The retail investors' enthusiasm for weekly options trading continues unabated despite measures by the Securities and Exchange Board of India (Sebi) more than a year ago to curb speculative excesses amid mounting losses for individuals.
Analysts said that the growth in options turnover is likely to outpace that of the cash market, amid heightened volatility across financial markets caused by the ongoing US-Iran conflict.
In an interaction with PTI last week, Sebi chairman Tuhin Kanta Pandey said that while the regulator has no concerns about the futures segment of the derivatives market, it remains watchful of speculative trading in short-dated options. Index options turnover has grown even as cash market activity has fallen despite the regulatory curbs.
Combined average daily premium turnover (ADT) of index options such as Nifty and Sensex rose 5% even as combined cash market ADT dipped by almost 8% in the current fiscal through 9 March (FY26), from the same period a year ago.
In absolute terms, index options' ADT rose to ₹67,143 crore from ₹63,828 crore in the period under review, while cash market ADT slipped to ₹1.12 trillion in the current fiscal (1 Apr 2025 -9 Mar 2026) from ₹1.22 trillion in FY25 (1 April 2024-7 Mar 2025).
The rise in combined options turnover comes despite regulatory curbs such as limiting index options expiry to one per exchange from multiple earlier, and tripling contract sizes to ₹15-20 lakh from ₹5 -10 lakh, among other measures, since November 2024.
The National Stock Exchange (NSE) offers weekly Nifty options every Tuesday while the BSE offers Sensex options every Thursday.
Volume shift
Market analysts attributed the growth to volumes shifting from discontinued liquid weekly contracts on the NSE such as Bank Nifty, Midcap Nifty and Finnifty to Sensex options.
Prior to November 2024, the NSE ran four liquid weeklies including Nifty while BSE's only liquid contract was the Sensex options contract. Sebi rules resulted in discontinuation of all NSE's liquid sectoral indices, excluding its benchmark Nifty50.
From four liquid indices, NSE was down to only one. BSE's Sensex, which was relaunched in May 2023, benefited from the shift of volumes from these discontinued weekly contracts, analysts said.
"The increase in combined index options turnover in the current fiscal through 9 March is because of a shift in share from discontinued weekly options contracts, like Bank Nifty, Midcap Nifty and Finnifty, on NSE to the Sensex options," said Amit Chandra, vice-president (research) at HDFC Securities.
The regulatory curbs came after Sebi in a September 2024 study found that retail investors suffered a combined net loss of ₹1.81 trillion trading largely options during FY22-24.
Despite the curbs, however, market experts expect the trend to continue.
"Most retail investors lack the expertise to trade options, and with heightened volatility induced first by global tariff uncertainty and now the war in West Asia, it's easier for such novices to take a view over 5 days rather than for a longer horizon," said Rajesh Palviya, senior vice-president (derivatives and technical research), Axis Securities.
"This will ensure that participation in weekly options keeps growing despite the regulatory measures to curb excesses," he said, adding that cash turnover would likely suffer amid persisting uncertainty stemming from the Iran war.
Volatility drives Nifty volumes
To be sure, the volatility is reflected by a jump in incremental premium turnover on both NSE and BSE in January-February this year due to global tariff turmoil and geopolitical tensions in West Asia, which began spiking crude prices.
NSE posted an ADT of ₹59,442 crore during January-February, against ADT of ₹47,546.91 crore in the current fiscal through 27 February. BSE reported an ADT of ₹27,011 crore in the two months against ₹18,396 crore in the current fiscal to February end.
Of the combined incremental turnover of ₹20,510 crore, NSE accounted for almost three-fifths, while the BSE accounted for the rest.
"In the past two months of Jan-Feb, when markets were rocked by tariff uncertainty and West Asia tensions, NSE contributed to almost three-fifths of incremental average daily premium turnover, which shows its Nifty options garnered more trading interest due to heightened volatility than its peer BSE's Sensex, which accounted for 42% share," added HDFC Securities' Chandra.