S&P CNX Nifty Futures at NSE, India : An Empirical Analysis

The National Stock Exchange of India Ltd. has recently introduced derivative trading. Yet, there is a fairly good response from market participants to derivative trading. This study attempts to understand the functional relationships between the trading value and the trading price of Nifty Futures. It also attempts to understand this relationship in different economic situations. The Box-Cox methodology proved that there is a nonlinear relationship between the trading value and trading price on account of asymmetric information. Through, the IGARCH (1, 1) two stage modeling, futile trading is observed in all the economic situations, causing inequilibrium in the market. Together, these results indicate the need to resolve efficiency, accountability and transparency issues to maximize returns