Currency Futures Traded on the NSE

The introduction of currency futures in India has passed a journey of almost two years and many changes have been implemented in the trading system in this regard. Currency futures have significantly gained importance all over the world since the first currency futures contract was traded in the year 1972. The futures market holds a great importance in the economy and, therefore, it becomes imperative that we analyse this important market and seek answers to a few basic questions. The main theme of this paper is to assess the speed in which the growth of currency futures in India has accelerated. It also aims at examining the volatility of the currency futures. In order to study the growth of the currency futures, the number of contracts traded and open interest at NSE has been inclusively compared. Attempt has been made to check whether the daily returns of the NSE on currency futures are normally distributed. For this purpose the changes in the daily value of Rupee as compared to Dollar, Yen, Euro and Pound have been calculated for the period and the data have been used for the ANOVA Test to test the hypothesis that the returns are normally distributed. The currency futures have received a good response from the investors as well as the hedgers. Initially, currency futures were started for USD-INR contracts but trading in Euro-INR, Yen-INR and Pound-INR contracts have been introduced in January 2010. The risk involved is comparatively low in this case and currency futures has proved to be a good tool for hedging the risk involved in the currency of a country (currency risk). It is hoped that the currency futures market will develop more faster and it will be a good choice for all the market participants in the near future and it will find its way in the Indian economy.