After stock markets, bullion and commodities markets, India,
is now gearing up for a newer investment asset class
- currency futures. Considering the risk and uncertainty
involved with volatility in foreign exchange rates, especially
for the exporters, hedging in currency futures is now
picking up pace among the investors.
, Chief Executive Officer, India Forex Advisors, one of the leading
forex advisory and management services in India, informed how Forex
hedging can prove to be a potential asset class for investments. In
a telephonic interaction with
, Goenka maintained that with higher volatility in currency
exchange rates, there is higher risk involved in investments,
but looking at the return on investments from currency
futures, it seems that new big thing in India's investment arena
will be the Forex trading or currency futures.
Commodity Online: How much is the spread of Forex-trading
in India and how much potential do you see?
India's Forex-trading business has a huge potential. Even though
the participation from investors was not so significant till past
few years, we have been successful in gaining rapid growth over
past three-four years. The pace of growth in Currency Futures has
been phenomenal with annual volume growth seen at a whopping 1500%
year on year. While forex trading business has been age old in the
US, in India, it has been fairly new. The gap can be seen of 25
years between the two countries with respect to forex trading
In India, we see investors from exporter communities, high net
worth individuals (HNIs), corporate and speculators. Currently, we
have reached to tire-2 level cities to tap the potential investors
in India. But the penetration of this business will continue to
progress in rest of the places over the due course of time.
CO: In India, there is less awareness about currency
futures. How do you think you can popularize this among the
There have been consistent efforts taken up by way of awareness
campaigns and seminars across the country. Even MCX is making
strong efforts by arranging special training programs at different
places so as to popularize the currency futures. I believe that in
next 4-5 years, currency futures market will be at par with India's
stock markets in volume terms.
CO: Currency futures market seems to be more expensive and
involving greater knowledge about finance for investors. In
this situation, what is there in store for retail
There has been low participation from retail investors till
recently. Previously there was low liquidity in the market but now
the liquidity seems to be improving with bigger players entering in
to the fray. This platform will particularly help traders and
exporters hedge dollar risk. Meanwhile, this also benefits small
investors by offering higher rate on investments than other asset
Meanwhile, the risk portion is also higher in currency futures
trading. Currency hedge will have risk attached to it. And at times
of turmoil, as volatility rises, so will be risk. Here needs a
little bit of expertise to understand currencies and global
According to me, the return on investments from currency futures
should vary between 5-10% per month, provided that investments are
made under strict disciplines.
CO: How investors can benefit from currency futures
Looking at the return on investments, there is huge potential for
currency futures in the country. The only thing required is the
expertise for understanding the currency movements, because it is
extremely difficult to predict currency movements of more than two
countries. If we consider trading in USD-INR, it is more
practically feasible and possible, but trading in JPY-INR will
require movements to be tracked from JPY-USD and then USD-INR.
Though, GBP-INR, JPY-INR and EUR-INR are best for hedging purpose
and most common among exporters. For trading purpose, USD-INR I
find most suitable.
CO: How do you see emergence of newer exchanges for
currency futures like United Stock Exchange etc?
Presently, National Stock Exchange (
) and Multi Commodity Exchange (
)-SX are poplar exchanges for currency futures trading. As for
other new exchanges, any new entrant in this field will take time
to pick up the pace as the current daily trading volumes on these
exchanges has been pegged at Rs.30,000 crore.
CO: There has been a debate on who is to regulate currency
futures - SEBI or FMC as MCX falls under FMC, while NSE is
regulated by SEBI?
Essentially, currency futures need to be governed by SEBI, as FMC
is a commodities markets' regulator. However, I am not yet sure on
CO: What is your role in currency futures market?
We provide customized forex trading solutions to our clients, who
are essentially corporate, HNI and retail. Presently, we provide
financial portfolio management services. We also provide advisories
on some select commodities like gold and crude oil etc. We have
also set up a small broking desk and a desk for advisory.
CO: How do you plan to expand your operations in coming
We have presently, four offices in India located in Mumbai, Delhi,
Bangalore and Kolkata. Our set of team is making presentations and
coordinating with exporters in smaller towns. We bring them to
notice about the discrepancies in the rates that bank offer for
Forex management. In order to bring awareness among the trading
community, we interact with trade associations. We see huge
potential in smaller towns in South India for currency futures. We
plan to add at least 25-30 HNI clients to our portfolio every
month. But our focus will be more on corporate clientele, which
ranges from export turnover of Rs.60 crore to Rs.4000 crore. There
are some 65 listed companies to our kitty.