New currency instruments expand Indian forex bourse

July 15
1:29 PM 2013

As of the latest count, the Indian rupee accounts for 1% of the total world foreign exchange transactions, estimated daily to be at US$4 trillion. Now, with this vast wealth, the introduction of currency derivatives back in 2008 stands to elevate the growth of the Indian market through the increase of its share in the world foreign exchange trading market.

In 2010 alone, the rupee's spot transactions have reached US$30 billion, which is 40% of total forex transactions done in India for the same year. Forex swaps followed with another 40% while the remainder were forward transactions done.

The  latest revolution in India's financial markets was the opening of currency futures. This marked the start of a period where the transaparency of trading mechanisms in currencies, with the goal to expand one's portfolio as well as manage losses in business as a result of risk exposure to currency fluctuations became common place. 

As the market understands the nuances and benefits of currency futures trading, the volume of the trading in these transactions have been increasing significantly. Before, the monthly turnover was a mere INR 30,000 crore from January to June 2012 to INR 45,000 crore in the same period for 2013 in the Indian stock exchanges.

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