Alarming levels of speculation in Indian stock markets

Source - ICICI Sec

Derivatives to cash volume ratio is 422 times in India. There’s no country which comes even close to this.

Will there be any issues in the future due to this? Most likely

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Some experts said the ratio calculated using notional turnover of options is misleading as the premium turnover, price a buyer pays for the option, is the right way given that options account for 98% of derivatives turnover.

Is this calculated differently elsewhere?

Anuj Singhal CNBC-TV18 had done a feature on this - its a must watch.

I am not sure.

Looping in @Meher_Smaran. Meher, can you ask Som to speak to the folks at ICICI to figure out if they are comparing notional turnover for all markets?

Btw, one point to note is that in India, since the SLB (Stock lending and borrowing) mechanism isn’t active, anyone wanting to short has to use derivatives. Also from the time restrictions on intraday stock leverage were capped at 5x, intraday trading volumes have moved from equity to FO.


Also, if govt/sebi wants to improve equity volumes, then from trading point of view ( which seems to bring most of the volume), one obvious factor is high costs - both intraday and overnight. Even for someone holding only for few days, there is a large difference in cost.

In my own case, if costs were lower i would probably take more trades but instead i have to optimize more towards edge per trade. And high cost of overnight cash is a big deterrent against working on overnight systems in cash for short term holding. Stock Futures has issue of things being banned far too often. I can’t backtest for that and it brings in unnecessary uncertainty.

Lots of restrictions in India and index is simple/liquid way out.

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Thanks @viswaram, could you please share the link for that, if possible?

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@viswaram Thank you so much for sharing this link.

Weekly Expiry Options Trading has gone through the roof. What a massive increase in the volume! And every month it is going higher and higher.