Retail investors demonstrated surprising activity in India's exchange-traded commodity derivatives (ETCD) segment during the West Asia conflict, according to reports from Stock Market News. The retail participation as percentage of turnover nearly doubled during the volatile period, with their share rising from 5.9% in March to 11.1% in May. This surge occurred despite regulatory curbs on rupee speculation that took effect two years ago, as market observers noted that wartime volatility prompted more retail investors to hedge their underlying exposure.
The average daily turnover of ETCD futures jumped to ₹5,535.58 crore through 25 June in the current fiscal, representing a 65% increase from ₹3,360 crore during the same period of the previous fiscal year, as reported by Stock Market News. The rupee plunged 6.5% from 91.07 to the dollar on 27 February when the war broke out, reaching a low of 96.96 on 20 May after crude surged 39% to $101 a barrel. This sharp volatility initially caused retail participation to slip to 5.9% in March from 7.8% in February before recovering to 10.2% in April and 11.1% in May.
The Reserve Bank of India (RBI) circular dated 5 January 2024 established that users could trade up to $100 million across currency pairs like dollar/euro/British pound and yen versus rupee across all stock exchanges, but only if they could establish the existence of unhedged underlying obligations to buy or sell forex if required, according to Stock Market News. The National Stock Exchange (NSE), which holds 100% market share in the ETCD segment, defines retail investors as individuals, non-resident Indians (NRIs), Hindu Undivided Families (HUFs) and proprietorships. NSE allows participants to trade only against documents supporting underlying exposure and a chartered account certificate.
Foreign investors, the second-biggest ETCD participants after proprietary traders, followed similar activity patterns to retail participants, as reported by Stock Market News. Their share dipped one percentage point from February to 15.7% in March before rising to 17% in April and 17.3% in May. Proprietary traders maintained the largest market share, ranging from 52.3-62.9% over the same period. The RBI's crackdown on ETCD space caused average daily turnover to plunge 81% to ₹5,520 crore in FY26 from the previous year, ahead of India's inclusion on the JP Morgan Government Bond Index on 28 June 2024.
