The only source of knowledge is

experience Albert Einstein

A PROJECT REPORT
ON
A Study On Derivative Instruments
(Future, Forward & Options)
FOR

Submitted to

Faculty Guide:

Company
Guide:

Mr. Ruturaj Doshi

Mr. Rajiv Parekh

Submitted by
VARDHANI AANCHAL MAHESHKUMAR
Enrollment No: 157340592228
MBA Semester III
Marwadi Education Foundations Group Of Institutions
MBA Program
Affiliated to Gujarat Technological University
Ahmedabad

CONTENT
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

Barter to Banking
Company at Glance
Products / Services of KMBL
SWOT Analysis
Derivatives
Literature Review
Research Methodology
Data Analysis & Interpretation
Results & Findings
Suggestion & Conclusions
Limitations
Bibliography

B to B
Barter - Trade instead of Pay

Money Juno Moneta

Banking-Banco-Bench
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Banking in Nation - 1786

The Banking System in India consists of:

Reserve Bank
Development Banks
Public Sector Banks
Foreign Banks
Private Sector Banks
Cooperative Banks
Regional Rural Banks

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Market Players
Public

Sector Bank
Private Sector Bank
Foreign Private Bank

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Company at Glance
30 September
2014- 641
branches -1159
ATMs - 363
locations in the
country.

Type

Pubic Company

Traded as

BSE : 500247
NSE : KOTAKBANK

Industry

Banking, Financial Service

Founded

1985 (as Kotak Mahindra Finance Ltd)

Headquarters

Mumbai, India

Key people

Uday Kotak(Founder & Executive Vice

Chairman, Dipak Gupta (Joint MD).

Merger with ING

Vysya.
29000 employees.

Products
Services
Revenue

109.63 billion(2011)

Net Income

15.69 billion(2011)

Total assets

USD 15.8 billion(2015)

No.
of employees

In 2014, it was the

fourth largest
private bank in
India by market

Deposit accounts, Loans, Investment

29,200 (before merger with ING Vysya )

(2015)

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Competitors push you to achieve

more

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Senior Management
UDAY KOTAK
Executive Vice Chairman and
Managing Director
Kotak Mahindra Bank Ltd

DIPAK GUPTA
Joint Managing Director
Kotak Mahindra Bank Ltd

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Products / Services of KMBL

Current a/c
Saving a/c
Loans & Overdrafts
Investment & Insurance
NRI a/c
Working Capital Finance
Convenience Banking
Trade Services

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SWOT Analysis
STRENGTHS

Innovative financial products of diverse categories

Has over 20,000 employees

Customer account base of over 2.7 million

WEAKNESSES

Lesser penetration as being late entrants

Low publicity and marketing as compared to other premium banks in the

urban areas

OPPORTUNITIES

Increase in Industry banking

Explore opportunities abroad by International banking

THREATS

Economic slowdown

Highly competitive environment

Stringent Banking Norms

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A STUDY ON DERIVATIVE INSTRUMENTS

Derivative to derive - product whose value
is derived from the value of one or more
underlying variables or assets in a
contractual manner. The underlying asset
can be equity, commodity or any other
asset.

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Forward v/s Future Contract

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OPTIONS CALL & PUT

A contract that gives its buyer the
right but not obligation to buy or sell
an asset at a fixed price on or
before a given time.
CALL BUY
PUT - SELL

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DERIVATIVES AT GLANCE WITH KMBL

GLOBAL TRADE A/C
Letter Of Credit
Bank Guarantee
How it works ?

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Literature Review
RAVICHANDRAN, D. K. (2008)
studied Investors Preferences towards various investment
avenues in Capital Market with special reference to
Derivatives. The study shows that in the current scenario,
investing in stock markets is a major challenge ever for
professionals. Derivatives acts as a major tool for reducing
the risk involved in investing in the stock markets for
getting the best results out of it. The study also focuses that
investors should be aware of the various hedging and
speculation strategies, which can be used for reducing their
risk. Awareness regarding various uses of derivatives can
help investors to reduce risk and increase profits.
Source : A Study On Investors
Preferences Towards Various
Investment Avenues in Capital Market
With Special Seference to
Derivatives", Journal of Contemporary
Research in Management

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Pasha, D. S. (2013)
studied Retail investors perception on financial derivatives
in India. It is found that 55 percent of the small investors
(respondents) are of the opinion that derivatives are new,
complex, and high-tech products. 38 percent of the
respondents, who are familiar with derivatives, said
derivatives are not new, complex, and high tech products.
And the remaining 7 percent of the investors could not
answer the question. This shows that a large number of
investors are not familiar with derivatives. The study also
found that 62 percent of the small investors are of the
opinion that derivatives are purely speculative and highly
leveraged instruments.
Source : Retail Investors
Percption On Financial
Derivatives In India, European
Scientific Journal, 9 (22).
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Tripathi, G. (2014)
studied Investors Perception towards Derivative Trading. The
study shows Indian investors mainly invest their money in
real estates and insurance as they are the options offering
great returns with minimum risk associated with it. It is
found that more than 75 percent of investors are aware
about derivatives, out of which 74 percent have invested in
derivatives. Most of the users often invest 10 percent 20
percent of their total investment in derivatives followed by
users who invest 20 percent 35 percent of their total
investment in derivatives. Out of derivative users 76 percent
investors have invested in options which offer benefits like
risk diversification and promises their investors great profits
with minimum investment. The study concluded that
derivative market is dominated by male investor with 72
Source
: "Anwhereas
Empirical
Investigation
ofonly
Investors
percent
female
investors are
28 percent.
Perception Towards Derivative Trading", Global Journal of
Finance and Management., 6(2), 99-104

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DR. Y. NAGARAJU, S. R. (2014)

studied investors' perception towards derivative instruments and
markets. The study shows that even though most people look at
derivatives with fear, they should understand the fact that
derivatives help in shifting the risk to the other party. There are
many myths that surround derivative market. All these can be done
away with proper system in place. Today institutional investors do
most of the derivative transactions. It is very important that even
individual investors participates in the derivative market actively
and reap the benefits from it. After this study it is clear that
derivative instruments and derivative markets are not so popular
among individual investors. Only educated investors with the help
of friends and brokers are investing in this market. The reasons for
not investing in this market are lack of knowledge and very
complex nature of instruments. Some people have a wrong
perception about derivatives. The study suggests that measures
should be taken to make sure that the investors get a right picture
of the instruments and their risk factors.

Source : "A Study on Investors' Perception Towards

Derivative Instruments and Markets", International Journal
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of Research In Commerce, Economics & Management,

Research Methodology
Research Design

Descriptive (e.g., case-study, naturalistic observation, Survey)

Correlational (e.g., case-control study, observational study)

Semi-experimental (e.g., field experiment, quasi-experiment)

Experimental (Experiment with random assignment)

Review (Literature review, Systematic review)

There were mainly two sources of data collection :

Primary data

Through structured questionnaire.(90 surveys)

Secondary data

Websites

Journals

Through internet, various official sites of the Bank.

Data used for study is primary sources of data as in this study data are collected
with the help of questionnaire by the 90 IMPORTERS-EXPORTERS.

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Analysis & Data Interpretation

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Which bank are you currently associated with?

RESPONSE
CORP BANK
CBI
BOI
Standard Chartered
DB
ICICI
CB
BOB
UBI
INDUSLND
YES
HDFC
AXIS
SBI
KMBl

RESPONSE

5
6
4
7
8
2
6
5
4
3

32
6
15
24

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What kind of account do you

maintain in this bank?
Response
Response
Any Other

GT

CC / OD

18

Saving

Current

32

26

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Are you trading in derivative market?

RESPONSE

NO; 33%
YES; 67%

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If No is the reply in the Q3 question,

reason for not investing in
derivative market?
Response
10
9
8
7
6
5
4
3
2
1
0

Response

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Which of the following Derivative

instruments do you deal in?

Response

Swaps; 9%
Future; 37%
Stock Option; 33%
Forward; 21%

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Are you satisfied with the current

performance of the derivative
market?
Response
Response
22

21
15
9

13
10

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Are you aware with benefits that

Kotak provides in regards to
Derivatives?
Reponse
35
34
33
32
31
30
29
28

YES

NO

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Would you want to switch to Kotak

Mahindra Bank in Future?

25

22

21
20

18

17

15

12

10
5
0

Response
Definitely would switch
Might switch
Definetely wouldnt

Probably would switch

Probably wouldnt switch

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Results & Findings

Derivative market is growing very fast in the Indian Economy.

Many of the respondents are trading in derivative market.

Those who are not trading, found the derivatives very risky .

37%, 21%, 33%, 9% trade in Future, Forward, Stock Options and

Swaps respectively.

The main factors that are driving the growth of Derivative Market
are Market improvement in communication facilities as well as long
term saving & investment is also possible through entering into
Derivative Contract.

It encourages the investor to take more risk & earn more return. So
in this way it helps the Indian Economy by developing
entrepreneurship. The rule of High Risk & High Return apply in
Derivatives.

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Suggestions & Conclusions

Suggestions

Kotak Mahindra Bank Ltd is a renowned name in the

banking sector. To grow in trade department, Bank
must lessen its charges.

There must be limits for collateral as other players in

the industry are providing collateral limits which are
than more preferred by investors.

Brief knowledge about how to deal in derivative

instruments must be given.

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Conlcusion

Derivative market should be developed in order to

keep it at par with other derivative markets in the
world.

Speculation should be discouraged.

There must be more derivative instruments aimed at

individual investors.

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Limitations

Limited Time

Limited Resources

Volatility

Aspects Coverage

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Bibliography
Book Referred
John C. Hull Options, Futures & Other
Derivatives (9th Edition)
Websites
www.kotak.com
www.derivativesindia.com
www.investopedia.com
www.wikipedia.org
www.economictimes.com
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Words put on paper are mere ink marks, but

when they have a purpose there exists a
thought behind them.
Expressing gratitude to the whole Kotak Mahindra
Bank Ltd team and faculties of Marwadi College
for the extreme support.

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