Subscribe to enjoy similar stories. The advent of single-expiry index options last week introduced a fresh layer of volatility to the Nifty, which witnessed dramatic price swings a day ahead of the Reserve Bank of India’s bi-annual policy announcement on 6 December.
The unusual gyrations likely caught the attention of regulators, including the Securities and Exchange Board of India (Sebi) and stock exchanges, which act as the first line of oversight, according to derivatives analysts. Traders, previously focused on the now-discontinued weekly Bank Nifty options, appeared to double down on Nifty contracts, driving the volatility, analysts noted.
Read this | Index options trading swells to record high in Oct amid heightened uncertainty "With multiple index option expiries behind us , it looks like traders specialised in trading weekly Bank Nifty option contracts shifted to the Nifty on Thursday , before the RBI meeting, causing option prices to swing wildly," said Rajesh Palviya, senior vice president and head of technicals & derivatives at Axis Securities. Palviya believes that regulators will closely monitor whether this was a one-off event or indicative of a pattern.
The shift in trader activity was evident in the trading volumes. Data from the National Stock Exchange (NSE) shows that the number of index options contracts traded last Thursday soared to 82.34 crore, significantly higher than the 53.8 crore contracts recorded on 4 June, the day after Lok Sabha election results showed the Bharatiya Janata Party falling short of a standalone majority.
Notably, while the market had tanked 1,379 points to 21,884.5 on 4 June, it subsequently rallied 20% to a fresh high of 26,277.35 by 27 September. On 5 December, a day before
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