According to RBI rules from April 5 currency derivatives can only be traded for hedging purposes. Previously users can take positions upto 100$ million without any exposures. RBI trying to restrict speculative trading.
NSE and BSE directed their member brokers to take note of this RBI notice. Currency derivatives trading is managed by RBI and SEBI. Click here for the NSE and BSE circular. For traders with smaller exposure can provide a declaration form to the brokers.
If you are using Zerodha here is the link to submit the currency trading declaration form click here.
The steps are
Download the declaration form (PDF), Sign the declaration form (e-sign/wet sign), Create a ticket here to submit the soft copy of the signed form.
Currency trading in India typically occurs through the foreign exchange market (Forex or FX market). Here’s a brief overview:
- Regulation: Currency trading in India is regulated by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). These regulatory bodies set rules and guidelines for currency trading activities.
- Currency Pairs: The Indian rupee (INR) is paired with other major currencies such as the US dollar (USD), euro (EUR), British pound (GBP), Japanese yen (JPY), etc. These pairs are traded on various platforms and exchanges.
- Platforms: Currency trading in India can be conducted through authorized banks, financial institutions, and online trading platforms. Individuals and businesses can trade currencies through these platforms, which offer tools for analysis, charting, and execution of trades.
- Leverage and Margin: Forex trading in India often involves the use of leverage, which allows traders to control larger positions with a relatively small amount of capital. However, leverage also increases the risk of losses. Margin requirements are set by brokers and regulatory authorities.
- Risk Management: Currency trading carries inherent risks due to the volatile nature of forex markets. Traders employ various risk management strategies such as stop-loss orders, hedging, and diversification to mitigate potential losses.
- Taxation: Profits from currency trading in India are subject to taxation. The tax treatment may vary depending on the nature of trading activity (whether it’s considered speculative or non-speculative) and the individual’s tax status.
- Market Hours: The forex market operates 24 hours a day, five days a week, allowing traders to participate in trading activities at any time. However, trading volumes and volatility may vary during different sessions.
- Factors Influencing Currency Prices: Currency prices are influenced by various factors such as economic indicators, geopolitical events, central bank policies, interest rates, inflation, and market sentiment.
- Risks: Currency trading carries risks, including market risk, liquidity risk, counterparty risk, and regulatory risk. It’s essential for traders to understand these risks and have a sound trading plan in place.
Before engaging in currency trading, it’s advisable to gain a good understanding of the forex market, develop a trading strategy, and consider seeking advice from financial professionals. Additionally, staying updated with market news and developments is crucial for making informed trading decisions.