Currency futures and options is emerging as an investment bet for retail investors, who so far have preferred to stay away from the complexities of currency market. Overall retail participation in currency derivatives market in India has roughly gone up to 13% from 8% in between February and November, 2010, according to the market players. Currently, the total Indian currency market?s F&O turnover is around Rs 45,000 crore. Globally, the average turnover in currency F&O market is around $4 trillion, highest among financial markets.
Pramit Brahmbhatt, CEO, UK-based Alpari, said, ?Currency derivative is the emerging asset class in India. Although, banks and corporates are the major volume drivers in the currency exchanges, there has been considerable increase in retail participation in the last six months to 1 year. We will see more retail participation once the liquidity increases in this market.?
While Alpari India has registered 20-25% increase in retail client base, ForexServe, a consultancy firm, is expecting a similar growth in 2010-11.
Vivek Dave, MRC India, a currency brokerage firm, said, ?We just launched a currency trading platform in August, 2010. We plan to penetrate our business mostly through retail customers. While investors should not stop investing in equity markets for long term, currency futures and options give an opportunity to generate short term income.?
MRC India, arm of MRC Global, which has presence in Europe and US with 65,000 clients dealing in currency, has initially acquired around 50 clients of which 50% are retail customers. It aims to increase the share of retail customers by the end of 2010-11. ?A retail investor can take the benefit of lower margin money in currency derivative. For a $1,000 contract, the margin money required is Rs 1,500 as per NSE. It is lower than equity derivatives. An investor can generate 30-35% absolute return in one year.? said Dave
Experts say, currency futures market is the most transparent market devoid of any insider trading and is impacted by macro economic factors. It is easier to measure the losses or profits in this market to a certain extent, hence it gives the retail investor some confidence to take a position.