'Needs to be tempered', PhonePe’s Sameer Nigam urges caution in F&O trading amid boom

Sameer Nigam, CEO of PhonePe talking about regulators in India at the Moneycontrol Startup Conclave

PhonePe co-founder and chief executive officer (CEO) Sameer Nigam has called for a balanced approach as retail participation surges in Futures & Options (F&O) trading, an issue that has forced the market regulator to propose some measures to protect investors.

While celebrating the explosive growth of his stock trading and investment app Share.Market, Nigam highlighted the paradox of the market environment where increasing retail participation in F&O trading is both being celebrated and is under scrutiny as well.

"There is a stability concern where new-to-capital- market investors start trading in instruments that they don't understand the underlying risk of," Nigam said, reflecting Securities and Exchange Board of India’s (SEBI's) apprehensions.

"I think it needs to be tempered — no question in my mind," Nigam said at the Moneycontrol Startup Conclave  in Bengaluru on August 9.

The remarks come at a time when Share.Market has seen explosive growth, with order volumes skyrocketing since the launch of the F&O segment on the platform in April.

"We were doing less than 20,000 orders before launching F&O as recently as April. We are doing over 6 lakh orders a day," Nigam said as he likened the platform's growth to "an Elon rocket ship”, referring to tech billionaire Elon Musk.

He remains optimistic yet cautious about the long-term viability of the segment.

"Do I love it as a business? Yes. Do I think it's sustainable? I don't think so in the current model," he said, underscoring the need for a thoughtful approach as the F&O market evolves.

The double-edged sword

Nigam’s comments come as SEBI tightens the criteria for stocks included in the F&O segment, alarmed by speculative bets that may not reflect a company’s true value.

In the past few months, the market watchdog has been raising the bar for stocks to be included in the volatile segment to curb retail participation.

Contrary to the belief that retail investors are fixated on individual stocks, Nigam said much of the activity on Share Market is centred on index funds rather than individual stocks.

"Most people are squaring off positions on indexes, not individual stocks," he said, suggesting that investors were leveraging the expertise behind index funds for more informed decisions.

This shift or approach, while less risky, still poses challenges as short-term speculation increases.

Watch the full edition of the Moneycontrol Startup Conclave 2024 here