In November, trading in stocks and their related options fell sharply because many investors felt unsure about the market. The Securities and Exchange Board of India (Sebi) introduced new rules to help protect investors from high-risk trading in futures and options. These changes aimed to reduce speculation, which is when people try to make quick profits without properly understanding the risks involved.
Here’s what happened:
– Options Trading: The turnover (total money traded) in options, which many individual traders like, dropped by almost 16% in November. This was the steepest monthly drop in over four years. The total amount traded in options fell to ₹333.4 lakh crore, the lowest number since May 2024.
– Futures Trading: Trading in futures on the National Stock Exchange (NSE) also declined by 8.3%. The total for futures trading went down to ₹1.71 lakh crore, the lowest seen since December 2023.
– Stock Market Volumes: The overall daily trading volume in cash stocks fell by 6.23% to ₹1.07 lakh crore, which is the lowest since March 2024.
These changes come after Sebi noticed many retail traders (individual investors) were losing money—around ₹1.81 lakh crore from FY22 to FY24. New rules also limited the number of futures and options contracts traders can use each week and increased the minimum size for index contracts from ₹5 lakh to ₹15 lakh.
Experts believe that the new regulations, along with a drop in the market, have made investors more cautious. For instance, since September 27, the Nifty index (a major stock index) fell by 7.3%.
With the new contract sizes going up, trading volumes may fall even more. For example, the NSE increased the Nifty lot size from 25 to 75 shares, making it more expensive to participate.
Many in the market are waiting for a clearer direction, especially with upcoming U.S. elections.
Overall, the recent downturn and new regulations are causing investors to step back, and many are likely looking for safer bets before jumping back in.
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