A STUDY ON HEDGING EFFECTIVENESS IN INDEX FUTURE
INDIAINFOLINE LTD, CHENNAI
MADHUSUDHANAN.J
This study finds out the effectiveness of
derivatives (index future) as a risk reduction to
the investors.
If one wants to hedge with portfolio, the portfolio
must consist of scrip from different sectors and
here index futures are better for hedging,
The hedger will have to be a strategic thinker and
also one who thinks positively.
Investment is the employment of funds with the
aim of earning additional income or capital
appreciation.
It has two attributes i.e., time and risk.
The capital market is basically divided into:
1. Primary market
2. Secondary market
Indian Stock Markets are one of the oldest in Asia.
In 1887, they formally established in Mumbai, the
“Native Share and Stock Broker’s Association”
(which is alternatively known as “The Stock
Exchange”).
It was founded in 2004 by Mr. Gajendra Nagpal
and Mr. Ram M. Gupta.
The company is headquartered in New Delhi,
Its corporate office in Mumbai with regional
offices in Kolkata, Chennai, Hyderabad and
Noida.
India Infoline Ltd and has a team of over 900
business offices in 235 cities across India.
India Infoline Ltd Group is With a customer base
of over 200,000.
They provide services ranging from offline &
online trading in equity, commodities and
currency derivatives to debt markets to corporate
finance and portfolio management services.
PRIMARY OBJECTIVE:
To find out the effectiveness of index futures as a Hedging
instrument.
SECONDARY OBJECTIVE:
To study about the impact of hedging in the derivative market.
To know about the emphasis of hedging in the future trading.
To analyze the effectiveness of hedging to reduce the risk.
To visualize about the Derivative market.
Research methodology is a way to systematically
solve the research problem.
Aims and objectives of the study are, Research
hypothesis, Research design, Sampling design,
pilot study, method for data collection, operation
definition statistical Analysis, limitation of the
study and chapterisation.
Beta value analysis
Index future analysis
Beta value analysis & Index future analysis
In case of hedged position the investor was able to
make a profit in Descriptive hedging and reduce loss
in All Time Hedging.
Though hedging minimizes risk, it is not possible
always. If the index moves up from the day of
hedging, then it can be loss.
Higher the beta value higher will be the risk.
The time of applying these strategies has an important
role in determining the effectiveness of hedging.
If one wants to hedge with portfolio, the
portfolio must consist of scrip’s from different
sectors and here index futures are better for
hedging.
Hedging is actually a tool to reduce the losses
that may arise from the market risk.
The hedger will have to be a strategic thinker
and also one who thinks positively.
The beta value for risk assessment is not precisely
correct as it changes from time to time.
The duration of the study was limited which can be
extended for accuracy.
The study is depending mostly on the web
information.
Brokerages are not taken into consideration.
The study was limited only to INDIA INFOLINE
LTD, Chennai.
Hedging does not remove losses. The best that
can be achieved using hedging is the removal of
unwanted exposure (i.e. Unnecessary Risk).
The hedged position will make less profit than
the un-hedged position.
One should not enter into a hedging strategy
hoping to make excess profits. All that come out
of hedging is to reduce risk.