Jaypee Business School

A constituent of Jaypee Institute of Information Technology

(Deemed University)
A-10, Sector 62, Noida (UP) India 201 307
www.jbs.ac.in

A Study On Online Trading

And
Equity Derivatives (FNO)

Corporate Internship Report

Internship Report submitted as a partial requirement for the award of the two year
Master of Business Administration Programme
MBA 2013-15

Name: Bhuvnesh Kothar

(13609123)

SHAREKHAN LTD.
Corporate Internship Supervisor
Name: Mr. Anil Sharma

JBS-Faculty Supervisor
Dr. Debdeep De

Start Date for Internship: 10th April, 2014

End Date for Internship: 10th June, 2014

Report Date: 16th June, 2014

 SELF CERTIFICATE

Summer Internship At :-

Sharekhan Ltd.
3-H/E, Jhandewalan Extension
New Delhi – 110055

From :- 10th April, 2014

To :- 10th June, 2014

Projects :-

1) Overview of Online Trading

a) Procedure to perform
b) Sharekhan’s Software knowledge (TRADE TIGER)

2) Derivatives (FNO trading)

a) Future index
b) Option Index
c) Trading in Equity Segment

Under the guidance of :-

Mr. Anil Sharma (Mentor at Sharekhan)

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II
 ACKNOWLEDGEMENT

I consider it my privilege to express my gratitude & indebtedness towards those who have supported me towards
the completion of my project report. The project wouldn’t have been completed with flying colors without the
help and guidance of many people. I take an opportunity to convey my deepest gratitude to all those individuals.

My first word of thanks to Mr. Anil Sharma (company guide) who provide me his valuable time and information.
His continuous support, affectionate encouragement and patience have greatly eased my burden and made this
project possible.

It was great opportunity for me to work with Sharekhan ltd., pioneer in the field of online trading and retail
broking arm of SSKI Investors pvt. ltd. I’m indebted to all the staff members of the Sharekhan ltd. for their valuable
support and co-operation during the entire tenure of this project.

I owe my special regard to the Director, HOD (JBS), my mentor Dr. Debdeep De and my programme director
Dr. Asit Bandyopadhayay to help me out in giving the relative information and guidance.

At last but very important I would like to thank my parents who stood by me to provide me with all the
infrastructure and other types of help required by me.

III
TABLE OF CONTENTS

IV
 EXECUTIVE SUMMARY

As the title suggests, the project report has been prepared regarding the learning of online trading in equity. It
includes trading in Derivatives of future & options of equity and analyzing their movement on daily basis via charts.
Derivatives include trading in Futures and Options. Today, a large number of people are showing interest in
trading. Online trading has given the ability to invest in the market to everyone who has a computer, enough
money to open an account and a reasonably good financial history. Easy accessibility does not mean online trading
can be taken lightly. In this project, we’ll discuss the different types of equity and derivatives trading, their trading
techniques and also risks involved with it.

In the starting, Company’s Profile is studied and Industry analysis is done which involve knowing of its Industry size
and its trends of growth and then doing its competitive analysis. The project discuss about the different trading
companies in India. Some of the major broking companies are Sharekhan, SMC, Indiabulls, etc. According to
customer’s requirements the companies offer different account types with different offers in terms of brokerage,
terminal types, and reports. According to a study on Investor’s preference it was found that Sharekhan was the
most preferred broking firm. After that its portfolio analysis was done.

Then the financial analysis of Sharekhan ltd was done, in which different financial ratios are discussed. The Balance
Sheet, P&L Statement and Cash Flow statement are shown. Certain financial crisis and frauds have been seen by
the markets in recent years which are discussed in the project warning investors to be aware of the risks involved
in the share market.

Learning is always incomplete without a practical experience. So, I had open a de-mat account starting with an
investment of Rs.15000/- and started my trading in equity, derivatives market first which included dealing in
general buying and selling of the shares of the listed companies. Secondly, the trading which has been carried in
the derivatives options index of the NIFTY and BANK NIFTY and moreover in the options of the various other listed
companies. This trading in different markets helped me learn about global market fluctuation and their relevance
onto the pricing of the shares and the market points.

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 CHAPTER – 1
OBJECTIVES OF THE STUDY

The project is about the “study of online trading and derivatives(FNO), which depicts the new way to trade in the
stock market and any investor’s vision is a long term investment ad short term investment and gets high returns by
bearing high risk. For that objective need to be climbed successfully an so objectives of this project are,

 To learn the overview of online trading.

 To learn how to trade in the equity via Trade Tiger software.
 To find the RIGHT SCRIPT to buy and sell at the RIGHT TIME.
 To get good return.
 To know how derivatives can be use for hedging.
 To know the outcome of Equity and Derivative.
 How to achieve Capital appreciations.

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 CHAPTER – 2
COMPANY’S PROFILE

Sharekhan is one of the leading retail brokerage of SSKI Group which was running sucessfully since 1922 in the
country. It is the retail broking arm of the Mumbai-based SSKI Group, which has over eight decades of experience
in the stock broking business. Sharekhan offers its customers a wide range of equity related services including
trade execution on BSE, NSE, Derivatives, depository services, online trading, investment advice etc.

The firm’s online trading and investment site - www.sharekhan.com - was launched on Feb 8, 2000. The site gives
access to superior content and transaction facility to retail customers across the country. Known for its jargon-free,
investor friendly language and high quality research, the site has a registered base of over one lakh customers. The
number of trading members currently stands at over 3 Lacs. While online trading currently accounts for just over 2
per cent of the daily trading in stocks in India, Sharekhan alone accounts for 32 per cent of the volumes traded
online. The content-rich and research oriented portal has stood out among its contemporaries because of its
steadfast dedication to offering customers best-of-breed technology and superior market information. The
objective has been to let customers makeinformed decisionsand to simplify the process of investing in stocks.

On April 17, 2002 Sharekhan launched Speed Trade, a net-based executable application that emulates the broker
terminals along with host of other information relevant to the Day Traders. This was for the first time that a net-
based trading station of this caliber was offered to the traders. In the last six months SpeedTrade has become a de
facto standard for the Day Trading community over the net.

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Sharekhan’s ground network includes over 588 centres in 148 cities in India, of which 32 are fully-owned branches.
Sharekhan has always believed in investing in technology to build its business. The company has used some of the
best-known names in the IT industry, like Sun Microsystems, Oracle, Microsoft, Cambridge Technologies, Nexgenix,
Vignette, Verisign Financial Technologies India Ltd, Spider Software Pvt Ltd. to build its trading engine and content.
The Morakhiya family holds a majority stake in the company. HSBC, Intel & Carlyle are the other investors.

With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and
corporate finance 18 years ago. Presently SSKI is one of the leading players in institutional broking and corporate
finance activities. SSKI holds a sizeable portion of the market in each of these segments. SSKI’s institutional broking
arm accounts for 7% of the market for Foreign Institutional portfolio investment and 5% of all Domestic
Institutional portfolio investment in the country. It has 60 institutional clients spread over India, Far East, UK
and US. Foreign Institutional Investors generate about 65% of the organization’s revenue, with a daily turnover of
over US$ 2 million. The Corporate Finance section has a list of very prestigious clients and has many ‘firsts’ to its
credit, in terms of the size of deal, sector tapped etc. The group has placed over US$ 1 billion in private equity
deals. Some of the clients include BPL Cellular Holding, Gujarat Pipavav, Essar, Hutchison, Planetasia, and
Shopper’s Stop.

2.1 WHY SHAREKHAN LIMITED ???

Experience
SSKI has more than eight decades of trust and credibility in the Indian stock market. In
the Asia Money broker's poll, SSKI won the 'India's best broking house for 2004' award.
Ever since it launched Sharekhan as its retail broking division in February 2000, it has
been providing institutional-level research and broking services to individual investors.
Technology
With the online trading account investors can buy and sell shares in an instant from any
PC with an internet connection. They get access to the powerful online trading tools that
helps them take complete control over their investments in shares.

Accessibility
Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXECUTION servies for
investors. These services are accessible through their centres across the country (Over
588 locations in 148 cities) over the internet (through the website www.sharekhan.com)
as well as over the Voice Tool.

Knowledge
In a business where the right information at the right time can translate into direct profits,
investors get access to a wide range of information on the content-rich portal, sharekhan.
They will also get a useful set of knowledge-based tools that will empower them to take
informed decisions.

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Convenience
Investors can call the Dial-N-Trade number to get investment advice and execute the
transactions.Sharekhan has a dedicated call-centre to provide this service via a Toll Free
Number 1800-22-7500&1800-22-7050 from anywhere in India.

Customer Service
Sharekhan customer service team assist their investors for any helpneeded relating to
transactions, billing, demat and other queries. Their customer service can be contracted
via a toll-free number, email or live chat on www.sharekhan.com.

Investment Advice
Sharekhan has dedicated research teams of more than 30 people for fundamental and
technical researchs. Their analysts constantly track the pulse of the market and provide
timely investment advice to the investors in the form of daily research emails, online
chat, printed reports and SMS.

2.2 BENEFITS

 Free Depository A/c

 Secure Order by Voice Tool Dial-n-Trade.
 Automated Portfolio to keep track of the value of your actual purchases.
 24x7 Voice Tool acess to your trading account.
 Personalised Price and Account Alerts delivered instantly to your Cell Phone & E-mail address.
 Special Personal Inbox for order and trade confirmations.
 On-line Customer Service via Web Chat.
 Anytime Ordering.

2.3 PRODUCTS OFFERED BY SHAREKHAN LTD.

 Equity and Derivative Trading on BSE and NSE.

 Depository Services.
 Online Trading.
 IPO Services.
 Commodities Trading on MCX and NSDEX.
 Portfolio Management Services.

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2.4 SERVICES PROVIDED BY SHAREKHAN

 Online Services
 Offline Services
 Depository Services
 Equity and Derivatives Trading
 Fundamental Research
 Technical Research
 Portfolio Management
 Commodities Trading
 Dial-n-trade
 Share shops

Online Services:

 Mutual Funds
 Commodity Futures
 PMS
 Technical PMS
 De-mat Services
 Share shops

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Offline Services:

 Trading with the help of Dealer

 Trading without credit
 By calling to the Share shops
 Credit facility (Only in Delivery-based)
 T+2 facility
 Special website for Offline Clients: www.mysharekhan.com
 Physical contract notes

2.5 TYPES OF ACCOUNT

 Classic A/c
 Speed-trade
 Classic A/c:

 Features of Classic A/c:

1. Online trading account for investing in Equities and Derivatives via sharekhan.com.
2. Integration of: Online trading + Bank + De-mat account.
3. Instant cash transfer facility against purchase & sale of shares.
4. Make IPO bookings.
5. You get Instant order and trade confirmations by e-mail
6. Streaming Quotes.
7. Personalized Market Scan with your own customized stock ticker.
8. Single screen interface for cash and derivatives

 Features of Speed-trade:

1. Instant order Execution & Confirmation

2. Single screen trading terminal
3. Real-time streaming quotes, tic-by-tic charts
4. Market summary (most traded scrip, highest value and lots of other relevant statistics)
5. Hot keys similar to a brokers terminal
6. Alerts and reminders
7. Back-up facility to place trades on Direct Phone lines
8. Single screen interface for cash and derivatives

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 Features of Dial-n-trade:

1. Two dedicated numbers for placing your orders with your cell phone or landline. Toll free number: 1-800-
22-7050. For people with difficulty in accessing the toll-free number, we also have a Reliance number
30307600 which is charged at Rs. 1.50 per minute for STD calls.
2. Automatic funds transfer with phone banking (for Citibank and HDFC bank customers).
3. Simple and Secure Interactive Voice Response based system for authentication.
4. No waiting time. Enter your TPIN to be transferred to our tele-brokers.
5. You also get the trusted, professional advice of our teleprocess.
6. After hours order placement facility between 8.00 am and 9.30 am (timings to be extended soon).

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 CHAPTER - 3
INDUSTRY ANALYSIS

3.1 INDUSTRY SIZE AND TRENDS OF GROWTH

Indian Equity Market is growing strongly these years as a result the Indian Stock Broking Industry is going through a
transformation phase with increasing participation and turnover.

 The face of the brokerage industry has been changed by the new generation of discount brokers. Their
high performance trading platforms, good customer service and off course saving of over 60% on
brokerage made investors try these services. Unlike traditional broker who spend lot of money on
advertising their services, the discount brokers has grown through word-of-mouth. The discount brokers
are the future of the brokerage industry because of the changing economy and the high-quality
performance by the Indian corporate sector. With the entrance of a number of corporate sectors, no
doubt the industry has achieved size and scale.

 India has two big stock exchanges named Bombay Stock Exchange (BSE) and National Stock Exchange
(NSE) and few small exchanges where shares and equities are traded. An investor can trade stocks in any
of the stock exchanges in India, but all the stock brokers trade online only in BSE and NSE. They are
registered member of the stock exchange and can register a client to one or more stock exchanges. They
take commissions(brokerages) for their service that vary from broker to broker. An investor has to take
the help of a stock broker to trade stocks because they only can directly buy and sell shares in Stock
Market.

Unlike many other large economies around the world, the participation in stock market by retail investors in India
is the lowest. The focus of the Government of India this year was to build policies to encourage more retail
investors to choose equity as a long term investment option. These policies and reforms will start showing results
in coming years and the investors and broking industry will gain the most from this.

3.2 COMPETITIVE ANALYSIS

Major players in Stock broking Industry

1. Sharekhan Limited
2. SMC Limited
3. Indiabulls
4. Kotak Street
5. ICICI Direct
6. HDFC Securities

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  HDFC SECURITIES

HDFC Securities Ltd is promoted by the HDFC Bank, HDFC and Chase Capital Partners and their associates. Pioneers
in setting up Dial-a-share service with the largest team of Tele-brokers.Providing a Plain Vanilla Account with focus
on 3 in 1 advantage.

Pricing of HDFC Account

i. Account Opening: Rs 750
ii. Demat: NIL, 1st year charges included in Account Opening
iii. Initial Margin : Rs 5000/- for non HDFC Bank Customers (AQB)
iv. Brokerages
 Intraday Trading 0.15% each side + ST (Rs. 25 Min Brokerage per transaction)
 Delivery 0.50% each side + ST (Rs 8 Min Brokerage per transaction)

 ICICI DIRECT

ICICI Direct is an online trading and investment platform on ICICI Securities, the largest stock broker firm in India
providing a wide range of investment options to the retail and institutional customers.
i. Account Opening: Rs 750
ii. Schemes: For short periods Rs 750 is refundable against brokerage generated in a qtr. These schemes are
introduced 3-4 times a year.
iii. De-mat: NIL, 1st year charges included in Account Opening Plus a facility to open additional 4 DP’s without
1st yr AMC. Only Rs 100 as linking charges per DP
iv. Initial Margin : Nil
v. Brokerage: ICICI’s brokerage rates are inclusive of Stamp duty (0.002%) for trading and 0.010% for
delivery while service tax (10.2%) on BROKERAGE land turnover tax is EXTRA.

TRADING BROKERAGE CHARGES

CM Segment .55%
Cash delivery
CM Segment .275%
Cash intraday
F&O Segment .05% - .03%
Futures
F&O Segment Rs 95 – Rs 65 (per lot)
Options
Minimum Brokerage Charges Rs 25

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  INDIABULLS

Indiabulls Securities (ISL) is one of India's leading capital markets companies providing securities broking and
advisory services. Indiabulls Securities also provides depository services, equity research services and IPO
distribution to its clients and offers commodities trading through a separate company. These services are provided
both through on-line and off-line distribution channels. Indiabulls Securities is a pioneer of on-line securities
trading in India. Indiabulls Securities in-house trading platform is one of the fastest and most efficient trading
platforms in the country. Indiabulls Securities has been assigned the highest rating BQ-1 by CRISIL.
India Bulls is a retail financial services company present in 70 locations covering 62 cities. It offers a full range of
financial services and products ranging from Equities to Insurance.
450 + Relationship Managers who act as personal financial advisors. Providing a Plain Vanilla Account with focus on
Equity Analysis and a Power India Bulls account with sophisticated trading tools.
The equity analysis is a paid service even for A/c holders.

Plain Vanilla A/c Power India Bulls A/c

Account Opening Rs 250 Rs 750
Demat Rs 200 if POA is signed Rs 200 if POA is signed
No AMC for this DP No AMC for this DP
Initial Margin NIL NIL
Brokerage Negotiable Negotiable

 KOTAKSTREET

Kotakstreet is the retail arm of Kotak Securities. Kotak Securities limited is a joint venture between Kotak Mahindra
Bank and Goldman Sachs. Providing Twin Advantage / Green Channel A/c, Free Way A/c, High Trader A/c and Cash
Expressway A/c.

i. Account Opening : Rs 500

ii. Demat: Rs 22.5 p.m
iii. Initial Margin : Rs 5000(Compulsory)
iv. Min Margin Retainable : Rs 1000
v. Brokerage Slab wise: Higher the volume, lower the brokerage.
vi. Even older customers (on 0.25% & 0.40%) have been moved to the slab wise structure w.e.f 1/4/2004

Delivery Volume P.M. Brokerage Square Volume P.M. Brokerage

<1lakhs 0.65% <10lakhs 0.10%
1lakhs – 5lakhs 0.60% 10lakhs – 25lakhs 0.08%
10lakhs – 20lakhs 0.40% 25lakhs – 1crore 0.05%
20lakhs – 60lakhs 0.30% >5crore 0.035%
60lakhs – 2crore 0.25% 60lakhs – 2crore 0.03%
>2crore 0.20%
Brokera is inclusive of all taxes

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  INDIA INFOLINE

Indiainfoline was founded in 1995 and was positioned as a research firm. In 2000 e-broking was started under the
brand name of 5paisa.com. Apart from offering online trading in stock market the company offers mutual funds
online. It also acts as a distributor of various financial services i.e. GOI securities Company Fixed Deposits,
Insurance. Limited ground network, present in 20 cities. Provides Investor Terminal A/c and Trader Terminal A/c.

Investor Terminal A/c Trader Terminal A/c

Account Opening Rs 500 Rs 500
Initial Margin Rs 2500 Rs 5000
Min Margin Retainable Rs 1000 Rs 1000
De-mat Rs 250 Rs 250
Brokerage ID 0.10%, D 0.50% + ST ID 0.10%, D 0.50% + ST

 SHAREKHAN

Sharekhan is the retail broking arm of SSKI Securities Pvt Ltd. SSKI owns 56% in Sharekhan, balance ownership is
HSBC, First Caryle, and Intel Pacific. Sharekhan is in broking since 80 years and mainly focused on providing equity
solutions to every segment. Resulting, they have largest ground network of 210 Branded Share shops in 90 cities
across India. Provides Classic A/c and Speed Trade A/c.

Classic A/c Speed Trade A/c

Account Opening Rs 750 Rs 1000
De-mat NIL Incl. in Account Opening
Initial Margin NIL NIL
Min Margin Retainable NIL NIL
Brokerage ID 0.10% and Del .50% + Taxes ID 0.10% and Del .50% + Taxes

Sharekhan also provides its customer with the DIAL-N-TRADE trading interface. The DNT is a value added services
meant for all customers who want to transact but are not online.

Some of its features are:

i. Dedicated Toll – Free number for Order placements
ii. Automatic fund transfer with phone banking*
iii. Simple and secure IVR based system for authentication
iv. No wait time, on entry of Phone Id & TPIN, the call is transferred
v. Trusted, professional advice of Tel-brokers who offer undiluted Sharekhan

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3.3 INVESTOR’SPREFERENCE

Investor's Preference

7%

12%
36% ShareKhan
SMC
IndiaBulls
16%
Religare
Others

29%

3.4 VISION

To be the best retail brokering brand in the retail business of stock market.

3.5 MISSION

To educate and empower the individual investor to make better investment decisions through quality advice and
superior service.

3.6 PORTFOLIO ANALYSIS

 TRADING AND SETTLEMENT AT SHARE KHAN

The NSE first introduced online trading in India. The Online trading system imparted a greater level of transparency
and investors preferred exchanges that offered Online trading because of the following factors:
i. The ease of operation from the view of the both members and the investors.
ii. Increase in the confidence of the investors because of higher level of transparency.
iii. Facilities better monitoring of the market by the exchange.
iv. The best price achieved in buying and selling.
v. All these resulted in ever-increasing volumes on the exchanges offering the online trading.

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  TRADING PROCEDURE AT SHARE KHAN STOCK BROKING

Share Khan deals in buying and selling equity shares and debentures on the National Stock Exchange (NSE), the
Bombay Stock Exchange (BSE) and the Over The-Counter Exchange of India (OTCEI).

Share Khan is provided with a computer and required software from their registered stock exchanges. These
centers are called “Broker Work Stations”. These computers are connected to the server at the stock exchanges
through cable. The member or broker sitting in his office can send the quotations, orders, negotiations, deals, in-
house deals, auction orders etc., through the computer.

The Central trading system (CTS) will accept these orders and send it for match. If there is any mistake in the order,
CTS will reject the orders and send respective error message to the member concern. All these operations are in
built. The main objective of CTS is to monitor the Stock Exchanges operations.

Order placed by the broker will be sent for a match and if the match is found suitable, the transaction will be
executed. Otherwise, the order will be deleted automatically after completion of trading time. The carry forward
transactions (Good Till cancellation) are forwarded to the next day. Even if the match is not found within the
prescribed period, the order will not cancel.

 TRADING SESSION

Trading timings are from 9:00 A.M. to 3:30 P.M. on all 5 days of the trading period. Monday to Friday is the trading
period in all the stock exchanges. SEBI has stipulated that all the stock exchanges in India must have same trading
period.

 BROKER WORK STATION

At the broker workstation the BBO’s, the last traded price, the day‘s opening price, previous day’s closing price,
highest and lowest prices, the weighted average price and total trade value will be available continuously, as the
BBO for each scrip.

Other information will be available on query from the BWS. These include top gainers /losers of the day. Trader-
wise, scrip wise net position, client wise net position, top scrip by the volume/value, market summary etc.
Brokers are also provided with information relating to the companies in the matter of Book closure, Dividend
declarations, resolutions in board meeting, information about liquidated companies, company report etc.

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  ORDERS

Orders can be done one at a time or in a batch mode. The submitted order will be accepted at the CTS, after
validation if it finds any invalid reason the order is return back to the BWS, with the appropriate error message. If
accepted at the CTS it will be added to the local pending order book.

The order will then be taken up for matching, if it is a buy order the system tries to find a sell order, which fits the
requirement of the buy order, when such match is found a trade gets executed. Each trade involves two brokers
and respective traders who sent the order. Both these traders are informed of the trade being executed at their
respective BWS. At the BWS the trade is added to the local trade book.

Orders sent by the brokers are two types:

 Good for the day (GFD)
This is also called as “market order”. For an order if the member selects the deal as good for the day, the
order is treated as market order. If a “best bid” founds match with “best order” then the transaction gets
executed. If the match is not found then after trade time the order gets cancelled that day. Next day he
has to place a new order.

 Good till cancellation(GTC)

This order is forwarded to the last trading day of that settlement period. This is also called as carry
forward order like GFD; broker has to select the option of GTC for the order. If the order finds match with
in the trading settlement period, the order is executed. If no match is found, the order is cancelled on the
last day of settlement period. This order is not carried forward to the next settlement period.

 SETTLEMENT OF TRANSACTIONS

Clearing of transaction in the form of shares and cash is called settlement. Buyers will take the delivery of shares
through the depository participants like SHARE KHAN and others.

Finally, the settlement is made by means of delivering the share certificates along with the transfer deeds. The
transferor (or the seller) duly signed transfer deed. It bears a stamp of the selling broker. The buyer then fills up
the certificates fills up the particulars in the transfer deed.

Settlement can be done in the following way.

Spot settlement: Under this method, the delivery of securities and payment for them are affectedon the day of the
contract itself.
Rolling settlement: Under this rolling settlement the trading is on “T+2”,basis i.e. if Monday is trading day then
Wednesday is the paying day . In case on non- delivery, the securities will go for auction.

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  DETAILS OF PROCEDURES

Delivery in: The members who are in pay-out position delivers share certificates in to clearing house within the
settlement period along with the delivery Chelan filled in with the details of share certificates which has folio
numbers or distinctive numbers etc.

Delivery out: The buyer of shares who made pay in position will take delivery of shares from the clearing house.

Pay-in: The member who is in paying position shall pay for value of shares with in the trading settlement period
(T+2).

Payout: The cheques paid in the clearinghouse will be paid to members who are in paying position. All disputes
arising between members regarding non-deliveries, non-payments, good and bad deliveries pertaining to the
settlement will be settled by the settlement committee of the exchange.

3.7 MARKET ANALYSIS OF SHAREKHAN : (7P’S OF SHAREKHAN)

 PRODUCT

 Product Variety
Share khan offers 3 types of online trading accounts for its customers specially designed according
to their volume in share trading. Those 3 varieties are:
 Classic- for retail investors
 Speed Trade: for high net worth investors with large and active equity portfolio who
need to monitor and action swiftly
 Speed trade plus: for high net worth investors dealing in derivative market.

 Quality
User Friendly, attractive & colorful Website designed by Infosys.
.
 Design
www.Sharekhan.com has been specially designed to facilitate its users to buy and sell shares
instantly at anytime and from anywhere they like. The site is user friendly allowing even a layman
to easily operate without any hassles.

 Features
Share khan’s product comes with the following features:

 Trade execution in a fraction of a second!

 Single Screen Trading Terminal
 Real time streaming quotes. Price watch on any number of scripts.
 Hot keys similar to Brokers Terminal.
 Customized Alerts based on Multiple Parameters.
 Back up Facility to place trades on Direct Phone Lines.
 Intra day charts, updated live, tick-by-tick.
 Instant Order\ Trade Confirmation in the same window
 Live margin, position, marked to market profit & loss report.

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  Competitive Brokerage.
 Flexibility to customize screen layout and setting.
 Facility to customize any number of portfolios & watch lists.
 Facility to cancel all pending orders at one click.
 Facility to square off all transactions at one click.
 Top Gainers, Top Losers, and Most Active, updated live.
 Index information; index chart, index stock information live.
 Market depth, i.e. Best 5 bids and offers, updated live for all scripts
 Online access to both accounts and DP.
 Live updated Order and Trade Book.
 Details of pending executed and rejected orders.
 Online access to Customer Service.
 128 - Bit super safe encryption.
 Facility to place after market orders
 Online fund transfer facility from leading Banks
 Online intra-day technical calls.
 Exhaustive database of over 2000 companies
 Historical charts and technical analysis tools.
 Last but not the least, ideas that help you to make money!!!

 Brand Name

 The company as a whole in its offline business has named itself as SSKI Securities Pvt.
Ltd - Sevaklal Sevantilal Kantilal and Ishwarlal Securities Pvt. Ltd. The company has
preferred to name themselves under a Blanket Family Name.

 But in its online division started since 1997, the company preferred to name itself as
“SHARE KHAN”. The Brand Name “SHARE KHAN” itself suggests the business in which
the company is dealing so that the consumer could easily identify the product or service
category.

 Recently Sharekhan has been awarded as India’s most preferred stock broker under
“consumer award 2005” research conducted by AC Nielsen-ORG MARG for Awaaz in the
“stock broking “category. This award will strengthen Sharekhan’s brand image.

 Services

 Share khan offers its customers, depository services and trade execution facilities for
equities, derivatives and commodities backed with investment advice tempered by
decades of broking experience. The teams of its dedicated analysts are constantly at
work to track performance and trends.

 Dial-n-trade is also an exclusive service available to all Sharekhan customers for trading
in shares via the telephone. On dialing the toll free number 1600-22-7050 and on
entering the customers T-PIN number, the customer will be directed to a call centre
executive who will buy or sell shares for him.

 Sharekhan provides online tips four times a day which consists of information like
premarket anticipation, intraday opportunities, post market analysis and next day
prediction.

17
 PRICE

 Price List

CLASSIC SPEED TRADE SPEED TRADE PLUS

One time 750 1000 1500

registration fee

Minimum brokerage Nil 1000 1500

Charges –Quarterly

 Brokerage

Share khan in its online business charges brokerage as follows

- In equity Market:
On Trading: 0.1%
On Delivery: 0.5%

- In Derivative Market:
First leg: 0.1%
Same day settlement: 0.02%
Next day settlement: 0.1%

 Service Tax
10.2% on brokerage

 Turnover tax + Stamp duty

0.02% (Rs. 20 on every turnover of Rs. 100000)

 Discounts
For investors with High Net worth, there are slabs in brokerage rates.

 Payment Period
The transaction settlement date in the securities market is T+ 2 days i.e. the payment of the
transaction taken place has to be made within two days of its occurrence.

 Credit terms
Share khan allows its customers to trade up to 4 times i.e. by keeping 1\4th margin with them.

 Dematerialization charges
Rs.5 per certificate or Rs.35 per scrip whichever is higher.

18
  PROMOTION

Online share trading is totally a new concept in Indian Market. Generally investor doesn’t like to come out
from conventional way of share trading. Share khan has introduced this product in. The concept and Product are
still new in the market. Therefore the company has undertaken extensive promotion campaign to create
awareness about the product. Share khan adopts the following tools for promoting the product.
Direct Sales:
Direct Sales is one the oldest way and the most effective way which is used worldwide to sell the product.
Until now Sharekhan was used to sell the product mainly through direct sales.Infact major portion of Sharekhan’s
existing customers has been acquired through this way. There are 250 share shops in 123 cities and in each of
them there is around 15 to20 employees working in direct sales force.

Advertising:
Sharekhan has realized the importance to strengthen its brand name and create the awareness among
the investor community to invest in the stock market. Sharekhan has used aggressively print as well as electronic
media to market the product.
They have taken the services of celebrity like Boman Irani and produced an electronic advertisement in
which Sharekhan covey the message that investment in the share market gives highest return than one can get in
mutual funds.

Sales promotion:

Sharekhan has started a unique program called First Step for those who want to invest first time in stock
market. Through this first step program Sharekhan is trying to remove first time jitter of the investors by explaining
the basics of the stock market and showing them the way how they should proceed in the stock market which is
really the first step to invest in the stock market.

What is the first step program?

It answers some fundamental questions which are there in the mind of new entrants in the stock market
field. In this first step program, Sharekhan has answered following queries:

 Why should one invest in shares?

Invest to create wealth
Shares – the best investment option
Benefits of share investing are many

 How do I buy / sell shares?

Invest through primary and secondary markets
A beginner’s guide to the stock market

19
 Placing an order to buy/ sell shares

 How do I select the right shares?

Science of investing in shares
Components of fundamental research
Learning to judge an IPO

 How can I minimize risks and maximize returns

Types of risk involved in investing in shares
Reducing risk
Become a successful investor

 How can I benefit from online trading?

Using your computer to trade
Trading online is convenient
Benefits of trading on Sharekhan.com

 PLACE

 Channels
Share khan uses various channel alternatives to reach to its customers through

 Internet
 Tele Marketing
 Retail Share Shops
 Franchisee Owners
 Power Brokers
 Sales Force

 Coverage
Access the website from any part of the globe.

 Locations
Share khan has the largest chain of retail share shops in India. It has 250 share shops located in 123
cities all over India like Pune, Thane, Chennai, Kolkata, Bangalore, Lucknow, Darjeeling, Kanpur,
Baroda, Midnapore, Surat, Delhi, Ghaziabad, Hyderabad, Allahabad, etc.

 PEOPLE

 Employees
i. Selection: Employees are selected on the basis of their experience and qualification as
applicable to the job.
ii. Training: Intensive training is provided to the employees till a week once they join and
even at times required after that.
iii. Motivation: The employees are motivated through incentives they are provided.

20
  Research Team

Share khan has a team of dedicated analysts who have years of working experience in the
industries that they track, and a proven track record in using their knowledge of the investment
science to deliver results.

 Customers, the heart of Sharekhan are really treated loyally like the kings. The customer care,
which comprises of highly trained executives operating from 9:30 to 8:00 p.m.

 PHYSICAL EVIDENCE

 Locality of the office: In Ahmadabad, two franchise outlets are located in posh areas like
Navrangpura and Maninagar.

 Office Environment: The ambience within the office is what can make the customer feel
comfortable in trading. The cordial and friendly atmosphere at office is like a full time motivation
for the employees.

 Interiors and Infrastructure: The office is well furnished and has 24 computer terminals on which
tick-by-tick price movements of the securities are displayed.

 PROCESS

 In this service organization, the ways in which the customers receive delivery of the service
constitutes the process. Here, the process involves adding ‘value’ or ‘utility’ so that the customers
get full satisfaction for the money spent by them.

 Here the process begins from the step when customer wants to open e-invest account and ends
when his account is actually activated.

 All Indian residents and NRI are eligible to avail this service.

 Customers can open a Sharekhan e-invest account by filling a single application form.
This form includes 12 agreements like

1. Main form with customer details

2. Agreement between Sharekhan and client in respect of the online investment support service
offered.
3. Agreement between the Depository Participant and the client for providing the transaction
statement through Internet.
4. Irrevocable power of attorney
5. Agreement between the DP and the person seeking to open an account with the DP.
6. Maintenance of client’s account on a running account bases by SSKI.
7. Agreement giving the right of lien on the credit balance of client in NSE trading.
8. Agreement giving the right of lien on the credit balance of client in BSE trading.
9. Risk disclosure document (cash segment)
10. Power of attorney
11. Member and client agreement.

21
 CHAPTER – 4
FINANCIAL ANALYSIS

One of the most common ways of analyzing financial data is to calculate ratios from the data to compare against
those of other companies or against the company's own historical performance. For example, return on assets is a
common ratio used to determine how efficient a company is at using its assets and as a measure of profitability.

Hereby, I had undertaken the two companies for the financial analysis that is to be performed on the data
collected from their relevant annual reports.

Company Number 1) SHAREKHAN LTD.

Company Number 2) INDIABULLS

 PROFITABILITY RATIOS

A class of financial metrics that are used to assess a business's ability to generate earnings as
compared to its expenses and other relevant costs incurred during a specific period of time.
For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio
from a previous period is indicative that the company is doing well. High percentages indicate
companies have more money to pay for business expenses or reinvest into the business.

1) OPERATING PROFIT MARGIN

A ratio used to measure a company's pricing strategy and operating efficiency.
Calculated as:

Operating margin is a measurement of what proportion of a company's revenue is left over

after paying for variable costs of production such as wages, raw materials, etc. A healthy
operating margin is required for a company to be able to pay for its fixed costs, such as
interest on debt.

2013 2012
Sharekhan 3.74 5.48
Indiabulls 84.27 75.16

22
 Operating Margin
90
80
70
60
50
40
30
20
10
0
2013 2012

Sharekhan Indiabulls

INTERPRETATION
Operating margin ratio shows whether the fixed costs are too high for the production or sales
volume.

Here Indiabulls have very high operating margin both in 2013 and 2012 respectively as
compared to Sharekhan which depicts that the company is earning more per dollar of sales.

Operating margin shows the profitability of sales resulting from regular business. Operating
income results from ordinary business operations and excludes other revenue or losses,
extraordinary items, interest on long term liabilities and income taxes.

2) EARNING PER SHARE

It measures how many dollars of net income have been earned by each share of common
stock. It is computed by dividing net income less preferred dividend by the number of shares
of common stock outstanding during the period. It is a popular measure of overall
profitability of the company and is usually expressed in dollars.

Formula:

2013 2012
Sharekhan 3.58 5.85

23
 Indiabulls 23.21 19.57

Earning Per Share

25

20

15

10

0
2013 2012

Sharekhan Indiabulls

INTERPRETATION

From the above chart its clearly seen that Indiabulls leads from Sharekhan
Earning per share is the same as any profitability or market prospect ratio.

Here higher earnings per share for Indiabulls creates a favour for them as it is always better
than a lower ratio because this means the company is more profitable and the company has
more profits to distribute to its shareholders.

But many investors don't pay much attention to the EPS, as higher earnings per share ratio
often makes the stock price of a company rise this will lead to create a favour in side of the
Sharekhan.
Since so many things can manipulate this ratio, investors tend to look at it but don't let it
influence their decisions drastically.

3) DIVIDEND PAYOUT RATIO

The dividend payout ratio measures the percentage of net income that is distributed to
shareholders in the form of dividends during the year. In other words, this ratio shows the
portion of profits the company decides to keep to fund operations and the portion of profits
that is given to its shareholders.

Investors are particularly interested in the dividend payout ratio because they want to know
if companies are paying out a reasonable portion of net income to investors. For instance,

24
most start up companies and tech companies rarely give dividends at all. In fact, Apple, a
company formed in the 1970s, just gave its first dividend to shareholders in 2012.

Conversely, some companies want to spur investors' interest so much that they are willing to
pay out unreasonably high dividend percentages. Inventors can see that these dividend rates
can't be sustained very long because the company will eventually need money for its
operations.
Calculated as:

2013 2012
Sharekhan 1.50 1.50
Indiabulls 13.00 10.00

Dividend Payout Ratio

14

12

10

0
2013 2012

Sharekhan Indiabulls

25
 INTERPRETATION

Since investors want to see a steady stream of sustainable dividends from a company, the
dividend payout ratio analysis is important. A consistent trend in this ratio is usually more
important than a high or low ratio.

Here Sharekhan is at benefit as it is maintaining the constant ratio of the DPS in the market
which is gaining benefit for their customers , whereas, Indiabulls also tend to increase its
dividend per share but its not guaranteed that it will be the same in the next financial year.

Since it is for companies to declare dividends and increase their ratio for one year, a single
high ratio does not mean that much. Investors are mainly concerned with sustainable trends.

For instance, investors can assume that a company that has a payout ratio of 20 percent for
the last ten years will continue giving 20 percent of its profit to the shareholders.

Conversely, a company that has a downward trend of payouts is alarming to investors. For
example, if a company's ratio has fallen a percentage each year for the last five years might
indicate that the company can no longer afford to pay such high dividends. This could be an
indication of poor operating performance.

Generally, more mature and stable companies like Indiabulls tend to have a higher ratio than
newer startup companies but still Sharekhan has shown more stabilized growth in the recent
5 financial years.

 LEVRAGE / LIQUIDITY RATIOS

Liquidity ratios provide business owners information regarding a competitor’s ability to meet short-
term financial obligations. The current ratio is ratio of current assets to current liabilities. A
company having a high current ratio indicates the business finances its assets with cash rather
than short-term debt.

Current ratio is a measure of the firm’s short term solvency. It indicates the availability of current
assets in rupee of current liabilities. As a conventional rule, a current ratio should be or slightly more.
It focuses the strong of weak position of the company.

An increase in the current ratio represents improvement in the liquidity position of the firm while a
decrease in the current ratio represents that there has been deterioration in the liquidity position of
the firm. A ratio 2:1 is considered as standard. However, the rule of 2:1 should not be blindly used
while making interpretation of the ratio. Firms having less than 2 : 1 ratio may be having a better

26
liquidity than even firms having more than 2 : 1 ratio. This is because of the reason that current ratio
measures the quantity of the current assets and not the quality of the current assets.

𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒔𝒕𝒔
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒓𝒂𝒕𝒊𝒐 =
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

2013 2012
Sharekhan Ltd. 2.10 1.92
Indiabulls 1.81 3.18

3.5
3.18

2.5
2.1
1.92
2 1.81

1.5

0.5

0
2013 2012

Sharekhan Indiabulls

The current ratio includes all current assets, but since inventory is often difficult to turn into cash,
many analysts remove it from the equation to arrive at a quick ratio. The quick ratio emphasizes
coverage assets quickly convertible into cash:
The traditional thinking is that the higher the ratio, the better off the company. Greater than 2:1 for
the current ratio or 1:1 for the quick ratio is good and safe; less than 2:1 or 1:1 is a sign of impending
problems meeting obligations.

Quick ratio = (current assets – inventory) / current liabilities

2013 2012

27
 Sharekhan Ltd. 1.75 1.62
Indiabulls 3.02 18.38

Quick Ratio
20
18
16
14
12
10
8
6
4
2
0
2013 2012

Sharekhan Indiabulls

INTERPRETATION
Current ratio of Indiabulls shows declining trend in current ratio as compared to Sharekhan.
Sharekhan have current asset more than current liabilities.
Liquidity ratio of 1:1 is favorable. This ratio of Indiabulls is far better than Sharekhan.
Here quick ratio of Indiabulls is higher, i.e., company may keep too much cash on hand or have a
problem collecting its accounts receivable. Higher quick ratio is needed when the company has
difficulty borrowing on short-term notes. A quick ratio higher than 1:1 indicates that the business can
meet its current financial obligations with the available quick funds on hand.
A quick ratio lower than 1:1 may indicate that the company relies too much on inventory or other
assets to pay its short-term liabilities.

 ACTIVITY RATIOS / TURNOVER RATIOS & LEVERAGE RATIOS

Any ratio used to calculate the financial leverage of a company to get an idea of the company's
methods of financing or to measure its ability to meet financial obligations. There are several
different ratios, but the main factors looked at include debt, equity, assets and interest
expenses.

28
1) DEBT RATIO

This ratio measures the financial leverage of a company. Companies with higher levels of
liabilities compared with assets are considered highly leveraged and more risky for lenders.
This helps investors and creditors analysis the overall debt burden on the company as well as
the firm's ability to pay off the debt in future, uncertain economic times.

2013 2012
Sharekhan .08 .08
Indiabulls 3.16 4

Debt Ratio
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
2013 2012

Sharekhan Indiabulls

INTERPRETATION

The debt ratio is shown in decimal format because it calculates total liabilities as a percentage
of total assets. As with many solvency ratios, a lower ratios is more favorable than a higher
ratio.
Here Sharekhan has a lower debt ratio which usually implies a more stable business with the
potential of longevity because a company with lower ratio also has lower overall debt.
Each industry has its own benchmarks for debt, but .5 is reasonable ratio.
A debt ratio of .5 is often considered to be less risky.
.5 debt ratio shows that the company has twice as many assets as liabilities. Or said a different
way, this company's liabilities are only 50 percent of its total assets.

29
Also, here Indiabulls high debt ratio depicts it as a highly leverage firm, i.e., the company
would have to sell off all of its assets in order to pay off its liabilities.

2) DEBT-EQUITY RATIO

The debt to equity ratio is a financial, liquidity ratio that compares a company's total debt to
total equity. The debt to equity ratio shows the percentage of company financing that comes
from creditors and investors. A higher debt to equity ratio indicates that more creditor
financing (bank loans) is used than investor financing (shareholders).

Formula:

The numerator consists of the total of current and long term liabilities and the denominator
consists of the total stockholders’ equity including preferred stock.

2013 2012
Sharekhan 0 .08
Indiabulls 2.36 3.19

Debt-Equity Ratio
3.5

2.5

1.5

0.5

0
2013 2012

Sharekhan Indiabulls

30
INTERPRETATION

Each industry has different debt to equity ratio benchmarks, as some industries tend to use
more debt financing than others.
A debt to equity ratio of 1 would mean that investors and creditors have an equal stake in the
business assets.
A lower debt to equity ratio usually implies a more financially stable business.
Indiabulls having higher debt to equity ratio would be considered more risky to creditors and
investors than Sharekhan with a lower ratio.

3) FIXED ASSET TURNOVER RATIO

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a
company's ability to generate net sales from fixed-asset investments - specifically property,
plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows
that the company has been more effective in using the investment in fixed assets to generate
revenues.
The fixed-asset turnover ratio is calculated as:

2013 2012
Sharekhan 2.78 2.98
Indiabulls .15 .13

Fixed Asset Turnover Ratio

3.5

2.5

1.5

0.5

0
2013 2012

Sharekhan Indiabulls

31
INTERPRETATION

This ratio measures how efficiently a firm uses its assets to generate sales, so a higher ratio is
always more favorable.

Sharekhan having higher turnover ratio mean the company is using its assets more efficiently.
This gives investors and creditors an idea of how a company is managed and uses its assets to
produce products and sales.

Whereas Indiabulls having lower ratio mean that the company isn't using its assets efficiently
and most likely have management or production problems.

32
 CHAPTER – 5
RESEARCH PROJECT

5.1 OVERVIEW

This project emphasizes mainly on online trading in equity derivatives of market. For trading in this segment we
require a stock broker.
For buying and selling through an exchange we need a broker who charges a commission to do so. A broker has
the license to trade in these equity derivatives through the exchange. An exchange is like a warehouse in which
people buy and sell equity. A person or computer must match each buy order to a sell order, and vice versa.

Major stock exchanges of India are:

 National Stock Exchange

The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the
country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system
with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and
market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems,
practices and procedures.
NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market
practices and trading volumes. The market today uses state-of-art information technology to provide an efficient
and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products &
services viz. de-mutualization of stock exchange governance, screen based trading, compression of settlement
cycles, dematerialization and electronic transfer of securities, securities lending and borrowing, professionalization
of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume
counterparty risks, market of debt and derivative instruments and intensive use of information technology.
Purpose
Committed to improve the financial well-being of people.
Vision
To continue to be a leader, establish global presence, facilitate the financial well being of people.
Values
i. NSE is committed to the following core values :
ii. Integrity
iii. Customer focussed culture
iv. Trust, respect and care for the individual
v. Passion for excellence
vi. Teamwork

33
Our Logo

The logo of the NSE symbolizes a single nationwide securities trading facility ensuring equal and fair access to
investors, trading members and issuers all over the country. The initials of the Exchange viz., N, S and E have been
etched on the logo and are distinctly visible. The logo symbolizes use of state of the art information technology
and satellite connectivity to bring about the change within the securities industry. The logo symbolizes vibrancy
and unleashing of creative energy to constantly bring about change through innovation.

 Bombay Stock Exchange

Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.), is Asia’s first Stock Exchange and
one of India’s leading exchange groups. Over the past 137 years, BSE has facilitated the growth of the Indian
corporate sector by providing it an efficient capital-raising platform. Popularly known as BSE, the bourse was
established as "The Native Share & Stock Brokers' Association" in 1875. BSE is a corporatized and demutualised
entity, with a broad shareholder-base which includes two leading global exchanges, Deutsche Bourse and
Singapore Exchange as strategic partners. BSE provides an efficient and transparent market for trading in equity,
debt instruments, derivatives, mutual funds. It also has a platform for trading in equities of small-and-medium
enterprises (SME).
More than 5000 companies are listed on BSE making it world's No. 1 exchange in terms of listed members. The
companies listed on BSE Ltd command a total market capitalization of USD 1.32 Trillion as of January 2013. It is
also one of the world’s leading exchanges (3rd largest in December 2012) for Index options trading (Source: World
Federation of Exchanges).

Vision
"Emerge as the premier Indian stock exchange with best-in-class global practice in technology, products innovation
and customer service."

Learning is always incomplete without a practical experience. So, I had open a de-mat account starting with an
investment of Rs.15,000/- and started my trading in equity derivative market which included dealing in futures and
options of NIFTY, BANKNIFTY, and various other derivatives shares of the companies like, HINDALCO,
BHARTIAIRTEL, IDEA,CENTRAL BANK, etc.
We were told to trade in derivatives market which involved trading in futures and options. Starting with the future
market we traded in future contracts of the above shares. After analyzing the movement of these equity derivative
and NIFTY on day to day basis I come onto conclusions to make a trade in that derivative whether we should buy
or sell that share. Then we moved onto Options and traded in calls and puts. This trading in different equity
derivative helped me learn a lot about global markets.

34
5.2 DERIVATIVES

Equity derivative is a class of derivatives whose value is at least partly derived from one or more underlying equity
securities. Options and futures are by far the most common equity derivatives. This section provides you with an
insight into the daily activities of the equity derivatives market segment on NSE. 2 major products under Equity
derivatives are Futures and Options, which are available on Indices and Stocks.

DERIVATIVES TYPES

1. Forward Contract:

It is an agreement to buy or sell an asset on a specified date for a specified price. One of the parties to the contract
assumes a long position and agrees to buy the underlying asset on a certain specified future date for a certain
specified price. The other party assumes a short position and agrees to sell the asset on the same date for the
same price. Other contract details like delivery date, price and quantity are negotiated bilaterally by the parties to
the contract. The forward contracts are normally trade doutside the exchanges.

features of forward contracts :

• They are bilateral contracts and hence exposed to counter-party risk.

• Each contract is custom designed, and hence is unique in terms of contract size, expiration date
and the asset type and quality.
• The contract price is generally not available in public domain.
• On the expiration date, the contract has to be settled by delivery of the asset.
• If the party wishes to reverse the contract, it has to compulsorily go to the same counter-party,
which often results in high prices being charged.

2. Future Contracts:

They are designed to solve the problems that exist in forward markets. A futures contract is an agreement
between two parties to buy or sell an asset at a certain time in the future at a certain price. But unlike forward
contracts, the futures contracts are standardized and exchange traded. To facilitate liquidity in the futures
contracts, the exchange specifies certain standard features of the contract. It is a standardized contract with
standard underlying instrument, a standard quantity and quality of the underlying instrument that can be
delivered, (or which can be used for reference purposes in settlement) and a standard timing of such settlement. A
futures contract may be offset prior to maturity by entering into an equal and opposite transaction. More than
99% of futures transactions are offset this way.

35
The standardized items in a futures contract are:
 Quantity of the underlying
 Quality of the underlying
 The date and the month of delivery
 The units of price quotation and minimum price change
 Location of settlement

OPTIONS CONTRACT

A contract that allows the holder to buy or sell an underlying security at a given price, known as the strike price.
The two most common types of options contracts are put and call options, which give the holder-buyer the right to
sell or buy respectively, the underlying at the strike if the price of the underlying crosses the strike. Typically each
options contract is written on 100 shares of the underlying.

Two basic types of options, call options and put options.

 Call option: A call option gives the holder the right but not the obligation tobuy an asset by a certain date
for a certain price.

Long a call:- person buys the right (a contract) to buy an asset at a certain price. We
feel that the price in the future will exceed the strike price. This is a bullish position.

Short a call:- person sells the right ( a contract) to someone that allows them to buy to buy an asset at a
certain price. The writer feels that asset will devaluate over the time period of the contract. This person is
bearish on that asset.

 Put option: A put option gives the holder the right but not the obligation tosell an asset by a certain date
for a certain price.

Long a put:- Buy the right to sell an asset at a pre-determined price. We feel that the asset will devalue
over the time of the contract. Therefore we can sell the asset at a higher price than is the current market
value. This is a bearish position.

Short a put:- sell the right to someone else. This will allow them to sell the asset at a specific price. We
feel the price will go down and we do not. This is a bullish position.

5.3 TRADING IN TRADE TIGER

For trading, Sharekhan provides a software named TradeTiger which acts as a terminal in which
we can place our orders by analyzing the equity derivative up and down charts throughout the
day.

36
 TRADE TIGER LAUNCHING APPLICATION

 MARKET WATCH

37
 ADDING SCRIP

 MARKET DEPTH

38
 CHARTS – ANALYSING SCRIP VOLUME

 BUYING SCRIP

 SELLING SCRIP

39
 MODIFYING ORDER

 ORDER BOOK

 TURNOVER

40