10-04-2017, 08:52 PM
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EXECUTIVE SUMMARY
One of the interesting developments in financial markets over the last 15 to 20 years has been the growing popularity of derivatives or contingent claims. In many situations, both hedgers and speculators find it more attractive to trade a derivative on an asset than to trade the asset itself. Some derivatives are traded on exchanges. Others are made available to corporate clients by financial institutions or added to new issues of securities by underwriters.
In this report we have included history of Derivatives. Than we have included Derivatives Market in India. Than after we have included stock market Derivatives.
In this report we have taken a first look at forward, futures and options contracts. A forward or futures contract involves an obligation to buy or sell an asset at a certain time in the future for a certain price. There are two types of options: calls and puts. A call option gives the holder the right to buy an asset by a certain date for a certain price. In India the derivatives market has grown very rapidly. There are mainly three types of traders: hedgers, speculators and arbitrageurs.
In the next section, we have tried to determine the study of Nifty derivatives for the short term period using the two important indicators namely Open Interest & Put/Call Ratio. In which Put/Call Ratio analysis proves to be more effective indicators. Moreover in the analysis of Put/Call Ratio, Combination of Open Interest & Volume gives more accurate results.
In the last section, we have determined different trading strategies for different market views i.e. Bullish, Bearish, Range bound & Volatile. On the basis of investors perceptions they can use suited strategies which will minimize the loss. There are also some arbitrage strategies prevailing in the market like reversal, conversion etc. which give fix amount of profit irrespective of market movements but it is not readily available in the market but one has to grab such Opportunities.
CH. 1 INTRODUCTION TO INDIAN CAPITAL MARKET
CAPITAL MARKET
In today s era investor invest their funds after basic analysis. The basic function of financial market is to facilitate the transfer of funds from surplus sectors that is from (lenders) to deficit sectors (borrowers). If we look at the financial cycle then we can say that households make their savings, which is provided to industrial sectors, which earn profit and finally this profit will go to the households in the form of interest and dividend.
Indian Financial System is made-up of 2 types of markets i.e. Money market & Capital Market. The money market has 2 components-The organized & unorganized. The organized market is dominated by commercial banks. The other major participants are RBI, LIC, GIC, UTI, and STCI. The main function of it is that of borrowing & lending of short term funds. On the other hand unorganized money market consists of indigenous bankers & money lenders. This sector is continuously providing finance for trade as well as personal consumption.
Capital Market
Primary Market
Secondary Market
To create funds, new firms use Primary Market by publishing their issues in different instruments. On the other hand Secondary Market provides base for trading and securities that have already been issued.
PAST OF SHARE MARKET
Before 1996, all the transactions were done through physical form in security market. Because of physical form investors were facing so many problems.
At that time the certificates were transferred to the purchase holder. On the other hand they are now transferred directly in their electronic form which is much more quicker and safer.
BSE
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act, 1956.
NSE
To obviate the problem, RELATED TO PHYSICAL FORM the NSE introduced screen based trading system (SBTC) where a member can punch into the computer the quantities of shares & the prices at which he wants to transact.