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A bull-market in Indian equities last year sparked spectacular growth in the country's equity derivatives market, which began trading four years ago. Monthly turnover in equity derivatives grew almost fourfold last year and in February this year it accounted for two-and-a-half times the spot cash market turnover on the National Stock Exchange (NSE).The average daily equity derivatives turnover in January touched Rs150 billion (more than $3 billion).
The Indian stock market had emerged from a bruising crash caused by over-leveraged positions when equity derivatives were first introduced, and there was apprehension over whether the Indian securities market was ready for them.
The Indian derivatives market trades in stock and index futures and options. Over 95% of derivatives trading takes place on the NSE.
Curiously, single-stock futures are the most popular product on the NSE, accounting for 60% of derivatives turnover. They are available on 53 stocks that trade on the NSE and around 45 stocks that trade on the Bombay Stock Exchange (BSE).
Index-based products are generally more popular in most developed markets, with perhaps the exception of a few such as Spain where single-stock futures are actively traded.