Sebi’s crackdown seen cooling India’s options frenzy even as guard rails go up
Subscribe to enjoy similar stories. Mumbai: The exuberance in derivatives trading is finally showing signs of waning after several warnings and a phased crackdown by India’s markets regulator. Trading in equity index options moderated in September, just before the Securities and Exchange Board of India on 1 October finalised proposals to curb frenzied trading by individual or retail investors.
The regulator found that nine out of 10 individual traders lost money in the stock market’s derivatives, or futures and options (F&O), segment in 2023-24—but retail investors remained undeterred, until now. Index options registered a 3% drop in average trade size to ₹4,925 in September from ₹5,079 in August, although the average trade size in the equity cash market inched up 1.6% month-on-month to ₹30,156 in September, NSE data show. Stock options witnessed trade size declining by a marginal 0.2% sequentially to ₹14,703 in September.
Because of the decline in index options, the overall trade size of equity options declined by 1.8% to ₹5,403 in September from ₹5,502 in August. Options premium turnover, not notional turnover, has been considered for calculating the average trade size. Market constituents attributed the decline in options trade size to Sebi’s moves to curb the frenzied trading by individuals.
Sebi found that in 2023-24 alone, individual traders with annual income under ₹5 lakh made a net loss of ₹42,790 crore in trading on futures and options. “The trade size is a function of sentiment," said Dhiraj Sachdev, chief investment officer at Roha Venture, a family office fund. “The Sebi crackdown after its findings showed huge losses for retail in options trading probably hurt sentiment, leading to a decline in trade size."
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