An Empirical Analysis of Hedged Items and Derivative Instruments Employed for Hedging by Indian Companies

Authors

  • Mahesh K S University of Mysore
  • B MAHADEVAPPA Professor, Department of Studies in Commerce University of Mysore, P G Centre, Hemagangotri, Hassan 573226 Karnataka, India.

Keywords:

Hedged Items, Hedging Instruments, Indian Companies

Abstract

The current study analyzed various hedging instruments and hedged items employed by Indian companies over five years. The data were collected from the annual reports of sample companies consisting of 19 high foreign revenue companies with significant foreign exchange exposure. The study's findings reveal that most Indian companies are exposed to foreign currency risks, and 95% of companies use derivatives to hedge their foreign currency risk. Additionally, 57% of companies used derivatives to hedge against interest rate risk; however, only two-faced commodity risk. Among the different hedging instruments, forward contracts were the most widely used instruments in Indian companies; 84% of sample companies used forward contracts for managing different types of risks. At the same time, future contracts were the most diminutive preferred hedging instrument among Indian companies.

References

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Published

2024-06-30

Issue

Vol. 56 No. 1 (2024)

Section

Articles

License

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