Contract Specifications for Euro-INR

Symbol EURINR
Instrument Type FUTCUR
Unit of trading 1 (1 unit denotes 1000 EURO)
Underlying EURO
Quotation/Price Quote Rs per EUR
Tick size 0.25 paise or INR 0.0025
Trading hours Monday to Friday
9:00 a.m. to 5:00 p.m.
Contract trading cycle 12 month trading cycle.
Settlement price RBI Reference Rate on the date of expiry
Last trading day Two working days prior to the last business day of the expiry month at 12:30 p.m.
Final settlement day Last working day (excluding Saturdays) of the expiry month.
The last working day will be the same as that for Interbank Settlements in Mumbai.
Base price Theoretical price on the 1st day of the contract. On all other days, DSP of the contract
Price operating range
Tenure upto 6 months Tenure greater than 6 months
+/-3 % of base price +/- 5% of base price
Position limits Position Limit
Settlement Daily settlement : T + 1
Final settlement : T + 2
Mode of settlement Cash settled in Indian Rupees
Daily settlement price (DSP) DSP shall be calculated on the basis of the last half an hour weighted average price of such contract or such other price as may be decided by the relevant authority from time to time.
Final settlement price (FSP) RBI reference rate
 
Hedging scenarios
Hedging against Indian Rupee appreciation
Suppose an Indian IT exporter receives an export order worth, say, 100,000 from a European Telecom major with the delivery date being in 3 months time. At the time when contract is placed, the Euro is worth say Rs.64.05 in the spot market, while on MSEI a futures contract for an expiry date that matches with order payment date is trading, say, at Rs.64. This puts the value of the order, when placed, at Rs.6,405,000. However, if the domestic exchange rate appreciates significantly (to Rs.63.20) when the order is paid for (which is one month after the delivery date), the firm would receive only Rs.6,320,000 rather than Rs.6,405,000.

To insure against such losses, the firm can, at the time it receives the order, can enter into 100 Euro futures contract of 1000 each to sell at Rs.64 a Euro, which involves contracting to sell a foreign currency on expiry date at the agreed exchange rate. Suppose on payment date the exchange rate is, say, Rs.63.20, the exporter would receives only Rs.6,320,000 on selling the Euro in the spot market, but gains Rs. 80,000 (i.e. 64 - 63.20 * 100 * 1000) in the futures market. Thus, overall the firm receives Rs.6,400,000 and protects itself from the sharp appreciation of domestic currency against Euro.

In the short term, firms can make gains or losses from hedging. But the basic purpose of hedging is to protect against excessive losses and to benefit from knowing exactly how much it was going to get from its export deal to avoid the uncertainty associated with future exchange rate movements.
Hedging against Indian Rupee depreciation
An organic chemicals dealer in India placed an import order worth, say, 100,000 with a German manufacturer. The current spot rate of Euro is, say, Rs.64.05 and at this rate the value of the order is Rs.6,405,000. The importer is worried about sharp depreciation of Indian Rupee against Euro in coming months when the payment is due and brought 100 Euro futures contract (1000 each) on MSEI, say, at Rs.64 a Euro. Suppose, at expiry date, Rupee depreciated to Rs.65 the importer would have to pay Rs.6,500,000, but he would gain Rs.100,000 (i.e. Rs.65 - 64 * 100 * 1000) from the futures market and the resultant outflow would be only Rs.6,400,000.

In the short term, firms can make gains or losses from hedging. But the basic purpose of hedging is to protect against excessive losses and to benefit from knowing exactly how much it was going to pay for the import order to avoid the uncertainty associated with future exchange rate movements.