Commodities are consumable products traded all over the world in different kinds of markets. It plays a significant role in economic development of any country. Commodity derivatives markets are such types of markets where primary products are traded on regulated commodities exchanges on standardized contracts. India has a long history of trading in commodity derivatives but emerged very strongly in recent decades. The Forward Market Commission (FMC) is an important regulatory body of commodity futures market in India which oversees the functioning of the market. Currently FMC has permitted 113 commodity futures contracts in Indian market. In terms of total number of contracts traded, Multi Commodity Exchange of India (MCX) is the world’s largest commodity futures exchange in gold and silver, second largest in natural gas and third in crude oil. With price volatility and uncertainty prevailing in the spot market, derivatives market provides an opportunity for risk mitigation through hedging. So considering these points, the present study has been undertaken to provide an overview of the growth of commodity derivatives market in India. The study analyses the challenges and issues prevailing in the Indian market, its benefits and present trends and related future prospect.