Upload
rohit-sachdeva
View
220
Download
0
Embed Size (px)
Citation preview
7/31/2019 SIP PROJECT- Praveen Agarwal
1/90
SUMMER INTERNSHIP PROJECT
REPORT SUBMISSION
TRAINING AT
ASHIKA STOCK BROKING
ICFAI BUSINESS SCHOOL HYDERABAD
7/31/2019 SIP PROJECT- Praveen Agarwal
2/90
SUMMER INTERNSHIP PROJECT
2 | P a g e
A REPORT
ON
HEDGING IN VOLATILE MARKETS
THROUGH DERIVATIVES
SUBMITTED BY: - SUBMITTED TO:-
PRAVEEN AGARWAL Pro. MANAS RANJAN PRADHAN
07BS2962
COMPANY GUIDE:
PARAS BOTHRA
7/31/2019 SIP PROJECT- Praveen Agarwal
3/90
SUMMER INTERNSHIP PROJECT
3 | P a g e
EXECUTIVE SUMMARY
I, Praveen Agarwal pursuing my MBA at IBS Hyderabad, have completed the Summer
Internship Program with Ashika Stock Broking, at AJC Bose Road ,Trinity 7 th Floor , Kolkatta
From 22nd February 2008 to 24th May 2008. Ashika Stock Broking is one of the leading brokersin Kolkata and is engaged in providing services to clients in equity trading, IPOs, Commodity
etc.
I completed my project on Hedging in volatile markets through derivatives. The project
was completed under the guidance of Mr. Paras Bothra- Head -Equity Research and Prof Manas
Ranjan Pradhan.
This project an attempt is made to:
To study the volatility in the Indian Equity market
To examine the reasons that cause volatility in the equity markets
To study and find if volatility is good for the market and suggest suitable mitigatingmeasures to minimize risk during periods of high volatility in the equity markets.
To find out how Hedging can be used as an effective tool to mitigate volatility and
minimize losses and how to use trading strategies using futures and options.
After this examples have been discussed used data from BSE to see how trading
strategies can be used using futures and Options for Hedging and trading point of view.
The scope of the project is extended by giving recommendation based on fundamental
analysis by detailed study of company along with projected financials which give a view
of how the company is expected to perform in future and the investment decision can be
taken accordingly.
Methodology used for the project is exploratory and analytical. The project is entirely based on
secondary data. The project was a study of volatility and hedging in volatile markets through
derivatives. In highly volatile markets investors/traders tend to make losses if they dont hedge
their portfolio. Though one can reduce the risk by setting objectives for investment and
diversification but the most effective tool is hedging. This report will give the reader an insight
as to how Derivatives i.e. Futures and Options can be used as effective tools for managing the
risk. The recommendation for investment based in fundamental analysis will also be helpful for
investment from a medium term point of view.
The project has helped me to gain knowledge on equity markets, derivatives and equity research.The company was satisfied with my effort and project and appreciated me for being a keen and
quick learner.
7/31/2019 SIP PROJECT- Praveen Agarwal
4/90
SUMMER INTERNSHIP PROJECT
4 | P a g e
CONTENTS
TOPIC PAGE NUMBER
Acknowledgement.. 6
Abstract... 7
Introduction. 8, 9
Movement of Sensex... 10, 11
Is volatility bad for equity markets. 12, 13
What drives equity markets volatility.. 13, 14
Volatility for year 2007-08.. 15, 16
The bigger question.. 17, 18
India VIX.. 18, 19
Hedging in Volatile markets. 20, 21
Hedging Strategies 22-24
Trading using Options... 25, 44
Delta Hedging Strategy.. 45-47
Limitations of Strategies. 48
Recommendations.
Market Outlook.. 49
Rajesh Exports (Company profile, Key Financials, Outlook,
Recommendation, Peer Comparison and Key Concerns).. 50-59
Kesoram Industries (Industry Profile, Key Financials,
7/31/2019 SIP PROJECT- Praveen Agarwal
5/90
SUMMER INTERNSHIP PROJECT
5 | P a g e
Rationale, Outlook, recommendation, risks involved).. 60-67
Visa Steel (Company background, Investment rationale, Key
Financials, Outlook on company and risks involved) . 68-73
Genus Power (Company Overview, Sector Outlook, Financials,
Outlook and risks involved). 74-77
Punj Llyod (Company Profile, Investment Rationale, Financials,
Peer Comparison, Outlook, recommendation and risks). 78-83
Axis Bank (Company profile, Investment Rationale, Key Financials,
Risk involved).. 84-88
Conclusion 89
Sources and References 90
7/31/2019 SIP PROJECT- Praveen Agarwal
6/90
SUMMER INTERNSHIP PROJECT
6 | P a g e
ACKNOWLEDGEMENT
Any achievement does not come from ones contribution; it requires some support from the
superior to make the task uncomplicated.
I acknowledge my endeavor to my Company Guide Mr. Paras Bothra Head Equity Research,
Ashika Stock Broking who gave me an opportunity to pursue my training in the Equity Research
Department under him.
I also my gratitude towards my Faculty Guide Prof. Manas Ranjan Pradhan whose invaluable
guidance and suggestion has helped me to complete this project. I would also like to thank my
parents and friends whose constant support helped me to complete this project.
Praveen Agarwal
07BS2962
7/31/2019 SIP PROJECT- Praveen Agarwal
7/90
SUMMER INTERNSHIP PROJECT
7 | P a g e
ABSTRACT
The Indian equity markets has undergone many changes over the past few years and the
volatility in the market has been increasing which has become a cause of concern for many
market participants. Investors and traders tend to make huge losses in the periods of high
volatility if they dont hedge their portfolio. This project is an attempt to study the volatility in
the Indian equity market and the cause behind it. It also discusses the importance of hedging the
portfolio with use of derivatives. Derivatives, whose price is determined by the price of
underlying asset, generally do not cause any fluctuations in the price of underlying asset. But
impact of any change in the price of underlying asset may cause swift change in the price of
Derivatives instrument.
An important issue in Derivatives is the appropriate position to choose from plethora of series of
Call options and Put Options on a single day and permutations and combinations of strategies.
This along with various option positions can be a daunting task. This project seeks to answer
some of the questions regarding appropriate strategy to choose in order to maximize total payoff
through technical analysis of the parameters of Option.
The report also contains recommendation for investment based on fundamental analysis of
stocks. The projected financials and ratios along with company developments and backgroundwill help one to properly understand the company and its future and can take his position
accordingly in the stock.
7/31/2019 SIP PROJECT- Praveen Agarwal
8/90
SUMMER INTERNSHIP PROJECT
8 | P a g e
INTRODUCTION
In the past few years Indian capital market has undergone metamorphic reforms. Every segmentof Indian capital market i.e. primary and secondary market derivatives, institutional investors and
market intermediation has experienced impact of these changes. There are several techniques,
instruments used by academicians, practitioners and investors to test the efficiency of the market.
In this report an effort has been made to analyze volatility of the Indian equity market. In the
period of high volatility there is huge fluctuation in all the indices including the major indices i.e.
Sensex and Nifty. In such periods of high volatility there is increased fluctuation in the markets
leading to huge losses for many investors. In this report an attempt is made to bring about such
volatility in the market. In such periods the investors and traders should play the markets
carefully to minimize losses. Hedging can be used as an effective tool for minimizing losses in
the volatile markets. It is a strategy designed to reduce investment risk using call options, put
options, short-selling, or futures contracts. A hedge can help lock in profits. Its purpose is to
reduce the volatility of a portfolio by reducing the risk of loss.
In the recent past there has been an increase in volatility in the stock markets because of
increased participation from FIIs (Foreign Institutional Investors) and mutual funds. With the
Indian economy doing well in the recent past, there has been an increase in the investment by
FIIs causing volatility in the market. The change in the government pol icies and steps taken by
SEBI (Securities and Exchange Board of India) has encouraged both existing & new market
players causing higher volatility in Sensex. The volatility in the market gives an opportunity to
the traders to speculate and make a quick buck in the market. At the same time, it increases the
risk of all market participants. This increased volatility can hit the retail investors the hardest
because they do not possess the high risk bearing capacity unlike other market participants.
Therefore it is very important to understand the factors that cause movement in stock market. It
has been seen over the years that investors who are not well aware of the market trends tend to
lose their money. The recent appreciation in rupee, the subprime crisis an d SEBIs action on
participatory notes are few of the current events that have caused fluctuations in the Indian Stock
Market. Also during the polling phases in elections there is sharp and sudden increase in market
volatility. Similarly when there is any change in government policies or nr change made by RBI
7/31/2019 SIP PROJECT- Praveen Agarwal
9/90
SUMMER INTERNSHIP PROJECT
9 | P a g e
(reserve bank of India) in terms of CRR (Current Reserve ratio) or changers in interest rates there
is increased market volatility because of changing sentiment in the market. During the budget
also there is high fluctuation in the stock market because of changing government policies which
affect the bottom-line of the companies which in turn cause high movement in sensex. In this
report an attempt has been made to study such movements and suggest hedging strategies for
such markets.
Today investors across the world have recognized the need of comprehensive strategy that would
help in mitigating the impact of volatility. Though regulators on their part are trying their due to
bring it down, an investor must take essential precautions to ensure that his portfolio is insulated
(as far as possible) from volatility shocks. Financial markets are today a different arena.
Development in financial market has brought new opportunities and challenges being
experienced for all the participant. One of the major challenges being experienced is the
increased volatility of the various financial markets. It is to be realized that all the happenings in
the financial markets are caused by one of the participant-so is volatility. Thus even volatility or
lack of it is a result of one of the four pillars or participants which constitute any financial
market-Investors, Issuers, Intermediaries and Regulator.
7/31/2019 SIP PROJECT- Praveen Agarwal
10/90
SUMMER INTERNSHIP PROJECT
10 | P a g e
MOVEMENT OF SENSEX
The graph above shows the sensex movements from 1991till 2008.It we look at the returns of the
sensex for these years it has given steady returns at a CAGR of 19.8%. This number though
looks quite attractive but there had been several ups and downs in the market as can be seen in
the graph. These ups and downs give opportunities to the investors to churn their portfolio and
make profits. But an investor who is not very well aware of the market may end up incurring loss
in the volatile markets. The journey of sensex as shown by the graph shows that there have been
high fluctuations in it. There have been many changes in stock market mechanism since years
which has helped to eliminate the loopholes of the system. For Instance during Harshad Mehta
Scam of 1992 the sensex fell over by over 12% from 4440 to 3870 levels in a single trading day.
The extent of losses in this scam was to the tune of 3500 crores and the fall in sensex from 4500
levels to 2500 levels after the scam wiped out market capitalization to the tune of 100000crores.
0
5,000
10,000
15,000
20,000
25,000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
SENSEX
Series1
7/31/2019 SIP PROJECT- Praveen Agarwal
11/90
SUMMER INTERNSHIP PROJECT
11 | P a g e
This left the investors in terror and shook their confidence too. But now the mechanism of stock
market has changes and we have a vigilant body Securities and Exchange Board of India (SEBI)
to keep an eye on stock market dealings. Similar the CRB scam of 1997 and Ketan Parekh scam
in 2001 shook the bourses as well as sentiments of investors. But these falls in the sensex where
due to deliberate manipulations by a group of people but there may be volatility because of
fundamental factors too or due to changes made by government policies or due the movement of
Foreign Institutional Investors (FII). If we look at the sensex we will find that year 2008 has been
a nightmare of stock market participants as we can see that the sensex has fallen from 21000
levels to settle at 16000 levels. The reason for this was global slowdown coupled with the fact
that Indian markets where trading at high premium in terms of valuation.
If we try to study the factors causing volatility and we can understand them then it can be very
easy to make money in the markets. If an investor or trader can study the market volatility then
he can use hedging strategies to hedge his portfolio against any losses. This will not only help
him to survive in the market but he can also make money when market is falling. Here an
attempt has been made to study volatility and devising appropriate strategies depending on
market conditions to make profits.
IS VOLATILITY BAD FOR THE MARKETS
An efficient market is one which responds to news rapidly and as such there should be some
amount of volatility in the market. But at times the volatility is so high that it makes condition
worse for market participants. This high volatility is because of hot money chasing the markets
or due to change in global scenario or changes in government policies. Prices that adjust are of
essence to the efficient functioning of a market economy. The job of financial markets is to hold
a mirror up to the real economy. Stock markets are called the barometer of the economy so the
changes in economy are clearly reflected by movement in the equity markets causing volatility.But at times there is too hot money chasing the market which causes a bubble growth in the
markets and the investors and traders get carried away by this and they stuck up themselves in
such scenario. When such money is being pulled out there is a steep fall in the markets and at
that moment investors are not able to pull out their money and end up incurring huge losses.
Therefore an efficient market will be volatile as the change in economy is reflected by it and the
7/31/2019 SIP PROJECT- Praveen Agarwal
12/90
SUMMER INTERNSHIP PROJECT
12 | P a g e
investors and traders have to take advantage of it by properly investing their money in the
market.
Increased volatility brings down the investors confidence in financial markets. This can either
lead to prevalence of Income effect over substitution effect or investment in other physical asset.
As per the RBI report 6.3% of the household savings goes to shares and debentures and of it
about 4.8% is in mutual funds which are very less as compared to developed nations. One of the
reasons for this may be high volatility in the equity markets. Volatility impairs the smooth
functioning of the financial markets and affect economic growth. Economists, academicians and
the final press have highlighted that if financial markets are to develop, it has to be inclusive. In a
country like India the average Indian has to invest and has to be a part of growth story which
Corporate India is experiencing.
WHAT DRIVES EQUITY MARKET VOLATILITY
Well if we look at factors driving equity market volatility they are many viz fundamental factors,
FIIs and Mutual Funds, corporate performance, liquidity in the system, political scenario etc.
Fundamental factors can be macroeconomic stability, volatility of GDP growth, stabilizing or
destabilizing monetary policy, fiscal policy. Further competition in the market also causes
volatility as more competition means more uncertain earnings. The others may be leverage of
firms, crises i.e. currency crisis, political crises. The factors internal to the securities markets like
liquidity of the market, securities trading issues: adequate supply of rational traders
individuals, hedge funds, arbitrageurs, crises like payments crisis, scandal on the market,
regulatory crackdown giving adverse shocks to liquidity also cause volatility in the equity
markets.
In recent decades there have been many changes in India. The GDP volatility has dropped,competition has gone up, equity has come up with a dominating mode of financing increasing the
number of market participants, liquidity has increased in the markets because of increasing
number of retails investors, Mutual Funds and a number of FII coming to equity markets. The
fiscal policy changes in respect of CRR, bank rates, changes in trade policies and political
scenario also cause high volatility in the equity market. In this respect it would be interesting to
7/31/2019 SIP PROJECT- Praveen Agarwal
13/90
SUMMER INTERNSHIP PROJECT
13 | P a g e
see the bloodbath at the Indian stock markets on May 22. The Sensex -- the benchmark 30-share
sensitive index of the Bombay Stock Exchange -- plummeted by a nerve-rattling 1,111.71 points
in intra-day trading. The bloodbath at the markets ended with the Sensex losing 457 points to
close at 10,482. The Nifty lost 166 points to close at 3,081. Trading was suspended in the market
for an hour as the market has hit the lower 10% circuit. The crash followed a statement by
Central Board of Direct Taxes seeking to dispel suggestions that its draft circular was
ambiguous.
This is just one instance of tragic movement in sensex. Such steep falls in sensex cause huge
losses to speculators and traders. We have the recent fall of Jan2008 where the markets fell from
21000 levels to consolidate at 15500 levels. The reason behind this fall was global slowdown due
to US subprime crisis coupled with the fact that there was decline in the Indian corporate growth.
What is even more interesting here is that the sensex which was flying like a rocket at 21000
levels on back of strong Indian economy and corporate performance dwindled like cards causing
heavy losses to market participants. Such volatility in the markets erodes investors confidence
http://in.rediff.com/money/2006/may/22sensex.htmhttp://in.rediff.com/money/2006/may/22sensex.htm7/31/2019 SIP PROJECT- Praveen Agarwal
14/90
SUMMER INTERNSHIP PROJECT
14 | P a g e
and spreads negative sentiments in the mind of people leading to further fall in the market.
Therefore in order to survive in such market an investor has to carefully plan his investment and
hedge his portfolio against such losses.
VOLATILTY IN YEAR 2007-08
The year 2007-08 is a year to be remembered in the history of Indian stock markets. During the
first nine months the sensex was moving up like a rocket giving stupendous returns to the
shareholders. But the nightmare started in Jan with sensex giving all the gains in less than two
months sweeping away the profits make by investor for last nine months. To measure how much
the volatility increased during the year 2007-08, the methods suggested in a SEBI Publication on
volatility by Raju and Ghosh of estimating inter and intraday stock market volatility is used here.
Daily Sensex data are used for estimation of volatility. Calculations show that both inter and
intraday volatility of BSE Sensex followed similar trend during 2007-08. From April to August,
both intra and inter day volatilities of Sensex were on a decline and were below the 1.5 mark.
The volatility for the sensex was highest in month of January 2008. This dropped down
marginally in months of February and March. If we look into the volatility for the said period we
will find that first half of the year 07-08 was quite smooth with sensex continuing its upwards
and smooth journey. The rupee appreciating against the dollar was taking a hit on export oriented
sectors but it was offset by growth in other sectors. The SEBIs action on banning of P notes
gave a setback to market with sensex hitting lower circuit on Aug 17 2007. But the markets again
recovered on back of strong liquidity and clarification on P notes issue. The markets was flying
high on back of strong liquidity and strong growth in economy but this trend was halted due to
breakout of subprime crisis in US. This crisis created negative sentiments globally with huge fall
in all the major world indices. This caused high volatility in Indian markets too. Then started the
turmoil in the Indian equity markets to and from Jan 22 it fell from 21000 levels to 16000 levels.If we look at the graph below we will find that volatility for the month of Jan and Feb was
highest for the said period. The Indian stock markets were trading at high valuations and fear of
recession in US caused steep fall in the Indian equity markets. This turned the sentiments of the
markets in favor of bears further pulling the markets down. The decoupling theory which the
market was talking about during the Bull Run was over with sensex moving down every day.
7/31/2019 SIP PROJECT- Praveen Agarwal
15/90
SUMMER INTERNSHIP PROJECT
15 | P a g e
The Budget presented by the Finance minister also did not bring any positive surprise for the
market while hike in Short term capital gain tax and change in treatment of STT from rebate to
deduction further deteriorated the condition. Therefore we can see that the volatility in the
months from Jan-March was highest during the year. The graph below shows the intraday
volatility and standard deviation from daily returns for year 2007-08.
VOLATILITY OF BSE SENSEX FOR 2007-08
Source: Calculation from Sensex daily data using formula by Raju and Ghosh
www.ideaswebsite.org/featart/nov2004/Volatility_Stock_Markets.pdf
0
0.5
1
1.5
2
2.5
3
3.5
4
Intaday Volatility
Standard Deviation from daily
returns
http://www.ideaswebsite.org/featart/nov2004/Volatility_Stock_Markets.pdfhttp://www.ideaswebsite.org/featart/nov2004/Volatility_Stock_Markets.pdf7/31/2019 SIP PROJECT- Praveen Agarwal
16/90
SUMMER INTERNSHIP PROJECT
16 | P a g e
THE BIGGER QUESTION
After having seen the volatilty of the equity markets the bigger question is what can be done to
mitigate volatilty. The following are the different strategies that an individual can adopt to
mitigate the impact of volatilty on his/her investment:
1)SETTING OBJECTIVES:
This may sound a bit theoritical but setting objectives helps to frame broad framework within
which one moves. The objectives set may be on the following parameter:
What is the expected return from the investment?
What is the timeframe for the investment.
What is the risk/tolerance level.
Setting such objective will helping properly allocating the funds and the money can be pulled out
once the target is achieved.
2)DIVERSIFICATION
It is very important to have a diversified portfolio in order to minimze losses druing high
volatilty. If a investor is looking for investment he should put the money across all the sectors in
sound companies. The risk and return of all the sectors and stocks vary and hence it is very
important to make a tradeoff between required return and risk appetite
SECTORAL ALLOCATION:The sectors should be chosen in such a way that
correlation between them is less than 1 , then having stocks form both the sectors would
bing down the overall risk.
SIZE ALLOCATION: Often small size firms have higher growth potential than large
caps. In investment terminolgy they are called Growth stocks and Value stocks. It is
important to have diversified across sizes and growth potential.
7/31/2019 SIP PROJECT- Praveen Agarwal
17/90
SUMMER INTERNSHIP PROJECT
17 | P a g e
3) RISK MANAGEMENT
It is understandable that sometimes even the best diversified portfolio gets volatile in the short
term. The investor is concerned with the sensitivity of the return as he losses his peace of mind
due to volatilty. To minimize the risk arising there from one can lock in the values in the
derivative market and sail through the downturn smoothly. Looking at the derivatives markets
closely one wouls realize that the essence of derivative market is to change the risk return pay-
off depending on the changing market portfolio.
It may so happen that entire market is faicng short term decline in which case a investor can
hedge his entire portfolio. Hedging can be done using both futures and options and there are
different strategies which can be used by studying the market trends.
INDIA VIX (VOLATILITY INDEX)
Recently, the National Stock Exchange has launched a volatility index reflecting the markets
expectation of volatility over the near term, which is the next 30 day period. The chairman of
the Securities and Exchange Board of India, C B Bhave, who launched the index called India
VIX, captures the implied volatility embedded in options prices. The index is based on the Nifty
50 Index Option prices. The advantage of measuring things is to first define them. The
volatility index will increase the understanding among people. From the best bid-ask price of
Nifty 50 Options contracts (traded on the F&O segment of NSE), a volatility figure (percentage)
is calculated, which indicates the expected market volatility over the next 30 days. Higher the
implied volatility, higher the India VIX. Implied volatility as captured by the volatility index
refers to the implied risks associated with the stock markets and not the size of the price swings.
When the market is range bound or has a mild upside bias, volatility is globally observed to betypically low. On such days, call option buying (a position taken on the view that market will
move lower) generally outnumbers put options buying (a position taken on the view that market
will move higher), indicating lower risk. Conversely, when selling activity increases
significantly, investors rush to buy puts, pushing the price of these options higher. This increased
amount investors are willing to pay for put options shows up in higher readings on the volatility
7/31/2019 SIP PROJECT- Praveen Agarwal
18/90
SUMMER INTERNSHIP PROJECT
18 | P a g e
index. High readings indicate a higher market place but the volatility index can also be used as
a contrarian indicator since spikes in the volatility index are associated with a market fall. The
introduction of the index would add volatility as an asset class to the inves tors portfolio.
Investors could hedge their portfolios against volatility with an offsetting position in India VIX
futures or options contracts. The implied volatility information that the index gives can also be
used in identifying mispriced options. Thus with the launch of the index and the volatility
shown the investors and traders can take their position accordingly in the market to maximize
their profits.
The graph below shows the implied volatility as given by India VIX from Nov 07to mar08.
Source: www.nseindia.com
Volatility
0
10
20
30
40
50
60
11/1/2007
11/15/2007
11/29/2007
12/13/2007
12/27/2007
1/10/2008
1/24/2008
2/7/2008
2/21/2008
3/6/2008
3/20/2008
Volatility
7/31/2019 SIP PROJECT- Praveen Agarwal
19/90
SUMMER INTERNSHIP PROJECT
19 | P a g e
HEDGING IN VOLATILE MARKET
It is a strategy designed to reduce investment risk using call options, put options, short-selling, or
futures contracts. A hedge can help lock in profits. Its purpose is to reduce the volatility of a
portfolio by reducing the risk of loss. It helps to minimize losses when market is unpredictable or
is highly volatile. The basic hedging strategy is to take an equal and opposite position in the
futures market to the spot market. If the investor buys the scrip in the spot market but suddenly
the market drops then the investor hedge their risk by taking the short position in the Index
futures. Hedging is one of the principal ways to manage risk, the other being diversification.
Diversification and hedging do not have cost in cash but have opportunity cost. Hedging is
implemented by adding a negatively and perfectly correlated asset to an existing asset. Hedging
eliminates both sides of risk: the potential profit and the potential loss. Diversification minimizes
risk for a given amount of return (or, alternatively, maximizes return for a given amount of risk).
Diversification is affected by choosing a group of assets instead of a single asset (technically, by
adding positively and imperfectly correlated assets).
There are various strategies which can be used to hedge a portfolio using futures and options.
SHORT HEDGE:This is one of the most basic hedging strategies that is used when one thinks that the price of a
particular asset will go down. Here investor takes long position in a stock and takes short
position in futures.
For example: A company knows that it is due to sell an asset at a particular time in future can
hedge by taking Short Futures Position. If the price of the asset goes up then company gains from
sale transaction and if the price of asset goes down the company gains from Futures Transaction.
The companies which have a large chunk of their earnings from exports use currency hedging to
minimize losses arising out of fluctuation in exchange rates. The same is applicable for equity
markets too. Suppose a person holds 100 shares of Reliance on date and thinks that the price may
go down but is not sure about it may sell 100 Reliance futures and if the price of the stock goes
down he may profit from futures and vice versa.
7/31/2019 SIP PROJECT- Praveen Agarwal
20/90
SUMMER INTERNSHIP PROJECT
20 | P a g e
LONG HEDGE:
This is just reverse of short hedge. A company that knows that it is due to buy an asset in the
future can hedge by taking Long Futures Position. Similarly, in this case also if the price of asset
goes up then the company gains in the Futures Transaction and if the price of asset goes down
then the company can gain from Purchase transaction.
Thus, we can see that in both the cases what Hedging as done is that it has made the result of the
outcome more predictable. Hedging not necessarily brings greater returns but what it does is that
it makes the result of the outcome more predictable and thus it minimizes the risks.
HEDGING USING INDEX FUTURES:
Stock index futures can be used to hedge the risk in well-diversified portfolio and removes the
risk arising from the market moves and leaves the hedger exposed only to the performance of
portfolio relative to the market.
LONG SECURITY/PORTFOLIO - SHORT FUTURES:
Every buy position in the security is a simultaneous Long Position in the Index so if the indexgains or loses the security also gains or losses simultaneously. In the sense, a Long Position on
any security is also a Long position in the Index. So every time a security is bought a
simultaneous short position in the index will hedge the security and offsets the index hidden
exposure. The position Long Reliance + short Nifty will be pure play on the value of reliance
stock without any extra risk from the fluctuations in the market.
7/31/2019 SIP PROJECT- Praveen Agarwal
21/90
SUMMER INTERNSHIP PROJECT
21 | P a g e
SHORT SECURITYLONG FUTURES:
A person may sell the stock thinking that its overvalued but if the index moves up he will lose
because every sell position in the stock is simultaneous sell position in the index. Even
thought the stock in this case may be overvalued the stock price will increase because index
has increased and the person will regret his decision to sell the stock. In this case he can hedge
by taking a long position in the futures contract so that it will offset the hidden exposure from
the index.
HEDGING STATERGIES:
HAVE PORTFOLIO, SHORT NIFTY FUTURES:
Here the investor are holding the portfolio of stocks and sells nifty futures. In the case of portfolios, most
of the portfolio risk is accounted for by index fluctuations. Hence a position LONG PORTFOLIO+
SHORT NIFTY can often become one-tenth as risky as the LONG PORTFOLIO position.
Let us assume that an investor is holding a portfolio of following scripts as given below on 4th
Jan 2008.
Company Beta Amount of Holding ( in
Rs)
Infosys 1.55 400,000.00
Rajesh Exports 1.35 300,000.00
Reliance capital 1.65 175,000.00
India bulls Financial 1.9 125,000.00
Total Value of Portfolio 1,000,000.00
7/31/2019 SIP PROJECT- Praveen Agarwal
22/90
SUMMER INTERNSHIP PROJECT
22 | P a g e
Trading Strategy to be followed
The investor feels that the market will go down in the next two months and wants to protect himfrom any adverse movement. To achieve this investor has to go short on 2 months NIFTY
futures i.e. he has to sell June Nifty. This strategy is called Short Hedge.
Formula to calculate the number of futures for hedging purposes is
Beta adjusted Value of Portfolio / Nifty Index level
Beta of the above portfolio
= (1.55*400,000) + (1.35*300,000) + (1.65*175,000) + (1.9*125, 000)/1,000,000
=1.55
Applying the formula to calculate the number of futures contracts
Assume NIFTY futures to be 6205 on 4th Jan 2008
= (1,000,000.00 * 1.55) / 6205
= 249.79
Since one Nifty contract is 50 units, the investor has to sell 5 Nifty contracts.
7/31/2019 SIP PROJECT- Praveen Agarwal
23/90
SUMMER INTERNSHIP PROJECT
23 | P a g e
Short Hedge
Stock Market Futures Market
5th
Jan Holds Rs 1,000,000.00 in
stock portfolio
Sell 5 NIFTY futures
contract at 6205.
28th Feb Stock portfolio fall by 21%
to Rs 790,000.00
NIFTY futures falls by
15.42% to 5248
Profit / Loss Loss: Rs 210,000.00 Profit: 239250
Net Profit: + Rs 29250
Therefore by using short position the investor has made a net profit of 29250. Had he not hedged
his portfolio he would have made a loss of 210000. There for this particular portfolio there has
been a net profit of 29250, however there may be even more profit or losses depending upon the
stocks but in case of loss also it would be very less as compared to loss if the portfolio was not
hedged.
SPECULATION
Bearish- Short FuturesIn this strategy if an investor/trader is bearish in market takes a short position in futures and if the
price goes down he makes profit from it. This is very risky as the risk is unlimited and if the
price of the stock goes up he will make losses.
On 2nd Jan the Index is 6140 and Futures for month are at Rs 6149 and Mr. X feels that the
index will go down in the near Future (Bearish) then he can take short position in the futures.
If he has Rs10, 00,000 with him and he takes short position of 3 contracts which expire
On 31st Jan, then his position as on 31st Jan when index futures is at 5248 will be
Profit form futures = (6140-5248)*3*50
Since the lot size is 50 and number of lots sold was 3
Therefore profit=133800
7/31/2019 SIP PROJECT- Praveen Agarwal
24/90
SUMMER INTERNSHIP PROJECT
24 | P a g e
If he has paid an initial margin of 20% (i.e.) 6140*3*50*0.20=184200, then he makes a profit of
72.6% on his portfolio.
Bullish- Long Futures
Here an investor/trader is very bullish on market and takes a long position in stock or index but
here also risk is unlimited as he may make a loss in case the price of the stock goes down.
On 22 Jan when the index spot was at 4910 and Feb. Futures were trading at 4900 and the
investor who feels that the index will increase (bullish) then he can take a long position and if
index moves in positive direction then he can make profits.
Suppose that Mr. is bullish as on 22nd Jan and he takes Long position in the futures
for 3 contracts and squares off his position on 28 th Feb when index is at 5245, then his position
as on 28th Feb will be
Profit= (5245-4900)*3*50=17250
Suppose the initial margin was 20% then his return on investment will be 11.7%.
HEDGING USING OPTIONS
We have seen above that how we can hedge our portfolio taking position in futures. On more
convenient way of hedging the portfolio is using options. Options can be used to hedge the
position of the underlying asset. Here the options buyers are not subject to margins as in hedging
through futures. Options buyers are however required to pay premium which are sometimes so
high that makes options unattractive. Before moving to discuss the strategies using options it will
be better to look at terminologies associated with options. Options not only help to hedge in the
volatile markets but also helps in speculation and if used prudently one can make good amount
of money using it.
7/31/2019 SIP PROJECT- Praveen Agarwal
25/90
SUMMER INTERNSHIP PROJECT
25 | P a g e
OPTION STRATEGIES:
BULL CALL SPREAD:
This strategy is used when investor is bullish in the market but to a limited upside .The Bull Call
Spread consists of the purchase of a lower strike price call an sale of a higher strike price call, of
the same month. However, the total investment is usually far less than that required to purchase
the stock.
Long Call -Lower Strike Price
Short Call -Higher Strike Price
Suppose Price of Reliance Petroleum is Rs. 190
Here the investor buys one month call of 185 at Rs 9 ticks per contract and sell one month call
of 195 and receive 4.6 ticks per contract.
Premium paid = 4.4 ticks per contract (9 paid- 4.6 received)
Lot size = 1675 shares
The pay-off table:
SPOT
PRICE
Call purchased
@185
Call sold at
@195
Initial
Payoff
Premium
Received
Total
Payoff
170 0 0 0 -4.4 -4.4
175 0 0 0 -4.4 -4.4
180 0 0 0 -4.4 -4.4
185 0 0 0 -4.4 -4.4190 5 0 5 -4.4 0.6
195 10 0 10 -4.4 5.6
200 15 5 10 -4.4 5.6
205 20 10 10 -4.4 5.6
210 25 15 10 -4.4 5.6
7/31/2019 SIP PROJECT- Praveen Agarwal
26/90
SUMMER INTERNSHIP PROJECT
26 | P a g e
Here we can see that the loss of the person being limited to premium amount paid i.e. Rs4.4 per
share whereas the maximum profit is Rs5.6 per share. Thus the person can earn with minimum
risk and whatever be the market condition his loss will be limited. The graph below shows the
payoff structure at various levels.
BEAR PUT SPREAD:
It is implemented in the bearish market with a limited downside. The Bear put Spread consists of
the purchase a higher strike price put and sale of a lower strike price put, of the same month. It
provides high leverage over a limited range of stock prices. However, the total investment is
usually far less than that required to buy the shares.
Bear spread with put:
Long Put - Higher Strike Price.
Short Put - Lower Strike Price
Market price of Reliance Capital is Rs. 1320
-6
-4
-2
0
2
4
6
8
170 175 180 185 190 195 200 205 210
BULL CALL SPREAD
BULL CALL SPREAD
7/31/2019 SIP PROJECT- Praveen Agarwal
27/90
SUMMER INTERNSHIP PROJECT
27 | P a g e
Here the investor buys one month put of 1350(higher price) at 150 ticks per contract and sell one
month put of 1290 (lower price) and receive 120 ticks per contract.
Premium paid = 30 ticks per contract (150 paid- 120 received)
Lot size = 138 shares
SPOT
PRICE
Put
Purchased@1350
Put sold at
@1290
Initial
Payoff
Premium
Received
Total
Payoff
1260 90 30 60 -30 30
1280 70 10 60 -30 30
1300 50 0 50 -30 20
1320 30 0 30 -30 0
1340 10 0 10 -30 -20
1360 0 0 0 -30 -30
1380 0 0 0 -30 -30
-40
-30
-20
-10
0
10
20
30
40
1260 1280 1300 1320 1340 1360 1380
BEAR PUT SPREAD
BEAR PUT SPREAD
7/31/2019 SIP PROJECT- Praveen Agarwal
28/90
SUMMER INTERNSHIP PROJECT
28 | P a g e
BULL PUT SPREAD.
Bull spread with one put is written with higher strike price and investor buys one put with lower
exercise price. Because put that is written with higher strike price in involves an initial cash
inflows.
If on the expiration date, the strike price is higher than both the Exercise price, then both the Put
will exercise worthless and investor will gain an amount equal to initial cash inflow. If on the
expiration date, the strike price is lower than both the exercise price then both the Put will be
exercised and there will be loss equal to difference between both the exercise prices.
If on the expiration date, the strike price is between two exercise price, and the Put that is written
(i.e.) with higher strike price will be exercised and the Put that is bought will expire worthless.
The resulting loss in this case will be higher exercise price less the strike price.
Bull spread with put
Long Put - Lower Strike Price.
Short PutHigher Strike Price
Suppose that a stock is trading at 1916.75 and if investor is bullish about the market but at
the same time he wants to reduce his risk he can use Bull Spread. Suppose an investor buys
2050 Put and at the same time sells 2100 Put then initial inflow will be:
Proceeds from writing a Put 195.00
Initial outlay from Long Put 147.65
Initial Inflow 47.35
His position when the stock price was at 2074.70 will be
Put that is written for 2100 will be exercised resulting in loss of Rs 25.30 and Put that is
bought will expire worthless
Thus investor has earned Rs 22.05(47.35-25.30).
7/31/2019 SIP PROJECT- Praveen Agarwal
29/90
SUMMER INTERNSHIP PROJECT
29 | P a g e
Payoff Structure from Bull Spread with Puts:
SPOT
PRICE
Put sold
2100
Put purchased
2050
Initial
Payoff
Premium
Received
Total
Payoff
2040 -60 10 -50 47.35 -2.65
2045 -55 5 -50 47.35 -2.65
2050 -50 0 -50 47.35 -2.65
2055 -45 0 -45 47.35 2.35
2060 -40 0 -40 47.35 7.35
2065 -35 0 -35 47.35 12.35
2070 -30 0 -30 47.35 17.35
2075 -25 0 -25 47.35 22.35
2080 -20 0 -20 47.35 27.35
2085 -15 0 -15 47.35 32.35
2090 -10 0 -10 47.35 37.35
2095 -5 0 -5 47.35 42.35
2100 0 0 0 47.35 47.35
2105 0 0 0 47.35 47.35
2110 0 0 0 47.35 47.35
2115 0 0 0 47.35 47.35
Here we can see that by using this strategy the extent of loss is minimum i.e. 2.65/share. Since
the investor is bullish on the market he thinks that the price will move up and if the price is
above 2100 then both the option expire worthless and he gains an amount equal to premium
received but at the same time he is uncertain and wants to hedge his risk and by doing so his
maximum loss has been minimized.
mailto:Put@2100mailto:Put@2100mailto:Put@2050mailto:Put@2050mailto:Put@2050mailto:Put@2050mailto:Put@2100mailto:Put@21007/31/2019 SIP PROJECT- Praveen Agarwal
30/90
SUMMER INTERNSHIP PROJECT
30 | P a g e
BEAR CALL SPREAD:
This strategy is best implemented in a moderately bearish or stable market to provide high
leverage over a limited range of stock prices. Here the investor buys a higher strike call and sells
a lower strike call with the same expiration dates. However, the total investment is usually far
less than that required to buy the stock or futures contract. The strategy has both limited profit
potential and limited downside risk.
Long Call -Higher Strike Price.
Short Call -Lower Strike Price.
Price of Tata steel 690
Here the investor buys one month call of 700 at 18 ticks per contract and sell one month call of
680 and receive 30 ticks per contract.
-10
0
10
20
30
40
50
PROFIT/LOSS
SPOT PRICE
BULL PUT SPREAD
BULL PUT SPREAD
7/31/2019 SIP PROJECT- Praveen Agarwal
31/90
SUMMER INTERNSHIP PROJECT
31 | P a g e
Premium = 12 ticks per contract (18 paid - 30received)
Lot size = 382 shares
SPOT
PRICE
Call
Purchased@700
Sold call @
680
Initial
Payoff
Premium
Received
Total
Payoff
670 0 0 0 12 12
680 0 0 0 12 12
690 0 10 -10 12 2
692 0 12 -12 12 0
700 0 20 -20 12 -8
710 10 30 -20 12 -8720 20 40 -20 12 -8
Here the person is slightly bearish in the market and using this strategy he gets initial premium
amount. If both the options expire worthless then he gets the premium amount and if the price
moves up his loss is limited as it has been hedged by taking two call options limiting the
maximum loss to Rs 8/share.
-10
-5
0
5
10
15
670 680 690 692 700 710 720
BEAR CALL SPREAD
BEAR CALL SPREAD
7/31/2019 SIP PROJECT- Praveen Agarwal
32/90
SUMMER INTERNSHIP PROJECT
32 | P a g e
STRADDLE:
In this strategy the investor purchase and sell the call as well as the put option of the same strike
price, the same expiration date, and the same underlying. In this strategy the investor is neutral in
the market.
This strategy is often used by the SPECULATORS who believe that asset prices will move in
one direction or other significantly or will remain fairly constant.
TYPES:
LONG STRADDLE:
Here the investor takes a long position (buy) on the call and put with the same strike price and
same expiration date. In this the investor is beneficial if the price of the underlying stock move
substantially in either direction. If prices fall the put option will be profitable an if the prices rises
the call option will give gains. Profit potential in this strategy is unlimited, while the loss is
limited up to the premium paid. This will occur if the spot price at expiration is same as the strike
price of the options.
.Detailed example of a long straddle
Suppose price of Tata Steel is 690
Here the investor buys one month call of strike price 700 at 18 ticks per contract and one month
put of strike price 700 for 22 ticks per contract.
Premium Paid = 40 ticks
Here the maximum loss is limited to premium amount and the investor/trader will gain from
either movement in stock price.
7/31/2019 SIP PROJECT- Praveen Agarwal
33/90
SUMMER INTERNSHIP PROJECT
33 | P a g e
SPOT
PRICE
Call
Purchased-700
Put
purchased-
700
Initial
Payoff
Premium
Paid
Total
Payoff
640 0 60 60 40 20660 0 40 40 40 0
680 0 20 20 40 -20
700 0 0 0 40 -40
720 20 0 20 40 -20
740 40 0 40 40 0
760 60 0 60 40 20
780 80 0 80 40 40
-50
-40
-30
-20
-10
0
10
20
30
40
50
640 660 680 700 720 740 760 780
LONG STRADLE
LONG STRADLE
7/31/2019 SIP PROJECT- Praveen Agarwal
34/90
SUMMER INTERNSHIP PROJECT
34 | P a g e
SHORT STRADDLE
This strategy is reverse of long straddle. Here the investor write (sell) the call as well as the put
in equal number for the same strike price and same expiration. This strategy is normally used
when the prices of the underlying stock is stable but the investor start suffering losses if the
market substantially moves in either direction
Suppose Nifty is trading at 4879 and the call and put option at strike price of 4900 are 80 and
87.25 respectively.
Then payoff from selling two options=80+87.25=167.25
PRICE Put sold-4900 Call sold-4900 Initial
Payoff
Premium
Received
Total
Payoff
4700 200 0 -200 167.25 -32.75
4750 150 0 -150 167.25 17.25
4800 100 0 -100 167.25 67.25
4850 50 0 -50 167.25 117.25
4900 0 0 0 167.25 167.25
4950 0 50 -50 167.25 117.25
5000 0 100 -100 167.25 67.25
5050 0 150 -150 167.25 17.25
5100 0 200 -200 167.25 -32.75
This strategy is very risky as the loss potential is unlimited whereas the profit potential islimitedand as such is not suitable for all class of investors.
7/31/2019 SIP PROJECT- Praveen Agarwal
35/90
SUMMER INTERNSHIP PROJECT
35 | P a g e
STRANGLE:
In this strategy the investor is neutral in the market which involves the purchase of a higher call
and a lower put that are slightly out of the money with different strike price and with the
different expiration date.
TYPES
LONG STRANGLE:
Here the investor purchases a higher call and a lower put with different strike price and with the
different expiration date. A long strangle strategy is used to profit from a volatile price a loss
from stable prices.
In case of Long Strangle again the investor is not sure about the direction of the stock price
but is expecting volatility. In case of Strangle the stock price has to move further away than
the Straddle for an investor to make profit but at the same time downward risk in Strangle is
less when compared to straddle when the stock ends up at the Central value.
-50
0
50
100
150
200
4700 4750 4800 4850 4900 4950 5000 5050 5100
SHORT STRADLE
SHORT STRADLE
7/31/2019 SIP PROJECT- Praveen Agarwal
36/90
SUMMER INTERNSHIP PROJECT
36 | P a g e
If the price of a stock on is at 2067.65 and investor is expecting Volatility and at the same
time he wants to minimize the downward risk that occurs from straddle he can buy a
strangle. If he buys a 2100 call and 1900 put then the total cost for him will be
Long Call 2100 3.00
Long Put 2050 37.95
Total Cost 40.95
Price Long call
2100
Long Put
2050
Initial Payoff Premium Paid Total Payoff
1875 0 175 175 40.95 134.05
1900 0 150 150 40.95 109.05
1925 0 125 125 40.95 84.05
1950 0 100 100 40.95 59.05
1975 0 75 75 40.95 34.05
2000 0 50 50 40.95 9.05
2025 0 25 25 40.95 -15.95
2050 0 0 0 40.95 -40.95
2075 0 0 0 40.95 -40.95
2100 0 0 0 40.95 -40.95
2125 25 0 25 40.95 -15.95
2150 50 0 50 40.95 9.05
2175 75 0 75 40.95 34.05
2200 100 0 100 40.95 59.05
2225 125 0 125 40.95 84.05
2250 150 0 150 40.95 109.05
2275 175 0 175 40.95 134.05
7/31/2019 SIP PROJECT- Praveen Agarwal
37/90
SUMMER INTERNSHIP PROJECT
37 | P a g e
Here again as we see that the loss is limited to the amount of premium paid and the profit
potential is unlimited and the investor will gain from both upward or downward movement on
the market.
SHORT STRANGLE:
In this the investor sells a higher call and a lower put with different strike price and with the
different expiration date. A short strangle strategy is used to profit from a stable prices an loss
starts when price is volatile
Suppose the price of a stock is 1977.50, if an investor shorts 100 2050 Calls and 100
2100 puts for May month with exercise price 2050 having an expiration date on 26th may,
then the total credit to the investor will be:Short Call 2050 8.30
Short Put 2100 139.75
Initial Inflow 148.05
-60
-40
-20
0
20
40
60
80
100
120
140
160
LONG STRANGLE
LONG STRANGLE
7/31/2019 SIP PROJECT- Praveen Agarwal
38/90
SUMMER INTERNSHIP PROJECT
38 | P a g e
Price Short
call 2050
Short
Put 2100
Initial
Payoff
Premium
Received
Total Payoff
1875 0 225 -225 148.05 -76.95
1900 0 200 -200 148.05 -51.951925 0 175 -175 148.05 -26.95
1950 0 150 -150 148.05 -1.95
1975 0 125 -125 148.05 23.05
2000 0 100 -100 148.05 48.05
2025 0 75 -75 148.05 73.05
2050 0 50 -50 148.05 98.05
2075 25 25 -50 148.05 98.05
2100 50 0 -50 148.05 98.05
2125 75 0 -75 148.05 73.05
2150 100 0 -100 148.05 48.05
2175 125 0 -125 148.05 23.05
2200 150 0 -150 148.05 -1.95
2225 175 0 -175 148.05 -26.95
2250 200 0 -200 148.05 -51.95
2275 225 0 -225 148.05 -76.95
7/31/2019 SIP PROJECT- Praveen Agarwal
39/90
SUMMER INTERNSHIP PROJECT
39 | P a g e
SHORT STRANGLE PAYOFF
BUTTERFLY STRATEGY
We have seen earlier the straddle and strangle strategies for trading in volatile markets but at
times they expose us to very high risk especially when we sell straddle or strangles so in order to
cut the wings of straddle we buy a call with high strike price and another put with a lower strike
price than that of a straddle. This will be clear with the following example
EXAMPLE
Suppose we sell 240 Strike Straddle of a company Cairn India with Call and Put premium at Rs
11 and Rs 13 respectively, then we will receive Rs 24 as Income and the two break even points
will be Rs 216 and Rs 264 respectively. But in this case if the price of the stock moves
substantially we are exposed to very high loss so we use butterfly strategy to cut short our losses.
In this we buy a call of strike price 260 and also a put of strike price 220 at Rs.6 and Rs.5
-100
-80
-60
-40
-20
0
20
40
60
80
100
120
1875
1900
1925
1950
1975
2000
2025
2050
2075
2100
2125
2150
2175
2200
2225
2250
2275
SHORT STRANGLE
SHORT STRANGLE
7/31/2019 SIP PROJECT- Praveen Agarwal
40/90
SUMMER INTERNSHIP PROJECT
40 | P a g e
respectively at a total cost of Rs.11 reducing the total amount of premium received from Rs.24 to
Rs.13. This however will insure from losses from both the ends.
The payoff table for the given example will be as under:
BUTTERFLY PAYOFF
Closing
Price
Profit on
240 Call
Sold
Profit on
260 Call
Bought
Profit on
220 Put
Bought
Profit on
240 Put
Sold
Net Profit
Including
Initial
Income of
Rs 13
200 0 0 20 -40 -7
210 0 0 10 -30 -7
220 0 0 0 -20 -7
230 0 0 0 -10 3
240 0 0 0 0 13
250 -10 0 0 0 3
260 -20 0 0 0 -7
270 -30 10 0 0 -7280 -40 20 0 0 -7
Thus, in this case we will generate a maximum profit of Rs 13 if the stock price remains at our
Straddle Strike price of Rs 240. The maximum loss is restricted to Rs 7 which happens when the
stock moves either below Rs 220 or above Rs 260. This loss is capped on both sides. Here we
sold the straddle as we thought that there will not be any significant change in price but if our
analysis goes wrong and the market falls because of any factor then our loss is capped to Rs.7
which was unlimited had we not used this strategy.
7/31/2019 SIP PROJECT- Praveen Agarwal
41/90
SUMMER INTERNSHIP PROJECT
41 | P a g e
The payoff diagram for Butterfly appears as under:
WHY BUTTERFLY STRATEGY?
As a Straddle Buyer, we are paying a fat premium (e.g. in the above example Rs 24). This
premium ispaid for the gains that we might make for unlimited possible movement in the stock.
Now we might expect that the stock might not move unlimited both ways. For example, we
might believe that Stock might rise but not above Rs 260 and might fall but not below Rs 220.
Why should we therefore pay for movement which in your opinion might never happen? We
should in that case, sell a 260 Call and generate Rs 5 as premium income. Similarly we should
sell a 220 Put and generate Rs 6 as premium income. This will have two impacts:
Onewe gain Rs 11 as income, thus reducing our cost to Rs 13 (from Rs 24)
Twowe are giving up gains above Rs 260 and below Rs 220
-10
-5
0
5
10
15
200 210 220 230 240 250 260 270 280
BUTTERFLY
BUTTERFLY
7/31/2019 SIP PROJECT- Praveen Agarwal
42/90
SUMMER INTERNSHIP PROJECT
42 | P a g e
LIMITATIONS OF BUTTERFLY
The main problems with these strategies which require us to enter into a number of transactionsare as under:
Several transactions result into high brokerage costs (to enter into a butterfly and thensquare up makes it 8 transactions)
Liquidity might not be available at all strike prices;
All four transactions might take time to execute at your desired prices if prices change
in the meantime, you might find the butterfly payoffs do not occur as you desired
COVERED CALL:
Under this strategy investors buys the shares which shows that they are bullish in the market but
suddenly they are scared about the market falls thus they sells the call option. Here the seller is
usually negative or neutral on the direction of the underlying security. This strategy is best
implemented in a bullish to neutral market where a slow rise in the market price of the
underlying stock is anticipated.
Thus if price rises he will not participate in the rally. However he has now reduced loss by the
amount of premium received, if prices fall. Finally if prices remain unchanged obtains the
maximum profit potential.
EXAMPLE:
Portfolio: 100 shares purchased at Rs.300
Components: Sell a two month call with strike price of 300 at 25
Net premium: 25 ticks
Premium received: Rs.2500 (25*100, the multiplier)
7/31/2019 SIP PROJECT- Praveen Agarwal
43/90
SUMMER INTERNSHIP PROJECT
43 | P a g e
Break-even-point: Rs.275:Rs.300-25 (Premium received)
Possible outcomes at expiration:
If the stock closes at 300, the 300 call option will not exercise and seller will receive the
premium.
If the stock ends at 275, the 300 call option expires worthless and loss is equivalent to the
premium received resulting into no profit no loss.
If the stock ends above 300, the 300 call option is exercised and call writer receives the premium
results into the maximum profit potential.
COVERED PUT:
Here the writer sell stock as well as put because he overall moderate bearish on the market and
profit potential is limited to the premium received plus the difference between the original share
price of the short position and strike price of the put. The potential loss on this position however
is substantial if price increases above the original share price of the short position. In this casethe short stock will suffer losses which will be offset by the premium received.
UNCOVERED CALL:
This strategy is reverse of the covered call. There is no opposite position in the naked call. A call
option writer (seller) is uncovered if the shares of the underlying security represented by the
option is not owned by the option writer.
The object of an uncovered call writer is to realize income by writing (selling) option without
committing capital to the ownership of the underlying shares.
7/31/2019 SIP PROJECT- Praveen Agarwal
44/90
SUMMER INTERNSHIP PROJECT
44 | P a g e
This shows that the seller has one sided position in the contract for this the seller must deposit
and maintain sufficient margin with the broker to assure that the stock can be purchased for
delivery if option is exercised.
RISKS INVOLVED IN WRITING UNCOVERED CALL OPTION ARE AS FOLLOWS :-
If the market price of the stock rises sharply the calls could be exercised, while as far as
the obligation is concerned the seller must buy the stock more than the option strike
price, which results in a substantial loss.
The rise of buying uncovered calls is similar to that of selling stock although, as an
option writer, the risk is cushioned somewhat by the amount of premium received.
ILLUSTRATION:
Portfolio: Write reliance call of 65 strike
Net premium: 6
Lot size: 100 shares
Market action: price settled at 55
Therefore the option will not be assigned because the seller has no stock position and price
decline has no effect on the profit of the premium received.
Suppose the price settled at Rs.75 the option assigned and the seller has to cover the position at a
net loss of Rs.400 [1000 (loss on covering call) - 600(premium income)]
Finally the loss is unlimited to the increase in the stock price and profit is limited to the decliningstable stock price.
7/31/2019 SIP PROJECT- Praveen Agarwal
45/90
SUMMER INTERNSHIP PROJECT
45 | P a g e
PROTECTIVE PUT:
Under this strategy the investor purchases the stock along with the put option because the
investor is bearish in the market. This strategy enables the holder of the stock to gain protection
from a surprise decline in the price as well as protect unrealized profits. Till the option expires,
no matter what the price of underlying is, the option buyer will be able to sell the stock at strike
price of put option.
SCENARIO
The investor buys 100 shares of HLL at 200 as well as put option at 200 strike rate at a premium
of Rs. 10. Here the profit potential is unlimited while the loss is minimum to the extent of
premium paid.
Price of HLL: 200
Components: Buy a one-month put of strike 200
Net premium: 10 ticks per contract
Premium paid: 1000 (10*100 multiplier)
Break-even-point: 210 (Rs.200+10, Premium paid)
Here the investor pays an additional margin of Rs.10 along with the price of Rs.210 combining a
share with a put option is referred as a Protective Put.
POSSIBLE OUTCOMES AT EXPIRATION
AT BREAK-EVEN-POINT:
Previously if the price rises to 210 the investor will gain but now the investor pays a margin of
Rs.10 so it will result in no profit or loss.
BELOW STRIKE PRICE:
7/31/2019 SIP PROJECT- Praveen Agarwal
46/90
SUMMER INTERNSHIP PROJECT
46 | P a g e
In case of fall in the stock price the loss is limited to Rs.10. This means that his maximum loss
that the investor would have to bear is limited to the extent of premium paid. If the price falls at
190 the investor will sell at 200.
ABOVE STRIKE PRICE :
In case of rise in prices then the put option will expire worthless and the investor will benefit
from rise in the stock price.
Finally uncertainty is the biggest curse of the market and a protective put helps override the
uncertainty in the markets. Protective put removes the uncertainty by limiting the investor loss at
Rs.10. In this case no matter what happens to the investor is protected by the loss of Rs.10. The
put option makes the investor life by telling the investor in advance how much it stands to lose.
This is also referred to as PORTFOLIO INSURANCE because it helps the investor by insuring
the value of investment just like any other asset for which the investor would purchase insurance.
DELTA HEDGING STRATEGY
DELTA
It is a measure of change in the premium of an option corresponding to a change in the price of
the underlying asset.
DELTA= Change in option premium/Change in underlying price
This strategy is used by taking position in options as well as spot market. The advantage of this
is that the extent of loss using this strategy is limited.
Let us consider an example of a share trading at Rs.120 with call option at a strike price of Rs.
105 trading at 17.98 and time left for expiration of contract being 20 days. Suppose the lot size is
100 shares. We sell 100 call option strike price being 105 and premium being 17.98. So we get a
total of Rs.1798 as option premium giving right to the buyer to buy 100 shares at 105 within
expiry period. If we we dont adopt any strategy and share price moves up significantly then we
7/31/2019 SIP PROJECT- Praveen Agarwal
47/90
SUMMER INTERNSHIP PROJECT
47 | P a g e
may end up incurring huge loss. Here delta hedging can help make portfolio delta neutral and
will help in making profits.
Hedge number Spot price Call value Call Delta Shares bought Cost
0 120.00 17.98 0.86 86 10320
1 127.74 24.79 0.93 7 894.18
2 129.34 26.17 0.95 2 258.68
3 130.88 27.52 0.96 1 130.88
4 130.96 27.47 0.96 0 0
5 129.09 25.55 0.96 0 0
6 126.09 22.57 0.95 -1 -126.09
7 122.11 18.71 0.92 -3 -366.33
8 124.22 20.53 0.94 2 248.44
9 117.50 14.23 0.87 -7 -822.5
10 111.33 8.97 0.75 -12 -1335.96
11 116.09 12.61 0.87 12 1393.08
12 112.56 9.44 0.80 -7 -787.92
13 114.93 11.17 0.87 7 804.51
14 110.55 7.32 0.77 -10 -1105.5
15 106.12 3.96 0.59 -18 -1910.16
16 107.58 4.52 0.67 8 860.64
17 104.88 2.49 0.52 -15 -1573.2
18 104.85 1.99 0.51 -1 -104.85
19 105.61 2.41 0.69 18 1900.98
20 105.98 0.98 1.00 31 3285.38
100 11964.26
7/31/2019 SIP PROJECT- Praveen Agarwal
48/90
SUMMER INTERNSHIP PROJECT
48 | P a g e
Therefore the net position at expiry of contract will be:
Amount Received through sale of 100 call at 17.98= 1798
Total Cost involved in buying the shares =11964.26
Value of 100 shares at expiry (105.98*100) =10598
Net Profit/loss= 431.7
Since the call options strike price is about equal to spot price it will expire worthless.
Thus by using this strategy the extent of loss will be minimum and one can tender the
shares purchased if the option is exercised. This results in minimizing the loss and helps in
getting profits. However, the extent of profit/loss will be different depending upon market
conditions.
LIMITATIONS
The various strategies of trading using futures and options discussed above are very useful for
market participants but the benefit of these depend upon the extent to which they understand the
market and use these strategies prudently depending upon the market conditions. Some of the
limitations of using these strategies are as follows:
The strategies discussed above may be useful for a market participant if he has some
basic knowledge about the equity markets and derivatives instruments.
At times the use of these strategies involves very high costs thus making overall
transaction to be expensive.
These strategies will be useful when used after proper study of market conditions. They
will help to cut sort the losses the extent of profit depends upon the fact that how
carefully we study the market trends and take position in the market.
These strategies may not be applicable for all the stocks of F&O segment as some of the
stocks do not have ample liquidity at all the prices and as such making transactions
difficult.
mailto:[email protected]:[email protected]7/31/2019 SIP PROJECT- Praveen Agarwal
49/90
SUMMER INTERNSHIP PROJECT
49 | P a g e
RECOMMENDATIONS
After having discussed about the trading strategies here I would be giving recommendations forinvestment based on fundamental analysis of stocks for investment for medium term point of
view which can give good returns to investors. The analysis will be done taking into account
fundamental analysis of company, the sector to which it belongs its, growth prospects etc.
MARKET OUTLOOK
The year 2008 was has been a year of tragic movement for the nifty and the sensex. Nifty after
touching all time high of 6300 levels in the month of January came down sharply to 4500 levels.
But the markets have again got some strength and the nifty has managed to cross 5100 in May08.
The long term outlook for the market looks to be positive looking into the growth of economy,
corporate earnings and current valuations though the short term trend for the market is expected
to be volatile because of growing concerns over increasing crude oil prices, high inflation and
US slowdown. The inflation has touched a five year high of 7.61% for the last week of April.
The inflation is expected to be stable around 5-6% with 2-3 months with government taking
measures to control prices. The crude oil has also touched an all time high if month of May08 to
126$/barrel. The crude oil process is also expected to come down gradually and will settle at
around 100-105 levels will be positive for market. The US Federal Reserve cut interest rate by
25 bps to 2%at its meeting held in April 29 th 2008. There is a general optimism that Fed may
pause for some time as far as interest rates are concerned. This will have a sobering impact on
commodity prices which has risen partly because of weakening dollar. With most of the
commodities process in US dollar terms a fall in dollar led to buying in commodities as a natural
hedge. A rise in dollar should lead to unwinding of positions resulting in lower commodity
prices. This will lead to reduced pressure in inflation in India. It seems that the worst for marketis over and the market is set over to rise again, therefore investors and traders can take position
accordingly in the market.
Here are some of the companies which one can invest for a time horizon of 8-12 months.
7/31/2019 SIP PROJECT- Praveen Agarwal
50/90
SUMMER INTERNSHIP PROJECT
50 | P a g e
RAJESH EXPORTS
Recommendation BUY
Market Price on 12/05/08 92
Target Price 192
Duration 10-12 Mths
Industry Gems and jewelry
BSE Code 531500
Sensex 16833
52 week H/L 204/67
6 Month Avg Vol 266437
Market Cap 16900
Rajesh exports is the worlds largest gold manufacturer which accounts for nearly one-fourth of
total gold exports of India. The company has a strong presence both in domestic and world
market and has strong growth prospects with company diversifying into various segments.
The company has diversified into
1) Jewelry retailing
2) Diamond jewelry
3) White labels
4) Real estate
7/31/2019 SIP PROJECT- Praveen Agarwal
51/90
SUMMER INTERNSHIP PROJECT
51 | P a g e
INDUSTRY PROSPECTS
In India, a combination of positive macro economic factors will lead to higher jewelry demand.These include a booming economy, high disposable income, growing middle-income class,
favourable demographics, and a cultural affinity with gold. All these positive factors will lead to
growth of the industry in India. Also, judging by past trends, it is expected that some jewelry
fabrication will move to low-cost manufacturing countries, such as India and China, further
boosting industry growth. Rajesh Exports has established a very large-scale jewelry operation by
selling its jewelry to wholesale distributors at very low margins. This has helped the company to
exponentially increase its sales, gain size and scale advantages, and build a large customer base .
It is now planning to enter the business segments of high-margin private label (white label) and
diamond jewelry exports and to explore the growing retail industry in India.
ORDERS TO BE ACCOMPLISHED
The company has recently bagged an export order of 463 crores on May 2nd 2008 from
Excel Goldsmiths which is to be executes by May 2009.
The Company has bagged an export order worth Rs 463 crores of gold jewelry from M/s.
Excel Goldsmiths. The order is for the latest range of designer jewelry developed by the
company. The order is to be completed by the March 30, 2008. Execution of this order
will significantly add to the bottom line of the Company. The Company is confident that
it will complete the order by March 30, 2008.
The company has bagged its maiden branded Diamond Jewelry order for Rs.116 crores
from M/s Excel Goldsmiths, UAE. The order is to be delivered by 31st March 2008.
It has bagged a mega order worth Rs 743 crores of gold jewelry from Gold Star Jewelry,
Singapore. The order is for the latest range of designer jewelry developed by the
Company. The order is to be completed by the January 30, 2008.
The Company had bagged an export order worth Rs 272 crores of gold jewelry from M/s.
Lazorde Jewelry, Kuwait. The Company is globally known for its consistent quality,
7/31/2019 SIP PROJECT- Praveen Agarwal
52/90
SUMMER INTERNSHIP PROJECT
52 | P a g e
international finish and timely delivery schedules at competitive rates, due to which this
order has been, placed by M/s. Lazorde Jewelry, Kuwait.
KEY INVESTMENT RATIONALE
Over the last decade, REL has grown its gold jewelry processing scale at a massive pace,
clocking 55% revenue CAGR and 26% PAT CAGR. The focus on building scale has paid off,
with REL accounting for 8% of all gold imports into India, and establishing itself as the lowest
cost gold jewelry producer globally. The companys scale has redefined the business economics,
especially, in an unorganized market like India. However, the focus on scale was achieved at the
cost of margins (1-1.5% NPM).
Management focus now is on leveraging this scale advantage to move up the value chain. For
this, REL has identified 3 growth engines:
Jewelry retailing: 38 stores operational. Vision 2013: To reach 750 stores.
Private label:Targeting global retailers. Orders already underway
Diamond jewelry: In India: retail through own stores. Globally: retail tie-ups.
It is expected that these businesses will contribute 21% to RELs revenues & 68% to PAT
in FY10E & consequently expand NPM to 4.2% in FY10E. NPM expansion is already
visible - 2.6% in 9MFY08 Vs 1.5% in FY07. Bulk exports contribution is expected to come
down from 100% in FY07 to 79% inFY10E at 1.7% NPM. REL has 140 acres of land in &
around Bangalore valued at Rs8 Bn (Rs43per share) as per management estimates.
7/31/2019 SIP PROJECT- Praveen Agarwal
53/90
SUMMER INTERNSHIP PROJECT
53 | P a g e
VALUATION AND RECOMMENDATION
SHAREHOLDING PATTERN
Promoters 61.47%
FIIs 6.66%
Mutual Funds 1.32%
Banks and FIs 3.20%
NRI/Private Corporate bodies 19.85%
General public 7.50%
Source: Capitaline
Year FY06(A) FY07(A) FY08(E) FY09(E) FY10(E)
Net Sales(Rs Mn) 54819 67660 78960 87600 94120
EBITDA(Rs Mn) 1115 2142 3610 4580 6040
EBITDA(% OF
SALES)
2.03 3.17 4.57 5.23 6.42
PAT 665 1013 1790 2830 3870
PAT(% OF
SALES)
1.21 1.50 2.27 3.23 4.11
EPS 18 27.4 8.6 11.6 16
P/E - - 10.60 7.90 5.75
Mcap/EBITDA - - 4.2 3.2 2.4A: Audited
E: Estimated
Source: Company Data and Estimate
Figures in Rs millions.
7/31/2019 SIP PROJECT- Praveen Agarwal
54/90
SUMMER INTERNSHIP PROJECT
54 | P a g e
RETAIL STORES
Y/e March FY08E FY09E FY10E
OYZTERBAY
SALES/STORES(Rs
CR)
------ 2 2.4
NO OF STORES ------ 30 70
LAABH
SALES/STORES(RsCR)
6 6 7.2
NO OF STORES 30 30 72
SUBH
SALES/STORES(RsCR) ------- 9.5 11.4
NO OF STORES ------- 30 100Source: Company Data
KEY RATIOS
Year FY06(A) FY07(A) FY08(E) FY09(E) FY10(E)
Current Ratio 1.6 2.1 2.1 2.1 2
Debt/Equity 5.7 10.8 4 1.8 1.6
Debt/Assets 26.9 61.9 48.2 10.2 6.1
Interest Coverage Ratio 2.7 2 2.1 2.8 3.7
Inventory Turnover 52.5 53.8 53.1 52.6 53.4Operating Profit
Margin(OPM)
2.00% 3.20% 4.60% 5.30% 6.40%
Return on Assets(ROA) 4.20% 2.80% 4.60% 6.80% 8.80%
Return on Capital
Employed(ROCE)
9.40% 8.20% 9.60% 11.50% 13.20%
(A)Audited; (E) Estimated
Source: Company data and Estimates
A look at the financials and the key ratios reveal that the company is on a strong growth track
and its diversification into retailing and real estate will give impetus to its growth. The company
is set to start it retail stores which will add to the bottomline of the company. The company has
currently Operating Profit Margin around 4.2% which will increase to 5.3 and 6.4% by FY10
(estimated). This is mainly because of higher profit margin in the retail sector. The company also
has good land bank in cities like Bangalore, Hyderabad and Chennai which will further unlock
7/31/2019 SIP PROJECT- Praveen Agarwal
55/90
SUMMER INTERNSHIP PROJECT
55 | P a g e
value for the company. Going forward the company is expected to grow even more and thus is a
good bet for investors.
At the price ofRs92, RELs FY09E EPS of Rs11.6 is discounted 7.9x and FY10E EPS of Rs16
is discounted 5.75x. I recommend a STRONG BUY on REL with a price target of Rs192
based on 12x FY10E earnings. The company has historically traded at higher P/E multiples of
20-25 but taking conservative and fair view a multiple of 12x is sustainable. The companys
decade old growth track record gives me comfort in the estimates. Also, RELs land
development plans are in the pipeline, acting as further cushion to the valuations.
INDUSTRY OVERVIEW
Global Gems & Jewelry Industry
The size of the global gems and jewelry industry is estimated at US$146 Bn in 2005 (according
to a KPMG-GJEPC report 2006), with industry sales growing at 5.2% CAGR over 2000-05.
Global Jewelry Industry Growth
Retailing accounts for the majority of the market, especially in the developed and mature
markets like the US and Europe. The global jewelry industry is divided based on the natural or
competitive advantage each market has. The mining of gold and diamonds is focused in
Australia, South Africa, other African nations and some parts of Russia. India, Turkey and Israel
lead in diamond processing. For jewelry fabrication, India and Italy dominate, with China
establishing its footprint rapidly. US, India, Europe, Middle East and now China lead in jewelry
consumption.
7/31/2019 SIP PROJECT- Praveen Agarwal
56/90
SUMMER INTERNSHIP PROJECT
56 | P a g e
India leads the pack in jewelry fabrication
Over the years, India has emerged as the largest jewelry fabrication centre in the world forming
~16% of the world jewelry fabrication in 2007E, led by the presence of skilled craftsmen,
processing skills and historical gold heritage. Jewelry fabrication formed the third largest pie in
the global gems and jewelry value chain in 2005 after retail and precious metals. Going forward,
India is expected to maintain its leadership in the fabrication part of the value chain as cost
pressures compel fabrication to move to low cost countries like India and China.
Indian Gems & Jewelry Industry
Gems and jewelry play a significant role in Indian customs and traditions, making this sector
integral to the economy and one of the fastest growing industries in the country. It is a leading
foreign exchange earner (US$17.1 Bn in FY07) with >15% share in Indias total exports and
provides employment to 1.3 MM people directly and indirectly. Apart from being the world's
largest diamond processing (cutting and polishing) centre with an 80% share in world market,
India's favorable trade policies have made India the hub for gems and jewelry. Rising disposable
incomes and traditional affinity towards precious metals has resulted in 11% CAGR in jewelryconsumption over FY02-07. The industry is predominantly divided into two segments: Gold
jewelry and fabricated studded jewelry (diamonds as well as gemstone studded jewelry).
Gold jewelry forms 80% of the Indian jewelry market, with the balance comprising fabricated
studded jewelry. While a major part of gold jewelry manufactured in India is for domestic
consumption, a large portion of fabricated studded jewelry is exported.
Indian gold market is valued at US$18 Bn and has been growing at 10% CAGR over the last 5
years.
Indian gold demand is firmly embedded in cultural and religious traditions. Apart from its
historical religious significance, gold is valued as an important savings and investment
avenue.
7/31/2019 SIP PROJECT- Praveen Agarwal
57/90
SUMMER INTERNSHIP PROJECT
57 | P a g e
India consumes nearly 850 tonnes of gold accounting for 25% of the world gold
consumption of which nearly 75% goes into making jewelry.
Cumulative holding in India is estimated at 15,000-16,000 tonnes of gold as against the
estimated cumulative holdings of all central banks in the world at 35,000 tonnes. The
Indian diamond trade generated over US$10 Bn per annum in exports in FY07 and its
large skilled labour force has been instrumental in catapulting the country as the world's
biggest diamond cutting center for small roughs. 11 out of 12 stones (diamonds) set in
jewelry are cut and polished in India.
India's share in this sector is ~80% of the world market.
India employs over 90% of the global diamond industry workforce.
JEWELRY DEMAND SET TO INCREASE; ORGANIZED RETAIL TO JUMP
MANIFOLD
Jewelry demand in India is set to increase led by rising disposable incomes and India's inherent
affinity towards gold and jewelry. Moreover, India's huge middle income segment, which is
witnessing substantial rise in purchasing power, also augurs well for the industry. In addition,
with cost pressures increasing continuously, jewelry manufacturing is set to move to low cost
countries like India and China, thereby boosting the industry dynamics further. India is the
largest consumer of gold in the world (850 tonnes of gold with 25% share) and has the highest
jewelry consumption as a % of disposable income at 3.5%. Despite this, the Indian jewelry
industry is highly fragmented with 4-5 lac small retailers and 850,000 goldsmiths. Organized
retail accounts for only 4% of the US$18 Bn market, with standalone family jewelers dominating
most of the market currently. This offers huge opportunity to players like Rajesh Exports, who
have plans of making big in organized retail, as the jewelry market in India matures and there is
7/31/2019 SIP PROJECT- Praveen Agarwal
58/90
SUMMER INTERNSHIP PROJECT
58 | P a g e
increasing awareness about the benefits of organized retail in terms of better technology in
designing jewelry, increased mechanization, hallmarking as also benefits of greater scale of
operations.
WORLD'S LARGEST AND LOWEST COST PRODUCER OF GOLD JEWELRY
Rajesh Exports Limited (REL) is the world's largest producer of gold jewelry and India's no.1
exporter of the same. It is also the world's lowest cost gold jewelry producer and has the world's
largest jewelry design database of 29,000 designs. The company operates the world's largest
state-of-the-art jewelry-manufacturing facility (250 tonne capacity) spread over 12-acres at
Bangalore. The facility is capable of producing hand-made jewelry, casting jewelry, machine
chains, stamped jewelry, studded jewelry, tube jewelry and electro-formed jewelry.
PEER COMPARISION
INDIA(FY09E) Rajesh
Exports
Titan Gitanjali
Gems
Vaibhav
Gems
Revenues(Rs Mn) 86696 39806 58512 13553
YoY growth 9.60% 34.20% 23.60% 32.50%
EBITDA Margins 5% 8.40% 6.80% 10.80%
PAT Margins 3% 5.00% 4.30% 5.20%
PAT YoY Growth 56.20% 40.60% 43.80% 2256.70%
P/E 7.9 23.50 8.30 2.90
There is no strictly comparable Indian peer for REL, when we take the size and scope of
operations of these companies into consideration. Among all the Indian gems and jewelryplayers, only REL is a fully integrated player, while most others are involved in retailing of
studded jewelry. I have used a P/E based valuation to arrive at the target price. The company has
been able to drive a rapid growth path with its revenues growing to 25 times and PAT growing to
9 times over FY02-07, in the process becoming the world's largest and cheapest cost jewelry
manufacturer, led by continued strong position in the bulk exports business. The estimates
7/31/2019 SIP PROJECT- Praveen Agarwal
59/90
SUMMER INTERNSHIP PROJECT
59 | P a g e
suggest the three ne