In India, the emergence and growth of derivatives market is relatively a recent phenomenon. Since June 2000, derivatives market has exhibited exponential growth both in terms of volume and number of traded contracts. The market turnover has grown to more than Rs. 4356754.53 crores in 2010–2011. The emergence of the market for derivatives products, mostly notably forwards, futures and options, can be traced back to the willingness of risk adverse economics agents to guard themselves against uncertainties arising out of fluctuations in assets prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivatives products, it is possible to partially or fully transfer price risks by locking in assets prices. With the advent of liberalization, privatization and globalization with the free economy environment, maximum efforts are made in strengthening the investor confidence. The basic reason underlined is in context to free and regular flow of funds to the corporate sector along with establishing a strong investor base by including more and more middle and small investors with their investible funds. This has also led to the redefining the economy of the nation to a significant status before the global scenario.
The present study encompasses in its scope an analysis of historical roots of derivative trading, types of derivative products, traders, factors affecting, trend and growth, future prospects and new era of derivative market in India. This paper is an attempt to examine the time varying properties of volatility of India's stock index futures market. In this context, the emergence of a well-functioning derivative market, with a wide range of trading mechanisms, is definitely a boost to all those perspective investors who are willing fully agreed to join the mainstream of investment business to meet with their own expectation of return on investment along with a support to structures the economy in a new way. The present topic is an endeavor to have an analytical study on the present status of derivative market in India by bridging the gap of its past experiences to project the future possible performances.
