Foreign exchange risk management practices of India s service sector a study on currency derivatives

Abstract

The excessive usage of USD for overseas operations by Indian enterprises and the newlineexcessive volatility of Indian rupee against USD have been resulting in a high degree of currency risk for Indian business enterprises. In this context the researcher has made an extensive study on how Indian Service industries are hedging their currency exposure optimally, therefore merits a study. Hence this thesis, and#8213;Foreign exchange risk management practices of Indian Service Sector - a study on currency derivatives has been attempted. newlineThe study is based on the data pertaining to international operations such as exchange earnings and outflow, exchange difference, currencies used, derivatives employed from 85 companies which represent 9 industries they are Aviation and Shipping, newlineBpo/Kpo Industry, Broadcasting and Media Industry, Electricity Generation and Transmission Industry, Hotel and Resort Industry, IT Industry, Telecom Industry, newlineInfrastructure Industry, Diamond and Jewellery Industry. Only listed companies have been chosen for the study, External Foreign exchange risk management techniques i.e. usage of currency derivatives is well thought-out for the study. . To have equal representation, companies were chosen on the basis of market capitalisation ranging newlinefrom large cap to small cap. newlineOutcome of the study is ascertaining the trends in currency derivative segment in terms of volume traded, settlement and currencies traded statistics, Establishing a model for estimation of exchange losses out of exchange exposure, number of derivative requirement for a given exchange exposure, exchange losses, revenue and profitability for different service industries chosen for the study and post derivative usage impact on minimising the exchange losses. newline