Hi, I am Spriha Srivastava, Digital Executive Editor at CNBC International. Welcome to this Inside India edition.
This week, see how a boom brought in the derivative markets in India a full range of fears for retailers, who are usually young and draw with the promise of fast profits.
Mumbai, India: The Securities and Stock Exchange Council logo in India (SEBI) was seen at the Bandra Kurla Complex (BKC) business (BKC) in Mumbai.
SOPA photos | Lightrockket | Gety pictures
This report from the newsletter “inside India” in CNBC for this week. Like what you see? You can subscribe here.
The big story
A week ago, the Indian market organizer sent a strong signal by preventing a global trading company Jin Street from participating in the local stock market. This step came in detail about the eye: freezing the profit of approximately $ 570 million, allegations of manipulation of the index, and the proposal that trading strategies in the pleasure may have exceeded the line.
But with the stability of noise and legal decline, the true story may lie elsewhere. This condition provides a window in the structure and stress points in the Indian options market and what happens when the organization, technology and retail enthusiasm collide.
Behind the height of trading sizes, there is something more fragile: a new generation of retail investors that floods complex financial products, and they often have little experience and even less protection.
The Indian derivative market has grown quickly. According to the Futures Industry Association, the country now represents approximately 60 % of the sizes of global stock derivatives. On paper, this looks like a success story. In practice, it is more complicated.
What distinguishes this market is not only its size. He is trading.
almost 11 million people Futures for futures contracts and options circulated in the last fiscal year, according to Sebi. The vast majority were the first spectators, often you are young, and reaping them with the promise of rapid profits that were amplified on social media platforms and influential accounts. It uses many mobile applications, follow Telegram channels, or simulate strategies that they do not fully understand. Market participants say this type of behavior has become increasingly common.
SEBI data, based on a recent study that included 9.6 million derived traders from individual stocks, shows that more than 40 % of these merchants were less than 30 years old, more than three quarters of less than 500,000 Indian rupees, or about 6000 dollars, annually, according to Reuters.
This means that most of the participants enter high -end and risky deals with limited -income stores and formal training on the market.
This analysts attributes this to momentum strategies, and is often affected by social media and telegram groups. Instead of trading mode on the basics of the company or profit expectations, it seems that many investors interact with market trends and peer activity – a pattern that is usually associated with FOMO, or fear of losing it. The result is to increase exposure to volatility, especially among traders who lack experience with limited risk stores.
The options market has become a hotbed for this type of highly dangerous and fast trade, especially with the high expiration of the weekly validity, which are short -term contracts that expire every week. These options are cheaper and more accessible, but they are also more dangerous because they can swing greatly in value within days or even minutes.
Financial influencers on YouTube and other platforms help fuel this trend, directing millions of retailers in India. The focus is often on speed, size-purchase and selling quickly to chase short-term gains.
Many of these investors are trading daily and use strategies that can collapse quickly. If the market moves even a little bit against them, it can lose everything. While this type of trading pays the total market activity, it raises the chances of great losses.
This is exactly what is happening.
Organizational challenge
According to SEBI, more than 90 % of future retail contracts and options in her studies were lost last year. The losses amounted to 1.06 trillion rupees, or about 12.5 billion dollars, an increase of 41 % over the previous year.
But this is not only about individual merchants who lose money. It creates a greater problem: when many investors make emotional or bad stakes, it opens the door for professional companies to benefit, legally and efficiently. These founding players have better tools, faster systems and more experience, giving them a clear advantage.
This is the background that makes the Jin Street issue very important.
SEBI accused the company of manipulating the price of the index by profit from options trading. Jin Street denies this, saying that she was using a standard arbitration strategy, which is a joint and legal tactic between professionals.
While the case continues and remains under the organizational review, with the issuance of Sebi after the issuance of a final ruling, the accident highlights the increasing gap between retail and large institutions. It also raises a major question: Does the market become driven by noise and short -term momentum?
If so, what happens to the role of the basics, actual performance and the value of companies, in determining prices? Are investors still trusting that the regime is fair?
Sibi is in a difficult situation. She wants more people to enter the markets, and more international companies to invest in India. But she also has to protect retail investors from exhaustion or exploitation.
To this end, Sebi has taken some measures, including the minimum trade sizes, which requires better disclosure of risks, and considers the prohibition of the end of the weekly validity on individual shares.
But the main challenge remains: How do you grow a fast and exciting market without making it dangerous for new expatriates?
India derivatives of a boom is a great story about financial inclusion and technological size. But the scale alone is not a measure of success. With the maturity of the market, it will be judged not only through the number of people who participate, but through their number they can do this sustainable, without preparing for failure.
What happens after that will not constitute the financial future of India. It may serve as a warning story for other markets facing the same growth pain.
You choose the top TV on CNBC
Mira Chankar, the former Indian ambassador to the United States, said that the BRICS bloc, which is part of India, is not “hostile to America”, noting that the founding countries have different foreign policies.
Meanwhile, Citan Seth, an expert in Asia and the Pacific Ocean in Nomura, said. High Indian stock reviews It was the largest deterrent to foreign investors, who are underweight in the country’s market.
You need to know
The Indian government ordered X to prevent 2,355 accounts. The social network owned by Elon Musk said on Tuesday that the country’s Ministry of Information and Information Technology demanded on July 3 that Indian users be Thousands of accounts are prevented from reachingIncluding Reuters wire service.
Jin Street for the competition prohibited access to the Indian market. In response to the accusation of the Securities Council and the Stock Exchange in India that the company was manipulating the marketing markets, Jin Street said it was running “The basic index arbitration.”
India in the “top part of the list” for the supply chain transformations. In an exclusive interview with CNBC TV18, CEO Deutsche Bank Christian Sewing said customers regardless of size, looking forward to India Matthew Reorganizing their production chains.
– Yeo box ping
What happened in the markets?
Indian stocks were traded on Thursday, with Elegant 50 0.43 % index is less from 12:30 pm local time.
The index has been constantly closed above 25,000 this month and more than 7 % rose this year so far, according to Lseg data.
The return of Indian government bonds for 10 years was fixed at 6.315 %.
– Lee Ying Chan
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