A STUDY ON DEVELOPMENT OF DERIVATIVES MARKET IN INDIA

Abstract

The derivatives market is relatively new in India. They supply what the financial and product markets require in terms of investment risk management. To make sure that the products offered by these changes satisfy investors' needs for risk management, a number of committees have been established to review the operation of the financial and derivative markets. Indian markets currently trade in both exchange traded and over-the-counter derivatives on a variety of asset classes, including securities, commodities, currencies, stock indices, and more. The derivative markets in India are expanding right now.It is well known that the growth of the free-market system can coincide with that of the financial markets, particularly the development of derivatives. Global economic integration has facilitated the free flow of products, services, capital, and human capital. While assuring the best possible use of the world's limited resources, this phenomenon rejects instability and risk in all areas of the organization. The management of this risk volatility becomes a difficult task since it calls for new goods and procedures-derivatives products. Derivatives are viewed as the hedging mechanism and risk management tools all over the world. Several economic elements influence the economy's value. The best measure of a healthy economy is the performance of the stock market and secondary market. In recent years, the Indian stock market has experienced increasing volatility and warning signs of disaster. In order to draw in the community of new investors, some degree of market volatility is desirable. Nonetheless, a number of studies show that the Indian stock market has too much volatility. Investors will be blamed unless market regulators take proper action to reduce the excessive volatility. In order to reduce the excessive volatility, derivatives trading was established in India. In order to reduce the risk associated with an investor's investment, derivatives are financial instruments that hedge the risk of a certain financial asset. It is often believed that derivatives are the best solution for reducing the excessive volatility in the stock market. The evolution of the derivatives market in the Indian setting is being carefully examined at this point.