in the foreign exchange market by simple theory of demand and supply, as now there will be excess supply of dollars. This implies that increase in imports by USA from India leading to more exports from India will cause dollar to depreciate and Indian rupee to appreciate.

Depreciation of rupeeOn the other hand if due to increase in incomes of Indian people causing arise in demand for American consumer goods or there is picking up of industrial activity in India requiring more imports of material, machines equipments and other capital goods from USA the Indian imports from USA will increase. The increase in imports from USA by India will have to be paid in dollars causing demand for dollars to increase. This will

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cause disequilibrium in the foreign exchange market, as with increase in demand for dollars, there will emerge excess demand for dollar, which will push up the price of dollar, and this rise in price of dollars in terms of rupees implies depreciation of value of rupee.

RESEARCH SECTION IN SHAREKHAN

Sharekhan Limited has its own in-house Research Organization, which is known as Value line. It comprises a team of experts who constantly keep an eye on the share market and do research on the various aspects of the share market.

Generally, the research is based on the Fundamentals and Technical analysis of different companies and taking into account various factors relating to the economy.

Sharekhan Limited’s research on the volatile market has been found accurate most of the time. Share khan’s trading calls in the month of November 2007 has given 89%

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strike rate. Out of 37 trading calls given by Sharekhan in the month of November 2007, 33 hit the profit target.

These exclusive trading picks come only to Sharekhan Online Trading Customer and are based on in-depth technical analysis. As a customer of Sharekhan Limited,

One receives daily 5-6 Research Reports on their emails, which they can use as tips for investing in the market.

These reports are named as Pre-Market Report, Eagle Eye, High Noon, Investors Eye, Daring Derivatives and Post-Market Report.

MY SIP IN SHAREKHAN

Before my Summer Internship Programmed (SIP), I had very little knowledge about the stock market and its fundamentals. Now after undergoing training for the 8th week at Sharekhan there is a tremendous increase in my knowledge about the stock market. I have also gained a lot of knowledge about the Sharekhan Company and its various products, schemes and policies and also about its competitors. The products, which I have sold up until, now are Demat accounts and Currency Derivatives Segment. In addition, I am confident about my knowledge about Demat accounts and Currency Derivatives Segment. Although nobody can claim, complete expertise but there is a sea change at least from my point of view. I have learnt what are the various indices and their significance in market. I have also learnt the impact of Sensex and Nifty on overall stock market. I have learnt about various fundamentals and technical aspects, which affect the stock prices in short, run and long run. At Sharekhan, we have also been taught to use the online terminal. Sharekhan is one of the top retail brokerage houses in India with a strong online trading platform. The company provides equity based products (research, equities, derivatives, depository, margin funding, etc.). It has one of the largest networks in the country with 1000 share shops in 375 cities and India’s premier online trading portal www.sharekhan.com. Out of these, we have to mostly sell Demat accounts and Currency Derivatives Segment.

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In the first week, we had training sessions for 3 days in which our company guide Mr.Sachin Chaudhary sir gave us the complete information about the company, its products and policies. He gave us tips on how to open and close the calls. He also gave us tips on how to do telecalling. He also gave us information on how to fill the KYC form and what are the documents required to open the Demat account. Then finally, after this we were sent to the market to bring Demat accounts and Currency Derivatives Segment. Initially we faced many obstacles and reasons were many like bad stock market conditions and we were unable to locate potential market etc. but slowly I collected a good number of leads and references from whom so ever I met. I am still following the clients who are giving follow up dates. Our main task is to sell the online Demat account. During this venture, I came across many people who came from different occupations. I have learned how to deal with them and convince them to open the Demat account with Sharekhan. Selling a Demat account requires special focus on targeting the customers. Each person does not invest in the share market. The person who will be investing in the share market should have at least the basic knowledge about the same or should have the curiosity to gain the same. Therefore, what I had to do is to identify the prospective client and then try to convince them. Wasting time on the customer who does not know anything about stock market is worthless.

While on the call if customer asks me any query about which I am not very much sure then I call our Sachin sir who then clears my doubts and queries without any irritation.

This not only solves clients query but also makes our concepts clear and strong. I initially met round about 9 to 11 people every day. Out of these, I found 3 to 5 persons who took actual interest in the Demat account and Currency Derivatives Segment. As I met more and more people, I learned how to identify the prospective clients. I came to know more about how to talk to him or her, how much time should be given to each client. Therefore, my clients’ conversion ratio also increased. Even, by solving the customer queries, my own understandings were enhanced. While selling our product in the market, I also came to know more about our competitor's product like, ICICIDirect, India bulls, India Info line, Motilal Oswal, Ventura, Angel Broking etc. and their strategy of marketing and the consumer's preference towards the competitor's product. I had created my own database through it during these two months.

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In the second month, some of the follow-ups from the first month started converting. Sharekhan also started giving advertisement in leading English dailies and on channels like CNBC where the customers care toll free number is displayed. Sharekhan also started giving ads on the various sites like Yahoo, Google etc.Sharekhan also started a scheme of free Demat account opening and the one in which the brokerage reduces to half of the original brokerage of 0.05% for Intraday and 0.05% for Delivery.

I met people in different locations i.e. at HCL Sec-127, sec-125, Logex park sec-16 noida, GIP sec-18 noida, shadra Delhi, microelectronics ltd greater noida etc.

Customer Relationship Managers, Assistant Sales Manager, and Engineers of some companies. Once the customer fills up the KYC form, I confirmed from him/her after 5 working days to check if he has received the welcome kit, which contains the login ID, and password from Mumbai office of Sharekhan. After he receives the kit I have to go to his place to install the software in his computer and I have to tell him how to trade online i.e. I have to explain him the complete terminal. I am required to show the customer how to make a transaction and how to get access to the terminal. In addition, if the client faces any problem, then those too had to be solved by me. Therefore, it is all a very good learning experience for me. We have to take about 25 signatures of the customer on the KYC form. This is again a big challenge because they say that now they don`t have enough time to sign in 25 places. In addition, if the sign mismatches even a little then there is again some long procedure to make that form acceptable. I had faced this kind of situation. My second client Mr. Peasant Modi from PATPARGANJ’S signature on the

KYC form was different from that on his PAN card. So the form got rejected. In addition, he even said that if this form will not proceed further then he don`t want to open the Demat account and asked me to return the cheque. Due to this, I was very depressed for 2-3 days but then maybe I called him at a right time as he instantly asked me come and collect the bank proof statement and I was very happy that day. At Sharekhan, the

Atmosphere is perfectly cordial. There are senior trainees and back office people always to solve the difficulties we faced in approaching a customer, filling up the form, demonstrating the terminal, or solving the customer’s queries. Even our Sachin sir helped us in solving our problems. We are supposed to be formally dressed and

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required to report once daily at any time. Whenever we went to KNOP Activity for opening the Demat A/c.

I was maintaining a daily record number of people I met, their addresses and contact numbers during my SIP and daily KNOP Report handed over to Sachin Sir.

WEEKLY ANALYSIS OF PERFORMANCE:

My SIP duration of 2 months( 6 weeks ) and these 2 months , My SIP company Guide Mr. Sachin gave me to Open at least 12 Demat A/c means per week 2 Demat a/c target to open . During my SIP, My weekly performance was as follows:

WEEK No. 1:

Had training for five days. In this training period we were told about Sharekhan Company, history of Sharekhan, organization structure, products, Sharekhan research reports, trading techniques, clients, Demat accounts, Currency Derivative segment, and how to fill the “Know Your Customer” form or KYC form, Online trading accounts in detail - Speed Trade and Classic account, learned how to buy and sell shares through these online terminals, Sales technique, Share khan’s brokerage. Met 10 people, out of this six people were interested in Share khan’s Demat account. Client Conversion ratio: 0%. As this was my first week and had training for 5 days, I got very less time to understand the products, market and potential customers.

WEEK No. 2:

Met 15 people in NCR, out of this 11 people were interested in Demat account. Client Conversion ratio: 0%. As this was the beginning of the SIP, I found it very difficult to identify the potential customers.

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WEEK No. 3:

Met people 7 People at my hometown, out of this 3 people were interested in Demat account. From which two people agreed to become the client of Sharekhan and investment in Demat trading. It enhanced my confidence level .I began to collected many leads and references. Got follow up dates and appointments from the interested customers and learned how to approach and convince the customer.

WEEK No. 5: Met 15 people, out of this six people were interested in Demat account. Opened two Demat account worth Rs 10000/- Client Conversion ratio: 0.026% Collected leads and references. Got follow up dates and appointments from the interested customers. Learned how to approach and convince the customer.

WEEK No. 6: Met five people, out of this four people were interested in Demat account opening. Opened three Demat account worth Rs 15000/- . Client Conversion ratio: 0.91%.

In this way, I had achieved my weekly target gracefully and learned more in Currency derivative segment market and its system followed by Sharekhan.

Learning in Sharekhan:

Stock broking companies technology in the field of stock broking is immense. The terminal through which the brokers buy and sell run with the help of IT. Shares are software that completely depends on the internet.

For Sharekhan, Buying and this terminal has been designed by the software company “Spider”. Selling through internet is fast. As soon as the prices of the shares goes up or comes down then they can be sold or purchased instantly within seconds. Customer Relationship is very necessary for the company to retain the customers.

In Sharekhan, I have learned how to maintain good relations with the customers by giving them the proper service and solving their queries regarding the share, I have learned how to maintain good relation with the employees market and the co- trainees.

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Learned in Sharekhan Ltd. I have learned a lot relating to the finance. Learned the meaning of the words that are mostly used in the share market.

Learned various aspects about various products of the Sharekhan Limited.

Learned about various products used in the share regarding Share Market.

Learned how to use online market especially Demat accounts and Currency Derivative Segment and trading terminal.

Learned how to approach the customers how to take appointments. Learned how to interact with people.

Learned the various policies of the convince them and guide them in trading Learned the importance of the learned to manage time properly. Got the Excel sheet. I maintained all my daily records in the Excel sheet. Had a practical experience of working in a practical knowledge of the market in a reputed organization named “Sharekhan”?

Exploratory Research:

Exploratory research is a type of research conducted because a problem has not been clearly defined. Exploratory research helps determine the best research design, data collection method and selection of subjects. Given its fundamental nature, exploratory research often concludes that a perceived problem does not actually exist. Here in My SIP during the Analysis of Currency Derivative Segment Market investment, I came to know that there was a huge difference between investment in Derivatives and other products of Sharekhan (Equities, Portfolio, and Mutual Funds & Commodities).

So, I decided to know the problem behind (why Investor takes a less interest in investing their money in Currency Derivatives Segment?) for that I with my group did a survey in various locations like HCL sec-127, sec-125, Shahadra, Patparganj Area, GIP sec-18 Noida etc among business people, employees in MNCs in Greater Noida, and collects data from them by providing a common questionnaire and analysis it carefully.

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I also with my group members opted a strategy of qualitative approaches such as informal discussions with consumers, employees, management or competitors, and more formal approaches through in-depth interviews, focus groups, and projective methods.

Descriptive Research:

Under this Research methodology besides primary data (prepare Questionnaire to find out less investment mentality of investors in Derivatives market) I took the help of secondary data for analysis of it completely. And through the descriptive research , it becomes helpful to me to analysis the market how it becomes slow down in eye of investors through a survey conducted my team of 6 members whose worked & help could not be ignored. During the survey, I prepared around 11 questions on which I tried to search out the concept & analysis of Derivative market & behavior of investor’s towards it.

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RESEARCH DESIGN

Non probability

The non –probability respondents have been researched by selecting the persons who do the trading in derivative market.

Those persons who do not trade in derivative market have not been interviewed.

SAMPLING METHODOLOGY

Sampling Technique :

Initially, a rough draft was prepared a pilot study was done to check the accuracy of the

Questionnaire and certain changes were done to prepare the final questionnaire to make it

more judgmental.

Sampling Unit

The respondents who were asked to fill out the questionnaire in the NCR / Noida are the sampling units. These respondents comprise of the persons dealing in derivative market. The people have been interviewed in the open market, in front of the companies, telephonic interviews and through other sources also.

Sample Size

The sample size was restricted to only 100 respondents.

Sampling Area:

The area of the research was National Capital Region (NCR)/ Noida.

Time:

2 months

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Statistical Tools Used:

Simple tools like bar graphs, tabulation, line diagrams have been used.

On the Job Training Experience On the job training is an important component of our training. It is an attempt to bridge the gap between the academic institution and the corporate world. During OJT, which would be a simulation of real work environment, requires me to undergo the rigor of professional environment, both in form and in substance. In the process, it provides an opportunity for me to satisfy my inquisitiveness about

Corporate, provides exposure to technical skills, and helps me to acquire social skills by being in constant interaction with the professionals of other organizations.

During OJT, I am required to undertake assignment (manual instruction as well as written work on accounting management & MIS) jobs along with the day-to- day function of the company, both at the assistance and execution level.

This will help to gain a deeper understanding of the work, culture, deadlines, etc. of an origination.

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DATA ANALYSIS & INTERPRETATION

Q 1) In which of these Financial Instruments do you invest into?

Financial Instrument Percentage of respondent

Mutual Fund 75 %

Bond 16 %

Online trading 7 %

Derivative 2 %

Re-spon-dents, 75%

Re-spon-

dents, 16%

Re-spon-

dents, 2%

Respondents, 7%

Respondents

Mutual funds Online TradingDerivativesBonds

Interpretation:

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This shows that although the Mutual funds market is on the rise yet, the most favored investment continues to be in the Share Market. Therefore, with a more transparent system, investment in the Stock Market can definitely be increased.

Q2. Are you aware of online Share trading?

Aware of online Trading Percentage of Respondent Yes 72 %

No 28 %

Respondents, 72%

Respondents, 28%

Respondents

YesNo

Interpretation:

With the increase in cyber education, the awareness towards online share trading has increased by leaps and bounds. This awareness is expected to increase further with the increase in Internet education. This means that in stock market awareness I feel, is very concise in nature.

Q.3) Heard about Sharekhan Limited.

Awareness of Sharekhan Ltd. Percentage of Respondent

Yes 70 %

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No 30 %

Respon-dents, 70%

Respondents, 30%

Awareness of sharekhan Ltd.

YesNo

Interpretation:

This pie chart shows that the company to increase its market share over its competitors should further leverage this brand image.

Q4) Do you know about the facilities provided by Sharekhan Ltd.?

Awareness about the facilities provided by Sharekhan Ltd.

Percentage of Respondent

Yes 36 %

No 64 %

Respondents, 36%

Respondents, 64%

YesNo

Interpretation:

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Although there is sufficiently high brand equity among the target audience yet, it is to be noted that the customers are not aware of the facilities provided by the company meaning thereby, that, the company should concentrate more towards promotional tools and increase its focus on product awareness rather than brand awareness.

Q.5) which company provides a less BROKARAGE rate?

Company Name Percentage of Respondent Sharekhan Ltd. 22 % HDFC 19 % ICICI 59 %

Interpretation:

This data shows that beyond more than 80 years experience in stock market trading in India but, lack of advertizing Sharekhan ltd‘s growth doesn’t as expected. This implies that Sharekhan has to pay special attention towards publicity.

Q.6) User of Dematerlisation (Demat) account?

User of Demat Percentage of Respondents Sharekhan Ltd. 41 % HDFC 28 % ICICI 31 %

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1

2

3

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7

Percentage of Respondent Company Name

Respondents, 41%

Respondents, 28%

Responde, 31%

Respondents

Share Khan HDFCICICI

Some under stable survey question Related to Derivatives:

Q.7) Education qualification of investors who investing in derivative market.

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Education No. of resultUndergraduate 6Graduate 10Post graduate 23Professional 11

Qualification of Investors

Under graduateGraduatePost graduateProfesional

Interpretation:

This chart shows that for Derivative trading there must be a great requirement of knowledge so, To understand of Derivative market trading a investor not only highly Qualified academically in finance sector but also knowledgeable. 23% of postgraduate shows the same thing during the survey.

Q.8) Income range of investors who investing in derivative market.

Income Range No. of Respondents (%)below 1,50,000 11,50,000-3,00,000 93,00,000-5,00,000 14above 5,00,000 26

75

below 1,50,000

1,50,000-3,00,000

3,00,000-5,00,000

above 5,00,000

0 5 10 15 20 25 30

Investment which gives maximum returns

NO. OF RESULT

Interpretation:

: Income range of investor in Derivatives market above Rs.50000000.

Q.9) What kind of risk do you perceive while investing in the stock market?

Risk in Stock Market Percentage of Respondents

Uncertainty of Returns 19 %

Slump in Stock Market 22 %

Fear of windup a company 6 %

Others 3 %

Uncertainty of returns

Slump in stock market

Fear of windup of company

Others05

10152025

No. of result

Interpretation:

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This graphs shows that investors think that it is too risky to invest in stock market because during “Recession Period” many investors were lost their money, which they invested in Equities. They feel that insurance is much helpful for their fulfill of Needs.

Q. 10) why people do not invest in derivative market?

Lack of knowledge & understanding

54%

Increase speculation4%

Risky & highly leveraged

34%

Counter party risk8%

Chart Title

Q.11) in which of the following would you like to participate?

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ReasonsPercentage of Respondents

Lack of knowledge & understanding 67 %

Increase speculation 6 %

Risky & highly leveraged 17 %

Counter party risk 10 %

59%

23 %

6 %

8 %4 %

No. of Result

Stock index futuresStock index OptionsFuture on individual stockCurrency futuersOptions on individual stock

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Participate in

Percentage of Respondent

Stock index futures 59

Stock index Options 23

Future on individual stock 6

Currency futures 8

Options on individual stock 4

Interpretation:

Many investors said that they are the regular investors in stock index future in Derivatives if they invested in Derivatives market.

FINDINGS

1) From the survey it was found that most of them are aware about Sharekhan as a FinancialServiceprovider.

2) Among all the services, most of the people were aware about Tax Planning’s and least awareness was for PPM and Stock Broking, so efforts should be taken accordingly.3)As far as the brand awareness is considered the Karvy tops the list so, the companies have to put the extra effort on its awareness, and also the company has to take maximum efforts on building its marketing strategy.

4) According to the respondents the quality of the service is very important. Therefore, the company should project itself as a brand in the market that gives end user the best quality of service with handy operations.

5) Most of the respondents have their own personal, consultant or company consultants. Sharekhan have to differentiate their services from other consultant effectively by delivering value added services to its customers.

6) The consultancy must give much more emphasis on creation of customer who make repurchase.

7) The maximum amount of awareness, which has been generated, is through newspaper and TV. Therefore, the company should take care of it, as it can be one of the potential media for advertisements.

RECOMMENDATIONS & SUGGESTIONS

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1) A knowledge need to be spread concerning the risk and return of the derivative market.

2) More variation in stock index future need to be made looking a demand side of investors.

3) RBI should play a greater role in supporting derivatives.

4) There must be more derivative instruments aimed at individual investors.

5) SEBI should conduct seminars regarding the use of derivatives to educate investors.

6) It is important for a consultancy to create awareness about its financial service effectively.

7) The customers are expecting frequent and timely correspondence from the consultancy regarding their funds and the monthly market overview. Therefore, the organization needs to give more weight age on this concern.

8) The company should increase the level of interaction between the customer & consultancy.

9) The organization should focus on developing long-term relationship with the customers.

10) According to the respondents the quality of the service is very important. Therefore, the company should project itself as a brand in the market that gives end user the best quality of service with handy operations.

.

CONCLUSION

Based on the study it is found that Sharekhan Ltd. is better Services provider than the other stockbrokers because of their timely research and personalized advice on what stocks to buy or sell.

Sharekhan Ltd. provides the facility of Trade Tiger as well as Relationship Manager Facility for encouragement and protects the interest of investors.

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It also provides the information through the internet and Mobile alerts what IPO’s are coming in the Market and it also provide its Research on the future prospect of the IPO.

Study also concludes that people are not much aware of Currency Derivative Segment and while it is going to be biggest Market in India.

The company should also organ-sized services and similar activities to enhance the Knowledge of prospective and existing Customers, so that they feel more comfortable while investing in the Stock Market.

BIBLOGRAPHY:

Books referred:

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Options Futures and other Derivatives by John C Hull. Derivatives FAQ by Ajay Shah. NSE’s Certification in Financial Markets: - Derivatives Core Modules. Financial Markets & Services by Gordon & Natarajan

Websites Visited:

www.nse-india.com www.derivativeindia.com

www.bseindia. com www.tradingcharts.com

www.google.com www.tradeing charts.com

www.ncdex.com www.dailyfutures.com

www.sebi.gov.in

ANNEXURE

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SURVEY QUESTIONNAIRE OF INVESTORS

FOR

PERCEPTION TOWARDS INVESTMENT IN DERIVATIVE MARKET

Sir/Ma’am,

This questionnaire is meant for educational purposes only.

The information provided by you will be kept secure and confidential.

NAME- __________________________________________________ __

CONTACT- ______________________________________________ ___

GENDER-________________________________________________ ___

OCCUPATION-___________________________________________ ____

ORGANISATION-_ ____________________________________________

Q.1) in which of these financial instrument do you invest into?

Mutual Fund Bond

Online Trading Derivatives

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Q.2) Are you aware of online share trading?

Yes No

Q.3) Heard about Sharekhan Ltd.?

Yes No

Q.4) Do you know about the facilities provided by Sharekhan Ltd.?

Yes No

Q.5) Which Company provide a less Brokerage Rate?

Sharekhan Ltd. HDFC

ICICI Others.

Q.6) User of Dematerlisation (Demat) account?

Sharekhan Ltd. HDFC

ICICI Others

Q.7) Educational Qualification

Undergraduate Graduate

Post Graduate Professional Degree Holder

Q.8) Income Range:

Below 1, 50,000 1, 50,000 – 3, 00,000

3, 00,000 – 5, 00,000 Above 5, 00,000

84

Q.9) What kind of risk do you perceive while investing in the stock market?

Uncertainty of return

Slump in stock market

Fear of being windup of company Other (Specify)

Q.10) why people do not invest in derivative market? (Rank your preference 1-4)

Lack of knowledge and difficulty in understanding

Increase speculation

Very risky and highly leveraged instrument

Counter party risk

Q.11) from where you prefer to take advice before investing in derivative market?

Brokerage houses Research analyst

Websites News Networks

Q.12) in which of the following would you like to participate?

Stock Index Futures Stock Index Options

Future on individual stock Options on individual stock

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Currency futures

Q.13) what contract maturity period would interest you for trading in?

1 month 2 month

3 month 6 month

9 month 12 month

ABBREVATIONS

A

AMEX- American Stock Exchange

B

BSE- Bombay Stock Exchange

BSI- British Standard Institute

C

CBOE - Chicago Board options Exchange

CBOT - Chicago Board of Trade

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CEBB - Chicago Egg and Butter Board

CME - Chicago Mercantile Exchange

CNX- Crisis NSE 50 Index

CPE - Chicago Produce Exchange

CWC- Central Warehousing Corporation

D

DTSS- Derivative Trading Settlement System

F

FIIs - Foreign Institutional Investors

F & O – Future and Options

FMC- Forward Markets Commission

G

GAICL-Gujarat Agro Industries Corporation Limited

GSAMB- Gujarat State Agricultural Marketing Board

I

IMM - International Monetary Market

IPSTA- India Pepper & Spice Trade Association

M

MCX – Multi Commodity Exchange

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N

NAFED-National Agricultural Co-Operative Marketing Federation of India

NCDEX – National Commodities and Derivatives Exchange

NIAM- National Institute of Agricultural Marketing

NMSE- National Multi Commodity Exchange

NSCCL- National Securities Clearing Corporation

NSDL- National Securities Depositories Limited

NSE - National Stock Exchange

O

OTC- Over the Counter

P

PHLX - Philadelphia Stock Exchange

PNB- Punjab National Bank

RRBI- Reserve Bank of India

S

SC(R) A - Securities Contracts (Regulation) Act, 1956

SEBI- Securities Exchange Board of India

SGX- Singapore Stock Exchange

SIMEX - Singapore International Monetary Exchange

88

V

VPN- Virtual Private Network

89