Khan Ahrar Hasan Ali Hasan - Financial Awareness.docx

PROJECT REPORT ON “HNI Clients and their Financial Awareness about Futures & Option”

TOWARDS FULFILLMENT FOR THE POST GRADUATE DEGREE IN

MASTER OF MANAGEMENT STUDIES (MMS) AS PER UNIVERSITY OF MUMBAI

SUBMITTED BY KHAN AHRAR HASAN ALI HASAN (FINANCE) 2017 – 2019

KOHINOOR BUSINESS SCHOOL KURLA, MUMBAI.

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DECLARATION I, Mr Khan Ahrar Hasan Ali Hasan, hereby declare that this project entitled “HNI Clients and their Financial Awareness about Futures & Option” is an outcome of my own efforts under the guidance of Prof. Nilesh Ubale. The project is submitted to KOHINOOR BUSINESS SCHOOL for the partial fulfilment of the Master of Management Studies (MMS), University of Mumbai.

Date:

Signature: _______

Place: Mumbai

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CERTIFICATE This is to certify that Khan Ahrar Hasan Ali Hasan of Kohinoor Business School has successfully completed the project work titled “HNI Clients and their Financial Awareness about Futures & Option” in partial fulfilment of requirement for the completion MMS as prescribed by the University of Mumbai. This project report is the record of authentic work carried out by him during the month of March 2019.

He has worked under my guidance.

Date: Place: Mumbai

Prof. Nilesh Ubale 3

ACKNOWLEDGEMENT It gives me a great pleasure to present my project on “HNI Clients and their Financial Awareness about Futures & Option”. I am very thankful to my project guide Prof. Nilesh Ubale, who always helped me to complete my project with his support & motivation. I also thank to our Head of Department Dr. Bharti Deshpande who gave me the ideas & suggestions for various books related to my project & helped me in completion of my project. I also would like to thank our library staff who supported me by giving various book related to my project and to help me in completion of project.

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PREFACE

Today India has become a “globalize country”. The process of globalization has very highly affected. Corporate world of both, India and exotic corporate world means today’s neoteric business world. This corporate world plays a decisive role in globalization. This corporate world is now becoming more and more competitive. Regarding this competition business houses need more professionalized people for their managerial work. Highly professionalized people come from business school. Business school offers training for all business aspects. Theoretical knowledge is not enough. After study student has to go practical world. At that time they have difficulty in practical works. This MBA program provides an opportunity for this type of practical knowledge. The rationale behind visiting the company and preparing the Project Report is to study the Financial Awareness of HNI clients in F & O

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Executive Summary New ideas and innovations have always been the hallmark progress made by mankind. At every stage of development, there have been two core factors that drive man to ideas to innovations. These are increasing returns and decreasing risk. The financial markets are no different. The endeavour has been always to maximize returns and minimize risk. A lot of goes in to developing financial products centred on those two factors. Derivatives are among the forefront of the innovations in the financial markets and aim to increase returns and reduce risk. They provide an outlet for investors to protect themselves from the vagaries of the financial markets. These instruments have become very popular with investors all over the world. Now, investors are more cautions before investing their money into any derivative segment as they fear loses. From this research I would say, there are only few HNI investors who are willing to invest in derivatives market as it carries Lack of knowledge and difficulty in understanding and an element of risk and uncertainty with it. Other than that the real servicing come when one moves ahead. I have done primary data analysis i.e. study of investment pattern of HNI clients among derivatives and the conclusion says that most of the HNI clients are not willing to participate in the derivative market because it is difficult for them to understand and they consider it as a highly risky. Also during the survey, findings showed that HNIs are optimistic that market condition will improve soon and they also thought this is right time to invest as prices are at all times low. The study has been done to know the different types of derivatives and also to know the derivative market in India.

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INDEX

Sr. No. 1 2

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5 6 7 8 9

Particulars Part-I GENERAL INFORMATION About the Industry Introduction of the Subject 1 What is Derivative? 2 Types & Products 3 Myths & Realities about Derivatives 4 Why FII is crucial for the F & O market? PART-II PRIMARY STUDY Introduction of the Study 1 Problem Statement 2 Importance of the Study 3 Objective of the Study Data Analysis and Interpretation Results and Findings Limitations of the Study Conclusion Suggestions & Annexure

Page No. 8

11 16 17 17

19 19 19 20 38 38 39 40 & 41

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Part-I GENERAL INFORMATION (1) ABOUT THE INDUSTRY

A stock market is a primarily a virtual exchange of securities (that is, shares and debentures, which companies use as a means of raising finance) and derivatives (i.e. virtual instruments such as contracts that relate to assets and securities and can be traded). It is virtual in the sense that the market is an intangible concept, rather than a physical place, and as a result of advancing technologies traders can now get involved with little more than a laptop or mobile phone. The market brings together a range of traders of all shapes and sizes - from small, one-man bands trading for their own personal gains through to hedge funds managing billions in assets, and everything in between. Stock markets list the securities of publicly traded companies. As distinct from a regular limited company ('Ltd.'), Shares can change hands several times on a daily basis, and at insignificant levels the company is unconcerned with who owns those shares.

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Shares themselves are intangible assets, entitling the bearer to an annual payment known as a 'dividend', paid out of distributable profits, and often corresponding voting rights in proportion to the size of the share held at the AGM, where major strategic decisions such as electing the board are put to the vote. The bearer of a share at any given point is in effect a part owner of the business to which those shares pertain, and it is this aspect that gives a share any underlying value. The price of a share at any given stage is dictated by supply and demand within the market, and rises or falls every time a share is bought or sold. This effectively means that shares are priced by the collective will and attitudes of the market, comprised of all the traders and investment houses that actively trade in those securities. Stock markets generally trade over a set duration of hours, usually reflecting the working day in their particular region, allowing the zealous trader to trade different markets round the clock - from London to New York to Tokyo while affording those companies so listed to raise capital in the form of initial share issues to the market. As a result, the markets operate on a slick basis almost around the clock, bringing together buyers and sellers of securities and giving businesses and governments a free, unadulterated bellwether for the economic and commercial outlook of a given sector, industry or economy. In essence, that's the foundation of what a stock market is, and it's by no means a comprehensive study. Getting to know the markets requires lengthy research and an understanding of business, economics, law and politics. Yet for those that do get to grips with how the markets operate, the allure of trading profits is sufficient rewards for all their hard work. List of Stock exchanges in India: Mumbai Stock Exchange Ahmedabad Stock exchange Association Ltd. Bangalore Stock Exchange Ltd. Metal Commodity Exchange Calcutta Stock Exchange Association Ltd. Cochin Stock Exchange Ltd. Delhi Stock Exchange Association Ltd. Guwahati Stock Exchange Ltd. Hyderabad Stock Exchange Ltd. Jaipur Stock Exchange Ltd. Kanara Stock Exchange Ltd.

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Ludhiana Stock Exchange Association Ltd. Madras stock Exchange Ltd. Madhya Pradesh Stock Exchange Ltd. Magadh Stock Exchange Ltd. Mangalore Stock Exchange Ltd. Pune Stock Exchange Ltd. Saurashtra Kutch Stock Exchange Ltd. Uttar Pradesh Stock Exchange Association Ltd. Vadodara Stock Exchange Ltd. Coimbatore Stock Exchange Meerut Stock Exchange Ltd. Over The Counter (OTC) Exchange of India National Stock Exchange of India

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(2) INTRODUCTION OF THE SUBJECT

(1) What is Derivative? The term “Derivative” is used to refer to financial instruments which derived their value from underlying assets. The underlying assets could be equities (shares), debt (bonds, T-bills and notes), currencies and indices of these various assets, such as the Nifty 50 index. Derivatives derive their names from their respective underlying assets. Thus, if a derivative’s underlying assets is equity, it is called equity derivative and so on. Derivatives can be traded either on a regulated exchange, such as the NSE or off the exchanges, i.e. directly between parties, which is called “over-the-counter” (OTC) trading. The basic purpose of derivatives is to transfer the price risk from one party to another; they facilitate the allocation of risk to those who are willing to take it. In so doing, derivatives help mitigate the risk arising from the future uncertainty of prices. There are various types of derivatives traded across the world. They range from the very simple to the most complex products. The following are the three basic forms of derivatives. Forward Future Option

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Forward A forward contract or simply a forward is a contract between two parties to buy or sell an asset at a certain future date for a certain price that is pre decided on the date of contract. The future date is referred to as expiry date and the pre-decided price is referred to as Forward Price. A forward is thus an agreement between two parties in which one party, the buyer, enters into an agreement with the other party, the seller that he would buy from the seller an underlying asset on the expiry date at the forward price. Therefore, it is a commitment by both the parties to engage in a transaction at a later date with the price set in advance. This is different from a spot market contract, which involves immediate payment and immediate transfer of asset. The party that agrees to buy the asset on a future date is referred to as a long investor and is said to have a long position. Similarly the party that agrees to sell the asset in a future date is referred to as a short investor and is said to have a short position. The price agreed upon is called the delivery price or the Forward Price. Forward contracts are traded only in Over the Counter (OTC) market and not in stock exchanges. OTC market is a private market where individuals/institutions can trade through negotiations on a one to one basis. Settlement of forward contracts When a forward contract expires, there are two alternate arrangements possible to settle the obligation of the parties: physical settlement and cash settlement. Both types of settlements happen on the expiry date. Default risk in forward contracts A drawback of forward contracts is that they are subject to default risk. Regardless of whether the contract is for physical or cash settlement, there exists a potential for one party to default, i.e. not honor the contract. It could be either the buyer or the seller. This results in the other party suffering a loss. This risk of making losses due to any of the two parties defaulting is known as counter party risk. The main reason behind such risk is the absence of any mediator between the parties, who could have undertaken the task of ensuring that both the parties Fulfill their obligations arising out of the contract. Default risk is also referred to as counter party risk or credit risk.

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Future Like a forward contract, a futures contract is an agreement between two parties in which the buyer agrees to buy an underlying asset from the seller, at a future date at a price that is agreed upon today. However, unlike a forward contract, a futures contract is not a private transaction but gets traded on a recognized stock exchange. In addition, a futures contract is standardized by the exchange. All the terms, other than the price, are set by the stock exchange (rather than by individual parties as in the case of a forward contract). Also, both buyer and seller of the futures contracts are protected against the counter party risk by an Entity called the Clearing Corporation.

Difference between Forwards & Futures Forward Privately negotiated contracts Not standardized Settlement dates can be set by the parties High counter party risk

Future Traded on an exchange Standardized contracts Fixed settlement dates as declared by the exchange Almost no counter party risk

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Options Like forwards and futures, options are derivative instruments that provide the opportunity to buy or sell an underlying asset on a future date. An option is a derivative contract between a buyer and a seller, where one party (say First Party) gives to the other (say Second Party) the right, but not the obligation, to buy from (or sell to) the First Party the underlying asset on or before a specific day at an agreed-upon price. In return for granting the option, the party granting the option collects a payment from the other party. This payment collected is called the “premium” or price of the option. The right to buy or sell is held by the “option buyer” (also called the option holder); the party granting the right is the “option seller” or “option writer”. Unlike forwards and futures contracts, options require a cash payment (called the premium) upfront from the option buyer to the option seller. This payment is called option premium or option price. Options can be traded either on the stock exchange or in over the counter (OTC) markets. Options traded on the exchanges are backed by the Clearing Corporation thereby minimizing the risk arising due to default by the counter parties involved. Options traded in the OTC market however are not backed by the Clearing Corporation. There are two types of options call options and put options

Call Options A call option is an option granting the right to the buyer of the option to buy the underlying asset on a specific day at an agreed upon price, but not the obligation to do so. It is the seller who grants this right to the buyer of the option. It may be noted that the person who has the right to buy the underlying asset is known as the “buyer of the call option”. The price at which the buyer has the right to buy the asset is agreed upon at the time of entering the contract. This price is known as the strike price of the contract (call option strike price in this case). Since the buyer of the call option has the right (but no obligation) to buy the underlying asset, he will exercise his right to buy the underlying asset if and only if the price of the underlying asset in the market is more than the strike price on or before the expiry date 14

of the contract. The buyer of the call option does not have an obligation to buy if he does not want to.

Put Options A put option is a contract granting the right to the buyer of the option to sell the underlying asset on or before a specific day at an agreed upon price, but not the obligation to do so. It is the seller who grants this right to the buyer of the option. The person who has the right to sell the underlying asset is known as the “buyer of the put option”. The price at which the buyer has the right to sell the asset is agreed upon at the time of entering the contract. This price is known as the strike price of the contract (put option strike price in this case). Since the buyer of the put option has the right (but not the obligation) to sell the underlying asset, he will exercise his right to sell the underlying asset if and only if the price of the underlying asset in the market is less than the strike price on or before the expiry date of the contract. The buyer of the put option does not have the obligation to sell if he does not want to

Difference between Futures & Options Futures

Options

Both the buyer and the seller are The buyer of the option has the right under an obligation to fulfill the and not an obligation whereas the contract. seller is under obligation to fulfill the contract if and when the buyer exercises his right. The buyer and the seller are The seller is subjected to unlimited risk of losing whereas the buyer has subject to unlimited risk of limited potential to lose (which is the loss. option premium). The buyer and the seller have potential to make unlimited gain or loss.

The buyer has potential to make unlimited gain while the seller has a potential to make unlimited gain. On the other hand the buyer has a limited loss potential and the seller has an unlimited loss potential.

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(2) Types of Products Index Futures A futures contract is a standardized contract to buy or sell a specific security at a future date at an agreed price. An Index future, as the name suggests, a future on the index i.e. underlying is the index itself. There is no underlying security or a stock, which is to be delivered to fulfill the obligations as index futures are cash settled. As other derivatives, the contract derived its value from underlying index. The underlying indices in this case will be the various eligible indices and as permitted by the Regulator from time to time.

Index Options Options contract gives its holder right, but not the obligation to buy or sell something on or before a specified date at a stated price. Generally Index options are European style. European style means those option contracts that can be exercised only on the expiration date. The underlying indices for index options are various eligible indices and as permitted by the Regulator from time to time.

Stock Futures A stock future contract is a standardized contract to buy or sell a specific stock at a future date at an agreed price. A stock future is, as the name suggests, a future on a stock i.e. underlying is a stock. The contract derives its value from the underlying stock. Single stock futures are cash settled.

Stock Options Options on individual stocks are options contracts where the underlying are individual stocks. Based on eligible criteria and subject to the approval from the regulator, stocks are selected on which options are introduced. These contracts are cash settled and are American style. American Style options are those options contracts that can be exercised on or before the expiry date.

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(3) Myths & Realities about Derivatives In less than three decades of their coming in to vogue, derivatives markets have become the most important market in the world. Today Derivatives have become the part and parcel of the day-to-day life for ordinary people in major parts of the world. While, this is true for many countries, there are still apprehensions about the introduction of derivatives. There are many myths for derivatives but the realities are different especially for the exchange traded derivatives, which are well regulated with all the safety mechanisms in place. What are these myths behind this derivative? Derivatives increase speculation and do not serve any economic purpose. Indian market is not ready for Derivative trading. Disasters are proved that Derivatives are very risky and highly leveraged instruments. Derivatives are very complex and exotic instruments that Indian investors find difficulty in understanding.

(4) Why FII play is crucial for the F & O Market? The foreign institutional investors (FIIs) play in the futures & options (F&O) segment is crucial for Indian markets, including in terms of setting the short term trend. Until February, their share was on the rise, accounting for a third of daily contracts (index and stock futures and options) traded on the NSE. Notably, since it has been proved decisive in the last couple of years to predict the undercurrent of the market, many traders and investors track it keenly. According to an expert, “F&O trades have become lead indicators for the market as they are interested in returns month on month. Apart from looking at leverage levels, traders also see when FIIs are long with huge positions, as any small negative news leads to unwinding and vice versa. Unwinding of long positions in F&O also puts pressure on the cash market even if there is no actual selling happening in a big way.” That apart, FIIs’ play in derivatives also leads to arbitrage in the cash market. Among key reasons for the rise in FII activity in the F&O segment are the higher returns. Expert says, FIIs are mostly based out at Europe and the US, see lucrative opportunities. The F&O segment has given returns of around eight per cent, going by the premiums prevailing in the derivatives segment, over the cash market. “These returns are substantially higher from their home 17

market fixed income returns. There are several such FIIs interested only in derivative deals,” Apart from higher returns, the rise in FII activity in F&O segment is also partly due to the depth in the cash segment, which is not big enough to absorb high volumes. Thus, FIIs, with strong back-up of significant holding in most index heavyweights from banking, software and automobiles sectors, have raised their play in the F&O segment rather than buying heavyweights in the cash market. Had it not been for the higher activity in the F&O segment, Indian markets would have been more volatile. The price sensitiveness of the cash segment vis-a-vis buying and selling by FIIs can be gauged from past trends. FIIs were net sellers in the cash market worth Rs 1.1 lakh crore during the global economic crisis of 2008-09. The market crashed in that period, with the Sensex falling over 60 per cent from its peak of 21,207 on January 10, 2008. While the successive reversal of outflow saw the Sensex revisiting its highest level on November 5, 2010, the market again moved down by 29 per cent on subsequent outflow led by the weakening world economy due to the debt crisis (in 2011). Meanwhile, barring the uncertainty over tax issues, 2012 has started on a good note. FIIs are net buyers and the Sensex has edged up from its 2011 low and is now hovering at around 17,000 levels. FIIs’ play in F&O in 2012 has been 8-10 times their turnover in cash market, up from five to seven times during AprilOctober 2011.

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PART-II PRIMARY STUDY (4) INTRODUCTION OF THE STUDY

(1) Problem Statement To know the awareness of HNI clients’ investment in F & O, in which derivative instrument do they invest more and the reasons behind their investment in F & O

(2) Importance of the Study Derivatives Instruments are important instruments for trading. But still in India many less people invest in that and specially HNI clients. This study is to know the awareness of HNI clients in derivatives, what factors attract HNI clients to invest in F & O-if they invest, and what the reason is why they do not invest in F & O-if they do not invest.

(3) Objective of the Study To know the awareness of HNI clients towards investment on Derivative market.

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(6) DATA ANALYSIS AND INTERPRETATION Que 1: Occupation of Respondents Business Salaried man Person

34%

66%

If Businessman; what kind of Business?

Manufact Trad Export Supp urer er er lier

8% 2%

31% 59%

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Que: 2 whom do you consult while taking the financial decisions? Own

family, friends, and relatives

Banker

Insurance Agent

Own & family, friends, relatives 7% 9% 4% 15% 65%

Options

Number of Respondents

Own Family/friends/relatives Banker Insurance Agent Own, Family/friends/relatives

65 15 04 09 07

Total

100

Interpretation: From above chart and table it reveals that 65% respondents take their financial decisions on their own. 15% take their financial decisions from family/friends/relatives. This means majority of HNIs do not want to consult any financial advisor.

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Que: 3 from following tools in which do you Invest? Equit Commo y dity

RealEstate

Own Business

Equity, Commodity

13% 8% 4% 14%

Options

61%

Number of Respondents

Equity Commodity Real-estate Own business Equity, Commodity

61 14 04 08 13

Total

100

Interpretation: From above chart and table it reveals that majority of respondents invest in Equity and only 8% invest in their own business. It shows the major area of interest for investment of HNIs is also equity.

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Que: 4 Who is your broker? Sharekh an

Indiabul ls

Motilal Oswal

Angel Broking

Oth ers

22% 28%

11%

25%

14%

Options

Number of Respondents

Sharekhan Indiabulls Motilal Oswal Angel Broking Others

19 10 12 22 25

Total

88

Interpretation: From above chart and table it reveals that as such there is no specific broker as majority of them falls under the category of others. Others are: SMC, Anand Rathi, Marfatia, AXIS Bank, VSE, HDFC Sec., Jhaveri Securities, Kuwarji, BMA Sub brokers,

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Que: 5 are you satisfied with your broker? Yes

No

5%

95%

Options Yes No Total

Number of respondents 84 04 88

Interpretation: From above chart and table it reveals that majority of investors are satisfied with their current broker.

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Que: 6 Do you invest in Derivative?

Yes

No

18%

82%

Options Yes No Total

Number of respondents 18 82 100

Interpretation: From above chart and table it reveals that majority of investors (82%) do not invest in derivatives.

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Que: 6A if you invest in derivatives-reasons? To hedge the Fund Risk Control More Stable Direct investment without buying and holding the assets More Stable, Direct investment without buying and holding the assets 11% 22% 6% 22%

39%

Options To hedge the Fund Risk Control More Stable Direct Investment without buying and holding the assets More Stable, Direct Investment without buying and holding the assets Total

Number of respondents 2 1 4 7 4 18

Interpretation: From above chart and table it reveals that more than 39% of investors invest in derivatives because, there is Direct Investment without buying and holding the assets. Those who invest in derivative market they take advantages of investing in derivative market. 26

Que: 6B if you do not invest in derivatives-reasons?

Lack of knowledge and difficult to understand Increase Speculation Very risky and highly leveraged instrument Counter party risk Lack of knowledge and difficult to understand, Counter party risk 19% 43%

9%

24% 5%

Options Lack of knowledge and difficulty in understanding Increase speculation Very risky and highly leveraged instruments Counter party risk Lack of knowledge and difficulty in understanding, Counter party risk Total

Number of respondents 35 4 20 7 16 82

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Interpretation: From above chart and table it reveals that almost 50% investors do not invest in derivatives because of Lack of knowledge and difficulty in understanding. Majority of them are around 45 years old, so usually they look for a safer investment, not showing interest in risky investment and difficult to understand for them.

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Que: 7 from where you prefer to take advice before investing in derivative market?

Brokerage houses News networks

Research Analyst Websites, news networks

others 6% 20%

27% 7%

7% 33%

Options Brokerage Houses Research Analyst Websites News Networks Others Websites, News Networks Brokerage Houses, Research Analyst Brokerage Houses, Websites Total

Number of respondents 1 4 1 5 1 3 2 1 18

Interpretation: From above chart and table it reveals that almost 40% of investors follow advices from news networks. Second highest advisor is Research Analyst. Only 1 respondent takes advices from others i.e. friends. 29

Que: 8 which of the following derivative instrument do you invest in? Stock Futures Stock Optins Stock Futures, Stock Options Stock Index Futures, Stock Options Stock Futures, Stock Index Futures

Stock Index Futures Stock Index Options Stock Futures, Stock Index Futures Stock Index Futures, Stock Index Options Stock Optins, Stock Index Options

6 6 % % 5%

17% 5%

17% 11% 11 % 17% 5%

Options

Number of respondents

Stock Futures Stock Index Futures Stock Options Stock Index Options Stock Futures, Stock Options Stock Futures, Stock Index Futures Stock Index Futures, Stock Options Stock Index Futures, Stock Index Options Stock Futures, Stock Index Options Stock Options, Stock Index Options

3 1 2 3 1 2 3 1 1 1

Total

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Interpretation: From above chart and table it reveals that almost 40% investors invest in Stock Options. 30

Que: 9 how much total of your investment goes to F & O?

10 %

1120%

21- more 40% than 40% 6%

22%

44% 28%

Options 10% 11-20% 21-40% More than 40% Total

Number of respondents 1 8 5 4 18

Interpretation: From above chart and table it reveals that because of risky investment those who invest in derivative market from their total investment in derivative market 44% investors show interest in derivative market from 11-20%

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Que: 10 what are the returns of your investment in F & O?

Up to 10%

1120%

21- more 30% than 30%

5% 28%

39%

28%

Options Up to 10% 11-20% 21-30% More than 30% Total

Number of respondents 5 5 8 1 18

Interpretation: From above chart and table it reveals that majority investors get 21-30% return on their investment in F & O. Systematic investment in derivative market bring good returns.

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Que: A respondent’s age?

20-30 yrs

31-40 yrs

41-50 yrs

51-60 yrs

more than 60

5% 0%

39% 56%

Options 20-30 yrs 31-40 yrs 41-50 yrs 51-60 yrs More than 60yrs Total

Number of respondents 10 7 1 0 0 18

Interpretation: From above chart and table it reveals that because of difficulty in understanding majority young HNIs show interest in derivative market.

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Que: B Gender of respondent? Male

Female

0%

100%

Options Male Female Total

Number of respondents 18 0 18

Interpretation: From above chart and table it reveals that all the investors in derivatives are male.

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Que: C qualification of respondent

Gradu ate

Post Graduate

17%

83%

Options Graduate Post Graduate Others Total

Number of respondents 15 03 0 18

Interpretation: From above chart and table it reveals that majority (83%) investors in derivatives are Graduates. However 17% are Post Graduates also. All the derivative market investors are at least graduates.

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Que: D if you are a businessman, annual turnover of your company?

50 lacks- 1.1-3 1 Cr Cr

3.1-5 Cr

5.1-10 above Cr 10 Cr.

0% 33%

34%

33%

Options

Number of respondents

50 lacks-1 Cr 1.1-3 Cr 3.1-5 Cr 5.1-10 Cr Above 10 Cr

3 3 3 0 0

Total

9

Interpretation: From above chart and table it reveals that all the businessman who invest in derivative, the annual turnover of their company is between 50Lacks to 5 Cr.

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Que: E if you are a salaried person, your monthly household income?

20000-50000 50001-75000 150000 more than 151000

11%

33%

75001-100000

100001-

0%

56%

Options

Number of respondents

20000-50000 50001-75000 75001-100000 100001-150000 Above 150000

0 5 3 1 0

Total

9

Interpretation: From above chart and table it reveals that majority salaried respondents have their monthly household income between 50001-75000.

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RESULTS AND FINDINGS Derivative market encourages the investor to take more risk and earn more return. So in this way it helps the Indian economy by developing entrepreneurship. Derivative market is more regulated and standardized so in this way it provides a more controlled environment. In a nutshell, we can say that the rule of High Risk and High Return apply in derivatives. If we are able to take more risk we can earn more profit.

(8) LIMITATION OF THE STUDY The study has been done on HNI clients of Vadodara city, so it may possible the perceptions of investment in F & O of HNI clients of other cities, metro cities are different. It may possible that the HNIs of other cities have different view of investment on F & O.

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(9) CONCLUSION

Derivatives allow firms and individuals to hedge risks to take risk efficiently. HNIs have to make sure that derivatives are used properly. This means that the risk of derivatives positions have to be measured and understood. HNIs should have well-defined policies for derivative uses. An HNI must know how risk is managed with derivative and the role of derivative in it.

So should we fear Derivatives? The answer is “No”. We should have a healthy respect for them. We do not fear planes because they may crash and do not refuse to board them because of that risk. Instead, we make sure that planes are as safe as it makes economic sense for them to be. The same applies to derivatives. Typically, the losses from derivatives are localized, but the whole economy gains from the existence existences of derivatives markets.

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(10) SUGGESTION Less number of HNIs invest in derivative market. For Value Plus they can be their target clients. In Life Line bulletin Value Plus can add the advantages, disadvantages, latest news about derivative market. So more number of HNIs will aware about derivative market. Majority derivative market investors are 25-35 years old. Value Plus can keep a seminar for them as well as for those who are around 45-50 years who do not invest in derivative market and can be prospective client for derivative market for Value Plus.

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10. ANNEXURE

Que 1: Occupation of Respondents A. Businessman B. Salaried Person Que 1A: If Businessman; what kind of Business? A. Manufacturer B. Trader C. Exporter D. Supplier Que: 2 whom do you consult while taking the financial decisions? A. B. C. D.

Own Family, friends, and relatives Banker Insurance Agent

E. Own & family, friends, relatives Que: 3 From following tools in which do you Invest? A. B. C. D. E.

Equity Commodity Real-Estate Own Business Equity, Commodity

Que: 4 Who is your broker? A. B. C. D. E.

Sharekhan Indiabulls Motilal Oswal Angel Broking Others

Que: 5 Are you satisfied with your broker? A. Yes B. No Que: 6 Do you invest in Derivative? A. Yes B. No

Que: 6A if you invest in derivatives-reasons? A. B. C. D. E.

To hedge the Fund Risk Control More Stable Direct investment without buying and holding the assets More Stable, Direct investment without buying and holding the assets 41

Que: 6B If you do not invest in derivatives-reasons? A. B. C. D. E.

Lack of knowledge and difficult to understand Increase Speculation Very risky and highly leveraged instrument Counter party risk Lack of knowledge and difficult to understand, Counter party risk

Que: 7 From where you prefer to take advice before investing in derivative market? A. B. C. D.

Brokerage houses Websites, news networks Others Research Analyst

Que: 8 Which of the following derivative instrument do you invest in? A. Stock Futures B. Stock Index Futures C. Stock Optins D. Stock Futures, Stock Options E. Stock Index Futures, Stock Options F. Stock Index Options G. Stock Futures, Stock Index Futures H. Stock Index Futures, Stock Index Options I. Stock Optins, Stock Index Options

Que: 9 how much total of your investment goes to F & O? 10% 11-20% 21-40% More 42

Que: 10 what are the returns of your investment in F & O? A. B. C. D.

11-20% 21-30% More than 30% Up to 10%

Que: A respondent’s age? A. B. C. D. E.

20-30 yrs 31-40 yrs 41-50 yrs 51-60 yrs More than 60

Que: B Gender of respondent? A. Male B. Female Que: C Qualification of respondent? A. Graduate B. Post Garduate

Que: D If you are a businessman, annual turnover of your company? A. B. C. D. E.

50 lacks-1 Cr 1.1-3 Cr 3.1-5 Cr 5.1-10 Cr Above 10 Cr.

Que: E If you are a salaried person, your monthly household income? A. 20000-50000 B. 50001-75000 C. 75001-100000 D. 100001-150000 E. More than 151000

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