India equity derivatives mkt trails US; shrinks more after Sebi curbs: NSE

India’s derivatives market continues to remain a fraction of that of the United States in premium value terms, with recent regulatory measures by the Securities and Exchange Board of India (Sebi) contributing to a further contraction in 2025.

 

Data from OCC and NSE Market Pulse show that total options turnover in the US rose 39 per cent to $9,332 billion in 2025, compared with $6,711 billion in 2024. In contrast, India’s total options turnover declined 15 per cent to $1,909 billion in 2025 from $2,247 billion a year earlier. 

Source: NSE

 

At its 2024 peak, India’s premium traded in equity options was around 35 per cent of US options premium. Following Sebi’s recent measures, including tighter position limits, higher margin requirements, curbs on weekly expiries, and stricter risk management norms for derivatives trading, India’s share has declined to roughly 20 per cent in 2025.

 

Differences in market structure also underscore the scale gap between the two derivatives markets. Contract sizes in India are materially smaller than those in the US. A single S&P 500 (SPX) options contract has a notional value more than 31 times that of a Nifty 50 options contract. Even a mini-SPX contract is over three times larger than a standard Nifty contract, NSE data showed.   

Sebi curbs, weak sentiment hit volumes

Nandish Shah, senior technical and derivative analyst at HDFC Securities, attributed the decline to a combination of regulatory tightening and weak market sentiment.

 

“This is due to a combination of two factors. First, Sebi increased the lot sizes from November 2024. The index lot size was raised from around ₹5 lakh to approximately ₹15–20 lakh. This significantly reduced participation from smaller traders and newcomers, leading to a decline in volumes. Second, overall market sentiment has deteriorated. Cash market stocks have fallen sharply, and volumes have also dried up in the F&O segment,” said shah.

 

He added that trading activity in India tends to rise during bull markets. “Over the past year, there has not been a strong bull market. Nifty has delivered only around a 10 per cent return, driven largely by a few volatile stocks,” he said.

 

According to Shah, trade tariff concerns and rupee depreciation have also weighed on Indian markets, leading to underperformance. Meanwhile, US markets have performed strongly and continued to rise, along with some Asian markets. This divergence has also contributed to the fall in Indian turnover.

Trading volumes to remain under pressure

Although markets have corrected sharply and a 3–5 per cent recovery is possible, Shah does not expect turnover to rise significantly. Even if markets were to rebound, F&O turnover may not increase proportionately due to higher lot sizes and stricter margin norms, he said.

 

Earlier this month, on February 1, Union Finance Minister Nirmala Sitharaman, in her Budget 2026 speech, announced an increase in the securities transaction tax on futures and options trades, effective April 1. The move is the second hike since 2024 and is aimed at curbing excessive speculation amid rising retail losses and shoring up tax collections, which have been dented by lower trading volumes this financial year.

 

“The higher transaction charges coming into effect from April will impact high-frequency traders and arbitrageurs, as costs have increased, especially in futures. Options are less affected, but futures volumes will likely decline. This will reduce overall participation from arbitrageurs and high-frequency traders,” said Shah.