New Delhi, [India], May 22 : After months of volatility triggered by regulatory changes, trading activity in index derivatives and options is showing signs of stabilisation, according to a report by rating agency ICRA.
The report noted that market participants have strategically recalibrated their trading approach following three consecutive months of decline in options volumes.
ICRA said "trading activity appears to be stabilising in index derivatives and options volumes, reflecting strategic recalibrations by market participants."
The regulatory measures, introduced in a phased manner starting November 2024, had led to a sharp contraction in trading volumes.
Between December 2024 and March 2025, the average daily premium turnover declined by 18 per cent compared to the April-November 2024 period. Additionally, the number of options contracts traded fell sharply by 60 per cent.
Order volumes, which are crucial for futures and options (F&O) brokerage, also took a hit, declining by 25-35 per cent. However, despite this dip ICRA noted that trading activity still remains above historical averages, indicating some resilience in the market.
The report highlighted that margin trading facility (MTF) exposures, which peaked in December 2024, have now pulled back closer to Rs. 71,000 crore.
However, the report believed that given the strong correlation of MTF with broader market trends, a rebound in investor confidence could once again push the exposure back towards the Rs. 1 lakh crore mark.
In terms of financial performance, securities broking firms have felt the impact of reduced trading activity.
ICRA's sample of nine broking firms reported a 19 per cent year-on-year decline in net revenue for the fourth quarter of FY2025. Profitability also dropped to 26 per cent, marking the lowest level in the past 12 quarters.
However, the outlook is not entirely bleak. The report pointed out that after three months of falling options volumes, trading activity appears to be stabilising. The upcoming launch of the MSEI-SX40 weekly index options could also help support trading volumes in the near future.
ICRA cautioned that despite early signs of recovery, the overall trading environment remains highly sensitive to any further regulatory developments.
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