Retail Trading in derivatives hit record high

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The enthusiasm for future and options (F&O) trading amongst retail investors is touching new highs in FY24. The volume of futures and options traded in the first half of FY24 has almost surpassed the entire trading volume witnessed in FY23. Around 41.42 billion contracts, with a turnover of Rs 35,999 trillion have already been traded on NSE until this month, which is close to 41.77 billion contracts worth Rs 38,223 trillion that were traded in all of FY23. 

According to media reports, Index volumes have also surged exponentially, touching 40.71 billion in October, a slight rise from 40.53 billion, which was the aggregate index volume last year. The excitement and market participation of retail investors continues to rise, despite a cautionary SEBI report which noted that between FY19 and FY22, 9 out of 10 traders in the equity F&O segment incurred losses averaging Rs 1.1 lakh. Only 11% traders manage to make profits in the market. As of August 2023, retail traders in NSE were about 10.7 million, an 18-month high. 

Thanks to the rapid proliferation of online brokers like Groww, Zerodha and others, small traders have found an easy, quick and less costly way to enter the market. The fin-fluencers ecosystem on social media also adds to the narrative that derivatives trading is a quickfix to make good money within a short span. 

NSE, which has a 98.5% market share and a virtual stronghold on India’s derivatives market, has also proposed extending trading timings, another move that is bound to propel more investors. However, the proposal is currently under SEBIs consideration. The market watchdog also instructed brokers to run warning flashes informing retail traders about the potential losses of trading without expertise and knowledge.