F&O Regulations: The Cat’s Out Of The Bag: Motilal Oswal

Motilal Oswal Report

Securities and Exchange Board of India has finally announced regulations to curb F&O volumes and strengthen the framework. Most of the measures are similar to the ones announced in the consultation paper released on July 30, 2024.

However, one measure from the consultation paper did not find a mention in the final regulation (rationalization of tick size) and two measures came in a relatively better form:

1. Minimum contract size increased to at least Rs 1.5 million versus Rs 2-3 million in two phases in the consultation paper and

2. increase in extreme loss margin only on the expiry day at 2% versus the 8% cumulative increase on pre-expiry and expiry day in the consultation paper.

The regulations will be partially implemented from Nov-24 and, resultantly, the impact on volumes will be visible from Dec-24.

Our sensitivity analysis yields nil earnings impact for Angel One Ltd. in FY26 if the order volumes are down 10% versus our assumption of 16% growth and the company is able to increase its realization from Rs 19.7 to Rs 25.

We maintain our Buy rating on Angel One.

Similarly, for BSE earnings, the hit would be miniscule if the derivative volumes decline by 20% instead of a 22% increase built in our forecasts and the premium to notional turnover ratio increases from 0.072% to 0.09%. We maintain our Neutral rating on BSE.

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