Portfolio hedging in the Indian stock market is a risk management strategy used by investors to protect their investment portfolios from potential market downturns or volatility. This is typically achieved by using derivative instruments such as options and futures, which are available on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). By buying put options or selling futures, investors can offset potential declines in their portfolio’s value, creating a cushion against market fluctuations. For example, purchasing a put option on an index allows an investor to benefit if the index declines, balancing losses in their portfolio with gains in the hedge position. This strategy is particularly valuable for institutional investors and individuals with significant exposure to equity markets who seek to manage downside risks without entirely liquidating their positions.
Hedging is essential for maintaining desired risk levels, especially in times of economic uncertainty or heightened market volatility. Using derivatives for hedging enables investors to fine-tune their portfolios to match their risk tolerance while remaining invested in growth opportunities. NSE and BSE provide a robust framework for trading various derivatives that facilitate portfolio hedging, including index options, stock futures, and index futures. These exchanges also offer resources, analytics, and market insights that help investors make informed decisions in adjusting their hedge positions as market conditions change. While portfolio hedging helps mitigate losses, it requires an understanding of derivative pricing, market trends, and associated costs, as it does not eliminate risk but strategically reduces potential losses within an investor’s risk profile.
567/10, Anand Nagar, Lucknow, Uttar Pradesh - 226005
info@amitguruhsachdeva.com
support@amitguruhsachdeva.com
+91-9044447559
General Disclaimer
Risk Disclosure on Derivatives
Source: SEBI Study
By continuing to use our services and by proceeding further, you are acknowledging the underlying risks and uncertainty associated with trading and investment in financial markets. You agree to bear the full liability for the same.
Learn and earn in the market with Amit Guruh Sachdeva!
This will close in 0 seconds