The domestic derivatives market has reached maturity in the past six years, established by the fact that investors now increasingly opt for trades in options (both index and individual stocks). This can be seen from the sharp rise in the settlement value of this derivative product in the last one year.
The total settlement value of exercised contracts in the options segment (both index and individual stocks) has swelled ten-fold from Rs 641 crore in October 2006 to Rs 6,698.4 crore in October 2007. Even the value of premiums settled in the options segment grew at around 300% over the same period.
Market experts attribute this to increasing investor sophistication in using options as a hedging tool. They say this clearly indicates that the futures & options (F&O) segment is becoming increasingly popular among various categories of investors.
According to data on the NSE website, the total settlement value in October 2007 in the F&O segment stood at Rs 17,734.56 crore, posting a growth of 600% from Rs 2,532.84 crore a year earlier. The total settlement in the derivatives segment of the NSE in fiscal 2006-07 was Rs 66,494.46 crore, while this year to October 2007, the figure already reached Rs 55,151.27 crore.
Viral Doshi, strategist and independent derivative analyst, says, ?The participation of retail investors is mainly for speculation as they have a tendency to make a quick buck. Participation by FIIs is to hedge their position and the huge open interest is attributed to them.?
Even in the futures segment, mark-to-market settlement in index as well as individual stocks has risen 617% from October 2006 to October 2007 with the value in October 2007 being Rs 15,924 crore. The final settlement in the futures segment (index as well as individual stocks) in October 2007 was Rs 222.61 crore, which has increased around 700% compared to Rs 27.95 crore in October 2006.