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00:00Ashish Gupta joining us. He's CIO at Axis AMC. Mr. Gupta, thank you so much for speaking with us.
00:05And of course, you were on the panel, which looked at some of those proposals that SEBI
00:11has put forth. So, you know, is it harsh, the way that these regulations are going forth?
00:20Could a more calibrated attempt have been made? Or do you think that this is what's appropriate?
00:25Looking at the number of volumes and the profile of investors who are coming into the F&O segment.
00:33So, good morning, Kamana. I think SEBI, the guidelines they have released has come after
00:42due consideration. I think they took consultation and if you see SEBI press release,
00:51I think they highlighted that they got thousands, I think more than 10,000
00:56people giving their comments and all were duly considered before coming out with the final
01:02guidelines. In fact, if you see the implementation schedule is also calibrated over the period of
01:12time, nearly six months. I think SEBI has been quite pragmatic in A, looking at this space,
01:18you know, because there was clearly a client need for action. We have seen,
01:26as SEBI has also characterized, the detailed frenzy that comes in, particularly around weekly
01:34expiry dates. And we are seeing this in the market as well. So, I'm sure on the shows you see
01:42the kind of volatility we have seen in the past few weeks in the last half hour or last
01:48trading, whenever there's a big weekly expiry. And SEBI document highlights that nearly 25,
01:5830% of all volumes happen in the just last one hour of that expiry. So, I think there was
02:06some need to rationalize the activity here because it adds both macro and micro risks
02:12to the market and the economy. Mr. Gupta, I wanted to understand from a sophisticated
02:19trader point of view, a trader or a participant who actually deals with substantially higher
02:26volumes, substantially larger funds in the futures and options space,
02:30do things change coming down to November 20th down the line?
02:36So, I think the whole aim of the regulation is not really to impact the sophisticated investor.
02:46It is actually really to protect the small detail investors. And some of them were getting pulled in
02:54because the ticket sizes of some of these option contracts was very low. And in fact, if you see
03:04the SEBI data, most of the losses on this trading activity was being borne by actually these
03:11investors. And I think what SEBI is trying to do is make sure these kinds of investors don't get
03:22lured into this activity. And as you would have seen in the SEBI document that came out a couple
03:29of weeks ago, even in the last financial year, 91% of detail traders actually lost significant
03:37amount of money. I don't think there is going to be an impact for the sophisticated investor,
03:45but for the fact that the counterparty, which are the small detail investors, hopefully
03:52it will not be as meaningful as was earlier.
03:58Ashish, was one way of doing this then identifying who could trade and have a filter,
04:05say on income tax returns filed or those kind of parameters? Because if you wanted to
04:12keep small investors out, then define and then target small investors from staying out.
04:19Was that one way to look at it or was this the best way? Because this is a more broad-based
04:23kind of an action, including reducing the number of weekly expiries.
04:29I think the challenge with some of those measures is really how well they can be executed.
04:39So, and where does the control lie? So, it has to be declaration-based
04:49and there are obviously challenges, you know, in India, how many people file income tax returns,
04:56you know, how many people can have an account and if someone else trades on that account.
05:04So, how do you really implement those? So, there are several suggestions and I'm sure
05:12that we will look at those, whether there is sophistication in terms of knowledge of the
05:18investor, minimum threshold of whether net worth or as you said income, but really some of those
05:28look better on paper, but really implementing them is very challenging.
05:33So, there's always the element of human behaviour and needing to take that speculative stance when
05:39it comes to equity markets. Now that this avenue moves out of the way, do you think
05:45that there could potentially be a shift towards relatively smaller stocks once again in the cash
05:52market? Do you think that there could be some changes that potentially that segment of the
05:58market that would undergo this? Sure. So, I think SEBI in their statements have spoken about the
06:08fact that they also believe that speculative element is an integral part of the market.
06:16It has really several positives in the way it impacts capital markets, whether it's in
06:26terms of liquidity or price discovery or arbitrage and the idea is not to kill all
06:34speculative activity. In fact, if you see on single stock futures and options and in particular
06:42options, SEBI a few weeks ago has actually come out with the detailed guidelines which will allow
06:48even more stocks to come into the ambit of single stock options. What here is being looked at
06:56is really one particular segment and this relates primarily just to index options, right, and that
07:04to just a weekly expiry and within weekly expiry the frenzy trading that happens on the expiry day.
07:13So, I think that is what SEBI is looking to do. It wants more participants to come into the market
07:23and if we look from a medium to long-term perspective, we want investors coming into the
07:29market to get a good experience of the capital market, right, and if you see the numbers that
07:36were put out in the SEBI report a few weeks ago, in the last three years nearly one crore investors
07:46on average have lost about two lakh rupees and that is a very significant amount of money. So,
07:54that's about two lakh crores of losses for retail investors and most of these investors are less
08:02than 30 years old. So, that's not really the experience of capital markets we want to give
08:08to our young investors. Yeah, you know, what do you say to those who
08:15argue that these investors will then move on from derivatives to
08:21maybe online gaming or to online lotteries or to dabba trading because
08:28money will find its destination, isn't it? Yeah, so I think if you look at the online
08:35gaming industry, it is already about 10x the options market, right, and actually we
08:43and I personally would not want our capital market players to really come in and see this as
08:51an equivalent of online gaming, right. The fact that online gaming is growing at a
09:00pace that is a separate matter of concern and 300 million people are already active there,
09:07that is another issue of concern, right, but I think the fact that about 40 million people are
09:15actively trading derivatives in this market and incurring this magnitude of losses is
09:22really what we need to control. All right, Mr. Gupta, we'll leave it at that. Thank you so much
09:27for joining us and giving us perspective on the latest changes that have been brought forward by
09:31the SEBI as far as the futures and options space is concerned. Again, this is something which is
09:36developing and we'll get a much better idea of how markets are going to take this on come November
09:4320th and after that.