Small investors should avoid getting into derivatives: NSE MD & CEO

NSE's MD & CEO suggests proposed rules will prevent potential malpractices by ensuring that only sufficiently liquid companies are included in the F&O segment

Amid concerns of excessive speculative activity in the futures and option (F&O) segment, Ashishkumar Chauhan, managing director (MD) and chief executive officer (CEO), NSE, tells Harsh Kumar in New Delhi that the concern will be to prevent potential malpractices by ensuring only sufficiently liquid companies are included. Edited excerpts.

India has surpassed $5 trillion in market capitalisation. What are the reasons behind the euphoria in the equity markets?

India defies economic theories suggesting that countries with lower per capita income cannot have robust market economies. India's success can be attributed to the trust investors have in its judiciary, Parliament, regulator, and stock exchange, despite its relatively lower per capita income.

What are your suggestions for the upcoming Budget?

From the market's perspective, consistency and growth-oriented policies are always welcomed. A growing economy benefits companies, investors, and the market as a whole. With an increasing number of investors in India, there is a growing demand for policies that promote growth.

What are your views on Sebi's proposed criteria on the inclusion of stocks in the F&O segment?

In the F&O segment, there have been a few changes in the stock inclusion over the years. Sebi has been contemplating this for some time now by formulating several committees. The consultative paper issued by the regulator is a result of this process, aiming to determine which companies should be included and which should be excluded from the segment. The concern is to prevent potential malpractices by ensuring that only sufficiently liquid companies are included.

What are your views on concerns on excessive speculative trading in the options segment?

Concerns regarding the options trading segment persist. In a country like India, caution is necessary. Small investors should ideally refrain from participating in derivatives altogether. Instead, they should consider options such as mutual funds or portfolio management, as trading may not be suitable for them.

BSE is gaining market share in the F&O segment. Is this a concern for NSE?

No, exchanges like BSE may be perceived as competition, but the majority of our work involves coordination and cooperation as frontline regulators. Therefore, we are not concerned about this development.

What is your stance on the issue of the computation of Sebi’s turnover fees? What is the right approach?

Ultimately, the taxes must be paid by everyone. Turnover fees are the type of levy that exchanges have been paying for a long time.