A STUDY ON FOREIGN EXCHANGE Submitted By

T. SUNIL SINGH (HT.NO: 1251 0967 2029)

Project submitted in partial fulfillment for the award of degree of MASTER OF BUSINESS ADMINISTRATION

WESLEY POST GRADUATE COLLEGE

OSMANIA UNIVERSITY 2009 2011

ACKNOWLEDGEMENT

I would like to give special acknowledgement to Dr. B. Vimal Sukumar, I am great full to Mrs. Maheswari Associate professor in finance, Wesley

director, Wesley Post Graduate College for his consistent support and motivation.

Post Graduate College, for her technical expertise, advice and excellent guidance. She not only gave my project a scrupulous critical reading, but added many examples and ideas to improve it.

I am indebted to my other faculty members who gave time and again I would like to thanks to Mr. S. Satish Kumar, Relationship Manager of I would like to express my appreciation towards my friends for their A final word of thanks goes to everyone else who made this project

reviewed options of this project and provide many valuable comments. Indiabulls securities Limited.

encouragement and support through out this project. possible. Your contributions have been most appreciated.

DECLARATION
I T. SUNIL SINGH, a student pursuing M.B.A here by declare that the project report entitled A STUDY OF FOREIGN EXCHAGE with special reference to Hyderabad Stock Exchange (HSC) and National Stock Exchange of India (NSE) is my own work. This project report is submitted in partial fulfillment of the requirement for the award of Master of Business Administration degree Affiliated to OSAMANIA UNIVERSITY, Hyderabad for the year 2009 -2011. I also declare that the project is a result of my efforts and has not been submitted to any other university for award of any other degree or diploma.

T. SUNIL SINGH

CONTENTS
Chapter-I Introduction

Objectives Needs for the study Methodology of study Data collection method Sample Sample size Techniques of analysis Period of study Limitation of the study

Chapter-II

Review of literature

Chapter-III
INDUSTRY PROFILE

History of Forex Forex methodology Table & Chart of forex market turnover Forex advantages Structure of Foreign Exchange Market Currency future and options Exchange rates Table and classification rep of exchange Balance of payment accounting Modern theories of Exchange rates Volatility of Exchange rates Participants in forex market Classification of Forex Market

Chapter-IV

Profile of the organization

Chapter-V

Evolution of forex market in India

Chapter-VI

Analysis and Interpretation

Chapter-VII

CONCLUSION BILOGRAPH

CHAPTER - I

INTRODUCTION

The foreign exchange market (forex, FX, or currency market) is a world wide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies. The primary purpose of the foreign exchange is to assist international trade and investment, by allowing businesses to convert one currency to another currency. For example, it permits a US business to import British goods and pay Pound Sterling, even though the business's income is in US dollars. It also supports speculation, and facilitates the carry trade, in which investors borrow low-yielding currencies and lend high-yielding currencies, and which may lead to loss of competitiveness in some countries. In a typical foreign exchange transaction, a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market began forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system. The foreign exchange market is unique because of

Its huge trading volume, leading to high liquidity Its geographical dispersion Its continuous operation: 24 hours a day except weekends The variety of factors that affect exchange rates

As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks. According to the Bank for International Settlements, as of April 2010, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007.

The $3.98 trillion break-down is as follows:

$1.490 trillion in spot transactions $475 billion in outright forwards

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$1.765 trillion in foreign exchange swaps $43 billion currency swaps $207 billion in options and other products

Definitions

1. The simple definition of Foreign Exchange is the exchange of one currency for another. The foreign exchange market allows Companies, Banks and individuals to buy and sell foreign currency. Unlike other financial market, the foreign exchange market has no single location-trading is done globally via telephone and computer links. The forex market is huge: the trading volume is in excess of 1.9 trillion USD per day, providing the greatest liquidity to the investors. In the past small investors have limited access to the lucrative forex market. The inter bank market is no longer the exclusive domain of large players. Technological leaps (such as state of the art deal boo FX2 trading software) have opened up this exciting market to small speculations. Real-time inter bank dealing rates allow the trader to place a buy or sell order and see it executed within a fraction of a second. There are always buyers and sellers in the forex market. The market absorbs trading volumes. A trader is never struck in a position due to a lack of market interest, volume and/or liquidity.

2. When companies conduct business across borders, they must deal in foreign currencies . Companies must exchange foreign currencies for home currencies when dealing with receivables, and vice versa for payables. This is done at the current exchange rate between the two countries. Foreign exchange risk is the risk that the exchange rate will change unfavorably before the currency is exchanged.

3. An over-the-counter market where buyers and sellers conduct foreign exchange transactions. The Forex market is useful because it helps enable trade and transactions between countries, and it also allows an investment opportunity for risk seeking investors who don't mind engaging in speculation. Individuals who trade in the Forex market typically look carefully at a country's economic and political situation, as these factors can influence the direction of its currency. One of the unique aspects of the Forex market is that the volume of trading is so high, partially because the units exchanged are so small.

4. The Forex, and also known as "The Foreign Exchange" market exists wherever one currency is traded for another. It's the largest financial market in the world. Simply if we compare the New York Stock Exchange trades vs changing hands in forex, we will discover Forex market is a lot of times larger than both Equity and Treasury markets combined. 5. There are more and less popular pairs of exchange in the forex market.Euro Dollar is one of the most important pairs and you are likely to see it written in the form of EUR/USD on all forex display screens. There are of course other tradable pairs such as GPB/USD (British Pound/ American dollar), USD/JPY (American dollar/Japanese Yen), USD/CHF (American dollar/Swiss Franc). Yet, they are far less popular than the EUR/USD pair.

6. Foreign currency exchange, or Forex, is the largest financial market in the world. It is sometimes also referred to as the FX market. Traders speculate on the values of currencies, and they profit from accurate predictions in exchange rates. The Forex market has many characteristics that differentiate it from the trading process of other markets. But ultimately, the Forex market is a volatile, auctionbased system not unlike the stock market and other financial markets. Risks remain high.

By 2010 in excess of 25 million individuals like you will be trading currencies as a career

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The inter bank foreign exchange market(IBFXM or FOREX MARKET) is an international market place where trading takes place on the worlds major currencies such as the United States Dollar, the Swiss France EURO, The Japanese Yen, British Pounds. The currency market is made up of approximately 6000 trading institutions. International Banks, Government Central Bank, Commercial Companies, Brokerage firms and Individual Speculators. Forex trading is not bound to any one floor or specific market and is done electronically between networks of banks continuously over a 24-hour period there is no centralized location for trading activity and trading occurs over the internet at locations world wide. The advent of the internet has opened a whole new world for the small investors allowing them to trade this profitable market place on very sophisticated trading software and finally executed via a designated dealing desk. Foreign exchange rates affect every walk of life, not just financial market. Exchange rate movement can be significant for companies engaged in international trading, Exposed to revenues and costs in foreign currency, or completing with foreign firms. After years if a relatively Fixed exchange rate regime where the government would announce exchange rates daily, Asian countries, particularly Thailand, woke up one day and found their currency floating. And end to the fixed currency regime disrupted capital flow and put up local interest rate in short run leading to fell blow financial economic crisis. Most people are deeply shocked at the high volatility of floating exchange rates. The results were what began as turn oil in the currency market will have a serious impact on inflation, employment, investment and economic growth. Many wonder how can one live with a floating currency regime.

Market Scope graph

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The Foreign Exchange Market Today: The major currencies today move independently from other currencies. The currencies are traded by anyone who wishes. This has caused a recent influx of speculation by banks, hedge funds, brokerage houses and individuals. Central banks intervene on occasion to move or attempt to move currencies to their desired levels. The underlying factor that drives todays Forex markets, however, is supply and demand. The free-floating system is ideal for todays forex.

OBJECTIVE

Objectives of the Study

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To study the functioning and structure of foreign market. To study the exchange rate determination. To evaluate critically exchange control methods. To show volatility of foreign currency.

Needs for the study

Let us say that the businessman who operates in more than one country needs to understand not only the mechanism of the foreign exchange system, but also why changes in monetary values occur and how to cope with them. Foreign
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exchange is the monetary mechanism by which transactions in two or more currencies are affected. The development of foreign exchange practices and procedures is similar to that of internal monetary systems. In the beginning, trade took place on a barter basis. That had an obvious disadvantage: each of the parties in a transaction had to have something the other wanted. The basis of the alternative, a monetary exchange system, is a material that has an intrinsic value that is relatively stable and so is wanted by both parties in a transaction. The most common examples of such a material--- the medium of exchange--- are gold and silver. When both buyer and seller accept a medium of exchange, it becomes possible to dispose of goods or services. With the development of nations, each with its own monetary system, and international trade, a foreign exchange mechanism became necessary and was developed. By means of foreign exchange, goods produced in one country can be purchased in another country. Regardless of its direction, such an international transaction must be denominated in a currency other than that of either the seller or buyer; that is, one party to the transaction must either buy or sell a foreign currency. It does so through the international banking system, and the result is a foreign exchange transaction. The problem that then arises is convertibility, or the relative values of two different currencies. Methods and procedures that have been developed by central banks and internal banking systems are the means of effecting actual foreign exchanges. Commercial transactions, in turn, are effected through the banking system.

Methodology of Study

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For the preparation of any project report the collection of relevant data is very much essential there are basically two board methods for collecting data, which are followed in a new report these methods are 1. 2. Primary data collection. Secondary data collection.

Primary data is collected by meeting the concerned people through consultation of a personnel observation. Secondary data is collected from sites: NSEINDIA, FX MARKET TRACKER and X-RATES.

Data collection method

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Trading in foreign currencies is an complex procedure, and this foreign exchange is also called Forex or FX. In this market, currencies from the globe are traded, one against the next, which changes the trade values between them at various rates. Forex never shuts down, which contrasts from other markets, and the rates fluctuate constantly. Banks and additional financial institutions conduct these foreign currency exchanges, and every one has certain rates. Forex is one of the world's largest, most flexible markets, increasing in size each day. The transactions take place globally, with minimal control between countries. If a broker wants to generate an income in a market as complex as this, he will need to carefully watch the continual fluctuations. If the trader misses an essential fact, they could go through staggering monetary loss, from which they may not recuperate. Due to its intricate nature, scores of traders are now trying computerized software packages such as Forex robots. To be profitable, traders need well-defined information, accurate data collection, and the power to put together decisions based upon solid figures instead of gut feelings. Forex software is designed to decrease, or even eradicate, mistakes that can easily be made by humans. They can present thorough information, reducing the load of constant pressure that comes with trading in this elaborate market. These programs will incessantly watch the market and execute buying or selling decisions as programmed by the trader. This will be made even if the trader is not present.As of late, Forex robots are an enormously hot topic among traders. It is enormously demanding to settle on which computer program, out of the huge number of programs currently promising exceptional results, is going to be the most valuable. It is truly even doable for software to correctly survive this incredibly complex market? Using a Forex program can be quite useful in gathering information and providing detailed statistics, but it should only be used as a trading tool, rather than a trader replacement.

Sample

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From different currencys the samples are USD, GBP, EUR and JPY. USDINR - US Dollar. GBPINR - British Pound. EURINR - Euro. JPYINR - Japanese Yen. Sample size
Only four countries currencies are selected.

Techniques of analysis To calculate the volatility of prices the following formula is used for analysis purpose P1-P0\p0*100 Where P1 refer to price quoted today. P0 refer to yesterdays price.

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LIMITATIONS OF THE STUDY

The study was limited to only foreign currency. The data is compared and analyzed on the basis of performance of the forex currency rates over the past months. The required data available on net from 19th Oct 2010 to 29th Dec 2010. It was very difficult to obtain the date regarding the currency rates yielded by USDINR, GBPINR, EURINR and JPYINR.

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CHAPTER - II

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REVIEW OF LITERATURE
A forex (or foreign exchange) scam is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading "has become the fraud du jour" as of early 2008, according to Michael Dunn of the U.S. Commodity Futures Trading Commission. But "the market has long been plagued by swindlers preying on the gullible," according to the New York Times. "The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records" according to The Wall Street Journal. The North American Securities Administrators Association says that "off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud." "In a typical case, investors may be promised tens of thousands of dollars in profits in just a few weeks or months, with an initial investment of only $5,000. Often, the investors money is never actually placed in the market through a legitimate dealer, but simply diverted stolen for the personal benefit of the con artists." In August, 2008 the CFTC set up a special task force to deal with growing foreign exchange fraud. In January 2010, the CFTC proposed new rules limiting leverage to 10 to 1, based on " a number of improper practices" in the retail foreign exchange market, "among them solicitation fraud, a lack of transparency in the pricing and execution of transactions, unresponsiveness to customer complaints, and the targeting of unsophisticated, elderly, low net worth and other vulnerable individuals." The forex market is a zero-sum game, meaning that whatever one trader gains, another loses, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, technically making forex a "negativesum" game.

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These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits, improperly managed "managed accounts", false advertising, Ponzi schemes and outright fraud. It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment. The U.S. Commodity Futures Trading Commission (CFTC), which loosely regulates the foreign exchange market in the United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry. An official of the National Futures Association was quoted as saying, "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $350 million. From 2001 to 2007, about 26,000 people lost $460 million in forex frauds. CNN quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?" The foreign exchange market is unique because of its huge trading volume, leading to high liquidity; its geographical dispersion; its continuous operation: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday; the variety of factors that affect exchange rates; the low margins of relative profit compared with other markets of fixed income; and the use of leverage to enhance profit margins with respect to account size.

As such, it has been referred to as the market closest to the ideal of perfect competition, notwithstanding currency intervention by central banks. According to the Bank for International Settlements,[3] as of April 2010, average daily turnover in global foreign exchange markets is estimated at $3.98 trillion, a growth of approximately 20% over the $3.21 trillion daily volume as of April 2007.

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The $3.98 trillion break-down is as follows:

$1.490 trillion in spot transactions $475 billion in outright forwards $1.765 trillion in foreign exchange swaps $43 billion currency swaps $207 billion in options and other products.

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CHAPTER - III

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INDUSTRY PROFILE:
History of the Foreign Exchange Market The Foreign Exchange market also referred to as the Forex or FX as we know it today originated in 1973. Forex market is the largest financial market in the world, with a daily average turnover of well over US $ 1 trillion-30 times larger than the combined volume of all U.S. equity markets. Foreign Exchange is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollars/Japanese Yen(USD/JPY). There are two reasons to buy and sell currencies. About 5 % of daily turnover is from companies and government that buy and sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 96% is trading for profit, or speculation. For speculators, the best trading opportunities are with the most commonly traded(and therefore most liquid) currencies, called The Majors. Today, more than 85% of all daily transactions involve trading of the majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. In the 17th and 18th century, the use of silver Spanish dollars or pieces of eight spread from the mines in the Americas eastwards to Asia and westwards to Europe forming an early worldwide currency. Prior to and during most of the 1800s international trade was denominated in terms of currencies that represented weights of gold. Most national currencies at the time were in essence merely different ways of measuring gold weights (much as the yard and the meter both measure length and are related by a constant conversion factor). Hence some asserts that gold was the worlds first global
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currency. The emerging collapse of the international gold standard around the time of World War I had significant implications for global trade. In the period following the Bretton Woods Conference of 1944, exchange rates around the world were pegged against the United States dollars, which could be exchanged for a fixed amount of gold. This reinforced the dominance of the US dollar a global currency. Since the collapse of the fixed exchange rate regime and the gold standard and the institution of floating exchange rates following the Smithsonian Agreement in 1971, currencies around the world have no longer been pegged against the United States dollar. However, as the United States remained the worlds preeminent economic superpower, most international transactions continued to be conducted with the United States dollar, it has remained the de facto world currency. Money has been around in one form or another since the time of Pharaohs. Middle Eastern money changers were the first currency traders who exchanged coins from one culture to another. However, during the middle ages, the need for another form of currency besides coins emerged as the method of choice. The Babylonians are credited with the first use of paper bills and receipts. These paper bills represented third-party payments of funds, making foreign currency exchange trading (also referred to as forex or FX) much easier for merchants and traders. From the infantile stages of foreign currency exchange during the Middle Ages to WWI, the Forex markets were relatively stable and without much speculative activity. After WWI, the Forex markets became very volatile and speculative activity increased tenfold. From 1931 until 1973, the Forex market went through a series of changes-many of which have paved the way for the road ahead. The Forex market, as we know it today, originated in 1973. A true 24-hour market, Forex trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New york. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur-day or night. The FX market is considered and over the Counter(OTC) or Inter bank market, due to the fact that transactions are conducted between two counterparts over the

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telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.

DIFFERENT CURRENCY
Currency Name US Dollar Euro British Pound Japanese Yen Australian Dollar UAE Dirham Saudi Arabian Riyal Kuwaiti Dinar Candian Dollar South African Rand HongKong Dollor Malaysian Ringgit New Zealand Dollar Singapore Dollor Norwegian Krone Swiss Franc Swedish Krone Danish Kroners Thai Bhat Baharain Dinar Oman Rial Qatar Rial Chinees Yaun

USD EUR GBP JPY AUD AED SAR KWD CAD ZAR HKD MYR NZD SGD NOK CHF SEK DKK THB BHD OMR QAR CNY

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Forex Methodology
Foreign exchange is the principal market of the world. If you study any market trading through the civilized world everything is valued in money, the root of all pricing. Global finance is the distribution and re-distribution of money through out different channels and different financial derivatives. Trading spot currencies can be done with may different methods and you will find many types of traders. From fundamental traders speculating on mid-to-long term positions based on world wide cash flow analysis and fixed income formulas, to the technical trader watching for breakout patterns in consolidating market or the Gann, the methods for trading foreign exchange are many. Spot currencies are a great market for the Trader. It is where big boys trade and can provide both large profits potential as well as commensurate risk for the speculator.

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TABLE REPRASENTATION OF FOREX MARKET TURN OVER Semi-Annual Report of Foreign Exchange Turnover October 2008 Table 1 Foreign Exchange Turnover by Instrument Outright Spot Outright Forwards FX Swaps TRADITIONAL FOREIGN EXCHANGE TURNOVER OTC Options TOTAL TURNOVER Oct 2008 US$m 36,076 7,197 71,025 114,298 2,143 116,441 Apr 2008 US$m 30,377 7,084 70,434 107,894 2,529 110,423 Change over six months US$m % 5,699 18.8 113 1.6 591 0.8 6,403 5.9 -386 6,018 -15.3 5.4

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October 2009 Table 2 Foreign Exchange Turnover by Instrumenta,b Oct 2009 US$m Outright Spot 44,844 Outright Forwards 8,688 FX Swaps 92,801 TRADITIONAL FOREIGN 146,334 EXCHANGE TURNOVER OTC Options 2,735 TOTAL TURNOVER 149,068 Apr 2009 US$m 53,982 11,290 90,032 155,303 3,524 158,827 Change over 6 month US$m % -9,138 -16.9 -2,602 -23.0 2,770 3.1 -8,970 -5.8 -789 -9,758 -22.4 -6.1

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October 2010 Table 3 Foreign Exchange Turnover by Instrumenta,b Oct 2010 US$m Outright Spot 59,164 Outright Forwards 6,457 FX Swaps 68,573 TRADITIONAL FOREIGN 134,194 EXCHANGE TURNOVERb Currency Swaps 5,637 OTC Options 1,809 TOTAL TURNOVER 141,641 Apr 2010 US$m 33,840 5,724 80,335 119,899 2,377 1,885 124,161 Change over 6 months US$m % 25,324 75 732 13 -11,762 -15 14,294 12 3,260 -75 17,479 137 -4 14

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FOREX ADVANTAGES
Commission-Free Trading Though some speculators are unaware, all financial markets have a spread (the difference between the bid and ask price). In the Futures market you are not only paying the spread, but you are also paying commission charges, clearing and exchange fees on top of the spread, but you are also paying commission charges, clearing and exchange fees on top of the spread. Ticker prices in the Futures market typically signify the last traded price, not the spread. FX Solutions offers you commission-free trading on tradable prices. This allows you to make quick decisions on your Forex trades without having to account for fees that may affect your profit/loss or slippage between the price you have just seen on the ticker and the price upon which the order will be filled.

No Middlemen The stock markets are comprised up of a number of centralized exchanges. One of the problems with any centralized exchange is the involvement of middlemen. Any party located in between the trader and the buyer or seller of the security or instrument traded presents additional costs. The cost can be either in time or in fees. Spot currency trading does away with the middlemen and allows clients to interact directly with the market maker. Forex traders get quicker access and cheaper transaction costs. Highly Trending markets The Forex market offers some of the smoothest trends available in any market. No other market can come close to the amount of monetary volume and participation as the Forex market. In turn, this creates a haven for traders not having to deal with gaps and price movements, erratic spikes and other choppy market conditions more commonly experienced in the lower volume markets, like Futures or Options.
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Better Leverage One of the main advantages for traders trading Spot currencies is the leverage capability afforded to them. With margin policies as lenient as .25%, a trader is able to leverage up to 400:1. That is, a trader can control a $100,000 position for only $25. Keep in mind however, leverage is a double-edged sword and you should try to avoid overleveraging, as it magnifies both profits and losses. Execution Speed and Quality As a result of the unsurpassed liquidity in the spot FX market, the execution speed and quality is far superior to that of the Futures markets, and other markets as well. Every Futures trader has experienced periods of inconsistent execution and price uncertainty for example when even a market order was subject to a 30-minute fill delay. Despite electronic platforms and limited guarantees on execution in the Futures market, execution price and time is far from certain. In contrast, when trading on the GTS Platform, the price you see is a real-time streaming executable rate. A 24-Hour Market A trader may take advantage of all profitable market conditions at any time. There is no waiting for the opening bell. High Liquidity The Forex market with an average trading volume of over $1.5 trillion per day. It is the most liquid market in the world. It means that a trader can enter or exit the market at will in almost any market condition minimal execution marries or risk and no daily limit. Low Transaction Cost The retail transaction cost (the bid/ask spread) is typically less than 0.1% (10 pips or points) under normal market conditions. At larger dealers, the spread could be 3-4 pips.

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Uncorrelated to the stock market A trader in the Forex market involves selling or buying one currency against another. Thus, there is no correlation between the foreign currency market and the stock market. Bull market or a bear market for a currency is defined in terms of the outlook for its relative value against other currencies, In the out look is positive. We have a bull market in which a trader profits by buying the currency against other currencies. Conversely, if the outlook is pessimistic, we have a bull market for other currencies. In either case, there is always a good market trading opportunity for the trader. Short-Selling Unlike the equity market, there is no restriction on short selling in the currency market. Trading opportunities exist in the currency market regardless of whether a trader is long or short, or which way the market is moving. Since currency trading always involves buying one currency and selling another, there is no bias to the market. Hence, a trader has an equal access to trade in a rising or falling market. Inter-bank market The backbone of the Forex market consists of global network of dealers. They are mainly major commercial banks that communicate and trade with one another and with their clients through electronic networks and telephones. There are no organized exchanges serves a central location to facilitate transactions the way the New York Stock Exchange serves the equity market. The Forex market operates in a manner similar to the way the NASDAQ market in united states operates, thus it is also referred to as an over the counter(OTC) market. No one can cornet the market The Forex market is so vast and has so many participants that no single entity, not even a central bank, can control the market price for an extended period of time. Even interventions by mighty central banks are becoming increasingly ineffectual and short lived. Thus central banks are becoming less and less inclined to intervene to manipulate market prices.
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The RBI publish daily data on exchange rates, forwards premier, and foreign exchange turnover etc. In the Weekly Statistical Supplement (WSS) of the RBI Bulletin with a lag of one week. The movement in foreign exchange reserves of the RBI on a weekly basis is furnished in the same publication. The RBI also publishes data on Nominal Effective Exchange Rate (NEER) and Real Effective. Exchange Rate (REER), RBIs purchases and sales in the foreign exchange market along with outstanding forward liabilities on reserves etc.in the monthly RBI bulletin a time lag of one month since July 1998, the Reserve Bank of India starts publishing the 5 country trade based NEER and REER in addition to 36 country developing and industrial country central banks, the RBI has been publishing the size of its gross intervention (purchase and sale) each month and its net forward liability position.

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Forex vs Stocks
Historically, the majority of the general public has viewed the securities markets as an investment vehicle. In the last ten years securities have taken on a more speculative nature. This was perhaps due to the downfall of the overall stock market as many security issues experienced extreme volatility because of the irrational exuberance displayed in the market place. The implied return associated with an investment was no longer true. (If indeed it ever was). Many traders engaged in the day trader rush of the late 90s only to realize that, from a leverage stand point, it took quite a bit of capital to day trade, and the return while potentially higher than long-term investing was not exponential. After the on set of the day trader rush, many traders moved into the futures stock index markets where they found they could leverage their capital greater and not have their capital tied up when it could be earning interest or making money some where else. Like the futures markets, spot currency trading is an excellent vehicle for pattern day traders who desire to leverage their current capital to trade. Spot currency or Forex trading provides more options, greater volatility and stronger trends than currently available in stock futures indexes. Former securities day traders have an excellent home in spot foreign exchange (Forex).

STRUCTURE OF FOREIGN EXCHANGE MARKET

The main players in the foreign exchange market are large commercial banks, Forex brokers large corporation and central banks. The cetral banks normally enter the market to smoothen out fluctuation in the exchange rate or to maintain fixed exchange rates. Large commercial banks deal in the market both for executives, their clients (Both corporate and individuals) order and on their own account. They act as market makers i.e., they stand ready to buy or sell their currencies at specific

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prices all points of times. Commercial banks give on demand a quote for a particular currency against another currency. That is the rate at which they are ready to buy or sell the former against the latter. At these rates they stand ready to take any side of the transaction (Buy or Sell) that the customer choose maximum amount of the currencies acceptable to the bank, through not specified at the time of making a quote, generally understood according to the conventions of the markets. This may not necessarily be applicable to amounts smaller or larger than those acceptable according to the going conventions. In the foreign markets, those are numerous market makers and all of them would be giving different quotes for the same pair of currencies simultaneously at any point of time. It would be very difficult for a player to keep of all the quotes available in the market and hence choose the one that is considered the most favorable. As a result a number of traders may be taking the place simultaneously at different exchange rates. The market making activity of commercial banks along with speculation makes markets extremely liquid, especially for the major currencies of the world. The foreign exchange brokers do not actually buy or sell any currency. They do the work of bringing buyers and sellers together. They deal in most of the major currencies and would exhaustive information about it. Other players in the markets, especially Commercial banks approach the brokers for information about the quote of other commercial banks. The brokers serve these important purposes in foreign currencies First is that instead of hunting around in the market for quotes, one can approach a broker and find out these prices. Second are those brokers helping the prospective buyers or seller keep their identity secret till the deal is struck? This prevents the quote being affected by the inquirers position that is whether he needs to buy or sell. Lastly, even when keep tier quote from going too far away from the quotes by other banks by inquiring about that market quotes form the brokers. While small corporations generally approach commercial banks for their needs, large corporation sometimes operates in the market on their own.

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Participants in Forex Market Any one who exchange currency of one country with another or needs such services is said to participants in forex market. The main players in forex market are: a) Customers: The customers who are engaged in foreign trade participate in foreign exchange market by availing the service for the agencies under taking foreign exchange operation. It includes individuals, tourists, importers, investors, and exporters investment managers and corporate treasures who exchange domestic for foreign currency and vice versa. b) Commercial banks: They are most active players in the forex market. Major commercial banks dealing with international transactions offer services for conversion of one currency into another. They are a wide network of branches/corresponding banks all over the world enabling them to under take international transactions in an efficient manner. c) Central banks: The central banks in most of the countries have been charge with the responsibilities of maintaining the external value in the foreign market. When the market rate of the currency reaches the upper lines called as Upper Intervention Point the central banks of that country must increased the sale of its own currency in exchange of the other currencies.

Similarly, the central banks must sale foreign currencies and buy its own currency when the market rate reaches the lower line called Lower Intention Point. d) Exchange Brokers:

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Forex brokers play a very important role in the forex market. However, the extent to which services of Forex brokers are utilized depends on the tradition and practice prevailing at a particular Forex market center. e) Speculators: Central banks, commercial banks, corporate and individuals who under take activity of buying and selling of foreign currencies for booking short-term profit by taking advantages of exchange rate movement are known as speculator. f) Commercial Companies: An important part of this market comes from the financial activities of companies seeking foreign exchange to pay for goods or services. Commercial companies often trade fairly small amounts compared to those of banks or speculators, and their trades often have little short term impact on market rates. Nevertheless, trade flows are an important factor in the long-term direction of a currencys exchange rate. Some multinational companies can have an unpredictable impact when very large positions are covered due to exposures that are not widely known by other market participants. g) Investment management firms: Investment management firms(Who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. For example, an investment manager with an international equity portfolio will need to buy and sell foreign currencies in the spot market in order to pay for purchases of foreign equities. Since the forex transactions are secondary to the actual investment decision, they are not seen as speculative or aimed at profit-maximization.

CLASSIFICATION OF FOREX MARKET The foreign exchange market is classified into two that is as a spot market of forward market.

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SPOT MARKET: In spot market, currencies are traded for immediate delivery at a rate existing on the day of transaction. If currency is delivered at the same day it is known as the value-same-day-contract. If it is done the next, the contract is known as valuenext-day-contract. Most of the markets do the transfer of funds electronically thus savings time and energy. The system existing in New York is known as clearing house inters bank payment system (CHIPS). The spot market covers spot quotations, transactions costs, and the mechanics of trading.

SPOT QUOTATION: Almost all major newspapers prints a daily list of exchange rates. For major currencies, up to four different quotes (prices) are displayed. One is the spot price and the other include the 30-day, 90-day, 180-day forward prices. These quotes are for trades among the dealers in the inter market. In their dealing with non-blank customers, banks in most countries use a system of DIRECT QUOTATION. A direct exchange rate quotes give the home currency price of certain quantity of foreign currency quoted. There are expectations to this rule, through banks in Great Britain quote the value of pound sterling in terms of foreign currency. This method of INDIRECT QUOTATION is also used in United States for domestic purposes and for the Candian dollar.

TRANSACTION COST:

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The bid-ask-spread that is, the spread between bids and ask rates for a currency-is based on the breadth and depth of the market for that currency as well as on the currencys volatility. This spread is usually stated as a percentage cost of transacting in the foreign exchange market, which is computed as follows:

Percentage spread = (ask price-bid price)/ ask price*100

FORWARD MARKET: In forward market contracts are made to buy and sell currencies for future deliveries say, after a fort night, two month and so on. The rate of exchange for the transactions agreed upon the every day the deal is finalized. The forward rates with varying maturity are quoted in the newspapers and those rates from the basis of the contract. STRUCTURE OF FOREX CURRENCY FUTURES AND OPTIONS

Currency futures: Contract for future delivery of a specific quantity of given currency, with the exchange rate fixed at the time the contract is entered. Futures contacts are similar to the forward contracts expect that they are traded on organized future exchange and the gains and loses on the contracts are settled each day.

Advantages and Disadvantages of Future Contracts:

40

The smaller size of a futures contract and the freedom to liquidate the contract at any time before its maturity in a well-organized futures market differentiate the future contracts from the forward contract. These features of future contract attract many users. On the other hand, the limited number of currencies traded, the limited delivery dates, and the rigid contractual amounts of currencies to be delivered are disadvantages of the futures contract to many commercial users. Only by chance will contracts exactly to corporate requirements. The contracts are of value mainly to only those commercial customers who have a fairly stable and stream of payments or receipts in the traded foreign currencies. Currency Options: Overview: A currency option is no different form a stock option except that the underlying asset id foreign exchange. The basic premises remain the same. The buyer of option has the right but not no obligation to enter into a contract with the seller. Therefore the buyer of a currency option has the right, to his advantage, to enter into the specified contract. In every currency transaction one currency is brought and another is sold. For example an option to buy US dollars (USD) for Indian Rupees (INR) is an USD call and an INR put. Conversely, an option to sell USD for INR is an USD put and an INR call. The other basics like strike price, expiration period, American style or European style are similar to stock options. Quotation of a Currency Option can be done in two ways: American or direct terms, in which a currency is quoted in terms of the Indian Rupees per unit of foreign currency, and European or inverse terms, in which the Rupees is quoted in terms of units of foreign currency per rupee. The same applies to situations where the Indian Rupee is not one of the currencies. Option Pricing: The premium quoted for the particular option at a particular time represents a consensus of the options current value which is comprised of two elements that
41

are intrinsic value and time value. Intrinsic value is simply the difference between the spot price is above the strike price. Options, which have positive intrinsic value, are said to be In-the-money. When the price of a call or put option is greater than its intrinsic value, it is because of its time value. Time value is determined by five variables, the spot or underlying price, the expected volatility of the underlying currency, the exercise price, time to expiration, and the difference in the risk-free rate of interest that can be earned by the two currencies. Time value falls toward zero as the expiration date approaches. An option is said to be Out-of-the-money if its price is comprised only of time value. A variety of complex option pricing models such as Black-Schools and Cox-Rubin stein have been developed to determine option pricing. Another commonly used model for currency option valuation is the Garmen-Kohlhagen model. Interest rate differentials between nations and temporary supply/demand imbalances can also have an effect on option premiums. In the final analysis, option prices (Premiums) must be low enough to induce potential buyers to buy and high enough to induce potential option writers to sell. Types of Options: Apart from the normal call and put the following are a few basic types of currency options. In real life most of the potions are combinations of these basic types.

Knock-out Options: These are like standard options except that they extinguish or cease to exit if the underlying market reaches a pre-determined level during the life of the option. The knockout component generally makes them cheaper than a standard call or put. Knock-in Option:

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These options are the reserve of knockout options because they dont come into existence until the underlying market reaches a certain pre-determined level, at this time a Call or Put option comes into life and takes on all the usual characteristics. Average Rate Options: The options have their strikes determined by an averaging process, for example at the end of every month. The profit or loss is determined by the difference between the calculated strike and the underlying market at expiry. Basket Options: A basket option has all the characteristic of a standard option, except that the strike price is base on the weighted value of the component currencies, calculated in the buyers base currency. The buyer stipulates the maturity of the option, the foreign currency amounts which make up the basket, and the strike price, which is expressed in units of the base currency. CURRENCY OPTIONS IN INDIA: Currency option are new comers in the Indian scenario. The Reserve Bank of India (RBI) allowed trading in rupee options from July 7th, 2003. The timing could not been more appropriate with the government having a comfortable Forex reserves position and markets mature enough to be able to exploit the opportunity. On the first day it witnessed brisk activity (trading volumes of $ 200-250 million with foreign as well as Indian banks like Standard Charted, HSBC, ABN Amro, SBI, IDBI, ICICI, bank and inducing entering into major transactions, Big corporate houses like Reliance, HCL, Murugappa and L&T were also not far behind. Before the introduction of currency options the Indian corporate had only two alternatives, either to enter into a forward contract or leave the exposure open. The problem with forwards is that they are price fixing agreements and deny any gains of favorable movement in the market. Leaving the exposure open subjects them to the mercy of the market.

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Options are like insurance contracts, they protect you from the downside at the same time allowing you to reap the benefits of any upside. Allowing Rupee options would introduce greater flexibility in risk management of corporate and cost control.

EXCHANGE RATE CLASSIFICATION Following are the different types of possible exchange rate regimes and how they work. Single Currency PEG: The country pegs to a major currency-usually the US & dollar of the French with infrequent adjustment of the of the parity. Composite PEG: The country pegs to a basket of currencies of major trader partners to make the pegged currency more stable than if single currency peg were used. The weight assigned to the currencies in the basket may reflect the geographical distribution of trade, services of capital flows. This may also be standardized, as in the case of SDR and the European currency units.

LIMITED FLEXIBILITY VIS--VIS A SINGLE CURRENCY: The value of currency is maintained with in certain margins of the peg.

LIMITED FLEXIBILITY THROUGH CO-OPERATIVE ARRANGEMENT: This applies to countries is the exchange rate mechanism of the European system (EMS) and is a cross between a peg of Individual EMS currencies jointly VIS-VIS no-EMS currencies.
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GREATER FLEXIBILITY THROUGH ADJUSTMENT TO AN INDICATION: The currency is adjusted more or less automatically to change in selected indicators. A common indicator is the real effective exchange rate, which reflects inflation-adjusted changes in the currency VIS--VIS major trading partners.

GREATER FLEXIBILITY THROUGH A MANAGED FLOAT: The central bank sets the rate but varies it frequently indicators for adjusting the rate include for example the balance market developments adjustment are not automatic.

FULL FLEXIBILITY THROUGH AN INDEPENDENT FLOAT: Rated are determine by market forces some industrial countries have except for EMS countries-but the no. of developing countries in this category has been increasing in recent years.

TABLE FOR THE EXCHANGE RATES OF INDIA CURRENCY WITH FOREIGN CURRENCIES
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Indian Rupee American Dollar Australian Dollar Brazilian Real British Pound Canadian Dollar Chinese Yuan Danish Krone Euro Hong Kong Dollar Japanese Yen Malaysian Ringgit Mexican Peso New Zealand Dollar Norwegian Kroner Singapore Dollar South Korean Won Sri Lanka Rupee Swedish Krona Swiss Franc Taiwan Dollar Thai Baht Venezuelan Bolivar 0.0220751 0.0291382 0.0471854 0.0471854 0.0249029 0.174351 0.131168 0.0131168 0.171777 2.634 0.0811038 0.239503 0.0333007 0.148141 0.0348035 21.1766 2.32892 0.161991 0.0279912 0.734437 0.822517 47.3422 45.20 39.19 21.193 70.26 41.85 5.85 8.13 61.84 5.67 0.51 12.61 4.17531 30.86 7.47 31.18 0.1472219 0.429384 6.17318 42.12 1.36159 1.31 0.02211228

TOP 10 CURRENCY TRADERS IN THE WORLD

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CURRENCY RATES BALANCE OF PAYMENT ACCOUNT The motivation for publishing the balance of payments is not a desire of govt. statistical to maintain a record of the factor behind the supply of and demand for an currency. Rater, the account is published to report the countrys international performance in the trading with other nation and to maintain a record of the volume of capital flowing in and out of the country. How ever, reporting in a countrys international trading performance and capital flow involves measurement of all the reasons a currency is supplied and demanded. This is what mades the BOP account such a handy way of thinking about what should be considered in the theory of exchange rates.

PRINCIPALS OF BALANCE OF PAYMENT ACCOUNTING The guiding principal of balance of payment of payment comes from the purpose of the account, namely to record the flow of payment between the residents of a country and the rest of the world during a given time period make the account dimensionally the same as the national income. National income account a flow of so much per year or per calendar quarter and indeed the part of the balance of payment that record the value of export and import appears in the national income account. Balance of payment accounting uses the system of double entry book keeping, Wish means that every debt or credit in the account is also rep as the credit or debit some where else.

THE ROLE OF PAYMENTS ACCOUNT IS AS FOLLOWS:

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Credit transaction represent demands for US $ and result from purchases by foreigners of goods, services, goodwill, financial and real assets, gold, or foreign exchange form US resident. Credits are recorded with a plus symbol. Debt transactions represent supplier of US $ and result from purchases by US residents of goods, services, goodwill, financial and real assets. Debits are recorded with negative sign.

COMPONENTS OF THE BALANCE OF PAYMENT ACCOUNT:

o o

The Current Account The Capital Account

The Current Account: The account records all the income related flows. These flows could arise on account of trading goods and services and transfer payments among countries trade in goods consists of exports and imports. It is also referred to as merchandise trade. As explained earlier, A countries export, i.e., Sales of goods resident of another country are a source of reserve.

The Capital Account: The capital account records movements on accounts 3 of international purchase of sale of assets. Assert include any form in which wealth may be held as cash or in the form of bank deposits, shares and debentures .Other debt instruments, real asset, land, factories, antique. The excess of the credits over debits in this account over a particular period is referred to as the capital account surplus. The excess of debits over credits is known as capital accounts deficit.

MODERN THERIES ON EXCHANGE RATES

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The Asset Approach: This approach is also referred to as the efficient market hypothesis approach. It does not talk about the effect of change in the basic economic variable on the exchange rates. According to this approach, what ever changes are expected to occur in the value of currency in future gets reflected in the exchange rate immediately. This theory stats that new information about the factor likely to affect exchange rates come to the market in a random manner. Through their profit-maximizing activities, the participants ensure that the market quickly absorbs all available information. There is one category of players in the currency in the currency markets, through, whose aim is to maximize their profits. This approach explains the implications of fiscal and monetary policy on exchange rates. Since a fiscal deficit is expected to increase the money supply levels some time in the future, an increase fiscal deficit is likely to trigger off an immediate increase in the money supply. Similarly, an increase in the money supply through the monetary policy would cause currency to depreciate immediately.

Monetary Approach: These stock models are based on IS/LM/Phillip Curve paradigm. Basically the theories are based on finding the exchange rate which the available amount of currency supply is equal to the demand to hold the currency. 1. Mundell-Fleming Model:

The theory considers three markets: Money, asset and goods market under profit price flexibility in long run. One implication is devalution may lead to further devaluation if fiscal discipline, inflation and balance of payments are not well managed. Another is that the higher the degree of re-export processing industry

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the country has, the lower the impact of devaluation for current account improvement. 2. Monetarist Model:

This concept implies that the exchange rate level is perfectly correlated with the level of the relative money supply in long run. In a stationary economy, the relative money growth rate would be zero and the exchange rate expectation would play a trivial role. Postulated in an inflationary and/or high growth economy, this explains why a foreign exchange rate market may be characterized by a self-fulfillment prophecy. When the money supply becomes stochastic, rational expectation and accuracy of market information play an important role in interemporal analysis.
3.

Sticky price Model:

When a currency is devalued and the price of goods remain fixed for short run, but not in the long run, the currency value may over short. A balance of payment crisis, extended from the model, is the equilibrium outcome of maximizing behavior by rational agents faced with a fundamental inconsistency between monetary and exchange rate policies. One implication can be in a gametheoretic perspective in policy implementation. In a player has little information on other players payoffs. There is no reason to believe everyone would act together to reach the desired outcome in a single step. Good government coordination as a signal. THE PORTFOLIO BALANCE APPORACH The portfolio balance approach states that the value of currency is determined by two factors- the relevant demand and supply of money and the relevant demand and supply of bonds. According to this approach, people can hold asset across different countries, denominated in different countries. Any change in exchange rates change the wealth of shareholders of these assets, whish becomes an instrument for maintaining equilibrium in money and bond markets. The theory provides an explanation for the change in the value of a currency arising from a change in the real GNP. A higher real GNP result in the higher demand for both money bonds. Both the shifts results in an appreciation of the
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currency, which is higher than that predicted by the monetary theory.

VOLATILITY IN EXCHANGE RATES: Volatility is expressed as the standard deviation of daily percentage change in the rate of the understanding currency. It is started as per percentage. The longer the volatility, the larger is the chance for the spot rate moving in to the in-the-money zone and greater is the value of the option. Vega express the impact of volatility on the options value. In other words. Vega = Change in premium/Change in vitality. However the problem is that is that it is difficult to know the extent of vitality in advance. The traders base their forecast on historical data but that is not always correct because the change in the spot rate are influenced by a number of economic and no-economic factor that may not happen to exit in the future.

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CHAPTER - IV

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COMPANY PROFILE

Introduction Indiabulls is Indias leading Financial, Real Estate and Power Company with a wide presence throughout India. They ensure convenience and reliability in all their products and services. Indiabulls has over 640 branches all over India. The customers of Indiabulls are more than 4,50,000 which covers from a wide range of financial services and products from securities, derivatives trading, depositary services, research & advisory services, consumer secured & unsecured credit, loan against shares and mortgage & housing finance. The company employs around 4000 Relationship managers who help the clients to satisfy their customized financial goals. Indiabulls entered the Real Estate business in the year 2005 with its group of companies. Large scale projects worth several hundred million dollars are evaluated by them. Indiabulls Financial Services Ltd is listed on the National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange. The market capitalization of Indiabulls is around USD 2500 million (29thDecember, 2006). Consolidated net worth of the group is around USD 700 million. Indiabulls and its group companies have attracted USD 500 million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.

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Growth of Indiabulls Year 2000-01: One of Indias first trading platforms was set up by Indiabulls Financial Services Ltd. with the development of an in-house team. Year 2001-03: The service offered by Indiabulls was increased to include Equity, F&O, Wholesale Debt, Mutual fund, IPO Financing/Distribution and Equity Research. Year 2003-04: In this particular year Indiabulls ventured into Distribution and Commodities Trading business. Year 2004-05: 2004. Indiabulls started its Consumer Finance business. Indiabulls entered the Indian Real Estate market and became the first Indiabulls won bids for landmark properties in Mumbai. This was one of the most important years in the history of Indiabulls. Indiabulls came out with its initial public offer (IPO) in September In this year:

company to bring FDI in Indian Real Estate. Year 2005-06: In this year the company acquired over 115 acres of land in Sonepat for residential home site development. The world renowned investment banks like

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Merrill Lynch and Goldman Sachs increased their shareholding in Indiabulls. It also became a market leader in securities brokerage industry, with around 31% share in Online Trading. The worlds largest hedge fund, Farallon Capital and its affiliates committed Rs. 2000 million for Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance Ltd. In the same year, the Steel Tycoon Mr. L N Mittal promoted LNM India Internet venture Ltd. acquired 8.2% stake in Indiabulls Credit Services Ltd. Year 2006-07: In this year, Indiabulls Financial Services Ltd. was included in the prestigious Morgan Stanley Capital International Index (MSCI). Indiabulls Financial Services Ltd. was benefited with the Farallon Capital agreeing to invest Rs. 6,440 million in it. The company also received an in principle approval from Government of India for development of multi product SEZ in the state of Maharashtra. Indiabulls Financial Services Ltd acquired 100% of the equity share capital of Noble Realtors Pvt. Ltd. Noble Realtors is a Company engaged in the business of construction and development of real estate projects. Indiabulls Real Estate Business was demerged to become a separate entity called Indiabulls Real Estate Ltd. The Board of Indiabulls Financial Services Ltd., Resolved to Amalgamate Indiabulls Credit Services Ltd and demerge Indiabulls Securities Limited. Indiabulls Financial Services Ltd Year 2008-09: Several developments across its group companies have propelled indiabulls forward and are expected to continue to power the rise of this conglomerate. Indiabulls financial services limited has recently signed a joint venture agreement

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with sogecap, the insurance arm of Societe Generale (SocGen) for its upcoming life insurance venture. At the same time it has also signed a Memorandum of understanding with MMTC. On the asset management front, the company has received formal approval uhby7hbfrom SEBI and is expected to shortly launch its first NFO. Indiabulls enter in to Public issue for his Indiabulls power Ltd.

Promoters for Indiabulls Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal Are the promoters of Indiabulls Financial Services Limited. While Sameer Gehlaut will have a 23.0% stake in the company post the IPO Rajiv Rattan and Saurabh Mittal will have a post issue holding of 11.5% and 10.1% respectively. All the three promoters of the company are engineering graduates while Saurabh Mittal is a management graduate as well.

Sector

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Since Indiabulls derives most of its revenues from the brokerage business, its fortunes are very much dependent on the Performance of the capital markets, i.e. debt, derivative and equity markets. The Indian equity markets have grown from strength to strength in the last decade with combined daily volumes of all segments on the BSE and the NSE touching Rs 232 bn in April 2004, from Rs 5 bn in FY96. Total shareholders in the country are over 20 m (2% of population) and this is the third largest after the US and Japan, in absolute terms. However, if one were to compare the percentage of all households in India that are invested in the stock markets, it is only about 1.9% as compared to an estimated 52%(including indirect ownership by way of mutual funds) of all households in the US. This highlights the long-term potential for the sector. to apply The Team:

Indiabulls Securities Ltd, main strength lies in its formidable team. This team comprising highly qualified and experienced personnel has been responsible for the overall management of the company and has provided direction in diverse areas of business strategy, operating management, regulatory reporting, human resources development and product development.

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Senior Vice President Yuv Raj Singh

Regional Manager Dashmeet Singh Branch Manager Senior Sales Manager Sujeet Roy Chowdary

Support System Vishal

Sujeet Roy Chowdary

Sales Function Subrot

Back Office Executive Ifran Khan

Local Compliance Officer Chary

RM/SRM Satish Kumar S

ARM Raja

Dealer Badri Nath

Vision statement: To become the preferred long term financial partner to a wide base of customers whilst optimizing stake holders value Mission statement: To establish a base of 1 million satisfied customers by 2010. We will create this by being a responsible and trustworthy partner Corporate action: An Approach to Business that reflects Responsibility, Transparency and Ethical Behavior. Respect for Employees, Clients & Stakeholder groups Indiabulls Group entities in India
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Indiabulls Capital Services Ltd. Indiabulls Commodities Pvt. Ltd. Indiabulls Credit Services Ltd. Indiabulls Finance Co. Pvt. Ltd Indiabulls Housing Finance Ltd. Indiabulls Insurance Advisors Pvt. Ltd. Indiabulls Resources Ltd. Indiabulls Securities Ltd. Indiabulls Power Ltd.

Indiabulls Securities Ltd is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) and its global depository shares are listed on the Luxembourg Stock Exchange Reasons to choose Indiabulls Securities Ltd: The Indiabulls Financial Services stock is the best performing stock in the MSCI Index the global benchmark for equity investments A person who bought Indiabulls shares in the IPO at Rs. 19 (US$ 0.48) in September 2004 has been rewarded almost 100 times in three and a half years a feat unparalleled in the history of Indian capital markets Indiabulls Real Estate Limited partnered Farallon Capital Management LLC of the US to bring the first Foreign Direct Investment into real estate

Seven Reasons why investing with Indiabulls Securities Limited is

smarter

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1) Customization: Formulates investment plans based on customer individual requirements 2) Expertise: Brings within customer reach, about institutional expertise and companies valuable understanding of the financial markets 3) One-stop shop: Caters to all customers investment needs under one roof. 4) Trust: Enjoys the pedigree of Indiabulls Securities Ltd and share its expertise in financial services. 5) Personalized service: Helps customer through the entire investment process, step by step, with innovative and efficient services. 6) Unbiased & Objective advice: We partner you in your investment process, with our team of expert investment advisors Reasons to apply Online trading potential is huge: Online trading accounted for 5% of overall market in FY04 as compared to an estimated 3% in FY03. Indiabulls currently has almost 20% market share of volumes in the Internet trading space. The table below indicates the growth in volumes of the Internet trading segment on the NSE over the last few years. The growth is indicative of the potential of this segment, which we believe is likely to be robust going forward as well. This is primarily driven by increasing penetration of computers, significant decline in Internet charges, convenience of usage and cost advantage. To put things in perspective, the offline brokerage on equities is around 1.0% as compared to 0.5% in the online trading space.

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NSE online trading statistics...

Enabled members*Registered clients* Trading Value (Rs bn)% of total trading value FY00 3 FY01 61 FY02 82 FY03 CM 80 F&O** 13 FY04 CM 70 F&O** 14

123,578 231,899 346,420 69,340 413,454 164,642

73 81 154 51 379 430

0.5 1.6 2.5 1.4 3.5 2

CM: Cash Market, F&O: Futures and Options market * At the end of the financial year ** trading value for F&O segment compiled from June 2009 Advisory services: Indiabulls is also into mutual fund and insurance advisory businesses. Though this field is extremely competitive and requires significant research skills, these are highly profitable business segments. Though these businesses currently account for an insignificant portion of overall revenues, considering the penetration levels of mutual funds and insurance in the country, prospects are promising. Aggressive growth plans: Indiabulls has set aggressive targets to expand its business in the offline space. This includes investments in upgradation of branch network and opening another 75 branches by the end of calendar year 2009 (150 in total). The company has also indicated its intent to acquire strategic stake in other companies towards growing the business inorganically Products provided Power Indiabulls An online trading system designed for the high-volume trader. The platform provides enhanced trade information and executes orders on an integrated software based trading platform.

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Indiabulls financial service offers: ? SME finance ? Mortgage loans ? Commercial vehicle loans ? Farm equipment loans ? Commercial credit loans ? Loan against shares and ? Third part distribution of insurance products.

Broking:

Equity, Derivatives, Commodities, Currency Derivatives.

Distribution: Mutual funds, IPOs, Home loans, Insurace.

Divisions: Investment Advisory and Broking? Division Project Syndication Division? Institutional Equity Broking? Division Institutional Debt Broking? Division

Retail Offerings:

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? Wealth Management Services ? Portfolio Management Services ? Securities Broking-Equities and derivatives ? Depository & Custodial Service & Distribution of financial . Products. .

Services: Indiabulls securities provides a wide range of services that include Power Indiabulls: An online trading system designed for the high-volume trader. The platform provides enhanced trade information and executes orders on an integrated software based trading platform. 1) Equities 2) Commodities 3) Wholesale debts 4) Futures and options 5) Depository services 6) Equity research services 7) Post Trade -Custodial, 8) Depository Services 9) Payment Gateway 10) Other back office support Online Banks Tie-ups for trading:

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Company having online transaction tie-ups with banks like HDFC BANK, ICICI BANK, IDBI BANK, CITI BANK. Company Achievements: The Indiabulls Group is one of the top fifteen conglomerates in the country with businesses in several significant sectors. The Indiabulls Financial Services stock is the best performing stock in the MSCI Index the global benchmark for equity investments. Indiabulls Real Estate Limited partnered Farallon Capital Management LLC of the US to bring the first Foreign Direct Investment into real estate. Indiabulls Financial Services Limited was accorded the highest rating P1+ for short term debt and the highest rating of AAA (SO) by CRISIL for loan receivables securitization while Indiabulls Securities Limited is the only broker in India to be assigned CRISILs highest broker quality grading of BQ1. In December 2007, Indiabulls acquired Pyramid Retail including Piramyd Megastores and Trumart, their chain of lifestyle and convenience outlets

Company competitors

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Kotak Securities Ltd, ICICI Securities Ltd, HDFC Securities Ltd, Religare Securities Ltd, Birla Money, Indiainfoline Ltd.

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ABOUT INDIABULLS GROUP

The Indiabulls Group is one of the top fifteen conglomerates in the country with businesses in several significant sectors. The group companies have a market capitalisation of over Rs. 25,000 crore (US$ 6.25 billion) while group revenues have grown at a cumulative annual rate of over 100% to now reach Rs. 3100 crore (US$ 775 million) and the group profit has surged to over Rs. 1200 crore (US$ 300 million). Its companies, listed in important Indian and overseas markets, have distributed over Rs. 700 crore (US$ 175 million) as dividend in the year 2008. Indiabulls Financial Services Limited was accorded the highest rating P1+ for short term debt and the highest rating of AAA (SO) by CRISIL for loan receivables securitisation while Indiabulls Securities Limited is the only broker in India to be assigned CRISILs highest broker quality grading of BQ1. In December 2007, Indiabulls acquired Pyramid Retail including Piramyd Megastores and Trumart, their chain of lifestyle and convenience outlets Indiabulls growth has been nothing short of stupendous. In less than eight years since the company was first registered, it has grown from just five employees to 21,000 and from one office to 600 across the country The Indiabulls Financial Services stock is the best performing stock in the MSCI Index the global benchmark for equity investments. A person who bought Indiabulls shares in the IPO at Rs. 19 (US$ 0.48) in September 2004 has been rewarded almost 100 times in three and a half years a feat unparalleled in the history of Indian capital markets Indiabulls Real Estate Limited partnered Farallon Capital Management LLC of the US to bring the first Foreign Direct Investment into real estate.

Companies History in India

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In 1999, three IIT-Delhi alumni Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal acquired Orbis,a Delhi based stock broking company. Young entrepreneur Sameer Gehlaut established Indiabulls in 2000, after acquiring orbis Securities, a stock brokerage company in Delhi. The group started its operations from a small office near Hauz Khas bus terminal in Delhi.The office had a tin roof and two computers. The idea of leveraging technology for trading stocks led to the creation of Indiabulls Incorporated on 10th January 2000, it was converted into a public limited company on 27th February 2004. Its original idea of leveraging technology bore fruit when Indiabulls was accorded permission to conduct online trading on Indian stock exchanges. The company had achieved the distinction of becoming only the second brokerage firm in India to be granted this consent. The challenges facing it were immense not least of all the mind set of investors who were called to make the big leap from traditional stock trading to a completely online interface. Having overcome this resistance, the company later expanded its service portfolio to include equity, F&O, wholesale debt, mutual fund distribution and equity research. In 2003/04, Indiabulls ventured into insurance distribution and commodity trading. It successfully floated its IPO in September 2004 and in the same year entered the consumer finance segment. Real estate, the new sunrise industry, was the next frontier for Indiabulls. In 2004/05, it entered this sector. But it wasnt just real estate that was booming. Opportunities were opening up in retail and infrastructure as well. To cement its position in the Indian business and industry firmament, Indiabulls acquired Pyramid Retail In 2007 and marked its presence in the power sector by launching Indiabulls Power

Brand Values

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Indiabulls is amongst the largest non-banking financial services companies in India and enjoys strong brand recognition and customer acceptance. The company attributes its dominant position in the brokerage industry to the preferential status it enjoys with investors Coupled with its forays into various segments; the Group believes that the bulk of its brand story is yet to be written. Indeed, when a case study on Indias youngest brands which have had a profound impact on the economy is crafted, Indiabulls will feature prominently in it. THINGS Recent Developments Several developments across its group companies have propelled Indiabulls forward and are expected to continue to power the rise of this conglomerate. Indiabulls Financial Services Limited has recently signed a joint venture agreement with Sogecap, the insurance arm of Societe Generale (SocGen) for its upcoming life insurance venture. At the same time it has also signed a Memorandum of Understanding with MMTC, the largest commodity trading house in India, to establish a Commodities Exchange with 26% Ownership held by MMTC. On the asset management front, the company has received formal approval from SEBI and is expected to shortly launch its first NFO.

The Board of Directors Following is the list of our Board Members as on November 4, 2009
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. Mr. Sameer Gehlaut Chairman & CEO

Gagan Banga

Executive Director

Rajiv Rattan

CEO

Shamsher Singh

Director

Aishwarya Katoch

Director

Karan Singh Prem Prakash Mird

Director Director

Saurabh K Mittal

Executive Director

Amit Jain

Company Secretary

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CHAPTER - V

70

EVOLUTION OF FOREX MARKET IN INDIA FOREX MARKET

For an introduction to the foreign exchange market and online currency trading see the forex market snapshot. For a list of basic concept of basic concept and terminology used in currency trading see forex basics, or for a selection of informative articles on forex trading, see forex articles. For the latest news. Views and commentary, and a wide range of links to other news sources, see forex news. Be sure to check out the Ask-an-Expert forum.

Foreign Exchange Market size and scope The forex exchange market dwarfs the combined operations of the New York, London London, Tokyo futures and stock exchanges. Daily turnover on the spot market is approximately US$ 1.9 trillion per day. Spot transactions and forward outright FX trading takes place in the inter-bank market. 51% of the market is in spot FX transactions, followed by 32% in currency swap transactions. Forward outright FX transactions represent another 5% of this daily turnover. Options on inter-bank FX transactions making up another 8%. Therefore the inter-bank market accounts for 96% of the global foreign exchange market, with the remaining 4% being divided among all the global futures exchanges.

The role of Forex in the Global Economy Overtime, the foreign exchange market has been an invisible hand that guides the sale of goods, services and raw materials on every corner of the globe. The forex market was created by necessity. Traders, bankers, investors, importers and exporters recognized the benefits of hedging risk, or speculating for profit. The fascination with this market comes from its sheer size, complexity and almost limitless reach of influence.

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The market has its own momentum, follows its own imperatives, and arrives at its own conclusions. These conclusions impact the value of all assets-it is crucial for every individual or institutional investor to have an understanding of the foreign exchange markets and the forces behind this ultimate free-market system.

Forex Services: For a selection of forex courses, systems and strategies in e-book format, browse the selection of e-books on offer under forex e-books. To receive a forex education, sign up for an online forex trading course with one of the firms listed under forex trading courses. For entry & exit signals or general advice on the direction of the market, see the list of firms offering forex trading signals. If you want to use a mechanical forex trading system to tell you when to enter the exit the market, visit forex trading systems. If you want to utilizes the services of an automated forex trading system to trade the market for you automatically 24 hours a day, see automated forex systems. If you would like someone to manage your money for you using a discretionary hands on approach, visit managed forex accounts. To review a forex product, service, broker or system on this site, please submit your review on the forex trading reviews page.

Forex Brokers: For a list of factors to consider when choosing a broker, read the forex broker guide and browse the forex broker list for a list of forex brokers, market makers and Meta Trader platforms available. You can compare some of the more prominent forex brokers. ECNs and market makers by eight different criteria in the forex broker comparison table, and see which firm GoForex recommends in the recommended forex brokers section. To rate and review your broker in GoForexs annual poll, add your rating to the rate your broker page. Find the best forex broker as voted by you on the forex broker ratings page.

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Forex Resources: The live Forex Charts can be used to track ten currency pairs in real time and click on forex rates for a pop-up window of ten currency pairs with live rates for the EUR/USE. USD/JPY, GBP/USD, USD/CHF, USE/CAD, AUD/USD, NZD/USD, EUR/JPY, EUR/GBP and EUR/CHF, including the daily highs and lows from 17:00 EST. For a selection of free ebooks martial offers, calculators and tutorials, visit free downloads. For a current snapshot of the foreign exchange market, use the market monitor to display time zones for several key markets, as well as live forex rates, a sentiment indicator and an economic calendar in a detachable window. Use the online money management calculator to calculate the correct position size for your trade based on your risk profile, Browse the selection of forex books on offer in forex books which includes special selections on technical analysis and general trading. There is a great number of forex related resources to be found in the categorized forex directory to help you find a particular niche or service.

EVOLUTION OF FOREIGN EXCHANGE MARKET IN INDIA: The Indian forex market owes its origin to the important step that RBI took in 1978 to allow banks to undertake intra-day trading in foreign exchange. As a consequence, the stipulation of maintaining Square or Near Square position was to be complied with only at the close of business each day. During the period 1975-1992, the exchange rate of rupee was officially determined by the RBI in terms of weighted basket of currencies of Indias major trading partners and there were significant restrictions on the current account transactions. The initiation of economic reforms in July 1991 saw significant two-step downward adjustment in the exchange rate of the rupee on July 1st and 3rd of 1991 with a view to placing it an appropriate level in line with the inflation differential to maintain the competitiveness of exports. Subsequently, following the recommendation of the High Level Committee on balance of payments (Chairman: Dr. C.Rangarajan) the Liberalized Exchange Rate Management System (LERMS) involving dual exchange rate mechanism was instituted in march 1992 which was followed by the ultimate.

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Convergence of the dual rates effective from March 1st, 1993 (christened modified LERMS). The unification of the exchange rate of the rupee marks the beginning of the era of market determined exchange rate regime of rupee, based on demand and supply in the Forex market. It is also an important step in the progress towards current account convertibility. Which was finally achieved in August 1994 by accepting Article VIII of the Articles of Agreement of the international Monetary Fund (IMF). The appointment of an Expert Group on Foreign Exchange (popularly known as sodhani committee) in November 1994 there is a landmark in the design of foreign exchange market in India. The Group studies the market in great detail and came up with far reaching recommendations to develop, deepen and widen the forex market. In the process of development of Forex market, banks have been accorded significant initiative and freedom to operate in the market. To quote a few important measures relating to market development and liberalization, banks were allowed freedom to fix their trading limits, permitted to borrow and invest funds in the overseas market up to specified limits, accorded freedom to determine interest rates on FCNR deposits within ceilings and allowed to use derivative products for asset-liability management purposes. Similarly, corporate were given flexibility to book forward cover based on past turnover and allowed to use a variety of instruments like interest rates and currency swaps, caps/collars and forward rate agreement in the International Forex market. Rupees in foreign currency swap market for hedging longer-term exposure has developed substantially in the last few years. Indiabulls securities provides a wide range of services that include

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MARKET PROFILE

The Indian Forex market id predominantly a transaction-based market with the existence of underlying Forex exposure generally being an essential requirement for market users. Similarly, regulations in most cases require end users to repatriate and surrender foreign exchange in the Indian Forex market. All Forex transactions of Government of India are routed through the market except for aid transactions.

The Forex market is made up of Authorized Dealers (generally banks). Some intermediaries with limited authorization and end users viz., individuals, corporate, institutional investors and others. Market making banks (generally foreign banks and new sector banks) account for the significant percentage of the overall turnover in the market.

The average monthly turnover in the merchant segment of the Forex market increased to US$ 174.5 billion in 2007-2008 compare with US$ 132.2 billion in 2006-2007.

In the inter-bank segment, the turnover has moved up from US$ 190.2 billion in 2006-2007 to US$ 213.2 billion in 2007-2008. Consequently, the average monthly total turnover increased sharply to US$ 194.4 billion in 2008-2009 from US$ 170 billion in the previous year. The inter-bank to merchant turnover ratio hovered in the range of 2.9-3.9 during the year.

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RBI / FEDAI GUIDELINES:

Under FERA 1973, RBI administrate the forex exchange business in India and there in turn are delegated power to banks to transact actual exchange business. Banks that transact exchange business under license from RBI are designated as authorized dealer.

To ensure that those handling exchange observer uniform norms and procedure RBI has handed powers to foreign exchange dealers association of India to frame guidelines for transaction exchange business.

RBI also prescribe exchange control regulations which are reviewed from time to time. Foreign exchange dealers association of India has issued guidelines on the quotation of merchant rates-spot and forward a peculiarity of Indian forward market is the availability of option forward contracts.

Forward contracts, which provide for utilization on a specific date are called fixed forward contracts. The date of utilization of contracts is determined on the date of booking and it is specific. Date is doesnt live option of delivery of utilization to either party to the contract.

Under FERA 1973, RBI administers the foreign exchange business in India and there in turn are delegated powers to bank to transact actual exchange business. Banks that transact exchange business under license from RBI are designated as authorized dealer.

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ROLE OF FEDAI:

In a regime where exchange rates were fixed and there were restrictions on outflow of foreign exchange, the RBI encouraged the bank to constitute a self -regulatory body and lay down rules for the conduct of forex business. In order to ensure that all the banks participated in the arrangement, the RBI placed a condition while issuing foreign exchange license that every license agrees to be bound by the rules laid down by the bankers body-the FEDAI. FEDAI also accredited brokers through whom the banks put through deals. There is increasing emphasis now on competition an fixing or advising charges by professional bodies is being viewed with disfavor and often treated as a restrictive trading practice. It is currently argued by some that with the growth in volumes and giant strides in telecommunication, banks may no longer need to deal through brokers when efficient match making arrangements exist. An in some other markets, the deals are concluded on the basis of voice broking and it is sometimes held that this often results in conclusion of deals which are less than transparent, evidenced by instances where deals have been called off on payment of differences. Under the circumstances, there is perhaps a need to review several aspects, viz., compatibility of advising or prescribing fees with pro-competition policy; role of brokers; electronic dealing vis--vis voice broking; and relationship between the RBI, FEDAI and authorized dealers.

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CHAPTER - VI

78

Analysis and Interpretation USDINR from 19th Oct 2010 To 29th Dec 2010
Transaction Date 19-Oct-2010 20-Oct-2010 21-Oct-2010 22-Oct-2010 25-Oct-2010 26-Oct-2010 27-Oct-2010 28-Oct-2010 29-Oct-2010 01-Nov-2010 02-Nov-2010 03-Nov-2010 04-Nov-2010 05-Nov-2010 08-Nov-2010 09-Nov-2010 10-Nov-2010 11-Nov-2010 12-Nov-2010 15-Nov-2010 16-Nov-2010 18-Nov-2010 19-Nov-2010 22-Nov-2010 23-Nov-2010 24-Nov-2010 25-Nov-2010 26-Nov-2010 29-Nov-2010 30-Nov-2010 01-Dec-2010 02-Dec-2010
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Price 44.8950 45.0025 44.8700 45.1400 44.9075 45.0200 45.1175 45.0850 44.9800 44.9150 44.8525 44.7600 44.6200 44.4500 44.8150 44.7725 44.7725 44.7225 45.2050 45.5675 45.6550 45.5700 45.5900 45.6950 45.8725 46.0075 45.7975 46.1175 46.1625 46.1750 45.6050 45.5000

% Change 0 0.24 -0.29 0.60 -0.51 0.24 0.22 -0.07 -0.23 -0.14 -0.14 -0.21 -0.31 -0.38 0.81 -0.09 0 -0.11 1.07 0.79 0.19 -0.18 0.4 0.23 0.39 0.29 -0.46 0.69 0.09 0.02 -1.24 -0.23

03-Dec-2010 06-Dec-2010 07-Dec-2010 08-Dec-2010 09-Dec-2010 10-Dec-2010 13-Dec-2010 14-Dec-2010 15-Dec-2010 16-Dec-2010 20-Dec-2010 21-Dec-2010 22-Dec-2010 23-Dec-2010 24-Dec-2010 27-Dec-2010 28-Dec-2010 29-Dec-2010

45.3100 45.1825 44.8600 45.2525 45.4025 45.2100 45.2725 45.0825 45.4900 45.4275 45.5200 45.3025 45.1425 45.1950 45.1475 45.2725 45.1125 45.1175

-0.42 -0.28 -0.72 0.87 0.33 -0.43 0.14 -.042 0.09 -0.14 0.20 -0.48 -0.35 0.11 -0.10 0.28 -0.35 0.01

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50 40 30 20 10 0 -10 19-Oct-10 20-Oct-10 21-Oct-10 22-Oct-10 25-Oct-10 26-Oct-10 P rice 44.89 5 45.0 025 4 4.87 4 5.14 44.9 075 4 5.02 %Chang e 0 0 .24 -0.29 0.6 -0.51 0 .24

19-Oct-10 20-Oct-10 21-Oct-10 22-Oct-10 25-Oct-10 26-Oct-10 27-Oct-10 28-Oct-10 29-Oct-10 1-Nov-10 2-Nov-10 3-Nov-10 4-Nov-10 5-Nov-10 8-Nov-10 9-Nov-10 10-Nov-10

Interpretation:
The above table and graph are showing the percentage change of USD dollar for certain period as the value is going downwards and upwards at last the value of December 29th 2010 is 0.01(+).

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GBPINR from 19th Oct 2010 To 29th Dec 2010

Transaction Date 19-Oct-2010 20-Oct-2010 21-Oct-2010 22-Oct-2010 25-Oct-2010 26-Oct-2010 27-Oct-2010 28-Oct-2010 29-Oct-2010 01-Nov-2010 02-Nov-2010 03-Nov-2010 04-Nov-2010 05-Nov-2010 08-Nov-2010 09-Nov-2010 10-Nov-2010 11-Nov-2010 12-Nov-2010 15-Nov-2010 16-Nov-2010 18-Nov-2010 19-Nov-2010 22-Nov-2010 23-Nov-2010 24-Nov-2010 25-Nov-2010 26-Nov-2010 29-Nov-2010 30-Nov-2010 01-Dec-2010 02-Dec-2010 03-Dec-2010 06-Dec-2010 Price 76.1475 76.1475 76.1475 76.1475 76.1475 76.1475 71.3900 71.4925 71.4800 71.9425 71.6650 71.9850 71.9750 72.0000 72.1500 72.1700 71.8775 72.0000 72.3350 73.1050 72.8300 72.7175 73.1050 73.0625 73.0450 72.6700 72.2800 72.3125 71.9575 71.7600 71.2675 71.0700 70.9925 70.8100
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% Change 0 0 0 0 0 0 -6.25 0.14 -0.02 0.65 -0.39 0.45 -0.01 0.03 0.21 0.03 -0.41 0.17 0.47 1.06 -0.38 -0.15 0.53 -0.06 -0.02 -0.51 -0.54 0.04 -0.49 -0.27 -0.69 -0.28 -0.11 -0.26

07-Dec-2010 08-Dec-2010 09-Dec-2010 10-Dec-2010 13-Dec-2010 14-Dec-2010 15-Dec-2010 16-Dec-2010 20-Dec-2010 21-Dec-2010 22-Dec-2010 23-Dec-2010 24-Dec-2010 27-Dec-2010 28-Dec-2010 29-Dec-2010

70.8225 71.3700 71.4625 71.5875 71.2325 71.5550 71.3025 70.9125 70.8000 70.2050 69.8450 69.5700 69.6625 69.9300 69.6200 69.4400

0.02 0.77 0.13 0.17 -0.50 0.45 -0.35 -0.55 -0.16 -0.84 -0.51 -0.39 0.13 0.38 -0.44 -0.26

90 80 70 60 50 40 30 20 10 0 -10 -20

P rice

%C hang e

19-Oct-10 20-Oct-10 21-Oct-10 22-Oct-10 25-Oct-10 26-Oct-10 27-Oct-10 28-Oct-10 29-Oct-10 1-Nov-10 2-Nov-10 3-Nov-10 4-Nov-10

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Interpretation:
In October prices for few days are same of 76.1475 so the percentage is zero (0) for those days and the currency value got decreasing as December the value is 69.4400 and the percentage is -0.26.

EURINR from 19th Oct 2010 To 29th Dec 2010

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Transaction Date 19-Oct-2010 20-Oct-2010 21-Oct-2010 22-Oct-2010 25-Oct-2010 26-Oct-2010 27-Oct-2010 28-Oct-2010 29-Oct-2010 01-Nov-2010 02-Nov-2010 03-Nov-2010 04-Nov-2010 05-Nov-2010 08-Nov-2010 09-Nov-2010 10-Nov-2010 11-Nov-2010 12-Nov-2010 15-Nov-2010 16-Nov-2010 18-Nov-2010 19-Nov-2010 22-Nov-2010 23-Nov-2010 24-Nov-2010 25-Nov-2010 26-Nov-2010 29-Nov-2010 30-Nov-2010 01-Dec-2010 02-Dec-2010 03-Dec-2010 06-Dec-2010 07-Dec-2010
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Price 62.5000 62.1500 62.9000 62.7000 62.9400 62.6625 62.2475 62.3450 62.1625 62.5050 62.5350 62.7000 63.3500 62.5250 62.2550 62.2100 61.6175 61.5000 61.7900 61.9425 61.9450 62.0900 62.4900 62.6450 62.2600 61.4175 61.0550 60.9750 60.8325 60.1900 59.7700 60.0225 60.0800 59.9550 59.9600

% Change 0 -0.56 1.22 -0.32 0.38 -.0.44 -0.66 0.16 -0.29 0.55 0.04 0.26 1.04 -1.30 -0.43 -0.07 -0.95 -0.19 0.47 0.33 -0.8 0.23 0.64 0.25 -0.61 -1.35 -0.59 -0.13 -0.23 -1.06 -0.70 0.42 0.10 -0.21 0.01

08-Dec-2010 09-Dec-2010 10-Dec-2010 13-Dec-2010 14-Dec-2010 15-Dec-2010 16-Dec-2010 20-Dec-2010 21-Dec-2010 22-Dec-2010 23-Dec-2010 24-Dec-2010 27-Dec-2010 28-Dec-2010 29-Dec-2010

59.9025 59.9650 59.8875 59.9300 60.7200 60.5550 60.1250 59.9025 59.6075 59.3500 59.2150 59.2775 59.6150 59.7800 59.2300

-0.10 0.10 -0.13 0.07 1.32 -0.27 -0.71 -0.37 -0.49 -0.43 -0.23 0.11 0.57 0.28 -0.92

70 60 50 40 30 20 10 0 -10 P rice %C ng ha e

19-Oct-10 20-Oct-10 21-Oct-10 22-Oct-10 25-Oct-10 26-Oct-10 27-Oct-10 28-Oct-10 29-Oct-10 1-Nov-10 2-Nov-10 3-Nov-10

Interpretation:

4-Nov-10 The EUR price and percentage got decrease from the starting of the month for 59.2300 and the % is -0.92.

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JPYINR from 19th Oct 2010 To 29th Dec 2010

Transaction Date 19-Oct-2010 20-Oct-2010 21-Oct-2010 22-Oct-2010 25-Oct-2010 26-Oct-2010 27-Oct-2010 28-Oct-2010 29-Oct-2010 01-Nov-2010 02-Nov-2010 03-Nov-2010 04-Nov-2010 05-Nov-2010 08-Nov-2010 09-Nov-2010 10-Nov-2010 11-Nov-2010 12-Nov-2010 15-Nov-2010 16-Nov-2010 18-Nov-2010 19-Nov-2010 22-Nov-2010 23-Nov-2010 24-Nov-2010 25-Nov-2010 26-Nov-2010 29-Nov-2010 30-Nov-2010 01-Dec-2010 02-Dec-2010 03-Dec-2010 06-Dec-2010
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Price 55.1850 55.2800 55.4475 55.6500 55.6900 55.3925 55.1500 55.3000 55.5975 55.6025 55.4500 55.3250 55.1000 54.8000 55.1975 55.3075 54.5975 54.3675 54.8825 54.8350 54.7000 54.7150 54.7150 54.6450 54.9000 55.0700 54.6375 54.9450 54.8525 55.0400 54.4800 54.1200 54.2350 54.5300

% Change 0 0.17 0.30 0.36 0.07 -0.54 -0.44 0.27 0.54 0.01 -0.28 -0.23 -0.41 -0.55 -0.72 0.20 -1.30 -0.42 0.94 -0.09 -0.27 0.03 0 -0.13 0.46 -1.81 -0.79 0.56 -0.17 0.34 -1.03 -0.66 0.21 0.54

07-Dec-2010 08-Dec-2010 09-Dec-2010 10-Dec-2010 13-Dec-2010 14-Dec-2010 15-Dec-2010 16-Dec-2010 20-Dec-2010 21-Dec-2010 22-Dec-2010 23-Dec-2010 24-Dec-2010 27-Dec-2010 28-Dec-2010 29-Dec-2010
60 50 40 30 20 10 0 -10 Price

54.3200 54.0100 54.0875 54.1200 53.8100 54.3800 54.1700 54.0525 54.3525 54.1575 54.0975 54.4650 54.5175 54.6475 54.9275 54.8600

-0.37 -0.57 0.14 0.06 -0.57 1.04 -0.38 -0.21 0.55 -0.36 -0.1 -0.68 0.10 0.24 0.50 -0.12
1 9-Oct-10 2 0-Oct-10 2 1-Oct-10 2 2-Oct-10 2 5-Oct-10 2 6-Oct-10 2 7-Oct-10 2 8-Oct-10 2 9-Oct-10 1 -Nov-10 2 -Nov-10 3 -Nov-10 4 -Nov-10 5 -Nov-10

%C hang e

Interpretation: The JPY price and percentage got decrease from the starting of *The currency change percentage:
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the months at December the price was 54.8600 and the % is -0.12 and in the graph as shown above the percentage got slit changes.

USDINR Oct 1st to 29th the percentage change

Transaction Date 1st Oct 2010 29th Oct 2010 Price 44.8950 44.9800 % Change 0 0.19

Oct 1st to Nov 29th the percentage change

Transaction Date 1st Oct 2010 30th Nov 2010 Price 44.8950 46.1750 % Change 0 2.85

Oct 1st to Dec 29th the percentage change

Transaction Date 1st Oct 2010 29th Dec 2010 Price 44.8950 45.1175 % Change 0 0.50

As shown the above three tables the changes between 1st Oct to 29th Oct is 0.19, 1st Oct to 29th Nov is 2.85 and 1st Oct to 29th Dec is 0.50. So the dollar value is going Up and Downwards.

GBPINR
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Oct 1st to 29th the percentage change

Transaction Date 1st Oct 2010 29th Oct 2010 Price 76.1475 71.4800 % Change 0 -6.13

Oct 1st to Nov 29th the percentage change

Transaction Date 1st Oct 2010 30th Nov 2010 Price 76.1475 71.7600 % Change 0 -5.76

Oct 1st to Dec 29th the percentage change

Transaction Date 1st Oct 2010 29th Dec 2010 Price 76.1475 69.4400 % Change 0 -8.81

As shown the above three tables the changes are -6.13, -5.76 and -8.81. So the currency value is going downwards as per the USD dollar.

EURINR
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Oct 1st to 29th the percentage change

Transaction Date 1st Oct 2010 29th Oct 2010 Price 62.5000 62.1625 % Change 0 -0.54

Oct 1st to Nov 29th the percentage change

Transaction Date 1st Oct 2010 30th Nov 2010 Price 62.5000 60.1900 % Change 0 -3.70

Oct 1st to Dec 29th the percentage change

Transaction Date 1st Oct 2010 29th Dec 2010 Price 62.5000 59.2300 % Change 0 -5.23

As shown the above 3 tables the changes between 1st Oct to 29th Oct is -0.54, 1st Oct to 29th Nov is -3.70 and 1st Oct to 29th Dec is -5.23. So the currency value is going downwards.

JPYINR
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Oct 1st to 29th the percentage change

Transaction Date 1st Oct 2010 29th Oct 2010 Price 55.1850 55.5975 % Change 0 0.75

Oct 1st to Nov 29th the percentage change

Transaction Date 1st Oct 2010 30th Nov 2010 Price 55.1850 55.0400 % Change 0 -0.26

Oct 1st to Dec 29th the percentage change

Transaction Date 1st Oct 2010 29th Dec 2010 Price 55.1850 54.8600 % Change 0 -0.59

As shown the above three tables the changes between 1st Oct to 29th Oct is 0.75, 1st Oct to 29th Nov is -0.26 and 1st Oct to 29th Dec is -0.59. So the currency value is coming down from positive (0.75) to negative (-0.59).

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CHAPTER - VII

93

CONSLUSION
The Foreign Exchange Market is the over the counter market with a vast network of interconnected traders, market places and different currency instruments. The functioning and structure of foreign market were does not exist a single dollar rate but a range of different rates, depending on what bank or market the party is trading. It is lucrative to the investors due to its liquidity, volatility, and low-cost per trade. Today, it is accessible to any investor enabling him to diversify his portfolio. Hence, one can fully appreciate the excellent opportunities to increase their profits.

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To conclude, the medium-term objective of developing an efficient and vibrant Forex currency market continues to be an important priority with in the overall frame work of development of financial market. It was very difficult to obtain the date regarding the currency rates yielded by USDINR, GBPINR, EURINR and JPYINR. The currency price is changing for the months as (1st Oct 2010 55.1850 to 29th Dec 2010 - 54.8600) and even the percentage change got the values as 0.75 to -0.59. Naturally, the pace and sequencing have to be determined by both the domestic and international development, in particular, the unique features of Indian forex currency market, legal, institutional and technological factor and developments related to macro-economic policies would govern the path of moving towards the medium-term objectives, without sacrificing freedom in tactical measures to respond to unforeseen circumstances in the very short-term.

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The foreign exchange dealers quoting activity presents a significant informative signal to overall market participants. By looking at a sample of major dealers on the Euro/Dollar exchange rate, we offer prima facie evidence that first, bank dealers quoting activity reacts differently to the same news announcements, and that there is heterogeneity of interpretation of the news contents. Second, bank dealers quoting activity is affected by those of some others. This means that dealers observe the frequency of price revision of other dealers in order to infer some useful information. This supports the hypothesis according to which FX dealers monitor quoting activity of some influential ones in order to infer some useful information, like private information held by other dealers or their manner to react to public news announcements. Quoting activity can be considered as an important informative signal that FX dealers

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BIBLOGRAPHY BOOKS REFERRED:

INTERNATIONAL FINANCE ------MAURICE.LEVI MULTINATIONAL MANAGAMENT ------ALACC.SHAPIRO INTERNATIONAL FINANCE ------G SHAILAJA

WEB SITES: WWW.X-RATES.COM WWW.MONEYCONTROL.COM WWW.WIKIPEDIA.COM WWW.INDIABULLS.COM WWW.NSEINDIA.COM

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