1.1 INTRODUCTION

Indian securities markets have indeed waited for too long for derivatives trading to

emerge. Mutual Funds, FII’s (Foreign Institutional Investors) and other investors who are

deprived of hedging opportunities will now have a derivatives market to bank on. First to

emerge are the globally popular variety - index futures.

While derivatives markets flourished in the developed world Indian markets remain

deprived of financial derivatives to the beginning of this millennium. While the rest of

the world progressed by leaps and bounds on the derivatives front, Indian market lagged

behind. Having emerged in the markets of the developed nations in the 1970s, derivatives

markets grew from strength to strength. The trading volumes nearly doubled in every

three years making it a trillion-dollar business. They became so ubiquitous that, now, one

cannot think of the existence of financial markets without derivatives.

Two broad approaches of SEBI is to integrate the securities market at the national level,

and also to diversify the trading products, so that more number of traders including

banks, financial institutions, insurance companies, mutual funds, primary dealers etc.

choose to transact through the Exchanges. In this context the introduction of derivatives

trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real

landmark.

1

SEBI first appointed the L.C.Gupta Committee in 1998 to recommend the regulatory

framework for derivatives trading and to recommend suggestive byelaws for Regulation

and Control of Trading and Settlement of Derivatives Contracts. The Board of SEBI in its

meeting held on May 11, 1998 accepted the recommendations of the Dr L.C.Gupta

Committee and approved the phased introduction of derivatives trading in India

beginning with Stock Index Futures. The Board also approved the "Suggestive Bye-laws"

recommended by the committee for Regulation and Control of Trading and Settlement of

Derivatives Contracts.

However the Securities Contracts (Regulation) Act, 1956 (SCRA) needed amendment to

include "derivatives" in the definition of securities to enable SEBI to introduce trading in

derivatives. The Government in the year 1999 carried out the necessary amendment. The

Securities Laws (Amendment) Bill 1999 was introduced to bring about the much-needed

changes. In December 1999 the new framework has been approved. Derivatives have

been accorded the status of `Securities'. The ban imposed on trading in derivatives way

back in 1969 under a notification issued by the Central Government has been revoked.

Thereafter SEBI formulated the necessary regulations/bye-laws and intimated the Stock

Exchanges in the year 2000, while derivative trading started in India at NSE in the same

year and BSE started trading in the year 2001. In this module we are covering the

different types of derivative products and their features, which are traded in the stock

exchanges in India.

2

Derivative is Financial Instrument whose value depends on the value of other investment

or consumption asset underlying in them. Very often the variables underlying derivatives

are the prices of trade assets. A stock option, for example, is a derivative whose value is

dependent on the price of a stock. However, derivatives can be dependent on almost any

variable from the price of hogs to the amount of snow falling at a certain ski resort.

Another example to understand Derivative is curd. Curd is a derivative of milk. The

price of the curd depends on the price of milk, which in turn depends upon the demand

and supply of milk. Derivative in short does not have a value by itself but it derives its

value from an underlying. In the above example the underlying is milk and the derivative

is curd.

In the last 20 years Derivatives have increasingly important in the world of finance.

Futures and Options are now traded actively on many exchanges through out the world,

forward contracts, swaps and many different types of options are regularly

Traded outside exchanges by financial institutions, fund managers and corporate

treasures in what is termed the over the counter market. Derivatives are also some times

added to a bond or stock issue, there have been many developments in derivative

markets, there is now active trading in credit derivatives, electricity derivatives and

insurance derivatives, many new types of interest rates, foreign exchange and equity

derivative products have been created.

Options are one better than futures. In option, as the name indicates, gives one party the

option to take or make deliver. But this option is given to only one party in the

3

transaction while the other party has an obligation to take or make delivery. The asset

can be a stock, bond, index, currency or a commodity.

The options are of two types, the call option and the put option. Call options give the

right but not the obligation to buy at a specified price up to a future date. They, thus

allow a purchase to be delayed while guaranteeing a maximum buying price. Put options

give the right but not the obligation to sell at a specified price up to a particular date in

the future. A put option thus provides a means of delaying the sale while guaranteeing a

minimum-selling price.

4

1.2 NEED OF THE STUDY

Derivative market is growing very rapidly as the investors are increasing from day to day

because of the usage of derivative is increasing day by day. Investors investing either in

commodity, currency, metal, index or stock derivatives, the importance of the derivative

is increasing because of low risk profile in capital market. The investor investing in

derivatives can get a more benefit/return by investing a small portion and this derivative

eliminates the risk for loosing a huge investment where only premium is paid based on

strike price of underlying asset.

Call options gives the right but not the obligation to buy at a specified price up to a future

date. They thus allow a purchase to be delayed while guaranteeing a maximum buying

price. Put options give the right but not the obligation to sell at a specified price up to a

particular date in the future. A put option thus provides a means of delaying a sale while

guaranteeing a minimum-selling price.

This study makes us to understand the advantages of options of Tata Steel, DLF,

UNITECH, Infosys Technologies in the month of Feb & Mar 2010 at NSE.

This study enables to understand the volatility of derivatives.

3. This study gives an idea to the investor to invest in which sector.

4. The study enables an investor to invest in call/put option.

1.3 OBJECTIVES OF THE STUDY

5

1. To know the volatility of options (call/put) through the equity

of a particular underlying.

2. To know when the investor should minimize his risk and

Maximize his return through investing in either call/ put

options.

3. To know when the underlying asset performing well.

4. To know equity volatility upon the options.

5. To know the relationship of trade quantities of options with

reference to equity.

6. To know the relationship of premium on options with

reference to the volatility in equity prices.

7. To focus on price movements of underlying assets and

derivatives during March and April seasons.

8. To know weather an underlying asset is maintaining its

stagnant position in its equity prices/ not.

9. To know the volatility of an underlying based upon the capital market.

1.4 SCOPE OF THE STUDY

6

1The study is permitted to study only 10 particular companies they are ICICI Bank,

Tata Steel, Reliance Communications, UNITECH, Hindustan Unilever, JPA, GMR

Infrastructure, Infosys Technology, Reliance

2This study permitted to observe the market volatility for a period of 45 days only.

3The time covered in the study is only May - June 2008year.

4To study the undertaken permits only the use of a secondary data only.

5The study was made only upon a part of a derivative market’s i.e., equity of specific

underlying assets.

.The study was limited to a particular strike price of a company of analyze the

volatility of options (call/put) upon the equity price and quantity.

1.5 RESEARCH METHODOLOGY

7

The project entitled “MARKET MOVEMENTS OF OPTIONS UPON EQUITY”, study

conducted on selected companies at INDIABULLS for a period of 45 days and all the

data was collected through a secondary source.

PRIMARY DATA

Primary sources of data are collected through personal interaction with concern

executives of India bulls.

SECONDARY DATA

1 The data is collected through various, books, magazines, news papers, Journals

and also took the help of internal guide and external guide in collecting the

required data for the study.

2 For better understanding Tables and Graphs were used wherever necessary.

3 Drawing conclusions by analyzing the collected data, interpreting the results from

the tables and graphs used.

EQUITY MARKET –AN INTRODUCTION

8

Equity: Stocks also know as Equities, are shares in a company. It is the certificate of

ownership of incorporation. In simple terms when you invest in a company’s stock or buy

its share, you own part of a company. Thus as stockholder, you share portion of the profit

the company may make, as well as portion of the loss a company may take. As the

company keeps doing better, your stock will increase in value and yield higher dividends.

Equity market or stock market: is a system through which a company shares are

traded. The equity market offers investors an opportunity to participate in a company‘s

success through an increase in its stock price.

Investment: An investment is the commitment of funds made in the expectation of some

positive rate of return. If the investment is properly undertaken the return will be

commensurate with the risk the investor assumes. The term investment or investing is a

word of many meanings; there are three concepts of investment Economic investment,

Business Investment and Financial investment.

The Investment portfolio: Refers to the various assets of an investor, which are to be

considered as a unit. An investment portfolio is not merely a collection of unrelated

assets but a carefully blended asset combination with as unified framework. The investor

takes decision with regards to his wealth position from the portfolio as a whole.

CLASSIFICATION OF INVESTORS

9

The kind of information required and the policy to be formulated depends on the kind of

investors. There are two kinds of investors, namely:

1. Individual investor.

2. Institutional investors

Individual Investor find it difficult their portfolio investment policies, as they will busy

with their business, family and social lives and do not have time to conduct research to

decide in which shares their hard earned savings have to be invested. Therefore, they tend

to adopt ‘hit and run’ policy.

The institutional investors have both time and resource to dig out the necessary

information to formulate their investment portfolio. They can afford to employ skilled

economists, financial analysts and investment managers. They can acquire all the

necessary financial information and in case inadequacy, they can also approach the

concerned organisation to make enquires and collect further information. An institutional

investor can have continuous review and scrutiny of its investment portfolio. In case of

adverse market conditions, they will be efficient to dispose off the securities. The

institutional investors own a major part of corporate securities and most of them into

buying and selling the securities as a part of their main policies of optimum utilisation of

their cash resources.

SOME BASIC TERMS AND MEANINGS

10

1 Dividend: A sum of money, determined by a company paid to shareholders of a

corporation out of its earnings.

2 Equity: Is the property of the ordinary share, hence these shares are popularly

known as equities.

3 Equity Markets: A market where investors buy and sell securities providing

ownership of a company shares.

4 Stock market: A market for the trading of publicly held company stock

associated financial instruments.

5 Face value: Is the value of the shares issued for the first time

6 Market value: Market value is the value of shares, current selling price.

7 Capital Market: It is the market for long-term loans equity capital. Companies

and the government can raise funds for long-term investment via the capital

market.

8 Money Market: It is the market that details in short term liquid assets where

brokers and investment bankers providing the facility for trade of company stocks

and other financial instruments.

9 Liquidity: Having investments that can readily be cashed in.

10 Broker: A securities firm or an investment advisor associated with a firm. When

acting as a broker for the purchase or sale of listed stock, the investment advisor

does not own the securities him or herself, but acts as an agent for the buyer and

seller and exchange a commission for these services.

11 Bull Markets: A market in which prices are rising. A ‘bull’ is a person who

11

expects that the market or the price of a particular security will rise.

12 Bear Market: A market in which prices are declining. A ‘bear’ is a person who

expects that the market or the price of a particular security will decline.

13 Stock Exchange: A stock market is a place that provides facilities to stockbrokers

to trade company stocks and other securities. A stock may be bought or sold only

if it is listed on stock exchange.

DERIVATIVES

The term "Derivative" indicates that it has no independent value, i.e. its value is entirely

"derived" from the value of the underlying asset. The underlying asset can be

s ecu r i t i e s , commod i t i e s , bu l l i on , cu r r ency , l i ve s tock o r any th ing

e l s e . I n o the r words , De r iva t i ve means a fo rwa rd , f u tu r e , op t i on o r

any o the r hyb r id con t r ac t o f p r e de t e rmined f i xed du ra t i on , l i nked

fo r t he pu rpose o f con t r ac t f u l f i l lmen t t o t he va lue o f a spec i f i ed

r ea l o r f i nanc i a l a s se t o r t o an i ndex o f s ecu r i t i e s .

The Secur i t i e s Contrac t s (Regu la t ion ) Ac t 1956 de f ine s der iva t ive

a s under :

12

"Der iva t ive" inc ludes -

A security derived from a debt instrument, share, and loan whether secured or unsecured,

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

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

securities.

The above definition conveys:

1. That derivative is financial products and derives its value from the underlying assets.

2. Derivative is derived from another financial instrument/contract called the underlying.

In the case of Nifty futures, Nifty index is the underlying.

TYPES OF DERIVATIVES

1 . Forwards : A forward contract is a customized contract between two entities, where

settlement takes place on a specific date in the future at today’s pre-agreed price.

2 . Futures : A futures contract is an agreement between two parties to buy or sell an

asset at a certain time in the future at a certain price. Futures contracts are special types of

forward contracts in the sense that the former are standardized exchange-traded contracts.

3 . Opt ions : Options are of two types - calls and puts. Calls give the buyer the right but

not the obligation to buy a given quantity of the underlying asset, at a given price on or

before a given future date. Puts give the buyer the right, but not the obligation to sell a

given quantity of the underlying asset at a given price on or before a given date.

4 . Warrant s : Options generally have lives of up to one year, the majority of options

traded on options exchanges having a maximum maturity of nine months. Longer-dated

options are called warrants and are generally traded over-the-counter.

13

5 . Leaps : The acronym LEAPS means Long-Term Equity Anticipation Securities.

These are options having a maturity of up to three years.

6 . Baske t s : Basket options are options on portfolios of underlying assets. The

underlying asset is usually a moving average of a basket of assets. Equity index options

are a form of basket options.

7. Swaps: Swaps are private agreements between two parties to exchange cash flows in

the future according to a prearranged formula. They can be regarded as portfolios of

forward contracts.

The two commonly used swaps are:

i . In tere s t ra te swaps : These entail swapping only the interest related cash flows

between the parties in the same currency.

i i . Currency swaps : These entail swapping both principal and interest between the

parties, with the cash flows in one direction being in a different currency than those in the

opposite direction.

8 . Swapt ions : Swaptions are options to buy or sell a swap that will become operative

at the expiry of the options. Thus a swaption is an option on a forward swap. Rather than

have calls and puts, the swaptions market has receiver swaptions and payer swaptions.

OPTIONS

An Op t ion i s a con t r ac t be tween two pa r t i e s i n wh ich one pa r t y ha s

t he r i gh t bu t no t t he ob l i ga t i on t o do some th ing -usua l l y t o buy o r

14

se l l some unde r ly ing a s se t s . Op t i ons a r e de f e r r ed de l i ve ry con t r ac t s

t ha t g ive buye r s t he r i gh t bu t no t t he ob l i ga t i on , t o buy o r s e l l a

spec i f i ed commod i ty o r s ecu r i t y a t a s e t p r i c e on o r be fo re a

spec i f i ed fu tu r e da t e .

TYPES OF OPTION CONTRACT

The two most basic types of option contracts are call option and pt option. Currently such

options are traded on many exchanges around the world. Furthermore, many of these

contracts are created privately (“that is off exchange” or “over the counter”), typically

involving institutions banking firms and their clients.

1 . CALL OPTION : The most prominent type of option contract is call option for

stocks. It gives the buyer the right to buy (“call away”) a specific number of shares of a

specific company from the option writer at a specific purchase price at any time up tp and

including a specific date.

2 . PUT OPTION : A second type of option for stocks is the put option. It gives the

buyer the right to sell (“put away”) a specific number of shares of a specific company to

the option writer at a specific selling price at any time up to and including a specific date.

UNDERLYING ASSETS IN OPTIONS :

Exchange traded options are currently actively traded on stocks indices, foreign

currencies, and futures contracts.

1 . S tock Opt ions – The exchanges trading stock options in the United States are

CBOE, the Philadelphia Stock Exchange, the American Stock Exchange, and the Pacific

Exchange. Options trade on more than 500 different stocks.

15

2 . Fore ign Currency Opt ions – The major exchange for trading foreign

currency option is the Philadelphia Stock Exchange. It offers both European and

American contracts on a variety of different currencies. The size of one contract depends

on the currency.

3 . Index Opt ions – Many different index options currently trade through out the

world. The most popular contracts in the United States are those on the S&P 500 index

(SPX), the S&P 100 index (OEX), the Nasdaq100 index (NDX) and the Dow Jones

Industrial Index (DJX).

4 . Futures Opt ions – In a futures option (or options on futures), the underlying

asset is a futures contract. The futures contract normally matures shortly after the

expiration of the option. Futures options are now available for most of the assets on

which futures contracts are traded and normally trade on the same exchange as the futures

contracts.

LITERATURE:1

Ki t Pong Wong (2005 ) , L iqu id i ty r i sk and the hedg ing ro l e o f

op t ions

16

Source : h t t p : / /www3. in t e r s c i ence .w i l ey . com/sea rch / a l l s ea r ch

ABSTRACT

This study examines the impact of liquidity risk on the behavior of the competitive firm

under price uncertainty in a dynamic two-period setting. The firm has access to unbiased

one-period futures and option contracts in each period for hedging purposes. A liquidity

constraint is imposed on the firm such that the firm is forced to terminate its risk

management program in the second period whenever the net loss due to its first-period

hedge position exceeds a predetermined threshold level. The imposition of the liquidity

constraint on the firm is shown to create perverse incentives to output. Furthermore, the

liquidity constrained firm is shown to purchase optimally the unbiased option contracts in

the first period if its utility function is quadratic or prudent. This study thus offers a

rationale for the hedging role of options when liquidity risk prevails.

LITERATURE:2

Darren L . Freche t t e (2004 ) , “ The Demand for Hedg ing w i th

Futures and Opt ions ”

17

Source : h t t p : / /www3. in t e r s c i ence .w i l ey . com/sea rch / a l l s ea r ch

ABSTRACT

The op t ima l hedg ing po r t fo l i o i s shown to i nc lude bo th fu tu r e s and

op t i ons unde r a va r i e t y o f c i r cums t ances when t he marg ina l co s t o f

hedg ing i s nonze ro . Fu tu re s and op t i ons a r e t r e a t ed a s subs t i t u t e

goods , and t he p rope r t i e s o f t he r e su l t i ng hedg ing demand sys t em

a r e exp l a ined . The ove ra l l op t ima l hedge r a t i o i s shown to i nc r ea se

when t he marg ina l co s t o f t r ad ing op t i ons i s r educed . The ove ra l l

op t ima l hedge r a t i o i s shown to dec rea se when t he marg ina l co s t o f

t r ad ing fu tu r e s i s dec r ea sed . One imp l i ca t i on i s t ha t hedg ing demand

can be s t imu la t ed by a r educ t i on i n t he pe r ce ived cos t o f t r ad ing

op t i ons t h rough t he educa t i on o f hedge r s abou t op t i ons and t he

i n i t i a t i on o f p rog rams such a s t he Da i ry Op t ions P i l o t P rog ram. The

demand app roach i s app l i ed t o e s t ima t e op t ima l hedge r a t i o s fo r

da i ry p roduce r s hedg ing co rn i npu t s i n f i ve r eg ions o f Pennsy lvan i a .

LITERATURE   : 3

James Boness (2004 ) , “OPTION PRICING THEORY AND ASSET

EXPECTATIONS”

18

Source : h t t p : / /www3. in t e r s c i ence .w i l ey . com/sea rch / a l l s ea r ch

ABSTRACT

James Boness shared with other early option theorists the hope that options could be used

to infer investor expectations revealed in observed market prices. His research

unfortunately pre-dated theoretical tools that might have helped that hope become a

reality. Moreover, the modern option theory of Black and Scholes, Merton, Rubinstein,

and others appeared to have "doomed to failure" any attempt to pursue the original

"expectations intuition," since expectations terms are not explicit terms in their option

pricing equations. A subsequent theoretical advance by O'Brien, following Brennan,

along with some observations by Figlewski, have furthered the possibility that obtaining

implied expectations from observed option prices can become a reality. This review

discussion of the literature is in honor of James Boness. The review is confined to the

fundamental theory of valuing dividend-protected European "equ i t y " op t i ons .

LITERATURE:4

Dona ld L ien (2001 ) , De l i very r i sk and the hedg ing ro l e o f op t ions

Source : h t t p : / /www3. in t e r s c i ence .w i l ey . com/sea rch / a l l s ea r ch

19

ABSTRACT

Multiple delivery specifications exist on nearly all commodity futures contracts. Sellers

typically are allowed to deliver any of several grades of the underlying commodity and at

any of several locations. On the delivery day, the futures price as such needs not

converge to the spot price of the par-delivery grade at the par-delivery location, thereby

imposing an additional delivery risk on hedgers. This article derives the optimal hedging

strategy for a risk-averse hedger in the presence of delivery risk. In particular, it is shown

that the hedger optimally uses options on futures for hedging purposes. This article

provides a rationale for the hedging role of options when futures markets allow for

multiple delivery specifications.

LITERATURE:5

Versatility of Stock Index Future and Options using S & P 500:

Source: Portfolio Organizer. January 2007.

20

ABSTRACT

Stock price index futures and options are contracts that allow effective buying and selling

an extremely well diversified portfolio stocks. They are also opportunities, chances to

make investment decision based on the opinion of the overall stock market. Stock index

futures and option are powerful and versatile instruments, whether you intend to risk your

own capital for investment reward or wish to insulate your investment capital from risk.

This paper describes about the versatility of S & P 500 stock index futures and options.

The Chicago Mercantile Exchange have enjoyed tremendous growth in trading volume.

INDUSTRY PROFILE

BOMBAY STOCK EXCHANGE:

21

This stock exchange, Mumbai, popularly known as “BSE” was established in 1875 as

“the native share and stock brokers association”; as a voluntary non-profit making

association. It has an evolved over the years into its present status as the premiere stock

exchange in the country. It may be noted that the stock exchange is the older on in Asia,

even older than the Tokyo stock exchange, which was founded in 1878.

The exchange, while providing as an efficient and transparent market for trading in

securities, upholds the interest of the investors and ensures redressed of their grievances,

weather against the companies or this own member brokers, it also strives to educate and

enlighten the investors by making available necessary informative inputs and conducting

investors education programmers.

A governing board comprised of 9 elected directors, 2 SEBI nominees, 7 Public

representatives and an executive director is the apex body, which decides the policies and

regulates the affairs of the exchange.

The executive director as the chief executive officer is responsible for the day today

administration of the exchange. The average daily turnover of the exchange during the

year 2000-01 (April-March) was Rs. 3984.19 crores and average number of daily trades

Rs. 5.69 Lakhs.

The average daily turn over of the exchange during the year 2002-03 has declined and

number of average daily trades during the period is also decreased.

The ban on all deferral products like BLESS ANDALBM in the Indian capital markets by

SEBI with effect from July 2, 2001 abolition of account period settlements, introduction

of compulsory rolling settlements in all scripts traded on the exchanges with compulsory

rolling settlements in all scripts traded on the exchange with effect from December 31,

22

2001 etc. Have adversely impacted the liquidity and consequently there is a considerable

decline in the daily turnover at the exchange. The average daily turnover of the

exchanges present scenario is 110363 (Lakhs) and number of average daily trades 1057

(Lakhs).

BSE INDICES:

In order to enable the market participants, analysts etc.. to track the various tips and

downs in the Indian stock market, the exchanges has introduced in 1986 an equity-stock

index called BSE- SENSEX that subsequently became the barometer of the moments of

the share prices in the Indian stock market. It is a “market capitalization weighted” index

of 30 components stocks representing a sample of large, well-established and leading

companies. The sensex is widely reported in both domestic and international markets

through print as well as electronic media.

Sensex is calculated using a market capitalization method. As per this methodology, the

level of the index reflects the total market value of all 30 – components stocks from

different industry related to determined by multiplying the price of its stock by the

number of shares outstanding. Statisticians call an index of a set of combined variables

(such as price and number of shares) a composite index. An indexed number is used to

represent the results of this calculation in order to make the value easier to work with a

track over a time. It is much easier to graph a chart based on indexed values than one

based on actual values world over majority of the well known indices are constructed

using ‘market capitalization weighted method indexed’.

In practice the daily calculation of SENSEX is done by dividing the aggregate market

value of the 30 as companies in the index by a number called the index divisor. The

23

divisor is the only link to the original base period value of the SENSEX. The divisor

deeps the index comparable over a period or time and if the reference point for the entire

index maintenance adjustments. SENSEX is widely used to describe the kook in the

Indian stock markets.

Base year average is changed as per the formula new base year average= old year average

*(new market value/old market value).

NATIONAL STOCK EXCHANGE:

The NSE was incorporated in Nov 1992 with an equity capital of Rs.25 crores. The

international security constancy (ISC) of Hong Kong has helped in setting up NSL- ISC

has prepared the detailed business plan and installation of hard ware and soft ware

systems. The promotions for NSE were financial institutions, insurance companies, banks

and SEBI capital market Ltd, infrastructure leasing and financial services ltd and stock

holding corporation ltd.

It has been set up to strengthen the move towards professionalisation of the capital

market as well as provides nation wide securities trading facilities to investors. NSE is

not an exchange in the striding sense where brokers owned and manage the exchange. A

two-tier administration ser up involving a company board and a governing aboard of the

exchange is envisaged.

NSE is a notional market for shares PSU bonds, debentures and government securities

since infrastructure and trading facilities are provided.

NSE NIFTY:

24

The NSE on April 22, 1996 launched a new equity indeed. The NSE-50 the new index,

which replaces the existing NSE-100 index, is expected to serve as an appropriate index

for the new segment of futures and options.

“Nifty” means national index for fifty stocks.

The NSE-50 comprises 50 companies that represent 20 board industry groups with an

aggregate market capitalization of around Rs.170000 crores. All companies included in

the index have a market capitalization in excess of Rs. 500 crores each and should have

traded for 85% of trading days at an impact cost of less than 1.5% corporation ltd. 85% of

the base period for the index is the close of prices on Nov 3 rd 1995. which makes one year

of completion of operation of NSE’s capital market segment. The base value of the index

has been set at 1000.

NSE- MIDCAP INDEX:

The NSE midcap index or the junior nifty comprises fifty stocks those represents 21

abroad industry groups and will provide proper representation of the midcap segment of

the Indian capital market. All stocks in the index should have market capitalization of

greater than Rs.200 crores and should have traded 85% of the trading day at an impact

cost of less than 2.5%.

The base period for the index is Nov 4th,1996, which signifies 2 years of completion of

operations of the capital market segment of the operations. The base value of the index

has been set at 1000.

MIDCAP NSE:

25

Average daily turnover of the present scenario 258212 (Lakhs) and number of averages

daily trades 2160 (Lakhs).

At present there are 24 stock exchanges recognized under the securities contract

(regulation) Act, 1956. They are

NAME OF THE STOCK EXCHANGE YEAR

Bombay Stock Exchange.

Ahmedabad Share and Stock Broker Association.

Calcutta Stock Exchange Association Ltd.

Delhi Stock Exchange Association Ltd.

Madras Stock Exchange Association Ltd.

Indore Stock Brokers Association Ltd.

Bangalore Stock Exchange.

Hyderabad Stock Exchange.

Cochin Stock Exchange.

Pune Stock Exchange.

U.P. Stock Exchange.

1875

1957

1957

1957

1957

1958

1963

1943

1978

1982

1982

26

Ludhiana Stock Exchange.

Jaipur Stock Exchange Ltd.

Gauhati Stock Exchange Ltd.

Mangalore Stock Exchange.

Maghad Stock Exchange Ltd, Patna.

Bhuvaneswar Stock Exchange Association Ltd.

Over the counter exchange Association Ltd.

Saurashtra Kuth Stock Exchange Ltd.

Vadodard Stock Exchange Ltd.

Coimbatore Stock Exchange Ltd.

The Meerut Stock Exchange

National Stock Exchange.

Integrated Stock Exchange.

1983

1983-84

1984

1985

1986

1989

1989

1990

1991

1991

1991

1991

1999

COMPANY PROFILE

27

Indiabulls Group is one of the top business house in the country with business interests in

Real Estate, Infrastructure, Financial Services, Retail, Multiplex and Power

Sectors.Indiabulls Group companies are listed in Indian and overseas financial markets.

The net worth of the Group exceeds USD 2 billion.

 

To be the largest and most profitable financial services organization in Indian retail

market and become one stop shop for all non banking financial products and services for

the retail customers.

 

Rapidly increase the number of client relationships by providing a broad array of product

offering to emerge as a clear market leader.

Indiabulls Group has four separately listed companies with subsidiaries which

contributed in enhancing scope and profile of the business.

28

INDIABULLS FINANCIAL SERVICES LIMITED

Indiabulls Financial Services Limited was incorporated on January 10, 2000 as M/s Orbis

Infotech Private Limited at New Delhi under the Companies Act, 1956. The name of

company was changed to M/s. Indiabulls Financial Services Private Limited on March

16, 2001. In the year 2004, Indiabulls came up with it own public issue & became a

public limited company on February 27, 2004. The name of company was changed to

M/s. Indiabulls Financial Services Limited.

The company was promoted by three engineers from IIT Delhi, and has attracted more

than Rs.700 million as investments from venture capital, private equity and institutional

investors and has developed significant relationships with large commercial banks such

as Citibank, HDFC Bank, Union Bank, ICICI Bank, ABN Amro Bank, Standard

Chartered Bank and IL&FS.

29

Mr. Rajiv Rattan

Co-Founder &

Vice Chairman

(Indiabulls Group)

Mr. Sameer Gelhaut

Chairman

(Indiabulls Group)

Mr. Saurabh K Mittal

Director

(Indiabulls Group)

 

The company headquarters are co-located in Mumbai and Delhi, allowing it to access the

two most important regions for Indian financial markets, The marketing and sales efforts

are headquartered out of Mumbai, with a regional headquarter in Delhi. Back office, risk

management, internal finances etc. are headquartered out of Delhi/NCR allowing the

company to scale these processes efficiently for the nationwide network.

Company is listed on:

National Stock Exchange

Bombay Stock Exchange

Luxemburg Stock Exchange

Market capitalization:

Rs  1,092.26 Cr   (27th July , 2009)

Net worth:

USD 905 million (31st December, 2007).

 Highest Ratings from CRISIL CRISIL is India's leading Ratings, Research, Risk and

Policy Advisory Company.

30

 

Broad array of product offering

Loans & mortgage

Home Loans/Home Equity

Small Medium Enterprises

Commercial Vehicle

Commercial Credit

Life Insurance

Advisory Services

IPO Financing

STRATEGIC UPDATES

Ind i abu l l s F inanc i a l Se rv i ce s l im i t ed ( IBFSL) comple t ed t he de -

merge r o f i t s r e a l e s t a t e bus ine s s i n to a s epa ra t e pub l i c l y t r aded

company , ( IBREL) un locked ove r Rs . 10000 c ro re o f sha r eho lde r

wea l t h .

DE-MERGER:

31

De-merger of Indiabulls Securities Limited from Indiabulls financial services limited.

Each shareholder of Indiabulls Financial Services Limited received a share of Indiabulls

Securities Limited.

SARFAESI ACT NOTIFICATION:

Indiabulls Housing Finance Limited, a wholly owned subsidiary of Indiabulls Financial

Services Limited has been notified as a ‘Financial Institution’ for the purpose of

SARFAESI Act, 2002. This notification is being effectively used by the Company to

yield positive results in speedy recoveries of delinquent mortgage loans.

NEW BUSINESS VENTURE UPDATE:

Life Insurance Venture: Indiabulls Financial Services Limited (IBFSL) has

entered into an MOU with Sogecap, the insurance arm of Societe Generale (SocGen) for

its upcoming life insurance joint venture. Sogecap will invest Rs.150 crore to subscribe to

26% of the paid up capital in the joint venture.

COMMODITIES EXCHANGE:

Indiabulls Financial Services Limited has entered into a MOU with MMTC

Limited, the largest commodity trading business in India to establish a Commodities

Exchange with 26% ownership with MMTC. Ministry of Commerce, Govt. of India has

given its in-principle approval and the formal approval of the Forward Markets

Commission is awaited.

ASSET MANAGEMENT BUSINESS:

32

Indiabulls Financial Services Limited proposes to set up an asset management

company to manage mutual funds and has applied to SEBI for its approval and the same

is awaited.

INDIABULLS REAL ESTATE LIMITED

Indiabulls stepped into the real estate market as Indiabulls Real Estate Limited

(IREL) in 2005. A joint venture between Indiabulls and a US based investment major

Farallon Capital Management LLC resulted in bringing FDI (Foreign Direct Investment)

for the first time in the Indian Real Estate Market. Another joint venture amongst

Indiabulls and DLF, Kenneth Builders and Developers (KBD), has brought up projects

for development of residential apartments.

OUR PROJECTS:

Indiabulls is currently evaluating many large-scale projects worth several hundred

million dollars.

Jupiter Mills Elphinstone Mills Sonepat Township Castlewood Raigarh SEZ Gurgaon Housing Goa Luxury Resort Nashik SEZ Chennai Housing Thane SEZ Chennai Township Mumbai Township

INDIABULLS SECURITIES LIMITED

33

Indiabulls Securities Limited is the jewel in the crown of Indiabulls group.

The products and services offered include securities, credit services, demat account for

share trading, mutual fund news, commodity and review along with technical analysis of

the market.

Indiabulls also provide commodity brokerage services under Indiabulls Commodities

Limited (ICL). It deals in research work and formation of reports on agri-commodites and

metals. ICL has one of the largest retail branch networks in the country.

PRODUCTS OFFERED EQUITIES AND DERIVATIVES

Offers purchase and sale of securities (stock,bonds,debentures etc.)

Broker assisted trade execution

Automated online investing

Access to all IPO's

Equity Analysis

Helps to build ideal portfolio

Satisfies need by rating stocks based on facts-based measures

Free of cost for all securities clients

Depository Services

Depository participant with NSDL and CDSL.

Helps in trading and settlement of dematerialized shares

34

Performs clearing services for all securities transactions

Offers platform to execute trade and settle transaction

Top  Sales Team Structure

Sales Force in Indiabulls securities Limited is divided into two groups. i.e. Online &

Offline

Mentioned below are the names of EVP's managing respective regions.

EVP's Name

 (Online)

Vijay Babbar Amiteshwar ChaudhayPrasenjeet

Mukherjee

Region

Managing NCR and UP,

Punjab,Haryana,Uttranchal,

Rajasthan and Gujarat

Managing Mahrashtra and

Goa, Kerala, Karnataka,

Andhra Pradesh

and Tamil Nadu

Managing West

Bengal,

Orissa, Bihar and

Jharkhand

EVP's Name

 (Offline)Nirdosh Gaur

Hemanshu

 Kamdar

Anirban

 Bhattacharya

Manoj

Srivastava

Region

Managing NCR and

Haryana,

Punjab, Uttar Pradesh

and

Madhya Pradesh

Managing Bengal,

Andhra

Pradesh ,Tamil Nadu,

Karnataka and part of

Mumbai and Gujarat

Managing

Mumbai,

 Pune and other

surrounding

regions

Managing

Rajasthan,

 part of Gujarat

and Mumbai

35

Cus tomer Ca re Depa r tmen t p rov id ing so lu t i on t o t he que r i e s o f

cus tomer s a s we l l a s b r anches f rom a cen t r a l i z ed l oca t i on ba sed ou t

o f gu rgaon

Clients

Client Helpline Number 0124 – 4572444

39407777 

(Local dialing from 25 cities)

Securities client can E-mail at helpdesk@indiabulls.com

Available from 25 cities: Ahmedabad, Bangalore, Bhopal, Chandigarh, Chennai,

Coimbatore, Delhi, Ernakulam, Hyderabad, Jaipur, Jalandhar, Kolkata, Kozhikode,

Ludhiana, Lucknow, Mumbai, Mangalore, Nashik,Pune, Salem, Surat, Vadodra,

Vadodra - Alkapuri, Vishakhapatnam.

Branch

Branch Helpline Number 0124-3989444

Queries E-mail at

Funds related funds@indiabulls.com

Reallocation related reallocate@indiabulls.com

Documents related documents@indiabulls.com

36

MILESTONES ACHIEVED

Developed one of the first Internet trading platforms in India

Amongst the first to develop in-house real-time CTCL (computer to computer link) with

NSE.

Introduction of integrated accounts with automatic gateways to client bank accounts.

Development of Products such as Power Indiabulls for high volume traders.

Indiabulls Signature Account for self-directed investors

Indiabulls Group Professional Network for information and trading service.

37

CORPORATE INFORMATION

Registered Office

F-60, Malhotra Building, 2nd Floor,

Connaught Place, NEW DELHI - 110001, INDIA.

Website: www.indiabulls.com

Corporate Offices

S.P.Centre, “C” Wing, 41/44, Minoo Desai

Road, Near Radio Club, Colaba,

MUMBAI – 400005

“Indiabulls House”

448-451, Udyog Vihar, Phase – V

GURGOAN – 122001.

ORGANISATIONAL STRUCTURE

38

Table No.4.1

TRADING QUANTITY OF UNITECH

Date EquityTradeQty(‘000)

Percentage

Call TradeQty(‘000)

Percentage

PutTrade Qty(‘000)

Percentage

10-02-2010 38074.270 100 27.000 100 9.000 10011-02-2010 41062.270 107.85 49.500 183.33 31.500 35015-02-2010 38801.826 101.91 90.000 333.33 108.000 120016-02-2010 20866.162 54.8 117.000 433.33 130.500 145017-02-2010 22278.503 58.51 189.000 700 166.500 185018-02-2010 54213.895 142.39 747.000 2748.14 189.000 210019-02-2010 55722.303 146.35 877.500 350 216.000 240022-02-2010 40337.265 105.94 1192.500 4416.66 225.000 250023-02-2010 28285.097 74.29 1323.000 4900 238.500 265024-02-2010 32214.549 84.65 1422.000 5266.66 342.000 380025-02-2010 39644.773 104.12 1948.500 7216.66 697.500 775026-02-2010 85057.794 223.39 3010.500 11150 954.000 1060002-03-2010 64497.622 169.39 3645.000 13500 1345.500 1495003-03-2010 35660.449 93.66 3334.500 12350 1692.000 1880004-03-2010 45445.790 119.36 2727.000 10100 2263.500 2515005-03-2010 48940.428 128.54 2466.000 9133.33 2187.000 2430008-03-2010 41230.658 108.29 2920.500 10816.66 1939.500 2155009-03-2010 40735.716 106.99 3100.500 11483.33 1948.500 2165010-03-2010 37850.871 99.41 3604.500 13350 1750.500 1945011-03-2010 36102.450 94.82 4014.000 14866.66 2088.000 2320012-03-2010 22673.099 59.54 4626.000 17133.33 2133.000 2370015-03-2010 22359.316 58.73 4761.000 17633.33 1957.500 2175016-03-2010 17916.804 47.06 4752.000 17600 1876.500 2085017-03-2010 37321.511 98.02 5305.500 19650 1764.000 1960018-03-2010 44221.122 116.14 5971.500 22116.66 1989.000 2210019-03-2010 26376.685 69.28 6088.500 22550 2160.000 2400022-03-2010 26587.042 69.83 6421.500 23783.33 1561.500 1735023-03-2010 23592.640 61.97 5580.000 20666.66 1305.000 1450025-03-2010 21517.992 56.51 5089.500 18850 1192.500 13250

39

GRAPH NO. 1

INTERPRETATION

The above table reveals the volume of trades in equity, options of UNITECH during the

period of Feb and March 2010.

It is observed that in the mid of the Feb to till the end of March-2010 the movement of

the UNITECH trading shows the positive influence of equity upon options with a

proportional growth.

During the contract period except first week the UNITECH shows ups and downs in

trading. This influences both sides of derivative coin i.e. positive side of call, which was

strong and gradual increase and gradual decrease trading in put option is observed.

Upside movement in trade quantity of UNITECH shows positive growth in call and

downside movement in trade quantity of UNITECH shows positive influence on put

option only. There fore it can be said that there is negative correlation between equity

and option trading.

40

Table No.4.2

PRICES OF UNITECH

Date EquityPrice

Percentage Call Price

Percentage PutPrice

Percentage

10-02-2010 71.55 100 4.50 100 6.50 10011-02-2010 74.75 104.47 5.50 122.22 5.50 84.6115-02-2010 75.3 105.24 5.60 124.44 5.00 76.9216-02-2010 75.4 105.38 5.05 122.22 5.50 84.6117-02-2010 74.8 104.54 4.80 106.66 4.63 71.5318-02-2010 70.65 98.74 3.75 83.33 7.00 107.6919-02-2010 70.3 98.25 3.15 70 8.25 126.9222-02-2010 68.25 95.38 2.65 58.88 7.25 111.5323-02-2010 69.5 96.60 2.90 64.44 8.00 123.0724-02-2010 70.95 98.62 3.20 71.11 7.50 115.3825-02-2010 70.5 97.98 3.00 66.66 7.40 113.8426-02-2010 71.75 100.28 2.50 55.55 5.80 89.2302-03-2010 74.6 104.26 3.30 73.33 3.70 56.9203-03-2010 75.75 105.87 3.55 78.88 2.70 41.5304-03-2010 78.75 110.06 5.40 120 1.60 24.6105-03-2010 77.45 108.25 4.60 102.22 1.75 26.9208-03-2010 75.75 105.87 3.40 75.55 2.25 34.6109-03-2010 74.85 104.61 2.75 61.11 2.65 40.7610-03-2010 75.25 105.17 2.70 60 2.40 36.9211-03-2010 74.65 104.33 2.45 54.44 2.30 35.3812-03-2010 74.35 103.91 2.00 44.44 2.40 36.9215-03-2010 74.25 103.71 1.70 37.77 2.25 34.6116-03-2010 75.1 104.96 2.15 47.77 1.65 25.3817-03-2010 73.5 102.72 1.30 28.88 2.35 36.1518-03-2010 73.4 102.58 1.20 26.66 2.35 36.1519-03-2010 73.65 102.93 0.85 18.88 2.00 30.7622-03-2010 71.5 99.93 0.25 5.55 3.75 57.6923-03-2010 71.8 100.34 0.20 4.44 3.40 52.3025-03-2010 72 100.62 0.05 1.11 3.05 46.92

41

GRAPHNO.2

INTERPRETATION

The above graph gives the flctuations of call & put premium with

the equity prices of UNITECH during the period of Feb and march 2010.

The above graph concludes that the UNITECH equity price increases the call premium

was also gets increase and put will decrease, if the UNITECH equity prices decreases the

call premium was gets decrease and put will increase but at the end of the month i.e.

expiry time of options if the equity price even increases the premium of call was going to

decrease and premium of put increase.

At the time of beginning of Feb again the equity price increases the call premium will

gets increases and put will gets decreases. In the mid of the month again the equity prices

of UNITECH was gets decrease the call premium was also decrease and put premium

was showing an increasing trend.

42

Table No.4.3

TRADING QUANTITY OF TATA STEEL

Date EquityTradeQty(‘000)

Percentage

Call TradeQty(‘000)

Percentage PutTrade Qty(‘000)

Percentage

10-02-2010 14263.92 100 19.100 100 1.528 10011-02-2010 6424.782 45.04 22.156 116 1.528 10015-02-2010 7261.457 50.90 38.964 204 1.528 10016-02-2010 6424.900 45.05 39.728 208 1.528 10017-02-2010 9588.185 67.21 46.604 244 12.224 80018-02-2010 4882.515 34.22 52.716 276 18.336 120019-02-2010 7575.148 53.10 89.388 468 15.280 100022-02-2010 5758.609 40.37 92.444 484 16.808 10023-02-2010 5695.239 39.92 106.960 560 19.864 130024-02-2010 5146.093 36.07 132.172 692 23.684 155025-02-2010 4366.133 30.60 157.384 824 29.796 195026-02-2010 5474.152 38.37 214.684 1124 58.828 385002-03-2010 6672.759 46.78 167.316 876 170.372 1115003-03-2010 6217.107 43.56 162.732 852 242.952 1590004-03-2010 7308.328 51.23 148.216 776 286.500 1875005-03-2010 4629.661 32.45 148.216 776 274.276 1795008-03-2010 4379.701 30.70 139.048 728 278.860 1825009-03-2010 3760.466 26.36 143.632 752 284.208 1860010-03-2010 3534.798 24.77 141.340 740 291.848 1910011-03-2010 3344.042 23.44 139.812 732 320.880 2100012-03-2010 4003.456 28.06 139.048 728 374.360 2450015-03-2010 3397.854 23.82 136.756 716 367.484 2405016-03-2010 4462.541 31.28 131.408 688 393.460 2575017-03-2010 5122.422 35.91 123.004 644 365.956 2395018-03-2010 4070.479 28.53 118.420 620 352.204 2305019-03-2010 3444.527 24.14 101.612 532 343.800 2250022-03-2010 3846.658 26.96 18.220 95.39 338.452 2215023-03-2010 3779.833 26.49 69.524 364 330.812 2165025-03-2010 4284.271 30.03 26.740 140 314.768 20600

43

GRAPHNO.3

INTERPRETATION

The above table illustrates that the volumes of Trades in equity, options of Tata Steel

during the period of Feb and March 2010.

At the end of the Feb the movement of a equity has a greater influence on the trading

quantity of call and put. At the end of the march the equity volume of a underlying was

decreased to 75.46% to 68.27% and with this the trading quantity in put was increased

and call was decreased.

During the contract period there was a greater volatility in the market was observed, for

every two or three days the asset was increasing and decreasing

Over all it was concluded that when the trade quantity was influencing more on call, if

trade quantity of equity increases the call was also increasing, but less effect on put was

observed. There was a negative correlation between equity and Option.

44

Table No.4.4

PRICES OF TATA STEEL

Date EquityPrice

Percentage Call Price

Percentage PutPrice

Percentage

10-02-2010 533.6 100 15 100 31.95 10011-02-2010 534.1 100.09 16.3 108.66 31.95 10015-02-2010 539 101.01 14.5 96.66 31.95 100

16-02-2010 550 103.07 19.85 132.33 31.95 10017-02-2010 583.6 109.37 31.5 210 32.5 101.7218-02-2010 578.55 108.42 29.55 197 34.6 108.2919-02-2010 560.05 104.95 19.3 128.66 44 137.71

22-02-2010 573 107.38 24.9 166 37.5 117.3723-02-2010 576.95 108.12 27.3 182 35 109.5424-02-2010 567.15 106.28 22.5 150 40.2 125.82

25-02-2010 571 107.00 23 153.33 36.1 112.9126-02-2010 574.6 107.68 21.8 145.33 29.5 92.3302-03-2010 610 114.31 43 286.66 13.33 41.62

03-03-2010 607.7 113.88 39.65 264.33 13.9 43.5004-03-2010 617 115.62 45.5 303.33 10. 31.2905-03-2010 617 115.62 44 293.33 8.4 26.2908-03-2010 620.65 116.31 47.05 313.66 7.05 22.06

09-03-2010 615.15 115.28 38.5 256.66 8.4 26.2910-03-2010 612 114.63 37.45 249.66 7 21.9011-03-2010 611.5 114.59 36.5 243.33 6.5 20.34

12-03-2010 606.4 113.64 33.5 223.33 5.9 18.4615-03-2010 610.5 114.41 35.1 234 5 15.6416-03-2010 629.95 118.05 49.8 332 1.2 3.75

17-03-2010 631.1 118.27 52.3 348.66 0.9 2.8118-03-2010 640.5 120.03 58 386.66 0.7 2.1919-03-2010 642.65 10.943 64.5 430 0.41 1.2522-03-2010 627.8 117.65 48.8 325.33 0.5 1.56

23-03-2010 637 119.37 57.7 384.66 0.15 0.4625-03-2010 638.8 119.71 65 433.33 0.05 0.15

45

GRAPH NO. 4

INTERPRETATION

The above table reveals the trade prices of equity ,call option and put option of

TATASTEEL for the period of Feb-March-2010.

It is observed that there is frequent growth in equity price movement. In mid of Feb there

was a positive influence of equity on options. From the mid period to end of the contract ,

as the equity increases the call option also increased but the put option is gradually

decreased.

The call option price increased from 15 to 65 at the end of the contract where as the put

option price was decreased from 31.95 to 0.05 . The equity is also increased from 533.6

to 638.8. so we can say that this stock is bullish stock.

Table No.4.5:TRADING QUANTITY OF DLF

46

Date EquityTradeQty(‘000)

Percentage

Call TradeQty(‘000)

Percentage

PutTrade Qty(‘000)

Percentage

18-02-2010 902.144 100 6.400 100 2.400 10019-02-2010 11084.290 112.86 47.200 737.5 2.400 10022-02-2010 9238.686 102.40 82.400 1287.5 4.000 166.6623-02-2010 9268.217 102.73 95.200 1487.5 4.800 20024-02-2010 7156.692 79.33 107.200 1675 5.600 233.3325-02-2010 8954.354 99.25 276.500 4325 8.800 366.6626-02-2010 20649.229 228.89 306.400 4787.5 16.800 70002-03-2010 16603.416 184.04 410.410 6412.5 18.400 766.6603-03-2010 9771.142 108.31 466.400 7287.5 17.600 733.3304-03-2010 9985.703 110.68 475.200 7425 16.800 70005-03-2010 1386.835 153.64 521.600 8150 32.800 1366.6608-03-2010 8168.944 90.55 617.600 9650 61.600 2566.6609-03-2010 6935.872 76.88 721.600 11275 57.600 240010-03-2010 9559.408 105.96 724.000 11312.5 56.800 2366.6611-03-2010 5995.496 66.45 829.600 12962.5 56.800 2366.6612-03-2010 5512.997 61.11 888.000 13875 57.600 240015-03-2010 5437.232 60.27 856.000 13375 61.600 2566.6616-03-2010 5580.344 61.85 940.800 14700 64.000 2666.6617-03-2010 6680.589 74.05 909.600 14212.5 64.800 270018-03-2010 7029.897 77.92 928.800 14512.5 102.400 4266.6619-03-2010 5147.460 57.05 1016.800 15887.5 114.400 4766.6622-03-2010 5849.529 64.84 968.800 15137.5 84.800 3533.3323-03-2010 8903.024 98.68 877.600 13712.5 74.400 310025-03-2010 6866.435 76.11 817.600 12775 17.600 733.33

GRAPH NO. 5

47

INTERPRETATION

The above graph reveals the trade quantity of equity , call option and put option of DLF

for the period of Feb and March 2010

The equity trading involved in more ups and downs during the trading period. Broadly

speaking there was no influence of equity on call or put options. It is observed that from

the mid of the Feb to end of the March there was gradual growth in call and put options

where as the equity is more volatile.

In the mid of the contract period the equity trading become lesser and then there were

continuous ups and downs in trading of equity where as there is continuous growth in

option trading quantities but at the end of the period all the three quantities are get

decreased.

Table No.4.6

48

PRICES OF DLF

Date EquityPrice

Percentage Call Price

Percentage PutPrice

Percentage

18-02-2010 311.8 100 15.95 100 28.2 100

19-02-2010 290.4 93.13 8.45 52.97 28.2 100

22-02-2010 283 90.76 7.00 43.88 39 138.29

23-02-2010 291.4 93.40 9.00 56.42 36.05 127.83

24-02-2010 288.95 92.67 8.00 50.15 33.85 120.03

25-02-2010 290 93.00 9.05 56.73 33.3 118.08

26-02-2010 291.5 93.48 7.00 43.88 36 127.65

02-03-2010 292.7 93.87 6.00 37.61 33 117.02

03-03-2010 298.55 95.75 6.00 37.61 27 97.74

04-03-2010 304.2 97.56 7.00 43.88 23 81.56

05-03-2010 316.7 101.57 10.00 62.69 13.2 46.80

08-03-2010 317.2 101.73 9.85 61.75 11.85 42.02

09-03-2010 310.65 99.63 6.50 40.75 15.5 54.96

10-03-2010 316.95 101.65 8.10 50.78 12.45 44.14

11-03-2010 312 100.06 7.30 45.76 13.5 47.87

12-03-2010 310 99.42 5.15 32.28 14.1 50

15-03-2010 309.8 99.35 3.95 24.76 13.75 48.75

16-03-2010 313.9 100.67 4.70 29.46 9.6 34.04

17-03-2010 313.2 100.44 4.05 25.39 11.45 40.60

18-03-2010 317 101.66 5.20 32.60 7.8 27.65

19-03-2010 311.7 99.96 2.45 15.36 9.5 33.68

22-03-2010 300.45 96.35 0.60 3.76 20 70.92

23-03-2010 294.8 94.54 0.10 0.62 25.5 90.42

25-03-2010 298.7 95.79 0.05 0.31 20.9 74.11

GRAPH NO. 6

49

INTERPRETATION

In the month of Feb the equity prices of DLF moves down wards, as the equity prices was

decreasing the put premium was increasing but at the same time the call premium was

decreasing, but if the equity decreases with a less percentage even the call decreases to

maximum extent of 0.031% with a decrease in equity price by 101.73% to 95.79%.

In the mid period of contract the equity increases to 101.73% and also has an influence

on option price that is call option increases slightly and put option decreases .

The put option was initially increased for two days but later it was continuously

decreased. Even At the end of contract days it was increased to 90.42%, ends at 74.11%.

The overall we can conclude that the equity has the positive influence on the option price

movement. So it is a bearish stock.

Table No.4.7

50

TRADING QUANTITY OF INFOSYS TECHNOLOGIES

Date EquityTradeQty(‘000)

Percentage Call TradeQty(‘000)

Percentage PutTrade Qty(‘000)

Percentage

17-02-2010 1156.560 100 3.000 100 1.200 100

18-02-2010 46.522 40.22 6.200 206.66 1.400 116.66

19-02-2010 749.874 64.83 6.600 220 1.400 116.66

22-02-2010 731.925 63.28 1.900 63.33 3.400 283.33

23-02-2010 473.254 40.91 20.000 666.66 3.400 283.33

24-02-2010 678.377 58.65 22.000 733.33 3.400 283.33

25-02-2010 1091.196 94.34 252.600 8420 212.800 17733.33

26-02-2010 1318.296 113.83 255.200 8506.6 224.600 18716.66

02-03-2010 1066.832 92.24 258.600 8620 244.000 20333.33

03-03-2010 738.122 63.82 254.200 8473.33 263.200 21933.33

04-03-2010 844.405 73.01 246.400 8213.3 255.000 21250

05-03-2010 623.101 53.87 246.400 8213.33 256.800 21400

08-03-2010 1083.124 93.65 244.600 8153.33 269.400 22450

09-03-2010 994.844 86.01 244.600 8153.33 274.800 22900

10-03-2010 916.369 79.23 244.600 8153.33 274.000 22833.33

11-03-2010 537.303 46.45 244.200 8140 281.400 23450

12-03-2010 397.115 34.33 244.400 8146.66 275.000 22946.66

15-03-2010 1322.857 114.37 243.000 8100 237.600 19800

16-03-2010 735.168 63.56 243.000 8100 242.000 20166.66

17-03-2010 794.000 68.65 242.600 8086.66 243.000 20250

18-03-2010 1115.381 96.43 240.200 800.666 242.800 20233.33

19-03-2010 1572.818 135.99 222.000 7400 243.600 20300

22-03-2010 513.566 44.40 222.000 7400 243.800 23316.66

23-03-2010 599.070 51.79 221.800 7393.33 237.000 230583.33

25-03-2010 1900.941 164.36 211.580 7052.66 234.800 19566.66

GRAPH NO. 7

51

.

INTERPRETATION

The equity of INFOSYS TECHNOLOGIES are more volatile during Feb- March 2010.

In the end of the Feb the equity of INFOSYS TECHNOLOGIES has greater influence on

option trading quantity i.e.; as trading quantity of equity increases in option trade quantity

of both call and put increases. So there was positive correlation between option trading

and equity. Over all the call and put has a no greater dependence upon equity was

observed.

Table No.4.8

PRICES OF INFOSYS TECHNOLOGIES

52

Date EquityPrice

Percentage Call Price

Percentage PutPrice

Percentage

17-02-2010 2402.35 100 58 100 129.6 100

18-02-2010 2530.65 105.34 540.2 93.44 120 92.59

19-02-2010 2535 105.52 54.5 93.96 120 92.59

22-02-2010 2567.15 106.85 69.35 119.56 89 68.67

23-02-2010 2583.2 107.52 73.95 127.5 89 68.67

24-02-2010 2579.3 107.36 64.75 111.63 88 67.90

25-02-2010 2615 108.85 81.8 141.03 69.2 53.39

26-02-2010 2600 108.22 69 118.96 63 48.61

02-03-2010 2639 109.85 84 144.82 40.1 30.94

03-03-2010 2670.65 111.16 95 163.79 33.3 25.69

04-03-2010 2626 109.30 60 103.44 38 29.32

05-03-2010 2630 109.47 65 112.06 36.7 28.31

08-03-2010 2660 110.72 80 137.93 25.5 19.67

09-03-2010 2685 111.76 94.5 162.93 20 15.43

10-03-2010 2661.5 110.78 85.85 148.01 19.65 15.16

11-03-2010 2689 111.93 96.65 166.63 11 8.48

12-03-2010 2675 111.34 89.75 154.74 13.45 10.37

15-03-2010 2709 112.76 104 179.31 8.5 6.55

16-03-2010 2740 114.05 140 241.37 3 2.31

17-03-2010 2744 114.22 133 229.31 2.6 2.006

18-03-2010 2791.95 116.46 185 318.96 1.5 1.15

19-03-2010 2767.35 115.19 184.8 318.10 1.4 1.08

22-03-2010 2752.15 114.56 184.5 318.10 0.6 0.46

23-03-2010 27771.5 115.36 178 306.89 0.25 0.19

25-03-2010 2811 117.01 184.9 318.79 0.1 0.077

GRAPH NO. 8

53

INTERPRETATION

In the above graph we can observe that there is a slight growth in the option price

movement. it is also

Observed that as the equity increases there is increase in the call premium and decrease

in the put premium during the Feb-March 2010. therefore we can say that there is positive

influence of equity on option price movement.

Therefore the stock is bullish stock.

5.1 FINDINGS

54

1. Upside movement in trade quantity of UNITECH shows positive growth in call.

2. Downside movement in trade quantity of UNITECH shows positive influence on put

option only.

3. There fore it can be said that there is negative correlation between equity and option

trading of UNITECH.

4. More volatility in the trade quantity of INFOSYS TECHNOLOGIES was observed.

5. The stocks of UNITECH and INFOSYS TECHNOLOGIES are BULLISH stocks.

6. The equity volume of Tata steel shows a decreasing value i.e, from 75.46% to 68.27%

& with this the trading quantity in put was increased and call was decreased.

7. In Tata steel at the end of the contract the call option price increased from 15 to 65 &

put option price decreased from 31.95 to .05, the equity also increased from 533.6 to

638.8, so we can say that this stock is BULLISH stock.

8. The DLF during the mid of the Feb to end of the March had seen a gradual growth

value in call & put option, where as equity is more volatile.

9. In case of DLF equity has positive influence on option price movement.

10. The stocks of DLF are BEARISH stocks.

55

5.2 CONCLUSION

In bullish market the call option writer incurs more losses so the investor is suggested to

go for a call option to hold, where as the put option holder suffers in a bullish market, so

he is suggested to write a put option.

In bearish market the call option holder will incur more losses so the investor is

suggested to go for a call option to write, where as the put option writer will get more

losses, so he is suggested to hold a put option.

Contract size should be minimized because small investors cannot afford this much of

huge premiums.

56

5.3 SUGGESTIONS

BULLISH MARKET

CASE1: BUY CALLS

If an investors has some hunch of bullishness in the stocks he could go for buying ATM

calls. If his hunch proves right his profit will be difference between the spot price and the

(strike price premium).As we know the buyer of a call has unlimited upside and limited

down side to the amount of premium paid.

CASE2: SELL PUTS

A speculator with a bullish view can also express his view by selling puts. If a speculator

thinks that the prices of certain stocks are going to rise then he could sell/write puts on

those stocks. If however his hunch proves wrong and the prices of those stocks fall, then

he will suffer losses to the extent of the difference between the strike price and the (spot

price +premium).As we know the writer of a put has a limited upside (the premium

money)and an unlimited downside.

57

BEARISH MARKET

CASE3: BUY PUTS

An investor who feels fall in the prices of few stocks could buy ATM puts with the lesser

premium. If his hunch proves correct then his ATM put will become an ITM put finally

ending up a huge profit.

CASE4: SELL CALLS

The other way an investor could protect himself from the bearish situation is buy writing

calls. If his hunch proves correct and the prices of the stocks falls then the buyer of the

call will let the options expire .However if his hunch proves incorrect and the prices of

those stocks rises then the buyer of the call option will exercise on him and the speculator

would suffer a loss to the difference between the spot price and the strike price reduced to

the extent of premium received by him earlier on.

58

5.4 LIMITATIONS OF THE STUDY

The s t udy was l im i t ed t o on ly fo r a pe r i od o f 45 days .

The s t udy enab l e s t o ana lyze t he vo l a t i l i t y o f 4

compan i e s on ly .

The s t udy was made t o obse rve on ly a t t he pa r t i cu l a r

p r i c e l eve l s o f a op t i on .

Di f f e r en t s t r i ke p r i c e s o f an op t i on we re no t cons ide red .

The i n fo rma t ion u sed t o ana lyze t he p roposed p ro j ec t i s

on ly fo r a 45 days i . e . Feb 8 t h t o March 25 t h -2010 . .

59

BIBLIOGRAPHY

BOOKS:

1. Khan.M.Y, Financial services, 3rd edition, TMH, New Delhi-8, 2006.

2. Mishkin.F.S, and Eakin S.G., Financial Markets and Institutions, 5th edition,

Pearson Education, 2006.

3. Gordon and Natarajan, Financial Markets and Services, 3rd edition, Himalaya

publications House, Mumbai, 2006.

4. Prasanna Chandra, Investment analysis and Portfolio Management, TMH,

2006.

5. G. Ramesh Babu, Financial Services in India, Concept Publishing Company,

New Delhi, 2005.

6. Dr. S. Guruswamy, Financial Markets and Institutions, Thomson Publishers,

Vijay Nicole, 2004.

60

JOURNALS:

1. Eugene F. Fama, Efficient Capital market, The Journal

of Finance, Vol.25(May,1970)

2. Demetrigades P.O and Lumintel. K.B, Evolution of

Indian Capital Market, Evidence from India, Economic Journal, Vol.106.

3. R. N.Agarwal, A Study of Growth in Indian Capital

Market, Institute of Economic Growth.

4. Juan Fernando Lucio, Capital Markets, Journal of

Financial Regulation and Compliance, Vol.14, 2006.

5. Shreya Das, A Complete Overview of the Volatile

Indian Capital Market, Posted: sep 8th, 2008.

NEWSPAPERS:

1. Economic Times

2. Business line

3. Times of India

4. Business Standard

WEB SITES:

1. http://www.indiabulls.com

2. http:// www.countercurents.org

3. http://www.equitymaster.com

4. http://www.bseindia.com/equityinfo

5. http://www.financial-dictionary

61

62