Hedging and speculative activity saw an increase in March 2026, as geopolitical tensions due to the ongoing US-Iran war sent jitters across global markets. On the National Stock Exchange (NSE), premium turnover in the index options segment rose to a record Rs 16.24 lakh crore, up 26.50 per cent month-on-month (m-o-m) from Rs 12.84 lakh crore in February, exchange data showed.
The jump in turnover came despite a slight decline in volumes, which stood at 350.75 crore against 355.39 crore in February, suggesting that higher premiums drove the increase amid volatile conditions.
Higher volatility typically boosts options activity as premiums rise, and short-term trading opportunities increase.
Average daily turnover (ADT), a key gauge of trading intensity, rose to Rs 85,508.84 crore, up from Rs 61,141 crore in February and Rs 44,427 crore in the corresponding month of the previous year, indicating a persistent increase in trading intensity amid high volatility. According to NSE’s monthly market pulse issue for March, the ADT in February itself was a 16-month high.
Turnover in the index options segment accounted for nearly 31 per cent of the overall derivatives turnover.
Across the derivatives market, activity was mixed during the month.
Index futures turnover increased to Rs 7.87 lakh crore from Rs 6.05 lakh crore. In contrast, stock futures turnover declined to Rs 27.09 lakh crore from Rs 29.59 lakh crore, while stock options premium turnover eased to Rs 1.57 lakh crore from Rs 1.87 lakh crore in February. Overall, total derivatives turnover rose to a 17-month high of Rs 52.78 lakh crore in March, as against Rs 50.35 lakh crore in the previous month.
Who Is Driving The Volumes
Individual traders contribute over one-third of the total premium turnover in the index options segment, as per NSE data. Proprietary traders account for over half of the turnover share. Foreign investors’ share typically stands in single digits.
The rise in derivatives activity comes despite curbs by the capital market regulator, the Securities and Exchange Board of India (Sebi), on retail derivatives trading. Recently, in the Union Budget 2026, the government increased the Securities Transaction Tax (STT), which became effective from the new financial year, April 1, 2026. The STT on futures trades was raised to 0.05 per cent from 0.02 per cent. In the options segment, the tax on premiums was increased to 0.15 per cent from 0.1 per cent, while the tax on the exercise of options was raised to 0.15 per cent from 0.125 per cent.
The STT on derivatives products was hiked due to persistent concerns over excessive speculation by traders, especially retail participants. Studies by Sebi have consistently shown that more than 91 per cent of retail participants end up losing money in F&O trading. The government had also previously raised the STT in the 2023 Budget.
The STT hike is one among several measures policymakers brought in to discourage retail investors from trading in derivatives. Sebi had, in November 2024, tightened norms by mandating upfront premium payments, curbing certain spread benefits and imposing stricter exposure limits. Over the past one to two years, the regulator has progressively revised rules to moderate retail participation in the futures and options markets.
