A Study of Indian Derivatives Market and its Current Position in Global Financial Derivatives Market

Abstract

Derivatives emerged as hedging instruments out of the need to control price risk. Earlier commodity prices were the sole concern of business community, and therefore, the derivatives on commodities were the first ones to emerge. The introduction of derivatives in India can be traced out in 1875, when the Bombay Cotton Trading Association Ltd was set up for futures trading in cotton. At present the markets for derivatives have been growing at a phenomenal pace. This paper traces the growth and current position of Indian derivatives market. Since its inception in June 2000, derivatives market has exhibited exponential growth both in terms of volume and number of contract traded. The market turnover has grown from Rs.24bn in 2000-01 to Rs. 2376tn in 2018-19. The present study is an effort to demonstrate the growth and expansion of derivatives in India during the time period 2010-11 to 2018-19. It also encompasses the scope, history, concept, types and growth of financial derivatives in India and the status of Indian derivatives market vis-à-vis global derivative market.