SEBI Plans Endgame for Weekly Expiry in Derivatives | Profit Puzzle for NSE

SEBI Plans Endgame for Weekly Expiry in Derivatives

SEBI’s move to restrict or do away with weekly expiries in the F&O is about systemic risk management and investor protection. Here are the key reasons behind it:

1. Retail investor protection:

• Data shows that retail traders form a very large share of index option turnover (40%+ of participants in some segments).
• But the majority of them lose money in short-term speculative trades, especially in weekly options where time decay is rapid and volatility spikes near expiry.
• SEBI has publicly expressed concern that the “casino-like” weekly expiry trade is exposing small investors to outsized risk and losses.

2. Curbing excessive speculation:

• Weekly expiries encourage very short-term, lottery-like bets on Nifty/Bank Nifty movements.
• This builds huge intraday speculative volume, often disconnected from fundamentals.
• SEBI sees this as destabilising and wants to shift trading behaviour toward longer maturities (monthly/fortnightly), where speculation is less intense and more hedging-driven.

3. Systemic risk reduction:

• Huge weekly expiry positions concentrate liquidity and risk on one day of the week (the expiry day).
• This leads to sharp intraday swings, option mispricing, and can amplify volatility in the cash market as well.
• By standardising expiry cycles, SEBI aims to smoothen volumes and reduce expiry-day shocks.

4. Market structure stability:

• NSE and BSE have been competing by introducing multiple weekly expiries on different days (Nifty, Bank Nifty, Sensex, FinNifty etc.).
• This has led to overlapping expiries almost every day of the week, creating continuous “expiry-day” speculation.
• SEBI wants to end this “expiry-arbitrage game” between exchanges and bring back balance.

5. Global best practices

• Most mature markets (US, Europe) rely on monthly/quarterly expiries, with limited weekly products (only for liquid benchmarks and not across the board).
• India’s F&O market has become the world’s largest by contract volume, but SEBI worries that the composition is overly skewed toward ultra-short-term speculation rather than hedging/price discovery.

 

In short:
SEBI is acting to protect small investors, reduce market-wide speculative frenzy, and bring Indian F&O closer to global norms.

------------------------------------------------------------------------------------------------------------------------

 

The Profit Puzzle for NSE

It may have  material and negative for NSE’s near-term profits, but not existential.
Removing weekly expiries and moving to (mostly) monthly expiries will cut derivatives turnover (hence transaction-fee revenue) substantially;  how much depends on how fast traders adjust and how much volume weekly contracts currently account for.

Why this matters for NSE’s profitability:-

• NSE’s transaction/turnover charges are heavily driven by derivatives: in Q4 FY24 the exchange said ~88% of transaction charges came from equity derivatives (i.e., derivatives are the dominant source of trading fee revenue).
• Removal/curbs and regulatory actions have already cut volumes sharply,  for example, index-options premium turnover on NSE fell by ~35–36% over a short period after regulatory action against a large high-frequency player (Jane Street). That shows how sensitive volumes (and thus fees) can be to structural/regulatory changes.

Mechanism: how profit gets hit:-

1. Lower transaction fees (top line): Weekly expiries are popular with retail/speculative traders and account for a disproportionate share of daily contract volume. Moving to monthly expiries reduces trading frequency and the number of contracts traded, thus, directly lowering NSE’s transaction-fee income.
2. Operating leverage (bottom line): Exchanges have high fixed costs (technology, surveillance, clearing infrastructure). Revenue falls won’t be matched by immediate cost declines, so profits fall faster than revenue unless the exchange cuts costs or finds replacement revenues. Reuters / NSE commentary has repeatedly pointed to transaction charges as the major revenue driver.
3. Liquidity / market share effects: If traders concentrate on the single allowed weekly contract (or move activity to another exchange or instrument), liquidity may fragment. That can reduce order flow for some NSE products, reducing ancillary revenues (market data, clearing, connectivity).
4. Volatility / option premium effects: Lower short-dated trading may reduce intraday/near-term volatility and option-premium volume (less trading in short time-decay plays), hitting premium-related turnover. We’ve seen option premium turnover shrink in stressed episodes.

 

What NSE (and other exchanges) should do:

1.     Product substitution: Traders might move to monthly or longer-dated strategies (calendar spreads, LEAPS), or to cash market hedges;  some volumes will reappear elsewhere (but spread over fewer contracts and lower turnover).

2. Lobby / consult for a glide path: work with SEBI on phased implementation to smooth volume transition (SEBI has signalled glide-path ideas).
3. Product & fee engineering: tweak fee schedules, encourage monthly/quarterly product liquidity, and create new derivatives products that attract flow.
4. Expand non-transaction revenues: accelerate market-data commercialisation, indices licensing, cross-border services, and tech services to brokers.
5. Capture residual retail flow: offer simplified, regulated products (ETFs, structured products) that attract retail hedging/speculation in a safer way.

 

Bottom line :

Because derivatives transaction fees are the single largest driver of NSE’s transaction revenue, ending weekly expiries will very likely reduce trading volumes and therefore meaningfully depress NSE’s near-term revenue and profits (order of magnitude: think tens of percent of transaction revenue in a plausible base case). The precise hit depends on how much of today’s volume is truly “weekly-only” flow and how quickly the market — traders, market-makers and the exchange itself — adapts

 

Warm Rgds

Thakur Ajit Singh

Founder

Graded Financial Services - A Mall of Financial Products and Services,

Quick Turtle - An Executive Placement firm,

Chairman, Investor & Consumer Protection, MRCC,

Trainer | Management Consultant

Cell: 8169810833 

Building Resilience Against Stock Market Crashes ... By Thakur Ajit Singh

“Building Resilience Against Stock Market Crashes”

Market crashes don’t happen overnight; they are usually the result of multiple interacting factors. Speculation, geopolitical tensions, inflation, and weakening economic indicators often converge to trigger panic selling.

Some key indicators like GDP contraction, rising unemployment, and spikes in the Volatility Index (VIX) à can act as early warning signals of potential market instability. For investors, diversification across asset classes and maintaining a long-term perspective remain the most effective shields against volatility.

 

Historical Perspective on Market Crashes:-

1. Speculation:- Excessive speculation inflates asset prices far beyond their fundamentals. When these bubbles burst, markets experience sharp corrections.

Example: The dot-com bubble of 2000, when overvalued tech stocks collapsed, wiping out trillions in market value.

2. Geopolitical Tensions:- Wars, political instability, or trade conflicts create uncertainty, driving investors to exit risky assets.

Example: The Russia–Ukraine conflict in 2022 triggered surges in commodity prices, disrupted global supply chains, and rattled equity markets worldwide.

3. Economic Indicators:- Weakening macroeconomic signals -- slowing GDP growth, rising unemployment, or contracting manufacturing output --often precede market downturns.

Example: The 2008 global financial crisis followed a housing sector collapse and subprime mortgage defaults, revealing deep cracks in the financial system.

4. Technological Disruptions:- While innovation fuels growth, sudden disruptions can also trigger volatility.

Example: In 2024, Nvidia’s (NVDA) meteoric rise (178% gain) on AI-driven demand was followed by turbulence when competing models like DeepSeek reshaped the AI landscape.

Warning Signs:

A. Economic Indicators:-

1)   GDP Slowdown: A shrinking or stagnating GDP signals weaker economic activity.

2)   Rising Unemployment: Reduces consumer spending and corporate profitability.

3)   Yield Curve Inversion: When short-term bond yields exceed long-term yields, it has historically preceded recessions (as seen before 2000 and 2008 crashes).

B. Market Sentiment & Volatility

1)   Volatility Index (VIX): Known as the “fear gauge,” the VIX recently touched a 6-month high, reflecting heightened nervousness among investors.

2)   Investor Sentiment Extremes: Over-optimism (bubbles) or over-pessimism (panic) often foreshadow reversals.

3)   Liquidity Shifts: Declining liquidity can amplify price swings and hinder smooth trade execution.

 

Learning from the Past:

Looking at the 2000 dot-com crash, the 2008 subprime crisis, and the 2020 COVID-19 selloff, one trend is clear: markets eventually recover.

For example, the Nifty 50 in India has delivered an average CAGR of ~15.23% over the past 20 years, despite these downturns. Investors who stayed invested and continued systematic buying during crises benefited.

 

Securing Your Portfolio Against Future Market Drops:-

While predicting the exact timing of a crash is impossible, preparing for downturns is essential.

Strategies for 2025:

1. Diversify Across Asset Classes:

a)   Equities (via Mutual Fund SIPs): Ensure long-term wealth creation through from compounding and rupee cost averaging .

b)   Bonds & Corporate FDs: Offer stability and regular income.

c)   Precious Metals (Gold & Silver): Serve as a hedge against inflation and uncertainty.

2. Maintain a Long-Term View:
   Market cycles are inevitable. Long-term investors who focus on fundamentals rather than panic-driven decisions are better positioned to ride out volatility.

2. Use Market Corrections as Opportunities:
   Bear markets often provide attractive entry points for quality assets at discounted valuations.

Bottom Line:

Market crashes, though unsettling, are temporary phases in a much larger growth cycle. By diversifying smartly and staying invested with discipline, investors can turn downturns into long-term wealth-building opportunities.

Author:

Thakur Ajit Singh 

Founder 

Graded Financial Services – A Mall of Financial Products & Services,

Quick Turtle - An Executive Placement Firm,

Chairman, Investor & Consumer Protection Cell, MRCC.

Trainer | Management Consultant.

Cell: 8169810833

Indian Bond Market: Opportunities for the Investors ……By Thakur Ajit Singh

 

Indian Bond Market: Opportunities for the Investors

                                                                                                                ……By Thakur Ajit Singh

 

A Positive Outlook for Fixed Income Investors in 2025:-

The Indian bond market presents a promising landscape in 2025, driven by easing inflation, supportive monetary policy, and rising foreign capital inflows. For investors with objectives such as income generation, capital preservation, or portfolio diversification, bonds—particularly in the secondary market—are gaining renewed relevance.

The choice between high-coupon bonds and high-yield instruments should be guided by an investor’s risk appetite, investment horizon, and return expectations. Let’s explore the key macroeconomic factors and strategic considerations shaping bond market opportunities this year.

Key Macroeconomic Drivers:-

1. Inflation at Multi-Year Lows: As of April 2025, India’s Consumer Price Index (CPI)-based inflation stood at 3.16%, down from 3.34% in March, and the lowest in six years. Importantly, this marks the third consecutive month of inflation staying below the RBI’s 4% target. Low inflation supports bond valuations, particularly for longer-tenure debt, by reinforcing expectations of lower policy rates and enhancing real returns for fixed-income investors.

2. RBI’s Accommodative Monetary Policy: The Reserve Bank of India (RBI) is expected to maintain an accommodative stance to bolster economic growth. This likely translates into:

v  Stable or lower repo rates

v  Improved system liquidity

v  Declining bond yields. 

In such a climate, bond prices rise, especially for existing higher-coupon bonds—making 2025 an opportune time to consider fixed income investments.

3. Strong Foreign Fund Inflows : India has witnessed a remarkable turnaround in foreign investor sentiment with $419 million in dedicated FII inflows in a recent six-month high; broken into $239 million directed into Fixed Income ETFs, and $180 million flowed into long-only bond funds.

This contrasts with outflows in other emerging markets, such as China, which recorded $532 million in redemptions during the same period.

4. Robust FDI Trends: Despite global uncertainties, India has been averaging over $4.5 billion in monthly FDI inflows since January 2025. Structural reforms, geopolitical stability, and investor-friendly policy initiatives by the Government of India continue to attract long-term capital, reinforcing confidence in India’s fixed income story.

Why Bond Prices Rise When Interest Rates Fall:-

A quick refresher: Bond prices and interest rates move inversely. When interest rates fall, new bonds offer lower coupon rates. Consequently, older bonds with higher coupons become more attractive, pushing their prices up. Conversely, rising rates make older bonds less appealing, lowering their prices.

Thus, in a falling interest rate environment, investing in existing bonds through the secondary market can be especially lucrative.

Primary vs. Secondary Market Bonds – What to Choose?

1. Secondary Market Bonds:

v  Advantageous in a falling rate cycle: Older bonds with higher coupons fetch premium prices.

v  Liquidity & Flexibility: Can be bought/sold before maturity.

v  Market-Driven Pricing: Subject to market sentiment and issuer creditworthiness.

2. Primary Market Bonds;

v  Lower Entry Price: Typically issued at face value.

v  Higher Risk: Especially in corporate bonds with uncertain ratings.

v  Strategic Fit: Suitable for those seeking to hold until maturity in stable rate environments.

Strategic Investment Recommendations for 2025:-

1. Lock in High Yields Now: With interest rates likely to decline, investors should consider locking in current yields before RBI rate cuts compress returns.
2. Invest in Long-Duration Government Securities: These stand to benefit the most from falling yields and provide stable, sovereign-backed returns.
3. Select High-Quality Corporate Bonds: AAA and AA+ rated corporate bonds offer attractive spreads over government securities with manageable risk.
4. Diversify via Fixed Income ETFs: Bond ETFs offer liquidity, diversification, and professional management—ideal for passive investors.
5. Explore Niche Fixed-Income Segments: Investors with a higher risk appetite can explore:-
• Corporate Credit: Loans to businesses; a key pillar for economic expansion.
• Securitized Debt: Includes Asset-Backed Securities (ABS) and Mortgage-Backed Securities (MBS) tied to cash-generating assets like auto loans and mortgages.
• Emerging Market Debt (EMD): Bonds issued by developing countries or companies therein, offering higher yields but with increased volatility.

Final Thoughts:-

The Indian bond market in 2025 offers an attractive risk-reward balance for investors seeking income stability, especially against the backdrop of falling inflation and accommodative policy. By strategically locking in yields and maintaining a diversified approach—across government, corporate, and structured debt instruments—investors can optimize returns while managing risk.

That said, due diligence is critical. Investors must prioritize credit quality, duration suitability, and market conditions when selecting bonds. GRADED FINANCIAL SERVICE can suggest and help Investors invest in Highly Rated Bonds.

Thakur Ajit Singh

Founder – Graded Financial Services, a Mall of Investment Products & Services,

Founder – Quick Turtle, Executive Search & Placement Firm

Chairman – Investor & Consumer Protection Cell, MRCC

Trainer | Management Consultant | Finance Expert.

 

Reality Scores Over Sentiments

 

     

         Reality Scores Over Sentiments

Global Scenario:

I believe 2025 will be a year of navigating turbulence rather than one of rapid GDP growth. Global economic expansion is expected to remain subdued, with the U.S. projected to grow at a modest 2.0%, the Eurozone lagging at 0.9%, and China’s growth forecast at 4.2%—well below its historical average.

Persistent inflation, fuelled by higher fiscal spending and potential tariff hikes, may limit central banks' ability to cut interest rates as they strive to balance growth and inflation control.

A few months into 2025, the sharp decline in the U.S. stock market has prompted leading Wall Street analysts to revise their bullish outlook for the S&P 500. Heightened uncertainty around President Donald Trump’s evolving tariff policies and retaliatory measures from trading partners have triggered fears of an escalating global trade war, leading to increased market volatility.

As of March 17, 2025, Wall Street’s revised year-end target for the S&P 500 is 6,667, implying a 17% advance from its current level of 5,675 (Source: MarketWatch).

The shift in Wall Street’s sentiment marks a sharp departure from late 2024, when strategists expected the market to sustain its upward trajectory following two strong years. Initially, hopes were pinned on Trump’s "pro-growth" agenda, promising tax cuts and deregulation. However, tangible policy action remains elusive, with attention largely focused on tariffs, immigration curbs, and fiscal downsizing.

Geopolitical & Policy Risks: 

The uncertainty surrounding trade policy could drive increased market volatility in 2025-26. A key trend to watch is the global shift in economic strategy—from monetary policy to fiscal policy, as governments seek new drivers of growth. With inflation still above comfort levels, central banks have limited flexibility, making fiscal measures the next battleground for economic expansion.

Indian Economy and Equity Market:

2025 has been challenging for Indian equities, marked by persistent FII selling and a steep market correction. Several factors have contributed to this downturn:

• Rupee depreciation
• High market valuations
• Earnings slowdown
• Strong dollar and rising U.S. bond yields

1)    Impact of U.S. Macros on Indian Markets : The U.S. bond yield surge is a key headwind. The 10-year U.S. Treasury yield has climbed above 4.3%, narrowing the spread between U.S. and Indian sovereign bonds to 2.24%, down from over 5% in 2022. A stronger dollar index (103 as of March 17, 2025) has led to sustained FII outflows, further pressuring the Indian market.

The big question: Why should FIIs invest in a high-valuation Indian market when U.S. bonds offer a risk-free return of 4.5%?

2)  Valuation Concerns: At Nifty 22,500, the Indian market is trading at 20x FY26 estimated earnings, well above the long-term average of 18x. Given the resilience of the U.S. economy and the relative affordability of other emerging markets, FIIs may continue to reduce exposure to Indian equities.

3)    India’s Long-Term Growth Potential: Despite near-term headwinds, India's economic trajectory remains compelling:

• IMF projects India’s GDP to grow at an average of 6.1% over the next five years, making it the world's third-largest economy by 2027 after the U.S. and China.
• The economy is expected to double from $3.5 trillion to $7 trillion by 2030.
• India’s manufacturing sector needs to transition from import substitution to export-led growth to sustain this momentum.
• However, a slower-than-expected global recovery and geopolitical disruptions could weigh on India’s export outlook. To counter this, India must harness its domestic strengths to drive sustainable growth.

4)   The Role of Capital Markets & Policy: India's capital markets play a critical role in channeling savings into investments, ensuring financial stability, and boosting investor confidence. However, while domestic institutional investors (DIIs) have cushioned the impact of FII outflows, they may not be able to fully counterbalance prolonged foreign selling.

Fiscal policy will be crucial in shaping India's economic trajectory. The government must:

• Balance fiscal discipline with growth-oriented spending
• Prioritize capital expenditure in key infrastructure projects
• Encourage state governments to efficiently utilize allocated funds

5)  India’s Near-Term Outlook:  India’s GDP is expected to grow between 6.7% and 7.3% in FY 2025-26, albeit with downside risks. Key challenges include:

• Geopolitical uncertainties impacting trade and supply chains
• Delayed global recovery affecting exports
• Inflation concerns, although expected to moderate with a strong agricultural output and proactive policy measures

Despite these risks, India's GDP gap versus pre-COVID-19 levels is closing, and the economy is gradually regaining momentum.

Investment Strategy for Indian Equity Markets:

1. I personally believe that India has bottomed out, and economic growth will accelerate over the next six months. Additionally, Donald Trump’s policies are likely to stabilize, reducing global market uncertainty.
2. Investors should consider deploying capital in tranches, strategically buying equities with every 5 % market decline to position themselves ahead of the recovery.
3. The approach should focus on bottom-up stock picking, prioritizing strong fundamentals over purely technical indicators, while also factoring in macro-economic trends.
4. In these uncertain times, smart and informed investing will be crucial. A well-researched, fundamentals-driven strategy can help investors navigate volatility and build capacity for strong returns over a one-year horizon.

Author
Thakur Ajit Singh
Founder - Quick Turtle | Graded Financial Services | AskCred
Financial Expert | Trainer | Management & Placement Consultant

Cell: 8169810833

Ways to Invest in Precious Metals: Gold & Silver

Ways to Invest in Precious Metals: Gold & Silver

In times of economic turmoil, precious metals (gold, silver) tend to retain their value or even appreciate. It is for this reason that they are so attractive as investment options as they provide a buffer to an equity-debt portfolio, as well as appreciate over time.

Unlike gold, silver has immense technical and industrial uses as it is an excellent thermal and electrical conductor. It is widely used in specialist electronics and solar panels. Its anti-bacterial properties also make it popular in the medical industry. Less than 10% of the gold mined is used for industrial purposes, but in the case of silver the number is 50%. These applications create a fundamental demand for silver, the intensity differing over various economic cycles with higher demand during boom times.

Investors can diversify by investing atleast 10% of their portfolios in low-risk assets like silver, gold, etc. This will reduce the overall risk exposure in their investment portfolio. 

GOLD

1. Physical Gold:
The price of physical gold varies by geography. It’s a traditional method of investment, but storing and insuring physical gold can be cumbersome and costly.

2. Gold ETFs (Exchange-Traded Funds):
Gold ETFs are financial instruments that hold gold bars, with each share representing a portion of that gold. These ETFs invest in gold bullion or futures, with prices that closely track the price of gold, although minor deviations due to tracking errors may occur.

• Advantages: Gold ETFs are more transparent, liquid, and closely aligned with market prices than physical gold. They can be bought and sold online and held in Demat form. One unit of a Gold ETF typically equals one gram of gold. They also have lower costs, with annual charges including brokerage and an expense ratio ranging from 0.50% to 1.00%.
• Taxation: Earnings from ETFs are taxed according to the investor's income tax slab, irrespective of the holding period.
• Liquidity: Gold ETFs are highly liquid and can be traded freely without a lock-in period, making them suitable for short, medium, or long-term investment objectives.
• Purity: 0.999 purity gold bullion is the underlying asset of gold ETFs.

3. Gold Mutual Funds:
Gold mutual funds are open-ended funds that invest directly or indirectly in gold assets. Unlike Gold ETFs, the value of one unit in a gold mutual fund doesn’t correspond to one gram of gold.

• Investment Method: You can invest in gold mutual funds through SIPs (Systematic Investment Plans) starting from as low as Rs. 500, or via a lump sum. The returns are linked to the performance of physical gold, gold ETFs, or gold-related securities.
• Types: Examples include gold mining funds and gold funds of funds (FoFs). Gold FoFs invest in units of Gold ETFs, and you don't need a Demat account to invest.
• Costs: Gold mutual funds have an annual expense ratio between 0.6% and 1.2%, which includes management fees and ETF fees. Redeeming gold mutual funds within a year may incur an exit load of 1-2%.
• Liquidity: Gold mutual funds are more liquid than Gold ETFs in India, as they can be quickly bought or sold.

 

 

 

Comparison: Gold ETF vs. Gold Mutual Fund

4. Sovereign Gold Bonds (SGBs):
SGBs are government-backed securities denominated in grams of gold. Investors pay cash for the issue price and hold the bonds for a specific period. Upon maturity, the bonds can be redeemed for cash equivalent to the prevailing gold price.

• Interest: SGBs offer a fixed interest rate of 2.50% per annum, which is tax-free if held until maturity.
• Purity: The issue of sovereign bonds is based on 24 carat gold price of 99.9% purity gold. 
• Security: SGBs are a digital asset stored in a Demat account, eliminating the risk of theft.
• Lock-In Period: SGBs have a lock-in period after which they can be redeemed. The redemption price is based on the average closing price of gold (99.9% purity) 3- days prior to the redemption date.
• Minimum Investment: The minimum investment in SGBs is one gram of gold.

Unlike physical gold, SGBs do not carry the risk of theft and are a more secure and tax-efficient way to invest in gold digitally.

Silver ETF

Investment Exposure:

A Silver ETF is an exchange traded fund, listed on the National Stock (NSE) Exchange and Bombay Stock Exchange (BSE). The ETF invests in 99.9% purity physical silver and may also participate in Exchange Traded Commodity Derivatives (ETCDs) with silver as the underlying commodity. These ETF units are held in a demat account. So, one can buy, sell or trade these units at ease during any time of the trading hours just like stocks.

Silver ETFs track the spot price of silver in the open markets. Fluctuations in the price of silver will change the NAV of these ETFs. Each unit of a silver ETF represents 1 gram of physical silver and is stored in a secure vault by the Asset Management Company. 

The fund managers must obtain auditor reports on physical verification of the silver stored in vaults at regular intervals.

 

Features of Silver ETFs

·       Purity: The underlying of silver ETFs is 0.999 purity silver bullion. 

·       Taxation: Silver is a capital asset. An individual’s investment in bullion attracts long-term capital gains tax if held for more than 36 months. In such a case, gains from silver are considered taxed at a flat rate of 20%.

However, if the investor’s holding is for less than 3 years or 36 months, profits are treated as short-term capital gains and are added to the regular income, which is taxed as per the respective tax slab.

·       Tracking Error: Tracking error is the difference between the returns of a scheme and that of an underlying benchmark. Fund houses must keep their tracking error within a range of 2%. If it exceeds 2%, the fund houses must mention tracking error percentage on their portal.

·       Expense Ratio:

SEBI has mandated that fund houses cannot charge more than 1% of the Silver ETF scheme’s assets under management as the expense ratio.

 

Gold ETF vs. Silver ETF: Where Should You Invest?

If you’re more conservative investor with a low appetite for risk, consider investing in gold ETFs due to their relatively stable nature. For more risk-aggressive investor with a high tolerance for volatility, silver ETFs is a choice.  

Author
Thakur Ajit Singh
Founder - Quick Turtle | Graded Financial Services | AskCred
Financial Expert | Trainer | Management & Placement Consultant