The Hindu Business Line : NRIs urged to consider investment in derivatives

But judging by the response at the two meetings held in Dubai and Abu Dhabi, NRIs could get into the market in a big way in the coming period, C.J. George of Geojit said.

Abu Dhabi , June 6

NRI investors who are concerned about the volatility in the Indian stock markets, and are keen to protect their investments from losses incurred due to crash in share prices, should seriously look at the derivatives market as it would help them hedge risks and obtain a better picture of the stock market, according to a senior NSE official.

Ms Chitra Ramakrishna, Deputy Managing Director, NSE, who addressed NRIs at a meeting held in Abu Dhabi recently, highlighted the relevance of the derivatives market for NRIs.

The RBI had recently issued guidelines permitting NRIs to trade in the derivatives market for the first time.

The NSE official sought to provide information and guidelines for trading in the derivatives markets and referred to the advantages.

Instances like losses incurred in the recent stock market crash could be avoided by trading in the derivatives market, as it was an excellent instrument to hedge risks, she said.

Investors can also buy a Nifty index that enables them to take a view of the stock market in general rather than restrict themselves to individual stocks.

The NSE, according to her, has become the world's largest for individual stock futures trading and the derivatives market has a turnover of approximately Rs 10,000 crore.

Mr C.J. George, Managing Director, Geojit Financial Services Ltd and Director, Barjeel Geojit Securities, who also participated in the meeting, told Business Line that not many NRIs were aware of the RBI permission to trade in derivatives and business was just picking up.

But judging by the response at the two meetings held in Dubai and Abu Dhabi, NRIs could get into the market in a big way in the coming period, he added

He also said that purchases could be made directly through a broker and unlike purchase of equities, RBI permission was not needed. Investor accounts would be monitored directly by the NSE.

According to Mr George, NRI investors in general were more confident of the Indian market today than a few years ago.

However, concerns were being voiced about the extreme volatility in the Indian markets experienced during and after the recent polls, which they termed as immature.

Mr George sought to reassure investors by referring to the last 10 instances when the markets crashed and stating that in all these cases, the entire losses incurred by investors were retrieved in two months. However, he urged only long-term investors to enter the market. "Investors who speculate or borrow funds and trade them spoil the market and they should be discouraged."

He added that the fundamentals of the Indian economy were strong now and there were no major reasons that could cause concern among investors.

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