TABLE OF CONTENTS

EXCUTIVE SUMMARY................................................................
......................................2 PART I..................................
................................................................................
.............3 COMPANY PROFILE..................................................
........................................................3 INTRODUCTION..........
................................................................................
...................4 COMPANY OVERVIEW...........................................
......................................................6 PART II.................
................................................................................
...............................10 PROJECT OVERVIEW..............................
........................................................................10 CHAPT
ER 1............................................................................
........................................11 INTRODUCTION TO DERIVATIVES..........
............................................................11 INTRODUCTION TO O
PTIONS..........................................................................
.....13 HISTORY OF STOCK EXCHANGES IN INDIA.....................................
................17 FUNCTIONS OF STOCK EXCHANGE..................................
..................................18 REGULATORY FRAMEWORK.......................
............................................................19 THE STOCK EXCHANG
ES..............................................................................
............21 MEMBERS OF THE STOCK EXCHANGE....................................
..............................22 History Of NSE(National Stock Exchange)........
.............................................................23 RESEARCH METHODO
LOGY............................................................................
.........27 DATA ANALYSIS.......................................................
...................................................28 LIMITATIONS...............
................................................................................
..............30 RECEMENDATION..................................................
...................................................31 PART III..................
................................................................................
............................32 CHARTS AND GRAPHS................................
...................................................................33 BIBLIOGRAP
HY..............................................................................
..................................34 Table of Figures Figure 1- Hierarchy of Off
ices............................................................................
...................9
1
EXCUTIVE SUMMARY
TITLE: “Trading pattern of informed participants in option (out of money Counter)”.
OBJECTIVES: The objective of the study includes the effect shown on the market b
y the informed participants in option.
RATIONALE OF THE STUDY: The purpose of this major research project is to find ou
t the total open interest on the same price after informal participants comes in
to the market.
METHODOLOGY:
The study is exploratory in nature. Secondary data has been
collected as a source of data collection. Trend analysis has been used for data
analysis.
CONCLUSION:
Finally the research is concluded with applicability of the study in
option areas of the derivatives and due to huge amount of informal participants
there are strong volatility in the market.
2
PART I COMPANY PROFILE
3
INTRODUCTION
Angel Broking tryst with excellence in customer relations began in 1987. Today,
Angel has emerged as one of the most respected Stock-Broking and Wealth Manageme
nt Companies in India. With its unique retail-focused stock trading business mod
el, Angel is committed to providing ‘Real Value for Money’ to all its clients. The A
ngel Group is a member of the Bombay Stock Exchange (BSE), National Stock Exchan
ge (NSE) and the two leading Commodity Exchanges in the country: NCDEX & MCX. An
gel is also registered as a Depository Participant with CDSL.
Our Business: • • • • • • • • Equity Trading Commodities Portfolio Management Services Mutu
nds Life Insurance Personal Loans IPO Depository Services Investment Advisory
Our Presence: • • Nation-wide network of 21 Regional Hubs Presence in 124 cities 4
• •
Over 6810 Sub-Brokers & Business Associates More than 5.9 lakh Clients
Angel Group:• • • • Angel Broking Ltd. Angel Capital & Debt Market Ltd. Angel Commoditie
s Broking Ltd. Angel Securities Ltd
5
COMPANY OVERVIEW VISION To provide values for money to investor through innovati
ve, product and trading / investment stratagies, state of art and technology and
personalized services.
CRM POLICY:- CUSTOMER IS KING MILESTONES: August, 2008 November, 2007 March, 200
7 December, 2006 October, 2006 September, 2006 July, 2006 March, 2006 October, 2
005 September, 2004 April, 2004 April, 2003 November, 2002 March, 2002 November,
1998 December, 1997 Crossed 500000 trading accounts ‘Major Volume Driver’ for 2007
Crossed 200000 trading accounts Created 2500 business associates ‘Major Volume Dri
ver’ award for 2006 Launched Mutual Fund and IPO business Launched the PMS functio
n Crossed 100000 trading accounts ‘Major Volume Driver’ award for 2005 Launched Onli
ne Trading Platform Initiated Commodities Broking division First published resea
rch report Angel’s first investor seminar Developed web-enabled back office softwa
re Angel Capital and Debt Market Ltd. incorporated Angel Broking Ltd. incorporat
ed
MANAGEMENT: 1. Mr. Dinesh Thakkar Founder Chairman & Managing Director The Angel
Group of Companies was brought to life by Mr. Dinesh Thakkar. He ventured into
stock trading with an intention to raise capital for his own independent enterpr
ise. 6
However, he recognized the opportunity offered by the stock market to serve indi
vidual investors. Thus India’s first retail-focused stock-broking house was establ
ished in 1987. Under his leadership, Angel became the first broking house to emb
race new technology for faster, more effective and affordable services to retail
investors. Mr. Thakkar is valued for his understanding of the economy and the s
tock-market. The print and electronic media often seek his views on the market t
rend as well as investment strategies 2. Mr. Lalit Thakkar Director – Research Mr.
Lalit Thakkar is the motivating force behind Angel’s highly acclaimed Research te
am. He’s been a part of the senior management team since the Angel Group’s inception
. His technical and fundamental outlook has provided impetus to Angel’s market res
earch team. Research-based & personalized advisory services are Angel’s forte, and
Mr. Lalit Thakkar has undoubtedly been the brain behind it. When it comes to an
alyzing the market, Mr. Lalit Thakkar is truly a genius. His hands-on experience
and fundamental knowledge of the market can predict the market trend early. His
views on the market trend are often quoted in the print and electronic media. 3
. Mr. Amit Majumdar Executive Director – Strategy and Finance A chartered
Accountant by qualification, Mr. Amit Majumdar is a key member of Angel’s strategi
c decision-making process. He has been with the group since August 2004. He has
handled several functions of the group like finance and operations, to name a fe
w. He has rich experience in finance, investment banking, treasury, consultancy
and advisory services. Mr. Majumdar has led many successful initiatives for the
group. Before joining the Angel Group, Mr. Majumdar has been associated with Rab
o India Finance, Ambit Corporate Finance and Ernst & Young.
7
4. Mr. Rajiv Phadke Executive Director – HR & Corp. Communications. Rajiv Phadke h
as actively contributed to the Group’s growth over the last four years. Holding a
major in Finance, Mr. Rajiv Phadke is a strategic thinker with expertise in the
field of corporate planning, international marketing, financial services, brand-
building, HRD and quality management. With over 32 years of experience, Mr. Phad
ke has successfully led SBUs and financial companies from concept to commissioni
ng. His career horizon spans Motilal Oswal Securities, Times Guaranty Financials
, Nagarjuna Securities and Tata Exports Ltd. He is also a well-known speaker in
the HR and business development circuit and his views are featured on various el
ectronic media as well. 5. Mr. Vinay Agrawal Executive Director – Equity Broking M
r. Vinay Agrawal leads the Equity Broking business at Angel, which comprises Bus
iness Development, Operations, Product Development and E-broking initiative. He
is actively involved in exploring new ways to adopt technology for business enha
ncement. A Chartered Accountant by qualification, Mr. Agrawal began his career w
ith the Angel Group as Finance and Operations Consultant and since then he’s quick
ly climbed up the corporate ladder.
8
Figure 1- Hierarchy of Offices CSO (Central Support Office)
Regional Office
Regional Office
Regional Office
Branches & Franchise Branches
Branches & Franchise Branches
Branches & Franchise Branches
Angel Clients
Business Associates
Angel Clients
9
PART II PROJECT OVERVIEW
10
CHAPTER 1
INTRODUCTION TO DERIVATIVES The emergence of the market for derivative products,
most notably forwards, futures and options, can be traced back to the willingne
ss of risk-averse economic agents to guard themselves against uncertainties aris
ing out of fluctuations in asset prices. By their very nature, the financial mar
kets are marked by a very high degree of volatility. Through the use of derivati
ve products, it is possible to partially or fully transfer price risks by lockin
g-in asset prices. As instruments of risk management, these generally do not inf
luence the fluctuations in the underlying asset prices. However, by lockingin as
set prices, derivative products minimize the impact of fluctuations in asset pri
ces on the profitability and cash flow situation of risk-averse investors. 1.1 D
ERIVATIVES DEFINED Derivative is a product whose value is derived from the value
of one or more basic variables, called bases (underlying asset, index, or refer
ence rate), in a contractual manner. The underlying asset can be equity, forex,
commodity or any other asset. For example, wheat farmers may wish to sell their
harvest at a future date to eliminate the risk of a change in prices by that dat
e. Such a transaction is an example of a derivative. The price of this derivativ
e is driven by the spot price of wheat which is the "underlying". In the Indian
context the Securities Contracts (Regulation) Act, 1956 (SC(R)A) defines "deriva
tive" to include11
1. A security derived from a debt instrument, share, loan whether secured or uns
ecured, risk instrument or contract for differences or any other form of securit
y. 2. A contract which derives its value from the prices, or index of prices, of
underlying securities. Derivatives are securities under the SC(R)A and hence th
e trading of derivatives is governed by the regulatory framework under the SC(R)
A. Interest rate swaps: These entail swapping only the interest related cash flo
ws between the parties in the same currency. Currency swaps: These entail swappin
g both principal and interest between the parties, with the cash flows in one di
rection being in a different currency than those in the opposite direction. Hist
ory of derivatives markets Early forward contracts in the US addressed merchants
concerns about ensuring that there were buyers and sellers for commodities. Ho
wever credit risk" remained a serious problem. To deal with this problem, a gro
up of Chicago businessmen formed the Chicago Board of Trade (CBOT) in 1848. The
primary intention of the CBOT was to provide a centralized location known in adv
ance for buyers and sellers to negotiate forward contracts. In 1865, the CBOT we
nt one step further and listed the first exchange traded" derivatives contract
in the US, these contracts were called futures contracts". In 1919, Chicago But
ter and Egg Board, a spin-off of CBOT, was reorganized to allow futures trading.
Its name was changed to Chicago Mercantile Exchange (CME). The CBOT and the CME
remain the two largest organized futures exchanges, indeed the two largest "fin
ancial" exchanges of any kind in the world today. 12
The first stock index futures contract was traded at Kansas City Board of Trade.
Currently the most popular stock index futures contract in the world is based o
n S&P 500 index, traded on Chicago Mercantile Exchange. During the mid eighties,
financial futures became the most active derivative instruments generating volu
mes many times more than the commodity futures. Index futures, futures on T-bill
s and Euro-Dollar futures are the three most popular futures contracts traded to
day. Other popular international exchanges that trade derivatives are LIFFE in E
ngland, DTB in Germany, SGX in Singapore, TIFFE in Japan, MATIF in France, Eurex
etc. NSE s DERIVATIVES MARKET The derivatives trading on the NSE commenced with
S&P CNX Nifty Index futures on June 12, 2000. The trading in index options comm
enced on June 4, 2001 and trading in options on individual securities commenced
on July 2, 2001. Single stock futures were launched on November 9, 2001. Today,
both in terms of volume and turnover, NSE is the largest derivatives exchange in
India. Currently, the derivatives contracts have a maximum of 3-month expiratio
n cycles. Three contracts are available for trading, with 1 month, 2 months and
3 months expiry. A new contract is introduced on the next trading day following
the expiry of the near month contract. INTRODUCTION TO OPTIONS In this section,
we look at the next derivative product to be traded on the NSE, namely options.
Options are fundamentally different from forward and futures contracts. An optio
n gives the holder of the option the right to do something. The holder does not
have to exercise this right. In contrast, in a forward or futures contract, the
two parties have committed themselves to doing something. Whereas it costs nothi
ng (except margin requirements) to enter into a futures contract, the purchase o
f an option requires an upfront payment. 13
OPTION TERMINOLOGY Index options: These options have the index as the underlying
. Some options are uropean while others are American. Like index futures contrac
ts, index options contracts are also cash settled. Stock options: Stock options
are options on individual stoc ks. Options currently trade on over 500 stocks in
the United States. A contract gives the holder the right to buy or sell shares
at the specified price. Buyer of an option: The buyer of an option is the one wh
o by paying the option premium buys the right but not the obligation to exercise
his option on the seller/writer. Writer of an option: The writer of a call/put
option is the one who receives the option premium and is thereby obliged to sell
/buy the asset if the buyer exercises on him. There are two basic types of optio
ns, call options and put options. Call option: A call option gives the holder th
e right but not the obligation to buy an asset by a certain date for a certain p
rice. Put option: A put option gives the holder the right but not the obligation
to sell an asset by a certain date for a certain price. Option price/premium: O
ption price is the price which the option buyer pays to the option seller. It is
also referred to as the option premium. Expiration date: The date specified in
the options contract is known as the expiration date, the exercise date, the str
ike date or the maturity. Strike price: The price specified in the options contr
act is known as the strike price or the exercise price. American options: Americ
an options are options that can be exercised at any time upto the expiration dat
e. Most exchange-traded options are American.
14
European options: European options are options that can be exercised only on the
expiration date itself. European options are easier to analyze than American op
tions, and properties of an American option are frequently deduced from those of
its European counterpart. In-the-money option: An in-the-money (ITM) option is
an option that would lead to a positive cashflow to the holder if it were exerci
sed immediately. A call option on the index is said to be in-the-money when the
current index stands at a level higher than the strike price (i.e. spot price >
strike price). If the index is much higher than the strike price, the call is sa
id to be deep ITM. In the case of a put, the put is ITM if the index is below th
e strike price. At-the-money option: An at-the-money (ATM) option is an option t
hat would lead to zero cashflow if it were exercised immediately. An option on t
he index is at-the-money when the current index equals the strike price (i.e. sp
ot price = strike price). Out-of-the-money option: An out-of-the-money (OTM) opt
ion is an option that would lead to a negative cashflow if it were exercised imm
ediately. A call option on the index is out-of-the-money when the current index
stands at a level which is less than the strike price (i.e. spot price < strike
price). If the index is much lower than the strike price, the call is said to be
deep OTM. In the case of a put, the put is OTM if the index is above the strike
price. Intrinsic value of an option: The option premium can be broken down into
two components - intrinsic value and time value. The intrinsic value of a call
is the amount the option is ITM, if it is ITM. If the call is OTM, its intrinsic
value is zero. Putting it another way, the intrinsic value of a call is Max[0,
(St — K)] which means the intrinsic value of a call is the greater of 0 or (St — K).
Similarly, the intrinsic value of a put is Max[0, K — St],i.e. the greater of 0 o
r (K — St). K is the strike price and St is the spot price. 15
Time value of an option: The time value of an option is the difference between i
ts premium and its intrinsic value. Both calls and puts have time value. An opti
on that is OTM or ATM has only time value. Usually, the maximum time value exist
s when the option is ATM. The longer the time to expiration, the greater is an o
ption s time value, all else equal. At expiration, an option should have no time
value.
History of options: Although options have existed for a long time, they were tra
ded OTC, without much knowledge of valuation. The first trading in options began
in Europe and the US as early the seventeenth century. It was only in the early
1900s that a group of firm setup what was known as the put and call Brokers and
Dealers Association with the aim of providing a mechanism for bringing buyers a
nd sellers together. If someone wanted to buy an option, he or she would contact
one of the member firms. The firm would then attempt to find a seller or writer
of the option either from its own clients or those of other member firms. If no
seller could be found,the firm would undertake to write the option itself in re
turn for a price. This market however suffered from two deficiencies. First, the
re was no secondary market and second, there was no mechanism to guarantee that
the writer of the option would honor the contract. In 1973, Black, Merton and Sc
holars invented the famed BlackScholars formula. In April 1973, CBOE was set up
specifically for the purpose of trading options. The market for options develope
d so rapidly that by early 80s, the number of shares underlying the option cont
ract sold each day exceeded the daily volume of shares traded on the NYSE. Since
then, there has been no looking back.
16
HISTORY OF STOCK EXCHANGES IN INDIA The origin of the stock exchanges in India c
an be traced back to the later half of 19th century. After the American Civil Wa
r (1860-61) due to the share mania of the public, the number of brokers dealing
in shares increased. The brokers organized an informal association in Mumbai nam
ed “The Native Stock and Share Brokers Association” in 1875. Increased activity in t
rade and commerce during the First World War and Second World War resulted in an
increase in the stock trading. Stock Exchanges were established in different ce
nters like Chennai, Delhi, Nagpur, Kanpur, Hyderabad and Bangalore. The growth o
f stock exchanges suffered a set back after the end of World War. Worldwide depr
ession affected them. Most of the stock exchanges in the early stages had a spec
ulative nature of working without technical strength. Securities and Contract Re
gulation Act 1956 gave powers to the central government to regulate the stock ex
changes. The SCR Act recognized the stock exchanges in Mumbai, Kolkata, Chennai,
Ahmadabad, Delhi, Hyderabad and Indore. The Bangalore stock exchange was recogn
ized only in1963. At present we have 23 stock exchanges and 21 of them had hardw
are and software compliant to solve Y2K problem. Till recent past, floor trading
took place in all the stock exchanges. In the floor trading system, the trade t
akes place through open outcry system during the official trading hours. Trading
posts are assigned for different securities where buy and sell activities of se
curities took place. This system needs a face-to-face contact among the traders
and restricts the trading volume. The speed of the new information reflected on
the prices was rather slow. The deals were also not transparent and the system f
avored the brokers rather than the investors.
17
The setting up of NSE and OTCEI with the screen based trading facility resulted
in more and more stock exchanges turning towards the computer based trading. Bom
bay stock exchange introduced the screen based trading system in 1995, which is
known as BOLT (Bombay On-line Trading System). Madras stock exchange introduced
Automated Network Trading System (MANTRA) on Oct 7th 1996. Apart from Bombay sto
ck exchange, Vadodara, Delhi, Pune, Bangalore, Kolkata and Ahmadabad stock excha
nges have introduced screen based trading. Other exchanges are also planning to
shift to the screen based trading. FUNCTIONS OF STOCK EXCHANGE 1. Maintains acti
ve trading: - Shares are traded on the stock exchanges, enabling the investor to
buy and sell securities. The prices may vary from transaction to transaction. A
continuous trading increased the liquidity or marketability of the shares trade
d on the stock exchanges. 2. Fixation of prices: - Price is determined by the tr
ansactions that flow from investors’ demand and suppliers’ preferences. Usually the
traded prices are made known to the public. This helps the investor to make bett
er decisions. 3. Ensures safe and fair dealing: - The rules, regulations and by-
laws of the stock exchanges’ provide a measure of safety to the investors. Transac
tions are conducted under competitive conditions enabling the investors to get a
fair deal. 4. Aids in financing the industry: - A continuous market for shares
provides a favorable climate for raising capital. The negotiability and transfer
ability of the securities helps the companies to raise long-term funds. When it
is easy to trade the securities, investors are willing to subscribe to the initi
al public offerings. This stimulates the capital formation. 18
5. Dissemination of information: - Stock Exchanges provide information through t
here various publications. They publish the share prices traded on daily basis a
long with the volume trade. Directory of Corporate Information is useful for the
investors’ assessment regarding the corporate. Handouts, handbooks, and pamphlets
provide information regarding the functioning of the stock exchanges. 6. Perfor
mance inducer: - The prices of stocks reflect the performance of the traded comp
anies. This makes the corporate more concerned with its public image and tries t
o maintain good performance. 7. Self-regulating organization: - The stock exchan
ges monitor the integrity of the members, brokers, listed companies and clients.
Continuous internal audit safeguards the investors against unfair trade practic
es. It settles the disputes between member brokers, investors, and brokers. REGU
LATORY FRAMEWORK The Securities Contract Regulation Act 1956 and the Securities
and Exchange Board of India Act 1992 provided a comprehensive legal framework. A
three tire regulatory structure comprising the Ministry of Finance, the Securit
ies and Exchange Board of India and Governing Boards of the Stock Exchanges regu
lates the functioning of stock exchanges. Ministry of Finance: - The Stock Excha
nge Division of the Ministry of Finance has powers related to the application of
the provision of the SCR Act and licensing of dealers in the other area. Accord
ing to SEBI Act, the Ministry of Finance has the appellate and supervisory power
s over the SEBI. It has power to grant recognition to the stock exchanges and re
gulation of their operations. Ministry of Finance has the power to approve the a
ppointments of executive chiefs and nominations of the public representatives in
the 19
Governing Boards of the stock exchanges. It has the responsibility of preventing
undesirable speculation. The Securities and Exchange Board of India: - The Secu
rities and Exchange Board of India even though established in the year 1988, rec
eived statutory powers only on 30th Jan 1992. Under the SEBI Act, a wide variety
of powers are vested in the hands of SEBI. SEBI has the powers to regulate the
business of stock exchanges, other security markets and mutual funds. Registrati
on and regulation of market intermediaries are also carried out by SEBI. It has
the responsibility tot prohibit the fraudulent unfair trade practices and inside
r dealings. Takeovers are also monitored by the SEBI. Stock Exchanges have to su
bmit periodic and annual returns to SEBI. SEBI has the multi-pronged duty to pro
mote the healthy growth of the capital market and protect the investors.
The Governing Board: - The Governing Board of the stock exchange consists of ele
cted member directors, government nominees and public representatives. Rules, by
elaws and regulations of the stock exchange provide substantial powers to the Ex
ecutive Director for maintaining efficient and smooth day-to-day functioning of
the stock exchange. The Governing Board has the responsibility to maintain an or
derly and well-regulated market. The governing body of the stock exchange consis
ts of 13 members of which (a) 6 members of the stock exchange are elected by the
members of the stock exchange (b) central government nominates not more than th
ree members. (c) The board nominates three public representatives (d) SEBI nomin
ates persons not exceeding three and (e) the stock exchange appoints one Executi
ve Director. One third of the elected members retire at annual general meeting.
The retired member can offer himself for election if he is not elected for two c
onsecutive years. If a
20
member serves in the governing body for two years consecutively, he should refra
in from offering himself for another two year. The members of the governing body
elect the President and vice-president. It needs no approval from the Central G
overnment or the Board. The office tenure for the President and Vice-President i
s one year. They can offer themselves for re-election, if they have not held off
ice for two consecutive years. In that case they can offer themselves for re-ele
ction after a gap of one-year period. THE STOCK EXCHANGES The names of the stock
exchanges are given below: • • • • • • • • • • • • • • Ahmadabad Stock Exchange Bangalore
ubaneswar Stock Exchange Chennai Stock Exchange Cochin Stock Exchange Coimbatore
Stock Exchange Delhi Stock Exchange Guwahati Stock Exchange Hyderabad Stock Exc
hange Indore Stock Exchange Jaipur Stock Exchange Kanpur Stock Exchange Kolkata
Stock Exchange Ludhiana Stock Exchange 21
• • • • • • • • •
Magadha Stock Exchange Mangalore Stock Exchange Mumbai Stock Exchange Pune Stock
Exchange Saurashtra Stock Exchange Vadodhara Stock Exchange NSE OTCEI Inter Con
nected Stock Exchange
Stock exchanges normally functions between 10.00 a.m. and 3.45 p.m. on the worki
ng days. Badla sessions are held on Saturdays. MEMBERS OF THE STOCK EXCHANGE The
Securities Contract Regulation Act of 1956 has provided uniform regulation for
the admission of members in the stock exchanges. The qualifications for becoming
a member for a recognized stock exchange are given below: • • • • • • • The minimum age pr
ribed for the members is 21 years. He/She should be an Indian Citizen. He/She sh
ould be neither a bankrupt nor compounded with the creditors. He/She should not
be convicted for fraud or dishonesty. He/She should not be engaged in any other
business connected with a company. He/She should not be a defaulter of any other
stock exchange. The minimum required educational qualification is a pass in 12t
h standard examination. 22
The Mumbai and Kolkata stock exchanges have set up training institutes to enable
the members to understand the complexities of the stock trading. In recent days
highly qualified persons such as Company secretaries, Chartered accountants and
MBA’s are becoming members. Corporate membership is also permitted now. The membe
rs of the stock exchanges are eligible to work either as individuals or in partn
ership or as representative members transacting business through their appointed
members. The governing board has to approve the partnership and the appointed m
embers. A member, if he has completed five years of membership in a stock exchan
ge can apply for membership in other stock exchanges. If he applies before the c
ompletion of five years he has to relinquish the membership of the present membe
rship before accepting the other.
History Of NSE(National Stock Exchange) The National Stock exchange, in Bombay i
s the largest Stock exchange of the country and the third largest in the world.
Before the NSE, the Indian securities industry was inefficient due to lack of pr
oper infrastructure and a few select brokerage firms controlling the industry. T
here was a great resistance to setting up modern facilities and innovative infra
structure. The basic idea of setting up the NSE was facilitating computerized ma
rket trading. The intention was to set up a vibrant and viable debt market, and
in the middle of 1993 it came into existence. The trading started in the middle
of 1994.The NSE is jointly owned by a group of financial institutions, Insurance
companies, banks and other financial intermediaries. In the completely de-mutua
lised exchange the ownership has no bearing
23
to trade. The objective is to place all investors across the country in more tha
n 1200 cities on equal footing. This was done by competitively harnessing the la
test technology and adapting a new system of operations through the VSAT (Very S
mall Earth Based Aperture Terminals) terminals. The fully automatic screen based
trading system is based on the principle of an order driven market which provid
es complete flexibility to the participants. There are no trading floors as in c
onventional stock exchanges. The trading is entirely screen based with automatic
order processing. One can obtain the entire market information, which is dynami
cally updated, at the click of a button. The system also conceals the identity o
f the market operators. As the market investors can sit and operate from their o
wn houses and homes, they have all the facilities of back office support. The co
nnection with other traders through the satellite link is established, and each
member receives the market information at the same time. The NSE is one of the f
irst stock exchanges in the world to use the VSAT system for end-to-end connecti
vity and computer based trading. NSE has completely shifted the trading platform
from the floors of the Stock Exchange to the computer terminals at the brokerag
e firms and further to personal computers and laptops in the investors’ homes and
offices! The NSE is one of the very few exchanges in the world trading all kinds
of securities on a single platform. The three mutually exclusive segments of th
e NSE are: • • Capital Market segment Wholesale and Debt Market segment 24
•
Futures Adoptions Trading
The capital Market Segment covers trading in equities and retail trade in conver
tible and non-convertible debentures and hybrids. This segment covers the securi
ties of medium and large companies with nation wide investor base. This might in
clude securities which are being traded on other exchanges as well. The Capital
Market increases the volume of trade and liquidity considerably. The wholesale a
nd Debt Market segment of the NSE is a facility for institutions including subsi
diaries of banks which are involved in financial services and other corporate bo
dies. The trading system facilitates making of two way quotes in a very flexible
manner. These three trading platforms were established one after the other. The
wholesale Debt market commenced its operations in June 1994 and the Capital Mar
ket Segment started operating at the end of 1994.The futures and options segment
began in 2000, and today the NSE holds the 14th position in the 40 futures and
Exchanges today. A company that wants to get listed with the NSE needs to enter
a listing agreement and is required to pay the specified listing fees. It also n
eeds to adhere to all the clauses of the agreement and to send details of book c
losure, record dates, annual and half yearly reports, and cash flow statements.
The NSE has emerged as the world’s third largest growing bourse today with such a
large number of companies being listed everyday. It has outpaced world leaders s
uch as the London Stock Exchange, NASDAQ and NYSE. The NSE can handle up to 1 mi
llion
25
trades per day .It recorded a 15% jump in the number of listed firms of 1244 dur
ing the one year period which ended in April 2007.
26
RESEARCH METHODOLOGY
PROJECT DESIGN:- This project is designed to find the action of inform participa
tion. This project is clearly understood by the charts we can predict the future
movement of various participants. INFORMATION NEEDED: - The information is need
ed for this project is dates of circuit breaker then after finding the dates. Th
e remaining data for this project are nifty under line value, nifty open interes
t, putt call ratio, putt open interest, call open interest, last trade price of
option. SOURCES OF DATA: - The data is secondary in nature which is taken from t
he national stock exchange web site.
27
DATA ANALYSIS 1. PUT OPEN INTEREST WITH LAST TRADE PRICE: - The data which is sh
owing the major response of the investor is on bullish side. In this chart the v
olume is very huge and stills the price of putt falling down. This indicates tha
t the investors are using the short putt strategy and the future expectation of
investor is bullish in the market. The strategy says that when you sell putt in
advance and then you have to buy after certain period. The highest selling press
ure is generating on 17th march 2009 and it continues to 6th may 2009 and then t
he volume fell down for two or three days. Then it builds a pressure again and v
olume continues to grow till the expiry date. 2. PUTT CALL RATIO WITH VOLATILITY
INDEX: - The putt call ratio is related with volatility index because they alwa
ys show an opposite effect. When volatility index increases then putt call ratio
falls down. In this chart as we saw that putt call ratio is not high as much hi
gh then volatility index. They both are moving in side ways movement then after
few week volatility index generates a huge rate this indicates that the market i
s trading in high volatile situation. 3. CALL OPEN INTEREST WITH LAST TRADE PRIC
E:- The call means a bullish option and this is bought when buyers prediction is
on bullish side. The above chart is showing that the investor are buying call i
n huge amount and this out of money counter is building a huge pressure to marke
t on positive side. The out of money counter is trading in huge volume this indi
cates there are some positive signs of increasing the price of index as well as
many stocks. 4. NIFTY OPEN INTEREST WITH UNDER LINE VALUE:- The nifty is generat
ing a high volume because the investor and foreign investor institute and 28
hedge funds are buying the index in a large amount this indicates that the predi
ction is on bullish side. One thing is clear with this chart that when huge volu
me is in the market there is rise in price the interest of buying the future of
nifty in large amount or high and increasing open interest is the sign of increm
ent in market.
29
LIMITATIONS It would be unethical and unfair to declare the research having no l
imitation. The research process witnessed several barriers and hurdles while it
was being processed. 1. Less liquidity in out of money counter. 2. Hedging actio
ns prior to high volatility expectations. 3. Hedge funds participations is one o
f the great limitation of option in out of money
counter. 4. Option writing in out of money counters by informed participation al
so taking place.
30
RECEMENDATION 1. Irrespective of same topic, what really matters is the way of l
ooking at a particular situation, perception, data collection by other researche
r due to which the analysis will effect the research work. 2. Before conducting
any research help should be taken from previous research but that should not be
taken as a base for any research as each research have some or the other flaws a
ssociated with it. 3. I would recommend all of you to take care while collecting
the data from bhavcopy.
31
PART III
32
CHARTS AND GRAPHS
33
BIBLIOGRAPHY
1. www.nseindia.com 2. www.Angeltrade.com 3. www.wikipidia.com 4. www.investoped
ia.com 5. www.google.com 6. www.altiusdirectory.com
34