Finance Minister Nirmala Sitharaman alerted retail investors about the risk of derivatives market during the ‘Viksit Bharat 2047’ event at BSE on Tuesday (May 14, 2024).
She also warned that an “unchecked explosion” in riskier futures and options (F&O) could lead to issues with household finances.
“Any unchecked explosion in trading of retail futures and options (F&O) can create future challenges, not just for the markets and investors’ sentiment but also for household savings that have made the generational shift,” Sitharaman said.
The Finance Minister also said that trading in F&O has been a source of concern, with many retail investors losing their hard-earned money.
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According to a Sebi survey from the previous year, approximately 89% of individual traders in the equities F&O segment, or 9 out of 10, suffered losses during FY22, with an average loss of Rs. 1.1 lakh. Also, 90% of active traders lost an average of Rs. 1.25 lakh over the same period.
Sitharaman urged BSE to work closely with SEBI to ensure stringent compliance and robust regulatory standards to maintain investor confidence.Also, to take a proactive role in promoting higher corporate governance standards among listed companies.
According to Sitharaman, home savings are now being invested in the stock market rather than only in post offices or bank fixed deposits. This is seen in the increase in the number of retail demat accounts that have been opened in recent years.
There were 2 crore retail demat accounts in 2013, and that number has now increased to 15.1 crore, with 3.6 crore new accounts opened in the past year.
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She said retail investors’ confidence in the stock market is due to increase in compliance levels by listed companies over the last several decades, which has resulted in greater transparency, efficiency, and corporate governance.
Sitharaman also assured Dalal Street that the next Modi government would be stable and majority-led. She clarified that the government’s approach is to focus on growth driven by investments along with inclusive growth.
Also, to include a welfare component, primarily from the perspective of empowering the poor rather than from the perspective of providing for the needs of any group.
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Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before investing in market-linked instruments.
