Currency markets are volatile and fears of forex derivative losses are still haunting Indian corporates but companies are now hoping to avert some of their forex risks through currency futures.

The National Stock Exchange (NSE) plans the formal launch of futures by the end of this month.

Bankers say the initial product, which will be limited to futures in the rupee-dollar pair upto a limit of $25 million, is going to benefit small corporates with limited forex exposures.

"They bring efficiencies into the market and it is something that’s long waiting to be done. We as a country are going into a calibrated careful process which is right and we do need these products," said Naina Lal Kidwai, Country Head, HSBC India.

However, many are still skeptical about how successful currency futures will be in their current form.

For one, futures trading will be restricted to the rupee-dollar pair and traders say that keeping FIIs and NRIs out will leave the market illiquid.

This means that futures trading will continue to be centered in the Singapore based Non Deliverable Forwards market.

Experts say that initially volumes on domestic futures market expected to be a fraction of the $700 million traded on the Singapore NDFs each day due to absence of external players.

But for now, the RBI and SEBI have both ruled against allowing foreign investors into the domestic futures market for fear of unnecessary speculation and volatility.

While the launch of currency futures is being watched closely at the start the derivative products will be more suited to smaller and medium sized companies rather than large corporates and foreign investors.

Only when the regulators expand the products and the participation then we can expect futures market become an integral part of the Indian financial system.