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1.1 GENERAL INTRODUCTION ABOUT THE SECTOR

A child is born, a tree has been planted, a bud is seen, a company

has been formed etc to the matured person, grown tree, flower, and reputed

company. In between a word comes which is growth. Growth is an increase in

size, number, value, or strength; the act of growing, getting bigger or higher;

something that grows or has grown.

In today’s world Financial Service sector plays a very important role

for the growth of an individual as well as for the growth of an organization.

With the help of Financial Service sector an individual or an organization gets

a clear idea about what to do with their hard earned money, where to invest

so that they can get a maximum return from the investment. And Financial

Service sector helps in making dreams come true for an individual and a

organization by giving them a better possible guidance about where to invest

there money in the market. In this project we are discussing about Financial

Service Sectors importance and going to discuss about one of the renowned

Financial Service sector in the world “Thomson Reuters”, And we are also

going to discuss about the “MODELS FOR CORPORATE VALUATION”.

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1.2 INDUSTRY PROFILE

A financial service refers to services provided by the finance industry. The

finance industry encompasses a broad range of organizations that deal with the

Management of money. Among these organizations are banks, credit card

companies, Insurance companies, consumer finance companies, stock

brokerages, investment Funds and some government sponsored enterprises. As of

2004, the financial services industry represented 20% of the market capitalization of

the S&P 500 in the United States.

1.2 (A) ORIGIN AND DEVELOPMENT OF THE INDUSTRY

“History of financial services”

In the United States

The term "financial services" became more prevalent in the United States

partly as a result of the Gramm-Leach-Bliley Act of the late 1990s, which

enabled different types of companies operating in the US financial services

industry at that time to merge. In the USA almost every company now which

previously described themselves as a bank, insurance company, or brokerage

house, now describes themselves in some way as a financial services

institution.

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Companies usually have two distinct approaches to this new type of business.

One approach would be a bank which simply buys an insurance company or

an investment bank, keeps the original brands of the acquired firm, and adds

the Acquisition to its holding company simply to diversify its earnings. Outside

the U.S., e.g., in Japan, non-financial services companies are permitted within

the holding company. In this scenario, each company still looks independent,

and has its own customers, etc.

In the other style, a bank would simply create its own brokerage division or

insurance division and attempt to sell those products to its own existing

customers, with incentives for combining all things with one company.

Banks

A commercial bank is what is commonly referred to as simply a "bank". The

term Commercial is used to distinguish it from an "investment bank", a type of

financial services entity which, instead of lending money directly to a

business, helps businesses raise money from other firms in the form of bonds

(debt) or stock (equity).

Private banking

The providing of banking services to very wealthy individuals and families.

Many financial services firms require a person or family to have a certain

minimum net worth to qualify for private banking services. Services are

provided by a bank or a division of a services company

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Capital market banks

Capital market banks underwrite debt and equity; assist company deals

(advisory Services, underwriting and advisory fees), and restructure debt into

structured finance Products.

Bank cards

Bank cards include both credit cards and debit cards. Bank of America is the

largest Issuer of bank cards.

Investment services

Asset management

Asset management is the term usually given to describe companies which run

collective Investment funds.

Hedge fund management

Hedge funds often employ the services of "prime brokerage" divisions at

major Investment banks to execute their trades.

Custody services

Custody services and securities processing is a kind of 'back-office'

administration for Financial services. Assets under custody in the world were

estimated to $65 trillion at the End of 2004. Firms engaged in custody

services include:

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Insurance

Insurance brokerage

Insurance brokers shop for insurance (generally corporate property and

casualty Insurance) on behalf of customers.

Insurance underwriting

Personal lines insurance underwriters actually underwrite insurance for

Individuals, a service still offered primarily through agents, insurance brokers,

And stock brokers. Underwriters may also offer similar commercial lines of

Coverage for businesses.

Activities include insurance and annuities, life insurance, retirement

insurance, health Insurance, and property & casualty insurance

Reinsurance

Reinsurance is insurance sold to insurers themselves, to protect them from

Catastrophic Losses. Firms in this sector include:

Intermediation or advisory services

Stock brokers (private client services) and discount brokers

Stock brokers assist investors in buying or selling shares. Primarily internet-

based Companies are often referred to as discount brokerages, although

many now have Branch offices to assist clients. These brokerages primarily

target Individual investors.

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Full service and private client firms primarily assist execute trades and

execute trades for clients with large amounts of capital to invest, such as large

Companies, wealthy Individuals and investment management funds.

Conglomerates

A financial services conglomerate is a financial services firm that is active

in more than one sector of the financial services market e.g. life insurance,

general Insurance, health insurance, asset management, retail banking,

wholesale Banking, investment banking, etc.

A key rationale for the existence of such businesses is the existence of

Diversification benefits that are present when different types of businesses

are aggregated i.e. bad things don't always happen at the same time. As a

Consequence, economic capital for a Conglomerate is usually substantially

less than economic capital is for the sum of its parts.

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1.2 (B) GROWTH AND PRESENT STATUS OF THE INDUSTRY

If we look at the current situation about the Financial Services sector it is

growing at a very rapid speed now a day. Because of the more awareness

among the general people how to utilize their money in the better way for the

secure return, so for that reason they started consulting the Financial Service

sector for the better guidance about the investment and this lead to the

development of the Financial Service sector over the world.

1.2 (C) FUTURE OF THE INDUSTRY

Financial Service Sector is having a very bright future as more and more

people are getting aware about the usefulness about the good investment in

the better growing and better developing organization will fetch them more

return on their investment compared to investing only looking at the brand of

the company. So more and more people become more conscious about

investing their money in any of the business organization and before investing

their money they will try to find out all the possible details about the

organization and it would not be possible for them to get all the required

information by their own so for that purpose they approach Financial Service

sector and try to get all the required information about the organization. So

looking at all these factors we can predict that Financial Service Sector is

going to have a very great and a bright future.

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2.1 ORIGIN OF THE ORGANIZATION

Name -- Thomson Reuters.

Headquarter -- Thomson Reuters 3 Times Square

New York, NY 1

Tel: +1 646.223.4000

Location in INDIA -- Bangalore,

Mumbai,

Hyderabad...

The Thomson Corporation

The Company was founded by Roy Thomson in 1934 in Ontario as the

publisher of The Timmins Daily Press. In 1953 Thomson acquired the

Scotsman newspaper and moved to Scotland the following year. He

consolidated his media position in Scotland in 1957 when he won the

franchise for Scottish Television. In 1959 he bought the Kemsley Group giving

him control of the Sunday Times. He separately acquired the Times in 1967.

He moved into the airline business in 1965, when he acquired Britannia

Airways and into oil and gas exploration in 1971 when he participated in a

consortium to exploit reserves in the North Sea. In the 1970s, following the

death of Lord Thomson, the Company withdrew from media selling the Times,

the Sunday Times and Scottish Television and instead moved into publishing,

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buying Sweet & Maxwell in 1987. In 1989, Thomson Newspapers was merged

with The Thomson Corporation. In 1996 The Thomson Corporation effectively

doubled its size and ensured future profitability by purchasing West

Publishing, a purveyor of legal research and solutions including Westlaw.

The Thomson Corporation was one of the world's largest information

companies. Thomson was active in financial services, healthcare sectors, law,

science & technology research, and tax & accounting sectors. The company

operated through five segments (2007 onwards): Thomson Financial,

Thomson Healthcare, Thomson Legal, Thomson Scientific, and Thomson Tax

& Accounting.

Until 2007, Thomson was also one of the world's leading providers of higher

education textbooks, academic information solutions and reference materials.

On October 26, 2006, Thomson announced the proposed sale of its Thomson

Learning assets. In May 2007, Thomson Learning was acquired by Apax

Partners and subsequently renamed Cengage Learning in July. The Thomson

Learning brand was used through the end of August, 2007.

Subsequently, on October 15, 2007, Educational Testing Service (ETS), the

world leader in educational research and assessment, finalized acquisition of

Thomson's Prometric. Thomson sold its global network of testing centers in

135 countries, for a reported $435 million. Prometric now operates as a wholly

owned subsidiary of ETS.

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Reuters

The Company was founded by Paul Julius Reuter in 1851 in London as a

business transmitting stock market quotations. Reuter set up his "Submarine

Telegraph" office in October 1851 and negotiated a contract with the London

Stock Exchange to provide stock prices from the continental exchanges in

return for access to London prices, which he then supplied to stockbrokers in

Paris in France. In 1865, Reuters was the first organization to report the

assassination of Abraham Lincoln in London. The company was involved in

developing the use of radio in 1923. It was acquired by the British National &

Provincial Press in 1941 and first listed on the London Stock Exchange in

1984. Reuters began to grow rapidly in the 1980s, widening the range of its

business products and expanding its global reporting network for media,

financial and economic services: key product launches included Equities 2000

(1987), Dealing 2000-2 (1992), Business Briefing (1994), Reuters Television

for the financial markets (1994), 3000 Series (1996) and the Reuters 3000

Xtra service (1999).

Paul Julius Reuter noticed that, with the electric telegraph, news no longer

required days or weeks to travel long distances. In 1850, the 34-year-old

Reuter was based in Aachen, close to the borders with the Netherlands and

Belgium, and he began using the newly opened Berlin–Aachen telegraph line

to send news to Berlin. However, there was a 76-mile (122 km) gap in the line

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between Aachen and Brussels, the Belgian capital city and the financial

center of that country. Reuter saw there was an opportunity to speed up news

service between Brussels and Berlin by using homing pigeons to bridge that

gap in the telegraph lines.

In 1851, Reuter moved to London. After failures in 1847 and 1850, attempts

by the Submarine Telegraph Company to lay an undersea telegraph cable

from Dover to Calais appeared to promise success.

In 1865, Reuter's private firm was restructured, and it became a limited

company (a corporation) called the Reuter's Telegram Company. Reuter

had been naturalized as a British citizen in 1857.

Reuter's agency built a reputation in Europe for being the first to report news

scoops from abroad, like the news of Abraham Lincoln’s assassination. After

many decades of progress, almost every major news outlet in the world

subscribes to the Reuters company's services. It operates in at least 200

cities in 94 countries, supplying news text in about 20 languages.

Reuters was financed as a public company in 1984 on the London Stock

Exchange and on the NASDAQ in the USA. However, there were concerns

that the company's tradition for objective reporting might be jeopardized if

control of the company later fell into the hands of a single shareholder. To

counter that possibility, the constitution of the company at the time of the

stock offering included a rule that no individual was allowed to own more than

15% of the company. If this limit is exceeded, the directors can order the

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shareholder to reduce the holding to less than 15%. That rule was applied in

the late 1980s when Rupert Murdoch's News Corporation, which already held

around 15% of Reuters, bought an Australian news company that also owned

stock in Reuters. The acquisition meant that Murdoch then held more than

15%, and then he was compelled to reduce the holding to less than 15% to

stay in line with the rules.

This is a company whose sole task is to protect the integrity of the company's

news output. It holds one "Founders Share" which can outvote all other

shares in the event that an attempt is made to alter any of the rules relating to

the Reuters Trust Principles. These principles set out the company's aim to

preserve its independence, integrity, and freedom from bias in its news

reporting.

Reuters began to grow rapidly in the 1980s, widening the range of its

business products and expanding its global reporting network for media,

financial and economic services. Recent key product launches include

Equities 2000 (1987), Dealing 2000-2 (1992), Business Briefing (1994),

Reuters Television for the financial markets (1994), 3000 Series (1996) and

the Reuters 3000 Xtra service (1999).

In the mid-1990s, the Reuters company engaged in a brief foray in the radio

sector — with London Radio's two radio stations, London News 97.3 FM and

London News Talk 1152 AM. A Reuters Radio News service was also set up

to compete with the Independent Radio News.

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In 1995, Reuters established its "Greenhouse Fund" to take minority

investments in a range of start-up technology companies, initially in the USA,

only.

Merger between Thomson Corporation and Reuters

On 15 May 2007, Canada's The Thomson Corporation reached an agreement

with Reuters to combine the two companies, in a deal valued at US $17.2

billion. Thomson now controls about 53% of the new company, named

“Thomson Reuters”. On 26 March 2008, shareholders of both

organizations agreed to the merger. The acquisition was closed on 17 April

2008.

In October 2007, Reuters Market Light, a division of Reuters, launched a

mobile phone service for Indian farmers to provide local and customized

commodity pricing information, news, and weather updates.

The last surviving member of the original Reuters family, Marguerite,

Baroness de Reuter, died aged 96 on 25 January 2009 after having suffered a

series of strokes in late 2008.

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ACHIEVEMENTS OF THOMSON REUTERS

Thomson Reuters is the world’s leading source of intelligent information for

Business and Professionals. It is a multinational company came into Picture

after Merging up of two Separate entities Thomson and Reuters Effective from

17-Apr-2008 and has become World’s 23rd biggest company and 2nd largest

information provider after Bloomberg.

Thomson Reuters is proud to be recognized by some of the most important

and influential publications and organizations around the world.

World's Most Ethical Companies.

Thomson Reuters made it onto the Ethisphere Institute's

World's Most Ethical Companies listing released in April

2009. Companies complete an in-depth survey regarding

their ethics and compliance programs, governance and corporate

responsibility. The EQ score generated by this data was used to compile the

list of the highest scoring companies for each industry

BusinessWeek annual ranking of the 100 Best Global Brands

Thomson Reuters was named the 44th of the Top 100 Global

Brands in the brand's inaugural year. Learn more about the

BusinessWeek Top 100 Global Brands rankings

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FTSE4Good Index

Thomson Reuters is listed on the FTSE4Good Index, which

measures the performance of companies that meet globally

recognized corporate responsibility standards, and

facilitates investment in those companies.

Jantzi Social Index

Thomson Reuters was named as one of 60

Canadian companies within the Jantzi Social Index

(JSI). JSI is comprised of companies that pass a set

of broadly-based environmental, social and governance criteria.

Caring Company '5 Years Plus' Award

In February 2009, Thomson Reuters Hong Kong Ltd was grated permission to

display the "5 Years Plus" Caring Company Logo having been awarded

Caring Company status from the Hong Kong Council of Social Service

(HKCSS) for six years in succession. This award is a recognition of our

community involvement and our commitment of being a corporate citizen.

Thomson Reuters Hong Kong Ltd. was nominated by St. James Settlement

and Hong Chi Association for this award.

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Top 1000 Publicly Traded Companies

Thomson Reuters ranked #3 on the 2008 list of the 1,000 largest publicly

traded Canadian corporations, measured by assets. Companies are ranked

according to their after-tax profits in their most recent fiscal year, excluding

extraordinary gains or losses.

2.2 GROWTH AND DEVELOPMENT OF THE ORGANIZATION

2008

Thomson Reuters launches a new federal government initiative that will

work across the company, developing information solutions and

services tailored to the unique needs of U.S. government customers.

The Thomson Corporation and Reuters Group PLC combine to form

Thomson Reuters.

2007

The Thomson Corporation and Reuters Group PLC announce that they

are in discussions for the combination of their two businesses.

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2006

Kenneth R. Thomson, former chairman of the Board of The Thomson

Corporation, dies at the age of 82.

Thomson Healthcare acquires Solucient, a leading healthcare

information provider of data and advanced analytics that hospitals and

health systems use to improve performance and lower costs.

Thomson Scientific acquires Scholar One, web-based workflow

solution for authoring, evaluating and publishing research to more than

two million users. 

Thomson Financial acquires Quantitative Analytics, Inc., a leading

provider of database integration and analysis solutions to the financial

services industry.

Thomson Healthcare acquires MercuryMD, Inc., the leading provider of

mobile information systems serving the healthcare market.

Reuters launches the first news bureau in the virtual world of Second

Life.

Reuters launches two products that allow its news output to be "read"

by machines for the purposes of automated trading for the first time.

2005

Thomson Financial partnered with Merrill Lynch to complete the rollout

of more than 23,000 workstations across more than 550 Merrill Lynch

offices. 

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Thomson acquires Global Securities Information, Inc., a leading

provider of online securities and securities-related information and

research services. 

Thomson acquires Tax Partners®, LLC, the nation's largest sales and

use tax compliance service firm enabling Thomson to offer end-to-end

sales and use tax solutions.

Thomson introduces the launch of Thomson Pharma bringing an

indispensable information solution to the workflow of the drug discovery

and development process.

Reuters transfers its London headquarters from Fleet Street to Canary

Wharf. All London employees, including editorial, are brought into one

building.

Reuters acquires Action Images, a specialist sports photography

agency, a deal designed to continue the expansion of Reuters global

picture business

Reuters takes major steps into next generation trading with the launch

of:

o Partnership with the Chicago Mercantile Exchange (CME),

linking sell-side traders in the interbank FX market to CME eFX

market

o Reuters Trading for Fixed Income

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o Reuters Trading for Foreign Exchange

2004

Thomson acquires Information Holdings Inc., a provider of intellectual

property and regulatory information for the scientific, legal, and

corporate markets to further advance its capability to develop

pharmaceutical and intellectual property solutions.

Thomson acquires TradeWeb, a fast-growing and leading online global

trading platform for fixed-income securities.

Thomson sells Thomson Media group, comprised of leading print-

based information products, to Investcorp.

Thomson acquires CCBN, a provider of web-based solutions for the

investment community, to further expand its offerings for the corporate

communications.

Thomson sells DBM (Drake Beam Morin), which was acquired along

with other Harcourt assets in 2001, to Compass Partners International

Limited.

2003

Thomson sells print-based healthcare magazines.

Thomson acquires Elite Information Group, a leading provider of

integrated practice and financial management applications for legal and

professional services markets

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Thomson sells its 20% interest in Bell Globemedia Inc. for $279 million

to The Woodbridge Company Limited. The sale of Bell Globemedia,

including the Corporation's interest in The Globe and Mail, is the

culmination of the Thomson strategy to exit the newspaper business

undertaken in February 2000.

Reuters launches Reuters Knowledge opening up a new market on the

buy-side of the financial services industry.

2002

Thomson announces $300 million+ five-year deal with Merrill Lynch to

develop and implement a new financial workstation to support Merrill

Lynch Financial Advisors -- most significant information solutions deal

of its kind in the financial services industry.

Thomson acquires Current Drugs a global leader in the delivery of

information solutions to the pharmaceutical and biotechnology

industries

Thomson common share offering raises US$1 billion.

Thomson begins trading on New York Stock Exchange under the

symbol TOC.

David K.R. Thomson appointed Chairman of The Thomson

Corporation.

Thomson acquires Gardiner-Caldwell, a leading global medical

education and communication business.

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Reuters launches Reuters Messaging, a reliable, high-security, high-

speed instant messaging service developed specifically for the global

financial services industry. Developed by Reuters and Microsoft and

more than 30 financial institutions, the service allows financial

professionals to communicate instantly with their colleagues and

customers.

2001

Thomson acquires NewsEdge Corporation, a global provider of real-

time news and information.

Thomson acquires select higher education and corporate training

businesses of Harcourt General.

Thomson acquires FindLaw, the leader in free online legal information

and services.

The Globe and Mail becomes part of Bell Globemedia, a Canadian

multimedia company, in which The Thomson Corporation holds a 20%

ownership position.

2000

Thomson sells community newspaper assets in North America for

approximately 2.5 billion

Thomson acquires La Ley, a leading legal publisher in Argentina.

Thomson acquires Primark, a leading provider of financial and

economic information products and solutions to customers worldwide.

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Thomson acquires Carson Group, a financial information services firm

focused on corporate strategic intelligence and investor relations

solutions.

Thomson acquires IOB, one of Brazil's leading regulatory publishers.

Thomson acquires online business of Dialog, a leading worldwide

provider of online-based information services.

Reuters announces major initiatives to exploit the Internet and open

new markets, reinforced by Joint Ventures in communications, wireless

delivery and investment research.

1999

Thomson acquires Editorial Aranzadi S.A., Spain's premier legal

publisher. 

Reuters completes its euro currency conversion programme, involving

4 billion changes affecting a quarter of a million financial instruments.

Some 700 engineers, developers, data specialists and customer

service staff worked 300 man-years on the project and cost £10 million.

Reuters and Dow Jones announce agreement to combine their

interactive business services for the corporate and professional

markets in a joint venture called Factiva.

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2.3 PRESENT STATUS OF THE ORGANIZATION

Thomson Reuters (TRI) is a dual-listed holding company that provides

aggregated financial data and analysis products to businesses and

professionals worldwide. These products are mostly distributed as electronic

content and on a prescription basis (90% and 86%, respectively, in FY2008).

Formed after Canada-based Thomson Corporation’s $17 billion acquisition of

UK-based Reuters Group (RTRSY) in June 2008, the company possesses

34% of the financial data market (as of February 2009), substantially ahead of

fellow industry duopolistic Bloomberg L.P., who holds 24%.

Thomson Reuters is composed of two segments: Markets, which consists of

its financial and media businesses, and Professional, which consists of its

legal, tax and accounting, healthcare, and science businesses. Markets,

responsible for 61% of its revenues in FY2008, specializes in news media

distribution and integrates its technology into the workflows of professionals

across the financial services sector, resulting in customized analytics for its

clients. Professional provides information, decision support tools and services

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to its non-financial businesses. It is supported largely by its Legal division,

which boasts a duopoly alongside global publisher Reed Elsevier NV (ENL).

In FY2008, Thomson Reuters witnessed a 62% revenue increase over the

previous year thanks to the Reuters Group (RTRSY) acquisition and the

ensuing revenue synergies. Its management expects integration programs will

save the company over $1.8 billion by the end of FY2009. The transaction has

also allowed Thomson Reuters to focus singularly on its information services

and to expand its exposure abroad (42% of its clients were international as of

December 31, 2008, as opposed to 17% pre-Reuters transaction).

Headquartered in New York and handling major operations in London and

Eagan, Minnesota, Thomson Reuters employs more than 50,000 people,

including more than 2,500 journalists, in over 90 countries. Before the Reuters

acquisition, the Thomson Corporation was a conglomerate with budding

businesses in anything from travel to oil drilling. The addition of its media

industry publisher strengthened its stance in the information systems industry

in a number of ways. Firstly, it allowed it to focus on its profitable information

services and spin off unprofitable non-core competencies. Secondly, it saved

the company $850 million in cost synergies, and management declared an

additional $975 million could be saved from the restructuring's progress by the

end of 2009. Lastly, it fortified its international exposure, catering to a more

geographically diverse client base (58% of revenues from the Americas, 32%

from EMEA, and 10% from Asia in FY2008). It is now the pacesetter in the

financial data industry, controlling 34% of the overall market (including 30%

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and 38% of the North American and European data markets, respectively)

and ahead of ardent rival Bloomberg L.P. by 1000 basis points as of April

2009.

Business and Financial Metrics

In FY2008, The Thomson Corporation observed total revenues jump 62%

over the previous year due to higher transaction revenues from existing

businesses and the acquisition of media titan Reuters Group (RTRSY), which

expanded operations abroad. It financed the merger through a cash and stock

deal, paying each holder of a Reuters share $6.99 in cash and .16 Thomson

Reuters, PLC shares. Its merger boosted Thomson Corp.'s Markets revenue

284% to $6.2 billion and its balance sheet 58% to $36 billion, and it managed

to finish the year with $840 million of cash on hand and $2.5 billion in

untapped credit facilities. However, the heavy costs of financing this $17

billion transaction resulted in a YoY net income drop of 65% to $1.4 billion,

and a profit margin decrease of 78%.

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Financial Data for Thomson Reuters, in millions

2008 2007 2006 2005

2004

Total Revenue 11,707 7,296 6,591 8,703

8,098

Operating Income 1,693 1,297 1,258 1,464

1,341

Net Income 1,405 4,004 1,120 934

1,011

Profit Margin 14.5% 17.8% 18.9% 16.8%

16.6%

Number of 53,700 32,900 32,400

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Employees

Business Segments

Markets ($6.3 billion, 54% of Revenue in FY2008). Thomson Reuters is

heavily reliant on its Markets division, composed of Investment & Advisory,

Sales and Trading , Enterprise, and Media businesses, each providing a

unique product suite to professionals.

Sales & Trading (48% of Markets Total Revenue in FY2008): Sales and

Trading dominates the Markets division, providing services to roughly 34,000

locations worldwide. It allows over 200,000 professionals to trade and

communicate with each other and connect their systems to electronic

markets. Its core services are Reuters 3000 Xtra, a desktop information-

product that provides analytics and trade connectivity tools to over 125,000

financial market professionals and Reuters Trader, a regional market-focused

data desktop that reaches over 2, 500 institutional clients. Investment &

Advisory (30% of Markets Total Revenue in FY2008):Through Reuters News

and Datastream, Investment & Advisory provides an integrated platform of

market analysis, online communication solutions, and customizable products

to money managers, institutional clients, and bankers around the world.

Enterprise (16% of Markets Total Revenue in FY2008): Enterprise offers real-

time financial instrument pricing and reference data to improve the pricing

transparency and trade execution of their customers, which includes

algorithmic traders, hedge fund managers and compliance officers.

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Media (6% of Markets Total Revenue in FY2008): Through Reuters, its news

and media brand, Media provides business-tailored news as well as

wholesale news services to professionals, offering real-time minute-by-minute

commentary and analysis of the markets.

Note: The metrics displayed here are calculated on a pro forma basis, and not on a Canadian GAAP

basis

Professional ($5.4 billion, 46% of Revenue in FY2008)

The Professional division, as mentioned above, is composed of Legal, Tax &

Accounting, Scientific and Healthcare subdivisions. It has capitalized on its

cutting edge technology to provide user-friendly electronic databases to

sectors that would otherwise be forced to rely on print releases and circulars

for their information.

Legal (64% of Professional Total Revenue in FY2008): Legal provides

decision support tools to legal, compliance, business and government

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professionals, utilizing its electronic databases to enable its customers to

research and make full use of its extensive legal information network. It also

provides lawyers with services for completing transactions such as mergers

and securities offerings. Alongside Reed Elsevier NV (ENL) , it is virtually a

duopolistic in the legal information business.

Tax & Accounting (16% of Professional Total Revenue in FY2008): Tax &

Accounting provides integrated tax compliance software and services, as well

as automation and information solutions, to professionals in accounting firms,

corporations, and government agencies.

Scientific (12% of Professional Total Revenue in FY2008): Scientific provides

technology to academic, government, corporate and pharmaceutical research

professionals that facilitates the product release step of research and

development.

Healthcare (8% of Professional Total Revenue in FY2008): Healthcare

focuses on improving the clinical and business performance of its clients,

providing them with decision support solutions.

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Note: The metrics displayed here are calculated on a pro forma basis, and not on a Canadian GAAP

basis

2.4 FUNCTIONAL DEPARTMENTS OF THE ORGANIZATION

INVESTMENT & ADVISORY SOLUTIONS

Corporate Services

Deal Making

Investment Management

Quantitative Analysis

Wealth Management

Corporate Services

Targeted to Investor Relations, Corporate Communications, and Business

Intelligence functions.

Deal Making

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Leading provider of products to the world’s investment banks, advisory firms,

private equity firms, consulting firms and law firms.

Investment Management

Our products help asset management professionals track investment ideas,

view portfolio performance, optimize risk.

Quantitative Analysis

Powerful tools allow quantitative investors to manage and access data for

sophisticated analysis.   

Wealth Management

Our easy-to-use wealth products let data flow seamlessly from your back-

office to your fingertips.

SALES & TRADING SOLUTIONS

Commodities & Energy

Equities & Derivatives

Event Driven Trading

Fixed Income

Foreign Exchange & Money Markets

Post Trade Services

Commodities & Energy

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Specialist news, rich content and market intelligence, bespoke analytic

tools, and order routing abilities via a single desktop solution.

Equities & Derivatives

Solutions deliver a complete and simplified workflow via a combination of

content, transactions and collaboration tools.

Event Driven Trading

Solutions deliver a complete and simplified workflow via a combination of

content, transactions and collaboration tools.

Fixed Income

Comprehensive news, prices, market data and tools spanning the complete

trading cycle for the global fixed income markets.

Foreign Exchange & Money Markets

Trade instantly on multiple venues, from a single platform with real time prices

in over 170 currencies, instruments and derivatives.

Post Trade Services

Post Trade Services enables true straight-through processing, reducing your

costs and operational risk as well as improving efficiencies.

RAI BUSINESS SCHOOL Page 34

ACROSS THE ENTERPRISE

Back Office & Accounting

Hedge Funds

Trading Infrastructure

Valuation & Risk Management

Back Office & Accounting

Our solutions empower companies to centralize and optimize their global

operations and reduce settlement costs and better manage risk.

Hedge Funds

Time-series databases, real-time data, and cross-asset analytics, provide

solutions linking investment decisions to trade execution and the back-office.

Trading Infrastructure

Transactions processing, data feeds and distribution platforms, and more to

support your market data and trading operations.

Valuation & Risk Management

Obtain independent, verified pricing across a range of asset classes and

achieve transparent valuations with our analytics and models.

RAI BUSINESS SCHOOL Page 35

INDIVIDUALS/SMALL BUSINESSES

Individual Traders/Investors

Independent Advisors

Individual Traders/Investors

Trading and investment solutions for individual investors, advisors and small

corporations.

Independent Advisors

Tools and market data solutions for independent financial advisors.

Healthcare

Critical information for healthcare delivery and management. Can Help

Hospitals Save $4 Billion and Improve Quality Improve Clinical Outcomes

With Evidence-Based Order Sets    Comparative Effectiveness Research:

Which Treatments Work Best in Real-World Settings?

Legal

Legal, compliance, intellectual property & government solutions.

Business & Transactional Law

Industry-specific features, financial and regulatory content, and business law

research combine in our suite of tools for business practitioners.

Business Intelligence

RAI BUSINESS SCHOOL Page 36

See the tools that help you learn more about your customers, competitors and

prospects to  maintain your organization’s competitive edge.

Client Development & Marketing

Support your firm’s growth strategy with our electronic marketing, relationship

management, market insight tools and consulting services.

Consulting Services

Our industry experts provide renowned insight, expertise and guidance on a

host of issues, including technology, strategy and discovery.

Intellectual Property

Efficient and comprehensive, our intellectual property solutions take the

complexity out of trademark research and management.

Investigations & Law Enforcement

Innovative, smart search technologies combine with our comprehensive

databases so that you can be confident in your public records research.

Law Firm Operations

Enhance your firm’s core business competencies and sharpen your strategic

focus with our  practice management and operations applications.

Legal Education

Stay current on emerging topics and trends with our bar review, accredited

continuing education and other solutions.

RAI BUSINESS SCHOOL Page 37

Legal Research

Authoritative content, insightful linking and indexing, and powerful search

technologies provide the insights and answers to complex issues.

Litigation

From case evaluation to transcript management, trial and appeals, we’ve got

all the necessary information and tools in one place.

Video

Our compelling video reports for broadcasters and online news media can be

accessed by geographic focus, news category and topic area. We cover world

events with dedicated teams around the globe who capture, edit and deliver

top quality video content.

Pictures

Reuters captures events that shape the world. Our award-winning

photojournalists distribute up to 1,700 pictures each day covering news,

sports, features, entertainment and business. Our up-to-the-minute, news

photographs show an accurate, timely view of global events.

Financial Information

Reuters financial information services are a powerful source of real-time and

historical financial news and data. Features include access to streaming

quotes, domestic news services, broker research, company fundamentals,

charting tools and a global news archive.

RAI BUSINESS SCHOOL Page 38

Thomson News Agency

Reuters, the world’s largest international news agency, is a leading provider of

real-time, high-impact, multimedia news and information services to

newspapers, television and cable networks, radio stations and websites

around the globe.

Science

Serving academic, government, corporate and pharma R&D professionals.

“INTELLIGENT INFORMATIONTO ACCELERATERESEARCH, SCIENTIFIC

DISCOVERY AND INNOVATION”

TAX & ACCOUNTING

For CPA Firms

More than 50,000 tax, accounting and audit professionals rely on our

integrated solutions and the top 100 U.S. CPA firms trust our research and

guidance.

For Corporations

See why corporate tax, finance, accounting, trust, payroll and HR

professionals choose our integrated workflow solutions and unparalleled

expert guidance.

For Law Firms

RAI BUSINESS SCHOOL Page 39

COUNTRY HEAD

REGION HEAD

MANAGER

TEAM LEADER

SENOIR RESEARCH ANALYST

EMPLOYEES

THOMAS GLOCER

(CEO)

GUSTAV CARLSON

(Chief Marketing Officer)

ROBERT DALEO

(CFO)

STEPHEN DANDO

(Chief Human Resource Officer)

MICHAEL WILENS

(Strategy, Innovation &

Technology Head)

DEIDRE STANLEY

(General Counsel)

Whether you're responsible for tax, accounting, estate planning or benefits,

join 98 of the top 100 U.S. law firms who depend on guidance from our

experts. 

2.5 ORGANIZATION STRUCTURE AND ORGANIZATION CHART

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2.6 PRODUCT AND SERVICE PROFILE OF THE ORGANIZATION

COMPETITORS

Competition

Although Thomson Reuters offers a diverse product suite, the fiercest

competition is in its financial data services business.

Bloomberg L.P

A privately-held worldwide information services, news, and media corporation.

In the realm of financial data services, its biggest product is the Bloomberg

terminal, an all-inclusive, subscription-based platform.

Dow Jones

A subsidiary of News Corporation (NWS), Dow Jones is a leading provider of

news and financial information. The company publishes The Wall Street

Journal, the world's leading financial daily paper and owns the investing

information site MarketWatch.com and financial news aggregator Factiva.

Interactive Data (IDC)

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IDC is a financial market research provider for large financial institutions,

active traders, and independent investors. IDC provides market information on

equities, including options, fixed-income securities, and stocks, and is

comprised of four businesses to better service its customers.

FactSet Research Systems (FDS)

A financial data and analysis products provider offering a single online

platform that aggregates information from over 200 information databases. All

of its clients are in the Financial Services industry, with the vast majority

involved in investment management.

Reed Elsevier NV (ENL)

A global publisher and information provider headquartered in London and

Amsterdam that competes with Thomson Reuters in the Legal segment,

famous for its journal ' ' LexisNexis ' '.

Market Share

As of February 2009, Thomson Reuters is the industry leader in financial data

services with a 34% market share (with respect to client base), according to

Burton-Taylor International Consulting LLC, a financial news and market data

research firm. Bloomberg L.P. holds 24% of the market, falling from a 33%

stake at the time of the Reuters merger. FactSet Research Systems (FDS) ,

Interactive Data (IDC) and SIX Telekurs, the next three on the list, together

hold less than 8% market share, highlighting the duopolistic nature of the

RAI BUSINESS SCHOOL Page 42

industry. The rest of the market is composed of small, local providers, roughly

two to five per country.

2.7 MARKET PROFILE OF THE ORGANIZATION

Rank Company Market Share

1 Thomson Reuters 34%

2 Bloomberg L.P. 24%

3 Interactive Data (IDC) 3.30%

4 FactSet Research Systems (FDS) 2.50%

5 SIX Telekurs 1.20%

6 Small regional competitors (Private) ≈35%

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3.1 STUDENTS WORK PROFILE (ROLE AND RESPONSIBILITIES)

We used to capture the announcement from the stock market.

And track it in our NDA ( Numeric Data Architecture ).

And then send it to the clients.

Announcements includes Dividends, Total shares outstanding, Capital

Change, Share Buy Back.

We do the market research and market analysis from the various stock

markets and various stock exchanges globally and do the production.

After doing the research we have to update all the information about

the corporate action which has taken place by the organization and we

needs to update it on the frequently bases.

We have to update the corporate action taken in the business

organization on the timely bases as soon as we get the information

about it from the various stock markets and various stock exchanges

globally.

We have to update the information accurately and there are some

calculations also involved in updating the information in the

organization’s product.

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Quality of the work is the most important thing which is required.

Maintaining the code of conduct which includes both content code of

Conduct and employee code of conduct.

Handling the process effectively.

Achieving the daily production target of 43 units which is considered as

100%.

Achieving monthly and yearly target.

Maintaining efficiency 100%.

Solving the queries timely.

Report to seniors like trainer, team leader and manager.

Maintain quality in production.

Working with colleagues as a team to improve team productivity.

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3.2 DESCRIPTION OF LIVE EXPERIENCESS

It is pleasure to be a part of such MNC and I have been gaining valuable

Experience regarding the corporate world, it includes culture, behavior,

discipline, timeliness, respect towards the seniors/peers etc. The culture of

the Organization is mixed as Western and Indian. Employees are not forced

to do huge task but there is a stipulated unit of production that every

Employee has to achieve per Day. Trainees like me are monitoring closely by

the seniors, even a small Issue is treated seriously. We are having friendly

weather here with maintaining code of conduct.

As a Trainee Market Research Analyst, I am a part of 22

Members Company Maintenance team which is consists in Entity

Management, Department Contains 200 employees (approx) Headed by Mr. -

Suresh Ranganathan as Senior Manager with Mr. - Shashidhar Reddy and

Mr-Parthivan Dora as Asst Manager. After having

one month of training on process I have been put straight into the Production,

where I am working on almost every task except pricing and able to Achieve

100% (approx) productivity each week.

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“STOCK FUTURES AND STCOK OPTIONS IN

INDIA”

INTRODUCTION ABOUT STOCK FUTURES AND STOCK OPTIONS

A derivative instrument broadly is a financial contract whose payoff structure

is determined by the value of underlying commodity, security, interest rate,

share price index, exchange rate, oil price, or the like. So a derivative is an

instrument which derives its values from some underlying variable /asset. A

derivative instrument by itself does not constitute ownership. It is, instead, a

promise to convey ownership.

All derivatives are based on some ‘cash’ products. The underlying

asset of a derivative instrument may be any product of the following types: -

1. Commodités (grain, coffee, beans, orange juice etc.)

2. Precious metals (Gold, Silver, Copper)

3. Foreign exchange rate

4. Bonds of different types including medium to long-term negotiation debt

securities.

5. Short term debt securities like T- bills

6. Over the counter (OTC) money market products such as loans or

deposits.

Financial derivatives came into the spotlight along with the rise in

uncertainty of post 1970, when the US announced an end to the Breton

Woods System of fixed exchange rates leading to introduction of currency

derivatives followed by other innovations, including stock index futures.

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DEFINITION OF DERIVATIVES

Derivatives are the financial instruments, which derive their value

from some other financial instruments, called the underlying. The foundation

of all derivatives market is the underlying market, which could be spot market

for gold, or it could be a pure number such as the level of the wholesale price

index of a market price.

“ A derivative is a financial instrument whose value depends on the value

of other basic underlying variables”

John c hull

According to the Securities Contract (Regulation) Act, 1956, derivatives

include:

A security derived from a debt instrument, share, and loan whether

secured or unsecured, risk instrument or contract for differences or any

other form of security.

A contract, which derives its value from the prices or index of prices of

underlying securities.

Therefore, derivatives are specialized contracts to facilitate temporarily

for hedging which is protection against losses resulting from unforeseen price

or volatility changes. Thus, derivatives are a very important tool of risk

management.

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Derivatives perform a number of economic functions like price discovery,

risk transfer and market completion.

The simplest kind of derivative market is the forward market. Here a

buyer and seller write a contract for delivery at a specific future date and a

specified future price. In India, a forward market exists in the form of the

dollar-rupee market. But forward market suffers from two serious problems;

counter party risk resulting in comparatively high rate of contract non-

compliance and poor liquidity.

PREREQUISITES FOR DERIVATIVES MARKET

There are five essential prerequisites for derivatives market to flourish in a

country.

a) Large market capitalization

At a market capitalization of near $1.5 trillion, India is well ahead of

many other countries where derivatives markets have succeeded.

b) Liquidity in the underlying

A few years ago, the total trading volume in India used to be

around Rs-300 crore a day. Today, daily trading volume in India is

around Rs-2000 crore a day. This implies a degree of liquidity, which is

around six times superior to the earlier conditions. There is empirical

evidence to suggest that there are many financial instruments in the

country today, which have adequate to support derivative market.

c) Clearing house that guarantees trades

Counter party risk is one of the major factor recognized as

essential for starting a strong and healthy derivatives market. Trade

guarantee therefore becomes imperative before a derivatives market

could start. The first clearinghouse corporation guarantees trades have

become fully functional from July 1996 in the form of National

Securities Clearing Corporation (NSCC). NSCC is responsible for

RAI BUSINESS SCHOOL Page 51

guaranteeing all open positions on the National Stock Exchange (NSE)

for which it does the clearing. Other exchanges are also moving

towards setting up separate and well-funded clearing corporations for

providing trade guarantees.

d) Physical infrastructure

India’s equity markets are all moving towards satellite connectivity,

which allows investors and traders anywhere in the country to buy

liquidity services from anywhere else. This telecommunications

infrastructure, India’s capabilities in computer hardware and software,

will enable the establishment of computer system for creation of

derivatives markets. Setting up of automated trading system as an

experience with various prospective exchanges will also be beneficial

while setting up the derivative market.

e) Risk-taking capability and Analytical skills

India’s investors are very strong in their risk-bearing capacity and can

cope with the risk that derivatives pose. Evidence of the volumes traded

on the capital markets, which are akin to a futures market, is indicative

of this capacity. In contrast, in some other countries, investors simply

lack the risk-bearing capacity to sustain the growth of even the equity

market. It is expected that such a barrier will not appear in India.

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Types of Derivatives

TYPES OF DERIVATIVES

A) OPTIONS:

The concept of options is not new one. In Fact, options have been in

use for centuries. The idea of an option existed in ancient Greece and Rome.

The Romans wrote options on the cargo that were transported by their ship.

In the 17th century, there was an active option markets in Holland. In fact,

options were used in a large measure in the ‘tulip bulb mania ‘ of that century.

However, in the absence of mechanism to guarantee the performance of the

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Derivatives

Forwards Future Options Swaps

Commodity

Security

Commodity Security Call Put

Interest rate

Currency

contract, the refusal of many put option writers to take delivery of the tulip bulb

and pay the high prices of the bulb they had originally agreed to, led to

bursting of the bulb bubble during the winter of 1637.A number of speculators

were wiped out in the process.

B) FORWARDS:

A forward is an agreement between two parties to exchange an agreed

quantity of asset at a specified future date at a predetermined price specified

in the agreements. The parties concerned agree the settlement date and price

in advance. The promised asset may be currency, commodity, instrument etc.

It is the oldest type of all the derivatives. The party who promises to buy but

he specified asset at an agreed price at a fixed future date is said to be in the

‘Long position ‘ and the party who promises to sell at an agreed price at a

future date is said to be in ‘ short position’.

C) FUTURES:

It is similar to the forward contract in all the respect. In fact, a future

is a standardized form of forward contract. A future is a contract or an

agreement between two parties to exchange assets / currency or commodity

at a certain future date at an agreed price. The trader who promises to buy is

said to be in ‘ long position ‘ and the party who promises to sell said be in

‘short position’.

D) SWAP:

Swap is an agreement between two parties to exchange one set of

financial obligations with other. It is widely used throughout the world but is

recent in India. Swap may be interest swap or currency swaps. Swaps give

companies extra flexibility to exploit their comparative advantage in their

respective borrowing markets. Swaps allow companies to focus on their

comparative advantage in borrowing in a single currency in the short end of

RAI BUSINESS SCHOOL Page 54

the maturity spectrum vs. the long-end of the maturity spectrum. Swaps allow

companies to exploit advantages across a matrix of currencies and maturities.

DERIVATIVES MARKET IN INDIA

Prior to liberalization, in India financial markets, there were only a few

financial products and the stringent regulatory products and the stringent

regulation environment also eluded any possibility of development of a

derivatives market in country. All Indian corporate were mainly relying on term

lending institution for meeting their project financing or any other financing

requirements and on commercial banks for meeting working capital finance

requirement. Commercial banks are on their assets and liabilities. The only

derivative product they were aware of is the foreign exchange forward

contract. But this scenario changed in the post liberalization period.

Conservative Indian business practitioners began to take a different view of

various aspects of their operations to remain competitive. Financial risks were

given adequate attention and “treasury function” has assumed a significance

role in all major corporate since then.

Initially, banks were allowed to pass on gains arising out of cancellation

of forward’s contracts to the customers and customers were permitted to

cancel and re-book the forward contracts. This remarkable change was

followed by the introduction of cross currency forward contacts. But the major

milestone in developing forex derivatives market in India was the introduction

of cross currency options. The RBI’s objective of introducing cross currency

options was to provide a complicated hedging strategy for the corporate in

their risk management activities.

The concept of “derivatives” is of course not new to the Indian market.

Though derivatives in the financial markets have nothing to talk about home,

in the commodity markets they have a long history of over hundred years. In

1875, the first commodity futures exchange was set up in Mumbai under the

guidance of Bombay Cotton Traders Association. A clearinghouse for clearing

RAI BUSINESS SCHOOL Page 55

and settlement of these traders was set up in 1918. Over a period of twenty

years during 1900-1920, other futures markets were set up in various places.

Futures market in raw jute in Kolkata (1912), wheat futures market in Hapur

(1913), and bullion futures market in Mumbai (1920).

When it comes to financial markets, derivatives in equities claim a long

existence. The official history of Bombay Stock Exchange (then known as

Native Share and Stock Brokers Association) reveals that the concept of

options existed since 1898 as is reflected from a quote given by one of the

MPs-“India being the original home of options, a native broker would give a

few points to the brokers of the other nations in the manipulation of puts and

calls”.

The NSE and BSE are two exchanges on which financial derivatives

are traded. The combined notional value of the daily volumes on both the

bourses stand at around RS. 400 cr. In developed markets trading in the

derivatives segment are thrice as large as in the cash markets. In India, the

figure is hardly 20% of cash markets. Quite clearly our derivative markets

have a long way to go.

According to the Executive Director of Association of NSE Member of

India (Amni), Vinod Jain, “Volumes in derivatives segment are stagnating due

to lack of growth in the number of markets participants. Besides these

products are still to catch up with the masses who are keeping away from this

segment due to lack of understanding of the products and high contract price”

The need for a derivatives market

The derivatives market performs a number of economic functions:

1. They help in transferring risks from risk a verse people to risk oriented people

2. They help in the discovery of future as well as current prices

3. They catalyze entrepreneurial activity

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4. They increase the volume traded in markets because of participation of risk

adverse people in greater numbers

5. They increase savings and investment in the long

Essentials for a good derivatives market

Large market capitalization

Liquidity

Clearinghouse that guarantees trades

Physical Infrastructure

Risk taking capability and analytical skills

Role of derivatives in India

Derivatives will make hedging possible

Derivatives will enable separation between speculators who wish to

bear risk Vs Hedgers

Derivatives will lead to an improvement in cash market

Develop Indian financial Industry

Risk management

Price Discovery

Market effectiveness

Ease of speculation

Introduction of Futures and options in India:

India is one of the many emerging markets of the world where

derivatives have been introduced in the recent past. For long exchanges like

the stock exchange, Mumbai and Vadodara Stock Exchange showed their

willingness in introducing trading in futures and options. However, a concerted

effort in this direction was made by the National Stock Exchange(NSE) in

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July, 1995 when it considered the modalities of introducing derivatives trading,

mainly futures and options. Within a few months, NSE developed a system of

options and futures trading aiming at modifying the carry forward system to

include options and futures in its scope.

By January 1996, the NSE started work on the scheme of such

trading. In March 1996, it made a presentation to SEBI on its plans to

commence trading in futures and options. The exchange proposed to start

with index based futures and index based options, which are seen as

comparatively safer forms of derivatives.

OPTIONS:

The concept of options is not new one. In Fact, options have been in

use for centuries. The idea of an option existed in ancient Greece and Rome.

The Romans wrote options on the cargo that were transported by their ship.

In the 17th century, there was an active option markets in Holland. In fact,

options were used in a large measure in the ‘tulip bulb mania ‘ of that century.

However, in the absence of mechanism to guarantee the performance of the

contract, the refusal of many put option writers to take delivery of the tulip bulb

and pay the high prices of the bulb they had originally agreed to, led to

bursting of the bulb bubble during the winter of 1637.A number of speculators

were wiped out in the process.

FACTORS DETERMINING THE OPTION VALUE:

The precise location of the option value depends on five key factors:

Exercise price

Expiration date

Stock price

Stock price variability

Interest rate

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STATEMENT OF PROBLEM

The stock future and stock options are used by investors for trading

and hedging. As a hedging instrument options are considered as better over

future as limited risk are attached with them. Even then in terms of volume of

trade stock future shows more growth than stock options. The study aims at

understanding what are the reason for increased trading in stock future over

stock options.

OBJECTIVES OF THE STUDY

To make a comparative analysis of stock option with stock future in

terms of volume and performance.

To understand various factors which influences stock future and stock

option market.

To enhance knowledge on derivative market by collecting opinion of

the experts.

SCOPE OF THE STUDY

The study is restricted to analysis of stock future and stock options.

The index future and option trading and other derivative product analysis are

beyond the scope of the study. The experts’ opinion is collected to enhance

the knowledge on derivative market. The outcome of the study will have

limited scope as only four major stocks on the basis of market capitalization

has been covered for the study.

METHODS OF DATA COLLECTION

In the present study analysis is done based on the data collected from

primary as well as secondary data.

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The primary data collected from experts through scheduling. To

enhance the knowledge to set greater insight in study the survey is

undertaken.

The data required for the study will be collected from secondary

source. The secondary data needed for the study is collected from

magazines, newspaper, website, books etc.

BHEL COMPANY PROFILE

Bharat Heavy Electrical Limited (BHEL) is one of the most leading and the

largest Engineering and Manufacturing Enterprises in India in the energy

related/infrastructure sector today. BHEL was Established more than 40 years

ago ushering in the indigenous Heavy Electrical Equipment Industry in India,

a dream that has been more than realized with a well-recognized track record

of performance. It has been earning profits continuously since 1971-72 and

paying dividends since 1976-77

The first plant of BHEL was set up at Bhopal in 1956. BHEL is involved in the

manufacture of over 180 products under 30 major products groups. BHEL's

range of services extends from project feasibility studies to After-sales -

service successfully meeting diverse needs through turnkey capability.

With corporate Head quarters at New Delhi, BHEL's operations are

organized around three Businesses sectors viz. power, industry and

international operations. Various corporate functions and the

operating/manufacturing units in turn support the business sectors, all of

which function in a well-orchestrated manner in order to meet

market/customer needs.

The BHEL-EDN division came into existence when BHEL took over Radio

and Electrical Manufacturing Company (REMCO), which formally merged with

BHEL-EDN in 1980. Growing from a turnover of 3 crores in 1976-77 to Rs.

465 crores in 1999-2000, BHEL, as on date is a tough competitor in the field

and has won many prestigious contracts against stiff worldwide competition.

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BHEL has acquired certifications to Quality Management Systems - ISO

9001, Environmental Management Systems - ISO 14001 and Occupational

Health & Safety Management Systems - OHSAS 18001 and has also adopted

the concepts of Total Quality Management

BHEL's vision is to become a world class engineering enterprise, committed

to enhance stakeholder value. The company is striving to give shape to its

aspirations and fulfill the expectations as a ' NAVRATNA COMPANY ’.

INFOSYS COMPANY PROFILE

History

Established in 1981, Infosys is a NASDAQ listed global consulting and IT services company with more than 103,000 employees. From a capital of US$ 250, we have grown to become a US$ 4 billion company with a market capitalization of approximately US$ 14 billion.

The Infosys’s journey of over 25 years, they have catalyzed some of the major changes that have led to India's emergence as the global destination for software services talent. They pioneered the Global Delivery Model and became the first IT company from India to be listed on NASDAQ. Our employee stock options program created some of India's first salaried millionaires.

Vision

"To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people."

Mission

"To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large."

ONGC COMPANY PROFILE

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ONGC (Oil and Natural Gas Corporation Limited) is India's leading oil

& gas exploration company. ONGC has produced more than 600 million

metric tonnes of crude oil and supplied more than 200 billion cubic metres of

gas since its inception. Today, ONGC is India's highest profit making

corporate. It has a share of 77 percent in India's crude oil production and 81

per cent in India's natural gas production.

The Industrial Policy Resolution of 1956 placed mineral oil industry

among the schedule 'A' industries. In August 1956, to ensure efficient

functioning of the Oil and Natural Gas Directorate, the Directorate was raised

to the status of a commission with enhanced powers. In 1960s, ONGC found

new resources in Assam and established new oil province in Cambay basin

(Gujarat). In early 1970s went offshore and discovered a giant oil field in the

form of Bombay High. After liberalization in 1991, ONGC was re-organized as

a limited Company under the Company's Act, 1956 in February 1994. Today,

ONGC has grown into a full-fledged horizontally integrated petroleum

company. Recently, ONGC has made six new discoveries, at Vasai West (oil

and gas) in Western Offshore, GS-49 (gas) and GS-KW (oil and gas) in

Krishna-Godavari Offshore, Chinnewala Tibba (gas) in Rajasthan, and

Laipling-gaon (oil and gas) and Banamali (oil), both in Assam.

ONGC has a fully owned subsidiary, ONGC Videsh Ltd (OVL) that

looks for exploration opportunities in other parts of the world. OVL is pursuing

exploration of oil and gas in Russia, Iran, Iraq, Libya Myanmar and other

countries. ONGC has also acquired 72% stake in MRPL with full management

control of the 9.69 tonne, state-of-the-art refinery.

RELIANCE COMPANY PROFILE

The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is

India's largest private sector enterprise, with businesses in the energy and

materials value chain. Group's annual revenues are in excess of US$ 34

RAI BUSINESS SCHOOL Page 62

billion. The flagship company, Reliance Industries Limited, is a Fortune Global

500 company and is the largest private sector company in India.

Backward vertical integration has been the cornerstone of the

evolution and growth of Reliance. Starting with textiles in the late seventies,

Reliance pursued a strategy of backward vertical integration - in polyester,

fibre intermediates, plastics, petrochemicals, petroleum refining and oil and

gas exploration and production - to be fully integrated along the materials and

energy value chain.

The Group's activities span exploration and production of oil and gas,

petroleum refining and marketing, petrochemicals (polyester, fibre

intermediates, plastics and chemicals), textiles, retail and special economic

zones.

Reliance enjoys global leadership in its businesses, being the largest

polyester yarn and fibre producer in the world and among the top five to ten

producers in the world in major petrochemical products.

The Group exports products in excess of US$ 20 billion to 108

countries in the world. Major Group Companies are Reliance Industries

Limited (including main subsidiaries Reliance Petroleum Limited and Reliance

Retail Limited) and Reliance Industrial Infrastructure Limited.

The famous quote from the Dhirubhai H. Ambani Founder Chairman

Reliance is

"Growth has no limit at Reliance. I keep revising my vision. Only when you can

dream it, you can do it."

ANALYSIS OF STOCK FUTURE CONTRACT

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Single stock future and single stock option trading in NSE started in

the year 2001. Since the volume of trading in index future and option and

single stock future and single stock option has increased tremendously.

Analysis and interpretation of single stock future and single stock

option is done on the basis of volume trade, payoff structure as well as by

evaluating these instruments as a risk management tool.

For the study purpose INFOSYS, BHEL, RELIANCE and ONGC.

Single stock future and single stock option data along with there cash market

data is used from year 2008.

VOLUME OF TRADE

The volume of trade in stock futures and stock options gives the clear

idea, about how the activities are happening in that stock. The following data

show, in India stock future has a high turnover than the stock option. For

calculation purpose 2007-08 year data’s are taken from the hand full statistics

book of RBI.

Stock futures and stock option turn over (rupees crore)

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The graphs indicates October month turn over in stock future market

was higher than other months. But from the graph we can’t find any particular

stagnant turn over.

SINGLE STOCK FUTURE AND OPTION TRADING

Stock Futures and options is one of the highly used risk management

tool in trading. In India majority of the time, stock future and stock option used

for speculation purpose rather than hedging purpose. The turnover in futures

and options contract increases, whenever the respective expiry date come

closesr.

Risk management

Risk management means mitigating the loss or reducing the loss which

may happen due to adverse market movement

Future as a risk management tool

Single stock future contract can be used for risk management. Suppose

one investor is having 75 share of BHEL and he anticipates great growth

prospect in BHEL in coming years, then he need to hold the stock. In case of

fall in the BHEL price due to systematic risk factors then he will incur a loss.

To avoid this problem he can take short position(selling) in single stock future

contract of BHEL. Thus he will ensure his position as safe at whatever the

market condition. To explain this following illustration is given.

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OPTIONS:

An options contract is an agreement between a buyer and a seller.

Such a contract confers on the buyer a right but not an obligation to buy or

sell a specified quantity of the underlying asset at a fixed price on or up to a

fixed day in the future on a payment of a premium to the seller. The premium

paid by the buyer to the seller is the price of an option contract.

Options are of two types - calls and puts. Calls give the buyer

the right but not the obligation to buy a given quantity of the underlying asset,

at a given price on or before a given future date. Puts give the buyer the right,

but not the obligation to sell a given quantity of the underlying asset at a given

price on or before a given date.

OPTION TERMINOLOGY

There are several important terms used in option they are: -

1) Call option: - Gives the buyer the right, but not the obligation to buy a

specific futures contract at a predetermined price within a limited

period of time.

2) Put option: - Gives the buyer the right, but not the obligation, to sell a

specific futures contract at a predetermined price within a limited

period of time.

3) Holder: - The buyer of the option.

4) Premium: - The amount paid by the buyer of the option to the seller.

5) Writer: - The option seller.

6) Strike price: - The predetermined price at which a given futures

contract bought or

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sold. Also called the “exercise price” these levels are set at regular

intervals.

7) At-the money: - An option is at-the money when the underlying futures

price

equals or nearly equals, the strike price.

8) In-the money: - A call option is in-the money when the underlying

futures price is

greater than the strike price.

9) Out-of-the money: - A call option is out-of-the money if the Strike price

is greater

than the underlying futures price.

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Futures > strike Futures < strike

Futures = strike Futures = strike

Futures < strike Futures > strike

At-the money

Out-of-the money

In-the money

Call option Put option

STOCK OPTIONS CONTRACT ANALYSIS

Option contract are used for hedging purpose. Option holder will make huge

amount of profit and minimum amount of loss by excising his option. Where

as option seller will make a huge amount of loss or minimum amount of gain,

in case option buyer excises his option contract or not respectively.

Call option

Call option buyer is bullish. He anticipates market to go up. Whenever

market moves up his option contract become in the money. In that case either

he may excises his option contract or else he will keep his position open till

the expiry date.

Put option

Put option buyer is bearish. He anticipate market to go down. Whenever

market moves down his option contract become in the money. In that case

either he excises his option contract or else he will keep his position open till

the expiry date.

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RELIANCE CALL OPTION

Option Date Equity Close Price

buyer contract cost

buyer profit/loss

seller profit/loss

CA 1-Jan-08 2848.25 2930 OTM -17250 17250

CA 2-Jan-08 2861.75 2930 OTM -17250 17250

CA 3-Jan-08 2903.7 2930 OTM -17250 17250

CA 4-Jan-08 2993 2930 ITM 4725 -4725

CA 7-Jan-08 3020.25 2930 ITM 6768.75 -6768.75

CA 8-Jan-08 3054.65 2930 ITM 9348.75 -9348.75

CA 9-Jan-08 3033.65 2930 ITM 7773.75 -7773.75

CA 10-Jan-08 3027.8 2930 ITM 7335 -7335

CA 11-Jan-08 3127.6 2930 ITM 14820 -14820

CA 14-Jan-08 3220.85 2930 ITM 21813.75 -21813.8

CA 24-Jan-08 2488.9 2930 OTM -17250 17250

CA 25-Jan-08 2615.4 2930 OTM -17250 17250

CA 28-Jan-08 2566.4 2930 OTM -17250 17250

CA 29-Jan-08 2576.9 2930 OTM -17250 17250

CA 30-Jan-08 2471.9 2930 OTM -17250 17250

CA 31-Jan-08 2478.9 2930 OTM -17250 17250

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Call option pay-off structure of RELIANCE for both seller and buyer

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RELIANCE PUT OPTION

Option Date Equity Close Price

Buyer contract cost

buyer profit/loss

seller profit/loss

PA 1-Jan-08 2848.25 2620 OTM -1500 1500

PA 2-Jan-08 2861.75 2620 OTM -1500 1500

PA 3-Jan-08 2903.7 2620 OTM -1500 1500

PA 4-Jan-08 2993 2620 OTM -1500 1500

PA 7-Jan-08 3020.25 2620 OTM -1500 1500

PA 8-Jan-08 3054.65 2620 OTM -1500 1500

PA 9-Jan-08 3033.65 2620 OTM -1500 1500

PA 10-Jan-08 3027.8 2620 OTM -1500 1500

PA 11-Jan-08 3127.6 2620 OTM -1500 1500

PA 24-Jan-08 2488.9 2620 ITM 9832.5 -9832.5

PA 25-Jan-08 2615.4 2620 ITM 345 -345

PA 28-Jan-08 2566.4 2620 ITM 4020 -4020

PA 29-Jan-08 2576.9 2620 ITM 3232.5 -3232.5

PA 30-Jan-08 2471.9 2620 ITM 11107.5 -11107.5

PA 31-Jan-08 2478.9 2620 ITM 10582.5 -10582.5

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Put option pay-off structure of RELIANCE for both seller and buyer.

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FINDINGS

Futures were basically introduced to hedge the risk. But they were

used more for speculation purpose.

Stock futures are widely used derivatives instruments. Compared to

stock options.

The turn over in stock futures and stock options in all the months were

not consistent to

the average turn over.

Open interest building is more in near month contract compared to far

month contract.

By taking opposite position in cash market and stock future market

hedging can be made.

Due to bearish trend in market, most of the call option contract were

not in the money but where put option contract were in the money.

the stock future market has a turn over, which is nearly 21 times more

the stock option turn over.

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SUGGESTIONS

The volume of trading in option and future is less in far month contract

compare to that of near month contract. There for investor need to be

very much care full before taking any position in far month contract.

Stock future and stock option can be used for hedging purpose. But the

perfect hedging can be made in case stock holding is equal to lot size.

Investor need to be aware about lot size of stock future and stock

option contract before investing in those stocks.

The seller of stock option contract the writer need to be very much

careful as the amount of loss possibility are there in case of adverse

market movement.

By using various combination of stock options and stock futures

contract hedging can be made even in case of not having position in

cash market.

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CONCLUSION

Stock futures and stock options market getting popularity because of

margin money concept. These derivative products need to be used for

hedging purpose and also as a risk management tools. Majority of time

speculators participates in this markets to make a short profit. The liquidity in

stock option market is less compare to stock future market. Investor need to

be careful before participating derivative market because of huge amount of

volatility fund from the previous year data analysis.

All the major stocks have shown downward trend in the market from

the previous year data analysis. Put option is really effective in bearish

market. Where as call option in bullish market.

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BOOKS REFERRED

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Security analysis and portfolio management – Prasanna Chandra

Security analysis and portfolio management – Sudhindra bhat

Investment analysis and portfolio management – Frank K. Reilly

Keith C. Brown

WEBSITES REFERRED

http://www.bseindia.com

http://www.nscindia.com

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