Q. Consider the following statements : - India accounts for a very large portion of all equity option contracts traded globally thus exhibiting a great boom.
- India's stock market has grown rapidly in the recent past even overtaking Hong Kong's at some point of time.
- There is no regulatory body either to warn the small investors about the risks of options trading or to act on unregistered financial advisors in this regard.
Which of the statements given above are correct? (UPSC Prelims 2025)
Answer:
I and II only
Notes: The correct answer is
[A] I and II only. India’s capital markets have seen unprecedented growth and a surge in retail participation in the derivatives segment in recent years.
- Statement I (Correct): India has indeed become a global leader in equity derivatives. According to the World Federation of Exchanges (WFE), the National Stock Exchange of India (NSE) has consistently ranked as the world's largest derivatives exchange by the number of contracts traded. In 2023, India accounted for a massive share (over 60% to 70%) of the global volume of equity options traded, driven largely by retail investors and weekly expiry contracts.
- Statement II (Correct): In early 2024, the Indian stock market's combined market capitalization surpassed that of Hong Kong, making it the fourth-largest equity market globally. This growth is attributed to a stable macroeconomic environment, strong corporate earnings, and a steady flow of domestic capital through Systematic Investment Plans (SIPs).
- Statement III (Incorrect): The Securities and Exchange Board of India (SEBI) is the dedicated statutory regulatory body for this purpose. SEBI frequently issues warnings and "Investor Charters" regarding the high risks of F&O (Futures and Options) trading. Furthermore, SEBI actively takes enforcement action against unregistered financial advisors (often called "finfluencers") through search and seizure operations, fines, and banning them from the securities market.
Recent SEBI studies have highlighted that 9 out of 10 individual traders in the equity symbols segment incurred losses, leading to stricter margin requirements and disclosure norms to protect small investors.