The mercantilism or trading of financial derivatives has received in depth attention. Meanwhile at the same time it has led to a debate over its impact on the underlying stock market from various facets by the academicians. All over the world researchers have done research on derivative trading and found out various facts about derivatives and their trading. In this study on literature review, efforts have been made to bring into the picture the research done about various issues throughout the world by the researchers. The review of literature and study is presented in four sections: first, the review of studies fundamental to capital market of India; second, the review of studies elementary to the testing about the capital market efficiency; third, the review of studies concerning the volatility study; and lastly, the review of fundamental studies analyzing the causal relation between spot and index futures market.

Allen, Chakrabarti, and De (2007), “India’s Financial System”, SSRN Online Library,http://ssrn.com/abstract=1261244

Bajpai (2006), “Developments of Capital Market in India”, Conference Proceeding at London School of Business, 2nd Oct. 2006

Bandivadekar, S. & Ghosh, S. (2003), “Derivatives and Volatility on Indian Stock Markets”, RBI Occasional Papers, Vol. 24 (3), pp. 12-28

Chhaochharia S. (2008), “Capital Market Development: The Race between China and India”, http://ssrn.com/abstract=1130074, pp. 1-15

Chan, K. (1992), “A further analysis of the lead-lag relationship between the cash market and the stock index futures market”, Review of Financial Studies, Vol.- 5, pp. 123-152

Debasish, S. S. (2009). An Empirical Study on Impact of Index Futures Trading On Spot Market in India. KCA Journal of Business Management

Debasish, S. S. (2009). Effect of futures trading on spot-price volatility: evidencefor NSE Nifty using GARCH. The Journal of Risk Finance, 10: 67 - 77

Damodaran, A. (1990). Index futures and stock market volatility. Review of Futures Markets, 9: 442 - 457

Dhankar, R., & Kumar, R. (2010). Empirical Analysis of Conditional Heteroskedasticity in Time Series of Stock Returns and Asymmetric effect on Volatility. Global Business Review, 11: 21 - 33

Floros, C. and Vougas, D. V. (2007), “Lead-Lag Relationship between Futures and Spot Markets in Greece: 1999-2001”, International Research Journal of Finance and Economics, Vol. 7, pp. 168-174

Gupta, K. and Singh, B. (2006), “Price Discovery and Causality in Spot and futures Market in India,” ICFAI Journal of Derivatives Market, Vol. III (1), pp. 30-4

Jagdeesh and Subrahmanyam (1993), “Liquidity Effects of the Introduction of the S&P 500 Index Futures Contracts on the Underlying stocks”, Journal of Business, Vol. 66, pp. 171-187

Kumar, K. K., & Mukhopadhyay, C. (2007). Impact of Futures Introduction on Underlying Index Volatility: Evidence from India. Journal of Management Science, 1: 26 - 42

Kumar, R., Sarin, A., & Shastri, K. (1988). Impact of Options trading on the market quality of the underlying security: An empirical analysis. Journal of Finance, 53: 717 - 732

Karmakar, M. (2007). Asymmetric Volatility and Risk-return Relationship in the Indian Stock Market, South Asia Economic Journal, 8: 99 – 117.

Karolyi, A. G. (1996). Stock Market Volatility around Expiration Days in Japan Journal of Derivatives, 4: 23 - 43

Kan, A. C. N. (2001). Expiration-Day Effect: Evidence from high-frequency data in Hong Kong stock market. Applied Financial Economics, 11: 107 - 118

Mohan, R. (2004), “Financial Sector Reforms in India: Policies and Performance Analysis”, Reserve Bank of India Bulletin, pp. 851-877

Mohan, R. (2007), “India’s Financial Sector Reforms: Fostering Growth While Containing Risk”, Address at Yale University on December 3, 2007

Mallikarjunappa, T. and Afsal E.M (2008), “Effect of future trading on spot market volatility: A study of CNX Bank Nifty”, Asian Academy of Management Journal of Accounting and Finance, Vol. 4(2), pp.43-65

Mukherjee, K. and Mishra R.K. (2006), “Lead-Lag Relationship between Equities and Stock Index Futures Market and its Variation around Information Release: Empirical Evidence from India”, NSE Research Paper, NSE India

Maniar, H. M., Bhatt, R. & Maniyar, D. M. (2009). Expiration hour effect of futures and options markets on stock market - A case study on NSE of India. International Review of Economics & Finance, 18: 381 - 391

Nath, G. C. (2003), “Behaviour of stock market volatility after derivatives”, NSE working paper, Retrieved May 23, 2011, http://www.nseindia.com/content/ research/Paper 60.pdf

Narang, S. (2012). Re-examining the Nifty returns after the first decade of derivative trading in Indian Capital Market using Non-linear Asymmetric GARCH Model. The International Journal of Innovation in the Digital Economy, 4

Pastor, L., Sinha, M., & Swaminathan, B. (2008). Estimating the Intertemporal Risk-Return Tradeoff Using the Implied Cost of Capital. Journal of Finance, 63: 2859 - 2897

Shirai S. (2004), “Impact of Financial and Capital Market Reforms on Corporate Finance in India”, Asia-Pacific Development Journal, Vol. 11, pp. 33-5

Tripathy, N. (2010). Expiration and Week effect: Empirical Evidence from the Indian Derivative Market. International Review of Business Research Papers, 6: 209 - 219

Zhang et. al (2010), “Market Efficiency Test in the VIX Futures Market”, CAMA Working paper No. 8/2010, The Australian National University, pp.12