Options in India

In India, options were first issued on an exchange in June 2001, when the world had already accepted options as a certified method to diversify and shift risk. The entry of options in India on any recognized platform was quite late, though they have since been accepted with open arms by the public, and as of 2011, the total value of the options traded in the year was close to Rs. 3 Crore Crore.
Options have appeared to the public as lucrative deals as these have limited downside and unlimited upside when bought. Although options in India have been welcomed, they don’t actually have the market and variety as in the developed countries. India, options have a limited field, and have concerned themselves to the equity segment basically, although currency options are also traded. In countries where financial markets are much more developed, options are available on commodities, swaps, interest rates, and even the weather. These kinds of innovative and exotic options can’t be expected to be made available in India anytime soon, for what we can attribute to the immaturity of the market.
Another fact that is peculiar about the Indian market is the fact that though derivatives have been introduced, the have a limited market, since the regulatory cap on the minimum contract value for them. This limits their appeal to the retail investors who could benefit by hedging their portfolio.
The technically sound Indian market is still a market that is governed by the expectation of the people and their sentiments. So far, what we can make of the scene of derivatives in India is that although India has the technology and infrastructure needed to venture further in the arena of derivatives, the mere immaturity of the market, regulatory hurdles etc. make it an uphill task for options and other derivatives to gain mainstream support for the retail investors, apart from the already active institutional ones. In this sense, India still has a long way to go before it can say that it is ready to accept the latest innovation in the field of finance, and in particular, options.

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