The industry’s concerns have extended beyond the immediate liquidity impact involving more than ₹50,000 crore.
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FRANCIS MASCARENHAS
The adverse impact of the Reserve Bank of India’s move to tighten bank lending for proprietary trading in the equity derivatives market from July has become evident in the sharp decline in trading turnover over the last four trading sessions.
The average daily turnover (ADT) in the derivatives segment on the NSE during the last four trading sessions fell 25 per cent to ₹1,22,677 crore, compared with ₹1,63,328 crore recorded during the corresponding period last month.
The ADT in stock and index futures on the NSE declined 4 per cent and 49 per cent, respectively, to ₹69,524 crore and ₹11,420 crore, against ₹72,223 crore and ₹22,506 crore registered during the same period in June.
Similarly, the premium ADT in index and stock options during the last four trading sessions dropped 45 per cent and 17 per cent to ₹34,038 crore and ₹7,694 crore, respectively, from ₹62,017 crore and ₹6,581 crore in the corresponding period, according to the exchange data.
Futures & options
A similar trend was witnessed on the BSE, where the ADT in futures and options during the last four trading sessions fell 30 per cent to ₹27,255 crore from ₹38,881 crore.
Ketan Marwadi, a member of the Capital Market Participants Association of India, said that ever since the revised norms came into effect, the industry’s concerns have extended beyond the immediate liquidity impact involving more than ₹50,000 crore.
“If a distinction is not made between speculative and directional proprietary trades, domestic intermediaries could be forced to create room for foreign proprietary firms to capture a larger share of market volumes and profitability. This could eventually lead to a gradual shift of value creation, tax revenue and employment opportunities away from India,” Marwadi said.
Anand James, Chief Market Strategist at Geojit Investments, said derivatives trading volumes, particularly in futures where capital requirements are higher, are likely to remain under pressure in the near term and could witness further moderation as firms adjust to the new regulatory framework.
“Impact costs will also be affected as bid-ask spreads widen. While this may not significantly hurt investor profitability, high-frequency traders who rely on thin margins and high liquidity could face challenges,” he added.
Margin funding
Sachin Gupta, Vice-President (Research) at Choice Equity Broking, said futures trading inherently depends on margin funding, and as funding costs rise, many traders are likely to scale back their activity, with larger institutional participants becoming more cautious.
“While traders may gradually adapt and become more disciplined in capital deployment, the immediate impact is likely to be a squeeze on profitability,” Gupta said.
Feroze Azeez, Joint CEO of Anand Rathi Wealth, noted that proprietary firms account for a meaningful share of derivatives market liquidity, particularly in options and arbitrage strategies. As firms adjust their funding structures and deploy a larger proportion of their own capital, participation is expected to become more selective.
However, he added that markets generally adapt to regulatory changes over time. While trading volumes may initially stabilise at lower levels, liquidity is likely to recover gradually as participants adjust to the new framework.
Amid the decline in derivatives trading activity, shares of exchange operators BSE and MCX came under pressure, falling 3 per cent each to ₹3,679 and ₹2,643, respectively, on Tuesday.
Published on July 7, 2026
