India’s growing cult of derivatives trading, in charts
- The equity derivatives segment has seen an influx of investors, especially in the retail segment, in recent years. While it has gained immense prominence, there are some hard truths that are difficult to ignore.
India’s derivatives market has seen exponential growth in the last few years. This segment tends to lure investors as one can take a larger exposure with a lower investment—you put just a fraction of the notional value to trade in the futures and options (F&O) segments, which could significantly push profit margins (but also losses). While these products are seen as a pathway to make a quick buck, they also come with their own share of risks, leaving the market regulator worried. At a recent quarterly board meeting, Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch expressed concern about retail investors participating in equity derivatives trading, saying it was the regulator's responsibility to caution investors, adding that Sebi was not worried about systemic risks.