Ragina Mutual Fund, wants to hedge its portfolio of shares of ₹15 crore using the NSE-NIFTY Index futures. The contract size is 100 NIFTY. The Index is currently quoted at 9,120. The beta value of the portfolio is 0.80,

Calculation of Number of Future Contracts to be Traded Value of Portfolio (Vp) = ₹15 crore = ₹15,00,00,000 Beta of Portfolio (βp) = 0.80 Beta of Market (βm) = 1.00 NIFTY Index Quoted Value = 9,120 Contract Size = 100 NIFTY Value of one NIFTY Future Contract (VF) = NIFTY Index Quoted Value * Contract Size VF = 9,120 * 100 = ₹9,12,000 Hedge Ratio = βp / βm = 0.80 / 1.00 = 0.80 Number of Future Contracts = (Value of Portfolio * Hedge Ratio) / Value of one NIFTY Future Contract Number of Future Contracts = (₹15,00,00,000 * 0.80) / ₹9,12,000 Number of Future Contracts = ₹12,00,00,000 / ₹9,12,000 Number of Future Contracts = 131.5789 Since contracts must be in whole numbers, Ragina Mutual Fund needs to trade approximately 132 future contracts to hedge its portfolio.