Briefly describe the evolution of derivatives in India.

Briefly describe the evolution of derivatives in India. 

Ans. Some form of derivatives existed even in the times of Mahabharata. Derivative transactions have been explained even in incidents that date back to the times of Jesus Christ. But the format in which derivatives are seen in today’s market, their existence started as per the needs of the farmers to protect themselves against any decline in the prices of their crops due to monsoon fluctuations or overproduction. Important achievements with their dates are mentioned below in derivative markets. 

(a) In 1875, Cotton Trade Association existed that was functional for commodity derivatives for cotton. 

(b) Exchange traded derivatives were introduced in India in June 2000 at two stock exchanges NSE and BSE. 

(c) National Commodities and Derivative Exchange Limited (NCDEX) started its operations from December 2003. It provided a platform for commodity trading. Futures account for 55% of total turnover of derivatives at NSE as on April 13, 2005. 

(d) Index options and stock option were introduced in November 2001. Rate futures on a national bond and T bill priced off ZCYC have been introduced in June 2003. 

(e) Exchange traded interest rate futures on a national bond priced off a basket of Government Securities were permitted for trading in January, 2004.