Derivatives volumes remained stagnant in January despite volatility

The spike in volatility in January did not significantly boost derivatives turnover. The average daily turnover (ADTV) for the futures and options (F&O) segment reached Rs 298 trillion, marking a 6.44 per cent increase month-on-month. However, this is still down 44 per cent from its peak of Rs 537 trillion in September, when benchmark indices hit record highs. In December, F&O volumes had already dropped 37 per cent to Rs 280 trillion.

 

Experts suggest that the recent decline in derivatives volumes over the past two months indicates that the stricter trading norms introduced by the Securities and Exchange Board of India (Sebi) may have had a lasting impact. The cash market ADTV remained largely unchanged at Rs 1.1 trillion for both the NSE and BSE combined. 

  December marked the first calendar month since the introduction of new rules, including one weekly expiry per exchange and higher extreme loss margins (ELM). Additional measures, such as the upfront collection of premiums and the removal of calendar spread benefits on expiry day, will take effect next week. Intra-day monitoring of positions will commence from April 1. Experts believe these changes could further suppress volumes.

 

In January, volatility likely prevented an even steeper decline in volumes. The Sensex and Nifty initially fell by over 3 per cent but recovered most of their losses, ending the month with losses of less than 1 per cent. In contrast, the Nifty Smallcap 100 Index concluded January with a 9.9 per cent decline, its most significant setback since May 2022. The Nifty Midcap 100 fell 6.1 per cent, marking its steepest monthly drop since October 2024.