With trading volumes in F&O (futures and options) shrinking dramatically, a pressing question emerges: Where did these volumes go? Some experts speculate the volumes might have shifted to small-cap stocks in the cash market.
To protect investors and rein in speculative trading, India's markets regulator took decisive measures targeting the derivatives segment (F&O), including reducing weekly option products that dominated trading volumes. This has led to a sharp decline in the total F&O turnover since November.
The ripple effects are visible in the cash market as well. After peaking in July, the daily average turnover has been falling, particularly in large-cap and mid-cap segments.
Adding to this narrative, a YES Securities report dated 17 December highlighted a sharp decline in the five-day average NSE total F&O turnover, from ₹413 trillion in January to ₹186 trillion in December.
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