www.eminencejournal.com INTERNATIONAL JOURNAL OF BUSIENSS MANAGEMENT AND SCIENTIFIC RESEARCH VOL : 1, JAN, 2015 ISSN: 2394-6636 14 INDIAN DERIVATIVE MARKET: EVOLUTION AND EMERGING CHALLENGES ISHA MEHRA Research Scholar, Punjab Technical University, Kapurthala MONU SETH Assoicate Professor, FIITJEE, Pune DR. H.P GUPTA Principal, Swami Satyanand College of Management and Technology, Amritsar ABSTRACT Derivative market is well known as risk averter market, in which investors invest their hard earned money without any fear. This market is well known for its logical mind under which individual investor or investment house can easily gain profits, but if they incurred any losses in present that is immediately adjusted with future derivatives to overcome the risk. Derivative market is a well known market these days because of commodities can easily be cashed in the future market, no matter the under laying asset is an agriculture product, metals or rupee value etc. Similarly, this paper includes the study regulatory framework regarding derivative market and its trading mechanism. This paper also highlights the challenges faced by derivative market in India and also considers the power of derivative in relation to economic development. It also attempts to analyze the impact of derivative on Indian market and role of derivatives in the emerging growth of Indian Stock Market. Keywords: Derivatives, Stock Market, Exchange Rate, Rationality, Commodity, Volatility etc. INTRODUCTION The scenario of derivative market in India has reached to multi-trillion dollar level and with the passage of time it is increasing like anything. Its ability of transfer the risk with the advantage of locking in assets prices, derivatives are earning popularity among individual and corporate investors. With the introduction of economic reforms in 1991, maximum push has been made to increase the investors’ confidence by generating the trading process more users’ friendly. Current era is considered to be a Risk Management Era. Under which derivatives are framed as emerging tool of stock market .Derivatives are those instruments which are not having value of its own. The history of derivatives is related with the mechanism where the value of one underlying asset is derived from other asset. The underlying asset may be of any types from the above two i.e. Financial or non-financial. Derivatives are lying in the first place. These instruments are having power to redistribute the risk that an individual and corporate investor faces. Thus also add as an important component in the investor’s portfolio. The unbalanced phase of equity markets over the years has resulted in efficient use of equity derivatives. The percentage of the exchange traded in equity futures and options have seen a significant growth. This unbeaten growth and development by the market participants has resulted in inflows of capital and also protect the investors from hedging. Derivatives are the financial instruments, which derive their value from some other financial instruments, called the underlying. It does not formulate any physical existence but comes out of a contract between two parties. It does not have any value of its own but is depends on the