A STUDY OF THE RELATIONSHIP BETWEEN SPOT AND FUTURE MARKET– A CASE STUDY OF BHARTI AIRTEL STOCK FUTURES

Abstract

The report titled “A study of the relationship between spot and future market – A case study of Bharti Airtel Stock Futures” is a report based on the case study carried out by me of the futures market in India with respect to stock futures traded in NSE. It is a part of the course work of 4 th semester, to be submitted as a requirement of the MBA program of Delhi School of Management, Delhi Technological University. The objectives of the report are to understand the relationship between spot and futures price of stock futures and to know the market efficiency of stock futures market by finding out the lead lag relationship between the spot and future prices in the market. It is a case study of the stock futures of Bharti Airtel, traded in NSE. This Report is divided into six chapters. The first chapter of this study deals with introduction that presents the financial markets in general and Indian stock futures market in particular. It talks about the various derivative products that are traded in NSE. Futures are discussed in detail with emphasis on its functions and importance. The second chapter of the report presents the literature review. This talks about the various studies that have been conducted in the past with respect to futures trading. Few papers are based on the Indian scenario and helps in understanding how emerging market like India are doing with respect to futures trading. Literature also tells us about the various econometrics techniques to be followed in order to test the objectives of the study. The third chapter is about the research methodology. The fourth chapter gives the test results and their analysis. Augmented Dickey Fuller test is used to check the stationarity of both the spot and future time series. After checking the presence of cointegration between the two series, VECM is applied to know about the lead-lag relationship between the two series. Granger causality test is performed to see the short run causality between both the time series. The fifth chapter summarizes the findings and concludes the discussion. The report is winded up with the sixth chapter on bibliography.