Derivative Market in India - A Growth Prespective

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DERIVATIVE MARKET IN INDIA

- A GROWTH PERSPECTIVE



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 produc ts, it is possible to partially or fullytransfer pric e risk away from risk-averse investors towards those more

willing and able to bear risk by loc king in asset pric es.

y D erivatives also help pric e disc overy, i.e. the proc ess of determining the

pric e level for any asset based on supply and demand.

y D erivatives 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 stoc k market between

1993 and 1996 and these reforms paved the way for the exc hange

traded equity derivatives market in India

y The total turnover of derivatives market has already superseded the

total turnover of c ash market in India. The sc reen 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

c omparison to the other developed markets of the world.



OBJECTIVE OF THE STUDY

yTo study Indian derivatives market

yTo study different constituents of Indianderivatives market e.g. commodity derivativesmarket, foreign exchange derivatives market and

exchange traded financial derivatives market.

yTo study the various regulatory requirements of derivatives market of India

yComparative study of cash market andderivatives market of India

yComparative study of Indian derivatives marketand 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 thederivatives market in India

y In India there are mainly two exchanges e.g. BSEand 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 thatmakes 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 gotthe maximum share.



TO CONCLUDE :

BENEFITS :

1. Pric e Disc overy

2. Risk Management

3. They Improve Market Effic ienc y for the Underlying Asset

4. Derivatives Also Help Reduc e Market Transac tion Costs



TO CONCLUDEDRAWBACKS :

1. Derivatives inc rease spec ulation and do not serve

any ec onomic purpose.

2. Indian Market is not ready for derivative trading

3. Disasters prove that derivatives are very risky and highly leveraged

instruments

4. Derivatives are c omplex and exotic instruments that Indian

investors will have diffic ulty in understanding

5. The existing c apital market is safer than D

erivatives

Derivative Market in India - A Growth Prespective

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