Retail Investors Should Avoid Derivatives Trading Says NSE CEO: Here's Why

In a recent message to investors, the CEO of the National Stock Exchange (NSE), Ashishkumar Chauhan, has advised retail investors to steer clear of derivatives trading due to the inherent high risk.

What Happened: As per a report by Mint, Chauhan issued this cautionary advice during his Diwali 2023 message. He asserted that the stock market is a platform for long-term wealth creation and urged investors to contribute to India’s growth through long-term investments.

Chauhan’s warning comes on the heels of a study conducted by the Securities and Exchange Board of India (SEBI) indicating that 90% of active traders in the equity futures and options (F&O) segment suffered losses in FY22.

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Despite the associated risks, there has been a surge in F&O trading in India, especially in the wake of the COVID-19 lockdown. A wave of new digital traders seeking fast returns attributes to this. In October 2023, NSE’s options average daily turnover reached a staggering ₹318 trillion.

During the Diwali Muhurat trading event, Chauhan emphasized the need for prudent choices and strategic investments. He also advised investors to transact only with registered intermediaries and steer clear of unregulated products.

Why It Matters? Chauhan’s advice significantly impacts retail investors, especially considering the recent surge in F&O trading in India. The exponential growth in digital trading, particularly post the COVID-19 lockdown, has resulted in increased participation in risky trading activities such as derivatives trading.

However, the SEBI study revealing a high percentage of losses among active traders in this segment underscores the risks involved. Chauhan’s call for long-term investment strategies and avoidance of unregulated products is a timely reminder for retail investors about the importance of prudent investing. The NSE CEO’s message serves as a prompt for investors to make informed decisions and participate in India’s growth story through strategic long-term investments.

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Posted In: FuturesOptionsMarketsderivativesF&ONSE