SYNOPSIS OF THE PROJECT:

This project is about currency trading, its usage and utility, what are hedging and arbitrage in
currency trading. How is currency trading done? What are its operations? What is pricing in
currency trading. What are factors deciding currency fluctuations. What are instruments to
protect any losses from currency fluctuation? How trading is done. What are initiatives taken by
Indian government for currency trading? Who are major participants in currency trading? What
is currency trading system? How hedging is done in currency trading. What are currency trading
platforms? How is currency trading done online? How is currency trading done online? What is
forex trading and forex trading in India?

CURRENCY TRADING
Currency trading means to exchange one currency for another currency is termed as currency
trading. This industry is one of the largest in the world with regards to trading volume. Foreign
currency is the ratio of one currency in consideration with another. How this process takes
place. For example if we take an interbank currency trade for instance, there are two banks A
and B. Then bank A will call bank B and will ask for the quote of the currency. For example
rupee against the dollar. Then bank B will reply to bank A with the rate of his bank. If the rate
seems attractive to bank A then they will enter a deal. All the basic information like price,
amount, and purchased amount will be entered in their systems. When the actual settlement
takes place bank A will depart with the specified rupee amount and bank B will follow suit by
turning in the dollar amount. If the rupee rises against the dollar then bank A will gain the
difference as profit.

When traders enter into currency trading they give a two- way quote. One of them is the rate of
purchase and other is the price of sale. The two prices are mainly separated by a hyphen. On
the left is the price at which the trader will purchase and on the right is the price at which is the
price at which the trader will sell. The difference between the purchase rate and sale is called
the bid-ask spread. The trader expects the slight variations on the sale and purchase rate. He
will also trade in the similar amounts of what he had purchased. There will not be any drastic
differences. The margin thus earned by the trader is the difference of the bid-ask spread.
The profit gained depends on the variation in the exchange rate and the size of the position.
Speculating over a period of time can be dangerous and hence every government has the strict
rules laid down which have to be adhered to, to prevent the chaos.

FOREX CURRENCY TRADING

Currency trading is done in Paris. They follow the International standards organization (ISO),
which has built a code abbreviation. For instance EUR/USD- EURO AND US DOLLAR. Similarly we
have USD/CHF, GBP/USD etc. Thus foreign exchange is the trading of one currency for another.
It is the ratio of one currency as valued for another. While trading the first currency is known as
the base currency and the other is known as the counter of quote currency. Counter currency is
purchased on one unit of the base currency. While selling we are told how much the counter or
quote currency we will receive for every base currency unit.

For simplifying foreign currency trade one monetary unit is considered equal to the base
currency. So if we are talking of the base currency i.e. Rupee, Euro, Dollar, it is 1 Rupee, 1 Euro,
and 1 Dollar. As the US Dollar is mostly traded with any currency paired with the US Dollar is
known as the direct rate. If the currency is not against the US Dollar it is known as the cross
rate. As the quote currency is lower than the base currency it is converted into smaller units of
the base currency. Foreign currency trading involves many intricacies but once one gain
knowledge and practice it, it soon get easy and attractive.

FOREX CURRENCY TRADING SYSTEM

There are many currencies trading systems.1) Piranha system: this system depends upon
prevailing interest rates. It helps to determine that whether on should play long or short.
Smooth to enter and exit is the core is the core fund of this system. This system has solid profit
ground.

2) Cross bow Swiss trading system: this system is based on entering long on dips and selling
short on rallies, the system is designed to allow online trading, thus allowing online market
information and transactions.

HEDGING IN CURRENCY TRADING

Risk is the factor that is involved everywhere. It is very high in currency trading. With the
currency trading evolving as huge market it is important to cover the risks involved in case of a
huge unexpected downfall.

Hedging is the kind of a transaction where two positions are made to offset each other in case
of price changes. It is the risk covered by those who are desirous of taking it and who are
capable of taking and handling it.

In the currency trading market high amounts are traded with. Hence if there is sudden decline
in prices it can be quite demanding on the investors and the whole economy per say.

CURRENCY TRADING ONLINE

Trading is always given an impetus because of its ability to promote an activity beyond its
current realms. Be it basic trading or online currency trading. It gives the individual a different
feeling. More of one to one basis. It eliminates the need of middlemen and thus reduces cost.
Online currency trading is more dangerous unless you are adapting with its requirements.
Some brokers offer teaching the uses of online trading at a minimal fee.

Trading currency online gives one the advantage of working from home. If you are in
individual investor you can delineate your commands to your broker from the comfort of
your home. Receive confirmation and check the transfer of funds in your account. On the
other hand if you are an investor you can trade in the main market. Buy on dips and sell on
rallies or trade on whatever system. It’s possible from your home. Another advantage of
trading online is that no special software is required. Connect yourself to internet and get
working. You can get prices 24 hours a day. Through the internet you can access the latest
exchange rates, reports, news and analysis. It is absolutely commission free. However it
depends upon the portal you are using for online currency trading as the charges differ from
company to company.

CURRENCY EXCHANGE
With Indians going global and dealing in international trade, currency exchange is very
common. Indian rupee is exchange is anywhere in the world. However it’s still weak to US
Dollar, GB Pound and EURO, so the exchange rate varies according to vagaries of the day to day
market. For the common trader or professional who wished to invest in currency exchange the
best way to do is through official channels.

Banks, forex institutions, authorized travel agents are the only ones who can exchange the
rupee to any other currency. When a person goes abroad for a holiday or for a business, a
certain slab is reserved for exchange. Any amount of currency cannot be exchanged. Since
there a restrictions some people try to smuggle hard cash in suitcases. Which is an offence, and
if caught they can be deported or not allowed to leave the country, without giving proper
explanation.

FACTORS DECIDING CURRENCY FLUCTUATION

1. CURRENCY FLUCTUATION

A market based exchange rate will change whenever the values of either of the two
component currencies change. A currency will tend to become more valuable whenever
demand for it is greater than the available supply. It will become less valuable whenever
demand is less then available supply (this does not mean people no longer want money, it just
means they prefer holding their wealth in some other form, possibly another currency).

Increased demand for a currency is due to either an increased transaction demand for money,
or an increased speculative demand for money. The transaction demand for money is highly
correlated to the country's level of business activity, gross domestic product (GDP), and
employment levels. The more people there are out of work, the less the public as a whole will
spend on goods and services. Central banks typically have little difficulty adjusting the available
money supply to accommodate changes in the demand for money due to business transactions.

The speculative demand for money is much harder for a central bank to accommodate but they
try to do this by adjusting interest rates. An investor may choose to buy a currency if the return
(that is the interest rate) is high enough. The higher a countries interest rates, the greater the
demand for that currency. It has been argued that currency speculation can undermine real
economic growth, in particular since large currency speculators may deliberately create
downward pressure on a currency in order to force that central bank to sell their currency to
keep it stable (once this happens, the speculator can buy the currency back from the bank at a
lower price, close out their position, and thereby take a profit).

2. In the absence of government intervention, the main driver of currency fluctuations is the
demand for the currency relative to the demand for other currencies. If many people want to
trade dollars for Indian rupees, the value of the rupee will rise and the dollar will fall. This
happens when there is a greater demand for one country's products, denominated in its home
currency, relative to the demand for another country's products. India, I believe, runs a large
trade surplus with the rest of the world, while the U.S., on the other hand, and runs a large trade
deficit.
There are several factors that can influence this dynamic. A country's central bank can reduce
the money supply by issuing bonds and collecting currency for them. They can increase the
required reserve level that banks must hold, therefore reducing the amount they can lend.
On the other hand, the central bank can buy back bonds, injecting more money into the market,
or they can simply start printing more money and buy things, thus getting it into circulation. This
last tactic usually leads to runaway inflation, since the government often winds up issuing more
money to keep ahead of individuals' perception of its value.
Other governments can also affect the value of a country's currency, which has happened in the
case of the U.S. Since the U.S. dollar is the world's de facto reserve currency (the one that most
international transactions are done in), it is in the interest of many countries to keep large stocks
of U.S, currency on hand, and to keep the value of the dollar stable. This allows the U.S. to float
more of its debt on world markets without suffering the ill effects of devaluing its currency.

3. Supply & Demand

Supply: If countries are inflating their currency, there will be more available on
international markets and it will not be as valuable. This will additionally cause lower
interest rates in the domestic market.

Demand: If investment opportunities are poor in the domestic economy, currency will
not be as valuable internationally.

4. Currency fluctuation or rather the value of a currency is determined by various factors

depending upon what time frame, we are looking at. Short term values are determined
by immediate supply and demand you may find during pre election time the rupee will
appreciate because lot of funds from abroad will get converted to Indian currency .In the
medium term it is the country's export /import and capital flows that will determine the
value. In the long term it is the confidence of people in the country's policies, the stability
of the system of government, its credibility etc which determines the value of a currency.
Dollar enjoyed the reserve currency status because of this factor.
5. The value of a local currency is its value in real terms. i.e., its purchasing power in the
international market. For example what you can buy by, say Rs. 100.If you can buy
items worth US $2 then the value of Rupee is 1/50 American Dollar. Similar is the case
with other currencies.

MARKET PARTICIPANTS
According to research data

53% of the forex deals are arranged between dealers or banks;

33% are between a dealer (a bank) and a fund manager or other non- banking financial
institutions;

14% involves a dealer and a non financial company.

BANKS
The largest part of forex market belong to the banks. They cater both to the majority of
commercial turnover and large amounts of speculative trading every day. Daily turnover
of one large bank may reach billions of dollars. And only the small part of trading this
trading is undertaken on behalf of customers. The rest trading banks arrange for their
own account.
Today large banks have moved on to electronic systems such as EBS, the Chicago
mercantile exchange, Bloomberg and Trade book(R).

COMMERCIAL COMPANIES
Commercial companies that seek foreign exchange to pay for goods or services are
important part of forex market. Comparing with banks or speculators, commercial
companies trade fairly small amount. Besides there trade usually have little short term
impact on currency’s exchange rates. But sometimes multinational companies can have
unpredictable impact on market rates. Especially when market participants do not know
about very large positions, covered due to little known exposures.

CENTRAL BANKS
National central banks are one of the most important participants of foreign exchange
market. There purpose is to control money supply, inflation and interest rates. Usually
they have official or unofficial target rates for their currencies. Usually their substantial
foreign exchange reserves as a stabilization market tool. One of the best stabilization
strategies, used by central banks, is to buy while the exchange rate is the loosest and to
sell when the rate is high. In such a way central banks may get a good profit.
Nevertheless, central banks are more protected then other market participants, as they
don’t go bankrupt if they make large losses. At the same time there is no convincing
evidence that central banks do not make a profit trading.

INVESTMENT MANGEMENT FIRMS

Their main activity is managing large accounts on behalf of customers such as pension
funds, endowments etc. Investment managers usually use the forex market to facilitate
transactions in foreign securities. Especially if an investment management firm is
specialized in foreign equities, it will need to buy and sell foreign currencies in the spot
market in order to pay for purchases.
However some investment management firms have speculative specialist currency
overlay units. They manage client's currency exposures with the aim of generating
profits as well as limiting risk. But the number of this type of investment management
firms is comparatively small.

COMPANY PROFILE
Religare Securities Limited (RSL), a 100% subsidiary of Religare Enterprises Limited is
a leading equity and securities firm in India. The company currently handles sizeable
volumes traded on NSE and in the realm of online trading and investments; it currently
holds a reasonable share of the market. The major activities and offerings of the
company today are Equity Broking, Depository Participant Services, Portfolio
Management Services, International Advisory Fund Management Services, Institutional
Broking and Research Services. To broaden the gamut of services offered to its
investors, the company offers an online investment portal armed with a host of
revolutionary features.

 RSL is a member of the National Stock Exchange of India, Bombay Stock

Exchange of India, Depository Participant with National Securities Depository
Limited and Central Depository Services (I) Limited, and is a SEBI approved
Portfolio Manager.

 Religare has been constantly innovating in terms of product and services and to
offer such incisive services to specific user segments it has also started the NRI,
FII, HNI and Corporate Servicing groups. These groups take all the portfolio
investment decisions depending upon a client’s risk / return parameter.

 Religare has a very credible Research and Analysis division, which not only
caters to the need of our Institutional clientele, but also gives their valuable inputs
to investment dealers.

The Study
Rationale for Study
It is reasonable to assume that a currency exchange generating high volumes of trade will in
some way deliver tangible benefit to its stakeholders. After all currency exchange imposes
additional costs on participants- membership fees, transaction fees, compliance costs, etc.
However, what type of benefits does currency exchanges deliver? Who gains and who loses?
How specifically have these institutions functioned in developing countries? Has there been a
notable development impact? The definition of development is heavily contested and
conceptually challenging. There is not scope to provide a full or adequate account here. Whilst
definitions vary widely, development approaches typically pursue some mixture of two broad
goals - poverty reduction and economic growth.
Study Aims and Objectives
Aim: To identify, analyze and assess the impacts made by currency futures exchanges in
developing countries on development.

Objectives:

Awareness-raising: to build awareness of the solutions that currency exchanges provide, and the
extent of their track record in doing so, among key national, regional and international
stakeholders – including governments, regulators, the private sector, civil society and the media.

Knowledge accumulation: to produce a high-quality report that adds to the existing knowledge
base - it will seek to establish within a coherent framework the enduring social and economic
impacts that currency exchanges have made in key markets over time.

Worldwide applicability: to demonstrate the extent to which exchange success in upgrading

currency sectors and fostering development is part of a worldwide phenomenon.

Exchange of information: to share information, experience and perspectives from across the
major developing country regions.

OFFERINGS

1. EQUITY AND DERIVATIVES

Trading in Equities with Religare truly empowers you for your investment needs. We
ensure you have a superlative trading experience through –

 A highly process driven, diligent approach.

 Powerful Research & Analytics and
 One of the “best-in-class” dealing rooms.
 Further, Religare also has one of the largest retail networks, with its presence in
more than 1800* locations across more than 490* cities and towns. This means,
you can walk into any of these branches and connect to our highly skilled and
dedicated relationship managers to get the best services.

The Religare edge

 Pan India footprint.

 Powerful research and analytics supported by a pool of highly skilled research
analysts.
 Ethical business practices.
 Offline/Online delivery models.
 Single window for all investment needs through your unique CRN.

2. DEPOSITORY

RSL provides depository services to investors as a Depository Participant with NSDL

and CDSL.

The Depository system in India links issuers, Depository Participants, Depositories

National Securities Depository Limited (NSDL) and Central Depository Services (India)
Limited (CDSL) and clearing houses / clearing Corporation of Stock Exchanges. These
facilitate holding of securities in dematerialized form and securities transactions are
processed by means of account transfers.

Our customer centric account schemes have been designed keeping in mind the
investment psychology. With a competent team of skilled professionals, we manage
over 380,000 accounts and have a dedicated customer care centre, exclusively trained
to handle queries from our customers. With our country wide network of branches, you
are never far from Religare depository services.

Religare’s depository service offers you a secure, convenient, paperless and cost
effective way to keep track of your investment in shares and other instruments over a
period of time, without the hassle of handling physical documents. Your DP account
with us takes care of your depository needs like dematerialization, dematerialisation,
transfer and pledging of shares, stock lending and borrowing.
Your demat account is safe and absolutely secure in our hands, every debit instruction
is executed only after its authenticity is established. Our hi-tech in-house capabilities
cater to the needs of software maintenance, database administration, network
maintenance, backups and disaster recovery. This extra cover of security has gained
the trust of our clients.

3. PORTFOLIO MANAGEMENT SERVICES

Religare offers PMS to address varying investment preferences. As a focused service,

PMS pays attention to details, and portfolios are customized to suit the unique
requirements of investors.

Religare PMS currently extends six portfolio management schemes, viz Monarque,
Panther, Tortoise, Elephant, Caterpillar and Leo. Each scheme is designed keeping in
mind the varying tastes, objectives and risk tolerance of our investors.

OUR SCHEMES

Monarque

At Religare, we understand ‘those who reign’ have truly inimitable needs and objectives
and deserve an equivalently matchless partner to provide your wealth the care it
deserves to grow and be preserved. Monarque is a portfolio structured to provide higher
returns by taking aggressive positions across sectors and market capitalizations.
Monarque is ideally suitable for investors with "High Risk High Return" appetite.

Panther
The Panther portfolio aims to achieve higher returns by taking aggressive positions
across sectors and market capitalizations. It is suitable for the “High Risk High Return”
investor with a strategy to invest across sectors and take advantage of various market
conditions.

Tortoise

The Tortoise portfolio aims to achieve growth in the portfolio value over a period of time
by way of careful and judicious investment in fundamentally sound companies having
good prospects. The scheme is suitable for the “Medium Risk Medium Return” investor
with a strategy to invest in companies which have consistency in earnings, growth and
financial performance.

Elephant

The Elephant portfolio aims to generate steady returns over a longer period by investing
in Securities selected only from BSE 100 and NSE 100 index. This plan is suitable for
the “Low Risk Low Return” investor with a strategy to invest in blue chip companies, as
these companies have steady performance and reduce liquidity risk in the market.

Caterpillar

The Caterpillar portfolio aims to achieve capital appreciation over a long period of time
by investing in a diversified portfolio. This scheme is suitable for investors with a high
risk appetite. The investment strategy would be to invest in scrip’s which are poised to
get a re-rating either because of change in business, potential fancy for a particular
sector in the coming years/months, business diversification leading to a better operating
performance, stocks in their early stages of an upturn or for those which are in sectors
currently ignored by the market.

Leo

Leo is aimed at retail customers and structured to provide medium to long-term capital
appreciation by investing in stocks across the market capitalization range. This scheme
is a mix of moderate and aggressive investment strategies. Its aim is to have a
balanced portfolio comprising selected investments from both Tortoise and Panther.
Exposure to Derivatives is taken within permissible regulatory limits.
The Religare Edge

We serve you with a diligent, transparent & process driven approach and ensure that
your money gets the care it deserves.

No experts, only expertise. PMS brought to you by Religare with its solid reputation of
an ethical and scientific approach to financial management. While we offer you the
services of a dedicated Relationship Manager who is at your service 24x7, we do not
depend on individual expertise alone. For you, this means lower risk, higher
dependability and unhindered continuity. Moreover, you are not limited by a particular
individual’s investment style.

No hidden profits. We ensure that a part of the broking at Religare Portfolio

Management Services is through external broking houses. This means that your
portfolio is not churned needlessly. Using more broking firms gives us access to a larger
number of reports and analysis, enabling us to make better, more informed decisions.
Furthermore, your portfolio is customized to suit your investment objectives.

Daily disclosures. Religare Portfolio Management Services gives you daily updates on
your investment. You can pinpoint where your money is being invested, 24x7, instead of
waiting till the end of the month to keep track.

No charge till you profit*.So sure are we of our approach to Portfolio Management
that we do not charge you for our services, until your investments start showing profit.
With customized investment options Religare Portfolio Management Services invites
you to invest across five broad portfolios to suit your investment needs.

CURRENCY FUTURES

Benefits of Currency Futures

  High Liquidity.
 Extended trading hours - 9 am to 5 pm.
 Opportunities to reap benefits owing to a highly dynamic market.
 Small lot size of only US $1000 with low exchange specified margins.

Currency Futures is best suited for-

 SMEs / Individuals involved in Imports/Exports.

 Corporate/ Institutions involved in Imports/Exports and anybody else who has
foreign currency exposure

RESEARCH
We at Religare believe in providing independent research for clients to make investment
decisions, with strict emphasis on self-regulation, avoiding possible conflict of interest in
objectivity.

Our Research Products

 Fundamental Research

 Technical Research

 Daily Reports

 Intraday trading tech calls