Increasing participation of retail investors in F&O segment...

The reserve bank of india has warned in its Financial Stability Report, expressing concern about the increasing participation of retail investors in the derivatives segment. According to the RBI, the participation of retail investors in the derivatives segment has increased by 42.8 percent in just one year. The report said that sudden sharp movement in the market without any risk management can have a bad effect on investors and its effect can be seen on the cash market.

F&O volume jump poses a challenge

In the Financial Stability Report, RBI said, a huge jump in futures and option volume is posing many challenges. Sharp fluctuations in the market can affect investors. Its effect can be seen on the cash market in the market. RBI said that the derivative segment needs to be monitored closely and appropriate policy action needs to be taken. Taking steps in this direction, SEBI has constituted an Expert Working Group within the Secondary Market Advisory Committee, which is reviewing the futures and options market in terms of investor protection and risk management. According to the report, in 2022-23, about 65 lakh retail investors participated in the derivatives segment, which has increased to 95.7 lakh in 2023-24 with a jump of 42.8 percent.

Bubble in small-midcap stocks

RBI expressed concern over the sharp rise in midcap and smallcap stocks in the last few years and the huge increase in inflows in smallcap and midcap mutual funds and said that a bubble is visible in some pockets of the market. According to the report, AMFI (Association of Mutual Funds in India) in collaboration with SEBI has made it mandatory for all asset management companies to disclose risk parameters.