Abstract

                         The benefits of derivatives are threefold: (i) risk management, (ii) price discovery, and (iii) enhancement of liquidity. Given the seemingly important benefits, why are derivatives, and especially credit derivatives, viewed so negatively in the current financial crisis?  The problem is not with the derivatives as an instrument, but with (i) the way they were traded and cleared, and (ii) how they were used by some financial institutions to increase their exposure to certain asset classes. In India, the emergence and growth of derivatives market is relatively a recent phenomenon. Since its inception in June 2000, derivatives market has exhibited exponential growth both in terms of volume and number of contract traded. The market turnover has grown from Rs.2365 Cr. in 2000-2001 to Rs.16807782.22 Cr. in 2012-13. Within a short span of twelve years, derivatives trading in India has surpassed cash segment in terms of turnover and number of traded contracts. The passed study encompasses in its scope, history, concept, definition, types, features, regulation, market, trend, growth, Future prospects and challenges of derivatives in India and status of Indian derivatives market vis-à-vis global derivative market.

Key words: Derivatives, Exponential Growth, Risk Management, Price Discovery, SENSEX