87% decline in average daily turnover of currency derivatives on NSE

The provision made by the Reserve Bank of India that exposures in foreign exchange should be linked to contracts trading in currency derivatives will now be implemented from tomorrow, Friday, May 3. Since the implementation of this provision, the number of trades in currency F&O on the National Stock Exchange (NSE) has declined by about 87 per cent.

The average daily turnover in currency derivatives on NSE, the country’s largest exchange, is expected to fall to Rs 5 in April 2024. Rs 20,646 crore, whereas a month ago i.e. in March 2024, this figure was Rs 20,646 crore. 1,56,007 crore. Thus, the average daily turnover has declined by 87 percent in a month.

The average daily turnover recorded in this segment for each month from April, 2022 to March, 2024 is Rs. The monthly average is. 1.51 lakh crore. This was because these contracts were also being traded from the proprietary accounts of retail investors and brokerage houses. According to experts, these investors were betting on the fluctuations of the rupee against foreign currencies to earn profits. Because of this the volume was high. Now that the provision is going to be implemented that only people investing in foreign currency will be able to trade in this F&O, a huge decline has been seen in this volume. According to experts, investors like FPIs earlier had exposure to foreign currencies to the extent of only 10 per cent of the total volume traded. Therefore, now a reduction of up to 90 percent has been seen in this volume.

As per the new provision, for trading in currency F&O, if the trade is within the limit of US$ 100 million, there is no need to submit proof of forex exposure and the player has to certify that he has such exposure. If the value of the transaction exceeds this limit, it becomes mandatory to provide proof of exposure to foreign currency.