Trading exercise in shares and equity derivatives slumped in November, weighed down by souring stock market sentiment and the brand new measures offered by the Securities and Alternate Board of India (Sebi) to curb coarse hypothesis in futures and alternatives in express in confidence to present protection to patrons.
Within derivatives, turnover in alternatives — the most well-favored among retail merchants — declined practically 16% in November from the old month, marking the steepest month-to-month decline in over four and a half years. Alternate choices turnover dropped to ₹333.4 lakh crore, the lowest since May possibly perchance 2024.
Futures turnover on the NSE fell 8.3% to ₹1.71 lakh crore, the lowest since December 2023, from ₹1.87 lakh crore in October.
The blended average every day buying and selling volume (ADTV) within the equity cash section of the BSE and NSE declined 6.23% in November to ₹1.07 lakh crore, the lowest since March 2024.
ET BureauInvestors Remain Cautious
The curbs imposed by the capital market regulator at some level of November incorporated limiting weekly derivatives contracts for every change to 1 and increasing the minimal contract size in index derivatives to Rs 15 lakh from Rs 5 lakh, among other steps.
“Steep market volatility and the implementation of Sebi’s new framework for regulating the F&O section fetch impacted overall volumes,” mentioned Dhiraj Relli, MD and CEO of HDFC Securities. “With the brand new norms in situation, volumes are anticipated to remain subdued for some time.”
Over the final four years, equity derivatives — particularly alternatives — fetch viewed explosive negate, fuelled by a bull market and the introduction of weekly contracts. This attracted an military of retail merchants hoping to originate some posthaste earnings. The fast upward thrust in speculative buying and selling, on the opposite hand, raised considerations for every the federal government and Sebi, prompting stricter regulations.
Ashish Chauhan, MD and CEO of NSE, mentioned these days that Sebi’s most up-to-date changes within the index derivatives framework may additionally fetch a “very significant impact” on change volumes.
The most up-to-date uncertainty within the stock market additionally contributed to the autumn in exercise in F&O.
“The market trended downward in November, which has brought on patrons and merchants to take care of cautious. They’re anticipating clearer course sooner than the US elections,” mentioned Gourav Munjal, chief monetary officer of brokerage 5paisa Since September 27, when the ongoing feeble spell began, the Nifty has slipped 7.3%. The Nifty Midcap 100 and Nifty Smallcap 100 fetch fallen 5.6% and 2.1%, respectively.
“The decline in volumes may additionally also be attributed to the keen market downturn in October and November,” mentioned Faisal Mohammed, vice chairman, buying and selling operations, Zerodha. “In overall, all over a market correction, we survey an initial spike in volume, followed by reduced exercise till the market recovers,” he mentioned.
INCREASE IN LOT SIZE
The decline in derivatives volumes may additionally deepen, particularly thanks to the lengthen within the minimal contract size for index derivatives. On November 20, every the NSE and BSE offered increases in lot sizes.
The NSE has elevated Nifty’s lot size — the minimal preference of shares to aquire a contract — from 25 to 75. Within the case of the Bank Nifty, it has elevated from 15 shares to 30.
The BSE elevated Sensex contracts size from 10 to twenty, and for the Bankex from 15 to 30. In weekly contracts, the NSE retained weekly contracts for the Nifty but discontinued them for the Nifty Bank from November 20 and Nifty Financial Products and services from November 19. The BSE discontinued weekly contracts for the Sensex 50 and the Bankex from November 14 and 18, respectively, and retained finest Sensex contacts.
Sebi’s moves advance within the wake of its gape that confirmed 11.3 million retail F&O merchants incurred a blended get lack of Rs 1.81 lakh crore over FY22-24.
“The elephantine impact of Sebi’s new F&O norms is anticipated to turn out to be evident in December,” mentioned Munjal.
