Investors’ Perception on Indian Derivatives Market

Divya Gakhar
University School of Management Studies, Guru Gobind Singh Indraprastha University, India
divya.ipu@gmail.com

Rationale of the Study: Derivatives market in India is of recent origin and is growing at a very fast
pace. The present study analyzes perception of Indian investor about Derivatives Market.

Objectives: To study the perception of Indian investor, first of all investors’ investment pattern,
objective of investment, risk-return attitude has been identified. Later on their derivatives market
literacy levels has been evaluated and finally their perception about various aspects of derivatives
market has been analysed.

Methods: A structured questionnaire was administered from 522 respondents. In this study we have
developed a scale known as Derivatives Awareness Level (DAL), which consisted of 25 statements on
likert scale. The statements in this scale were related to conceptual understanding of terminologies
used in derivatives market, strategies made for investment in futures and options, trading rules in
Indian market. ANOVA, Chi-square test and Structured Equation Modelling has been applied to judge
perception of stakeholders.

Results and Findings: 46.20 percent males consider themselves to be conservative investors, 46.70
percent are balanced investor, 7.20 percent claimed to be aggressive investors and 47.40 percent
females are conservative investors, 38.60 percent are balanced investors and 14 percent fall in the
category of aggressive investors. Age, gender, nature of employment, work experience, family income
are significantly affecting risk attitude of investors. Nature of employment, workplace activity and
annual family income significantly affect return expectation of the investors. The investment pattern
shows that out of total income, 50 percent is invested by an average Indian investor in saving bank
deposits and fixed deposits are most preferred investment instruments. 6.27 percent is investment in
derivative instruments. The results show derivative awareness level (DAL) of average respondent is
81.82 with standard deviation of 23.93.

Conclusion: The study shows that an average Indian investor has fair level of understanding of
derivatives market and its concepts. SEM has extracted five factors including: features of derivatives
market, benefits of derivatives market, issues and challenges, economy impact of derivatives and
future of derivatives market.

Keywords: derivatives, perception, investors, derivatives awareness level

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