ANALYSIS AND INTERPRETATION I

IMPACT OF DERIVATIVE MARKET IN THE INDIAN FINANCIAL

MARKET

In this chapter the data collected from the secondary sources of Security

Exchange Board of India, National Stock Exchange, Reserve Bank of India, World

Federation of Exchanges, Bank of International Settlements, International Monetary

Fund etc., are analysed with the help of the use of charts and graphs. The analytical

design is carefully framed to interpret the information that is useful to predict the

prospects of the fiscal feasibility of the country as well as the financial market with

special reference to exchange traded financial derivatives.




TABLE IV.1

GLOBAL DOMESTIC PRODUCT – COUNTRYWISE

'WϮϬϭϯͲ ŽƵƌŶƚƌLJǁŝƐĞ








h^dŶ͘





) ! ) !
D-  < 2%+ ;%" 6%4  E!+ 0&&  E  D   9&!%  $F "
!!&  
27/
>,%  )
G?
 
 
 

  






 



Source: International Monetary Fund

It is observed from the data, USA is the leader in GDP with USD. 15 Tn. in

2013 with Mexico having 1.15 Tn. USD. India is having the GDP of 1.635 Tn. in

2013.

The GDP level of developed countries has influence on international financial

markets. In these countries the financial markets are also matured to include many of

the derivative products.





TABLE IV.2

GROSS DOMESTIC PRODUCT-NET DOMESTIC PRODUCT – INDIA

'ƌŽƐƐŽŵĞƐƚŝĐWƌŽĚƵĐƚͲEĞƚŽŵĞƐƚŝĐWƌŽĚƵĐƚͲ /ŶĚŝĂ



ZƐ͘;ŶͿ






:

:

:

:

:

:

: : 
: : : : : : :  : 
: 
: 

: 
:







  
         






27/








 
   
 
 

 
 
  
 

 


=7/ 
 













 
  
   
   

  

Source: CSO

The Gross Domestic Product and Net Domestic Product of India has increased

from 8180 Bn. and 7351 Bn in 1993-94 to 20007 Bn. and 17939 Bn. in 2001. Indian

GDP is at 94610 Bn. and 84676 Bn in 2013.

It is observed from the data that there is a tremendous growth of GDP in India

after 2001. During this period new financial products including derivative products

are introduced in financial market of India.




TABLE IV.3

GROSS DOMESTIC CAPITAL FORMATION-NET DOMESTIC CAPITAL

FORMATION - INDIA

'ƌŽƐƐŽŵĞƐƚŝĐĂƉŝƚĂů&ŽƌŵĂƚŝŽŶͲ EĞƚŽŵĞƐƚŝĐĂƉŝƚĂů&ŽƌŵĂƚŝŽŶͲ /ŶĚŝĂ



ZƐ͘Ŷ͘






:

:

:

:

:

:

: : 
: : : : : : :  : 
: 
: 

:







  
         





27D;

   
 

    

 









 
 
 


=7D;






     
  
 
 









 
 

Source: CSO

The Gross Domestic Capital Formation and Net Domestic Capital Formation

has increased from 1978 Bn. and 1149 Bn.in 1993-94 to 5283 Bn. and 3214 Bn. in

2001. It further increased to 31415 Bn. and 22647 Bn.in 2012.

It is observed from the data that capital formation of India has grown manifold

after 2004.



TABLE IV.4

PER CAPITA GNP-PER CAPITA NNP

WĞƌĂƉŝƚĂ'EWͲWĞƌĂƉŝƚĂEEW



ZƐ͘Ŷ

:

:

:

:

:

:

: : 
: : : : : : :  : 
: 
:







  
         




/D2=/






 
 





  




    
 
/D==/














 
 
 


    



Source: CSO

The Per Capita Gross National Product and Per Capita Net National Product

has increased from 9035 Bn. and 8106 Bn.in 1993-94 to 19411 Bn. and 17381 Bn. in

2001. It further increased to 78009 Bn. and 68757 Bn. in 2013.

It is observed from the data the per capita income has increased in 2011 nearly

six fold since 1994 and it is instrumental for overall growth in the financial sector.



TABLE IV.5

GROSS DOMESTIC SAVINGS

'ƌŽƐƐŽŵĞƐƚŝĐ^ĂǀŝŶŐƐͲ йŽĨ'W



WĞƌĐĞŶƚĂŐĞ










:
:

: : : : : : :  :

:
 
:



:
 
:


2%&&7&! "* &       
     
 
 

Source: RBI

It is observed from the data that percentage of Gross Domestic Savings to

GDP has increased after 2004 to more than 30% compared to earlier values of 20-

25%.

There is a significant change in the Gross Domestic Savings to GDP after

2004 and maintained above 30%




TABLE IV.6

INFLATION – WHOLE SALE PRICE INDEX

/ŶĨůĂƚŝŽŶͲ tW/;ǀĞƌĂŐĞͿ



džŝƐdŝƚůĞ

:
:

: : : : : : :  :

:
 
:



:
 
:


% &
 
       
  

Source: RBI

It is observed from the data the Inflation remained in the range of 3.3 to 9.6

during 2000 to 2013 with the maximum of 9.6 in 2011 and the minimum of 3.3 in

2000.

The inflation is high in the range of 7.6 to 9.6 during the past three years from

2011.



TABLE IV.7

EXCHANGE RATE – (USD-INR)

džĐŚĂŶŐĞZĂƚĞͲ h^




h^Ͳ /EZ






:
:

: : : : : : :  :

:
 
:



:
 
:


% &

    
        


Source: RBI

It is observed from the data the exchange rate for USD – INR remained in the

range of 40.2 to 48.4 during 2000 to 2013 with the maximum rate of 48.4 in 2003 and

the minimum rate of 40.2 in 2008.

Exchange rate is influenced by the inflow of FII, FDI and NRI and it is able to

maintain the rate below 50. But during 2013 it has crossed the value of 54.

Participation of FII in the financial markets influences the currency rate.




TABLE IV.8

EXPORT – IMPORT DATA

džƉŽƌƚͲ /ŵƉŽƌƚĂƚĂ





ZƐ͘ƌŽƌĞƐ













:


:


:


:

:

:
 :

:
 
:



:
 
:

% & 






 


   



% &
 
 

 
 








Source: RBI

It is observed from the data the exports (series 1) is deficit by nearly 50%

compared to the imports (series 2). After 2001, both imports and exports have

increased significantly at imports at Rs.2669161 crores and exports are at Rs.

1634318 crores in 2013.


 

TABLE IV.9

FOREIGN EXCHANGE RESERVES

&ŽƌĞŝŐŶdžĐŚĂŶŐĞ


ZĞƐĞƌǀĞƐ




ZƐ͘ƌŽƌĞƐ










:

:

:

:

:

:

:

:

:

: : 
: : : : : : :  : 
: 
: 

: 
:










 
       







;% F"-
0&%*&> 0&D%%?


     
   





 




  
 






    


  







 

Source: RBI

It is observed from the data that the foreign exchange reserve is steadily

increasing due various factors of FII and FDI as well as remittances from NRI. With

the participation of FII in all the segments of the financial market the foreign

exchange reserve is increasing day by day. It was at its peak of 1588418 crores in

2013.

It is possible to increase the foreign exchange reserve due to inflow of funds

by the FII and NRI in the financial markets. Exchange reserve is at Rs. 158841 crores

in 2013




TABLE IV.10

AMOUNT MOBILISED BY MUTUAL FUNDS

ŵŽƵŶƚŵŽďŝůŝƐĞĚďLJDƵƚƵĂů&ƵŶĚƐ





ŝůůŝŽŶƐ

:

:








 
       

 


 

=!!

 : : 
 





 
 


  :   :  : 

Source: National Stock Exchange

During 1995 to 2000, Mutual funds in India mobilised a maximum of 221 Bn.

in 2000 and minimum of -58 Bn. (withdrawal) in 1996. During 2001 to 2004 the

funds mobilised a maximum of 479 Bn. in 2003 and minimum of 46 Bn. in 2003.

During 2005 to 2013 they mobilised the funds with a maximum of 1587 Bn. 2008 and

a minimum of -486 Bn. (withdrawal) in 2011.

It is observed the data that after 2004, there is a huge change in the amount

mobilised by the mutual funds depending upon the market conditions. Mutual funds

play a vital role in financial markets as important participant.




TABLE IV.11

PUBLIC ISSUES

Wh>//^^h^Ͳ EŽƐ͘










EŽ͘







:

:

:

:

:

:

: : 
: : : : : : :  : 
: 
: 

: 
:






 
       






9!/% =   
 
    

 






  
  
9!/%= 




      
 
   
 

Source: SEBI

It is observed from the data public issues are coming down over the years. In

1996 there was 1661 issues out of which the issues at premium was 480 and at par

was 1181. During 2013 is only 45 issues at premium with not even one with at par.

After 2000, the public issues have come down drastically compared to

previous years. Though it picked up in the year 2006 with 138 issues, it further came

down to 45 in 2013.




TABLE IV.12

NET INVESTMENTS BY FIIs IN THE INDIAN CAPITAL MARKET

Ed/Es^dDEd^z&//Ɛ/Ed,/E/EW/d>DZ<d










ŝůůŝŽŶƐ





:

:
:









 
       

 


 

9!     
:

    
     :




 



Source: National Stock Exchange

During 1994 to 2000, FIIs in India invested in the capital market a maximum

of 98 Bn. in 2000 and minimum of -7 Bn. (withdrawal) in 1999. During 2001 to 2004

the FIIs invested a maximum of 440 Bn. in 2004 and minimum of 27 Bn. in 2003.

During 2005 to 2013 they invested the funds with a maximum of 1406 Bn. 2013 and a

minimum of -433 Bn. (withdrawal) in 2009.

FIIs play a dominant role in the Indian capital market with net addition during

all the years except in the year 2009 with the withdrawal of Rs. 433 bn. The

participation by the FIIs has increased significantly as they participate in financial

derivative market also.




TABLE IV.13

Bonds issued by Public sector undertakings

 KE^/^^hzWh^dKZhEZd</E'^








ZƐ͘ŶƐ








:

:

:

:

:

:

: : 
: : : : : : :  : 
: 
: 

: 
:







  
         






,!6&    


 
   


 
 

 

      

,F36& 


  
 
 




   

 

    


  
,F: %6&




              


  
 

Source: RBI

It is observed from the data that the bonds issued by the public sector

undertakings have increased from 2007 onwards. They issue Taxable as well as Tax

free bonds to mobilise the resources.

Speedy growth in the issue of bonds by public sector undertakings shows the

mobilisation domestic savings for the development of economy for the industrial

activities and infrastructure development. Total Bonds issued during 2013 stands at

Rs. 527.1 Bn.




TABLE IV.14

RESOURCES MOBILISED THROUGH CERTIFICATE OF DEPOSIT

ĞƌƚŝĨŝĐĂƚĞŽĨĞƉŽƐŝƚ













<


<


<


<


<

<

<
<

<
<
<
<
<
<
<
<

<

<


<

<

džŝƐdŝƚůĞ

Source: RBI

During 1994 to 2000, deposits mobilised through Certificate of Deposit is less

than 200 Bn. and it remained the same during 2001 to 2004. Whereas during 2005 to

2013 it has increased with manifold to nearly 4500 Bn. and remaining in the range of

3000 to 4500 Bn.

Tremendous growth in resource mobilisation through commercial paper which

is around Rs. 3500 Bn. is good for the industrial sector for their investments.



TABLE IV.15

RESOURCES MOBILISED THROUGH COMMERCIAL PAPER

ŽŵŵĞƌĐŝĂůWĂƉĞƌ






 % &


<



<



<



<



<


<


<

<


<

<

<

<

<

<

<

<


<


<



<


<


<


Source: RBI

During 1994 to 2000, deposits mobilised through Certificate of Deposit is less

than 100 Bn. and it remained the same during 2001 to 2004. Whereas during 2005 to

2013 it has increased manifold to nearly 2000 Bn. and remaining in the range of 1000

to 2000 Bn.

Commercial Paper is also another source of resource mobilisation for the

companies which is at around Rs. 2000 Bn. In 2014.




TABLE IV.16

INVESTMENT BY LIFE INSURANCE CORPORATION OF INDIA

/Es^dDEdz>/





ZƐ͘Ŷ͘














 
       

 


 


zZ

/3 " /% *! < ! D:%! *

Source: RBI

It is observed from the data that Life Insurance Corporation of India is a

forerunner in mobilisation of domestic savings through life insurance and they mostly

invest their assets in the Public and Private Industries.

Investment in the corporate bodies by the LIC is huge and it is at more than

Rs.1200 Bn in 2013.They participate in the financial market also to a greater extent.




TABLE IV.17

RATIO OF INVESTMENT LIC (ASSET WISE)

H

H
H
H
H
H (&
H !"#F"-"% ! &
H
H

H
H









 
       

 


 


Source: RBI

It is observed from the chart that % of investment in stock exchange securities

is increasing year by year and it is around 95% compared to only 5% by way of loans.

Participation by LIC over the period in the Securities

Securities market has increased to

make the financial market vibrant and dynamic.




TABLE IV.18

FOREIGN DIRECT INFLOW

&ŽƌĞŝŐŶŝƌĞĐƚŝŶĨůŽǁ



WĞƌĐĞŶƚĂŐĞ









) ! =!-%
$% ! &  % < )9 D+%& 2%+ ;%" )9
  &
% &




     




Source: RBI

It is observed from the data Maurititus is having the highest percentage of

inflow of 36.51%. Singapore, United Kingdom, Japan, U.S.A., Netherland, Cyprus,

Germany, France and UAE are other countries where the percentage of foreign direct

flow is significant levels.

FIIs route their funds mostly through countries like Mauritius, Singapore to

get the tax benefit. Global participation is a boon to the developing countries like

India especially for the financial markets.


 

TABLE IV.19

NIFTY 50 INDEX MOVEMENT AFTER INTRODUCTION OF FINANCIAL

DERIVATIVES

EŝĨƚLJϱϬͲ /ŶĚĞdž




/ŶĚĞdž






:

: : : : : : :  :

:
 
:



:
 
:

= !+

 



 


   
  


  
  

Source: SEBI

It is observed from the data that the nifty index movement is larger from 2005

which is incidentally after the introduction of financial derivative products.

Index movement is largely due to the participation by FIIs, HNI and Domestic

financial institutions. Derivative products act as a catalyst for the market movement.




TABLE IV.20

NIFTY INDEX MOVEMENT FROM 1994

E/&dz/EyDKsDEd


/ŶĚĞdžͲE^
















 
       

 


 

9 











 
  
 
    

Source: National Stock Exchange

During 1994 to 2000, Nifty Index in India was maximum of 1369 in 2000 and

minimum of 886 in 1994. During 2001 to 2004 the Nifty Index was at a maximum of

1428 in 2004 and minimum of 1037 in 2003. During 2005 to 2013 the index moved

with a maximum of 5584 in 2011 and a minimum of 1805 in 2005.

It is observed from the data that the nifty movement is significant after the

introduction of derivative products in India. Nifty was around 1000 points from 1994

to 2004 and it drastically jumped after the derivatives market introduction. Nifty is at

the level of 5520 in 2013.




TABLE IV.21

SENSEX – INDEX MOVEMENT

^ĞŶƐĞdžͲ /ŶĚĞdž




/ŶĚĞdž




:

: : : : : : :  :

:
 
:



:
 
:

&F  
   
 
 

 



 




 

Source: SEBI

Similarly Sensex movement is also in line with Nifty and it started increasing

from 2004 and it at 18835 in 2013.





TABLE IV.22

NO OF BROKERS REGISTERED WITH SEBI

EŽ͘ŽĨďƌŽŬĞƌƐƌĞŐĚ͘ǁŝƚŚ^/







 


EŽ͘






 


:

: : : : : : :  :

:
 
:



:
 
:

= 3%#%&
 
 








 







Source: SEBI

It is observed from the data that the no of brokers have marginally decreased

from 2001s and it again increased periodically from 2005 to the level of 10128 in

2013.



TABLE IV.23

NO OF DEPOSITORY PARTICIPANTS

ĞƉŽƐŝƚŽƌLJWĂƌƚŝĐŝƉĂŶƚƐ




EŽ͘













 
       

 


 

7& !%+/%! " !&     



    
  
  
    

Source: SEBI

It is observed from the data that there is a steady increase in the depository

participants in India which is the intermediary to service the investors to keep the

stock in the demat form.

The number of depository participants has increased from 191 in 2000 to 865

in 2013.



TABLE IV.24

PORTFOLIO MANAGERS

WŽƌƚĨŽůŝŽDĂŶĂŐĞƌƐ




EŽ͘















 
       

 


 

/%!  $%&  




 
   

      

Source: SEBI

It is observed from the data that there is a steady increase in the portfolio

managers in India who are offering service the investors for the fund management.

The number of portfolio managers has increased from 23 in 2000 to 241 in

2013. This help the investors to take the informed decisions.




TABLE IV.25

FOREIGN INSTITUTIONAL INVESTORS

&ŽƌĞŝŐŶ/ŶƐƚŝƚƵƚŝŽŶĂů/ŶǀĞƐƚŽƌƐ



EŽƐ͘









 
       

 


 

;% E&! !! E*&!%&
   

    
     












Source: SEBI

It is observed from the data the number of FIIs has increased significantly

after the introduction of the financial derivative products. FIIs use take derivative

products to hedge their investment as well as to take advantage of arbitrage in the

market. From a number of 506 in 2000, it has increased to 1757 in 2013.




TABLE IV.26

ANNUAL TURNOVER CASH MARKET – NSE

ŶŶƵĂůdƵƌŶŽǀĞƌĂƐŚDĂƌŬĞƚͲ E^



ŝůůŝŽŶƐ







 
       

 


 

9
 
  
 



 
 









 
  
   

 

Source: National Stock Exchange

During 1995 to 2000, annual turnover of cash market in National Stock

Exchange was maximum of 8391 Bn. in 2000 and minimum of 18 Bn. in 1996.

During 2001 to 2004 the annual turnover was a maximum of 6180 Bn. in 2003 and

minimum of 1099 Bn. in 2004. During 2005 to 2013 the annual turnover moved with

a maximum of 4138 Bn. 2010 and a minimum of 1140 Bn. in 2005.

Annual turnover in the cash segment of NSE has increased from Rs.11401 Bn.

to Rs. 27083 Bn. in 2013. As the market participants use derivative market as the

hedging mechanism, it is evident in the increase in the turnover of the cash market

also.



TABLE IV.27

NSE MARKETCAP TO GDP

 E^DĂƌŬĞƚĐĂƉƚŽ'W





% &




:


:


:

:
:

:
:
:
:
:
:
 :


:


:




:


:


:

Source: NSE

It is observed from the data that NSE market cap to GDP ratio is increasing

significantly after the introduction of financial reforms and new products. The ratio

has increased from around 20 to nearly 100. This makes the financial market in India

is in line with the economic development in the country.




TABLE IV.28

TURNOVER GOVERNMENT SECURITIES

dƵƌŶŽǀĞƌͲ '͘^ĞĐ͘

dƵƌŶŽǀĞƌ;ZƐ͘DŶ͘Ϳ












:

: : : : : : :  :

:
 
:



:
 
:

,%*%>?   


 






 


 

 
 
 

      

Source: SEBI

There is a tremendous growth in the volume of the trading of the Government

Securities. In this segment mostly financial institutions take part and it is line with the

economic development. This market is also in the developing stage with turnover of

Rs. 32,570,860 Mn at the end of 2013


 

TABLE IV.29

BOOK VALUE OF INDIAN COMPANIES

ŽŽŬǀĂůƵĞ



s






$%I $%I
$%I $%I $%I $%I $%I $%I $%I $%I
$%I
 $%I

$%I
 $%I

6#


 








 

 
 

   

 

Source: NSE

During 2000 to 2004 the book value of the companies listed in NSE was about

100 and it has increased during 2005 to 2013 from 127.56 to 565.




TABLE IV.30

EARNINGS PER SHARE OF INDIAN COMPANIES

ĂƌŶŝŶŐƐWĞƌ^ŚĂƌĞ




W^







$% $% $% $% $% $% $% $% $% $% $% $% $% $%
I I
I I I I I I I I
I
 I

I
 I

% &/%-%



 
       
  
  
 


Source: National Stock Exchange

During 2000 to 2004 the Earnings per share of the companies listed in NSE

was in the range of 5.09 to 47.48. During 2005 to 2013 it has moved to the range of

52.13 to 72.74 keeping the value above 50 always during this period.



TABLE IV.31

DERIVATIVE CONTRACT STATISTICS (Global) – STOCK FUTURES

^dK<&hdhZ^KEdZd^dZEŽƐ͘Ͳ ϮϬϭϯ



DŶ͘






=! 
=A
$&"@ !"# %
%F %F!
F"- F"- F"-
>%?
E 
% &




 


Source: World Federation of Exchanges.

It is observed from the data that New York Stock Exchange Euronext (Europe)

is the leader in the Stock future contracts traded in 2013 with a volume of 247 Mn.

National Stock Exchange is in the fourth position with 153 Mn. Contracts traded in

2013.




TABLE IV.32

DERIVATIVE CONTRACT STATISTICS (Global) – STOCK OPTIONS

^dK<KWd/KE^KEdZd^dZEŽƐ͘Ͳ ϮϬϭϯ




DŶƐ͘




D- "
E!%!  =A
6$J;6 =979K 6%
"% ! & %F!
/9 $L ! &
F"- >)?
F"-
% &


 
     

Source: World Federation of Exchanges.

It is observed from the data that Brazil Stock Exchange is the leader in the

Stock options contracts traded in 2013 with a volume of 909 Mn. Nasdaq OMX,

International Securities exchange, NYSE Euronext (US), Chicago Board of Options

Exchange all from USA find the place next to Brazil.




TABLE IV.33

DERIVATIVE CONTRACT STATISTICS (Global) – INDEX FUTURES

/Ey&hdhZ^KEdZd^dZEŽƐ͘Ͳ ϮϬϭϯ



DŶƐ͘







< D- 
$&"@ F"- ; " 
D$2% %F
F"- 2%: ;!%&
&# F"-
% &
    



Source: World Federation of Exchanges.

It is observed from the data that Chicago Mercantile Exchange Group is the

leader in the Index Futures contracts traded in 2013 with a volume of 573 Mn.

Eurex, Mosco, Japan and China are placed next to CME group with 327, 268, 265,

193 Mn. respectively.




TABLE IV.34

DERIVATIVE CONTRACT STATISTICS (Global) – INDEX OPTIONS

/EyKWd/KE^dZEŽƐ͘Ͳ ϮϬϭϯ




DŶƐ͘




=!  D- "
!"# % 6%
%F 6E 
F"- F"- ! &
E  F"-
% &

    
 

Source: World Federation of Exchanges.

It is observed from the data that National Stock Exchange in India is the leader

in the Index Options contracts traded in 2013 with a volume of 930 Mn. Korea,

Chicago Board of Options Exchange, Eurex and Bombay Stock Exchange are having

the trading volume of 580, 373, 317, 250 Mn. contracts respectively.



TABLE IV.35

TURNOVER IN THE EQUITY DERIVATIVES MARKET - NSE

dhZEKsZ/Ed,Yh/dzZ/sd/s^DZ<dͲE^



ZƐ͘ŝůůŝŽŶƐ








:
 
: : : : : : :   :
 
:
 
:

 

:
 
:

!"#! &  






 


 


 
!"#;!%&  
  


 


  
   
 

 
  

EF! &  
 


  





  
  

EF;!%&  
   


 
   

    

Source: National Stock Exchange

During 2001 to 2004 the annual turnover of derivative market in National

Stock Exchange was a maximum of 2172 Bn. in 2004, 13059 Bn. in 2004, 528 Bn. in

2004, 5544 Bn. in 2004 and minimum of 252 Bn. in 2002, 515 Bn. in 2002, 38 Bn.

in 2002 and 24 Bn. in 2001 for stock options, stock futures, index options, index

futures respectively. During 2005 to 2013 it was a maximum of 20004 Bn. in 2013,

75486 Bn. in 2008, 227816 Bn. in 2013, 43568 Bn. in 2011 and minimum of 1688

Bn. in 2005, 14841 Bn. in 2005, 1219 Bn. in 2005 and 7721 Bn. in 2005 for stock

options, stock futures, index options, index futures respectively.

It is observed from the data that Index options is gaining importance in the

Indian financial derivative market with a value of Rs. 227816 Bns. are traded in 2013.

Other products like Stock futures and options and Index futures are also growing

significantly.



TABLE IV.36

DERIVATIVE PRODUCTS IN NSE - % WISE

ĞƌŝǀĂƚŝǀĞWƌŽĚƵĐƚƐŝŶE^Ͳ йǁŝƐĞ

H

H
H
H
džŝƐdŝƚůĞ

H !"#! &
H
H !"#;!%&
H EF! &
H
EF;!%&

H
H
:

:::::::  :

:

:



:

:


džŝƐdŝƚůĞ

Source: National Stock Exchange

It is observed from the graph the proportion of index options in the derivative

market is increasing past and the proportion index and stock futures is decreasing

steadily.



TABLE IV.37

DERIVATIVE MARKET – FII INVESTMENT

Z/sd/sDZ<dͲ&//Ͳ /Es^dDEd




ZƐ͘DŶ









7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" : 7" :









 
       

 


 

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Source: National Stock Exchange

It is observed from the data that cumulative value of investment in the

derivative market by FII in India has steeply increased

increased from 2004. They are the

drivers in the Indian derivative market and use the hedging and arbitrage mechanism

for their investments. It is a huge position of Rs. 40,950,008 mn.




TABLE IV.38

GLOBAL DERIVATIVE MARKET – EQUITY INDEX - CONTRACTS

OUTSTANDINGS

ƋƵŝƚLJŝŶĚĞdž



DŶƐ͘


7"
 7"
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7"

7" 7"
7" 7" 7" 7" 7" 7" 7" 7"
7"
 7"

7"
 7"


M !+ F







  

  



 


   


 



 


Source: BIS Quarterly Review

It is observed from the data that the equity index contracts outstanding in the

global exchanges is to the tune of 39.719 mn. There is a decline during 2007 to 2010

and it has started increasing from 2011.


 

TABLE IV.39

GLOBAL DERIVATIVE MARKET – CURRENCY - CONTRACTS

OUTSTANDINGS

ƵƌƌĞŶĐLJ




DŶƐ͘

 7"
 7"
 7"
 7"
 7"
7"

7" 7"
7" 7" 7" 7" 7" 7" 7" 7"
7"
 7"

7"
 7"


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Source: BIS Quarterly Review

It is observed from the data that currency derivatives outstanding in the global

exchanges are increasing steadily and it at 13.09 mn in 2013.





TABLE IV.40

GLOBAL DERIVATIVE MARKET – INTEREST RATE - CONTRACTS

OUTSTANDINGS

/ŶƚĞƌĞƐƚƌĂƚĞ




DŶƐ͘


7"
 7"
 7"
 7"
 7"
7"

7" 7"
7" 7" 7" 7" 7" 7" 7" 7"
7"
 7"

7"
 7"


E!%&!%!
  











 
 
     



  

 
 




Source: BIS Quarterly Review

It is observed from the data that the number of contracts outstanding in interest

rate derivatives in global exchanges is around 98.114 during financial crisis and it

has declined to 55.293 in 2013.




TABLE IV.41

CORRELATION BETWEEN THE INDICES

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Source: National Stock Exchange

Various indices available in the National Stock Exchange is correlated and the

pearson coefficient is arrived using the statistical tool. It is observed from the data, IT

index and Realty index is having the negative correlation with most of the indices.

Nifty 100 index is having negative correlation of - 0.296 with IT index and -0.073

with realty index. With the media index it is having the correlation of 0.493. With the

remaining indices the correlation varies from 0.806 to 0.997.

Nifty 100 index is having negative correlation of - 0.296 with IT index and -

0.073 with realty index. With the media index it is having the correlation of 0.493.

With the remaining indices the correlation varies from 0.806 to 0.997. Nifty 100 index

is having negative correlation of - 0.296 with IT index and -0.073 with Realty index.

With the Media index it is having the correlation of 0.493. With the remaining indices

the correlation varies from 0.806 to 0.997 which is highest with Nifty 100 index.




Nifty 200 index is having low correlation of 0.044 with IT index and 0.055

with realty index. With the media index it is having the correlation of 0.0.565. With

the remaining indices the correlation varies from 0.760 to 0.997 which is highest with

Nifty 200 and Nifty 100 indices.

Nifty 500 index is having negative correlation of - 0.513 with IT index and

low correlation of 0.060 with Realty index. With the Media index it is having the

correlation of 0.570. With the remaining indices the correlation varies from 0.854 to

0.997.

Auto index is having negative correlation of - 0.540 with Realty index and low

correlation of 0.176 with IT index. With the Media index it is having the correlation

of 0.120. With the remaining indices the correlation varies from 0.562 to 0.961.

Bank index is having negative correlation of - 0.498 with IT index and -0.312

with realty index. With the media index it is having the correlation of 0.302. With the

remaining indices the correlation varies from 0.729 to 0.997.

Energy index is having negative correlation of - 0.610 with IT index. It is

having the correlation of 0.460 with the Media index and 0.316 with Realty index.

With the remaining indices the correlation varies from 0.686 to 0.968.

Finance index is having negative correlation of - 0.266 with Realty index.

With the media index it is having the correlation of 0.340. With the remaining indices

the correlation varies from 0.744 to 0.997.

FMCG index is having negative correlation of - 0.184 with IT index and -

0.583 with Realty index. With the Media index it is having the correlation of 0.028.

With the remaining indices the correlation varies from 0.380 to 0.977.

IT index is having negative correlation with many of the indices. With the

media index it is having the correlation of 0.309.




Media index is having high correlation with Realty index and 0.747. With the

Media index it is having the correlation of 0.493. With the remaining indices the

correlation varies from 0.806 to 0.997 which is highest with Nifty 100 index.

Metal, Midcap, Junior, Nifty, PSUa Small cap are all having the negative

correlation with IT. All of them have high correlation with other indices except realty

index.

It is observed from the data except IT, Realty and Media other indices are in

tandem with each other. Though the correlation varies they move in synchronised

manner.