We use Black-76 model, which is a variant of the well known Black Scholes model. It is better suited for the Indian markets and is widely used by professional quants. 

In this model, we

  • Assume no interest rate 
  • Assume no dividend etc
  • Use Future Prices instead of Stock Prices for stock options 
  • Use Index Prices for index options

It is assumed that interest rate and dividends are accounted for in Future Prices.