A Study on Index Futures and Index Options in India with Special Reference to NSE S&P CNX NIFTY

A Study on Index Futures and Index Options in India with Special Reference to NSE S&P CNX NIFTY

The surfacing and growth of derivative market in India is a recent observable fact. Since the introduction, the derivative market has been showing a dramatic growth in terms of both trading volume and number of contracts. This market helps different participants or economic agents to hedge themselves alongside uncertainties arise out of highly volatile market conditions. It is evident that the growth of trading on indices is massive for the last 5 years i.e, from 2008 to till date. This study tries to make an in-depth revise on Index Derivatives -Index Futures and Index Options, market in India and the reason behind the growing popularity of trading on indices with special reference to NSE S&P CNX Nifty. Since volatility is a part of derivative market and has a major effect in derivative market fluctuations, this paper attempts to study the volatility of Index derivatives over a period of time in NSE India. This study also aims to understand the historical background and growth of Index derivative market in India. The study covers the period of eleven years spread over from 2000 to 2011. Lastly, for the better understanding of the trend, future prospects and latest innovations in this market, different participants of Indian index derivative market are interviewed. In chapter one, the study presents an overview of Indian derivative market, the history of Index derivative market, various participants of derivative market, types and application of derivative products and theories and principles associated with these financial instruments. It also talks about the economic benefits of derivatives to the nation. Chapter two consists of literature related to the current study. It talks about various views about derivative market, the impact of derivative products especially index futures and index options to the market and economy. It also points out the volatility aspect of the derivative market, suggestions to improve the market etc Chapter three discusses about the research methodology for the study. It consists of statement of the problem, objectives of the study, data collection analysis and interpretation and limitations of the study. Chapter four discusses the research problem with different statistical analysis and measurement. It also talks about the findings of the study. Various statistical tools were used for the study like One Sample t-test, GARCH, EGARCH etc this chapter also does a historical and trend analysis of the derivative market in India for period ranging from 2000 to 2012. Chapter five is about the findings, suggestions and conclusion of this study. Keywords: Index Futures, Index Options, Volatility, Trading Volume, Open Interest

Jacob Eby

Commerce