India’s derivatives market has outgrown its cash market : Dr. Raja Reddy Bujunoori, Dr. Sumit Saurav & Dr. Venkatesh Panchapagesan

In an op-ed for Financial Express titled ‘A liquidity mismatch for CAS’, Dr. Raja Reddy Bujunoori, Dr. Sumit Saurav and Dr. Venkatesh Panchapagesan of IIM Bangalore’s Finance & Accounting area examine the liquidity mismatch at the heart of India’s equity-options market and why it may matter more than the mechanics of the new Closing Auction Session (CAS).

On expiry days, the notional value of index derivatives traded in India can reach 3,000 times the turnover in the underlying shares, compared with roughly 5-15 times in most developed markets. The authors argue that this imbalance has important consequences.