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Key Points

ICRA reports that index options trading is stabilizing after months of volatility caused by regulatory changes. Trading volumes dropped sharply but remain above historical averages, showing market resilience. Broking firms faced revenue declines, but new index options could support future activity. However, the market remains sensitive to further regulatory shifts.

Key Points: ICRA Reports Index Options Trading Stabilizes After Regulatory Changes

  • Regulatory changes led to 18% drop in daily premium turnover
  • Options contracts fell 60% but remain above historical averages
  • Broking firms saw 19% revenue decline in Q4 FY2025
  • MSEI-SX40 weekly options may boost future volumes
2 min read

Regulatory measures stabilise index options trading as market shows recovery signs: ICRA

ICRA notes market recovery as index options trading stabilizes post-regulatory measures, though broking firms see revenue declines.

"Trading activity appears to be stabilising in index derivatives and options volumes, reflecting strategic recalibrations by market participants. – ICRA"

New Delhi,, 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.

- ANI

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Reader Comments

R
Rahul K.
Finally some good news for retail investors like me! The market was becoming too volatile after those regulatory changes. Hope this stability continues 🤞 ICRA's report gives some confidence that brokers and traders are adapting well.
P
Priya M.
The 60% drop in options contracts is concerning though. SEBI's regulations may have gone too far in curbing speculation. We need balanced policies that protect small investors without killing market liquidity. What do others think?
A
Amit S.
As someone who trades F&O regularly, I've noticed the changes. Volumes dropped but quality of trades improved. Less noise, more strategic positions now. The initial pain was worth it for long-term market health. #SmartMoney
N
Neha P.
The broking firms' 19% revenue decline shows how dependent they were on speculative trading. Maybe time for them to diversify services? Also, new MSEI-SX40 weekly options could be interesting - anyone planning to trade them?
V
Vikram J.
ICRA's cautious optimism makes sense. Our markets are still developing and need careful regulation. Remember what happened in 2008! Better to have slower, stable growth than boom-bust cycles that hurt middle-class investors the most.
S
Sangeeta R.
The MTF exposure coming down to ₹71,000 cr is a relief. Too much leverage was making the market risky. But as ICRA says, if confidence returns, we might see it go up again. Market sentiment is everything! 📈

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