Fears that the market regulator may announce steps to limit retail participation in the futures and options (F&O) segment during a board meeting later today caused Sensex, Nifty, and Nifty Bank to plummet on Monday morning. While peer Chinese markets continued to rise, other Asian markets sank, with Japan plunging nearly 5%. This raised concerns that FPI flows may soon shift to the reasonably-valued market.

The BSE market capitalization m-cap dropped 3.15 lakh crore to Rs 474.77 lakh crore, while the Sensex slid 700.29 points, or 0.82 percent, to 84,871.56. Just 1,195 of the 2,101 listed equities on the BSE saw an increase. A total of 116 equities reached their corresponding lower circuit limits, while 37 stocks reached their 52-week lows. At 25,998.95, Nifty had fallen below the 26,000 barrier and was down 180 points, or 0.69 percent.

The Shanghai Composite index on the Chinese mainland surged 5.7%, while the Hang Seng in Hong Kong increased 3.7% as well.

According to recent SEBI data, between FY22 and FY24, 93% of the more than 1 million individual F&O dealers lost an average of over Rs 2 lakh. Seven recommendations were made in consultation papers that Sebi recently released. These included the removal of the calendar spread benefit on expiry day, an increase in near contract expiry margin, a revision to the minimum contract size, a rationalization of weekly index products, intraday monitoring of position limits, rationalization of strike prices, and the collection of option premiums on an upfront basis.

Recall that in the Union Budget 2024, the government raised STT on futures and options, which economists said would significantly reduce trading in derivatives starting on October 1.