Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
Commentary

Proposed Rupee Futures in a Regulatory Vice

Vikram Murarka on the upcoming rupee futures:

The lot size has been kept at a mere $1,000, which is just about Rs 42,500 at today’s rate….To put things in perspective, the value of one lot of rupee futures is going to be half that of one lot of the Mini Nifty.

…Corporates are supposed to access the market only to hedge their forex exposures, not for speculative purposes…Cut to the futures market. Since there will be no delivery involved, all the trades will be termed speculative….even if a small exporter were to ‘hedge’ himself on the futures market, when it comes to realising rupees against his dollar receivables, he would still need to transact with a bank, which would charge him a steep 20 paise per dollar
let us suppose that skilled speculative trading gives rise to profits. Will corporates want to pay capital gains tax thereon…RBI’s report prescribes a client level open position limit of $5 million

(Emphasis mine)

Lots of issues, but definitely better than no futures at all. Hopefully the RBI will react fast to market action and change or ease regulations accordingly.