For the essential in capital market. it is most important to know about derivative market.

1. A STUDY OF DERIVATIVE MARKET
IN INDIA.
Guided by : Prof. S. K. Sarangi
Submitted by :Sudarsan Prasad
roll no - 1606260019

2. CONTENT
 company Profile
 Derivative
 Objective of the Study
 Research & Methodology
 Analysis of the study
 Recommendation
 conclusion

3. COMPANY PROFILE
LKP Securities Limited
Embassy Centre, Nariman Point, Mumbai - 400021, Maharashtra
Website: www.lkpsec.com
LKP Merchant Financing Ltd What started as one of India's first
securities brokerage houses in 1948 is today one of the country's
largest multi dimensional financial services group. LKP Finance Limited
is a Non Banking Finance Company (NBFC) registered with Reserve
Bank of India & a listed public limited company having a net worth of
Rs.158 cr. as on FY’16-17.
LKP is the India's first financial group to be awarded the
prestigious ISO 9002 certified KPMG Quality Registrar, USA, for certain
businesses. Pan India footprint with 25 own branches, With 1900
franchises outlet in 200 cities. Large number of customer over 1,00,000
client.

4. LKP SECURITIES LIMITED AND ITS ASSOCIATES
ENJOY THE FOLLOWING REGISTRATIONS &
MEMBERSHIPS: -
 Merchant Bankers with SEBI
 Membership of BSE & NSE (Capital & Debt
Market)
 AMFI registered all India Mutual Fund
Distributors
 Member of Commodity Exchanges MCX, NCDX
and DGCX (Dubai)
 Member of NSE for Interest Rate Futures
 Member of MCX and NSE Currency

5. OVERVIEW OF LKP FINANCE LIMITED
The Company was originally incorporated as Elkaypee Merchant
Financing Pvt. Ltd. on 5th May 1984 and the certificate of change of
name to LKP Merchant Financing Ltd was obtained on 13th
February 1986.
The Company was promoted by M/s L K Panday and Mr. Mahendra V
Doshi. But in Presently the company was Managed by those
people:
MR. GANESH MALHOTRA (Independent Director) MR. PRATIK M DOSHI
(Managing Director )

6. PRODUCT & SERVICE OF LKP :-
 Equities
 Derivatives
 E-Broking
 Commodities
 Insurance
 Mutual Fund
 IPO (Initial public offering)
 Depository Services

7. COMMUNICATION PROCESS :-
 Be LKP is a service provider organisation so the
client/customer communication is fore most
important than other. So that the LKP have the
following channel for his client support
 Offline branches
 Toll free number
 E-mail support
 With limited communication channels opened off for
service LKP does seem to be very serious as Per
as servicing its clients concerned. There is process
in place for turn around time , set up for
personalized communication and the support staff
seems to be trained as well.

8. OBJECTIVE OF LKP SECURITIES :-
 In a share market, shares are bought and sold.
The stock market is a share market, however
besides shares of companies, other instruments
like bonds, mutual funds and derivative contracts
too are traded in the stock market , but it is not
easy to every one to enter into stock market and
do their transaction. LKP Securities provided plat
from to those who are interested to invest in
stock market.

9. WHAT IS A “DERIVATIVE” ?
 The term Derivative stands for a contract whose price is
derived from or is dependent upon an underlying asset.
 The underlying asset could be a financial asset such as
currency , stock and market index, an interest bearing
securities or a physical commodity.
 As Derivative are merely contract between two or more
parties, anything like weather data or amount of rain can
be used as underlying assets.

10. NEED FOR DERIVATIVES -
The derivatives market performs a number of
economic functions. They help in:
 Transferring risks
 Discovery of future as well as current prices
 Catalyzing entrepreneurial activity
 Increasing saving and investments in long
run

11. PARTICIPANTS IN DERIVATIVE MARKETS
 Hedgers use futures or options markets to reduce
or eliminate the risk associated with price of an
asset.
 Speculators use futures and options contracts to
get extra leverage in betting on future movements
in the price of an asset.
 Arbitrageurs are in business to take advantage
of a discrepancy between prices in two different
markets.

12. TYPE OF DERIVATIVE -
 Forward
 Futures
 Options
 Swaps

13. FORWARD
 Forward is a non-standardized contract
between two parties to buy or sell at a
specified future time at a price agreed today.
contract
Two private
parties
Transaction
at expiry
date
Forward
price
physical /
cash
settlement

14. PARTICIPANTS IN FORWARD CONTRACT
Buyer
(who takes a long
position)
Seller
(Who take a short
position)
Delivery of
Asset
Money

15. FUTURES
 Future contract is a standardized contract between two
parties to exchange a specified asset of standardized
quantity and quality for a price agreed today (the futures
price or strike price) with delivery occurring at a specified
future date, the delivery date.
Contract between two parties
Traded in Recognized stock exchange
Future Date
Price agreed upon today

16. PARTICIPANTS IN FUTURES CONTRACT
Future Buyer
Future Seller
Clearing
corporation
Buy
contract
Sell
contract
Paymen
t
Paymen
t

17. POSITION IN THE FUTURE CONTRACT
• When a person buy
a futures contractLong
• When a person sell
a futures contractShort

18. OPTION
 An option is a derivative financial instrument
that specifies a contract between two parties for
a future transaction on an asset at a reference
price.
A contract Between two parties
Where buyer of the option has the right and
not obligation to fulfill the contract
Seller is under obligation to fulfill the
contract

19. TYPE OF OPTION
option
Call option
(Right to buy)
Put option
(Right to sell)

20. SWAPS
It is an agreement between two parties to
exchange sequences of cash flows for a set
period of time.

21. OBJECTIVES OF THE STUDY :-
 To study in various trend in derivative market
 Comparison of the profit/losses in cash market
and derivative market.
 To study in detail about the role of future and
option.
 To study the role of derivative in India market.
 To know different types of Derivatives instruments.
 To analysis the performance of Derivative Trading
since 2001 with special reference to Futures &
Options
 In terms of Turnover
 In terms of Traded quantity
 In terms of No of Contracts Traded

22. RESERSH METHODOLOGY
 Primary Data :-
Primary Data are collected from a structured
questionnaire . the questionnaire was distributed
through online platform by E-mail as well as by
meet to the customer.
 Secondary Data :-
Under secondary sources, information was collected
from internal & external sources. I am use internet and
miscellaneous sources (such as brochures,
pamphlets,books,Websites) under external sources.

23. ANALYSIS OF THE STUDY
 The Analysis part of the study consists of analyzing the
performance Stock futures and Options contracts and
the returns that are obtained in buying these and the
how much brokerage fees on contracts and exercising
them at the exchange on the expiry date. Then the
Future prices and Option prices of the next month
contract are been determined by the Firstly Future
contracts of the Indexes namely NIFTY, CNX IT and
NIFTYMIDCAP and the Stock Future contracts of
different companies from each sector has been taken.
The following table gives a summary of Index and Stock
Futures and their lot sizes that are traded at the
exchange:

24. Sn no
Underlying Asset
Lot Size
1 NIFTY 75
2 CNX IT 45
3 NIFTY MIDCAP 200
4 Arvind Ltd 1700
5 Bharti Airtel 1200
6 Dr. Reddy’s 200
7 GMR Infra 45000

25.  The Future prices of these contracts of May month expiring contract
which expires on last Thursday of the month i.e. on 25May, 2017 are
compared with that of the spot price of the underlying asset on
expiry. And the corresponding returns have been calculated
although the brokerage is not included. The following data gives you
a view of returns in buying these following Index Futures and Stock
Futures contracts and exercising them on expiry: The formula used
to calculate the returns is:
Returns= Future Price – Spot price * 100
Spot price
INDEX Futures Price Spot Price
on Expiry
Profit/Loss Returns (
%)
NIFTY 9838 9803.10 34.90 0.35
NIFTY
MIDCAP
4734.45 4664.05 70.40 1.50
CNX IT 10.49 10.39 .10 0.96

26. Futures Stock: -
Sl.No. STOCK Futures
Price
Spot Price
on Expiry
Profit/Loss Returns(%)
1
2
3
4
5
6
7
8
9
10
Arvind Mills
Bharti Airtel
Dr. Reddy’s
GMR Infra
Hero Honda
Infosys Tech
NTPC
RPL
TCS
ITC Future
375
405.85
2716
18.90
3785
984.35
163.20
43.60
2500
335.70
374
397.40
2671.95
18.70
3737
979
163.20
44.30
2449
330.80
1
8.45
76.95
0.2
48
5.35
0
-0.7
51
4.9
0.267
2.12
2.87
1.06
1.28
0.54
0
-1.60
2.08
1.48

27.  Full Service:-
Full-service brokers offer a range of services such as estate
planning, tax advice and personal advice either in-person or over the phone.
They offer a large choice of products. However, they are the most
expensive type of broker.
The standard commission fee is 1 to 2% of a client’s assets. For
example, Pratap wants to purchase 10 shares of TCS Company at Rs.2440
per share. If the broker charges a 2% brokerage fee to process the trade,
the cost of trade would be Rs., Rs.2440x 10 shares = Rs.244,00. Rs.244,00
x .02 = Rs.488. Rs.244,00 +Rs.488 = Rs. 24888.
 Discount :-
Discount brokers charge lower fees than full-service brokers do. They
charge a flat fee for each trade transaction, but they do not offer personal
advice and offer a narrower choice of products. The per-trade flat fee
ranges from Rs.15 to Rs.20 per trade in India . Account maintenance fees
are usually 0.5%.
 Online :-
Online brokers are the least expensive type of broker. They allow
investors to buy and sell trades online. They offer limited access to
customer service. The per-trade flat fee Rs.15 per trade. Online trade also
provide unlimited plan of Rs.1899,But the provide trading only through
NEST trading platform which is not that great.

28. ANALYSIS OF BROKERAGE-
Sl.No. STOCK Futures
Price
Spot Price
on Expiry
3% of
Brokerage
Profit/Losses
1 Arvind Mills 375 374 2.24 -1.14
2 Bharti Airtel 405.85 397.40 2.40 6.05
3 Dr. Reddy’s 2716 2671.95 16.16 27.89
4 GMR Infra 18.90 18.70 0.11 0.09
5 Hero Honda 3785 3737 22.56 25.44
6 Infosys Tech 984.35 979 5.89 -0.54
7 NTPC 163.20 163.20 0.97 -0.97

29.  Findings :-
1. The derivative products help to transfer risks from those who have them but
may not like them to those who have an appetite for them.
2. Rather than trade in physical commodities, futures markets buy and sell
futures contracts, which state the price per unit, type, value, quality and
quantity of the commodity in question, as well as the month the contract
expires.
3. Buying and selling in the futures market can seem risky and complicated.
Futures and Options trading are not for everyone, but it works for a wide
range of people. The futures market is a global marketplace, initially created
as a place for farmers and merchants to buy and sell commodities for either
spot or future delivery. This was done to lessen the risk of both waste and
scarcity.
4. The players in the Derivatives market are hedgers and speculators. A
hedger tries to minimize risk by buying or selling now in an effort to avoid
rising or declining prices. Conversely, the speculator will try to profit from the
risks by buying or selling now in anticipation of rising or declining prices.
5. Always there will be three contracts available for trading with 1 month, 2
months and 3 months which of those expires on the last Thursday of the
respective month.

30. CONCLUSION
 The summary of the study and survey done in
“Derivative Market in India” in a LKP Securities
ltd conclusion That it is a financial instrument
which was traded in securities market. The
underlying asset could be a financial asset such as
currency , stock and market index, an interest
bearing securities or a physical commodity.

31. BIBLIOGRAPHY
 nseindia.com
 bseindia.com
 sebi.gov.in
 www.LKP.sec.com
 Ashutosh Vashishtha and Satish Kumar “Development of Financial
Derivatives Market in India- A Case Study”
 Dr. Premalata Shenbagaraman “Do Futures and Options trading
increase stock market volatility?”
 Golaka C Nath “Behaviour of Stock Market Volatility after Derivatives”