India has rapidly risen from being a minor participant in the equity derivatives market to becoming the world’s largest in just five years. This surge in growth began largely after the introduction of weekly-expiring contracts in 2019, which replaced the traditional monthly expirations.
According to FIA data, over 36.8 billion equity index options were traded on India's two leading derivatives exchanges, the National Stock Exchange of India (NSE) and BSE India, during the second quarter of 2024. This figure was more than double the volume traded in Q2 2023 and accounted for more than two-thirds of all futures and options traded globally across all exchanges.
Bloomberg reported that notional turnover in futures and options trading reached $6 trillion in February before seeing a recent slowdown. This represents a six-fold increase since early 2022. Most of this turnover was generated from trading on the NSE, which has seen an exceptionally rapid expansion in equity index options trading.
Key Statistics Overview
- Retail investors now account for 41% of India’s overall derivative trading volumes, compared with just 2% in 2018.
- India had 154 million trading accounts as of April 2024, a more than four times jump from the 36 million trading accounts in April 2019.
- India's monthly notional value of derivatives traded reached a worldwide high of 9,504 trillion rupees in May, data from Reuters shows.
What is Behind the Surge?
A significant portion of the demand for equity futures and options in India comes from retail investors. Their participation in derivatives trading has surged from just 2% in 2018 to 41%, as reported by the Securities and Exchange Board of India (SEBI), the country's financial regulator.
The COVID-19 pandemic played a key role in boosting interest in these financial products, as millions of people were working from home. This surge in trading was further driven by a strong Indian stock market, the rise of mobile trading apps, the simplicity of opening trading accounts, and the widespread availability of trading tutorials on social media.
Equity futures and options allow retail investors to speculate on stock price movements with relatively small capital outlay. They only need to pay for the contracts, which can cost as little as 10 rupees, enabling them to take leveraged positions up to five times their initial investment.
How do Regulators Plan to Curb Retail Trading?
In July 2024, SEBI proposed several measures to reduce retail participation in the index derivatives market. These include increasing the minimum contract size for index derivatives, restricting weekly options to a single benchmark per exchange, requiring upfront collection of options premiums, and reducing the number of available strike prices.
If implemented, these proposals could lead to lower trading volumes on both NSE and BSE, potentially impacting their profitability. Additionally, these changes would likely have a significant effect on brokers operating in the market.
What is the Next Big Thing?
Bloomberg reported, retail investors are increasingly favoring passive investments, with index funds emerging as a major trend in India’s $700 billion mutual fund industry. Assets in index funds have skyrocketed more than 25-fold over the past four years, surpassing 2.1 trillion rupees ($25 billion) by March. This growth is being driven by both equity and debt index products, which are expanding at nearly the same rate. As a result, nearly every mutual fund provider now offers an index fund to meet this rising demand.
With the growing popularity of passive investment strategies, many investors are also looking at trading instruments like the SGX Nifty Futures. This allows them to hedge or speculate on the Indian market's movements in a more accessible and cost-effective way, especially for those seeking exposure to the Nifty 50 index outside of Indian market hours.
Trading the SGX GIFT Nifty 50 Index Futures
The SGX Nifty 50 lndex Futures Contracts has the following specifications:
The contract size for SGX Nifty 50 Index Futures Contract is USD 2 times the Nifty 50 Index and has a tick size of 0.5 index points (USD 1.00 per contract).
The last trading day of the contract month is the last Thursday of the month. (If this happens to fall on an Indian holiday, the last trading day shall be the preceding business day).
Contract months are for all months.
Trading Hours are from Monday to Friday, at these trading hours:
9:00 am – 6:10 am / 6:40 pm – 4:45 a.m (Singapore SGT)
Nifty 50 Index Future Contract Symbol: GIN
Start Trading with Orient Futures Singapore
Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG). Starting August 2023, corporate clients can also gain access to the B3 Exchange through us, opening additional trading avenues.
Expect streamlined processes and an easy-to-use interface designed for minimal latency, accompanied by our team's round-the-clock availability on trading days to provide assistance for all your trading needs.
