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a study on investors perception towards derivative market

Abstract

Derivative trading was introduced in India in the year 2000 on NSE and BSE. Since their launch Derivative securities have penetrated the Indian stock market and it has emerged that investors are using these securities for different purposes, namely, risk management, profit enhancement, speculation and arbitrage. High net worth individuals and proprietary traders account for a large proportion of broker turnover. Interestingly, some retail participation was also witnessed despite the fact that these securities are considered largely beyond the reach of retail investors (because of complexity and relatively high initial investment).The study has conducted a survey through structured questionnaire targeting 100 retail investors of Delhi/NCR region to understand the awareness and attractiveness of different derivative securities amongst the retail investors. The study also tries to understand the profile of retail investors dealing in derivative trading, to understand the different purposes for which the investors are using these securities in order of preference, popularity of a particular derivative security out of total set and reasons for not investing by some investors. The study uses chi square test to examine the effect of demographic characteristics on derivative investment. The study finds that education, profession and gender do not effect the derivative investing behaviour, however income is found to have a significant effect on derivative investment. Further study proposes to popularize option instruments because they may prove to be a useful medium for enhancing retail participation in the derivative market