Volume 4 •  Number 2  • February  2010

Is An Introduction of Derivatives Trading Cause-Increased Volatility?

As the word suggests, derivative is a financial contract, which derives its value from its underlying variable. The variable can be any asset, index, interest rate, weather and so on. Derivatives provide a platform to the participants for hedging their real or potential exposure, speculating on the degree and the direction of the movement in underlying variable and finding and exploiting arbitrage opportunities arising out of temporary mispricing of various derivative products or the temporary violation of non arbitrage conditions between derivative contract and its underlying variable from which it derives value.

The major attraction of the derivative market for the traders is that it allows them to assume highly leveraged positions at low transaction costs and also allows them to crate some of the highly flexible and innovative payoffs by combining different derivatives products.

Dr.Mayank Joshipura
Associate Professor(Finance)
S.P Jain Institute of Management & Research,Mumbai
mayank.joshipura@spjimr.org

The Indian Fertiliser Industry entered into the hundredth year of its existence in the year 2006. The industry had a very humble beginning in 1906, when the manufacturing unit of Single Super Phosphate (SSP) was set up in Ranipet near Chennai with annual capacity of 600 MT. The Fertiliser & Chemicals Travancore of India Ltd. (FACT) at Cochin in Kerala and the Fertiliser Corporation of India (FCI) in Sindri in Bihar were the first large sized fertiliser plants set up in forties and fifties with a view to establish an industrial base to achieve self-sufficiency in food grains. Subsequently, green revolution in the late sixties gave an impetus to the growth of fertiliser industry in India. In seventies and eighties, a significant addition to the fertiliser production capacity was witnessed. There has been spectacular growth in the production capacity and production of fertilisers, particularly during eighties and early nineties to meet the rising demand of fertilisers. The Indian fertiliser industry is one of the best in the world in terms of capacity utilisation.

Swaran Singh
Research Scholar
Punjab School of Management Studies
Punjabi University
Patiala,Punjab
swaransingh@live.com

Dr.S.K.Bansal
Professor
Punjab School of Management Studies
Punjabi University
Patiala,Punjab
skbansal_mba@rediffmail.com

A Study on Awareness and Adaptability of Economic Value Added Concept in Indian Banking Sector

The fundamental principle of capitalism is that organizations are expected to take financial capital from shareholders and make it worth more. The success of the firm depends on its proficient management having theoretically sound knowledge of time-honoured tools for planning, decision-making, forecasting and monitoring. Developing new-fangled financial and management accounting tool is an incredibly contemporary subject matter for both the academicians engaged in business research and financial consultants in practice. During the last few years, the field of finance has become even more prominent. The concept of the Economic Value Added is similar to the traditional accounting concept of Residual Income [RI]. The concept emerges in several variations and incarnations including the trade-marked Stern Stewart & Co’s EVA with its copious accounting adjustments. Corresponding to Stewart [1991] view, EVA is a residual return measure that subtracts the cost of invested capital from net operating profit after tax.

R.Satish
Research Scholar
Sathyabama University
Chennai
radhasat@yahoo.com

Dr.S.S.Rao
Registrar
Sathyabama University
Chennai

State Bank of India Vs Unit Trust of India : A Comparison of Performance of Mutual Fund Schemes

The changing financial services scenario emerging by virtue of liberalization in last one decade has introduced a vast variety of concepts. Mutual fund is one of these. Mutual funds in Indian context are a recent phenomenon. In a short span of less than one decade, it has changed the investment pattern of medium and small Investors in India.
The origin of the Indian mutual fund industry can be traced back to 1964 when the Indian government, with a view to augment small savings within the country and to channelise these savings to the capital markets, set up the Unit Trust of India (“UTI”). The UTI was setup under a specific statute, the Unit Trust of India Act, 1963. The Unit Trust of India launched its first open-ended equity scheme called US 64 in the year 1964, which turned out to be one of the most popular mutual fund schemes in the country. In 1987, the government permitted other public sector banks and insurance companies to promote mutual fund schemes. Pursuant to this relaxation, six public sector banks and two insurance companies viz. Life Insurance Corporation of India and General Insurance Corporation of India launched mutual fund schemes in the country. Subsequently, in 1993, the Securities and Exchange Board of India ("SEBI") introduced The Securities and Exchange Board of India (Mutual Funds) Regulations, 1993, which paved way for the entry of private sector players in the mutual fund industry.

Dr.Sushil Kumar Mehta
Assistant Professor
School of Business,College of Management,Shri Mata Vaishno Devi University,Katra
Jammu & Kashmir

sushilmehta2@rediffmail.com

A Comparative Study of Gold Price Movements in Indian And Global Markets

Since the earliest times, gold has been important for mankind. The basic reason for this being its unique physical properties. Gold as a commodity, as a currency, continues to play its ancient role as the only true standard of value in times of war or crisis. History tells us that only gold retains its value during war; change of empires and govt. and at the time of crisis. Although now officially, gold held to be of only industrial value, gold is the oldest and most respected currency in the world and only one respected currency in the world when national paper money lose value. That is why every central bank of any significance buys and holds goods in reserve in a world of almost universal paper money. The monetary use of gold, along with silver has been very wide spread since ancient times. Gold and silver coins have been most readily acceptable medium of exchange due to intrinsic values of the two metals. The major problem in this use of gold as a coinage metal is its short supply. It is produced only by a few countries mainly South Africa (producing 3/4th of the total world production) Soviet Union, Canada, USA, Ghana, Philippines and Australia. In India gold has maintained an important presence since very early times.

Dr.Arti Gaur
Lecturer
Department of Business Administration
Ch.Devi Lal University
Sirsa, Haryana

Dr.Monica Bansal
Lecturer
Department of Management Studies
Jan Nayak Ch.Devi Lal Vidyapeeth
Sirsa, Haryana
monikabansal22@gmail.com

Evolution of Cost of Capital : An Appraisal

Capital is considered as the life blood of business. The employment of the capital in production, its generation into cost and its subsequent recovery through recovery of cost involve a delay and there is a time lag in the process. Therefore, the owner of capital is paid a price known as ‘cost of capital’ as compensation of such deprivation of funds for the said period of time. The overall cost of capital consists of cost incurred for different sources from which capital is raised by the firm. Here we focus on the evolution of available theories and models of cost of capital and evaluate those. For this purpose, in this paper, we have discussed ‘Capital Structure’ of a company in the light of capital, sources available for financing capital and basic factors which are considered for selecting the appropriate sources to finance capital. Then we will start source wise evaluation of the theories and models available for finding out the cost of capital in chronological order of their evolution and transformation. We conclude this paper with overall critical comments on the available models and theories of cost of capital.

Dr.Abhik Mukhopadhyay
Senior Lecturer
Department of Commerce
Sabang Sajanikanta Mahavidyalaya
Paschim Medinipur
West Bengal
amdhyay@rediffmail.com

Forecasting Share Prices : A Good Practive Or A Waste of Time

Today, financial markets are extremely volatile by nature and hence, the risk factor is an important concern for all the investors who want to invest their money in the stock market. Is there any measure or criteria to forecast the next day stock price? Does any model exist in the market which can forecast the next day stock price exactly? This study is carried out to generate a general, sector wise forecasting model for all the existing BSE 30 companies and examines their price variation pattern with respect to the BSE Index.

Mayank V.Bhatt
Lecturer
MQPM,Department of Statistics
Sardar Patel University
Vallabh Vidyanagar,Gujarat
mayankbhatt_2003@yahoo.co.in

Nishchit N.Sheth
Tushar N.Patel
Management Student
Master in Quality and Productivity Management,Department of Statistics
Sardar Patel University
Vallabh Vidyanagar,Gujarat