SEBI’s ‘no new F&O curbs’ signal lifts capital market stocks and reshapes trader expectations
India’s capital markets saw a sentiment boost on February 4 after Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey said the regulator is not considering any immediate changes to futures and options (F&O) rules, calming fears of tighter curbs in a segment heavily used by traders and hedgers.
Pandey’s comments came amid heightened policy focus on derivatives trading following the Union Budget’s move to raise securities transaction tax (STT) on equity derivatives. His remarks helped lift capital market-linked stocks and reassured market participants worried about further regulatory tightening.
“There will be no new F&O curbs and no change in weekly expiry,” Pandey told reporters on the sidelines of an event in Mumbai. He added, “At this point of time, we are not contemplating any measures and whatever framework that we have put in place, that will continue.”
Clarity from SEBI comes as derivatives trading faces policy scrutiny
The statement is significant because derivatives volumes in India have expanded rapidly, drawing scrutiny from policymakers concerned about speculation and retail investor losses.
In the Union Budget for 2026–27, Finance Minister Nirmala Sitharaman proposed higher STT rates on derivatives:
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STT on futures raised to 0.05% from 0.02%
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STT on options premium increased to 0.15%
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STT on exercise of options raised to 0.15% from 0.125%
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Other STT rates left unchanged
The government argued that the scale of derivatives trading — estimated at more than 500 times India’s GDP in notional terms — justified a tax adjustment to curb purely speculative activity.
Capital market stocks rally as regulatory overhang eases
Following Pandey’s remarks, capital market stocks moved higher.
The Nifty Capital Market index traded about 1.6% higher in the session, with brokerage and exchange-linked firms leading gains.
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MCX shares rose roughly 4.7%
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Angel One climbed about 3.5%
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BSE shares rebounded about 3% from the day’s low
Market participants said the rally reflected relief that no immediate operational restrictions — such as limits on expiries or contract structures — were forthcoming.
A Mumbai-based derivatives trader said, “The fear was about sudden rule changes. When that uncertainty goes away, positioning becomes easier.”
Here’s what happened today and why traders reacted
Traders reacted to the removal of near-term regulatory uncertainty.
Key triggers behind the reaction:
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No change in weekly expiry structure
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No new F&O curbs despite recent policy debate
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Clear communication from the regulator
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Existing framework to continue for now
For short-term traders, regulatory clarity matters because F&O strategies often depend on contract design, expiry cycles and liquidity concentration.
Government frames STT hike as investor protection, not revenue move
Officials have emphasized that the derivatives tax changes are meant to protect investors rather than raise revenue.
Chief Economic Advisor V. Anantha Nageswaran said the objective is to safeguard household savings. “The purpose is to ensure that hard-earned savings are deployed in ways that help households build wealth. SEBI has repeatedly highlighted how retail investors lose money in F&O,” he said.
Revenue Secretary Arvind Shrivastava echoed the concern, saying derivatives volumes point to heavy speculation relative to the underlying cash market and GDP. He said the intention is to discourage speculation and address systemic risk, while noting revised rates remain modest compared with trading volumes.
SEBI also pushes for deeper corporate bond markets
Beyond derivatives, Pandey highlighted the need to deepen India’s corporate bond market. He cited a SEBI survey suggesting more investors are aware of cryptocurrencies than bonds, underscoring the awareness gap.
He said bond markets have grown over the past decade but require broader issuer participation, more public issuances and diversification beyond financial sector borrowers.
SEBI has adopted what Pandey described as an “optimum regulation” approach for bonds and is engaging with market participants on budget proposals aimed at market deepening.
BSE Managing Director and CEO Sundararaman Ramamurthy suggested mandating bond market access for fundraising above a certain size and offering tax incentives to encourage issuers.
Trade deals and policy predictability seen aiding capital formation
Pandey also linked easing trade frictions to investment sentiment, saying trade deals such as those with the US reduce uncertainty.
“When you have an overhang of a regulatory action which is removed, and trade frictions removed, any capital formation is always accelerated,” he said. Greater predictability, he added, can spur investment decisions.
What this means for investors and portfolios
For investors, the immediate takeaway is regulatory stability in the derivatives segment.
Potential portfolio implications include:
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Greater confidence in F&O strategies
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Reduced fear of abrupt rule changes
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Continued viability of weekly expiry-based trades
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Supportive sentiment for brokerage and exchange stocks
However, the higher STT still raises trading costs, which could gradually influence volumes and strategy choices.
What to watch in the coming days
Investors and traders are likely to track:
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Whether derivatives volumes adjust after the STT hike
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Any future consultation papers from SEBI
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Retail participation trends in F&O
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Performance of capital market stocks after the initial rally
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Further policy signals on investor protection
For now, SEBI’s message suggests continuity rather than disruption. In a market sensitive to policy signals, that clarity has provided near-term relief — even as the broader debate on speculation and investor protection continues.
