- SEBI is exploring margin reduction for longer-term derivative contracts to support capital formation
- Recent SEBI actions focused on curbing excessive speculation in short-term futures and options markets
- SEBI Chairman highlighted ongoing high losses in derivatives and stressed investor risk awareness
Securities and Exchange Board of India (SEBI) is examining whether margin requirements can be rationalised or reduced for longer-term derivative contracts, SEBI Chairman Tuhin Kanta Pandey said on Wednesday. Speaking at the SBI Banking and Economics Conclave, Pandey said the regulator is looking at the possibility of lowering margins for longer-tenure derivatives. The move comes as SEBI seeks to balance concerns around excessive speculation in short-term derivatives with the need to deepen India's capital markets and support longer-term capital formation.
SEBI has tightened several aspects of the futures and options (F&O) market in recent years, particularly around short-dated options and expiry-day trading. Retail investor losses in derivatives have remained a key regulatory concern, with the regulator repeatedly highlighting the risks involved in F&O trading.
Pandey also said F&O losses remain high and underlined the importance of investor suitability and risk awareness.
A possible reduction in margins for longer-term contracts could indicate a greater focus on encouraging participation in longer-tenure derivative instruments while continuing to address speculative activity concentrated in very short-dated contracts. However, Pandey's comments reflect a consideration by the regulator and do not represent a policy change at this stage.
The SEBI chairman also spoke about the broader challenges facing India's financial sector. He said India's next phase of economic growth is unfolding against a difficult global backdrop, marked by geopolitical tensions, changing trade relationships and capital flows that remain sensitive to developments overseas.
Technology, particularly artificial intelligence, is also rapidly transforming businesses and financial markets, he said.
ALSO READ: US Stock Market Today: Nasdaq, S&P 500 Slip As Oil Prices Gain Amid US-Iran Uncertainties
Despite these challenges, Pandey said India's economic performance remains encouraging, with strong growth, inflation within the Reserve Bank of India's target framework and comfortable external buffers.
He said the more important question for the financial sector is what will be required to sustain India's growth over the next decade and beyond.
"A growing economy needs a growing pool of capital. More importantly, it needs different kinds of capital, available for different purposes and different periods," Pandey said.
Pandey said banks and capital markets should not be viewed as competing channels of finance, arguing that India needs both to remain strong because businesses have different funding requirements. While some businesses require debt financing, others need equity. Infrastructure projects require patient capital, while young businesses may need risk capital before they become eligible for conventional borrowing.
India's capital markets have expanded significantly over the past decade. According to the figures cited by Pandey, market capitalisation has grown at around 17% annually since FY16 and currently stands at about Rs 481 trillion. Indian companies have raised an average of around Rs 10 trillion every year through equity and debt issuances in the securities market over the past decade.
Retail and mutual fund participation has also expanded sharply. Mutual fund assets have risen from Rs 12.3 lakh crore in FY16 to Rs 87 lakh crore as of August 2026. The number of unique investors in India's securities market has more than tripled over the same period to around 150 million.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.