RBI, Sebi monitoring high volumes in F&O market

Mumbai: The Reserve Bank of India and the markets regulator are monitoring the high volume of trading in the futures and options segment, RBI governor Shaktikanta Das said, but ruled out any signs of overheating in the financial market.

The Securities and Exchange Board of India is is fully seized of the matter and will take action if necessary, Das said, adding that the two regulators discussed the issue under the aegis of the Financial Stability and Development Council (FSDC).

“Options and futures volumes are larger than nominal GDP of the country. We have discussed this matter with Sebi and they will deal with it,” Das said at an event organised by ET Now in Mumbai.

That said, “all the parameters and indicators of the Indian economy and financial sector look stable at the moment”, Das added.

India's nominal GDP is ₹78,8281.48 billion, as per Bloomberg data.

Unchecked explosion

Trading in equity derivatives has soared in recent years fueled mainly by retail investors, sparking concerns from market participants and government officials. 

Derivatives' turnover grew 23-fold over the last 5 years to reach ₹79,927 trillion at the end of March, NSE data show.

Sebi is now considering a series of tweaks to its derivatives trading rules, including higher margins for selling options contracts and more detailed disclosures.

Also read | Why Sebi’s reviewing the eligibility criteria for derivatives trading

Last month, finance minister Nirmala Sitharaman alluded to an unchecked explosion in retail trading of futures and options, saying it could create challenges not just for the markets but for investor sentiment and household finances as well.

Stubborn food prices

Das on Tuesday said the last mile of the disinflationary process was proving to be sticky owing to 'stubborn' food prices. But he added that it was "too premature" to change the monetary policy stance and that the apex bank had to shun an "adventurism" approach on the rates front.

Also read | The MPC has done well to keep policy interest rates unchanged

"The disinflationary process is facing a lot of resistance from food inflation which is stubborn and high, primarily due to supply-side factors affected by weather conditions," he said.

RBI's monetary policy committee kept its rates and stance unchanged in its June policy. The MPC also raised its forecast on India's GDP growth in financial year 2024-25 to 7.2% from 7% following the economy's blistering 8.2% expansion in FY24. 

The six-member panel kept its inflation forecast for FY25 at 4.5%.