Stock Index Futures in India-Does the Market Justify Its Use

Does the Market Justify Its Use?
Sumon Kumar Bhaumik The L C Gupta Committee, which was constituted to decide whether or not financial derivatives should be traded in India, is reportedly of the opinion that the Indian capital market is ready for options and index futures. Stock index futures, a multi-role derivative product which is more complex and interesting as a financial instrument, find the rationale for its use in the so-called efficient market hypothesis which argues that stock prices are random walks. This paper examines the role played by index futures, and argues that the Bombay Stock Exchange is significantly efficient, thereby justifying the introduction of stock index futures.