A Comprehensive Guide to Currency Market Trading Market in India | Motilal Oswal
A Comprehensive Guide to Currency Market Trading Market in India | Motilal Oswal

Benefits of Currency Trading in India

India’s economy has a strong foothold and is host to several international business giants owing to the market size, scope for innovation and soundness of financial market. India’s robust and stable financial system has gradually transcended from being a highly controlled environment to a more liberalized set-up.
According to UNCTAD's World Investment Prospects Survey 2012-14, India is the third most attractive destination for FDI in the world, after China and US. Indian markets throw tremendous opportunities and high-profit prospects, running on smooth regulations.
And in this energetic scenario currency trading in India is emerging as the platform for trading amongst different buyers from all over the globe, day and night. Foreign exchange market or currency trading market in India is a place of exchange for trading of international currencies.

Quick facts about the market
Currency futures are traded on platforms offered by exchanges like the NSE, Bombay Stock Exchange (BSE), MCX-SX, and United Stock Exchange (USE).Currency trading hour is 9.00 am to 5.00 pm. There is no cash or equity form like we use in Indian stock market, for trading this currency market. So, you need to open a trading account only with a broker & no need to open a DEMAT account We can only trade future & option segments in currency market.

The reasons for expansion are plenty
Introduction of future derivative in Forex trading kick started an upward growth trend for the currency trading market in India. This opened up trading for individuals and investors, which was otherwise a privilege only for banks and large corporates. Liberalization significantly boosted currency trading in India by allowing both banks and corporations greater flexibility in holding and trading foreign currencies. Softening trading regulations expedited the integration of global and local economies and this made risk management through derivative products a necessity.

Why the need for risk management through derivatives?
Just like most financial tools, currency prices are highly volatile as it is affected by a variety of economic and political conditions. But the most important ones are interest rates, international trade, inflation, and political stability. Governments, through central bank intervention, can participate in the foreign exchange market to influence the value of their currencies. In order to create impact, they either flood the market with their domestic currency to lower the price or buy to raise the price. Large market orders by mammoth corporations can also render the currency trading market in India, unstable. Rise in export earnings of a country increases foreign exchange supply. Rise in imports increases demand. Other influencing factors are directional viewpoints of market participants, expectations of national economic performance, and confidence in a country's economy.

These interventions can cause high volatility in currency prices and hence, currency trading in India. However, the size and volume of the currency trading market in India makes it extremely difficult for any one body to drive the market for any length of time.

Exchange-traded currency futures are a superior tool for such hedging because of greater transparency, liquidity, counter party guarantee and accessibility.

Currency trading in India is a significant contributor to the national economy owing to its size, volume and frequency of trading. Since the economy is made up of businesses of all sizes, anything that is good for business directly boosts the national economy.
If you’re just beginning, open a trading account first with the help of a broker. Research and ask your family members, friends or colleagues to make recommendations based on their experience with firms and choose your broker wisely. Stay up-to-date on the global market trends and you’ll see that currency trading is a lucrative opportunity. 
 

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