Speculation in the stock markets has continued to reach a new high, despite the market regulator – the Securities and Exchange Board of India’s (Sebi) – guidelines to curb them in the derivatives market.
In October, the activity in the futures and options (F&O) market in notional terms hit 476 times – the highest monthly average in two years while the turnover in the cash segment fell 4% month-on-month. The last time this happened was in October 2023 when it stood at 487.3 times. The average monthly position reflects the total value of all F&O positions held by investors.
According to data from both the exchanges, the turnover from the cash segment in the month of October was Rs 22.34 lakh crore and the notional F&O turnover was Rs 10,632 lakh crore. While the latter hit a one-year high this October, the cash market turnover is 32% lower from the high of Rs 32.96 lakh crore hit in July 2024.
Nirav Harish Chheda, assistant vice president of technical and derivatives at Nirmal Bang said that one factor driving higher derivatives volume is that the run-up seen in F&O stocks in the past couple of months has been good. “While some other markets have gone up from last year, the Nifty has consolidated,” he said and added that there is more bullishness seen which is why people are betting on these stocks.
Meanwhile, in premium terms also, the average daily turnover hit a five-month high in October. This was 2.2 times volumes of the cash segment.
Chheda added that in the last two years, people have made at least 2x returns on their holdings in the mid and small cap segment after they shifted their portfolios away from large caps to broader markets in 2020-21. He noted that most of the portfolios have a higher percentage of small and mid-caps and since January last year they have come down. “Investors cannot churn portfolio and book profits when the portfolio is in the red,” he said.
The notional F&O turnover had fallen nearly 50% between October 2024- February 2025 after the Sebi’s revised F&O framework effective November 20, 2024 was implemented in phases till February.
These included a slew of measures including, upfront collection of option premium from options buyer, removal of calendar spread treatment on the expiry day, intra-day monitoring of position limits, contract size for index derivatives, rationalisation of weekly index derivatives products and increase in tail risk coverage on the day of options expiry.
Sebi’s July analysed the impact of these measures from December 2024 to May 2025 and found that the index options turnover, year on year, was down by 9% (in premium terms) and 29% (in notional terms).
However, compared to 2 years ago, index options volume was up by 14% (in premium terms) and 42% (in notional terms). The turnover of individuals in premium terms in the equity derivatives segment was down by 11% year on year and up by 36% over a similar period two years ago and the number of unique individual investors trading in the derivatives segment was down by 20% compared to previous year and up by 24% from 2 years ago.
In May, Sebi introduced measures to strengthen risk metrics in derivatives with better monitoring and disclosure of derivatives risks, reducing instances of spurious F&O ban periods in single stocks, and better oversight over the possibility of concentration or manipulation risk in index options.
It noted that analysis of profit and loss of individual traders in equity derivatives segment suggests that at an aggregate level, nearly 91% of individual traders incurred net loss in FY 2025 and a similar trend was observed in FY2024