Sensex, Nifty To Become Options Trading 'Flagship' After New SEBI Rules: Motilal Oswal’s Ankit Mandholia

The new F&O (Futures and Options) rules imposed by the Securities and Exchange Board of India (SEBI) have positioned the Nifty and Sensex as the "flagship products" in options trading, marking a shift that is expected to become the "new normal”, according to Ankit Mandholia, the head of Equity and Derivatives, Wealth Management, at Motilal Oswal.

SEBI, on Nov. 20, imposed a set of new rules in the equity derivatives framework. This includes raising the contract size for index derivatives, streamlining weekly index derivative products, and enhancing tail risk coverage on options expiry days. The market regulator imposed these stricter rules to curb losses faced by retail investors in F&O.

Talking to NDTV Profit, Mandholia mentioned that with the suspension of weekly contracts for Bank Nifty, Midcap Select, Sensex 50, and other such indices, the Nifty 50 and Sensex have gained prominence.

“What I mean by new normal is Nifty and Sensex being the flagship products is definitely the new normal. We used to see a lot of volumes in Bank Nifty that have reduced. So the new normal definitely has more of Nifty and Sensex in the forefront,” he said.

He noted that these flagship products will be gaining more popularity in the coming days.

“Weekly options in these contracts are seeing an increase,” the Motilal Oswal executive noted.

However, Ankit Mandholia also underlined that the market is currently in a transition period.

“A lot of trading strategies and a lot of investment strategies are getting reattuned to the new emerging realities,” he said.

With the new rules in place, Mandholia noted that there was some pulldown in options volumes, but it was on “the expected lines.”.

“We have seen, especially the products where the weekly expiries have been stopped, the volumes have reduced quite a bit,” he said.

The top executive further acknowledged that the markets had witnessed a lot of “harping of volumes” in important instruments like Bank Nifty, which are popular with traders.

“But on the other hand, we have also seen some uptick in indices like Nifty and even a little bit on the Sensex side when I'm talking about index options,” Mandholia said.

The volumes that have come down for indices like Bank Nifty and Midcap Nifty are being “compensated by the growth in Nifty and Sensex” to some degree, he noted.

“Currently, we have seen two weeks go by, and we still are left with two more weeks in this month. So as we approach the final week of expiry, we will get more clarity towards the exact impact of these measures,” the Motilal Oswal executive said.