A RESEARCH PROPOSAL ON

RELATIONSHIP BETWEEN INDEX DERIVATIVES AND INDEX

Submitted by: Rinkal M.vachhani -117760592069 Nikita patel -117760592066

UNDER THE GUIDENCE OF:

Mr. Mahendra patel

Submitted To:

THE CO-ORDINATOR SIGMA INSTITUTE OF MANAGEMENT STUDIES BAKROL (BARODA) NOV. 2012

1 ABOUT TOPIC
Index derivatives are derivative contracts which derive their value from an Underlying index. The two most popular index derivatives are index futures and index options. Index derivatives have become very popular worldwide. Index derivatives offer various advantages and hence have become very popular.

Institutional and large equity-holders need portfolio-hedging facility. Index-derivatives are more suited to them and more costeffective than derivatives based on individual stocks. Pension funds in the User known to use stock index futures for risk hedging purposes.

Index derivatives offer ease of use for hedging any portfolio Irrespective of its composition. Stock index is difficult to manipulate as compared to individual stock prices, more so in India and the possibility of cornering is reduced. This is partly because an individual stock has a limited supply, which can be cornered.

Stock index, being an average, is much less volatile than individual Stock prices. This implies much lower capital adequacy and margin requirements.

Index derivatives are cash settled, and hence do not suffer from Settlement delays and problems related to bad delivery, forged/fake Certificates.

2 IMPORTANT OF TOPIC
This study suggests which segment is to be select for investment. It includes find correlation between index derivative (only of selected scripts contract) and index. Project is involve comparison between selected index derivative contract and selected index It analyses derivative concept. This study helps measuring the risk in index derivative and index. This study also provides individual risk of securities.

3 OBJECTIVE OF STUDY Put before Importance

To analyze index derivative (future & option) contract To analyze index (sport market ) contract To find correlation between index derivative contract and index contract.

To compare index derivative and index segment selected scripts.

To suggest less risky segment from index derivative and index for investment.

Its Research Methodology

4 RESEARCH DESIGN
According to KERLINGER, Research design is the plan, structure and strategy of investigation conceived so as to obtain answers to research question and to control the variance. The definition consists of three important terms Plan, structure and strategy. Plan is an outline of the research scheme on which the researcher is to work. Structure of the research is more specific outline or the scheme and strategy shows how the research will be carried out, specifying the methods to be used in the collection and analyses of data.

Types of research design:

1) Exploratory Research Explain InShort 2) Descriptive design 3) Causal design

Out of these three main Types of research design, in this study we select Exploratory Research.

1. Exploratory Research:

In exploratory design the emphasis is on discovery of new ideas. Eg: in a business where sales are reduction since last few months, the mgt. may conduct a study to find out what could be the possible explanations sales might have decline on account of number of factors like deterioration in the quality of product, increased competition, inadequate or ineffective advertisement, lack of efficient and trained salesman or the use of wrong channels of distribution. In such a case an Exploratory Research may be conducted to find out most likely causes. It is based on secondary data. It does not have a formal or a rigid design as the researcher may have to change

his focus or direction, depending on the availability of new ideas. An exploratory study is in nature a preliminary investigation.

SAMPLING: Sampling is the process of drawing a sample from a large

population. In short, the sampling is the process of taking a few units from target population, analyzing them & making conclusion about the population.

POPULATION:

All the scripts of index Specified The Index(SENSEX or Nifty) derivative &index segment

SAMPLES:
Four scripts of index derivative & index segment BANKER NIFTY CNX IT NIFTY NIFTY MIDCAP50

15-10-2012 to 30-11-2012 on daily bases

SAMPLING PROCESS:
NON PROBABILITY SAMPLING METHOD RULE OF THUMB APPROACH Explain Please or Be Sure about Its Implication

5 PROBLEM OF STATEMENT:
Present in Proper Sentence Comparison between index derivative and index.

6 TOOLS AND TECHNIQUES:

Co-relation Coefficient Beta

7 DATA COLLECTION:
Source Of Data

Secondary sources

- Annual Reports Of Company, - Magazines - Capital Market - Business Standards

WEB SITES: write only E-Media or Electronic Media

www.nseindia.com Thats Put in Bibliography or Source www.bseindia.com

8 LIMITATION OF STUDY
The following are the limitations which are faced during gathering of data and which makes project work in trouble.

All the data (whole project) is based on secondary sources of data collection so if these data is wrong, project is also contain these wrong data. Irrelevant or Insufficient data, Data Biasness

Sometime data is not available.

This project Is Limited to selected scripts and products. Investment decision is subjective matter with regard to this study Not include the study of all scripts and products so some investor may not take decision of investment in those scripts or products which are not included in this study.

If data is not reliable then correlation, beta and stander deviation will not leads proper result.

9 Literature Review:
a. Bhattacharya et al (2003) used GARCH framework by incorporating the lagged returns (BSE 1001) as explanatory variables in the conditional mean. They have used reporting and non-reporting weeks2 to study the day of the week effect.

b. Goswami and Angshuman (2000) examined the prices of seventy individual securities at BSE from 1991 to 1996 and found a significant positive Fridayeffect which was correlated with the firm size. A more recent study by Nath and Dalvi (2004) examines the impact of the introduction of rolling settlement. They use high frequency data for the period of 1999 to 2003 and analyse them using robust regression technique. They conclude that there were Monday and Friday-effects before introduction of rolling settlement; however,

after the introduction of rolling settlement only Friday-effect is surviving.

c. Arora, Varun and Das, Sromon (2007) investigates the existence of seasonality in Indias stock market, primarily trying to detect the day of the week effect in the Stocks listed on the National Stock Exchange for the period from November 1994 to September 2007. The results confirm the existence of seasonality (in the form of Day of the Week Effect) stock returns in India for 66 Stocks spanning across various sectors. The results of the study imply that the stock market in India is inefficient, and hence, investors can time their share investments to improve returns and make abnormal profits. However the Day of the Week effect was found to be absent in the Bullish as well as the Bearish phase. No Indian study so far explicitly addresses the effect of changing expiration day effects of the index futures on their volatility on the intra-week behavior of the stock returns. The present study is making an attempt to fill this gap. Add Information regading Index and about Topic Old Research Topic and Title should be increase Objectives are Primary and Secondary Limitation of study at Last of Project General Conclusion Put you research Plan (In short how should you invove in report and how should you prepare it TIME LINE OF PROJECT REPORT