chandan sharma project11.docx
TRANSCRIPT
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A PROJECT REPORT ON
“A STUDY ON FOREIGN EXCHANGE RISK MANAGEMENT BY
EXPORT SMEs OF BENGALURU ’’
SUBMITTED BY
CHANDAN SHARMA D
1MS14MBA20
Under the guidance and supervisin !"
INTERNA# $UIDE E%TERNA# $UIDE
Dr. Y.M S!"s# SHANKAR RA$A M P
Pr!essr Regina& 'ead ()arnata*a+
Depart,ent ! Manage,ent Studies Shiva-inagar+
MSRIT+ Banga&re . /011/2 Banga&re(/011/3
Su4,itted in the partia& !u&!i&,ent !r the a5ard !
Ms!%r &' B(s")%ss *+")"s!r!"&)
M.S.RAMAIAH INSTITUTE OF TECHNOLOGY
6Autn,us Institute+ A!!i&iated t 7TU+ Be&gau,8
ISO" 911: Certi!ied
;7idS>R>I>T POST+ Banga&re( /011/2
2014,1-
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CERTIFICATE
This is t certi!< that the pr-ect 5r* entit&ed “A STUDY ON FOREIGN
EXCHANGE RISK MANAGEMENT BY EXPORT SMEs OF
BENGALURU is a 4na!ide 5r* carried ut 4< CHANDAN SHARMA D
/1MS14MBA20 in a partia& !u&!i&,ent !r the a5ard ! the degree ! Master !
Business Ad,inistratin ! 7isvesvara
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CERTIFICATE BY THE GUIDE
This is t certi!< that the pr-ect n “A STUDY ON FOREIGN EXCHANGE
RISK MANAGEMENT BY EXPORT SMEs OF BENGALURU+
su4,itted in partia& !u&!i&,ent ! the curricu&u, re?uire,ent ! Ms!%r &'
B(s")%ss A*+")"s!r!"&) curse a!!i&iated t "s%sr9 T%:#)&3&7":3
U)"%rs"!9 is recrd ! rigina& 5r* carried ut 4< CHANDAN SHARMA D
/1MS14MBA20 under ,< supervisin and guidance> This has nt 4een
su4,itted !r the a5ard ! an< degree@dip&,a 4< 7isvesvara
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DECLARATION
I+ CHANDAN SHARMA D+ 4earing USN N" /1MS14MBA20 student !
MSRIT C&&ege+ Banga&re here4< dec&are that the pr-ect tit&ed “A STUDY
ON FOREIGN EXCHANGE RISK MANAGEMENT BY EXPORT SMEs
OF BENGALURU is su4,itted 4< ,e !r the partia& !u&!i&,ent ! a5ard !
Ms!%rs &' B(s")%ss A*+")"s!r!"&)> This reprt 5as prepared n ,< 5n
e!!rts and it has nt 4een prduced ear&ier t5ards the a5ard ! an< ther
degree>
Date"
C'ANDAN S'ARMA D
P&ace" Banga&re /CHANDAN SHARMA D
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ACKNO;LEDGEMENT
The success!u& c,p&etin ! an< tas* 5u&d 4e inc,p&ete 5ithut
,entining the pep&e 5h ,ade it pssi4&e and 5hse cnstant guidance and
encurage,ent secured us ur success>
I a, inde4ted t Dr. Y.M S!"s# 6 Pr!essr+ MSRIT8 !r his per!ect guidance in
ever< step ! ,< pr-ect+ 5hich has a&5a I etend ,< sincere than*s !r her cnstant supprt and guidance>
I 5u&d &i*e t epress ,< sincere heart !i&&ed than*s t
SHANKAR RA$A M P+ Assistant 7ice President+ !r his perseverance and
eagerness t he&p ,e in a&& pssi4&e 5a
CHANDAN SHARMA D
1MS14MBA20
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Contents
1. EXECUTIE SUMMARY................................................................................12. INTRODUCTION..........................................................................................3 NATURE O T'E BUSINESS CARRIED..................................................................................32
C. VISION, MISSION AND QUALITY POLICY............................................................................33
D. PRODUCT / SERVICE PROFILE.......................................................................................33
E> AREA O OPERATION . $#OBA#@NATIONA#@R E$IONA#..........................................................36
> OFNERS'IP PATTERN...................................................................................................36
G. COMPETITORS INFORMATION.........................................................................................37
H. INFRASTRUCTURAL FACILITIES........................................................................................38
I. ACHIEVEMENT AWARDS................................................................................................39
J. WORKFLOW MODEL (END TO END)..................................................................................40
5. MCKINSEY’S SEVEN S MODEL......................................................................41 A. STRUCTURE..............................................................................................................41
B. SKILL.......................................................................................................................42
C. STYLE......................................................................................................................42
D. STRATEGY................................................................................................................42
E. SYSTEM...................................................................................................................43
F. STAFF......................................................................................................................44
G. SHARED V ALUE..........................................................................................................44
6. RESEARCH METHODOLOY........................................................................47 A. TITLE OF THE PROJECT................................................................................................47
B. STATEMENT OF THE PROBLEM........................................................................................47
C. OBJECTIVES..............................................................................................................48
D. OPERATIONAL DEFINITIONS...........................................................................................49E. D ATA COLLECTION......................................................................................................52
F. STATISTICAL TOOLS USED FOR RESEARCH........................................................................52
G. PLAN OF ANALYSIS......................................................................................................54
H. LIMITATIONS TO THE STUDY...........................................................................................54
!. DATA ANALYSIS AND IMPLEMENTATION..........................................................54". SUMMARY OF FINDINS..............................................................................60#. SUESTIONS.........................................................................................61$%. CONCLUSIONS & FUTURE RO'TH...............................................................62
A. QUESTIONNAIRES.......................................................................................................62
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LIST OF TABLES
T=3% N& Pr!":(3rs P7% N&
1 #ist ! Stc* Echanges 4< Mar*et Capita&iatin
2 Sh5ing Tp Traded C,,dities
<Vital Data of Anand Rathi
4 Indian Presence ! Anand Rathi
> #ist ! Prducts and Services !!ered 4< Anand Rathi
- C&assi!
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LIST OF CHARTS
S.N& Pr!":(3rs P7%
N&
1 Prducts !!ered 4< Stc* Br*ing C,panies
2 Sh5ing #arge Capita&iatin Stc*s ! Indian C,panies
< Sh5ing Mediu, Capita&iatin Stc*s ! Indian C,panies
4 Sh5ing S,a&& Capita&iatin Stc*s ! Indian C,panies
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1. E5%:(!"% S(++r9
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
inance is strict&< stud< ! h5 individua&s prtin their assets ver the a,unt
! Regu&atrs had at !irst s&e&<
per,itted certain 4an*s t dea& in this ,ar*et 4ut n5 even crprate a&s can
5rite ptin cntracts>r n5+ Indian Industries are active&< hedging their !reign echanges ris*s
5ith !r5ards+ currenc< and rate ! interest s5aps and di!!erent t The high use ! !r5ard
cntracts 4< indian crpratins a&s high&ights the a4sence ! a rupee !utures
echange in India> '5ever+ the ur4an center $&d and C,,dities Echange
in June+ :11G intrduced Rupee( d&&ar !utures that 5u&d 4e traded n its
echanges !&&5ed 4< Rupee(EURO+ Rupee(YEN and had prvided anther
rute !r !ir,s t hedge n a transparent 4asis> There are !ears that RBIs a4i&it<
t regu&ate the partia&&< cnverti4&e currenc< are su4dued 4< this intrductinh5ever this issue is n the !ar side the scpe ! this stud
This stud< is ,ain&< is principa&&< 4ased n stud< ! 4ehaviur and attitude !
hand(pic*ed s,a&& sca&e trade 5h are int I,prt and eprt ! prducts and
their ,anner ! uti&iatin ! !reign echange hedging techni?ue especia&&<
their dependenc< n currenc< derivative !r ris* ,itigatin purpse
The &i,itatin ! this stud< is that -ust ne srt ! ris* is assu,ed i>e the
interchange ris*> Cn-int&< re&evanc< ! cnc&usin is &i,ited as s&e&< ver<
!e5 c,panies 5ere revie5ed ver -ust ne perid ! ti,e> 4ut the resu&ts !r,
P$&e
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
this ep&ratr< stud< are encuraging and attentin(gra44ing+ &eading us t
cnc&ude that theres scpe !r a &t ! rigrus stud< n these &ines>
P$&e 0
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
2. I)!r&*(:!"&)
Fhat is ris* ,anage,entK
McNa,ee 6399G8 prvides a use!u& vie5 ! ris* ,anage,ent and prpses that
ris* is never ,anaged since it is a cnceptua& prpert It is the rganiatin that
is ,anaged t anticipate the uncertainties characterised 4< ris*> 'e a&s 5rites"
Managing ris* is actua&&< ,anaging the rganiatin" p&anning+ rganiing+
directing+ and cntr&&ing rganiatin s Managing ris* ,ust c,e !r, 5ithin and act t change the
rganiatin and its respnse t change in envirn,ent> Rather than tr< t guess
5hat ris*s 5i&& a!!ect the rganiatin+ the rganiatin shu&d 4ui&d in certain
characteristic t i,prve its a4i&it< t respnd t change>
'5ever+ it is ,re c,,n t vie5 ris* ,anage,ent as the prcess !
deter,ining 5hether r h5 ,uch ! the ris* is accepta4&e and 5hat actinshu&d 4e ta*en 6McNa,ee+ 399G8> Accrding&
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
assess,ent and ris* treat,ent> Ptentia& treat,ents are ris* diversi!icatin r
avidance+ ris* sharing and cntingenc< p&anning 6McNa,ee+ 399G8>
igure 4e&5 presents a !ra,e5r* !r integrated ris*(,anage,ent+ 5hich is
adapted !r, McNa,ees 6399G8 ntin that the ris* ,anage,ent prcess
inc&udes three ,a-r steps" 638 esta4&ishing !ir,s 4-ectives+ 6:8 ris* assess,ent
and 6L8 ris* treat,ent> This prcess is regu&ar&< in!&uenced 4< ris*
c,,unicatin 4et5een eperts+ !r, eperts t ,anage,ent tea,s+ and !r,
,anage,ent tea,s t the pu4&ic in the 5h&e prcess ! ris* ana& A nu,4er
! tet 4*s re&ating t ris* ,anage,ent !&&5 this !ra,e5r* and suggest a
prcess ! ris* ,anage,ent+ !r ea,p&e C> M> E&&itt and 7aughan 639G:8+
7aughan and 7aughan 6:11G8+ Shapir 6:1108> As the !irst step in the ris*(
,anage,ent prcess+ a !ir, 5u&d deter,ine 4-ectives 4< deciding precise&<
5hat is t 4e epected !r, its ris*(,anage,ent prgra,,e> It is c,,n t 4e a5are ! ris*s 4e!re an A nu,4er ! t&s can 4e used
t identi!< ris*s+ inc&uding insurance p&ic< chec*&ists+ ris* ana& Based n this eva&uatin+ ran*ing ! pririties is !&&5ed+ *n5n as ris*
priritiatin> The net step is the cnsideratin ! a&ternative techni?ues and
se&ectin ! ris* treat,ent> Ris* characteristics are cnsidered as deter,inants
! the treat,ent+ such as 5hether a ris* is t 4e trans!erred r t 4e retained>
igure :(3" Ris* Manage,ent Prcess+ adapted !r, McNa,ee 6399G8
Si,i&ar& GL38
P$&e 2
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
Thus a !ir,s !inancia& ris* ,anager+ 5h is part ! a ris*(,anage,ent
depart,ent r grup+ is !irst&< atte,pting t assess and ,easure the ris*s !acing
the !ir, as a resu&t ! its activities and the 4usiness envirn,ent then t
,nitr the ris*s !r an< change t deter,ine 5hether the !ir, has the
resurces t dea& 5ith the ris*s t a&ert senir ,anagers and 4ards ! directrsa4ut the ris* in!r,atin and !ina&&< t suggest curses ! actin !r the !ir,
t ta*e t dea& 5ith the ris*s 6inger+ 39998> As discussed ear&ier+ !re ris* is
categrised as ne ! the ris*s !aced 4< !ir,s thus it is reasna4&e t adapt this
ris*(,anage,ent !ra,e5r* !r !re ris*(,anage,ent> Ris* c,,unicatin
its activities and the 4usiness envirn,ent then t ,nitr the ris*s !r an<
change t deter,ine 5hether the !ir, has the resurces t dea& 5ith the ris*s
t a&ert senir ,anagers and 4ards ! directrs a4ut the ris* in!r,atin and
!ina&&< t suggest curses ! actin !r the !ir, t ta*e t dea& 5ith the ris*s
6inger+ 39998> As discussed ear&ier+ !re ris* is categrised as ne ! the ris*s
!aced 4< !ir,s thus it is reasna4&e t adapt this ris*(,anage,ent !ra,e5r*
!r !re ris*(,anage,ent>
SMEs+ si,i&ar t &arge !ir,s+ a&s !ace 4usiness ris*s+ 5hich can cause !inancia&
distress and 4an*ruptc< in the 5rst case 6Tan+ :1328> '5ever+ the the,e !
ris* ,anage,ent !r SMEs has &arge&< 4een neg&ected in the 4usiness
,anage,ent &iterature 6$a+ Sung+ hang+ :13L 'ensche&+ :119 Shari!i+
:132 Tan+ :1328> The etant &iterature n SMEs ris* ,anage,ent sh5s that
SMEs are incapa4&e ! e,p&
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
In India+ echange rates 5ere deregu&ated and 5ere a&&5ed t 4e deter,ined
4< ,ar*ets in 399L> The ecn,ic &i4era&iatin ! the ear&< nineties
!aci&itated the intrductin ! derivatives 4ased n interest rates and !reign
echange> '5ever derivative use is sti&& a high&< regu&ated area due t the
partia& cnverti4i&it< ! the rupee> Current&< !r5ards+ s5aps and ptins areavai&a4&e in India and the use ! !reign currenc< derivatives is per,itted !r
hedging purpses n&
This stud< ai,s t prvide a perspective n ,anaging the ris* that !ir,s
!ace due t !&uctuating echange rates> It investigates the prudence in
investing resurces t5ards the purpse ! hedging and then intrduces the
t&s !r ris* ,anage,ent> These are then app&ied in the Indian cntet> The
,tivatin ! this stud< ca,e !r, the recent rise in v&ati&it< in the ,ne<
,ar*ets ! the 5r&d and particu&ar&< in the US D&&ar+ due t 5hich Indianeprts are !ast gaining a cst disadvantage> 'edging 5ith derivative
instru,ents is a !easi4&e s&utin t this situatin>
M)7%+%)! &' '&r%5 r"s6
The prcess ! !re ris* ,anage,ent+ 5hich is adapted !r, the prcess !
,anaging ris* 6sh5n in igure :(38+ inc&udes three ,a-r steps> irst&g>+ ,itigating
certain !re ris* epsure+ r reducing the v&ati&it< ! cash !&5s>
Secnd&
T& #%*7% &r )&! !& #%*7%6
The ter, hedging is de!ined di!!erent&< in the &iterature> Brad& 3218 h&ds that hedgers are thse 5h see* insurance against the
ris* the< ,a< !ace> T ana& L998 cnsider hedging as ;the ac?uisitin ! !inancia& assets
that reduce the variance ! the !ir,s pa #e&ands cncept is 5ide&<
used in the &iterature cncerning !re ,anage,ent> 'edging can 4e carried
ut interna&& On the ther hand+
eterna& hedging entai&s the ac?uisitin ! !inancia& instru,ents+ e>g>+
currenc< derivatives+ 5hich are !inancia& instru,ents 5hse characteristics
and va&ue depend upn the characteristics and va&ue ! a currenc
P$&e 4
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
Cnsidering that ris* ,anage,ent is a4ut ;p&anning+ rganiing+ directing+
and cntr&&ing rganiatin s 28+ ,anaging !re ris* re!ers t p&anning+ rganiing+
directing+ and cntr&&ing a !ir,s s A&thugh hedging ai,s t see*insurance !r !re ris*+ hedging is ne 5a< ! ,anaging !re ris*+ the
ther 5a< is t d nthing> A decisin 5hether t hedge r nt t hedge is
ne step in the prcess ! ,anaging !re ris*> T this end+ ;ding nthing=
6n(hedge8 is ne ! the hedging strategies> It ,ight nt necessar< t hedge i!
SMEs cu&d !ind 4ene!its !r, !avura4&e ,ve,ents in the echange rates+
r i! there ,ight 4e n 5a< the< ,a*e a &ss>
Fhi&e s,e the,es !r, the &iterature ppse hedging at a crprate &eve&+
thers supprt crprate !re hedging strategies> r ea,p&e+ Du!e< Srinivasu&u 639L8 ,ade a case !r crprate !re ris* hedging> The< pint
ut that in a per!ect 5r&d in 5hich Purchasing P5er Parit< 6PPP8 there,+
Capita& Asset Pricing Mde& 6CAPM8+ Mdig&iani(Mi&&er 6MM8 there,+ the
Cncept ! Se&!(insurance+ the E!!icient Mar*et '
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
prgra,,e 6Pra,4rg+ :11/8> T this end+ due t high cst ! esta4&ishing a
hedging prgra,,e+ and &5 ,agnitude ! internatina& inv&ve,ent !
SMEs in c,parisn 5ith &arge MNEs+ SMEs ,ight chse nt t hedge
h5ever+ nce SMEs have a high percentage ! their turnver den,inated
in a !reign currenc
H%*7")7 s!r!%7"%s6
There are a nu,4er ! hedging strategies nted in the &iterature cncerning
!re ris* ,anage,ent h5ever+ ,st hedging strategies re!er t the use !
currenc< derivatives as hedging instru,ents> r instance+ !ir,s under a n
hedge strateg< never purchase a !r5ard !reign echange cntract t cver
echange rate ris*> An a&ternative strateg< is a&5a #arge pre,ia strateg< is re!erred t
as hedging 5hen !r5ard rates are at a histrica&&< &arge pre,iu,> This
happens i! spt echange rates and !uture@!r5ard echange rates are ?uite
di!!erent+ 5hen !r5ard echange rates and spt echange rates ,ve apart>
On a re&ative purchasing p5er parit< 6ppp8 echange rate+ !ir,s 5i&& hedge
5henever the current spt rate is a4ve the ppp e?ui&i4riu,+ 5hich is
re!erred t as ppp d5n strateg Under a hedge(n(hedge strateg
A&& ! these hedging strategies 6su,,aried in Ea*er $rant+ 39G Msa+
:112 Mre< Si,psn+ :1138 are 4ased n the use ! currenc< derivatives>
The e!!ectiveness ! these strategies is etensive&< cvered in the &iterature>
r ea,p&e+ e,pirica& data !r, Msa 6:1128 stud< sh5 n signi!icant
di!!erence in the per!r,ance ! the three strategies+ na,e&< n hedge+
a&5a This resu&t i,p&ies that !re?uent !re epsure is
nt necessari&< hedged 4ecause the un4iased e!!icienc< h Accrding t this h Mrever+ un4iasedness a&s i,p&ies that in the &ng
run+ negative errrs 5u&d cance& ut psitive errrs+ since the esti,atin
errr is rand, rather than s
'5ever+ Mre< Si,psn 6:1138 !ind that in ever< ti,e hrin+ and !r
ever< sa,p&e ! their stud
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
Additina&& This resu&t is cnsistent 5ith &gica&
predictins a4ut the re&atinship 4et5een currencies> In ther 5rds+ the
true crre&atin 4et5een assets and currencies is ne ! the deter,inants !the ,easured e!!ectiveness ! crss hedging 6Ea*er $rant+ 39G+ p> G8>
As a resu&t+ ,u&tip&e hedges+ 5hich partia&&< ,itigate pr4&e,s ! inter(
te,pra& insta4i&it< ! the echange rate ce!!icients+ are ,re e!!ective than
sing&e currenc< crss(hedges> Ea*er and $rant a&s add that the e!!ectiveness
! naive hedging strategies and ,re sphisticated nes is the sa,e 5hen
prt!&i psitins are 4eing hedged>
There are t5 initia& inputs necessar< !r an< hedging strateg These prvide
in!r,atin !r the assess,ent ! ris*s in re&atin t echange rate
,ve,ents> '5ever+ nt a&& !ir,s have this capa4i&it ir,s are un&i*e&< t *n5 h5 t ?uanti!< their ris*
pr!i&e as the< are una4&e t !igure ut the percentage that their perating
cash !&5s change i! the !re rates change 6#derer Pich&er+ :1118>
Si,i&ar& It is the c,p&eities t
,easure accurate&< current ris* epsure that presents a cha&&enge !r !ir,sin se&ecting the apprpriate hedging strateg< 6Papaiannu+ :1108> A&s+
dai&< echange rates are etre,e&< di!!icu&t t precise&< !recast 6hu+
399:8> In the &ight ! a&& ! these resu&ts+ SMEs ,ight !ind di!!icu&ties in
accessing these t5 *e< initia& inputs !r their !re ris* ,anage,ent>
H%*7")7 s !&&3 !& +)7% '&r%"7) %5:#)7% r"s
There is a spectru, ! pinins regarding !reign echange hedging> S,e
!ir,s !ee& hedging techni?ues are specu&ative r d nt !a&& in their area !
epertise and hence d nt venture int hedging practices> Other !ir,s are
una5are ! 4eing epsed t !reign echange ris*s> There are a set ! !ir,s
5h n&< hedge s,e ! their ris*s+ 5hi&e thers are a5are ! the varius
ris*s the< !ace+ 4ut are una5are ! the ,ethds t guard the !ir, against the
ris*> There is 6$idd< and Du!e
There are s,e ep&anatins 4ac*ed 4< ther< a4ut the irre&evance !,anaging the ris* ! change in echange rates> r ea,p&e+ the
P$&e 7
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
Internatina& isher e!!ect states that echange rates changes are 4a&anced
ut 4< interest rate changes+ the Purchasing P5er Parit< ther< suggests
that echange rate changes 5i&& 4e !!set 4< changes in re&ative price
indices@in!&atin since the #a5 ! One Price shu&d h&d> Bth these theries
suggest that echange rate changes are evened ut in s,e !r, r the ther>A&s+ the Un4iased r5ard Rate ther< suggests that &c*ing in the !r5ard
echange rate !!ers the sa,e epected return and is an un4iased indicatr !
the !uture spt rate> But these theries are per!ect&< p&a A&s+ echange rate(&in*ed
changes in !actrs &i*e in!&atin and interest rates ta*e ti,e t ad-ust and in
the ,ean5hi&e !ir,s stand t &se ut n adverse ,ve,ents in the echange
rates>
The eistence ! di!!erent *inds ! ,ar*et i,per!ectins+ such as inc,p&ete
!inancia& ,ar*ets+ psitive transactin and in!r,atin csts+ pr4a4i&it< !
!inancia& distress+ and agenc< csts and restrictins n !ree trade ,a*e
!reign echange ,anage,ent an apprpriate cncern !r crprate
,anage,ent> 6$idd< and Du!e This
5u&d negate the Mdig&iani(Mi&&er prpsitin as shareh&ders cannt
dup&icate such ta advantages> The MM argu,ent that shareh&ders can
hedge n their 5n is a&s nt va&id n accunt ! high transactin csts and&ac* ! *n5&edge a4ut !inancia& ,anipu&atins n the part ! shareh&ders>
There is a&s a vast p& ! research that prves the e!!icac< ! ,anaging
!reign echange ris*s and a signi!icant a,unt ! evidence sh5ing the
reductin ! epsure 5ith the use ! t&s !r ,anaging these epsures> In
ne ! the ,re recent studies+ A&&a
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Once a !ir, recgnies its epsure+ it then has t dep&< resurces in
,anaging it> A heuristic !r !ir,s t ,anage this ris* e!!ective&< is presented
4e&5 5hich can 4e ,di!ied t suit !ir,(speci!ic needs i>e> s,e r a&& the
!&&5ing t&s cu&d 4e used>
F&r%:s!s6 A!ter deter,ining its epsure+ the !irst step !r a !ir, is t
deve&p a !recast n the ,ar*et trends and 5hat the ,ain directin@trend is
ging t 4e n the !reign echange rates> The perid !r !recasts is
t It is i,prtant t 4ase the !recasts n va&id assu,ptins>
A&ng 5ith identi!
R"s Es!"+!"&)6 Based n the !recast+ a ,easure ! the 7a&ue at Ris* 6the
actua& pr!it r &ss !r a ,ve in rates accrding t the !recast8 and the
pr4a4i&it< ! this ris* shu&d 4e ascertained> The ris* that a transactin
5u&d !ai& due t ,ar*et(speci!ic pr4&e,s2 shu&d 4e ta*en int accunt>
ina&& 'edging strategies
and instru,ents are ep&red in a sectin>
S!& L&ss6 The !ir,s ris* ,anage,ent decisins are 4ased n !recasts 5hich
are 4ut esti,ates ! reasna4&< unpredicta4&e trends> It is i,perative t have
stp &ss arrange,ents in rder t rescue the !ir, i! the !recasts turn ut
5rng> r this+ there shu&d 4e certain ,nitring s
R%&r!")7 )* R%"%86 Ris* ,anage,ent p&icies are t The reprts ,ain&< inc&ude pr!it@ &ssstatus n pen cntracts a!ter ,ar*ing t ,ar*et+ the actua& echange@ interest
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rate achieved n each epsure+ and pr!ita4i&it< vis((vis the 4ench,ar* and
the epected changes in vera&& epsure due t !recasted echange@ interest
rate ,ve,ents> The revie5 ana&
igure :(: ra,e5r* ! !reign echange ris* ,anage,ent
H%*7")7 S!r!%7"%s I)s!r(+%)!s
Basica&& A 5ide range ! hedging techni?ues is &isted in
Ta4&e :>:> Accrding t Mathur 639/8+ interna& hedging re!ers pri,ari&< t the shi!ting !
!unds and c,,dities 5ithin a !ir, s as t ,aintain !avura4&e 4a&ance sheet psitins
n the ther hand+ eterna& hedging genera&&< inv&ves cntractua& 4&igatins 5ith parties
eterna& t the !ir,> Si,i&ar&+ !unds+ gds 5ithin the !ir,> Bth
eterna& and interna& hedging can 4e used t i,prve the !ir,s a4i&it< t respnd t !re
rate changes>
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
T=3% 6 H%*7")7 !%:#)"(%s C!%7&r9 T%:#)"(%s
I)!%r)3
1. Pr":")7.
There are three ptins !r currenc< invicing"
Q d,estic currenc< ! the cuntr< 5here !ir,s are 4ased>
Q the currenc< in 5hich the ,a-rit< ! the csts are incurred>
Q the d,estic currenc< ! the ,ain c,petitrs in rder t e&i,inate the e!!ect !
echange rate variatins n c,parative prices>
:> Matching in!&5s and ut!&5s 5ith respect t ti,ing ! sett&e,ent>
L> Inter(c,pan< netting ! !reign receiva4&es and pa Asset@&ia4i&it< ,anage,ent
/> Trans!er pricing agree,ents
E5!%r)3
0> #eading and &agging
G> Ad-ust,ent c&ause in sa&es cntracts
> Crss hedging 5ith !utures> 9> Crss(currenc< interest rate s5aps
31> reign currenc< s5aps
33> r5ard echange cntracts
3:> re ptins
3L> re !utures
32> reign currenc< 4rr5ing and &ending
3/> actring 4i&&s receiva4&e
30> Eurpean currenc< unit
3G> Specia& dra5ing rights
3> Other currenc< 4&cs
39> $vern,ent echange ris* guarantee
:1> Insurance p&icies
A derivative is a !inancia& cntract 5hse va&ue is derived !r, the va&ue ! s,e ther!inancia& asset+ such as a stc* price+ a c,,dit< price+ an echange rate+ an interest
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
rate+ r even an inde ! prices> The ,ain r&e ! derivatives is that the< rea&&cate ris*
a,ng !inancia& ,ar*et participants+ he&p t ,a*e !inancia& ,ar*ets ,re c,p&ete> This
sectin ut&ines the hedging strategies using derivatives 5ith !reign echange 4eing the
n&< ris* assu,ed>
F&r8r*s6 A !r5ard is a ,ade(t(,easure agree,ent 4et5een t5 parties t 4u The
depreciatin ! the receiva4&e currenc< is hedged against 4< se&&ing a currenc< !r5ard> I!
the ris* is that ! a currenc< appreciatin 6i! the !ir, has t 4u< that currenc< in !uture sa<
!r i,prt8+ it can hedge 4< 4u E>g i! RI# 5ants t 4u< crude
i& in US d&&ars si ,nths hence+ it can enter int a !r5ard cntract t pa< INR and
4u< USD and &c* in a !ied echange rate !r INR(USD t 4e paid a!ter 0 ,nths
regard&ess ! the actua& INR(D&&ar rate at the ti,e> In this ea,p&e the d5nside is an
appreciatin ! D&&ar 5hich is prtected 4< a !ied !r5ard cntract> The ,ain
advantage ! a !r5ard is that it can 4e tai&red t the speci!ic needs ! the !ir, and an
eact hedge can 4e 4tained> On the d5nside+ these cntracts are nt ,ar*eta4&e+ the<
cant 4e s&d t anther part< 5hen the< are n &nger re?uired and are 4inding>
F(!(r%s6 A !utures cntract is si,i&ar t the !r5ard cntract 4ut is ,re &i?uid 4ecause it
is traded in an rganied echange i>e> the !utures ,ar*et> Depreciatin ! a currenc< can
4e hedged 4< se&&ing !utures and appreciatin can 4e hedged 4< 4u
Advantages ! !utures are that there is a centra& ,ar*et !r !utures 5hich e&i,inates the
pr4&e, ! du4&e cincidence> utures re?uire a s,a&& initia& ut&a< 6a prprtin ! the
va&ue ! the !uture8 5ith 5hich signi!icant a,unts ! ,ne< can 4e gained r &st 5iththe actua& !r5ards price !&uctuatins> This prvides a srt ! &everage> The previus
ea,p&e !r a !r5ard cntract !r RI# app&ies here a&s -ust that RI# 5i&& have t g t a
USD !utures echange t purchase standardised d&&ar !utures e?ua& t the a,unt t 4e
hedged as the ris* is that ! appreciatin ! the d&&ar> As ,entined ear&ier+ the
tai&ra4i&it< ! the !utures cntract is &i,ited i>e> n&< standard den,inatins ! ,ne<
can 4e 4ught instead ! the eact a,unts that are 4ught in !r5ard cntracts>
O!"&)s6 A currenc< Optin is a cntract giving the right+ nt the 4&igatin+ t 4u< r
se&& a speci!ic ?uantit< ! ne !reign currenc< in echange !r anther at a !ied price
ca&&ed the Eercise Price r Stri*e Price> The !ied nature ! the eercise price reduces the
uncertaint< ! echange rate changes and &i,its the &sses ! pen currenc< psitins>
Optins are particu&ar&< suited as a hedging t& !r cntingent cash !&5s+ as is the case
in 4idding prcesses> Ca&& Optins are used i! the ris* is an up5ard trend in price 6! the
currenc Again ta*ing the
ea,p&e ! RI# 5hich needs t purchase crude i& in USD in 0 ,nths+ i! RI# 4ue> the right t 4u< a speci!ied
a,unt ! d&&ars at a !ied rate n a speci!ied date+ there are t5 scenaris> I! the
echange rate ,ve,ent is !avura4&e i>e the d&&ar depreciates+ then RI# can 4u< the,at the spt rate as the< have 4ec,e cheaper> In the ther case+ i! the d&&ar appreciates
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
c,pared t tda In either case RI# 4ene!its 4< pa The c,pan< pa11 p>a> ever< 0 ,nths n 3st Januar< 3st Ju&
F&r%"7) D%=!" reign de4t can 4e used t hedge !reign echange epsure 4< ta*ing
advantage ! the Internatina& ischer E!!ect re&atinship> This is de,nstrated 5ith the
ea,p&e ! an eprter 5h has t receive a !ied a,unt ! d&&ars in a !e5 ,nths
!r, present> The eprter stands t &se i! the d,estic currenc< appreciates against that
currenc< in the ,ean5hi&e s+ t hedge this+ he cu&d ta*e a &an in the !reign currenc<!r the sa,e ti,e perid and cnvert the sa,e int d,estic currenc< at the current
echange rate> The ther< assures that the gain rea&ised 4< investing the prceeds !r,
the &an 5u&d ,atch the interest rate pa
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
varius ,ar*et !actrs> Regu&atin in the !reign echange ,ar*ets ! varius cuntries
,a< a&s s*e5 such resu&ts>
D%!%r+"))!s &' H%*7")7 D%:"s"&)s
The ,anage,ent ! !reign echange ris*+ as has 4een esta4&ished s !ar+ is a !air&<c,p&icated prcess> A !ir,+ epsed t !reign echange ris*+ needs t !r,u&ate a
strateg< t ,anage it+ chsing !r, ,u&tip&e a&ternatives> This sectin ep&res 5hat
!actrs !ir,s ta*e int cnsideratin 5hen !r,u&ating these strategies>
Pr&*(:!"&) )* Tr*% s. H%*7")7 D%:"s"&)s
An i,prtant issue !r ,u&tinatina& !ir,s is the a&&catin ! capita& a,ng di!!erent
cuntries prductin and sa&es and at the sa,e ti,e hedging their epsure t the var Research in this area suggests that the e&e,ents ! echange rate
uncertaint< and the attitude t5ard ris* are irre&evant t the ,u&tinatina& !ir,s sa&es and prductin decisins 6Br&&+399L8> On&< the revenue !unctin and cst ! prductin are
t 4e assessed+ and+ the prductin and trade decisins in ,u&tip&e cuntries are
independent ! the hedging decisin>
The i,p&icatin ! this independence is that the presence ! ,ar*ets !r hedging
instru,ents great&< reduces the c,p&eit< inv&ved in a !ir,s decisin ,a*ing as it can
separate prductin and sa&es !unctins !r, the !inance !unctin> The !ir, avids the
need t !r, epectatins a4ut !uture echange rates and !r,u&atin ! ris* pre!erences
5hich entai&s high in!r,atin csts>
C&s! &' H%*7")7
'edging can 4e dne thrugh the derivatives ,ar*et r thrugh ,ne< ,ar*ets 6!reign
de4t8> In either case the cst ! hedging shu&d 4e the di!!erence 4et5een va&ue received
!r, a hedged psitin and the va&ue received i! the !ir, did nt hedge> In the presence !
e!!icient ,ar*ets+ the cst ! hedging in the !r5ard ,ar*et is the di!!erence 4et5een the
!uture spt rate and current !r5ard rate p&us an< transactins cst assciated 5ith the
!r5ard cntract> Si,i&ar& In e!!icient ,ar*ets+
4th t
The three ,ain e&e,ents ! these transactin csts are 4r*erage r service !ees charged
4< dea&ers+ in!r,atin csts such as su4scriptin t Reuter reprts and ne5s channe&s
and ad,inistrative csts ! epsure ,anage,ent>
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
F:!&rs ''%:!")7 !#% *%:"s"&) !& #%*7% '&r%"7) :(rr%):9 r"s
Research in the area ! deter,inants ! hedging separates the decisin ! a !ir, t hedge
!r, that ! h5 ,uch t hedge> There is cnc&usive evidence t suggest that !ir,s 5ith
&arger sie+ RD ependiture and epsure t echange rates thrugh !reign sa&es and
!reign trade are ,re &i*e&< t use derivatives> 6A&&a
F"r+ s"%" ir, sie acts as a pr< !r the cst ! hedging r ecn,ies ! sca&e> Ris*
,anage,ent inv&ves !ied csts ! setting up ! c,puter s Mrever+ &arge !ir,s ,ight 4e cnsidered
as ,re credit5rth< cunterparties !r !r5ard r s5ap transactins+ thus !urther
reducing their cst ! hedging> The 4* va&ue ! assets is used as a ,easure ! !ir, sie>
L%%r7%6 Accrding t the ris* ,anage,ent &iterature+ !ir,s 5ith high &everage have
greater incentive t engage in hedging 4ecause ding s reduces the pr4a4i&it 'igh&< &evered !ir,s avid !reign de4t as a ,eans
t hedge and use derivatives>
L"("*"!9 )* r&'"!="3"!96 ir,s 5ith high&< &i?uid assets r high pr!ita4i&it< have
&ess incentive t engage in hedging 4ecause the< are epsed t a &5er pr4a4i&it< !
!inancia& distress> #i?uidit< is ,easured 4< the ?uic* rati+ i>e> ?uic* assets divided 4<
current &ia4i&ities8> Pr!ita4i&it< is ,easured as EBIT divided 4< 4* assets>
S3%s 7r&8!#" Sa&es gr5th is a !actr deter,ining decisin t hedge as pprtunities are
,re &i*e&< t 4e a!!ected 4< the underinvest,ent pr4&e,> r these !ir,s+ hedging 5i&&
reduce the pr4a4i&it< ! having t re&< n eterna& !inancing+ 5hich is cst&< !r
in!r,atin as The ,easure ! sa&es As regards the degree ! hedging A&&a In ther 5rds+ given that a !ir, decides t hedge+ the decisin ! h5
,uch t hedge is a!!ected s&e&< 4< its epsure t !reign currenc< ,ve,ents>
A) O%r"%8 &' C&r&r!% H%*7")7 ") I)*"The ,ve !r, a !ied echange rate s In this cntet+ the ,ar*et !r hedging instru,ents is sti&& in its
deve&ping stages> In rder t understand the a&ternative hedging strategies that Indian
!ir,s can adpt+ it is i,prtant t understand the regu&atr< !ra,e5r* !r the use !
derivatives here>
D%%3&+%)! &' D%r"!"% Mr%!s ") I)*"
The ecn,ic &i4era&iatin ! the ear&< nineties !aci&itated the intrductin !derivatives 4ased n interest rates and !reign echange> Echange rates 5ere deregu&ated
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
and ,ar*et deter,ined in 399L> B< 3992+ the rupee 5as ,ade !u&&< cnverti4&e n current
accunt> The 4an n !utures trading ! ,an< c,,dities 5as &i!ted starting in the ear&<
:111s> As ! e4 :130+ even crprates have 4een a&&5ed t 5rite ptins in the
at,sphere ! high v&ati&it
Derivatives n stc* indees and individua& stc*s have gr5n rapid&< since inceptin> In
particu&ar+ sing&e stc* !utures have 4ec,e huge&< ppu&ar> Institutina& investrs pre!er
t trade in the Over(The(Cunter6OTC8 ,ar*ets t interest rate !utures+ 5here
instru,ents such as interest rate s5aps and !r5ard rate agree,ents are thriving> reign
echange derivatives are &ess active than interest rate derivatives in India+ even thugh
the< have 4een arund !r &nger> OTC instru,ents in currenc< !r5ards and s5aps are
the ,st ppu&ar> I,prters+ eprters and 4an*s use the rupee !r5ard ,ar*et t hedge
their !reign currenc< epsure> Turnver and &i?uidit< in this ,ar*et has 4een
increasing+ a&thugh trading is ,ain&< in shrter ,aturit< cntracts ! ne
The t
The Indian rupee+ 5hich is 4eing traded n the Du4ai $&d and C,,dities Echange
6D$C%8+ crssed a turnver ! /L>:2 ,i&&in in Jan :130>
R%7(3!&r9 G("*%3")%s '&r !#% (s% &' F&r%"7) E5:#)7% D%r"!"%s
Fith respect t !reign echange derivatives inv&ving rupee+ residents have access t
!reign echange !r5ard cntracts+ !reign currenc derivatives can 4e used !r hedging purpses n&
The RBI has a&s !r,u&ated guide&ines t si,p&i!< prcedura&@dcu,entatin
re?uire,ents !r S,a&& and Mediu, Enterprises 6SME8 sectr> In rder t ensure that
SMEs understand the ris*s ! these prducts+ n&< 4an*s 5ith 5hich the< have credit
re&atinship are a&&5ed t !!er such !aci&ities> These !aci&ities shu&d a&s have s,e
re&atinship 5ith the turnver ! the entit Si,i&ar&
Authrised Dea&er6AD8 4an*s ,a< a&s enter int !r5ard cntracts 5ith residents in
respect ! transactins den,inated in !reign currenc< 4ut sett&ed in Indian Rupees
inc&uding hedging the currenc< indeed epsure ! i,prters in respect ! cust,s dut<
pa D,estic
prducers@users are a&&5ed t hedge their price ris* n a&u,iniu,+ cpper+ &ead+ nic*e&
and inc as 5e&& as aviatin tur4ine !ue& in internatina& c,,dit< echanges 4ased n
their under& Authrised dea&ers are per,itted t use innvative prducts &i*e crss(currenc< ptins interest rate s5aps 6IRS8 and currenc< s5aps+
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
caps@c&&ars and !r5ard rate agree,ents 6RAs8 in the internatina& !reign echange
,ar*et> reign Institutina& Investrs 6II8+ persns resident utside India having
reign Direct Invest,ent 6DI8 in India and Nnresident Indians 6NRI8 are a&&5ed
access t the !r5ards ,ar*et t the etent ! their epsure in the cash ,ar*et>
H%*7")7 I)s!r(+%)!s '&r I)*") F"r+s
The recent perid has 5itnessed a,p&i!ied v&ati&it< in the INR(US echange rates in the
4ac*drp ! the su4(pri,e crisis in the US and increased d&&ar(in!&5s int the Indian
stc* ,ar*ets> In this cntet+ the paper has atte,pted t stud< the chice ! instru,ents
adpted 4< pr,inent !ir,s t ste, their !reign echange epsures> A&& the data !r this
has 4een c,pi&ed !r, the :132(:13/ Annua& Reprts ! the respective c,panies> Asu,,ar< ! the !reign echange ris* hedging 4ehaviur ! se&ect Indian !ir,s is given in
Ta4&e
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Discussin n 'edging 4< Indian ir,s
r, Ta4&e + it can 4e seen that earnings ! a&& the !ir,s are &in*ed t either US d&&ar+
Eur r Pund as !ir,s transact pri,ari&< in these !reign currencies g&4a&& r5ard
cntracts are c,,n&< used and a,ng these !ir,s+ Ran4a< and RI# depend heavi&<
n these cntracts !r their hedging re?uire,ents> As discussed ear&ier+ !r5ards cntracts
can 4e tai&red t the eact needs ! the !ir, and this cu&d 4e the reasn !r their
ppu&arit The tai&ra4i&it< is a cnsideratin as it ena4&es the !ir,s t ,atch their
epsures in an eact ,anner c,pared t echange traded derivatives &i*e !utures thatare standardised 5here eact ,atching is di!!icu&t>
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RI#+ Maruti Ud
S5ap usage is a &ng ter, strateg< !r hedging and suggests that the p&anning hrins
!r these c,panies are &nger than thse ! ther !ir,s> These 4usinesses+ 4< nature
inv&ve &nger gestatin perids and higher initia& capita& ut&a
Anther 4servatin is that TCS pre!ers t hedge its epsure t the US D&&ar thrugh
ptins rather than !r5ards> This strateg< has 4een 4served a,ng ,an< !ir,s recent&<
in India33> This has 4een adpted due t the ,ar*ed high v&ati&it< ! the US D&&ar
against the Rupee> Optins are ,re pr!ita4&e instru,ents in v&ati&e cnditins as the<
!!er un&i,ited upside pr!ita4i&it< 5hi&e hedging the d5nside ris* 5hereas there is a
ris* 5ith !r5ards i! the epectatin ! the echange rate 6the guess8 is 5rng as !ir,s
&se ut n s,e pr!it> The use ! Range 4arrier ptins 4< In!s S!t5are !ir,s have a
&i,ited d,estic ,ar*et and re&< n eprts !r the ,a-r part ! their revenues and
hence re?uire additina& !&ei4i&it< in hedging 5hen the v&ati&it< is high> Anther
i,p&icatin ! this is that their p&anning hrins are shrter c,pared t capita& intensive
!ir,s>
It is evident that ,st Indian !ir,s use !r5ards and ptins t hedge their !reign
currenc< epsure> This i,p&ies that these !ir,s chse shrt(ter, ,easures t hedge as
ppsed t !reign de4t> This pre!erence is pssi4&< a cnse?uence ! their csts 4eing in
Rupees+ the a4sence ! a Rupee !utures echange in India and cur4s n !reign de4t> It
a&s !&&5s that ,st ! these !ir,s 4ehave &i*e Net Eprters and are adverse&< a!!ected 4< appreciatin ! the &ca& currenc There are a !e5 !ir,s 5hich have i,prt &ia4i&ities
5hich 5u&d 4e adverse&< a!!ected 4< Rupee depreciatin> '5ever it ,ust 4e pinted
ut that the data set cnsidered !r this stud< des nt indicate h5 the use ! !reign
de4t 4< these !ir,s hedges their epsures t !reign echange ris* and 5hether such a
strateg< is used as a su4stitute r c,p&e,ent t hedging 5ith derivatives>
I)'%r%):%6
Derivative use !r hedging is n&< t increase due t the increased g&4a& &in*ages and
v&ati&e echange rates> ir,s need t &* at instituting a sund ris* ,anage,ent s
In India+ regu&atin has 4een steadi&< eased and turnver and &i?uidit< in the !reign
currenc< derivative ,ar*ets has increased+ a&thugh the use is ,ain&< in shrter ,aturit<
cntracts ! ne r5ard and ptin cntracts are the ,re ppu&ar
instru,ents> Regu&atrs had initia&&< n&< a&&5ed certain 4an*s t dea& in this ,ar*et
h5ever n5 crprates can a&s 5rite ptin cntracts> There are ,an< variants ! these
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
derivatives 5hich invest,ent 4an*s acrss the 5r&d specia&ie in+ and as the a5areness
and de,and !r these variants increases+ RBI 5u&d have t revise regu&atins>
r n5+ Indian c,panies are active&< hedging their !reign echanges ris*s 5ith
!r5ards+ currenc< and interest rate s5aps and di!!erent t The high use ! !r5ard cntracts 4< Indian
!ir,s a&s high&ights the a4sence ! a rupee !utures echange in India> '5ever+ the
Du4ai $&d and C,,dities Echange in June+ :11G intrduced Rupee( D&&ar !utures
that cu&d 4e traded n its echanges !&&5ed 4< Rupee(EURO+ Rupee(YEN and had
prvided anther rute !r !ir,s t hedge n a transparent 4asis> There are !ears that
RBIs a4i&it< t cntr& the partia&&< cnverti4&e currenc< 5i&& 4e su4dued 4< this
intrductin 4ut this issue is 4e
The C,,ittee n u&&er Capita& Accunt Cnverti4i&it< had rec,,ended that currenc<
!utures ,a< 4e intrduced su4-ect t ris*s 4eing cntained thrugh prper trading
,echanis,+ structure ! cntracts and regu&atr< envirn,ent> Accrding&
The &i,itatin ! this stud< is that n&< ne te the !reign
echange ris*> A&s app&ica4i&it< ! cnc&usin is &i,ited as n&< ver< !e5 !ir,s 5ere
revie5ed ver -ust ne ti,e perid> '5ever the resu&ts !r, this ep&ratr< stud< are
encuraging and interesting+ &eading us t cnc&ude that there is scpe !r ,re rigrus
stud< a&ng these &ines>
As a resu&t ! g&4a&iatin+ !ir,s+ 5hether the< are ,u&tinatina& enterprises 6MNEs8 r
s,a&& and ,ediu, sied enterprises 6SMEs8+ have 4een increasing&< inv&ved in
internatina& 4usiness> Eprting !ir,s ,ight 4e particu&ar&< a!!ected 4< !&uctuatins !
echange rates+ !r the !&uctuatin in currenc< ,ar*ets i,pacts n the ecn,< in genera&
and !ir, prductin csts and revenues+ in particu&ar> It is a&s 5rth cnsidering the!&uctuatins in the cntet ! a !&ating echange rate> There!re+ !reign echange
6!re8 ris* ,anage,ent is ! interest t eprting !ir,s>
'5ever+ a ,a-rit< ! research papers n this tpic !cus speci!ica&&< n tac*&ing
pr4&e,s in MNEs+ 5hi&e there is a scarcit< ! studies n ,anaging !re ris* !r SMEs
6Bartra,+ Br5n+ Mintn+ :131 Jnu*a Sa,VnaitV+ :11L8> S,e research studies+
such as thse ! Jnu*a Sa,VnaitV 6:11L8+ Chan(#au 6:11/8 and Pra,4rg 6:11/8+
&*ed int hedging and ,anaging !re ris* in deve&ping cuntries+ 5here the ,a-rit<
! the c,panies are SMEs> These studies have addressed a variet< ! hedging
deter,inants+ 4ut tended nt t descri4e in detai& h5 these deter,inants tgether i,pact
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hedging 4ehaviurs> This stud< investigates the interre&atinships a,ng hedging
deter,inants+ 5hich are speci!ic a4ut eprting SMEs>
In the &iterature n !re ris* ,anage,ent+ there are a nu,4er ! varia4&es 5hich have
4een seen as deter,inants ! !ir,s chice t hedge !re ris*> The< inc&ude the cst !
hedging versus 4ene!its received+ cst ! using derivatives+ ,anagers *n5&edge+ trust in
4an*s+ accunting prcedures 6Jnu*a Sa,VnaitV+ :11L8 hedging 4-ectives 6e>g>+ t
reduce !&uctuatins in cash !&5s and !&uctuatins ! accunting nu,4ers8+ ,aturit< !
derivative ,ar*ets 6Pra,4rg+ :11/8 !ir, sie+ ecn,ies ! sca&e+ and internatina&
dependenc< 6Ber*,an+ Brad4ur
This thesis added t the current &iterature n !re ris* ,anage,ent 4< !cusing n h5
SMEs ,anage their !re ris*+ speci!ica&&< identi!ied !actrs that in!&uence hedging
strateg The thesis etended the &iterature n
!re ris* ,anage,ent t a setting ! eprting SMEs+ ea,ined the i,pact ! !actrs
5ith regard t !ir,s resurces+ and the degree ! internatina&isatin 6$an*e,a+ Snui!+
5art+ :111
L> Industr< Pr!i&eThe e?uit< 4r*erage industr< in India is ne ! the &dest in the Asian regin> India had an
active stc* ,ar*et !r a4ut 3/1
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! -int stc* c,panies that issued securities t raise !inance> This trend 5as a*in t the
rapid gr5th ! securities ,ar*et in Eurpe and the Nrth A,erica in the 4ac*grund !
epansin ! rai&rads+ ep&ratin ! natura& resurces and &and deve&p,ent>
'istrica& recrds sh5s that as ear&< as 302+ there 5ere a4ut 3111 4r*ers 5ith the stc*
,ar*et !unctining !r, three p&aces in Mu,4ai 4et5een 9a, t Gp, at the -unctin !
Mead5s Street and Ra,part R5 !r, da< 4rea* ti&& 9a, and !r, Gp, t ear&< hurs !
net ,rning at Baargate>
Share Prices rse sharp&< even at that ti,e> A share ! C&a4a #and C,pan< during the
4, perid ! the 301s rse !r, Rs31+111 at par t Rs 3:1+111 and that ! Bac*4a<
Shares 5ent up !r, Rs /2111> B,4a
In ear&ier ti,es+ the trading+ that is+ the 4u Thus+ the persn needs t g at that particu&ar
p&at!r, i! he r she needs t trade in the shares> '5ever 5ith the advance,ent !
techn&g N5 the trading ! shares and stc*
can ta*es p&ace e&ectrnica&& There is a tre,endus reductin in paper 5r* as ever This ,ar*et is nt ne5 t India it has a4ut :99
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alc'tta "as fo!'lated kno" as /alc'tta )tock *-chan&e Association
follo"ed $ othe! stock e-chan&es.
Pos!-Independence Era
There 5as shutd5n ! varius stc* echanges in India due t the depressin that t* p&ace
a!ter Independence> It 5as under the Securities Cntracts 6Regu&atin8 Act+ 39/0 that varius
stc*s Echange has gt recgnitin as a recgnised stc* echange such as B,4a At the &ast cunt+the BSE had a4ut 2+G11 &isted !ir,s+ 5hereas the riva& NSE had near&< 3+:11> Out ! a&& the&isted !ir,s n the BSE+ n&< a4ut /11 !ir,s cnstitute ,re than 91 ! its ,ar*etcapita&iatin and the rest ! the cr5d cnsists ! high&< i&&i?uid shares>
A&,st a&& the signi!icant !ir,s ! India are &isted n 4th the echanges> NSE en- Bth echanges c,pete !r the rder !&5 that &eads t reduced csts+ ,ar*ete!!icienc< and innvatin> The presence ! ar4itrageurs *eeps the prices n the t5 stc*
echanges 5ithin a ver< tight range>
Trading Mechanism
Trading at 4th the echanges ta*es p&ace thrugh an pen e&ectrnic &i,it rder 4* + in5hich rder ,atching is dne 4< the trading c,puter> There are n ,ar*et,a*ers r specia&ists and the entire prcess is rder(driven+ 5hich ,eans that ,ar*et rders
p&aced 4< investrs are aut,atica&&< ,atched 5ith the 4est &i,it rders> As a resu&t+ 4u
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An II registered as a de4t(n&< II can invest 311 ! its invest,ent int de4t instru,ents>Other IIs ,ust invest a ,ini,u, ! G1 ! their invest,ents in e?uit The 4a&ance ! L1can 4e invested in de4t> IIs ,ust use specia& nn(resident rupee 4an* accunts+ in rder t,ve ,ne< in and ut ! India> The 4a&ances he&d in such an accunt can 4e !u&&<repatriated>
Restrictions/Investment Ceilings
The gvern,ent ! India prescri4es the DI &i,it and di!!erent cei&ings have 4een prescri4ed!r di!!erent sectrs> Over a perid ! ti,e+ the gvern,ent has 4een prgressive&< increasingthe cei&ings> DI cei&ings ,st&< !a&& in the range ! :0(311>
B< de!au&t+ the ,ai,u, &i,it !r prt!&i invest,ent in a particu&ar &isted !ir,+ is decided 4< the DI &i,it prescri4ed !r the sectr t 5hich the !ir, 4e&ngs> '5ever+ there are t5additina& restrictins n prt!&i invest,ent> irst+ the aggregate &i,it ! invest,ent 4< a&&IIs+ inc&usive ! their su4(accunts in an< particu&ar !ir,+ has 4een !ied at :2 ! the paid(up capita&> '5ever+ the sa,e can 4e raised up t the sectr cap+ 5ith the apprva& ! thec,pan
Secnd& '5ever+ in case ! !reigncrpratins r individua&s investing as a su4(accunt+ the sa,e cei&ing is n&< />Regu&atins a&s i,pse &i,its !r invest,ent in e?uit
Investment Opportunities for Retail Foreign Investors
reign entities and individua&s can gain epsure t Indian stc*s thrugh institutina&investrs> Man< India(!cused ,utua& !unds are 4ec,ing ppu&ar a,ng retai& investrs>Invest,ents cu&d a&s 4e ,ade thrugh s,e ! the !!shre instru,ents+ &i*e participatr<ntes 6PNs8 and depsitar< receipts+ such as A,erican depsitar< receipts6ADRs8+ g&4a&depsitar< receipts 6$DRs8+ and echange traded !unds 6ETs8 and echange(tradedntes 6ETNs8>
As per Indian regu&atins+ participatr< ntes representing under& '5ever+ even s,a&& investrs can investin A,erican depsitar< receipts representing the under& ADRs are
den,inated in d&&ars and su4-ect t the regu&atins ! the U>S> Securities and EchangeC,,issin 6SEC8> #i*e5ise+ g&4a& depsitar< receipts are &isted n Eurpean stc*echanges> '5ever+ ,an< pr,ising Indian !ir,s are nt
Retai& investrs a&s have the ptin ! investing in ETs and ETNs+ 4ased n Indian stc*s>India ETs ,st&< ,a*e invest,ents in indees ,ade up ! Indian stc*s> Mst ! the stc*sinc&uded in the inde are the nes a&read< &isted n NYSE and Nasda?> As ! :119+ the t5,st pr,inent ETs 4ased n Indian stc*s are the Fisd,(Tree India Earnings und6NYSE" EPI8 and the P5erShares India Prt!&i und 6NYSE"PIN8> The ,st pr,inentETN is the MSCI India Inde Echange Traded Nte 6NYSE"INP8> Bth ETs and ETNs
prvide gd invest,ent pprtunit< !r utside investrs>
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The Bottom Line
E,erging ,ar*ets &i*e India+ are !ast 4ec,ing engines !r !uture gr5th> Current& Ma
Forex Market History In India
The !reign echange currenc< trading in India is gr5ing at a rea&&< gd paceh5ever it is said that the !re ,ar*et is sti&& in the ear&< phase in India> Neverthe&ess thereare a&read< severa& 4ig p&a #et us !ind ut detai&s n the !re,ar*et histr< in India t *n5 ,re a4ut Indian !re ,ar*et>
The histr< ! !re ,ar*et in India 5es its rigin t an i,prtant decisin ta*en 4< theReserve Ban* ! India 6RBI8 in the As a resu&t ! this step+ the agree,ent ! ,aintainings?uare r near s?uare psitin 5as t 4e c,p&ied 5ith n&< at the c&se ! 4usiness ever<da The histr< ! currenc< trading in India a&s c&ear&< sh5s that during the initia& perid5hen these ecn,ic re!r,s started+ the echange rate ! natina& currenc< i>e> Indian rupeeused t 4e deter,ined 4< the RBI in ter,s ! a 5eighted 4as*et ! currencies ! Indias ,a-r trading partners> Mrever+ there 5ere s,e !air&< signi!icant restrictins n the currentaccunt transactins>
Then again during ear&< nineties+ ,re ecn,ic re!r,s 5ere intrduced 5hich 5itnessedthe i,prtant t5(step d5n5ard ad-ust,ent in the echange rate ! the Indian rupee inrder t p&ace it at a suita4&e &eve& in &ine 5ith the in!&atin di!!erentia& s that thec,petitiveness in eprts cu&d 4e ,aintained> Fith these ecn,ic re!r,s 5hich resu&tedin the uni!icatin echange rate ! the rupee hera&ded the c,,ence,ent ! the ne5 era !,ar*et deter,ined !re currenc< rate regi,e ! rupee in the Indian !re histr< 5hich 5as
4ased n the de,and and supp&< princip&e in the !re ,ar*et>
Anther &and,ar* in re histr< ! India ca,e 5ith the appint,ent ! an Epert $rupc,,ittee n re currenc< in 3992> This c,,ittee 5as ,ade t stud< the !re ,ar*et indetai& s that step can 4e ta*en ut t deve&p+ deepen and 5iden the !re ,ar*et in India>The resu&t ! this eercise 5as that 4an*s 5ere signi!icant !reed, in ,an< ! its ,ar*etperatins re&ated t &i*e !re ,ar*et deve&p,ent and &i4era&iatin> The !reed, 5as
granted t 4an*s in ter, ! !iing their trading &i,its+ a&&5ed t 4rr5 and invest !unds inthe verseas ,ar*ets up t speci!ied &i,its+ accrded !reed, t ,a*e use ! derivative
prducts !r asset(&ia4i&it< ,anage,ent purpses>
The crprate 5ere granted the !&ei4i&it< t 4* !r5ard cver 4ased n previus turnverand 5ere given !reed, t ,a*e use ! !inancia& instru,ents &i*e interest rates and currenc<s5aps in the internatina& currenc< echange ,ar*et> The ther !eature ! !re histr< inIndia is that a &arge su, ! !reign echange in India ca,e thrugh the &arge Indian
ppu&atin 5r*ing in !reign cuntries> '5ever+ the c,,n ,an 5as nt ,uch interestedin !re trading> the things are changing n5 and 5ith the gr5ing ecn,< ,re and ,re
pep&e are sh5ing interest in !re trading and are &*ing ut !r hedging currenc< ris*s>
Natina& Stc* Echange ! India ppu&ar&< *n5n as NSE 5as the !irst recgniedechange in Indian !re histr< t &aunch !re currenc< !utures trading in India> These
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currenc< !utures are 4ene!icia& ver verseas !re trading especia&&< t c,parative&< s,a&&traders and retai& investrs> Anther i,prtant pint t *n5 is that 4e!re discussing thehistr< ! !re ,ar*et in India+ it is i,prtant t *n5 the centra& gvern,ent ! India hasthe p5ers t cntr& transactins in !reign echange and hence !re transactins in Indiaare ,anaged 4< the gvern,ent authrities>
B"'9$: S!";< E=;>$%&e (BSE)
A ver< c,,n na,e !r a&& traders in the stc*,ar*et+ BSE+ stands !r B,4a< Stc*
Echange> The &dest ,ar*et nt n&< in the cuntr In the ear&< da It 5as esta4&ished in the
In 39/0+ BSE 4tained a per,anent recgnitin !r, the $vern,ent ! India
under the Securities Cntracts 6Regu&atin8 Act+ 39/0>
In the past and even n5+ it p&a
Ear&ier it 5as an Assciatin ! Persns 6AOP8+ 4ut n5 it is a de,utua&ised and crpratised
entit< incrprated under the prvisins ! the C,panies Act+ 39/0+ pursuant t the BSE
6Crpratisatin and De,utua&isatin8 Sche,e+ :11/ nti!ied 4< the Securities and Echange
Bard ! India 6SEBI8>
BSE 7isin
The visin ! the B,4a< Stc* Echange is t E,erge as the pre,ier Indian stc*
echange 4< esta4&ishing g&4a& 4ench,ar*s>
BSE Manage,ent
B,4a< Stc* Echage is ,anaged pr!essina&&< 4< Bard ! Directrs> It c,prises !
e,inent pr!essina&s+ representatives ! Trading Me,4ers and the Managing Directr> The
Bard is an inc&usive ne and is shaped t 4ene!it !r, the ,ar*et inter,ediaries
participatin>
The Bard eercises c,p&ete cntr& and !r,u&ates &arger p&ic< issues> The da
BSE Net5r*
The Echange reaches ph
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BSEs Internatina& Cnventin 'a&&
The B,4a< Stc* Echange prvides cnventin ha&& !r &isted c,panies and ther
Institutins t h&d their Annua&@rdinar< $enera& Meetings+ #isting cere,nies+ Ana&
It is centra&&< &cated at Mu,4ai+ 5hich can 4e easi&< reached !r, Churchgate r CST 67T8
rai&5a< statins> It has a capacit< ! arund G11 t 911 persns 5ith state(!(the(art
in!rastructure> The ha&& has Pr-ectin E?uip,ent+ Fe4(cast !aci&it< and a Business R,
5ith acsi,i&e+ Internet+ Phtcpier and te&ec, e?uip,ent>
BSE acts
• irst in India t intrduce E?uit< Derivatives
• irst in India t &aunch a ree &at Inde
• irst in India t &aunch US versin ! BSE Sense
• irst in India t &aunch Echange Ena4&ed Internet Trading P&at!r,
• irst in India t 4tain ISO certi!icatin !r Survei&&ance+ C&earing Sett&e,ent
• BSE On(#ine Trading S 6NSCC#8It is a 5h&&< 5ned su4sidiar It 5as !r,ed t 4ui&d cn!idence in c&earing and
sett&e,ent ! securities+ t pr,te and ,aintain the shrt and cnsitent sett&e,ent c
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NSE>IT #td>It is a&s a 5h&&< 5ned su4sidiar< ! NSE and is its IT ar,> This ar, ! the NSE isuni?ue&< psitined t prvide prducts+ services and s&utins !r the securities industr
NSE>IT pri,ari&< !cusses n in the area ! trading+ 4r*er !rnt(end and 4ac*(!!ice+
c&earing and sett&e,ent+ 5e4(4ased+ insurance+ etc> A&ng 5ith this+ it a&s prvidescnsu&tanc< and i,p&e,entatin services in Data Farehusing+ Business Cntinuit< P&ans+Site Maintenance and Bac*ups+ Stratus Main!ra,e aci&it< Manage,ent+ Rea& Ti,e Mar*etAna&
India Inde Services Prducts #td> 6IIS#8It is a -intventure 4et5een NSE and CRISI# #td> t prvide a variet< ! indices and indere&ated services and prducts !r the Indian Capita& ,ar*ets> It 5as set up in Ma< 399> IIS#has a cnsu&ting and &icensing agree,ent 5ith the Standard and Prs 6SP8+ 5r&ds &eading
prvider ! investi4&e e?uit< indices+ !r c(4randing e?uit< indices>
Natina& Securities Depsitr< #td> 6NSD#8 NSE -ined hands 5ith IDBI and UTI t pr,te de,ateria&isatin ! securities> This step5as ta*en t s&ve pr4&e,s re&ated t trading in ph It c,,encedperatins in Nve,4er 3990>
DtE Internatina& #i,itedDtE 5as !r,ed t prvide a 5e&& structured inter trading p&at!r, !r the ,e,4ers t!urther !!er n&ine trading !aci&ities t their cust,ers> Fith this !aci&it The investrs a&s get c,prehensive and updated in!r,atin thrughit>
NSE acts
• It uses sate&&ite c,,unicatin techn&g< t energise participatin !r, arund 211
cities in India>
• NSE can hand&e up t 3 ,i&&in trades per da
• It is ne ! the &argest interactive 7SAT 4ased stc* echanges in the 5r&d>
• The NSE( net5r* is the &argest private 5ide area net5r* in India and the !irst
etended C( Band 7SAT net5r* in the 5r&d>
• Present&< ,re than 9111 users are trading n the rea& ti,e(n&ine NSE app&icatin>
the! than this the!e a!e !e&ional stock e-chan&es. The!e "e!e 26 !e&ional stock
e-chan&es at ties. Afte! *AT soft"a!e the !e'i!eent of !e&ional stocke-chan&e dec!eased and no" cae do"n to 19 in total.
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De!. "# M$%$&e'e%! S!*e+, MSRIT, Be%&$-
2. C"'$%: P-"#*e
$. B$; AnandRathi and Mr>Pradeeep $upta+ the grup tda<e,p& Private 5ea&th,anage,ent strng 'NI re&atinship>
Access t 5ea&th< !a,i&ies in India having ,re than :/111 crres ! inventi4&e surp&uses>
AnandRathi has 4een vted Z 3 4< ,ne< p&&s !r : cnsecutive
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• Strng prduct prt!&i 5hich induces e?uities+ Derivatives+ c,,dities+ IPOs
,utua& !unds+ &i!e and nn(&i!e insurance depsitr< services and 4nds>
• #eading distri4utr ! IPO+ insurance+ ,utua& !unds and third part< prducts>
• Fe have 4een ran*ed th a,ngst a&& 4r*ers !r a,unt prcured in IPOs in India
during Januar< t June :131 4< pri,e data 4ase> The !ir,s phi&sph< is entire&<c&ient centric+ 5ith a c&ear !cus n prviding &ng ter, va&ue additin t c&ients+5hi&e ,arinating the highest standard ! ece&&ence+ ethics and pr!essina&is,>
4> Nature ! the 4usiness carried
AnandRathi is a &eading !u&& service securities !ir, prviding the entire ga,ut ! !inancia&services> The !ir,+ !unded in 3992 4< Mr> AnandRathi+ tda< has a pan India presence as5e&& as an internatina& presence thrugh !!ices in Du4ai and Bang**>
AnandRathi prvides a 4readth ! !inancia& and advisr< services inc&uding 5ea&th,anage,ent+ invest,ent 4an*ing+ crprate advisr
The !ir,s phi&sph< is entire&< c&ient centric+ 5ith a c&ear !cus n prviding &ng ter,
va&ue additin t c&ients+ 5hi&e ,aintaining the highest standards ! ece&&ence+ ethics and pr!essina&is,> The entire !ir, activities are divided acrss distinct c&ient grups"Individua&s+ Private C&ients+ Crprates and Institutins>
;. V*+*"%, M*++*"% $% Q$*!: P"*;:
"s"&)
“T& =% s#")")7 %5+3% s 3%*%r ") "))&!"&) !#% '"rs! :#&":%
'&r :3"%)!s )* E+3&9%%s
Ar&:#
lient ent!ic )ol'tions lon& te! foc'sed Resea!ch
Relationship d!i#en
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3(%s
'stoe! ent!ic Tea "o!k +nno#ation Respect.
(3"!9 P&3":9
• I,prving asset ?ua&it< is *e< 4ehind per!r,ance ! 4an* stc* in a !a&&ing interest
rate envirn,ent
• Credit t i,prve+ s!t in!&atin t spur depsits>
• a&&ing in!&atin 5u&d i,prve rea& interest rates+ 5hich in turn+ cu&d channe& 4th
huseh&d and crprate savings t 4an*
• Esti,ated depsit gr5th at 3G in Y 30 and 30 in Y 30
. P-";! / Se-?*;e P-"#*e
Services O!!erings
• Private Fea&th Manage,ent Services
• Institutina& Services
• Invest,ent Ban*ing Services
• Currenc< Cnsu&tanc<
• Crprate Insurance Advisr<
• Invest,ent Services
3> Pre!erred C&ients Services
:> Privi&ege C&ients Services
Prducts O!!erings
• E?uit<
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• Institutina& E?uit< Research+ Sa&es Trading
• E?uit< De4t Capita& Mar*ets
Invest,ent Services $rup
• Fide range ! prducts Services
• E,phasis n vera&& !inancia& p&anning 4ased n c&ients speci!ic re?uire,ents
• Presence in 3/11 &catins acrss India
E?uit< Derivative Br*erage"
AnandRathi prvides end t end e?uit< s&utins t s&utins t institutina& and
individua& investrs> Cnsistent de&iver< ! high ?ua&it< advice n individua& stc*>Sectr trends and invest,ent strateg< has esta4&ished a c,petent a and re&ia4&e unit
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acrss the cuntr C&ient can trade thrugh n&ine n BSE and NSE !r 4th e?uitiesand Derivatives> The< are supprted 4< dedicated sa&es and trading tea,s in tradingdes*s acrss the cuntr Research and invest,ent ideas can 4e accessed 4< c&ientseither thrugh their designated dea&ers+ e,ai&+ 5e4 r s,s>
Mutua& !unds" AnandRathi is ne ! Indias tp ,utua& !und distri4utin huses> Their success&ies in their phi&sph< ! prviding cnsistent& The< !ir,&< 4e&ieve in thei,prtance ! se&ecting asset a&&catin 4ased n their c&ients ris* pr!i&e+ The< havea dedicated ,utua& !und research ce&& !r ,utua& !unds that cnsistent&< churns utsuperir invest,ent ideas+ pic*ing 4est per!r,ing !unds acrss asset c&asses >
Depsitr< Services" AnandRathi depsitr< services prvides 5ith a secure and cnvenient 5a< !
h&ding AR depsitr< services inc&udessette&e,ent+ c&earing and custd< ! securities+ registratin ! shares andde,ateria&iatin> A&s !!er dai&< updates ! internet access t h&ding state,ent andtransactin su,,ar
C,,dities" AR c,,dities 4r*ing services inc&ude n&ine !utures thrugh NCDE% and MC%and depsitr< services thrugh CDS#> Their research cvers 4rad range ! tradedc,,dities inc&uding precius and 4ase ,eta&s+ i&s and i& seeds+ agri( c,,ditiessuch as 5eat+ chana+ guar etc> The< a&s prvide cust,ied advice n hedging>
Insurance Services" As an insurance 4r*er+ AR prvides t their c&ients c,prehensive ris*,anage,ent techni?ues+ 4th 5ithin the 4usiness as 5e&& as n the persna& !rnt>Ris* ,anage,ent inc&udes identi!icatin+ ,easure,ent and assess,ent ! the ris* andhand&ing ! the ! the ris* ! 5hich insurance is a integra& part> The< dea& 5ith 4th&i!e and nn &i!e insurance> Their ai, is t prvide pti,u, &eve& ! cver 5ith &east
pssi4&e cst>
e> Area ! Operatin . $&4a&@Natina&@Regina&
AR !inancia& services !!ers and prvides services nt n&< t regina&+natina& 4ut a&s t internatina& cuntries it has a strng and 5ide distri4utinnet5r*> Fe can !ind !!ices ! AnandRathi in ,re than 39G cities and : states andhas severa& 4ranches in Du4ai+ Bang** etc>
!> O5nership Pattern
AR has an autcratic ,anage,ent s Ne5 p&ans+ 4ranch+ pening decisins ta*en 4< tp,anage,ent in entire AnandRathi services !ir,> But in 4ranch &eve& the< have
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de,cratic ,anage,ent s That is a&& vita& decisins ta*en 4< 4ranch,anage,ent>
T% ana&eent
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&. C"'e!*!"-+ I%#"-'$!*"%
There are ,an< c,petitrs t AnandRathi as stc* ,ar*et is ne ! the gd and 4est
avenues ! invest,ent stc* 4r*ing services are increasing da< 4< da e5 ,a-rc,petitrs are Share )han+ Mti&a& Os5a&+ Ange& Br*ing+ ICICI Direct+ erda etc
1 %r&*# 6 The< are ne ! the &argest and &dest Discunt 4r*er in India having ,re
than /1+111 c&ients> The< have a ver< c,petitive and a si,p&e 4r*erage structure 6Rs
:1 per trade8 and gd cust,er service> The accunt pening prcess is a&s ver< eas<
and ,st ! the 5r* can 4e c,p&eted n&ine> The< are ne ! the !e5 discunt 4r*er
5h have their 5n Prprietr trading@charting s!t5are ca&&er Pi 5hich a&&5s !r
5riting cust, a&grith,> The gd thing a4ut these discunt 4r*ers is The !r,s can 4e !i&&ed n&ine and the app&icatin can 4e
shipped t the,2: RKS" R)S7 is a discunt 4r*er perating !r, Mu,4ai> The< prvide ver<
c,petitive rates ! Rs :1 per trade irrespective ! the sie ! the trade> The prvide
NEST and ODIN p&at!r, !r trading> The< are c,ing up 5ith ne5 ,4i&e 4ased
p&at!r, ca&&ed Upstc* and the prduct &* nice> There accunt pening prcess is
a&s ver< eas< and ,st ! the 5r* can 4e c,p&eted n&ine> The<
have decent service and eas< t use user inter!ace 4ut there 4r*erage is rea&&< high
c,pared t 5hat ther discunt 4r*ers are prviding> There rates starts !r, as high as
>/ t >: depending n the va&ue ! trades There 4iggest se&&ing
pint is there sea,&ess integratin 5ith $d 4r*er !r investr 4ut nt !r
trader>
4 S#r%K#) " Incrprated in e4ruar< :111+ Share*han is Indias :nd 3r7%s! s!&:
=r&%r as per nu,4er ! cust,ers+ prviding 4r*erage services thrugh its n&ine
trading 5e4site Share*han>c, and 39/1 Share shps 5hich inc&udes 4ranches
ranchises in ,re than /G/ cities acrss India> The< are !u&& service 4r*er and prvide
varius ther services &i*e asset ,anage,ent etc>
> HDFC S%:(r"!96 The< are ne ! the &arger 4r*ing huses in India and 5ith their 4an*
4ranches+ the< have ne ! the &argest net5r* 5hich is n&< a!ter ICICI> The< have avast net5r* ! 4an* 4ranch in even s,a&&er t5n> Mst ! the investr 5h have a 4an*
accunt end up pening a trading@De,at accunt 5ith the,> The< are gd !u&& service
4r*ers prviding a&& ,a-r services &i*e research des*+ ,utua& !und invest,ents and
prt!&i ,anage,ent services>
- K&! S%:(r"!"%s" The< are ne ,re 5e&& *n5 na,e in inancia& services and 5ith
their 4an* 4ranches in 4ig cities the< are a4&e t cater t c&ients in 4ig cities> There
n&ine service is decent 4ut 4r*erage is nt that c,petitive>
? R%3"):% M&)%96 The< ca,e 5ith a 4ang 4ut &ate&< have &st a &t ! sheen !r, theirna,e> There have 4een &ts ! ?uestin a4ut their 4usiness practices>
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https://upstox.com/https://upstox.com/https://upstox.com/
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@ M&!"33 Os83 " These are ne ! the decent 4r*er perating in India> The< are a&s !u&&
service 4r*ers prviding ga,ut ! !inancia& service t the cust,er>
Kr9 " The< are ne ! the &dest 4r*ing huse perating in India> The< are the
4r*ers 5hich
>. I%#-$+!-;!-$ #$;**!*e+
• Dea&ing des* and &and &ine phnes
• Sa&es ta&ent and research tea, and e?uit< tea,
• Inte&&ectua& capita&+ specia&ied transactins
• C&ient Huire r,>
• Training and ,eeting r,>
• Dea&ers ca4in
• T7 !r share ,ar*et update 5atch
• Ca!eteria
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*. A;>*e?e'e%! A@$-+
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. W"-
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3. M;
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9. S These can 4edistinctive c,petencies pep&e+ ,anage,ent practices+ s This can 4e &earnt thrugh a SFOT Ana&
The c,petent s*i&&s ! the pep&e inc&ude gd c,,unicatin and presentatin s*i&&s+strng acade,ic recrd+ cnsistent in the per!r,ance &eve&s etc>
;. S!:e
St
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. S!-$!e&:
Set ut visin+ ,issin 4-ective and ,a-r actin p&ans and p&icies ! the rganisatin>These set ut picture ! the rganisatin in the !uture t The ,a-rareas ! strategic ga&s ! Anandrathi are"
38 Mar*eting Standing Desired share ! present and ne5 ,ar*ets+inc&uding areas in 5hich ne5 prducts areneeded and services ga&s ai,ed at 4ui&dingcust,er & At AnandRathi in Shiva-inagar the
prcedure !&&5ed is c&ear+ transparent and nt c,p&icated> The in!r,atin s The activities ! the !rnt end peratin inc&ude"
• 'ead !!ice ! Suth ne AnandRathi
• C&ient Advisr< Services
• Prcessing ! de,at accunt transactins
• Ne5 issue pr,tins>
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• Prt!&i Manage,ent ! NRI c&ients>
• Pr,tins activities !r pr,tins ! ne5&< arrived varius prducts
• ina&&< MIS reprting ! da< t da< transactins>
• Ad,inistratin accunting ! a&& !!ice peratina& epenses
At the !!ice da< t da< peratins inc&ude(
• Prcessing ! varius app&icatin !r,s ! de,at accunt IPOs and !r5arding the
sa,e t the 'ead !!ice>
• Prviding state,ent ! accunt t the varius investrs n re?uesting>
• Addressing re?uests !r nn(pa
• MIS reprting ! da< t da< transactins>
• Transactin ! accunts ! accunt h&ders are carried ut 4< dea&ers>
• Training ! Re&atinship Managers and ne5&< appinted individua&s
The tta& Hua&it< Cntr& S It iscnnected t NSD#+ CDS#+ NSE and BSE and he&ps stc* 4r*e trade n&ine> The
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• D pep&e have a shared understanding ! 5h< a c,pan< eistK
• D pep&e have a shared understanding ! the visin ! the c,panation and has its o"n "eaknesses.
;o! e-aple it a$ tend to pe!s'ade its 'se!s to copile lists !athe! than tothink ao't act'al ipo!tant facto!s in achie#in& o@ecti#es. +t also p!esents the
!es'ltin& lists 'nc!iticall$ and "itho't clea! p!io!iti>ation so that fo! e-aple"eak oppo!t'nities a$ appea! to alance st!on& th!eats.
+t is p!'dent not to eliinate an$ candidate )?T ent!$ too 'ickl$. Theipo!tance of indi#id'al )?Ts "ill e !e#ealed $ the #al'e of the st!ate&ies
the$ &ene!ate. A )?T ite that p!od'ces #al'ale st!ate&ies is ipo!tant. A
)?T ite that &ene!ates no st!ate&ies is not ipo!tant.
)?T ATR+
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https://en.wikipedia.org/wiki/Marketing_mixhttps://en.wikipedia.org/wiki/Personnelhttps://en.wikipedia.org/wiki/Financehttps://en.wikipedia.org/wiki/Manufacturinghttps://en.wikipedia.org/wiki/Macroeconomichttps://en.wikipedia.org/wiki/Technological_changehttps://en.wikipedia.org/wiki/Legislationhttps://en.wikipedia.org/wiki/Table_(information)https://en.wikipedia.org/wiki/Table_(information)https://en.wikipedia.org/wiki/Categorizationhttps://en.wikipedia.org/wiki/Marketing_mixhttps://en.wikipedia.org/wiki/Personnelhttps://en.wikipedia.org/wiki/Financehttps://en.wikipedia.org/wiki/Manufacturinghttps://en.wikipedia.org/wiki/Macroeconomichttps://en.wikipedia.org/wiki/Technological_changehttps://en.wikipedia.org/wiki/Legislationhttps://en.wikipedia.org/wiki/Table_(information)https://en.wikipedia.org/wiki/Categorization
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Breadth ! Services>
In &ine 5ith its c&ient( centric phi&sph Distri4utin
! ,utua& !unds+ IPs and Insurance prducts+ rea& estate+ invest,ent 4an*ing+ ,ergers and
ac?uisitins+ crprate advisr
In(Depth Research"
Our research epertise is at the cre ! the va&ue prprtin 5hat 5e !!er t ur c&ients>
Research tea,s acrss the !ir, cntinuus&< trac* varius ,ar*ets and prducts> The ai, is
h5ever c,,n t g !ar deeper than thers+ t de&iver incisive insights and ideas and 4e
accunta4&e !r resu&ts>
Strengths>
$&4a& parentage and epertise>
Eperienced senir ,anage,ent
Fr&d c&ass techn&g< and in!rastructure
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Strict ris* cntr& s
Mu&tip&e prducts under ne r!>
C,pan< 5ith 5e&& diversi!ied prt!&i>
Fea*ness
• Man< c,petitrs>
• Ine!!ective direct ,ar*eting strategies
• N g&4a& reach
• Fea* 4rand na,e>
• N Digita& ,ar*eting
Opprtunities
• T gra4 the gr5ing India ,ar*et>
• Scpe !r ta*ing 4usiness and ging g&4a&>
• Scpe !r increasing its 4ranch net5r* especia&&< in the i,prtant !inancia& centres
as 5e&& as etending its ph
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all ,!s 't especiall$ those "hich a!e di!ectl$ in#ol#ed in inte!national'siness. )e#e!al ,ndin&s 'estion the #al'e of ,!s hed&in& fo!e- !isk eca'se