India’s alternative market faces reality checks
Hi, I am Spraha Srivastava, Digital Executive Editor of CNBC International. Welcome to this version of Inside India.
This week, I see how the prosperity of the India’s derivatives market has brought complete concerns to the retail investors, which are usually young and are attracted by the promise of quick profit.
Mumbai, Bhard: The Bandra Kurla Complex (BKC) business in Mumbai is seen in the office building in the district.
Simple image | Light Prococol | Getty
This report is from CNBC’s “Inside India” newspaper this week. Likes what you see? You can subscribe Here.
Big story
A week ago, India’s Market Regulator sent the Global Trading Firm Jane Street to the local equity market from participating in a strong signal. These steps were with the details of the attention: about $ 70 7070 million profit freeze, accusations of index manipulations and arbitrage trading Strategi had crossed the line.
But as the noise stabilizes and the legal back-end, the true story may be elsewhere. The matter gives a window in the design of India’s options market and stress points and what happens when regulating, technology and minor enthusiasm collide.
This is another delicate behind the growth in trading volume: a new generation of retail investors floods complex financial products, often with low experience and even low protection.
India’s derivative market has increased rapidly. According to the Futures Industry Association, now there are about 60% of the world equity derivatives volume. On paper, this looks like a success. In practice, this is more complicated.
What is different from this market is not just in size. Who is the trade.
Almost 11 million persons According to SEBI, equity futures and options contracts in the last financial year. The majority were mostly the first-time, most often young, and they were removed with the promise of quick profits enhanced on social media platforms and effective accounts. Many people use mobile apps, follow the telegram channels, or imitate the strategies they do not fully understand. This type of behavior, market participants, says that, is becoming normal.
According to royators, 9.6 million personal equity derivatives traders. On the basis of their recent study, Sebi statistics have shown that more than 40% of these traders earn more than 30 years under 30 and more than three quarters.
That is, most participants are conducting high beneficiaries, dangerous trade and little formal market training with limited income buffers.
Analysts attribute this to speed-procedure policies, most often influenced by social media and telegram groups. Instead of trading the company’s basic things or earning from the point of view of earnings, many investors appear to react to market trends and chiefs’ activities – usually a pattern or fear of losing a FOMO. The result is the intense contact of the volatility, especially the inexperienced trades with limited risk buffers.
The option for this type of high-racial, fast-speeding trade has become an attraction in the market, especially with the increase in weekly expiration, which is a short-term contract for the week. These options are cheaper and more accessible, but are also very dangerous because they can swing in the price for days or even minutes.
The financial impact on YouTube and other platforms is helping this trend and billions of retail traders in India. Focus is often on speed and volume-quick purchases and sale to chase the profits of the Al-Muddy.
Many of these investors are trade daily and using strategies that can be exposed fast. If the market moves slightly against them, they can lose everything. While this type of trade is increasing the total market activity, it also increases the likelihood of a major loss.
And this is what is happening.
Regulatory challenge
According to Sebi, in his studies last year, more than 90% of retail futures and options trades. They lost money. The loss was 1.06 trillion, or approximately $ 12.5 billion, an increase of 41% over the previous year.
But this is just a personal trade. They are not about losing money. This creates a major problem: When many investors make emotional or poor outdated islands, they open the door to legalize business companies legally and efficiently. These institutional players have good tools, fast systems and more experiences that give them a clear edge.
This is the backdrop that makes Jenna Street case so important.
Sebi has alleged that the firm has changed the index prices to make profit from the option of options. He is using a standard arbitrage strategy, saying that Jen Street rejects it, a general and legal trick of professionals.
The matter is ongoing and the regulatory review is on, Sebi has not yet made a final decision, but the incident has shown the rising distance between retail traders and large institutions. This also raises an important question: Is the market going a lot due to hyper and short-term speed?
If so, what was the role of the basic principles, the actual performance and value of the companies to determine the price? And daily investors can still believe that this system is right?
Sebi is in a difficult position. More people want to enter the market and more global companies in India to invest in India. But retail investors will have to be saved from being overwhelmed or exploited.
For this, Sebi has taken some action with minimal trade size, which requires a good risk manifestation and is planning to ban the weekly deadline on individual reserves.
But the main challenge is: How do you raise a fast, exciting market without dangerous for novice?
India’s Derivative Boom is a remarkable story of financial inclusion and technology. But the scale alone is not a successful metric. As the market is mature, how many people participate will be justified, but how many people can durable without failing.
What happens next will not only shape India’s financial future. It can serve as a precautionary story for other markets, with the same growing pain.
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Meanwhile, Nomura’s Asia-Pacific Equity Strategist Chetan Seth said High assessment of Indian shares The biggest obstacle to foreign investors, which have lost weight in the country market.
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– Yeoo Boon Ping
What happened in the market?
On Thursday, Indian stocks trade less. Nifty 50 The index is 0.44% lower until 12:30 pm by local time.
According to LSEG data, this month is constantly closing more than 25,000 this month and has increased by more than 7% this year.
The production of a ten -year -old Indian government’s bond was flat at 6.315%.
– Lee Ying Shan
Is coming
July 14: CPI and WPI June, distributor of food and health factors, Kemkart’s IPO, Airport F&B Operator Travel Food Services’ IPO
July 15: Unemployment rate in June, pharmaceutical company Antham Biosyns IPO
July 17: Office Leasing Firm Smartworks Corking Space ‘IPO
Every week, CNBC’s “Inside India” News Show gives you news and market commentary on emerging powerhouse businesses and its growth. Livestream on shows and highlights on YouTube Here??
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