New Delhi: NSE chairman Ashishkumar Chauhan warned retail investors about futures and options derivatives trading and suggested that they could take the equity mutual funds route instead to take part in stock markets. He said that F&O derivatives trading requires deeper knowledge of risk management.
Chauhan’s advice followed a warning from finance minister Nirmala Sitharaman and Chief Economic Advisor V Anantha Nageswaran who said that retail investors’ participation in the F&O segment was fraught with risk. SEBi chair Madhabi Puri Buch has also advised caution in the matter.
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What is the size of F&O trading in India
F&O trading in India has grown to Rs 8,740 lakh crore as of March 2024, from Rs 217 lakh crore in March 2019. The F&O segment registered a daily turnover of Rs 330 lakh crore compared to Rs 1 lakh crore in the equity segment. Nearly 89 per cent of equity F&O traders lost money with the average ticket size being Rs 1.1 lakh in FY22, according to data shared by markets regulator SEBI. Participation in the F&O segment has surged over 6X to 45.24 lakh in FY21, compared to 7.1 lakh in FY19, according to official data.
While expressing concerns about the burgeoning F&O segment in India Sitharaman said that its unchecked explosion” can “create future challenges” for the markets as well as for investor sentiments. Household finances were also vulnerable to retail futures and options trading, she added.
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What is F&O trading
F&O trading involves contracts based on future prices of assets such as stocks or commodities. Futures trade entails an obligation to sell assets or assets at a future date on a pre-determined price. Options trading involves the right to sell or purchase an asset at a particular price in a specified time period. This segment entails trading based on risk management and price speculation, It also involves gains made based on arbitration.
NSE Chairman Ashishkumar Chauhan warned investors against futures and options derivatives trading without having the required knowledge of risk management. Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
