Foreign Exchange - HDFC

A SYNOPSIS
On
FOREIGN EXCHANGE
At
HDFC BANK LIMITED
Submitted in partial fulfillment for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted By
R. SREERAJ
H.NO: 1315-20-672-002
UNDER THE GUIDANCE
OF
------------------------------
Asst. Professor
OSMANIA UNIVERSITY, HYDERABAD

DEPARTMENT OF BUSINESS MANAGEMENT
NAVA BHARATHI COLLEGE OF P.G.STUDIES
(Affiliated to Osmania University)
Road no: 37, Burton Road, Bolarum, Secundrabad,
Medchal, Hyderabad
(2020-2022)
INTRODUCTION
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or
over-the-counter (OTC) market for the trading of currencies. This market determines the
foreign exchange rate. It includes all aspects of buying, selling and exchanging currencies at
current or determined prices. In terms of trading volume, it is by far the largest market in the
world, followed by the Credit market. The main participants in this market are the larger
international banks. Financial centers around the world function as anchors of trading
between a wide range of multiple types of buyers and sellers around the clock, with the
exception of weekends. Since currencies are always traded in pairs, the foreign exchange
market does not set a currency's absolute value but rather determines its relative value by
setting the market price of one currency if paid for with another. The foreign exchange
market works through financial institutions, and operates on several levels. Behind the
scenes, banks turn to a smaller number of financial firms known as "dealers", who are
involved in large quantities of foreign exchange trading. Most foreign exchange dealers are
banks, so this behind-the-scenes market is sometimes called the "interbank market" (although
a few insurance companies and other kinds of financial firms are involved). Trades between
foreign exchange dealers can be very large, involving hundreds of millions of dollars.
Because of the sovereignty issue when involving two currencies, Forex has little (if any)
supervisory entity regulating its actions.
The original derivatives contract of International Finance is the “Foreign exchange contract”.
Forward Foreign exchange is a traditional and popular risk management tool to obtain
protection against adverse exchange rate movements. The exchange rate is ‘locked in’ for a
specific date in future which enables the person involved in the contract to plan for and
budget the business expenses with more certainty. Forward exchange market, has since the
1960s, played the role of linking international interest rates. Today’s, however, forward
contract have to share other instruments and markets for arbitrage and for hedging. These
newer derivative instruments include Futures, Options and Swaps.
NEED FOR THE STUDY
Foreign exchange market is the most liquid financial market in the world. Traders
include governments and central banks, commercial banks, other institutional investors and
financial institutions, currency speculators, other commercial corporations, and individuals.
According to the 2010 Triennial Central Bank Survey, coordinated by the Bank for
International Settlements, average daily turnover was $3.98 trillion in April 2010 (compared
to $1.7 trillion in 1998).Of this $3.98 trillion, $1.5 trillion was spot transactions and $2.5
trillion was traded in outright forwards, swaps, and other derivatives. This is traded in an
over-the-counter market where brokers/dealers negotiate directly with one another, so there is
no central exchange or clearing house. There is no unified or centrally cleared market for the
majority of trades, and there is very little cross-border regulation. Due to the over-the-counter
(OTC) nature of currency markets, there are rather a number of interconnected marketplaces,
where different currencies instruments are traded. This implies that there is not a single
exchange rate but rather a number of different rates (prices), depending on what bank or
market maker is trading, and where it is. In practice, the rates are quite close due to arbitrage.
Therefore the study will be relevant to know the current practices undertaken by the HDFC
Bank in dealing with FOREX trading.
OBJECTIVES OF THE STUDY
The following are the objectives of the study:-
1. To study the functioning and structure of foreign market.
2. To study the exchange rate determination.
3. To evaluate critically exchange control methods.
4. To show volatility of foreign currency.
SCOPE OF THE STUDY
The scope of the proposed study is strictly confined to the study on “Foreign Exchange
Market in India”. It is the monetary mechanism by which transactions in two or more
currencies will be affected. Further the Scope of the Study focus on: -
 Foreign exchange is the monetary mechanism by which transactions in two or more
currencies are affected.
 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.
 Therefore the need of foreign exchange has been a raised.
 To know what is foreign exchange and what are the various foreign exchange
services.
 To know how the transactions related to foreign exchange volatility carried out.
 To have a brief knowledge about various foreign currencies and their exchange rates
compare to other nations currencies.
RESEARCH METHODOLOGY
For the preparation of any project report the collection of relevant data is very much essential
there are basically two broad methods for collecting data, which will be followed in a new
report these methods are Secondary data collection.
The Secondary data is collected from sites: NSEINDIA, FX MARKET TRACKER
and X-RATES.
Sample:
 From different currencies the samples is USD, GBP, EUR and JPY.
 USDINR - US Dollar.
 GBPINR - British Pound.
 EURINR - Euro.
 JPYINR - Japanese Yen.
Techniques of analysis
To calculate the volatility of prices the following formula used for analysis purpose
P1-P0\p0*100
Where:
P1 refer to price quoted today.
P0 refer to yesterday’s price.
PERIOD OF THE STUDY:

The study was carried for a period of 45 days.
REFERENCE PERIOD:
For the present study the Data pertaining to the Financial Years 2017 to 2021 we are used for
analysis and interpretation.
LIMITATIONS OF THE STUDY:
The following are the limitations of the proposed study: -
 The study was carried for a limited 45 days.
 The study was confined to only foreign currency.
 The study wascarried with the help of only secondary source of data. Hence the
limitations pertaining to the use of secondary data will be applicable to this study.

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A SYNOPSIS

OSMANIA UNIVERSITY, HYDERABAD

PERIOD OF THE STUDY:

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