A project report on

STUDY OF DERIVATIVES IN INDIAN STOCK MARKET

PERIOD (2009-2012)

Submitted to
_______________________________________________________
__________________________________________________________
Nashik
In partial fulfillment of the Requirement of the award of the degree
Of

Master of Business Administration (MBA-Finance)

By:
__________________________________________________

Under The Guidance of

Through
The Coordinator
Study Centre Code: _________

CERTIFICATE

This is to certify that the project report entitled on

STUDY OF DERIVATIVES IN INDIAN STOCK MARKET PERIOD
(2009-2012) for the Academic Year 2010-2012
Submitted to the School of Commerce and Management, Yashwantrao
Chavan Maharashtra Open University, Nashik in partial fulfillment of the
requirement for the award of Degree of Master of Business Administration
(MBA) is original work carried out by
__________________________________________________ with
PRN-2010017002887675 under my guidance. The matter embodied in this
project is genuine work done by the student and has not been submitted to
this University or any other University/Institute for the partial fulfillment of
the required study.

Date:
Place:

DECLARATION

I, __________________________________________________, the student

of MBA-Finance, completed project on
STUDY OF DERIVATIVES IN INDIAN STOCK MARKET
PERIOD (2009-2012), for the Academic Year 2010-2012.
The information provided in this project is my original work and is being
submitted in partial fulfillment for the award of Masters Degree in Business
Administration of __________________________________________.
This report has not been submitted earlier either to this or to any other
University or Institution for the fulfillment or the requirement of a course of
study. The information given in this project is true to the base of my
knowledge.

MR.. __________________________________________________
Student

Date: 13/10/2012
Place: Nashik

ACKNOWLEDGEMENT

For any success, you require hard work and genuine efforts, but it is incomplete
without innumerable blessings, support, and sincere guidance.
I especially thank my Guide and Mentor Dr. Sunil Joshi for all the support,
motivation, and technical guidance he provided throughout the duration without
which my aim would have been incomplete.
I am indeed grateful to all professors and staff from Bhonsla Military College,
with whom I had the opportunity to interact. I am also thankful to Mrs.
Kochargaonkar (principal) and Mr. Sawant (Coordinator YCMOU MBA) as
without their cooperation and blessings, the work I had undertaken was not
possible at all.
I thank to all staff of the DMS group who interacted with me and provided all the
information necessary for the concluding work.
I am also very thankful to my family members and my friends who have been
extremely supportive throughout this journey.

E X E C U T I V E S U M M AR Y
Financial markets are, by nature, extremely volatile and hence the risk factor
is major concern for financial agents. As uncertainty about future goes
down, volatility is expected to go down; however as mentioned earlier, the
response/ reaction time becomes shorter, volatility is expected to increase.
To reduce the risk, the concept of derivatives comes into picture. Last
decade was one of the eventful decades in the Indian markets. In India, the
emergence and growth of derivatives market is relatively a recent
phenomenon. Since its inception in June 2000, derivatives market has
exhibited exponential growth both in terms of volume and number of traded
contracts.
On one side, just a few derivatives disaster stories were enough to bring
entire business of derivatives under the limelight, make every one worry
about unknown risk associated with derivatives, and elevate derivatives into
mysterious something; while on the other side, there were people who
started understanding the derivatives and used the derivatives for hedging
and mitigating the risks while adding liquidity to the markets.
This study attempts to discuss the genesis of derivatives, trading by tracing
its historical developments, types of traded derivatives products, regulation
and policy developments, trend and growth, future prospects and challenges
of derivative market in India. The study also covered the myths carried by
the general investors as well as the traders.

INDEX
Chapter-1
INTRODUCATION
1.1
1.2

Objectives of the project.

Selection of the topic for the study.

1.3
1.4

Objectives of the study.

Research methodology.

1.5

Scope of the study.

1.6

Limitations of the project.

Chapter-2
PROFILE OF THE ORGANIZATION
2.1

Historical background of DMS.

2.2

Organizational flowchart of DMS.

2.3

Product and services offered by the organization.

Chapter-3
DERIVATIES IN INDIA AND RECENT DEVELOPMENT
MAINLY SINCE YEAR 2009
3.1

Approval for derivative trading.

3.2

Derivative market at NSE.

3.3

Major developments since year 2009.

3.4

Trading mechanism.

3.5

Membership criteria.

3.6

Turnover.

3.7

Clearing and settlement.

3.8

Definition.

3.9

Features.

3.10

Economic role of derivatives.

14

3.11

Basis of classification of derivatives.

3.12

Type of derivatives.

3.13

Derivative products.
3.13-1 Futures.
3.13-2 Options.

3.14

Associated risks with derivatives.

3.15

Advantages and disadvantages.

3.16

Participants in the derivatives markets.

Chapter-4
ANALYSIS AND INTERPRETATION OF THE DATA
4.1

Practical Illustrations:

4.2

Interpretation.

46

Chapter-5
CONCLUSION OF THE STUDY

59

Chapter-6
RECOMMENDATIONS AND SUGGESTIONS
6.1

61

Ten commandments of futures & options trading.

APPENDICES/ BIBLIOGRAPHY
WEBLIOGRAPHY.

64

list of graphs

Page No

1. Long future

28

2. Short future

29

3. Long call

34

4. Long call

35

5. Short call

37

6. Long put

38

7. Short put

40

Organizational Flowchart

11

Table 1: Derivative in India: A Chronology

15

NSE Derivatives Segment Turnover (in cr.)

18