Capital markets

Story hook

It is 9 November 2024, a Saturday. The trading floors of the National Stock Exchange (NSE) and BSE are quiet. But inside SEBI Bhavan in Bandra-Kurla Complex, Chairperson Madhabi Puri Buch is signing off on a six-measure crackdown package: weekly index options reduced to one per exchange per week; contract sizes hiked from ₹5-10 lakh to ₹15-20 lakh; upfront premium collection mandatory; calendar-spread benefit removed on expiry day; intraday position monitoring; an extra Extreme Loss Margin (ELM) of 2% on short options on expiry day.

The reason: a SEBI study published on 23 September 2024 had found that 91.1% of individual F&O traders lost money in FY 2023-24, with aggregate losses of ₹75,000 crore for retail traders. Meanwhile, NSE was processing 8 out of every 10 derivative contracts traded globally by volume — a statistic the Financial Stability Board began flagging at G20 meetings.

That same week, Hyundai Motor India completed its ₹27,870 crore IPO — the largest in Indian history — with retail subscription only 0.5×, suggesting the heat had cooled. The Nifty 50 had crossed 26,000 in late September 2024 before correcting 8% by month-end. India's market capitalisation had crossed $5 trillion for the first time. The world's fifth-largest economy now had the world's fourth-largest equity market by market cap.

What does it mean when a country's stock market outgrows its real economy by a factor of 1.3, when retail investors number 17 crore, when SIPs cross ₹25,000 crore a month, and when 91% of derivative traders lose money?

Why this matters for UPSC

Capital markets are a standing GS-III topic — Prelims has tested SEBI (2013, 2017, 2019, 2023), IPO/FPO/OFS distinctions (2018, 2022), derivatives terminology (2016, 2023). Mains questions on market reforms appear roughly every two years. The 2024 F&O crackdown, Hindenburg-Adani saga, and SEBI Chair conflict-of-interest allegations have made capital markets a high-yield Mains + Interview topic for 2024-25.