MUMBAI: Finance minister Nirmala Sitharaman has ruled out shuttering the highly contested futures and options (F&O) trading, which by a huge margin top the market volume at over Rs 516 trillion, but vast majority of retail investors who also dabble in this space have been heavily losing consistently.
“The government is not here to shut the door on futures and options trading. The government is here to remove the roadblocks and work on them," said Sitharaman, while speaking at a banking and economics conclave organised by State Bank of India in Mumbai on Thursday.
“It is investors' responsibility to understand the associated risks and that government cannot direct a person to spend his money in one particular manner,” she added.
The market regulator Securities Exchange Board of India (SEBI) has put in place a lot of curbs since last November after two of its own successive studies found that more than 93 percent of the retail investors who play in the F&O space have been losing heavily to the tune of Rs 1.25 lakh per year per person. SEBI did the studies for fiscals 2024 and 2025.
News reports earlier this year had said government wanted to deepen the cash market which is only a fraction of the F&O volume and reduce speculation through weekly expiries.
Last month, SEBI chief Tuhin Kanta Pandey had also ruled out the same using more or less the same words that it was not planning to shutter the market one fine day.
"We cannot just shut down weekly F&O expiries, many market participants are using this," Pandey had said last week.
"The weekly F&O expiry is a very sensitive subject and has a lot of nuances. There has been a problem in the derivatives market, which has been highlighted by SEBI," Pandey had said at an event.
"Need to see irrational exuberance is in control for smaller or lesser-savvy market participants. How can we shut down the weekly options market just like that? Sebi will do further data crunching on weekly options issue," Pandey added.
To another question on the banking sector reforms and especially the reported plan of the government to go in for a second round of consolidation among public sector banks, Sitharaman said the country needs big and world-class banks, and discussions are on with the Reserve Bank and lenders in this regard.
It can be noted that the nations’ biggest bank is ranked only at 53rd slot globally with Rs 70 trillion balance-sheet and a little over Rs 100 trillion in overall business. Even from the market capitlalisation perspective our banks don’t come anywhere near the top 25 even with the most valued bank HDFC having only around $180 billion in market capital, while SBI’s is far lower at $100 billion.
Stressing that the country needs a lot of big and world-class banks, she said, “the government is looking at this and work has already commenced. We are discussing with the RBI. We are also discussing with banks".
She also asked lenders to deepen and widen credit flow to the industry, exuding confidence that GST rate cut-driven demand would unleash a virtuous investment cycle.