India's largest stock exchange was severely hit by the central bank's tighter funding rules implemented last month, with spending on derivatives slumping to a 17-month low.
The average daily notional turnover for futures and options listed on the National Stock Exchange of India Ltd. declined 23% to 214 trillion rupees ($2.2 trillion) in July from June, the lowest since February 2025. Meanwhile, at listed peer BSE Ltd., it jumped 8.4% to 232 trillion rupees.
Another closely watched gauge of options activity, average daily premium turnover, slid 18% to 502 billion rupees last month for NSE and 3.1% to 254 billion rupees for BSE.
The drop comes after the Reserve Bank of India required bank guarantees to be fully backed by collateral, with at least half in cash. While the move reduces risk for lenders, it curbs leverage among local trading firms, raising funding costs and limiting their capacity to execute deals. Meanwhile, lower market swings — the India NSE Volatility Index fell for a fourth straight month as the NSE Nifty 50 Index rose — reduced the need to hedge.
“The decline in index futures and options volumes is clearly a result of the RBI circular and recent geopolitical uncertainty,” said Kranthi Bathini, equity strategist at WealthMills Securities. “We need to wait at least another quarter to assess its full impact.”
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It's a critical time for NSE, which will soon sell shares in an initial public offering that is expected to be one of the nation's biggest. Despite the drop in derivatives spending, it remains the world's largest exchange for the products and last week reported a jump in quarterly profit.
The decline extends a broader slowdown in India's once-booming derivatives market following a series of regulatory measures aimed at curbing excessive speculative activity. Over the past two years, the Securities and Exchange Board of India has raised contract sizes, tightened position limits and introduced other safeguards to temper retail participation in options.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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