A Comprehensive Guide to Currency Trading Market in India

Comprehensive Understanding Of Currency Trading

Currency trading in India is now gaining momentum and is emerging as one of the platforms for trading. Many investors are now interested in trading in the currency market. Currency trading is where you trade in a pair of currency and get gains through the fluctuation in its prices. The currency market is the fastest growing market in the world with a daily turnover of trillions.

Quick Facts About Currency Trading in India

  1. Trading in the currency market in India happens on the National Stock Exchange, Bombay Stock Exchange, Multi Commodity Exchange Stock Exchange.
  2. The currency trading time in India is from 9.00 am to 5.00 am.
  3. You do not need cash or equity to trade in currencies.
  4. You can trade futures and options in the currency market.

History of Currency Trading in India in A Gist

The upward trend for currency trading in India started when future derivatives were introduced in Forex. This opened the market for individual investors unlike before when it was only open for banks and corporates. Liberalization led to banks and corporates getting more freedom and flexibility to hold and trade in foreign currencies. As the trading regulations were softened, it gave rise to the integration of local and global economies. With this rose the necessity to manage risk through derivative products.

Reasons for Risk Management Through Derivatives

Currency prices go through the highest volatility as they are affected by different economic and political conditions. Other than these conditions they are also affected by inflation, interest rates, and international trade. Governments can influence the value of their country’s currency in the foreign exchange market. They can do this with the intervention of the central banks. The can either flood the market with their domestic currency and lower its price or buy the domestic currency so as to raise its price. Big corporates can also impact currency trading in India with humungous market orders. If a country experiences a rise in its export earnings, then there is an increase in its foreign exchange supply. A rise in a country’s imports increases demand.

The abovementioned interventions can be causes for high volatility in currency prices and in turn for currency trading in India. Yet, given the size of the currency market in India, it is not easy for any company or body to single-handedly impact the market for a long time. This is because of the superior tool called exchange-traded currency futures. These have greater transparency, accessibility, counterparty guarantee an also liquidity.

Currency trading is a significant contributor to India’s economy. As the India economy is made up of all kinds of business, a profit to even one business gives a good push to the economy.

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