The Finance Minister, Nirmala Sitharaman, issued a warning on Tuesday regarding the risks that a sudden increase in retail trading in futures and options (F&O) could pose to household savings.
At an event at the BSE, Sitharaman mentioned, "Any unchecked explosion in retail trading in F&O can create future challenges not just for the markets (but) for investor sentiment and also for household finances."
SEBI's study from last year indicated that the majority of retail investors, specifically 9 out of 10, experienced losses when participating in the F&O market.
She has stated that the government is closely monitoring the situation and is working on various measures to control inflation. This includes keeping a check on food prices, increasing the supply of essential commodities, and implementing policies to stabilize prices in the market.
Additionally, the government is also focusing on improving productivity and efficiency in various sectors to ensure a steady supply of goods and services at affordable prices.
FM Sitharaman has assured that the government is committed to addressing inflationary pressures and will take necessary actions to ensure price stability and economic growth.
Sitharaman's remarks regarding F&O arrive amidst a surge in retail participation. Over the past three years, the average daily turnover in the F&O segment has experienced a significant increase, soaring from Rs 71 trillion in FY22 to Rs 359 trillion in FY24. Furthermore, in the first two months of FY25, the average daily turnover has further escalated to Rs 450 trillion (as of May 13).
Simultaneously, the net turnover of retail investors in the derivative market has also witnessed growth, rising from Rs. 48,000 crore to Rs. 92,000 crore.
Additionally, she highlighted the favorable response to the T+2 settlement cycle from numerous international markets, underscoring India's shift towards a quicker T+0 settlement cycle due to advancements in technology.
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