BSE shares have crashed about 29% from their peak, erasing Rs 35,000 crore in market value, while NSE’s unlisted shares, among the biggest multibaggers in the unlisted space, have plummeted 22% from their highs, wiping out a staggering Rs 1.4 lakh crore.
The carnage extends far beyond the exchanges themselves. Shares of discount brokerage firm Angel One, which derives the bulk of its brokerage revenue from the F&O segment, has been hammered 37% from its peak and closed Thursday’s session down 5%.
“The stocks had corrected because of the talk about weekly expiry changing fortnightly or reducing the number of expiries,” market expert Neeraj Dewan said, highlighting the market’s fears over Sebi’s potential moves to further restrict derivative trading.
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Sebi’s war on F&O speculation
The regulator’s crackdown, first announced in October 2024, has been relentless. With 91% of individual traders incurring losses worth Rs 1.06 lakh crore in the equity derivatives segment during FY25, meaning an average trader lost Rs 1.1 lakh, Sebi has pulled no punches in its battle against what it sees as rampant speculation.NSE’s dominance in the derivatives space makes it particularly vulnerable, commanding a 78% share in options premium turnover and over 99% in futures premium turnover. The exchange also dominates cash markets with a 93.5% gross turnover market share as of June 2025.Beginning from this month, BSE and NSE have swapped their derivatives expiry days. While many were expecting BSE to lose market share as it shifts Sensex expiry to Thursday from Tuesday, the first week saw BSE gaining ground.
The exchange’s premium Average Daily Turnover (ADTO) in September’s first week surged to Rs 208 billion—a robust 19% higher than the August average. More impressively, BSE’s market share jumped 110 basis points to 28.2%, with the exchange gaining market share on all days except E-2 (two days before expiry), which was anticipated.
While long-term investors remain structurally bullish on the capital market theme given the rising per capita income, financialisation of household savings trend and increasing preference for equity investments, the current uncertainty in the market (ban on Jane Street, possible scrutiny on other players and risk of more regulations amid rising retail losses) would weigh on near-term exchange volumes.
Recent comments by the Sebi Chairman expressing preference for longer-tenure contracts have sparked speculation about the introduction of fortnightly or monthly contracts, replacing the current weekly expiries that have been the biggest F&O contributor.
“Until there is regulatory clarity, earnings uncertainty remains high for exchanges and dependent models,” warn market analysts, as the phased implementation of multiple restrictive measures between November 2024 and April 2025 continues to weigh on market sentiment.
The measures include reduction in derivatives with weekly expiry, increase in lot sizes, and a 2% hike in extreme loss margins on short options contracts on expiry day. More recent changes in 2025 include upfront collection of option premiums and removal of calendar spread treatment on expiry day.
Street veteran Sudip Bandyopadhyay struck a cautious tone, emphasizing the regulatory and government focus on protecting retail investors. “The regulator and the government are very focused on protecting the common man, protecting the small investor. There is a threat running through the thinking of the government if you look at banning online games, coming down on F&O in a big way because the data shows that 90% plus people lose money when they are trading in F&O.”
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He warned that any news indicating potential income impacts would have “detrimental effects,” noting that exchange stocks are “fully priced” and vulnerable to regulatory headwinds.
However, Neeraj Dewan sees opportunity in the chaos: “As long as that is not coming, volume will pick up. I like BSE also at these prices, it makes a case for investing in BSE for a little long-term perspective.”
The Indian capital markets collectively represent nearly Rs 1.3 lakh crore of revenue and a Rs 50,000 crore profit pool across segments. Over the past decade, aggregate revenue and profits have reported CAGRs of approximately 20% and 25% respectively, driven by strong equity markets, improved retail accessibility, and supportive regulations.
But the golden run appears to be ending. As Bandyopadhyay noted: “Growth rates will soften, as the market and regulatory forces weigh.”
The stunning reversal comes after BSE shares had zoomed an astronomical 3,574% over the past five years, while NSE’s unlisted shares had emerged as one of the biggest success stories in the unlisted market.
With Sebi showing no signs of backing down from its mission to protect retail investors from derivative trading losses, market participants are bracing for more volatility ahead as the regulatory noose continues to tighten around India’s once-booming F&O industry.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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