A seminar was held on the 1st of March in conjunction with EY, NSE and Eforexindia. This is the presentation by Religare as we promoted the exchange platform to corporates and the benefits associated with it. Interpretation of Direct and Indirect tax was explained by EY while the fundamental changes effecting Exchange rate was broadly discussed by Mr. Soumya Dutta, CEO EFOREXINDIA. FIEO have more than 24K exporters as their members across India, and the event was conducted in their Delhi HO. Shri Ajay Sahai, DG & CEO FIEO addressed the exporters on the important amendments in policies and new incentives to boost the declining Indian exports continuously past 14 months. The Exchange rate of Indian Rupee primarily against US Dollar was most crucial topic concerning all the exporters. Mr. Ankur Kapoor, Product Head Currency Religare Securities highlighted the key benefits of the exchange platform like market timing 9 Am to 5 Pm which is 9 Am to 4.30 PM in OTC. The price transparency and ease of execution of hedging even for transaction as low as 1000 $ are also few of the key features.

1. SEMINAR ON RISK MANAGEMENT
&
IMPACT OF BUDGET ON RUPEE
New Delhi – 1st March 2016

2. Products available on exchanges
• Exporters can mitigate the currency fluctuation risks through various
strategies in the currency markets. Some commonly used methods are:
• Selling USD at Spot + premium
• Locks the priceFutures
• Buying premium for selected
strike price
• Full advantage if spot goes down
Options

3. Exporters should take ‘short’ hedge position on the futures market.
This can be elaborated by the illustration below:
March September
Currency Fluctuation Risk
• Wants to sell USD in
September (receivables from
export)
• Takes a short position in
USDINR September contract
to protect from risk.
• Sells USD received as
revenue in spot market.
• Squares up position in the
futures contract.
Risk covered!
Hedging through Futures

4. Futures are standardized version of forward contracts.
Trades on regulated exchanges gives higher accessibility, transparency and No
counter party risk involved
Upfront margin and daily settlement (MTM) is mandatory in Currency Futures
Ease of trading and lower cost of hedging attracting even smaller entities to the
exchange
Bid – Ask spread as low as 0.0025 paisa whereas it is 1 to 2 paisa in OTC.
One can easily hedge indirect exposure also through futures.
Why futures?

5. MTM Calculation
Consider a client who Sell USDINR on day 1 the contract at 68.0000
• The settlement price on day 1 is 68.1000
Mark to market :
Difference between the two multiplied by the number of contracts
and the contract multiplier
• The contract is carried forward at the settlement price
• The payment of profit or loss happens the next day
• The client squares up at 68.6500 on day 5
• No open positions and no mark to market
Day Buy Qty in Contracts Price Closing Price Profit / Loss
1 1000 68.0000 68.1000 -100
2 1000 68.1000 67.9000 200
3 1000 67.9000 67.8000 100
4 1000 67.8000 68.4000 -600
5 1000 68.4000 68.6500 -250

6. Bank Vs Exchange Traded Currency Derivative
Currency Exchange Traded Forwards/ OTC
Type of Contracts Standardized Customized
Price transparency High, Real time rate Low, Over the phone
Accessibility Online / Offline modes Offline/ OTC
Underlying exposure Not Required Required
Margin Requirement 3.00%
Non standardized may vary
from 8-12 %
MTM Settlement Daily Settled NA
Settlement Net settled in INR (Cash) Physical Settlement

7. Exporter-specific currency
strategies
Options Strategy
Exporter: Risk of
appreciation of
Rupee beyond
spot price of 68
Buy ‘PUT’ option:
Strike price 68 :
Premium 0.26 paisa
Profit: Rs 2 in OTC
Loss: Maximum up to
premium paid
(in this case, 0.26 paisa)
Loss: Rs 2 in OTC
Profit: : Actual loss is
compensated by
appreciation in premium
price
If spot price
becomes 66
If spot price
becomes 70

8. Source: www.nseindia.com

9. • Finance Act, 2005 has amended section 43(5) so as to
exclude transactions in derivatives carried out in a
“recognized stock exchange” for the purpose
transactions entered into by hedgers and stock exchange
members in course of jobbing or arbitrage activity were
specifically excluded from the purview of definition of
speculative transaction..
• This implies that income or loss on derivative
transactions which are carried out in a “recognized stock
exchange” is not taxed as speculative income or loss.
• Thus, loss on derivative transactions can be set off
against any other income during the year. In case the
same cannot be set off, it can be carried forward to
subsequent assessment year and set off against any
other income of the subsequent year. Such losses can be
carried forward for a period of 8 assessment years.
• NO Securities Transaction Tax (STT)
Source:- NISM Series –I Currency Derivatives
Taxation for Corporates

10. • Domestic clients may take long or short positions in the
permitted currency pairs upto
• The limit (long as well as short) in USD-INR pair upto USD
15 million per exchange
• EUR-INR, GBP-INR and JPY-INR pairs, all put together,
upto USD 5 million equivalent per exchange
• As applicable, per stock exchange without having to
establish the existence of any underlying exposure.
• Domestic clients may take positions in the permitted
currency pairs in excess of above, as applicable, subject to
the conditions specified the RBI A.P. (DIR Series) Circular
no. 147 dated June 20, 2014.
A.P.(DIR Series) Circular No. 90 dated March 31, 2015
Latest RBI guidelines

11. How to Start Currency Hedging
Contact our nearest branch office of Religare Securities Ltd and
Relationship Manager will fix an appointment with you
Complete the KYC registration along with simple supporting
documentation
Your exclusive trading code will be generated within 4 working days
Trading
Preference

12. Mobile Trading App

13. Odin Software

14. Web Based Trading

15. Our Offerings
Real time rates enabling towards customer convenience
Dedicated desk for Corporate and SME clients
We can accept FD, BG, Mutual Funds and other collaterals as
approved by SEBI as initial margin
Extended sector-specific hedging advisory & risk management
services

16. Let’s Begin!
Website: Email:
www.religareonline.com product.currency@religare.com
Member :
NSE, MSEI, BSE
Address:
A-3/4/5 , Sec-125, Noida,
Uttar Pradesh, India
Exporter-specific currency
strategies

17. Disclaimer
 The document is the property of Religare. This document should not be reproduced or redistributed or passed on
directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose,
without prior written permission from Religare.
 We have reviewed this presentation, and in so far as it includes current or historical information, it is believed to be
reliable. It should be noted that the information contained herein is from publicly available data or other sources
believed to be reliable. While every effort has been made to ensure the quality and accuracy of the contents of this
document, Religare or any of their respective officers, directors, employees or agents make no warranty, express or
implied, concerning the accuracy, completeness, non-infringement or updating of content present in this document.
 Religare is not soliciting any action based upon this document. This document is not to be construed as an offer to sell
or a solicitation of an offer to buy any security in any jurisdiction, including where such an offer or solicitation would
be illegal. It is for the general information of recipients. It does not constitute a recommendation or take into account
the particular investment objectives, financial situations, or needs of individual recipients. Not all recipients may
receive this document at the same time. Religare will not treat recipients as customers/ clients by virtue of their
receiving this document.
 This document is not intended to be and must not be taken as the basis for any investment decision. The investment
discussed or views expressed may not be suitable for all investors. The user assumes the entire risk of any use made of
this information. The recipients of this document should rely on their own investigations and take their own
professional advice.
 Illustration in the presentation are indicative one client shared exercise due diligence before delay.
Exporter-specific currency
strategies