DERIVATIVES STRATEGIES AND GOVERNMENT POLICIES TO CONTROL STOCK MARKET RISK

Abstract

Derivatives were introduced in India during the year 2000, with the hope that they will help to control over the risk of the stock market. Today, the business of financial derivative is almost 16.54 times of the business of cash market. In the year 2015-2016, the average daily turnover of financial derivatives in India has almost 251826.87 crore, as compared to cash market, which has only 15,225 crore average daily turnover. But, still the stock market in India is in a delimama of risk and uncertainty. So, there is a need to find out new ways and policies which helps in controlling the risk of the stock market up to certain extent. Objective: This paper helps in finding out the measures that can assist the policy maker in controlling the risk of the stock market. Scope: There are three sections in this paper. First section explains the risk controlling strategies of financial derivatives, especially in the context of futures and options. Second section elaborates the regulatory framework of the SEBI. The last section explains the other measure that can be used to mitigate the risk up to certain extent. Strategies are game tactics formed by an investor to deal with the risk and achieve objectives. These strategies are based on an investor perception of how the market will move. Different strategies are available for different views on market movements