disertation hedging

A

DISSERTATION REPORT

ON

CURRENCY HEDGING

AT

DESTIMONEY SECURITIES PRIVATE LIMITED, DEHRADUN

SUBMITTED TO GURUKUL KANGRI UNIVERSITY, HARIDWAR IN

PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE OF

MASTERS IN BUSINESS ADMINISTRATION

(2013-2015)

SUPERVISED BY: SUBMITTED BY:

DR.SUREKHA RANA SHRAYA CHAUHAN

DEPARTMENT OF MANAGEMENT STUDIES

KANYA GURUKUL CAMPUS , DEHRADUN

2ND CAMPUS, GURUKUL KANGRI UNIVERSITY, HARIDWAR

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DECLARATION

I Shraya Chauhan a bonafide student of MBA from Kanya Gurukul Campus, Dehradun Uttarakhand hereby

declare that I have undergone training at DESTIMONEY SECURITIES PRIVATE LIMITED, DEHRADUN

under the supervision of Mr. Kulveer Kandari on and from 19 Jan 2015 to 19 May 2015 .

I also declare that the present project report is based on the above training and is my original work. The

content of this project report has not been submitted to any other university or institute either in part or in full

for the award of any degree, diploma or fellowship.

SHRAYA CHAUHAN

MBA – FINANCE

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ACKNOWLEDGEMENTACKNOWLEDGEMENT

I express my sincere thanks to my project guide ‘Prof. Surekha Rana’ whose valuable suggestions made the

project worthwhile. My deepest regard are also there for ‘Prof. Patiraj Kumari’, Prof .Bindu Arora for without

their valuable and cooperation the task accomplished would have been impossible.

I express my sincere thanks to the Management of DESTIMONEY SECURITIES PRIVATE LIMITED of

DEHRADUN for giving me an opportunity to gain exposure on matter related to Project under the esteem

guidance of Mr. KULVEER KANDARI (M.D)

I am also indebted to Mr. SANDEEP BHASKAR (Director) for his valuable information's and inputs, which

added dimensions and meaning to my project.

With Sincere Thanks

SHRAYA CHAUHAN

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PREFACE

"No Learning Can Be Complete Without Practicing"

The conceptual knowledge acquired by management students is best manifested in the project and training

they undergo, I have got a chance to undergo practical training in DSPL, Dehradun. The present project gives

a perfect vent to my understanding of the financial management specially the most modern concept of

“Currency Hedging”

The project report entitled “ CURRENCY HEDGING” is based on theme of DSPL DEHRADUN

performance on the basis of economic value addition made by them in the last 7 years.

The report will provide all the information regarding the CURRENCY HEDGING and their importance in

DESTIMONEY SECURITIES PRIVATE LIMITED, DEHRADUN. .

I also hope that this report will be beneficial for the students, academician and Managers who are related to

this topic.

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CONTENT

S.NO TOPIC PAGE NO.

Chapter:1 Company Profile

1.1. About the company

1.2. Objectives

1.3. SWOT analysis

7-13

Chapter:2 Introduction

2.1. Currency hedging

2.2.Hedging strategies or instruments

2.3.Determinants of hedging decision

2.4.Currency risk management techniques

15-24

Chapter:3 Objectives of study

3.1. Research methodology

26-28

Chapter4 Data analysis and findings

4.1.Contract note cum bill

4.2.Profit and Loss statement

30-46

Chapter5 Conclusion and recommendation 47-48

Bibliography

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CHAPTER: 1

COMPANY

PROFILE

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ABOUT THE COMPANY

DSPL: An Overview

Destimoney was established in 2006. It is one of the leading full service financial organizations in the country

today. Destimoney is led by Sudip Bandyopadhyay.

A chartered accountant by profession, Mr. Bandyopadhyay has over 25 years of experience in the financial

sector. He was responsible for building Reliance Securities (Reliance money) into one of the largest brooking

and distribution house in the country.

Destimoney have a nation wide presence with their own offices and a strong sub broker / Authorised person

network supported by more than 450 dedicated employees.

Destimoney is promoted by New Silk Route- a leading Asia-focused growth capital firm with $1.5 billion

under management. Dhanlaxmi Bank is amongst their esteemed shareholders in Destimoney Securities.

About Dhanlaxmi Bank:

Dhanlaxmi bank is amongst their esteemed shareholders.

Dhanlaxmi bank limited was incorporated in 1927,at Thrissur and became a scheduled commercial bank in

the year 1977. The bank has a pan India presence through a network of 274 branches, 453 ATM’s covering

136 centers across 14 states.

The bank’s Board of Directors is comprised of eminent professionals who provide leadership and guidance to

a strong , multi skilled management team. Its comprehensive range of banking and financial services and its

extensive nationwide presence has set the stage for an era of unprecedented growth.

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MAJOR COMPETITORS OF DSPL :-

Edelweiss

Sharekhan

S M C Global

Relligare

Kotak Mahindra

Karvy securities

ICICI Direct

India infoline

Angel broking

Geojit

HDFC Securities

Reliance money

Anand Rathi

SBI Demat

Citi Bank Demat

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VALUES

MEETING COMMITMENTS MADE TO EXTERNAL AND INTERNAL CUSTOMERS

FOSTER LEARNING, CREATIVITY AND SPEED OF RESPONSE. RESPECT FOR DIGNITY AND POTENTAIL OF INDIVIDUALS. LOYALTY AND PRIDE IN THE COMPANY. TEAM PLAYING ZEAL TO EXCEL INTEGRITY AND FAIRNESS IN ALL MATTER.

COMPANYS VISION AND MISSION

VISION:-

1. To build DSPL as a globally trusted brand in the financial services domain.

2. To build a world class customer centric financial services entity that fulfills the financial needs of ‘Middle

Class India.’

3. To focus on profitable growth.

4. To unlock potential across four dimensions: Individual, Team, Customer and Marketplace.

MISSION:-

1. Providing complete financial care driven by the core values of diligence and transparency.

2. To forge strong , sustained relationships with their clients by creating value for them.

3. To get a thorough insight into client’s financial needs and goals & offer customized solutions.

4. Uphold clients trust in their products and services.

5. Endeavor to protect & increase client’s capital with transparent and knowledge based investment process &

systems.

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PRODUCTS

BROKING

1.Equities

2.Commodities

3.Currencies

4.Depositories

WEALTH MANAGEMENT

1.Portfolio management

2.Advisory services

DISTRIBUTION

1.Mutual Fund

2.Insurance

3.IPOs and others

INVESTMENT BANKING

RESEARCH

1.Fundamental

2.Technical

3.Industry

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SERVICES OF DSPL

Broking & commodity services

On-line trading platform

State of art user friendly On-line Trading Platform also facilitates Mobile Trading and Off-line

Trading.

Real time streaming quotes and portfolio tracking.

Single window to invest in Equity, Commodity , Currency, IPO, and Mutual funds.

Tie up with leading Indian banks like HDFC Bank, ICICI Bank, AXIS Bank and DHANLAXMI Bank

to facilitate seamless payments towards trading in equities, commodities and derivatives.

24*7 real time on line back office access to our customers.

.

Trading services

Trading and clearing member of BSE, NSE, and MCX providing broking services in Equity,

Derivatives and Commodities.

Competitive Brokerage

Option of Online as well as offline trading.

Dedicated and expert Dealers team for execution of trade orders.

Hi-Tech Dealing room with best communication facilitates.

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BUSINESS OBJECTIVES

GROWTH : - To ensure a steady growth by enhancing the competitive edge of DSPL.

PROFITABILITY :- To provide a reasonable and adequate return on capital employed, primarily

through improvements in operational efficiency, capacity utilization, productivity and generate

adequate internal resources to finance the company's growth.

CUSTOMER FOCUS :- To build a high degree of customer confidence by providing increased

value for his money through trading and investment.

PEOPLE-ORIENTATION :- To enable each employee to achieve his potential, improve his

capabilities, perceive his role and responsibilities and participate and contribute positively to the

growth and success of the company. To invest in human resources continuously and be alive to their

needs.

TECHNOLOGY :- Achieve technological excellence in operations by development of indigenous

technologies and efficient absorption and adaptations of imported technologies to suit business need

and priorities and provide the competitive advantage to the company.

IMAGE :- To fulfill the expectations of customers

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SWOT ANALYSIS

STRENGTH (S): -

It is promoted by New Silk Route – a leading Asia- focused growth capital firm with $1.5 billion under management.

Dhanlaxmi Bank is amongst their esteemed shareholder in Destimoney Securities.

Dedicated research team.

WEAKNESSES (W): -

Localized presence due to insufficient investments for countrywide expansion.

Lack of awareness among customers.

Lesser emphasis on customer retention.

OPPORTUNITIES (O): -

It can easily tap the retail investors with small saving through promotional channels like print media,

electronic media etc.

More and more small investors are entering into commodity market.

Increasing usage of internet through broadband connectivity may boost a whole new breed of investors

for trading in securities.

THREATS (T): -

Lack of sufficient branch offices for speedy delivery of services.

More and more players are venturing into this domain.

Current market condition is very bad so its not easy to convince clients to trade in commodity market.

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CHAPTER:2

INTRODUCTION

TO

TOPIC

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HEDGING

INTODUCTION:

.A hedge is an investment position intended to offset potential losses/ gains that may be incurred by a

companion investment. In simple language a hedge is used to reduce any substantial losses/ gains suffered by an

individual or an organization.

Hedging is often considered an advanced investing strategy, but the principles of hedging are fairly simple.

With the popularity-and accompanying criticism of hedge funds the practice of hedging is becoming more

widespread

EVERYDAY HEDGES

Most people have, whether they know it or not, engaged in hedging. For example- when you take out

insurance to minimize the risk that an injury will erase your income or you buy life insurance to support your

family in the case of your death, this is a hedge.

You pay money in monthly sums for the coverage provided by an insurance company. Although the textbook

definition of hedging is an investment taken out to limit the risk of another investment, insurance is an

example of real world hedge

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CURRENCY HEDGING

A particular hedging strategy used to reduce risk in the foreign exchange market. The same strategies are used as in any hedging situation, where one security would be offset by another security such as holding a short and long position of the same security at the same time

Foreign Exchange Risk Management: Process & Necessity: Firms dealing in multiple currencies face a risk (an unanticipated gain/loss) on account of sudden/unanticipated changes in exchange rates, quantified in terms of exposures. Exposure is defined as a contracted, projected or contingent cash flow whose magnitude is not certain at the moment and depends on the value of the foreign exchange risk. The process of identifying risks faced by the firm and implementing the process of protection from these risks by financial or operational hedging is defined as foreign exchange risk management. This paper limits its scope to hedging only the foreign exchange risks faced by the firm.

Kinds of Foreign Exchange Exposure

Risk management techniques vary with the type of exposure (accounting or economic) and term of exposure. Accounting exposure, also called translation exposure, results from the need to restate foreign subsidiaries’ financial statements into the parent’s reporting currency and is the sensitivity of net income to the variation in the exchange rate between a foreign subsidiary and its parent. Economic exposure is the extent to which a firm's market value, in any particular currency, is sensitive to unexpected changes in foreign currency. Currency fluctuations affect the value of the firm’s operating cash flows, income statement, and competitive position, hence market share and stock price. Currency fluctuations

also affect a firm's balance sheet by changing the value of the firm's assets and liabilities, accounts payable, accounts receivables, inventory, loans in foreign currency, investments (CDs) in foreign banks; this type of

economic exposure is called balance sheet exposure. Transaction Exposure is a form of short term economic exposure due to fixed price contracting in an atmosphere of exchange rate volatility.

Necessity of managing foreign exchange risk

A key assumption in the concept of foreign exchange risk is that exchange rate changes are not predictable and that this is determined by how efficient the markets for foreign exchange are. Research in the area of efficiency of foreign exchange markets has thus far been able to establish only a weak form of the efficient

market hypothesis conclusively which implies that successive changes in exchange rates cannot be predicted by analyzing the historical sequence of exchange rates.

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Hedging as a tool to manage foreign exchange risk

There is a spectrum of opinions regarding foreign exchange hedging. Some firms feel hedging techniques are speculative or do not fall in their area of expertise and hence do not venture into hedging practices. Other firms are unaware of being exposed to foreign exchange risks. There are a set of firms who only hedge some of their risks, while others are aware of the various risks they face, but are unaware of the methods to guard the firm against the risk. There is yet another set of companies who believe shareholder value cannot be increased by hedging the firm’s foreign exchange risks as shareholders can themselves individually hedge themselves against the same using instruments like forward

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Foreign Exchange Risk Management Framework

Once a firm recognizes its exposure, it then has to deploy resources in managing it. A heuristic for firms to manage this risk effectively is presented below which can be modified to suit firm-specific needs i.e. some or all the following tools could be used:

1. Forecasts: After determining its exposure, the first step for a firm is to develop a forecast on the market trends and what the main direction/trend is going to be on the foreign exchange rates. The period for forecasts is typically 6 months. It is important to base the forecasts on valid assumptions. Along with identifying trends, a probability

should be estimated for the forecast coming true as well as how much the change would be

2. Risk Estimation: Based on the forecast, a measure of the Value at Risk (the actual profit or loss for a move in rates according to the forecast) and the probability of this risk should be as curtained . The risk that a transaction would fail due

to market specific problems to be taken into account. Finally, the Systems Risk that can arise due to

inadequacies such as reporting gaps and implementation gaps in the firms’ exposure management system should be estimated.

3. Benchmarking: Given the exposures and the risk estimates, the firm has to set its limits for handling foreign exchange exposure. The firm also has to decide whether to manage its exposures on a cost centre or profit centre basis. A cost centre approach is a defensive one and the main aim is ensure that cash flows of a firm are not adversely affected beyond a point. A profit centre approach on the other hand is a more aggressive approach

where the firm decides to generate a net profit on its exposure over time.

4. Hedging: Based on the limits a firm set for itself to manage exposure, the firms then decides an appropriate hedging strategy. There are various financial instruments available for the firm to choose from: futures, forwards,

options and swaps and issue of foreign debt. Hedging strategies and instruments are explored in a section.

5. Stop Loss: The firms risk management decisions are based on forecasts which are but estimates of reasonably unpredictable trends. It is imperative to have stop loss arrangements in order to rescue the firm if the forecasts turn out wrong. For this, there should be certain monitoring systems in place to detect critical levels in the foreign exchange rates for appropriate measure to be taken.

6. Reporting and Review: Risk management policies are typically subjected to review based on periodic reporting. The reports mainly include profit/ loss status on open contracts after marking to market, the actual exchange/ interest rate achieved on each exposure and profitability vis-à-vis the benchmark and the expected changes in overall exposure due to forecasted exchange/ interest rate movements. The review analyses whether the benchmarks

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set are valid and effective in controlling the exposures, what the market trends are and finally whether the overall strategy is working or needs change.

HEDGING STRATEGIES/ INSTRUMENTS

A derivative is a financial contract whose value is derived from the value of some other financial asset, such as a stock price, a commodity price, an exchange rate, an interest rate, or even an index of prices. The main role of derivatives is that they reallocate risk among financial market participants, help to make financial markets more complete. This section outlines the hedging strategies using derivatives with foreign exchange being the only risk assumed.

Forwards:

A forward is a made-to-measure agreement between two parties to buy/sell a specified amount of a currency at a specified rate on a particular date in the future. The depreciation of the receivable currency is hedged against by selling a currency forward. If the risk is that of a currency appreciation (if the firm has to buy that currency in future say for import), it can hedge by buying the currency forward. E.g if RIL wants to buy crude oil in US dollars six months hence, it can enter into a forward contract to pay INR and buy USD and lock in a fixed exchange rate for INR-USD to be paid after 6 months regardless of the actual INR-Dollar rate at the time. In this example the downside is an appreciation of Dollar which is protected by a fixed forward contract. The main advantage of a forward is that it can be tailored to the specific needs of the firm and an exact hedge can be obtained. On the downside, these contracts are not marketable, they can’t be sold to another party when they are no longer required and are binding.

Futures:

A futures contract is similar to the forward contract but is more liquid because it is traded in an organized exchange i.e. the futures market. Depreciation of a currency can be hedged by selling futures and appreciation can be hedged by buying futures. Advantages of futures are that there is a central market for futures which eliminates the problem of double coincidence. Futures require a small initial outlay (a proportion of the value of the future) with which significant amounts of money can be gained or lost with the actual forwards price fluctuations. This provides a sort of leverage. The previous example for a forward contract for RIL applies here also just that RIL will have to go to a USD futures exchange to purchase standardised dollar futures equal to the amount to be hedged as the risk is that of appreciation of the dollar. As mentioned earlier, the tailor ability of the futures contract is limited i.e. only standard denominations of money can be bought instead of the exact amounts that are bought in forward

contracts.

Options:

A currency Option is a contract giving the right, not the obligation, to buy or sell a specific quantity of one foreign currency in exchange for another at a fixed price; called the Exercise Price or Strike Price. The fixed

nature of the exercise price reduces the uncertainty of exchange rate changes and limits the losses of open currency positions. Options are particularly suited as a hedging tool for contingent cash flows, as is the case in

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bidding processes. Call Options are used if the risk is an upward trend in price (of the currency), while Put Options are used if the risk is a downward trend. Again taking the example of RIL which needs to purchase crude oil in USD in 6 months, if RIL buys a Call option (as the risk is an upward trend in dollar rate), i.e. the right to buy a specified amount of dollars at a fixed rate on a specified date, there are two scenarios. If the exchange rate movement is favourable i.e the dollar depreciates, then RIL can buy them at the spot rate as they have become cheaper. In the other case, if the dollar appreciates compared to today’s spot rate, RIL can exercise the option to purchase it at the agreed strike price. In either case RIL benefits by paying the lower price to purchase the dollar.

Swaps:

A swap is a foreign currency contract whereby the buyer and seller exchange equal initial principal amounts of two different currencies at the spot rate. The buyer and seller exchange fixed or floating rate interest payments in their respective swapped currencies over the term of the contract. At maturity, the principal amount is effectively re-swapped at a predetermined exchange rate so that the parties end up with their original currencies. The advantages of swaps are that firms with limited appetite for exchange rate risk may move to a partially or completely hedged position through the mechanism of foreign currency swaps, while leaving the underlying borrowing intact. Apart from covering the exchange rate risk, swaps also allow firms to hedge the floating interest rate risk. Consider an export oriented company that has entered into a swap for a notional principal of USD 1 mn at an exchange rate of 42/dollar. The company pays US 6months LIBOR to the bank and receives 11.00% p.a. every 6 months on 1st January & 1st July, till 5 years. Such a company would have earnings in Dollars and can use the same to pay interest for this kind of borrowing (in dollars rather than in Rupee) thus hedging its exposures.

Foreign Debt:

Foreign debt can be used to hedge foreign exchange exposure by taking advantage of the International Fischer Effect relationship. This is demonstrated with the example of an exporter who has to receive a fixed amount of dollars in a few months from present. The exporter stands to lose if the domestic currency appreciates

against that currency in the meanwhile so, to hedge this, he could take a loan in the foreign currency for the same time period and convert the same into domestic currency at the current exchange rate. The theory assures that the gain realised by investing the proceeds from the loan would match the interest rate payment (in the foreign currency) for the loan

Choice of hedging instruments:

The literature on the choice of hedging instruments is very scant. Among the available studies, some people (1 argues that currency swaps are more cost-effective for hedging foreign debt risk, while forward contracts are more cost-effective for hedging foreign operations risk. This is because foreign currency debt payments are long-term and predictable, which fits the long-term nature of currency swap contracts. Foreign currency revenues, on the other hand, are short-term and unpredictable, in line with the short-term nature of forward contracts. A survey done by Marshall also points out that currency swaps are better for hedging against

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translation risk, while forwards are better for hedging against transaction risk. This13 study also provides anecdotal evidence that pricing policy is the most popular means of hedging economic exposures. These results however can differ for different currencies depending in the sensitivity of that currency to various market factors. Regulation in the foreign exchange markets of various countries may also skew such results.

Determinants of Hedging Decisions:The management of foreign exchange risk, as has been established so far, is a fairlycomplicated process. A firm, exposed to foreign exchange risk, needs to formulate a strategy to manage it, choosing from multiple alternatives. This section explores what factors firms take into consideration when formulating these strategies.

1. Production and Trade vs. Hedging Decisions

An important issue for multinational firms is the allocation of capital among different countries production and sales and at the same time hedging their exposure to the varying exchange rates. Research in this area suggests that the elements of exchange rate uncertainty and the attitude toward risk are irrelevant to the multinational firm's sales and production decisions. Only the revenue function and cost of production are to be assessed, and, the production and trade decisions in multiple countries are independent of the hedging decision. The implication of this independence is that the presence of markets for hedging instruments greatly reduces the complexity involved in a firm’s decision making as it can separate production and sales functions from the finance function. The firm avoids the need to form expectations about future exchange rates and formulation of risk preferences which entails high information costs.

2. Cost of Hedging

Hedging can be done through the derivatives market or through money markets (foreigndebt). In either case the cost of hedging should be the difference between value received from a hedged position and the value received if the firm did not hedge. In the presence of efficient markets, the cost of hedging in the forward market is the difference between the future spot rate and current forward rate plus any transactions cost money market are the transactions cost plus the difference between the interest rate differential and the expected value of the difference between the current and future spot rates. In efficient markets, both types of hedging should produce similar results at the same costs, because interest rates and forward and spot exchange rates are determined simultaneously. The costs of hedging, assuming efficiency in foreign exchange markets result in pure transaction costs. The three main elements of these transaction costs are brokerage or service fees charged by dealers, information costs such as subscription to reports associated with the forward contract.

3. Factors affecting the decision to hedge foreign currency risks

Research in the area of determinants of hedging separates the decision of a firm tohedge from that of how much to hedge. There is conclusive evidence to suggest thatfirms with larger size, R&D expenditure and exposure to exchange rates through foreign sales and foreign trade are more likely to use derivatives. First, the following section describes the factors that affect the decision to hedge and then the factors affecting the degree of hedging are considered.

Firm size: Firm size acts as a proxy for the cost of hedging or economies of scale. Risk management involves fixed costs of setting up of computer systems and training/hiring of personnel in foreign exchange management. Moreover,

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large firms might be considered as more creditworthy counterparties for forward or swap transactions, thus further reducing their cost of hedging. The book value of assets is used as a measure of firm size.

Leverage: According to the risk management literature, firms with high leverage have greater incentive to engage in hedging because doing so reduces the probability, and thus the expected cost of financial distress. Highly levered firms avoid foreign debt as a means to hedge and use derivatives.

Liquidity and profitability: Firms with highly liquid assets or high profitability have less incentive to engage in hedging because they are exposed to a lower probability of financial distress. Liquidity is measured by the quick ratio, i.e. quick assets divided by current liabilities). Profitability is measured as EBIT divided by book assets

Sales growth: Sales growth is a factor determining decision to hedge as opportunities are more likely to be affected by the underinvestment problem. For these firms, hedging will reduce the probability of having to rely on external financing, which is costly for information asymmetry reasons, and thus enable them to enjoy uninterrupted high growth. The measure of sales growth is obtained using the 3-year geometric average of yearly sales growth rates.

As regards the degree of hedging conclude that the sole determinants of the degree of hedging are exposure factors (foreign sales and trade). In other words, given that a firm decides to hedge, the decision of how much to hedge is affected solely by its exposure to foreign currency movements. This discussion highlights how risk management systems have to be altered according to characteristics of the firm, hedging costs, nature of operations, tax considerations, regulatory requirements etc. The next section discusses these issues in the in the Indian context and regulatory environment.

.

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Currency Risk Management Techniques:

A firm may choose any one or any set of combinations of the following techniques (Figure-2) to manage foreign exchange rate risks.

Figure-2: Techniques of Risk Management/Hedging

Matching:- Cash inflows in one of the pairing currencies can be offset against cash flows in the others. A firm can balance its receivables and payables in the same currency. Firms may also deliberately influence the balance by arranging short or long term loans or deposits.

Multi-lateral Netting:- The netting can be done between inflows and outflows of different currencies arising from cross-border transactions of the different entities in the group. This, of course, requires a comprehensive information system concerning foreign exchange dealings of the group companies.

Leads and Lags:- Within the boundaries of the terms of the trading contracts or in keeping with prevailing commercial practices and within the existing regulations, payments to trading partners or foreign subsidiaries, in currencies whose values are expected to appreciate or depreciate, can be accelerated or delayed.

Invoicing and Currency Clauses:- Trading companies may, sometimes, have options to invoice their cross-border sales or purchases, in domestic currency so that the other party absorbs exchange rate risk. Similar choices of invoicing in third country currencies may also be negotiated with trading partners. There are instances of invoicing in terms of currency baskets, comprising a composite index

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Matching

Money Market Hedging

Multilateral Netting

Currency Options Leads & Lags Techniques of Hedging

Currency Swaps Invoicing & Currency Clauses

Currency Futures Forward Currency Transactions

of different national currencies that have been allotted predetermined weights. Judiciously employed, this can help in reducing the impact of volatility of exchange rates.

Forward Currency Transactions :- This involves an agreement between two parties, a buyer and a seller, to buy/sell a currency at a later date at a fixed price. Forward currency contracts can be easily arranged with banks, which are ADs in foreign exchange. A forward contract has the advantage of locking in the exchange rate at an agreed level, protecting from adverse movement in exchange rates.

Currency Futures:- This involves an agreement between two parties, a buyer and a seller, to purchase/sell a currency at a later date at a fixed price, and that it trades on the futures exchange and is subject to a daily settlement procedure to guarantee each party that claims against the other party will be paid. In India, we are yet to have a futures exchange and clearing house for financial futures.

Currency Options:- Currency options offer the holder the right, but not the obligation, to buy or sell foreign currency at an agreed price, within a specified period of time. Generally, on most exchanges, options are not constructed on the underlying market, but rather convey the right to buy or sell the futures contract. There can be exchange-traded options as also OTC options.

Swaps:- A financial swap is a transaction in which two parties agree to an exchange of payments over a specified time period. It is ordinarily marked by an exchange of principals, which may be actual or notional. In a cross currency swap, the counter-parties exchange principals in different currencies at an exchange rate that is usually the current spot rate and reverse the exchange at a later date, usually at the same exchange rate.

Money Market Hedging:- Companies that have need to raise medium term foreign currency loans should explore the possibility of reducing currency risk by raising them in currencies in which they have medium term exposure in terms of receivables and assets in these currencies.

.

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CHAPTER:3

RESEARCH

METHODOLOGY

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Research Methodology

Research refers to a search for knowledge. Research is scientific investigation.

ACCORDING TO REDMAN and MORY

A market research can’t draw decision, but it helps in the task of decision making. “Research is a systematic

effort to gain new knowledge.” ACCORDING TO LERNER’S DICTIONARY OF CURRENT ENGLISH,

Research is careful investigation or inquiry especially through search for new facts in any branch of

knowledge

Significance of the Study:India had earlier followed a tightly regulated foreign exchange regime. The liberalisation of the Indian

economy started in 1991. The 1992-93 Budget provided for partial convertibility of Indian Rupee in current

accounts and, in March 1993, the Rupee was made fully convertible in current account. Demand and supply

conditions now govern the exchange rates in our foreign exchange market. A fast developing economy has to

cope with a multitude of changes, ranging from individual and institutional preferences to changes in

technology, in economic policies, in regulations etc. Besides, there are changes arising from external trade and

capital account interactions. These generate a variety of risks, which have to be managed. There has been a

sharp increase in foreign investment in India. Multi-national and transnational corporations are playing

increasingly important roles in Indian business. Indian corporate units are also engaging in a much wider

range of cross border transactions with different countries and products. Indian firms have also been more

active in raising financial resources abroad. All these developments combine to give a boost to cross-currency

cash flows, involving different currencies and different countries. The corporate enterprises in India are

increasingly alive to the need for organised fund management and for the application of innovative hedging

techniques for protecting themselves against attendant risks. Derivatives are the tools that facilitate trading in

risk.The foreign exchange market is still evolving and corporate enterprises are going through the movements

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in transition from a passive to an active role in risk management. There is no organized information available

on how the corporate enterprises in India are facing this challenge. It is in this context that a review of the

perceptions and concerns of the corporates, in relation to derivatives and of their initiatives in tuning the

organisational set up to acquire and adopt the requisite skills in risk management, assumes significance.

Appropriate policy and other measures can then be taken to accelerate the process of further development of

foreign exchange market and also upgrade foreign exchange risk management (FERM) with higher

professionalism and increased effectiveness

OBJECTIVE OF RESEARCH

Objective of the study includes the following :-

To analyse the currency hedging in DSPL.

Practical implementation of future transaction in DSPL.

RESEARCH PROCESS

Identify the problem

Set the objective

Develop the Research Plan

Data collection

Analysis of Data

Finding (results)

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All these steps are done systematically as one by one to find out the results:- The first step in the research process is to identify the problem and set objective carefully and agree on

the research objective.

The second step to research process is to develop the most efficient research plan for gathering the needed information. Designing the research plan call for gathering the primary data, secondary data, or both, research instruments, sampling plan & contacts methods

The third step in the research process is data collection. It is most expensive and most prone to error. Data collection methods are rapidly improving, thanks to modern computer and tele communication.

The fourth step in research process is to analyze the collected data. In this step researcher tabulate the data and develop the frequency distribution.

The last step in the research process is that the researchers present their findings to the relevant parties. The researcher should present the major findings that are pertinent to major marketing decision facing management

Research methodology constitute of research method.

Collection of data:

Collection of data is one of the important aspects of research methodology. This consists of gathering the data

from various sources.

Data is important to collect the necessary information. Data may be of two types: primary and secondary data.

I have adopted secondary data analyze and interpreted

Secondary data:

Secondary data is one of the parts of research methodology through which information about

the project can be collected. For this research data is collected through internet and various books. Different

financial data like annual report, balance sheet, books and bank manual, books and budget manual were used.

Analysis and interpretation:

Analysis and interpretation of data is the next step of research methodology in this we have analyses the

working capital and cash management of the company. Through this we were able to find out the reasons of

stock piling and other related issue affecting the working capital management in the organization. Various

graphs, pie chart and table were used to present and interpret the results.

[28

CHAPTER:4

DATA ANALYSIS

AND

INTERPRETATION

[29

1.1 Contract note of a particular investor on various dates

CONTRACT NOTE CUM BILL

DESTIMONEY SECURITIES PRIVATE LIMITEDRegd Office: TECHWEB CENTRE, A-WING, 6TH FLOOR, NEW LINK ROAD, OSHIWARA, JOGESHWARI-W,

MUMBAI-400102PHONE NO : 67482222 , FAX NO 67482399

Web Site : www.destimoney.com CIN # : U67120MH2005PTC156678

For any queries/complaints write to us at Email ID for Investor Grievance :

Corp Office: 203, PHOENIX HOUSE, 2ND FLOOR, B WING, SENAPATI BAPAT MARG,LOWER PAREL ( WEST ),

MUMBAI-13. PHONE NO:67484700,FAX NO 67484710 Tel :

Dealing Office:

H - 14, PS TILAK MARG

NEW DELHI ,110001

To,

SATYA PAL MEHTA BO/Trading Code : DHUKSA919 UCC CODE :SA919

736 STREET 4 LANE 3 RAJENDER NAGAR

DEHRADUN DEHRADUN 248001 INDIA

Pan # ADRPM6426A

Contract Note No : 102933 TRADE DATE : 11/09/2014

ExchangeClearing

NoTrading

No.Compliance Officer Compliance Email ID

Compliance Tel #

CMBPIDSebi

Registration(Segment) NumberBSE 3103 MR. SANJAY NAYAK [email protected] 022-67482222 IN656405 INB011348233BSECBSEF C50008 3103 MR. SANJAY NAYAK [email protected] 022-67482222 INF011348233NSE 13482 MR. SANJAY NAYAK [email protected] 022-67482222 IN566544 INB231348237NSEC M51358 13482 MR. SANJAY NAYAK [email protected] 022-67482222 INE231348237NSEF C50008 13482 MR. SANJAY NAYAK [email protected] 022-67482222 INF231348237NSEM 13482 MR. SANJAY NAYAK [email protected] 022-67482222 IN564949 INB231348237

Sir / Madam,I/We have this day done by your order and on your account the following transactions:

To be Stamped as per the provisions applicable under the

relevant Stamp Act.

Order NoOrder Time

Trade No.Trade Time

Security/Contract descriptionBuy

(B)/Sell (S)

Quantity

Gross Rate/Trade Price Per

Unit

Brokerage Per Unit

Net Rate Per Unit

Closing Rate per

Unit (Only for

Derivatives)

Net Total (Before Levies)

Remarks

Rs. Rs. Rs. Rs. Rs.

Exchange NSEC Booktype FUTURES Settlement 140911 Settlement Date 12/09/2014

2014091100002695

09:00:262014091100000309

09:00:36 FUTCUR USDINR 26-SEP-14 B 450.000 61.0258 0.0100 61.0358 61.1250 -40140.00

B/f FUTCUR USDINR 26-SEP-14 S 300.000 61.1825 0.0000 61.1825 61.1250 -17250.00

2014091100069000

10:18:122014091100013706

10:18:24 FUTCUR USDINR 26-SEP-14 S 150.000 61.1308 0.0100 61.1208 61.1250 630.00

BUY TOTAL 450000 27461625.0

0

SELL TOTAL 450000 27524375.0

0

NET TOTAL 0 -62750.00

TOTAL STT 0.00

[ S CHARGES ] 732.6300 0.0000732.6300 0.0000 732.63

[EDU.CESS] 21.6000 0.0000 21.6000 0.0000 21.60

[OTHER CHRGS- F ] 164.6200 0.0000164.6200 0.0000 164.62

[30

[SB&T CH F + S.TAX] 82.3100 0.0000 82.3100 0.0000 82.31

[SERVICE TAX] 720.0000 0.0000720.0000 0.0000 720.00

[TRAN.CHG F-B+S.TAX] 354.8600 0.0000354.8600 0.0000 354.86

[TRAN.CHG F-S+S.TAX] 118.4900 0.0000118.4900 0.0000 118.49

DR. TOTAL -37945.49

CR. TOTAL 16620.00

NET AMOUNT DUE TO YOU. 54565.49 0.00

NSEC-FUTURES-140911-DEFAULT PRODUCT

<> Payout Obligation 56760.00 Service Tax and CESS @ 12.00 % of Brokerage 741.60 Exchange Transaction Charges 979.56 Other Charges 473.35 Net Amount Payable 54565.49 0.00 Final Payout Obligation 56760.00 Total Service Tax and CESS @ 12.00 % 741.60 Total Exchange Transaction Charges 979.56 Total Other Charges 473.35 Final Net Amount Payable 54565.49 Net Amount due to us/You : Rs. Fifty Four Thousand Five Hundred Sixty Five and Forty Nine Paise ** Indicates trades were executed due to non-discharge of clients obligation towards Margin/MTM/Settlement or other debit.

Details of trade-wise levies shall be provided on request.

Transactions mentioned in this contract note cum bill shall be governed and subject to the Rules, Bye-laws and Regulations and Circulars of the respective Exchanges on which trades have been executed and Securities and ExchangeBoard of India from time to time. The Exchanges provide Complaint Resolution, Arbitration and Appellate arbitration facilities at the Regional Arbitration Centres (RAC). The client may approach its nearest centre, details of which areavailable on respective Exchange’s website. Please visit www.bseindia.com for BSE, www.mcx-sx.com for MCX-SX, www.nseindia.com for NSE and www.useindia.com for USE.

PLACE

: MUMBAI.

DATE : 11/09/2014

Yours Faithfully,For DESTIMONEY SECURITIES PRIVATE LIMITED Authorised Signatory GIRI KRISHNASWAMY SANJAY NAYAK KISHORE SALIAN SHARAD SASANE / NITIN LOKHANDE GIRI KRISHNASWAMY SANJAY NAYAK KISHORE SALIAN SHARAD SASANE/NITIN LOKHANDE GIRI KRISHNASWAMY SANJAY NAYAK KISHORE SALIAN SHARAD SASANE / NITIN LOKHANDE GIRI KRISHNASWAMY SANJAY NAYAK KISHORE SALIAN SHARAD SASANE / NITIN LOKHANDE GIRI KRISHNASWAMY SANJAY NAYAK KISHORE SALIAN SHARAD SASANE / NITIN LOKHANDE GIRI KRISHNASWAMY SANJAY NAYAK KISHORE SALIAN SHARAD SASANE / NITIN LOKHANDE PAN : AACCD2614A S.Tax Regn # : MUMBAI/SB/DN-I/3465/2005

[31

1.2








Dealing Office:


NEW DELHI ,110001

To,




Pan # ADRPM6426A


ExchangeClearing

NoTrading


Compliance Tel #

CMBPIDSebi




relevant Stamp Act.

Order NoOrder Time

Trade No.Trade Time


(B)/Sell (S)

Quantity


Unit

Brokerage Per Unit

Net Rate Per Unit

Closing Rate per

Unit (Only for

Derivatives)


Remarks

Rs. Rs. Rs. Rs. Rs.


2014092400013479

12:46:05

2014092400036148

12:46:05 FUTCUR USDINR 26-SEP-14 B 250.000 60.9975 0.0100 61.0075 61.0200 15251875.00

2014092400009512

09:02:55

2014092400001877

09:03:01 FUTCUR USDINR 26-SEP-14 S 250.000 61.0570 0.0100 61.0470 61.0200-

15261750.00

BUY TOTAL 250000 15249375.00

SELL TOTAL 250000 15264250.00

NET TOTAL 0 -14875.00

TOTAL STT 0.00

2014092400010093

09:03:09

2014092400001944

09:03:09 FUTCUR USDINR 29-OCT-14 B 200.000 61.4550 0.0100 61.4650 61.4150 12293000.00

2014092400012854

14:21:26

2014092400053581

14:22:11 FUTCUR USDINR 29-OCT-14 S 200.000 61.4433 0.0101 61.4332 61.4150-

12286655.00

BUY TOTAL 200000 12291000.00

SELL TOTAL 200000 12288655.00

NET TOTAL 0 2345.00

TOTAL STT 0.00

[ S CHARGES ] 1101.8600 0.00001101.860

00.0000 1101.86

[EDU.CESS] 32.4000 0.0000 32.4000 0.0000 32.40

[OTHER CHRGS- F ] 247.5900 0.0000 247.5900 0.0000 247.59

[SB&T CH F + S.TAX] 123.7900 0.0000 123.7900 0.0000 123.79

[SERVICE TAX] 1080.0000 0.00001080.000

00.0000 1080.00

[32

[TRAN.CHG F-B+S.TAX] 355.8700 0.0000 355.8700 0.0000 355.87

[TRAN.CHG F-S+S.TAX] 356.0300 0.0000 356.0300 0.0000 356.03

DR. TOTAL 27548172.54

CR. TOTAL 27548405.00



<> Payout Obligation 3530.00 Service Tax and CESS @ 12.00 % of Brokerage 1112.40 Exchange Transaction Charges 1473.24 Other Charges 711.90 Net Amount Payable 232.46 0.00 Final Payout Obligation 3530.00 Total Service Tax and CESS @ 12.00 % 1112.40 Total Exchange Transaction Charges 1473.24 Total Other Charges 711.90 Final Net Amount Payable 232.46 Net Amount due to us/You : Rs. Two Hundred Thirty Two and Forty Six Paise ** Indicates trades were executed due to non-discharge of clients obligation towards Margin/MTM/Settlement or other debit.



PLACE

: MUMBAI.

DATE : 24/09/2014


[33

1.3








Dealing Office:


NEW DELHI ,110001

To,




Pan # ADRPM6426A


ExchangeClearing

NoTrading


Compliance Tel #

CMBPIDSebi




relevant Stamp Act.

Order NoOrder Time

Trade No.Trade Time


(B)/Sell (S)

Quantity


Unit

Brokerage Per Unit

Net Rate Per Unit

Closing Rate per

Unit (Only for

Derivatives)


Remarks

Rs. Rs. Rs. Rs. Rs.


2014092500012785

09:04:09

2014092500002110

09:04:11 FUTCUR USDINR 26-SEP-14 B 400.000 61.0106 0.0100 61.0206 61.3700 24408250.00

2014092500019363

09:19:59

2014092500008012

09:35:32 FUTCUR USDINR 26-SEP-14 S 400.000 61.0619 0.0101 61.0518 61.3700-

24420750.00

BUY TOTAL 400000 24404250.00

SELL TOTAL 400000 24424750.00

NET TOTAL 0 -20500.00

TOTAL STT 0.00

2014092500163714

12:52:01

2014092500039549


2014092500029128

09:20:54

2014092500006001

09:20:58 FUTCUR USDINR 29-OCT-14 S 100.000 61.4275 0.0100 61.4175 61.7625 -6141750.00

BUY TOTAL 100000 6146500.00

SELL TOTAL 100000 6142750.00

NET TOTAL 0 3750.00

TOTAL STT 0.00

[ S CHARGES ] 1222.3700 0.00001222.370

00.0000 1222.37

[EDU.CESS] 36.0000 0.0000 36.0000 0.0000 36.00

[OTHER CHRGS- F ] 274.6700 0.0000 274.6700 0.0000 274.67

[SB&T CH F + S.TAX] 137.3300 0.0000 137.3300 0.0000 137.33

[34

[SERVICE TAX] 1200.0000 0.00001200.000

00.0000 1200.00

[TRAN.CHG F-B+S.TAX] 394.7800 0.0000 394.7800 0.0000 394.78

[TRAN.CHG F-S+S.TAX] 395.0000 0.0000 395.0000 0.0000 395.00

DR. TOTAL 30559410.15

CR. TOTAL 30562500.00



<> Payout Obligation 6750.00 Service Tax and CESS @ 12.00 % of Brokerage 1236.00 Exchange Transaction Charges 1634.37 Other Charges 789.78 Net Amount Payable 3089.85 0.00 Final Payout Obligation 6750.00 Total Service Tax and CESS @ 12.00 % 1236.00 Total Exchange Transaction Charges 1634.37 Total Other Charges 789.78 Final Net Amount Payable 3089.85 Net Amount due to us/You : Rs. Three Thousand Eighty Nine and Eighty Five Paise ** Indicates trades were executed due to non-discharge of clients obligation towards Margin/MTM/Settlement or other debit.



PLACE

: MUMBAI.

DATE : 25/09/2014


[35

1.4








Dealing Office:


NEW DELHI ,110001

To,




Pan # ADRPM6426A


ExchangeClearing

NoTrading


Compliance Tel #

CMBPIDSebi




relevant Stamp Act.

Order NoOrder Time

Trade No.Trade Time


(B)/Sell (S)

Quantity


Unit

Brokerage Per Unit

Net Rate Per Unit

Closing Rate per

Unit (Only for

Derivatives)


Remarks

Rs. Rs. Rs. Rs. Rs.


2014092900371483

16:22:20

2014092900067404


2014092900003735

09:00:40

2014092900000588


37075625.00

BUY TOTAL 350000 21676000.00

SELL TOTAL 600000 37081625.00

NET TOTAL -250000 -

15405625.00

TOTAL STT 0.00

[ S CHARGES ] 1175.1500 0.00001175.150

00.0000 1175.15

[EDU.CESS] 34.2000 0.0000 34.2000 0.0000 34.20

[OTHER CHRGS- F ] 264.0600 0.0000 264.0600 0.0000 264.06

[SB&T CH F + S.TAX] 132.0300 0.0000 132.0300 0.0000 132.03

[SERVICE TAX] 1140.0000 0.00001140.000

00.0000 1140.00

[TRAN.CHG F-B+S.TAX] 280.1000 0.0000 280.1000 0.0000 280.10

[TRAN.CHG F-S+S.TAX] 479.1700 0.0000 479.1700 0.0000 479.17

DR. TOTAL 21683004.71

CR. TOTAL 37075625.00

NET AMOUNT DUE TO YOU. 15392620.29

[36

0.00


<> Payout Obligation 15396125.00 Service Tax and CESS @ 12.00 % of Brokerage 1174.20 Exchange Transaction Charges 1571.24 Other Charges 759.27 Net Amount Payable 15392620.29 0.00 Final Payout Obligation 15396125.00 Total Service Tax and CESS @ 12.00 % 1174.20 Total Exchange Transaction Charges 1571.24 Total Other Charges 759.27 Final Net Amount Payable 15392620.29 Net Amount due to us/You : Rs. One Crore Fifty Three Lakhs Ninety Two Thousand Six Hundred Twenty and Twenty Nine Paise ** Indicates trades were executed due to non-discharge of clients obligation towards Margin/MTM/Settlement or other debit.



PLACE

: MUMBAI.

DATE : 29/09/2014


[37

1.5








Dealing Office:


NEW DELHI ,110001

To,




Pan # ADRPM6426A


ExchangeClearing

NoTrading


Compliance Tel #

CMBPIDSebi




relevant Stamp Act.

Order NoOrder Time

Trade No.Trade Time


(B)/Sell (S)

Quantity


Unit

Brokerage Per Unit

Net Rate Per Unit

Closing Rate per

Unit (Only for

Derivatives)


Remarks

Rs. Rs. Rs. Rs. Rs.


2014093000187503

12:43:102014093000040299

12:54:10 FUTCUR USDINR 26-NOV-14 B 100.000 62.2662 0.0100 62.2762 62.4875 6227625.00

2014093000200039

13:32:482014093000052820

14:04:56 FUTCUR USDINR 26-NOV-14 S 100.000 62.3125 0.0100 62.3025 62.4875 -6230250.00

BUY TOTAL 100000 6226625.00

SELL TOTAL 100000 6231250.00

NET TOTAL 0 -4625.00

TOTAL STT 0.00

2014093000084621

11:44:272014093000031505


B/ FUTCUR USDINR 29-OCT-14 S 250.000 61.9525 0.0000 61.9525 62.1075-

15488125.00

2014093000084154

10:52:372014093000015777


12399750.00

BUY TOTAL 200000 12399750.00

SELL TOTAL 450000 27889875.00

NET TOTAL -250000 -

[38

15490125.00

TOTAL STT 0.00

[ S CHARGES ] 745.1900 0.0000745.190

00.0000 745.19

[EDU.CESS] 21.6000 0.0000 21.6000 0.0000 21.60

[OTHER CHRGS- F ] 167.4500 0.0000167.450

00.0000 167.45

[SB&T CH F + S.TAX] 83.7200 0.0000 83.7200 0.0000 83.72

[SERVICE TAX] 720.0000 0.0000720.000

00.0000 720.00

[TRAN.CHG F-B+S.TAX] 240.6900 0.0000240.690

00.0000 240.69

[TRAN.CHG F-S+S.TAX] 240.7800 0.0000240.780

00.0000 240.78

DR. TOTAL 18631594.43

CR. TOTAL 34118125.00



<> Payout Obligation 15488750.00 Service Tax and CESS @ 12.00 % of Brokerage 741.60 Exchange Transaction Charges 996.36 Other Charges 481.47 Net Amount Payable 15486530.57 0.00 Final Payout Obligation 15488750.00 Total Service Tax and CESS @ 12.00 % 741.60 Total Exchange Transaction Charges 996.36 Total Other Charges 481.47 Final Net Amount Payable 15486530.57 Net Amount due to us/You : Rs. One Crore Fifty Four Lakhs Eighty Six Thousand Five Hundred Thirty and Fifty Seven Paise ** Indicates trades were executed due to non-discharge of clients obligation towards Margin/MTM/Settlement or other debit.

[39



PLACE : MUMBAI.DATE : 30/09/2014


1.6








Dealing Office:


NEW DELHI ,110001

To,




Pan # ADRPM6426A


ExchangeClearing

NoTrading


Compliance Tel #

CMBPIDSebi




relevant Stamp Act.

Order NoOrder Time

Trade No.Trade Time


(B)/Sell (S)

Quantity


Unit

Brokerage Per Unit

Net Rate Per Unit

Closing Rate per

Unit (Only for

Derivatives)


Remarks

Rs. Rs. Rs. Rs. Rs.


2014100100025137

09:13:022014100100005391

09:14:19 FUTCUR USDINR 26-NOV-14 B 150.000 62.5608 0.0100 62.5708 62.3000 9385625.00

2014100100361792

16:45:222014100100077379

16:45:22 FUTCUR USDINR 26-NOV-14 S 150.000 62.2900 0.0100 62.2800 62.3000 -9342000.00

BUY TOTAL 150000 9384125.00

SELL TOTAL 150000 9343500.00

NET TOTAL 0 40625.00

TOTAL STT 0.00

2014100100361791

16:45:222014100100077370



15526875.00

2014100100365919

16:48:142014100100078592


12382000.00

BUY TOTAL 250000 15481037.50

SELL TOTAL 450000 27910875.00

NET TOTAL -200000 -

12429837.50

TOTAL STT 0.00

[ S CHARGES ] 931.8500 0.0000 931.850 0.0000 931.85

[40

0

[EDU.CESS] 27.0000 0.0000 27.0000 0.0000 27.00

[OTHER CHRGS- F ] 209.3900 0.0000209.390

00.0000 209.39

[SB&T CH F + S.TAX] 104.6900 0.0000104.690

00.0000 104.69

[SERVICE TAX] 900.0000 0.0000900.000

00.0000 900.00

[TRAN.CHG F-B+S.TAX] 321.3100 0.0000321.310

00.0000 321.31

[TRAN.CHG F-S+S.TAX] 280.7700 0.0000280.770

00.0000 280.77

DR. TOTAL 24871937.51

CR. TOTAL 37250875.00



<> Payout Obligation 12381712.50 Service Tax and CESS @ 12.00 % of Brokerage 927.00 Exchange Transaction Charges 1245.93 Other Charges 602.08 Net Amount Payable 12378937.49 0.00 Final Payout Obligation 12381712.50 Total Service Tax and CESS @ 12.00 % 927.00 Total Exchange Transaction Charges 1245.93 Total Other Charges 602.08 Final Net Amount Payable 12378937.49 Net Amount due to us/You : Rs. One Crore Twenty Three Lakhs Seventy Eight Thousand Nine Hundred Thirty Seven and Forty Nine Paise ** Indicates trades were executed due to non-discharge of clients obligation towards Margin/MTM/Settlement or other debit.



PLACE

: MUMBAI.

DATE : 01/10/2014


[41

1.7








Dealing Office:


NEW DELHI ,110001

To,




Pan # ADRPM6426A


ExchangeClearing

NoTrading


Compliance Tel #

CMBPIDSebi




relevant Stamp Act.

Order NoOrder Time

Trade No.Trade Time


(B)/Sell (S)

Quantity


Unit

Brokerage Per Unit

Net Rate Per Unit

Closing Rate per

Unit (Only for

Derivatives)


Remarks

Rs. Rs. Rs. Rs. Rs.


2014100700002997

09:00:312014100700000487



12385500.00

BUY TOTAL 200000 12343500.00

SELL TOTAL 200000 12385500.00

NET TOTAL 0 -42000.00

TOTAL STT 0.00

[ S CHARGES ] 246.8700 0.0000246.870

00.0000 246.87

[EDU.CESS] 7.2000 0.0000 7.2000 0.0000 7.20

[OTHER CHRGS- F ] 55.4700 0.0000 55.4700 0.0000 55.47

[SB&T CH F + S.TAX] 27.7400 0.0000 27.7400 0.0000 27.74

[SERVICE TAX] 240.0000 0.0000240.000

00.0000 240.00

[TRAN.CHG F-B+S.TAX] 159.5000 0.0000 159.500 0.0000 159.50

[42

0

DR. TOTAL 12346236.78

CR. TOTAL 12385500.00



<> Payout Obligation 40000.00 Service Tax and CESS @ 12.00 % of Brokerage 247.20 Exchange Transaction Charges 330.08 Other Charges 159.50 Net Amount Payable 39263.22 0.00 Final Payout Obligation 40000.00 Total Service Tax and CESS @ 12.00 % 247.20 Total Exchange Transaction Charges 330.08 Total Other Charges 159.50 Final Net Amount Payable 39263.22 Net Amount due to us/You : Rs. Thirty Nine Thousand Two Hundred Sixty Three and Twenty Two Paise ** Indicates trades were executed due to non-discharge of clients obligation towards Margin/MTM/Settlement or other debit.



PLACE

: MUMBAI.

DATE : 07/10/2014


[43

1. Profit and loss statement of that particular investor on the basis of

contract note

Top of Form

From Date : To Date : Client Code :

Bottom of FormTop of Form

Scrip Code

Scrip Name

Purchase Qty

Purchase Avg

Purchase Valu

e

Sell

Qty

Sell

Avg

Sell Valu

e

Net

Qty

Net Avg

Net Valu

e

Market Pric

e

Market

Value

Profit/Loss

23204

ABAN OFFSHORE

21.00

462.12

9704.57

21.00

472.35

9919.35

0.00

-214.

78

-214.

78

388.85

0.00214.7

8

425

AMBUJA CEMENTS LTD

195.00

255.65

49851.75

101.00

243.12

24555.60

94.00

269.11

25296.15

231.40

21751.60

-3544.

55

32454

BHARTI AIRTEL LTD

129.00

386.70

49884.30

129.00

397.80

51316.20

0.00

-1431.90

-1431

.90

393.65

0.001431.

90

32483

CANARA BANK

12.00

395.54

4746.47

0.00

0.00

0.0012.00

395.54

4746.47

355.40

4264.80

-481.6

7

87 CIPLA 8.00706.

005648

.008.0

0723.00

5784.00

0.00

-136.

00

-136.

00

627.80

0.00136.0

0

[44

180

H D F C BANK

30.00

1046.25

31387.50

0.00

0.00

0.0030.00

1046.25

31387.50

951.30

28539.00

-2848.

50

32281

HCL TECHNOLOGIES

88.00

944.38

83105.60

88.00

913.06

80349.40

0.00

2756.20

2756.20

920.75

0.00-

2756.20

696

HINDUSTAN UNILEVER L

59.00

837.27

49398.90

59.00

874.00

51566.00

0.00

-2167.10

-2167

.10

866.25

0.002167.

10

520

MAHINDRA & MAHINDRA

42.00

1181.25

49612.50

0.00

0.00

0.0042.00

1181.25

49612.50

1170.75

49171.50

-441.0

0

359

RANBAXY LABORATORIES

12.00

816.00

9792.00

0.00

0.00

0.0012.00

816.00

9792.00

859.80

10317.60

525.60

112

STATE BANK OF INDIA

34.00

284.32

9666.80

34.00

289.35

9837.90

0.00

-171.

11

-171.

11

260.95

0.00171.1

1

32755

TECH MAHINDRA

15.00

636.50

9547.50

15.00

669.75

10046.25

0.00

-498.

75

-498.

75

614.25

0.00498.7

5

32343

TVS MOTOR COMPANY L

211.00

236.00

49796.00

211.00

246.20

51948.20

0.00

-2152.20

-2152

.20

215.30

0.002152.

20

[45

FINDINGS

On 11 September 2014, we bought U.S Dollar in the quantity of 100.00 lot at the rate of Rs. 62.2662

and sold at the rate of Rs 62.3125, so the client got a profit of Rs 62760.






and sold at the rate of Rs 61.8027, so the client got a loss of Rs 45045.

On 1 October 2014, we bought U.S Dollar in the quantity of 150.00 lot at the rate of Rs. 62.5608 and

sold at the rate of Rs 62.2900, so the client got a profit of Rs 40620.

On 7 October 2014, we bought U.S Dollar in the quantity of 200.00 lot at the rate of Rs. 61.7175 and sold at the rate of Rs 61.9275, so the client got a profit of Rs 42000.

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CONCLUSION

Derivative use for hedging is only to increase due to the increased global linkages and volatile exchange rates. Firms need to look at instituting a sound risk management system and also need to formulate their hedging strategy that suits their specific firm characteristics and exposures. In India, regulation has been steadily eased and turnover and liquidity in the foreign currency derivative markets has increased, although the use is mainly in shorter maturity contracts of one year or less. Forward and option contracts are the more popular instruments. Regulators had initially only allowed certain banks to deal in this market however now corporates can also write option contracts. There are many variants of these derivatives which investment banks across the world specialize in, and as the awareness and demand for these variants increases, RBI would have to revise regulation. For now, Indian companies are actively hedging their foreign exchanges risks with forwards, currency and interest rate swaps and different types of options such as call, put, cross currency and range barrier options. The high use of forward contracts by Indian firms also highlights the absence of a rupee futures exchange in India. However, the Dubai Gold and Commodities Exchange in June, 2007 introduced Rupee of enterprise-wide risk management needs to be developed. This is an area of further enquiry.The limitation of this study is that only one type of risk is assumed i.e the foreign exchange risk. Also applicability of conclusion is limited as only very few firms were reviewed over just one time period. However the results from this exploratory study are encouraging and interesting, leading us to conclude that there is scope for more rigorous study along these lines- Dollar futures that could be traded on its exchanges and had provided another route for firms to hedge on a transparent basis. There are fears that RBI’s ability to control. the partially convertible currency will be subdued by this introduction but this issue is beyond the scope of this study. The partial convertibility of the Rupee will be difficult to control if many exchanges offer such instruments and that will be factor to consider for the RBI. The framework developed in this research is based on a mental model of a medium-to-large manufacturing company producing industrial components, as perceived by the researcher. The complex nature of the relationship between the ‘risk elements’ and ‘decision variables’ may often be beyond human comprehension without the aid of special diagnostic and analytical tools. Decisions and actions in the area of FERM may have impact on other segments and activities in the enterprise.

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RECOMMENDATION

1.You can use currencies to balance your portfolio, particularly if it is heavily focused in U.S. Equities. For example, if you believe the dollar will drop in the future you can buy one or more currencies that you think will increase.

2. One difference between stocks and currencies is that stocks move independently of each other while currencies move relative to each other. With currencies, when one is rising, another must be falling.

3.Currency investing is simple, but not easy.

4.Don’t let world events (like what’s happening in the world) affect your investing decision.

5.There is a growing fear that current U. S. fiscal and monetary policies will generate inflation and weaken the dollar over time. Growing budget deficits, record low interest rates and the amount of money being created by the Federal Reserve are all reasons for concern, and these developments are being closely tracked by currency traders. The currency market allows you to select currencies based on how you perceive their relative values will change over time.

6.Currencies are akin to commodities and stocks because they offer the potential for capital appreciation. If the value of your currencies rises against the dollar, you will profit. If your currencies fall relative to the dollar, you will lose money.

7. Don’t think you have to be an expert to profit from currency.

8.Don’t go for the quick profit.

9.Rate cuts by the RBI , the beginning of a rate rise cycle in the US, the union budget for 2015-2016, the movement of crude oil prices and India’s economic growth are seen as the key factors for the currency and bond markets next year.

10. The repo rate or the rate at which banks borrow from RBI stands at 8% unchanged since the last rise of 25 basis point in January this year.

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http://www.investopedia.com/terms/c/commodity.asp

http://www.investopedia.com/terms/f/federalreservesystem.asp

http://www.investopedia.com/terms/i/inflation.asp

BIBLIOGRAPHY

BOOKS

Allayannis, George and Ofek, Eli, 2001, Exchange rate exposure, hedging, and the use of foreign currency derivatives, Journal of International Money and Finance 20 (2001) 273–296

Baril, Charles P.: “Managing Risks with Derivatives” Management Accountant, November Bauman, Joseph; Saratore, Steve and Liddle, William : “A Practical Framework for Corporate Risk Management” Journal of Applied Corporate Finance, Vol. 7, No. 3, Fall (1994)

Bodnar, M. Gordon, Hayt, S. Gregory and Marston, C. Richard : “1998 Wharton Survey of ofFinancial Risk Management by US Non-Financial Firms”, Financial Management, Winter, Vol. 27, No. 4, pp 70-91 (1998)

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