Chandan Sharma Project11.docx

8/17/2019 Chandan Sharma Project11.docx

1/92

A PROJECT REPORT ON

“A STUDY ON FOREIGN EXCHANGE RISK MANAGEMENT BY

EXPORT SMEs OF BENGALURU ’’

SUBMITTED BY

CHANDAN SHARMA D

1MS14MBA20

Under the guidance and supervisin !"

INTERNA# $UIDE E%TERNA# $UIDE

Dr. Y.M S!"s# SHANKAR RA$A M P

Pr!essr Regina& 'ead ()arnata*a+

Depart,ent ! Manage,ent Studies Shiva-inagar+

MSRIT+ Banga&re . /011/2 Banga&re(/011/3

Su4,itted in the partia& !u&!i&,ent !r the a5ard !

Ms!%r &' B(s")%ss *+")"s!r!"&)

M.S.RAMAIAH INSTITUTE OF TECHNOLOGY

6Autn,us Institute+ A!!i&iated t 7TU+ Be&gau,8

ISO" 911: Certi!ied

;7idS>R>I>T POST+ Banga&re( /011/2

2014,1-


2/92

CERTIFICATE

This is t certi!< that the pr-ect 5r* entit&ed “A STUDY ON FOREIGN

EXCHANGE RISK MANAGEMENT BY EXPORT SMEs OF

BENGALURU is a 4na!ide 5r* carried ut 4< CHANDAN SHARMA D

/1MS14MBA20 in a partia& !u&!i&,ent !r the a5ard ! the degree ! Master !

Business Ad,inistratin ! 7isvesvara


3/92


4/92

CERTIFICATE BY THE GUIDE

This is t certi!< that the pr-ect n “A STUDY ON FOREIGN EXCHANGE

RISK MANAGEMENT BY EXPORT SMEs OF BENGALURU+

su4,itted in partia& !u&!i&,ent ! the curricu&u, re?uire,ent ! Ms!%r &'

B(s")%ss A*+")"s!r!"&) curse a!!i&iated t "s%sr9 T%:#)&3&7":3

U)"%rs"!9 is recrd ! rigina& 5r* carried ut 4< CHANDAN SHARMA D

/1MS14MBA20 under ,< supervisin and guidance> This has nt 4een

su4,itted !r the a5ard ! an< degree@dip&,a 4< 7isvesvara


5/92

DECLARATION

I+ CHANDAN SHARMA D+ 4earing USN N" /1MS14MBA20 student !

MSRIT C&&ege+ Banga&re here4< dec&are that the pr-ect tit&ed “A STUDY

ON FOREIGN EXCHANGE RISK MANAGEMENT BY EXPORT SMEs

OF BENGALURU is su4,itted 4< ,e !r the partia& !u&!i&,ent ! a5ard !

Ms!%rs &' B(s")%ss A*+")"s!r!"&)> This reprt 5as prepared n ,< 5n

e!!rts and it has nt 4een prduced ear&ier t5ards the a5ard ! an< ther

degree>

Date"

C'ANDAN S'ARMA D

P&ace" Banga&re /CHANDAN SHARMA D


6/92

ACKNO;LEDGEMENT

The success!u& c,p&etin ! an< tas* 5u&d 4e inc,p&ete 5ithut

,entining the pep&e 5h ,ade it pssi4&e and 5hse cnstant guidance and

encurage,ent secured us ur success>

I a, inde4ted t Dr. Y.M S!"s# 6 Pr!essr+ MSRIT8 !r his per!ect guidance in

ever< step ! ,< pr-ect+ 5hich has a&5a I etend ,< sincere than*s !r her cnstant supprt and guidance>

I 5u&d &i*e t epress ,< sincere heart !i&&ed than*s t

SHANKAR RA$A M P+ Assistant 7ice President+ !r his perseverance and

eagerness t he&p ,e in a&& pssi4&e 5a

CHANDAN SHARMA D

1MS14MBA20


7/92

Contents

1. EXECUTIE SUMMARY................................................................................12. INTRODUCTION..........................................................................................3 NATURE O T'E BUSINESS CARRIED..................................................................................32

C. VISION, MISSION AND QUALITY POLICY............................................................................33

D. PRODUCT / SERVICE PROFILE.......................................................................................33

E> AREA O OPERATION . $#OBA#@NATIONA#@R E$IONA#..........................................................36

> OFNERS'IP PATTERN...................................................................................................36

G. COMPETITORS INFORMATION.........................................................................................37

H. INFRASTRUCTURAL FACILITIES........................................................................................38

I. ACHIEVEMENT AWARDS................................................................................................39

J. WORKFLOW MODEL (END TO END)..................................................................................40

5. MCKINSEY’S SEVEN S MODEL......................................................................41 A. STRUCTURE..............................................................................................................41

B. SKILL.......................................................................................................................42

C. STYLE......................................................................................................................42

D. STRATEGY................................................................................................................42

E. SYSTEM...................................................................................................................43

F. STAFF......................................................................................................................44

G. SHARED V ALUE..........................................................................................................44

6. RESEARCH METHODOLOY........................................................................47 A. TITLE OF THE PROJECT................................................................................................47

B. STATEMENT OF THE PROBLEM........................................................................................47

C. OBJECTIVES..............................................................................................................48

D. OPERATIONAL DEFINITIONS...........................................................................................49E. D ATA COLLECTION......................................................................................................52

F. STATISTICAL TOOLS USED FOR RESEARCH........................................................................52

G. PLAN OF ANALYSIS......................................................................................................54

H. LIMITATIONS TO THE STUDY...........................................................................................54

!. DATA ANALYSIS AND IMPLEMENTATION..........................................................54". SUMMARY OF FINDINS..............................................................................60#. SUESTIONS.........................................................................................61$%. CONCLUSIONS & FUTURE RO'TH...............................................................62

A. QUESTIONNAIRES.......................................................................................................62


8/92

LIST OF TABLES

T=3% N& Pr!":(3rs P7% N&

1 #ist ! Stc* Echanges 4< Mar*et Capita&iatin

2 Sh5ing Tp Traded C,,dities

<Vital Data of Anand Rathi

4 Indian Presence ! Anand Rathi

> #ist ! Prducts and Services !!ered 4< Anand Rathi

- C&assi!


9/92

LIST OF CHARTS

S.N& Pr!":(3rs P7%

N&

1 Prducts !!ered 4< Stc* Br*ing C,panies

2 Sh5ing #arge Capita&iatin Stc*s ! Indian C,panies

< Sh5ing Mediu, Capita&iatin Stc*s ! Indian C,panies

4 Sh5ing S,a&& Capita&iatin Stc*s ! Indian C,panies


10/92

1. E5%:(!"% S(++r9


11/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

inance is strict&< stud< ! h5 individua&s prtin their assets ver the a,unt

! Regu&atrs had at !irst s&e&<

per,itted certain 4an*s t dea& in this ,ar*et 4ut n5 even crprate a&s can

5rite ptin cntracts>r n5+ Indian Industries are active&< hedging their !reign echanges ris*s

5ith !r5ards+ currenc< and rate ! interest s5aps and di!!erent t The high use ! !r5ard

cntracts 4< indian crpratins a&s high&ights the a4sence ! a rupee !utures

echange in India> '5ever+ the ur4an center $&d and C,,dities Echange

in June+ :11G intrduced Rupee( d&&ar !utures that 5u&d 4e traded n its

echanges !&&5ed 4< Rupee(EURO+ Rupee(YEN and had prvided anther

rute !r !ir,s t hedge n a transparent 4asis> There are !ears that RBIs a4i&it<

t regu&ate the partia&&< cnverti4&e currenc< are su4dued 4< this intrductinh5ever this issue is n the !ar side the scpe ! this stud

This stud< is ,ain&< is principa&&< 4ased n stud< ! 4ehaviur and attitude !

hand(pic*ed s,a&& sca&e trade 5h are int I,prt and eprt ! prducts and

their ,anner ! uti&iatin ! !reign echange hedging techni?ue especia&&<

their dependenc< n currenc< derivative !r ris* ,itigatin purpse

The &i,itatin ! this stud< is that -ust ne srt ! ris* is assu,ed i>e the

interchange ris*> Cn-int&< re&evanc< ! cnc&usin is &i,ited as s&e&< ver<

!e5 c,panies 5ere revie5ed ver -ust ne perid ! ti,e> 4ut the resu&ts !r,

P$&e


12/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

this ep&ratr< stud< are encuraging and attentin(gra44ing+ &eading us t

cnc&ude that theres scpe !r a &t ! rigrus stud< n these &ines>

P$&e 0


13/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

2. I)!r&*(:!"&)

Fhat is ris* ,anage,entK

McNa,ee 6399G8 prvides a use!u& vie5 ! ris* ,anage,ent and prpses that

ris* is never ,anaged since it is a cnceptua& prpert It is the rganiatin that

is ,anaged t anticipate the uncertainties characterised 4< ris*> 'e a&s 5rites"

Managing ris* is actua&&< ,anaging the rganiatin" p&anning+ rganiing+

directing+ and cntr&&ing rganiatin s Managing ris* ,ust c,e !r, 5ithin and act t change the

rganiatin and its respnse t change in envirn,ent> Rather than tr< t guess

5hat ris*s 5i&& a!!ect the rganiatin+ the rganiatin shu&d 4ui&d in certain

characteristic t i,prve its a4i&it< t respnd t change>

'5ever+ it is ,re c,,n t vie5 ris* ,anage,ent as the prcess !

deter,ining 5hether r h5 ,uch ! the ris* is accepta4&e and 5hat actinshu&d 4e ta*en 6McNa,ee+ 399G8> Accrding&


14/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

assess,ent and ris* treat,ent> Ptentia& treat,ents are ris* diversi!icatin r

avidance+ ris* sharing and cntingenc< p&anning 6McNa,ee+ 399G8>

igure 4e&5 presents a !ra,e5r* !r integrated ris*(,anage,ent+ 5hich is

adapted !r, McNa,ees 6399G8 ntin that the ris* ,anage,ent prcess

inc&udes three ,a-r steps" 638 esta4&ishing !ir,s 4-ectives+ 6:8 ris* assess,ent

and 6L8 ris* treat,ent> This prcess is regu&ar&< in!&uenced 4< ris*

c,,unicatin 4et5een eperts+ !r, eperts t ,anage,ent tea,s+ and !r,

,anage,ent tea,s t the pu4&ic in the 5h&e prcess ! ris* ana& A nu,4er

! tet 4*s re&ating t ris* ,anage,ent !&&5 this !ra,e5r* and suggest a

prcess ! ris* ,anage,ent+ !r ea,p&e C> M> E&&itt and 7aughan 639G:8+

7aughan and 7aughan 6:11G8+ Shapir 6:1108> As the !irst step in the ris*(

,anage,ent prcess+ a !ir, 5u&d deter,ine 4-ectives 4< deciding precise&<

5hat is t 4e epected !r, its ris*(,anage,ent prgra,,e> It is c,,n t 4e a5are ! ris*s 4e!re an A nu,4er ! t&s can 4e used

t identi!< ris*s+ inc&uding insurance p&ic< chec*&ists+ ris* ana& Based n this eva&uatin+ ran*ing ! pririties is !&&5ed+ *n5n as ris*

priritiatin> The net step is the cnsideratin ! a&ternative techni?ues and

se&ectin ! ris* treat,ent> Ris* characteristics are cnsidered as deter,inants

! the treat,ent+ such as 5hether a ris* is t 4e trans!erred r t 4e retained>

igure :(3" Ris* Manage,ent Prcess+ adapted !r, McNa,ee 6399G8

Si,i&ar& GL38

P$&e 2


15/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

Thus a !ir,s !inancia& ris* ,anager+ 5h is part ! a ris*(,anage,ent

depart,ent r grup+ is !irst&< atte,pting t assess and ,easure the ris*s !acing

the !ir, as a resu&t ! its activities and the 4usiness envirn,ent then t

,nitr the ris*s !r an< change t deter,ine 5hether the !ir, has the

resurces t dea& 5ith the ris*s t a&ert senir ,anagers and 4ards ! directrsa4ut the ris* in!r,atin and !ina&&< t suggest curses ! actin !r the !ir,

t ta*e t dea& 5ith the ris*s 6inger+ 39998> As discussed ear&ier+ !re ris* is

categrised as ne ! the ris*s !aced 4< !ir,s thus it is reasna4&e t adapt this

ris*(,anage,ent !ra,e5r* !r !re ris*(,anage,ent> Ris* c,,unicatin

its activities and the 4usiness envirn,ent then t ,nitr the ris*s !r an<

change t deter,ine 5hether the !ir, has the resurces t dea& 5ith the ris*s

t a&ert senir ,anagers and 4ards ! directrs a4ut the ris* in!r,atin and

!ina&&< t suggest curses ! actin !r the !ir, t ta*e t dea& 5ith the ris*s

6inger+ 39998> As discussed ear&ier+ !re ris* is categrised as ne ! the ris*s

!aced 4< !ir,s thus it is reasna4&e t adapt this ris*(,anage,ent !ra,e5r*

!r !re ris*(,anage,ent>

SMEs+ si,i&ar t &arge !ir,s+ a&s !ace 4usiness ris*s+ 5hich can cause !inancia&

distress and 4an*ruptc< in the 5rst case 6Tan+ :1328> '5ever+ the the,e !

ris* ,anage,ent !r SMEs has &arge&< 4een neg&ected in the 4usiness

,anage,ent &iterature 6$a+ Sung+ hang+ :13L 'ensche&+ :119 Shari!i+

:132 Tan+ :1328> The etant &iterature n SMEs ris* ,anage,ent sh5s that

SMEs are incapa4&e ! e,p&


16/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

In India+ echange rates 5ere deregu&ated and 5ere a&&5ed t 4e deter,ined

4< ,ar*ets in 399L> The ecn,ic &i4era&iatin ! the ear&< nineties

!aci&itated the intrductin ! derivatives 4ased n interest rates and !reign

echange> '5ever derivative use is sti&& a high&< regu&ated area due t the

partia& cnverti4i&it< ! the rupee> Current&< !r5ards+ s5aps and ptins areavai&a4&e in India and the use ! !reign currenc< derivatives is per,itted !r

hedging purpses n&

This stud< ai,s t prvide a perspective n ,anaging the ris* that !ir,s

!ace due t !&uctuating echange rates> It investigates the prudence in

investing resurces t5ards the purpse ! hedging and then intrduces the

t&s !r ris* ,anage,ent> These are then app&ied in the Indian cntet> The

,tivatin ! this stud< ca,e !r, the recent rise in v&ati&it< in the ,ne<

,ar*ets ! the 5r&d and particu&ar&< in the US D&&ar+ due t 5hich Indianeprts are !ast gaining a cst disadvantage> 'edging 5ith derivative

instru,ents is a !easi4&e s&utin t this situatin>

M)7%+%)! &' '&r%5 r"s6

The prcess ! !re ris* ,anage,ent+ 5hich is adapted !r, the prcess !

,anaging ris* 6sh5n in igure :(38+ inc&udes three ,a-r steps> irst&g>+ ,itigating

certain !re ris* epsure+ r reducing the v&ati&it< ! cash !&5s>

Secnd&

T& #%*7% &r )&! !& #%*7%6

The ter, hedging is de!ined di!!erent&< in the &iterature> Brad& 3218 h&ds that hedgers are thse 5h see* insurance against the

ris* the< ,a< !ace> T ana& L998 cnsider hedging as ;the ac?uisitin ! !inancia& assets

that reduce the variance ! the !ir,s pa #e&ands cncept is 5ide&<

used in the &iterature cncerning !re ,anage,ent> 'edging can 4e carried

ut interna&& On the ther hand+

eterna& hedging entai&s the ac?uisitin ! !inancia& instru,ents+ e>g>+

currenc< derivatives+ 5hich are !inancia& instru,ents 5hse characteristics

and va&ue depend upn the characteristics and va&ue ! a currenc

P$&e 4


17/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

Cnsidering that ris* ,anage,ent is a4ut ;p&anning+ rganiing+ directing+

and cntr&&ing rganiatin s 28+ ,anaging !re ris* re!ers t p&anning+ rganiing+

directing+ and cntr&&ing a !ir,s s A&thugh hedging ai,s t see*insurance !r !re ris*+ hedging is ne 5a< ! ,anaging !re ris*+ the

ther 5a< is t d nthing> A decisin 5hether t hedge r nt t hedge is

ne step in the prcess ! ,anaging !re ris*> T this end+ ;ding nthing=

6n(hedge8 is ne ! the hedging strategies> It ,ight nt necessar< t hedge i!

SMEs cu&d !ind 4ene!its !r, !avura4&e ,ve,ents in the echange rates+

r i! there ,ight 4e n 5a< the< ,a*e a &ss>

Fhi&e s,e the,es !r, the &iterature ppse hedging at a crprate &eve&+

thers supprt crprate !re hedging strategies> r ea,p&e+ Du!e< Srinivasu&u 639L8 ,ade a case !r crprate !re ris* hedging> The< pint

ut that in a per!ect 5r&d in 5hich Purchasing P5er Parit< 6PPP8 there,+

Capita& Asset Pricing Mde& 6CAPM8+ Mdig&iani(Mi&&er 6MM8 there,+ the

Cncept ! Se&!(insurance+ the E!!icient Mar*et '


18/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

prgra,,e 6Pra,4rg+ :11/8> T this end+ due t high cst ! esta4&ishing a

hedging prgra,,e+ and &5 ,agnitude ! internatina& inv&ve,ent !

SMEs in c,parisn 5ith &arge MNEs+ SMEs ,ight chse nt t hedge

h5ever+ nce SMEs have a high percentage ! their turnver den,inated

in a !reign currenc

H%*7")7 s!r!%7"%s6

There are a nu,4er ! hedging strategies nted in the &iterature cncerning

!re ris* ,anage,ent h5ever+ ,st hedging strategies re!er t the use !

currenc< derivatives as hedging instru,ents> r instance+ !ir,s under a n

hedge strateg< never purchase a !r5ard !reign echange cntract t cver

echange rate ris*> An a&ternative strateg< is a&5a #arge pre,ia strateg< is re!erred t

as hedging 5hen !r5ard rates are at a histrica&&< &arge pre,iu,> This

happens i! spt echange rates and !uture@!r5ard echange rates are ?uite

di!!erent+ 5hen !r5ard echange rates and spt echange rates ,ve apart>

On a re&ative purchasing p5er parit< 6ppp8 echange rate+ !ir,s 5i&& hedge

5henever the current spt rate is a4ve the ppp e?ui&i4riu,+ 5hich is

re!erred t as ppp d5n strateg Under a hedge(n(hedge strateg

A&& ! these hedging strategies 6su,,aried in Ea*er $rant+ 39G Msa+

:112 Mre< Si,psn+ :1138 are 4ased n the use ! currenc< derivatives>

The e!!ectiveness ! these strategies is etensive&< cvered in the &iterature>

r ea,p&e+ e,pirica& data !r, Msa 6:1128 stud< sh5 n signi!icant

di!!erence in the per!r,ance ! the three strategies+ na,e&< n hedge+

a&5a This resu&t i,p&ies that !re?uent !re epsure is

nt necessari&< hedged 4ecause the un4iased e!!icienc< h Accrding t this h Mrever+ un4iasedness a&s i,p&ies that in the &ng

run+ negative errrs 5u&d cance& ut psitive errrs+ since the esti,atin

errr is rand, rather than s

'5ever+ Mre< Si,psn 6:1138 !ind that in ever< ti,e hrin+ and !r

ever< sa,p&e ! their stud


19/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

Additina&& This resu&t is cnsistent 5ith &gica&

predictins a4ut the re&atinship 4et5een currencies> In ther 5rds+ the

true crre&atin 4et5een assets and currencies is ne ! the deter,inants !the ,easured e!!ectiveness ! crss hedging 6Ea*er $rant+ 39G+ p> G8>

As a resu&t+ ,u&tip&e hedges+ 5hich partia&&< ,itigate pr4&e,s ! inter(

te,pra& insta4i&it< ! the echange rate ce!!icients+ are ,re e!!ective than

sing&e currenc< crss(hedges> Ea*er and $rant a&s add that the e!!ectiveness

! naive hedging strategies and ,re sphisticated nes is the sa,e 5hen

prt!&i psitins are 4eing hedged>

There are t5 initia& inputs necessar< !r an< hedging strateg These prvide

in!r,atin !r the assess,ent ! ris*s in re&atin t echange rate

,ve,ents> '5ever+ nt a&& !ir,s have this capa4i&it ir,s are un&i*e&< t *n5 h5 t ?uanti!< their ris*

pr!i&e as the< are una4&e t !igure ut the percentage that their perating

cash !&5s change i! the !re rates change 6#derer Pich&er+ :1118>

Si,i&ar& It is the c,p&eities t

,easure accurate&< current ris* epsure that presents a cha&&enge !r !ir,sin se&ecting the apprpriate hedging strateg< 6Papaiannu+ :1108> A&s+

dai&< echange rates are etre,e&< di!!icu&t t precise&< !recast 6hu+

399:8> In the &ight ! a&& ! these resu&ts+ SMEs ,ight !ind di!!icu&ties in

accessing these t5 *e< initia& inputs !r their !re ris* ,anage,ent>

H%*7")7 s !&&3 !& +)7% '&r%"7) %5:#)7% r"s

There is a spectru, ! pinins regarding !reign echange hedging> S,e

!ir,s !ee& hedging techni?ues are specu&ative r d nt !a&& in their area !

epertise and hence d nt venture int hedging practices> Other !ir,s are

una5are ! 4eing epsed t !reign echange ris*s> There are a set ! !ir,s

5h n&< hedge s,e ! their ris*s+ 5hi&e thers are a5are ! the varius

ris*s the< !ace+ 4ut are una5are ! the ,ethds t guard the !ir, against the

ris*> There is 6$idd< and Du!e

There are s,e ep&anatins 4ac*ed 4< ther< a4ut the irre&evance !,anaging the ris* ! change in echange rates> r ea,p&e+ the

P$&e 7


20/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

Internatina& isher e!!ect states that echange rates changes are 4a&anced

ut 4< interest rate changes+ the Purchasing P5er Parit< ther< suggests

that echange rate changes 5i&& 4e !!set 4< changes in re&ative price

indices@in!&atin since the #a5 ! One Price shu&d h&d> Bth these theries

suggest that echange rate changes are evened ut in s,e !r, r the ther>A&s+ the Un4iased r5ard Rate ther< suggests that &c*ing in the !r5ard

echange rate !!ers the sa,e epected return and is an un4iased indicatr !

the !uture spt rate> But these theries are per!ect&< p&a A&s+ echange rate(&in*ed

changes in !actrs &i*e in!&atin and interest rates ta*e ti,e t ad-ust and in

the ,ean5hi&e !ir,s stand t &se ut n adverse ,ve,ents in the echange

rates>

The eistence ! di!!erent *inds ! ,ar*et i,per!ectins+ such as inc,p&ete

!inancia& ,ar*ets+ psitive transactin and in!r,atin csts+ pr4a4i&it< !

!inancia& distress+ and agenc< csts and restrictins n !ree trade ,a*e

!reign echange ,anage,ent an apprpriate cncern !r crprate

,anage,ent> 6$idd< and Du!e This

5u&d negate the Mdig&iani(Mi&&er prpsitin as shareh&ders cannt

dup&icate such ta advantages> The MM argu,ent that shareh&ders can

hedge n their 5n is a&s nt va&id n accunt ! high transactin csts and&ac* ! *n5&edge a4ut !inancia& ,anipu&atins n the part ! shareh&ders>

There is a&s a vast p& ! research that prves the e!!icac< ! ,anaging

!reign echange ris*s and a signi!icant a,unt ! evidence sh5ing the

reductin ! epsure 5ith the use ! t&s !r ,anaging these epsures> In

ne ! the ,re recent studies+ A&&a


21/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

Once a !ir, recgnies its epsure+ it then has t dep&< resurces in

,anaging it> A heuristic !r !ir,s t ,anage this ris* e!!ective&< is presented

4e&5 5hich can 4e ,di!ied t suit !ir,(speci!ic needs i>e> s,e r a&& the

!&&5ing t&s cu&d 4e used>

F&r%:s!s6 A!ter deter,ining its epsure+ the !irst step !r a !ir, is t

deve&p a !recast n the ,ar*et trends and 5hat the ,ain directin@trend is

ging t 4e n the !reign echange rates> The perid !r !recasts is

t It is i,prtant t 4ase the !recasts n va&id assu,ptins>

A&ng 5ith identi!

R"s Es!"+!"&)6 Based n the !recast+ a ,easure ! the 7a&ue at Ris* 6the

actua& pr!it r &ss !r a ,ve in rates accrding t the !recast8 and the

pr4a4i&it< ! this ris* shu&d 4e ascertained> The ris* that a transactin

5u&d !ai& due t ,ar*et(speci!ic pr4&e,s2 shu&d 4e ta*en int accunt>

ina&& 'edging strategies

and instru,ents are ep&red in a sectin>

S!& L&ss6 The !ir,s ris* ,anage,ent decisins are 4ased n !recasts 5hich

are 4ut esti,ates ! reasna4&< unpredicta4&e trends> It is i,perative t have

stp &ss arrange,ents in rder t rescue the !ir, i! the !recasts turn ut

5rng> r this+ there shu&d 4e certain ,nitring s

R%&r!")7 )* R%"%86 Ris* ,anage,ent p&icies are t The reprts ,ain&< inc&ude pr!it@ &ssstatus n pen cntracts a!ter ,ar*ing t ,ar*et+ the actua& echange@ interest

P$&e


22/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

rate achieved n each epsure+ and pr!ita4i&it< vis((vis the 4ench,ar* and

the epected changes in vera&& epsure due t !recasted echange@ interest

rate ,ve,ents> The revie5 ana&

igure :(: ra,e5r* ! !reign echange ris* ,anage,ent

H%*7")7 S!r!%7"%s I)s!r(+%)!s

Basica&& A 5ide range ! hedging techni?ues is &isted in

Ta4&e :>:> Accrding t Mathur 639/8+ interna& hedging re!ers pri,ari&< t the shi!ting !

!unds and c,,dities 5ithin a !ir, s as t ,aintain !avura4&e 4a&ance sheet psitins

n the ther hand+ eterna& hedging genera&&< inv&ves cntractua& 4&igatins 5ith parties

eterna& t the !ir,> Si,i&ar&+ !unds+ gds 5ithin the !ir,> Bth

eterna& and interna& hedging can 4e used t i,prve the !ir,s a4i&it< t respnd t !re

rate changes>

P$&e 0


23/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

T=3% 6 H%*7")7 !%:#)"(%s C!%7&r9 T%:#)"(%s

I)!%r)3

1. Pr":")7.

There are three ptins !r currenc< invicing"

Q d,estic currenc< ! the cuntr< 5here !ir,s are 4ased>

Q the currenc< in 5hich the ,a-rit< ! the csts are incurred>

Q the d,estic currenc< ! the ,ain c,petitrs in rder t e&i,inate the e!!ect !

echange rate variatins n c,parative prices>

:> Matching in!&5s and ut!&5s 5ith respect t ti,ing ! sett&e,ent>

L> Inter(c,pan< netting ! !reign receiva4&es and pa Asset@&ia4i&it< ,anage,ent

/> Trans!er pricing agree,ents

E5!%r)3

0> #eading and &agging

G> Ad-ust,ent c&ause in sa&es cntracts

> Crss hedging 5ith !utures> 9> Crss(currenc< interest rate s5aps

31> reign currenc< s5aps

33> r5ard echange cntracts

3:> re ptins

3L> re !utures

32> reign currenc< 4rr5ing and &ending

3/> actring 4i&&s receiva4&e

30> Eurpean currenc< unit

3G> Specia& dra5ing rights

3> Other currenc< 4&cs

39> $vern,ent echange ris* guarantee

:1> Insurance p&icies

A derivative is a !inancia& cntract 5hse va&ue is derived !r, the va&ue ! s,e ther!inancia& asset+ such as a stc* price+ a c,,dit< price+ an echange rate+ an interest

P$&e 1


24/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

rate+ r even an inde ! prices> The ,ain r&e ! derivatives is that the< rea&&cate ris*

a,ng !inancia& ,ar*et participants+ he&p t ,a*e !inancia& ,ar*ets ,re c,p&ete> This

sectin ut&ines the hedging strategies using derivatives 5ith !reign echange 4eing the

n&< ris* assu,ed>

F&r8r*s6 A !r5ard is a ,ade(t(,easure agree,ent 4et5een t5 parties t 4u The

depreciatin ! the receiva4&e currenc< is hedged against 4< se&&ing a currenc< !r5ard> I!

the ris* is that ! a currenc< appreciatin 6i! the !ir, has t 4u< that currenc< in !uture sa<

!r i,prt8+ it can hedge 4< 4u E>g i! RI# 5ants t 4u< crude

i& in US d&&ars si ,nths hence+ it can enter int a !r5ard cntract t pa< INR and

4u< USD and &c* in a !ied echange rate !r INR(USD t 4e paid a!ter 0 ,nths

regard&ess ! the actua& INR(D&&ar rate at the ti,e> In this ea,p&e the d5nside is an

appreciatin ! D&&ar 5hich is prtected 4< a !ied !r5ard cntract> The ,ain

advantage ! a !r5ard is that it can 4e tai&red t the speci!ic needs ! the !ir, and an

eact hedge can 4e 4tained> On the d5nside+ these cntracts are nt ,ar*eta4&e+ the<

cant 4e s&d t anther part< 5hen the< are n &nger re?uired and are 4inding>

F(!(r%s6 A !utures cntract is si,i&ar t the !r5ard cntract 4ut is ,re &i?uid 4ecause it

is traded in an rganied echange i>e> the !utures ,ar*et> Depreciatin ! a currenc< can

4e hedged 4< se&&ing !utures and appreciatin can 4e hedged 4< 4u

Advantages ! !utures are that there is a centra& ,ar*et !r !utures 5hich e&i,inates the

pr4&e, ! du4&e cincidence> utures re?uire a s,a&& initia& ut&a< 6a prprtin ! the

va&ue ! the !uture8 5ith 5hich signi!icant a,unts ! ,ne< can 4e gained r &st 5iththe actua& !r5ards price !&uctuatins> This prvides a srt ! &everage> The previus

ea,p&e !r a !r5ard cntract !r RI# app&ies here a&s -ust that RI# 5i&& have t g t a

USD !utures echange t purchase standardised d&&ar !utures e?ua& t the a,unt t 4e

hedged as the ris* is that ! appreciatin ! the d&&ar> As ,entined ear&ier+ the

tai&ra4i&it< ! the !utures cntract is &i,ited i>e> n&< standard den,inatins ! ,ne<

can 4e 4ught instead ! the eact a,unts that are 4ught in !r5ard cntracts>

O!"&)s6 A currenc< Optin is a cntract giving the right+ nt the 4&igatin+ t 4u< r

se&& a speci!ic ?uantit< ! ne !reign currenc< in echange !r anther at a !ied price

ca&&ed the Eercise Price r Stri*e Price> The !ied nature ! the eercise price reduces the

uncertaint< ! echange rate changes and &i,its the &sses ! pen currenc< psitins>

Optins are particu&ar&< suited as a hedging t& !r cntingent cash !&5s+ as is the case

in 4idding prcesses> Ca&& Optins are used i! the ris* is an up5ard trend in price 6! the

currenc Again ta*ing the

ea,p&e ! RI# 5hich needs t purchase crude i& in USD in 0 ,nths+ i! RI# 4ue> the right t 4u< a speci!ied

a,unt ! d&&ars at a !ied rate n a speci!ied date+ there are t5 scenaris> I! the

echange rate ,ve,ent is !avura4&e i>e the d&&ar depreciates+ then RI# can 4u< the,at the spt rate as the< have 4ec,e cheaper> In the ther case+ i! the d&&ar appreciates

P$&e 2


25/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

c,pared t tda In either case RI# 4ene!its 4< pa The c,pan< pa11 p>a> ever< 0 ,nths n 3st Januar< 3st Ju&

F&r%"7) D%=!" reign de4t can 4e used t hedge !reign echange epsure 4< ta*ing

advantage ! the Internatina& ischer E!!ect re&atinship> This is de,nstrated 5ith the

ea,p&e ! an eprter 5h has t receive a !ied a,unt ! d&&ars in a !e5 ,nths

!r, present> The eprter stands t &se i! the d,estic currenc< appreciates against that

currenc< in the ,ean5hi&e s+ t hedge this+ he cu&d ta*e a &an in the !reign currenc<!r the sa,e ti,e perid and cnvert the sa,e int d,estic currenc< at the current

echange rate> The ther< assures that the gain rea&ised 4< investing the prceeds !r,

the &an 5u&d ,atch the interest rate pa


26/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

varius ,ar*et !actrs> Regu&atin in the !reign echange ,ar*ets ! varius cuntries

,a< a&s s*e5 such resu&ts>

D%!%r+"))!s &' H%*7")7 D%:"s"&)s

The ,anage,ent ! !reign echange ris*+ as has 4een esta4&ished s !ar+ is a !air&<c,p&icated prcess> A !ir,+ epsed t !reign echange ris*+ needs t !r,u&ate a

strateg< t ,anage it+ chsing !r, ,u&tip&e a&ternatives> This sectin ep&res 5hat

!actrs !ir,s ta*e int cnsideratin 5hen !r,u&ating these strategies>

Pr&*(:!"&) )* Tr*% s. H%*7")7 D%:"s"&)s

An i,prtant issue !r ,u&tinatina& !ir,s is the a&&catin ! capita& a,ng di!!erent

cuntries prductin and sa&es and at the sa,e ti,e hedging their epsure t the var Research in this area suggests that the e&e,ents ! echange rate

uncertaint< and the attitude t5ard ris* are irre&evant t the ,u&tinatina& !ir,s sa&es and prductin decisins 6Br&&+399L8> On&< the revenue !unctin and cst ! prductin are

t 4e assessed+ and+ the prductin and trade decisins in ,u&tip&e cuntries are

independent ! the hedging decisin>

The i,p&icatin ! this independence is that the presence ! ,ar*ets !r hedging

instru,ents great&< reduces the c,p&eit< inv&ved in a !ir,s decisin ,a*ing as it can

separate prductin and sa&es !unctins !r, the !inance !unctin> The !ir, avids the

need t !r, epectatins a4ut !uture echange rates and !r,u&atin ! ris* pre!erences

5hich entai&s high in!r,atin csts>

C&s! &' H%*7")7

'edging can 4e dne thrugh the derivatives ,ar*et r thrugh ,ne< ,ar*ets 6!reign

de4t8> In either case the cst ! hedging shu&d 4e the di!!erence 4et5een va&ue received

!r, a hedged psitin and the va&ue received i! the !ir, did nt hedge> In the presence !

e!!icient ,ar*ets+ the cst ! hedging in the !r5ard ,ar*et is the di!!erence 4et5een the

!uture spt rate and current !r5ard rate p&us an< transactins cst assciated 5ith the

!r5ard cntract> Si,i&ar& In e!!icient ,ar*ets+

4th t

The three ,ain e&e,ents ! these transactin csts are 4r*erage r service !ees charged

4< dea&ers+ in!r,atin csts such as su4scriptin t Reuter reprts and ne5s channe&s

and ad,inistrative csts ! epsure ,anage,ent>

P$&e 4


27/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

F:!&rs ''%:!")7 !#% *%:"s"&) !& #%*7% '&r%"7) :(rr%):9 r"s

Research in the area ! deter,inants ! hedging separates the decisin ! a !ir, t hedge

!r, that ! h5 ,uch t hedge> There is cnc&usive evidence t suggest that !ir,s 5ith

&arger sie+ RD ependiture and epsure t echange rates thrugh !reign sa&es and

!reign trade are ,re &i*e&< t use derivatives> 6A&&a

F"r+ s"%" ir, sie acts as a pr< !r the cst ! hedging r ecn,ies ! sca&e> Ris*

,anage,ent inv&ves !ied csts ! setting up ! c,puter s Mrever+ &arge !ir,s ,ight 4e cnsidered

as ,re credit5rth< cunterparties !r !r5ard r s5ap transactins+ thus !urther

reducing their cst ! hedging> The 4* va&ue ! assets is used as a ,easure ! !ir, sie>

L%%r7%6 Accrding t the ris* ,anage,ent &iterature+ !ir,s 5ith high &everage have

greater incentive t engage in hedging 4ecause ding s reduces the pr4a4i&it 'igh&< &evered !ir,s avid !reign de4t as a ,eans

t hedge and use derivatives>

L"("*"!9 )* r&'"!="3"!96 ir,s 5ith high&< &i?uid assets r high pr!ita4i&it< have

&ess incentive t engage in hedging 4ecause the< are epsed t a &5er pr4a4i&it< !

!inancia& distress> #i?uidit< is ,easured 4< the ?uic* rati+ i>e> ?uic* assets divided 4<

current &ia4i&ities8> Pr!ita4i&it< is ,easured as EBIT divided 4< 4* assets>

S3%s 7r&8!#" Sa&es gr5th is a !actr deter,ining decisin t hedge as pprtunities are

,re &i*e&< t 4e a!!ected 4< the underinvest,ent pr4&e,> r these !ir,s+ hedging 5i&&

reduce the pr4a4i&it< ! having t re&< n eterna& !inancing+ 5hich is cst&< !r

in!r,atin as The ,easure ! sa&es As regards the degree ! hedging A&&a In ther 5rds+ given that a !ir, decides t hedge+ the decisin ! h5

,uch t hedge is a!!ected s&e&< 4< its epsure t !reign currenc< ,ve,ents>

A) O%r"%8 &' C&r&r!% H%*7")7 ") I)*"The ,ve !r, a !ied echange rate s In this cntet+ the ,ar*et !r hedging instru,ents is sti&& in its

deve&ping stages> In rder t understand the a&ternative hedging strategies that Indian

!ir,s can adpt+ it is i,prtant t understand the regu&atr< !ra,e5r* !r the use !

derivatives here>

D%%3&+%)! &' D%r"!"% Mr%!s ") I)*"

The ecn,ic &i4era&iatin ! the ear&< nineties !aci&itated the intrductin !derivatives 4ased n interest rates and !reign echange> Echange rates 5ere deregu&ated

P$&e 5


28/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

and ,ar*et deter,ined in 399L> B< 3992+ the rupee 5as ,ade !u&&< cnverti4&e n current

accunt> The 4an n !utures trading ! ,an< c,,dities 5as &i!ted starting in the ear&<

:111s> As ! e4 :130+ even crprates have 4een a&&5ed t 5rite ptins in the

at,sphere ! high v&ati&it

Derivatives n stc* indees and individua& stc*s have gr5n rapid&< since inceptin> In

particu&ar+ sing&e stc* !utures have 4ec,e huge&< ppu&ar> Institutina& investrs pre!er

t trade in the Over(The(Cunter6OTC8 ,ar*ets t interest rate !utures+ 5here

instru,ents such as interest rate s5aps and !r5ard rate agree,ents are thriving> reign

echange derivatives are &ess active than interest rate derivatives in India+ even thugh

the< have 4een arund !r &nger> OTC instru,ents in currenc< !r5ards and s5aps are

the ,st ppu&ar> I,prters+ eprters and 4an*s use the rupee !r5ard ,ar*et t hedge

their !reign currenc< epsure> Turnver and &i?uidit< in this ,ar*et has 4een

increasing+ a&thugh trading is ,ain&< in shrter ,aturit< cntracts ! ne

The t

The Indian rupee+ 5hich is 4eing traded n the Du4ai $&d and C,,dities Echange

6D$C%8+ crssed a turnver ! /L>:2 ,i&&in in Jan :130>

R%7(3!&r9 G("*%3")%s '&r !#% (s% &' F&r%"7) E5:#)7% D%r"!"%s

Fith respect t !reign echange derivatives inv&ving rupee+ residents have access t

!reign echange !r5ard cntracts+ !reign currenc derivatives can 4e used !r hedging purpses n&

The RBI has a&s !r,u&ated guide&ines t si,p&i!< prcedura&@dcu,entatin

re?uire,ents !r S,a&& and Mediu, Enterprises 6SME8 sectr> In rder t ensure that

SMEs understand the ris*s ! these prducts+ n&< 4an*s 5ith 5hich the< have credit

re&atinship are a&&5ed t !!er such !aci&ities> These !aci&ities shu&d a&s have s,e

re&atinship 5ith the turnver ! the entit Si,i&ar&

Authrised Dea&er6AD8 4an*s ,a< a&s enter int !r5ard cntracts 5ith residents in

respect ! transactins den,inated in !reign currenc< 4ut sett&ed in Indian Rupees

inc&uding hedging the currenc< indeed epsure ! i,prters in respect ! cust,s dut<

pa D,estic

prducers@users are a&&5ed t hedge their price ris* n a&u,iniu,+ cpper+ &ead+ nic*e&

and inc as 5e&& as aviatin tur4ine !ue& in internatina& c,,dit< echanges 4ased n

their under& Authrised dea&ers are per,itted t use innvative prducts &i*e crss(currenc< ptins interest rate s5aps 6IRS8 and currenc< s5aps+

P$&e 6


29/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

caps@c&&ars and !r5ard rate agree,ents 6RAs8 in the internatina& !reign echange

,ar*et> reign Institutina& Investrs 6II8+ persns resident utside India having

reign Direct Invest,ent 6DI8 in India and Nnresident Indians 6NRI8 are a&&5ed

access t the !r5ards ,ar*et t the etent ! their epsure in the cash ,ar*et>

H%*7")7 I)s!r(+%)!s '&r I)*") F"r+s

The recent perid has 5itnessed a,p&i!ied v&ati&it< in the INR(US echange rates in the

4ac*drp ! the su4(pri,e crisis in the US and increased d&&ar(in!&5s int the Indian

stc* ,ar*ets> In this cntet+ the paper has atte,pted t stud< the chice ! instru,ents

adpted 4< pr,inent !ir,s t ste, their !reign echange epsures> A&& the data !r this

has 4een c,pi&ed !r, the :132(:13/ Annua& Reprts ! the respective c,panies> Asu,,ar< ! the !reign echange ris* hedging 4ehaviur ! se&ect Indian !ir,s is given in

Ta4&e

P$&e 7


30/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

Discussin n 'edging 4< Indian ir,s

r, Ta4&e + it can 4e seen that earnings ! a&& the !ir,s are &in*ed t either US d&&ar+

Eur r Pund as !ir,s transact pri,ari&< in these !reign currencies g&4a&& r5ard

cntracts are c,,n&< used and a,ng these !ir,s+ Ran4a< and RI# depend heavi&<

n these cntracts !r their hedging re?uire,ents> As discussed ear&ier+ !r5ards cntracts

can 4e tai&red t the eact needs ! the !ir, and this cu&d 4e the reasn !r their

ppu&arit The tai&ra4i&it< is a cnsideratin as it ena4&es the !ir,s t ,atch their

epsures in an eact ,anner c,pared t echange traded derivatives &i*e !utures thatare standardised 5here eact ,atching is di!!icu&t>

P$&e 08


31/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

RI#+ Maruti Ud

S5ap usage is a &ng ter, strateg< !r hedging and suggests that the p&anning hrins

!r these c,panies are &nger than thse ! ther !ir,s> These 4usinesses+ 4< nature

inv&ve &nger gestatin perids and higher initia& capita& ut&a

Anther 4servatin is that TCS pre!ers t hedge its epsure t the US D&&ar thrugh

ptins rather than !r5ards> This strateg< has 4een 4served a,ng ,an< !ir,s recent&<

in India33> This has 4een adpted due t the ,ar*ed high v&ati&it< ! the US D&&ar

against the Rupee> Optins are ,re pr!ita4&e instru,ents in v&ati&e cnditins as the<

!!er un&i,ited upside pr!ita4i&it< 5hi&e hedging the d5nside ris* 5hereas there is a

ris* 5ith !r5ards i! the epectatin ! the echange rate 6the guess8 is 5rng as !ir,s

&se ut n s,e pr!it> The use ! Range 4arrier ptins 4< In!s S!t5are !ir,s have a

&i,ited d,estic ,ar*et and re&< n eprts !r the ,a-r part ! their revenues and

hence re?uire additina& !&ei4i&it< in hedging 5hen the v&ati&it< is high> Anther

i,p&icatin ! this is that their p&anning hrins are shrter c,pared t capita& intensive

!ir,s>

It is evident that ,st Indian !ir,s use !r5ards and ptins t hedge their !reign

currenc< epsure> This i,p&ies that these !ir,s chse shrt(ter, ,easures t hedge as

ppsed t !reign de4t> This pre!erence is pssi4&< a cnse?uence ! their csts 4eing in

Rupees+ the a4sence ! a Rupee !utures echange in India and cur4s n !reign de4t> It

a&s !&&5s that ,st ! these !ir,s 4ehave &i*e Net Eprters and are adverse&< a!!ected 4< appreciatin ! the &ca& currenc There are a !e5 !ir,s 5hich have i,prt &ia4i&ities

5hich 5u&d 4e adverse&< a!!ected 4< Rupee depreciatin> '5ever it ,ust 4e pinted

ut that the data set cnsidered !r this stud< des nt indicate h5 the use ! !reign

de4t 4< these !ir,s hedges their epsures t !reign echange ris* and 5hether such a

strateg< is used as a su4stitute r c,p&e,ent t hedging 5ith derivatives>

I)'%r%):%6

Derivative use !r hedging is n&< t increase due t the increased g&4a& &in*ages and

v&ati&e echange rates> ir,s need t &* at instituting a sund ris* ,anage,ent s

In India+ regu&atin has 4een steadi&< eased and turnver and &i?uidit< in the !reign

currenc< derivative ,ar*ets has increased+ a&thugh the use is ,ain&< in shrter ,aturit<

cntracts ! ne r5ard and ptin cntracts are the ,re ppu&ar

instru,ents> Regu&atrs had initia&&< n&< a&&5ed certain 4an*s t dea& in this ,ar*et

h5ever n5 crprates can a&s 5rite ptin cntracts> There are ,an< variants ! these

P$&e 0


32/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

derivatives 5hich invest,ent 4an*s acrss the 5r&d specia&ie in+ and as the a5areness

and de,and !r these variants increases+ RBI 5u&d have t revise regu&atins>

r n5+ Indian c,panies are active&< hedging their !reign echanges ris*s 5ith

!r5ards+ currenc< and interest rate s5aps and di!!erent t The high use ! !r5ard cntracts 4< Indian

!ir,s a&s high&ights the a4sence ! a rupee !utures echange in India> '5ever+ the

Du4ai $&d and C,,dities Echange in June+ :11G intrduced Rupee( D&&ar !utures

that cu&d 4e traded n its echanges !&&5ed 4< Rupee(EURO+ Rupee(YEN and had

prvided anther rute !r !ir,s t hedge n a transparent 4asis> There are !ears that

RBIs a4i&it< t cntr& the partia&&< cnverti4&e currenc< 5i&& 4e su4dued 4< this

intrductin 4ut this issue is 4e

The C,,ittee n u&&er Capita& Accunt Cnverti4i&it< had rec,,ended that currenc<

!utures ,a< 4e intrduced su4-ect t ris*s 4eing cntained thrugh prper trading

,echanis,+ structure ! cntracts and regu&atr< envirn,ent> Accrding&

The &i,itatin ! this stud< is that n&< ne te the !reign

echange ris*> A&s app&ica4i&it< ! cnc&usin is &i,ited as n&< ver< !e5 !ir,s 5ere

revie5ed ver -ust ne ti,e perid> '5ever the resu&ts !r, this ep&ratr< stud< are

encuraging and interesting+ &eading us t cnc&ude that there is scpe !r ,re rigrus

stud< a&ng these &ines>

As a resu&t ! g&4a&iatin+ !ir,s+ 5hether the< are ,u&tinatina& enterprises 6MNEs8 r

s,a&& and ,ediu, sied enterprises 6SMEs8+ have 4een increasing&< inv&ved in

internatina& 4usiness> Eprting !ir,s ,ight 4e particu&ar&< a!!ected 4< !&uctuatins !

echange rates+ !r the !&uctuatin in currenc< ,ar*ets i,pacts n the ecn,< in genera&

and !ir, prductin csts and revenues+ in particu&ar> It is a&s 5rth cnsidering the!&uctuatins in the cntet ! a !&ating echange rate> There!re+ !reign echange

6!re8 ris* ,anage,ent is ! interest t eprting !ir,s>

'5ever+ a ,a-rit< ! research papers n this tpic !cus speci!ica&&< n tac*&ing

pr4&e,s in MNEs+ 5hi&e there is a scarcit< ! studies n ,anaging !re ris* !r SMEs

6Bartra,+ Br5n+ Mintn+ :131 Jnu*a Sa,VnaitV+ :11L8> S,e research studies+

such as thse ! Jnu*a Sa,VnaitV 6:11L8+ Chan(#au 6:11/8 and Pra,4rg 6:11/8+

&*ed int hedging and ,anaging !re ris* in deve&ping cuntries+ 5here the ,a-rit<

! the c,panies are SMEs> These studies have addressed a variet< ! hedging

deter,inants+ 4ut tended nt t descri4e in detai& h5 these deter,inants tgether i,pact

P$&e 00


33/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

hedging 4ehaviurs> This stud< investigates the interre&atinships a,ng hedging

deter,inants+ 5hich are speci!ic a4ut eprting SMEs>

In the &iterature n !re ris* ,anage,ent+ there are a nu,4er ! varia4&es 5hich have

4een seen as deter,inants ! !ir,s chice t hedge !re ris*> The< inc&ude the cst !

hedging versus 4ene!its received+ cst ! using derivatives+ ,anagers *n5&edge+ trust in

4an*s+ accunting prcedures 6Jnu*a Sa,VnaitV+ :11L8 hedging 4-ectives 6e>g>+ t

reduce !&uctuatins in cash !&5s and !&uctuatins ! accunting nu,4ers8+ ,aturit< !

derivative ,ar*ets 6Pra,4rg+ :11/8 !ir, sie+ ecn,ies ! sca&e+ and internatina&

dependenc< 6Ber*,an+ Brad4ur

This thesis added t the current &iterature n !re ris* ,anage,ent 4< !cusing n h5

SMEs ,anage their !re ris*+ speci!ica&&< identi!ied !actrs that in!&uence hedging

strateg The thesis etended the &iterature n

!re ris* ,anage,ent t a setting ! eprting SMEs+ ea,ined the i,pact ! !actrs

5ith regard t !ir,s resurces+ and the degree ! internatina&isatin 6$an*e,a+ Snui!+

5art+ :111

L> Industr< Pr!i&eThe e?uit< 4r*erage industr< in India is ne ! the &dest in the Asian regin> India had an

active stc* ,ar*et !r a4ut 3/1


34/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

! -int stc* c,panies that issued securities t raise !inance> This trend 5as a*in t the

rapid gr5th ! securities ,ar*et in Eurpe and the Nrth A,erica in the 4ac*grund !

epansin ! rai&rads+ ep&ratin ! natura& resurces and &and deve&p,ent>

'istrica& recrds sh5s that as ear&< as 302+ there 5ere a4ut 3111 4r*ers 5ith the stc*

,ar*et !unctining !r, three p&aces in Mu,4ai 4et5een 9a, t Gp, at the -unctin !

Mead5s Street and Ra,part R5 !r, da< 4rea* ti&& 9a, and !r, Gp, t ear&< hurs !

net ,rning at Baargate>

Share Prices rse sharp&< even at that ti,e> A share ! C&a4a #and C,pan< during the

4, perid ! the 301s rse !r, Rs31+111 at par t Rs 3:1+111 and that ! Bac*4a<

Shares 5ent up !r, Rs /2111> B,4a

In ear&ier ti,es+ the trading+ that is+ the 4u Thus+ the persn needs t g at that particu&ar

p&at!r, i! he r she needs t trade in the shares> '5ever 5ith the advance,ent !

techn&g N5 the trading ! shares and stc*

can ta*es p&ace e&ectrnica&& There is a tre,endus reductin in paper 5r* as ever This ,ar*et is nt ne5 t India it has a4ut :99


35/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

alc'tta "as fo!'lated kno" as /alc'tta )tock *-chan&e Association

follo"ed $ othe! stock e-chan&es.

Pos!-Independence Era

There 5as shutd5n ! varius stc* echanges in India due t the depressin that t* p&ace

a!ter Independence> It 5as under the Securities Cntracts 6Regu&atin8 Act+ 39/0 that varius

stc*s Echange has gt recgnitin as a recgnised stc* echange such as B,4a At the &ast cunt+the BSE had a4ut 2+G11 &isted !ir,s+ 5hereas the riva& NSE had near&< 3+:11> Out ! a&& the&isted !ir,s n the BSE+ n&< a4ut /11 !ir,s cnstitute ,re than 91 ! its ,ar*etcapita&iatin and the rest ! the cr5d cnsists ! high&< i&&i?uid shares>

A&,st a&& the signi!icant !ir,s ! India are &isted n 4th the echanges> NSE en- Bth echanges c,pete !r the rder !&5 that &eads t reduced csts+ ,ar*ete!!icienc< and innvatin> The presence ! ar4itrageurs *eeps the prices n the t5 stc*

echanges 5ithin a ver< tight range>

Trading Mechanism

Trading at 4th the echanges ta*es p&ace thrugh an pen e&ectrnic &i,it rder 4* + in5hich rder ,atching is dne 4< the trading c,puter> There are n ,ar*et,a*ers r specia&ists and the entire prcess is rder(driven+ 5hich ,eans that ,ar*et rders

p&aced 4< investrs are aut,atica&&< ,atched 5ith the 4est &i,it rders> As a resu&t+ 4u


36/92


37/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

An II registered as a de4t(n&< II can invest 311 ! its invest,ent int de4t instru,ents>Other IIs ,ust invest a ,ini,u, ! G1 ! their invest,ents in e?uit The 4a&ance ! L1can 4e invested in de4t> IIs ,ust use specia& nn(resident rupee 4an* accunts+ in rder t,ve ,ne< in and ut ! India> The 4a&ances he&d in such an accunt can 4e !u&&<repatriated>

Restrictions/Investment Ceilings

The gvern,ent ! India prescri4es the DI &i,it and di!!erent cei&ings have 4een prescri4ed!r di!!erent sectrs> Over a perid ! ti,e+ the gvern,ent has 4een prgressive&< increasingthe cei&ings> DI cei&ings ,st&< !a&& in the range ! :0(311>

B< de!au&t+ the ,ai,u, &i,it !r prt!&i invest,ent in a particu&ar &isted !ir,+ is decided 4< the DI &i,it prescri4ed !r the sectr t 5hich the !ir, 4e&ngs> '5ever+ there are t5additina& restrictins n prt!&i invest,ent> irst+ the aggregate &i,it ! invest,ent 4< a&&IIs+ inc&usive ! their su4(accunts in an< particu&ar !ir,+ has 4een !ied at :2 ! the paid(up capita&> '5ever+ the sa,e can 4e raised up t the sectr cap+ 5ith the apprva& ! thec,pan

Secnd& '5ever+ in case ! !reigncrpratins r individua&s investing as a su4(accunt+ the sa,e cei&ing is n&< />Regu&atins a&s i,pse &i,its !r invest,ent in e?uit

Investment Opportunities for Retail Foreign Investors

reign entities and individua&s can gain epsure t Indian stc*s thrugh institutina&investrs> Man< India(!cused ,utua& !unds are 4ec,ing ppu&ar a,ng retai& investrs>Invest,ents cu&d a&s 4e ,ade thrugh s,e ! the !!shre instru,ents+ &i*e participatr<ntes 6PNs8 and depsitar< receipts+ such as A,erican depsitar< receipts6ADRs8+ g&4a&depsitar< receipts 6$DRs8+ and echange traded !unds 6ETs8 and echange(tradedntes 6ETNs8>

As per Indian regu&atins+ participatr< ntes representing under& '5ever+ even s,a&& investrs can investin A,erican depsitar< receipts representing the under& ADRs are

den,inated in d&&ars and su4-ect t the regu&atins ! the U>S> Securities and EchangeC,,issin 6SEC8> #i*e5ise+ g&4a& depsitar< receipts are &isted n Eurpean stc*echanges> '5ever+ ,an< pr,ising Indian !ir,s are nt

Retai& investrs a&s have the ptin ! investing in ETs and ETNs+ 4ased n Indian stc*s>India ETs ,st&< ,a*e invest,ents in indees ,ade up ! Indian stc*s> Mst ! the stc*sinc&uded in the inde are the nes a&read< &isted n NYSE and Nasda?> As ! :119+ the t5,st pr,inent ETs 4ased n Indian stc*s are the Fisd,(Tree India Earnings und6NYSE" EPI8 and the P5erShares India Prt!&i und 6NYSE"PIN8> The ,st pr,inentETN is the MSCI India Inde Echange Traded Nte 6NYSE"INP8> Bth ETs and ETNs

prvide gd invest,ent pprtunit< !r utside investrs>

P$&e 05

http://www.investopedia.com/terms/forex/i/inr-indian-rupee.asphttp://www.investopedia.com/terms/a/adr.asphttp://www.investopedia.com/terms/g/gdr.asphttp://www.investopedia.com/terms/g/gdr.asphttp://www.investopedia.com/terms/g/gdr.asphttp://www.investopedia.com/terms/g/gdr.asphttp://www.investopedia.com/terms/e/etf.asphttp://www.investopedia.com/terms/e/etn.asphttp://www.investopedia.com/terms/e/etn.asphttp://www.investopedia.com/terms/s/sec.asphttp://www.investopedia.com/terms/s/sec.asphttp://www.investopedia.com/terms/s/sec.asphttp://www.investopedia.com/markets/stocks/EPIhttp://www.investopedia.com/markets/stocks/PINhttp://www.investopedia.com/markets/stocks/inp/http://www.investopedia.com/terms/forex/i/inr-indian-rupee.asphttp://www.investopedia.com/terms/a/adr.asphttp://www.investopedia.com/terms/g/gdr.asphttp://www.investopedia.com/terms/g/gdr.asphttp://www.investopedia.com/terms/e/etf.asphttp://www.investopedia.com/terms/e/etn.asphttp://www.investopedia.com/terms/e/etn.asphttp://www.investopedia.com/terms/s/sec.asphttp://www.investopedia.com/terms/s/sec.asphttp://www.investopedia.com/markets/stocks/EPIhttp://www.investopedia.com/markets/stocks/PINhttp://www.investopedia.com/markets/stocks/inp/


38/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

The Bottom Line

E,erging ,ar*ets &i*e India+ are !ast 4ec,ing engines !r !uture gr5th> Current& Ma

Forex Market History In India

The !reign echange currenc< trading in India is gr5ing at a rea&&< gd paceh5ever it is said that the !re ,ar*et is sti&& in the ear&< phase in India> Neverthe&ess thereare a&read< severa& 4ig p&a #et us !ind ut detai&s n the !re,ar*et histr< in India t *n5 ,re a4ut Indian !re ,ar*et>

The histr< ! !re ,ar*et in India 5es its rigin t an i,prtant decisin ta*en 4< theReserve Ban* ! India 6RBI8 in the As a resu&t ! this step+ the agree,ent ! ,aintainings?uare r near s?uare psitin 5as t 4e c,p&ied 5ith n&< at the c&se ! 4usiness ever<da The histr< ! currenc< trading in India a&s c&ear&< sh5s that during the initia& perid5hen these ecn,ic re!r,s started+ the echange rate ! natina& currenc< i>e> Indian rupeeused t 4e deter,ined 4< the RBI in ter,s ! a 5eighted 4as*et ! currencies ! Indias ,a-r trading partners> Mrever+ there 5ere s,e !air&< signi!icant restrictins n the currentaccunt transactins>

Then again during ear&< nineties+ ,re ecn,ic re!r,s 5ere intrduced 5hich 5itnessedthe i,prtant t5(step d5n5ard ad-ust,ent in the echange rate ! the Indian rupee inrder t p&ace it at a suita4&e &eve& in &ine 5ith the in!&atin di!!erentia& s that thec,petitiveness in eprts cu&d 4e ,aintained> Fith these ecn,ic re!r,s 5hich resu&tedin the uni!icatin echange rate ! the rupee hera&ded the c,,ence,ent ! the ne5 era !,ar*et deter,ined !re currenc< rate regi,e ! rupee in the Indian !re histr< 5hich 5as

4ased n the de,and and supp&< princip&e in the !re ,ar*et>

Anther &and,ar* in re histr< ! India ca,e 5ith the appint,ent ! an Epert $rupc,,ittee n re currenc< in 3992> This c,,ittee 5as ,ade t stud< the !re ,ar*et indetai& s that step can 4e ta*en ut t deve&p+ deepen and 5iden the !re ,ar*et in India>The resu&t ! this eercise 5as that 4an*s 5ere signi!icant !reed, in ,an< ! its ,ar*etperatins re&ated t &i*e !re ,ar*et deve&p,ent and &i4era&iatin> The !reed, 5as

granted t 4an*s in ter, ! !iing their trading &i,its+ a&&5ed t 4rr5 and invest !unds inthe verseas ,ar*ets up t speci!ied &i,its+ accrded !reed, t ,a*e use ! derivative

prducts !r asset(&ia4i&it< ,anage,ent purpses>

The crprate 5ere granted the !&ei4i&it< t 4* !r5ard cver 4ased n previus turnverand 5ere given !reed, t ,a*e use ! !inancia& instru,ents &i*e interest rates and currenc<s5aps in the internatina& currenc< echange ,ar*et> The ther !eature ! !re histr< inIndia is that a &arge su, ! !reign echange in India ca,e thrugh the &arge Indian

ppu&atin 5r*ing in !reign cuntries> '5ever+ the c,,n ,an 5as nt ,uch interestedin !re trading> the things are changing n5 and 5ith the gr5ing ecn,< ,re and ,re

pep&e are sh5ing interest in !re trading and are &*ing ut !r hedging currenc< ris*s>

Natina& Stc* Echange ! India ppu&ar&< *n5n as NSE 5as the !irst recgniedechange in Indian !re histr< t &aunch !re currenc< !utures trading in India> These

P$&e 06

http://www.investopedia.com/terms/e/emergingmarketeconomy.asphttp://www.investopedia.com/terms/e/emergingmarketeconomy.asp


39/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

currenc< !utures are 4ene!icia& ver verseas !re trading especia&&< t c,parative&< s,a&&traders and retai& investrs> Anther i,prtant pint t *n5 is that 4e!re discussing thehistr< ! !re ,ar*et in India+ it is i,prtant t *n5 the centra& gvern,ent ! India hasthe p5ers t cntr& transactins in !reign echange and hence !re transactins in Indiaare ,anaged 4< the gvern,ent authrities>

B"'9$: S!";< E=;>$%&e (BSE)

A ver< c,,n na,e !r a&& traders in the stc*,ar*et+ BSE+ stands !r B,4a< Stc*

Echange> The &dest ,ar*et nt n&< in the cuntr In the ear&< da It 5as esta4&ished in the

In 39/0+ BSE 4tained a per,anent recgnitin !r, the $vern,ent ! India

under the Securities Cntracts 6Regu&atin8 Act+ 39/0>

In the past and even n5+ it p&a

Ear&ier it 5as an Assciatin ! Persns 6AOP8+ 4ut n5 it is a de,utua&ised and crpratised

entit< incrprated under the prvisins ! the C,panies Act+ 39/0+ pursuant t the BSE

6Crpratisatin and De,utua&isatin8 Sche,e+ :11/ nti!ied 4< the Securities and Echange

Bard ! India 6SEBI8>

BSE 7isin

The visin ! the B,4a< Stc* Echange is t E,erge as the pre,ier Indian stc*

echange 4< esta4&ishing g&4a& 4ench,ar*s>

BSE Manage,ent

B,4a< Stc* Echage is ,anaged pr!essina&&< 4< Bard ! Directrs> It c,prises !

e,inent pr!essina&s+ representatives ! Trading Me,4ers and the Managing Directr> The

Bard is an inc&usive ne and is shaped t 4ene!it !r, the ,ar*et inter,ediaries

participatin>

The Bard eercises c,p&ete cntr& and !r,u&ates &arger p&ic< issues> The da

BSE Net5r*

The Echange reaches ph


40/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

BSEs Internatina& Cnventin 'a&&

The B,4a< Stc* Echange prvides cnventin ha&& !r &isted c,panies and ther

Institutins t h&d their Annua&@rdinar< $enera& Meetings+ #isting cere,nies+ Ana&

It is centra&&< &cated at Mu,4ai+ 5hich can 4e easi&< reached !r, Churchgate r CST 67T8

rai&5a< statins> It has a capacit< ! arund G11 t 911 persns 5ith state(!(the(art

in!rastructure> The ha&& has Pr-ectin E?uip,ent+ Fe4(cast !aci&it< and a Business R,

5ith acsi,i&e+ Internet+ Phtcpier and te&ec, e?uip,ent>

BSE acts

• irst in India t intrduce E?uit< Derivatives

• irst in India t &aunch a ree &at Inde

• irst in India t &aunch US versin ! BSE Sense

• irst in India t &aunch Echange Ena4&ed Internet Trading P&at!r,

• irst in India t 4tain ISO certi!icatin !r Survei&&ance+ C&earing Sett&e,ent

• BSE On(#ine Trading S 6NSCC#8It is a 5h&&< 5ned su4sidiar It 5as !r,ed t 4ui&d cn!idence in c&earing and

sett&e,ent ! securities+ t pr,te and ,aintain the shrt and cnsitent sett&e,ent c


41/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

NSE>IT #td>It is a&s a 5h&&< 5ned su4sidiar< ! NSE and is its IT ar,> This ar, ! the NSE isuni?ue&< psitined t prvide prducts+ services and s&utins !r the securities industr

NSE>IT pri,ari&< !cusses n in the area ! trading+ 4r*er !rnt(end and 4ac*(!!ice+

c&earing and sett&e,ent+ 5e4(4ased+ insurance+ etc> A&ng 5ith this+ it a&s prvidescnsu&tanc< and i,p&e,entatin services in Data Farehusing+ Business Cntinuit< P&ans+Site Maintenance and Bac*ups+ Stratus Main!ra,e aci&it< Manage,ent+ Rea& Ti,e Mar*etAna&

India Inde Services Prducts #td> 6IIS#8It is a -intventure 4et5een NSE and CRISI# #td> t prvide a variet< ! indices and indere&ated services and prducts !r the Indian Capita& ,ar*ets> It 5as set up in Ma< 399> IIS#has a cnsu&ting and &icensing agree,ent 5ith the Standard and Prs 6SP8+ 5r&ds &eading

prvider ! investi4&e e?uit< indices+ !r c(4randing e?uit< indices>

Natina& Securities Depsitr< #td> 6NSD#8 NSE -ined hands 5ith IDBI and UTI t pr,te de,ateria&isatin ! securities> This step5as ta*en t s&ve pr4&e,s re&ated t trading in ph It c,,encedperatins in Nve,4er 3990>

DtE Internatina& #i,itedDtE 5as !r,ed t prvide a 5e&& structured inter trading p&at!r, !r the ,e,4ers t!urther !!er n&ine trading !aci&ities t their cust,ers> Fith this !aci&it The investrs a&s get c,prehensive and updated in!r,atin thrughit>

NSE acts

• It uses sate&&ite c,,unicatin techn&g< t energise participatin !r, arund 211

cities in India>

• NSE can hand&e up t 3 ,i&&in trades per da

• It is ne ! the &argest interactive 7SAT 4ased stc* echanges in the 5r&d>

• The NSE( net5r* is the &argest private 5ide area net5r* in India and the !irst

etended C( Band 7SAT net5r* in the 5r&d>

• Present&< ,re than 9111 users are trading n the rea& ti,e(n&ine NSE app&icatin>

the! than this the!e a!e !e&ional stock e-chan&es. The!e "e!e 26 !e&ional stock

e-chan&es at ties. Afte! *AT soft"a!e the !e'i!eent of !e&ional stocke-chan&e dec!eased and no" cae do"n to 19 in total.

P$&e 1


42/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

2. C"'$%: P-"#*e

$. B$; AnandRathi and Mr>Pradeeep $upta+ the grup tda<e,p& Private 5ea&th,anage,ent strng 'NI re&atinship>

Access t 5ea&th< !a,i&ies in India having ,re than :/111 crres ! inventi4&e surp&uses>

AnandRathi has 4een vted Z 3 4< ,ne< p&&s !r : cnsecutive


43/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

• Strng prduct prt!&i 5hich induces e?uities+ Derivatives+ c,,dities+ IPOs

,utua& !unds+ &i!e and nn(&i!e insurance depsitr< services and 4nds>

• #eading distri4utr ! IPO+ insurance+ ,utua& !unds and third part< prducts>

• Fe have 4een ran*ed th a,ngst a&& 4r*ers !r a,unt prcured in IPOs in India

during Januar< t June :131 4< pri,e data 4ase> The !ir,s phi&sph< is entire&<c&ient centric+ 5ith a c&ear !cus n prviding &ng ter, va&ue additin t c&ients+5hi&e ,arinating the highest standard ! ece&&ence+ ethics and pr!essina&is,>

4> Nature ! the 4usiness carried

AnandRathi is a &eading !u&& service securities !ir, prviding the entire ga,ut ! !inancia&services> The !ir,+ !unded in 3992 4< Mr> AnandRathi+ tda< has a pan India presence as5e&& as an internatina& presence thrugh !!ices in Du4ai and Bang**>

AnandRathi prvides a 4readth ! !inancia& and advisr< services inc&uding 5ea&th,anage,ent+ invest,ent 4an*ing+ crprate advisr

The !ir,s phi&sph< is entire&< c&ient centric+ 5ith a c&ear !cus n prviding &ng ter,

va&ue additin t c&ients+ 5hi&e ,aintaining the highest standards ! ece&&ence+ ethics and pr!essina&is,> The entire !ir, activities are divided acrss distinct c&ient grups"Individua&s+ Private C&ients+ Crprates and Institutins>

;. V*+*"%, M*++*"% $% Q$*!: P"*;:

"s"&)

“T& =% s#")")7 %5+3% s 3%*%r ") "))&!"&) !#% '"rs! :#&":%

'&r :3"%)!s )* E+3&9%%s

Ar&:#

lient ent!ic )ol'tions lon& te! foc'sed Resea!ch

Relationship d!i#en

P$&e 11


44/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

3(%s

'stoe! ent!ic Tea "o!k +nno#ation Respect.

(3"!9 P&3":9

• I,prving asset ?ua&it< is *e< 4ehind per!r,ance ! 4an* stc* in a !a&&ing interest

rate envirn,ent

• Credit t i,prve+ s!t in!&atin t spur depsits>

• a&&ing in!&atin 5u&d i,prve rea& interest rates+ 5hich in turn+ cu&d channe& 4th

huseh&d and crprate savings t 4an*

• Esti,ated depsit gr5th at 3G in Y 30 and 30 in Y 30

. P-";! / Se-?*;e P-"#*e

Services O!!erings

• Private Fea&th Manage,ent Services

• Institutina& Services

• Invest,ent Ban*ing Services

• Currenc< Cnsu&tanc<

• Crprate Insurance Advisr<

• Invest,ent Services

3> Pre!erred C&ients Services

:> Privi&ege C&ients Services

Prducts O!!erings

• E?uit<

P$&e 12


45/92


46/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

• Institutina& E?uit< Research+ Sa&es Trading

• E?uit< De4t Capita& Mar*ets

Invest,ent Services $rup

• Fide range ! prducts Services

• E,phasis n vera&& !inancia& p&anning 4ased n c&ients speci!ic re?uire,ents

• Presence in 3/11 &catins acrss India

E?uit< Derivative Br*erage"

AnandRathi prvides end t end e?uit< s&utins t s&utins t institutina& and

individua& investrs> Cnsistent de&iver< ! high ?ua&it< advice n individua& stc*>Sectr trends and invest,ent strateg< has esta4&ished a c,petent a and re&ia4&e unit

P$&e 14


47/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

acrss the cuntr C&ient can trade thrugh n&ine n BSE and NSE !r 4th e?uitiesand Derivatives> The< are supprted 4< dedicated sa&es and trading tea,s in tradingdes*s acrss the cuntr Research and invest,ent ideas can 4e accessed 4< c&ientseither thrugh their designated dea&ers+ e,ai&+ 5e4 r s,s>

Mutua& !unds" AnandRathi is ne ! Indias tp ,utua& !und distri4utin huses> Their success&ies in their phi&sph< ! prviding cnsistent& The< !ir,&< 4e&ieve in thei,prtance ! se&ecting asset a&&catin 4ased n their c&ients ris* pr!i&e+ The< havea dedicated ,utua& !und research ce&& !r ,utua& !unds that cnsistent&< churns utsuperir invest,ent ideas+ pic*ing 4est per!r,ing !unds acrss asset c&asses >

Depsitr< Services" AnandRathi depsitr< services prvides 5ith a secure and cnvenient 5a< !

h&ding AR depsitr< services inc&udessette&e,ent+ c&earing and custd< ! securities+ registratin ! shares andde,ateria&iatin> A&s !!er dai&< updates ! internet access t h&ding state,ent andtransactin su,,ar

C,,dities" AR c,,dities 4r*ing services inc&ude n&ine !utures thrugh NCDE% and MC%and depsitr< services thrugh CDS#> Their research cvers 4rad range ! tradedc,,dities inc&uding precius and 4ase ,eta&s+ i&s and i& seeds+ agri( c,,ditiessuch as 5eat+ chana+ guar etc> The< a&s prvide cust,ied advice n hedging>

Insurance Services" As an insurance 4r*er+ AR prvides t their c&ients c,prehensive ris*,anage,ent techni?ues+ 4th 5ithin the 4usiness as 5e&& as n the persna& !rnt>Ris* ,anage,ent inc&udes identi!icatin+ ,easure,ent and assess,ent ! the ris* andhand&ing ! the ! the ris* ! 5hich insurance is a integra& part> The< dea& 5ith 4th&i!e and nn &i!e insurance> Their ai, is t prvide pti,u, &eve& ! cver 5ith &east

pssi4&e cst>

e> Area ! Operatin . $&4a&@Natina&@Regina&

AR !inancia& services !!ers and prvides services nt n&< t regina&+natina& 4ut a&s t internatina& cuntries it has a strng and 5ide distri4utinnet5r*> Fe can !ind !!ices ! AnandRathi in ,re than 39G cities and : states andhas severa& 4ranches in Du4ai+ Bang** etc>

!> O5nership Pattern

AR has an autcratic ,anage,ent s Ne5 p&ans+ 4ranch+ pening decisins ta*en 4< tp,anage,ent in entire AnandRathi services !ir,> But in 4ranch &eve& the< have

P$&e 15


48/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

de,cratic ,anage,ent s That is a&& vita& decisins ta*en 4< 4ranch,anage,ent>

T% ana&eent

P$&e 16


49/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

&. C"'e!*!"-+ I%#"-'$!*"%

There are ,an< c,petitrs t AnandRathi as stc* ,ar*et is ne ! the gd and 4est

avenues ! invest,ent stc* 4r*ing services are increasing da< 4< da e5 ,a-rc,petitrs are Share )han+ Mti&a& Os5a&+ Ange& Br*ing+ ICICI Direct+ erda etc

1 %r&*# 6 The< are ne ! the &argest and &dest Discunt 4r*er in India having ,re

than /1+111 c&ients> The< have a ver< c,petitive and a si,p&e 4r*erage structure 6Rs

:1 per trade8 and gd cust,er service> The accunt pening prcess is a&s ver< eas<

and ,st ! the 5r* can 4e c,p&eted n&ine> The< are ne ! the !e5 discunt 4r*er

5h have their 5n Prprietr trading@charting s!t5are ca&&er Pi 5hich a&&5s !r

5riting cust, a&grith,> The gd thing a4ut these discunt 4r*ers is The !r,s can 4e !i&&ed n&ine and the app&icatin can 4e

shipped t the,2: RKS" R)S7 is a discunt 4r*er perating !r, Mu,4ai> The< prvide ver<

c,petitive rates ! Rs :1 per trade irrespective ! the sie ! the trade> The prvide

NEST and ODIN p&at!r, !r trading> The< are c,ing up 5ith ne5 ,4i&e 4ased

p&at!r, ca&&ed Upstc* and the prduct &* nice> There accunt pening prcess is

a&s ver< eas< and ,st ! the 5r* can 4e c,p&eted n&ine> The<

have decent service and eas< t use user inter!ace 4ut there 4r*erage is rea&&< high

c,pared t 5hat ther discunt 4r*ers are prviding> There rates starts !r, as high as

>/ t >: depending n the va&ue ! trades There 4iggest se&&ing

pint is there sea,&ess integratin 5ith $d 4r*er !r investr 4ut nt !r

trader>

4 S#r%K#) " Incrprated in e4ruar< :111+ Share*han is Indias :nd 3r7%s! s!&:

=r&%r as per nu,4er ! cust,ers+ prviding 4r*erage services thrugh its n&ine

trading 5e4site Share*han>c, and 39/1 Share shps 5hich inc&udes 4ranches

ranchises in ,re than /G/ cities acrss India> The< are !u&& service 4r*er and prvide

varius ther services &i*e asset ,anage,ent etc>

> HDFC S%:(r"!96 The< are ne ! the &arger 4r*ing huses in India and 5ith their 4an*

4ranches+ the< have ne ! the &argest net5r* 5hich is n&< a!ter ICICI> The< have avast net5r* ! 4an* 4ranch in even s,a&&er t5n> Mst ! the investr 5h have a 4an*

accunt end up pening a trading@De,at accunt 5ith the,> The< are gd !u&& service

4r*ers prviding a&& ,a-r services &i*e research des*+ ,utua& !und invest,ents and

prt!&i ,anage,ent services>

- K&! S%:(r"!"%s" The< are ne ,re 5e&& *n5 na,e in inancia& services and 5ith

their 4an* 4ranches in 4ig cities the< are a4&e t cater t c&ients in 4ig cities> There

n&ine service is decent 4ut 4r*erage is nt that c,petitive>

? R%3"):% M&)%96 The< ca,e 5ith a 4ang 4ut &ate&< have &st a &t ! sheen !r, theirna,e> There have 4een &ts ! ?uestin a4ut their 4usiness practices>

P$&e 17

https://upstox.com/https://upstox.com/https://upstox.com/


50/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

@ M&!"33 Os83 " These are ne ! the decent 4r*er perating in India> The< are a&s !u&&

service 4r*ers prviding ga,ut ! !inancia& service t the cust,er>

Kr9 " The< are ne ! the &dest 4r*ing huse perating in India> The< are the

4r*ers 5hich

>. I%#-$+!-;!-$ #$;**!*e+

• Dea&ing des* and &and &ine phnes

• Sa&es ta&ent and research tea, and e?uit< tea,

• Inte&&ectua& capita&+ specia&ied transactins

• C&ient Huire r,>

• Training and ,eeting r,>

• Dea&ers ca4in

• T7 !r share ,ar*et update 5atch

• Ca!eteria

P$&e 28


51/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

*. A;>*e?e'e%! A@$-+

P$&e 2


52/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

. W"-


53/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

3. M;


54/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

9. S These can 4edistinctive c,petencies pep&e+ ,anage,ent practices+ s This can 4e &earnt thrugh a SFOT Ana&

The c,petent s*i&&s ! the pep&e inc&ude gd c,,unicatin and presentatin s*i&&s+strng acade,ic recrd+ cnsistent in the per!r,ance &eve&s etc>

;. S!:e

St


55/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

. S!-$!e&:

Set ut visin+ ,issin 4-ective and ,a-r actin p&ans and p&icies ! the rganisatin>These set ut picture ! the rganisatin in the !uture t The ,a-rareas ! strategic ga&s ! Anandrathi are"

38 Mar*eting Standing Desired share ! present and ne5 ,ar*ets+inc&uding areas in 5hich ne5 prducts areneeded and services ga&s ai,ed at 4ui&dingcust,er & At AnandRathi in Shiva-inagar the

prcedure !&&5ed is c&ear+ transparent and nt c,p&icated> The in!r,atin s The activities ! the !rnt end peratin inc&ude"

• 'ead !!ice ! Suth ne AnandRathi

• C&ient Advisr< Services

• Prcessing ! de,at accunt transactins

• Ne5 issue pr,tins>

P$&e 23


56/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

• Prt!&i Manage,ent ! NRI c&ients>

• Pr,tins activities !r pr,tins ! ne5&< arrived varius prducts

• ina&&< MIS reprting ! da< t da< transactins>

• Ad,inistratin accunting ! a&& !!ice peratina& epenses

At the !!ice da< t da< peratins inc&ude(

• Prcessing ! varius app&icatin !r,s ! de,at accunt IPOs and !r5arding the

sa,e t the 'ead !!ice>

• Prviding state,ent ! accunt t the varius investrs n re?uesting>

• Addressing re?uests !r nn(pa

• MIS reprting ! da< t da< transactins>

• Transactin ! accunts ! accunt h&ders are carried ut 4< dea&ers>

• Training ! Re&atinship Managers and ne5&< appinted individua&s

The tta& Hua&it< Cntr& S It iscnnected t NSD#+ CDS#+ NSE and BSE and he&ps stc* 4r*e trade n&ine> The

P$&e 24


57/92


58/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

• D pep&e have a shared understanding ! 5h< a c,pan< eistK

• D pep&e have a shared understanding ! the visin ! the c,panation and has its o"n "eaknesses.

;o! e-aple it a$ tend to pe!s'ade its 'se!s to copile lists !athe! than tothink ao't act'al ipo!tant facto!s in achie#in& o@ecti#es. +t also p!esents the

!es'ltin& lists 'nc!iticall$ and "itho't clea! p!io!iti>ation so that fo! e-aple"eak oppo!t'nities a$ appea! to alance st!on& th!eats.

+t is p!'dent not to eliinate an$ candidate )?T ent!$ too 'ickl$. Theipo!tance of indi#id'al )?Ts "ill e !e#ealed $ the #al'e of the st!ate&ies

the$ &ene!ate. A )?T ite that p!od'ces #al'ale st!ate&ies is ipo!tant. A

)?T ite that &ene!ates no st!ate&ies is not ipo!tant.

)?T ATR+

P$&e 26

https://en.wikipedia.org/wiki/Marketing_mixhttps://en.wikipedia.org/wiki/Personnelhttps://en.wikipedia.org/wiki/Financehttps://en.wikipedia.org/wiki/Manufacturinghttps://en.wikipedia.org/wiki/Macroeconomichttps://en.wikipedia.org/wiki/Technological_changehttps://en.wikipedia.org/wiki/Legislationhttps://en.wikipedia.org/wiki/Table_(information)https://en.wikipedia.org/wiki/Table_(information)https://en.wikipedia.org/wiki/Categorizationhttps://en.wikipedia.org/wiki/Marketing_mixhttps://en.wikipedia.org/wiki/Personnelhttps://en.wikipedia.org/wiki/Financehttps://en.wikipedia.org/wiki/Manufacturinghttps://en.wikipedia.org/wiki/Macroeconomichttps://en.wikipedia.org/wiki/Technological_changehttps://en.wikipedia.org/wiki/Legislationhttps://en.wikipedia.org/wiki/Table_(information)https://en.wikipedia.org/wiki/Categorization


59/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

Breadth ! Services>

In &ine 5ith its c&ient( centric phi&sph Distri4utin

! ,utua& !unds+ IPs and Insurance prducts+ rea& estate+ invest,ent 4an*ing+ ,ergers and

ac?uisitins+ crprate advisr

In(Depth Research"

Our research epertise is at the cre ! the va&ue prprtin 5hat 5e !!er t ur c&ients>

Research tea,s acrss the !ir, cntinuus&< trac* varius ,ar*ets and prducts> The ai, is

h5ever c,,n t g !ar deeper than thers+ t de&iver incisive insights and ideas and 4e

accunta4&e !r resu&ts>

Strengths>

$&4a& parentage and epertise>

Eperienced senir ,anage,ent

Fr&d c&ass techn&g< and in!rastructure

P$&e 27


60/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

Strict ris* cntr& s

Mu&tip&e prducts under ne r!>

C,pan< 5ith 5e&& diversi!ied prt!&i>

Fea*ness

• Man< c,petitrs>

• Ine!!ective direct ,ar*eting strategies

• N g&4a& reach

• Fea* 4rand na,e>

• N Digita& ,ar*eting

Opprtunities

• T gra4 the gr5ing India ,ar*et>

• Scpe !r ta*ing 4usiness and ging g&4a&>

• Scpe !r increasing its 4ranch net5r* especia&&< in the i,prtant !inancia& centres

as 5e&& as etending its ph


61/92


62/92

De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-

all ,!s 't especiall$ those "hich a!e di!ectl$ in#ol#ed in inte!national'siness. )e#e!al ,ndin&s 'estion the #al'e of ,!s hed&in& fo!e- !isk eca'se

Chandan Sharma Project11.docx

Documents

Transcript of Chandan Sharma Project11.docx