Cash segment volumes at record high, but pale before F&O

livemint.com:

MUMBAI : Combined cash market turnover on the stock exchanges has hit a record high this fiscal, but is overshadowed by turnover growth of the derivatives segment, which has doubled to a record high from the previous fiscal, underscoring the retail investor craze for options. The average daily turnover (ADT) on the cash segments of the National Stock Exchange (NSE) and BSE has jumped 26% to an all-time high of ₹72,674 crore so far this fiscal (FY24), from that in the last.

In contrast, the ADT on derivatives has more than doubled, or risen by a whopping 114%, to ₹331.19 trillion through 17 November. The options frenzy was described by Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch as something that “confused" and “surprised" her at a function in the BSE on Monday, given that individual investors lose nine out of 10 times on such trades daily.

A five-year picture shows that while cash segment ADT has doubled over FY19-24, derivatives segment turnover has soared 34 times, thanks to the advent of daily index options trading. The rise in cash and derivatives segments is attributable to the increase in the retail investor count on both these segments in addition to the increased popularity of weekly index options launched by both NSE and BSE.

Data from NSE, which currently enjoys 93% market share in the cash segment and 95% in the derivatives segment, shows that retail presence in the cash segment jumped from less than 3 million in FY19 to 11.3 million in the first-half of the current fiscal year, while the retail count in derivatives increased from less than half a million to 3.9 million over the same period. NSE has over the years launched weekly Midcap Nifty index options expiring on Monday,