India kicks off FX futures trade, front-months lead

MUMBAI, Aug 29 (Reuters) - India kicked off its first exchange-traded rupee futures on Friday with heavy trading reported in the first minutes of business and front-month contracts seeing the highest activity.

Dealers said banks and large companies made the bulk of trading, even though the contract size is small compared with exchange-traded currency futures elsewhere.

By 10:14 a.m. (0444 GMT), more than 8,000 contracts were traded on the National Stock Exchange (NSE), the first of several platforms planned, with the heaviest trade on the September and October contracts, NSE data showed <NSI/INRFUT01>.

On the spot market, the rupee was trading at 43.74/75 per dollar INR=IN, slightly firmer than Thursday close at 43.78/79.

India is trying to develop more sophisticated financial markets and hedging tools to support its rapidly growing economy and Finance Minister Palaniappan Chidambaram said at the start of trading the government needed to push on with more instruments.

"After having launched currency futures, we need to revitalise exchange-traded interest rate derivatives markets, offer exchange-traded credit derivatives and also need to strengthen the corporate bond markets," he said.

"These three products are high on the priority list of the government and I ask the government to move forward on this."

Each contract size is $1,000, smaller than 12.5 million Japanese yen ($115,000) or 100,000 Australian dollars (US$86,000) contract sizes on the Chicago Mercantile Exchange.

The Multi Commodity Exchange of India and the Bombay Stock Exchange have also received in-principle approval to offer exchange-trade currency futures. (Reporting by Anurag Joshi and Saikat Chatterjee; Editing by Charlotte Cooper)