Retail traders are increasingly opting for commodity options over equity index options, driven by sharper price swings in energy and bullion markets and lower tax incidence. According to exchange data, average daily premium turnover (ADPT) of metals and energy options on MCX rose 15% in the September quarter from the June quarter, while ADPT in index options on NSE and BSE fell 27% over the same period. As reported by Bloomberg, the active crude oil contract on MCX gyrated in a 59% range between a closing low of ₹6,426 a barrel on 2 July and ₹10,238 on 15 September, compared with a 41% movement in the previous quarter.
The tax differential is significantly favoring commodity options over equity derivatives. According to SAMCO Securities, the securities transaction tax (STT) on equity options was raised 50% to 0.15% this fiscal year, while commodity transactions are still taxed at 0.05%. This tax structure change has made trading equity F&O costlier since April, as noted by Nilesh Sharma, Executive Director and President of SAMCO Securities. The increased cost of every trade, combined with SEBI's earlier curbs, tighter leverage rules from July and the August introduction of the Closing Auction Session (CAS), has left the equity side crowded and expensive for traders.
The shift is reflected in significant growth in MCX participation. As reported by the exchange's investor presentation, the number of clients trading on MCX nearly doubled to 13.72 lakh in the first quarter of FY27 from 7.03 lakh in the first quarter of FY26. According to Sebi data, retail investors' share of turnover rose 12% from June-end to 41.6% at the end of August, compared with 8% and 8.6% increases on BSE and NSE respectively to 37.8% and 39.2%. Amit Chandra, vice-president at HDFC Securities, noted that MCX September ADTP is trending at ₹11,000 crore, which is the second-highest in a month.
The increased participation is supported by extended trading hours of almost 15 hours until 11:30 pm and the ability to leverage common collateral. According to Kotak Neo, six key commodities—gold, silver, crude oil, natural gas, copper and zinc—have monthly expiries, effectively offering six additional expiry opportunities every month over and above the eight weekly index-option expiries. Naveen Mathur, director of commodities and currencies at Anand Rathi Share & Stock Brokers Ltd, noted that higher volatility in products such as crude oil, coupled with transaction tax on commodities being one-third that on index options, has helped drive volumes. The active gold contract swung 18% between its low and high in the September quarter, according to Bloomberg data.
