Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

A Study on the Impact of Derivatives in Indian Capital Market


Affiliations
1 Department of Management Studies, Pondicherry University, Kalapet, Pondicherry-605 014.
2 Department of Management Studies, Pondicherry University, Kalapet, Pondicherry-605 014
     

   Subscribe/Renew Journal


Derivative business is a new segment of trade introduced in stock market in the year 2000 mainly to bring liquidity into the market. People who are doing business in derivatives are not genuine buyers and sellers and they do only speculative trading. The excess speculation and open position in the derivative market have influenced Spot Market Prices. The objective of this study is to find out the real impact of derivatives on Spot Market and overall capital market. The study result indicates that volume of trade increased tremendously after the introduction of derivatives. During 2010-2011, Index Option contributes 63 per cent to the overall derivatives business. Though there is a fluctuation in share price, the deviation in price is less after introduction of derivatives. In fact, the volatility is reduced after the introduction of derivatives. The open interest positions which arise because of Futures Trading are having effect on share price.

Keywords

Impact of Derivatives on Spot Price, Impact of Index Futures on Index Spot
Subscription Login to verify subscription
User
Notifications
Font Size


  • Business Growth in Derivatives segment http://www.nseindia. com/content/fo/fo_businessgrowth.htm.

  • List of S&P CNX Nifty stocks-NSE http://www.nseindia. com/content/indices/ind_niftylist.csv.

  • Naliniprava Tripathy, S.V. Ramana Rao, A. Kanagaraj (2009), "Impact of derivatives trading on spot market volatility: an empirical study”, International Journal of Applied Decision Sciences, Volume 2, Number 2 / 2009, Pg. 209 – 232.

  • SathyaSwaroopDebasish (2009), "Effect of futures trading on spot-price volatility: evidence for NSE Nifty using GARCH”, Journal of Risk Finance, The, Vol. 10 Iss: 1, Pg.67-77.

  • Shenbagaraman P (2003), "Do Futures and Options trading increase stock market volatility?”, NSE Working Papers, http://www.nseindia.com/content/research/Paper60.pdf.

  • Thenmozhi M: Futures Trading, Information and Spot Price Volatility of NSE-50 Index Futures Contract, NSE Working Paper, 2002.

  • Vipul (2006), "Impact of the introduction of derivatives on underlying volatility: evidence from India”, Applied Financial Economics, Pg. 687-697.


Abstract Views: 513

PDF Views: 2




  • A Study on the Impact of Derivatives in Indian Capital Market

Abstract Views: 513  |  PDF Views: 2

Authors

P. Praveen Kumar
Department of Management Studies, Pondicherry University, Kalapet, Pondicherry-605 014.
R. Kasilingam
Department of Management Studies, Pondicherry University, Kalapet, Pondicherry-605 014

Abstract


Derivative business is a new segment of trade introduced in stock market in the year 2000 mainly to bring liquidity into the market. People who are doing business in derivatives are not genuine buyers and sellers and they do only speculative trading. The excess speculation and open position in the derivative market have influenced Spot Market Prices. The objective of this study is to find out the real impact of derivatives on Spot Market and overall capital market. The study result indicates that volume of trade increased tremendously after the introduction of derivatives. During 2010-2011, Index Option contributes 63 per cent to the overall derivatives business. Though there is a fluctuation in share price, the deviation in price is less after introduction of derivatives. In fact, the volatility is reduced after the introduction of derivatives. The open interest positions which arise because of Futures Trading are having effect on share price.

Keywords


Impact of Derivatives on Spot Price, Impact of Index Futures on Index Spot

References