- A GROWTH PERSPECTIVE

DERIVATIVE MARKET IN INDIA

INTRODUCTION
Derivatives are recognized as the best and most cost-efficient way of meeting the felt need for risk hedging in certain types of commercial and financial operations. y Through the use of derivatives products, it is possible to partially or fully transfer price risk away from risk-averse investors towards those more willing and able to bear risk by locking in asset prices. y Derivatives also help price discovery, i.e. the process of determining the price level for any asset based on supply and demand. y Derivatives market in India started working in 2001

RESEARCH MOTIVATION
y

Derivatives market has emerged in India after 2000, but its foundation had already been laid just after the reforms of the stock market between 1993 and 1996 and these reforms paved the way for the exchange traded equity derivatives market in India

y

The total turnover of derivatives market has already superseded the total turnover of cash market in India. The screen based trading in India has given an edge to the trading of derivatives in India. The derivatives market of India has expanded torrently but it¶s still very less in comparison to the other developed markets of the world.

OBJECTIVE OF THE STUDY
y To study Indian derivatives market y To study different constituents of Indian derivatives market e.g. commodity derivatives market, foreign exchange derivatives market and exchange traded financial derivatives market. y To study the various regulatory requirements of derivatives market of India y Comparative study of cash market and derivatives market of India y Comparative study of Indian derivatives market and global derivatives market

TYPES OF DERIVATIVES

TURNOVER IN CRORES

INDIAN DERIVATIVES MARKET

FINDINGS AND DISCUSSION
y After the economic reforms of 1991, capital market had gained momentum and it paved the way for the derivatives market in India y In India there are mainly two exchanges e.g. BSE and NSE in which NSE accounts for nearly all the exchange traded derivatives trading. y Index options and Stock futures has the maximum share of the total derivatives market and that makes India to come in highest position in trading of these two products. y In both futures and options market, as far as most traded contract is concerned, Index trading has got the maximum share.

TO CONCLUDE :
BENEFITS :
1. Price Discovery 2. Risk Management 3. They Improve Market Efficiency for the Underlying Asset 4. Derivatives Also Help Reduce Market Transaction Costs

TO CONCLUDE
DRAWBACKS :
1.

Derivatives increase speculation and do not any economic purpose.

serve

2. 3.

Indian Market is not ready for derivative trading Disasters prove that derivatives are very risky and highly leveraged instruments

4.

Derivatives are complex and exotic instruments that Indian investors will have difficulty in understanding

5.

The existing capital market is safer than Derivatives

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