Since the beginning of commerce, the main concentration
had been on investment. To get a reward in terms of tangible
appreciation, people always looked out for commercial avenues.
But with the passage of time, people started to sharpen
their investment skills to maximize their earnings. Everybody
understood that higher risk can increase their returns.
So, they became more innovative in various types of investments.
One major contribution of this innovativeness in the financial
sector is derivatives.
Derivatives, for the first time, were introduced in the
early of 17th century in Europe. Since then, the speculative
traders used futures and options to trade in agricultural
commodities. But the system was totally unorganized with
the lack of proper legal control and as a result, the markets
collapsed. After sometime, when markets became matured and
many institutions got involved in the process then these
derivatives became the most significant innovation of the
time. From time to time, various amendments in the regulation
of the derivatives have been made, not only in the developed
economies but also in the developing economies like India.
One major initiative in the Indian financial sector was
to allow the mutual funds to invest in the financial derivatives.
A mutual fund is a vehicle which pools money from investors
with a promise that the money would be invested in a particular
manner by professional managers who are expected to honor
the promise. In India the Securities and Exchange Board
of India's (Sebi) regulations govern the mutual funds. The study mainly concentrates on the present status of
the derivatives in India and the regulations available as
well as appreciates the new regulations for mutual funds
participating in the financial derivatives.Before studying
the details of the investment of mutual funds in Indian
financial derivatives, we try to find out the changes in
the Indian derivatives and its present status.
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