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Trading In Foreign Exchange Market: A Study

of factors influencing customers to choose Axis

Bank as their primary forex account.
(April 2018- June 2018)

Submitted for the partial fulfillment of Masters of Business

Administration (MBA) to

Submitted by
Shashwat Mishra
Roll No. 1700070A303
MBA -19

Under guidance of

Ms. Ritu Chhikara Mr. Rahul Joshi

Professor Branch Head And Vice President
SOM, BML Munjal University Axis Bank

School Of Management, BML Munjal University (BMU),

Siddhrawali, Haryana 122413

Date of Submission:


With increasing globalization and robust performance of the economy, businesses in India have been
rapidly integrating with the world, especially in the past few years, forcing them to face the additional
risk of exchange rate fluctuations besides other risks.

The daily transacted volume of forex in India is estimated at $34 billion. According to the Bank for
International Settlements (2007), India’s share in global transactions has increased sharply in the past
three years from about 0.3% to the current 0.7%.

Before the launch of currency derivatives, risk management was mainly done through OTC forwards,
swaps, and options, but were accessible only to a few players. The OTC Currency Market broadly
comprised Forwards, prior to the introduction of Currency Futures. While nationalized banks and foreign
banks were the market makers; FII’s, importers, exporters, and Oil companies were the major market
takers. Hedging of transactions was backed by underlying exposures.

The following were the Key Onshore Regulations that governed the process:

o INR was freely convertible on current account and partially on Capital account

o Only ‘authorized dealers’ could buy/ sell INR

o Documentary evidence was required for all FX deals

o Local regulations did not recognize offshore NDF market

o Transaction, if on the basis of PPC, was not fully and freely re-bookable

Excess volatility in foreign exchange market has adverse impact on price discovery, export performance,
sustainability of current account balance, and balance sheets. Exchange traded currency futures &
options offer investors a transparent platform to manage volatility in the Indian currency market.


With a view to enable entities to manage currency market fluctuations better, RBI approved
introduction of currency futures in August 2008 with USD-INR pair. Three new currency pairs (EUR-INR,
GBP-INR, JPY-INR) were introduced in February 2010.

Exchange traded futures as compared to OTC forwards serve the same economic purpose, yet differ in
fundamental ways. An individual entering into a forward contract agrees to transact at a forward price
on a future date. On the maturity date, the obligation of the individual equals the forward price at which
the contract was executed. Except on the maturity date, no money changes hands.

On the other hand, in the case of an exchange traded futures contract, mark-to-market obligations are
settled on a daily basis. Since the profits or losses in the futures market are collected / paid on a daily
basis, the scope for building up of mark to market losses in the books of various participants gets
limited. The counterparty risk in a futures contract is further eliminated by the presence of a clearing
corporation, which by assuming counterparty guarantee eliminates credit risk.

Further, in an Exchange traded scenario where the market lot is fixed at a much lesser size than the OTC
market, equitable opportunity is provided to all classes of investors whether large or small to participate
in the futures market. The transactions on an Exchange are executed on a price time priority ensuring
that the best price is available to all categories of market participants irrespective of their size. Other
advantages of an Exchange traded market would be greater transparency, efficiency and accessibility.

Currency futures saw an exponential growth in the Indian market from USD 50 million at introduction to
USD 8-10 billion at present. They are currently trading through NSE and MCX-SX, with USE being a recent

o Key features of currency futures are as follows:

o Since all transactions are cash settled, there is no requirement for an underlying exposure.
o High price transparency, standardized contracts, daily MTM and counterparty risk management
through clearing corporation
o Participation of FIIs, NRIs, PIOs is not allowed currently. However, whenever permitted by
regulations, CWA may offer the same to all the permitted categories.
o Market participants:
 Nationalized/Foreign banks and brokerage firms doing proprietary trading, Corporates
doing hedging & view based trading
 Retail investors and HNIs


o Addition of one more product offering to CWA’s suite of products.

o Most of the competition is offering similar products. This will help CWA to retain / acquire
customers, as well as reach out to new segments. CWA can offer this product to the entirely
new set of customers like Corporates, Hedgers, Speculators and Arbitrageurs in the Currency

Additional revenue stream.