NSE Chief Urges Caution: Mutual Funds, Not Derivatives for Retail Investors

NSE chief Ashishkumar Chauhan advises retail investors to refrain from trading in derivatives and instead invest in equities through mutual funds. Highlighting the risks of F&O trading, he emphasized that it is best suited for informed investors. This comes amidst rising concerns from financial authorities about the growing risks to retail investors in the F&O market.

National Stock Exchange (NSE) Chief Ashishkumar Chauhan on Friday urged retail investors to consider mutual funds as a safer investment route compared to derivatives trading. Addressing an event, Chauhan emphasized the high risks associated with Futures & Options (F&O) trading, advising that only well-informed investors who can manage these risks should engage in such activities.

This warning aligns with recent concerns raised by Finance Minister Nirmala Sitharaman and Chief Economic Advisor V. Anantha Nageswaran, who have both highlighted the potential pitfalls of F&O trading for individuals. In November 2023, Sebi Chief Madhabi Puri Buch also warned investors against heavy betting on derivatives, echoing Chauhan's sentiments.

Despite these warnings, derivative trading continues to gain popularity, often driven by the allure of quick profits. The monthly turnover in the F&O segment skyrocketed to Rs 8,740 lakh crore in March 2024 from Rs 217 lakh crore in March 2019. However, Chauhan cautioned that derivatives should only be traded by those who comprehend the risks and have the capacity to manage them effectively.