A Study on Profitable of Futures with the Reference to SBI Bank

ISSN : 2249-4510 International Journal of Information Technology and Management (IJITM) Volume: 17 | Issue: 1 February 2022 An Internationally indexed, Refereed & Peer reviewed journal www.ignited.in

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International Journal of Information Technology and Management Vol. 17, Issue No. 1, February-2022, ISSN 2249-4510 A Study on Profitable of Futures with the Reference to SBI Bank Dr. Naveen Prasadula* MSC (I.T), MBA, PHD. Assistant Professor, Department of Business Management Osmania University Hyderabad Abstract - New instruments and reengineering of the financial system were introduced in India in 1992 as a part of economic market reforms. One among them was that the growth and innovation were slow in familiarizing Securities. The formation and expansion of derivatives in Indian markets are moderately a latest spectacle. Subsequently its commencement in June 2000, the products need devises displayed epidemicaugmentation in magnitude and the number of bartered conventional agreements. Significant termend product guides an expansive class of financial tools that specifically possess options and futures. These mechanisms emanate their significance from the underlying asset's price and other related variables. They accomplish not having a value of their own and originate their importance from the prerogative they give to their proprietors to own some additional financial support or safety. The present study is deliberate in examining the financial results obeying SBI Bank Ltd. Keywords - Derivatives, Futures, SBI Bank, Traded Contracts. -----------------------------------X---------------------------------- INTRODUCTION Interconnected the Stock Exchange have www.ignited.in demonstrated by used as a illustrative example. The The emergence of derivatives markets, specifically learning cannot be termed as completely forward, futures, besidesdecisions, perhapsdrawn back impeccable. Several changes will be welcomed. to risk-averse monetary negotiators' desire to protect This study does not take into account the their own from the uncertainty of price fluctuations in international perspective of derivatives markets, assets. Despite the high volatility of the financial such as those found on NASDAQ, CBOT, etc. markets, derivatives allow for partial or complete risk transfer by lock up-in ability prices of asstes. As risk OBJECTIVES OF THE STUDY managing appliances, these products are generally not inefficient. The lock-in effect of derivative products 1. A review of the future contracts and option minimizes the risk of asset price fluctuations affecting selection markets productivity and money flow for risk-averse savers. Products are risk administrationtools whose value 2. Calculate the yield and harm of the futures derives from an underlying asset a hedge against buyer and seller, as well as the threats to gain access to cheaper money, and spinoffs choiceauthor and selectionreceptacle are recycled by banks, securities organizations, firms, plu sstockholders to make cash. Derivatives will grow 3. In the direction of learning about Risk and even quicker in the hereafter. threat management using derivatives. REQUIREMENT FOR THE STUDY 4. Explain the types and features of financial derivatives. With the increasing use of derivatives (domestic as well as overseas) in the market, the Derivative markets 5. Identify the uses and functions of derivative have gained importance in the recent years. Using securities. derivative products, it is possible to enhance the economic performance. 6. Differentiate between forward contracts and futures contracts. SCOPE OF STUDY RESEARCH METHODOLOGY The learning focuses on \"Derivatives\" through special orientation to future contracts besides option Research and methodology is an organized opertunities in Indian framework and the methodology to resolve an investigation problem. In Dr. Naveen Prasadula* 1

A Study on Profitable of Futures with the Reference to SBI Bank general, research refers to a quest for knowledge. scheduled individual were launched in 2001. They www.ignited.in Researchers usually follow distinct stages when emphasized in their paper the advantages of trading studying research problems and the logic behind them futures over other alternatives such as savings to conduct research. Data is composed from both reserves, inventories, stocks, bonds, options, real principal and subordinate bases in the study.Data estate, and collectibles are High influence, earnings in collected from primary sources will be in the form of bear and bull markets, lower marketing costs, and high questionnaires.Secondary data is available in the form liquidity. of books, internet catalogs, etc. Ashutosh Vashishtha Satish Kumar (2014), in his LITERATURE REVIEW study, he highlighted that Threat is a distinctive feature of most article of trade and cash-on-hand According to Dr.Naveen Prasadula (2021) the marketplaces. Deviations in the expenses of farming emergence and expansion of derivatives markets are and un-farming merchandises are rendered, over time, relatively recent in India has exhibited exponential by ultimatum-supply undercurrents. The most recent growth since its commencement in June 2000.The flea two decades have noticed a countless-fold marketrevenue has grownupstarting Rs.12365 Cr. in enlargement cutting-edge global trade and trade 2000-2001 on the way to Rs. 126444804.86 Cr. in volume due to globalization and liberalization 2020-21. Within a smallperiod of Twenty years, vacuuming. The marketplacebusiness has increased derivatives exchange in India hasexceeded the cash from Rs.2365 crore in 2000-2001 to Rs.21010482.20 component in terms of turnover and the number of crores in 2018-2019. Within a short span of eighteen traded warrants. The handed study confines its scope, years, derivatives trading in India have exceeded the chronology, conception, purpose, kinds, features, cash component in terms of turnover and the principles, market, tendency, blossoming, possibilities, quantity of traded agreements. He terminated with besidesencounters of byproducts in India and an examination of the antiqueancestries of eminence of Indian harvests market imitativetransaction, types of derivative products, concerninginternationalend productmarketplace. regulation and policy developments, trends and growth, prospects, and challenges of the derivatives Dr. Madireddi SSV Srikumar (2019), in his paper, market in India. they have concluded that financial results are essential among all the financial mechanisms (consequences) K.Soniya (2013), in her article, emphasized the due to the creation and revolutionizing of the preface of the derivative market and specified that it landscape. Derivatives are an agency that enables the started newly in India, and every investor does not merchandiser to supervise risk and earns a yield. It know it, consequently SEBI consumes to helps to transmit threats from one to another. India is yieldstepladders to producealertness among the one of the concentrated prosperous expanding depositors about the unoriginal element. In the motherlands in terms of a tremble market for money need market; the profit and loss of the exchange-traded products. The introduction of investor relies on the market price of the equityand derivatives in Indian market has been fundamental asset. The investor may incur favorably promising besidesprofitable. The blossoming anextensive profit, or he may incur a massive loss. of offshoots in contemporary years has overtaken But in the derivatives segment, the investor enjoys every development of its replica globally. The equity huge profits with limited disadvantage. Derivatives derivatives market is playing a significant role in are mainly used for hedging objectives. To improve shaping price discovery. Unpredictability in commercial the derivatives market in India, SEBI should modify asset price, financial market integration, some of its restrictions, like agreement size eruditejeopardy management tools, inventions in contribution of FII in the offshootsmarketplace. In a financial industrial and selections at risk administration nutshell, the study throws light on the byproductsflea approaches became motivating the development of market. financial byproduct derivatives in international and in India. DATA ANALYSIS AND INTERPRETATION Naveen Prasadula Research Schloar Jiwaji State The unprejudiced of this examination is to appraise University (2017) studied on futures and precise that a the profit and loss location of futures. This futures agreement is a typeof derivative instrument, or examination is grounded on sample data taken of monetary warranty, in which two partakers approve to SBI BANK scrip, HDFC Bank Scrip, and Axis Bank transact a collection of economic tools or material Scrip.The analysis considered the May 2020 commodities for prospective delivery data particular contract of banks, and the proportion size was 3000. price. Locationsin futuresmarkets canbe occupied much The time period in which this analysis is done is more quickly and much more cheaply (in terms of from 01-05-2020 to 25-05- 2020. transaction costs) than positions in the underlying advert markets. The futures contract on financial 2 instruments came into existence in India With the overview of catalog futures and future s contract Dr. Naveen Prasadula*

International Journal of Information Technology and Management Vol. 17, Issue No. 1, February-2022, ISSN 2249-4510 Table 1: Table screening the Market and Future 22- 254.7 7744800078051 prices of SBI BANK May- 253.9 20 Date Market FuturesOpen No. of 23- Price price Interest contracts May- 263.2 20 262.8 7779600061836 2- 241.55 8316600011369 May- 221 20 24- May- 268.5 20 267.95 7869300026451 3- 242.35 8292300011869 May- 241.9 20 25- May- 266.95 267.65 7310400018106 4- 20 May- 241.95 242 20 8169300010938 5- 246.1 8242800013021 May- 246.5 20 8- May- 250.05 250.45 8387700024082 20 9- 248.15 8556300010929 May- 248 20 10- May- 247.95 247.2 8352900012377 20 11- Graph 1: Displaying the price movements of SBI May- 250.35 250.2 8118000010753 Bank Futures 20 Interpretation: 12- 252.2 7751700013529 If one individual buys one lot, i.e., 1000 contract May- 253.6 futures of SBI on 2nd May 2020 and vends on 25th 20 May 2020, he will get a Profit of Rs 241 - Rs 266.95 = Rs 25.95 per share. So, he will get a Yield of 15- 246.75 7837500018732 Rs.1650, i.e., 0.55*1000. If he vends the SBI futures May- 248 on 17th May for Rs 242.7, he would be getting more 20 profits than what he got on expiry.”The interchange week exposed high and low strike prices or training 16- 242.05 7761000019541 prices for the SBI futures. There always exists an May- 243.1 impact of price tendencies on open interest and 20 agreements traded. The futures market is also prejudiced by cash market, NIFTY index future, and 17- 242 7774800010492 news related to the underlying asset or sector May- 242.7 (industry), FII’S involvement, national and 20 international affairs, etc. The closing price of SBI at the end of the convention period is Rs 266.95and 18- this is considered a settlement price””. May- 238.85 238.4 7599900012388 20 Table 2: Showing Mark to Market Profit & loss of SBI futures: www.ignited.in 19- Date Mark to market May- 244.45 244.6 7303200019429 20 Dr. Naveen Prasadula* 3

A Study on Profitable of Futures with the Reference to SBI Bank 2-May-20 0 The subsequent table elucidates the market price and 3-May-20 900 payments of calls. 4-May-20 50 5-May-20 4550 The leading column clarifies trading date,Subsequent 8-May-20 3550 column explains the SPOT market price in cash section 9-May-20 -2050 on that date.The third column enlightens call premiums 10-May-20 -50 amounting at these strike prices 260, 280,300 and 11-May-20 2400 320. The Mark to Market Can be Calculated as, 12-May-20 3250 15-May-20 -5600 Graph 3: presenting the price movements of SBI 16-May-20 -4900 Bank Spot & Futures 17-May-20 -400 18-May-20 -3850 (Current day Market Price – Previous day Market 19-May-20 5600 Price) * Lot size. 22-May-20 9450 23-May-20 9300 Interpretation: 24-May-20 5300 25-May-20 -1550 The forthcomingvalue of SBI is heartrendinglengthwise with the market value.“If the Graph 2: Showing Mark to Mark Profit & Loss of acquisition price of the future is less than the www.ignited.in SBI Bank Futures payment price, than the buyer of a future getsprofit.If the selling price of the future is less than the settlement price, than the seller incurslosses”. Findings: Based on findings, and following conclusions are drawn. 1. Researchers found that risk reduction via hedging strategies was effective.. Risk is not something that can avoid altogether. 2. As a result of the study, it established that a hedge provides a safe position on an underlying security. The loss gets shifted to the counterparty. Thus, the hedging covers the loss and trouble. Occasionally, the market portrays against the anticipation. This will trigger losses. So, the hedger should be a strategic and optimistic philosopher. 3. A hedger's ability to anticipate the price movement of the underlying security is critical to the outcome of the strategy applied Dr. Naveen Prasadula* 4

International Journal of Information Technology and Management Vol. 17, Issue No. 1, February-2022, ISSN 2249-4510 4. It encloses that all the approaches involved on investor should try to hedge his/her positions to historical data of the duration of the study were minimize losses rather anticipating huge profits. able to diminish the loss that grew from price risk Avoid taking positions in contact where liquidity is substantially. low. 5. If the vendor is unsure about the direction of the REFERENCES profits of the current position, he can make a counterpart in the future warranty and decrease the 1. Dr Naveen Prasadula, A Study of Derivatives level of risks. Market in India and its Current Position in Global Financial Derivatives Markets, IOSR Journal of 6. The trader can virtually use the method for rescue Economics and Finance Volume 3, Issue 3. (Mar- enhancement to deliver the correct market Apr. 2021), PP 25-42 anticipation. 7. In unrestricted, the uncertainty of the strategies 2. Greeshma Franc, A study on Emerging Trends in www.ignited.in purely for return enhancement is a risky matter Indian Derivative Market, International Research because, if the anticipation around the Journal of Engineering and Technology (IRJET) performance of the demand and the underlying Volume: 06 Issue: 04 | Apr 2019 goes inaccurate, the job taker will end up in higher losses. 3. Mohammed Rubani, A Study of Derivative Market in India, International Journal of Suggestions: Business Administration and Management. ISSN 2278-3660 Volume 7, Number 1 (2017). 1. Suppose an investor wants to hedge with portfolios. In that case, it must consist of scripts 4. A Vashishtha, S Kumar ,Development of from different industries since they are convenient financial derivatives market in India-a case and represent the true nature of the securities study market. , International Research Journal of Finance, 2. In hedge funds, the tool reduces the possibility of International Research Journal of Finance and losses arising from market risks. Its primary Economics, Volume 37, Issue 37,Pages 15-29 objective is loss minimization, not profit 5. K. Soniya, A Study on Financial Derivatives maximization. The losses from lots or claims will (Future & Options) with Special Reference to offset aThe profit from futures or shares. as a ICICI & SBI,International Journal of Commerce result, a & Business Studies Volume 1, Issue 2, October- December, 2013 3. Hedgers earn a lower rate of return compared to non-hedgers. But the non-hedger faces a high risk TEXT BOOKS than a hedger. 1. M.Y. Khan & P. K. Jain, “Financial 4. The hedger will have to be a strategic thinker and one who thinks positively. This individual must be Management”, Fourth edition, published by able to comprehend market conditions and TATA McGrawHILL. fluctuations. 2. I.M. Pandey,” Financial Management”, edition, 5. It is imperative to become aware of the stock market and investment patterns, both in the spot published by TATA McGraw HILL publishing and futures markets. The work of the BSE Training company. Institute and NSE Institutes is apprehensible. 3. Prof. Satish Inamdar,” Financial Management”, CONCLUSION by Symbiosis center for distance learning. Derivative trading provides a lot of opportunities in the market, but the investor should have a deep 4. Prasanna Chandra: financial management, insight into derivatives and the use of different product combinations. An investor should book profit published by Himalayapublications. than anticipate additionalearnings because, dissimilar equity markets, small price association in WEBSITES equity may show some adverse influence on the premium amount underneath Futures and options. 1. www.nseindia.com Short positions should be handled carefully because of unlimited loss liability with limited profits. An 2. www.bseindia.com 3. www.karvyonline.com Dr. Naveen Prasadula* 5

A Study on Profitable of Futures with the Reference to SBI Bank 4. Economictimes.indiatimes.org 5. www.moneycontrol.com Corresponding Author Dr. Naveen Prasadula* Assistant Professor, Department of Business Management Osmania University Hyderabad www.ignited.in Dr. Naveen Prasadula* 6