Journal of Commerce and Accounting Research

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A Study on Currency Derivatives In India - An Evidence from FMCG Sector


Affiliations
1 Professor & Head, Department of Management Studies & Research, Nagarjuna College of Engineering & Technology, Bengaluru, Karanataka, India
2 Professor & Head, P.G. Department of Commerce, Presidency College, Bengaluru, Karnataka, India
     

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Foreign Exchange Risk management (FERM) involves using both internal and external techniques such as forwards, futures, options and swaps which are called as currency derivatives. The firms with greater growth opportunities and tighter financial constraints are more inclined to use currency derivatives. Forex market provides various derivative instruments to hedge against currency exposures such as currency forwards, options, futures and swaps. The current paper aims at studying various FERM Techniques used in the Indian FMCG sector and its impact on exchange gain/losses. For this purpose, foreign exchange cash flows arising out of imports and exports and exchange gain/losses of the companies during 2010-2017 of seven sample companies chosen from the FMCG sector is used. It is observed from the study that only two currencies-USD and EUR hold command in the Forex market and other currencies are being used minimally. It is also noted that there are several currency derivatives available to the business firms such as forwards, futures, options, swaps etc. for hedging currency exposure. However, among all these techniques forward contract is considered to be an effective hedging tool and easier to understand.

Keywords

Exchange Inflows and Outflows, Forex, Forwards, Futures, FMCG Sector.
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  • A Study on Currency Derivatives In India - An Evidence from FMCG Sector

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Authors

Prakash Basanna
Professor & Head, Department of Management Studies & Research, Nagarjuna College of Engineering & Technology, Bengaluru, Karanataka, India
K. R. Pundareeka Vittala
Professor & Head, P.G. Department of Commerce, Presidency College, Bengaluru, Karnataka, India

Abstract


Foreign Exchange Risk management (FERM) involves using both internal and external techniques such as forwards, futures, options and swaps which are called as currency derivatives. The firms with greater growth opportunities and tighter financial constraints are more inclined to use currency derivatives. Forex market provides various derivative instruments to hedge against currency exposures such as currency forwards, options, futures and swaps. The current paper aims at studying various FERM Techniques used in the Indian FMCG sector and its impact on exchange gain/losses. For this purpose, foreign exchange cash flows arising out of imports and exports and exchange gain/losses of the companies during 2010-2017 of seven sample companies chosen from the FMCG sector is used. It is observed from the study that only two currencies-USD and EUR hold command in the Forex market and other currencies are being used minimally. It is also noted that there are several currency derivatives available to the business firms such as forwards, futures, options, swaps etc. for hedging currency exposure. However, among all these techniques forward contract is considered to be an effective hedging tool and easier to understand.

Keywords


Exchange Inflows and Outflows, Forex, Forwards, Futures, FMCG Sector.

References