Summary of this article
Equity futures and options turnover declined sharply in Q2FY27.
Traders shifted their capital towards surging energy commodity contracts.
Retail participation in commodity derivatives doubled during this timeframe.
The derivatives space has been in the news for most of 2026 even as volatility has remained high in the market. Amid this heightened volatility, the way investors invest in the derivatives space has also changed in the second quarter of FY27.
According to the National Stock Exchange's (NSE) Market Pulse report for October 2026, secondary market equity trading witnessed a sequential contraction compared to the first quarter of FY27. However, market participants did not just exit the ecosystem; instead, they pivoted towards commodity contracts.
Among commodity contracts, crude oil and electricity derivatives trading witnessed historic highs as investor preferences seemed to change.
Equity F&O Contraction
The report showed that during Q2FY27, the average daily turnover (ADT) for equity futures declined by 19 per cent quarter-on-quarter, while equity options ADT plunged by 25 per cent. Notably, ADT refers to the total value of trades for a financial instrument over a specific time period, divided by the number of trading days in that time period.
Compared to Q4FY26, equity futures ADT dropped by 30 per cent, led by a 53 per cent fall in index futures turnover and a 25 per cent decline in stock futures. Equity options ADT also fell 37 per cent over the same timeframe, indicating a cooling in the speculative frenzy that has typically been seen in the equity derivatives space.
Notably, this moderation extended into the cash market segment as well, as the ADT in the cash market segment declined by 13 per cent quarter-on-quarter to Rs 1.2 lakh crore. By September 2026, monthly ADT slipped to Rs 1.14 lakh crore, marking a seven-month low and the fourth consecutive month of declining volumes.
However, the drop in turnover did not stem merely from a lack of participation, as the total number of trades increased by 10 per cent month-on-month in September, while the average trade size shrank by 13 per cent to hit a 17-month low, suggesting that traders remained active, but their capital deployment sizes contracted.
Commodity and Energy Futures Surge
Even as equity market volumes decreased, the commodity derivatives segment experienced a surge in activity. It is likely that traders tried to seek fresh opportunities amid escalating global energy shocks in the commodity space.
During Q2FY27, commodity futures ADT increased by 38 per cent quarter-on-quarter. The options segment witnessed even more aggressive growth, with commodity options ADT surging 116 per cent over the same period. In September, both segments recorded their highest-ever monthly average daily turnovers, climbing 63 per cent and 53 per cent month-on-month, respectively.
Energy contracts dominated the commodity market boom as crude oil and electricity futures contracts collectively accounted for 94 per cent of all commodity futures turnover on the exchange in September. Crude oil futures alone recorded an ADT of Rs 103.1 crore, while electricity futures contributed Rs 71.5 crore. The concentration was even more pronounced in the options market, where crude oil options contracts accounted for 97 per cent of the total premium turnover, logging an ADT of Rs 368.6 crore.
Shifting Market Demographics
Across the first half of the current financial year (H1FY27), the share of individual retail investors in overall commodity derivatives notional turnover more than doubled, surging to 34.4 per cent from just 15.3 per cent in the corresponding period last year.
Conversely, the market share of proprietary traders dropped sharply from 80.5 per cent to 54.1 per cent over the same timeframe, indicating a change in the demographics participating in the segment.
