MUMBAI : Combined cash market turnover on the stock exchanges reached a record this fiscal, but is overshadowed by turnover growth in the derivatives segment, which doubled to a record high from the previous fiscal, underscoring the retail investment frenzy for options.
The average daily turnover (ADT) on the currency segments of the National Stock Exchange (NSE) and BSE jumped 26% to an all-time high of ₹72,674 crore so far this fiscal (FY24), from the one in the last. In contrast, the ADT on derivatives more than doubled, or rose by a whopping 114%, to ₹331.19 trillion until 17 November.
The options frenzy was described by Securities and Exchange Board of India (Sebi) chairman Madhabi Puri Buch as something that “confused” and “surprised” her at a function on the BSE on Monday, as individual investors lose nine out of 10 times on such trades every day
A five-year picture shows that while cash segment ADT doubled during FY19-24, the segment’s derivatives turnover soared 34 times, thanks to the advent of daily index options trading.
The increase in cash and derivatives is attributable to the increase in the retail investment count on both these segments apart from 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 during the same period.
NSE has over the years launched weekly Midcap Nifty index options expiring on Monday, Finnifty index options on Tuesday, Bank Nifty on Wednesday and Nifty on Thursday. BSE this year introduced weekly Sensex options expiring on Friday and Bankex options on Monday.
“There is a frenzy over options among retail investors and I believe we could see incremental measures from Sebi to moderate the same sooner or later,” said Raamdeo Agrawal, chairman of Motilal Oswal Financial Services. “This could be in the form of increased margin. requirements for business or some other initiatives.”
Agrawal believes that the setback in favor of derivatives will continue until Sebi puts incremental measures on top of the cautionary disclaimers on contract notes.
The notices state, among other things, that nine out of 10 individual traders in the equity F&O segment made net losses and on average loss makers recorded a net trading loss of close to ₹50,000.
Agrawal’s failed quote shows that cash segment volumes represent only 0.21% of total market volumes in the current fiscal, down from 3.5% in FY19.
The Sebi chairman said that if retail investors chose to take a longer-term view of the market as opposed to short-term trading, they would rarely go wrong. “There is a very good chance that you will create wealth for yourself and your family over a sustained period of time that will outpace the inflation rate in the economy,” she said.
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Updated: 22 Nov 2023, 22:30 IST
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