yables. Indian companies hedge rupee receivables or payables through banks with forward contracts or tailored options for limited durations, usually not beyond some months. Cross-currency instruments are available abroad for other currencies, e.g. using futures or options in Tokyo, the Chicago Mercantile Exchange or the Philadelphia Stock Exchange, but no rupee-denominated hedging instruments are traded in markets.
Importers and exporters need products such as rupee futures and options in addition to forwards to manage their currency exposure cost-effectively, with the institutional infrastructure of exchanges where these are traded. With volumes, competition and liquidity, prices are likely to fall significantly. Such developments will give Indian companies access to reasonably priced hedging alternatives, adding to their competitive strength.
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