Currency-derivatives segment shrinks further by 72% MoM and by 96% since RBI directive made headlines

From March to May, the segment's notional turnover shrunk by a little more than 96 percent--from Rs 29.5 lakh crore to Rs 1.14 lakh crore.

When the central bank's circular was issued, many market watchers such as Zerodha's Nithin Kamath had predicted the end of this segment.

The online brokerage's co-founder posted through his handle on X, "I have said this before, regulatory risk is by far the biggest risk for stock brokers."

He added, "The RBI has its own reasons for restricting unhedged currency derivatives, but this means the death of currency derivative trading on stock exchanges by retail traders."

While the central bank's directive has remained the same since 2020, the Reserve Bank of India (RBI) had merely reiterated its policy through the January 5 circular. Market insiders had told Moneycontrol that the communication to traders, through their brokers, happened at the last minute because of poor coordination at the exchanges' end.

Also read: Forex market turmoil: Exchanges' poor communication and not RBI's circular causing losses in currency-derivatives, say sources

The last minute scramble had resulted in traders having to exit their positions at heavy losses.

The bulletin also recorded that funds mobilised through equity issuances in May was Rs 40,332 crore versus April's Rs 45,544 crore. Funds raised through initial public offers (IPOs) nearly doubled month-on-month, with them raising Rs 10,133 crore in May versus Rs 5,727 crore in April. Most of this was from mainboard IPOs that raised Rs 9,606 crore in May versus Rs 5,055 crore in April.