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Chief Economic Advisor sounds fresh warning on retail play in futures and options trading

V. Anantha Nageswaran said the common people may not possess the financial literacy skills to handle such trades as he urged re-evaluating the practice

Our Special Correspondent New Delhi Published 19.05.24, 11:40 AM
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Chief Economic Advisor V. Anantha Nageswaran on Saturday became the second top government official this week to sound an alert on retail investors indulging in futures and options (F&O) trading when he warned against the growing trend of household savings being diverted into this risky segment.

The CEA said the common people may not possess the financial literacy skills to handle such trades as he urged re-evaluating the practice.


Speaking at the CII’s Annual Business Summit 2024, Nageswaran pointed to the historical pitfalls of rapid financial sector expansion ahead of national development, citing the 1997-98 Asian financial crisis as a cautionary example.

“When we celebrate having the world’s largest trading volume in futures and options, we must question whether this signifies progress or concern,” Nageswaran said.

He emphasized the financial sector should focus on leveraging household savings for productive investments instead of speculative trades.

On Tuesday, finance minister Nirmala Sitharaman warned of the dangers of an “unchecked explosion” in retail F&O trading as it could destabilise householdfinances.

Highlighting the complexity of F&O trading, Nageswaran noted, “The sachetisation of futures and options needs reconsideration, as the financial literacy required for trading stocks is vastly different from that for F&O trading.” Sachetisation refers to entities offering financial products in smaller, more accessible units.

Nageswaran also addressed broader economic risks, highlighting the need for India to navigate challenges posed by loose financial conditions and uncertainties around US interest rates and the dollar.

“Global financial stability remains a significant risk that has yet to fully manifest, and we must consider this given our current market valuations,” he added.

Special trading

Equity benchmark indices closed the special trading session on a firm note on Saturday, extending their rally to the third day running amid fresh foreign fund inflows, reports PTI.

The 30-share BSE Sensex climbed 88.91 points or 0.12 per cent to end at 74005.94. During the session, it jumped 245.73 points or 0.33 per cent to 74162.76.

The NSE Nifty advanced 35.90 points or 0.16 per cent to 22502.

The National Stock Exchange (NSE) and BSE on May 7 said they will conduct a special trading session in the equity and equity derivative segments on May 18 to check their preparedness for handling major disruptions or failures at the primary site.

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