A Study On Strategic Growth In Indian Financial Derivatives Market

Research Article
Prakash Yalavatti
Financial Derivatives, Regulation, Turnover, Comparison, NSE and BSE

The past two decades have witnessed the multiple growth in the volume of international trade and business due to the adoption of globalization and liberalization all over the world. As result, the demand for the international money and financial instruments increased significantly at global level. In this respect, change in exchange rates, interest rates and stock prices of different financial markets have increased the financial risk to the corporates and investors globally. Due to some adverse changes in this, which threatened the survival of business world. Therefore, in order to manage such risk, the new instruments have been developed in the financial markets, which are popularly known as financial derivatives at national and international financial market. The primary purpose of these instruments is to ensure commitments to prices for future dates for giving protection against adverse movements in future prices to reduce the extent of financial risk in financial markets. Now there is a faster development in derivatives products as well as trading as they are very significant for every corporates and investors. In India, emergence and growth of derivative market is completely new phenomenon. The introduction of equity derivatives was essentially the beginning of a new era in the Indian Capital Market. With the launch of Index Futures in June 2000, as the first derivative product, SEBI expanded the portfolio by quickly adding index options, individual stock options and individual stock futures. So now, the growth of this market has been quite significant. With these products in place, Indian Capital Market is at par with any other Capital Market across the globe. The Indian derivative market has exhibited exponential growth in terms of volume and number of contracts traded. The market turnover of NSE has grown from Rs 2,365 Crores in 2000-01 to Rs 3, 82, 11,408.05crores in 2013-14 and BSE market turnover also increased from Rs 5021.81 crores in 2003-04 to Rs 92, 19,434.32crores in 2013-14. Within a short span of fourteen years, there is a substantial development in derivatives trading in terms of turnover and number of contracts traded in India. The present study is mainly focusing on growth and development of financial derivatives products and financial derivative market in India and its regulation.