Consider the following statements:

I. India accounts for a very large portion of all equity option contracts traded globally thus exhibiting a great boom.

II. India’s stock market has grown rapidly in the recent past even overtaking Hong Kong’s at some point of time.

III. There is no regulatory body either to warn the small investors about the risks of options trading or to act on unregistered financial advisors in this regard.

Which of the statements given above are correct?
(a) I and II only (b) II and III only (c) I and III only (d) I, II and III

Based on the statements provided, the correct answer is (a) I and II only.

Explanation:

Statement I: Correct. India, and specifically the National Stock Exchange of India (NSE), has become the world’s largest derivatives exchange by the number of contracts traded. A massive portion of this volume comes from equity index options (like Nifty 50 and Bank Nifty) and stock options. This represents a significant boom in retail and institutional participation in the derivatives market.
Statement II: Correct. India’s stock market has seen remarkable growth. In January 2024, the total market capitalization of companies listed on Indian exchanges did indeed surpass that of Hong Kong’s stock market, making India the fourth-largest equity market in the world at that time.
Statement III: Incorrect. This statement is factually wrong. The Securities and Exchange Board of India (SEBI) is the primary regulatory body for India’s securities and commodities market.
1. Warnings on Risks: SEBI has repeatedly issued warnings to small investors about the high-risk nature of derivatives (Futures & Options). It has published studies showing that a vast majority (around 9 out of 10) of individual traders in the F&O segment lose money.
2. Action on Unregistered Advisors: SEBI actively regulates financial advisors and research analysts. It has a framework to take strong action against unregistered financial advisors and “finfluencers” (financial influencers) who provide unauthorized investment advice.