Chorus around rising retail interest in riskier derivatives gets louder

Survey says mkt claim on real economy 'excessively high', may lead to instability

- KHUSHBOO TIWARI & SAMIE MODAK

The Economic Survey released on Monday echoed other regulators' concern over the rising retail interest in the riskier derivatives segment, where average daily turnover is more than ₹400 trillion (notional turnover for options) regularly compared to about ₹1.2 trillion in the cash segment.

The survey cautioned on the expensive valuations and termed the market's claim on the real economy "excessively high". It described derivatives as speculative instruments and likened trading in it to gambling.

"Derivatives trading holds the potential for outsized gains. Thus, it caters to humans' gambling instincts and can augment income if profitable. These considerations are likely driving active retail participation in derivatives trading. However, globally, derivatives trading loses money for the investors, for the most part," the survey said, calling for more awareness and education.

Reserve Bank of India Governor Shaktikanta Das and Securities and Exchange Board of India (Sebi) Chairperson Madhabi Puri Buch have expressed similar concerns in the past.